(Stock Code: 02727) CONNECTED TRANSACTION PROPOSED DEBT-TO-EQUITY SWAP IN GOSS INTERNATIONAL BY CONTROLLING SHAREHOLDER

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1 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) CONNECTED TRANSACTION PROPOSED DEBT-TO-EQUITY SWAP IN GOSS INTERNATIONAL BY CONTROLLING SHAREHOLDER The Board is pleased to announce that on 27 July 2015, the Board resolved to approve the proposed Debt-to-Equity Swap in Goss International by SEC and SMEIC (a subsidiary of the Company). As at the date of this announcement, Goss International is a directly wholly-owned subsidiary of SMEIC while SEC and SMEIC hold debt interest in Goss International in the amount of US$ million and US$ million, respectively. After the proposed Debt-to-Equity Swap, SEC and SMEIC would hold 93.63% and 6.37% of the equity interest in Goss International, respectively, and accordingly, Goss International would no longer be a direct subsidiary of SMEIC or an indirect subsidiary of the Company. The proposed Debt-to-Equity Swap constitutes the deemed disposal under Rule 14A.24 of the Listing Rules. SEC is our controlling shareholder holding 55.05% equity interest in the total issued share capital of the Company as at 31 March Therefore, SEC is a connected person of the Company as defined under Chapter 14A of the Listing Rules and this transaction constitutes a connected transaction on the part of the Company under Chapter 14A of the Listing Rules. Given that the highest applicable percentage ratio (excluding the profit ratio) (as defined in the Listing Rules) for this transaction, aggregated with the applicable ratios for the Previous Transactions according to Rule 14A.81 of the Listing Rules, is more than 0.1% but less than 5%, this transaction is subject to the reporting and announcement requirements but exempt from the circular (including independent financial advice) and the independent shareholders approval requirements under Chapter 14A of the Listing Rules. According to the Stock Listing Rules of the Shanghai Stock Exchange, the proposed 1

2 Debt-to-Equity Swap is subject to the shareholders' approval. INTRODUCTION The Board is pleased to announce that on 27 July 2015, the Board resolved to approve the proposed Debt-to-Equity Swap in Goss International by SEC and SMEIC (a subsidiary of the Company). KEY INFORMATION OF THE PROPOSED DEBT-TO-EQUITY SWAP Parties SEC; SMEIC ; and Goss International. Details of the Proposed Debt-to-Equity Swap As at the date of this Announcement, Goss International is a directly wholly-owned subsidiary of SMEIC while SEC and SMEIC hold debt interest in Goss International in the amount of US$ million and US$ million, respectively. After the proposed Debt-to-Equity Swap, SEC and SMEIC would hold 93.63% and 6.37% of the equity interest in Goss International, respectively, and accordingly, Goss International would no longer be a direct subsidiary of SMEIC or an indirect subsidiary of the Company. Financial information of Goss International Set out below is a summary of the consolidated audited financial information of Goss International for the two years ended 31 December 2014: For the year ended 31 December (RMB in millions) Net profit (before taxation) Net profit (after taxation) Note: Net profit (before taxation) of Goss International for the year ended 31 December 2013 was RMB -31 million; after considering the income tax gain in the amount of RMB69.53 million, the net profit was RMB38.5 million. As at and for the year ended 31 December 2014, the total assets of Goss International was RMB 1, million, the total liability was RMB 2, million, the net assets was RMB million, the total revenue was RMB 1, million and the net profit was RMB million. As at the date of this announcement, Goss International has been a subsidiary of the Company for more than 12 months. The proposed Debt-to- Equity Swap would result in a net gain of approximately RMB400 million for the Company. 2

3 Basis of Consideration and payment The shareholding of SEC and SMEIC in Goss International upon the completion of the proposed Debt-to-Equity Swap is deteremined based on the percentage of the debt interest held by each of SEC and SMEIC in Goss International (US$ million and US$ million, respectively). Others Upon the shareholders' approval of the proposed Debt-to-Equity Swap, SEC and SMEIC would transfer all of their respective equity interest in Goss International to American Industrial Partners, which is a third party independent of the Company and connected persons of the Company. REASONS FOR AND BENEFITS OF THE TRANSACTION The proposed Debt-to-Equity Swap would result in a net gain of around RMB400 million for the Company, reduce the negative impact brought by the printing machine business on the Company and facilitate the exiting of the printing machine business by the Company. OPINIONS OF THE BOARD Mr. Huang Dinan, Mr. Wang Qiang and Mr. Zheng Jianhua, all being Directors, hold directorship(s) or act as senior management in SEC Group and its associates and thus have material interests in the proposed Debt-to-Equity Swap. They have therefore abstained from voting on the relevant board resolution approving the proposed Debt-to-Equity Swap. Other than as disclosed above, none of the other Directors has material interests in this transaction. The Directors (including the independent non-executive Directors) consider that the proposed Debt-to-Equity Swap is conducted after arm s length negotiations and on normal commercial terms which are fair and reasonable and in the interests of the Company and its shareholders as a whole. LISTING RULES IMPLICATIONS SEC is our controlling shareholder holding 55.05% equity interest in the total issued share capital of the Company as at 31 March Therefore, SEC is a connected person of the Company as defined under Chapter 14A of the Listing Rules and this transaction constitutes a connected transaction on the part of the Company under Chapter 14A of the Listing Rules. Given that the highest applicable percentage ratio (excluding the profit ratio) (as defined in the Listing Rules) for this transaction, aggregated with the applicable ratios for the Previous Transactions according to Rule 14A.81 of the Listing Rules, is more than 0.1% but less than 5%, this transaction is subject to the reporting and announcement requirements but exempt from the circular (including independent financial advice) and the independent shareholders approval requirements under Chapter 14A of the Listing Rules. 3

4 According to the Stock Listing Rules of the Shanghai Stock Exchange, the proposed Debtto-Equity Swap is subject to the shareholders' approval. GENERAL INFORMATION The Group is one of the largest industrial equipment manufacturing conglomerates in China engaged in the following principal activities: (i) design, manufacture and sale of nuclear power nuclear island equipment products, wind power equipment products and heavy machinery including large forging components; (ii) design, manufacture and sale of thermal power equipment products and auxiliary equipment, nuclear power conventional island equipment products and power transmission and distribution equipment products; (iii) design, manufacture and sale of elevators, electric motors, machine tools, printing and packaging equipment, marine crankshafts and other electromechanical equipment products; and (iv) provision of integrated engineering services for power station projects and other industries, financial services and functional services including international trading services. SEC is our controlling shareholder holding approximately 55.05% equity interest in the total issued share capital of the Company as at 31 March The principal business of SEC is the management of state-owned assets and investment activities. Goss International is a company incorporated in Delaware, the United States, on 1 February Its business scope includes the provision of printing machine series products and ancillary equipments, provision of resolutions for commercial printing clients and news institutions, including pre-printing products, high-speed printer, innovative post-printing products and regular maintenance on parts and components. DEFINITIONS In this announcement, the following expressions have the meanings set out below unless the context requires otherwise: associate(s) Board Company connected person(s) "Debt-to-Equity Swap" has the meaning ascribed thereto under the Listing Rules; the board of directors of the Company; Shanghai Electric Group Company Limited ( 上海電氣集團股份有限公司 ), a joint stock limited company duly incorporated in the PRC with limited liability, the H shares of which are listed on the Stock Exchange under stock code and the A shares of which are listed on the Shanghai Stock Exchange under stock code ; has the meaning ascribed thereto under the Listing Rules; the conversion of debt interest to equity interest in Goss International by SEC and SMEIC, details of which are set 4

5 out in the section "Key Information of the Proposed Debt-to- Equity Swap" in this announcement; Directors Goss International Group Hong Kong Listing Rules PRC or China Previous Transactions RMB SEC SEC Group Shanghai Electric Land Company the directors of the Company; GOSS INTERNATIONAL CORPORATION ( 美國高斯國際有限公司 ); the Company and its subsidiaries from time to time; Hong Kong Special Administrative Region of the PRC; the Rules Governing the Listing of Securities on the Stock Exchange; the People s Republic of China which, for the purpose of this announcement only, does not include Hong Kong, the Macau Special Administrative Region and Taiwan; (i) the connected transaction entered into between Shanghai Yawa and SEC on 10 October 2014 for disposal of the buildings of Shanghai Yawa located at No. 20, North Chaling Road, Shanghai, China; (ii) connected transaction entered into between Shanghai Electric Printing Company and Shanghai Electric Land Company on 24 December 2014 in respect of the proposed transfer of 100% equity interest in Shanghai Shen Wei Da; and (iii) the connected transaction entered into between SEC and Wind Power Company on 25 June 2015 in respect of the capital injection into Wind Power Company by SEC (details of which are set out in the announcements of the Company published on 10 October 2014, 24 December 2014 and 25 June 2015, respectively); Renminbi, the lawful currency of the PRC; Shanghai Electric (Group) Corporation ( 上海電氣 ( 集團 ) 總公司 ), the controlling shareholder (as defined in the Listing Rules) of the Company holding approximately 55.05% interests in the total issued share capital of the Company as at 31 March 2015; SEC, its subsidiaries and its associates, but excluding the Group; Shanghai Electric Group Land Co., Ltd. ( 上海電氣集團置業有限公司 ), a wholly-owned subsidiary of SEC; 5

6 Shanghai Electric Printing Company Shanghai Electric Group Printing & Packaging Machinery Co., Ltd. ( 上海電氣集團印刷包裝機械有限公司 ), a wholly-owned subsidiary of Shanghai Mechanical & Electrical and a company duly incorporated in the PRC with limited liability; Shanghai Shen Wei Da Shanghai Shen Wei Da Machinery Co., Ltd. ( 上海申威達機械有限公司 ), a company duly incorporated in the PRC with limited liability and is wholly owned by Shanghai Electric Printing Company as at the date of this announcement; Shanghai Yawa SMEIC Stock Exchange US$ Wind Power Company Shanghai Yawa Printing Machinery Co., Ltd. ( 上海亚华印刷机械有限公司 ), a company duly incorporated in the PRC with limited liability, the Company is no longer holding any interest of its total issued share capital as at the date of this announcement; 60% interests of its total issued share capital being held by Shanghai Electric Printing Company and 40% of its total issued share capital being held by Tai Kong Holdings (Hong Kong) Limited as at 10 October 2014; Shanghai Mechanical & Electrical Industry Co., Ltd. ( 上海機電股份有限公司 ), a non-wholly owned subsidiary of the Company, approximately 47.49% of its total issued share capital being held by the Company as at the date of this announcement; The Stock Exchange of Hong Kong Limited; United States dollars, the lawful currency of the United States; Shanghai Electric Wind Power Equipment Co., Ltd. ( 上海電氣風 電設備有限公司 ), 96.77% equity interest being held by the Company as at the date of this announcement; and % per cent. By order of the Board Shanghai Electric Group Company Limited Huang Dinan Chairman of the Board Shanghai, the PRC, 27 July

7 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 7