Shanghai Electric Group Company Limited: Announcement

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no
responsibility for the contents of this announcement, 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 announcement.
SHANGHAI ELECTRIC GROUP COMPANY LIMITED

上海電氣集團股份有限公司
(A joint stock limited company incorporated in the People’s Republic of China with limited liability)
(Stock Code: 02727)
ANNOUNCEMENT
Reference is made to the announcement of Shanghai Electric Group Company Limited

(the “Company”) dated 4 December 2015, in relation to the proposed discloseable and
connected transaction and the proposed issuance and placing of A shares (the
“Proposed Transactions Announcement”). The Proposed Transactions Announcement
mentioned that the qualified PRC valuer appraised the incoming assets in according to
requirements of relevant PRC laws and regulations and valuation principles.
The appendix of this announcement is the full text of the valuation report for the target
properties prepared by the qualified PRC valuer, Shanghai Lixin Appraisal Co., Ltd.,
for the information of the shareholders of the Company and the investors.
By order of the Board

Shanghai Electric Group Company Limited
Huang Dinan
Chairman of the Board
Shanghai, the PRC, 4 December 2015
As at the date of this announcement, the executive directors of the Company are Mr. HUANG Dinan, Mr.
ZHENG Jianhua and Mr. HUANG Ou; the non-executive directors of the Company are Mr. WANG Qiang,
Mr. ZHU Kelin and Ms. YAO Minfang; and the independent non-executive directors of the Company are
Dr. LUI Sun Wing, Mr. KAN Shun Ming and Dr. CHU Junhao.
* For identification purpose only

Evaluation Report For 100% Equity Interests’ Value of Shanghai Heavy Machinery Plant Co., Ltd s
EVALUATION REPORT FOR ENTERPRISE VALUE
(REPORT)
PROJECT NAME:
EVALUATION REPORT FOR 100% EQUITY INTERESTS’ VALUE OF THE OUTGOING
ASSETS-SHANGHAI HEAVY MACHINERY PLANT CO., LT REGARD TO SHANGHAI
ELECTRIC GROUP CO., LTD’S ASSET SWAP AND SHARE ISSURANCE FOR ASSETS
PURCHASE
LXA (2015) No.464
Prepared by
Shanghai Lixin Appraisal Ltd
Dec. 2015
1
TABLE OF CONTENTS
EVALUATION REPORT FOR 100% EQUITY INTERESTS’ VALUE OF THE
OUTGOING ASSETS-SHANGHAI HEAVY MACHINERY PLANT CO., LTD .......... 1
VALUER’S DECLARATION..................................................................................... 3
EXECUTIVE SUMMARY ......................................................................................... 5
EVALUATION REPORT FOR 100% EQUITY INTERESTS’ VALUE OF THE
OUTGOING ASSETS-SHANGHAI HEAVY MACHINERY PLANT CO., LTD .......... 7
1.THE ENTRUSTING PARTIES: TARGET COMPANY, SHAREHOLDERS OF
TARGET COMPANY AND THE REPORT USERS ................................................. 7
2. PURPOSE OF EVALUATION ........................................................................... 13
3. SCOPE OF EVALUATION ................................................................................ 13
4. TYPE OF VALUE & THEIR DEFINITION .......................................................... 14
5. DATE OF EVALUATION ................................................................................... 15
6. EVALUATION BASIS ........................................................................................ 15
7. EVALUATION APPROACH ............................................................................... 18
8. EVALUATION PROCEDURES .......................................................................... 27
9. ASSUMPTIONS AND CONDITIONS ................................................................ 28
10. EVALUATION CONCLUSION ......................................................................... 29
11. SPECIAL MATTERS AND DISCLAIMERS...................................................... 31
12. LIMITATIONS ON THE USE OF THIS REPORT ............................................ 36
13. DATE OF REPORT ISSUED ........................................................................... 37
APPENDIX
1. OFFICIAL DOCUMENTS LEADING TO THIS EVALUATION ACTIVITY ····· 38
2. BUSINESS LICENSE OF ENTRUSTING PARTIES AND SHMP ·················43
3. AUDIT REPORT OF SHMP ·································································46
4. LETTER OF COMMITMENT OF ENTRUSTING PARTIES AND
SHMP(ORIGINAL COPY) ··································································80
5. LETTER OF COMMITMENT OF EVALUATOR( ORIGINAL COPY) ···········81
6. BUSINESS LICENSE OF LIXIN ASSETS APPRAISAL LTD ·······················82
7. LIXIN’S EVALUTION CERTIFICATE ·····················································83
8. EVALUATOR’S CERTIFICATES···························································84
9. SERVICE AGREEMENT ·····································································85
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VALUER’S DECLARATION
The Valuer’s Declaration is extracted from this report. It should not be used or be
interpreted independently from the complete report [LXA-2015-464].
Pursuant to the engagement and in accordance with relevant laws and regulations of the assets
evaluation, we conducted an evaluation on Shanghai Heavy Machinery Plant Co., Ltd, adopting
the appropriate evaluation approaches. We hereby make the following statements:
1Ƚ The contents in this evaluation report are true and objective. Our analysis and
conclusions in this report are based on the principle of independence, objectiveness and fairness
wherein we are not subject to any influence or restrictions of any third party.
2Ƚ The evaluators’ responsibility is to provide professional comments on the value of
the target company as at the date of evaluation by applying to the evaluation standards and the
relevant laws and regulations for the specific purpose, while it is the responsibility of our clients
and the relevant parties to provide necessary information to ensure the genuineness, legality and
completeness of the information provided, as well as the proper use the evaluation report.
3Ƚ We assess the evaluation subject and the scope of the target company designated by
the entrusting parties. The entrusting parties provided detail stamped list of the target assets and
liabilities. The relevant off-balance assets are also taken into consideration. We suggest report
users pay high attention to the subject and the scope of target assets to be transferred is as same
as the evaluation subject and the scope designated by the entrusting parties.
4Ƚ We have no previous, present and future interests with the target company. We have
neither interest nor bias toward the relevant parties and the relevant persons.
5Ƚ The purpose of the evaluation herein is to evaluate the value of the target company
and to give our professional opinions. We are not liable to the decision-making of the relevant
parties. The users of this report are advised to pay high attention to the evaluation conclusion
which is only effective under the assumptions and the restrictions stated in this report, and shall
3
not be deemed as a guaranteed value which could be realized in the market.

6Ƚ We paid necessary attention to the legal ownership of the target and checked the
information provided by the client, we only expressed opinion on the value of the target assets
and we are not authorized to make any form of guarantee to their legal titles. This report shall
not be used as any form of the ownership supporting document.
7Ƚ Our inspection on the fixed assets is limited to their appearance quality and the
existing condition. We are not qualified to carry out a full technical and professional
evaluation on the fixed assets involving invisible and/or untouchable parts. Our evaluation is
based on the materials provided by the client and the evaluation conclusion will be impacted
in case of any defects in the inner quality of the target assets.
8Ƚ For the proper use of this report, we suggest the report users pay high attention to the
‘Assumptions and Conditions’, ‘Special Matters and Disclaimers’ and ‘Limitations On The
Use of This Report’ when reading this report.
9Ƚ This report can only be used for the stated evaluation purpose for the entrusting
parties and the review by the competent authorities. The use right of this report belongs to the
client. The whole or any part of this report shall not be published on any public media without
our consent, except it is to be filed with the relevant government authorities or required to be
disclosed publicly by the law.
In case of any discrepancy between the Chinese and the English version of this report, the
Chinese version shall prevail.
4
EXECUTIVE SUMMARY
LXA (2015) No.464
The executive summary is extracted from the main body of this evaluation report.
To get more detail information and to understand our conclusion, please read the
report thoroughly.
Pursuant to the engagement by Shanghai Electric (Group) Corporation (The entrusting party
1: SH Electric (Group) )and Shanghai Electric Group Co. Ltd (The entrusting party 2: SEC)
and subject to the relevant PRC laws and regulations, Shanghai Lixin Appraisal Co., Ltd.,
conducted an evaluation in connection with the proposed transfer of 100% of equity interests
of Shanghai Heavy Machinery Plant Co., Ltd (The asset owner: SHMP) regarding to the
assets swap and share issuance activity of SEC based on the principles of objectiveness,
independence, fairness, and scientific.
We have undertaken this project through fieldwork, market research and inquiries on
evidences to figure out the market value of the equity of SHMP on the date of 30 Sep 2015.
The evaluation result is as follows:
Subject of Evaluation: the total value of Shareholders’ equity of Shanghai Heavy Machinery
Plant Co., Ltd as at 30 Sep. 2015, and
Scope of Evaluation: total assets and liabilities of Shanghai Heavy Machinery Plant Co., Ltd,
with the book value of the equity RMB-264,325,927.45
Date of Evaluation: 30 Sep 2015
Purpose of Evaluation: Equity transfer
Type of evaluation: Market value
Evaluation Approach: Asset-Based Approach
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Conclusion: under the Asset-Based Approach, the total equity of Shanghai Heavy Machinery
Plant Co., Ltd has the following market value, as at the date of evaluation is:
RMB -184,868,000
Summary of Evaluation
Date of Evaluation: 30 Sep. 2015 Unit:’000 (RMB)
Increase/
Net Book Valuated Increase/
decrease
Accounts Value Value Decrease
Ratio (%)
A B C=B-A D=C/A
Current Assets 3,874,220.30 3,920,894.10 46,673.80 1.2
Non-current Assets 1,712,313.30 1,702,829.60 -9,483.70 -0.55
Incl.:Long term equity 130,018.90 132,157.00 2,138.10 1.64
investment
Fixed Assets 1,217,208.10 1,231,288.50 14,080.40 1.16
CIP 77,118.00 78,798.80 1,680.80 2.18
Intangible Assets 1,964.80 9,470.70 7,505.90 382.02
Development expenditure 709.70 709.70 - 0
Long term deferred expenses 285,293.80 250,404.90 -34,888.90 -12.23
Total Assets 5,586,533.60 5,623,723.70 37,190.10 0.67
Current Liabilities 5,650,450.10 5,648,023.20 -2,426.90 -0.04
Non-current Liabilities 200,409.40 160,568.50 -39,840.90 -19.88
Total Liabilities 5,850,859.50 5,808,591.70 -42,267.80 -0.72
Net Assets -264,325.90 -184,868.00 79,457.90 30.06
This report is dated on 2 Dec. 2015, and it will be expired on 29 Sep. 2016.
Please pay attention to the ‘Valuer’s Declaration’, ‘Assumptions and Conditions’ and ‘Special
Matters and Disclaimers’ when using this report.
This report can only be used after filed with the State-owned Assets Supervision and
Administration Commission of Shanghai Municipal Government and the relevant authorities.
In case of any discrepancy between the Chinese and the English version of this report, the
Chinese version shall prevail.
6
EVALUATION REPORT FOR 100% EQUITY INTERESTS’ VALUE OF
THE OUTGOING ASSETS-SHANGHAI HEAVY MACHINERY PLANT
CO., LTD
LXA (2015) No.464
Shanghai Electric (Group) Corperation and Shanghai Electric Group Co. Ltd:
Pursuant to the engagement by entrusting party 1: Shanghai Electric (Group) Corporation
(SH Electric Group) and entrusting party 2: Shanghai Electric Group Co. Ltd (SEC) and
subject to the related PRC laws and regulations, Shanghai Lixin Appraisal Co., Ltd.,
conducted an evaluation in connection with the proposed transfer of 100% of equity interests
of Shanghai Heavy Machinery Plant Co., Ltd (The asset owner: SHMP) regarding to the
assets swap and share issuance activity of SEC based on the principles of objectiveness,
independence, fairness, and scientific.
We have undertaken this project through fieldwork, market research and inquiries on
evidences to figure out the market value of the equity on the date of 30 Sep 2015. The
evaluation result is as follows:
1. The Entrusting Parties: Target Company, Shareholders of the Target Company and
the Report Users
1.1 The Entrusting Party 1: Shanghai Electric (Group) Corperation

Registered Address: No.110 Sichuan Zhong Road
Registered Capital: RMB 7,024,766,000
Type of Company: industrial enterprises owned by the whole people
Legal Representative: Huang Dinan
Business Scope: contractor business for electric engineering project and conglomeration or
division of equipment, labor repatriation, investment of property, produce and sale of
7
machinery equipment and relevant products, provide technique consulting or training services
to import or export projects, manage state-owned assets in authorized scope, domestic trading
(except special restrains) ɋspecial projects shall be conducted after approved by the relevant
government departmentɌ
Company Introduction:
Shanghai Electric Group Corporate is one of the largest equipment manufacturing and
conglomeration companies in China. It engages in the relevant project design and it was
formally named as Shanghai Electric Union. On 22 Aug. 1984, the company was approved by
Shanghai government, as part of the restructuring for Shanghai Power Station Equipment
Company, where Shanghai Motor Factory, Shanghai Steam Turbine Factory, Shanghai Boiler
Factory and Shanghai Power Station Auxiliary Equipment Factory and some other factories
had been transferred out from Shanghai Motor Manufacturing Management Bureau. Under
the approval of the relevant Finance and Commerce Bureau, in 1994, the company changed
its name to Shanghai Electric (Group) Corporation.
1.2 The Entrusting Party 2: Shanghai Electric Group Co. Ltd (stock code: 601727)
Registered address: 30/F, No.8 Xingyi Road,
Type of Company: Limited Company (Joint venture of Taiwan, Hong Kong, Macau and
Mainland Company, listing company)
Legal Representative: Huang Dinan
Business Scope: Power station and electronic transfer, conglomeration of motor/electrical
equipment, transportation, design, manufacturing, sales and after sales services for
environmental device and related equipment. Wholesales, import and export of goods and
technology, agency commission service and other packaging services. Contractor for
electronic project, conglomeration and division of device/equipment, and technical services.
ɋspecial projects shall be conducted after approved by the relevant government departmentɌ
1.3 The Target Company: Shanghai Heavy Machinery Plant Co., Ltd (SHMP)
8
Type of Company: Single Person Limited Liability Company (wholly owned by the legal
representative)
Address: No.1800 Jiangchuan Road
Legal Representative: Zhang Anpin
Operating Period: 1 Jan.1992 to 30 Jun.2054
Business Scope: Metallurgy, building resistance, military equipment, gas furnace, casting and
forging, mining accessories, power stations, pressure vessels, motor transportation of cargo
import and export business, forging, dock landing barge business, railway vehicle’s
consolidating, transportation and loading. Mining and water projects, maintenance of two
types of motor vehicle (large and medium-sized truck maintenance). Design, manufacture,
installation production of complete sets of engineering, technical consulting services
regarding machinery, electronic equipment and their accessories. Industrial oxygen
(self-production and self-use) the following restrictions on branches: hotels and hostels.
ɋSpecial projects shall be conducted after approved by the relevant government departmentɌ
1.3.1 Company introduction:

SHMP was named as Shanghai Heavy Machinery Plant Co., Ltd, (referred as ‘Shanghai
Heavy’ or SHMP). It was jointly invested by Shanghai Electric Group Co.Ltd and Shanghai
Power Station Auxiliary Equipment Works Co., Ltd on 1 Jan. 1993. It obtained its business
license on 30 Sep.2004 with registered capital RMB 1,205,510,000. After several share
transfers and capital injections, the shareholder structure of Shanghai Heavy is as follows:
Shareholder Investment Amount(RMB) Shareholding %
Shanghai Electric Group Co.Ltd 2,473,210,000 100%
Total 2,473,210,000 100%
Above information are quoted from No.ɋ2014Ɍ55 capital verification report issued by Shanghai Shangshen
Certified Public Accountants Co., Ltd
1.3.2 Historical operation performance of SHMP

SHMP’s financial position for the period 2013-2015.9 is as follows:
9
Unit: ‘000 (RMB)

Accounts 2013-12-31 2014-12-31 2015-9-30
Total Assets 7,836,371.50 6,251,694.90 5,586,533.60
Total Liabilities 7,269,371.40 5,994,023.80 5,850,859.50
Net Assets 567,000.10 257,671.10 -264,325.90
Financial performance of SHMP for the period 2013-2015.9 is as follows:

Unit: ‘000 (RMB)
Accounts 2013 2014 2015.1-9
Sales revenue 2,374,295.90 1,990,559.60 999,935.10
Less : Cost of sales 3,000,607.20 2,248,691.60 1,107,116.60
Less φBusiness Tax and surcharge 375.00 359.60 109.90
Sales expenses 51,458.90 59,069.40 34,975.30
Management and Admin. Expenses 245,774.30 199,108.10 117,322.00
Financial Expenses 187,687.50 169,011.70 107,525.10
Assets impairment losses 177,777.30 279,328.00 178,252.70
Add: Income on investment -
Operating profit -1,289,384.30 -965,008.90 -545,366.60
Add: non –operating income 176,486.60 156,145.00 23,148.10
Less φnon –operating expense 187.40 3,369.00 7,091.80
Profit Before Tax -1,113,085.10 -812,232.90 -529,310.30
Less: Cor. Income tax -49,278.20 45.40 75,000.00
Net Profit -1,063,806.90 -812,278.30 -604,310.30
Financial data is quoted from 2013-2015.9’s audit report issued by Baker Tilly CPA Limited.
10
1.3.3 Long term equity investments (Subsidiaries)

SHMP’s subsidiaries are as follows:
Capital
Established Date Ownership
Subsidiary (RMB: Main Business
(year-month-day) (%)
million)
Design, manufacture,
installation, and after sale
Shanghai
services on environmental
Shangzhong
equipment. Design,
Environmental
development, consulting
1 protection 8 June 2001 35.5 49.29%
services, mechanical and
equipment
electrical equipment
Engineering Co.,
manufacturing, installation
Ltd.
and maintenance on
environmental project.
Shanghai electric
Manufacture and
2 (Wuxi) forging 10 May 2010 250 51.00%
processing of forge piece
Co., Ltd.
Design of nuclear
Shanghai Nuclear equipment, IT system
Technology service, technique
3 13 April 2006 5 50.00%
Equipment Co., consulting business of
Ltd nuclear, Equipment and
appliance sales.
1.3.4 Accounting Policy, Key Tax Rate and Depreciation Policy

SHMP follows the PRC Accounting Standard for Business Enterprises. The in charge tax
bureau of SHMP is Minhang District Tax Bureau in Shanghai. SHMP is a VAT general
taxpayer. The applying tax rates are as follows:
Taxes Tax Rate
VAT-Value Added Tax 17%,6%
CIT-Corporate Income Tax 15%
Urban maintenance and construction tax 7%
NoteφSHMP was recognized as a High and New Technology Enterprise in October 2014
(Certification No.GF201431001732), so as to enjoy CIT rate at 15% from 2014 to 2016.
SHMP adopted straight-line depreciation method and the depreciation policy of fixed assets is
11
illustrated as follows:
Estimated Service Annual Depreciation
Type of fixed assets Residual Value Rate
Life Rate
Property 20-40 year 5% 2.375-4.75%
General motor & 5-28 year 5% 3.39-19.00%
equipment
Special used equipment 10 year 5% 9.50%
vehicle 5-12 year 5% 9.72-19.00%
Office & Other equipment 1.5-18 year 5% 5.28-63.33%
The operating plant of SHPM is located at No.1800 Jiangchuan Road, Minhang Distrct which
is rented from Shanghai Electric (Group) Corporation.
1.3.5 Shareholders:
Shanghai Electric Group Co. Ltd
1.3.6 The relation of entrust parties and target company

Entrust Party 1 Shanghai Electric (Group) Corporation is the shareholder of Entrust party 2
Shanghai Electric Group Co. Ltd.
Entrust party 2 Shanghai Electric Group Co. Ltd is the 100% holding company of the target
Shanghai Heavy Machinery Plant Co Ltd.
Entrusting party 1 Shanghai Electric (Group) Corporation
Entrusting party 2 Shanghai Electric Group Co. Ltd
100%
The target: Shanghai Heavy Machinery Plant Co., Ltd
1.3.7 The report users

This report can only be used for the stated evaluation purpose for the entrusting parties and
the review by the competent authorities. The use right of this report belongs to the entrusting
parties.
The report users:
(1) the entrusting parties and
12
(2) the other report users subject to the laws and regulations.
2. Purpose of Evaluation
The purpose of the evaluation is for equity transfer.
According to the Resolution of Board of Directors of Shanghai Electric (Group) Corporation

(SH Electric Group) and Shanghai Electric Group Co. Ltd (SEC) θSEC plans to transfer
100% equity interests in SHMP for the incoming assets by assets swap of the outgoing assets
and share issuance .The evaluation is conducted herein for the above purpose.
3. Scope of Evaluation
3.1 Evaluation Scope and Subject:

Subject of Evaluation: Shareholders’ equity of Shanghai Heavy Machinery Plant Co., Ltd as
at 30 Sep. 2015, and
Scope of Evaluation: total assets and liabilities of Shanghai Heavy Machinery Plant Co., Ltd,
at the book value RMB-264,325,927.45, including:
z Current assets—cash, notes receivable, trade receivable, prepayment, other receivables,
inventory
z Non-current assets—long term equity investment, fixed assets, CIP, intangible assets,
development expenditure and Long term prepaid expenditures
z Current Liabilities—short term borrowings, Notes payable, trade payables, Receipts in
advance, salaries payable, tax payables, other payable, non-current liability due within 1
year
z Non-current liabilities—Estimated Liabilities and deferred revenue
The scope of assets and liabilities in this evaluation is the same as that upon the engagement
by the client.
The book value of the total assets is RMB 5,586,533,559.27, consisting of the current assets
RMB3,874,220,269.32 and the non-current assets RMB1,712,313,289.95, the book value of
total liabilities is RMB5,850,859,486.72, including the current liabilities of
13
RMB5,650,450,116.43 and the non-current liabilities of RMB200,409,370.29. The book value

of the net assets is RMB-264,325,927.45. As at 30 Sep. 2015, the financial position of the
target is as follows:
Unit: RMB
Accounts Book value
Cash and cash equivalents 61,560,011.06
Notes receivable 137,998,156.24
Trade receivable 1,810,219,104.83
Prepayments 166,032,160.34
Other receivables 80,176,883.44
Inventories 1,618,233,953.41
Long term equity investment 130,018,880.71
Fixed assets 1,217,208,064.06
Construction in progress 77,118,014.89
Intangible assets 1,964,771.61
Development expenditure 709,741.78
Long term prepaid expenditures 285,293,816.90
Short term borrowings 2,679,745,918.70
Notes payable 637,760,316.12
Trade payables 1,703,736,008.50
Receipts in advance 381,257,275.32
Employee benefits payable 13,266,943.29
Tax payables 53,006,226.63
Other payables 48,329,394.87
Non-current liability due within 1 year 133,348,033.00
Estimated Liabilities 108,729,613.29
Deferred revenue 91,679,757.00
Besides the above assets and liabilities, there are off balance sheet intangibles assets available,
including 144 patents, 3 trademarks and 2 copyrights of software. (Please refer to the
spreadsheets for more details)
Besides, there are 369 scrap equipment with nil book value that has been included in the
evaluation scope. (Please refer to the spreadsheets for more details)
4. Type of value & the definition
On this report, the type of value refers to the market value.
14
The market value refers to the estimated amount for which an asset should be exchanged on
the date of evaluation between a willing buyer and a willing seller in an arm’s length principle
that both parties are acted knowledgeably, prudently and without compulsion.
5. Date of Evaluation
The date of evaluation is on 30 Sep. 2015 because:
5.1 The financial accounts is closed at the month end and the information is complete and
accurate
5.2 Close to the date on which the purpose of evaluation can be realized.
The standard price or price index used in this report to determine the value of target assets are
effective as at the evaluation date.
6. Evaluation Basis
6.1 Legislation Basis

(1) Company Law of the People's Republic of China
(2) Securities Law of the People’s Republic of China
(3) Copyright Law of the People's Republic of China
(4) Trademark Law of the People's Republic of China
(5) Implementing Regulations of the Trademark Law of the People's Republic of China
(6) Patent Law of the People's Republic of China
(7) Implementing Regulations of the Patent Law of the People's Republic of China
(8) Accounting Standard for Business Enterprises of the People's Republic of China
(9) Corporate income tax law of the People's Republic of China
(10) Implementation regulations of the Provisional Regulations on the value added tax of the
People's Republic of China
(11) Measures for Administration of Important restructuring of Companies
(12) Regulations of Urban Real Estate Administration of the People's Republic of China
15
(13) Law of State-owned Assets of the People's Republic of China

(14) Rules on the Evaluation and Management of State Assets
(15) Implementing Regulations of on the Evaluation and Management of State–owned Assets
(16) The Notice to strengthen the evaluation and management of state-owed Assets
(17) The guidelines of evaluation record registration of state-owned assets evaluation
(18) The manual for enterprises’ to achieve evaluation result approvals or evaluation record
registration to the government of the state-owned assets of Shanghai
(19) Real estate appraisal standard
(20) Other related legislations and regulations
6.2 Principles Basis

(1) Standard for Assets Appraisal– General Principle δCAIQI[2004]20ε,
(2) Ethic Standard for Assets Appraisal Principle– General PrincipleδCAIQI[2004]20ε
(3) Standard for Assets Appraisal–Enterprise ValueδCAS[2011]227ε
(4) Standard for Assets Appraisal–Evaluation ReportδCAS[2011]230ε
(5) Standard for Assets Appraisal–Evaluation ProcedureδCAS[2007]189ε
(6) Standard for Assets Appraisal–Engagement LetterδCAS[2011]230ε
(7) Guide Note for type of value of assets evaluationδCAS[2007]189ε
(8) Standard for Assets Appraisal–EquipmentδCAS[2007]189ε
(9) Standard for Assets Appraisal–Immovable propertyδCAS[2007]189ε
(10) Guidelines for Assets Appraisal Report of State-owned Enterprise (CAS [2008]218)
(11) Standard for Assets Appraisal–Intangible AssetsδCAS[2008]217ε
(12) Guidance Note for of trademark evaluationδCAS [2011]228ε
(13) Guidance Note for of copyright evaluationδCAS [2010]215ε
(14) Guidance Note for of patent evaluationδCAS [2008]217ε
(15) Guidance Note for legal titles of the evaluation subjectδCAS [2003]18ε
(16) Expert Tip for Assets Appraisal Practice–Disclosure on the evaluation report for
important restructuring of listed companiesδCAS [2012]246ε
(17) Ethics of Standard for Assets Appraisal-independenceδCAS [2012]248ε
(18) Other appraisal principles, guidelines or guiding opinions issued by the Municipal of
16
Finance and China Appraisal Society
6.3 Behavior Basis

(1) The evaluation service contract
(2) Official documents leading to this evaluation activity
6.4 Ownership Basis

(1) Business license of SHMP
(2) Property certificates and land use right certificates of SHMP
(3) Trademark certificates Ƚpatent certificates and copyright certificates of software of
SHMP
(4) Vehicle licenses of SHMP
6.5 Evaluation Basis

(1) 2015 Price information of Equipment
(2) 2015 Price information of assets evaluation
(3) Equipment price for 2015 and price information from internet
(4) Construction price index issued by National Bureau of Statistics of China
(5) Financial statements and audit reports on evaluation date provided by the entrusting
parties
(6) Index issued by the Construction Engineering Bureau regarding equipment’s industrial
construction projects Jixiejiδ1995ε1041
(7) Loan rate and deposit rate issued by People’s Bank Of China
(8) On-site work records
(9) Provisions on the Standards for Compulsory Retirement of Motor Vehicles(Issued on 27
Dec.2012 by Ministry of Commerce, National Development and Reform Commission,
the Ministry of Public Security, and the Ministry of Environmental Protection)
(10) Other supporting information collected by evaluators
17
7. Evaluation Approach
7.1 Introduction of Evaluation Approach

There are three theoretical evaluation approaches, the Market Comparison approach, the
Income Capitalization Approach, and the Asset-Based Approach.
The Market Comparison Approach refers to the evaluation of an asset by comparison or

analysis of the market value a similar comparable at the time near to the evaluation date.
Market approach will be adopted under the condition that the asset can be traded in an active
and open market.
The Income Approach refers to the evaluation approach where the asset value is arrived
through estimating the present value of the expected income of the appraised assets.
The rationale underlying of the income approach is that a willing buyer will not pay for an
asset in an amount higher than the return that asset could bring to him in the future.
The Prerequisites for adopting the income approach including: the expected income can be
quantified, the term of the expected income can be forecasted, and the risks correlated to the
discounting for the expected income can be forecasted.
The Asset-Based Approach is to give a replacement value of the target and then less the
devalue amount caused by several factors. It is based on a principle that the price which a
willing customer would pay for a certain asset will not exceed the current trading price or the
reconstruction cost of that asset.
Each approach evaluates the subject assets from different perspectives. They are adopted
according to the evaluation purpose, the evaluation subject, the market conditions, and the
statistics that can be collected.
According to the statistics, during the first half of 2015, the market of the heavy machinery
18
industry has shown a significant downturn and suffered fierce competition, yet we have not
seen a recovery of the market at the date of issuing this report.
SHMP is a national machinery enterprise. Due to the overcapacity in the industry and the
negative impact of macro economy, the financial position of SHMP’s Y2013-YTD 2015 is as
follows:
Unit:’000(RMB)
Account 2013 2014 YTD 2015

Sales revenue 2,374,295.90 1,990,559.60 999,935.10
Net profit -1,063,806.90 -812,278.30 -604,310.30
The SHMP has suffered loss in the past few years and the operating performance is not
optimistic in the future, so Income Approach is not appropriate to be applied for an unstable
company. The Market Comparison Approach is also not appropriate to be applied because of
the lack of available comparable transactions to measure the corporation value where the
target is in a negative performance.
Consider the above factors, in this evaluation the Asset-Based Approach is adopted.
7.2 Brief Introduction of Asset-Based Approach :

Asset-Based Approach is a type of that focuses on a company's net asset value, or the
fair-market value of its total assets minus its total liabilities. Reasonable evaluation
approaches on each category of the target assets and liabilities shall be adopted accordingly.
7.2.1 Evaluation of Current Assets
Current Assets refer to the assets can be cashed or consumed within one year or one operation
period in the company’s operating activities.
Current assets can be classified into 13 categories, including cash, financial assets held for
trading, notes receivables, dividend receivables, interest receivables, account receivable, other
receivables, prepayment, subsidy receivables, inventories, deferred expenses, non-current
assets due within 1 year and other current assets. For different current assets, we have adopted
19
different evaluation approaches. In this evaluation, the current assets include cash, trade
receivables, prepayments, other receivables and inventories.
1. Cash and cash equivalents
Cash and cash equivalents, are cash and cash in banks during this evaluation. Their value are
determined based on book value after checking the bank records, bank reconciliation
statement and the bank’s ending balance adjustment sheets.
2. Trade receivablesδIncluding notes receivable, trade receivables, other receivables and

prepaymentε
Depending on the company’s practice and our inspection, we have verified the accuracy of
each receivable by checking the details of the accounts and sending inquiry letters.
Based on the information we verified to determine the assessed value of each receivable
according to the possibility of recovery. The evaluators by means of the historical data and the
current investigation, the amount by specific analysis, the time and cause of arrears, the
payments situation, the defaulters capital, the credit, the operation status etc. For there are
substantial grounds to believe that full amount can be recovered, assessed according to the
book value after verification, comply with the relevant provisions of the management
guidelines, those amount should be written off, or the expenses should be included in profit or
loss. If a clear indication that the amount cannot be recovered, assessed according at nil value.
The evaluation results summarized the variety of the situations to assess the present value of
all receivables.
3. Evaluation of Inventory
There are 4 kinds of inventories: materials purchased, raw materials, finished goods and work
in progress.
δ1ε Materials purchased and raw materials :
Value of materials purchased and raw materials = market unit price × quantity of raw
materials + reasonable expenses (freight, damages and storage expenses happened before
accepted by warehouse)
The market price can be collected by checking the inventory record or from procurement
20
department. For materials that are at the book value and is not different significantly from the
market price, the estimated unit value based on unit price at the book value .For the
over-stocked materialsθit can be valued under discounted market price or recoverable value.
δ2ε Finished goods

To some extent, part of profit margin is taken into account while evaluate the finished goods.
We have verified the quantity of the finished goods and the appraised value of finished goods
are based on the actual sales price less the relevant taxes.
Value of product in progress ωsales revenue - selling expenses - tax and surcharges-
appropriate margin after tax
= sales revenue × [1- Sales Expense Rate - sales tax and surcharges rate - gross profit margin
× income tax rate - gross profit margin × (1- income tax rate) × net profit discount rate]
δ3ε Work in Progress
(21) During this evaluation, WIP is raw materials and manufacturing costs. After enquired the
manufacturing staff of the SHMP, it is known that some projects are delayed or even
suspended due to clients’ responsibility which lead to the over stocked of the WIP. For the
risk control purposes, the provision is accrued on the WIP. As such discounts are taken
into account while assess the value of the WIP.
7.2.2 Evaluation of long term equity investment

Long term equity investment (here refer to SHMP’s subsidiaries) is recognized as a
corporate asset. The company has a certain interests in these subsidiaries which has to be
evaluated.
Value of subsidiary= shareholding percentage of target subsidiary × equity value of
subsidiary on evaluation date
Regarding the long term investment, the equity value of the subsidiary is based on the
evaluation result of the total value of the subsidiary.
Value of controlling subsidiary = shareholding percentage of target subsidiary ×
Market value of equity of the target on evaluation date
21
7.2.3 Evaluation of buildings and constructions

δ1εMarket comparison approach
Market comparison approach is adopted while evaluating apartments. Similar comparable
samples in the same area are collected to compare the trading condition, the market
situation, the location and the physical condition with targets and adjustment are made to
achieve the market price of the targets.
P=Pˊ× A × B × C × D
P — the value of target property
Pˊ— the value of sample property collected
A — adjustment parameter of trading condition
B — adjustment parameter of market condition
C —adjustment parameter of location
D —adjustment parameter of physical condition
δ2εIncome approach
Income approach estimates the sum of present value of the net revenue in each period of
the target properties in the future, using an applied capitalization rate.
The formula of income approach is as follows:
Q
)L
V =¦
L U
L
V Ăvalue of target property

r Ăcapitalization rate
n Ăprospective term χ
Fi Ănet operating income in period i
7.2.4 Evaluation of Equipment

Equipment is valued based on the market price, and the cost replacement approach is
adopted.
Value= Replacement cost × Newness rate
(1) Determine of replacement cost
22
Replacement cost refers to the cost of a new equipment or other improvement which has
the same utility, or similar functions.
Replacement cost of imported equipment=CIF + Tariff + import VAT + consumption
tax + Bank charges + Foreign trade commission fee + Inspection fee + Local freight fee +
Base fee + Installing & trial running Fee + Other reasonable expenses
z CIF can be replaced by the purchase price of the domestic manufactured equipment with
similar function as of the imported one.
z CIF can be determined by inquiry with the manufactures or the trading agency, or figure
out from the purchasing contract.
z Import taxes, consumption tax and import VAT are determined according to the related
tax regulations.
z Freight and shipping fee is calculated based on the weight, the bulk, the volume, the
shipping miles and some other relevant factors to determinate a composition percentage
in relation to the CIF. In addition, the rates set by the government should also be
followed.
z Bank charges, trading company agency fee, and inspection fee, can be estimated in terms
of 1.5% of CIF.
z Base fee and installing & trial running fee can be estimated according to the relevant
available information.
z Other reasonable expenses include the expenses such as the capital cost and the training
expenses. For equipment with high value and long purchase and construction circle, its
capital cost is taken into consideration.
The replacement cost of the domestic purchased equipment can be determined by the
purchase cost of a similar comparable equipment plus reasonable expenses including the
base fee, the transportation fee, the installation, the adjustment fee and the cost of capital
etc.
z As at the evaluation date, input VAT of the target equipment can be deducted as input
23
credit by SHMP as SHMP is a general VAT taxpayer, so VAT are excluded from the
replacement cost in this report.
z Replacement cost of the vehicle is calculated as follows:
Replacement cost of vehicle= vehicle purchase price + vehicle purchase tax + other
reasonable costs
Other reasonable costs of the vehicle including the examination fee, the photo fees for apply
license, the stamp fees etc.
If we were unable to inquire the price of the target equipment, the market price of a similar
equipment is used as a reference and it is adjusted by some relevant factors to determine the
replacement cost.
(2) Determination of the Newness rate
Newness rate
A. Newness rate for key and special equipment
We apply different weighting between the straight line method and the technology inspection
method to integrate a composite newness rate.
Straight line method newness rate = remaining useful life ÷ (used years + remaining
useful life ) × 100%
Or (estimated useful life – used years) ÷ expected useful life ×100%
The remaining useful life of the equipment is based on the professional judgment by the
evaluators, considering the utilization, the loading, the maintenance, the original manufacturing
quality, the failure frequency, the environment conditions.
Integrated newness rate = (technical assessed rate × 60% + life method newness rate ×
40%)
B. Newness rate for general equipment
Newness rate= (economic useful life – used years) ÷ economic life × 100%
For the equipment exceeded its economic useful life but continue to be used, the newness rate
is determined based on the actual operating status observed.
24
C. Newness rate of vehicles
For the vehicles, the newness rate is determined with reference to the regulation
‘Mandatory Retirement Standards for Motor Vehicles’ issued by Ministry of Commerce,
The National Development and Reform Commission, Ministry of Public Security and
Ministry of Environmental Protection Bureau on 14 Jan. 2013. It stipulates the provisions
of retirement age and retirement exercise miles, and we also refer to the ‘Asset Appraisal
Common Manual’ and the ‘Economic Life of Vehicle Reference Table’ to determine the
estimated economic useful life of the vehicle, in order to identify a newness rate based on
the technical assessment and life method to integrate a rate, the formula is as follows:
Integrated newness rate = (technical inspection method newness rate × 60% + life
method newness rate × 40%)
7.2.5 Evaluation of Construction in Progress- Constructions

a. Since the content in CIP are project costs for industrial natural gas engineering
project, it is measured at the value with all the cost of projects in processing.
Value of CIP-Construction= construction cost + management expenses + cost of
capital
b. Evaluation of Construction in Progress-Equipment in installation

(1) For the equipment in installation, the physical status, the construction cycle are taken into
consideration, the cost invested by the target company and reasonable management fees
are also analyzed while determine the value of CIP-equipment in installation.
Value of CIP-Equipment in installation= Equipment cost + installment &
Management fee + cost of capital
VAT shall be deducted from the book value of equipment since the SHMP is a general VAT
payer.
Project management fee is estimated at 1%-3%, includes the staff salary, the deprecation fee
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and the travel expense, etc.

For equipment with long construction period and high value, we also have considered the
construction period and the payment method to determine the cost of capital.
(2) For equipment used in the suspending projects, we analyzed the suspension reasons. For
those projects that would re-start, they are evaluated as CIP-equipment. For ceased
projects, their recoverable value will be estimated.
7.2.6 Evaluation of Intangible assets—Other intangible assets

(a) Intangible assets recorded on the balance sheet
The book value of intangible assets are the residual value of software, so the value of
intangible assets can be determined through market inquiry.
(b) Intangible assets- off balance sheets intangible assets
Excessing earnings generated by the intangible assets are not available in this case. The
trademarks were stopped using and the company has been suffering losses. The copyrights of
software were stopped upgrading and cannot meet the requirement for the existing
manufacturing. Off-balance sheet intangible assets are difficult to find comparable and
detailed data. Thus, the market comparison approach and the income approach are not suitable
and thus the cost approach is adopted.
Value of patent= Replacement cost × (1-devalued rate)

Replacement cost = application fee for registration of patent+ maintenance fee + patent
registration fee+ printing fee+stamp duty+ material cost + production cost
Devalued rate due to time = used life / patent protection period
Value of trademark = replacement cost= trademark registration fee + design fee
Value of copyright of software = Replacement cost × (1- devalued rate due to time) × (1-
devalued rate due to function)
ωapplication fee+ registration fee+ maintenance and protection fee of
Replacement costω
software source code + checking fee on data base +files searching fee + material cost+ +
26
producing charges + labor cost

ωused life of copyright of software/copy right protection period
Devalued rate due to timeω
7.2.7 Evaluation of development expenditure

Development expenditure incurred in some projects. We verified the incurred
development expenses of those projects in the operation period and the value of
development expenditure is remained as the book value.
7.2.8 Evaluation of Long term prepaid expenditures

Long term deferred expenses include the maintenance expenses and the transportation
expenses on equipment. We considered above factors while evaluate equipment, as such
we assess it at nil. For the amortized furnishing expense we value it at the net book value.
For the amortized manufacturing tools & supplementary items, we spited them into the
normal use and the idle one, where we value them at the market value and at disposal
value respectively.
7.2.9 Evaluation of liabilities

Liabilities are the economic debts that can be quantified by money and undertaken by
enterprises that should be paid by future cash flows generated by the assets or by providing
services. The evaluation of liabilities is the progress of verification of actual amount of debt
borne by the target company. Liabilities that are not actually borne by the company are
measured at nil.
8. Evaluation Procedures
Pursuant to the ‘Management Method of Evaluation of State Owned Assets’, we conducted

necessary evaluation procedures in this evaluation, which are summarized as follows:
(1) Communicate with the entrusting parties to determine the evaluation objective and scope
of evaluation. The service contract LXA (2015εNo. 464 was signed in Oct. 2015.
(2) Collect data and relevant information, such as list of assets and accounting vouchers.
Interview the relevant personnel of SHMP regarding the current operation of the
27
company and the historical and current status of the target assets. The evaluation date, the
proposal and the procedure were then determined according to the evaluation objective,
the evaluation scope and the evaluation subject.
(3) Carry out onsite -work inspection in SHMP from 15 Oct.2015 . The on site work lasted
for 45 days.
(4) Analyze the information collected and carry out market research and the necessary
inquiries. Approperiate approaches are then be adopted to evalute the target assests.
(5) Analyze the evaluation result and issue our draft report. Communication with the
entrusting parties are processed and the final report are submitted after our internal
3-level review.
9. Assumptions and Conditions
9.1 Assumptions
9.1.1 General assumptions
(1) The stable macroeconomic environment
The value of asests is also impacted by the the macro econmy. We assumed that the
industrial policies, the tax policies and the economic policies remain stable to ensure the
result of this report to be reasonable in a certain period.
(2) The going concern
The assets of SHMP will contintue to be used in current purpose and service condition
after the realization of the stated purpose of this report. The company will continue
producing the same or similar products.There would be no change on the sales and
purchase strategy of SHMP and interests allocation between the associate companies
would remain the same.
(3) Inflation impact is not taken into consideration in this evaluation.
(4) We assumed that the interest rates and the extrange rates will not be fluctuated
significantly with refer to the current rates.
28
10. Evaluation Conclusion
The equity value of SHMP under Asset-Based Approach, as at the date of evaluation (30 Sep.
2015) is RMB -184,868,000, increasing RMB 79,457,900 or 30.06% compared to the book
value.
Date of Evaluation: 30 Sep. 2015 Unit:’000 (RMB)
Increase/
Net Book Valuated Increase/
decrease
Accounts Value Value Decrease
Ratio (%)
A B C=B-A D=C/A
Current Assets 3,874,220.30 3,920,894.10 46,673.80 1.2
Non-current Assets 1,712,313.30 1,702,829.60 -9,483.70 -0.55
Incl.:Long term equity 130,018.90 132,157.00 2,138.10 1.64
investment
Fixed Assets 1,217,208.10 1,231,288.50 14,080.40 1.16
CIP 77,118.00 78,798.80 1,680.80 2.18
Intangible Assets 1,964.80 9,470.70 7,505.90 382.02
Development expenditure 709.70 709.70 - 0
Long term deferred expenses 285,293.80 250,404.90 -34,888.90 -12.23
Total Assets 5,586,533.60 5,623,723.70 37,190.10 0.67
Current Liabilities 5,650,450.10 5,648,023.20 -2,426.90 -0.04
Non-current Liabilities 200,409.40 160,568.50 -39,840.90 -19.88
Total Liabilities 5,850,859.50 5,808,591.70 -42,267.80 -0.72
Net Assets -264,325.90 -184,868.00 79,457.90 30.06
The NBV of net assets increased RMB 79,457,900, increasing 30.06% because:
Current assets:
The value of current assets increased because the inventory provision were cautiously
recorded into book value by the auditor according to the accouting standard , which decreased
the net book value of the inventory and thus increased the value of inventory measured under
market price.
Long-term equity investment:

The value of long term equity investment increased because we appraised subsidiaries of
SHMP respectively. The value of subsidiary company Shanghai electric (Wuxi) forging Co.,
Ltd increased (refer to the spreadsheet) , and thus increased the value of 51% shares held by
29
SHMP.
Fixed assets- properties:

The value of properties increased only because the property price has been soaring in the past
few years in Shanghai.
Fixed assets- equipment:
The value of equipment decreased because:
Most of equipment’s book value included VAT which shall be excluded from the assessed
value since SHMP is a genernal VAT payer.
The appreciation of RMB in the past years led to a lower import price for a similar equipment,
so the market price declined.
The decreasing market demand of heavy machines made the lower import price which
decrease the replacement cost of the target equipment.
The accounting depreciation rate is lower than the evalution newness rate which reflected the
actual using condition of target equipment. It thus make the net assessed value higher than the
net book value of equipment .
CIP:
The value of CIP increased because the cost of capital and management expnese are taken
into account while evaluating CIP assets.
Intangible assets:
The value of intangible assets increased because some off-balance sheet intangible assets are
included in the evaluation scope.
Long-term defferred expenses:
The value of long-term defferred expenses decreased due to:
δ1εthe maitenance costs record to the book value are considered while evaluting equipment,
so they are valued at nil value.
δ2εthe depreciation factors are taken into account on tools and appliances which make the
assesed value declined.
Current liabilities:
The value of current liabilities decreased because the education expense for staff was valued
30
at nil .
Deferred revenue
The value of the deferred revenue decrease because of the projects revenue for the
completed projects which their revenues carried over by the percentage of completion and
some non-refundable subsidies are valued at nil value.
11. Special Matters and Disclaimers
11.1 The evaluation conclusion reflects the market value on the evaluation date only.
During the recent period from evaluation date, the prices of the materials and the
labors keep stable as recent and the exchange rate fluctuates in a reasonable range, as
a result, the assets value will not change dramatically on the date of transfer which is
close to the date of evaluation.
11.2 The ‘appraisal value’ in this report refers to the market value on the open market of
the subject assets while SHMP will continue its operation following the original
practice and to manufacture the same or similar products. We do not consider present
and future mortgages or guarantees, or benefit from different way of transaction.
Besides, force majeure is also not taken into consideration.
11.3 In the event of any changes of above items or evaluation principles, the result of this
report will partly or completely invalid.
11.4 This report is prepared for the appointed purpose of SHMP only. Different objective,
different type of evaluation and different date of evaluation will lead to different
evaluation conclusion for the same asset, so we are not responsible for inappropriate
use of this report.
11.5 Our company and the evaluators are not responsible for the flaws that could not be
identified under normal circumstance, the flaws may affect the evaluation result if the
entrusting parties or the owner do not notify the information to the evaluators on time
31
of appointment.
11.6 During our inspection, we were provided with the copies of documents, business
license, certificates, accounting evidences, and other relevant materials. We have not
carried out an independent verification of the provided materials, and we are not
responsible the genuine of the provided materials.
11.7 This report is prepared to reflect the market value of target assets. It is not necessary
for the assets’ owner to adjust the book value in its financial statements accordingly.
Whether to pay tax and conduct tax reporting should follow the guidance of local tax
bureau and act according to the tax regulations.
11.8 The evaluation objective is equity transfer. We did not consider taxes and the other
expenses afforded by the buyer or the seller which might affect the final result.
Individual income tax and CIT payment should follow the tax bureau and the relative
regulations. Usually, the equity transfer is a transaction between the shareholders and
it will not impact the tax position of the target company. During this report, we have
not provide any tax or tax provision for the target that caused by the evaluation
result.
11.9 In case of any factual changes in quantity of the assets and the market price after the
date of evaluation and thus affect the value under Asset-Based Approach, the
entrusting party should engage an appraisal firm to carry out a new evaluation.
11.10 Pending litigations

As of 30 September 2015, ,there are 7 unsettled lawsuits and arbitrations as followsφ
δ1εSHMP (the seller) signed two Sales and Purchase Agreements, including Two Sets of
Single-stand Six-roller Reversible Mill Equipment for 100t Tonggang One Megaton
Cold-rolled Sheet Project and Supply Contract of Single-stand Temper Mill for 100t
Tonggang One Megaton Cold-rolled Sheet Project with Jilin Tonggang Cold-rolled
Sheet Co., Ltd. (referred as Jilin Company) on 27 Dec.2005 for selling equipment to
32
Jilin Company. SHMP lodged an arbitration in May 2015 with Tonghua Arbitration
Commission, requesting Jilin Company to pay for the overdue payment RMB
26,636,529,the overdue payment interest RMB1, 874,044.01, and the relevant legal
fee. The Arbitration is still in the progress and has not settled yet. The full amount was
accrued as bad debt provision by the auditor and the trade receivable is measured at
nil.
δ2εSHMP signed purchase contracts with Tianjin Hongan Heavy Industrial Machinery
Co., Ltd (referred as Tianjin Company) during the period Jan.2007 to May 2014.
Tianjin Company filed a lawsuit to Shanghai People’s Court of Minhang District in
Jun.2014, requesting SHMP to pay the outstanding payment RMB17, 202,337.70 ,the
overdue payment interest RMB 10,393,449 and the relevant legal fee. Tianjing
Company also requested the purchasing contract for equipment purchasing shall
continue to implement. The court entered a judgement according to (2014) Min Min
Er (Shang) Chu Zi No.1062 Civil Ruling Paper on 7 Jan.2015. The lawsuit is in the
first trial stage and has not been settled yet. The corresponding outstanding payment
RMB14, 330,130.90 was recorded in the trade payable and thus it is measured at the
book value.
δ3εSHMP (the seller) signed Bhushan Hot-rolling Equipment Manufacturing and

Supplying Contract with SMS (Beijing) International Trading Co.Ltd (referred as
SMS Beijing) on 22 Feb.2011, WAHAB Project Manufacturing and Supplying
Contract on 20 Oct.2011 and Purchase Order on 8 Mar.2013 with SMS (Beijing)
International Trade Co., Ltd. (referred as SMS Beijing). The dispute was caused by the
overdue payment regarding the 3 SPAs, as a result SHMP lodged two arbitrations with
China International Economic and Trade Arbitration Commission regarding the 3
SPAs, requesting SMS Beijing for the overdue payment of RMB 20,676,161.93 and
the relevant legal fee. The lawsuit is still in the arbitration progress and has not settled
been yet. 20% of corresponding trade receivable was recorded as bad debt provision
and the trade receivable is measured at the book value.
33
δ4εSHMP (the seller) entered into 4 SPAs on 19 Apr.2010 and 19 Jun.2010 respectively,
selling 4 set of equipment including 140mn quickly-forging oil press, 100t/600t.m
rail-bound forging manipulator, 66MN quickly-forging oil press and 80t, 200t.m
rail-bound forging manipulator to Jiangsu Sunan Heavy Industrial Machinery Co., Ltd
(referred as Jiangsu Company). SHMP sued to Suzhou Intermediate People's Court,
requiring for the outstanding payment RMB 99,866,474.38 together with the overdue
payment interests, and the relevant legal fee. The lawsuit is still in the progress of
waiting for the court session to open. During this evaluation, the relevant trade
receivable is measured at the book value
δ5εSHMP’s affiliated companyĂShanghai Shangzhong Environmental protection

equipment Engineering Co., Ltd. (SSEPEE) entered into a Contract and a Technology
Agreement with Tianyang Sewage Treatment (Dalian) Co. Ltd.δreferred as Dalian
Companyεon 22 Apr.2007, for the re-construction project conducted by SSEPEE. Due
to the quality of re-construction projects conducted by SSEPEE, Dalian Company
lodged an appeal with LiaoNing Province Dalian Intermediate People's Court in
Jan.2014, requesting for the loss of RMB10, 610,314. SHMP was ranked as the
number three defendant with joint liabilities to the obligations. Dalian Company also
claimed that the legal fee shall be borne by SSEPEE and SHMP. The court issued the
written sentence of first trial on 22 Nov. 2014, stated that SSEPEE shall pay for RMB2,
218,886 to the Dalian Company as compensation in 30 days after the effectiveness of
the sentence. Other claims are dismissed by the Court. As at report date, SSEPEE
lodged an appeal with to the Liaoning High People’s Court. The book value of
corresponding trade receivable is CNY 2,249,460.00 and it is measured at the book
value.
δ6εSHMP’s affiliated companyĂShanghai Shangzhong Environmental protection

equipment Engineering Co., Ltd. (SSEPEE) entered into a Construction Contract and a
Technology Agreement with Tianyang Sewage Treatment (Dalian) Co. Ltd.δreferred
34
as Dalian Companyεon 22 Apr.2007, for the construction project conducted by

SSEPEE. Due to the disputation of construction quality, Dalian Company lodge an
appeal with Dalian Jinzhou People’s Court, requesting SSEPEE for the construction
cost and improvement cost RMB5, 891,100, including the advance payment of RMB
522,700 made on behalf of Dalian Company by SSEPEE, the relevant interests and the
incurred construction cost of RMB 4,150,000. SHMP was required to bear the joint
liabilities as to the obligations. The lawsuit is still in the progress of first trail.
δ7εSHMP signed a Cooperate Agreement and a Trading Contract with Brighton GmbH,
Inc (former name: Schiess Brighton Gmbh, Inc and now Brighton Gmb, Inc, referred
as the Germen Company) on 10. Jan.2006 and 25 Jan.2006 respectively. SHMP agreed
to manufacture 20M vertical lathe as a sub-contractor of the Germen Company who
won the bidding of Shanghai Electric Lingang Heavy Machinery Equipment Co Ltd
on 20 Dec.2005. Due to the dispute regarding the payment, SHMP lodged with
Shanghai No.1 Intermediate People's Court requiring Germen Company for the cost of
the spare parts of 20M vertical lathe in the amount of EUR 2,400,000 and the interests
on the overdue payment and the relevant legal fee. The suit is still in the progress of
arbitration. The full amount of the relevant trade receivable was accrued as a bad debt
provision, and thus the trade receivable is measured at nil value.
11.11 During this evaluation, there are 401 equipment recorded in the fixed assets of
SHMP, with the historical original book value RMB 377,312,233.33 and the net book
value RMB197,574,263.38 ,planned to be transferred to Shanghai Electric SHMP
Casting & Forging Co.,Ltd. and Shanghai Electric SHMP Pulverizing & Special
Equipment Co., Ltd.δplease refer to the spread sheets for more detailsε.
11.12 The company also has the following disclosures related to limited ownership or
limited use right of assets:
1) The cash in bank RMB23, 940,441.75 was frozen by Shanghai Minhang People’s
court due to the pending litigations.
35
2) The bank loan RMB75, 000,000.00 was obtained by a domestic factoring

contract with recourse signed with bank on the trade receivables RMB
92,263,410.40.
11.13 SHEPEE transferred part of properties, land and whole equipment on the
valuation date 31 Aug.2012 due to the cease of operation. Shanghai Electric (Group)
Corporation entered into a property transfer contract with SHEPEE on 17 Jul.2013
and paid RMB23, 400,000.00 as a deposit. However, as at the evaluation date, the
transfer has not completed legally. The additional charges for land granting fee and
relevant taxes based on the contract amount have been taken into consideration.
As at the date of this report, except the above issues, we are not aware of any other
specific issues that may impact the valuation result and shall be disclosed, as
according to the observation of our evaluation work by and the information provided
by the entrust parties and SHMP.
11.14 In case of any discrepancy between the Chinese and English version of this
report, the Chinese version shall prevail.
12. Limitations On The Use of This Report
12.1 This report can only be used for listed appraisal objective only. The entrusting party
has the right to use the report. Without consent by the appraisal firm the report shall not
be delivered to any third parties or persons other than the report users, the report, part or
whole, shall not be published on any public media.
12.2 The report users are :

(1) the entrusting parties and
(2) other relevant parties subject to the relevent laws and regulations.
12.3 This report can only be released to the public after filed with the State-owned Assets
Supervision and Administration Commission.
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Shanghai Electric Group Company Limited: Announcement

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Shanghai Electric Group Company Limited: Announcement

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Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no

SHANGHAI ELECTRIC GROUP COMPANY LIMITED

(Stock Code: 02727)

Reference is made to the announcement of Shanghai Electric Group Company Limited

By order of the Board

Shanghai, the PRC, 4 December 2015

* For identification purpose only

EVALUATION REPORT FOR ENTERPRISE VALUE

EVALUATION REPORT FOR 100% EQUITY INTERESTS’ VALUE OF THE OUTGOING

ASSETS-SHANGHAI HEAVY MACHINERY PLANT CO., LT REGARD TO SHANGHAI

LXA (2015) No.464

Shanghai Lixin Appraisal Ltd

not be deemed as a guaranteed value which could be realized in the market.

LXA (2015) No.464

EVALUATION REPORT FOR 100% EQUITY INTERESTS’ VALUE OF

THE OUTGOING ASSETS-SHANGHAI HEAVY MACHINERY PLANT

LXA (2015) No.464

1.1 The Entrusting Party 1: Shanghai Electric (Group) Corperation

1.3.1 Company introduction:

Certified Public Accountants Co., Ltd

1.3.2 Historical operation performance of SHMP

Unit: ‘000 (RMB)

Financial performance of SHMP for the period 2013-2015.9 is as follows:

1.3.3 Long term equity investments (Subsidiaries)

1.3.4 Accounting Policy, Key Tax Rate and Depreciation Policy

Taxes Tax Rate

VAT-Value Added Tax 17%,6%

CIT-Corporate Income Tax 15%

Urban maintenance and construction tax 7%

1.3.6 The relation of entrust parties and target company

Entrusting party 1 Shanghai Electric (Group) Corporation

Entrusting party 2 Shanghai Electric Group Co. Ltd

The target: Shanghai Heavy Machinery Plant Co., Ltd

1.3.7 The report users

The purpose of the evaluation is for equity transfer.

According to the Resolution of Board of Directors of Shanghai Electric (Group) Corporation

3.1 Evaluation Scope and Subject:

RMB5,650,450,116.43 and the non-current liabilities of RMB200,409,370.29. The book value

4. Type of value & the definition

On this report, the type of value refers to the market value.

The date of evaluation is on 30 Sep. 2015 because:

6.1 Legislation Basis

(13) Law of State-owned Assets of the People's Republic of China

6.2 Principles Basis

Finance and China Appraisal Society

6.3 Behavior Basis

6.4 Ownership Basis

6.5 Evaluation Basis

7.1 Introduction of Evaluation Approach

The Market Comparison Approach refers to the evaluation of an asset by comparison or

Account 2013 2014 YTD 2015

7.2 Brief Introduction of Asset-Based Approach :

2. Trade receivablesδIncluding notes receivable, trade receivables, other receivables and

δ2ε Finished goods

7.2.2 Evaluation of long term equity investment

7.2.3 Evaluation of buildings and constructions

V Ăvalue of target property

7.2.4 Evaluation of Equipment

B. Newness rate for general equipment

C. Newness rate of vehicles

7.2.5 Evaluation of Construction in Progress- Constructions

b. Evaluation of Construction in Progress-Equipment in installation

and the travel expense, etc.