##### Table of Contents

As filed with the Securities and Exchange Commission on April 26, 2017







UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549





FORM 20-F





(Mark One)

|☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------------------

or



|☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2016

or



|☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from
 to

or



|☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------------------------

Date of event requiring this shell company report

Commission file number: 1-14362







LOGO

(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) 2558-8150

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)

Securities registered or to be registered pursuant to Section 12(b) of the Act:



|                                                                                                                                  |  |                                                                      
|--------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------
|Title of Each Class                                                                                                               |  | Name of Each Exchange on which Listed                                
|American Depositary Shares, each representing 50 Class H ordinary shares Class H ordinary
shares, nominal value RMB1.00 per share |  | New York Stock Exchange, Inc.
The Stock Exchange of Hong Kong Limited

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None





Indicate the number of outstanding shares of each of the Registrants classes of capital or common stock as of December 31,
2016:



|                                                        |  |  |               | 
|------------------------------------------------------- |  |  | ------------- | 
|Domestic shares (A shares), par value RMB1.00 per share |  |  | 5,652,237,000 | 
|H shares, par value RMB1.00 per share                   |  |  | 1,431,300,000 | 

(including 110,211,850 H shares in the form of American Depositary Shares)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes  ☒    No  ☐

If this report is an annual
or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the Exchange
Act).    Yes  ☐    No  ☒

Indicate by check mark
whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes  ☐    No  ☐

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, and emerging growth
company in Rule 12b-2 of the Exchange Act.



|                        |  |   |  |                   |  |   |  |                         |  |  |  |                           
|----------------------- |  | - |  | ----------------- |  | - |  | ----------------------- |  |  |  | --------------------------
|Large Accelerated Filer |  | ☒ |  | Accelerated Filer |  | ☐ |  | Non-Accelerated File  ☐ |  |  |  | Emerging growth company  ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial
statements included in this filing:



|             |  |                                                                                                          |  |         
|------------ |  | -------------------------------------------------------------------------------------------------------- |  | --------
|U.S. GAAP  ☐ |  | International Financial Reporting Standards as issued by the International Accounting Standards Board  ☒ |  | Other  ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 The term new or revised financial accounting standard refers to any update issued by the Financial
Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

If Other has been
checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    Item 17  ☐    Item 18  ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).    Yes  ☐    No  ☒

(APPLICABLE ONLY TO ISSUERS
INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.    ☐   Yes     ☐   No









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##### Table of Contents

TABLE OF CONTENTS



|                              |  |                                                       |   |      |    | 
|----------------------------- |  | ----------------------------------------------------- | - | ---- | -- | 
|                              |  |                                                       |   | Page |   
|Forward-Looking Statements    |  |                                                       | 1 |     
|Certain Terms and Conventions |  |                                                       | 1 |     
|Part I                        |  |                                                       | 3 |     
|ITEM 1.                       |  | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS |   |      | 3  | 
|ITEM 2.                       |  | OFFER STATISTICS AND EXPECTED TIMETABLE               |   |      | 3  | 
|ITEM 3.                       |  | KEY INFORMATION                                       |   |      | 3  | 
|                              |  |                                                      
|A.                            |  | Selected Financial Data                               |   |      | 3  | 
|B.                            |  | Capitalization and Indebtedness                       |   |      | 6  | 
|C.                            |  | Reasons for the Offer and Use of Proceeds             |   |      | 6  | 
|D.                            |  | Risk Factors                                          |   |      | 6  | 
|                              |  |                                                      
|ITEM 4.                       |  | INFORMATION ON THE COMPANY                            |   |      | 15 | 
|                              |  |                                                      
|A.                            |  | History and Development of the Company                |   |      | 15 | 
|B.                            |  | Business Overview                                     |   |      | 19 | 
|C.                            |  | Organizational Structure                              |   |      | 31 | 
|D.                            |  | Property, Plant and Equipment                         |   |      | 32 | 
|                              |  |                                                      
|ITEM 4A.                      |  | UNRESOLVED STAFF COMMENTS                             |   |      | 33 | 
|                              |  |                                                      
|ITEM 5.                       |  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS          |   |      | 33 | 
|                              |  |                                                      
|A.                            |  | Operating Results                                     |   |      | 34 | 
|B.                            |  | Liquidity and Capital Resources                       |   |      | 48 | 
|C.                            |  | Research and Development, Patents and Licenses, etc.  |   |      | 50 | 
|D.                            |  | Trend Information                                     |   |      | 50 | 
|E.                            |  | Off-Balance Sheet Arrangements                        |   |      | 52 | 
|F.                            |  | Tabular Disclosure of Contractual Obligations         |   |      | 52 | 
|G.                            |  | Safe Harbor                                           |   |      | 52 | 
|                              |  |                                                      
|ITEM 6.                       |  | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES            |   |      | 52 | 
|                              |  |                                                      
|A.                            |  | Directors and Senior Management                       |   |      | 52 | 
|B.                            |  | Compensation                                          |   |      | 60 | 
|C.                            |  | Board Practices                                       |   |      | 61 | 
|D.                            |  | Employees                                             |   |      | 63 | 
|E.                            |  | Share Ownership                                       |   |      | 64 | 
|                              |  |                                                      
|ITEM 7.                       |  | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS     |   |      | 65 | 
|                              |  |                                                      
|A.                            |  | Major Shareholders                                    |   |      | 65 | 
|B.                            |  | Related Party Transactions                            |   |      | 66 | 
|C.                            |  | Interests of Experts and Counsel                      |   |      | 73 | 



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|          |  |                                                                              |  |  |     | 
|--------- |  | ---------------------------------------------------------------------------- |  |  | --- | 
|ITEM 8.   |  | FINANCIAL INFORMATION                                                        |  |  | 73  | 
|          |  |                                                                             
|A.        |  | Consolidated Statements and Other Financial Information                      |  |  | 73  | 
|A.7       |  | Legal Proceedings                                                            |  |  | 73  | 
|A.8       |  | Dividend Distributions                                                       |  |  | 74  | 
|B.        |  | Significant Changes                                                          |  |  | 74  | 
|          |  |                                                                             
|ITEM 9.   |  | THE OFFER AND LISTING                                                        |  |  | 74  | 
|          |  |                                                                             
|A.        |  | Offer and Listing Details                                                    |  |  | 74  | 
|B.        |  | Plan of Distribution                                                         |  |  | 75  | 
|C.        |  | Markets                                                                      |  |  | 75  | 
|D.        |  | Selling Shareholders                                                         |  |  | 75  | 
|E.        |  | Dilution                                                                     |  |  | 75  | 
|F.        |  | Expenses of the Issue                                                        |  |  | 76  | 
|          |  |                                                                             
|ITEM 10.  |  | ADDITIONAL INFORMATION                                                       |  |  | 76  | 
|          |  |                                                                             
|A.        |  | Share Capital                                                                |  |  | 76  | 
|B.        |  | Memorandum and Articles of Association                                       |  |  | 76  | 
|C.        |  | Material Contracts                                                           |  |  | 85  | 
|D.        |  | Exchange Controls                                                            |  |  | 85  | 
|E.        |  | Taxation                                                                     |  |  | 86  | 
|F.        |  | Dividends and Paying Agents                                                  |  |  | 93  | 
|G.        |  | Statement by Experts                                                         |  |  | 94  | 
|H.        |  | Documents on Display                                                         |  |  | 94  | 
|I.        |  | Subsidiary Information                                                       |  |  | 94  | 
|          |  |                                                                             
|ITEM 11.  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   |  |  | 94  | 
|ITEM 12.  |  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       |  |  | 96  | 
|          |  |                                                                             
|A.        |  | Debt Securities                                                              |  |  | 96  | 
|B.        |  | Warrants and Rights                                                          |  |  | 96  | 
|C.        |  | Other Securities                                                             |  |  | 96  | 
|D.        |  | American Depositary Shares                                                   |  |  | 96  | 
|          |  |                                                                             
|Part II   |  |                                                                              |  |  | 97  | 
|          |  |                                                                             
|ITEM 13.  |  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              |  |  | 97  | 
|ITEM 14.  |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |  |  | 98  | 
|ITEM 15.  |  | CONTROLS AND PROCEDURES                                                      |  |  | 98  | 
|ITEM 16.  |  |                                                                              |  |  | 99  | 
|          |  |                                                                             
|ITEM 16A. |  | AUDIT COMMITTEE FINANCIAL EXPERT                                             |  |  | 99  | 
|ITEM 16B. |  | CODE OF ETHICS                                                               |  |  | 99  | 
|ITEM 16C. |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                       |  |  | 99  | 
|ITEM 16D. |  | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                   |  |  | 99  | 
|ITEM 16E. |  | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS       |  |  | 100 | 
|ITEM 16F. |  | CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT                                 |  |  | 100 | 
|ITEM 16G. |  | CORPORATE GOVERNANCE                                                         |  |  | 101 | 
|ITEM 16H. |  | MINE SAFETY DISCLOSURE                                                       |  |  | 102 | 



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|         |  |                      |  |  |     | 
|-------- |  | -------------------- |  |  | --- | 
|Part III |  |                      |  |  | 102 | 
|         |  |                     
|ITEM 17. |  | FINANCIAL STATEMENTS |  |  | 102 | 
|ITEM 18. |  | FINANCIAL STATEMENTS |  |  | 102 | 
|ITEM 19. |  | EXHIBITS             |  |  | 102 | 



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Forward-Looking Statements

Certain information contained in this annual report are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). These forward-looking statements can be identified by the use of words or phrases such as is expected
to, will, is anticipated, plan to, estimate, believe, may, intend, should or similar expressions, or the negative forms of these words, phrases or
expressions, or by discussions of strategy. Such statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from our historical results and those presently anticipated or projected. You
are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date on which such statements were made. Among the factors that could cause our actual results in the future to differ materially from any
opinions or statements expressed with respect to future periods include changes in the economic policy of the PRC government, changes in the Pearl River Delta economy and elsewhere in mainland China, increased competition from other means of
transportation, delays in major development projects, occurrence of health epidemics or outbreaks in Hong Kong or China, foreign currency fluctuations and other factors beyond our control.

When considering such forward-looking statements, you should keep in mind the factors described in ITEM 3. KEY
INFORMATIOND. Risk Factors and other cautionary statements appearing in ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS of this annual report. Such risk factors and statements describe circumstances which could
cause actual results to differ materially from those contained in any forward-looking statement.

Certain Terms and Conventions

Solely for the convenience of the reader, this annual report contains translations of amounts from RMB into U.S. dollars and vice versa at the rate of RMB6.9430 to US$1.00, the certified exchange rate for
December 30, 2016 as published by the Federal Reserve Board of the United States, except where we specify that a different rate has been used. You should not construe these translations as representations that the RMB amounts actually represent
U.S. dollar amounts or could be converted into U.S. dollars at that rate or at all. See ITEM 3. KEY INFORMATIONA. Selected Financial DataExchange Rate Information for information regarding the certified exchange rates
for U.S. dollar/RMB conversions from January 1, 2012 through April 20, 2017.

We prepare and publish our
consolidated financial statements in RMB.

Various amounts and percentages set out in this document have been rounded and,
accordingly, may account for apparent discrepancies in the tables appearing herein. Unless the context otherwise requires or otherwise specified:



| |  | Acquisition means our acquisition of the railway transportation business between Guangzhou and Pingshi and the related assets and
liabilities from 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.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  | CRH means China Railway High-Speed.
|- |  | -------------------------------------



| |  | CSRC means China Securities Regulatory Commission.
|- |  | ----------------------------------------------------



1



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| |  | China Railway Corporation or CRC means the entity set up on March 14, 2013 by the First Session of the 12th National
Peoples Congress of the PRC to perform the commercial functions formerly performed by the Ministry of Railways.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Company, we, our, our Company, the Group, 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.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | CRC Group means CRC together with the subsidiaries transferred from MOR.
|- |  | --------------------------------------------------------------------------



| |  | EMU means electric multiple unit, a multiple unit train consisting of self-propelled carriages.
|- |  | -------------------------------------------------------------------------------------------------



| |  | GRCL means Guangmeishan Railway Company Limited.
|- |  | --------------------------------------------------



| |  | GRGC means Guangzhou Railway (Group) Company, our largest shareholder.
|- |  | ------------------------------------------------------------------------



| |  | GSRC means Guangdong Sanmao Railway Company Limited.
|- |  | ------------------------------------------------------



| |  | 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.
|- |  | ---------------------------------------------------------------------------------------



| |  | KCR means KowloonCanton Railway.
|- |  | -----------------------------------



| |  | Macau means the Macau Special Administrative Region of the PRC.
|- |  | -----------------------------------------------------------------



| |  | MOF means the Ministry of Finance of the PRC.
|- |  | -----------------------------------------------



| |  | MOR means the Ministry of Railways, which was dissolved by the First Session of the 12th National Peoples Congress of the PRC.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  | MOT means Ministry of Transport.
|- |  | ----------------------------------



| |  | MTR means MTR Corporation Limited.
|- |  | ------------------------------------



| |  | NDRC means the National Development and Reform Commission of the PRC.
|- |  | -----------------------------------------------------------------------



| |  | PBOC means the Peoples Bank of China.
|- |  | ----------------------------------------



| |  | 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.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Reform means the transfer of (i) administrative functions pertaining to railway development planning and policies from the MOR to the
MOT, (ii) other administrative functions previously performed by the MOR to the National Railway Administration, supervised by the MOT, and (iii) commercial functions previously performed by the MOR to the CRC, in accordance with the
approved plan on State Council Institutional Reform and Transformation of Government Functions and Approval On Setting Up China Railway Company by the State Council.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | RMB means Renminbi Yuan, the lawful currency of the PRC.
|- |  | ----------------------------------------------------------



2



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| |  | 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.
|- |  | --------------------------------------------------------



| |  | ton means metric ton; and one ton is approximately 2,205 pounds in weight.
|- |  | ----------------------------------------------------------------------------



| |  | US$, USD or U.S. dollars means U.S. dollars, the lawful currency of the 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.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

PART I



|ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
|------- | -----------------------------------------------------

Not applicable.



|ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE
|------- | ---------------------------------------

Not applicable.

ITEM 3. KEY INFORMATION



|A. | Selected Financial Data
|-- | -----------------------

The following selected consolidated data relating to our Consolidated Balance Sheets as of December 31, 2015 and 2016, and our
Consolidated Comprehensive Income Statements, Consolidated Statements of Changes in Equity and Consolidated Cash Flow Statements for each of the years ended December 31, 2014, 2015 and 2016 are derived from and are qualified by reference
to our audited consolidated financial statements included elsewhere in this annual report and should be read in conjunction with ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS. The Selected Consolidated Balance Sheets Data as
of December 31, 2012, 2013 and 2014 and our Consolidated Income Statements, Consolidated Statements of Changes in Equity and Consolidated Cash Flow Statements for each of the years ended December 31, 2012 and 2013 are derived from our
audited consolidated financial statements that are not included in this annual report.

The consolidated financial statements
from which the selected consolidated financial data set forth below have been derived were prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB.



3



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|                                                                                                                              |  |                                              |             |   |      |  |             |      |  |  |             |   |  |      |             |   |         |  |             |   |  |  |            |  
|----------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------- | ----------- | - | ---- |  | ----------- | ---- |  |  | ----------- | - |  | ---- | ----------- | - | ------- |  | ----------- | - |  |  | ---------- | -
|                                                                                                                              |  | Year ended December 31,                      |            
|                                                                                                                              |  | 2012                                         |             |   | 2013 |  |             | 2014 |  |  | 2015        |   |  | 2016 |            
|                                                                                                                              |  | RMB                                          |             |   | RMB  |  |             | RMB  |  |  | RMB         |   |  | RMB  |             |   | US$ (1) | 
|                                                                                                                              |  | (in thousands except for per share/ADS data) |            
|Income Statement Data:                                                                                                        |  |                                              |             |   |      |  |             |      |  |  |             |   |  |      |             |   |         |  |             |   |  |  |            |  
|Revenue from Railroad and Related Business                                                                                    |  |                                              |             |   |      |  |             |      |  |  |             |   |  |      |             |   |         |  |             |   |  |  |            |  
|- Passenger transportation                                                                                                    |  |                                              | 7,841,091   |   |      |  | 8,058,291   |      |  |  | 6,988,288   |   |  |      | 6,997,562   |   |         |  | 7,358,851   |   |  |  | 1,059,895  |  
|- Freight transportation                                                                                                      |  |                                              | 1,344,113   |   |      |  | 1,603,288   |      |  |  | 1,763,679   |   |  |      | 1,761,449   |   |         |  | 1,718,260   |   |  |  | 247,481    |  
|- Railway network usage and other transportation related services                                                             |  |                                              | 4,890,640   |   |      |  | 5,034,676   |      |  |  | 5,031,241   |   |  |      | 5,874,727   |   |         |  | 7,093,198   |   |  |  | 1,021,633  |  
|                                                                                                                              |  |                                              |             |   |      |  |             |      |  |  |             |   |  |      |             |   |         |  |             |   |  |  |            |  
|Subtotal                                                                                                                      |  |                                              | 14,075,844  |   |      |  | 14,696,255  |      |  |  | 13,783,208  |   |  |      | 14,633,738  |   |         |  | 16,170,309  |   |  |  | 2,329,009  |  
|Revenue from other businesses                                                                                                 |  |                                              | 1,016,042   |   |      |  | 1,104,422   |      |  |  | 1,017,573   |   |  |      | 1,091,571   |   |         |  | 1,110,195   |   |  |  | 159,901    |  
|                                                                                                                              |  |                                              |             |   |      |  |             |      |  |  |             |   |  |      |             |   |         |  |             |   |  |  |            |  
|Total revenue                                                                                                                 |  |                                              | 15,091,886  |   |      |  | 15,800,677  |      |  |  | 14,800,781  |   |  |      | 15,725,309  |   |         |  | 17,280,504  |   |  |  | 2,488,910  |  
|Railroad and Related business operating expenses                                                                              |  |                                              | (12,263,021 | ) |      |  | (12,878,816 | )    |  |  | (12,729,828 | ) |  |      | (13,150,405 | ) |         |  | (14,561,793 | ) |  |  | (2,097,334 | )
|Other businesses operating expenses                                                                                           |  |                                              | (966,377    | ) |      |  | (1,048,553  | )    |  |  | (1,022,133  | ) |  |      | (1,006,330  | ) |         |  | (1,076,206  | ) |  |  | (155,006   | )
|Other (expense)/income and other (losses)/gains-net                                                                           |  |                                              | 71,815      |   |      |  | 14,903      |      |  |  | 7,138       |   |  |      | (114,627    | ) |         |  | (108,270    | ) |  |  | (15,594    | )
|Operating profit                                                                                                              |  |                                              | 1,934,303   |   |      |  | 1,888,211   |      |  |  | 1,055,958   |   |  |      | 1,453,947   |   |         |  | 1,534,235   |   |  |  | 220,976    |  
|Profit attributable to equity holders of the Company                                                                          |  |                                              | 1,318,938   |   |      |  | 1,273,841   |      |  |  | 662,021     |   |  |      | 1,070,822   |   |         |  | 1,158,253   |   |  |  | 166,823    |  
|Operating profit per share                                                                                                    |  |                                              | 0.27        |   |      |  | 0.27        |      |  |  | 0.15        |   |  |      | 0.21        |   |         |  | 0.22        |   |  |  | 0.03       |  
|Earnings per share for profit attributable to equity holders of the Company                                                   |  |                                              |             |   |      |  |             |      |  |  |             |   |  |      |             |   |         |  |             |   |  |  |            |  
|- Basic and diluted                                                                                                           |  |                                              | 0.19        |   |      |  | 0.18        |      |  |  | 0.09        |   |  |      | 0.15        |   |         |  | 0.16        |   |  |  | 0.02       |  
|Dividends declared per share                                                                                                  |  |                                              | 0.08        |   |      |  | 0.08        |      |  |  | 0.05        |   |  |      | 0.08        |   |         |  | 0.08        |   |  |  | 0.01       |  
|Earnings per ADS for profit attributable to equity holders of the Company                                                     |  |                                              | 9.31        |   |      |  | 8.99        |      |  |  | 4.67        |   |  |      | 7.56        |   |         |  | 8.18        |   |  |  | 1.18       |  
|Balance Sheet Data (at year end):                                                                                             |  |                                              |             |   |      |  |             |      |  |  |             |   |  |      |             |   |         |  |             |   |  |  |            |  
|Working capital                                                                                                               |  |                                              | 3,254,818   |   |      |  | 648,201     |      |  |  | 1,011,115   |   |  |      | 1,338,889   |   |         |  | 830,610     |   |  |  | 119,633    |  
|Fixed assets-net                                                                                                              |  |                                              | 24,524,248  |   |      |  | 24,302,653  |      |  |  | 24,179,210  |   |  |      | 24,073,759  |   |         |  | 24,278,032  |   |  |  | 3,496,764  |  
|Leasehold land payments                                                                                                       |  |                                              | 528,296     |   |      |  | 657,593     |      |  |  | 668,005     |   |  |      | 948,526     |   |         |  | 1,624,859   |   |  |  | 234,028    |  
|                                                                                                                              |  |                                              |             |   |      |  |             |      |  |  |             |   |  |      |             |   |         |  |             |   |  |  |            |  
|Total assets                                                                                                                  |  |                                              | 32,867,182  |   |      |  | 33,231,989  |      |  |  | 30,536,663  |   |  |      | 31,943,272  |   |         |  | 32,870,258  |   |  |  | 4,734, 302 |  
|Equity attributable to equity holders of the Company                                                                          |  |                                              | 25,945,190  |   |      |  | 26,650,544  |      |  |  | 26,745,843  |   |  |      | 27,462,488  |   |         |  | 28,054,058  |   |  |  | 4,040,625  |  
|Share capital, issued and outstanding (domestic shares 5,652,237; H shares 1,431,300), RMB1.00 par value domestic
shares      |  |                                              | 5,652,237   |   |      |  | 5,652,237   |      |  |  | 5,652,237   |   |  |      | 5,652,237   |   |         |  | 5,652,237   |   |  |  | 814,091    |  
|H shares                                                                                                                      |  |                                              | 1,431,300   |   |      |  | 1,431,300   |      |  |  | 1,431,300   |   |  |      | 1,431,300   |   |         |  | 1,431,300   |   |  |  | 206,150    |  
|Cash Flow Statement Data:                                                                                                     |  |                                              |             |   |      |  |             |      |  |  |             |   |  |      |             |   |         |  |             |   |  |  |            |  
|Net cash generated from operating activities                                                                                  |  |                                              | 2,177,673   |   |      |  | 1,883,411   |      |  |  | 1,945,576   |   |  |      | 2,259,691   |   |         |  | 1,641,238   |   |  |  | 236,387    |  
|Net cash used in investing activities                                                                                         |  |                                              | (2,160,895  | ) |      |  | (1,572,961  | )    |  |  | 3,373,821   |   |  |      | (1,349,235  | ) |         |  | (1,935,702  | ) |  |  | (278,799   | )
|Net cash (used in) /generated from financing activities                                                                       |  |                                              | (708,522    | ) |      |  | (572,785    | )    |  |  | (4,067,018  | ) |  |      | (354,710    | ) |         |  | (566,683    | ) |  |  | (81,619    | )
|Payment for acquisition of fixed assets and construction-in-progress and prepayment for fixed assets; net of related
payables |  |                                              | (1,836,154  | ) |      |  | (1,376,601  | )    |  |  | (999,633    | ) |  |      | (1,292,273  | ) |         |  | (1,973,897  | ) |  |  | (284,300   | )
|Dividends paid to the Companys shareholders                                                                                  |  |                                              | (708,354    | ) |      |  | (566,680    | )    |  |  | (566,685    | ) |  |      | (354,177    | ) |         |  | (566,683    | ) |  |  | (81,619    | )



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##### Table of Contents

|                                         |  |                                              |           |  |      |  |           |      |  |  |           |   |  |      |           |  |         |  |           |  |  |  |         | 
|---------------------------------------- |  | -------------------------------------------- | --------- |  | ---- |  | --------- | ---- |  |  | --------- | - |  | ---- | --------- |  | ------- |  | --------- |  |  |  | ------- | 
|                                         |  | Year ended December 31,                      |          
|                                         |  | 2012                                         |           |  | 2013 |  |           | 2014 |  |  | 2015      |   |  | 2016 |          
|                                         |  | RMB                                          |           |  | RMB  |  |           | RMB  |  |  | RMB       |   |  | RMB  |           |  | US$ (1) | 
|                                         |  | (in thousands except for per share/ADS data) |          
|Other Data:                              |  |                                              |           |  |      |  |           |      |  |  |           |   |  |      |           |  |         |  |           |  |  |  |         | 
|Railroad transportation operating income |  |                                              | 1,812,823 |  |      |  | 1,817,439 |      |  |  | 1,053,380 |   |  |      | 1,483,333 |  |         |  | 1,608,516 |  |  |  | 231,675 | 
|Other businesses operating income        |  |                                              | 49,665    |  |      |  | 55,869    |      |  |  | (4,560    | ) |  |      | 85,241    |  |         |  | 33,985    |  |  |  | 4,895   | 



|(1) | Translation of amounts from RMB into US$, for the convenience of the reader has been made at RMB6.9430 to US$1.00, the certified exchange rate for December 30,
2016 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 30, 2016 or on any other date.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Exchange Rate Information

We derive a majority of our revenue and incur most of our expenses in RMB. In addition, we maintain our books and records in RMB and our financial statements are prepared and expressed in
RMB. Solely for the convenience of the reader, this annual report contains translations of certain RMB amounts into U.S. dollars and vice versa at US$1.00 = RMB6.9430, the certified exchange rate for December 30, 2016 as published by the
Federal Reserve Board of United States. These translations should not be construed as representations that the RMB amounts could have been or could be converted into U.S. dollars at such rate or at all.

Effective January 1, 2009, the Federal Reserve Bank of New York discontinued publication of foreign exchange rates certified for
customs purposes. Effective January 5, 2009, the Federal Reserve Board of the United States reinstituted the publication of the daily exchange rate data in a weekly version of the H.10 release. The certified exchange rate for RMB published by
the Federal Reserve Board of the United States was US$1.00 = RMB 6.8800 on April 20, 2017.

The following table sets
forth information for the RMB noon buying rate in New York City for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York for the periods indicated:



|                                    |  |                                           |        |  |            |  |        |     |  |  |        |  |  |  |        | 
|----------------------------------- |  | ----------------------------------------- | ------ |  | ---------- |  | ------ | --- |  |  | ------ |  |  |  | ------ | 
|                                    |  | Renminbi per U.S. Dollar Noon Buying Rate |       
|                                    |  | Period End                                |        |  | Average(1) |  |        | Low |  |  | High   | 
|2012                                |  |                                           | 6.2301 |  |            |  | 6.3043 |     |  |  | 6.2221 |  |  |  | 6.3879 | 
|2013                                |  |                                           | 6.0537 |  |            |  | 6.1412 |     |  |  | 6.0537 |  |  |  | 6.2438 | 
|2014                                |  |                                           | 6.2046 |  |            |  | 6.1704 |     |  |  | 6.0402 |  |  |  | 6.2591 | 
|2015                                |  |                                           | 6.4778 |  |            |  | 6.2869 |     |  |  | 6.1870 |  |  |  | 6.4896 | 
|2016                                |  |                                           | 6.9430 |  |            |  | 6.6400 |     |  |  | 6.4480 |  |  |  | 6.9580 | 
|October 2016                        |  |                                           | 6.7735 |  |            |  | 6.7303 |     |  |  | 6.6685 |  |  |  | 6.7819 | 
|November 2016                       |  |                                           | 6.8837 |  |            |  | 6.8402 |     |  |  | 6.7630 |  |  |  | 6.9195 | 
|December 2016                       |  |                                           | 6.9430 |  |            |  | 6.9198 |     |  |  | 6.8830 |  |  |  | 6.9580 | 
|2017                                |  |                                           |        |  |            |  |        |     |  |  |        |  |  |  |        | 
|January 2017                        |  |                                           | 6.8768 |  |            |  | 6.8907 |     |  |  | 6.8360 |  |  |  | 6.9575 | 
|February 2017                       |  |                                           | 6.8665 |  |            |  | 6.8694 |     |  |  | 6.8517 |  |  |  | 6.8821 | 
|March 2017                          |  |                                           | 6.8832 |  |            |  | 6.8940 |     |  |  | 6.8687 |  |  |  | 6.9132 | 
|April 2017 (through April 20, 2017) |  |                                           | 6.8800 |  |            |  | 6.8871 |     |  |  | 6.8778 |  |  |  | 6.8988 | 



|(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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Dividends

At a meeting of the directors held on March 29, 2017, the directors proposed a final dividend of RMB0.08 per ordinary share for the year ended December 31, 2016, which is to be voted up on
at our annual general meeting of shareholders scheduled on June 15, 2017.

This proposed dividend has not been reflected
as a dividend payable in the financial statements as of December 31, 2016, but instead as equity attributable to equity holders of our Company.

In accordance with our Articles of Association, dividends for our domestic shares will be paid in RMB while dividends for our H shares will be calculated in RMB and paid in Hong Kong dollars.
Hong Kong dollar dividend payments will then be converted by the depositary and distributed to holders of ADSs in U.S. dollars. The exchange rate was based on the average of the closing exchange rates for RMB to Hong Kong dollars as announced by the
Peoples Bank of China, or the PBOC, during the calendar week preceding the date on which the dividend was declared.



|B. | Capitalization and Indebtedness
|-- | -------------------------------

Not applicable.



|C. | Reasons for the Offer and Use of Proceeds
|-- | -----------------------------------------

Not applicable.



|D. | 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.

The global financial markets experienced periods of extreme volatility and disruption in 2008 and early 2009. The global financial crisis, concerns over inflation or deflation, energy costs,
geopolitical risks, and the availability and cost of financing contributed to the unprecedented levels of market volatility and adversely affected the expectations for the continuous growth of the global economy, the capital markets and the consumer
industry. These factors, combined with others, resulted in a severe global economic downturn and also a slowdown in the PRC economy. This change in the macro-economic conditions had an adverse impact on our business and operations by
causing a decrease in the number of passengers and the volume of freight that we transported. Current events, including the recent potential changes in international policies of the United States and United Kingdoms vote to exit the European
Union, create a level of uncertainty for multi-national companies. In particular, we experienced successive decreased freight volume in 2014, 2015 and 2016, partially due to diminished export of PRC commodities affected by the slowdown of the
global economic growth and international trade and decelerating economic growth in China, overall downward demand on the transportation market and diversion of customers away to high-speed railways for the passenger transportation business. Any
recurrence of a global financial crisis as a result of the recent market volatility arising from the concerns over among other issues, the fiscal stability of certain European countries, may adversely affect the growth of the PRC economy, which
could adversely affect our business, financial condition, results of operations and prospects.



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##### Table of Contents

We face competition, which may adversely affect our business growth and results of
operations.

Our passenger and freight transportation businesses face competition from other means of transportation,
such as road, air and water transportation. In our passenger transportation business, we compete with the bus and ferry services operating within Hong Kong, Guangzhou, Shenzhen and elsewhere in our service region. We compete for passengers with
bus and ferry services in terms of price, speed, comfort, reliability, convenience, service quality, frequency of service and safety. In our freight transportation business, we primarily compete with water, truck and air transportation services
operating within our service region. We increasingly compete for freight business with truck operators, shipping companies and airline companies on the basis of price, reliability, capacity, convenience, service quality, and safety. In
addition, the inter-city traffic system is gradually expanding within the Pearl River Delta region and there are a number of new high-speed inter-city passenger rail lines in operation or under construction within our service territory. As a
result, the competition in both passenger and freight transportation in our service territory could increase significantly.

We expect competition to increase in the future as the marketization reform of the railway industry (including the reformation of the
investment and financing system, the transportation management system and the pricing system) gradually deepens. In 2008, the National Development and Reform Commission of the PRC (the NDRC) approved the construction of a four
horizontal and four vertical high-speed railway network to connect major populous and industry-intensive cities in China. With the establishment of the four horizontal and four vertical high-speed railway network and the Pearl
River Delta Intercity railway network, the number of high-speed trains and intercity trains connecting the Pearl River Delta and other major mainland cities is increasing. The Guangzhou- Shenzhen section of the Guangzhou-Shenzhen-Hong Kong passenger
line commenced operation in December 2011, the Beijing-Guangzhou passenger line commenced operation in December 2012, the Xiamen-Shenzhen passenger line commenced operation in December 2013, the Nanning-Guangzhou and Guiyang-Guangzhou passenger
lines commenced operation in December 2014, the Guangzhou-Foshan-Zhaoqing Intercity passenger line and the new section from Changping East Station to Xiaojinkou Station of the Dongguan-Huizhou Intercity passenger line commenced operation in March
2016. As a result, the number of passengers using our Guangzhou-Shenzhen intercity train and long-distance train services has decreased. Although we commenced the operation of the Shenzhen East Station in December 2012, the Pinghu Station in
September 2016 and more long-distance trains to increase our passenger transportation capacity, we may continue to experience a decrease in the number of passengers using our Guangzhou-Shenzhen intercity train and long-distance train services in the
future, which could materially and adversely affect our revenue from railway passenger transportation services. Furthermore, improvements in the high-speed railway network in China may further increase the competition we face and materially and
adversely affect our revenue and results of operations. We believe that the entry barrier to the industry will decrease, investors in the industry will become more diversified and the States high-speed railway network with Four East-West Lines
and Four South-North Lines and numerous inter-city railways will complete construction and commence operation, leading to increased competition within the industry itself.

See ITEM 4. INFORMATION ON THE COMPANYB. Business OverviewCompetition for additional information regarding
our competition.



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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.

The volume of freight and the number of passengers we transport are affected by the overall levels of business, industrial, manufacturing and tourism activities within the Pearl River Delta region,
especially Guangdong and Hong Kong, which is our main service region, and elsewhere in China, which is in turn affected by many factors beyond our control, such as applicable policies and regulations of the PRC government, perceptions regarding the
attractiveness of investing or operating a business within our service region, consumer confidence levels and interest rate levels. Any significant decrease in the overall levels of passenger travel or freight transportation, whether due to an
economic slowdown or other reasons, such as freezing weather, floods, earthquake and other natural disasters or a recurrence of the SARS epidemic or outbreaks of avian flu, H1N1 or H7N9 influenza, dengue fever, Ebola virus or other similar health
epidemics, may have a material adverse effect on our business, results of operations and financial condition. For example, we experienced decreased freight revenue in 2016, partially due to the slowdown of Chinas GDP growth, the adjustment of
the economic structure in the Pearl River Delta Region, and the heightened competition in the freight transportation market, which resulted in decreased freight volume transported by rail and the decrease in the outbound freight transportation
revenues. Furthermore, following Chinas accession to the World Trade Organization, the policy advantages that Shenzhen currently enjoys due to its status as a special economic zone may be phased out, and its economic growth rate may not be
sustained in the long run. Other coastal regions, ports and free trade zones in China may develop at a faster pace and become more competitive than Shenzhen. As a result, part of the freight currently imported or exported through ports in Hong Kong,
Shenzhen or Guangzhou may be shipped through other ports in China, which may adversely affect our freight transportation business.

Extensive government regulation of the railway transportation industry may limit our flexibility in responding to market conditions, competition or changes in our cost structure.

We are subject to extensive PRC laws and regulations relating to the railway transportation industry. Chinese governmental
authorities currently regulate pricing, speed, train routes, new railway construction projects, and investment in the railway transportation industry.

In March 2013, the First Session of the 12th National Peoples Congress of the PRC considered and approved the plan on State Council institutional reform and transformation of government
functions, pursuant to which the Ministry of Railways (MOR) was dissolved. In accordance with the plan, administrative functions pertaining to railway development planning and policies were transferred to the Ministry of Transport
(MOT), other administrative functions previously performed by the MOR were transferred to the National Railway Administration, supervised by the MOT, and commercial functions previously performed by the MOR were transferred to the China
Railway Corporation (CRC) established in March 2013 (the Reform). In January 2014, the National Railway Bureau was established. It oversees seven regional railway supervision and administration bureaus, including the
Guangzhou Railway Supervision and Administration Bureau, which supervises Guangzhou Railway (Group) Company (GRGC) and Nanning Railway Bureau. The Reform was completed on January 1, 2017 and as a result thereof, the actual
controlling entity of our Companys largest shareholder became the CRC. Regardless of the completion of such transfer, there may be uncertainty in the division of functions with the MOR or the entities previously controlled or owned by it in
the future, and in our future relationships with the MOT, the National Railway Administration and the China Railway Corporation. Our commercial transactions may be renegotiated and the regulatory landscape may change.

Any significant change in the relevant regulations of the PRC government as a result of these reforms or for any other reason is likely
to have a material impact on our business and results of operations. In addition, our ability to respond to changes in our market conditions may be limited by those regulations set by the MOT, National Railway Administration and other Chinese
governmental authorities.



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##### Table of Contents

Significant changes with respect to the PRC railway industry could adversely affect
our business and results of operations

From 2005 to 2010, the PRC railway industry experienced
rapid growth in terms of total investment in infrastructure construction from RMB88 billion to RMB707 billion, representing a compounded annual growth rate of 52%, according to statistics published by the MOR. However, after the occurrence of the
Wenzhou Railway Accident (defined below) on July 23, 2011, the MOR reduced the investment in the construction of fixed assets for the railway industry in China from RMB744.1 billion in 2010 to RMB591.5 billion in 2011, representing an annual
decrease rate of 20.5%. Although the investment in the construction of railway-related fixed assets during the
12thFive-Year Plan (from 2011 to 2015) achieved a record
of RMB3.58 trillion and the newly proposed investment amount in the construction of railway-related fixed assets during the 13thFive-Year Plan (from 2016 to 2020) is approximately RMB3.5 trillion, we cannot assure you that there will not be any
significant changes with regard to the actual amount the MOR will invest in the railway industry in the future. As the railway industry is heavily reliant on capital expenditures on infrastructure construction, the reduced investment in
infrastructure construction may have material adverse impact on our future development and results of operations. In addition, to ensure the safe operation of high-speed railway transportation, the MOR also set speed limits on certain high-speed
railways. Corresponding with the reduced speed limits, the ticket fare of the affected high-speed railways may be reduced. Although the speed limits do not affect the railways we operate, we cannot assure you that the future policies of
the PRC government authorities in relation to railway speed limits will not affect us.

Changes in freight composition
in our freight transportation business may adversely affect our results of operations.

Historically, our freight
transportation revenue was derived mainly from the transportation of construction materials, coal, iron ore, oil, steel and chemicals, in which our railroad transportation services have an advantage over other means of transportation, such as road
transportation services. With the restructuring of these industries, the movement of labor, the upgrading of the industrial structure and a shift in the Pearl River Delta economy towards technology businesses, we may experience reduced demand
for our freight transportation services. For example, some products and materials, such as advanced technological products, which tend to be compact, may be instead shipped by road or air. We face significant competition in the
transportation of such low-volume, high-value products. For example, the aggregate weight of goods we transported decreased each year from 2012 to 2015. Changes in freight composition may affect the usage volume and pricing of our freight
transportation services and adversely affect our results of operations.

Significant increases in electricity prices
could harm our business.

Significant increases in the cost of electricity could increase the costs of our passenger
and freight transportation. The electricity we use, including electricity used for our lines, is supplied through various entities under the jurisdiction of the Guangdong provincial power bureau on normal commercial terms. Any increase in
the cost of electricity in Guangdong could increase our railway operating expenses. In 2014, 2015 and 2016, we paid approximately RMB585.8 million, RMB599.3 million and RMB599.2 million, respectively, in electricity charges. Accordingly, significant
increases in electricity prices could have a material adverse effect on our financial condition and 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.

Our railroads
are an integral part of the PRC national railway network. Our railroads connect with the Beijing-Guangzhou line in the north, the Shenzhen-Kowloon rail line in the south, the Guangzhou-Maoming rail line in the west, and the
Guangzhou-Meizhou-Shantou rail line in the east, all of which are owned and operated by other operators. See ITEM 4. INFORMATION ON THE COMPANYA. History and Development of the CompanyService Territory for additional
information. Our train services use these other railroads to carry passengers and freight to locations outside of our service territory. The performance of our domestic long distance trains services and our Hong Kong Through Trains depends on the
smooth operation of these railroads and our cooperation with the operators of these railroads. Any disruption in the operation of these railroads, or our cooperation with any one of these railroad operators for any reason, could have a material
adverse effect on our business and results of operations.



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##### Table of Contents

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.

We have been granted certain rights by the MOR and the State Council, with respect to certain aspects of our railroad and related
businesses and operations, and also received legal clarification and confirmation of our asset ownership, corporate powers and relationships with service providers and other entities in the national railway system, in connection with our
Restructuring. These rights include the right to own and operate our business and assets, the right to profit and the right of asset disposal. Although these rights were granted to us indefinitely, we cannot assure you that these rights
will not be affected by future changes in PRC governmental policies or regulations or that other railway operators will not be granted similar rights within our service region. For example, since the MOT and National Railway Administration will
be assuming the administrative duties formerly performed by the MOR, there may be changes in the regulatory landscape for such rights. If another railway operator is granted similar rights within our service region, the level of competition we face
will increase significantly.

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.

Before
our A Share Offering, in December 2006, GRGC held 67% of our issued share capital and was our controlling shareholder. Although the equity interest held by GRGC in our Company decreased to approximately 41% after the completion of the A Share
Offering and further to approximately 37.1% as a result of the transfer by GRGC of a portion of its equity interest in our Company to the National Social Security Fund Council in September 2009, GRGC can still exercise substantial influence
over our Company. GRGCs ownership percentage enables it to exercise substantial influence over (i) our policies, management and affairs; (ii) our determinations on the timing and amount of dividend payments and our adoption of
amendments to certain of the provisions of our Articles of Association and (iii) the outcome of most corporate actions. Subject to the requirements of applicable laws and regulations in China and the HKSE Listing Rules, GRGC may also cause
us to effect certain corporate transactions.

GRGCs interests may sometimes conflict with the interests of the other
shareholders. We cannot assure you that GRGC, as our single largest shareholder, will always vote its shares in a way that benefits the other shareholders of our Company. In addition to its relationship with us as our single largest shareholder,
GRGC, by itself or through its affiliates, such as Yangcheng Railway Enterprise Development Company, a wholly owned subsidiary of GRGC, and Guangmeishan Railway Co., Ltd., also provides us with certain services, for which we have limited alternative
sources of supply. The interests of GRGC and its affiliates as providers of these services may also conflict with our interests. We have entered into service agreements, and our transactions with GRGC and its affiliates have been conducted on open,
fair and competitive commercial terms. However, we only have limited leverage in negotiating with GRGC and its affiliates over the specific terms of the agreements for the provision of these services as there are no alternate suppliers. See
ITEM 4. INFORMATION ON THE COMPANYB. Business OverviewMajor Suppliers and Service Providers and ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSB. Related Party Transactions for additional
information regarding the services provided to us by GRGC and its subsidiaries.



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##### Table of Contents

We have very limited insurance coverage.

We do not maintain any insurance coverage against third party liabilities, except compulsory automobile liability insurance. Since
November 1, 2015, passengers in China can voluntarily purchase accident insurance while purchasing a train ticket at RMB3.0 per person for a maximum coverage of up to RMB300,000 for an adult, or RMB100,000 for a minor, for death, injury and
disability claims, and up to RMB30,000 for an adult, or RMB10,000 for a minor, for medical services and treatments, as a result of an accident. However, since we do not maintain any insurance coverage for most of our property, for business
interruption or for environmental damage arising from accidents that occur in the course of our operations, we have to pay for financial and other losses, damages and liabilities, including those caused by natural disasters and other events beyond
our control, out of our own funds, which could have a material adverse effect on our results of operations and financial condition.

We could incur significant costs for violations of applicable environmental laws and regulations.

Our railroad operations and real estate ownership are subject to extensive national and local environmental laws and regulations concerning, among other things, gaseous emissions, wastewater discharge,
disposal of solid waste and noise control. In addition, environmental liabilities may arise from claims asserted by adjacent landowners or other third parties. As of December 31, 2016, we had not incurred any such liabilities and
therefore, had not made any provision for such liabilities. We may also be required to incur significant expenses to remediate any violation of applicable environmental laws and regulations. In 2016, our environmental protection-related expenses
were approximately RMB 1.53 million, mainly related to the landscaping of our railroad and office areas.

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.

Our operations may be affected from time to time by equipment failures, delays, collisions and derailments attributable to accidents, human error or natural disasters, such as typhoons or floods.

As our high-speed train service becomes technologically more complex, it may become more difficult for us to upkeep and
repair our equipment and facilities as well as to maintain our service and safety standards. Furthermore, as we heavily rely on third parties for technical upgrades and support with regard to certain equipment and facilities, in case of any
problems arising during our operation, our own staff may lack the technical expertise to identify and fix the problems in time. Moreover, the newly upgraded equipment may not be fully compatible with our existing operation system and may not
meet our safety, security or other standards. The use of such equipment and facilities could result in malfunctions or defects in our services. In addition to potential technical complications, natural disasters could interrupt our rail
services, thus leading to decreased revenue, increased maintenance and higher engineering costs.

If we experience any
equipment failures, delays, temporary cancellations of schedules, collisions and derailments, or any deterioration in the performance or quality of any of our services, it could result in personal injuries, damage of goods, customer claims of
damages, customer refunds and loss of goodwill. These problems may lead to decreases in customers and revenue, damage to our reputation, unexpected expenses, loss of passengers and freight customers, incurrence of significant warranty and repair
costs, diversion of our attention from our transportation service efforts or strained customer relations, any one of which could materially adversely affect our business. For example, in January and February 2008, certain regions in
southern China experienced extraordinary harsh winter weather, which caused equipment failures and delays and cancellations of some of our scheduled trains. As a result, during such period of freezing weather, our cost for repair of equipment
increased and our revenue decreased. We cannot assure you that such events will not happen again in the future. In addition, on July 23, 2011, two high-speed trains collided on the Yongtaiwen railway line in the suburbs of Wenzhou, Zhejiang
Province, China. 40 people were killed and 172 people were injured in this accident (the Wenzhou Railway Accident). Although we believe we have maintained effective safety measures and there has been no such collision accidents on
railway lines operated by us since our inception, we cannot assure you that similar accidents will not occur on our railway lines in the future. The occurrence of any such accident could have a material adverse impact on us.



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The revenue or charges for certain long-distance passenger train and freight
transportation businesses are finally settled by China Railway Corporation in accordance with the unified settlement rules.

As described in ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSB Related Party Transactions and Notes 37 and 38 to our audited consolidated financial statements included
elsewhere in this annual report, due to the fact that the railway business is centrally managed by China Railway Corporation (CRC) within the PRC, we work in cooperation with CRC and other railway companies controlled by the CRC for the
operation of certain long-distance passenger train and freight transportation businesses within the PRC. The revenue generated from these long-distance passenger and freight transportation businesses is collected and settled by the CRC according to
its settlement systems. The charges for the use of the rail lines and services provided by other railway companies are also settled by the CRC based on its systems. Although we can, to a certain extent, calculate the revenue and charges settled by
the CRC based on our own data and information, the amount of settlement is finally settled by the CRC.

We may encounter
difficulties in complying with the Sarbanes-Oxley Act of 2002.

The United States Securities and Exchange Commission,
as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company in the United States to include a management report on such companys internal control over financial reporting in its annual
report, which contains managements assessment of the effectiveness of the companys internal control over financial reporting. In addition, an independent registered public accounting firm must report on the effectiveness of the
companys internal control over financial reporting. Although we have concluded that we maintained effective internal control over financial reporting for each of the years ended December 31, 2014, 2015 and 2016, we may not be able to
conclude in future years that we have effective internal control over financial reporting, in accordance with the Sarbanes-Oxley Act of 2002. See ITEM 15. CONTROLS and PROCEDURES.

Moreover, in future years, even if our management concludes that our internal control over financial reporting is effective, our
independent registered public accounting firm may disagree. If our independent registered public accounting firm is not satisfied with our internal control over financial reporting or the level at which our internal control over financial
reporting is designed or operated, or if the independent registered public accounting firm interprets the requirements, rules or regulations differently than we do, then they may issue an adverse opinion. Any of these possible outcomes could
result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of our reporting processes, which could adversely impact the market price of our H shares and ADSs. In addition, we will
continue to incur significant costs and use significant management and other resources in order to comply with Section 404 of the Sarbanes-Oxley Act of 2002.

Risks Relating to Conducting Business in China

Substantially all of our
assets are located in China and substantially all of our revenue is derived from our operations in China. Accordingly, our results of operations and prospects are subject, to a significant extent, to the economic, political and legal
developments in China.



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Chinas economic, political and social conditions, as well as government
policies, could affect our business.

As we are established, and operate substantially all of our businesses, in
China, any changes in the political, economic and social conditions of the PRC or any changes in PRC governmental policies or regulations, including a change in the PRC governments economic or monetary policies or railway or other
transportation regulations, may have a material adverse effect on our business and operations and our results of operations. The economic environment in the PRC differs significantly from the United States and many Western European countries in
terms of its structure, stage of development, capital reinvestment, growth rate, level of government involvement, resource allocation, self-sufficiency, rate of inflation and balance of payments position. The PRC governments economic reform
policies since 1978 have resulted in a gradual reduction in state planning in the allocation of resources, pricing and management of assets, and a shift towards the utilization of market forces. The PRC government is expected to continue its
reforms, and many of its economic and monetary policies still need to be developed and refined. In addition, certain changes in governmental policies from time to time may negatively affect our business and operations. For example, the cooling
measures imposed by PRC government on the real estate industry since early 2011 in response to rising housing prices has resulted in our decreased transportation of construction materials, coal, iron ore, oil and steel that are largely used in that
industry. On January 1, 2014, the PRC government also implemented a Pilot Scheme for the Change from Business Tax to Value-added Tax (the Pilot Scheme) in the railway transportation industry. Value-added tax is a tax on top of but
separated from price. According to the relevant accounting standard in China and overseas, operating revenues should be recognized after deducting value-added tax. As our income and pricing scheme remained unchanged after the implementation of the
Pilot Scheme, the deduction of value-added tax from our income received from the original pricing scheme resulted in our reduced operating revenues in 2014 as compared to the same period in 2013. On January 1, 2016, the NDRC delegated its power
to set baseline ticket pricing standards for high speed trains to the CRC. If the CRC increases or decreases the ticket prices for trains in our operation area, our revenue from railroad businesses will be affected accordingly. For further
information on the ticket pricing, see ITEM 4. INFORMATION ON THE COMPANYB. Business OverviewPricing. We cannot assure you that future changes in governmental policies or regulation will not have a material adverse effect on
our business, operations or results of operations.

Government control of currency conversion may adversely affect our
operations and financial results.

Our books and records are maintained and our financial statements are prepared and
presented in RMB, which is not a freely convertible currency. All foreign exchange transactions involving RMB must be transacted through banks and other institutions authorized by the PBOC. We receive substantially all of our revenue in RMB. We need
to convert a portion of our revenue into other currencies to meet our foreign currency obligations, such as payment of cash dividends on our H shares and equipment purchases from overseas regions. In addition, the existing foreign exchange
limitations under PRC law could affect our ability to obtain foreign currencies through debt financing, or to obtain foreign currencies for capital expenditures or for distribution of cash dividends on our H shares.

Fluctuation of the RMB could adversely affect our financial condition and results of operations.

The value of the RMB fluctuates and is subject to changes in market conditions as well as Chinas political and economic conditions.
Since 1994, the conversion of RMB into foreign currencies, including Hong Kong and U.S. dollars, has been based on rates set by the PBOC, which are set daily based on the previous days inter-bank foreign exchange market rates and current
exchange rates on the world financial markets. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar. Under the new policy, the RMB is permitted to fluctuate within a narrow and
managed floating band against a basket of certain foreign currencies. On April 14, 2012, the PRC government further allowed the floating band of RMBs trading prices against the U.S. dollar to widen from 0.5% to 1% on each
business day effective from April 2012, and further widened the floating band to 2% in March 2014. This has resulted in greater volatility in RMB exchange rate. While the international reaction to the RMB revaluation has generally
been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant appreciation of the RMB against the U.S. dollar. We have
certain U.S. dollar-denominated and HK dollar-denominated assets and the appreciation of RMB could result in a decrease of the value of these assets. For further information on our foreign exchange risks and certain exchange rates, see
ITEM 3. KEY INFORMATIONA. Selected Financial Data and ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKCurrency Risks. We cannot assure you that any future movements in the exchange
rate of RMB against the United States dollar or other foreign currencies will not adversely affect our results of operations and financial condition.



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The differences with respect to the PRC legal system could limit the legal protections
available to you.

As the PRC and the U.S. have different legal systems and the court decisions in China do not have
binding force on subsequent cases, there are significant differences between the PRC legal system and the U.S. legal system. In addition, because the PRC Company Law is different in certain important aspects from company laws in Hong Kong,
United States and other common law countries and regions and because the PRC laws and regulations dealing with business and economic matters, including PRC securities laws, are still evolving, you may not enjoy shareholder protections to which you
may be entitled in Hong Kong, the United States or other jurisdictions.

PCAOB registered public accounting firms in
China, including our independent registered public accounting firm, are not inspected by the U.S. Public Company Accounting Oversight Board, which deprives us and our investors of the benefits of such inspection.

Auditors of companies whose shares are registered with the U.S. Securities and Exchange Commission and traded publicly in the United
States, including our independent registered public accounting firm, must be registered with the U.S. Public Company Accounting Oversight Board (the PCAOB) and are required by the laws of the United States to undergo regular inspections
by the PCAOB to assess their compliance with the laws of the United States and professional standards applicable to auditors. Our independent registered public accounting firm is located in, and organized under the laws of, the PRC, which is a
jurisdiction where the PCAOB, notwithstanding the requirements of U.S. law, is currently unable to conduct inspections without the approval of the Chinese authorities. In May 2013, PCAOB announced that it had entered into a Memorandum of
Understanding on Enforcement Cooperation with the CSRC and the PRC Ministry of Finance (the MOF), which establishes a cooperative framework between the parties for the production and exchange of audit documents relevant to investigations
undertaken by PCAOB, the CSRC or the MOF in the United States and the PRC, respectively. PCAOB continues to be in discussions with the CSRC and the MOF to permit joint inspections in the PRC of audit firms that are registered with PCAOB and audit
Chinese companies that trade on U.S. exchanges.

This lack of PCAOB inspections in China prevents the PCAOB from fully
evaluating audits and quality control procedures of our independent registered public accounting firm. As a result, we and investors in our common stock are deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct
inspections of auditors in China makes it more difficult to evaluate the effectiveness of our independent registered public accounting firms audit procedures or quality control procedures as compared to auditors outside of China that are
subject to PCAOB inspections, which could cause investors and potential investors in our stock to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.

If additional remedial measures are imposed on the Big Four PRC-based accounting firms, including our independent registered public
accounting firm, in administrative proceedings brought by the SEC alleging the firms failure to meet specific criteria set by the SEC, we may have difficulties complying with the requirements of the Exchange Act.



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In December 2012, the SEC instituted administrative proceedings against the Big Four
PRC-based accounting firms, including our independent registered public accounting firm, alleging that these firms had violated U.S. securities laws and the SECs rules and regulations thereunder by failing to provide to the SEC the firms
audit work papers with respect to certain PRC-based companies that are publicly traded in the United States. On January 22, 2014, the administrative law judge presiding over the matter rendered an initial decision that each of the firms had
violated the SECs rules of practice by failing to produce audit work papers to the SEC. The initial decision censured each of the firms and barred them from practicing before the SEC for a period of six months. The Big Four PRC-based
accounting firms appealed the administrative law judges initial decision to the SEC. The administrative law judges decision does not take effect unless and until it is endorsed by the SEC.

In February 2015, the four China-based accounting firms each agreed to a censure and to pay a fine to the SEC to settle the dispute
and avoid suspension of their ability to practice before the SEC and audit U.S.-listed companies. The settlement required the firms to follow detailed procedures and to seek to provide the SEC with access to PRC firms audit documents via the
CSRC. If future document productions fail to meet specified criteria, the SEC retains the authority to impose a variety of additional remedial measures on the firms depending on the nature of the failure.

While we cannot predict if the SEC will further review the four China-based accounting firms compliance with specified criteria or
if the results of such a review would result in the SEC imposing penalties such as suspensions or restarting the administrative proceedings, if the accounting firms are subject to additional remedial measures, our ability to file our financial
statements in compliance with SEC requirements could be impacted. A determination that we have not timely filed financial statements in compliance with SEC requirements could ultimately lead to the delisting of our ADSs from the NYSE or the
termination of the registration of our ADSs under the Exchange Act, or both, which would substantially reduce or effectively terminate the trading of our ADSs in the United States.



|ITEM 4. | INFORMATION ON THE COMPANY
|------- | --------------------------



|A. | History and Development of the Company
|-- | --------------------------------------

Overview

We were
established as a joint stock limited company under the Company Law of the PRC on March 6, 1996, and have conducted our business for twenty years. Our legal name is


LOGO
, and its English translation is Guangshen Railway Company Limited. Our registered office is located at No. 1052 Heping Road, Shenzhen, Guangdong Province, The Peoples Republic of China, 518010. Our telephone
number is (86-755) 2558-8150 and our fax number is (86-755) 2559-1480.

In May 1996, our H shares (stock code:
00525) were listed on the HKSE and our American Depositary Shares, or ADSs (ticker symbol: GSH), were listed on the NYSE. Our A shares (stock code: 601333) were listed on the Shanghai Stock Exchange in December 2006. We are currently
the only PRC railway enterprise with shares concurrently listed in Shanghai, Hong Kong and New York.



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We are mainly engaged in passenger and freight transportation businesses on
the Shenzhen-Guangzhou-Pingshi Railway, which is 481.2 kilometers long, running vertically through Guangdong Province. The Guangzhou-Pingshi Railway is the southern part of Beijing-Guangzhou Railway, which connects Northern China with
Southern China. The Guangzhou-Shenzhen Railway is strategically located and links with major railway networks in China, including the Beijing-Guangzhou, Beijing-Kowloon, Sanshui-Maoming, Pinghu-Nantou, and Pinghu-Yantian lines, as well as to the
Kowloon Canton Railway in Hong Kong, which is an important component of the transportation network of southern China, as well as the only railway channel linking Hong Kong with Mainland China. The Guangzhou-Shenzhen Railway is currently one of
the most modern railways in the PRC as well as the first wholly fenced railway with four parallel lines in the PRC that allows passenger trains and freight trains to run on separate lines.

Passenger transportation is our principal business. As of December 31, 2016, there were 253 pairs of passenger trains in
our operation area according to the then train schedule, including 102 pairs of intercity high-speed passenger trains between Guangzhou and Shenzhen (including 94 pairs of inter-city trains between Guangzhou East to Shenzhen (including 20 stand-by
pairs), 8 pairs of Guangzhou East to the Chaozhou-Shantou cross-network EMU trains), 13 pairs of Hong Kong Through Trains (including 11 pairs of Canton-Kowloon Through Trains, 1 pair of Zhaoqing-Kowloon Through Trains and 1 pair
of Beijing/Shanghai-Kowloon Through Trains) and 138 pairs of long-distance trains (including 10 pairs of Guangzhou-Foshan-Zhaoqing intercity trains, 3 pairs of Guangzhou to Guilin North, NaningEast and Guiyang North cross-network EMU trains). We
have adopted an As-Frequent-As-Buses operating model by dispatching one pair of our domestically manufactured electric multiple units trains, known as China Railway High-Speed trains or CRHs, every 10 minutes on
average during peak hours between Guangzhou and Shenzhen. The through-trains passing Hong Kong jointly operated by us and the MTR Corporation Limited (MTR) are one of the most important means of transportation between Guangzhou and Hong
Kong. We have organized and operated a number of long-distance trains running from and to Guangzhou and Shenzhen that linked with most of the provinces, autonomous regions and municipals across the nation.

Freight transportation is another important segment of our business. We are well-equipped with comprehensive freight facilities and
are able to efficiently transport full load cargo, single load cargo, containers, bulky and overweight cargo, dangerous cargo, fresh and live cargo, and oversized cargo. Our rail lines operated are closely knitted with the major ports in
Guangzhou and Shenzhen and are connected to several large industrial zones, logistics zones and plants and mines in the Pearl River Delta region via the railroad sidings. The major market of our freight transportation business is domestic mid-to
long-distance transportation, and we enjoy competitive advantages in domestic mid-to long-distance freight transportation.

We
have extended our passenger and freight transportation business to include railway operation services with the commencement of Wuhan-Guangzhou Passenger Railway Line in December 2009. As of the date of this annual report, we have provided such
services to Wuhan-Guangzhou Passenger Railway Line Co., Ltd., Guangdong GuangzhouZhuhai Inter-city Railway Traffic Co., Ltd., Guangzhou-Shenzhen-Hong Kong Express Rail Link Company Limited, Guangzhou-Zhuhai Railway Company Limited,
Xiamen-Shenzhen Railway (Guangdong) Company Limited, Ganzhou-Shaoguan Railway Company Limited, Nanning-Guangzhou Railway Company Limited, Guiyang-Guangzhou Railway Company Limited and Guangdong Pearl River Delta Inter-city Railway Traffic Company
Limited. With the successful completion and commencement of operation of a series of high-speed railways and inter-city railways in the Pan Pearl River Delta, our geographical coverage of railway operation service will be more extensive.
We also intend to grow our business through railway operation services.

Background, Restructuring and Acquisition

The railroad system between Guangzhou and Shenzhen was part of the original Canton-Kowloon railroad, which began operations in
1911. In 1949, following the establishment of the PRC, the railroad was divided into two sections, with the first linking Guangzhou and Shenzhen, and the second, across the Hong Kong border and separately owned, linking Luohu and the Kowloon
peninsula in Hong Kong. The Guangzhou to Shenzhen railroad has been operated since 1949 by a sub-division of the Guangzhou Railway Bureau, a predecessor to GRGC.

In 1979, Guangshen Railway Company, our predecessor, in conjunction with KowloonCanton Railway (KCR), which has been merged into the MTR, was engaged in the joint operation of Hong Kong
Through Train passenger services between Guangzhou and Hong Kong.



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In 1984, to exploit the rapid growth in the Pearl River Delta, Guangshen Railway Company,
our predecessor, was established pursuant to the approval of the State Council as a state-owned enterprise administered by the Guangzhou Railway Bureau. At that time, Guangshen Railway Company had only a single-line railroad. Since then, large
capital expenditures have been made to expand and upgrade its facilities and services. In 1987, construction of the second line was completed. In 1991, Guangshen Railway Company began the construction of a semi-high-speed rail line and
purchased locomotives and passenger coaches, which can provide passenger train services at speeds of more than 160 kilometers per hour. Commercial operation of the EMUs commenced in December 1994.

We were established as a joint stock limited company on March 6, 1996 following the Restructuring, which was carried out to
reorganize the railroad assets and related businesses of Guangshen Railway Company and certain of its subsidiaries. As part of the Restructuring, 2,904,250,000 state legal person shares, par value RMB1.00 per share, of our Company were issued
to GRGC, a state-owned enterprise controlled by the MOR. Guangshen Railway Company retained the assets, liabilities and businesses not assumed by us, including units providing staff quarters and social services such as health care, education,
public security and other ancillary services, as well as subsidiaries or joint ventures whose businesses do not relate to railroad operations and do not compete with our businesses. As part of our Restructuring, Guangshen Railway Company was
renamed Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company.

Since April 1, 1996, we have been
able to set our own prices for our EMU train services and charge a premium over average national prices for our other passenger and freight train services. See ITEM 4. INFORMATION ON THE COMPANYB. Business OverviewRegulatory
OverviewPricing for a more detailed description of our pricing scheme.

We completed our initial public offering
of class H ordinary shares, or H shares, and our American depositary shares, or ADSs, in May 1996. In that offering, we issued a total of 1,431,300,000 H shares, par value RMB1.00 per share. Our H shares are listed for
trading on the HKSE and our American depositary shares, or ADSs, each representing 50 H shares, are listed for trading on the NYSE.

On November 15, 2004, we entered into an asset purchase agreement with Yangcheng Railway Company to acquire the railway transportation business between Guangzhou and Pingshi and related assets and
liabilities, or the Acquisition. In order to finance such Acquisition, on December 13, 2006, we issued 2,747,987,000 A shares that are now listed for trading on the Shanghai Stock Exchange (stock code: 601333) and raised approximately
RMB10.0 billion from the A Share Offering. After the A Share Offering, approximately 41% of our issued and outstanding shares were owned by GRGC, while institutional and public shareholders own approximately 59% of our issued and outstanding
ordinary shares, including A shares, H shares and ADSs.

On December 28, 2006, we paid RMB5.27 billion out of the
proceeds raised from the A Share Offering to Yangcheng Railway Company. On January 1, 2007, the railway transportation business of the Guangzhou-Pingshi Railway came under our control as a result of the Acquisition. As a result, our
operations expanded from a regional railway to a national trunk line network and our operating railway distance extended from 152 kilometers to 481.2 kilometers, running vertically through the entire Guangdong Province. In June 2007, we
paid the remaining balance in the amount of RMB4.87 billion to Yangcheng Railway Company.

In April 2010, in order to
further reduce our administrative expenses and improve the overall efficiency of our administration system, we made efforts to optimize our internal management structure, including establishing the General Administrative Department, the Human
Resources Department, the Planning and Finance Department, the Operation Management Department and the Audit Department, each of which is under the supervision of our general manager, and outsourcing all other administrative functions to external
service providers.



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On November 30, 2013, we entered into an agreement to acquire the freight service
business and related assets of China Railway Express Co., Ltd. Guangzhou Branch (CREC) and China Railway Container Transport Co. Ltd. Dalang Processing Station (CRCT), the subsidiaries of the CRC which operate freight service
business. The purchase considerations for CREC and CRCT were approximately RMB102.3 million and RMB79.9 million, respectively. On the same day, control of the assets and operations of CREC and CRCT were transferred to us. The results
of the operations of the above-mentioned entities have been included in our consolidated comprehensive income statement from November 30, 2013 onwards.

On May 29, 2014, we entered into an agreement with Guangzhou Railway (Group) Company Guangzhou Railway Economic Development Co., Ltd. to acquire certain assets and liabilities in relation to the
freight service business. The total amount of assets were RMB161.7 million and total amount of liabilities were RMB39.3 million. The purchase price was approximately RMB122.4 million.

On October 20, 2014, we entered into an agreement with Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company to
acquire approximately an additional 17.7% equity interest in Zengcheng Lihua Stock Company Limited (Zengcheng Lihua). The purchase price was approximately RMB 4.7 million. Upon the completion of the acquisition, we held an aggregate
of approximately 44.7% equity interest in Zengcheng Lihua. On February 12, 2015, we obtained control of Zengcheng Lihua and began to consolidate its financial statements from that date.

On October 26, 2016, we entered into agreements to acquire certain railway operating assets of GRGC, Guangmeishan Railway Company
Limited (GRCL) and Guangdong Sanmao Railway Company Limited (GSRC). GRCL and GSRC are subsidiaries of GRGC which operates passenger and freight transport service business. The purchase prices to GRGC, GRCL and GSRC were
approximately RMB28,657,000, RMB453,658,000 and RMB249,677,000, respectively. On October 26, 2016, we obtained control of the above-mentioned railway operation assets and began to consolidate the results of operations of GRGC, GRCL and GSRC in
our consolidated comprehensive income statement from that date.

Service Territory

Our rail lines traverse the Pearl River Delta and also run vertically through Guangdong Province, an area which benefited early from the
PRC economic reform policies that began in the late 1970s. Throughout the 1980s and early 1990s, the economy of the Pearl River Delta, fueled by foreign investments, grew rapidly. The Pearl River Delta is currently one of the most affluent
and fastest growing areas in China.

As of April 20, 2017, we had 48 stations situated on our rail lines, providing
passenger and freight transportation services for cities, towns and ports situated along the Shenzhen-Guangzhou-Pingshi corridors and Hong Kong Through Train passenger service, which we serve in conjunction with the MTR. We also provide railway
operation services to other Chinese domestic railway companies.

The Shenzhen-Guangzhou-Pingshi railroad is an integral
component of the PRC national railway network, and provides nationwide access to passenger and freight traffic from southern China to other regions of mainland China as described below:

Northbound. At Pingshi, our rail line connects with the Beijing-Guangzhou line, which is one of the major trunk lines linking
southern China with Beijing and northern China. Another trunk line connecting northern and southern China, the Beijing-Hong Kong rail line, includes the section of our line from Dongguan to Shenzhen.

Southbound. Our line connects at Shenzhen with the rail line owned by the MTR that runs to Kowloon, Hong Kong.



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Westbound. Our line connects with the Guangzhou-Maoming rail line operated by
GSRC, a company in which GRGC holds a 49.1% equity interest, which runs through the western part of Guangdong Province, connecting with other rail lines that continue on into the Guangxi Zhuang Autonomous Region, which provides access to
southwestern China. Nanning-Guangzhou Railway and Guiyang-Guangzhou Railway commeced operation on December 26, 2014, which are connected with our line at Guangzhou Station since May 2016 by three EMUs operating between Guangzhou and Guiyang
North, Guangzhou and Nanning East, and Guangzhou and Guilin North. Nanning-Guangzhou Railway is owned by Nanning-Guangzhou Railway Company Limited, a subsidiary of Nanning Railway Bureau of CRC. Guiyang-Guangzhou Railway is owned by
Guiyang-Guangzhou Railway Company Limited, a subsidiary of Chengdu Railway Bureau of CRC. We provide the operational services to Nanning-Guangzhou Railway and Guiyang-Guangzhou Railway. Our line also connects with Guangzhou-Foshan-Zhaoqing Intercity
Railway, which commenced operation on March 30, 2016 and was jointly invested by Guangdong Provincial Railway Construction Investment Group Co., Ltd. and the CRC

Eastbound. Our line connects with the Guangzhou-Meizhou-Shantou rail line and Xiamen-Shenzhen rail line. Guangzhou-Meizhou-Shantou rail line is operated by GRCL, a company in which GRGC holds a
78.2% equity interest. A section of this line forms, along with our Dongguan to Shenzhen segment, a part of the Beijing-Hong Kong rail line, which terminates in Kowloon, Hong Kong. The section of Xiamen-Shenzhen rail line in Guangdong Province
is owned by Xiamen-Shenzhen Railway (Guangdong) Company Limited, a subsidiary of GRGC. We provide the operational services to Xiamen-Shenzhen Railway (Guangdong) Company Limited. At Pinghu, our rail line connects with two local rail lines: one of
them, Pingnan Railway, principally serves three ports located in western ShenzhenShekou, Chiwan and Mawan, which is under renovation and expansion to add passenger transport and sea-railway cargo transport capabilities in the futureand
the other, Pingyan Railway, serves Yantian port, an international deep-water port located in eastern Shenzhen. At the Huangpu and Xiayuan stations in Guangzhou, our line connects with Huangpu port and Xinsha port. Our rail line also
connects with certain industrial districts, commercial districts and the facilities of many of our customers through spur lines, which are rail lines running off the main line that are used and typically financed by a freight customer or a group of
freight customers and maintained by us for a fee. We believe that the customers connected to these spur lines and customers with goods that must be shipped through these regional ports are likely to use our services on a long-term basis.

Capital Expenditure

Our capital expenditure includes payments for acquisition of fixed assets and construction-in-progress, and prepayments for fixed assets, net of related payables. In 2014, 2015 and 2016, our total
capital expenditure were RMB999.6 million, RMB1,292.3 million and RMB1,973.9 million, respectively.

For more information
concerning the Companys principal capital expenditure and divestitures currently in progress, including the distribution of these investments geographically and the method of financing, see ITEM 5. OPERATING AND FINANCIAL REVIEW AND
PROSPECTS - B. Liquidity and Capital Resources and ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS - F. Tabular Disclosure of Contractual Obligations.



|B. | Business Overview
|-- | -----------------

Business Operations

Our principal businesses are railroad passenger, transportation, freight transportation, railway network usage and other
transportation-related services, which collectively generated 93.6% of our total revenue in 2016. The remaining 6.4% of our total revenue in 2016 mainly consisted of on-board catering services, leasing, sales of materials and supplies, sale of goods
and other businesses related to railway transportation.



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In 2016, affected by the unfavorable factors including the slowdown of the macro-economy,
the competition in the railway passenger transportation market and a weak demand in the railway freight transportation market, our passenger and freight transportation business continued to decline, which resulted in our business stagnating. We
responded with a series of measures to increase our revenue and reduce expenses. With the goal to increase our revenue, we have been exploring opportunities in the railway passenger and freight transportation markets by making arrangements to open
five new pairs of cross-network EMU traveling between Guangzhou East and Chaozhou-Shantou and one pair of long-distance trains between Shenzhen and Urumqi, recommence inter-city passenger transportation business at Pinghu Railway Station, adopt
railway supply-side structural reform measures, increase the frequency of southern express lines for freight transportation and continuously expand the service scope of railway operations. At the same time, we enhanced our cost controls of our
general and non-production expenses. As a result of those measures, we achieved growth both in operating revenue and net profit.

In 2016, we achieved a passenger delivery volume of 84.9 million persons, representing a year-to-year decrease of 0.6%; a tonnage of outbound freight of 15.36 million tons, representing
a year-to-year decrease of 9.0%; generating operating revenues of RMB17,281 million, representing a year-to-year increase of 9.9%; consolidated profits attributable to equity holders of RMB1,158 million, representing
a year-to-year increase of 8.2%; and basic earnings per share of RMB0.16.

The table below summarizes our railroad and
related business revenue and traffic volume for the periods indicated:



|                                                                               |  |                         |           |  |      |  |           |      |  |  |           |  |  |      |           |  |  |  |           | 
|------------------------------------------------------------------------------ |  | ----------------------- | --------- |  | ---- |  | --------- | ---- |  |  | --------- |  |  | ---- | --------- |  |  |  | --------- | 
|                                                                               |  | Year ended December 31, |          
|                                                                               |  | 2012                    |           |  | 2013 |  |           | 2014 |  |  | 2015      |  |  | 2016 |          
|Passenger Transportation                                                       |  |                         |           |  |      |  |           |      |  |  |           |  |  |      |           |  |  |  |           | 
|Total passenger transportation revenue (RMB millions)                          |  |                         | 7,841.09  |  |      |  | 8,058.29  |      |  |  | 6,988.29  |  |  |      | 6,997.56  |  |  |  | 7,358.85  | 
|Total passengers (millions)                                                    |  |                         | 84.60     |  |      |  | 90.96     |      |  |  | 90.11     |  |  |      | 85.37     |  |  |  | 84.90     | 
|Total passenger-kilometers (millions)                                          |  |                         | 26,788.80 |  |      |  | 27,844.65 |      |  |  | 27,953.94 |  |  |      | 25,989.28 |  |  |  | 25,479.15 | 
|Revenue per passenger-kilometer (RMB)(1)                                       |  |                         | 0.29      |  |      |  | 0.29      |      |  |  | 0.25      |  |  |      | 0.27      |  |  |  | 0.29      | 
|Freight Transportation                                                         |  |                         |           |  |      |  |           |      |  |  |           |  |  |      |           |  |  |  |           | 
|Total freight transportation revenue (RMB millions)                            |  |                         | 1,344.11  |  |      |  | 1,603.29  |      |  |  | 1,763.68  |  |  |      | 1,761.45  |  |  |  | 1,718.26  | 
|Total freight tons (millions)                                                  |  |                         | 62.67     |  |      |  | 59.56     |      |  |  | 51.56     |  |  |      | 48.44     |  |  |  | 48.60     | 
|Revenue per ton (RMB)(2)                                                       |  |                         | 21.45     |  |      |  | 26.92     |      |  |  | 34.21     |  |  |      | 36.36     |  |  |  | 35.36     | 
|Total ton-kilometers (millions)                                                |  |                         | 14,620.50 |  |      |  | 13,293.83 |      |  |  | 11,435.00 |  |  |      | 10,874.30 |  |  |  | 10,302.05 | 
|Revenue per ton-kilometer (RMB)(3)                                             |  |                         | 0.09      |  |      |  | 0.12      |      |  |  | 0.15      |  |  |      | 0.16      |  |  |  | 0.17      | 
|Railway Network Usage and other transportation related services (RMB millions) |  |                         | 4,890.64  |  |      |  | 5,034.68  |      |  |  | 5,031.24  |  |  |      | 5,874.73  |  |  |  | 7,093.20  | 



|(1) | Revenue per passenger-kilometer is calculated by dividing total passenger transportation 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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Revenue per ton is calculated by dividing total freight revenue by total freight tons. Management believes that revenue per ton is a useful measure for assessing the
revenue levels of our freight transportation business.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Revenue per ton-kilometer is calculated by dividing total freight revenue by total ton-kilometers. Management believes that revenue per ton-kilometer is a useful
measure for assessing the revenue levels of our freight transportation business.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Passenger Transportation

Passenger transportation is our largest business stream, accounting for 42.6% of our total revenue and 45.5% of our railroad and related
business revenue in 2016. Our passenger train services can be categorized as follows:



| |  | transportation business of Guangzhou-Shenzhen inter-city express trains;
|- |  | ------------------------------------------------------------------------



| |  | long-distance trains; and
|- |  | -------------------------



| |  | Through Trains in Hong Kong.
|- |  | ----------------------------

As of December 31, 2016, there were a total of 253 pairs of passenger trains in our operation area according to the then train schedule (each pair of trains meaning trains making one round-trip
between two points), representing an increase of 14 pairs from 239 pairs as of December 31, 2015, of which:



| |  | 102 pairs of intercity high-speed passenger trains between Guangzhou and Shenzhen (including 94 pairs of inter-city trains between Guangzhou East
to Shenzhen (including 20 stand-by pairs), and 8 pairs of Guangzhou East to the Chaozhou-Shantou cross-network EMU trains);
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 13 pairs of Hong Kong Through Trains (including 11 pairs of Canton-Kowloon Through Trains, 1 pair of Zhaoqing-Kowloon Through Trains and
1 pair of Beijing/Shanghai-Kowloon Through Trains); and
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 138 pairs of long-distance trains, representing an increase of 17 pairs from 121 pairs as of December 31, 2015. Long-distance
trains included long-distance passenger trains operated by us between the following departure and terminal stations:
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                            |  |                                                                                                                                                                                
|--------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Departure/ Terminal Station |  | Terminal/Departure Station                                                                                                                                                     
|                            | 
|Guangzhou                   |  | Beijing West, Shanghai South, Xining, Xian, Yantai, Chongqing North, Taizhou, Wenzhou, Dazhou, Ganzhou, Zhangjiajie, Jiujiang, Chengdu, Yueyang,
Pingshi, Maoming East, Xinyi
|                            | 
|Guangzhou East              |  | Beijing West, Kowloon, Xiamen, Shantou, Meizhou                                                                                                                                
|                            | 
|Shenzhen                    |  | Beijing West, Shanghai South, Urumqi, Qingdao, Nanjing, Hefei, Meizhou                                                                                                         
|                            | 
|Shezhen East                |  | Chengdu East                                                                                                                                                                   
|                            | 
|Dongguan East               |  | Chengdu                                                                                                                                                                        
|                            | 
|Shantou                     |  | Chongqing North, Wuchang, Meizhou                                                                                                                                              
|                            | 
|Huizhou                     |  | Wuchang                                                                                                                                                                        
|                            | 
|Zhaoqing                    |  | Wuchang, Dazhou, Chenzhou, Zhangjiajie, Kowloon                                                                                                                                
|                            | 
|Sanya                       |  | Beijing West                                                                                                                                                                   



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##### Table of Contents

Long-distance trains also included domestic long-distance trains that are operated by other
operators but originate or terminate on, or pass through, our railroad.

The table below sets out passenger transportation
revenue and volumes for our Hong Kong Through Trains and domestic trains for each of the periods indicated:



|                                                |  |                                        |         |  |                  |  |         |                       |  |  |         |  |  |      |      |  |      |  |      |      |  |  |      |  |  |      |       |     |  |  |       |     |  |  |       |    
|----------------------------------------------- |  | -------------------------------------- | ------- |  | ---------------- |  | ------- | --------------------- |  |  | ------- |  |  | ---- | ---- |  | ---- |  | ---- | ---- |  |  | ---- |  |  | ---- | ----- | --- |  |  | ----- | --- |  |  | ----- | ---
|                                                |  | Total 
passengertransportation revenue |         |  | Total passengers |  |         | Revenue per passenger | 
|                                                |  | 2014                                   |         |  | 2015             |  |         | 2016                  |  |  | 2014    |  |  | 2015 |      |  | 2016 |  |      | 2014 |  |  | 2015 |  |  | 2016 |      
|                                                |  | (RMB millions)                         |         |  | (millions)       |  |         |                       |  |  | (RMB)   |  |  |      |     
|Guangzhou-Shenzhen Trains                       |  |                                        | 2,115.1 |  |                  |  | 2,224.0 |                       |  |  | 2,413.0 |  |  |      | 36.0 |  |      |  | 35.7 |      |  |  | 36.2 |  |  |      | 58.8  |     |  |  | 62.3  |     |  |  | 66.7  |    
|Hong Kong Through Trains                        |  |                                        | 526.9   |  |                  |  | 510.4   |                       |  |  | 528.3   |  |  |      | 3.9  |  |      |  | 3.8  |      |  |  | 3.5  |  |  |      | 135.1 |     |  |  | 134.3 |     |  |  | 150.9 |    
|Long-distance Trains(1)                         |  |                                        | 3,782.5 |  |                  |  | 3,883.6 |                       |  |  | 4,019.3 |  |  |      | 50.2 |  |      |  | 45.9 |      |  |  | 45.2 |  |  |      | N/A   | (1) |  |  | N/A   | (1) |  |  | N/A   | (1)
|Other Revenues from Passenger Transportation(2) |  |                                        | 563.8   |  |                  |  | 379.6   |                       |  |  | 398.4   |  |  |      |     |  |      |  |     |      |  |  |     |  |  |      |      |     |  |  |      |     |  |  |      |    
|Combined passenger operations                   |  |                                        | 6,988.3 |  |                  |  | 6,997.6 |                       |  |  | 7,358.9 |  |  |      | 90.1 |  |      |  | 85.4 |      |  |  | 84.9 |  |  |      | N/A   | (1) |  |  | N/A   | (1) |  |  | N/A   | (1)



|(1) | 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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Since 2014, we have separated Other Revenues from Passenger Transportation from Long-distance Trains to more accurately reflect the correlation between passenger
revenue and volumes, and have re-categorized Revenue from Long-distance Trains for 2012 and 2013 to reflect this change.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Guangzhou-Shenzhen Trains. In 2016, our passenger transportation services on the trains between Guangzhou and Shenzhen accounted for 32.8% of our railroad passenger transportation
revenue. As of December 31, 2016, we operated 102 pairs of intercity CRH passenger trains between Guangzhou and Shenzhen. Such CRH passenger trains are capable of running at a top speed of 200 kilometers per hour. The number of
passengers traveling on our Guangzhou-Shenzhen trains increased by 1.5% from 35.7 million in 2015 to 36.2 million in 2016. The revenue from our Guangzhou-Shenzhen trains increased by 8.5% from RMB2,224.0 million in 2015 to
RMB2,413.0 million in 2016. The increase in revenue of Guangzhou-Shenzhen trains was primarily due to: (i) the commencement of the service of five pairs of cross-network EMU trains between Guangzhou and Chaozhou-Shantou, and the revenue
from such trains is accounted for in the revenue from Guangzhou-Shenzhen trains, and (ii) the recommencement of inter-city passenger transportation business at Pinghu Railway Station since September 26, 2016.

Hong Kong Through Trains. In 2016, our passenger transportation services on Hong Kong through trains accounted for 7.2% of
our railroad passenger transportation revenue. We currently operate, jointly with the MTR, 13 pairs of Hong Kong Through Trains (including 11 pairs of Canton-Kowloon Through Trains, 1 pair of Zhaoqing-Kowloon Through Trains and 1 pair
of Beijing West/Shanghai-Kowloon Through Trains). The MTR is responsible for the operation of 3 pairs of Canton-Kowloon Through Trains while we are responsible for the remaining 10 pairs of Hong Kong Through Trains (except for the
Shanghai-Kowloon Through Train which is operated by Shanghai Railway Bureau). In addition, we also provide railway network usage services to MTR for the Hong Kong Through Trains it operates in the section between Shenzhen Station and Guangzhou East
Station.

The Hong Kong Through Train services beyond Guangzhou to Shanghai are provided by Shanghai Railway
Bureau. Revenue from these Hong Kong Through Trains on the Guangzhou-Hong Kong section is shared between MTR and us, in proportion to our track mileage for the Hong Kong Through Train services, with 81.2% accruing to us and 18.8% to MTR. In
addition, we share all related costs with MTR at the same rate for the Hong Kong Through Train services.



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##### Table of Contents

Most of the passengers taking our Hong Kong Through Trains are from Hong Kong, Macau, Taiwan
regions and foreign countries, and many are business travelers. As the prices for our Hong Kong Through Train services are higher than the prices we charge for our domestic train services, these Hong Kong Through Train services produce higher
per-passenger revenue than our other passenger train services.

In 2016, the volume of passengers who traveled on the Hong
Kong Through Trains decreased by 8.4% from 3.8 million in 2015 to 3.5 million in 2016. The revenue from Hong Kong Through Trains increased by 3.5% from RMB510.4 million in 2015 to RMB528.3 million in 2016. This decrease in passenger
volume was mainly due to the decrease in mainland Chinese visitors travelling to and shopping in Hong Kong. This increase in revenue was mainly due to the increase in ticket prices for Hong Kong Through Trains starting from July 2015.

Domestic Long-distance Trains. In 2016, our passenger transportation services on domestic long-distance trains accounted for 54.6%
of our railroad passenger transportation revenue. As of December 31, 2016, we operated on a daily basis 138 pairs of long-distance trains on our rail lines to cities in Guangdong, Hunan, Hubei, Jiangxi, Anhui, Jiangsu, Liaoning, Shaanxi,
Gansu, Fujian, Heilongjiang, Jilin, Zhejiang, Hebei, Henan, Sichuan, Yunnan, Hainan, Shanxi and Shandong provinces, Chongqing, Shanghai, Beijing and Tianjin municipalities and Guangxi Autonomous Region, Xinjiang Autonomous Region and Tibet
Autonomous Region. In 2016, the number of passengers traveled on our long-distance trains was 45.2 million, representing a decrease of 1.5% from 45.9 million in 2015. Our revenue from long-distance trains in 2016 was RMB4,019.3 million,
compared to RMB3,883.6 million in 2015. The decrease of the passenger volume of long-distance trains was primarily due to the high-speed railways diversion effect, which has resulted in a continuous decrease of passenger volume of
long-distance trains. The increase in revenue of long-distance trains was primarily due to the commencement of the service of one pair of long-distance trains between Shenzhen and Urumqi.

Major Stations. The following are the major train stations owned and operated by us as of December 31, 2016:



|                       |  |                            |  |                                                                                                                                                                                                                                                                          |  |                                                                                                  |  |                                   |       | 
|---------------------- |  | -------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------ |  | --------------------------------- | ----- | 
|Station                |  | Location                   |  | Connected Railways                                                                                                                                                                                                                                                       |  | Passenger
Transportation Business                                                                |  | TotalPassengersfor 2016(millions) |      
|Guangzhou Station      |  | Yuexiu District, Guangzhou |  | Beijing-Guangzhou Railway, Guangzhou-Maoming Railway, Guangzhou-Shenzhen Railway, Guangzhou-Foshan-Zhaoqing Intercity Railway, Guangzhou-Huizhou Intercity Railway, Guiyang-Guangzhou
Raiwlay, Nanning-Guangzhou Railway, Line 2 and Line 5 of Guangzhous subway system |  | Long-distance trains, inter-city trains between Guangzhou and Shenzhen                           |  |                                   | 25.59 | 
|                       |  |                            |  |                                                                                                                                                                                                                                                                         
|Guangzhou East Station |  | Tianhe District, Guangzhou |  | Beijing-Guangzhou Railway, Guangzhou-Shenzhen Railway, Xiamen-Shenzhen Railway, Line 1 and Line 3 of Guangzhous subway system                                                                                                                                           |  | Long-distance trains, inter-city trains between Guangzhou and Shenzhen, Hong Kong Through Trains |  |                                   | 21.09 | 
|                       |  |                            |  |                                                                                                                                                                                                                                                                         
|Shenzhen Station       |  | Luohu District, Shenzhen   |  | Guangzhou-Shenzhen Railway, Hong Kong railway, Luobao Line of Shenzhens subway system                                                                                                                                                                                   |  | Long-distance trains, inter-city trains between Guangzhou and Shenzhen                           |  |                                   | 18.72 | 
|                       |  |                            |  |                                                                                                                                                                                                                                                                         
|Shaoguan East Station  |  | Shaoguan                   |  | Beijing-Guangzhou Railway                                                                                                                                                                                                                                                |  | Long-distance trains                                                                             |  |                                   | 3.13  | 



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##### Table of Contents

Freight Transportation

Revenue from our freight transportation accounted for 9.9% of our total revenue and 10.6% of our railroad and related business revenue in
2016. Our principal market for freight is domestic medium and long-haul freight, originating and/or terminating outside the Shenzhen-Guangzhou-Pingshi corridor. We are well equipped with various freight facilities and can efficiently transport
full load cargo, single load cargo and containers. We have established business cooperation with ports, logistics bases and specialized building materials markets in our service region.

The majority of the freight we transport is high-volume, medium to long-distance freight received from and/or transferred to other rail
lines. A portion of the freight we transport both originates and terminates in the Shenzhen-Guangzhou-Pingshi corridor. We classify our freight business into three categories:



| |  | 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.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------

Revenue from freight transportation business in 2016 was RMB1,718.3 million, an decrease of 2.5% from
RMB1,761.5 million in 2015. The total tonnage of freight we transported in 2016 was 48.6 million tons, representing an increase of 0.3% from 48.4 million tons in 2015. The decrease in freight revenue was mainly due to the
decrease in outbound freight tonnage and outbound freight transportation revenue, which resulted from the slowing economy in China, the structural adjustment in the Pearl River Delta region and the heightened competition in the freight
transportation market in 2016. The increase in the volume of freight transportation was due to the increase in inbound freight tonnage and inbound freight transportation revenue as a result of our deepening reform of railway freight transportation
and the increased operations of southern express trains (containers, single load cargo), and freight tonnage (mainly in containers) through each station we managed.

We serve a broad customer base and ship a wide range of goods in our freight transportation business. We are not dependent upon any particular customers or industries. We transport a broad range
of goods, which can generally be classified as follows: metal ores, coal, containers, construction materials, steel, petroleum, and other goods.

The majority of our inbound freight consists of raw materials and essential production materials for manufacturing, industrial and construction activities, while the majority of our outbound freight
consists of imported mineral ores as well as coal and goods produced or processed within our service territory, for customers throughout China and abroad.



24



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##### Table of Contents

Railway Network Usage and other Transportation-Related Services Business

Revenue from our railway network usage and other transportation-related services accounted for 41.1% of our total revenue and 43.9% of our
railroad and related business revenue in 2016. In 2016, our revenue from railway network usage and other transportation-related services was RMB7,093.2 million, representing an increase of 20.7% from RMB5,874.7 million in 2015. The
increase in revenue from railway network usage, railway operation service, and other transportation-related services was principally due to:



| |  |  | the acquisition of locomotive assets of GSRC, which resulted in an increase in the usage of locomotive towing services, and an increase in the revenue
from such services;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase in the railway operation services we provided to railway companies we have been serving in the past, including but not limited to,
Wuhan-Guangzhou Passenger Railway Line Co., Ltd., Guangzhou-Shenzhen-Hong Kong Express Rail Link Company Limited, Xiamen-Shenzhen Railway Company Limited, Ganzhou-Shaoguan Railway Company Limited, Guiyang-Guangzhou Railway Company Limited, and
Nanning-Guangzhou Railway Company Limited;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the acquisition of part of the operating assets and personnel of GRCL and GSRC, which resulted in us providing transportation service to them; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | adding new transportation services for the Pearl River Delta Intercity Railway.
| | - |  | -------------------------------------------------------------------------------

The following table shows the composition of our revenue from railway network usage and other transportation-related services for each of
the periods indicated:



|                                                |  |                |         |  |      |  |         |      |  |  |         | 
|----------------------------------------------- |  | -------------- | ------- |  | ---- |  | ------- | ---- |  |  | ------- | 
|                                                |  | 2014           |         |  | 2015 |  |         | 2016 | 
|                                                |  | (RMB millions) |        
|Railway Network Usage(1)                        |  |                | 2,860.2 |  |      |  | 2,933.5 |      |  |  | 3,178.5 | 
|Passenger transportation network usage services |  |                | 2,630.9 |  |      |  | 2,701.2 |      |  |  | 2,940.5 | 
|Freight transportation network usage services   |  |                | 229.3   |  |      |  | 232.3   |      |  |  | 238.0   | 
|Other Transportation-Related Services(2)        |  |                | 2,171.0 |  |      |  | 2,941.2 |      |  |  | 3,914.7 | 
|Railway operation services                      |  |                | 1,773.3 |  |      |  | 2,387.2 |      |  |  | 2,614.3 | 
|Other Services(3)                               |  |                | 397.7   |  |      |  | 554.0   |      |  |  | 1,300.4 | 
|                                                |  |                |         |  |      |  |         |      |  |  |         | 
|Total                                           |  |                | 5,031.2 |  |      |  | 5,874.7 |      |  |  | 7,093.2 | 
|                                                |  |                |         |  |      |  |         |      |  |  |         | 



|(1) | In the past, we divided the Railway Network Usage Service into locomotive traction, track usage, electric catenary (overhead wires used to transmit electrical energy to
trains), vehicle coupling and other services. Since 2014, we have divided the Railway Network Usage Service into passenger transportation network usage services and freight transportation railway network usage services to better reflect the business
structure of transportation network clearance service.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Other transportation-related services include provision of railway operation services and other services.
|--- | ---------------------------------------------------------------------------------------------------------

|(3) | Other services include lease of locomotive and passenger trains, fueling of locomotive and passenger trains, parcel transportation and other transportation.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

Other Businesses

Revenue from our other businesses accounted for 6.4% of our total revenue in 2016. Our other businesses mainly consist of on-board catering services, leasing, sales of materials and supplies, sale of
goods and other businesses related to railway transportation.

Revenue from our other businesses was RMB1,110.2 million
in 2016, compared to RMB1,091.6 million in 2015.



25



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##### Table of Contents

Seasonality of Our Railway Transportation Business

There is some seasonality in our businesses. The first quarter of each year typically contributes the highest portion of our annual
revenue, mainly because it coincides with the Spring Festival holidays when Chinese people customarily travel from all over the country back to their hometowns. In addition, the Spring Festival holidays, the Qingming Festival holidays, the
Labor Day holidays, the Dragon Boat Festival holidays, summer holidays and the National Day holidays in China are also high travel seasons. During these holidays, we usually operate additional passenger trains to meet the increased
transportation demand.

Sales

Passenger Transportation

Our passenger tickets are currently sold primarily through the internet. Passengers also can buy tickets at the ticket counters and automatic selling machines which are located in our train stations as
well as through telephone. Additionally, our tickets are sold in Hong Kong and major cities in the Guangdong Province through ticket agents, travel agents and hotels, at our usual prices plus nominal commissions.

Hong Kong Through Train tickets are sold in Guangdong Province through our railway stations, as well as through various ticket outlets,
hotels and travel agents. In Hong Kong, these tickets are sold exclusively by the MTR. As MTRs sales network for these tickets is relatively limited, MTR has engaged the China Travel Service (HK) Ltd., or CTS, as the primary agent for such
sales on a non-exclusive basis.

Our stations along the Guangzhou-Shenzhen line have adopted a real-name ticketing system,
allowing passengers to use their identification cards to purchase tickets and board trains. Customers who provide their second generation China identification cards or Hong Kong and Macau identification cards may purchase tickets aboard trains
without customer service representatives. Customers can also purchase tickets for our Guangzhou-Shenzhen inter-city trains online. As of December 31, 2016, we had a total of 195 automatic ticket selling machines, 138 automatic ticket
inspection machines and 194 internet ticket printing machines along the Guangzhou-Shenzhen line.

The current settlement
method for passenger transportation was stipulated by the MOR and is still under execution by the CRC. It provides that all revenue from passenger train services (including revenue generated from luggage and parcel services) is considered passenger
transportation revenue and belongs to the railway bureau that operates that train. The railway bureau in turn pays other railway bureaus the fees for the use of their rail lines, hauling services, in-station passenger services, water supply,
electricity for electric locomotives and contact wire use fees, etc. Under this settlement method, the railway bureaus operating the long-distance train services are required to pay us the following fees: (i) the portion of the revenue from the
sale of tickets that is higher than the PRC national railway standards due to our special pricing standards and (ii) other fees including those for railroad line usage, in-station passenger service, haulage service, power supply for electric
locomotives, usage fees of contact wires and water supply. This settlement method does not apply to the settlement of our revenue from the passenger trains between Guangzhou and Shenzhen, between Beijing and Hong Kong, between Shanghai and Hong
Kong, between Zhaoqing and Hong Kong and the Hong Kong Through Trains. See ITEM 4. INFORMATION ON THE COMPANYB. Business OverviewRegulatory OverviewPricing.

In October 2016, we acquired parts of the railway operation assets of GRCL and GSRC. As a result of the acquisition, we expanded our
service scope of railway operation of the Shenzhen-Pinshi rail line to the entire Guangdong Province, which improved the supply of passenger trains and our competitiveness in passenger transportation.



26



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##### Table of Contents

Freight Transportation

Since June 2013, the CRC implemented the door-to-door freight fee for railway freight transportation which covers all fees incurred from
loading goods, transportation from departure station to arrival station and ultimately to the designated destination. Door-to-door freight fees are charged one-time on the consignors account and evidenced by consignment invoice, which lists
all chargeable services with corresponding prices.

We charge door-to-door freight fees where we are responsible to goods
delivery. After deducting freight fees payable to us incurring in the railway lines under our control, we settled the balance with other relevant Railway Bureau through the CRCs clearing system on a monthly basis. For goods not delivered by us
but transported through our lines, we received the settlement through National Railway Corporations clearing system on a monthly basis.

In May 2013, the CRC restructured the businesses between CRCT, CREC and China Railway Special Cargo Services CO., Ltd. (CRSCS). After the restructuring, CRCT took charge of the container
operation and management and left the container transportation business with all relevant assets to State Railway Bureaus (including GRGC). CREC transformed into a logistics company, providing services to the public, while National Railway Bureau
was responsible for the operation and management of luggage carts, postal trains, postal and parcel express special trains and operational bases. CRSCS expanded the businesses into container, mail and luggage transportation.

On November 30, 2013, we entered into an asset transfer agreement with China Railway Express Co., Ltd. Guangzhou Branch (CREC
GB) and China Railway Container Transport Co. Ltd. Dalang Processing Station (CRCT DS). CREC GB and CRCT DS are all subsidiaries of the CRC. The consideration for CREC GB and CRCT DS were approximately RMB102.3 million and
RMB79.9 million, respectively. On the same day, control of the assets and operations of CREC and CRCT were transferred to us. The results of operations of the above-mentioned entities have been included in our consolidated comprehensive
income statements starting on November 30, 2013.

Our revenue from container, postal transportation and postal and parcel
express special train services have been included into transportation revenue after business optimization.

We and State
Railway Bureaus (including GRGC) pay the CRC a fee for railway containers, which is collected by the CRCT. Special cargo transportation income, partially paid to National Railway Bureau and us as railroad usage fees and locomotive traction fees, is
attributable to CRSCS.

Competition

We provide passenger and freight transportation services on the Shenzhen-Guangzhou-Pingshi Railway. We expect competition to increase in the future as the marketization reform of the railway industry
(including the reformation of the investment and financing system, the transportation management system and the pricing system) gradually deepens. We compete for long-distance traveling passengers against other railway service providers operating
within our service territory. The Guangzhou-Shenzhen section of the Guangzhou-Shenzhen-Hong Kong passenger line commenced operation in December 2011, the Beijing-Guangzhou passenger line commenced operation in December 2012, the Xiamen-Shenzhen
passenger line commenced operation in December 2013 and the Nanning-Guangzhou and Guiyang-Guangzhou passenger lines commenced operation in December 2014. In addition, in areas where our railroad connects with lines of other railway companies, such
as in the Guangzhou area where our railroad connects with the Guangzhou-Maoming Line, and in the Dongguan area where our railroad connects with the Guangzhou-Meizhou-Shantou Line, we face competition from the railway companies operating in these
areas. We believe that the entry barrier to the industry will decrease, investors in the industry will become more diversified and the States high-speed railway network with Four East-West Lines and Four South-North Lines and numerous
inter-city railways will complete construction and commence operation, leading to increased competition within the industry itself.



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We also face competition from the providers of a variety of other means of transportation
within our service territory. With respect to passenger transportation, we face competition from bus services, which are available between Guangzhou and Hong Kong, between Guangzhou and Shenzhen and between many other locations that we provide
passenger transportation services. Bus fares are typically lower than the fares for our passenger train services. Furthermore, buses can offer added convenience to passengers by departing from or arriving at locations outside their central
terminals, such as hotels. However, train services generally offer greater speed, safety and reliability than bus services. In addition, since the implementation of our As-Frequent-As-Buses operating model, our high-speed train services
and Hong Kong Through Train services have enabled us to compete more effectively with bus operators in terms of speed and frequency. We also compete to a lesser extent with commercial air passenger transportation services and ferry services
operating between Guangzhou and Hong Kong.

With respect to freight transportation, we face increasing competition from truck
transportation in the medium-and short-distance freight transportation market as the expressway and highway networks in our service region and neighboring areas have increasingly improved. By comparison, in the long-distance freight transportation
market, especially in the areas where water transportation is not well developed, our freight transportation service has many advantages compared to truck transportation due to the higher cost of truck transportation, susceptibility of truck
transportation to traffic conditions and a scarcity of heavy duty trucks. Our freight transportation also competes with water transportation as the waterway networks have increasingly improved. Supported by its more extensive network,
railway freight transportation is more competitive in terms of speed and safety compared to water transportation, especially in those areas that are far from coasts and main waterways. As air freight is very expensive and attracts a different
group of customers, we do not consider that our freight transportation services face significant competition from air freight. In China, a significant portion of the bulky freight with low added-value is still transported by railroad. In addition,
the CRC recently proposed to conduct deeper reform to adopt more modernized methods for railway freight transportation, including, but not limited to, the use of the internet to book and manage all cargos, which would further marketize freight
transportation-related services and may increase competition from companies that have adopted more modernized methods in railway freight transportation.

Equipment, Tracks and Maintenance

As of December 31, 2016, we
operated 187 diesel locomotives, 73 electric locomotives, 26 EMUs and 2,554 passenger coaches for our operations.

The freight
cars we use are all leased from the CRC, to which we pay uniform rental fees based on the national standards set by the CRC. The amounts of such usage fees we paid to the CRC in 2014, 2015 and 2016 were approximately RMB269.1 million, RMB251.3
million, and RMB261.9 million, respectively.

From 2007, we started the operation of our CRHs, which we bought from
Bombardier Sifang Power (Qingdao) Transportation Ltd. and Bombardier Sweden Transportation Ltd. Each CRH is designed to have a top speed of 200 kilometers per hour and we believe that the introduction of CRHs has strengthened our capability to
deliver safety, speed, comfort and quality in our transport services and increased our efficiency and competitiveness.

Our
repair and maintenance facilities, including our Guangzhou passenger vehicle maintenance facility, Shipai passenger vehicle maintenance facility, Shenzhen North passenger vehicle maintenance facility, Guangzhou vehicle maintenance facility and
Guangzhou North vehicle maintenance facility, provide services for general maintenance and routine repairs on our coaches and locomotives. Major repairs and overhauls are performed by manufacturers or qualified railway bureaus or
plants. The repair and maintenance services for the CRHs are provided by our Guangzhou EMU vehicle maintenance facility.

We believe that our existing tracks and equipment meet the needs of our current business and operations. Most of the rails and ties
on our main lines have been installed within the last decade and are maintained and upgraded on an ongoing basis as required. In 2014, 2015 and 2016, we replaced approximately 133 kilometers, 7 kilometers and 41 kilometers of railway lines,
respectively.



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Major Suppliers and Service Providers

GRGC, our single largest shareholder, and its subsidiaries are major suppliers of our materials and supplies. In 2016, we purchased
approximately RMB469.3 million in materials and supplies from GRGC and its subsidiaries, which represented 35.1% of our total purchase of materials and supplies. See ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSB.
Related Party Transactions.

The companies or bureaus owned or controlled by the CRC, including the GRGC, our single
largest shareholder, are our major customers. In 2016, we collected approximately RMB3,408.0 million from GRGC and its subsidiaries, which represented 19.7% of our operating revenues.

The electricity we use, including electricity used for our lines, is supplied through various entities under the jurisdiction of the
Guangdong provincial power bureau on normal commercial terms. In 2014, 2015 and 2016, we paid approximately RMB585.8 million, RMB599.3 million and RMB599.2 million, respectively, for electricity charges.

Regulatory Overview

As
a joint stock limited company with publicly traded shares, we are subject to regulation by the PRC securities regulatory authorities with respect to our compliance with PRC securities laws and regulations.

Prior to March 14, 2013, we were regulated by the MOR. However, on March 14, 2013, the First Session of the 12th National
Peoples Congress of the PRC considered and approved the plan on State Council institutional reform and transformation of government functions, pursuant to which the MOR was dissolved. In accordance with the plan, administrative functions
pertaining to railway development planning and policies were transferred to the MOT, other administrative functions previously performed by the MOR were transferred to the National Railway Administration, supervised by the MOT, and commercial
functions previously performed by the MOR were transferred to the CRC. The Reform was completed on January 1, 2017 and as a result, the actual controlling entity of our Companys largest shareholder became the CRC. See ITEM 3.
KEY INFORMATIOND. Risk FactorsRisks Relating to Our Business Extensive government regulation of the railway transportation industry may limit our flexibility in responding to market conditions, competition or changes in our cost
structure.

National Railway System

Railroads in the PRC fall largely into three categories: state-owned railroads, jointly owned railroads and local railroads. The PRC central government holds the equity interests in state-owned
railroads. The state-owned railway system comprises over 70% of all rail lines, including all trunk lines. Prior to the dissolution of the MOR, the state-owned railway system was operated as a nationwide integrated system under the
supervision and management of the MOR. Jointly owned railroads are jointly invested and operated by the central government of the PRC, the local government and other foreign or domestic investors. Local railroads consist of regional lines usually
within provincial or municipal boundaries that have been constructed under the sponsorship of local governments or local enterprises to serve local needs. Although the MOR did not operate other railroads, it provided guidance, coordination,
supervision and assistance with respect to industry matters to such other railroads. The MORs responsibilities include the centralized coordination of train routing and scheduling nationwide, planning of freight shipments and freight car
allocations, overseeing equipment standardization and maintenance requirements, and financial oversight and revenue clearing throughout the national railway system. After the dissolution of the MOR, the administrative functions formerly performed by
the MOR were assigned to the MOT and the National Railway Administration, while the commercial functions formerly performed by the MOR were assigned to the CRC.



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Railway group companies are directly responsible for passenger and freight transportation as
well as the coordination and supervision of operations carried out by train stations within their respective service territory. There are currently 18 railway group companies overseeing distinct portions of the national railway system.

Transport Operations

Prior to the dissolution of the MOR, the transport operations of the PRC national railway system were organized under the centralized regulation of the MOR. In order to promote efficient utilization of
the railroad network nationwide, the MOR supervised and coordinated traffic flow on national trunk lines and through any connection points, where two rail lines operated by different companies connect to each other, in the system. Based on
route capacity, available equipment and national priorities, the MOR formulated and issued the plans to the railway bureaus or railway group companies regarding routings on trunk lines, allocation of transportation capacities between railway bureaus
or railway group companies at the connection points and allocation of freight cars to railway bureaus or railway group companies. The MOR also regulated the dispatch of empty freight cars to designated locations in order to enhance the
utilization rate of the freight cars within the national railway system. Within the plans set forth by the MOR, each railway bureau and railway group company supervised and coordinated traffic within its own jurisdiction.

Currently, the plans and schedules for our passenger and freight services that were conducted solely on our own lines were determined by
us; while our passenger and freight services that ran beyond our own lines were subject to overall planning and scheduling of GRGC or the CRC.

Where our service runs beyond our own line, clearance by and coordination with GRGC is necessary. Prior to the dissolution of the MOR, to the extent that we operated long-distance services beyond
GRGCs jurisdiction, they were subject to coordination and clearance by the MOR. Currently, they were subject to coordination and clearance by the CRC. In addition, in order to enable GRGC and the MOR to allocate freight cars and control
traffic going through connection points, we were required to provide GRGC with prior electronic notice through internal network, on a daily basis, of the number and types of freight cars we required, as well as the number of our freight trains that
would go through particular connection points. Currently, the daily notice is still provided to GRGC and the allocation of freight cars and control of traffic through connection points are carried out by GRGC and the CRC. Furthermore, we were
required to carry out special shipping tasks, such as emergency aid and military and diplomatic transport, as directed by the MOR (and now by the CRC) or GRGC. Revenue from military and diplomatic transport generally account for less than 1% of our
total transportation revenue. Emergency aid transport was required only during periods of natural disasters declared by the PRC government, and was provided with reduced fees.

Pricing

Prior to the dissolution of the MOR, the MOR was generally
responsible for preparing a proposal for the baseline pricing standards for the nationwide railway system with respect to freight and passenger transportation. Such proposed pricing standards would take effect after being approved by and/or
filed with relevant PRC government authorities. Currently, the CRC is responsible for the preparing and filing of such proposal for the baseline pricing standards.

Pursuant to relevant approvals from the MOR and other relevant PRC government authorities, we have some discretion to adjust and determine our service price. With respect to our freight
transportation services within our Guangzhou-Shenzhen lines, we may set our prices within a range between 50% and 150% of national price levels. With respect to our passenger transportation services, we may set the prices for our regular speed
Guangzhou-Shenzhen trains within a range between 25% and 225% of national price levels, and may freely determine the prices for our high-speed express trains between Guangzhou and Shenzhen. In addition, we set the prices for our Hong Kong
Through Trains in consultation with MTR, our business partner and the prices for our Hong Kong Through Trains are higher than the prices we charge for our domestic train services.



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Environmental Protection

We believe that we are in material compliance with all applicable PRC national and local environmental protection laws and
regulations. We have not been fined or cited for any activities that have caused environmental damages. We have 14 wastewater treatment facilities used for purposes of treating wastewater generated from cleaning of special cargo freight cars,
locomotives, coaches and from residential use of our employees. We pay regular fees to local authorities for the discharge of waste substances. In 2016, our environmental protection-related expenses were approximately RMB1.35 million,
mainly related to the landscaping of our railroad and office areas.

Insurance

We do not currently maintain any insurance coverage with third party carriers against third party liabilities. Consistent with what
we believe to be the customary practice among railway operators in the PRC, we do not maintain insurance coverage for our property and facilities (other than for our automobiles), for business interruption or for environmental damage arising from
accidents on our property or relating to our operations. As a result, in the event of an accident or other event causing loss, destruction or damage to our property or facilities, causing interruption to our normal operations or causing liability
for environmental damage or clean-up, we will be liable for such damages. See ITEM 3. KEY INFORMATIOND. Risk FactorsRisks Relating to Our BusinessWe have very limited insurance coverage.

In addition, we have purchased liability insurance for our directors and have taken out basic retirement insurance, basic medical
insurance, work-related personal injury insurance policies and childbearing insurance for our employees.



|C. | Organizational Structure
|-- | ------------------------

The following table lists our significant subsidiaries as of December 31, 2016:



|                                                                             |  |                         |     |  |                                           |       
|---------------------------------------------------------------------------- |  | ----------------------- | --- |  | ----------------------------------------- | ------
|Name                                                                         |  | Country ofIncorporation |     |  | Percentage of Interestheld by our Company
|Dongguan Changsheng Enterprise Company Limited                               |  |                         | PRC |  |                                           | 51%   
|Shenzhen Fu Yuan Enterprise Development Company Limited                      |  |                         | PRC |  |                                           | 100%  
|Shenzhen Pinghu Qun Yi Railway Store Loading and Unloading Company Limited   |  |                         | PRC |  |                                           | 100%  
|Shenzhen Nantie Construction Supervision Company Limited                     |  |                         | PRC |  |                                           | 76.66%
|Shenzhen Railway Property Management Company Limited                         |  |                         | PRC |  |                                           | 100%  
|Shenzhen Shenhuasheng Storage and Transportation Company Limited             |  |                         | PRC |  |                                           | 100%  
|Shenzhen Guangshen Railway Economic and Trade Enterprise Company Limited     |  |                         | PRC |  |                                           | 100%  
|Shenzhen Railway Station Passenger Services Company Limited                  |  |                         | PRC |  |                                           | 100%  
|Guangshen Railway Station Dongqun Trade and Commerce Service Company Limited |  |                         | PRC |  |                                           | 100%  
|Guangzhou Railway Huangpu Service Company Limited                            |  |                         | PRC |  |                                           | 100%  
|Zengcheng Lihua Stock Company Limited(1)                                     |  |                         | PRC |  |                                           | 44.72%



|(1) | According to the Articles of Association of Zengcheng Lihua Stock Company Limited (Zengcheng Lihua), the remaining shareholders of Zengcheng Lihua are all
natural persons and none of such individual shareholders holds more than 0.5% equity interest in Zengcheng Lihua. All directors of Zengcheng Lihua were appointed by the Company. After considering that all shareholders of Zengcheng Lihua other than
the Company are individuals with individual interest of less than 0.5% in Zengcheng Lihua and such individuals do not act in concert, and that all directors of Zengcheng Lihua were appointed by the Company, the directors of the Company believe that
the Company has the de facto control power over the board of Zengcheng Lihua with regard to material financial and operating decisions of Zengcheng Lihua.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|D. | Property, Plant and Equipment
|-- | -----------------------------

We occupy a total area of approximately 41.1 million square meters, among which, we own the land use right of approximately 13.1 million square meters on which our buildings and facilities of
Guangzhou-Shenzhen railway are located, we lease approximately 28.0 million square meters from GRGC for the Guangzhou-Pingshi Railway.

With respect to the land for which we hold the land use rights, the terms range from 36.5 to 50 years, terminating between 2031 and 2055. We will renew the term of extend land use right upon its
expiry in strict compliance with requirements of relevant laws and regulations. With respect to the land leased from GRGC, the term is 20 years, terminating in 2027. Based on the land lease agreement we entered into with GRGC in 2004, we can
renew such lease at our discretion upon the expiration of the term of such land lease.

As of December 31, 2016, we had
not obtained the land use right certificates, or Land Certificates, of certain parcels of land with an aggregate area of approximately 1,928,603 square meters. After consultation with our PRC legal counsel, we believe there is no legal hurdle
for us to apply for and to obtain the Land Certificates and we do not believe the current lack of Land Certificates will lead to any material adverse impact on the operation of our business. Accordingly, we do not consider any provision for
impairment necessary.

As of December 31, 2016, we had not obtained the ownership certificates of certain buildings, or
Building Ownership Certificates, which had an aggregate carrying value of approximately RMB1,819.5 million. After consultation with our PRC legal counsel, we believe that there is no legal hurdle for us to apply for and obtain the Building
Ownership Certificates and it should not lead to any material adverse impact on the operation of our business. Accordingly, we do not consider any provision for impairment necessary.

Railroad operators typically require substantial land use rights for track, freight and maintenance yards, stations and related
facilities. The availability of convenient rail transportation generally enhances the value of land along a rail line. We have not engaged and do not have any current plans to engage in commercial development of any of our land use rights
for use other than in connection with our existing businesses. We do not at present intend to contribute capital to engage in any land development projects in the future. However, we may contribute land use rights not otherwise being fully
utilized by us for equity stakes in these projects if we believe these opportunities are economically viable. Any development projects will require approval from PRC government authorities responsible for regulating land development.

As of April 20, 2017, we had 48 stations situated on our rail line, of which the Guangzhou East Station is the largest, occupying an
area of 41,925 square meters.

For additional information regarding our property, plant and equipment, see ITEM 4.
INFORMATION ON THE COMPANYB. Business OverviewEquipment, Tracks and Maintenance and Note 6 to our audited consolidated financial statements included elsewhere in this annual report.



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|ITEM 4A. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

We do not have any unresolved Staff comments that are required to be disclosed under this item.



|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 Standards as issued by IASB.

Overview

Our principal businesses are railroad passenger and freight transportation as well as railway network usage and other transportation
related services on the Shenzhen-Guangzhou-Pingshi railway and certain long-distance passenger transportation services. We also operate the Hong Kong Through Trains under a cooperative arrangement with MTR in Hong Kong. Prior to the
Acquisition, our key strategic focus was to provide high-speed passenger train services in the Guangzhou-Shenzhen corridor. After the Acquisition, we have aimed to establish ourselves as a comprehensive railway service provider on the
Shenzhen-Guangzhou-Pingshi corridor by providing passenger transportation, freight transportation and railway network usage and other transportation related services to our customers. In addition to our core railroad transportation business, we also
engage in other businesses that complement our core businesses, including on-board and station sales, restaurant services, as well as advertising and tourism.

For the year ended December 31, 2016, our total revenue was RMB17,280.5 million, profit attributable to equity holders was RMB1,158.3 million, and earnings per share were
RMB0.16. Railroad and related business revenue accounted for 93.1%, 93.1% and 93.6% of our total revenue in 2014, 2015 and 2016, respectively.

Passenger transportation is our principal business. In 2016, the total number of our passengers was 84.9 million, representing a decrease of 0.6% from 85.4 million in 2015. Our
passenger transportation revenue was RMB7,358.9 million in 2016, representing an increase of 5.2% from RMB6,997.6 million in 2015.

We transported a total of 48.6 million tons of freight in 2016, representing an increase of 0.3% from 48.4 million tons in 2015. Our freight transportation revenue in 2016 was RMB1,718.3
million, representing a decrease of 2.5% from RMB1,761.4 million in 2015.

Revenue from our railway network usages and other
transportation related services business was RMB7,093.2 million in 2016, representing an increase of 20.7% from RMB5,874.7 million in 2015.

Revenue from our other businesses was RMB1,110.2 million in 2016, compared to RMB1,091.6 million in 2015.



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|A. | Operating Results
|-- | -----------------

Principal Factors Affecting Our Results of Operations

Economic
Development in the Pearl River Delta Region and the PRC. We are mainly engaged in railway transportation services on the trains between Guangzhou-Shenzhen intercity trains, certain long-distance trains and Hong Kong Through Trains. Our
results of operations relating to passenger transportation are influenced by the economic development in the Pearl River Delta region. The level of economic activities in the Pearl River Delta region, including the economic cooperation among
Hong Kong, Macau and China, affects the number of business people and migrant workers traveling in this region. In addition, the average income levels of residents in this region and elsewhere in the PRC affects the number of the tourists departing
from or arriving at our train stations. The majority of the freight we transport is large-volume, medium-to long-distance freight received from and/or transferred to other railway lines. Economic development in the PRC, including but not limited to
the Pearl River Delta region, determines the market demand for such goods as coal, iron ore, steel and therefore indirectly affects the market demand of freight train transportation service. Furthermore, the global financial crisis and economic
downturn in 2008 had adversely affected economies and businesses around the world, including in China. This change in the macro-economic conditions had an adverse impact on our business and operations by causing a decrease in the number of
passengers and the volume of freight that we transported in 2009. Although many places around the world have recovered since the second half of 2009, the global economic downturn, Europes sovereign debt crisis, the stability of the Eurozone
and the decreased growth rate of Chinas economy may have a material and adverse effect on our businesses, results of operations and financial condition. In 2016, Chinas economy grew at a slower pace and trended stably and positively.
Although Chinas GDP growth rate remained high compared to other countries and the quality and efficiency of economic development were enhanced, providing strong and solid protection for the long-term and stable development of the Company, with
the still complicated and evolving domestic and international economic environment, Chinas economy still faced greater downward pressure, which suppressed the demand growth of passenger and freight transportation. For example, we experienced a
decrease in the volume of freight transportation, partially due to the slowdown of Chinas economic growth and a shift in the Pearl River Delta economy towards technology businesses, which require less freight to be transported by rail.

Competitive Pressure from other Railway Operators and other Means of Transportation. Sales for our passenger
transportation services are also affected by the competitive pressure from other railway operators and other means of transportation, such as the automobile, bus, ferry and airplane services. With the establishment of the four horizontal and
four vertical high-speed railway network, more high-speed trains that connect the Pearl River Delta region and other major mainland cities are available to the public, including the Guangzhou-Shenzhen section of the Guangzhou-Shenzhen-Hong
Kong passenger line which commenced operation in December 2011, the Beijing-Guangzhou passenger line which commenced operation in December 2012, the Xiamen-Shenzhen passenger line which commenced operation in December 2013 and the
Nanning-Guangzhou and Guiyang-Guangzhou passenger lines which commenced operation in December 2014. As a result, the number of passengers traveling by our long-distance train services decreased recently. In response to such competition, we adjusted
the operational scheme of passenger transportation to increase the number of pairs of long-distance trains. In addition, the opening of the Guangzhou-Shenzhen high speed rail way, the rapid growth in the number of privately owned vehicles and a
higher penetration of bus services also affected the number of train passengers traveling short distances and any significant decrease in the air transportation prices affects the number of train passengers traveling long distances. Our sales of the
freight transportation services are also affected by the competition from other means of transportation, such as water, truck and freight transportation services. We also expect competition to increase in the future as the marketization reform
of the railway industry (including the reformation of the investment and financing system, the transportation management system and the pricing system) gradually deepens.

We believe that the entry barrier to the industry will decrease, investors in the industry will become more diversified and the States high-speed railway network with Four East-West Lines and Four
South-North Lines and numerous inter-city railways will complete construction and commence operation, leading to increased competition within the industry itself.

PRC Policies. We are allowed to be more flexible in setting the prices of both passenger transportation and the freight transportation services as compared to other domestic railroad
operators. Material changes in the policies of the PRC government that affect such preferential treatments will affect our results of operations.



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Year ended December 31, 2016 compared with year ended December 31, 2015

Revenue

In 2016,
our total revenue was RMB17,280.5 million, representing an increase of 9.9% from RMB15,725.3 million in 2015. Our revenue from railroad passenger transportation service, freight transportation service and railway network usage and other
transportation related services was RMB7,358.9 million, RMB1,718.3 million and RMB7,093.2 million, respectively, accounting for approximately 42.6%, 9.9% and 41.0% of our total revenue in 2016, respectively.

Passenger transportation. Revenue from passenger transportation accounted for 42.6% of our total revenue and 45.5% of our railroad
and related business revenue in 2016. As of December 31, 2016, we operated 253 pairs of passenger trains each day, including 102 pairs of intercity high-speed passenger trains between Guangzhou and Shenzhen (including 94 pairs of
inter-city trains between Guangzhou East to Shenzhen (including 20 stand-by pairs), 8 pairs of Guangzhou East to the Chaozhou-Shantou cross-network EMU trains), 13 pairs of Hong Kong Through Trains (including 11 pairs of Canton-Kowloon
Through Trains, 1 pair of Zhaoqing-Kowloon Through Trains and 1 pair of Beijing/Shanghai-Kowloon Through Trains) and 138 pairs of long-distance trains (including 10 pairs of Guangzhou-Foshan-Zhaoqing intercity trains, 3 pairs of Guangzhou
to Guilin North, NaningEast and Guiyang North cross-network EMU trains).

In 2016, the total number of our passengers was
84.9 million, representing a decrease of 0.6% from 85.4 million in 2015. Our passenger transportation revenue was RMB7,358.9 million in 2016, representing an increase of 5.2% from RMB6,997.6 million in 2015. The increase in revenue from
passenger volume was primarily due to the commencement of service of five new pairs of cross-network EMU trains between Guangzhou East and Chaozhou-Shantou and one new pair of long-distance trains between Shenzhen and Urumqi, and the recommencement
of inter-city passenger transportation business at Pinghu Railway Station since September 26, 2016. The decrease in passenger volume was primarily due to (i) the increasing number of high-speed railways between the Pearl River-Delta Area
and other major cities in China, which has greatly drawn away passengers from us and (ii) the decrease in mainland visitors travelling to and shopping in Hong Kong, which caused the decrease of the volume of passengers taking our Hong Kong
Through Trains.

The following table sets forth our revenue from passenger transportation and the number of passengers for
2015 and 2016:



|                                                      |  |                         |           |  |             |  |           |              |  |  |      |   
|----------------------------------------------------- |  | ----------------------- | --------- |  | ----------- |  | --------- | ------------ |  |  | ---- | --
|                                                      |  | Year ended December 31, |           |  | Change from | 
|                                                      |  | 2015                    |           |  | 2016        |  |           | 2015 to 2016 | 
|Revenue from passenger transportation (RMB thousands) |  |                         | 6,997,562 |  |             |  | 7,358,851 |              |  |  | 5.2  | % 
|Total passengers (thousands)                          |  |                         | 85,367    |  |             |  | 84,896    |              |  |  | (0.6 | %)
|Total passenger-kilometers (millions)                 |  |                         | 25,989    |  |             |  | 25,479    |              |  |  | (2.0 | %)
|Revenue per passenger-kilometer (RMB)                 |  |                         | 0.27      |  |             |  | 0.29      |              |  |  | 7.4  | % 

Freight transportation. Revenue from our freight transportation accounted for 9.9% of our
total revenue and 10.6% of our railroad and related business revenue in 2016.



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Revenue from our freight transportation business in 2016 was RMB1,718.3 million, a decrease
of 2.5% from RMB1,761.4 million in 2015. The total tonnage of freight we transported in 2016 was 48.6 million tons, representing an increase of 0.3% from 48.4 million tons in 2015. The decrease in freight revenue was mainly due to the
decrease in outbound freight tonnage and outbound freight transportation revenue, which resulted from the slowing economy in China, the structural adjustment in the Pearl River Delta region and the heightened competition in the freight
transportation market in 2016. The increase in the volume of freight transportation was due to the increase in inbound freight tonnage and inbound freight transportation revenue as a result of our deepening reform of railway freight transportation
and the increased operations of southern express trains (containers, single load cargo), and freight tonnage (mainly in containers) through each station we managed.

The following table sets forth our revenue from freight transportation and the volumes of commodities we shipped for 2015 and 2016:



|                                                       |  |                         |           |  |            |  |           |              |  |  |       |   
|------------------------------------------------------ |  | ----------------------- | --------- |  | ---------- |  | --------- | ------------ |  |  | ----- | --
|                                                       |  | Year ended December 31, |           |  | Changefrom | 
|                                                       |  | 2015                    |           |  | 2016       |  |           | 2015 to 2016 | 
|Revenue from freight transportation (RMB thousands)    |  |                         | 1,761,449 |  |            |  | 1,718,260 |              |  |  | (2.5  | %)
|- Revenue from outbound freight transportation         |  |                         | 565,392   |  |            |  | 476,505   |              |  |  | (15.7 | %)
|- Revenue from inbound and pass-through transportation |  |                         | 1,022,025 |  |            |  | 1,105,061 |              |  |  | 8.1   | % 
|- Revenue from other freight transportation services   |  |                         | 174,032   |  |            |  | 136,694   |              |  |  | (21.5 | %)
|Total freight tons (thousands of tons)                 |  |                         | 48,438    |  |            |  | 48,603    |              |  |  | 0.3   | % 
|- Outbound freight tonnage                             |  |                         | 16,882    |  |            |  | 15,356    |              |  |  | (9.0  | %)
|- Inbound and pass-through freight tonnage             |  |                         | 31,556    |  |            |  | 33,247    |              |  |  | 5.4   | % 
|Revenue per ton (RMB)                                  |  |                         | 36.4      |  |            |  | 35.4      |              |  |  | (2.7  | )%
|Total ton-kilometers (millions)                        |  |                         | 10,874    |  |            |  | 10,302    |              |  |  | (5.3  | %)
|Revenue per ton-kilometer (RMB)                        |  |                         | 0.16      |  |            |  | 0.17      |              |  |  | 6.3   | % 

Railway network usage and other transportation related services. Revenue from our railway network
usage and other transportation related services accounted for 41.0% of our total revenue and 43.9% of our railroad and related business revenue in 2016. Railway network usage and other transportation related services mainly include locomotive
traction, track usage, electric catenary, vehicle coupling and other services. Revenue from our railway network usages and other transportation related services business was RMB7,093.2 million in 2016, representing an increase of 20.7% from
RMB5,874.7 million in 2015. The increase in revenue from railway network usage and other transportation related services was principally due to (i) the acquisition of locomotive assets of GSRC, which induced an increase in the usage of
locomotive towing services, and an increase in the revenue from such services; (ii) an increase in the railway operation services we provided to railway companies we have been serving in the past, including but not limited to, Wuhan-Guangzhou
Passenger Railway Line Co., Ltd., Guangzhou-Shenzhen-Hong Kong Express Rail Link Company Limited, Xiamen-Shenzhen Railway Company Limited, Ganzhou-Shaoguan Railway Company Limited, Guiyang-Guangzhou Railway Company Limited, and Nanning-Guangzhou
Railway Company Limited; and (iii) the acquisition of part of the operating assets and personnel of GRCL and GSRC, which resulted in us providing transportation service to them and adding new transportation services among Pearl River Delta
cities.

Other Businesses. Our other businesses mainly consist of the sale of materials and supplies, on-board
catering services, labor services, train repair and other businesses related to railway transportation. Revenue from our other businesses was RMB1,110.2 million in 2016, representing an increase of 1.7% from RMB1,091.6 million in 2015,
primarily due to the increased profit we received from train repair services and food and beverage we provided in trains.



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Operating Expenses

In 2016, our total operating expenses were RMB15,638.0 million, representing an increase of 10.5% from RMB14,156.7 million in 2015.

The following table sets forth the principal operating expenses associated with our railroad and related business, as a percentage of our
railroad and related business revenue for 2015 and 2016.



|                                                                           |  |                         |          |   |      |  |          |  
|-------------------------------------------------------------------------- |  | ----------------------- | -------- | - | ---- |  | -------- | -
|                                                                           |  | Year ended December 31, |         
|                                                                           |  | 2015                    |          |   | 2016 | 
|Railroad and related business revenue (RMB millions)                       |  |                         | 14,633.7 |   |      |  | 16,170.3 |  
|Business tax                                                               |  |                         | 0.3      | % |      |  | 0.2      | %
|Employee benefits                                                          |  |                         | 32.6     | % |      |  | 35.0     | %
|Equipment leases and services                                              |  |                         | 26.7     | % |      |  | 25.9     | %
|Land use right leases                                                      |  |                         | 0.4      | % |      |  | 0.3      | %
|Materials and supplies                                                     |  |                         | 8.4      | % |      |  | 8.3      | %
|Repairs and facilities maintenance costs, excluding materials and supplies |  |                         | 4.9      | % |      |  | 3.8      | %
|Depreciation of fixed assets                                               |  |                         | 9.5      | % |      |  | 9.2      | %
|Cargo logistics and outsourcing service charges                            |  |                         | 1.1      | % |      |  | 1.3      | %
|Amortization of leasehold land payments                                    |  |                         | 0.1      | % |      |  | 0.2      | %
|Social services expenses                                                   |  |                         | 0.1      | % |      |  | 0.1      | %
|Utility and office expenses                                                |  |                         | 0.4      | % |      |  | 0.3      | %
|Impairment for trade and other receivables and materials and supplies      |  |                         | 0.4      | % |      |  | 0.0      | %
|Others                                                                     |  |                         | 5.0      | % |      |  | 5.5      | %
|Operating expenses ratio(1)                                                |  |                         | 89.9     | % |      |  | 90.1     | %
|Railroad and related business operating margin                             |  |                         | 10.1     | % |      |  | 9.9      | %



|(1) | Total railroad operating expenses as a percentage of railroad and related business revenue.
|--- | -------------------------------------------------------------------------------------------

Railway Operating Expenses. Our total railway operating expenses increased by 10.7% to RMB14,561.8 million in 2016 from
RMB13,150.4 million in 2015. This increase was driven primarily by:



| |  | Employee Benefits. Our Employee Benefits mainly consist of wages and welfare. In 2016, our expenses relating to employee benefits amounted to
RMB5,654.9 million, representing an increase of 18.6% from RMB4,767.1 million in 2015. This increase was mainly due to an increase in the number of employees providing railway operations and services due to the acquisition of GRCL and GSRC, and an
increase in industry-wide pay levels and contributions to the housing provident fund and social security fund.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 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 2016, our expenses relating to equipment leases and services amounted to RMB4,193.6 million, representing an increase of 7.3% from RMB3,908.5 million in 2015. This increase was mainly due to the
commencement of five newly added cross-network EMU pairs traveling across Guangzhou and Chaozhou-Shantou and one new pair of long distance trains between Shenzhen and Urumqi, and newly provided transportation service to GRCL and GSRC.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Depreciation of Fixed Assets. In 2016, our expenses of depreciation of fixed assets amounted to RMB1,488.3 million, representing an increase of 7.3%
from RMB1,387.5 million in 2015. The increase was mainly due to the acquisition of part of the operating assets of GRCL and GSRC.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The increase in our operating expenses was partially offset by repairs and facilities
maintenance costs, excluding materials and supplies. In 2016, our repairs and facilities maintenance costs, excluding materials and supplies, amounted to RMB612.5 million, representing a decrease of 14.5% from RMB716.2 million in 2015.
This was mainly due to the decrease of repairs and facilities maintenance costs in 2016.

Profit from Operations

Our profit from operations increased by 5.5% to RMB1,534.2 million in 2016 from RMB1,453.9 million in 2015, primarily due to the
increased profit we received from passenger business, railway network usage and other transportation related services and other businesses in 2016.

Taxation

In 2016, according to relevant tax regulations, our
subsidiaries were subject to income tax at the rate of 25%. Our income tax expense was RMB390.3 million in 2016, representing an increase of 0.5%, compared to RMB388.5 million in 2015. This increase was primarily due to the increase
in our profit from operations. The effective tax rate in 2016 was 25.3%, representing a decrease of 1.5% from 26.8% in 2015. This decrease was mainly due to the reversal of deferred tax assets for the impairment losses in investments
in associates and other receivables recognized in prior years relating to Zengcheng Lihua, a predecessor associate of the Company which became a subsidiary in 2015.

Profit attributable to equity holders of our Company

As a result of
the above, our profit attributable to equity holders of our Company increased by 8.2% to RMB1,158.3 million in 2016 from RMB1,070.8 million in 2015.

Year ended December 31, 2015 compared with year ended December 31, 2014

Revenue

In 2015,
our total revenue was RMB15,725.3 million, representing an increase of 6.2% from RMB14,800.8 million in 2014. Our revenue from railroad passenger transportation service, freight transportation service and railway network usage and other
transportation related services was RMB6,997.6 million, RMB1,761.4 million and RMB5,874.7 million, respectively, accounting for approximately 44.5%,11.2% and 37.4% of our total revenue in 2015, respectively.

Passenger transportation. Revenue from passenger transportation accounted for 44.5% of our total revenue and 47.8% of our railroad
and related business revenue in 2015. As of December 31, 2015, we operated 239 pairs of passenger trains each day, including 105 pairs of intercity high-speed passenger trains between Guangzhou and Shenzhen (including 19 stand-by
pairs), 13 pairs of Hong Kong Through Trains (including 11 pairs of Canton-Kowloon Through Trains, 1 pair of Zhaoqing-Kowloon Through Trains and 1 pair of Beijing/Shanghai-Kowloon Through Trains) and 121 pairs of long-distance
trains.

In 2015, the total number of our passengers was 85.4 million, representing a decrease of 5.3% from
90.1 million in 2014. Our passenger transportation revenue was RMB6,997.6 million in 2015, representing an increase of 0.1% from RMB6,988.3 million in 2014. The decrease in passenger volume was primarily due to (i) the increasing number of
high-speed railways between the Pearl River-Delta Area and other major cities in China, which has greatly drawn away passengers from us and (ii) the Occupy Central movement in Hong Kong, which caused the decrease of the volume of
passengers taking our Hong Kong Through Trains. The increase in revenue from passenger volume was primarily due to the commencement of service of one new pair of long-distance trains between Guangzhou and Ganzhou and three new pairs of cross-network
EMU trains between Guangzhou East and Chaozhou-Shantou on September 30, 2014 and February 1, 2015, respectively.



38



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The following table sets forth our revenue from passenger transportation and the number of
passengers for 2014 and 2015:



|                                                      |  |                         |           |  |             |  |           |              |  |  |      |   
|----------------------------------------------------- |  | ----------------------- | --------- |  | ----------- |  | --------- | ------------ |  |  | ---- | --
|                                                      |  | Year ended December 31, |           |  | Change from | 
|                                                      |  | 2014                    |           |  | 2015        |  |           | 2014 to 2015 | 
|Revenue from passenger transportation (RMB thousands) |  |                         | 6,988,288 |  |             |  | 6,997,562 |              |  |  | 0.1  | % 
|Total passengers (thousands)                          |  |                         | 90,113    |  |             |  | 85,367    |              |  |  | (5.3 | %)
|Total passenger-kilometers (millions)                 |  |                         | 27,954    |  |             |  | 25,989    |              |  |  | (7.0 | %)
|Revenue per passenger-kilometer (RMB)                 |  |                         | 0.25      |  |             |  | 0.27      |              |  |  | 8.0  | % 

Freight transportation. Revenue from our freight transportation accounted for 11.2 % of
our total revenue and 12.0 % of our railroad and related business revenue in 2015.

Revenue from our freight
transportation business in 2015 was RMB1,761.4 million, a decrease of 0.1% from RMB1,763.7 million in 2014. The total tonnage of freight we transported in 2015 was 48.4 million tons, representing a decrease of 6.1% from 51.6 million
tons in 2014. The decrease in freight revenue and freight volume were mainly due to the slowing economy in China, the structural adjustment in the Pearl River-Delta region and the heightened competition in the freight transportation market in 2015.
Despite the fact that both freight revenue and total tonnage decreased between 2014 and 2015, the amount of total tonnage transported decreased at a greater rate than the decrease in total revenue; and there has been an increase in the unified
national railway freight transportation fee by RMB0.01 per ton kilometer since February 1, 2015, as a result, revenue per ton in 2015 increased by 6.4% compared to 2014 (RMB36.4 in 2015 and RMB34.2 in 2014).

The following table sets forth our revenue from freight transportation and the volumes of commodities we shipped for 2014 and 2015:



|                                                       |  |                         |           |  |            |  |           |              |  |  |       |   
|------------------------------------------------------ |  | ----------------------- | --------- |  | ---------- |  | --------- | ------------ |  |  | ----- | --
|                                                       |  | Year ended December 31, |           |  | Changefrom | 
|                                                       |  | 2014                    |           |  | 2015       |  |           | 2014 to 2015 | 
|Revenue from freight transportation (RMB thousands)    |  |                         | 1,763,679 |  |            |  | 1,761,449 |              |  |  | (0.1  | %)
|- Revenue from outbound freight transportation         |  |                         | 590,448   |  |            |  | 565,392   |              |  |  | (4.2  | %)
|- Revenue from inbound and pass-through transportation |  |                         | 920,255   |  |            |  | 1,022,025 |              |  |  | 11.1  | % 
|- Revenue from other freight transportation services   |  |                         | 252,976   |  |            |  | 174,032   |              |  |  | (31.2 | %)
|Total freight tons (thousands of tons)                 |  |                         | 51,562    |  |            |  | 48,438    |              |  |  | (6.1  | %)
|- Outbound freight tonnage                             |  |                         | 18,318    |  |            |  | 16,882    |              |  |  | (7.8  | %)
|- Inbound and pass-through freight tonnage             |  |                         | 33,244    |  |            |  | 31,556    |              |  |  | (5.1  | %)
|Revenue per ton (RMB)                                  |  |                         | 34.2      |  |            |  | 36.4      |              |  |  | 6.4   | % 
|Total ton-kilometers (millions)                        |  |                         | 11,435    |  |            |  | 10,874    |              |  |  | (4.9  | %)
|Revenue per ton-kilometer (RMB)                        |  |                         | 0.15      |  |            |  | 0.16      |              |  |  | 6.7   | % 

Railway network usage and other transportation related services. Revenue from our railway network
usage and other transportation related services accounted for 37.4% of our total revenue and 40.1% of our railroad and related business revenue in 2015. Railway network usage and other transportation related services mainly include locomotive
traction, track usage, electric catenary, vehicle coupling and other services. Revenue from our railway network usages and other transportation related services business was RMB5,874.7 million in 2015, representing an increase of 16.8% from
RMB5,031.2 million in 2014. The increase in revenue from railway network usage and other transportation related services was principally due to (i) an increase in the railway operation services we provided to railway companies we have
been serving in the past, including but not limited to, Wuhan-Guangzhou Passenger Railway Line Co., Ltd., Guangzhou-Shenzhen-Hong Kong Express Rail Link Company Limited, Xiamen-Shenzhen Railway Company Limited and Ganzhou-Shaoguan Railway Company
Limited, and (ii) the railway operating services we newly provided to Guiyang-Guangzhou Railway Company Limited and Nanning-Guangzhou Railway Company Limited.



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Other Businesses. Our other businesses mainly consist of the sale of materials
and supplies, on-board catering services, labor services and other businesses related to railway transportation. Revenue from our other businesses was RMB1,091.6 million in 2015, representing an increase of 7.3% from RMB1,017.6 million in 2014,
primarily because we included fueling service for locomotives and passenger cars as other businesses in 2015, which previously were categorized as part of the principal business mentioned above.

Operating Expenses

In 2015, our total operating expenses were RMB14,156.7 million, representing an increase of 2.9% from RMB13,752.0 million in 2014.

The following table sets forth the principal operating expenses associated with our railroad and related business, as a
percentage of our railroad and related business revenue for 2014 and 2015.



|                                                                           |  |                         |          |   |      |  |          |  
|-------------------------------------------------------------------------- |  | ----------------------- | -------- | - | ---- |  | -------- | -
|                                                                           |  | Year ended December 31, |         
|                                                                           |  | 2014                    |          |   | 2015 | 
|Railroad and related business revenue (RMB millions)                       |  |                         | 13,783.2 |   |      |  | 14,633.7 |  
|Business tax                                                               |  |                         | 0.4      | % |      |  | 0.3      | %
|Labor and benefits                                                         |  |                         | 32.2     | % |      |  | 32.6     | %
|Equipment leases and services                                              |  |                         | 26.3     | % |      |  | 26.7     | %
|Land use right leases                                                      |  |                         | 0.4      | % |      |  | 0.4      | %
|Materials and supplies                                                     |  |                         | 9.5      | % |      |  | 8.4      | %
|Repairs and facilities maintenance costs, excluding materials and supplies |  |                         | 6.6      | % |      |  | 4.9      | %
|Depreciation of fixed assets                                               |  |                         | 10.2     | % |      |  | 9.5      | %
|Amortization of leasehold land payments                                    |  |                         | 0.1      | % |      |  | 0.1      | %
|Social services expenses                                                   |  |                         | 0.1      | % |      |  | 0.1      | %
|Utility and office expenses                                                |  |                         | 0.5      | % |      |  | 0.4      | %
|Impairment for trade and other receivables and materials and supplies      |  |                         |         |   |      |  | 0.4      | %
|Others                                                                     |  |                         | 5.9      | % |      |  | 6.1      | %
|Operating expenses ratio(1)                                                |  |                         | 92.4     | % |      |  | 89.9     | %
|Railroad and related business operating margin                             |  |                         | 7.6      | % |      |  | 10.1     | %



|(1) | Total railroad operating expenses as a percentage of railroad and related business revenue.
|--- | -------------------------------------------------------------------------------------------

Railway Operating Expenses. Our total railway operating expenses increased by 3.3% to RMB13,150.4 million in 2015 from
RMB12,729.8 million in 2014. This increase was driven primarily by:



| |  | 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 2015, our expenses relating to equipment leases and services amounted to RMB3,908.5 million, representing an increase of 7.7% from RMB3,629.8 million in 2014. This increase was mainly due to the
commencement of three newly added cross-network EMU pairs traveling across Guangzhou and Chaozhou-Shantou, the increase in leasing fees of locomotives and management fees of railway operation services settled by GRGC.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  | Labor and benefits. In 2015, our labor and benefits expenses amounted to RMB4,767.1 million, representing an increase of 7.3% from RMB4,441.6 million
in 2014. The increase was mainly due to increases in the number of employees and the average monthly staff cost by person.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The increase in our operating expenses was partially offset by:



| |  | Materials and supplies. Our materials and supplies consist of expenses for materials, fuel, water and electricity. In 2015, our materials and supplies
amounted to RMB1,224.3 million, representing a decrease of 6.5% from RMB1,310.1 million in 2014. The decrease was mainly due to the completion of certain locomotive maintenance projects in 2014 and no occurrence of similar new projects in
2015. See ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSB. Related Party Transactions and Note 36 to our audited consolidated financial statements included elsewhere in this annual report.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Repairs and facilities maintenance costs, excluding materials and supplies. In 2015, our repairs and facilities maintenance costs, excluding materials
and supplies, amounted to RMB716.2 million, representing a decrease of 20.9% from RMB905.5 million in 2014. This was mainly due to a decrease of maintenance work on locomotives and rolling stock.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Impairment for trade and other receivables and materials and supplies. In 2015, our impairment for trade and other receivables and materials and
supplies amounted to RMB59.6 million, approximately RMB52.8 million of which was made for reusable rail-line track materials due to the decrease in steel prices in 2015. In addition, we recognized impairment loss of approximately RMB11.3 million for
certain locomotive accessories, which were no longer used for commercial operations due to technological changes and development in 2015.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Profit from Operations

Our profit from operations increased by
37.7% to RMB1,453.9 million in 2015 from RMB1,056.0 million in 2014, primarily due to the increased profit we received from railway network usage and other transportation related services in 2015.

Taxation

In
2015, according to relevant tax regulations, our subsidiaries were subject to income tax at the rate of 25%. Our income tax expense was RMB388.5 million in 2015, representing an increase of 77.0%, compared to RMB219.5 million in
2014. The increase was primarily due to the increase in our profit from operations. The effective tax rate in 2015 was 26.8%, representing an increase of 1.9% from 24.9% in 2014. The increase was mainly due to expenses and losses incurred,
which are not deductible for tax assessment purposes, and reversal of deferred tax asset associated with impairment loss of investment in associates and other receivables recognized in prior years.

Profit attributable to equity holders of our Company

As a result of the above, our profit attributable to equity holders of our Company increased by 61.8% to RMB1,070.8 million in 2015 from RMB662.0 million in 2014.



41



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##### Table of Contents

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with IFRS. Our principal accounting policies are set out in
Note 2 to our audited consolidated financial statements included elsewhere in this annual report. IFRS also requires us to exercise our judgment in the process of applying our accounting policies. The areas involving a higher degree of judgment
or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4 to our audited consolidated financial statements included elsewhere in this annual report. Although these estimates are
based on our best knowledge of current events and actions, actual results ultimately may differ from those estimates.

Revenue
recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and
services in the ordinary course of our activities. Revenue is shown net of value-added tax, rebates and discounts and after eliminating sales within the Group.

We recognize revenue when the services are rendered and the amount of revenue can be reliable measured, future economic benefits will probably flow to the entity with reasonably certainty, and specific
criteria have been met for each of our activities as described below. The recognition also involves use of estimates exercised by management based on historical results, takes into consideration the different type of customers, transactions and the
specifics of each arrangement.



| | (a) | Revenue from railroad and related business
| | --- | ------------------------------------------

Revenue from passenger transportation

The passenger transportation is
generally classified by transportation business of Guangzhou-Shenzhen inter-city express trains, long-distance trains and Guangzhou-Hong Kong city through trains. These services are provided in cooperation with other railway companies in PRC and the
corresponding revenue information is captured and processed by the CRC through a central clearance system.

Revenues are
recognized on a monthly basis when the train transportation services are rendered within the month, i.e. upon the passenger tickets with fixed prices and dates of travel, which are non-refundable and non-reschedulable, are sold and the respective
trains have reached the prescribed destinations within that particular month, as well as upon approval and notification is made by the CRC on a monthly basis (the CRC Monthly Statement) for transactions completed within that month and
when the amounts of revenue can be reliably measured and collectability is certain. The revenue is presented net of value-added tax but before deduction of any sales handling commissions.

Revenue from freight transportation

We also operate with other railway companies in PRC for the provision of freight transportation services. Service information and computation of the attributable revenues entitled by us are processed by
the central clearance system of the CRC on a monthly basis. Revenue from outbound and inbound freight transportation with ports of loading and discharge located at railway lines owned and operated by us; pass-through transportation with freight
trains passing through railway lines owned and operated by us; as well as goods loading and discharge services rendered at ports located at railway lines owned by us, are recognized, on a monthly basis, when the goods are delivered to the ports of
discharge within a month, or when the loading/discharge services are rendered, and when the amounts are approved and notified in the CRC Monthly Statement, upon which the amounts can be reliably measured and collectability is certain.



42



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The revenues are presented at the gross amounts of the attributable freight charges computed
from the standard freight charges imposed by the CRC.

Revenue from railway network usage and other transportation related
business

Revenue from railway network usage and other transportation related business, mainly consist of network usage
services (locomotive traction, track usage and electric catenary service, etc.) and railway operation services and other services, are rendered by us together with other railway companies in PRC. The information relating to network usage service is
captured and processed by the central clearance system of the CRC. The revenue from network usage services are recognized on a monthly basis, when the services are rendered within that month and revenue can be reliably measured, i.e. upon approval
and notification made in the the CRC Monthly Statement, for the transactions completed within that month, when the respective revenue amounts can be reliably measured and when collectability is certain. Railway operation services and other
services are rendered solely by us and they are recognized when the services are rendered and revenue can be reliably measured. All proceeds are collected by us directly.

The operations of our railway and related business form part of the nationwide railway system in PRC and they are supervised and governed by the CRC. We render the passenger transportation and freight
transportation services in cooperation with other railway companies and the related service fees and charges are collected either by us or by other railway companies. In addition, we also receive service fees and charges for on behalf of other
railway companies. The respective fares and charges of the services, fee sharing basis, and processing of the respective revenue sharing among different railway companies are done centrally by a central clearance system operated by the CRC. We
record revenues based on the amounts of attributable revenue approved and notified in the CRC Monthly Statement for services undertaken by us completed within the specific month, upon then the revenues can be reliably measured and collectability is
certain. The respective share of revenues, in excess of amount collected by us, are credited by the CRC to bank accounts maintained by us. In the case that the attributable amount is less than the amount collected by us, we remit the surplus to the
CRC.



| | (b) | Revenue from other businesses
| | --- | -----------------------------

Revenue from other business mainly consist of on-board catering services, leasing, sales of materials, sale of goods and other businesses related to railway transportation. Revenues from on-board catering
services are recognized when the related services are rendered. Revenues from sales of materials and supplies and sale of goods are recognized when the respective materials and goods are delivered to customers. Revenue from operating lease
arrangements on certain properties and locomotives is recognized on a straight-line basis over the period of the respective leases.

Fixed assets

The
railway industry is capital intensive. Under IFRS, fixed assets are initially recorded at historical cost with the balance subsequently adjusted for depreciation and impairment. Historical cost represents expenditure that is directly attributable to
the acquisition of the items (for the case of fixed assets acquired by us from GRGC during the Restructuring, the revaluated amount in the Restructuring was deemed costs).

Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will
flow to us and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the comprehensive income statement during the financial period in which they are
incurred.



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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 years  | 
|Track, bridges and service roads (Note a) |  |  | 16 to 100 years | 
|Locomotives and rolling stock             |  |  | 20 years        | 
|Communications and signaling systems      |  |  | 8 to 20 years   | 
|Other machinery and equipment             |  |  | 4 to 25 years   | 

Note a: The estimated useful lives of some buildings, tracks, bridges and service roads exceed the
initial lease periods of the land use rights from operation lease; and the initial period of certain land use right acquired, on which these assets are located.

We will renew the term of land use rights upon their expiry in strict compliance with requirements of relevant laws and regulations. There is no substantive impediment for the renewal except for possible
competing public interests. In addition, based on the provision of the land use right operating lease agreement entered into with the single largest shareholder, we can renew the lease at its own discretion upon expiry of the operating lease term.
Based on the above consideration, our directors consider the current estimated useful lives of those assets to be reasonable.

The assets residual values and estimated useful lives are reviewed, and adjusted if appropriate, at the end of each year.

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.

Gains and losses on disposals are determined by comparing the proceeds with
the carrying amount and are recognized within other income and other gains/(losses)net, included in the comprehensive income statement.

Government grants

Grants from the government are recognized at
their fair value where there is a reasonable assurance that the grant will be received and we will comply with all attached conditions.

Government grants relating to costs are deferred and recognized in the comprehensive income statement over the period necessary to match them with the costs that they are intended to compensate.

Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government
grants and are credited to the comprehensive income statement on a straight-line basis over the expected lives of the related assets.

Trade and other receivables

Trade 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 recognized initially at fair value and subsequently measured at amortized cost using the effective
interest method, less provision for impairment.



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A provision for impairment of receivables is established when there is objective evidence to
prove the following:



| |  | significant financial difficulty of the issuer or obligor;
|- |  | ----------------------------------------------------------



| |  | a breach of contract, such as a default or delinquency in interest or principal payments;
|- |  | -----------------------------------------------------------------------------------------



| |  | we, 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 reorganization;
|- |  | ----------------------------------------------------------------------------------------------



| |  | 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; and

(ii) national or local economic conditions that correlate with defaults on the assets in the portfolio.

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.

Trade payables

Trade payables are obligations to pay for goods or
services that have been acquired in the ordinary course of business from suppliers. 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 recognized initially at fair value and subsequently
measured at amortized cost using the effective interest method.

We derecognize financial liability when, and only when, our
obligations are discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

Goodwill

Goodwill represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the
acquisition-date fair value of any previous equity interest in the acquiree over the fair value of our share of identifiable net assets acquired. Goodwill arising from acquisitions of subsidiaries business is disclosed separately on the
balance sheet.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the
cash-generating units (CGUs), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the
goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.



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Goodwill impairment reviews are undertaken annually or more frequently if events or changes
in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognized immediately as an expense
and is not subsequently reversed.

Impairment of non-financial assets other than goodwill

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 recognized 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 (CGUs). Non-financial assets other than goodwill that suffered impairment are reviewed for possible
reversal of the impairment at each reporting date.

Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognized in the consolidated comprehensive income
statement, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.



| | (a) | Current income tax
| | --- | ------------------

The
current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in PRC where our subsidiaries and associates operate and generate taxable income. We periodically evaluate positions
taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establish provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.



| | (b) | Deferred income tax
| | --- | -------------------

Inside basis differences

Deferred income tax is recognized, 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 or 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 realized
or the deferred income tax liability is settled.

Deferred income tax assets are recognized only to the extent that it is
probable that future taxable profit will be available against which the temporary differences can be utilized. The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Outside
basis differences

Deferred income tax liabilities are provided on taxable temporary differences arising from
investments in our subsidiaries, and associates and joint arrangements, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by us and it is probable that the temporary difference will
not reverse in the foreseeable future. Generally we are unable to control the reversal of the temporary difference for associates. Only when there is an agreement in place that gives us the ability to control the reversal of the temporary difference
in the foreseeable future, deferred tax liability in relation to taxable temporary differences arising from our associates undistributed profits is not recognized.



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Deferred income tax assets are recognized on deductible temporary differences arising from
investments in our subsidiaries, and associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference
can be utilized.



| | (c) | Offsetting
| | --- | ----------

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 tax 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.

Employee benefits



| | (a) | Defined contribution plan
| | --- | -------------------------

We pay contributions to defined contribution schemes operated by the local government for employee benefits in respect of pension and
unemployment. We also pay contributions to defined contribution schemes operated by Guangzhou Railway Group for employee supplementary pension benefit. We have no further payment obligations once the contributions have been paid. The contributions
to the defined contribution schemes are recognized as staff costs when they are due.



| | (b) | Termination benefits
| | --- | --------------------

Termination benefits are payable when employment is terminated by us before the normal retirement date, or whenever an employee accepts
voluntary redundancy in exchange for these benefits. We recognize termination benefits at the earlier of the following dates: (a) when we can no longer withdraw the offer of those benefits; and (b) when we recognize costs for a
restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to
accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.

Critical Accounting Estimates and Judgments

Estimates 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.

We make 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 addressed
below:

Impairment of receivables

We make provision for impairment of receivables based on an assessment of the recoverability of trade and other receivables with reference to the extent and duration that the amount will be recovered.
Provisions are applied where events or changes in circumstances indicate that the balances may not be collectible. The identification of impairment requires the use of judgment and estimates. Where the expectation is different from the original
estimate, such difference will impact the carrying amount of trade and other receivables and the impairment charge in the period in which such estimate has been changed.



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Recently adopted accounting standards

In the current year, we have adopted the following new and revised standards, and amendments to existing standards which are
mandatory for the financial year beginning January 1, 2016:



| |  | Accounting for acquisitions of interests in joint operations  Amendments to IFRS 11
|- |  | ------------------------------------------------------------------------------------



| |  | Clarification of acceptable methods of depreciation and amortization  Amendments to IAS 16 and IAS 38
|- |  | ------------------------------------------------------------------------------------------------------



| |  | Annual improvements to IFRSs 2012  2014 cycle, and
|- |  | ---------------------------------------------------



| |  | Disclosure initiative  amendments to IAS 1.
|- |  | --------------------------------------------

The adoption of the above new/revised standards had no significant financial effect on our consolidated financial statements.

New accounting pronouncements

The following new standards,
amendments and interpretations have been issued as of December 31, 2016 but are not yet effective for IFRS financial statements for the year ended December 31, 2016:



|                                                                                                                          |  |                                                  |                              | 
|------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ---------------------------- | 
|                                                                                                                          |  | Effective for annualPeriods
beginning onor after |                             
|Amendments to IFRS 10 and IAS 28 on sale or contribution of assets
between an investor and its associate or joint venture |  |                                                  | The effective date is unkown | 
|Amendments to IAS 7 Disclosure Initiative                                                                                 |  |                                                  | January 1, 2017              | 
|Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealized 
Losses                                            |  |                                                  | January 1, 2017              | 
|Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions                                   |  |                                                  | January 1, 2018              | 
|IFRS15 Revenue from Contracts with Customers                                                                              |  |                                                  | January 1, 2018              | 
|IFRS 9 Financial Instruments                                                                                              |  |                                                  | January 1, 2018              | 
|IFRS16 Leases                                                                                                             |  |                                                  | January 1, 2019              | 

Our management has already commenced an assessment of the impact of these new or revised standards which
are relevant to our operation. According to the preliminary assessment made by the directors of the Company, no significant impact on the financial performance and positions is expected when adopting IFRS 9, IFRS 15 and IFRS16. Our management does
not intend to adopt the standards before their respective effective dates.



|B. | Liquidity and Capital Resources
|-- | -------------------------------

Our principal source of capital has been cash flow from operations and cash flow from financing activities, and our principal uses of capital are to fund capital expenditures, investment and payment of
taxes and dividends.

We generated approximately RMB1,641.2 million of net cash flow from operating activities in
2016. Substantially all of our revenue was received in cash, with accounts receivable arising primarily from long-distance passenger train services provided and pass-through freight transactions originating from other railway companies whose
lines connect to our railroad. Similarly, some accounts payable arise from payments for railroad transportation services that we collect on behalf of other railroad companies and should pay to these companies. Accounts receivable and
payable were generally settled either quarterly or monthly between us and the other railroad companies. Most of our revenue generated from our other businesses was also received in cash. We also have accounts payable associated with
the purchase of materials and supplies in our other businesses.



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In 2016, other than operating expenses, our cash outflow mainly related to the following:



| |  | capital expenditures of approximately RMB1,973.9 million, representing an increase of 52.7% from RMB1,292.3 million in 2015;
|- |  | ----------------------------------------------------------------------------------------------------------------------------



| |  | payment of dividends of approximately RMB566.7 million; and
|- |  | -----------------------------------------------------------



| |  | income tax expenses of approximately RMB571.6 million.
|- |  | ------------------------------------------------------

Our capital expenditures for 2016 consisted primarily of the following projects:



| |  | the reconstruction of the section from Guangzhou East Station to Xintang Station of Guangshen Line to be connected with the Guangzhou-Dongguan-Shenzhen
Intercity Passenger Lines;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the improvement of the UM71 automatic shut-off and computer interlocking systems of the section from Guangzhou to Pingshi of the Beijing-Guangzhou
Line; and
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the purchase of four sets of EMU trains, each of which has a maximum operational speed of 250 km/h.
|- |  | ---------------------------------------------------------------------------------------------------

Funds not required for immediate use are kept in short-term investments and bank deposits. We had cash and cash equivalents of
approximately RMB1,359.7 million as of December 31, 2016.

As of December 31, 2016, we did not have any
entrusted deposits placed with any financial institutions in the PRC and we did not engage in any trust business.

As of
December 31, 2016, we did not have any banking facilities.

Cash Flow

Our net cash and cash equivalents as of December 31, 2016 decreased by approximately RMB861.1 million from December 31,
2015. Our principal source of capital was revenue generated from operating activities.

The following table sets forth
certain items in our consolidated cash flow statements for 2014, 2015 and 2016, and the percentage change in these items from 2015 to 2016:



|                                                       |  |                         |            |   |                         |  |            |      |  |  |            |   |  |  |       |   
|------------------------------------------------------ |  | ----------------------- | ---------- | - | ----------------------- |  | ---------- | ---- |  |  | ---------- | - |  |  | ----- | --
|                                                       |  | Year ended December 31, |            |   | Change from 2015to 2016 | 
|                                                       |  | 2014                    |            |   | 2015                    |  |            | 2016 |  | 
|                                                       |  | (RMB thousands)         |            |   |                         | 
|Net cash generated from operating activities           |  |                         | 1,945,576  |   |                         |  | 2,259,691  |      |  |  | 1,641,238  |   |  |  | (27.4 | )%
|Net cash (used in)/generated from investing activities |  |                         | 3,373,821  |   |                         |  | (1,349,235 | )    |  |  | (1,935,702 | ) |  |  | N/A   |   
|Net cash used in financing activities                  |  |                         | (4,067,018 | ) |                         |  | (354,710   | )    |  |  | (566,683   | ) |  |  | 59.8  | % 
|Net (decrease)/increase in cash and cash equivalents   |  |                         | 1,252,379  |   |                         |  | 555,746    |      |  |  | (861,147   | ) |  |  | N/A   |   



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Our net cash inflow from operating activities decreased to RMB1,641.2 million in 2016 from
RMB2,259.7 million in 2015, primarily due to (i) the increase of payments in employee benefits about RMB984.4 million and income tax of RMB310.9 million, and (ii) the increase in revenue of RMB1,555.2 million offsets by cashflow outflow of RMB855.7
million as a result of changes in accounts receivable and account payables. Our net cash inflow from operating activities increased to RMB2,259.7 million in 2015 from RMB1,945.6 million in 2014, primarily due to (i) the increase of
our revenue in 2015, which further increased our net cash inflow by RMB99.2 million, (ii) the decrease of cash payments of income tax by RMB47.3 million in 2015 compared to 2014, and (iii) the payment of RMB167.7 million interest
accrued from the RMB3.5 billion bond that was repaid in December 2014 and no occurrence of new long-term debts or other interest in 2015.

Our net cash used in investment activities increased from RMB1,349.2 million in 2015 to RMB1,935.7 million in 2016, primarily due to an increase in expenses on investment of certain fixed assets
of GRCL and GSRC. Our net cash used in investment activities in 2015 was RMB1,349.2 million and our net cash from investment activities was RMB3,373.8 million in 2014, primarily due to the collection of deposit of fixed terms over three
months at the end of 2015 and increase in expenses on investment of fixed assets.

Our net cash used in financing activities
increased to RMB566.7 million in 2016 from RMB354.7 million in 2015, primarily due to the increase in allocation of cash dividends in 2016.

Our net cash used in financing activities decreased to RMB354.7 million in 2015 from RMB4,067.0 million in 2014, primarily due to the repayment of the medium-term notes with face value of RMB3.5
billion at the end of 2014 and no occurrence of cash outflow for financing activities in 2015.

Our working capital was mainly
used for capital expenditures, operating expenses and payment of taxes and dividends and investments. In 2016, our expenses for the purchase of fixed assets and payments for construction-in-progress totaled RMB1,973.9 million. In
addition, we paid RMB571.6 million for income taxes and approximately RMB566.7 million for dividends.

We believe we
have sufficient financial resources to meet our operational and development requirements in 2017.



|C. | Research and Development, Patents and Licenses, etc.
|-- | ----------------------------------------------------

We do not generally conduct our own research and development with respect to major capital projects. In the past, in connection with
our high-speed train and electrification projects, our predecessor relied upon the engineering and technical services of various research and design institutes under the CRC. In recent years, we conducted limited research and development
activities in connection with the implementation of automated ticketing, including the development of related computer software.

We do not anticipate a significant need for research and development services in the foreseeable future, and do not expect to require any such services in connection with our other businesses. To the
extent that these services are needed, we expect to engage outside service providers to satisfy this need. In connection with major engineering and construction projects, as well as major equipment acquisitions, we intend to conduct technical
research and feasibility studies with relevant engineering service organizations, so as to ensure the cost-effectiveness of our capital expenditures.



|D. | Trend Information
|-- | -----------------

The
Pearl River Delta remains one of Chinas fastest growing economic regions. We believe that various factors, including the increasing economic cooperation within the Pearl River Delta region and its adjacent areas, the Relaxed Individual
Travel program, the improvement of the subway system in Shenzhen and Guangzhou, will continue to increase passenger travel and freight transportation within our service region. We expect the PRC governments current economic, import and
export, foreign investment and infrastructure policies to generate additional demand for transportation services in our service areas. These policies and measures may have both positive and negative effects on our business development. They are
expected to promote economic growth and create new demand for our transportation services.



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At the same time, however, with the improvement of highway and waterway transportation
facilities, we anticipate additional competition. In addition, the economic measures PRC government implemented to manage its economy may have an impact on our business and results of operations in 2017. In addition, any change of the
benchmark interest rates set by the PRC government and the implementation of other applicable policies may have an impact on our business and results of operations in 2017.

While the PRC government is in the progress of lessening restrictions on foreign investment, the opening up of domestic railway transportation will be gradual and we expect competition from foreign and
domestic railway to be limited in the short term. In addition, as the PRC government lifts control over foreign investments, including allowing foreign participation in railway construction, our competitive position in our service region may be
challenged by foreign strategic investment.

In addition, the global financial crisis and economic downturn since 2008 had
adversely affected economies and businesses around the world, including in China. This change in the macro-economic conditions had an adverse impact on our business and operations by causing a decrease in the number of passengers and the volume
of freight that we transported in 2009. Although the economy in China, as well as in many other places around the world, has recovered since the second half of 2009, the sustainability of these recoveries is uncertain due to escalating concerns
regarding Europes sovereign debt crisis, the stability of the Eurozone and sustainability of high rates of growth in China. In 2016, Chinas economy grew at a slower pace and trended stably and positively. Although Chinas GDP growth
rate remained high compared to other countries and the quality and efficiency of economic development were enhanced, providing strong and solid protection for the long-term and stable development of the Company, with the still complicated and
evolving domestic and international economic environment, Chinas economy still faced greater downward pressure, which suppressed the demand growth of passenger and freight transportation.

Nevertheless, we believe the Chinese railway industry will continue to grow in the coming years in light of the launch of certain
government policies. There are expected to be stable investments in the countrys railway industry from 2016 to 2020 in accordance with the Thirteenth Five-Year Plan on National Economics and Social Development of the PRC and in July 2016,
the NDRC, Ministry of Transport and the CRC jointly issued the Medium to Long Term Plan for Railway Network Development (the Plan), which sets out the railway network development plan for the period of 2016 to 2025. According to the
Plan, by the year 2020, a series of landmark railway projects will be completed and put into operation, extending the length of railways in China to 150,000 kilometers, representing a 24.0% increase from 121,000 kilometers at the end of 2015. Length
of high speed rails will increase to 30,000 kilometers, representing a 57.9% increase from 19,000 kilometers at the end of 2015. During the same period, the Chinese government expects to invest more than RMB2.8 trillion in railway network
development.

Looking into 2017, we believe China remains in a strategic opportunity phase for its development even though the
rate of growth in China may not be maintained at historical levels. Under the background of the steady growth of Chinas economy and its stable social situation, the railway transportation industry is expected to develop in a more scientific,
orderly, sustained and stable manner in 2017, with continuous growth of the railway network and transportation capacity, as well as volume of passengers and freight.



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|E. | Off-Balance Sheet Arrangements
|-- | ------------------------------

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results
of operations, liquidity, capital expenditures or capital resources that is material to investors.



|F. | Tabular Disclosure of Contractual Obligations
|-- | ---------------------------------------------

The following table sets forth our contractual obligations, capital commitments and operating lease commitments as of December 31, 2016 for the periods indicated.



|                                  |  |                                       |           |  |           |  |         |          |  |  |          |  |  |           |         |  |  |  |         | 
|--------------------------------- |  | ------------------------------------- | --------- |  | --------- |  | ------- | -------- |  |  | -------- |  |  | --------- | ------- |  |  |  | ------- | 
|                                  |  | Payment due by period (RMB thousands) |           |  |           | 
|                                  |  |                                       |           |  |          
|                                  |  |                                       |           |  | Less than |  |         |          |  |  |          |  |  | More than |        
|Contractual Obligations           |  | Total                                 |           |  | 1 year    |  |         | 1-3 year |  |  | 3-5 year |  |  | 5 years   |        
|Capital Expenditure Obligation(1) |  |                                       | 769,013   |  |           |  | 769,013 |          |  |  |         |  |  |           |        |  |  |  |        | 
|Operating Lease Obligations(2)    |  |                                       | 740,000   |  |           |  | 74,000  |          |  |  | 148,000  |  |  |           | 148,000 |  |  |  | 370,000 | 
|                                  |  |                                       |           |  |           |  |         |          |  |  |          |  |  |           |         |  |  |  |         | 
|Total                             |  |                                       | 1,509,013 |  |           |  | 843,013 |          |  |  | 148,000  |  |  |           | 148,000 |  |  |  | 370,000 | 
|                                  |  |                                       |           |  |           |  |         |          |  |  |          |  |  |           |         |  |  |  |         | 





|(1) | See Note 35(a) to our audited consolidated financial statements, Capital Commitments.
|--- | ---------------------------------------------------------------------------------------

|(2) | See Note 35(b) to our audited consolidated financial statements, Operating Lease Commitments.
|--- | -----------------------------------------------------------------------------------------------

Based on the current progress of our new projects, we estimate that our capital expenditures for 2017 will amount to approximately RMB2.9
billion and will consist primarily of the following projects:



| |  | the expansion of the section repair capacity for the vehicle section at Guangzhou North Station;
|- |  | ------------------------------------------------------------------------------------------------



| |  | the reconstruction of the section from Guangzhou East Station to Xintang Station of Guangsheng Line III and IV;
|- |  | ---------------------------------------------------------------------------------------------------------------



| |  | the improvement of the five-stage operational system of CRH EMU trains;
|- |  | -----------------------------------------------------------------------



| |  | the improvement of the UM71 automatic shut-off and computer interlocking systems of the section from Guangzhou to Pingshi of the Beijing-Guangzhou
Line; and
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the improvement of the adaptability of traction power supply system of the section from Pingshi to Guangzhou of the Beijing-Guangzhou Line.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------



|G. | Safe Harbor
|-- | -----------

See Forward-Looking Statements.



|ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|------- | ------------------------------------------



|A. | Directors and Senior Management
|-- | -------------------------------

Directors

Our board of
directors is composed of six non-independent directors and three independent directors. Except for Mr. Wu Yong, Mr. Chen Jianping and Mr. Hu Lingling, all of our directors were elected or re-elected at our annual
shareholders general meeting held on May 29, 2014 by cumulative voting. Mr. Wu Yong was elected as a director at our shareholders extraordinary general meeting on December 16, 2014 and then the Chairman of the Board of
Directors at a Board meeting on December 18, 2014. Mr. Chen Jianping was elected as a director at our annual shareholders general meeting held on May 28, 2015. Mr. Hu Lingling was elected as a director at our annual
shareholders general meeting held on May 26, 2016. The business address of each of our directors is No. 1052 Heping Road, Shenzhen, Peoples Republic of China 518010.



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The table below sets forth the information relating to our directors as of April 26,
2017:



|              |  |     |  |                                    |  |                              
|------------- |  | --- |  | ---------------------------------- |  | -----------------------------
|Name          |  | Age |  | Position                           |  | Date FirstElected orAppointed
|Wu Yong       |  | 53  |  | Chairman of the Board of Directors |  | 2014                         
|Hu Lingling   |  | 53  |  | Executive Director                 |  | 2016                         
|Sun Jing      |  | 51  |  | Director                           |  | 2012                         
|Yu Zhiming    |  | 58  |  | Director                           |  | 2008                         
|Chen Jianping |  | 50  |  | Director                           |  | 2015                         
|Luo Qing      |  | 52  |  | Executive Director                 |  | 2009                         
|Chen Song     |  | 44  |  | Independent Non-executive Director |  | 2014                         
|Jia Jianmin   |  | 59  |  | Independent Non-executive Director |  | 2014                         
|Wang Yunting  |  | 58  |  | Independent Non-executive Director |  | 2014                         

Wu Yong is our Chairman. Mr. Wu holds a bachelors degree and is a senior engineer with
advanced engineering remuneration. Mr. Wu started his career in July 1986, and served as the deputy bureau chief of Benghu Sub-bureau of Shanghai Railway Bureau, the commander chief of Hefei-Wuhan Railway Engineering Construction Headquarters of
Shanghai Railway Bureau, the bureau chief assistant and the deputy bureau chief of Wuhan Railway Bureau and the bureau chief of Chengdu Railway Bureau. Since August 2014, he has been the chairman and the general manager of GRGC and the deputy
secretary of the party committee.

Hu Lingling is our executive Director and general manager. Mr. Hu holds a
bachelors degree and is an engineer. Mr. Hu started to work in the railway transportation industry in 1985. Mr. Hu served as the deputy chief engineer and the deputy station chief of Shaoguan East Station (f/k/a Shaoguan Station) of
former Yangcheng Railway Company of GRGC, the deputy chief engineer and the deputy general manager of former Yangcheng Railway Company of GRGC and the director of the transportation department of GRGC, and the deputy general manager of GRGC. He also
worked in the global business department of the headquarter of International Union of Railways in Paris, France and served as the deputy general manager of Guangzhou-Shenzhen-Hong Kong Express Rail Link Company Limited. Mr. Hu has been serving as
our general manager since November 2015.

Sun Jing is our non-executive Director. Mr. Sun holds a bachelors degree
and is a senior engineer. Mr. Sun started to work in the railway transportation industry in July 1985. Mr. Sun served as the section chief and deputy party secretary of Yueshan locomotive section of Zhengzhou Sub-bureau of Zhengzhou Railway Bureau,
the deputy division chief and the division chief of locomotive department of Zhengzhou Railway Bureau and an assistant to the director of Zhengzhou Railway Bureau. He has been serving as deputy general manager of GRGC since May 2007.

Yu Zhiming is our non-executive Director. Mr. Yu holds a bachelors degree and is a senior accountant. Mr. Yu
started his career in May 1980. He served as the director of the Sub-division of Finance of Wuhan Railway Sub-bureau of Zhengzhou Railway Bureau, the director of the finance department of Wuhan Railway Bureau and the standing vice-director of
capital settlement center of MOR. He has been serving as the chief accountant of GRGC Since April 2008.



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Chen Jianping is our non-executive Director. Mr. Chen holds a bachelors degree
and a masters degree and is a political engineer. Mr. Chen served as a Supervisor representing employees of the Company before being elected as our non-executive Director. Mr. Chen worked with the First High School of Guangzhou
Railway and Locomotive Sports Association of GRGC and is working with GRGC. From 1997 to 2007, Mr. Chen served as the office secretary of the trade union of GRGC, director of the logistics department of our Company, deputy secretary of the
Party Work Committee and concurrently the secretary of the committee for disciplinary inspection of the passenger transportation business unit of our Company, deputy office manager of our Company and chairman of the trade union of the mechanized
line center of GRGC. From 2007 to October 2012, Mr. Chen served as the section chief of Guangzhou Passenger Transportation Division. From November 2012 to October 2013, he was the general manager of diversified operation and
development center, deputy secretary of the Party Work Committee and director of various operation and management offices of GRGC. From November 2013 to September 2014, he was the stationmaster of Shenzhen North Station and deputy secretary of
the Party Work Committee of our Company. Since October 2014, Mr. Chen has been the chief of the passenger transportation department of GRGC. Mr. Chen was also a Supervisor representing employee of the Company from May 2014 to May 2015.

Luo Qing is our executive Director. Mr. Luo is a postgraduate at the Party School of the Communist Party of China and is
a political engineer. Mr. Luo has been working in the railway transportation industry since August 1981. Previously, he served as the secretary-general of Locomotive Sports Association of Yangcheng Railway Company of GRGC, the secretary-general of
Locomotive Sports Association of GRGC, the chief of the organization department of trade union of GRGC and the chairman of the trade union of the Company. Since May 2010, he has been the deputy secretary of the party and working committee, the
secretary of the discipline inspection and working commission of the Company and the chairman of the trade union of the Company.

Chen Song is our independent non-executive Director. Mr. Chen holds a doctorate degree in finance and investment from the Management School of Sun Yat-sen University, and is a certified public
accountant of China and a certified internal auditor registered in the U.S. Mr. Chen was a teacher in higher mathematics and pharmaceutical machinery in Guangdong Food and Drug Vocational College, the tutor for MBA and EMBA in Management School
of Sun Yat-sen University, managerial trainee in P&G (China) Investment Limited Company, financial analysis manager in Crest Oral Department, financial supervisor of business department, CFO, executive director of Heinz (China) Investment Co.,
Ltd., chief financial officer of Ren Coty (China) and a director and general manager of its cosmetics division, financial supervisor of Greater China Region in Boer CMC Markets Asia Pacific Pty Ltd, the deputy general manager and CFO of Chongqing
Brewery Co., Ltd. He currently serves as a director and general manager of Chongqing Brewery Co., Ltd.

Jia Jianmin is our
independent non-executive Director. Mr. Jia holds a masters degree and doctorate degree from the McCombs School of Business of the University of Texas at Austin. He was a member of The National Natural Science Foundation of Department of
Management Science Advisory Committee of Experts, a member of China National MBA Education Supervisory Committee and a Scholar Director of MSI USA. He has served companies including Hutchison Whampoa, China Telecom, China Mobile, China Citic Bank,
IBM, China Rail, CSR and CNR. He is a professor and chairman of the Department of Marketing of Faculty of Business Administration of The Chinese University of Hong Kong and holds the title of Changjiang Scholar Professor of the Ministry of Education
of PRC.

Wang Yunting is our independent non-executive Director. Mr. Wang holds a bachelors degree from the Medical
School of Xian Jiaotong University and an EMBA degree from Guanghua School of Management, Peking University. Mr. Wang was the vice general manager of China Commercial Foreign Trade Corporation, Ltd. (Shenzhen) and vice general manager of
Beijing Capital Huayin Group. He is now a director of Shaanxi Fortune Investment Limited.



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Supervisors

The table below sets forth the information relating to our supervisors as of April 26, 2017.



|              |  |     |  |                                        |  |                              
|------------- |  | --- |  | -------------------------------------- |  | -----------------------------
|Name          |  | Age |  | Position                               |  | Date FirstElected orAppointed
|Liu Mengshu   |  | 53  |  | Chairman of the supervisory committee. |  | 2014                         
|Chen Shaohong |  | 50  |  | Supervisor                             |  | 2008                         
|Shen Jiancong |  | 48  |  | Supervisor                             |  | 2011                         
|Li Zhiming    |  | 55  |  | Supervisor                             |  | 2005                         
|Zhou Shangde  |  | 46  |  | Supervisor                             |  | 2015                         
|Song Min      |  | 46  |  | Supervisor                             |  | 2014                         

Liu Mengshu is chairman of our supervisory committee. Mr. Liu holds a bachelors degree and is
an engineer. He served in the Huaihua Sub-bureau of Guangzhou Railway Bureau and GRGC Changsha headquarters. He served in GRGC as the head of the director of organization of the party committee of GRGC from November 2004 to April 2006, as head of
the GRGC party committees propaganda department from April 2006 to September 2008 and as GRGCs office director from September 2008 to December 2013. Since December 2013, he has been the deputy secretary of CPC and the secretary of
Committee for Discipline Inspection of GRGC.

Chen Shaohong is our Supervisor. Mr. Chen holds a bachelors degree
and is an economist. Mr. Chen has been engaged in the research and practice of enterprise management for a long time. Before April 2006, he has been vice-section chief and section chief of mechanism reform section of corporate management
office, vice-director of corporate management office and vice-director of corporate management and legal affairs department of GRGC. From April 2006 to May 2008, he served as director of corporate management and legal affairs
department of GRGC. From June 2008 to July 2015, Mr. Chen was the vice-chief economist and director of corporate and legal affairs department of GRGC. Since August 2015, Mr. Chen has been the director of the Corporate and Legal
Affairs department of CRGC.

Shen Jiancong is our Supervisor. Mr. Shen holds a bachelors degree and is an
economist. Before March 2011, Mr. Shen has worked as secretary of Chinese Youth League of the Guangzhou mechanical refrigerator car depot of Guangzhou Sub-bureau of Guangzhou Railway Bureau, deputy director and director of division of
personnel of GRGC, deputy director of Division of Human Resources of GRGC, concurrently as deputy director of organization department of Party Committee of GRGC and secretary of CPC committee and vice stationmaster of Shenzhen Station of our
Company. He has been director of division of human resources and director of organization department of party committee of GRGC since March 2011.

Li Zhiming is our Supervisor. Mr. Li holds a bachelors degree in economics and management from the Party School of the Communist Party of China and is an accountant. Before 1996, Mr. Li
had served in various managerial positions in Hengyang Railway Sub-bureau of Guangzhou Railway Bureau and Changsha Railway Company of GRGC. From 1996 to March 2005, he was chief of Finance Sub-division of Changsha Railway Company of
GRGC. Since April 2005, Mr. Li has been deputy chief and chief of the audit department of GRGC.



55



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Zhou Sangde is our Supervisor and represents employees of our Company. Mr. Zhou
holds a masters degree from the Party School of the Communist Party of China and is a political engineer. Mr. Zhou used to serve as the secretary of the Communist Youth League of Sungang Station (formerly known as the Shenzhen North
Station), deputy chief of the organization and human resources department, director of the party committee office, and chairman of the trade union of the integrated service center of our Company. From July 2007 to March 2011, Mr. Zhou was
transferred to GRGC and served as the deputy chief of the human resources office, deputy office manager and concurrently director of the reception office, and chief party secretary of the administrative office of GRGC. In March 2011, Mr. Zhou was
transferred back to our Company and served as party secretary and station supervisor of Shenzhen Station. Since December 2014, Mr. Zhou has been the supervisor of the Sungang Station.

Song Min is our Supervisor and represents employees of our Company. Ms. Song holds a bachelors degree in accounting from
Lanzhou University and is an accountant. Ms. Song joined the railway industry in 1991 and has served in many railway companies. She has served as the deputy manager of the operating finance office, department of finance of Qinghai-Tibet Railway
Company, deputy director and finance director of Qinghai-Tibet Railway Public Security Bureau, vice office supervisor of Qinghai-Tibet Railway Company Annuity Council, vice consultant of financial management of the State Taxation Bureau of Qinghai
Province and the senior manager of Petrol China Guangdong Sales Company, Shenzhen Branch. Since November 2012, she has been the chief of the Audit Department of our Company.

Senior Management

The table below sets forth information relating to our
senior management as of April 26, 2017:



|                 |  |     |  |                            |  |                              
|---------------- |  | --- |  | -------------------------- |  | -----------------------------
|Name             |  | Age |  | Position                   |  | Date FirstElected orAppointed
|Hu Lingling(1)   |  | 53  |  | General Manager            |  | 2015                         
|Luo Jiancheng    |  | 44  |  | Deputy General Manager     |  | 2016                         
|Guo Xiangdong(2) |  | 51  |  | Deputy General Manager and |  | 2010                         
|                 |  |     |  | Company Secretary          |  | 2004                         
|Tang Xiangdong   |  | 48  |  | Chief Accountant           |  | 2008                         



|(1) | See Item 6. Directors, Senior Management and Employees  A. Directors and Senior Management  Directors for information regarding Hu Lingling.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Guo Xiangdong was firstly appointed as our Deputy General Manager in 2010 and Company Secretary in 2004.
|--- | --------------------------------------------------------------------------------------------------------

Luo Jiancheng is a deputy general manager of our Company. Mr. Luo holds a bachelors degree and is a senior engineer.
Mr. Luo served successively as the chief of the Investigation & Inspection Division of the General Office of GRGC, Shiweitang station master of GSRC, deputy chief of the Transportation Department of GRGC, the assistant of the general
manager of the Company, the general manager of Guangzhou Tiecheng Industrial Company and the deputy general manager of GMSR. Since December 2016, he has been serving as our deputy general manager.



56



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Guo Xiangdong is the Deputy General Manager and secretary of the Board. Mr. Guo holds a
bachelors degree from Central China Normal University and an MBA degree and is an economist. Before January 2004, he has been deputy section chief, deputy head and head of secretariat of the Board. From January 2004 to
November 2010, he has been appointed as the secretary of the Board and since December 2010, Mr. Guo has been appointed as the deputy general manager and secretary of the Board.

Tang Xiangdong is Chief Accountant of our Company. Mr. Tang holds a bachelors degree in business administration from Jinan
University and an MBA degree and is a senior accountant. Before March 2006, he has served in various professional management positions in the Labor and Capital Department, Diversified Business Department and Revenue Settlement Center of our
Company. From March 2006 to November 2008, he was director of Finance Department of our Company. Since December 2008, Mr. Tang has been the chief accountant of our Company.

Additional Information

Our non-independent directors, members of our supervisory committee and senior management also serve as the directors, supervisors or
senior management members in other companies as follows:



|           |  |                                                                                                          
|---------- |  | ---------------------------------------------------------------------------------------------------------
|Name       |  | Position                                                                                                 
|Wu Yong    |  | Chairman of the Board of Directors of:                                                                   
|           |  | Guangmeishan Railway Company Limited                                                                     
|           |  | Guangdong Sanmao Railway Co., Ltd.                                                                       
|           |  | Yuehai Railway Company Limited                                                                           
|           |  | Shichang Railway Company Limited                                                                         
|           | 
|Sun Jing   |  | Director of:                                                                                             
|           |  | Guangzhou Electric Locomotive Co., Ltd.                                                                  
|           | 
|Yu Zhiming |  | Chairman of the Board of Directors of:                                                                   
|           |  | China Railway (Hong Kong) Holdings Limited                                                               
|           | 
|           |  | Chairman of the Supervisory Committee of:                                                                
|           |  | Yuehai Railway Company Limited                                                                           
|           |  | Guangdong GuangzhouZhuhai Inter-city Railway Traffic Co., Ltd.                                          
|           |  | MaoZhan Railway Company Limited                                                                          
|           |  | Guangdong Pearl River Delta Inter-city Railway Traffic Co., Ltd.                                         
|           | 
|           |  | Director of:                                                                                             
|           |  | Guangmeishan Railway Company Limited                                                                     
|           |  | Guangdong Sanmao Railway Co., Ltd.                                                                       
|           |  | Shichang Railway Company Limited                                                                         
|           |  | Hukun Passenger Railway Line (Hunan) Co., Ltd.                                                           
|           |  | Hainan High-speed Railway Company Limited (formerly known as Hainan Eastern Ring Railway Company Limited)
|           |  | Ganshao Railway Company Limited                                                                          
|           |  | China Railway Container Transportation Company Limited                                                   
|           |  | China Railway Special Goods Transportation Company
Limited                                               



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##### Table of Contents

|              |  |                                                                                                                                                             
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name          |  | Position                                                                                                                                                    
|              |  | Supervisor of:                                                                                                                                              
|              |  | GuangzhouZhuhai Railway Company Limited
China Railway Express Co., Ltd.                                                                                    
|              | 
|Chen Jianping |  | Director of:                                                                                                                                                
|              |  | Hainan Railway Economic and Technological Development Corporation Company                                                                                   
|              | 
|              |  | Supervisor of:                                                                                                                                              
|              |  | China Railway Commemorative Ticket Company                                                                                                                  
|              | 
|Chen Song     |  | Director and General Manager of:                                                                                                                            
|              |  | Chongqing Brewery Co., Ltd.                                                                                                                                 
|              | 
|Jia Jianmin   |  | Professor and Chairman of the Department of Marketing of Faculty of Business Administration and Changjiang Scholar Profesor of the Ministry of Education of:
|              |  | The Chinese University of Hong Kong                                                                                                                         
|              | 
|Wang Yunting  |  | Chairman of the Board of Directors of:                                                                                                                      
|              |  | Shaanxi Fortune Investment Limited                                                                                                                          
|              | 
|Liu Mengshu   |  | Chairman of Supervisory Committee of:                                                                                                                       
|              |  | Guangmeishan Railway Company Limited                                                                                                                        
|              |  | Guangdong Sanmao Railway Co., Ltd.                                                                                                                          
|              | 
|Chen Shaohong |  | Chairman of Supervisory Committee of:                                                                                                                       
|              |  | Shichang Railway Company Limited                                                                                                                            
|              |  | Hukun Passenger Railway Line (Hunan) Co., Ltd.                                                                                                              
|              |  | Hainan Railway Economic and Technological Development Corporation Company                                                                                   
|              | 
|              |  | Director of:                                                                                                                                                
|              |  | Guangmeishan Railway Company Limited                                                                                                                        
|              |  | Yuehai Railway Company Limited                                                                                                                              
|              |  | Xiamen-Shenzhen Railway (Guangdong) Company Limited                                                                                                         
|              |  | Jingyue Railway Company Limited                                                                                                                             
|              |  | Guangdong Shenmao Railway Company Limited                                                                                                                   
|              |  | Guangdong Meishan Passenger Railway Line Company Limited                                                                                                    
|              | 
|              |  | Supervisor of:                                                                                                                                              
|              |  | Guangdong Sanmao Railway Co., Ltd.                                                                                                                          
|              |  | Hunan Inter-city Railway Company Limited                                                                                                                    
|              |  | Guangdong Pearl River Delta Inter-city Railway Traffic Co., Ltd.                                                                                            
|              |  | Hainan High-speed Railway Company Limited                                                                                                                   
|              |  | Ganshao Railway Company Limited                                                                                                                             
|              |  | China Railway Express Co., Ltd.                                                                                                                             
|              |  | Guangzhou Electric Locomotive Co., Ltd.                                                                                                                     
|              | 
|Li Zhiming    |  | Chairman of the Supervisory Committee of:                                                                                                                   
|              |  | Guangzhou Tiecheng Enterprise Company Limited                                                                                                               
|              |  | Xingguangji Trade Company Limited                                                                                                                           
|              |  | Guangdong Shenmao Railway Company Limited                                                                                                                   



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##### Table of Contents

|               |  |                                                                          
|-------------- |  | -------------------------------------------------------------------------
|Name           |  | Position                                                                 
|               |  | Director of:                                                             
|               |  | Hong Kong Qiwen Company Limited                                          
|               |  | Hainan Railway Economic and Technological Development Corporation Company
|               | 
|               |  | Supervisor of:                                                           
|               |  | Guangmeishan Railway Company Limited                                     
|               |  | Guangdong Sanmao Railway Co., Ltd.                                       
|               |  | Yuehai Railway Company Limited                                           
|               |  | Shichang Railway Company Limited                                         
|               |  | Hukun Passenger Railway Line (Hunan) Co., Ltd.                           
|               |  | Xiamen-Shenzhen Railway (Guangdong) Company Limited                      
|               |  | Ganzhou-Shaoguan Railway Company Limited                                 
|               |  | Guiyang-Guangzhou Railway Company Limited                                
|               |  | Nanning-Guangzhou Railway Company Limited                                
|               |  | Jingyue Railway Company Limited                                          
|               |  | GuangzhouZhuhai Railway Company Limited                                 
|               |  | Guangdong Meishan Passenger Railway Line Company Limited                 
|               |  | Guangzhou Northeastern Cargo Outer Ring Railway Company Limited          
|               |  | Guangzhou Nanshagang Railway Company Limited                             
|               | 
|Tang Xiangdong |  | Director of:                                                             
|               |  | Guangzhou Tiecheng Enterprise Company Limited                            
|               |  | Shenzhen Guangshen Railway Civil Engineering Company                     



|Note: | Chongqing Brewery Co., Ltd is a listed A share company of China. The Chinese University of Hong Kong is a university located in Hong Kong. Shaanxi Fortune Investment
Limited is a company located in Xian, Shaanxi Province, China. China Railway Container Transportation Company Limited, China Railway Special Goods Transportation Company Limited, China Railway Express Co., Ltd., China Railway Commemorative
Ticket Company, Guiyang-Guangzhou Railway Company Limited, and Nanning-Guangzhou Railway Company Limited are subsidiaries of CRC. Guangzhou Tiecheng Industrial Company and Shenzhen Guangshen Railway Civil Engineering Company are our joint venture
partners. Guangzhou Electric Locomotive Co., Ltd., Guangzhou Zhuhai Railway Company Limited, Guangdong GuangzhouZhuhai Inter-city Railway Traffic Co., Ltd., Guangdong Pearl River Delta Inter-city Railway Traffic Co., Ltd., Guangdong Shenmao
Railway Company Limited, Jingyue Railway Company Limited, Guangdong Meishan Passenger Railway Line Company Limited, MaoZhan Railway Company Limited and Guangzhou Nanshagang Railway Company Limited are joint venture partners of GRGC. The remaining
companies in the table above are subsidiaries of GRGC.
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|B. | Compensation
|-- | ------------

Directors and Senior
Management

Total remuneration of our directors, supervisors and senior management members during 2016 included wages,
bonuses, other schemes and allowances. Directors or supervisors who are also officers and employees of our Company receive certain other benefits in kind from GRGC or us, such as subsidized or medical insurance, housing and transportation, as
customarily provided by the railway companies in the PRC to their employees. The amount of compensation to each director, supervisor and senior management for the year ended December 31, 2016 is listed as follows:



|               |  |                                                |  |                                                                                                     |         | 
|-------------- |  | ---------------------------------------------- |  | --------------------------------------------------------------------------------------------------- | ------- | 
|Name           |  | Position                                       |  | Total remuneration received from theCompany (before tax) during 
the reportingperiod (RMB thousand) |        
|Wu Yong        |  | Chairman of the Board of Directors             |  |                                                                                                     |        | 
|Hu Lingling    |  | Executive Director and General Manager         |  |                                                                                                     | 407.0   | 
|Shen Yi*       |  | Executive Director                             |  |                                                                                                     |        | 
|Sun Jing       |  | Non-executive Director                         |  |                                                                                                     |        | 
|Yu Zhiming     |  | Non-executive Director                         |  |                                                                                                     |        | 
|Chen Jianping  |  | Non-executive Director                         |  |                                                                                                     |        | 
|Luo Qing       |  | Executive Director                             |  |                                                                                                     | 343.0   | 
|Chen Song      |  | Independent Non-executive Director             |  |                                                                                                     | 112.0   | 
|Jia Jianmin    |  | Independent Non-executive Director             |  |                                                                                                     | 143.0   | 
|Wang Yunting   |  | Independent Non-executive Director             |  |                                                                                                     | 112.0   | 
|Liu Mengshu    |  | Chairman of the Supervisory Committee          |  |                                                                                                     |        | 
|Chen Shaohong  |  | Supervisor                                     |  |                                                                                                     |        | 
|Shen Jiancong  |  | Supervisor                                     |  |                                                                                                     |        | 
|Li Zhiming     |  | Supervisor                                     |  |                                                                                                     |        | 
|Zhou Shangde   |  | Supervisor Representing Employees              |  |                                                                                                     | 340.0   | 
|Song Min       |  | Supervisor Representing Employees              |  |                                                                                                     | 310.0   | 
|Luo Jiancheng  |  | Deputy General Manager                         |  |                                                                                                     |        | 
|Mu Anyun*      |  | Deputy General Manager                         |  |                                                                                                     | 345.0   | 
|Guo Xiangdong  |  | Deputy General Manager, Secretary of the Board |  |                                                                                                     | 343.0   | 
|Tang Xiangdong |  | Chief Accountant                               |  |                                                                                                     | 342.0   | 
|Total:         |  |                                                |  |                                                                                                     | 2,797.0 | 



|(1) | Those marked with asterisk (*) in the table represents that the person has resigned during the fiscal year ended December 31, 2016, of which: Mr. Shen Yi
ceased to serve as the executive Director of the Company for the reason of age and Mr. Mu Anyun ceased to serve as the Deputy General Manager of the Company due to change of position.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The aggregate amount of cash remuneration paid by our Company in 2016 to all individuals who are our directors, supervisors and senior
management members was approximately RMB2.8 million, of which approximately RMB1.4 million was paid to our non-independent directors and supervisors and approximately RMB0.4 million was paid to the independent non-executive directors.
The aggregate amount of cash remuneration we paid during the year ended December 31, 2016 for pension and retirement benefits to all individuals who are currently our directors, supervisors and senior management members was approximately
RMB0.2 million.



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Interests of Our Directors, Supervisors and Other Senior Management in Our Share Capital

As of December 31, 2016, there was no record of interests or short positions (including the interests or short
positions which were taken or deemed to have under the provisions of the Hong Kong Securities and Futures Ordinance) held by our directors or supervisors in our shares, debentures or other securities, or securities of any of our associated
corporation (within the meaning of the Hong Kong Securities and Futures Ordinance) in the register required to be kept under section 352 of the Hong Kong Securities and Futures Ordinance. We had not received notification of such interests or short
positions from any of our directors or supervisors as required to be made to us and the HKSE pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in Appendix 10 to the HKSE Listing Rules. We have not granted any of
our directors or supervisors, or any of their respective spouses or children under the age of 18, any right to subscribe for any of our shares or debentures.

Service Contracts of Our Directors and Supervisors

Each of our
directors and supervisors has entered into a service agreement with us. Except as disclosed, no other service contract has been entered into between any of our subsidiaries or us on one hand, and any of our directors or supervisors on the others,
that cannot be terminated by us within one year without payment of compensation (other than statutory compensation).

Contracts
Entered into by Our Directors and Supervisors

None of our directors or supervisors had any direct or indirect material
interests in any contract of significance subsisting during the year ended on December 31, 2016 or as of December 31, 2016 to which we or any of our subsidiaries was a party.

Remuneration of Our Directors and Supervisors

The level of
remuneration of our directors and supervisors was determined by reference to various factors, including the prevailing rates of remuneration in Shenzhen, where we are located, and the job nature of each of our directors and supervisors. The
remuneration and annual incentive of the Directors and the Supervisors will be considered and recommended by the Remuneration Committee and will be approved and authorized by the shareholders at shareholders general meetings of our Company. No
Director or Supervisor is involved in determining his/her own remuneration.



|C. | Board Practices
|-- | ---------------

Board
of Directors

In accordance with our currently effective Articles of Association, our board of directors comprises
nine directors, one of whom is the chairman. Directors are appointed at our shareholders general meeting through voting, and generally serve for a term of three years (except for Chen Jianping whose term is two years). Upon the expiration
of the term of their office, they can serve consecutive terms if re-appointed at the next shareholders general meeting. The service contracts that we have entered into with our directors do not provide for any payment of compensation upon
termination. Our board of directors held five meetings during the year ended December 31, 2016.



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Supervisory Committee

We have a supervisory committee consisting of five to seven supervisors. Supervisors generally serve a term of three years. Upon the expiration of their terms of office, they may be re-appointed to
serve consecutive terms. The supervisory committee is presided over by a chairman who may be elected or removed with the consent of two-thirds or more of the members of the supervisory committee. The term of office of the chairman is
three years, renewable upon re-election. Our supervisory committee currently consists of four representatives of the shareholders who may be elected or removed by our shareholders general meeting, and two representatives of our employees
who may be elected by our employees at the employees congress or employees general meeting or through any other democratic means. Members of our supervisory committee may also attend meetings of the board of directors. The current
members of our supervisory committee are: Liu Mengshu, Chen Shaohong, Shen Jiancong, Li Zhiming, Zhou Shangde and Song Min. All shareholder representatives of our supervisory committee were elected or re-elected at the annual shareholders
general meeting held on May 29, 2014. Zhou Shangde and Song Min were elected as the Supervisors of our Company as employee representatives at the employees congress held in 2014. Except for Zhou Shangde, whose term is two years, the term
of the remaining supervisors is three years. Our supervisory committee held four meetings during the year ended December 31, 2016, at which resolutions concerning our periodic reports, internal control evaluations and our dividend
policy were passed and ratified. Our supervisors attended shareholders general meetings, meetings of our board of directors and other important meetings concerning our operation during the year ended December 31, 2016. Our
supervisory committee reviews the report of our directors, the financial report and proposed profit distribution presented by our board of directors at our annual general meeting of shareholders.

Supervisors attend board meetings as non-voting members. The supervisory committee is accountable to the shareholders general
meeting and has the following duties and responsibilities:



| |  | to examine our 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 managers, 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 our 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 151 of the Company Law.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Supervisors may attend meetings of the board of directors and question
or give advice on the resolutions of the board of directors.

The supervisory committee may conduct investigation if they find
the operation of our Company unusual and may engage professionals such as lawyers, certified public accountants or practicing auditors to assist if necessary. All reasonable fees so incurred shall be borne by our Company.

Audit Committee

We have
an audit committee consisting of three independent non-executive directors. The current members of our audit committee, appointed by the Board of Directors, are Chen Song (Chairman), Jia Jianmin and Wang Yunting. Mr. Chen, Mr. Jia and
Mr. Wang are independent directors of our Company as defined in Section 303A.02 of the NYSE Listed Company Manual. The audit committee must convene at least four meetings each year, and may invite the executive directors,
persons in charge of the financial and audit departments and our independent auditors to participate. The audit committee must have at least two meetings with management and at least two meetings with the auditors each year without any
executive directors present. Our audit committee held six meetings during the year ended December 31, 2016. The duties of the audit committee include:



| |  | reviewing the annual financial statements and interim financial statements of our Company, including the disclosures made by our Company in this annual
report;
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | reviewing the financial reports and the reports of our Company prepared by the independent auditor and its supporting documents, including the review
of the 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;
|- |  | ------------------------------------------------------------------------------------------



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##### Table of Contents

| |  | 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 our 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 our Company.
|- |  | ------------------------------------------------------------------------

Remuneration Committee

We have a remuneration committee consisting of two
executive Directors and three independent non-executive Directors, namely, Wu Yong, Hu Lingling, Chen Song (chairman of remuneration committee), Jia Jianmin and Wang Yunting. The remuneration committee will meet from time to time when required to
consider remuneration-related matters of our Company.

The principal duties of the remuneration committee include reviewing
and making recommendations to the Board for the remuneration packages for the Directors and the Supervisors of our Company. The remuneration policy of our Company seeks to provide, in the context of our business strategy, reasonable remuneration to
attract and retain high caliber executives. The remuneration committee obtains benchmark information from internal and external sources in relation to market conditions, packages offered in the industry and the overall performance of our Company
when determining the Directors and the Supervisors emoluments.



|D. | Employees
|-- | ---------

As of
December 31, 2014, 2015 and 2016, we had approximately 37,301, 43,824 and 44,609 employees, respectively. The increase in the number of our employees in 2016 was primarily due to an increase in passenger and freight transportation and transit
operation personnel, and electricity personnel. The following chart sets forth the number of our employees by function as of December 31, 2016:



|                                                                                |  |           |        | 
|------------------------------------------------------------------------------- |  | --------- | ------ | 
|Function                                                                        |  | Employees |       
|Passenger and freight transportation and transit operation personnel(1) (2) (3) |  |           | 19,989 | 
|Engineering personnel(4)                                                        |  |           | 5,418  | 
|Driving personnel(5)                                                            |  |           | 4,428  | 
|Public works personnel(6)                                                       |  |           | 4,510  | 
|Electricity personnel(7)                                                        |  |           | 2,042  | 
|Electricity and water supplies personnel(8)                                     |  |           | 2,376  | 
|Building construction personnel(9)                                              |  |           | 1,067  | 
|Various operations and other employees of subsidiaries(10)                      |  |           | 69     | 
|Technical and administrative personnel(11)                                      |  |           | 4,710  | 
|Other employees(12)                                                             |  |           | 115    | 
|                                                                                |  |           |        | 
|Total                                                                           |  |           | 44,609 | 
|                                                                                |  |           |        | 



|(1) | Passenger transportation personnel mean those people that provide station boarding and train services and those people responsible for organization of freight
transportation.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Freight transportation personnel mean those people responsible for organization of freight transportation.
|--- | ----------------------------------------------------------------------------------------------------------

|(3) | Transit operation personnel mean those people responsible for providing station boarding services.
|--- | --------------------------------------------------------------------------------------------------

|(4) | Engineering personnel mean those people responsible for locomotive operation and overhaul.
|--- | ------------------------------------------------------------------------------------------

|(5) | Driving personnel mean those people responsible for vehicle operation and overhaul.
|--- | -----------------------------------------------------------------------------------

|(6) | Public works personnel mean those people responsible for station track and railroad switch maintenance.
|--- | -------------------------------------------------------------------------------------------------------

|(7) | Electricity personnel mean those people responsible for signal equipment maintenance.
|--- | -------------------------------------------------------------------------------------

|(8) | Electricity and water supplies personnel mean those people responsible for catenary operation and overhaul as well as power and water consumption maintenance.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Building construction personnel mean those people responsible for construction, apartments and dining halls.
|--- | ------------------------------------------------------------------------------------------------------------

|(10) | Various operations and other employees of subsidiaries 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.
|---- | ------------------------------------------------------------------------------------



63



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All of our employees are located in Guangzhou, Shenzhen, Pingshi and the area adjacent to
our Shenzhen-Guangzhou-Pingshi line.

We have established a trade union to protect employees rights, assist in the
fulfillment of their economic objectives, encourage employee participation in management decisions and assist in mediating disputes between the management and union members. Each of our train stations and railway units has a separate branch of the
trade union. Most of our employees belong to the trade union. We have not experienced any strikes or other labor disturbances that have interfered with our operations in the past, and we believe that our relations with our employees are good.

We have implemented a salary policy which links our employees salaries with results of operations, labor efficiency and
individual performance. Employees salaries distribution is subject to our overall operational results and is based on their performance records and reviews. In addition, pursuant to applicable government policies and regulations, we set aside
statutory funds for our employees and also maintain various insurance policies for the benefits of our employees, including housing fund, retirement insurance, supplemental retirement insurance, basic and supplemental medical insurance,
pregnancy-related medical insurance and other welfare programs. In 2016, we paid approximately RMB6,219.3 million in aggregate salaries and benefits to our employees.

In addition, pursuant to an early retirement scheme implemented by our Company, certain employees who meet certain specified criteria were provided with the option to retire early and enjoy certain early
retirement benefits, such as payments of the basic salary and other relevant benefits, offered by our Company, until they reach the statutory retirement age. Under the terms of the scheme, all applications are subject to our approval. Expenses
incurred on such employee early retirement benefits have been recognized in the income statement when we approved such applications from the employees. The specific terms of these benefits vary among different employees, depending on their position
held, tenure of service and employment location.

Details of our statutory welfare fund and retirement benefits are set out in
Notes 24 and 27 to our audited consolidated financial statements included elsewhere in this annual report.



|E. | Share Ownership
|-- | ---------------

As of
April 26, 2017, none of our directors, supervisors or senior management owned any interest in any shares or options to purchase our shares.



64



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##### Table of Contents

|ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|------- | -------------------------------------------------



|A. | Major Shareholders
|-- | ------------------

We
are a joint stock company organized under the laws of the PRC in March 1996. Before the A Share Offering, GRGC, a state-owned enterprise under the administration of the MOR, owned approximately 66.99% of our outstanding ordinary shares.
Although the equity interest held by GRGC decreased to approximately 41% after the completion of our initial public offering of A shares in December 2006 and further reduced to 37.1% as a result of the transfer by GRGC of a portion of its
shares to the National Social Security Fund Council in September 2009, GRGC can still exercise substantial influence over our Company. In addition, before the dissolution of MOR on March 14, 2013, GRGC also acted as an administrative agent
of the MOR that controls and coordinates railway operations in Guangdong Province, Hunan Province and Hainan Province. As an instrumentality of the MOR, GRGC performed direct regulatory oversight functions with respect to us, including determining
and enforcing technical standards and implementing special transportation directives.

After the dissolution of MOR on
March 14, 2013, the MORs administrative functions were transferred to the MOT and its subordinate body, the newly established State Railway Administration, whereas its commercial functions, together with its underlying assets, liabilities
and staff, were transferred to the newly incorporated the CRC. Since GRGC was a railway corporation directly under the former MOR, its interests were also transferred to the CRC after the completion of the Reform on January 1, 2017. As a result
thereof, the actual controlling entity of our Companys largest shareholder became the CRC.

Shareholding Structure of our Company

As of March 31, 2017, we had 365 record holders holding our H shares (including ADSs) and 259,826 record holders
holding our A shares according to records we obtained from Computershare Hong Kong Investor Services Limited and CSDC, respectively. Set out below is the current shareholding structure of our Company as of the date hereof:



|                                                 |  |               |          |  |                      |  |               |                          |  |  |       | 
|------------------------------------------------ |  | ------------- | -------- |  | -------------------- |  | ------------- | ------------------------ |  |  | ----- | 
|Name of Shareholders                             |  | Type ofShares |          |  | Number of SharesHeld |  |               | ShareholdingPercentage % | 
|Public Shareholders of H shares (including ADSs) |  |               | H shares |  |                      |  | 1,431,300,000 |                          |  |  | 20.2  | 
|Guangzhou Railway (Group) Company                |  |               | A shares |  |                      |  | 2,629,451,300 |                          |  |  | 37.1  | 
|Other Public Shareholders of A shares(1)         |  |               | A shares |  |                      |  | 3,022,785,700 |                          |  |  | 42.7  | 
|                                                 |  |               |          |  |                      |  |               |                          |  |  |       | 
|Total                                            |  |               |          |  |                      |  | 7,083,537,000 |                          |  |  | 100.0 | 
|                                                 |  |               |          |  |                      |  |               |                          |  |  |       | 



|(1) | On September 22, 2009, GRGC transferred 274,798,700 A shares held by it to the National Council for Social Security Fund in the PRC (the NCSSF)
according to regulations issued by the relevant PRC authorities. Upon this transfer, the NCSSF has voluntarily agreed to extend the transfer restriction period associated with these shares for another three years. The transfer restriction of
these 274,798,700 shares expired on December 21, 2012. No shares were subject to sale restriction and all the shares achieved full circulation on December 24, 2012.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table sets forth information regarding ownership of our issued and outstanding capital stock as of April 20, 2017,
including all persons who are known by us to own, either as beneficial owners or holders of record, 5% or more of our capital stock.



|                              |  |                           |      |  |              |  |               |                             |  |  |                         |  |  |  |      | 
|----------------------------- |  | ------------------------- | ---- |  | ------------ |  | ------------- | --------------------------- |  |  | ----------------------- |  |  |  | ---- | 
|Title of Class                |  | Identity ofPerson orGroup |      |  | Amount Owned |  |               | Percentage ofClass ofShares |  |  | Percent ofTotal Capital | 
|Ordinary 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.
|--- | ---------------------------------------------------------------------------------------------------------



65



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The following table sets forth all persons who were known by us to beneficially own 5% or
more of our issued and outstanding H shares as of April 20, 2017.



|                            |  |             |             |     |                       |     |      |                            |  |      |     |  
|--------------------------- |  | ----------- | ----------- | --- | --------------------- | --- | ---- | -------------------------- |  | ---- | --- | -
|Identity of Person or Group |  | SharesOwned |             |     | Percentageof H Shares |     |      | Percentage 
ofTotalCapital | 
|BlackRock, Inc.             |  |             | 271,821,893 | (L) |                       |     | 19.0 | %                          |  |      | 3.8 | %
|                            |  | 1,182,000   | (S)         |     |                       | 0.1 | %    |                            |  | 0.02 | %  
|BlackRock Global Funds      |  |             | 201,265,049 | (L) |                       |     | 14.1 | %                          |  |      | 2.8 | %
|FIL Limited                 |  |             | 162,788,000 | (L) |                       |     | 11.4 | %                          |  |      | 2.3 | %
|Fidelity Funds              |  |             | 125,726,000 | (L) |                       |     | 8.8  | %                          |  |      | 1.8 | %

Note: (L)  Long Position, (S)  Short Position

As of the date hereof, we are not aware of any arrangement that may at a subsequent date result in a change of control of our Company.

In accordance with our Articles of Association, each share of our capital stock has one vote and the shares of the same
class have the same rights. Other than restrictions on the controlling shareholder as described under ITEM 10. ADDITIONAL INFORMATIONB. Memorandum and Articles of AssociationRestrictions on Controlling Shareholders,
the voting rights of our major holders of domestic shares are identical to those of any other holders of our domestic shares, and the voting rights of our major holders of H shares are identical to those of our other holders of H shares.
Holders of domestic shares and H shares are deemed to be shareholders of different classes for some matters, which may affect their respective interests. Holders of H shares and domestic shares are entitled to the same voting rights.



|B. | Related Party Transactions
|-- | --------------------------

Under IAS 24, parties 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. Parties are also considered to be related if they are subject to common control or common significant influence.



66



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The following table sets forth our principal related parties that do not control and are not
controlled by our Company as of December 31, 2016. For related parties that control or are controlled by our Company, see ITEM 4. INFORMATION ON THE COMPANYC. Organizational Structure.



|                                                                                   |  |                      |                            | 
|---------------------------------------------------------------------------------- |  | -------------------- | -------------------------- | 
|Name of related parties                                                            |  | Relationship with Us |                           
|Single largest shareholder and its subsidiaries                                    |  |                      |                            | 
|                                                                                   | 
|GRGC                                                                               |  |                      | Single largest shareholder | 
|                                                                                   | 
|Guangzhou Railway Group Yangcheng Railway Enterprise Development Company           |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Guangmeishan Railway Company Limited                                               |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company         |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Guangzhou Railway Material Supply Company                                          |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Guangzhou Railway Engineer Construction Enterprise Development Company             |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Yangcheng Construction Company of Yangcheng Railway Enterprise Development Company |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Guangzhou Railway Real Estate Construction Company                                 |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Yuehai Railway Company Limited                                                     |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Shichang Railway Company Limited                                                   |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Guangzhou Railway Station Service Centre                                           |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|GSRC                                                                               |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Changsha Railway Construction Company Limited                                      |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Guangzhou Qingda Transportation Company Limited                                    |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Guangzhou Yuetie Operational Development Company                                   |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Guangzhou Railway Rolling Stock Works                                              |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Foreign Economic & Trade Development Corporation of Guangzhou Railway Group        |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Shenzhen Guangshen Railway Living Service Centre                                   |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Guangzhou Yangcheng Living Service Centre                                          |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Pajiangkou Stone Pit of Yangcheng Railway Enterprise Development Company           |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Guangdong Tieqing International Travel Agency Company Limited                      |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Guangdong Sanmao Enterprise Development Company Limited                            |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Huaihua Railway Engineer Construction Company                                      |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Lechang Anjie Railway Sleeper Company Limited                                      |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Xiashen Railway Guangdong Company Limited                                          |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Ganshao Railway Company Limited                                                    |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Guangzhou Railway Economic Technology Development Corporation                      |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Hunan Changtie Industrial Development Co. Ltd.                                     |  |                      | Subsidiary of GRGC         | 
|                                                                                   | 
|Associates of the Group                                                            |  |                      |                            | 
|                                                                                   | 
|Guangzhou Tiecheng Enterprise Company Limited                                      |  |                      | Associate of the Group     | 
|                                                                                   | 
|Shenzhen Guangzhou Railway Civil Engineering Company                               |  |                      | Associate of the Group     | 



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Since the Restructuring carried out in 1996 in preparation for our initial public offering,
certain transactions between our Company and GRGC and the subsidiaries of GRGC, including Yangcheng Railway Company and Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company continued in the form of cross-provision of goods and
services.

We entered into the Comprehensive Services Framework Agreement with GRGC on October 27, 2010, or the Framework
Agreement, which governs the mutual provision of services between our Company and GRGC and the subsidiaries of GRGC, including Yangcheng Railway Company and Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company. The Framework
Agreement has a term of three years beginning from January 1, 2011 and was approved by the independent shareholders at the extraordinary shareholders general meeting held on December 21, 2010. Upon its expiration, we entered
into a second Comprehensive Services Framework Agreement with GRGC on October 18, 2013. The continuing connected transactions contemplated thereunder, and the proposed annual caps in relation to the continuing connected transactions under the
Comprehensive Services Framework Agreement for the three financial years ending December 31, 2016 were approved by the independent shareholders at the extraordinary shareholders general meeting held on December 19, 2013.
Upon its expiration, we entered into a new Comprehensive Services Framework Agreement with CRC on November 1, 2016, which governs the mutual provision of services between our Company, GRGC and the subsidiaries of GRGC and other companies of the
CRC Group. The continuing connected transactions contemplated thereunder, and the proposed annual caps in relation to the continuing connected transactions under the Comprehensive Services Framework Agreement for the three financial years
ending December 31, 2019 were approved by the independent shareholders at the extraordinary shareholders general meeting held on December 30, 2016.

According to the current Framework Agreement, the scope of services between us and the CRC Group include the following:



| | (a) | Mutual provision of railway transportation services, which comprise:
| | --- | --------------------------------------------------------------------



| | (i) | production co-ordination, safety management and dispatching services;
| | --- | ---------------------------------------------------------------------



| | (ii) | application and rental services of railway infrastructure and transportation equipment;
| | ---- | ---------------------------------------------------------------------------------------



| | (iii) | railway communications services;
| | ----- | --------------------------------



| | (iv) | railway network services (including but not limited to passenger services, water supply in trains, use of railway lines, traction and electricity supply for locomotives
and ticket services);
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | crew services; and
| | --- | ------------------



| | (vi) | cleaning services of locomotives, trains and railway stations.
| | ---- | --------------------------------------------------------------



| | (b) | Mutual provision of railway related services, which comprise:
| | --- | -------------------------------------------------------------



| | (i) | repair services of railway infrastructure and equipment;
| | --- | --------------------------------------------------------



| | (ii) | repair services of locomotives and trains;
| | ---- | ------------------------------------------



| | (iii) | procurement and sales services of railway related materials;
| | ----- | ------------------------------------------------------------



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| | (iv) | security services;
| | ---- | ------------------



| | (v) | hygiene and epidemic prevention services;
| | --- | -----------------------------------------



| | (vi) | property management and building maintenance services; and
| | ---- | ----------------------------------------------------------



| | (vii) | project construction, management and supervision services.
| | ----- | ----------------------------------------------------------



| | (c) | We will provide special entrusted railway transportation services to the CRC Group, which include but are not limited to:
| | --- | -------------------------------------------------------------------------------------------------------------------------



| | (i) | operation and management of passengers and freight transportation and related services; and
| | --- | -------------------------------------------------------------------------------------------



| | (ii) | repair services of transportation facilities and equipment.
| | ---- | -----------------------------------------------------------



| | (d) | Mutual provision of miscellaneous services between us and the CRC Group that are necessary for the proper functioning of railway transportation and operation.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

The prices at which these mutual goods and services are provided under the current Framework Agreement are
determined according to the following priority:



| | (a) | the prices as determined by Chinese government;
| | --- | -----------------------------------------------



| | (b) | if the prices are not specified by Chinese government, the prices will be determined in accordance with the pricing standards and rules of national railways within the
guidance prices set by Chinese government;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | if the prices are not specified by Chinese government and Chinese government has not set applicable guidance prices, the prices shall be determined in accordance with
the applicable industry price settlement rules;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | except for applying the prices specified by Chinese government, the guidance prices set by Chinese government and the industry settlement rules, if there are comparable
market prices or pricing standards, priority shall be given to such market prices or pricing standards as reference points to determine the prices upon negotiation;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | if none of the above-mentioned pricing standards is available, the prices shall be determined with reference to the prices of non-connected transactions between the
connected parties and independent third parties; and
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (f) | if neither comparable market prices nor prices of non-connected transactions are available for reference, the prices shall be determined upon negotiation according to
the aggregate of the total actual costs for providing the relevant services, reasonable profits and taxes and additional charges paid.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The chart below sets forth the material transactions we undertook with related parties for
the periods indicated:



|                                                                                                                      |  |                         |           |  |      |  |           |      |  |  |           | 
|--------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | --------- |  | ---- |  | --------- | ---- |  |  | --------- | 
|                                                                                                                      |  | Year ended December 31, |          
|                                                                                                                      |  | 2014                    |           |  | 2015 |  |           | 2016 | 
|                                                                                                                      |  | (RMB thousands)         |          
|Provision of services and sales of goods                                                                              |  |                         |           |  |      |  |           |      |  |  |           | 
|Railroad and Related Business                                                                                         |  |                         |           |  |      |  |           |      |  |  |           | 
|Provision of train transportation services to GRGC and
itssubsidiaries(i)                                             |  |                         | 424,743   |  |      |  | 751,956   |      |  |  | 1,425,538 | 
|Revenue collected by the CRC for railway network usage and related services provided to GRGC and its subsidiaries(ii) |  |                         | 1,153,630 |  |      |  | 1,180,852 |      |  |  | 1,400,876 | 
|Revenue from railway operation service provided to GRGCs subsidiaries(iii)                                           |  |                         | 359,740   |  |      |  | 550,168   |      |  |  | 579,253   | 
|                                                                                                                      |  |                         |           |  |      |  |           |      |  |  |           | 
|                                                                                                                      |  |                         | 1,938,113 |  |      |  | 2,482,976 |      |  |  | 3,405,667 | 
|Other Businesses                                                                                                      |  |                         |           |  |      |  |           |      |  |  |           | 
|Sales of materials and supplies to GRGC and its subsidiaries(iv)                                                      |  |                         | 22,579    |  |      |  | 25,940    |      |  |  | 29,449    | 
|Services received and purchases made                                                                                  |  |                         |           |  |      |  |           |      |  |  |           | 
|Railroad and Related Business                                                                                         |  |                         |           |  |      |  |           |      |  |  |           | 
|Provision of train transportation services by GRGC and
itssubsidiaries(i)                                             |  |                         | 633,382   |  |      |  | 888,903   |      |  |  | 989,778   | 
|Cost settled by the CRC for railway network usage and related services provided by GRGC and its subsidiaries(ii)      |  |                         | 1,436,711 |  |      |  | 1,406,962 |      |  |  | 1,628,336 | 
|Operating lease rental paid to GRGC for the leasing of land use rights                                                |  |                         | 53,962    |  |      |  | 55,090    |      |  |  | 55,090    | 
|                                                                                                                      |  |                         |           |  |      |  |           |      |  |  |           | 
|                                                                                                                      |  |                         | 2,124,055 |  |      |  | 2,350,955 |      |  |  | 2,673,204 | 
|                                                                                                                      |  |                         |           |  |      |  |           |      |  |  |           | 
|Other Businesses                                                                                                      |  |                         |           |  |      |  |           |      |  |  |           | 
|Social services (employee housing and public security services and other ancillary services) provided by GEDC(iii)    |  |                         | 12,430    |  |      |  | 16,080    |      |  |  | 11,297    | 
|Provision of repair and maintenance services by GRGC and its
subsidiaries(iv)                                         |  |                         | 295,283   |  |      |  | 489,038   |      |  |  | 306,988   | 
|Purchase of materials and supplies from GRGC and its subsidiaries(v)                                                  |  |                         | 560,034   |  |      |  | 384,262   |      |  |  | 469,273   | 
|Provision of construction services by GRGC and its subsidiaries(vi)                                                   |  |                         | 280,983   |  |      |  | 226,089   |      |  |  | 347,409   | 
|Others                                                                                                                |  |                         | 8,729     |  |      |  |          |      |  |  |          | 
|                                                                                                                      |  |                         |           |  |      |  |           |      |  |  |           | 
|                                                                                                                      |  |                         | 1,157,459 |  |      |  | 1,115,469 |      |  |  | 1,134,967 | 
|                                                                                                                      |  |                         |           |  |      |  |           |      |  |  |           | 



|(i) | The service charges are determined based on a pricing scheme set by the CRC or based on negotiation between the contracting parties with reference to actual cost
incurred.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(ii) | Such revenues/charges are determined by the CRC based on its standard charges applied on a nationwide basis.
|---- | ------------------------------------------------------------------------------------------------------------

|(iii) | The service charges are levied based on contract prices determined based on a cost plus a profit margin and explicitly agreed between both contract parties.
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|(iv) | The prices are determined based on mutual negotiation between the contracting parties with reference to actual cost incurred.
|---- | -----------------------------------------------------------------------------------------------------------------------------

|(v) | The prices are determined based on mutual negotiation between the contracting parties with reference to procurement cost plus a management fee ranging from 0.3% to 5%.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(vi) | Based on construction amount determined under national railway engineering guidelines.
|---- | --------------------------------------------------------------------------------------



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##### Table of Contents

We had the following material balances with our related parties as of the dates indicated:



|                                                          |  |                    |         |  |      |  |         | 
|--------------------------------------------------------- |  | ------------------ | ------- |  | ---- |  | ------- | 
|                                                          |  | As of December 31, |        
|                                                          |  | 2015               |         |  | 2016 | 
|                                                          |  | (RMB thousands)    |        
|Trade receivables                                         |  |                    | 862,199 |  |      |  | 730,061 | 
|- GRGC(i)                                                 |  |                    | 96,314  |  |      |  | 229,056 | 
|- Subsidiaries of GRGC(i)                                 |  |                    | 765,885 |  |      |  | 501,005 | 
|Prepayments and other receivables                         |  |                    | 7,788   |  |      |  | 25,961  | 
|- GRGC                                                    |  |                    | 6,011   |  |      |  | 691     | 
|- Subsidiaries of GRGC                                    |  |                    | 1,777   |  |      |  | 25,270  | 
|Prepayments for fixed assets and construction-in-progress |  |                    | 1,092   |  |      |  | 225     | 
|- GRGC                                                    |  |                    | 1,092   |  |      |  |        | 
|- Subsidiaries of GRGC(ii)                                |  |                    |        |  |      |  | 225     | 
|Trade payables                                            |  |                    | 431,650 |  |      |  | 533,051 | 
|- GRGC(i)                                                 |  |                    | 24,467  |  |      |  | 61,486  | 
|- Subsidiaries of GRGC(ii)                                |  |                    | 366,015 |  |      |  | 432,712 | 
|- Associates                                              |  |                    | 41,168  |  |      |  | 38,853  | 
|Payables for fixed assets and construction-in-progress    |  |                    | 185,339 |  |      |  | 249,308 | 
|- GRGC                                                    |  |                    | 18,829  |  |      |  | 10,805  | 
|- Subsidiaries of GRGC                                    |  |                    | 128,871 |  |      |  | 168,038 | 
|- Associates                                              |  |                    | 37,639  |  |      |  | 70,465  | 
|Accruals and other payables                               |  |                    | 399,634 |  |      |  | 430,331 | 
|- GRGC                                                    |  |                    | 1,891   |  |      |  | 5,663   | 
|- Subsidiaries of GRGC(iii)                               |  |                    | 396,590 |  |      |  | 422,877 | 
|- Associates(iv)                                          |  |                    | 1,153   |  |      |  | 1,791   | 



|(i) | The trade balances due from/to GRGC, 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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(ii) | The trade payables due to subsidiaries of GRGC mainly represented 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.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(iii) | The other payables due to subsidiaries of GRGC mainly represented the performance deposits received for construction projects and deposits received from ticketing
agencies.
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(iv) | The other payables due to associates mainly represented the performance deposits received for construction projects operated by associates.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------

As of December 31, 2016, all the balances maintained with related parties are unsecured, non-interest bearing and are repayable on
demand.

Our related party transactions have been carried out on normal commercial terms according to the HKSE Listing Rules
and the contracts we entered into with our related parties. Except for the transactions discussed in this section, no other material related party transactions were entered into in 2016. Our independent non-executive directors have
confirmed that these transactions (which are connected transactions as defined in the HKSE Listing Rules) entered into by us in 2016 were entered into in the ordinary and usual course of our business on normal commercial terms and in
accordance with the terms of an agreement governing such transactions.

Transaction with the CRC and other railway companies

On March 14, 2013, pursuant to the approved plan on State Council Institutional Reform and Transformation of
Government Functions and Approval On Setting Up China Railway Company by the State Council, the previous controlling entity of GRGC, MOR, was dissolved. The administrative function of MOR was transferred to the MOT and the newly established National
Railway Bureau, and its business functions were transferred to the CRC. Accordingly, the equity interests of GRGC, which was previously wholly controlled by MOR, were transferred to the CRC. The Reform was completed on January 1, 2017.



71



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We work in cooperation with the CRC and other railway companies owned and controlled by the
CRC 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 CRC
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 CRC and settled by the CRC based on its systems. Since March 2013, the collecting, processing
and distribution functions of revenues, which were previously executed by MOR, have been transferred to the CRC. As at December 31, 2016, the cooperation mode and pricing model had not been subject to any material changes.

The chart below sets forth the material transactions our Company undertook with the CRC and its subsidiaries during the last three fiscal
years. Unless otherwise specified, the transactions disclosed below have excluded the transactions with GRGC and its subsidiaries:



|                                                                        |  |                         |           |  |      |  |           |      |  |  |           | 
|----------------------------------------------------------------------- |  | ----------------------- | --------- |  | ---- |  | --------- | ---- |  |  | --------- | 
|                                                                        |  | Year ended December 31, |          
|                                                                        |  | 2014                    |           |  | 2015 |  |           | 2016 | 
|                                                                        |  | (RMB thousands)         |          
|Provision of services and sales of goods                                |  |                         |           |  |      |  |           |      |  |  |           | 
|Railroad and Related Business                                           |  |                         |           |  |      |  |           |      |  |  |           | 
|Provision of train transportation services to the CRC Group(i)          |  |                         | 5,229     |  |      |  | 36,515    |      |  |  | 29,794    | 
|Revenue collected by the CRC for services provided to the CRC Group(ii) |  |                         | 1,706,558 |  |      |  | 1,752,666 |      |  |  | 1,777,640 | 
|Revenue from railway operation service provided to the CRC Group(iii)   |  |                         | 950,966   |  |      |  | 1,421,995 |      |  |  | 1,628,143 | 
|                                                                        |  |                         |           |  |      |  |           |      |  |  |           | 
|                                                                        |  |                         | 2,662,753 |  |      |  | 3,211,176 |      |  |  | 3,435,577 | 
|                                                                        |  |                         |           |  |      |  |           |      |  |  |           | 
|Other Businesses                                                        |  |                         |           |  |      |  |           |      |  |  |           | 
|Provision of repairing services for cargo trucks to the CRC Group(ii)   |  |                         | 259,470   |  |      |  | 284,348   |      |  |  | 323,993   | 
|Sales of materials and supplies to the CRC Group(iv)                    |  |                         | 43,239    |  |      |  | 38,395    |      |  |  | 7,073     | 
|Provision of apartment leasing services to the CRC Group(iv)            |  |                         | 732       |  |      |  | 762       |      |  |  | 641       | 
|                                                                        |  |                         |           |  |      |  |           |      |  |  |           | 
|                                                                        |  |                         | 303,441   |  |      |  | 323,505   |      |  |  | 331,707   | 
|Services received and purchases made                                    |  |                         |           |  |      |  |           |      |  |  |           | 
|Railroad and Related Business                                           |  |                         |           |  |      |  |           |      |  |  |           | 
|Provision of train transportation services by the CRC Group(i)          |  |                         | 292,866   |  |      |  | 277,138   |      |  |  | 292,754   | 
|Cost settled by the CRC for services provided by the CRC Group(ii)      |  |                         | 1,265,873 |  |      |  | 1,365,352 |      |  |  | 1,376,047 | 
|                                                                        |  |                         |           |  |      |  |           |      |  |  |           | 
|                                                                        |  |                         | 1,558,739 |  |      |  | 1,642,490 |      |  |  | 1,668,801 | 
|Other Businesses                                                        |  |                         |           |  |      |  |           |      |  |  |           | 
|Provision of repair and maintenance services by the CRC Group(iv)       |  |                         | 28,531    |  |      |  | 2,813     |      |  |  | 42,954    | 
|Purchase of materials and supplies from the CRC Group(v)                |  |                         | 9,317     |  |      |  | 33,591    |      |  |  | 15,220    | 
|Provision of construction services by the CRC Group(vi)                 |  |                         |          |  |      |  | 13,538    |      |  |  | 4,385     | 
|                                                                        |  |                         |           |  |      |  |           |      |  |  |           | 
|                                                                        |  |                         | 37,848    |  |      |  | 49,942    |      |  |  | 62,559    | 
|                                                                        |  |                         |           |  |      |  |           |      |  |  |           | 



|(i) | The service charges are determined based on a pricing scheme set by the CRC or based on negotiation between the contracting parties with reference to actual costs
incurred.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(ii) | Such revenues/charges are determined by the CRC based on its standard charges applied on a nationwide basis.
|---- | ------------------------------------------------------------------------------------------------------------

|(iii) | The service charges are levied based on contract prices determined based on a cost plus a profit margin and explicitly agreed between both contracting
parties.
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(iv) | The prices are determined based on mutual negotiation between the contracting parties with reference to actual costs incurred.
|---- | ------------------------------------------------------------------------------------------------------------------------------

|(v) | The prices are determined based on mutual negotiation between the contracting parties with reference to procurement cost plus management fee ranged from 0.3% to 5%.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(vi) | Based on construction amounts determined under national railway engineering guidelines.
|---- | ---------------------------------------------------------------------------------------



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The chart below sets forth the revenue collected and settled through the CRC for the periods
indicated:



|                         |  |                         |           |  |      |  |           |      |  |  |           | 
|------------------------ |  | ----------------------- | --------- |  | ---- |  | --------- | ---- |  |  | --------- | 
|                         |  | Year ended December 31, |          
|                         |  | 2014                    |           |  | 2015 |  |           | 2016 | 
|                         |  | (RMB thousands)         |          
|Passenger transportation |  |                         | 6,630,629 |  |      |  | 6,642,129 |      |  |  | 6,960,491 | 
|Freight transportation   |  |                         | 920,255   |  |      |  | 1,022,025 |      |  |  | 1,105,061 | 
|Luggage and parcel       |  |                         | 148,863   |  |      |  | 86,199    |      |  |  | 86,883    | 
|                         |  |                         |           |  |      |  |           |      |  |  |           | 
|                         |  |                         | 7,699,747 |  |      |  | 7,750,353 |      |  |  | 8,152,435 | 
|                         |  |                         |           |  |      |  |           |      |  |  |           | 

We cooperate with the CRC and other railway companies owned and controlled by the CRC for the operation
of certain long distance passenger trains and freight transportation businesses within the PRC. The revenues generated from these long-distance passenger trains and freight transportation businesses are collected and settled by the CRC Group on our
behalf through the CRCs nationwide settlement systems.

We had the following material balances maintained with the CRC
Group as of December 31, 2015 and December 31, 2016:



|                       |  |                    |         |  |      |  |           | 
|---------------------- |  | ------------------ | ------- |  | ---- |  | --------- | 
|                       |  | As of December 31, |        
|                       |  | 2015               |         |  | 2016 | 
|                       |  | (RMB thousands)    |        
|Due from the CRC Group |  |                    |         |  |      |  |           | 
|Trade receivables      |  |                    | 897,030 |  |      |  | 1,443,272 | 
|Other receivables      |  |                    | 6,700   |  |      |  | 4,672     | 
|Due to the CRC Group   |  |                    |         |  |      |  |           | 
|Trade payables         |  |                    | 62,709  |  |      |  | 65,496    | 
|Other payables         |  |                    | 19,968  |  |      |  | 15,901    | 



|C. | Interests of Experts and Counsel
|-- | --------------------------------

Not applicable



|ITEM 8. | FINANCIAL INFORMATION
|------- | ---------------------



|A. | Consolidated Statements and Other Financial Information
|-- | -------------------------------------------------------

A.1  A.6:

See
pages F-1 to F-78 following ITEM 19.



|A.7 | Legal Proceedings
|--- | -----------------

We are
not a party to any material legal proceeding and no material legal proceeding is known to us to be pending against us or with respect to our properties.



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|A.8 | Dividend Distributions
|--- | ----------------------

We make decisions concerning the payment of dividends on an annual basis. Any dividends are paid at the discretion of our board of
directors, which makes a recommendation in this regard that must be confirmed at our annual general meeting. Our Articles of Association permit us to distribute dividends from profits more than once a year. The amount of these interim
dividends cannot exceed 50% of our distributable income as stated in our interim profit statements. In accordance with our Articles of Association, the amounts available for the purpose of paying dividends will be deemed to be the lesser of:



| |  | 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.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See ITEM 10. ADDITIONAL INFORMATIONE. Taxation for a discussion
of the tax consequences related to the receipt of dividends.

Our Articles of Association prohibit us from distributing
dividends without first making up for cumulative losses from prior periods (determined in accordance with PRC accounting standards) and making all tax and other payments required by law. Further, prior to the payment of dividends, our profits are
subject to deductions such as allocations to a statutory common reserve fund. The common reserve fund may be used to make up losses or be converted into share capital or reinvested.

Our Articles of Association require that cash dividends in respect of H shares be declared in RMB and paid in Hong Kong dollars
at the average of the exchange rate as published by the PBOC for each day of the calendar week preceding the date of the dividend declaration. To the extent that we are unable to pay dividends in Hong Kong dollars from our own foreign exchange
resources, we will have to obtain Hong Kong dollars through the interbank system or by other permitted means. Hong Kong dollar dividend payments will be converted by the depositary and distributed to holders of ADSs in U.S. dollars.

On March 29, 2017, our Board of Directors proposed a final dividend distribution of RMB0.08 per share to our shareholders for
the year ended December 31, 2016. The final dividend payment is expected to be approved by our shareholders at our annual general meeting of shareholders to be held on June 15, 2017.



|B. | Significant Changes
|-- | -------------------

Other than events already mentioned in this annual report, there have been no significant changes since December 31, 2016.



|ITEM 9. | THE OFFER AND LISTING
|------- | ---------------------



|A. | Offer and Listing Details
|-- | -------------------------

Price Range of our H shares and ADSs

As of December 31, 2016 and April 20,
2017, there were 1,431.3 million H shares issued and outstanding. As of December 31, 2016 and April 20, 2017, there were 2,204,237 ADSs and 2,204,237 ADSs outstanding held by 139 and 137 registered holders, respectively.



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The HKSE is the principal non-US trading market for our H shares. The ADSs, each
representing 50 H shares, have been issued by JPMorgan Chase Bank as depositary and are listed on the NYSE. The following table sets forth, for the periods indicated, the reported high and low sales prices for our securities on each of these
stock exchanges:



|                                    |  |                        |       |  |                   |  |       |      |  |  |      |  |  |  |      | 
|----------------------------------- |  | ---------------------- | ----- |  | ----------------- |  | ----- | ---- |  |  | ---- |  |  |  | ---- | 
|                                    |  | New York StockExchange |       |  | HKSE              | 
|Calendar Period                     |  | High                   |       |  | Low               |  |       | High |  |  | Low  | 
|                                    |  | (USD per ADS)          |       |  | (HKD per H share) | 
|Annual highs and lows               |  |                        |       |  |                   |  |       |      |  |  |      |  |  |  |      | 
|2012                                |  |                        | 21.38 |  |                   |  | 13.97 |      |  |  | 3.37 |  |  |  | 2.19 | 
|2013                                |  |                        | 28.17 |  |                   |  | 18.73 |      |  |  | 4.48 |  |  |  | 2.81 | 
|2014                                |  |                        | 24.59 |  |                   |  | 18.05 |      |  |  | 3.82 |  |  |  | 2.79 | 
|2015                                |  |                        | 34.85 |  |                   |  | 18.92 |      |  |  | 5.43 |  |  |  | 2.92 | 
|2016                                |  |                        | 30.50 |  |                   |  | 20.51 |      |  |  | 4.92 |  |  |  | 3.11 | 
|Quarterly highs and lows            |  |                        |       |  |                   |  |       |      |  |  |      |  |  |  |      | 
|First Quarter 2015                  |  |                        | 26.00 |  |                   |  | 23.04 |      |  |  | 4.14 |  |  |  | 3.48 | 
|Second Quarter 2015                 |  |                        | 34.85 |  |                   |  | 23.54 |      |  |  | 5.43 |  |  |  | 3.60 | 
|Third Quarter 2015                  |  |                        | 27.39 |  |                   |  | 18.92 |      |  |  | 4.27 |  |  |  | 2.92 | 
|Fourth Quarter 2015                 |  |                        | 26.69 |  |                   |  | 19.93 |      |  |  | 4.34 |  |  |  | 3.13 | 
|First Quarter 2016                  |  |                        | 24.43 |  |                   |  | 20.51 |      |  |  | 3.90 |  |  |  | 3.11 | 
|Second Quarter 2016                 |  |                        | 25.74 |  |                   |  | 21.22 |      |  |  | 4.05 |  |  |  | 3.30 | 
|Third Quarter 2016                  |  |                        | 27.51 |  |                   |  | 22.74 |      |  |  | 4.38 |  |  |  | 3.52 | 
|Fourth Quarter 2016                 |  |                        | 30.50 |  |                   |  | 25.58 |      |  |  | 4.92 |  |  |  | 3.97 | 
|Monthly highs and lows              |  |                        |       |  |                   |  |       |      |  |  |      |  |  |  |      | 
|October 2016                        |  |                        | 28.44 |  |                   |  | 25.71 |      |  |  | 4.43 |  |  |  | 3.97 | 
|November 2016                       |  |                        | 27.99 |  |                   |  | 25.58 |      |  |  | 4.32 |  |  |  | 3.98 | 
|December 2016                       |  |                        | 30.50 |  |                   |  | 26.23 |      |  |  | 4.92 |  |  |  | 4.08 | 
|January 2017                        |  |                        | 33.18 |  |                   |  | 29.96 |      |  |  | 5.17 |  |  |  | 4.63 | 
|February 2017                       |  |                        | 32.43 |  |                   |  | 30.34 |      |  |  | 5.15 |  |  |  | 4.69 | 
|March 2017                          |  |                        | 32.34 |  |                   |  | 30.10 |      |  |  | 5.03 |  |  |  | 4.63 | 
|April 2017 (through April 20, 2017) |  |                        | 31.60 |  |                   |  | 30.08 |      |  |  | 4.97 |  |  |  | 4.60 | 

During the year ended December 31, 2016, we did not purchase, sell or redeem any of our
H shares.

In addition to our H Shares, our A shares have been listed for trading on the Shanghai Stock Exchange starting
from December 22, 2006.



|B. | Plan of Distribution
|-- | --------------------

Not applicable.



|C. | Markets
|-- | -------

Our H shares are listed on the HKSE under the stock code 00525 and American Depositary Shares representing our H shares are listed on the NYSE under the stock code GSH.
Our A shares are listed for trading on the Shanghai Stock Exchange under the stock code 601333.



|D. | Selling Shareholders
|-- | --------------------

Not applicable.



|E. | Dilution
|-- | --------

Not applicable.



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|F. | Expenses of the Issue
|-- | ---------------------

Not applicable.



|ITEM 10. | ADDITIONAL INFORMATION
|-------- | ----------------------

We were established as a joint stock limited company under the Company Law of the PRC on March 6, 1996. Our legal name is


LOGO
, and its English translation is Guangshen Railway Company Limited.



|A. | Share Capital
|-- | -------------

We issued a total of 2,747,987,000 A shares in our initial public offering of A shares on the PRC domestic market in December 2006, and raised proceeds of approximately RMB10.0 billion. Each A share
has a par value of RMB1.00 and has been listed for trading on the Shanghai Stock Exchange.

The total number of shares of our
Company after the A Share Offering is 7,083,537,000. As of December 31, 2016, our issued share capital consisted of:



|                                                                 |  |                 |               |  |                         |  |       | 
|---------------------------------------------------------------- |  | --------------- | ------------- |  | ----------------------- |  | ----- | 
|                                                                 |  | Number ofshares |               |  | Percentage ofshares
(%) | 
|Type of share capital                                            |  |                 |               |  |                         |  |       | 
|Domestic tradable shares without restriction on sales (A shares) |  |                 | 5,652,237,000 |  |                         |  | 79.8  | 
|H shares                                                         |  |                 | 1,431,300,000 |  |                         |  | 20.2  | 
|                                                                 |  |                 |               |  |                         |  |       | 
|Total                                                            |  |                 | 7,083,537,000 |  |                         |  | 100.0 | 
|                                                                 |  |                 |               |  |                         |  |       | 

Public Float

As of April 26, 2017, at least 25% of our total issued share capital was held by the public, as required under the HKSE Listing Rules.

Pre-Emptive Rights

There is no provision in our Articles of
Association or under the laws of the PRC which provides for pre-emptive rights of our shareholders.



|B. | Memorandum and Articles of Association
|-- | --------------------------------------

Our shareholders previously adopted the amended and restated Articles of Association at an annual shareholders general meeting held on June 25, 2009, which was filed as an exhibit to our
annual report on Form 20-F with the SEC on June 22, 2010. On September 27, 2012 and May 28, 2015, our shareholders passed resolutions to make additional amendments to the Articles of Association, the full text of which was filed as an
exhibit to our annual report on Form 20-F with the SEC on April 27, 2016. On May 26, 2016, our shareholders passed resolutions to make additional amendments concerning the scope of the business of the Company set forth in Article 13 of the
Articles of Association, the full text of which is filed as Exhibit 1.1 hereto.

Described below is a summary of the
significant provisions of our amended and restated Articles of Association as currently in effect. As this is a summary, it does not contain all the information that may be important to you.



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General

We are a joint stock limited company established in accordance with the Company Law of China, the Rules of the State Council on the Overseas Issuance and Listings and other relevant laws and regulations
of the PRC. Our Company was established by way of promotion with approval evidenced by the document Ti Gai Sheng [1995] No. 151 of the PRCs State Commission for Economic Restructuring. We were registered with and obtained a
business license from the Administration for Industry and Commerce of Shenzhen, Guangdong Province on March 6, 1996. The number of our business license is Shen Si Zi 4403011022106. Article 12 of our Articles of Association states that
our object is to carry on the business of railway transportation.

Significant Differences between H shares and A shares

Holders of H shares and A shares (also referred to as domestic shares), with minor exceptions, are entitled to the
same economic and voting rights. However, our Articles of Association provide that holders of H shares will receive dividends in Hong Kong dollars while holders of A shares will receive dividends in RMB. Other differences between the
rights of holders of H shares and A shares relate primarily to ownership and transferability. H shares may only be subscribed for and owned by legal and natural persons of any country other than the PRC (excluding Taiwan, Hong Kong, and
Macau), and must be subscribed for, transferred and traded in a foreign currency. Other than the limitation on ownership, H shares are freely transferable in accordance with our Articles of Association. A shares may only be subscribed for
and owned by legal or natural persons in the PRC (excluding Taiwan, Hong Kong and Macau), and must be subscribed for and traded in RMB. Transfers of A shares are subject to restrictions set forth under PRC rules and regulations, which are not
applicable to H shares. Transfers of A shares owned by our directors or employees are also subject to restrictions under PRC rules and regulations. A shares and H shares are also distinguished by differences in administration and
procedure, including provisions relating to notices and financial reports to be sent to shareholders, dispute resolution, registration of shares on different parts of the register of shareholders, the method of share transfer and appointment of
dividend receiving agents.

Restrictions on Transferability

H shares may be traded only among foreign investors, and may not be sold to PRC investors (except investors from Hong Kong, Macau and Taiwan). PRC investors (except investors from Hong Kong, Macau
and Taiwan) are not entitled to be registered as holders of H shares. Under our Articles of Association, we may refuse to register a transfer of H shares unless:



| |  | 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
|- |  | -----------------------------------------------------------------------------------------------------------------



| |  | we do not have any lien on the relevant shares.
|- |  | -----------------------------------------------



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Dividends

Unless otherwise resolved by a shareholders general meeting, we may distribute dividends more than once a year, provided that the amount of interim dividends to be distributed shall not exceed
50% of the distributable profit as stated in our interim profit statement. In accordance with our Articles of Association, our net profit for the purpose of profit distribution will be deemed to be the lesser of the amount determined in
accordance with:



| |  | PRC accounting standards and regulations; and
|- |  | ---------------------------------------------



| |  | international accounting standards or the accounting standards of the countries in which our shares are listed.
|- |  | ---------------------------------------------------------------------------------------------------------------

Our Articles of Association allow for distributions of dividends in the form of cash or shares, and encourage the Board to first
consider a payment of cash dividends as opposed to share dividends. In particular, according to our Articles of Association, interim dividends may be distributed by way of cash dividends. Dividends may only be distributed, however, after
allowance has been made in the following sequence:



| |  | 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.
|- |  | ---------------------------------------------------

The board of directors shall, in accordance with the laws and administrative regulations of the State (if any) and our Companys operation and development requirements, determine the proportions of
allocations to the discretionary common reserve fund and payment of ordinary share dividends subject to approval of shareholders at the general meeting. The Company may not distribute any dividend before making up for its losses and allocating funds
to the statutory common reserve fund.

Our Articles of Association require us to appoint on behalf of the holders of
H shares a receiving agent to receive on behalf of these shareholders dividends declared and all other moneys in respect of the H shares. The receiving agent appointed shall be a company that is registered as a trust company under the
Trustee Ordinance of Hong Kong. Our Articles of Association require that cash dividends in respect of H shares be declared in RMB and paid by us in Hong Kong dollars. If we record no profit for the year, we may not normally distribute
dividends for the year.

Voting Rights and Shareholder Meetings

Shareholders general meetings can be annual shareholders general meetings or extraordinary general meetings.
Shareholders meetings shall be convened by the board of directors. The board of directors shall convene an annual shareholders meeting within six months from the end of the preceding accounting year. The shareholders provide us
with principal authority at general meetings. We exercise our functions and powers in compliance with our Articles of Association.

We are not permitted to enter into any contract with any person other than a director, supervisor, general manager, deputy general manager, or other senior officers of our Company whereby the management
and administration of the whole of our Company or any material business of our Company is to be handed over to such person without the prior approval of the shareholders in a general meeting.



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The board of directors shall convene an extraordinary shareholders meeting within
two months if any one of the following circumstances occurs:



| |  | 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.
|- |  | -------------------------------------------------------------

Where we convene a shareholders general meeting (when we have more than one shareholder), we shall give not less than 45 days
prior public notice or other means (if necessary) as specified in our Articles of Association to all shareholders whose names appear in the share register of the items to be considered and the date and venue of the meeting. Any shareholder
intending to attend the shareholders general meeting shall give us a written reply stating his or her intention to attend the meeting 20 days prior to the date of the meeting.

Where our Company convenes an annual general meeting, shareholders who severally or jointly hold more than 3% of our Companys
shares, may present an extraordinary proposal for the shareholders general meeting in written form to our Company. If the subject of the extraordinary proposal falls within the functions and powers of a shareholders general meeting, then
it should be included in the agenda of the meeting.

A shareholder extraordinary general meeting shall not resolve any matter
not stated in the notice of such meeting. A notice of meeting of shareholders shall:



| |  | 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 our Company with another entity, to repurchase the shares of our Company, to reorganize its share capital or to restructure our 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 our 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.
|- |  | --------------------------------------------------------------------------------------------------------



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The Company may send the notice to the domestic shareholders by way of public notice
published in one or more newspapers designated by the securities regulatory authority under the State Council at least forty-five (45) days before the date of the meeting. After the publication of such notice, all holders of domestic shares
shall be deemed to have received the notice of the relevant shareholders general meeting. Notice of a shareholders general meeting to holders of overseas-listed foreign-invested shares shall be published on our Companys website
(www.gsrc.com) at least forty-five (45) days prior to the date of the meeting. After the publication of such notice, all holders of overseas-listed foreign-invested shares shall be deemed to have received the notice of the relevant
shareholders general meeting. The accidental omission to give notice of a meeting to, or the non-receipt of notice of a meeting by any person entitled to receive notice, shall not invalidate the meeting or the resolutions adopted therein.
Where we convene an annual general meeting, we shall include in the agenda of the meeting any resolutions submitted by shareholders (including proxies) who either separately or in aggregate hold more than 3% of the total number of our shares,
provided that these resolutions fall within the scope of powers of a shareholders general meeting.

The following
matters shall be resolved by way of ordinary resolution of the shareholders general meeting:



| |  | 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.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

The following matters shall be resolved by way of special resolution of the shareholders
general meeting:



| |  | 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 our Company;
|- |  | -------------------------------------------------------------



| |  | amendment to our Articles of Association;
|- |  | -----------------------------------------



| |  | alteration to the form of our Company;
|- |  | --------------------------------------



| |  | acquisition or disposal within one year of material assets exceeding 30% of the total assets of our Company; and
|- |  | ----------------------------------------------------------------------------------------------------------------



| |  | any other matter that, according to an ordinary resolution of the shareholders meeting, may have a significant impact on our Company and requires
adoption by way of a special resolution.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Shareholders have the right to attend general meetings of shareholders and to exercise their
voting rights, in person or by proxy, in relation to the amount of voting shares they represent. Each share carries the right to one vote. Any share of our Company held by our Company does not carry any voting right.

At any meeting of shareholders a resolution shall be decided by a show of hands unless a poll is demanded before or after any vote by
show of hands:



| |  | 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.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Unless a poll is demanded, a declaration by the chairman of the meeting that a
resolution has on a show of hands been carried and an entry to that effect in the minutes of the meeting shall be conclusive evidence of the fact, without proof of the number or proportion of the votes recorded in favor of or against that
resolution, that the resolution has been carried. A demand for a poll may be withdrawn. A poll demanded on the election of the chairman, or on a question of suspension of the meeting, shall be taken at the meeting immediately. A poll demanded on any
other questions shall be taken at such time as the chairman of the meeting directs, and any business other than that on which the poll has been demanded may be proceeded with. The result of the poll shall be deemed to be the resolution of the
meeting at which the poll was demanded. On a poll taken at a meeting, a shareholder should cast his or her vote(s) either at the meeting, online or through another way as permitted by the Articles of Association; a shareholder (including their
proxies) entitled to two or more votes need not cast all his or her votes in the same way. In the case of a tie, the chairman of the meeting shall be entitled to one additional vote. Shareholders shall be entitled to designate two shareholder
representatives to participate in counting the votes and supervising the voting process; provided that no person shall be permitted to serve as a shareholder representative to the extent such person has an interest in, or is otherwise impacted by,
the resolutions being voted on, to the extent such interest or impact is disproportionate in comparison to other shareholders.

Board of
Directors

Where a director is interested in any resolution proposed at a board meeting, the director shall not be present
and shall not have a right to vote at the meeting. That director shall also not be counted in the quorum of the relevant meeting.

Our directors compensation is determined by resolutions approved at shareholders general meetings. Our directors have no power to approve their own compensation.

Our directors are not required to hold shares of our Company. There is no age limit requirement with respect to retirement or
non-retirement of our directors.

At least one-third of our board members shall be independent directors. An independent
director is a director who does not act in other capacities in our Company other than as a director, and who does not have any relationship with our Company or our Companys substantial shareholders which may affect the director in making
independent and objective judgment. An independent director shall have certain special duties, including, among others, to approve a connected transaction of which the total consideration accounts for more than 5% of the latest audited net asset
value of our Company before submission to the board of the directors for discussion, to propose the convening of a board meeting, to engage external auditors or consultants independently, and to make independent opinion on significant events of our
Company. To ensure that the independent directors can effectively perform their duties, our Company shall provide them with certain working conditions.



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Liquidation Rights

In the event of the termination or liquidation of our Company, our shareholders shall have the right to participate in the distribution of surplus assets of our Company in accordance with the type and
number of shares held by those shareholders.

Liability of Shareholders

The liability of holders of our shares for our losses or liabilities is limited to their capital contributions in our Company.

Increases in Share Capital

Our Articles of Association require that approval by a special resolution of the shareholders and by special resolution of holders of domestic shares and H shares at separate shareholder class
meetings be obtained prior to authorizing, allotting, issuing or granting shares, securities convertible into shares or options, warrants or similar rights to subscribe for any shares or convertible securities. No approval is required to be obtained
from separate class meetings if, but only to the extent that, we issue domestic shares and H shares, either separately or concurrently, in numbers not exceeding 20% of the number of domestic shares and H shares then in issue, respectively,
in any 12-month period, as approved by a special resolution of the shareholders. New issues of shares must also be approved by relevant PRC authorities.

Reduction of Share Capital and Purchase by Us of Our Shares

We may,
following the procedures provided in the Articles of Association and subject to the approval of the relevant governing authority of the State, repurchase any of our issued shares under the following circumstances:



| | (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 our Companys resolution for merger or spin-off at a shareholders general
meeting.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

Any repurchase of shares under items (1) to (3) of the foregoing paragraph shall be
approved by shareholders general meeting of our Company. After repurchase of the shares according to the foregoing paragraph by our Company, the shares repurchased under item 1 shall be cancelled within ten days from the date of the
repurchase; and the shares repurchased under items 2 and 4 shall be transferred or cancelled within six months.

The
shares repurchased by our Company under item 3 may not exceed 5% of the total of our Companys issued shares. Such repurchase shall be financed by our Companys profit after tax. The shares so repurchased shall be transferred to the
employees within one year.

We may not accept our shares as the subject of any pledge.

In the event that the regulatory authorities at the place of listing of our overseas-listed foreign shares have different requirements,
such requirements shall prevail.



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Subject to approval by PRC securities regulatory authorities and compliance with applicable
law, we may carry out a share repurchase by one of the following methods:



| |  | under a general offer;
|- |  | ----------------------



| |  | open offer on a stock exchange; or
|- |  | ----------------------------------



| |  | by off-market contract.
|- |  | -----------------------

We may, with the prior approval of shareholders in general meeting obtained in accordance with our Articles of Association, repurchase our shares by an off-market contract, and we may rescind or vary
such a contract or waive any of our rights under the contract with the prior approval of shareholders obtained in the same manner. A contract to repurchase shares includes (without limitation) an agreement to become obliged to repurchase and an
agreement to acquire the right to repurchase our shares. We may not assign a contract to repurchase our own shares or any rights provided thereunder.

Shares repurchased by us shall be canceled and the amount of our registered capital shall be reduced by the par value of those shares. The amount of our registered capital so reduced to the extent that
shares are repurchased out of an amount deducted from our distributable profits, shall be transferred to our capital common reserve account.

Unless we are in the process of liquidation:



| |  | 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
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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; shall be made out of our distributable profits.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------

Restrictions on Controlling Shareholders

In addition to obligations imposed by law or required by the stock exchanges on which our shares are listed, a controlling shareholder (as defined below) shall not exercise his or her voting rights in
respect of the following matters in a manner prejudicial to the interests of the shareholders generally or any part of our shareholders:



| |  | to relieve a director or supervisor of his or her duty to act honestly in our best interests;
|- |  | ---------------------------------------------------------------------------------------------



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| |  | 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.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Controlling shareholder means a shareholder whose shareholdings represent over 50%
of the total share capital of our Company, or if less than 50%, whose entitlement to voting rights is sufficient to materially affect the resolutions at general meetings of our Company.

Changing Rights of a Class of Shareholders

Rights conferred on any class
of shareholders in the capacity of shareholders may not be varied or abrogated unless approved by a special resolution of shareholders at a general meeting and by holders of shares of that class at a separate class meeting conducted in accordance
with our Articles of Association.

Duties of Directors, Supervisors and Other Senior Officers in Interested Transactions

Where any director, supervisor, general manager, deputy general manager or other senior officers (or an associate thereof)
is in any way materially interested in a contract or transaction or arrangement or proposed contract or transaction or arrangement with us (other than his or her contract of service with us), he or she shall declare the nature and extent of his or
her interest to the board of directors at the earliest opportunity, whether or not the contract, transaction or proposal or arrangement is subject to the approval of the board of directors.

Unless the interested director, supervisor, general manager deputy general manager or other senior officers has disclosed his or her
interests and the contract or transaction is approved by the board of directors at a meeting in which the interested director, supervisor, general manager, deputy general manager or other senior officers has not been counted in the quorum and has
refrained from voting, a contract or transaction in which that director, supervisor, general manager, deputy general manager or other senior officers is materially interested is voidable except as against a bona fide party to the contract or
transaction acting without notice of the breach of duty by the interested director, supervisor, general manager, deputy general manager or other senior officers.

We shall not directly or indirectly make a loan to or provide any guarantees in connection with a loan to a director, supervisor, general manager, deputy general manager or other senior officers of our
Company or of GRGC or any of their respective associates. However, the following transactions are not subject to this prohibition:



| |  | 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.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|C. | Material Contracts
|-- | ------------------

Other than the Comprehensive Services Framework Agreement, dated as of November 1, 2016, all other material contracts we entered into during the fiscal years of 2015 and 2016 were made in the
ordinary course of business.



|D. | Exchange Controls
|-- | -----------------

The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. Effective
January 1, 1994, the dual foreign exchange system in China was abolished in accordance with the notice of the PBOC concerning future reform of the foreign currency control system issued December 1993. The conversion of RMB into U.S.
dollars in China currently must be based on the PBOC rate. The PBOC rate is set based on the previous days Chinese interbank foreign exchange market rate and with reference to current exchange rates on the world financial markets. On
July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar. Under the new policy, RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign
currencies. On April 14, 2012, the PRC government further allowed the floating band of RMBs trading prices against the U.S. dollar to widen from 0.5% to 1% on each business day effective from April 2012, and further widened such
floating band to 2% in March 2014. In recent years, the PBOC has been working to develop a mechanism for formulating the midpoint rate of the RMB. On August 11, 2015, it announced the implementation of the RMB exchange rate formation
mechanism reform to allow the market to play a bigger role in exchange rate determination. As a result thereof, the PBOC guided the RMB weaker by lowering the midpoint rate to reflect the prevailing market rate, while emphasizing the use of the
closing rate on the preceding day as a reference when deciding the midpoint rate. In February 2016, the PBOC disclosed a mechanism for formulating the midpoint rate of the RMB based on the closing rate on the preceding date + currency
basket-based adjustment rule.

Any future fluctuation of the RMB against the U.S. dollar (whether due to a decrease in
the foreign currency reserves held by the PRC government or any other reason) will have an adverse effect upon the U.S. dollar equivalent and Hong Kong dollar equivalent of our net income and increase the effective cost of foreign equipment and the
amount of foreign currency expenses and liabilities. In 2016, we incurred a foreign exchange gain of approximately RMB6.4 million due to the depreciation of the Hong Kong dollar against the RMB. If the applicable market exchange rates were to change
by 5%, this would result in a change in our net income of approximately RMB4.3 million. We have no plans to hedge our currency exposure in the future. No assurance can be given that the Hong Kong dollar to U.S. dollar exchange rate link will be
maintained in the future. Furthermore, any change in exchange rate that has a negative effect on the market for the H shares in either the United States or Hong Kong is likely to result in a similar negative effect on the other market.

We have been, and will continue to be, affected by changes in exchange rates in connection with our ability to meet our
foreign currency obligations and will be affected by such changes in connection with our ability to pay dividends on H shares in Hong Kong dollars and on ADSs in U.S. dollars. As of December 31, 2016, we maintained the equivalent of
approximately RMB115.8 million in U.S. dollar and Hong Kong dollar-denominated balances for purposes of satisfying our foreign currency obligations (e.g., to purchase foreign equipment) and paying dividends to our overseas shareholders. See
Note 3 to our audited consolidated financial statements included elsewhere in this annual report. We believe that we have or will be able to obtain sufficient foreign exchange to continue to satisfy these obligations. We do not engage in any
financial contract or other arrangement to hedge our currency exposure.



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|E. | Taxation
|-- | --------

PRC Taxation

Tax Basis of Assets

As of June 30, 1995, our assets were valued in conjunction with the Restructuring. This valuation, which was
confirmed by the State Assets Administration Bureau, establishes the tax basis for these assets.

Income Tax

In accordance with the Enterprise Income Tax Law of the PRC (hereinafter referred to as the EIT Law),
which was adopted at the 5thSession of the 10thNational Peoples Congress of the PRC on March 16, 2007,
enterprises and other organizations that earn income within the territory of the PRC are payers of enterprise income tax, which shall be paid in accordance with the provisions of EIT Law. The EIT Law and the implementation regulations for the EIT
Law (the Implementation Regulations) both came into effect on January 1, 2008, meanwhile the Income Tax Law of the PRC for Foreign-invested Enterprises and Foreign Enterprises and the Interim Regulations of the PRC on Enterprise
Income Tax have been simultaneously repealed.

Pursuant to the EIT Law, the income tax rate for PRC enterprises is reduced
from the original 33% to 25%, same as the rate applied to foreign investment enterprises and foreign enterprises.

According
to the EIT Law and the Notice Regarding Implementation of the Preferential Enterprise Income Tax in the Transition Period issued by the State Council, an enterprise established with approval prior to the promulgation of the EIT Law that enjoyed a
preferential tax rate according to the provisions of tax laws and administrative regulations then in force could gradually transition to the tax rate provided for therein within five years after the implementation of the EIT Law. The
preferential income tax rate of 15% that was applicable to companies incorporated in Shenzhen and other special economic zones was phased out over five years beginning on January 1, 2008. After such five-year period and since
January 1, 2012, the tax rate applicable to us has been fixed at 25%, i.e., the unified income tax rate applicable to all domestic companies in the PRC (with limited exceptions). An enterprise enjoying regular tax reduction or exemption may
continue to enjoy such tax reduction or exemption until the expiration of the term thereof pursuant to the provisions of the State Council; if it has not yet enjoyed such tax reduction or exemption because it fails to make a profit, the term of such
tax reduction or exemption shall be calculated from the effective date of the EIT Law (that is January 1, 2008).

Value Added Tax

Pursuant to the Provisional Regulations of the PRC Concerning Value Added Tax effective from January 1, 1994,
which was amended by the State Council on November 10, 2008 and the Detailed Rules for the Implementation of the Interim Regulations of the PRC on Value-Added Tax ,which was promulgated on December 18, 2008, and revised on October 28,
2011, our passenger and freight transportation businesses are not subject to value added tax, while our other businesses are subject to value added tax at rates ranging from 3% to 17%, depending on the scale and nature of the businesses.

Pursuant to the Notice of the Ministry of Finance and the State Administration of Taxation on Including Railway Transport and Postal
Services under the Pilot Program of Replacing Business Tax with Value-Added Tax, which was promulgated on December 12, 2013, and came into effect on January 1, 2014, the value-added tax rate of 11% shall be levied on enterprises providing
transport and postal services.



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Tax on Dividends

For an Individual Investor. According to the Individual Income Tax Law of the PRC, an income tax at the rate of 20% shall be withheld on dividend payments from PRC enterprises to residents of the
PRC. According to the Circular on Relevant Tax Policies on Pilot Shanghai-Hong Kong Stock Connect Scheme (Cai Shui [2014] No. 81) (hereinafter referred to as Circular 81) issued by the Ministry of Finance, State Tax Bureau and CSRC
on October 31, 2014, which became effective November 17, 2014, a PRC company that pays dividends to a PRC individual investor, with respect to H shares listed on the HKSE through the Shanghai-Hong Kong Stock Connect, must first request
from the China Securities Depository and Clearing Company Limited (hereinafter referred to as the CSDC) a list of PRC individual investors. The PRC company shall then withhold PRC individual income tax at a rate of 20% on payments to
such individual investors. For a foreign individual who is not a resident of the PRC, the receipt of dividends from a PRC company with A shares listed on the Shanghai Stock Exchange is normally subject to PRC withholding tax at a rate of 20% unless
specifically exempted by the tax authority of the State Council or reduced by an applicable tax treaty. According to the Notice on the Issues Concerning the Collection and Administration of Individual Income Tax Following the Repeal of Circular 45
issued by the PRC State Tax Bureau, foreign non-resident individual shareholders receiving dividends from shares in a PRC non-foreign-invested enterprise may be subject to PRC withholding tax at a rate of 10%, subject to reduction under an
applicable tax treaty. A non-PRC individual that is a resident of a country that has not entered into a tax treaty with the PRC or in any other case will be subject to PRC withholding tax at a rate of 20%. A PRC company that pays dividends to
investors in Hong Kong (including enterprises and individuals), with respect to A shares listed on the Shanghai Stock Exchange, before the Hong Kong Securities Clearing Company Ltd is able to provide details of an investors identity and stock
holding period to CSDC, must withhold PRC tax at a rate of 10%, rather than applying the exemptions based on the stock holding period discussed in the following paragraph, and should also apply for a withholding declaration from the appropriate PRC
tax authority.

According to the Notice on the Issues concerning the Implementation of Differential Individual Income Tax
Policies on Dividends and Bonuses of Listed Companies promulgated on December 28, 2012, individual PRC resident holders of A shares who have held such shares for one month or less shall include all cash and share distributions in their
taxable income. Individual PRC resident holders of A shares who have held such shares for more than one month, but not more than one year, shall temporarily include 50% of all cash and share distributions in their taxable income. In
addition, individual PRC resident holders of A shares who have held shares for more than one year shall temporarily include 25% of all cash and share distributions in their taxable income.

For An Enterprise.According to Circular 81, PRC enterprise investors dividends from investment in stocks listed on the HKSE
through the Shanghai-Hong Kong Stock Connect shall be included in income and shall be subject to PRC enterprise income tax. However, a PRC enterprise investors dividends in respect of H shares, which have been continuously held by such
investor for a period of over 12 months, shall be exempt from PRC enterprise income tax. According to the EIT Law and its Implementation Regulations, and pursuant to the Notice on the Issues Regarding Withholding of the Enterprise Income Tax on the
Dividends Paid by Chinese Resident Enterprises to H share Holders Which Are Overseas Non-resident Enterprises issued by State Administration of Taxation on November 6, 2008, when a non-PRC resident enterprise with no establishment or
office in the PRC receives dividends from a company in the PRC, or a non-PRC resident enterprise with an establishment or office in the PRC receives dividends from a company in the PRC, and such dividends are not effectively connected with an
establishment or office in the PRC, the non-PRC resident enterprise is normally subject to a PRC withholding tax at a rate of 10% under the EIT Law.

The Response to Questions on Levying Enterprise Income Tax on Dividends Derived by Non-resident Enterprise from Holding B-shares issued by the SAT on July 24, 2009 further provides that any PRC
resident enterprise that is listed on an overseas stock exchange must withhold PRC enterprise income tax at a rate of 10% on dividends that it distributes to non-PRC resident enterprises, subject to reduction under an applicable tax treaty.



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Capital Gains Tax

For An Individual Investor. According to the Notice Concerning the Continuation of Exemption from Individual Income Tax on the Income from Stock Transfer issued by the PRC Ministry of Finance and
the PRC State Tax Bureau on March 30, 1998, effective from January 1, 1997, gains realized by individuals from transferring stock of listed companies are not subject to individual income tax.

After the latest amendment to the Individual Income Tax Law on June 30, 2011 and its implementation rules on February 18, 2008,
the State Administration of Taxation has not stated whether it will continue to exempt from individual income tax income derived by individuals from the transfer of listed shares. However, on December 31, 2009, the Ministry of Finance, State
Administration of Taxation and CSRC jointly issued the Circular on Related Issues on Collection of Individual Income Tax over the Income Received by Individuals from Transfer of Listed Shares Subject to Sales Limitation (Cai Shui [2009]
No. 167), which states that individuals income from transferring listed shares on certain domestic exchanges shall continue to be exempted from the individual income tax, except for shares of certain specified companies under certain
situations which are subject to sales limitations (as defined in such Circular and its supplementary notice issued on November 10, 2010). Meanwhile, according to Circular 81, PRC individual investors gains from transferring stock of a
company listed on the HKSE through the Shanghai-Hong Kong Stock Connect shall be temporarily exempted from PRC individual income tax from November 17, 2014 to November 16, 2017. Moreover, the gains received by individual investors from
Hong Kong from transferring A shares listed on the Shanghai Stock Exchange shall be temporarily exempted from income tax.

For An Enterprise. In accordance with the EIT Law and its Implementation Regulations, a non-resident enterprise is
generally subject to PRC enterprise income tax at a rate of 10% with respect to PRC-sourced income, including gains derived from the disposal of equity interests in a PRC resident enterprise, if it does not have an establishment or
premises in the PRC or has an establishment or premises in the PRC but the PRC-sourced income is not connected with such establishment or premises in the PRC. According to Circular 81, the gains derived from transferring A shares listed on the
Shanghai Stock Exchange received by Hong Kong enterprise investors through the Shanghai-Hong Kong Stock Connect shall be temporarily exempted from income tax. In addition, such gains may be exempted in the PRC if the tax treaty or agreement that the
PRC concluded with the relevant jurisdiction, where applicable, states that the PRC may not tax capital gains.

In accordance
with Circular 81, PRC enterprise investors gains from transferring stocks listed on the HKSE through the Shanghai-Hong Kong Stock Connect shall be included in total income and shall be subject to enterprise income tax.

Tax Treaties

For
non-PRC resident enterprises with no establishment in the PRC and individuals not resident in the PRC, if their home countries or jurisdictions have entered into double taxation treaties with the PRC, such enterprises and individuals may be entitled
to a reduction of any withholding tax imposed on the payment of dividends from a PRC company. The PRC currently has double taxation treaties with a number of countries, including Australia, Canada, France, Germany, Japan, Malaysia, the Netherlands,
Singapore, the United Kingdom and the United States.

The Agreement Between the Government of the United States of America and
the PRC Government for the Avoidance of Double Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income, together with related protocols, referred to herein as the US-PRC tax treaty, currently limits the rate of PRC
withholding tax upon dividends paid by our Company to a U.S. holder (as defined below under U.S. Federal Income Taxation) who is a resident of the United States for purposes of the U.S.-PRC tax treaty to 10%. It is uncertain if the
US-PRC tax treaty exempts from PRC tax the capital gains of a U.S. holder arising from the sale or disposition of H shares or ADSs. U.S. holders are advised to consult their tax advisors with respect to these matters.



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U.S. Federal Income Taxation

The following is a general discussion of the material U.S. federal income tax consequences of purchasing, owning and disposing of the H shares or ADSs if you are a U.S. holder, as defined below, and
hold the H shares or ADSs as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the Code). This discussion does not address all of the U.S. federal income tax consequences
relating to the purchase, ownership and disposition of the H shares or ADSs, and does not take into account U.S. holders who may be subject to special rules including:



| |  | banks, insurance companies and financial institutions;
|- |  | ------------------------------------------------------



| |  | U.S. 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.
|- |  | --------------------------------------------------------------

This discussion is based on the Code, its legislative history, final, temporary and proposed United States Treasury regulations
promulgated thereunder, published rulings and court decisions as in effect on the date hereof, all of which are subject to change, or changes in interpretation, possibly with retroactive effect. In addition, this discussion is based in part upon
representations of the depositary and the assumption that each obligation in the deposit agreement and any related agreements will be performed according to its terms.

You are a U.S. holder if you are a beneficial owner of H shares or ADSs and are:



| |  | a citizen or resident of the United States for U.S. federal income tax purposes;
|- |  | --------------------------------------------------------------------------------



| |  | a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States,
any state thereof or the District of Columbia;
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | an estate the income of which is subject to U.S. federal income tax without regard to its source; or
|- |  | ----------------------------------------------------------------------------------------------------



| |  | a trust:
|- |  | --------



| |  | subject to the primary supervision of a U.S. court and the control of one or more U.S. persons; or
|- |  | --------------------------------------------------------------------------------------------------



| |  | that has elected to be treated as a U.S. person under applicable U.S. Treasury regulations.
|- |  | -------------------------------------------------------------------------------------------



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If a partnership (including any entity taxed as a partnership for U.S. federal income tax
purposes) holds the H shares or ADSs, the tax treatment of a partner generally will depend on the status of the partner and the activities of the partnership. If you are a partner of a partnership that holds the H shares or ADSs, we urge
you to consult your tax advisors regarding the consequences of the purchase, ownership and disposition of the H shares or ADSs.

This discussion does not address any U.S. federal estate or gift tax consequences, or any state, local or non-U.S. tax consequences of the purchase, ownership and disposition of the H shares or ADSs.

We urge you to consult your tax advisors regarding the U.S. federal, state, local and non-U.S. tax consequences of the purchase, ownership
and disposition of the H shares or ADSs.

In general, if you hold ADRs evidencing ADSs, you will be treated as the
owner of the H shares represented by the ADSs. The following discussion assumes that we are not a passive foreign investment company (a PFIC), as discussed under PFIC Rules below.

Distributions on the H shares or ADSs

The gross amount of any distribution (without reduction for any PRC tax withheld) we make on the H shares or ADSs out of our current or accumulated earnings and profits will be includible in your
gross income as dividend income when the distribution is actually or constructively received by you, in the case of the H shares, or by the depositary in the case of ADSs. Subject to certain limitations, dividends paid to non-corporate U.S.
holders, including individuals, may be eligible for a reduced rate of taxation if we are deemed to be a qualified foreign corporation for U.S. federal income tax purposes. A qualified foreign corporation includes:



| |  | 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,
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

but does not include an otherwise qualified foreign corporation that is a PFIC
in the taxable year the dividend is paid or the prior taxable year. We believe that we will be a qualified foreign corporation so long as we are not a PFIC (and were not a PFIC for our prior taxable year) and we are considered
eligible for the benefits of the U.S.-PRC tax treaty. Our status as a qualified foreign corporation, however, may change.

Distributions by a corporation that exceed its current and accumulated earnings and profits (as determined for U.S. federal income tax
purposes) generally are treated as a return of capital to the extent of a shareholders basis in the corporations shares, and thereafter as capital gain. We do not maintain calculations of our current and accumulated earnings and profits
as determined for U.S. federal income tax purposes, and you should expect that the full amount of any distribution to you will be treated as a dividend for U.S. federal income tax purposes. Any dividend will not be eligible for the
dividends-received deduction generally allowed to U.S. corporations in respect of dividends received from U.S. corporations. The amount of any distribution of property other than cash will be the fair market value of such property on the date of
such distribution.

If we make a distribution paid in Hong Kong dollars, you will be considered to receive the U.S. dollar
value of the distribution determined at the spot HK dollar/U.S. dollar rate on the date such distribution is received by you or by the depositary, regardless of whether you or the depositary convert the distribution into U.S. dollars on such date.
Any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is includible in your income to the date you or the depositary convert the distribution into U.S. dollars will be treated as foreign
currency exchange gain or loss that is U.S.-source ordinary income or loss for foreign tax credit limitation purposes.



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Subject to various limitations, any PRC tax withheld from distributions in accordance with
PRC law, as limited by the U.S.-PRC tax treaty, may be creditable against your U.S. federal income tax liability. For foreign tax credit limitation purposes, dividends paid on the H shares or ADSs will be foreign source income, and will be
treated as passive category income or, in the case of some U.S. holders, general category income. You may not be able to claim a foreign tax credit (and instead may claim a deduction) for non- U.S. taxes imposed on dividends
paid on the H shares or ADSs if you (i) have held the H shares or ADSs for less than a specified minimum period during which you are not protected from risk of loss with respect to such shares, or (ii) are obligated to make
payments related to the dividends (for example, pursuant to a short sale).

Sale, Exchange or Other Disposition

Upon a sale, exchange or other disposition of the H shares or ADSs, you will recognize a capital gain or loss for U.S. federal income
tax purposes in an amount equal to the difference between the U.S. dollar value of the amount realized and your tax basis, determined in U.S. dollars, in such H shares or ADSs. Any gain or loss will generally be U.S.-source gain or loss for
foreign tax credit limitation purposes. Capital gain of certain non-corporate U.S. holders, including individuals, is generally taxed at reduced rates where the H shares or ADSs have been held more than one year. Your ability to deduct
capital losses is subject to limitations.

If any PRC tax is withheld from your gain on a disposition of H shares or
ADSs, such tax would only be creditable against your U.S. federal income tax liability to the extent that you have foreign-source income. However, in the event that PRC tax is withheld, a U.S. holder that is eligible for the benefits of the U.S.-
PRC tax treaty may be able to treat the gain as foreign-source income for foreign tax credit limitation purposes.

If you are
paid in a currency other than U.S. dollars, any gain or loss resulting from currency exchange fluctuations during the period from the date of the payment resulting from sale, exchange or other disposition to the date you convert the payment into
U.S. dollars will be treated as foreign currency exchange gain or loss that is U.S.-source ordinary income or loss for foreign tax credit limitation purposes.

PFIC Rules

In general, a foreign corporation is a PFIC for any
taxable year in which, after applying relevant look-through rules with respect to the income and assets of subsidiaries:



| |  | 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.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------

We believe that we were not a PFIC for our taxable year ended December 31, 2016 and do not
currently believe that we will be treated as a PFIC for the current or subsequent taxable years. However, PFIC status cannot be determined until the close of a taxable year and, accordingly, there can be no assurance that we will not be a
PFIC in the current or subsequent taxable years.

If we were a PFIC in any taxable year that you held the
H shares or ADSs, you generally would be subject to special rules with respect to excess distributions made by us on the H shares or ADSs and with respect to gain from a disposition of the H shares or ADSs. An excess
distribution generally is defined as the excess of the distributions you receive with respect to the H shares or ADSs in any taxable year over 125% of the average annual distributions you have received from us during the shorter of
the three preceding years or your holding period for the H shares or ADSs. Generally, you would be required to allocate any excess distribution or gain from the disposition of the H shares or ADSs ratably over your holding period for
the H shares or ADSs. The portion of the excess distribution or gain allocated to a prior taxable year, other than a year prior to the first year in which we became a PFIC, would be taxed at the highest U.S. federal income tax
rate on ordinary income in effect for such taxable year, and you would be subject to an interest charge on the resulting tax liability, determined as if the tax liability had been due with respect to such particular taxable years. The
portion of the excess distribution or gain that is allocated to the current year, together with the portion allocated to the years prior to the first year in which we became a PFIC, would be included in your gross income for the
taxable year of the excess distribution or disposition and taxed as ordinary income.



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The foregoing rules with respect to excess distributions and dispositions may be avoided or
reduced if you are eligible for and timely make a valid mark-to-market election. If your H shares or ADSs were treated as shares regularly traded on a qualified exchange for U.S. federal income tax purposes and a valid
mark-to-market election was made, in calculating your taxable income for each taxable year you generally would be required to take into account as ordinary income or loss the difference, if any, between the fair market value and the adjusted
tax basis of your H shares or ADSs at the end of your taxable year. However, the amount of loss you would be allowed is limited to the extent of the net amount of previously included income as a result of the market-to-market election. Your
basis in the H shares or ADSs will be adjusted to reflect any such gain or loss. The NYSE on which the ADSs are traded is a qualified exchange for U.S. federal income tax purposes.

Alternatively, a timely election to treat us as a qualified electing fund under Section 1295 of the Code could be made to avoid the
foregoing rules with respect to excess distributions and dispositions. You should be aware, however, that if we become a PFIC, we do not intend to satisfy record keeping requirements that would permit you to make a qualified electing fund election.

If you own the H shares or ADSs during any year that we are a PFIC, you generally will be required to file Internal
Revenue Service (the IRS), Form 8621, as described in the instructions to Form 8621, subject to certain exceptions based on the value of PFIC stock held. We encourage you to consult your own tax advisor concerning the U.S.
federal income tax consequences of holding the H shares or ADSs that would arise if we were considered a PFIC.

Backup Withholding
and Information Reporting

In general, information reporting requirements will apply to dividends in respect of the
H shares or ADSs or the proceeds of the sale, exchange, or redemption of the H shares or ADSs paid within the United States, and in some cases, outside of the United States, other than to various exempt recipients. In addition, you may,
under some circumstances, be subject to backup withholding with respect to dividends paid on the H shares or ADSs or the proceeds of any sale, exchange or transfer of the H shares or ADSs, unless you:



| |  | 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.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Any
amount withheld under the backup withholding rules generally will be creditable against your U.S. federal income tax liability provided that you furnish the required information to the IRS in a timely manner. If you do not provide a correct taxpayer
identification number, you may be subject to penalties imposed by the IRS.

Certain U.S. holders who are individuals that hold
certain foreign financial assets (which may include the H shares or ADSs) are required to report information relating to such assets, subject to certain exceptions. You should consult your own tax advisors regarding the effect, if any, of these
requirements on your ownership and disposition of the H shares or ADSs.



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Hong Kong Taxation

The following discussion summarizes the material Hong Kong tax provisions relating to the ownership of H shares or ADSs held by you.

Dividends

Under current practice, no tax will be payable by you in
Hong Kong in respect of dividends paid by us.

Taxation of Capital Gains

No capital gain tax is generally imposed in Hong Kong in respect of capital gains from the sale of shares (such as the H shares).
However, if trading gains from the sale of property by persons as part of profit making are regarded as carrying on a trade, profession or business in Hong Kong, where such gains are derived from or arise in Hong Kong from such trade, profession or
business, such trading gains will be chargeable to Hong Kong profits tax, which is currently imposed at the rate of 16.5% on corporations and at a maximum rate of 15% on unincorporated businesses. Certain categories of taxpayers are likely to be
regarded as deriving trading gains rather than capital gains (for example, financial institutions, insurance companies and securities dealers) unless these taxpayers can prove that the investment securities are held for long-term investment. Gains
from sales of the H shares affected on the Hong Kong Stock Exchange will be considered to be derived from or arise in Hong Kong. Liability for Hong Kong profits tax would thus arise in respect of trading gains from sales of H shares
realized by persons carrying on a business of trading or dealing in Hong Kong in securities.

There will be no liability for
Hong Kong profits tax in respect of profits from the sale of ADSs (i.e., the profits derived abroad), where purchases and sales of ADSs are effected outside Hong Kong, e.g. on the NYSE.

Hong Kong Stamp Duty

Hong Kong stamp duty will be payable by each
of the seller and the purchaser for every sale and purchase, respectively, of the H shares. An ad valorem duty is charged at the rate of 0.2% of the consideration of the fair value of the H shares transferred and the relevant contract
notes shall be stamped (the buyer and seller each paying half of such stamp duty). In addition, a fixed duty of HKD 5 is currently payable on an instrument of transfer of H shares.

The withdrawal of H shares when ADSs are surrendered, and the issuance of ADSs when H shares are deposited, may be subject to
Hong Kong stamp duty at the rate described above for sale and purchase transactions, if the withdrawal or deposit results in a change of legal and beneficial ownership under Hong Kong law. The issuance of ADSs for deposited H shares issued
directly to the depositary or for the account of the depositary should not lead to a Hong Kong stamp duty liability. You are not liable for the Hong Kong stamp duty payable on transfers of ADSs outside of Hong Kong.

Hong Kong Estate Duty

Prior to February 11, 2006, estate duty was levied on the value of property situated in Hong Kong passing or deemed passing on the death of a person. H shares are regarded as property situated
in Hong Kong for estate duty purposes. HK estate duty is not applicable with respect to estates of persons who passed away on or after Feb. 11, 2006.



|F. | Dividends and Paying Agents
|-- | ---------------------------

Not applicable.



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|G. | Statement by Experts
|-- | --------------------

Not applicable.



|H. | Documents on Display
|-- | --------------------

We filed with SEC in Washington, D.C. a registration statement on Form F-1 (Registration No. 333-3382) under the Securities Act of 1933, as amended, in connection with our global offering in
May 1996. The registration statement contains exhibits and schedules. For further information with respect to our Company and our ADSs, please refer to the registration statement and to the exhibits and schedules filed with the registration
statement.

Additionally, we are subject to the informational requirements of the Exchange Act, and in accordance with the
Exchange Act, we file annual reports on Form 20-F within four months of our fiscal year end, and we will furnish other reports and information under cover of Form 6-K with the SEC. You may review a copy of the registration
statement and other information without charge at the public reference facilities maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also inspect the registration statement and its exhibits and schedules at the
office of the New York Stock Exchange, 11 Wall Street, New York, New York 10005. You may also get copies, upon payment of a prescribed fee, of all or a portion of the registration statement from the SECs public reference room or by calling the
SEC on 1-800-SEC-0330 or visiting the SECs website at www.sec.gov.

As a foreign private issuer, we are exempt
from the rules under the Exchange Act prescribing the furnishing and content of proxy statements to shareholders.



|I. | Subsidiary Information
|-- | ----------------------

Not applicable.



|ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------

The following paragraphs describe the various market risks to which we were exposed as of December 31, 2015 and 2016.

Currency Risks

We
mainly operate in the PRC with most of the transactions settled in RMB. RMB is also the functional currency of our Company. 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 monetary assets and liabilities denominated in currencies other than RMB would subject our Company to currency risks. In addition,
we are required to pay dividends in Hong Kong dollars in the future when dividends are declared.

The monetary assets and
liabilities held by us that are denominated in U.S. dollars and Hong Kong dollars as of December 31, 2015 and 2016 are set forth below.



|                                |  |                      |  |      |        |  |      |  |         | 
|------------------------------- |  | -------------------- |  | ---- | ------ |  | ---- |  | ------- | 
|                                |  | As of December 31,   | 
|Monetary assets and liabilities |  | CurrencyDenomination |  | 2015 |        |  | 2016 | 
|                                |  | (RMB thousands)      | 
|Cash and cash equivalents       |  | USD                  |  |      |       |  |      |  | 96      | 
|Cash and cash equivalents       |  | HKD                  |  |      | 72,140 |  |      |  | 115,680 | 
|Other receivables               |  | HKD                  |  |      | 71     |  |      |  | 66      | 
|Other payables                  |  | HKD                  |  |      |       |  |      |  |        | 



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We may experience a loss as a result of any foreign currency exchange rate fluctuations in
connection with our deposits. We have not used any means to hedge the exposure to foreign exchange risk.

We incurred a
foreign exchange gain of RMB6.4 million for the year ended December 31, 2016. As of December 31, 2016, our assets denominated in Hong Kong dollars and U.S. dollars were translated into RMB at the applicable market exchange rates as of
that date and amounted to approximately RMB115.8 million. If the applicable market exchange rates were to change by 5%, this would result in a change in fair value of approximately RMB4.3 million in these balances.

While our foreign currency deposits are relatively stable, they are insufficient to pay all dividends and operating expenses, therefore,
we bear the risk of exchange rate fluctuations when we convert RMB to pay foreign-currency denominated dividends and operating expenses. However, our management believes that these contingent exposures relating to foreign exchange rate fluctuations
have not had and are not likely to have a material effect on our financial position. As a result, we do not enter into any hedging transactions with respect to our exposure to foreign currency movements. Furthermore, we are not aware of any
effective financial hedging products that serve as protection against a possible RMB devaluation or appreciation.

Interest Rate Risks

As of December 31, 2016, funds that we do not need in the short term are generally kept as temporary cash deposits in
commercial banks in the form of fixed-term deposits. We do not hold any market risk-sensitive instruments for trading purposes. As we have no significant interest-bearing assets (except for deposits held in banks), our income and operating cash
flows are not materially affected by the changes of market interest rates. Other than deposits held in banks, the Group does not have significant interest-bearing assets.

Credit Risks

The carrying amount of cash and cash equivalents, trade and
other receivables (excluding prepayments), short-term deposits, and long-term receivables represent our maximum exposure to credit risk in relation to financial assets.

Cash and short-term liquid investments are placed with reputable banks. No significant credit risk is expected.

The majority of our accounts receivable balance relate to the rendering of services or sales of products to third party customers. Our other receivable balances mainly arise from services other than the
main railway transportation services. We perform ongoing credit evaluations of our customers/debtors financial condition and generally do not require collateral from the customers/debtors account on the outstanding balances. Based on the
expected reliability and the timing for collection of the outstanding balances, we maintain a provision for doubtful accounts and actual losses incurred have been within managements expectation.

No other financial assets carry a significant exposure to credit risk.



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Liquidity Risks

Prudent liquidity risk management includes maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to
close out market positions. Due to the dynamic nature of the underlying businesses, our Companys treasury function allows flexibility in funding by maintaining committed credit lines.

We monitor our liquidity reserves (comprises undrawn borrowing facilities and cash and cash equivalents on the basis of expected cash
flows) on a regular basis. See Note 3 to our audited consolidated financial statements included elsewhere in this annual report, which analyzes our Companys financial liabilities into relevant maturity groups based on the remaining periods at
the date of the balance sheet to the contractual maturity date.

Except as described above and in Note 3 to our audited
consolidated financial statements included elsewhere in this annual report, our management believes that as of December 31, 2016, at present and in our normal course of business, we are not subject to any other material market-related risks.



|ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|-------- | ------------------------------------------------------



|A. | Debt Securities
|-- | ---------------

Not applicable.



|B. | Warrants and Rights
|-- | -------------------

Not applicable.



|C. | Other Securities
|-- | ----------------

Not applicable.



|D. | American Depositary Shares
|-- | --------------------------

JPMorgan Chase Bank, N.A. is the depositary for our ADSs. The depositarys office is located at 4 New York Plaza, New York, NY 10004. On April 25, 2008, JPMorgan Chase Bank, N.A. signed an
agreement with Wells Fargo Bank, pursuant to which Wells Fargo Bank will provide the depositary service for our ADSs on behalf of JPMorgan Chase Bank, N.A. Each of our ADRs represents 50 H shares of par value RMB1.00 per share.

In April 2009, we entered into an amendment to our deposit agreement with JPMorgan Chase Bank, N.A., which we initially entered into
on May 10, 1996. The revisions include allowing the depositary, in line with the current market practice, to charge the holders of the ADSs a cash distribution fee and an annual administrative fee, the aggregate of which should not exceed
US$0.02 per ADS in any calendar year. The amendment of the deposit agreement became effective on May 25, 2009. At such effective date, every holder of our ADSs shall be deemed by holding our ADSs to consent and agree to such amendment and
to be bound by the deposit agreement and the American Depositary Receipts as amended by such amendment. For further information, see the Form F-6EF we filed with the SEC on April 24, 2009 and the Form 6-K we furnished on
April 28, 2009.

In May 2015, we proposed certain amendments to the form of the deposit agreement and the American
Depositary Receipts while keeping the terms of deposit the same as the terms disclosed in the Form F-6EF we filed with the SEC on April 24, 2009. For further information of the amended and restated deposit agreement and the American Depositary
Receipts, see the Form F-6 we filed with the SEC on May 12, 2015.



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Fees Payable by ADS Holders

The Depositary may charge each person, US$5.00 for each 100 ADSs (or portion thereof) for ADRs issued, delivered, reduced, cancelled or surrendered, as the case may be.

The following additional charges may be incurred by holders of our ADSs:



| |  | a fee of US$1.50 per ADR for transfers of ADRs;
|- |  | -----------------------------------------------



| |  | a fee of US$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;
|- |  | --------------------------------------------------------------------------------------



| |  | an administration fee of US$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 US$0.02 per ADS in any calendar year;
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 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.
|- |  | -----------------------------------------------------------------------------------------------------

We will pay all other charges and expenses of the depositary and its agents (except the custodian) pursuant to the agreements between us
and the depositary. The fees described above may be amended from time to time.

Payments Received by Foreign Private Issuer

The depositary has agreed to reimburse and waive certain fees and expenses incurred by us in connection with our ADR program.

Direct Payments

The table below sets forth the types of expenses that the depositary has reimbursed us for the year ended December 31, 2016:



|                      |  |              |            | 
|--------------------- |  | ------------ | ---------- | 
|Category of Expenses  |  | Amount (US$) |           
|NYSE list fee         |  |              | 75,000.00  | 
|Broker reimbursements |  |              | 13,387.09  | 
|Miscellaneous         |  |              | 19,727.07  | 
|                      |  |              |            | 
|Total                 |  |              | 108,114.16 | 
|                      |  |              |            | 

PART II



|ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|-------- | -----------------------------------------------

None.



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|ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|-------- | ----------------------------------------------------------------------------

None.



|ITEM 15. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Disclosure Controls and Procedures

Our Chairman of the Board, General
Manager, Chief Accountant and Company Secretary, evaluated the effectiveness of the design and operation of our Companys disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the
period covered by this Form 20-F. Based on this evaluation, our Chairman of the Board, General Manager, Chief Accountant and Company Secretary concluded that our Companys disclosure controls and procedures were effective as of
December 31, 2016. Our Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file and furnish under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange Commissions rules and regulations and such information is accumulated and communicated to our Companys management including the Chairman of the Board, General
Manager, Chief Accountant and Company Secretary, as appropriate, to allow timely decision regarding required disclosures.

Managements Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over
financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our
Companys internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of our Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures
of our Company are being made only in accordance with authorizations of management and directors of our Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of
our Companys assets that could have a material effect on the financial statements.

Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies and procedures may deteriorate.

For the year ended
December 31, 2016, under the supervision, and with the participation, of our Chairman of the Board, General Manager, Company Secretary and Chief Accountant, our management has conducted an assessment of the effectiveness of our internal control
over financial reporting based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal ControlIntegrated Framework (2013).Based on this evaluation, our Companys management has
concluded that its internal control over financial reporting was effective as of December 31, 2016.

The
effectiveness of our Companys internal control over financial reporting as of December 31, 2016 has been audited by PricewaterhouseCoopers Zhong Tian LLP, an independent registered public accounting firm, as stated in their report which
is included elsewhere in this annual report.



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Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2016
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



|ITEM 16. | 
|-------- | 



|ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT
|--------- | --------------------------------

Our board of directors has determined that Chen Song is an audit committee financial expert as defined in Item 16A of Form 20-F. Mr. Jia Jianmin and each of the other members of
the Audit Committee is an independent director as defined in Section 303A.02 of the NYSE Listed Company Manual.



|ITEM 16B. | CODE OF ETHICS
|--------- | --------------

We have adopted a code of ethics that applies to our Chairman, General Manager, Company Secretary, Chief Accountant and other senior officers, or the Code of Ethics for Senior Management, on
April 20, 2004. On April 23, 2008, we amended the Code of Ethics for Senior Management pursuant to Section 404 of the Sarbanes-Oxley Act. On April 29, 2009, we further amended the Code of Ethics for Senior Management in order to
further strengthen our corporate governance, regulate the acts of our executive officers and ensure the better performance of duties by our executive officers. According to the amended Code of Ethics for Senior Management, each of our senior
officers is required to sign a certificate for the compliance with the Code of Ethics for Senior Management at his/her initial or subsequent election or engagement, and to submit an annual certificate with respect to his/her compliance with the Code
of Ethics for Senior Management. A copy of this amended Code of Ethics for Senior Management is filed as Exhibit 11.1 to our annual report on Form 20-F filed with the SEC on June 25, 2009.



|ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|--------- | --------------------------------------

On December 30, 2016, we appointed PricewaterhouseCoopers Zhong Tian LLP, or PwC China, as our independent registered public accounting firm, and dismissed PricewaterhouseCoopers, or PwC HK (PwC
HK and PwC China, collectively referred to herein as PwC).

The following table presents the
aggregate fees for professional services and other services rendered by PwC to us in 2015 and 2016.



|                   |  |                |      |  |      |  |      | 
|------------------ |  | -------------- | ---- |  | ---- |  | ---- | 
|                   |  | 2015           |      |  | 2016 | 
|                   |  | (RMB millions) |     
|Audit Fees         |  |                | 8.08 |  |      |  | 8.08 | 
|Audit-related Fees |  |                |     |  |      |  |     | 
|Tax Fees           |  |                |     |  |      |  |     | 
|All Other Fees     |  |                | 0.25 |  |      |  | 0.19 | 
|                   |  |                |      |  |      |  |      | 
|Total              |  |                | 8.33 |  |      |  | 8.27 | 
|                   |  |                |      |  |      |  |      | 





|1. | Traveling expenses and tax fees are included in the audit fees and do not require additional payment.
|-- | -----------------------------------------------------------------------------------------------------

|2. | As of December 31, 2016, there did not exist any amount that became payable but remained outstanding.
|-- | -----------------------------------------------------------------------------------------------------

All non-audit services to be provided by our independent registered public accountants, PwC, must be approved by our audit committee.



|ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
|--------- | ----------------------------------------------------------

Not applicable.



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|ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
|--------- | ----------------------------------------------------------------------

During the year ended December 31, 2016, there was no purchase, sale or redemption of our H shares or ADSs by us, or any of
our subsidiaries.



|ITEM 16F. | CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
|--------- | --------------------------------------------

(a)(1) Previous independent registered public accounting firm.

(i) On December
30, 2016, we appointed PwC China, as our independent registered public accounting firm, and dismissed PwC HK.

(ii) The reports
of PwC HK on the financial statements for the fiscal years ended December 31, 2015 and 2014 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle.

(iii) Our Audit Committee participated in and approved the decision to change our independent registered public accounting firm.

(iv) During the fiscal years ended December 31, 2015 and 2014 and the subsequent interim period through December 30, 2016,
there were no disagreements with PwC HK on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of PwC HK would have caused them to
make reference thereto in their reports on the financial statements for such years.

(v) During the fiscal years ended December
31, 2015 and 2014 and the subsequent interim period through December 30, 2016, there were no reportable events (as defined in Item 16F(a)(1)(v) of Form 20-F).

(2) New independent registered public accounting firm.

PwC China was appointed to
be our new independent registered public accounting firm for the purpose of this Form 20-F for the year ended December 30, 2016. During the fiscal years ended December 31, 2015 and 2014 and the subsequent interim period through December 30, 2016,
other than in the ordinary course of the audit, we did not consult with PwC China regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be
rendered on the Registrants financial statements, and neither a written report nor oral advice was provided to us that PwC China concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or
financial reporting issue; or (ii) any matter that was either the subject of a disagreement, as that term is defined in Item 16F(a)(1)(iv) of Form 20-F and the related instructions thereto, or a reportable event, as that term is defined
in Item 16F(a)(1)(v) of Form 20-F.

(3) We have provided PwC HK with a copy of the foregoing disclosure, and requested that PwC
HK furnish us with a letter addressed to the SEC stating whether or not it agrees with the above statements. A copy of such letter, dated April 26, 2017, is filed as Exhibit 16.1 to this Form 20-F.

(b) Not applicable.



100



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|ITEM 16G. | CORPORATE GOVERNANCE
|--------- | --------------------

Under the NYSEs corporate governance listing standards, we are required to disclose any significant ways in which our governance practices differ from those followed by U.S. domestic companies under
the NYSE listing standards. There are no significant differences in our corporate governance practices compared to those followed by a U.S. domestic company under the NYSE listing standards, except for the following:



| |  | 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;
|- |  | -------------------------------------------------------------------------------------------------------------------------------



| |  | we do not have a compensation committee wholly made up of independent directors. Our remuneration committee currently consists both executive directors
and independent non-executive directors with the independent non-executive directors making up the majority of such committee;
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 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.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|ITEM 16H. | MINE SAFETY DISCLOSURE
|--------- | ----------------------

Not applicable.

PART III



|ITEM 17. | FINANCIAL STATEMENTS
|-------- | --------------------

We
have elected to provide the financial statements and related information specified in ITEM 18 in lieu of ITEM 17.



|ITEM 18. | FINANCIAL STATEMENTS
|-------- | --------------------

See pages F-1 to F-78 following ITEM 19.



|ITEM 19. | EXHIBITS
|-------- | --------



| | (a) | See pages F-1 to F-78 following this item.
| | --- | ------------------------------------------



| | (b) | Index of Exhibits
| | --- | -----------------

Documents
filed as exhibits to this annual report:



|              |  |                                                                                                                                                                                             
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                 
|              | 
|1.1           |  | Amended and Restated Articles of Association                                                                                                                                                
|              | 
|2.1(1)        |  | Form of Amendment to Deposit Agreement                                                                                                                                                      
|              | 
|2.2(1)        |  | Form of American Depositary Receipt                                                                                                                                                         
|              | 
|4.1(2)        |  | English Translation of the Land Lease Agreement dated November 15, 2004 between Guangshen Railway Company Limited and Guangzhou Railway (Group) Company                                     
|              | 
|4.2           |  | English Translation of the Comprehensive Services Framework Agreement, dated November 1, 2016, between Guangshen Railway Company Limited and China Railway Corporation                      
|              | 
|7.1           |  | Statements explaining how certain ratios are calculated in this annual report                                                                                                               
|              | 
|8.1           |  | List of subsidiaries of Guangshen Railway Company Limited as of December 31, 2016                                                                                                           
|              | 
|11.1(3)       |  | 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 certifications                                                                                                  
|              | 
|13.1          |  | 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
|              | 
|16.1          |  | Letter from PricewaterhouseCoopers to the SEC                                                                                                                                               





|(1) | Incorporated by reference from the Registrants Form F-6 filed with the SEC on May 12, 2015.
|--- | --------------------------------------------------------------------------------------------

|(2) | Incorporated by reference from the Registrants annual report on Form 20-F filed with the SEC on June 28, 2005.
|--- | ---------------------------------------------------------------------------------------------------------------

|(3) | Incorporated by reference from the Registrants annual report on Form 20-F filed with the SEC on June 25, 2009.
|--- | ---------------------------------------------------------------------------------------------------------------



102



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SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.



|                     |  |                                   |  |                                   
|-------------------- |  | --------------------------------- |  | ----------------------------------
|                     |  | GUANGSHEN RAILWAY COMPANY LIMITED
|                     |  |                                  
|Date: April 26, 2017 |  | By:                               |  | /s/ Wu Yong                       
|                     |  |                                   |  | Wu Yong                           
|                     |  |                                   |  | Chairman of the Board of Directors



---

##### Table of Contents

INDEX TO FINANCIAL STATEMENTS



|                                                                                                  |  |      |         | 
|------------------------------------------------------------------------------------------------- |  | ---- | ------- | 
|                                                                                                  |  | Page |        
|GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES                                                |  |      |         | 
|                                                                                                  | 
|Report of Independent Registered Public Accounting Firm                                           |  |      | F-2,3,4 | 
|                                                                                                  | 
|Consolidated Balance Sheets as atDecember 31, 2015 and 2016                                       |  |      | F-5     | 
|                                                                                                  | 
|Consolidated Comprehensive Income Statements for the years ended December 31, 2014, 2015 and
2016 |  |      | F-6,7   | 
|                                                                                                  | 
|Consolidated Cash Flow Statements for the years ended December 31, 2014, 2015 and
2016            |  |      | F-8     | 
|                                                                                                  | 
|Consolidated Statements of Changes in Equity for the years ended December 31, 2014, 2015 and
2016 |  |      | F-9,10  | 
|                                                                                                  | 
|Notes to the Consolidated Financial Statements                                                    |  |      | F-11    | 



F-1



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##### Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Guangshen Railway Company Limited

In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of comprehensive income, of cash flows, and of changes in equity present fairly, in all material
respects, the financial position of Guangshen Railway Company Limited (the Company) and its subsidiaries (the Group) at December 31, 2016, and the results of their operations and their cash flows for the year then ended in
conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2016, based on criteria established in Internal Control - Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Companys management is responsible for these financial
statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in Managements Report on Internal Control over Financial
Reporting appearing under Item 15. Our responsibility is to express opinions on these financial statements and on the Groups internal control over financial reporting based on our integrated audit. We conducted our audit in accordance with the
standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and
whether effective internal control over financial reporting was maintained in all material respects. Our audit of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.



F-2



---

##### Table of Contents

A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material
effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.

/s/ PricewaterhouseCoopers Zhong Tian LLP

Shanghai, the Peoples Republic of China

April 26, 2017



F-3



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##### Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Guangshen Railway Company Limited

In our opinion, the accompanying consolidated balance sheet as of December 31, 2015 and the related consolidated statements of comprehensive income, of cash flows, and of changes in equity for each of the
two years in the period ended December 31, 2015 present fairly, in all material respects, the financial position of Guangshen Railway Company Limited (the Company) and its subsidiaries (the Group) as of December 31, 2015, and
the results of their operations and their cash flows for each of the two years in the period ended December 31, 2015, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. These
financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers

Hong Kong

April 27, 2016



F-4



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS AT DECEMBER 31, 2015 AND 2016

(Amounts in thousands)



|                                                                  |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|----------------------------------------------------------------- |  | ---- | -- |  | ----------- |  | ---------- | ---- |  |  | ---------- | - |  |  | --------- | -
|                                                                  |  |      |    |  | December 31 | 
|                                                                  |  | Note |    |  | 2015        |  |            | 2016 |  |  | 2016       |  
|                                                                  |  |      |    |  | RMB         |  |            | RMB  |  |  | US$*       |  
|ASSETS                                                            |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|Non-current assets                                                |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|Fixed assets-net                                                  |  |      | 6  |  |             |  | 24,073,759 |      |  |  | 24,278,032 |   |  |  | 3,496,764 |  
|Construction-in-progress                                          |  |      | 7  |  |             |  | 569,573    |      |  |  | 790,308    |   |  |  | 113,828   |  
|Prepayments for fixed assets and
construction-in-progress         |  |      |    |  |             |  | 46,546     |      |  |  | 60,095     |   |  |  | 8,655     |  
|Leasehold land payments                                           |  |      | 8  |  |             |  | 948,526    |      |  |  | 1,624,859  |   |  |  | 234,028   |  
|Goodwill                                                          |  |      | 9  |  |             |  | 281,255    |      |  |  | 281,255    |   |  |  | 40,509    |  
|Investments in associates                                         |  |      | 11 |  |             |  | 168,711    |      |  |  | 167,604    |   |  |  | 24,140    |  
|Deferred tax assets                                               |  |      | 12 |  |             |  | 93,249     |      |  |  | 79,929     |   |  |  | 11,512    |  
|Long-term prepaid expenses                                        |  |      | 13 |  |             |  | 14,485     |      |  |  | 7,824      |   |  |  | 1,127     |  
|Available-for-sale investments                                    |  |      | 15 |  |             |  | 53,826     |      |  |  | 53,826     |   |  |  | 7,753     |  
|Long-term receivable                                              |  |      | 16 |  |             |  | 30,804     |      |  |  | 31,406     |   |  |  | 4,524     |  
|                                                                  |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|                                                                  |  |      |    |  |             |  | 26,280,734 |      |  |  | 27,375,138 |   |  |  | 3,942,840 |  
|                                                                  |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|Current assets                                                    |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|Materials and supplies                                            |  |      | 17 |  |             |  | 307,056    |      |  |  | 332,607    |   |  |  | 47,905    |  
|Trade receivables                                                 |  |      | 18 |  |             |  | 2,886,066  |      |  |  | 3,364,366  |   |  |  | 484,569   |  
|Prepayments and other receivables                                 |  |      | 19 |  |             |  | 142,613    |      |  |  | 330,491    |   |  |  | 47,601    |  
|Short-term deposits                                               |  |      | 20 |  |             |  | 106,000    |      |  |  | 108,000    |   |  |  | 15,556    |  
|Cash and cash equivalents                                         |  |      | 20 |  |             |  | 2,220,803  |      |  |  | 1,359,656  |   |  |  | 195,831   |  
|                                                                  |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|                                                                  |  |      |    |  |             |  | 5,662,538  |      |  |  | 5,495,120  |   |  |  | 791,462   |  
|                                                                  |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|Total assets                                                      |  |      |    |  |             |  | 31,943,272 |      |  |  | 32,870,258 |   |  |  | 4,734,302 |  
|                                                                  |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|EQUITY AND LIABILITIES                                            |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|Capital and reserves attributable to the Companys equity holders |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|Share capital                                                     |  |      | 21 |  |             |  | 7,083,537  |      |  |  | 7,083,537  |   |  |  | 1,020,242 |  
|Share premium                                                     |  |      |    |  |             |  | 11,562,738 |      |  |  | 11,562,738 |   |  |  | 1,665,381 |  
|Other reserves                                                    |  |      | 22 |  |             |  | 2,708,543  |      |  |  | 2,825,593  |   |  |  | 406,970   |  
|Retained earnings                                                 |  |      |    |  |             |  | 6,107,670  |      |  |  | 6,582,190  |   |  |  | 948,032   |  
|                                                                  |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|                                                                  |  |      |    |  |             |  | 27,462,488 |      |  |  | 28,054,058 |   |  |  | 4,040,625 |  
|                                                                  |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|Non-controlling interests                                         |  |      |    |  |             |  | (18,226    | )    |  |  | (24,003    | ) |  |  | (3,457    | )
|                                                                  |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|Total equity                                                      |  |      |    |  |             |  | 27,444,262 |      |  |  | 28,030,055 |   |  |  | 4,037,168 |  
|                                                                  |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|Liabilities                                                       |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|Non-current liabilities                                           |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|Deferred income relating to government grants                     |  |      | 23 |  |             |  | 103,985    |      |  |  | 106,810    |   |  |  | 15,384    |  
|Deferred tax liabilities                                          |  |      | 12 |  |             |  | 71,376     |      |  |  | 68,883     |   |  |  | 9,921     |  
|                                                                  |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|                                                                  |  |      |    |  |             |  | 175,361    |      |  |  | 175,693    |   |  |  | 25,305    |  
|                                                                  |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|Current liabilities                                               |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|Trade payables                                                    |  |      | 25 |  |             |  | 1,105,291  |      |  |  | 1,143,523  |   |  |  | 164,702   |  
|Payables for fixed assets and
construction-in-progress            |  |      |    |  |             |  | 1,425,998  |      |  |  | 1,765,185  |   |  |  | 254,240   |  
|Dividends payable                                                 |  |      |    |  |             |  | 14,318     |      |  |  | 15,542     |   |  |  | 2,239     |  
|Income tax payable                                                |  |      |    |  |             |  | 313,656    |      |  |  | 121,513    |   |  |  | 17,501    |  
|Accruals and other payables                                       |  |      | 26 |  |             |  | 1,464,386  |      |  |  | 1,618,747  |   |  |  | 233,147   |  
|                                                                  |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|                                                                  |  |      |    |  |             |  | 4,323,649  |      |  |  | 4,664,510  |   |  |  | 671,829   |  
|                                                                  |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|Total liabilities                                                 |  |      |    |  |             |  | 4,499,010  |      |  |  | 4,840,203  |   |  |  | 697,134   |  
|                                                                  |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  
|Total equity and liabilities                                      |  |      |    |  |             |  | 31,943,272 |      |  |  | 32,870,258 |   |  |  | 4,734,302 |  
|                                                                  |  |      |    |  |             |  |            |      |  |  |            |   |  |  |           |  

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$1.00=RMB6.9430, the certified exchange rates for December 30, 2016 as published by the Federal Reserve Board of the United States. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate
on December 30, 2016 or on any other date.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|         |  |                 |  |                 
|-------- |  | --------------- |  | ----------------
|         |  |                 |  |                 
|Chairman |  | General Manager |  | Chief Accountant



F-5



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016

(Amounts in thousands, except per share and per ADS data)



|                                                                          |  |      |       |  |                         |  |             |      |  |  |             |   |  |      |             |   |  |  |            |  
|------------------------------------------------------------------------- |  | ---- | ----- |  | ----------------------- |  | ----------- | ---- |  |  | ----------- | - |  | ---- | ----------- | - |  |  | ---------- | -
|                                                                          |  |      |       |  | Years ended December 31 | 
|                                                                          |  | Note |       |  | 2014                    |  |             | 2015 |  |  | 2016        |   |  | 2016 |            
|                                                                          |  |      |       |  | RMB                     |  |             | RMB  |  |  | RMB         |   |  | US$* |            
|Revenue from Railroad and Related Business                                |  |      |       |  |                         |  |             |      |  |  |             |   |  |      |             |   |  |  |            |  
|Passenger transportation                                                  |  |      |       |  |                         |  | 6,988,288   |      |  |  | 6,997,562   |   |  |      | 7,358,851   |   |  |  | 1,059,895  |  
|Freight transportation                                                    |  |      |       |  |                         |  | 1,763,679   |      |  |  | 1,761,449   |   |  |      | 1,718,260   |   |  |  | 247,481    |  
|Railway network usage and other transportation related services           |  |      |       |  |                         |  | 5,031,241   |      |  |  | 5,874,727   |   |  |      | 7,093,198   |   |  |  | 1,021,633  |  
|                                                                          |  |      |       |  |                         |  |             |      |  |  |             |   |  |      |             |   |  |  |            |  
|                                                                          |  |      |       |  |                         |  | 13,783,208  |      |  |  | 14,633,738  |   |  |      | 16,170,309  |   |  |  | 2,329,009  |  
|Revenue from other businesses                                             |  |      |       |  |                         |  | 1,017,573   |      |  |  | 1,091,571   |   |  |      | 1,110,195   |   |  |  | 159,901    |  
|                                                                          |  |      |       |  |                         |  |             |      |  |  |             |   |  |      |             |   |  |  |            |  
|Total revenue                                                             |  |      |       |  |                         |  | 14,800,781  |      |  |  | 15,725,309  |   |  |      | 17,280,504  |   |  |  | 2,488,910  |  
|Operating expenses                                                        |  |      |       |  |                         |  |             |      |  |  |             |   |  |      |             |   |  |  |            |  
|Railroad and Related business                                             |  |      |       |  |                         |  |             |      |  |  |             |   |  |      |             |   |  |  |            |  
|Business tax and surcharge                                                |  |      |       |  |                         |  | (61,021     | )    |  |  | (46,785     | ) |  |      | (38,723     | ) |  |  | (5,577     | )
|Employee benefits                                                         |  |      | 27    |  |                         |  | (4,441,615  | )    |  |  | (4,767,083  | ) |  |      | (5,654,869  | ) |  |  | (814,471   | )
|Equipment leases and services                                             |  |      |       |  |                         |  | (3,629,757  | )    |  |  | (3,908,545  | ) |  |      | (4,193,555  | ) |  |  | (603,998   | )
|Land use right leases                                                     |  |      | 35(b) |  |                         |  | (53,962     | )    |  |  | (55,090     | ) |  |      | (55,090     | ) |  |  | (7,935     | )
|Materials and supplies                                                    |  |      |       |  |                         |  | (1,310,106  | )    |  |  | (1,224,262  | ) |  |      | (1,336,614  | ) |  |  | (192,512   | )
|Repair and facilities maintenance costs, excluding materials and supplies |  |      |       |  |                         |  | (905,540    | )    |  |  | (716,193    | ) |  |      | (612,484    | ) |  |  | (88,216    | )
|Depreciation of fixed assets                                              |  |      |       |  |                         |  | (1,405,580  | )    |  |  | (1,387,534  | ) |  |      | (1,488,324  | ) |  |  | (214,363   | )
|Cargo logistics and outsourcing service charges                           |  |      |       |  |                         |  |            |      |  |  | (158,947    | ) |  |      | (206,195    | ) |  |  | (29,698    | )
|Amortisation of leasehold land payments                                   |  |      |       |  |                         |  | (18,245     | )    |  |  | (17,949     | ) |  |      | (27,338     | ) |  |  | (3,937     | )
|Social services expenses                                                  |  |      |       |  |                         |  | (12,430     | )    |  |  | (16,080     | ) |  |      | (11,297     | ) |  |  | (1,627     | )
|Utility and office expenses                                               |  |      |       |  |                         |  | (74,740     | )    |  |  | (63,602     | ) |  |      | (55,718     | ) |  |  | (8,025     | )
|Reversal of/(provision for) impairment of materials and supplies          |  |      |       |  |                         |  |            |      |  |  | (64,096     | ) |  |      | 5,209       |   |  |  | 750        |  
|Others                                                                    |  |      |       |  |                         |  | (816,832    | )    |  |  | (724,239    | ) |  |      | (886,795    | ) |  |  | (127,725   | )
|                                                                          |  |      |       |  |                         |  |             |      |  |  |             |   |  |      |             |   |  |  |            |  
|                                                                          |  |      |       |  |                         |  | (12,729,828 | )    |  |  | (13,150,405 | ) |  |      | (14,561,793 | ) |  |  | (2,097,334 | )
|                                                                          |  |      |       |  |                         |  |             |      |  |  |             |   |  |      |             |   |  |  |            |  
|Other businesses                                                          |  |      |       |  |                         |  |             |      |  |  |             |   |  |      |             |   |  |  |            |  
|Business tax and surcharge                                                |  |      |       |  |                         |  | (29,957     | )    |  |  | (31,759     | ) |  |      | (13,593     | ) |  |  | (1,958     | )
|Employee benefits                                                         |  |      | 27    |  |                         |  | (469,273    | )    |  |  | (443,014    | ) |  |      | (564,478    | ) |  |  | (81,302    | )
|Materials and supplies                                                    |  |      |       |  |                         |  | (306,128    | )    |  |  | (341,386    | ) |  |      | (360,552    | ) |  |  | (51,930    | )
|Depreciation of fixed assets                                              |  |      |       |  |                         |  | (23,694     | )    |  |  | (24,208     | ) |  |      | (30,646     | ) |  |  | (4,414     | )
|Amortisation of leasehold land payments                                   |  |      |       |  |                         |  | (919        | )    |  |  | (10,464     | ) |  |      | (11,332     | ) |  |  | (1,632     | )
|Utility and office expenses                                               |  |      |       |  |                         |  | (34,880     | )    |  |  | (30,080     | ) |  |      | (23,051     | ) |  |  | (3,320     | )
|Others                                                                    |  |      |       |  |                         |  | (157,282    | )    |  |  | (125,419    | ) |  |      | (72,554     | ) |  |  | (10,450    | )
|                                                                          |  |      |       |  |                         |  |             |      |  |  |             |   |  |      |             |   |  |  |            |  
|                                                                          |  |      |       |  |                         |  | (1,022,133  | )    |  |  | (1,006,330  | ) |  |      | (1,076,206  | ) |  |  | (155,006   | )
|                                                                          |  |      |       |  |                         |  |             |      |  |  |             |   |  |      |             |   |  |  |            |  
|Total operating expenses                                                  |  |      |       |  |                         |  | (13,751,961 | )    |  |  | (14,156,735 | ) |  |      | (15,637,999 | ) |  |  | (2,252,340 | )
|Other income and other gains/(losses) - net                               |  |      | 28    |  |                         |  | 7,138       |      |  |  | (114,627    | ) |  |      | (108,270    | ) |  |  | (15,594    | )
|                                                                          |  |      |       |  |                         |  |             |      |  |  |             |   |  |      |             |   |  |  |            |  
|Operating profit                                                          |  |      |       |  |                         |  | 1,055,958   |      |  |  | 1,453,947   |   |  |      | 1,534,235   |   |  |  | 220,976    |  
|Finance income/(costs)-net                                                |  |      | 29    |  |                         |  | (180,373    | )    |  |  | (4,608      | ) |  |      | 2,551       |   |  |  | 367        |  
|Share of results of associates                                            |  |      | 11    |  |                         |  | 5,048       |      |  |  | 2,499       |   |  |      | 7,223       |   |  |  | 1,041      |  
|                                                                          |  |      |       |  |                         |  |             |      |  |  |             |   |  |      |             |   |  |  |            |  
|Profit before income tax                                                  |  |      |       |  |                         |  | 880,633     |      |  |  | 1,451,838   |   |  |      | 1,544,009   |   |  |  | 222,384    |  
|Income tax expense                                                        |  |      | 30    |  |                         |  | (219,507    | )    |  |  | (388,530    | ) |  |      | (390,309    | ) |  |  | (56,217    | )
|                                                                          |  |      |       |  |                         |  |             |      |  |  |             |   |  |      |             |   |  |  |            |  
|Profit for the year                                                       |  |      |       |  |                         |  | 661,126     |      |  |  | 1,063,308   |   |  |      | 1,153,700   |   |  |  | 166,167    |  
|                                                                          |  |      |       |  |                         |  |             |      |  |  |             |   |  |      |             |   |  |  |            |  



F-6



---

##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016

(Amounts in
thousands, except per share and per ADS data)



|                                                                                                |  |      |    |  |                         |     |         |      |  |     |           |   |  |      |           |   |  |     |         |  
|----------------------------------------------------------------------------------------------- |  | ---- | -- |  | ----------------------- | --- | ------- | ---- |  | --- | --------- | - |  | ---- | --------- | - |  | --- | ------- | -
|                                                                                                |  |      |    |  | Years ended December 31 |    
|                                                                                                |  | Note |    |  | 2014                    |     |         | 2015 |  |     | 2016      |   |  | 2016 |          
|                                                                                                |  |      |    |  | RMB                     |     |         | RMB  |  |     | RMB       |   |  | US$* |          
|Profit for the year                                                                             |  |      |    |  |                         |     | 661,126 |      |  |     | 1,063,308 |   |  |      | 1,153,700 |   |  |     | 166,167 |  
|                                                                                                |  |      |    |  |                        
|Other comprehensive income                                                                      |  |      |    |  |                         |     |        |      |  |     |          |   |  |      |          |   |  |     |        |  
|                                                                                                |  |      |    |  |                         |     |         |      |  |     |           |   |  |      |           |   |  |     |         |  
|Total comprehensive income for the year, net of tax                                             |  |      |    |  |                         |     | 661,126 |      |  |     | 1,063,308 |   |  |      | 1,153,700 |   |  |     | 166,167 |  
|                                                                                                |  |      |    |  |                         |     |         |      |  |     |           |   |  |      |           |   |  |     |         |  
|Profit attributable to:                                                                         |  |      |    |  |                         |     |         |      |  |     |           |   |  |      |           |   |  |     |         |  
|Equity holders of the Company                                                                   |  |      |    |  |                         |     | 662,021 |      |  |     | 1,070,822 |   |  |      | 1,158,253 |   |  |     | 166,823 |  
|Non-controlling interests                                                                       |  |      |    |  |                         |     | (895    | )    |  |     | (7,514    | ) |  |      | (4,553    | ) |  |     | (656    | )
|                                                                                                |  |      |    |  |                         |     |         |      |  |     |           |   |  |      |           |   |  |     |         |  
|                                                                                                |  |      |    |  |                         |     | 661,126 |      |  |     | 1,063,308 |   |  |      | 1,153,700 |   |  |     | 166,167 |  
|                                                                                                |  |      |    |  |                         |     |         |      |  |     |           |   |  |      |           |   |  |     |         |  
|Total comprehensive income attributable to:                                                     |  |      |    |  |                         |     |         |      |  |     |           |   |  |      |           |   |  |     |         |  
|Equity holders of the Company                                                                   |  |      |    |  |                         |     | 662,021 |      |  |     | 1,070,822 |   |  |      | 1,158,253 |   |  |     | 166,823 |  
|Non-controlling interests                                                                       |  |      |    |  |                         |     | (895    | )    |  |     | (7,514    | ) |  |      | (4,553    | ) |  |     | (656    | )
|                                                                                                |  |      |    |  |                         |     |         |      |  |     |           |   |  |      |           |   |  |     |         |  
|                                                                                                |  |      |    |  |                         |     | 661,126 |      |  |     | 1,063,308 |   |  |      | 1,153,700 |   |  |     | 166,167 |  
|                                                                                                |  |      |    |  |                         |     |         |      |  |     |           |   |  |      |           |   |  |     |         |  
|Earnings per share for profit attributable to the equity holders of the Company during the year |  |      |    |  |                         |     |         |      |  |     |           |   |  |      |           |   |  |     |         |  
|- Basic and diluted                                                                             |  |      | 31 |  |                         | RMB | 0.09    |      |  | RMB | 0.15      |   |  | RMB  | 0.16      |   |  | US$ | 0.02    |  
|                                                                                                |  |      |    |  |                         |     |         |      |  |     |           |   |  |      |           |   |  |     |         |  
|Earnings per equivalent ADS                                                                     |  |      |    |  |                         |     |         |      |  |     |           |   |  |      |           |   |  |     |         |  
|- Basic and diluted                                                                             |  |      | 31 |  |                         | RMB | 4.67    |      |  | RMB | 7.56      |   |  | RMB  | 8.18      |   |  | US$ | 1.18    |  
|                                                                                                |  |      |    |  |                         |     |         |      |  |     |           |   |  |      |           |   |  |     |         |  

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$1.00=RMB6.9430, the certified exchange rates for December 30, 2016 as published by the Federal Reserve Board of the United States. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate
on December 30, 2016 or on any other date.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|         |  |                 |  |                 
|-------- |  | --------------- |  | ----------------
|         |  |                 |  |                 
|Chairman |  | General Manager |  | Chief Accountant



F-7



---

##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

CONSOLIDATED CASH FLOW STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016

(Amounts in
thousands)



|                                                                                                                               |  |      |       |  |                        |  |            |      |  |  |            |   |  |      |            |   |  |  |          |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ----- |  | ---------------------- |  | ---------- | ---- |  |  | ---------- | - |  | ---- | ---------- | - |  |  | -------- | -
|                                                                                                                               |  |      |       |  | Year ended December 31 | 
|                                                                                                                               |  | Note |       |  | 2014                   |  |            | 2015 |  |  | 2016       |   |  | 2016 |           
|                                                                                                                               |  |      |       |  | RMB                    |  |            | RMB  |  |  | RMB        |   |  | US$* |           
|Cash flows from operating activities:                                                                                          |  |      |       |  |                        |  |            |      |  |  |            |   |  |      |            |   |  |  |          |  
|Cash generated from operations                                                                                                 |  |      | 33(a) |  |                        |  | 2,421,206  |      |  |  | 2,520,379  |   |  |      | 2,212,863  |   |  |  | 318,719  |  
|Interest paid                                                                                                                  |  |      |       |  |                        |  | (167,650   | )    |  |  |           |   |  |      |           |   |  |  |         |  
|Income tax paid                                                                                                                |  |      |       |  |                        |  | (307,980   | )    |  |  | (260,688   | ) |  |      | (571,625   | ) |  |  | (82,332  | )
|                                                                                                                               |  |      |       |  |                        |  |            |      |  |  |            |   |  |      |            |   |  |  |          |  
|Net cash generated from operating activities                                                                                   |  |      |       |  |                        |  | 1,945,576  |      |  |  | 2,259,691  |   |  |      | 1,641,238  |   |  |  | 236,387  |  
|                                                                                                                               |  |      |       |  |                        |  |            |      |  |  |            |   |  |      |            |   |  |  |          |  
|Cash flows from investing activities:                                                                                          |  |      |       |  |                        |  |            |      |  |  |            |   |  |      |            |   |  |  |          |  
|Payments for acquisition of fixed assets and
construction-in-progress and prepayment for fixed assets, net of related payables |  |      |       |  |                        |  | (999,633   | )    |  |  | (1,292,273 | ) |  |      | (1,973,897 | ) |  |  | (284,300 | )
|Proceeds from disposal of fixed assets and leasehold land                                                                      |  |      | 33(b) |  |                        |  | 708        |      |  |  | 7,821      |   |  |      | 17,950     |   |  |  | 2,585    |  
|Government grants received                                                                                                     |  |      |       |  |                        |  |           |      |  |  | 8,160      |   |  |      | 6,082      |   |  |  | 876      |  
|Interest received                                                                                                              |  |      |       |  |                        |  | 128,139    |      |  |  | 2,895      |   |  |      | 1,949      |   |  |  | 281      |  
|Payment for investment in associates                                                                                           |  |      |       |  |                        |  |           |      |  |  | (19,110    | ) |  |      |           |   |  |  |         |  
|(Increase)/ decrease in short-term deposits with maturities more than three months, net                                        |  |      |       |  |                        |  | 4,379,600  |      |  |  | (2,000     | ) |  |      | (2,000     | ) |  |  | (288     | )
|Dividends received                                                                                                             |  |      |       |  |                        |  | 4,904      |      |  |  | 5,884      |   |  |      | 14,214     |   |  |  | 2,047    |  
|Payment for business combination, net of cash acquired                                                                         |  |      |       |  |                        |  | (139,897   | )    |  |  | (60,612    | ) |  |      |           |   |  |  |         |  
|                                                                                                                               |  |      |       |  |                        |  |            |      |  |  |            |   |  |      |            |   |  |  |          |  
|Net cash generated from/(used in) investing activities                                                                         |  |      |       |  |                        |  | 3,373,821  |      |  |  | (1,349,235 | ) |  |      | (1,935,702 | ) |  |  | (278,799 | )
|                                                                                                                               |  |      |       |  |                        |  |            |      |  |  |            |   |  |      |            |   |  |  |          |  
|Cash flows from financing activities:                                                                                          |  |      |       |  |                        |  |            |      |  |  |            |   |  |      |            |   |  |  |          |  
|Repayments of bond payables                                                                                                    |  |      |       |  |                        |  | (3,500,000 | )    |  |  |           |   |  |      |           |   |  |  |         |  
|Dividends paid to non-controlling interests shareholders                                                                      |  |      |       |  |                        |  |           |      |  |  | (533       | ) |  |      |           |   |  |  |         |  
|Dividends paid to the Companys shareholders                                                                                   |  |      |       |  |                        |  | (566,685   | )    |  |  | (354,177   | ) |  |      | (566,683   | ) |  |  | (81,619  | )
|Payments for management fee of bond payables                                                                                   |  |      |       |  |                        |  | (333       | )    |  |  |           |   |  |      |           |   |  |  |         |  
|                                                                                                                               |  |      |       |  |                        |  |            |      |  |  |            |   |  |      |            |   |  |  |          |  
|Net cash used in financing activities                                                                                          |  |      |       |  |                        |  | (4,067,018 | )    |  |  | (354,710   | ) |  |      | (566,683   | ) |  |  | (81,619  | )
|                                                                                                                               |  |      |       |  |                        |  |            |      |  |  |            |   |  |      |            |   |  |  |          |  
|Net increase/(decrease) in cash and cash equivalents                                                                           |  |      |       |  |                        |  | 1,252,379  |      |  |  | 555,746    |   |  |      | (861,147   | ) |  |  | (124,031 | )
|                                                                                                                               |  |      |       |  |                        |  |            |      |  |  |            |   |  |      |            |   |  |  |          |  
|Cash and cash equivalents, at beginning of year                                                                                |  |      |       |  |                        |  | 412,678    |      |  |  | 1,665,057  |   |  |      | 2,220,803  |   |  |  | 319,862  |  
|                                                                                                                               |  |      |       |  |                        |  |            |      |  |  |            |   |  |      |            |   |  |  |          |  
|Cash and cash equivalents, at end of year                                                                                      |  |      | 20    |  |                        |  | 1,665,057  |      |  |  | 2,220,803  |   |  |      | 1,359,656  |   |  |  | 195,831  |  
|                                                                                                                               |  |      |       |  |                        |  |            |      |  |  |            |   |  |      |            |   |  |  |          |  

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$1.00=RMB6.9430, the certified exchange rates for December 30, 2016 as published by the Federal Reserve Board of the United States. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate
on December 30, 2016 or on any other date.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|         |  |                 |  |                 
|-------- |  | --------------- |  | ----------------
|         |  |                 |  |                 
|Chairman |  | General Manager |  | Chief Accountant



F-8



---

##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016

(Amounts in thousands)



|                                                 |  |                                               |           |  |                   |  |            |                                         |  |  |                                            |  |  |                             |         |  |                      |  |          |           |  |  |                                |   |  |                  |            |   |  |  |         |   |  |  |            |  
|------------------------------------------------ |  | --------------------------------------------- | --------- |  | ----------------- |  | ---------- | --------------------------------------- |  |  | ------------------------------------------ |  |  | --------------------------- | ------- |  | -------------------- |  | -------- | --------- |  |  | ------------------------------ | - |  | ---------------- | ---------- | - |  |  | ------- | - |  |  | ---------- | -
|                                                 |  | Attributable to equity holders of the Company |           |  |                   |  |            |                                         | 
|                                                 |  | Share capitalRMB (Note 21)                    |           |  | Share premium RMB |  |            | Statutory surplus reserve
RMB (Note
22) |  |  | Discretionarysurplus
reserve
RMB (Note
22) |  |  | Other reserve RMB (Note 22) |         |  | Retainedearnings RMB |  |          | Total RMB |  |  | Non-
controlling
interests
RMB |   |  | Total equity RMB |           
|Balance at January 1, 2014                       |  |                                               | 7,083,537 |  |                   |  | 11,562,777 |                                         |  |  | 2,226,688                                  |  |  |                             | 304,059 |  |                      |  |         |           |  |  | 5,473,483                      |   |  |                  | 26,650,544 |   |  |  | 43,821  |   |  |  | 26,694,365 |  
|Total comprehensive income                       |  |                                               |          |  |                   |  |           |                                         |  |  |                                           |  |  |                             |        |  |                      |  |         |           |  |  | 662,021                        |   |  |                  | 662,021    |   |  |  | (895    | ) |  |  | 661,126    |  
|Profit for the year                              |  |                                               |          |  |                   |  |           |                                         |  |  |                                           |  |  |                             |        |  |                      |  |         |           |  |  | 662,021                        |   |  |                  | 662,021    |   |  |  | (895    | ) |  |  | 661,126    |  
|Other comprehensive income                       |  |                                               |          |  |                   |  |           |                                         |  |  |                                           |  |  |                             |        |  |                      |  |         |           |  |  |                               |   |  |                  |           |   |  |  |        |   |  |  |           |  
|Special reserve-Safety Production Fund (Note 22) |  |                                               |          |  |                   |  |           |                                         |  |  |                                           |  |  |                             |        |  |                      |  |         |           |  |  |                               |   |  |                  |           |   |  |  |        |   |  |  |           |  
|Appropriation                                    |  |                                               |          |  |                   |  |           |                                         |  |  |                                           |  |  |                             |        |  |                      |  | 208,250  |           |  |  | (208,250                       | ) |  |                  |           |   |  |  |        |   |  |  |           |  
|Utilisation                                      |  |                                               |          |  |                   |  |           |                                         |  |  |                                           |  |  |                             |        |  |                      |  | (208,250 | )         |  |  | 208,250                        |   |  |                  |           |   |  |  |        |   |  |  |           |  
|Liquidation of a subsidiary                      |  |                                               |          |  |                   |  | (39        | )                                       |  |  |                                           |  |  |                             |        |  |                      |  |         |           |  |  |                               |   |  |                  | (39        | ) |  |  | (1,905  | ) |  |  | (1,944     | )
|Appropriations from retained earnings (Note 22)  |  |                                               |          |  |                   |  |           |                                         |  |  | 66,036                                     |  |  |                             |        |  |                      |  |         |           |  |  | (66,036                        | ) |  |                  |           |   |  |  |        |   |  |  |           |  
|Dividends relating to 2013                       |  |                                               |          |  |                   |  |           |                                         |  |  |                                           |  |  |                             |        |  |                      |  |         |           |  |  | (566,683                       | ) |  |                  | (566,683   | ) |  |  | (404    | ) |  |  | (567,087   | )
|                                                 |  |                                               |           |  |                   |  |            |                                         |  |  |                                            |  |  |                             |         |  |                      |  |          |           |  |  |                                |   |  |                  |            |   |  |  |         |   |  |  |            |  
|Balance at December 31, 2014                     |  |                                               | 7,083,537 |  |                   |  | 11,562,738 |                                         |  |  | 2,292,724                                  |  |  |                             | 304,059 |  |                      |  |         |           |  |  | 5,502,785                      |   |  |                  | 26,745,843 |   |  |  | 40,617  |   |  |  | 26,786,460 |  
|                                                 |  |                                               |           |  |                   |  |            |                                         |  |  |                                            |  |  |                             |         |  |                      |  |          |           |  |  |                                |   |  |                  |            |   |  |  |         |   |  |  |            |  
|Balance at January 1, 2015                       |  |                                               | 7,083,537 |  |                   |  | 11,562,738 |                                         |  |  | 2,292,724                                  |  |  |                             | 304,059 |  |                      |  |         |           |  |  | 5,502,785                      |   |  |                  | 26,745,843 |   |  |  | 40,617  |   |  |  | 26,786,460 |  
|Total comprehensive income                       |  |                                               |          |  |                   |  |           |                                         |  |  |                                           |  |  |                             |        |  |                      |  |         |           |  |  | 1,070,822                      |   |  |                  | 1,070,822  |   |  |  | (7,514  | ) |  |  | 1,063,308  |  
|Profit for the year                              |  |                                               |          |  |                   |  |           |                                         |  |  |                                           |  |  |                             |        |  |                      |  |         |           |  |  | 1,070,822                      |   |  |                  | 1,070,822  |   |  |  | (7,514  | ) |  |  | 1,063,308  |  
|Other comprehensive income                       |  |                                               |          |  |                   |  |           |                                         |  |  |                                           |  |  |                             |        |  |                      |  |         |           |  |  |                               |   |  |                  |           |   |  |  |        |   |  |  |           |  
|Special reserve-Safety Production Fund (Note 22) |  |                                               |          |  |                   |  |           |                                         |  |  |                                           |  |  |                             |        |  |                      |  |         |           |  |  |                               |   |  |                  |           |   |  |  |        |   |  |  |           |  
|Appropriation                                    |  |                                               |          |  |                   |  |           |                                         |  |  |                                           |  |  |                             |        |  |                      |  | 192,860  |           |  |  | (192,860                       | ) |  |                  |           |   |  |  |        |   |  |  |           |  
|Utilisation                                      |  |                                               |          |  |                   |  |           |                                         |  |  |                                           |  |  |                             |        |  |                      |  | (192,860 | )         |  |  | 192,860                        |   |  |                  |           |   |  |  |        |   |  |  |           |  
|Business combination                             |  |                                               |          |  |                   |  |           |                                         |  |  |                                           |  |  |                             |        |  |                      |  |         |           |  |  |                               |   |  |                  |           |   |  |  | (49,902 | ) |  |  | (49,902    | )
|Appropriations from retained earnings (Note 22)  |  |                                               |          |  |                   |  |           |                                         |  |  | 111,760                                    |  |  |                             |        |  |                      |  |         |           |  |  | (111,760                       | ) |  |                  |           |   |  |  |        |   |  |  |           |  
|Dividends relating to 2014                       |  |                                               |          |  |                   |  |           |                                         |  |  |                                           |  |  |                             |        |  |                      |  |         |           |  |  | (354,177                       | ) |  |                  | (354,177   | ) |  |  | (1,427  | ) |  |  | (355,604   | )
|                                                 |  |                                               |           |  |                   |  |            |                                         |  |  |                                            |  |  |                             |         |  |                      |  |          |           |  |  |                                |   |  |                  |            |   |  |  |         |   |  |  |            |  
|Balance at December 31, 2015                     |  |                                               | 7,083,537 |  |                   |  | 11,562,738 |                                         |  |  | 2,404,484                                  |  |  |                             | 304,059 |  |                      |  |         |           |  |  | 6,107,670                      |   |  |                  | 27,462,488 |   |  |  | (18,226 | ) |  |  | 27,444,262 |  
|                                                 |  |                                               |           |  |                   |  |            |                                         |  |  |                                            |  |  |                             |         |  |                      |  |          |           |  |  |                                |   |  |                  |            |   |  |  |         |   |  |  |            |  



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016

(Amounts in
thousands)



|                                                 |  |                                               |           |  |                   |     |            |                                         |  |     |                                            |  |  |                             |         |  |                      |  |          |           |  |     |                                |   |  |                  |            |   |  |     |         |   |  |     |            |  
|------------------------------------------------ |  | --------------------------------------------- | --------- |  | ----------------- | --- | ---------- | --------------------------------------- |  | --- | ------------------------------------------ |  |  | --------------------------- | ------- |  | -------------------- |  | -------- | --------- |  | --- | ------------------------------ | - |  | ---------------- | ---------- | - |  | --- | ------- | - |  | --- | ---------- | -
|                                                 |  | Attributable to equity holders of the Company |           |  |                   |     |            |                                         | 
|                                                 |  | Share capitalRMB (Note 21)                    |           |  | Share premium RMB |     |            | Statutory surplus reserve
RMB (Note
22) |  |     | Discretionarysurplus
reserve
RMB (Note
22) |  |  | Other reserve RMB (Note 22) |         |  | Retainedearnings RMB |  |          | Total RMB |  |     | Non-
controlling
interests
RMB |   |  | Total equity RMB |           
|Balance at January 1, 2016                       |  |                                               | 7,083,537 |  |                   |     | 11,562,738 |                                         |  |     | 2,404,484                                  |  |  |                             | 304,059 |  |                      |  |         |           |  |     | 6,107,670                      |   |  |                  | 27,462,488 |   |  |     | (18,226 | ) |  |     | 27,444,262 |  
|Total comprehensive income                       |  |                                               |          |  |                   |     |            |                                         |  |     |                                           |  |  |                             |         |  |                      |  |         |           |  |     | 1,158,253                      |   |  |                  | 1,158,253  |   |  |     | (4,553  | ) |  |     | 1,153,700  |  
|Profit for the year                              |  |                                               |          |  |                   |     |            |                                         |  |     |                                           |  |  |                             |         |  |                      |  |         |           |  |     | 1,158,253                      |   |  |                  | 1,158,253  |   |  |     | (4,553  | ) |  |     | 1,153,700  |  
|Other comprehensive income                       |  |                                               |          |  |                   |     |            |                                         |  |     |                                           |  |  |                             |         |  |                      |  |         |           |  |     |                                |   |  |                  |           |   |  |     |        |   |  |     |           |  
|Special reserve-Safety Production Fund (Note 22) |  |                                               |          |  |                   |     |           |                                         |  |     |                                           |  |  |                             |        |  |                      |  |         |           |  |     |                               |   |  |                  |           |   |  |     |        |   |  |     |           |  
|Appropriation                                    |  |                                               |          |  |                   |     |           |                                         |  |     |                                           |  |  |                             |        |  |                      |  | 204,792  |           |  |     | (204,792                       | ) |  |                  |           |   |  |     |        |   |  |     |           |  
|Utilisation                                      |  |                                               |          |  |                   |     |           |                                         |  |     |                                           |  |  |                             |        |  |                      |  | (204,792 | )         |  |     | 204,792                        |   |  |                  |           |   |  |     |        |   |  |     |           |  
|Appropriations from retained earnings (Note 22)  |  |                                               |          |  |                   |     |           |                                         |  |     | 117,050                                    |  |  |                             |        |  |                      |  |         |           |  |     | (117,050                       | ) |  |                  |           |   |  |     |        |   |  |     |           |  
|Dividends relating to 2015                       |  |                                               |          |  |                   |     |           |                                         |  |     |                                           |  |  |                             |        |  |                      |  |         |           |  |     | (566,683                       | ) |  |                  | (566,683   | ) |  |     | (1,224  | ) |  |     | (567,907   | )
|                                                 |  |                                               |           |  |                   |     |            |                                         |  |     |                                            |  |  |                             |         |  |                      |  |          |           |  |     |                                |   |  |                  |            |   |  |     |         |   |  |     |            |  
|Balance at December 31, 2016                     |  |                                               | 7,083,537 |  |                   |     | 11,562,738 |                                         |  |     | 2,521,534                                  |  |  |                             | 304,059 |  |                      |  |         |           |  |     | 6,582,190                      |   |  |                  | 28,054,058 |   |  |     | (24,003 | ) |  |     | 28,030,055 |  
|                                                 |  |                                               |           |  |                   |     |            |                                         |  |     |                                            |  |  |                             |         |  |                      |  |          |           |  |     |                                |   |  |                  |            |   |  |     |         |   |  |     |            |  
|Balance at December 31, 2016(*)                  |  | US$                                           | 1,020,242 |  |                   | US$ | 1,665,381  |                                         |  | US$ | 363,176                                    |  |  | US$                         | 43,794  |  |                      |  |         |           |  | US$ | 948,032                        |   |  | US$              | 4,040,625  |   |  | US$ | (3,457  | ) |  | US$ | 4,037,168  |  
|                                                 |  |                                               |           |  |                   |     |            |                                         |  |     |                                            |  |  |                             |         |  |                      |  |          |           |  |     |                                |   |  |                  |            |   |  |     |         |   |  |     |            |  

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$1.00=RMB6.9430, the certified exchange rates for December 30, 2016 as published by the Federal Reserve Board of the United States. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate
on December 30, 2016 or on any other date.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|         |  |                 |  |                 
|-------- |  | --------------- |  | ----------------
|         |  |                 |  |                 
|Chairman |  | General Manager |  | Chief Accountant



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|1 | GENERAL INFORMATION
|- | -------------------

Guangshen Railway Company Limited (the Company) was established as a joint stock limited company in the Peoples Republic
of China (the PRC) on 6 March 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), certain subsidiaries of the Predecessor; and Guangzhou Railway (Group) Company (the Guangzhou Railway Group) and certain of its subsidiaries prior to the formation of
the Company.

The Predecessor was controlled by and was 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 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) for the exchange of 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 (the 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 (Yangcheng Railway Business) of Guangzhou Railway Group Yangcheng Railway Enterprise Development Company (Yangcheng Railway ), 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.

Before March 2013, the Ministry of Railway of the PRC (MOR) was the controlling entity of the Companys single largest shareholder (i.e. Guangzhou Railway Group). In addition, it was the
government authority which governed and monitored the railway business centrally within the PRC.



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|1 | GENERAL INFORMATION (CONTINUED)
|- | -------------------------------



On 14 March 2013, pursuant to the approved plan on State Council Institutional
Reform and Transformation of Government Functions and Approval On Setting Up China Railway Company by the State Council, the previous controlling entity of Guangzhou Railway Group, MOR, was dissolved. The administrative functions of MOR were
transferred to the Ministry of Transport and a newly established National Railway Bureau. The business functions were transferred to the China Railway Corporation (CRC). Accordingly, the equity interests of Guangzhou Railway Group which
was wholly controlled by MOR previously were also transferred to the CRC (Reform). The Reform was completed and CRC became the controlling entity of the Companys principal shareholder, Guangzhou Railway Group. Upon the completion
of necessary procedures and approval, CRC became the controlling entity of the Companys principal shareholder, Guangzhou Railway Group since 1 January 2017. CRC, together with subsidiaries which were wholly controlled by MOR previously
became related parties (hereinafter collectively as CRC Group).

The principal activities of the Group are the
provision of passenger and freight transportation on railroads. 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 in 2056.

The financial statements were
authorised for issue by the board of directors of the Company on 26 April 2017.

The English names of all companies listed in
the financial statements are direct translations of their registered names in Chinese.



|2 | PRINCIPAL ACCOUNTING POLICIES
|- | -----------------------------

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless
otherwise stated.



|2.1 | Basis of preparation
|--- | --------------------

The
consolidated financial statements have been prepared in accordance with all applicable International Financial Reporting Standards (IFRS) as issued by International Accounting Standards Board (IASB). The consolidated
financial statements have been prepared under the historical cost convention.



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
|- | -----------------------------------------



|2.1 | Basis of preparation (continued)
|--- | --------------------------------



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
consolidated financial statements are disclosed in Note 4.



|2.1.1 | Changes in accounting policy and disclosures
|----- | --------------------------------------------



|(a) | New and amended standards adopted by the Group
|--- | ----------------------------------------------

The following amendments to standards have been adopted by the Group for the first time for the financial year beginning on 1 January 2016:



| |  |  | Accounting for acquisitions of interests in joint operations  Amendments to IFRS 11
| | - |  | ------------------------------------------------------------------------------------



| |  |  | Clarification of acceptable methods of depreciation and amortisation  Amendments to IAS 16 and IAS 38
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | Annual improvements to IFRSs 2012  2014 cycle, and
| | - |  | ---------------------------------------------------



| |  |  | Disclosure initiative  amendments to IAS 1.
| | - |  | --------------------------------------------

The directors of the Company consider that the adoption of the amendments to standards have no material impact on the Groups operating results and financial position.



|(b) | The following new standards, amendments and interpretations have been issued as at 31 December 2016 but are not effective for IFRS financial statements for the
year ended 31 December 2016
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Amendments to IFRS 10 and IAS 28 Sale or contribution of assets between an investor and its associate or joint venture. The amendments
address an inconsistency between IFRS 10 and IAS 28 in the sale and contribution of assets between an investor and its associate or joint venture. A full gain or loss is recognised when a transaction involves a business. A partial gain or loss is
recognised when a transaction involves assets that do not constitute a business, even if those assets are in a subsidiary. These amendments were originally intended to be effective for annual periods beginning on or after 1 January 2016. The
effective date is unknown.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Amendments to IAS 7 Disclosure Initiative. The amendments are part of the IASBs disclosure initiative project and introduce
additional disclosure requirements intended to address investors concerns that financial statements do not currently enable them to understand the entitys cash flows; particularly in respect to the management of financing activities.
These amendments will be effective for annual periods beginning on or after 1 January 2017.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
|- | -----------------------------------------



|2.1 | Basis of preparation (continued)
|--- | --------------------------------



|2.1.1 | Changes in accounting policy and disclosures (continued)
|----- | --------------------------------------------------------



|(b) | The following new standards, amendments and interpretations have been issued as at 31 December 2016 but are not effective for IFRS financial statements for the
year ended 31 December 2016(continued):
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses . The amendments clarify the recognition of deferred tax
assets for unrealised losses related to debt instruments measured at fair value. These amendments will be effective for annual periods beginning on or after 1 January 2017.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Amendments to IFRS 2  Classification and Measurement of Share-based Payment Transactions . The amendments relate to the following areas:
(1) The accounting for the effects of vesting conditions on cash-settled share-based payment transactions;(2) The classification of share-based payment transactions with net settlement features for withholding tax obligations;(3) The accounting
for a modification to the terms and conditions of a share-based payment that changes the transaction from cash-settled to equity-settled. These amendments will be effective for annual periods beginning on or after 1 January 2018.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | IFRS 9, Financial instruments. IFRS 9 (2014), Financial instruments replaces the whole of IAS 39. IFRS 9 has three financial
asset classification categories for investments in debt instruments: amortised cost, fair value through other comprehensive income (OCI) and fair value through profit or loss. Classification is driven by the entitys business model
for managing the debt instruments and their contractual cash flow characteristics. Investments in equity instruments are always measured at fair value. However, management can make an irrevocable election to present changes in fair value in OCI,
provided the instrument is not held for trading. If the equity instrument is held for trading, changes in fair value are presented in profit or loss. For financial liabilities there are two classification categories: amortised cost and fair value
through profit or loss. Where non-derivative financial liabilities are designated at fair value through profit or loss, the changes in the fair value due to changes in the liabilitys own credit risk are
recognised in OCI, unless such changes in fair value would create an accounting mismatch in profit or loss, in which case, all fair value movements are recognised in profit or loss. There is no subsequent recycling of the amounts in OCI to profit or
loss. For financial liabilities held for trading (including derivative financial liabilities), all changes in fair value are presented in profit or loss. IFRS 9 introduces a new model for the recognition of impairment lossesthe expected credit
losses (ECL) model, which constitutes a change from the incurred loss model in IAS 39. IFRS 9 contains a three stage approach, which is based on the change in credit quality of financial assets since initial recognition. IFRS 9 applies
to all hedging relationships, with the exception of portfolio fair value hedges of interest rate risk. The new guidance better aligns hedge accounting with the risk management activities of an entity and provides relief from the more
rule-based approach of IAS39. This standard will be effective for annual periods beginning on or after 1 January 2018.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
|- | -----------------------------------------



|2.1 | Basis of preparation (continued)
|--- | --------------------------------



|2.1.1 | Changes in accounting policy and disclosures (continued)
|----- | --------------------------------------------------------



|(b) | The following new standards, amendments and interpretations have been issued as at 31 December 2016 but are not effective for IFRS financial statements for the
year ended 31 December 2016 (continued):
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | IFRS 15 Revenue from Contracts with Customers. IFRS 15 establishes a comprehensive framework for determining when to recognize revenue and
how much revenue to recognize through a 5-step approach: (1) Identify the contract(s) with customer; (2) Identify separate performance obligations in a contract (3) Determine the transaction
price (4) Allocate transaction price to performance obligations and (5) recognize revenue when performance obligation is satisfied. The core principle is that a company should recognize revenue to depict the transfer of promised goods or
services to the customer in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. It moves away from a revenue recognition model based on an earnings processes to an
asset-liability approach based on transfer of control. IFRS 15 provides specific guidance on capitalization of contract cost and license arrangements. It also includes a cohesive set of disclosure requirements about the nature, amount,
timing and uncertainty of revenue and cash flows arising from the entitys contracts with customers. IFRS 15 replaces the previous revenue standards: IAS 18 Revenue and IAS 11 Construction Contracts, and the related Interpretations on revenue
recognition: IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers and SIC-31 Revenue- Barter Transactions Involving
Advertising Services. This standard will be effective for annual periods beginning on or after 1 January 2018.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | IFRS16 Leases. IFRS 16 provides updated guidance on the definition of leases, and the guidance on the combination and separation of
contracts. Under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. IFRS 16 requires lessees to recognise lease liability
reflecting future lease payments and a right-of-use-asset for almost all lease contracts, with an exemption for
certain short-term leases and leases of low-value assets. The lessors accounting stays almost the same as under IAS 17. However, the new accounting model for lessees is expected to impact negotiations between
lessors and lessees. This standard will be effective for annual periods beginning on or after 1 January 2019.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Group has already commenced an assessment of the impact of these new or revised standards which are relevant to the Groups operation. According to the preliminary assessment made by the
directors of the Company, no significant impact on the financial performance and positions of the Group is expected when adopting IFRS 9, IFRS 15 and IFRS16. At this stage, the Group does not intend to adopt the standard before its effective date.



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
|- | -----------------------------------------



|2.2 | Subsidiaries
|--- | ------------

A
subsidiary is an entity (including a structured entity) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.



|(a) | Business combinations
|--- | ---------------------

The Group
applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and
the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values at the acquisition date.

The Group recognises
any non-controlling interest in the acquiree on an acquisition-by-acquisition basis.
Non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of the entitys net assets in the event of liquidation are measured at
either fair value or the present ownership interests proportionate share in the recognised amounts of the acquirees identifiable net assets. All other components of non-controlling interests are
measured at their acquisition date fair value, unless another measurement basis is required by IFRS.

Acquisition-related costs
are expensed as incurred.

If the business combination is achieved in stages, the acquirer shall remeasure its previously held
equity interest in the acquiree at its acquisition-date fair value and recognise the resulting gain or loss, if any, in profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be
an asset or liability is recognised in accordance with IAS 39 either in profit or loss. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

The excess of the consideration transferred, the amount of any non-controlling interest in the
acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised
directly in the income statement (Note 2.9).

Intra-group transactions, balances and unrealised gains on transactions between
group companies are eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Groups accounting policies.



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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
|- | -----------------------------------------



|2.2 | Subsidiaries (continued)
|--- | ------------------------



|(b) | Changes in ownership interests in subsidiaries without change of control
|--- | ------------------------------------------------------------------------

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions  that is, as transactions with the
owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.



|(c) | Disposal of subsidiaries
|--- | ------------------------

When
the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The
fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in
respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.



|2.3 | Associates
|--- | ----------

An associate
is an entity 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. Under
the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investors share of the profit or loss of the investee after the date of acquisition. The Groups
investments in associates include goodwill identified on acquisition. Upon the acquisition of the ownership interest in an associate, any difference between the cost of the associate and the Groups share of the net fair value of the
associates identifiable assets and liabilities is accounted for as goodwill.

If the ownership interest in an associate
is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.

The Groups share of post-acquisition profit or loss is recognised in the comprehensive income statement, and its share of
post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to 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 legal or constructive obligations or made payments on behalf of the associate.



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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
|- | -----------------------------------------



|2.3 | Associates (continued)
|--- | ----------------------



The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If
this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to share of result of associates in the
comprehensive income statement.

Profits or losses and other comprehensive income resulting from upstream and downstream
transactions between the Group and its associate are recognised in the Groups financial statements only to the extent of unrelated investors interests in the associates. Unrealised losses are 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.

In the Companys balance sheet, investments in associates are accounted for at cost less provision for impairment losses. Cost also
includes direct attributable costs of investment. The results of associates are accounted for by the Company on the basis of dividend received and receivable.



|2.4 | Segment reporting
|--- | -----------------

Operating 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.



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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
|- | -----------------------------------------



|2.5 | Foreign currency transaction
|--- | ----------------------------



|(a) | Functional and presentation currency
|--- | ------------------------------------

Items 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 balances
|--- | -------------------------

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions or valuation where items are re-measured. 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.

Foreign exchange gains and losses are presented in the consolidated comprehensive income statement within Finance costs.



|2.6 | Fixed assets
|--- | ------------

Fixed
assets are stated at historical cost less depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items (for the case of fixed assets acquired by the Company from Predecessor
during the Restructuring, the revaluated amount in the Restructuring was deemed costs).

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.



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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
|- | -----------------------------------------



|2.6 | Fixed assets (continued)
|--- | ------------------------



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 years  | 
|Tracks, bridges and service roads (Note a) |  |  | 16 to 100 years | 
|Locomotives and rolling stock              |  |  | 20 years        | 
|Communications and signaling systems       |  |  | 8 to 20 years   | 
|Other machinery and equipment              |  |  | 4 to 25 years   | 

Note a:

The estimated useful lives of some buildings, tracks, bridges and service roads exceed the initial lease periods of the land use rights from operation lease( details contained in Note 35(b)); and the
initial period of certain land use right acquired(Note 2.8), on which these assets are located.

The Group will renew the term
of extend land use right upon its expiry in strict compliance with requirements of relevant laws and regulations. There is no substantive impediment for the renewal except public interests. In addition, based on the provision of the land use right
operating lease agreement entered into with the single largest shareholder (Note 35(b)), the Company can renew the lease at its own discretion upon expiry of the operating lease term. Based on the above consideration, the directors consider the
current estimated useful lives of those assets to be reasonable.

The assets residual values and estimated useful lives
are reviewed, and adjusted if appropriate, at the end of each year.

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 2.10).

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within other income and other gains/(losses) - net, included in the
comprehensive income statement.



|2.7 | Construction-in-progress
|--- | ------------------------

Construction-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.



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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
|- | -----------------------------------------



|2.8 | Leasehold land payments
|--- | -----------------------

The Group acquired the right to use certain parcels of land for certain of its rail lines, stations and other businesses. The payment paid
for such land represents pre-paid lease payments, which are amortised over the lease terms of 36.5 to 50 years using the straight-line method.



|2.9 | Goodwill
|--- | --------

Goodwill
represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the
fair value of the Groups share of identifiable net assets acquired. Goodwill arising from acquisitions of subsidiaries business is disclosed separately on the balance sheet.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units
(CGUs), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored
for internal management purposes. Goodwill is monitored at the operating segment level.

Goodwill impairment reviews are
undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to
sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.



|2.10 | Impairment of non-financial assets other than goodwill
|---- | ------------------------------------------------------

Assets that subjected to amortisation 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 (CGUs). Non-financial assets other than goodwill that suffered
impairment are reviewed for possible reversal of the impairment at each reporting date.



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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
|- | -----------------------------------------



|2.11 | Financial assets
|---- | ----------------



|2.11.1 | Classification
|------ | --------------

The Group
classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, available-for-sale financial assets and held to
maturity investment. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. In current year, the Group held loan and
receivables and available-for-sale financial assets.



|(a) | Loans and receivables
|--- | ---------------------

Loans 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 the amounts that are settled or
expected to be settled more than 12 months after the end of the reporting period. These are classified as non-current assets. The Groups loans and receivables comprise long-term receivables,
trade and other receivables, short-term deposits and cash and cash equivalents in the balance sheet (Notes 2.16 and 2.17).



|(b) | Available-for-sale financial assets
|--- | -----------------------------------

Available-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 the investment
matures or management intends to dispose of it within 12 months of the end of the reporting period.



|2.11.2 | Recognition and measurement
|------ | ---------------------------

Regular 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 for all financial assets not carried at fair value through profit or loss. Available-for-sale financial assets are subsequently carried at
fair value, except for those investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, which shall be measured at cost. 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. 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 other income and other gains/(losses) - net.



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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
|- | -----------------------------------------



|2.11 | Financial assets (continued)
|---- | ----------------------------



|2.11.2 | Recognition and measurement (continued)
|------ | ---------------------------------------



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.



|2.12 | Offsetting financial instruments
|---- | --------------------------------

Financial 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. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or
bankruptcy of the Company or the counterparty.



|2.13 | Impairment of financial assets
|---- | ------------------------------



|(a) | Assets carried at amortised cost
|--- | --------------------------------

The 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;
| | - |  | ----------------------------------------------------------------------------------------------



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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
|- | -----------------------------------------



|2.13 | Impairment of financial assets (continued)
|---- | ------------------------------------------



|(a) | Assets carried at amortised cost (continued)
|--- | --------------------------------------------



| |  |  | 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.

For loans and receivables category, 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 carrying amount of the asset is reduced and the amount of the
loss is recognised in the comprehensive income statement. If a loan 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.



|(b) | Assets classified as available for sale
|--- | ---------------------------------------

The 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 equity investments, 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 the cumulative loss, which is 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 profit or loss. Impairment losses recognised in the consolidated comprehensive income statement on equity instruments are not reversed through the consolidated comprehensive income statement.



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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
|- | -----------------------------------------



|2.14 | Long-term prepaid expenses
|---- | --------------------------

Long-term prepaid expenses include the various expenditures that have been incurred but should be
recognised as expenses over more than one year in the current and subsequent periods. Long-term prepaid expenses are amortised on the straight-line basis over the expected beneficial period and are presented at actual expenditure net of accumulated
amortisation.



|2.15 | Materials and supplies
|---- | ----------------------

Materials 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. The cost of materials and
supplies may not be recoverable if they are damaged, if they have become wholly or partially obsolete, or if their selling prices have declined due to various reasons. When such circumstances happen, cost of materials and supplies is written to net
realisable value, which is the estimated selling price less applicable variable expenses.



|2.16 | Trade and other receivables
|---- | ---------------------------

Trade 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.



|2.17 | Cash and cash equivalents
|---- | -------------------------

Cash 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.



|2.18 | Share capital
|---- | -------------

Ordinary
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.



|2.19 | Trade payables
|---- | --------------

Trade
payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. 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.



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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
|- | -----------------------------------------



|2.19 | Trade payables (continued)
|---- | --------------------------



Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

The Group derecognises financial liability when, and only when, the Groups obligations are discharged, cancelled or
expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.



|2.20 | Borrowings
|---- | ----------

Borrowings
are recognised initially at fair value, net of transaction costs incurred. They are subsequently carried 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 end of the reporting period.



|2.21 | Borrowing costs
|---- | ---------------

General
and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the
cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income
earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation .

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.



|2.22 | Current and deferred income tax
|---- | -------------------------------

The tax expense for the period comprises current and deferred tax. Tax is recognised in the consolidated comprehensive 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.



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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
|- | -----------------------------------------



|2.22 | Current and deferred income tax (continued)
|---- | -------------------------------------------



|(a) | Current income tax
|--- | ------------------

The current
income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in PRC 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.



|(b) | Deferred income tax
|--- | -------------------

Inside
basis differences

Deferred income tax is recognised, 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.

Outside basis differences

Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, and associates and joint arrangements, except for deferred income tax liability
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. Generally the Group is unable to control the reversal of the
temporary difference for associates. Only when there is an agreement in place that gives the Group the ability to control the reversal of the temporary difference in the foreseeable future, deferred tax liability in relation to taxable temporary
differences arising from the associates undistributed profits is not recognised.

Deferred income tax assets are
recognised on deductible temporary differences arising from investments in subsidiaries, and associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable
profit available against which the temporary difference can be utilised.



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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
|- | -----------------------------------------



|2.22 | Current and deferred income tax (continued)
|---- | -------------------------------------------



|(c) | Offsetting
|--- | ----------

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.



|2.23 | Employee benefits
|---- | -----------------



|(a) | Defined contribution plan
|--- | -------------------------

The
Group pays contributions to defined contribution schemes operated by the local government for employee benefits in respect of pension and unemployment. The Group also pays contribution to defined contribution schemes operated by Guangzhou Railway
Group for employee supplementary pension benefit. 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 benefits
|--- | --------------------

Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee
accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier of the following dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the entity
recognises costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of
employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.



|2.24 | Provisions
|---- | ----------

Provisions
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

(All amounts expressed in Renminbi unless otherwise stated)



|2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
|- | -----------------------------------------



|2.25 | Revenue recognition
|---- | -------------------

Revenue 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, rebates and discounts and after eliminating sales within the Group.

The Group recognises revenue when the services are rendered and the amount of revenue can be reliable measured, future economic benefits will probably flow to the entity with reasonably certainty, and
specific criteria have been met for each of the Groups activities as described below. The recognition also involves use of estimates exercised by management based on historical results, takes into consideration the different type of customers,
transactions and the specifics of each arrangement.



|(a) | Revenue from railroad and related business
|--- | ------------------------------------------

Revenue from passenger transportation

The passenger transportation is
generally classified by transportation business of Guangzhou-Shenzhen inter-city express trains, long-distance trains and Guangzhou-Hong Kong city through trains. These
services are provided in cooperation with other railway companies in PRC and the corresponding revenue information is captured and processed by CRC through a central clearance system.

Revenues are recognized on a monthly basis when the train transportation services are rendered within the month, i.e. upon the passenger
tickets with fixed prices and dates of travel, which are non-refundable and non-reschedulable, are sold and the respective trains have reached the prescribed
destinations within that particular month; as well as upon approval and notification is made by CRC on a monthly basis (the CRC Monthly Statement) for transactions completed within that month and when the amounts of revenue can be
reliably measured and collectability is certain. The revenue is presented net of value-added tax but before deduction of any sales handling commissions.

Revenue from freight transportation

The Group also operates with other
railway companies in PRC for the provision of freight transportation services. Service information and computation of the attributable revenues entitled by the Group are processed by the central clearance system of CRC on a monthly basis. Revenue
from outbound and inbound freight transportation with ports of loading and discharge located at railway lines owned and operated by the Group; pass-through transportation with freight trains passing through railway lines owned and operated by the
Group; as well as goods loading and discharge services rendered at ports located at railway lines owned by the Group, are recognized, on a monthly basis, when the goods are delivered to the ports of discharge within a month, or when the
loading/discharge services are rendered, and when the amounts are approved and notified in the CRC Monthly Statement, upon which the amounts can be reliably measured and collectability is certain.



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GUANGSHEN RAILWAY COMPANY LIMITEDAND SUBSIDIARIES

NOTES TO THECONSOLIDATEDFINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
|- | -----------------------------------------



|2.25 | Revenue recognition (continued)
|---- | -------------------------------



|(a) | Revenue from railroad and related business (continued)
|--- | ------------------------------------------------------



Revenue from freight transportation(continued)



The revenues are presented at the gross amounts of the
attributable freight charges computed from the standard freight charges imposed by CRC.

Revenue from railway network usage
and other transportation related services

Revenue from railway network usage and other transportation related services,
mainly consist of network usage services (locomotive traction, track usage and electric catenaries service, etc.) and railway operation services and other services, are rendered by the Group together with other railway companies in PRC. The
information relating to network usage service is captured and processed by the central clearance system of CRC. The revenue from network usage services are recognized on a monthly basis, when the services are rendered within that month and revenue
can be reliably measured, i.e. upon approval and notification made in the CRC Monthly Statement, for the transactions completed within that month, when the respective revenue amounts can be reliably measured and when collectability is certain.
Railway operation services and other services are rendered solely by the Group and they are recognized when the services are rendered and revenue can be reliably measured. All proceeds are collected by the Group directly.

The operations of the railway business of the Group form part of the nationwide railway system in PRC and they are supervised and governed
by CRC. The Group render the passenger transportation and freight transportation services in cooperation with other railway companies and the related service fees and charges are collected either by the Group itself or by other railway companies. In
addition, the Group also receives service fees and charges for on behalf of other railway companies. The respective fares and charges of the services, fee sharing basis, and processing of the respective revenue sharing among different railway
companies are done centrally by a central clearance system operated by CRC. The Group records revenues based on the amounts of attributable revenue approved and notified in the CRC Monthly Statement for services undertaken by the Group completed
within the specific month, upon then the revenues can be reliably measured and collectability is certain. The respective share of revenues, in excess of amount collected by the Group itself, are credited by CRC to bank accounts maintained by the
Group. In the case that the attributable amount is less than the amount collected by the Group, the Group remits the surplus to CRC.



|(b) | Revenue from other businesses
|--- | -----------------------------

Revenue from other business mainly consist of on-board catering services, leasing, sales of
materials, sale of goods and other businesses related to railway transportation. Revenues from on-board catering services are recognized when the related services are rendered. Revenues from sales of materials
and supplies and sale of goods are recognized when the respective materials and goods are delivered to customers. Revenue from operating lease arrangements on certain properties and locomotives is recognized on a straight-line basis over the period
of the respective leases.



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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
|- | -----------------------------------------



|2.26 | Interest income
|---- | ---------------

Interest
income is recognised using the effective interest method. When a loan and 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.



|2.27 | Dividend income
|---- | ---------------

Dividend
income is recognised when the right to receive payment is established.



|2.28 | Government grants
|---- | -----------------

Grants
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 costs are deferred and recognised in the comprehensive income statement over the period necessary to match
them with the costs that they are intended to compensate.

Government grants relating to fixed assets are included in non-current liabilities as deferred government grants and are credited to the comprehensive income statement on a straight-line basis over the expected lives of the related assets.



|2.29 | Operating leases
|---- | ----------------

Leases
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.



|2.30 | Dividend distribution
|---- | ---------------------

Dividend distribution to the shareholders is recognised as a liability in the Groups financial statements in the period in which the
dividends are approved by the shareholders.



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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|3 | FINANCIAL RISK MANAGEMENT
|- | -------------------------



|3.1 | Financial risk factor
|--- | ---------------------

The Groups activities expose it to a variety of financial risks: market risk (including foreign currency risk and 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) | Market risk
|--- | -----------



|(i) | Foreign currency risk
|--- | ---------------------

The Group
mainly operates in the PRC with most of the transactions settled in RMB. RMB is also the functional currency of the Group. 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.

The following table shows the Groups foreign currency denominated monetary assets in RMB equivalent:



|                          |  |              |     |  |                   |  |        |           |  |  |         | 
|------------------------- |  | ------------ | --- |  | ----------------- |  | ------ | --------- |  |  | ------- | 
|                          |  | Currency     |     |  | As at 31 December | 
|Monetary assets           |  | denomination |     |  | 2015              |  |        | 2016      | 
|                          |  |              |     |  | (RMB000)         |  |        | (RMB000) | 
|Cash and cash equivalents |  |              | HKD |  |                   |  | 72,140 |           |  |  | 115,680 | 
|Cash and cash equivalents |  |              | USD |  |                   |  |       |           |  |  | 96      | 
|Other receivables         |  |              | HKD |  |                   |  | 71     |           |  |  | 66      | 
|                          |  |              |     |  |                   |  |        |           |  |  |         | 
|                          |  |              |     |  |                   |  | 72,211 |           |  |  | 115,842 | 
|                          |  |              |     |  |                   |  |        |           |  |  |         | 

The Group may experience a loss as a result of any foreign currency exchange rate fluctuations in
connection with monetary assets shown above. The Group has not used any means to hedge the exposure.

As at 31 December
2016, if RMB had weakened/strengthened by 5% against the HKD with all other variables held constant, profit after tax for the year would have been RMB4,340,000 (2015: RMB2,708,000 ) 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.



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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|3 | FINANCIAL RISK MANAGEMENT (CONTINUED)
|- | -------------------------------------



|3.1 | Financial risk factor (continued)
|--- | ---------------------------------



|(a) | Market risk (continued)
|--- | -----------------------



|(ii) | Cash flow and fair value interest rate risk
|---- | -------------------------------------------

Other 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 1.38%
(2015: 1.71%). Any change in the interest rate promulgated by the Peoples Bank of China from time to time is not considered to have a significant impact to the Group.

As at 31 December 2015 and 2016, the Group had no interest bearing debts, which may expose the Group to any interest rate risk.



|(b) | Credit risk
|--- | -----------

Credit risk is
managed on a group basis. Credit risk arises from bank balances, trade and other receivables (excluding prepayments) and long-term receivable.

The credit quality of financial assets that are neither past due nor impaired can be analysed by the nature of counterparties as follows:



|                                        |  |                                |           |  |                                |  |           | 
|--------------------------------------- |  | ------------------------------ | --------- |  | ------------------------------ |  | --------- | 
|                                        |  | As at 31 December
2015
RMB000 |           |  | As at 31 December
2016
RMB000 | 
|Trade receivables                       |  |                                |           |  |                                |  |           | 
|Due from CRC Group                      |  |                                | 885,472   |  |                                |  | 1,314,352 | 
|Due from related parties                |  |                                | 804,845   |  |                                |  | 721,557   | 
|Due from third parties                  |  |                                | 499,946   |  |                                |  | 481,372   | 
|                                        |  |                                |           |  |                                |  |           | 
|                                        |  |                                | 2,190,263 |  |                                |  | 2,517,281 | 
|                                        |  |                                |           |  |                                |  |           | 
|Other receivables excluding prepayments |  |                                |           |  |                                |  |           | 
|Due from CRC Group                      |  |                                | 6,378     |  |                                |  | 3,846     | 
|Due from related parties                |  |                                | 6,953     |  |                                |  | 2,619     | 
|Due from third parties                  |  |                                | 69,536    |  |                                |  | 220,035   | 
|                                        |  |                                |           |  |                                |  |           | 
|                                        |  |                                | 82,867    |  |                                |  | 226,500   | 
|                                        |  |                                |           |  |                                |  |           | 
|Long-term receivable                    |  |                                |           |  |                                |  |           | 
|Due from a third party                  |  |                                | 30,804    |  |                                |  | 31,406    | 
|                                        |  |                                |           |  |                                |  |           | 

For trade and other receivables, management performs ongoing credit evaluations of its
customers/debtors financial condition and generally does not require collateral from the customers/debtors. After assessing the expected realizability and timing for collection of the outstanding balances, the Group maintains a provision for
impairment of receivables and actual losses incurred have been within managements expectation.



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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|3 | FINANCIAL RISK MANAGEMENT (CONTINUED)
|- | -------------------------------------



|3.1 | Financial risk factor (continued)
|--- | ---------------------------------



|(b) | Credit risk (continued)
|--- | -----------------------





|                                     |  |                                 |           |  |                                 |  |           | 
|------------------------------------ |  | ------------------------------- | --------- |  | ------------------------------- |  | --------- | 
|                                     |  | As at December 31,
2015
RMB000 |           |  | As at December 31,
2016
RMB000 | 
|Cash at bank and short-term deposits |  |                                 |           |  |                                 |  |           | 
|Placed in listed banks in the PRC    |  |                                 | 2,326,757 |  |                                 |  | 1,467,616 | 
|                                     |  |                                 |           |  |                                 |  |           | 

Cash and short term deposits 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.

There were no other financial assets
carrying a significant exposure to credit risk.

None of the financial assets that are fully performing has been renegotiated
in the current year.



|(c) | Liquidity risk
|--- | --------------

Prudent
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 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 1 yearRMB000 |           |  | Between 1and 2 yearsRMB000 |  |   | Between 2and 5 yearsRMB000 | 
|At 31 December 2016                                                                      |  |                         |           |  |                             |  |   |                             |  |  |   | 
|Trade and other payables excluding tax payables, employee benefits payables and advances |  |                         | 2,201,483 |  |                             |  |  |                             |  |  |  | 
|Dividends payable                                                                        |  |                         | 15,542    |  |                             |  |  |                             |  |  |  | 
|Payables for fixed assets and
construction-in-progress                                   |  |                         | 1,765,185 |  |                             |  |  |                             |  |  |  | 
|                                                                                         |  |                         |           |  |                             |  |   |                             |  |  |   | 
|At 31 December 2015                                                                      |  |                         |           |  |                             |  |   |                             |  |  |   | 
|Trade and other payables excluding tax payables, employee benefits payables and advances |  |                         | 2,136,570 |  |                             |  |  |                             |  |  |  | 
|Dividends payable                                                                        |  |                         | 14,318    |  |                             |  |  |                             |  |  |  | 
|Payables for fixed assets and
construction-in-progress                                   |  |                         | 1,425,998 |  |                             |  |  |                             |  |  |  | 
|                                                                                         |  |                         |           |  |                             |  |   |                             |  |  |   | 



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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|3 | FINANCIAL RISK MANAGEMENT (CONTINUED)
|- | -------------------------------------



|3.2 | Capital risk management
|--- | -----------------------

The 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 and to maintain an optimal capital structure to reduce the cost of capital.

As at December 2015 and 2016, the Group did not have borrowings and bonds. The directors are of the opinion that the Groups capital risk is low.



|3.3 | Fair value estimation
|--- | ---------------------

According to amendment to IFRS 7 for financial instruments that are measured in the balance sheet at fair value, it requires disclosure of
fair value measurements by level of 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 31 December 2016, the Group did not have any financial instruments that were measured at fair value.

As at 31 December 2016, the fair values of other financial instruments approximated their carrying values.



|4 | CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
|- | --------------------------------------------

Estimates and judgements 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.

The 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 addressed below.

Impairment of receivables

The Group makes provision for impairment of receivables based on an assessment of the recoverability of trade and other receivables with reference to the extent and duration that the amount will be
recovered. Provisions are applied where events or changes in circumstances indicate that the balances may not be collectible. The identification of impairment requires the use of judgment and estimates. Where the expectation is different from the
original estimate, such difference will impact the carrying amount of trade and other receivables and the impairment charge in the period in which such estimate has been changed.



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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|5 | SEGMENT INFORMATION
|- | -------------------

The
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. The operating segments were determined based on these
management reports.

Senior executives evaluate the business from a perspective of revenues and operating results generated
from railroad and related business conducted by the Company (the Railway Transportation Business). Other segments mainly include on-board catering services, leasing, sales of materials, sale of
goods and other businesses related to railway transportation provided by the subsidiaries of the Company. 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.

The segment results for 2014, 2015 and 2016 are as follows:



|                                                                 |  |                                    |            |  |         |  |            |             |  |  |            |   |  |         |         |  |         |  |         |         |  |  |         |  |  |         |         |   |         |  |         |         |  |  |         |   |  |  |            |  |  |  |            |  |  |  |            |  
|---------------------------------------------------------------- |  | ---------------------------------- | ---------- |  | ------- |  | ---------- | ----------- |  |  | ---------- | - |  | ------- | ------- |  | ------- |  | ------- | ------- |  |  | ------- |  |  | ------- | ------- | - | ------- |  | ------- | ------- |  |  | ------- | - |  |  | ---------- |  |  |  | ---------- |  |  |  | ---------- | -
|                                                                 |  | The Railway TransportationBusiness |            |  | Others  |  |            | Elimination |  |  | Total      |  
|                                                                 |  | 2014                               |            |  | 2015    |  |            | 2016        |  |  | 2014       |   |  | 2015    |         |  | 2016    |  |         | 2014    |  |  | 2015    |  |  | 2016    |         |   | 2014    |  |         | 2015    |  |  | 2016    |  
|                                                                 |  | RMB000                            |            |  | RMB000 |  |            | RMB000     |  |  | RMB000    |   |  | RMB000 |         |  | RMB000 |  |         | RMB000 |  |  | RMB000 |  |  | RMB000 |         |   | RMB000 |  |         | RMB000 |  |  | RMB000 |  
|Segment revenue                                                  |  |                                    |            |  |         |  |            |             |  |  |            |   |  |         |         |  |         |  |         |         |  |  |         |  |  |         |         |   |         |  |         |         |  |  |         |   |  |  |            |  |  |  |            |  |  |  |            |  
|- Railroad and Related Business                                  |  |                                    | 13,783,208 |  |         |  | 14,633,738 |             |  |  | 16,170,309 |   |  |         |        |  |         |  |        |         |  |  |        |  |  |         |        |   |         |  |        |         |  |  |        |   |  |  | 13,783,208 |  |  |  | 14,633,738 |  |  |  | 16,170,309 |  
|- Other Businesses                                               |  |                                    | 586,564    |  |         |  | 672,455    |             |  |  | 663,418    |   |  |         | 473,204 |  |         |  | 458,944 |         |  |  | 487,097 |  |  |         | (42,195 | ) |         |  | (39,828 | )       |  |  | (40,320 | ) |  |  | 1,017,573  |  |  |  | 1,091,571  |  |  |  | 1,110,195  |  
|                                                                 |  |                                    |            |  |         |  |            |             |  |  |            |   |  |         |         |  |         |  |         |         |  |  |         |  |  |         |         |   |         |  |         |         |  |  |         |   |  |  |            |  |  |  |            |  |  |  |            |  
|Total revenue                                                    |  |                                    | 14,369,772 |  |         |  | 15,306,193 |             |  |  | 16,833,727 |   |  |         | 473,204 |  |         |  | 458,944 |         |  |  | 487,097 |  |  |         | (42,195 | ) |         |  | (39,828 | )       |  |  | (40,320 | ) |  |  | 14,800,781 |  |  |  | 15,725,309 |  |  |  | 17,280,504 |  
|                                                                 |  |                                    |            |  |         |  |            |             |  |  |            |   |  |         |         |  |         |  |         |         |  |  |         |  |  |         |         |   |         |  |         |         |  |  |         |   |  |  |            |  |  |  |            |  |  |  |            |  
|Segment result                                                   |  |                                    | 869,701    |  |         |  | 1,487,249  |             |  |  | 1,549,120  |   |  |         | 13,394  |  |         |  | (28,549 | )       |  |  | 3,548   |  |  |         | (2,462  | ) |         |  | (6,862  | )       |  |  | (8,659  | ) |  |  | 880,633    |  |  |  | 1,451,838  |  |  |  | 1,544,009  |  
|                                                                 |  |                                    |            |  |         |  |            |             |  |  |            |   |  |         |         |  |         |  |         |         |  |  |         |  |  |         |         |   |         |  |         |         |  |  |         |   |  |  |            |  |  |  |            |  |  |  |            |  
|Finance costs/(income)                                           |  |                                    | 180,208    |  |         |  | 4,448      |             |  |  | (2,728     | ) |  |         | 165     |  |         |  | 160     |         |  |  | 177     |  |  |         |        |   |         |  |        |         |  |  |        |   |  |  | 180,373    |  |  |  | 4,608      |  |  |  | (2,551     | )
|Share of results of associates                                   |  |                                    | 5,048      |  |         |  | 2,499      |             |  |  | 7,223      |   |  |         |        |  |         |  |        |         |  |  |        |  |  |         |        |   |         |  |        |         |  |  |        |   |  |  | 5,048      |  |  |  | 2,499      |  |  |  | 7,223      |  
|Depreciation                                                     |  |                                    | 1,423,023  |  |         |  | 1,404,439  |             |  |  | 1,511,570  |   |  |         | 6,251   |  |         |  | 7,303   |         |  |  | 7,400   |  |  |         |        |   |         |  |        |         |  |  |        |   |  |  | 1,429,274  |  |  |  | 1,411,742  |  |  |  | 1,518,970  |  
|Amortisation of leasehold land payments                          |  |                                    | 18,245     |  |         |  | 17,949     |             |  |  | 27,338     |   |  |         | 919     |  |         |  | 10,464  |         |  |  | 11,332  |  |  |         |        |   |         |  |        |         |  |  |        |   |  |  | 19,164     |  |  |  | 28,413     |  |  |  | 38,670     |  
|Amortisation of long-term prepaid expenses                       |  |                                    | 13,610     |  |         |  | 13,842     |             |  |  | 6,729      |   |  |         | 321     |  |         |  | 337     |         |  |  | 239     |  |  |         |        |   |         |  |        |         |  |  |        |   |  |  | 13,931     |  |  |  | 14,179     |  |  |  | 6,968      |  
|Impairment of fixed assets                                       |  |                                    |           |  |         |  | 80,393     |             |  |  |           |   |  |         |        |  |         |  |        |         |  |  |        |  |  |         |        |   |         |  |        |         |  |  |        |   |  |  |           |  |  |  | 80,393     |  |  |  |           |  
|Impairment of construction-in progress                           |  |                                    |           |  |         |  | 2,434      |             |  |  | 5,662      |   |  |         |        |  |         |  |        |         |  |  |        |  |  |         |        |   |         |  |        |         |  |  |        |   |  |  |           |  |  |  | 2,434      |  |  |  | 5,662      |  
|Loss arising from business combination                           |  |                                    |           |  |         |  |           |             |  |  |           |   |  |         |        |  |         |  | 45,073  |         |  |  |        |  |  |         |        |   |         |  |        |         |  |  |        |   |  |  |           |  |  |  | 45,073     |  |  |  |           |  
|(Reversal of)/provision for impairment of materials and supplies |  |                                    |           |  |         |  | 64,096     |             |  |  | (5,209     | ) |  |         |        |  |         |  |        |         |  |  |        |  |  |         |        |   |         |  |        |         |  |  |        |   |  |  |           |  |  |  | 64,096     |  |  |  | (5,209     | )
|                                                                 |  |                                    |            |  |         |  |            |             |  |  |            |   |  |         |         |  |         |  |         |         |  |  |         |  |  |         |         |   |         |  |         |         |  |  |         |   |  |  |            |  |  |  |            |  |  |  |            |  



F-36



---

##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts expressed in Renminbi unless otherwise stated)



|5 | SEGMENT INFORMATION (CONTINUED)
|- | -------------------------------



A reconciliation of the segment results to profit of 2014, 2015 and 2016 is as follows:



|                           |  |                                     |          |   |                    |  |           |             |  |  |           |   |  |         |        |   |         |  |         |         |  |  |         |   |  |         |        |   |         |  |        |         |  |  |         |   |  |  |          |   |  |  |           |   |  |  |           |  
|-------------------------- |  | ----------------------------------- | -------- | - | ------------------ |  | --------- | ----------- |  |  | --------- | - |  | ------- | ------ | - | ------- |  | ------- | ------- |  |  | ------- | - |  | ------- | ------ | - | ------- |  | ------ | ------- |  |  | ------- | - |  |  | -------- | - |  |  | --------- | - |  |  | --------- | -
|                           |  | The Railway Transportation Business |          |   | All other segments |  |           | Elimination |  |  | Total     |  
|                           |  | 2014                                |          |   | 2015               |  |           | 2016        |  |  | 2014      |   |  | 2015    |        |   | 2016    |  |         | 2014    |  |  | 2015    |   |  | 2016    |        |   | 2014    |  |        | 2015    |  |  | 2016    |  
|                           |  | RMB000                             |          |   | RMB000            |  |           | RMB000     |  |  | RMB000   |   |  | RMB000 |        |   | RMB000 |  |         | RMB000 |  |  | RMB000 |   |  | RMB000 |        |   | RMB000 |  |        | RMB000 |  |  | RMB000 |  
|Segment result             |  |                                     | 869,701  |   |                    |  | 1,487,249 |             |  |  | 1,549,120 |   |  |         | 13,394 |   |         |  | (28,549 | )       |  |  | 3,548   |   |  |         | (2,462 | ) |         |  | (6,862 | )       |  |  | (8,659  | ) |  |  | 880,633  |   |  |  | 1,451,838 |   |  |  | 1,544,009 |  
|Income tax expense         |  |                                     | (214,389 | ) |                    |  | (372,142  | )           |  |  | (385,840  | ) |  |         | (5,118 | ) |         |  | (16,388 | )       |  |  | (4,469  | ) |  |         |       |   |         |  |       |         |  |  |        |   |  |  | (219,507 | ) |  |  | (388,530  | ) |  |  | (390,309  | )
|                           |  |                                     |          |   |                    |  |           |             |  |  |           |   |  |         |        |   |         |  |         |         |  |  |         |   |  |         |        |   |         |  |        |         |  |  |         |   |  |  |          |   |  |  |           |   |  |  |           |  
|Profit/(loss) for the year |  |                                     | 655,312  |   |                    |  | 1,115,107 |             |  |  | 1,163,280 |   |  |         | 8,276  |   |         |  | (44,937 | )       |  |  | (921    | ) |  |         | (2,462 | ) |         |  | (6,862 | )       |  |  | (8,659  | ) |  |  | 661,126  |   |  |  | 1,063,308 |   |  |  | 1,153,700 |  
|                           |  |                                     |          |   |                    |  |           |             |  |  |           |   |  |         |        |   |         |  |         |         |  |  |         |   |  |         |        |   |         |  |        |         |  |  |         |   |  |  |          |   |  |  |           |   |  |  |           |  

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 RailwayTransportation Business |            |  | All other segments |  |            | Elimination |  |  | Total   | 
|                                                                                           |  | 2015                               |            |  | 2016               |  |            | 2015        |  |  | 2016    |  |  | 2015    |         |  | 2016    |  |          | 2015    |  |  | 2016     |  
|                                                                                           |  | RMB000                            |            |  | RMB000            |  |            | RMB000     |  |  | RMB000 |  |  | RMB000 |         |  | RMB000 |  |          | RMB000 |  |  | RMB000  |  
|Total segment assets                                                                       |  |                                    | 31,554,271 |  |                    |  | 32,483,625 |             |  |  | 595,173 |  |  |         | 586,519 |  |         |  | (206,172 | )       |  |  | (199,886 | ) |  |  | 31,943,272 |  |  |  | 32,870,258 | 
|                                                                                           |  |                                    |            |  |                    |  |            |            
|Total segment assets include:                                                              |  |                                    |            |  |                    |  |            |             |  |  |         |  |  |         |         |  |         |  |          |         |  |  |          |   |  |  |            |  |  |  |            | 
|Investment in associates                                                                   |  |                                    | 168,711    |  |                    |  | 167,604    |             |  |  |        |  |  |         |        |  |         |  |         |         |  |  |         |   |  |  | 168,711    |  |  |  | 167,604    | 
|Additions to non-current assets (other than financial instruments and deferred tax
assets) |  |                                    | 1,625,915  |  |                    |  | 2,817,557  |             |  |  | 363,926 |  |  |         | 3,279   |  |         |  |         |         |  |  |         |   |  |  | 1,989,841  |  |  |  | 2,820,836  | 
|                                                                                           |  |                                    |            |  |                    |  |            |             |  |  |         |  |  |         |         |  |         |  |          |         |  |  |          |   |  |  |            |  |  |  |            | 
|Total segment liabilities                                                                  |  |                                    | 4,066,001  |  |                    |  | 4,398,759  |             |  |  | 578,754 |  |  |         | 588,128 |  |         |  | (145,745 | )       |  |  | (146,684 | ) |  |  | 4,499,010  |  |  |  | 4,840,203  | 
|                                                                                           |  |                                    |            |  |                    |  |            |             |  |  |         |  |  |         |         |  |         |  |          |         |  |  |          |   |  |  |            |  |  |  |            | 

Revenues of approximately RMB3,407,998,000 (2014: RMB1,958,375,000 and 2015: RMB2,508,916,000) are
derived from Guangzhou Railway Group and its subsidiaries. These revenues are attributable to the Railway Transportation Business. Except that, no revenues derived from a single external customer have exceeded 10% of the total revenues.



F-37



---

##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

(All amounts expressed in Renminbi
unless otherwise stated)



|6 | FIXED ASSETS-NET
|- | ----------------



|                                                            |  |                  |            |   |                                          |  |            |                                    |  |  |                                             |   |  |                                      |            |   |              |  |            |   |  |  |             |  
|----------------------------------------------------------- |  | ---------------- | ---------- | - | ---------------------------------------- |  | ---------- | ---------------------------------- |  |  | ------------------------------------------- | - |  | ------------------------------------ | ---------- | - | ------------ |  | ---------- | - |  |  | ----------- | -
|                                                            |  | BuildingsRMB000 |            |   | Tracks, bridges and service roadsRMB000 |  |            | Locomotivesand rollingstockRMB000 |  |  | Communications
and signallingsystemsRMB000 |   |  | Other machinery and equipmentRMB000 |            |   | TotalRMB000 | 
|At 1 January 2015                                           |  |                  |            |   |                                          |  |            |                                    |  |  |                                             |   |  |                                      |            |   |              |  |            |   |  |  |             |  
|Cost                                                        |  |                  | 6,723,551  |   |                                          |  | 15,433,890 |                                    |  |  | 7,568,098                                   |   |  |                                      | 1,712,493  |   |              |  | 5,810,040  |   |  |  | 37,248,072  |  
|Accumulated depreciation                                    |  |                  | (2,066,210 | ) |                                          |  | (2,769,268 | )                                  |  |  | (3,487,701                                  | ) |  |                                      | (1,216,155 | ) |              |  | (3,528,366 | ) |  |  | (13,067,700 | )
|Impairment                                                  |  |                  |           |   |                                          |  |           |                                    |  |  |                                            |   |  |                                      |           |   |              |  | (1,162     | ) |  |  | (1,162      | )
|                                                            |  |                  |            |   |                                          |  |            |                                    |  |  |                                             |   |  |                                      |            |   |              |  |            |   |  |  |             |  
|Net book amount                                             |  |                  | 4,657,341  |   |                                          |  | 12,664,622 |                                    |  |  | 4,080,397                                   |   |  |                                      | 496,338    |   |              |  | 2,280,512  |   |  |  | 24,179,210  |  
|                                                            |  |                  |            |   |                                          |  |            |                                    |  |  |                                             |   |  |                                      |            |   |              |  |            |   |  |  |             |  
|Year ended 31 December 2015                                 |  |                  |            |   |                                          |  |            |                                    |  |  |                                             |   |  |                                      |            |   |              |  |            |   |  |  |             |  
|Opening net book amount                                     |  |                  | 4,657,341  |   |                                          |  | 12,664,622 |                                    |  |  | 4,080,397                                   |   |  |                                      | 496,338    |   |              |  | 2,280,512  |   |  |  | 24,179,210  |  
|Additions due to business combination                       |  |                  | 22,550     |   |                                          |  | 1,346      |                                    |  |  |                                            |   |  |                                      |           |   |              |  | 599        |   |  |  | 24,495      |  
|Other additions                                             |  |                  | 8,991      |   |                                          |  |           |                                    |  |  | 488,335                                     |   |  |                                      | 11,845     |   |              |  | 113,443    |   |  |  | 622,614     |  
|Transfer in from
construction-in-progress(Note 7)           |  |                  | 241,860    |   |                                          |  | 234,030    |                                    |  |  | 38,470                                      |   |  |                                      | 90,469     |   |              |  | 218,690    |   |  |  | 823,519     |  
|Reclassifications                                           |  |                  | 616        |   |                                          |  |           |                                    |  |  |                                            |   |  |                                      |           |   |              |  | (616       | ) |  |  |            |  
|Impairment                                                  |  |                  |           |   |                                          |  |           |                                    |  |  | (80,393                                     | ) |  |                                      |           |   |              |  |           |   |  |  | (80,393     | )
|Disposals                                                   |  |                  | (5,187     | ) |                                          |  | (48,341    | )                                  |  |  | (26,408                                     | ) |  |                                      | (293       | ) |              |  | (3,715     | ) |  |  | (83,944     | )
|Depreciation charges                                        |  |                  | (273,380   | ) |                                          |  | (217,204   | )                                  |  |  | (431,070                                    | ) |  |                                      | (132,392   | ) |              |  | (357,696   | ) |  |  | (1,411,742  | )
|                                                            |  |                  |            |   |                                          |  |            |                                    |  |  |                                             |   |  |                                      |            |   |              |  |            |   |  |  |             |  
|Closing net book amount                                     |  |                  | 4,652,791  |   |                                          |  | 12,634,453 |                                    |  |  | 4,069,331                                   |   |  |                                      | 465,967    |   |              |  | 2,251,217  |   |  |  | 24,073,759  |  
|                                                            |  |                  |            |   |                                          |  |            |                                    |  |  |                                             |   |  |                                      |            |   |              |  |            |   |  |  |             |  
|At 31 December 2015                                         |  |                  |            |   |                                          |  |            |                                    |  |  |                                             |   |  |                                      |            |   |              |  |            |   |  |  |             |  
|Cost                                                        |  |                  | 6,989,242  |   |                                          |  | 15,615,264 |                                    |  |  | 7,657,021                                   |   |  |                                      | 1,807,311  |   |              |  | 6,022,269  |   |  |  | 38,091,107  |  
|Accumulated depreciation                                    |  |                  | (2,336,451 | ) |                                          |  | (2,980,811 | )                                  |  |  | (3,587,690                                  | ) |  |                                      | (1,341,344 | ) |              |  | (3,769,890 | ) |  |  | (14,016,186 | )
|Impairment                                                  |  |                  |           |   |                                          |  |           |                                    |  |  |                                            |   |  |                                      |           |   |              |  | (1,162     | ) |  |  | (1,162      | )
|                                                            |  |                  |            |   |                                          |  |            |                                    |  |  |                                             |   |  |                                      |            |   |              |  |            |   |  |  |             |  
|Net book amount                                             |  |                  | 4,652,791  |   |                                          |  | 12,634,453 |                                    |  |  | 4,069,331                                   |   |  |                                      | 465,967    |   |              |  | 2,251,217  |   |  |  | 24,073,759  |  
|                                                            |  |                  |            |   |                                          |  |            |                                    |  |  |                                             |   |  |                                      |            |   |              |  |            |   |  |  |             |  
|Year ended 31 December 2016                                 |  |                  |            |   |                                          |  |            |                                    |  |  |                                             |   |  |                                      |            |   |              |  |            |   |  |  |             |  
|Opening net book amount                                     |  |                  | 4,652,791  |   |                                          |  | 12,634,453 |                                    |  |  | 4,069,331                                   |   |  |                                      | 465,967    |   |              |  | 2,251,217  |   |  |  | 24,073,759  |  
|Additions due to business combination(Note 36)              |  |                  |           |   |                                          |  |           |                                    |  |  | 565,493                                     |   |  |                                      | 11,859     |   |              |  | 71,538     |   |  |  | 648,890     |  
|Other additions                                             |  |                  | 6,294      |   |                                          |  |           |                                    |  |  | 446,754                                     |   |  |                                      | 42,182     |   |              |  | 154,100    |   |  |  | 649,330     |  
|Transfer in from
construction-in-progress(Note 7)           |  |                  | 485,087    |   |                                          |  | 88,128     |                                    |  |  | 36,584                                      |   |  |                                      | 77,808     |   |              |  | 330,106    |   |  |  | 1,017,713   |  
|Transfer out to construction-in-progress for
repair(Note 7) |  |                  | (4,743     | ) |                                          |  |           |                                    |  |  | (189,888                                    | ) |  |                                      | (2,958     | ) |              |  | (8,797     | ) |  |  | (206,386    | )
|Transfer in from construction-in-progress after
repair      |  |                  | 10,451     |   |                                          |  | 2,088      |                                    |  |  | 430,050                                     |   |  |                                      | 6,613      |   |              |  | 21,833     |   |  |  | 471,035     |  
|Reclassifications                                           |  |                  | (10,141    | ) |                                          |  | (94        | )                                  |  |  |                                            |   |  |                                      | 172        |   |              |  | 10,063     |   |  |  |            |  
|Reclassified to leasehold land payments (a)                 |  |                  |           |   |                                          |  | (715,003   | )                                  |  |  |                                            |   |  |                                      |           |   |              |  |           |   |  |  | (715,003    | )
|Disposals                                                   |  |                  | (946       | ) |                                          |  | (92,586    | )                                  |  |  | (42,618                                     | ) |  |                                      | (1,621     | ) |              |  | (4,565     | ) |  |  | (142,336    | )
|Depreciation charges                                        |  |                  | (293,503   | ) |                                          |  | (216,765   | )                                  |  |  | (460,387                                    | ) |  |                                      | (107,148   | ) |              |  | (441,167   | ) |  |  | (1,518,970  | )
|                                                            |  |                  |            |   |                                          |  |            |                                    |  |  |                                             |   |  |                                      |            |   |              |  |            |   |  |  |             |  
|Closing net book amount                                     |  |                  | 4,845,290  |   |                                          |  | 11,700,221 |                                    |  |  | 4,855,319                                   |   |  |                                      | 492,874    |   |              |  | 2,384,328  |   |  |  | 24,278,032  |  
|                                                            |  |                  |            |   |                                          |  |            |                                    |  |  |                                             |   |  |                                      |            |   |              |  |            |   |  |  |             |  
|At 31 December 2016                                         |  |                  |            |   |                                          |  |            |                                    |  |  |                                             |   |  |                                      |            |   |              |  |            |   |  |  |             |  
|Cost                                                        |  |                  | 7,468,977  |   |                                          |  | 14,887,093 |                                    |  |  | 8,557,841                                   |   |  |                                      | 1,917,478  |   |              |  | 6,514,493  |   |  |  | 39,345,882  |  
|Accumulated depreciation                                    |  |                  | (2,623,687 | ) |                                          |  | (3,186,872 | )                                  |  |  | (3,702,522                                  | ) |  |                                      | (1,424,604 | ) |              |  | (4,129,003 | ) |  |  | (15,066,688 | )
|Impairment                                                  |  |                  |           |   |                                          |  |           |                                    |  |  |                                            |   |  |                                      |           |   |              |  | (1,162     | ) |  |  | (1,162      | )
|                                                            |  |                  |            |   |                                          |  |            |                                    |  |  |                                             |   |  |                                      |            |   |              |  |            |   |  |  |             |  
|Net book amount                                             |  |                  | 4,845,290  |   |                                          |  | 11,700,221 |                                    |  |  | 4,855,319                                   |   |  |                                      | 492,874    |   |              |  | 2,384,328  |   |  |  | 24,278,032  |  
|                                                            |  |                  |            |   |                                          |  |            |                                    |  |  |                                             |   |  |                                      |            |   |              |  |            |   |  |  |             |  



F-38



---

##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|6 | FIXED ASSETS-NET (CONTINUED)
|- | ----------------------------



|(a) | The costs of approximately RMB715,003,000 in relation to land use right have been reclassified to the leasehold land payments (Note 8)
|--- | --------------------------------------------------------------------------------------------------------------------------------------



|(b) | As at 31 December 2016, the ownership certificates of certain buildings of the Group with an aggregate carrying value of approximately RMB1,819,505,000 (2015:
RMB1,753,314,000) had not been obtained by the Group. After consultation made with the Companys legal counsel, the directors of the Company consider that there is no legal restriction for the Group to apply for and obtain the ownership
certificates of such buildings and it should not lead to any significant adverse impact on the operations of the Group.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | As at 31 December 2016, fixed assets of the Group with an aggregate net book value of approximately RMB116,953,000 (2015: RMB100,888,000) had been fully
depreciated but they were still in use.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|7 | CONSTRUCTION-IN-PROGRESS
|- | ------------------------



|                                                  |  |         |          |   |         |  |            |  
|------------------------------------------------- |  | ------- | -------- | - | ------- |  | ---------- | -
|                                                  |  | 2015    |          |   | 2016    | 
|                                                  |  | RMB000 |          |   | RMB000 | 
|At 1 January                                      |  |         | 401,434  |   |         |  | 569,573    |  
|Additions due to business combination (Note 36)   |  |         |         |   |         |  | 59,992     |  
|Transfer in from fixed assets for repair (Note 6) |  |         |         |   |         |  | 206,386    |  
|Other additions                                   |  |         | 994,092  |   |         |  | 1,448,767  |  
|Transfer to fixed assets (Note 6)                 |  |         | (823,519 | ) |         |  | (1,017,713 | )
|Transfer out to fixed assets after repair(Note 6) |  |         |         |   |         |  | (471,035   | )
|Impairment                                        |  |         | (2,434   | ) |         |  | (5,662     | )
|                                                  |  |         |          |   |         |  |            |  
|At 31 December                                    |  |         | 569,573  |   |         |  | 790,308    |  
|                                                  |  |         |          |   |         |  |            |  

Construction-in-progress as at 31 December 2016 mainly was improvement projects for road existing
railway equipment in the PRC.

For the year ended 31 December 2016, no interest expense (2015: Nil) had been capitalised
in the construction-in-progress balance as there were no third party borrowings during this year.



F-39



---

##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

(All amounts expressed in Renminbi
unless otherwise stated)



|8 | LEASEHOLD LAND PAYMENTS
|- | -----------------------

The Groups interests in leasehold land represent prepaid operating lease payments in the PRC and its net book value are analysed as
follows:



|                                  |  |         |           |  
|--------------------------------- |  | ------- | --------- | -
|                                  |  | RMB000 |          
|At 1 January 2015                 |  |         |           |  
|Cost                              |  |         | 965,148   |  
|Accumulated amortisation          |  |         | (297,143  | )
|                                  |  |         |           |  
|Net book amount                   |  |         | 668,005   |  
|                                  |  |         |           |  
|Year ended 31 December 2015       |  |         |           |  
|Opening net book amount           |  |         | 668,005   |  
|Additions                         |  |         | 308,934   |  
|Amortisation charges              |  |         | (28,413   | )
|                                  |  |         |           |  
|Closing net book amount           |  |         | 948,526   |  
|                                  |  |         |           |  
|At 31 December 2015               |  |         |           |  
|Cost                              |  |         | 1,274,082 |  
|Accumulated amortisation          |  |         | (325,556  | )
|                                  |  |         |           |  
|Net book amount                   |  |         | 948,526   |  
|                                  |  |         |           |  
|Year ended 31 December 2016       |  |         |           |  
|Opening net book amount           |  |         | 948,526   |  
|Transfer from fix assets (Note 6) |  |         | 715,003   |  
|Amortisation charges              |  |         | (38,670   | )
|                                  |  |         |           |  
|Closing net book amount           |  |         | 1,624,859 |  
|                                  |  |         |           |  
|At 31 December 2016               |  |         |           |  
|Cost                              |  |         | 1,989,085 |  
|Accumulated amortisation          |  |         | (364,226  | )
|                                  |  |         |           |  
|Net book amount                   |  |         | 1,624,859 |  
|                                  |  |         |           |  

As at 31 December 2016, land use right certificates of certain parcels of land of the Group with an
aggregate carrying value of approximately RMB936,304,000 (2015: RMB236,522,000), respectively 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 or the Company to apply for and obtain the land use right certificates and it should not lead to any significant adverse impact on the operations of the Group or the Company.

The remaining lease period of leasehold land as at 31 December 2016 was as follows:



|                                |  |         |         |  |         |  |           | 
|------------------------------- |  | ------- | ------- |  | ------- |  | --------- | 
|                                |  | 2015    |         |  | 2016    | 
|                                |  | RMB000 |         |  | RMB000 | 
|Lease of between 10 to 50 years |  |         | 948,526 |  |         |  | 1,624,859 | 
|                                |  |         |         |  |         |  |           | 



F-40



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

(All amounts expressed in Renminbi
unless otherwise stated)



|9 | GOODWILL
|- | --------



|                                     |  |         |         | 
|------------------------------------ |  | ------- | ------- | 
|                                     |  | RMB000 |        
|Year ended 31 December 2015 and 2016 |  |         |         | 
|Opening net book amount              |  |         | 281,255 | 
|Additions                            |  |         |        | 
|Impairment                           |  |         |        | 
|                                     |  |         |         | 
|Closing net book amount              |  |         | 281,255 | 
|                                     |  |         |         | 
|At 31 December 2015 and 2016         |  |         |         | 
|Cost                                 |  |         | 281,255 | 
|Accumulated impairment               |  |         |        | 
|                                     |  |         |         | 
|Net book amount                      |  |         | 281,255 | 
|                                     |  |         |         | 

As at 31 December 2015 and 2016, the outstanding balance of goodwill 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.

On 1 January 2009, the Group integrated the Yangcheng Railway Business with the Groups railway business in order to improve the
operation efficiency. As a result, the management considers that the Yangcheng Railway Business and the Groups other railway business (collectively the Combined Railway Business) represents the lowest level of CGUs within the Group
at which goodwill is monitored for internal management purposes. As a result, the goodwill balance has been allocated to the CGU comprising the Combined Railway Business.

The recoverable amount of the CGU is determined based on higher of value-in-use and fair value less costs to sell. 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.

The key assumptions used for
value-in-use calculations are as follows:



|                  |  |      |       |   |      |  |       |  
|----------------- |  | ---- | ----- | - | ---- |  | ----- | -
|Railroad business |  | 2015 |       |   | 2016 | 
|Gross margin      |  |      | 18.02 | % |      |  | 18.92 | %
|Growth rate       |  |      | 2.00  | % |      |  | 2.00  | %
|Discount rate     |  |      | 12.44 | % |      |  | 12.44 | %
|                  |  |      |       |   |      |  |       |  

Management estimated the gross margin and growth rate based on past performance and its expectations for
the market development. The discount rate used is pre-tax and reflect specific risks relating to the railroad business segment.



F-41



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|9 | GOODWILL (CONTINUED)
|- | --------------------



If the budgeted growth rate used in the value-in-use calculation for the CGU in railroad business had been 10% lower than managements estimates as at 31 December 2016, the Group would have no impairment recognised against goodwill.

If the estimated pre-tax discount rate applied to the discounted cash flows for the
CGU in railroad business had been 1% higher than managements estimates as at 31 December 2016, the Group would have no impairment recognised against goodwill.



F-42



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

(All amounts expressed in Renminbi
unless otherwise stated)



|10 | SUBSIDIARIES
|-- | ------------

The
following is a list of the principal subsidiaries at 31 December 2016:



|                                                                           |  |                                                  |  |                                                                         |  |                                                      |       |   |                                                    |  |       |                                                                   |  |  |       |  
|-------------------------------------------------------------------------- |  | ------------------------------------------------ |  | ----------------------------------------------------------------------- |  | ---------------------------------------------------- | ----- | - | -------------------------------------------------- |  | ----- | ----------------------------------------------------------------- |  |  | ----- | -
|Name of the entity                                                         |  | Place of incorporation andnature of
legal entity |  | Principal activities and place of operation                             |  | Proportion ofequity 
interestsheld by theCompany (%) |       |   | Proportion of equityinterests held by thegroup (%) |  |       | Proportion of equityinterests
held bynon-controllinginterests (%) | 
|Dongguan Changsheng Enterprise Company Limited                             |  | China, limited liability company                 |  | Warehousing in PRC                                                      |  |                                                      | 51    | % |                                                    |  | 51    | %                                                                 |  |  | 49    | %
|Shenzhen Fu Yuan Enterprise Development Company Limited                    |  | China, limited liability company                 |  | Hotel management in PRC                                                 |  |                                                      | 100   | % |                                                    |  | 100   | %                                                                 |  |  |      |  
|Shenzhen Pinghu Qun Yi Railway Store Loading and Unloading Company Limited |  | China, limited liability company                 |  | Cargo loading and unloading, warehousing, freight transportation in PRC |  |                                                      | 100   | % |                                                    |  | 100   | %                                                                 |  |  |      |  
|Shenzhen Nantie Construction Supervision Company Limited                   |  | China, limited liability company                 |  | Supervision of construction projects in PRC                             |  |                                                      | 67.46 | % |                                                    |  | 76.66 | %                                                                 |  |  | 23.34 | %
|Shenzhen Railway Property Management Company Limited                       |  | China, limited liability company                 |  | Property management in PRC                                              |  |                                                      |      |   |                                                    |  | 100   | %                                                                 |  |  |      |  
|Shenzhen Shenhuasheng Storage and Transportation Company Limited           |  | China, limited liability company                 |  | Warehousing, freight transport and packing agency services              |  |                                                      | 41.50 | % |                                                    |  | 100   | %                                                                 |  |  |      |  
|Shenzhen Guangshen Railway Economic and Trade Enterprise Company Limited   |  | China, limited liability company                 |  | Catering management in PRC                                              |  |                                                      |      |   |                                                    |  | 100   | %                                                                 |  |  |      |  
|Shenzhen Railway Station Passenger Services Company Limited                |  | China, limited liability company                 |  | Catering services and sales of merchandise in PRC                       |  |                                                      | 100   | % |                                                    |  | 100   | %                                                                 |  |  |      |  



F-43



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

(All amounts expressed in Renminbi
unless otherwise stated)



|10 | SUBSIDIARIES (CONTINUED)
|-- | ------------------------



The following is a list of the principal subsidiaries at 31 December 2016
(continued):





|                                                                             |  |                                                |  |                                                                                            |  |                                                      |       |   |                                                    |  |       |                                                                   |  |  |       |  
|---------------------------------------------------------------------------- |  | ---------------------------------------------- |  | ------------------------------------------------------------------------------------------ |  | ---------------------------------------------------- | ----- | - | -------------------------------------------------- |  | ----- | ----------------------------------------------------------------- |  |  | ----- | -
|Name of the entity                                                           |  | Place of incorporation andkind of legal
entity |  | Principal activities and place of
operation                                                |  | Proportion of equityinterests
held by theCompany (%) |       |   | Proportion of equityinterests
held by thegroup (%) |  |       | Proportion of equityinterests held bynon-controllinginterests (%) | 
|Guangshen Railway Station Dongqun Trade and Commerce Service Company Limited |  | China, limited liability company               |  | Sales of merchandises in PRC                                                               |  |                                                      | 100   | % |                                                    |  | 100   | %                                                                 |  |  |      |  
|Guangzhou Railway Huangpu Service Company Limited                            |  | China, limited liability company               |  | Cargo loading and unloading, warehousing, freight transportation in PRC                    |  |                                                      | 100   | % |                                                    |  | 100   | %                                                                 |  |  |      |  
|Zengcheng Lihua Stock Company Limited (Zengcheng Lihua) (i)                |  | China, limited liability company               |  | Real estate construction, provision of warehousing, cargo uploading and unloading services |  |                                                      | 44.72 | % |                                                    |  | 44.72 | %                                                                 |  |  | 55.28 | %



| | (i) | According to the Articles of Association of Zengcheng Lihua, the remaining shareholders are all natural persons and none of individual holds more than 0.5% equity
interest in Zengcheng Lihua. All directors of Zengcheng Lihua were appointed by the Company. After considering all shareholders of Zengcheng Lihua other than the Company are individuals with individual interest holding of less than 0.5% and such
individuals do not act as concert, and also all directors of Zengcheng Lihua were appointed by the Company, the directors of the Company consider that the Company has the de facto control power over the board on the substantial financial and
operating decisions of Zengcheng Lihua.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As at 31 December 2016, the
non-wholly owned subsidiaries were not significant to the Group. Therefore, financial information of the non-wholly owned subsidiaries had not been disclosed.



F-44



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|11 | INVESTMENTS IN ASSOCIATES
|-- | -------------------------



|                                        |  |         |         |  |         |  |         | 
|--------------------------------------- |  | ------- | ------- |  | ------- |  | ------- | 
|                                        |  | 2015    |         |  | 2016    | 
|                                        |  | RMB000 |         |  | RMB000 | 
|Share of net assets                     |  |         | 168,711 |  |         |  | 167,604 | 
|Less: provision for impairment in value |  |         |        |  |         |  |        | 
|                                        |  |         |         |  |         |  |         | 
|                                        |  |         | 168,711 |  |         |  | 167,604 | 
|                                        |  |         |         |  |         |  |         | 

The movement of investments in associates of the Group during the year is as follows:



|                                       |  |         |         |  |         |  |         |  
|-------------------------------------- |  | ------- | ------- |  | ------- |  | ------- | -
|                                       |  | 2015    |         |  | 2016    | 
|                                       |  | RMB000 |         |  | RMB000 | 
|Beginning of the year                  |  |         | 147,102 |  |         |  | 168,711 |  
|Share of results after tax             |  |         | 2,499   |  |         |  | 7,223   |  
|Dividend                               |  |         |        |  |         |  | (8,330  | )
|Capital injection made in an associate |  |         | 19,110  |  |         |  |        |  
|                                       |  |         |         |  |         |  |         |  
|End of the year                        |  |         | 168,711 |  |         |  | 167,604 |  
|                                       |  |         |         |  |         |  |         |  

As at 31 December 2016, the Group had direct interests in the following companies which are
incorporated/established and are operating in the PRC:



|                                                                |  |                                    |  |                                                        |  |                 |                |  |                      |                                              
|--------------------------------------------------------------- |  | ---------------------------------- |  | ------------------------------------------------------ |  | --------------- | -------------- |  | -------------------- | ---------------------------------------------
|Name of the entity                                              |  | Date
ofincorporation/establishment |  | Percentage ofequity interestattributable to theCompany |  | Paid-in capital |                |  | Principal activities
|Guangzhou Tiecheng Enterprise Company Limited (Tiecheng)      |  | 2 May 1995                         |  | 49%                                                    |  |                 | RMB343,050,000 |  |                      | Properties leasing and trading of merchandise
|Shenzhen Guangzhou Railway Civil Engineering Company (Shentu) |  | 1 March 1984                       |  | 49%                                                    |  |                 | RMB64,000,000  |  |                      | Construction of railroad properties          

All the above associates are limited liability companies and they are unlisted companies. There are no
significant contingent liabilities relating to the Groups interest in the associates and there are no significant restrictions on the transfer of assets or earnings from the associates to the Group.



F-45



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|11 | INVESTMENTS IN ASSOCIATES (CONTINUED)
|-- | -------------------------------------



Set out below are the summarised financial information for Tiecheng and Shentu which are
accounted for using the equity method in the consolidated financial statements.

Summarised balance sheets



|                                          |  |             |         |  |             |  |         |             |  |  |             |  |  |  |         | 
|----------------------------------------- |  | ----------- | ------- |  | ----------- |  | ------- | ----------- |  |  | ----------- |  |  |  | ------- | 
|                                          |  | Tiecheng    |         |  | Shentu      | 
|                                          |  | 2015RMB000 |         |  | 2016RMB000 |  |         | 2015RMB000 |  |  | 2016RMB000 | 
|Current assets                            |  |             | 71,947  |  |             |  | 87,733  |             |  |  | 871,300     |  |  |  | 921,761 | 
|Non-current assets                        |  |             | 346,761 |  |             |  | 339,409 |             |  |  | 7,734       |  |  |  | 7,614   | 
|                                          |  |             |         |  |             |  |         |             |  |  |             |  |  |  |         | 
|Total assets                              |  |             | 418,708 |  |             |  | 427,142 |             |  |  | 879,034     |  |  |  | 929,375 | 
|                                          |  |             |         |  |             |  |         |             |  |  |             |  |  |  |         | 
|Current liabilities                       |  |             | 211,121 |  |             |  | 210,553 |             |  |  | 742,313     |  |  |  | 803,713 | 
|Non-current liabilities                   |  |             |        |  |             |  | 202     |             |  |  |            |  |  |  |        | 
|                                          |  |             |         |  |             |  |         |             |  |  |             |  |  |  |         | 
|Total liabilities                         |  |             | 211,121 |  |             |  | 210,755 |             |  |  | 742,313     |  |  |  | 803,713 | 
|                                          |  |             |         |  |             |  |         |             |  |  |             |  |  |  |         | 
|Equity                                    |  |             | 207,587 |  |             |  | 216,387 |             |  |  | 136,721     |  |  |  | 125,662 | 
|                                          |  |             |         |  |             |  |         |             |  |  |             |  |  |  |         | 
|Share of net assets                       |  |             | 101,718 |  |             |  | 106,030 |             |  |  | 66,993      |  |  |  | 61,574  | 
|                                          |  |             |         |  |             |  |         |             |  |  |             |  |  |  |         | 
|Carrying amount of interest in associates |  |             | 101,718 |  |             |  | 106,030 |             |  |  | 66,993      |  |  |  | 61,574  | 
|                                          |  |             |         |  |             |  |         |             |  |  |             |  |  |  |         | 

Summarised comprehensive income statements



|                                        |  |             |        |  |             |  |        |             |  |  |             |  |  |             |         |  |             |  |         |  |  |  |         | 
|--------------------------------------- |  | ----------- | ------ |  | ----------- |  | ------ | ----------- |  |  | ----------- |  |  | ----------- | ------- |  | ----------- |  | ------- |  |  |  | ------- | 
|                                        |  | Tiecheng    |        |  | Shentu      | 
|                                        |  | 2014RMB000 |        |  | 2015RMB000 |  |        | 2016RMB000 |  |  | 2014RMB000 |  |  | 2015RMB000 |         |  | 2016RMB000 | 
|                                        |  |             |        |  |             |  |        |             |  |  |             |  |  |             |         |  |             |  |         |  |  |  |         | 
|Revenue                                 |  |             | 33,190 |  |             |  | 32,955 |             |  |  | 41,217      |  |  |             | 535,193 |  |             |  | 467,911 |  |  |  | 493,277 | 
|Net profit                              |  |             | 5,095  |  |             |  | 4,516  |             |  |  | 8,800       |  |  |             | 5,206   |  |             |  | 583     |  |  |  | 5,941   | 
|Other comprehensive income              |  |             |       |  |             |  |       |             |  |  |            |  |  |             |        |  |             |  |        |  |  |  |        | 
|Total comprehensive income for the year |  |             | 5,095  |  |             |  | 4,516  |             |  |  | 8,800       |  |  |             | 5,206   |  |             |  | 583     |  |  |  | 5,941   | 
|                                        |  |             |        |  |             |  |        |             |  |  |             |  |  |             |         |  |             |  |         |  |  |  |         | 

Reconciliation of the summarised financial information presented to the carrying amount of its interests
in associates as follows:



|                                 |  |             |         |   |             |  |         |             |  |  |             |   |  |             |         |   |             |  |         |   |  |  |         |  
|-------------------------------- |  | ----------- | ------- | - | ----------- |  | ------- | ----------- |  |  | ----------- | - |  | ----------- | ------- | - | ----------- |  | ------- | - |  |  | ------- | -
|                                 |  | Tiecheng    |         |   | Shentu      |  |         | Total       | 
|Summarised financial information |  | 2015RMB000 |         |   | 2016RMB000 |  |         | 2015RMB000 |  |  | 2016RMB000 |   |  | 2015RMB000 |         |   | 2016RMB000 | 
|Opening net assets               |  |             | 203,071 |   |             |  | 207,587 |             |  |  | 97,138      |   |  |             | 136,721 |   |             |  | 300,209 |   |  |  | 344,308 |  
|Profit for the year              |  |             | 4,516   |   |             |  | 8,800   |             |  |  | 583         |   |  |             | 5,941   |   |             |  | 5,099   |   |  |  | 14,741  |  
|Dividend                         |  |             |        |   |             |  |        |             |  |  |             |   |  |             | (17,000 | ) |             |  |        |   |  |  | (17,000 | )
|Increase in paid-in capital      |  |             |        |   |             |  |        |             |  |  | 39,000      |   |  |             |        |   |             |  | 39,000  |   |  |  |        |  
|                                 |  |             |         |   |             |  |         |             |  |  |             |   |  |             |         |   |             |  |         |   |  |  |         |  
|Closing net assets               |  |             | 207,587 |   |             |  | 216,387 |             |  |  | 136,721     |   |  |             | 125,662 |   |             |  | 344,308 |   |  |  | 342,049 |  
|                                 |  |             |         |   |             |  |         |             |  |  |             |   |  |             |         |   |             |  |         |   |  |  |         |  
|Percentage of ownership interest |  |             | 49      | % |             |  | 49      | %           |  |  | 49          | % |  |             | 49      | % |             |  | 49      | % |  |  | 49      | %
|                                 |  |             |         |   |             |  |         |             |  |  |             |   |  |             |         |   |             |  |         |   |  |  |         |  
|Carrying value                   |  |             | 101,718 |   |             |  | 106,030 |             |  |  | 66,993      |   |  |             | 61,574  |   |             |  | 168,711 |   |  |  | 167,604 |  
|                                 |  |             |         |   |             |  |         |             |  |  |             |   |  |             |         |   |             |  |         |   |  |  |         |  



F-46



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

(All amounts expressed in Renminbi
unless otherwise stated)



|12 | DEFERRED TAX ASSETS/(LIABILITIES)
|-- | ---------------------------------



|                                             |  |             |         |   |             |  |         |  
|-------------------------------------------- |  | ----------- | ------- | - | ----------- |  | ------- | -
|                                             |  | 2015RMB000 |         |   | 2016RMB000 | 
|Deferred tax assets                          |  |             | 113,418 |   |             |  | 98,862  |  
|Less: Offsetting of deferred tax liabilities |  |             | (20,169 | ) |             |  | (18,933 | )
|                                             |  |             |         |   |             |  |         |  
|Deferred tax assets (net)                    |  |             | 93,249  |   |             |  | (79,929 | )
|                                             |  |             |         |   |             |  |         |  
|Deferred tax liabilities                     |  |             | (91,545 | ) |             |  | (87,816 | )
|Less: Offsetting of deferred tax assets      |  |             | 20,169  |   |             |  | 18,933  |  
|                                             |  |             |         |   |             |  |         |  
|Deferred tax liabilities (net)               |  |             | (71,376 | ) |             |  | (68,883 | )
|                                             |  |             |         |   |             |  |         |  
|                                             |  |             | 21,873  |   |             |  | 11,046  |  
|                                             |  |             |         |   |             |  |         |  

The analysis of deferred tax assets and deferred tax liabilities is as follows:



|                                                                    |  |                              |         |   |                              |  |         |  
|------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---------------------------- |  | ------- | -
|                                                                    |  | As at31 December
2015RMB000 |         |   | As at31 December
2016RMB000 | 
|Deferred tax assets:                                                |  |                              |         |   |                              |  |         |  
|-Deferred tax assets to be recovered after more than 12 months      |  |                              | 112,511 |   |                              |  | 97,706  |  
|-Deferred tax assets to be recovered within 12 months               |  |                              | 907     |   |                              |  | 1,156   |  
|                                                                    |  |                              |         |   |                              |  |         |  
|                                                                    |  |                              | 113,418 |   |                              |  | 98,862  |  
|                                                                    |  |                              |         |   |                              |  |         |  
|Deferred tax liabilities:                                           |  |                              |         |   |                              |  |         |  
|-Deferred tax liabilities to be recovered after more than 12 months |  |                              | (88,325 | ) |                              |  | (83,937 | )
|-Deferred tax liabilities to be recovered within 12 months          |  |                              | (3,220  | ) |                              |  | (3,879  | )
|                                                                    |  |                              |         |   |                              |  |         |  
|                                                                    |  |                              | (91,545 | ) |                              |  | (87,816 | )
|                                                                    |  |                              |         |   |                              |  |         |  



F-47



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

(All amounts expressed in Renminbi
unless otherwise stated)



|12 | DEFERRED TAX ASSETS/(LIABILITIES) (CONTINUED)
|-- | ---------------------------------------------

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:



At 1 January2015RMB000


(Credited)/ Charged to the
comprehensive
income
statementRMB000


At 31 December 2015RMB000


(Credited)/ Charged to the
comprehensive
income
statementRMB000


At 31 December 2016RMB000Deferred tax assets:Impairment provision for receivables


19,573



(11,745
)


7,828



(825
)


7,003Impairment provision for fixed assets and
construction-in-progress


2,130



609



2,739



1,416



4,155Impairment provision for interests in associates


7,422



(7,422
)










Impairment provision for materials and supplies


4,511



7,326



11,837



(5,843
)


5,994Difference in accounting base and tax base of the government grants


20,987



3,965



24,952



768



25,720Difference in accounting base and tax base of employee benefits obligations


33,884



1,323



35,207



4,448



39,655Loss on disposal of fixed assets


349



30,456



30,805



(14,520
)


16,285Other


50







50







5088,906



24,512



113,418



(14,556
)


98,862




At 1 January2015RMB000


BusinesscombinationRMB000


Charged/ (Credited) to the
comprehensive
income
statementRMB000


At 31 December 2015RMB000


Charged/ (Credited) to the
comprehensive
income
statementRMB000


At 31 December 2016RMB000Deferred tax liabilities:Differences in accounting base and tax base in recognition of fixed assets


10,865







(1,258
)


9,607



(1,340
)


8,267Differences in accounting base and tax base in recognition of intangible assets






73,661



(2,285
)


71,376



(2,493
)


68,883Others


10,457







105



10,562



104



10,66621,322



73,661



(3,438
)


91,545



(3,729
)


87,816




F-48



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|12 | DEFERRED TAX ASSETS/(LIABILITIES) (CONTINUED)
|-- | ---------------------------------------------



Deferred income tax assets are recognised for tax loss carry-forwards to the extent that
the realisation of the related tax benefit through future taxable profits is probable.

Deferred income tax assets are
recognised for tax loss carry-forwards and other temporary difference to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Group did not recognise deferred income tax assets in respect of tax
losses and other temporary difference amounting to RMB89,630,000 (2015: RMB75,926,000) that can be carried forward against future taxable income as follows:



|                                                |  |                              |        |  |                              |  |        | 
|----------------------------------------------- |  | ---------------------------- | ------ |  | ---------------------------- |  | ------ | 
|                                                |  | As at31 December
2015RMB000 |        |  | As at31 December
2016RMB000 | 
|Tax losses that can be carried forward (Note a) |  |                              | 63,452 |  |                              |  | 77,328 | 
|Deductible temporary differences                |  |                              | 12,474 |  |                              |  | 12,302 | 
|                                                |  |                              |        |  |                              |  |        | 
|                                                |  |                              | 75,926 |  |                              |  | 89,630 | 
|                                                |  |                              |        |  |                              |  |        | 

Note a:

The tax loss carry-forwards in which no deferred income tax assets were recognised amounting to RMB77,328,000 (2015: RMB63,452,000) will expire in the following years:



|     |  |                       |        |  |                       |  |        | 
|---- |  | --------------------- | ------ |  | --------------------- |  | ------ | 
|     |  | As at31 December
2015 |        |  | As at31 December
2016 | 
|     |  | RMB000               |        |  | RMB000               | 
|2016 |  |                       | 8,746  |  |                       |  |       | 
|2017 |  |                       | 15,405 |  |                       |  | 15,405 | 
|2018 |  |                       | 14,307 |  |                       |  | 14,307 | 
|2019 |  |                       | 6,516  |  |                       |  | 6,516  | 
|2020 |  |                       | 18,478 |  |                       |  | 18,478 | 
|2021 |  |                       |       |  |                       |  | 22,622 | 
|     |  |                       |        |  |                       |  |        | 
|     |  |                       | 63,452 |  |                       |  | 77,328 | 
|     |  |                       |        |  |                       |  |        | 



F-49



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

(All amounts expressed in Renminbi
unless otherwise stated)



|13 | LONG-TERM PREPAID EXPENSES
|-- | --------------------------

The movements of long-term prepaid expenses are set forth as follows:



|                         |  |             |         |   |             |  |         |  
|------------------------ |  | ----------- | ------- | - | ----------- |  | ------- | -
|                         |  | 2015RMB000 |         |   | 2016RMB000 | 
|At 1 January             |  |             |         |   |             |  |         |  
|Cost                     |  |             | 57,110  |   |             |  | 63,770  |  
|Accumulated amortisation |  |             | (35,106 | ) |             |  | (49,285 | )
|                         |  |             |         |   |             |  |         |  
|Net book amount          |  |             | 22,004  |   |             |  | 14,485  |  
|                         |  |             |         |   |             |  |         |  
|Year ended 31 December   |  |             |         |   |             |  |         |  
|Opening net book amount  |  |             | 22,004  |   |             |  | 14,485  |  
|Additions                |  |             | 6,660   |   |             |  | 307     |  
|Amortisation             |  |             | (14,179 | ) |             |  | (6,968  | )
|                         |  |             |         |   |             |  |         |  
|Closing net book amount  |  |             | 14,485  |   |             |  | 7,824   |  
|                         |  |             |         |   |             |  |         |  
|At 31 December           |  |             |         |   |             |  |         |  
|Cost                     |  |             | 63,770  |   |             |  | 64,077  |  
|Accumulated amortisation |  |             | (49,285 | ) |             |  | (56,253 | )
|                         |  |             |         |   |             |  |         |  
|Net book amount          |  |             | 14,485  |   |             |  | 7,824   |  
|                         |  |             |         |   |             |  |         |  



|14 | FINANCIAL INSTRUMENTS BY CATEGORY
|-- | ---------------------------------



|                                                                    |  |                              |           |  |                            |  |        |              |  |  |           | 
|------------------------------------------------------------------- |  | ---------------------------- | --------- |  | -------------------------- |  | ------ | ------------ |  |  | --------- | 
|                                                                    |  | Loans and receivablesRMB000 |           |  | Available- for-saleRMB000 |  |        | TotalRMB000 | 
|Assets as per consolidated balance sheet                            |  |                              |           |  |                            |  |        |              |  |  |           | 
|As at 31 December 2015:                                             |  |                              |           |  |                            |  |        |              |  |  |           | 
|Available-for-sale investments (Note
15)                            |  |                              |          |  |                            |  | 53,826 |              |  |  | 53,826    | 
|Long-term receivable (Note 16)                                      |  |                              | 30,804    |  |                            |  |       |              |  |  | 30,804    | 
|Trade and other receivables excluding prepayments (Notes 18 and 19) |  |                              | 3,022,923 |  |                            |  |       |              |  |  | 3,022,923 | 
|Short-term deposits (Note 20)                                       |  |                              | 106,000   |  |                            |  |       |              |  |  | 106,000   | 
|Cash and cash equivalents (Note 20)                                 |  |                              | 2,220,803 |  |                            |  |       |              |  |  | 2,220,803 | 
|                                                                    |  |                              |           |  |                            |  |        |              |  |  |           | 
|Total                                                               |  |                              | 5,380,530 |  |                            |  | 53,826 |              |  |  | 5,434,356 | 
|                                                                    |  |                              |           |  |                            |  |        |              |  |  |           | 
|As at 31 December 2016:                                             |  |                              |           |  |                            |  |        |              |  |  |           | 
|Available-for-sale investments (Note
15)                            |  |                              |          |  |                            |  | 53,826 |              |  |  | 53,826    | 
|Long-term receivable (Note 16)                                      |  |                              | 31,406    |  |                            |  |       |              |  |  | 31,406    | 
|Trade and other receivables excluding prepayments (Notes 18 and 19) |  |                              | 3,665,646 |  |                            |  |       |              |  |  | 3,665,646 | 
|Short-term deposits (Note 20)                                       |  |                              | 108,000   |  |                            |  |       |              |  |  | 108,000   | 
|Cash and cash equivalents (Note 20)                                 |  |                              | 1,359,656 |  |                            |  |       |              |  |  | 1,359,656 | 
|                                                                    |  |                              |           |  |                            |  |        |              |  |  |           | 
|Total                                                               |  |                              | 5,164,708 |  |                            |  | 53,826 |              |  |  | 5,218,534 | 
|                                                                    |  |                              |           |  |                            |  |        |              |  |  |           | 



F-50



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|14 | FINANCIAL INSTRUMENTS BY CATEGORY (CONTINUED)
|-- | ---------------------------------------------



|                                                                                                           |  |                                    |           | 
|---------------------------------------------------------------------------------------------------------- |  | ---------------------------------- | --------- | 
|                                                                                                           |  | Other financial
liabilitiesRMB000 |          
|Liabilities as per consolidated balance sheet                                                              |  |                                    |           | 
|As at 31 December 2015:                                                                                    |  |                                    |           | 
|Trade and other payables excluding tax payables, employee benefits payables and advances (Notes 25 and 26) |  |                                    | 2,136,570 | 
|Dividends payable                                                                                          |  |                                    | 14,318    | 
|Payables for fixed assets and
construction-in-progress                                                     |  |                                    | 1,425,998 | 
|                                                                                                           |  |                                    |           | 
|Total                                                                                                      |  |                                    | 3,576,886 | 
|                                                                                                           |  |                                    |           | 
|As at 31 December 2016:                                                                                    |  |                                    |           | 
|Trade and other payables excluding tax payables, employee benefits payables and advances (Notes 25 and 26) |  |                                    | 2,201,483 | 
|Dividends payable                                                                                          |  |                                    | 15,542    | 
|Payables for fixed assets and
construction-in-progress                                                     |  |                                    | 1,765,185 | 
|                                                                                                           |  |                                    |           | 
|Total                                                                                                      |  |                                    | 3,982,210 | 
|                                                                                                           |  |                                    |           | 



|15 | AVAILABLE-FOR-SALE INVESTMENTS
|-- | ------------------------------



|                                  |  |             |        |  |             |  |        | 
|--------------------------------- |  | ----------- | ------ |  | ----------- |  | ------ | 
|                                  |  | 2015RMB000 |        |  | 2016RMB000 | 
|Beginning and the end of the year |  |             | 53,826 |  |             |  | 53,826 | 
|                                  |  |             |        |  |             |  |        | 

The available-for-sale
investments mainly represent equity interests held by the Group in certain unlisted companies with percentage ownership less than 2% individually. Due to the fact that there is no quoted market price in an active market available for the assessment
of the fair values of these investments, the directors of the Company are of the opinion that their fair values could not be reliably measured by any reasonable valuation methods. As a result, the investments had been carried at cost, subject to
review for impairment loss. As at 31 December, 2016, no impairment provision was considered necessary by the directors.



F-51



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

(All amounts expressed in Renminbi
unless otherwise stated)



|16 | LONG-TERM RECEIVABLE
|-- | --------------------

The long-term receivable balance represents freight service fees receivable from a third party customer which was acquired from Yangcheng
Railway Business. 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 at 31 December 2016.



|17 | MATERIALS AND SUPPLIES
|-- | ----------------------



|                                   |  |                              |         |  |                              |  |         | 
|---------------------------------- |  | ---------------------------- | ------- |  | ---------------------------- |  | ------- | 
|                                   |  | As at31 December
2015RMB000 |         |  | As at31 December
2016RMB000 | 
|Raw materials                      |  |                              | 156,441 |  |                              |  | 184,520 | 
|Reusable rail-line track materials |  |                              | 93,134  |  |                              |  | 79,311  | 
|Accessories                        |  |                              | 55,264  |  |                              |  | 67,236  | 
|Retailing consumables              |  |                              | 2,217   |  |                              |  | 1,540   | 
|                                   |  |                              |         |  |                              |  |         | 
|                                   |  |                              | 307,056 |  |                              |  | 332,607 | 
|                                   |  |                              |         |  |                              |  |         | 

The costs of materials and supplies consumed by the Group during the year were recognised as
operating expenses in the amount of RMB1,697,166,000 (2015: RMB1,565,648,000).

As at 31 December 2016, the
balance of the provision for writing down the materials and supplies to their net realizable values was approximately RMB23,976,000 (2015: RMB47,348,000). During the year, no additional provision had been made and RMB18,163,000 was written off due
to the reusable rail-line track materials disposal(2015: RMB34,792,000).



F-52



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

(All amounts expressed in Renminbi
unless otherwise stated)



|18 | TRADE RECEIVABLES
|-- | -----------------



|                                              |  |                              |           |   |                              |  |           |  
|--------------------------------------------- |  | ---------------------------- | --------- | - | ---------------------------- |  | --------- | -
|                                              |  | As at31 December 2015RMB000 |           |   | As at31 December 2016RMB000 | 
|Trade receivables                             |  |                              | 2,894,461 |   |                              |  | 3,369,331 |  
|Including: receivables from related parties   |  |                              | 862,199   |   |                              |  | 730,061   |  
|Less: Provision for impairment of receivables |  |                              | (8,395    | ) |                              |  | (4,965    | )
|                                              |  |                              |           |   |                              |  |           |  
|                                              |  |                              | 2,886,066 |   |                              |  | 3,364,366 |  
|                                              |  |                              |           |   |                              |  |           |  

As at 31 December 2016, the Groups trade receivables were all denominated in RMB (2015: RMB).
The majority of the trade receivable customers were related parties, other state-owned railroad companies or companies in transportation industry.

The passenger railroad services are usually transacted on a 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. The aging analysis of the outstanding trade
receivables is as follows:



|                                |  |                              |           |  |                              |  |           | 
|------------------------------- |  | ---------------------------- | --------- |  | ---------------------------- |  | --------- | 
|                                |  | As at31 December 2015RMB000 |           |  | As at31 December 2016RMB000 | 
|Within 1 year (Note 3.1(b))     |  |                              | 2,190,263 |  |                              |  | 2,517,281 | 
|Over 1 year but within 2 years  |  |                              | 547,527   |  |                              |  | 588,640   | 
|Over 2 years but within 3 years |  |                              | 133,764   |  |                              |  | 223,675   | 
|Over 3 years but within 5 years |  |                              | 22,907    |  |                              |  | 39,735    | 
|                                |  |                              |           |  |                              |  |           | 
|                                |  |                              | 2,894,461 |  |                              |  | 3,369,331 | 
|                                |  |                              |           |  |                              |  |           | 

As at 31 December 2016, the Groups trade receivables of approximately RMB847,085,000(2015:
RMB695,803,000), were past due but not impaired. These relate to a number of independent customers that are State-owned companies engaged in the railroad and transportation business and there had been continuous businesses carried out with the Group
and there was continuous repayment made and no history of default. The aging analysis of these trade receivables is as follows:



|                               |  |                              |         |  |                              |  |         | 
|------------------------------ |  | ---------------------------- | ------- |  | ---------------------------- |  | ------- | 
|                               |  | As at31 December 2015RMB000 |         |  | As at31 December 2016RMB000 | 
|Over 1 year but within 2 years |  |                              | 547,527 |  |                              |  | 588,640 | 
|Over 2 year but within 3 years |  |                              | 133,764 |  |                              |  | 223,675 | 
|Over 3 years                   |  |                              | 14,512  |  |                              |  | 34,770  | 
|                               |  |                              |         |  |                              |  |         | 
|                               |  |                              | 695,803 |  |                              |  | 847,085 | 
|                               |  |                              |         |  |                              |  |         | 



F-53



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|18 | TRADE RECEIVABLES (CONTINUED)
|-- | -----------------------------



As at 31 December 2016, the Groups trade receivables of approximately
RMB4,965,000(2015: RMB8,395,000), had been impaired and provided for. The impaired receivable balances were mainly related to the provision of freight transportation services. The related customers were in significant financial difficulties. The
aging analysis of these receivables is as follows:



|             |  |             |       |  |             |  |       | 
|------------ |  | ----------- | ----- |  | ----------- |  | ----- | 
|             |  | 2015RMB000 |       |  | 2016RMB000 | 
|Over 5 years |  |             | 8,395 |  |             |  | 4,965 | 
|             |  |             |       |  |             |  |       | 

Movements on the provision for impairment of trade receivables are as follows:



|                              |  |         |       |  |         |  |        |         |  |  |        |  
|----------------------------- |  | ------- | ----- |  | ------- |  | ------ | ------- |  |  | ------ | -
|                              |  | 2014    |       |  | 2015    |  |        | 2016    | 
|                              |  | RMB000 |       |  | RMB000 |  |        | RMB000 | 
|                              |  |         |       |  |         |  |        |         |  |  |        |  
|At 1 January                  |  |         | 6,195 |  |         |  | 7,003  |         |  |  | 8,395  |  
|Provision for impairment loss |  |         | 808   |  |         |  | 3,305  |         |  |  | 6      |  
|Reversal                      |  |         |      |  |         |  | (127   | )       |  |  |       |  
|Written-off                   |  |         |      |  |         |  | (1,786 | )       |  |  | (3,436 | )
|                              |  |         |       |  |         |  |        |         |  |  |        |  
|At 31 December                |  |         | 7,003 |  |         |  | 8,395  |         |  |  | 4,965  |  
|                              |  |         |       |  |         |  |        |         |  |  |        |  

The creation and release of provision for impaired receivables have been included in operating 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.

The maximum exposure to credit risk at the reporting date is the carrying value mentioned above. The Group does not hold any collateral as
security.



F-54



---

##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

(All amounts expressed in Renminbi
unless otherwise stated)



|19 | PREPAYMENTS AND OTHER RECEIVABLES
|-- | ---------------------------------



|                                    |  |                               |         |   |                               |  |         |  
|----------------------------------- |  | ----------------------------- | ------- | - | ----------------------------- |  | ------- | -
|                                    |  | As at 31 December 2015RMB000 |         |   | As at 31 December 2016RMB000 | 
|Due from third parties              |  |                               | 134,825 |   |                               |  | 304,530 |  
|Due from other related parties      |  |                               | 7,788   |   |                               |  | 25,961  |  
|                                    |  |                               |         |   |                               |  |         |  
|                                    |  |                               | 142,613 |   |                               |  | 330,491 |  
|                                    |  |                               |         |   |                               |  |         |  
|                                    |  |                              
|                                    |  | As at31 December 2015RMB000  |         |   | As at31 December 2016RMB000  | 
|Other receivables                   |  |                               | 150,234 |   |                               |  | 314,616 |  
|Less: Provision for impairment loss |  |                               | (13,377 | ) |                               |  | (13,336 | )
|                                    |  |                               |         |   |                               |  |         |  
|Other receivables, net (Note (a))   |  |                               | 136,857 |   |                               |  | 301,280 |  
|Prepayments (Note (b))              |  |                               | 5,756   |   |                               |  | 29,211  |  
|                                    |  |                               |         |   |                               |  |         |  
|                                    |  |                               | 142,613 |   |                               |  | 330,491 |  
|                                    |  |                               |         |   |                               |  |         |  



|(a) | Other receivables mainly represent miscellaneous deposits and receivables arising from the course of provision of non-railway
transportation services by the Group. As of 31 December 2016, the input VAT with related invoices not been received or verified amounted to 156,072,000.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Prepayments mainly represent amounts paid in advance to the suppliers for utilities and other operating expenses of the Group.
|--- | ------------------------------------------------------------------------------------------------------------------------------

Movements on the provision for impairment of other receivables are as follows:



|                                              |  |             |        |   |             |  |         |             |  |  |        |  
|--------------------------------------------- |  | ----------- | ------ | - | ----------- |  | ------- | ----------- |  |  | ------ | -
|                                              |  | 2014RMB000 |        |   | 2015RMB000 |  |         | 2016RMB000 | 
|At 1 January                                  |  |             | 61,718 |   |             |  | 62,060  |             |  |  | 13,377 |  
|Provision for impairment loss                 |  |             | 346    |   |             |  | 62      |             |  |  |       |  
|Reversal of impairment loss provision         |  |             | (4     | ) |             |  | (7,699  | )           |  |  | (1     | )
|Written-off                                   |  |             |       |   |             |  | (28,734 | )           |  |  | (40    | )
|Elimination arising from business combination |  |             |       |   |             |  | (12,312 | )           |  |  |       |  
|                                              |  |             |        |   |             |  |         |             |  |  |        |  
|At 31 December                                |  |             | 62,060 |   |             |  | 13,377  |             |  |  | 13,336 |  
|                                              |  |             |        |   |             |  |         |             |  |  |        |  



F-55



---

##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|19 | PREPAYMENTS AND OTHER RECEIVABLES (CONTINUED)
|-- | ---------------------------------------------



The carrying amounts of the Groups prepayments and other receivables are
denominated in the following currencies:



|    |  |                       |         |  |                       |  |         | 
|--- |  | --------------------- | ------- |  | --------------------- |  | ------- | 
|    |  | As at31 December 2015 |         |  | As at31 December 2016 | 
|    |  | RMB000               |         |  | RMB000               | 
|RMB |  |                       | 142,542 |  |                       |  | 330,425 | 
|HKD |  |                       | 71      |  |                       |  | 66      | 
|    |  |                       |         |  |                       |  |         | 
|    |  |                       | 142,613 |  |                       |  | 330,491 | 
|    |  |                       |         |  |                       |  |         | 

The maximum exposure to credit risk at the reporting date is the carrying value of each class of
receivable mentioned above. The Group does not hold any collateral as security.



|20 | CASH AND CASH EQUIVALENTS AND SHORT-TERM DEPOSITS
|-- | -------------------------------------------------



|                                                             |  |                       |           |  |                       |  |           | 
|------------------------------------------------------------ |  | --------------------- | --------- |  | --------------------- |  | --------- | 
|                                                             |  | As at31 December 2015 |           |  | As at31 December 2016 | 
|                                                             |  | RMB000               |           |  | RMB000               | 
|Cash at bank and on hand                                     |  |                       | 1,268,803 |  |                       |  | 1,007,156 | 
|Term deposits with initial term not more than three months   |  |                       | 952,000   |  |                       |  | 352,500   | 
|                                                             |  |                       |           |  |                       |  |           | 
|Cash and cash equivalents                                    |  |                       | 2,220,803 |  |                       |  | 1,359,656 | 
|Term deposits with initial term of over three months(Note a) |  |                       | 106,000   |  |                       |  | 108,000   | 
|                                                             |  |                       |           |  |                       |  |           | 
|                                                             |  |                       | 2,326,803 |  |                       |  | 1,467,656 | 
|                                                             |  |                       |           |  |                       |  |           | 

Note a: The original effective interest rate of term deposits was 1.65 %p.a. (2015: 2.50%p.a.).

The carrying amounts of the cash and cash equivalents and short-term deposits are denominated in the following currencies:



|    |  |                       |           |  |                       |  |           | 
|--- |  | --------------------- | --------- |  | --------------------- |  | --------- | 
|    |  | As at31 December 2015 |           |  | As at31 December 2016 | 
|    |  | RMB000               |           |  | RMB000               | 
|USD |  |                       |          |  |                       |  | 96        | 
|RMB |  |                       | 2,254,663 |  |                       |  | 1,351,880 | 
|HKD |  |                       | 72,140    |  |                       |  | 115,680   | 
|    |  |                       |           |  |                       |  |           | 
|    |  |                       | 2,326,803 |  |                       |  | 1,467,656 | 
|    |  |                       |           |  |                       |  |           | 



F-56



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

(All amounts expressed in Renminbi
unless otherwise stated)



|21 | SHARE CAPITAL
|-- | -------------

As at
31 December 2016, the total authorised number of ordinary shares is 7,083,537,000 shares (2015: 7,083,537,000 shares) with a par value of RMB1.00 per share (2015: RMB1.00 per share). These shares are divided into A shares and H shares. They
rank pari passu against each other and they were fully paid up (2015: same).



As at 31 December 2014


Movement


As at 31 December 2015


Movement


As at 31 December 2016RMB000


RMB000


RMB000


RMB000


RMB000Authorised, issued and fully paid:Listed shares- H shares


1,431,300







1,431,300







1,431,300- A shares


5,652,237







5,652,237







5,652,237Total


7,083,537







7,083,537







7,083,537




|22 | RESERVES
|-- | --------

According 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.



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|22 | RESERVES (CONTINUED)
|-- | --------------------



For the year ended 31 December 2015 and 2016, the directors proposed the following
appropriations to reserves of the Company:



|                          |  |             |    |   |             |  |         |                |  |  |             |   |  |  |         | 
|------------------------- |  | ----------- | -- | - | ----------- |  | ------- | -------------- |  |  | ----------- | - |  |  | ------- | 
|                          |  | 2015RMB000 |    |   | 2015RMB000 |  |         | 2016Percentage |  |  | 2016RMB000 |  
|Statutory surplus reserve |  |             | 10 | % |             |  | 111,760 |                |  |  | 10          | % |  |  | 117,050 | 
|                          |  |             |    |   |             |  |         |                |  |  |             |   |  |  |         | 

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 or (b) IFRS. 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. The main
difference between the retained earnings of the Company determined under PRC GAAP and those determined under IFRS was relating to accounting policies in respect of investment in associates adopted under PRC GAAP and IFRS.

For the year 2015 and 2016, the movement of Special reserve - Safety Production Fund of the Group are as below:



|                      |  |             |          |   |             |  |          |  
|--------------------- |  | ----------- | -------- | - | ----------- |  | -------- | -
|                      |  | 2015RMB000 |          |   | 2016RMB000 | 
|Beginning of the year |  |             |         |   |             |  |         |  
|Appropriation         |  |             | 192,860  |   |             |  | 204,792  |  
|Utilization           |  |             | (192,860 | ) |             |  | (204,792 | )
|                      |  |             |          |   |             |  |          |  
|End of the year       |  |             |         |   |             |  |         |  
|                      |  |             |          |   |             |  |          |  

The Company is engaged in passenger and freight transportation business. In accordance with the
regulation issued by Ministry of Finance and State Administration of Work Safety, the Company is required to establish a special reserve (Safety Production Fund) calculated based on the passenger and freight transportation revenue of the
previous year using the following percentages:



| | (a) | 1% for regular freight business;
| | --- | --------------------------------



| | (b) | 1.5% for passenger transportation, dangerous goods delivery business and other special business.
| | --- | ------------------------------------------------------------------------------------------------



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|22 | RESERVES (CONTINUED)
|-- | --------------------



The Safety Production Fund is mainly used for the renovation and maintenance of security
equipment and facilities. For the purpose of the consolidated financial statements under IFRS, such reserve is established through an appropriation from retained earnings based on the aforementioned method. When the Safety Production Fund is
actually utilised, the actual expenses incurred are charged to comprehensive income statement. Meanwhile, the corresponding Safety Production Fund reserve is released back to retained earnings.



|23 | DEFERRED INCOME RELATING TO GOVERNMENT GRANTS
|-- | ---------------------------------------------



|                             |  |             |         |   |             |  |         |  
|---------------------------- |  | ----------- | ------- | - | ----------- |  | ------- | -
|                             |  | 2015RMB000 |         |   | 2016RMB000 | 
|Beginning of the year        |  |             | 88,771  |   |             |  | 103,985 |  
|Additions                    |  |             | 22,563  |   |             |  | 12,594  |  
|Credited to income statement |  |             | (7,349  | ) |             |  | (9,769  | )
|Including: amortisation      |  |             | (2,529  | ) |             |  | (3,258  | )
|                             |  |             |         |   |             |  |         |  
|End of the year              |  |             | 103,985 |   |             |  | 106,810 |  
|                             |  |             |         |   |             |  |         |  



|24 | EMPLOYEE BENEFITS OBLIGATIONS
|-- | -----------------------------



|                                                                        |  |                              |         |   |                              |  |         |  
|----------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---------------------------- |  | ------- | -
|                                                                        |  | As at31 December 2015RMB000 |         |   | As at31 December 2016RMB000 | 
|Employee benefits obligations                                           |  |                              | 13,380  |   |                              |  | 34,043  |  
|Less: current portion included in accruals and other payables (Note 26) |  |                              | (13,380 | ) |                              |  | (34,043 | )
|                                                                        |  |                              |         |   |                              |  |         |  
|                                                                        |  |                              |        |   |                              |  |        |  
|                                                                        |  |                              |         |   |                              |  |         |  

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. These obligations mainly include 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.



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|24 | EMPLOYEE BENEFITS OBLIGATIONS (CONTINUED)
|-- | -----------------------------------------



The employee benefits 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 when the liability was recognised at the inception date on high quality investments in the PRC.

The movement in the employee benefits obligation over the year is as follows:



|                                   |  |             |         |   |             |  |        |  
|---------------------------------- |  | ----------- | ------- | - | ----------- |  | ------ | -
|                                   |  | 2015RMB000 |         |   | 2016RMB000 | 
|At 1 January                       |  |             | 44,928  |   |             |  | 13,380 |  
|Additions (Note 36)                |  |             |        |   |             |  | 24,727 |  
|Amortisation of interest (Note 29) |  |             | 226     |   |             |  |       |  
|Payments                           |  |             | (31,774 | ) |             |  | (4,064 | )
|                                   |  |             |         |   |             |  |        |  
|At 31 December                     |  |             | 13,380  |   |             |  | 34,043 |  
|                                   |  |             |         |   |             |  |        |  



F-60



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

(All amounts expressed in Renminbi
unless otherwise stated)



|25 | TRADE PAYABLES
|-- | --------------



|                            |  |                              |           |  |                              |  |           | 
|--------------------------- |  | ---------------------------- | --------- |  | ---------------------------- |  | --------- | 
|                            |  | As at31 December 2015RMB000 |           |  | As at31 December 2016RMB000 | 
|Payables to third parties   |  |                              | 673,641   |  |                              |  | 610,472   | 
|Payables to related parties |  |                              | 431,650   |  |                              |  | 533,051   | 
|                            |  |                              |           |  |                              |  |           | 
|                            |  |                              | 1,105,291 |  |                              |  | 1,143,523 | 
|                            |  |                              |           |  |                              |  |           | 

The aging analysis of trade payables was as follows:



|                                |  |                              |           |  |                              |  |           | 
|------------------------------- |  | ---------------------------- | --------- |  | ---------------------------- |  | --------- | 
|                                |  | As at31 December 2015RMB000 |           |  | As at31 December 2016RMB000 | 
|Within 1 year                   |  |                              | 939,640   |  |                              |  | 860,315   | 
|Over 1 year but within 2 years  |  |                              | 138,648   |  |                              |  | 258,227   | 
|Over 2 years but within 3 years |  |                              | 9,545     |  |                              |  | 7,477     | 
|Over 3 years                    |  |                              | 17,458    |  |                              |  | 17,504    | 
|                                |  |                              |           |  |                              |  |           | 
|                                |  |                              | 1,105,291 |  |                              |  | 1,143,523 | 
|                                |  |                              |           |  |                              |  |           | 



|26 | ACCRUALS AND OTHER PAYABLES
|-- | ---------------------------



|                       |  |                              |           |  |                              |  |           | 
|---------------------- |  | ---------------------------- | --------- |  | ---------------------------- |  | --------- | 
|                       |  | As at31 December 2015RMB000 |           |  | As at31 December 2016RMB000 | 
|Due to third parties   |  |                              | 1,064,752 |  |                              |  | 1,188,416 | 
|Due to related parties |  |                              | 399,634   |  |                              |  | 430,331   | 
|                       |  |                              |           |  |                              |  |           | 
|                       |  |                              | 1,464,386 |  |                              |  | 1,618,747 | 
|                       |  |                              |           |  |                              |  |           | 



|                                                                      |  |                              |           |  |                              |  |           | 
|--------------------------------------------------------------------- |  | ---------------------------- | --------- |  | ---------------------------- |  | --------- | 
|                                                                      |  | As at31 December 2015RMB000 |           |  | As at31 December 2016RMB000 | 
|Payables to GEDC assumed by business combination with Zengcheng Lihua |  |                              | 368,560   |  |                              |  | 368,560   | 
|Advances received from customers                                      |  |                              | 249,825   |  |                              |  | 295,088   | 
|Other deposits received                                               |  |                              | 232,776   |  |                              |  | 242,104   | 
|Deposits received for construction projects                           |  |                              | 188,416   |  |                              |  | 207,877   | 
|Salary and welfare payables                                           |  |                              | 152,727   |  |                              |  | 172,299   | 
|Amount received on behalf of Labour Union                             |  |                              | 58,993    |  |                              |  | 68,914    | 
|Other taxes payable                                                   |  |                              | 17,175    |  |                              |  | 59,357    | 
|Deposits received from ticketing agencies                             |  |                              | 37,543    |  |                              |  | 36,018    | 
|Employee benefits obligations (Note 24)                               |  |                              | 13,380    |  |                              |  | 34,043    | 
|Housing maintenance fund                                              |  |                              | 15,859    |  |                              |  | 15,692    | 
|Other payables                                                        |  |                              | 129,132   |  |                              |  | 118,795   | 
|                                                                      |  |                              |           |  |                              |  |           | 
|                                                                      |  |                              | 1,464,386 |  |                              |  | 1,618,747 | 
|                                                                      |  |                              |           |  |                              |  |           | 



F-61



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

(All amounts expressed in Renminbi
unless otherwise stated)



|27 | EMPLOYEE BENEFITS
|-- | -----------------



|                                                                      |  |             |           |  |             |  |           |             |  |  |           | 
|--------------------------------------------------------------------- |  | ----------- | --------- |  | ----------- |  | --------- | ----------- |  |  | --------- | 
|                                                                      |  | 2014RMB000 |           |  | 2015RMB000 |  |           | 2016RMB000 | 
|Wages and salaries                                                    |  |             | 3,414,192 |  |             |  | 3,672,234 |             |  |  | 4,362,506 | 
|Provision for medical, housing scheme and other employee benefits (a) |  |             | 857,203   |  |             |  | 916,965   |             |  |  | 1,114,918 | 
|Contributions to the defined contribution scheme (b)                  |  |             | 639,493   |  |             |  | 620,898   |             |  |  | 741,923   | 
|                                                                      |  |             |           |  |             |  |           |             |  |  |           | 
|                                                                      |  |             | 4,910,888 |  |             |  | 5,210,097 |             |  |  | 6,219,347 | 
|                                                                      |  |             |           |  |             |  |           |             |  |  |           | 



|(a) | Housing scheme
|--- | --------------

In accordance
with the PRC housing reform regulations, the Group is required to make contributions to a state-sponsored housing fund at 10% or 12% of the salaries of the employees. At the same time, the employees are also required to make a contribution at 10% or
12% 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 has no further legal or constructive obligation for housing benefits of these
employees beyond the above contributions made.



|(b) | Defined contribution pension scheme
|--- | -----------------------------------

All 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 expense in the year to which the contributions relate.



|(c) | Five highest paid individuals
|--- | -----------------------------

The five individuals whose emoluments were the highest in the Group for the year include one directors (2015: two), no supervisor (2015:
one) and four senior executives (2015: two), whose emoluments have already been reflected in the analysis presented above.

The
emolument range of each individual is within the band of Nil to HK$500,000(equivalent to RMB 447,255) (2015: RMB418,890).



F-62



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

(All amounts expressed in Renminbi
unless otherwise stated)



|28 | OTHER INCOME AND OTHER GAINS/(LOSSES)  NET
|-- | -------------------------------------------



|                                                  |  |             |          |   |             |  |          |             |  |  |          |  
|------------------------------------------------- |  | ----------- | -------- | - | ----------- |  | -------- | ----------- |  |  | -------- | -
|                                                  |  | 2014RMB000 |          |   | 2015RMB000 |  |          | 2016RMB000 | 
|Loss on disposal of fixed assets                  |  |             | (123,567 | ) |             |  | (49,008  | )           |  |  | (133,073 | )
|Interest income from banks                        |  |             | 122,020  |   |             |  | 38,145   |             |  |  | 24,772   |  
|Dividend income on available-for-sale
investments |  |             | 4,904    |   |             |  | 5,884    |             |  |  | 5,884    |  
|Government grants (Note 23)                       |  |             | 7,963    |   |             |  | 7,349    |             |  |  | 9,769    |  
|Impairment of fixed assets (Note 6)               |  |             |         |   |             |  | (80,393  | )           |  |  |         |  
|Loss arising from business combination            |  |             |         |   |             |  | (45,073  | )           |  |  |         |  
|Impairment of construction-in-progress (Note
7)   |  |             |         |   |             |  | (2,434   | )           |  |  | (5,662   | )
|Income from compensation                          |  |             |         |   |             |  | 1,167    |             |  |  | 749      |  
|Others                                            |  |             | (4,182   | ) |             |  | 9,736    |             |  |  | (10,709  | )
|                                                  |  |             |          |   |             |  |          |             |  |  |          |  
|                                                  |  |             | 7,138    |   |             |  | (114,627 | )           |  |  | (108,270 | )
|                                                  |  |             |          |   |             |  |          |             |  |  |          |  



|29 | FINANCE INCOME/(COSTS)-NET
|-- | --------------------------



|                                                                    |  |             |          |   |             |  |        |             |  |  |        |  
|------------------------------------------------------------------- |  | ----------- | -------- | - | ----------- |  | ------ | ----------- |  |  | ------ | -
|                                                                    |  | 2014RMB000 |          |   | 2015RMB000 |  |        | 2016RMB000 | 
|Interest expense                                                    |  |             | (160,760 | ) |             |  |       |             |  |  |       |  
|Bank charges                                                        |  |             | (7,332   | ) |             |  | (7,387 | )           |  |  | (3,823 | )
|Amortisation of bonds payable                                       |  |             | (7,277   | ) |             |  |       |             |  |  |       |  
|Amortisation of interest for employee benefit obligations (Note 24) |  |             | (4,594   | ) |             |  | (226   | )           |  |  |       |  
|Net foreign exchange (losses)/gains                                 |  |             | (410     | ) |             |  | 3,005  |             |  |  | 6,374  |  
|                                                                    |  |             |          |   |             |  |        |             |  |  |        |  
|                                                                    |  |             | (180,373 | ) |             |  | (4,608 | )           |  |  | 2,551  |  
|                                                                    |  |             |          |   |             |  |        |             |  |  |        |  



F-63



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

(All amounts expressed in Renminbi
unless otherwise stated)



|30 | INCOME TAX EXPENSE
|-- | ------------------

In
2014, 2015 and 2016, the applicable income tax rate of the Company was 25%.

An analysis of the current year taxation charges
is as follows:



|                              |  |             |         |  |             |  |         |             |  |  |         | 
|----------------------------- |  | ----------- | ------- |  | ----------- |  | ------- | ----------- |  |  | ------- | 
|                              |  | 2014RMB000 |         |  | 2015RMB000 |  |         | 2016RMB000 | 
|Current income tax            |  |             | 195,864 |  |             |  | 416,480 |             |  |  | 379,482 | 
|Deferred income tax (Note 12) |  |             | 23,643  |  |             |  | (27,950 | )           |  |  | 10,827  | 
|                              |  |             |         |  |             |  |         |             |  |  |         | 
|                              |  |             | 219,507 |  |             |  | 388,530 |             |  |  | 390,309 | 
|                              |  |             |         |  |             |  |         |             |  |  |         | 

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:



|                                                                                                                                    |  |             |         |   |             |  |           |             |  |  |           |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | ------- | - | ----------- |  | --------- | ----------- |  |  | --------- | -
|                                                                                                                                    |  | 2014RMB000 |         |   | 2015RMB000 |  |           | 2016RMB000 | 
|Profit before tax                                                                                                                   |  |             | 880,633 |   |             |  | 1,451,838 |             |  |  | 1,544,009 |  
|                                                                                                                                    |  |             |         |   |             |  |           |             |  |  |           |  
|Tax calculated at the statutory rate of 25% (2015 and 2014: 25%)                                                                    |  |             | 220,158 |   |             |  | 362,960   |             |  |  | 386,002   |  
|Effect of tax rates differentials                                                                                                   |  |             | 118     |   |             |  |          |             |  |  |          |  
|Effect of income not subject to tax                                                                                                 |  |             | (2,498  | ) |             |  | (2,096    | )           |  |  | (3,277    | )
|Effect of expenses not deductible for tax purposes                                                                                  |  |             | 451     |   |             |  | 1,920     |             |  |  | 1,928     |  
|Effect of undeductible loss arising from business combination                                                                       |  |             |        |   |             |  | 11,268    |             |  |  |          |  
|Reversal of deferred tax assets for the impairment loss of investments in associates and other receivable recognized in prior
years |  |             |        |   |             |  | 10,500    |             |  |  |          |  
|Tax losses for which no deferred tax asset was recognised                                                                           |  |             | 1,683   |   |             |  | 4,619     |             |  |  | 5,656     |  
|Utilisation of previously unrecognised tax losses                                                                                   |  |             | (405    | ) |             |  | (641      | )           |  |  |          |  
|                                                                                                                                    |  |             |         |   |             |  |           |             |  |  |           |  
|Income tax expense                                                                                                                  |  |             | 219,507 |   |             |  | 388,530   |             |  |  | 390,309   |  
|                                                                                                                                    |  |             |         |   |             |  |           |             |  |  |           |  



F-64



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

(All amounts expressed in Renminbi
unless otherwise stated)



|31 | EARNINGS PER SHARE
|-- | ------------------

The
calculation of basic earnings per share is based on the net profit for the year attributable to equity holders of approximately RMB1,158,253,000 (2014 and 2015: RMB662,021,000 and RMB1,070,822,000), divided by the weighted average number of ordinary
shares outstanding during the year of 7,083,537,000 shares (2014 and 2015: 7,083,537,000 shares). There were no dilutive potential ordinary shares during each of the three years in the period ended December 31, 2016. The calculation of earnings
per equivalent ADS is based on the net profit for the year attributable to equity holders, divided by the weighted average equivalent ADSs (one ADS represents 50 H Shares) outstanding during the year of 141,670,740 ADSs (2014 and 2015: 141,670,740
ADSs).



|                                                    |  |             |           |  |             |  |           |             |  |  |           | 
|--------------------------------------------------- |  | ----------- | --------- |  | ----------- |  | --------- | ----------- |  |  | --------- | 
|                                                    |  | 2014RMB000 |           |  | 2015RMB000 |  |           | 2016RMB000 | 
|Profit attributable to owners of the company        |  |             | 662,021   |  |             |  | 1,070,822 |             |  |  | 1,158,253 | 
|                                                    |  |             |           |  |             |  |           |             |  |  |           | 
|Weighted average number of ordinary shares in issue |  |             | 7,083,537 |  |             |  | 7,083,537 |             |  |  | 7,083,537 | 
|                                                    |  |             |           |  |             |  |           |             |  |  |           | 
|Weighted average equivalent ADSs                    |  |             | 141,670   |  |             |  | 141,670   |             |  |  | 141,670   | 
|                                                    |  |             |           |  |             |  |           |             |  |  |           | 
|Basic and diluted earnings per share                |  |             | RMB0.09   |  |             |  | RMB0.15   |             |  |  | RMB0.16   | 
|                                                    |  |             |           |  |             |  |           |             |  |  |           | 
|Basic and diluted earnings per equivalent ADS       |  |             | RMB4.67   |  |             |  | RMB7.56   |             |  |  | RMB8.18   | 
|                                                    |  |             |           |  |             |  |           |             |  |  |           | 



|32 | DIVIDENDS
|-- | ---------

The dividends
paid to the ordinary shareholders of the Group in 2014, 2015 and 2016 were, RMB566,683,000 (RMB0.08 per share), RMB354,177,000 (RMB0.05 per share) and RMB566,683,000 (RMB0.08 per share) respectively.



|                                                                             |  |             |         |  |             |  |         |             |  |  |         | 
|---------------------------------------------------------------------------- |  | ----------- | ------- |  | ----------- |  | ------- | ----------- |  |  | ------- | 
|                                                                             |  | 2014RMB000 |         |  | 2015RMB000 |  |         | 2016RMB000 | 
|Final, proposed, of RMB0.08 (2014: RMB0.05 2015: RMB0.08) per ordinary share |  |             | 354,177 |  |             |  | 566,683 |             |  |  | 566,683 | 
|                                                                             |  |             |         |  |             |  |         |             |  |  |         | 

At the meeting of the directors held on 29 March 2017, the directors proposed a final dividend of
RMB0.08per ordinary share for the year ended 31 December 2016, which is subject to the approval by the shareholders in general meeting. This proposed dividend was not reflected as a dividend payable in the financial statements as at
31 December 2016.



F-65



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

(All amounts expressed in Renminbi
unless otherwise stated)



|33 | CASH FLOW GENERATED FROM OPERATIONS
|-- | -----------------------------------



|(a) | Reconciliation from profit before income tax to cash generated from operations:
|--- | -------------------------------------------------------------------------------



|                                                                            |  |         |           |   |         |  |           |         |  |  |            |  
|--------------------------------------------------------------------------- |  | ------- | --------- | - | ------- |  | --------- | ------- |  |  | ---------- | -
|                                                                            |  | 2014    |           |   | 2015    |  |           | 2016    | 
|                                                                            |  | RMB000 |           |   | RMB000 |  |           | RMB000 | 
|Profit before income tax:                                                   |  |         | 880,633   |   |         |  | 1,451,838 |         |  |  | 1,544,009  |  
|Adjustments for:                                                            |  |         |           |   |         |  |           |         |  |  |            |  
|Depreciation of fixed assets (Note 6)                                       |  |         | 1,429,274 |   |         |  | 1,411,742 |         |  |  | 1,518,970  |  
|Impairment of fixed assets (Note 6)                                         |  |         |          |   |         |  | 80,393    |         |  |  |           |  
|Impairment of construction-in-progress (Note
7)                             |  |         |          |   |         |  | 2,434     |         |  |  | 5,662      |  
|Loss arising from business combination                                      |  |         |          |   |         |  | 45,073    |         |  |  |           |  
|(Reversal) of/Provision of impairment of materials and supplies (Note 17)   |  |         |          |   |         |  | 64,096    |         |  |  | (5,209     | )
|Amortisation of leasehold land payments (Note 8)                            |  |         | 19,164    |   |         |  | 28,413    |         |  |  | 38,670     |  
|Loss on disposal of fixed assets (Note 28)                                  |  |         | 123,567   |   |         |  | 49,008    |         |  |  | 133,073    |  
|Amortisation of long-term prepaid expenses (Note 13)                        |  |         | 13,931    |   |         |  | 14,179    |         |  |  | 6,968      |  
|Amortisation of interest for employee benefit obligations(Note 24)          |  |         | 4,594     |   |         |  | 226       |         |  |  |           |  
|Share of results of associates (Note 11)                                    |  |         | (5,048    | ) |         |  | (2,499    | )       |  |  | (7,223     | )
|Dividends income on available-for-sale
investments(Note 28)                 |  |         | (4,904    | ) |         |  | (5,884    | )       |  |  | (5,884     | )
|Investment income from liquidation of a subsidiary                          |  |         | (39       | ) |         |  |          |         |  |  |           |  
|Provision for/(reversal of) impairment of receivables (Note 18 and Note 19) |  |         | 1,150     |   |         |  | (4,459    | )       |  |  | 5          |  
|Amortisation of bonds payable                                               |  |         | 7,277     |   |         |  |          |         |  |  |           |  
|Amortisation of government grants related fixed assets(Note 23)             |  |         | (3,249    | ) |         |  | (2,529    | )       |  |  | (3,258     | )
|Interest expense                                                            |  |         | 160,760   |   |         |  |          |         |  |  |           |  
|Interest income                                                             |  |         | (90,112   | ) |         |  | (5,502    | )       |  |  | (4,353     | )
|                                                                            |  |         |           |   |         |  |           |         |  |  |            |  
|Operating profit before working capital changes                             |  |         | 2,536,998 |   |         |  | 3,126,529 |         |  |  | 3,221,430  |  
|Increase in trade receivables                                               |  |         | (752,684  | ) |         |  | (553,980  | )       |  |  | (1,034,064 | )
|Decrease in materials and supplies                                          |  |         | 44,909    |   |         |  | 34,843    |         |  |  | 14,432     |  
|Decrease/(increase) in prepayments and other receivables                    |  |         | 15,083    |   |         |  | 83,553    |         |  |  | (47,594    | )
|Decrease in long-term receivable                                            |  |         | 2,000     |   |         |  | 2,000     |         |  |  | 2,000      |  
|Increase/(decrease) in trade payables                                       |  |         | 514,289   |   |         |  | (270,151  | )       |  |  | 34,178     |  
|Decrease in employee benefit obligations                                    |  |         | (7,909    | ) |         |  |          |         |  |  |           |  
|Increase in accrued and other payables                                      |  |         | 68,520    |   |         |  | 97,585    |         |  |  | 22,481     |  
|                                                                            |  |         |           |   |         |  |           |         |  |  |            |  
|Cash generated from operations                                              |  |         | 2,421,206 |   |         |  | 2,520,379 |         |  |  | 2,212,863  |  
|                                                                            |  |         |           |   |         |  |           |         |  |  |            |  



F-66



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GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

(All amounts expressed in Renminbi
unless otherwise stated)



|33 | CASH FLOW GENERATED FROM OPERATIONS (CONTINUED)
|-- | -----------------------------------------------



|(b) | In the cash flow statement, proceeds from disposal of fixed assets and leasehold land comprise:
|--- | -----------------------------------------------------------------------------------------------



|                                                 |  |         |          |   |         |  |         |         |  |  |          |  
|------------------------------------------------ |  | ------- | -------- | - | ------- |  | ------- | ------- |  |  | -------- | -
|                                                 |  | 2014    |          |   | 2015    |  |         | 2016    | 
|                                                 |  | RMB000 |          |   | RMB000 |  |         | RMB000 | 
|Net book amount (Note 6)                         |  |         | 179,745  |   |         |  | 83,944  |         |  |  | 142,336  |  
|Receivable arising from disposal of fixed assets |  |         | (2,089   | ) |         |  | (21,627 | )       |  |  | 20,349   |  
|Transfer to inventories                          |  |         | (53,381  | ) |         |  | (5,488  | )       |  |  | (11,662  | )
|Loss on disposal of fixed assets (Note 28)       |  |         | (123,567 | ) |         |  | (49,008 | )       |  |  | (133,073 | )
|                                                 |  |         |          |   |         |  |         |         |  |  |          |  
|Proceeds from disposal of fixed assets           |  |         | 708      |   |         |  | 7,821   |         |  |  | 17,950   |  
|                                                 |  |         |          |   |         |  |         |         |  |  |          |  



|(c) | Except the business combination as set out in note 36, no non-cash investing or financing activities incurred in the year ended
31 December 2016 (2015: Nil).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------



|34 | CONTINGENCY
|-- | -----------

There were
no significant contingent liabilities as at the date of approval of these financial statements.



|35 | COMMITMENTS
|-- | -----------



|(a) | Capital commitments
|--- | -------------------

As at
31 December 2015 and 2016, the Group had the following capital commitments which are authorised but not contracted for, and contracted but not provided for:



|                                  |  |                        |           |  |                        |  |           | 
|--------------------------------- |  | ---------------------- | --------- |  | ---------------------- |  | --------- | 
|                                  |  | As at 31 December 2015 |           |  | As at 31 December 2016 | 
|                                  |  | RMB000                |           |  | RMB000                | 
|Authorised but not contracted for |  |                        | 1,967,894 |  |                        |  | 1,165,237 | 
|                                  |  |                        |           |  |                        |  |           | 
|Contracted but not provided for   |  |                        | 304,199   |  |                        |  | 769,013   | 
|                                  |  |                        |           |  |                        |  |           | 

A substantial amount of these commitments is related to the reform of stations or facilities relating to
the existing railway line of the Company, which would be financed by self-generated operating cash flow.



F-67



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|35 | COMMITMENTS (CONTINUED)
|-- | -----------------------



|(b) | Operating lease commitments
|--- | ---------------------------

In
connection with the acquisition of Yangcheng Railway Business, the Company signed an agreement on 15 November 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 1 January 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 31 December 2016, the related lease rental paid and payable was approximately RMB55,090,000
(2014 and 2015: RMB53,962,000 and RMB55,090,000).



|36 | BUSINESS COMBINATIONS
|-- | ---------------------

On
26 October 2016, the Company entered into agreements to acquire certain railway service businesses of Guangzhou Railway Group, Guangmeishan Railway Company Limited (GRCL) and Guangdong Sanmao Railway Company
Limited(GSRC). GRCL and CSRC are subsidiaries of Guangzhou Railway Group which operate freight service business (the Acquisition).

The purchase considerations payable to Guangzhou Railway Group, GRCL and CSRC were approximately RMB28,657,000, RMB453,658,000 and RMB249,677,000, respectively.

On 26 October 2016, the Company obtain control over above mentioned railway service businesses and the directors of the Company
determined that it was the completion date of the Acquisition. The results of the operations of the above-mentioned entities have been included in the Groups consolidated comprehensive income statement from 26 October 2016 onwards
accordingly.

The following table summarizes the consideration paid for Guangzhou Railway Group, GRCL and CSRC, the fair value
of identifiable assets acquired and liabilities assumed at the date of the Acquisition:



|                                                                         |  |                        |        |  |         |  |         |         |  |  |         |   |  |  |         |  
|------------------------------------------------------------------------ |  | ---------------------- | ------ |  | ------- |  | ------- | ------- |  |  | ------- | - |  |  | ------- | -
|                                                                         |  | GuangzhouRailway Group |        |  | GRCL    |  |         | CSRC    |  |  | Total   |  
|                                                                         |  | RMB000                |        |  | RMB000 |  |         | RMB000 |  |  | RMB000 |  
|Amount payables arising from the Acquisition(a)                          |  |                        | 28,657 |  |         |  | 453,658 |         |  |  | 249,677 |   |  |  | 731,992 |  
|Less: Employee benefits obligation undertaken to be borne by the Company |  |                        |       |  |         |  | (9,024  | )       |  |  | (15,703 | ) |  |  | (24,727 | )
|                                                                         |  |                        |        |  |         |  |         |         |  |  |         |   |  |  |         |  
|Total consideration(a)                                                   |  |                        | 28,657 |  |         |  | 444,634 |         |  |  | 233,974 |   |  |  | 707,265 |  
|                                                                         |  |                        |        |  |         |  |         |         |  |  |         |   |  |  |         |  



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|36 | BUSINESS COMBINATIONS(CONTINUED)
|-- | --------------------------------



|(a) | The total consideration of approximately RMB707,265,000 had been offset against the trade receivables due from Guangzhou Railway Group, GRCL and CSRC to the Group.
Therefore, no actual cash outflow occurred in the business acquisition.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As at the completion date of the
Acquisition, the fair value of the identifiable assets and liabilities acquired were as below:



|                                  |  |  |         |  
|--------------------------------- |  |  | ------- | -
|Inventories                       |  |  | 23,110  |  
|Fixed assets (Note 6)             |  |  | 648,890 |  
|Construction-in-progress (Note 7) |  |  | 59,992  |  
|Other liabilities                 |  |  | (24,727 | )
|                                  |  |  |         |  
|Total identifiable net assets     |  |  | 707,265 |  
|                                  |  |  |         |  
|Total consideration               |  |  | 707,265 |  
|                                  |  |  |         |  
|Goodwill                          |  |  |        |  
|                                  |  |  |         |  

The directors of the Company made reference to the valuation report performed by an independent valuer on
the acquired businesses when they determined the fair value of the identifiable assets and the liabilities acquired.



|37 | RELATED PARTY TRANSACTIONS
|-- | --------------------------

Parties 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.



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|37 | RELATED PARTY TRANSACTIONS(CONTINUED)
|-- | -------------------------------------



|(b) | Nature of the principal related parties that do not control/are not controlled by the Company:
|--- | ----------------------------------------------------------------------------------------------



|                                                                                   |  |                                             
|---------------------------------------------------------------------------------- |  | --------------------------------------------
|Name of related parties                                                            |  | Relationship with the Company               
|Single largest shareholder and its subsidiaries                                    |  |                                             
|Guangzhou Railway Group                                                            |  | Single largest shareholder                  
|Guangzhou Railway Group YangCheng Railway Enterprise Development Company           |  | Subsidiary of the single largest shareholder
|GRCL                                                                               |  | Subsidiary of the single largest shareholder
|GEDC                                                                               |  | Subsidiary of the single largest shareholder
|Guangzhou Railway Material Supply Company                                          |  | Subsidiary of the single largest shareholder
|Guangzhou Railway Engineer Construction Enterprise Development Company             |  | Subsidiary of the single largest shareholder
|Yangcheng Construction Company of YangCheng Railway Enterprise Development Company |  | Subsidiary of the single largest shareholder
|Guangzhou Railway Real Estate Construction Company                                 |  | Subsidiary of the single largest shareholder
|Yuehai Railway Company Limited                                                     |  | Subsidiary of the single largest shareholder
|Shichang Railway Company Limited                                                   |  | Subsidiary of the single largest shareholder
|Guangzhou Railway Station Service Centre                                           |  | Subsidiary of the single largest shareholder
|Changsha Railway Construction Company Limited                                      |  | Subsidiary of the single largest shareholder
|GSRC                                                                               |  | Subsidiary of the single largest shareholder
|Guangzhou Qingda Transportation Company Limited                                    |  | Subsidiary of the single largest shareholder
|Guangzhou Yuetie Operational Development Company                                   |  | Subsidiary of the single largest shareholder
|Guangzhou Railway Rolling Stock Works                                              |  | Subsidiary of the single largest shareholder
|Foreign Economic & Trade Development Corporation of Guangzhou Railway Group        |  | Subsidiary of the single largest shareholder
|Shenzhen Guangshen Railway Living Service Centre                                   |  | Subsidiary of the single largest shareholder
|Guangzhou Yangcheng Living Service Centre                                          |  | Subsidiary of the single largest shareholder
|Pajiangkou Stone Pit of YangCheng Railway Enterprise Development Company           |  | Subsidiary of the single largest shareholder
|Guangdong Tieqing International Travel Agency Company Limited                      |  | Subsidiary of the single largest shareholder
|Guangdong Sanmao Enterprise Development Company Limited                            |  | Subsidiary of the single largest shareholder
|Huaihua Railway Engineer Construction Company                                      |  | Subsidiary of the single largest shareholder
|Lechang Anjie Railway Sleeper Company Limited                                      |  | Subsidiary of the single largest shareholder
|Xiashen Railway Guangdong Company Limited                                          |  | Subsidiary of the single largest shareholder
|Ganshao Railway Company Limited                                                    |  | Subsidiary of the single largest shareholder
|Guangzhou Railway Economic Technology Development Corporation                      |  | Subsidiary of the single largest shareholder
|Hunan Changtie Industrial Development Co. Ltd.                                     |  | Subsidiary of the single largest shareholder
|Associates of the Group                                                            |  |                                             
|Tiecheng                                                                           |  | Associate of the Group                      
|Shentu                                                                             |  | Associate of the Group                      



F-70



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|37 | RELATED PARTY TRANSACTIONS (CONTINUED)
|-- | --------------------------------------



|(c) | In addition to those disclosed elsewhere in the financial statements, during the year, the Group had the following material transactions undertaken with related
parties:
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                                                                      |  |         |           |  |         |  |           |         |  |  |           | 
|------------------------------------------------------------------------------------------------------------------------------------- |  | ------- | --------- |  | ------- |  | --------- | ------- |  |  | --------- | 
|                                                                                                                                      |  | 2014    |           |  | 2015    |  |           | 2016    | 
|                                                                                                                                      |  | RMB000 |           |  | RMB000 |  |           | RMB000 | 
|Provision of services and sales of goods                                                                                              |  |         |           |  |         |  |           |         |  |  |           | 
|Railroad and Related Business                                                                                                         |  |         |           |  |         |  |           |         |  |  |           | 
|Provision of train transportation services to Guangzhou Railway Group and its subsidiaries (i)                                        |  |         | 424,743   |  |         |  | 751,956   |         |  |  | 1,425,538 | 
|Revenue collected by CRC for railway network usage and related services provided to Guangzhou Railway Group and its
subsidiaries (ii) |  |         | 1,153,630 |  |         |  | 1,180,852 |         |  |  | 1,400,876 | 
|Revenue from railway operation service provided to Guangzhou Railway Groups subsidiaries (iii)                                       |  |         | 359,740   |  |         |  | 550,168   |         |  |  | 579,253   | 
|                                                                                                                                      |  |         |           |  |         |  |           |         |  |  |           | 
|                                                                                                                                      |  |         | 1,938,113 |  |         |  | 2,482,976 |         |  |  | 3,405,667 | 
|                                                                                                                                      |  |         |           |  |         |  |           |         |  |  |           | 
|Other Businesses                                                                                                                      |  |         |           |  |         |  |           |         |  |  |           | 
|Sales of materials and supplies to Guangzhou Railway Group and its subsidiaries (iv)                                                  |  |         | 22,579    |  |         |  | 25,940    |         |  |  | 29,449    | 
|                                                                                                                                      |  |         |           |  |         |  |           |         |  |  |           | 
|Services received and purchase made                                                                                                   |  |         |           |  |         |  |           |         |  |  |           | 
|Railroad and Related Business                                                                                                         |  |         |           |  |         |  |           |         |  |  |           | 
|Provision of train transportation services by Guangzhou Railway Group and its subsidiaries (i)                                        |  |         | 633,382   |  |         |  | 888,903   |         |  |  | 989,778   | 
|Cost settled by CRC for railway network usage and related services provided by Guangzhou Railway Group and its subsidiaries
(ii)      |  |         | 1,436,711 |  |         |  | 1,406,962 |         |  |  | 1,628,336 | 
|Operating lease rental paid to Guangzhou Railway Group for the leasing of land use rights (Note 35 (b))                               |  |         | 53,962    |  |         |  | 55,090    |         |  |  | 55,090    | 
|                                                                                                                                      |  |         |           |  |         |  |           |         |  |  |           | 
|                                                                                                                                      |  |         | 2,124,055 |  |         |  | 2,350,955 |         |  |  | 2,673,204 | 
|                                                                                                                                      |  |         |           |  |         |  |           |         |  |  |           | 
|Other Businesses                                                                                                                      |  |         |           |  |         |  |           |         |  |  |           | 
|Social services (employee housing and public security services and other ancillary services) provided by GEDC
(iii)                   |  |         | 12,430    |  |         |  | 16,080    |         |  |  | 11,297    | 
|Provision of repair and maintenance services by Guangzhou Railway Group and its subsidiaries (iv)                                     |  |         | 295,283   |  |         |  | 489,038   |         |  |  | 306,988   | 
|Purchase of materials and supplies from Guangzhou Railway Group and its subsidiaries (v)                                              |  |         | 560,034   |  |         |  | 384,262   |         |  |  | 469,273   | 
|Provision of construction services by Guangzhou Railway Group and its subsidiaries (vi)                                               |  |         | 280,983   |  |         |  | 226,089   |         |  |  | 347,409   | 
|Others                                                                                                                                |  |         | 8,729     |  |         |  |          |         |  |  |          | 
|                                                                                                                                      |  |         |           |  |         |  |           |         |  |  |           | 
|                                                                                                                                      |  |         | 1,157,459 |  |         |  | 1,115,469 |         |  |  | 1,134,967 | 
|                                                                                                                                      |  |         |           |  |         |  |           |         |  |  |           | 



F-71



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|37 | RELATED PARTY TRANSACTIONS (CONTINUED)
|-- | --------------------------------------



|(c) | 
|--- | 





| | (i) | The service charges are determined based on a pricing scheme set by the CRC or based on negotiation between the contracting parties with reference to actual costs
incurred.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Such revenues/charges are determined by the CRC based on its standard charges applied on a nationwide basis.
| | ---- | ------------------------------------------------------------------------------------------------------------



| | (iii) | The service charges are levied based on contract prices determined based on a cost plus a profit margin and explicitly agreed between both contracting
parties.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | The prices are determined based on mutual negotiation between the contracting parties with reference to actual costs incurred.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------



| | (v) | The prices are determined based on mutual negotiation between the contracting parties with reference to procurement costs incurred plus a management fee ranged from
0.3% to 5% on the costs.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vi) | Based on construction amount determined under national railway engineering guidelines.
| | ---- | --------------------------------------------------------------------------------------



|(d) | Key management compensation
|--- | ---------------------------

The
compensation paid or payable to key management for employee services is shown in Note 27(c).



F-72



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|37 | RELATED PARTY TRANSACTIONS (CONTINUED)
|-- | --------------------------------------



|(e) | As at 31 December 2015 and 2016, the Group had the following material balances maintained with related parties:
|--- | ---------------------------------------------------------------------------------------------------------------



|                                                          |  |         |         |  |         |  |         | 
|--------------------------------------------------------- |  | ------- | ------- |  | ------- |  | ------- | 
|                                                          |  | 2015    |         |  | 2016    | 
|                                                          |  | RMB000 |         |  | RMB000 | 
|Trade receivables                                         |  |         | 862,199 |  |         |  | 730,061 | 
|- Guangzhou Railway Group (i)                             |  |         | 96,314  |  |         |  | 229,056 | 
|- Subsidiaries of Guangzhou Railway Group (i)             |  |         | 765,885 |  |         |  | 501,005 | 
|                                                          |  |        
|Prepayments and other receivables                         |  |         | 7,788   |  |         |  | 25,961  | 
|- Guangzhou Railway Group                                 |  |         | 6,011   |  |         |  | 691     | 
|- Subsidiaries of Guangzhou Railway Group                 |  |         | 1,777   |  |         |  | 25,270  | 
|                                                          |  |        
|Prepayments for fixed assets and
construction-in-progress |  |         | 1,092   |  |         |  | 225     | 
|- Guangzhou Railway Group                                 |  |         | 1,092   |  |         |  |        | 
|- Subsidiaries of Guangzhou Railway Group (ii)            |  |         |        |  |         |  | 225     | 
|                                                          |  |        
|Trade payables                                            |  |         | 431,650 |  |         |  | 533,051 | 
|- Guangzhou Railway Group (i)                             |  |         | 24,467  |  |         |  | 61,486  | 
|- Subsidiaries of Guangzhou Railway Group (ii)            |  |         | 366,015 |  |         |  | 432,712 | 
|- Associates                                              |  |         | 41,168  |  |         |  | 38,853  | 
|                                                          |  |        
|Payables for fixed assets and
construction-in-progress    |  |         | 185,339 |  |         |  | 249,308 | 
|- Guangzhou Railway Group                                 |  |         | 18,829  |  |         |  | 10,805  | 
|- Subsidiaries of Guangzhou Railway Group                 |  |         | 128,871 |  |         |  | 168,038 | 
|- Associates                                              |  |         | 37,639  |  |         |  | 70,465  | 
|                                                          |  |        
|Accruals and other payables                               |  |         | 399,634 |  |         |  | 430,331 | 
|- Guangzhou Railway Group                                 |  |         | 1,891   |  |         |  | 5,663   | 
|- Subsidiaries of Guangzhou Railway Group (iii)           |  |         | 396,590 |  |         |  | 422,877 | 
|- Associates (iv)                                         |  |         | 1,153   |  |         |  | 1,791   | 



F-73



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|37 | RELATED PARTY TRANSACTIONS (CONTINUED)
|-- | --------------------------------------



|(e) | As at 31 December 2015 and 2016, the Group had the following material balances maintained with related parties (continued):
|--- | ---------------------------------------------------------------------------------------------------------------------------



| | (i) | The trade balances due from/to Guangzhou Railway Group, subsidiaries of Guangzhou Railway Group mainly represent 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.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | The trade payables 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.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | The other payables due to subsidiaries of Guangzhou Railway Group mainly represent the performance deposits received for construction projects and deposits received
from ticketing agencies.
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | The other payables due to associates mainly represent the performance deposits received for construction projects operated by associates.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------

As at 31 December 2015 and 2016, all the balances maintained with related parties were unsecured,
non-interest bearing and were repayable on demand.



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

(All amounts expressed in Renminbi
unless otherwise stated)



|38 | TRANSACTIONS WITH CRC AND OTHER RAILWAY COMPANIES
|-- | -------------------------------------------------

On 14 March 2013, pursuant to the Approval, the previous controlling entity of Guangzhou Railway Group, MOR, had been dismantled. The administrative function of MOR were transferred to the Ministry
of Transport and the newly established National Railway Bureau, and its business functions were transferred to the CRC. Accordingly, the equity interests of Guangzhou Railway Group which was wholly controlled by MOR previously were transferred to
the CRC (Reform). The Reform was completed since 1 January 2017. In order to facilitate users comprehensive understanding of the Companys business transactions, the Company disclosed these transactions with CRC Group for
2016 and 2015. Unless otherwise specified, the transactions disclosed below have excluded the transactions undertaken with Guangzhou Railway Group and its subsidiaries disclosed in Note 37.

The Company works in cooperation with the CRC and other railway companies owned and controlled by the CRC 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 CRC 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 CRC and settled by the CRC based on its systems. Since March 2013, the collecting, processing and distribution functions
of revenues which were executed by MOR previously had been transferred to CRC. As at 31 December 2016, the cooperation mode and pricing model had not been subject to any material changes.



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|38 | TRANSACTIONS WITH CRC AND OTHER RAILWAY COMPANIES (CONTINUED)
|-- | -------------------------------------------------------------



|(a) | In addition to those disclosed elsewhere in the financial statements, during the year, the Group had the following material transactions undertaken with the CRC Group:
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                   |  |         |           |  |         |  |           |         |  |  |           | 
|------------------------------------------------------------------ |  | ------- | --------- |  | ------- |  | --------- | ------- |  |  | --------- | 
|                                                                   |  | 2014    |           |  | 2015    |  |           | 2016    | 
|                                                                   |  | RMB000 |           |  | RMB000 |  |           | RMB000 | 
|Provision of services and sales of goods                           |  |         |           |  |         |  |           |         |  |  |           | 
|Railroad and Related Business                                      |  |         |           |  |         |  |           |         |  |  |           | 
|Provision of train transportation services to CRC Group (i)        |  |         | 5,229     |  |         |  | 36,515    |         |  |  | 29,794    | 
|Revenue collected by CRC for services provided to CRC Group (ii)   |  |         | 1,706,558 |  |         |  | 1,752,666 |         |  |  | 1,777,640 | 
|Revenue from railway operation service provided to CRC Group (iii) |  |         | 950,966   |  |         |  | 1,421,995 |         |  |  | 1,628,143 | 
|                                                                   |  |         |           |  |         |  |           |         |  |  |           | 
|                                                                   |  |         | 2,662,753 |  |         |  | 3,211,176 |         |  |  | 3,435,577 | 
|                                                                   |  |         |           |  |         |  |           |         |  |  |           | 
|Other Businesses                                                   |  |         |           |  |         |  |           |         |  |  |           | 
|Provision of repairing services for cargo trucks to CRC Group (ii) |  |         | 259,470   |  |         |  | 284,348   |         |  |  | 323,993   | 
|Sales of materials and supplies to CRC Group (iv)                  |  |         | 43,239    |  |         |  | 38,395    |         |  |  | 7,073     | 
|Provision of apartment leasing services to CRC Group (iv)          |  |         | 732       |  |         |  | 762       |         |  |  | 641       | 
|                                                                   |  |         |           |  |         |  |           |         |  |  |           | 
|                                                                   |  |         | 303,441   |  |         |  | 323,505   |         |  |  | 331,707   | 
|                                                                   |  |         |           |  |         |  |           |         |  |  |           | 
|Services received and purchases made                               |  |         |           |  |         |  |           |         |  |  |           | 
|Railroad and Related Business                                      |  |         |           |  |         |  |           |         |  |  |           | 
|Provision of train transportation services by CRC Group (i)        |  |         | 292,866   |  |         |  | 277,138   |         |  |  | 292,754   | 
|Cost settled by CRC for services provided by CRC Group (ii)        |  |         | 1,265,873 |  |         |  | 1,365,352 |         |  |  | 1,376,047 | 
|                                                                   |  |         |           |  |         |  |           |         |  |  |           | 
|                                                                   |  |         | 1,558,739 |  |         |  | 1,642,490 |         |  |  | 1,668,801 | 
|                                                                   |  |         |           |  |         |  |           |         |  |  |           | 
|Other Businesses                                                   |  |         |           |  |         |  |           |         |  |  |           | 
|Provision of repair and maintenance services by CRC Group (iv)     |  |         | 28,531    |  |         |  | 2,813     |         |  |  | 42,954    | 
|Purchase of materials and supplies from CRC Group (v)              |  |         | 9,317     |  |         |  | 33,591    |         |  |  | 15,220    | 
|Provision of construction services by CRC Group (vi)               |  |         |          |  |         |  | 13,538    |         |  |  | 4,385     | 
|                                                                   |  |         |           |  |         |  |           |         |  |  |           | 
|                                                                   |  |         | 37,848    |  |         |  | 49,942    |         |  |  | 62,559    | 
|                                                                   |  |         |           |  |         |  |           |         |  |  |           | 



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|38 | TRANSACTIONS WITH CRC AND OTHER RAILWAY COMPANY (CONTINUED)
|-- | -----------------------------------------------------------



|(a) | In addition to those disclosed elsewhere in the financial statements, during the year, the Group had the following material transactions undertaken with the CRC
Group(continued):
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (i) | The service charges are determined based on a pricing scheme set by the CRC or based on negotiation between the contracting parties with reference to actual costs
incurred.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Such revenues/charges are determined by the CRC based on its standard charges applied on a nationwide basis.
| | ---- | ------------------------------------------------------------------------------------------------------------



| | (iii) | The service charges are levied based on contract prices determined based on a cost plus a profit margin and explicitly agreed between both contracting
parties.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | The prices are determined based on mutual negotiation between the contracting parties with reference to actual costs incurred.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------



| | (v) | The prices are determined based on mutual negotiation between the contracting parties with reference to procurement costs incurred plus a management fee ranged from
0.3% to 5% on the costs.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vi) | Based on construction amounts determined under national railway engineering guidelines.
| | ---- | ---------------------------------------------------------------------------------------



|(b) | Revenues collected and settled through the CRC:
|--- | -----------------------------------------------



|                           |  |         |           |  |         |  |           |         |  |  |           | 
|-------------------------- |  | ------- | --------- |  | ------- |  | --------- | ------- |  |  | --------- | 
|                           |  | 2014    |           |  | 2015    |  |           | 2016    | 
|                           |  | RMB000 |           |  | RMB000 |  |           | RMB000 | 
|- Passenger transportation |  |         | 6,630,629 |  |         |  | 6,642,129 |         |  |  | 6,960,491 | 
|- Freight transportation   |  |         | 920,255   |  |         |  | 1,022,025 |         |  |  | 1,105,061 | 
|- Luggage and parcel       |  |         | 148,863   |  |         |  | 86,199    |         |  |  | 86,883    | 
|                           |  |         |           |  |         |  |           |         |  |  |           | 
|                           |  |         | 7,699,747 |  |         |  | 7,750,353 |         |  |  | 8,152,435 | 
|                           |  |         |           |  |         |  |           |         |  |  |           | 

The Company works in cooperation with the CRC and other railway companies owned and controlled by the CRC
for the operation of certain long distance passenger trains and freight transportation businesses within the PRC. The revenues generated from these long-distance passenger trains and freight transportation businesses are collected and settled by the
CRC Group on behalf of the Group through the CRCs nationwide settlement systems.



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##### Table of Contents

GUANGSHEN RAILWAY COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER2016

(All amounts expressed
in Renminbi unless otherwise stated)



|38 | TRANSACTIONS WITH CRC AND OTHER RAILWAY COMPANY (CONTINUED)
|-- | -----------------------------------------------------------



|(c) | Balances due from/to CRC Group:
|--- | -------------------------------



|                    |  |                   |         |  |         |  |           | 
|------------------- |  | ----------------- | ------- |  | ------- |  | --------- | 
|                    |  | As at 31 December |        
|                    |  | 2015              |         |  | 2016    | 
|                    |  | RMB000           |         |  | RMB000 | 
|Due from CRC Group  |  |                   |         |  |         |  |           | 
|- Trade receivables |  |                   | 897,030 |  |         |  | 1,443,272 | 
|- Other receivables |  |                   | 6,700   |  |         |  | 4,672     | 
|                    |  |                   |         |  |         |  |           | 
|Due to CRC Group    |  |                   |         |  |         |  |           | 
|- Trade payables    |  |                   | 62,709  |  |         |  | 65,496    | 
|- Other payables    |  |                   | 19,968  |  |         |  | 15,901    | 
|                    |  |                   |         |  |         |  |           | 

As at 31 December 2016, all the balances maintained with CRC Group were unsecured, non-interest bearing and were repayable on demand.



|39 | SUBSEQUENT EVENTS
|-- | -----------------

Save
as already disclosed in the notes to the financial statements, the Group had no other significant subsequent event.



F-78