##### Table of Contents



As filed with the Securities and Exchange Commission on June 22, 2010
   UNITED
STATESSECURITIES AND EXCHANGE COMMISSION
 Washington, DC
20549
 
 FORM 20-F
  o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF
1934
 or
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to
 or
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 Commission file number: 1-14362
 
 
 (Exact name of Registrant as specified in its charter)
 GUANGSHEN RAILWAY COMPANY LIMITED
 (Translation of Registrants name into English)
 Peoples Republic of China
 (Jurisdiction of incorporation or organization)
 
 No. 1052 Heping Road, Shenzhen, Peoples Republic of China 518010
 (Address of Principal Executive Offices)
 
 Mr. Guo Xiangdong
Telephone: (86-755) 2558-7920 or (86-755) 2558-8146
Email: ir@gsrc.com
Facsimile: (86-755) 2559-1480
No. 1052 Heping Road, Shenzhen, Peoples Republic of China 518010  (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
 
  Title of Each Class
    
    Name of Each Exchange on which ListedAmerican Depositary Shares, each
representing 50 Class H ordinary shares
    
    New York Stock Exchange, Inc.Class H ordinary shares, nominal value
RMB 1.00 per share
    
    The Stock Exchange of Hong Kong Limited
    Domestic shares (A shares), par value RMB 1.00 per share
    
    
    5,652,237,000H shares, par value RMB 1.00 per share
    
    
    1,431,300,000
   þ o
  o þ
  þ o
  o o
  Large Accelerated Filer þ
    
    Accelerated Filer o
    
    Non-Accelerated Filer o
  o
 þ
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Table of Contents
 PagesForward-Looking Statements
    
    
    1Certain Terms and Conventions
    
    
    1PART IITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
    
    
    4ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    4ITEM 3. KEY INFORMATION
    
    
    4Item 3A. Selected Consolidated Financial and Other Data
    
    
    4Item 3B. Capitalization and Indebtedness
    
    
    7Item 3C. Reasons for the Offer and Use of Proceeds
    
    
    7Item 3D. Risk Factors
    
    
    7ITEM 4. INFORMATION ON THE COMPANY
    
    
    15Item 4A. History and Development of the Company
    
    
    15Item 4B. Business Overview
    
    
    19Item 4C. Organizational Structure
    
    
    35Item 4D. Property, Plant and Equipment
    
    
    35ITEM 4A. UNRESOLVED STAFF COMMENTS
    
    
    36ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    36Item 5A. Operating Results
    
    
    38Item 5B. Liquidity and Capital Resources
    
    
    51Item 5C. Research and Development, Patents and Licenses, etc.
    
    
    53Item 5D. Trend Information
    
    
    54Item 5E. Off-Balance Sheet Arrangements
    
    
    55Item 5F. Tabular Disclosure of Contractual Obligations
    
    
    55Item 5G. Safe Harbor
    
    
    56ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    56Item 6A. Directors and Senior Management
    
    
    56Item 6B. Board Compensation
    
    
    62Item 6C. Board Practices
    
    
    64Item 6D. Employees
    
    
    66Item 6E. Share Ownership
    
    
    68ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    68Item 7A. Major Shareholders
    
    
    68Item 7B. Related Party Transactions
    
    
    69Item 7C. Interests of Experts and Counsel
    
    
    78ITEM 8. FINANCIAL INFORMATION
    
    
    78Item 8A. Consolidated Statements and Other Financial Information
    
    
    78Item 8B. Significant Changes
    
    
    80ITEM 9. THE OFFER AND LISTING
    
    
    81Item 9A. Offer and Listing Details
    
    
    81Item 9B. Plan of Distribution
    
    
    81Item 9C. Markets
    
    
    82




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PagesItem 9D. Selling Shareholders
    
    
    82Item 9E. Dilution
    
    
    82Item 9F. Expenses of the Issue
    
    
    82ITEM 10. ADDITIONAL INFORMATION
    
    
    83Item 10A. Share Capital
    
    
    83Item 10B. Memorandum and Articles of Association
    
    
    83Item 10C. Material Contracts
    
    
    94Item 10D. Exchange Controls
    
    
    94Item 10E. Taxation
    
    
    95Item 10F. Dividends and Paying Agents
    
    
    104Item 10G. Statement by Experts
    
    
    104Item 10H. Documents on Display
    
    
    104Item 10I. Subsidiary Information
    
    
    104ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    105ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    108PART IIITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    110ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND
USE OF PROCEEDS
    
    
    110ITEM 15. CONTROLS AND PROCEDURES
    
    
    110ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    111ITEM 16B. CODE OF ETHICS
    
    
    111ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    112ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    112ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS
    
    
    112ITEM 16F. CHANGE IN OUR CERTIFYING ACCOUNTANT
    
    
    112ITEM 16G. CORPORATE GOVERNANCE
    
    
    112ITEM 17. FINANCIAL STATEMENTS
    
    
    114ITEM 18. FINANCIAL STATEMENTS
    
    
    114ITEM 19. EXHIBITS
    
    
    114EX-4.3EX-7.1EX-8.1EX-12.1EX-13.1




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Forward-Looking Statements
   
 Certain Terms and Conventions
     
    
    Acquisition means our acquisition of the railway transportation business between
Guangzhou and Pingshi and the related assets and liabilities from
 1




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Yangcheng Railway Company according to the asset purchase agreement dated November
15, 2004 between Yangcheng Railway Company and us.
    
    China or PRC means the Peoples Republic of China.
    
    CEPA means the Closer Economic Partnership Arrangement between Hong Kong and
Chinese Mainland entered into on October 27, 2004, as amended.
    
    GEDC means Guangzhou Railway (Group) Guangshen Railway Enterprise Development
Company, a wholly owned subsidiary of GRGC.
    
    GRGC means Guangzhou Railway (Group) Company, our largest shareholder.
    
    Company, we, our, our Company or us means Guangshen Railway Company
Limited, a joint stock limited company incorporated in Shenzhen, China with limited
liability, and its subsidiaries on a consolidated basis.
    
    HKSE means the Stock Exchange of Hong Kong Limited.
    
    HKSE Listing Rules means the Rules Governing the Listing of Securities on the
HKSE.
    
    Hong Kong means the Hong Kong Special Administrative Region of the PRC.
    
    Hong Kong dollars or HKD means Hong Kong dollars, the lawful currency of Hong
Kong.
    
    Macau means the Macau Special Administrative Region of the PRC.
    
    MOR means the Ministry of Railways.
    
    Pearl River Delta means the area in and adjacent to the southern part of Guangdong
Province, PRC, surrounding the mouth of the Pearl River and its lower reaches.
    
    RMB means Renminbi Yuan, the lawful currency of the PRC.
    
    Restructuring means the restructuring conducted in connection with our initial
public offering in 1996 during which we succeeded to the railroad and certain other
businesses of our predecessor company and certain assets and liabilities of GRGC.
    
    SEC means the U.S. Securities and Exchange Commission.
    
    tonne means metric tonne; and one tonne is approximately 2,205 pounds in weight.
    
    US$, USD or U.S. dollars means U.S. dollars, the lawful currency of the
 2




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United States.
    
    Yangcheng Railway Company means Guangzhou Railway Group Yangcheng Railway
Enterprise Development Company, a wholly owned subsidiary of GRGC, or its predecessor,
Guangzhou Railway Group Yangcheng Railway Company.
 3




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PART I
 
 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
  
 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3. KEY INFORMATION
 
 Item 3A. Selected Consolidated Financial and Other Data
   Year ended December 31,2005
    
    
    2006
    
    
    2007(2)
    
    
    2008(2)
    
    
    2009(2)
    
    
    2009(2)RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(1)(in thousands except for per share data)Income Statement Data:Revenue from railroad businesses Passenger
    
    
    2,253,335
    
    
    
    2,608,838
    
    
    
    5,833,538
    
    
    
    6,759,229
    
    
    
    7,195,717
    
    
    
    1,053,546 Freight
    
    
    540,341
    
    
    
    565,557
    
    
    
    1,326,450
    
    
    
    1,324,701
    
    
    
    1,210,118
    
    
    
    177,177 Railway network usage and services
    
    
    305,790
    
    
    
    291,489
    
    
    
    2,659,529
    
    
    
    2,738,425
    
    
    
    3,105,654
    
    
    
    454,708Subtotal
    
    
    3,099,466
    
    
    
    3,465,884
    
    
    
    9,819,517
    
    
    
    10,822,355
    
    
    
    11,511,489
    
    
    
    1,685,431Revenue from other businesses
    
    
    177,462
    
    
    
    128,590
    
    
    
    688,987
    
    
    
    866,300
    
    
    
    874,268
    
    
    
    128,004Total revenue
    
    
    3,276,928
    
    
    
    3,594,474
    
    
    
    10,508,504
    
    
    
    11,688,655
    
    
    
    12,385,757
    
    
    
    1,813,435Railroad operating expenses
    
    
    (2,339,384
    )
    
    
    (2,527,907
    )
    
    
    (8,334,293
    )
    
    
    (9,162,278
    )
    
    
    (9,620,732
    )
    
    
    (1,408,599
    )Other businesses operating expenses
    
    
    (190,347
    )
    
    
    (166,011
    )
    
    
    (458,819
    )
    
    
    (829,077
    )
    
    
    (797,367
    )
    
    
    (116,745
    )Other income/(expense)
    
    
    51,628
    
    
    
    64,648
    
    
    
    49,816
    
    
    
    17,703
    
    
    
    (19,765
    )
    
    
    (2,894
    )Profit from operations
    
    
    798,825
    
    
    
    965,204
    
    
    
    1,765,208
    
    
    
    1,715,003
    
    
    
    1,947,893
    
    
    
    285,197Profit attributable to shareholders of the Company
    
    
    646,960
    
    
    
    771,513
    
    
    
    1,431,415
    
    
    
    1,224,129
    
    
    
    1,363,458
    
    
    
    199,784Profit from operations per share
    
    
    0.18
    
    
    
    0.22
    
    
    
    0.25
    
    
    
    0.24
    
    
    
    0.27
    
    
    
    0.04Earnings per share for profit attributable to
shareholders of the Company
 4




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Year ended December 31,2005
    
    
    2006
    
    
    2007(2)
    
    
    2008(2)
    
    
    2009(2)
    
    
    2009(2)RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(1) Basic and diluted
    
    
    0.15
    
    
    
    0.17
    
    
    
    0.20
    
    
    
    0.17
    
    
    
    0.19
    
    
    
    0.03Dividends declared per share
    
    
    0.12
    
    
    
    0.08
    
    
    
    0.08
    
    
    
    0.08
    
    
    
    0.08
    
    
    
    0.01Earnings per ADS for profit attributable to
shareholders of the Company
    
    
    7.46
    
    
    
    8.73
    
    
    
    10.10
    
    
    
    8.64
    
    
    
    9.63
    
    
    
    1.41Balance Sheet Data (at year end):Working capital
    
    
    467,124
    
    
    
    4,249,117
    
    
    
    433,615
    
    
    
    (616,158
    )
    
    
    31,118
    
    
    
    (4556
    )Fixed assets
    
    
    6,346,822
    
    
    
    6,738,477
    
    
    
    19,995,286
    
    
    
    23,903,846
    
    
    
    24,048,573
    
    
    
    3,521,021Leasehold land payments
    
    
    620,798
    
    
    
    625,628
    
    
    
    607,971
    
    
    
    592,368
    
    
    
    576,379
    
    
    
    84,389Total assets
    
    
    11,683,057
    
    
    
    24,139,331
    
    
    
    26,689,929
    
    
    
    28,221,826
    
    
    
    28,662,614
    
    
    
    4,196,576Equity attributable to shareholders of the Company
    
    
    9,796,076
    
    
    
    20,169,008
    
    
    
    21,125,761
    
    
    
    21,783,207
    
    
    
    22,581,125
    
    
    
    3,306,168Share capital, issued and outstanding, RMB 1.00
per value,domestic shares
    
    
    2,904,250
    
    
    
    5,652,237
    
    
    
    5,652,237
    
    
    
    5,652,237
    
    
    
    5,652,237
    
    
    
    827,560H shares
    
    
    1,431,300
    
    
    
    1,431,300
    
    
    
    1,431,300
    
    
    
    1,431,300
    
    
    
    1,431,300
    
    
    
    209,561Cash Flow Statement Data:Net cash generated from operating activities
    
    
    1,380,147
    
    
    
    1,112,004
    
    
    
    1,957,645
    
    
    
    1,641,069
    
    
    
    2,617,533
    
    
    
    383,240Net cash used in investing activities
    
    
    (820,915
    )
    
    
    (7,833,331
    )
    
    
    (5,585,414
    )
    
    
    (2,915,785
    )
    
    
    (2,096,154
    )
    
    
    (306,904
    )Net cash (used in)/generated from financing
activities
    
    
    (491,733
    )
    
    
    11,461,030
    
    
    
    128,289
    
    
    
    483,317
    
    
    
    (966,680
    )
    
    
    (141,534
    )Purchase of fixed assets and payment for
construction-in-progress
    
    
    (1,588,374
    )
    
    
    (3,202,670
    )
    
    
    (1,107,320
    )
    
    
    (2,947,804
    )
    
    
    (1,639,674
    )
    
    
    (240,070
    )Dividends paid to shareholders of the Company
    
    
    (476,904
    )
    
    
    (520,655
    )
    
    
    (566,711
    )
    
    
    (566,683
    )
    
    
    (566,683
    )
    
    
    (82,970
    )Other Data:Railroad transportation operating income
    
    
    808,613
    
    
    
    999,968
    
    
    
    1,538,053
    
    
    
    1,660,077
    
    
    
    1,890,757
    
    
    
    276,832Other businesses operating income/(loss)
    
    
    (9,788
    )
    
    
    (34,764
    )
    
    
    277,155
    
    
    
    37,223
    
    
    
    76,901
    
    
    
    11,259
 
 (1)
    
    Translation of amounts from RMB into US$, for the convenience of the reader has been
made at US$1.00 = RMB 6.83, which is rounded from 6.8259, the certified exchange rate for
December 31, 2009 as published by the Federal Reserve Board of the United States. No
representation is made that the RMB amounts could have been, or could be, converted into
U.S. dollars at that rate on December 31, 2009 or on any other date.(2)
    
    On January 1, 2007, we acquired the railway transportation business and related assets
and liabilities associated with such railway transportation business, or the Yangcheng
Railway Business, between Guangzhou and Pingshi from Yangcheng Railway Company. The
Yangcheng Railway Business came under the control of our Company beginning on January 1,
2007. Accordingly, we consider January 1, 2007 as the effective date of the acquisition
for accounting purposes. Prior to the initial public offering of our class A ordinary
shares (the A Shares) in December 2006, or the A Share Offering, Yangcheng Railway
Company and our Company were both controlled by GRGC, as GRGC held controlling interests in
both companies. Subsequent to our A Share Offering, the equity interest of GRGC in our
Company decreased to approximately 41% meaning that Yangcheng Railway Company and our
Company were no longer deemed to be under common control. As a result, the Acquisition
does not constitute a business combination under common control because our Company and
Yangcheng Railway Company are not ultimately controlled by the same party both before and
after the business combination. Accordingly, the transaction has been accounted for using
the purchase method of accounting and the results of operations of Yangcheng Railway
Business have been included in our consolidated comprehensive income statement starting
from January 1, 2007. As a result, our consolidated financial information for each of the
years ended December 31, 2007, 2008 and 2009 included in this annual report has reflected
the impact arising from the Acquisition. Exchange Rate Information
  5




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Certified Exchange RatePeriod
    
    Average(1)
    
    High
    
    Low(RMB per U.S. dollar)2005
    
    
    8.1826
    
    
    
    8.2765
    
    
    
    8.07022006
    
    
    7.9579
    
    
    
    8.0702
    
    
    
    7.80412007
    
    
    7.5806
    
    
    
    7.8127
    
    
    
    7.29462008
    
    
    6.9193
    
    
    
    7.2946
    
    
    
    6.78002009
    
    
    6.8295
    
    
    
    6.8470
    
    
    
    6.8176December
    
    
    6.8275
    
    
    
    6.8299
    
    
    
    6.82442010January
    
    
    6.8269
    
    
    
    6.8295
    
    
    
    6.8258February
    
    
    6.8285
    
    
    
    6.8330
    
    
    
    6.8258March
    
    
    6.8262
    
    
    
    6.8270
    
    
    
    6.8254April
    
    
    6.8256
    
    
    
    6.8275
    
    
    
    6.8229May
    
    
    6.8275
    
    
    
    6.8310
    
    
    
    6.8245June (through June 11)
    
    
    6.8294
    
    
    
    6.8322
    
    
    
    6.8268
 
 (1)
    
    The average rate for a year means the average of the exchange rates on the last day of
each month during a year. The average rate for a month means the average of the daily
exchange rates during that month. Dividends
   6




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Item 3B. Capitalization and Indebtedness
  
 Item 3C. Reasons for the Offer and Use of Proceeds
  
 Item 3D. Risk Factors
 Risks Relating to Our Business
 Any recurrence of a global financial crisis or economic downturn similar to that which
occurred in 2008 and early 2009 could materially and adversely affect our business, financial
condition, results of operations and prospects.
  We face competition, which may adversely affect our business growth and results of operations.
  7




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Any significant decrease in the overall levels of business, industrial, manufacturing and
tourism activities within the Pearl River Delta region and elsewhere in China may have a material
adverse effect on our revenue and results of operations.
  8




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Changes in freight composition in our freight transportation business may adversely
affect our results of operations.
  Our railroads connect with the railroads of other operators and any disruption in the
operation of those railroads, or our cooperation with other operators, could have a material
adverse effect on our business and operations.
  A change to our preferential income tax status as a result of a change of law could have a
material adverse effect on our results of operations.
   9




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
    
    18% for 2008;
    
    20% for 2009;
    
    22% for 2010;
    
    24% for 2011; and
    
    25% for 2012.
  Any changes in our right to own and operate our business and assets, our right to profit and
our right of asset disposal as previously granted by the MOR and the State Council may have a
material adverse effect on our business and results of operations.
  Guangzhou Railway (Group) Company as our largest shareholder and one of our major service
providers may have interests that conflict with the best interests of our other shareholders and
our Company.
  10




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We have very limited insurance coverage.
  We could incur significant costs for violations of applicable environmental laws and
regulations.
  Technological problems attributable to accidents, human error, severe weather or natural
disasters could affect the performance or perception of our railway and result in decreases in
customers and revenue, unexpected expenses and loss of market share.
   11




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Extensive government regulation of the railway transportation industry may limit our
flexibility in responding to market conditions, competition or changes in our cost structure.
  The revenue or charges settled by the MOR for certain long-distance passenger train and
freight transportation businesses are finally determined by the MOR.
  12




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We may encounter difficulties in complying with the Sarbanes-Oxley Act of 2002.
   Risks Relating to Conducting Business in China
  Chinas economic, political and social conditions, as well as government policies, could
affect our business.
  13




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Government control of currency conversion may adversely affect our operations and financial
results.
  Fluctuation of the RMB could adversely affect our financial condition and results of
operations.
  The differences with respect to the PRC legal system could limit the legal protections
available to you.
  14




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We face risks related to health epidemics and other outbreaks.
  
 ITEM 4. INFORMATION ON THE COMPANY
 
 Item 4A. History and Development of the Company
 Overview
 
   15




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Background, Restructuring and Acquisition
    16




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17




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Service Territory
    Northbound
 Southbound
 Westbound
 Eastbound
 18




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Item 4B. Business Overview
 Business Operations
       19




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Year ended December 31,2005
    
    
    2006
    
    
    2007(7)
    
    
    2008(7)
    
    
    2009(7)Passenger TransportationTotal passenger revenue (RMB millions)
    
    
    2,253.34
    
    
    
    2,608.84
    
    
    
    5,833.54
    
    
    
    6,759.23
    
    
    
    7,195.71Total passengers (millions)(1)
    
    
    33.00
    
    
    
    35.98
    
    
    
    73.05
    
    
    
    83.82
    
    
    
    81.84Revenue per passenger (RMB)(2)
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotal passenger-kilometers (millions)
    
    
    4,539.10
    
    
    
    4,842.7
    
    
    
    26,278.2
    
    
    
    27,923.70
    
    
    
    27,233.10Revenue per passenger-kilometer (RMB)(3)
    
    
    0.50
    
    
    
    0.54
    
    
    
    0.22
    
    
    
    0.24
    
    
    
    0.26Freight TransportationTotal freight revenue (RMB millions)
    
    
    540.34
    
    
    
    565.56
    
    
    
    1,326.45
    
    
    
    1,324.70
    
    
    
    1,210.12Total freight tonnes (millions)
    
    
    31.89
    
    
    
    30.71
    
    
    
    71.01
    
    
    
    70.14
    
    
    
    61.99Revenue per tonne (RMB)(4)
    
    
    16.94
    
    
    
    18.42
    
    
    
    18.68
    
    
    
    18.89
    
    
    
    19.52Total tonne-kilometers (millions)
    
    
    2,294.80
    
    
    
    2,276.3
    
    
    
    15,306.9
    
    
    
    15,557.37
    
    
    
    13,446.70Revenue per tonne-kilometer (RMB)(5)
    
    
    0.24
    
    
    
    0.25
    
    
    
    0.09
    
    
    
    0.09
    
    
    
    0.09Railway Network Usage and Services(RMB
millions)(6)
    
    
    305.79
    
    
    
    291.49
    
    
    
    2,659.53
    
    
    
    2,738.43
    
    
    
    3,105.65
 
 (1)
    
    Prior to 2007, we recorded the aggregate of the passengers arriving at and departing
from our railway stations as total passengers. As of January 1, 2007, we began recording
only those passengers departing from our railway stations as our passengers. In order to
make the presentation of our financial data in 2009 consistent with previous years, we have
adjusted the numbers of total passengers for the years ended December 31, 2005 and 2006 to
only include passengers departing from our railway stations.(2)
    
    Revenue per passenger is calculated by dividing the total passenger revenue (including
revenue of long-distance passenger trains) by total number of passengers. Our revenue of
long-distance passenger trains includes both the revenue from the passengers arriving at
our railway stations and the revenue from the passengers departing from our railway
stations. However, the number of our long-distance passengers only includes the passengers
departing from our railway stations. As a result, we believe that the per passenger
revenue cannot fairly reflect the financial status of our passenger transportation
business.(3)
    
    Revenue per passenger-kilometer is calculated by dividing total passenger revenue by
total passenger-kilometers. Management believes that revenue per passenger-kilometer is a
useful measure for assessing the revenue levels of our passenger transportation business.
The decrease in revenue per passenger-kilometer in 2007, 2008 and 2009 from 2006 was
primarily due to our acquisition of the railway transportation business between Guangzhou
and Pingshi in 2007, whose passenger transportation business had lower pricing levels than
the Guangzhou-Shenzhen Railway we operated before 2007.(4)
    
    Revenue per tonne is calculated by dividing total freight revenue by total freight
tonnes. Management believes that revenue per tonne is a useful measure for assessing the
revenue levels of our freight transportation business. 20




---



##### Table of Contents



(5)
    
    Revenue per tonne-kilometer is calculated by dividing total freight revenue by total
tonne-kilometers. Management believes that revenue per tonne-kilometer is a useful measure
for assessing the revenue levels of our freight transportation business. The decrease in
revenue per tonne-kilometer in 2007, 2008 and 2009 from 2006 was primarily due to our
acquisition of the railway transportation business between Guangzhou and Pingshi in 2007,
whose freight transportation business had lower pricing levels than the Guangzhou-Shenzhen
Railway we operated before 2007.(6)
    
    Since our revenue from railway network usage and services was insignificant before the
acquisition of the railway transportation business of Guangzhou-Pingshi Railway in 2007, we
recorded such revenue into the revenue from passenger and freight transportation in
previous years. Upon the acquisition of the railway transportation business of
Guangzhou-Pingshi Railway, our revenue from railway network usage and services have become
material. Our management decided to record the revenue from railway network usage and
services separately starting from the year ended December 31, 2007. To conform to the
current year presentation, we have adjusted the revenue of each of the years ended December
31, 2005 and 2006.(7)
    
    On January 1, 2007, the railway transportation business of the Guangzhou-Pingshi
Railway came under the control of our Company. Accordingly, we consider January 1, 2007 as
the effective date of the acquisition for accounting purposes. Prior to our A Share
Offering, Yangcheng Railway Company and our Company were both controlled by the MOR, as the
MOR indirectly held controlling interests in both companies. Subsequent to our A Share
Offering, the equity interest of the MOR in our Company decreased to approximately 41%. On
January 1, 2007, Yangcheng Railway Company and our Company were no longer deemed to be
under common control. As a result, such transaction does not constitute a business
combination under common control because our Company and Yangcheng Railway Company are not
ultimately controlled by the same party both before and after the business combination.
Accordingly, the transaction has been accounted for using the purchase method of accounting
and the results of operations of Yangcheng Railway Business have been included in our
consolidated comprehensive income statement starting from January 1, 2007. As a result,
our consolidated financial information for each of the years ended December 31, 2007, 2008
and 2009 included in this annual report has reflected the impact arising from the
Acquisition. Passenger Transportation
  
    
    intercity high-speed express trains between Guangzhou and Shenzhen;
    
    Hong Kong Through Trains between Hong Kong and Guangzhou; and
    
    domestic long-distance trains.
  
    
    100 pairs were high-speed express passenger trains operating between Guangzhou and
Shenzhen (including 15 stand-by pairs), representing a decrease of 20 pairs;
    
    13 pairs were Hong Kong Through Trains, including 11 pairs of Hong Kong Through
Trains, one pair of through train between Zhaoqing and Kowloon, and one through train
that operates on alternating days either on the Beijing-Kowloon line or the
Shanghai-Kowloon line; and
 21




---



##### Table of Contents




    
    105 pairs were domestic long-distance passenger trains, representing a decrease of
1.5 pairs from 106.5 pairs as of December 31, 2008, which included 16.5 pairs of
long-distance passenger trains operated by us between Shenzhen and Yueyang, between
Shenzhen and Shanghai South, between Shenzhen and Beijing West, between Kowloon and
Beijing West, between Shenzhen and Shaoguan, between Guangzhou and Chongqing North,
between Guangzhou and Wanzhou, between Guangzhou and Liuzhou, between Guangzhou and
Xian, between Guangzhou and Taizhou, between Guangzhou and Shanghai South, between
Guangzhou and Jiujiang, between Chenzhou and Foshan, between Guangzhou and Zhangjiajie,
between Guangzhou and Lhasa and between Sanya and Beijing West, and 88.5 pairs of
domestic long-distance trains, operated by other operators but originating or
terminating on, or passing through, our railroad.
  Total passenger revenue
    
    Total passengers
    
    Revenue per passenger2007
    
    
    2008
    
    
    2009
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2007
    
    
    2008
    
    
    2009(RMB millions)
    
    
    
    
    
    (millions)
    
    
    
    
    
    
    
    
    
    (RMB)Guangzhou-Shenzhen Trains
    
    
    1,494.2
    
    
    
    1,973.1
    
    
    
    2,046.6
    
    
    
    24.7
    
    
    
    32.1
    
    
    
    33.5
    
    
    
    60.5
    
    
    
    61.5
    
    
    
    61.1Hong Kong Through Trains (1)
    
    
    430.5
    
    
    
    380.3
    
    
    
    378.4
    
    
    
    3.2
    
    
    
    3.1
    
    
    
    2.8
    
    
    
    134.5
    
    
    
    122.1
    
    
    
    135.2Long-distance Trains (1)
    
    
    3,908.8
    
    
    
    4,405.8
    
    
    
    4,770.6
    
    
    
    45.1
    
    
    
    48.6
    
    
    
    45.5
    
    
    
    N/A
    (2)
    
    
    N/A
    (2)
    
    
    N/A
    (2)Combined passenger operations
    
    
    5,833.5
    
    
    
    6,759.2
    
    
    
    7,195.6
    
    
    
    73.0
    
    
    
    83.8
    
    
    
    81.8
    
    
    
    N/A
    (2)
    
    
    N/A
    (2)
    
    
    N/A
    (2)
 
 (1)
    
    The operation of Beijing-Kowloon Through Trains, which run between Beijing West and Kowloon,
has been handed over to our Company since January 1, 2009. Before 2009, our Companys revenue
from Beijing-Kowloon Through Trains, excluding the revenue attributable to MTR in Hong Kong,
was generated only from the Guangzhou East-Kowloon section that implemented a special pricing
policy. Starting from January 1, 2009, all the revenue generated from the operation of
Beijing-Kowloon Through Trains, excluding the revenue attributable to MTR in Hong Kong, became
the revenue of our Company. We divide the revenue generated from the operation of
Beijing-Kowloon Through Trains into two parts: (i) all the revenue generated from passengers
departing for or from Hong Kong, excluding the revenue attributable to MTR, is accounted as
revenue from Hong Kong Through Trains and (ii) the remaining revenue is accounted as revenue
from long-distance trains.(2)
    
    Our revenue of long-distance passenger trains includes both the revenue from the passengers
arriving at our railway stations and the revenue from the passengers departing from our
railway stations. However, the number of our long-distance passengers only includes the
passengers departing from our railway stations. As a result, we believe that the per
passenger revenue cannot fairly reflect the financial status of our passenger transportation
business. Guangzhou-Shenzhen Trains
 22




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##### Table of Contents



Hong Kong Through Trains.
    Domestic Long-distance Trains.
 23




---



##### Table of Contents



Major Stations.
 Guangzhou East Station.
 Dongguan Station.
 Shenzhen Station.
 24




---



##### Table of Contents



Shaoguan East Station.
 Guangzhou Station.
 Freight Transportation
   
    
    inbound freight, which is primarily freight unloaded at freight stations and spur
lines connected to ports on our rail line or in Hong Kong;
    
    outbound freight, which is primarily freight bound for other regions in Mainland
China as well as foreign countries loaded at our train stations and spur lines
connected to ports on our rail line or in Hong Kong; and
    
    pass-through freight, which refers to freight that travels on our rail line, but
which does not originate from or terminate at our rail line.
 25




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##### Table of Contents



Outbound Freight
    
    
    Inbound (and Pass-through) Freight2007
    
    
    2008
    
    
    2009
    
    
    2007
    
    
    2008
    
    
    2009As a Percentage of Total InboundAs a Percentage of Total Outbound Freight
    
    
    (and Pass-through) FreightConstruction materials
    
    
    44.9
    %
    
    
    40.6
    %
    
    
    37.7
    %
    
    
    36.5
    %
    
    
    34.7
    %
    
    
    37.0
    %Energy products
    
    
    27.3
    %
    
    
    26.0
    %
    
    
    25.6
    %
    
    
    24.7
    %
    
    
    22.9
    %
    
    
    22.1
    %Food products
    
    
    2.8
    %
    
    
    3.1
    %
    
    
    3.4
    %
    
    
    14.9
    %
    
    
    15.3
    %
    
    
    11.7
    %Chemicals
    
    
    3.2
    %
    
    
    3.3
    %
    
    
    2.8
    %
    
    
    9.3
    %
    
    
    10.1
    %
    
    
    11.1
    %Manufactured goods
    
    
    2.1
    %
    
    
    3.0
    %
    
    
    4.0
    %
    
    
    1.3
    %
    
    
    1.7
    %
    
    
    1.6
    %Containers
    
    
    13.2
    %
    
    
    17.5
    %
    
    
    20.0
    %
    
    
    9.6
    %
    
    
    11.8
    %
    
    
    13.4
    %Other goods
    
    
    6.5
    %
    
    
    6.5
    %
    
    
    6.5
    %
    
    
    3.7
    %
    
    
    3.5
    %
    
    
    3.1
    %Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 Railway Network Usage and Services Business
  26




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2007
    
    
    2008
    
    
    2009(RMB millions)Locomotive traction
    
    
    1,155.3
    
    
    
    1,114.2
    
    
    
    1,359.9Track usage
    
    
    919.7
    
    
    
    953.5
    
    
    
    1,026.7Electric catenaries
    
    
    211.2
    
    
    
    281.8
    
    
    
    283.3Vehicle coupling
    
    
    216.6
    
    
    
    224.0
    
    
    
    275.4Other services
    
    
    156.7
    
    
    
    164.9
    
    
    
    160.4Total
    
    
    2,659.5
    
    
    
    2,738.4
    
    
    
    3,105.7
 Other Businesses
    As a Percentage of Total RevenueRevenue
    
    from Other Businesses2007
    
    2008
    
    2009
    
    2007
    
    2008
    
    2009(RMB millions)Sale of materials and supplies
    
    
    103.8
    
    
    
    227.7
    
    
    
    154.1
    
    
    
    15.1
    %
    
    
    26.3
    %
    
    
    17.6
    %Maintenance of trains
    
    
    239.2
    
    
    
    225.5
    
    
    
    241.4
    
    
    
    34.7
    %
    
    
    26.0
    %
    
    
    27.6
    %On-board catering services
    
    
    67.3
    
    
    
    106.5
    
    
    
    118.5
    
    
    
    9.8
    %
    
    
    12.3
    %
    
    
    13.5
    %Labor services
    
    
    49.7
    
    
    
    62.2
    
    
    
    67.8
    
    
    
    7.2
    %
    
    
    7.2
    %
    
    
    7.8
    %Other services related to
railway transportation
    
    
    229.0
    
    
    
    244.4
    
    
    
    292.5
    
    
    
    33.2
    %
    
    
    28.2
    %
    
    
    33.5
    %Total
    
    
    689.0
    
    
    
    866.3
    
    
    
    874.3
    
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 Seasonality of Our Railway Transportation Business
  Sales
 Passenger Transportation
 27




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##### Table of Contents



Freight Transportation
   28




---



##### Table of Contents



Competition
    29




---



##### Table of Contents



Equipment, Tracks and Maintenance
       30




---



##### Table of Contents



Major Suppliers and Service Providers
    31




---



##### Table of Contents



Regulatory Overview
  National Railway System
  32




---



##### Table of Contents



Transport Operations
     33




---



##### Table of Contents



Pricing
   Environmental Protection
  Insurance
  34




---



##### Table of Contents



Item 4C. Organizational Structure
  Country of
    
    Percentage of Interest heldName
    
    Incorporation
    
    by our CompanyGuangshen Railway Dongqun Trade and Commerce Service
Company
    
    PRC
    
    
    100
    %Shenzhen Fu Yuan Enterprise Development Company Limited
    
    PRC
    
    
    100
    %Shenzhen Guangshen Railway Travel Service Ltd.
    
    PRC
    
    
    100
    %Shenzhen Pinghu Qun Yi Railway Store Loading and Unloading
Company Limited
    
    PRC
    
    
    55
    %Dongguan Changsheng Enterprise Company Limited
    
    PRC
    
    
    51
    %Shenzhen Railway Station Passenger Services Company Limited
    
    PRC
    
    
    100
    %Guangzhou Tielian Economy Development Company Limited
    
    PRC
    
    
    50.5
    %Shenzhen Nantie Construction Supervision Company
    
    PRC
    
    
    76.66
    %Guangzhou Railway Huangpu Service Company Limited
    
    PRC
    
    
    100
    %Shenzhen Guangshen Railway Economic and Trade Enterprise
Company Limited
    
    PRC
    
    
    100
    %Shenzhen Railway Property Management Company Limited
    
    PRC
    
    
    100
    %Guangzhou Dongqun Advertising Company Limited
    
    PRC
    
    
    100
    %Shenzhen Shenhuasheng Storage and Transportation Company
Limited
    
    PRC
    
    
    100
    %
 
 Item 4D. Property, Plant and Equipment
   35




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##### Table of Contents



ITEM 4A. UNRESOLVED STAFF COMMENTS
  
 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 This discussion and analysis should be read in conjunction with our audited consolidated
financial statements included elsewhere in this annual report. Our audited consolidated financial
statements are prepared in accordance with International Financial Reporting
 36




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##### Table of Contents



Standards as issued by IASB.
 Overview
       37




---



##### Table of Contents



Item 5A. Operating Results
 Principal Factors Affecting Our Results of Operations
 Economic Development in the Pearl River Delta Region and the PRC.
 Competitive Pressure from other Means of Transportation.
 PRC Policies.
 38




---



##### Table of Contents



.
 Year ended December 31, 2009 compared with year ended December 31, 2008
 Revenue
  Passenger transportation service.
   Year ended December 31,
    
    
    Change in 2009 from2007
    
    
    2008
    
    
    2009
    
    
    2008Revenue from passenger
transportation (RMB thousands)
    
    
    5,833,538
    
    
    
    6,759,229
    
    
    
    7,195,717
    
    
    
    6.5
    %Total passengers (thousands)(1)
    
    
    73,053
    
    
    
    83,825
    
    
    
    81,838
    
    
    
    (2.4
    %)Revenue per passenger (RMB)(2)
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotal passenger-kilometers (millions)
    
    
    26,278.2
    
    
    
    27,923.7
    
    
    
    27,233.1
    
    
    
    (2.5
    %)Revenue per passenger-kilometer (RMB)
    
    
    0.22
    
    
    
    0.24
    
    
    
    0.26
    
    
    
    8.3
    %
 39




---



##### Table of Contents



(1)
    
    Prior to 2007, we recorded the aggregate of the passengers arriving at and departing
from our railway stations as total passengers. As of January 1, 2007, we began recording
only those passengers departing from our railway stations as our passengers. In order to
make the presentation of our financial data in 2009 consistent with previous years, we have
adjusted the numbers of total passengers for the years ended December 31, 2005 and 2006 to
only include passengers departing from our railway stations.(2)
    
    Revenue per passenger is calculated by dividing the total passenger revenue (including
revenue of long-distance passenger trains) by total number of passengers. Our revenue of
long-distance passenger trains includes both the revenue from the passengers arriving at
our railway stations and the revenue from the passengers departing from our railway
stations. However, the number of our long-distance passengers only includes the passengers
departing from our railway stations. As a result, we believe that the per passenger
revenue cannot fairly reflect the financial status of our passenger transportation
business.  Freight transportation.
 
    
    in 2009, our outbound freight tonnage was 17.6 million tonnes, representing an increase
of 4.6% from 16.8 million tonnes in 2008. Our outbound freight revenue was RMB 285.2
million in 2009, representing an increase of 0.9% from RMB 282.7 million in 2008. Our
outbound freight tonnage increased in 2009 due to (i) the partial recovery of our freight
transportation business, along with the economic recovery of China, from the decline caused
by the global financial crisis and economic downturn in 2008 and (ii) an increase in the
freight transportation volume of our Beijing-Guangzhou line.
    
    in 2009, our inbound and pass-through freight tonnages were 44.4 million tonnes,
representing a decrease of 16.8% from 53.3 million tonnes in 2008. Our inbound and
pass-through freight revenue was RMB 836.4 million in 2009, representing a decrease of
11.8% from RMB 948.2 million in 2008. Our inbound and pass-through freight revenue
decreased mainly because of the decrease in the inbound and pass-through freight tonnages,
as a result of the decrease in freight transported to harbors for exportation, which was
affected by the PRC governments policy to encourage domestic enterprises to focus on
meeting demand from the domestic market.
  40




---



##### Table of Contents



Year ended December 31,
    
    
    Change in 2009 from2007
    
    
    2008
    
    
    2009
    
    
    2008Revenue from freight transportation
(RMB thousands)
    
    
    1,326,450
    
    
    
    1,324,701
    
    
    
    1,210,118
    
    
    
    (8.7
    %) Revenue from outbound freight
transportation(1)
    
    
    216,888
    
    
    
    282,678
    
    
    
    285,186
    
    
    
    0.9
    % Revenue from inbound(1) and
pass-through transportation
    
    
    1,010,665
    
    
    
    948,177
    
    
    
    836,408
    
    
    
    (11.8
    %)Revenue from other freight transportation
services
    
    
    98,897
    
    
    
    93,848
    
    
    
    88,524
    
    
    
    (5.7
    %)Total freight tonnes (thousands of tonnes)
    
    
    71,010
    
    
    
    70,141
    
    
    
    61,987
    
    
    
    (11.6
    %) Outbound freight tonnage
    
    
    19,056
    
    
    
    16,847
    
    
    
    17,622
    
    
    
    4.6
    % Inbound and pass-through freight tonnage
    
    
    51,955
    
    
    
    53,295
    
    
    
    44,365
    
    
    
    (16.8
    %)Revenue per tonne (RMB)
    
    
    18.68
    
    
    
    18.89
    
    
    
    19.52
    
    
    
    3.3
    %Total tonne-kilometers (millions)
    
    
    15,306.9
    
    
    
    15,557.4
    
    
    
    13,446.7
    
    
    
    (13.6
    %)Revenue per tonne-kilometer (RMB)
    
    
    0.09
    
    
    
    0.09
    
    
    
    0.09
    
    
    
    
 
 (1)
    
    A portion of the revenue previously recorded as inbound freight revenue was recognized
as revenue from outbound freight.  Railway Network Usage and Services Business.
 Other Businesses.
  Year ended December 31,2007
    
    2008
    
    2009(RMB millions)Revenue from other businesses
    
    
    689.0
    
    
    
    866.3
    
    
    
    874.3 Sale of materials and supplies
    
    
    103.8
    
    
    
    227.7
    
    
    
    154.1 Maintenance of trains
    
    
    239.2
    
    
    
    225.5
    
    
    
    241.4 On-board catering services
    
    
    67.3
    
    
    
    106.5
    
    
    
    118.5 Labor services
    
    
    49.7
    
    
    
    62.2
    
    
    
    67.8 Other railway transportation related businesses
    
    
    229.0
    
    
    
    244.4
    
    
    
    292.5
 41




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##### Table of Contents



Operating Expenses
  Year ended December 31,2007
    
    2008
    
    2009Railroad businesses revenue (RMB millions)
    
    
    9,819.5
    
    
    
    10,822.4
    
    
    
    11,511.5Business tax
    
    
    2
    %
    
    
    2
    %
    
    
    2
    %Labor and benefits
    
    
    20
    %
    
    
    20
    %
    
    
    20
    %Equipment leases and services
    
    
    26
    %
    
    
    25
    %
    
    
    26
    %Lease of land use right
    
    
    0.51
    %
    
    
    0.46
    %
    
    
    0.45
    %Materials and supplies
    
    
    13
    %
    
    
    12
    %
    
    
    12
    %Repair costs, excluding materials and supplies
    
    
    5
    %
    
    
    6
    %
    
    
    5
    %Depreciation and amortization of leasehold land payments
    
    
    10
    %
    
    
    11
    %
    
    
    11
    %Fee for social services
    
    
    4
    %
    
    
    4
    %
    
    
    3
    %Utility and office expenses
    
    
    1
    %
    
    
    1
    %
    
    
    1
    %Others
    
    
    3
    %
    
    
    4
    %
    
    
    3
    %Operating expenses ratio(1)
    
    
    85
    %
    
    
    85
    %
    
    
    84
    %Railroad businesses operating margin
    
    
    15
    %
    
    
    15
    %
    
    
    16
    %
 
 (1)
    
    Total railroad operating expenses as a percentage of railroad businesses revenue. Railway Operating Expenses.
 
    
    Equipment leases and services. Our expenses for equipment leases and services
mainly consist of railway line usage fees, train hauling fees and train leasing fees
paid to other railway bureaus. In 2009, our expenses relating to equipment leases and
services amounted to RMB 2,974.8 million, representing an increase of 12.1% from RMB
2,653.2 million in 2008. This was mainly due to increased railway usage fees paid by
us as result of (i) our takeover of the entire operation of Beijing-Kowloon Through
Train since January 2009 and (ii) the change in the status of the Guangzhou-Xian
trains from temporarily operated trains to regularly operated trains.
    
    Depreciation.Our depreciation expenses of fixed assets increased by 8.0% from RMB
1,145.6 million in 2008 to RMB 1,237.4 million in 2009, mainly due to the increase in
depreciation expenses relating to the CRHs and the Fourth Rail Line between Guangzhou
and Shenzhen.
    
    Labor and benefits. In 2009, our labor and benefits expenses amounted to RMB
2,277.1 million, representing an increase of 7.1% from RMB 2,125.4 million in 2008.
The increase was mainly due to the increase in employees basic salaries, allowances
and benefits.
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
    
    Business tax. Our business tax in 2009 was RMB 267.0 million, representing an
increase of 5.5% from RMB 253.0 million in 2008. The increase was mainly due to the
increase in our operating revenue.
  
    
    Others. Our other railway operating expenses decreased by 13.8% from RMB 382.2
million in 2008 to RMB 329.6 million in 2009. This was mainly because we did not incur
as severe weather conditions in the first quarter of 2009 as in the first quarter of
2008, and therefore did not spend the related operating costs.
    
    Repair (excluding materials and supplies). Our repair expenses decreased by 12.2%
from RMB 670.2 million in 2008 to RMB 588.3 million in 2009, primarily because we
completed most of our previously planned repair work in 2008 and therefore managed to
reduce repair expenses in 2009.
    
    Utility and office expense. Our utility and office expense decreased by 7.9% from
RMB 121.4 million in 2008 to RMB 111.8 million in 2009. This was mainly due to our
efforts to control costs on administration and transportation in response to the recent
global financial crisis and economic downturn.
    
    Social service expenses. Our social service expenses decreased by 6.8% from RMB
400.5 million in 2008 to RMB 373.3 million in 2009. This was primarily because (i) we
did not experience as severe weather conditions in the first quarter of 2009 as in the
first quarter of 2008 and therefore incurred less expenses for implementing security
measures and (ii) in 2009, we were no longer required to implement the security
measures required by the PRC government for the Beijing 2008 Olympic Games.
 Profit from Operations
  Taxation
  43




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Profit attributable to shareholders of the Company
  Year ended December 31, 2008 compared with year ended December 31, 2007
 Revenue
  Passenger transportation service.
 Freight transportation.
 
    
    in 2008, our outbound freight tonnage was 16.8 million tonnes, representing a decrease
of 11.6% from 19.1 million tonnes in 2007. Our outbound freight revenue was RMB 282.7
million in 2008, representing an increase of 30.3% from RMB 216.9 million in 2007. The
Companys outbound freight tonnage declined due to the freezing weather at the beginning of
2008, the upgrading of the industrial structure in the Pearl River Delta region and the
global financial crisis and economic downturn. The increase in outbound
 44




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freight revenue was primarily due to (i) the increase in railway freight transportation
tariffs in 2008 against 2007 as a result of the price adjustment in November 2007 and (ii)
an increase in the delivery of higher value-added processed goods.
    
    in 2008, our inbound and pass-through freight tonnages were 53.3 million tonnes,
representing an increase of 2.6% from 52.0 million tonnes in 2007, primarily due to the
increase in the pass-through freight tonnages. Our inbound and pass-through freight
revenue was RMB 948.2 million in 2008, representing a decrease of 6.1% from RMB 101.1
million in 2007, primarily due to the decrease in our inbound freight revenue as a result
of the decrease in inbound freight tonnages.
 Railway Network Usage and Services Business.
 Other Businesses.
 Operating Expenses
  Railway Operating Expenses.
 
    
    Business tax. Our business tax in 2008 was RMB 253.0 million, representing an
increase of 14.1% from RMB 221.8 million in 2007. The increase was mainly due to the
increase in our operating revenue.
    
    Labor and benefits. In 2008, our labor and benefits expenses amounted to RMB
2,125.4 million, representing an increase of 10.2% from RMB 1,928.2 million in 2007.
The increase was mainly due to (i) the increase in employees basic salaries and
benefits and (ii) the increase in the number of operating staff and workload as a
result of the increase in the number of trains in operation during the year.
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
    
    Equipment leases and services.Our expenses for equipment leases and services
mainly consist of railway line usage fees, train hauling fees and train leasing fees
paid to other railway bureaus. In 2008, our expenses relating to equipment leases and
services amounted to RMB 2,653.2 million, representing an increase of 2.2% from RMB
2,595.2 million in 2007. This was mainly due to (i) the temporary change in
locomotives and routes of the long-distance trains as a result of the freezing weather
at the beginning of 2008, which led to the increase in railway network expenses; (ii)
the operation of Guangzhou-Zhengzhou trains in July 2008 and the corresponding
increase in railway network expenses and (iii) the change in electric locomotive
routing, which led to the increase in locomotive traction expenses. Such increase was
partially offset by the fact that we did not incur any expenses relating to the lease
of Blue Arrow high-speed electric train-sets in 2008.
    
    Materials and supplies.Our materials and supplies expenses consist mainly of
materials, fuel, water and electricity expenses. In 2008, our materials and supplies
expenses were RMB 1,345.7 million, representing an increase of 8.5% from RMB 1,240.8
million in 2007. The increase was mainly due to (i) the increase in the prices of
fuel, electricity and other railway-related materials and (ii) the increased
consumption of materials, fuel, water and electricity as a result of the increase in
the number of trains we operated in 2008.
    
    Repair (excluding materials and supplies).Our repair expenses increased by 45.7%
from RMB 460.1 million in 2007 to RMB 670.2 million in 2008, primarily due to (i) an
increase in repairs of locomotives, cars, buildings and structures as a result of the
increase in the number of trains we operated in 2008 and the expansion of our business
and (ii) the addition of new vegetation and tree planting along the rail lines to
strengthen the roadbed.
    
    Depreciation.Our depreciation expenses of fixed assets increased by 13.8% from
RMB 1,006.7 million in 2007 to RMB 1,145.6 million in 2008, mainly due to the increase
in depreciation expenses relating to the CRHs and the Fourth Rail Line between
Guangzhou and Shenzhen.
    
    Utility and office expense.Our utility and office expense increased by 10.6% from
RMB 109.8 million in 2007 to RMB 121.4 million in 2008. This was mainly due to the
increase in security expenses during the Beijing 2008 Olympic Games.
    
    Others. Our other railway operating expenses increased by 23.4% from RMB 309.9
million in 2007 to RMB 382.2 million in 2008. This was mainly due to the increase in
communication fees as a result of the installation of the train monitoring system and
the upgrade of communication technology.
 Profit from Operations
  46




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Taxation
  Profit attributable to shareholders of the Company
  Critical Accounting Policies and Estimates
   Revenue recognition
   Revenue from railway business:
 Revenue from other businesses:
 47




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Interest income:
 Dividend income:
 Rental income:
 Fixed assets
  Buildings (Note a)
    
    20 to 40 yearsLeasehold improvements
    
    Shorter of useful life or lease termsTrack, bridges and service roads (Note a)
    
    16 to 100 yearsLocomotives and rolling stock
    
    20 yearsCommunications and signaling systems
    
    8 to 20 yearsOther machinery and equipment
    
    4 to 25 years
 
 Note a:
    
    The estimated useful lives of buildings, tracks, bridges and service roads exceed the
initial lease periods of the respective land use right lease grants (the Lease Term) and
land use right operating leases (the Operating Lease Term) of the land on which these assets
are located. Pursuant to the relevant laws and regulations in the PRC governing the land use
right lease grant, we have the right to renew the leases to a period not less than 50 years
after payment of additional cost. This right can be exercised within one year of the expiry
of the initial Lease Term and can only be denied if such renewals are considered to be
detrimental to the public interest. We consider the approval process to be perfunctory. In
addition, based on the provision of the land use right operating lease agreement entered into
with our substantial shareholder, we can renew the lease at our own discretion upon expiration
of the Operating Lease Term. Based on these considerations, we determined the estimated
useful lives of these assets to extend beyond the initial Lease Term as well as the Operating
Lease Term. 48




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Trade and other receivables
   Trade payables
  Goodwill
   49




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Impairment of investment in subsidiaries, associates and non-financial assets
   Current and deferred income tax
     50




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Employee benefits
   
 Item 5B. Liquidity and Capital Resources
     
    
    repayment of borrowings of RMB 3,900 million;
    
    capital expenditures of approximately RMB 1,639.7 million, representing a decrease
of 44.4% from RMB 2,947.8 million in 2008; and
 51




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
    
    payment of dividends of approximately RMB 566.7 million.
  
    
    purchasing 25G and 25T passenger trains;
    
    purchasing CRHs;
    
    constructing the Buji passenger station; and
    
    upgrading and expanding the transportation equipment for the
Shenzhen-Guangzhou-Pingshi Railway.
     Cash Flow
  52




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Year ended December 31,
    
    Change in 20092008
    
    2009
    
    from 2008(RMB thousands)Net cash generated from operating
activities
    
    
    1,641,069
    
    
    
    2,617,533
    
    
    
    59.5
    %Net cash used in investing activities
    
    
    (2,915,785
    )
    
    
    (2,096,154
    )
    
    
    (28.1
    %)Net cash (used in)/generated from
financing activities
    
    
    483,317
    
    
    
    (966,680
    )
    
    
    (300.0
    %)Net decrease in cash and
cash equivalents
    
    
    (791,399
    )
    
    
    (445,301
    )
    
    
    43.7
    %
      
 Item 5C. Research and Development, Patents and Licenses, etc.
   53




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.
 
 Item 5D. Trend Information
      54




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Item 5E. Off-Balance Sheet Arrangements
  
 Item 5F. Tabular Disclosure of Contractual Obligations
  Contractual Obligations Payments Due by Period
 Payment due by period(RMB thousands)Less than 1Contractual Obligations
    
    Total
    
    year
    
    1-3 year
    
    3-5 year
    
    More than 5 yearsLong-Term Debt Obligations
    
    
    4,331,942
    
    
    
    167,650
    
    
    
    335,300
    
    
    
    3,828,992
    
    
    
    Capital Expenditure Obligation
    
    
    248,630
    
    
    
    236,898
    
    
    
    11,732
    
    
    
    
    
    
    
    Operating Lease Obligations(1)
    
    
    1,258,000
    
    
    
    74,000
    
    
    
    148,000
    
    
    
    148,000
    
    
    
    888,000Other Long-Term Liabilities Reflected on
the Companys Balance Sheet under IFRS
    
    
    231,939
    
    
    
    57,172
    
    
    
    101,650
    
    
    
    70,342
    
    
    
    2,775Total
    
    
    6,070,511
    
    
    
    535,720
    
    
    
    596,682
    
    
    
    4,047,334
    
    
    
    890,775
 
 (1)
    
    In connection with the Acquisition, we signed an agreement on November 15, 2004 with
GRGC for leasing the land on which the acquired assets are located. The agreement became effective
upon the completion of the Acquisition on January 1, 2007 and the lease term is 20 years, renewable
at our discretion. According to the terms of the agreement, the rental for such lease will be
agreed by both parties every year with a maximum amount not exceeding RMB 74.0 million. In the
year ended December 31, 2009, the related rental cost paid and payable was RMB 51.2 million.  
    
    constructing new ancillary facilities for the Guangzhou-Shenzhen Fourth Rail
Line;
    
    constructing the Buji passenger station; and
    
    upgrading the supporting facilities to improve safety for railway
transportation.
 55




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Item 5G. Safe Harbor
 Safe Harbor
  
 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 
 Item 6A. Directors and Senior Management
 Directors
   Date First Elected orName
    
    Age
    
    Position
    
    AppointedXu Xiaoming
    
    
    55
    
    
    Chairman of the Board of Directors
    
    
    2010Guo Zhuxue
    
    
    43
    
    
    Director
    
    
    2010Shen Yi
    
    
    55
    
    
    Director and General Manager
    
    
    2008Li Liang
    
    
    50
    
    
    Director
    
    
    2009Yu Zhiming
    
    
    51
    
    
    Director
    
    
    2008Luo Qing
    
    
    45
    
    
    Director
    
    
    2009Dai Qilin
    
    
    42
    
    
    Independent Director
    
    
    2008Wilton Chau Chi Wai
    
    
    48
    
    
    Independent Director
    
    
    2004Lv Yuhui
    
    
    55
    
    
    Independent Director
    
    
    2008
   56




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57




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Supervisors
  Date First ElectedName
    
    Age
    
    Position
    
    or AppointedXu Ling
    
    
    54
    
    
    Chairman of the supervisory committee
    
    
    2010Chen Shaohong
    
    
    43
    
    
    Supervisor
    
    
    2008Wang Jianping
    
    
    53
    
    
    Supervisor
    
    
    2008Li Zhiming
    
    
    49
    
    
    Supervisor
    
    
    2005Xu Huiliang
    
    
    47
    
    
    Supervisor
    
    
    2010Liu Xilin
    
    
    54
    
    
    Supervisor
    
    
    2008
   58




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,
 Senior Management
  Name
    
    Age
    
    Position
    
    Date First Elected or AppointedShen Yi
    
    55
    
    General Manager
    
    2008Mu Anyun
    
    50
    
    Deputy General Manager
    
    2009Tang Xiangdong
    
    41
    
    Chief Accountant
    
    2008Guo Xiangdong
    
    44
    
    Company Secretary
    
    2004
  59




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Additional Information
  Name
    
    PositionXu Xiaoming
    
    Chairman of the Board of Directors of:    GRGC    Guangdong Pearl Delta Inter-city Railway Transportation Company Limited    Guangmeishan Railway Company Limited    Sanmao Railway Company Limited    Shichang Railway Company Limited    Yuehai Railway Company Limited    Guangzhu Railway Company Limited    Hainan Donghuan Railway Company Limited    Xiashen Railway Guangdong Company Limited    Ganshao Railway Company Limited    China Railway (Hong Kong) Holdings Company LimitedGuo Zhuxue
    
    Chairman of the Board of Directors of:    Hukun Railway Passenger Line Hunan Company LimitedVice Chairman of the Board of Directors and General Manager of:
 60




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Name
    
    Position    GRGCShen Yi
    
    Director of:    Guangzhou Tiecheng Industrial Company LimitedLi Liang
    
    Executive Deputy General Manager of:    GRGCYu Zhiming
    
    Chairman of the supervisory committee of:    Yuehai Railway Company Limited    Guangshengang Passenger Line Company Limited    Guangdong Pearl Delta Inter-city Railway Transportation Company Limited    Maozhan Railway Company LimitedDirector of:    Guangmeishan Railway Company Limited    Sanmao Railway Company Limited    Shichang Railway Company Limited    Hainan Donghuan Railway Company Limited    Hukun Railway Passenger Line Hunan Company Limited    Ganshao Railway Company Limited    China Railway Container Transportation Company Limited    China Railway Special Goods Transportation Company LimitedSupervisor of:    Guangzhu Railway Company LimitedChief Accountant of:    GRGCXu Ling
    
    Chairman of the supervisory committee of:    Guangmeishan Railway Company Limited    Sanmao Railway Company LimitedSupervisor of:    Guangzhu Railway Company LimitedChen Shaohong
    
    Director of:    Yuehai Railway Company Limited    Guangdong Tieqing International Travel Agency Limited    Guangmeishan Railway Company Limited    Xiashen Railway Guangdong Company Limited    Jinyue Railway Company Limited    Sanmao Railway Enterprise Development Company LimitedChairman of the supervisory committee of:    Shichang Railway Company Limited    Hukun Railway Passenger Line Hunan Company Limited
 61




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Name
    
    PositionSupervisor of:    Hainan Donghuan Railway Company Limited    Ganshao Railway Company Limited    Sanmao Railway Company Limited    China Railway Express Co., Ltd.Li Zhiming
    
    Chairman of the supervisory committee of:    Guangdong Tieqing International Travel Agency Company Limited    Beijing Xingguangji Economy and Trade Company Limited    Guangzhou Tiecheng Industrial Company LimitedSupervisor of:    Sanmao Railway Company Limited    Sanmao Railway Enterprise Development Company Limited    Guangmeishan Railway Company Limited    Hukun Railway Passenger Line Hunan Company Limited    Xiashen Railway Guangdong Company Limited    Ganshao Railway Company Limited    Guiguang Railway Company Limited    Nanguang Railway Company Limited    Jinyue Railway Company Limited    Yuehai Railway Company Limited    Shichang Railway Company Limited    Hong Kong Qiwen CompanyTang Xiangdong
    
    Supervisor of:    Guangdong Tiecheng Industrial Company Limited
  
 Item 6B. Board Compensation
 Directors and Senior Management
  62




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Interests of Our Directors, Supervisors and Other Senior Management in Our Share Capital
  Service Contracts of Our Directors and Supervisors
  Contracts Entered into by Our Directors and Supervisors
  Remuneration of Our Directors and Supervisors
  63




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Item 6C. Board Practices
 Board of Directors
  Supervisory Committee
   64




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
    
    to examine the Companys financial situation;
    
    to supervise the performance of duties of the directors, general manager, deputy
general managers and other senior management; to propose the dismissal of directors,
general manager, deputy general managers and other senior management who have violated
any law, administrative regulations, the Articles of Association or resolutions of the
shareholders general meetings;
    
    to demand a director, general manager, deputy general manager or any other senior
management to rectify such breach when the acts of such persons are harmful to the
Companys interest;
    
    to propose the convening of shareholders general meetings, and to convene and chair
the shareholders general meetings if the board of directors fails to perform this duty
as stipulated in the Articles of Association;
    
    to propose motions to shareholders general meetings; and
    
    to initiate legal proceedings against any director, general manager, deputy general
manager and other senior management in accordance with Article 152 of the Company Law.
   Audit Committee
  
    
    reviewing the annual financial statements and interim financial statements of the
Company, including the disclosures made by the Company in this annual report;
    
    reviewing the financial reports and the reports of the Company prepared by the
independent auditor and its supporting documents, including the review of the
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internal control and disclosure controls and procedures, and to discuss with the
auditor the annual audit plan and solutions to problems in the previous year;
    
    reviewing and approving the selection of and remuneration paid to the independent
auditor;
    
    pursuant to the resolutions of the annual general meeting, determining with the
Board of Directors the annual auditing fees paid to our independent auditor;
    
    reviewing with the management and the independent auditor the performance, adequacy
and effectiveness of the internal controls and risk management, as well as any material
deficiencies and weakness existing in the internal controls;
    
    evaluating the Companys performance in complying with industrial practices, market
rules, and statutory duties, and the safeguarding of its own interests and the
interests of its shareholders;
    
    considering and determining whether any senior executive officer or senior financial
personnel is in violation of their code of conduct, and the consequences for such a
violation; and
    
    overseeing the management of the retirement pension fund of the Company.
 Remuneration Committee
   
 Item 6D. Employees
  66




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Function
    
    EmployeesPassenger transportation personnel (1)
    
    
    8,901Coordination personnel (2)
    
    
    1,950Freight transportation personnel (3)
    
    
    1,497Mechanical personnel (4)
    
    
    4,137Power and water supply personnel (5)
    
    
    1,501Vehicle personnel (6)
    
    
    2,905Maintenance personnel (7)
    
    
    3,755Power service personnel (8)
    
    
    1,200Transportation supporting personnel (9)
    
    
    1,059Diversified businesses and other supporting personnel
(10)
    
    
    387Technical and administrative personnel (11)
    
    
    4,044Other personnel (12)
    
    
    1,834Total
    
    
    33,170
 
 (1)
    
    Passenger transportation personnel mean those people that provide station boarding and
train services.(2)
    
    Coordination personnel mean those people responsible for train coordination.(3)
    
    Freight transportation personnel mean those people responsible for organization of
freight transportation.(4)
    
    Mechanical personnel mean those people responsible for train operation and overhaul.(5)
    
    Power and water supply personnel mean those people responsible for contact network
operation and overhaul as well as power and water consumption maintenance.(6)
    
    Vehicle personnel mean those people responsible for vehicle operation and overhaul.(7)
    
    Maintenance personnel mean those people responsible for station track and railroad
switch maintenance.(8)
    
    Power service personnel mean those people responsible for signal equipment maintenance.(9)
    
    Transportation supporting personnel means the supporting personnel of trains,
machinery, works, power and vehicle organizations.(10)
    
    Diversified businesses and other supporting personnel mean all personnel involved in
diversified businesses.(11)
    
    Technical and administrative personnel mean all managerial personnel other than the
personnel of diversified businesses.(12)
    
    Other personnel include all personnel who have been sick, studying or early-retired.     67




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Item 6E. Share Ownership
  
 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 
 Item 7A. Major Shareholders
  Shareholding Structure of our Company
  Types
    
    
    
    
    
    ShareholdingName of Shareholders
    
    of Shares
    
    Number of Shares Held
    
    Percentage %Public Shareholders of
H shares (including
ADSs)
    
    H shares
    
    
    1,431,300,000
    
    
    
    20.2Guangzhou Railway
(Group) Company
    
    A shares
    
    
    2,629,451,300
    
    
    
    37.1National Social
Security Fund
Council(1)
    
    A shares
    
    
    274,798,700
    
    
    
    3.9Other Public
Shareholders of A
shares
    
    A shares
    
    
    2,747,987,000
    
    
    
    38.8Total
    
    
    
    
    
    
    7,083,537,000
    
    
    
    100.0
 
 (1)
    
    On September 22, 2009, in accordance with relevant PRC regulations on transferring a
portion of state-owned shares to the National Social Security Fund Council, the state-owned assets
supervision and administration authority ordered China Securities Depository and Clearing Co., Ltd.
to transfer 274,798,700 state-owned shares held by GRGC to the National Social Security 68




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Fund Council, with an extended lock-up period of an additional three years following the expiry of
the original three-year lock-up period.  PercentageIdentity of Person
    
    
    
    
    
    of Class of
    
    Percent of TotalTitle of Class
    
    or Group
    
    Amount Owned
    
    Shares
    
    CapitalOrdinary Shares (A shares)(1)
    
    GRGC
    
    
    2,629,451,300
    
    
    
    46.5
    
    
    
    37.1
 
 (1)
    
    A shares held by GRGC are no longer restricted from sales and redemption starting from
December 22, 2009.  Percentage ofIdentity of Person or Group
    
    Shares Owned
    
    H Shares
    
    Percent of Total CapitalCredit Suisse Group AG
    
    
    82,763,665
    (L)(1)
    
    
    5.78
    
    
    
    1.1781,976,950
    (S)(1)
    
    
    5.73
    
    
    
    1.16
 
 (1)
    
    The letter L denotes a long position. The letter S denotes a short position.   
 Item 7B. Related Party Transactions
   Name of related parties
    
    Relationship with usSubstantial shareholder and fellow subsidiariesGRGC
    
    Substantial shareholder
 69




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Name of related parties
    
    Relationship with usYangcheng Railway Company
    
    Subsidiary of GRGCGuangmeishan Railway Company Limited
    
    Subsidiary of GRGCGEDC
    
    Subsidiary of GRGCGuangzhou Railway Material Supply Company
    
    Subsidiary of GRGCGuangzhou Railway Engineer Construction Enterprise Development Company
    
    Subsidiary of GRGCYuehai Railway Company Limited
    
    Subsidiary of GRGCShichang Railway Company Limited
    
    Subsidiary of GRGCCYTS Guangdong Railway Shenzhen Co., Ltd., or CYTS
    
    Subsidiary of GRGCChangsha Railway Construction Company Limited
    
    Subsidiary of GRGCGuangdong Sanmao Enterprise Development Company Limited
    
    Subsidiary of GRGCGuangzhou Qingda Transportation Company Limited
    
    Subsidiary of GRGCYangcheng Construction Company of Yangcheng Railway Enterprise
Development Company
    
    Subsidiary of GRGCGuangzhou Yuetie Operational Development Company
    
    Subsidiary of GRGCGuangzhou Railway Real Estate Construction Company
    
    Subsidiary of GRGCGuangdong Pearl River Delta Inter-city Railway Traffic Co., Ltd.
    
    Subsidiary of GRGCGuangzhou Railway Group Diversified Management Development Center
    
    Subsidiary of GRGCGuangzhou Railway Rolling Stock Factory
    
    Subsidiary of GRGCGuangzhou Railway Group Foreign Economic & Trade Development 
Corporation
    
    Subsidiary of GRGCAssociates of our CompanyGuangzhou Tiecheng Enterprise Company Limited
    
    Associate of our CompanyZengcheng Lihua Stock Company Limited
    
    Associate of our CompanyShenzhen Guangshen Railway Civil Engineering Company
    
    Associate of our Company
    70




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
    
    locomotives, railcars and operating personnel;
    
    leasing of passenger coaches;
    
    maintenance services for locomotives and passenger coaches;
    
    railroad transportation related services;
    
    fuel for the operation of locomotives;
    
    railway related materials;
    
    overhaul and emergency repair of our track and bridges;
    
    public security; and
    
    employee housing.
   
    
    prices for railroad transportation-related services are determined in accordance
with the actual costs incurred in providing these services plus a profit margin of 8%
of aggregate chargeable costs (fuel expenses, asset depreciation and water utility
fees are not counted as chargeable costs for purposes of this calculation), or in
accordance with the standard prices published by the MOR. We believe that the prices
for the provision of these services are consistent with that which would be charged
in an arms-length transaction;
    
    the rental fees for the high-speed passenger coaches leased to our Company by GRGC
at approximately 6% of GRGCs purchase price for the coaches, equivalent to GRGCs
depreciation expenses for the coaches; we also bear all costs of maintenance and
overhaul of these coaches;
    
    the prices for social and related services provided by Yangcheng Railway Company
and GEDC are determined based on the actual cost of providing these services plus a
profit margin of 8%;
    
    the prices for social and related services, such as child care services and
newspaper supply services, that are provided by GRGC are determined based on the
actual cost of providing such services;
    
    the prices for the supply of railroad transportation related materials are
determined in accordance with the relevant policies and regulations issued by GRGC
(which regulations are applicable to other railroads under the jurisdiction
 73




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##### Table of Contents



of GRGC); and
    
    the prices for the provision of overhaul and large scale maintenance services for
our track and bridges are based on the relevant approved estimates plus a profit
margin of 8%, and the prices for other maintenance services are to be agreed by the
parties on a case-by-case basis.
   74




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##### Table of Contents



Year ended December 31,2007
    
    
    2008
    
    
    2009(RMB thousands)Provision of ServicesRevenue collected by MOR for services provided to
GRGC and its subsidiaries (1)
    
    
    (1,005,505
    )
    
    
    (1,038,611
    )
    
    
    (1,069,053
    )Provision of repairing services for cargo trucks
of GRGC and its subsidiaries (2)
    
    
    (175,248
    )
    
    
    (148,322
    )
    
    
    (220,000
    )Provision of train transportation services to GRGC
and its subsidiaries (3)
    
    
    (183,989
    )
    
    
    (265,998
    )
    
    
    (208,860
    )Receipt of ServicesCost settled by MOR for services provided by GRGC
and its subsidiaries (1)
    
    
    1,105,890
    
    
    
    1,218,138
    
    
    
    1,530,479Train transportation services provided by GRGC and
its subsidiaries (4)
    
    
    213,388
    
    
    
    235,303
    
    
    
    347,969Social services (employee housing and public
security services and other ancillary services)
provided by GEDC and Yangcheng Railway Company
(5)
    
    
    429,655
    
    
    
    440,602
    
    
    
    369,257Provision of construction services by GRGC and its
subsidiaries (2)
    
    
    61,950
    
    
    
    259,787
    
    
    
    241,753Provision of repair and maintenance services by
GRGC and its subsidiaries (3)
    
    
    104,111
    
    
    
    115,568
    
    
    
    115,455Provision of turnkey service by CYTS (6)
    
    
    50,569
    
    
    
    15,280
    
    
    
    PurchasePurchase of materials and supplies from GRGC and
its subsidiaries (7)
    
    
    577,352
    
    
    
    398,230
    
    
    
    631,149OthersPayment for the acquisition of net assets of
Yangcheng Railway Business
    
    
    4,873,332
    
    
    
    
    
    
    
    Operating lease rental paid to GRGC for the
leasing of land use rights
    
    
    50,000
    
    
    
    50,000
    
    
    
    51,200
 
 (1)
    
    Such revenues/charges are determined by the MOR based on its standard charges
applied on a nationwide basis.(2)
    
    The service charges are determined based on a pricing scheme set by the MOR or by
reference to market prices with guidance provided by the MOR.(3)
    
    The service charges are determined based on a pricing scheme set by the MOR or
based on negotiation between the contracting parties with reference to full cost
principle.(4)
    
    The service charges are determined based on negotiation between the contracting
parties with reference to full cost principle.(5)
    
    The service charges are levied based on contract prices determined based on cost
plus a profit margin and explicitly agreed between the contracting parties.(6)
    
    The prices are determined based on mutual negotiation between the contracting
parties.(7)
    
    The prices are determined based on mutual negotiation between the contracting
parties with reference to the cost plus a management fee model. 75




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As of December 31,2007
    
    
    2008
    
    
    2009(RMB thousands)Due from GRGC
    



    
155,034

    
    
    113,195 Trade receivables (1)
        
    
    

    
    
    
    150,066
    
    
    
    108,341 Other receivables
    

    

    
    
4,968

    
    
4,854Due to GRGC
    

    (78,262
    )
    

    (35,209
    )
    

    (63,396
    ) Trade payables (1)
    
    
    (96,995
    )
    
    
    (25,787
    )
    
    
    (53,955
    ) Other payables (3)
    

18,733
    
    
(9,442
    )
    
(9,441
    )Due from subsidiaries of GRGC
    
39,911
    
    
16,815
    
    28,733 Trade receivables
    
    
    17,843
    
    
    
    15,354
    
    
    
    13,126Less:impairment provision
    
    
    
    
    
    
    (4
    )
    
    
    (113
    ) Other receivables
    
22,068
    
    
1,465
    
    
15,720Due to subsidiaries of GRGC
    
(940,928
    )
    
(302,206
    )
    
(230,260
    ) Trade payables (2)
    
    
    (198,843
    )
    
    
    (198,843
    )
    
    
    (174,054
    ) Other payables (3)
    
(783,927
    )
    
(103,363
    )
    
(56,206
    )Due from an associate
    
1,825
    
    
2,019
    
    
1,312 Trade receivables
    
    
    
    
    
    
    160
    
    
    
     Other receivables
    
    
    14,137
    
    
    
    14,171
    
    
    
    13,624Less: impairment provision (5)
    

(12,312
    )
    

(12,312
    )
    
(12,312
    )Due to an associate
    
(2,935
    )
    
(25,118
    )
    
(9,534
    ) Trade payables
    
    
    
    
    
    
    
    
    
    
    (135
    ) Other payables (4)
    
(2,935
    )
    
(25,118
    )
    

(9,399
    )Prepayment for fixed assets and construction-in-progress
    
12,617
    
    
31,012
    
    
 GRGC and its subsidiaries
    
12,617
    
    
31,012
    
    
Payables for fixed assets and construction-in-progress
    
(53,546
    )
    
(125,487
    )
    
(101,316
    ) GRGC and its subsidiaries
    
    
    (45,496
    )
    
    
    (95,498
    )
    
    
    (101,316
    ) Associates
    
(8,050
    )
    
(29,989
    )
    

 
 (1)
    
    The trade balances due from/to GRGC and subsidiaries of GRGC mainly represented
service fees and charges payable and receivable balances arising from the provision of
passenger transportation and cargo forwarding businesses jointly with these related
parties within the PRC.(2)
    
    The trade balances due to subsidiaries of GRGC mainly represent payables arising
from unsettled fees for purchase of materials and provision of other services according
to various service agreements entered into between us and the related parties.(3)
    
    The non-trade balances due to subsidiaries of GRGC mainly represent the deposits
of related parties maintained in the deposit-taking center of our Company. 76




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##### Table of Contents



(4)
    
    The non-trade balance due to an associate mainly represents the payable balance
arising from unsettled balance for the construction project services undertaken by an
associate.(5)
    
    Full impairment loss provision set up against a receivable balance due from
Zengcheng Lihua, which was brought forward from prior years.   Transaction with the MOR
   Year ended December 31,2007
    
    
    2008
    
    
    2009(RMB thousands)Recurring Transactions:IncomeRevenue collected from the MOR, including
revenue collected by the MOR for services
provided to GRGC and its subsidiaries Passenger transportation
    
    
    (5,318,369
    )
    
    
    (6,196,596
    )
    
    
    (6,542,333
    ) Freight transportation
    
    
    (906,516
    )
    
    
    (841,240
    )
    
    
    (752,561
    ) Railway network usage and services
    
    
    (2,659,529
    )
    
    
    (2,738,425
    )
    
    
    (3,105,654
    )Charges and PaymentsServices charges allocated from the MOR,
including cost settled by the MOR for services
provided to GRGC and its subsidiaries
    
    
    1,990,297
    
    
    
    2,179,407
    
    
    
    2,404,966Operating lease rentals paid/payable to the MOR
    
    
    156,628
    
    
    
    176,880
    
    
    
    162,651
 77




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As of December 31,2007
    
    
    2008
    
    
    2009(RMB thousands)Due from the MOR Trade receivables
    
    
    42,189
    
    
    
    53,048
    
    
    
    273,300
 
 Item 7C. Interests of Experts and Counsel
  
 ITEM 8. FINANCIAL INFORMATION
 
 Item 8A. Consolidated Statements and Other Financial Information
 Item 8A.1  Item 8.A.6:
  Item 8A.7 Legal Proceedings
    78




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Item 8A.8 Dividend Distributions
  
    
    net after-tax income determined in accordance with PRC accounting standards and
regulations; and
    
    net after-tax income determined in accordance with either international accounting
standards or the accounting standards of the countries in which our shares are listed.
     79




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Item 8B. Significant Changes
  80




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ITEM 9. THE OFFER AND LISTING
 
 Item 9A. Offer and Listing Details
 Price Range of our H shares and ADSs
   New York Stock Exchange
    
    HKSECalendar Period
    
    High
    
    Low
    
    High
    
    Low(USD per ADS)
    
    (HKD per H share)2005
    
    
    20.50
    
    
    
    13.07
    
    
    
    3.225
    
    
    
    2.002006
    
    
    35.24
    
    
    
    14.70
    
    
    
    5.41
    
    
    
    2.302007
    
    
    45.22
    
    
    
    27.11
    
    
    
    6.91
    
    
    
    4.402008January to March
    
    
    37.02
    
    
    
    24.25
    
    
    
    5.83
    
    
    
    3.70April to June
    
    
    30.01
    
    
    
    21.00
    
    
    
    4.65
    
    
    
    3.31July to September
    
    
    25.55
    
    
    
    19.45
    
    
    
    3.95
    
    
    
    3.00October to December
    
    
    26.11
    
    
    
    13.05
    
    
    
    3.93
    
    
    
    2.002009January to March
    
    
    20.1
    
    
    
    13.83
    
    
    
    3.09
    
    
    
    2.23April to June
    
    
    25.52
    
    
    
    17.58
    
    
    
    3.93
    
    
    
    2.66July to September
    
    
    25.28
    
    
    
    20.05
    
    
    
    3.93
    
    
    
    3.13October to December
    
    
    23.00
    
    
    
    19.46
    
    
    
    3.49
    
    
    
    3.00December
    
    
    21.11
    
    
    
    19.46
    
    
    
    3.24
    
    
    
    2.982010January
    
    
    21.91
    
    
    
    20.19
    
    
    
    3.48
    
    
    
    3.11February
    
    
    20.94
    
    
    
    19.88
    
    
    
    3.30
    
    
    
    3.07March
    
    
    20.73
    
    
    
    19.83
    
    
    
    3.19
    
    
    
    3.07April
    
    
    20.49
    
    
    
    19.38
    
    
    
    3.14
    
    
    
    3.03May
    
    
    19.37
    
    
    
    16.03
    
    
    
    3.00
    
    
    
    2.56June (through June 11)
    
    
    17.20
    
    
    
    16.22
    
    
    
    2.66
    
    
    
    2.57
   
 Item 9B. Plan of Distribution
  81




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Item 9C. Markets
  
 Item 9D. Selling Shareholders
  
 Item 9E. Dilution
  
 Item 9F. Expenses of the Issue
  82




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ITEM 10. ADDITIONAL INFORMATION
 
 
 Item 10A. Share Capital
    PercentageNumber
    
    
    of sharesType of share capital
    
    of shares
    
    
    (%)Domestic tradable shares with restriction on sales (A shares)
    
    
    274,798,700
    
    
    
    3.88Domestic tradable shares without restriction on sales (A
shares)
    
    
    5,377,438,300
    
    
    
    75.91H shares
    
    
    1,431,300,000
    
    
    
    20.2Total
    
    
    7,083,537,000
    
    
    
    100.00
 Public Float
  Pre-Emptive Rights
  
 Item 10B. Memorandum and Articles of Association
  General
  83




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Significant Differences between H shares and A shares
  Restrictions on Transferability
  
    
    relevant transfer fees have been paid, if any;
    
    the instrument of transfer only involves H shares;
    
    the stamp duty chargeable on the instrument of transfer has been paid;
    
    the relevant share certificate and, upon the reasonable request of the board of
directors, any evidence in relation to the right of the transferor to transfer the
shares have been submitted;
    
    if the shares are being transferred to joint owners, the maximum number of joint
owners does not exceed four; and
 84




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##### Table of Contents




    
    we do not have any lien on the relevant shares.
 Dividends
  
    
    PRC accounting standards and regulations; and
    
    international accounting standards or the accounting standards of the countries in
which our shares are listed.
  
    
    making up losses;
    
    allocations to the statutory common reserve fund;
    
    allocations to the discretionary common reserve fund upon the approval of
shareholders at a general meeting; and
    
    payment of dividends in respect of ordinary shares.
   85




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Voting Rights and Shareholder Meetings
    
    
    the number of directors falls short of the number stipulated in the Company Law of
the PRC or our by-laws or is below two-thirds of the number required in our Articles of
Association;
    
    our unrecovered losses that have not been made up amount to one-third of our paid-in
share capital;
    
    shareholder(s), severally or jointly, holding 10% or more of our issued shares
carrying the right to vote make a request in writing to convene an extraordinary
general meeting;
    
    the board of directors considers it necessary; or
    
    the supervisory committee proposes to convene such a meeting.
   86




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##### Table of Contents




    
    be given by way of public notice or other means as specified under our Articles of
Association;
    
    specify the place, date and the time of the meeting;
    
    state the motions to be discussed at the meeting;
    
    provide such information and explanations as are necessary for the shareholders to
exercise an informed judgment on the proposals before them. Without limiting the
generality of the foregoing, where a proposal is made to merge the Company with another
entity, to repurchase the shares of the Company, to reorganize its share capital or to
restructure the Company in any other way, the terms of the proposed transaction must be
provided in detail, together with copies of the proposed agreement, if any, and the
cause and effect of the proposal must be properly explained;
    
    contain disclosure of the nature and extent, if any, of material interests of any
director, supervisor, general manager, deputy general manager or other senior officers
of the Company in the transaction proposed and the effect of the proposed transaction
on them in their capacity as shareholders in so far as it is different from the effect
on the interests of other shareholders of the same class;
    
    contain the full text of any special resolution proposed to be approved at the
meeting;
    
    contain conspicuously a statement that a shareholder entitled to attend and vote is
entitled to appoint one or more proxies to attend and vote instead of him or her and
that a proxy need not also be a shareholder; and
    
    state the time within which and the address to which voting proxies for the meeting
are to be delivered.
 www.gsrc.com
 87




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##### Table of Contents




    
    work reports of the board of directors and the supervisory committee;
    
    profit distribution proposals and loss recovery proposals formulated by the board of
directors;
    
    removal of members of the board of directors and the supervisory committee, their
remuneration and methods of payment;
    
    our annual financial budget, final accounts, balance sheet, income statement and
other financial statements; and
    
    matters other than those that are required by laws, administrative regulations or
our Articles of Association to be adopted by way of special resolution.
  
    
    increase or reduction of our share capital and the issuance of shares of any class,
warrants and other similar securities;
    
    issuance of Company debentures;
    
    division, merger, dissolution and liquidation of the Company;
    
    amendment to our Articles of Association;
    
    alteration to the form of the Company;
    
    acquisition or disposal within one year of material assets exceeding 30% of the
total assets of the Company; and
    
    any other matter that, according to an ordinary resolution of the shareholders
meeting, may have a significant impact on the Company and requires adoption by way of a
special resolution.
  88




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
    
    by the chairman of the meeting;
    
    by at least two shareholders who possess the right to vote, present in person or by
proxy; or
    
    by one or more shareholders (including proxies) representing either separately or in
aggregate, not less than one-tenth of all shares having the right to vote at the
meeting.
  Board of Directors
     89




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Liquidation Rights
  Liability of Shareholders
  Increases in Share Capital and Preemptive Rights
  Reduction of Share Capital and Purchase by Us of Our Shares
  (1)
    
    cancellation of shares for capital reduction;(2)
    
    merging with another company that holds our shares;(3)
    
    paying shares to our employees as bonus; or(4)
    
    repurchasing, upon request, any shares held by any shareholder who is opposed
to the Companys resolution for merger or spin-off at a shareholders general meeting.
  90




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
    
    under a general offer;
    
    open offer on a stock exchange; or
    
    by off-market contract.
    
    
    where we repurchase our shares at par value, the amount of the total par value of
shares so repurchased shall be deducted from our book balance distributable profits or
out of the proceeds of a new issue of shares made in respect of the repurchase; and
    
    where we repurchase our shares at a premium, an amount equivalent to their total par
value shall be deducted from our book balance distributable profits or the proceeds of
a new issue of shares made in respect of the repurchase. Payment of the portion in
excess of their par value shall be effected as follows:
 
    
    if the shares being repurchased were issued at par value, payment
shall be made out of our book balance distributable profits; and
 91




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
    
    if the shares being repurchased were issued at a premium, payment
shall be made out of our distributable profits or out of proceeds of a new issue
of shares made in respect of the repurchase, provided that the amount paid out
of the proceeds of the new issue may not exceed the aggregate of premiums
received by us on the issue of the shares repurchased or the current balance of
our capital common reserve account (inclusive of the premiums from the new issue
of shares).
 
    
    Payment by us in consideration for:
 
    
    the acquisition of rights to repurchase our shares;
    
    the variation of any contract to repurchase our shares; or
    
    the release of any of our obligations under any contract to
repurchase our shares;
  Restrictions on Controlling Shareholders
  
    
    to relieve a director or supervisor of his or her duty to act honestly in our best
interests;
    
    to approve the expropriation, by a director or supervisor (for his or her own
benefit or for the benefit of another person), in any guise, of our assets, including
without limitation opportunities advantageous to us; or
    
    to approve the expropriation by a director or supervisor (for his or her own benefit
or for the benefit of another person) of the individual rights of other shareholders,
including without limitation rights to distributions and voting rights, save and except
where it was done pursuant to a restructuring submitted to and approved by our
shareholders in accordance with our Articles of Association.
  92




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Changing Rights of a Class of Shareholders
  Duties of Directors, Supervisors and Other Senior Officers in Interested Transactions
    
    
    the provision by us of a loan or a guarantee of a loan to one of our subsidiaries;
    
    the provision by us of a loan or a guarantee in connection with a loan or any other
funds to any of our directors, supervisors, general managers, deputy general managers
or other senior officers to pay expenditures incurred or to be incurred on our behalf
by him or her or for the purpose of enabling him or her to perform his or her duties
properly, in accordance with the terms of a service contract approved by the
shareholders at a general meeting; and
    
    the provision by us of a loan or a guarantee in connection with a loan to any of our
directors, supervisors, general managers, deputy general managers or other senior
officers or their respective associates on normal commercial terms, provided that the
ordinary course of our business includes the lending of money or the giving of
guarantees.
 Recent Amendments to Our Articles of Association
 93




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##### Table of Contents



Item 10C. Material Contracts
  
 Item 10D. Exchange Controls
  94




---



##### Table of Contents



e.g.
 
 Item 10E. Taxation
 PRC Taxation
 Tax Basis of Assets
  Income Tax
  95




---



##### Table of Contents



Value Added Tax
  Business Tax
  Tax on Dividends
 For an Individual Investor
 96




---



##### Table of Contents



For An Enterprise
 Capital Gains Tax
 For An Individual Investor
 For An Enterprise
 Tax Treaties
   United States Federal Income Taxation
  97




---



##### Table of Contents




    
    banks, insurance companies and financial institutions;
    
    United States expatriates;
    
    tax-exempt entities;
    
    certain insurance companies;
    
    broker-dealers;
    
    traders in securities that elect to mark to market;
    
    U.S. holders liable for alternative minimum tax;
    
    U.S. holders that own 10% or more of our voting stock;
    
    U.S. holders that hold the H shares or ADSs as part of a straddle or a hedging or
conversion transaction; or
    
    U.S. holders whose functional currency is not the U.S. dollar.
   
    
    a citizen or resident of the United States for United States federal income tax
purposes;
    
    a corporation, or other entity treated as a corporation for United States federal
income tax purposes, created or organized under the laws of the United States or any
political subdivision thereof;
    
    an estate the income of which is subject to United States federal income tax
without regard to its source; or
    
    a trust:
 
    
    subject to the primary supervision of a United States court
and the control of one or more United States persons; or
    
    that has elected to be treated as a United States person
under applicable United States Treasury regulations.
  98




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We urge you to consult your tax advisors regarding the United States federal, state, local and
non-United States tax consequences of the purchase, ownership and disposition of the H shares or
ADSs.
  Distributions on the H shares or ADSs
  
    
    a foreign corporation that is eligible for the benefits of a comprehensive income
tax treaty with the United States that includes an exchange of information program;
and
    
    a foreign corporation if its stock with respect to which a dividend is paid (or
ADSs backed by such stock) is readily tradable on an established securities market
within the United States,
   99




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Sale, Exchange or Other Disposition
    100




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PFIC Rules
  
    
    75% or more of its gross income consists of passive income, such as dividends,
interest, rents and royalties; or
    
    50% or more of the average quarterly value of its assets consists of assets that
produce, or are held for the production of, passive income.
    101




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Backup Withholding and Information Reporting
  
    
    are a corporation or fall within various other exempt categories, and, when
required, demonstrate this fact; or
    
    provide a correct taxpayer identification number on a properly completed IRS Form
W-9 or a substitute form, certify that you are exempt from backup withholding and
otherwise comply with applicable requirements of the backup withholding rules.
  Recent Legislative Developments
  102




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Hong Kong Taxation
  Dividends
  Taxation of Capital Gains
   Hong Kong Stamp Duty
   Hong Kong Estate Duty
  103




---



##### Table of Contents



Item 10F. Dividends and Paying Agents
  
 Item 10G. Statement by Experts
  
 Item 10H. Documents on Display
    
 Item 10I. Subsidiary Information
  104




---



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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Currency Risks
   As of December 31,Currency
    
    
    2008
    
    
    2009Monetary assets and liabilities
    
    denomination
    
    
    (RMB thousands)Current assetsCash and cash equivalents
    
    USD
    
    
    
    3,176
    
    
    
    455Cash and cash equivalents
    
    HKD
    
    
    
    30,452
    
    
    
    66,801Other receivables
    
    HKD
    
    
    
    529
    
    
    
    994Trade payables
    
    USD
    
    
    
    (940
    )
    
    
    (939
    )
    105




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Interest Rate Risks
  Credit Risks
     Liquidity Risks
   106




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107




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ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 A. Debt Securities
  B. Warrants and Rights
  C. Other Securities
  D. American Depositary Shares
   Fees Payable by ADS holders
   
    
    a fee of US$1.50 per ADR for transfers of ADRs;
    
    a fee of $0.02 or less per ADS for any cash distribution made, or the cash
distribution fee;
    
    a fee of US$5.00 for each 100 ADSs (or portion thereof) for any security
distribution;
 108




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
    
    an administration fee of $0.02 per ADS per calendar year (or portion
thereof), provided, however, that the aggregate amount of such administration fee and
the cash distribution fee shall not exceed $0.02 per ADS in any calendar year;
    
    reimbursement of fees and expenses incurred by the depositary and/or its
agents in connection with the servicing and delivery of our H shares and compliance
with applicable laws;
    
    stock transfer or other taxes and other governmental charges;
    
    cable, telex and facsimile transmission and delivery charges incurred at
the request of the ADS holders;
    
    transfer or registration fees for the registration or transfer of
deposited securities on any applicable register in connection with the deposit or
withdrawal of deposited securities; and
    
    expenses of the depositary in connection with the conversion of foreign
currencies into U.S. dollars.
  Payments Received by Foreign Private Issuer
  Direct Payments
  Category of Expenses
    
    Amount (US$)Legal fees
    
    
    875.00Investor relations
    
    
    14,969.00Broker reimbursements
    
    
    37,981.00Total
    
    
    53,820.00
 Indirect Payments
  109




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##### Table of Contents



Category of Expenses
    
    Amount (US$)Fees waived
    
    
    300,000.00
 
 PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
  
 ITEM 15. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Managements Report on Internal Control over Financial Reporting
  110




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Internal Control  Integrated Framewor
  Changes in Internal Control over Financial Reporting
  
 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B. CODE OF ETHICS
  111




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##### Table of Contents



ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    2008
    
    2009(RMB millions)Audit Fees
    
    
    9.6
    
    
    
    9.6Audit-related Fees
    
    
    
    
    
    
    0.15Tax Fees
    
    
    
    
    
    
    All Other Fees
    
    
    
    
    
    
    Total
    
    
    9.6
    
    
    
    9.75
 
 Notes:1.
    
    Traveling expenses and tax fees are included in the audit fees and do not require additional
payment.2.
    
    As of December 31, 2009, there did not exist any amount that became payable but remained
outstanding.3.
    
    PwC provided a consent letter for making reference to the auditors report on our
consolidated financial statements for the year ended December 31, 2008 in the offering
circular relating to our issuance of the Notes in December 2009.  
 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  
 ITEM 16F. CHANGE IN OUR CERTIFYING ACCOUNTANT
  
 ITEM 16G. CORPORATE GOVERNANCE
  112




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
    
    we do not have the majority of our board of directors comprised of independent
directors as defined under Section 303A.02 of the NYSE Manual;
    
    we do not have a nominating committee or a corporate governance committee similar to
that required for U.S. domestic companies;
    
    instead of having formal corporate governance guidelines similar to those required
for U.S. domestic companies, we have, in accordance with applicable PRC laws and
regulations and the HKSE Listing Rules, adopted the Articles of Association, the
General Meeting System, the Working Ordinance for the Board of Directors, the Working
Ordinance for the supervisory committee, the Working Ordinance for the General Manager,
the Capital Management Measures, the Investment Management Measures, the Code of Ethics
for Senior Officers and the Audit Committee Charter that contain provisions addressing
(i) director qualification standards and responsibilities; (ii) key board committee
responsibilities; (iii) director access to management and, as necessary and
appropriate, independent advisors; (iv) director compensation; (v) management
succession and (vi) director orientation and continuing education;
    
    as a company listed on the HKSE, we are required to comply with applicable corporate
governance and other related requirements of the HKSE Listing Rules, including the
Corporate Governance Code, unless an exemption is available; and
    
    we have not adopted a set of formal code of business conduct and ethics for our
directors, officers and employees similar to that required for U.S. domestic companies.
We have implemented code of business conduct and ethics for senior management,
including our General Manager, Deputy General Manager, Chief Accountant and Company
Secretary. In addition, our directors are required to comply with the Model Code for
Securities Transactions by Directors of Listed Companies set out in the HKSE Listing
Rules, which sets out standards with which directors are required to comply with
respect to transactions involving our securities.
 113




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PART III
 ITEM 17. FINANCIAL STATEMENTS
  
 ITEM 18. FINANCIAL STATEMENTS
  
 ITEM 19. EXHIBITS
    ExhibitNumber
    
    Description1.1
    
    Amended and Restated Articles of
Association#2.1
    
    Form of Amendment No. 1 to Deposit Agreement*2.2
    
    Form of American Depositary Receipt*4.1
    
    Land Lease Agreement dated November 15, 2004 between Guangshen Railway
Company Limited and Guangzhou Railway (Group) Company**4.2
    
    Master comprehensive services agreements dated November 5, 2007 between
Guangshen Railway Company Limited and each of GRGC, GEDC and Yangcheng
Railway Company***4.3
    
    English summary of certain material terms of the RMB 3.5 billion of 4.79%
fixed rate notes due 20147.1
    
    Statements explaining how certain ratios are calculated in this annual report8.1
    
    List of subsidiaries of Guangshen Railway Company Limited as of December 31,
200911.1
    
    Code of Ethics for the Senior
Management as amended on April 29, 2009#12.1
    
    Section 302 principal executive officers and principal financial officers
certifications13.1
    
    Certifications of principal executive officers and principal financial
officer pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section
906 of the U.S. Sarbanes-Oxley Act of 2002
 
 *
    
    Incorporated by reference from the Registrants Form F-6EF filed with the SEC on April 24,
2009**
    
    Incorporated by reference from the Registrants annual report on Form 20-F filed with the SEC
on June 28, 2005***
    
    Incorporated by reference from the Registrants annual report on Form 20-F filed with the
SEC on June 26, 2008#
    
    Incorporated by reference from the Registrants annual
report on Form 20-F filed with the SEC on June 25, 2009 114




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##### Table of Contents



SIGNATURE
  GUANGSHEN RAILWAY COMPANY LIMITEDDate: June 22, 2010
    By:
    /s/ Xu XiaomingXu XiaomingChairman of the Board of Directors




---



##### 



INDEX TO FINANCIAL STATEMENTS
 PageGUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIESReport of Independent Registered Public Accounting Firm
    
    
    F-2,3Consolidated Balance Sheets as of December 31, 2009 and 2008
    
    
    F-4Consolidated Comprehensive Income Statements for the years ended
December 31, 2009, 2008 and 2007
    
    
    F-5Consolidated Cash Flow Statements for the years ended December
31, 2009, 2008 and 2007
    
    
    F-6Consolidated Statements of Changes in Equity for the years ended
December 31, 2009, 2008 and 2007
    
    
    F-7Notes to the Consolidated Financial Statements
    
    
    F-8
  F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
   F-2




---



##### Table of Contents



F-3




---



##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 AS OF DECEMBER 31, 2009 AND 2008
  December 31,Note
    
    
    2008
    
    
    2009
    
    
    2009RMB
    
    
    RMB
    
    
    US$*(Note 40)ASSETSNon-current assetsFixed assets
    
    
    6
    
    
    
    23,903,846
    
    
    
    24,048,573
    
    
    
    3,521,021Construction-in-progress
    
    
    7
    
    
    
    504,775
    
    
    
    662,183
    
    
    
    96,952Prepayment for fixed assets and
construction-in-progress
    
    
    
    
    
    
    151,972
    
    
    
    60,134
    
    
    
    8,805Leasehold land payments
    
    
    8
    
    
    
    592,368
    
    
    
    576,379
    
    
    
    84,389Goodwill
    
    
    9
    
    
    
    281,255
    
    
    
    281,255
    
    
    
    41,179Investments in associates
    
    
    11
    
    
    
    120,705
    
    
    
    119,547
    
    
    
    17,503Deferred tax assets
    
    
    12
    
    
    
    331,738
    
    
    
    320,430
    
    
    
    46,915Deferred employee costs
    
    
    13
    
    
    
    99,614
    
    
    
    79,736
    
    
    
    11,674Available-for-sale investments
    
    
    16
    
    
    
    48,326
    
    
    
    53,826
    
    
    
    7,881Long-term receivable
    
    
    17
    
    
    
    48,136
    
    
    
    44,229
    
    
    
    6,47626,082,735
    
    
    
    26,246,292
    
    
    
    3,842,795Current assetsMaterials and supplies
    
    
    18
    
    
    
    201,923
    
    
    
    231,110
    
    
    
    33,838Trade receivables, net
    
    
    19
    
    
    
    272,051
    
    
    
    483,218
    
    
    
    70,749Prepayments and other receivables, net
    
    
    20
    
    
    
    96,865
    
    
    
    72,343
    
    
    
    10,592Short-term deposits
    
    
    
    
    
    
    7,300
    
    
    
    514,000
    
    
    
    75,256Cash and cash equivalents
    
    
    34
    (c)
    
    
    1,560,952
    
    
    
    1,115,651
    
    
    
    163,3462,139,091
    
    
    
    2,416,322
    
    
    
    353,781Total assets
    
    
    
    
    
    
    28,221,826
    
    
    
    28,662,614
    
    
    
    4,196,576EquityCapital and reserves attributable to
the Companys equity holdersShare capital
    
    
    21
    
    
    
    7,083,537
    
    
    
    7,083,537
    
    
    
    1,037,121Share premium
    
    
    
    
    
    
    10,294,490
    
    
    
    10,294,570
    
    
    
    1,507,258Other reserves
    
    
    22
    
    
    
    1,797,229
    
    
    
    1,932,131
    
    
    
    282,889Retained earnings
    
    
    
    
    
    
    2,607,951
    
    
    
    3,270,887
    
    
    
    478,900- Proposed final dividend
    
    
    
    
    
    
    566,683
    
    
    
    566,683
    
    
    
    82,97021,783,207
    
    
    
    22,581,125
    
    
    
    3,306,168Minority interests
    
    
    
    
    
    
    55,948
    
    
    
    55,717
    
    
    
    8,157Total equity
    
    
    
    
    
    
    21,839,155
    
    
    
    22,636,842
    
    
    
    3,314,325LiabilitiesNon-current liabilitiesBorrowings
    
    
    23
    
    
    
    3,390,000
    
    
    
    
    
    
    
    Bonds payable
    
    
    24
    
    
    
    
    
    
    
    3,465,801
    
    
    
    507,438Employee benefits obligations
    
    
    25
    
    
    
    237,422
    
    
    
    174,767
    
    
    
    25,5883,627,422
    
    
    
    3,640,568
    
    
    
    533,026Current liabilitiesTrade payables
    
    
    26
    
    
    
    640,856
    
    
    
    791,355
    
    
    
    115,865Payables for fixed assets and
construction-in-progress
    
    
    
    
    
    
    764,609
    
    
    
    674,652
    
    
    
    98,778Dividends payable
    
    
    
    
    
    
    47
    
    
    
    45
    
    
    
    7Income tax payable
    
    
    
    
    
    
    48,977
    
    
    
    116,036
    
    
    
    16,989Accruals and other payables
    
    
    27
    
    
    
    790,760
    
    
    
    803,116
    
    
    
    117,586Borrowings
    
    
    23
    
    
    
    510,000
    
    
    
    
    
    
    
    2,755,249
    
    
    
    2,385,204
    
    
    
    349,225Total liabilities
    
    
    
    
    
    
    6,382,671
    
    
    
    6,025,772
    
    
    
    882,251Total equity and liabilities
    
    
    
    
    
    
    28,221,826
    
    
    
    28,662,614
    
    
    
    4,196,576
 The accompanying notes are an integral part of these consolidated financial statements.
 
 *
    
    Translation of amounts from Renminbi (RMB) into United States dollars (US$) for the
convenience of the reader has been made at US$1.00=RMB6.83, which is rounded from 6.8259, the
certified exchange rates for December 31, 2009 as published by the Federal Reserve Board of
the United States. No representation is made that the RMB amounts could have been, or could
be, converted into US$ at that rate on December 31, 2009 or on any other date. F-4




---



##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
 
 CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
  Years ended December 31,Note
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2009RMB
    
    
    RMB
    
    
    RMB
    
    
    US$*Revenue from railroad businessesPassenger
    
    
    
    
    
    
    5,833,538
    
    
    
    6,759,229
    
    
    
    7,195,717
    
    
    
    1,053,546Freight
    
    
    
    
    
    
    1,326,450
    
    
    
    1,324,701
    
    
    
    1,210,118
    
    
    
    177,177Railway network usage and services
    
    
    
    
    
    
    2,659,529
    
    
    
    2,738,425
    
    
    
    3,105,654
    
    
    
    454,7089,819,517
    
    
    
    10,822,355
    
    
    
    11,511,489
    
    
    
    1,685,431Revenue from other businesses
    
    
    
    
    
    
    688,987
    
    
    
    866,300
    
    
    
    874,268
    
    
    
    128,004Total revenues
    
    
    
    
    
    
    10,508,504
    
    
    
    11,688,655
    
    
    
    12,385,757
    
    
    
    1,813,435Operating expensesRailroad businessesBusiness tax
    
    
    
    
    
    
    (221,820
    )
    
    
    (253,001
    )
    
    
    (266,951
    )
    
    
    (39,085
    )Labour and benefits
    
    
    28
    
    
    
    (1,928,171
    )
    
    
    (2,125,376
    )
    
    
    (2,277,057
    )
    
    
    (333,391
    )Equipment leases and services
    
    
    
    
    
    
    (2,595,181
    )
    
    
    (2,653,188
    )
    
    
    (2,974,805
    )
    
    
    (435,550
    )Land use right leases
    
    
    36
    (b)
    
    
    (50,000
    )
    
    
    (50,000
    )
    
    
    (51,200
    )
    
    
    (7,496
    )Materials and supplies
    
    
    
    
    
    
    (1,240,801
    )
    
    
    (1,345,651
    )
    
    
    (1,395,333
    )
    
    
    (204,295
    )Repair and facilities maintenance
costs, excluding materials and
supplies
    
    
    
    
    
    
    (460,133
    )
    
    
    (670,209
    )
    
    
    (588,331
    )
    
    
    (86,139
    )Depreciation of fixed assets
    
    
    
    
    
    
    (1,006,728
    )
    
    
    (1,145,624
    )
    
    
    (1,237,361
    )
    
    
    (181,166
    )Amortisation of leasehold land payments
    
    
    
    
    
    
    (15,002
    )
    
    
    (15,001
    )
    
    
    (15,001
    )
    
    
    (2,196
    )Social services charges
    
    
    
    
    
    
    (396,789
    )
    
    
    (400,546
    )
    
    
    (373,321
    )
    
    
    (54,659
    )Utility and office expenses
    
    
    
    
    
    
    (109,792
    )
    
    
    (121,436
    )
    
    
    (111,816
    )
    
    
    (16,371
    )Others
    
    
    
    
    
    
    (309,876
    )
    
    
    (382,246
    )
    
    
    (329,556
    )
    
    
    (48,251
    )(8,334,293
    )
    
    
    (9,162,278
    )
    
    
    (9,620,732
    )
    
    
    (1,408,599
    )Other businessesBusiness tax
    
    
    
    
    
    
    (17,611
    )
    
    
    (20,846
    )
    
    
    (24,671
    )
    
    
    (3,612
    )Labour and benefits
    
    
    28
    
    
    
    (171,921
    )
    
    
    (312,333
    )
    
    
    (347,842
    )
    
    
    (50,928
    )Materials and supplies
    
    
    
    
    
    
    (161,719
    )
    
    
    (387,651
    )
    
    
    (318,123
    )
    
    
    (46,577
    )Depreciation of fixed assets
    
    
    
    
    
    
    (10,372
    )
    
    
    (26,418
    )
    
    
    (24,783
    )
    
    
    (3,629
    )Amortisation of leasehold land payments
    
    
    
    
    
    
    (1,019
    )
    
    
    (602
    )
    
    
    (988
    )
    
    
    (145
    )Utility and office expenses
    
    
    
    
    
    
    (96,177
    )
    
    
    (81,227
    )
    
    
    (80,960
    )
    
    
    (11,854
    )(458,819
    )
    
    
    (829,077
    )
    
    
    (797,367
    )
    
    
    (116,745
    )Total operating expenses
    
    
    
    
    
    
    (8,793,112
    )
    
    
    (9,991,355
    )
    
    
    (10,418,099
    )
    
    
    (1,525,344
    )Other income / (expense), net
    
    
    29
    
    
    
    49,816
    
    
    
    17,703
    
    
    
    (19,765
    )
    
    
    (2,894
    )Profit from operations
    
    
    
    
    
    
    1,765,208
    
    
    
    1,715,003
    
    
    
    1,947,893
    
    
    
    285,197Finance costs
    
    
    30
    
    
    
    (98,487
    )
    
    
    (213,469
    )
    
    
    (236,287
    )
    
    
    (34,596
    )Share of results of associates
    
    
    11
    
    
    
    1,830
    
    
    
    128
    
    
    
    773
    
    
    
    113Profit before income tax
    
    
    
    
    
    
    1,668,551
    
    
    
    1,501,662
    
    
    
    1,712,379
    
    
    
    250,714Income tax expense
    
    
    31
    
    
    
    (232,349
    )
    
    
    (277,294
    )
    
    
    (348,921
    )
    
    
    (51,086
    )Profit for the year
    
    
    
    
    
    
    1,436,202
    
    
    
    1,224,368
    
    
    
    1,363,458
    
    
    
    199,628Other comprehensive income, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total comprehensive income for the year
    
    
    
    
    
    
    1,436,202
    
    
    
    1,224,368
    
    
    
    1,363,458
    
    
    
    199,628Profit attributable to:Equity holders of the Company
    
    
    
    
    
    
    1,431,415
    
    
    
    1,224,129
    
    
    
    1,364,521
    
    
    
    199,784Minority interests
    
    
    
    
    
    
    4,787
    
    
    
    239
    
    
    
    (1,063
    )
    
    
    (156
    )1,436,202
    
    
    
    1,224,368
    
    
    
    1,363,458
    
    
    
    199,628Total comprehensive income attributable to:Equity holders of the Company
    
    
    
    
    
    
    1,431,415
    
    
    
    1,224,129
    
    
    
    1,364,521
    
    
    
    199,784Minority interests
    
    
    
    
    
    
    4,787
    
    
    
    239
    
    
    
    (1,063
    )
    
    
    (156
    )1,436,202
    
    
    
    1,224,368
    
    
    
    1,363,458
    
    
    
    199,628Earnings per share for profit attributable
to the equity holders of the Company during
the year- Basic and diluted
    
    
    32
    
    
    RMB0.20
    
    RMB0.17
    
    RMB0.19
    
    
    
    US$0.03Earnings per equivalent ADS- Basic and diluted
    
    
    
    
    
    RMB10.10
    
    RMB8.64
    
    RMB9.63
    
    
    
    US$1.41
  
 *
    
    Translation of amounts from Renminbi (RMB) into United States dollars (US$) for the
convenience of the reader has been made at US$1.00=RMB6.83, which is rounded from 6.8259, the
certified exchange rates for December 31, 2009 as published by the Federal Reserve Board of the
United States. No representation is made that the RMB amounts could have been, or could be,
converted into US$ at that rate on December 31, 2009 or on any other date. F-5




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
 
 CONSOLIDATED CASH FLOW STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
  Year ended December 31,Note
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2009RMB
    
    
    RMB
    
    
    RMB
    
    
    US$*Cash flows from operating activities:Cash generated from operations
    
    
    34
    (a)
    
    
    2,430,689
    
    
    
    2,173,685
    
    
    
    3,108,375
    
    
    
    455,106Interest paid
    
    
    
    
    
    
    (173,515
    )
    
    
    (221,488
    )
    
    
    (220,288
    )
    
    
    (32,253
    )Income tax paid
    
    
    
    
    
    
    (299,529
    )
    
    
    (311,128
    )
    
    
    (270,554
    )
    
    
    (39,613
    )Net cash generated from operating activities
    
    
    
    
    
    
    1,957,645
    
    
    
    1,641,069
    
    
    
    2,617,533
    
    
    
    383,240Cash flows from investing activities:Payments for acquisition of fixed assets and
construction-in-progress and prepayment for
fixed assets, net of related parties
    
    
    
    
    
    
    (1,107,320
    )
    
    
    (2,947,804
    )
    
    
    (1,639,674
    )
    
    
    (240,070
    )Payment for business combination, net of cash
acquired
    
    
    
    
    
    
    (4,781,633
    )
    
    
    
    
    
    
    
    
    
    
    Proceeds from sales of fixed assets
    
    
    34
    (b)
    
    
    83,701
    
    
    
    11,358
    
    
    
    28,349
    
    
    
    4,151Interest received
    
    
    
    
    
    
    57,183
    
    
    
    24,321
    
    
    
    24,440
    
    
    
    3,578Addition on available-for-sale investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,500
    )
    
    
    (1,098
    )Decrease/(Increase) in short-term deposits
with maturities more than three months
    
    
    
    
    
    
    169,739
    
    
    
    (7,300
    )
    
    
    (506,700
    )
    
    
    (74,187
    )Dividends received
    
    
    
    
    
    
    
    
    
    
    4,475
    
    
    
    4,931
    
    
    
    722Disposal of subsidiaries, net of cash received
    
    
    
    
    
    
    (7,084
    )
    
    
    (835
    )
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    
    
    
    
    (5,585,414
    )
    
    
    (2,915,785
    )
    
    
    (2,096,154
    )
    
    
    (306,904
    )Cash flows from financing activities:Proceeds from borrowings
    
    
    
    
    
    
    695,000
    
    
    
    1,050,000
    
    
    
    
    
    
    
    Proceeds from bonds issuance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,499,093
    
    
    
    512,312Repayments of borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,900,000
    )
    
    
    (571,010
    )Addition from minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    147Dividends paid to minority interests
shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (88
    )
    
    
    (13
    )Dividends paid to the Companys shareholders
    
    
    
    
    
    
    (566,711
    )
    
    
    (566,683
    )
    
    
    (566,685
    )
    
    
    (82,970
    )Net cash generated from / (used in) financing
activities
    
    
    
    
    
    
    128,289
    
    
    
    483,317
    
    
    
    (966,680
    )
    
    
    (141,534
    )Net decrease in cash and cash equivalents
    
    
    
    
    
    
    (3,499,480
    )
    
    
    (791,399
    )
    
    
    (445,301
    )
    
    
    (65,198
    )Cash and cash equivalents, at beginning of year
    
    
    
    
    
    
    5,851,831
    
    
    
    2,352,351
    
    
    
    1,560,952
    
    
    
    228,544Cash and cash equivalents, at end of year
    
    
    34
    (c)
    
    
    2,352,351
    
    
    
    1,560,952
    
    
    
    1,115,651
    
    
    
    163,346
  
 *
    
    Translation of amounts from Renminbi (RMB) into United States dollars (US$) for the
convenience of the reader has been made at US$1.00=RMB6.83, which is rounded from 6.8259, the
certified exchange rates for December 31, 2009 as published by the Federal Reserve Board of
the United States. No representation is made that the RMB amounts could have been, or could
be, converted into US$ at that rate on December 31, 2009 or on any other date. F-6




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
 Attributable to equity holdersDiscretionaryStatutory surplus
    
    surplusShare capital
    
    
    
    
    
    reserve
    
    reserve
    
    
    
    
    
    Minority
    
    TotalRMB
    
    Share premium
    
    RMB
    
    RMB
    
    Retained earnings
    
    interest
    
    equity(Note 21)
    
    RMB
    
    (Note 22)
    
    (Note 22)
    
    RMB
    
    RMB
    
    RMBBalance at January 1, 2007
    
    
    7,083,537
    
    
    
    10,202,469
    
    
    
    1,268,683
    
    
    
    346,034
    
    
    
    1,268,285
    
    
    
    50,922
    
    
    
    20,219,930Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,431,415
    
    
    
    4,787
    
    
    
    1,436,202Adjustment to deferred tax arising
from group reorganisation brought
forward due to change of income tax
rate (Note 31)
    
    
    
    
    
    
    92,021
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92,021Appropriation from retained earnings
    
    
    
    
    
    
    
    
    
    
    139,778
    
    
    
    
    
    
    
    (139,778
    )
    
    
    
    
    
    
    Reversal of appropriations
    
    
    
    
    
    
    
    
    
    
    (2,766
    )
    
    
    
    
    
    
    2,766Dividends relating to 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (566,683
    )
    
    
    
    
    
    
    (566,683
    )Balance at December 31, 2007
    
    
    7,083,537
    
    
    
    10,294,490
    
    
    
    1,405,695
    
    
    
    346,034
    
    
    
    1,996,005
    
    
    
    55,709
    
    
    
    21,181,470Balance at January 1, 2008
    
    
    7,083,537
    
    
    
    10,294,490
    
    
    
    1,405,695
    
    
    
    346,034
    
    
    
    1,996,005
    
    
    
    55,709
    
    
    
    21,181,470Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,224,129
    
    
    
    239
    
    
    
    1,224,368Appropriation from retained
earnings (Note 22)
    
    
    
    
    
    
    
    
    
    
    121,444
    
    
    
    
    
    
    
    (121,444
    )
    
    
    
    
    
    
    Reversal of appropriations (Note 22)
    
    
    
    
    
    
    
    
    
    
    (33,969
    )
    
    
    (41,975
    )
    
    
    75,944
    
    
    
    
    
    
    
    Dividends relating to 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (566,683
    )
    
    
    
    
    
    
    (566,683
    )Balance at December 31, 2008
    
    
    7,083,537
    
    
    
    10,294,490
    
    
    
    1,493,170
    
    
    
    304,059
    
    
    
    2,607,951
    
    
    
    55,948
    
    
    
    21,839,155Balance at January 1, 2009
    
    
    7,083,537
    
    
    
    10,294,490
    
    
    
    1,493,170
    
    
    
    304,059
    
    
    
    2,607,951
    
    
    
    55,948
    
    
    
    21,839,155Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,364,521
    
    
    
    (1,063
    )
    
    
    1,363,458Appropriation from retained
earnings (Note 22)
    
    
    
    
    
    
    
    
    
    
    134,902
    
    
    
    
    
    
    
    (134,902
    )
    
    
    
    
    
    
    Dividends relating to 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (566,683
    )
    
    
    (88
    )
    
    
    (566,771
    )Addition from minority interests
    
    
    
    
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    920
    
    
    
    1,000Balance at December 31, 2009
    
    
    7,083,537
    
    
    
    10,294,570
    
    
    
    1,628,072
    
    
    
    304,059
    
    
    
    3,270,887
    
    
    
    55,717
    
    
    
    22,636,842Balance at December 31, 2009 (*)
    
    US$
    1,037,121
    
    
    US$
    1,507,258
    
    
    US$
    238,371
    
    
    US$
    44,518
    
    
    US$
    478,900
    
    
    US$
    8,157
    
    
    US$
    3,314,325
  
 *
    
    Translation of amounts from Renminbi (RMB) into United States dollars (US$) for the
convenience of the reader has been made at US$1.00=RMB6.83, which is rounded from 6.8259, the
certified exchange rates for December 31, 2009 as published by the Federal Reserve Board of the
United States. No representation is made that the RMB amounts could have been, or could be,
converted into US$ at that rate on December 31, 2009 or on any other date. F-7




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##### Table of Contents

================================================================================

GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 1
    
    GENERAL INFORMATIONGuangshen Railway Company Limited (the Company) was established as a joint stock limited
company in the Peoples Republic of China (the PRC) on March 6, 1996. On the same date, the
Company assumed the business operations of certain railroad and other related businesses
(collectively the Businesses) that had been undertaken previously by its predecessor, Guangshen
Railway Company (the Predecessor) and certain of its subsidiaries; and Guangzhou Railway (Group)
Company (the Guangzhou Railway Group) and certain of its subsidiaries prior to the formation of
the Company.The Predecessor is controlled by and is under the administration of the Guangzhou Railway Group.
Pursuant to a restructuring agreement entered into between the Guangzhou Railway Group, the
Predecessor and the Company in 1996 (the Restructuring Agreement), the Company issued to the
Guangzhou Railway Group 100% of its equity interest in the form of 2,904,250,000 ordinary shares
(the State-owned Domestic Shares) in exchange for the assets and liabilities associated with the
operations of the Businesses (the Restructuring). After the Restructuring, the Predecessor
changed its name to Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company
(GEDC).In May 1996, the Company issued 1,431,300,000 shares, representing 217,812,000 H Shares (H
Shares) and 24,269,760 American Depositary Shares (ADSs, one ADS represents 50 H Shares) in a
global public offering for cash of approximately RMB4,214,000,000 in order to finance the capital
expenditure and working capital requirements of the Company and its subsidiaries (collectively
defined as the Group).In December 2006, the Company issued 2,747,987,000 A Shares on the Shanghai Stock Exchange through
an initial public offering of shares in order to finance the acquisition of the business and
related assets and liabilities associated with the railway transportation business of Guangzhou
Railway Group Yangcheng Railway Enterprise Development Company (Yangcheng Railway Business), a
wholly owned subsidiary of Guangzhou Railway Group which operates a railway line between the cities
of Guangzhou and Pingshi in the Southern region of the PRC.The principal activities of the Group are the provision of passenger and cargo transportation on
railroad. The Group also operates certain other businesses, which principally include services
offered in railway stations; and sales of food, beverages and merchandises on board the trains and
in the railway stations.The registered address of the Company is No. 1052 Heping Road, Shenzhen, Guangdong Province, the
Peoples Republic of China. The business license for the Company will expire until 2056.As of December 31, 2009, the Company had in total approximately 33,170 employees, representing a
decrease of 609 as compared with that of December 31, 2008.The financial statements were authorized for issue by the board of directors of the Company on
June 22, 2010.The English names of all companies listed in the financial statements are direct translations of
their registered names in Chinese.
 F-8




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2
    
    PRINCIPAL ACCOUNTING POLICIESThe principal accounting policies adopted in the preparation of these financial statements are set
out below. These policies have been consistently applied to all the years presented, unless
otherwise stated.2.1
    
    Basis of presentationThe consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) as issued by International Accounting Standards Board (IASB). The
financial statements have been prepared under the historical cost convention.The preparation of financial statements in conformity with IFRS requires the use of certain
critical accounting estimates. It also requires management to exercise its judgement in the process
of applying the Groups accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the financial statements
are disclosed in Note 4.(a)
    
    New accounting pronouncements and amendments effective in 2009
 
    
    IFRS 7 Financial Instruments  Disclosures (amendment)  effective January 1, 2009.
The amendment requires enhanced disclosures about fair value measurement and liquidity risk.
In particular, the amendment requires disclosure of fair value measurements by level of a fair
value measurement hierarchy. As the change in accounting policy only results in additional
disclosures, there is no impact on earnings per share. The Group has made relevant additional
disclosures in these financial statements.
    
    IFRS 8, Operating segments. IFRS 8 replaces IAS 14, Segment reporting, and aligns
segment reporting with the requirements of the US standard SFAS 131, Disclosures about
segments of an enterprise and related information. The new standard requires a management
approach, under which segment information is presented on the same basis as that used for
internal reporting purposes. This has resulted in change of the reportable segments
presented. In addition, the segments are reported in a manner that is more consistent with
the internal reporting provided to the chief operating decision-maker.Goodwill is allocated by management to groups of cash-generating units at a segment level.
Goodwill relating to a previous business combination remains in the Companys Business segment.
The change in reportable segments has not resulted in any additional goodwill impairment.Comparatives for 2008 and 2007 in note 5 have been restated. However, such restatement in note
disclosure does not have any impact on the balance sheets.
 F-9




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.1
    
    Basis of preparation (continued)(a)
    
    New accounting pronouncements and amendments effective in 2009 (continued)
 
    
    IAS 1 (revised). Presentation of financial statements  effective January 1, 2009. The
revised standard prohibits the presentation of items of income and expenses (that is,
non-owner changes in equity) in the statement of changes in equity, requiring non-owner
changes in equity to be presented separately from owner changes in equity in a statement of
comprehensive income. The Group has elected to present one performance statement: i.e. the
statement of comprehensive income. These financial statements have been prepared under the
revised disclosure requirements
    
    IAS 23 (amendment), Borrowing costs. The amendment requires an entity to capitalise
borrowing costs directly attributable to the acquisition, construction or production of a
qualifying asset (one that takes a substantial period of time to get ready for use or sale) as
part of the cost of that asset. The option of immediately expensing those borrowing costs was
removed. The Group adopted the relevant accounting policy consistent with the new
requirements under revised IAS 23 in the past and therefore there was no substantial impact
arising from this amendment.
 (b)
    
    Accounting interpretations effective in 2009 but not relevant to the Groups operations
 
    
    IFRS 2 (amendment), Share-based payment (effective January 1, 2009) deals with vesting
conditions and cancellations. It clarifies that vesting conditions are service conditions and
performance conditions only. Other features of a share-based payment are not vesting
conditions. These features would need to be included in the grant date fair value for
transactions with employees and others providing similar services; they would not impact the
number of awards expected to vest or valuation there of subsequent to grant date. All
cancellations, whether by the entity or by other parties, should receive the same accounting
treatment.
 (c)
    
    Accounting standards, amendments and interpretations to existing standards that are not yet
effective and have not been early adopted by the Group
 
    
    IFRS 3 (Revised), Business Combination (effective from July 1, 2009). Management will
apply IFRS 3 (Revised) for all business combinations to be undertaken.
    
    IAS 27 (Revised), Consolidated and Separate Financial Statements (effective from July 1,
2009). Management does not expect the adoption of this new requirement will have a material
impact on the Groups financial statements.
    
    IAS 38 (amendment), Intangible Assets (effective from July 1, 2009). The amendment is
part of the IASBs annual improvements project published in April/May 2009 and the Group will
apply IAS 38 (amendment) from the date IFRS 3 (revised) is adopted. The amendment clarifies
guidance in measuring the fair value of an intangible asset acquired in a business combination
and it permits the grouping of intangible assets as a single asset if each asset has similar
useful economic lives. Management will apply IAS 38 (amendment) to future deals.
 F-10




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.1
    
    Basis of preparation (continued)(c)
    
    Accounting standards, amendments and interpretations to existing standards that are not yet
effective and have not been early adopted by the Group (continued)
 
    
    IFRS 9 Financial Instruments (effective from January 1, 2013). Financial assets are
required to be classified into two measurement categories: those to be measured subsequently
at fair value, and those to be measured subsequently at amortised cost. The decision is to be
made at initial recognition. The classification depends on the entitys business model for
managing its financial instruments and the contractual cash flow characteristics of the
instrument. The expected impact of this new standard is still being assessed in details by
management, but management does not anticipate that the application will result in a material
impact on the Groups financial statements.
    
    IFRIC 17 Distribution of non-cash assets to owners (effective on or after July 1, 2009).
The interpretation is part of the IASBs annual improvements project published in April/May
2009. This interpretation provides guidance on accounting for arrangements whereby an entity
distributes non-cash assets to shareholders either as a distribution of reserves or as
dividends. IFRS 5 has also been amended to require that assets are classified as held for
distribution only when they are available for distribution in their present condition and the
distribution is highly probable. The Group will apply IFRIC 17 from January 1, 2010. It is
not expected to have a material impact on the Groups financial statements.
    
    IFRS 5 (amendment), Measurement of non-current assets (or disposal groups) classified as
held for sale. The amendment is part of the IASBs annual improvements project published in
April/May 2009. The amendment provides clarification that IFRS 5 specifies the disclosures
required in respect of non-current assets (or disposal groups) classified as held for sale or
discontinued operations. It also clarifies that the general requirement of IAS 1 still apply,
particularly paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of
estimation uncertainty) of IAS 1. The Group will apply IFRS 5 (amendment) from January 1,
2010. It is not expected to have a material impact on the Groups financial statements.
    
    IAS 1 (amendment), Presentation of financial statements. The amendment is part of the
IASBs annual improvements project published in April/May 2009. The amendment provides
clarification that the potential settlement of a liability by the issue of equity is not
relevant to its classification as current or non-current. By amending the definition of
current liability, the amendment permits a liability to be classified as non-current (provided
that the entity has an unconditional right to defer settlement by transfer of cash or other
assets for at least 12 months after the accounting period) notwithstanding the fact that the
entity could be required by the counterparty to settle in shares at any time. The Group will
apply IAS 1 (amendment) from January 1, 2010. It is not expected to have a material impact on
the Groups financial statements.
    
    IFRS 2 (amendments), group cash-settled share-based payment transactions (effective from
1 January 2010). In addition to incorporating IFRIC-Int 8, Scope of IFRS 2, and IFRIC-Int
11, IFRS 2  group and treasury share transactions, the amendments expand on the guidance
in IFRIC 11 to address the classification of group arrangements that were not covered by the
interpretation. The new guidance is not expected to have a material impact on the Groups
financial statements.
 F-11




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.1
    
    Basis of preparation (continued)(c)
    
    Accounting standards, amendments and interpretations to existing standards that are not yet
effective and have not been early adopted by the Group (continued)
 
    
    IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective from July
1, 2010). A debtor and creditor might renegotiate the terms of a financial liability with the
result that the debtor extinguishes the liability fully or partially by issuing equity
instruments to the creditor. These transactions are sometimes referred to as debt for equity
swaps. IFRIC 19 provide further guidance for such transactions. The Group will apply IFRIC
19 from July 1, 2010. It is not expected to have a material impact on the Groups financial
statements.
    
    IFRIC 14 (amendment), Prepayments of a Minimum Funding Requirement(effective from January
1, 2011). The amendments apply in limited circumstances: when an entity is subject to minimum
funding requirements and makes an early payment of contributions to cover those requirements.
The amendments permit such an entity to treat the benefit of such an early payment as an
asset. The Group will apply IFRIC 14 from January 1, 2011. It is not expected to have a
material impact on the Groups financial statements.
    
    IFRS 1 (amendment), Limited Exemption from Comparative IFRS 7 Disclosures for First-time
Adopters (effective from July 1, 2010). A first-time adopter may apply the transition
provisions in paragraph 44G of IFRS 7. This standard is not relevant to the Group.
    
    IAS 24 (revised), Related Party Disclosures (effective from January 1, 2011). This
standard simplifies the definition of a related party, clarifies its intended meaning and
eliminates inconsistencies from the definition. This standard also provides a partial
exemption from the disclosure requirements for government-related entities. The Group will
apply IAS 24 from January 1, 2011.
    
    The improved IFRS 1, First-time Adoption of IFRS, IASBs Annual Improvements Project
published in May 2010. According to the improved IFRS 1, the revaluated amount can become
deemed costs so long as the revaluation takes place at periods before or during the first-time
adoptors first set of IFRS financial statements. In addition, the IASB has made a special
provision in this IFRS 1 exemption that existing IFRS preparers may also be able to
retrospectively apply this. The Group is currently assessing the possible impact arising from
the implementation of the improved IFRS 1.
 F-12




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.2
    
    Consolidation(a)
    
    Subsidiaries
 Subsidiaries are all entities (including special purpose entities) over which the Group has the
power to govern the financial and operating policies generally accompanying a shareholding of more
than one half of the voting rights. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing whether the Group controls
another entity. Subsidiaries are fully consolidated from the date on which control is transferred
to the Group. They are de-consolidated from the date that control ceases. Details of the Companys
subsidiaries are set out in Note 10.The purchase method of accounting is used to account for the acquisition of subsidiaries by the
Group. The cost of an acquisition is measured as the fair value of the assets given, equity
instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly
attributable to the acquisition. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their fair values at the
acquisition date, irrespective of the extent of any minority interest. The excess of the cost of
acquisition over the fair value of the Groups share of the identifiable net assets acquired is
recorded as goodwill. If the cost of acquisition is less than the fair value of the Groups share
of the identifiable net assets of the subsidiary acquired, the difference is recognised directly in
the comprehensive income statement.Inter-company transactions, balances and unrealised gains on transactions between group companies
are eliminated. Unrealised losses are also eliminated unless considered an impairment indicator of
the asset transferred. Accounting policies of subsidiaries have been changed where necessary to
ensure consistency with the policies adopted by the Group.
 (b)
    
    Associates
 Associates are all entities over which the Group has significant influence but not control,
generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in
associates are accounted for using the equity method of accounting and are initially recognised at
cost. The Groups investment in associates includes goodwill identified on acquisition, net of any
accumulated impairment loss (Note 2.9). Details of the Groups associates are set out in Note 11.The Groups share of its associates post-acquisition profits or losses is recognised in the
comprehensive income statement, and its share of post-acquisition movements in reserves is
recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying
amount of the investment. When the Groups share of losses in an associate equals or exceeds its
interest in the associate, including any other unsecured receivables, the Group does not recognise
further losses, unless it has incurred obligations or made payments on behalf of the associate.Unrealised gains on transactions between the Group and its associates are eliminated to the extent
of the Groups interest in the associates. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Accounting policies of
associates have been changed where necessary to ensure consistency with the policies adopted by the
Group.Dilution gains and losses arising in investments in associates are recognised in the comprehensive
income statement.
 F-13




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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.3
    
    Segment reportingOperating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision-maker. The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating segments, has been identified as
the senior executives that make strategic decisions.2.4
    
    Foreign currency transactions(a)
    
    Functional and presentation currencyItems included in the financial statements of each of the Groups entities are measured using the
currency of the primary economic environment in which the entity operates (the functional
currency). The consolidated financial statements are presented in Renminbi (Rmb), which is the
Companys functional and the Groups presentation currency.(b)
    
    Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year-end exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognised in the comprehensive income
statement.2.5
    
    Fixed assetsFixed assets are stated at cost less accumulated depreciation and impairment losses. Cost
represents the purchase price of the assets and other costs incurred to bring the assets into
intended use.Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will
flow to the Group and the cost of the item can be measured reliably. The carrying amount of the
replaced part is derecognised. All other repairs and maintenance are charged to the comprehensive
income statement during the financial period in which they are incurred.Depreciation is calculated using the straight-line method to allocate the cost amount, after taking
into account the estimated residual value of not more than 4% of cost, of each asset over its
estimated useful life. The estimated useful lives are as follows:
 Buildings (Note a)
    
    20 to 40 yearsLeasehold improvements
    
    Shorter of useful life or lease termsTracks, bridges and service roads (Note a)
    
    16 to 100 yearsLocomotives and rolling stock
    
    20 yearsCommunications and signalling systems
    
    8 to 20 yearsOther machinery and equipment
    
    4 to 25 years
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.5
    
    Fixed assets (continued)Note a:The estimated useful lives of buildings, tracks, bridges and service roads exceed the initial lease
periods of the respective land use right lease grants (the Lease Term); and the initial period of
land use right operating leases (the Operating Lease Term), on which these assets are located
(Notes 2.7 and 36(b)).Pursuant to the relevant laws and regulations in the PRC governing the land use right lease grants,
the Group has the right to renew the respective leases up to a period not less than 50 years with
additional cost paid. This right can be exercised within one year before the expiry of the initial
Lease Term, and can only be denied if such renewals are considered to be detrimental to the public
interest. Accordingly, the directors of the Company consider that the approval process to be
perfunctory. In addition, based on the provision of the land use right operating lease agreement
entered into with the substantial shareholder (details contained in Note 36(b)), the Company can
renew the lease at its own discretion upon expiry of the Operating Lease Term. Based on the above
considerations, the directors have determined the estimated useful lives of these assets to extend
beyond the initial Lease Term as well as the Operating Lease Term.The assets residual values and estimated useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date.An assets carrying amount is written down immediately to its recoverable amount if the assets
carrying amount is greater than its estimated recoverable amount (Note 2.9).Gains and losses on disposals are determined by comparing the sales proceeds with the carrying
amount and are recognised within other income/(expense)  net, included in the comprehensive
income statement.2.6
    
    Construction-in-progressConstruction-in-progress represents buildings, tracks, bridges and service roads, mainly includes
the construction related costs for the associated facilities of the existing railway line of the
Group. Construction-in-progress is stated at cost, which includes all expenditures and other direct
costs, site restoration costs, prepayments attributable to the construction and interest charges
arising from borrowings used to finance the construction during the construction period, less
impairment loss. Construction-in-progress is not depreciated until such assets are completed and
ready for their intended use.2.7
    
    Leasehold land paymentsAll land in the PRC is state-owned and no individual land ownership right exists. The Group
acquired the right to use certain parcels of land for certain of its rail lines, stations and other
businesses. The premium paid for such leasehold land payments represents pre-paid lease payments,
which are amortised over the lease terms of 36.5 to 50 years using the straight-line method.
Pursuant to the relevant laws and regulations in the PRC governing the land use right lease grant,
the Group has the right to extend and renew the lease for a period not less than 50 years. This
right can be exercised within one year before the expiry of the initial Lease Term, and can only be
denied if such renewals are considered to be detrimental to public interest. The Group considers
the approval process to be perfunctory and the renewal is reasonably assured.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.8
    
    GoodwillGoodwill represents the excess of the cost of an acquisition over the fair value of the Groups
share of the net identifiable assets of the acquired subsidiary/business at the date of
acquisition. Goodwill arising from acquisitions of subsidiaries is disclosed separately on the
balance sheet. Goodwill is tested for impairment annually or, whenever there is an indication of
impairment, and carried at cost less accumulated impairment losses. Impairment losses on goodwill
are not reversed. Gains and losses on the disposal of an entity include the carrying amount of
goodwill relating to the entity sold.Goodwill is allocated to cash-generating units for the purpose of impairment testing. The
allocation is made to those cash-generating units or groups of cash-generating units that are
expected to benefit from the business combination in which the goodwill arose identified according
to operating segment.2.9
    
    Impairment of investment in subsidiaries, associates and non-financial assetsAssets that have an indefinite useful life, for example goodwill, are not subject to amortization
and are tested annually for impairment. Assets that are subject to amortization are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the assets carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an assets fair value less
costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash flows (cash-generating units).
Non-financial assets other than goodwill that suffered impairment are reviewed for possible
reversal of the impairment at each reporting date.Impairment testing of the investments in subsidiaries or associates is required upon receiving
dividends from these investments if the dividend exceeds the total comprehensive income of the
subsidiary or associate in the period the dividend is declared or if the carrying amount of the
investment in the separate financial statements exceeds the carrying amount in the consolidated
financial statements of the investees net assets including goodwill.2.10
    
    Financial assets2.10.1
    
    ClassificationThe Group classifies its financial assets in the following categories: at fair value through profit
or loss, loans and receivables, and available-for-sale financial assets. The classification depends
on the purpose for which the financial assets were acquired. Management determines the
classification of its financial assets at initial recognition. Other than loans and receivables and
available-for-sale financial assets, the Group did not hold any financial assets carried at fair
value through profit or loss during 2009 and 2008.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.10
    
    Financial assets (continued)2.10.1
    
    Classification (continued)(a)
    
    Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. They are included in current assets, except for maturities
greater than 12 months after the balance sheet date. These are classified as non-current
assets. The Groups loans and receivables comprise trade and other receivables and cash
and cash equivalents in the balance sheet (Notes 2.15 and 2.16).(b)
    
    Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivatives that are either designated in this category
or not classified in any of the other categories. They are included in non-current assets unless
management intends to dispose of the investment within 12 months of the balance sheet date.2.10.2
    
    Recognition and measurementRegular way purchases and sales of financial assets are recognised on the trade-date  the date on
which the Group commits to purchase or sell the asset. Investments are initially recognised at
fair value plus transaction costs, except for all financial assets carried at fair value through
profit or loss. Financial assets are derecognised when the rights to receive cash flows from the
investments have expired or have been transferred and the Group has transferred substantially all
risks and rewards of ownership. Available-for-sale financial assets are subsequently carried at
fair value. Loans and receivables are subsequently carried at amortised cost using the effective
interest method.Changes in the fair value of monetary and non-monetary securities classified as available-for-sale
are recognised in other comprehensive income. When securities classified as available-for-sale are
sold or impaired, the accumulated fair value adjustments recognised in equity are included in the
comprehensive income statement as gains and losses from investment securities.Dividends on available-for-sale equity instruments are recognised in the comprehensive income
statement as part of other income when the Groups right to receive payments is established.The fair values of quoted investments are based on current bid prices. If the market for a
financial asset is not active (and for unlisted securities), the Group established fair value by
using valuation techniques. These include the use of recent arms length transactions, reference
to other instruments that are substantially the same, discounted cash flow analysis, and option
pricing models, making maximum use of market inputs and relying as little as possible on
entity-specific inputs. In case of unlisted equity instruments that do not have a quoted market
price in an active market and whose fair value cannot be reliably determined via valuation
techniques, they are measured at cost, subject to impairment review.2.11
    
    Offsetting financial instrumentsFinancial assets and liabilities are offset and the net amount reported in the balance sheet when
there is a legally enforceable right to offset the recognised amounts and there is an intention to
settle on a net basis, or realise the asset and settle the liability simultaneously.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.12
    
    Impairment of financial assets(a)
    
    Assets carried at amortised costThe Group assesses at the end of each reporting period whether there is objective evidence that a
financial asset or group of financial assets is impaired. A financial asset or a group of financial
assets is impaired and impairment losses are incurred only if there is objective evidence of
impairment as a result of one or more events that occurred after the initial recognition of the
asset (a loss event) and that loss event (or events) has an impact on the estimated future cash
flows of the financial asset or group of financial assets that can be reliably estimated.The criteria that the Group uses to determine that there is objective evidence of an impairment
loss include:
 
    
    Significant financial difficulty of the issuer or obligor;
    
    A breach of contract, such as a default or delinquency in interest or principal payments;
    
    The Group, for economic or legal reasons relating to the borrowers financial difficulty,
granting to the borrower a concession that the lender would not otherwise consider;
    
    It becomes probable that the borrower will enter bankruptcy or other financial
reorganisation;
    
    The disappearance of an active market for that financial asset because of financial
difficulties; or
    
    Observable data indicating that there is a measurable decrease in the estimated future cash
flows from a portfolio of financial assets since the initial recognition of those assets,
although the decrease cannot yet be identified with the individual financial assets in the
portfolio, including:
 (i)
    
    adverse changes in the payment status of borrowers in the portfolio;(ii)
    
    national or local economic conditions that correlate with defaults on the assets in
the portfolio.
 The Group first assesses whether objective evidence of impairment exists.The amount of the loss is measured as the difference between the assets carrying amount and the
present value of estimated future cash flows (excluding future credit losses that have not been
incurred) discounted at the financial assets original effective interest rate. The assets
carrying amount of the asset is reduced and the amount of the loss is recognised in the
comprehensive income statement. If a loan or held-to-maturity investment has a variable interest
rate, the discount rate for measuring any impairment loss is the current effective interest rate
determined under the contract. As a practical expedient, the Group may measure impairment on the
basis of an instruments fair value using an observable market price.If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognised (such as an
improvement in the debtors credit rating), the reversal of the previously recognised impairment
loss is recognised in the comprehensive income statement.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.12
    
    Impairment of financial assets (continued)(b)
    
    Assets classified as available for saleThe Group assesses at the end of each reporting period whether there is objective evidence that a
financial asset or a group of financial assets is impaired. For debt securities, the Group uses the
criteria refer to (a) above. In the case of equity investments classified as available for sale, a
significant or prolonged decline in the fair value of the security below its cost is also evidence
that the assets are impaired. If any such evidence exists for available-for-sale financial assets,
the cumulative loss  measured as the difference between the acquisition cost and the current fair
value, less any impairment loss on that financial asset previously recognised in profit or loss 
is removed from equity and recognised in the separate comprehensive income statement. Impairment
losses recognised in the separate comprehensive income statement on equity instruments are not
reversed through the separate comprehensive income statement. If, in a subsequent period, the fair
value of a debt instrument classified as available for sale increases and the increase can be
objectively related to an event occurring after the impairment loss was recognised in profit or
loss, the impairment loss is reversed through the separate comprehensive income statement.2.13
    
    Deferred employee costsThe Group implemented a scheme (the Scheme) for selling staff quarters to its employees in
2000. Under the Scheme, the Group sold certain staff quarters to their employees at
preferential prices in the form of housing benefits provided to these employees. The total
housing benefits (the Benefits), which represent the difference between the net book value
of the staff quarters sold and the proceeds collected from the employees, are expected to
benefit the Group at least over 15 years, which was determined according to the contractual
service period of the employees participating in the Scheme. Upon the implementation of the
Scheme in 2000, the Benefits were recorded as deferred employee costs and the balance is then
amortised over the contractual service period of the employees participating in the Scheme.At each balance sheet date, the Group reassesses whether there is any indication of impairment,
taking into account the remaining service period of the employees and other qualitative
factors. If such indication exists, a detailed analysis will be performed in order to assess
whether the carrying amount of the deferred employee costs can be recoverable in full. A
write-down is made if the carrying amount exceeds the recoverable amount.2.14
    
    Materials and suppliesMaterials and supplies are stated at the lower of cost and net realisable value. Cost is determined
using the weighted average method. Materials and supplies are charged as fuel costs and repair and
maintenance expenses when consumed, or capitalised to fixed assets when the items are installed
with the related fixed assets, whichever is appropriate. Net realisable value is the estimated
selling price in the ordinary course of business, less applicable variable selling expenses.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.15
    
    Trade and other receivablesTrade receivables are amounts due from customers for merchandise sold or services performed in the
ordinary course of business. If collection of trade and other receivables is expected in one year
or less (or in the normal operating cycle of the business if longer), they are classified as
current assets. If not, they are presented as non-current assets.Trade and other receivables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method, less provision for impairment.2.16
    
    Cash and cash equivalentsCash and cash equivalents include cash in hand; deposits held at call with banks; and other
short-term highly liquid investments with original maturities of three months or less.2.17
    
    Share capitalOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of
new shares or options are shown in equity as a deduction, net of tax, from the proceeds.2.18
    
    Trade payablesTrade payables are recognised initially at fair value and subsequently measured at amortised cost
using the effective interest method. Accounts payable are classified as current liabilities if
payment is due within one year or less (or in the normal operating cycle of the business if
longer). If not, they are presented as non-current liabilities.Trade payables are recognised initially at fair value and subsequently measured at amortised cost
using the effective interest method.2.19
    
    BorrowingsBorrowings (including bonds payable) are recognised initially at fair value, net of transaction
costs incurred. They are subsequently stated at amortised cost; and any difference between proceeds
(net of transaction costs) and the redemption value is recognised in the comprehensive income
statement over the period of the borrowings using the effective interest method.Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan
to the extent that it is probable that some or all of the facility will be drawn down. In this
case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it
is probable that some or all of the facility will be drawn down, the fee is capitalised as a
prepayment for liquidity services and amortised over the period of the facility to which it
relates.Borrowings are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least 12 months after the balance sheet date.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.20
    
    Current and deferred income taxThe tax expense for the period comprises current and deferred tax. Tax is recognised in the
consolidated income statement, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity, respectively.The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the balance sheet date in the countries where the Companys subsidiaries and associates
operate and generate taxable income. Management periodically evaluates positions taken in tax
returns with respect to situations in which applicable tax regulation is subject to interpretation
and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax
authorities.Deferred income tax is provided in full, using the liability method, on temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the
consolidated financial statements. However, the deferred income tax is not accounted for if it
arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit nor
loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or
substantially enacted by the balance sheet date and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax liability is settled.Deferred income tax assets are recognised only to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be utilised.Deferred income tax is provided on temporary differences arising on investments in subsidiaries and
associates, except where the timing of the reversal of the temporary difference is controlled by
the Group and it is probable that the temporary difference will not reverse in the foreseeable
future.Deferred income tax assets and liabilities are offset when there is a legally enforceable right to
offset current tax assets against current tax liabilities and when the deferred income taxes assets
and liabilities relate to income taxes levied by the same taxation authority on either the taxable
entity or different taxable entities where there is an intention to settle the balances on a net
basis.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.21
    
    Employee benefits(a)
    
    Defined contribution planThe Group pays contributions to defined contribution schemes operated by the local government for
employee benefits in respect of pension and housing, etc. The Group has no further payment
obligations once the contributions have been paid. The contributions to the defined contribution
schemes are recognised as staff costs when they are due.(b)
    
    Termination benefitsTermination benefits are payable when selected employees who meet certain criteria accept voluntary
redundancy in exchange for these benefits, with specific approval granted by management of the
Group. The Group recognises retirement benefits when it is demonstrably committed to either
terminate the employment of current employees according to a detailed formal plan without
possibility of withdrawal or to provide retirement benefits as a result of an offer made to
encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date
are discounted to present value.2.22
    
    ProvisionsProvisions for environmental restoration, restructuring costs and legal claims are recognised when:
the Group has a present legal or constructive obligation as a result of past events; it is probable
that an outflow of resources will be required to settle the obligation; and the amount has been
reliably estimated. Restructuring provisions comprise lease termination penalties and employee
termination payments. Provisions are not recognised for future operating losses.Where there are a number of similar obligations, the likelihood that an outflow will be required
in settlement is determined by considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to any one item included in the same
class of obligations may be small.Provisions are measured at the present value of the expenditures expected to be required to settle
the obligation using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the obligation. The increase in the provision due to
passage of time is recognised as interest expense.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.23
    
    Revenue recognitionRevenue comprises the fair value of the consideration received or receivable for the sale of goods
and services in the ordinary course of the Groups activities. Revenue is shown net of
value-added tax, returns, rebates and discounts and after eliminating sales within the Group.The Group recognises revenue when the amount of revenue can be reliably measured, it is probable
that future economic benefits will flow to the entity and specific criteria have been met for each
of the Groups activities as described below. The Group bases its estimates on historical
results, taking into consideration the type of customer, the type of transactions and the
specifics of each arrangement.(a)
    
    Revenue from railway businessRevenue from railway business includes revenue from passenger and freight services and revenue from
railway network usage and services. Revenue from railway business is recognised when the services
are rendered and revenue can be reliably measured.(b)
    
    Revenue from other businessesRevenue from other business is recognised once the related services or goods are delivered, the
related risks and rewards of ownership have been transferred and revenue can be reliably measured.(c)
    
    Interest incomeInterest income is recognised using the effective interest method. When a receivable is impaired,
the Group reduces the carrying amount to its recoverable amount, being the estimated future cash
flow discounted at original effective interest rate of the instrument, and continues unwinding the
discount as interest income. Interest income on impaired receivables is recognised using the
original effective interest rate.(d)
    
    Dividend incomeDividend income is recognised when the right to receive payment is established.(e)
    
    Rental incomeRevenue from operating lease arrangements is recognized on a straight-line basis over the period
of the respective leases.2.24
    
    Government grantsGrants from the government are recognised at their fair value where there is a reasonable assurance
that the grant will be received and the Group will comply with all attached conditions.Government grants relating to the purchase of fixed assets are deducted against the carrying amount
of the fixed assets.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.25
    
    Operating leasesLeases in which a significant portion of the risks and rewards of ownership are retained by the
lessor are classified as operating leases. Payments made under operating leases (net of any
incentives received from the lessor) are charged to the comprehensive income statement on a
straight-line basis over the period of the lease.2.26
    
    Dividend distributionDividend distribution to the Companys shareholders is recognised as a liability in the Groups
financial statements in the period in which the dividends are approved by the Companys
shareholders.3
    
    FINANCIAL RISK MANAGEMENT3.1
    
    Financial risk factorThe Groups activities expose it to a variety of financial risks: price risk, foreign currency
risk, cash flow and fair value interest rate risk, credit risk, and liquidity risk. The Groups
overall risk management strategy seeks to minimise the potential adverse effects on the financial
performance of the Group.(a)
    
    Price riskThe Group is exposed to price risk because of investments held by the Group and classified as
available-for-sale on the consolidated balance sheet.To manage its price risk arising from investments in equity interests, the Group diversifies its
portfolio. Diversification of the portfolio is done in accordance with the limits set by the
Group.(b)
    
    Foreign currency riskThe Group mainly operates in the PRC with most of the transactions settled in RMB. RMB is also the
functional currency of the Company and its subsidiaries. RMB is not freely convertible into other
foreign currencies. The conversion of RMB denominated balances into foreign currencies is subject
to the rates and regulations of foreign exchange control promulgated by the PRC government. Any
foreign currency denominated monetary assets and liabilities other than in RMB would subject the
Group to foreign exchange exposure.The Groups objective of managing the foreign currency risk is to minimise potential adverse
effects arising from foreign transaction movements. Depending on volatility of specific foreign
currency exposed, measures are taken by management to manage the foreign currency positions.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 3
    
    FINANCIAL RISK MANAGEMENT (CONTINUED)3.1
    
    Financial risk factor (continued)(b)
    
    Foreign currency risk (continued)The following table shows the Groups exposures to foreign currency rate fluctuation arising from
foreign currency denominated monetary assets and liabilities:
 Currency
    
    
    As of December 31,denomination
    
    
    2008
    
    
    2009Monetary assets and liabilities
    
    
    
    
    
    (RMB000)
    
    
    (RMB000)Cash and cash equivalents
    
    USD
    
    
    3,176
    
    
    
    455Cash and cash equivalents
    
    HKD
    
    
    30,452
    
    
    
    66,801Other receivables
    
    HKD
    
    
    529
    
    
    
    994Trade payables
    
    USD
    
    
    (940
    )
    
    
    (939
    )
 The Group may experience a loss as a result of any foreign currency exchange rate fluctuations in
connection with the deposits and other monetary assets and liabilities shown above. The Group has
not used any means to hedge the exposure.As at December 31, 2009, if RMB had weakened/strengthened by 5% against the HKD with all other
variables held constant, post-tax profit for the year would have been RMB3,390,000 (2008:
RMB1,270,000) higher/lower, mainly as a result of foreign exchange gains/losses on translation of
HKD-denominated cash in banks. The impact of exchange fluctuations of USD is not significant.(c)
    
    Cash flow and fair value interest rate riskOther than deposits held in banks, the Group does not have significant interest-bearing assets. The
average interest rate of deposits held in banks in the PRC throughout the year was approximately
1.27% (2008: 1.10%). Any change in the interest rate promulgated by the Peoples Bank of China from
time to time is not considered to have significant impact to the Group.The Groups interest rate risk which affects its income and operating cash flows mainly arises from
bank borrowings and bonds payable. The Groups bonds payable were at fixed rates, and expose the
Group to fair value interest rate risk. All the Groups bank borrowings were at floating rates
(Note 23). Bank borrowings at floating rates expose the Group to cash flow interest rate risk. As
of December 31, 2009, there were no bank borrowings (2008: borrowings of RMB3,900,000,000).As of December 31, 2008, if interest rates on bank borrowings had been 10 basis points higher/lower
with all other variables held constant, post-tax profit for the year would have been approximately
RMB2,574,800 lower/higher, mainly as a result of higher or lower interest expense.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 3
    
    FINANCIAL RISK MANAGEMENT (CONTINUED)3.1
    
    Financial risk factor (continued)(d)
    
    Credit riskCredit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, trade
and other receivables (excluding prepayments), short-term deposit, and long-term receivable.Cash and short term liquid investments are placed with reputable banks. There was no recent
history of default of cash and cash equivalents and short-term deposits from such financial
institutions/authority. The majority of the Groups trade receivable balances and long term
receivable balance are due from third party customers as a result of rendering of services or sales
of merchandises. The Groups other receivable balances mainly arise from services rendered other
than the main railway transportation operations. The Group performs ongoing credit evaluations of
its customers/debtors financial condition and generally does not require collateral from the
customers/debtors account on the outstanding balances. Based on the expected realisability and
timing for collection of the outstanding balances, the Group maintains a provision for doubtful
accounts and actual losses incurred have been within managements expectation. In view of the
history of business dealings made with the customers and the sound collection history of the
receivables due from them, management believes that there is no material credit risk inherent in
the Groups outstanding receivable balances.There were no other financial assets carrying a significant exposure to credit risk.With the consideration stated of the above and due to the fact that the majority of the Groups
revenue is derived from the railroad businesses which are cash transactions, the directors believe
that there is no significant credit risk inherent in the Groups business during the reporting
period.(e)
    
    Liquidity riskPrudent liquidity risk management includes maintaining sufficient cash, the availability of funding
through an adequate amount of committed credit facilities and the ability to close out market
positions.Management monitors rolling forecasts of the Groups liquidity reserves (comprising undrawn
borrowing facilities and cash and cash equivalents) on the basis of expected cash flows.The directors are of the view that the following measures would be adequate to contain the Groups
liquidity risk at an acceptable level.
 (i)
    
    Maintain and generate stable operating cash inflow from its profitable operations;(ii)
    
    Undertake close monitoring process to control the magnitude and timing of the expected cash
outlays associated with the construction of railway lines and the improvement of the existing
operation equipments; and(iii)
    
    Obtain new bank facilities and identify sources of medium term financing in order to finance
the expected cash outlays associated with the expected capital expenditures.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 3
    
    FINANCIAL RISK MANAGEMENT (CONTINUED)3.1
    
    Financial risk factor (continued)(d)
    
    Liquidity risk (continued)The table below analyses the Groups financial liabilities into relevant maturity groupings based
on the remaining period at the balance sheet to the contractual maturity date. The amounts
disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months
equal their carrying balances, as the impact of discounting is not significant.
 Less than
    
    Between 1 and 2
    
    Between 2 and 51 year
    
    years
    
    yearsRMB000
    
    RMB000
    
    RMB000At December 31, 2009Bonds payable (including interests) (Note 24)
    
    
    167,650
    
    
    
    167,650
    
    
    
    3,996,642Trade and other payables excluding statutory
liabilities (Notes 26 and 27)
    
    
    1,225,037
    
    
    
    
    
    
    
    Payables for fixed assets and construction-in-progress
    
    
    674,652
    
    
    
    
    
    
    
    At December 31, 2008Borrowings (including interests) (Note 23)
    
    
    737,185
    
    
    
    188,704
    
    
    
    3,559,551Trade and other payables excluding statutory
liabilities (Notes 26 and 27)
    
    
    1,189,912
    
    
    
    
    
    
    
    Payables for fixed assets and construction-in-progress
    
    
    764,609
    
    
    
    
    
    
    
    
 3.2
    
    Capital risk managementThe Groups objectives of managing capital are to safeguard the Groups ability to continue as a
going concern in order to provide returns for shareholders and benefits for other stakeholders; as
well as to maintain an optimal capital structure to reduce the cost of capital.In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends
paid to shareholders, issue new shares or sell assets to reduce debt.The Group monitors capital by regularly reviewing the gearing ratio. This ratio is calculated as
net debt divided by total capital. Net debt is calculated as total borrowings (including current
and non-current bank borrowings and bonds payable as shown in the consolidated balance sheet) less
cash and cash equivalents. Total capital is calculated as equity, as shown in the consolidated
balance sheet plus net debt. The gearing ratios as at December 31, 2009 and 2008 were as follows:
 2008
    
    
    2009RMB000
    
    
    RMB000Total bank borrowings and bonds payable (Notes 23 and 24)
    
    
    3,900,000
    
    
    
    3,465,801Less: Cash and cash equivalents (Note 34(c))
    
    
    (1,560,952
    )
    
    
    (1,115,651
    )Net Debt
    
    
    2,339,048
    
    
    
    2,350,150Total Equity
    
    
    21,839,155
    
    
    
    22,636,842Total capital
    
    
    24,178,203
    
    
    
    24,986,992Gearing ratio
    
    
    10
    %
    
    
    9
    %
 The gearing ratio as at end of 2009 had been maintained consistent as compared with 2008. The
directors are of the view that current capital structure is within their expectation.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 3
    
    FINANCIAL RISK MANAGEMENT (CONTINUED)3.3
    
    Fair value estimationEffective January 1, 2009, the group adopted the amendment to IFRS 7 for financial instruments that
are measured in the balance sheet at fair value, this requires disclosure of fair value
measurements by level of the following fair value measurement hierarchy:
 
    

Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
    

    Inputs other than quoted prices included within level 1 that are observable for the asset
or liability, either directly (that is, as prices) or indirectly (that is, derived from
prices) (level 2).
    

    Inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs) (level 3).
 As at December 31, 2008 and 2009, the Group did not have any assets or liabilities that were
measured at fair value.The fair values of long-term receivable and long-term bank borrowings and bonds payable for
disclosure purposes are estimated by discounting the future contractual cash flows at the current
market interest rate that is available to the Group for similar financial instruments.4
    
    CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTSEstimates and judgments are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the
circumstances.4.1
    
    Critical accounting estimates and assumptionsThe Group makes estimates and assumptions concerning the future. The resulting accounting estimates
will, by definition, seldom equal the related actual results. The estimates and assumptions that
have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are outlined below.(a)
    
    The estimates of the depreciable lives of fixed assetsThe estimate of depreciable lives of fixed assets, especially tracks, bridges and service roads,
was made by the directors with reference to the historical usage of the assets; their expected
physical wear and tear; results of recent durability assessment performed; technical or commercial
obsolescence arising from changes or improvements in production of similar fixed assets, the right
of the Group to renew the land use right grants and the land use right lease on which these assets
are located (Notes 2.5 and 36(b)), and the changes in market demand for, or legal or comparable
limits imposed on, the use of such fixed assets.The current estimated useful lives are stated in Note 2.5. If the estimated depreciable lives of
tracks, bridges and service roads had been increased/decreased by 10%, the depreciation of fixed
assets would have been decreased/increased by approximately RMB17,832,000 and RMB21,795,000,
respectively (2008: RMB15,901,000 and RMB19,435,000, respectively).
 F-28




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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 4
    
    CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)4.1
    
    Critical accounting estimates and assumptions (continued)(b)
    
    Estimated impairment of goodwillThe Group tests whether goodwill has suffered any impairment annually or, whenever there is an
indication of impairment, in accordance with the accounting policy stated in Note 2.8. The
recoverable amounts of cash-generating units have been determined based on the higher of an assets
fair value less costs to sell and value in use. These calculations require the use of estimates
(Note 9).(c)
    
    Estimated impairment of non-financial assets (other than goodwill)In determining whether an asset is impaired or the event previously causing the impairment no
longer exists, management has to exercise judgement, particularly in assessing: (1) whether an
event has occurred that may affect the asset value or such event affecting the asset value has not
been in existence; (2) whether the carrying value of an asset can be supported by the net present
value of future cash flows which are estimated based upon the continued use of the asset or
derecognition; and (3) the appropriate key assumptions to be applied in preparing cash flow
projections including whether these cash flow projections are discounted using an appropriate rate.
Changing the assumptions selected by management to determine the level of impairment, including the
discount rate or the growth rate assumptions in the cash flow projections, could materially affect
the net present value used in the impairment test.(d)
    
    Income taxesThe Group recognizes liabilities for anticipated tax audit issues based on estimates of whether
additional taxes will be due. Where the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will impact the current and deferred income
tax assets and liabilities in the period in which such determination is made.5
    
    SEGMENT INFORMATIONThe chief operating decision-makers have been identified as senior executives. Senior executives
review the Groups internal reporting in order to assess performance and allocate resources.
Management has determined the operating segments based on these reports.Senior executives consider the business from a perspective on revenues and operating results
generated from railroad and related business conducted by the Company (the Companys Business).
Other segments mainly include provision of on-board catering services, warehousing services, hotel
management services and sales of merchandises provided by the subsidiaries of the Group.Senior executives assess the performance of the operating segments based on a measure of the profit
before income tax. Other information provided, except as noted below, to senior executives is
measured in a manner consistent with that in the financial statements.
 F-29




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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 5
    
    SEGMENT INFORMATION (CONTINUED)The segment results for 2009 , 2008 and 2007 are as follows:
 The Companys Business
    
    All other segments
    Total2009
    
    2008
    
    2007
    
    2009
    
    2008
    
    2007
    
    2009
    
    2008
    
    2007RMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000Total revenue (all from external customers)
    
    
    12,212,031
    
    
    
    11,530,435
    
    
    
    10,365,956
    
    
    
    173,726
    
    
    
    158,220
    
    
    
    142,548
    
    
    
    12,385,757
    
    
    
    11,688,655
    
    
    
    10,508,504Segment result
    
    
    1,690,726
    
    
    
    1,493,926
    
    
    
    1,661,254
    
    
    
    21,653
    
    
    
    7,736
    
    
    
    7,297
    
    
    
    1,712,379
    
    
    
    1,501,662
    
    
    
    1,668,551Finance costs
    
    
    (236,437
    )
    
    
    (213,376
    )
    
    
    (98,597
    )
    
    
    150
    
    
    
    (93
    )
    
    
    (110
    )
    
    
    (236,287
    )
    
    
    (213,469
    )
    
    
    (98,487
    )Share of results of associates
    
    
    773
    
    
    
    128
    
    
    
    1,830
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    773
    
    
    
    128
    
    
    
    1,830Depreciation
    
    
    (1,257,432
    )
    
    
    (1,167,462
    )
    
    
    (1,012,396
    )
    
    
    (4,712
    )
    
    
    (4,580
    )
    
    
    (4,704
    )
    
    
    (1,262,144
    )
    
    
    (1,172,042
    )
    
    
    (1,017,100
    )Amortization of leasehold land payments
    
    
    (15,001
    )
    
    
    (15,001
    )
    
    
    (15,002
    )
    
    
    (988
    )
    
    
    (602
    )
    
    
    (1,019
    )
    
    
    (15,989
    )
    
    
    (15,603
    )
    
    
    (16,021
    )Amortization of deferred employee costs
    
    
    (20,048
    )
    
    
    (31,867
    )
    
    
    (24,339
    )
    
    
    (108
    )
    
    
    (138
    )
    
    
    
    
    
    
    (20,156
    )
    
    
    (32,005
    )
    
    
    (24,339
    )Recognition of employee benefits obligations
    
    
    
    
    
    
    (76,382
    )
    
    
    (63,347
    )
    
    
    (1,200
    )
    
    
    (9,606
    )
    
    
    (1,909
    )
    
    
    (1,200
    )
    
    
    (85,988
    )
    
    
    (65,256
    )Impairment of fixed assets
    
    
    
    
    
    
    
    
    
    
    (6,359
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,359
    )Impairment of construction-in-progress
    
    
    (448
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (448
    )
    
    
    
    
    
    
    Provision/(reversal of provision) for
doubtful accounts
    
    
    (299
    )
    
    
    (2,280
    )
    
    
    8,236
    
    
    
    (115
    )
    
    
    (486
    )
    
    
    24
    
    
    
    (414
    )
    
    
    (2,766
    )
    
    
    8,260
 A reconciliation of the segment results to profit of 2009, 2008 and 2007 is as follows:
 The Companys Business
    
    All other segments
    
    Total2009
    
    2008
    
    2007
    
    2009
    
    2008
    
    2007
    
    2009
    
    2008
    
    2007RMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000Segment result
    
    
    1,690,726
    
    
    
    1,493,926
    
    
    
    1,661,254
    
    
    
    21,653
    
    
    
    7,736
    
    
    
    7,297
    
    
    
    1,712,379
    
    
    
    1,501,662
    
    
    
    1,668,551Income tax expense
    
    
    (343,207
    )
    
    
    (274,263
    )
    
    
    (227,876
    )
    
    
    (5,714
    )
    
    
    (3,031
    )
    
    
    (4,473
    )
    
    
    (348,921
    )
    
    
    (277,294
    )
    
    
    (232,349
    )Profit for the year
    
    1,347,519
    
    
    1,219,663
    
    
    
    1,433,378
    
    
    
    15,939
    
    
    
    4,705
    
    
    
    2,824
    
    
    
    1,363,458
    
    
    
    1,224,368
    
    
    
    1,436,202
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 5
    
    SEGMENT INFORMATION (CONTINUED)The Group is domiciled in the PRC. All the Groups revenues were generated in the PRC, and the
total assets are also located in the PRC.
 The Companys Business
    
    All other segments
    
    Elimination
    
    Total2009
    
    2008
    
    2009
    
    2008
    
    2009
    
    2008
    
    2009
    
    2008RMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000Total segment assets
    
    
    28,605,980
    
    
    
    28,147,670
    
    
    
    239,228
    
    
    
    223,247
    
    
    
    (182,594
    )
    
    
    (149,091
    )
    
    
    28,662,614
    
    
    
    28,221,826Total segment assets include:Investment in associates
    
    
    119,547
    
    
    
    120,705
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    119,547
    
    
    
    120,705Acquision of Yangcheng Railway Business
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additions to non-current assets (other
than financial instruments and
deferred tax assets)
    
    
    1,536,507
    
    
    
    3,479,126
    
    
    
    6,705
    
    
    
    1,432
    
    
    
    
    
    
    
    
    
    
    
    1,543,212
    
    
    
    3,480,558Total segment liabilities
    
    
    6,048,524
    
    
    
    6,380,140
    
    
    
    73,800
    
    
    
    66,743
    
    
    
    (96,552
    )
    
    
    (64,212
    )
    
    
    6,025,772
    
    
    
    6,382,671
 There are approximately RMB10,400,548,000 (2008 and 2007: RMB9,776,261,000 and
RMB8,884,413,000) of the revenues of the Group which were settled through the Ministry of Railway
of the PRC (MOR). Except that, no revenues derived from a single external customer have exceeded
10% of the total revenues.
 F-31




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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 6
    
    FIXED ASSETS
 Tracks,
    
    Locomotives and
    
    Communications andLeasehold
    
    bridges and
    
    rolling
    
    signalling
    
    Other machinery andBuildings
    
    improvements
    
    service roads
    
    stock
    
    systems
    
    equipment
    
    TotalRMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000At January 1, 2008Cost
    
    
    3,363,597
    
    
    
    38,500
    
    
    
    11,929,430
    
    
    
    3,859,566
    
    
    
    1,194,756
    
    
    
    3,515,465
    
    
    
    23,901,314Accumulated depreciation
    
    
    (495,898
    )
    
    
    (38,500
    )
    
    
    (1,109,165
    )
    
    
    (727,703
    )
    
    
    (396,834
    )
    
    
    (1,131,215
    )
    
    
    (3,899,315
    )Impairment
    
    
    (6,359
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (354
    )
    
    
    (6,713
    )Net book amount
    
    
    2,861,340
    
    
    
    
    
    
    
    10,820,265
    
    
    
    3,131,863
    
    
    
    797,922
    
    
    
    2,383,896
    
    
    
    19,995,286Year ended December 31, 2008Opening net book amount
    
    
    2,861,340
    
    
    
    
    
    
    
    10,820,265
    
    
    
    3,131,863
    
    
    
    797,922
    
    
    
    2,383,896
    
    
    
    19,995,286Additions
    
    
    2,425
    
    
    
    
    
    
    
    
    
    
    
    2,626,286
    
    
    
    38,421
    
    
    
    103,836
    
    
    
    2,770,968Transfer from
construction-in-progress
(Note 7)
    
    
    326,841
    
    
    
    
    
    
    
    1,634,785
    
    
    
    13,363
    
    
    
    219,002
    
    
    
    173,079
    
    
    
    2,367,070Government grants received
    
    
    (8,675
    )
    
    
    
    
    
    
    (5,550
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,225
    )Reclassifications
    
    
    (3,774
    )
    
    
    
    
    
    
    1,002
    
    
    
    (13
    )
    
    
    (75,334
    )
    
    
    78,119
    
    
    
    Disposals
    
    
    (3,867
    )
    
    
    
    
    
    
    (36,258
    )
    
    
    
    
    
    
    (1
    )
    
    
    (2,774
    )
    
    
    (42,900
    )Depreciation charges
    
    
    (116,008
    )
    
    
    
    
    
    
    (174,916
    )
    
    
    (369,163
    )
    
    
    (166,678
    )
    
    
    (345,588
    )
    
    
    (1,172,353
    )Closing net book amount
    
    
    3,058,282
    
    
    
    
    
    
    
    12,239,328
    
    
    
    5,402,336
    
    
    
    813,332
    
    
    
    2,390,568
    
    
    
    23,903,846At December 31, 2008Cost
    
    
    3,686,870
    
    
    
    
    
    
    
    13,519,696
    
    
    
    6,499,176
    
    
    
    1,364,722
    
    
    
    3,900,756
    
    
    
    28,971,220Accumulated depreciation
    
    
    (622,229
    )
    
    
    
    
    
    
    (1,280,368
    )
    
    
    (1,096,840
    )
    
    
    (551,390
    )
    
    
    (1,509,991
    )
    
    
    (5,060,818
    )Impairment
    
    
    (6,359
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (197
    )
    
    
    (6,556
    )Net book amount
    
    
    3,058,282
    
    
    
    
    
    
    
    12,239,328
    
    
    
    5,402,336
    
    
    
    813,332
    
    
    
    2,390,568
    
    
    
    23,903,846Year ended December 31, 2009Opening net book amount
    
    
    3,058,282
    
    
    
    
    
    
    
    12,239,328
    
    
    
    5,402,336
    
    
    
    813,332
    
    
    
    2,390,568
    
    
    
    23,903,846Additions
    
    
    27,802
    
    
    
    
    
    
    
    102
    
    
    
    366,342
    
    
    
    24,262
    
    
    
    143,204
    
    
    
    561,712Transfer from
construction-in-progress
(Note 7)
    
    
    129,520
    
    
    
    
    
    
    
    261,192
    
    
    
    41,287
    
    
    
    60,045
    
    
    
    423,438
    
    
    
    915,482Reclassifications
    
    
    (16,491
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14
    )
    
    
    16,505
    
    
    
    Disposals
    
    
    (4,989
    )
    
    
    
    
    
    
    (62,330
    )
    
    
    
    
    
    
    
    
    
    
    (2,665
    )
    
    
    (69,984
    )Depreciation charges
    
    
    (133,249
    )
    
    
    
    
    
    
    (196,154
    )
    
    
    (405,905
    )
    
    
    (174,958
    )
    
    
    (352,217
    )
    
    
    (1,262,483
    )Closing net book amount
    
    
    3,060,875
    
    
    
    
    
    
    
    12,242,138
    
    
    
    5,404,060
    
    
    
    722,667
    
    
    
    2,618,833
    
    
    
    24,048,573At December 31, 2009Cost
    
    
    3,808,046
    
    
    
    
    
    
    
    13,704,120
    
    
    
    6,945,305
    
    
    
    1,449,108
    
    
    
    4,427,459
    
    
    
    30,334,038Accumulated depreciation
    
    
    (740,812
    )
    
    
    
    
    
    
    (1,461,982
    )
    
    
    (1,541,245
    )
    
    
    (726,441
    )
    
    
    (1,808,578
    )
    
    
    (6,279,058
    )Impairment
    
    
    (6,359
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48
    )
    
    
    (6,407
    )Net book amount
    
    
    3,060,875
    
    
    
    
    
    
    
    12,242,138
    
    
    
    5,404,060
    
    
    
    722,667
    
    
    
    2,618,833
    
    
    
    24,048,573
   F-32




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 7
    
    CONSTRUCTION-IN-PROGRESS
 2008
    
    
    2009RMB000
    
    
    RMB000At January 1
    
    
    1,422,635
    
    
    
    504,775Additions
    
    
    1,449,210
    
    
    
    1,073,338Impairment
    
    
    
    
    
    
    (448
    )Transfer to fixed assets (Note 6)
    
    
    (2,367,070
    )
    
    
    (915,482
    )At December 31
    
    
    504,775
    
    
    
    662,183
 For the year ended December 31, 2009, no interest expenses (2008: RMB13,721,000) were capitalised
in the construction-in-progress balance. A capitalisation rate of 6.55% in 2008 per annum was used
to determine the amount of borrowing costs eligible for capitalisation.
 8
    
    LEASEHOLD LAND PAYMENTS
 RMB000At January 1, 2008Cost
    
    
    791,018Accumulated amortization
    
    
    (183,047
    )Net book amount
    
    
    607,971Year ended December 31, 2008Opening net book amount
    
    
    607,971Amortisation charges
    
    
    (15,603
    )Closing net book amount
    
    
    592,368At December 31, 2008Cost
    
    
    791,213Accumulated amortization
    
    
    (198,845
    )Net book amount
    
    
    592,368Year ended December 31, 2009Opening net book amount
    
    
    592,368Amortisation charges
    
    
    (15,989
    )Closing net book amount
    
    
    576,379At December 31, 2009Cost
    
    
    791,213Accumulated amortization
    
    
    (214,834
    )Net book amount
    
    
    576,379
 As of December 31, 2009, land use right certificates (Land Certificates) of certain parcels
of land of the Group with an aggregate area of 1,620,894 square meters (2008: same) had not been
obtained. After consultation made with the Companys legal counsel, the directors consider that
there is no legal restriction for the Group to apply for and obtain the Land Certificates and it should
not lead to any significant adverse impact on the operations of the Group.
 F-33




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 9
    
    GOODWILL
 RMB000Year ended December 31, 2008 and 2009Opening net book amount
    
    
    281,255Additions
    
    
    Closing net book amount
    
    
    281,255At December 31, 2008 and 2009Cost
    
    
    281,255Accumulated impairment
    
    
    Net book amount
    
    
    281,255
 The goodwill balance arose from the excess of a purchase consideration paid by the Company
over the aggregate fair values of the identifiable assets, liabilities and contingent liabilities
of the Yangcheng Railway Business acquired by the Company.Prior to January 1, 2009, the goodwill had been allocated to a cash-generating units (CGU)
comprising the Yangcheng Railway Business. The recoverable amount of that CGU is determined based
on value-in-use calculations. These calculations use pre-tax cash flow projections based on
financial forecasts prepared by management covering a five-year period. Cash flows beyond the
five-year period are extrapolated using the estimated growth rates stated below.No impairment had been recognised by the Group as at December 31, 2008. The key assumptions used
for value-in-use calculations as of December 31, 2008 are as follows:
 Gross margin
    
    
    26.85
    %Growth rate
    
    
    2.0
    %Discount rate
    
    
    12.37
    %
 Management estimated the gross margin and growth rate based on past performance and its
expectations for the market development. The growth rate did not exceed the long-term average
growth rate for the industry in which the CGU operates and the weighted average growth rate used
was consistent with the external sources of information available to management. The discount rate
used was pre-tax and reflected specific risks relating to the railroad business segment.On January 1, 2009, the Group integrated the Yangcheng Railway Business with the Groups railway
business in order to improve operation efficiency. As a result, the management considers that the
Yangcheng Railway Business and the Groups remaining railway business (collectively the Combined
Railway Business) represents the lowest level of cash-generating units within the Group at which
goodwill is monitored for internal management purposes. In addition, the Combined Railway Business
is not larger than an operating segment determined under with IFRS 8. Therefore, the Group has
reallocated the goodwill to the cash generating unit (CGU) comprising the Combined Railway
Business.The recoverable amount of the CGU is mainly determined based on fair value less costs to sell.
The assessment of fair value was performed based on the market price of the Companys publicly
traded shares as of December 31, 2009.Even if the market price of shares of the Company used in the assessment had been 10% lower
than the price as of December 31, 2009, the Group still would not be required to recognize any
impairment losses against goodwill.
 F-34




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 10
    
    INVESTMENTS IN SUBSIDIARIESAs of December 31, 2009, the Company had direct or indirect interests in the following
subsidiaries which are incorporated/established and are operating in the PRC:
 Date of
    Percentage of equityincorporation/
    interest attributable toName of the entity
    
    establishment
    
    the Company
    
    Paid-in capital
    
    Principal activitiesDirectly
    
    IndirectlyDongguan Changsheng
Enterprise Company
    
    May 22, 1992
    
    
    51
    %
    
    
    
    
    
    RMB38,000,000
    
    WarehousingShenzhen Fu Yuan
Enterprise 

Development
Company(Fu Yuan)
    
    November 1, 1991
    
    
    97.3
    %
    
    
    2.7
    %
    
    RMB18,500,000
    
    Hotel managementShenzhen Pinghu Qun
Yi Railway Store
Loading and Unloading
Company
    
    September 11, 1993
    
    
    55
    %
    
    
    
    
    
    RMB10,000,000
    
    Cargo loading and
unloading,
warehousing, freight
transportationShenzhen Railway
Property  Management
Company Limited
    
    November 13,
2001
    
    
    
    
    
    
    100
    %
    
    RMB3,000,000
    
    Property managementShenzhen Guangshen
Railway Travel 

Service Ltd.
    
    August 16, 1995
    
    
    75
    %
    
    
    25
    %
    
    RMB2,400,000
    
    Travel agencyShenzhen Shenhuasheng
Storage and 

Transportation
Company Limited
    
    January 2, 1985
    
    
    41.5
    %
    
    
    58.5
    %
    
    RMB2,000,000
    
    Warehousing, freight
transport and
packaging agency
servicesShenzhen Nantie
Construction 
Supervision Company
    
    May 8, 1995
    
    
    67
    %
    
    
    9
    %
    
    RMB3,000,000
    
    Supervision of
construction
projectsShenzhen Guangshen
Railway Economic and
Trade Enterprise
Company Limited
    
    March 7, 2002
    
    
    
    
    
    
    100
    %
    
    RMB2,000,000
    
    Catering managementShenzhen Railway
Station Passenger 
Services Company
    
    December 18, 1986
    
    
    100
    %
    
    
    
    
    
    RMB1,500,000
    
    Catering services
and sales of
merchandiseGuangshen Railway
Station Dongqun 
Trade
and Commerce Service
Company
    
    November 23, 1992
    
    
    100
    %
    
    
    
    
    
    RMB1,020,000
    
    Sales of merchandisesGuangzhou Tielian
Economy 
Development
Company Limited
(Tielian)
    
    December 27, 1994
    
    
    50.50
    %
    
    
    
    
    
    RMB1,000,000
    
    Warehousing and
freight transport
agency servicesGuangzhou Dongqun
Advertising 
Company
Limited
    
    March 6, 1996
    
    
    
    
    
    
    100
    %
    
    RMB500,000
    
    Advertising serviceGuangzhou Railway
Huangpu Service
Company
    
    January 2, 1985
    
    
    100
    %
    
    
    
    
    
    RMB379,000
    
    Cargo loading and
unloading,
warehousing, freight
transportation
 All the above subsidiaries are limited liability companies.
 F-35




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 11
    
    INVESTMENTS IN ASSOCIATES
 2008
    
    
    2009RMB000
    
    
    RMB000Share of net assets
    
    
    150,394
    
    
    
    149,236Less: provision for impairment in value (a)
    
    
    (29,689
    )
    
    
    (29,689
    )120,705
    
    
    
    119,547
  The movement of investments in associates of the Group during the year is as follows:
 2008
    
    
    2009RMB000
    
    
    RMB000Beginning of the year
    
    
    124,350
    
    
    
    120,705Share of results after tax
    
    
    128
    
    
    
    773Dividends received and receivable from the
associates
    
    
    (2,055
    )
    
    
    (1,931
    )Reclassifications (Note 16)
    
    
    (1,718
    )
    
    
    End of the year
    
    
    120,705
    
    
    
    119,547
 As of December 31, 2009, the Group had direct interests in the following companies which are
incorporated/established and are operating in the PRC:
 Percentage ofDate of
    
    equity interestincorporation/
    
    attributable to theName of the entity
    
    establishment
    
    Company
    
    Paid-in capital
    
    Principal activitiesShenzhen Guangshen
Railway Civil 

Engineering Company
    
    March 1, 1984
    
    
    49
    %
    
    RMB55,000,000
    
    Construction of railroad propertiesZengcheng Lihua
    
    July 30, 1992
    
    
    26.98
    %
    
    RMB107,054,682
    
    Real estate construction,
provision of warehousing, cargo
uploading and unloading servicesTiecheng
    
    May 2, 1995
    
    
    49
    %
    
    RMB543,050,000
    
    Properties leasing and trading of
merchandise
 All the above associates are limited liability companies.
 F-36




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 11
    
    INVESTMENTS IN ASSOCIATES (CONTINUED)The Groups share of the results with its percentage ownership of its principal associates, and its
share of the related assets and liabilities, net of applicable impairment provision are as follows:
 Assets
    
    
    Liabilities
    
    
    Revenue
    
    
    (Loss)/ProfitRmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    Rmb000
    
    
    % interest held2008Tiecheng (b)
    
    
    190,783
    
    
    
    105,051
    
    
    
    11,158
    
    
    
    (2,018
    )
    
    
    49
    %Other associates
    
    
    172,808
    
    
    
    137,835
    
    
    
    128,466
    
    
    
    2,146
    
    
    
    27%~49
    %363,591
    
    
    
    242,886
    
    
    
    139,624
    
    
    
    1282009Tiecheng (b)
    
    
    192,703
    
    
    
    107,732
    
    
    
    10,813
    
    
    
    (761
    )
    
    
    49
    %Other associates
    
    
    191,666
    
    
    
    152,229
    
    
    
    185,668
    
    
    
    1,534
    
    
    
    27%~49
    %384,369
    
    
    
    259,961
    
    
    
    196,481
    
    
    
    773
 Note b:The carrying amount of the Groups investment in Tiecheng as of December 31, 2009 was approximately
RMB84,971,000 (2008: RMB85,732,000).In 1996, Tiecheng and a third party company jointly established a sino-foreign contractual joint
venture, Guangzhou Guantian Real Estate Company (Guangzhou Guantian), in Guangzhou of the PRC for
developing certain properties near a railway station operated by the Group. In 2000, Guangzhou
Guantian together with two other parties, namely Guangzhou Guanhua Real Estate Company Limited
(Guangzhou Guanhua) and Guangzhou Guanyi Real Estate Company Limited (Guangzhou Guanyi),
undertook to act as joint guarantors (collectively the Guarantors) for certain payable balances
(the Payables) due from Guangdong Guancheng Real Estate Company Limited (Guangdong Guancheng)
to a third party creditor (the Creditor).Due to the fact that Guangdong Guancheng had failed to settle the Payables, as a result, the
Guarantors were found to be jointly liable to the Creditor an amount of approximately
RMB257,000,000 plus accrued interest (collectively the Damages) according to the court verdicts
(the Verdicts). Guangzhou Guantian made an appeal to overturn the Verdicts.A final judgement on the appeal, which was in favour of Guangzhou Guantian, was obtained from the
Supreme Peoples Court of the PRC in March 2009. Accordingly, Guangzhou Guantian was not held
liable to settle the Damages.
 F-37




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 12
    
    DEFERRED TAX ASSETS/LIABILITIESThe analysis of deferred tax assets and deferred tax liabilities is as follows:
 2008
    
    
    2009RMB000
    
    
    RMB000Deferred tax assets:- Deferred tax assets to be recovered after more than 12 months
    
    
    337,893
    
    
    
    331,676- Deferred tax assets to be recovered within 12 months
    
    
    18,848
    
    
    
    14,451356,741
    
    
    
    346,127Deferred tax liabilities:- Deferred tax liabilities to crystallise after more than 12 months
    
    
    (24,802
    )
    
    
    (25,435
    )- Deferred tax liabilities to crystallise within 12 months
    
    
    (201
    )
    
    
    (262
    )(25,003
    )
    
    
    (25,697
    )Deferred tax assets (net)
    
    
    331,738
    
    
    
    320,430
 The gross movement on the deferred income tax account is as follows:
 2008
    
    
    2009RMB000
    
    
    RMB000At January 1
    
    
    338,921
    
    
    
    331,738Comprehensive income statement charge (Note 31)
    
    
    (7,183
    )
    
    
    (11,308
    )At December 31
    
    
    331,738
    
    
    
    320,430
 The movement in deferred tax assets and liabilities of the Group during the year, without taking
into consideration the offsetting of balances within the same tax jurisdiction, is as follows:
 Charged/ (Credited)
    
    
    
    
    
    
    Charged/ (Credited)to the
    
    
    
    
    
    
    to theAt January 1,
    
    
    comprehensive
    
    
    
    
    
    
    comprehensive2008
    
    
    income statement
    
    
    At December 31, 2008
    
    
    income statement
    
    
    At December 31, 2009RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000Deferred tax assets:Impairment
provision for
receivables
    
    
    20,363
    
    
    
    1,088
    
    
    
    21,451
    
    
    
    73
    
    
    
    21,524Impairment
provision for fixed
assets
    
    
    1,928
    
    
    
    (39
    )
    
    
    1,889
    
    
    
    75
    
    
    
    1,964Impairment
provision for
interests in
associates
    
    
    7,422
    
    
    
    
    
    
    
    7,422
    
    
    
    
    
    
    
    7,422Difference in
accounting base and
tax base of fixed
assets
    
    
    257,384
    
    
    
    (3,925
    )
    
    
    253,459
    
    
    
    (6,193
    )
    
    
    247,266Difference in
accounting base and
tax base of
employee benefits
obligations
    
    
    75,159
    
    
    
    (2,639
    )
    
    
    72,520
    
    
    
    (4,594
    )
    
    
    67,926Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    25362,256
    
    
    
    (5,515
    )
    
    
    356,741
    
    
    
    (10,614
    )
    
    
    346,127
 F-38




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 12
    
    DEFERRED TAX ASSETS/LIABILITIES (CONTINUED)
 (Credited)/ Charged
    
    
    
    
    
    
    (Credited)/ Chargedto the
    
    
    
    
    
    
    to theAt January 1,
    
    
    comprehensive
    
    
    
    
    
    
    comprehensive
    
    
    At December2008
    
    
    income statement
    
    
    At December 31, 2008
    
    
    income statement
    
    
    31, 2009RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000Deferred tax liabilities:Difference in accounting
base and tax base of
fixed assets
    
    
    20,074
    
    
    
    (229
    )
    
    
    19,845
    
    
    
    (201
    )
    
    
    19,644Others
    
    
    3,261
    
    
    
    1,897
    
    
    
    5,158
    
    
    
    895
    
    
    
    6,05323,335
    
    
    
    1,668
    
    
    
    25,003
    
    
    
    694
    
    
    
    25,697
 13
    
    DEFERRED EMPLOYEE COSTSAs disclosed in Note 2.13, the Group implemented a scheme (the Scheme) for selling staff quarters
to its employees in 2000. The movement of deferred employee costs is set forth as follows:
 2008
    
    
    2009RMB000
    
    
    RMB000At January 1Cost
    
    
    271,369
    
    
    
    243,102Accumulated amortization
    
    
    (129,978
    )
    
    
    (143,488
    )Net book amount
    
    
    141,391
    
    
    
    99,614Year ended December 31Opening net book amount
    
    
    141,391
    
    
    
    99,614Additions
    
    
    16,733
    
    
    
    278Amortization (Note 28)
    
    
    (32,005
    )
    
    
    (20,156
    )Offset against employee benefits obligation provision
(Note 25)
    
    
    (26,505
    )
    
    
    Closing net book amount
    
    
    99,614
    
    
    
    79,736At December 31Cost
    
    
    243,102
    
    
    
    243,380Accumulated amortization
    
    
    (143,488
    )
    
    
    (163,644
    )Net book amount
    
    
    99,614
    
    
    
    79,736
 F-39




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 14
    
    FINANCIAL INSTRUMENTS BY CATEGORYThe accounting policies for financial instruments have been applied to the items tabulated below:
 Loans and
    
    
    Available-receivables
    
    
    for-sale investment
    
    
    TotalAssets as per consolidated balance sheetAs at December 31, 2009:Available-for-sale investments (Note 16)
    
    
    
    
    
    
    53,826
    
    
    
    53,826Long-term receivable (Note 17)
    
    
    44,229
    
    
    
    
    
    
    
    44,229Trade and other receivables excluding
prepayments (Notes 19 and 20)
    
    
    527,210
    
    
    
    
    
    
    
    527,210Short-term deposits
    
    
    514,000
    
    
    
    
    
    
    
    514,000Cash and cash equivalents (Note 34(c))
    
    
    1,115,651
    
    
    
    
    
    
    
    1,115,651Total
    
    
    2,201,090
    
    
    
    53,826
    
    
    
    2,254,916As at December 31, 2008:Available-for-sale investments (Note 16)
    
    
    
    
    
    
    48,326
    
    
    
    48,326Long term receivable (Note 17)
    
    
    48,136
    
    
    
    
    
    
    
    48,136Trade and other receivables excluding
prepayments(Notes 19 and 20)
    
    
    337,920
    
    
    
    
    
    
    
    337,920Short-term deposits
    
    
    7,300
    
    
    
    
    
    
    
    7,300Cash and cash equivalents (Note 34(c))
    
    
    1,560,952
    
    
    
    
    
    
    
    1,560,952Total
    
    
    1,954,308
    
    
    
    48,326
    
    
    
    2,002,634
 Other financialliabilitiesLiabilities as per consolidated balance sheetAs at December 31, 2009:Bonds payable (Note 24)
    
    
    3,465,801Trade and other payables excluding statutory liabilities (Notes 26 and 27)
    
    
    1,225,037Payables for fixed assets and construction-in-progress
    
    
    674,652Total
    
    
    5,365,490As at December 31, 2008:Bank borrowings (Note 23)
    
    
    3,900,000Trade and other payables excluding statutory liabilities (Notes 26 and 27)
    
    
    1,189,912Payables for fixed assets and construction-in-progress
    
    
    764,609Total
    
    
    5,854,521
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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 15
    
    CREDIT QUALITY OF FINANCIAL ASSETSThe credit quality of financial assets that are neither past due nor impaired can be assessed by
reference to historical information about counterparty default rates:
 2008
    
    
    2009RMB000
    
    
    RMB000Trade receivablesDue from MOR
    
    
    53,048
    
    
    
    273,300Due from related parties
    
    
    165,576
    
    
    
    121,354Due from third parties
    
    
    53,427
    
    
    
    88,564272,051
    
    
    
    483,218
 2008
    
    
    2009RMB000
    
    
    RMB000Other receivables excluding prepaymentsDue from related parties
    
    
    8,292
    
    
    
    7,185Due from third parties
    
    
    57,577
    
    
    
    36,80765,869
    
    
    
    43,992
 2008
    
    
    2009RMB000
    
    
    RMB000Long-term receivableDue from third parties
    
    
    44,229
    
    
    
    48,136
 2008
    
    
    2009RMB000
    
    
    RMB000Cash at bank and short-term bank depositsBalance placed in listed banks
    
    
    1,568,098
    
    
    
    1,629,575Balance placed in unlisted banks
    
    
    104
    
    
    
    421,568,202
    
    
    
    1,629,617
 None of the financial assets that are fully performing has been renegotiated in the last year.
 F-41




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 16
    
    AVAILABLE-FOR-SALE INVESTMENTS
 2008
    
    
    2009RMB000
    
    
    RMB000Beginning of the year
    
    
    46,608
    
    
    
    48,326Additions
    
    
    
    
    
    
    7,500Disposal
    
    
    
    
    
    
    (2,000
    )Reclassifications (Note 11)
    
    
    1,718
    
    
    
    End of the year
    
    
    48,326
    
    
    
    53,826
 The Groups equity ownership in each of these investments is less than 10%. The directors of the
Company are of the opinion that no quoted market price in an active market was available for these
investments and their fair values could not be reliably measured by alternative valuation methods.
In accordance with the provisions under IFRS, the above non-current available-for-sale investments
are carried at cost subject to review for impairment loss. As of December 31, 2009 and 2008, no
impairment provision was considered necessary by the directors to write down the carrying amounts
of these investments.17
    
    LONG-TERM RECEIVABLE
 2008
    
    
    2009RMB000
    
    
    RMB000Opening net book amount
    
    
    48,547
    
    
    
    48,136Release of accrued interest (Note 29)
    
    
    7,589
    
    
    
    4,093Repayment received
    
    
    (8,000
    )
    
    
    (8,000
    )Closing net book amount
    
    
    48,136
    
    
    
    44,229
 The long-term receivable balance represents freight service fees receivable from a third party
customer which was acquired from Yangcheng Railway Business (as mentioned in Note 1). The original
gross value of the receivable is RMB140,400,000. On the acquisition date of Yangcheng Railway
Business, it was remeasured at its then fair value, which was assessed by the discounted cash flow
method, by making reference to the repayment schedule agreed by both parties.The balance is subsequently carried at amortised cost using an average effective interest rate of
6.54%.The balance approximated its fair value as of December 31, 2009 and 2008.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 18
    
    MATERIALS AND SUPPLIES
 2008
    
    
    2009RMB000
    
    
    RMB000Raw materials
    
    
    139,497
    
    
    
    137,328Accessories
    
    
    52,794
    
    
    
    75,108Reuseable rail-line track materials
    
    
    5,741
    
    
    
    15,277Retailing Materials
    
    
    3,891
    
    
    
    3,397201,923
    
    
    
    231,110
 The costs of materials and supplies consumed by the Group during the year were recognised as
operating expenses in the amount of approximately RMB1,713,456,000 (2008: RMB1,733,302,000). As
of December 31, 2009 and 2008, there were no inventories stated at net realisable value.19
    
    TRADE RECEIVABLES, NET
 2008
    
    
    2009RMB000
    
    
    RMB000Trade receivables
    
    
    281,193
    
    
    
    492,369Including: receivables from related parties
    
    
    165,580
    
    
    
    121,467Less: Provision for impairment of receivables
    
    
    (9,142
    )
    
    
    (9,151
    )272,051
    
    
    
    483,218
 As of December 31, 2009 and 2008, the Groups trade receivables are all denominated in RMB.The passenger railroad services are usually transacted on cash basis. The Group does not have
formal contractual credit terms agreed with its customers for freight services but the trade
receivables are usually settled within a period less than one year. As a result, the Group regards
any receivable balance within a one-year credit period being not overdue. As of December 31, 2009
and 2008, the ageing analysis of the outstanding trade receivables was as follows:
 2008
    
    
    2009RMB000
    
    
    RMB000Within 1 year
    
    
    255,961
    
    
    
    445,668Over 1 year but within 2 years
    
    
    6,333
    
    
    
    23,241Over 2 years but within 3 years
    
    
    9,445
    
    
    
    4,931Over 3 years
    
    
    312
    
    
    
    9,378272,051
    
    
    
    483,218
 As of December 31, 2009 the Groups trade receivables of approximately RMB35,971,000 (2008:
RMB13,378,000) were past due but not impaired. These relate to a number of independent customers
for whom there is no recent history of default. The ageing analysis of these trade receivables is
as follows:
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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 19
    
    TRADE RECEIVABLES, NET (CONTINUED)
 2008
    
    
    2009RMB000
    
    
    RMB000Over 1 year but within 2 years
    
    
    3,888
    
    
    
    21,840Over 2 year but within 3 years
    
    
    9,445
    
    
    
    4,863Over 3 years
    
    
    45
    
    
    
    9,26813,378
    
    
    
    35,971
 As of December 31, 2009, the Groups trade receivables of approximately RMB33,487,000 (2008:
RMB11,924,000) had been impaired and provided for. The amount of the provision was approximately
RMB9,151,000 as of December 31, 2009 (2008: RMB9,142,000). The impaired receivable balances were
mainly related to the provision of freight transportation services. The related customers are in
unexpected difficult financial conditions. Nevertheless, it was assessed that a portion of the
carrying amount of the receivables would be recovered. The ageing analysis of these receivables is
as follows:
 2008
    
    
    2009RMB000
    
    
    RMB000Within 1 year
    
    
    629
    
    
    
    23,100Over 1 year but within 2 years
    
    
    2,565
    
    
    
    1,475Over 2 years but within 3 years
    
    
    
    
    
    
    76Over 3 years
    
    
    8,730
    
    
    
    8,83611,924
    
    
    
    33,487
 Movements on the provision for impairment of trade receivables are as follows:
 2008
    
    
    2009RMB000
    
    
    RMB000At January 1
    
    
    6,767
    
    
    
    9,142Provision for impairment loss
    
    
    2,630
    
    
    
    368Reversal of impairment loss provision
    
    
    (255
    )
    
    
    (359
    )At December 31
    
    
    9,142
    
    
    
    9,151
 The creation and release of provision for impaired receivables have been included in utility and
office expenses in the comprehensive income statement. Amounts charged to the allowance account are
generally written off against the gross accounts receivable balances when there is no expectation
of recovering additional cash.Concentration of credit risk with respect to trade receivables is low due to the fact that the
Group has a large number of customers, which are widely dispersed. Accordingly, the directors of
the Company believe that there was no additional significant credit risk beyond the amount that had
already been provided for impairment losses as at December 31, 2009 and 2008.As of December 31, 2009 and 2008, the carrying amounts of the above trade receivables approximated
their fair values.
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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 20
    
    PREPAYMENTS AND OTHER RECEIVABLES, NET
 2008
    
    
    2009RMB000
    
    
    RMB000Receivables from third parties
    
    
    88,573
    
    
    
    50,457Receivables from related parties
    
    
    8,292
    
    
    
    21,88696,865
    
    
    
    72,343
 2008
    
    
    2009RMB000
    
    
    RMB000Other receivables
    
    
    132,461
    
    
    
    110,983Less: Provision for impairment loss (Note a)
    
    
    (66,592
    )
    
    
    (66,991
    )Other receivables, net
    
    
    65,869
    
    
    
    43,992Prepayments
    
    
    30,996
    
    
    
    28,35196,865
    
    
    
    72,343
  Other receivables mainly represent miscellaneous deposits and receivables arising during the course
of the provision of non-railway transportation services by the Group. Prepayments mainly represent
amounts paid in advance to the suppliers for utilities and other operating expenses of the Group.As of December 31, 2009 and 2008, there were no significant balances of other receivables that were
past due after the credit period that are not impaired. Provision for impairment loss of
approximately RMB405,000 (2008: RMB391,000) has been included in the consolidated comprehensive
income statement.Movements on the provision for impairment of other receivables are as follows:
 2008
    
    
    2009RMB000
    
    
    RMB000At January 1
    
    
    66,248
    
    
    
    66,592Provision for impairment loss
    
    
    553
    
    
    
    498Reversal of impairment loss provision
    
    
    (162
    )
    
    
    (93
    )Receivables written off during the year as
uncollectible
    
    
    (47
    )
    
    
    (6
    )At December 31
    
    
    66,592
    
    
    
    66,991
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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 20
    
    PREPAYMENTS AND OTHER RECEIVABLES, NET (CONTINUED)
  2008
    
    
    2009RMB000
    
    
    RMB000RMB
    
    
    96,336
    
    
    
    71,349HKD
    
    
    529
    
    
    
    99496,865
    
    
    
    72,343
 21
    
    SHARE CAPITALAs of December 31, 2009, the total authorised number of ordinary shares is 7,083,537,000 shares
(2008: 7,083,537,000 shares) with a par value of RMB1.00 per share (2008: RMB1.00 per share). These
shares are divided into A shares and H shares. Apart from certain A shares held by state-own legal
person and legal persons which have sale restrictions (see details below), they rank pari passu
against each other.
 Opening
    
    
    
    
    
    
    Closingbalance at
    
    
    
    
    
    
    balance atJanuary 1,
    
    
    
    
    
    
    December 31,2008
    
    
    Transfers
    
    
    2008RMB000
    
    
    RMB000
    
    
    RMB000Authorised, issued and fully paid:A shares subject to sale restrictions- shares held by state-owned
legal person (Note a)
    
    
    2,904,250
    
    
    
    
    
    
    
    2,904,250Listed shares- H shares
    
    
    1,431,300
    
    
    
    
    
    
    
    1,431,300- A shares
    
    
    2,747,987
    
    
    
    
    
    
    
    2,747,9874,179,287
    
    
    
    
    
    
    
    4,179,287Total
    
    
    7,083,537
    
    
    
    
    
    
    
    7,083,537
 Opening
    
    
    
    
    
    
    Closingbalance at
    
    
    
    
    
    
    balance atJanuary 1,
    
    
    
    
    
    
    December 31,2009
    
    
    Transfers
    
    
    2009RMB000
    
    
    RMB000
    
    
    RMB000Authorised, issued and fully paid:A shares subject to sale restrictions- shares held by state-owned
legal person (Note a)
    
    
    2,904,250
    
    
    
    (2,904,250
    )
    
    
    - shares held by the National
Council for Social Security Fund
of the PRC (Note a)
    
    
    
    
    
    
    274,799
    
    
    
    274,7992,904,250
    
    
    
    (2,629,451
    )
    
    
    274,799Listed shares- H shares
    
    
    1,431,300
    
    
    
    
    
    
    
    1,431,300- A shares
    
    
    2,747,987
    
    
    
    2,629,451
    
    
    
    5,377,4384,179,287
    
    
    
    2,629,451
    
    
    
    6,808,738Total
    
    
    7,083,537
    
    
    
    
    
    
    
    7,083,537
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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 21
    
    SHARE CAPITAL (CONTINUED)Note a:In December 2006, the Company issued 2,747,987,000 A shares on the Shanghai Stock Exchange through
an initial public offering, among which 1,480,944,000 A shares held by state-owned legal persons
were subject to a sale and transfer restriction period of 3-months or one year; In addition, at the
time of this A shares offering, Guangzhou Railway Group also undertook to have its 2,904,250,000 A
shares be subject to a 3-year sale and transfer restriction period. As of December 31, 2008, the
number of shares that were subject to sale and transfer restriction was 2,904,250,000.On September 22, 2009, Guangzhou Railway Group transferred 274,798,700 A shares held by it to the
National Council for Social Security Fund in the PRC (SSF) according to regulations issued by the
relevant PRC authorities. Upon this transfer, SSF has voluntarily agreed to extend the transfer
restriction period associated with these shares for another three years. Thus, the shares that are
still subject to sale and transfer restriction were 274,798,700 as of December 31, 2009.22
    
    OTHER RESERVESAccording to the provisions of the articles of association of the Company, the Company shall first
set aside 10% of its profit after tax attributable to shareholders as indicated in the Companys
statutory financial statements for the statutory surplus reserve (except where the reserve has
reached 50% of the Companys registered share capital) in each year. The Company may also make
appropriations from its profit attributable to shareholders to a discretionary surplus reserve,
provided that it is approved by a resolution passed in a shareholders general meeting. These
reserves cannot be used for purposes other than those for which they are created and are not
distributable as cash dividends without the prior approval obtained from the shareholders in a
shareholders general meeting under specific circumstances.When the statutory surplus reserve is not sufficient to make good for any losses of the Company in
previous years, the current year profit attributable to shareholders shall be used to make good the
losses before any allocations are set aside for the statutory surplus reserve.The statutory surplus reserve, the discretionary surplus reserve and the share premium account
could be converted into share capital of the Company provided it is approved by a resolution passed
in a shareholders general meeting with the provision that the ending balance of the statutory
surplus reserve does not fall below 25% of the registered share capital amount. The Company may
either allot newly created shares to the shareholders at the same proportion of the existing number
of shares held by these shareholders, or it may increase the par value of each share.For the years ended December 31, 2009, 2008 and 2007, the directors proposed the following
appropriations to reserves of the Company:
 2007
    
    
    2008
    
    
    2009Percentage
    
    
    RMB000
    
    
    Percentage
    
    
    RMB000
    
    
    Percentage
    
    
    RMB000Statutory surplus reserve
    
    
    10
    %
    
    
    139,778
    
    
    
    10
    %
    
    
    121,444
    
    
    
    10
    %
    
    
    134,902
 Because of a change in the rules governing appropriations of statutory reserves of enterprises in
the PRC effective from 2008, the Group had made appropriate changes to the reserve balances brought
forward from 2007 and before during the year ended 31 December 2008.
 F-47




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 22
    
    OTHER RESERVES (CONTINUED)In accordance with the provisions of the articles of association of the Company, the profit after
appropriation to reserves and available for distribution to shareholders shall be the lower of the
retained earnings determined under (a) PRC GAAP, (b) IFRS and (c) the accounting standards of the
countries in which its shares are listed. Due to the fact that the statutory financial statements
of the Company have been prepared in accordance with PRC GAAP, the retained earnings so reported
may be different from those reported in the statement of changes in shareholders equity prepared
under IFRS contained in these financial statements.23
    
    BORROWINGS
 2008
    
    
    2009RMB000
    
    
    RMB000Non currentUnsecured bank borrowings
    
    
    3,390,000
    
    
    
    CurrentUnsecured bank borrowings
    
    
    510,000
    
    
    
    Total borrowings
    
    
    3,900,000
    
    
    
    
 The borrowings in 2008 were mainly obtained for the financing of settlement of construction related
costs of the fourth rail-line of the Group and purchase of locomotives of the Group. The carrying
amounts of the Groups borrowings are all denominated in RMB.The maturity of these borrowings is as follows:
 2008
    
    2009RMB000
    
    RMB000Within one year
    
    
    510,000
    
    
    Within 1 to 2 years
    
    
    10,000
    
    
    Within 2 to 5 years
    
    
    3,380,000
    
    
    3,900,000
    
    
    
 The interest rate exposure of the borrowings of the Group is as follows:
 2008
    
    
    2009Rmb000
    
    
    Rmb000At floating rates (at relevant prevailing interest
rates with a maximum range of downward adjustment
up to 10%)
    
    
    3,900,000
    
    
    
    
 The effective interest rate of the bank borrowings for the year ended December 31, 2009 was 5.91%
(2008: 6.44%). The carrying amounts of the Groups borrowings approximated their fair values as
all the borrowings are at floating interest rates.As of December 31, 2009, the Group had unutilized banking facilities granted by various financial
institutions amounting to approximately RMB1,500,000,000 (2008: RMB9,000,000,000).
 F-48




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 24
    
    BONDS PAYABLE
 At 1 January
    
    
    
    
    
    
    
    
    
    
    At 31 December2009
    
    
    Addition
    
    
    Amortisation
    
    
    2009RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB00009 Guangshen Tie MTN1
    
    
    
    
    
    
    3,465,476
    
    
    
    325
    
    
    
    3,465,801
 The Company issued 3,500,000,000 bonds of medium terms at a nominal value of RMB3,500,000,000
on December 17, 2009. The bonds will reach maturity five years from the issue date at their nominal
value of RMB3,500,000,000 and bear an annual interest rate with 4.79%.On the issue dates, the bonds are recognised based on the residual amounts of the principals after
deduction of issuance costs of approximately RMB34,524,000. The bonds are subsequently carried at
amortised cost using an average effective interest rate of 5.018%.As of December 31, 2009, the fair value of bonds payable approximates to their carrying amount.25
    
    EMPLOYEE BENEFITS OBLIGATIONS
 2008
    
    
    2009RMB000
    
    
    RMB000At January 1
    
    
    377,409
    
    
    
    288,541Additions (Note 28)
    
    
    85,988
    
    
    
    1,200Interest unwound
    
    
    3,417
    
    
    
    6,510Payment
    
    
    (151,768
    )
    
    
    (64,312
    )Offset against deferred employee costs (Note 13)
    
    
    (26,505
    )
    
    
    At December 31
    
    
    288,541
    
    
    
    231,939
 2008
    
    
    2009RMB000
    
    
    RMB000Employee benefits obligations
    
    
    288,541
    
    
    
    231,939Less: current portion included in accruals and other payables (Note 27)
    
    
    (51,119
    )
    
    
    (57,172
    )237,422
    
    
    
    174,767
 Pursuant to a redundancy plan implemented by the Group in 2006, selected employees who had met
certain specified criteria and accepted voluntary redundancy were provided with an offer of early
retirement benefits, up to their official age of retirement. Such arrangements required specific
approval granted by management of the Group.With the acquisition of the Yangcheng Railway Business in 2007, the Group has also assumed certain
retirement and termination benefits obligations associated with the operations of Yangcheng Railway
Business. The amount mainly includes the redundancy termination benefits similar to those
mentioned above, as well as the obligation for funding post-retirement medical insurance premiums
of retired employees before the acquisition.
 F-49




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 25
    
    EMPLOYEE BENEFITS OBLIGATIONS (CONTINUED)These obligations have been provided for by the Group at amounts equal to the total expected
benefit payments. Where the obligation does not fall due within twelve months, the obligation
payable has been discounted using a pre-tax rate that reflects managements current market
assessment of the time value of money and risk specific to the obligation (the discount rate was
determined with reference to market yields at the balance sheet date on high quality investments in
the PRC).26
    
    TRADE PAYABLES
 2008
    
    
    2009RMB000
    
    
    RMB000Payables to third parties
    
    
    416,226
    
    
    
    563,211Payables to related parties
    
    
    224,630
    
    
    
    228,144640,856
    
    
    
    791,355
  2008
    
    
    2009RMB000
    
    
    RMB000Within 1 year
    
    
    628,405
    
    
    
    782,594Over 1 year but within 2 years
    
    
    10,565
    
    
    
    7,589Over 2 years but within 3 years
    
    
    66
    
    
    
    211Over 3 years
    
    
    1,820
    
    
    
    961640,856
    
    
    
    791,355
 27
    
    ACCRUALS AND OTHER PAYABLES
 2008
    
    
    2009RMB000
    
    
    RMB000Payables to third parties
    
    
    652,857
    
    
    
    728,070Payables to related parties
    
    
    137,903
    
    
    
    75,046790,760
    
    
    
    803,116
 2008
    
    
    2009RMB000
    
    
    RMB000Deposits received for construction projects
    
    
    264,922
    
    
    
    155,030Other taxes payable
    
    
    44,256
    
    
    
    152,763Salary and welfare payables
    
    
    70,806
    
    
    
    80,388Other deposits received
    
    
    43,688
    
    
    
    68,124Advance received from customers
    
    
    58,237
    
    
    
    61,934Deposits received from ticketing agencies
    
    
    50,297
    
    
    
    22,441Employee benefits obligations (Note 25)
    
    
    51,119
    
    
    
    57,172Housing maintenance fund
    
    
    17,286
    
    
    
    17,177Other payables
    
    
    190,149
    
    
    
    188,087790,760
    
    
    
    803,116
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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 28
    
    LABOUR AND BENEFITS
 2007
    
    
    2008
    
    
    2009RMB000
    
    
    Rmb000
    
    
    Rmb000Wages and salaries
    
    
    1,388,342
    
    
    
    1,661,325
    
    
    
    1,835,560Provision for medical and other employee benefits
    
    
    325,438
    
    
    
    306,282
    
    
    
    326,018Contributions to a defined contribution pension
scheme (a)
    
    
    220,856
    
    
    
    260,014
    
    
    
    316,640Contributions to the housing scheme (b)
    
    
    75,861
    
    
    
    92,095
    
    
    
    125,325Amortisation of deferred staff cost (Note 13)
    
    
    24,339
    
    
    
    32,005
    
    
    
    20,156Retirement benefit obligations (Note 25)
    
    
    65,256
    
    
    
    85,988
    
    
    
    1,2002,100,092
    
    
    
    2,437,709
    
    
    
    2,624,899
 (a)
    
    Pension schemeAll the full-time employees of the Group are entitled to join a statutory pension scheme. The
employees would receive pension payments equal to their basic salaries payable upon their
retirement up to their death. Pursuant to the PRC laws and regulations, contributions to the basic
old age insurance for the Groups local staff are to be made monthly to a government agency based
on 26% of the standard salary set by the provincial government, of which 18% is borne by the
Company or its subsidiaries and the remainder 8% is borne by the employees. The government agency
is responsible for the pension liabilities due to the employees upon their retirement. The Group
accounts for these contributions on an accrual basis and charges the related contributions to
income in the year to which the contributions relate.(b)
    
    Housing schemeIn accordance with the PRC housing reform regulations, the Group is required to make contributions
to a State-sponsored Housing Fund at 7% or 13% of the salaries of the employees. At the same time,
the employees are also required to make a contribution at 7% or 13% of the salaries out of their
payroll. The employees are entitled to claim the entire sum of the fund under certain specified
withdrawal circumstances. The Group have no further legal or constructive obligation for housing
benefits of these employees beyond the above contributions made.29
    
    OTHER INCOME, NET
 2007
    
    
    2008
    
    
    2009RMB000
    
    
    RMB000
    
    
    RMB000Interest income from bank
    
    
    61,063
    
    
    
    24,321
    
    
    
    24,440Unwinding of interest accrued on long-term
receivable (Note 17)
    
    
    
    
    
    
    7,589
    
    
    
    4,093Write-back of long outstanding payables
    
    
    
    
    
    
    21,562
    
    
    
    1,932Loss on disposal of fixed assets
    
    
    (3,335
    )
    
    
    (31,542
    )
    
    
    (41,635
    )Loss on disposal of subsidiaries
    
    
    (1,063
    )
    
    
    (188
    )
    
    
    Dividends income on available-for-sale investments
    
    
    
    
    
    
    (2,420
    )
    
    
    (3,000
    )Others
    
    
    (6,849
    )
    
    
    (1,619
    )
    
    
    (5,595
    )49,816
    
    
    
    17,703
    
    
    
    (19,765
    )
 F-51




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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 30
    
    FINANCE COSTS
 2007
    
    
    2008
    
    
    2009RMB000
    
    
    RMB000
    
    
    RMB000Interest expenses
    
    
    173,515
    
    
    
    221,488
    
    
    
    227,178Less: interest capitalized in
construction-in-progress (Note 7)
    
    
    (79,438
    )
    
    
    (13,721
    )
    
    
    Amortization of bonds payable (Note 24)
    
    
    
    
    
    
    
    
    
    
    325Interest unwound for employee benefit
obligations (Note 25)
    
    
    (1,988
    )
    
    
    3,417
    
    
    
    6,510Bank charges
    
    
    3,930
    
    
    
    2,311
    
    
    
    2,227Net foreign exchange losses
    
    
    2,468
    
    
    
    (26
    )
    
    
    4798,487
    
    
    
    213,469
    
    
    
    236,287
 31
    
    INCOME TAX EXPENSEBefore 2008, enterprises established in the Shenzhen Special Economic Zone of the PRC were subject
to income tax at a reduced preferential rate of 15% as compared with the standard income tax rate
for PRC companies of 33%. The Company and the subsidiaries located in Shenzhen were subject to
income tax rate of 15%, while those subsidiaries located outside Shenzhen were subject to income
tax rate of 33%.On March 16, 2007, the National Peoples Congress approved the Corporate Income Tax Law of the
Peoples Republic of China (the new CIT Law), which became effective on January 1, 2008. Under
the new CIT Law, the enterprise income tax rate was changed from 33% to 25% from January 1, 2008
onwards. While the enterprise income tax rate applicable to the Company and the subsidiaries
located in Shenzhen would increase gradually to 25% within 5 years from 2008 to 2012. In 2009,
2008 and 2007, the applicable income tax rate is 20%, 18% and 15% respectively.An analysis of the current year taxation charges is as follows:
 2007
    
    
    2008
    
    
    2009RMB000
    
    
    RMB000
    
    
    RMB000Current income tax
    
    
    255,749
    
    
    
    270,111
    
    
    
    337,613Deferred income tax (Note 12)
    
    
    (23,400
    )
    
    
    7,183
    
    
    
    11,308232,349
    
    
    
    277,294
    
    
    
    348,921
 The tax on the Groups profit before tax differs from the theoretical amount that would arise
using the tax rate of the home country of the Company as follows:
 F-52




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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 31
    
    INCOME TAX EXPENSE (CONTINUED)
 2007
    
    
    2008
    
    
    2009RMB000
    
    
    RMB000
    
    
    RMB000Profit before tax
    
    
    1,668,551
    
    
    
    1,501,662
    
    
    
    1,712,379Tax calculated at the statutory rate of 20% (2008
and 2007: 18% and 15%)
    
    
    250,283
    
    
    
    270,299
    
    
    
    342,476Effect of change of income tax rate on
deferred taxation previously recognised (Note a)
    
    
    (30,413
    )
    
    
    
    
    
    
    Effect of tax rates differentials
    
    
    1,137
    
    
    
    (3,652
    )
    
    
    (996
    )Effect of share of results of associates
    
    
    (275
    )
    
    
    (23
    )
    
    
    (155
    )Effect of expenses not deductible for tax purposes
    
    
    5,462
    
    
    
    10,686
    
    
    
    7,411Effect of income not subject to tax
    
    
    
    
    
    
    (436
    )
    
    
    (590
    )Tax losses for which no deferred tax asset was
recognized
    
    
    380
    
    
    
    420
    
    
    
    775Reversal of deferred tax assets due to changes
in tax law
    
    
    5,775
    
    
    
    
    
    
    
    Income tax expense
    
    
    232,349
    
    
    
    277,294
    
    
    
    348,921
 Note a:
    
    As explained above, the corporate income tax rate for enterprises in the PRC was changed
with effect from January 1, 2008. As a result of such a change in enacted tax rate, additional
deferred tax assets at approximately RMB30,413,000 was recognized by the Group in the
comprehensive income statement within income tax expenses for the year ended December 31,
2007.In addition, additional deferred tax asset at approximately RMB92,021,000 arising from the
change in enacted tax rate was recognized in the share premium by the Group for the year
ended December 31, 2007 due to temporary differences arising from fixed assets contributed
by GEDC into the Group during the Restructuring of the Group (see Note 1).
 The effective tax rate was 20.4% (2008 and 2007: 18.5% and 13.9%). The increase was mainly caused
by the increase in statutory tax rate as explained above.
 32
    
    EARNINGS PER SHAREThe calculation of basic earnings per share is based on the net profit for the year attributable to
ordinary shareholders of approximately RMB1,364,521,000 (2008 and 2007: RMB1,224,129,000 and
RMB1,431,415,000), divided by the weighted average number of ordinary shares outstanding during the
year of 7,083,537,000 shares (2008 and 2007: 7,083,537,000 shares). There were no dilutive
potential ordinary shares during both years.
 F-53




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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 33
    
    DIVIDENDSThe dividends paid in 2009, 2008 and 2007 were RMB566,685,000 (RMB 0.08 per share), RMB566,683,000
(RMB 0.08 per share) and RMB566,711,000 respectively.
 2007
    
    
    2008
    
    
    2009RMB000
    
    
    RMB000
    
    
    RMB000Final, proposed, of RMB0.08 (2007 and
2008: RMB0.08) per ordinary share
    
    
    566,683
    
    
    
    566,683
    
    
    
    566,683
  34
    
    CASH FLOW GENERATED FROM OPERATIONS
 (a)
    
    Reconciliation from profit attributable to shareholders to cash generated from operations:
 2007
    
    
    2008
    
    
    2009RMB000
    
    
    RMB000
    
    
    RMB000Profit before income tax:
    
    
    1,668,551
    
    
    
    1,501,662
    
    
    
    1,712,379Adjustments for:Depreciation of fixed assets
    
    
    1,017,100
    
    
    
    1,172,042
    
    
    
    1,262,144Impairment of fixed assets and construction-in-progress
    
    
    6,359
    
    
    
    
    
    
    
    448Amortization of leasehold land payments (Note 8)
    
    
    16,021
    
    
    
    15,603
    
    
    
    15,989Loss on disposal of fixed assets (Note 29)
    
    
    3,335
    
    
    
    31,542
    
    
    
    41,635Amortization of deferred employee costs (Note 13)
    
    
    24,339
    
    
    
    32,005
    
    
    
    20,156Recognition of employee benefits obligations (Note 25)
    
    
    65,256
    
    
    
    85,988
    
    
    
    1,200Interest unwound for employee benefit obligations (Note
25)
    
    
    (1,988
    )
    
    
    3,417
    
    
    
    6,510Share of results of associates (Note 11)
    
    
    (1,830
    )
    
    
    (128
    )
    
    
    (773
    )Loss on disposal of subsidiaries (Note 29)
    
    
    1,063
    
    
    
    188
    
    
    
    Dividend income on available-for-sale investment (Note
29)
    
    
    
    
    
    
    (2,420
    )
    
    
    (3,000
    )(Reversal of provision)/provision for doubtful accounts
    
    
    (8,260
    )
    
    
    2,766
    
    
    
    414Write-back of long outstanding of payables (Note 29)
    
    
    
    
    
    
    (21,562
    )
    
    
    (1,932
    )Amortization of bonds payable (Note 24)
    
    
    
    
    
    
    
    
    
    
    325Interest expenses (Note 30)
    
    
    173,515
    
    
    
    207,767
    
    
    
    227,178Interest income (Note 29)
    
    
    (61,063
    )
    
    
    (31,910
    )
    
    
    (28,533
    )Operating profit before working capital changes
    
    
    2,902,398
    
    
    
    2,996,960
    
    
    
    3,254,140Increase/(decrease) in trade receivables
    
    
    115,407
    
    
    
    (143,200
    )
    
    
    (211,176
    )Increase in materials and supplies
    
    
    (31,637
    )
    
    
    (48,249
    )
    
    
    (29,187
    )Decrease/(increase) in prepayments and other receivables
    
    
    (46,175
    )
    
    
    51,335
    
    
    
    24,117Decrease in long-term receivable
    
    
    6,000
    
    
    
    8,000
    
    
    
    8,000(Decrease)/increase in trade payables
    
    
    (174,639
    )
    
    
    95,438
    
    
    
    150,499Decrease in employee benefits obligations
    
    
    (112,526
    )
    
    
    (126,179
    )
    
    
    (64,312
    )Decrease in accrued expenses and other payables
    
    
    (228,139
    )
    
    
    (660,420
    )
    
    
    (23,706
    )Cash generated from operations
    
    
    2,430,689
    
    
    
    2,173,685
    
    
    
    3,108,375
 F-54




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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 34
    
    CASH FLOW GENERATED FROM OPERATIONS (CONTINUED)(b)
    
    In the cash flow statement, proceeds from disposal of property, plant and equipment comprise:
 2007
    
    
    
    2008
    
    
    
    2009RMB000
    
    
    
    RMB000
    
    
    
    RMB000Net book amount (Note 6)
    
    
    113,236
    
    
    
    42,900
    
    
    
    69,984Receivable arising from disposal of
property, plant and equipment
    
    
    (26,200
    )
    
    
    
    
    
    
    Loss on disposal of fixed assets
    
    
    (3,335
    )
    
    
    (31,542
    )
    
    
    (41,635
    )Proceeds from disposal of fixed assets
    
    
    83,701
    
    
    
    11,358
    
    
    
    28,349
 (c)
    
    Analysis of the balance of cash and cash equivalents:
 2008
    
    
    2009RMB000
    
    
    RMB000Cash at bank and in hand
    
    
    618,877
    
    
    
    432,651Short-term deposits with original maturities no
more than three months (Note a)
    
    
    942,075
    
    
    
    683,0001,560,952
    
    
    
    1,115,651
 Note a:
    Short term time deposits with maturities of no more
than three months consist of deposits denominated in RMB. The
original effective interest rate of RMB deposits is 1.35% (2008:
1.35%).
 35
    
    CONTINGENCYThere were no significant contingent liabilities as at the date of approval of these financial
statements.36
    
    COMMITMENTS(a)
    
    Capital commitmentsAs of December 31, 2009 and 2008, the Group had the following capital commitments which are
authorized but not contracted for, and contracted but not provided for:
 2008
    
    
    2009RMB000
    
    
    RMB000Authorised but not contracted for
    
    
    2,530,325
    
    
    
    1,357,620Contracted but not provided for
    
    
    390,691
    
    
    
    248,630
 A substantial amount of these commitments as of December 31, 2009 is related to the reform of
stations or facilities relating to the existing railway line of the Group. The related financing
would be from self generated operating cash flow and bank facilities.
 F-55




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 36
    
    COMMITMENTS (CONTINUED)(b)
    
    Operating lease commitmentsIn connection with the acquisition of Yangcheng Railway Business, the Company signed an agreement
on November 15, 2004 with Guangzhou Railway Group for leasing the land use rights associated with
the land on which the acquired assets of Yangcheng Railway Business are located. The agreement
became effective upon the completion of the acquisition on January 1, 2007 and the remaining lease
term is 20 years, renewable at the discretion of the Company. According to the terms of the
agreement, the rental for such lease would be agreed by both parties every year with a maximum
amount not exceeding RMB74,000,000 per year. During the year ended December 31, 2009, the related
lease rental paid and payable was RMB51,200,000 (2008: 50,000,000).37
    
    RELATED PARTY TRANSACTIONSParties are considered to be related if one party has the ability, directly or indirectly, to
control the other party or exercise significant influence over the other party in making financial
and operating decisions.(a)
    
    Related parties that control the Company or are controlled by the Company:See Note 10 for the subsidiaries.None of the shareholders is the controlling entity of the Company.(b)
    
    Nature of the principal related parties that do not control/are not controlled by the
Company:
 Name of related parties
    
    Relationship with the CompanySubstantial shareholder and fellow subsidiariesGuangzhou Railway Group
    
    Substantial shareholderGuangzhou Railway Group YangCheng Railway Enterprise Development 
Company (Yangcheng Railway)
    
    Subsidiary of the substantial shareholderGuangmeishan Railway Company Limited (Guangmeishan)
    
    Subsidiary of the substantial shareholderGuangzhou Railway (Group) Guangshen Railway Enterprise 
Development Company (GEDC)
    
    Subsidiary of the substantial shareholderGuangzhou Railway Material Supply Company
    
    Subsidiary of the substantial shareholderGuangzhou Railway Engineer Construction Enterprise Development 
Company (Engineer Construction Enterprise)
    
    Subsidiary of the substantial shareholderYuehai Railway Company Limited
    
    Subsidiary of the substantial shareholderShichang Railway Company Limited
    
    Subsidiary of the substantial shareholderCYTS Guangdong Railway Shenzhen Co., Ltd. (CYTS)
    
    Subsidiary of the substantial shareholderChangsha Railway Construction Company Limited
    
    Subsidiary of the substantial shareholderGuangdong Pearl River Delta Inter-city Railway Traffic Co., Ltd.
    
    Subsidiary of the substantial shareholderGuangdong Sanmao Enterprise Development Company Limited
    
    Subsidiary of the substantial shareholderGuangzhou Qingda Transportation Company Limited
    
    Subsidiary of the substantial shareholderYangcheng Construction Company of YangCheng Railway
    
    Subsidiary of the substantial shareholderGuangzhou Yuetie Operational Development Company
    
    Subsidiary of the substantial shareholderGuangzhou Railway Real Estate Construction Company
    
    Subsidiary of the substantial shareholderGuangzhou Railway Group Diversified Management Development Center
    
    Subsidiary of the substantial shareholderGuangzhou Railway Rolling Stock Works
    
    Subsidiary of the substantial shareholderForeign Economic & Trade Development Corporation of Guangzhou
Railway group
    
    Subsidiary of the substantial shareholderAssociates of the GroupGuangzhou Tiecheng Enterprise Company Limited
    
    Associate of the GroupZengcheng Lihua Stock Company Limited
    
    Associate of the GroupShenzhen Guangshen Railway Civil Engineering Company
    
    Associate of the Group
 F-56




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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 37
    
    RELATED PARTY TRANSACTIONS (CONTINUED)(c)
    
    Save as disclosed in other notes to the Financial Statements, during the year, the Group had
the following material transactions undertaken with related parties:
 2007
    
    
    2008
    
    
    2009RMB000
    
    
    RMB000
    
    
    RMB000Provide ServicesRevenue collected by MOR for services provided to Guangzhou Railway
Group and its subsidiaries (i) (Note 38)
    
    
    (1,005,505
    )
    
    
    (1,038,611
    )
    
    
    (1,069,053
    )Provision of repairing services for cargo trucks of Guangzhou Railway
Group and its subsidiaries (ii)
    
    
    (175,284
    )
    
    
    (148,322
    )
    
    
    (220,000
    )Provision of train transportation services to Guangzhou Railway Group
and its subsidiaries (iii)
    
    
    (183,989
    )
    
    
    (265,998
    )
    
    
    (208,860
    )Receive ServicesCost settled by MOR for services provided by Guangzhou Railway Group
and its subsidiaries (i) (Note 38)
    
    
    1,105,890
    
    
    
    1,218,138
    
    
    
    1,530,479Provision of train transportation services provided by Guangzhou
Railway Group and its subsidiaries (iv)
    
    
    213,388
    
    
    
    235,303
    
    
    
    347,969Social services (employee housing and public security services and
other ancillary services) provided by GEDC and Yangcheng Railway (v)
    
    
    429,655
    
    
    
    440,602
    
    
    
    369,257Provision of construction services of Guangzhou Railway Group and its
subsidiaries (ii)
    
    
    61,950
    
    
    
    259,787
    
    
    
    241,753Provision of repair and maintenance services by Guangzhou Railway
Group and its subsidiaries (iii)
    
    
    104,111
    
    
    
    115,568
    
    
    
    115,455Provision of turnkey service by CYTS (vi)
    
    
    50,569
    
    
    
    15,280
    
    
    
    PurchasePurchase of materials and supplies from Guangzhou Railway Group and
its subsidiaries (vii)
    
    
    577,352
    
    
    
    398,230
    
    
    
    631,149OthersPayment for the acquisition of net assets of Yangcheng Railway Business
    
    
    4,873,332
    
    
    
    
    
    
    
    Operating lease rental paid to Guangzhou Railway Group for the leasing
of land use rights (Note 36(b))
    
    
    50,000
    
    
    
    50,000
    
    
    
    51,200
 
 (i)
    
    Such revenues/charges are determined by the MOR based on its standard charges applied on a
nationwide basis.(ii)
    
    The service charges are determined based on a pricing scheme set by the MOR or by reference
to current market prices with guidance provided by the MOR.(iii)
    
    The service charges are determined based on a pricing scheme set by the MOR or based on
negotiation between the contracting parties with reference to full cost principle.(iv)
    
    The service charges are determined based on negotiation between the contracting parties with
reference to full cost principle.(v)
    
    The service charges are levied based on contract prices determined based on cost plus a
profit margin and explicitly agreed between both contract parties.(vi)
    
    The prices are determined based on mutual negotiation between the contracting parties.(vii)
    
    The prices are determined based on mutual negotiation between the contracting
parties with reference to cost plus a management fee. (d)
    
    Key management compensationKey management includes directors (executive and non-executive), general manager and vice general
managers, assistant of general manager, chief financial officer and the company Secretary. During
the year ended December 31, 2009 and 2008, the compensation paid or payable to key management for
employee services is RMB3,562,597 and RMB3,340,844 respectively.
 F-57




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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 37
    
    RELATED PARTY TRANSACTIONS (CONTINUED)(e)
    
    As of December 31, 2009 and 2008, the Group had the following material balances maintained
with related parties:
 2008
    
    
    2009RMB000
    
    
    RMB000Due from Guangzhou Railway Group
    
    
    155,034
    
    
    
    113,195 Trade receivables (i)
    
    
    150,066
    
    
    
    108,341 Other receivables
    
    
    4,968
    
    
    
    4,854Due to Guangzhou Railway Group
    
    
    (35,209
    )
    
    
    (63,396
    ) Trade receivables (i)
    
    
    (25,787
    )
    
    
    (53,955
    ) Other payables (iii)
    
    
    (9,422
    )
    
    
    (9,441
    )Due from subsidiaries of Guangzhou Railway Group
    
    
    16,815
    
    
    
    28,733 Trade receivables
    
    
    15,354
    
    
    
    13,126Less: impairment provision
    
    
    (4
    )
    
    
    (113
    ) Other receivables
    
    
    1,465
    
    
    
    15,720Due to subsidiaries of Guangzhou Railway Group
    
    
    (302,206
    )
    
    
    (230,260
    ) Trade payables (ii)
    
    
    (198,843
    )
    
    
    (174,054
    ) Other payables (iii)
    
    
    (103,363
    )
    
    
    (56,206
    )Due from an associate
    
    
    2,019
    
    
    
    1,312 Trade receivables
    
    
    160
    
    
    
     Other receivables
    
    
    14,171
    
    
    
    13,624Less: impairment provision (v)
    
    
    (12,312
    )
    
    
    (12,312
    )Due to an associate
    
    
    (25,118
    )
    
    
    (9,534
    ) Trade payables
    
    
    
    
    
    
    (135
    ) Other payables (iv)
    
    
    (25,118
    )
    
    
    (9,399
    )Prepayment for fixed assets and
construction-in-progress
    
    
    31,012
    
    
    
     Guangzhou Railway Group
and its subsidiaries
    
    
    31,012
    
    
    
    Payables for fixed assets and
construction-in-progress
    
    
    (125,487
    )
    
    
    (101,316
    ) Guangzhou Railway Group and
its subsidiaries
    
    
    (95,498
    )
    
    
    (101,316
    ) Associates
    
    
    (29,989
    )
    
    
    
 
 (i)
    
    The trade balances due from/to Guangzhou Railway Group, subsidiaries of Guangzhou Railway
Group mainly represented service fees and charges payable and receivable balances arising
from the provision of passenger transportation and cargo forwarding businesses jointly with
these related parties within the PRC as described in 37(c)(i).(ii)
    
    The trade balances due to subsidiaries of Guangzhou Railway Group mainly represent payables
arising from unsettled fees for purchase of materials and provision of other services
according to various service agreements entered into between the Group and the related parties
(see Note 37(c) above). F-58




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 37
    
    RELATED PARTY TRANSACTIONS (CONTINUED)(e)
    
    As of December 31, 2009 and 2008, the Group had the following material balances maintained
with related parties (continued):
 (iii)
    
    The non-trade balances due to subsidiaries of Guangzhou Railway Group mainly represent the
deposits of related parties maintained in the deposit-taking centre of the Company.(iv)
    
    The non-trade balance due to an associate mainly represents the payable balance arising from
unsettled balance for the construction project services undertaken by an associate.(v)
    
    Full impairment loss provision set up against a receivable balance due from Zengcheng Lihua,
which was brought forward from prior years.
 As of December 31, 2009 and 2008, all the balances maintained with related parties are
unsecured, non-interest bearing and are repayable on demand.38
    
    TRANSACTIONS WITH MORMOR is the controlling entity of the Companys substantial shareholder (i.e. Guangzhou Railway
Group). In addition, it is the government authority which governs and monitors the railway
business centrally within the PRC. The Company works in cooperation with the MOR and other
railway companies owned and controlled by the MOR for the operation of certain long distance
passenger train and freight transportation businesses within the PRC. The revenues generated
from these long-distance passenger and freight transportation businesses are collected and
settled by the MOR according to its settlement systems. The charges for the use of the rail
lines and services provided by other railway companies are also instructed by the MOR and
settled by the MOR based on its systems.(a)
    
    Save as disclosed in other notes to the Financial Statements, during the year, the Group had
the following material transactions undertaken with MOR:
 2007
    
    
    2008
    
    
    2009RMB000
    
    
    RMB000
    
    
    RMB000Recurring Transactions:IncomeRevenue collected from the MOR, including
revenue collected by MOR for services provided
to Guangzhou Railway Group and its
subsidiaries (Note 37(c)) Passenger transportation
    
    
    (5,318,369
    )
    
    
    (6,196,596
    )
    
    
    (6,542,333
    ) Freight transportation
    
    
    (906,516
    )
    
    
    (841,240
    )
    
    
    (752,561
    ) Railway network usage and services
    
    
    (2,659,529
    )
    
    
    (2,738,425
    )
    
    
    (3,105,654
    )Charges and PaymentsServices charges allocated from the MOR,
including cost settled by MOR for services
provided by Guangzhou Railway Group and its
subsidiaries (Note 37(c))
    
    
    1,990,297
    
    
    
    2,179,407
    
    
    
    2,404,966Operating lease rentals paid/payable to the MOR
    
    
    156,628
    
    
    
    176,880
    
    
    
    162,651
 The service charges are determined based on a pricing scheme set by the MOR or by reference to
current market prices with guidance provided by the MOR.
 F-59




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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 38
    
    TRANSACTIONS WITH MOR (CONTINUED)(b)
    
    As of December 31, 2009 and 2008, the Group had the following material balances maintained
with MOR:
 2008
    
    
    2009RMB000
    
    
    RMB000Due from MOR Trade receivables
    
    
    53,048
    
    
    
    273,300
 39
    
    SUBSEQUENT EVENTSSave as already disclosed in the notes to the financial statements, the Group had no other
significant subsequent event.40
    
    COMPARATIVE FIGURESCertain 2008 comparative figures have been reclassified as follows:(a)
    
    Amount due from/to related parties which were separately disclosed in prior year have been
recorded within the Trade receivables, net, amounting to RMB165,576,000, Prepayments and
other receivables, net, amounting to RMB8,292,000, Trade payables, amounting to
RMB224,630,000 and Accruals and other payables , amounting to RMB137,903,000 respectively on
balance sheet in order to conform with current year presentation.(b)
    
    Amount of equity which were recorded within Other Reserve in prior year have been disclosed
separately as Share premium, Other reserves, and Retained earnings on the balance sheet
in order to conform with current year presentation.
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