Nine Express : SUPPLEMENTAL ANNOUNCEMENT ON THE ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2018

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NINE EXPRESS LIMITED

九號運通有限公司

(incorporated in Bermuda with limited liability)

(Stock Code: 00009)

SUPPLEMENTAL ANNOUNCEMENT ON THE ANNUAL REPORT FOR

THE YEAR ENDED 31 DECEMBER 2018

This announcement is made at the request of The Stock Exchange of Hong Kong Limited (the "Stock Exchange").

Reference is made to the annual report of Nine Express Limited (the "Company", together with its subsidiaries, referred to as the "Group") for the year ended 31 December 2018 ("Annual Report 2018"). Unless otherwise defined, capitalised terms used in this announcement shall have the same meanings as those defined in the Annual Report 2018.

The board of directors ("Directors") of the Company ("Board") wishes to provide the shareholders of the Company and potential investors with additional information of the Group for the year ended 31 December 2018.

As disclosed in the Annual Report 2018, the Group recorded recognise an impairment loss of investment in an associate, Ever-Grand Development Limited ("Ever-Grand") of approximately HK$226,023,000, the calculation of the impairment loss as at 31 December 2018, is the shortfall of the recoverable amount of approximately HK$421,990,000, which falls below the carrying amount of the investment of approximately HK$648,013,000. The impairment was mainly attributable to the following factors:

• the business plan of the ChangAn town, of the Ever-Grand Group was further delayed and suspended with uncertainties, which affected the financial projection adopted by Ever-Grand and its subsidiaries (collectively the "Ever-GrandGroup");
• the capital investment plan of the Ever-Grand Group was not carried out as planned;

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The delay coupled with the sustained delay of the public release from the local and central government of the Changan Binhai New Area's "Guangdong, Hong Kong, and Macau Greater Bay Area Development Plan Outline" and the Dawan District Plan was yet to issue as scheduled from the local and central government of the PRC authority.

Based on the above reasons, the financial projections, in particular, the capital expenditures ("CAPEX") plan of Ever-Grand have been delayed from the period from 31 December 2019 to 31 December 2020, further delayed to the period from 31 December 2020 to 31 December 2022, thus the revenue projections for Ever-Grand have been delayed accordingly and the revenue projection decreased as compared the 2018 valuation with 2017 valuation. The management of the Ever-Grand Group (the "Management") have then revised the financial forecast of Ever-Grand as at 31 December 2018 in arriving at a more conservative estimate which better reflect the industry outlook. As a result of the decrease in revenue projection of Ever-Grand, the cost of sales, management expense, business tax and surcharge and staff expense in respect of Ever-Grand have been reduced accordingly.

VALUATION METHOD AND THE REASONS FOR USING THE VALUATION METHOD

In applying the income approach to the valuation of the fair value of the 49% equity interest in Ever- Grand, the discounted cash flow ("DCF") methodology was used. The DCF methodology views a company as an operating entity, with the principal focus of the analysis on the operating entity's ability to generate debt-free cash flow in the future. Debt-free cash flow is defined as cash that is available either to invest in new or existing businesses or to distribute to investors (both debt and equity investors). Reasonable projections of revenues, expenses, and reinvestment requirements (i.e. working capital and capital expenditures) form the basis for estimating the future debt-free cash flows that a company will likely generate from its existing business. The Management provided the financial projections for the financial years ending from 31 December 2019 to 31 December 2023. These projections formed the basis of the DCF analysis. The DCF analysis was based on key qualitative factors applicable to the valuation of the 49% equity interest in Ever-Grand Group, outlook for the general economy of the territory in which it operates, and discussions with and projections prepared by the Management.

The debt-free cash flow for each year of the projection period was calculated by adding back after tax interest expenses and other items affecting cash flows to net profit. Non-cash expenses, such as depreciation and amortization, were then added and incremental investments in working capital, and CAPEX were deducted, all of which were provided by Management.

In addition to calculating the debt-free cash flows throughout the projection period, it was necessary to calculate the terminal value of the Ever-Grand Group, which reflects the value of the total capital at the end of the projection period. The terminal value was calculated by applying the Gordon Growth Model with a long term growth rate. The projected free cash flows, including the terminal value, were discounted to present value at an appropriate rate of return, or "discount rate".

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In determining the fair value of the 49% equity interest in the Ever-Grand Group, the independent valuer (the "Valuer") based on the share of the present value of the estimated future cash flows expected to be generated by Ever-Grand, including the cash flows from the operation of Ever-Grand during the forecast period and the terminal value. Unless otherwise noted, in estimating the fair value of the subject assets, the Valuer assumed the assets will remain a going concern in accordance with the relevant accounting literature. In estimating the fair value of the common equity of Ever-Grand, the Valuer relied primarily on the income approach in the form of DCF methodology.

The Valuer has referenced to HKAS 36 and adopted income-based approach in valuing the fair value of Ever-Grand, in which five-year financial forecasts were adopted in measuring the fair value of Ever-Grand as at 31 December 2018. Under the income-based approach, the Valuer has adopted the DCF method to discount all future cash flows into present value.

As such, fair value less cost of disposal was adopted as the recoverable amount of the 49% equity interest in the Ever-Grand Group, assuming immaterial disposal cost. The valuation method of discounted cash flow has been consistently applied in the valuation 49% equity interest in the Ever- Grand Group since 2016, for annual financial reporting purpose.

DISCOUNT RATE

The pre-tax discount rate adopted for determining the fair value of the 49% equity interest in Ever- Grand was decreased from 21.0% in the valuation as at 31 December 2017 to 19.1% in the valuation as at 31 December 2018. With the set of comparable companies, the decrease in discount rate was mainly due to the increase in comparable companies' debt to equity ratio and the decrease in comparable companies' beta coefficient as extracted from Bloomberg.

MAJOR ASSUMPTIONS

Set out below are the major assumptions adopted by in the 2018 valuation are, among others, as follows:

• the valuation was mainly based on the projections of the future cash flows for the period from year ending 31 December 2019 to 31 December 2023, as provided by the Management. The projections outlined in the financial information provided are reasonable, reflecting market conditions and economic fundamentals, and will be materialized;
• the projection adopted in the valuation was relied on the information provided by the Management, which included but not limited to revenue, cost of sales, business tax and surcharge, administrative expense and capital expenditure;
• the unaudited management accounts of Ever-Grand as at 31 December 2018 can reasonably represent its financial position since an audited financial account was not available;
• Ever-Grandwill be operated and developed as planned by the Management;

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• Ever-Grandwill retain and have competent management, key personnel, and technical staff to support its ongoing operation;
• All relevant legal approvals and business certificates or licenses to operate the business in the localities in which the Ever-Grand operates or intends to operate has or would be officially obtained and renewable upon expiry;
• there will be no major changes in the current taxation laws in the localities in which Ever-Grand operate or intend to operate and that the rates of tax payable shall remain unchanged and that all applicable laws and regulations will be complied with;
• there will be no major change in the political, legal, economic or financial conditions in the localities in which Ever-Grand operate or intend to operate, which would adversely affect the revenues attributable to and profitability of Ever-Grand; and
• interest rates and exchange rates in the localities for the operation of Ever-Grand will not differ materially from those presently prevailing.

Save as disclosed in this announcement, the remaining contents of the 2018 Annual Report remain unchanged.

By order of the Board

Nine Express Limited

Zhang Li

Executive Director and Chief Executive Officer

Hong Kong, 30 October 2019

As at the date of this announcement, the Board comprises six directors. The executive Directors of the Company are Ms. Qian Ling Ling (Chairman), Mr. Zhang Li (Chief Executive Officer), Mr. Xiang Junjie; and the independent non-executive Directors are Mr. Tsui Pui Hung, Mr. Tang Ping Sum and Mr. Chiu Sin Nang, Kenny.

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