##### Table of Contents



As filed with the Securities and Exchange Commission on June 2, 2011
 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 FORM 20-F
 (Mark
One)o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES
EXCHANGE ACT OF 1934orþ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934For the fiscal year ended
December 31, 2010oro
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934For the transition period from                      tooro
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Date of event requiring this
shell company report
 Commission file number: 1-14362
 
 
 (Exact name of Registrant as specified in its charter)
 GUANGSHEN RAILWAY COMPANY LIMITED
 (Translation of Registrants name into English)
 Peoples Republic of China  (Jurisdiction of incorporation or organization)
 
 No. 1052 Heping Road, Shenzhen, Peoples Republic of China 518010  (Address of Principal Executive Offices)
 
 Mr. Guo Xiangdong
Telephone: (86-755) 2558-7920 or (86-755) 2558-8146
Email: ir@gsrc.com
Facsimile: (86-755) 2559-1480
No. 1052 Heping Road, Shenzhen, Peoples Republic of China 518010  (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
 
  Title of Each Class
    
    Name of Each Exchange on which ListedAmerican Depositary Shares, each
representing 50 Class H ordinary shares
    
    New York Stock Exchange, Inc.Class H ordinary shares, nominal value
RMB 1.00 per share
    
    The Stock Exchange of Hong Kong Limited
    Domestic shares (A shares), par value RMB 1.00 per share
    
    
    5,652,237,000H shares, par value RMB 1.00 per share
    
    
    1,431,300,000
   þ o
  o þ
  þ o
  o o
  þ o o
  o
 þ
 o
  o o
  o þ




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##### Table of Contents



Table of Contents
 PagesForward-Looking Statements
    
    
    1Certain Terms and Conventions
    
    
    1PART IITEM 1.
    
    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
    
    
    3ITEM 2.
    
    OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    3ITEM 3.
    
    KEY INFORMATION
    
    
    3Item 3A.
    
    Selected Consolidated Financial and Other Data
    
    
    3Item 3B.
    
    Capitalization and Indebtedness
    
    
    5Item 3C.
    
    Reasons for the Offer and Use of Proceeds
    
    
    5Item 3D.
    
    Risk Factors
    
    
    6ITEM 4.
    
    INFORMATION ON THE COMPANY
    
    
    13Item 4A.
    
    History and Development of the Company
    
    
    13Item 4B.
    
    Business Overview
    
    
    17Item 4C.
    
    Organizational Structure
    
    
    30Item 4D.
    
    Property, Plant and Equipment
    
    
    30ITEM 4A.
    
    UNRESOLVED STAFF COMMENTS
    
    
    31ITEM 5.
    
    OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    31Item 5A.
    
    Operating Results
    
    
    32Item 5B.
    
    Liquidity and Capital Resources
    
    
    48Item 5C.
    
    Research and Development, Patents and Licenses, etc.
    
    
    50Item 5D.
    
    Trend Information
    
    
    50Item 5E.
    
    Off-Balance Sheet Arrangements
    
    
    51Item 5F.
    
    Tabular Disclosure of Contractual Obligations
    
    
    52Item 5G.
    
    Safe Harbor
    
    
    52ITEM 6.
    
    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    52Item 6A.
    
    Directors and Senior Management
    
    
    52Item 6B.
    
    Board Compensation
    
    
    59Item 6C.
    
    Board Practices
    
    
    60Item 6D.
    
    Employees
    
    
    63Item 6E.
    
    Share Ownership
    
    
    64ITEM 7.
    
    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    64Item 7A.
    
    Major Shareholders
    
    
    64Item 7B.
    
    Related Party Transactions
    
    
    66Item 7C.
    
    Interests of Experts and Counsel
    
    
    72ITEM 8.
    
    FINANCIAL INFORMATION
    
    
    72Item 8A.
    
    Consolidated Statements and Other Financial Information
    
    
    72Item 8B.
    
    Significant Changes
    
    
    74ITEM 9.
    
    THE OFFER AND LISTING
    
    
    75Item 9A.
    
    Offer and Listing Details
    
    
    75Item 9B.
    
    Plan of Distribution
    
    
    75Item 9C.
    
    Markets
    
    
    76Item 9D.
    
    Selling Shareholders
    
    
    76Item 9E.
    
    Dilution
    
    
    76Item 9F.
    
    Expenses of the Issue
    
    
    76




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PagesITEM 10.
    
    ADDITIONAL INFORMATION
    
    
    77Item 10A.
    
    Share Capital
    
    
    77Item 10B.
    
    Memorandum and Articles of Association
    
    
    77Item 10C.
    
    Material Contracts
    
    
    87Item 10D.
    
    Exchange Controls
    
    
    87Item 10E.
    
    Taxation
    
    
    88Item 10F.
    
    Dividends and Paying Agents
    
    
    96Item 10G.
    
    Statement by Experts
    
    
    96Item 10H.
    
    Documents on Display
    
    
    96Item 10I.
    
    Subsidiary Information
    
    
    96ITEM 11.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    97ITEM 12.
    
    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    99PART IIITEM 13.
    
    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    101ITEM 14.
    
    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

    
    101ITEM 15.
    
    CONTROLS AND PROCEDURES
    
    
    101ITEM 16A.
    
    AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    102ITEM 16B.
    
    CODE OF ETHICS
    
    
    102ITEM 16C.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    102ITEM 16D.
    
    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    103ITEM 16E.
    
    PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    103ITEM 16F.
    
    CHANGE IN OUR CERTIFYING ACCOUNTANT
    
    
    103ITEM 16G.
    
    CORPORATE GOVERNANCE
    
    
    103ITEM 17.
    
    FINANCIAL STATEMENTS
    
    
    105ITEM 18.
    
    FINANCIAL STATEMENTS
    
    
    105ITEM 19.
    
    EXHIBITS
    
    
    105EX-7.1EX-8.1EX-12.1EX-13.1




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




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




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PART I
 
 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
  
 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3. KEY INFORMATION
 
 Item 3A. Selected Consolidated Financial and Other Data
   Year ended December 31,2006(2)
    
    2007(2)
    
    2008(2)
    
    2009(2)
    
    2010
    
    2010RMB
    
    RMB
    
    RMB
    
    RMB
    
    RMB
    
    US$ (1)(Restated)
    
    (Restated)
    
    (Restated)
    
    (Restated)(in thousands except for per share data)Income Statement Data:Revenue from railroad businesses Passenger
    
    
    2,608,838
    
    
    
    5,833,538
    
    
    
    6,759,229
    
    
    
    7,195,717
    
    
    
    8,104,126
    
    
    
    1,227,898 Freight
    
    
    565,557
    
    
    
    1,326,450
    
    
    
    1,324,701
    
    
    
    1,210,118
    
    
    
    1,360,822
    
    
    
    206,185 Railway network usage and
services
    
    
    291,489
    
    
    
    2,659,529
    
    
    
    2,738,425
    
    
    
    3,105,654
    
    
    
    3,115,911
    
    
    
    472,108Subtotal
    
    
    3,465,884
    
    
    
    9,819,517
    
    
    
    10,822,355
    
    
    
    11,511,489
    
    
    
    12,580,859
    
    
    
    1,906,191Revenue from other businesses
    
    
    128,590
    
    
    
    688,987
    
    
    
    866,300
    
    
    
    874,268
    
    
    
    903,589
    
    
    
    136,907Total revenue
    
    
    3,594,474
    
    
    
    10,508,504
    
    
    
    11,688,655
    
    
    
    12,385,757
    
    
    
    13,484,448
    
    
    
    2,043,098Railroad operating expenses
    
    
    (2,591,801
    )
    
    
    (8,367,791
    )
    
    
    (9,203,347
    )
    
    
    (9,651,278
    )
    
    
    (10,481,496
    )
    
    
    (1,588,105
    )Other businesses operating expenses
    
    
    (166,011
    )
    
    
    (458,819
    )
    
    
    (829,077
    )
    
    
    (797,367
    )
    
    
    (845,774
    )
    
    
    (128,148
    )Other income/(expense)
    
    
    66,124
    
    
    
    56,419
    
    
    
    21,623
    
    
    
    (16,808
    )
    
    
    (47,060
    )
    
    
    (7,130
    )Profit from operations
    
    
    902,787
    
    
    
    1,738,313
    
    
    
    1,677,854
    
    
    
    1,920,304
    
    
    
    2,110,118
    
    
    
    319,715Profit attributable to shareholders
of the Company
    
    
    718,458
    
    
    
    1,408,554
    
    
    
    1,193,668
    
    
    
    1,342,450
    
    
    
    1,486,062
    
    
    
    225,161Profit from operations per share
    
    
    0.20
    
    
    
    0.25
    
    
    
    0.24
    
    
    
    0.27
    
    
    
    0.30
    
    
    
    0.05Earnings per share for profit
attributable to shareholders of the
Company
 3




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Year ended December 31,2006(2)
    
    2007(2)
    
    2008(2)
    
    2009(2)
    
    2010
    
    2010RMB
    
    RMB
    
    RMB
    
    RMB
    
    RMB
    
    US$ (1)(Restated)
    
    (Restated)
    
    (Restated)
    
    (Restated)(in thousands except for per share data) Basic and diluted
    
    
    0.16
    
    
    
    0.20
    
    
    
    0.17
    
    
    
    0.19
    
    
    
    0.21
    
    
    
    0.03Dividends declared per share
    
    
    0.08
    
    
    
    0.08
    
    
    
    0.08
    
    
    
    0.08
    
    
    
    0.09
    
    
    
    0.01Earnings per ADS for profit
attributable to shareholders of the
Company
    
    
    8.13
    
    
    
    9.94
    
    
    
    8.43
    
    
    
    9.48
    
    
    
    10.49
    
    
    
    1.59Balance Sheet Data (at year end):Working capital
    
    
    4,249,117
    
    
    
    433,615
    
    
    
    (616,158
    )
    
    
    31,118
    
    
    
    1,576,567
    
    
    
    238,874Fixed assets
    
    
    7,817,581
    
    
    
    21,040,892
    
    
    
    24,922,566
    
    
    
    25,036,329
    
    
    
    24,466,130
    
    
    
    3,706,989Leasehold land payments
    
    
    625,628
    
    
    
    607,971
    
    
    
    592,368
    
    
    
    576,379
    
    
    
    560,391
    
    
    
    84,908Total assets
    
    
    25,071,095
    
    
    
    27,523,542
    
    
    
    29,011,095
    
    
    
    29,427,247
    
    
    
    30,604.502
    
    
    
    4,637,046Equity attributable to shareholders
of the Company
    
    
    19,334,080
    
    
    
    21,845,806
    
    
    
    22,472,791
    
    
    
    23,248,638
    
    
    
    24,168,017
    
    
    
    3,661,820Share capital, issued and outstanding,
RMB 1.00 per value,
domestic shares
    
    
    5,652,237
    
    
    
    5,652,237
    
    
    
    5,652,237
    
    
    
    5,652,237
    
    
    
    5,652,237
    
    
    
    856,400H shares
    
    
    1,431,300
    
    
    
    1,431,300
    
    
    
    1,431,300
    
    
    
    1,431,300
    
    
    
    1,431,300
    
    
    
    216,864Cash Flow Statement Data:Net cash generated from operating
activities
    
    
    1,112,004
    
    
    
    1,957,645
    
    
    
    1,641,069
    
    
    
    2,617,533
    
    
    
    3,331,458
    
    
    
    504,766Net cash used in investing activities
    
    
    (7,833,331
    )
    
    
    (5,585,414
    )
    
    
    (2,915,785
    )
    
    
    (2,096,154
    )
    
    
    (1,188,763
    )
    
    
    (180,116
    )Net cash generated from /(used in)
financing activities
    
    
    11,461,030
    
    
    
    128,289
    
    
    
    483,317
    
    
    
    (966,680
    )
    
    
    (599,288
    )
    
    
    (90,801
    )Purchase of fixed assets and payment
for construction-in-progress
    
    
    (3,202,670
    )
    
    
    (1,107,320
    )
    
    
    (2,947,804
    )
    
    
    (1,639,674
    )
    
    
    (1,158,399
    )
    
    
    (175,515
    )Dividends paid to shareholders of
the Company
    
    
    (520,655
    )
    
    
    (566,711
    )
    
    
    (566,683
    )
    
    
    (566,683
    )
    
    
    (566,685
    )
    
    
    (85,861
    )Other Data:Railroad transportation operating
income
    
    
    874,083
    
    
    
    1,451,726
    
    
    
    1,619,008
    
    
    
    1,860,211
    
    
    
    2,099.363
    
    
    
    318,086Other businesses operating
income/(loss)
    
    
    (34,764
    )
    
    
    277,155
    
    
    
    37,223
    
    
    
    76,901
    
    
    
    57,815
    
    
    
    8,426
 
 (1)
    
    Translation of amounts from RMB into US$, for the convenience of the reader has been
made at US$ 1.00 = RMB 6.60, the certified exchange rate for December 30, 2010 as published
by the Federal Reserve Board of the United States. No representation is made that the RMB
amounts could have been, or could be, converted into U.S. dollars at that rate on December
31, 2009 or on any other date.(2)
    
    In 2010, we have changed our accounting policies in respect of fixed assets and
government grants to enhance the comparability of our financial statements with those of
the other listed companies with similar backgrounds, as well as to eliminate the
differences between our financial statements under IFRS and our financial statements under
PRC Generally Accepted Accounting Principles (PRC GAAP). See Note 5 to our audited
consolidated financial statements included elsewhere in this annual report. Exchange Rate Information
   4




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Certified Exchange RatePeriod
    
    Average (1)
    
    High
    
    Low(RMB per U.S. dollar)2006
    
    
    7.9579
    
    
    
    8.0702
    
    
    
    7.80412007
    
    
    7.5806
    
    
    
    7.8127
    
    
    
    7.29462008
    
    
    6.9193
    
    
    
    7.2946
    
    
    
    6.78002009
    
    
    6.8295
    
    
    
    6.8470
    
    
    
    6.81762010
    
    
    6.7603
    
    
    
    6.8330
    
    
    
    6.6000November 2010
    
    
    6.6538
    
    
    
    6.6892
    
    
    
    6.6630December 2010
    
    
    6.6497
    
    
    
    6.6745
    
    
    
    6.60002011January
    
    
    6.5964
    
    
    
    6.6364
    
    
    
    6.5809February
    
    
    6.5761
    
    
    
    6.5965
    
    
    
    6.5520March
    
    
    6.5438
    
    
    
    6.5743
    
    
    
    6.5483April
    
    
    6.5267
    
    
    
    6.5477
    
    
    
    6.4900May (through May 27, 2011)
    
    
    6.4965
    
    
    
    6.5073
    
    
    
    6.4913
 
 (1)
    
    The average rate for a year means the average of the exchange rates on the last day of
each month during a year. The average rate for a month means the average of the daily
exchange rates during that month. Dividends
   
 Item 3B. Capitalization and Indebtedness
  
 Item 3C. Reasons for the Offer and Use of Proceeds
  5




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Item 3D. Risk Factors
 Risks Relating to Our Business
 Any recurrence of a global financial crisis or economic downturn similar to that which
occurred in 2008 and early 2009 could materially and adversely affect our business, financial
condition, results of operations and prospects.
  We face competition, which may adversely affect our business growth and results of operations.
  6




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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.
  Extensive government regulation of the railway transportation industry may limit our
flexibility in responding to market conditions, competition or changes in our cost structure.
  Changes in freight composition in our freight transportation business may adversely affect our
results of operations.
  7




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Our railroads connect with the railroads of other operators and any disruption in the
operation of those railroads, or our cooperation with other operators, could have a material
adverse effect on our business and operations.
  A change to our preferential income tax status as a result of a change of law could have a
material adverse effect on our results of operations.
   
    
    18% for 2008;
    
    20% for 2009;
    
    22% for 2010;
    
    24% for 2011; and
    
    25% for 2012.
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Any changes in our right to own and operate our business and assets, our right to profit and
our right of asset disposal as previously granted by the MOR and the State Council may have a
material adverse effect on our business and results of operations.
  Guangzhou Railway (Group) Company as our largest shareholder and one of our major service
providers may have interests that conflict with the best interests of our other shareholders and
our Company.
   We have very limited insurance coverage.
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##### Table of Contents



We could incur significant costs for violations of applicable environmental laws and
regulations.
  Technological problems attributable to accidents, human error, severe weather or natural
disasters could affect the performance or perception of our railway and result in decreases in
customers and revenue, unexpected expenses and loss of market share.
    10




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The revenue or charges settled by the MOR for certain long-distance passenger train and
freight transportation businesses are finally determined by the MOR.
  We may encounter difficulties in complying with the Sarbanes-Oxley Act of 2002.
   11




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Risks Relating to Conducting Business in China
  Chinas economic, political and social conditions, as well as government policies, could
affect our business.
  Government control of currency conversion may adversely affect our operations and financial
results.
  Fluctuation of the RMB could adversely affect our financial condition and results of
operations.
  12




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The differences with respect to the PRC legal system could limit the legal protections
available to you.
  
 ITEM 4. INFORMATION ON THE COMPANY
 
 Item 4A. History and Development of the Company
 Overview
 
   13




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Background, Restructuring and Acquisition
    14




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15




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Service Territory
    Northbound
 Southbound
 Westbound
 Eastbound
  16




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##### Table of Contents



Item 4B. Business Overview
 Business Operations
       Year ended December 31,2006
    

2007
    

2008(4)
    
    2009(4)
    
    2010(4)Passenger TransportationTotal passenger revenue (RMB millions)
    
    
    2,608.84
    
    
    
    5,833.54
    
    
    
    6,759.23
    
    
    
    7,195.71
    
    
    
    8,104.13Total passengers (millions)
    
    
    35.98
    
    
    
    73.05
    
    
    
    83.82
    
    
    
    81.84
    
    
    
    84.92Total passenger-kilometers (millions)
    
    
    4,842.7
    
    
    
    26,278.2
    
    
    
    27,923.70
    
    
    
    27,233.10
    
    
    
    27,472.00Revenue per passenger-kilometer (RMB)(1)
    
    
    0.54
    
    
    
    0.22
    
    
    
    0.24
    
    
    
    0.26
    
    
    
    0.29Freight TransportationTotal freight revenue (RMB millions)
    
    
    565.56
    
    
    
    1,326.45
    
    
    
    1,324.70
    
    
    
    1,210.12
    
    
    
    1,360.82Total freight tonnes (millions)
    
    
    30.71
    
    
    
    71.01
    
    
    
    70.14
    
    
    
    61.99
    
    
    
    67.93Revenue per tonne (RMB)(2)
    
    
    18.42
    
    
    
    18.68
    
    
    
    18.89
    
    
    
    19.52
    
    
    
    20.03Total tonne-kilometers (millions)
    
    
    2,276.3
    
    
    
    15,306.9
    
    
    
    15,557.37
    
    
    
    13,446.70
    
    
    
    15,191.43Revenue per tonne-kilometer (RMB)(3)
    
    
    0.25
    
    
    
    0.09
    
    
    
    0.09
    
    
    
    0.09
    
    
    
    0.09
 17




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##### Table of Contents



Year ended December 31,2006
    

2007
    

2008(4)
    
    2009(4)
    
    2010(4)Railway Network Usage and Services(RMB millions)
    
    
    291.49
    
    
    
    2,659.53
    
    
    
    2,738.43
    
    
    
    3,105.65
    
    
    
    3,115.91
 
 (1)
    
    Revenue per passenger-kilometer is calculated by dividing total passenger revenue by
total passenger-kilometers. Management believes that revenue per passenger-kilometer is a
useful measure for assessing the revenue levels of our passenger transportation business.
The decrease in revenue per passenger-kilometer in 2007, 2008, 2009 and 2010 from 2006 was
primarily due to our acquisition of the railway transportation business between Guangzhou
and Pingshi in 2007, whose passenger transportation business had lower pricing levels than
the Guangzhou-Shenzhen Railway we operated before 2007.(2)
    
    Revenue per tonne is calculated by dividing total freight revenue by total freight
tonnes. Management believes that revenue per tonne is a useful measure for assessing the
revenue levels of our freight transportation business.(3)
    
    Revenue per tonne-kilometer is calculated by dividing total freight revenue by total
tonne-kilometers.
Management believes that revenue per tonne-kilometer is a useful measure for assessing
the revenue levels of our freight transportation business. The decrease in revenue per
tonne-kilometer in 2007, 2008, 2009 and 2010 from 2006 was primarily due to our
acquisition of the railway transportation business between Guangzhou and Pingshi in
2007, whose freight transportation business had lower pricing levels than the
Guangzhou-Shenzhen Railway we operated before 2007.(4)
    
    On January 1, 2007, the railway transportation business of the Guangzhou-Pingshi
Railway came under the control of our Company. Accordingly, we consider January 1, 2007
as the effective date of the acquisition for accounting purposes. Prior to our A Share
Offering, Yangcheng Railway Company and our Company were both controlled by the MOR, as
the MOR indirectly held controlling interests in both companies. Subsequent to our A
Share Offering, the equity interest of the MOR in our Company decreased to approximately
41%. On January 1, 2007, Yangcheng Railway Company and our Company were no longer deemed
to be under common control. As a result, such transaction does not constitute a business
combination under common control because our Company and Yangcheng Railway Company are not
ultimately controlled by the same party both before and after the business combination.
Accordingly, the transaction has been accounted for using the purchase method of
accounting and the results of operations of Yangcheng Railway Business have been included
in our consolidated comprehensive income statement starting from January 1, 2007. As a
result, our consolidated financial information for each of the years ended December 31,
2007, 2008, 2009 and 2010 included in this annual report has reflected the impact arising
from the Acquisition. Passenger Transportation
  
    
    inter-city high-speed express trains between Guangzhou and Shenzhen;
    
    Hong Kong Through Trains between Hong Kong and Guangzhou; and
    
    domestic long-distance trains.
  
    
    110 pairs were high-speed express passenger trains operating between Guangzhou and
Shenzhen (including 19 stand-by pairs), representing an increase of 10 pairs;
    
    13 pairs were Hong Kong Through Trains, including 11 pairs of Guangzhou-
 18




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##### Table of Contents



Kwoloon
Through Trains, one pair of through trains between Zhaoqing and Kowloon, and one pair
of through trains that operates on alternating days either on the Beijing-Kowloon line
or the Shanghai-Kowloon line; and
    
    101 pairs were domestic long-distance passenger trains, representing a decrease of
3 pairs from 104 pairs as of December 31, 2009, which included long-distance passenger
trains operated by us between Shenzhen and Yueyang, between Shenzhen and Shanghai
South, between Shenzhen
and Beijing West, between Kowloon and Beijing West, between Shenzhen and Shaoguan,
between Guangzhou and Chongqing North, between Guangzhou and Wanzhou, between
Guangzhou and Liuzhou, between Guangzhou and Xian, between Guangzhou and Taizhou,
between Guangzhou and Shanghai South, between Guangzhou and Jiujiang, between
Chenzhou and Foshan, between Guangzhou and Zhangjiajie, between Guangzhou and Lhasa
and between Sanya and Beijing West, as well as domestic long-distance trains that
are operated by other operators but originating or terminating on, or passing
through, our railroad.
  Total
passenger revenue
    

Total passengers
    

Revenue per passenger2008
    

2009
    

2010
    

2008
    

2009
    

2010
    

2008
    

2009
    

2010(RMB millions)
    
    (millions)
    
    (RMB)Guangzhou-Shenzhen Trains
    
    
    1,973.1
    
    
    
    2,046.6
    
    
    
    2,361.3
    
    
    
    32.1
    
    
    
    33.5
    
    
    
    36.9
    
    
    
    61.5
    
    
    
    61.1
    
    
    
    63.9Hong Kong Through Trains (1)
    
    
    380.3
    
    
    
    378.4
    
    
    
    413.7
    
    
    
    3.1
    
    
    
    2.8
    
    
    
    3.1
    
    
    
    122.1
    
    
    
    135.2
    
    
    
    133.7Long-distance Trains (1)
    
    
    4,405.8
    
    
    
    4,770.6
    
    
    
    5,329.2
    
    
    
    48.6
    
    
    
    45.5
    
    
    
    44.9
    
    
    
    N/A
    (2)
    
    
    N/A
    (2)
    
    
    N/A
    (2)Combined passenger operations
    
    
    6,759.2
    
    
    
    7,195.7
    
    
    
    8,104.1
    
    
    
    83.8
    
    
    
    81.8
    
    
    
    84.9
    
    
    
    N/A
    (2)
    
    
    N/A
    (2)
    
    
    N/A
    (2)
 
 (1)
    
    The operation of Beijing-Kowloon Through Trains, which run between Beijing West and Kowloon,
has been handed over to our Company since January 1, 2009. Before 2009, our Companys revenue
from Beijing-Kowloon Through Trains, excluding the revenue attributable to MTR in Hong Kong,
was generated only from the Guangzhou East-Kowloon section that implemented a special pricing
policy. Starting from January 1, 2009, all the revenue generated from the operation of
Beijing-Kowloon Through Trains, excluding the revenue attributable to MTR in Hong Kong, became
the revenue of our Company. We divide the revenue generated from the operation of
Beijing-Kowloon Through Trains into two parts: (i) all the revenue generated from passengers
departing for or from Hong Kong, excluding the revenue attributable to MTR, is accounted as
revenue from Hong Kong Through Trains and (ii) the remaining revenue is accounted as revenue
from long-distance trains.(2)
    
    Our revenue of long-distance passenger trains includes both the revenue from the passengers
arriving at our railway stations and the revenue from the passengers departing from our
railway stations. However, the number of our long-distance passengers only includes the
passengers departing from our railway stations. As a result, we believe that the per
passenger revenue cannot fairly reflect the financial status of our passenger transportation
business. Guangzhou-Shenzhen Trains
 19




---



##### Table of Contents



Hong Kong Through Trains.
    Domestic Long-distance Trains.
 20




---



##### Table of Contents



Major Stations.
 Guangzhou East Station.
 Dongguan Station.
 Shenzhen Station.
 21




---



##### Table of Contents



Shaoguan East Station.
 Guangzhou Station.
 Freight Transportation
   
    
    inbound freight, which is primarily freight unloaded at freight stations and
spur lines connected to ports on our rail line or in Hong Kong;
    
    outbound freight, which is primarily freight bound for other regions in Mainland
China as well as foreign countries loaded at our train stations and spur lines
connected to ports on our rail line or in Hong Kong; and
    
    pass-through freight, which refers to freight that travels on our rail line, but
which does not originate from or terminate at our rail line.
  
    
    the recovery of the Chinese economy, which resulted in strong demand for our
railway freight transportation services;
 22




---



##### Table of Contents




    
    leveraging on the launching of the Wuhan-Guangzhou passenger line which resulted in
the release of certain freight transportation capacity for the Wuhan-Guangzhou section
of the Beijing-Guangzhou line, we actively increased our marketing efforts and
strengthened the coordination of our freight transportation activities; and
    
    the increase in the national basic freight transportation price by RMB 0.007 per
tonne kilometer from December 13, 2009, which also contributed to the increase in the
revenue of our freight transportation business.
   Railway Network Usage and Services Business
   2008
    
    2009
    
    2010(RMB millions)Locomotive traction
    
    
    1,114.2
    
    
    
    1,359.9
    
    
    
    1,372.6Track usage
    
    
    953.5
    
    
    
    1,026.7
    
    
    
    965.4Electric catenaries
    
    
    281.8
    
    
    
    283.3
    
    
    
    282.9Vehicle coupling
    
    
    224.0
    
    
    
    275.4
    
    
    
    307.6Other services
    
    
    164.9
    
    
    
    160.4
    
    
    
    187.4Total
    
    
    2,738.4
    
    
    
    3,105.7
    
    
    
    3,115.9
 Other Businesses
  23




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Seasonality of Our Railway Transportation Business
  Sales
 Passenger Transportation
     24




---



##### Table of Contents



Freight Transportation
     Competition
   25




---



##### Table of Contents



Equipment, Tracks and Maintenance
      26




---



##### Table of Contents



Major Suppliers and Service Providers
     Regulatory Overview
  National Railway System
  27




---



##### Table of Contents



Transport Operations
     28




---



##### Table of Contents



Pricing
   Environmental Protection
  Insurance
  29




---



##### Table of Contents



Item 4C. Organizational Structure
  Country of
    
    Percentage of Interest heldName
    
    Incorporation
    
    by our CompanyGuangshen Railway Dongqun Trade and Commerce Service
Company
    
    PRC
    
    
    100
    %Shenzhen Fu Yuan Enterprise Development Company Limited
    
    PRC
    
    
    100
    %Shenzhen Guangshen Railway Travel Service Ltd.
    
    PRC
    
    
    100
    %Shenzhen Pinghu Qun Yi Railway Store Loading and Unloading
Company Limited
    
    PRC
    
    
    55
    %Dongguan Changsheng Enterprise Company Limited
    
    PRC
    
    
    51
    %Shenzhen Railway Station Passenger Services Company Limited
    
    PRC
    
    
    100
    %Guangzhou Tielian Economy Development Company Limited
    
    PRC
    
    
    50.5
    %Shenzhen Nantie Construction Supervision Company Limited
    
    PRC
    
    
    76.66
    %Guangzhou Railway Huangpu Service Company Limited
    
    PRC
    
    
    100
    %Shenzhen Guangshen Railway Economic and Trade Enterprise
Company Limited
    
    PRC
    
    
    100
    %Shenzhen Railway Property Management Company Limited
    
    PRC
    
    
    100
    %Guangzhou Dongqun Advertising Company Limited
    
    PRC
    
    
    100
    %Shenzhen Shenhuasheng Storage and Transportation Company
Limited
    
    PRC
    
    
    100
    %
 
 Item 4D. Property, Plant and Equipment
   30




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##### Table of Contents



ITEM 4A. UNRESOLVED STAFF COMMENTS
  
 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 This discussion and analysis should be read in conjunction with our audited consolidated
financial statements included elsewhere in this annual report. Our audited consolidated financial
statements are prepared in accordance with International Financial Reporting Standards as issued by
IASB.
 Overview
  31




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##### Table of Contents



Item 5A. Operating Results
 Principal Factors Affecting Our Results of Operations
 Economic Development in the Pearl River Delta Region and the PRC.
 32




---



##### Table of Contents



Competitive Pressure from other Railway Operators and other Means of Transportation.
 PRC Policies. .
 Year ended December 31, 2010 compared with year ended December 31, 2009
 Revenue
  Passenger transportation service.
 33




---



##### Table of Contents



Year ended December 31,
    
    Change in 2010 from2008
    
    2009
    
    2010
    
    2009Revenue from passenger
transportation (RMB thousands)
    
    
    6,759,229
    
    
    
    7,195,717
    
    
    
    8,104,126
    
    
    
    12.6
    %Total passengers (thousands)
    
    
    83,825
    
    
    
    81,838
    
    
    
    84,923
    
    
    
    3.8
    %Total passenger-kilometers (millions)
    
    
    27,923.7
    
    
    
    27,233.1
    
    
    
    27,472.0
    
    
    
    0.9
    %Revenue per passenger-kilometer (RMB)
    
    
    0.24
    
    
    
    0.26
    
    
    
    0.29
    
    
    
    11.5
    %
 Freight transportation
 
    
    the recovery of the Chinese economy, which resulted in strong demand for our railway
freight transportation services;
    
    leveraging on the launching of the Wuhan-Guangzhou passenger line, which resulted in
the release of certain freight transportation capacity for the Wuhan-Guangzhou section
of the Beijing-Guangzhou line, we actively increased our marketing efforts and
strengthened the coordination of our freight transportation activities; and
    
    the increase in the national basic transportation price by RMB 0.007 per tonne
kilometer from December 13, 2009, which also contributed to the increase in the revenue
of our freight transportation business.
  Year ended December 31,
    
    Change in 2010 from2008
    
    2009
    
    2010
    
    2009Revenue from freight transportation
(RMB thousands)
    
    
    1,324,701
    
    
    
    1,210,118
    
    
    
    1,360,822
    
    
    
    12.5
    % Revenue from outbound freight
transportation(1)
    
    
    282,678
    
    
    
    285,186
    
    
    
    339,956
    
    
    
    19.2
    %
 34




---



##### Table of Contents



Year ended December 31,
    
    Change in 2010 from2008
    
    2009
    
    2010
    
    2009 Revenue from inbound(1) and
pass-through transportation
    
    
    948,177
    
    
    
    836,408
    
    
    
    925,608
    
    
    
    10.7
    %Revenue from other freight transportation
services.
    
    
    93,848
    
    
    
    88,524
    
    
    
    95,258
    
    
    
    7.6
    %Total freight tonnes (thousands of tonnes)
    
    
    70,141
    
    
    
    61,987
    
    
    
    67,932
    
    
    
    9.6
    % Outbound freight tonnage
    
    
    16,847
    
    
    
    17,622
    
    
    
    20,963
    
    
    
    19.0
    % Inbound and pass-through freight tonnage
    
    
    53,295
    
    
    
    44,365
    
    
    
    46,969
    
    
    
    5.9
    %Revenue per tonne (RMB)
    
    
    18.89
    
    
    
    19.52
    
    
    
    20.03
    
    
    
    2.6
    %Total tonne-kilometers (millions)
    
    
    15,557.4
    
    
    
    13,446.7
    
    
    
    15,191.4
    
    
    
    13.0
    %Revenue per tonne-kilometer (RMB)
    
    
    0.09
    
    
    
    0.09
    
    
    
    0.09
    
    
    
    
 
 (1)
    
    A portion of the revenue previously recorded as inbound freight revenue was recognized
as revenue from outbound freight. Railway Network Usage and Services Business.
 Other Businesses.
 Operating Expenses
  Year ended December 31,2008
    
    2009
    
    2010Railroad businesses revenue (RMB millions)
    
    
    10,822.4
    
    
    
    11,511.5
    
    
    
    12,580.9Business tax
    
    
    2
    %
    
    
    2
    %
    
    
    2
    %Labor and benefits
    
    
    20
    %
    
    
    20
    %
    
    
    21
    %Equipment leases and services
    
    
    25
    %
    
    
    26
    %
    
    
    26
    %Lease of land use right
    
    
    0.46
    %
    
    
    0.45
    %
    
    
    0.42
    %Materials and supplies
    
    
    12
    %
    
    
    12
    %
    
    
    12
    %Repair costs, excluding materials and supplies
    
    
    6
    %
    
    
    5
    %
    
    
    7
    %Depreciation and amortization of leasehold land payments
    
    
    11
    %
    
    
    11
    %
    
    
    11
    %Fee for social services
    
    
    4
    %
    
    
    3
    %
    
    
    1
    %Utility and office expenses
    
    
    1
    %
    
    
    1
    %
    
    
    1
    %Others
    
    
    4
    %
    
    
    3
    %
    
    
    3
    %Operating expenses ratio(1)
    
    
    85
    %
    
    
    84
    %
    
    
    83
    %Railroad businesses operating margin
    
    
    15
    %
    
    
    16
    %
    
    
    17
    %
 35




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##### Table of Contents



(1)
    
    Total railroad operating expenses as a percentage of railroad businesses revenue. Railway Operating Expenses.
 
    
    Labor and benefits. In 2010, our labor and benefits expenses amounted to RMB
2,662.3 million, representing an increase of 16.9% from RMB 2,277.1 million in 2009.
The increase was mainly due to the increase in employees basic salaries, allowances
and benefits and the increase in retirement benefits paid to retired employees.
    
    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 2010, our expenses relating to equipment leases and
services amounted to RMB 3,235.9 million, representing an increase of 8.8% from RMB
2,974.8 million in 2009. This was mainly due to (i) the increase in railway network
usage and service fees due to the commencement of operations of Guanghzhou-Xinyang,
Guangzhou-Tongren and Shenzhen-Shanghai long-distance trains; (ii) the increase in the
rental of locomotive and passenger trains as a result of the increased number of our
long-distance trains and additional services provided during the Chinese New Year and
(iii) the increase in freight tonnage, which resulted in increased train usage.
    
    Repairs and facilities maintenance costs, excluding materials and supplies. In
2010, our repairs and facilities maintenance costs, excluding materials and supplies,
amounted to RMB 828.4 million, representing an increase of 40.8% from RMB 588.3 million
in 2009. This was mainly because (i) we completed the repairs and maintenances for the
majority of our CRHs in 2010 and (ii) the route selection and passenger trains repair
expenses increased.
    
    Materials and supplies. Our materials and supplies consist of materials, fuel,
water and electricity expenses. In 2010, our materials and supplies amounted to RMB
1,457.8 million, representing an increase of 4.5% from RMB 1,395.3 million in 2009.
This was mainly due to (i) the increase in material consumption cost as a result of the
commencement of operations of Guanghzhou-Xinyang, Guangzhou-Tongren and
Shenzhen-Shanghai long-distance trains and upgrades of Guangzhou-Xian and
Guangzhou-Wanzhou trains and (ii) the increase of electricity expenses as a result of
the significant increase in the workload of our electric driven trains due to the
adjustments of railway diagrams by the MOR in November 2009 and April 2010.
    
    Utility and office expense. Our utility and office expense increased by 12.7% from
RMB 111.8 million in 2009 to RMB 126.0 million in 2010. This was mainly due to the
Companys internal restructuring in 2010, when certain functions that were previously
outsourced, including social security, were handled by the Company itself and therefore
led to an increase in the relevant expenses in 2010.
  36




---



##### Table of Contents




    
    Social service expenses. Our social service expenses decreased by 61.2% from RMB 373.3 million in 2009 to RMB 144.8 million in 2010. This was primarily due to the fact
that since January 1, 2010, we paid significantly less for the railway security
services provided by railway security staff as a result of the reform of the railway
security system. In addition, railway security fees were no longer accounted for as
social services fees but as utility and office expense.
 Profit from Operations
  Taxation
   Profit attributable to shareholders of the Company
  Year ended December 31, 2009 compared with year ended December 31, 2008
 Revenue
  Passenger transportation service.
 37




---



##### Table of Contents



Year ended December 31,
    
    Change in 2009 from2007
    
    2008
    
    2009
    
    2008Revenue from passenger
transportation (RMB thousands)
    
    
    5,833,538
    
    
    
    6,759,229
    
    
    
    7,195,717
    
    
    
    6.5
    %Total passengers (thousands)
    
    
    73,053
    
    
    
    83,825
    
    
    
    81,838
    
    
    
    (2.4
    %)Total passenger-kilometers (millions)
    
    
    26,278.2
    
    
    
    27,923.7
    
    
    
    27,233.1
    
    
    
    (2.5
    %)Revenue per passenger-kilometer (RMB)
    
    
    0.22
    
    
    
    0.24
    
    
    
    0.26
    
    
    
    8.3
    %
  Freight transportation.
 
    
    in 2009, our outbound freight tonnage was 17.6 million tonnes, representing an
increase of 4.6% from 16.8 million tonnes in 2008. Our outbound freight revenue was
RMB 285.2 million in 2009, representing an increase of 0.9% from RMB 282.7 million in
2008. Our outbound freight tonnage increased in 2009 due to (i) the partial recovery
of our freight transportation business, along with the economic recovery of China, from
the decline caused by the global
 38




---



##### Table of Contents



financial crisis and economic downturn in 2008 and (ii) an increase in the freight
transportation volume of our Beijing-Guangzhou line.
    
    in 2009, our inbound and pass-through freight tonnages were 44.4 million tonnes,
representing a decrease of 16.8% from 53.3 million tonnes in 2008. Our inbound and
pass-through freight revenue was RMB 836.4 million in 2009, representing a decrease of
11.8% from RMB 948.2 million in 2008. Our inbound and pass-through freight revenue
decreased mainly because of the decrease in the inbound and pass-through freight
tonnages, as a result of the decrease in freight transported to harbors for
exportation, which was affected by the PRC governments policy to encourage domestic
enterprises to focus on meeting demand from the domestic market.
  Year ended December 31,
    
    Change in 2009 from2007
    
    2008
    
    2009
    
    2008Revenue from freight transportation
(RMB thousands)
    
    
    1,326,450
    
    
    
    1,324,701
    
    
    
    1,210,118
    
    
    
    (8.7
    %) Revenue from outbound freight
transportation(1)
    
    
    216,888
    
    
    
    282,678
    
    
    
    285,186
    
    
    
    0.9
    % Revenue from inbound(1) and
pass-through transportation
    
    
    1,010,665
    
    
    
    948,177
    
    
    
    836,408
    
    
    
    (11.8
    %)Revenue from other freight transportation
services
    
    
    98,897
    
    
    
    93,848
    
    
    
    88,524
    
    
    
    (5.7
    %)Total freight tonnes (thousands of tonnes)
    
    
    71,010
    
    
    
    70,141
    
    
    
    61,987
    
    
    
    (11.6
    %) Outbound freight tonnage
    
    
    19,056
    
    
    
    16,847
    
    
    
    17,622
    
    
    
    4.6
    % Inbound and pass-through freight tonnage
    
    
    51,955
    
    
    
    53,295
    
    
    
    44,365
    
    
    
    (16.8
    %)Revenue per tonne (RMB)
    
    
    18.68
    
    
    
    18.89
    
    
    
    19.52
    
    
    
    3.3
    %Total tonne-kilometers (millions)
    
    
    15,306.9
    
    
    
    15,557.4
    
    
    
    13,446.7
    
    
    
    (13.6
    %)Revenue per tonne-kilometer (RMB)
    
    
    0.09
    
    
    
    0.09
    
    
    
    0.09
    
    
    
    
 
 (1)
    
    A portion of the revenue previously recorded as inbound freight revenue was recognized
as revenue from outbound freight.  Railway Network Usage and Services Business.
 Other Businesses.
 Operating Expenses
  39




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Year ended December 31,2007
    
    2008
    
    2009Railroad businesses revenue (RMB millions)
    
    
    9,819.5
    
    
    
    10,822.4
    
    
    
    11,511.5Business tax
    
    
    2
    %
    
    
    2
    %
    
    
    2
    %Labor and benefits
    
    
    20
    %
    
    
    20
    %
    
    
    20
    %Equipment leases and services
    
    
    26
    %
    
    
    25
    %
    
    
    26
    %Lease of land use right
    
    
    0.51
    %
    
    
    0.46
    %
    
    
    0.45
    %Materials and supplies
    
    
    13
    %
    
    
    12
    %
    
    
    12
    %Repair costs, excluding materials and supplies
    
    
    5
    %
    
    
    6
    %
    
    
    5
    %Depreciation and amortization of leasehold land payments
    
    
    10
    %
    
    
    11
    %
    
    
    11
    %Fee for social services
    
    
    4
    %
    
    
    4
    %
    
    
    3
    %Utility and office expenses
    
    
    1
    %
    
    
    1
    %
    
    
    1
    %Others
    
    
    3
    %
    
    
    4
    %
    
    
    3
    %Operating expenses ratio(1)
    
    
    85
    %
    
    
    85
    %
    
    
    84
    %Railroad businesses operating margin
    
    
    15
    %
    
    
    15
    %
    
    
    16
    %
 
 (1)
    
    Total railroad operating expenses as a percentage of railroad businesses revenue. Railway Operating Expenses.
 
    
    Equipment leases and services. Our expenses for equipment leases and services
mainly consist of railway line usage fees, train hauling fees and train leasing fees
paid to other railway bureaus. In 2009, our expenses relating to equipment leases and
services amounted to RMB 2,974.8 million, representing an increase of 12.1% from RMB
2,653.2 million in 2008. This was mainly due to increased railway usage fees paid by
us as result of (i) our takeover of the entire operation of Beijing-Kowloon Through
Train since January 2009 and (ii) the change in the status of the Guangzhou-Xian
trains from temporarily operated trains to regularly operated trains.
    
    Depreciation.Our depreciation expenses of fixed assets increased by 6.8% from RMB 1,186.7 million in 2008 to RMB 1,267.9 million in 2009, mainly due to the increase in
depreciation expenses relating to the CRHs and the Fourth Rail Line between Guangzhou
and Shenzhen.
    
    Labor and benefits. In 2009, our labor and benefits expenses amounted to RMB
2,277.1 million, representing an increase of 7.1% from RMB 2,125.4 million in 2008.
The increase was mainly due to the increase in employees basic salaries, allowances
and benefits.
    
    Business tax. Our business tax in 2009 was RMB 267.0 million, representing an
increase of 5.5% from RMB 253.0 million in 2008. The increase was mainly due to the
increase in our operating revenue.
  40




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##### Table of Contents




    
    Others. Our other railway operating expenses decreased by 13.8% from RMB 382.2
million in 2008 to RMB 329.6 million in 2009. This was mainly because we did not incur
as severe weather conditions in the first quarter of 2009 as in the first quarter of
2008, and therefore did not spend the related operating costs.
    
    Repair (excluding materials and supplies). Our repair expenses decreased by 12.2%
from RMB 670.2 million in 2008 to RMB 588.3 million in 2009, primarily because we
completed most of our previously planned repair work in 2008 and therefore managed to
reduce repair expenses in 2009.
    
    Utility and office expense. Our utility and office expense decreased by 7.9% from
RMB 121.4 million in 2008 to RMB 111.8 million in 2009. This was mainly due to our
efforts to control costs on administration and transportation in response to the recent
global financial crisis and economic downturn.
    
    Social service expenses. Our social service expenses decreased by 6.8% from RMB
400.5 million in 2008 to RMB 373.3 million in 2009. This was primarily because (i) we
did not experience as severe weather conditions in the first quarter of 2009 as in the
first quarter of 2008 and therefore incurred less expenses for implementing security
measures and (ii) in 2009, we were no longer required to implement the security
measures required by the PRC government for the Beijing 2008 Olympic Games.
 Profit from Operations
  Taxation
  Profit attributable to shareholders of the Company
  41




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##### Table of Contents



Critical Accounting Policies and Estimates
   Revenue recognition
   Revenue from railway business:
 Revenue from other businesses:
 Interest income:
 Dividend income:
 42




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##### Table of Contents



Rental income:
 Fixed assets
    Buildings (Note a)
    
    20 to 40 yearsLeasehold improvements
    
    Shorter of useful life or lease termsTrack, bridges and service roads (Note a)
    
    16 to 100 yearsLocomotives and rolling stock
    
    20 yearsCommunications and signaling systems
    
    8 to 20 yearsOther machinery and equipment
    
    4 to 25 years
 
 Note a:
    
    The estimated useful lives of buildings, tracks, bridges and service roads exceed the
initial lease periods of the respective land use right lease grants (the Lease Term) and
land use right operating leases (the Operating Lease Term) of the land on which these assets
are located. Pursuant to the relevant laws and regulations in the PRC governing the land use
right lease grant, we have the right to renew the leases to a period not less than 50 years
after payment of additional cost. This right can be exercised within one year of the expiry
of the initial Lease Term and can only be denied if such renewals are considered to be
detrimental to the public interest. We consider the approval process to be perfunctory. In
addition, based on the provision of the land use right operating lease agreement entered into
with our substantial shareholder, we can renew the lease at our own discretion upon expiration
of the Operating Lease Term. Based on these considerations, we determined the estimated
useful lives of these assets to extend beyond the initial Lease Term as well as the Operating
Lease Term.  43




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##### Table of Contents



Government grants
    Trade and other receivables
   
    
    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
 44




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##### Table of Contents



(ii)
    
    national or local economic conditions that correlate with defaults on the assets in
the portfolio.
  Trade payables
  Goodwill
   Impairment of investment in subsidiaries, associates and non-financial assets
   45




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##### Table of Contents



Current and deferred income tax
       Employee benefits
   46




---



##### Table of Contents



Critical Accounting Estimates and Assumptions
  Estimates of the depreciable lives of fixed assets
   Estimated impairment of goodwill
  Estimated impairment of non-financial assets (other than goodwill)
  47




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##### Table of Contents



Income taxes
  
 Item 5B. Liquidity and Capital Resources
    
    
    capital expenditures of approximately RMB 1,158.4 million, representing a decrease
of 29.4% from RMB 1,639.7 million in 2009;
    
    payment of dividends of approximately RMB 566.7 million; and
    
    income tax expenses of approximately RMB 390.3 million.
  
    
    constructing the Buji passenger station;
    
    upgrading and expanding the transportation equipment for the
Shenzhen-Guangzhou-Pingshi Railway; and
    
    upgrading the supporting facilities to improve the safety for railway
transportation.
   48




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##### Table of Contents



Cash Flow
  Year ended December 31,
    
    Change in 20102008
    
    2009
    
    2010
    
    from 2009(RMB thousands)Net cash generated from operating
activities
    
    
    1,641,069
    
    
    
    2,617,533
    
    
    
    3,331,458
    
    
    
    27.3
    %Net cash used in investing activities
    
    
    (2,915,785
    )
    
    
    (2,096,154
    )
    
    
    (1,188,763
    )
    
    
    (43.3
    %)Net cash used in financing activities
    
    
    483,317
    
    
    
    (966,680
    )
    
    
    (599,288
    )
    
    
    (38.0
    %)Net (decrease)/increase in cash and
cash equivalents
    
    
    (791,399
    )
    
    
    (445,301
    )
    
    
    1,543,407
    
    
    
    446.6
    %
      49




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##### Table of Contents



Item 5C. Research and Development, Patents and Licenses, etc.
  .
 
 Item 5D. Trend Information
  50




---



##### Table of Contents



Item 5E. Off-Balance Sheet Arrangements
  51




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##### Table of Contents



Item 5F. Tabular Disclosure of Contractual Obligations
  Payment due by period(RMB thousands)Contractual Obligations
    
    Total
    
    Less than 1year
    
    1-3 year
    
    3-5 year
    
    More than5 yearsLong-Term Debt Obligations
    
    
    4,163,710
    
    
    
    167,650
    
    
    
    335,300
    
    
    
    3,660,760
    
    
    
    Capital Expenditure Obligation
    
    
    99,313
    
    
    
    84,531
    
    
    
    14,782
    
    
    
    
    
    
    
    Operating Lease Obligations(1)
    
    
    1,184,000
    
    
    
    74,000
    
    
    
    148,000
    
    
    
    148,000
    
    
    
    814,000Other Long-Term Liabilities Reflected on the Companys Balance Sheet under IFRS
    
    
    269,180
    
    
    
    71,794
    
    
    
    127,513
    
    
    
    69,557
    
    
    
    315Total
    
    
    5,716,203
    
    
    
    397,975
    
    
    
    625,595
    
    
    
    3,878,317
    
    
    
    814,315
 
 (1)
    
    In connection with the Acquisition, we signed an agreement on November 15, 2004
with GRGC for leasing the land on which the acquired assets are located. The agreement
became effective upon the completion of the Acquisition on January 1, 2007 and the lease
term is 20 years, renewable at our discretion. According to the terms of the agreement,
the rental for such lease will be agreed by both parties every year with a maximum amount
not exceeding RMB 74.0 million. In the year ended December 31, 2010, the related rental
cost paid and payable was RMB 52.4 million.  
    
    constructing the Buji passenger station;
    
    constructing new ancillary facilities for the Guangzhou-Shenzhen Fourth Rail Line;
and
    
    upgrading the supporting facilities to improve the safety for railway
transportation.
 
 Item 5G. Safe Harbor
 Safe Harbor
  
 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 
 Item 6A. Directors and Senior Management
 Directors
  52




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##### Table of Contents



Date First Elected orName
    
    Age
    
    Position
    
    AppointedXu Xiaoming
    
    
    55
    
    
    Chairman of the Board of Directors
    
    
    2010Shen Yi
    
    
    56
    
    
    Director and General Manager
    
    
    2008Guo Zhuxue
    
    
    44
    
    
    Director
    
    
    2010Li Liang
    
    
    50
    
    
    Director
    
    
    2009Yu Zhiming
    
    
    52
    
    
    Director
    
    
    2008Luo Qing
    
    
    46
    
    
    Director
    
    
    2009Lu Minlin
    
    
    57
    
    
    Independent Director
    
    
    2011Liu Xueheng
    
    
    37
    
    
    Independent Director
    
    
    2011Liu Feiming
    
    
    41
    
    
    Independent Director
    
    
    2011
      53




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##### Table of Contents



Supervisors
  Date First ElectedName
    
    Age
    
    Position
    
    or AppointedXu Ling
    
    
    55
    
    
    Chairman of the supervisory committee
    
    
    2010
 54




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##### Table of Contents



Date First ElectedName
    
    Age
    
    Position
    
    or AppointedChen Shaohong
    
    44
    
    
    
    Supervisor
    2008Li Zhiming
    
    50
    
    
    
    Supervisor
    2005Shen Jiancong
    
    42
    
    
    
    Supervisor
    2011Xu Huiliang
    
    48
    
    
    
    Supervisor
    2010Chen Jianping
    
    44
    
    
    
    Supervisor
    2011
       55




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##### Table of Contents



Senior Management
  Name
    
    Age
    
    Position
    

Date First Elected or AppointedShen Yi
    
    
    56
    
    
    General Manager
    
    2008Mu Anyun
    
    
    50
    
    
    Deputy General Manager
    
    2009Guo Xiangdong
    
    
    45
    
    
    Deputy General Managerand Company Secretary
    
2004Tang Xiangdong
    
    
    41
    
    
    Chief Accountant
    
    2008
     Additional Information
 56




---



##### Table of Contents



Name
    
    PositionXu Xiaoming
    
    Chairman of the Board of Directors of:   GRGC   Guangdong Pearl Delta Inter-city Rail Transportation Company Limited   Guangmeishan Railway Company Limited   Guangdong Sanmao Railway Company Limited   Shichang Railway Company Limited   Yuehai Railway Company Limited   Guangzhou-Zhuhai  Railway Company Limited   Hainan Donghuan Railway Company Limited   Xiashen Railway (Guangdong) Company Limited   Ganshao Railway Company Limited   Hunan Inter-city Railway Company Limited   Guangzhou Electric Locomotive Co., Ltd.   China Railway (Hong Kong) Holdings Company LimitedGuo Zhuxue
    
    Chairman of the Board of Directors of:   Hukun Railway Passenger Line Hunan Company LimitedVice Chairman of the Board of Directors and General Manager of   GRGCShen Yi
    
    Director of:   Guangzhou Tiecheng Industrial Company LimitedLi Liang
    
    Executive Deputy General Manager of:   GRGCYu Zhiming
    
    Chairman of the supervisory committee of:   Yuehai Railway Company Limited   Guangzhou-Shenzhen-Hong
Kong Express Rail Link Company Limited, Guangzhou-Zhuhai   Guangzhou-Zhuhai Railway Company Limited   Maozhan Railway Company LimitedDirector of:   Guangmeishan Railway Company Limited   Guangdong Sanmao Railway Company Limited   Shichang Railway Company Limited   Hainan Donghuan Railway Company Limited   Hukun Railway Passenger Line (Hunan) Company Limited   Ganshao Railway Company Limited   Guangdong
Pearl Delta Inter-city Rail Transportation Company Limited   China Railway Container Transportation Company Limited   China
Railway Special Goods Transportation Company Limited
 57




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##### Table of Contents



Name
    
    PositionSupervisor of:   Guangzhou-Zhuhai Railway Company LimitedChief Accountant of:   GRGCXu Ling
    
    Chairman of the supervisory committee of:   Guangmeishan Railway Company Limited   Guangdong Sanmao Railway Company LimitedSupervisor of:   Guangzhou-Zhuhai Railway Company LimitedChen Shaohong
    
    Director of:   Yuehai Railway Company Limited   Guangmeishan Railway Company Limited   Xiashen Railway Guangdong Company Limited   Jinyue Railway Company Limited   Sanmao Railway Enterprise Development Company LimitedChairman of the supervisory committee of:   Shichang Railway Company Limited   Hukun Railway Passenger Line (Hunan) Company LimitedSupervisor of:   Guangdong Sanmao Railway Company Limited   Hunan Inter-city Railway Company Limited   Guangdong
Pearl River Delta Inter-city Railway Company Limited   Hainan Donghuan Railway Company Limited   GanShao Railway Company Limited   China Railway Express Co., Ltd.Li Zhiming
    
    Chairman of the supervisory committee of:   Beijing Xingguangji Company Limited   Guangzhou Tiecheng Industrial Company LimitedDirector of:   Hong Kong Kai Man LimitedSupervisor of :   Guangmeishan Railway Company Limited   Guangdong Sanmao Railway Company Limited   Guangdong
Sanmao Railway Enterprise Development Company Limited   Yuehai Railway Company Limited   Shichang
Railway Company Limited, Hukun Passenger Railway Line (Hunan) Co., Ltd.   Xiashen Railway (Guangdong) Company Limited   Hukun Railway Passenger Line (Hunan) Company Limited   GanShao Railway Company Limited   Guiyang-Guangzhou Railway Co., Ltd.
 58




---



##### Table of Contents



Name
    
    Position   Hunan - Guangzhou Railway Co., Ltd.   JingYue Railway Company LimitedTang Xiangdong
    
    Supervisor of:   Guangdong Tiecheng Industrial Company Limited
  
 Item 6B. Board Compensation
 Directors and Senior Management
    Interests of Our Directors, Supervisors and Other Senior Management in Our Share Capital
  59




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##### Table of Contents



Service Contracts of Our Directors and Supervisors
  Contracts Entered into by Our Directors and Supervisors
  Remuneration of Our Directors and Supervisors
  
 Item 6C. Board Practices
 Board of Directors
  Supervisory Committee
  60




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##### Table of Contents




    
    to examine the Companys financial situation;
    
    to supervise the performance of duties of the directors, general manager, deputy
general managers and other senior management; to propose the dismissal of directors,
general manager, deputy general managers and other senior management who have violated
any law, administrative regulations, the Articles of Association or resolutions of the
shareholders general meetings;
    
    to demand a director, general manager, deputy general manager or any other senior
management to rectify such breach when the acts of such persons are harmful to the
Companys interest;
    
    to propose the convening of shareholders general meetings, and to convene and
chair the shareholders general meetings if the board of directors fails to perform
this duty as stipulated in the Articles of Association;
    
    to propose motions to shareholders general meetings; and
    
    to initiate legal proceedings against any director, general manager, deputy general
manager and other senior management in accordance with Article 152 of the Company Law.
   Audit Committee
  61




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##### Table of Contents




    
    reviewing the annual financial statements and interim financial statements of the
Company, including the disclosures made by the Company in this annual report;
    
    reviewing the financial reports and the reports of the Company prepared by the
independent auditor and its supporting documents, including the review of the internal
control and disclosure controls and procedures, and to discuss with the auditor the
annual audit plan and solutions to problems in the previous year;
    
    reviewing and approving the selection of and remuneration paid to the independent
auditor;
    
    pursuant to the resolutions of the annual general meeting, determining with the
Board of Directors the annual auditing fees paid to our independent auditor;
    
    reviewing with the management and the independent auditor the performance, adequacy
and effectiveness of the internal controls and risk management, as well as any
material deficiencies and weakness existing in the internal controls;
    
    evaluating the Companys performance in complying with industrial practices, market
rules, and statutory duties, and the safeguarding of its own interests and the
interests of its shareholders;
    
    considering and determining whether any senior executive officer or senior
financial personnel is in violation of their code of conduct, and the consequences for
such a violation; and
    
    overseeing the management of the retirement pension fund of the Company.
 Remuneration Committee
   62




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##### Table of Contents



Item 6D. Employees
  Function
    
    EmployeesPassenger transportation personnel (1)
    
    
    8,863Coordination personnel (2)
    
    
    1,983Freight transportation personnel (3)
    
    
    1,497Mechanical personnel (4)
    
    
    4,080Power and water supply personnel (5)
    
    
    1,545Vehicle personnel (6)
    
    
    2,706Maintenance personnel (7)
    
    
    3,756Power service personnel (8)
    
    
    1,281Transportation supporting personnel (9)
    
    
    955Diversified businesses and other supporting personnel(10)
    
    
    391Technical and administrative personnel (11)
    
    
    4,107Other personnel (12)
    
    
    1,015Total
    
    
    32,179
 
 (1)
    
    Passenger transportation personnel mean those people that provide station boarding
and train services.(2)
    
    Coordination personnel mean those people responsible for train coordination.(3)
    
    Freight transportation personnel mean those people responsible for organization of
freight transportation.(4)
    
    Mechanical personnel mean those people responsible for train operation and overhaul.(5)
    
    Power and water supply personnel mean those people responsible for contact network
operation and overhaul as well as power and water consumption maintenance.(6)
    
    Vehicle personnel mean those people responsible for vehicle operation and overhaul.(7)
    
    Maintenance personnel mean those people responsible for station track and railroad
switch maintenance.(8)
    
    Power service personnel mean those people responsible for signal equipment
maintenance.(9)
    
    Transportation supporting personnel means the supporting personnel of trains,
machinery, works, power and vehicle organizations.(10)
    
    Diversified businesses and other supporting personnel mean all personnel involved in
diversified businesses.(11)
    
    Technical and administrative personnel mean all managerial personnel other than the
personnel of diversified businesses.(12)
    
    Other personnel include all personnel who have been sick, studying or early-retired.    63




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##### Table of Contents



Item 6E. Share Ownership
  
 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 
 Item 7A. Major Shareholders
  Shareholding Structure of our Company
  Types
    
    
    
    
    
    ShareholdingName of Shareholders
    
    of Shares
    
    Number of Shares Held
    
    Percentage %Public Shareholders
of H shares
(including ADSs)
    
    H shares
    
    
    1,431,300,000
    
    
    
    20.2Guangzhou Railway
(Group)
    
    A shares
    
    
    2,629,451,300
    
    
    
    37.1
 64




---



##### Table of Contents



Types
    
    
    
    
    
    ShareholdingName of Shareholders
    
    of Shares
    
    Number of Shares Held
    
    Percentage %CompanyNational Social
Security Fund
Council(1)
    
    A shares
    
    
    274,798,700
    
    
    
    3.9Other Public Shareholders of A
shares
    
    A shares
    
    
    2,747,987,000
    
    
    
    38.8Total
    
    
    
    
    
    
    7,083,537,000
    
    
    
    100.0
 
 (1)
    
    On September 22, 2009, in accordance with relevant PRC regulations on transferring a portion of
state-owned shares to the National Social Security Fund Council, the state-owned assets supervision
and administration authority ordered China Securities Depository and Clearing Co., Ltd. to transfer
274,798,700 state-owned shares held by GRGC to the National Social Security Fund Council, with an
extended lock-up period of an additional three years following the expiry of the original
three-year lock-up period.  Percentageof Class of
    
    Percent of TotalTitle of Class
    

Identity of Person or Group
    
    Amount Owned
    
    Shares
    
    CapitalOrdinary Shares (A shares)(1)
    
    GRGC
    
    
    2,629,451,300
    
    
    
    46.5
    
    
    
    37.1
 
 (1)
    
    A shares held by GRGC are no longer restricted from sales and redemption starting from December
22, 2009.  Percentage of
    
    Percentage of TotalIdentity of Person or Group
    
    Shares Owned
    
    H Shares
    
    CapitalFIL Limited
    
    128,390,000
    (L)(1)
    
    
    8.97
    (L)
    
    
    1.81
    (L)Credit Suisse Group AG
    
    99,727,18997,615,189
    (L)(1)
(S)(1)
    
    
    6.97
6.82
    (L)
(S)
    
    
    1.41
1.38
    (L)
(S)The Bank of New York Mellon Corporation
    
    85,694,9169,161,876
    (L)(1)
(S)(1)
    
    
    5.99
0.64
    (L)
(S)
    
    
    1.21
0.13
    (L)
(S)Blackrock, Inc.
    

79,141,42154,193,071
    (L)(1)
(P)(1)
    
    
    5.53
3.79
    (L)
(P)
    
    
    1.12
0.77
    (L)
(P)Hillhouse Capital Management, Ltd.
    
    73,802,000
    (L)(1)
    
    
    5.16
    (L)
    
    
    1.04
    (L)Gaoling Fund, L.P.
    
    72,070,000
    (L)(1)
    
    
    5.04
    (L)
    
    
    1.02
    (L)
 
 (1)
    
    The letter L denotes a long position. The letter S denotes a short position. The letter
P denotes lending pool.   65




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##### Table of Contents



Item 7B. Related Party Transactions
   Name of related parties
    
    Relationship with usSubstantial
shareholder and fellow subsidiariesGRGC
    
    Substantial shareholderYangcheng Railway Company
    
    Subsidiary of GRGCGuangmeishan Railway Company Limited
    
    Subsidiary of GRGCGEDC
    
    Subsidiary of GRGCGuangzhou Railway Material Supply Company
    
    Subsidiary of GRGCGuangzhou Railway Engineer Construction Enterprise Development Company
    
    Subsidiary of GRGCYuehai Railway Company Limited
    
    Subsidiary of GRGCShichang Railway Company Limited
    
    Subsidiary of GRGCGuangzhou Railway Station Service Center
    
    Subsidiary of GRGCChangsha Railway Construction Company Limited
    
    Subsidiary of GRGCGuangdong Sanmao Enterprise Development Company Limited
    
    Subsidiary of GRGCGuangzhou Qingda Transportation Company Limited
    
    Subsidiary of GRGCYangcheng Construction Company of Yangcheng Railway Enterprise
Development Company
    
    Subsidiary of GRGCGuangzhou Yuetie Operational Development Company
    
    Subsidiary of GRGCGuangzhou Railway Real Estate Construction Company
    
    Subsidiary of GRGCGuangzhou Railway Rolling Stock Factory
    
    Subsidiary of GRGCGuangzhou Railway Group Foreign Economic & Trade Development Corporation
    
    Subsidiary of GRGCCYTS Guangdong Railway Shenzhen Co., Ltd. (CYTS)
    
    Subsidiary of GRGCGuangdong Pearl River Delta Inter-city Railway Traffic Co., Ltd.
    
    Subsidiary of GRGCGuangzhou Railway Group Diversified Management Development Center
    
    Subsidiary of GRGCAssociates of our CompanyGuangzhou Tiecheng Enterprise Company Limited
    
    Associate of our CompanyZengcheng Lihua Stock Company Limited
    
    Associate of our CompanyShenzhen Guangshen Railway Civil Engineering Company
    
    Associate of our Company
   66




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##### Table of Contents




    
    production coordination, safety management and scheduling;
    
    leasing of locomotives;
    
    railway communications;
    
    railway network services (including but not limited to passenger coordination,
provision of water to trains, locomotive traction and electricity provision and ticket
sale services;
    
    passenger agency services;
    
    maintenance service of large scale railroad machinery, track replacement and
overhauling services for railroads and bridges, and locomotive and train repair and
maintenance services;
    
    agency services for purchase of railway transportation related materials;
    
    security services;
    
    hygiene and epidemic prevention services;
    
    property management, construction and maintenance services and leasing of
properties; and
    
    construction project management and supervision services.
   
    
    for production coordination, safety management and scheduling, the prices will be
determined with reference to the unit cost (which is in turn calculated with reference
to the total cost incurred by GRGC for the provision of the relevant services, divided
by the total amount of services provided during certain period) and the actual volume
of services provided by GRGC;
    
    for leasing of locomotives, if MOR settlement method is available, the prices will
be determined in accordance with the settlement price lists issued by the MOR. If MOR
settlement method is not available, the prices will be determined in accordance with
the settlement price lists agreed after arms
 67




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length negotiations between the parties.
Such prices shall not be higher than (i) those offered by the GRGC and its
subsidiaries to the other GRGC subsidiaries, any enterprises invested by GRGC and any
independent third party, or (ii) those offered by independent third parties in the
market;
 
    
    for railway communication services and railway network services, the prices will be
determined based on the settlement method or pricing standards issued by the MOR;
    
    for passenger agency services, the prices will comprise a service contract fee
(which is determined with reference to the total cost incurred by GRGC and/or its
subsidiaries for the provision of such passenger services and the workload incurred)
and a portion of revenue from ticket sales on the trains, which are determined after
arms length negotiations between the parties;
    
    for maintenance services, the prices will be determined with reference to the costs
incurred by the GRGC and/or its subsidiaries for the provision of such services plus a
profit margin of 8% (if there is no MOR standard available for charging fees regarding
track replacement and overhauling services or locomotive or train repair and
maintenance services);
    
    for agency services, the prices of the materials will not be higher than those
offered by the GRGC and its subsidiaries to the other GRGC subsidiaries, any
enterprises invested by GRGC and any independent third party, or those offered by
independent third parties in the market; and the service fees shall not be (i) not
more than 0.3% of the total purchase price in the case of the purchase of diesel; (ii)
not more than 1% of total purchase price in the case of the purchase of steel tracks;
and (iii) not more than 5% of the total purchase price in the case of other materials.
Such service fees will be determined on an arms length basis by taking into account
the historical transactions between the parties;
    
    for security services, the service fees have been and will continue to be
determined with reference to the actual costs incurred by GRGC and/or its subsidiaries
for the provision of such services plus a profit margin of 8%;
    
    for hygiene and epidemic prevention services, the prices will be calculated based
on the kind of services provided and the relevant standard prices set by the relevant
provincial government without any adjustments;
    
    for property management, construction and maintenance services, the prices of most
of such services will continue to be determined with reference to the actual costs
incurred by GRGC and/or its subsidiaries for the provision of such services plus a
profit margin of 8%. For leasing of properties, the rental shall not exceed the
market price or an amount payable by any independent third parties to GRGC and/or its
subsidiaries for the same properties; and
    
    for construction project management and supervision services, the prices will be
determined in accordance with the settlement method issued by the MOR.
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
    
    for railway network services, the prices will be determined in accordance with the
settlement method issued by the MOR; and
    
    for transportation services other than railway network services, the prices will be
determined in accordance with the following principles:
 
    
    market price (if available);
    
    if market price is not available, settlement method or
pricing standards issued by the MOR; and
    
    if neither market price nor MOR standard is
available, the prices shall be determined between the parties based on
arms length negotiations in each case.
   Year ended December 31,2008
    
    2009
    
    2010(RMB thousands)Provision of ServicesRevenue collected by MOR for
services provided to GRGC and its
subsidiaries
    
    
    (1,038,611
    )
    
    
    (1,069,053
    )
    
    
    (1,115,028
    )Provision of repairing services for
cargo trucks of GRGC and its
subsidiaries
    
    
    (148,322
    )
    
    
    (220,000
    )
    
    
    (191,369
    )Provision of train transportation
services to GRGC and its
subsidiaries
    
    
    (265,998
    )
    
    
    (208,860
    )
    
    
    (347,849
    )Receipt of ServicesCost settled by MOR for services
provided by GRGC and its
subsidiaries
    
    
    1,218,138
    
    
    
    1,530,479
    
    
    
    1,367,444Train transportation services
provided by GRGC and its
subsidiaries
    
    
    235,303
    
    
    
    347,969
    
    
    
    428,288Social services (employee housing
and public security services and
other ancillary services) provided
by GEDC and Yangcheng Railway
Company
    
    
    440,602
    
    
    
    369,257
    
    
    
    144,750Provision of construction services
by GRGC and its subsidiaries
    
    
    259,787
    
    
    
    241,753
    
    
    
    115,075Provision of repair and maintenance
services by GRGC and its
subsidiaries
    
    
    115,568
    
    
    
    115,455
    
    
    
    171,154Provision of turnkey service by CYTS
    
    
    15,280
    
    
    
    
    
    
    
    
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Year ended December 31,2008
    
    2009
    
    2010(RMB thousands)PurchasePurchase of materials and supplies
from GRGC and its subsidiaries
    
    
    398,230
    
    
    
    631,149
    
    
    
    431,988SalesSales of materials and supplies to
GRGC and its subsidiaries
    
    
    
    
    
    
    2,520
    
    
    
    17,827OthersOperating lease rental paid to GRGC
for the leasing of land use rights
    
    
    50,000
    
    
    
    51,200
    
    
    
    52,400
  As of December 31,2008
    
    
    2009
    
    
    2010(RMB thousands)Due from GRGC
    
    
    155,034
    
    
    
    113,195
    
    
    
    299,400 Trade receivables (1)
    
    
    150,066
    
    
    
    108,341
    
    
    
    292,504 Other receivables
    
    
    4,968
    
    
    
    4,854
    
    
    
    6,896Due to GRGC
    
    
    (35,209
    )
    
    
    (63,396
    )
    
    
    (18,408
    ) Trade payables (1)
    
    
    (25,787
    )
    
    
    (53,955
    )
    
    
    (9,694
    ) Other payables (3)
    
    
    (9,442
    )
    
    
    (9,441
    )
    
    
    (8,714
    )Due from subsidiaries of GRGC
    
    
    16,815
    
    
    
    28,733
    
    
    
    33,629 Trade receivables
    
    
    15,354
    
    
    
    13,126
    
    
    
    26,682Less:impairment provision
    
    
    (4
    )
    
    
    (113
    )
    
    
    (19
    ) Other receivables
    
    
    1,465
    
    
    
    15,720
    
    
    
    6,966Due to subsidiaries of GRGC
    
    
    (302,206
    )
    
    
    (230,260
    )
    
    
    (158,522
    ) Trade payables (2)
    
    
    (198,843
    )
    
    
    (174,054
    )
    
    
    (135,999
    ) Other payables (3)
    
    
    (103,363
    )
    
    
    (56,206
    )
    
    
    (22,523
    )Due from an associate
    
    
    2,019
    
    
    
    1,312
    
    
    
    1,451 Trade receivables
    
    
    160
    
    
    
    
    
    
    
    22 Other receivables
    
    
    14,171
    
    
    
    13,624
    
    
    
    13,741Less: impairment provision (5)
    
    
    (12,312
    )
    
    
    (12,312
    )
    
    
    (12,312
    )Due to an associate
    
    
    (25,118
    )
    
    
    (9,534
    )
    
    
    (6,991
    ) Trade payables
    
    
    
    
    
    
    (135
    )
    
    
     Other payables (4)
    
    
    (25,118
    )
    
    
    (9,399
    )
    
    
    (6,991
    )Prepayment for fixed assets and construction-in-progress
    
    
    31,012
    
    
    
    
    
    
    
     GRGC and its subsidiaries
    
    
    31,012
    
    
    
    
    
    
    
    Payables for fixed assets and construction-in-progress
    
    
    (125,487
    )
    
    
    (101,316
    )
    
    
    (96,328
    ) GRGC and its subsidiaries
    
    
    (95,498
    )
    
    
    (101,316
    )
    
    
    (77,423
    ) Associates
    
    
    (29,989
    )
    
    
    
    
    
    
    (18,905
    )
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(1)
    
    The trade balances due from/to GRGC and subsidiaries of GRGC mainly represented
service fees and charges payable and receivable balances arising from the provision of
passenger transportation and cargo forwarding businesses jointly with these related
parties within the PRC.(2)
    
    The trade balances due to subsidiaries of GRGC mainly represent payables arising
from unsettled fees for purchase of materials and provision of other services according
to various service agreements entered into between us and the related parties.(3)
    
    The non-trade balances due to subsidiaries of GRGC mainly represent the deposits
of related parties maintained in the deposit-taking center of our Company.(4)
    
    The non-trade balance due to an associate mainly represents the payable balance
arising from unsettled balance for the construction project services undertaken by an
associate.(5)
    
    Full impairment loss provision set up against a receivable balance due from
Zengcheng Lihua, which was brought forward from prior years.   Transaction with the MOR
   Year ended December 31,2008
    
    2009
    
    2010(RMB thousands)Recurring Transactions:IncomeRevenue collected from the MOR, including
revenue collected by the MOR for services
provided to GRGC and its subsidiaries Passenger transportation
    
    
    6,196,596
    
    
    
    6,542,333
    
    
    
    7,569,570
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Year ended December 31,2008
    
    2009
    
    2010(RMB thousands) Freight transportation
    
    
    841,240
    
    
    
    752,561
    
    
    
    835,216 Railway network usage and services
    
    
    2,738,425
    
    
    
    3,105,654
    
    
    
    3,115,911Charges and PaymentsServices charges allocated from the MOR,
including cost settled by the MOR for services
provided to GRGC and its subsidiaries
    
    
    2,179,407
    
    
    
    2,404,966
    
    
    
    2,487,995Operating lease rentals paid/payable to the MOR
    
    
    176,880
    
    
    
    162,651
    
    
    
    178,917
   As of December 31,2008
    
    
    2009
    
    
    2010(RMB thousands)Due from the MOR Trade receivables
    
    
    53,048
    
    
    
    273,300
    
    
    
    24,805Due to the MOR Trade payables
    
    
    
    
    
    
    
    
    
    
    166,271
 
 Item 7C. Interests of Experts and Counsel
  
 ITEM 8. FINANCIAL INFORMATION
 
 Item 8A. Consolidated Statements and Other Financial Information
 Item 8A.1  Item 8.A.6:
  Item 8A.7 Legal Proceedings
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Item 8A.8 Dividend Distributions
  
    
    net after-tax income determined in accordance with PRC accounting standards and
regulations; and
    
    net after-tax income determined in accordance with either international accounting
standards or the accounting standards of the countries in which our shares are listed.
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Item 8B. Significant Changes
  74




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ITEM 9. THE OFFER AND LISTING
 
 Item 9A. Offer and Listing Details
 Price Range of our H shares and ADSs
   New York StockExchange
    
    HKSECalendar Period
    
    High
    
    Low
    
    High
    
    Low(USD per ADS)
    
    (HKD per H share)2006
    
    
    34.54
    
    
    
    14.78
    
    
    
    5.34
    
    
    
    2.332007
    
    
    45.22
    
    
    
    27.11
    
    
    
    6.91
    
    
    
    4.402008
    
    
    36.45
    
    
    
    13.72
    
    
    
    5.71
    
    
    
    2.102009January to March
    
    
    20.10
    
    
    
    13.83
    
    
    
    3.09
    
    
    
    2.23April to June
    
    
    25.52
    
    
    
    17.58
    
    
    
    3.92
    
    
    
    2.66July to September
    
    
    25.28
    
    
    
    20.05
    
    
    
    3.93
    
    
    
    3.13October to December
    
    
    23.00
    
    
    
    19.46
    
    
    
    3.49
    
    
    
    3.002010January to March
    
    
    21.91
    
    
    
    19.83
    
    
    
    3.48
    
    
    
    3.07April to June
    
    
    20.49
    
    
    
    16.03
    
    
    
    3.14
    
    
    
    2.56July to September
    
    
    18.95
    
    
    
    16.76
    
    
    
    2.92
    
    
    
    2.62October to December
    
    
    22.26
    
    
    
    18.28
    
    
    
    3.40
    
    
    
    2.82December
    
    
    20.62
    
    
    
    19.36
    
    
    
    3.19
    
    
    
    3.032011January
    
    
    20.98
    
    
    
    19.94
    
    
    
    3.30
    
    
    
    3.12February
    
    
    20.87
    
    
    
    18.78
    
    
    
    3.25
    
    
    
    2.92March
    
    
    19.77
    
    
    
    18.03
    
    
    
    3.07
    
    
    
    2.80April
    
    
    20.39
    
    
    
    19.00
    
    
    
    3.19
    
    
    
    2.98May
    
    
    21.38
    
    
    
    19.87
    
    
    
    3.37
    
    
    
    3.08
   
 Item 9B. Plan of Distribution
  75




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Item 9C. Markets
  
 Item 9D. Selling Shareholders
  
 Item 9E. Dilution
  
 Item 9F. Expenses of the Issue
  76




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ITEM 10. ADDITIONAL INFORMATION
 
 
 Item 10A. Share Capital
    Number
    
    PercentageType of share capital
    
    of shares
    
    of shares(%)Domestic tradable shares with restriction on sales (A shares)
    
    
    274,798,700
    
    
    3.88Domestic tradable shares without restriction on sales (A
shares)
    
    
    5,377,438,300
    
    
    75.91H shares
    
    
    1,431,300,000
    
    
    20.2Total
    
    
    7,083,537,000
    
    
    100.00
 Public Float
  Pre-Emptive Rights
  
 Item 10B. Memorandum and Articles of Association
  General
  77




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Significant Differences between H shares and A shares
  Restrictions on Transferability
  
    
    relevant transfer fees have been paid, if any;
    
    the instrument of transfer only involves H shares;
    
    the stamp duty chargeable on the instrument of transfer has been paid;
    
    the relevant share certificate and, upon the reasonable request of the board of
directors, any evidence in relation to the right of the transferor to transfer the shares have been submitted;
    
    if the shares are being transferred to joint owners, the maximum number of joint
owners does not exceed four; and
    
    we do not have any lien on the relevant shares.
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Dividends
  
    
    PRC accounting standards and regulations; and
    
    international accounting standards or the accounting standards of the countries in
which our shares are listed.
  
    
    making up losses;
    
    allocations to the statutory common reserve fund;
    
    allocations to the discretionary common reserve fund upon the approval of
shareholders at a general meeting; and
    
    payment of dividends in respect of ordinary shares.
   Voting Rights and Shareholder Meetings
  79




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
    
    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.
    
    
    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;
 80




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##### Table of Contents




    
    provide such information and explanations as are necessary for the shareholders to
exercise an informed judgment on the proposals before them. Without limiting the
generality of the foregoing, where a proposal is made to merge the Company with another
entity, to repurchase the shares of the Company, to reorganize its share capital or to
restructure the Company in any other way, the terms of the proposed transaction must be
provided in detail, together with copies of the proposed agreement, if any, and the
cause and effect of the proposal must be properly explained;
    
    contain disclosure of the nature and extent, if any, of material interests of any
director, supervisor, general manager, deputy general manager or other senior officers
of the Company in the transaction proposed and the effect of the proposed transaction
on them in their capacity as shareholders in so far as it is different from the effect
on the interests of other shareholders of the same class;
    
    contain the full text of any special resolution proposed to be approved at the
meeting;
    
    contain conspicuously a statement that a shareholder entitled to attend and vote is
entitled to appoint one or more proxies to attend and vote instead of him or her and
that a proxy need not also be a shareholder; and
    
    state the time within which and the address to which voting proxies for the meeting
are to be delivered.
   
    
    work reports of the board of directors and the supervisory committee;
    
    profit distribution proposals and loss recovery proposals formulated by the board of
directors;
 81




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##### Table of Contents




    
    removal of members of the board of directors and the supervisory committee, their
remuneration and methods of payment;
    
    our annual financial budget, final accounts, balance sheet, income statement and
other financial statements; and
    
    matters other than those that are required by laws, administrative regulations or
our Articles of Association to be adopted by way of special resolution.
  
    
    increase or reduction of our share capital and the issuance of shares of any class,
warrants and other similar securities;
    
    issuance of Company debentures;
    
    division, merger, dissolution and liquidation of the Company;
    
    amendment to our Articles of Association;
    
    alteration to the form of the Company;
    
    acquisition or disposal within one year of material assets exceeding 30% of the
total assets of the Company; and
    
    any other matter that, according to an ordinary resolution of the shareholders
meeting, may have a significant impact on the Company and requires adoption by way of a
special resolution.
   
    
    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.
  82




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Board of Directors
     Liquidation Rights
  Liability of Shareholders
  Increases in Share Capital and Preemptive Rights
  83




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Reduction of Share Capital and Purchase by Us of Our Shares
  
    
    cancellation of shares for capital reduction;
    
    merging with another company that holds our shares;
    
    paying shares to our employees as bonus; or
    
    repurchasing, upon request, any shares held by any shareholder who is opposed to the
Companys resolution for merger or spin-off at a shareholders general meeting.
      
    
    under a general offer;
    
    open offer on a stock exchange; or
    
    by off-market contract.
  84




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
    
    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;
  Restrictions on Controlling Shareholders
  85




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
    
    to relieve a director or supervisor of his or her duty to act honestly in our best
interests;
    
    to approve the expropriation, by a director or supervisor (for his or her own
benefit or for the benefit of another person), in any guise, of our assets, including
without limitation opportunities advantageous to us; or
    
    to approve the expropriation by a director or supervisor (for his or her own benefit
or for the benefit of another person) of the individual rights of other shareholders,
including without limitation rights to distributions and voting rights, save and except
where it was done pursuant to a restructuring submitted to and approved by our
shareholders in accordance with our Articles of Association.
  Changing Rights of a Class of Shareholders
  Duties of Directors, Supervisors and Other Senior Officers in Interested Transactions
    86




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
    
    the provision by us of a loan or a guarantee of a loan to one of our subsidiaries;
    
    the provision by us of a loan or a guarantee in connection with a loan or any other
funds to any of our directors, supervisors, general managers, deputy general managers
or other senior officers to pay expenditures incurred or to be incurred on our behalf
by him or her or for the purpose of enabling him or her to perform his or her duties
properly, in accordance with the terms of a service contract approved by the
shareholders at a general meeting; and
    
    the provision by us of a loan or a guarantee in connection with a loan to any of
our directors, supervisors, general managers, deputy general managers or other senior
officers or their respective associates on normal commercial terms, provided that the
ordinary course of our business includes the lending of money or the giving of
guarantees.
 Recent Amendments to Our Articles of Association
  
 Item 10C. Material Contracts
  
 Item 10D. Exchange Controls
   87




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##### Table of Contents



e.g.
 
 Item 10E. Taxation
 PRC Taxation
 Tax Basis of Assets
  Income Tax
   88




---



##### Table of Contents



Value Added Tax
  Business Tax
  Tax on Dividends
 For an Individual Investor
 For An Enterprise
 89




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##### Table of Contents



Capital Gains Tax
 For An Individual Investor
 For An Enterprise
 Tax Treaties
   United States Federal Income Taxation
  
    
    banks, insurance companies and financial institutions;
    
    United States expatriates;
    
    tax-exempt entities;
    
    certain insurance companies;
    
    broker-dealers;
 90




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##### Table of Contents




    
    traders in securities that elect to mark to market;
    
    U.S. holders liable for alternative minimum tax;
    
    U.S. holders that own 10% or more of our voting stock;
    
    U.S. holders that hold the H shares or ADSs as part of a straddle or a hedging or
conversion transaction; or
    
    U.S. holders whose functional currency is not the U.S. dollar.
   
    
    a citizen or resident of the United States for United States federal income tax
purposes;
    
    a corporation, or other entity treated as a corporation for United States federal
income tax purposes, created or organized under the laws of the United States or any
political subdivision thereof;
    
    an estate the income of which is subject to United States federal income tax
without regard to its source; or
    
    a trust:
 
    
    subject to the primary supervision of a United States court
and the control of one or more United States persons; or
    
    that has elected to be treated as a United States person
under applicable United States Treasury regulations.
   We urge you to consult your tax advisors regarding the United States federal, state, local and
non-United States tax consequences of the purchase, ownership and disposition of the H shares or
ADSs.
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Distributions on the H shares or ADSs
  
    
    a foreign corporation that is eligible for the benefits of a comprehensive income
tax treaty with the United States that includes an exchange of information program;
and
    
    a foreign corporation if its stock with respect to which a dividend is paid (or
ADSs backed by such stock) is readily tradable on an established securities market
within the United States,
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Sale, Exchange or Other Disposition
    PFIC Rules
  
    
    75% or more of its gross income consists of passive income, such as dividends,
interest, rents and royalties; or
    
    50% or more of the average quarterly value of its assets consists of assets that
produce, or are held for the production of, passive income.
   93




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Backup Withholding and Information Reporting
  
    
    are a corporation or fall within various other exempt categories, and, when
required, demonstrate this fact; or
 94




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
    
    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.
   Hong Kong Taxation
  Dividends
  Taxation of Capital Gains
   Hong Kong Stamp Duty
  95




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##### Table of Contents



Hong Kong Estate Duty
  
 Item 10F. Dividends and Paying Agents
  
 Item 10G. Statement by Experts
  
 Item 10H. Documents on Display
  
  
 Item 10I. Subsidiary Information
  96




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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Currency Risks
   Currency
    
    As of December 31,Monetary assets and liabilities
    
    denomination
    
    2009
    
    2010(RMB thousands)Current assetsCash and cash equivalents
    
    USD
    
    
    455
    
    
    
    322Cash and cash equivalents
    
    HKD
    
    
    66,801
    
    
    
    103,221Other receivables
    
    HKD
    
    
    994
    
    
    
    549Trade payables
    
    USD
    
    
    (939
    )
    
    
    
    97




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##### Table of Contents



Interest Rate Risks
  Credit Risks
     Liquidity Risks
    98




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##### Table of Contents



ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 
 A. Debt Securities
  
 B. Warrants and Rights
  
 C. Other Securities
  
 D. American Depositary Shares
   Fees Payable by ADS holders
   
    
    a fee of US$ 1.50 per ADR for transfers of ADRs;
    
    a fee of 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;
 99




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##### Table of Contents




    
    reimbursement of fees and expenses incurred by the depositary and/or its agents in
connection with the servicing and delivery of our H shares and compliance with
applicable laws;
    
    stock transfer or other taxes and other governmental charges;
    
    cable, telex and facsimile transmission and delivery charges incurred at the request
of the ADS holders;
    
    transfer or registration fees for the registration or transfer of deposited
securities on any applicable register in connection with the deposit or withdrawal of
deposited securities; and
    
    expenses of the depositary in connection with the conversion of foreign currencies
into U.S. dollars.
  Payments Received by Foreign Private Issuer
  Direct Payments
  Category of Expenses
    
    Amount (US$)Investor relations
    
    
    26,900Broker reimbursements
    
    
    32,600NYSE listing fee
    
    
    38,000Total
    
    
    97,500
 Indirect Payments
  Category of Expenses
    
    Amount (US$)Fees waived
    
    
    300,000.00
 100




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##### Table of Contents



PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
  
 ITEM 15. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Managements Report on Internal Control over Financial Reporting
   101




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##### Table of Contents



Internal Control  Integrated Framewor
  Changes in Internal Control over Financial Reporting
  
 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B. CODE OF ETHICS
  
 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  102




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##### Table of Contents



2009
    
    2010(RMB millions)Audit Fees
    
    
    9.6
    
    
    
    8.68Audit-related Fees (3)
    
    
    0.15
    
    
    
    Tax Fees
    
    
    
    
    
    
    All Other Fees
    
    
    
    
    
    
    Total
    
    
    9.75
    
    
    
    8.68
 
 Notes:1.
    
    Traveling expenses and tax fees are included in the audit fees and do not require additional
payment.2.
    
    As of December 31, 2010, there did not exist any amount that became payable but remained
outstanding.3.
    
    PwC provided a consent letter for making reference to the auditors report on our
consolidated financial statements for the year ended December 31, 2008 in the offering
circular relating to our issuance of the Notes in December 2009.  
 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  
 ITEM 16F. CHANGE IN OUR CERTIFYING ACCOUNTANT
  
 ITEM 16G. CORPORATE GOVERNANCE
  
    
    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;
 103




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##### Table of Contents




    
    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.
 104




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PART III
 
 ITEM 17. FINANCIAL STATEMENTS
  
 ITEM 18. FINANCIAL STATEMENTS
  
 ITEM 19. EXHIBITS
 (a)
    
    See pages F-1 to F-78 following this item.(b)
    
    Index of Exhibits
  ExhibitNumber
    
    Description1.1
    
    Amended and Restated Articles of Association*****2.1
    
    Form of Amendment No. 1 to Deposit Agreement*2.2
    
    Form of American Depositary Receipt*4.1
    
    Land Lease Agreement dated November 15, 2004 between Guangshen Railway
Company Limited and Guangzhou Railway (Group) Company**4.2
    
    Master comprehensive services agreements dated November 5, 2007 between
Guangshen Railway Company Limited and each of GRGC, GEDC and Yangcheng
Railway Company***4.3
    
    English summary of certain material terms of the RMB 3.5 billion of 4.79%
fixed rate notes due 2014*****7.1
    
    Statements explaining how certain ratios are calculated in this annual report8.1
    
    List of subsidiaries of Guangshen Railway Company Limited as of December 31,
201011.1
    
    Code of Ethics for the Senior Management as amended on April 29, 2009****12.1
    
    Section 302 principal executive officers and principal financial officers
certifications13.1
    
    Certifications of principal executive officers and principal financial
officer pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section
906 of the U.S. Sarbanes-Oxley Act of 2002
 
 *
    
    Incorporated by reference from the Registrants Form F-6EF filed with the SEC on April 24,
2009. 105




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##### Table of Contents



**
    
    Incorporated by reference from the Registrants annual report on Form 20-F filed with the
SEC on June 28, 2005.***
    
    Incorporated by reference from the Registrants annual report on Form 20-F filed with the
SEC on June 26, 2008.****
    
    Incorporated by reference from the Registrants annual report on Form 20-F filed with the
SEC on June 25, 2009.*****
    
    Incorporated by reference from the Registrants annual report on Form 20-F filed with the
SEC on June 22, 2010. 106




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SIGNATURE
   Date: June 2, 2011
    By:
    /s/ Xu XiaomingXu XiaomingChairman of the Board of Directors




---



##### 



INDEX TO FINANCIAL STATEMENTS
 PageGUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIESReport of Independent Registered Public Accounting Firm
    
    
    F-2,3Consolidated Balance Sheets as at January 1, 2009 and December 31, 2009 and 2010
    
    
    F-4Consolidated Comprehensive Income Statements for the years ended December 31,
2008, 2009 and 2010
    
    
    F-5,6Consolidated Cash Flow Statements for the years ended December 31, 2008, 2009
and 2010
    
    
    F-7Consolidated Statements of Changes in Equity for the years ended December 31,
2008, 2009 and 2010
    
    
    F-8Notes to the Consolidated Financial Statements
    
    
    F-9
  F-1




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##### Table of Contents



(GRAPHIC)
    
    PricewaterhouseCoopers
22/F, Princes Building
Central, Hong Kong
Telephone (852) 2289 8888
Facsimile (852) 2810 9888
www.pwchk.com
 
 Report of Independent Registered Public Accounting Firm
    F-2




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##### Table of Contents



F-3




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
AS AT JANUARY 1, 2009 AND DECEMBER 31, 2009 AND 2010
 January 1,
    
    
    December 31,2009
    
    
    2009RMB
    
    
    RMBRestated
    
    
    Restated
    
    
    2010
    
    
    2010Note
    
    
    
    (Note 5)
    
    
    (Note 5)
    
    
    RMB
    
    
    US$*ASSETSNon-current assetsFixed assets
    
    
    7
    
    
    
    24,922,566
    
    
    
    25,036,329
    
    
    
    24,466,130
    
    
    
    3,706,989Construction-in-progress
    
    
    8
    
    
    
    504,775
    
    
    
    662,183
    
    
    
    752,862
    
    
    
    114,070Prepayment for fixed assets and
construction-in-progress
    
    
    
    
    
    
    151,972
    
    
    
    60,134
    
    
    
    21,650
    
    
    
    3,280Leasehold land payments
    
    
    9
    
    
    
    592,368
    
    
    
    576,379
    
    
    
    560,391
    
    
    
    84,908Goodwill
    
    
    10
    
    
    
    281,255
    
    
    
    281,255
    
    
    
    281,255
    
    
    
    42,614Investments in associates
    
    
    12
    
    
    
    120,705
    
    
    
    119,547
    
    
    
    120,661
    
    
    
    18,282Deferred tax assets
    
    
    13
    
    
    
    103,097
    
    
    
    97,307
    
    
    
    112,621
    
    
    
    17,064Deferred employee costs
    
    
    14
    
    
    
    99,614
    
    
    
    79,736
    
    
    
    5,964
    
    
    
    904Available-for-sale investments
    
    
    17
    
    
    
    48,326
    
    
    
    53,826
    
    
    
    53,826
    
    
    
    8,155Long-term receivable
    
    
    18
    
    
    
    48,136
    
    
    
    44,229
    
    
    
    35,122
    
    
    
    5,32226,872,814
    
    
    
    27,010,925
    
    
    
    26,410,482
    
    
    
    4,001,588Current assetsMaterials and supplies
    
    
    19
    
    
    
    201,923
    
    
    
    231,110
    
    
    
    255,079
    
    
    
    38,648Trade receivables
    
    
    20
    
    
    
    272,051
    
    
    
    483,218
    
    
    
    592,819
    
    
    
    89,821Prepayments and other receivables
    
    
    21
    
    
    
    96,865
    
    
    
    72,343
    
    
    
    78,564
    
    
    
    11,904Short-term deposits
    
    
    
    
    
    
    7,300
    
    
    
    514,000
    
    
    
    608,500
    
    
    
    92,197Cash and cash equivalents
    
    
    36
    (c)
    
    
    1,560,952
    
    
    
    1,115,651
    
    
    
    2,659,058
    
    
    
    402,8882,139,091
    
    
    
    2,416,322
    
    
    
    4,194,020
    
    
    
    635,458Total assets
    
    
    
    
    
    
    29,011,905
    
    
    
    29,427,247
    
    
    
    30,604,502
    
    
    
    4,637,046EquityCapital and reserves attributable to the
Companys equity holdersShare capital
    
    
    22
    
    
    
    7,083,537
    
    
    
    7,083,537
    
    
    
    7,083,537
    
    
    
    1,073,263Share premium
    
    
    
    
    
    
    11,564,501
    
    
    
    11,564,581
    
    
    
    11,564,581
    
    
    
    1,752,209Other reserves
    
    
    23
    
    
    
    1,797,229
    
    
    
    1,932,131
    
    
    
    2,087,957
    
    
    
    316,357Retained earnings
    
    
    
    
    
    
    2,027,524
    
    
    
    2,668,389
    
    
    
    3,431,942
    
    
    
    519,991- Proposed final dividend
    
    
    
    
    
    
    566,683
    
    
    
    566,683
    
    
    
    637,518
    
    
    
    96,59422,472,791
    
    
    
    23,248,638
    
    
    
    24,168,017
    
    
    
    3,661,820Non-controlling interests
    
    
    
    
    
    
    55,948
    
    
    
    55,717
    
    
    
    54,559
    
    
    
    8,267Total equity
    
    
    
    
    
    
    22,528,739
    
    
    
    23,304,355
    
    
    
    24,222,576
    
    
    
    3,670,087LiabilitiesNon-current liabilitiesBorrowings
    
    
    25
    
    
    
    3,390,000
    
    
    
    
    
    
    
    
    
    
    
    Deferred income related to government grants
    
    
    24
    
    
    
    100,495
    
    
    
    97,120
    
    
    
    95,093
    
    
    
    14,408Bonds payable
    
    
    26
    
    
    
    
    
    
    
    3,465,801
    
    
    
    3,471,994
    
    
    
    526,060Employee benefits obligations
    
    
    27
    
    
    
    237,422
    
    
    
    174,767
    
    
    
    197,386
    
    
    
    29,9073,727,917
    
    
    
    3,737,688
    
    
    
    3,764,473
    
    
    
    570,375Current liabilitiesTrade payables
    
    
    28
    
    
    
    640,856
    
    
    
    791,355
    
    
    
    1,174,644
    
    
    
    177,976Payables for fixed assets and
construction-in-progress
    
    
    
    
    
    
    764,609
    
    
    
    674,652
    
    
    
    477,806
    
    
    
    72,395Dividends payable
    
    
    
    
    
    
    47
    
    
    
    45
    
    
    
    54
    
    
    
    8Income tax payable
    
    
    
    
    
    
    48,977
    
    
    
    116,036
    
    
    
    181,465
    
    
    
    27,495Accruals and other payables
    
    
    29
    
    
    
    790,760
    
    
    
    803,116
    
    
    
    783,484
    
    
    
    118,710Borrowings
    
    
    25
    
    
    
    510,000
    
    
    
    
    
    
    
    2,755,249
    
    
    
    2,385,204
    
    
    
    2,617,453
    
    
    
    396,584Total liabilities
    
    
    
    
    
    
    6,483,166
    
    
    
    6,122,892
    
    
    
    6,381,926
    
    
    
    966,959Total equity and liabilities
    
    
    
    
    
    
    29,011,905
    
    
    
    29,427,247
    
    
    
    30,604,502
    
    
    
    4,637,046
  
 *
    
    Translation of amounts from Renminbi (RMB) into United States dollars (US$) for the
convenience of the reader has been made at US$1.00=RMB6.60, the certified exchange rates for
December 30, 2010 as published by the Federal Reserve Board of the United States. No
representation is made that the RMB amounts could have been, or could be, converted into US$
at that rate on December 30, 2010 or on any other date. F-4




---



##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
 
 CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 Years ended December 31,2008
    
    
    2009RMB
    
    
    RMBRestated
    
    
    Restated
    
    
    2010
    
    
    2010Note
    
    
    (Note 5)
    
    
    (Note 5)
    
    
    RMB
    
    
    US$*Revenue from Railroad BusinessesPassengers
    
    
    
    
    
    
    6,759,229
    
    
    
    7,195,717
    
    
    
    8,104,126
    
    
    
    1,227,898Freight
    
    
    
    
    
    
    1,324,701
    
    
    
    1,210,118
    
    
    
    1,360,822
    
    
    
    206,185Railway network usage and services
    
    
    
    
    
    
    2,738,425
    
    
    
    3,105,654
    
    
    
    3,115,911
    
    
    
    472,10810,822,355
    
    
    
    11,511,489
    
    
    
    12,580,859
    
    
    
    1,906,191Revenue from other businesses
    
    
    
    
    
    
    866,300
    
    
    
    874,268
    
    
    
    903,589
    
    
    
    136,907Total revenue
    
    
    
    
    
    
    11,688,655
    
    
    
    12,385,757
    
    
    
    13,484,448
    
    
    
    2,043,098Operating expensesRailroad businessesBusiness tax
    
    
    
    
    
    
    (253,001
    )
    
    
    (266,951
    )
    
    
    (312,265
    )
    
    
    (47,313
    )Labour and benefits
    
    
    30
    
    
    
    (2,125,376
    )
    
    
    (2,277,057
    )
    
    
    (2,662,299
    )
    
    
    (403,379
    )Equipment leases and services
    
    
    
    
    
    
    (2,653,188
    )
    
    
    (2,974,805
    )
    
    
    (3,235,868
    )
    
    
    (490,283
    )Land use right leases
    
    
    38
    (b)
    
    
    (50,000
    )
    
    
    (51,200
    )
    
    
    (52,400
    )
    
    
    (7,939
    )Materials and supplies
    
    
    
    
    
    
    (1,345,651
    )
    
    
    (1,395,333
    )
    
    
    (1,457,769
    )
    
    
    (220,874
    )Repair and facilities maintenance
costs, excluding materials and
supplies
    
    
    
    
    
    
    (670,209
    )
    
    
    (588,331
    )
    
    
    (828,438
    )
    
    
    (125,521
    )Depreciation of fixed assets
    
    
    
    
    
    
    (1,186,693
    )
    
    
    (1,267,907
    )
    
    
    (1,325,032
    )
    
    
    (200,762
    )Amortization of leasehold land payments
    
    
    
    
    
    
    (15,001
    )
    
    
    (15,001
    )
    
    
    (15,001
    )
    
    
    (2,273
    )Social services charges
    
    
    
    
    
    
    (400,546
    )
    
    
    (373,321
    )
    
    
    (144,750
    )
    
    
    (21,932
    )Utility and office expenses
    
    
    
    
    
    
    (121,436
    )
    
    
    (111,816
    )
    
    
    (125,989
    )
    
    
    (19,089
    )Others
    
    
    
    
    
    
    (382,246
    )
    
    
    (329,556
    )
    
    
    (321,685
    )
    
    
    (48,740
    )(9,203,347
    )
    
    
    (9,651,278
    )
    
    
    (10,481,496
    )
    
    
    (1,588,105
    )Other businessesBusiness tax
    
    
    
    
    
    
    (20,846
    )
    
    
    (24,671
    )
    
    
    (26,359
    )
    
    
    (3,994
    )Labour and benefits
    
    
    30
    
    
    
    (312,333
    )
    
    
    (347,842
    )
    
    
    (373,420
    )
    
    
    (56,579
    )Materials and supplies
    
    
    
    
    
    
    (387,651
    )
    
    
    (318,123
    )
    
    
    (334,501
    )
    
    
    (50,682
    )Depreciation of fixed assets
    
    
    
    
    
    
    (26,418
    )
    
    
    (24,783
    )
    
    
    (24,178
    )
    
    
    (3,663
    )Amortization of leasehold land payments
    
    
    
    
    
    
    (602
    )
    
    
    (988
    )
    
    
    (987
    )
    
    
    (150
    )Utility and office expenses
    
    
    
    
    
    
    (81,227
    )
    
    
    (80,960
    )
    
    
    (86,329
    )
    
    
    (13,080
    )(829,077
    )
    
    
    (797,367
    )
    
    
    (845,774
    )
    
    
    (128,148
    )Total operating expenses
    
    
    
    
    
    
    (10,032,424
    )
    
    
    (10,448,645
    )
    
    
    (11,327,270
    )
    
    
    (1,716,253
    )Other income / (expense), net
    
    
    31
    
    
    
    21,624
    
    
    
    (16,808
    )
    
    
    (47,060
    )
    
    
    (7,130
    )Profit from operations
    
    
    
    
    
    
    1,677,855
    
    
    
    1,920,304
    
    
    
    2,110,118
    
    
    
    319,715Finance costs
    
    
    32
    
    
    
    (213,469
    )
    
    
    (236,287
    )
    
    
    (186,172
    )
    
    
    (28,208
    )Share of results of associates
    
    
    12
    
    
    
    128
    
    
    
    773
    
    
    
    1,361
    
    
    
    206Profit before income tax
    
    
    
    
    
    
    1,464,514
    
    
    
    1,684,790
    
    
    
    1,925,307
    
    
    
    291,713Income tax expense
    
    
    33
    
    
    
    (270,607
    )
    
    
    (343,403
    )
    
    
    (440,389
    )
    
    
    (66,725
    )Profit for the year
    
    
    
    
    
    
    1,193,907
    
    
    
    1,341,387
    
    
    
    1,484,918
    
    
    
    224,988
 F-5




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 Years ended December 31,2008
    
    
    2009RMB
    
    
    RMBRestated
    
    
    Restated
    
    
    2010
    
    
    2010Note
    
    
    (Note 5)
    
    
    (Note 5)
    
    
    RMB
    
    
    US$*Profit for the year
    
    
    
    
    
    
    1,193,907
    
    
    
    1,341,387
    
    
    
    1,484,918
    
    
    
    224,988Other comprehensive income, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total comprehensive income for the year,
net of tax
    
    
    
    
    
    
    1,193,907
    
    
    
    1,341,387
    
    
    
    1,484,918
    
    
    
    224,988Profit attributable to:Equity holders of the Company
    
    
    
    
    
    
    1,193,668
    
    
    
    1,342,450
    
    
    
    1,486,062
    
    
    
    225,161Non-controlling interests
    
    
    
    
    
    
    239
    
    
    
    (1,063
    )
    
    
    (1,144
    )
    
    
    (173
    )1,193,907
    
    
    
    1,341,387
    
    
    
    1,484,918
    
    
    
    224,988Total comprehensive income attributable to:Equity holders of the Company
    
    
    
    
    
    
    1,193,668
    
    
    
    1,342,450
    
    
    
    1,486,062
    
    
    
    225,161Non-controlling interests
    
    
    
    
    
    
    239
    
    
    
    (1,063
    )
    
    
    (1,144
    )
    
    
    (173
    )1,193,907
    
    
    
    1,341,387
    
    
    
    1,484,918
    
    
    
    224,988Earnings per share for profit attributable
to the equity holders of the Company
during the year- Basic and diluted
    
    
    34
    
    
    RMB0.17
    
    RMB0.19
    
    RMB0.21
    
    US$
    0.03Earnings per equivalent ADS- Basic and diluted
    
    
    
    
    
    RMB8.43
    
    RMB9.48
    
    RMB10.49
    
    US$
    1.59
  
 *
    
    Translation of amounts from Renminbi (RMB) into United States dollars (US$) for the
convenience of the reader has been made at US$1.00=RMB6.60, the certified exchange rates for
December 30, 2010 as published by the Federal Reserve Board of the United States. No
representation is made that the RMB amounts could have been, or could be, converted into US$ at
that rate on December 30, 2010 or on any other date. F-6




---



##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
 
 CONSOLIDATED CASH FLOW STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 Year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010Note
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$*Cash flows from operating activities:Cash generated from operations
    
    
    36
    (a)
    
    
    2,173,685
    
    
    
    3,108,375
    
    
    
    3,889,382
    
    
    
    589,300Interest paid
    
    
    
    
    
    
    (221,488
    )
    
    
    (220,288
    )
    
    
    (167,650
    )
    
    
    (25,402
    )Income tax paid
    
    
    
    
    
    
    (311,128
    )
    
    
    (270,554
    )
    
    
    (390,274
    )
    
    
    (59,132
    )Net cash generated from operating activities
    
    
    
    
    
    
    1,641,069
    
    
    
    2,617,533
    
    
    
    3,331,458
    
    
    
    504,766Cash flows from investing activities:Payments for acquisition of fixed assets and
construction-in-progress and prepayment for
fixed assets, net of related payables
    
    
    
    
    
    
    (2,947,804
    )
    
    
    (1,639,674
    )
    
    
    (1,158,399
    )
    
    
    (175,515
    )Proceeds from sales of fixed assets
    
    
    36
    (b)
    
    
    11,358
    
    
    
    28,349
    
    
    
    31,156
    
    
    
    4,721Interest received
    
    
    
    
    
    
    24,321
    
    
    
    24,440
    
    
    
    29,127
    
    
    
    4,413Addition on available-for-sale investments
    
    
    
    
    
    
    
    
    
    
    (7,500
    )
    
    
    
    
    
    
    Increase in short-term deposits with
maturities more than three months, net
    
    
    
    
    
    
    (7,300
    )
    
    
    (506,700
    )
    
    
    (94,500
    )
    
    
    (14,318
    )Dividends received
    
    
    
    
    
    
    4,475
    
    
    
    4,931
    
    
    
    3,853
    
    
    
    583Disposal of subsidiaries, net of cash received
    
    
    
    
    
    
    (835
    )
    
    
    
    
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    
    
    
    
    (2,915,785
    )
    
    
    (2,096,154
    )
    
    
    (1,188,763
    )
    
    
    (180,116
    )Cash flows from financing activities:Proceeds from borrowings
    
    
    
    
    
    
    1,050,000
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from bonds issuance
    
    
    
    
    
    
    
    
    
    
    3,499,093
    
    
    
    
    
    
    
    Repayments of borrowings
    
    
    
    
    
    
    
    
    
    
    (3,900,000
    )
    
    
    
    
    
    
    Addition from non-controlling interests
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    
    
    
    
    Dividends paid to non-controlling interests
shareholders
    
    
    
    
    
    
    
    
    
    
    (88
    )
    
    
    (5
    )
    
    
    (1
    )Payments for management fee of bond payables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,600
    )
    
    
    (4,939
    )Dividends paid to the Companys shareholders
    
    
    
    
    
    
    (566,683
    )
    
    
    (566,685
    )
    
    
    (566,683
    )
    
    
    (85,861
    )Net cash generated from / (used in) financing
activities
    
    
    
    
    
    
    483,317
    
    
    
    (966,680
    )
    
    
    (599,288
    )
    
    
    (90,801
    )Net (decrease)/increase in cash and cash
equivalents
    
    
    
    
    
    
    (791,399
    )
    
    
    (445,301
    )
    
    
    1,543,407
    
    
    
    233,849Cash and cash equivalents, at beginning of year
    
    
    
    
    
    
    2,352,351
    
    
    
    1,560,952
    
    
    
    1,115,651
    
    
    
    169,038Cash and cash equivalents, at end of year
    
    
    36
    (c)
    
    
    1,560,952
    
    
    
    1,115,651
    
    
    
    2,659,058
    
    
    
    402,887
  
 *
    
    Translation of amounts from Renminbi (RMB) into United States dollars (US$) for the
convenience of the reader has been made at US$1.00=RMB6.60, the certified exchange rates for
December 30, 2010 as published by the Federal Reserve Board of the United States. No
representation is made that the RMB amounts could have been, or could be, converted into US$
at that rate on December 30, 2010 or on any other date. F-7




---



##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 Attributable to equity holdersStatutory
    
    
    DiscretionaryShare
    
    
    Share
    
    
    surplus
    
    
    surplus
    
    
    Retained
    
    
    Non-capital
    
    
    premium
    
    
    reserve
    
    
    reserve
    
    
    earnings
    
    
    controlling
    
    
    TotalRMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    interests
    
    
    equity(Note 22)
    
    
    (Restated)
    
    
    (Note 23)
    
    
    (Note 23)
    
    
    (Restated)
    
    
    RMB
    
    
    RMBBalance at January 1, 2008 restated
    
    
    7,083,537
    
    
    
    11,564,501
    
    
    
    1,405,695
    
    
    
    346,034
    
    
    
    1,446,039
    
    
    
    55,709
    
    
    
    21,901,515Original reported
    
    
    7,083,537
    
    
    
    10,294,490
    
    
    
    1,405,695
    
    
    
    346,034
    
    
    
    1,996,005
    
    
    
    55,709
    
    
    
    21,181,470Effect of changes in accounting
policy (Note 5)
    
    
    
    
    
    
    1,270,011
    
    
    
    
    
    
    
    
    
    
    
    (549,966
    )
    
    
    
    
    
    
    720,045Total comprehensive income, restated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,193,668
    
    
    
    239
    
    
    
    1,193,907Original reported
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,224,129
    
    
    
    239
    
    
    
    1,224,368Effect of changes in accounting
policy (Note 5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,461
    )
    
    
    
    
    
    
    (30,461
    )Appropriations from retained
earnings (Note 23)
    
    
    
    
    
    
    
    
    
    
    121,444
    
    
    
    
    
    
    
    (121,444
    )
    
    
    
    
    
    
    Reversal of appropriations (Note 23)
    
    
    
    
    
    
    
    
    
    
    (33,969
    )
    
    
    (41,975
    )
    
    
    75,944
    
    
    
    
    
    
    
    Dividends relating to 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (566,683
    )
    
    
    
    
    
    
    (566,683
    )Balance at December 31, 2008,
restated
    
    
    7,083,537
    
    
    
    11,564,501
    
    
    
    1,493,170
    
    
    
    304,059
    
    
    
    2,027,524
    
    
    
    55,948
    
    
    
    22,528,739Original reported
    
    
    7,083,537
    
    
    
    10,294,490
    
    
    
    1,493,170
    
    
    
    304,059
    
    
    
    2,607,951
    
    
    
    55,948
    
    
    
    21,839,155Effect of changes in accounting
policy (Note 5)
    
    
    
    
    
    
    1,270,011
    
    
    
    
    
    
    
    
    
    
    
    (580,427
    )
    
    
    
    
    
    
    689,584Balance at January 1, 2009, restated
    
    
    7,083,537
    
    
    
    11,564,501
    
    
    
    1,493,170
    
    
    
    304,059
    
    
    
    2,027,524
    
    
    
    55,948
    
    
    
    22,528,739Original reported
    
    
    7,083,537
    
    
    
    10,294,490
    
    
    
    1,493,170
    
    
    
    304,059
    
    
    
    2,607,951
    
    
    
    55,948
    
    
    
    21,839,155Effect of changes in accounting
policy (Note 5)
    
    
    
    
    
    
    1,270,011
    
    
    
    
    
    
    
    
    
    
    
    (580,427
    )
    
    
    
    
    
    
    689,584Total comprehensive income, restated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,342,450
    
    
    
    (1,063
    )
    
    
    1,341,387Original reported
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,364,521
    
    
    
    (1,063
    )
    
    
    1,363,458Effect of changes in accounting
policy (Note 5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,071
    )
    
    
    
    
    
    
    (22,071
    )Appropriations from retained
earnings (Note 23)
    
    
    
    
    
    
    
    
    
    
    134,902
    
    
    
    
    
    
    
    (134,902
    )
    
    
    
    
    
    
    Dividends relating to 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (566,683
    )
    
    
    (88
    )
    
    
    (566,771
    )Addition from non-controlling
interests
    
    
    
    
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    920
    
    
    
    1,000Balance at December 31, 2009,
restated
    
    
    7,083,537
    
    
    
    11,564,581
    
    
    
    1,628,072
    
    
    
    304,059
    
    
    
    2,668,389
    
    
    
    55,717
    
    
    
    23,304,355Original reported
    
    
    7,083,537
    
    
    
    10,294,570
    
    
    
    1,628,072
    
    
    
    304,059
    
    
    
    3,270,887
    
    
    
    55,717
    
    
    
    22,636,842Effect of changes in accounting
policy (Note 5)
    
    
    
    
    
    
    1,270,011
    
    
    
    
    
    
    
    
    
    
    
    (602,498
    )
    
    
    
    
    
    
    667,513Balance at January 1, 2010
    
    
    7,083,537
    
    
    
    11,564,581
    
    
    
    1,628,072
    
    
    
    304,059
    
    
    
    2,668,389
    
    
    
    55,717
    
    
    
    23,304,355Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,486,062
    
    
    
    (1,144
    )
    
    
    1,484,918Appropriations from retained
earnings (Note 23)
    
    
    
    
    
    
    
    
    
    
    155,826
    
    
    
    
    
    
    
    (155,826
    )
    
    
    
    
    
    
    Dividends relating to 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (566,683
    )
    
    
    (14
    )
    
    
    (566,697
    )Balance at December 31, 2010
    
    
    7,083,537
    
    
    
    11,564,581
    
    
    
    1,783,898
    
    
    
    304,059
    
    
    
    3,431,942
    
    
    
    54,559
    
    
    
    24,222,576
  
 *
    
    Translation of amounts from Renminbi (RMB) into United States dollars (US$) for the
convenience of the reader has been made at US$1.00=RMB6.60, the certified exchange rates for
December 30, 2010 as published by the Federal Reserve Board of the United States. No
representation is made that the RMB amounts could have been, or could be, converted into US$
at that rate on December 30, 2010 or on any other date. F-8




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    GENERAL INFORMATIONGuangshen Railway Company Limited (the Company) was established as a joint stock limited company
in the Peoples Republic of China (the PRC) on March 6, 1996. On the same date, the Company
assumed the business operations of certain railroad and other related businesses (collectively the
Businesses) that had been undertaken previously by its predecessor, Guangshen Railway Company
(the Predecessor) and certain of its subsidiaries; and Guangzhou Railway (Group) Company (the
Guangzhou Railway Group) and certain of its subsidiaries prior to the formation of the Company.The Predecessor is controlled by and is under the administration of the Guangzhou Railway Group.
Pursuant to a restructuring agreement entered into between the Guangzhou Railway Group, the
Predecessor and the Company in 1996 (the Restructuring Agreement), the Company issued to the
Guangzhou Railway Group 100% of its equity interest in the form of 2,904,250,000 ordinary shares
(the State-owned Domestic Shares) in exchange for the assets and liabilities associated with the
operations of the Businesses (the Restructuring). After the Restructuring, the Predecessor
changed its name to Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company
(GEDC).In May 1996, the Company issued 1,431,300,000 shares, representing 217,812,000 H Shares (H
Shares) and 24,269,760 American Depositary Shares (ADSs, one ADS represents 50 H Shares) in a
global public offering for cash of approximately RMB4,214,000,000 in order to finance the capital
expenditure and working capital requirements of the Company and its subsidiaries (collectively
defined as the Group).In December 2006, the Company issued 2,747,987,000 A Shares on the Shanghai Stock Exchange through
an initial public offering of shares in order to finance the acquisition of the business and
related assets and liabilities associated with the railway transportation business of Guangzhou
Railway Group Yangcheng Railway Enterprise Development Company (Yangcheng Railway Business), a
wholly owned subsidiary of Guangzhou Railway Group which operates a railway line between the cities
of Guangzhou and Pingshi in the Southern region of the PRC.The principal activities of the Group are the provision of passenger and freight transportation on
railroad. The Group also operates certain other businesses, which principally include services
offered in railway stations; and sales of food, beverages and merchandises on board the trains and
in the railway stations.The registered address of the Company is No. 1052 Heping Road, Shenzhen, Guangdong Province, the
Peoples Republic of China. The business license for the Company will expire until 2056.As at December 31, 2010, the Company had in total approximately 32,179 employees, representing a
decrease of 991 as compared with that of December 31, 2009.The financial statements were authorized for issue by the board of directors of the Company on
June 2, 2011.The English names of all companies listed in the financial statements are direct translations of
their registered names in Chinese.
 F-9




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    PRINCIPAL ACCOUNTING POLICIESThe principal accounting policies adopted in the preparation of these financial statements are set
out below. These policies have been consistently applied to all the years presented, unless
otherwise stated.2.1
    
    Basis of presentationThe consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) as issued by International Accounting Standards Board (IASB). The
consolidated financial statements have been prepared under the historical cost convention.The preparation of financial statements in conformity with IFRS requires the use of certain
critical accounting estimates. It also requires management to exercise its judgement in the process
of applying the Groups accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the financial statements
are disclosed in Note 4.(a)
    
    New and amended standards early adopted by the Group
 
    
    Third improvements to International Financial Reporting Standards (2010) were issued in May
2010, by IASB. All improvements are effective in the financial year of 2011. The Group early
adopted the improved IFRS 1, First-time Adoption of IFRS from January 1, 2010. With the
improved IFRS 1, the revalued amount can become deemed costs so long as the revaluation takes
place at periods before or during the first-time adoptors first set of IFRS financial
statements. In addition, the IASB has made a special provision in this IFRS 1 that existing
IFRS preparers may also be able to retrospectively apply this. The impact of early adoption
of the improved IFRS 1 is summarised in Note 5.
 (b)
    
    Standards, amendments and interpretations to existing standards effective in 2010 and
relevant to the Group:
 
    
    IAS 17 (amendment), Leases, deletes specific guidance regarding classification of leases
of land, so as to eliminate inconsistency with the general guidance on lease classification.
As a result, leases of land should be classified as either finance or operating lease using
the general principles of IAS 17, i.e. whether the lease transfers substantially all the risks
and rewards incidental to ownership of an asset to the lessee. Prior to the amendment, land
interest which title is not expected to pass to the Group by the end of the lease term was
classified as operating lease under Leasehold land payments, and amortized over the lease
term.
 F-10




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.1
    
    Basis of preparation (continued)(b)
    
    Standards, amendments and interpretations to existing standards effective in 2010 and
relevant to the Group: (continued):
 IAS 17 (amendment) has been applied retrospectively for annual periods beginning January 1,
2010 in accordance with the effective date and transitional provisions of the amendment.
The Group has reassessed the classification of unexpired land use rights as at January 1,
2010 on the basis of information existing at the inception of those leases. The Group has
concluded that the classification of such land use rights as operating leases remains
appropriate as the leases do not transfer substantially all the risks and rewards
incidental to ownership of the land use rights to the Group.
 (c)
    
    Standards, amendments and interpretations to existing standards effective in 2010 but not
relevant to the Group:
 
    
    IFRS 3 (revised), Business combinations, and consequential amendments to IAS 27,
Consolidated and separate financial statements, IAS 28, Investments in associates, and IAS
31, Interests in joint ventures, are effective prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual reporting period
beginning on or after July 1, 2009. This is not currently applicable to the Group, as it has
no such transactions.
    
    IAS 27 (revised) requires the effects of all transactions with non-controlling interests to
be recorded in equity if there is no change in control and these transactions will no longer
result in goodwill or gains and losses. The standard also specifies the accounting when
control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain
or loss is recognized in profit or loss. IAS 27 (revised) has had no impact on the current
period, as there have been no transactions with non-controlling interests.
    
    IFRIC-Int 17, Distributions of non-cash assets to owners is effective for annual periods
beginning on or after July 1, 2009. This is not currently applicable to the Group, as it has
not made any non-cash distributions.
    
    IFRIC 18, Transfers of assets from customers, effective for transfer of assets received
on or after July 1, 2009. This is not currently applicable to the Group, as there is no such
transaction during the period.
    
    An additional exemption for first-time adopters (Amendment to IFRS 1) is effective for
annual periods beginning on or after January 1, 2010. That is not relevant to the Group, as it
is an existing IFRS preparer.
    
    IAS 39 (Amendment), Eligible hedged items is effective for annual period on or after July
1, 2009. That is not currently applicable to the Group, as it has no hedging.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.1
    
    Basis of preparation (continued)(c)
    
    Standards, amendments and interpretations to existing standards effective in 2010 but not
relevant to the Group (continued):
 
    
    IFRS 2 (Amendment), Group cash-settled share-based payment transaction is effective for
annual periods beginning on or after January 1, 2010. This is not currently applicable to the
Group, as it has no such share-based payment transactions.
    
    First improvements to International Financial Reporting Standards (2008) were issued in May
2008 by the IASB. The improvement related to IFRS 5 Non-current assets held for sale and
discontinued operations is effective for annual period on or after July 1, 2009.
    
    Second improvements to International Financial Reporting Standards (2009) were issued in
April 2009 by IASB. All improvements are effective in the financial year of 2010.
 (d)
    
    The following new standards, new interpretations and amendments to standards and
interpretations have been issued but are not effective for the financial year beginning
January 1, 2010 and have not been early adopted:
 
    
    IFRS 9, Financial instruments addresses the classification and measurement of financial
assets and is likely to affect the Groups accounting for its financial assets. IFRS 9 was
further updated in October 2010 to include guidance on financial liabilities and derecognition
of financial instruments. The standard is not applicable until January 1, 2013 but is
available for early adoption.
    
    Amendment to IFRS 7, Disclosures  Transfers of Financial Assets is issued in October
2010 which requires additional disclosures for risk exposures arising from transferred
financial assets. The amendments aim at helping users of financial statements to evaluate the
ongoing risk exposures relating to transfers of financial assets and the effect of those risks
on an entitys financial position and promoting transparency in the reporting of transfer
transactions, particularly those involving securitisation of financial assets. The amendments
will apply from annual periods beginning on or after July 1, 2011. Earlier application is
permitted.
    
    IAS 24 (Revised) Related party disclosures supersedes IAS 24 Related party disclosures
issued in 2003. The revised standard clarifies and simplifies the definition of a related
party and removes the requirement for government-related entities to disclose details of all
transactions with the government and other government-related entities. The revised IAS 24 is
required to be applied from January 1, 2011. Earlier application, in whole or in party, is
permitted. The Group will apply the new revised IAS 24 from January 1, 2011.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.1
    
    Basis of preparation (continued)(d)
    
    The following new standards, new interpretations and amendments to standards and
interpretations have been issued but are not effective for the financial year beginning
January 1, 2010 and have not been early adopted (continued):
 
    
    Under Classification of rights issues (Amendment to IAS 32), for rights issues offered
for a fixed amount of foreign currency, current practice appears to require such issues to be
accounted for as derivative liabilities. The amendment states that if such rights are issued
pro rata to all the entitys existing shareholders in the same class for a fixed amount of
currency, they should be classified as equity regardless of the currency in which the exercise
price is denominated. The amendment should be applied for annual periods beginning on or after
February 1, 2010. Earlier application is permitted.
    
    Amendments to IFRIC Int-14 Prepayments of a minimum funding requirement correct an
unintended consequence of IFRIC Int-14, IAS  The limit on a defined benefit asset, minimum
funding requirements and their interaction. Without the amendments, entities are not
permitted to recognize as an asset for any surplus arising from the voluntary prepayment of
minimum funding contributions in respect of future service. This was not intended when IFRIC
Int-14 was issued, and the amendments correct the problem. The amendments are effective for
annual periods beginning January 1, 2011. Earlier application is permitted. The amendments
should be applied retrospectively to the earliest comparative period presented.
    
    IFRICInt 19, Extinguishing financial liabilities with equity instruments clarifies the
requirements of IFRSs when an entity renegotiates the terms of a financial liability with its
creditor and the creditor agrees to accept the entitys shares or other equity instruments to
settle the financial liability fully or partially. The interpretation is effective for annual
periods beginning on or after July 1, 2010. Earlier application is permitted.
    
    Limited exemption from comparative IFRS 7 disclosures for first-time adopters (Amendment
to IFRS 1) provide first-time adopters with the same transition provisions as included in the
amendment to IFRS 7 in relation to relief from presenting comparative information that ended
before December 31, 2009 for new fair value disclosures requirements. This is required to be
applied for annual periods beginning on or after July 1, 2010. Early adoption is permitted.
    
    Amendment to IAS 12, Deferred tax: Recovery of underlying assets. The amendments are
effective for annual periods beginning January 1, 2012. Earlier application is permitted.
 The directors of the Company are in the process of making an assessment of the impact of these
new/revised standards to the financial statements of the Group.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.2
    
    Consolidation(a)
    
    SubsidiariesSubsidiaries are all entities (including special purpose entities) over which the Group has the
power to govern the financial and operating policies generally accompanying a shareholding of more
than one half of the voting rights. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing whether the Group controls
another entity. Subsidiaries are fully consolidated from the date on which control is transferred
to the Group. They are de-consolidated from the date that control ceases. Details of the Companys
subsidiaries are set out in Note 11.The Group uses the acquisition method of accounting 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 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. Acquisition-related costs are expensed as incurred.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date. On an
acquisition-by-acquisition basis, the group recognizes any non-controlling interest in the acquiree
either at fair value or at the non-controlling interests proportionate share of the acquirees net
assets.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 is recorded as goodwill. If
this is less than the fair value of the net assets of the subsidiary acquired in the case of a
bargain purchase, the difference is recognized directly in the comprehensive income statement.Inter-company transactions, balances and unrealized gains on transactions between group companies
are eliminated. Unrealized losses are also eliminated. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with the policies adopted by the Group.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.2
    
    Consolidation (continued)(b)
    
    AssociatesAssociates are all entities over which the Group has significant influence but not control,
generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in
associates are accounted for using the equity method of accounting and are initially recognized at
cost. The Groups investment in associates includes goodwill identified on acquisition, net of any
accumulated impairment loss (Note 2.9). Details of the Groups associates are set out in Note 12.The Groups share of its associates post-acquisition profits or losses is recognized in the
comprehensive income statement and its share of post-acquisition movements in other comprehensive
income is recognized in other comprehensive income. The cumulative post-acquisition movements are
adjusted against the carrying amount of the investment. When the Groups share of losses in an
associate equals or exceeds its interest in the associate, including any other unsecured
receivables, the Group does not recognize further losses, unless it has incurred obligations or
made payments on behalf of the associate.Unrealized gains on transactions between the Group and its associates are eliminated to the extent
of the Groups interest in the associates. Unrealized losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Accounting policies of
associates have been changed where necessary to ensure consistency with the policies adopted by the
Group.Dilution gains and losses arising in investments in associates are recognized in the comprehensive
income statement.2.3
    
    Segment reportingOperating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision-maker. The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating segments, has been identified as
the senior executives that make strategic decisions.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.4
    
    Foreign currency transactions(a)
    
    Functional and presentation currencyItems included in the financial statements of each of the Groups entities are measured using the
currency of the primary economic environment in which the entity operates (the functional
currency). The consolidated financial statements are presented in Renminbi (Rmb), which is the
Companys functional and the Groups presentation currency.(b)
    
    Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions 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 recognized in the comprehensive income statement.2.5
    
    Fixed assetsFixed 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). The Group has early adopted the improved IFRS 1,
First-time Adoption of IFRS from January 1, 2010. With the improved IFRS 1, the revaluated amount
can become deemed costs so long as the revaluation takes place at periods before or during the
first-time adoptors first set of IFRS financial statements. In addition, the IASB has made a
special provision in this IFRS 1 that existing IFRS preparers may also be able to retrospectively
apply this. The impact of early adoption of the improved IFRS is discussed in Note 5.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 the Group 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.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 yearsTracks, bridges and service roads (Note a)
    
    
    16 to 100 yearsLocomotives and rolling stock
    
    
    20 yearsCommunications and signalling systems
    
    
    8 to 20 yearsOther machinery and equipment
    
    
    4 to 25 years
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.5
    
    Fixed assets (continued)Note a:The estimated useful lives of buildings, tracks, bridges and service roads exceed the initial lease
periods of the respective land use right lease grants (the Lease Term); and the initial period of
land use right operating leases (the Operating Lease Term), on which these assets are located
(Notes 2.7 and 38(b)).Pursuant to the relevant laws and regulations in the PRC governing the land use right lease grants,
the Group has the right to renew the respective leases up to a period not less than 50 years with
additional cost paid. This right can be exercised within one year before the expiry of the initial
Lease Term, and can only be denied if such renewals are considered to be detrimental to the public
interest. Accordingly, the directors of the Company consider that the approval process to be
perfunctory. In addition, based on the provision of the land use right operating lease agreement
entered into with the substantial shareholder (details contained in Note 38(b)), the Company can
renew the lease at its own discretion upon expiry of the Operating Lease Term. Based on the above
considerations, the directors have determined the estimated useful lives of these assets to extend
beyond the initial Lease Term as well as the Operating Lease Term.The assets residual values and estimated useful lives are reviewed, and adjusted if appropriate,
at the end of each reporting period.An assets carrying amount is written down immediately to its recoverable amount if the assets
carrying amount is greater than its estimated recoverable amount (Note 2.9).Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and
are recognized within other (expense)/income  net, included in the comprehensive income
statement.2.6
    
    Construction-in-progressConstruction-in-progress represents buildings, tracks, bridges and service roads, mainly includes
the construction related costs for the associated facilities of the existing railway line of the
Group. Construction-in-progress is stated at cost, which includes all expenditures and other direct
costs, site restoration costs, prepayments attributable to the construction and interest charges
arising from borrowings used to finance the construction during the construction period, less
impairment loss. Construction-in-progress is not depreciated until such assets are completed and
ready for their intended use.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.7
    
    Leasehold land paymentsThe 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
amortized over the lease terms of 36.5 to 50 years using the straight-line method. Pursuant to the
relevant laws and regulations in the PRC governing the land use right lease grant, the Group has
the right to extend and renew the lease for a period not less than 50 years. This right can be
exercised within one year before the expiry of the initial Lease Term, and can only be denied if
such renewals are considered to be detrimental to public interest. The Group considers the
approval process to be perfunctory and the renewal is reasonably assured.2.8
    
    GoodwillGoodwill 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.
Goodwill is tested annually for impairment or, whenever there is an indication of impairment, and
carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to
the entity sold.Goodwill is allocated to cash-generating units for the purpose of impairment testing. The
allocation is made to those cash-generating units or groups of cash-generating units that are
expected to benefit from the business combination in which the goodwill arose identified according
to operating segment.2.9
    
    Impairment of investment in subsidiaries, associates and non-financial assetsAssets that have an indefinite useful life, for example goodwill, are not subject to amortization
and are tested annually for impairment. Assets 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 (cash-generating units). Non-financial assets
other than goodwill that suffered impairment are reviewed for possible reversal of the impairment
at each reporting date.Impairment testing of the investments in subsidiaries or associates is required upon receiving
dividends from these investments if the dividend exceeds the total comprehensive income of the
subsidiary or associate in the period the dividend is declared or if the carrying amount of the
investment in the separate financial statements exceeds the carrying amount in the consolidated
financial statements of the investees net assets including goodwill.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.10
    
    Financial assets2.10.1
    
    ClassificationThe Group classifies its financial assets in the following categories: at fair value through profit
or loss, loans and receivables, and available-for-sale financial assets. The classification depends
on the purpose for which the financial assets were acquired. Management determines the
classification of its financial assets at initial recognition. Other than loans and receivables and
available-for-sale financial assets, the Group did not hold any financial assets carried at fair
value through profit or loss during 2010 and 2009.(a)
    
    Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. They are included in current assets, except for maturities
greater than 12 months after the 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
2.15 and 2.16).(b)
    
    Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivatives that are either designated in this category
or not classified in any of the other categories. They are included in non-current assets unless
the investment matures or management intends to dispose of it within 12 months of the end of the
reporting period.2.10.2
    
    Recognition and measurementRegular way purchases and sales of financial assets are recognized on the trade-date  the date on
which the Group commits to purchase or sell the asset. Investments are initially recognized 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. Loans and
receivables are subsequently carried at amortized cost using the effective interest method.
Financial assets are derecognized 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.Changes in the fair value of monetary and non-monetary securities classified as available-for-sale
are recognized in other comprehensive income.When securities classified as available-for-sale are sold or impaired, the accumulated fair value
adjustments recognized in equity are included in the comprehensive income statement as gains and
losses from investment securities.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.10
    
    Financial assets (continued)2.10.2
    
    Recognition and measurement (continued)Dividends on available-for-sale equity instruments are recognized in the comprehensive income
statement as part of other income when the Groups right to receive payments is established.The fair values of quoted investments are based on current bid prices. If the market for a
financial asset is not active (and for unlisted securities), the Group established fair value by
using valuation techniques. These include the use of recent arms length transactions, reference
to other instruments that are substantially the same, discounted cash flow analysis, and option
pricing models, making maximum use of market inputs and relying as little as possible on
entity-specific inputs. In case of unlisted equity instruments that do not have a quoted market
price in an active market and whose fair value cannot be reliably determined via valuation
techniques, they are measured at cost, subject to impairment review.2.11
    
    Offsetting financial instrumentsFinancial assets and liabilities are offset and the net amount reported in the balance sheet when
there is a legally enforceable right to offset the recognized amounts and there is an intention to
settle on a net basis, or realize the asset and settle the liability simultaneously.2.12
    
    Impairment of financial assets(a)
    
    Assets carried at amortized costThe Group assesses at the end of each reporting period whether there is objective evidence that a
financial asset or group of financial assets is impaired. A financial asset or a group of financial
assets is impaired and impairment losses are incurred only if there is objective evidence of
impairment as a result of one or more events that occurred after the initial recognition of the
asset (a loss event) and that loss event (or events) has an impact on the estimated future cash
flows of the financial asset or group of financial assets that can be reliably estimated.The criteria that the Group uses to determine that there is objective evidence of an impairment
loss include:
 
    
    Significant financial difficulty of the issuer or obligor;
    
    A breach of contract, such as a default or delinquency in interest or principal payments;
    
    The Group, for economic or legal reasons relating to the borrowers financial difficulty,
granting to the borrower a concession that the lender would not otherwise consider;
    
    It becomes probable that the borrower will enter bankruptcy or other financial
reorganisation;
    
    The disappearance of an active market for that financial asset because of financial
difficulties; or
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.12
    
    Impairment of financial assets (continued)(a)
    
    Assets carried at amortized cost (continued)
 
    
    Observable data indicating that there is a measurable decrease in the estimated future cash
flows from a portfolio of financial assets since the initial recognition of those assets,
although the decrease cannot yet be identified with the individual financial assets in the
portfolio, including:
 (i)
    
    adverse changes in the payment status of borrowers in the portfolio;(ii)
    
    national or local economic conditions that correlate with defaults on the assets in
the portfolio.
 The Group first assesses whether objective evidence of impairment exists.The amount of the loss is measured as the difference between the assets carrying amount and the
present value of estimated future cash flows (excluding future credit losses that have not been
incurred) discounted at the financial assets original effective interest rate. The carrying amount
of the asset is reduced and the amount of the loss is recognized in the comprehensive income
statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate
for measuring any impairment loss is the current effective interest rate determined under the
contract. As a practical expedient, the Group may measure impairment on the basis of an
instruments fair value using an observable market price.If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized (such as an
improvement in the debtors credit rating), the reversal of the previously recognized impairment
loss is recognized in the comprehensive income statement.(b)
    
    Assets classified as available for saleThe Group assesses at the end of each reporting period whether there is objective evidence that a
financial asset or a group of financial assets is impaired. For debt securities, the Group uses the
criteria refer to (a) above. In the case of equity investments classified as available for sale, a
significant or prolonged decline in the fair value of the security below its cost is also evidence
that the assets are impaired. If any such evidence exists for available-for-sale financial assets,
the cumulative loss  measured as the difference between the acquisition cost and the current fair
value, less any impairment loss on that financial asset previously recognized in profit or loss 
is removed from equity and recognized in the separate comprehensive income statement. Impairment
losses recognized in the separate comprehensive income statement on equity instruments are not
reversed through the separate comprehensive income statement. If, in a subsequent period, the fair
value of a debt instrument classified as available for sale increases and the increase can be
objectively related to an event occurring after the impairment loss was recognized in profit or
loss, the impairment loss is reversed through the separate comprehensive income statement.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.13
    
    Deferred employee costsThe Group implemented a scheme (the Scheme) for selling staff quarters to its employees in
2000. Under the Scheme, the Group sold certain staff quarters to their employees at
preferential prices in the form of housing benefits provided to these employees. The total
housing benefits (the Benefits), which represent the difference between the net book value
of the staff quarters sold and the proceeds collected from the employees, are expected to
benefit the Group at least over 15 years, which was determined according to the contractual
service period of the employees participating in the Scheme. Upon the implementation of the
Scheme in 2000, the Benefits were recorded as deferred employee costs and the balance is then
amortized over the contractual service period of the employees participating in the Scheme.At the end of the reporting period, the Group reassesses whether there is any indication of
impairment, taking into account the remaining service period of the employees and other
qualitative factors. If such indication exists, a detailed analysis will be performed in
order to assess whether the carrying amount of the deferred employee costs can be recoverable
in full. A write-down is made if the carrying amount exceeds the recoverable amount.2.14
    
    Materials and suppliesMaterials and supplies are stated at the lower of cost and net realizable 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 capitalized to fixed assets when the items are installed
with the related fixed assets, whichever is appropriate. Net realizable value is the estimated
selling price in the ordinary course of business, less applicable variable selling expenses.2.15
    
    Trade and other receivablesTrade receivables are amounts due from customers for merchandise sold or services performed in the
ordinary course of business. If collection of trade and other receivables is expected in one year
or less (or in the normal operating cycle of the business if longer), they are classified as
current assets. If not, they are presented as non-current assets.Trade and other receivables are recognized initially at fair value and subsequently measured at
amortized cost using the effective interest method, less provision for impairment.2.16
    
    Cash and cash equivalentsCash and cash equivalents include cash in hand; deposits held at call with banks; and other
short-term highly liquid investments with original maturities of three months or less.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.17
    
    Share capitalOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of
new shares or options are shown in equity as a deduction, net of tax, from the proceeds.2.18
    
    Trade payablesTrade payables are 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.2.19
    
    BorrowingsBorrowings (including bonds payable) are recognized initially at fair value, net of transaction
costs incurred. They are subsequently stated at amortized cost; and any difference between proceeds
(net of transaction costs) and the redemption value is recognized 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 recognized 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 capitalized as a
prepayment for liquidity services and amortized 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.2.20
    
    Current and deferred income taxThe 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.The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the balance sheet date in the countries where the Companys subsidiaries and associates
operate and generate taxable income. Management periodically evaluates positions taken in tax
returns with respect to situations in which applicable tax regulation is subject to interpretation
and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax
authorities.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.20
    
    Current and deferred income tax (continued)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 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 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.Deferred income tax is provided on temporary differences arising on investments in subsidiaries and
associates, 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.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.2.21
    
    Employee benefits(a)
    
    Defined contribution planThe Group pays contributions to defined contribution schemes operated by the local government for
employee benefits in respect of pension and housing, etc. The Group has no further payment
obligations once the contributions have been paid. The contributions to the defined contribution
schemes are recognized as staff costs when they are due.(b)
    
    Termination benefitsTermination benefits are payable when selected employees who meet certain criteria accept voluntary
redundancy in exchange for these benefits, with specific approval granted by management of the
Group. The Group recognizes retirement benefits when it is demonstrably committed to either
terminate the employment of current employees according to a detailed formal plan without
possibility of withdrawal or to provide retirement benefits as a result of an offer made to
encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date
are discounted to present value.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.22
    
    ProvisionsProvisions for environmental restoration, restructuring costs and legal claims are recognized 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 recognized 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
recognized 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 recognized as interest expense.2.23
    
    Revenue recognitionRevenue comprises the fair value of the consideration received or receivable for the sale of goods
and services in the ordinary course of the Groups activities. Revenue is shown net of
value-added tax, returns, rebates and discounts and after eliminating sales within the Group.The Group recognizes revenue when the amount of revenue can be reliably measured, it is probable
that future economic benefits will flow to the entity and specific criteria have been met for each
of the Groups activities as described below. The Group bases its estimates on historical
results, taking into consideration the type of customer, the type of transactions and the
specifics of each arrangement.(a)
    
    Revenue from railway businessRevenue from railway business includes revenue from passenger and freight services and revenue from
railway network usage and services. Revenue from railway business is recognized when the services
are rendered and revenue can be reliably measured.(b)
    
    Revenue from other businessesRevenue from other business principally includes services offered in railway stations, sales of
food, beverages and merchandises on board the trains and in the railway stations. Revenue from
other business is recognized once the related services or goods are delivered, the related risks
and rewards of ownership have been transferred and revenue can be reliably measured.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.23
    
    Revenue recognition (continued)(c)
    
    Interest incomeInterest income is recognized 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 recognized
using the original effective interest rate.(d)
    
    Dividend incomeDividend income is recognized when the right to receive payment is established.(e)
    
    Rental incomeRevenue from operating lease arrangements is recognized on a straight-line basis over the period
of the respective leases.2.24
    
    Government grantsGrants from the government are recognized 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 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.The Group changed the accounting policy in respect of government grants relating to property, plant
and equipment from January 1, 2010. Please refer to Note 5 for more details.2.25
    
    Operating leasesLeases in which a significant portion of the risks and rewards of ownership are retained by the
lessor are classified as operating leases. Payments made under operating leases (net of any
incentives received from the lessor) are charged to the comprehensive income statement on a
straight-line basis over the period of the lease. Please refer to Note 2.23(e) for accounting
policy on operating lease income.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    PRINCIPAL ACCOUNTING POLICIES (CONTINUED)2.26
    
    Dividend distributionDividend distribution to the Companys shareholders is recognized as a liability in the Groups
financial statements in the period in which the dividends are approved by the Companys
shareholders.3.
    
    FINANCIAL RISK MANAGEMENT3.1
    
    Financial risk factorThe Groups activities expose it to a variety of financial risks: price risk, foreign currency
risk, cash flow and fair value interest rate risk, credit risk, and liquidity risk. The Groups
overall risk management strategy seeks to minimise the potential adverse effects on the financial
performance of the Group.(a)
    
    Price riskThe Group is exposed to price risk because of investments held by the Group and classified as
available-for-sale on the consolidated balance sheet.To manage its price risk arising from investments in equity interests, the Group diversifies its
portfolio. Diversification of the portfolio is done in accordance with the limits set by the
Group.(b)
    
    Foreign currency riskThe Group mainly operates in the PRC with most of the transactions settled in RMB. RMB is also the
functional currency of the Company and its subsidiaries. RMB is not freely convertible into other
foreign currencies. The conversion of RMB denominated balances into foreign currencies is subject
to the rates and regulations of foreign exchange control promulgated by the PRC government. Any
foreign currency denominated monetary assets and liabilities other than in RMB would subject the
Group to foreign exchange exposure.The Groups objective of managing the foreign currency risk is to minimise potential adverse
effects arising from foreign transaction movements. Depending on volatility of specific foreign
currency exposed, measures are taken by management to manage the foreign currency positions.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    FINANCIAL RISK MANAGEMENT (CONTINUED)3.1
    
    Financial risk factor (continued)(b)
    
    Foreign currency risk (continued)The following table shows the Groups exposures to foreign currency rate fluctuation arising from
foreign currency denominated monetary assets and liabilities:
 As at January 1,
    
    
    As at December 31,Currency
    
    2009
    
    
    2009
    
    
    2010Monetary assets and liabilities
    
    denomination
    
    (RMB000
    )
    
    (RMB000
    )
    
    (RMB000
    )Cash and cash equivalents
    
    USD
    
    
    3,176
    
    
    
    455
    
    
    
    322Cash and cash equivalents
    
    HKD
    
    
    30,452
    
    
    
    66,801
    
    
    
    103,221Other receivables
    
    HKD
    
    
    529
    
    
    
    994
    
    
    
    549Trade payables
    
    USD
    
    
    (940
    )
    
    
    (939
    )
    
    
    
 The Group may experience a loss as a result of any foreign currency exchange rate fluctuations in
connection with the deposits and other monetary assets and liabilities shown above. The Group has
not used any means to hedge the exposure.As at December 31, 2010, if RMB had weakened/strengthened by 5% against the HKD with all other
variables held constant, post-tax profit for the year would have been RMB5,200,000 (2009:
RMB3,390,000, 2008: RMB1,270,000) higher/lower, mainly as a result of foreign exchange gains/losses
on translation of HKD-denominated cash in banks. The impact of exchange fluctuations of USD is not
significant.(c)
    
    Cash flow and fair value interest rate riskOther than deposits held in banks, the Group does not have significant interest-bearing assets. The
average interest rate of deposits held in banks in the PRC throughout the year was approximately
0.87% (2009: 1.27%, 2008: 1.10%). Any change in the interest rate promulgated by the
Peoples Bank of China from time to time is not considered to have significant impact to the Group.The Groups interest rate risk which affects its income and operating cash flows mainly arises from
bonds payable. The bonds payable were at fixed rates, and expose the Group to fair value interest
rate risk.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    FINANCIAL RISK MANAGEMENT (CONTINUED)3.1
    
    Financial risk factor (continued)(d)
    
    Credit riskCredit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, trade
and other receivables (excluding prepayments), short-term deposit, and long-term receivable.Cash and short term liquid investments are placed with reputable banks. There was no recent
history of default of cash and cash equivalents and short-term deposits from such financial
institutions/authority. The majority of the Groups trade receivable balances and long term
receivable balance are due from third party customers as a result of rendering of services or sales
of merchandises. The Groups other receivable balances mainly arise from services rendered other
than the main railway transportation operations. The Group performs ongoing credit evaluations of
its customers/debtors financial condition and generally does not require collateral from the
customers/debtors account on the outstanding balances. Based on the expected realizability and
timing for collection of the outstanding balances, the Group maintains a provision for doubtful
accounts and actual losses incurred have been within managements expectation. In view of the
history of business dealings made with the customers and the sound collection history of the
receivables due from them, management believes that there is no material credit risk inherent in
the Groups outstanding receivable balances.There were no other financial assets carrying a significant exposure to credit risk.With the consideration stated of the above and due to the fact that the majority of the Groups
revenue is derived from the railroad businesses which are cash transactions, the directors believe
that there is no significant credit risk inherent in the Groups business during the reporting
period.(e)
    
    Liquidity riskPrudent liquidity risk management includes maintaining sufficient cash, the availability of funding
through an adequate amount of committed credit facilities and the ability to close out market
positions.Management monitors rolling forecasts of the Groups liquidity reserves (comprising undrawn
borrowing facilities and cash and cash equivalents) on the basis of expected cash flows.The 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.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    FINANCIAL RISK MANAGEMENT (CONTINUED)3.1
    
    Financial risk factor (continued)(e)
    
    Liquidity risk (continued)
 Less than
    
    
    Between 1 and 2
    
    
    Between 21 year
    
    
    years
    
    
    and 5 yearsRMB000
    
    
    RMB000
    
    
    RMB000As at January 1, 2009Borrowings (including interests) (Note 25)
    
    
    737,185
    
    
    
    188,704
    
    
    
    3,559,551Trade and other payables excluding statutory
liabilities (Notes 28 and 29)
    
    
    1,251,454
    
    
    
    
    
    
    
    Payables for fixed assets and construction-in-progress
    
    
    764,609
    
    
    
    
    
    
    
    At December 31, 2009Bonds payable (including interests) (Note 26)
    
    
    167,650
    
    
    
    167,650
    
    
    
    3,996,060Trade and other payables excluding statutory
liabilities (Notes 28 and 29)
    
    
    1,394,977
    
    
    
    
    
    
    
    Payables for fixed assets and construction-in-progress
    
    
    674,652
    
    
    
    
    
    
    
    At December 31, 2010Bonds payable (including interests) (Note 26)
    
    
    167,650
    
    
    
    167,650
    
    
    
    3,828,410Trade and other payables excluding statutory
liabilities (Notes 28 and 29)
    
    
    1,732,119
    
    
    
    
    
    
    
    Payables for fixed assets and construction-in-progress
    
    
    477,806
    
    
    
    
    
    
    
    
 3.2
    
    Capital risk managementThe Groups objectives of managing capital are to safeguard the Groups ability to continue as a
going concern in order to provide returns for shareholders and benefits for other stakeholders; as
well as to maintain an optimal capital structure to reduce the cost of capital.In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends
paid to shareholders, issue new shares or sell assets to reduce debt.The Group monitors capital by regularly reviewing the gearing ratio. This ratio is calculated as
net debt divided by total capital. Net debt is calculated as total borrowings (including current
and non-current bank borrowings and bonds payable as shown in the consolidated balance sheet) less
cash and cash equivalents. Total capital is calculated as equity, as shown in the consolidated
balance sheet plus net debt. The gearing ratios as at January 1, 2009 and December 31, 2009 and
2010 were as follows:
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    FINANCIAL RISK MANAGEMENT (CONTINUED)3.2
    
    Capital risk management (continued)
 As atJanuary 1,
    
    
    As at
    
    
    As at2009
    
    
    December 31, 2009
    
    
    December 31, 2009RMB000
    
    
    RMB000
    
    
    RMB000Total bank borrowings and bonds payable
(Notes 25 and 26)
    
    
    3,900,000
    
    
    
    3,465,801
    
    
    
    3,471,994Less: Cash and cash equivalents (Note 36(c))
    
    
    (1,560,952
    )
    
    
    (1,115,651
    )
    
    
    (2,659,058
    )Net Debt
    
    
    2,339,048
    
    
    
    2,350,150
    
    
    
    812,936Total Equity
    
    
    22,528,739
    
    
    
    23,304,355
    
    
    
    24,222,576Total capital
    
    
    24,867,787
    
    
    
    25,654,505
    
    
    
    25,035,512Gearing ratio
    
    
    9
    %
    
    
    9
    %
    
    
    3
    %
 The gearing ratio as at end of 2009 had been maintained consistent as compared with 2008. The
decrease in the gearing ratio in 2010 is primarily due to the increase in cash and cash
equivalents. The directors are of the view that current capital structure is within their
expectation.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 3
    
    FINANCIAL RISK MANAGEMENT (CONTINUED)3.3
    
    Fair value estimationAccording 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 January 1, 2009 and December 31, 2009 and 2010, the Group did not have any assets or
liabilities that were measured at fair value.The fair values of long-term receivable and bonds payable for disclosure purposes are estimated by
discounting the future contractual cash flows at the current market interest rate that is available
to the Group for similar financial instruments.
 4.
    
    CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTSEstimates and judgments are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the
circumstances.
 4.1
    
    Critical accounting estimates and assumptionsThe Group makes estimates and assumptions concerning the future. The resulting accounting estimates
will, by definition, seldom equal the related actual results. The estimates and assumptions that
have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are addressed below.
 (a)
    
    The estimates of the depreciable lives of fixed assetsThe estimate of depreciable lives of fixed assets, especially tracks, bridges and service roads,
was made by the directors with reference to the historical usage of the assets; their expected
physical wear and tear; results of recent durability assessment performed; technical or commercial
obsolescence arising from changes or improvements in production of similar fixed assets, the right
of the Group to renew the land use right grants and the land use right lease on which these assets
are located (Notes 2.5 and 38(b)), and the changes in market demand for, or legal or comparable
limits imposed on, the use of such fixed assets.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 4.
    
    CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)4.1
    
    Critical accounting estimates and assumptions (continued)(a)
    
    The estimates of the depreciable lives of fixed assets (continued)The current estimated useful lives are stated in Note 2.5. If the estimated depreciable lives of
tracks, bridges and service roads had been increased/decreased by 10%, the depreciation expenses of
fixed assets for the year ended 31 December 2010 would have been decreased/increased by
approximately RMB18,712,000 and RMB22,870,000 respectively (2009: RMB17,832,000 and RMB21,795,000;
2008: RMB17,209,000 and RMB 21,033,000 respectively).
 (b)
    
    Estimated impairment of goodwillThe Group tests whether goodwill has suffered any impairment annually or, whenever there is an
indication of impairment, in accordance with the accounting policy stated in Note 2.8. The
recoverable amounts of cash-generating units have been determined based on the higher of an assets
fair value less costs to sell and value in use. These calculations require the use of estimates
(Note 10).
 (c)
    
    Estimated impairment of non-financial assets (other than goodwill)In determining whether an asset is impaired or the event previously causing the impairment no
longer exists, management has to exercise judgment, particularly in assessing: (1) whether an event
has occurred that may affect the asset value or such event affecting the asset value has not been
in existence; (2) whether the carrying value of an asset can be supported by the net present value
of future cash flows which are estimated based upon the continued use of the asset or
derecognition; and (3) the appropriate key assumptions to be applied in preparing cash flow
projections including whether these cash flow projections are discounted using an appropriate rate.
Changing the assumptions selected by management to determine the level of impairment, including the
discount rate or the growth rate assumptions in the cash flow projections, could materially affect
the net present value used in the impairment test.
 (d)
    
    Income taxesThe Group recognizes liabilities for anticipated tax audit issues based on estimates of whether
additional taxes will be due. Where the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will impact the current and deferred income
tax assets and liabilities in the period in which such determination is made.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 5.
    
    CHANGES IN ACCOUNTING POLICIESDuring the current year, the Group changed its accounting policies in respect of fixed assets and
government grants to enhance the comparability of the Groups financial statements with those of
the other listed companies with similar background, as well as to eliminate the differences between
the Groups financial statements under IFRS and its PRC Generally Accepted Accounting Principles
(GAAP) financial statements.
 a)
    
    Change in accounting policy for fixed assetsThe Groups first financial statements prepared under IFRS were for the year ended December
31,1996, with the start of the earliest comparative period being January 1,1994. During the period
from January 1,1994 to December 31, 1996, the Group was required, due to the Restructuring, by the
applicable laws and regulations of the PRC to undertake a valuation of the to-be-listed fixed
assets by an independent appraisal firm and the values arising from this valuation became the
deemed costs of the related fixed assets included the Groups PRC GAAP financial statements.However, prior to the improvements to IFRSs (2010) issued in May 2010, IFRS 1 only permitted such
valuations to be used as deemed cost if the event occurred before the date of the entitys
transition to IFRS. As this valuation was performed as at a date later than the date of transition
to IFRS, the Group was not permitted at that time to adopt these valuations as deemed cost for the
purposes of its IFRS financial statements.With the improvements to IFRSs (2010) issued in May 2010, IFRS 1 was revised and the revalued
amounts can become deemed costs so long as the revaluation takes place at periods before or during
the first-time adopters first set of IFRS financial statements. In addition, the IASB has made a
special provision in this IFRS 1 that existing IFRS preparers may also be able to retrospectively
apply this.The Group early adopted the aforementioned improved IFRS 1 from January 1,2010. The impact of the
improved IFRS 1 was applied retrospectively and the comparative financial information has also been
restated. The effect of the change is tabulated below:
 As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Increase in fixed assets
    
    
    918,225
    
    
    
    890,636
    
    
    
    863,187Decrease in deferred income tax assets
    
    
    (228,641
    )
    
    
    (223,123
    )
    
    
    (217,084
    )Increase in share premium
    
    
    1,270,011
    
    
    
    1,270,011
    
    
    
    1,270,011Decrease in retained earnings
    
    
    (580,427
    )
    
    
    (602,498
    )
    
    
    (623,908
    )
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 5.
    
    CHANGES IN ACCOUNTING POLICIES (CONTINUED)a)
    
    Change in accounting policy for fixed assets (continued)
 Year ended December 31,2008
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Increase in operating expenses
    
    
    37,106
    
    
    
    27,171
    
    
    
    27,449Increase in other expense, net
    
    
    42
    
    
    
    418
    
    
    
    Decrease in income tax expense
    
    
    (6,687
    )
    
    
    (5,518
    )
    
    
    (6,039
    )Decrease in profit for the period
    
    
    30,461
    
    
    
    22,071
    
    
    
    21,410
 Year ended December 31,2008
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Decrease in earnings per share for
profit attributable to the equity
holders of the Company during the
period
- Basic and diluted
    
    
    
    
    
    
    
    
    
    
    
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 5.
    
    CHANGES IN ACCOUNTING POLICIES (CONTINUED)b)
    
    Change in accounting policy for government grantsUnder IAS 20 Accounting for government grants and disclosure of government assistance, government
grants related to fixed assets are presented in the financial statements either by setting up the
grant as deferred income or by deducting the grant in arriving at the carrying amount of the
related fixed asset. Prior to January 1, 2010, the Group accounted for government grant related to
fixed assets as a deduction to the carrying amount of the related fixed assets. The grants are
recognized in profit or loss over the lives of the related fixed assets by way of a reduced
depreciation charge. With the consideration of the following, the Group changed its accounting
policy during the current year to account for government grants related to fixed assets as deferred
income that is recognized in profit or loss on a systematic basis over the useful lives of the
related fixed assets:
 
    
    The practice of other listed companies with similar background;
    
    Eliminating the difference between the Groups financial statements under IFRS and its PRC
GAAP financial statements; and
    
    The change will provide reliable and more relevant information regarding the relevant
government grants received by the Company.The change in the accounting policy for government grants has been accounted for retrospectively.The effect of the change is tabulated below:
 As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Increase in fixed assets
    
    
    100,495
    
    
    
    97,120
    
    
    
    95,093Increase in deferred government grants
    
    
    100,495
    
    
    
    97,120
    
    
    
    95,093
 Year ended December 31,2008
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Increase in operating expenses
    
    
    3,963
    
    
    
    3,375
    
    
    
    3,388Decrease in other expense, net
    
    
    (3,963
    )
    
    
    (3,375
    )
    
    
    (3,388
    )
 Other than the above stated, the aforementioned accounting policy changes do not have any impact on
other notes to the financial statements.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 6.
    
    SEGMENT INFORMATIONThe chief operating decision-makers have been identified as senior executives. Senior executives
review the Groups internal reporting in order to assess performance and allocate resources.
Management has determined the operating segments based on these reports.Senior executives consider the business from a perspective on revenues and operating results
generated from railroad and related business conducted by the Company (the Companys Business).
Other segments mainly include provision of on-board catering services, warehousing services, hotel
management services and sales of merchandises provided by the subsidiaries of the Group.Senior executives assess the performance of the operating segments based on a measure of the profit
before income tax. Other information provided, except as noted below, to senior executives is
measured in a manner consistent with that in the financial statements.The segment results for 2008, 2009 and 2010 are as follows:
 The Company's Business
    
    
    All other segments
    
    
    Total2008
    
    
    2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2008
    
    
    2009RMB000
    
    
    RMB000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    RMB000
    
    
    RMB000Restated
    
    
    Restated
    
    
    2010
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Restated
    
    
    Restated
    
    
    2010(Note 5)
    
    
    (Note 5)
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    (Note 5)
    
    
    (Note 5)
    
    
    RMB000Segment revenue
    
    
    11,530,435
    
    
    
    12,212,031
    
    
    
    13,249,298
    
    
    
    158,220
    
    
    
    173,726
    
    
    
    245,977
    
    
    
    11,688,655
    
    
    
    12,385,757
    
    
    
    13,495,275Inter-segment revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,827
    )
    
    
    
    
    
    
    
    
    
    
    (10,827
    )Total revenue
    
    
    11,530,435
    
    
    
    12,212,031
    
    
    
    13,249,298
    
    
    
    158,220
    
    
    
    173,726
    
    
    
    235,150
    
    
    
    11,688,655
    
    
    
    12,385,757
    
    
    
    13,484,448Segment result
    
    
    1,456,778
    
    
    
    1,663,137
    
    
    
    1,916,607
    
    
    
    7,736
    
    
    
    21,653
    
    
    
    8,700
    
    
    
    1,464,514
    
    
    
    1,684,790
    
    
    
    1,925,307Finance costs
    
    
    (213,376
    )
    
    
    (236,437
    )
    
    
    (186,101
    )
    
    
    (93
    )
    
    
    150
    
    
    
    (71
    )
    
    
    (213,469
    )
    
    
    (236,287
    )
    
    
    (186,172
    )Share of results of associates
    
    
    128
    
    
    
    773
    
    
    
    1,361
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128
    
    
    
    773
    
    
    
    1,361Depreciation
    
    
    1,208,531
    
    
    
    1,287,978
    
    
    
    1,344,525
    
    
    
    4,580
    
    
    
    4,712
    
    
    
    4,685
    
    
    
    1,213,111
    
    
    
    1,292,690
    
    
    
    1,349,210Amortization of leasehold land payments
    
    
    15,001
    
    
    
    15,001
    
    
    
    15,001
    
    
    
    602
    
    
    
    988
    
    
    
    987
    
    
    
    15,603
    
    
    
    15,989
    
    
    
    15,988Write-down and amortization of deferred
employee costs
    
    
    31,867
    
    
    
    20,048
    
    
    
    73,804
    
    
    
    138
    
    
    
    108
    
    
    
    107
    
    
    
    32,005
    
    
    
    20,156
    
    
    
    73,911Recognition of employee benefits obligations
    
    
    76,382
    
    
    
    
    
    
    
    97,930
    
    
    
    9,606
    
    
    
    1,200
    
    
    
    3,059
    
    
    
    85,988
    
    
    
    1,200
    
    
    
    100,989Impairment of construction-in-progress
    
    
    
    
    
    
    448
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    448
    
    
    
    Provision/(reversal of provision) for
doubtful accounts
    
    
    2,280
    
    
    
    299
    
    
    
    (1,659
    )
    
    
    (486
    )
    
    
    115
    
    
    
    (2
    )
    
    
    (2,766
    )
    
    
    414
    
    
    
    (1,661
    )
 F-37




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 6.
    
    SEGMENT INFORMATION (CONTINUED)A reconciliation of the segment results to profit of 2008, 2009 and 2010 is as follows:
 The Companys Business
    
    
    All other segments
    
    
    Total2008
    
    
    2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2008
    
    
    2009RMB000
    
    
    RMB000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    RMB000
    
    
    RMB000Restated
    
    
    Restated
    
    
    2010
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Restated
    
    
    Restated
    
    
    2010(Note 5)
    
    
    (Note 5)
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    (Note 5)
    
    
    (Note 5)
    
    
    RMB000Segment result
    
    
    1,456,778
    
    
    
    1,663,137
    
    
    
    1,916,607
    
    
    
    7,736
    
    
    
    21,653
    
    
    
    8,700
    
    
    
    1,464,514
    
    
    
    1,684,790
    
    
    
    1,925,307Income tax expense
    
    
    (267,576
    )
    
    
    (337,689
    )
    
    
    (434,752
    )
    
    
    (3,031
    )
    
    
    (5,714
    )
    
    
    (5,637
    )
    
    
    (270,607
    )
    
    
    (343,403
    )
    
    
    (440,389
    )Profit for the year
    
    
    1,189,202
    
    
    
    1,325,448
    
    
    
    1,481,855
    
    
    
    4,705
    
    
    
    15,939
    
    
    
    3,063
    
    
    
    1,193,907
    
    
    
    1,341,387
    
    
    
    1,484,918
 F-38




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 6.
    
    SEGMENT INFORMATION (CONTINUED)The Group is domiciled in the PRC. All the Groups revenues were generated in the PRC, and the
total assets are also located in the PRC.
 The Companys Business
    
    
    All other segments
    
    
    Elimination
    
    
    Total2008
    
    
    2009
    
    
    
    
    
    2008
    
    
    2009
    
    
    
    
    
    2008
    
    
    2009
    
    
    
    
    
    2008
    
    
    2009RMB000
    
    
    RMB000
    
    
    
    
    
    RMB000
    
    
    RMB000
    
    
    
    
    
    RMB000
    
    
    RMB000
    
    
    
    
    
    RMB000
    
    
    RMB000Restated
    
    
    Restated
    
    
    2010
    
    
    Restated
    
    
    Restated
    
    
    2010
    
    
    Restated
    
    
    Restated
    
    
    2010
    
    
    Restated
    
    
    Restated
    
    
    2010(Note 5)
    
    
    (Note 5)
    
    
    RMB000
    
    
    (Note 5)
    
    
    (Note 5)
    
    
    RMB000
    
    
    (Note 5)
    
    
    (Note 5)
    
    
    RMB000
    
    
    (Note 5)
    
    
    (Note 5)
    
    
    RMB000Total segment assets
    
    
    28,937,749
    
    
    
    29,370,613
    
    
    
    30,555,755
    
    
    
    223,247
    
    
    
    239,228
    
    
    
    249,132
    
    
    
    (149,091
    )
    
    
    (182,594
    )
    
    
    (200,385
    )
    
    
    29,011,905
    
    
    
    29,427,247
    
    
    
    30,604,502Total segment assets include:Investment in associates
    
    
    120,705
    
    
    
    119,547
    
    
    
    120,661
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    120,705
    
    
    
    119,547
    
    
    
    120,661Additions to non-current
assets (other than financial
instruments and deferred tax
assets)
    
    
    3,479,126
    
    
    
    1,536,779
    
    
    
    953,938
    
    
    
    1,432
    
    
    
    6,711
    
    
    
    4,831
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,480,558
    
    
    
    1,543,490
    
    
    
    958,769Total segment liabilities
    
    
    6,480,635
    
    
    
    6,145,644
    
    
    
    6,410,992
    
    
    
    66,743
    
    
    
    73,800
    
    
    
    94,864
    
    
    
    (64,212
    )
    
    
    (96,552
    )
    
    
    (123,930
    )
    
    
    6,483,166
    
    
    
    6,122,892
    
    
    
    6,381,926
 There are approximately RMB11,520,698,000 (2009 and 2008: RMB10,400,548,000 and
RMB9,776,261,000) of the revenues of the Group which were settled through the Ministry of Railway
of the PRC (MOR)(Note 40). Except that, no revenues derived from a single external customer have
exceeded 10% of the total revenues.
 F-39




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 7.
    
    FIXED ASSETS
 Tracks,
    
    
    Locomotives and
    
    
    Communications andbridges and
    
    
    rolling
    
    
    signalling
    
    
    Other machinery andBuildings
    
    
    service roads
    
    
    stock
    
    
    systems
    
    
    equipment
    
    
    TotalRMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000Note 5
    
    
    Note 5
    
    
    Note 5
    
    
    Note 5
    
    
    Note 5
    
    
    Note 5At January 1, 2009Cost, restated
    
    
    4,556,120
    
    
    
    14,254,098
    
    
    
    6,499,176
    
    
    
    1,446,878
    
    
    
    3,922,893
    
    
    
    30,679,165Accumulated depreciation, restated
    
    
    (916,996
    )
    
    
    (1,610,424
    )
    
    
    (1,098,358
    )
    
    
    (573,268
    )
    
    
    (1,557,356
    )
    
    
    (5,756,402
    )Impairment, restated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (197
    )
    
    
    (197
    )Net book amount, restated
    
    
    3,639,124
    
    
    
    12,643,674
    
    
    
    5,400,818
    
    
    
    873,610
    
    
    
    2,365,340
    
    
    
    24,922,566Year ended December 31, 2009Opening net book amount
    
    
    3,639,124
    
    
    
    12,643,674
    
    
    
    5,400,818
    
    
    
    873,610
    
    
    
    2,365,340
    
    
    
    24,922,566Additions
    
    
    27,802
    
    
    
    102
    
    
    
    366,342
    
    
    
    24,262
    
    
    
    143,204
    
    
    
    561,712Transfer from
construction-in-progress (Note 8)
    
    
    129,520
    
    
    
    261,192
    
    
    
    41,287
    
    
    
    60,045
    
    
    
    423,438
    
    
    
    915,482Reclassifications
    
    
    (16,491
    )
    
    
    
    
    
    
    
    
    
    
    (14
    )
    
    
    16,505
    
    
    
    Disposals, restated
    
    
    (5,049
    )
    
    
    (62,689
    )
    
    
    
    
    
    
    
    
    
    
    (2,664
    )
    
    
    (70,402
    )Depreciation charges, restated
    
    
    (153,679
    )
    
    
    (203,364
    )
    
    
    (405,711
    )
    
    
    (177,996
    )
    
    
    (352,279
    )
    
    
    (1,293,029
    )Closing net book amount, restated
    
    
    3,621,227
    
    
    
    12,638,915
    
    
    
    5,402,736
    
    
    
    779,907
    
    
    
    2,593,544
    
    
    
    25,036,329At December 31, 2009Cost, restated
    
    
    4,677,195
    
    
    
    14,437,512
    
    
    
    6,945,305
    
    
    
    1,531,255
    
    
    
    4,449,452
    
    
    
    32,040,719Accumulated depreciation, restated
    
    
    (1,055,968
    )
    
    
    (1,798,597
    )
    
    
    (1,542,569
    )
    
    
    (751,348
    )
    
    
    (1,855,860
    )
    
    
    (7,004,342
    )Impairment, restated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48
    )
    
    
    (48
    )Net book amount, restated
    
    
    3,621,227
    
    
    
    12,638,915
    
    
    
    5,402,736
    
    
    
    779,907
    
    
    
    2,593,544
    
    
    
    25,036,329Year ended December 31, 2010Opening net book amount
    
    
    3,621,227
    
    
    
    12,638,915
    
    
    
    5,402,736
    
    
    
    779,907
    
    
    
    2,593,544
    
    
    
    25,036,329Additions
    
    
    4,335
    
    
    
    
    
    
    
    16,272
    
    
    
    16,595
    
    
    
    131,947
    
    
    
    169,149Transfer from
construction-in-progress (Note 8)
    
    
    153,588
    
    
    
    212,188
    
    
    
    15,914
    
    
    
    185,468
    
    
    
    170,126
    
    
    
    737,284Reclassifications
    
    
    
    
    
    
    
    
    
    
    (492
    )
    
    
    4,709
    
    
    
    (4,217
    )
    
    
    Disposals
    
    
    (1,868
    )
    
    
    (47,478
    )
    
    
    (64,750
    )
    
    
    (8,619
    )
    
    
    (4,290
    )
    
    
    (127,005
    )Depreciation charges
    
    
    (174,066
    )
    
    
    (205,829
    )
    
    
    (417,190
    )
    
    
    (176,582
    )
    
    
    (375,960
    )
    
    
    (1,349,627
    )Closing net book amount
    
    
    3,603,216
    
    
    
    12,597,796
    
    
    
    4,952,490
    
    
    
    801,478
    
    
    
    2,511,150
    
    
    
    24,466,130At December 31, 2010Cost
    
    
    4,832,566
    
    
    
    14,593,786
    
    
    
    6,873,927
    
    
    
    1,522,555
    
    
    
    4,716,620
    
    
    
    32,539,454Accumulated depreciation
    
    
    (1,229,350
    )
    
    
    (1,995,990
    )
    
    
    (1,921,437
    )
    
    
    (721,077
    )
    
    
    (2,205,422
    )
    
    
    (8,073,276
    )Impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48
    )
    
    
    (48
    )Net book amount
    
    
    3,603,216
    
    
    
    12,597,796
    
    
    
    4,952,490
    
    
    
    801,478
    
    
    
    2,511,150
    
    
    
    24,466,130
 As at December 31, 2010, the ownership certificates of certain buildings (Building Ownership
Certificates) of the Group with an aggregate carrying value of approximately RMB916,538,000
(December 31, 2009: RMB1,329,751,000, January 1, 2009: RMB2,000,621,000) 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 Building
Ownership Certificates and it should not lead to any significant adverse impact on the operations
of the Group.As at December 31, 2010, fixed assets of the Group with an aggregate net book value of
approximately RMB27,024,000 (December 31, 2009: RMB27,190,000, January 1, 2009: RMB26,894,000) had
been fully depreciated but they were still in use.
 F-40




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 8.
    
    CONSTRUCTION-IN-PROGRESS
 2009
    
    
    2010RMB000
    
    
    RMB000At January 1
    
    
    504,775
    
    
    
    662,183Additions
    
    
    1,073,338
    
    
    
    827,963Impairment
    
    
    (448
    )
    
    
    Transfer to fixed assets (Note 7)
    
    
    (915,482
    )
    
    
    (737,284
    )At December 31
    
    
    662,183
    
    
    
    752,862
 For the year ended December 31, 2010, no interest expenses (2009: none, 2008: RMB13,721,000) were
capitalized in the construction-in-progress balance. A capitalization rate of 6.55% in
2008 per annum was used to determine the amount of borrowing costs eligible for capitalization.
 9.
    
    LEASEHOLD LAND PAYMENTS
  RMB000At January 1, 2009Cost
    
    
    791,213Accumulated amortization
    
    
    (198,845
    )Net book amount
    
    
    592,368Year ended December 31, 2009Opening net book amount
    
    
    592,368Amortization charges
    
    
    (15,989
    )Closing net book amount
    
    
    576,379At December 31, 2009Cost
    
    
    791,213Accumulated amortization
    
    
    (214,834
    )Net book amount
    
    
    576,379Year ended December 31, 2010Opening net book amount
    
    
    576,379Amortization charges
    
    
    (15,988
    )Closing net book amount
    
    
    560,391At December 31, 2010Cost
    
    
    791,213Accumulated amortization
    
    
    (230,822
    )Net book amount
    
    
    560,391
 As at December 31, 2010, land use right certificates (Land Certificates) of certain parcels
of land of the Group with an aggregate area of 1,620,894 square meters (December 31, 2009:
1,620,894, January 1, 2009: 1,620,894) had not been obtained. After consultation made with the
Companys legal counsel, the directors consider that there is no legal restriction for the Group to
apply for and obtain the Land Certificates and it should not lead to any significant adverse impact
on the operations of the Group .
 F-41




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 10.
    
    GOODWILL
 RMB000Year ended December 31, 2009 and 2010Opening net book amount
    
    
    281,255Additions
    
    
    Closing net book amount
    
    
    281,255At January 1, 2009 and December 31, 2009 and 2010Cost
    
    
    281,255Accumulated impairment
    
    
    Net book amount
    
    
    281,255
 The goodwill balance arose from the excess of a purchase consideration paid by the Company
over the aggregate fair values of the identifiable assets, liabilities and contingent liabilities
of the Yangcheng Railway Business acquired by the Company.Prior to January 1, 2009, the goodwill had been allocated to a cash-generating units (CGU)
comprising the Yangcheng Railway Business. The recoverable amount of that CGU is determined based
on value-in-use calculations and no impairment losses had been recognized prior to January 1,
2009.On January 1, 2009, the Group integrated the Yangcheng Railway Business with the Groups
railway business in order to improve operation efficiency. As a result, the management considers
that the Yangcheng Railway Business and the Groups remaining railway business (collectively the
Combined Railway Business) represents the lowest level of cash-generating units within the Group
at which goodwill is monitored for internal management purposes. In addition, the Combined Railway
Business is not larger than an operating segment determined under with IFRS 8. Therefore, the
Group has reallocated the goodwill to the cash generating unit (CGU) comprising the Combined
Railway Business.As at December 31, 2009, the recoverable amount of the CGU is determined based on fair value less
costs to sell. The assessment of fair value was performed based on the market price of the
Companys publicly traded shares as at December 31, 2009.Even if the market price of shares of the Company used in the assessment had been 10% lower
than the price as at December 31, 2009, the Group still would not be required to recognize any
impairment losses against goodwill.
 F-42




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 10.
    
    GOODWILL (CONTINUED)As at December 31, 2010, the recoverable amount of the CGU is determined based on value-in-use
calculations. These calculations use pre-tax cash flow projections based on financial forecasts
prepared by management covering a five-year period. Cash flows beyond the five-year period are
extrapolated using the estimated growth rates stated below.The key assumptions used for value-in-use calculations as at December 31, 2010 are as follows:
 Railroad businessGross margin
    
    
    27.6
    %Growth rate
    
    
    2.0
    %Discount rate
    
    
    11.54
    %
 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.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 at December 31, 2010, the Group would have no
impairment recognized 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, the Group would have no impairment
recognized against goodwill.
 F-43




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 11. INVESTMENTS IN SUBSIDIARIES
 As at December 31, 2010, the Company had direct or indirect interests in the following
subsidiaries which are incorporated/established and are operating in the PRC:
 Date of
    
    Percentage of equityincorporation/
    
    interest attributable toName of the entity
    
    establishment
    
    the Company
    
    
    Paid-in capital
    
    Principal activitiesDirectly
    
    
    IndirectlyDongguan Changsheng Enterprise Company
    
    May  22, 1992
    
    
    51
    %
    
    
    
    
    
    RMB38,000,000
    
    WarehousingShenzhen Fu Yuan Enterprise Development Company(Fu Yuan)
    
    November  1, 1991
    
    
    97.3
    %
    
    
    2.7
    %
    
    RMB18,500,000
    
    Hotel managementShenzhen Pinghu Qun Yi Railway Store Loading and Unloading Company
    
    September 11,1993
    
    
    55
    %
    
    
    
    
    
    RMB10,000,000
    
    Cargo loading and unloading, warehousing, freight transportationShenzhen Nantie Construction Supervision Company
    
    May  8, 1995
    
    
    67.46
    %
    
    
    9.2
    %
    
    RMB3,000,000
    
    Supervision of construction projectsShenzhen Railway Property Management Company Limited
    
    November 13, 2001
    
    
    
    
    
    
    100
    %
    
    RMB3,000,000
    
    Property managementShenzhen Guangshen Railway Travel Service Ltd.
    
    August 16, 1995
    
    
    75
    %
    
    
    25
    %
    
    RMB2,400,000
    
    Travel agencyShenzhen Shenhuasheng Storage and Transportation Company Limited
    
    January 2, 1985
    
    
    41.5
    %
    
    
    58.5
    %
    
    RMB2,000,000
    
    Warehousing, freight transport and packaging agency servicesShenzhen Guangshen Railway Economic and Trade Enterprise Company Limited
    
    March 7, 2002
    
    
    
    
    
    
    100
    %
    
    RMB2,000,000
    
    Catering managementShenzhen Railway Station Passenger Services Company
    
    December  18, 1986
    
    
    100
    %
    
    
    
    
    
    RMB1,500,000
    
    Catering services and sales of merchandiseGuangshen Railway Station Dongqun Trade and Commerce Service Company
    
    November  23, 1992
    
    
    100
    %
    
    
    
    
    
    RMB1,020,000
    
    Sales of merchandisesGuangzhou Tielian Economy Development Company Limited (Tielian)
    
    December  27, 1994
    
    
    50.50
    %
    
    
    
    
    
    RMB1,000,000
    
    Warehousing and freight transport agency servicesGuangzhou Dongqun Advertising Company Limited
    
    March 6,1996
    
    
    
    
    
    
    100
    %
    
    RMB500,000
    
    Advertising serviceGuangzhou Railway Huangpu Service Company
    
    March 15, 1985
    
    
    100
    %
    
    
    
    
    
    RMB379,000
    
    Cargo loading and unloading, warehousing, freight transportation
  F-44




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 12. INVESTMENTS IN ASSOCIATES
 As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Share of net assets
    
    
    150,394
    
    
    
    149,236
    
    
    
    150,350Less: provision for impairment in value (Note a)
    
    
    (29,689
    )
    
    
    (29,689
    )
    
    
    (29,689
    )120,705
    
    
    
    119,547
    
    
    
    120,661
 
 Note a:
    
    The impairment provision at the Group level as at December 31, 2010 represents provision for full
impairment losses in investment in Zengcheng Lihua Stock Company Limited at approximately
RMB29,689,000 (December 31, 2009: RMB29,689,000, January 1, 2009: RMB29,689,000) made in prior
years (Zengcheng Lihua Provision).  2009
    
    
    2010RMB000
    
    
    RMB000Beginning of the year
    
    
    120,705
    
    
    
    119,547Share of results after tax
    
    
    773
    
    
    
    1,361Dividends received and receivable from the associates
    
    
    (1,931
    )
    
    
    (247
    )End of the year
    
    
    119,547
    
    
    
    120,661
  Percentage ofDate of
    
    equity interestincorporation/
    
    attributable toName of the entity
    
    establishment
    
    the Company
    
    
    Paid-in capital
    
    Principal activitiesShenzhen Guangshen Railway Civil Engineering Company
    
    March 1, 1984
    
    
    49
    %
    
    RMB55,000,000
    
    Construction of railroad propertiesZengcheng Lihua
    
    July 30, 1992
    
    
    26.98
    %
    
    RMB107,054,682
    
    Real estate construction, provision of warehousing, cargo uploading and unloading servicesTiecheng
    
    May 2, 1995
    
    
    49
    %
    
    RMB543,050,000
    
    Properties leasing and trading of merchandise
  F-45




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 12. INVESTMENTS IN ASSOCIATES (CONTINUED)
 The Groups share of the results with its percentage ownership of its principal associates, and its
share of the related assets and liabilities, net of applicable impairment provision are as follows:
 Assets
    
    
    Liabilities
    
    
    Revenue
    
    
    (Loss)/Profit
    
    
    % interestRMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    held2008Tiecheng (b)
    
    
    190,783
    
    
    
    105,051
    
    
    
    11,158
    
    
    
    (2,018
    )
    
    
    49
    %Other associates
    
    
    172,808
    
    
    
    137,835
    
    
    
    128,466
    
    
    
    2,146
    
    
    
    27%~49
    %363,591
    
    
    
    242,886
    
    
    
    139,624
    
    
    
    1282009Tiecheng (Note b)
    
    
    192,703
    
    
    
    107,732
    
    
    
    10,813
    
    
    
    (761
    )
    
    
    49
    %Other associates
    
    
    191,666
    
    
    
    152,229
    
    
    
    185,668
    
    
    
    1,534
    
    
    
    27%~49
    %384,369
    
    
    
    259,961
    
    
    
    196,481
    
    
    
    7732010Tiecheng (Note b)
    
    
    193,651
    
    
    
    109,526
    
    
    
    12,045
    
    
    
    (600
    )
    
    
    49
    %Other associates
    
    
    207,397
    
    
    
    210,118
    
    
    
    302,954
    
    
    
    1,961
    
    
    
    27%~49
    %401,048
    
    
    
    319,644
    
    
    
    314,999
    
    
    
    1,361
 
 Note b:
    
    The carrying amount of the Groups investment in Tiecheng as at December 31, 2010 was approximately
RMB84,125,000 (December 31, 2009: RMB84,971,000, January 1, 2009: RMB85,732,000).    F-46




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 13. DEFERRED TAX ASSETS/(LIABILITIES)
 The analysis of deferred tax assets and deferred tax liabilities is as follows:
 As at
    
    
    As atJanuary 1,
    
    
    December 31,2009
    
    
    2009
    
    
    As atRMB000
    
    
    RMB000
    
    
    December 31,Restated
    
    
    Restated
    
    
    2010(Note 5)
    
    
    (Note 5)
    
    
    RMB000Deferred tax assets:- Deferred tax assets to be recovered after more than 12 months
    
    
    114,768
    
    
    
    114,592
    
    
    
    123,570- Deferred tax assets to be recovered within 12 months
    
    
    13,332
    
    
    
    8,412
    
    
    
    15,021128,100
    
    
    
    123,004
    
    
    
    138,591Deferred tax liabilities:- Deferred tax liabilities to crystallise after more than 12 months
    
    
    (24,802
    )
    
    
    (25,435
    )
    
    
    (25,695
    )- Deferred tax liabilities to crystallise within 12 months
    
    
    (201
    )
    
    
    (262
    )
    
    
    (275
    )(25,003
    )
    
    
    (25,697
    )
    
    
    (25,970
    )Deferred tax assets (net)
    
    
    103,097
    
    
    
    97,307
    
    
    
    112,621
  2009RMB000Restated
    
    
    2010(Note 5)
    
    
    RMB000At January 1
    
    
    103,097
    
    
    
    97,307Comprehensive income statement charge (Note 33)
    
    
    (5,790
    )
    
    
    15,314At December 31
    
    
    97,307
    
    
    
    112,621
 F-47




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 13. 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:
 Charged/(Credited) to thecomprehensive
    
    
    
    
    
    
    Charged/At January 1,
    
    
    income
    
    
    At December
    
    
    (Credited) to the2009
    
    
    statement
    
    
    31,2009
    
    
    comprehensiveRMB000
    
    
    RMB000
    
    
    RMB000
    
    
    income
    
    
    At DecemberRestated
    
    
    Restated
    
    
    Restated
    
    
    statement
    
    
    31,2010(Note 5)
    
    
    (Note 5)
    
    
    (Note 5)
    
    
    RMB000
    
    
    RMB000Deferred tax assets:Impairment provision for
receivables
    
    
    21,451
    
    
    
    73
    
    
    
    21,524
    
    
    
    (418
    )
    
    
    21,106Impairment provision for
fixed assets and
construction-in-progress
    
    
    1,889
    
    
    
    75
    
    
    
    1,964
    
    
    
    
    
    
    
    1,964Impairment provision for
interests in associates
    
    
    7,422
    
    
    
    
    
    
    
    7,422
    
    
    
    
    
    
    
    7,422Difference in accounting
base and tax base in the
recognition of fixed
assets
    
    
    24,818
    
    
    
    (675
    )
    
    
    24,143
    
    
    
    (703
    )
    
    
    23,440Difference in accounting
base and tax base of
employee benefits
obligations
    
    
    72,520
    
    
    
    (4,594
    )
    
    
    67,926
    
    
    
    16,683
    
    
    
    84,609Other
    
    
    
    
    
    
    25
    
    
    
    25
    
    
    
    25
    
    
    
    50128,100
    
    
    
    (5,096
    )
    
    
    123,004
    
    
    
    15,587
    
    
    
    138,591
 (Credited)/
    
    
    
    
    
    
    (Credited)/Charged to the
    
    
    
    
    
    
    Charged to thecomprehensive
    
    
    
    
    
    
    comprehensiveAt January 1,
    
    
    income
    
    
    At December
    
    
    income
    
    
    At December2009
    
    
    statement
    
    
    31,2009
    
    
    statement
    
    
    31,2010RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000Deferred tax liabilities:Difference in accounting
base and tax base of
fixed assets
    
    
    19,845
    
    
    
    (201
    )
    
    
    19,644
    
    
    
    (409
    )
    
    
    19,235Others
    
    
    5,158
    
    
    
    895
    
    
    
    6,053
    
    
    
    682
    
    
    
    6,73525,003
    
    
    
    694
    
    
    
    25,697
    
    
    
    273
    
    
    
    25,970
 F-48




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 13. DEFERRED TAX ASSETS/(LIABILITIES) (CONTINUED)
 Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the
realization of the related tax benefit through future taxable profits is probable. As at December
31, 2010, the Group did not recognize deferred income tax assets in respect of losses amounting to
approximately RMB9,872,000 (December 31, 2009: RMB6,210,000 and January 1, 2009: RMB2,333,000) that
can be carried forward against future taxable income and will be expired as follows:
 As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB0002013
    
    
    2,333
    
    
    
    2,333
    
    
    
    1,9242014
    
    
    
    
    
    
    3,877
    
    
    
    3,8772015
    
    
    
    
    
    
    
    
    
    
    4,0712,333
    
    
    
    6,210
    
    
    
    9,872
 14. DEFERRED EMPLOYEE COSTS
 As disclosed in Note 2.13, the Group implemented a scheme (the Scheme) for selling staff quarters
to its employees in 2000. The movement of deferred employee costs is set forth as follows:
 2009
    
    
    2010RMB000
    
    
    RMB000At January 1Cost
    
    
    243,102
    
    
    
    243,380Accumulated amortization
    
    
    (143,488
    )
    
    
    (163,644
    )Net book amount
    
    
    99,614
    
    
    
    79,736Year ended December 31Opening net book amount
    
    
    99,614
    
    
    
    79,736Additions
    
    
    278
    
    
    
    139Amortization (Note 30)
    
    
    (20,156
    )
    
    
    (4,083
    )Write-down (Note a)
    
    
    
    
    
    
    (69,828
    )Closing net book amount
    
    
    79,736
    
    
    
    5,964At December 31Cost
    
    
    243,380
    
    
    
    173,691Accumulated amortization
    
    
    (163,644
    )
    
    
    (167,727
    )Net book amount
    
    
    79,736
    
    
    
    5,964
 F-49




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 14. DEFERRED EMPLOYEE COSTS (CONTINUED)
 
 Note a:During the current year, the Group conducted an organizational structure reform suggested by the
MOR where certain employees were transferred either to different departments of the Group or other
railway companies outside the Group. As a result of the reform, the Group considers that it is no
longer feasible to keep track of the service records of the employees participating in the housing
benefit scheme. Therefore, the Group has decided to eliminate the service period restriction
relating to the entire employees housing benefit scheme. Accordingly, the Group wrote down the
remaining deferred employee costs in the current year.
 15. FINANCIAL INSTRUMENTS BY CATEGORY
 The accounting policies for financial instruments have been applied to the items tabulated below:
 Loans and
    
    
    Available-receivables
    
    
    for-sale
    
    
    TotalRMB000
    
    
    RMB000
    
    
    RMB000Assets as per consolidated balance sheetAs at January 1, 2009:Available-for-sale investments (Note 17)
    
    
    
    
    
    
    48,326
    
    
    
    48,326Long term receivable (Note 18)
    
    
    48,136
    
    
    
    
    
    
    
    48,136Trade and other receivables excluding
prepayments (Notes 20 and 21)
    
    
    337,920
    
    
    
    
    
    
    
    337,920Short-term deposits
    
    
    7,300
    
    
    
    
    
    
    
    7,300Cash and cash equivalents (Note 36(c))
    
    
    1,560,952
    
    
    
    
    
    
    
    1,560,952Total
    
    
    1,954,308
    
    
    
    48,326
    
    
    
    2,002,634As at December 31, 2009:Available-for-sale investments (Note 17)
    
    
    
    
    
    
    53,826
    
    
    
    53,826Long term receivable (Note 18)
    
    
    44,229
    
    
    
    
    
    
    
    44,229Trade and other receivables excluding
prepayments (Notes 20 and 21)
    
    
    527,210
    
    
    
    
    
    
    
    527,210Short-term deposits
    
    
    514,000
    
    
    
    
    
    
    
    514,000Cash and cash equivalents (Note 36(c))
    
    
    1,115,651
    
    
    
    
    
    
    
    1,115,651Total
    
    
    2,201,090
    
    
    
    53,826
    
    
    
    2,254,916As at December 31, 2010:Available-for-sale investments (Note 17)
    
    
    
    
    
    
    53,826
    
    
    
    53,826Long-term receivable (Note 18)
    
    
    35,122
    
    
    
    
    
    
    
    35,122Trade and other receivables excluding
prepayments (Notes 20 and 21)
    
    
    662,399
    
    
    
    
    
    
    
    662,399Short-term deposits
    
    
    608,500
    
    
    
    
    
    
    
    608,500Cash and cash equivalents (Note 36(c))
    
    
    2,659,058
    
    
    
    
    
    
    
    2,659,058Total
    
    
    3,965,079
    
    
    
    53,826
    
    
    
    4,018,905
 F-50




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 15. FINANCIAL INSTRUMENTS BY CATEGORY (CONTINUED)
 OtherfinancialliabilitiesRMB000Liabilities as per consolidated balance sheetAs at January 1, 2009:Bank borrowings (Note 25)
    
    
    3,900,000Trade and other payables excluding statutory liabilities (Notes 28 and 29)
    
    
    1,251,454Payables for fixed assets and construction-in-progress
    
    
    764,609Total
    
    
    5,916,063As at December 31, 2009:Bonds payable (Note 26)
    
    
    3,465,801Trade and other payables excluding statutory liabilities (Notes 28 and 29)
    
    
    1,394,977Payables for fixed assets and construction-in-progress
    
    
    674,652Total
    
    
    5,535,430As at December 31, 2010:Bonds payable (Note 26)
    
    
    3,471,994Trade and other payables excluding statutory liabilities (Notes 28 and 29)
    
    
    1,732,119Payables for fixed assets and construction-in-progress
    
    
    477,806Total
    
    
    5,681,919
 F-51




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 16. CREDIT QUALITY OF FINANCIAL ASSETS
 The credit quality of financial assets that are neither past due nor impaired can be assessed by
reference to historical information about counterparty default rates:
 As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Trade receivablesDue from MOR
    
    
    53,048
    
    
    
    273,300
    
    
    
    24,805Due from related parties
    
    
    152,884
    
    
    
    106,454
    
    
    
    302,810Due from third parties
    
    
    49,959
    
    
    
    43,157
    
    
    
    238,631255,891
    
    
    
    422,911
    
    
    
    566,246Other receivables excluding prepaymentsDue from related parties
    
    
    1,937
    
    
    
    2,366
    
    
    
    3,599Due from third parties
    
    
    41,951
    
    
    
    27,294
    
    
    
    48,98743,888
    
    
    
    29,660
    
    
    
    52,586Long-term receivableDue from third parties
    
    
    48,136
    
    
    
    44,229
    
    
    
    35,1222008
    
    
    
    2009
    
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Cash at bank and short-term bank depositsBalance placed in listed banks in the PRC
    
    
    1,568,098
    
    
    
    1,629,575
    
    
    
    3,264,849Balance placed in unlisted banks in the PRC
    
    
    104
    
    
    
    42
    
    
    
    2,6471,568,202
    
    
    
    1,629,617
    
    
    
    3,267,496
  F-52




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 17. AVAILABLE-FOR-SALE INVESTMENTS
 2009
    
    
    2010RMB000
    
    
    RMB000Beginning of the year
    
    
    48,326
    
    
    
    53,826Additions
    
    
    7,500
    
    
    
    Disposal
    
    
    (2,000
    )
    
    
    End of the year
    
    
    53,826
    
    
    
    53,826
  F-53




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 18. LONG-TERM RECEIVABLE
 2009
    
    
    2010RMB000
    
    
    RMB000Opening net book amount
    
    
    48,136
    
    
    
    44,229Release of accrued interest (Note 31)
    
    
    4,093
    
    
    
    2,893Repayment received
    
    
    (8,000
    )
    
    
    (12,000
    )Closing net book amount
    
    
    44,229
    
    
    
    35,122
    19. MATERIALS AND SUPPLIES
 As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Raw materials
    
    
    139,497
    
    
    
    137,328
    
    
    
    147,220Accessories
    
    
    52,794
    
    
    
    75,108
    
    
    
    80,764Reuseable rail-line track materials
    
    
    5,741
    
    
    
    15,277
    
    
    
    22,645Retailing Materials
    
    
    3,891
    
    
    
    3,397
    
    
    
    4,450201,923
    
    
    
    231,110
    
    
    
    255,079
  F-54




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 20. TRADE RECEIVABLES
 As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Trade receivables
    
    
    281,193
    
    
    
    492,369
    
    
    
    600,070Including: receivables from related parties
    
    
    165,580
    
    
    
    121,467
    
    
    
    319,208Less: Provision for impairment of receivables
    
    
    (9,142
    )
    
    
    (9,151
    )
    
    
    (7,251
    )272,051
    
    
    
    483,218
    
    
    
    592,819
   As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Within 1 year
    
    
    255,961
    
    
    
    445,668
    
    
    
    566,246Over 1 year but within 2 years
    
    
    6,333
    
    
    
    23,241
    
    
    
    6,270Over 2 years but within 3 years
    
    
    9,445
    
    
    
    4,931
    
    
    
    6,550Over 3 years
    
    
    312
    
    
    
    9,378
    
    
    
    13,753272,051
    
    
    
    483,218
    
    
    
    592,819
  As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Over 1 year but within 2 years
    
    
    3,888
    
    
    
    21,840
    
    
    
    6,270Over 2 year but within 3 years
    
    
    9,445
    
    
    
    4,863
    
    
    
    6,550Over 3 years
    
    
    45
    
    
    
    9,268
    
    
    
    13,64313,378
    
    
    
    35,971
    
    
    
    26,463
 F-55




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 20. TRADE RECEIVABLES (CONTINUED)
  As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Within 1 year
    
    
    629
    
    
    
    23,100
    
    
    
    Over 1 year but within 2 years
    
    
    2,565
    
    
    
    1,475
    
    
    
    147Over 2 years but within 3 years
    
    
    
    
    
    
    76
    
    
    
    45Over 3 years
    
    
    8,730
    
    
    
    8,836
    
    
    
    7,16911,924
    
    
    
    33,487
    
    
    
    7,361
  2008
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000At January 1
    
    
    6,767
    
    
    
    9,142
    
    
    
    9,151Provision for impairment loss
    
    
    2,630
    
    
    
    368
    
    
    
    90Reversal of impairment loss provision
    
    
    (255
    )
    
    
    (359
    )
    
    
    (1,978
    )Receivables written off during the year
as uncollectible
    
    
    
    
    
    
    
    
    
    
    (12
    )At December 31
    
    
    9,142
    
    
    
    9,151
    
    
    
    7,251
    F-56




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 21. PREPAYMENTS AND OTHER RECEIVABLES
 As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Receivables from third parties
    
    
    88,573
    
    
    
    50,457
    
    
    
    63,273Receivables from related parties
    
    
    8,292
    
    
    
    21,886
    
    
    
    15,29196,865
    
    
    
    72,343
    
    
    
    78,564
 As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Other receivables
    
    
    132,461
    
    
    
    110,983
    
    
    
    136,798Less: Provision for impairment loss (Note a)
    
    
    (66,592
    )
    
    
    (66,991
    )
    
    
    (67,218
    )Other receivables, net
    
    
    65,869
    
    
    
    43,992
    
    
    
    69,580Prepayments
    
    
    30,996
    
    
    
    28,351
    
    
    
    8,98496,865
    
    
    
    72,343
    
    
    
    78,564
 
 Note a:
    
    Included in the balance was a doubtful debt provision of approximately RMB31,365,000 set
up by the Group in prior years, against the principal balance of a deposit (the Deposit)
placed with a deposit-taking agency, Zeng Cheng City Li Cheng Credit Cooperative (Li Cheng).
The Group has been unable to recover the Deposit from Li Cheng upon maturity and the Group has
initiated several legal proceedings against Li Cheng to enforce the recovery but without
success.
    F-57




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 21. PREPAYMENTS AND OTHER RECEIVABLES (CONTINUED)
  2008
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000At January 1
    
    
    66,248
    
    
    
    66,592
    
    
    
    66,991Provision for impairment loss
    
    
    553
    
    
    
    498
    
    
    
    234Reversal of impairment loss provision
    
    
    (162
    )
    
    
    (93
    )
    
    
    (7
    )Receivables written off during the year
as uncollectible
    
    
    (47
    )
    
    
    (6
    )
    
    
    At December 31
    
    
    66,592
    
    
    
    66,991
    
    
    
    67,218
  As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000RMB
    
    
    96,336
    
    
    
    71,349
    
    
    
    78,015HKD
    
    
    529
    
    
    
    994
    
    
    
    54996,865
    
    
    
    72,343
    
    
    
    78,564
 22. SHARE CAPITAL
  F-58




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 22. SHARE CAPITAL (CONTINUED)
 As at
    
    
    
    
    
    
    As atJanuary 1,
    
    
    
    
    
    
    December 31,2009
    
    
    Transfers
    
    
    2009RMB000
    
    
    RMB000
    
    
    RMB000Authorized, issued and fully paid:A shares subject to sale restrictions- shares held by state-owned
legal person (Note a)
    
    
    2,904,250
    
    
    
    (2,904,250
    )
    
    
    - shares held by the National
Council for Social Security Fund
of the PRC
    
    
    
    
    
    
    274,799
    
    
    
    274,7992,904,250
    
    
    
    (2,629,451
    )
    
    
    274,799Listed shares- H shares
    
    
    1,431,300
    
    
    
    
    
    
    
    1,431,300- A shares
    
    
    2,747,987
    
    
    
    2,629,451
    
    
    
    5,377,4384,179,287
    
    
    
    2,629,451
    
    
    
    6,808,738Total
    
    
    7,083,537
    
    
    
    
    
    
    
    7,083,537
 As at
    
    
    
    
    
    
    As atJanuary 1,
    
    
    
    
    
    
    December 31,2010
    
    
    Transfers
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Authorized, issued and fully paid:A shares subject to sale restrictions- shares held by the National
Council for Social Security Fund of
the PRC (Note a)
    
    
    274,799
    
    
    
    
    
    
    
    274,799274,799
    
    
    
    
    
    
    
    274,799Listed shares- H shares
    
    
    1,431,300
    
    
    
    
    
    
    
    1,431,300- A shares
    
    
    5,377,438
    
    
    
    
    
    
    
    5,377,4386,808,738
    
    
    
    
    
    
    
    6,808,738Total
    
    
    7,083,537
    
    
    
    
    
    
    
    7,083,537
 
 Note a:
    
    In December 2006, the Company issued 2,747,987,000 A shares on the Shanghai Stock Exchange through
an initial public offering, among which 1,480,944,000 A shares held by state-owned legal persons
were subject to a sale and transfer restriction period of 3-months or one year; In addition, at the
time of this A shares offering, Guangzhou Railway Group also undertook to have its 2,904,250,000 A
shares be subject to a 3-year sale and transfer restriction period.On September 22, 2009, Guangzhou Railway Group transferred 274,798,700 A shares held by it to the
National Council for Social Security Fund in the PRC (SSF) according to regulations issued by the
relevant PRC authorities. Upon this transfer, SSF has voluntarily agreed to extend the transfer
restriction period associated with these shares for another three years. Thus, there were
274,798,700 shares that are still subject to sale and transfer restriction as at December 31, 2010. F-59




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 23. RESERVES
     2008
    
    
    2009
    
    
    2010Percentage
    
    
    RMB000
    
    
    Percentage
    
    
    RMB000
    
    
    Percentage
    
    
    RMB000Statutory surplus reserve
    
    
    10
    %
    
    
    121,444
    
    
    
    10
    %
    
    
    134,902
    
    
    
    10
    %
    
    
    155,826
  F-60




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 23.
    
    RESERVES (CONTINUED)In accordance with the provisions of the articles of association of the Company, the profit after
appropriation to reserves and available for distribution to shareholders shall be the lower of the
retained earnings determined under (a) PRC GAAP and (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. As a result, the
appropriations to reserves were made based on the retained earnings determined under PRC GAAP in
2008 and 2009 while under IFRS in 2010. The main difference between the retained earnings
determined under PRC GAAP and those determined under IFRS was resulted from the difference in
accounting policies in respect of fixed assets adopted under PRC GAAP and IFRS. With the change in
the accounting policy for fixed assets disclosed in Note 5, management does not expect any
significant differences in the future retained earnings determined under PRC GAAP and IFRS.24.
    
    DEFERRED INCOME RELATED TO GOVERNMENT GRANT
 2009RMB000Restated
    
    
    2010(Note 5)
    
    
    RMB000Beginning of the year
    
    
    100,495
    
    
    
    97,120Additions
    
    
    
    
    
    
    1,361Amortization
    
    
    (3,375
    )
    
    
    (3,388
    )End of the year
    
    
    97,120
    
    
    
    95,093
 25.
    
    BORROWINGS
 As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Non currentUnsecured bank borrowings
    
    
    3,390,000
    
    
    
    
    
    
    
    CurrentUnsecured bank borrowings
    
    
    510,000
    
    
    
    
    
    
    
    Total borrowings
    
    
    3,900,000
    
    
    
    
    
    
    
    
  F-61




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 25.
    
    BORROWINGS (CONTINUED)The maturity of these borrowings is as follows:
 As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Within one year
    
    
    510,000
    
    
    
    
    
    
    
    Within 1 to 2 years
    
    
    10,000
    
    
    
    
    
    
    
    Within 2 to 5 years
    
    
    3,380,000
    
    
    
    
    
    
    
    3,900,000
    
    
    
    
    
    
    
    
 The interest rate exposure of the borrowings of the Group is as follows:
 As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000At floating rates (at
relevant prevailing
interest rates with a
maximum range of
downward adjustment up
to 10%)
    
    
    3,900,000
    
    
    
    
    
    
    
    
 The effective interest rate of the bank borrowings as at January 1, 2009 was 6.72%. The carrying
amounts of the Groups borrowings approximated their fair values as all the borrowings are at
floating interest rates.As at December 31, 2010, the Group had no unutilized banking facilities granted by various
financial institutions. As at December 31, 2009 and January 1, 2009, the Group had unutilized
banking facilities granted by various financial institutions amounting to approximately
RMB1,500,000,000 and RMB9,000,000,000, respectively.26.
    
    BONDS PAYABLE
 At January 1,
    
    
    
    
    
    
    
    
    
    
    At December2009
    
    
    Addition
    
    
    Amortisation
    
    
    31, 2009RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB00009 Guangshen Tie MTN1
    
    
    
    
    
    
    3,465,476
    
    
    
    325
    
    
    
    3,465,801
 At January 1,
    
    
    
    
    
    
    
    
    
    
    At December2010
    
    
    Addition
    
    
    Amortization
    
    
    31, 2010RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB00009 Guangshen Tie MTN1
    
    
    3,465,801
    
    
    
    
    
    
    
    6,193
    
    
    
    3,471,994
 F-62




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 26.
    
    BONDS PAYABLE (CONTINUED)The Company issued 3,500,000,000 bonds of medium terms at a nominal value of RMB3,500,000,000 on
December 17, 2009. The bonds will reach maturity five years from the issue date at their nominal
value of RMB3,500,000,000 and bear an annual interest rate with 4.79%.On the issue dates, the bonds are recognized based on the residual amounts of the principals after
deduction of issuance costs of approximately RMB34,524,000. The bonds are subsequently carried at
amortized cost using an average effective interest rate of 5.018%.The fair value of bonds payable approximates to their carrying amount.27.
    
    EMPLOYEE BENEFITS OBLIGATIONS
 2009
    
    
    2010RMB000
    
    
    RMB000At January 1
    
    
    288,541
    
    
    
    231,939Additions (Note 30)
    
    
    1,200
    
    
    
    100,989Interest unwound
    
    
    6,510
    
    
    
    7,609Payment
    
    
    (64,312
    )
    
    
    (71,357
    )At December 31
    
    
    231,939
    
    
    
    269,180
 As at
    
    
    As at
    
    
    As atJanuary 1
    
    
    December 31
    
    
    December 312009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Employee benefits obligations
    
    
    288,541
    
    
    
    231,939
    
    
    
    269,180Less: current portion
included in accruals and
other payables (Note 29)
    
    
    (51,119
    )
    
    
    (57,172
    )
    
    
    (71,794
    )237,422
    
    
    
    174,767
    
    
    
    197,386
 Pursuant to a redundancy plan implemented by the Group in 2006, selected employees who had met
certain specified criteria and accepted voluntary redundancy were provided with an offer of early
retirement benefits, up to their official age of retirement. Such arrangements required specific
approval granted by management of the Group.With the acquisition of the Yangcheng Railway Business in 2007, the Group has also assumed certain
retirement and termination benefits obligations associated with the operations of Yangcheng Railway
Business. The amount mainly includes the redundancy termination benefits similar to those
mentioned above, as well as the obligation for funding post-retirement medical insurance premiums
of retired employees before the acquisition.
 F-63




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 27.
    
    EMPLOYEE BENEFITS OBLIGATIONS (CONTINUED)These obligations have been provided for by the Group at amounts equal to the total expected
benefit payments. Where the obligation does not fall due within twelve months, the obligation
payable has been discounted using a pre-tax rate that reflects managements current market
assessment of the time value of money and risk specific to the obligation (the discount rate was
determined with reference to market yields at the balance sheet date on high quality investments in
the PRC).28.
    
    TRADE PAYABLES
 As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Payables to third parties
    
    
    416,226
    
    
    
    563,211
    
    
    
    1,028,951Payables to related parties
    
    
    224,630
    
    
    
    228,144
    
    
    
    145,693640,856
    
    
    
    791,355
    
    
    
    1,174,644
 The aging analysis of trade payables was as follows:
 As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Within 1 year
    
    
    628,405
    
    
    
    782,594
    
    
    
    1,164,732Over 1 year but within 2 years
    
    
    10,565
    
    
    
    7,589
    
    
    
    8,343Over 2 years but within 3 years
    
    
    66
    
    
    
    211
    
    
    
    554Over 3 years
    
    
    1,820
    
    
    
    961
    
    
    
    1,015640,856
    
    
    
    791,355
    
    
    
    1,174,644
 F-64




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 29.
    
    ACCRUALS AND OTHER PAYABLES
 As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Payables to third parties
    
    
    652,857
    
    
    
    728,070
    
    
    
    745,256Payables to related parties
    
    
    137,903
    
    
    
    75,046
    
    
    
    38,228790,760
    
    
    
    803,116
    
    
    
    783,484
 As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Deposits received for construction projects
    
    
    264,922
    
    
    
    155,030
    
    
    
    153,634Other taxes payable
    
    
    44,256
    
    
    
    152,763
    
    
    
    162,072Salary and welfare payables
    
    
    70,806
    
    
    
    80,388
    
    
    
    86,130Other deposits received
    
    
    43,688
    
    
    
    68,124
    
    
    
    96,848Advance received from customers
    
    
    58,237
    
    
    
    61,934
    
    
    
    68,085Deposits received from ticketing agencies
    
    
    50,297
    
    
    
    22,441
    
    
    
    23,338Employee benefits obligations (Note 27)
    
    
    51,119
    
    
    
    57,172
    
    
    
    71,794Housing maintenance fund
    
    
    17,286
    
    
    
    17,177
    
    
    
    15,927Other payables
    
    
    190,149
    
    
    
    188,087
    
    
    
    105,656790,760
    
    
    
    803,116
    
    
    
    783,484
 F-65




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 30.
    
    LABOUR AND BENEFITS
 2008
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Wages and salaries
    
    
    1,661,325
    
    
    
    1,835,560
    
    
    
    2,004,467Provision for medical and other
employee benefits
    
    
    306,282
    
    
    
    326,018
    
    
    
    365,689Contributions to a defined contribution
pension scheme (a)
    
    
    260,014
    
    
    
    316,640
    
    
    
    342,002Contributions to the housing scheme (b)
    
    
    92,095
    
    
    
    125,325
    
    
    
    148,661Write-down and amortization of deferred
staff cost (Note 14)
    
    
    32,005
    
    
    
    20,156
    
    
    
    73,911Retirement benefit obligations (Note 27)
    
    
    85,988
    
    
    
    1,200
    
    
    
    100,9892,437,709
    
    
    
    2,624,899
    
    
    
    3,035,719
 
 (a)
    
    Pension schemeAll the full-time employees of the Group are entitled to join a statutory pension scheme. The
employees would receive pension payments equal to their basic salaries payable upon their
retirement up to their death. Pursuant to the PRC laws and regulations, contributions to the basic
old age insurance for the Groups local staff are to be made monthly to a government agency based
on 26% of the standard salary set by the provincial government, of which 18% is borne by the
Company or its subsidiaries and the remainder 8% is borne by the employees. The government agency
is responsible for the pension liabilities due to the employees upon their retirement. The Group
accounts for these contributions on an accrual basis and charges the related contributions to
income in the year to which the contributions relate.(b)
    
    Housing schemeIn accordance with the PRC housing reform regulations, the Group is required to make contributions
to a State-sponsored Housing Fund at 9% or 13% of the salaries of the employees. At the same time,
the employees are also required to make a contribution at 9% or 13% of the salaries out of their
payroll. The employees are entitled to claim the entire sum of the fund under certain specified
withdrawal circumstances. The Group has no further legal or constructive obligation for housing
benefits of these employees beyond the above contributions made. F-66




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 31.
    
    OTHER INCOME/(EXPENSE), NET
 2008
    
    
    2009RMB000
    
    
    RMB000Restated
    
    
    Restated
    
    
    2010(Note 5)
    
    
    (Note 5)
    
    
    RMB000Interest income from bank
    
    
    24,321
    
    
    
    24,440
    
    
    
    41,510Unwinding of interest accrued on
long-term receivable (Note 18)
    
    
    7,589
    
    
    
    4,093
    
    
    
    2,893Write-back of long outstanding payables
    
    
    21,562
    
    
    
    1,932
    
    
    
    537Loss on disposal of fixed assets
    
    
    (31,584
    )
    
    
    (42,053
    )
    
    
    (95,849
    )Loss on disposal of subsidiaries
    
    
    (188
    )
    
    
    
    
    
    
    Amortization of government grants
    
    
    3,963
    
    
    
    3,375
    
    
    
    3,388Dividends income on available-for-sale
investments
    
    
    2,420
    
    
    
    3,000
    
    
    
    3,853Others
    
    
    (6,459
    )
    
    
    (11,595
    )
    
    
    (3,392
    )21,624
    
    
    
    (16,808
    )
    
    
    (47,060
    )
 32.
    
    FINANCE COSTS
 2008
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Interest expenses
    
    
    221,488
    
    
    
    227,178
    
    
    
    167,650Less: interest capitalized in
construction-in-progress (Note 8)
    
    
    (13,721
    )
    
    
    
    
    
    
    Amortization of bonds payable (Note 26)
    
    
    
    
    
    
    325
    
    
    
    6,193Interest unwound for employee benefit
obligations (Note 27)
    
    
    3,417
    
    
    
    6,510
    
    
    
    7,609Bank charges
    
    
    2,311
    
    
    
    2,227
    
    
    
    2,325Net foreign exchange losses
    
    
    (26
    )
    
    
    47
    
    
    
    2,395213,469
    
    
    
    236,287
    
    
    
    186,172
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 33.
    
    INCOME TAX EXPENSEBefore 2008, enterprises established in the Shenzhen Special Economic Zone of the PRC were subject
to income tax at a reduced preferential rate of 15% as compared with the standard income tax rate
for PRC companies of 33%. The Company and the subsidiaries located in Shenzhen were subject to
income tax rate of 15%, while those subsidiaries located outside Shenzhen were subject to income
tax rate of 33%.On March 16, 2007, the National Peoples Congress approved the Corporate Income Tax Law of the
Peoples Republic of China (the new CIT Law), which became effective on 1 January 2008. Under the
new CIT Law, the enterprise income tax rate was changed from 33% to 25% from 1 January 2008
onwards. While the enterprise income tax rate applicable to the Company and the subsidiaries
located in Shenzhen would increase gradually to 25% within 5 years from 2008 to 2012. In 2010,
2009 and 2008, the applicable income tax rate is 22%, 20% and 18% respectively.An analysis of the current year taxation charges is as follows:
 2008
    
    
    2009RMB000
    
    
    RMB000Restated
    
    
    Restated
    
    
    2010(Note 5)
    
    
    (Note 5)
    
    
    RMB000Current income tax
    
    
    254,117
    
    
    
    337,613
    
    
    
    455,703Deferred income tax (Note 13)
    
    
    16,490
    
    
    
    5,790
    
    
    
    (15,314
    )270,607
    
    
    
    343,403
    
    
    
    440,389
 The tax on the Groups profit before tax differs from the theoretical amount that would arise using
the tax rate of the home country of the Company as follows:
 F-68




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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 33.
    
    INCOME TAX EXPENSE (CONTINUED)
 2008
    
    
    2009RMB000
    
    
    RMB000Restated
    
    
    Restated
    
    
    2010(Note 5)
    
    
    (Note 5)
    
    
    RMB000Profit before tax
    
    
    1,464,514
    
    
    
    1,684,790
    
    
    
    1,925,307Tax calculated at the statutory rate of
22% (2009 and 2008: 20% and 18%)
    
    
    263,612
    
    
    
    336,958
    
    
    
    423,567Effect of tax rates differentials
    
    
    (3,652
    )
    
    
    (996
    )
    
    
    118Effect of share of results of associates
    
    
    (23
    )
    
    
    (155
    )
    
    
    (299
    )Effect of expenses not deductible for
tax purposes
    
    
    10,686
    
    
    
    7,411
    
    
    
    16,955Effect of income not subject to tax
    
    
    (436
    )
    
    
    (590
    )
    
    
    (848
    )Tax losses for which no deferred tax
asset was recognized
    
    
    420
    
    
    
    775
    
    
    
    896Income tax expense
    
    
    270,607
    
    
    
    343,403
    
    
    
    440,389
 The effective tax rate was 22.9% (2009 and 2008: 20.4% and 18.5%). The increase was mainly caused
by the increase in statutory tax rate as explained above.34.
    
    EARNINGS PER SHAREThe calculation of basic earnings per share is based on the net profit for the year attributable to
ordinary shareholders of approximately RMB1,486,062,000 (2009 and 2008: RMB1,342,450,000 and
RMB1,193,668,000, restated), divided by the weighted average number of ordinary shares outstanding
during the year of 7,083,537,000 shares (2009 and 2008: 7,083,537,000 shares). There were no
dilutive potential ordinary shares during both years.35.
    
    DIVIDENDSThe dividends paid to the ordinary shareholders of the Group in 2010, 2009 and 2008 were
RMB566,683,000 (RMB0.09 per share), RMB566,683,000 (RMB0.08 per share) and RMB566,683,000 (RMB0.08
per share) respectively.
 2008
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Final, proposed, of RMB0.09 (2009 and
2008: RMB0.08) per ordinary share
    
    
    566,683
    
    
    
    566,683
    
    
    
    637,518
 At a meeting of the directors held on March 24, 2011, the directors proposed a final dividend of
RMB0.09 per ordinary share for the year ended December 31, 2010, which is subject to the approval
by the shareholders in general meeting. This proposed dividend has not been reflected as a dividend
payable in the financial statements, but will be reflected as an appropriation of retained earnings
for the year ending December 31, 2011.
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 36.
    
    CASH FLOW GENERATED FROM OPERATIONS(a)
    
    Reconciliation from profit attributable to shareholders to cash generated from operations:
 2008
    
    
    2009RMB000
    
    
    RMB000Restated
    
    
    Restated
    
    
    2010(Note 5)
    
    
    (Note 5)
    
    
    RMB000Profit before income tax:
    
    
    1,464,514
    
    
    
    1,684,790
    
    
    
    1,925,307Adjustments for:Depreciation of fixed assets (Note 7)
    
    
    1,213,111
    
    
    
    1,292,690
    
    
    
    1,349,210Impairment of fixed assets and
construction-in-progress
    
    
    
    
    
    
    448
    
    
    
    Amortization of leasehold land payments (Note 9)
    
    
    15,603
    
    
    
    15,989
    
    
    
    15,988Loss on disposal of fixed assets (Note 31)
    
    
    31,584
    
    
    
    42,053
    
    
    
    95,849Write-down and amortization of deferred employee
costs (Note 14)
    
    
    32,005
    
    
    
    20,156
    
    
    
    73,911Recognition of employee benefits obligations (Note
27)
    
    
    85,988
    
    
    
    1,200
    
    
    
    100,989Interest unwound for employee benefit obligations
(Note 27)
    
    
    3,417
    
    
    
    6,510
    
    
    
    7,609Share of results of associates (Note 12)
    
    
    (128
    )
    
    
    (773
    )
    
    
    (1,361
    )Loss on disposal of subsidiaries (Note 31)
    
    
    188
    
    
    
    
    
    
    
    Dividend income on available-for-sale investment
(Note 31)
    
    
    (2,420
    )
    
    
    (3,000
    )
    
    
    (3,853
    )Provision /(reversal of provision) for doubtful
accounts
    
    
    2,766
    
    
    
    414
    
    
    
    (1,661
    )Write-back of long outstanding of payables (Note 31)
    
    
    (21,562
    )
    
    
    (1,932
    )
    
    
    (537
    )Amortization of bonds payable (Note 26)
    
    
    
    
    
    
    325
    
    
    
    (6,193
    )Amortization of government grants (Note 24)
    
    
    (3,963
    )
    
    
    (3,375
    )
    
    
    (3,388
    )Interest expenses (Note 32)
    
    
    207,767
    
    
    
    227,178
    
    
    
    167,650Interest income (Note 31)
    
    
    (31,910
    )
    
    
    (28,533
    )
    
    
    (44,403
    )Operating profit before working capital changes
    
    
    2,996,960
    
    
    
    3,254,140
    
    
    
    3,675,117Increase in trade receivables
    
    
    (143,200
    )
    
    
    (211,176
    )
    
    
    (107,701
    )Increase in materials and supplies
    
    
    (48,249
    )
    
    
    (29,187
    )
    
    
    (23,969
    )Decrease/(increase) in prepayments and other
receivables
    
    
    51,335
    
    
    
    24,117
    
    
    
    (6,448
    )Decrease in long-term receivable
    
    
    8,000
    
    
    
    8,000
    
    
    
    12,000Increase in trade payables
    
    
    95,438
    
    
    
    150,499
    
    
    
    383,289Decrease in employee benefits obligations
    
    
    (126,179
    )
    
    
    (64,312
    )
    
    
    (71,357
    )(Decrease)/increase in accrued expenses and other
payables
    
    
    (660,420
    )
    
    
    (23,706
    )
    
    
    28,451Cash generated from operations
    
    
    2,173,685
    
    
    
    3,108,375
    
    
    
    3,889,382
 F-70




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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 36.
    
    CASH FLOW GENERATED FROM OPERATIONS (CONTINUED)(b)
    
    In the cash flow statement, proceeds from disposal of fixed assets comprise:
 2008
    
    
    2009RMB000
    
    
    RMB000Restated
    
    
    Restated
    
    
    2010(Note 5)
    
    
    (Note 5)
    
    
    RMB000Net book amount (Note 7)
    
    
    42,942
    
    
    
    70,402
    
    
    
    127,005Loss on disposal of fixed assets
    
    
    (31,584
    )
    
    
    (42,053
    )
    
    
    (95,849
    )Proceeds from disposal of fixed assets
    
    
    11,358
    
    
    
    28,349
    
    
    
    31,156
 (c)
    
    Analysis of the balance of cash and cash equivalents:
 As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Cash at bank and in hand
    
    
    618,877
    
    
    
    432,651
    
    
    
    729,058Short-term deposits
with original
maturities no more than
three months (Note a)
    
    
    942,075
    
    
    
    683,000
    
    
    
    1,930,0001,560,952
    
    
    
    1,115,651
    
    
    
    2,659,058
 
 Note a:
    
    Short term time deposits with maturities of no more than three months consist of deposits
denominated in RMB. As at December 31, 2010, the original effective interest rate of RMB
deposits is 1.37% (December 31, 2009: 1.35% and January 1, 2009: 1.35%).37.
    
    CONTINGENCYThere were no significant contingent liabilities as at the date of approval of these financial
statements.
 F-71




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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 38.
    
    COMMITMENTS(a)
    
    Capital commitmentsAs at January 1, 2009 and December 31, 2009 and 2010, the Group had the following capital
commitments which are authorized but not contracted for, and contracted but not provided for:
 As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Authorized but not contracted for
    
    
    2,530,325
    
    
    
    1,357,620
    
    
    
    1,744,503Contracted but not provided for
    
    
    390,691
    
    
    
    248,630
    
    
    
    99,313
  (b)
    
    Operating lease commitmentsIn connection with the acquisition of Yangcheng Railway Business, the Company signed an agreement
on November 15, 2004 with Guangzhou Railway Group for leasing the land use rights associated with
the land on which the acquired assets of Yangcheng Railway Business are located. The agreement
became effective upon the completion of the acquisition on January 1, 2007 and the remaining lease
term is 20 years, renewable at the discretion of the Company. According to the terms of the
agreement, the rental for such lease would be agreed by both parties every year with a maximum
amount not exceeding RMB74,000,000 per year. During the year ended December 31, 2010, the related
lease rental paid and payable was RMB52,400,000 (2009: RMB51,200,000, 2008: RMB50,000,000).39.
    
    RELATED PARTY TRANSACTIONSParties are considered to be related if one party has the ability, directly or indirectly, to
control the other party or exercise significant influence over the other party in making financial
and operating decisions.(a)
    
    Related parties that control the Company or are controlled by the Company:See Note 11 for the subsidiaries.None of the shareholders is the controlling entity of the Company.
 F-72




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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 39.
    
    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 GroupSubstantial shareholder and fellow subsidiariesGuangzhou Railway Group
    
    Substantial shareholderGuangzhou Railway Group YangCheng Railway
Enterprise Development Company (Yangcheng
Railway)
    
    Subsidiary of the substantial shareholderGuangmeishan Railway Company Limited
(Guangmeishan)
    
    Subsidiary of the substantial shareholderGuangzhou Railway (Group) Guangshen Railway
Enterprise Development Company (GEDC)
    
    Subsidiary of the substantial shareholderGuangzhou Railway Material Supply Company
    
    Subsidiary of the substantial shareholderGuangzhou Railway Engineer Construction
Enterprise Development Company (Engineer
Construction Enterprise)
    
    Subsidiary of the substantial shareholderYuehai Railway Company Limited
    
    Subsidiary of the substantial shareholderShichang Railway Company Limited
    
    Subsidiary of the substantial shareholderGuangzhou Railway Station Service Centre
    
    Subsidiary of the substantial shareholderChangsha Railway Construction Company Limited
    
    Subsidiary of the substantial shareholderGuangdong Sanmao Enterprise Development Company 
Limited
    
    Subsidiary of the substantial shareholderGuangzhou Qingda Transportation Company Limited
    
    Subsidiary of the substantial shareholderYangcheng Construction Company of YangCheng
Railway Enterprise Development Company
    
    Subsidiary of the substantial shareholderGuangzhou Yuetie Operational Development Company
    
    Subsidiary of the substantial shareholderGuangzhou Railway Real Estate Construction Company
    
    Subsidiary of the substantial shareholderGuangzhou Railway Rolling Stock Works
    
    Subsidiary of the substantial shareholderForeign Economic & Trade Development Corporation
of Guangzhou Railway group
    
    Subsidiary of the substantial shareholderCYTS Guangdong Railway Shenzhen Co., Ltd. (CYTS)
    
    Subsidiary of the substantial shareholderGuangdong Pearl River Delta Inter-city Railway
Traffic Co., Ltd.
    
    Subsidiary of the substantial shareholderGuangzhou Railway Group Diversified Management 
Development Center
    
    Subsidiary of the substantial shareholderAssociates of the GroupGuangzhou Tiecheng Enterprise Company Limited
    
    Associate of the GroupZengcheng Lihua Stock Company Limited
    
    Associate of the GroupShenzhen Guangshen Railway Civil Engineering 
Company
    
    Associate of the Group
 F-73




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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 39.
    
    RELATED PARTY TRANSACTIONS (CONTINUED)(c)
    
    Save as disclosed in other notes to the Financial Statements, during the year, the
Group had the following material transactions undertaken with related parties:
 2008
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Provide ServicesRevenue collected by MOR for services
provided to Guangzhou Railway Group and
its subsidiaries (i) (Note 40)
    
    
    (1,038,611
    )
    
    
    (1,069,053
    )
    
    
    (1,115,028
    )Revenue collected through Guangzhou
Railway Group for provision of
repairing services for cargo trucks
(ii)
    
    
    (148,322
    )
    
    
    (220,000
    )
    
    
    (191,369
    )- For Guangzhou Railway Group and its
subsidiaries
    
    
    (1,178
    )
    
    
    (17,984
    )
    
    
    (6,173
    )- For other companies
    
    
    (147,144
    )
    
    
    (202,016
    )
    
    
    (185,196
    )Provision of train transportation
services to Guangzhou Railway Group and
its subsidiaries (ii)
    
    
    (265,998
    )
    
    
    (208,860
    )
    
    
    (347,849
    )Receive ServicesCost settled by MOR for services
provided by Guangzhou Railway Group and
its subsidiaries (i) (Note 40)
    
    
    1,218,138
    
    
    
    1,530,479
    
    
    
    1,367,444Provision of train transportation
services provided by Guangzhou Railway
Group and its subsidiaries (iii)
    
    
    235,303
    
    
    
    347,969
    
    
    
    428,288Social services (employee housing and
public security services and other
ancillary services) provided by GEDC
and Yangcheng Railway (iv)
    
    
    440,602
    
    
    
    369,257
    
    
    
    144,750Provision of construction services of
Guangzhou Railway Group and its
subsidiaries (ii)
    
    
    259,787
    
    
    
    241,753
    
    
    
    115,075Provision of repair and maintenance
services by Guangzhou Railway Group and
its subsidiaries (ii)
    
    
    115,568
    
    
    
    115,455
    
    
    
    171,154Provision of turnkey service by CYTS (v)
    
    
    15,280
    
    
    
    
    
    
    
    PurchasePurchase of materials and supplies from
Guangzhou Railway Group and its
subsidiaries (vi)
    
    
    398,230
    
    
    
    631,149
    
    
    
    431,988SalesSales of materials and supplies to
Guangzhou Railway Group and its
subsidiaries (v)
    
    
    
    
    
    
    2,520
    
    
    
    17,827OthersOperating lease rental paid to
Guangzhou Railway Group for the leasing
of land use rights (Note 38(b))
    
    
    50,000
    
    
    
    51,200
    
    
    
    52,400
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 39.
    
    RELATED PARTY TRANSACTIONS (CONTINUED)
 (i)
    
    Such revenues/charges are determined by the MOR based on its standard charges applied on a
nationwide basis.(ii)
    
    The service charges are determined based on a pricing scheme set by the MOR or based on
negotiation between the contracting parties with reference to full cost principle.(iii)
    
    The service charges are determined based on negotiation between the contracting parties with
reference to full cost principle.(iv)
    
    The service charges are levied based on contract prices determined based on cost plus a
profit margin and explicitly agreed between both contract parties.(v)
    
    The prices are determined based on mutual negotiation between the contracting parties.(vi)
    
    The prices are determined based on mutual negotiation between the contracting parties with
reference to cost plus a management fee.
 (d)
    
    Key management compensationKey management includes directors (executive and non-executive), general manager and vice general
managers, assistant of general manager, chief financial officer and the company Secretary. During
the year ended December 31, 2010, 2009 and 2008, the compensation paid or payable to key management
for employee services is RMB4,093,022, RMB3,562,597 and RMB3,340,844 respectively.
 F-75




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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 39.
    
    RELATED PARTY TRANSACTIONS (CONTINUED)(e)
    
    As at January 1, 2009 and December 31, 2009 and 2010, the Group had the following
material balances maintained with related parties:
 As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Due from Guangzhou Railway Group
    
    
    155,034
    
    
    
    113,195
    
    
    
    299,400- Trade receivables (i)
    
    
    150,066
    
    
    
    108,341
    
    
    
    292,504- Prepayments and other receivables
    
    
    4,968
    
    
    
    4,854
    
    
    
    6,896Due to Guangzhou Railway Group
    
    
    (35,209
    )
    
    
    (63,396
    )
    
    
    (18,408
    )- Trade payables (i)
    
    
    (25,787
    )
    
    
    (53,955
    )
    
    
    (9,694
    )- Other payables (iii)
    
    
    (9,422
    )
    
    
    (9,441
    )
    
    
    (8,714
    )Due from subsidiaries of Guangzhou Railway Group
    
    
    16,815
    
    
    
    28,733
    
    
    
    33,629- Trade receivables
    
    
    15,354
    
    
    
    13,126
    
    
    
    26,682Less: impairment provision
    
    
    (4
    )
    
    
    (113
    )
    
    
    (19
    )- Prepayments and other receivables
    
    
    1,465
    
    
    
    15,720
    
    
    
    6,966Due to subsidiaries of Guangzhou Railway Group
    
    
    (302,206
    )
    
    
    (230,260
    )
    
    
    158,522- Trade payables (ii)
    
    
    (198,843
    )
    
    
    (174,054
    )
    
    
    135,999- Other payables (iii)
    
    
    (103,363
    )
    
    
    (56,206
    )
    
    
    22,523Due from an associate
    
    
    2,019
    
    
    
    1,312
    
    
    
    1,451- Trade receivables
    
    
    160
    
    
    
    
    
    
    
    22- Prepayments and other receivables
    
    
    14,171
    
    
    
    13,624
    
    
    
    13,741Less: impairment provision (v)
    
    
    (12,312
    )
    
    
    (12,312
    )
    
    
    (12,312
    )Due to an associate
    
    
    (25,118
    )
    
    
    (9,534
    )
    
    
    6,991- Trade payables
    
    
    
    
    
    
    (135
    )
    
    
    - Other payables (iv)
    
    
    (25,118
    )
    
    
    (9,399
    )
    
    
    6,991Prepayment for fixed assets and
construction-in-progress
    
    
    31,012
    
    
    
    
    
    
    
    - Guangzhou Railway Group and its subsidiaries
    
    
    31,012
    
    
    
    
    
    
    
    Payables for fixed assets and
construction-in-progress
    
    
    (125,487
    )
    
    
    (101,316
    )
    
    
    96,328- Guangzhou Railway Group and its subsidiaries
    
    
    (95,498
    )
    
    
    (101,316
    )
    
    
    77,423- Associates
    
    
    (29,989
    )
    
    
    
    
    
    
    18,905
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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 39.
    
    RELATED PARTY TRANSACTIONS (CONTINUED)(e)
    
    As at January 1, 2009 and December 31, 2009 and 2010, 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 represented service fees and charges payable and receivable balances arising
from the provision of passenger transportation and cargo forwarding businesses jointly with
these related parties within the PRC as described in 39(c)(i).(ii)
    
    The trade balances due to subsidiaries of Guangzhou Railway Group mainly represent payables
arising from unsettled fees for purchase of materials and provision of other services
according to various service agreements entered into between the Group and the related parties
(see Note 39(c) above).(iii)
    
    The non-trade balances due to subsidiaries of Guangzhou Railway Group mainly represent the
deposits of related parties maintained in the deposit-taking centre of the Company.(iv)
    
    The non-trade balance due to an associate mainly represents the payable balance arising from
unsettled balance for the construction project services undertaken by an associate.(v)
    
    Full impairment loss provision set up against a receivable balance due from Zengcheng Lihua,
which was brought forward from prior years.
  40.
    
    TRANSACTIONS WITH MORMOR is the controlling entity of the Companys substantial shareholder (i.e. Guangzhou Railway
Group). In addition, it is the government authority which governs and monitors the railway
business centrally within the PRC. The Company works in cooperation with the MOR and other
railway companies owned and controlled by the MOR for the operation of certain long distance
passenger train and freight transportation businesses within the PRC. The revenues generated
from these long-distance passenger and freight transportation businesses are collected and
settled by the MOR according to its settlement systems. The charges for the use of the rail
lines and services provided by other railway companies are also instructed by the MOR and
settled by the MOR based on its systems.
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##### Table of Contents



GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 40.
    
    TRANSACTIONS WITH MOR (CONTINUED)(a)
    
    Save as disclosed in other notes to the Financial Statements, during the year, the Group had
the following material transactions undertaken with MOR:
 2008
    
    
    2009
    
    
    2010Recurring Transactions:
    
    RMB000
    
    
    RMB000
    
    
    RMB000IncomeRevenue collected from the MOR- Passenger transportation
    
    
    (6,196,596
    )
    
    
    (6,542,333
    )
    
    
    (7,569,570
    )- Freight transportation
    
    
    (841,240
    )
    
    
    (752,561
    )
    
    
    (835,216
    )- Railway network usage and services
    
    
    (2,738,425
    )
    
    
    (3,105,654
    )
    
    
    (3,115,911
    )Charges and PaymentsServices charges allocated from the MOR
for equipment lease and services
    
    
    2,179,407
    
    
    
    2,404,966
    
    
    
    2,487,995Operating lease rentals paid/payable to
the MOR
    
    
    176,880
    
    
    
    162,651
    
    
    
    178,917
  (b)
    
    As at January 1, 2009 and December 31, 2009 and 2010, the Group had the following material
balances maintained with MOR:
 As at
    
    
    As at
    
    
    As atJanuary 1,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2009
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000Due from MOR- Trade receivables
    
    
    53,048
    
    
    
    273,300
    
    
    
    24,805Due to MOR- Trade payables
    
    
    
    
    
    
    
    
    
    
    (166,271
    )
 41.
    
    SUBSEQUENT EVENTSSave as already disclosed in the notes to the financial statements, the Group had no other
significant subsequent event.
 F-78