Document:

<PAGE>

                                                                    Exhibit 4.12
                                                           (English Translation)

                  Ningbo Yuming Machinery Industrial Co., Ltd.

                       EQUITY INTEREST TRANSFER AGREEMENT

TRANSFEROR: Ms. Chen Qiuling

TRANSFEREE: Beston Asia Investment Ltd.

                                October 19, 2004

                                       1

<PAGE>

            This Agreement is entered into between the following Parties on
October 19, 2004 in Ningbo City, Zhejiang Province:

Transferor: Ms. Chen Qiuling

Address:    Hsinchu City, Taiwan

Transferee: Beston Asia Investment Ltd.

Address:    Akara bldg, 24 De Castro Street, Wickhams Cay I, Road Town, Tortola,
            British Virgin Islands

WHEREAS:

      1.    The Transferor owns 49% equity interest in Ningbo Yuming Machinery
Industrial Co., Ltd. ("Ningbo Yuming").

      2.    The Transferee is a limited liability company lawfully incorporated
and validly existing under the laws of the British Virgin Islands.

      3.    The Transferor has agreed to transfer 49% equity interest in Ningbo
Yuming owned by the Transferor to the Transferee, and the Transferee has agreed
to accept transfer of such equity interest, upon the terms of this Agreement.
After the transfer becomes effective, the Transferee shall own 100% equity
interest in Ningbo Yuming.

            Therefore, the Parties agree, adhering to the principles of
faithfulness, equality and mutual benefit, through friendly consultations and in
accordance with the relevant laws and regulations of the People's Republic of
China, upon the following terms to be complied with.

                      ARTICLE 1 SUBJECT MATTER OF AGREEMENT

1.0   The subject matter of the agreed transfer under this Agreement is the 49%
      equity interest in Ningbo Yuming owned by Ms. Chen Qiuling.

              ARTICLE 2 SHARE OF EQUITY INTEREST TO BE TRANSFERRED

2.1   The share of equity interest to be transferred from the Transferor to the
      Transferee shall be the 49% equity interest in Ningbo Yuming owned by the
      Transferor. From the date on which the transfer becomes effective, the
      Transferee shall enjoy the rights and bear the obligations in respect of
      the transferred equity interest under the laws, and the Transferor shall
      no longer enjoy the rights nor bear the obligations in respect of the
      transferred equity interest.

                                       2

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2.2   The original equity interest in Ningbo Yuming Machinery Industrial Co.,
      Ltd. was allocated as follows:

<TABLE>
<S>                                     <C>
Beston Asia Investment Ltd.             51%

Ms. Chen Qiuling                        49%
</TABLE>

      The equity interest after completion of the equity interest transfer
      hereunder shall be:

<TABLE>
<S>                                                                   <C>
Beston Asia Investment Ltd.                                           100%
</TABLE>

                  ARTICLE 3 PRICE FOR EQUITY INTEREST TRANSFER

3.1   The Transferee has agreed to accept transfer of the 49% equity interest in
      Ningbo Yuming owned by the Transferor by payment in cash.

3.2   The Transferee shall pay a total amount of Renminbi 10,000,000 for
      transfer of the above-mentioned equity interest.

                            ARTICLE 4 PAYMENT METHOD

4.1   As agreed between the Parties, the Transferee shall pay in cash for
      transfer of the 49% equity interest in Ningbo Yuming owned by the
      Transferor.

4.2   Prior to November 30, 2004, the Transferee shall pay to the Transferor the
      total price for the equity interest transfer in the amount of Renminbi
      10,000,000 or an equivalent in U.S. dollars by a lump sum payment. In case
      the procedures for transfer of the equity interest are not completed
      within fifteen days after payment, the Transferor shall return the payment
      to the Transferee within seven days upon receipt of written notice from
      the Transferee.

                    ARTICLE 5 REPRESENTATIONS AND WARRANTIES

      Each Party represents and warrants to the other Party as follows:

5.1   Each Party has the full civil rights and civil capacity to execute this
      Agreement, and the signatory of this Agreement is the legal representative
      duly authorized by the Transferor (or the Transferee) who has the
      authority to represent the Transferor (or the Transferee) to execute this
      Agreement.

5.2   The Transferor warrants that the Transferor's ownership of the 49% equity
      interest in Ningbo Yuming is in compliance with the laws of the People's
      Republic of China and is lawful and valid, that the Transferor is the
      lawful and actual owner of the 49% equity interest, that no third party's
      interest, such as a lien or other encumbrance, has been created against
      the transferred equity interest, and that there is no contradictory
      rights, whether present or future, in the transferred equity interest.

5.3   The Transferor warrants that it has the power to possess, use, benefit
      from and dispose of the equity interest referred to in Article 1 of this
      Agreement under the laws of the

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      People's Republic of China. All consents, permits, approvals,
      registrations, exemptions and notices in relation to the equity interest
      to be transferred have been obtained or completed.

5.4   The provisions in this Agreement represent the actual intentions of the
      Parties and are binding upon the Parties.

5.5   The performance of this Agreement shall not violate the laws which the
      Parties must abide by, and shall not be in breach of any agreement or
      obligation to be complied with by the Parties.

5.6   On or after the execution of this Agreement, each Party shall provide the
      other Party with the legally valid documents in relation to this equity
      interest transfer, including, but not limited to, Shareholders'
      Resolutions, Board Resolutions, Business Licenses, etc.

                ARTICLE 6 THE RELEVANT OBLIGATIONS OF THE PARTIES

6.1   The Obligations of the Transferor

6.1.1 Complete the procedures for transfer of the equity interest in accordance
      with Articles 3 and 4 of this Agreement.

6.1.2 Provide the Transferee with all documents in relation to transfer and
      change of registration of the equity interest, and assist the Transferee
      with the relevant procedures.

6.2   The Obligations of the Transferee

6.2.1 Deliver the approval documents of its Board of Directors to the Transferee
      within 7 days from the date of execution of this Agreement.

6.2.2 Make payment on schedule in accordance with Article 5 of this Agreement.

6.2.3 Provide the Transferor with all documents in relation to transfer and
      change of registration of the equity interest.

                        ARTICLE 7 LIABILITIES FOR BREACH

7.0   If any Party breaches this Agreement and, as a result, the other Party is
      unable to perform or unable to fully perform this Agreement, the losses
      caused thereby shall be borne by the defaulting Party. If both Parties
      breach this Agreement, each Party shall bear the liabilities arising from
      its own defaults.

                             ARTICLE 8 FORCE MAJEURE

8.1   Force Majeure shall mean an event that is beyond the control of, and
      unforeseeable or unavoidable by, the Parties and that prevents any Party
      from fully performing or partially performing this Agreement, such as
      earthquake, extremely serious natural disaster, war and any event which is
      generally accepted as `Force Majeure" in international practice.

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8.2   If an event of Force Majeure occurs, a Party's obligations affected by
      such event shall be suspended during the period when the Force Majeure
      occurs and shall be automatically extended for a period equal to such
      suspension, and such Party shall not bear any liabilities for breach of
      contract.

8.3   The Party claiming Force Majeure shall promptly notify the other Party in
      writing upon occurrence of such event, and shall furnish sufficient proof
      of the occurrence and duration of such Force Majeure within 30 days of
      such occurrence issued by the Notary Office at the place where such event
      occurs. The Party claiming Force Majeure shall make its best efforts to
      minimize the effects of the Force Majeure.

8.4   If an event of Force Majeure occurs, the Parties shall promptly conduct
      consultations to seek for a fair resolution and shall make their best
      efforts to minimize the effects of Force Majeure.

                        ARTICLE 9 SETTLEMENT OF DISPUTES

9.0   Any dispute arising from or in relation to this Agreement shall be settled
      through friendly consultations between the Parties. If no settlement can
      be reached through consultations, either Party shall have the right to
      take legal action at a court with jurisdiction.

                            ARTICLE 10 MISCELLANEOUS

10.1  This Agreement is executed in four copies, with one copy to be retained by
      each Party, and one copy each to be retained by Ningbo Yuming and the
      Administration for Industry and Commerce for filing.

10.2  This Agreement shall be made after it is signed and sealed by the legal
      representatives (or authorized representatives) of the Parties, and shall
      become effective from the date of approval by the competent authorities.

10.3  Any matters not covered under this Agreement shall be supplemented by
      appendix.

Transferor:                                   Transferee:

Ms. Chen Qiuling                              Beston Asia Investment Ltd.

           (Seal)                                           (Seal)

Legal Representative/Authorized               Legal Representative/Authorized
Representative:                               Representative:
(signed)                                      (signed)

[Signature of Legal Representative]           [Stamp and Signature of Authorized
                                                          Representative]

                                              October 19, 2004

                                       5<PAGE>

                                                                     EXHIBIT 4.1
                                                                     -----------
                                                                TO ANNUAL REPORT
                                                                ----------------
                                                                    ON FORM 20-F
                                                                    ------------

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

                         RAILWAY BUSINESS RELATED ASSETS

                               PURCHASE AGREEMENT

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

                                     between

                        GUANGSHEN RAILWAY COMPANY LIMITED

                                       and

                GUANGZHOU RAILWAY GROUP YANGCHENG RAILWAY COMPANY

                                NOVEMBER 15, 2004

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                                TABLE OF CONTENTS

ARTICLE 1   BASIC INTRODUCTION OF THE PARTIES

ARTICLE 2   SCOPE OF PURCHASE

ARTICLE 3   PURCHASE PRINCIPLES AND EMPLOYEE SETTLEMENT

ARTICLE 4   CREDITORS' RIGHTS AND LIABILITIES AND SETTLEMENT OF CONTRACTS UNDER
            PERFORMANCE

ARTICLE 5   METHOD AND PRICE OF PURCHASE

ARTICLE 6   IMPLEMENTATION OF PURCHASE

ARTICLE 7   ALLOCATION OF EXPENSES INCURRED WITH THE PURCHASE

ARTICLE 8   REPRESENTATIONS AND WARRANTIES

ARTICLE 9   MATTERS FOLLOWING THE CUT-OFF DATE

ARTICLE 10  MATERIAL OPERATION MATTERS

ARTICLE 11  LIABILITY FOR BREACH

ARTICLE 12  AMENDMENT, CANCELLATION AND TRANSFER OF THE AGREEMENT

ARTICLE 13  FORCE MAJEURE

ARTICLE 14  APPLICABLE LAWS AND DISPUTE RESOLUTION

ARTICLE 15  CONDITIONS PRECENDENT TO THE EFFECTIVENESS OF THIS AGREEMENT

ARTICLE 16  MISCELLANEOUS

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This RAILWAY BUSINESS RELATED ASSETS PURCHASE AGREEMENT (this "Agreement") is
made by and between the following parties:

TRANSFEROR: Guangzhou Railway Group Yangcheng Railway Company ("Party A")

TRANSFEREE: Guangshen Railway Company Limited ("Party B")

WHEREAS:

     1. Party A is an enterprise owned by the whole people, which is engaged in
the railway transportation business from Guangzhou to Pingshi and owns the
relevant railway business related assets ("Railway Business Related Assets");

     2. Party A's industrial competent authority and title unit, Guangzhou
Railway (Group) Company, has agreed to the transfer of the Railway Business
Related Assets by Party A to Party B pursuant to the terms and conditions set
forth herein;

     3. Party B intends to launch the initial public offering of its A shares,
and acquire the Railway Business Related Assets from Party A by the funds raised
and other legal sources of funds pursuant to the terms and conditions set forth
herein.

     NOW, THEREFORE, after negotiation, the parties hereby agree as follows:

                   ARTICLE 1 BASIC INTRODUCTION OF THE PARTIES

1.   Party A

     Name: Guangzhou Railway Group Yangcheng Railway Company

     Address: 28 Baiyun Road, Guangzhou

     Legal representative: An Guodong

     Registered capital: RMB7,260,000,000

     Date of establishment: February 24, 1993

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2.   Party B

     Name: Guangshen Railway Company Limited

     Address: 1052 Heping Road, Shenzhen

     Legal representative: Wu Junguang

     Registered capital: RMB4,335,550,000

     Date of establishment: March 6, 1996

                           ARTICLE 2 SCOPE OF PURCHASE

     Party B intends to purchase (the "Purchase") from Party A the Railway
Business Related Assets in connection with the railway transportation from
Guangzhou to Pingshi (Exhibit I: Rail Line Map), including the railway
transportation related assets ("Assets") and the business conducted based on the
Assets ("Business"). The Assets shall include, but not limited to, houses,
buildings, projects under construction, railway roads, locomotives, vehicles,
equipment, investment rights and interests, contract rights and interests and
liabilities and creditors' rights occurred in the course of transportation
business operation. The Business shall mean the railway transportation business
currently conducted by Party A, including railway passenger transportation,
railway freight transportation and the business in connection therewith.

     The specific scope of the Purchase shall be subject to the scope specified
in the Asset Appraisal Report set forth in Article 5.

              ARTICLE 3 PURCHASE PRINCIPLE AND EMPLOYEE SETTLEMENT

     The parties agree to implement the Purchase contemplated hereby in
accordance with the principle of "the assets and employees shall be transferred
to the extent that they are related to the business", i.e.: (i) all of Party A's
assets related to the railway transportation shall be transferred to Party B;
(ii) the employees listed in Party A's employee list and related to the railway
transportation business transferred shall be transferred to Party B; and (iii)
the employees listed in Party A's employee list and unrelated to the railway
transportation business transferred shall be settled by Party A in its sole
discretion.

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                 ARTICLE 4 CREDITORS' RIGHTS AND LIABILITIES AND
                   SETTLEMENT OF CONTRACTS UNDER PERFORMANCE

     In accordance with this Agreement, Party A's creditors' rights and
liabilities and rights and obligations under contracts being performed relating
to the railway transportation business shall be included in the assets to be
purchased and assumed by Party B. As of the appraisal cut-off date set forth in
Article 5 (the "Cut-off Date"), the liabilities included in the scope of the
Purchase shall be RMB1,401,482,255.46, and the creditors' rights shall be
RMB358,510,786.24, in each case subject to the confirmation by the Asset
Appraisal Report set forth in Article 5.

     Party A shall notify the obligors of its creditors' rights included in the
scope of the Purchase. Party A shall notify the creditors of its liabilities
included in the scope of the Purchase and obtain a letter of undertaking from
the creditors, stating their consent to Party B's assumption. With respect to
the contracts to be performed by Party B following the Purchase, Party A shall
notify other parties to such contracts and obtain a letter of undertaking from
such parties, stating their consent to the performance of such contracts by
Party B. Party A shall notify the relevant creditors, obligors and the other
parties to the relevant contracts within ten (10) days from the adoption of
Party B's board resolutions and the approval by the relevant State-owned assets
administration authority, and obtain the relevant undertaking or confirmation
letters within thirty (30) days.

     While making the notification as described above, Party A shall expressly
notify the creditors, obligors and other parties to the contracts that the
transfer of the relevant creditors' rights, liabilities and contracts shall be
subject to the effectiveness of this Agreement.

                     ARTICLE 5 METHOD AND PRICE OF PURCHASE

     1. Method of Purchase: The parties agree that Party B shall purchase all of
Party A's assets and businesses related to the railway transportation at one
time;

     2. Price of Purchase: The parties agree that Beijing Pan-China Assets
Appraisal Co., Ltd. shall be engaged to appraise the purchased assets in
accordance with the principles and scope specified in the "Asset Restructuring
Proposal of Yangcheng Railway Company" confirmed by the parties, and that the
basic price of the Purchase shall be determined based on the valuation specified
in the Asset Appraisal Report filed with the relevant State-owned assets
administration authority. The Cut-off Date shall be June 30, 2004 or such other
date as reselected later according to the

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revaluation of such assets pursuant to other working requirements, such as the
progress of Party B's issuance of A shares. With respect to the business
attached to the assets, the parties agree not to make evaluation or appraise the
value thereof.

     According to the results of the Asset Appraisal Report issued by Beijing
Pan-China Assets Appraisal Co., Ltd. with June 30, 2004 as the Cut-off Date that
has not been filed with the relevant State-owned assets administration
authority, the appraised value of the purchased assets shall be
RB10,264,120,700.

     The base price set forth above shall be adjusted pursuant to Article 9
hereof while implementing the Purchase, and the purchase price shall be
determined based on the amount adjusted ("Acquisition Price", and the payment
determined based on such price being the "Purchase Price").

                      ARTICLE 6 IMPLEMENTATION OF PURCHASE

     1. The commencement date of implementation of the Purchase contemplated
hereby shall be the date on which Party B launches its initial public offering
of A shares and all funds raised have been remitted to Party B's bank account
and a domestic accounting firm has issued a capital verification report
following its verification ("Purchase Commencement Date").

     2. Within five (5) days of the Purchase Commencement Date, Party A shall
deliver to Party B the complete asset list and the relevant title certificates,
the Purchase certificates, certificates of creditors' rights and liabilities,
contracts and all licenses, approval documents, permits in connection with the
business and go through the procedures for the handover of assets and
businesses. In the event that it is required to go through the amendment and
transfer procedures for the relevant assets and businesses by law, Party A shall
provide relevant documents and materials to assist Party B in going through such
procedures in accordance with such requirements. Party A shall complete the
asset and business hand-over procedures for the delivery to Party B within
fifteen (15) days of the Purchase Commencement Date, verify the content of the
actually delivered assets and businesses as set forth in this Agreement and the
Asset Appraisal Report, and execute the written hand-over certificate with Party
B.

     3. Party B shall pay 51% of the amount as determined in the Asset Appraisal
Report as part of the Purchase Price to Party A within five (5) days of the
Purchase Commencement Date.

     4. Within fifteen (15) days of the execution of the written hand-over
certificate by the parties and the completion of the audit set forth in Article
9, Party B shall pay

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the remaining part of the Purchase Price to Party A at one time. However, if the
funds raised by Party B's issuance of A shares (after deduction of all issuance
expenses, including, but not limited to, evaluation, audit, underwriting, legal
and public relationship expenses) are not sufficient for full payment of the
Purchase Price, Party B shall only pay the amount of the funds raised to Party A
as part of the Purchase Price within fifteen (15) days as set forth above, and
the shortfall shall be raised by Party B from other legal sources of funds and
paid by Party B to Party A within six (6) months from the execution of the
written hand-over certificate by the parties and the completion of the audit set
forth in Article 9.

     5. Following the date hereof and prior to the execution of the written
hand-over certificate by the parties, Party A shall ensure the proper operation
of the businesses. In the event of any losses or damages in respect of houses,
buildings, projects under construction, railway roads, locomotives, vehicles,
equipment incurred in the ordinary course of use thereof, Party A shall be
liable to repair, replace and maintain such houses, buildings, projects under
construction, railway roads, locomotives, vehicles and equipment, in order to
ensure that there be no substantial change to the assets and businesses during
such period.

     6. The title or right and risks under the purchased assets shall be
transferred upon the parties' hand-over and execution of the written hand-over
certificate; provided, however, that, with respect to the purchased assets for
which the amendment and transfer procedures shall be gone through, the title or
right and risks thereunder shall be transferred upon such amendment and
transfer.

           ARTICLE 7 ALLOCATION OF EXPENSES INCURRED WITH THE PURCHASE

     1. The parties agree that the taxes and expenses incurred in the course of
the Purchase shall be born pursuant to the tax laws and other relevant laws and
regulations or the relevant approval documents of the government. The taxes and
expenses for which there are no express provisions under law shall be equally
born by the parties.

     2. Unless otherwise provided herein, the costs and expenses incurred in
connection with drafting, execution and implementation of this Agreement shall
be born by the party incurring such costs and expenses.

     3. The appraisal costs set forth in Article 5 hereof shall be born by Party
B.

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<PAGE>

                    ARTICLE 8 REPRESENTATIONS AND WARRANTIES

     With respect to the matters as of the Cut-off Date (as defined in Article
9) in connection with the Purchase contemplated hereby, Party A hereby
represents and warrants to Party B as follows:

     1.    ACCOUNTING MATTERS

     Party A's accounting report:

     (i)   presents truly and fairly Party A's assets, liabilities (including
           potential and contingent liabilities) and the profits for the
           accounting period;

     (ii)  is in compliance with the requirements under the laws and
           regulations;

     (iii) has no reservations and will not be affected by other matters, unless
           expressly disclosed in such report;

     (iv)  reflects Party A's financial conditions fully, completely and
           accurately;

     (v)   All of Party A's financial accounts, statements or other accounting
           records are under Party A's control and reflect Party A's financial
           conditions truly and fairly.

     2.    FINANCIAL MATTERS

     (i)   From the Cut-off Date to the audit base date, Party A has not paid or
           distributed any profit, or made any similar decision or arrangement;

     (ii)  Party A has no other outstanding liabilities (including contingent
           liabilities), unless disclosed in the accounting report and incurred
           in the ordinary course of business;

     (iii) The reimbursement of creditors' rights set forth in the accounting
           report shall be paid no less than the amount listed therein;

     (iv)  Unless disclosed in the accounting report, Party A has not entered
           into any agreement with respect to any guarantee for any third party
           or any agreement with a nature of subrogation, and the assets
           transferred are free and clear of any mortgage, lien or any other
           third party right.

     3.    TAX MATTERS

     (i)   Sufficient reserve has been allocated in the accounting report for
           the taxes payable by Party A;

     (ii)  All accounting statements prepared by Party A for tax purposes or any
           calculation and payment made in connection therewith, have been

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<PAGE>

           prepared or made correctly during the period as provided under the
           relevant tax regulations and are in compliance with the requirements
           of the taxation authority;

     (iii) Party A has withheld the taxes payable by its employees in accordance
           with law.

     4.    ASSETS

     (i)   The lawful certificates or evidence certifying the title of houses,
           buildings, projects under construction, railway roads, locomotives,
           vehicles, equipment included in the scope of the Purchase have been
           obtained, and possessed or controlled by Party A;

     (ii)  The houses, buildings, projects under construction, railway roads,
           locomotives, vehicles, equipment included in the scope of the
           Purchase are free and clear of any mortgage or any other third party
           right or interest.

     5.   LABOR MATTERS

     (i)   Party A has made all payments for its employees with respect to any
           pension, medical insurance, work-related injury insurance in
           accordance with the relevant laws and regulations;

     (ii)  Party A has complied with the relevant national and local labor
           regulations in accordance with law. Party A has not violated any
           national or local labor regulations, nor shall Party A be jointly
           liable for any violation of any labor regulation by any other person.

     Party A shall indemnity and hold harmless Party B against any losses or
obligations incurred by Party B with respect to any damages to Party B's
interests or any claim by any third party seeking damages or recovery from Party
B, resulting from Party A's breach of the representations or warranties
described above.

                  ARTICLE 9 MATTERS FOLLOWING THE CUT-OFF DATE

     In the event that there is any change in the assets included in the scope
of the Purchase and specified in the Asset Appraisal Report as a result of Party
A's business operation or any other reason, the Acquisition Price as determined
pursuant to the Asset Appraisal Report shall be adjusted based on the effects
that such change might have on the acquirer's interest. The parties agree,
within five (5) days of the Purchase Commencement Date, to engage Pan-China
Schinda Certified Public

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Accountants ("PSCPA") to conduct a special audit of the change in the purchased
assets from the Cut-off Date to the audit base date pursuant to the enterprise
accounting rules and Enterprise Accounting System, and determine the effects of
such change on the Acquisition price in accordance with the report issued and
based on which adjust the Acquisition Price. The principles of adjustment shall
be as follows:

     1.   In the event that the depreciation shall be provided for with respect
          to the calculation of the fixed assets included in the scope of the
          Purchase for the period from the Cut-off Date to the audit base date
          pursuant to the relevant laws and accounting rules, the total amount
          of such depreciation shall be deducted form the Purchase Price;

     2.   From the Cut-off Date to the audit base date, in the event that there
          is any loss, destruction or deduction in the assets included in the
          scope of the Purchase, the determined value of such loss, destruction
          or deduction with respect to the assets shall be deducted from the
          Purchase Price;

     3.   From the Cut-off Date to the audit base date, in the event that there
          is any increase in the assets within the normal budge of Party A
          (including the additional assets increased as a result of the
          subsequent construction of any project under construction included in
          the scope of the Purchase and the valuation of which has been
          determined in the Asset Appraisal Report), upon audit by PSCPA and
          confirmation by Party B, the Purchase Price shall be increased
          accordingly;

     4.   From the Cut-off Date to the audit base date, in the event that Party
          A has to build more railway network facilities, such as group stations
          and connection links, as required by the State or the Ministry of
          Railways for the unified planning of railway network construction,
          such facilities shall be purchased by Party B and the method and price
          of the Purchase shall be determined in a separate supplemental
          agreement between the parties;

     5.   In the event that, pursuant to the domestic enterprise accounting
          rules and Enterprise Accounting System, there are other matters that
          are subject to adjustment but not addressed in the principles
          described above, such other matters shall be handled pursuant to such
          accounting rules and Enterprise Accounting System.

     The special audit described herein shall be completed within sixty (60)
days. The audit base date shall be determined in accordance with the following
principles:

     1.   If the Purchase Commencement Date is prior to the Fifteenth (15)
          calendar day of the current month (inclusive), the audit base date
          shall be the end of last month;

     2.   If the Purchase Commencement Date is after the Fifteenth (15) calendar

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          day of the current month (not inclusive), the audit base date shall be
          the end of current month.

     In the event that, according to the audit results, the difference between
the Acquisition Price and RMB10,264,120,700 is less than "+" or "-" 10%, the
parties shall continue to perform this Agreement based on the amount of actual
purchase as adjusted. In the event that the difference between the Acquisition
Price and RMB10,264,120,700 is more than "+" or "-" 10%, the parties shall
negotiate separately on whether to continue the performance of this Agreement.
If the parties cannot reach an agreement, either party shall be entitled to
terminate this Agreement. For the avoidance of doubt, the Acquisition Price
determined based on June 30, 2004 or such other base date as reselected shall
be subject to the adjustment of "+" or "-" 10% between the Acquisition Price and
RMB10,264,120,700 set forth above.

       Party A shall be entitled to or be liable for any profit and loss
incurred in the on-going course of operation of the purchased assets and
businesses from the Cut-off Date to the audit base date; and Party B shall be
entitled to or be liable for any profit and loss incurred thereafter.

                      ARTICLE 10 MATERIAL OPERATION MATTERS

     1.   From the date hereof, Party A shall promptly notify Party B of any
          proposed material asset disposition or acquisition with a value of
          more than five million Renminbi (RMB5,000,000) or any material
          operation matters such as proposed material transaction contract or
          proposed financing with a value of more than five million Renminbi
          (RMB5,000,000), and shall not implement such proposed arrangement
          without the consent of Party B. If Party B believes that any such
          material operation matter might have an impact on Party A's
          performance of its obligations hereunder or result in the frustration
          of the purpose of Party B's purchase in whole or in part, Party B may
          request Party A not to pursue such material operation matters in
          writing.

     2.   If Party A fails to disclose any material operation matter or comply
          with Party B's written request, and continues to conduct the material
          operation that has an adverse impact on Party B's interests, Party B
          shall be entitled to request Party A to indemnify it against the
          losses or terminate this Agreement.

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<PAGE>

                         ARTICLE 11 LIABILITY FOR BREACH

     1.   The parties shall perform their respective obligations hereunder in
          good faith. In the event that this Agreement cannot be performed, in
          whole or in part, as a result of either party's breach, the breaching
          party shall be liable for such breach; and in the event that both
          parties breach this Agreement, the parties shall be liable for their
          respective breaches according to their respective actual faults;
          provided, however, that such liability shall not preclude the right of
          the non-breaching party from requesting the breaching party to
          continue to perform.

     2.   In the event that Party B delays the payment of the Purchase Price as
          provided herein, it shall pay liquidated damages in an amount equal to
          0.03% of the shortfall each day.

     3.   In the event that the purchased assets are subject to any claim by any
          third party or cannot be delivered for use, or no title transfer
          procedures can be gone therefor, as a result of lack of lawful title
          certificates or existence of any third party rights such as mortgage
          and pledge, Party B may request Party A to continue to perform or
          refuse to accept such assets and deduct the payment of such assets
          from the Purchase Price payable. Party B may also request Party A to
          indemnify it against all losses resulting therefrom, including, but
          not limited to, losses of expected profits.

     4.   In the event that Party B cannot conduct the business or its conduct
          of business is limited following the Purchase as Party A has not
          obtained the relevant licenses, approval documents, permits with
          respect to the purchased businesses, Party B may request Party A to
          indemnify it against all losses as a result thereof, including, but
          not limited to, losses of expected profits.

               ARTICLE 12 AMENDMENT, CANCELLATION AND TRANSFER OF
                                 THE AGREEMENT

     1.   This Agreement may not be amended or cancelled without the written
          consent of the parties.

     2.   Neither party may transfer any rights or obligations hereunder to any
          third party in any way without the express written consent of the
          other party.

     3.   Notwithstanding the foregoing, if the conditions precedent to the
          effectiveness as set forth in Article 15 hereof are not fully
          satisfied

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          within two (2) years from the date hereof, this Agreement shall be
          terminated automatically.

                            ARTICLE 13 FORCE MAJEURE

     1.   Should a party be prevented from performing its obligations under this
          Agreement pursuant to the terms as provided herein directly by the
          occurrence of an event of force majeure, such party shall notify the
          other party by telephone without delay and, within fifteen (15) days,
          provide the other party with information explaining the reasons for
          its inability to perform, or for its delay in performance of, all or
          part of its obligations under this Agreement and effective supporting
          documents. Based on the effect of such event on this Agreement, the
          parties shall decide on the performance hereof through negotiation,
          and decide whether to release the affected part's legal liability to
          perform this Agreement.

     2.   "FORCE MAJEURE" described above shall mean any event which is
          unforeseeable by the parties and not due to the parties' faults or
          negligence and the occurrence and consequences of which cannot be
          prevented or are unavoidable, including (without limitation) war,
          earthquake, fire, flood or any other event caused by similar natural
          force.

                ARTICLE 14 APPLICABLE LAWS AND DISPUTE RESOLUTION

     1.   The formation of this Agreement, its validity, interpretation,
          implementation, and settlement of any disputes arising hereunder shall
          be governed by the laws of the People's Republic of China.

     2.   If a dispute arises in connection with the interpretation or
          implementation of this Agreement, the parties shall attempt to resolve
          such dispute through friendly consultations or mediation.

     3.   If the dispute is not resolved through friendly consultations within
          ninety (90) days from the occurrence of the dispute, then any party
          may bring an action to the competent People's Court.

                                       13
<PAGE>

                    ARTICLE 15 CONDITIONS PRECENDENT TO THE
                        EFFECTIVENESS OF THIS AGREEMENT

     The conditions precedent to the effectiveness of this Agreement are as
follows:

1.   This Agreement has been signed by the legal representatives or authorized
     representatives of the parties and sealed with the parties' corporate
     seals;

2.   Party B has complied with the voting procedures of affiliated transactions
     pursuant to its articles of association and the Rules Governing the Listing
     of Securities on the Stock Exchange of Hong Kong Limited, and obtained the
     approval of the Purchase hereunder by independent shareholders;

3.   Party B has complied with the voting procedures of affiliated transactions
     pursuant to its articles of association and the Listing Rules of the Hong
     Kong Stock Exchange, and obtained the approval of the possible affiliated
     transactions with its controlling shareholders or any subsidiaries thereof
     following the completion of the Purchase hereunder by independent
     shareholders;

4.   Party A's State-owned assets disposition proposal has been approved by the
     relevant State-owned assets administration authority;

5.   Other legal procedures as required by the relevant provisions under the
     laws and regulations have been gone through;

6.   Party B's domestic initial public offering of A shares has been approved
     and all funds raised have been remitted to Party B's bank account, the
     amount of which is no less than 65% of the Acquisition Price;

7.   Party B has obtained the National Development and Reform Commission's
     approval of the pricing for the freight transportation from Guangzhou to
     Pingshi.

     Party A and Party B agree that Party B shall be entitled to the waiver of
the condition precedent set forth in Item 6 above.

                            ARTICLE 16 MISCELLANEOUS

1.   All notices, consents or acknowledgements hereunder shall be in writing.

                                       14
<PAGE>

2.   Following the effectiveness of this Agreement, if either party's economic
     interest has been materially adversely affected by the promulgation or
     implementation of any new law, regulation or decree or the modification or
     new interpretation of any law, regulation or decree, the parties shall
     promptly negotiate and make necessary adjustment to protect the benefit to
     the parties hereunder; provided, however, that the parties may terminate
     this Agreement through negotiation if such promulgation, implementation,
     modification or interpretation will cause substantial damages to either
     party's interest after such adjustment.

3.   The "day" or "calendar day" referred to herein shall mean any working day,
     excluding weekend and lawful holiday.

4.   This Agreement is executed in eight (8) copies with equal legal validity,
     with each party holding two (2) copies and the remaining copies to be filed
     with or approved by the competent authority or the relevant State-owned
     assets administration authority

PARTY A: Guangzhou Railway Group Yangcheng Railway Company

LEGAL REPRESENTATIVE OR ITS AUTHORIZED REPRESENTATIVE:

PARTY B: Guangshen Railway Company Limited

LEGAL REPRESENTATIVE OR ITS AUTHORIZED REPRESENTATIVE:

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