<PAGE>

                                  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, 2002
                                       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
representing 50 H shares                New York Stock Exchange, Inc.

Class H Ordinary Shares                 The Stock Exchange of Hong Kong Limited
</TABLE>


 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, 2002:

Domestic shares, par value RMB1.00 per share...................... 2,904,250,000
H shares, par value RMB1.00 per share, including 148,214,050 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 4.  Information on the Company......................................................................9
         Item 5.  Operating and Financial Review and Prospects...................................................31
         Item 6.  Directors, Senior Management and Employees.....................................................46
         Item 7.  Major Shareholders and Related Party Transactions..............................................54
         Item 8.  Financial Information..........................................................................59
         Item 9.  The Offer and Listing..........................................................................61
         Item 10. Additional Information.........................................................................62
         Item 11. Quantitative and Qualitative Disclosures about Market Risk.....................................81
         Item 12. Description of Securities other than Equity Securities.........................................82

PART II

         Item 13.  Defaults, Dividend Arrearages and Delinquencies...............................................83
         Item 14.  Material Modifications to the Rights of Security Holders and Use of Proceeds..................83
         Item 15.  Controls and Procedures.......................................................................83
         Item 16.  [Reserved]....................................................................................83

PART III

         Item 17.  Financial Statements..........................................................................84
         Item 18.  Financial Statements..........................................................................84
         Item 19.  Exhibits......................................................................................84

</TABLE>


<PAGE>

                           FORWARD-LOOKING STATEMENTS

         Certain information contained in this annual report, which does not
relate to historical financial information may be deemed to constitute
forward-looking statements. The words or phrases "will likely result", "are
expected to", "will continue", "is anticipated", "estimate", "project",
"believe" or similar expressions are intended to identify "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, or the Securities Act, and Section 21E of the Securities and Exchange
Act of 1934, as amended, or the Exchange Act. Such statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from historical results and those presently anticipated or projected.
We wish to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date 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, the unknown impact of the recent
outbreak of Severe Acute Respiratory Syndrome, or SARS, in Hong Kong and China,
and foreign currency fluctuations.

         When considering such forward-looking statements, you should keep in
mind the factors described in "Item 3. Key Information--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

         Translations of amounts in this annual report from renminbi into U.S.
dollars and vice versa have been made at the rate of RMB8.2800 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, 2002. 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 3. Key
Information--Exchange Rate Information" for information regarding the noon
buying rates from January 1, 1998 through June 20, 2003.

         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:

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

         o  "Guangshen Railway", "Company", "we", "our" and "us" means Guangshen
            Railway Company Limited, a joint stock limited company incorporated
            in China with limited liability.

                                       1
<PAGE>

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

         o  "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

         o  "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.

         o  "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

                             SELECTED FINANCIAL DATA

HISTORICAL FINANCIAL INFORMATION OF THE COMPANY

         The following tables present our selected consolidated financial
information as of December 31, 1998, 1999, 2000, 2001 and 2002 and for the years
then ended, which were extracted from the following financial statements:

         Our consolidated balance sheets as of December 31, 2001 and 2002, and
our consolidated statements of income, changes in equity and cash flows for each
of the years ended December 31, 2000, 2001 and 2002, prepared in accordance with
International Financial Reporting Standards, or "IFRS", are derived from our
audited consolidated financial statements, included elsewhere in this annual
report. Our consolidated balance sheets as of December 31, 1998, 1999 and 2000,
and our consolidated statements of income, changes in equity and cash flows for
each of the years ended December 31, 1998 and 1999 are derived from our audited
consolidated financial statements and are not included in this annual report.

         The selected income statement data, cash flow statement data and other
data for the years ended December 31, 2000, 2001 and 2002, and the selected
balance sheet data as of December 31, 2001 and 2002 should be read in
conjunction with "Item 5. Operating and Financial Review and Prospects", and are
qualified by reference to our audited consolidated financial statements included
elsewhere in this annual report.

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                           --------------------------------------------------------------------------
                                              1998         1999         2000       2001          2002        2002
                                           ----------- -----------  ----------- -----------  ----------- ------------
                                               RMB         RMB          RMB         RMB          RMB        US$(1)

                                                            (IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<S>                                         <C>         <C>          <C>         <C>          <C>            <C>
INCOME STATEMENT DATA:
  Revenues from railroad businesses
    - passenger.........................    1,070,411   1,114,046    1,237,289   1,426,010    1,846,599      223,019
    - freight...........................      681,945     537,970      549,694     567,276      514,036       62,082
                                           ----------- -----------  ----------- -----------  ----------- ------------
    Subtotal............................    1,752,356   1,652,016    1,786,983   1,993,286    2,360,635      285,101
  Revenues from other businesses........      190,231     166,800      193,415     160,306      156,893       18,948
                                           ----------- -----------  ----------- -----------  ----------- ------------
  Total revenues........................    1,942,587   1,818,816    1,980,398   2,153,592    2,517,528      304,049
  Railroad operating expenses...........   (1,144,277) (1,189,641)  (1,297,464) (1,460,629)  (1,735,292)   (209,576)
  Other businesses operating expenses...     (165,336)   (151,255)    (163,529)   (138,852)    (159,739)    (19,292)
                                           ----------- -----------  ----------- -----------  ----------- ------------
  Profit from operations................      632,974     477,920      519,405     554,111      622,497       75,181
  Net profit............................      642,175     529,674      492,089     533,495      557,083       67,281
  Earnings per share....................        0.15        0.12         0.11        0.12         0.13          0.02
  Dividends declared per share..........        0.12        0.10         0.12        0.10         0.10          0.01
  Earnings per ADS......................        7.41        6.11         5.68        6.15         6.42          0.78
</TABLE>


                                       3
<PAGE>

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                           --------------------------------------------------------------------------
                                              1998         1999         2000       2001          2002        2002
                                           ----------- -----------  ----------- -----------  ----------- ------------
                                               RMB         RMB          RMB         RMB          RMB        US$(1)

                                                            (IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<S>                                         <C>         <C>          <C>         <C>          <C>            <C>
BALANCE SHEET DATA (AT PERIOD END):
  Working capital (excluding due from and
    due to Parent Company)..............    1,951,542   1,772,772    1,463,073   1,581,054    1,592,040       192,275
  Due from Parent Company...............        9,666      48,485       80,604      29,499       39,374         4,755
  Fixed assets..........................    6,877,355   6,757,336    7,074,907   7,031,040    6,798,280       821,048
  Leasehold land payments...............      726,019     710,625      695,231     673,746      656,998        79,348
  Total assets..........................   10,738,335  10,970,496   10,917,564  10,997,216   11,257,594     1,359,613
  Equity................................    9,952,741  10,048,860   10,020,683  10,120,623   10,244,151     1,237,216
  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              855,001     656,802      729,189     886,016    1,157,177       139,756
  activities............................
  Net cash provided by (used in)             (468,359)    (61,791)    (458,087)   (430,425)     251,003        30,314
  investing activities..................
  Net cash provided by (used in)             (630,821)   (384,474)    (520,453)   (420,137)    (360,643)      (43,556)
  financing activities..................
  Capital expenditures..................      599,114     449,130      564,759     551,508      553,337        66,828
  Dividends paid........................      520,266     433,555      520,266     419,957      356,490        43,054

OTHER DATA:
  Railroad transportation operating income    608,079     462,375      489,519     532,657      625,343        75,525
  Other businesses operating income.....       24,895      15,545       29,886      21,454       (2,846)         (344)
US GAAP DATA
    - Operating income..................      632,974     477,920      519,405     554,111      622,497        75,181
    - Net income........................      683,334     570,833      533,248     574,654      598,242        72,251
    - Earnings per share................         0.16        0.13         0.12        0.13         0.14          0.02
    - Earnings per ADS..................         7.88        6.58         6.15        6.63         6.90          0.83
    - Equity............................    8,801,001   8,938,279    8,951,259   9,092,358    9,257,045     1,118,001
    - Fixed assets......................    5,522,366   5,450,769    5,816,762   5,821,317    5,636,979       680,794
</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, 2002 of US$1.00 = RMB8.2800. No
       representation is made that the RMB amounts could have been, or could be,
       converted into US$ at that rate on December 31, 2002 or on any other
       date.

EXCHANGE RATE INFORMATION

         In this report, references to "renminbi" or "RMB" are to renminbi, the
lawful currency of the PRC, references to "US$" or "U.S. dollars" are to United
States dollars, and references to "HK$" are to Hong Kong dollars in New York for
cable transfers payable in foreign currencies as certified for customs purposes
by the Federal Reserve Bank of New York. We maintain our books and records in
renminbi. On June 24, 2003, the noon buying rate for renminbi was US$1.00=RMB
8.2774.


                                       4
<PAGE>


         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>
1998.....................................             8.2968                 8.3180                  8.2774
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
December 2002............................             8.2777                 8.2800                  8.2271
January 2003.............................             8.2774                 8.2800                  8.2766
February 2003............................             8.2780                 8.2800                  8.2768
March 2003...............................             8.2773                 8.2775                  8.2770
April 2003...............................             8.2771                 8.2774                  8.2769
May 2003.................................             8.2769                 8.2771                  8.2768
June 2003 (through June 24)..............             8.2770                 8.2774                  8.2768
</TABLE>
---------------------------
(1)    Determined by averaging the rates on the last business day of each
       month during the respective period.


                                       5
<PAGE>


                                  RISK FACTORS

         Guangshen Railway is subject to various changing competitive, economic,
political and social conditions in China. These changing conditions entail
certain risks, which are described below.

         o    PRC government regulation has a significant impact on our
              business. The price of railway transportation in particular has a
              substantial impact on our income. Current governmental regulation
              of railway transportation pricing may limit our flexibility to
              respond to market conditions, competition or changes in our cost
              levels.

         o    Keen competition from other forms of transportation may affect our
              profitability and growth. The railroad transportation sector,
              particularly the passenger transportation business, faces
              increasing competition from other means of surface, air and water
              transportation. We face significant competition from bus services
              operating in the Pearl River Delta.

         o    Our business is to a certain degree dependent on the provision by
              our Parent Company, Guangzhou Railway (Group) Company, and its
              subsidiaries of services 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.

         o    The current and continuing global economic slowdown may cause a
              decline in China's and Guangdong Province's export of goods,
              thereby reducing the volume of freight transported via our rail
              line. Although neither exports from China nor Guangdong decreased
              in 2002, if the current global economic situation continues to
              deteriorate, exports from China and specifically Guangdong
              Province may decrease which could adversely affect our freight
              transportation and railroad transportation revenue.

         o    The Pearl River Delta and Hong Kong were among the areas most
              seriously affected by the recent outbreak of SARS in Asia. We have
              already experienced a decrease in passenger traffic on our routes.
              The number of passengers traveling on our trains from January to
              May 2003 decreased 11.7% from the same period in 2002. Our
              operating results and financial condition could be materially
              adversely affected by the SARS epidemic if our passenger volumes
              do not recover sufficiently in the near future.

         o    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


                                       6
<PAGE>

              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.

         o    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 increase in this preferential income tax rate could have an
              adverse effect on our operating results.

         o    Continued adjustments in the PRC industrial structure and
              international trading policies may adversely affect our freight
              transport revenues. With the expected upgrading in the PRC
              industrial structure, we anticipate that transportation needs for
              high technology products will grow. Because a large portion of
              these compact items may be shipped by the developed road, air or
              water transport systems in the Pearl River Delta region, increases
              in such high-value (therefore high unit shipping revenue) products
              per se may not result in improvements in our freight transport
              revenues. In addition, with the adjustments by the government of
              its import-export policies from time to time, our port-related
              freight transportation volumes may also suffer.

         o    Our operations and financial results may be affected by operating
              hazards and natural disasters resulting in losses for which we
              have limited insurance. Consistent with relevant PRC regulations
              and customary practices of railway companies in China, we do not
              maintain any insurance coverage against third party liabilities.
              In addition, we do not maintain 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
              may suffer financial and other consequences of any such losses,
              damages or liabilities without the benefit of any payments from
              any insurance coverage.

         o    We are also subject to a number of risks relating to the PRC,
              including the following:

              -    Most of our assets are located in China and most of our
                   revenue is primarily derived from our operations in China.
                   Accordingly, our financial position and operating results are
                   subject to the political, economic and legal developments in
                   China. We currently expect that the PRC government will
                   continue with economic reform policies, which since the 1970s
                   have emphasized autonomous enterprises and the utilization of
                   market mechanisms. Although we believe these reforms will
                   have a positive effect on our development, we cannot predict
                   whether certain changes to China's political, economic,
                   social conditions, laws and

                                       7
<PAGE>

                   regulations and policies will have any adverse effect on our
                   current or future business or results of operation.

              -    We receive most of our revenues in renminbi, but we may need
                   to make dividend payments and equipment purchase and lease
                   payments in foreign currencies. Accordingly, if our foreign
                   currency deposits are insufficient to pay all dividends and
                   operating expenses we may need to convert renminbi into
                   relevant foreign currencies at the applicable exchange rates
                   set by the People's Bank of China. We do not enter into any
                   currency hedging transactions with respect to our foreign
                   currency exposure. Any future devaluation of the renminbi
                   against the U.S. dollar will increase the effective cost of
                   foreign equipment and the amount of our foreign currency
                   expenses and have an adverse effect on the U.S. dollar
                   equivalent and Hong Kong dollar equivalent of our net income.
                   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.

              -    Because PRC laws and regulations dealing with 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 law 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 4. Information on the Company -- Business Overview --
Regulatory Overview", "-- Insurance", "Item 5. Operating and Financial Review
and Prospects", "Item 7. Major Shareholders and Related Party Transactions --
Related Party Transactions", "Item 8. Financial Information" and "Item 11.
Qualitative and Quantitative Disclosures About Market Risks".


                                       8


<PAGE>


                       ITEM 4. INFORMATION ON THE COMPANY

                     HISTORY AND DEVELOPMENT OF THE COMPANY

OVERVIEW

         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) 2558-4891 and our fax number is (86-755) 2556-5424.

         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 services and retail sales
aboard trains and in stations, advertising, tourism and leasing of property.

         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 in the Guangzhou-Shenzhen
corridor. 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 carload cargo, less-than-car-load cargo, containers, bulky and
overweight cargo, dangerous cargo, fresh and live cargo, and oversized cargo. We
enjoy extensive competitive advantages in transporting freight for medium to
long distances in the PRC.

         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.

RECENT DEVELOPMENTS

         In 2002, we continued to optimize our high-speed train service to make
it as convenient and frequent as buses, or our, "As-frequent-as-buses" Train
Project, for the Guangzhou-Shenzhen line, and also operated more high-speed
passenger trains between Guangzhou and Shenzhen. We actively enhanced our
passenger transportation services by making it more

                                       9
<PAGE>

convenient for our passengers to purchase train tickets, specifically we worked
with the Guangzhou Subway and Guangzhou Fangcun Bus Station in establishing a
"Green Passage" for passengers at the Guangzhou East Station, whereby passengers
could purchase our train tickets and discounted subway and bus tickets at that
station. In addition, passengers would be able to purchase our train tickets at
the Guangzhou Subway and Guangzhou Fangcun Bus Stations. We also improved our
passenger transportation service by implementing advanced technologies such as
our Dynamic Ticket Management System for the Guangzhou-Shenzhen route, and
building the West Ticketing Hall of Shenzhen Railway Station, the first
computerized railway ticketing hall in China. Our Dynamic Ticket Management
System allows passengers to reserve specific seats on our trains along the
Guangzhou-Shenzhen route and allows us to track where and when passengers embark
and disembark. We also upgraded and rebuilt the passenger transportation
directory system. We increased passenger fares slightly during peak periods to
reflect market changes. In 2002, we carried a total of approximately 39.8
million passengers on our trains, representing an increase of 2.4% as compared
to 2001. Passenger transport revenues were RMB1,846.6 million, representing an
increase of 29.5% over 2001.

         In 2002, we contributed RMB120.6 million of telecommunication assets to
China Railway Communication Company Limited ("China Railcom") for an equity
interest of approximately 0.85% in China Railcom. In 2002, we completed our
investment in China Railway Express Company Limited ("CRE"). We invested a total
of RMB13.61 million in cash and received 7.56 million common shares of CRE,
representing an equity interest of approximately 2.52% in CRE.

         In 2002, we completed the following infrastructure projects: (1)
replaced 19 sections of wooden moveable center switches to improve the safety
and stability of our passenger trains; (2) purchased twelve modern "25k" coaches
with improved comfort features for long-distance trains for the Shenzhen-
Yueyang and Shenzhen-Beijing routes; and (3) implemented a computerized ticket
hall at the Shenzhen Station and established the Dynamic Ticket Management
System for the Guangzhou-Shenzhen route.

BACKGROUND AND RESTRUCTURING

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


                                       10
<PAGE>


was completed. In view of the magnitude of the capital expenditures and the
relative affluence of the Pearl River Delta served by Guangshen Railway Company,
the State Council permitted the charging of a premium by Guangshen Railway
Company of 50% above the national pricing guidelines for passenger and freight
transportation from 1984 through March 31, 1996. Since April 1, 1996, pursuant
to the "Jijiaguan [1996] No. 261" document issued by the State Planning
Committee, we have been able to set our own prices for our high-speed trains and
also continue charging the premium for our other passenger and freight trains.
See "- Regulatory Overview - Pricing" for a more detailed description of our
pricing scheme.

         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 kilometers
per hour or faster. This high-speed line was the first of its kind in China.
Commercial operation of the high-speed trains commenced in December 1994 when
the principal facilities of the high-speed line were completed.

         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. Until our
initial public offering (as described below), these shares constituted the only
issued and outstanding shares of our company. Under PRC law, domestic shares may
be owned by or transferred to PRC entities only.

         The restructuring was undertaken in preparation of our initial public
offering, which occurred 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.
Of this total, 217,812,000 H shares were listed for trading on the Stock
Exchange of Hong Kong Limited. The remaining H shares, represented by 24,269,760
American depositary shares, or ADSs, were listed for trading on the New York
Stock Exchange. Each ADS represents 50 H shares. Since our public offering,
approximately 67% of our issued and outstanding common shares have been owned by
our Parent Company, and the remaining 33% have been owned by public
shareholders. The Parent Company owns all of our domestic shares. 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
process, 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 has provided related services to us
on a contractual basis since the restructuring.

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


                                       11
<PAGE>

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 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.

         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.

         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 set of customers and maintained
by Guangshen Railway for a fee. In 2002, the freight tonnage originating or
terminating on these spur lines amounted to approximately 12.1 million tons,
representing 43.9% of our total volume of freight handled, which was
approximately 27.6 million tons. In addition, the freight tonnage from ports
amounted to approximately 5.0 million tons, representing 18.0% of our total
volume of freight handled in 2002. 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.


                                       12
<PAGE>



                                BUSINESS OVERVIEW

BUSINESS OPERATIONS

         Our principal businesses are railroad passenger and freight
transportation. In 2002, 93.8% of our gross revenues and 100% of our total
operating income were produced by our railroad transport business. In each of
the past five years, passenger transportation has accounted for a larger portion
of our revenue base than freight transportation. In 2002, passenger
transportation represented 73.4%, and freight transportation represented 20.4%
of our total revenues. Our other businesses, including the sale of food,
beverages and merchandise aboard trains and in stations, accounted for 6.2% of
our total revenues.

         The table below summarizes our railroad transportation revenues and
volumes of traffic for the past five years:

<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31,
                                                    -----------------------------------------------------------
                                                        1998          1999         2000        2001        2002
                                                        ----          ----         ----        ----        ----
<S>                                                    <C>           <C>          <C>         <C>         <C>
PASSENGER TRANSPORTATION
Total passenger revenues (RMB millions)(1)..        1,070.41      1,114.05     1,237.29    1,426.01    1,846.60
Total passengers (millions).................           28.77         31.64        34.95       38.84       39.78
Revenues per passenger (RMB)................           37.21         35.21        35.40       36.71       46.42
Total passenger-kilometers (millions).......        2,438.50      2,804.20     3,051.70     3,257.9    3,453.20
Revenues per passenger-kilometer (RMB)......            0.44          0.40         0.41        0.44        0.53
FREIGHT TRANSPORTATION
Total freight revenues (RMB millions)(1)....          681.95        537.97       549.69      567.28      514.04
Total freight tons (millions)...............           26.81         27.78        28.73       29.01       27.58
Revenues per ton (RMB)......................           25.43         19.36        19.13       19.55       18.64
Total ton-kilometers (millions).............        1,939.10      2,082.10     2,071.60    2,082.50    1,926.00
Revenues per ton-kilometer (RMB)............            0.35          0.26         0.27        0.27        0.27
</TABLE>
---------------------------
(1)      Audited; all other figures in the table are unaudited.

         During 2002, the economic growth in our service territory generated
growth in demand for railroad transportation. However, we still faced keen
competition from transportation by road and other means of transportation in
both our passenger and freight transportation businesses.

PASSENGER TRANSPORT

         Passenger transport is our largest business segment, accounting for
73.4% of our total revenues and 78.2% of our railroad revenues in 2002. We
operated:

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

         o    through trains between Hong Kong and Guangzhou; and

         o    two pairs of long-distance passenger trains between Shenzhen and
              Yueyang and

                                       13
<PAGE>

              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 at December 31, 2002, we operated on average, 99 pairs of passenger
trains per day (each pair of trains meaning trains making one round-trip between
two points) of which:

         o    54 pairs were high-speed express passenger trains operating
              between Guangzhou and Shenzhen;

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

         o    seven pairs were Hong Kong through trains (including six pairs of
              high-speed Guangzhou-Kowloon through trains and one pair of
              high-speed Dongguan-Kowloon through trains operated during Hong
              Kong holidays and weekends), but excluding one pair of
              Zhaoqing-Kowloon through trains, and one pair of through trains
              that operate on alternating days either on the Beijing-Kowloon
              line or the Shanghai-Kowloon line; and

         o    34 pairs were domestic long-distance trains.

         The table below sets out passenger revenues and volumes for our Hong
Kong through trains and domestic trains in each of 2000, 2001 and 2002:

<TABLE>
<CAPTION>
                                          PASSENGER REVENUES         PASSENGER VOLUME        REVENUE PER PASSENGER
                                        ----------------------     ---------------------     ----------------------
                                        2000     2001     2002     2000     2001    2002     2000     2001     2002
                                        ----     ----     ----     ----     ----    ----     ----     ----     ----
                                          (RMB MILLIONS)              (MILLIONS)              (RMB MILLIONS)
<S>                                    <C>    <C>      <C>         <C>      <C>     <C>     <C>       <C>      <C>
Hong Kong through trains............   276.8    316.7    333.2      1.9      2.0     2.2   145.20    158.4    151.5
Domestic trains.....................   960.5  1,109.3  1,513.4     33.0     36.8    37.6    29.07     30.2     40.3
Combined passenger operations....... 1,237.3  1,426.0  1,846.6     35.0     38.8    39.8    35.40    36.71     46.4
</TABLE>

         GUANGZHOU-SHENZHEN TRAINS. In 2002, our passenger transportation
services on the trains between Guangzhou and Shenzhen contributed most to our
total revenues and accounted for a substantial portion of the 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.

         In 2002, approximately 14.9 million passengers traveled on the
Guangzhou-Shenzhen route, which represents a decrease of 2.9% from approximately
15.3 million in 2001. The decrease was due to the increase in the number of
high-speed trains and a decrease in the number of regular speed trains which
resulted in a decline in the number of passengers boarding on intermediate
stops. However, revenue per passenger and revenue per passenger-kilometer rose
sharply as compared to 2001 because the "As-frequent-as buses" Train Project
operated throughout 2002 and most of the passengers on this route traveled on
higher fare high-speed trains. Although there was a slight decrease in the
passenger volume over 2001 on the


                                       14
<PAGE>

Guangzhou-Shenzhen route, the impact of such decrease on our overall revenues
generated from passenger transportation on this route was minor.

         Prior to 2002, due to limitations on data collection, the number of
passengers on the Guangzhou-Shenzhen route did not include the passengers that
traveled between 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. In 2002, we refined our data
collection techniques and classification methods and were able to more
accurately track and classify passengers traveling on high-speed trains and
regular-speed trains on the Guangzhou-Shenzhen route. However, for the purpose
of comparing 2001's data, the number of passengers for the Guangzhou-Shenzhen
route quoted above was based on the old data classification method. Under the
new classification method, the total number of passengers that traveled on the
Guangzhou-Shenzhen route in 2002 was approximately 17.3 million, of which
approximately 15.7 million were travelers on high-speed trains and approximately
1.6 million were travelers on regular-speed trains. We will be using the new
data collection and classification method for all future periods.

         HONG KONG THROUGH TRAINS. We operate jointly with the KCR seven pairs
of high-speed through trains between Hong Kong and Guangzhou (including one pair
of high-speed Dongguan-Kowloon through trains but excluding one pair of
Zhaoqing-Kowloon through trains, and one pair of through trains that operate on
alternating days either on the Beijing-Kowloon line or the Shanghai-Kowloon
line). The KCR and we provide the trains and personnel for two pairs and five
pairs, respectively, of these Hong Kong-Guangzhou high-speed through train
services. Service beyond Guangzhou to Foshan, Zhaoqing, Beijing and Shanghai is
provided in conjunction with Guangzhou Railway (Group) Passenger Transportation
Company, Beijing Railway Administration and Shanghai Railway Administration,
respectively. Revenues from the through trains on the Guangzhou-Hong Kong
section are split 81.22% to us and 18.78% to the KCR. In addition, we share
costs with the KCR based on track mileage for the operating of the through train
service.

         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 relatively high per-passenger
revenues for us.

         In 2002, approximately 2.22 million passengers traveled on the Hong
Kong through trains, which represents an increase of 8.4% from approximately
2.05 million in 2001. The revenue from the operation of the Hong Kong through
trains for 2002 was RMB333.2 million, representing a 5.2% increase from RMB316.7
million for 2001. Both of these increases were mainly due to:

         o    the simplification of the tourist visa application procedures and
              the promotion of "holiday economy" by the PRC government to
              stimulate consumption through longer holidays, resulting in an
              increase in the number of tourists traveling from inland China to
              Hong Kong;

         o    an increase in passenger volume because the trains on this route
              operated on all


                                       15
<PAGE>

              PRC holidays throughout 2002, whereas the trains on this route
              only operated during the second half of 2001; and

         o    increased purchases of leisure properties in the Pearl River Delta
              by Hong Kong residents.

         DOMESTIC LONG-DISTANCE TRAINS. As of December 31, 2002, an average of
34 pairs of domestic long-distance passenger trains daily connected our rail
line to cities in Guangdong, Hunan, Hubei, Jiangxi, Anhui, Liaoning, Shanxi,
Fujian, Heilongjiang, Jilin, Henan and Shandong Provinces as well as cities to
the north, such as Shanghai, Beijing and Tianjin. In 2002, the number of
long-distance passengers increased by 5.6% from approximately 21.46 million in
2001 to approximately 22.67 million in 2002. The increase was due principally to
the operation of the Shenzhen-Yueyang and Shenzhen-Beijing long-distance trains
throughout 2002 and a greater number of tourists traveling on these routes due
to longer holidays instituted by the PRC government. According to our new
classification method described under "-Guangzhou-Shenzhen Trains", the number
of long-distance passengers was approximately 20.2 million in 2002. Due to the
higher ticket prices paid by long-distance passengers, revenue per passenger
also increased as a result of the full-year operation of those two long-distance
trains.

         HIGH-SPEED PROJECT. In 1991, we embarked on the construction of a
high-speed rail line, the first of its kind in the PRC. 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. As part of our
High-Speed Project, we rebuilt two rail lines in 1994 for use by high-speed
passenger trains. We began to build the third line in 1998 for freight trains
and regular-speed passenger trains. After launching our high-speed passenger
train operations in 1994 with four daily pairs, we have steadily increased the
number of high-speed passenger trains between Guangzhou and Shenzhen and reduced
the number of regular-speed passenger trains. During 2002, we operated on
average a total of 54 pairs of inter-city express passenger trains between
Guangzhou and Shenzhen daily and basically completed our "As-frequent-as-buses"
Train Project.

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

         MAJOR STATIONS. Guangzhou East Station We completed construction of the
main structure of our Guangzhou East Station in 2000 to serve several
objectives, including:

         o    enabling us to operate significantly more frequent service between
              Guangzhou and Shenzhen and between Guangzhou and Hong Kong by
              increasing overall station capacity dedicated to our operations;
              and

         o    serving as a new hub for long-distance trains to locations
              throughout China.

         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

                                       16
<PAGE>

and 3 of the subway system in the near future, will continue to promote, our
passenger transportation business. As of December 31, 2002, the Guangzhou East
Station handles six pairs of Hong Kong through trains, 54 pairs of
Guangzhou-Shenzhen trains, 14 pairs of long-distance passenger trains between
the Guangzhou East Station and Beijing West Station, Shanghai, Jiujiang,
Shantou, Bengbu, Tianjin, Taiyuan, Nanchang, Yingtan, Harbin, Xiangfan, Qingdao,
Changchun and Xiamen, and eight pairs of passenger trains passing through the
Guangzhou East Station. In 2002, outbound passenger volume from our Guangzhou
East Station amounted to 11.6 million persons.

         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. The station currently handles on a
daily basis the transfer service for five pairs of domestic long-distance
passenger trains and 16 pairs of Guangzhou-Shenzhen high-speed passenger trains
and four pairs of Guangzhou-Shenzhen regular-speed trains. Dongguan municipality
is an area that has received substantial foreign investment. One pair of
Dongguan-Kowloon passenger trains operated during Hong Kong holidays and
weekends in 2002. As a result of these factors, outbound passenger volume from
our Dongguan Station amounted to approximately 1.9 million persons in 2002.

         Shenzhen Station. Our Shenzhen Station is located in the Shenzhen
Special Economic Zone, close to the Luohu Station on the Guangzhou-Kowloon rail
line. Built in 1991, Shenzhen Station's second phase, the main construction of
the west wing of the station, was completed at the end of 2000. 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 implemented China's first computerized ticket hall in our Shenzhen
Station. Currently, our Shenzhen Station handles 58 pairs of Guangzhou-Shenzhen
passenger trains and 12 pairs of domestic long-distance passenger trains between
Shenzhen and Beijing, Changsha, Shaoguan, Wuchang, Meizhou, Shantou, Maoming
East, Huangchuan, Zhengzhou, Fuzhou, Hankou and Jinjiang. Outbound passenger
volume from Shenzhen Station amounted to approximately 9.7 million persons in
2002 (excluding passengers from the Guangzhou-Kowloon through trains).

FREIGHT TRANSPORT

         Revenue from our freight transport accounted for 20.4% of our total
revenues and 21.8% of our railroad revenues in 2002. 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 that is received from and/or transferred to other rail
lines. Little of the freight we transport both originates and terminates in the
Guangzhou-Shenzhen corridor. We classify our freight business into three
categories:

         o    inbound freight, which is primarily freight unloaded at freight
              stations and spur


                                       17
<PAGE>

              lines connected with ports on our line or in Hong Kong;

         o    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

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

         In 2002, based on a study of our freight transportation market, we took
a series of measures to improve our freight transportation business. These
measures included: (1) strengthening our marketing efforts and continuing with
the practice of freight agency system for the entire journey; (2) cooperative
marketing efforts between our freight stations and local ports to promote and
organize multi-model freight transportation services; (3) organizing and
operating container trains and improving the management of container
transportation, including improving the container express train service between
Dongguan and Hong Kong; (4) strengthening our cooperation with various industry
customers to establish a stable source of freight; (5) improving the technology
and services at our freight yards; and (6) offering price discounts for large
quantities of freight from new customers with the approval of our Parent Company
or the Ministry of Railways. We also intend to launch a container express train
service between Dongguan and Yantian port.

         We transported approximately 27.6 million tons of freight for the year
2002. It represented a decrease of 4.9% over that of 2001. Among the total
tonnage of freight, approximately 7.3 million tons were outbound freight
representing an increase of 7.2% over that of 2001; inbound freight was in total
approximately 11.6 million tons, representing a decrease of 8.9% from 2001;
pass-through freight was approximately 8.7 million tons, representing a decrease
of 8.3% over that of 2001.

         In 2002, revenues from our outbound freight transportation business
continued to increase due to an increase in tonnage as a result of freight price
discounts and enhanced relationships with ports, mines and factories and
cooperative efforts in directing freight traffic from ocean shipments to our
railway.

         In 2002, there was a decline in our inbound freight transportation
business. This resulted from: (1) the construction of the second track on the
Beijing-Jiujiang Line; (2) railway re-routing by the Ministry of Railways; (3)
the decrease in the amount of goods being transported into the Shenzhen area
from other parts of China due to the increase of imported goods from overseas;
and (4) competition from highway and water transportation. In addition, the
development of better highways and ports led to an increase of freight handled
by trucks and water transportation vehicles.

         In 2002, our freight transportation revenues were RMB514.0 million,
representing a decrease of 9.4% over 2001. Revenues generated from outbound
freight transportation services were RMB94.3 million, representing an increase
of 2.4% over 2001. Revenues generated from inbound and pass-through freight
services were RMB248.1 million, representing a decrease of

                                       18
<PAGE>

8.5% from 2001. Revenues from storage, loading and unloading services and other
income were RMB171.7 million, representing a decrease of 15.8% from 2001.

         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 most recent three years (based on tons transported).


<TABLE>
<CAPTION>
                                           OUTBOUND FREIGHT                  INBOUND (AND PASS-THROUGH) FREIGHT
                                    -------------------------------          ----------------------------------
                                    2000          2001         2002          2000          2001           2002
                                    ----          ----         ----          ----          ----           ----

<S>                                  <C>          <C>           <C>          <C>           <C>            <C>
Construction materials.......        14%          36%           33%          28%            31%            39%
Energy products..............        19           24            32            18            17             14
Food products................        10            7             6            22            23             21
Chemicals....................        13           10             7            11            10             10
Manufactured goods...........         6            6             7             4             3              5
Containers...................        10            8            12             6             7              7
Other goods..................        28            9             3            11             9              4
                                    ---          ---           ---           ---           ---            ---
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, two handled freight exceeding 1.0
million tons each in 2002. Huangpu Station handled approximately 2.4 million
tons and Xiayuan Station handled approximately 5.7 million tons. Pursuant to 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 2002, revenues from the operation of our
warehouses (including from loading and unloading) and miscellaneous items
amounted to RMB171.7 million, accounting for 33.4% of our freight revenues for
the year.

OTHER BUSINESSES

         We engage in service businesses principally related to our transport
business. Our other businesses include:

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

                                       19
<PAGE>

         o    services in the 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

         o    other businesses, principally railroad-related construction.

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

<TABLE>
<CAPTION>
                                                                                         PERCENTAGE OF TOTAL
                                                          REVENUES                    OTHER BUSINESSES REVENUES
                                              ------------------------------         ---------------------------
                                              2000         2001         2002         2000        2001       2002
                                              ----         ----         ----         ----        ----       ----
                                                      (RMB MILLIONS)
<S>                                            <C>          <C>          <C>         <C>         <C>         <C>
On-board and station sales.............        58           52           41          30%         32%         26%
Station services.......................        66           41           44          34          26          28
Tourism, advertising and others........        69           67           72          36          42          46
                                           ----------   ----------   ----------   ----------  ----------  ------
    Total..............................       193          160          157         100%        100%        100%
                                           ==========   ==========   ==========   ==========  ==========  =======
</TABLE>

         Revenues from our other business segment decreased by 2.1% from
RMB160.3 million in 2001 to RMB156.9 million 2002. Revenues from our other
businesses accounted for 6.2% of our total revenues in 2002. Due to the increase
in frequency and speed of our passenger trains, the waiting time and traveling
time involved was reduced, which led to a decrease in revenues from our other
businesses as the consumption of food and beverages and other goods both in our
stations and on-board our trains was reduced.

SALES

PASSENGER TRANSPORT

         Our passenger tickets are currently sold primarily at ticket counters
located at train stations. Additionally, 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.

         Since January 1, 2001, the Ministry of Railways implemented a new
settlement method for passenger transport. This settlement method stipulates
that all revenues from any passenger train service (including revenues generated
from luggage and parcel services) are considered passenger transport revenues
and belongs 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. The
settlement method does not have a consequential impact on our passenger
transport revenues. We are still using the settlement method for passenger
transport 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

                                       20
<PAGE>

Hong Kong and the Hong Kong through trains. However, it changes the settlement
method for revenues from long-distance passenger trains departing from, arriving
at or passing through our rail line other than from the Beijing-Hong Kong and
Shanghai-Hong Kong trains. Before the implementation of the settlement method,
we received transportation revenues from those railway administrations that
operated long-distance train services in accordance with special pricing formula
we set. Since the implementation of the settlement method, those railway
administrations operating these long-distance train services pay us the
following fees: (1) revenues from ticket prices that are higher than national
railway standards due to our special pricing standards; and (2) 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. Because of 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.
The KCR and we are exploring plans to supplement the through train ticket sales
network through computer sales.

FREIGHT TRANSPORT

         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. As a practical matter, we have been able to satisfy
demand for outbound freight transport even on short notice.

COMPETITION

         We are the sole railroad on the Guangzhou-Shenzhen corridor and enjoy
monopoly status; 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


                                       21
<PAGE>

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
transport businesses.

         With respect to passenger transport, 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 service generally offers greater comfort, better safety and more
reliability. The increase in high-speed rail services has allowed us to compete
more effectively with bus operators on speed, safety and frequency. There is
also commercial air and sea hovercraft passenger transport services operating
between Guangzhou and Hong Kong.

         With respect to freight transport, we believe that we face competition
in our principal market, namely, long-distance freight transport. 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
encounters only limited competition from truck transportation. Most
long-distance freight in China is still shipped by rail. Although waterway
transport is competitive to rail on the basis of price, the multiple handling
involved in water transport tends to produce greater loss of or damage to goods.
Long-distance trucking is limited by road conditions and the shortage of
heavy-duty trucks in China. Moreover, 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 recently been substantially
upgraded, medium- and short-distance freight transportation by trucks poses a
significant competitive threat to our freight transport business.

EQUIPMENT, TRACKS AND MAINTENANCE

         As of the end of 2002, 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 2001 and 2002 were
approximately RMB52.3 million and RMB57.3 million, respectively.

         In October 1999, we entered into a five-year lease 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. We paid the lessor
RMB39 million in 2001 and RMB104 million in 2002 under the lease. In 2002, we
purchased 12 express passenger coaches for the Shenzhen-Yueyang and
Shenzhen-Beijing long-distance routes.

         Our repair and maintenance facility, located near our Guangzhou East
Station, and our Shipai passenger vehicle maintenance facility near Pinghu Nan,
near Shenzhen, services the


                                       22
<PAGE>

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.

         Our track is of a type and quality suitable and satisfactory for our
operations. Most of the rails and ties on our main line have been installed
within the last six years, and generally have a useful life of approximately 45
years. In 1997, we completed a track improvement project in which we replaced a
portion of the rails on our high-speed tracks with longer rails to provide
greater stability, allow for smoother and more comfortable travel and reduce
friction damage on both rail and wheels. 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 and improved the operation
quality of the relevant rail tracks. In 2002, we replaced 19 sections of wooden
moveable center switches to improve safety and stability.

SUPPLIERS AND SERVICE PROVIDERS

         All manufacturers of locomotives, rolling stock and major railway
supplies and equipment in China are owned directly or indirectly by the Ministry
of Railways. We purchase our high-speed coaches and locomotives, as well as most
other railway equipment, directly from suppliers in China. We may also purchase
such 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 according to 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%. The cost includes 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. The
Parent Company and some of its subsidiaries, such as Yangcheng Railway Company,
Guangmeishan Railway Company, and Guangzhou Railway (Group) Passenger
Transportation Company, have similar agreements with us to provide services and
assistance with respect to our railroad operations. In addition, GEDC provides
medical and health care services, public security, education and housing for our
employees and their families under a contract and in exchange for fee payments.
In 2002, the total amount of these payments we made accounted for 6.9% of our
railroad business operating costs for the year.

         Under the Listing Rules of the Stock Exchange of Hong Kong,
transactions between us and 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. According to 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 for 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 as stated in the waiver letter issued by the

                                       23
<PAGE>

Stock Exchange of Hong Kong.

         The electricity we use, including electricity used for the
electrification of our line, is supplied through various entities under the
jurisdiction of the Guangdong provincial power bureau at regular rates
applicable to all commercial electricity users. In 2001 and 2002, we paid
approximately RMB40.3 million and RMB57.2 million, respectively, in electricity
charges.

REGULATORY OVERVIEW

         As a joint stock limited company with publicly traded shares, we are
subject to regulation by the PRC securities regulatory authorities with respect
to our compliance with PRC securities laws and regulations. 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 of these 14 administrations are further subdivided
on a geographical basis into 46 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,

                                       24
<PAGE>

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 transport 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, 2002, the total number of intercity express trains running between
Guangzhou and Shenzhen increased from 52 pairs to 54 pairs daily. At the same
time, the total number of regular speed passenger trains was reduced from six
pairs in 2001 to four pairs in 2002. Now we have 34 pairs of long-distance
trains and 7 pairs of Hong Kong 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 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. Since 1984, we have been granted by the
Ministry of Railways and the State Council the special authorization to charge
passenger fares and freight tariffs that have, in most

                                       25
<PAGE>

instances, exceeded these national standards by 50%. On April 1, 1996, the
State Council granted us additional flexibility over pricing.

         In 2002, with approval from our Parent Company or the Ministry of
Railways, as applicable, 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 2002;

         2.   continuing to offer price discounts to our freight customers; and

         3.   increasing passenger ticket prices by RMB5 for our
              Guangzhou-Shenzhen high-speed trains during all major PRC holidays
              in 2002.

         Passenger Transportation. We set prices for Hong Kong through trains in
consultation with the KCR, independently of PRC national pricing standards. For
domestic passenger trains, until March 1996, we were permitted to charge fares
up to 50% above the national standard. Since April 1996, we have been given
complete autonomy in setting high-speed train fares, and have the authority to
set and adjust regular-speed train fares within a range not to exceed an
additional 50% above our previous levels (i.e., up to 125% above the national
pricing standard).

         Since 1998, we have made a number of minor upward adjustments to our
passenger train fares to reflect our increased cost of operations and the
overall increase in our service quality. Depending on the types of seats, the
range of price adjustments varied. In 2001 and 2002, we raised our passenger
fares slightly on certain routes during peak seasons.

         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 transport tariffs. Prices for freight shipments on a
renminbi per ton-kilometer basis normally decreases with the increase in the
distance shipped, reflecting both the economy of freight transport and the PRC
government's policy of encouraging the use of railroads for long-distance
freight shipments.

         Under the current freight transport tariff regime, all cargo passing on
the Guangzhou-Shenzhen railroad is charged tariffs at national railroad levels.
During 2002, as a way of attracting new freight sources we offered price
discounts for such freight as beverage, steel, grains, coal, gypsum, containers,
and for coal that is transported along our lines that are directly connected to
mines and factories. These discounts were instrumental in increasing our volume
of freight in 2002, as well as in enhancing our competitiveness against other
means of transportation.

ENVIRONMENTAL PROTECTION

         We believe that we have been in material compliance with all applicable
PRC national


                                       26
<PAGE>

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 2002, our environmental protection-related expenses were
approximately RMB630,000.

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 the customary practice among railroad operators in the
PRC, we do not maintain insurance coverage for our property and facilities
(other than for its automobiles), for business interruption or for environmental
damage arising from accidents on our property or relating to our operations. As
a consequence, 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 rely on our own resources to cover losses and damages.

         Based on current Ministry of Railways regulations and in view of our
past experience, we believe that our liability exposure for personal injury and
property loss under PRC law and regulations is relatively insignificant. In 2001
and 2002, we paid RMB879,381 and RMB1,009,061, respectively, in connection with
personal injuries to or deaths of non-passengers. We have never been subject to
liability for injury or death of a passenger. However, no assurance can be given
that such regulations or the interpretation thereof will not change, that the
number of claims will not increase or that our exposure to personal injury or
freight damage claims will not increase significantly in the future. In
addition, for personal injuries, deaths or property damage related to our
through train service that occur in Hong Kong, Hong Kong laws may apply, in
which case recovery ceilings under PRC regulations will not apply and we may be
subject to significantly higher damage awards.

                            ORGANIZATIONAL STRUCTURE

         We are organized as a joint stock limited company under PRC law in
March 1996. Our Parent Company, a state-owned enterprise under the
administration of the Ministry of Railways, owns 67% of our common shares. The
remaining 33% is owned by public shareholders.



                                       27
<PAGE>



                         PROPERTY, PLANTS 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 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 4. Information on the
Company--Business Overview--Equipment and Track Maintenance."

         In 2000, we used RMB504.3 million to fund (i) improvements to our
high-speed tracks and related facilities, (ii) the ancillary facilities for the
electrification project, and (iii) the purchase of "Xin Shi Su" high-speed
electric train and high-speed locomotives and continuing to construct our
maintenance base for locomotives and coaches. Our 2000 capital expenditure
program was financed by cash flows from operations and the remainder of the
proceeds from our initial offering of H shares.

         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 original annual capital expenditures plan set out at the
beginning of the year was RMB961 million, but our actual capital expenditures
were only RMB422.4 million, representing 43.95% of our original capital
expenditures plan. The reduction in capital expenditures was due to a delay in
our construction projects that were budgeted for 2002. Of the


                                       28
<PAGE>

422.4 million spent in 2002, RMB315 million was spent on capital construction
projects and RMB107 million was used for other purchases of equipment and
machinery. Our capital expenditures in 2002 consisted principally of the
following projects:

         o     acquiring the land for the construction of the technical support
               and maintenance depot in northern Shenzhen (RMB81.3 million, of
               which RMB80 million was paid to the Shenzhen Municipal Planning
               and Land Bureau for acquiring the land and relocating residents);

         o     replacing 19 sections of wooden moveable center switches to
               improve the safety and stability of our passenger trains (RMB13.5
               million);

         o     constructing the last portion of the electrification project of
               the Guangzhou-Shenzhen third line (RMB69.3 million);

         o     constructing the Western Ticket Hall at our Shenzhen Station and
               other related projects (RMB28.8 million);

         o     constructing the immigration and customs inspection building at
               our Dongguan Station and other related projects (RMB18.1
               million);

         o     completing the construction of the Ninth National Games Stadium
               Station and the crossing stations at Tangmei, Nanshe and Lincun
               Villages (RMB31.9 million);

         o     expanding and implementing technological improvements at our
               Guangzhou East Station (RMB52.8 million);

         o     purchasing twelve "25k" coaches (RMB 31.5 million);

         o     paying the down-payment for four diesel locomotives (RMB10.2
               million); and

         o     other remodeling projects (RMB 85 million).

         Our total budget for capital expenditures in 2003 is approximately
RMB769 million. In addition to the projects that were budgeted before 2002 but
are expected to be completed in 2003, we plan to invest RMB490.9 million in
several projects in 2003 to prepare for the future growth in passenger and
freight transportation, to further improve our transportation facilities, and
generally to enhance our competitiveness, including principally:

         1.    the planned expansion of the Guangzhou-Shenzhen Line
               (construction of the fourth track), with a budgeted investment of
               RMB10 million (this project did not commence in 2002 due to a
               delay in obtaining the appropriate government approvals; we hope
               to obtain the necessary approvals this year and, if so, we plan
               to secure a portion of the funds to


                                       29
<PAGE>

               commence this project and will increase our original budgeted
               investment);

         2.    the construction of a technical support and maintenance depot in
               northern Shenzhen for a budgeted investment of RMB50 million,
               which was scheduled to commence in 2002, but did not commence due
               to a delay in acquiring the land and a delay in relocating
               affected residents;

         3.    the construction of a track from Pinghu to Shenzhen for passenger
               trains, with a budgeted investment of RMB10 million;

         4.    the renovation of the northern square and platforms of the
               Guangzhou East Station, with a budgeted investment of RMB50
               million;

         5.    the purchase of additional locomotives and trains, with a budget
               of RMB219.2 million;

         6.    the construction of an elevated parking lot in the south and a
               walkway in the west of Shenzhen Station, with a budget of RMB10
               million;

         7.    the construction of a pedestrian square connecting the Shenzhen
               Station and the Luohu Subway Station, with a budgeted investment
               of RMB10 million; and

         8.    other renovations and construction projects.


                                       30
<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. References to Guangshen
Railway in this discussion shall mean Guangshen Railway and its consolidated
subsidiaries.

                                    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.

         Railroad business revenues accounted for 90.2%, 92.5% and 93.8% of our
total revenues in 2000, 2001 and 2002, respectively. The following table sets
forth as a percentage of railroad business revenues the principal operating
expenses associated with our railroad businesses for 2000, 2001 and 2002:

<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                                     ----------------------------------
                                                                     2000           2001           2002
                                                                     ----           ----           ----
<S>                                                                 <C>             <C>           <C>
Railroad businesses revenues (RMB millions)................         1,787           1,993         2,361
Labor and benefits.........................................            15%             16%           16%
Equipment leases and services..............................            15%             13%           18%
Materials and supplies.....................................             7%              7%            8%
Repair costs, excluding materials and supplies.............             5%              5%            4%
Depreciation (and amortization of leasehold land payments).            18%             17%           16%
General and administrative expenses........................             7%              8%            5%
Fee for social services....................................             3%              3%            2%
Others.....................................................             3%              4%            4%
Operating ratio(1).........................................            73%             73%           73%
Railroad businesses operating margin.......................            27%             27%           27%
</TABLE>
-------------
(1)  Total railroad operating expenses as a percentage of railroad businesses
     revenues.

                              RESULTS OF OPERATIONS

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


                                       31
<PAGE>

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
service continued to be the growth engine of our revenues. 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. Before October 2001, we operated 31 pairs of
high-speed trains and 15 pairs of regular-speed trains between Guangzhou and
Shenzhen daily, with high-speed trains accounting for 67% of the total. 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-Shenzhen 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.

         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 Shenzhen 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.

         The following table sets forth the revenues from passenger
transportation and the number of passengers for the three years ended December
31, 2000, 2001 and 2002:

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                       ----------------------------------------      CHANGE FROM
                                                          2000            2001           2002           2001
                                                          ----            ----           ----           ----
<S>                                                    <C>             <C>            <C>               <C>
Revenue from passenger
    transportation (RMB thousands)............         1,237,289       1,426,010      1,846,599         29.5%
Total passengers (thousands)..................            34,947          38,842         39,776          2.4%
Revenue per passenger (RMB)...................             35.40           36.71          46.42         26.4%
Total passenger-kilometers (millions).........          3,051.70        3,257.90       3,453.20          6.0%
Revenue per passenger-kilometer (RMB).........              0.41            0.44           0.53         20.5%

</TABLE>

         Freight transportation. In 2002, our freight transportation revenues
declined 9.4% from that of 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.

         o     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


                                       32
<PAGE>

               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.

         o     Inbound and pass-through freight revenue decreased by 8.5% from
               RMB271.2 million in 2001 to RMB248.1 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.

         o     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 tonnage, the implementation of
               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,
2000, 2001 and 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%)
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, 2000,
2001 and 2002:


                                       33
<PAGE>


<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:

         o     Labor and benefits. In 2002, 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.

         o     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 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.

         o     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.


                                       34
<PAGE>

         o     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.

         o     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.

         o     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.

         o     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.

         o     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 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


                                       35
<PAGE>

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%.

YEAR ENDED DECEMBER 31, 2001 COMPARED WITH YEAR ENDED DECEMBER 31, 2000

REVENUES

         Our total revenues increased by 8.7% from RMB1,980.4 million in 2000 to
RMB2,153.6 million in 2001 as a result of the increase in revenues from both
passenger and freight transportation, which was slightly offset by the decrease
in revenues from our other businesses. Revenues from passenger and freight
transportation operations accounted for approximately 71.5% and 28.5%,
respectively, of the total revenues generated by the railroad business,
representing approximately 66.2% and 26.3%, respectively, of our total revenues
in 2001.

         Passenger Transportation. Passenger transportation is our largest
business segment and it experienced significant growth in 2001. The revenues
from the passenger transportation business were RMB1,426.0 million in 2001,
representing an increase of 15.3% from RMB1,237.3 million in 2000. The increase
in the revenues from passenger transportation was mainly due to the increase in
the number of passengers from approximately 34.947 million in 2000 to
approximately 38.842 million in 2001 and an increase in revenue per passenger
from RMB35.40 in 2000 to RMB36.71 in 2001.

         Freight Transportation. Revenues from our freight transportation
business in 2001 were RMB567.3 million, representing an increase of 3.2% from
RMB549.7 million in 2000. The total tonnage of freight increased from
approximately 28.7 million tons in 2000 to approximately 29.0 million tons in
2001, and the increase of revenue per ton also increased from RMB19.1 in 2000 to
RMB19.6 in 2001. This growth in freight transportation business in 2001 was
mainly due to continued domestic economic growth. As a result of our flexible
pricing policy and enhancement of marketing strategies, the freight volume and
revenues from freight transportation both increased despite increasingly keen
competition from other means of transportation.

         Other Businesses. The revenues from our other businesses decreased by
17.1% from RMB193.4 million in 2000 to RMB160.3 million in 2001. The revenues
from other businesses


                                       36
<PAGE>

accounted for 7.5% of the total revenues in 2001. The increased frequency and
speed of our passenger trains have reduced waiting time and travel time, leading
to a decrease in revenues from our other businesses as consumption of food and
beverages and other goods both in stations and aboard trains was reduced.

OPERATING EXPENSES

         Our total operating expenses were RMB1,599.5 million, representing an
increase of approximately 9.5% from RMB1,461.0 million in 2000, due mainly to
the increase in railroad operating expenses. The operating expenses of our
railroad businesses in 2001 accounted for 91.3% of our total operating expenses
for the year.

         Railroad operating expenses. Our total railroad operating expenses
increased by 12.6% from RMB1,297.5 million in 2000 to RMB1,460.6 million in
2001. Our total railroad operating expenses as a percentage of total railroad
operating revenues increased slightly from 72.6% in 2000 to 73.3% in 2001. The
increase in the railroad operating expenses was due primarily to the increase in
depreciation expenses, labor and welfare expenses, materials and supplies
expenses, and general and administrative expenses. Details are as follows:

         o     Depreciation. Our railroad related depreciation expenses
               increased by 12.2% from RMB305.3 million in 2000 to RMB342.5
               million in 2001. It was attributable mainly to the further
               upgrading and expansion of our railroad networks as well as to
               the increase in corresponding capital expenditures.

         o     Labor and benefits. Due to the increase in frequency of trains
               and the launching of newly operated routes in 2001, there was an
               increase in workload and the number of employees. This resulted
               in an increase of labor and related welfare expenses by 23.0%
               from RMB260.7 million in 2000 to RMB320.6 million in 2001. In
               addition, we raised the remuneration packages offered to our
               employees to ensure that they were competitive. We also
               implemented a pay policy of linking performance to rewards under
               the existing pay and remuneration system.

         o     Materials and supplies. The materials and supplies expenses
               consisted mainly of fuel, water and electricity expenditures.
               Materials and supplies expenses increased by 19.3% from RMB121.3
               million in 2000 to RMB144.7 million in 2001. The increase was due
               primarily to an increase in fuel and electricity consumption
               resulting from the operation of two new long-distance trains in
               2001 and the increase in frequency of our high-speed electric
               passenger trains.

         o     General and administrative expenses. The general and
               administrative expenses increased by 13.9% from RMB131.9 million
               in 2000 to RMB150.2 million in 2001 principally because of
               increases in provisions. Provision for bad debts increased from
               RMB17.0 million in 2000 to RMB29.6 million in 2001 due primarily
               to a one-time provision for rental and utility expenses overdue
               from a third party and, to a lesser extent, certain other
               provisions including those for overdue accounts receivables from
               freight transportation customers.


                                       37
<PAGE>

PROFIT FROM OPERATIONS

         Our profit from operations increased by 6.7% from RMB519.4 million in
2000 to RMB554.1 million in 2001, principally driven by the increase in
operating profit from railroad businesses from RMB489.5 million in 2000 to
RMB532.7 million in 2001, which was offset slightly by a decrease in operating
profit of our other businesses from RMB29.9 million in 2000 to RMB21.5 million
in 2001.

TAXATION

         Being registered and established in the Shenzhen Special Economic Zone,
we are subject to corporate income tax at a rate of 15%. We and our subsidiaries
had income tax expenses of RMB99.3 million in 2001 and RMB99.4 million in 2000,
reflecting effective tax rates of 15.8% and 16.8%, respectively. The decrease of
in income tax resulted from a recognition of additional deferred tax assets in
2001.

NET PROFIT

         Our consolidated net profit increased 8.4% from RMB492.1 million in
2000 to RMB533.5 million in 2001.

CRITICAL ACCOUNTING POLICIES

         Our audited consolidated financial statements have been prepared in
accordance with IFRS. Our principal accounting policies are set out on pages
F-12 to F-18 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. However, different policies, estimation
techniques and assumptions in critical areas could lead to materially different
results, in particular, with respect to impairments discussed in the next
paragraph.

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.


                                       38
<PAGE>

                         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 RMB1,157.2 million of net cash flow from
operating activities in 2002. Substantially all of our railroad business
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
the 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 generated from other businesses
were received in cash. There were also accounts payable associated with purchase
of materials and supplies in other businesses. Our provision for bad debt
decreased from RMB29.6 million in 2001 to RMB4.6 million in 2002, due primarily
to the better collection of overdue accounts receivable.

         In 2002, other than for operating expenses, our cash outflow was mainly
related to the following:

         o     capital expenditures of approximately RMB535.0 million,
               representing a decrease of 36.3% from RMB840.5 million in 2001;
               such expenditures were mainly used for the purchase of
               long-distance passenger coaches, the renovation and expansion of
               our facilities and the purchase of available-for-sale
               investments; and

         o     payment of dividends of approximately RMB356.5 million.

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

         We had temporary cash investments of approximately RMB567.3 million as
of December 31, 2002 and cash and cash equivalents of RMB1,413.0 million. We
have no contingent liabilities.

         We believe that we have sufficient funds to satisfy our current working
capital requirements.

CASH FLOW

         Cash and cash equivalents in 2002 increased by approximately RMB1,047.5
million over 2001 primarily due to the maturity of RMB809.3 million of time
deposits. The table below sets forth the major items in the consolidated cash
flow statements for 2001 and 2002 and the percentage change from 2001 to 2002.


                                       39
<PAGE>

<TABLE>
<CAPTION>

                                                     YEAR ENDED DECEMBER 31,
                                                   ---------------------------         CHANGE FROM
                                                    2001             2002                 2001
                                                    ----             ----                 ----
                                                        (RMB THOUSANDS)
<S>                                                 <C>             <C>                   <C>
Net cash generated from operating
     activities.............................         886,016        1,157,177              30.6%
Net cash (used)/from in investing activities        (430,425)         251,003               N/A
Net cash (used) in financing activities.....        (420,137)        (360,643)            (14.2)%
                                                    --------        ---------             -----
Net increase/(decrease) of cash and
     cash equivalents.......................          35,454        1,047,537                --
                                                    ========        =========

</TABLE>

CASH FLOW FROM OPERATIONS AND WORKING CAPITAL

         Our net cash generated from operating activities in 2002 was
approximately RMB1,157.2 million, representing an increase of RMB271.2 million
from RMB886.0 million in 2000. The increase resulted primarily from an increase
in cash flow generated from our passenger transportation business.

         Our working capital increased slightly from RMB1,610.6 million in 2001
to RMB1,631.4 million in 2002. The increase was due mainly to an increase in
payables due to related parties of RMB99.5 million from RMB58.7 million in 2001
to RMB158.2 million in 2002, a decrease of prepayments and other current assets
of RMB62.2 million from RMB322.3 million in 2001 to RMB260.1 million in 2002,
and an increase in accrued expenses and other payables of RMB4.0 million from
RMB454.0 million in 2001 to RMB458.0 million in 2002, which was offset slightly
by a decrease in trade payables of RMB27.3 million from RMB69.0 million in 2001
to RMB41.7 million in 2002 and a decrease in trade receivables (before the
provision for doubtful accounts) of RMB24.1 million from RMB91.5 million in 2001
to RMB67.4 million in 2002.

CASH FLOW FROM INVESTING ACTIVITIES

         The total cash from investing activities was approximately RMB251.0
million in 2002, representing an increase of RMB681.4 million from cash used in
investing activities of RMB430.4 million in 2001. Cash from investing activities
in 2002 mainly included a decrease in temporary cash investments and interest
received. The increase was mainly due to the shortening of the term of
re-investment upon maturity of a portion of our short-term investments, thus
increasing cash and cash equivalents by approximately RMB703.2 million.

CASH FLOW FROM FINANCING ACTIVITIES

         Net cash used in financing activities in 2002 was approximately
RMB360.6 million, representing a decrease of RMB59.5 million from RMB420.1
million in 2001. It consisted of a dividend payment of RMB356.5 million and
distribution to minority shareholders of approximately RMB4.15 million.

CAPITAL COMMITMENTS

         The table below sets forth our capital commitments and operating lease
commitments for the years ended December 31, 1998 to 2002.


                                       40
<PAGE>


<TABLE>
<CAPTION>
                                                                                    AS AT DECEMBER 31
                                                                    ---------- --------- --------- --------- ---------
                                                                       1998      1999      2000      2001      2002
                                                                       ----      ----      ----      ----      ----
                                                                                     (RMB THOUSANDS)
<S>                                                                 <C>         <C>       <C>       <C>       <C>
Capital commitments............................................     1,050,000   196,625    55,340    15,640    10,158
Operating lease commitments....................................        32,000   556,710   546,750   399,375   399,375
 - not more than one year                                              22,040    14,460    91,125         -   108,000
 - more than one year but nor more than five years                      9,960   542,250   455,625   399,375   291,375

</TABLE>

         In 2002, we had capital commitments of approximately RMB10.2 million
for the purchase of four locomotives. We also had operating lease commitments of
RMB399.4 million, of which RMB108.0 million were for operating lease commitments
of less than a year and RMB291.4 million were for commitments over one year but
less than five years.


         As of December 31, 2002, we had not used any of our assets as security
or collateral for any loans or provided any guarantees.

CAPITAL EXPENDITURE PLAN FOR 2003

         Our capital expenditure plan for 2003 will focus on increasing our
passenger and freight transportation capacity and enhancing our competitiveness.
In 2003, we plan to invest a total of RMB490.9 million on the following
projects:

         o     the expansion of Guangzhou-Shenzhen Line (construction of the
               fourth track);

         o     the construction of a technical support and maintenance depot for
               passenger trains in northern Shenzhen; and

         o     the purchase of additional trains and other renovation and
               construction projects.

         For more information about these capital expenditure projects, see
"Item 4. Information on the Company - Property, Plants and Equipment".

         Our capital expenditure needs for 2003 will be funded by internally
generated funds from operations and other financings, as necessary.

                       DIFFERENCE 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

         As stated in Note 13 of our audited consolidated financial statements,
we revalued our fixed assets on March 6, 1996. We recorded a revaluation surplus
of fixed assets amounting to


                                       41
<PAGE>

approximately RMB1.5 billion. 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 for the year ended December 31, 2002.

         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 RMB48.4 million for the year ended
December 31, 2002 (2001: approximately RMB48.4 million).

         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.

         Effects on our consolidated net profit of the significant differences
between IFRS and US GAAP are summarized below:

<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                                  ----------------------------------------------------------------
                                                      2000             2001             2002             2002
                                                  -------------    -------------    -------------    -------------
                                                      RMB              RMB              RMB             US$(1)
                                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                    <C>              <C>              <C>               <C>
Net profit under IFRS..........................        492,089          533,495          557,083           67,280
US GAAP adjustments:
    Reversal of additional depreciation charges
       arising from the revaluation surplus on
       fixed assets............................         48,422           48,422           48,422            5,848
    Effect of US GAAP adjustment on taxation...         (7,263)          (7,263)          (7,263)            (877)
                                                       -------          -------          -------           ------
Consolidated net profit under US GAAP..........        533,248          574,654          598,242           72,251
                                                       =======          =======          =======           ======
Earnings per share under US GAAP...............           0.12             0.13             0.14             0.02
                                                       =======          =======          =======           ======
Earnings per equivalent ADS under
    US GAAP....................................           6.15             6.63             6.90             0.83
                                                       =======          =======          =======           ======
</TABLE>
---------------
(1)  Translated solely for the convenience of the reader into U.S. dollars at
     the noon buying rate prevailing on December 31, 2002 of US$1.00 to
     RMB8.2800.


                                       42
<PAGE>

         Effects on consolidated net assets of significant differences between
IFRS and US GAAP are summarized below:

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                                   -----------------------------------------------
                                                                        2001             2002             2002
                                                                   -------------    -------------    -------------
                                                                        RMB              RMB             US$(1)
                                                                                    (IN THOUSANDS)
<S>                                                                  <C>              <C>               <C>
Consolidated net assets under IFRS..........................         10,120,623       10,244,151        1,237,216
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...............            282,462          330,884           39,962
    Deferred tax assets created.............................            181,458          174,195           21,038
Consolidated net assets under US GAAP.......................          9,092,358        9,257,045        1,118,001
                                                                     ==========       ==========       ==========
</TABLE>
---------------
(1)  Translated solely for the convenience of the reader into U.S. dollars at
     the noon buying rate prevailing on December 31, 2002 of US$1.00 to
     RMB8.2800.

         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

         The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 143, Accounting for Assets Retirement
Obligations ("SFAS 143"), Statement of Financial Accounting Standards No. 146,
Accounting for Costs Associated With Exit or Disposal Activities ("SFAS 146"),
FASB interpretation N. 45, Guarantor's Accounting and Disclosure Requirements
for Guarantees, including Indirectly Guarantees of Indebtedness of Others ("FIN
45"), FASB Interpretation No. 46, Consolidation of Variable Interest Entities
("FIN 46") and Emerging Issues Task Force ("EITF") Issue 00-21, "Accounting for
Revenue Arrangements with Multiple Deliverables" that addresses certain aspects
of a vendor's accounting for multiple revenue-generating arrangements ("EITF
Issue 00-21).

(a)      SFAS 143 addresses financial accounting and reporting for obligations
         associated with the retirement of tangible long-lived assets and the
         associated assets retirement costs. SFAS 143 is effective for fiscal
         years beginning after 31 December, 2002. We do not expect that the
         adoption of SFAS143 will have a material an impact on our audited
         consolidated financial statements.

(b)      SFAS 146 addresses financial accounting and reporting for costs
         associated with exit or disposal activities and nullifies Emerging
         Issues Task Force Issue No. 94-3 "Liability Recognition for Certain
         Employee Termination Benefits and Other Costs to Exit Activity
         (including Certain Costs Incurred in a Restructuring)". We adopted SFAS
         146 on January 1, 2003 and do not expect the adoption of this standard
         to have a material impact on our audited consolidated financial
         statements.


                                       43
<PAGE>


(c)      FIN 45 elaborates on the disclosures to be made by a guarantor about
         its obligations under certain guarantees that it has issued. It also
         clarifies that a guarantor is required to recognize, at the inception
         of a guarantee, a liability for the fair value of the obligation
         undertaken in issuing the guarantee. The initial recognition and
         initial measurement provisions under FIN 45 are applicable
         prospectively to guarantees issued or modified after December 31, 2002.
         The adoption of disclosure requirements that are effective for the year
         ended December 31, 2002 did not have a material impact on our audited
         consolidated financial statements, or to the notes thereto.

(d)      FIN 46 provides guidance on the identification of and financial
         reporting for entities over which control 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 the parties involved. The interpretation applies
         immediately to variable interest entities created after January 31,
         2003, and to variable interest entities in which an enterprise obtains
         an interest after that date. It applies in the first fiscal year for
         interim periods beginning after June 15, 2003 and to variable
         interests entities in which an enterprise holds a variable interest
         that it acquires before February 1, 2003. We do not expect that the
         adoption of FIN 46 will have a material impact on our audited
         consolidated financial statements.

              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 our capital expenditures.

                                TREND INFORMATION

         The Pearl River Delta has been one of China's fastest growing regions.
The PRC government is making adjustments to China's economic structure, import
and export policies and foreign investment policies, and is expanding its
investment in infrastructure systems, which are expected to generate additional
demand for transportation services. The policies and measures may have both
positive and negative effects on our business development. They are expected to




                                       44
<PAGE>

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. In addition,
the adjustment of the economic structure and import and export policies may
change freight composition and our freight transportation revenues, which could
have an adverse effect on our business and financial position in 2003.

         In 2002, our passenger transportation operations continued to grow, due
primarily to the continued economic growth in our service territory, our
"As-frequent-as buses" Train Project and the two new long-distance trains we
added in 2002, which provide faster passenger train service at shorter
intervals. We intend to add a pair of Hong Kong through trains to support
increasing passenger volumes between Guangdong and Hong Kong. In addition, we
plan to further integrate our railway system with urban public transportation
systems to expand our service territory and attract more passengers.

         However, due to the recent outbreak of SARS in Asia, we have
experienced a decrease in passenger traffic on our routes in the second quarter
of 2003. The SARS epidemic could have a material adverse effect on our operating
results and financial condition if passenger volumes do not recover sufficiently
in the near future. On May 16, 2003, the Shenzhen Bureau of Finance, Shenzhen
Municipal Office of the State Administration of Taxation and the Shenzhen Local
Taxation Bureau issued the "Notice Concerning Certain Taxation Measures for
Promoting the Prevention and Cure of Atypical Pneumonia of our Municipality,"
decreasing business taxes, urban construction taxes and educational taxes by 50%
from May 1, 2003 to September 20, 2003. However, we do not expect these tax
exemptions to have a material beneficial impact on our net income.

         The implementation of our "As-frequent-as buses" Train Project has had
a negative effect on our other businesses as passengers spend less time at our
train stations and aboard trains and as a result consume less. The revenue of
our other businesses decreased by 2.1% in 2002.

         Our freight transport business decreased in 2002 due to competition
from road and water transport, the shift in the mix of industries in our service
territory toward technology-intensive industrial structure, and the impact of
the global economic slowdown. We expect that growth in our freight
transportation operation is likely to be modest.

         We believe that while the PRC government will fulfill its obligation to
loosen its restrictions on foreign investment after China's entry into the WTO,
the opening up of the railway transportation will be gradual and the impact of
foreign and domestic railway competition to our operations in the near term will
be limited. We also believe that we will be prepared for the challenges as well
as the opportunities that will arise with China's accession to the WTO.


                                       45
<PAGE>


               ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

                         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, 2003, Mr. Wu Junguang, Mr.
Feng Qifu, Mr. Hu Lingling and Mr. Wen Weiming were elected as directors and Mr.
Jiang Linyang, Mr. Li Daihua, Mr. Wu Yiquan and Mr. Shen Jun ceased to be
directors. 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                         54           Chairman of the Board of Directors                          2003
Feng Qifu                           54           General Manager and Director                                2003
Hu Lingling                         39           Director                                                    2003
Li Qingyun                          39           Deputy General Manager and Director                         2000
Wu Houhui                           54           Director                                                    1999
Wen Weiming                         40           Director                                                    2003
Li Peng                             56           Director and Chairman of the Trade Union                    1998
Chang Loong Cheong                  57           Director                                                    1996
Deborah Kong                        43           Director                                                    1996

</TABLE>

         Wu Junguang, age 54, 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 its predecessor,
Guangzhou Railway Sub-administration. Since April 2002, Mr. Wu has served as the
general manager of our Parent Company. Since June 2002, Mr. Wu has served as our
Parent Company's Chairman.

         Feng Qifu, age 54, is a director and the general manager of Guangshen
Railway. Mr. Feng is an economist and graduated from Guangdong Provincial Cadre
Management College. He has been working in the railway industry for over thirty
years. Since 1993, Mr. Feng has served as the general manager of the Changsha
Railway Company, the assistant to the general manager and the deputy general
manager of our Parent Company. Mr. Feng joined Guangshen Railway in April 2003
and was appointed our general manager on May 8, 2003.

         Hu Lingling, age 39, is a director of Guangshen Railway. Mr. Hu is an
engineer and graduated from Changsha Railway Institute. Mr. Hu has served as the
deputy chief engineer and the deputy stationmaster of Shaoguan Railway station
of Yangcheng Railway Company, and the deputy chief engineer and the deputy
general manager of Yangcheng Railway Company. Since May 2001, Mr. Hu has served
as the director of the transportation department of our Parent Company.


                                       46
<PAGE>

         Li Qingyun, age 39, is a director and deputy general manager of
Guangshen Railway. 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.

         Wu Houhui, age 54, is a director of Guangshen Railway. He is a graduate
of Dalian Railway College and a senior economist. Mr. Wu served in various
managerial positions up to the position of director of the Enterprise Management
Office in our Parent Company from 1984 to 2000. Since November 2001, Mr. Wu has
served as deputy chief economist of our Parent Company.

         Wen Weiming, age 40, is a director of Guangshen Railway. Mr. Wen is an
accountant and graduated from Guangzhou Railway Workers' College. He has been
working in the railway industry for over ten years, and has served as the
director of the accounting and finance department and the chief accountant of
the diversified businesses sub-section of Yangcheng Railway Company, 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 Peng, age 56, is a director and the chairman of the trade union of
Guangshen Railway. Mr. Li is a graduate of the East China Civil Engineering
Institute and has served in various executive and labor organizational positions
in Yang Cheng since 1977. He was the deputy general manager of our predecessor
and the Guangshen Railway Enterprise Development Company from 1992 to 1997. Mr.
Li joined us in December 1997.

         Chang Loon Cheong, age 57, 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 been
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 43, is an independent non-executive director of
Guangshen Railway. 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.

         Wu Yiquan, age 58, was a director and the general manager of Guangshen
Railway from 1999 until this year. Mr. Wu was replaced by Mr. Feng as our
general manager on May 8, 2003. Mr. Wu ceased to be a director at our general
shareholders' meeting held on June 10, 2003.

         Li Daihua, age 60, was a director of Guangshen Railway from 1997 until
2003. Mr. Li ceased to be a director at our general shareholders' meeting held
on June 10, 2003.

                                       47
<PAGE>

         Jiang Linyang, age 60, was the chairman of the board of directors of
Guangshen Railway from 2002 until this year. Mr. Jiang ceased to be a director
at our general shareholders' meeting held on June 10, 2003.

         Shen Jun, age 53, was a director of Guangshen Railway from 1999 until
this year. Mr. Shen ceased to be a director at our general shareholders' meeting
held on June 10, 2003.

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>
Gu Hongxi                           56           Chairman of the Supervisory Committee                   1996
Zhao Genrong                        57           Supervisor                                              2000
Chen Yunzhong                       50           Supervisor                                              2001
Yao Muming                          49           Supervisor                                              1999
Chen Yongbao                        51           Supervisor                                              2002
Yang Rongjiu                        55           Supervisor                                              2002

</TABLE>

         Gu Hongxi, age 56, is the chairman of the supervisory committee of
Guangshen Railway. He is a graduate of Zhejiang University. Mr. Gu joined the
railway department in 1974, and has served as the deputy director of Changsha
Railway Sub-administration and the director of the welfare and education
departments of our Parent Company. Mr. Gu has served as the chief economist of
our Parent Company since 1995.

         Zhao Genrong, age 57, is a supervisor of Guangshen Railway. 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 then 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 Yunzhong, age 50, is a supervisor of Guangshen Railway. 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.

         Yao Muming, age 49, is a supervisor of Guangshen Railway. Mr. Yao is a
graduate of Huanan Normal University, and has served as the deputy director of
the Guangzhou and Zhuhai Animal and Plant Quarantine Bureaus. He joined us in
1997.

         Chen Yongbao, age 51, is a supervisor of Guangshen Railway. 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 of our Parent Company. Since May 2001, Mr. Chen served as the chief of
the supervision department of our Parent Company.

                                       48
<PAGE>

         Yang Rongjiu, age 55, is a supervisor of Guangshen Railway. 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>
Yan Ping                       43           Deputy General Manager                                 2000
Luo Qingming                   46           Deputy General Manager and Chief Engineer              1999
Yao Xiaocong                   50           Chief Accountant and Company Secretary                 1997
Ma Kaiming                     32           Deputy General Manager                                 2003

</TABLE>

         Yan Ping, age 43, is a deputy general manager of Guangshen Railway. Mr.
Yan graduated with a master's degree in economic management at Donghei
University of Finance and Economics and is a senior engineer. He was the general
manager of Tielong Company of Dalian Railway Company, the director of the other
businesses department of Shenyang Railway Administration and the head of Dalian
Railway Station of Dalian Railway Sub-administration. Mr. Yan joined Guangshen
Railway in August 2000 as the head of Guangzhou East Station.)

         Luo Qingming, age 46, is currently a deputy general manager and the
chief engineer of Guangshen Railway. Mr. Luo is a senior engineer. Mr. Luo
graduated from Changsha Railway Institute in 1982, where he majored in railway
engineering. He has served as an engineer, the chief engineer, a deputy section
chief, and the section chief of the engineering section of Guangshen Railway. He
received a government allowance awarded by the PRC State Council in 1999 for
achievement in his field.

         Yao Xiaocong, age 50, is the chief accountant and company secretary.
Mr. Yao graduated from the Guangzhou Railway Management Academy. He has served
in financial and accounting positions in various PRC railway departments since
1975, giving him over 20 years of experience. Mr. Yao was the director of the
financial sub-department of Yang Cheng before he joined us in 1997.

         Ma Kaiming, age 32, is a deputy general manager of Guangshen Railway.
Mr. Ma graduated from Norththern Jiaotong University in 1995. He holds a
master's degree and is an engineer. He served in managerial positions in various
technical and administration departments of Yangcheng Railway Company and our
Parent Company from April 1995 to April 2003. Mr. Ma became a deputy general
manager of our company on 23 April 2003.

         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 concurrently the chairman and
general manager of our Parent Company.

                                       49
<PAGE>

         Mr. Feng Qifu is concurrently the chairman of the board of directors of
Guangzhou Tiecheng Industrial Company and a director of Sanmao Railway
Industrial Company. Mr. Wu Houhui is concurrently the director of Guangmeishan
Railway Company, Sanmao Railway Company and Shichang Railway Company. Mr. Hu
Lingling is concurrently 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 concurrently 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 a joint venture partner of ours. We have business
relationships relating to railroad transportation with Guangmeishan Railway
Company and Sanmao Railway Company.

         In order to safeguard our interests and the interests of our
shareholders and to strengthen the decision-making process in our subsidiaries,
Mr. Yan Ping, deputy general manager of Guangshen Railway, also serves as
director and chairman of Guangzhou Donglian Travel Service Co., Ltd., Shenzhen
Railway Station Passenger Services Company, Shenzhen Huatie Road Multi-model
Enterprise Co., Ltd., Zengcheng Lihua Joint Stock Company Ltd., Dongguan
Changsheng Road Multi-model Enterprise Company, Shenzhen Longgang Pinghu Qunyi
Railroad Storage, Loading and Unloading Company and Shenzhen Transportation
Service Company.

                                  COMPENSATION

DIRECTORS AND SENIOR MANAGEMENT

         Total remuneration of our directors, supervisors and senior officers
during 2002 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 enterprises in
the PRC to their employees.

         The aggregate amount of cash remuneration paid by Guangshen Railway in
2002 to all individuals who are currently its directors, supervisors and senior
officers was approximately RMB1,649,000, of which approximately RMB1,237,000 was
paid to directors and supervisors and approximately HK$260,000 was paid to the
two independent non-executive directors.

         The aggregate amount of cash remuneration we paid during the year ended
December 31, 2002 for pension and retirement benefits to all individuals who are
currently our directors, supervisors and senior officers was approximately
RMB134,000.

                                 BOARD PRACTICES

BOARD OF DIRECTORS

         Our board of directors is composed of nine directors, one of whom is
the chairman. Directors are appointed at the 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


                                       50
<PAGE>

if re-appointed at the general shareholders' meeting. Mr. Jiang Linyang, Mr. Li
Daihua, Mr. Wu Yiquan and Mr. Shen Jun ceased to be directors on June 10, 2003
and Mr. Wu Junguang, Mr. Feng Qifu, Mr. Hu Lingling and Mr. Wen Weiming were
appointed as directors at the general shareholders' meeting held on June 10,
2003. The board of directors is responsible to our shareholders.

SUPERVISORY COMMITTEE

         We have a supervisory committee composed 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. The
current supervisory committee is comprised of five representatives of the
shareholders who may be elected or removed by the shareholders in a general
meeting and one representative of our staff and workers who may be elected or
removed by voting. Members of the supervisory committee may also observe
meetings of the board of directors. The current members of the supervisory
committee are: Gu Hongxi, Zhao Genrong, Chen Yunzhong, Yao Muming, Chen Yongbao
and Yang Rongjiu. This supervisory committee is the second supervisory committee
of Guangshen Railway, and was appointed at the interim general shareholders'
meeting held on June 28, 2002. The term of this supervisory committee will
expire in 2005, when the shareholders, at a general meeting, appoint a new
supervisory committee.

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

         o     to supervise our handling of our financial matters;

         o     to supervise any acts of directors, the general manager, deputy
               general manager and other senior officers that are in violation
               of laws, administrative regulations or our articles of
               association;

         o     to request directors, the general manager, deputy general manager
               and other senior officers to rectify their acts that are
               detrimental to the interests of Guangshen Railway;

         o     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;

         o     to propose to convene interim general shareholders' meetings; and

         o     to bring law suits against directors on behalf of Guangshen
               Railway.

                                       51
<PAGE>


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 established an audit committee under the
board of directors consisting of two independent non-executive directors. Its
current members, appointed by the board of directors, are: Mr. Chang Loong
Cheong and Ms. Deborah Kong. 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 the audit committee include:

         o     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;

         o     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;

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

         o     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.

         The service contracts that we have entered into with our directors do
not provide for any payment of compensation upon termination.

EMPLOYEES

         As of December 31, 2000, 2001 and 2002, we had approximately 7,659,
9,132 and 9,258 employees, respectively. The following chart sets forth the
number of our employees by functional area as of December 31, 2002:


         <TABLE>
         <CAPTION>

         FUNCTION                                              EMPLOYEES
         <S>                                                     <C>
         Passenger transportation personnel.............         1,983
         Freight transportation personnel...............           531
         Transportation personnel.......................         4,490
         Supporting personnel...........................           286
         Other business personnel.......................           716
         Administrative and managerial personnel........         1,252
                                                                 -----
              Total.....................................         9,258
                                                                 =====
         </TABLE>


                                       52
<PAGE>

         A substantial majority of our employees work at locations in Guangdong
Province and Shenzhen. The number of our employees increased by 1.4% in 2002 due
to the new staff employed in 2002 to fill the openings in connection with our
two additional long-distance trains.

         We have established a trade union to protect employees' rights, assist
in the fulfillment of their economic objectives, to encourage employee
participation in management decisions and to assist in mediating disputes
between the management and union members. Each of our stations has a separate
branch of the trade union. Most of our employees belong to the trade union.
Since our inception in 1984, we have not been subjected to any strikes or other
labor disturbances that have interfered with our operations, and we believe that
our relations with our employees are good.

SHARE OWNERSHIP

         None of our directors, supervisors or senior management own any
interest in any shares or options to purchase our shares.


                                       53
<PAGE>

            ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

                               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, such as in
devising 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, 2002. 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%
Common Shares (H shares)                 HKSCC Nominees Limited              1,379,462               31.82%

</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)        Hong Kong and Shanghai Banking               705,513                49.29%
                                  Corporation (Nominees) Limited
Common Shares (H Shares)        Standard Chartered Bank                      118,639                 8.29%
Common Shares (H Shares)        Bank of China (Hong Kong) Limited             88,890                 6.21%

</TABLE>

         We are not aware of any arrangement that may at a subsequent date
result in a change of control of Guangshen Railway.

         To the best of our knowledge, as of December 31, 2002, none of the
outstanding H shares was held by United States holders of record, and all of the
outstanding ADSs were held by 169 United States holders of record. Because
domestic shares can only be held by PRC investors, there were no non-PRC holders
of record.

         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


                                       54
<PAGE>

association, each share of our capital stock has one vote and the shares of the
same class have the 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.

                           RELATED PARTY TRANSACTIONS

         The restructuring in 1996 was carried out in preparation for our
initial public offering and to focus Guangshen Railway on our primary business
as a railroad. Prior to our restructuring, Guangshen Railway Company, our
predecessor, was a state-owned enterprise within the national railway system,
directly controlled by Guangzhou Railway (Group) Company, our Parent Company. As
part of the restructuring, we were established as a joint stock limited company
on March 6, 1996. Our Parent Company received 100% of the equity interest in the
form of domestic shares in exchange for assets relating to the railroad and
other businesses transferred to us by our Parent Company, some of our
subsidiaries and Guangshen Railway Company. We assumed from these entities those
assets and liabilities that relate to the businesses now conducted by us,
including the high-speed project and equity interests in subsidiaries and joint
ventures whose principal businesses relate to the operation of warehouses or
freight yards. We 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


                                       55
<PAGE>

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 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 2000, 2001 and
2002 were RMB245.0 million, RMB243.2 million and RMB153.4 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:

         o     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;

         o     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


                                       56
<PAGE>
          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;

     -    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 Guangshen Railway and our Parent Company and its affiliates
in 2000, 2001 and 2002.

                                       57
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION OF TRANSACTION                                                          2000     2001      2002
--------------------------                                                        -------   ------   -------
                                                                                        (RMB THOUSANDS)
<S>                                                                               <C>       <C>      <C>
Lease of locomotives and related services from Yangcheng Railway ..............   132,576   70,345    42,047
Provision of trains and related services from Guangmeishan Railway Company, a
 subsidiary of our Parent Company .............................................    23,839    5,205     4,864
Provision of trains and related services from Sanmao Railway, a subsidiary of
 our Parent Company ...........................................................     3,546        -         -
Provision of trains and related services from Changsha Railway, a subsidiary of
 our Parent Company ...........................................................     5,336        -         -
Provision of trains and related services from Huaihua Railway, a subsidiary of
 our Parent Company ...........................................................     3,317        -         -
Purchase of materials and supplies from Guangzhou Railway Material Supply
 Company, a subsidiary of our Parent Company ..................................    22,846   36,544    33,074
Social services (employee housing, health care, educational and public security
 services and other ancillary services) provided by our Parent Company and
 affiliates (including GEDC) ..................................................    58,300   56,800    66,744
Operating lease rentals paid to the Ministry of Railways ......................    50,435   52,296    57,298
Operating lease rental paid to our Parent Company .............................         -
Provision of trains and related services by the Ministry of Railway ...........         -   66,475   211,667
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
Interest received from our Parent Company .....................................       447        -         -
Interest expenses paid to our Parent Company ..................................     3,886    1,178     2,443
Interest received from the Ministry of Railways' Railroad Deposit-taking Center    25,792   11,887     3,239
Interest received from Pingnan Railway, an affiliate of our Parent Company ....     1,712    1,866       806
Interest received from Guangmeishan Railway Company ...........................       833    1,291     1,884
</TABLE>

     As of December 31, 2002, we and our subsidiaries had the following material
balances with related parties:

<TABLE>
<CAPTION>
                                                          CONSOLIDATED                            COMPANY
                                                --------------------------------      --------------------------------
                                                  2000        2001        2002          2000       2001         2002
                                                -------     -------     --------      -------     -------     --------
                                                         (RMB THOUSANDS)                      (RMB THOUSANDS)
<S>                                             <C>         <C>         <C>           <C>         <C>         <C>
Temporary cash investments in the Ministry
 of Railway's Railroad Deposit-taking
 Center .....................................   304,029     250,152      168,000      304,029     250,152      168,000
Due from our Parent Company .................    80,604      29,499       39,374       83,183      28,492       37,575
Due from affiliates, net* ...................   247,932     276,013      267,885      246,728     275,940      263,873
Due to affiliates* ..........................   (63,734)    (58,650)    (158,199)     (63,662)    (58,823)    (156,909)
</TABLE>
------------
*    Affiliates mainly include GEDC and Guangmeishan Railway Company.

(1)  As of December 31, 2002, the balances with the Ministry of Railways, our
     Parent Company and affiliates were unsecured, non-interest bearing and
     repayable on demand, except for those "material transactions" disclosed in
     the table above. These balances resulted from transactions carried out by
     Guangshen Railway and its subsidiaries with related parties in the ordinary
     course of business.

(2)  Pursuant to the Notice "Tiezhengfa 2000 No. 116" issued by the Ministry of
     Railways, starting from January 1, 2001, settlement method regarding
     provision of trains and related services for long-distance passenger
     transportation was changed. Settlements previously made with certain
     subsidiaries of our Parent Company are now performed through Ministry of
     Railways' Settlement Center. The Company's directors are of the opinion
     that the change in settlement method does not have material impact on our
     results of operations.

                                       58
<PAGE>
                          ITEM 8. FINANCIAL INFORMATION

             CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION


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


                                LEGAL PROCEEDINGS

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


DIVIDENDS

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

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

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

     See "Item 10. Additional Information--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.

                                       59
<PAGE>
                               SIGNIFICANT CHANGES


     Other than events already mentioned in this annual report, there have been
no significant changes since December 31, 2002.

                                       60
<PAGE>
                          ITEM 9. THE OFFER AND LISTING

     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>
1998................................................      13.625          4.1875          2.10           0.64
1999................................................       7.625          4.8125          1.19           0.72
2000................................................       7.625          4.5625          1.23            0.7
2001
  January to March.................................         8.33            6.19          1.36           0.96
  April to June....................................        10.48            6.50          1.76           1.03
  July to September................................         9.18            6.30          1.44           0.90
  October to December..............................         9.15            6.95          1.37           1.10
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..........................................         9.25            8.70          1.41           1.32
  February.........................................         9.40            8.91          1.47           1.41
  March............................................         9.09            8.69          1.44           1.35
  April............................................         8.87            8.20          1.40           1.26
  May..............................................         8.96            8.30          1.39           1.28
  June (through June 24)...........................         9.68            8.87          1.48           1.37
</TABLE>

                                       61
<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 (CHINESE CHARACTERS), and its
English translation is Guangshen Railway Company Limited.

                     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 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.

                                       62
<PAGE>

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;

     -    allocations to the statutory public welfare fund; and

                                       63
<PAGE>

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

                                       64
<PAGE>

     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

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

                                       65
<PAGE>

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

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<PAGE>

     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.

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.

LIABILITY OF SHAREHOLDERS

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

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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.

     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:

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<PAGE>

     -    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 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

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<PAGE>


          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.

     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;

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<PAGE>

     -    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.

                               MATERIAL CONTRACTS

     We believe that the contracts we entered into during the fiscal year of
2002 were all made in the ordinary course of business.

                                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.

     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, 2002, we maintained the equivalent of approximately RMB1.3 billion
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

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<PAGE>

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.

                                    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, 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 its 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 its
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 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%.

                                       72







<PAGE>
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 withholding tax of 20% under the Income
Tax 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

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<PAGE>
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 29, 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. In March 1996, the Ministry of Finance and the
State Tax Bureau issued the Notice on the Temporary Non-Levy of Individual
Income Tax on Gains from Share Transfers, providing that individual income tax
will not be imposed on gains from the sale of shares in 1996. The Ministry of
Finance and the State Tax Bureau have made no subsequent pronouncement on this
subject. Consequently, the March 1996 notice remains in effect.

     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, Guangshen Railway believes 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 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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<PAGE>
     -    tax-exempt entities;

     -    partnerships or other entities treated as partnerships for United
          States federal income tax purposes;

     -    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.

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<PAGE>
     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 ADR's 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 ordinary dividend income
when the distribution is actually or constructively received by you, or by the
depositary in the case of ADSs. 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.

     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.

     Subject to various limitations, any Chinese tax withheld from distributions
in accordance with 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 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

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<PAGE>
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 20 percent 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.

     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

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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 in which the ADSs will be
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 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.


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

                                       78
<PAGE>
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.

     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.

                                       79
<PAGE>
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.


                              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.

     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.

                                       80
<PAGE>
       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, 2002.


CURRENCY RISK

     As approved by the PRC foreign exchange administration, Hong Kong
dollar-denominated income from our through train service may be deposited in
Hong Kong dollars and need not be converted into renminbi. If necessary,
subsequent payment of Hong Kong dollar-denominated and U.S. dollar-denominated
dividends on our H shares and ADSs, respectively, may 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. 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.


INTEREST RATE RISK

     Funds 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, 2002, we had no loans
outstanding. Accordingly, we are not exposed to any material interest rate
risks.

     As of December 31, 2002, our balances denominated in Hong Kong dollars and
U.S. dollars had been translated into renminbi at the applicable market exchange
rates as of that date, amounting to approximately RMB1.34 billion. If the
applicable market exchange rates were to change by 10%, this would result in a
change in fair value of approximately RMB134 million in these balances. For the
year ended December 31, 2002, the interest income derived from cash balances at
banks and temporary cash investments amounted to approximately RMB29.0 million.
A 10% change in interest rates would result in a change in interest income of
approximately RMB2.9 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, 2002, at present and in our normal course of business, we
are not subject to any other market-related risks.

                                       81
<PAGE>
         ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     Not applicable.

                                       82
<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

            MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS

     None.


                        ITEM 15. CONTROLS AND PROCEDURES

     Within the 90-day period prior to the filing of this report, an evaluation
was carried out under the supervision of and with the participation of our
management, including our principal executive and financial officers, of the
effectiveness of our disclosure controls and procedures (as defined in Rules
13a-14 and 15d-14 under the Exchange Act). Based on that evaluation, our
principal executive and financial officers concluded that the design and
operation of these disclosure controls and procedures were effective to ensure
that material information relating to us and our consolidated subsidiaries would
be made known to them by others within those entities. There were no significant
changes in our internal controls or in other factors that could significantly
affect our disclosure controls and procedures subsequent to the date of their
evaluation, nor were there any significant deficiencies or material weaknesses
in our internal controls. As a result, no corrective actions were required or
undertaken. However, as recommended by the SEC in its adopting release, our
principal executive and financial officers along with other management personnel
are continually testing and improving our disclosure controls and procedures and
we will be making modifications from time to time as deemed necessary to ensure
that information is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms.


                               ITEM 16. [RESERVED]

                                       83
<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-41 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>
6.1           X    Statement explaining how earnings per share information was calculated in this annual report
7.1           X    Statements explaining how certain ratios are calculated in this annual report
8.1           X    List of subsidiaries of Guangshen Railway Company Limited as of December 31, 2002
12.1          X    Section 302 principal executive officers' and principal financial officer's certifications
12.2          X    Certifications pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the U.S. Sarbanes-Oxley
                   Act of 2002.
</TABLE>

                                       84
<PAGE>


GUANGSHEN RAILWAY COMPANY LIMITED
AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS
AS OF 31 DECEMBER, 2000, 2001 AND 2002
TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


<PAGE>


                          INDEX TO FINANCIAL STATEMENTS

                                                                           Page
                                                                           ----
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
    Report of Independent Public Accountants............................... F-2
    Consolidated Income Statements for the years ended 31 December,
        2000, 2001 and 2002................................................ F-4
    Consolidated Balance Sheets as of 31 December, 2001 and 2002........... F-5
    Consolidated Cash Flow Statements for the years ended 31 December
        2000, 2001 and 2002................................................ F-6
    Consolidated Statements of Changes in Equity for the years ended
        31 December 2000, 2001 and 2002.................................... F-7
    Notes to the Consolidated Financial Statements......................... F-8



<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 sheet 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) as of 31 December, 2002, and the
results of their operations and their cash flows for the year 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 audit. We conducted our audit of these statements in accordance with
International Standards on Auditing issued by the International Federation of
Accountants and auditing standards generally accepted in the United States of
America, which 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
audit provide a reasonable basis for our opinion. The consolidated financial
statements of the Company and its subsidiaries as of 31 December, 2001, and for
each of the two years in the period ended 31 December, 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 important respects
from accounting principles generally accepted in the United States of America.
The application of the latter would have affected the determination of
consolidated net income for each of the three years in the period ended 31
December, 2002 and the determination of consolidated shareholders' equity at 31
December, 2001 and 2002 to the extent summarized in Note 30 to the consolidated
financial statements.


PRICEWATERHOUSECOOPERS
Certified Public Accountants


Hong Kong
April 23, 2003


                                      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:

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 31 DECEMBER, 2000, 2001 AND 2002

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

<TABLE>
<CAPTION>
                                              Notes                       Years ended 31 December,
                                              -----      ----------------------------------------------------------
                                                            2000            2001            2002            2002
                                                         ----------      ----------      ----------      ----------
                                                             RMB             RMB             RMB             US$
<S>                                             <C>      <C>             <C>             <C>             <C>
Revenues from railroad businesses
   Passenger                                              1,237,289       1,426,010       1,846,599         222,482
   Freight                                                  549,694         567,276         514,036          61,932
                                                         ----------      ----------      ----------      ----------
   Sub-total                                              1,786,983       1,993,286       2,360,635         284,414
Revenues from other businesses                              193,415         160,306         156,893          18,903
                                                         ----------      ----------      ----------      ----------
Total revenues                                            1,980,398       2,153,592       2,517,528         303,317
                                                         ----------      ----------      ----------      ----------
Operating expenses

   Railroad businesses
     Labour and benefits                                   (260,671)       (320,569)       (373,781)        (45,034)
     Equipment leases and services                         (263,348)       (262,320)       (433,918)        (52,279)
     Materials and supplies                                (121,337)       (144,651)       (192,141)        (23,150)
     Repair costs, excluding materials and
       supplies                                             (93,471)        (94,545)       (102,377)        (12,335)
     Depreciation                                          (305,300)       (342,534)       (335,508)        (40,423)
     Amortization of leasehold land payments                (15,394)        (15,453)        (15,131)         (1,823)
     Fees for social services                               (58,300)        (57,157)        (57,385)         (6,914)
     General and administrative expenses        4          (131,885)       (150,162)       (123,800)        (14,915)
     Others                                                 (47,758)        (73,238)       (101,251)        (12,198)
                                                         ----------      ----------      ----------      ----------
     Sub-total                                           (1,297,464)     (1,460,629)     (1,735,292)       (209,071)
                                                         ----------      ----------      ----------      ----------
   Other businesses
     Materials and supplies                                (121,535)       (108,930)       (124,602)        (15,013)
     General and administrative expenses        4           (41,994)        (29,922)        (35,137)         (4,233)
                                                         ----------      ----------      ----------      ----------
     Sub-total                                             (163,529)       (138,852)       (159,739)        (19,246)
                                                         ----------      ----------      ----------      ----------
Total operating expenses                                 (1,460,993)     (1,599,481)     (1,895,031)       (228,317)
                                                         ----------      ----------      ----------      ----------
Profit from operations                                      519,405         554,111         622,497          75,000

Other (expense) income                          5            (5,537)         12,952           6,575             792
Interest income, net                            6            76,566          63,621          32,712           3,941
Share of profits (losses) of associates         16              253             609            (323)            (39)
                                                         ----------      ----------      ----------      ----------
Profit before tax                                           590,687         631,293         661,461          79,694

Income tax expense                              7           (99,380)        (99,297)       (104,265)        (12,562)

Minority interests                                              782           1,499            (113)            (14)
                                                         ----------      ----------      ----------      ----------
Profit attributable to shareholders                         492,089         533,495         557,083          67,118
                                                         ==========      ==========      ==========      ==========
Earnings per share
    - Basic                                     8           RMB0.11         RMB0.12         RMB0.13         USD0.02
                                                         ==========      ==========      ==========      ==========
    - Diluted                                   8               N/A             N/A             N/A             N/A
                                                         ==========      ==========      ==========      ==========

Earnings per equivalent ADS
    - Basic                                     8           RMB5.68         RMB6.15         RMB6.42         USD0.77
                                                         ==========      ==========      ==========      ==========
    - 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, 2002 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,
2002.


                                      F-4
<PAGE>


               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                        AS OF 31 DECEMBER, 2001 AND 2002

                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                           Notes                    31 December,
                                                          ------      -------------------------------------------
                                                                         2001             2002            2002
                                                                      ----------       ----------      ----------
                                                                          RMB              RMB             US$
<S>                                                         <C>       <C>              <C>             <C>
ASSETS

Current assets
     Cash and cash equivalents                                           365,508        1,413,045         170,246
     Temporary cash investments                             10         1,376,602          567,339          68,354
     Interest receivables                                                 14,873           18,851           2,271
     Trade receivables                                      11            67,440           51,457           6,200
     Materials and supplies                                               34,191           34,105           4,109
     Prepayments and other receivables, net                 12           307,403          241,224          29,063
     Due from Parent Company                                              29,499           39,374           4,744
     Due from related parties                                            276,013          267,885          32,275
                                                                      ----------       ----------      ----------
         Total current assets                                          2,471,529        2,633,280         317,262
Fixed assets                                                13         7,031,040        6,798,280         819,070
Construction-in-progress                                    14           446,399          672,827          81,063
Leasehold land payments                                     15           673,746          656,998          79,156
Interests in associates                                     16           141,122          140,842          16,969
Available-for-sale investments                              17            32,000          166,695          20,084
Deferred tax assets                                         18             5,193            7,577             913
Deferred staff costs                                        19           196,187          181,095          21,819
                                                                      ----------       ----------      ----------
         Total assets                                                 10,997,216       11,257,594       1,356,336
                                                                      ==========       ==========      ==========


LIABILITIES AND EQUITY

Current liabilities
     Trade payables                                                       69,048           41,734           5,028
     Payables for construction of fixed assets                           199,780          181,473          21,864
     Accrued expenses and other payables                    20           519,900          529,797          63,831
     Due to related parties                                               58,650          158,199          19,060
     Dividend payable                                                     13,598           90,663          10,923
                                                                      ----------       ----------      ----------
         Total current liabilities                                       860,976        1,001,866         120,706
                                                                      ----------       ----------      ----------

Minority interests                                                        15,617           11,577           1,395
                                                                      ----------       ----------      ----------
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                                                 1,198,335        1,287,370         155,105
     Retained earnings                                                   602,603          637,096          76,759
                                                                      ----------       ----------      ----------
         Total equity                                                 10,120,623       10,244,151       1,234,235
                                                                      ----------       ----------      ----------
         Total liabilities and equity                                 10,997,216       11,257,594       1,356,336
                                                                      ==========       ==========      ==========
</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, 2002 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,
2002.


                                      F-5
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                        CONSOLIDATED CASH FLOW STATEMENTS

              FOR THE YEARS ENDED 31 DECEMBER, 2000, 2001 AND 2002

                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                                          Year ended 31 December,
                                                       -------------------------------------------------------------
                                                          2000             2001             2002             2002
                                                       ----------       ----------       ----------       ----------
                                                           RMB              RMB              RMB              US$
<S>                                                    <C>              <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Profit attributable to shareholders                    492,089          533,495          557,083           67,118
   Adjustments for:
       Minority interests                                    (782)          (1,499)             113               14
       Income tax expense                                  99,380           99,297          104,265           12,562
       Depreciation                                       308,795          345,949          337,797           40,698
       Amortisation of leasehold land payments             15,394           15,453           15,131            1,823
       Loss on disposals of fixed assets                    4,579           25,448           29,339            3,535
       Amortization of deferred staff costs                14,461           15,721           15,092            1,818
       Housing benefits charged for retired
         employees                                          3,602               --               --               --
       Share of (profits) losses of associates               (253)            (609)             323               39
       Provision for doubtful accounts                     17,030           29,620            4,598              554
       Interest expense                                     3,887            2,087            4,064              490
       Interest income                                    (80,452)         (65,708)         (36,920)          (4,448)
       Decrease (increase) in current assets
         Trade receivables                                 12,986            4,597           24,064            2,899
         Materials and supplies                            (5,526)          (4,158)              86               10
         Prepayments and other receivables                (47,702)        (141,067)          87,676           10,563
         Due from Parent Company                          (32,119)          51,105           (9,875)          (1,190)
         Due from related parties                          48,482          (28,081)           8,128              979
       Increase (decrease) in current liabilities
         Trade payables                                    11,561            7,901          (27,314)          (3,291)
         Due to related parties                           (90,594)          (5,084)          99,549           11,994
         Accrued expenses and other payables               22,382          102,329           48,529            5,849
       Interest paid                                       (3,887)          (2,087)          (4,064)            (490)
       Tax paid                                           (64,124)         (98,693)        (100,487)         (12,107)
                                                       ----------       ----------       ----------       ----------
   Net cash provided by operating activities              729,189          886,016        1,157,177          139,419
                                                       ----------       ----------       ----------       ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of fixed assets and payments for
     construction-in-progress, net of related
     payables                                            (564,759)        (551,508)        (553,337)         (66,667)
   Proceeds from sale of fixed assets                          --               --           12,369            1,490
   Increase in interests in associates                    (33,513)         (17,572)          (4,761)            (574)
   Decrease in temporary cash investments                  61,450           74,728          777,898           93,723
   Purchase of available-for-sale investments                  --           (2,000)         (14,108)          (1,700)
   Interest received                                       78,735           65,927           32,942            3,969
                                                       ----------       ----------       ----------       ----------
   Net cash (used in) from investing activities          (458,087)        (430,425)         251,003           30,241
                                                       ----------       ----------       ----------       ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Dividends paid to group shareholders                  (520,266)        (419,957)        (356,490)         (42,951)
   Dividends paid  to minority interests                     (187)            (180)          (4,153)            (500)
                                                       ----------       ----------       ----------       ----------
   Net cash used in financing activities                 (520,453)        (420,137)        (360,643)         (43,451)
                                                       ----------       ----------       ----------       ----------

Net (decrease) increase in cash and cash
   equivalents                                           (249,351)          35,454        1,047,537          126,209

Cash and cash equivalents, beginning of year              579,405          330,054          365,508           44,037
                                                       ----------       ----------       ----------       ----------
Cash and cash equivalents, end of year*                   330,054          365,508        1,413,045          170,246
                                                       ==========       ==========       ==========       ==========
</TABLE>

*    Analysis of the balances of cash and cash equivalents

<TABLE>
<CAPTION>
                                                                          Year ended 31 December,
                                                       -------------------------------------------------------------
                                                          2000             2001             2002             2002
                                                       ----------       ----------       ----------       ----------
                                                           RMB              RMB              RMB              US$
<S>                                                    <C>              <C>              <C>              <C>
Cash and bank deposits                                    330,054          365,508        1,413,045          170,246
                                                       ==========       ==========       ==========       ==========
</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, 2002 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,
2002.


                                      F-6
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

              FOR THE YEARS ENDED 31 DECEMBER, 2000, 2001 AND 2002

                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                                     Dedicated capital
                                                              ------------------------------------
                                        Share                             Statutory
                                      capital/   Additional   Statutory    public    Discretionary
                                       common      paid-in     surplus     welfare      surplus      Retained
                                Note    stock      Capital     reserve      fund        reserves     earnings     Total
                                ----  ---------  ----------   ---------   ---------  -------------  ---------   ----------
                                          RMB         RMB         RMB         RMB          RMB          RMB         RMB
<S>                             <C>   <C>         <C>         <C>         <C>          <C>          <C>         <C>
Balances at January 1, 2000           4,335,550   3,984,135     321,646     315,099      286,709      805,721   10,048,860
Profit attributable to
   shareholders                              --          --          --          --           --      492,089      492,089
Appropriation from retained
   earnings                      22          --          --      53,802      53,607       54,950     (162,359)          --
Dividends relating to 1999       9           --          --          --          --           --     (520,266)    (520,266)
                                      ---------   ---------   ---------   ---------    ---------    ---------   ----------
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 31 December, 2002         4,335,550   3,984,135     491,409     454,302      341,659      637,096   10,244,151
                                      =========   =========   =========   =========    =========    =========   ==========
</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's
     businesses. The price of railway transportation in particular is an
     important factor and has a substantial impact on the Group's 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 of its passengers, in the case
     of accidents and regardless of fault, for up to RMB40 per passenger and
     (ii) personal injury to or death of non-passengers, for hospital and/or
     funeral expenses and a payment of up to RMB40 per person, and/or property
     damage to non-passengers (exclusive of damage to freight shipped by the
     Company), but in each case only to the extent that the Company is at fault.
     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 RMB0.013 for each kilogram of damaged baggage and/or parcels.
     Similarly, freight transport customers who elect not to purchase insurance
     may recover up to RMB2 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 RMB769,000 for
     capital expenditures in 2003, 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 restatements have been made to the Group's
     statutory accounts to conform with IFRS. Differences arising from the
     restatements are not incorporated in the accounting records of the Group.

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

     o    Additional depreciation charges on fixed assets;

     o    Write-down of reclaimed rails to realizable value;

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

     o    Reversal of dividends declared after end of year;

     o    Recording of deferred tax impact according to IFRS;

     o    Write-off of deferred renovation expenses.

     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)

     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.

     Difference 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, 2002 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, 2002.

(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.

(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.

     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.


                                      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)

(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 recognized in the income statement in the period in which
     they arise. Translation differences on monetary assets measured at fair
     value are recognized 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 capitalized
     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. 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. 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 realized
     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.


                                      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)

     The estimated useful lives are as follows:

     Buildings                                  25 to 40 years
     Leasehold improvements                     over the lease terms
     Track, bridges and service roads           44 years
     Locomotives and rolling stock              16 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.

(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 amortized 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 recognized
     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.


                                      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)

(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 recognized 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 finalized 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 amortized 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 lesser 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.

(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.


                                      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)

(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 recognized to the extent that it is
     probable that future taxable profit will be available against which the
     temporary differences can be utilized. Deferred income tax is provided on
     temporary differences arising on investments in subsidiaries and
     associates, except 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 10% of the standard salary set by the provincial
     government, of which 5% is borne by the Company or its subsidiaries and the
     remainder 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.

(t)  Provisions

     Provisions are recognized when the Group has a present legal or
     constructive obligation as 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.

(u)  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 recognized on the
     following bases:


                                      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)

(u)  Revenue recognition (Cont'd)

     (i)  Rendering of services and sales of goods

          Railroad revenues are recognized 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 recognized when services are rendered.

          Sales aboard the trains and in the stations of food, beverages and
          merchandise are recognized 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 recognized 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 recognized when the right to receive payment is
          established.

(v)  Dividends

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

(w)  Segments

     Business segments: for management purposes the Group is organized 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-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)


3.   SEGMENTAL INFORMATION

     (a)  Business segments

          An analysis by business segment is as follows:

<TABLE>
<CAPTION>
                                                       Railroad businesses          Other businesses
                                                    ------------------------     ----------------------
                                                       2002           2001          2002         2001
                                                    ----------     ---------     ---------    ---------
                                                      RMB'000       RMB'000       RMB'000      RMB'000
     <S>                                            <C>            <C>           <C>          <C>
     Revenues
     - External                                      2,360,635     1,993,286       156,893      160,306
     - Inter-segment                                        --            --        75,188       52,159
                                                    ----------     ---------     ---------    ---------
                                                     2,360,635(i)  1,993,286(i)    232,081      212,465
                                                    ==========     =========     =========    =========

     Segment result                                    625,343       532,657        (2,846)      21,454
     Other income                                        1,411        12,004         5,164          948
     Interest income                                    36,281        64,634           639        1,074
     Finance costs                                          --            --            --           --
     Share of (losses) profits of associates              (323)          609            --           --
     Income tax expense
     Minority interests

     Profit attributable to shareholders

     Other information
     Segment assets                                 10,147,098    10,123,179       962,077      727,722

     Deferred tax assets                                    --            --            --           --

     Interests in associates                           139,972       140,252           870          870


     Total assets


     Segment liabilities                               678,303       495,934       251,719      299,360

     Taxes payable                                          --            --            --           --

     Total liabilities

     Capital expenditure
                       - Accrual basis                 526,700       837,117         8,330        3,392

                       - Cash basis                    545,007       548,116         8,330        3,392

     Non-cash expenses - Depreciation                  335,508       342,534         2,289        3,415

                       - Amortization of leasehold
                         land payments                  15,131        15,453            --           --

                       - Provision for doubtful
                         accounts                        4,257        29,038           341          582

                       - Amortization of deferred
                         staff costs                    15,092        15,721            --           --

<CAPTION>
                                                         Unallocated              Consolidation                 Total
                                                     ---------------------    ---------------------    ------------------------
                                                       2002         2001         2002        2001          2002          2001
                                                     --------    ---------    ---------   ---------    ----------    ----------
                                                     RMB'000      RMB'000      RMB'000     RMB'000       RMB'000       RMB'000
     <S>                                             <C>         <C>          <C>         <C>          <C>           <C>
     Revenues
     - External                                            --           --           --          --     2,517,528     2,153,592
     - Inter-segment                                       --           --      (75,188)    (52,159)            -             -
                                                     --------    ---------    ---------   ---------    ----------    ----------
                                                           --           --      (75,188)    (52,159)    2,517,528     2,153,592
                                                     ========    =========    =========   =========    ==========    ==========

     Segment result                                        --           --           --          --       622,497       554,111
     Other income                                          --           --           --          --         6,575        12,952
     Interest income                                       --           --           --          --        36,920        65,708
     Finance costs                                     (4,208)      (2,087)          --          --        (4,208)       (2,087)
     Share of (losses) profits of associates               --           --           --          --          (323)          609
     Income tax expense                                                                                  (104,265)      (99,297)
     Minority interests                                                                                      (113)        1,499
                                                                                                       ----------    ----------
     Profit attributable to shareholders                                                                  557,083       533,495
                                                                                                       ==========    ==========
     Other information
     Segment assets                                       --            --           --          --    11,109,175    10,850,901

     Deferred tax assets                               7,577         5,193           --          --         7,577         5,193

     Interests in associates                              --            --           --          --       140,842       141,122
                                                                                                       ----------    ----------

     Total assets                                                                                      11,257,594    10,997,216
                                                                                                       ==========    ==========

     Segment liabilities                                  --            --           --          --       930,022       795,294

     Taxes payable                                    71,844        65,682           --          --        71,844        65,682
                                                                                                       ----------    ----------
     Total liabilities                                                                                  1,001,866       860,976
                                                                                                       ==========    ==========
     Capital expenditure
                       - Accrual basis                    --            --           --          --       535,030       840,509
                                                                                                       ==========    ==========
                       - Cash basis                       --            --           --          --       553,337       551,508
                                                                                                       ==========    ==========
     Non-cash expenses - Depreciation                     --            --           --          --       337,797       345,949
                                                                                                       ==========    ==========
                       - Amortization of leasehold
                         land payments                    --            --           --          --        15,131        15,453
                                                                                                       ==========    ==========
                       - Provision for doubtful
                         accounts                         --            --           --          --         4,598        29,620
                                                                                                       ==========    ==========
                       - Amortization of deferred
                         staff costs                      --            --           --          --        15,092        15,721
                                                                                                       ==========    ==========
</TABLE>

For the years ended 31 December, 2000, 2001 and 2002, no revenues from a single
customer counted for 10 percent or more of the Group's total revenues



                                      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 (CONT'D)

(a)  Business segments (Cont'd)

     (i)  Revenues from railroad businesses include:

<TABLE>
<CAPTION>
                                               Year ended 31 December,
                                      -----------------------------------------
                                         2000            2001            2002
                                      ---------       ---------       ---------
                                         RMB             RMB             RMB

          <S>                         <C>             <C>             <C>
          Passenger                   1,237,289       1,426,010       1,846,599
          Freight                       549,694         567,276         514,036
                                      ---------       ---------       ---------
          Total                       1,786,983       1,993,286       2,360,635
                                      =========       =========       =========
</TABLE>

(b)  Geographic segments

     For the year ended 31 December, 2002, all of the Group's business
     operations are conducted in the PRC.

4.   GENERAL AND ADMINISTRATIVE EXPENSES

<TABLE>
<CAPTION>
                                                                        Year ended 31 December,
                                                               ----------------------------------------
                                                                 2000             2001            2002
                                                               -------          -------         -------
                                                                 RMB              RMB             RMB
 <S>                                                            <C>              <C>             <C>
Wages and bonus                                                 19,666           15,026          16,226
Retirement and employee benefits                                47,235           50,553          49,722
Utility expenses                                                 3,017              361             195
Selling expenses                                                 8,212            5,397               -
Office expenses                                                 10,692           14,394          15,538
Construction duty, land use fees and other duties                2,944            3,664           3,761
Depreciation                                                     3,284            3,392           1,625
Amortization of deferred staff costs                            14,461           15,721          15,092
Provision for doubtful accounts                                 17,030           29,620           4,598
Others                                                          47,338           41,956          52,180
                                                               -------          -------         -------
                                                               173,879          180,084         158,937
                                                               =======          =======         =======
Attributable to:
     Railroad businesses                                       131,885          150,162         123,800
     Other businesses                                           41,994           29,922          35,137
                                                               -------          -------         -------
                                                               173,879          180,084         158,937
                                                               =======          =======         =======
</TABLE>


                                      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)


5.   OTHER (EXPENSES) INCOME

<TABLE>
<CAPTION>
                                   Year ended 31 December,
                            -----------------------------------
                              2000          2001          2002
                            -------       -------       -------
                              RMB           RMB           RMB
<S>                         <C>           <C>           <C>
Exchange (gain) losses       (1,691)       (1,069)          799
Others                       (3,846)       14,021         5,776
                            -------       -------       -------
                             (5,537)       12,952         6,575
                            =======       =======       =======
</TABLE>

6.   INTEREST INCOME, NET

<TABLE>
<CAPTION>
                                   Year ended 31 December,
                            -----------------------------------
                              2000          2001          2002
                            -------       -------       -------
                              RMB           RMB           RMB
<S>                         <C>           <C>           <C>
Finance costs                (3,887)       (2,087)       (4,208)
Interest income              80,453        65,708        36,920
                            -------       -------       -------
                             76,566        63,621        32,712
                            =======       =======       =======
</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, 2002 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. There is no material effect on the
consolidated financial statements of the Company arising from these tax
holidays.

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,
                                                                 -------------------------------------
                                                                   2000          2001           2002
                                                                 --------      --------       --------
                                                                    RMB           RMB            RMB
<S>                                                              <C>           <C>            <C>
Provision for PRC income tax                                       94,347       106,823        106,649
Deferred tax loss (income) resulting from provision for
   doubtful accounts                                                5,033        (4,175)        (1,173)
Deferred tax income resulting from loss on the disposals of
   fixed assets                                                        --        (3,351)        (1,211)
                                                                 --------      --------       --------
                                                                   99,380        99,297        104,265
                                                                 ========      ========       ========
</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)


7.   INCOME TAX EXPENSE (CONT'D)

Reconciliation of the statutory tax rate to effective tax rate is as follows:

<TABLE>
<CAPTION>
                                                                        2000             2001            2002
                                                                     ----------       ----------       ----------
                                                                     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:
   - Provision for doubtful accounts                                     1.2%              --              --
   - Amortisation of deferred staff costs                                0.5%             0.4%            0.3%
Effect of different tax rates for certain subsidiaries and
      others                                                             0.1%             0.4%            0.4%
                                                                        -----            -----           -----
Effective income tax rate                                               16.8%            15.8%           15.7%
                                                                        =====            =====           =====
</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 RMB557,083 (2001: RMB533,495), 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 (2001: 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 2002, the directors have recommended and declared a final dividend of RMB0.10
(2001: RMB0.10) per share in respect of the financial year ended 31 December,
2002, totaling RMB433,555 (2001: RMB433,555).

10.  TEMPORARY CASH INVESTMENTS

<TABLE>
<CAPTION>
                                                                             31 December,
                                                                     ------------------------
                                                          Note          2001            2002
                                                          ----       ---------        -------
                                                                        RMB             RMB

<S>                                                        <C>       <C>              <C>
Time deposits with maturities over three months in banks   (a)       1,126,450        399,339
Time deposits with maturities over three months in the
   MOR's Railway Deposits-taking Center                    (b)         250,152        168,000
                                                                     ---------        -------
                                                                     1,376,602        567,339
                                                                     =========        =======
</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)


10.  TEMPORARY CASH INVESTMENTS (CONT'D)

(a)  Time deposits with maturities over three months in banks consist of
     short-term deposits denominated in RMB, Hong Kong dollars ("HK$") and
     United States dollars ("USD") with original maturities ranging from six
     months to one year, placed with banks in the PRC. The annual interest rates
     of RMB deposits was 1.98% in 2002 (2001: 2.16%), the annual interest rate
     of HK$ deposit was 1.13% in 2002 (2001: from 1.25% to 3.91%) and the annual
     interest rates of USD deposits were LIBOR plus a floating rate ranged from
     -0.2% to 0.1% (2001: from -0.2% to 0.1%). Total interest earned from such
     deposits amounted to approximately RMB15,121 for the year (2001:
     approximately RMB46,875).

(b)  Time deposits with maturities over three months in the MOR's Railroad
     Deposit-taking Center consist of short-term deposits denominated in RMB and
     USD with original maturities ranging from six months to one year. The
     annual interest rates of RMB deposits ranged from 1.98% in 2002 (2001: from
     2.25% to 5.00%) and the annual interest rates of USD deposits were LIBOR
     plus a floating rate ranged from -0.2% to 0.1% (2001: from -0.2% to 0.1%).
     Total interest earned from such deposits amounted to approximately RMB3,239
     (2001: approximately RMB28,792) for the year (see Note 24).

11.  TRADE RECEIVABLES

<TABLE>
<CAPTION>
                                                             31 December,
                                                        ---------------------
                                                          2001          2002
                                                        -------       -------
                                                          RMB           RMB
<S>                                                     <C>           <C>
Trade receivables                                        91,480        67,416
Less: Provision for doubtful accounts                   (24,040)      (15,959)
                                                        -------       -------
                                                         67,440        51,457
                                                        =======       =======
</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.

Movements of provision for doubtful accounts:

<TABLE>
<CAPTION>
                                                      Year ended 31 December,
                                                      -----------------------
                                                       2001              2002
                                                      ------           ------
                                                        RMB               RMB
<S>                                                   <C>              <C>
At beginning of year                                   8,633           24,040
Addition of provision during the year                 15,407                -
Utilization during the year                                -           (8,081)
                                                      ------           ------
At end of year                                        24,040           15,959
                                                      ======           ======
</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)


12.  PREPAYMENTS AND OTHER RECEIVABLES, NET

<TABLE>
<CAPTION>
                                                31 December,
                                           -----------------------
                                             2001           2002
                                           --------       --------
                                              RMB            RMB
<S>                                         <C>            <C>
Other receivables                           125,686        149,385
Less: Provision for doubtful accounts       (34,008)       (39,898)
                                           --------       --------
Other receivables, net                       91,678        109,487
Prepayments                                 215,725        131,737
                                           --------       --------
                                            307,403        241,224
                                           ========       ========
</TABLE>

Movements of provision for doubtful accounts:

<TABLE>
<CAPTION>
                                           Year ended 31 December,
                                           -----------------------
                                             2001           2002
                                           --------       --------
                                              RMB            RMB
<S>                                         <C>            <C>
At beginning of year                         19,144         34,008
Addition of provision during the year        14,864          5,890
                                           --------       --------
At end of year                               34,008         39,898
                                           ========       ========
</TABLE>


As of 31 December, 2002, the Company had fixed deposit with the principal amount
of approximately RMB31 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, in current
year, 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-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)


13.  FIXED ASSETS, NET

<TABLE>
<CAPTION>
                                                                            Group
                                 ---------------------------------------------------------------------------------------------
                                                              Track,     Locomotives  Communications    Other
                                                           bridges and       and            and        machinery
                                               Lease hold     service      rolling       signaling       and
                                  Buildings   improvement      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, 2001             2,108,498            --    4,102,845       849,462       510,683     1,426,443     8,997,931
Additions                             1,631        38,500        7,591        56,048         8,492        99,140       211,402
Transfer from
construction-in-progress            152,761            --       52,068       200,475        10,106         9,157       424,567
Disposals                          (196,345)           --      (92,488)     (101,774)      (38,557)      (11,966)     (441,130)
                                 ----------    ----------   ----------    ----------    ----------    ----------    ----------
As of 31 December, 2001           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
                                 ----------    ----------   ----------    ----------    ----------    ----------    ----------
Representing:
At cost                              27,694        38,500       40,255           870        46,456        55,586       209,361
At 2002 professional valuation    1,913,462            --    4,205,291     1,025,335       250,650     1,530,126     8,924,864
                                 ----------    ----------   ----------    ----------    ----------    ----------    ----------
                                  1,941,156        38,500    4,245,546     1,026,205       297,106     1,585,712     9,134,225
                                 ----------    ----------   ----------    ----------    ----------    ----------    ----------

Accumulated depreciation
As of 1 January, 2001               285,600            --      852,322       215,657       250,614       318,831     1,923,024
Charges for the year                 61,043         5,775       91,185        53,905        50,304        83,737       345,949
Disposals                            (1,214)           --      (11,447)      (56,637)      (34,336)       (3,609)     (107,243)
                                 ----------    ----------   ----------    ----------    ----------    ----------    ----------
As of 31 December, 2001             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
                                 ----------    ----------   ----------    ----------    ----------    ----------    ----------
Net book value
At end of year                    1,564,964        25,025    3,207,993       755,053       118,709     1,126,536     6,798,280
                                 ==========    ==========   ==========    ==========    ==========    ==========    ==========
At beginning of year              1,721,116        32,725    3,137,956       791,286       224,142     1,123,815     7,031,040
                                 ==========    ==========   ==========    ==========    ==========    ==========    ==========
</TABLE>


Had the fixed assets been carried at cost less accumulated depreciation, the
carrying amounts at year end would have been:

<TABLE>
<S>                              <C>           <C>          <C>           <C>           <C>           <C>           <C>
Cost                              1,102,617        38,500    3,466,945     1,002,484       266,179     1,470,261     7,346,986
Accumulated depreciation           (192,666)      (13,475)    (677,572)     (229,672)     (160,458)     (407,152)   (1,680,995)
                                 ----------    ----------   ----------    ----------    ----------    ----------    ----------
                                    909,951        25,025    2,789,373       772,812       105,721     1,063,109     5,665,991
                                 ==========    ==========   ==========    ==========    ==========    ==========    ==========
</TABLE>

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 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.

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, 2002 approximated to their fair values.


                                      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)


14.  CONSTRUCTION-IN-PROGRESS

<TABLE>
<CAPTION>
                                    31 December,
                              -----------------------
                                2001           2002
                              --------       --------
                                 RMB            RMB
<S>                           <C>            <C>
At beginning of year           369,285        446,399
Additions                      629,107        382,918
Disposals                     (127,426)       (10,204)
Transfer to fixed assets      (424,567)      (146,286)
                              --------       --------
At end of year                 446,399        672,827
                              ========       ========
</TABLE>

As of 31 December, 2002, there was no interest capitalised in the
construction-in-progress as the Group had no bank borrowings.

Disposals in 2002 mainly represented injection in available-for-sale investments
(see Note 17). Disposals in 2001 mainly represented disposals of staff quarters.

15.  LEASEHOLD LAND PAYMENTS

<TABLE>
<CAPTION>
                              Year ended 31 December,
                              -----------------------
                                2001           2002
                              --------       --------
                                 RMB            RMB
<S>                           <C>            <C>
Cost
At beginning of year           769,724        762,087
Additions                        6,327             --
Disposals                      (13,964)        (2,000)
                              --------       --------
At end of year                 762,087        760,087
                              --------       --------
Accumulated amortization
At beginning of year            74,493         88,341
Charges for the year            15,453         15,131
Disposals                       (1,605)          (383)
                              --------       --------
At end of year                  88,341        103,089
                              --------       --------
Net book value
At end of year                 673,746        656,998
                              ========       ========
At beginning of year           695,231        673,746
                              ========       ========
</TABLE>


                                      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)


16.  INTERESTS IN ASSOCIATES

<TABLE>
<CAPTION>
                                                   31 December,
                                             -----------------------
                                               2001           2002
                                             --------       --------
                                              RMB'000        RMB'000

<S>                                           <C>            <C>
Share of net assets, beginning of year        116,868        117,477
Addition                                           --         19,420
Share of profits (losses) before tax              609           (323)
                                             --------       --------
Share of net assets, end of year              117,477        136,574

Due from associates                            88,787         48,095
Due to associates                              (2,742)           (40)
                                             --------       --------
                                              203,522        184,629

Less: Provision for impairment in value       (29,689)       (29,689)
      Provision for doubtful accounts         (32,711)       (14,098)
                                             --------       --------
                                              141,122        140,842
                                             ========       ========
</TABLE>

The amounts due from/to associates are unsecured, interest free and had no fixed
repayment dates. 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.

Movements of provision for impairment in value and for doubtful accounts are as
follows:

 <TABLE>
 <CAPTION>
                                Year ended 31 December,
                                -----------------------
                                   2001          2002
                                 -------       -------
                                    RMB           RMB
<S>                              <C>           <C>
Beginning of year                 63,051        62,400
Utilization during the year         (651)      (18,613)
                                 -------       -------
End of year                       62,400        43,787
                                 =======       =======
</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 equity
                                                                interest
                                              Date of         attributable
                                           incorporation         to the           Paid-up
         Name of the entity               / establishment       Company          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

Guangzhou Tielian Economy                 27 December, 1994        34%         RMB1,000,000    Warehousing and
   Development Company Limited                                                                   freight transport
                                                                                                 agency

</TABLE>


                                      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)


16.  INTERESTS IN ASSOCIATES (CONT'D)

<TABLE>
<CAPTION>
                                                               Percentage
                                                                of equity
                                                                interest
                                              Date of         attributable
                                           incorporation         to the           Paid-up
         Name of the entity               / establishment       Company          capital          Principal activities
--------------------------------------    ----------------    ------------   --------------    ----------------------
<S>                                       <C>                    <C>         <C>               <C>
Zengcheng Lihua Stock Company               30 July, 1992          27%       RMB100,000,000    Real estate,
   Limited                                                                                       warehousing, cargo
                                                                                                 loading and unloading
Indirectly held by the Company

Guangzhou Dongqun Advertising               6 March, 1996          40%           RMB500,000    Design and production
   Company Limited                                                                               of advertisements

Guangzhou Huangpu Yuehua Freight            20 July, 1990        33.3%         RMB6,610,000    Cargo loading and
   Transportation Joint Venture                                                                  unloading,
   Company Limited                                                                               warehousing, freight
                                                                                                 transport agency
</TABLE>



17.  AVAILABLE-FOR-SALE INVESTMENTS

<TABLE>
<CAPTION>
                                                          31 December,
                                                      --------------------
          Name of the investee company                  2001         2002
          ----------------------------                -------      -------
                                                      RMB'000      RMB'000
<S>                                                   <C>          <C>
China Railcom Company Limited ("China Railcom")*           --      120,587
Shenzhen Innovation Technology Investment
  Company Limited                                      30,000       30,000
China Railway Express Company Limited                      --       13,608
Shenzhen Huatie Enterprise Company Limited              2,000        2,000
Zhongtie Information Company Limited                       --          500
                                                      -------      -------
                                                       32,000      166,695
                                                      =======      =======
</TABLE>

All the above investees are unlisted companies and stated at cost. 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 2002, the Company invested in China Railcom by injecting certain
     communication and signaling systems and related constructions in progress
     with their respective carrying value of approximately RMB120,587. China
     Railcom has confirmed in writing that the Group is entitled to the 0.85%
     equity interest in China Railcom as of 31 December, 2002. The relevant
     legal registration procedures are in progress.



                                      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)


18.  DEFERRED TAX ASSETS

<TABLE>
<CAPTION>
                                                31 December,
                                              ----------------
                                               2001       2002
                                              -----      -----
                                               RMB        RMB
<S>                                           <C>        <C>
Deferred tax assets:
   - Provision for doubtful accounts          1,842      3,015
   - Losses on disposals of fixed assets      3,351      4,562
                                              -----      -----
                                              5,193      7,577
                                              =====      =====
</TABLE>

The movements of deferred taxation during the years are as follows:

 <TABLE>
 <CAPTION>
                                                  Year ended 31 December,
                                                  -----------------------
                                                     2001         2002
                                                    ------       ------
                                                      RMB          RMB
<S>                                                 <C>           <C>
At beginning of year                                (2,333)       5,193
Credit to consolidated profit during the years       7,526        2,384
                                                    ------       ------
At end of year                                       5,193        7,577
                                                    ======       ======
</TABLE>

19.  DEFERRED STAFF COSTS

<TABLE>
<CAPTION>
                                             31 December,
                                        -----------------------
                                          2001           2002
                                        --------       --------
                                         RMB'000        RMB'000
<S>                                     <C>            <C>
Cost, at beginning and end of year       226,369        226,369
                                        --------       --------
Accumulated amortization
At beginning of year                     (14,461)       (30,182)
Charges for the year                     (15,721)       (15,092)
                                        --------       --------
At end of year                           (30,182)       (45,274)
                                        --------       --------
 Net book amount
 At end of year                          196,187        181,095
                                        ========       ========
 At beginning of year                    211,908        196,187
                                        ========       ========
</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)


20.  ACCRUED EXPENSES AND OTHER PAYABLES

<TABLE>
<CAPTION>
                                     31 December,
                                 --------------------
                                   2001         2002
                                 -------      -------
                                   RMB          RMB
<S>                              <C>          <C>
Advances from customers          173,533      143,388
Accrued expenses                  98,349       79,790
Salary and welfare payables       42,657       21,260
Taxes payables                    65,682       71,844
Other payables                   139,679      213,515
                                 -------      -------
                                 519,900      529,797
                                 =======      =======
</TABLE>

Other payables mainly represented various payables and deposits for daily
operation of business.

21.  SHARE CAPITAL

As of 31 December, 2002, the authorised capital of the Company consisted of
ordinary shares of par value RMB1.00 per share:

<TABLE>
<CAPTION>
                                                                      Percentage
                                        Number of       Nominal       of capital
                                          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 net
profit of each year, the Company shall set aside 10% of its net profit 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 net profit 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 net profit shall be used to
make good the losses before allocations are set aside for the statutory surplus
reserve or the statutory public welfare fund.

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.


                                      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)


22.  DISTRIBUTION OF INCOME (CONT'D)

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 income 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 consolidated income
statement.

As of 31 December, 2002, the reserve of the Company available for distribution
was approximately RMB667,416 (2001: approximately RMB621,595).

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.

<TABLE>
<CAPTION>
                                       31 December,
                                     ----------------
                                      2001       2002
                                     -----      -----
                                      RMB        RMB
<S>                                  <C>        <C>
Payable for pension obligations      9,002         --
                                     =====      =====
</TABLE>


                                      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)


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:

<TABLE>
<CAPTION>
                                                                                          Year ended 31 December,
                                                                                     ---------------------------------
                                                                                       2000         2001         2002
                                                                                     -------      -------      -------
                                                                                       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) (iii)                                 132,576       70,345       42,047

     Provision of trains and related services from Guangmeishan Railway
        Company Limited, a subsidiary of the Parent Company (iii)                     23,839        5,205        4,864

     Provision of trains and related services by Sanmao Railway Company Limited,
        an associate of the Parent Company (iii)                                       3,546           --           --

     Provision of trains and related services by Changsha Railway Company,
        a subsidiary of the Parent Company (iii)                                       5,336           --           --

     Provision of trains and related services by Huaihua Railway Company,
        a subsidiary of the Parent Company (iii)                                       3,317           --           --

     Purchases of materials and supplies from Guangzhou
        Railway Material Supply Company, a subsidiary of
        the Parent Company                                                            22,846       36,544       33,074
</TABLE>


                                      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)

<TABLE>
<CAPTION>
                                                                                          Year ended 31 December,
                                                                                     ---------------------------------
                                                                                       2000         2001         2002
                                                                                     -------      -------      -------
                                                                                       RMB          RMB          RMB
     <S>                                                                             <C>          <C>          <C>
     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)                             58,300       56,800       66,744

     Operating lease rentals paid to the MOR                                          50,435       52,296       57,298

     Provision of trains and related service through MOR (iii)                            --       66,475      211,667

     Provision of trains usage and related services from Guangzhou Railway
        (Group) Passenger Transportation Company, a subsidiary of the
        Parent Company                                                                    --        7,844        6,681

     Interest received from the Parent Company (ii)                                      447           --           --

     Interest expenses paid to the Parent Company (ii)                                 3,886        1,178        2,443

     Interest received from the MOR's Railroad
        Deposit-taking Centre (see Note 10(b) and 24(b))                              25,792       11,887        3,239

     Interest received from Pingnan Railway Company
        Limited, an associate of the Parent Company (ii)                               1,712        1,866          806

     Interest received from Guangmeishan Railway Company
        Limited (ii)                                                                     833        1,291        1,884
</TABLE>


                                      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)

     (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 renewable annually and 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.

     (iii) Pursuant to the Notice "Tiezhengfa 2000 No. 116" issued by the MOR,
          starting from January 1, 2001, settlement method regarding provision
          of trains and related services for long-distance passenger
          transportation was changed. Settlements previously made with certain
          subsidiaries of the Parent are now performed through MOR's Settlement
          Centre. The Company's directors are of the opinion that the change in
          settlement method does not have material impact on the Group' results.

(b)  As of 31 December, 2002, the Group had the following material balances with
     related parties:

<TABLE>
<CAPTION>
                                                                   31 December,
                                                              ----------------------
                                                                2001          2002
                                                              -------       --------
                                                                RMB           RMB
     <S>                                                      <C>            <C>
     Temporary cash investments in the MOR's Railroad
        Deposit-taking Center (see Note 10(b))                250,152        168,000
     Bank deposits in the MOR's railroad Deposit-taking
        Center                                                 38,767        206,452
     Due from Parent Company                                   29,499         39,374
     Due from related parties                                 276,013        267,885
     Due to related parties                                   (58,650)      (158,199)
</TABLE>

     As of 31 December, 2002, 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.


                                      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

<TABLE>
<CAPTION>
                                                        Year ended 31 December,
                                                   ---------------------------------
                                                    2000          2001         2002
                                                   -------      -------      -------
                                                     RMB           RMB          RMB
     <S>                                           <C>          <C>          <C>
     Non-cash investment transaction
     - Investment in China Railcom (see Note 17)        --           --      120,587
                                                   -------      -------      -------
                                                        --           --      120,587
                                                   =======      =======      =======
</TABLE>

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, 2002, 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, 2002, balances denominated in USD 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's
     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, 2002 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, 2002, the Group had the following capital commitments:

<TABLE>
<CAPTION>
                                                                       31 December,
                                                                   --------------------
                                                                     2001         2002
                                                                   -------      -------
                                                                     RMB          RMB
     <S>                                                           <C>          <C>
     Authorised and contracted for                                  15,640      10,158
                                                                   =======      =======
</TABLE>

(b)  Operating lease commitments

     Total future minimum lease payments under non-cancelable operating leases
     were as follows:

<TABLE>
<CAPTION>
                                                                       31 December,
                                                                   --------------------
                                                                     2001         2002
                                                                   -------      -------
                                                                     RMB          RMB
     <S>                                                           <C>          <C>
     Machinery and equipment
         - not more than one year                                       --      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      108,000
         - more than three years but not more than four years      108,000       75,375
         - more than four years but not more than five years        75,375           --
                                                                   -------      -------
                                                                   399,375      399,375
                                                                   =======      =======
</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, 2002, the Company's investment in an associated company,
Guangzhou Tiecheng Enterprise Company Limited ("Tiecheng"), amounted to
approximately RMB140,000. 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 Novermeber, 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 stated above, if Guangzhou Guantian is held responsible for the guarantee,
the Group may need to provide for impairment on its interests in Tiecheng.
Having consulted an independent lawyer, the directors are of the opinion that
the guarantee arrangement should be invalid according to the relevant PRC rules
and regulations. Tiecheng is now in the process to apply to the court for
discharging the obligation of Guangzhou Guantian in relation to the guarantee.
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 for the year ended 31 December,
2002.

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 RMB48,422 for the year ended 31 December, 2002 (2001:
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)

Under US GAAP, fixed assets are required to be stated at 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 RMB223,828 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.

Effects on the consolidated profit attributable to shareholders of significant
differences between IFRS and US GAAP are summarized below:

<TABLE>
<CAPTION>
                                                                      Year ended 31 December,
                                                     ----------------------------------------------
                                                       2000         2001         2002         2002
                                                     -------      -------      -------      -------
                                                       RMB          RMB          RMB           US$
<S>                                                  <C>          <C>          <C>           <C>
Consolidated profit attributable to
   shareholders under IFRS                           492,089      533,495      557,083       67,118
US GAAP adjustments:
    Reversal of additional depreciation charges
       arising from the revaluation surplus on
       fixed assets                                   48,422       48,422       48,422        5,834
    Effect of US GAAP adjustment on taxation          (7,263)      (7,263)      (7,263)        (875)
                                                     -------      -------      -------      -------
Consolidated profit attributable to
   shareholders under US GAAP                        533,248      574,654      598,242       72,077
                                                     =======      =======      =======      =======
Earnings per share under US GAAP                     RMB0.12      RMB0.13      RMB0.14      USD0.02
                                                     =======      =======      =======      =======
Earnings per equivalent ADS under
    US GAAP                                          RMB6.15      RMB6.63      RMB6.90      USD0.83
                                                     =======      =======      =======      =======
</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 summarized below:

<TABLE>
<CAPTION>
                                                                              Year ended 31 December,
                                                                   -----------------------------------------------
                                                                       2001             2002              2002
                                                                   -----------       -----------       -----------
                                                                        RMB              RMB               US$
<S>                                                                 <C>               <C>               <C>
Consolidated net assets under IFRS                                  10,120,623        10,244,151         1,234,235
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                                          282,462           330,884            39,866
    Deferred tax assets related to net revaluation surplus             181,458           174,195            20,987
                                                                   -----------       -----------       -----------
Consolidated net assets under US GAAP                                9,092,358         9,257,045         1,115,307
                                                                   ===========       ===========       ===========
</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.

The Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards No. 143, Accounting for Assets Retirement Obligations
("SFAS 143"), Statement of Financial Accounting Standards No. 146, Accounting
for Costs Associated With Exit or Disposal Activities ("SFAS 146"), FASB
interpretation N. 45, Guarantor's Accounting and Disclosure Requirements for
Guarantees, including Indirectly Guarantees of indebtedness of Others ("FIN
45"), FASB Interpretation No. 46, Consolidation of Variable Interest Entities
("FIN 46") and Emerging Issues Task Force ("EITF") Issue 00-21, "Accounting for
Revenue Arrangements with Multiple Deliverables" that addresses certain aspects
of a vendor's accounting for multiple revenue-generating arrangements ("EITF
Issue 00-21).

(a)  SFAS 143 addresses financial accounting and reporting for obligations
     associated with the retirement of tangible long-lived assets and the
     associated assets retirement costs. SFAS 143 is effective for fiscal years
     beginning after 31 December, 2002. The Group does not expect that the
     adoption of SFAS143 will have a material an impact on the consolidated
     financial statements.

(b)  SFAS 146 addresses financial accounting and reporting for costs associated
     with exit or disposal activities and nullifies Emerging issues Task Force
     Issue No. 94-3 "Liability Recognition for Certain Employee Termination
     Benefits and Other Costs to Exit Activity (including Certain Costs Incurred
     in a Restructuring)". The Group will adopt SFAS 146 on 1 January, 2003 and
     does not expect a material impact upon adoption.


                                      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)

(c)  FIN 45 elaborates on the disclosures to be made by a guarantor about its
     obligations under certain guarantees that it has issued. It also clarifies
     that a guarantor is required to recognize, at the inception of a guarantee,
     a liability for the fair value of the obligation undertaken in issuing the
     guarantee. The initial recognition and initial measurement provisions under
     FIN 45 are applicable prospectively to guarantees issued or modified after
     31 December, 2002. The Group does not expect that the adoption of
     disclosure requirements that are effective for the year ended 31 December,
     2002 did not have a material impact on the note disclosures of the
     consolidated financial statements.

(d)  FIN 46 provides guidance on the identification of and financial reporting
     for entities over which control 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. The
     interpretation applies immediately to variable interest entities created
     after 31 January 2003, and to variable interest entities in which an
     enterprise obtains and interest after that date. It applies in the first
     fiscal year for interim period beginning after 15 June, 2003 to variable
     interests entities in which an enterprise holds a variable interest that it
     acquires before 1 February, 2003. The Group does not expect that the
     adoption of FIN 46 will have a material impact on the consolidated
     financial statements.

31.  POST BALANCE SHEET EVENTS

Pursuant to a board resolution dated 23 April, 2003, the directors recommended
the payment of a final dividend of RMB0.10 per share, totaling RMB433,555.

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 authorized 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 23 April,
2003.

<PAGE>


               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                   SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following tables present selected consolidated financial information of the
Group as of 31 December, 1998, 1999, 2000, 2001 and 2002 and for the years then
ended, which were extracted from the following financial statements:

The Consolidated Balance Sheets as of 31 December, 2001 and 2002, and the
Consolidated Statements of Income, Changes in Equity and Cash Flows for the
years ended 31 December, 2000, 2001 and 2002, prepared in accordance with IFRS,
have been audited and were included elsewhere in this Annual Report. The
Consolidated Balance Sheets as of 31 December, 1998, 1999 and 2000, and the
Consolidated Statements of Income, Changes in Equity and Cash Flows for the
years ended 31 December, 1998 and 1999 have been audited while were not included
in this Annual Report.

The selected income statement data, cash flow statement data and other data for
the years ended 31 December, 2000, 2001 and 2002, and the selected balance sheet
data as of 31 December, 2001 and 2002 should be read in conjunction with, and
are qualified by reference to, the Consolidated Financial Statements.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                          Year ended 31 December,
                                             ----------------------------------------------------------------------------------
                                                 1998         1999         2000           2001            2002          2002
                                             -----------   ----------   -----------    -----------    -----------   -----------
                                                  RMB          RMB          RMB            RMB            RMB           US$
                                                                                                                        (a)
                                                                 (Amounts in thousands except per share data)
<S>                                          <C>           <C>          <C>            <C>            <C>           <C>
INCOME STATEMENT DATA:
  Revenues from railroad businesses
    - passenger                                1,070,411    1,114,046     1,237,289      1,426,010      1,846,599       222,482
    - freight                                    681,945      537,970       549,694        567,276        514,036        61,932
                                             -----------   ----------   -----------    -----------    -----------   -----------
    Subtotal                                   1,752,356    1,652,016     1,786,983      1,993,286      2,360,635       284,414
  Revenues from other businesses                 190,231      166,800       193,415        160,306        156,893        18,903
                                             -----------   ----------   -----------    -----------    -----------   -----------
  Total revenues                               1,942,587    1,818,816     1,980,398      2,153,592      2,517,528       303,317
  Railroad operating expenses                 (1,144,277)  (1,189,641)   (1,297,464)    (1,460,629)    (1,735,292)     (209,071)
  Other businesses operating expenses           (165,336)    (151,255)     (163,529)      (138,852)      (159,739)      (19,246)
                                             -----------   ----------   -----------    -----------    -----------   -----------
  Profit from operation                          632,974      477,920       519,405        554,111        622,497        75,000
  Profit attributable to shareholders            642,175      529,674       492,089        533,495        557,083        67,118
  Earnings per common share                      RMB0.15      RMB0.12       RMB0.11        RMB0.12        RMB0.13       USD0.02
  Dividends declared per common share            RMB0.12      RMB0.10       RMB0.12        RMB0.10        RMB0.10       USD0.01

BALANCE SHEET DATA:
  Working capital (excluding due from and
    due to Parent Company)                     1,951,542    1,772,772     1,463,073      1,581,054      1,592,040       191,812
  Due from Parent Company                          9,666       48,485        80,604         29,499         39,374         4,744

  Fixed assets                                 6,877,355    6,757,336     7,074,907      7,031,040      6,798,280       819,070
  Total assets                                10,738,335   10,970,496    10,917,564     10,997,216     11,257,594     1,356,336
  Equity                                       9,952,741   10,048,860    10,020,683     10,120,623     10,244,151     1,234,235

CASH FLOW STATEMENT DATA:
  Net cash provided by operating
    activities                                   851,664      656,802       729,189        886,016      1,157,177       139,419
  Net cash (used in) provided by
    investing activities                        (465,022)     (61,791)     (458,087)      (430,425)       251,003        30,241
  Net cash used in financing activities         (630,821)    (384,474)     (520,453)      (420,137)      (360,643)      (43,451)
  Purchase of fixed assets and payment
    for construction-in-progress, net of
    related payables                             599,114      449,130       564,759        551,508        553,337        66,667
  Dividends paid                                 520,266      433,555       520,266        419,957        356,490        42,951

OTHER DATA:
  EBITDA (b)                                     907,318      796,980       853,554        946,294        979,402       118,000
  Railroad transportation operating income       608,079      462,375       489,519        532,657        625,343        75,343
  Other businesses operating income               24,895       15,545        29,886         21,454         (2,846)         (343)
  US GAAP data
    - Profit attributable to shareholders        683,334      570,833       533,248        574,654        598,242        72,077
    - Earnings per common share                  RMB0.16      RMB0.13       RMB0.12        RMB0.13        RMB0.14       USD0.02
    - Equity                                   8,801,001    8,938,279     8,951,259      9,092,358      9,257,045     1,115,307
</TABLE>

(a)  Translation of amounts from Chinese Renminbi ("RMB") into United States
     dollars ("US$") for the convenience of the reader has been made at the Noon
     Buying Rate on 31 December, 2002 of US$1.00=RMB8.3. No representation is
     made that the RMB amounts could have been, or could be, converted into US$
     at that rate on 31 December, 2002 or on any other date.

(b)  EBITDA refers to earnings before interest income, interest expense, taxes,
     depreciation and amortization. EBITDA should not be construed as an
     alternative to operating income or any other measure of performance
     determined in accordance with IFRS or US GAAP or as an indicator of the
     Company's operating performance, liquidity or cash flows generated by
     operating, investing and financing activities. The Company has included the
     information concerning EBITDA because management believes it is useful
     supplement to cash flow data as a measure of the Company's performance.


<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




                                             /s/ Wu Junguang
                                         -----------------------------------
                                         Wu Junguang
                                         Chairman of the Board of Directors




Date: June 24, 2003

                                       85