<PAGE>

      AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 28, 2005

                                  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, 2004

                                       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 LISTED
   -------------------                                  -------------------------------------
<S>                                                     <C>
American Depositary Shares, each
representing 50 Class H ordinary shares                    New York Stock Exchange, Inc.

Class H ordinary shares, nominal value
RMB 1.00 per share                                         The Stock Exchange of Hong Kong Limited
</TABLE>

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

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

Indicate the number of outstanding shares of each of the Registrant's classes of
capital or common stock as of December 31, 2004:

<TABLE>
<S>                                                                                                 <C>
Domestic shares, par value RMB1.00 per share ....................................................   2,904,250,000
H shares, par value RMB1.00 per share ...........................................................   1,431,300,000
(including 243,129,050 H shares in the form of American Depositary Shares)
</TABLE>

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

                                 Yes [X] No [ ]

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

                             Item 17 [ ] Item 18 [X]

<PAGE>

                                TABLE OF CONTENTS

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

PART I
         ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS..........................................      3
         ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE........................................................      3
         ITEM 3.  KEY INFORMATION................................................................................      3
         Item 3A. Selected Consolidated Financial and Other Data.................................................      3
         Item 3B. Capitalization and Indebtedness................................................................      5
         Item 3C. Reasons for the Offer and Use of Proceeds......................................................      5
         Item 3D. Risk Factors...................................................................................      5
         ITEM 4.  INFORMATION ON THE COMPANY.....................................................................     13
         Item 4A. History and Development of the Company.........................................................     13
         Item 4B. Business Overview..............................................................................     16
         Item 4C. Organizational Structure.......................................................................     29
         Item 4D. Property, Plant and Equipment..................................................................     30
         ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS...................................................     32
         Item 5A. Results of Operations..........................................................................     34
         Item 5B. Liquidity and Capital Resources................................................................     46
         Item 5C. Research and Development, Patents and Licences, etc............................................     48
         Item 5D. Trend Information..............................................................................     49
         Item 5E. Off-Balance Sheet Arrangements.................................................................     49
         Item 5F. Tabular Disclosure of Contractual Obligations..................................................     49
         Item 5G. Additional Information.........................................................................     50
         ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.....................................................     52
         Item 6A. Directors and Senior Management................................................................     52
         Item 6B. Board Compensation.............................................................................     57
         Item 6C. Board Practices................................................................................     58
         Item 6D. Employees......................................................................................     60
         Item 6E. Share Ownership................................................................................     61
         ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS..............................................     62
         Item 7A. Major Shareholders.............................................................................     62
         Item 7B. Related Party Transactions.....................................................................     63
         Item 7C. Interests of Experts and Counsel...............................................................     67
         ITEM 8.  FINANCIAL INFORMATION..........................................................................     68
         Item 8A. Consolidated Statements and Other Financial Information........................................     68
         Item 8B. Significant Changes............................................................................     69
         ITEM 9.  THE OFFER AND LISTING..........................................................................     70
         Item 9A. The Offer and Listing Details..................................................................     70
         Item 9B. Plan of Distribution...........................................................................     71
         Item 9C. Markets........................................................................................     71
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                                   <C>
         Item 9D.  Selling Shareholders..........................................................................     71
         Item 9E.  Dilution......................................................................................     71
         Item 9F.  Expenses of the Issue.........................................................................     71
         ITEM 10.  ADDITIONAL INFORMATION........................................................................     72
         Item 10A. Share Capital.................................................................................     72
         Item 10B. Memorandum and Articles of Association........................................................     72
         Item 10C. Material Contracts............................................................................     82
         Item 10D. Exchange Controls.............................................................................     82
         Item 10E. Taxation......................................................................................     83
         Item 10F. Dividends and Paying Agents...................................................................     91
         Item 10G. Statement by Experts..........................................................................     91
         Item 10H. Documents on Display..........................................................................     91
         Item 10I. Subsidiary Information........................................................................     92
         ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................................     93
         ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES........................................     95

PART II
         ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES...............................................     96
         ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS..................     96
         ITEM 15.  CONTROLS AND PROCEDURES.......................................................................     96
         ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT..............................................................     97
         ITEM 16B. CODE OF ETHICS................................................................................     97
         ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES........................................................     97
         ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES....................................     98
         ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS........................     98

PART III
         ITEM 17.  FINANCIAL STATEMENTS..........................................................................     99
         ITEM 18.  FINANCIAL STATEMENTS..........................................................................     99
         ITEM 19.  EXHIBITS......................................................................................     99
</TABLE>

                                       2
<PAGE>

                           FORWARD-LOOKING STATEMENTS

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

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

                          CERTAIN TERMS AND CONVENTIONS

      Solely for the convenience of the reader, this annual report contains
translations of amounts from renminbi into U.S. dollars and vice versa at the
rate of RMB8.30 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, 2004, except
where we specify that a different rate has been used. You should not construe
these translations as representations that the renminbi amounts actually
represent U.S. dollar amounts or could be converted into U.S. dollars at that
rate or at all. See "Item 3A. Selected Consolidated Financial Data -- Exchange
Rate Information" for information regarding the noon buying rates for U.S.
dollar/renminbi conversions from January 1, 2000 through June 17, 2005.

      We prepare and publish our consolidated financial statements in renminbi.

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

      Unless the context otherwise requires or otherwise specified:

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

      -     "CEPA" means the Closer Economic Partnership Arrangement between
            Hong Kong and Chinese Mainland entered into on October 27, 2004.

                                       1
<PAGE>

      -     "GEDC" means Guangzhou Railway (Group) Guangshen Railway Enterprise
            Development Company, a wholly owned subsidiary of our Parent
            Company.

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

      -     "Guangshen Railway", "Company", "we", "our" or "us" means Guangshen
            Railway Company Limited, a joint stock limited company incorporated
            in China with limited liability, and its subsidiaries on a
            consolidated basis.

      -     "Hong Kong" means the Hong Kong Special Administrative Region of the
            PRC.

      -     "Macau" means the Macau Special Administrative Region of the PRC.

      -     "MOR" means the Ministry of Railways.

      -     "Pearl River Delta" means the area in and adjacent to the southern
            part of Guangdong Province, PRC, surrounding the mouth of the Pearl
            River and its lower reaches.

      -     "restructuring" means the restructuring conducted in connection with
            our initial public offering in 1996 during which we succeeded to the
            railroad and certain other businesses of our predecessor company and
            certain assets and liabilities of our Parent Company.

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

      -     "Yangcheng Railway Company" means Guangzhou Railway Group Yangcheng
            Railway Company, a wholly-owned subsidiary of our Parent Company.

                                       2
<PAGE>

                                     PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

      Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

      Not applicable.

ITEM 3. KEY INFORMATION

ITEM 3A. SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

      The following selected consolidated data relating to our consolidated
balance sheets as of December 31, 2003 and 2004, and our consolidated statements
of income, changes in equity and cash flows for each of the years ended December
31, 2002, 2003 and 2004 are derived from and are qualified by reference to our
audited consolidated financial statements included elsewhere in this annual
report and should be read in conjunction with "ITEM 5. Operating and Financial
Review and Prospects". The following selected consolidated data relating to our
consolidated balance sheets as of December 31, 2000, 2001 and 2002, and our
consolidated statements of income, changes in equity and cash flows for each of
the years ended December 31, 2000 and 2001 are derived from our previously
published audited consolidated financial statements that are not included in
this annual report.

      The audited consolidated financial statements from which the selected
consolidated financial data set forth below have been derived were prepared in
accordance with International Financial Reporting Standards, or IFRS, and the
information set forth below under "US GAAP data" have been reconciled to
generally accepted accounting principles in the United States, or US GAAP, which
differ in some material respects from IFRS. For a discussion of the principal
differences between IFRS and US GAAP, see "Item 5G. Additional
Information-Principal Differences between IFRS and US GAAP" and Note 31 to our
audited consolidated financial statements included elsewhere in this annual
report.

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                           ------------------------------------------------------------------------
                                              2000        2001         2002        2003         2004        2004
                                           ----------  ----------   ----------  ----------   ----------  ----------
                                              RMB         RMB          RMB         RMB          RMB        US$(1)
                                                           (IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<S>                                        <C>         <C>          <C>         <C>          <C>         <C>
IFRS INCOME STATEMENT DATA:
  Revenues(2) from railroad businesses
    - Passenger.........................    1,278,213   1,471,895    1,903,782   1,790,204    2,259,671     272,250
    - Freight...........................      567,176     585,616      530,776     526,382      611,807      73,712
                                           ----------  ----------   ----------  ----------   ----------  ----------
    Subtotal............................    1,845,389   2,057,511    2,434,558   2,316,586    2,871,478     345,962
  Revenues(2) from other businesses.....      198,352     167,064      166,266     151,596      166,671      20,081
                                           ----------  ----------   ----------  ----------   ----------  ----------
  Total revenues(2).....................    2,043,741   2,224,575    2,600,824   2,468,182    3,038,149     366,043
  Railroad operating expenses...........   (1,355,870) (1,524,854)  (1,809,215) (1,755,855)  (2,241,821)    270,098
  Other businesses operating expenses...     (168,466)   (145,610)    (169,112)   (149,614)    (166,155)     20,020
                                           ----------  ----------   ----------  ----------   ----------  ----------
  Profit from operations................      519,405     554,111      622,497     562,713      630,173      75,925
  Net profit............................      492,089     533,495      557,083     511,762      567,484      68,373

  Earnings per share....................         0.11        0.12         0.13        0.12         0.13       0.016
  Dividends declared per share..........         0.12        0.10         0.10        0.10        0.105        0.01
  Earnings per ADS .....................         5.68        6.15         6.42        5.90         6.54       0.788
  Diluted net income per share .........            -           -            -           -            -           -
</TABLE>

                                        3
<PAGE>

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                           ------------------------------------------------------------------------
                                              2000        2001         2002        2003         2004        2004
                                           ----------     ----         ----        ----         ----     ----------
                                              RMB         RMB          RMB         RMB          RMB        US$(1)
                                                           (IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<S>                                        <C>         <C>          <C>         <C>          <C>         <C>
IFRS BALANCE SHEET DATA (AT PERIOD END):
  Working capital (excluding due from
    and due to Parent Company)...........   1,463,073   1,581,054    1,592,040   1,935,979    2,076,207     250,145
  Due from Parent Company................      80,604      29,499       39,374           -            -           -
  Due to Parent Company..................          -           -            -      37,230       24,617       2,966
  Fixed assets...........................   7,074,907   7,031,040    6,798,280   6,952,878    6,973,279     840,154
  Leasehold land payments................     695,231     673,746      656,998     652,083      636,379      76,672
  Total assets...........................  10,917,564  10,997,216   11,257,594  11,073,953   11,409,051   1,374,584
  Equity.................................  10,020,683  10,120,623   10,244,151  10,322,358   10,420,574   1,255,491

  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     349,910
       H shares - 1,431,300,000..........   1,431,300   1,431,300    1,431,300   1,431,300    1,431,300     172,446

IFRS CASH FLOW STATEMENT DATA:
  Net cash provided by operating
    activities...........................     729,189     886,016    1,157,177     798,449    1,236,579     148,985
  Net cash provided by/(used in)
    investing activities.................    (458,087)   (430,425)     251,003    (375,469)  (1,000,639)   (120,559)
  Net cash provided by/(used in)
    financing activities.................    (520,453)   (420,137)    (360,643)   (433,666)    (469,044)    (56,511)
  Purchase of fixed assets and payment
    for construction-in-progress.........     564,759     551,508      553,337     339,208      310,179      37,371
  Dividends paid to shareholders of the
    Company..............................     520,266     419,957      356,490     433,561      455,009      54,820

OTHER IFRS DATA:
  Railroad transportation operating
      income.............................     489,519     532,657      625,343     560,731      629,657      75,862
  Other businesses operating income......      29,886      21,454       (2,846)      1,982          516          62

CERTAIN US GAAP DATA
  Operating income.......................     519,405     554,111      622,497     562,713      630,173      75,925
  Net income.............................     533,248     574,654      598,242     544,528      600,250      72,320
  Earnings per share(3)..................        0.12        0.13         0.14        0.13         0.14       0.017
  Earnings per ADS.......................        6.15        6.63         6.90        6.28         6.92       0.834
  Equity.................................   8,951,259   9,092,358    9,257,045   9,368,018    9,499,000   1,144,458
  Fixed assets...........................   5,816,762   5,821,317    5,636,979   5,830,125    5,889,074     709,527
</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, 2004 of US$1.00 = RMB8.30. No representation is made
      that the RMB amounts could have been, or could be, converted into US
      dollars at that rate on December 31, 2004 or on any other date.

(2)   To better conform to "International Accounting Standards (IAS) 18 --
      Revenue", our revenues stated in this annual report are stated before the
      deduction of business tax, although our revenues as presented in
      previously filed annual reports were stated after the deduction of
      business tax.

(3)   The calculation of earnings per share is based on the net profit for the
      period attributable to ordinary shareholders divided by the weighted
      average number of ordinary shares outstanding during the year.

      We derive a majority of our revenue and incur most of our expenses in
renminbi. In addition, we maintain our books and records in renminbi and our
financial statements are prepared and expressed in renminbi. Solely for the
convenience of the reader, this annual report contains translations of certain
renminbi amounts into U.S. dollars and vice versa at RMB8.30 = US$1.00, the noon
buying rate in New York City for cable transfers as certified for customs
purposes by the Federal Reserve Bank of New York on December 31, 2004. These
translations should not be construed as representations that the renminbi
amounts could have been or could be converted into U.S. dollars at such rate or
at all.

      The noon buying rates for renminbi in New York City for cable transfers as
certified for customs purposes by the Federal Reserve Bank of New York were RMB
8.30 = US$1.00 on June 17, 2005.

                                       4
<PAGE>

      The following table sets forth information concerning the noon buying rate
in New York City for cable transfers as certified for customs purposes by the
Federal Reserve Bank of New York for the renminbi, expressed in renminbi per
U.S. dollar, for the periods indicated:

<TABLE>
<CAPTION>
                                                                        NOON BUYING RATE
                                                    -------------------------------------------------------
                 PERIOD                             AVERAGE (1)               HIGH                    LOW
                 ------                             -----------               ----                   ------
                                                                   (RENMINBI PER U.S. DOLLAR)
<S>                                                 <C>                      <C>                     <C>
2000.....................................             8.2784                 8.2799                  8.2768
2001.....................................             8.2770                 8.2786                  8.2676
2002.....................................             8.2766                 8.2800                  8.2700
2003.....................................             8.2771                 8.2800                  8.2765
2004.....................................             8.2768                 8.2774                  8.2764
January 2005.............................             8.2765                 8.2765                  8.2765
February 2005............................             8.2765                 8.2765                  8.2765
March 2005...............................             8.2765                 8.2765                  8.2765
April 2005...............................             8.2765                 8.2765                  8.2765
May 2005.................................             8.2765                 8.2765                  8.2765
June 2005 (through June17)...............             8.2765                 8.2765                  8.2765
</TABLE>

---------------
(1)   The average rate for a year means the average of the exchange rates on the
      last day of each month during a year. The average rate for a month means
      the average of the daily exchange rates during that month.

DIVIDENDS

      On March 17, 2005, our board of directors approved a final dividend of
RMB0.11 per share to our shareholders for the year ended December 31, 2004.

      In accordance with our articles of associations, dividends for our
domestic shares will be paid in renminbi while dividends for our H shares will
be calculated in renminbi and paid in Hong Kong dollars. The exchange rate will
be based on the average of the closing exchange rates for renminbi to Hong Kong
dollars as announced by the People's Bank of China during the calendar week
preceding the date on which the dividend is to be distributed. Dividends paid on
our H shares for the year ended December 31, 2004 were converted at a rate of
RMB1.00 = HK$0.94.

ITEM 3B. CAPITALIZATION AND INDEBTEDNESS

      Not applicable.

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

      Not applicable.

ITEM 3D. RISK FACTORS

RISKS RELATING TO OUR BUSINESS

   WE FACE INCREASING COMPETITION, WHICH MAY ADVERSELY AFFECT OUR BUSINESS
GROWTH AND RESULTS OF OPERATIONS.

      Our passenger and freight transportation businesses face intense
competition from other means of road, air and water transportation. In our
passenger transportation business, we

                                       5
<PAGE>

compete with the bus and ferry services operating within Hong Kong, Guangzhou,
Shenzhen and elsewhere in our service region. We compete for passengers with bus
and ferry services in terms of price, comfort, reliability, convenience, service
quality, frequency of service and safety. In our freight transportation
business, we primarily compete with water, truck and air transportation services
operating within our service region. We compete for freight business with truck
operators, shipping companies and airline companies on the basis of price,
reliability, capacity, convenience, frequency of service, service quality, and
safety. In addition, as the PRC government lifts its restrictions and control
over foreign investments in China following China's entry into the World Trade
Organization, or the WTO, for example, by allowing foreign participation and
investment in railway operations, we may lose the monopoly status we currently
enjoy in our service territory. Furthermore, the completion of the
Wuhan-Guangzhou express railway, which is under construction, and the proposed
high-speed Guangzhou-Shenzhen-Hong Kong express railway, may further increase
the competition we face. Increased competition against us may adversely affect
our revenues and results of operations. "See Item 4B. Business
Overview--Competition" for additional information regarding our competition.

      ANY SIGNIFICANT DECREASE IN THE OVERALL LEVELS OF BUSINESS, INDUSTRIAL,
MANUFACTURING AND TOURISM ACTIVITIES WITHIN THE PEARL RIVER DELTA REGION AND
ELSEWHERE IN CHINA, WILL HAVE A MATERIAL ADVERSE EFFECT ON OUR REVENUES AND
RESULTS OF OPERATIONS.

      The volume of freight and the number of passengers we transport are
affected by the overall levels of business, industrial, manufacturing and
tourism activities within the Pearl River Delta region, which is our main
service region, and elsewhere in China, which is in turn affected by many
factors beyond our control, such as applicable policies and regulations of the
PRC government, perceptions regarding the attractiveness of investing or
operating a business within our service region, consumer confidence levels and
interest rate levels. Any significant decrease in the overall levels of
passenger travel or freight transportation, whether due to an economic slowdown
or other reasons, such as a natural disaster or a recurrence of the SARS
epidemic, will have a material adverse effect on our revenues and results of
operations. Following China's accession to the WTO, the policy advantages that
Shenzhen currently enjoys due to its status as a special economic zone may be
phased out, and its economic growth rate may not be sustained in the long run.
Other coastal regions and ports in China may develop at a faster pace and become
more competitive than Shenzhen. As a result, part of the freight currently
imported or exported through ports in Hong Kong, Shenzhen or Guangzhou may be
shipped through other ports in China, which will adversely affect our freight
transportation business.

      CHANGES IN FREIGHT COMPOSITION IN OUR FREIGHT TRANSPORTATION BUSINESS MAY
ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

      Historically, our freight transportation revenue was derived mainly from
the transportation of high-volume products, such as coal, iron ore, oil and
steel, in which our railroad transportation services have an advantage over road
transportation services, such as truck operators. As infrastructure and
technology in the PRC improves, there is an increasing demand for more advanced
technological products, such as computer components, which tend to be smaller
and lighter. As many new technology products are compact and can be shipped by
road or air, we face significant competition in the transportation of such
low-volume, high-value

                                       6
<PAGE>

products. Changes in freight composition will affect the usage volume and
pricing of our freight transportation services and may adversely affect our
results of operations.

      OUR RAILROADS CONNECT WITH THE RAILROADS OF OTHER OPERATORS AND ANY
DISRUPTION IN THE OPERATION OF THOSE RAILROADS, OR OUR COOPERATION WITH OTHER
OPERATORS, COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND OPERATIONS.

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

      ANY MATERIAL ADVERSE CHANGE TO OUR PREFERENTIAL INCOME TAX STATUS COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS.

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

      ANY CHANGES IN OUR RIGHT TO OWN AND OPERATE OUR BUSINESS AND ASSETS, OUR
RIGHT TO PROFIT AND OUR RIGHT OF ASSET DISPOSAL AS PREVIOUSLY GRANTED BY THE MOR
AND THE SATE COUNCIL OF THE PRC MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS AND RESULTS OF OPERATIONS.

      We were granted certain rights by the MOR and the State Council of the
PRC, or the State Council, with respect to certain aspects of our railroad
businesses and operations, and also received legal clarification and
confirmation of our asset ownership, corporate powers and relationships with
service providers and other entities in the national railway system, in
connection with our restructuring. These rights include the right to own and
operate our business and assets, the right to profit and the right of asset
disposal. Although these rights were granted to us indefinitely, we cannot
assure you that these rights will not be affected by future changes in PRC
governmental policies or regulation or that other railway operators will not be
granted similar rights within our service region. If another railway operator is
granted similar rights within our service region, the level of competition we
face will increase significantly.

      WE ARE CONTROLLED BY GUANGZHOU RAILWAY (GROUP) COMPANY, WHICH HAS
INTERESTS THAT MAY CONFLICT WITH THE BEST INTERESTS OF OUR OTHER SHAREHOLDERS.

      Guangzhou Railway (Group) Company, or GRGC, owns approximately 67% of our
issued share capital. This ownership percentage enables GRGC to elect our entire
board of

                                       7
<PAGE>

directors without the concurrence of any of our other shareholders. Accordingly,
GRGC is in a position to: (1) control our policies, management and affairs; (2)
subject to applicable PRC laws and regulations and provisions of our articles of
association, determine the timing and amount of dividend payments and adopt
amendments to certain of the provisions of our articles of association; and (3)
otherwise determine the outcome of most corporate actions and, subject to the
requirements of the HKSE Listing Rules, cause us to effect corporate
transactions without the approval of minority shareholders.

      GRGC's interests may sometimes conflict with those of some or all of our
minority shareholders. We cannot assure you that GRGC, as the controlling
shareholder, will always vote its shares in a way that benefits our minority
shareholders. In addition to its relationship with us as our controlling
shareholder, GRGC by itself or through its affiliates, such as Yang Cheng
Railway Company, GEDC, and Guang Mei Shan Railway Co., Ltd., also provides us
with certain services, for which we have limited alternative sources of supply.
The interests of GRGC and its affiliates as providers of these services to us
may conflict with our interests. We have entered into service agreements, and
our transactions with GRGC and its affiliates over the past three years have
been conducted on open, fair and competitive commercial terms. However, we have
only limited leverage in negotiating with GRGC and its affiliates over the
specific terms of the agreements for the provision of these services as there
are no alternate suppliers. See "Item 4B. Business Overview -- Suppliers and
Service Providers" and "Item 7B. Related Party Transactions" for additional
information regarding the services provided to us by our Parent Company and its
subsidiaries.

      WE HAVE VERY LIMITED INSURANCE COVERAGE.

      We do not maintain any insurance coverage against third party liabilities.
In addition, we do not maintain any insurance coverage for most of our property,
for business interruption nor for environmental damage arising from accidents
that occur in the course of our operations. As a result, we have to pay for
financial and other losses, damages and liabilities, including those caused by
natural disasters and other events beyond our control, out of our own funds,
which could have a material adverse effect on our results of operations and
financial condition.

      WE COULD INCUR SIGNIFICANT COSTS FOR VIOLATIONS OF APPLICABLE
ENVIRONMENTAL LAWS AND REGULATION.

      Our railroad operations and real estate ownership are subject to extensive
national and local environmental laws and regulations concerning, among other
things, emissions to the air, discharges to waters, disposal of waste and noise
control. Environmental liabilities may arise from claims asserted by adjacent
landowners or other third parties. We may be required to incur significant
expenses to remediate any violation of any violation of applicable environmental
law and regulation.

RISKS RELATING TO OUR PROPOSED ACQUISITION AND A SHARE ISSUE

      On November 15, 2004, we entered into an assets purchase agreement, or the
Acquisition Agreement, with Yangcheng Railway Company to acquire the railway
transportation business between Guangzhou and Pingshi and related assets, or the
Acquisition. In order to finance such

                                       8
<PAGE>

acquisition, we have applied to the relevant PRC authorities for approval to
allot no more than 2.75 billion A shares to be listed in China, or the A Share
Issue. The proposed amount of the issuance represents approximately 63.43% of
our existing issued share capital and approximately 38.81% of our issued share
capital as enlarged by the issuance of A shares. Upon completion of the A Share
Issue, our Parent Company will own approximately 41% of our issued and
outstanding common shares, all of which are A shares, while institutional and
public shareholders will own approximately 59% of our issued and outstanding
common shares, including A shares, H shares and ADSs. See "ITEM 5. Operating and
Financial Review and Prospects--Overview--Proposed Issue of A
Shares, Very Substantial Acquisition and Continuing Connected Transactions" for
additional information.

      OUR PROPOSED ACQUISITION MAY NOT BE COMPLETED, AND A FAILURE TO COMPLETE
THIS TRANSACTION MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND RESULTS
OF OPERATIONS.

      The proposed Acquisition is conditioned upon the fulfillment of the
following conditions:

            -     the formal approvals of relevant authorities or bodies in
                  relation to the A Share Issue have been obtained;

            -     the A Share Issue has been completed and an amount of not less
                  than 65% of the consideration for the Acquisition has been
                  raised;

            -     the approvals of relevant government bodies responsible for
                  the supervision and management of state-owned assets in
                  relation to Yangcheng Railway Company's proposal on disposal
                  of its state-owned assets have been obtained; and

            -     the approval of the National Development and Reform Committee
                  in relation to the price determination for passenger and
                  freight railway transportation services between Guangzhou and
                  Pingshi has been obtained.

      Except for the second condition listed above, which can be waived by us,
none of the above conditions can be waived. If the above conditions are not
fulfilled by November 15, 2006, the Acquisition Agreement will lapse and no
party to the Acquisition Agreement will have any liability thereunder. We cannot
assure you that the relevant PRC authorities would approve our proposed A Share
Issue nor that we would be able to raise proceeds amounting to not less than 65%
of the consideration for the Acquisition from such offering. Failure to complete
the proposed Acquisition may have a material adverse effect on our business and
operations.

      WE CANNOT ASSURE YOU THAT THE PROPOSED ACQUISITION, IF CONSUMMATED, WILL
BENEFIT OUR BUSINESS AND RESULTS OF OPERATIONS AS WE EXPECTED.

      We cannot assure you that the proposed Acquisition, if consummated, will
benefit our business and results of operations as we expect. Upon completion of
the proposed Acquisition, our railway will be extended from 147 kilometers to
481.2 kilometers. The proposed Acquisition will result in greater administrative
burdens and operating costs and, to the extent financed with

                                       9
<PAGE>

debt, additional interest costs. We cannot assure you that we will be able to
mange or integrate the acquired business successfully. The process of combining
the business and railway related assets of Yangcheng Railway Company into our
operation may be disruptive to our business and may cause an interruption of, or
a loss of momentum in, our business as a result of the following factors, among
others:

            -     loss of key employees or customers of the acquired business;

            -     possible inconsistencies in standards, controls, procedures
                  and policies between us and acquired business and the need to
                  implement company-wide financial, accounting, information and
                  other systems;

            -     failure to maintain the quality of services that we have
                  historically provided;

            -     the need to coordinate geographically diverse organizations;
                  and

            -     the diversion of management's attention from our day-to-day
                  business as a result of the need to deal with any disruptions
                  and difficulties and the need to add management resources to
                  do so.

      These disruptions and difficulties, if they occur, may cause us to fail to
realize the cost savings, revenue enhancement and other benefits that we
currently expect to result from the acquisition and the integration and may
cause material adverse short- and long-term effects on our operating results and
financial conditions.

      GRGC MAY LOSE ITS CONTROLLING SHAREHOLDER STATUS, WHICH MAY HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND RESULTS OF OPERATIONS.

      Upon completion of the proposed A Share Issue, GRGC's interests in our
issued and outstanding common shares will decrease from 67% to no less than 41%.
As a result, GRGC may lose its controlling shareholder status and may not be
able to control our board of directors. Our current directors are all appointed
by our GRGC. Change in our board of directors and related changes in our
management may have a material adverse effect in our business and results of
operations.

RISKS RELATING TO THE RAILWAY TRANSPORTATION INDUSTRY IN CHINA

      EXTENSIVE GOVERNMENT REGULATION OF THE RAILWAY TRANSPORTATION INDUSTRY MAY
LIMIT OUR FLEXIBILITY IN RESPONDING TO MARKET CONDITIONS, COMPETITION OR CHANGES
IN OUR COST STRUCTURE.

      We are subject to extensive PRC laws and regulations relating to the
railway transportation industry. The MOR and other Chinese governmental
authorities regulate pricing, speed, train routes, new railway construction
projects, and foreign investment in the railway transportation industry. Any
significant change in the relevant regulations of the PRC government is likely
to have a material impact on our business and results of operations. In
addition, our ability to respond to changes in our market conditions may be
limited by those regulations set by the MOR and other Chinese governmental
authorities.

                                       10
<PAGE>

RISKS RELATING TO THE PEOPLE'S REPUBLIC OF CHINA

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

      CHINA'S ECONOMIC, POLITICAL AND SOCIAL CONDITIONS, AS WELL AS GOVERNMENT
POLICIES, COULD AFFECT OUR BUSINESS.

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

      GOVERNMENT CONTROL OF CURRENCY CONVERSION MAY ADVERSELY AFFECT OUR
OPERATIONS AND FINANCIAL RESULTS.

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

      FLUCTUATION OF THE RENMINBI COULD MATERIALLY AFFECT OUR FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

      The value of the renminbi fluctuates and is subject to changes in China's
political and economic conditions. Since 1994, the conversion of renminbi into
foreign currencies, including Hong Kong and U.S. dollars, has been based on
rates set by the PBOC, which are set daily based on the previous day's interbank
foreign exchange market rates and current exchange rates on the world financial
markets. We receive our revenues from through train services in Hong Kong

                                       11
<PAGE>

dollars and receive other revenues in renminbi. Fluctuations in exchange rates
may adversely affect the value, translated or converted into United States
dollars or Hong Kong dollars, of our net assets, earnings and any declared
dividends payable on our H shares in foreign currency terms. Our financial
condition and results of operations may also be affected by changes in the value
of certain currencies other than the renminbi, in which our obligations are
denominated. In particular, a devaluation of the renminbi is likely to increase
the portion of our cash flow required to satisfy our foreign
currency-denominated obligations. For further information on our foreign
exchange risks and certain exchange rates, see "Item 3A. Selected Financial Data
-- Exchange Rate Information" and "ITEM 11. Quantitative and Qualitative
Disclosure About Market Risk -- Foreign Exchange Rate Risk." We cannot assure
you that any future movements in the exchange rate of renminbi against the
United Sates dollar or other foreign currencies will not adversely affect our
results of operations and financial condition.

      THE PRC LEGAL SYSTEM HAS INHERENT UNCERTAINTIES THAT COULD LIMIT THE LEGAL
PROTECTIONS AVAILABLE TO YOU.

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

      ANY FUTURE OUTBREAK OF SEVERE ACUTE RESPIRATORY SYNDROME OR SIMILAR
ADVERSE PUBLIC HEALTH DEVELOPMENTS IN MAINLAND CHINA MAY HAVE A MATERIAL ADVERSE
EFFECT ON OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

      In late 2002 and the first half of 2003, mainland China and certain other
countries and regions experienced an outbreak of severe acute respiratory
syndrome, or SARS. On July 5, 2003, the World Health Organization declared that
the SARS outbreak had been contained. However, new individual cases of SARS have
been reported after that in China and other countries and regions in Asia. Any
future outbreak of SARS or similar adverse public health developments, such as
Avian Flu, may, among other things, significantly disrupt our ability to
adequately staff our business, and may generally disrupt our operations.
Furthermore, an outbreak may severely restrict the level of economic activity in
affected areas, which may in turn materially and adversely affect our business
and prospects. As a result, we cannot assure you that any future outbreak of
SARS or similar adverse public health developments would not have a material
adverse effect on our financial condition and results of operations.

                                       12
<PAGE>

ITEM 4. INFORMATION ON THE COMPANY

ITEM 4A. HISTORY AND DEVELOPMENT OF THE COMPANY

OVERVIEW

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

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

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

      Our railroad 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, Guangzhou-Maoming, Pinghu-Nantou, Pinghu-Yantian, and
Kowloon-Guangzhou lines. Moreover, our railroad connects with the Huangpu and
Xinsha ports 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 a wide range of different customer needs, including the
transportation of whole and partial carload cargo, containers, special and
regular cargo. We believe that railway transportation offers many advantages
compared to other types of transportation in transporting medium and
long-distance freight from southern China to other inland regions within
mainland China.

      Our railroad system 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.

                                       13
<PAGE>

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 administered by the Guangzhou
Railway Administration. At that time, Guangshen Railway Company had only a
single-line railroad. Since then, large capital expenditures have been made to
expand and upgrade its facilities and services. In 1987, a second line was
completed. In 1991, Guangshen Railway Company began the construction of a
high-speed rail line and purchased high-speed locomotives and passenger coaches,
which can provide passenger train services at speeds of more than 160 or more
kilometers per hour. Guangshen Railway Company high-speed line was the first of
its kind in China. Commercial operation of the high-speed trains commenced in
December 1994.

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

      We completed our initial public offering in May 1996. In this offering, we
issued a total of 1,431,300,000 class H ordinary shares, par value RMB1.00 per
share, or H shares. Our H shares are listed for trading on the Stock Exchange of
Hong Kong Limited and our American depositary shares, or ADSs, each representing
50 H shares, are listed for trading on the New York Stock Exchange. As of
December 31, 2004, approximately 67% of our issued and outstanding common shares
were owned by our Parent Company, and the remaining 33% were owned by public
shareholders. The Parent Company currently owns all of our issued and
outstanding domestic shares. Our public shareholders own only H shares or ADSs,
which may not be purchased or owned by domestic investors in the PRC.

      GEDC, a state-owned enterprise established in the restructuring undertaken
in connection with our initial public offering, assumed the operations and
assets of the Guangshen Railway Company that were not transferred to us in the
restructuring, such as employee housing, hospitals, schools and public security,
and provides related services to us on a contractual basis since the 1996
restructuring. In the second half of 2004, all of the hospitals and schools
originally vested in GEDC were transferred to the local government pursuant to
applicable PRC

                                       14
<PAGE>

policies. As a result, GEDC no longer provides any education and hospital
services to us under the contractual arrangements made upon our restructuring.

      Since April 1, 1996, we have been able to set our own prices for our
high-speed train services and to charge a premium over average national prices
for our other passenger and freight train services. See "Item 4B. Regulatory
Overview - Pricing" for a more detailed description of our pricing scheme.

SERVICE TERRITORY

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

      As of December 31, 2004, there were 26 stations situated on our rail line,
providing passenger and freight transportation services for cities, towns and
ports situated between Guangzhou and Shenzhen in the Guangzhou-Shenzhen corridor
and Hong Kong (which we service in conjunction with the KCR). In addition to our
Hong Kong passenger through train services in conjunction with the KCR, we also
allow Hong Kong-bound freight trains of KCR to use our Guangzhou-Shenzhen
railroad.

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

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

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

      Westbound. Our line connects with the Guangzhou-Maoming rail line operated
by Sanmao Railway Company, a joint venture railroad of our Parent Company 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
Guangzhou-Meizhou-Shantou rail line operated by Guangmeishan Railway Company, a
company jointly established by our Parent Company, the Guangdong provincial
government and other public investors. 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 --

                                       15
<PAGE>

and the other, Pingyan Railway, services Yantian port, an international
deepwater port located in eastern Shenzhen. At the Huangpu and Xiayuan stations
in Guangzhou, our line connects with Huangpu port and Xinsha port. Our rail line
also connects with certain industrial districts, commercial districts and the
facilities of many of our customers through spur lines, which are rail lines
running off the main line that are used and typically financed by a freight
customer or a group of freight customers and maintained by us for a fee. We
believe that the customers connected to these spur lines and customers with
goods that must be shipped through these regional ports are likely to utilize
our services on a long-term basis.

ITEM 4B. BUSINESS OVERVIEW

BUSINESS OPERATIONS

      Our principal businesses are railroad passenger and freight
transportation, which generated 94.5% of our total revenues and 99.9% of our
total operating income in 2004. In 2004, passenger transportation accounted for
74.4% of our total revenues, while freight transportation accounted for 20.1%.
Our other businesses, which include the sale of food, beverages and merchandise
aboard trains and in stations, accounted for 5.5% of our total revenues.

      In 2004, due to continuous and rapid growth in the PRC economy, the
expansion of regional economic cooperation in the Pearl River Delta and its
adjacent areas, the gradual implementation of CEPA and the implementation of the
"Relaxed Individual Travel" program for PRC tourists from the mainland to Hong
Kong and Macau, there was strong demand for passenger and freight transportation
services in our service region, which provided us with excellent development
opportunities.

      In 2004, our total revenues were RMB3,038.1 million, representing an
increase of 23.1% from RMB2,468.2 million in 2003. Our revenues from passenger
transportation service, freight transportation service and other businesses were
RMB2,259.7 million, RMB611.8 million and RMB166.7 million respectively,
accounting for approximately 74.4%, 20.1% and 5.5%, respectively, of our total
revenues in 2004. In 2004, our profit attributable to shareholders was RMB567.5
million, representing an increase of 10.9% from RMB511.8 million in 2003.

      The table below summarizes our railroad transportation revenues and
volumes of traffic in each of the five years ended December 31, 2004:

<TABLE>
<CAPTION>
                                                                       YEAR ENDED DECEMBER 31,
                                                    -----------------------------------------------------------
                                                      2000          2001         2002        2003        2004
                                                    --------      --------     --------    --------    --------
<S>                                                 <C>           <C>          <C>         <C>         <C>
PASSENGER TRANSPORTATION
Total passenger revenues(1) (RMB millions).....     1,278.21      1,471.90     1,903.78    1,790.20    2,259.67
Total passengers (millions)....................        34.95         38.84        39.78       37.86       46.01
Revenues(1) per passenger (RMB)(2).............        36.57         37.90        47.86       47.28       49.11
Total passenger-kilometers (millions)..........      3,051.7       3,257.9      3,453.2     3,295.5     4,200.2
Revenues(1) per passenger-kilometer (RMB)(3)...         0.42          0.45         0.55        0.54        0.54
FREIGHT TRANSPORTATION
Total freight revenues(1) (RMB millions).......       567.18        585.62       530.78      526.38      611.81
Total freight tons (millions)..................        28.73         29.01        27.58       27.58       34.20
Revenues(1) per ton (RMB)(4)...................        19.74         20.19        19.25       19.08       17.89
Total ton-kilometers (millions)................      2,071.6       2,082.5      1,926.0     1,978.9     2,489.5
Revenues(1) per ton-kilometer (RMB)(5).........         0.27          0.28         0.28        0.27        0.25
</TABLE>

-------------
(1)   To better conform to "International Accounting Standards (IAS) 18 --
      Revenue", our revenues stated in this annual report are stated before the
      deduction of business tax, although our revenues as presented in
      previously filed annual reports were stated after the deduction of
      business tax.

                                       16
<PAGE>

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

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

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

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

      On November 15, 2004, we entered into an assets purchase agreement with
Yangcheng Railway Company to acquire the railway transportation business between
Guangzhou and Pingshi and related assets. In order to finance such acquisition,
we have applied to the relevant PRC authorities for approval to allot no more
than 2.75 billion A shares to be listed in China. The proposed amount of the
issuance represents approximately 63.43% of our existing issued share capital
and approximately 38.81% of our issued share capital as enlarged by the issuance
of A shares. Under PRC law, these A shares will be deemed to be domestic shares
which may be owned by or transferred to PRC entities or persons only. Upon
completion of the proposed issue of 2.75 billion A shares, our Parent Company
will own approximately 41% of our issued and outstanding common shares, all of
which are A shares, while institutional and public shareholders will own
approximately 59% of our issued and outstanding common shares, including A
shares, H shares and ADSs. See "ITEM 5. Operating and Financial Review and
Prospects--Overview--Proposed Issue of A Shares, Very Substantial
Acquisition and Continuing Connected Transactions" for additional information.

PASSENGER TRANSPORTATION

      Passenger transportation is our largest business segment, and accounted
for 74.4% of our total revenues, and 78.7% of our railroad transportation
revenues, in 2004. Our passenger train services can be categorized as follows:

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

      -     through trains between Hong Kong and Guangzhou; and

      -     domestic long-distance trains.

      As of December 31, 2004, we operated 117 pairs of passenger trains per day
(each pair of trains meaning trains making one round-trip between two points) of
which:

                                       17
<PAGE>

      -     64 pairs were high-speed express passenger trains operating between
            Guangzhou and Shenzhen (eight of which are standby, which means that
            such trains will only operate from Friday to Monday);

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

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

      -     38 pairs were domestic long-distance passenger trains (including two
            pairs of long-distance passenger trains between Shenzhen and Yueyang
            and between Shenzhen and Beijing, respectively, and 36 pairs of
            domestic long-distance trains, operated by other operators but
            passed-through, originated or terminated on our Guangzhou-Shenzhen
            railroad).

      The table below sets out passenger revenues and volumes for our Hong Kong
through trains and domestic trains in each of 2002, 2003 and 2004:

<TABLE>
<CAPTION>
                                       PASSENGER REVENUES(1)          PASSENGER VOLUME          REVENUE(1) PER PASSENGER
                                     ------------------------       ---------------------       ------------------------
                                      2002     2003     2004        2002     2003    2004        2002     2003     2004
                                     -----     ----     -----       ----     ----    ----       -----     ----    ------
                                           (UNAUDITED)                     (UNAUDITED)                 (UNAUDITED)
                                          (RMB MILLIONS)                   (MILLIONS)                (RMB MILLIONS)
<S>                                  <C>      <C>      <C>          <C>      <C>     <C>        <C>      <C>      <C>
Guangzhou-Shenzhen Trains........... 1,005.8    913.4  1,152.5      17.3     16.0    20.3        58.1     57.0     56.9
Hong Kong through trains............   344.0    322.4    436.9       2.2      2.0     2.9       156.4    160.0    151.2
Long-distance trains ...............   554.0    554.4    670.3      20.3     19.8    22.9        27.3     28.0     29.3
Combined passenger operations....... 1,903.8  1,790.2  2,259.7      39.8     37.9    46.0        47.8     47.3     49.1
</TABLE>

-------------
(1)   To better conform to "International Accounting Standards (IAS) 18 --
      Revenue", our revenues stated in this annual report are stated before the
      deduction of business tax, although our revenues as presented in
      previously filed annual reports were stated after the deduction of
      business tax.

      Guangzhou-Shenzhen Trains. In 2004, our passenger transportation services
on the trains between Guangzhou and Shenzhen contributed most to our railroad
passenger transportation revenues.

      We divide our regular-speed train services and high-speed train services
into different types based on the number of stops made by the train and the
class of seating. Our train fares are determined on the basis of the types of
services and the transportation distance.

      The number of passengers travelling on our Guangzhou-Shenzhen trains
increased by 26.5% from 16.0 million in 2003 to 20.3 million in 2004. The number
of passengers travelling on our high-speed passenger trains between Guangzhou
and Shenzhen increased by 29.4% from 15.2 million in 2003 to 19.6 million in
2004; while the number of passengers travelling on our regular-speed passenger
trains between Guangzhou and Shenzhen decreased by 25.4% from 0.9 million in
2003 to 0.6 million in 2004. The revenues from our Guangzhou-Shenzhen trains
increased by 26.2% from RMB913.4 million in 2003 to RMB1,152.5 million in 2004.

                                       18
<PAGE>

      Through-Trains. We currently operate jointly with the KCR 11 pairs of
high-speed through trains between Hong Kong and Guangzhou. We provide the trains
and personnel for eight pairs of these train services, which KCR provide for
three pairs. The through train services beyond Guangzhou to Foshan, Zhaoqing,
Beijing and Shanghai are provided by Guangzhou Railway (Group) Company, Beijing
Railway Administration and Shanghai Railway Administration. Revenues from these
through trains on the Guangzhou-Hong Kong section are shared between KCR and us,
in proportion to our track mileage for the through train services, with 81.2%
accruing to us and 18.8% to KCR. In addition, we share all related costs with
KCR at the same rate for the through train services.

      Most of the passengers taking our Hong Kong through trains are from Hong
Kong, Macau, Taiwan and foreign countries, and many are business travellers. As
a result of the prices for our Hong Kong through train services, which are
higher than the prices charged for our domestic train services, these through
train services produce higher per-passenger revenues than our other passenger
train services.

      In 2004, approximately 2.9 million passengers travelled on the Hong Kong
through trains, representing an increase of 43.4% from approximately 2.0 million
in 2003. Our revenue from the operation of the Hong Kong through trains for 2004
was RMB436.9 million, representing a 35.6% increase from RMB322.3 million for
2003.

      Domestic Long-distance Trains. As of December 31, 2004, we operated on a
daily basis 38 pairs of domestic long-distance passenger trains on our rail line
to cities in Guangdong, Hunan, Hubei, Jiangxi, Anhui, Liaoning, Shanxi, Fujian,
Heilongjiang, Jilin, Zhejiang, Hebei, Henan, Guangxi and Shandong Provinces as
well as cities to the north, such as Shanghai, Beijing and Tianjin. Since April
20, 2004, we have been operating a new "five fixed" (fixed location, fixed line,
fixed time, fixed price and fixed schedule) train service from Shenzhen to
Chengdu. In 2004, the number of passengers travelling on our long-distance
trains were 22.9 million, representing an increase of 15.3% from 19.8 million in
2003. Revenues from our long-distance trains increased by 20.9% from RMB554.4
million in 2003 to RMB670.2 million in 2004.

      High-Speed Trains. As of December 31, 2004, we operated on average a total
of 64 pairs of inter-city high-speed passenger trains between Guangzhou and
Shenzhen daily. Our high-speed trains are capable of running at 160 to 200
kilometers per hour, 33% to 67% faster than our regular-speed trains, which
typically run at 120 kilometers per hour.

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

      MAJOR STATIONS. The following are the major train stations owned and
operated by us as of December 31, 2004:

      Guangzhou East Station. Our Guangzhou East Station services our train
services between Guangzhou and Shenzhen and between Guangzhou and Hong Kong and
provides a hub for long-distance trains to different locations within China. Our
Guangzhou East Station is

                                       19
<PAGE>

connected to Lines 1 and 2 of the Guangzhou municipal subway. We believe that
this connection has boosted and, with the anticipated operation of Line 3 of the
subway system in the near future, will continue to promote, our passenger
transportation business. As of December 31, 2004, the Guangzhou East Station
handled on a daily basis 11 pairs of Hong Kong through trains, 66 pairs of
Guangzhou-Shenzhen trains, 12 pairs of long-distance passenger trains between
the Guangzhou East Station and other locations in China, including Beijing,
Shanghai, Jiujiang, Shantou, Bengbu, Tianjin, Taiyuan, Nanchang, Wuhan, Yingtan,
Harbin, Xiangfan, Qingdao, Xiamen, Shenyang and Macheng, and 17 pairs of
passenger trains passing through the Guangzhou East Station. In 2004, the number
of passengers travelling from Guangdong East Station was 12.3 million, while the
number of passengers arriving at Guangdong East Station was 11.2 million.

      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 Kowloon and Zhaoqing. As
of December 31, 2004, this station handled on a daily basis the transfer service
for eight pairs of domestic long-distance passenger trains, 28 pairs of
Guangzhou-Shenzhen high-speed passenger trains and two pairs of
Guangzhou-Shenzhen regular-speed trains. Dongguan municipality is an area that
has received substantial foreign investment. In 2004, the number of passengers
travelling from Dongguan Station was 2.7 million, while the number of passengers
arriving at Dongguan Station was 3.2 million.

      Shenzhen Station. Our Shenzhen Station is located in the Shenzhen Special
Economic Zone, close to the Luohu Station on the Guangzhou-Kowloon rail line. As
this station is connected to the Shenzhen's subway system, which commenced
operations on December 28, 2004, we believe that it will have a high utilization
rate. In 2002, we introduced China's first computerized ticket hall in our
Shenzhen Station. As of December 31, 2004, our Shenzhen Station handled on a
daily basis 66 pairs of Guangzhou-Shenzhen passenger trains (including eight
backup pairs) and 18 pairs of domestic long-distance passenger trains between
Shenzhen and other locations in China, including Beijing, Changsha, Shaoguan,
Wuchang, Meizhou, Shantou, Maoming East, Huangchuan, Zhengzhou, Fuzhou, Hankou,
Shenyang, Huaihua and Jinjiang. In 2004, the number of passengers travelling
from Shenzhen Station was 13.4 million, while the number of passengers arriving
at Shenzhen Station was 13.0 million.

FREIGHT TRANSPORTATION

      Revenue from our freight transportation accounted for 20.1% of our total
revenues and 21.3% of our railroad transportation revenues in 2004. 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 high-volume, medium- to
long-distance freight received from and/or transferred to other rail lines. Only
a small percentage of the freight we transport both originates and terminates in
the Guangzhou-Shenzhen corridor. We classify our freight business into three
categories:

                                       20
<PAGE>

      -     inbound freight, which is primarily freight bound for the Pearl
            River Delta region unloaded at freight stations and spur lines
            connected to ports on our rail line or in Hong Kong;

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

      -     pass-through freight, which refers to freight that travels on our
            rail line, but which do not originate or terminate from our rail
            line.

      The total tonnage of freight we transported in 2004 was 34.2 million
tonnes, representing an increase of 24.0% from 27.6 million tonnes in 2003.
Revenues from freight transportation business in 2004 were RMB611.8 million,
representing an increase of 16.2% from RMB526.4 million in 2003. Our outbound
freight revenues increased by 28.8% in 2004, while our inbound freight revenues
increased by 20.6% in 2004.

      We serve a broad customer base and ship a wide range of goods in our
freight transportation business. We are not dependent upon any particular
customers or industries.

      Freight Composition. We transport a broad range of goods, which can
generally be classified as follows: construction materials, energy products,
food products, chemicals, manufactured goods, containers and other goods. The
majority of our inbound freight consists of raw materials and essential
production inputs for manufacturing, industrial and construction activities,
while the majority of our outbound freight consists of imported mineral ores as
well as coal and goods produced or processed within our service territory, for
customers throughout China and abroad.

      The following table shows the composition of our freight volume by
percentage for the three years ended December 31, 2004 (based on tons
transported).

<TABLE>
<CAPTION>
                                           OUTBOUND FREIGHT                   INBOUND (AND PASS-THROUGH) FREIGHT
                              ------------------------------------------      -----------------------------------
                                 2002            2003             2004         2002          2003            2004
                              ---------          ----            -------      -----          ----            ----
                              AS A PERCENTAGE OF TOTAL OUTBOUND  FREIGHT        AS A PERCENTAGE OF TOTAL INBOUND
                                                                                  (AND PASS-THROUGH) FREIGHT
<S>                           <C>                <C>             <C>           <C>           <C>             <C>
Construction materials.......     33%             30%               23%         39%           37%             44%
Energy products..............     32%             43%               50%         14%           14%             12%
Food products................      6%              4%                5%         21%           21%             20%
Chemicals....................      7%              6%                4%         10%            9%             10%
Manufactured goods...........      7%              4%                2%          5%            3%              3%
Containers...................     12%             10%               12%          7%            8%              8%
Other goods..................      3%              3%                4%          4%            8%              3%
                                 ---             ---               ---         ---           ---             ---
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 that we own and operate, three
handled freight exceeding 1.0 million tons in 2004. Our freight yard at Huangpu
Station handled approximately 2.8 million tons, while Xiayuan Station handled
approximately 6.7 million tons and Shenzhen North Station handled approximately
1.6 million tons, respectively, in 2004. In 2004, revenues from the operation of

                                       21
<PAGE>

our warehouses (including loading and unloading charges) and miscellaneous items
amounted to RMB175.3 million, which accounted for 28.6% of our freight revenues
for the year.

OTHER BUSINESSES

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

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

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

      -     other businesses, principally railroad-related construction.

      Revenues from our other businesses in 2004 were RMB166.7 million,
representing an increase of 9.9% from RMB151.6 million in 2003. Such increase
was mainly due to the increase in passenger volume, which led to an increase in
of revenues from sales of goods, food and beverages in our train stations and on
board our trains.

      The table below sets out the revenues for our other businesses, by
categories of activity, in each of 2002, 2003 and 2004:

<TABLE>
<CAPTION>
                                                                                     AS A PERCENTAGE OF TOTAL
                                                        REVENUES(1)              REVENUES(1) FROM OTHER BUSINESSES
                                             -------------------------------     ---------------------------------
                                              2002        2003         2004      2002           2003          2004
                                             -----        -----        -----     ----           ----          ----
                                                        (UNAUDITED)                          (UNAUDITED)
                                                     (RMB MILLIONS)
<S>                                          <C>          <C>          <C>       <C>            <C>           <C>
On-board and station sales.............       43.1         39.2         48.5       26%            26%           29%
Station services.......................       46.2         41.6         45.2       28%            28%           27%
Tourism, advertising and others........       77.0         70.8         73.0       46%            46%           44%
                                             -----        -----        -----     ----           ----          ----
    Total..............................      166.3        151.6        166.7      100%           100%          100%
                                             =====        =====        =====     ====           ====          ====
</TABLE>

----------
(1)   To better conform to "International Accounting Standards (IAS) 18 --
      Revenue", our revenues stated in this annual report are stated before the
      deduction of business tax, although our revenues as presented in
      previously filed annual reports were stated after the deduction of
      business tax.

SEASONALITY OF OUR RAILWAY TRANSPORTATION BUSINESS

      We do not experience any significant seasonality in our businesses.
Historically, the first quarter of each year typically contributes the highest
portion of our annual revenues, mainly because it coincides with the Spring
Festival holidays when the Chinese people customarily travel from all over the
country back to their hometowns. In addition, the New Year holidays, the Labour
Day holidays and the National Day holidays in China are also high travel
seasons. During these holidays, we usually operate additional passenger trains
to meet the increased transportation demand and increase the fares of our
passenger trains.

                                       22

<PAGE>

SALES

PASSENGER TRANSPORTATION

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

      On January 1, 2001, the MOR implemented a new settlement method for
passenger transportation. This settlement method stipulates that all revenues
from passenger train services (including revenues generated from luggage and
parcel services) are considered passenger transportation 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. This change in settlement
method did not have a material impact on our passenger transportation revenues.

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

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

FREIGHT TRANSPORTATION

      Generally, we collect payment for our freight service directly from our
customers. For inbound freight, we collect transportation fees incurred on our
line from the receiving party prior to the release of the freight. For outbound
freight, we collect the total transportation fees from the dispatching party,
retain the portion allocated to us and remit the remainder to the other railroad
operators on a monthly basis either directly or through a national settlement
procedure administered by the MOR. 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.

                                       23

<PAGE>

      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 procedure administered by the MOR. We generally
receive such funds within a month after the service is provided.

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

      In January 2005, the MOR modified the settlement method on the income from
railway freight transportation. Pursuant to the new settlement methods, starting
from January 1, 2005, all freight transportation fees relating to post parcels
and luggage, containers and special goods shall be collected by Zhongtie Parcels
Courier Company Limited, Zhongtie Container Transportation Company Limited and
Zhongtie Special Goods Transportation Company Limited, or collectively the
Professional Transportation Companies. The Professional Transportation Companies
shall pay railway usage fees to relevant railway companies, including us. Prior
to January 1, 2005, we charged freight transportation fees for these post
parcels and luggage based on the categories of goods and distance of
transportation; while after January 1, 2005, we collect railway usage fees from
the Professional Transportation Companies. Although the modifications in the
settlement method will change our structure of freight transportation income, we
believe that the modifications will not affect our revenues from freight
transportation significantly.

COMPETITION

      We are the sole railway service provider on the Guangzhou-Shenzhen
corridor; therefore, we do not face any direct competition from other railway
service providers within our service territory. However, in areas where our
railroad connects with lines of other railway companies, such as in the
Guangzhou area, where our railroad connects with the Beijing-Guangzhou Line, and
in the Dongguan area, where our railroad connects with the
Guangzhou-Meizhou-Shantou Line, we face competition from the railway companies
operating in these areas. We also face competition from the providers of a
variety of other means of transportation within our service region.

      With respect to passenger transportation, we face competition from bus
services, which 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 outside
their central terminals, such as hotels. However, train services generally offer
greater speed, safety and reliability than bus services. In addition, since the
implementation of our "As-Frequent-As-Buses" Train Project in October 2001, our
high-speed train services and through train services have enabled us to compete
more effectively with bus operators in terms of speed and frequency. We also
compete to a lesser extent with commercial air and sea hovercraft passenger
transportation services operating between Guangzhou and Hong Kong.

                                       24

<PAGE>

      With respect to freight transportation, we face significant competition
from trucks transportation in the medium- and short-distance freight
transportation market as the expressway and highway networks in our service
region and neighboring areas have increasingly improved. By comparison, in the
long-distance freight transportation market, we offer many advantages compared
to truck transportation due to the higher cost of truck transportation,
susceptibility of truck transportation to traffic conditions and a scarcity of
heavy duty trucks. Our freight transportation also compete with water
transportation. Although water transportation is competitive in terms of price,
we believe that water transportation subjects goods to greater risks of loss and
damage due to the multiple handling processes required. In addition, our freight
transportation is more competitive in terms of speed compared to water
transportation. As air freight is very expensive, we consider that market to be
very different from the ones in which we compete. Most long-distance freight in
China is still transported by rail.

EQUIPMENT, TRACKS AND MAINTENANCE

      As of December 31, 2004, 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 MOR, to which we pay
uniform rental fees and depreciation fees based on the national standards set by
the MOR. The amounts of such usage fees and depreciation charges we paid to the
MOR in 2002, 2003 and 2004 were approximately RMB57.3 million, RMB58.9 million
and RMB65.5 million, respectively.

      From September 2000, we began 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 RMB104.2 million,
RMB104.2 million and RMB103.2 million in 2002, 2003 and 2004, respectively,
under the lease. This lease agreement is due to expire in March 2006. We plan to
purchase new high-speed electric train-sets in 2005. We will decide whether to
renew the lease agreement with Zhongche based on the progress of our plans to
purchase new trains. We did not purchase or lease any new material equipment in
2004.

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

      We believe that our existing tracks and equipment meet the needs of our
current business and operations. Most of the rails and ties on our main lines
have been installed within the last seven years, and are maintained and upgraded
on an ongoing basis as required.  In 2002, we replaced 27 sets of wooden movable
center switches with 19 sets of cement movable center switches to improve safety
and stability. In 2003, we replaced a whole section of steel rail amounting to
38 kilometers, 29 sets of wooden moveable center switches with 23 sets of cement
moveable center switches, 1042 meters of separate steel bars and 1926 pieces of
separate

                                       25

<PAGE>

wooden crossties to sustain safety and stability of our railway. In 2004, we
replaced 77 kilometers of heavily worn-out tracks and upgraded 88 kilometers of
electrified catenary network. In addition to that, we upgraded some power
projects in the Shenzhen North Station to accommodate changes to our train
routes and speed acceleration projects.

SUPPLIERS AND SERVICE PROVIDERS

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

      We lease from our Parent Company locomotives and rolling stock that are
used in our transportation operations. Our Parent Company also services these
locomotives and rolling stock under contracts which stipulate fees based on a
cost plus profit formula. The profit portion is fixed for a 10-year term of the
relevant contract at 8% of costs. Costs include all actual costs related to
providing and servicing the locomotives and rolling stock. Because such costs
are affected by inflation, we are subject to inflationary risks in connection
with our payment obligations under these contracts. Our Parent Company and some
of its subsidiaries, such as Yangcheng Railway Company and Guangmeishan Railway
Company, have similar agreements with us to provide services and assistance with
respect to our railroad operations. In addition, 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 the
second half of 2004, all of the hospitals and schools originally vested in GEDC
were transferred to the local government pursuant to applicable PRC policies. As
a result, GEDC no longer provides any education and hospital services to us
under the contractual arrangements made upon our restructuring. In 2004, the
total amount of these payments we made to our Parent Company and its
subsidiaries accounted for 6.62% of our railroad business operating costs for
the year. See " Item 7B. Related Party Transactions."

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

      The electricity we use, including electricity used for our lines, is
supplied through various entities under the jurisdiction of the Guangdong
provincial power bureau on normal commercial terms. In 2003 and 2004, we paid
approximately RMB89.9 million and RMB106.9 million, respectively, in electricity
charges.

                                       26

<PAGE>

      Our five largest customers accounted for less than 30% of our revenue and
our five largest suppliers accounted for less than 30% of our purchases in 2004.

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 MOR within the overall framework of the PRC
national railway system.

NATIONAL RAILWAY SYSTEM

      Railroads in the PRC fall largely into three categories: state-owned
railroads, jointly owned railroads and local railroads. State-owned railroads
are invested by the central government of the PRC and are managed directly by
the MOR. The state-owned railway system comprises over 70% of all rail lines,
including all trunk lines. Jointly owned railroads are jointly invested and
operated by the central government of the PRC, the local government and other
foreign or domestic investors. Local railroads consist of regional lines usually
within provincial or municipal boundaries that have been constructed under the
sponsorship of local governments or local enterprises to serve local needs. The
state-owned railway system operates as a nationwide integrated system under the
supervision and management of the MOR. Although the MOR does not operate other
railroads, it provides guidance, coordination, supervision and assistance with
respect to industry matters to such other railroads. The MOR's responsibilities
include the centralized coordination of train routing and scheduling nationwide,
planning of freight shipments and freight car allocations, overseeing equipment
standardization and maintenance requirements, and financial oversight and
revenue clearing throughout the national railway system.

      Prior to March 18, 2005, the MOR divided the national railway system into
15 regions, each overseen and operated by a separate railway administration, or
group companies. Ten of these 15 administrations were further subdivided on a
geographical basis into 41 railway sub-administrations, or general companies. On
March 18, 2005, the MOR issued a notice under which all general companies were
dissolved and three new group companies were established. As a result, the
number of group companies increased to 18. Group companies are directly
responsible for the coordination and supervision of operations carried out by
train stations.

TRANSPORT OPERATIONS

      The transport operations of the PRC national railway system are organized
under the centralized control and management of the MOR. In order to promote
efficient utilization of the railroad network nationwide, the MOR directly
manages and coordinates traffic flow on national trunk lines and through any
connection points, where two rail lines operated by different companies connect
to each other, in the system. Based on route capacity, available equipment and
national priorities, the MOR allocates to the 18 group companies authority to
make routings on trunk lines, allocates numbers and types of freight cars to the
group companies 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 MOR, each group
companies manages and coordinates traffic within its own jurisdiction.

                                       27

<PAGE>

      Our passenger and freight operations that involve long-distance routing
beyond our own lines, such as the routing of freight trains to Shanghai, are
conducted, in general, pursuant to quota allocations from our Parent Company
based on the quota allocations our Parent Company received from the MOR. The
plans and schedules for our passenger and freight services that are conducted
solely on our own lines are determined by ourselves; while our passenger and
freight services that run beyond our own lines are subject to overall planning
and scheduling of our Parent Company and/ or the MOR.

      Since March 1996, the MOR and our Parent Company have accorded us
substantially greater latitude in our transportation operations. In particular,
we were granted sufficient autonomy over passenger services on our own line,
including autonomy over speed, frequency and train car mix. Pursuant to 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. On October 21, 2004, we
successfully launched our "As-Frequent-As-Buses" Train Project, which provides
intercity express train services. As of December 31, 2004, the total number of
intercity express trains running daily between Guangzhou and Shenzhen increased
from 63 pairs in 2003 to 64 pairs, while the total number of regular speed
passenger trains was reduced from three pairs in 2003 to two pairs. We currently
have 38 pairs of long-distance trains and 13 pairs of through trains.

      Where our service runs beyond our own line, clearance by and coordination
with our Parent Company is necessary. To the extent that we operate
long-distance services beyond our Parent Company's jurisdiction, they are
subject to coordination and clearance by the MOR. In addition, in order to
enable our Parent Company and the MOR to allocate freight cars and control
traffic going through connection points, 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 connection points. Furthermore, we must still
carry out special shipping tasks, such as emergency aid and military and
diplomatic transport, as directed by the MOR 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

      In general, the MOR is responsible for preparing a proposal for the
baseline pricing standards for the nationwide railway system with respect to
freight and passenger transportation. Such proposed pricing standards will take
effect after being approved by and/or filed with relevant PRC government
authorities.

      Pursuant to relevant approvals from the MOR and other relevant PRC
government authorities, we have broad discretion to adjust and determine our
service price. With respect to our freight transportation services within our
own lines, we may set our prices within a range between 50% to 150% of national
price levels. With respect to our passenger transportation services, we may set
the prices for our regular speed Guangzhou-Shenzhen trains within a range

                                       28

<PAGE>

between 25% to 225% of national price levels, and may freely determine the
prices for our high-speed express trains between Guangzhou and Shenzhen. In
addition, we set the prices for our Hong Kong through trains in consultation
with KCR, our business partner.

ENVIRONMENTAL PROTECTION

      We believe that we are in material compliance with all applicable PRC
national and local environmental protection laws and regulations. We have not
been fined or cited for any activities that have caused environmental damages.
We have six wastewater treatment facilities used for purposes of treating
wastewater generated from cleaning of special cargo freight cars, locomotives,
coaches and from residential use. We pay regular fees to local authorities for
the discharge of waste substances. In 2004, our environmental protection-related
expenses were approximately RMB 0.49 million.

INSURANCE

      Pursuant to applicable PRC regulations, we are liable for the compensation
to passengers for body injury arising from accidents to the limit of RMB
60,000/person, including transportation business liability compensation
amounting to RMB 40,000/person. 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 RMB15 for each kilogram of damaged baggage and/or
parcels. Similarly, freight transport customers who elect not to purchase
insurance may recover up to RMB2,000 for each ton of damaged freight if insured
by weight.

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

      We maintain retirement insurances and medical insurances for our employees
in accordance with applicable insurance laws and regulations in Guangzhou and
Shenzhen, as applicable. In addition, we have taken out work-related personal
injury insurance policies and child-bearing insurances for our employees.

                                       29

<PAGE>

ITEM 4C. ORGANIZATIONAL STRUCTURE

      The following table lists the significant subsidiaries of Guangshen
Railway Company Limited as of June 15, 2005:

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

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

INDIRECTLY HELD BY THE COMPANY

Shenzhen Nantie Construction Supervision Company                          PRC                      100%
Shenzhen Guangshen Railway Economic and Trade Enterprise
   Company                                                                PRC                      100%
Shenzhen Railway Property Management Company Limited                      PRC                      100%
Shenzhen Yuezheng Enterprise Company Limited                              PRC                      100%
Shenzhen Road Multi-modal Transportation Company Limited                  PRC                       60%
</TABLE>

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

ITEM 4D. PROPERTY, PLANT AND EQUIPMENT

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

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

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

                                       30

<PAGE>

      For additional information regarding our property, plant and equipment,
see "Item 4B. Business Overview-Equipment and Track Maintenance" and Note 13 to
our audited financial statements included elsewhere in this annual report.

                                       31

<PAGE>

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

This discussion and analysis should be read in conjunction with our consolidated
financial statements contained elsewhere in this annual report. The revenues
provided in this part are set out the deduction of business tax. 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 31 to our audited
consolidated financial statements.

OVERVIEW

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

      In 2004, there was a significant increase in both passenger travel and
freight transportation in our service region due to (i) continuing economic
growth in the PRC, including in the Guangdong Province and Hong Kong, (ii) the
ongoing implementation of CEPA, (iii) the implementation of the "Relaxed
Individual Travel" program for PRC tourists from the mainland to Hong Kong and
Macau and (iv) our continuous improvement in our "As-Frequent-As-Buses" train
services and seasonable increase, in our train stops and service frequency. Our
results of operations for the full year achieved overall growth from 2003.

      For the year ended December 31, 2004, our total revenues were RMB3,038.1
million, profit attributable to shareholders was RMB567.5 million, and earnings
per share were RMB0.13. Railroad business revenues accounted for 93.6%, 93.9%
and 94.5% of our total revenues in 2002, 2003 and 2004, respectively.

      Passenger transportation business is our most important business. In 2004,
we continued to enhance the operation of the Guangzhou-Shenzhen high speed
passenger trains and The Canton-Kowloon through trains, improve our
transportation capacity, increase the operation of standby trains during
holidays, increase the frequency of stopping at intermediary stations, refurbish
our passenger stations for the convenience of passengers, and enhance our
service quality to attract more passengers. In 2004, the total number of
passengers was 46.0 million, representing an increase of 21.5% from 2003;
passenger transportation revenues were RMB2,259.7 million, representing an
increase of 26.2% from 2003.

      During 2004, our freight transportation business achieved overall growth
due to (i) a substantial increase in demand for fuel and raw materials as a
result of significant growth in the PRC economy, (ii) an increase in overall
demand for transportation services, (iii) the Chinese government's large-scale
crackdown on oversize and overloaded trucks on highways, (iv) the implementation
of the New Road Traffic Safety Law, (v) the enhanced marketing measures in

                                       32

<PAGE>

our freight transportation business, and (vi) the increase in our transportation
capacity. We transported a total of 34.2 million tonnes of freight in 2004,
representing an increase of 24.0% from 2003. Freight transportation revenues in
2004 were RMB611.8 million, representing an increase of 16.2% compared to 2003.

      Revenues from our other businesses were RMB166.7 million in 2004,
representing an increase of 9.9% from 2003.

      In 2004, in order to enhance the management of our contracts, we
implemented the Measures of Contract Management. Pursuant to certain amendments
to the HKSE Listing Rules and in accordance with the relevant requirements of
the U.S. Sarbanes-Oxley Act of 2002, we amended our Audit Committee Charter. To
regulate the corporate actions and professional ethics of our senior management,
we adopted the Code of Ethics for the Senior officers. To meet applicable
securities regulations in the PRC relating to our proposed application for the
issuance of A shares, we amended certain articles in our Articles of
Association, and formulated the Working Regulations for Independent Directors,
the Decision Making System Concerning Connected Transactions, and the System for
Shareholders' General Meeting System. Such amendments and rules will take effect
if the proposed issuance and listing of our A shares are completed.

PROPOSED ISSUE OF A SHARES, VERY SUBSTANTIAL ACQUISITION AND CONTINUING
CONNECTED TRANSACTIONS

      On November 15, 2004, we entered into the Acquisition Agreement with
Yangcheng Railway Company for the acquisition by us of the railway
transportation business between Guangzhou and Pingshi, a city on the border
between Guangdong Province and Hunan Province, currently operated by Yangcheng
Railway Company and the assets and liabilities relating to such business. The
consideration of the Acquisition will be RMB10,264,120,700, subject to certain
adjustments stipulated in the Acquisition Agreement. In order to finance
the Acquisition, we intend to issue and allot up to 2.75 billion A shares and
use the proceeds from the A Share Issue to pay the consideration of the
Acquisition. We have submitted relevant application documents to relevant
authorities for approval of the A Share Issue. Pursuant to the HKSE Listing
Rules, the Acquisition constitutes a very substantial acquisition. As Yangcheng
Railway Company is a wholly-owned subsidiary of our Parent Company, the
Acquisition also constitutes a connected transaction. In anticipation of the A
Share Issue and the Acquisition, we entered into various agreements with each of
Yangcheng Railway Company and our Parent Company in respect of certain
continuing connected transactions. Such agreements will take effect upon the
completion of the Acquisition and will thereafter replace all existing connected
transaction agreements relating to the same categories of transactions.

      We made an announcement in respect of the above matters on November 15,
2004 and also sent a circular to our shareholders on December 5, 2004. The
circular contained details relating to the A Share Issue, the proposed
amendments to the Articles of Association, the Acquisition and the continuing
connected transactions, a letter from our independent board committee to our
independent shareholders containing their recommendation, and a letter from our
independent financial adviser to our independent board committee and our
independent shareholders containing its advice, etc. We held our domestic
shareholders' class meeting, H shares shareholders' class meeting and
extraordinary general meeting on December 30, 2004 to

                                       33

<PAGE>

approve related matters. We submitted our application proposal relating to the A
Share Issue to the China Securities Regulatory Commission, or CSRC, on December
31, 2004.

      The Acquisition Agreement is conditioned upon the fulfillment of, among
other things, the following conditions:

      1.    the formal approvals of relevant authorities or bodies in relation
            to the A Share Issue have been obtained;

      2.    the A Share Issue has been completed and an amount of not less than
            65% of the consideration of the Acquisition has been raised;

      3.    the approvals of relevant government bodies responsible for the
            supervision and management of state-owned assets in relation to
            Yangcheng Railway Company's proposal on disposal of its state-owned
            assets have been obtained; and

      4.    the approval of the National Development and Reform Committee in
            relation to the price determination for passenger and freight
            railway transportation services between Guangzhou and Pingshi has
            been obtained.

      Save for the condition numbered 2 above, which can be waived by us, none
of the above conditions can be waived. If the above conditions are not fulfilled
within two years from the date of signing of the Acquisition Agreement, November
15, 2004, the Acquisition Agreement will lapse and no party will have any
liability thereunder. In the event that any party rescinds the Acquisition
Agreement for whatever reason after the A Share Issue has been completed, we
will retain the proceeds from the A Share Issue as general working capital. See
Exhibit 4.1 to this report for additional information.

      As of the date of this report, none of the above conditions have been
fulfilled or waived. It is difficult to estimate when the A Share Issue will be
completed as it is subject to the market conditions and policies of the CSRC.

ITEM 5A.  RESULTS OF OPERATIONS

PRINCIPAL FACTORS AFFECTING OUR RESULTS OF OPERATIONS

      Economic Development in the Pearl River Delta Region and the PRC. Our
passenger transportation services on the trains between Guangzhou and Shenzhen
contribute the majority of our passenger transportation revenue. Accordingly our
results of operations relating to passenger transportation are closely and
directly affected by the performance of our passenger transportation services
between Guangzhou and Shenzhen, which is influenced by the economic development
in the Pearl River Delta region. The level of economic activities in the Pearl
River Delta region, including the economic cooperation among Hong Kong, Macau
and mainland China, affects the number of business people travelling in this
region. In addition, the average income levels of residents in this region and
elsewhere in the PRC affects the number of the tourists departing from or
arriving at our train stations. The majority of the freight we transport is
large-volume, medium- to long-distance freight received from and/or transferred
to other railway lines. Economic development in the PRC, including but not
limited to the Pearl River Delta region, determines the market demand for such
goods as coal, iron ore, steel and therefore indirectly affects the market
demand of freight train transportation service.

                                       34

<PAGE>

      Economic Cooperation between Hong Kong and Mainland China. The second most
important source of our passenger transportation revenue is the through trains
services between Shenzhen and Hong Kong. As the prices for our Hong Kong through
trains are higher than the prices charged for our domestic train services, these
through trains services produce higher per-passenger revenues than our other
passenger train services. Most of our passengers taking our Hong Kong through
trains are from Hong Kong and Macau, and many are business travellers. The
economic cooperation between Hong Kong and mainland China affects the number of
our through train passengers and will impact our results of operations.

      Competitive Pressure from other Means of Transportation. Sales for our
passenger transportation services are also affected by the competitive pressure
from other means of transportation, such as the automobile, bus, ferry and
airplane services. For example, the fast growth in the number of privately owned
vehicles and a higher penetration of bus services affect the number of train
passengers travelling short distances; and any significant decrease in the air
transportation prices affects the number of train passengers travelling long
distances. Our sales of the freight transportation services are also affected by
the competition from other means of transportation, such as water, truck and
freight air transportation services. The Chinese government's large-scale
crackdown on oversize and overloaded trucks on highways and the implementation
of the New Road Traffic Safety Law in 2004 led to the increase of the cost in
the truck transportation and thus enhanced our competitiveness.

      PRC Policies. We enjoy certain preferential policies granted by the PRC
government. For example, 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 domestic companies in the PRC. In addition, we
are allowed to be more flexible in setting the price for both the passenger
transportation and the freight transportation as compared to other domestic
railroad operators. Material changes in the policies of the PRC government that
affect such preferential treatments will impact our results of operations.

REVENUES

      In 2004, our total revenues were RMB3,038.1 million, representing an
increase of 23.1% from RMB2,468.2 million in 2003. Revenues from our passenger
transportation service, our freight transportation service and our other
businesses accounted for 74.4%, 20.1% and 5.5%, respectively, of our total
revenues in 2004. Revenues from our passenger transportation service and our
freight transportation service accounted for 78.7% and 21.3%, respectively, of
our revenues from our railroad transportation businesses in 2004.

      Passenger transportation service. Passenger transportation remains our
most important business. As of December 31, 2004, we operated 117 pairs of
passenger trains daily, representing an increase of five pairs from the number
in operation as of December 31, 2003. There were 64 pairs of high-speed
passenger trains between Guangzhou and Shenzhen, representing an increase of one
pair compared to 2003; two pairs of regular-speed passenger trains between
Guangzhou and Shenzhen, representing a decrease of one pair compared to 2003; 13
pairs of Hong Kong Through Trains, representing an increase of two pairs and 38
pairs of long-distance passenger trains, an increase of three pairs compared to
2003.

                                       35

<PAGE>

      In 2004, our total number of passengers was 46.0 million, representing an
increase of 21.5% from 37.9 million in 2003. Our revenue from passenger
transportation was RMB2,259.7 million, representing an increase of 26.2% from
RMB1,790.2 million in 2003.

      The following table sets forth our revenues from passenger transportation
and the number of our passengers for the three years ended December 31, 2004:

<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,       CHANGE IN 2004 FROM
                                                      ----------------------------------  -------------------
                                                        2002          2003       2004             2003
                                                      ---------     ---------  ---------          ----
<S>                                                   <C>           <C>        <C>                <C>
Revenue from passenger
    transportation (RMB thousands)............        1,903,782     1,790,204  2,259,671          26.2%
Total passengers (thousands)..................           39,776        37,861     46,012          21.5%
Revenue per passenger (RMB)...................            47.86         47.28      49.11           3.9%
Total passenger-kilometers (millions).........         3,453.20      3,295.50    4,200.2          27.5%
Revenue per passenger-kilometer (RMB).........             0.55          0.54       0.54             -
</TABLE>

      In 2004, we made the following adjustments to the prices of our passenger
transportation services: (1) during the Spring Festival, we adjusted the
passenger fares of different classes of our long-distance domestic train
services; and (2)during the New Year holidays, the Spring Festival holidays, the
Labour Day holidays and the National Day holidays, we increased the fares of our
high-speed passenger trains and regular-speed passenger trains between Guangzhou
and Shenzhen by RMB5 per trip journey.

      Freight transportation. The total tonnage of freight transported by us in
2004 was 34.2 million tonnes, representing an increase of 24.0% from 27.6
million tonnes in 2003. In 2004, in order to attract more freight resources, we
continued to offer price discounts for freight transportation of steel, coal,
corn, beverage, container, rice and plastic as in 2003. Our revenues from
freight transportation business were RMB611.8 million, representing an increase
of 16.2% from RMB526.4 million in 2003.

  -   In 2004, our outbound freight tonnage was 8.2 million tonnes, representing
      an increase of 27.5% from 6.5 million tonnes in 2003. Our outbound freight
      revenues were RMB113.4 million, representing an increase of 28.8% from
      RMB88.0 million in 2003. The increase in outbound freight tonnages in 2004
      was mainly due to (i) the economic growth in mainland China which
      increased the demand for energy and raw materials, such as coal, ore and
      petroleum imports, etc, and in turn led to greater demand for freight
      transportation services; (ii) the severe crackdown on oversize and
      overloaded trucks on highways by the PRC government in 2004, and the
      implementation of the Road Traffic Safety Law, which led to an increase in
      the costs of road transportation; as a result, part of the freight
      previously transported by road shifted to railway transportation; (iii)
      the operation of additional container trains from Dongguan to Kowloon and
      the "5 fixed" (fixed locations, fixed line, fixed time, fixed price and
      fixed schedule) freight trains, from Pinghu South to Chengdu East and
      other locations led to a significant increase in the number of container
      transported by us; and (iv) the end of the SARS epidemic, which adversely
      affected the freight transportation business last year.

  -   In 2004, our inbound and pass-through freight tonnages were 26.0 million
      tonnes, representing an increase of 22.9% from 21.1 million tonnes in
      2003. Our inbound and pass-through freight revenues were RMB323.1 million
      in 2004, representing an increase of 20.6% from RMB267.8 million in 2003.
      The increase in inbound and pass-through

                                       36

<PAGE>

      freight tonnages was mainly due to (i) the rapid economic growth in the
      PRC, including the Pearl River Delta region, which created great demand
      for raw materials, such as steel and cement; (ii) the recovery of the Hong
      Kong economy, and the increased volume of Chinese exports, which led to a
      large increase in the demand for freight transportation; and (iii) the
      Chinese government's crackdown on oversize and overloaded trucks on
      highways, which led to a shift of part of truck freight to railway
      transportation.

  -   In 2004, our revenues from storage, loading and unloading and other
      miscellaneous items were RMB175.3 million, representing an increase of
      2.8% from RMB170.5 million in 2003. The increase was mainly due to the
      significant increase in the total tonnage of freight we transported, which
      offset the effects of certain downward adjustments of fares for some of
      our customers and some categories of freight, which we implemented to
      attract more business.

      The following table sets forth our revenues from freight transportation
and the volumes of commodities we shipped for the three years ended December 31,
2004:

<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31,        CHANGE IN 2004 FROM
                                                       ------------------------------    -------------------
                                                        2002         2003      2004             2003
                                                       -------      -------   -------           ----
<S>                                                    <C>          <C>       <C>               <C>
Revenue(1) from freight transportation
      (RMB thousands)............................      530,776      526,382   611,807           16.2%
Total freight tons (thousands of tons)...........       27,583       27,584    34,199           24.0%
-Revenues from outbound freight transportation...       97,178       88,042   113,421           28.8%
-Revenues from inbound and
      pass-through transportation................      255,777      267,844   323,108           20.6%
-Revenues from storage, loading and unloading
       and other miscellaneous items.............      177,821      170,496   175,278            2.8%
Revenue(1) per ton (RMB).........................        19.24        19.08     17.89           (6.2%)
-Outbound freight tonnage........................        7,266        6,466     8,241           27.5%
-Inbound and pass-through freight tonnage........       20,317       21,118    29,958           22.9%
Total ton-kilometers (millions)..................      1,926.0      1,978.9   2,489.5           25.8%
Revenue(1) per ton-kilometer (RMB)...............         0.28         0.27      0.25           (7.4%)
</TABLE>

      In 2004, we made the following adjustments to the prices of our freight
transportation services: (1) in accordance with the slight increase in the
national price levels for railway fright transportation, we increased the prices
of our freight transportation services slightly; and (2) we offered certain
price discounts to some categories of freight to maintain existing business and
attract new freight business.

      Other Businesses. Our other businesses mainly consist of sales of goods
and food, advertising and tourism services on board and in stations. Revenues
from other businesses in 2004 were RMB166.7 million, representing an increase of
9.9% from RMB151.6 million in 2003. Such increase was mainly due to the increase
in passenger volume, which in turn increased revenues from sales of goods, food
and beverages in our train stations and on board our trains.

                                       37

<PAGE>

      The table below sets forth a breakdown of our revenues from the different
categories of other businesses for the three years ended December 31, 2004:

<TABLE>
<CAPTION>
                                                                            YEAR ENDED DECEMBER 31,
                                                                 --------------------------------------------
                                                                  2002              2003               2004
                                                                 -------          -------             -------
                                                                               (RMB THOUSANDS)
<S>                                                              <C>              <C>                 <C>
On-board and station sales(1).............................        43,112           39,217              48,496
Station services(1).......................................        46,212           41,610              45,206
Tourism, advertising and others(1)........................        76,942           70,769              72,969
                                                                 -------          -------             -------
     Total(1).............................................       166,266          151,596             166,671
                                                                 =======          =======             =======
</TABLE>

----------

(1)   To better conform to "International Accounting Standards (IAS) 18 --
      Revenue", our revenues stated in this annual report are stated before the
      deduction of business tax, although our revenues as presented in
      previously filed annual reports were stated after the deduction of
      business tax.

OPERATING EXPENSES

      In 2004, our total operating expenses were RMB2,408.0 million,
representing an increase of 26.4% from RMB1,905.5 million in 2003. The following
table sets forth, as a percentage of our railroad revenues, the principal
operating expenses associated with our railroad businesses for 2002, 2003 and
2004:

<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31,
                                                                -------------------------------------
                                                                  2002           2003           2004
                                                                -------         -------       -------
<S>                                                             <C>             <C>           <C>
Railroad businesses revenues(1) (RMB millions)...............   2,434.6         2,316.6       2,871.5
Labor and benefits...........................................        15%             15%           17%
Equipment leases and services................................        18%             19%           16%
Materials and supplies.......................................         8%             10%            9%
Repair costs, excluding materials and supplies...............         4%              4%            8%
Depreciation (and amortization of leasehold land payments)...        16%             13%           12%
General and administrative expenses..........................         5%              6%            7%
Fee for social services......................................         2%              3%            3%
Others.......................................................         4%              5%            4%
Operating ratio(2)...........................................        73%             75%           78%
Railroad businesses operating margin.........................        27%             25%           22%
</TABLE>

----------
(1)   To better conform to "International Accounting Standards (IAS) 18 --
      Revenue", our revenues stated in this annual report are stated before the
      deduction of business tax, although our revenues as presented in
      previously filed annual reports were stated after the deduction of
      business tax.

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

      Railway Operating Expenses. Our total railway operating expenses increased
by 27.7% from RMB1,755.9 million in 2003 to RMB2,241.8 million in 2004, as
follows:

      -     Business tax. Our business tax in 2004 was RMB83.7 million,
            representing an increase of 76.0% from RMB47.6 million in 2003. The
            increase was mainly due to the substantial increase in revenues from
            passenger and freight transportation in 2004. In addition, we were
            granted an exemption from business tax on our revenue from passenger
            transportation between May 1, 2003 and September 30, 2003 due to a
            special measure implemented by the PRC government in 2003 as a
            result of the SARS epidemic, which significantly reduced our
            business tax in 2003.

                                       38

<PAGE>

      -     Labor and benefits. In 2004, our labor and benefits expenses
            amounted to RMB492.6 million, representing an increase of 41.7% from
            RMB347.6 million in 2003. The increase was mainly due to the
            increase in our passenger and freight volume, which led to a
            corresponding increase in the number of our employees, and related
            salaries and welfare expenses. Our employees' salaries and welfare
            expenses were lower than usual in 2003 due to the decrease in the
            number of employees and the average salary of our employees resulted
            from the impact of the SARS epidemic.

      -     Materials and supplies. Our materials and supplies expenses consist
            mainly of fuel, water and electricity expenses. In 2004, our
            materials and supplies expenses amounted to RMB245.5 million,
            representing an increase of 13.2% from RMB217.0 million in 2003. The
            increase was mainly due to: (i) increases in the prices of oil and
            electricity, which increased the costs of the fuels and electricity
            used by our locomotives and vehicles; and (ii) increased consumption
            of materials and supplies due to the operation of additional
            high-speed passenger trains between Guangzhou and Shenzhen, the Hong
            Kong through trains and additional passenger trains during the
            Spring Festival.

      -     Depreciation. Our depreciation expenses of fixed assets increased by
            15.3% from RMB290.0 million in 2003 to RMB334.5 million in 2004,
            mainly due to an increase in our fixed assets.

      -     Repair. Our repair expenses increased by 141.3% from RMB89.6 million
            in 2003 to RMB216.3 million in 2004, primarily due to (i) the
            replacement of worn-out high-speed rails; (ii) an increase in the
            number of trains and vehicles that needed overhaul; and (iii) the
            further refurbishment of our Guangzhou East Station, our Shenzhen
            Station and a number of passenger stations along our line.

      -     Equipment leases and services. Our expenses on equipment leases and
            services mainly consist of railway line usage fees, train hauling
            fees and train leasing fees paid to other railway administrations.
            In 2004, our expenses relating to equipment leases and services
            amounted to RMB452.2 million, representing an increase of 3.3% from
            RMB437.7 million in 2003. This was mainly due to the operation of
            additional high-speed passenger trains and Hong Kong through trains,
            and the operation of additional long-distance passenger trains
            during peak travel seasons, such as the Spring Festival holidays and
            Golden Week holidays, which resulted in an increase in railway line
            usage fees and train hauling fees. Leasing fees paid by us to the
            MOR for transportation trucks also increased due to the increase in
            the volume of freight we transported.

      -     Social services. Our social services fees in 2004 were RMB84.6
            million, representing an increase of 35.3% from RMB62.6 million in
            2003. The increase was mainly due to the subsidies amounting to RMB
            12.19 million which was paid to GEDC pursuant to relevant PRC
            government policies when the hospitals and schools owned and
            operated by GEDC were transferred to local government in the second
            half of 2004. As a result, GEDC no longer provides any education and
            hospital services to us under the contractual arrangements made upon
            our restructuring.

                                       39

<PAGE>

      -     General and administrative. Our general and administration expenses
            increased by 41.3% from RMB134.7 million in 2003 to RMB190.3 million
            in 2004. This was mainly due to: (i) the payment of medical
            insurance fees for all of our employees, and a one-time payment of
            medical insurance premium for our retired employees, in accordance
            with certain government policies implemented to reform the medical
            insurance system in the PRC; and (ii) an increase in our provision
            for bad debt associated with our deposit held by Zeng Cheng City Li
            Cheng Credit Cooperative, or Li Cheng, which was overdue and not
            recovered.

      -     Other expenses. Our other expenses in 2004 were RMB126.3 million,
            representing an increase of 11.4% from RMB113.4 million in 2003.
            This was mainly due to an increase in communication services fees
            and various surcharges for production.

PROFIT FROM OPERATIONS

      Our profit from operations increased by 12.0% from RMB562.7 million in
2003 to RMB630.2 million in 2004 due to the increase in our total revenues.

TAXATION

      As we are registered and established in the Shenzhen Special Economic
Zone, our railroad businesses are subject to income tax at a rate of 15%.
According to relevant tax regulations, our other businesses and our subsidiaries
are subject to income tax at the rate of either 15% or 33%, depending on the
location of incorporation. In addition, a member of our subsidiaries engaged in
other businesses are Sino-foreign joint ventures which are entitled to full
exemption from the PRC income tax for two years and a 50% reduction in the next
three years starting from the first profit-making year, after offsetting
available tax losses carried forward from prior years. Our income tax expense
was RMB98.4 million in 2004, representing an effective tax rate of 14.8%
(compared to 15.4% in 2003) and an increase of RMB5.0 million compared to
RMB93.4 million in 2003.

NET PROFIT

      Our consolidated net profit increased by 10.9% from RMB511.8 million in
2003 to RMB567.5 million in 2004.

YEAR ENDED DECEMBER 31, 2003 COMPARED WITH YEAR ENDED DECEMBER 31, 2002

REVENUES

      In 2003, our total revenues were RMB2,468.2 million, representing a
decrease of 5.1% from RMB2,600.8 million in 2002. Revenues from our passenger
transportation service, our freight transportation service and our other
businesses accounted for 72.6%, 21.3% and 6.1% of our total revenues in 2003
respectively. Revenues from our passenger transportation service and our freight
transportation service accounted for 77.3% and 22.7%, respectively, of our
revenues from our railroad transportation businesses in 2003.

                                       40

<PAGE>

      Passenger transportation service. Due to the impact from the SARS
epidemic, our revenues from passenger transportation declined during the first
half of 2003. We operated more trains and increased the frequency of stopping at
intermediary stations to attract more passengers following the end of the SARS
epidemic. We also worked on the integrated refurbishment of our passenger
stations, such as Guangzhou East Station, Shenzhen Station and Dongguan Station,
to improve our public image. Furthermore, we expanded our ticket network by
opening more ticket offices at Guangzhou Station and other stations along the
Guangzhou-Shenzhen route. We also made slight adjustments to our fares during
peak periods and took other steps to improve our service quality and enhance our
market efforts. In 2003, the total number of our passengers was 37.9 million,
representing a decrease of 4.8% when compared to that of 2002; our passenger
transportation revenues were RMB1,790.2 million, representing a decrease of 6.0%
from that of 2002.

      Freight transportation. During 2003, despite the impact from SARS on our
freight transportation business and competition from other means of
transportation such as highway and water transportation, we transported a total
of 27.6 million tonnes of freight, representing an increase of 1,000 tonnes when
compared to that of 2002. We believe that this increase resulted from our
marketing efforts in our freight transportation business and our relationships
with ports, mines and other corporates, which enabled us to maintain existing
large volume freight and capture new freight transportation business. Our
freight transportation revenues in 2003 were RMB526.4 million, representing a
slight increase of 0.1% when compared to that of 2002.

  -   Our outbound freight revenues decreased by 9.4% from RMB97.18 million in
      2002 to RMB88.04 million in 2003. This decrease in outbound freight
      transportation revenue was mainly due to the influence of SARS, which led
      to a decrease in the supply of some categories of goods (such as aero-fuel
      etc.) that accounted for large proportions of our outbound freight.
      Improvements in the road and water transportation networks and the
      increasing number of Chinese ports opening to countries outside China also
      reduced the amount of freight transported by rail. Following the end of
      the SARS epidemic, we enhanced marketing efforts on our freight
      transportation business and offered discounts to certain major customers
      and some categories of freight to maintain existing and attract new
      freight business. Following the end of the SARS epidemic, the Chinese
      economy recovered rapidly and demands for energy and raw material
      increased significantly. Increased charges for water and road
      transportation also contributed partly to a recovery in railway freight
      transportation business. All of these factors reduced the overall decrease
      of our outbound freight business in 2003.

  -   Our inbound and pass-through freight revenues increased by 4.7% from
      RMB255.8 million in 2002 to RMB267.8 million in 2003. This increase was
      mainly due to the growth in demand for railway transportation resulting
      from the growth of the PRC economy and increased charges for road and
      water transportation, which offset of the adverse influence of SARS in
      2003. Furthermore, the completion of the construction of the second
      railway track between Beijing and Jiujiang led to a resumption of the
      inbound and pass-through freight previously interrupted by the
      construction.

  -   Our revenues from storage, loading and unloading and other miscellaneous
      freight services decreased by 4.1% from RMB177.8 million in 2002 to
      RMB170.5 million in 2003. This decrease was mainly due to a decrease in
      outbound freight, the discounts that

                                       41

<PAGE>

      we offered to certain customers and for some categories of freight to
      enhance the competitiveness of our freight transportation services, and
      reduced charges for our storage, loading and unloading services.

      Other Businesses. Our other businesses mainly consist of sales of goods
and food, advertising and tourism services on board our trains and in our
stations. Our revenues from other businesses in 2003 were RMB151.6 million,
representing a decrease of 8.8% from RMB166.3 million in 2002. This decrease was
mainly due to a decrease in our passenger volume and in consumption by
passengers on board our trains and in our stations due to the SARS epidemic. In
addition, revenues from our leases and advertising decreased due to the
refurbishment of our passenger stations such as Guangzhou East Station, Shenzhen
Station and Dongguan Station.

OPERATING EXPENSES

      In 2003, our total operating expenses were RMB1,905.5 million,
representing a decrease of 3.7% from RMB1,978.3 million in 2002.

      Railway Operating Expenses. Our total railway operating expenses decreased
by 2.9% from RMB1,809.2 million in 2002 to RMB1,755.9 million in 2003, as
follows:

      -     Business Tax. Our business tax in 2003 was RMB47.6 million,
            representing a decrease of 35.6% from RMB73.9 million in 2002. The
            decrease was partly due to the decrease in revenues from passenger
            transportation in 2003 as a result of the impact of the SARS
            epidemic. In addition, we were granted an exemption from business
            tax on our revenue from passenger transportation between May 1, 2003
            and September 30, 2003 due to a special measure implemented by the
            PRC government in 2003 as a result of the SARS epidemic, which
            significantly reduced our business tax in 2003.

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

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

                                       42

<PAGE>

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

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

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

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

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

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

PROFIT FROM OPERATIONS

      Our profit from operations decreased by 9.6% from RMB622.5 million in 2002
to RMB562.7 million in 2003 due to a decrease in our total revenues.

                                       43

<PAGE>

TAXATION

      Our income tax expense was RMB93.3 million in 2003, representing an
effective tax rate of 15.4% and a decrease of RMB11.0 million compared to
RMB104.3 million in 2002. The main reason for the decrease is an exemption from
business tax granted by the PRC government on our revenue from passenger
transportation between May 1, 2003 and September 30, 2003 pursuant to a special
measure implemented as a result of the SARS epidemic.

NET PROFIT

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

FIXED ASSETS

      The railway industry is capital intensive. Under IFRS, fixed assets are
initially recorded at cost less accumulated depreciation and impairment loss.
Cost represents the purchase price of the asset and other costs incurred to
bring the asset into existing use, and subsequent to the initial recognition,
fixed assets are stated at cost or valuation less accumulated depreciation and
impairment losses. Independent valuations, on a market value basis or
depreciated replacement cost basis when there is no evidence of market value for
such an item, are performed at least every five years or sooner if considered
necessary by the directors. In the intervening years, the directors review the
carrying values of the fixed assets and an adjustment is made where there has
been a material change. Repairs and maintenance are charged to our income
statement during the financial period in which they are incurred. The cost of
major renovations is included in the carrying amount of the asset when it is
probable that future economic benefits in excess of the originally assessed
standard of performance of the existing asset will flow to the Group. Major
renovations are depreciated over the remaining useful life of the related asset.

      Estimation of the useful lives of assets that are long-lived as well as
their salvage value requires significant management judgments. 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.

                                       44

<PAGE>

      Our management reassessed the estimated useful lives and depreciation
rates of fixed assets periodically. The assessment was based on the experience
and maintenance program established by our management and engineering personnel,
current operations and potential changes in technology, personnel, estimated
salvage value of the assets, and industry regulations. The estimated useful
lives of our fixed assets are as follows:

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

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

RECEIVABLES

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

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

IMPAIRMENTS

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

                                       45

<PAGE>

CONTINGENCY

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

ACCOUNTING TREATMENT REGARDING THE DIFFERENCES BETWEEN THE SELLING PRICES
AND COSTS OF EMPLOYEES' HOUSING

      We had constructed and purchased new residential properties for our
employees in the past to improve their living conditions. Under a housing
benefit scheme implemented by the PRC government, we sold these residential
properties to our employees at a price approved by the PRC government. For the
purpose of preparing our consolidated financial statements for the year ended
December 31, 2004, we estimated that our losses from the sales of completed
staff quarters and the sales of premises under construction for which future
services could be reasonably estimated was approximately RMB226.4 million. Such
losses were amortized on a straight line basis over the estimated remaining
average service period of our employees (15 years) from the time of such sales.
During the year ended December 31, 2004, the amortization charged as deferred
labour costs to our consolidated income statement was RMB15.1 million and the
accumulated amortization amounted to RMB75.5 million.

      As of December 31, 2004, unamortized deferred losses, which were recorded
as deferred staff costs on our balance sheet, were RMB150.9 million.

ITEM 5B. LIQUIDITY AND CAPITAL RESOURCES

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

      We generated approximately RMB1,236.6 million of net cash flow from
operating activities in 2004. Substantially all of our revenues were received in
cash, with accounts receivable arising primarily from long-distance passenger
train services provided and pass-through freight transactions originating from
other railway companies whose lines connect to our railroad. Similarly, some
accounts payable arise from payments for railroad transportation services that
we collect on behalf of other railroad companies. 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. We also have accounts payable associated with the
purchase of materials and supplies in our other businesses.

      In 2004, other than operating expenses, our cash outflow mainly related to
the following:

      -     capital expenditures of approximately RMB326.5 million as described
            below, representing an increase of 6.7% from RMB306.0 million in
            2003; and

      -     payment of dividends of approximately RMB455.0 million.

                                       46

<PAGE>

      Our capital expenditures for 2004 consisted primarily of the following
projects:

      1.    expanding our Guangzhou-Shenzhen Line (Guangzhou to Pinghu link);

      2.    upgrading locomotives and passenger coaches;

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

      4.    upgrading station rooms at Shilong Station;

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

      6.    partially renovating our Guangzhou East Station; and

      7.    building ancillary facilities at our Guangzhou East Station.

      Funds not required for immediate use are kept in short and medium-term
investments and bank deposits. We had temporary cash investments of
approximately RMB1,379.3 million and cash equivalents of RMB1,169.3 million as
of December 31, 2004.

      As of December 31, 2004, we had an overdue time deposit in the amount of
approximately RMB31.4 million held by Li Cheng, which we were unable to recover
upon the expiry of the fixed deposit term in 1998. In March 1999, we instituted
legal proceedings against Li Cheng to recover the deposit and the related
interest. Under a court verdict dated October 12, 1999, Li Cheng was ordered to
repay the deposit principal and the related interest to us. Li Cheng failed to
comply with the court ruling, and we further applied to the court for compulsory
enforcement of the court order. In July 2000, Li Cheng filed a court petition
for winding up. On November 9, 2000, the court ordered the suspension of
execution of the court ruling dated October 12 , 1999 during the winding-up of
Li Cheng. On November 23, 2000, we applied to the Guangdong Provincial
Government for an allocation of funds by the government to Li Cheng for the
repayment of our deposit principal. The provincial government accepted our
petition and requested the municipal government to follow up on our case. In
2002, we reclassified such amount from temporary cash investment to other
receivables, and accounted for 50% provision pursuant to our management's
estimates. The amount of the fixed deposit remains unpaid to date. Based on our
management's estimates in 2004, we have made full provision for such amount in
our audited consolidated financial statements.

      Except for such overdue time deposit, we have no other overdue time
deposit that has not been repaid. We have not encountered any difficulty in
withdrawing deposits. We have placed most of our deposits with other state-owned
commercial banks in the PRC and the Railway Deposit-taking Centre.

                                       47

<PAGE>

      As of December 31, 2004, we did not have any bank loans or guarantees
outstanding nor any trust deposits placed with any financial institutions in the
PRC.

CASH FLOW

      Our cash and cash equivalents in 2004 decreased by approximately RMB233.1
million over 2003. The table below sets forth certain items in our consolidated
cash flow statements for 2003 and 2004, and the percentage change in these items
from 2003 to 2004.

<TABLE>
<CAPTION>

                                                    YEAR ENDED DECEMBER 31,
                                                   -------------------------               CHANGE
                                                     2003           2004                 FROM 2003
                                                   --------       ----------             ---------
                                                        (RMB THOUSANDS)
<S>                                                <C>            <C>                    <C>
Net cash generated from operating
     activities................................     798,449        1,236,579                 54.9%
Net cash from/(used in) investing activities...    (375,469)      (1,000,639)               166.5%
Net cash (used in) financing activities........    (433,666)        (469,044)                 8.2%
                                                   --------       ----------             --------
Net increase/(decrease) of cash and
     cash equivalents..........................     (10,686)        (233,104)              2081.4%
                                                   ========       ==========             ========
</TABLE>

      Our principal source of capital was revenues generated from operating
activities. In 2004, the net cash inflow from our operations was RMB1,236.6
million, representing an increase of RMB438.2 million from RMB798.4 million in
2003. The increase in net cash inflow from our operating activities was mainly
due to the increase in revenues from our passenger and freight transportation
businesses.

      Our working capital was mainly used for temporary cash investments,
capital expenditures, operating expenses and payment of taxes and dividends. In
2004, our temporary cash investments increased by RMB751.9 million. Our expenses
for the purchase of fixed assets and payments for construction-in-progress were
RMB310.2 million. In addition, we paid RMB84.2 million for income taxes and
approximately RMB455.0 million for dividends.

      We believe that we have sufficient working capital to meet our current
operational and development requirements.

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

      We do not generally conduct our own research and development with respect
to major capital projects. In the past, in connection with our high-speed train
and electrification projects, our predecessor relied upon the engineering and
technical services of various research and design institutes under the MOR. More
recently, we conduct limited research and development activities in connection
with the implementation of automated 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.

                                       48

<PAGE>

ITEM 5D. TREND INFORMATION

      The Pearl River Delta has been one of China's fastest growing economic
regions. We believe that various factors, including the increasing economic
cooperation within the Pearl River Delta region and its adjacent areas , the
"Relaxed Individual Travel" program, the commencement of operation of the
Shenzhen Subway and the opening of Disneyland in Hong Kong in 2005, will
continue to increase passenger travel and freight transportation within our
service region. We expect the PRC government's current economic, import and
export, foreign investment and infrastructure policies to generate additional
demand for transportation services generally. These policies and measures may
have both positive and negative effects on our business development. They are
expected to promote economic growth and create new demand for our transportation
services. At the same time, however, with the improvement of highway and
waterway transportation facilities, we anticipate additional competition. In
2004 and the first half of 2005, the PRC government implemented economic
measures to manage the growth of the PRC economy, including imposing lending
restrictions in certain sectors. Such measures are expected to slow the pace of
economic growth in China, and may have an adverse impact on our business and
results of operations in 2005. Due to the SARS epidemic, we experienced a
significant decrease in passenger traffic in the first half of 2003. A similar
outbreak of SARS or other epidemic in the future is likely to have a material
adverse effect on our results of operations and financial condition.

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

ITEM 5E. OFF-BALANCE SHEET ARRANGEMENTS

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

ITEM 5F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

      The following table sets forth our contractual obligations, capital
commitments and operating lease commitments as of December 31, 2004 for the
periods indicated.

                                       49

<PAGE>

                 CONTRACTUAL OBLIGATIONS PAYMENTS DUE BY PERIOD

<TABLE>
<CAPTION>
         CONTRACTUAL OBLIGATIONS                                         PAYMENT DUE BY PERIOD
                                                                          (RMB IN THOUSANDS)
                                                                                                                 2010 AND
                                              TOTAL       2005       2006        2007        2008     2009      THEREAFTER
<S>                                          <C>        <C>         <C>          <C>         <C>      <C>       <C>
Long-Term Debt Obligations                         -          -          -          -           -        -           -
Capital (Finance) Lease Obligations                -          -          -          -           -        -           -
Operating Lease Obligations                  183,375    108,000     75,375          -           -        -           -
Purchase Obligations                               -          -          -          -           -        -           -
Other Long-Term Liabilities Reflected on
  the Company's Balance Sheet under IFRS           -          -          -          -           -        -           -
Total                                        183,375    108,000     75,375          -           -        -           -
</TABLE>

      Based on the current progresses of our new projects, we estimate that our
capital expenditures for 2005 will amount to approximately RMB1.7 billion, which
consists primarily of the following projects:

      1.    expanding our Guangzhou-Shenzhen Line (Guangzhou to Pinghu link);

      2.    building ancillary facilities at our Guangzhou East Station;

      3.    building a Technical Support and Maintenance Depot for Passenger
            Vehicles at Shenzhen North Station and a passenger station, station
            houses and ancillary facilities for long-distance passenger travel
            to Buji (including the construction of the connecting line from
            Pinghu to Shenzhen);

      4.    purchasing additional locomotives;

      5.    upgrading ancillary facilities to station rooms at Shenzhen
            Station;

      6.    building the computerized ticketing system for our
            "As-Frequent-As-Buses" Train Project between Guangzhou and Shenzhen;
            and

      7.    second phase comprehensive upgrading of Shenzhen Station.

      We may be unable to obtain sufficient financing to fund our substantial
capital requirements, which could limit our growth potential. Our actual capital
requirements may be greater. We may not be able to obtain sufficient funds on
commercially acceptable terms. If adequate capital is not available, our planned
capital expenditure and business prospects could be adversely affected.

ITEM 5G. ADDITIONAL INFORMATION

PRINCIPAL DIFFERENCES BETWEEN IFRS AND US GAAP

      Our audited consolidated financial statements conform to IFRS, which
differ in certain respects from those prepared under US GAAP. A major difference
between IFRS and US

                                       50

<PAGE>

GAAP, which has a significant effect on our consolidated net profit and
consolidated net assets is set out below:

REVALUATION OF FIXED ASSETS

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

      Under IFRS, revaluation of fixed assets is permitted and depreciation is
based on the revalued amount. Additional depreciation arising from the
revaluation surplus was approximately RMB38.5 million for the year ended
December 31, 2004 compared to approximately RMB38.5 million in 2003.

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

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

<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                                       ----------------------------------------------------------
                                                        2002             2003              2004           2004
                                                       -------          -------          -------        ---------
                                                        RMB              RMB              RMB             US$(1)
                                                                                                        UNAUDITED
<S>                                                    <C>              <C>              <C>            <C>
Net profit under IFRS (in thousands)...........        557,083          511,762          567,484           68,373
US GAAP adjustments:
    Reversal of additional depreciation charges
       arising from the revaluation surplus on
       fixed assets  (in thousands)............         48,422           38,548           38,548            4,644
    Effect of US GAAP adjustment on taxation
       (in thousands)..........................         (7,263)          (5,782)          (5,782)            (697)
                                                       -------          -------          -------        ---------
Consolidated net profit under US GAAP (in
   thousands)..................................        598,242          544,528          600,250           72,320
                                                       =======          =======          =======        =========
Earnings per share under US GAAP...............           0.14             0.13             0.14            0.017
                                                       =======          =======          =======        =========
Earnings per equivalent ADS under
    US GAAP....................................           6.90             6.28             6.92            0.834
                                                       =======          =======          =======        =========
</TABLE>

----------
(1)   Translated solely for the convenience of the reader into U.S. dollars at
      the noon buying rate prevailing on December 31, 2004 of US$1.00 to
      RMB8.30.

                                       51

<PAGE>

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

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                                     --------------------------------------------
                                                                        2003             2004             2004
                                                                     ----------       ----------       ----------
                                                                       RMB IN           RMB IN         US$(1) IN
                                                                     THOUSANDS        THOUSANDS        THOUSANDS
                                                                                                       UNAUDITED
<S>                                                                  <C>              <C>              <C>
Consolidated net assets under IFRS..........................         10,322,358       10,420,574        1,255,491
US GAAP adjustments:
    Reversal of the revaluation surplus on fixed assets.....         (1,492,185)      (1,492,185)        (179,781)
    Reversal of additional depreciation charges arising from
      the revaluation surplus on fixed assets...............            369,432          407,980           49,154
    Reversal of deferred tax assets ........................            168,413          162,631           19,594
                                                                     ----------       ----------       ----------
Consolidated net assets under US GAAP.......................          9,368,018        9,499,000        1,144,458
                                                                     ==========       ==========       ==========
</TABLE>

----------
(1)   Translated solely for the convenience of the reader into U.S. dollars at
      the noon buying rate prevailing on December 31, 2004 of US$1.00 to
      RMB8.30.

      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.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

ITEM 6A. DIRECTORS AND SENIOR MANAGEMENT

DIRECTORS

      All of our directors were duly elected at meetings of our shareholders.
All of our current directors were elected at our general shareholders' meeting
held on May 12, 2005. 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 as of
June 27, 2005:

<TABLE>
<CAPTION>
                                                                                                          DATE FIRST
                                                                                                          ELECTED OR
        NAME                       AGE                        POSITION                                     APPOINTED
-------------------                ---           ----------------------------------                       ----------
<S>                                <C>           <C>                                                      <C>
Wu Junguang                         56           Chairman of the Board of Directors                          2003
Li Kelie                            57           Director and General Manager                                2004
Hu Lingling                         41           Director                                                    2003
Wu Houhui                           56           Director                                                    1999
Wen Weiming                         42           Director                                                    2003
Yang Jinzhong                       53           Director                                                    2005
Chang Loong Cheong                  59           Independent Director                                        1996
Deborah Kong                        45           Independent Director                                        1996
Wilton Chau Chi Wai                 43           Independent Director                                        2004
</TABLE>

      Wu Junguang, age 56, was elected the chairman of the board of directors of
Guangshen Railway on June 10, 2003. Mr. Wu graduated from South China Normal
University. Since 1964, Mr. Wu has served in various managerial positions
including general manager of Yangcheng Railway Company and our predecessor,
Guangzhou Railway Sub-administration.

                                       52

<PAGE>

Mr. Wu has served as the general manager of our Parent Company since April 2002
and as the chairman of our Parent Company since June 2003.

      Li Kelie, age 57, was elected a director and the General Manager of the
Company. Mr. Li is a member of Chinese Writers' Association and a vice chairman
of Guangzhou Writers' Association. Since 1994, Mr. Li has held various senior
positions within Guangzhou Railway (Group) Company and its subsidiaries. Before
he joined the Company, he was the Chairman and the General Manager of Sanmao
Railway Company Limited. He is currently a member of the senior management of
our Parent Company.

      Hu Lingling, age 41, was elected a director of Guangshen Railway in 2003.
Mr. Hu is an engineer and graduated from Changsha Railway Institute. Mr. Hu has
served as the deputy chief engineer, the deputy stationmaster of Shaoguan
Railway station of Yangcheng Railway Company, the deputy chief engineer, the
deputy general manager of Yangcheng Railway Company and the director of the
transportation department of our Parent Company Chronologically. Presently he
serves as the deputy general manager of our Parent Company.

      Wu Houhui, age 56, was elected a director of Guangshen Railway in 1999. He
is a graduate of Dalian Railway College and a senior economist. Mr. Wu served in
various managerial position, including the position of director of the
Enterprise Management Office, at our Parent Company from 1984 to 2000. Since
November 2001, Mr. Wu has served as the deputy chief economist of our Parent
Company.

      Wen Weiming, age 42, was elected a director of Guangshen Railway in 2003.
Mr. Wen is an accountant and graduated from Guangzhou Railway Workers' College.
He has over 10 years experience in the railway industry, and has served as the
director of the accounting and finance department, the chief accountant of the
diversified businesses sub-section, and the director of the finance sub-section
of Yangcheng Railway Company. Since May 2001, Mr. Wen has served as the deputy
director of the finance department of our Parent Company.

      Yang Jinzhong, aged 53, was elected a director of Guangshen Railway in
2005. Mr. Yang is an engineer and graduated from Harbin Electrician Institute.
He has over 30 years experience in the railway industry and has served in
various managerial positions in Wuhan Railway Sub-administration. Since August
2000, he has served as the manager of the Transportation Business Department of
Guangshen Railway and the Stationmaster of Shenzhen Station. He is currently the
acting chairman of the Labour Union of the Company.

      Chang Loong Cheong, age 59, was elected an independent non-executive
director of Guangshen Railway in 1996. He holds a management certificate from
the Hong Kong Management Association and is an independent non-executive
director of Guangshen Railway. Mr. Chang is also a director of Shanghai Xinhua
Iron & Steel Company Limited and Orient International (Shanghai) Limited. Mr.
Chang has acted as a manager of Cathay Restaurant in Lagos, Nigeria, a member of
the senior management of Island Navigation Corporation International Limited and
Orient Overseas Container Line Limited in West Africa, and the general manager
and a director of Noble Ascent Company Limited.

                                       53

<PAGE>

      Deborah Kong, age 45, was elected an independent non-executive director of
Guangshen Railway in 1996. Ms. Kong is currently an executive director of
Centennial Resources Holding Company Limited. Ms. Kong holds a bachelor of arts
degree from Sydney University and a one-year master degree course of finance
degree from Macquarie University in Australia. She is a member of the Standing
Committee of the People's Political Consultative Conference of Shandong Province
in the PRC.

      Wilton Chau Chi Wai, age 43, was elected an independent non-executive
director of Guangshen Railway in 2004. Mr. Chau holds a bachelor degree in
applied mathematics from University of Hong Kong, a LLB degree from University
of Wolverhampton and a Master of Business Administration from the University of
Wales. Mr. Chau is a fellow member of the Association of Chartered Certified
Accountants, a member of Singapore Institute of Arbitrators and Council member
of Hong Kong Biotechnology Association. Since 1987, Mr. Chau has served several
financial institutions in various senior positions overseeing investment and
development in railway, road and airport infrastructure projects. Mr. Chau is
currently the chairman of Qleap Venture Limited.

SUPERVISORS

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

<TABLE>
<CAPTION>
                                                                            DATE FIRST ELECTED
    NAME                           AGE           POSITION                      OR APPOINTED
-------------                      ---           ----------                 ------------------
<S>                                <C>           <C>                        <C>
Yao Muming                          51           Supervisor                        1999
Tang Dinghong                       56           Supervisor                        2004
Chen Yongbao                        53           Supervisor                        2002
Li Zhiming                          44           Supervisor                        2005
Chen Yunzhong                       52           Supervisor                        2001
Wang Jianping                       41           Supervisor                        2005
Lu Ximei                            49           Supervisor                        2005
</TABLE>

      Yao Muming, age 51, was appointed as a Supervisor of Guangshen Railway in
1999. Mr. Yao graduated from South China Normal University and previously served
as the Deputy Director of the Guangzhou and Zhuhai Animal and Plant Quarantine
Bureaus. From 1997 to 2003, he was a member of the senior management of the
Company. Since July 2003, Mr. Yao has been a member of the senior management of
our Parent Company. Since July 2003, he has served the chairman of the
supervisory board.

      Tang Dinghong, age 56, was appointed as a supervisor of Guangshen Railway
in 2004. Mr. Tang graduated from Zhongshan University. He started to work in the
railway industry since 1969 and had served in various senior managerial
positions of Guangzhou Railway (Group) Company. Mr. Tang joined us in July 2003.

      Chen Yongbao, age 53, was appointed as a supervisor of Guangshen Railway
in 2002. Mr. Chen graduated from Zhuzhou Railway Mechanical School. Since 1975,
he has served in various managerial positions in Guangzhou Railway Company and
Yangcheng Railway Company. From 1997 to 2001, Mr. Chen served in the
administration supervisory position at our

                                       54

<PAGE>

Parent Company. Since May 2001, Mr. Chen has served as the chief of the
supervision department of our Parent Company.

      Li Zhiming, age 44, was appointed as a supervisor of Guangshen Railway in
2005. Mr. Li graduated from the Party School of the CPC majoring in economics
and management and is an accountant. Since 1981, he has served in various
managerial positions in Hengyang Railway Sub-administration and Changsha Railway
Company. Mr. Li is currently the director of the Finance Office of Guangzhou
Railway (Group) Company Changsha Railway Office.

      Chen Yunzhong, age 52, was appointed as a supervisor of Guangshen Railway
in 2001. Mr. Chen graduated from Guangzhou Railway Driver's School, Guangdong
Jinan University and the Central Administration Academy. He was a member of the
senior management of Hainan Railway Company. Mr. Chen joined us in May 2000.

      Wang Jianping, age 41, was appointed a supervisor of the Company in 2005.
Mr. Wang graduated from the Party School of the CPC majoring in economics and
management. Since 1983, Mr. Wang has served in various managerial positions in
Guangzhou Railway Sub-administration and Guangzhou Railway (Group) Limited. Mr.
Wang joined the Company in 2003 and is currently a member of our senior
management.

      Lu Ximei, age 49, was appointed a supervisor of the Company in 2005. Ms.
Lu graduated from Changsha Railway Institute majoring in railway traffic
management. Since 1972., Ms. Lu has served in various managerial positions in
the passenger transportation division of Yangcheng Railway Company. Ms. Lu was
appointed section chief of the Guangzhou-Hong Kong Passenger Transportation
Section of the Company in January 1999.

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>
Li Qingyun                          41           Deputy General Manager                   2000
Wu Weimin                           47           Deputy General Manager                   2004
Han Dong                            43           Deputy General Manager                   2004
Yao Xiaocong                        51           Chief Accountant                         1997
Guo Xiangdong                       39           Company Secretary                        2004
</TABLE>

      Li Qingyun, age 41, joined the Company in September 1999 and is a Deputy
General Manger of the Company. Mr. Li graduated from Northern Jiaotong
University majoring in railway transportation and organization and has obtained
a master's degree. Before joining the Company, Mr. Li has served in various
managerial positions in the technical and transportation departments under our
Parent Company from 1989 to August of 1999.

      Wu Weimin, age 47, joined the Company in January 2004 and is a Deputy
General Manager of the Company. Mr. Wu graduated from Guangdong Radio & TV
University and is an engineer. Since 1984, he had served in various managerial
positions in the Material and

                                       55

<PAGE>

Equipment Department, the Planning and Statistic Department and the Labour and
Wage Department of Yangcheng Railway Company. He also had served as an engineer
in the Material and Equipment Section, the Director of the Planning and
Statistic Sub-department of Yangcheng Railway Company. Mr. Wu was the Director
of Labour and Wage Sub-department and Director of Social Insurance Centre of
Yangcheng Railway Company before joining the Company as a Deputy General Manager
in January 2004.

      Han Dong, age 43, joined the Company in May 2000 and is a Deputy General
Manager of the Company. Mr. Han graduated from Party School of the CPC, majored
in economics and management, and is an engineer. Mr. Han joined the Company in
August 1985 and had served in various managerial positions in the Material and
Equipment Department, the Planning and Statistic Department, Passenger and
Freight Transportation Marketing Department. Mr. Han was director of each of the
Passenger and Freight Management Department and Equipment and Property
Department of the Company.

      Yao Xiaocong, age 51, is the Chief Accountant of the Company. Mr. Yao
graduated from Party School of the CPC, majored in economics and management.
Since 1975, Mr. Yao has served in the Financial Accounting Department in railway
departments and has acquired nearly 30-year experience in financial accounting.
Mr. Yao was a member of the senior management of the Company from June 1997 to
January 2004. Mr Yao was the Director of the Accounting Department of Guangzhou
Railway (Group) Company before he was appointed as the Chief Accountant of the
Company in August 2004.

      Guo Xiangdong, age 39, is the Company Secretary and the Director of
Secretariat of the Board of Directors. Mr. Guo graduated from the Central China
Normal University with a Bachelor of Laws degree and is an economist. He joined
the Company in 1991, and previously served as the Deputy Section Chief, Deputy
Director and the Director of Secretariat of the Board of Directors of Guangshen
Railway. Mr. Guo has been as the Company Secretary since January 2004.

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

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

                                       56
<PAGE>

ITEM 6B. BOARD COMPENSATION

DIRECTORS AND SENIOR MANAGEMENT

      Total remuneration of our directors, supervisors and senior officers
during 2004 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, GEDC or us, such as subsidized or free health care
services, housing and transportation, as customarily provided by companies in
the PRC to their employees. In the second half of 2004, all of the hospitals and
schools originally vested in GEDC were transferred to the local government
pursuant to applicable PRC policies. As a result, GEDC no longer provides any
education and hospital services to us under the contractual arrangements made
upon our restructuring.

      The aggregate amount of cash remuneration paid by Guangshen Railway in
2004 to all individuals who are currently our directors, supervisors and senior
officers was approximately RMB2.76 million, of which approximately RMB1.74
million was paid to directors and supervisors and approximately HK$0.31 million
was paid to the three independent non-executive directors.

      The aggregate amount of cash remuneration we paid during the year ended
December 31, 2004 for pension and retirement benefits to all individuals who are
currently our directors, supervisors and senior officers was approximately
RMB155,000.

INTERESTS OF OUR DIRECTORS, SUPERVISORS AND OTHER SENIOR MANAGEMENT IN OUR SHARE
CAPITAL

      As of December 31, 2004, there was no record of interests or short
positions (including the interests or short positions which were taken or deemed
to have under the provisions of the Hong Kong Securities and Futures Ordinance)
held by our directors or supervisors in our shares, debentures or other
securities, or securities of any of our associated corporation (within the
meaning of the Hong Kong Securities and Futures Ordinance) in the register
required to be kept under section 352 of the Hong Kong Securities and Futures
Ordinance. We had not received notification of any interests or short positions
from any of our directors or supervisors required to be made to us and the Hong
Kong Exchange pursuant to the Model Code for Securities Transactions by
Directors of Listed Companies in Appendix 10 to the HKSE Listing Rules. We have
not granted any of our directors or supervisors, or any of their respective
spouses or children under the age of 18, any right to subscribe for any of our
shares or debentures.

SERVICE CONTRACTS OF OUR DIRECTORS AND SUPERVISORS

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

                                       57

<PAGE>

CONTRACTS ENTERED INTO BY OUR DIRECTORS AND SUPERVISORS

      None of our directors or supervisors had any direct or indirect material
interests in any contract of significance subsisting during the year ended on
December 31, 2004 or at December 31, 2004 to which we or any of our subsidiaries
was a party.

REMUNERATION OF OUR DIRECTORS AND SUPERVISORS

      The level of remuneration of our directors and supervisors was determined
by reference to various factors, including the going rates of remuneration in
Shenzhen, where we are located, and the job nature of each of our directors and
supervisors. The remuneration standard for our directors and supervisors is
determined by our shareholders.

ITEM 6C. BOARD PRACTICES

BOARD OF DIRECTORS

      In accordance with our currently valid Articles of Association, our board
of directors consists of nine directors, one of whom is the chairman. Directors
are appointed at our general shareholders' meeting through voting, and serve for
terms of three years. Upon the expiration of the term of their office, they can
serve consecutive terms if re-appointed at the general shareholders' meeting.
The service contracts that we have entered into with our directors do not
provide for any payment of compensation upon termination.

SUPERVISORY COMMITTEE

      We have a supervisory committee consisting of five to seven supervisors.
Supervisors serve a term of three years. Upon the expiration of their terms of
office, they may be re-appointed to serve consecutive terms. The supervisory
committee is presided over by a chairman who may be elected or removed with the
consent of two-thirds or more of the members of the supervisory committee. The
term of office of the chairman is three years, renewable upon re-election. Our
supervisory committee was appointed at the general shareholders' meeting held on
May 12, 2005 and consists of five representatives of the shareholders who may be
elected or removed by our shareholders and two representative of our employees
who may be elected or removed by our employees. Members of our supervisory
committee may also observe meetings of the board of directors. The current
members of our supervisory committee are: Yao Muming, Tang Dinghong, Chen
Yongbao, Li Zhiming, Chen Yunzhong, Wang Jianping and Lu Ximei. The term of this
supervisory committee will expire in 2008. Our supervisory committee held four
meetings during the year ended December 31, 2004, at which resolutions
concerning identified key issues were passed and notified to our board of
directors. Our supervisors attended all meetings of our board of directors and
other important meetings concerning our operation during the year ended December
31, 2004. Our supervisory committee had carefully reviewed the report of our
directors, the financial report and proposed profit distribution presented by
our board of directors at the annual general meeting held on May 12, 2005.

                                       58

<PAGE>

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

      -     to supervise our handling of our financial matters;

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

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

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

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

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

AUDIT COMMITTEE

      We have an audit committee consisting of three independent non-executive
directors. The current members of our audit committee, appointed by the board of
directors, are: Mr. Chang Loong Cheong, Ms. Deborah Kong and Mr. Wilton Chau Chi
Wai. Mr. Chang, Ms. Kong and Mr. Chau are "independent directors" of our Company
as defined in Section 303A.02 of the New York Stock Exchange's Listed Company
Manual. The audit committee must convene at least four meetings each year, and
may invite the executive directors, persons in charge of the financial and audit
departments and our independent auditors. The audit committee must convene at
least one meeting with the auditors each year without any executive directors
present. The duties of our audit committee include:

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

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

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

      -     reviewing audit matters specifically identified by the board of
            directors, and determining whether such projects are in compliance
            with industrial practices and

                                       59

<PAGE>

            market rules, and performing statutory duties and safeguarding our
            interests and the interests of our shareholders.

ITEM 6D. EMPLOYEES

      As of December 31, 2002, 2003 and 2004, we had approximately 9,258, 9,029
and 8,964 employees, respectively. The following chart sets forth the number of
our employees by function as of December 31, 2004:

<TABLE>
<CAPTION>
FUNCTION                                                            EMPLOYEES
<S>                                                                 <C>

Passenger transportation personnel (1).........                       1,525
Coordination personnel (2).....................                         972
Freight transportation personnel (3)...........                         414
Mechanical personnel (4).......................                         433
Power and water supply personnel (5)...........                         478
Vehicle personnel (6)..........................                         685
Maintenance personnel (7)......................                         876
Power service personnel (8)....................                         428
Transportation supporting personnel (9)........                         542
Diversified businesses and other supporting
  personnel (10)...............................                       1,168
Technical and administrative personnel (11)....                       1,166
Other personnel (12)...........................                         277
Total..........................................                       8,964
</TABLE>

--------------------
(1)   Passenger transportation personnel means those people that provide station
      boarding and train services.

(2)   Coordination personnel means those people responsible for train
      coordination.

(3)   Freight transportation personnel means those people responsible for
      organization of freight transportation.

(4)   Mechanical personnel means those people responsible for train operation
      and overhaul.

(5)   Power and water supply personnel means those people responsible for
      contact network operation and overhaul as well as power and water
      consumption maintenance.

(6)   Vehicle personnel means those people responsible for vehicle operation and
      overhaul.

(7)   Maintenance personnel means those people responsible for station track and
      railroad switch maintenance.

(8)   Power service personnel means those people responsible for signal
      equipment maintenance.

(9)   Transportation supporting personnel means the supporting personnel of
      trains, machinery, works, power and vehicle organizations.

(10)  Diversified businesses and other supporting personnel means all personnel
      involved in diversified businesses.

(11)  Technical and administrative personnel means all managerial personnel
      other than the personnel of diversified businesses.

(12)  Other personnel means all personnel who have been sick, studying or
      retired for a long time.

                                       60

<PAGE>

      All of our employees are located in Guangzhou, Shenzhen and the area
adjacent to our Guagnzhou-Shenzhen line. The number of our employees decreased
by 65 in 2004, which we consider is a normal change occurred in the ordinary
course of our business.

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

      We have implemented a salary policy which links our employees' salaries
with results of operations, labor efficiency and individual performance.
Employees' salaries distribution is subject to macro-control and is based on
their performance records and reviews. We paid approximately RMB492.6 million in
salaries and benefits for our railroad businesses in 2004.

      Pursuant to applicable government policies and regulations, we set aside
statutory fund for our employees and also maintain various insurance policies
for the benefits of our employees as set forth in the following table:

<TABLE>
<CAPTION>
                                                   AS A PERCENTAGE OF THE AGGREGATE SALARIES OF OUR EMPLOYEES
                                                                             IN 2004
                                                   ----------------------------------------------------------
                                                        EMPLOYEES RESIDING IN
                                                     GUANGZHOU AREA OR ALONG THE      EMPLOYEES RESIDING IN
           EMPLOYEE BENEFITS                          GUANGZHOU-SHENZHEN ROUTE               SHENZHEN
           -----------------                         ---------------------------      ---------------------
<S>                                                  <C>                              <C>
Housing Fund..............................                        7%                              13%
Retirement Insurance .....................                       18%                              18%
Supplemental Retirement Insurance.........                        5%                               5%
Basic Medical Insurance...................                        8%                               6%
Supplemental Medical Insurance............                        1%                             0.5%
Child-bearing Medical Insurance...........                      0.4%                             0.5%
Other Welfare Contributions...............                        6%                               8%
</TABLE>

      Details of our statutory welfare fund and retirement benefits are set out
in Notes 22 and 23 to the financial statement.

ITEM 6E. SHARE OWNERSHIP

      As of June 27, 2005, none of our directors, supervisors or senior
management own any interest in any shares or options to purchase our shares.

                                       61

<PAGE>

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

ITEM 7A. MAJOR SHAREHOLDERS

      We are a joint stock company organized under the laws of the PRC in March
1996. The Parent Company, a state-owned enterprise under the administration of
the MOR 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 MOR that controls and coordinates railway operations in Guangdong
Province, Hunan Province and Hainan Province. As an instrumentality of the MOR,
our Parent Company performs direct regulatory oversight functions with respect
to us, including determining and enforcing technical standards and implementing
special transportation directives.

      The following table sets forth information regarding ownership of our
issued and outstanding capital stock as of December 31, 2004. 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                67.0%
</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, 2004.

<TABLE>
<CAPTION>
                                                                               PERCENT OF TOTAL     PERCENTAGE OF
       TITLE OF CLASS      IDENTITY OF PERSON OR GROUP        AMOUNT OWNED          CAPITAL        CLASS OF SHARES
       --------------      ---------------------------      -----------------  ----------------    ---------------
                                                            (THOUSAND SHARES)
<S>                        <C>                              <C>                <C>                 <C>
Common Shares (H Shares)   Sumitomo Life Insurance               128,916             3.0%                9.0%
                           Company (1)
Common Shares (H Shares)   Sumitomo Mitsui Asset                 128,916             3.0%                9.0%
                           Management Company, Limited
Common Shares (H Shares)   Mondrian Investment Partners         71,818.5             1.7%                5.0%
                           Ltd (formerly known as
                           Delaware International
                           AdvisersLimited)
</TABLE>

--------------
(1)   As at December 31, 2004, Sumitomo Life Insurance Company was deemed to be
      interested in 128,916,000 H Shares (representing 9.01% of the total H
      Shares of the Company or 2.97% of the total share capital of the Company)
      held by Sumitomo Mitsui Asset Management Company, Limited, a controlled
      corporation of Sumitomo Life Insurance Company.

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

      As an owner of at least 30% of our issued and outstanding shares, our
Parent Company is deemed a controlling shareholder (defined in Item 10 below),
and therefore may not exercise our

                                       62

<PAGE>

voting rights with respect to various matters in a manner prejudicial to the
interests of our other shareholders. See "Item 10B. Memorandum and Articles of
Association -- Restrictions on Controlling Shareholders". In accordance with our
articles of association, each share of our capital stock has one vote and the
shares of the same class have the same rights. Other than the restrictions noted
in the first sentence of this paragraph, the voting rights of our major holders
of domestic shares are identical to those of any other holders of our domestic
shares, and the voting rights of our major holders of H shares are identical to
those of our other holders of H shares. Holders of domestic shares and H shares
are deemed to be shareholders of different classes for some matters, which may
affect their respective interests. Holders of H shares and domestic shares are
entitled to the same voting rights.

ITEM 7B. RELATED PARTY TRANSACTIONS

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

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

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

                                       63

<PAGE>

      In the second half of 2004, all of the hospitals and schools originally
vested in GEDC were transferred to the local government pursuant to applicable
PRC policies. As a result, GEDC no longer provides any education and hospital
services to us under the contractual arrangements made upon our restructuring.

      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 passenger coaches;

      -     maintenance services for locomotives and passenger coaches;

      -     railroad transportation related services;

      -     fuel for the operation of locomotives;

      -     railway related materials;

      -     overhaul and emergency repair of our track and bridges;

      -     medical and health care services, which were terminated in August,
            2004;

      -     public security;

      -     educational services, which were terminated in August, 2004; and

      -     employee housing.

      The aggregate costs to us of these goods and services in 2002, 2003 and
2004 were RMB153.4 million, RMB167.2 million and RMB214.5 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
advertising space at our Shenzhen station.

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

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

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

                                       64
<PAGE>

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

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

      -     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 medical services and educational services were terminated in the
            second half of 2004 when the hospitals and schools were transferred
            by GEDC to local government.

      -     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.

                                       65

<PAGE>

      Beginning from 2001, we implemented the measures for the settlement of
railway networks promulgated by the MOR. As such measures are more rational and
scientific than the past measures, the implementation of such measures does not
have a material impact on our revenues from and cost for our passenger and
freight transportation business but has a certain positive impact on our results
of operations.

      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 MOR
is renewable annually. Substantially all the above transactions will continue in
the future, although not necessarily on the same terms.

      The chart below sets forth a breakdown by category of the material
transactions between our Parent Company and its affiliates and us in 2002, 2003
and 2004.

<TABLE>
<CAPTION>
                                                                                        2002       2003       2004
DESCRIPTION OF TRANSACTION                                                              ----       ----       ----
--------------------------                                                                    (RMB THOUSANDS)
<S>                                                                                   <C>        <C>        <C>
Lease of locomotives and related services from Yangcheng Railway(i)..............      42,047     40,882     48,179
Provision of trains and related services from Guangmeishan Railway Company, a
  subsidiary of our Parent Company(ii)...........................................       4,864      5,305      6,066
Purchase of materials and supplies from Guangzhou Railway Material Supply
  Company, a subsidiary of our Parent Company(iii)...............................      33,074     50,687     65,998
Social services (employee housing, health care, educational and public security
  services and other ancillary services) provided by our Parent Company and
  affiliates (including GEDC)(ii)................................................      66,744     68,079     94,246
Operating lease rentals paid to the MOR(i).......................................      57,298     58,904     65,485
Provision of trains and related services by the Ministry of Railway(i)...........     211,667    201,870    209,503
Train use fees and related service fees paid to Guangzhou Railway (Group)
  Passenger Transportation Company, a subsidiary of our Parent Company(i)........       6,681      2,207          -
Interest expenses paid to our Parent Company(iv).................................       2,443      2,037        553
Interest received from the MOR' Railroad Deposit-taking Center(v)................       3,239      3,516      6,111
Interest received from Pingnan Railway, an affiliate of our Parent Company(iv)...         806        827        527
Interest received from Guangmeishan Railway Company(iv)..........................       1,884        901        109
</TABLE>

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

(ii)  The services are provided at the contractual prices based on cost and
      reasonable margin.

(iii) The prices are based on market price.

(iv)  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.

(v)   See Note 10(b) and 24(b) to our audited consolidated financial statements
      included elsewhere in this annual report.


                                       66

<PAGE>

      As of December 31, 2004, we had the following material balances with our
related parties:

<TABLE>
<CAPTION>
                                                                   31 December,
                                               ------------------------------------------------------
                                                2002                    2003                   2004
                                                ----               ----------------            ----
                                                                   RMB in thousands
<S>                                            <C>                 <C>                        <C>
Temporary cash investments in the
   MOR's Railroad Deposit-taking
   Center(i)                                   168,000                  168,000               168,000
Bank deposits in the MOR's railroad
   Deposit-taking Center                       206,452                  321,985               862,508
Due from Parent Company(ii)                     39,374                        -                  -
Due to Parent Company                                -                  (37,230)              (24,617)
Due from related parties                       267,885                  199,921                56,064
   - Trading balance(iii)                       54,425                   10,608                36,531
   - Non-trading balance(ii)                   213,460                  189,313                19,533
Due to related parties                        (158,199)                (120,605)             (172,121)
   - Trading balance(iii)                     (125,847)                 (60,128)              (83,492)
   - Non-trading balance(iv)                   (32,352)                 (60,477)              (88,629)
</TABLE>

(i)   See Note 10(b) to our audited consolidated financial statements included
      elsewhere in this annual report.

(ii)  As of 31 December, 2004, the balance with the Parent Company, which is
      non-trading in nature, and the non-trading balance due from related
      parties mainly represented the Company's payment on behalf of related
      parties, who were required to make settlements to the Parent Company in
      respect of their provision of long-distance transportation services.
      Interests arose from the balance due from the related parties are
      disclosed in Notes 24(a)(iv) to our audited consolidated financial
      statements included elsewhere in this annual report.

(iii) The balances with related parties, which are of trading in nature, all
      aged within one year.

(iv)  As of 31 December, 2004, the non-trading balance due to related parties
      mainly represented the Company's collection of railroad revenue on behalf
      of the related parties.

      As of 31 December, 2004, the balances with the MOR, the Parent Company and
related parties are unsecured, non-interest bearing and repayable on demand,
except for those disclosed in Notes 10(b) and 24(a) to the audited financial
statements included elsewhere in this annual report and bank deposits in MOR's
railroad Deposit-taking centre. These balances resulted from transactions
between our related parties and us in the ordinary course of business. The
balances with our Parent Company are all non-trading in nature. The balances
with our related parties, which are trading in nature, are all due within one
year.

      Our related party transactions have been carried out on usual terms
according to the conditions and waiver granted by The Stock Exchange of Hong
Kong Limited and the contracts entered into between our related parties and us.
Except for the Acquisition Agreement and connected transaction agreements as
discussed in "ITEM 5. Operating and Financial Review and
Prospects--Overview--Proposed Issue of A Shares, Very Substantial Acquisition
and Continuing Connected Transactions", no new related party transaction were
entered into in 2004. Our independent non-executive directors confirmed that,
except for the proposed Acquisition as contemplated in the Acquisition
Agreement, these transactions (which are "connected transactions" as defined in
the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
Limited) entered into by us during 2004 were entered into in the ordinary and
usual course of our business on normal commercial terms or on terms that were
fair and reasonable so far as our shareholders were concerned, or in accordance
with the terms of an agreement governing such transactions or, where there was
no such agreement, on terms no less favorable than those offered to (or from)
independent third parties.

ITEM 7C. INTERESTS OF EXPERTS AND COUNSEL

      Not applicable.

                                       67

<PAGE>

ITEM  8. FINANCIAL INFORMATION

ITEM  8A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

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

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

ITEM  8A.7 LEGAL PROCEEDINGS

      As of December 31, 2004, our interest in an associated company, Guangzhou
Tiecheng Enterprise Company Limited, or Tiecheng, amounted to approximately
RMB140 million. In 1996, Tiecheng and a Hong Kong incorporated company jointly
established Guangzhou Guantian Real Estate Company Limited, or Guangzhou
Guantian, a sino-foreign cooperative joint venture to develop certain properties
near a railway station owned and operated by us.

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

      On December 15, 2003, Guangzhou Guantian applied to the High People's
Court of Guangdong Province, or the Court, to discharge the aforesaid guarantee,
which application was heard by the court on March 18, 2004. The Court has yet to
complete the procedures for its reassessment of the previous court verdict. If
Guangzhou Guantian were held responsible for the guarantee, we may need to
provide for impairment on our interest in Tiecheng. However, based on counsel's
advice, the directors are of the opinion that the guarantee arrangement is
invalid under the relevant PRC rules and regulations. Accordingly, the directors
consider that the chance of Guangzhou Guantian to settle the above claim is
remote and no provision for impairment on the interests in Tiecheng was made in
the accounts. In order to avoid any loss arising from any of the above legal
proceedings, we have obtained a letter of undertakings from our Parent Company,
whereby our Parent Company undertakes that it shall resolve or assume any loss
arising from the above legal proceedings so as to ensure that our interests in
the investment in Tiecheng will not be affected by the above legal proceedings.

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

ITEM  8A.8 DIVIDEND DISTRIBUTIONS

      We make decisions concerning the payment of dividends on an annual basis.
Any dividends are paid at the discretion of our board of directors, which makes
a recommendation in this regard that must be confirmed at our annual general
shareholders' meeting. Our articles of

                                       68

<PAGE>

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

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

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

      On March 17, 2005, the Board proposed a final dividend distribution of
RMB0.11 per share to our shareholders for the year ended December 31, 2004. The
final dividend payment has been approved by the shareholders at our 2004 annual
general meeting held on May 12, 2005.

ITEM 8B. SIGNIFICANT CHANGES

      Other than events already mentioned in this annual report, there have been
no significant changes since December 31, 2004.

                                       69

<PAGE>

ITEM 9. THE OFFER AND LISTING

ITEM 9A. THE OFFER AND LISTING DETAILS

PRICE RANGE OF OUR H SHARES AND ADSS

      As of December 31, 2004 and June 17, 2005, there were 1,431.3 million H
shares issued and outstanding. As of December 31, 2004 and June 17, 2005, there
were, respectively, 4,233,001 and 3,877,621 ADSs outstanding held by 183 and 185
registered holders. Since a percentage of the ADSs are held by nominees, these
numbers may not be representative of the actual number of U.S. beneficial
holders of ADSs or the number of ADSs beneficially held by U.S. persons. The
depositary for the ADSs is JPMorgan Chase Bank.

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

<TABLE>
<CAPTION>
                                                          NEW YORK STOCK EXCHANGE     STOCK EXCHANGE OF HONG KONG
                                                          -----------------------     ---------------------------
                   CALENDAR PERIOD                         HIGH            LOW            HIGH            LOW
                   ---------------                         ----            ---            ----            ---
                                                              (US$ PER ADS)                (HK$ PER H SHARE)
                                                              -------------                -----------------
<S>                                                        <C>            <C>             <C>            <C>
1999................................................       7.625          4.8125          1.19            0.72
2000................................................       7.625          4.5625          1.23             0.7
2001................................................       10.48            6.19          1.76            0.90
2002................................................       10.24            8.05          1.58            1.27

2003
   January to March.................................         9.4            8.69          1.47            1.32
   April to June....................................        9.68            8.20          1.48            1.26
   July to September................................        13.7            9.15         2.125            1.42
   October to December..............................       14.84           12.88          2.25            1.95

2004
   January to March.................................       17.25           13.95          2.65            2.15
   April to June....................................       15.54           11.77          2.45            1.77
   July to September................................       14.70           13.23         2.325           2.075
   October to December..............................       20.62           13.60          3.25           2.125

2005
   January..........................................       20.20           17.91          3.20            2.80
   February.........................................       19.80           18.45         3.125           2.875
   March............................................       18.92           17.76          3.05            2.80
   April............................................       18.63           15.35         2.925            2.45
   May..............................................       17.94           16.20         2.825            2.50
   June (through June 17th )........................       17.42           16.42         2.775            2.55
</TABLE>

      During the year ended December 31, 2004, we did not purchase, sell or
redeem any of our shares.

                                       70

<PAGE>

ITEM 9B. PLAN OF DISTRIBUTION

      Not applicable.

ITEM 9C. MARKETS

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

ITEM 9D. SELLING SHAREHOLDERS

      Not applicable.

ITEM 9E. DILUTION

         Not applicable.

ITEM 9F. EXPENSES OF THE ISSUE

         Not applicable.

                                       71

<PAGE>

ITEM 10. ADDITIONAL INFORMATION

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

ITEM 10A. SHARE CAPITAL

      As of December 31, 2004, our share capital consisted of:

<TABLE>
<CAPTION>
                                                         NUMBER                  PERCENTAGE
                                                       OF SHARES                  OF SHARE
TYPE OF SHARE CAPITAL                                    ('000)                     (%)
<S>                                                    <C>                       <C>
State-owned legal person shares                        2,904,250                      66.99
H Shares                                               1,431,300                      33.01
                                                       ---------                     ------
Total                                                  4,335,550                     100.00
                                                       ---------                     ------
</TABLE>

      There was no change in our share capital during 2004.

PUBLIC FLOAT

      As at March 17, 2005, at least 25% of our total issued share capital was
held by the public, as required under the HKSE Listing Rules.

PRE-EMPTIVE RIGHTS

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

ITEM 10B. MEMORANDUM AND ARTICLES OF ASSOCIATION

      Described below is a summary of the significant provisions of our articles
of association as currently in effect. As this is a summary, it does not contain
all the information that may be important to you. A copy of our complete
articles of association as amended on the annual general meeting held on May 12,
2005 is attached hereto as Exhibit 1.1.

      Our shareholders have approved a number of proposed amendments to our
Articles of Association, which will take effect only upon the completion of our
proposed A Share Issue. See "Item 5. Operating and Financial Review and
Prospects--Proposed Issue of A Shares, Very Substantial Acquisition and
Continuing Connected Transactions" and "--Recent Amendments to our Articles of
Association" below.

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

                                       72

<PAGE>

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.

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

                                       73

<PAGE>

      -     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

      -     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.

                                       74

<PAGE>

      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.

      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;

                                       75

<PAGE>

      -     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.

      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;

                                       76

<PAGE>

      -     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.

      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

                                       77

<PAGE>

as the chairman of the meeting directs, and any business other than that on
which the poll has been demanded may be proceeded with, pending the taking of
the poll. The result of the poll shall be deemed to be the resolution of the
meeting at which the poll was demanded. On a poll taken at a meeting, a
shareholder entitled to two or more votes need not cast all his or her votes in
the same way. In the case of a tie, the chairman of the meeting shall be
entitled to one additional vote.

BOARD OF DIRECTORS

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

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

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

LIQUIDATION RIGHTS

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

LIABILITY OF SHAREHOLDERS

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

INCREASES IN SHARE CAPITAL AND PREEMPTIVE RIGHTS

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

REDUCTION OF SHARE CAPITAL AND PURCHASE BY US OF OUR SHARES

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

                                       78

<PAGE>

      -     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:

      -     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

                                       79

<PAGE>

                  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
            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.

                                       80

<PAGE>

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;

      -     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.

RECENT AMENDMENTS TO OUR ARTICLES OF ASSOCIATION

      In connection with our proposed Acquisition and A Share Issue, we made a
conditional amendment to our articles of association in December 2004 to meet
applicable PRC regulatory

                                       81

<PAGE>

requirements, in particular, the Mandatory Provisions for the Articles of
Association of Companies to be Listed Outside China. The proposed amendment to
our articles of association was furnished to the SEC as Exhibit 1.1 -- Appendix
IX IX to the Form 6-K filed on December 8, 2004. The proposed amendment will
take effect only if our proposed A Share Issue is completed. In May 2004, we
made further amendments to our then effective articles of association, which
changed the number of our directors from ten to nine. This amendment to our
article of association was furnished to the SEC as Exhibit 1.1 to the Form 6-K
filed on May 13, 2005.

ITEM 10C. MATERIAL CONTRACTS

      Except for the Acquisition Agreement and the connected transaction
agreements we entered into with Yangcheng Railway Company as discussed in "ITEM
5. Operating and Financial Review and Prospects(pound)-Overview(pound)-Proposed
Issue of A Shares, Very Substantial Acquisition and Continuing Connected
Transactions", all other material contracts we entered into during the fiscal
year of 2003 and 2004 were all made in the ordinary course of business.

ITEM 10D. EXCHANGE CONTROLS

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

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

      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, 2004, we maintained the equivalent of approximately RMB934.8
million in U.S. dollar or Hong Kong dollar-denominated balances for purposes of
satisfying our foreign currency obligations (e.g., to purchase foreign
equipment) and

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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.

ITEM 10E. TAXATION

PRC TAXATION

TAX BASIS OF ASSETS

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

INCOME TAX

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

VALUE ADDED TAX

      Pursuant to the Provisional Regulations of the PRC Concerning Value Added
Tax effective from January 1, 1994 and the related implementing rules, our
passenger and freight transportation businesses are is not subject to value
added tax, while our other businesses, such as retail sales of food, beverages
and merchandise aboard our trains and in our stations, and some of the
businesses conducted by our subsidiaries are subject to value added tax at the
rate of either 6% or 17%, depending on the scale and nature of the businesses.

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

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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
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.

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CAPITAL GAINS TAX

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

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

TAX TREATIES

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

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

UNITED STATES FEDERAL INCOME TAXATION

      The following is a general discussion of the material United States
federal income tax consequences of purchasing, owning and disposing of the H
shares or ADSs if you are a U.S. holder, as defined below, and hold the H shares
or ADSs as capital assets within the meaning of Section 1221 of the Internal
Revenue Code of 1986, as amended, or 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:

      -     tax-exempt entities;

      -     certain insurance companies;

      -     broker-dealers;

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      -     traders in securities that elect to mark to market;

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

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

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

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

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

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

      -     a citizen or resident of the United States for United States federal
            income tax purposes;

      -     a corporation, or other entity treated as a corporation for United
            States federal income tax purposes, created or organized under the
            laws of the United States or any political subdivision thereof;

      -     an estate the income of which is subject to United States federal
            income tax without regard to its source; or

      -     a trust:

            -     subject to the primary supervision of a United States court
                  and the control of one or more United States persons; or

            -     that has elected to be treated as a United States person under
                  applicable United States Treasury regulations.

      If a partnership holds the H shares or ADSs, the tax treatment of a
partner generally will depend on the status of the partner and the activities of
the partnership. If you are a partner of a partnership that holds the H shares
or ADSs, we urge you to consult your tax advisors regarding the consequences of
the purchase, ownership and disposition of the H shares or ADSs.

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

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<PAGE>

      WE URGE YOU TO CONSULT YOUR TAX ADVISORS REGARDING THE UNITED STATES
FEDERAL, STATE, LOCAL AND NON-UNITED STATES TAX CONSEQUENCES OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE H SHARES OR ADSS.

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

DISTRIBUTIONS ON THE H SHARES OR ADSS

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

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

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

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

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

      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

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the date you or the depositary convert the distribution into U.S. dollars will
be treated as United States source ordinary income or loss for foreign tax
credit limitation purposes.

      Subject to various limitations, any PRC tax withheld from distributions in
accordance with PRC law, as limited by the Treaty, will be deductible or
creditable against your United States federal income tax liability. For foreign
tax credit limitation purposes, dividends paid on the H shares or ADSs will be
foreign source income, and for taxable years beginning on or before December 31,
2006, generally will be treated as "passive income" or, in the case of some U.S.
holders, "financial services income." For taxable years beginning after December
31, 2006, such dividends generally will be treated as "passive category income"
or, in the case of some U.S. holders, "general category income." You may not be
able to claim a foreign tax credit (and instead may claim a deduction) for
non-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, or (ii) are obligated to make payments related to the dividends (for
example, pursuant to a short sale).

SALE, EXCHANGE OR OTHER DISPOSITION

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

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

PFIC RULES

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

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

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

      We believe that we 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.

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

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

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

      If you own the H shares or ADSs during any year that we are a PFIC, you
must file Internal Revenue Service, or 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

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shares or ADSs or the proceeds of any sale, exchange or transfer of the H shares
or ADSs, unless you

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

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

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

HONG KONG TAXATION

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

DIVIDENDS

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

TAXATION OF CAPITAL GAINS

      No capital gain tax is generally imposed in Hong Kong in respect of
capital gains from the sale of property (such as the H Shares). However, if
trading gains from the sale of property by persons as part of profit making are
regarded as carrying on a trade, profession or business in Hong Kong, where such
gains are derived from or arise in Hong Kong from such trade, profession or
business, such trading gains will be chargeable to Hong Kong profits tax, which
is currently imposed at the rate of 17.5% on corporations and at a maximum rate
of 16% 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.

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HONG KONG STAMP DUTY

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

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

HONG KONG ESTATE DUTY

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

ITEM 10F. DIVIDENDS AND PAYING AGENTS

      Not applicable.

ITEM 10G. STATEMENT BY EXPERTS

      Not applicable.

ITEM 10H. DOCUMENTS ON DISPLAY

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

      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

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Plaza, 450 Fifth Street, N.W., Washington, D.C. You may also inspect the
registration statement and its exhibits and schedules at the office of the New
York Stock Exchange, 11 Wall Street, New York, New York 10005. You may also get
copies, upon payment of a prescribed fee, of all or a portion of the
registration statement from the SEC's public reference room or by calling the
SEC on 1-800-SEC-0330 or visiting the SEC's website at www.sec.gov.

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

ITEM 10I. SUBSIDIARY INFORMATION

      Not applicable.

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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, 2004.

CURRENCY RISKS

      As approved by the PRC foreign exchange administration, Hong Kong
dollar-denominated income from our through train service may be deposited by us
in Hong Kong dollars up to an amount equal to US$ 18.5 million and need not be
converted into renminbi. If necessary, we had U.S. dollar denominated payment of
Hong Kong dollar-denominated and U.S. dollar-denominated dividends on our H
shares and ADSs, respectively, in excess of the foregoing limit have to be made
after reconverting renminbi at the then applicable People's Bank of China rate
into the relevant foreign currency. Some of our vendor contracts and equipment
leases for the provision of equipment, parts and services, particularly with
respect to the high-speed project, are paid by us in foreign currencies. As of
December 31, 2004, U.S. dollar denominated time deposits with maturities of more
than three months in an amount equivalent to RMB830.5 million, and Hong Kong
dollar denominated time deposits with maturation of more than three months in an
amount equivalent to RMB83.0 million. Our cash, bank deposits and time deposits
with maturities of no more than three months consist of deposits denominated in
U.S. dollar in a amount equivalent to RMB8.7 million, and deposits denominated
in Hong Kong dollar in a amount equivalent to RMB12.6 million. While our foreign
currency deposits are relatively stable, they are insufficient to pay all
dividends and operating expenses, therefore, we bear the risk of exchange rate
fluctuations when we convert renminbi to pay foreign-currency denominated
dividends and operating expenses. However, our management believes that these
contingent exposures relating to foreign exchange rate fluctuations have not had
and are not likely to have a material effect on our financial position. As a
result, we do not enter into any hedging transactions with respect to our
exposure to foreign currency movements. Furthermore, we are not aware of any
effective financial hedging products that serve as protection against a possible
renminbi devaluation.

INTEREST RATE RISKS

      Funds that we do not need in the short term are generally kept as
temporary cash deposits in state-owned commercial banks and in the MOR
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, 2004,
we had no loans outstanding. Accordingly, we are not exposed to any material
interest rate risks.

      As of December 31, 2004, our balances denominated in Hong Kong dollars and
U.S. dollars were translated into renminbi at the applicable market exchange
rates as of that date and amounted to approximately RMB934.8 million. If the
applicable market exchange rates were to change by 10%, this would result in a
change in fair value of approximately RMB93.5 million in these balances. For the
year ended December 31, 2004, the interest income derived from our cash balances
at banks and temporary cash investments amounted to approximately RMB47.0
million. A 10% change in interest rates would have resulted in a change in
interest income of

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approximately RMB4.7 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, 2004, at present and in our normal course of business, we
are not subject to any other market-related risks.

CREDIT RISKS

      See "ITEM 8A.7 Legal Proceedings" for a discussion of our potential loss
in our interests in Tiecheng resulting from a litigation. See "Item 5B.
Liquidity and Capital Resources" for a discussion of the overdue time deposit
held by Li Cheng.

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ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

      Not applicable.

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                                     PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

      None.

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

      None.

ITEM 15. CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

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

INTERNAL CONTROL OVER FINANCIAL REPORTING

      There were no changes in our internal control over financial reporting
that occurred during the year ended December 31, 2004 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.

HOME COUNTRY PRACTICES

      Under the NYSE's corporate governance listing standards, we are required
to disclose any significant ways in which our governance practices differ from
those followed by US domestic companies under the NYSE listing standards. There
are no significant differences in our corporate governance practices compared to
those followed by a U.S. domestic company under the NYSE listing standards,
except for the following:

      -     according to our Audit Committee Charter, the members of our audit
            committee, who are all non-executive independent directors, shall
            meet at least four times a year pursuant to the schedule determined
            by our audit committee.

      -     we do not have a nominating committee or a corporate governance
            committee similar to that required for U.S. domestic companies;

      -     we do not have a compensation committee similar to that required for
            U.S. domestic companies. Under the Corporate Governance Code
            implemented by the HKSE in January 2005, there is a mandatory
            requirement for a company listed on the HKSE to have a remuneration
            committee composed of a majority of independent non-executive
            directors;

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      -     we do not have formal corporate governance guidelines similar to
            those required for U.S. domestic companies. However, in accordance
            with applicable PRC laws and regulations and the HKSE Listing Rules,
            we have adopted the Articles of Association, the General Meeting
            System, the Working Ordinance for the Board of Directors, the
            Working Ordinance for the Board of Supervisors, the Working
            Ordinance for the General Manager, the Capital Management Measures,
            the Investment Management Measures, the Code of Ethics for Senior
            Officers and the Audit Committee Charter that contain provisions
            addressing (1) director qualification standards and
            responsibilities; (2) key board committee responsibilities; (3)
            director access to management and, as necessary and appropriate,
            independent advisors; (4) director compensation; (5)management
            succession; and (6)director orientation and continuing education;

      -     as a company listed on the HKSE, we are required to comply with
            applicable corporate governance and other related requirements of
            the HKSE Listing Rules, including the Corporate Governance Code,
            unless an exemption is available.

      -     we have not adopted a code of business conduct and ethics for our
            directors, officers and employees similar to that required for U.S.
            domestic companies. We have implemented code of business conduct and
            ethics for senior management, including our General Manager, Deputy
            General Manager, Chief Accountant, Chief Engineer and Company
            Secretary. In addition, our directors are required to comply with
            the Model Code for Securities Transactions by Directors of Listed
            Companies set out in the HKSE Listing Rules, which sets out
            standards with which directors are required to comply with respect
            to transactions involving our securities.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

      Our board of directors has determined that Mr. Wilton Chau Chi Wai is an
"audit committee financial expert" as defined in Item 16A of Form 20-F. Mr. Chau
and each of the other members of the Audit Committee is an "independent
director" as defined in Section 303A.02 of the New York Stock Exchange's Listed
Company Manual.

ITEM 16B. CODE OF ETHICS

      We have adopted a code of ethics that applies to our Chief Executive
Officer, President, Chief Financial Officer and other senior officers on April
20, 2004. A copy of this code of ethics was filed with the SEC as Exhibit 11.1
to the annual report on Form 20-F for the fiscal year ended December 31, 2003.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

      Resolutions to appoint PricewaterhouseCoopers (certified public
accountants in Hong Kong), or PwC, as our international auditors for 2004 have
been approved at the annual general meeting of Guangshen Railway held on June
10, 2004.

                                       97

<PAGE>

      PwC was our international auditors for 2003 and 2002.

      The following table presents the aggregate fees for professional services
and other services rendered by PwC to us in 2004 and 2003.

<TABLE>
<CAPTION>
                                              2004                2003
                                              ----                ----
                                                 (RMB MILLIONS)
<S>                                           <C>                 <C>
Audit Fees                                     2.0                 2.0
Audit-related Fees                               -                   -
Tax Fees                                         -                   -
All Other Fees                                   -                   -

                                               ---                 ---
Total                                          2.0                 2.0
                                               ===                 ===
</TABLE>

      Other than the audits performed on our financial statements, PwC did not
provide any services to us in 2004 and 2003. The Audit Committee Charter, which
was adopted by our board of directors on August 12, 2004 based on the applicable
guidelines set forth in the HKSE Listing Rules and U.S. Sarbanes-Oxley Act of
2002, provides that our audit committee is responsible for, among other matters,
supervising the audit of our Company, including the assessment and evaluation of
the nature, quality and scope of work and the fees of our external auditors.
Pursuant to paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation S-X, the
engagement of PwC to perform these audit services were approved by our audit
committee and our board of directors.

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

      Not applicable.

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

      During the year ended December 31, 2004, there was no purchase, sale or
redemption of our equity securities by us, or any of our subsidiaries.

                                       98

<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-47 following ITEM 19.

                                ITEM 19. EXHIBITS

      (a)   See pages F-1 to F-47 following this item.

      (b)   Index of Exhibits

      Documents filed as exhibits to this annual report:

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

4.1         Railway Business Related Assets Purchase Agreement dated November
            15, 2004 between Guangshen Railway Company Limited and Guangzhou
            Railway Group Yangcheng Railway Company

4.2         Land Lease Agreement dated November 15, 2004 between Guangshen
            Railway Company Limited and Guangzhou Railway (Group) Company

4.3         Comprehensive Services Agreement dated November 15, 2004 between
            Guangshen Railway Company Limited and Guangzhou Railway (Group)
            Company

4.4         Comprehensive Services Agreement dated November 15, 2004 between
            Guangshen Railway Company Limited and Guangzhou Railway Group
            Yangcheng Railway Company

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

8.1         List of significant subsidiaries of Guangshen Railway Company
            Limited as of December 31, 2004

12.1        Section 302 principal executive officers' and principal financial
            officer's certifications
</TABLE>

                                       99

<PAGE>

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

                                      100
<PAGE>

                          INDEX TO FINANCIAL STATEMENTS

GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                                       Page
                                                                                       ----
<S>                                                                                    <C>
Report of Independent Registered Public Accounting Firm                                 F-2
Consolidated Income Statements for the years ended 31 December, 2002, 2003 and 2004     F-3
Consolidated Balance Sheets as of 31 December, 2003 and 2004                            F-4
Consolidated Cash Flow Statements for the years ended 31 December 2002, 2003 and
  2004                                                                                  F-5
Consolidated Statements of Changes in Equity for the years ended 31 December 2002,
  2003 and 2004                                                                         F-6
Notes to the Consolidated Financial Statements                                          F-7
</TABLE>

<PAGE>
[PRICEWATERHOUSECOOPERS LOGO]

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, cash flows and changes in shareholders'
equity present fairly, in all material respects, the financial position of
Guangshen Railway Company Limited (the "Company") and its subsidiaries
(established in the People's Republic of China) at 31 December, 2003 and 2004,
and the results of their operations and their cash flows for each of the three
years in the period ended 31 December, 2004, in conformity with International
Financial Reporting Standards. These financial statements are the responsibility
of the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with International Standards on Auditing issued by the
International Federation of Accountants and the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

International Financial Reporting Standards vary in certain significant respects
from accounting principles generally accepted in the United States of America.
Information relating to the nature and effect of such differences is presented
in Note 31 to the consolidated financial statements.

PRICEWATERHOUSECOOPERS

Hong Kong
June 27, 2005

                                      F-2
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME

              FOR THE YEARS ENDED 31 DECEMBER, 2002, 2003 AND 2004

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

<TABLE>
<CAPTION>
                                                                        Years ended 31 December,
                                                          ---------------------------------------------------
                                                 Notes       2002           2003          2004         2004
                                                 -----    ----------    -----------    ----------    --------
                                                             RMB            RMB           RMB          US$*
<S>                                              <C>      <C>           <C>            <C>           <C>
Revenues from railroad businesses
   Passenger                                               1,903,782      1,790,204     2,259,671     272,250
   Freight                                                   530,776        526,382       611,807      73,712
                                                          ----------    -----------    ----------    --------

   Sub-total                                               2,434,558      2,316,586     2,871,478     345,962
Revenues from other businesses                               166,266        151,596       166,671      20,081
                                                          ----------    -----------    ----------    --------

Total revenues                                             2,600,824      2,468,182     3,038,149     366,043
                                                          ----------    -----------    ----------    --------

Operating expenses

   Railroad businesses
     Business tax                                            (73,923)       (47,569)      (83,732)    (10,088)
     Labour and benefits                                    (373,781)      (347,649)     (492,581)    (59,347)
     Equipment leases and services                          (433,918)      (437,739)     (452,204)    (54,482)
     Materials and supplies                                 (192,141)      (216,993)     (245,534)    (29,582)
     Repair costs, excluding materials and
       supplies                                             (102,377)       (89,640)     (216,294)    (26,060)
     Depreciation                                           (335,508)      (290,014)     (334,501)    (40,301)
     Amortisation of leasehold land payments                 (15,131)       (15,602)      (15,704)     (1,892)
     Fees for social services                                (57,385)       (62,579)      (84,643)    (10,198)
     General and administrative expenses           4        (123,800)      (134,688)     (190,290)    (22,927)
     Others                                                 (101,251)      (113,382)     (126,338)    (15,221)
                                                          ----------    -----------    ----------    --------

     Sub-total                                            (1,809,215)    (1,755,855)   (2,241,821)   (270,098)
                                                          ----------    -----------    ----------    --------

   Other businesses
     Business tax                                             (9,373)        (7,226)       (7,840)       (945)
     Materials and supplies                                 (124,602)      (112,677)      (95,637)    (11,523)
     General and administrative expenses           4         (35,137)       (29,711)      (62,678)     (7,552)
                                                          ----------    -----------    ----------    --------

     Sub-total                                              (169,112)      (149,614)     (166,155)    (20,020)
                                                          ----------    -----------    ----------    --------

Total operating expenses                                  (1,978,327)    (1,905,469)   (2,407,976)   (290,118)
                                                          ----------    -----------    ----------    --------

Profit from operations                                       622,497        562,713       630,173      75,925

Other income                                       5           6,575         17,586         5,809         700
Interest income, net                               6          32,712         27,287        41,248       4,970
Share of losses of associates                     16            (323)        (2,508)      (12,119)     (1,460)
                                                          ----------    -----------    ----------    --------

Profit before tax                                            661,461        605,078       665,111      80,135

Income tax expense                                 7        (104,265)       (93,348)      (98,373)    (11,852)

Minority interests                                              (113)            32           746          90
                                                          ----------    -----------    ----------    --------

Profit attributable to shareholders                          557,083        511,762       567,484      68,373
                                                          ==========    ===========    ==========    ========

Dividends                                                    433,555        455,233       476,911      57,459

Earnings per share
    - Basic                                        8         RMB0.13        RMB0.12       RMB0.13    USD0.016
                                                          ==========    ===========    ==========    ========
    - Diluted                                      8             N/A            N/A           N/A         N/A
                                                          ==========    ===========    ==========    ========

Earnings per equivalent ADS
    - Basic                                        8         RMB6.42        RMB5.90       RMB6.54    USD0.788
                                                          ==========    ===========    ==========    ========
    - Diluted                                      8             N/A            N/A           N/A         N/A
                                                          ==========    ===========    ==========    ========
</TABLE>

      The accompanying notes are an integral part of these consolidated
financial statements.

----------------
*Translation of amounts from Renminbi ("RMB") into United States dollars ("US$")
for the convenience of the reader has been made at the Noon Buying Rate on 31
December, 2004 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,
2004.

                                      F-3
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                        AS OF 31 DECEMBER, 2003 AND 2004

                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                                                      31 December,
                                                                      -------------------------------------------
                                                           Notes         2003             2004             2004
                                                           -----      ----------      ------------      ---------
                                                                         RMB              RMB              US$*
<S>                                                        <C>        <C>             <C>               <C>
ASSETS

Current assets
     Cash and cash equivalents                                         1,402,359        1,169,255         140,874
     Temporary cash investments                               10         627,440        1,379,309         166,182
     Interest receivables                                                 25,497           10,513           1,267
     Trade receivables, net                                   11          80,614          106,652          12,850
     Materials and supplies, at cost                                      38,692           60,602           7,300
     Prepayments and other receivables, net                   12         223,463          206,060          24,827
     Due from related parties                                            199,921           56,064           6,755
                                                                      ----------       ----------       ---------

         Total current assets                                          2,597,986        2,988,455         360,055

Fixed assets                                                  13       6,952,878        6,973,279         840,154

Construction-in-progress                                      14         390,393          345,313          41,604

Leasehold land payments                                       15         652,083          636,379          76,672

Interests in associates                                       16         140,494          128,346          15,463

Available-for-sale investments                                17         167,962          167,962          20,236

Deferred tax assets                                           18           6,154           18,406           2,218

Deferred staff costs                                          19         166,003          150,911          18,182
                                                                      ----------       ----------       ---------

         Total assets                                                 11,073,953       11,409,051       1,374,584
                                                                      ==========       ==========       =========

LIABILITIES AND EQUITY

Current liabilities
     Trade payables                                                       34,625           56,272           6,780
     Payables for construction of fixed assets                           148,258          164,591          19,830
     Accrued expenses and other payables                      20         358,287          518,808          62,507
     Due to Parent Company                                                37,230           24,617           2,966
     Due to related parties                                              120,605          172,121          20,737
     Dividend payable                                                        232              456              55
                                                                      ----------       ----------       ---------

         Total current liabilities                                       699,237          936,865         112,875
                                                                      ----------       ----------       ---------

Minority interests                                                        52,358           51,612           6,218
                                                                      ----------       ----------       ---------

Commitments and contingencies                              28,30               -                -               -
                                                                      ----------       ----------       ---------

Equity
     Common stock, par value RMB1.00 per share,
         4,335,550 shares authorized and outstanding          21       4,335,550        4,335,550         522,355
     Additional paid-in capital                                        3,984,135        3,970,100         478,325
     Dedicated capital                                                 1,368,627        1,369,711         165,026
     Retained earnings                                                   634,046          745,213          89,785
                                                                      ----------       ----------       ---------

         Total equity                                                 10,322,358       10,420,574       1,255,491
                                                                      ----------       ----------       ---------

         Total liabilities and equity                                 11,073,953       11,409,051       1,374,584
                                                                      ==========       ==========       =========
</TABLE>

      The accompanying notes are an integral part of these consolidated
financial statements.

-----------------
*Translation of amounts from Renminbi ("RMB") into United States dollars ("US$")
for the convenience of the reader has been made at the Noon Buying Rate on 31
December, 2004 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,
2004.

                                      F-4
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                        CONSOLIDATED CASH FLOW STATEMENTS

              FOR THE YEARS ENDED 31 DECEMBER, 2002, 2003 AND 2004

                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                                            Year ended 31 December,
                                                            ------------------------------------------------------
                                                              2002           2003            2004           2004
                                                            ---------      ---------      ----------      --------
                                                               RMB            RMB            RMB            US$*
<S>                                                         <C>            <C>            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Profit attributable to shareholders                        557,083        511,762         567,484        68,373
   Adjustments for:
       Minority interests                                         113            (32)           (746)          (90)
       Income tax expense                                     104,265         93,348          98,373        11,852
       Depreciation                                           337,797        291,653         336,089        40,493
       Amortisation of leasehold land payments                 15,131         15,602          15,704         1,892
       Loss on disposals of fixed assets                       29,339         16,935             234            28
       Amortisation of deferred staff costs                    15,092         15,092          15,092         1,818
       Share of losses of associates                              323          2,508          12,119         1,460
       Provision for doubtful accounts                          4,598            172          18,750         2,259
       Interest expense                                         4,064          2,359           1,030           124
       Interest income                                        (36,920)       (29,755)        (42,384)       (5,107)
       Decrease / (increase) in current assets
         Trade receivables                                     24,064        (28,621)        (26,038)       (3,137)
         Materials and supplies                                    86         (4,587)        (21,910)       (2,640)
         Prepayments and other receivables                     87,676         17,320           3,998           482
         Due from Parent Company                               (9,875)             -               -             -
         Due from associated companies                                                            29             3
         Due from related parties                               8,128         66,179         143,857        17,332
       Increase / (decrease) in current liabilities
         Trade payables                                       (27,314)        (7,109)         21,647         2,608
         Due to Parent Company                                      -        (13,821)        (12,613)       (1,520)
         Due to related parties                                99,549        (37,594)         51,516         6,207
         Accrued expenses and other payables                   48,529        (10,924)        139,619        16,822
       Interest paid                                           (4,064)        (2,359)         (1,030)         (124)
       Tax paid                                              (100,487)       (99,679)        (84,241)      (10,150)
                                                            ---------      ---------      ----------      --------
   Net cash provided by operating activities                1,157,177        798,449       1,236,579       148,985
                                                            ---------      ---------      ----------      --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of fixed assets and payments for
     construction-in-progress, net of related
     payables                                                (553,337)      (339,208)       (310,179)      (37,371)
   Proceeds from sale of fixed assets                          12,369          1,105           4,041           487
   Increase in interests in associates                         (4,761)          (374)              -             -
   Decrease / (increase) in temporary cash
     investments                                              777,898        (60,101)       (751,869)      (90,587)
   Purchase of available-for-sale investments                 (14,108)             -               -             -
   Interest received                                           32,942         23,109          57,368         6,912
                                                            ---------      ---------      ----------      --------
   Net cash from (used in) investing activities               251,003       (375,469)     (1,000,639)     (120,559)
                                                            ---------      ---------      ----------      --------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Share issuance costs                                             -              -         (14,035)       (1,691)
   Dividends paid to Company's shareholders                  (356,490)      (433,561)       (455,009)      (54,820)
   Dividends paid to minority interests                        (4,153)          (105)              -             -
                                                            ---------      ---------      ----------      --------
   Net cash used in financing activities                     (360,643)      (433,666)       (469,044)      (56,511)
                                                            ---------      ---------      ----------      --------

Net increase / (decrease) in cash and cash equivalents      1,047,537        (10,686)       (233,104)      (28,085)

Cash and cash equivalents, beginning of year                  365,508      1,413,045       1,402,359       168,959
                                                            ---------      ---------      ----------      --------

Cash and cash equivalents, end of year*                     1,413,045      1,402,359       1,169,255       140,874
                                                            =========      =========      ==========      ========
</TABLE>

* Analysis of the balances of cash and cash equivalents

<TABLE>
<CAPTION>
                                             Year ended 31 December,
                             ----------------------------------------------------
                                2002           2003           2004         2004
                             ---------      ---------      ---------      -------
                                RMB            RMB            RMB           US$*
<S>                          <C>            <C>            <C>            <C>
Cash and bank deposits       1,413,045      1,402,359      1,169,255      140,874
                             =========      =========      =========      =======
</TABLE>

      The accompanying notes are an integral part of these consolidated
financial statements.

---------------
*Translation of amounts from Renminbi ("RMB") into United States dollars ("US$")
for the convenience of the reader has been made at the Noon Buying Rate on 31
December, 2004 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,
2004.

                                      F-5
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

              FOR THE YEARS ENDED 31 DECEMBER, 2002, 2003 AND 2004

                             (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        reserve     earnings      Total
                             ----  ---------  ----------  ---------  ---------  -------------  ---------  ----------
                                      RMB        RMB         RMB        RMB          RMB          RMB         RMB
<S>                          <C>   <C>        <C>         <C>        <C>        <C>            <C>        <C>
Balances at 1 January, 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                 -          -           -         -            -     (433,555)    (433,555)
                                   ---------  ---------   ---------   -------     --------     --------   ----------

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

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

Balances at 1 January, 2004        4,335,550  3,984,135     545,574   481,394      341,659      634,046   10,322,358

Profit attributable to
   shareholders                            -          -           -         -            -      567,484      567,484
Share issuance costs                       -    (14,035)          -         -            -            -      (14,035)
Appropriation from retained
   earnings                   22           -          -      59,771    29,900            -      (89,671)           -
Dividends relating to 2003     9           -          -           -         -            -     (455,233)    (455,233)
                                   ---------  ---------   ---------   -------     --------     --------   ----------

Balances at 31 December,
   2004                            4,335,550  3,970,100     605,345   511,294      341,659      656,626   10,420,574
                                   =========  =========   =========   =======     ========     ========   ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-6
<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 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 operates 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 conducts its operations in the PRC and accordingly is 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-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 (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

      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-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)

(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 1
      April, 1996, increased flexibility and autonomy with respect to the
      setting of passenger fares and freight tariffs. This regulatory
      flexibility and autonomy allows the Company a greater degree of control
      over its operations and the ability to adjust its services to meet market
      demand. Further, in preparation for the offering in 1996, the Company
      received legal clarification and confirmation of its asset ownership,
      corporate powers and relationships with service providers and other
      entities in the national railway system.

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

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

(f)   Development and competition in the transportation industry

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

                                      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)

(f)   Development and competition in the transportation industry (Cont'd)

      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, faces significant
      competition from bus services operating in the Pearl River Delta.

(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 our passengers in the case of
      accidents for up to RMB20 per passenger and (ii) personal injury to or
      death of passengers for fault for up to RMB60 per passenger. With respect
      to loss of or damage to baggage, parcels and freight, the Company's
      customers may elect to purchase insurance administered by the MOR for up
      to their declared value. Passengers who do not elect to purchase insurance
      in respect of their baggage and/or parcels may nevertheless recover up to
      RMB0.03 for each 10-kilogram of damaged baggage and/or parcels. Similarly,
      freight transport customers who elect not to purchase insurance may
      recover up to RMB0.1 for each ton of damaged freight.

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

                                      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 (Con'd)

      Before November of 2004, the Company does not maintain medical insurance
      or disability insurance with any third party insurance carriers. The
      Company 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 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. After November of 2004, with
      the medical insurance reform, the Company entered the social insurance
      system organized by the government. Under the new medical insurance
      system, the Group's contributions to the medical insurance for the Group's
      employees in the PRC are made monthly to a government agency. The
      government agency is responsible for the medical liabilities relating to
      these employees. The Group accounts for these contributions on an accrual
      basis and the costs of the benefits are recognised as an expense in the
      period in which they are incurred.

(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.

(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 RMB3,360,692 for
      capital expenditures in 2005, mainly for financing the construction of its
      fourth track between Guangzhou and Shenzhen, the improvement of eastern
      station of Guangzhou, 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.

                                      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)

2.    PRINCIPAL ACCOUNTING POLICIES

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

(a)   Basis of presentation

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

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

      -     Additional depreciation charges on fixed assets;

      -     Write-down of reclaimed rails to realisable value;

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

      -     Reversal of amortisation of deferred renovation expenses;

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

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

      -     Recording of the share issuance costs to the reserves.

      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)

      In 2003, there was a change of accounting estimate in respect of the
      useful lives of certain fixed assets. The financial effects of the change
      of accounting estimate were reported in the previous year's consolidated
      financial statements.

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

      Differences between IFRS and generally accepted accounting principles in
      the United States of America ("US GAAP") as applicable to the group are
      set forth in Note 31.

      Translation of amounts from RMB into US$ for the convenience of the reader
      has been made at the Noon Buying Rate on 31 December, 2004 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,
      2004.

(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.

                                      F-13
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

2.    PRINCIPAL ACCOUNTING POLICIES (CONT'D)

(d)   Associates

      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 recognise further losses, unless the Group has incurred
      obligations or made payments on behalf of the associates.

(e)   Foreign currency transactions

      The Group maintains its books and records in RMB.

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

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

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

(f)   Financial instruments

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

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

                                      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

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

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

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

      Depreciation is calculated using the straight-line method to write off the
      cost or revalued amount, after taking into account the estimated residual
      value of not more than 4% of cost, of each asset over its estimated useful
      life. The estimated useful lives are as follows:

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

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

                                      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)

(g)   Fixed assets (Cont'd)

      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 ready for 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 amortised over
      the lease terms of 36.5 to 50 years using the straight-line method.

(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-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)

(k)   Available-for-sale investments

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

(l)   Deferred staff costs

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

(m)   Operating leases

      Leases where a significant portion of the risks and rewards of ownership
      are retained by the lessor are classified as operating leases. Payments
      made under operating leases are charged to the income statement on a
      straight-line basis over the period of the lease.

(n)   Materials and supplies

      Materials and supplies consist mainly of items for repair and maintenance
      of track, and are stated at lower of cost and net realisable value.
      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.

                                      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)

(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 amortised cost.

(q)   Cash and cash equivalents

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

(r)   Income tax expense

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

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

(s)   Employee benefits

      Pursuant to the PRC laws and regulations, contributions to the basic old
      age insurance for the Group's local staff are to be made monthly to a
      government agency based on 26% of the standard salary set by the
      provincial government, of which 18% is borne by the Company or its
      subsidiaries and the remainder 8% is borne by the staff. The government
      agency is responsible for the pension liabilities relating to such staff
      on their retirement. The Group accounts for these contributions on an
      accrual basis and charges the related contributions to income in the year
      to which the contributions relate.

                                      F-18
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

2.    PRINCIPAL ACCOUNTING POLICIES (CONT'D)

(t)   Government grants

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

(u)   Provisions

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

(v)   Revenue recognition

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

      (i)   Rendering of services and sales of goods

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

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

      (ii)  Interest income

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

      (iii) Dividend income

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

                                      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)

2.    PRINCIPAL ACCOUNTING POLICIES (CONT'D)

(w)   Dividends

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

(x)   Segments

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

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

(y)   Comparatives

      Certain amounts reported in previous years have been reclassified to
      conform with current year presentation.

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-20
<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

3.    SEGMENTAL INFORMATION

(a)   Business segments (Cont'd)

      An analysis by business segment is as follows:

<TABLE>
<CAPTION>
                                                     Railroad businesses             Other businesses           Unallocated
                                             ----------------------------------- ------------------------ -----------------------
                                                2004        2003        2002      2004     2003   2002     2004    2003     2002
                                             ----------- ----------- ----------- ------- ------- -------- ------- ------- -------
                                               RMB'000     RMB'000     RMB'000   RMB'000 RMB'000 RMB'000  RMB'000 RMB'000 RMB'000
<S>                                          <C>         <C>         <C>         <C>     <C>     <C>      <C>     <C>     <C>
Revenues
- External                                    2,871,478   2,316,586   2,434,558  166,671 151,596 166,266       -       -       -
- Inter-segment                                       -           -           -   58,727  52,172  75,188       -       -       -
                                             ----------  ----------  ----------  ------- ------- -------  ------  ------  ------
                                              2,871,478   2,316,586   2,434,558  225,398 203,768 241,454       -       -       -
                                             ==========  ==========  ==========  ======= ======= =======  ======  ======  ======

Segment result                                  629,657     560,731     625,343      516   1,982  (2,846)      -       -       -
Other income                                      5,175      16,809       1,411      634     777   5,164       -       -       -
Interest income                                  41,850      29,349      36,281      534     406     639       -       -       -
Finance costs                                         -           -           -        -       -       -  (1,136) (2,468) (4,208)
Share of losses of associates                   (12,119)     (2,508)       (323)       -       -       -       -       -       -
Income tax expense
Minority interests


Profit attributable to shareholders


Other information
Segment assets                               11,046,722  10,082,637  10,147,098  215,577 844,668 962,077       -       -       -

Deferred tax assets                                   -           -           -        -       -       -  18,406   6,154   7,577

Interests in associates                         128,346     140,494     139,972        -       -     870       -       -       -


Total assets


Segment liabilities                             757,510     429,123     678,303  103,477 220,620 251,719       -       -       -

Taxes payable                                         -           -           -        -       -       -  75,878  49,494  71,844


Total liabilities


Capital expenditure                             315,035     298,890     526,700   11,477   7,103   8,330       -       -       -


Non-cash expenses - Depreciation                334,501     290,014     335,508    1,588   1,639   2,289       -       -       -

                  - Amortisation of
                     leasehold land payments     15,704      15,602      15,131        -       -       -       -       -       -

                  - Provision for doubtful
                     accounts                    18,668         123       4,257       82      49     341       -       -       -

                  - Amortisation of deferred
                     staff costs                 15,092      15,092      15,092        -       -       -       -       -       -
</TABLE>

<TABLE>
<CAPTION>
                                                   Consolidation                      Total
                                             -------------------------- -----------------------------------
                                               2004    2003     2002       2004        2003        2002
                                             -------- -------- -------- ----------- ----------- -----------
                                             RMB'000  RMB'000  RMB'000    RMB'000     RMB'000     RMB'000
<S>                                          <C>      <C>      <C>      <C>         <C>         <C>
Revenues
- External                                         -        -        -   3,038,149   2,468,182   2,600,824
- Inter-segment                              (58,727) (52,172) (75,188)          -           -           -
                                             -------  -------  -------  ----------  ----------  ----------
                                             (58,727) (52,172) (75,188)  3,038,149   2,468,182   2,600,824
                                             =======  =======  =======  ==========  ==========  ==========

Segment result                                     -        -        -     630,173     562,713     622,497
Other income                                       -        -        -       5,809      17,586       6,575
Interest income                                    -        -        -      42,384      29,755      36,920
Finance costs                                      -        -        -      (1,136)     (2,468)     (4,208)
Share of losses of associates                      -        -        -     (12,119)     (2,508)       (323)
Income tax expense                                                         (98,373)    (93,348)   (104,265)
Minority interests                                                             746          32        (113)
                                                                        ----------  ----------  ----------

Profit attributable to shareholders                                        567,484     511,762     557,083
                                                                        ==========  ==========  ==========

Other information
Segment assets                                     -        -        -  11,262,299  10,927,305  11,109,175

Deferred tax assets                                -        -        -      18,406       6,154       7,577

Interests in associates                            -        -        -     128,346     140,494     140,843
                                                                        ----------  ----------  ----------

Total assets                                                            11,409,051  11,073,953  11,257,594
                                                                        ==========  ==========  ==========

Segment liabilities                                -        -        -     860,987     649,743     930,022

Taxes payable                                      -        -        -      75,878      49,494      71,844
                                                                        ----------  ----------  ----------

Total liabilities                                                          936,865     699,237   1,001,866
                                                                        ==========  ==========  ==========

Capital expenditure                                -        -        -     326,512     305,993     535,030
                                                                        ==========  ==========  ==========

Non-cash expenses - Depreciation                   -        -        -     336,089     291,653     337,797
                                                                        ==========  ==========  ==========
                  - Amortisation of
                     leasehold land payments       -        -        -      15,704      15,602      15,131
                                                                        ==========  ==========  ==========
                  - Provision for doubtful
                     accounts                      -        -        -      18,750         172       4,598
                                                                        ==========  ==========  ==========
                  - Amortisation of deferred
                     staff costs                   -        -        -      15,092      15,092      15,092
                                                                        ==========  ==========  ==========
</TABLE>

For the years ended 31 December, 2002, 2003 and 2004, no revenues from a single
customer accounted for 10 percent or more of the Group's total revenues.

                                      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)

3.    SEGMENTAL INFORMATION (CONT'D)

(b)   Geographic segments

      For the year ended 31 December, 2004, all of the Group's business
      operations are conducted in the PRC.

4.    GENERAL AND ADMINISTRATIVE EXPENSES

<TABLE>
<CAPTION>
                                                             Year ended 31 December,
                                                       ---------------------------------
                                                         2002         2003         2004
                                                       -------      -------      -------
                                                         RMB          RMB          RMB
<S>                                                    <C>          <C>          <C>
Wages and bonus                                         16,226       14,936       46,043
Retirement and employee benefits                        49,722       58,778      100,659
Utility expenses                                           195          219          138
Office expenses                                         15,538       15,414       15,131
Construction duty, land use fees and other duties        3,761        3,539        1,683
Depreciation                                             1,625        1,693        1,589
Amortisation of deferred staff costs                    15,092       15,091       15,092
Provision for doubtful accounts                          4,598          172       18,750
Others                                                  52,180       54,557       53,883
                                                       -------      -------      -------

                                                       158,937      164,399      252,968
                                                       =======      =======      =======
Attributable to:
     Railroad businesses                               123,800      134,688      190,290
     Other businesses                                   35,137       29,711       62,678
                                                       -------      -------      -------

                                                       158,937      164,399      252,968
                                                       =======      =======      =======
</TABLE>

5.    OTHER INCOME

<TABLE>
<CAPTION>
                              Year ended 31 December,
                             --------------------------
                              2002      2003      2004
                             -----    -------    ------
                              RMB       RMB        RMB
<S>                          <C>      <C>        <C>
Exchange losses /(gain)        799    (1,356)     (363)
Others                       5,776    18,942     6,172
                             -----    ------     -----

                             6,575    17,586     5,809
                             =====    ======     =====
</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)

6.    INTEREST INCOME, NET

<TABLE>
<CAPTION>
                              Year ended 31 December,
                            ---------------------------
                              2002      2003     2004
                            -------   -------   -------
                              RMB       RMB       RMB
<S>                         <C>       <C>       <C>
Finance costs               (4,208)   (2,468)   (1,136)
Interest income             36,920    29,755    42,384
                            ------    ------    ------

                            32,712    27,287    41,248
                            ======    ======    ======
</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 income tax 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,
2004 is 15%.

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

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

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

<TABLE>
<CAPTION>
                                                                       Year ended 31 December,
                                                                     ----------------------------
                                                                       2002      2003      2004
                                                                     --------   ------   --------
                                                                       RMB       RMB       RMB
<S>                                                                  <C>        <C>      <C>
Provision for PRC income tax                                         106,649    91,925   110,625
Deferred tax benefits resulting from recognition of bad debts
   aging over three years                                                  -         -    (9,404)
Deferred tax (benefit) / charge resulting from provision for
   doubtful accounts                                                  (1,173)      316    (2,813)
Deferred tax (benefit) / charge resulting from loss on the
   disposals of fixed assets                                          (1,211)    1,107       (35)
                                                                     -------    ------   -------

                                                                     104,265    93,348    98,373
                                                                     =======    ======   =======
</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)

7.    INCOME TAX EXPENSE (CONT'D)

The tax on the Group's profit before tax differs from the theoretical amount
that would arise using the applicable tax rate of the Company as follows:

<TABLE>
<CAPTION>
                                                                        2002             2003             2004
                                                                     ----------       ----------       ----------
                                                                     Percentage       Percentage       Percentage
<S>                                                                  <C>              <C>              <C>
Weighted average statutory tax rate                                     15.0%            15.0%           15.0%
Tax effect of expenses that are not deductible in determining
   taxable profit:
   - Amortisation of deferred staff costs                                0.3%             0.4%            0.3%
   - Share of loss of associate                                            -                -             0.3%
   - Entertainment expenses over deductible limits                                                        0.3%
Effect of different tax rates for certain subsidiaries                   0.4%               -             0.3%
Deferred tax benefits resulting from recognition of bad
  debts aging over three years                                                                           (1.4%)
                                                                        ----             ----            ----

Effective income tax rate                                               15.7%            15.4%           14.8%
                                                                        ====             ====            ====
</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 RMB567,484 (2003: RMB511,762), 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 (2003: 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

<TABLE>
<CAPTION>
                                                                       2003       2004
                                                                     -------     -------
                                                                     RMB'000     RMB'000
<S>                                                                  <C>         <C>
Final, proposed, of RMB0.11 (2003: RMB0.105) per ordinary share      455,233     476,911
                                                                     =======     =======
</TABLE>

At a meeting held on 17 March, 2005, the directors proposed a final dividend of
RMB0.11 per ordinary share. This proposed dividend is not reflected as a
dividend payable in these accounts, but will be reflected as an appropriation of
retained earnings for the year ending 31, December 2005.

                                      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)

10.   TEMPORARY CASH INVESTMENTS

<TABLE>
<CAPTION>
                                                                        31 December,
                                                                   ---------------------
                                                          Note      2003          2004
                                                          ----     -------     ---------
                                                                     RMB          RMB
<S>                                                       <C>      <C>         <C>
Time deposits with maturities over three months in banks   (a)     459,440     1,211,309
Time deposits with maturities over three months in the
   MOR's Railway Deposits-taking Center                    (b)     168,000       168,000
                                                                   -------     ---------

                                                                   627,440     1,379,309
                                                                   =======     =========
</TABLE>

(a)   Time deposits with maturities over three months in banks consist of
      short-term deposits denominated in RMB, Hong Kong dollars ("HK$"), and US
      dollars ("USD") (2003: RMB and USD) with original maturities ranging from
      six months to one year, placed with banks in the PRC. The annual interest
      rate of RMB deposits ranged from 1.71% to 2.07% in 2004 (2003: 1.98%), the
      annual interest rate of HK$ deposit was 1.2% (2003: 1.13%), and the annual
      interest rates of USD deposits were LIBOR plus a floating rate ranging
      from -0.2% to 0% (2003: LIBOR plus a floating rate ranging from -0.2% to
      0%). Total interest earned from such deposits amounted to approximately
      RMB 15,015 for the year (2003: approximately RMB 11,868).

(b)   Time deposits with maturities over three months in the MOR's Railroad
      Deposit-taking Center consist of short-term deposits denominated in RMB
      (2003: RMB) with original maturities of one year (2003: one year). The
      annual interest rate of RMB deposits was 1.98% in 2004 (2003: 1.98%).
      Total interest earned from such deposits amounted to approximately RMB
      3,098 (2003: approximately RMB 3,326) for the year (see Note 24(b)).

                                      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)

11.   TRADE RECEIVABLES, NET

<TABLE>
<CAPTION>
                                               31 December,
                                          ---------------------
                                            2003          2004
                                          --------     --------
                                            RMB           RMB
<S>                                       <C>          <C>
Trade receivables                          96,037      122,075
Less: Provision for doubtful accounts     (15,423)     (15,423)
                                          -------      -------

                                           80,614      106,652
                                          =======      =======
</TABLE>

The credit terms of trade receivables are within one year. The aging analysis of
trade receivables, net was as follows:

<TABLE>
<CAPTION>
                                       31 December,
                                    ------------------
                                     2003       2004
                                    ------     -------
                                      RMB        RMB
<S>                                 <C>        <C>
Within 1 year                       75,674      99,297
Over 1 year but within 2 years       4,719       7,332
Over 2 years but within 3 years        221          23

                                    80,614     106,652
                                    ======     =======
</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,
                            -----------------------
                             2003             2004
                            -------          ------
                              RMB             RMB
<S>                         <C>              <C>
At beginning of year        15,959           15,423
Reversal during the year      (536)               -
                            ------           ------

At end of year              15,423           15,423
                            ======           ======
</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)

12.   PREPAYMENTS AND OTHER RECEIVABLES, NET

<TABLE>
<CAPTION>
                                                  31 December,
                                            -----------------------
                                              2003           2004
                                            --------       --------
                                              RMB             RMB
<S>                                         <C>            <C>
Other receivables                           157,690        200,555
Less: Provision for doubtful accounts       (38,288)       (57,038)
                                            -------        -------
Other receivables, net                      119,402        143,517
Prepayments                                 104,061         62,543
                                            -------        -------

                                            223,463        206,060
                                            =======        =======
</TABLE>

Movements of provision for doubtful accounts:

<TABLE>
<CAPTION>
                                            Year ended 31 December,
                                            -----------------------
                                             2003             2004
                                            -------          ------
                                             RMB              RMB
<S>                                         <C>              <C>
At beginning of year                        39,898           38,288
Addition of provision during the year          172           18,750
Reversal during the year                    (1,782)               -
                                            ------           ------

At end of year                              38,288           57,038
                                            ======           ======
</TABLE>

As of 31 December, 2004 and 2003, the Company had fixed deposit with the
principal amount of approximately RMB31.365 million in Zeng Cheng City Li Cheng
Credit Cooperative ("Li Cheng"). The Company had not been able to recover the
principal from Li Cheng upon the expiry of the fixed deposit term. In March
1999, the Company instituted legal proceedings against Li Cheng to recover the
deposit and the related interest. According to the court verdict dated 12
October, 1999, Li Cheng was required to repay the deposit principal and the
related interest to the Company. As Li Cheng failed to execute the court ruling,
the Company further applied to the court for compulsory enforcement of the court
order. In July 2000, Li Cheng filed a petition to the court for winding up. On 9
November, 2000, the court ordered the suspension of execution of the court
ruling dated 12 October, 1999, while Li Cheng was undergoing a winding-up. On 23
November, 2000, the Company applied to the Guangdong Provincial Government for
allocation of special funds by the government to Li Cheng for repayment of the
Company's deposit principal. The provincial government accepted the petition and
requested the municipal government to follow up on the case. In 2002, the
Company reclassified such amount from temporary cash investment and accounted
for 50% provision pursuant to management's estimates. As of the date of this
report, the fixed deposit has not yet been collected. Based on the management's
current estimates, the Company accounted for full provision in 2004.

                                      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)

13.   FIXED ASSETS, NET

<TABLE>
<CAPTION>
                                                          Track,
                                                         bridges    Locomotives  Communications    Other
                                                           and          and           and        machinery
                                            Leasehold    service      rolling      signalling       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
At 1 January, 2003              1,941,156     38,500    4,245,546   1,026,205       297,106      1,585,712   9,134,225
Additions                             260          -            -      21,679           916         32,823      55,678
Transfer from
  construction-in-progress        209,479          -      123,832           -           720        198,718     532,749
Government grants                 (17,000)         -            -           -             -              -     (17,000)
Reclassification                 (154,024)         -      (37,113)          -         5,936        185,201           -
Disposals                         (92,503)         -      (16,560)     (4,992)       (4,600)       (33,116)   (151,771)
                                ---------     ------    ---------   ---------       -------      ---------   ---------

At 31 December, 2003            1,887,368     38,500    4,315,705   1,042,892       300,078      1,969,338   9,553,881
Additions                          22,644                              15,232         3,379            355      41,610
Transfer from
  construction-in-progress        229,261                  26,851                    17,905         55,965     329,982
Reclassification*                 171,753                 (21,878)                   21,992       (171,867)          -
Disposals                         (15,216)                 (3,600)                   (1,260)       (18,311)    (38,387)
                                ---------     ------    ---------   ---------       -------      ---------   ---------

At 31 December, 2004            2,295,810     38,500    4,317,078   1,058,124       342,094      1,835,480   9,887,086
                                ---------     ------    ---------   ---------       -------      ---------   ---------

Representing:
At cost                           457,122     38,500      187,339      37,781        68,116        325,136   1,113,994
At 2002 professional valuation  1,838,688          -    4,129,739   1,020,343       273,978      1,510,344   8,773,092
                                ---------     ------    ---------   ---------       -------      ---------   ---------

                                2,295,810     38,500    4,317,078   1,058,124       342,094      1,835,480   9,887,086
                                ---------     ------    ---------   ---------       -------      ---------   ---------

Accumulated depreciation
At 1 January, 2003                376,192     13,475    1,037,553     271,152       178,397        459,176   2,335,945
Charges for the year               54,399      7,700       46,476      47,648        34,144        101,286     291,653
Reclassification*                       -          -      (16,682)          -           563         16,119           -
Disposals                            (921)         -       (2,550)     (4,992)       (4,417)       (13,715)    (26,595)
                                ---------     ------    ---------   ---------       -------      ---------   ---------

At 31 December, 2003              429,670     21,175    1,064,797     313,808       208,687        562,866   2,601,003
Charges for the year               75,363      7,700       51,103      44,126        35,609        122,188     336,089
Reclassification                    9,226          -           77           -           777        (10,080)          -
Disposals                          (1,915)         -       (3,240)          -        (1,248)       (16,882)    (23,285)
                                ---------     ------    ---------   ---------       -------      ---------   ---------

At 31 December, 2004              512,344     28,875    1,112,737     357,934       243,825        658,092   2,913,807
                                ---------     ------    ---------   ---------       -------      ---------   ---------

Net book value
At 31 December, 2004            1,783,466      9,625    3,204,341     700,190        98,269      1,177,388   6,973,279
                                =========     ======    =========   =========       =======      =========   =========

At 1 January, 2004              1,457,698     17,325    3,250,908     729,084        91,391      1,406,472   6,952,878
                                =========     ======    =========   =========       =======      =========   =========

Had the fixed assets been carried at cost less accumulated depreciation, the
carrying amounts at 31 December, 2004 would have been:

Cost                            1,595,705     38,500    3,667,016   1,038,319       316,272      1,739,089   8,394,901
Accumulated depreciation          265,812     28,875      736,830     314,177       222,916        582,978   2,151,588
                                ---------     ------    ---------   ---------       -------      ---------   ---------

                                1,329,893      9,625    2,930,186     724,142        93,356      1,156,111   6,243,313
                                =========     ======    =========   =========       =======      =========   =========
</TABLE>

                                      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)

13.   FIXED ASSETS, NET (CONT'D)

*     During the year ended 31 December, 2004, based on the construction
      completion reports, the directors reclassified certain fixed assets to
      appropriate categories. Accordingly, the carrying amounts of the aforesaid
      fixed assets are depreciated over their remaining useful lives under the
      respective categories.

   On 6 March, 1996, the fixed assets of the Group were revalued by Vigers Hong
   Kong Limited (the "Valuer"), a qualified independent valuer in Hong Kong,
   using a replacement cost approach and open market value approach. The
   replacement cost approach considers the cost to replace in new condition the
   assets appraised for similar assets, and includes purchase price, delivery
   charge and installation cost. The purchase price is based on the open market
   value. The Valuer assumed that the assets will be used for the purposes for
   which they are presently used and did not consider alternative uses. The
   total revalued amount based on the aforesaid 1996 revaluation was RMB
   5,318,202,000. The revaluation surplus of fixed assets amounting to
   approximately RMB1,492,185,000 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, 2004 approximated to their fair values.

14.   CONSTRUCTION-IN-PROGRESS

<TABLE>
<CAPTION>
                                 31 December,
                            -----------------------
                              2003          2004
                            ---------     ---------
                               RMB           RMB
<S>                         <C>           <C>
At 1 January                 672,827       390,393
Additions                    250,315       284,902
Transfer to fixed assets    (532,749)     (329,982)
                            --------      --------

At 31 December               390,393       345,313
                            ========      ========
</TABLE>

As of 31 December, 2004, there was no interest capitalised in the
construction-in-progress as the Group had no bank borrowings.

                                      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)

15.   LEASEHOLD LAND PAYMENTS

<TABLE>
<CAPTION>
                                               Year ended 31 December,
                                             --------------------------
                                               2003              2004
                                             -------            -------
                                               RMB               RMB
<S>                                          <C>                <C>
Cost
At 1 January                                 760,087            770,774
Additions                                     10,687                  -
Disposals                                          -                  -
                                             -------            -------

At 31 December                               770,774            770,774
                                             -------            -------
Accumulated amortisation
At 1 January                                 103,089            118,691
Charges for the year                          15,602             15,704
Disposals                                          -                  -
                                             -------            -------

At 31 December                               118,691            134,395
                                             -------            -------

Net book value
At 31 December                               652,083            636,379
                                             =======            =======

At 1 January                                 656,998            652,083
                                             =======            =======
</TABLE>

16.  INTERESTS IN ASSOCIATES

<TABLE>
<CAPTION>
                                                    31 December,
                                             --------------------------
                                              2003               2004
                                             -------            -------
                                             RMB'000            RMB'000
<S>                                          <C>                <C>
Share of net assets, at 1 January            136,574            134,066
Share of losses                               (2,508)           (12,119)
                                             -------            -------
Share of net assets, at 31 December          134,066            121,947

Due from associates                           48,437             48,402
Due to associates                                 (8)                (2)
                                             -------            -------
                                             182,495            170,347

Less: Provision for impairment in value      (29,689)           (29,689)
      Provision for doubtful accounts        (12,312)           (12,312)
                                             -------            -------

                                             140,494            128,346
                                             =======            =======
</TABLE>

                                      F-30

<PAGE>

               GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

16.   INTERESTS IN ASSOCIATES (CONT'D)

Analysis of share of net assets of the associates is as follows:

<TABLE>
<CAPTION>
                                             2003               2004
                                           RMB '000           RMB '000
<S>                                        <C>               <C>
At 1 January                               136,574            134,066
Share of losses before tax                  (2,417)           (12,070)
Share of taxation                              (91)               (49)
                                           -------            -------

At 31 December                             134,066            121,947
                                           =======            =======
</TABLE>

The amounts due from/to associates were unsecured, interest free and had no
fixed repayment terms. The provision for impairment in value and provision for
doubtful accounts were provided for Zengcheng Lihua Stock Company Limited
("Zengcheng Lihua") as Zengcheng Lihua is in financial difficulty.

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

<TABLE>
<CAPTION>
                                             Year ended 31 December,
                                            ------------------------
                                             2003               2004
                                            ------             ------
                                             RMB                RMB
<S>                                         <C>                <C>
Beginning of year                           43,787             42,001
Utilisation during the year                 (1,786)                 -
                                            ------             ------

End of year                                 42,001             42,001
                                            ======             ======
</TABLE>

As of 31 December, 2004, the Company had direct or indirect interests in the
following companies which were incorporated/established and are operating in the
PRC:

<TABLE>
<CAPTION>
                                                                   Percentage of
                                                  Date of         equity interest
                                              incorporation /     attributable to
          Name of the entity                   establishment        the Company     Paid-up capital       Principal activities
---------------------------------------      -----------------    ---------------   ---------------     -------------------------
<S>                                          <C>                  <C>               <C>                 <C>
Directly held by the Company

Guangzhou Tiecheng Enterprise Company              2 May, 1995                 49%   RMB245,000,000     Properties management and
   Limited                                                                                                trading of merchandise

Zengcheng Lihua Stock Company                    30 July, 1992                 27%   RMB100,000,000     Real estate, warehousing,
   Limited                                                                                                cargo loading and
                                                                                                          unloading

Indirectly held by the Company

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

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

17.   AVAILABLE-FOR-SALE INVESTMENTS

<TABLE>
<CAPTION>
                                                                 31 December,
                                                              ------------------
              Name of the investee company                      2003       2004
---------------------------------------------------           -------    -------
                                                              RMB'000    RMB'000
<S>                                                           <C>        <C>
China Railway Communication Company Limited ("China
 Railcom")*                                                   121,854    121,854
Shenzhen Innovation Technology Investment Company
 Limited                                                       30,000     30,000
China Railway Express Company Limited                          13,608     13,608
Shenzhen Huatie Enterprise Company Limited                      2,000      2,000
Zhongtie Information Company Limited                              500        500
                                                              -------    -------

                                                              167,962    167,962
                                                              =======    =======

</TABLE>

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.

*     China Railcom has confirmed in writing that the Company is entitled to the
      0.69% equity interest in China Railcom as of 31 December, 2003. The
      relevant legal registration procedures have not been completed in 2004.
      Taking into account of a legal opinion, the directors believe that as at
      31 December, 2004, the Company's equity investment in China Railcom is
      valid.

      Pursuant to Tiezhengfa (2004) No. 6 jointly issued by MOR and State-owned
      Assets Supervision and Administration Commissions, the Company is required
      to dispose its investment in China Railcom. For fulfilling such
      requirement, the Company has been negotiating with the Parent Company,
      which would buy the Company's investment in China Railcom. The management
      expected that the consideration will be no less than the carrying book
      value of the Company's investment in China Railcom as at 31 December,
      2004.

                                      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)

18.   DEFERRED TAX ASSETS

<TABLE>
<CAPTION>
                                                                    31 December,
                                                                ---------------------
                                                                2003            2004
                                                                -----          ------
                                                                 RMB             RMB
<S>                                                             <C>            <C>
Deferred tax assets:
  -   Provision for doubtful accounts                           2,699          14,916
  -   Loss on disposals of fixed assets                         3,455           3,490
                                                                -----          ------

                                                                6,154          18,406
                                                                =====          ======
</TABLE>

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

<TABLE>
<CAPTION>
                                                                Year ended 31 December,
                                                               ------------------------
                                                                2003              2004
                                                               ------            ------
                                                                RMB               RMB
<S>                                                             <C>              <C>
At beginning of year                                            7,577             6,154
(Debit) / credit to consolidated profit during the years       (1,423)           12,252
                                                               ------            ------

At end of year                                                  6,154            18,406
                                                               ======            ======
</TABLE>

19.   DEFERRED STAFF COSTS

<TABLE>
<CAPTION>
                                                                      31 December,
                                                                 ---------------------
                                                                  2003          2004
                                                                 -------       -------
                                                                 RMB'000       RMB'000
<S>                                                              <C>           <C>
Cost, at 1 January and 31 December                               226,369       226,369
                                                                 -------       -------

Accumulated amortisation
At 1 January                                                     (45,274)      (60,366)
Charges for the year                                             (15,092)      (15,092)
                                                                 -------       -------

At 31 December                                                   (60,366)      (75,458)
                                                                 -------       -------

Net book amount
At 31 December                                                   166,003       150,911
                                                                 =======       =======
At 1 January                                                     181,095       166,003
                                                                 =======       =======
</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)

20.   ACCRUED EXPENSES AND OTHER PAYABLES

<TABLE>
<CAPTION>
                                                       31 December,
                                                 ----------------------
                                                  2003           2004
                                                 -------        -------
                                                   RMB            RMB
<S>                                              <C>            <C>
Advances from customers                           89,840        127,411
Accrued expenses                                  24,000         74,173
Salary and welfare payables                       15,138         24,257
Taxes payables                                    49,494         75,878
Other payables                                   179,815        217,089
                                                 -------        -------

                                                 358,287        518,808
                                                 =======        =======
</TABLE>

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

Pursuant to Caishui [2004] No. 36 and Caishui [2003] No. 149 issued by MOF and
State Administration of Taxation, the Group is exempted from certain real estate
taxes amounting to approximately RMB14,000,000 for the year ended 31 December
2004 (2003: approximately RMB12,000,000). The grant of such exemption is subject
to the acknowledgement of relevant authorities that the Company is a
transportation company under the MOR. The directors believe that the Group is
qualified for such exemption and is in the process of seeking the
acknowledgement from the relevant authorities. Accordingly, such real estate
taxes have not been accrued for in the accompanying financial statements.

21.   SHARE CAPITAL

As of 31 December, 2004, the authorised capital of the Company consisted of
ordinary shares of par value RMB1.00 per share:

<TABLE>
<CAPTION>
                                                                                       Percentage
                                                 Number of                             of capital
                                                  shares          Nominal 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>

                                      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)

22.   DISTRIBUTION OF INCOME

According to the articles of association of the Company, when distributing
profit attributable to shareholders of each year, the Company shall set aside
10% of its profit attributable to shareholders after tax based on the Company's
local statutory accounts for the statutory surplus reserve (except where the
reserve has reached 50% of the Company's registered share capital) and 5% to 10%
for the statutory public welfare fund at a percentage determined by the
directors. The Company may make appropriation from its profit attributable to
shareholders to the discretionary surplus reserve provided it is approved by a
resolution of a shareholders' general meeting. These reserves cannot be used for
purposes other than those for which they are created and are not distributable
as cash dividends without prior approval from a shareholders' general meeting
under certain conditions.

When the statutory surplus reserve is not sufficient to make good for any losses
of the Company from previous years, current year profit attributable to
shareholders shall be used to make good the losses before allocations are set
aside for the statutory surplus reserve or the statutory public welfare fund.

The statutory public welfare fund is used to build or acquire capital items,
such as dormitories and other facilities for the Company's employees and cannot
be used to pay for welfare expenses. Title of these capital items will remain
with the Company.

The statutory surplus reserve, the discretionary surplus reserve and the share
premium may be converted into share capital 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.

                                      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)

22.   DISTRIBUTION OF INCOME (CONT'D)

In accordance with the articles of association of the Company, dividends are
determined based on the least of retained earnings determined in accordance with
(a) PRC GAAP, (b) IFRS and (c) the accounting standards of the countries in
which its shares are listed. As the statutory accounts have been prepared in
accordance with PRC GAAP, the retained earnings as reported in the statutory
accounts may be different from the amount reported in the accompanying statement
of changes in shareholders' equity.

As of 31 December, 2004, the reserve of the Company available for distribution
was approximately RMB694,086,000 (2003: approximately RMB656,893,000).

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.

Starting from April 2002, the ultimate pension liability is under the management
of local government authority. For administrative purpose, during the transition
period from April 2002 to November 2004, the Group continued to pay such
contributions to the Parent Company, which in turn paid such amounts to the
relevant government authority. Since November 2004, the Group has paid all such
contributions directly to the relevant government authority.

The retirement benefits borne by the Company in 2002, 2003 and 2004 were RMB
31,858, RMB39,999 and RMB42,950 respectively. As of 31 December, 2004, payable
for pension obligations due to the Parent Company was nil (2003: nil).

24.   RELATED PARTY TRANSACTIONS

Parties are considered to be related if one party has the ability, directly or
indirectly, to control the other party or exercise significant influence over
the other party in making financial and operating decisions. Parties are also
considered to be related if they are subject to common control or common
significant influence.

(a)   During the year, the Group had the following material transactions with
      related parties:

      Recurring transactions

      A significant portion of transactions undertaken by the Group during the
      year was with related PRC state-owned enterprises and on such terms as
      determined by the relevant PRC authorities and/or stipulated in the
      related agreements entered into with these parties. The following is a
      summary of significant recurring transactions carried out in the ordinary
      course of business by the Group with its related parties during the year:

                                      F-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)

24.   RELATED PARTY TRANSACTIONS (CONT'D)

      Recurring transactions (Cont'd)

<TABLE>
<CAPTION>
                                                                                        Year ended 31 December,
                                                                            -----------------------------------------------
                                                                              2002               2003                2004
                                                                            -------             -------             -------
                                                                              RMB                 RMB                 RMB
<S>                                                                         <C>                 <C>                 <C>
Expense
Lease of locomotives and related services from Guangzhou Railway Group
   Yang Cheng Railway Company, a subsidiary of the Parent Company(i)         42,047              40,882              48,179

Provision of trains and related services from Guangmeishan Railway
   Company Limited, a subsidiary of the Parent Company (ii)                   4,864               5,305               6,066

Purchases of materials and supplies from Guangzhou Railway
   Material Supply Company, a subsidiary of the Parent Company(iii)          33,074              50,687              65,998

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) (ii)            66,744              68,079              94,246

Operating lease rentals paid to the MOR(i)                                   57,298              58,904              65,485

Provision of trains and related service through MOR(i)                      211,667             201,870             209,503

Provision of trains usage and related services from Guangzhou Railway
   (Group) Passenger Transportation Company, a subsidiary of the
   Parent Company(i)                                                          6,681               2,207                   -

Interest expenses paid to the Parent Company (iv)                             2,443               2,037                 553

Income

Interest received from the MOR's Railroad Deposit-taking Centre
   (see Note 10(b) and 24(b))                                                 3,239               3,516               6,111

Interest received from Pingnan Railway Company Limited, an
   associate of the Parent Company (iv)                                         806                 827                 527

Interest received from Guangmeishan Railway Company Limited (iv)              1,884                 901                 109
</TABLE>

                                      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)

24.   RELATED PARTY TRANSACTIONS (CONT'D)

      Non-recurring transactions

<TABLE>
<CAPTION>
                                                                           2002                2003                2004
                                                                          -------             -------             -------
                                                                          RMB'000             RMB'000             RMB'000
<S>                                                                       <C>                 <C>                 <C>
Expense

Provision of repair and maintenance services from Guangzhou Railway
    Engineer Construction Enterprise Development Company, a subsidiary
    of the Parent Company (i)                                                   -                   -              46,588

Provision of repair and maintenance services from
    Guangzhou Guangtie Huake Technology Service Company,
    a subsidiary of the Parent Company(i)                                       -                   -              12,320

Provision of management services for construction of
    fixed assets from the Parent Company (v)                                    -                   -               5,300
                                                                          =======             =======             =======
</TABLE>

(i)   The services are based on the pricing scheme set by the MOR.

(ii)  The services are based on the contractual prices determined at cost plus
      reasonable margin.

(iii) The prices of materials and supplies are based on market price.

(iv)  The interest arose 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.

(v)   In 2004, the Company entered into certain management agreements and
      supplementary agreements (collectively, the "Management Agreements") with
      the Parent Company. Pursuant to the Management Agreements, the Parent
      Company, on behalf of the Company, provided monitoring and supervision to
      the sub-contractors, who are responsible for construction of certain
      railway and stations to the Company. The management service fees are based
      on the pricing scheme set by MOR.

                                      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)

24.   RELATED PARTY TRANSACTIONS (CONT'D)

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

<TABLE>
<CAPTION>
                                                                                                      31 December,
                                                                                             ------------------------------
                                                                                              2003                   2004
                                                                                             -------                -------
                                                                                               RMB                    RMB
<S>                                                                                          <C>                    <C>
Temporary cash investments in the MOR's Railroad Deposit-taking Center (see
    Note 10(b))                                                                              168,000                168,000
Bank deposits in the MOR's railroad Deposit-taking Center                                    321,985                862,508
Due to Parent Company (vi)                                                                   (37,230)               (24,617)
Due from related parties                                                                     199,921                 56,064
                                                                                            --------               --------
   - Trading balance (vii)                                                                    10,608                 36,531
   - Non-trading balance (vi)                                                                189,313                 19,533
                                                                                            --------               --------
Due to related parties                                                                      (120,605)              (172,121)
                                                                                            --------               --------
   - Trading balance (vii)                                                                   (60,128)               (83,492)
   - Non-trading balance (viii)                                                              (60,477)               (88,629)
                                                                                            --------               --------
</TABLE>

(vi) As of 31 December, 2004, the balance with the Parent Company, which is
non-trading in nature, and the non-trading balance due from related parties
mainly represented the Company's payment on behalf of related parties, who were
required to make settlements to the Parent Company in respect of their provision
of long-distance transportation services. Interest arose from the balance due
from the related parties is disclosed in Notes 24 (a) (iv).

(vii) The balances with related parties, which are of trading in nature, all
aged within one year.

(viii) As of 31 December, 2004, the non-trading balance due to related parties
mainly represented the Company's collection of railroad revenue on behalf of the
related parties.

As of 31 December, 2004, 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). The trading balances are
resulted from transactions carried out by the Group with related parties in the
ordinary course of business, and/or in accordance with the bases as set out in
Note 24(a)(i), (ii) and (iii).

25.   NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

Non-cash transactions

During the year ended 31 December, 2004, the Group disposed certain staff
quarters of approximately RMB11 million (2003: approximately RMB92 million) to
their employees pursuant to its housing benefit scheme.

                                      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)

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, 2004, 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, 2004, 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 performs
      ongoing credit evaluations of its customers' financial condition and
      generally does not require collateral on accounts receivable. The Group
      maintains 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, 2004 was minimum
      since their deviation from their respective fair values was not
      significant.

                                      F-40

<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 PBOC. 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 PBOC or
      other banks authorised to buy and sell foreign currencies at the exchange
      rates quoted by the PBOC. Approval of foreign currency payments by the
      PBOC 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, 2004, the Group had the following capital commitments
      which are authorized but not contracted for and contracted but not
      provided for:

<TABLE>
<CAPTION>
                                                                                              31 December,
                                                                                  ----------------------------------
                                                                                  2003                        2004
                                                                                  ----                       -------
                                                                                   RMB                         RMB
<S>                                                                               <C>                        <C>
Authorised but not contracted for                                                    -                       451,500

Contracted but not provided for                                                      -                       693,828
                                                                                  ====                       =======
</TABLE>

(b)   Operating lease commitments

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

<TABLE>
<CAPTION>
                                                                                               31 December,
                                                                                   -----------------------------------
                                                                                    2003                        2004
                                                                                   -------                     -------
                                                                                    RMB                         RMB
<S>                                                                                <C>                         <C>
Machinery and equipment

     - not more than one year                                                      108,000                     108,000
     - more than one year but not more than two years                              108,000                      75,375
     - more than two years but not more than three years                            75,375                           -
                                                                                   -------                     -------

                                                                                   291,375                     183,375
                                                                                   =======                     =======
</TABLE>

                                      F-41

<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)

28.   COMMITMENTS (CONT'D)

(c)   Commitment under a conditional acquisition agreement

      See Note 29.

29.   PROPOSED ACQUISITION OF A RAILWAY BUSINESS

On 15 November, 2004 the Company and Guangzhou Railway Group Yangcheng Railway
Company (The "Vendor"), a wholly owned subsidiary of the Parent Company, have
entered into an agreement for the acquisition of the railway transportation
business between Guangzhou and Pingshi (currently operated by the Vendor) and
the assets and liabilities relating to such business (the "Acquisition
Agreement"). The consideration for the Acquisition was determined to be RMB
10,264,120,700, subject to confirmation from the relevant PRC authorities and
certain adjustments to be made as per the Acquisition Agreement.

The Company intends to finance the payment of the Consideration with the
proceeds of an A share issue with any shortfall being financed by internal
resources / bank borrowings etc. These shares will be listed on the Shanghai
Stock Exchange.

In this regard, the Company has applied to the relevant authorities in China for
the issue and allotment of not more than 2.75 billion A shares. The Company
submitted its application proposal relating to the A Share Issue to the China
Securities Regulatory Commission (the "CSRC") on 31 December, 2004.

Pursuant to the requirements of the Listing Rules of Hong Kong, the proposed
Acquisition will be deemed to be a very substantial acquisition by the Company.
As the vendor is a wholly-owned subsidiary of the Parent Company, the
controlling shareholder of the Company, the proposed Acquisition will also be
considered a connected transaction of the Company.

In addition to the Acquisition Agreement, the Company has entered into various
agreements in respect of leasing agreement and services agreement with the
parent company or the vendor. Such agreements shall take effect upon the
completion of the Acquisition and shall replace all existing connected
transaction agreements relating to the same categories of transactions.

On 5 December, 2004, the Company issued a circular to its shareholders in
respect of the proposed A share issue, the proposed very substantial acquisition
and ongoing connected transaction, and the proposed ongoing connected
transactions. On 30 December, 2004, the Company held its domestic shareholders'
class meeting, H shares shareholders' class meeting and extraordinary general
meetings that approved the proposed A share issue, the proposed acquisition and
the proposed ongoing connected transactions.

                                      F-42

<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.   PROPOSED ACQUISITION OF A RAILWAY BUSINESS (CONT'D)

The Acquisition Agreement is conditional upon the fulfillment of, among other
things, the following remaining conditions: (1) the formal approval of the
relevant authorities or bodies in relation to the A Share Issue being obtained;
(2) the A Share Issue having completed and raised an amount of not less than 65%
of the consideration; (3) the approval of the relevant government bodies
responsible for the supervision and management of state owned assets in relation
to the vendor's proposal on disposal of state-owned assets being obtained; and
(4) the approval of the National Development and Reform Committee in relation to
the price determination for passenger and freight railway transportation
services between Guangzhou and Pingshi being obtained. As of the date of this
report, none of the conditions are fulfilled.

Save for condition (2) which can be waived by the Company, none of the above
conditions can be waived. If the above conditions are not fulfilled within 2
years from the date of signing of the Acquisition Agreement, 15 November, 2004,
the Acquisition Agreement shall lapse and no party shall have any liability
thereunder. In the event that any party rescinds the Acquisition Agreement for
whatever reason after the A Share Issue has been completed, it is expected that
the Company will retain the proceeds from the A Share Issue as general working
capital.

The Company believes that the A Share Issue will be completed by the end of
2005, subject to the market conditions and policies of the CSRC.

30.   CONTINGENCY

As of 31 December, 2004, the Company's interest in an associated company,
Guangzhou Tiecheng Enterprise Company Limited ("Tiecheng"), amounted to
approximately RMB140,000,000. In 1996, Tiecheng entered into an agreement with a
Hong Kong incorporated company to establish Guangzhou Guantian Real Estate
Company ("Guangzhou Guantian"), a sino-foreign contractual joint venture to
develop certain properties near a railway station operated by the Group.

On 27 October, 2000, Guangzhou Guantian together with Guangzhou Guanhua Real
Estate Company Limited ("Guangzhou Guanhua") and Guangzhou Guanyi Real Estate
Company Limited ("Guangzhou Guanyi") agreed to act as joint guarantors (the
"Guarantors") of certain payables of Guangdong Guancheng Real Estate Company
Limited ("Guangdong Guancheng") to an independent third party.

Guangzhou Guantian, Guangzhou Guanhua, Guangzhou Guanyi and Guangdong Guancheng
were related companies with a common chairman. As Guangdong Guancheng failed to
repay the payables, according to a court verdict on 4 November, 2001, Guangzhou
Guantian, Guangzhou Guanhua and Guangzhou Guanyi were liable to the independent
third party to recover an amount of approximately RMB257,000,000 plus interest
from Guangdong Guancheng.

                                      F-43

<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.   CONTINGENCY (CONT'D)

As stated above, if Guangzhou Guantian were held responsible for the guarantee,
the Company may need to provide for impairment on its interests in Tiecheng.
Having consulted with a PRC 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 Guangtian 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 has been made in the
financial statements.

To avoid the possible loss resulting from the litigation, the Company has
obtained a letter of undertaking issued by the Parent Company. The Parent
Company undertakes to resolve through relevant channels or to take up the
responsibilities so that the equity interest of the Company in Tiecheng will not
be affected by the litigation.

31.   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

The Group revalued their fixed assets on 6 March, 1996. The revaluation surplus
of fixed assets amounting to approximately RMB1,492,185,000 was recorded by the
Group on that date. The revaluation as of 30 September, 2002 did not result in a
material difference from the carrying amounts and no revaluation surplus or
deficit was recorded.

Under IFRS, revaluation of fixed assets is permitted and depreciation is based
on the revalued amount. Additional depreciation arising from the revaluation
surplus was approximately RMB38,548,000 for the year ended 31 December, 2004
(2003: approximately RMB38,548,000).

Under US GAAP, fixed assets are required to be stated at original cost. Hence,
no additional depreciation from revaluation will be recognised under US GAAP.
However, a deferred tax asset related to the revaluation surplus amounting to
approximately RMB223,828,000 was created under US GAAP with a corresponding
increase in equity since the revaluation resulted in a higher tax base which
will be realised through additional depreciation for PRC tax purposes.

                                      F-44

<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)

31.   DIFFERENCE BETWEEN IFRS AND US GAAP (CONT'D)

Revaluation of fixed assets (Cont'd)

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

<TABLE>
<CAPTION>
                                                                                      Year ended 31 December,
                                                                 ---------------------------------------------------------------
                                                                  2002                2003                2004             2004
                                                                 -------             -------             -------        --------
                                                                  RMB                 RMB                 RMB             US$
<S>                                                              <C>                 <C>                 <C>            <C>
Consolidated profit attributable to shareholders under
   IFRS                                                          557,083             511,762             567,484          68,373
US GAAP adjustments:
    Reversal of additional depreciation charges arising
        from the revaluation surplus on fixed assets              48,422              38,548              38,548           4,644
    Effect of US GAAP adjustment on deferred tax
        provision                                                 (7,263)             (5,782)             (5,782)           (697)
                                                                 -------             -------             -------        --------

Consolidated profit attributable to shareholders under
    US GAAP                                                      598,242             544,528             600,250          72,320
                                                                 =======             =======             =======        ========

Earnings per share under US GAAP                                 RMB0.14             RMB0.13             RMB0.14        USD0.017
                                                                 =======             =======             =======        ========
Earnings per equivalent ADS under
    US GAAP                                                      RMB6.90             RMB6.28             RMB6.92        USD0.834
                                                                 =======             =======             =======        ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                             Year ended 31 December,
                                                                             --------------------------------------------------
                                                                               2003                2004                  2004
                                                                             ----------          ----------           ---------
                                                                               RMB                 RMB                 US$
<S>                                                                          <C>                 <C>                  <C>
Consolidated net assets under IFRS                                           10,322,358          10,420,574           1,255,491
US GAAP adjustments:
    Reversal of the revaluation surplus on fixed assets                      (1,492,185)         (1,492,185)           (179,781)
    Reversal of accumulated depreciation on the revaluation surplus on
       fixed assets                                                             369,432             407,980              49,154
    Deferred tax assets related to net revaluation surplus                      168,413             162,631              19,594
                                                                             ----------          ----------           ---------

Consolidated net assets under US GAAP                                         9,368,018           9,499,000           1,144,458
                                                                             ==========          ==========           =========
</TABLE>

                                      F-45

<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)

31.   DIFFERENCE BETWEEN IFRS AND US GAAP (CONT'D)

Revaluation of fixed assets (Cont'd)

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.

RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, the Financial Accounting Standards Board (the "FASB") issued
Financial Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest
Entities" and in December 2003 issued a revised interpretation FIN 46R. Under
these interpretations, certain entities known as variable interest entities must
be consolidated by the primary beneficiary of the entity. The adoption of FIN 46
did not have any material impact on the Group's financial statements.

In November, 2004, the FASB issued FASB Statement No. 151, "Inventory Costs --
an amendment of ARB No. 43, Chapter 4" (FAS 151), which is the result of its
efforts to converge U.S. accounting standards for inventories with International
Financial Reporting Standards. This statement requires abnormal amounts of idle
facility expense, freight, handling costs, and wasted material (spoilage) to be
recognized as current-period charges. It also requires that allocation of fixed
production overheads to the costs of conversion be based on the normal capacity
of the production facilities. FAS 151 will be effective for inventory costs
incurred during fiscal years beginning after 15 June, 2005. The adoption of this
standard will not have a material impact on the Group's consolidated financial
statements.

In December 2004, the FASB issued FASB Statement No. 153, "Exchanges of
Non-monetary Assets" (FAS 153), which amends APB Opinion No. 29, "Accounting for
Non-monetary Transactions", to eliminate the exception for non-monetary
exchanges of similar productive assets and replaces it with a general exception
for exchanges of non-monetary assets that do not have commercial substance.
Under FAS 153, exchanges of non-monetary assets, except for exchanges of
non-monetary assets that do not have commercial substance, should be measured
based on the fair value of the assets exchanged. The provisions of this
Statement shall be effective for non-monetary asset exchanges occurring in
fiscal periods beginning after 15 June, 2005. The Group is currently assessing
the impact of the standard on its consolidated financial statements.

32.   FOREIGN CURRENCY EXCHANGE

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

                                      F-46

<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)

33.   APPROVAL OF ACCOUNTS

The financial statements were approved by the Board of Directors on June 27,
2005.

                                      F-47
<PAGE>

                                    SIGNATURE

         The registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.

                                         GUANGSHEN RAILWAY COMPANY LIMITED

Date: June 27, 2005                      By: /s/ Wu Junguang
                                             ----------------------------------
                                             Wu Junguang
                                             Chairman of the Board of Directors