Date: 2013-07-31

Shanghai Prime (HKG:2345) Unit Compensated RMB39M for Relocation

Shanghai Tian An Bearing Company Limited (Tian An), a 99%-owned subsidiary of Shanghai Prime Machinery (HKG:2345), has entered into a relocation and compensation agreement with Shanghai Electric (Group) Corporation (SEC), the controlling shareholder of Shanghai Prime Machinery, pursuant to which SEC will make a total compensation of approximately RMB38.77 million to Tian An for the losses incurred in relation to removal, adjustments and testing, and work suspension resulting from relocation of a plant in Shanghai as well as staff resettlement fees.

Meanwhile, SEC will provide Tian An with a suitable manufacturing site at No.4399, Yindu Road, Shanghai with approximately equivalent rental price as paid for the land at Caobao Road. The new lease will fall under the scope of a framework property lease agreement and will not result in the existing annual caps of the framework property lease agreement being exceeded.

As per the future commercial development plan of Xuhui District, the land plot where Tian An is currently located no longer allocated for industrial use and is subject to future relocation requirement.

The land to which Tian An will be relocated is located in the industrial parks in Xinzhuang. The land approximately amounts to twice of the original space of Tian An and is therefore beneficial to the continuing growth of Tian An upon its relocation. Shanghai Prime Machinery acknowledges that the relocation as stated above is likely to result in a temporary suspension of the operation of Tian An and hence may have an adverse impact on the operation of the company. However, SEC will pay a compensation amount with respect to the losses incurred in relation to the removal, adjustments and testing, and work suspension resulting from such relocation as well as staff resettlement fees. Shanghai Prime Machinery is of the view that the compensation is sufficient to off-set any foreseeable loss with respect to the relocation.

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