<PAGE>

     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 29, 2004

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                _________________

                                    FORM 20-F

      (Mark One)
[ ]   REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
      SECURITIES EXCHANGE ACT OF 1934

                                       or

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
      For the fiscal year ended December 31, 2003

                                       or

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
      For the transition period from          to

                         COMMISSION FILE NUMBER: 1-14362
                               ___________________

                           [COMPANY NAME IN CHINESE]

             (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)
                               __________________

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

<TABLE>
<CAPTION>
         TITLE OF EACH CLASS                     NAME OF EACH EXCHANGE ON WHICH REGISTERED
---------------------------------------          -----------------------------------------
<S>                                              <C>
American Depositary Shares, each                 New York Stock Exchange, Inc.
representing 50 H shares

Class H Ordinary Shares, nominal value           The Stock Exchange of Hong Kong Limited
RMB 1.00 per share(1)
</TABLE>

------------
(1)   Not for trading, but only in connection with the registration of American
      Depositary Shares representing these shares pursuant to the requirements
      of the Securities and Exchange Commission.

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

                                      None
                                (Title of Class)

 Securities for which there is a reporting obligation pursuant to Section 15(d)
                                  of the Act:

                                      None
                                (Title of Class)

Indicate the number of outstanding shares of each of the issuer's classes of
                capital or common stock as of December 31, 2003:

Domestic shares, par value RMB1.00 per share.......................2,904,250,000
H shares, par value RMB1.00 per share, including 243,129,050 H shares in the
form of American Depositary Shares................................ 1,431,300,000

      Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                    Yes  [X]    No [ ]

      Indicate by check mark which financial statement item the registrant has
elected to follow.

                                 Item 17 [ ] Item 18  [X]

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                            Pages
                                                                                                            -----
<S>                                                                                                         <C>
Forward-Looking Statements................................................................................      1
Certain Terms and Conventions.............................................................................      1

PART I

       ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS......................................     3

       ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE....................................................     3

       ITEM 3.  KEY INFORMATION............................................................................     3
       Item 3A.  Selected Consolidated Financial Data......................................................     3
       Item 3B.  Capitalization and Indebtedness...........................................................     5
       Item 3C.  Reasons for the Offer and Use of Proceeds.................................................     5
       Item 3D.  Risk Factors..............................................................................     6

       ITEM 4.  INFORMATION ON THE COMPANY.................................................................    10
       Item 4A.  History and Development of the Company....................................................    10
       Item 4B.  Business Overview.........................................................................    13
       Item 4C.  Organizational Structure..................................................................    26
       Item 4D.  Property, Plant and Equipment.............................................................    27

       ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS...............................................    30
       Item 5A. Operating Results..........................................................................    32
       Item 5B. Liquidity and Capital Resources............................................................    42
       Item 5C. Research and Development, Patents and Licences, etc........................................    44
       Item 5D. Trend Information..........................................................................    45
       Item 5E. Off-Balance Sheet Arrangements.............................................................    45
       Item 5F. Tabular Disclosure of Contractual Obligations..............................................    45
       Item 5G.  Additional Information....................................................................    47

       ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.................................................    50
       Item 6A. Directors and Senior Management............................................................    50
       Item 6B. Board Compensation.........................................................................    54
       Item 6C. Board Practices............................................................................    55
       Item 6D. Employees..................................................................................    57
       Item 6E. Share Ownership............................................................................    58

       ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS..........................................    59
       Item 7A. Major Shareholders.........................................................................    59
       Item 7B. Related Party Transactions.................................................................    60
       Item 7C. Interests of Experts and Counsel...........................................................    64

       ITEM 8. FINANCIAL INFORMATION.......................................................................    65
       Item 8A. Consolidated Statements and Other Financial Information....................................    65
       Item 8B. Significant Changes........................................................................    66

       ITEM 9.  THE OFFER AND LISTING......................................................................    67
       Item 9A. The Offer and Listing Details..............................................................    67
       Item 9B. Plan of Distribution.......................................................................    67
       Item 9C. Markets....................................................................................    68
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                            <C>
       Item 9D. Selling Shareholders.......................................................................    68
       Item 9E. Dilution...................................................................................    68
       Item 9F. Expenses of the Issue......................................................................    68

       ITEM 10.  ADDITIONAL INFORMATION....................................................................    69
       Item 10A. Share Capital.............................................................................    69
       Item 10B. Memorandum and Articles of Association....................................................    69
       Item 10C. Material Contracts........................................................................    78
       Item 10D. Exchange Controls.........................................................................    78
       Item 10E. Taxation..................................................................................    79
       Item 10F. Dividends and Paying Agents...............................................................    87
       Item 10G. Statement by Experts......................................................................    87
       Item 10H. Documents on Display......................................................................    87
       Item 10I. Subsidiary Information....................................................................    88

       ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................................    88

       ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES....................................    89
PART II

       ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES...........................................    90

       ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS..............    90

       ITEM 15.  CONTROLS AND PROCEDURES...................................................................    90

       ITEM 16A.  AUDIT COMMITTEE FINANCIAL EXPERT.........................................................    90

       ITEM 16B.  CODE OF ETHICS...........................................................................    90

       ITEM 16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES...................................................    90

       ITEM 16D.  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES...............................    91

       ITEM 16E.  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS...................    91

PART III

       ITEM 17.  FINANCIAL STATEMENTS......................................................................    92

       ITEM 18.  FINANCIAL STATEMENTS......................................................................    92

       ITEM 19.  EXHIBITS..................................................................................    92
</TABLE>

                                        2

<PAGE>

                           FORWARD-LOOKING STATEMENTS

      Certain information contained in this annual report are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange Act of 1934, as amended.
These forward-looking statements can be identified by the use of words or
phrases such as "is expected to", "will", "is anticipated", "plan to",
"estimate", "believe," "may," "intend," "should" or similar expressions, or the
negative forms of these words, phrases or expressions, or by discussions of
strategy. Such statements are subject to risks, uncertainties and other factors
that could cause our actual results to differ materially from its historical
results and those presently anticipated or projected. You are cautioned not to
place undue reliance on any such forward-looking statements, which speak only as
of the date on which such statements were made. Among the factors that could
cause our actual results in the future to differ materially from any opinions or
statements expressed with respect to future periods include adverse effects on
the economy in the Pearl River Delta region, increased competition from other
means of transportation, failure or delay in implementation of the development
projects, reoccurrence of Severe Acute Respiratory Syndrome in Hong Kong or
China, foreign currency fluctuations and other factors beyond our control.

      When considering such forward-looking statements, you should keep in mind
the factors described in "Item 3E. Risk Factors" and other cautionary statements
appearing in "Item 5. Operating and Financial Review and Prospects" of this
annual report. Such risk factors and statements describe circumstances which
could cause actual results to differ materially from those contained in any
forward-looking statement.

                          CERTAIN TERMS AND CONVENTIONS

      Solely for the convenience of the reader, this annual report contains
translations of amounts from renminbi into U.S. dollars and vice versa at the
rate of RMB 8.28 to US$1.00, which was the noon buying rate in the New York City
for cable transfers in renminbi per U.S. dollar as certified for customs
purposes by the Federal Reserve Bank of New York on December 31, 2003, except
where we specify that a different rate has been used. You should not construe
these translations as representations that the renminbi amounts actually
represent U.S. dollar amounts or could be converted into U.S. dollars at that
rate or at all. See "Item 3A. Selected Consolidated Financial Data - Exchange
Rate Information" for information regarding the noon buying rates for U.S.
dollar/renminbi conversions from January 1, 1999 through June 28, 2004.

      We publish our consolidated financial statements in renminbi.

      Various amounts and percentages set out in this document have been rounded
and, accordingly, are not the exact figures and may not total.

      Unless the context otherwise requires or otherwise specified:

      -     "China" or "PRC" means the People's Republic of China.

      -     "Guangshen Railway", "Company", "we", "our" and "us" means Guangshen
            Railway Company Limited, a joint stock limited company incorporated
            in China

                                        1

<PAGE>

            with limited liability, and its subsidiaries on a consolidated
            basis.

      -     "MOR" means the Ministry of Railways.

      -     "Parent Company" means Guangzhou Railway (Group) Company, our parent
            company.

      -     "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, including the Hong Kong Special
            Administrative Region and Macau; and

      -     "restructuring" means the restructuring in which we succeeded to the
            railroad and certain other businesses of our predecessor company and
            certain of its subsidiaries, and certain assets and liabilities of
            our Parent Company and certain of its subsidiaries and associated
            companies.

      -     "ton" means metric ton and is approximately 2,205 pounds in weight.

                                        2

<PAGE>

                                     PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

      Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

      Not applicable.

ITEM 3. KEY INFORMATION

ITEM 3A. SELECTED CONSOLIDATED FINANCIAL DATA

      The following selected consolidated data relating to our consolidated
balance sheets as of December 31, 2002 and 2003, and our consolidated statements
of income, changes in equity and cash flows for each of the years ended December
31, 2001, 2002 and 2003 are derived from and are qualified by reference to our
audited consolidated financial statements included elsewhere in this annual
report and should be read in conjunction with "Item 5. Operating and Financial
Review and Prospects". The following selected consolidated data relating to our
consolidated balance sheets as of December 31, 1999, 2000 and 2001, and our
consolidated statements of income, changes in equity and cash flows for each of
the years ended December 31, 1999 and 2000 are derived from our audited
consolidated financial statements that are not included in this annual report.

      The audited consolidated financial statements from which the selected
consolidated financial data set forth below have been derived were prepared in
accordance with International Financial Reporting Standards, or IFRS, and the
information disclosed under "US GAAP data" have been reconciled to US GAAP,
which differ in some respects from IFRS. For a discussion of the principal
differences between IFRS and US GAAP, see Note 30 to our audited consolidated
financial statements included elsewhere in this annual report.

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                            ------------------------------------------------------------------------
                                              1999        2000          2001       2002         2003          2003
                                            ---------   ---------    ---------   ---------   ----------   -----------
                                               RMB         RMB          RMB         RMB          RMB        US$ (1)
                                                                                                          (Unaudited)
                                                            (IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<S>                                         <C>         <C>          <C>         <C>         <C>            <C>
INCOME STATEMENT DATA:
  Revenues from railroad businesses
    - Passenger.........................    1,114,046   1,237,289    1,426,010   1,846,599    1,754,223      211,863
    - Freight...........................      537,970     549,694      567,276     514,036      514,794       62,173
                                            ---------   ---------    ---------   ---------   ----------     --------
    Subtotal............................    1,652,016   1,786,983    1,993,286   2,360,635    2,269,017      274,036
  Revenues from other businesses........      166,800     193,415      160,306     156,893      144,370       17,436
                                            ---------   ---------    ---------   ---------   ----------     --------
  Total revenues........................    1,818,816   1,980,398    2,153,592   2,517,528    2,413,387      291,472
  Railroad operating expenses...........   (1,189,641) (1,297,464)  (1,460,629) (1,735,292)  (1,708,286)    (206,315)
  Other businesses operating expenses...     (151,255)   (163,529)    (138,852)   (159,739)    (142,388)     (17,196)
                                            ---------   ---------    ---------   ---------   ----------     --------
  Profit from operations................      477,920     519,405      554,111     622,497      562,713       67,961
  Net profit............................      529,674     492,089      533,495     557,083      511,762       61,807
  Earnings per share....................         0.12        0.11         0.12        0.13         0.12         0.01
  Dividends declared per share..........         0.10        0.12         0.10        0.10         0.10         0.01
  Earnings per ADS......................         6.11        5.68         6.15        6.42         5.90         0.71

BALANCE SHEET DATA (AT PERIOD END):
  Working capital (excluding due from and
    due to Parent Company)..............    1,772,772   1,463,073    1,581,054   1,592,040    1,935,979      233,814
  Due from Parent Company...............       48,485      80,604       29,499      39,374            -            -
  Due to Parent Company.................            -           -            -           -       37,230        4,496
</TABLE>

                                        3

<PAGE>

<TABLE>
<CAPTION>
                                                                         YEAR ENDED DECEMBER 31,
                                               -------------------------------------------------------------------------
                                                  1999        2000          2001       2002         2003          2003
                                               ----------  ----------   ----------  ----------   ----------   -----------
                                                   RMB         RMB          RMB         RMB          RMB        US$ (1)
                                                                                                              (Unaudited)
                                                                (IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<S>                                            <C>         <C>          <C>         <C>         <C>           <C>
  Fixed assets..............................    6,757,336   7,074,907    7,031,040   6,798,280    6,952,878      839,720
  Leasehold land payments...................      710,625     695,231      673,746     656,998      652,083       78,754
  Total assets..............................   10,970,496  10,917,564   10,997,216  11,257,594   11,073,953    1,337,434
  Equity....................................   10,048,860  10,020,683   10,120,623  10,244,151   10,322,358    1,246,662
  Share capital, issued and outstanding,
  RMB1.00 per value,
       domestic shares - 2,904,250,000......    2,904,250   2,904,250    2,904,250   2,904,250    2,904,250      350,755
       H shares - 1,431,300,000.............    1,431,300   1,431,300    1,431,300   1,431,300    1,431,300      172,862

CASH FLOW STATEMENT DATA:
  Net cash provided by operating
  activities................................      656,802     729,189      886,016   1,157,177      798,449       96,431
  Net cash provided by (used in)
  investing activities......................      (61,791)   (458,087)    (430,425)    251,003     (375,469)     (45,346)
  Net cash provided by (used in)
  financing activities......................     (384,474)   (520,453)    (420,137)   (360,643)    (433,666)     (52,375)
  Purchase of fixed assets and payment
  for construction-in-progress..............      449,130     564,759      551,508     553,337      339,208       40,967
  Dividends paid to shareholders of the
  Company...................................      433,555     520,266      419,957     356,490      433,561       52,362

OTHER DATA:
  Railroad transportation operating income..      462,375     489,519      532,657     625,343      560,731       67,721
  Other businesses operating income.........       15,545      29,886       21,454      (2,846)       1,982          239
US GAAP DATA
    - Operating income......................      477,920     519,405      554,111     622,497      562,713       67,961
    - Net income............................      570,833     533,248      574,654     598,242      544,528       65,764
    - Earnings per share....................         0.13        0.12         0.13        0.14         0.13         0.02
    - Earnings per ADS......................         6.58        6.15         6.63        6.90         6.28         0.76
    - Equity................................    8,938,279   8,951,259    9,092,358   9,257,045    9,368,018    1,131,403
    - Fixed assets..........................    5,450,769   5,816,762    5,821,317   5,636,979    5,830,125      704,121
</TABLE>

---------------------------
(1)   Translation of amounts from renminbi, or RMB, into United States dollars,
      or US$, for the convenience of the reader has been made at the noon buying
      rate on December 31, 2003 of US$1.00 = RMB8.28. No representation is made
      that the RMB amounts could have been, or could be, converted into US
      dollars at that rate on December 31, 2003 or on any other date.

Exchange Rate Information

      We maintain our books and records in renminbi and our financial statements
are expressed in renminbi. Solely for the convenience of the reader, this annual
report contains translations of certain renminbi and Hong Kong dollar amounts
into U.S. dollars and vice versa at RMB8.28 = US$1.00 and HK$7.76 = US$1.00, the
noon buying rates in New York City for cable transfers as certified for customs
purposes by the Federal Reserve Bank of New York on December 31, 2003. These
translations should not be construed as representations that the renminbi or
Hong Kong dollar amounts could have been or could be converted into U.S. dollars
at such rates or at all.

      The noon buying rates in New York City for cable transfers as certified
for customs purposes by the Federal Reserve Bank of New York were RMB8.2766 =
US$1.00 and HK$7.799 = US$1.00, respectively, on June 28, 2004.

      The following table sets forth certain information concerning exchange
rates between the renminbi and the U.S. dollar for the periods indicated:

<TABLE>
<CAPTION>
                                                                     NOON BUYING RATE
                                                                     ----------------
                PERIOD                                 AVERAGE (1)         HIGH            LOW
-----------------------------------------             ------------   ----------------     ------
<S>                                                   <C>            <C>                  <C>
1999.....................................                8.2784           8.2800          8.2770
2000.....................................                8.2784           8.2799          8.2768
2001.....................................                8.2770           8.2786          8.2676
2002.....................................                8.2766           8.2800          8.2700
2003.....................................                8.2771           8.2800          8.2765
</TABLE>

                                        4

<PAGE>

<TABLE>
<CAPTION>
                                                                     NOON BUYING RATE
                                                                     ----------------
                PERIOD                                 AVERAGE (1)        HIGH             LOW
-----------------------------------------             ------------   ----------------     ------
<S>                                                   <C>            <C>                  <C>
December 2003............................                  -             8.2772           8.2765
January 2004.............................                  -             8.2772           8.2767
February 2004............................                  -             8.2773           8.2769
March 2004...............................                  -             8.2774           8.2767
April 2004...............................                  -             8.2772           8.2768
May 2004.................................                  -             8.2773           8.2768
June 2004 (through June 28)..............                  -             8.2768           8.2766
</TABLE>

----------------------
(1)   Determined by averaging the rates on the last business day of each month
      during the respective period.

ITEM 3B. CAPITALIZATION AND INDEBTEDNESS

      Not applicable.

ITEM 3C. REASONS FOR THE OFFER AND USE OF PROCEEDS

      Not applicable.

                                        5

<PAGE>

ITEM 3D. RISK FACTORS

      In addition to the information and risks described elsewhere in this
annual report, we are subject to the following risks:

        -       We were granted certain rights by the MOR and the State Council
                of the PRC, or the "State Council," with respect to certain
                aspects of our railroad businesses and operations, and also
                received legal clarification and confirmation of our asset
                ownership, corporate powers and relationships with service
                providers and other entities in the national railway system, in
                connection with the restructuring conducted in connection with
                our initial public offering in 1996. Although these rights were
                granted to us indefinitely, we cannot assure you that these
                rights will not be affected by future changes in PRC
                governmental policies or regulation or that other railway
                operators will not be granted similar rights within our service
                region. If another railway operator is granted similar rights
                within our service region, the level of competition we face will
                increase significantly. We remain a part of the PRC national
                railway system, which is principally state-owned and operated as
                a single unified system and is subject to significant
                operational and regulatory control by the MOR. As a principally
                state-owned entity, our corporate and management structure may
                be more bureaucratic than many private enterprises. As a result,
                we may be slower to respond to market changes. The PRC
                government regulates the pricing that we may charge for our
                railroad transportation services. Any change in such pricing
                policies is likely to have a material impact on our financial
                results. Our ability to respond to changes in market conditions,
                competition or costs may be limited by pricing or other
                regulations set by the MOR.

        -       Our railroad passenger and freight transportation businesses
                face increasing competition from other means of surface, air and
                water transportation, which may affect our profitability and
                growth. In our passenger transportation business, we compete
                with the bus and ferry

                                        6

<PAGE>

                services operating between Hong Kong, Guangzhou and Shenzhen and
                elsewhere in our service region. In our freight transportation
                business, we compete with water, truck and air transportation
                services operating within our service region.

        -       We depend to a certain degree on certain services provided by
                our Parent Company, Guangzhou Railway (Group) Company, and its
                subsidiaries, such as Yang Cheng Railway Company, Guangshen
                Enterprise Development Company, and Guang Mei Shan Railway Co.,
                Ltd., for which currently we have limited alternative sources of
                supply. The interests of our Parent Company and its subsidiaries
                as providers of these services to us may conflict with our
                interests and our Parent Company is not obliged to act in our
                best interests.

        -       The volume of freight and the number of passengers we transport
                are affected by the level of economic activities and growth
                within our service region and elsewhere in China. Any decrease
                in passenger travel or the import or export of goods, whether
                due to an economic slowdown, an epidemic outbreak or other
                reasons, will have a material adverse effect on our revenues and
                financial results. For example, the Pearl River Delta and Hong
                Kong were among the areas most seriously affected by the
                outbreak of SARS in Asia in 2003, and the number of passengers
                traveling on our trains from January to June 2003 decreased
                14.1% compared to the same period in 2002. As a result, our
                revenues for the first six months of 2003 decreased by 15.9%
                compared to the same period in 2002.

        -       China's entry into the World Trade Organization, or the WTO, may
                increase competition for our businesses. After China's accession
                to the WTO in December 2001, the policy advantages Shenzhen
                currently enjoys due to its status as a special economic zone
                may be phased out, and the high economic growth rate may not be
                sustained in the long run. Other coastal regions and ports in
                China may develop at a faster pace and become competitive, and
                part of the freight currently transferred through ports in Hong
                Kong and Shenzhen may be shipped through other ports in China,
                which will adversely affect our railway freight business. In
                addition, as the PRC government lifts its restrictions and
                control over foreign investments in China, such as allowing
                foreign participation railway operations, the monopoly status we
                currently enjoy in our service territory may be challenged and
                increasing competition may adversely affect our revenues and
                results of operations.

        -       As a company located in the Shenzhen Special Economic Zone, we
                enjoy a preferential income tax rate of 15%, rather than the 33%
                income tax rate generally applicable to other domestic
                companies. Any change to our preferential income tax status
                could have an adverse effect on our operating results.

        -       As infrastructure and technology in the PRC improves, there is
                an increasing demand for more advanced technological products,
                such as computer components. Historically, our freight
                transportation business has relied mainly on bulkier products,
                such as coal, oil and steel, in which our railroad
                transportation

                                        7

<PAGE>

                services has an advantage compared to road transportation
                services. Changes in consumer demands will affect the type,
                volume and price of our freight and may require us to invest in
                new storage and transportation systems for our current railroad
                operations. As many new technology products are compact and can
                be shipped by road, air or water, we face significant
                competition in the transportation of such low-bulk, high-value
                products.

        -       Consistent with customary practices of railway companies in
                China, we do not maintain any insurance coverage against third
                party liabilities. In addition, we do not maintain any insurance
                coverage for most of our property, for business interruption or
                for environmental damage arising from accidents relating to our
                operations. As a result, we would have to pay for financial and
                other losses, damages or liabilities, such as those caused by
                natural disasters, without the benefit of any insurance
                coverage. If we are required to pay for one or more of such
                losses or liabilities, our financial results and financial
                condition may be materially and adversely affected.

        -       Our books and records are maintained and our financial
                statements are presented in Reminbi, which is not a freely
                convertible currency. All foreign exchange transactions
                involving the Reminbi must be transacted by banks and other
                institutions authorised by the People's Bank of China, or
                "PBOC". The PBOC sets the exchange rates used for foreign
                exchange transactions. We receive substantially all of our
                revenues in renminbi. We need to convert a portion of our
                revenues into other currencies to meet certain foreign currency
                obligations such as payment of dividends on our H shares and
                overseas equipment purchases. We do not enter into any currency
                hedging transactions with respect to our foreign currency
                exposure. Any devaluation of the renminbi against the U.S.
                dollar will increase the effective cost of our equipment
                purchased from overseas and have an adverse effect on our
                financial results as reported in U.S. dollars and Hong Kong
                dollars. In addition, the existing foreign exchange limitations
                under PRC law could affect our ability to obtain foreign
                exchange through debt financing, or to obtain foreign exchange
                for capital expenditures or for distribution of dividends on our
                H shares.

        -       As we are established and operate substantially all of our
                businesses in China, any changes in the political and social
                conditions of the PRC or any changes in PRC governmental
                policies or regulation, such as a change in the PRC government's
                economic or monetary policies or in the regulation of the PRC
                railway transportation or other transportation industries, may
                have a material adverse effect on our business and operations
                and our financial results. The economic environment in the PRC
                differs significantly from many North American and Western
                European countries in terms of economic structure, levels of
                development and capital reinvestment, growth rate, government
                involvement, resource allocation, self-sufficiency, rate of
                inflation and balance of payments position. The PRC government's
                economic reform policies since 1978 has resulted in a gradual
                reduction in the role of state economic plans in the allocation
                of resources, pricing and management of such assets, and
                increased emphasis on the utilization of market forces. Although
                the PRC government is expected to continue its reforms, many of
                its economic and monetary policies are still being developed and
                refined. We cannot assure you that future changes in
                governmental policies or regulation will not have a material
                adverse effect on our business, operations or financial results.

        -       Because PRC laws and regulations dealing with business and
                economic matters are relatively new and still evolving, and
                because of the limited volume of published judicial
                interpretations and the non-binding nature of prior court
                decisions, the interpretation and enforcement of these laws and
                regulations involve some uncertainty. In addition, because the
                PRC Company Law is different in certain important aspects from
                company laws in the Hong Kong Special Administrative Region,
                United States and other common law countries and regions and
                because the PRC securities laws are still at an early state of
                development, you may not enjoy shareholder protections to which
                you may be entitled in other jurisdictions.

      See also "Item 4B. Business Overview - Regulatory Overview", " -
Insurance", "Item 5. Operating and Financial Review and Prospects", "Item 7B.
Related Party Transactions", "Item 8.

                                        8

<PAGE>

Financial Information" and "Item 11. Qualitative and Quantitative Disclosures
About Market Risks".

                                        9

<PAGE>

ITEM 4.  INFORMATION ON THE COMPANY

ITEM 4A. HISTORY AND DEVELOPMENT OF THE COMPANY

OVERVIEW

      We were established as a joint stock limited company under the Company Law
of the PRC on March 6, 1996. Our legal name is [COMPANY NAME IN CHINESE] and its
English translation is Guangshen Railway Company Limited. Our registered office
is located at No. 1052 Heping Road, Shenzhen, Guangdong Province, The People's
Republic of China, 518010. Our telephone number is (86-755) 2558-7920 or
2558-8146 and our fax number is (86-755) 2559-1480.

      We are mainly engaged in the railway passenger and freight transportation
business between Guangzhou and Shenzhen and certain long-distance passenger
transportation services. We provide consolidated services relating to railway
facilities and technology. We also engage in other businesses that are ancillary
to our transportation business, such as retail sales of food, beverages and
merchandise aboard our trains and in our stations, advertising, tourism and
property leasing.

      We operate the sole railroad, 147 kilometers long, between Guangzhou, the
capital city of Guangdong Province, and Shenzhen, one of the original special
economic zones of the PRC established to promote economic reforms in China. The
Guangzhou to Shenzhen railroad is an important component of the transportation
infrastructure of southern China, and we are a leading provider of passenger and
freight transportation services on the Guangzhou-Shenzhen route. Our rail line
connects with the rail line from Shenzhen to Hong Kong, and we operate jointly
with Kowloon-Canton Railway Corporation, or the KCR, "through train" passenger
service between Hong Kong and Guangzhou.

      Our rail line is an integral part of the PRC national railroad system,
with links to the other parts of the national railroad system as well as local
railroad systems in southern China, including the Beijing-Guangzhou,
Beijing-Jiujiang, Sanshui-Maoming, Pinghu-Nantou, Pinghu-Yantian, and
Kowloon-Guangzhou lines. Moreover, our rail line has close links with regional
ports. Specifically, it connects with the Guangzhou Port in Guangzhou, and with
the Yantian, Shekou, Chiwan and Mawan ports in Shenzhen. We are well equipped
with various freight facilities and can effectively satisfy customers' needs for
transporting whole and partial carload cargo, containers, bulky and overweight
cargo, dangerous cargo, fresh and live cargo, and oversized cargo. We enjoy
extensive competitive advantages in transporting medium-to-long distance freight
from southern China to other regions within mainland China.

      Our railroad is currently one of the most modern railroads in the PRC. It
is equipped with state-of-the-art equipment and facilities, including high-speed
electric trains. Several aspects of our technical performance have reached or
are approaching international standards. Ours is one of the few rail lines in
the PRC that operate high-speed passenger trains with speeds up to 200
kilometers per hour.

BACKGROUND AND RESTRUCTURING

      The railroad system between Guangzhou and Shenzhen was part of the
original "Canton-

                                       10

<PAGE>

Kowloon" railroad, which began operation in 1911. In 1949, following the
founding of the PRC, the railroad was divided into two sections, with the first
linking Guangzhou and Shenzhen, and the second, across the Hong Kong border and
separately owned, linking Luohu and the Kowloon peninsula in Hong Kong. The
Guangzhou to Shenzhen railroad has been operated since 1949 by a sub-division of
the Guangzhou Railway Administration, a predecessor to our Parent Company.

      In 1979, our predecessor, in conjunction with the KCR, was engaged in the
joint operation of through train passenger services between Guangzhou and Hong
Kong.

      In 1984, to exploit the rapid growth in the Pearl River Delta, the
Guangshen Railway Company, our predecessor, was formed pursuant to the approval
of the State Council as a state-owned enterprise with the status of a
sub-administration under the Guangzhou Railway Administration. At that time, it
had only a single-line railroad. Since then, large capital expenditures have
been expended to upgrade those facilities and services. In 1987, a second line
was completed. In 1991, Guangshen Railway Company began the construction of a
high-speed rail line and purchased high-speed locomotives and passenger coaches
in order to increase the speed of some of its passenger trains to 160 or more
kilometers per hour. This high-speed line was the first of its kind in China.
Commercial operation of the high-speed trains commenced in December 1994.

      We were established as a joint stock limited company on March 6, 1996 as a
result of the restructuring that was carried out to reorganize the railroad
assets and related businesses of the Guangshen Railway Company and certain of
its subsidiaries. As part of the restructuring, 2,904,250,000 "state legal
person shares," generally referred to herein as "domestic shares," par value
RMB1.00 per share, of Guangshen Railway were issued to our Parent Company, a
state-owned enterprise under the Ministry of Railways of the PRC. Under PRC law,
domestic shares may be owned by or transferred to PRC entities or persons only.

      We completed our initial public offering in May 1996. In this offering, we
issued a total of 1,431,300,000 class H ordinary shares, or "H shares," par
value RMB1.00 per share. Our H shares are listed for trading on the Stock
Exchange of Hong Kong Limited and American depositary shares, or ADSs, each
representing 50 H shares, are listed for trading on the New York Stock Exchange.
As of December 31, 2003, approximately 67% of our issued and outstanding common
shares were owned by our Parent Company, and the remaining 33% were owned by
public shareholders. The Parent Company currently owns all of our issued and
outstanding domestic shares. Our public shareholders own only H shares or ADSs,
which may not be purchased or owned by PRC domestic investors.

      Guangzhou Railway (Group) Guangshen Railway Enterprise Development
Company, or GEDC, a state-owned enterprise established in the restructuring
undertaken in connection with our initial public offering, assumed the
operations and assets of the Guangshen Railway Company that were not transferred
to us in the restructuring, such as employee housing, hospitals, schools and
public security, and provides related services to us on a contractual basis
since the 1996 restructuring. Since April 1, 1996, we have been able to set our
own prices for high-speed train services and to charge a premium over average
national prices for our other passenger and freight train services. See "Item
4B. Regulatory Overview - Pricing" for a more detailed description of our
pricing scheme.

                                       11

<PAGE>

SERVICE TERRITORY

      Our rail line traverses the Pearl River Delta, an area that was first to
benefit from the PRC economic reform policies that began in the late 1970s.
Throughout the 1980s and early 1990s, the economy of the Pearl River Delta,
fueled by foreign investments, grew rapidly. It is currently one of the most
affluent and fastest growing areas in China.

      There are 26 stations situated on our rail line, providing passenger and
freight transportation services for cities, towns and ports situated between
Guangzhou and Shenzhen in the Guangzhou-Shenzhen corridor and Hong Kong (which
we service in conjunction with the KCR). In addition to our Hong Kong passenger
through train services in conjunction with the KCR, we also allow Hong
Kong-bound freight trains of KCR to use our Guangzhou-Shenzhen railroad.

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

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

      Southbound. Our line connects at Shenzhen with the rail line owned by the
KCR that runs to Kowloon, Hong Kong. Since April 18, 2004, we have been
operating two new pairs of through trains between Guangzhou and Kowloon.

      Westbound. Our line connects with the Sanshui-Maoming rail line operated
by Sanmao Railway Company, a joint venture railroad of the Ministry of Railways
and the Guangdong provincial government that runs through the western part of
Guangdong Province, connecting with other rail lines that continue on into the
Guangxi Zhuang Autonomous Region, which provides access to southwestern China.
Since April 20, 2004, we have been operating a new "five fixed" (fixed location,
fixed line, fixed time, fixed price and fixed schedule) train service from
Shenzhen to Chengdu.

      Eastbound. Our rail line intersects at Dongguan with the
Dongguan-Meizhou-Shantou rail line operated by Guangmeishan Railway Company, a
company jointly established by the Ministry of Railways and the Guangdong
provincial government. A section of this line forms, along with our Dongguan to
Shenzhen segment, a part of the Beijing-Hong Kong rail line, which terminates in
Kowloon, Hong Kong.

      At Pinghu, our rail line connects with two local port lines: one of them,
Pingnan Railway, principally services three ports located in western Shenzhen --
Shekou, Chiwan and Mawan -- and the other, Yantian Railway, services Yantian
port, an international deepwater port located in eastern Shenzhen. At the
Huangpu and Xiayuan stations in Guangzhou, our line connects with Huangpu port
and Xinsha port. Our rail line also connects with certain industrial districts,
commercial districts and the facilities of many of our customers through spur
lines, which are rail lines running off the main line that are used and
typically financed by a freight customer or a

                                       12

<PAGE>

group of freight customers and maintained by us for a fee. We believe that the
customers connected to these spur lines and customers with goods that must be
shipped through these regional ports are likely to utilize our services on a
long-term basis.

ITEM 4B. BUSINESS OVERVIEW

BUSINESS OPERATIONS

      Our principal businesses are railroad passenger and freight
transportation, which generated 94.0% of our total revenues and 99.6% of our
total operating income in 2003. In 2003, passenger transportation represented
72.7%, and freight transportation represented 21.3% of our total revenues. Our
other businesses, including the sale of food, beverages and merchandise aboard
trains and in stations, accounted for 6.0% of our total revenues.

      In the first half of 2003, our passenger and freight transportation
businesses declined as a result of the outbreak of Severe Acute Respiratory
Syndrome, or "SARS", in some provinces of Chinese mainland and in Hong Kong.
Following the SARS epidemic, the PRC government implemented a series of policies
to promote economic recovery in China. We also carried out various marketing
measures to increase our transportation volume and implemented measures on cost
control, which helped to reduce the negative influence of SARS on our business.
All these measures helped to achieve a recovery in our operating results in the
second half of 2003. For the year ended December 31, 2003, our total revenues
were RMB2,413.4 million, profit attributable to shareholders was RMB511.8
million, and earnings per share were RMB0.12.

      The table below summarizes our railroad transportation revenues and
volumes of traffic in each of the five years ended December 31, 2003:

<TABLE>
<CAPTION>
                                                                         YEAR ENDED DECEMBER 31,
                                                    -----------------------------------------------------------
                                                      1999          2000         2001        2002        2003
                                                    --------      --------     --------    --------    --------
<S>                                                 <C>           <C>          <C>         <C>         <C>
PASSENGER TRANSPORTATION
Total passenger revenues (RMB millions)......       1,114.05      1,237.29     1,426.01    1,846.60    1,754.22
Total passengers (millions)..................          31.64         34.95        38.84       39.78       37.86
Revenues per passenger (RMB)(1)..............          35.21         35.40        36.71       46.42       46.33
Total passenger-kilometers (millions)........        2,804.2       3,051.7      3,257.9     3,453.2     3,295.5
Revenues per passenger-kilometer (RMB)(2)....           0.40          0.41         0.44        0.53        0.53

FREIGHT TRANSPORTATION
Total freight revenues (RMB millions)........         537.97        549.69       567.28      514.04      514.79
Total freight tons (millions)................          27.78         28.73        29.01       27.58       27.58
Revenues per ton (RMB)(3)....................          19.36         19.13        19.55       18.64       18.66
Total ton-kilometers (millions)..............        2,082.1       2,071.6      2,082.5     1,926.0     1,978.9
Revenues per ton-kilometer (RMB)(4)..........           0.26          0.27         0.27        0.27        0.26
</TABLE>

--------------

  (1)  Revenues per passenger is calculated by dividing total passenger revenue
       by total passengers. Management believes that revenues per passenger is a
       useful measure for assessing the revenue levels of our passenger
       transportation business.

  (2)  Revenues per passenger-kilometer is calculated by dividing total
       passenger revenue by total passenger-kilometers. Management believes that
       revenues per passenger is a useful measure for assessing the revenue
       levels of our passenger transportation business.

                                       13

<PAGE>
  (3)  Revenues per tons is calculated by dividing total freight revenue by
       total freight tons. Management believes that revenues per tons is a
       useful measure for assessing the revenue levels of our freight
       transportation business.

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

PASSENGER TRANSPORTATION

      Passenger transportation is our largest business segment, accounting for
72.7% of our total revenues and 77.3% of our railroad transportation revenues in
2003. We operated:

      -     intercity high-speed express trains and regular-speed passenger
            trains between Guangzhou and Shenzhen;

      -     through trains between Hong Kong and Guangzhou; and

      -     two pairs of long-distance passenger trains between Shenzhen and
            Yueyang and between Shenzhen and Beijing, along with other operators
            of domestic long-distance trains that passed-through, originated or
            terminated on our Guangzhou-Shenzhen railroad.

      As of December 31, 2003, we operate 112 pairs of passenger trains per day
(each pair of trains meaning trains making one round-trip between two points) of
which:

      -     63 pairs were high-speed express passenger trains operating between
            Guangzhou and Shenzhen (nine of which are standby);

      -     three pairs were regular-speed passenger trains operating between
            Guangzhou and Shenzhen;

      -     11 pairs were Hong Kong through-trains (including nine Hong Kong
            through-trains, one through-train between Zhaoqing and Kowloon, and
            one through train that operates on alternating days either on the
            Beijing-Kowloon line or the Shanghai-Kowloon line); and

      -     35 pairs were domestic long-distance passenger trains.

      The table below sets out passenger revenues and volumes for our Hong Kong
through trains and domestic trains in each of 2001, 2002 and 2003:

<TABLE>
<CAPTION>
                                              PASSENGER REVENUES          PASSENGER VOLUME        REVENUE PER PASSENGER
                                          -------------------------     ---------------------    ----------------------
                                           2001     2002     2003       2001     2002    2003     2001     2002     2003
                                          -------  -------  -------     ----     ----    ----     ----     ----     ----
                                                (UNAUDITED)                 (UNAUDITED)                (UNAUDITED)
                                               (RMB MILLIONS)               (MILLIONS)                (RMB MILLIONS)
<S>                                       <C>      <C>      <C>         <C>      <C>     <C>     <C>      <C>      <C>
Guangzhou-Shenzhen Trains ..........          (1)    974.1    893.3      (1)     17.3    16.0      (1)     56.2     55.7
Hong Kong through trains............        316.7    333.2    315.2      2.0      2.2     2.0    158.4    150.1    156.4
Long-distance trains ...............          (1)    539.4    545.7      (1)     20.2    19.8      (1)     26.7     27.5
Combined passenger operations.......      1,426.0  1,846.6  1,754.2     38.8     39.8    37.9    36.71     46.4     46.3
</TABLE>

                                       14

<PAGE>
 ------------------
 (1)  Not available. Prior to 2002, due to limitations on data collection,
      available data for the number of passengers on our Guangzhou Shenzhen
      trains did not include the passengers that travelled between the Guangzhou
      Station (which is owned by Yangcheng Railway Company) and stations on the
      Guangzhou Shenzhen route. These passengers were included in the passenger
      volume for long distance trains. The revenues from our Guangzhou-Shenzhen
      trains and long-distance trains in 2001 were RMB1,109.3 million in
      aggregate, while the corresponding combined passenger volume was 36.8
      million persons and the corresponding combined revenue per passenger was
      RMB30.23. In 2002, we refined our data collection techniques and
      classification methods and were able to more accurately track and classify
      passengers traveling on our high-speed trains and regular-speed trains on
      the Guangzhou Shenzhen route. We have been using the new data collection
      and classification method for all periods commencing after December 31,
      2001.

      GUANGZHOU-SHENZHEN TRAINS. In 2003, our passenger transportation services
on the trains between Guangzhou and Shenzhen contributed most to our railroad
passenger transportation revenues and accounted for a substantial portion of our
railroad passenger volume.

      We divide our services on the regular-speed trains and high-speed trains
into different types based on the number of stops made by the train and the
class of seating. Different types of services are priced at different fare
levels.

      The number of passengers travelling on our Guangzhou-Shenzhen trains
decreased by 7.6% from 17.345 million in 2002 to 16.027 million in 2003. The
number of passengers travelling on our high-speed passenger trains between
Guangzhou and Shenzhen decreased by 3.5% from 15.724 million in 2002 to 15.170
million in 2003; while the number of passengers travelling on our regular-speed
passenger trains between Guangzhou and Shenzhen decreased by 47.1% from 1.621
million in 2002 to 0.857 million in 2003. The revenues from our
Guangzhou-Shenzhen trains declined by 8.3% from RMB974.1 million in 2002 to
RMB893.3 million in 2003. The decrease in business volume of our
Guangzhou-Shenzhen trains was mainly due to reduced travelers resulting from the
outbreak of the SARS epidemic, especially during the period from April 2, 2003,
when the World Health Organization issued a travel warning for the Guangdong
Province until the warning was lifted on May 23, 2003. During this period, we
reduced the capacity of a number of our trains and suspended the operation of
several Guangzhou-Shenzhen trains to reduce our operation costs, which also
reduced our passenger transportation revenues during that period.

      THROUGH-TRAINS. We currently operate jointly with the KCR 11 pairs of
high-speed through trains between Hong Kong and Guangzhou, including two new
pairs of through trains between Guangzhou and Kowloon which we have been
operating since April 18, 2004. We provide the trains and personnel for eight
pairs of these train services, which KCR provide for three pairs. We provide
train services beyond Guangzhou to Foshan, Zhaoqing, Beijing and Shanghai in
cooperation with Guangzhou Railway (Group) Passenger Transportation Company,
Beijing Railway Administration and Shanghai Railway Administration. Revenues
from these through trains on the Guangzhou-Hong Kong section are split 81.22% to
us and 18.78% to KCR. In addition, we share costs with the KCR based on track
mileage for the through train services.

      Most of the passengers taking Hong Kong through trains are residents of
Hong Kong, Macau, Taiwan or foreign countries, and most are travelers on
commercial or government business. As a consequence of the market pricing for
the Hong Kong through trains, these trains produce higher per-passenger revenues
than our other passenger trains.

                                       15

<PAGE>

      In 2003, approximately 2.0 million passengers traveled on the Hong Kong
through trains, which represents a decrease of 9.2% from approximately 2.2
million in 2002. The revenue from the operation of the Hong Kong through trains
for 2003 was RMB315.2 million, representing a 5.4% decrease from RMB333.2
million for 2002. Both of these decreases were mainly due to the impact of the
SARS epidemic. In addition, the commencement of 24-hour service at the
Shenzhen-Huanggang checkpoint since January 27, 2003 led to an increase in the
number of passenger coaches travelling between Guangzhou and Hong Kong, which
diverted some passenger flow from our Hong Kong through-trains.

      DOMESTIC LONG-DISTANCE TRAINS. As of December 31, 2003, we operated on a
daily basis 35 pairs of domestic long-distance passenger trains on our rail line
to cities in Guangdong, Hunan, Hubei, Jiangxi, Anhui, Liaoning, Shanxi, Fujian,
Heilongjiang, Jilin, Zhejiang, Hebei, Henan and Shandong Provinces as well as
cities to the north, such as Shanghai, Beijing and Tianjin. In 2003, the number
of passengers travelling on our long-distance trains were 19.8 million,
representing a decrease of 1.9% from 20.212 million in 2002. Revenues from our
long-distance trains slightly increased by 1.2% from RMB539.4 million in 2002 to
RMB545.7 million in 2003. The decrease in passenger volume was mainly due to the
impact of the SARS epidemic. However, the operation of an additional
long-distance train between Shenzhen, and each of Huaihua, Hankou and
Zhangjiajie in May 2003 by other railway companies generated some passenger flow
which offset, to some extent, the decrease of passenger volume caused by SARS.
Revenues from our long-distance trains in 2003 increased slightly when compared
with that of 2002 due to increased revenues from our network facilities
resulting from the operation of these three additional long-distance trains.

      HIGH-SPEED TRAINS. In 1991, we embarked on the construction of a
high-speed rail line, the first of its kind in the PRC. As of December 31, 2003,
we operated on average a total of 63 pairs of inter-city high-speed passenger
trains between Guangzhou and Shenzhen daily. Our high-speed trains are capable
of running at 160 to 200 kilometers per hour, 33% to 67% faster than our
regular-speed trains, which run at 120 kilometers per hour.

      Our fleet of high-speed electric trains consists of one X-2000 high-speed
passenger train, and eight leased, domestically-made "Blue Arrow" high-speed
electric trains known in China as "Xin Shi Su," . The X-2000 train is an
electric tilting train built in Sweden that can travel at speeds of up to 200
kilometers per hour.

      MAJOR STATIONS. The following are the major train stations owned and
operated by us:

      Guangzhou East Station. Our Guangzhou East Station services our train
services between Guangzhou and Shenzhen and between Guangzhou and Hong Kong and
provides a hub for long-distance trains to different locations within China. Our
Guangzhou East Station is connected to Lines 1 and 2 of the Guangzhou municipal
subway. We believe that this connection has boosted and, with the anticipated
operation of Line 3 of the subway system in the near future, will continue to
promote, our passenger transportation business. As of December 31, 2003, the
Guangzhou East Station handled on a daily basis nine Hong Kong through trains,
66 Guangzhou-Shenzhen trains, 13 long-distance passenger trains between the
Guangzhou East Station and Beijing West Station, Shanghai, Jiujiang, Shantou,
Bengbu, Tianjin, Taiyuan, Nanchang, Wuhan, Yingtan, Harbin, Xiangfan, Qingdao,
Changchun and Xiamen, and seven

                                       16

<PAGE>

passenger trains passing through the Guangzhou East Station.

      Dongguan Station. Our intermediate station at Dongguan is the point of
connection between our line and the neighboring Dongguan-Meizhou-Shantou rail
line, and is also the point where our line intersects with the Beijing-Hong Kong
rail line. Dongguan Station, by connecting our rail line to the Beijing-Hong
Kong line, also facilitates passenger service between Hong Kong and cities such
as Shanghai, Beijing, Guangzhou and Zhaoqing. As of December 31, 2003, the
station handled on a daily basis the transfer service for eight pairs of
domestic long-distance passenger trains and 24 Guangzhou-Shenzhen high-speed
passenger trains and three pairs of Guangzhou-Shenzhen regular-speed trains.
Dongguan municipality is an area that has received substantial foreign
investment.

      Shenzhen Station. Our Shenzhen Station is located in the Shenzhen Special
Economic Zone, close to the Luohu Station on the Guangzhou-Kowloon rail line.
When the station is connected to Shenzhen's subway system which is currently
under construction, the station's transportation and distribution capacity will
be fully utilized. We expect that the Shenzhen subway system will be completed
by the end of 2004. In 2002, we introduced China's first computerized ticket
hall in our Shenzhen Station. As of December 31, 2003, our Shenzhen Station
handled on a daily basis 66 pairs of Guangzhou-Shenzhen passenger trains
(including nine backup pairs) and 16 pairs of domestic long-distance passenger
trains between Shenzhen and Beijing, Changsha, Shaoguan, Wuchang, Meizhou,
Shantou, Maoming East, Huangchuan, Zhengzhou, Fuzhou, Hankou and Jinjiang.

FREIGHT TRANSPORTATION

            Revenue from our freight transportation accounted for 21.3% of our
total revenues and 22.7% of our railroad transportation revenues in 2003. Our
principal market for freight is domestic long-haul freight, originating and/or
terminating outside the Guangzhou-Shenzhen corridor.

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

      -     inbound freight, which is primarily freight unloaded at freight
            stations and spur lines connected with ports on our line or in Hong
            Kong;

      -     outbound freight, which is primarily northbound freight loaded at
            our stations and spur lines connected with ports on our line or in
            Hong Kong; and

      -     pass-through freight, which refers to freight that travels on our
            line, but originates and terminates beyond our line.

                                       17

<PAGE>

      Our total tonnage of freight transportation in 2003 was 27.584 million
tonnes, representing an increase of 1 thousand tonnes from 27.583 million tonnes
in 2002. Revenues from freight transportation business were RMB514.8 million,
representing a slight increase of 0.1% from RMB514.0 million in 2002. Our
outbound freight revenues decreased by RMB8.86 million in 2003, mainly due to
the impact of the SARS epidemic. To offset the losses caused by SARS, we
enhanced our marketing efforts freight transportation and offered discounts to
certain major customers and some categories of freight to maintain and attract
freight business. After the SARS epidemic, the economy of the Chinese backland
recovered rapidly and demands for energy and raw material increased
significantly. Increased charges for water transportation and road
transportation also helped the recovery of our railway freight transportation
business. Our inbound freight revenues increased by RMB11.7 million to RMB259.8
million in 2003. All of these factors offset the overall decrease of our
outbound freight business in 2003.

      We serve a broad customer base and ship a wide range of goods in our
freight transport business. Our freight revenues are not dependent upon specific
customers or industries.

      Freight Composition. We transport a broad range of goods, which can
generally be classified into the following categories: construction materials,
energy products, food products, chemicals, manufactured goods, containers and
other goods. Inbound freight is more heavily weighted toward raw materials and
essential production inputs, while outbound freight consists of imported mineral
ores, coal and goods manufactured or processed in our service territory destined
for consumption throughout China and abroad.

      The following table shows the composition of our freight volume by
percentage for the three years ended December 31, 2003 (based on tons
transported).

<TABLE>
<CAPTION>
                                           OUTBOUND FREIGHT                  INBOUND (AND PASS-THROUGH) FREIGHT
                                    -------------------------------          ----------------------------------
                                    2001          2002         2003          2001          2002           2003
                                    ----          ----         ----          ----          ----           ----
                                                  (%)                                       (%)
<S>                                 <C>           <C>          <C>           <C>           <C>            <C>
Construction materials.......        36            33            30            31            39             37
Energy products..............        24            32            43            17            14             14
Food products................         7             6             4            23            21             21
Chemicals....................        10             7             6            10            10              9
Manufactured goods...........         6             7             4             3             5              3
Containers...................         8            12            10             7             7              8
Other goods..................         9             3             3             9             4              8
                                    ---           ---           ---           ---           ---            ---
Total........................       100           100           100           100           100            100
                                    ===           ===           ===           ===           ===            ===
</TABLE>

      Freight Yards, Container Yards and Warehouses. We own freight yards,
container yards and warehouses, most of which are located at our Shenzhen North,
Xiayuan, Huangpu, Zhangmutou, Dongguan, Shipai, Jishan, Pinghu South and
Guangzhou East Stations. Of the freight yards we own and operate either directly
or through our subsidiaries or affiliates, three handled freight exceeding 1.0
million tons each in 2003. Huangpu Station handled approximately 1.931 million
tons, Xiayuan Station handled approximately 5.484 million tons, and Shenzhen
North Station handled approximately 2.275 million tons. In accordance with the
relevant regulations of the Ministry of Railways, we charge our customers for
storing their freight at our freight yards, container yards or warehouses
starting from the third day after the freight is unloaded. The charges for using
freight yards, container yards and warehouses are subject to Guangdong
provincial government regulation. In 2003, revenues from the operation

                                       18

<PAGE>

of our warehouses (including from loading and unloading) and miscellaneous items
amounted to RMB169.6 million, accounting for 32.9% of our freight revenues for
the year.

OTHER BUSINESSES

      We engage in other businesses principally related to our railroad
transportation business, including:

      -     sales of food, beverages, newspapers, magazines and other
            merchandise aboard our trains and in our stations;

      -     services in our stations, including operating restaurants, operating
            a travel agency and a hotel in our Shenzhen Station, providing
            kiosks and advertising boards in our stations for commercial
            advertising and leasing space to independent retailers; and

      -     other businesses, principally railroad-related construction.

       Revenues from our other businesses in 2003 were RMB144.4 million,
representing a decrease of 8.0% from RMB156.9 million in 2002. The main reasons
for such decrease were: (1) a decrease in passenger volume and consumption by
passengers on board our trains and in our stations due to the SARS epidemic; and
(2) a decrease in revenues from leases and advertising due to the refurbishment
of our passenger stations such as the Guangzhou East Station, the Shenzhen
Station and the Dongguan Station.

      The table below sets out the revenues for our other businesses, by
categories of activity, in each of 2000, 2001 and 2002:

<TABLE>
<CAPTION>
                                                                                       PERCENTAGE OF TOTAL
                                                          REVENUES                   OTHER BUSINESSES REVENUES
                                              -------------------------------       ---------------------------
                                              2001         2002        2003         2001        2002       2003
                                              ----         ----        ----         ----        ----      -----
                                                        (UNAUDITED)                           (UNAUDITED)
                                                       (RMB MILLIONS)                             (%)
<S>                                           <C>          <C>         <C>          <C>         <C>       <C>
On-board and station sales.............        52           41           38           32          26         26
Station services.......................        41           44           40           26          28         28
Tourism, advertising and others........        67           72           66           42          46         46
                                              ----         ----        ----         ----        ----      -----
    Total..............................       160          157          144          100         100        100
                                              ====         ====        ====         ====        ====      =====
</TABLE>

SALES

PASSENGER TRANSPORTATION

      Our passenger tickets are currently sold primarily at ticket counters
located in our train stations. Additionally, our tickets are sold in Hong Kong
and in major cities in Guangdong Province through ticket agents, travel agents
and at hotels, at prices corresponding to our pricing plus nominal commissions.
Substantially all of our ticket sales are made in cash.

      On January 1, 2001, the Ministry of Railways implemented a new settlement
method for passenger transportation. This settlement method stipulates that all
revenues from any passenger

                                       19

<PAGE>

train service (including revenues generated from luggage and parcel services)
are considered passenger transportation revenues and belong to the railway
administration that operates that train. The railway administration in turn pays
other railway administrations fees for the use of their rail lines, hauling
services, in-station passenger services, water supply, electricity for electric
locomotives and contact wire use fees, etc. This settlement method did not have
a material impact on our passenger transportation revenues. We are still using
the settlement method for passenger transportation that became effective on
January 1, 2001.

      The implementation of the settlement method did not change the existing
settlement method for transportation revenues from the passenger trains between
Guangzhou and Shenzhen, between Beijing and Hong Kong, between Shanghai and Hong
Kong, between Zhaoqing and Hong Kong and the Hong Kong through trains. However,
it changed the settlement method for our revenues from all long-distance
passenger trains departing from, arriving at or passing through our rail line
other than the Beijing-Hong Kong and Shanghai-Hong Kong trains. Since the
implementation of the settlement method in 2001, the railway administrations
operating these long-distance train services affected by the new settlement
method pay us the following fees: (1) revenues from ticket prices that are
higher than the PRC national railway standards due to our special pricing
standards; and (2) other fees including those for railroad line usage,
in-station passenger service, haulage service, power supply for electric
locomotives, usage fees of contact wires, and water supply.

      Hong Kong through train tickets are sold in Guangdong Province through our
own ticket outlets, as well as through various hotels and travel agents. In Hong
Kong, these tickets are sold exclusively by the KCR. As KCR's sales network for
these tickets is relatively limited, KCR has engaged the China Travel Service
(HK) Ltd., or CTS, as the primary agent for such sales on a non-exclusive basis.
CTS also operates bus services from Hong Kong to Guangzhou. In 2003, we
established an online ticket sales system with KCR for the Hong Kong through
trains.

FREIGHT TRANSPORTATION

      Generally, we deal directly with our customers in collecting payment for
freight service, and typically receive payment prior to, or immediately
following, delivery of service. For inbound freight, we collect from the
receiving party prior to the release of the freight. For outbound freight, we
charge the dispatching party, retain the portion allocated to transportation on
our line and remit the remainder to the other railroad operators on a monthly
basis either directly or through a national settlement procedure. These
collection procedures also apply to freight transported to or from Hong Kong.
Substantially all payments for inbound and outbound freight are settled in cash.

      For pass-through freight, payments are collected at the originating
stations, and allocated portions for the use of our rail line are remitted to us
through the national settlement process. We generally receive such funds within
a month after service is provided.

      Freight customers in the Guangzhou-Shenzhen area deal directly with us or
use shipping agents. In general, freight cars must be booked as part of the
national ordering process which requires the booking to be made approximately
one month in advance. As a practical matter, we have been able to satisfy demand
for outbound freight transportation on shorter notice.

                                       20

<PAGE>

COMPETITION

      We are the sole railroad on the Guangzhou-Shenzhen corridor; therefore, we
do not face any direct competition from other railroads in our service
territory. However, in areas where our rail line connects with lines of other
railway companies, such as in the Guangzhou area, where our rail line connects
with the Beijing-Guangzhou Line, and in the Dongguan area, where our rail line
connects with the Guangzhou-Meizhou-Shantou Line, we face some competition. We
also face competition from providers of a variety of other means of
transportation in both our passenger and freight transportation businesses.

      With respect to passenger transportation, bus services are conveniently
available between Guangzhou and Hong Kong and between Guangzhou and Shenzhen.
Bus fares are lower than the fares for our high-speed passenger train services.
Furthermore, buses can offer added convenience to passengers by departing from
or arriving at locations other than central terminals, such as hotels. However,
train services generally offer greater comfort, better safety and more
reliability. The increase in high-speed rail services has allowed us to compete
more effectively with bus operators in terms of speed, safety and frequency. We
also compete with commercial air and sea hovercraft passenger transportation
services operating between Guangzhou and Hong Kong.

      With respect to freight transportation, we believe that we face
competition in our principal market, namely, long-distance freight
transportation. However, due to the PRC government's prohibition on overloading
trucks and the increase in the price of gas, we believe that long-distance
freight transportation experiences only limited competition from truck
transportation. Most long-distance freight in China is still transported by
rail. Although waterway transportation is competitive to rail in terms of price,
we believe that the multiple handling involved in water transportation involves
greater risks of loss of or damage to goods. Long-distance trucking is limited
by road conditions and the shortage of heavy-duty trucks in China. Moreover, we
believe that goods shipped by truck are usually more susceptible to loss or
damage. However, because the road network between the Pearl River Delta and
neighboring provinces has been substantially upgraded, medium- and
short-distance freight transportation by trucks poses a significant competitive
threat to our freight transportation business.

EQUIPMENT, TRACKS AND MAINTENANCE

      As of the end of 2003, we owned 12 diesel high-speed locomotives, five
high-speed electric locomotives, 18 shunting locomotives, one high-speed
electric passenger train, 84 semi-high-speed passenger coaches, 41 regular-speed
passenger coaches and 112 long-distance express passenger train coaches.

      The freight cars we use are all leased from the Ministry of Railways, to
which we pay uniform rental fees and depreciation fees based on the national
standards set by the Ministry of Railways. The amounts of such usage fees and
depreciation charges we paid to the Ministry of Railways in 2002 and 2003 were
approximately RMB57.3 million and RMB58.9 million, respectively.

                                       21

<PAGE>

      In October 1999, we entered into a lease, which became effective on
September 2000, to lease eight "Blue Arrow" high-speed electric train-sets from
Guangzhou Zhongche Railway Rolling Stock Sales and Service Company Limited, or
Guangzhou Zhongche, to facilitate the development of our "As-Frequent-As-Buses"
Train Project for a term of five years to five and a half years. We paid the
lessor RMB104 million in 2002 and RMB104.2 million in 2003 under the lease. This
lease agreement is due to expire in March 2006. We do not intend to renew this
lease agreement upon expiry. In 2003, we purchased four diesel locomotives,
which cost RMB 20.57 million in the aggregate.

      Our repair and maintenance facility, located near our Guangzhou East
Station, and our Shipai passenger vehicle maintenance facility near Pinghu Nan,
near Shenzhen, provide services for the high-speed passenger coaches and
locomotives we own or lease. This facility currently performs general
maintenance and routine repairs on our equipment. Major repairs and overhauls
are performed by manufacturers or qualified railway administrations or plants.

      We believe that our tracks meet the requirements of our operations. Most
of the rails and ties on our main lines have been installed within the last
seven years, and generally have a useful life of approximately 100 years. In
2000, we increased the attainable speeds on our two high-speed tracks, which
enabled the "Blue Arrow" high-speed electric trains to travel at speeds of up to
210 kilometers per hour. In 2001, we replaced 21 sets of wooden movable center
switches with 21 sets of cement movable center switches and improved the
operation quality of the relevant rail tracks. In 2002, we replaced 27 sets of
wooden movable center switches with 19 sets of cement movable center switches to
improve safety and stability. In 2003, we replaced a whole section of steel rail
amounting to 38 kilometers, 46 sets of wooden moveable center switches with 40
sets of cement moveable center switches, 1042 meters of separate steel bars and
1926 pieces of separate wooden crossties to sustain the safety and stability of
our railway.

SUPPLIERS AND SERVICE PROVIDERS

      We purchase our high-speed coaches and locomotives, as well as most other
railway equipment, directly from China Northern Locomotive & Rolling Stock
Industry (Group) Corporation, China Southern Locomotive & Rolling Stock Industry
(Group) Corporation and China Railway Materials and Supplies Corporation, all of
which are also state-owned enterprises. We may also purchase equipment from
foreign vendors or other domestic suppliers. We are not materially dependent
upon any overseas suppliers.

      We lease from our Parent Company regular-speed locomotives and rolling
stock that are used in our transportation operations. Our Parent Company also
services these locomotives and rolling stock under contracts which stipulate
fees based on a cost plus profit formula. The profit portion is fixed for a
10-year term of the relevant contract at 8% of costs. Costs include all actual
costs related to providing and servicing the locomotives and rolling stock.
Because such costs are affected by inflation, we are subject to inflationary
risks in connection with our payment obligations under these contracts. Our
Parent Company and some of its subsidiaries, such as Yangcheng Railway Company
and Guangmeishan Railway Company, have similar agreements with us to provide
services and assistance with respect to our railroad operations. In addition,
Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company'
provides medical and health care services, public security, education and
housing for our

                                       22

<PAGE>

employees and their families under a contract and in exchange for fee payments.
In 2003, the total amount of these payments we made to our Parent Company and
its subsidiaries accounted for 6.8% of our railroad business operating costs for
the year. See " Item 7B. Related Party Transactions."

      Under the Listing Rules of the Stock Exchange of Hong Kong, transactions
between us and our connected persons constitute connected transactions and such
transactions are normally subject to reporting, announcement and/or
shareholders' approval unless otherwise waived by the Stock Exchange of Hong
Kong. Under certain waivers granted by the Stock Exchange of Hong Kong in
connection with our original listing of H shares in May 1996, our independent
non-executive directors review and certify annually that these contracts are
entered into on normal commercial terms that are fair and reasonable to us. The
above transactions are exempted from the strict compliance of the requirements
under the Listing Rules in relation to connected transactions, subject to
certain conditions set forth in the waiver letter issued by the Stock Exchange
of Hong Kong.

      The electricity we use, including electricity used for our lines, is
supplied through various entities under the jurisdiction of the Guangdong
provincial power bureau on normal commercial terms. In 2002 and 2003, we paid
approximately RMB57.2 million and RMB89.9 million, respectively, in electricity
charges.

      Our five largest customers accounted for less than 30% of our revenue and
our five largest suppliers accounted for less than 30% of our purchases in 2003.

REGULATORY OVERVIEW

      As a joint stock limited company with publicly traded shares, we are
subject to regulation by the PRC securities regulatory authorities with respect
to our compliance with PRC securities laws and regulations. We are also subject
to industry regulation by the Ministry of Railways within the overall framework
of the PRC national railway system.

NATIONAL RAILWAY SYSTEM

      Railroads in the PRC fall largely into two categories: national railroads
and local railroads. The national railway system comprises over 70% of all rail
lines, including all trunk lines. Local railroads consist of regional lines
usually within provincial or municipal boundaries that have been constructed
under the sponsorship of local governments or local enterprises to serve local
needs. The national railway system operates as a nationwide integrated system
under the supervision and management of the Ministry of Railways. Although local
railroads are generally administered by local governments, the Ministry of
Railways provides local railroads with guidance, coordination, supervision and
assistance with respect to industry matters. The Ministry of Railways'
responsibilities include the centralized coordination of train routing and
scheduling nationwide, planning of freight shipments and freight car
allocations, overseeing equipment standardization and maintenance requirements,
and financial oversight and revenue clearing throughout the national railway
system.

      Currently, the Ministry of Railways divides the national railway system
into 14 regions, each overseen and operated by a separate railway administration
("group companies"). Twelve

                                       23

<PAGE>

of these 14 administrations are further subdivided on a geographical basis into
44 railway sub-administrations ("general companies"). General companies are
responsible for the coordination and supervision of operations carried out by
stations and other operational units. Each of the group companies is responsible
for coordinating and supervising the activities of its subsidiary general
companies.

TRANSPORT OPERATIONS

      The transport operations of the PRC national railway system are organized
under the centralized control and management of the Ministry of Railways. In
order to promote efficient utilization of the railroad network nationwide, the
Ministry of Railways directly manages and coordinates traffic flow on national
trunk lines and through any bottlenecks in the system. Each railway
sub-administration is required to submit to its governing railway
administration, on a monthly basis, information regarding its requirements for
freight cars and the number of its trains that will pass through particular
bottlenecks in the coming month. The railway administration then consolidates
and coordinates this information and submits it to the Ministry of Railways,
also on a monthly basis. Based on route capacity, available equipment and
national priorities, the Ministry of Railways allocates to the 14 railway
administrations authority to make routings on trunk lines and through
bottlenecks, allocates numbers and types of freight cars to the administrations
and specifies requirements to dispatch empty freight cars to designated
locations in order to facilitate freight car circulation within the national
railway system. Within the allocations set by the Ministry of Railways, each
railway administration manages and coordinates traffic within its own
jurisdiction.

      Historically, our passenger and freight operations that involved
long-distance routing through national bottlenecks, such as the routing of
freight trains to Shanghai, were conducted, in general, pursuant to quota
allocations from our Parent Company based on the quota allocations our Parent
Company received from the Ministry of Railways. Our passenger and freight
operations solely within the geographical territory of our Parent Company were
subject to overall planning and scheduling at our Parent Company level.

      Since March 1996, the Ministry of Railways and our Parent Company have
accorded us substantially greater latitude in our transportation operations. The
Parent Company has granted us sufficient autonomy over passenger services on our
own line, including autonomy over scheduling, frequency and train car mix.
Taking advantage of this authority, we have implemented a strategy of scheduling
more high-speed trains, running shorter passenger trains more frequently, and
adjusting the train schedules on our line to meet consumer demand. As of
December 31, 2003, the total number of intercity express trains running daily
between Guangzhou and Shenzhen increased from 54 pairs in 2002 to 63, while the
total number of regular speed passenger trains was reduced from four pairs in
2002 to three pairs. We currently have 35 pairs of long-distance trains and 11
pairs of through trains.

      Where our service runs beyond our own line, clearance by and coordination
with our Parent Company is necessary. To the extent that we operate
long-distance services beyond our Parent Company's jurisdiction, they are
subject to coordination and clearance by the Ministry of Railways. In addition,
in order to enable our Parent Company and the Ministry of Railways to allocate
freight cars and control traffic going through bottlenecks, we are required to
provide our

                                       24

<PAGE>

Parent Company with prior written notice, on a monthly basis, of the number and
types of freight cars we will require, as well as the number of our freight
trains that will go through particular bottlenecks. Furthermore, we must still
carry out special shipping tasks, such as emergency aid and military and
diplomatic transport, as directed by the Ministry of Railways or our Parent
Company. Revenues from military and diplomatic transport generally account for
less than 1% of our total transportation revenues. Emergency aid transport is
required only during periods of rare natural disasters declared by the PRC
government, and is provided free of charge.

PRICING

      The State Council, by taking into account national policy considerations,
prescribes from time to time certain baseline pricing standards for the entire
national railway system with respect to freight and passenger transportation.
Because railroad transportation is basic to the national economy and people's
daily life, the national pricing standards have historically been set below
market levels. The Ministry of Railways has authority over setting
transportation-related fees and charges. Under the special authorization granted
to us by the Ministry of Railways and the State Council, we charge passenger
fares and freight tariffs that, in most instances, exceed these national
standards by 50%.

      In 2003, with approval from our Parent Company and the Ministry of
Railways, we made various adjustments to our passenger and freight
transportation pricing formula, including:

      1.    slight upward adjustments to our passenger ticket prices for
            passengers traveling on our long-distance trains during the Spring
            Festival holiday in 2003;

      2.    slight upward adjustments to passenger ticket prices for passengers
            traveling between Guangzhou and Shenzhen by our high-speed train
            during the Spring Festival and the National Day holidays in 2003;

      3.    upward adjustments from RMB 60 to RMB 65 to our hard seat passenger
            ticket price for passengers traveling between Guangzhou and Shenzhen
            by our high-speed train since October 8, 2003; and

      4.    price discounts to our freight customers.

      Passenger Transportation. We set prices for Hong Kong through trains in
consultation with KCR, independent of PRC national pricing standards. For
domestic passenger trains that run within mainland China, we have the discretion
to set our high-speed train fares, the discretion to set and adjust our
regular-speed train fares within a specified range which is approximately 125%
above the PRC national pricing standard.

      Freight Transportation. Freight transportation prices are set based on the
type of commodity, its weight and the distance shipped. Generally, higher value
products carry higher transportation tariffs. Prices for freight shipments on a
per ton-kilometer basis usually decreases with an increase in the distance
shipped.

      Under the current freight transportation tariff regime, we are permitted
to charge all inbound or outbound freight at a fluctuated price ranging from 50%
to 150% of national levels while we charge all pass through freight tariffs of
national levels. In 2003, in order to attract more freight resources, we
continued to offer price discounts for freight transportation of steel, coal,
corn, beverage and container as in 2002. In addition, we extended our price

                                       25

<PAGE>

discounts to other types of freight, such as rice and plastic.

ENVIRONMENTAL PROTECTION

      We believe that we are in material compliance with all applicable PRC
national and local environmental protection laws and regulations. We have not
been fined or cited for any activities that have caused environmental damages.
We have six wastewater treatment facilities used for purposes of treating
wastewater generated from cleaning of special cargo freight cars, locomotives,
coaches and from residential use. We pay regular fees to local authorities for
the discharge of waste substances. In 2003, our environmental protection-related
expenses were approximately RMB855,000.

INSURANCE

      We do not currently maintain any insurance coverage with third party
carriers against third party liabilities. Pursuant to applicable PRC regulations
and the practice of national railway companies, we are liable for (i) personal
injury to or death our passengers in the case of accidents for up to RMB20,000
per passenger and (ii) personal injury to or death of passengers for fault for
up to RMB60,000 per passenger (including RMB20,000 for accidents and RMB40,000
for liability). With respect to loss of or damage to baggage, parcels and
freight, our customers may elect to purchase insurance administered by the
Ministry of Railways for up to their declared value. Passengers who do not elect
to purchase insurance in respect of their baggage and/or parcels may
nevertheless recover up to RMB30 for each 10 kilograms of damaged baggage and/or
parcels. Similarly, freight transport customers who elect not to purchase
insurance may recover up to RMB100 for each ton of damaged freight or up to
RMB2,000 for each ton of damaged freight if insured by unit and by weight.

      Consistent with what we believe to be the customary practice among railway
operators in the PRC, we do not maintain insurance coverage for our property and
facilities (other than for our automobiles), for business interruption or for
environmental damage arising from accidents on our property or relating to our
operations. As a result, in the event of an accident or other event causing
loss, destruction or damage to our property or facilities, causing interruption
to our normal operations or causing liability for environmental damage or
clean-up, we will be reliant on its own resources to cover losses and damages.

      With respect to our employees, we do not maintain medical insurance or
disability insurance with any third party insurance carriers. We have adopted
internal rules to provide for medical and disability benefits to our employees,
consistent with Ministry of Railways regulations and practices and relevant
regulations of the Shenzhen municipality. We have entered into service
agreements with the Parent Company and Guangzhou Railway (Group) Guangshen
Railway Enterprise Development Company, or "GEDC," a wholly-owned subsidiary of
our Parent Company, pursuant to which the health care facilities owned by these
entities provide medical services to the our employees and their families.

ITEM 4C.  ORGANIZATIONAL STRUCTURE

      The following table lists the significant subsidiaries of Guangshen
Railway Company Limited as of December 31, 2003:

                                       26

<PAGE>

<TABLE>
<CAPTION>
                                                                       COUNTRY OF          PERCENTAGE OF INTEREST
                              NAME                                    INCORPORATION       HELD BY GUANGSHEN RAILWAY
--------------------------------------------------------------        -------------       -------------------------
<S>                                                                   <C>                 <C>
DIRECTLY HELD BY THE COMPANY

Guangzhou East Station Dongqun Trade and Commerce Service                 PRC                       100%
   Company
Shenzhen Fu Yuan Enterprise Development Company                           PRC                       100%
Shenzhen Guangshen Railway Civil Engineering Company                      PRC                       100%
Shenzhen Guangshen Railway Travel Service Ltd.                            PRC                       100%
Shenzhen Jian Kai Trade Company                                           PRC                       100%
Shenzhen Xiang Qun Enterprise Company                                     PRC                       100%
Shenzhen Jing Ming Industrial & Commercial Company Limited                PRC                       100%
Shenzhen Railway Station Travel Service Company(i)                        PRC                        75%
Shenzhen Longgang Pinghu Qun Yi Railway Store Loading and                 PRC                        55%
   Unloading Company
Dongguan Changsheng Enterprise Company                                    PRC                        51%
Shenzhen Guangshen Railway Electric Section Service Limited               PRC                       100%
Shenzhen Railway Station Passenger Services Company Limited               PRC                       100%

INDIRECTLY HELD BY THE COMPANY

Shenzhen Nantie Construction Supervision Company                          PRC                       100%
Shenzhen Guangshen Railway Economic and Trade Enterprise                  PRC                       100%
   Company
Shenzhen Railway Property Management Company Limited                      PRC                       100%
Shenzhen North Station Auto Repair Plant                                  PRC                       100%
Shenzhen North Station Loading and Unloading Transportation               PRC                       100%
   Company
Shenzhen North Station Railway Industry Technology Development            PRC                       100%
   Company
Shenzhen Yuezheng Enterprise Company Limited                              PRC                       100%
Shenzhen Road Multi-modal Transportation Company Limited                  PRC                        60%
</TABLE>

--------------------
(i)   Sino-foreign equity or co-operative joint ventures.

ITEM 4D.  PROPERTY, PLANT AND EQUIPMENT

      We occupy a total area of approximately 11.2 million square meters.

      We own all of the buildings and facilities on our premises in Guangdong
Province. We have freely transferable land use rights for terms ranging from
36.5 to 50 years, terminating between 2031 and 2045, in respect of the land upon
which our buildings, facilities and rail line are located. Pursuant to relevant
PRC regulations currently in effect, these land use rights are renewable at the
end of their terms upon execution of relevant documentation and payment of
applicable fees.

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

                                       27

<PAGE>

projects if we believe these opportunities are economically viable. Any
development projects will require approval from PRC government authorities
responsible for regulating land development.

      We have 26 train stations, of which the Guangzhou East Station is the
largest, occupying an area of 402,400 square meters.

      For information about our equipment, see "Item 4B. Business Overview --
Equipment and Track Maintenance."

      In 2001, we invested RMB548.8 million in capital expenditures, mainly for
infrastructure projects such as speed enhancing projects, the construction of
ancillary projects relating to our "As-Frequent-As-Buses" Train Project, adding
98 new coaches by way of acquisition and exchange of used coaches, the
construction and rebuilding of our Guangzhou East Station, Shenzhen West Station
and their ancillary facilities, and the construction of the immigration and
customs inspection building at our Dongguan Station and crossing stations at
Huangcun, Tangmei, Nanshe and Lincun. Our 2001 capital expenditure program was
financed by cash flows from operations.

      In 2002, our actual capital expenditures were RMB422.4 million, mainly for
construction projects and purchases of equipment and machinery, such as
acquiring the land for the construction of the technical support and maintenance
depot in northern Shenzhen, replacing 19 sections of wooden moveable center
switches, constructing the last portion of the electrification project of the
Guangzhou-Shenzhen third line, constructing the Western Ticket Hall at our
Shenzhen Station and the immigration and customs inspection building at our
Dongguan Station, completing the construction of the Ninth National Games
Stadium Station and the crossing stations at Tangmei, Nanshe and Lincun
Villages, expanding and implementing technological improvements at our Guangzhou
East Station, purchasing twelve "25k" coaches, and paying the down-payment for
four diesel locomotives.

      Our capital expenditures in 2003 was approximately RMB415 million. Our
capital expansion plan was partly delayed by a delay in land acquisition and in
relocating affected residents in the area. Our 2003 capital expenditures
consisted primarily of:

      1.    upgrading our Guangzhou-Shenzhen Line,

      2.    constructing a building in Guangzhou and ancillary facilities at our
            Shenzhen Station;

      3.    purchasing four DF12 diesel locomotives;

      4.    upgrading and renovating our Guangzhou East Station, Pinghu Station
            and the old Dongguan Station;

      5.    implementing a new ticket booking system, the TMIS information
            system, a new office information system; and

      6.    other small-scale construction and acquisition projects.

                                       28

<PAGE>

      Our planned capital expenditures for 2004 is approximately RMB 1,550
million and consist primarily of the following projects:

      1.    an expansion of our Guangzhou-Shenzhen Line (Guangzhou to Pinghu
            link);

      2.    building a centralized and computerized auxiliary schedule system to
            enable the automatic scheduling of our railway transportation
            services;

      3.    building a Technical Support and Maintenance Deport for Passenger
            Vehicles at Shenzhen North Station and a passenger station, station
            houses and ancillary facilities for long-distance passenger travel
            to Buji;

      4.    building a connecting line for our Pinghu-Shenzhen passenger trains;

      5.    upgrading one of our Guangzhou-Shenzhen regular-speed train lines;

      6.    purchasing additional locomotives;

      7.    building station rooms and ancillary facilities and upgrading
            certain facilities at our Shenzhen Station;

      8.    partial renovation at our Guangzhou East Station; and

      9.    building ancillary facilities at our Guangzhou East Station.

                                       29

<PAGE>

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

      This discussion and analysis should be read in conjunction with our
audited consolidated financial statements contained elsewhere in this annual
report. Our audited consolidated financial statements are prepared in accordance
with International Financial Reporting Standards, which differ in certain
material respects from United States Generally Accepted Accounting Principles.
For a discussion of the differences that affect Guangshen Railway, see note 30
to our audited consolidated financial statements.

OVERVIEW

      Our principal businesses are railroad passenger and freight transportation
between Guangzhou and Shenzhen and certain long-distance passenger
transportation services. We also operate the Hong Kong through trains under a
cooperative arrangement with the KCR in Hong Kong. Our key strategic focus in
recent years has been to develop and improve high-speed passenger train service
in the Guangzhou-Shenzhen corridor. In addition to our core railroad
transportation business, we also engage in other businesses that are
complimentary with our overall business strategy, including on-board and station
sales, station dining services, as well as advertising and tourism.

      During the first half of 2003, all of our businesses were affected by the
outbreak of Severe Acute Respiratory Syndrome, or "SARS", in some provinces of
Chinese mainland and in Hong Kong area to a relatively large extent. Our total
revenues during the first half of 2003 decreased by 14.3% when compared to that
of the same period of 2002.

      Following the effective control of the SARS epidemic, the PRC government
implemented a series of policies to promote economic recovery, and we also
carried out various marketing measures to increase our transportation volume,
which helped to reduce the negative influence brought about by SARS. In
addition, the economic interaction between Guangdong Province and Hong Kong
increased due to the signing of Mainland and Hong Kong Closer Economic
Partnership Arrangement ("CEPA") in June 2003, which provided a favorable
environment for us to increase our transportation volume during the second half
of the year to compensate for our decreased business during the first half of
the year.

      On May 16, 2003, Shenzhen Local Taxation Bureau issued Notice Concerning
Certain Taxation Measures for Promoting the Prevention and Cure of Atypical
Pneumonia of Our Municipality (the "No. 406 Notice"). According to the No. 406
Notice, we enjoyed the following preferential taxation policies: (i) during the
period from May 1, 2003 to September 30, 2003, the business tax levied on the
revenues generated from our passenger transportation business, city construction
tax and education sub-charge was reduced by half; and (ii) upon our application,
the real estate tax for our real estate used in the operation of our
transportation business was reduced by half during the period from April 1, 2003
to September 30, 2003.

      On December 22, 2003,Shenzhen Local Taxation Bureau issued Notice
Concerning Taxation Policies for Promoting the Prevention and Cure of Atypical
Pneumonia Forwarded by Shenzhen Local Taxation Bureau to Bureau of Finance and
State Administration of Taxation (the "No. 1103 Notice"). According to the No.
1103 Notice, we were exempted from paying the

                                       30

<PAGE>

business tax levied on the revenues generated from our passenger transportation
business, city construction tax and education sub-charge for the period from May
1, 2003 to September 30, 2003. 50% of each of the business tax on the revenues
generated from our passenger transportation business, city construction tax and
education sub-charge levied according to the No. 406 Notice were refunded.

      In 2003, in order to improve our operational efficiency and budget
management, we implemented the Measures for Assessment and Targets of Operating
Responsibilities of the Company. We adjusted the structure of our core
transportation businesses, and made efforts to improve the management efficiency
of our department. We also established a new management and regulatory system
and increased the capacity of our day-to-day management. In addition, we
established a Disclosure Committee and formulated the Measures and Procedures
for the Company's Disclosure Controls for better control of information
disclosure.

      In 2003, our total revenues were RMB2,413.4 million, representing a
decrease of 4.1% from RMB2,517.5 million in 2002. In 2003, our revenues from
passenger transportation service, freight transportation service and other
businesses accounted for approximately 72.7%, 21.3% and 6.0% of our total
revenues in 2003, respectively. In 2003, our profit attributable to shareholders
was RMB511.8 million, representing a decrease of 8.1% from RMB557.1 million in
2002.

      In 2002 and 2003, we acquired a 0.69% equity interest in China Railway
Communication Company Limited, or "CRCC" by injecting certain communication and
signaling systems and construction-in-progress with a total carrying value of
approximately RMB121.9 million. CRCC has confirmed in writing that we are
entitled to 0.69% of the equity interest in CRCC as of December 31, 2003. The
relevant legal registration procedures are still in progress and have not been
completed as of the date of this annual report.

      In 2003, we replaced 46 sets of wooden moveable center switches with 40
sets of cement moveable center switches to improve the safety and stability of
our passenger trains and constructed the Guangzhou East Regional Services and
Electrical Affairs Comprehensive Building. In addition, we also established the
ticket booking system, TIMIS information system and office information system.

      Railroad business revenues accounted for 92.5%, 93.8% and 94.0% of our
total revenues in 2001, 2002 and 2003, respectively. The following table sets
forth as a percentage of railroad business revenues the principal operating
expenses associated with our railroad businesses for 2001, 2002 and 2003:

<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                                   ------------------------------------
                                                                    2001            2002          2003
                                                                   ------          ------        ------
<S>                                                                <C>             <C>           <C>
Railroad businesses revenues (RMB millions)................         1,993           2,361         2,269
Labor and benefits.........................................            16%             16%           15%
Equipment leases and services..............................            13%             18%           19%
Materials and supplies.....................................             7%              8%           10%
Repair costs, excluding materials and supplies.............             5%              4%            4%
Depreciation (and amortization of leasehold land payments).            17%             16%           13%
</TABLE>

                                       31
<PAGE>

<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                                        --------------------------
                                                                          2001     2002     2003
                                                                          ----     ----     ----
<S>                                                                       <C>      <C>      <C>
General and administrative expenses...................................     8%       5%       6%
Fee for social services...............................................     3%       2%       3%
Others................................................................     4%       4%       5%
Operating ratio(1)....................................................    73%      73%      75%
Railroad businesses operating margin..................................    27%      27%      25%
</TABLE>

----------------
(1)   Total railroad operating expenses as a percentage of railroad businesses
      revenues.

ITEM 5A. OPERATING RESULTS

REVENUES

      In 2003, our total revenues were RMB2,413.4 million, representing a
decrease of 4.1% from RMB2,517.5 million in 2002. Revenues from our passenger
transportation service, our freight transportation service and our other
businesses accounted for 72.7%, 21.3% and 6.0% of our total revenues in 2003
respectively. Revenues from our passenger transportation service and our freight
transportation service accounted for 77.3% and 22.7%, respectively, of our
revenues from our railroad transportation businesses in 2003.

      Passenger transportation service. Due to the impact from the SARS
epidemic, our revenues from passenger transportation declined during the first
half of 2003. We operated more trains and increased the frequency of stopping at
intermediary stations to attract more passengers following the end of the SARS
epidemic. We also worked on the integrated refurbishment of our passenger
stations, such as Guangzhou East Station, Shenzhen Station and Dongguan Station,
to improve our public image. Furthermore, we expanded our ticket network by
opening more ticket offices at Guangzhou Station and other stations along the
Guangzhou-Shenzhen route. We also made slight adjustments to our fares during
peak periods and took other steps to improve our service quality and enhance our
market efforts. In 2003, the total number of our passengers was 37.9 million,
representing a decrease of 4.8% when compared to that of 2002; our passenger
transportation revenues were RMB1,754.2 million, representing a decrease of 5.0%
from that of 2002.

      The following table sets forth our revenues from passenger transportation
and the number of our passengers for the three years ended December 31, 2003:

<TABLE>
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,            CHANGE IN
                                                                      -----------------------------------------    2003 FROM
                                                                         2001             2002           2003         2002
                                                                         ----             ----           ----         ----
<S>                                                                    <C>             <C>            <C>          <C>
Revenue from passenger
       transportation (RMB thousands)................................. 1,426,010       1,846,599      1,754,223       (5.0%)
Total passengers (thousands)..........................................    38,842          39,776         37,861       (4.8%)
Revenue per passenger (RMB)...........................................     36.71           46.42          46.33       (0.2%)
Total passenger-kilometers (millions).................................  3,257.90        3,453.20       3,295.50       (4.6%)
Revenue per passenger-kilometer (RMB).................................      0.44            0.53           0.53          -
</TABLE>

      Freight transportation. During 2003, despite the impact from SARS on our
freight transportation business and competition from other means of
transportation such as highway and

                                       32
<PAGE>

water transportation, we transported a total of 27.6 million tonnes of freight,
representing an increase of 1,000 tonnes when compared to that of 2002. We
believe that this increase resulted from our marketing efforts in our freight
transportation business and our relationships with ports, mines and other
corporates, which enabled us to maintain existing large volume freight and
capture new freight transportation business. Our freight transportation revenues
in 2003 were RMB514.8 million, representing a slight increase of 0.1% when
compared to that of 2002.

      -     Our outbound freight revenues decreased by 9.4% from RMB94.26
            million in 2002 to RMB85.4 million in 2003. This decrease in
            outbound freight transportation revenue was mainly due to the
            influence of SARS, which led to a decrease in the supply of
            some categories of goods (such as aero-fuel etc.) that accounted for
            large proportions of our outbound freight. Improvements in the road
            and water transportation networks and the increasing number of
            Chinese ports opening to countries outside China also reduced the
            amount of freight transported by rail. Following the end of the SARS
            epidemic, we enhanced marketing efforts on our freight
            transportation business and offered discounts to certain major
            customers and some categories of freight to maintain existing and
            attract new freight business. Following the end of the SARS
            epidemic, the Chinese economy recovered rapidly and demands for
            energy and raw material increased significantly. Increased charges
            for water and road transportation also contributed partly to a
            recovery in railway freight transportation business. All of these
            factors reduced the overall decrease of our outbound freight
            business in 2003.

      -     Our inbound and pass-through freight revenues increased by 4.7% from
            RMB248.1 million in 2002 to RMB259.8 million in 2003. This increase
            was mainly due to the growth in demand for railway transportation
            resulting from the growth of the PRC economy and increased charges
            for road and water transportation, which offset of the adverse
            influence of SARS in 2003. Furthermore, the completion of the
            construction of the second railway track between Beijing and
            Jiujiang led to a resumption of the inbound and pass-through freight
            previously interrupted by the construction.

      -     Our revenues from storage, loading and unloading and other
            miscellaneous freight services decreased by 1.2% from RMB171.7
            million in 2002 to RMB169.6 million in 2003. This decrease was
            mainly due to a decrease in outbound freight, the discounts that we
            offered to certain customers and for some categories of freight to
            enhance the competitiveness of our freight transportation services,
            and reduced charges for our storage, loading and unloading services.

            The following table sets forth our revenues from freight
transportation and the volumes of commodities we shipped for the three years
ended December 31, 2003:

<TABLE>
<CAPTION>

                                                                                         YEAR ENDED DECEMBER 31,    CHANGE IN
                                                                                       --------------------------   2003 FROM
                                                                                      2001       2002        2003      2002
                                                                                      ----       ----        ----      ----
<S>                                                                                  <C>        <C>         <C>     <C>
Revenue from freight transportation
      (RMB thousands)...........................................................     567,276    514,036     514,794     0.1%
Total freight tons (thousands of tons)..........................................      29,012     27,583      27,584     0.0%
</TABLE>

                                       33
<PAGE>

<TABLE>
<CAPTION>

                                                                                         YEAR ENDED DECEMBER 31,     CHANGE IN
                                                                                       --------------------------    2003 FROM
                                                                                        2001      2002        2003      2002
                                                                                        ----      ----        ----      ----
<S>                                                                                  <C>        <C>        <C>       <C>
Revenue per ton (RMB)...........................................................       19.55      18.64       18.66     0.1%
Total ton-kilometers (millions).................................................     2,082.5    1,926.0    1,978.90     2.7%
Revenue per ton-kilometer (RMB).................................................        0.27       0.27        0.26    (3.7%)
</TABLE>

      Other Businesses. Our other businesses mainly consist of sales of goods
and food, advertising and tourism services on board our trains and in our
stations. Our revenues from other businesses in 2003 were RMB144.4 million,
representing a decrease of 8.0% from RMB156.9 million in 2002. This decrease was
mainly due to a decrease in our passenger volume and in consumption by
passengers on board our trains and in our stations due to the SARS epidemic. In
addition, revenues from our leases and advertising decreased due to the
refurbishment of our passenger stations such as Guangzhou East Station, Shenzhen
Station and Dongguan Station.

      The table below sets forth a breakdown of our revenues from the different
categories of our other businesses for the three years ended December 31, 2003:

<TABLE>
<CAPTION>
                                                                                                  YEAR  ENDED DECEMBER 31,
                                                                                       -------------------------------------------
                                                                                         2001             2002            2003
                                                                                         ----             ----            ----
                                                                                                    (RMB THOUSANDS)
<S>                                                                                    <C>              <C>             <C>
On-board and station sales......................................................        51,627           40,977          38,156
Station services................................................................        41,287           43,913          40,003
Tourism, advertising and others.................................................        67,392           72,003          66,211
                                                                                       -------          -------         -------
     Total......................................................................       160,306          156,893         144,370
                                                                                       =======          =======         =======
</TABLE>

      Operating Expenses. In 2003, our total operating expenses were RMB1,850.7
million, representing a decrease of 2.3% from RMB1,895.0 million in 2002.

      Railway Operating Expenses. Our total railway operating expenses decreased
by 1.6% from RMB1,735.3 million in 2002 to RMB1,708.3 million in 2003, as
follows:

      -     Labor and benefits. In 2003, our labor and benefits expenses
            amounted to RMB347.6 million, representing a decrease of 7.0% from
            RMB373.8 million in 2002. This decrease in our labor and benefits
            expenses was mainly due to a decrease in the bonuses we pay based on
            our operating results. The decrease in such bonuses also led to a
            decrease in the overall costs of our welfare benefits.

      -     Materials and supplies. Our materials and supplies expenses consist
            mainly of fuel, water and electricity expenses. In 2003, our
            material and supplies expenses amounted to RMB217.0 million,
            representing an increase of 13.0% from RMB192.1 million in 2002.
            This increase was mainly due to an increase in the prices of diesel
            oil and other fuels used by locomotives, which was caused by a rise
            in the prices of petroleum products. Our consumption of water and
            electricity also increased significantly because of the additional
            ventilation systems and disinfection equipments we installed in our
            stations and on board our trains and an increase in the frequency of
            the cleaning and disinfecting of public areas during the SARS
            period. In addition, the operation of the additional Hong Kong
            through-

                                       34
<PAGE>

            trains and the high-speed passenger trains between Guangzhou and
            Shenzhen also increased our consumption of materials, water and
            electricity.

      -     Depreciation. In 2003, depreciation expenses relating to our fixed
            assets were RMB290.0 million, representing a decrease of 13.6% from
            RMB335.5 million in 2002. This decrease was mainly due to an
            extension of the estimated useful life of a portion of our fixed
            assets. We re-estimated the useful life and the depreciation rate of
            part of its fixed assets in 2003 based on the experience and
            maintenance program established by our management and engineering
            personnel, which decreased depreciation expenses relating to our
            fixed assets in 2003. See note 13 to our audited financial
            statements included elsewhere in this annual report.

      -     Repair. In 2003, our repair expenses were RMB89.6 million,
            representing a decrease of 12.5% from RMB102.4 million in 2002. This
            decrease was mainly due to a decrease in the repair expenses
            relating to our buildings in 2003. We also undertook the repair work
            of some locomotives and vehicles formerly outsourced to other
            factories. Completion of the improvement work at passenger stations
            along the Guangzhou Shenzhen route in 2002 also contributed to a
            decrease in our related expenses in 2003.

      -     Equipment leases and services. Our expenses on equipment leases and
            services mainly consist of railway line usage fees, train hauling
            fees and train leasing fees paid to other railway administrations.
            In 2003, our expenses on equipment leases and services were RMB437.7
            million, representing an increase of 0.9% from RMB433.9 million in
            2002. This increase was mainly due to the operation of additional
            Hong Kong through-trains and the high-speed passenger trains between
            Guangzhou and Shenzhen in 2003. We also leased more trucks from the
            MOR in 2003, resulting in an increase in the leasing fees we paid to
            the MOR.

      -     Social services. These fees relate to services provided to our
            employees, including health care and education and to services
            relating to passenger safety and security. In 2003, our fees for
            social services were RMB62.6 million, representing an increase of
            9.0% from RMB57.4 million in 2002. This increase was mainly due to
            the additional medical and sterilization services we implemented
            during the SARS epidemic.

      -     General and administrative. Our general and administrative expenses
            were RMB134.7 million in 2003, representing an increase of 8.8% from
            RMB123.8 million in 2002. This increase was mainly due to a growth
            in payment for pensions. The pensions were calculated based on the
            aggregate amount of our employees' salaries for the previous year.
            As the aggregate amount of our employees' salaries in 2002 was
            higher than those in 2001, our expenses for pensions in 2003
            increased.

      -     Other expenses. In 2003, our other expenses amounted to RMB113.4
            million, representing an increase of 11.9% from RMB101.3 million in
            2002.

PROFIT FROM OPERATIONS

      Our profit from operations decreased by 9.6% from RMB622.5 million in 2002
to

                                       35
<PAGE>

RMB562.7 million in 2003 due to a decrease in our total revenues.

TAXATION

      As we are registered and established in the Shenzhen Special Economic
Zone, our railroad businesses are subject to income tax at a rate of 15%.
According to relevant tax regulations, our other businesses and our subsidiaries
are subject to income tax at the rate of either 15% or 33%, depending on the
location of incorporation. In addition, a member of our subsidiaries engaged in
other businesses are Sino-foreign joint ventures which are entitled to full
exemption from the PRC income tax for two years and a 50% reduction in the next
three years starting from the first profit-making year, after offsetting
available tax losses carried forward from prior years. Our income tax expense
was RMB93.4 million in 2003, representing an effective tax rate of 15.4% and a
decrease of RMB11.0 million compared to RMB104.4 million in 2002.

NET PROFIT

      Our consolidated net profit decreased by 8.1% from RMB557.1 million in
2002 to RMB511.8 million in 2003.

YEAR ENDED DECEMBER 31, 2002 COMPARED WITH YEAR ENDED DECEMBER 31, 2001

REVENUES

      In 2002, our total revenues were RMB2,517.5 million, representing an
increase of 16.9% from RMB2,153.6 million in 2001. Revenues from passenger
transportation service, freight transportation service and other businesses
accounted for 73.4%, 20.4% and 6.2% of our 2002 total revenues respectively.
Revenues from passenger transportation service and freight transportation
service accounted for 78.2% and 21.8% of our 2002 revenues from railway
businesses, respectively.

      Passenger transportation service. In 2002, passenger transportation
experienced significant growth. The revenues from the passenger transportation
business were RMB1,846.6 million in 2002, representing an increase of 29.5% from
RMB1,426.0 million in 2001. The sharp increase in revenues from passenger
transportation was due primarily to the full-year operation of our
Shenzhen-Yueyang and Shenzhen-Beijing long-distance passenger trains (as
compared to 2001, when these trains operated for less than half the year) and
the completion of our "As-Frequent-As-Buses" Train Project between Guangzhou and
Shenzhen in 2002. Since January 2002, we have been operating 54 pairs of high
speed trains and 4 pairs of regular speed trains, with high speed trains
accounting for more than 93% of the total. The per passenger ticket price of
long distance trains is two to four times the price of the Guangzhou Shenzhen
high speed trains, and the ticket price of the Guangzhou Shezhen high-speed
trains is double the price of regular speed trains. As a result of the increase
in the number of high-speed trains and long-distance trains operating in 2002
compared to 2001, our revenue per passenger increased by 26.4% from RMB36.7 in
2001 to RMB46.4 in 2002.

                                       36
<PAGE>

      In 2002, we operated an average of 99 pairs of passenger trains per day on
the Guangzhou Shenzhen route, of which seven pairs were the Hong Kong through
trains between Guangzhou and Kowloon, 54 pairs were high-speed trains between
Guangzhou and Shenzhen, four pairs were regular speed trains between Guangzhou
and Schenzhen and 34 pairs were long-distance trains. The total number of
passengers increased by 2.4% from approximately 38.8 million in 2001 to
approximately 39.8 million in 2002.

      Freight transportation. In 2002, our freight transportation revenues were
RMB514.0 million, representing a decline of 9.4% from RMB567.3 million in 2001.
The decline was primarily due to the intense competition from other modes of
transportation. Total freight tonnage was approximately 27.6 million tons,
representing a 4.9% decrease from approximately 29.0 million tons in 2001.

      -     Our outbound freight revenue increased by 2.4% from RMB92.1 million
            in 2001 to RMB94.26 million in 2002. The increase in outbound
            freight transportation revenue was mainly due to higher
            transportation volume generated by freight price discounts. These
            decreased prices helped us to maintain our existing customers and
            attract some new freight customers. Furthermore, we enhanced our
            relationships with ports, mines and factories, and strengthened our
            efforts in directing certain freight from ocean shipments to our
            railway, which also contributed to the increase in transportation
            volume. Outbound freight tonnage increased by 7.2% from
            approximately 6.8 million tons in 2001 to approximately 7.3 million
            tons in 2002.

      -     Our inbound and pass through freight revenue decreased by 8.5% from
            RMB271.2 million in 2001 to RMB 248.1 million in 2002. The decline
            was mainly caused by the construction of the second track on the
            Beijing Jiujiang line and the national railway re-routing that
            decreased the volume of inbound and pass through freight
            transportation. Furthermore, there was a decline in the amount of
            goods being shipped to Shenzhen from other parts of China due to an
            increase of imported goods from overseas. In 2002, our inbound and
            pass through freight transportation volume was approximately 20.3
            million tons, representing a decline of 8.6% from approximately 22.2
            million tons in 2001.

      -     Our revenue from storage, loading, unloading and other miscellaneous
            items of freight services decreased by 15.8% from RMB204.0 million
            in 2001 to RMB171.7 million in 2002. The decrease was mainly due to
            the drop in freight price discounts and the reduction of storage and
            loading charges.

      The following table sets forth the revenues from freight transportation
and the volumes of commodities shipped for the three years ended December 31,
2002:

<TABLE>
<CAPTION>
                                                                                         YEAR ENDED DECEMBER 31,
                                                                                   -------------------------------  CHANGE FROM
                                                                                   2000         2001        2002       2001
                                                                                   ----         ----        ----       ----
<S>                                                                                <C>         <C>         <C>      <C>
Revenue from freight transportation
      (RMB thousands)...........................................................   549,694     567,276     514,036     (9.4%)
Total freight tons (thousands of tons)..........................................    28,733      29,012      27,583     (4.9%)
</TABLE>

                                       37
<PAGE>

<TABLE>
<CAPTION>
                                                                                          YEAR ENDED DECEMBER 31,
                                                                                    ------------------------------   CHANGE FROM
                                                                                    2000       2001        2002          2001
                                                                                    ----       ----        ----          ----
<S>                                                                                <C>         <C>         <C>       <C>
Revenue per ton (RMB)...........................................................     19.13       19.55       18.64     (4.7%)
Total ton-kilometers (millions).................................................   2,071.6     2,082.5     1,926.0     (7.5%)
Revenue per ton-kilometer (RMB).................................................      0.27        0.27        0.27        -
</TABLE>

      Other Businesses. Revenues from our other businesses decreased by 2.1%
from RMB160.3 million in 2001 to RMB156.9 million in 2002. The decline was due
primarily to increased train frequency and higher train speeds that reduced
passengers' consumption of food and beverages both on-board and in railway
stations. In addition, the subway construction outside Shenzhen Station also
affected the number of customers dining at our station restaurants.

      The table below sets forth a breakdown of the revenues from different
categories of our other businesses for the three years ended December 31, 2002:

<TABLE>
<CAPTION>
                                                                                             YEAR  ENDED DECEMBER 31,
                                                                                   ------------------------------------------
                                                                                        2000           2001            2002
                                                                                        ----           ----            ----
                                                                                                  (RMB THOUSANDS)
<S>                                                                                    <C>            <C>             <C>
On-board and station sales.........................................................     58,030         51,627          40,977
Station services...................................................................     65,934         41,287          43,913
Tourism, advertising and others....................................................     69,451         67,392          72,003
                                                                                       -------        -------         -------
     Total.........................................................................    193,415        160,306         156,893
                                                                                       =======        =======         =======
</TABLE>

      Operating Expenses. In 2002, our total operating expenses were RMB1,895.0
million, representing an increase of 18.5% from RMB1,599.5 million in 2001. This
was due mainly to an increase in railway operating expenses.

      Railway Operating Expenses. Our total railway operating expenses increased
by 18.8% from RMB1,460.6 million in 2001 to RMB1,735.3 million in 2002. Details
are as follows:

      -     Labor and benefits. In 2002, our labor and benefits expenses
            amounted to RMB373.8 million, representing an increase of 16.6% from
            RMB320.6 million in 2001. The rise in labor and benefits expenses
            was mainly due to the increase in the number of employees resulting
            from the operation of two additional long-distance trains and the
            more frequent train service along the Guangzhou-Shenzhen route, as
            well as an increase in the average salaries of our employees. The
            number of our employees increased to 9,258 as of December 31, 2002
            from 9,132 as of December 31, 2001. Moreover, our efforts to link
            compensation with our employees' performance also increased the
            overall salary and welfare expenses in 2002.

      -     Materials and supplies. Materials and supplies consisted of fuel,
            water and electricity. In 2002, our materials and supplies expenses
            amounted to RMB192.1 million, representing an increase of 32.8% from
            RMB144.7 million in 2001. The higher expenses were mainly caused by
            the increase in materials consumption resulting from the full year
            operation of the eight newly operated "Blue Arrow" electric trains
            that were part of our "As-Frequent-As-Buses" Train Project that we
            leased in the second half of 2001 and the two additional
            long-distance passenger trains that operated throughout 2002. The
            higher frequency of train service on the

                                       38
<PAGE>

            Guangzhou-Shenzhen route, the increased number of pairs of electric
            trains and the shift to electricity power on some freight trains
            also added to the materials and supplies expenses.

      -     Depreciation. In 2002, depreciation expenses of fixed assets were
            RMB335.5 million, representing a 2.0% decrease from RMB342.5 million
            in 2001. The decrease in depreciation expenses was mainly due to our
            contribution of RMB120.6 million of telecommunication assets and
            certain related construction-in-progress to China Railcom. The
            depreciation associated with these assets of approximately RMB11.1
            million was no longer reflected in our audited consolidated
            financial statements, thus reducing our depreciation expenses in
            2002.

      -     Repair expenses. In 2002, repair expenses amounted to RMB102.4
            million, representing an 8.3% increase from RMB94.6 million in 2001.
            The increase was mainly due to the full year operation of two new
            long-distance trains that commenced operation in the second half of
            2001 and the full year operation of the "As-Frequent-As-Buses" Train
            Project on the Guangzhou-Shenzhen route. In addition, efforts to
            improve both passenger and freight transportation facilities along
            the Guangzhou-Shenzhen route also increased repair expenses.

      -     Equipment leases and services. In 2002, expenses on equipment leases
            and services amounted to RMB433.9 million, representing a 65.4%
            increase from RMB262.3 million in 2001. The substantial increase of
            such expenses in 2002 was mainly due to the full year operation of
            two new long-distance trains (Shenzhen-Yueyang and Shenzhen-Beijing)
            which significantly increased the expenditures paid to other railway
            companies for railway line usage and train hauling expenses.
            Furthermore, the full year operation of the eight high-speed
            electric trains leased from Guangzhou Zhong Che Rolling Stock Sales
            and Leasing Company also increased leasing expenses significantly.

      -     Fees for social services. Fees for social services are paid for
            services provided to our employees, including health care and
            education and for services relating to passenger safety and
            security. In 2002, fees for social services were RMB57.39 million,
            representing an increase of 0.4% from RMB57.16 million in 2001. The
            increase was due primarily to the fees paid for passenger safety and
            security on our two new long-distance passenger trains.

      -     General and administrative expenses. General and administrative
            expenses in 2002 were RMB123.8 million, representing a decrease of
            17.6% from RMB150.2 million in 2001. The decrease was due primarily
            to the significant drop in the provision for bad debts in 2002, and
            to the decrease in losses from bad debts from RMB29.6 million in
            2001 to RMB4.6 million in 2002. In 2002, we improved our receivables
            collection by managing and clearing outstanding accounts receivable.
            As a result, our accounts receivable dropped significantly.

      -     Other expenses. In 2002, other expenses amounted to RMB101.3
            million, representing an increase of 38.2% from RMB73.2 million in
            2001. The increase in

                                       39
<PAGE>

            other expenses was due to the addition of two long-distance trains
            and the full year operation of the "As-Frequent-As-Buses" Train
            Project on the Guangzhou-Shenzhen route, which increased various
            direct costs. Since we contributed our telecommunication assets into
            China Railcom, we started to pay for telecommunication services
            provided by China Railcom, which increased our expenses for
            telecommunication services.

PROFIT FROM OPERATIONS

      Our profit from operations increased by 12.3% from RMB554.1 million in
2001 to RMB622.5 million in 2002, principally driven by the increase in
operating profit from railroad businesses from RMB532.7 million in 2001 to
RMB625.3 million in 2002, which was offset slightly by a decrease in operating
profit of our other businesses from RMB21.5 million in 2001 to an operating loss
of RMB2.8 million in 2002.

TAXATION

      As we are registered and established in the Shenzhen Special Economic
Zone, our railroad businesses are subject to income tax at a rate of 15%.
According to relevant tax regulations, our other businesses and our subsidiaries
are subject to income tax at the rate of either 15% or 33%, depending on the
location of incorporation. Taxes payable by us and our subsidiaries were
RMB104.4 million in 2002, implying an actual tax rate of 15.7%. Income tax
expense of RMB104.4 million in 2002 increased by RMB5.0 million over RMB99.4
million in 2001, which was due to the growth of profits before tax.

NET PROFIT

      Our consolidated net profit increased from RMB533.5 million in 2001 to
RMB557.1 million in 2002, representing an increase of 4.4%.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

      Our audited consolidated financial statements have been prepared in
accordance with IFRS. Our principal accounting policies are set out in Note 2 to
our audited consolidated financial statements. IFRS requires that we adopt the
accounting policies and estimation techniques that are most appropriate in the
circumstances for the purpose of giving a true and fair view of our results and
financial condition. We based our estimates and judgments on historical
experience and on various other assumptions we deem reasonable under relevant
circumstances. However, different policies, estimation techniques and
assumptions in critical areas could lead to materially different results, in
particular, with respect to fixed assets, receivables, provision and impairments
discussed in the following paragraphs.

FIXED ASSETS

      The railway industry is capital intensive. Under IFRS, fixed assets are
initially recorded at cost less accumulated depreciation and impairment loss.
Cost represents the purchase price of the asset and other costs incurred to
bring the asset into existing use and subsequent to the initial recognition,
fixed assets are stated at cost or valuation less accumulated depreciation and
impairment losses. Independent valuations, on a market value basis or
depreciated replacement

                                       40
<PAGE>

cost basis when there is no evidence of market value for such an item, are
performed at least every five years or sooner if considered necessary by the
directors. In the intervening years, the directors review the carrying values of
the fixed assets and an adjustment is made where there has been a material
change. Repairs and maintenance are charged to our income statement during the
financial period in which they are incurred. The cost of major renovations is
included in the carrying amount of the asset when it is probable that future
economic benefits in excess of the originally assessed standard of performance
of the existing asset will flow to the Group. Major renovations are depreciated
over the remaining useful life of the related asset.

     Estimation of the useful lives of assets that are long-lived as well as
their salvage values requires significant management judgment. Depreciation is
calculated using the straight-line method to write off the cost or revalued
amount, after taking into account the estimated residual value of 4% to 10% of
cost, of each asset over its estimated useful life.

     Our management reassessed the estimated useful lives and depreciation rates
of fixed assets periodically. The assessment was based on the experience and
maintenance program established by the management and the engineering personnel,
current operations and potential changes in technology, personnel, estimated
salvage value of assets, and industry regulations. Effective from 1 January,
2003, we changed the estimated useful lives of our track, bridges and service
roads from 44 years to a range from 55 years to 100 years and changed the useful
lives of our locomotives and rolling stock from 16 years to 20 years. The effect
of such change of accounting estimates to our consolidated income statement for
the year ended 31 December 2003 is set out in Note 13 to our audited financial
statements includes elsewhere in this annual report. The estimated useful lives
of our fixed assets are as follows:

<TABLE>
<S>                                              <C>
Buildings                                        25 to 40 years
Leasehold improvements                           over the lease terms
Track, bridges and service roads                 55 to 100 years
Locomotives and rolling stock                    20 years
Communications and signaling systems             8 to 20 years
Other machinery and equipment                    7 to 25 years
</TABLE>

     Where the carrying amount of an asset is greater than its estimated
recoverable amount, it is written down immediately to its recoverable amount.

     Due to the capital intensive nature of our business and the large base of
depreciable assets, variances to those estimates could have a material effect on
our Consolidated Financial Statements. If the estimated useful lives of all
depreciable assets were increased by one year, annual depreciation expense would
decrease by RMB16.3 million. If the estimated useful lives of all assets to be
depreciated were decreased by one year, annual depreciation expense would
increase by RMB19.9 million.


RECEIVABLES

      Receivables are carried at original invoice amount less the provision made
for impairment of these receivables. A provision for impairment of receivables
is established when there is an objective evidence that we will not be able to
collect all amounts due according to the original terms of receivables. The
amount of the provision is the difference between the carrying

                                       41
<PAGE>

amount and the recoverable amount, being the present value of expected cash
flows, discounted at the market rate of interest for similar borrowers.

     Other receivables are also assessed for incollectibility when the
circumstances indicate that we might not be able to collect all amounts due
according to the original terms of receivables.

IMPAIRMENTS

      If circumstances indicate that the net book value of an asset or
investment may not be recoverable, this asset may be considered "impaired", and
an impairment loss may be recognized in accordance with IFRS 36 "Impairment of
Assets". We review the carrying amounts of long-lived assets periodically in
order to assess whether the recoverable amounts have declined below the carrying
amounts. We test these assets for impairment whenever events or changes in
circumstances indicate that their recorded carrying amounts may not be
recoverable. When such a decline has occurred, the carrying amount is reduced to
the estimated recoverable amount. The amount of impairment loss is the
difference between the carrying amount of the asset before the reduction and the
estimated recoverable amount. The recoverable amount is the greater of the
estimated net selling price and the value in use. It is difficult to precisely
estimate selling prices because quoted market prices for our assets are often
not readily available. In determining the value in use, we discount cash flows
that we expect the asset to generate to their present value. Determining cash
flows that we expect an asset to generate requires significant judgment relating
to the expected level of sales volume, selling prices and the amount of
operating costs.

CONTINGENCY

     An accrual for a loss contingency is established if information available
prior to the issuance of the financial statements indicates that it is probable
that a liability has been incurred or an asset has been impaired. Judgment is
necessary in assessing the likelihood that a pending claim will succeed or a
liability will arise. The estimates of whether an accrual is necessary have been
developed in consultation with our outside counsel based upon an analysis of
potential results.

ITEM 5B. LIQUIDITY AND CAPITAL RESOURCES

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

      We generated approximately RMB798.4 million of net cash flow from
operating activities in 2003. Substantially all of our revenues were received in
cash, with accounts receivable arising primarily from long-distance passenger
and pass-through freight transactions originating from other railway companies
whose lines connect to our railroad. Similarly, some accounts payable arise from
payments for railroad transportation services that we collect on behalf of other
railroad companies. Accounts receivable and payable were generally settled
either quarterly or monthly between us and the other railroad companies. Most of
our revenues

                                       42
<PAGE>

generated from other businesses were received in cash. We also have accounts
payable associated with the purchase of materials and supplies in our other
businesses.

      In 2003, other than operating expenses, our cash outflow mainly related to
the following:

      -     capital expenditures of approximately RMB306.0 million, representing
            a decrease of 2.8% from RMB535.0 million in 2002 (see "Item 4D.
            Property, Plant and Equipment" for a description of these capital
            expenditures); and

      -     payment of dividends of approximately RMB433.6 million.

      Funds not required for immediate use are kept in short and medium-term
investments and bank deposits.

      We had temporary cash investments of approximately RMB627.4 million as of
December 31, 2003 and cash and cash equivalents of RMB1,402.4 million.

      As of 31 December, 2003, we had a fixed deposit of approximately RMB31.4
million in Zeng Cheng City Li Cheng Credit Cooperative, or "Li Cheng." We were
unable to recover the principal from Li Cheng upon the expiry of the fixed
deposit term. In March 1999, we instituted legal proceedings against Li Cheng to
recover the deposit and the related interest. According to a court verdict dated
12 October, 1999, Li Cheng was required to repay the deposit principal and the
related interest to us. Li Cheng failed to comply with the court ruling, and we
further applied to the court for compulsory enforcement of the court order. In
July 2000, Li Cheng filed a court petition for winding up. On 9 November, 2000,
the court ordered the suspension of execution of the court ruling dated 12
October, 1999 during the winding-up of Li Cheng. On 23 November, 2000, we
applied to the Guangdong Provincial Government for an allocation of funds by the
government to Li Cheng for the repayment of our deposit principal. The
provincial government accepted our petition and requested the municipal
government to follow up on our case. As of December 31, 2003, we have not
collected our fixed deposit. Accordingly, this amount is classified as other
receivables and accounted for as part of our provision for doubtful accounts
according to management's estimates.

      As of December 31, 2003, we did not have any bank loans or guarantees
outstanding nor any trust deposits placed with any financial institutions in the
PRC.

CASH FLOW

      Our cash and cash equivalents in 2003 decreased by approximately RMB10.7
million over 2002 primarily due to the negative impact of SARS on sales. The
table below sets forth the major items in the consolidated cash flow statements
for 2002 and 2003 and the percentage change from 2002 to 2003.

                                       43
<PAGE>

<TABLE>
<CAPTION>

                                                                                          YEAR ENDED DECEMBER 31,
                                                                                   ---------------------------------   CHANGE
                                                                                       2002            2003          FROM 2002
                                                                                       ----            ----          ---------
                                                                                           (RMB THOUSANDS)
<S>                                                                                 <C>              <C>             <C>
Net cash generated from operating
     activities.................................................................     1,157,177        798,449           (31%)
Net cash from/(used in) investing activities....................................       251,003       (375,469)         (250%)
Net cash (used in) financing activities.........................................      (360,643)      (433,666)          (20%)
                                                                                     ---------       --------
Net increase/(decrease) of cash and
     cash equivalents...........................................................     1,047,537        (10,686)         (101%)
                                                                                     =========       ========          ====
</TABLE>

      Our net cash generated from operating activities in 2003 was approximately
RMB798.4 million, representing a decrease of RMB358.8 million from RMB1,157.2
million in 2002. The decrease resulted primarily from a decrease in cash flow
generated from our passenger transportation business.

      Our working capital increased from RMB1,631.4 million in 2002 to
RMB1,898.7 in 2003. The decrease was mainly due to the accrued expense decrease
resulted from the house reform project completed.

      Our net cash used in investing activities was approximately RMB375.5
million in 2003, as compared to net cash provided by investing activities of
RMB251.0 million in 2002. Cash used in investing activities in 2003 mainly
included the purchase of fixed assets and payments for construction-in-progress.
The net cash provided by investing activities in 2002 was mainly due to the
company reduced the temporary cash investment by RMB777.09 million, while the
temporary cash investment was increased by RMB60.1 million in 2003.

      Net cash used in financing activities in 2003 was approximately RMB433.7
million, representing an increase of RMB73.0 million from RMB360.6 million in
2002. It consisted of a dividend payment of RMB433.6 million to shareholders of
the Company and distribution to minority shareholders of approximately RMB0.1
million.

ITEM 5C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENCES, ETC.

      We do not generally conduct our own research and development with respect
to major capital projects. In the past, in connection with the high-speed
project and electrification, our Parent Company has contracted for the
engineering and technical services of research and design institutes under the
Ministry of Railways. Since our inception, our Parent Company has not borne any
research and development expenses on our behalf.

      We conduct limited research and development in designing and implementing
automation in ticket sales, including the development of related computer
software.

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

                                       44
<PAGE>

our capital expenditures.

ITEM 5D. TREND INFORMATION

      The Pearl River Delta has been one of China's fastest growing economic
regions. We expect the PRC government's current economic, import and export,
foreign investment and infrastructure policies to generate additional demand for
transportation services generally. These policies and measures may have both
positive and negative effects on our business development. They are expected to
promote economic growth and create new demand for our transportation services.
At the same time, however, with the improvement of highway and waterway
transportation facilities, we anticipate additional competition. Due to the SARS
epidemic, we experienced a significant decrease in passenger traffic in the
first half of 2003. A similar outbreak of SARS or other epidemic in the future
is likely to have a material adverse effect on our operating results and
financial condition.

      We believe that while the PRC government is in the progress of lessening
restrictions on foreign investment following China's entry into the WTO, the
opening up of domestic railway transportation will be gradual and we expect due
to competition from foreign and domestic railway to be limited in the short
term. China's entry into the WTO may increase other Chinese coastal cities'
significance in trading. As a result, part of the freight currently transferred
through ports in Hong Kong and Shenzhen may be divested to other ports in the
PRC, which will adversely affect our railway freight business. In addition, as
the PRC government lifts control over foreign investments, including allowing
foreign participation in railway construction, our railway monopoly position in
our service region may be challenged by foreign strategic investment. We believe
that we are prepared for the challenges as well as the opportunities that have
arised or will arise with China's accession to the WTO.

      With increasing economic cooperation in regional economies of the "Great
Pearl River Delta" and the "Extensive Pearl River Delta", and the implementation
of the Mainland and Hong Kong Closer Economic Partnership Arrangement, or
"CEPA", we expect our service territory to experience a rapid and sustained
economic growth. In addition, we also expect domestic policies and developments,
such as the "Fifth Great Speed Up in Chinese Railways," the "Relaxed Individual
Travel to Hong Kong and Macao Special Administrative Region," the commencement
of operation of the Shenzhen Subway and improvement in the Guangzhou Subway to
have a positive impact on our passenger and freight transportation businesses in
2004.

ITEM 5E. OFF-BALANCE SHEET ARRANGEMENTS

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

ITEM 5F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

      The following table sets forth our contractual obligations, capital
commitments and operating lease commitments as of December 31, 2003 for the
periods indicated.

                                       45
<PAGE>

                 CONTRACTUAL OBLIGATIONS PAYMENTS DUE BY PERIOD

<TABLE>
<CAPTION>
                                                                        PAYMENT DUE BY PERIOD
                                                                         (RMB in thousands)
                                                                                                                        2009 AND
     CONTRACTUAL OBLIGATIONS               TOTAL          2004          2005           2006         2007       2008    THEREAFTER
<S>                                        <C>           <C>           <C>            <C>           <C>        <C>     <C>
Long-Term Debt Obligations                   -             -             -               -            -         -         -
Capital (Finance) Lease Obligations          -             -             -               -            -         -         -
Operating Lease Obligations                291,375       108,000       108,000         75,375         -         -         -
Purchase Obligations                         -             -             -               -            -         -         -
Other Long-Term Liabilities Reflected        -             -             -               -            -         -         -
on the Company's Balance Sheet
under IFRS
Total                                      291,375       108,000       108,000         75,375         -         -         -
</TABLE>

      We plan to implement the following development projects in 2004:

      -     We plan to increase our overall transportation capacity, including
            the construction of a fourth line between Guangzhou and Shenzhen, a
            technical support and maintenance depot for passenger vehicles at
            Northern Shenzhen Station, an auxiliary station in Buji for
            long-distance passenger trains and a connecting track for passenger
            trains from Pinghu to Shenzhen.

      -     In our passenger transportation business, we plan to: (i) further
            improve our "As-Frequent-As-Buses" Train Project of the
            Guangzhou-Shenzhen high-speed passenger trains by increasing the
            frequency of our high-speed train services and appropriately
            adjusting the stops at intermediary stations based on passenger
            demand; (ii) conduct feasibility studies on the introduction of
            advanced electric passenger trains and the IC Card Ticketing System;
            (iii) continue the integrated refurbishment of our stations and
            improve our passenger service facilities and enhance our service
            quality; and (vi) continue the expansion of our through-train
            business between Guangdong Province and Hong Kong. We commenced the
            operations of two pairs of Hong Kong through-trains on April 18,
            2004.

      -     In our freight transportation business, we plan to: (i) increase our
            marketing efforts and enhance our cooperation with key ports, mines,
            factories and corporate entities; (ii) continue to improve our
            service quality and efficiency; (iii) commence the operation of "5
            fixed" (fixed location, fixed line, fixed time, fixed price and
            fixed schedule) freight train services in southwest China.

      -     We also plan to maintain a tight control over our working capital
            and to achieve low-cost expansion through equity investments,
            mergers and acquisitions when appropriate opportunities arise.

      We may be unable to obtain sufficient financing to fund our substantial
capital requirements, which could limit its growth potential. We estimate that
we will require approximately RMB1,550.0 million for capital expenditures in
2004, mainly including the construction of our fourth track between Guangzhou
and Shenzhen, the construction of a technical support and maintenance depot in
northern Shenzhen, the purchase of additional

                                       46
<PAGE>

locomotives and trains. Our actual capital requirements may be greater. We may
not be able to obtain sufficient funds on commercially acceptable terms. If
adequate capital is not available, our planned capital expenditure and business
prospects could be adversely affected.

ITEM 5G.  ADDITIONAL INFORMATION

PRINCIPAL DIFFERENCES BETWEEN IFRS AND US GAAP

      Our audited consolidated financial statements conform to IFRS, which
differ in certain respects from those prepared under US GAAP. A major difference
between IFRS and US GAAP, which has a significant effect on our consolidated net
profit and consolidated net assets is set out below:

REVALUATION OF FIXED ASSETS

      In connection with the restructuring undertaken for our initial public
offering, we revalued our fixed assets on March 6, 1996 and we recorded a
revaluation surplus of fixed assets amounting to approximately RMB1.5 billion.
We carried out a further revaluation as of September 30, 2002, which did not
result in a material difference from the carrying amounts and no revaluation
surplus or deficit was recorded. See note 13 to our audited financial statements
included elsewhere in this annual report.

      Under IFRS, revaluation of fixed assets is permitted and depreciation is
based on the revalued amount. Additional depreciation arising from the
revaluation surplus was approximately RMB38.5 million for the year ended
December 31, 2003 compared to approximately RMB48.4 million in 2002.

      Under US GAAP, fixed assets are required to be stated at their original
cost. Hence, no additional depreciation from revaluation will be recognized
under US GAAP. However, a deferred tax asset related to the revaluation surplus
amounting to approximately RMB223.8 million was created under US GAAP with a
corresponding increase in equity since the revaluation resulted in a higher tax
base which will be realized through additional depreciation for PRC tax
purposes.

      The effects on our consolidated net profit resulting from the significant
differences between IFRS and US GAAP are summarized below:

<TABLE>
<CAPTION>
                                                                                       YEAR ENDED DECEMBER 31,
                                                                      --------------------------------------------------------
                                                                         2001            2002            2003          2003
                                                                         ----            ----            ----          ----
                                                                        RMB IN         RMB IN          RMB IN        US$(1) IN
                                                                       THOUSANDS      THOUSANDS       THOUSANDS      THOUSANDS
                                                                                                                    (Unaudited)
<S>                                                                    <C>            <C>             <C>            <C>
Net profit under IFRS..............................................      533,495        557,083         511,762         61,807
US GAAP adjustments:
       Reversal of additional depreciation charges
         arising from the revaluation surplus on
         fixed assets..............................................       48,422         48,422          38,548          4,655
       Effect of US GAAP adjustment on taxation....................       (7,263)        (7,263)         (5,782)          (698)
                                                                         -------        -------         -------         ------
Consolidated net profit under US GAAP..............................      574,654        598,242         544,528         65,764
                                                                         =======        =======         =======         ======
Earnings per share under US GAAP...................................         0.13           0.14            0.13           0.02
                                                                         =======        =======         =======         ======
</TABLE>

                                       47
<PAGE>

<TABLE>
<S>                                                                         <C>            <C>             <C>            <C>
Earnings per equivalent ADS under
       US GAAP.....................................................         6.63           6.90            6.28           0.76
                                                                            ====           ====            ====           ====
</TABLE>

---------------
            (1)   Translated solely for the convenience of the reader into U.S.
                  dollars at the noon buying rate prevailing on December 31,
                  2003 of US$1.00 to RMB8.28.

      The effects on our consolidated net assets resulting from the significant
differences between IFRS and US GAAP are summarized below:

<TABLE>
<CAPTION>
                                                                                         YEAR ENDED DECEMBER 31,
                                                                             -------------------------------------------------
                                                                                 2002             2003             2003
                                                                                 ----             ----             ----
                                                                               RMB IN           RMB IN           US$(1) IN
                                                                              THOUSANDS        THOUSANDS         THOUSANDS
                                                                                                                (Unaudited)
<S>                                                                          <C>              <C>               <C>
Consolidated net assets under IFRS........................................   10,244,151       10,322,358        1,246,662
US GAAP adjustments:
       Reversal of the revaluation surplus on fixed assets................   (1,492,185)      (1,492,185)        (180,216)
       Reversal of additional depreciation charges arising from the
        revaluation surplus on fixed assets...............................      330,884          369,432           44,617
       Deferred tax assets created........................................      174,195          168,413           20,340
                                                                              ---------        ---------        ---------
Consolidated net assets under US GAAP.....................................    9,257,045        9,368,018        1,131,403
                                                                              =========        =========        =========
</TABLE>

---------------
            (1)   Translated solely for the convenience of the reader into U.S.
                  dollars at the noon buying rate prevailing on December 31,
                  2003 of US$1.00 to RMB8.28.

      There are no significant differences between IFRS and US GAAP that would
affect the classification in the balance sheet and the income statement that
would not also affect our net income or shareholders' equity.

RECENTLY ISSUED U.S. ACCOUNTING STANDARDS

      In 2003, the Financial Accounting Standards Board, or "FASB", issued
Statement of Financial Accounting Standards No.150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity, or
"SFAS 150", and FASB Interpretation No.46, Consolidation of Variable Interest
Entities, or "FIN 46".

      SFAS 150 established standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that issuer classify a financial instrument that is within
its scope as liability (or an asset in some circumstances). Many of those
instruments were previously classified as equity. Some of the

                                       48
<PAGE>

provisions of this Statement are consistent with the current definition of
liabilities in FASB Concepts Statement No.6, Elements of Financial Statements.
The remaining provisions of this Statement are consistent with the Board's
proposal to revise that definition to encompass certain obligations that a
reporting entity can or must settle by issuing its own equity shares, depending
on the nature of the relationship established between the holder and the issuer.
In addition, SFAS 150 concludes the first phase of the Board's redeliberations
of the Exposure Draft, Accounting for Financial Instruments with Characteristics
of Liability, Equity, or Both. SFAS 150 is effective for financial instruments
entered into or modified after 31 May, 2003, and otherwise is effective at the
beginning of the first interim period beginning after 15 June, 2003, except for
mandatorily redeemable financial instruments of non-public entities. We do not
expect that the adoption of SFAS 150 will any material impact on our financial
statements.

      FIN 46 provides guidance on the identification of and financial reporting
for entities over which controls is achieved through means other than voting
rights. This interpretation requires existing unconsolidated variable interest
entities to be consolidated by their primary beneficiaries if the entities do
not effectively disperse risks among parties involved. FIN 46 applies
immediately to variable interest entities created after 31 January, 2003, and to
variable interest entities in which an enterprise obtains an interest after the
date. It applies in the first fiscal year or interim period beginning after 15
June, 2003, to variable interest entities in which an enterprise holds a
variable interest that it acquired before 1 February, 2003. We do not expect
that the adoption FIN 46 will have any material impact on our financial
statements.

                                       49
<PAGE>

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

ITEM 6A. DIRECTORS AND SENIOR MANAGEMENT

DIRECTORS

      All of our directors were duly elected at meetings of our shareholders. At
our general shareholders' meeting held on June 10, 2004, Mr. Wilton Chau was
elected as a director of our Company. The business address of each of our
directors is No. 1052 Heping Road, Shenzhen, People's Republic of China 518010.

      The table below sets forth the information relating to our directors:

<TABLE>
<CAPTION>
                                                                                                  DATE FIRST
                                                                                                  ELECTED OR
  NAME                             AGE                      POSITION                              APPOINTED
  ----                             ---                      --------                              ---------
<S>                                <C>              <C>                                           <C>
Wu Junguang                        55               Chairman of the Board of Directors                2003
Feng Qifu                          55               Director and General Manager                      2003
Hu Lingling                        40               Director                                          2003
Wu Houhui                          55               Director                                          1999
Wen Weiming                        41               Director                                          2003
Li Qingyun                         40               Director and Deputy General Manager               2000
Li Peng                            57               Director and Chairman of the Trade Union          1998
Chang Loong Cheong                 58               Director                                          1996
Deborah Kong                       44               Director                                          1996
Wilton Chau                        42               Director                                          2004
</TABLE>

      Wu Junguang, age 55, was elected the chairman of the board of directors of
Guangshen Railway on June 10, 2003. Mr. Wu graduated from South China Normal
University. Since 1964, Mr. Wu has served in various managerial positions
including general manager of Yangcheng Railway Company and our predecessor,
Guangzhou Railway Sub-administration. Mr. Wu has served as the general manager
of our Parent Company since April 2002 and as the chairman of our Parent Company
since June 2003.

      Feng Qifu, age 55, was elected a director of Guangshen Railway in 2003 and
is currently our general manager. Mr. Feng is an economist and graduated from
the Party's School of Guangdong Provincial. He has over 30 years of experience
in the railway industry. Since 1993, Mr. Feng has served as the general manager
of the Changsha Railway Company and as the assistant to the general manager and
the deputy general manager of our Parent Company. Mr. Feng was appointed our
general manager on May 8, 2003.

      Hu Lingling, age 40, was elected a director of Guangshen Railway in 2003.
Mr. Hu is an engineer and graduated from Changsha Railway Institute. Mr. Hu has
served as the deputy chief engineer, the deputy stationmaster of Shaoguan
Railway station of Yangcheng Railway Company, the deputy chief engineer, the
deputy general manager of Yangcheng Railway Company and the director of the
transportation department of our Parent Company Chronologically. Presently he
serves as the deputy general manager of our Parent Company.

                                       50
<PAGE>

      Wu Houhui, age 55, was elected a director of Guangshen Railway in 1999. He
is a graduate of Dalian Railway College and a senior economist. Mr. Wu served in
various managerial position, including the position of director of the
Enterprise Management Office, at our Parent Company from 1984 to 2000. Since
November 2001, Mr. Wu has served as the deputy chief economist of our Parent
Company.

      Wen Weiming, age 41, was elected a director of Guangshen Railway in 2003.
Mr. Wen is an accountant and graduated from Guangzhou Railway Workers' College.
He has over 10 years expereice in the railway industry, and has served as the
director of the accounting and finance department, the chief accountant of the
diversified businesses sub-section, and the director of the finance sub-section
of Yangcheng Railway Company. Since May 2001, Mr. Wen has served as the deputy
director of the finance department of our Parent Company.

      Li Qingyun, age 40, was elected a director of Guangshen Railway in 2000
and is currently our deputy general manager. Mr. Li graduated from North
Communications University in 1989. He holds a master's degree in railway
transportation and organization. He served in managerial positions in various
technical and transportation departments of our Parent Company from 1989 to
August 1999. He joined us in September 1999.

      Li Peng, age 57, was elected a director of Guangshen Railway in 1998 and
is also acting as the chairman of our trade union. Mr. Li is a graduate of the
East China Civil Engineering Institute and has served in various executive and
labor organizational positions in Yangcheng Railway Company since 1977. He was
the deputy general manager of Guangzhou Railway Company and the Guangshen
Railway Enterprise Development Company from 1992 to 1997. Mr. Li joined us in
December 1997.

      Chang Loon Cheong, age 58, was elected an independent non-executive
director of Guangshen Railway in 1996. He holds a management certificate from
the Hong Kong Management Association and is an independent non-executive
director of Guangshen Railway. Mr. Chang is also a director of Shanghai Xinhua
Iron & Steel Company Limited and Orient International (Shanghai) Limited. Mr.
Chang has acted as a manager of Cathay Restaurant in Lagos, Nigeria, a member of
the senior management of Island Navigation Corporation International Limited and
Orient Overseas Container Line Limited in West Africa, and the general manager
and a director of Noble Ascent Company Limited.

      Deborah Kong, age 44, was elected an independent non-executive director of
Guangshen Railway in 1996. Ms. Kong is currently an executive director of
Centennial Resources Holding Company Limited. Ms. Kong holds a bachelor of arts
degree from Sydney University and a one-year master degree course of finance
degree from Macquarie University in Australia. She is a member of the Standing
Committee of the People's Political Consultative Conference of Shandong Province
in the PRC.

      Wilton Chau, age 42, was elected an independent non-executive director of
Guangshen Railway in 2004. Mr. Chau holds a bachelor degree in applied
mathematics from University of Hong Kong, a LLB degree from University of
Wolverhampton and a Master of Business Administration from the University of
Wales. Mr. Chau is a fellow member of the Association of Chartered Certified
Accountants, a member of Singapore Institute of Arbitrators and Council

                                       51
<PAGE>

member of Hong Kong Biotechnology Association. Since 1987, Mr. Chau has served
several financial institutions in various senior positions overseeing investment
and development in railway, road and airport infrastructure projects. Mr. Chau
is currently the chairman of Qleap Venture Limited.

SUPERVISORS

      The table below sets forth the information relating to our supervisors:

<TABLE>
<CAPTION>
                                                           DATE FIRST ELECTED
NAME                 AGE             POSITION               OR APPOINTED
----                 ---             --------               ------------
<S>                  <C>             <C>                   <C>
Yao Muming           50              Supervisor                 1999
Tang Dinghong        55              Supervisor                 2004
Zhao Genrong         58              Supervisor                 2000
Chen Yongbao         52              Supervisor                 2002
Chen Yunzhong        51              Supervisor                 2001
Yang Rongjiu         56              Supervisor                 2002
</TABLE>

      Yao Muming, age 50, was appointed as a Supervisor of Guangshen Railway in
1999. Mr. Yao graduated from South China Normal University and previously served
as the Deputy Director of the Guangzhou and Zhuhai Animal and Plant Quarantine
Bureaus. From 1997 to 2003, he was a member of the senior management of the
Company. Since July 2003, Mr. Yao has been a member of the senior management of
our Parent Company. Since July 2003, he has served the chairman of the
supervisory board.

      Tang Dinghong, age 55, was appointed as a supervisor of Guangshen Railway
in 2004. Mr. Tang graduated from Zhongshan University. He started to work in the
railway industry since 1969 and had served in various senior managerial
positions of Guangzhou Railway (Group) Company. Mr. Tang joined us in July 2003.

      Zhao Genrong, age 58, was appointed as a supervisor of Guangshen Railway
in 2000. Mr. Zhao is a graduate of North Communications University. He served in
various financial positions in Hengyang Railway Company from 1968. Since 1983,
Mr. Zhao has served as the deputy director and subsequently as the director of
the financial department of our Parent Company. Since August 1999, Mr. Zhao has
served as the director of the audit department of our Parent Company.

      Chen Yongbao, age 52, was appointed as a supervisor of Guangshen Railway
in 2002. Mr. Chen graduated from Zhuzhou Railway Mechanical School. Since 1975,
he has served in various managerial positions in Guangzhou Railway Company and
Yangcheng Railway Company. From 1997 to 2001, Mr. Chen served in the
administration supervisory position at our Parent Company. Since May 2001, Mr.
Chen has served as the chief of the supervision department of our Parent
Company.

      Chen Yunzhong, age 51, was appointed as a supervisor of Guangshen Railway
in 2001. Mr. Chen graduated from Guangzhou Railway Driver's School, Guangdong
Jinan University and the Central Administration Academy. He was a member of the
senior management of Hainan Railway Company. Mr. Chen joined us in May 2000.

                                       52
<PAGE>

      Yang Rongjiu, age 56, was appointed as a supervisor of Guangshen Railway
in 2002. Mr. Yang graduated from Cadres Further Education (Secondary School) at
Guangzhou Zhongshan University. He has served in various PRC railway departments
since 1964 and was the Stationmaster of Shenzhen Station. In May 2001, Mr. Yang
served as the deputy chairman of our company's trade union.

SENIOR MANAGEMENT

      The table below sets forth information relating to our senior management:

<TABLE>
<CAPTION>
                                                                                  DATE FIRST
                                                                                  ELECTED OR
NAME                AGE                       POSITION                            APPOINTED
----                ---                       --------                            ---------
<S>                 <C>             <C>                                           <C>
Luo Qingming        47              Deputy General Manager and Chief Engineer        1999
Shao Huaping        46              Deputy General Manager                           2004
Wu Weimin           46              Deputy General Manager                           2004
Li Ruizhi           48              Chief Accountant                                 2004
Guo Xiangdong       38              Company Secretary                                2004
</TABLE>

      Luo Qingming, age 47, is a Deputy General Manager and the Chief Engineer
of Guahgshen Railway. In 1982, Mr. Luo graduated from Changsha Railway Institute
with major in railway engineering. He is a senior engineer and had previously
served as an engineer, the Chief Engineer, a Deputy Section Chief and the
Section Chief of Guangshen Engineering Section of our company. He received a
government allowance awarded by the State Council of the PRC in 1999.

      Shao Huaping, age 46, is a Deputy General Manager of Guahgshen Railway.
Mr. Shao graduated from the Huazhong University of Science and Technology with a
master's degree in engineering and is a senior engineer. Since 1979, he had
served in various managerial positions of Wuhan Railway Sub-administration and
Shenzhen Pingyan Railway Company. From August 1998 to September 2001, he served
as the Deputy Section Chief of Shenzhen Power Section of Guahgshen Railway. Mr.
Shao was the Deputy Director of Locomotive Department of Guangzhou Railway
(Group) Company before joining Guahgshen Railway as a Deputy General Manager in
January 2004.

      Wu Weimin, age 46, is a Deputy General Manager of Guahgshen Railway. Mr.
Wu graduated from Guangdong Radio & TV University and is an engineer. Since
1984, he has served in various managerial positions in the Material and
Equipment Department, the Planning and Statistic Department and the Labour and
Wage Department of Yangcheng Railway Company. He has also served as an engineer
in the Material and Equipment Section, the Deputy Director and the Director of
the Planning and Statistic Sub-department of Yangcheng Railway Company. Mr. Wu
was the Director of Labour Sub-department and Director of Social Insurance
Centre of Yangcheng Railway Company before joining Guahgshen Railway as a Deputy
General Manager in January 2004.

                                       53
<PAGE>

      Li Ruizhi, age 48, is the Chief Accountant of Guahgshen Railway. Ms. Li
graduated from Economy and Management Department of School of the Central Party
Committee and is an accountant. Since 1984, she has served in various finance
and accounting positions at different PRC railway departments. She has 20 years
of experience in finance and accounting areas. Ms. Li previously served as the
deputy section-chief of the Finance Department and the Deputy Director of
Guangzhou Railway Settlement Centre of Guangzhou Railway (Group) Company before
joining Guangshen Railway in January 2004.

      Guo Xiangdong, age 38, is the Company Secretary and the Director of
Secretariat of the Board of Directors. Mr. Guo graduated from the Central China
Normal University with a Bachelor of Laws degree and is an economist. He joined
the Company in 1991, and previously served as the Deputy Section Chief, Deputy
Director and the Director of Secretariat of the Board of Directors of Guangshen
Railway. Mr. Guo has been as the Company Secretary since January 2004.

      There are no family relationships between any director or executive
officer and any other director or executive officer. Of the members of the board
of directors, our chairman, Mr. Wu Junguang, is both the chairman and the
general manager of our Parent Company.

      Mr. Feng Qifu is the chairman of the board of directors of Guangzhou
Tiecheng Industrial Company and a director of Sanmao Railway Industrial Company.
Mr. Wu Houhui is the director of Guangmeishan Railway Company, Sanmao Railway
Company and Shichang Railway Company. Mr. Hu Lingling is a director of Nanhai
Saiyanqiao Railway Freight Yard and Storage Company, Sanmao Railway Company and
Guangdong Railway Youth Travel Service Co., Ltd.. Mr. Wen Weiming is a
supervisor of Guangzhou Railway Engineering (Group) Company and Guangdong
Railway Youth Travel Service Co., Ltd.. The lines operated by Guangmeishan
Railway Company, Sanmao Railway Company and Shichang Railway Company are local
railroads. Guangzhou Tiecheng Industrial Company is our joint venture partner.
We are currently envolved in certain litigation proceedings relating to this
joint venture. See Item 8A.7 Legal Proceedings. We have business relationships
relating to railroad transportation with Guangmeishan Railway Company and Sanmao
Railway Company.

ITEM 6B. BOARD COMPENSATION

DIRECTORS AND SENIOR MANAGEMENT

      Total remuneration of our directors, supervisors and senior officers
during 2003 included wages and bonuses. Directors or supervisors who are also
officers and employees of Guangshen Railway receive certain other benefits in
kind from our Parent Company and GEDC, such as subsidized or free health care
services, housing and transportation, as customarily provided by

                                       54
<PAGE>

companies in the PRC to their employees.

      The aggregate amount of cash remuneration paid by Guangshen Railway in
2003 to all individuals who are currently our directors, supervisors and senior
officers was approximately RMB1.72 million, of which approximately RMB1.14
million was paid to directors and supervisors and approximately HK$0.31 million
was paid to the two independent non-executive directors.

      The aggregate amount of cash remuneration we paid during the year ended
December 31, 2003 for pension and retirement benefits to all individuals who are
currently our directors, supervisors and senior officers was approximately
RMB121,000.

ITEM 6C. BOARD PRACTICES

BOARD OF DIRECTORS

      In accordance with the 4th Amendment to our Articles of Association,
which was approved at our general shareholders' meeting held on June 10, 2004,
our board of directors consists of ten directors, one of whom is the chairman.
Directors are appointed at our general shareholders' meeting through voting,
and serve for terms of three years. Upon the expiration of the term of their
office, they can serve consecutive terms if re-appointed at the general
shareholders' meeting. The service contracts that we have entered into with our
directors do not provide for any payment of compensation upon termination.

SUPERVISORY COMMITTEE

      We have a supervisory committee consisting of five to seven supervisors.
Supervisors serve a term of three years. Upon the expiration of their terms of
office, they may be re-appointed to serve consecutive terms. The supervisory
committee is presided over by a chairman who may be elected or removed with the
consent of two-thirds or more of the members of the supervisory committee. The
term of office of the chairman is three years, renewable upon re-election. Our
supervisory committee was appointed at the general shareholders' meeting held on
June 28, 2002 and consists of five representatives of the shareholders who may
be elected or removed by our shareholders and one representative of our
employees who may be elected or removed by our employees. At the general
shareholders' meeting held on June 10, 2004, Gu Hongxi was substituted by Tang
Dinghong due to Gu Hongxi's change of position. Members of our supervisory
committee may also observe meetings of the board of directors. The current
members of the supervisory committee are: Yao Muming, Tang Dinghong, Zhao
Genrong, Chen Yongbao, Chen Yunzhong, and Yang Rongjiu. The term of this
supervisory committee will expire in 2005.

      Supervisors attend board meetings as non-voting members. The supervisory
committee is responsible to our shareholders and has the follow duties and
responsibilities:

      -     to supervise our handling of our financial matters;

      -     to supervise our directors, general manager, deputy general manager
            and other senior officers for compliance with laws, administrative
            regulations or our articles

                                       55
<PAGE>

            of association;

      -     to regulate any acts of directors, the general manager, deputy
            general manager and other senior officers that are detrimental to
            the interests of Guangshen Railway;

      -     to verify such financial information as financial reports, business
            reports and profit distribution plans submitted by the board of
            directors to the general shareholders' meeting, and arrange
            certified public accounts and auditors to verify issues;

      -     to convene interim general shareholders' meetings as requested; and

      -     to initiate legal proceedings against directors on behalf of
            Guangshen Railway.

AUDIT COMMITTEE

      In accordance with the Listing Rules of the Stock Exchange of Hong Kong
that encourage the establishment of an audit committee, and the "Guidance for
the Formation of An Audit Committee" promulgated by the Hong Kong Accountants'
Association in December 1997, we have an audit committee consisting of two
independent non-executive directors. The current members of our audit committee,
appointed by the board of directors, are: Mr. Chang Loong Cheong and Ms. Deborah
Kong. Mr. Chang and Ms. Kong are "independent directors" of our Company as
defined in Section 303A.02 of the New York Stock Exchange's Listed Company
Manual. The audit committee must convene at least two meetings each year, and
may invite the executive directors, persons in charge of the financial and audit
departments and our independent auditors. The audit committee must convene at
least one meeting with the auditors each year without any executive directors
present. The duties of our audit committee include:

                                       56
<PAGE>

      -     reviewing the reports prepared by the board of directors, the annual
            and interim reports on our operating results, the annual financial
            report and public announcements of our operating results;

      -     reviewing our financial reports and the reports prepared by our
            independent auditor and its supporting documents, including the
            review of our internal controls and disclosure controls and
            procedures, and to discuss with the auditor our annual audit plan
            and solutions to problems in the previous year;

      -     reviewing and approving the selection of and remuneration paid to
            our independent auditor; and

      -     reviewing audit matters specifically identified by the board of
            directors, and determining whether such projects are in compliance
            with industrial practices and market rules, and performing statutory
            duties and safeguarding our interests and the interests of our
            shareholders.

ITEM 6D. EMPLOYEES

      As of December 31, 2001, 2002 and 2003, we had approximately 9,132,9,258
and 9,029 employees, respectively. The following chart sets forth the number of
our employees by function as of December 31, 2003:

<TABLE>
<CAPTION>
            FUNCTION                      EMPLOYEES
<S>                                       <C>
Passenger transportation personnel ......   1,432
Freight transportation personnel ........     429
Transportation personnel ................   4,547
Supporting personnel ....................     316
Other business personnel ................   1,042
Administrative and managerial personnel..   1,263
     Total ..............................   9,029
</TABLE>

      A substantial majority of our employees are located in the Guangdong
Province and in Shenzhen. The number of our employees decreased by 229 in 2003
mainly because we laid off some of our temporary employees in order to increase
our operational efficiency and to reduce operation costs.

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

      We have implemented a salary policy which links our employees' salaries
with operating results, labor efficiency and individual performance. Employees'
salaries distribution is subject to

                                       57
<PAGE>

macro-control and is based on their performance records and reviews. We paid
approximately RMB347.6 million in salaries and benefits for our railroad
businesses in 2003.

      Pursuant to applicable state policies and regulations, our employees enjoy
the following benefits: (1) retirement pension -we are required to set aside a
sum equivalent to 18% of the aggregate amount of salaries of all of our
employees for the year and 5% of the aggregate amount of salaries of all of its
employees for the year as employees' retirement pension and supplemental
retirement pension, respectively; (2) welfare fund - we are required to set
aside 14% of the aggregate amount of our employees' salaries for the year as
their welfare fund contributions and medical service fees; and (3) housing fund
- both we and our employees are required to deposit 7% (for residents in
Guangzhou area or along the Guangzhou-Shenzhen route), or 13% (for Shenzhen
residents) of the employee's monthly salary into the employee's personal housing
fund account. Save as disclosed, we have not participated in any other
employees' basic medical insurance schemes.

      We had previously constructed and purchased new residential properties for
our employees to improve their living conditions. Under a housing benefit scheme
introduced by the Ministry of Finance, we sold these residential properties to
our employees at a price approved by the government. The losses arising from the
difference between the net book value and the proceeds from the sales of staff
quarters to the employees was approximately RMB226.4 million as of December 31,
2003. Pursuant to the prevailing policies of the Ministry of Finance, the
aforesaid losses should be credited to retained earnings in the statutory
accounts as of January 1, 2001, or in case of a debit balance, to offset against
statutory public welfare fund, statutory surplus reserve, discretionary surplus
reserve and capital surplus reserve upon the approval of the Board. Such
treatment conforms to the accounting principles and regulations applicable to us
in the PRC.

      In our financial statements for the year ended December 31, 2003 prepared
in accordance with IFRS, we accounted for the losses arising from housing scheme
as follows: losses from the sale of completed staff quarters to employees, or
from the sale of premises under construction of which could be reasonably
estimated for future services was approximately RMB226.4 million. Such losses
were amortized on a straight-line basis over the estimated remaining average
service period of employees of 15 years from the time of such sales. During the
year ended December 31, 2003, the amortization charged to the deferred labor
costs of the consolidated income statement was RMB15.09 million and the
accumulated amortization amounted to RMB60.37 million.

      As of December 31, 2003, the unamortized deferred losses, which were
recorded as deferred staff costs in our balance sheet, were RMB166.0 million.

ITEM 6E. SHARE OWNERSHIP

      As of June 23, 2004, none of our directors, supervisors or senior
management own any interest in any shares or options to purchase our shares.

                                       58
<PAGE>

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

ITEM 7A. MAJOR SHAREHOLDERS

      We are a joint stock company organized under the laws of the PRC in March
1996. The Parent Company, a state-owned enterprise under the administration of
the Ministry of Railways owns 67% of our outstanding common shares. The Parent
Company is the sole shareholder of all of our domestic shares in the form of
state legal person shares and is entitled to exercise all rights as our
controlling shareholder according to the relevant laws, rules and regulations.
The Parent Company has substantial influence over our operations, not only in
its capacity as controlling shareholder, but also because of its role as an
administrative agent of the Ministry of Railways that controls and coordinates
railway operations in Guangdong Province, Hunan Province and Hainan Province. As
an instrumentality of the Ministry of Railways, our Parent Company performs
direct regulatory oversight functions with respect to us, including determining
and enforcing technical standards and implementing special transportation
directives.

      The following table sets forth information regarding ownership of our
issued and outstanding capital stock as of December 31, 2003. Note that it
includes all persons who are known by us to own, either as beneficial owners or
holders of record, five percent or more of our capital stock.

<TABLE>
<CAPTION>
       TITLE OF CLASS             IDENTITY OF PERSON OR GROUP    AMOUNT OWNED      PERCENT OF CAPITAL
---------------------------       ---------------------------    ------------      ------------------
                                                               (THOUSAND SHARES)
<S>                              <C>                           <C>                 <C>
Common Shares (Domestic Shares)  The Parent Company               2,904,250             66.99%
</TABLE>

      The following table sets forth all persons who are known by us to own, as
holders of record, five percent or more of our issued and outstanding H shares
as of December 31, 2001.

<TABLE>
<CAPTION>
     TITLE OF CLASS              IDENTITY OF PERSON OR GROUP        AMOUNT OWNED      PERCENT OF CAPITAL
------------------------         ---------------------------        ------------      ------------------
                                                                  (THOUSAND SHARES)
<S>                          <C>                                  <C>                 <C>
Common Shares (H Shares)     Marathon Asset Management Ltd.            115,706              8.08%
Common Shares (H Shares)     Sumitomo Life Insurance Company(1)         71,692              5.00%
Common Shares (H Shares)     Sumitomo Mitsui Asset Management           71,692              5.00%
                             Company, Limited
</TABLE>

--------------
(1) As at December 31, 2003, Sumitomo Life Insurance Company was deemed to be
interested in 71,692,000 H Shares (representing 5.00% of the total H Shares of
the Company or 1.65% of the total share capital of the Company) held by Sumitomo
Mitsui Asset Management Company, Limited, a controlled corporation of Sumitomo
Life Insurance Company.

      As of the date of this report, we are not aware of any arrangement that
may at a subsequent date result in a change of control of Guangshen Railway.

      As an owner of at least 30% of our issued and outstanding shares, our
Parent Company is deemed a controlling shareholder (defined in Item 10 below),
and therefore may not exercise our voting rights with respect to various matters
in a manner prejudicial to the interests of our other shareholders. See "Item
10. Additional Information -- Memorandum and Articles of Association --
Restrictions on Controlling Shareholders". In accordance with our articles of
association, each share of our capital stock has one vote and the shares of the
same class have the

                                       59
<PAGE>

same rights. Other than the restrictions noted in the first sentence of this
paragraph, the voting rights of our major holders of domestic shares are
identical to those of any other holders of our domestic shares, and the voting
rights of our major holders of H shares are identical to those of our other
holders of H shares. Holders of domestic shares and H shares are deemed to be
shareholders of different classes for some matters, which may affect their
respective interests. Holders of H shares and domestic shares are entitled to
the same voting rights.

ITEM 7B. RELATED PARTY TRANSACTIONS

      As part of the restructuring carried out in 1996 in preparation for our
initial public offering, we assumed from Guangshen Railway Company, our
predecessor, Guangzhou Railway (Group) Company, our Parent Company, assets and
liabilities that relate to the businesses now conducted by us, including the
high-speed passenger train project and equity interests in subsidiaries and
joint ventures engaged in the operation of warehouses or freight yards. We also
assumed from Yangcheng Railway certain assets, including 14 shunting locomotives
and passenger coaches that Yangcheng Railway had previously leased to us. Our
predecessor company retained the assets, liabilities and businesses not assumed
by us, including units providing staff quarters and social services such as
health care, educational and public security services and other ancillary
services, as well as subsidiaries or joint ventures whose businesses do not
relate to railroad operations and do not compete with our businesses. As part of
our restructuring, our predecessor was renamed Guangzhou Railway (Group)
Guangshen Railway Enterprise Development Company, or GEDC.

      The Parent Company and GEDC on the one hand and us on the other have
agreed to certain mutual indemnities arising from or in respect of the various
assets and liabilities transferred to or retained by the parties. The purpose of
the indemnities is to ensure that none of Guangshen Railway, our Parent Company
or GEDC will bear liabilities that it has not agreed to assume, even in cases
where third parties have not consented to the division of liabilities among them
and continue to make claims against an entity that has not assumed the relevant
liability. The Parent Company and GEDC have agreed to indemnify Guangshen
Railway against any claims arising from facts or events prior to the
restructuring as well as any claims against Guangshen Railway in respect of
assets and liabilities retained by them in the restructuring.

      As a result of the restructuring, GEDC, Yangcheng Railway and our Parent
Company (together with some of its subsidiaries) continue to provide social
services to Guangshen Railway on a contractual basis. These services include
medical care for our employees and their family members, kindergarten,
elementary and secondary school education for the children of employees, room
and board for our employees traveling on business, employee housing management
and maintenance and public security in our stations and on-board our trains.
GEDC provides most of these services through its facilities in Shenzhen. The
Parent Company and Yangcheng Railway provide to Guangshen Railway in Guangzhou
other services, including health care, employee training and childcare. For the
services rendered, Guangshen Railway pays our Parent Company, Yangcheng Railway
or GEDC, as the case may be, reasonable, arms-length fees.

      Some transactions between Guangshen Railway and our Parent Company and its
subsidiaries have continued after the restructuring, in the form of a
cross-provision of goods and

                                       60
<PAGE>

services. The principal goods and services provided by our Parent Company and
some of its subsidiaries (including Yangcheng Railway and GEDC) to Guangshen
Railway include the following:

      -     locomotives, railcars and operating personnel;

      -     leasing of regular speed passenger coaches;

      -     maintenance services for regular speed locomotives and passenger
            coaches;

      -     railroad transportation related services;

      -     fuel for the operation of locomotives;

      -     railway related materials;

      -     overhaul and emergency repair of our track and bridges;

      -     medical and health care services;

      -     public security;

      -     educational services; and

      -     employee housing.

      The aggregate costs to us of these goods and services in 2001, 2002 and
2003 were RMB243.2 million, RMB153.4 million and RMB167.2 million, respectively.

      The principal goods and services provided by us to our Parent Company and
its subsidiaries include railroad transportation related services, sale of duty
free goods on-board of our Hong Kong through trains and at Guangzhou station and
Guangzhou East Station, and advertising space at our Shenzhen station.

      Under an agreement with Yangcheng Railway, Yangcheng Railway and Guangshen
Railway provide each other and their passengers with services at Guangzhou
Station, including, among other things, passenger boarding, ticket collection
and on-board water supply.

      The prices at which these goods and services are provided are different in
each case. In general:

      -     prices for railroad transportation-related services are determined
            in accordance with the actual costs incurred in providing these
            services plus a profit margin of 8% of aggregate chargeable costs
            (fuel expenses, asset depreciation and water utility fees are not
            counted as chargeable costs for purposes of this calculation), which
            amount, Guangshen Railway believes, is consistent with that which
            would be charged in an arm's-length transaction;

      -     the rental amounts for the high-speed passenger coaches leased to
            Guangshen Railway by our Parent Company equal 6% of our Parent
            Company's purchase price for the coaches, approximating our Parent
            Company's depreciation expenses for the coaches; Guangshen Railway
            also bears all costs of maintenance and overhaul of these coaches;

      -     the prices for social and related services provided by Yangcheng
            Railway (i.e., educational) and GEDC (i.e., security, medical,
            educational and housing) are determined based on the actual cost of
            providing these services;

                                       61
<PAGE>


      -     the prices for social and related services provided by our Parent
            Company are determined on the following basis:

            - medical services          : in accordance with the relevant local
                                          standards, subject to a 20% discount
                                          (except in respect of medicine and
                                          registration fees);

            - educational services      : in accordance with the standards set
                                          by our Parent Company;

            - child care services       : in accordance with the actual cost
                                          incurred for providing such services;

            - newspaper supply services : at an agreed cost of approximately
                                          RMB25 per year per copy of newspaper
                                          supplied, which cost may change based
                                          on cost changes to our Parent Company;

      -     the prices for the supply of railroad transportation related
            materials are determined in accordance with the relevant regulations
            issued by our Parent Company (which regulations are applicable to
            other railroads under the jurisdiction of our Parent Company);

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

      -     Guangshen Railway is entitled to 45% of the profits derived from the
            advertising businesses at its Shenzhen station.

      The agreement with Yangcheng Railway was revised on March 6, 1996 and
provides for a 10-year lease period starting from 1996. The lease with the
Ministry of Railways is renewable annually. Substantially all the above
transactions will continue in the future, although not necessarily on the same
terms.

      The chart below sets forth a breakdown by category of the material
transactions between our Parent Company and its affiliates and us in 2001, 2002
and 2003.

<TABLE>
<CAPTION>
                           DESCRIPTION OF TRANSACTION                                2001      2002       2003
                           --------------------------                                ----      ----       ----
                                                                                            (RMB THOUSANDS)
<S>                                                                                 <C>        <C>        <C>
Lease of locomotives and related services from Yangcheng Railway(1).............    70,345     42,047     40,882
Provision of trains and related services from Guangmeishan Railway Company, a
  subsidiary of our Parent Company..............................................     5,205      4,864      5,305
</TABLE>

                                       62
<PAGE>

<TABLE>
<CAPTION>
                          DESCRIPTION OF TRANSACTION                                        2001      2002       2003
                          --------------------------                                        -------------------------
                                                                                                   (RMB THOUSANDS)
<S>                                                                                        <C>        <C>       <C>
Purchase of materials and supplies from Guangzhou Railway Material Supply
  Company, a subsidiary of our Parent Company..........................................    36,544     33,074     50,687
Social services (employee housing, health care, educational and public security
  services and other ancillary services) provided by our Parent Company and
  affiliates (including GEDC)..........................................................    56,800     66,744     68,079
Operating lease rentals paid to the Ministry of Railways...............................    52,296     57,298     58,904
Provision of trains and related services by the Ministry of Railway....................    66,475    211,667    201,870
Train use fees and related service fees paid to Guangzhou Railway (Group)
  Passenger Transportation Company, a subsidiary of our Parent Company.................     7,844      6,681      2,207
Interest expenses paid to our Parent Company(ii).......................................     1,178      2,443      2,037
Interest received from the Ministry of Railways' Railroad Deposit-taking Center........    11,887      3,239      3,516
Interest received from Pingnan Railway, an affiliate of our Parent Company(ii).........     1,866        806        827
Interest received from Guangmeishan Railway Company(ii)................................     1,291      1,884        901
</TABLE>

------------------
(i)   The lease agreement with Yang Cheng Railway Company was revised on March
      6, 1996 and provides for a 10-year lease period starting from 1996. The
      lease with MOR is based on the uniform rate set by MOR and is renewable
      annually.

(ii)  The interest was resulted from the long-distance transportation services,
      which was calculated based on the average balances due from/to related
      parties on a quarterly basis, at the prevailing interest rates of
      six-month bank loans.

      As of December 31, 2003, we had the following material balances with our
related parties:

<TABLE>
<CAPTION>
                                                 31 December,
                                         ---------------------------
                                         2001       2002        2003
                                         ---------------------------
                                               RMB THOUSANDS
<S>                                    <C>         <C>         <C>
Temporary cash investments in the
   MOR's Railroad Deposit-taking
   Center                              250,152     168,000     168,000
Bank deposits in the MOR's railroad
   Deposit-taking Center                38,767     206,452     321,985
Due from Parent Company                 29,499      39,374           -
Due to Parent Company                        -           -     (37,230)
Due from related parties               276,013     267,885     199,921
   - Trading balance                    82,923      54,425      10,608
   - Non-trading balance               193,090     213,460     189,313
Due to related parties                 (58,650)   (158,199)   (120,605)
   - Trading balance                   (40,196)   (125,847)    (60,128)
   - Non-trading balance               (18,454)    (32,352)    (60,477)
</TABLE>

                                       63
<PAGE>

      As of 31 December, 2003, the balances with the MOR, the Parent Company and
related parties are unsecured, non-interest bearing and repayable on demand,
except for those disclosed in notes 10(b) and 24(a) to the audited financial
statements included elsewhere in this annual report and bank deposits in MOR's
railroad Deposit-taking centre. These balances resulted from transactions
between our related parties and us in the ordinary course of business. The
balances with our Parent Company are all non-trading in nature. The balances
with our related parties, which are trading in nature, are all due within one
year.

      Our related party transactions have been carried out on usual terms
according to the conditions and waiver granted by The Stock Exchange of Hong
Kong Limited and the contracts entered into between our related parties and us.
Our independent non-executive directors confirmed that these transactions (which
are "connected transactions" as defined in the Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited) entered into by us during
2003 were entered into in the ordinary and usual course of our business on
normal commercial terms or on terms that were fair and reasonable so far as our
shareholders were concerned, or in accordance with the terms of an agreement
governing such transactions or, where there was no such agreement, on terms no
less favorable than those offered to (or from) independent third parties.

ITEM 7C. INTERESTS OF EXPERTS AND COUNSEL

      Not applicable.

                                       64
<PAGE>

ITEM 8. FINANCIAL INFORMATION

ITEM 8A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

ITEM 8A.1 - ITEM 8.A.6:

      See pages F-1 to F-41 following Item 19.

ITEM 8A.7 LEGAL PROCEEDINGS

      As of December 31, 2003, our interest in an associated company, Guangzhou
Tiecheng Enterprise Company Limited, or "Tiecheng," amounted to approximately
RMB140 million. In 1996, Tiecheng and a Hong Kong incorporated company jointly
established Guangzhou Guantian Real Estate Company Limited, or "Guangzhou
Guantian", a sino-foreign cooperative joint venture to develop certain
properties near a railway station owned and operated by us.

      On October 27, 2000, Guangzhou Guantian together with Guangzhou Guanhua
Real Estate Company Limited, or "Guangzhou Guanhua," and Guangzhou Guanyi Real
Estate Company Limited, or "Guangzhou Guanyi," agreed to act as joint
guarantors, or, collectively, the "Guarantors," of certain payables of Guangdong
Guangcheng Real Estate Company Limited, or "Guangdong Guancheng," owned to an
independent third party. The Guarantors, Guangdong Guancheng were related
companies with a common chairman. Guangdong Guancheng failed to repay these
payables, and the Guarantors were found liable under a court verdict made on
November 4, 2001 to pay the independent third party an amount of approximately
RMB257 million plus interest.

      On December 15, 2003, Guangzhou Guantian applied to the High People's
Court of Guangdong Province, or "the Court," to discharge the aforesaid
guarantee, which application was heard by the court on March 18, 2004. The Court
has yet to complete the procedures for its reassessment of the previous court
verdict. If Guangzhou Guantian were held responsible for the guarantee, we may
need to provide for impairment on our interest in Tiecheng. However, based on
counsel's advice, the directors are of the opinion that the guarantee
arrangement is invalid under the relevant PRC rules and regulations.
Accordingly, the directors consider that the chance of Guangzhou Guantian to
settle the above claim is remote and no provision for impairment on the
interests in Tiecheng was made in the accounts.

      Except as disclosed, we are not a party to any material legal proceeding
and no material legal proceeding is known to us to be pending against us or with
respect to our properties.

ITEM 8A.8 DIVIDEND DISTRIBUTIONS

      We make decisions concerning the payment of dividends on an annual basis.
Any dividends are paid at the discretion of our board of directors, which makes
a recommendation in this regard that must be confirmed at our annual general
shareholders' meeting. Our articles of association permit us to distribute
dividends from profits more than once a year. The amount of these interim
dividends cannot exceed 50% of our distributable income as stated in our interim

                                       65
<PAGE>

profit statements. In accordance with our articles of association, the amounts
available for the purpose of paying dividends will be deemed to be the lesser
of:

      -     net after-tax income determined in accordance with PRC accounting
            standards and regulations; and

      -     net after-tax income determined in accordance with either
            international accounting standards or the accounting standards of
            the countries in which our shares are listed.

      See "Item 10. E Taxation" for a discussion of the tax consequences related
to the receipt of dividends.

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

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

      On April 20, 2004, the Board proposed a final dividend distribution of
RMB0.105 per share to our shareholders for the year ended December 31, 2003. The
final dividend payment has been approved by the shareholders at our 2003 annual
general meeting held on June 10, 2004.

ITEM 8B. SIGNIFICANT CHANGES

      Other than events already mentioned in this annual report, there have been
no significant changes since December 31, 2003.

                                       66
<PAGE>

ITEM 9. THE OFFER AND LISTING

ITEM 9A. THE OFFER AND LISTING DETAILS

PRICE RANGE OF OUR H SHARES AND ADSS

      As of December 31, 2003 and June 18, 2004, there were 1,431.3 million H
shares issued and outstanding. As of December 31, 2003 and June 18, 2004, there
were, respectively, 4,862,581 and 5,003,261 ADSs outstanding held by 177 and 174
registered holders. Since a percentage of the ADSs are held by nominees, these
numbers may not be representative of the actual number of U.S. beneficial
holders of ADSs or the number of ADSs beneficially held by U.S. persons. The
depositary for the ADSs is JPMorgan Chase Bank.

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

<TABLE>
<CAPTION>
                               NEW YORK STOCK EXCHANGE   STOCK EXCHANGE OF HONG KONG
                               -----------------------   ---------------------------
      CALENDAR PERIOD              HIGH        LOW             HIGH       LOW
      ---------------             -----       -----            ----       ----
                                    (US$ PER ADS)              (HK$ PER H SHARE)
<S>                               <C>        <C>               <C>        <C>
1999 .......................      7.625      4.8125             1.19      0.72
2000 .......................      7.625      4.5625             1.23       0.7
2001 .......................      10.48        6.19             1.76      0.90
2002
  January to March .........       9.60        8.38             1.47      1.30
  April to June ............      10.24        8.87             1.58      1.42
  July to September ........       9.60        8.30             1.49      1.33
  October to December ......       8.90        8.05             1.39      1.27
2003
  January to March .........        9.4        8.69             1.47      1.32
  April to June ............       9.68        8.20             1.48      1.26
  July to September ........       13.7        9.15            2.125      1.42
  October to December ......      14.84       12.88             2.25      1.95
2004
  January ..................      17.25       14.20             2.65      2.25
  February .................      15.35       13.95             2.40      2.15
  March ....................      15.60       14.47            2.475      2.30
  April ....................      15.54       13.39             2.45      2.05
  May ......................      14.45       11.77            2.275      1.77
  June (through June 18) ...       17.9       12.93             2.20      2.00
</TABLE>

      During the year ended December 31, 2001, we did not purchase, sell or
redeem any of our shares.

ITEM 9B. PLAN OF DISTRIBUTION

      Not applicable.

                                       67
<PAGE>

ITEM 9C. MARKETS

      Our H shares are listed on the Stock Exchange of Hong Kong under the stock
code "0525" and American Depositary Shares representing our H shares are listed
on the New York Stock Exchange under the stock code "GSH".

ITEM 9D. SELLING SHAREHOLDERS

      Not applicable.

ITEM 9E. DILUTION

      Not applicable.

ITEM 9F. EXPENSES OF THE ISSUE

      Not applicable.

                                       68
<PAGE>

ITEM 10. ADDITIONAL INFORMATION

      We were established as a joint stock limited company under the Company Law
of the PRC on March 6, 1996. Our legal name is [COMPANY NAME IN CHINESE], and
its English translation is Guangshen Railway Company Limited.

ITEM 10A. SHARE CAPITAL

      Not Applicable.

ITEM 10B. MEMORANDUM AND ARTICLES OF ASSOCIATION

      Described below is a summary of the significant provisions of our articles
of association as currently in effect. As this is a summary, it does not contain
all the information that may be important to you. A copy of our complete
articles of association was filed with the U.S. Securities and Exchange
Commission (the "SEC") as an exhibit to the registration statement on Form F-1
(Registration No.333-3382) under the Securities Act in connection with our
global offering of H shares and related American depositary shares on May 13,
1996.

GENERAL

      We are a joint stock limited company established in accordance with the
Company Law of China, the State Council's special regulations regarding the
issue of shares overseas and the listing of shares overseas by companies limited
by shares and other relevant laws and regulations of the PRC. Guangshen Railway
was established by way of promotion with approval evidenced by the document "Ti
Gai Sheng" [1995] No.151 of the PRC's State Commission For Restructuring The
Economic System. We were registered with and obtained a business licence from
the Administration Bureau of Industry And Commerce of Shenzhen, Guangdong
Province on March 6, 1996. The number of our business licence is Shen Si Zhi
N12183. Article 12 of our articles of association states that our object is to
carry on the business of railway transportation.

SIGNIFICANT DIFFERENCES BETWEEN H SHARES AND DOMESTIC SHARES

      Holders of H shares and domestic shares, with minor exceptions, are
entitled to the same economic and voting rights. However, our articles of
association provide that holders of H shares will receive dividends in Hong Kong
dollars while holders of domestic shares will receive dividends in renminbi.
Other differences between the rights of holders of H shares and domestic shares
relate primarily to ownership and transferability. H shares may only be
subscribed for and owned by legal and natural persons of Taiwan, Hong Kong,
Macau or any country other than the PRC, and must be subscribed for, transferred
and traded in a foreign currency. Other than the limitation on ownership, H
shares are freely transferable in accordance with our articles of association.
Domestic shares may only be subscribed for and owned by legal or natural persons
in the PRC, and must be subscribed for and traded in renminbi. Transfers of
domestic shares are subject to restrictions set forth under PRC rules and
regulations, which are not applicable to H shares, and also to restrictions on
transfers of shares owned by the PRC government, and by our directors or
employees. Domestic shares and H shares are also distinguished by differences in
administration and procedure, including provisions relating to notices and
financial reports to be

                                       69
<PAGE>

sent to shareholders, dispute resolution, registration of shares on different
parts of the register of shareholders, the method of share transfer and
appointment of dividend receiving agents.

RESTRICTIONS ON TRANSFERABILITY

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

      -     relevant transfer fees are 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.

DIVIDENDS

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

      -     PRC accounting standards and regulations,

      -     international accounting standards; and

      -     the accounting standards of the countries in which our shares are
            listed.

      The articles of association allow for distributions of cash dividends or
shares. Dividends may only be distributed, however, after allowance has been
made for:

      -     making up losses, if any, for prior years;

      -     allocations to the statutory common reserve fund;

                                       70
<PAGE>

      -     allocations to the statutory public welfare fund; and

      -     allocations to a discretionary common reserve if approved by the
            shareholders.

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

VOTING RIGHTS AND SHAREHOLDER MEETINGS

      General shareholders' meetings can be annual general shareholders'
meetings or extraordinary general meetings. Shareholders' meetings shall be
convened by the board of directors. The board of directors shall convene an
annual shareholders' meeting within six months of the end of each financial
year. The shareholders provide us with principal authority at general meetings.
We exercise our functions and powers in compliance with our articles of
association and our by-laws.

      We shall not enter into any contract with any person other than a
director, supervisor, general manager or other senior officer of Guangshen
Railway whereby the management and administration of the whole or any
substantial part of any business of Guangshen Railway is to be handed over to
such person without the prior approval of the shareholders in a general meeting.

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

      -     the number of directors falls short of the number stipulated in our
            by-laws or is below two-thirds of the number required in our
            articles of association;

      -     our accrued losses amount to one-third of our total share capital;

      -     shareholders holding not less than 10% of our issued shares carrying
            the right to vote make a request in writing to convene an
            extraordinary general meeting; or

      -     the board of directors considers it necessary or the supervisory
            committee proposes to convene such a meeting.

      Where we convene a general shareholders' meeting (when we have more than
one shareholder), we shall, not less than 45 days before the meeting, issue a
written notice to all shareholders whose names appear in the share register of
the items to be considered and the date and venue of the meeting. Any
shareholder intending to attend the general shareholders' meeting

                                       71
<PAGE>
shall give us a written reply stating his or her intention to attend the meeting
20 days prior to the date of the meeting.

      Where we convene an annual general meeting, shareholders holding not less
than five percent of our total shares shall be entitled to submit new motions in
writing to us. We shall include in the agenda of the meeting all items in the
motion that fall within the scope of the general shareholders' meeting. An
extraordinary shareholders' meeting shall not decide on matters that are not
specified in the notice.

      Based on the written replies received by us 20 days before a general
shareholders' meeting, we shall calculate the number of voting shares
represented by shareholders who have indicated their intention to attend the
meeting. Where the number of voting shares represented by those shareholders
reaches half of our total number of shares, we may convene the general
shareholders' meeting. Otherwise, we shall, within five days, inform the
shareholders again of the motions to be considered, the date and the venue of
the meeting by way of a public announcement. After making the announcement, the
general shareholders' meeting may be convened.

      A notice of meeting of shareholders shall:

      -     be in writing;

      -     specify the place, day and the time of the meeting;

      -     state the motions to be discussed at the meeting;

      -     provide such information and explanations as are necessary for the
            shareholders to exercise an informed judgment on the proposals
            before them. Without limiting the generality of the foregoing, where
            a proposal is made to amalgamate Guangshen Railway with another
            entity, to repurchase the shares of Guangshen Railway, to reorganize
            its share capital or to restructure Guangshen Railway 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 or other
            senior officer of Guangshen Railway 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 shareholders of the same class;

      -     contain the text of any special resolution proposed to be moved 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

                                       72

<PAGE>

      -     state the time within which and the address to which the relevant
            instruments appointing the proxies for the meeting are to be
            delivered.

      Notice of general meetings of shareholders shall be served on each
shareholder whether or not entitled to vote at that meeting, by personal
delivery or prepaid mail to the address of the shareholder as shown in the share
register. For the benefit of holders of domestic shares, notice of general
meetings of shareholders may also be given by way of public announcement by
publication in one or more newspapers specified by the securities regulatory
authorities on any day within 45 to 50 days prior to the meeting. This public
announcement shall be deemed receipt by each holder of domestic shares of notice
of the relevant meeting. The accidental omission to give notice of a meeting to,
or the non-receipt of notice of a meeting by any person entitled to receive
notice shall not invalidate the meeting and the resolutions adopted. Where we
convene an annual general meeting, we shall include in the notice of the meeting
any resolutions submitted by shareholders (including proxies) who hold five
percent or more of the total number of shares, provided that these resolutions
fall within the scope of a general shareholders' meeting.

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

      -     work reports of the board of directors and the supervisory
            committee;

      -     profit distribution proposals and loss recovery proposals formulated
            by the board of directors;

      -     appointment and 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, profit
            and loss account and other financial statements; and

      -     matters other than those that are required by laws, administrative
            regulations or our articles of association to be adopted by way of
            special resolution.

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

      -     increase or reduction of our share capital and the issuance of
            shares of any class, warrants and other similar securities;

      -     issuance of company debentures;

      -     division, merger, dissolution and liquidation of Guangshen Railway;

      -     amendment to our articles of association; and

      -     any other matter that, according to an ordinary resolution of the
            shareholders

                                       73

<PAGE>

            meeting, may have a significant impact on Guangshen Railway and
            requires adoption by way of a special resolution.

      Shareholders have the right to attend general meetings of shareholders and
to exercise their voting rights, in person or by proxy, in relation to the
amount of voting shares they represent. Each share carries the right to one
vote.

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

      -     by the chairman of the meeting;

      -     by at least two shareholders who possess the right to vote, present
            in person or by proxy; or

      -     by one or more shareholders (including proxies) representing either
            separately or in aggregate, not less than one-tenth of all shares
            having the right to vote at the meeting.

      Unless a poll is demanded, a declaration by the chairman of the meeting
that a resolution has on a show of hands been carried and an entry to that
effect in the minutes of the meeting shall be conclusive evidence of the fact,
without proof of the number or proportion of the votes recorded in favor of or
against that resolution, that the resolution has been carried. A demand for a
poll may be withdrawn. A poll demanded on the election of the chairman, or on a
question of adjournment, shall be taken. A poll demanded on any other question
shall be taken at such time as the chairman of the meeting directs, and any
business other than that on which the poll has been demanded may be proceeded
with, pending the taking of the poll. The result of the poll shall be deemed to
be the resolution of the meeting at which the poll was demanded. On a poll taken
at a meeting, a shareholder entitled to two or more votes need not cast all his
or her votes in the same way. In the case of a tie, the chairman of the meeting
shall be entitled to one additional vote.

BOARD OF DIRECTORS

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

      Our directors' compensation is determined by resolutions approved at the
general shareholders' meeting. Our directors have no power to decide their own
compensations.

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

LIQUIDATION RIGHTS

      In the event of the termination or liquidation of Guangshen Railway,
ordinary shareholders of Guangshen Railway shall have the right to participate
in the distribution of surplus assets of Guangshen Railway in accordance with
the number of shares held by those shareholders.

                                       74

<PAGE>

LIABILITY OF SHAREHOLDERS

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

INCREASES IN SHARE CAPITAL AND PREEMPTIVE RIGHTS

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

REDUCTION OF SHARE CAPITAL AND PURCHASE BY US OF OUR SHARES

      We may reduce our registered share capital. In the following
circumstances, we may repurchase shares, that we issued in the market, subject
to a resolution passed in accordance with the provisions of our articles of
association and approval by the securities regulatory authorities:

      -     to cancel shares by way of reduction of capital;

      -     to merge with another company that holds our shares; or

      -     other circumstances permitted by laws and regulations.

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

      -     under a general offer;

      -     on a stock exchange; or

      -     by off-market contract.

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

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

      Unless we are in the process of liquidation:

      -     where we repurchase our shares at par value, the amount of the total
            par value shall be deducted from our distributable profits or out of
            the proceeds of a new issue of shares made for that purpose; and

      -     where Guangshen Railway repurchases its shares at a premium, an
            amount equivalent to their total par value shall be deducted from
            our distributable profits or the proceeds of a fresh issue of shares
            made for that purpose. Payment of the portion in excess of their
            face value shall be effected as follows:

            -     if the shares being repurchased were issued at par value,
                  payment shall be made out of our 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 for that purpose,
                  provided that the amount paid out of the proceeds of the new
                  issue may not exceed the lesser of 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 fresh issue).

      Payment by us in consideration for:

      -     the acquisition of rights to repurchase our shares; the variation of
            any contract to repurchase our shares; or

      -     the release of any of our obligations under any contract to
            repurchase our shares; shall be made out of our distributable
            profits.

RESTRICTIONS ON CONTROLLING SHAREHOLDERS

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

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

      -     to approve the expropriation, by a director or supervisor (for his
            or her own benefit or for the benefit of another person), in any
            guise, of our assets, including without

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            limitation opportunities advantageous to us; or

      -     to approve the expropriation by a director or supervisor (for his or
            her own benefit or for the benefit of another person) of the
            individual rights of other shareholders, including without
            limitation rights to distributions and voting rights, save and
            except where it was done pursuant to a restructuring submitted to
            and approved by our shareholders in accordance with our articles of
            association.

      "Controlling shareholder" means a person or a group of persons who
satisfies one or more of the following conditions:

      -     he or she alone or the group acting in concert has the power to
            elect more than half the board of directors;

      -     he or she alone or acting in concert with others has the power to
            exercise or to control the exercise of 30% or more of our voting
            rights;

      -     he or she alone or acting in concert with others holds 30% or more
            of our issued and outstanding shares; or

      -     he or she alone or acting in concert with others in any other manner
            controls us in fact.

CHANGING RIGHTS OF A CLASS OF SHAREHOLDERS

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

DUTIES OF DIRECTORS, SUPERVISORS AND OTHER SENIOR OFFICERS IN INTERESTED
TRANSACTIONS

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

      Unless the interested director, supervisor or other senior officer
discloses his or her interests and the contract or transaction is approved by
the board of directors at a meeting in which the interested director, supervisor
or other senior officer is not counted in the quorum and refrains from voting, a
contract or transaction in which that director, supervisor or other senior
officer is materially interested is voidable by us except as against a bona fide
party to the contract or transaction acting without notice of the breach of duty
by the interested director or supervisor or other senior officer.

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      We shall not make a loan to or provide any guarantees in connection with a
loan to a director, supervisor or other senior officer of Guangshen Railway or
any of their respective associates. However, the following transactions are not
subject to this prohibition:

      -     the provision by us of a loan or a guarantee of a loan to one of our
            subsidiaries;

      -     the provision by us of a loan or a guarantee in connection with a
            loan or any other funds to any of our directors, supervisors 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 or other senior officers
            or their respective associates in the ordinary course of our
            business on normal commercial terms, provided that the ordinary
            course of business includes the lending of money or the giving of
            guarantees.

ITEM 10C. MATERIAL CONTRACTS

      We believe that the material contracts we entered into during the fiscal
year of 2003 were all made in the ordinary course of business.

ITEM 10D. EXCHANGE CONTROLS

      The PRC government imposes control over its foreign currency reserves in
part through direct regulation of the conversion of renminbi into foreign
exchange and through restrictions on foreign trade. Effective January 1, 1994,
the dual foreign exchange system in China was abolished in accordance with the
notice of the People's Bank of China concerning future reform of the foreign
currency control system issued December 1993. The conversion of renminbi into
U.S. dollars in China currently must be based on the People's Bank of China
rate. The People's Bank of China rate is set based on the previous day's Chinese
interbank foreign exchange market rate and with reference to current exchange
rates on the world financial markets.

      Any future devaluation of the renminbi against the U.S. dollar (whether
due to a decrease in the foreign currency reserves held by the PRC government or
any other reason) will have an adverse effect upon the U.S. dollar equivalent
and Hong Kong dollar equivalent of our net income and increase the effective
cost of foreign equipment and the amount of foreign currency expenses and
liabilities. We have no plans to hedge our currency exposure in the future. No
assurance can be given that the Hong Kong dollar to U.S. dollar exchange rate
link will be maintained in the future, or, therefore, that the Hong Kong dollar
revenues of Guangshen Railway will insulate Guangshen Railway from changes in
the renminbi-U.S. dollar and renminbi-HK dollar exchange rates. Furthermore, any
change in exchange rates that has a negative effect on the market for the H
shares in either the United States or Hong Kong is likely to result in a similar
negative effect on the other market.

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      We have been, and will continue to be, affected by changes in exchange
rates in connection with our ability to meet our foreign currency obligations
and will be affected by such changes in connection with our ability to pay
dividends on H shares in Hong Kong dollars and on ADSs in U.S. dollars. As of
December 31, 2003, we maintained the equivalent of approximately RMB974.0
million in U.S. dollar or Hong Kong dollar-denominated balances for purposes of
satisfying our foreign currency obligations (e.g., to purchase foreign
equipment) and paying dividends to our overseas shareholders. See Note 32 to our
audited consolidated financial statements. Guangshen Railway believes that it
has or will be able to obtain sufficient foreign exchange to continue to satisfy
these obligations. Guangshen Railway does not engage in any financial contract
or other arrangement to hedge its currency exposure.

      We are not aware of any other PRC laws, decrees or regulations that
restrict the export or import of capital or that affect the remittance of
dividends, interest or other payments to non-resident holders.

ITEM 10E. TAXATION

PRC TAXATION

TAX BASIS OF ASSETS

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

INCOME TAX

      Since January 1, 1994, income tax payable by PRC domestic enterprises,
including state-owned enterprises and joint stock companies, has been governed
by the PRC Enterprise Income Tax Provisional Regulations and its implementation
measures, or EIT regulations, which provide for an income tax rate of 33%,
unless a lower rate is provided by law, administrative regulations or State
Council regulations. Guangshen Railway is generally subject to tax at a rate of
33% pursuant to the EIT Regulations. However, as a result of our incorporation
in the Shenzhen Special Economic Zone, our corporate income tax rate is reduced
to 15%. Pursuant to an approval from the Shenzhen Local Tax Bureau dated
November 12, 1997, Guangshen Railway was also entitled to a 50% further
reduction of income tax arising from our high-speed train services in 1997, 1998
and 1999. To the extent that Guangshen Railway engages in other businesses
through subsidiaries, those other companies are subject to corporate income tax
rates of either 15% or 33% (applicable to places other than Shenzhen), depending
mainly on their places of incorporation.

VALUE ADDED TAX

      Pursuant to the Provisional Regulations of the PRC Concerning Value Added
Tax effective from January 1, 1994 and its implementing rules, any goods sold by
Guangshen Railway, including any sales at concession stands operated by
Guangshen Railway, are subject to value added tax. Value added tax payable is
calculated by "output value added tax" minus "input value added tax." Input
value added tax payable by Guangshen Railway on purchases is

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recoverable out of the output value added tax collected from the customers, and
any excess of output value added tax over input value added tax paid is payable
to the tax authority.

      The rate of value added tax on inputs and outputs is 17%.

BUSINESS TAX

      Pursuant to the Provisional Regulations of the PRC Concerning Business Tax
effective from January 1, 1994 and its implementing rules, business tax is
imposed on enterprises that provide transportation services in the PRC. Business
tax is levied at a rate of 3% on the transport of passengers and goods in or out
of the PRC.

TAX ON DIVIDENDS

      For an Individual Investor. According to the Provisional Regulations of
the PRC Concerning Questions of Taxation on Enterprises Experimenting with the
Share System promulgated on June 12, 1992, referred to herein as the provisional
regulations, an income tax of 20% shall be withheld in accordance with the
Individual Income Tax Law of the PRC on dividend payments from such enterprises
to an individual. For a foreign individual who is not a resident of the PRC, the
receipt of dividends from a company in the PRC is normally subject to this 20%
PRC withholding tax unless reduced by an applicable double-taxation treaty.
However, on July 21, 1993, the PRC State Tax Bureau issued a Notice Concerning
the Taxation of Gains on Transfers and Dividends from Shares (Equities) Received
by Foreign Investment Enterprises, Foreign Enterprises and Foreign Individuals,
referred to herein as the tax notice, which stipulates that dividends from a PRC
company on shares listed on an overseas stock exchange, or overseas shares, such
as H shares (including H shares represented by ADSs), would not for the time
being be subject to PRC withholding tax. The relevant tax authority has thus far
not collected any withholding tax on dividend payments on overseas shares.

      Amendments to the Individual Income Tax Law of the PRC were promulgated on
October 31, 1993 and became effective on January 1, 1994. These amendments
stipulate that any provisions of prior administrative regulations concerning
individual income tax that contradict the amendments shall be superseded by the
amendments. The amendments and the amended Individual Income Tax Law may be
interpreted as meaning that foreign individuals will be subject to a withholding
tax on dividends received from a company in the PRC at a rate of 20% unless such
income is specifically exempted from individual income tax by the financial
authority of the State Council.

      However, in a letter dated July 26, 1994 to the State Commission for
Restructuring the Economic System, the State Securities Commission and the China
Securities Regulatory Commission regarding "Relevant Tax Issues on Dividends
Received by Foreigners Who Hold Shares of Listed PRC Companies," the State Tax
Bureau reiterated the temporary tax exemption stated in the Tax Notice for
dividends received from a PRC company listed overseas. As long as this letter is
in effect, foreign individual investors will not be subject to the 20%
withholding tax on dividends received from such a company.

      For an Enterprise. When a foreign enterprise with no establishment or
office in the PRC receives dividends from a company in the PRC, the foreign
enterprise is normally subject to PRC

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withholding tax of 20% under the IncomeTax Law of the PRC Concerning Enterprises
with Foreign Investment and Foreign Enterprises. With respect to dividends paid
by a company incorporated in the Shenzhen Special Economic Zone (such as
Guangshen Railway), the withholding tax rate is 10%. However, according to the
Tax Notice, a foreign enterprise without an establishment in the PRC receiving a
dividend payment on overseas shares, such as H shares or ADSs, will not be
subject to withholding tax on the dividend payment.

CAPITAL GAINS TAX

      For An Individual Investor. Although the Provisions of Implementation of
Individual Income Tax Law of the PRC, issued on January 28, 1994, stipulate that
gains realized on the sale of shares by an individual would be subject to income
tax at a rate of 20% and empower the Ministry of Finance to draft detailed rules
on the mechanism of collecting this tax, the Tax Notice provides that gains
realized by holders (both individuals and enterprises) of H shares or ADSs will
not be subject to income tax.

      For An Enterprise. A foreign enterprise with no establishment or office in
the PRC is generally subject to a 20% tax on capital gains from the sale of
shares in a company in the PRC. However, We believe that the tax exemption on
capital gains enjoyed by foreign enterprises pursuant to the Tax Notice
continues to be valid.

TAX TREATIES

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

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

UNITED STATES FEDERAL INCOME TAXATION

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

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      -     tax-exempt entities;

      -     certain insurance companies;

      -     broker-dealers;

      -     traders in securities that elect to mark to market;

      -     U.S. holders liable for alternative minimum tax;

      -     U.S. holders that own 10% or more of our voting stock;

      -     U.S. holders that hold the H shares or ADSs as part of a straddle or
            a hedging or conversion transaction; or

      -     U.S. holders whose functional currency is not the U.S. dollar.

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

      You are a "U.S holder" if you are:

      -     a 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.

      If a partnership holds the H shares or ADSs, the tax treatment of a
partner generally will depend on the status of the partner and the activities of
the partnership. If you are a partner of a

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partnership that holds the H sharesor ADSs, we urge you to consult your tax
advisors regarding the consequences of the purchase, ownership and disposition
of the H shares or ADSs.

      This discussion does not address any aspects of United States taxation
other than federal income taxation.

      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.

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

DISTRIBUTIONS ON THE H SHARES OR ADSS

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

            -     a foreign corporation that is eligible for the benefits of a
                  comprehensive income tax treaty with the United States that
                  includes an exchange of information program; and

            -     a foreign corporation if its stock with respect to which a
                  dividend is paid (or ADSs backed by such stock) is readily
                  tradable on an established securities market within the United
                  States,

but does not include an otherwise qualified foreign corporation that is a PFIC.
We believe that we will be a qualified foreign corporation so long as we are not
a PFIC and we are considered eligible for the benefits of the Agreement between
the Government of the United States of America and the Government of the
People's Republic of China for the Avoidance of Double Taxation and the
Prevention of Tax Evasion with Respect to Taxes on Income (the "Treaty"). Our
status as a qualified foreign corporation, however, may change.

      Distributions that exceed our current and accumulated earnings and profits
will be treated as a return of capital to you to the extent of your basis in the
H shares or ADSs and thereafter as capital gain. Any dividend will not be
eligible for the dividends-received deduction generally allowed to United States
corporations in respect of dividends received from United States corporations.
The amount of any distribution of property other than cash will be the fair
market value of such property on the date of such distribution.

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

      Subject to various limitations, any Chinese tax withheld from
distributions in accordance with Chinese law, as limited by the Treaty, will be
deductible or creditable against your United States federal income tax
liability. For foreign tax credit limitation purposes, dividends paid on the H
shares or ADSs will be foreign source income, and generally will be treated as
"passive income" or, in the case of some U.S. holders, "financial services
income." You may not be able to claim a foreign tax credit (and instead may
claim a deduction) for non-United States taxes imposed on dividends paid on the
H Shares or ADSs if you (i) have held the H Shares or ADSs for less than a
specified minimum period during which you are not protected from risk of loss
with respect to such shares, (ii) are obligated to make payments related to the
dividends (for example, pursuant to a short sale) or (iii) hold the H shares or
ADSs in an arrangement in which your expected economic return, after non-United
States taxes, is insubstantial.

SALE, EXCHANGE OR OTHER DISPOSITION

      Upon a sale, exchange or other disposition of the H shares or ADSs, you
will recognize a capital gain or loss for United States federal income tax
purposes in an amount equal to the difference between the U.S. dollar value of
the amount realized and your tax basis, determined in U.S. dollars, in such H
shares or ADSs. Any gain or loss will generally be United States source gain or
loss for foreign tax credit limitation purposes. Capital gain of certain
non-corporate U.S. holders, including individuals, is generally taxed at a
maximum rate of 15% where the property has been held more than one year. Your
ability to deduct capital losses is subject to limitations.

      If you are paid in a currency other than U.S. dollars, any gain or loss
resulting from currency exchange fluctuations during the period from the date of
the payment resulting from sale, exchange or other disposition to the date you
convert the payment into U.S. dollars will be treated as United States source
ordinary income or loss.

PFIC RULES

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

      -     75% or more of its gross income consists of passive income, such as
            dividends, interest, rents and royalties; or

      -     50% or more of the average quarterly value of its assets consists of
            assets that produce, or are held for the production of, passive
            income.

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      We believe that we will not meet either of the PFIC tests in the current
or subsequent taxable years and therefore will not be treated as a PFIC for such
periods. However, there can be no assurance that we will not be a PFIC in the
current or subsequent taxable years.

      If we were a PFIC in any taxable year that you held the H shares or ADSs,
you generally would be subject to special rules with respect to "excess
distributions" made by us on the H shares or ADSs and with respect to gain from
your disposition of the H shares or ADSs. An "excess distribution" generally is
defined as the excess of the distributions you receive with respect to the H
shares or ADSs in any taxable year over 125% of the average annual distributions
you have received from us during the shorter of the three preceding years, or
your holding period for the H shares or ADSs. Generally, you would be required
to allocate any excess distribution or gain from the disposition of the H shares
or ADSs ratably over your holding period for the H shares or ADSs. The portion
of the excess distribution or gain allocated to a prior taxable year, other than
a year prior to the first year in which we became a PFIC, would be taxed at the
highest United States federal income tax rate on ordinary income in effect for
such taxable year, and you would be subject to an interest charge on the
resulting tax liability, determined as if the tax liability had been due with
respect to such particular taxable years. The portion of the excess distribution
or gain that is not allocated to prior taxable years, together with the portion
allocated to the years prior to the first year in which we became a PFIC, would
be included in your gross income for the taxable year of the excess distribution
or disposition and taxed as ordinary income.

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

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

      If you own the H shares or ADSs during any year that we are a PFIC, you
must file Internal Revenue Service ("IRS") Form 8621. We encourage you to
consult your own tax advisor concerning the United States federal income tax
consequences of holding the H shares or ADSs that would arise if we were
considered a PFIC.

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BACKUP WITHHOLDING AND INFORMATION REPORTING

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

      -     are a corporation or fall within various other exempt categories,
            and, when required, demonstrate this fact; or

      -     provide a correct taxpayer identification number on a properly
            completed IRS Form W-9 or a substitute form, certify that you are
            exempt from backup withholding and otherwise comply with applicable
            requirements of the backup withholding rules.

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

HONG KONG TAXATION

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

DIVIDENDS

      No tax will be payable by you in Hong Kong in respect of dividends paid by
us.

TAXATION OF CAPITAL GAINS

      No capital gain tax is generally imposed in Hong Kong in respect of
capital gains from the sale of property (such as the H Shares). However, if
trading gains from the sale of property by persons as part of profit making are
regarded as carrying on a trade, profession or business in Hong Kong, where such
gains are derived from or arise in Hong Kong from such trade, profession or
business, such trading gains will be chargeable to Hong Kong profits tax, which
is currently imposed at the rate of 16% on corporations and at a maximum rate of
15% on individuals. Amendments to increase the Hong Kong profits tax to 17.5%
for corporations and 15.5% for individuals have been proposed by the Financial
Secretary. However, as of the date of this annual report, such proposals have
not yet been adopted. Gains from sales of the H Shares effected on the Hong Kong
Stock Exchange will be considered to be derived from or arise in Hong Kong.
Liability for Hong Kong profits tax would thus arise in respect of trading gains
from sales of H shares realized by persons carrying on a business of trading or
dealing in Hong Kong in securities.

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<PAGE>

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

HONG KONG STAMP DUTY

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

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

HONG KONG ESTATE DUTY

      Estate duty is levied on the value of property situated in Hong Kong
passing or deemed passing on the death of a person. H shares are regarded as
property situated in Hong Kong for estate duty purposes. Currently, for persons
dying on or after April 1, 1998, Hong Kong estate duty is imposed on the
principal value of a deceased's estate at graduated rates from 5% to 15%. No
estate duty is payable where the principal value of the dutiable estate does not
exceed HK$7.5 million; the maximum rate of 15% applies where the principal value
exceeds HK$10.5 million.

ITEM 10F. DIVIDENDS AND PAYING AGENTS

      Not applicable.

ITEM 10G. STATEMENT BY EXPERTS

      Not applicable.

ITEM  10H. DOCUMENTS ON DISPLAY

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

                                       87
<PAGE>

      Additionally, we are subject to the informational requirements of the
Exchange Act, and, in accordance with the Exchange Act, we file annual reports
on Form 20-F within six months of our fiscal year end, and we will submit other
reports and information under cover of Form 6-K with the SEC. You may review a
copy of the registration statement and other information without charge at the
public reference facilities maintained by the SEC at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. You may also inspect the registration
statement and its exhibits and schedules at the office of the New York Stock
Exchange, 11 Wall Street, New York, New York 10005. You may also get copies,
upon payment of a prescribed fee, of all or a portion of the registration
statement from the SEC's public reference room or by calling the SEC on
1-800-SEC-0330 or visiting the SEC's website at www.sec.gov.

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

ITEM  10I. SUBSIDIARY INFORMATION

      Not applicable.

ITEM  11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The following paragraphs describe the various market risks to which we
were exposed as of December 31, 2003.

CURRENCY RISK

      As approved by the PRC foreign exchange administration, Hong Kong
dollar-denominated income from our through train service may be deposited by us
in Hong Kong dollars up to an amount equivalent to US$18.5 million and need not
be converted into renminbi. If necessary, we had U.S. dollar-denominated payment
of Hong Kong dollar-denominated and U.S. dollar-denominated dividends on our H
shares and ADSs, respectively, in excess of the foregoing limit have to be made
after reconverting renminbi at the then applicable People's Bank of China rate
into the relevant foreign currency. Some of our vendor contracts and equipment
leases for the provision of equipment, parts and services, particularly with
respect to the high-speed project, are paid by us in foreign currencies. As of
December 31, 2003, time deposits with maturities of more than three months in an
amount equivalent to RMB807.8 million, and Hong Kong dollar denominated time
deposits with maturities of more than three months in an amount equivalent to
RMB91.1 million. Our cash, bank deposits and time deposits with maturities of no
more than three months consist of deposits denominated in U.S. dollar in an
amount equivalent to RMB9.2 million, and deposits denominated in Hong Kong
dollar in an amount equivalent to RMB65.9 million. While our foreign currency
deposits are relatively stable, they are insufficient to pay all dividends and
operating expenses, therefore, we bear the risk of exchange rate fluctuations
when we convert renminbi to pay foreign-currency denominated dividends and
operating expenses. However, our management believes that these contingent
exposures relating to foreign exchange rate fluctuations have not had and are
not likely to have a material effect on our financial position. As a result, we
do not enter into any hedging transactions with respect to our exposure to
foreign currency movements. Furthermore, we are not aware of any effective
financial hedging products that serve as protection against a possible renminbi
devaluation.

                                       88
<PAGE>

INTEREST RATE RISK

      Funds that we do not need in the short term are kept as temporary cash
deposits in commercial banks and in the Ministry of Railways Deposit-Taking
Center in the form of demand or time deposits. We do not hold any market
risk-sensitive instruments for trading purposes. As of December 31, 2003, we had
no loans outstanding. Accordingly, we are not exposed to any material interest
rate risks.

      As of December 31, 2003, our balances denominated in Hong Kong dollars and
U.S. dollars were translated into renminbi at the applicable market exchange
rates as of that date and amounted to approximately RMB974.0 million. If the
applicable market exchange rates were to change by 10%, this would result in a
change in fair value of approximately RMB97.4 million in these balances. For the
year ended December 31, 2003, the interest income derived from our cash balances
at banks and temporary cash investments amounted to approximately RMB28.0
million. A 10% change in interest rates would have resulted in a change in
interest income of approximately RMB2.8 million.

      Except as described above and in notes 26 and 27 to our audited
consolidated financial statements herein, our management believes that as of the
end of December 31, 2003, at present and in our normal course of business, we
are not subject to any other market-related risks.

ITEM  12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

      Not applicable.

                                       89
<PAGE>

                                     PART II

ITEM  13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

         None.

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

      None.

ITEM  15. CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

      Our Chairman of the Board, our General Manager, and our Chief Accountant,
after evaluating the effectiveness of our disclosure controls and procedures (as
defined in US Exchange Act Rules 13a-15(e)) as of the end of the period covered
by this Form 20-F, have concluded that, as of such date, our disclosure controls
and procedures were effective.

INTERNAL CONTROL OVER FINANCIAL REPORTING

      There were no changes in our internal control over financial reporting
that occurred during the year ended December 31, 2003 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.

ITEM  16A. AUDIT COMMITTEE FINANCIAL EXPERT

      Our Board of Directors has determined that none of our current audit
committee members is an "audit committee financial expert" as defined in the
Instruction to paragraph (a) of Item 16A to Form 20-F. We are in discussions
with potential candidates who are qualified as such regarding their appointment
as audit committee members of our company. We have not been able to agree
commercially reasonable terms with these candidates as of the date of this
annual report but expect to have such an "audit committee financial expert"
appointed to our audit committee by December 31, 2004.

ITEM  16B. CODE OF ETHICS

      We have adopted a code of ethics that applies to our Chief Executive
Officer, President, Chief Financial Officer and Corporate Controller. See
Exhibit 11.1.

ITEM  16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

      On June 10, 2003, resolutions were passed at the annual general meeting of
Guangshen Railway to appoint PricewaterhouseCoopers (certified public
accountants in Hong Kong, "PwC") as our international auditors for 2003.
Resolutions to re-appoint PwC

                                       90
<PAGE>

firms as our international auditors for 2004 have been approved at the annual
general meeting of Guangshen Railway held on June 10, 2004.

      PwC was our international auditors for 2002 and Arthur Andersen was our
international auditors for 2001.

      The following table presents the aggregate fees for professional services
and other services rendered by PwC to us in 2003 and 2002.

<TABLE>
<CAPTION>
                       2003    2002
                       ----    ----
                       RMB MILLIONS
<S>                    <C>      <C>
Audit Fees              2.0     2.0
Audit-related Fees        -       -
Tax Fees                  -       -
All Other Fees            -       -

Total                   2.0     2.0
</TABLE>

      Other than the audits performed on our financial statements, PwC did not
provide any services to us in 2002 and 2003. The working charter of our audit
committee, which was adopted by our board of directors on August 30, 2000 based
on the applicable guidelines set forth in the Hong Kong Stock Exchange Listing
Rules, provides that our audit committee is responsible for, among other
matters, supervising the audit of our Company, including the assessment and
evaluation of the nature, quality and scope of work and the fees of our external
auditors. Pursuant to paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation S-X, the
engagement of PwC to perform these audit services were approved by our audit
committee.

ITEM  16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

      Not applicable.

ITEM  16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS

      Not applicable.

                                       91
<PAGE>

                                    PART III

                          ITEM 17. FINANCIAL STATEMENTS

      We have elected to provide the financial statements and related
information specified in Item 18 in lieu of Item 17.

                          ITEM 18. FINANCIAL STATEMENTS

      See pages F-1 to F-44 following Item 19.

                                ITEM 19. EXHIBITS

      (a)   See pages F-1 to F-41 following this item.

      (b)   Index of Exhibits

      Documents filed as exhibits to this annual report:

<TABLE>
<CAPTION>
Exhibit
Number      Description
------      -----------
<S>         <C>
1.1         Articles of Association

6.1         Statement explaining how earnings per share information was
            calculated in this annual report

7.1         Statements explaining how certain ratios are calculated in this
            annual report

8.1         List of significant subsidiaries of Guangshen Railway Company
            Limited as of December 31, 2003

11.1        Code of Ethics for the Senior Officers

12.1        Section 302 principal executive officers' and principal financial
            officer's certifications

13.1        Certifications of principal executive officers and principal
            financial officer pursuant to 18 U.S.C. Section 1350, as enacted
            pursuant to Section 906 of the U.S. Sarbanes-Oxley Act of 2002.
</TABLE>

                                       92
<PAGE>

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----
<S>                                                                       <C>
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
  Report of Independent Public Accountants                                 F-2
  Consolidated Income Statements for the years ended 31 December,
    2001, 2002 and 2003                                                    F-4
  Consolidated Balance Sheets as of 31 December, 2002 and 2003             F-5
  Consolidated Cash Flow Statements for the years ended 31 December
    2001, 2002 and 2003                                                    F-6
  Consolidated Statements of Changes in Equity for the years ended 31
    December 2001, 2002 and 2003                                           F-7
  Notes to the Consolidated Financial Statements                           F-8
</TABLE>

<PAGE>

[PRICEWATERHOUSECOOPERS LOGO]

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of Guangshen Railway Company Limited:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of cash flows and of changes in shareholders'
equity present fairly, in all material respects, the financial position of
Guangshen Railway Company Limited (the "Company") and its subsidiaries
(established in the People's Republic of China) at December 31, 2003 and 2002,
and the results of their operations and their cash flows for the years then
ended, in conformity with International Financial Reporting Standards. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
International Standards on Auditing issued by the International Federation of
Accountants and the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. The consolidated financial
statements of the Company and its subsidiaries as of December 31, 2001 were
audited by other independent accountants who have ceased operations. Those
independent accountants expressed an unqualified opinion on those financial
statements in their report dated April 23, 2002.

International Financial Reporting Standards vary in certain significant respects
from accounting principles generally accepted in the United States of America.
Information relating to the nature and effect of such differences is presented
in Note 30 to the consolidated financial statements.

PRICEWATERHOUSECOOPERS
Certified Public Accountants

Hong Kong
April 20, 2004

                                      F-2
<PAGE>

THE FOLLOWING REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN
& CO AND HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN & CO:

(THE BALANCE SHEET AS OF 31 DECEMBER, 2000 AND THE CONSOLIDATED STATEMENTS OF
INCOME, CHANGES IN EQUITY AND CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 1999 AND
2000 ARE NOT REPRODUCED)

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Guangshen Railway Company Limited:

We have audited the accompanying Consolidated Balance Sheets of Guangshen
Railway Company Limited (the "Company") and its subsidiaries (established in the
People's Republic of China) as of 31 December, 2000 and 2001, and the related
Consolidated Statements of Income, Changes in Equity and Cash Flows for the
years ended 31 December, 1999, 2000 and 2001, expressed in Chinese Renminbi.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these Consolidated Financial
Statements based on our audits.

We conducted our audits in accordance with international standards on auditing
issued by the International Federation of Accountants and generally accepted
auditing standards in the United States of America. Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the
Consolidated Financial Statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the Consolidated Financial Statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the accompanying Consolidated Financial Statements referred to
above present fairly, in all material respects, the financial position of the
Company and its subsidiaries as of 31 December, 2000 and 2001, and the results
of their operations and cash flows for the years ended 31 December, 1999, 2000
and 2001 in conformity with International Financial Reporting Standards.

International Financial Reporting Standards do not conform to generally accepted
accounting principles in the United States of America. A description of the
significant differences between those two generally accepted accounting
principles and the approximate effect of those differences on net income and
shareholders' equity are set forth in Note 30 to the Consolidated Financial
Statements.

ARTHUR ANDERSEN & CO
Certified Public Accountants

Hong Kong
April 23, 2002

                                      F-3
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                         CONSOLIDATED INCOME STATEMENTS

             FOR THE YEARS ENDED 31st DECEMBER, 2001, 2002 AND 2003

            (Amounts in thousands, except per share and per ADS data)

<TABLE>
<CAPTION>
                                                                  Years ended 31 December,
                                                   -----------------------------------------------------
                                            Notes     2001          2002          2003           2003
                                            -----   ---------     ---------     ---------       -------
                                                       RMB           RMB           RMB            US$
<S>                                         <C>    <C>           <C>           <C>             <C>
Revenues from railroad businesses
   Passenger                                        1,426,010     1,846,599     1,754,223       211,352
   Freight                                            567,276       514,036       514,794        62,023
                                                   ----------    ----------    ----------      --------

   Sub-total                                        1,993,286     2,360,635     2,269,017       273,375
Revenues from other businesses                        160,306       156,893       144,370        17,394
                                                   ----------    ----------    ----------      --------
Total revenues                                      2,153,592     2,517,528     2,413,387       290,769
                                                   ----------    ----------    ----------      --------
Operating expenses

   Railroad businesses
     Labour and benefits                             (320,569)     (373,781)     (347,649)      (41,885)
     Equipment leases and services                   (262,320)     (433,918)     (437,739)      (52,740)
     Materials and supplies                          (144,651)     (192,141)     (216,993)      (26,144)
     Repair costs, excluding materials and
       supplies                                       (94,545)     (102,377)      (89,640)      (10,800)
     Depreciation                                    (342,534)     (335,508)     (290,014)      (34,941)
     Amortisation of leasehold land payments          (15,453)      (15,131)      (15,602)       (1,880)
     Fees for social services                         (57,157)      (57,385)      (62,579)       (7,540)
     General and administrative expenses      4      (150,162)     (123,800)     (134,688)      (16,227)
     Others                                           (73,238)     (101,251)     (113,382)      (13,660)
                                                   ----------    ----------    ----------      --------
     Sub-total                                     (1,460,629)   (1,735,292)   (1,708,286)     (205,817)
                                                   ----------    ----------    ----------      --------
   Other businesses
     Materials and supplies                          (108,930)     (124,602)     (112,677)      (13,576)
     General and administrative expenses      4       (29,922)      (35,137)      (29,711)       (3,580)
                                                   ----------    ----------    ----------      --------
     Sub-total                                       (138,852)     (159,739)     (142,388)      (17,156)
                                                   ----------    ----------    ----------      --------
Total operating expenses                           (1,599,481)   (1,895,031)   (1,850,674)     (222,973)
                                                   ----------    ----------    ----------      --------
Profit from operations                                554,111       622,497       562,713        67,796

Other income                                  5        12,952         6,575        17,586         2,119
Interest income, net                          6        63,621        32,712        27,287         3,288
Share of profits / (losses) of associates    16           609          (323)       (2,508)         (302)
                                                   ----------    ----------    ----------      --------
Profit before tax                                     631,293       661,461       605,078        72,901

Income tax expense                            7       (99,297)     (104,265)      (93,348)      (11,247)

Minority interests                                      1,499          (113)           32             4
                                                   ----------    ----------    ----------      --------
Profit attributable to shareholders                   533,495       557,083       511,762        61,658
                                                   ==========    ==========    ==========      ========
Earnings per share
   - Basic                                    8       RMB0.12       RMB0.13      RMB 0.12       US$0.01
                                                   ==========    ==========    ==========      ========
   - Diluted                                  8           N/A           N/A           N/A           N/A
                                                   ==========    ==========    ==========      ========
Earnings per equivalent ADS
   - Basic                                    8       RMB6.15       RMB6.42      RMB 5.90       US$0.71
                                                   ==========    ==========    ==========      ========
   - Diluted                                  8           N/A           N/A           N/A           N/A
                                                   ==========    ==========    ==========      ========
</TABLE>

    The accompanying notes are an integral part of these Consolidated Income
                                  Statements.

-------------------
Translation of amounts from Renminbi ("RMB") into United States dollars ("US$")
for the convenience of the reader has been made at the Noon Buying Rate on 31
December, 2003 of US$1.00=RMB8.3 as certified for customs purposes by the
Federal Reserve Bank of New York. No representation is made that the RMB amounts
could have been, or could be, converted into US$ at that rate on 31 December,
2003.

                                      F-4
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                        AS OF 31 DECEMBER, 2002 AND 2003

                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                                          31 December,
                                                             -------------------------------------
                                                     Notes      2002          2003         2003
                                                     -----   ----------    ----------    ---------
                                                                 RMB           RMB          US$
<S>                                                  <C>     <C>           <C>           <C>
ASSETS

Current assets
    Cash and cash equivalents                                 1,413,045     1,402,359      168,959
    Temporary cash investments                        10        567,339       627,440       75,595
    Interest receivables                                         18,851        25,497        3,072
    Trade receivables                                 11         51,457        80,614        9,713
    Materials and supplies                                       34,105        38,692        4,662
    Prepayments and other receivables, net            12        241,224       223,463       26,923
    Due from Parent Company                                      39,374             -            -
    Due from related parties                                    267,885       199,921       24,087
                                                             ----------    ----------    ---------
        Total current assets                                  2,633,280     2,597,986      313,011
Fixed assets                                          13      6,798,280     6,952,878      837,696
Construction-in-progress                              14        672,827       390,393       47,035
Leasehold land payments                               15        656,998       652,083       78,564
Interests in associates                               16        140,842       140,494       16,927
Available-for-sale investments                        17        166,695       167,962       20,236
Deferred tax assets                                   18          7,577         6,154          741
Deferred staff costs                                  19        181,095       166,003       20,000
                                                             ----------    ----------    ---------
        Total assets                                         11,257,594    11,073,953    1,334,210
                                                             ==========    ==========    =========

LIABILITIES AND EQUITY

Current liabilities
    Trade payables                                               41,734        34,625        4,172
    Payables for construction of fixed assets                   181,473       148,258       17,862
    Accrued expenses and other payables               20        529,797       358,287       43,167
    Due to Parent Company                                             -        37,230        4,486
    Due to related parties                                      158,199       120,605       14,531
    Dividend payable                                             90,663           232           28
                                                             ----------    ----------    ---------
        Total current liabilities                             1,001,866       699,237       84,246
                                                             ----------    ----------    ---------
Minority interests                                               11,577        52,358        6,308
                                                             ----------    ----------    ---------
Equity
    Common stock, par value RMB1.00 per share,
        4,335,550 shares authorised and outstanding   21      4,335,550     4,335,550      522,355
    Additional paid-in capital                                3,984,135     3,984,135      480,016
    Dedicated capital                                         1,287,370     1,368,627      164,895
    Retained earnings                                           637,096       634,046       76,390
                                                             ----------    ----------    ---------
        Total equity                                         10,244,151    10,322,358    1,243,656
                                                             ----------    ----------    ---------
        Total liabilities and equity                         11,257,594    11,073,953    1,334,210
                                                             ==========    ==========    =========

</TABLE>

   The accompanying notes are an integral part of these Consolidated Balance
                                    Sheets.

-------------------
Translation of amounts from Renminbi ("RMB") into United States dollars ("US$")
for the convenience of the reader has been made at the Noon Buying Rate on 31
December, 2003 of US$1.00=RMB8.3 as certified for customs purposes by the
Federal Reserve Bank of New York. No representation is made that the RMB amounts
could have been, or could be, converted into US$ at that rate on 31 December,
2003.

                                      F-5
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                        CONSOLIDATED CASH FLOW STATEMENTS

              FOR THE YEARS ENDED 31 DECEMBER, 2001, 2002 AND 2003

                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                               Year ended 31 December,
                                                     -------------------------------------------
                                                       2001       2002         2003       2003
                                                      --------  ---------   ---------    -------
                                                        RMB        RMB          RMB        US$
<S>                                                  <C>        <C>         <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Profit attributable to shareholders                 533,495     557,083     511,762     61,658
  Adjustments for:
      Minority interests                               (1,499)        113         (32)        (4)
      Income tax expense                               99,297     104,265      93,348     11,247
      Depreciation                                    345,949     337,797     291,653     35,139
      Amortisation of leasehold land payments          15,453      15,131      15,602      1,881
      Loss on disposals of fixed assets                25,448      29,339      16,935      2,040
      Amortisation of deferred staff costs             15,721      15,092      15,092      1,818
      Share of (profits) / losses of associates          (609)        323       2,508        302
      Provision for doubtful accounts                  29,620       4,598         172         21
      Interest expense                                  2,087       4,064       2,359        284
      Interest income                                 (65,708)    (36,920)    (29,755)    (3,585)
      Decrease / (increase) in current assets
        Trade receivables                               4,597      24,064     (28,621)    (3,448)
        Materials and supplies                         (4,158)         86      (4,587)      (553)
        Prepayments and other receivables            (141,067)     87,676      17,320      2,088
        Due from Parent Company                        51,105      (9,875)          -          -
        Due from related parties                      (28,081)      8,128      66,179      7,973
      Increase / (decrease) in current
        liabilities
        Trade payables                                  7,901     (27,314)     (7,109)      (857)
        Due to Parent Company                               -           -     (13,821)    (1,665)
        Due to related parties                         (5,084)     99,549     (37,594)    (4,529)
        Accrued expenses and other payables           102,329      48,529     (10,924)    (1,317)
      Interest paid                                    (2,087)     (4,064)     (2,359)      (284)
      Tax paid                                        (98,693)   (100,487)    (99,679)   (12,010)
                                                     --------   ---------   ---------    -------
  Net cash provided by operating activities           886,016   1,157,177     798,449     96,199
                                                     --------   ---------   ---------    -------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of fixed assets and payments for
    construction-in-progress                         (551,508)   (553,337)   (339,208)   (40,868)
  Proceeds from sale of fixed assets                        -      12,369       1,105        133
  Increase in interests in associates                 (17,572)     (4,761)       (374)       (45)
  Decrease / (increase) in temporary cash
    investments                                        74,728     777,898     (60,101)    (7,241)
  Purchase of available-for-sale investments           (2,000)    (14,108)          -          -
  Interest received                                    65,927      32,942      23,109      2,784
                                                     --------   ---------   ---------    -------
  Net cash / (used in) from investing activities     (430,425)    251,003    (375,469)   (45,237)
                                                     --------   ---------   ---------    -------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Dividends paid to group shareholders               (419,957)   (356,490)   (433,561)   (52,236)
  Dividends paid to minority interests                   (180)     (4,153)       (105)       (13)
                                                     --------   ---------   ---------    -------
  Net cash used in financing activities              (420,137)   (360,643)   (433,666)   (52,249)
                                                     --------   ---------   ---------    -------
Net increase / (decrease) in cash and cash
  equivalents                                          35,454   1,047,537     (10,686)    (1,287)

Cash and cash equivalents, beginning of year          330,054     365,508   1,413,045    170,246
                                                     --------   ---------   ---------    -------
Cash and cash equivalents, end of year*               365,508   1,413,045   1,402,359    168,959
                                                     ========   =========   =========    =======
</TABLE>

*  Analysis of the balances of cash and cash equivalents

<TABLE>
<CAPTION>
                                                               Year ended 31 December,
                                                      ------------------------------------------
                                                        2001      2002         2003       2003
                                                      -------   ---------   ---------    -------
                                                        RMB        RMB          RMB        US$
<S>                                                   <C>       <C>         <C>          <C>
Cash and bank deposits                                365,508   1,413,045   1,402,359    168,959
                                                      =======   =========   =========    =======
</TABLE>

     The accompanying notes are an integral part of these Consolidated Cash
                                Flow Statements.

-------------------
Translation of amounts from Renminbi ("RMB") into United States dollars ("US$")
for the convenience of the reader has been made at the Noon Buying Rate on 31
December, 2003 of US$1.00=RMB8.3 as certified for customs purposes by the
Federal Reserve Bank of New York. No representation is made that the RMB amounts
could have been, or could be, converted into US$ at that rate on 31 December,
2003.

                                      F-6
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

              FOR THE YEARS ENDED 31 DECEMBER, 2001, 2002 AND 2003

                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                                            Dedicated capital
                                                                  --------------------------------------
                                     Share capital/   Additional  Statutory   Statutory    Discretionary
                                        common          paid-in    surplus      public        surplus      Retained
                               Note      stock          Capital    reserve   welfare fund     reserve      earnings       Total
                               ----    ---------      ---------    -------   ------------     -------      --------     ----------
                                           RMB           RMB         RMB         RMB            RMB          RMB           RMB
<S>                            <C>   <C>              <C>         <C>        <C>           <C>             <C>          <C>
Balances at January 1, 2001            4,335,550      3,984,135    375,448     368,706        341,659       615,185     10,020,683
Profit attributable to
   shareholders                                -              -          -           -              -       533,495        533,495
Appropriation from retained
   earnings                     22             -              -     56,660      55,862              -      (112,522)             -
Dividends relating to 2000       9             -              -          -           -              -      (433,555)      (433,555)
                                       ---------      ---------    -------     -------        -------      --------     ----------

Balances at January 1, 2002            4,335,550      3,984,135    432,108     424,568        341,659       602,603     10,120,623

Profit attributable to
   shareholders                                -              -          -           -              -       557,083        557,083
Appropriation from retained
   earnings                     22             -              -     59,301      29,734              -       (89,035)             -
Dividends relating to 2001       9             -              -          -           -              -      (433,555)      (433,555)
                                       ---------      ---------    -------     -------        -------      --------     ----------

Balances at January 1, 2003            4,335,550      3,984,135    491,409     454,302        341,659       637,096     10,244,151

Profit attributable to
   shareholders                                -              -          -           -              -       511,762        511,762
Appropriation from retained
   earnings                     22             -              -     54,165      27,092              -       (81,257)             -
Dividends relating to 2002       9             -              -          -           -              -      (433,555)      (433,555)
                                       ---------      ---------    -------     -------        -------      --------     ----------

Balances at 31 December, 2003          4,335,550      3,984,135    545,574     481,394        341,659       634,046     10,322,358
                                       =========      =========    =======     =======        =======      ========     ==========

</TABLE>

       The accompanying notes are an integral part of these Consolidated
                        Statements of Changes in Equity.

                                      F-7
<PAGE>


               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

1. ORGANISATION AND PRINCIPAL ACTIVITIES

Guangshen Railway Company Limited (the "Company") was established as a joint
stock limited company in the People's Republic of China (the "PRC") on 6 March,
1996 to take over and operate certain railroad and other businesses (the
"Businesses").

Prior to the formation of the Company, the Businesses were carried on by the
Company's predecessor, Guangshen Railway Company (the "Predecessor"), and
certain of its subsidiaries, and in certain cases, by Guangzhou Railway (Group)
Company (the "Parent Company") and certain of its subsidiaries, which were all
under the common control and jurisdiction of the PRC Ministry of Railways (the
"MOR"). The Predecessor was controlled by and under the administration of the
Parent Company. Pursuant to a restructuring agreement entered into among the
Parent Company, the Predecessor and the Company on 8 March, 1996 and with effect
from 6 March, 1996 (the "Restructuring Agreement"), the Company issued to the
Parent Company 100% of its equity interest in the form of 2,904,250,000 shares
of ordinary shares (the "State-owned Domestic Shares") in exchange for the
assets and liabilities of the Businesses (the "Restructuring").

In May 1996, the Company issued 1,431,300,000 shares, represented by 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 to finance the capital expenditures and working capital
requirements of the Company and its subsidiaries (the "Group").

The principal activities of the Group are railroad passenger and freight
transportation. The Group also operate certain other businesses, principally
services in the stations and sales of food, beverages and merchandise aboard the
trains and in the stations.

The directors of the Company considered Guangzhou Railway (Group) Company, a
state-owned enterprise established in the PRC, to be the ultimate holding
company.

The Group conduct their operations in the PRC and accordingly are subject to
special considerations and significant risks not typically associated with
investments in equity securities of North American and Western European
companies. These include risks associated with, among others, the political,
economic and legal environments, foreign currency exchange, government
regulation of the railway system, development and competition in the
transportation industry, insurance, entry by the PRC with the World Trade
Organisation (the "WTO"), and the ability to obtain sufficient financing. These
are described further in the following paragraphs:

(a)   Political environment

      The operating results of the Group may be adversely affected by changes in
      the political and social conditions in the PRC and by changes in
      governmental policies with respect to laws and regulations, inflationary
      measures, currency conversion and remittance abroad, and rates and methods
      of taxation, among other things. While the PRC's government is expected to
      continue its economic reform policies, many of the reforms are new or
      experimental and may be refined or changed. It is also possible that a
      change in the PRC's leadership could lead to changes in economic policy.

                                      F-8
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

1.    ORGANISATION AND PRINCIPAL ACTIVITIES (CONT'D)

(b)   Economic environment

      The economy of the PRC differs significantly from the economies in the
      North America and Western Europe in many respects, including its
      structure, levels of development and capital reinvestment, growth rate,
      government involvement, resource allocation, self-sufficiency, rate of
      inflation and balance of payments position. The adoption of economic
      reform policies since 1978 has resulted in a gradual reduction in the role
      of state economic plans in the allocation of resources, pricing and
      management of such assets, and increased emphasis on the utilization of
      market forces, and rapid growth in the PRC's economy. However, such growth
      has been uneven among various regions of the country and among various
      sectors of the economy.

      The central government has from time to time adopted various measures
      designed to stabilize the economy, regulate growth and contain inflation.
      All such economic events and measures could adversely affect the results
      of operations and expansion plans of the Group.

(c)   Legal environment

      The PRC legal system is based on written statutes under which prior court
      decisions may be cited as authority but do not have binding precedential
      effect. The PRC's legal system is relatively new, and the government is
      still in the process of developing a comprehensive system of laws, a
      process that has been ongoing since 1979. Considerable progress has been
      made in the promulgation of laws and regulations dealing with economic
      matters such as corporate organization and governance, foreign investment,
      commerce, taxation and trade. Such legislation has significantly enhanced
      the protection afforded to foreign investors. However, experience with
      respect to the implementation, interpretation and enforcement of such laws
      is limited.

(d)   Foreign currency exchange

      The books and records of the Group are maintained in RMB, their functional
      currency. RMB is not freely convertible into foreign currencies. All
      foreign exchange transactions involving RMB must take place through the
      banks and other institutions authorised by the People's Bank of China
      ("PBOC") to buy and sell foreign exchange.

      The applicable market exchange rates used for the transactions are
      administered by the PBOC. Enterprises can deal with an approved bank for
      foreign exchange on recurring items and approved capital items.

      A major portion of the Company's revenues is denominated in RMB. A portion
      of such revenues will need to be converted into other currencies to meet
      foreign currency obligations such as payment of any dividends declared.
      The existing foreign exchange limitations under PRC law could affect the
      Group's ability to obtain foreign exchange through debt financing, or to
      obtain foreign exchange for capital expenditures or for distribution of
      dividends on H shares and ADSs.

                                      F-9
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

1.    ORGANISATION AND PRINCIPAL ACTIVITIES (CONT'D)

(e)   Government regulation of the railway system

      The PRC's national railway system is principally state-owned and operated
      as a single unified system, and is subject to operational and regulatory
      control by the MOR and, with respect to price setting for transport
      services, by the State Council of the PRC (the "State Council"). Prior to
      the Restructuring, the Company operated substantially within this system
      in which the MOR exercised overall authority over transportation
      operations, equipment and materials procurement, engineering and
      construction, revenue and expenditure controls, as well as other aspects
      of railroad operations.

      In connection with the Restructuring, the Company was granted special
      flexibility and autonomy in areas such as obtaining freight cars,
      scheduling services and determining the mix of passenger seat classes
      within its own line, routing trains through bottlenecks and dispatching
      empty freight cars to destinations beyond its rail line. In addition, in
      February 1996, the State Council granted the Company, with effect from
      April 1, 1996, increased flexibility and autonomy with respect to the
      setting of passenger fares and freight tariffs. This regulatory
      flexibility and autonomy allows the Company a greater degree of control
      over its operations and the ability to adjust its services to meet market
      demand. Further, in preparation for the offering in 1996, the Company
      received legal clarification and confirmation of its asset ownership,
      corporate powers and relationships with service providers and other
      entities in the national railway system.

      Although the operating flexibility and autonomy were granted to the
      Company without a fixed time limit, there can be no assurance that these
      will not be changed in the future or that other railway operators will not
      be granted similar treatment. Apart from the special dispensations granted
      in connection with the Restructuring, the Company, as a part of the
      national railway system, is generally subject to industry regulation by
      the MOR and must coordinate as required with other entities in the railway
      system.

      PRC government regulation has a significant impact on the Group'
      businesses. The price of railway transportation in particular is an
      important factor and has a substantial impact on the Group' business
      income. The regulatory framework with respect to the pricing of railway
      services may limit the Group's flexibility to respond to market
      conditions, competition or changes in the Group's cost structure.

(f)   Development and competition in the transportation industry

      As the industrial structure in the PRC is increasingly upgraded, advanced
      technological products, such as computer components, will gradually
      replace traditional industrial products as the principal goods in the
      Group's freight transportation business. These changes will affect the
      variety, volume and price of the Group's freight transportation and could
      have an adverse effect on the Group's results of operations.

      Intensifying competition from other forms of transportation may affect the
      Group's profitability and growth. With the gradual implementation of the
      PRC government's policies of supporting infrastructure industries, the
      railway transportation sector, particularly the passenger transportation
      business, is facing increasing competition from other means of surface,
      air and water transportation. The Group, in particular, face significant
      competition from bus services operating in the Pearl River Delta.

                                      F-10
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

1.    ORGANISATION AND PRINCIPAL ACTIVITIES (CONT'D)

(g)   Insurance

      The Company does not currently maintain any insurance coverage with third
      party carriers against third party liabilities. Pursuant to applicable PRC
      regulations and the practice of national railway companies, the Company is
      liable for (i) personal injury to or death its passengers in the case of
      accidents for up to RMB20 per passenger and (ii) personal injury to or
      death of passengers for fault for up to RMB60 per passenger . With respect
      to loss of or damage to baggage, parcels and freight, the Company's
      customers may elect to purchase insurance administered by the MOR for up
      to their declared value. Passengers who do not elect to purchase insurance
      in respect of their baggage and/or parcels may nevertheless recover up to
      RMB0.03 for each 10-kilogram of damaged baggage and/or parcels. Similarly,
      freight transport customers who elect not to purchase insurance may
      recover up to RMB0.1 for each ton of damaged freight.

      Consistent with what it believes to be the customary practice among
      railway operators in the PRC, the Company does not maintain insurance
      coverage for its property and facilities (other than for its automobiles),
      for business interruption or for environmental damage arising from
      accidents on Company property or relating to Company operations. As a
      consequence, in the event of an accident or other event causing loss,
      destruction or damage to the Company's property or facilities, causing
      interruption to the Company's normal operations or causing liability for
      environmental damage or clean-up, the Company will be reliant on its own
      resources to cover losses and damages.

      With respect to its employees, the Company does not maintain medical
      insurance or disability insurance with any third party insurance carriers.
      The Company has adopted internal rules to provide for medical and
      disability benefits to its employees, consistent with MOR regulations and
      practices and relevant regulations of the Shenzhen municipality. The
      Company has entered into service agreements with the Parent Company and
      Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company
      ("GEDC"), a wholly-owned subsidiary of the Parent Company, pursuant to
      which the health care facilities owned by these entities provide medical
      services to the Company's employees and their families.

(h)   Entry by the PRC with the WTO

      Entry by the PRC with the WTO, may increase competition for the Group's
      business. With the PRC's entry into the WTO, other Chinese coastal cities'
      significance in trading will be enhanced. Part of the freight currently
      transferred through ports in Hong Kong and Shenzhen will be shipped to
      other ports in the PRC, which will adversely affect the Group's railway
      freight business. In addition, as the PRC government lifts control over
      foreign investments, including allowing foreign participation in railway
      construction, the Company's railway monopoly position in its region may be
      challenged by foreign strategic investment, and potential competitors may
      arise in the Pearl River Delta.

                                      F-11
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

1.    ORGANISATION AND PRINCIPAL ACTIVITIES (CONT'D)

(i)   Ability to obtain sufficient financing

      The Company may be unable to obtain sufficient financing to fund its
      substantial capital requirements, which could limit its growth potential.
      The Company estimates that it will require approximately RMB1,550,000 for
      capital expenditures in 2004, mainly including the construction of its
      fourth track between Guangzhou and Shenzhen, the construction of a
      technical support and maintenance depot in northern Shenzhen, the purchase
      of additional locomotives and trains. The Company's actual capital
      requirements may be greater. The Company may not be able to obtain
      sufficient funds on commercially acceptable terms. If adequate capital is
      not available, the Company's planned capital expenditure and business
      prospects could be adversely affected.

2.    PRINCIPAL ACCOUNTING POLICIES

The principal accounting policies adopted in preparing the financial statements
of the Group are as follows:

(a)   Basis of presentation

      The financial statements have been prepared in accordance with
      International Financial Reporting Standards ("IFRS"). This basis of
      accounting differs in certain material respects from that used in the
      preparation of the Group's statutory accounts in the PRC, which have been
      prepared in accordance with generally accepted principles and relevant
      financial regulations in the PRC ("PRC GAAP"). In preparing these
      financial statements, appropriate adjustments have been made to the
      Group's statutory accounts to conform with IFRS. Differences arising from
      the adjustments are not incorporated in the accounting records of the
      Group.

      The principal adjustments made to conform to IFRS include the following:

      -     Additional depreciation charges on fixed assets;

      -     Write-down of reclaimed rails to realisable value;

      -     Difference in the recognition policy on housing benefits to the
            employees;

      -     Recording of deferred tax impact according to IFRS;

      -     Difference in depreciation charges on fixed assets resulting from
            reclassification; and

      -     Recognition of government grants by deducting the carrying value of
            fixed assets.

      The financial statements have been prepared under the historical cost
      convention except that, as disclosed in the accounting policies below,
      certain fixed assets are stated at valuation less accumulated depreciation
      and impairment losses.

      The preparation of financial statements in conformity with IFRS requires
      the use of estimates and assumptions that affect the reported amounts of
      assets and liabilities and disclosure of contingent assets and liabilities
      at the date of the financial statements and the reported amounts of
      revenues and expenses during the reporting period. Although these
      estimates are based on management's best knowledge of current event and
      actions, actual results ultimately may differ from those estimates.

                                      F-12
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

2.    PRINCIPAL ACCOUNTING POLICIES (CONT'D)

(a)   Basis of presentation (Cont'd)

      During the year, there was a change of accounting estimate in respect of
      the useful lives of certain fixed assets. Details of such change are set
      out in Note 2(g) and Note 13.

      The Consolidated Financial Statements reflect certain reclassification and
      additional disclosures to conform more closely to presentations customary
      in filings with the Securities and Exchange Commission of the United
      States of America.

      Differences between IFRS and generally accepted accounting principles in
      the United States of America ("US GAAP") are set forth in Note 30.

      Translation of amounts from RMB into US$ for the convenience of the reader
      has been made at the Noon Buying Rate on 31 December, 2003 of
      US$1.00=RMB8.3 as certified for customs purposes by the Federal Reserve
      Bank of New York. No representation is made that the RMB amounts could
      have been, or could be, converted into US$ at that rate on 31 December,
      2003.

(b)   Group accounting

      The consolidated financial statements include those of the Company and its
      subsidiaries and also incorporate the Group's interest in associates on
      the basis as set out in Note 2(c) and 2(d) below. The equity and net
      income attributable to minority shareholders' interests are shown
      separately in the consolidated balance sheet and consolidated income
      statement, respectively.

      All significant intercompany balances and transactions, including
      intercompany profits and unrealised profits and losses are eliminated on
      consolidation; unrealised losses are also eliminated unless cost cannot be
      recovered. Consolidated financial statements are prepared using uniform
      accounting policies for like transactions and other events in similar
      circumstances.

(c)   Subsidiaries

      Subsidiaries, which are those entities in which the Group has an interest
      of more than one half of the voting rights or otherwise has power to
      govern the financial and operating policies are consolidated.

      In the Company's financial statements, the Company's share of the
      post-acquisition profits or losses of subsidiaries is recognised in the
      income statement and its share of post-acquisition movements in reserves
      is recognised in reserves. The cumulative post-acquisition movements are
      adjusted against the cost of the investment. An assessment of interests in
      subsidiaries is performed when there is an indication that the asset has
      been impaired or the impairment losses recognised in prior years no longer
      exist.

(d)   Associates

      Associates are entities over which the Group generally has between 20% and
      50% of the voting rights, or over which the Group has significant
      influence, but which it does not control.

                                      F-13
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

2.    PRINCIPAL ACCOUNTING POLICIES (CONT'D)

(d)   Associates (Cont'd)

      Investments in associates are accounted for by the equity method of
      accounting. Under this method the Company's share of the post-acquisition
      profits or losses of associates is recognised in the income statement and
      its share of post-acquisition movements in reserves is recognised in
      reserves. The cumulative post-acquisition movements are adjusted against
      the cost of the investment.

      Unrealised gains on transactions between the Group and its associates are
      eliminated to the extent of the Group's interest in the associates;
      unrealised losses are also eliminated unless the transaction provides
      evidence of an impairment of the asset transferred. When the Group's share
      of losses in an associate equals or exceeds its interest in the associate,
      the Group does not to recognise further losses, unless the Group has
      incurred obligations or made payments on behalf of the associates.

(e)   Foreign currency transactions

      The Group maintains its books and records in RMB.

      Foreign currency transactions are translated into RMB using the exchange
      rates prevailing at the dates of the transactions. Foreign exchange gains
      and losses resulting from the settlement of such transactions and from the
      translation of monetary assets and liabilities denominated in foreign
      currencies, are recognised in the income statement in the period in which
      they arise. Translation differences on monetary assets measured at fair
      value are recognised in foreign exchange gains and losses.

      The Group did not enter into any hedge contracts during any of the periods
      presented.

      No foreign currency exchange gains or losses were capitalised for any
      periods presented.

(f)   Financial instruments

      Financial assets and financial liabilities carried on the balance sheet
      include cash and cash equivalents, temporary cash investments, trade
      receivables and payables, other receivables and payables and
      available-for-sale investments. The accounting policies on recognition and
      measurement of these items are disclosed in the respective accounting
      policies.

      The Group had no derivative financial instruments in any of the years
      presented.

(g)   Fixed assets

      Fixed assets are initially recorded at cost less accumulated depreciation
      and impairment loss. Cost represents the purchase price of the asset and
      other costs incurred to bring the asset into existing use.

      Subsequent to the initial recognition, fixed assets are stated at cost or
      valuation less accumulated depreciation and impairment losses (see Note
      13). Independent valuations, on a market value basis or depreciated
      replacement cost basis when there is no evidence of market value for such
      an item, are performed at least every five years or sooner if considered
      necessary by the directors. In the intervening years, the directors review
      the carrying values of the fixed assets and adjustment is made where there
      has been a material change. Increases in valuation are credited to the
      revaluation reserve.

                                      F-14
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

2.    PRINCIPAL ACCOUNTING POLICIES (CONT'D)

(g)   Fixed assets (Cont'd)

      Decreases in valuation of fixed assets are first offset against increases
      from earlier valuations in respect of the same asset and are thereafter
      charged to the income statement. Any subsequent increases are credited to
      the income statement up to the amount previously charged. Upon the
      disposal of the fixed assets, the relevant portion of the realised
      revaluation reserve of previous valuations is transferred from the
      revaluation reserve to retained earnings and is shown as a movement in
      reserves.

      Depreciation is calculated using the straight-line method to write off the
      cost or revalued amount, after taking into account the estimated residual
      value of 4% to 10% of cost, of each asset over its estimated useful life.
      Effective from 1 January, 2003, the Group changed the estimated useful
      lives of track, bridges and service roads from 44 years to a range from 55
      years to 100 years and changed the useful lives of locomotives and rolling
      stock from 16 years to 20 years. Effect of such change of accounting
      estimates to the consolidated income statement for the year ended 31
      December 2003 is set out in Note 13. The estimated useful lives are as
      follows:

      Buildings                                       25 to 40 years
      Leasehold improvements                          over the lease terms
      Track, bridges and service roads                55 to 100 years
      Locomotives and rolling stock                   20 years
      Communications and signaling systems            8 to 20 years
      Other machinery and equipment                   7 to 25 years

      Where the carrying amount of an asset is greater than its estimated
      recoverable amount, it is written down immediately to its recoverable
      amount.

      Gains and losses on disposals are determined by comparing proceeds with
      carrying amount and are included in the income statement. When revalued
      assets are sold, the amounts included in fair value and other reserves are
      transferred to retained earnings.

      Repairs and maintenance are charged to the income statement during the
      financial period in which they are incurred. The cost of major renovations
      is included in the carrying amount of the asset when it is probable that
      future economic benefits in excess of the originally assessed standard of
      performance of the existing asset will flow to the Group. Major
      renovations are depreciated over the remaining useful life of the related
      asset.

(h)   Construction-in-progress

      Construction-in-progress represents plant and facilities, including
      railroad stations and maintenance facilities under construction and
      machinery pending for installation. This includes the costs of
      construction and acquisition. No depreciation is provided on construction
      in progress until the asset is completed and put into use.

                                      F-15
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

2.    PRINCIPAL ACCOUNTING POLICIES (CONT'D)

(i)   Leasehold land payments

      All land in the PRC is state-owned and no individual land ownership right
      exists. The Group acquired the right to use certain land for its rail
      line, stations and other businesses. The premium paid for such leasehold
      land payments represents pre-paid lease payments, which are amortised over
      the lease terms of 36.5 to 50 years.

(j)   Impairment of long lived assets

      Fixed assets and other non-current assets are reviewed for impairment
      losses whenever events or changes in circumstances indicate that the
      carrying amount may not be recoverable. An impairment loss is recognised
      for the amount by which the carrying amount of the asset exceeds its
      recoverable amount which is the higher of an asset's net selling price and
      value in use. For the purposes of assessing impairment, assets are grouped
      at the lowest level for which there are separately identifiable cash
      flows.

(k)   Available-for-sale investments

      Investments intended to be held for an indefinite period of time, which
      may be sold in response to needs for liquidity or changes in interest
      rates, are classified as available-for sale investments; these are
      included in non-current assets unless management has the express intention
      of holding the investment for less than 12 months from the balance sheet
      date or unless they will need to be sold to raise operating capital, in
      which case they are included in current assets. All purchases and sales of
      available-for-sale investments are recognised on the date that the
      transaction is effective. Cost of purchase includes transaction costs.
      Available-for-sale investments are not subsequently fair-valued because
      they do not have quoted market prices in active markets and whose fair
      values cannot be reliably measured. These investments are carried at cost,
      and are subject to review for impairments.

(l)   Deferred staff costs

      The Group have finalised a scheme for selling staff quarters to its staff
      in 2000. Under the scheme, the Group sold certain staff quarters to their
      employees at preferential prices as housing benefits to the employees. The
      total housing benefits, which represented 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 over 15 years, which is the
      estimated remaining average service lives of the employees participating
      in the scheme. Upon the sales of staff quarters to the employees, the
      housing benefits incurred are recorded as deferred staff costs and
      amortised over the remaining average service lives of the employees
      participating in the scheme.

(m)   Operating leases

      Leases where 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 are charged to the income statement on a
      straight-line basis over the period of the lease.

(n)   Materials and supplies

      Materials and supplies consist mainly of items for repair and maintenance
      of track, and are stated at weighted average cost. Materials and supplies
      are expensed when used.

                                      F-16
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

2.    PRINCIPAL ACCOUNTING POLICIES (CONT'D)

(o)   Receivables

      Receivables are carried at original invoice amount less provision made for
      impairment of these receivables. A provision for impairment of receivables
      is established when there is an objective evidence that the Group will not
      be able to collect all amounts due according to the original terms of
      receivables. The amount of the provision is the difference between the
      carrying amount and the recoverable amount, being the present value of
      expected cash flows, discounted at the market rate of interest for similar
      borrowers.

(p)   Temporary cash investments

      Temporary cash investments represent short-term deposits with original
      maturities ranging from three months to one year, which are held for
      investment purpose and are stated at cost.

(q)   Cash and cash equivalents

      Cash and cash equivalents are carried in the balance sheet at cost. For
      the purposes of the cash flow statement, cash and cash equivalents
      comprise cash on hand, deposits held at call with banks and other
      financial institutions, other short-term highly liquid investments with
      original maturities of three months or less.

(r)   Income tax expense

      The Group provides for income tax expense on the basis of the results for
      the year as adjusted for items which are not assessable or deductible for
      income tax purposes. Taxation of the Group is determined in accordance
      with the relevant tax rules and regulations applicable to enterprises
      established/incorporated in the PRC.

      Deferred income tax is provided in full, using the liability method, on
      temporary differences arising between the tax bases of assets and
      liabilities and their carrying amounts in the financial statements.
      Currently enacted tax rates are used in the determination of deferred
      income tax. Deferred tax assets are recognised to the extent that it is
      probable that future taxable profit will be available against which the
      temporary differences can be utilised. Deferred income tax is provided on
      temporary differences arising on investments in subsidiaries and
      associates, except where the timing of the reversal of the temporary
      difference can be controlled and it is probable that the temporary
      difference will not reverse in the foreseeable future.

(s)   Employee benefits

      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 staff. The government
      agency is responsible for the pension liabilities relating to such staff
      on 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.

                                      F-17
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

2.    PRINCIPAL ACCOUNTING POLICIES (CONT'D)

(t)   Government grants

      Grants from the government are recognised at their fair value where there
      is a reasonable assurance that the grant will be received and the Group
      will comply with all attached conditions. Government grants relating to
      the purchase of fixed assets are deducted against the carrying value of
      the fixed assets and are credited to the income statement on a
      straight-line basis over the useful lives of the fixed assets.

(u)   Provisions

      Provisions are recognised when the Group has a present legal or
      constructive obligation as a result of past events, it is probable that an
      outflow of resources will be required to settle the obligation, and a
      reliable estimate of the amount can be made.

(v)   Revenue recognition

      Provided it is probable that the economic benefits associated with a
      transaction will flow to the Group and the revenues and costs, if
      applicable, can be measured reliably, revenue is recognised on the
      following bases:

      (i)   Rendering of services and sales of goods

            Railroad revenues are recognised when services are performed.
            Revenues from other businesses include sales aboard the trains and
            in the stations of food, beverages and other merchandise and
            revenues from operating restaurants in major stations. Revenues from
            operating restaurants are recognised when services are rendered.

            Sales aboard the trains and in the stations of food, beverages and
            merchandise are recognised upon delivery, when the significant risks
            and rewards of ownership of these goods have been transferred to the
            buyers.

            Revenues are net of turnover tax.

      (ii)  Interest income

            Interest income from bank deposits is recognised on a time
            proportion basis, taking into account of the principal outstanding
            and the effective rate over the period to maturity, when it is
            determined that such income will accrue to the Group.

      (iii) Dividend income

            Dividend income is recognised when the right to receive payment is
            established.

(w)   Dividends

      Dividends are recorded in the Group's financial statements in the period
      in which they are approved by the Group's shareholders.

                                      F-18
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

2.    PRINCIPAL ACCOUNTING POLICIES (CONT'D)

(x)   Segments

      Business segments: for management purposes the Group is organised into
      railroad transportation and other business operations. The divisions are
      the basis upon which the Group reports their primary segment information.
      Financial information on business segments is presented in Note 3.

      Intersegment transactions: segment revenues, segment expenses and segment
      performance include transfers between business segments. Those transfers
      are eliminated on consolidation.

3.    SEGMENTAL INFORMATION

(a)   Business segments

      The Group conducts the majority of its business activities in railroad and
      other business operations (see Note 1). These segments are determined
      primarily because the senior management makes key operating decisions and
      assesses performance of the segments separately. The accounting policies
      of the Group's segments are the same as those described in the principal
      accounting policies in Note 2. The Group evaluates performance based on
      profit from operations. Segment assets consist primarily of fixed assets,
      materials and supplies, receivables and operating cash, and mainly exclude
      deferred tax assets and interests in associates. Segment liabilities
      comprise operating liabilities and exclude taxes payable. Capital
      expenditure comprises additions to fixed assets (see Note 13) and
      construction-in-progress (see Note 14).

                                      F-19

<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

      (Amounts in thousands,except number of shares and ADSs,per share and
                   per ADS data and unless otherwise stated)

3. SEGMENTAL INFORMATION

(a) Business segments (Cont'd)

      An analysis by business segment is as follows:

<TABLE>
<CAPTION>
                                                              Railroad businesses    Other businesses    Unallocated
                                                             ----------------------  ----------------  ----------------
                                                                2003        2002      2003     2002     2003     2002
                                                             ----------  ----------  -------  -------  -------  -------
                                                               RMB'000     RMB'000   RMB'000  RMB'000  RMB'000  RMB'000
<S>                                                          <C>         <C>         <C>      <C>      <C>      <C>
Revenues
- External                                                    2,269,017   2,360,635  144,370  156,893        -        -
- Inter-segment                                                       -           -   52,172   75,188        -        -
                                                             ----------  ----------  -------  -------  -------  -------
                                                              2,269,017   2,360,635  196,542  232,081        -        -
                                                             ==========  ==========  =======  =======  =======  =======

Segment result                                                  560,731     625,343    1,982   (2,846)       -        -
Other income                                                     16,809       1,411      777    5,164        -        -
Interest income                                                  29,349      36,281      406      639        -        -
Finance costs                                                         -           -        -        -   (2,468)  (4,208)
Share of losses of associates                                    (2,508)       (323)       -        -        -        -
Income tax expense
Minority interests


Profit attributable to shareholders

Other information
Segment assets                                               10,082,637  10,147,098  844,668  962,077        -        -

Deferred tax assets                                                   -           -        -        -    6,154    7,577

Interests in associates                                         140,494     139,972        -      870        -        -


Total assets


Segment liabilities                                             429,123     678,303  220,620  251,719        -        -

Taxes payable                                                         -           -        -        -   49,494   71,844



Total liabilities


Capital expenditure                                             298,890     526,700    7,103    8,330        -        -



Non-cash expenses - Depreciation                                290,014     335,508    1,639    2,289        -        -
                  - Amortisation of leasehold land payments      15,602      15,131        -        -        -        -
                  - Provision for doubtful accounts                 123       4,257       49      341        -        -
                  - Amortisation of deferred staff costs         15,092      15,092        -        -        -        -

<CAPTION>
                                                                Consolidation          Total
                                                              ----------------  ----------------------
                                                               2003     2002       2003        2002
                                                              -------  -------  ----------  ----------
                                                              RMB'000  RMB'000     RMB'000     RMB'000
<S>                                                           <C>      <C>      <C>         <C>
Revenues
- External                                                          -        -   2,413,387   2,517,528
- Inter-segment                                               (52,172) (75,188)          -           -
                                                              -------  -------  ----------  ----------
                                                              (52,172) (75,188)  2,413,387   2,517,528
                                                              =======  =======  ==========  ==========

Segment result                                                      -        -     562,713     622,497
Other income                                                        -        -      17,586       6,575
Interest income                                                     -        -      29,755      36,920
Finance costs                                                       -        -      (2,468)     (4,208)
Share of losses of associates                                       -        -      (2,508)       (323)
Income tax expense                                                                 (93,348)   (104,265)
Minority interests                                                                      32        (113)
                                                                                ----------  ----------

Profit attributable to shareholders                                                511,762     557,083
                                                                                ==========  ==========
Other information
Segment assets                                                      -        -  10,927,305  11,109,175

Deferred tax assets                                                 -        -       6,154       7,577

Interests in associates                                             -        -     140,494     140,842
                                                                                ----------  ----------

Total assets                                                                    11,073,953  11,257,594
                                                                                ==========  ==========

Segment liabilities                                                 -        -     649,743     930,022

Taxes payable                                                       -        -      49,494      71,844
                                                                                ----------  ----------

Total liabilities                                                                  699,237   1,001,866
                                                                                ==========  ==========

Capital expenditure                                                 -        -     305,993     535,030
                                                                                ==========  ==========

Non-cash expenses - Depreciation                                    -        -     291,653     337,797
                                                                                ==========  ==========
                  - Amortisation of leasehold land payments         -        -      15,602      15,131
                                                                                ==========  ==========
                  - Provision for doubtful accounts                 -        -         172       4,598
                                                                                ==========  ==========
                  - Amortisation of deferred staff costs            -        -      15,092      15,092
                                                                                ==========  ==========

</TABLE>

For the years ended 31 December, 2001, 2002 and 2003, no revenues from a single
customer counted for 10 percent or more of the Group's total revenues

                                      F-20
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

        (Amounts in thousands,except number of shares and ADSs,per share
                  and per ADS data and unless otherwise stated)

3.    SEGMENTAL INFORMATION (CONT'D)

(b)   Geographic segments

      For the year ended 31 December, 2003, all of the Group's business
      operations are conducted in the PRC.

4.    GENERAL AND ADMINISTRATIVE EXPENSES

<TABLE>
<CAPTION>
                                                      Year ended 31 December,
                                                    ----------------------------
                                                      2001     2002       2003
                                                    -------   -------   --------
                                                      RMB       RMB       RMB
<S>                                                 <C>       <C>       <C>
Wages and bonus                                      15,026    16,226    14,936
Retirement and employee benefits                     50,553    49,722    58,778
Utility expenses                                        361       195       219
Selling expenses                                      5,397         -         -
Office expenses                                      14,394    15,538    15,414
Construction duty, land use fees and other duties     3,664     3,761     3,539
Depreciation                                          3,392     1,625     1,693
Amortisation of deferred staff costs                 15,721    15,092    15,091
Provision for doubtful accounts                      29,620     4,598       172
Others                                               41,956    52,180    54,557
                                                    -------   -------   -------
                                                    180,084   158,937   164,399
                                                    =======   =======   =======
Attributable to:
        Railroad businesses                         150,162   123,800   134,688
        Other businesses                             29,922    35,137    29,711
                                                    -------   -------   -------
                                                    180,084   158,937   164,399
                                                    =======   =======   =======
</TABLE>

5.    OTHER INCOME

<TABLE>
<CAPTION>
                                                       Year ended 31 December,
                                                    ----------------------------
                                                     2001      2002       2003
                                                    -------   -------   --------
                                                      RMB       RMB       RMB
<S>                                                 <C>       <C>       <C>
Exchange (gain) / losses                             (1,069)      799     (1,356)
Others                                               14,021     5,776     18,942
                                                    -------   -------   --------
                                                     12,952     6,575     17,586
                                                    =======   =======   ========
</TABLE>

                                      F-21
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 (Amounts in thousands, except number of shares and ADSs, per share and
                   per ADS data and unless otherwise stated)

6.   INTEREST INCOME, NET

<TABLE>
<CAPTION>
                                       Year ended 31 December,
                                   ------------------------------
                                    2001        2002        2003
                                   ------      ------      ------
                                    RMB         RMB         RMB
<S>                                <C>         <C>         <C>
Finance costs                      (2,087)     (4,208)     (2,468)
Interest income                    65,708      36,920      29,755
                                   ------      ------      ------
                                   63,621      32,712      27,287
                                   ======      ======      ======
</TABLE>

7.    INCOME TAX EXPENSE

Enterprises established in Shenzhen Special Economic Zone are subject to income
tax at a reduced rate of 15% as compared with the standard rate for PRC
companies of 33%. The Shenzhen Municipal Tax Bureau confirmed in 1996 that the
Company is subject to a reduced income tax rate of 15% starting from the same
year. The income tax rate of the Company for the year ended 31 December, 2003 is
15%.

According to the relevant income tax laws, other businesses of the Group are
subject to income tax rates of 15% or 33%, depending mainly on their places of
incorporation/establishment. Furthermore, certain subsidiaries engaged in other
businesses are Sino-foreign joint ventures which are entitled to full exemption
from the PRC income tax for two years and a 50% reduction in the next three
years starting from the first profit-making year, after offsetting available tax
losses carried forward from prior years.

Save as described above, the directors of the Company are not being informed of
any change in the enterprise income tax treatment applicable to the Group.

Details of taxation charged to the consolidated income statement during the year
were as follows:

<TABLE>
<CAPTION>
                                                                        Year ended 31 December,
                                                                  ---------------------------------
                                                                    2001         2002         2003
                                                                  -------      -------       ------
                                                                    RMB          RMB          RMB
<S>                                                               <C>          <C>           <C>
Provision for PRC income tax                                      106,823      106,649       91,925
Deferred tax loss (income) resulting from provision for
   doubtful accounts                                               (4,175)      (1,173)         316
Deferred tax loss (income) resulting from loss on the
   disposals of fixed assets                                       (3,351)      (1,211)       1,107
                                                                  -------      -------       ------
                                                                   99,297      104,265       93,348
                                                                  =======      =======       ======
</TABLE>

                                      F-22
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 (Amounts in thousands, except number of shares and ADSs, per share and
                   per ADS data and unless otherwise stated)

7.    INCOME TAX EXPENSE (CONT'D)

The tax on the Group's profit before tax differs from the theoretical amount
that would arise using the applicable tax rate of the Company as follows:

<TABLE>
<CAPTION>
                                                                        2001             2002            2003
                                                                     ----------       ----------       ----------
                                                                     Percentage       Percentage       Percentage
<S>                                                                  <C>              <C>              <C>
Weighted average statutory tax rate                                     15.0%            15.0%           15.0%
Tax effect of expenses that are not deductible in determining
   taxable profit:
   - Amortisation of deferred staff costs                                0.4%             0.3%            0.4%
Effect of different tax rates for certain subsidiaries                   0.4%             0.4%              -
                                                                        ----             ----            ----
Effective income tax rate                                               15.8%            15.7%           15.4%
                                                                        ====             ====            ====
</TABLE>

8.    EARNINGS PER SHARE AND PER EQUIVALENT ADS

The calculation of basic earnings per share and per equivalent ADS were based on
the profit attributable to shareholders for the year attributable to ordinary
shareholders of RMB511,762 (2002: RMB557,083), divided by the weighted average
number of ordinary shares and equivalent ADS outstanding during the year of
4,335,550,000 and 86,711,000 respectively (2002: 4,335,550,000 and 86,711,000
respectively). No diluted earnings per share and per equivalent ADS were
presented as there were no dilutive potential ordinary shares as of year end.

9.    DIVIDENDS

In 2003, the directors have recommended and declared a final dividend of RMB0.10
(2002: RMB0.10) per share in respect of the financial year ended 31 December,
2002, totaling RMB433,555 (2002: RMB433,555).

10.   TEMPORARY CASH INVESTMENTS

<TABLE>
<CAPTION>
                                                                             31 December,
                                                                        ----------------------
                                                           Note          2002             2003
                                                           ----         -------         -------
                                                                          RMB             RMB
<S>                                                        <C>          <C>             <C>
Time deposits with maturities over three months in banks   (a)          399,339         459,440
Time deposits with maturities over three months in the
   MOR's Railway Deposits-taking Center                    (b)          168,000         168,000
                                                                        -------         -------
                                                                        567,339         627,440
                                                                        =======         =======
</TABLE>

                                      F-23
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 (Amounts in thousands, except number of shares and ADSs, per share and
                   per ADS data and unless otherwise stated)

10.   TEMPORARY CASH INVESTMENTS (CONT'D)

(a)   Time deposits with maturities over three months in banks consist of
      short-term deposits denominated in RMB and US$ (2002: RMB, Hong Kong
      dollars "HK$", and US$) with original maturities ranging from six months
      to one year, placed with banks in the PRC. The annual interest rate of RMB
      deposits was 1.98% in 2003 (2002: 1.98%), the annual interest rate of HK$
      deposit was 1.13% in 2002, and the annual interest rates of US$ deposits
      were LIBOR plus a floating rate ranged from -0.2% to 0% (2002: from -0.2%
      to 0.1%). Total interest earned from such deposits amounted to
      approximately RMB 11,868 for the year (2002: approximately RMB15,121).

(b)   Time deposits with maturities over three months in the MOR's Railroad
      Deposit-taking Center consist of short-term deposits denominated in RMB
      (in 2002 included both RMB and USD) with original maturities of one year
      (2002: ranging from six months to one year). The annual interest rate of
      RMB deposits was 1.98% in 2003 (2002: 1.98% ) and the annual interest
      rates of US$ deposits were LIBOR plus a floating rate ranged from -0.2% to
      0.1% in 2002. Total interest earned from such deposits amounted to
      approximately RMB3,326 (2002: approximately RMB3,239) for the year (see
      Note 24).

11.   TRADE RECEIVABLES, NET

<TABLE>
<CAPTION>
                                                             31 December,
                                                      --------------------------
                                                       2002                2003
                                                      ------              ------
                                                       RMB                 RMB
<S>                                                   <C>                 <C>
Trade receivables                                     67,416              96,037
Less: Provision for doubtful accounts                (15,959)            (15,423)
                                                      ------              ------
                                                      51,457              80,614
                                                      ======              ======
</TABLE>

The credit terms of trade receivables are within one year. The aging analysis of
trade receivables, net was as follows:

<TABLE>
<CAPTION>
                                                             31 December,
                                                      --------------------------
                                                       2002                2003
                                                      ------              ------
                                                       RMB                 RMB
<S>                                                   <C>                 <C>
Within 1 year                                         44,986              75,674
Over 1 year but within 2 years                         3,490               4,719
Over 2 years but within 3 years                        1,652                 221
Over 3 years                                           1,329                   -
                                                      ------              ------
                                                      51,457              80,614
                                                      ======              ======
</TABLE>

Concentrations of credit risk with respect to trade receivables are limited due
to the Group's large number of customers, who are widely dispersed. Due to this
factor, management believes that no additional credit risk beyond amounts
provided for collection losses is inherent in the Group's trade receivables.

                                      F-24
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 (Amounts in thousands, except number of shares and ADSs, per share and
                   per ADS data and unless otherwise stated)

11.   TRADE RECEIVABLES (CONT'D)

Movements of provision for doubtful accounts:

<TABLE>
<CAPTION>
                                                        Year ended 31 December,
                                                      --------------------------
                                                       2002                2003
                                                      ------              ------
                                                       RMB                 RMB
<S>                                                   <C>                 <C>
At beginning of year                                  24,040              15,959
Utilisation during the year                           (8,081)               (536)
                                                      ------              ------
At end of year                                        15,959              15,423
                                                      ======              ======
</TABLE>

12.   PREPAYMENTS AND OTHER RECEIVABLES, NET

<TABLE>
<CAPTION>
                                                             31 December,
                                                     ---------------------------
                                                       2002               2003
                                                     -------             -------
                                                       RMB                 RMB
<S>                                                  <C>                 <C>
Other receivables                                    149,385             157,690
Less: Provision for doubtful accounts                (39,898)            (38,288)
                                                     -------             -------
Other receivables, net                               109,487             119,402
Prepayments                                          131,737             104,061
                                                     -------             -------
                                                     241,224             223,463
                                                     =======             =======
</TABLE>

Movements of provision for doubtful accounts:

<TABLE>
<CAPTION>
                                                        Year ended 31 December,
                                                      --------------------------
                                                       2002                2003
                                                      ------              ------
                                                       RMB                 RMB
<S>                                                   <C>                 <C>
At beginning of year                                  34,008              39,898
Addition of provision during the year                  5,890                 172
Utilisation during the year                                -              (1,782)
                                                      ------              ------
At end of year                                        39,898              38,288
                                                      ======              ======
</TABLE>

As of 31 December, 2003, the Company had fixed deposit with the principal amount
of approximately RMB31.365 million in Zeng Cheng City Li Cheng Credit
Cooperative ("Li Cheng"). The Company had not been able to recover the principal
from Li Cheng upon the expiry of the fixed deposit term. In March 1999, the
Company instituted legal proceedings against Li Cheng to recover the deposit and
the related interest. According to the court verdict dated 12 October, 1999, Li
Cheng was required to repay the deposit principal and the related interest to
the Company. As Li Cheng failed to execute the court ruling, the Company further
applied to the court for compulsory enforcement of the court order. In July
2000, Li Cheng filed a petition to the court for winding up. On 9 November,
2000, the court ordered the suspension of execution of the court ruling dated 12
October, 1999, while Li Cheng was undergoing a winding-up. On 23 November, 2000,
the Company applied to the Guangdong Provincial Government for allocation of
special funds by the government to Li Cheng for repayment of the Company's
deposit principal. The provincial government accepted the petition and requested
the municipal government to follow up on the case. As of the date of this
report, the fixed deposit has not yet been collected. Accordingly, the Company
reclassified such amount from temporary cash investments to other receivables
and accounted for provision for doubtful accounts pursuant to management's
estimates.

                                      F-25
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 (Amounts in thousands, except number of shares and ADSs, per share and
                   per ADS data and unless otherwise stated)

13.   FIXED ASSETS, NET

<TABLE>
<CAPTION>
                                                                 Track,      Locomotives  Communications      Other
                                                 Lease hold    bridges and   and rolling  and signaling   machinery and
                                      Buildings  improvement  service roads     stock        systems        equipment      Total
                                      ---------  -----------  -------------  -----------  --------------  -------------  ---------
                                         RMB         RMB           RMB           RMB            RMB            RMB          RMB
<S>                                   <C>        <C>          <C>            <C>          <C>             <C>            <C>
Cost/valuation
As of 1 January, 2002                 2,066,545     38,500     4,070,016       1,004,211     490,724        1,522,774    9,192,770
Additions                                25,985          -        22,871          23,620       1,475           78,161      152,112
Transfer from
  construction-in-progress               40,852          -        43,791             870      46,372           14,401      146,286
Reclassification                       (124,057)         -       122,752               -     (42,484)          43,789            -
Disposals                               (68,169)         -       (13,884)         (2,496)   (198,981)         (73,413)    (356,943)
                                      ---------     ------     ---------       ---------     -------        ---------    ---------
As of 31 December, 2002               1,941,156     38,500     4,245,546       1,026,205     297,106        1,585,712    9,134,225
Additions                                   260          -             -          21,679         916           32,823       55,678
Transfer from
  construction-in-progress              209,479          -       123,832               -         720          198,718      532,749
Government grants                       (17,000)         -             -               -           -                -      (17,000)
Reclassification                       (154,024)         -       (37,113)              -       5,936          185,201            -
Disposals                               (92,503)         -       (16,560)         (4,992)     (4,600)         (33,116)    (151,771)
                                      ---------     ------     ---------       ---------     -------        ---------    ---------
As of 31 December, 2003               1,887,368     38,500     4,315,705       1,042,892     300,078        1,969,338    9,553,881
                                      ---------     ------     ---------       ---------     -------        ---------    ---------
Representing:
At cost                                 220,433     38,500       164,088          22,549      48,092          287,127      780,789
At 2003 professional valuation        1,666,935          -     4,151,617       1,020,343     251,986        1,682,211    8,773,092
                                      ---------     ------     ---------       ---------     -------        ---------    ---------
                                      1,887,368     38,500     4,315,705       1,042,892     300,078        1,969,338    9,553,881
                                      ---------     ------     ---------       ---------     -------        ---------    ---------
Accumulated depreciation
As of 1 January, 2002                   345,429      5,775       932,060         212,925     266,582          398,959    2,161,730
Charges for the year                     58,739      7,700        92,400          60,723      23,962           94,273      337,797
Reclassification                        (22,652)         -        18,404               -      (4,256)           8,504            -
Disposals                                (5,324)         -        (5,311)         (2,496)   (107,891)         (42,560)    (163,582)
                                      ---------     ------     ---------       ---------     -------        ---------    ---------
As of 31 December, 2002                 376,192     13,475     1,037,553         271,152     178,397          459,176    2,335,945
Charges for the year                     54,399      7,700        46,476          47,648      34,144          101,286      291,653
Reclassification                              -          -       (16,682)              -         563           16,119            -
Disposals                                  (921)         -        (2,550)         (4,992)     (4,417)         (13,715)     (26,595)
                                      ---------     ------     ---------       ---------     -------        ---------    ---------
As of 31 December, 2003                 429,670     21,175     1,064,797         313,808     208,687          562,866    2,601,003
                                      ---------     ------     ---------       ---------     -------        ---------    ---------
Net book value
At end of year                        1,457,698     17,325     3,250,908         729,084      91,391        1,406,472    6,952,878
                                      =========     ======     =========       =========     =======        =========    =========
At beginning of year                  1,564,964     25,025     3,207,993         755,053     118,709        1,126,536    6,798,280
                                      =========     ======     =========       =========     =======        =========    =========
Had the fixed assets been carried at
 cost less accumulated depreciation,
 the carrying amounts at year end
 would have been:

Cost                                  1,048,829     38,500     3,537,104       1,019,170     269,152        1,853,887    7,766,642
Accumulated depreciation                214,612     21,175       696,853         256,906     189,263          513,581    1,892,390
                                      ---------     ------     ---------       ---------     -------        ---------    ---------
                                        834,217     17,325     2,840,251         762,264      79,889        1,340,306    5,874,252
                                      =========     ======     =========       =========     =======        =========    =========
</TABLE>

* During the year ended 31 December, 2003, based on the construction completion
reports, the directors reclassified certain fixed assets to appropriate
categories. Accordingly, the carrying amounts of the aforesaid fixed assets are
depreciated over their remaining useful lives under the respective categories.

On 6 March, 1996, the fixed assets of the Group were revalued by Vigers Hong
Kong Limited (the "Valuer"), a qualified independent valuer in Hong Kong, using
a replacement cost approach and open market value approach. The replacement cost
approach considers the cost to replace in new condition the assets appraised for
similar assets, and includes purchase price, delivery charge and installation
cost. The purchase price is based on the open market value. The Valuer assumed
that the assets will be used for the purposes for which they are presently used
and did not consider alternative uses. The total revalued amount based on the
aforesaid 1996 revaluation was RMB 5,318,202. The revaluation surplus of fixed
assets amounting to approximately RMB1,492,185 was recorded by the Group as of 6
March, 1996, and depreciation on the increment to fixed assets commenced on that
date. Upon the Restructuring, the revaluation surplus was converted to shares
allotted to the Parent Company.

                                      F-26
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 (Amounts in thousands, except number of shares and ADSs, per share and
                   per ADS data and unless otherwise stated)

13.   FIXED ASSETS, NET (CONT'D)

On 30 September, 2002, the fixed assets were revalued by Pan-China (Schinda)
Certified Public Accountants, a qualified independent valuer registered in the
PRC, on a replacement cost approach and open market value approach, where
applicable. These fixed assets were stated at their revalued amounts in the
financial statements as of 30 September, 2002.

The directors of the Company are of the opinion that the carrying values of
fixed assets as of 31 December, 2003 approximated to their fair values.

With reference to "Cai Jian Han (2002) No. 42" and "Cai Jian Han (2002) No. 349"
issued by Ministry of Finance ("MOF") and "Ban Cai Fa (2003) No. 10" issued by
MOR and to further comply with international practice in railway industry, the
management reassessed the estimated useful lives and depreciation rates of fixed
assets as of 1 January 2003. The assessment is based on the experience and
maintenance program established by the management and the engineering personnel.
Effective from 1 January, 2003, the Group changed the estimated useful lives of
track, bridges and service roads from 44 years to a range from 55 years to 100
years and changed the useful lives of locomotives and rolling stock from 16
years to 20 years. This change in accounting estimates resulted in a decrease in
depreciation expenses and an increase in profit attributable to shareholders for
the year ended 31 December, 2003 by approximately RMB 63,610.

14.   CONSTRUCTION-IN-PROGRESS

<TABLE>
<CAPTION>
                                                            31 December,
                                                  -------------------------------
                                                    2002                   2003
                                                  -------                 -------
                                                    RMB                     RMB
<S>                                               <C>                     <C>
At beginning of year                              446,399                 672,827
Additions                                         382,918                 250,315
Disposals                                         (10,204)                      -
Transfer to fixed assets                         (146,286)               (532,749)
                                                  -------                 -------
At end of year                                    672,827                 390,393
                                                  =======                 =======
</TABLE>

As of 31 December, 2003, there was no interest capitalised in the
construction-in-progress as the Group had no borrowings.

Disposals in 2002 mainly represented injection in available-for-sale investments
(see Note 17).

                                      F-27
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

15. LEASEHOLD LAND PAYMENTS

<TABLE>
<CAPTION>
                                Year ended 31 December,
                                -----------------------
                                  2002        2003
                                 -------     -------
                                   RMB         RMB
<S>                              <C>         <C>
Cost
At beginning of year             762,087     760,087
Additions                              -      10,687
Disposals                         (2,000)          -
                                 -------     -------
At end of year                   760,087     770,774
                                 -------     -------

Accumulated amortisation
At beginning of year              88,341     103,089
Charges for the year              15,131      15,602
Disposals                           (383)          -
                                 -------     -------
At end of year                   103,089     118,691
                                 -------     -------

Net book value
At end of year                   656,998     652,083
                                 =======     =======

At beginning of year             673,746     656,998
                                 =======     =======
</TABLE>

16. INTERESTS IN ASSOCIATES

<TABLE>
<CAPTION>
                                                  31 December,
                                              --------------------
                                                2002        2003
                                              --------    --------
                                              RMB'000      RMB'000
<S>                                           <C>         <C>
Share of net assets, beginning of year         117,477     136,574
Addition                                        19,420           -
Share of losses                                   (323)     (2,508)
                                              --------    --------
Share of net assets, end of year               136,574     134,066

Due from associates                             48,095      48,437
Due to associates                                  (40)         (8)
                                              --------    --------
                                               184,629     182,495

Less: Provision for impairment in value        (29,689)    (29,689)
      Provision for doubtful accounts          (14,098)    (12,312)
                                              --------    --------

                                               140,842     140,494
                                              ========    ========
</TABLE>

The amounts due from/to associates are unsecured, interest free and had no fixed
repayment terms. The provision for impairment in value and provision for
doubtful accounts were provided for Zengcheng Lihua Stock Company Limited
("Zengcheng Lihua") as Zengcheng Lihua is in financial difficulty.

                                      F-28
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

16. INTERESTS IN ASSOCIATES (CONT'D)

Movements of provision for impairment in value and for doubtful accounts are as
follows:

<TABLE>
<CAPTION>
                                  Year ended 31 December,
                                  -----------------------
                                     2002       2003
                                    -------    -------
                                      RMB        RMB
<S>                                 <C>        <C>
Beginning of year                    62,400     43,787
Utilisation during the year         (18,613)    (1,786)
                                    -------    -------
End of year                          43,787     42,001
                                    =======    =======
</TABLE>

As of 31 December, 2002, the Company had direct or indirect interests in the
following companies which were incorporated/established and are operating in the
PRC:

<TABLE>
<CAPTION>
                                                               Percentage of
                                             Date of          equity interest
                                          incorporation /     attributable to
    Name of the entity                     establishment         the Company       Paid-up capital        Principal activities
    ------------------                    ---------------     ---------------      ---------------        --------------------
<S>                                       <C>                 <C>                  <C>                 <C>
Directly held by the Company

Guangzhou Tiecheng Enterprise              2 May, 1995               49%            RMB245,000,000     Properties management
   Company Limited                                                                                       and trading of merchandise

Zengcheng Lihua Stock Company              30 July, 1992             27%            RMB100,000,000     Real estate, warehousing,
   Limited                                                                                               cargo loading and unloading

Indirectly held by the Company

Guangzhou Tielian Economy                  27 December, 1994         34%            RMB  1,000,000     Warehousing and freight
   Development Company Limited                                                                           transport agency

Guangzhou Huangpu Yuehua Freight           20 July, 1990           33.3%            RMB  6,610,000     Cargo loading and unloading,
   Transportation Joint Venture                                                                          warehousing, freight
   Company Limited                                                                                       transport agency

</TABLE>

17. AVAILABLE-FOR-SALE INVESTMENTS

<TABLE>
<CAPTION>
                                                       31 December,
                                                    -----------------
   Name of the investee company                      2002      2003
   ----------------------------                     -------   -------
                                                    RMB'000   RMB'000
<S>                                                 <C>       <C>
China Railway Communication Company
  Limited ("China Railcom")*                        120,587   121,854
Shenzhen Innovation Technology Investment
  Company Limited                                    30,000    30,000
China Railway Express Company Limited                13,608    13,608
Shenzhen Huatie Enterprise Company Limited            2,000     2,000
Zhongtie Information Company Limited                    500       500
                                                    -------   -------
                                                    166,695   167,962
                                                    =======   =======
</TABLE>

                                      F-29
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

17. AVAILABLE-FOR-SALE INVESTMENTS (CONT'D)

The Company's share of equity interests in each of the respective companies is
not more than 10%. No quoted market prices are available for the above unlisted
companies as of year end.

*    In 2003, the Company invested in China Railcom by injecting certain
     communication and signalling systems with their respective carrying value
     of approximately RMB1,267 (in 2002 the Company invested in China Railcom by
     injecting certain communication and signalling systems and construction-in
     progress with carrying value of approximately RMB120,587). China Railcom
     has confirmed in writing that the Group is entitled to the 0.69% equity
     interest in China Railcom as of 31 December, 2003 (2002: 0.85%). The
     relevant legal registration procedures are still in progress.

18. DEFERRED TAX ASSETS

<TABLE>
<CAPTION>
                                                       31 December,
                                                      --------------
                                                      2002     2003
                                                      -----   ------
                                                       RMB      RMB
<S>                                                   <C>     <C>
Deferred tax assets:
   -   Provision for doubtful accounts                3,015    2,699
   -   Losses on disposals of fixed assets            4,562    3,455
                                                      -----   ------
                                                      7,577    6,154
                                                      =====   ======
</TABLE>

The movements of deferred taxation during the years are as follows:

<TABLE>
<CAPTION>
                                                          Year ended 31 December,
                                                          -----------------------
                                                               2002     2003
                                                              ------   ------
                                                               RMB       RMB
<S>                                                           <C>      <C>
At beginning of year                                           5,193    7,577
Credit (debit) to consolidated profit during the years         2,384   (1,423)
                                                              ------   ------
At end of year                                                 7,577    6,154
                                                              ======   ======
</TABLE>

19. DEFERRED STAFF COSTS

<TABLE>
<CAPTION>
                                              31 December,
                                          --------------------
                                            2002        2003
                                          --------    --------
                                          RMB'000     RMB'000
<S>                                       <C>         <C>
Cost, at beginning and end of year         226,369     226,369
                                          --------    --------

Accumulated amortisation
At beginning of year                       (30,182)    (45,274)
Charges for the year                       (15,092)    (15,092)
                                          --------    --------

At end of year                             (45,274)    (60,366)
                                          --------    --------

Net book amount
At end of year                             181,095     166,003
                                          ========    ========
At beginning of year                       196,187     181,095
                                          ========    ========
</TABLE>

                                      F-30
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

20. ACCRUED EXPENSES AND OTHER PAYABLES

<TABLE>
<CAPTION>
                                       31 December,
                                    -----------------
                                     2002      2003
                                    -------   -------
                                      RMB       RMB
<S>                                 <C>       <C>
Advances from customers             143,388    89,840
Accrued expenses                     79,790    24,000
Salary and welfare payables          21,260    15,138
Taxes payables                       71,844    49,494
Other payables                      213,515   179,815
                                    -------   -------
                                    529,797   358,287
                                    =======   =======
</TABLE>

Other payables mainly represented various payables and deposits for daily
operation of business.

Pursuant to Caishui [2004] No.36 and Caishui [2003] No.149 issued by MOF and
State Administration of Taxation, the Group exempt from certain real estate
taxes amounting to approximately RMB12,000 during the year ended 31 December,
2003. The grant of such exemption is subject to the acknowledgement of relevant
authorities that the Company is a transportation company under the MOR. The
directors believe that the Group is qualified for such exemption and is in the
process of seeking the acknowledgement from the relevant authorities.
Accordingly, such real estate taxes have not been accrued for in the
accompanying financial statements.

21. SHARE CAPITAL

As of 31 December, 2003, the authorised capital of the Company consisted of
ordinary shares of par value RMB1.00 per share:

<TABLE>
<CAPTION>
                                                                                                        Percentage
                                                                       Number          Nominal          of capital
                                                                     of shares          value              stock
                                                                     ---------         -------          ----------
                                                                       '000              RMB
<S>                                                                  <C>               <C>              <C>
Authorised, issued and fully paid:
   State-owned Domestic Shares                                        2,904,250        2,904,250            67%
   H Shares                                                           1,431,300        1,431,300            33%
                                                                      ---------        ---------           ---
                                                                      4,335,550        4,335,550           100%
                                                                      =========        =========           ===
</TABLE>

22. DISTRIBUTION OF INCOME

According to the articles of association of the Company, when distributing
Profit attributable to shareholders of each year, the Company shall set aside
10% of its Profit attributable to shareholders after tax based on the Company's
local statutory accounts for the statutory surplus reserve (except where the
reserve has reached 50% of the Company's registered share capital) and 5% to 10%
for the statutory public welfare fund at a percentage determined by the
directors. The Company may make appropriation from its Profit attributable to
shareholders to the discretionary surplus reserve provided it is approved by a
resolution of a shareholders' general meeting. These reserves cannot be used for
purposes other than those for which they are created and are not distributable
as cash dividends without prior approval from a shareholders' general meeting
under certain conditions.

When the statutory surplus reserve is not sufficient to make good for any losses
of the Company from previous years, current year Profit attributable to
shareholders shall be used to make good the losses before allocations are set
aside for the statutory surplus reserve or the statutory public welfare fund.

                                      F-31
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

22. DISTRIBUTION OF INCOME (CONT'D)

The statutory public welfare fund is used to build or acquire capital items,
such as dormitories and other facilities for the Company's employees and cannot
be used to pay for welfare expenses. Title of these capital items will remain
with the Company.

The statutory surplus reserve, the discretionary surplus reserve and the share
premium may be converted into capital stock provided it is approved by a
resolution at a shareholders' general meeting and the balance of the statutory
surplus reserve does not fall below 25% of the registered capital stock. The
Company may either distribute new shares in proportion to the number of shares
held by shareholders, or increase the par value of each share.

In accordance with the articles of association of the Company, dividends are
determined based on the least of retained earnings determined in accordance with
(a) PRC GAAP, (b) IFRS and (c) the accounting standards of the countries in
which its shares are listed. As the statutory accounts have been prepared in
accordance with PRC GAAP, the retained earnings as reported in the statutory
accounts may be different from the amount reported in the accompanying statement
of changes in shareholders equity.

As of 31 December, 2003, the reserve of the Company available for distribution
was approximately RMB656,893 (2002: approximately RMB667,416).

23. RETIREMENT BENEFITS

All the full-time staff of the Group are covered by a defined-contribution
pension scheme. Pursuant to a circular dated 24 October, 1995 issued by the
Parent Company, the Company is required to pay to the Parent Company an amount
equivalent to 19% of the salary and certain amount of bonus of the staff for
pension benefits, and the Parent Company is responsible for the ultimate pension
liability to the staff. Starting from December 2000, the percentage borne by the
Company changed to 18% pursuant to another circular dated 21 December, 2000
issued by the Parent Company. As of 31 December, 2003, payable for pension
obligations was nil (2002: nil).

24. RELATED PARTY TRANSACTIONS

      Parties are considered to be related if one party has the ability,
      directly or indirectly, to control the other party or exercise significant
      influence over the other party in making financial and operating
      decisions. Parties are also considered to be related if they are subject
      to common control or common significant influence.

(a)   During the year, the Group had the following material transactions with
      related parties:

      Recurring transactions

      A significant portion of transactions undertaken by the Group during the
      year was with related PRC state-owned enterprises and on such terms as
      determined by the relevant PRC authorities and stipulated in the related
      agreements entered into with these parties. The following is a summary of
      significant recurring transactions carried out in the ordinary course of
      business by the Group with its related parties during the year:

                                      F-32
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

24. RELATED PARTY TRANSACTIONS (CONT'D)

      Recurring transactions (Cont'd)

<TABLE>
<CAPTION>
                                                                       Year ended 31 December,
                                                                     ---------------------------
                                                                       2001     2002      2003
                                                                     -------   -------   -------
                                                                       RMB       RMB       RMB
<S>                                                                  <C>       <C>       <C>
Lease of locomotives and related services from Yang
   Cheng Railway Company, a subsidiary of the
   Parent Company(i)                                                  70,345    42,047    40,882

Provision of trains and related services from
   Guangmeishan Railway Company Limited, a
   subsidiary of the Parent Company                                    5,205     4,864     5,305

Purchases of materials and supplies from Guangzhou
   Railway Material Supply Company, a subsidiary of
   the Parent Company                                                 36,544    33,074    50,687

Social services (employee housing, health care, educational
   and public security services and other ancillary
   services) provided by the Parent Company and related
   parties (including Guangzhou Railway (Group) Guangshen
   Railway Enterprise Development Company)                            56,800    66,744    68,079

Operating lease rentals paid to the MOR(i)                            52,296    57,298    58,904

Provision of trains and related service through MOR                   66,475   211,667   201,870

Provision of trains usage and related services from
   Guangzhou Railway (Group) Passenger Transportation
   Company, a subsidiary of the Parent Company                         7,844     6,681     2,207

Interest expenses paid to the Parent Company (ii)                      1,178     2,443     2,037

Interest received from the MOR's Railroad
   Deposit-taking Centre (see Note 10(b) and 24(b))                   11,887     3,239     3,516

Interest received from Pingnan Railway Company
   Limited, an associate of the Parent Company (ii)                    1,866       806       827

Interest received from Guangmeishan Railway Company
   Limited (ii)                                                        1,291     1,884       901
</TABLE>

      (i)   The lease agreement with Yang Cheng Railway Company was revised on
            March 6, 1996 and provides for a 10-year lease period starting from
            1996. The lease with MOR is based on the uniform rate set by MOR and
            is renewable annually.

                                      F-33
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

24. RELATED PARTY TRANSACTIONS (CONT'D)

      Recurring transactions (Cont'd)

      (ii)  The interest was resulted from the long-distance transportation
            services, which was calculated based on the average balances due
            from/to related parties on a quarterly basis, at the prevailing
            interest rates of six-month bank loans.

(b)   As of 31 December, 2002, the Group had the following material balances
      with related parties:

<TABLE>
<CAPTION>
                                                               31 December,
                                                           --------------------
                                                             2002        2003
                                                           --------    --------
                                                              RMB         RMB
<S>                                                        <C>         <C>
Temporary cash investments in the MOR's Railroad
   Deposit-taking Center (see Note 10(b))                   168,000     168,000
Bank deposits in the MOR's railroad Deposit-taking
   Center                                                   206,452     321,985
Due from Parent Company                                      39,374           -
Due to Parent Company                                             -     (37,230)
Due from related parties                                    267,885     199,921
                                                           --------    --------
   - Trading balance                                         54,425      10,608
   - Non-trading balance                                    213,460     189,313
                                                           --------    --------
Due to related parties                                     (158,199)   (120,605)
                                                           --------    --------
   - Trading balance                                       (125,847)    (60,128)
   - Non-trading balance                                    (32,352)    (60,477)
                                                           --------    --------
</TABLE>

      As of 31 December, 2003, the balances with the MOR, the Parent Company and
      related parties are unsecured, non-interest bearing and repayable on
      demand, except for those disclosed in Notes 10(b), 24(a) and bank deposits
      in MOR's railroad Deposit-taking centre. These balances resulted from
      transactions carried out by the Group with related parties in the ordinary
      course of business. The balances with the Parent Company are all
      non-trading in nature. The balances with related parties, which are of
      trading in nature, all aged within one year.

25. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

Non-cash transactions

      (i)   During the year ended 31 December, 2003, the Group disposed certain
            staff quarters of approximately RMB92 million (2002: approximately
            RMB63 million) to their employees pursuant to its housing benefit
            scheme.

      (ii)  During the year ended 31 December, 2003, the Company and the
            minority shareholder increased their investments in a subsidiary by
            capitalising approximately RMB42 million and RMB41 million due from
            that subsidiary respectively.

                                      F-34
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

25. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (CONT'D)

Non-cash transactions (Cont'd)

      (iii) During the year ended 31 December, 2003, the Company invested of
            approximately RMB1,267 (2002: approximately RMB120,587) in China
            Railcom by injecting certain communication and signalling systems
            (see note 17).

26. FINANCIAL INSTRUMENTS

      The carrying amounts of the cash and cash equivalents, temporary cash
      investments and accounts receivable and payables of the Group approximate
      their fair values because of the short maturity of those instruments. Cash
      and cash equivalents and temporary cash investments denominated in foreign
      currencies have been translated at the applicable market exchange rates
      prevailing at the balance sheet date. The Company has not had and does not
      believe it will have any difficulty in exchanging its foreign currency
      cash and cash equivalents for RMB.

      As of 31 December, 2003, cash and cash equivalents and temporary cash
      investments were mainly maintained with commercial banks in the PRC and
      the MOR's Railroad Deposit-taking Centre.

      As of 31 December, 2003, balances denominated in US$ and HK$ have been
      translated into RMB at the applicable market exchange rates as of that
      date.

27. CONCENTRATION OF RISKS

(a)   Credit risk

      The carrying amount of cash and cash equivalents, accounts receivable and
      other receivables, and due from related parties and other current assets
      except for prepayments and deferred tax assets, represent the Group'
      maximum exposure to credit risk in relation to financial assets.

      The majority of the Group's accounts receivable relate to the rendering of
      services or sales of products to third party customers. The Group perform
      ongoing credit evaluations of their customers' financial condition and
      generally do not require collateral on accounts receivable. The Group
      maintain a provision for doubtful accounts and actual losses have been
      within management's expectation.

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

(b)   Interest rate risk

      The directors of the Group believe that the exposure to interest rate risk
      of financial assets and liabilities as of 31 December, 2003 was minimum
      since their deviation from their respective fair values was not
      significant.

                                      F-35
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

27. CONCENTRATION OF RISKS (CONT'D)

(c)   Currency risk

      Substantially all of the revenue-generating operations of the Group are
      transacted in Renminbi, which is not freely convertible into foreign
      currencies. On 1 January, 1994, the Mainland China government abolished
      the dual rate system and introduced single rate of exchange as quoted by
      the People's Bank of China. However, the unification of the exchange rate
      does not imply free convertibility of Renminbi into foreign currencies.
      All foreign exchange transactions continue to take place either through
      the People's Bank of China or other banks authorised to buy and sell
      foreign currencies at the exchange rates quoted by the People's Bank of
      China. Approval of foreign currency payments by the People's Bank of China
      or other institution requires submitting a payment application form
      together with suppliers' invoices, shipping documents and signed
      contracts.

28. COMMITMENTS

(a)   Capital commitments

      As of 31 December, 2003, the Group had the following capital commitments:

<TABLE>
<CAPTION>
                                                               31 December,
                                                           --------------------
                                                             2002        2003
                                                           --------    --------
                                                             RMB          RMB
<S>                                                        <C>         <C>
Authorised and contracted for                               10,158         -
                                                           ========    ========
</TABLE>

(b)   Operating lease commitments

      Total future minimum lease payments under non-cancelable operating leases
      were as follows:

<TABLE>
<CAPTION>
                                                                                  31 December,
                                                                        -------------------------------
                                                                         2002                    2003
                                                                        -------                --------
                                                                          RMB                     RMB
<S>                                                                     <C>                    <C>
Machinery and equipment

    - not more than one year                                            108,000                 108,000
    - more than one year but not more than two years                    108,000                 108,000
    - more than two years but not more than three years                 108,000                  75,375
    - more than three years but not more than four years                 75,375                       -
    - more than four years but not more than five years                       -                       -
                                                                        -------                 -------
                                                                        399,375                 291,375
                                                                        =======                 =======
</TABLE>

                                      F-36
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

29. CONTINGENCY

As of 31 December, 2003, the Company's interest in an associated company,
Guangzhou Tiecheng Enterprise Company Limited ("Tiecheng"), amounted to
approximately RMB140,000,000. In 1996, Tiecheng entered into an agreement with a
Hong Kong incorporated company to establish Guangzhou Guantian Real Estate
Company ("Guangzhou Guantian"), a sino-foreign contractual joint venture to
develop certain properties near a railway station operated by the Group.

On 27 October, 2000, Guangzhou Guantian together with Guangzhou Guanhua Real
Estate Company Limited ("Guangzhou Guanhua" ) and Guangzhou Guanyi Real Estate
Company Limited ("Guangzhou Guanyi") agreed to act as joint guarantors (the
"Guarantors") of certain payables of Guangdong Guancheng Real Estate Company
Limited ("Guangdong Guancheng") to an independent third party. Guangzhou
Guantian, Guangzhou Guanhua, Guangzhou Guanyi and Guangdong Guancheng were
related companies with a common chairman. As Guangdong Guancheng failed to repay
the payables, according to a court verdict on 4 November, 2001, Guangzhou
Guantian, Guangzhou Guanhua and Guangzhou Guanyi were liable to the independent
third party to recover an amount of approximately RMB257,000 plus interest from
Guangdong Guancheng. As such, if Guangzhou Guantian were held responsible for
the guarantee, the Company may need to provide for impairment on its interests
in Tiecheng.

On 15 December, 2003, the High People's Court of Guangdong Province (the
"Court") received the Guangzhou Guantian's application for discharging the
aforesaid guarantee. As a necessary procedure for the Court to decide to
reassess the previous court verdict, a hearing was held on 18 March, 2004. In
this respect, Guangzhou Guantian appointed an independent lawyer to represent on
its behalf to attend the hearing. Up to the date of this report, the Court is
yet to finish the necessary procedures before making decision to reassess the
previous court verdict. However, having consulted that independent lawyer, the
directors are of the opinion that the guarantee arrangement should be invalid
according to the relevant PRC rules and regulations. Accordingly, the directors
consider that as of the date of this report, the chance of Guangzhou Guantian to
settle the above claim is remote and no provision for impairment on the
interests in Tiecheng was made in the accounts.

30. DIFFERENCE BETWEEN IFRS AND US GAAP

The accompanying financial statements conform to IFRS which differ in certain
respects from those prepared under Generally Accepted Accounting Principles in
the United States of America ("US GAAP"). A major difference between IFRS and US
GAAP, which has a significant effect on consolidated profit attributable to
shareholders and consolidated net assets is set out below:

Revaluation of fixed assets

As stated in Note 13, the Group revalued their fixed assets on March 6, 1996.
The revaluation surplus of fixed assets amounting to approximately RMB1,492,185
was recorded by the Group on that date. The revaluation as of September 30, 2002
did not result in a material difference from the carrying amounts and no
revaluation surplus or deficit was recorded.

Under IFRS, revaluation of fixed assets is permitted and depreciation is based
on the revalued amount. Additional depreciation arising from the revaluation
surplus was approximately RMB38,548 for the year ended 31 December, 2003 (2002:
approximately RMB48,422).

                                      F-37
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

30. DIFFERENCE BETWEEN IFRS AND US GAAP (CONT'D)

Revaluation of fixed assets (Cont'd)

Under US GAAP, fixed assets are required to be stated at original cost. Hence,
no additional depreciation from revaluation will be recognised under US GAAP.
However, a deferred tax asset related to the revaluation surplus amounting to
approximately RMB223,828 was created under US GAAP with a corresponding increase
in equity since the revaluation resulted in a higher tax base which will be
realised through additional depreciation for PRC tax purposes.

Effects on the consolidated profit attributable to shareholders of significant
differences between IFRS and US GAAP are summarised below:

<TABLE>
<CAPTION>
                                                                      Year ended 31 December,
                                                           --------------------------------------------
                                                             2001        2002        2003        2003
                                                           --------    --------    --------    --------
                                                             RMB          RMB        RMB         US$
<S>                                                        <C>         <C>         <C>         <C>
Consolidated profit attributable to
   shareholders under IFRS                                  533,495     557,083     511,762      61,658
US GAAP adjustments:
    Reversal of additional depreciation charges
       arising from the revaluation surplus on
       fixed assets                                          48,422      48,422      38,548       4,644
    Effect of US GAAP adjustment on deferred
       tax provision                                         (7,263)     (7,263)     (5,782)       (697)
                                                           --------    --------    --------    --------

Consolidated profit attributable to
   shareholders under US GAAP                               574,654     598,242     544,528      65,605
                                                           ========    ========    ========    ========

Earnings per share under US GAAP                            RMB0.13     RMB0.14     RMB0.13     USD0.02
                                                           ========    ========    ========    ========

Earnings per equivalent ADS under
    US GAAP                                                 RMB6.63     RMB6.90     RMB6.28     USD0.76
                                                           ========    ========    ========    ========
</TABLE>

                                      F-38
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

30. DIFFERENCE BETWEEN IFRS AND US GAAP (CONT'D)

Effects on consolidated net assets of significant differences between IFRS and
US GAAP are summarised below:

<TABLE>
<CAPTION>
                                                                                 Year ended 31 December,
                                                                     ---------------------------------------------
                                                                        2002             2003             2003
                                                                     ----------       ----------        ---------
                                                                        RMB              RMB              US$
<S>                                                                  <C>              <C>               <C>
Consolidated net assets under IFRS                                   10,244,151       10,322,358        1,243,656
US GAAP adjustments:
    Reversal of the gross revaluation surplus on fixed assets        (1,492,185)      (1,492,185)        (179,781)
    Reversal of accumulated depreciation on the revaluation
      surplus on fixed assets                                           330,884          369,432           44,510
    Deferred tax assets related to net revaluation surplus              174,195          168,413           20,291
                                                                      ---------        ---------        ---------

Consolidated net assets under US GAAP                                 9,257,045        9,368,018        1,128,676
                                                                      =========        =========        =========
</TABLE>

There are no significant differences between IFRS and US GAAP which affect
classification in the balance sheet and the income statement but do not affect
net income or shareholders' equity.

In 2003, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No.150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity ("SFAS 150") and
FASB Interpretation No.46, Consolidation of Variable Interest Entities ("FIN
46").

SFAS 150 established standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that and issuer classify a financial instrument that is within its
scope as liability (or an asset in some circumstances). Many of those
instruments were previously classified as equity. Some of the provisions of this
Statement are consistent with the current definition of liabilities in FASB
Concepts Statement No.6, Elements of Financial Statements. The remaining
provisions of this Statement are consistent with the Board's proposal to revise
that definition to encompass certain obligations that a reporting entity can or
must settle by issuing its own equity shares, depending on the nature of the
relationship established between the holder and the issuer. SFAS 150 is
effective for financial instruments entered into or modified after 31 May, 2003,
and otherwise is effective at the beginning of the first period beginning after
15 June, 2003.

                                      F-39
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

     (Amounts in thousands, except number of shares and ADSs, per share and
                    per ADS data and unless otherwise stated)

30. DIFFERENCE BETWEEN IFRS AND US GAAP (CONT'D)

The Company considered the effect of adoption SFAS 150 and do not expect any
material impact on the financial statements.

FIN 46 provides guidance on the identification of and financial reporting for
entities over which controls is achieved through means other than voting rights.
This interpretation requires existing unconsolidated variable interest entities
to be consolidated by their primary beneficiaries if the entities do not
effectively disperse risks among parties involved. FIN 46 applies immediately to
variable interest entities created after 31 January, 2003, and to variable
interest entities in which an enterprise obtains an interest after the date. It
applies in the first fiscal year or interim period beginning after 15 June,
2003, to variable interest entities in which an enterprise holds a variable
interest that it acquired before 1 February, 2003. The Company considered the
effects of adoption FIN 46 and do not expect any material impact on the
financial statements.

31. POST BALANCE SHEET EVENTS

Pursuant to a board resolution dated 20 April, 2004, the directors recommended
the payment of a final dividend of RMB0.105 per share, totaling RMB455,233.

32. FOREIGN CURRENCY EXCHANGE

The books and records of the Group are maintained in RMB, their functional
currency. RMB is not freely convertible into foreign currencies. All foreign
exchange transactions involving RMB must take place through the banks and other
institutions authorised by the People's Bank of China ("PBOC") to buy and sell
foreign exchange. The applicable market exchange rates used for the transactions
are administered by the PBOC. Enterprises can deal with an approved bank for
foreign exchange on recurring items and approved capital items.

33. APPROVAL OF ACCOUNTS

The financial statements were approved by the Board of Directors on 20 April,
2004.

                                      F-40
<PAGE>

                                    SIGNATURE

      The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.

                                        GUANGSHEN RAILWAY COMPANY LIMITED

Date: June 29, 2004                    By: /s/ Wu Junguang
                                           -------------------------------------
                                            Wu Junguang
                                            Chairman of the Board of Directors