Connected Transaction - Establishment of Joint Venture in Sichuan Province

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this announcement.

(Incorporated in Hong Kong with limited liability)

The Board is pleased to announce that the Joint Venture Company was established on 6 November
2013 for the purpose of undertaking the Business in Sichuan province in the PRC. The shareholders of the Joint Venture Company comprise SIIC Wuhan, an indirectly held subsidiary of the Company, Sichuan Development and Shanghai Galaxy.
As at the date of this announcement, SIIC Wuhan is an indirectly held subsidiary of the Company. SIIC is the controlling shareholder of the Company holding approximately 57.23% of the entire issued capital of the Company, and is therefore a connected person of the Company. SIIC indirectly holds 50% of the registered capital of Shanghai Galaxy. Shanghai Galaxy is therefore an associate of SIIC and a connected person of the Company. Accordingly, the Transaction constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. As one of the applicable percentage ratios in respect of the Transaction exceeds 0.1% but is less than 5%, the Transaction is subject to the reporting and announcement requirements, but is exempt from the
independent shareholders' approval requirement under Chapter 14A of the Listing Rules.

The Board is pleased to announce that the Joint Venture Company was established on 6 November
2013 for the purpose of undertaking the business of investment in environmental protection, including but not limited to, water industry and new energy projects, and related assets management in Sichuan province in the PRC (the "Business"). The shareholders of the Joint Venture Company comprise SIIC Wuhan, an indirectly held subsidiary of the Company, Sichuan Development and
Shanghai Galaxy.

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The structure of the current registered capital of the Joint Venture Company is as follows:

(RMB)

SIIC Wuhan 12,000,000 30% Sichuan Development 16,000,000 40% Shanghai Galaxy 12,000,000 30% Current total registered capital 40,000,000 100%
Pursuant to the Shareholders' Agreement and the potential funding needs of the Joint Venture Company, the parties have agreed that the registered capital of the Joint Venture Company shall be RMB200,000,000 (equivalent to approximately HK$253,453,000), to be paid up in cash within five years from the establishment of the Joint Venture Company, in the same proportions as above. As such, SIIC Wuhan's total capital contribution would amount to an aggregate of RMB60,000,000 (equivalent to approximately HK$76,036,000). The investment of SIIC Wuhan in the Joint Venture Company will be funded by internal resources.
The board of directors of the Joint Venture Company comprises five members: two directors appointed by Sichuan Development and three directors jointly appointed by SIIC Wuhan and Shanghai Galaxy.

Sichuan province is a water scarce province in the PRC, where a significant proportion of the population in the province encounters water shortages. In line with the various nationwide initiatives and policies, the water industry in Sichuan province is expected to undergo significant development and growth during the next 5-year period. The potential promising market and steady income growth make Sichuan province a very attractive investment region for water industry.
As such, the Board believes that by leveraging on the relevant experience, capability and resources of Sichuan Development and Shanghai Galaxy, the Transaction presents a timely opportunity to the Group to tap into the Business to take advantage of the potential of the water industry in Sichuan province.
The Board (including the independent non-executive Directors) believes that the terms of the Shareholders' Agreement are fair and reasonable and in the interests of the shareholders of the Company as a whole. None of the Directors has a material interest in the Transaction or was required to abstain from voting on the relevant resolutions of the Board. However, Mr. Zhou Jun, who is also a director and chairman of Shanghai Galaxy and SIIC Environment, has voluntarily
abstained from voting on the resolution approving the Transaction.

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As at the date of this announcement, SIIC Wuhan is a wholly-owned subsidiary of SIIC Environment. The Company is a controlling shareholder of SIIC Environment, currently indirectly holding 2,762,841,132 shares, representing 50.33% of its total issued share capital. SIIC Wuhan is therefore an indirectly held subsidiary of the Company.
SIIC is the controlling shareholder of the Company holding approximately 57.23% of the entire issued capital of the Company, and is therefore a connected person of the Company. SIIC is authorised to operate SIIC Shanghai, a state-owned enterprise. Each of SIIC Shanghai and Hu-Ning Expressway, a wholly-owned subsidiary of the Company, holds 50% of the registered capital of Shanghai Galaxy. Shanghai Galaxy is therefore an associate of SIIC and a connected person of the Company.
Accordingly, the Transaction constitutes a connected transaction of the Company under Chapter
14A of the Listing Rules. As one of the applicable percentage ratios in respect of the Transaction exceeds 0.1% but is less than 5%, the Transaction is subject to the reporting and announcement requirements, but is exempt from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.

The Company is principally engaged in the business of infrastructure facilities, real estate and consumer products.
Shanghai Galaxy specializes in financial investment, asset management and relevant businesses under SIIC, the controlling shareholder of the Company. Shanghai Galaxy's business includes direct investments, asset management and other consultation business. In the recent years, Shanghai Galaxy has been focusing on the clean energy arena, and has made several strategic investments in the related fields. As at the date of this announcement, the equity interest of Shanghai Galaxy is held in equal proportions by each of SIIC and Hu-Ning Expressway, a wholly-owned subsidiary of the Company.
Sichuan Development is a fund management company which has undertaken various institutional investments with vast experience in organizing and leading the formation of industrial related funds. As at 30 June 2013, the size of its industrial related fund was approximately RMB8.6 billion (equivalent to approximately HK$10.9 billion). Sichuan Development is an independent third party of the Company.

In this announcement, unless the context requires otherwise, the following terms have the meanings set out below:

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"Board" the board of Directors
"Business" as defined in the section headed "Formation of Joint Venture
Company" in this announcement
"Company" Shanghai Industrial Holdings Limited, a company incorporated in Hong Kong with limited liability, whose shares are listed on the Main Board of the Stock Exchange
"Director(s)" the director(s) of the Company
"HK$" Hong Kong dollars, the lawful currency of Hong Kong
"Hong Kong" the Hong Kong Special Administrative Region of the PRC
"Hu-Ning Expressway" Shanghai Hu-Ning Expressway (Shanghai Section) Co., Ltd. (