年
度
報
告
年 度 報 告
[STOCK CODE：00525]
Address: No. 1052, Heping Road, Shenzhen Postcode: 518010
Tel: (86)-755-25587920 Fax: (86)-755-25591480
Website: www.gsrc.com
ANNUAL
REPORT
2018 ANNUAL REPORT
[ Stock Code: 00525 ]
Guangzhou-Shenzhen, Guangzhou-Pingshi and Canton Kowloon
Main Stops of Trains
89,348.4 (’000 People)
45,454.3 (’000 People)
40,297.2 (’000 People)
3,596.9 (’000 People)
Volume of passenger traffic: 25,497.0 million
passenger-kilometers
Total passenger delivery volume of 2018
Passenger delivery volume of
long-distance trains
Passenger delivery volume of
Guangzhou-Shenzhen inter-city trains
Passenger delivery volume of Hong Kong
Through Trains
52,110.5 (’000 tonnes)
15,708.5 (’000 tonnes)
36,402.0 (’000 tonnes)
Volume of freight traffic: 10,705.0 million
tonne-kilometers
Total tonnage of freight of 2018
Outbound freight tonnage
Inbound freight tonnage (including arrival
and pass-through tonnage)
Single-track railways
Double- and multi-track railways
Railways under construction
Joint venture railways and
local railways
GUANGSHEN RAILWAY (cid:135) 2018 ANNUAL REPORT
Important Notice
1.
2.
3.
The board of directors of the Company (the “Board”), the Supervisory
Committee, directors, supervisors and senior management of the Company
warrant that the contents of this annual report are authentic, accurate and
complete, and there are no misrepresentations or misleading statements
contained in or material omissions from this annual report, and severally
and jointly accept the related legal responsibility.
All directors of the Company attended the meeting of the Board considering
this annual report.
PricewaterhouseCoopers issued an audit report for the Company with
standardized and unqualified audit opinions.
4. Wu Yong, Chairman of the Board of the Company, Hu Lingling, General
Manager, Tang Xiangdong, Chief Accountant, and Lin Wensheng, Chief
of Finance Department hereby declare the authenticity, accuracy and
completeness of the financial statements contained in this annual report.
5.
Plans for profits distribution for the reporting period or plan for Common
Reserve Capitalization after consideration and discussion by the Board
At the tenth meeting of the eighth session of the Board of the Company held on
March 27, 2019, the Board considered and passed the profit distribution plan of the
reporting period, and the Board recommended the payment of a final cash dividend
for 2018 of RMB0.06 per share (including tax) to the shareholders of the Company,
based on the total share capital of 7,083,537,000 shares as of December 31, 2018,
totaling RMB425,012,220. The above proposal is subject to approval at the 2018
annual general meeting.
6.
Declaration of risks with respect to forward-looking statements
Forward-looking statements, including future plans and development strategies
contained in the annual report, do not constitute any actual commitments to the
investors of the Company. Investors are advised to consider the risks.
7.
Is there any non-regular appropriation of the Company’s fund by its
controlling shareholders and their related parties?
No
8.
Is there any violation of the decision-making procedures with respect to
the provision of external guarantee by the Company?
No
9.
Notice of Material Risks
This annual report contains details of future potential risks. Please read “Potential
risks” in the chapter “Report of Directors (Including Management’s Discussion and
Analysis)” for details.
目
錄
Contents
Chapter 1 Definitions
Chapter 2 Company Profile and Major Financial
Indicators
Chapter 3 Summary of the Company’s Business
Chapter 4 Report of Directors (Including
Management’s Discussion and
Analysis)
Chapter 5 Matters of Importance
Chapter 6 Changes in Ordinary Share Capital and
Particulars of Shareholders
Chapter 7 Information regarding Preference
Shares
Chapter 8 Directors, Supervisors, Senior
Management and Employees
Chapter 9 Corporate Governance
Chapter 10 Information regarding Corporate
Bonds
Chapter 11 Financial Statements
Chapter 12 Documents Available for Inspection
14
16
21
26
46
60
67
74
84
103
104
211
Chapter 1
Definitions
In this report, unless the context otherwise requires, the expressions stated below will have the following
meanings:
Company, The Company
Reporting period, this period,
Guangshen Railway Company Limited
12 months from January 1 to December 31, 2018
this year
Same period last year
A Share
H Share
ADS
CSRC
SSRB
SSE
SEHK
NYSE
SFO
Listing Rules
Articles
Company Law
Securities Law
CRC
GRGC, largest shareholder
GZIR
WGPR
GSHER
GZR
12 months from January 1 to December 31, 2017
Renminbi-denominated ordinary shares of the Company with a par value
of RMB1.00 issued in the PRC and listed on the SSE for subscription in
Renminbi
Overseas listed foreign shares of the Company with a par value of RMB1.00
issued in Hong Kong and listed on the SEHK for subscription in Hong Kong
dollars
U.S. dollar-denominated American Depositary Shares representing
ownership of 50 H shares issued by trustees in the United States under the
authorization of the Company
The China Securities Regulatory Commission
The Shenzhen Securities Regulatory Bureau of the China Securities
Regulatory Commission
The Shanghai Stock Exchange
The Stock Exchange of Hong Kong Limited
The New York Stock Exchange
The Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong)
The listing rules of SEHK and/or the listing rules of SSE (as the case may
be)
The articles of associations of the Guangshen Railway Company Limited
The Company Law of the People’s Republic of China
The Securities Law of the People’s Republic of China
China Railway Corporation
China Railway Guangzhou Group Co., Ltd.
Guangdong Guangzhou Intercity Rail Transportation Company Limited
Wuhan-Guangzhou Passenger Railway Line Co., Ltd.
Guangzhou-Shenzhen-Hong Kong Express Rail Link Company Limited
Guangzhou-Zhuhai Railway Company Limited
014
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
XSR
GSR
GGR
NGR
PRDIR
GMSR
SR
MZR
Xiamen-Shenzhen Railway Company Limited
Ganzhou-Shaoguan Railway Company Limited
Guiyang-Guangzhou Railway Company Limited
Nanning-Guangzhou Railway Company Limited
Guangdong Pearl River Delta Inter-city Railway Traffic Company Limited
Guangmeishan Railway Limited Company
Guangdong Sanmao Railway Limited Company
MaoZhan Railway Company Limited
015
Annual report
Chapter 2
Company Profile and Major Financial Indicators
1. GENERAL INFORMATION OF THE COMPANY
(1) Company Information
Chinese name
Chinese name abbreviation
English name
Legal representative of the Company
廣深鐵路股份有限公司
廣深鐵路
Guangshen Railway Company Limited
Wu Yong
(2) Contact Person and Contact Information
Name
Address
Tel.
Fax.
E-mail
Company Secretary
Guo Xiangdong
No. 1052 Heping Road, Luohu District,
Shenzhen, Guangdong Province
(86)755-25588150
(86)755-25591480
ir@gsrc.com
Representative of Securities Affairs
Deng Yanxia
No. 1052 Heping Road, Luohu District,
Shenzhen, Guangdong Province
(86)755-25588150
(86)755-25591480
ir@gsrc.com
(3) Basic Information
Registered Address
Postal Code of the Registered Address
Place of Business
No. 1052 Heping Road, Luohu District,
Shenzhen, Guangdong Province
518010
No. 1052 Heping Road, Luohu District,
Shenzhen, Guangdong Province
Postal Code of the Place of Business
Company Website
E-mail
518010
http://www.gsrc.com
ir@gsrc.com
(4) Places for Information Disclosure and Reserve Address
Newspapers for information disclosure
China Securities Journal, Securities Times,
of the Company
Websites specified by CSRC to publish
the annual report
Reserve address of annual report
Shanghai Securities News, Securities Daily
http://www.sse.com.cn
http://www.hkexnews.hk
http://www.gsrc.com
No. 1052 Heping Road, Luohu District, Shenzhen,
Guangdong Province
016
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
(5) Share Information of the Company
Share Information of the Company
Types of the Shares
A Share
H Share
ADS
Stock Exchange
SSE
SEHK
NYSE
Stock Short Name
廣深鐵路
廣深鐵路股份
—
Stock Code
601333
00525
GSH
(6) Other Relevant Information
Auditor engaged
by the Company
(Domestic)
Auditor engaged
by the Company
(International)
Legal advisor to PRC
law
Name
Office Address
Name of signing
auditors
Name
Office Address
Name
Office Address
Legal advisor as to
Hong Kong law
Name
Office Address
Legal advisor as to
United States law
Name
Office Address
Registrar for A Share Name
Office Address
Registrar for H Share Name
Depository
Principal banker
Office Address
Name
Office Address
Name
Office Address
PricewaterhouseCoopers Zhong Tian LLP
11/F PricewaterhouseCoopers Center, 2 Corporate Avenue, 202 Hu
Bin Road, Huangpu District, Shanghai, China
Yao Wenping, Liu Jingping
PricewaterhouseCoopers
22nd Floor, Prince’s Building, Central, Hong Kong
Beijing Grandway Law Office
12/F, Block C, Skyworth Building, 8 South One Street, Hi-Tech Zone,
Nanshan District, Shenzhen, China
Cleary Gottlieb Steen & Hamilton (Hong Kong)
37th Floor, Hysan Place, 500 Hennessy Road, Causeway Bay, Hong
Kong
Jones Day
31st Floor, Edinburgh Tower, The Landmark, 15 Queen’s Road
Central, Hong Kong
China Securities Depository and Clearing Corporation Limited
Shanghai Branch
36th Floor, China Insurance Building, No. 166, Lujiazui East Road,
Pudong New District, Shanghai, China
Computershare Hong Kong Investor Services Limited
Rooms 1712-1716, 17th Floor, Hopewell Centre,
183 Queen’s Road East, Wan Chai, Hong Kong
JPMorgan Chase Bank, N.A.
13th Floor, No. 4 New York Plaza, New York, USA
Construction Bank of China Shenzhen Branch Jiabin Road Sub-branch
1st to 4th Floors, Jinwei Building, Jiabin Road, Shenzhen, Guangdong
Province, China
017
Annual report
Chapter 2
Company Profile and Major Financial Indicators
II. COMPANY PROFILE
On March 6, 1996, the Company was registered and established in Shenzhen, the PRC in accordance with
the Company Law.
In May 1996, the H shares and American Depositary Shares issued by the Company were listed on the SEHK
and the NYSE respectively. In December 2006, the A Shares issued by the Company were listed on the
SSE. In January 2007, the Company used the proceeds from the issue of A Shares to acquire the railway of
Guangzhou-Pingshi, taking the coverage of the Company’s operations into the national trunk line networks.
Currently, the Company is the only PRC railway transportation enterprise with its shares listed in Shanghai,
Hong Kong and New York.
The Company is mainly engaged in railway passenger and freight transportation businesses, the Hong Kong
Through Train passenger services in cooperation with MTR Corporation Limited, and management services
for commissioned transportation for other railway companies in the PRC. The Company is also engaged in
the provision of integrated services in relation to railway facilities and technology, commercial trading and
other industrial businesses that are consistent with the Company’s objectives.
The Shenzhen-Guangzhou-Pingshi Railway, which is operated solely and independently by the Company,
runs 481.2 kilometers long and connects the entire Guangdong Province vertically. The Guangzhou-
Pingshi Railway is the southern part of Beijing-Guangzhou railway, forming an aorta connecting northern
and southern China; whereas the Guangzhou-Shenzhen Railway is one of the two railway passways from
mainland China to Hong Kong, linking with the Beijing-Guangzhou, Beijing-Kowloon, Sanshui-Maoming,
Pinghu-Nantou, and Pinghu-Yantian lines, as well as to the Xiamen-Shenzhen Railway and the East Rail Line
in Hong Kong, to form an integral part of the railway transportation network in the PRC.
Passenger transportation is the principal business of the Company. As of December 31, 2018, the Company
operated 252 pairs of passenger trains each day, including 109 pairs of intercity high-speed passenger
trains between Guangzhou and Shenzhen (including 99 pairs of inter-city trains between Guangzhou East to
Shenzhen, and 10 pairs of Guangzhou East to the Chaozhou-Shantou cross-network EMU trains), 13 pairs
of Hong Kong Through Trains (11 pairs of Canton-Kowloon Through Trains, 1 pair of Zhaoqing-Kowloon
Through Train, and 1 pair of Beijing/Shanghai-Kowloon Through Train), and 130 pairs of long-distance trains
(including 11 pairs of Guangzhou-Foshan-Zhaoqing intercity trains, and 4 pairs of Guangzhou East to Guilin
North, Nanning East, Guiyang North and Xiamen cross-network EMU trains). The Company adopts an “as-
frequent-as-buses” operation for Guangzhou-Shenzhen inter-city trains, meaning that one pair of China
Railway High-speed train (the “CRH”) is dispatched every 10 minutes on an average during peak hours
between Guangzhou and Shenzhen. The through-trains passing through Hong Kong jointly operated by the
Company and the MTR Corporation Limited are one of the important transportation means going between
Guangzhou and Hong Kong. The Company operates a number of long-distance trains running from and to
Guangzhou and Shenzhen, linking with most of the provinces, autonomous regions and municipals across the
nation.
018
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
Freight transportation is an important business line of the Company. The Company is well-equipped with
comprehensive freight facilities and is able to efficiently transport full load cargo, single load cargo,
containers, bulky and heavy cargo, dangerous cargo, fresh and live cargo, and oversized cargo, and the rail
lines operated are closely knitted with the major ports in Guangzhou and Shenzhen and are connected to
several large industrial zones, logistics zones and plants and mines in the Pearl River Delta region via the
railroad sidings. The major market of the Company’s freight transportation business is domestic mid-to-long-
distance transportation, and the Company enjoys competitive advantages in domestic mid-to-long-distance
freight transportation in China.
Since WGPR commenced operations in December 2009, it has extended its railway operation service and
expanded passenger and freight transportation. So far, the Company has provided this service to WGPR,
GZIR, GSHER, GZR, XSR, GSR, NGR, GGR, PRDIR and MZR, and such railway operation service has also
become a new point for business growth. With the successive completion and commencement of operation
of a series of high-speed railways and inter-city railways in “Pan Pearl River Delta” region, the geographical
coverage of the Company’s railway operation service will expand.
III. MAJOR ACCOUNTING DATA AND FINANCIAL INDICATORS FOR
THE PAST FIVE YEARS
(Unit: RMB thousand)
Income items
2018
2017
Year-
on-year
increase/
decrease
(%)
2016
2015
2014
Total revenue
Total operating
expenses
Profit from
operations
Profit before tax
Profit after tax
Consolidated
profit
attributable to
shareholders
Basic earnings
per share
(RMB/Share)
Earnings per ADS
(RMB/Unit)
19,828,018
18,331,422
8.16
17,280,504
15,725,309
14,800,781
18,658,213
16,932,587
10.19
15,637,999
14,156,735
13,751,961
1,062,253
1,068,800
779,034
1,350,358
1,347,132
1,011,768
(21.34)
(20.66)
(23.00)
1,534,235
1,544,009
1,153,700
1,453,947
1,451,838
1,063,308
1,055,958
880,633
661,126
784,059
1,015,361
(22.78)
1,158,253
1,070,822
662,021
0.11
5.53
0.14
7.17
(21.43)
(22.87)
0.16
8.18
0.15
7.56
0.09
4.67
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Annual report
Chapter 2
Company Profile and Major Financial Indicators
Increase/
decrease as
at the end
of the year
compared
to the end
of last year
(%)
At the end
of 2016
At the end
of 2015
At the end
of 2014
Assets and
liabilities
At the end
of 2018
At the end
of 2017
Total assets
Total liabilities
Shareholders’
equity interests
(excluding
non-controlling
interests)
Net assets per
share (RMB/
Share)
35,402,237
6,585,908
33,994,238
5,337,157
4.14
23.40
32,870,258
4,840,203
31,943,272
4,499,010
30,536,663
3,750,203
28,852,299
28,684,677
0.58
28,054,058
27,462,488
26,745,843
4.07
4.05
0.49
3.96
3.88
3.78
Note: During the reporting period, indicators including profit from operations, profit before tax, profit after tax and
consolidated profit attributable to shareholders of the Company all recorded year-on-year decrease, mainly due to an
increase in operating expenses during the reporting period, which exceeded the increase in operating revenues. For
details about the reasons for the increase in operating expenses during the reporting period, please refer to the detailed
analysis of the table headed “Analysis of Costs” in the chapter “Report of Directors (Including Management’s Discussion
and Analysis)”.
I V . D I F F E R E N C E S I N A C C O U N T I N G D A T A U N D E R C H I N E S E A N D
INTERNATIONAL ACCOUNTING STANDARDS
Applicable ✓Not applicable
020
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
Chapter 3
Summary of the Company’s Business
I. PRINCIPAL ACTIVITIES, BUSINESS MODEL AND INDUSTRY FACT
SHEET DURING THE REPORTING PERIOD
(1) Principal activities and business model
During the reporting period, as a railway transportation enterprise, the Company has primarily been
operating the passenger and freight transportation businesses of the Shenzhen-Guangzhou-Pingshi Railway.
It has also operated the Hong Kong Through Train passenger services in cooperation with MTR Corporation
Limited, and provided railway operation services for commissioned transportation for other railway companies
such as WGPR, GZIR, GSHER, GZR, XSR, GSR, NGR, GGR, PRDIR and MZR.
(2) Industry fact sheet
Railway, as the aorta of the nation’s economy, the key important infrastructure and the significant project
for people’s livelihood, the backbone of an integrated transportation system and one of the main means of
transportation, is of crucial importance for the nation’s economic and social development. Since the State
Council approved implementation of the Medium to Long Term Plan for Railway Network Development in
2004, railways in China have developed rapidly. The completion and operation commencement of a series
of high-speed railways and inter-city railways in recent years, has essentially alleviated the tight capacity
of railway transportation in China, eliminated the bottle-neck restrictions, and helped the country fulfill its
economic and social development needs as a whole. By the end of 2018, the national railway operations
reached 131,000 kilometers, among which the high-speed railway spanned over 29,000 kilometers. In 2018,
the national railway had achieved significant growth in both of its passenger and freight transportation, with
its passenger delivery volume reaching 3.37 billion people throughout the year, representing a year-on-year
increase of 9.4%; meanwhile, the outbound freight tonnage reached 4.022 billion tonnes, representing a
year-on-year increase of 9.1%.
021
Annual report
Chapter 3
Summary of the Company’s Business
II. EXPLANATION OF SIGNIFICANT CHANGES IN THE MAJOR ASSETS
OF THE COMPANY DURING THE REPORTING PERIOD
For details on significant changes in the major assets of the Company during the reporting period, please
read “Analysis of Assets and Liabilities” in the chapter “Report of Directors (Including Management’s
Discussion and Analysis)” in this annual report.
022
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
023
Annual report
Chapter 4
Report of Directors
(Including Management’s Discussion and Analysis)
Chairman of the Board
I. CHAIRMAN’S STATEMENT
Dear Shareholders,
On behalf of the Board, I am hereby pleased to present the audited operating results of the Company for
2018 for the shareholders to review.
(1) Business review
In 2018, China’s economy had successfully withstood every challenge of the complicated and changing
external environment, ongoing intensified economic and trading conflicts, as well as the changes in the
steady-state economy, all of which had fostered the remarkable achievements of the key targets in relation
to the economic and social developments. With its national economy remaining its operations within a
reasonable range, China had continuously realized its developments in a stable and progressing way. China
had once again reached new heights in its gross economic output, with its national gross domestic product
(“GDP”) attaining new highs of RMB90 trillion for the first time, representing a year-on-year growth of
6.6%. Meanwhile, the national railway showed significant improvements in both of its passenger and freight
transportation, with its passenger delivery volume reaching 3.37 billion people over the course of the year,
representing a year-on-year increment of 9.4%, and its outbound freight tonnage reaching 4.022 billion
tonnes, representing a year-on-year growth of 9.1%.
026
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
Given such positive macroeconomic environment and industrial developments, coupled with the sound
leadership of the Board and the joint efforts of its employees, the Company managed its operations
with a close adherence to its business objectives, meanwhile focused on “building up China’s strength
in transportation with railway as the priority” and deepened its vision on “strengthening the foundation,
pursuing achievements, improving quality and efficiency”. In addition to the efforts in enhancing inter-city
train routes and schedules, adjusting transportation capacity in a timely manner and exploiting every market
potential of passenger and freight transportation, the Company also strengthened its core advantages in
railway transportation, all in a bid to adapt to the commencement of the Hong Kong section of Guangzhou-
Shenzhen-Hong Kong Express Rail Link and the reform in rail carrier system. Each of the duties and goals
as set by the Board at the beginning of the year has been effectively accomplished. During the reporting
period, the Company’s transportation safety remained stable as a whole, bringing continuous and steady
improvements to its operating revenue; nonetheless, due to the upward adjustment of the industry pay level
and the effects from the reform in rail carrier system, both labour expenses and expenses on its railway
network usage recorded increase during the reporting period, the Company’s net profits had shown a greater
decrease as compared to that of in the previous year.
In 2018, the Company achieved a passenger delivery volume of 89,348,400 people, representing a year-
on-year growth of 4.95%, while its freight delivery volume amounted to 15,708,500 tonnes, representing
a year-on-year decrease of 0.98%. Additionally, the Group had achieved its operating revenues reaching
RMB19.828 billion, representing a year-on-year growth of 8.16%; consolidated profits attributable to
shareholders equaled to RMB784 million, representing a year-on-year decline of 22.78%; and its basic
earnings per share equaled to RMB0.11.
Throughout 2018, the Board duly performed its duties under the Company’s Articles of Association. With their
meticulous and conscientious efforts, all directors strived to enhance the Company’s corporate governance
and regulate its operations management. During the year, the Company convened 1 general meeting,
5 Board meetings and 7 audit committee meetings, in which the Company had made sound decisions in
relation to the important matters of the Company such as the Company’s profit distribution, financial budget,
production and operation, connected transactions, establishment of systems, changes in accounting policies,
elections of directors so as to enhance the Company’s continuous development.
The Company has always been striving to enhance its enterprise value. Due to its persistence in ensuring
a long-term and stable cash dividend distribution policy so as to ensure an ongoing favorable return to
shareholders. The Board recommended the payment of final cash dividend of RMB0.06 per share for 2018,
representing 54.55% of the basic earnings per share for the year. The proposal above shall be subject to
approval at the Company’s 2018 annual general meeting.
(2) Prospects
Shareholders are reminded that the Company has made certain forward-looking statements in this annual
report in relation to domestic and international economic conditions and the railway transportation market,
as well as the Company’s work plans in 2019 and in the future. These forward-looking statements are
subject to the influences of various uncertainties, and the actual outcome may be greatly different from the
forward-looking statements of the Company. These statements do not constitute any commitment to the
future operating results of the Company. Please be advised to consider the investment risks.
027
Annual report
Chapter 4
Report of Directors
(Including Management’s Discussion and Analysis)
For the year of 2019, with all the changes in a steady-state economy and public worries over changes
under the pressure of economic downtown, it would mean a year of intensifying complicated and difficult
external environment for the economic developments in China. Yet, we should also pay heed to the fact
that our national developments are still situating right at a crucial period of strategic opportunities, through
deepening the supply-side structural reform, taking forward the economic reform and liberation, as well
as speeding up the optimization and upgrades in economic structures, China has the best of its foundation
and conditions, aligning with its confidence and ability to maintain its economy to be operated within a
reasonable range, so as to realize a sustainable and healthy growth in its economy. With respect to industry
developments, when railway being the aorta of the nation’s economy and an important component of the
country’s infrastructure, the State has continuously increased its investments in railways. Over the past few
years, various high-speed railways and inter-city railways had been successively completed and commenced
their operations, altogether benefiting the significant improvements in the capacity of railway passenger
and freight transportation. Given the above factors, we expect that the market demand of national railway
passenger and freight transportation will maintain its rapid acceleration in 2019.
In 2019, facing the abovementioned business circumstances, the Company will adhere to the direction
expressed from Xi Jingping Great Thought on Socialism with Chinese Characteristics for a New Era,
meanwhile will firmly uphold the spirits of the 19th Party Congress, the Central Economic Work Conference
and the CRC Annual Work Conference, in order to march bravely on to glory by living on our historical mission
of “building China’s strength in transportation with the railway as the priority”. Moreover, the Company will
proactively adapt to the new normal of economic developments and the unprecedented system of industry
management. With its adherence to a market-oriented approach, the Company will focus on economic
efficiency, strengthen its foundation and obtain achievements, improve its quality and efficiency, deepen
and facilitate its actions in improving its freight transportation capacity and its plan on lifting the quality and
efficiency of its passenger transportation service. In the meantime, the Company will continuously better
its transportation service quality and operation management, strengthen its efforts in the operation and
development of railway assets, strengthen its cost and expenses control, emphasize on improving quality
yet reducing costs and boosting efficiency, and coordinate and manage its work in the areas of safety,
transportation, operation, construction and stability.
I, together with the members of the Board, believe that in the forthcoming year, the Company is going to
attain new achievements in different aspects and create new value for our shareholders. Together, we will
make new contributions to the development of the society with the strong support of all shareholders and
various sectors in the public, along with the joint efforts of the Board, supervisory committee, management
and staff.
By order of the Board
Wu Yong
Chairman of the Board
Shenzhen, China
March 27, 2019
028
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
II. DISCUSSION AND ANALYSIS OF THE PRINCIPAL OPERATION OF
THE COMPANY DURING THE REPORTING PERIOD
In 2018, the operating revenues of the Company were RMB19,828 million, compared to RMB18,331 million
in the previous year, representing an increase of 8.16% over the same period in the previous year; among
which, revenues from passenger transportation, freight transportation, railway network usage and other
transportation-related services, and other businesses were RMB8,108 million, RMB1,849 million, RMB8,866
million and RMB1,005 million respectively, accounting for 40.89%, 9.33%, 44.71% and 5.07% of the total
revenues respectively. Profit from operations amounted to RMB1,062 million, representing a year-on-
year decrease of 21.34% as compared to the RMB1,350 million in the previous year; consolidated profit
attributable to shareholders was RMB784 million, representing a year-on-year decrease of 22.78% as
compared to the RMB1,015 million in the previous year.
(1) Analysis of principal operations
1. An analysis of changes in items of the income statement and the cash flow statement
Item
Current period
Operating revenues
Operating expenses
Other losses — net
Income tax expenses
Net cash flows from operating activities
Net cash flows from investing activities
Net cash flow from financing activities
19,828,018
18,658,213
108,613
289,766
3,261,402
(2,113,132)
(570,032)
(Unit: RMB thousand)
Same
period
last year
18,331,422
16,932,587
48,477
335,364
2,634,839
(2,264,647)
(569,333)
Change (%)
8.16
10.19
124.05
(13.60)
23.78
(6.69)
0.12
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(Including Management’s Discussion and Analysis)
2. Analysis of revenue and costs
(i) Passenger transportation
Passenger transportation, which is the most important transportation business segment of the Company,
includes Guangzhou-Shenzhen inter-city trains (including Guangzhou East to the Chaozhou-Shantou cross-
network EMU trains), long-distance trains and Hong Kong Through Trains. As of December 31, 2018, the
Company operates a total of 252 pairs of passenger trains on a daily basis, among which there are 109 pairs
of Guangzhou-Shenzhen inter-city trains (including 99 pairs of inter-city trains between Guangzhou East to
Shenzhen, and 10 pairs of Guangzhou East to the Chaozhou-Shantou cross-network EMU trains); 13 pairs
of Hong Kong Through Trains (11 pairs of Canton-Kowloon Through Trains, 1 pair of Zhaoqing-Kowloon
Through Train and 1 pair of Beijing/Shanghai-Kowloon Through Train), and 130 pairs of long-distance trains
(including 11 pairs of Guangzhou-Foshan-Zhaoqing intercity trains, and 4 pairs of Guangzhou East to Guilin
North, Nanning East, Guiyang North and Xiamen cross-network EMU trains). The table below sets forth the
revenues from passenger transportation and passenger delivery volumes for the period in comparison with
those from the same period last year:
2018
2017
Year-on-year
increase/
decrease (%)
Passenger transportation revenues (RMB ten
thousand)
— Guangzhou-Shenzhen inter-city trains
— Through trains
— Long-distance trains
— Other revenues from passenger
transportation
Passenger delivery volume (Persons)
— Guangzhou-Shenzhen inter-city trains
— Through trains
— Long-distance trains
Total passenger — kilometers (‘00 million
passenger-kilometer)
810,838
287,734
49,759
415,807
57,538
89,348,416
40,297,195
3,596,888
45,454,333
775,708
256,642
52,337
420,620
46,109
85,133,187
36,948,135
3,569,760
44,615,292
254.97
255.29
4.53
12.11
(4.93)
(1.14)
24.79
4.95
9.06
0.76
1.88
(0.13)
•
The increase in passenger transportation revenues was mainly due to: despite the
commencement of the Hong Kong section of Guangzhou-Shenzhen-Hong Kong Express Rail Link and
the diversion effect from the optimizing of high-speed railway network, coupled with the decreased
revenue from the through trains and long-distance trains operated by the Company, both the
passenger transportation volume and revenue of Guangzhou-Shenzhen inter-city trains recorded
considerable increase as driven by the noticeable increase in its capacity. Due to the combined effect
of the above, the overall revenues from passenger transportation still achieved a growth during the
reporting period.
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Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
•
The increase in passenger transportation revenues and passenger delivery volume was
mainly due to the followings: (a) the Company had increased the number of cross-network
EMU trains between Guangzhou East to Chaozhou-Shantou from 8 pairs to 10 pairs each day
since September 21, 2017; (b) it also utilized the high-capacity CRH6A EMU trains for some of the
Guangzhou East to Shenzhen inter-city trains since the Spring Festival of 2018, coupled with the
adoption of “3+4” operation model for inter-city trains between Guangzhou East to Shenzhen since
April 10, 2018, resulting into the increase in the capacity and the number of pairs of the trains; (c)
the addition of 1 pair of cross-network EMU trains from Guangzhou East station to Xiamen since July 1,
2018.
(ii) Freight transportation
Freight transportation forms an important part of the Company’s transportation business. The table below
sets forth the revenues from freight transportation and outbound freight volume for the period as compared
with the same period last year:
Freight transportation revenues (RMB ten
thousand)
— Revenues from freight charges*
— Other revenues from freight transportation
Outbound freight volume (tonnes)
Full-distance volume of outbound freight traffic
(‘00 million tonne-kilometers)*
2018
2017
184,936
160,969
23,967
15,708,483
189,359
174,197
15,162
15,864,237
107.05
107.00
Year-on-year
increase/
decrease (%)
(2.34)
(7.59)
58.07
(0.98)
0.05
•
•
*
The decrease in freight transportation revenues was mainly due to: the decrease in total
amount of freight transportation revenues under the combined effect of the reform in rail carrier
system.
The decrease in outbound freight volume was mainly due to the followings: due to the
combined effect of industrial restructuring within Pearl River Delta and the more fierce competition
from highways and ocean transportation, the freight delivery volume of steel and petroleum
decreased.
Since January 1, 2018, the charging model of the national railway freight transportation has changed to freight
consignment system from the previous section fares system. Adjustments have been made accordingly to the
reporting of certain freight transportation statistics in this annual report as follows:
Revenues from freight charges: it mainly represents the revenues from the total freight charges of the
Company’s outbound freight transportation, whereas the revenues from outbound freight and inbound
freight as presented in previous years refer to the revenue of freight transportation (including the outbound,
pass-through and arrival freight) charged by the distance managed by the Company under the section fares
system.
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Full-distance volume of outbound freight traffic: it represents the full-distance volume of the Company’s
outbound freight traffic, whereas the “volume of freight traffic” as presented in previous years refers to
the volume of freight traffic (including the outbound, arrival and pass-through freight) transported on the
distance managed by the Company under the section fares system.
(iii) Railway network usage and other transportation related services
Railway network usage and other transportation services provided by the Company mainly include passenger
railway network usage, provision of railway operation services, locomotive and passenger car leasing,
passenger service and luggage transportation. The table below sets forth the revenues from railway network
usage and other transportation services for the period in comparison with those of the same period last
year:
Railway network usage and other
transportation related services (RMB ten
thousand)
(a) Railway network usage services
(b) Other transportation related services
— Railway operation services
— Other services
2018
2017
Year-on-year
increase/
decrease (%)
886,564
385,526
501,038
329,323
171,715
764,423
330,647
433,776
284,998
148,778
15.98
16.60
15.51
15.55
15.42
•
•
The increase in the revenues from railway network usage services was mainly due to the
followings: As required by CRC, a consignment settlement system was implemented for railway
freight transportation with effect from January 1, 2018. Accordingly, the full freight transportation
fee will be received by the carriers, which in turn pay service fees to other railway corporations for
the provision of transportation services. Such change in the freight transportation settlement system
resulted in an increase in revenues from railway network usage of freight transportation.
The increase in revenues from other transportation services was mainly due to: the increase
in workload for railway operations and passenger services provided by the Company during the
reporting period driving the growth of related revenue.
(iv) Other business
The Company’s other services include train repair, on-board catering services, leasing, sales of materials and
supplies, sale of goods and other businesses related to railway transportation. In 2018, revenues from other
businesses was RMB1,005 million, representing a decline of 3.08% as compared to RMB1,037 million over
the same period last year.
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GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
2018
16,242
6,912,390
5,370,634
58,490
1,342,344
2017
21,658
6,300,223
4,372,330
57,358
1,314,002
917,898
1,581,685
879,597
1,632,926
171,390
246,563
44,450
98,820
1,095,845
17,610,188
534,025
315,983
28,058
11,332
53,759
104,868
1,048,025
18,658,213
34,348
60,360
930,691
15,850,056
541,997
313,990
29,534
11,332
34,488
151,190
1,082,531
16,932,587
(Unit: RMB thousand)
Year-on-year
increase/
decrease (%)
(25.01)
9.72
22.83
1.97
2.16
4.35
(3.14)
(30.49)
29.41
63.72
17.75
11.10
(1.47)
0.63
(5.00)
—
55.88
(30.64)
(3.19)
10.19
(v) Analysis of costs
By Industry
Item
Railway
business
Other
business
Business tax and surcharges
Employee benefits
Equipment leases and services
Lease of land use right
Materials and supplies
Repairs and facilities
maintenance costs (materials
and supplies excluded)
Depreciation of fixed assets
Cargo logistics and outsourcing
service fees
Amortization of leasehold land
payment
Utility and office expenses
Other
Subtotal
Employee benefits
Materials and supplies
Depreciation of fixed assets
Amortization of leasehold land
payment
Utility and office expenses
Other
Subtotal
Total
•
The increase in the costs of railway business was mainly due to the followings: (a) the
upward adjustment of the industry-wide pay level and the increase in the provision of railway
operation service, which induced a rise in expenses in wages and welfare; (b) in accordance with
the requirement of CRC, a consignment settlement system was implemented for railway freight
transportation with effect from January 1, 2018. Accordingly, the full freight transportation fee will be
received by the carriers, which in turn pay service fees to other railway corporations for the provision
of transportation services. Such change in the freight transportation settlement system resulted in
an increase in equipment leasing and service fee; (c) the additional train trips of cross-network EMU
trains between Guangzhou East to Chaozhou-Shantou and inter-city trains from Guangzhou East to
Shenzhen, and the increase in the provision of railway operation service, altogether inducing the
corresponding increase in the consumption of materials and utilities, and passenger service costs.
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Report of Directors
(Including Management’s Discussion and Analysis)
(vi) Major sales customers and suppliers
During the reporting period, the sales from the top five customers of the Company amounted to
RMB3,331.89 million, accounting for 16.78% of the total annual sales; of which the sales from related
parties amounted to RMB2,884.23 million, accounting for 14.50% of the total annual sales.
During the reporting period, the purchases from the top five suppliers of the Company amounted to
RMB2,697.23 million, accounting for 19.56% of total annual procurement; of which purchases from related
parties amounted to RMB931.50 million, accounting for 6.80% of total annual procurement.
None of the Directors of the Company, their associates or any shareholder (which to the knowledge of the
Directors own more than 5% of the Company’s share capital) had any beneficial interest in the Company’s
five largest customers and suppliers during the reporting period.
3. Expenses
Item
Other losses —
net
Income tax
expenses
(Unit: RMB thousand)
Year-on-year
increase/
decrease
2018
108,613
2016
48,477
(%) Major reason for the changes
124.05 The increase in losses from the retirement
289,766
335,364
(13.60) The decrease in the total profit during the
reporting period.
of fixed assets and the expenses from
the reform of “Three Supplies and One
Property”.
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GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
4. Cash flow
In 2018, the principal capital sources of the Company were revenues generated from operating activities.
The Company’s capital was mainly used for operating and capital expenses, as well as payment of taxes and
dividends. The Company has sufficient cash flow and believes that it has sufficient working capital, bank
loans and other capital sources to meet its needs for operation and developments.
Year-on-year
increase/
(Unit: RMB thousand)
2018
2017
decrease (%) Major reason for the changes
3,261,402
2,634,839
23.78 The increase in the transportation revenue
and service fee received from the
provision of railway operation service.
(2,113,132)
(2,264,647)
(6.69) —
Net cash flows
from operating
activities
Net cash
flows from
investment
activities
Net cash
(570,032)
(569,333)
0.12 —
flows from
financing
activities
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(Including Management’s Discussion and Analysis)
(2) Analysis of assets and liabilities
(Unit: RMB thousand)
Item
Fixed assets — net
Construction-in-progress
Deferred tax assets
Financial assets measured at fair value and
changes in fair value recorded under other
comprehensive income
Available-for-sale investments
Trade receivables
Cash and cash equivalents
Trade payables
Contract liabilities
Payables from fixed assets and construction-in-
progress
Income tax payable
Accruals and other payables
Amount at
the end of
current period
Amount at
the end of
previous period
24,184,248
1,828,372
197,295
23,617,138
1,430,671
37,005
321,246
—
3,861,617
1,738,753
1,440,834
203,631
2,441,647
246,441
2,076,798
—
296,414
4,142,210
1,160,515
1,325,077
—
2,214,547
149,227
1,463,231
Changes in
amount from
the end of
previous period
to the end of
current period
(%)
2.40
27.80
433.16
100.00
(100.00)
(6.77)
49.83
8.74
100.00
10.25
65.15
41.93
1.
2.
3.
4.
The increase in net fixed assets was mainly due to: the additions and purchases of CRH6A EMU trains;
The increase in construction-in-progress was mainly due to: the increase in the investments in
construction-in-progress projects;
The increase in deferred tax assets was mainly due to: the increase in deferred income tax assets
resulting from the compensation received in advance in relation to the resumption of land use rights
over Guangzhou East Shipai Old Goods Yard;
The increase in financial assets measured at fair value and changes in fair value recorded under other
comprehensive income and the decrease in available-for-sale investments were mainly due to: the
available-for-sale financial assets being reclassified to investments on other equity instruments under
the relevant requirements of the new financial instruments standards;
5.
The decrease in trade receivables was mainly due to: the recovery of trade receivables of previous
years;
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Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
6.
7.
8.
9.
10.
11.
The increase in cash and cash equivalents was mainly due to: the compensation received in advance
in relation to the resumption of land use rights over Guangzhou East Shipai Old Goods Yard;
The increase in trade payables was mainly due to: the increase in payables for repairment costs;
The increase in contract liabilities was mainly due to: the advances for the provision of transportation
services being reclassified to contract liabilities by the Company due to the implementation of the new
revenue standard;
The increase in payables for fixed assets and construction-in-progress was mainly due to: the increase
in payables for constructions and equipment;
The increase in income tax payable was mainly due to: the increase in enterprise income tax
payables;
The increase in accruals and other payables was mainly due to: the compensation received in advance
in relation to the resumption of land use rights over Guangzhou East Shipai Old Goods Yard; the
advances for the provision of transportation services being reclassified to contract liabilities by the
Company due to the implementation of the new revenue standard; and the increase in the payables
for the reform of “Three Supplies and One Property”.
(3) Analysis on investment positions
1. General analysis on investments in external equity interests
During the reporting period, the Company did not invest in securities such as stocks, warrants or convertible
bonds, and did not hold or deal in equity interests of other listed companies and non-listed financial
enterprises. Details of investments on the external equity interests of the Company at the end of the
reporting period are set out in Notes 10, 11 and 15 to the financial statements.
(i) Significant investments in equity interests
During the reporting period, the Company had no significant investments in equity interests.
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(Including Management’s Discussion and Analysis)
(ii) Significant non-equity investments
During the reporting period, the significant non-equity investment project of the Company mainly included:
Project name
Purchases of CRH6A EMU
trains (6 pairs)
Reconstruction of automatic
inter-locking equipment
from Guangzhou to
Pingshi section
Improvements of system
adaptability of the
traction power supply
system from Pingshi to
Guangzhou section of
the Beijing-Guangzhou
railway
Fourth and fifth-grade
transformation of uses
of CRH1A EMU trains (11
pairs)
Section repair, capacity
expansion and renovation
project of the Guangzhou
North vehicle section
Reconstruction of the
section from Guangzhou
East to Xintang of
Guangshen line III and IV
Phase I construction of
the newly built staff
apartment in Shipai of
Guangzhou area
Project amount
Progress of
project
Invested
amount during
the year
Actual amount
invested in
aggregate
(Unit: RMB ten thousand)
77,328
100%
23,198
23,198
72,651
51%
14,182
37,173
58,499
58%
19,892
33,890
52,618
100%
52,618
52,618
37,600
44%
12,724
16,663
36,383
74%
3,493
26,845
35,000
48%
1,690
16,636
(iii) Financial assets at fair value
Details of financial assets at fair value which were held by the Company during the reporting period are set
out in Note 15 to the financial statements.
(4) Major assets and disposal of equity interests
During the reporting period, the Company had no major disposal of assets and equity interests.
(5) Analysis on the major controlling and invested companies
During the reporting period, there was no net profit from an individual subsidiary or investment returns from
an individual invested company that accounted for over 10% of the Company’s net profit.
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GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
III. DISCUSSION AND ANALYSIS ON THE FUTURE DEVELOPMENT OF
THE COMPANY
(1) Industry landscape and trend
Industry development trend: Acting as the aorta of the nation’s economy, a vital infrastructure of
the nation as well as a popular form of transportation, railway is of crucial importance for the national
economic and social development. Since the implementation of Medium to Long Term Plan for Railway
Network Development in 2004, China’s railway has developed rapidly. Currently, on the whole, the tight
capacity of railway transportation in China has been alleviated, and the bottle-neck restriction has also been
eliminated, altogether contributing to fulfillment of economic and social development needs. However, when
benchmarking with the requirements for a new normal of economic developments, other transportation forms
and developed countries, China’s railway still faces deficiencies such as incomplete layout, low operational
efficiency and severe structural conflicts. To expedite the establishment of a modern railway network with
reasonable layout, wide coverage, high efficiency and convenience, safety and economic efficiencies, the
Medium to Long Term Plan for Railway Network Development (2016-2025) had been jointly modified by
the National Development and Reform Commission, Ministry of Transport and China Railway Corporation in
July 2016, highlighting a more ambitious “Eight East-West Lines and Eight South-North Lines” high-speed
railway network for a new era. Consequently, it is estimated that in the long run, the development of railway
transportation industry will remain at a high rate, and the passenger and freight transportation capacity and
the market competitive position of railway will gradually grow.
Industry competition scenario: The national railway is highly concentrated with a unified transportation
management system. Competitions in the industry mainly brought by other transportation industries include
highways, aviation and water transportation, and are expected to continue to exist in the long run. However,
as the marketization reform of the railway industry (including the reforms of the investment and financing
system, the transportation management system and the pricing mechanism) gradually deepens, the entry
barrier to the industry will be lowered at a gradual pace, where the investment subject of the industry will
become more diversified. Following the completion of construction and operation commencement of the
State’s high-speed railway network with “Four East-West Lines and Four South-North Lines” and numerous
inter-city railways, the competition structure of the railway transportation industry is expected to experience
substantial changes, with more intense competitions not only externally from the highway, aviation and
water transportation industries but also from within the industry itself.
(2) Development strategies of the company
Under the sound leadership and scientific decision-making of the Board, the Company will capitalize on the
historic opportunity presented by the extensive railway construction, proactively adapt to the policy direction
of railway system reform in order to establish a steadfast foothold in the Pan Pearl River Delta region, and
perfect and enhance its business portfolio centered on railway passenger and freight transportation and
complemented by the railway-related businesses. Striving to become a top-notch railway transportation
services enterprise in the PRC and to actualize its development objective of “scaling up and consolidating
its strengths”, the Company will also focus on improving its quality of service and on continuing efforts to
advance management innovation, service innovation and technology innovation.
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(Including Management’s Discussion and Analysis)
(3) Operating plans
At the tenth meeting of the eighth session of the Board of the Company held on March 27, 2019, the Board
passed the financial budget for 2019. The Company plans to achieve a passenger delivery volume of 82.6
million people (excluding commissioned transportation) and outbound freight tonnes of 16.61 million tonnes.
To actualize these objectives, the Company will focus on the following tasks:
1.
2.
3.
4.
Production safety: Consistently adopting the approach of “safety first, prevention-led, integrated
governance” in its construction of route with illustrative standards on safety and quality, while
optimizing safety management system, reinforcing control over safe production process, intensifying
rectification of safety problems as well as investments in safety facilities and equipment, and
enhancing the capability for safety protection.
Passenger transportation: Firstly, enhancing the passenger traffic volume analysis during festivals and
holidays including the transport over the Spring Festival, Ching Ming Festival and the May 1 Labour
Holiday, to timely adjust transportation coordination and improve the train routes and schedules,
with a view to realize the improvements in both transportation volumes and revenues; secondly,
speeding up large-scale construction projects including the reconstruction of the section from
Guangzhou East to Xintang of Guangshen line III and IV, as well as the Xintang station district public
transport interchange in East Guangzhou, and striving to complete and commence operation as soon
as possible; thirdly, improving the service environment of passenger transportation and enhancing
customers’ service experience, by enhancing quality and efficiencies of passenger transportation.
Freight transportation: Firstly, continuing to implement the reform of supply-side of railway services,
strengthening strategic cooperation with large enterprises, establishing strategic cooperative
relationship with large enterprises such as steel and electricity plants, expanding bulk goods freight
transportation volume; secondly, continuously developing new trains for “white freight”, strengthening
the existing sources and supply organizations and improving the operational efficiency of “white
freight”.
Operational management: Firstly, strengthening the awareness of operating efficiency, improving
budget management, strictly controlling the costs and expenditure; secondly, strengthening the capital
and budget management and centralizing the management, ensuring capital availability, reducing
the capital costs and improving the efficiency of the use of capital; thirdly, intensifying efforts on the
comprehensive developments of lands and assets, striving for vitalizing Company’s land resources, and
improving the return on Company’s assets.
040
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
(4) Potential risks
Type of risk
Macro-economic risk
Policy and regulatory risk
Transportation safety risk
Market competition risk
Description of risk
Railway transportation industry is
highly related to the macro-economic
development condition and greatly
affected by macro-economic atmosphere.
If the macro-economic atmosphere
becomes depressed, the Company’s
operation results and financial condition
may be adversely affected.
Railway transportation industry is greatly
affected by policy and regulations.
With the changes in domestic and
international economic environment, and
the reform and development of railway
transportation industry, corresponding
adjustments may be required for relative
laws, regulations and industrial policies.
These changes may incur uncertainties
to the Company’s business development
and operation results.
Transportation safety is the prerequisite
and foundation for normal operation and
good reputation of railway transportation
industry. Bad weather, mechanical
failures, human errors and other force
majeure incidents may impose adverse
impacts on the transportation safety of
the Company.
Competition exists in certain markets
w i t h i n a v i a t i o n , r o a d a n d w a t e r
transportation and railway transportation
industries. In addition, a range of high-
speed railways and inter-city railways
have been completed and commenced
operation along with the development of
railway transportation industry. Internal
competitions within railway transportation
industry have also intensified. The
Company may be subject to greater
competitive pressure in the future, which
in turn could impact the operation results
of the Company.
Addressing measures
The Company will pay close attention
to the changes in international and
domestic macro-economic conditions,
strengthen its analysis and researches
of the contributing factors relating to
the railway and transportation industry,
timely adjust its development strategies
in response to the changes in the market
environment, and strive to maintain the
stability of the Company’s production
and operation.
The Company will proactively engage in
different seminars for the improvement
of industrial polices and regulations
development, study the latest changes
in policy and regulations, capture the
development opportunities brought by the
amendments of policy and regulations,
and adopt a prudent approach in
addressing uncertainties caused by
changes in policy and regulations.
The Company will proactively participate
in regular transportation safely meetings
held by competent authorities of the
industry to understand the transportation
safety condition of the Company, deploy
resources in its transportation safety
management, establish and optimize
safety risk management and control, and
intensify the training of safety knowledge
a n d c a p a b i l i t y o f t r a n s p o r t a t i o n
personnel.
The Company will take proactive
measures to address market competition
by leveraging the advantages of “safe,
comfortable, convenient, on time” railway
transportation, improve service facilities
and enhance service quality. In respect
of freight transportation, the Company is
committed to increasing the efficiencies
of its loaders and the turnover rate of its
freight trains to improve the freight train
frequency. In addition, the Company will
strengthen its analysis and research of
the railway transportation market, and
proactively apply to competent authorities
of the industry to add new long-distance
trains in areas not covered by high-speed
railways.
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(Including Management’s Discussion and Analysis)
Type of risk
Financial risk
Description of risk
The operating activities of the Company
are subject to various financial risks, such
as exchange risks, interest risks, credit
risks and liquidity risks.
Addressing measures
The Company has established a set of
managerial procedures for financial risks
with a focus on the uncertainties of the
financial market. It is also dedicated
to minimizing to the potential adverse
impacts on the financial performance of
the Company. For more detailed analysis,
please refer to “Note 3 to the financial
statements”.
IV. EXPLANATION OF CONDITIONS AND REASONS NOT DISCLOSED
B Y T H E C O M P A N Y I N A C C O R D A N C E W I T H S T A N D A R D S D U E T O
N O N - A P P L I C A B L E S T A N D A R D S A N D R E G U L A T I O N S O R S P E C I A L
REASONS SUCH AS NATIONAL SECRETS, COMMERCIAL SECRETS
Applicable ✓Not applicable
V. OTHER DISCLOSURES
(1) Liquidity and capital sources
During the reporting period, the principal capital sources of the Company were revenues generated from
operating activities. The Company’s capital was mainly used for operating and capital expenses, and the
payment of taxes. The Company has sufficient cash flow and it believes it has sufficient working capital,
bank loans and other capital sources to meet its operation and development needs.
As of the end of the reporting period, the Company had no borrowings in any form. The Company’s capital
commitments and operating lease commitments as of the end of reporting period have been set out in Note
38 to the financial statements.
As of the end of the reporting period, the Company had no charges on any of its assets and had not
provided any guarantees, or entrusted deposits. The gearing ratio (calculated by the balance of liabilities
divided by total assets as of the end of the reporting period) of the Company was 18.60%.
(2) Risk of exchange rate fluctuations and related hedges
The Company’s exposure to foreign exchange risks was mainly related to the U.S. dollar and Hong
Kong dollar. Other than import purchase business and dividend payment to overseas investors which
are denominated in foreign currencies, all other major businesses of the Company were denominated in
Renminbi. Renminbi is not freely convertible into other foreign currencies. The conversion of Renminbi
denominated balances into foreign currencies is subject to the rates and regulations of foreign exchange
control promulgated by the PRC government. Any foreign currency denominated monetary assets and
liabilities other than in Renminbi would be subject to foreign exchange exposure.
042
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
The Company has not used any financial instruments to hedge the foreign exchange risks. The Company has
minimized these risks by controlling the sizes of transactions, assets and liabilities in foreign currencies.
(3) Taxation
Details of income tax applicable to the Company during the reporting period are set out in Note 33 to the
financial statements.
(4) Interest capitalized
During the reporting period, no interest was capitalized in the fixed assets or construction-in-progress of the
Company.
(5) Properties and fixed assets
During the reporting period, all properties held by the Company were for the purpose of developments,
and their percentage ratio (as defined by Rule 14.04(9) of the Listing Rules of SEHK) did not exceed 5%.
Movements in the properties and fixed assets held by the Company during the reporting period are set out
in Note 6 to the financial statements.
(6) Undistributed profit
Details of movements in the undistributed profit of the Company during the reporting period are set out in
the Statements of Changes in Equity.
(7) Surplus reserve
Details of movements in the surplus reserve of the Company during the reporting period are set out in the
Statements of Changes in Equity and Note 23 to the financial statements.
(8) Subsidiaries
Details of the principal subsidiaries of the Company as at the end of the reporting period are set out in Note
10 to the financial statements.
(9) Material investments held, material acquisitions and disposals of subsidiaries and
associates, and future plans of material investments or acquisition of capital assets
Except as disclosed in this annual report, during the reporting period, the Company had no material
investment held, had not carried out any material acquisition or disposal of subsidiaries and associates, and
had no definite plan for material investment or acquisition of capital assets.
043
Annual report
Chapter 4
Report of Directors
(Including Management’s Discussion and Analysis)
(10) Contingent liabilities
At the end of the reporting period, the Company had no contingent liability.
(11) Fixed interest rate
At the end of the reporting period, the Company has no loan bearing fixed interest rates.
(12) Laws and regulations
During the reporting period, the Company has complied with all relevant laws and regulations that have
significant impact on the Company.
(13) Directors of subsidiaries
At the end of the reporting period, except for Dongguan Changsheng Enterprise Company Limited and
Zengcheng Lihua Stock Company Limited, no other subsidiaries of the Company had set up their board of
directors. The members of the boards of directors for the above subsidiaries are as follows:
Name of Company
Name List of Board Members
Dongguan Changsheng Enterprise Company Limited Luo Jiancheng, Li Yingtang, Chen Longwei, Lin
Zengcheng Lihua Stock Company Limited
Wensheng, Huang Ruibin, Yin Jinwen, Ren Zhuoquan
Luo Jiancheng, Zhu Xiaoqiang, Deng Hui, Lin
Wensheng, Huang Jian
(14) Persons of significant relationship with the Company
During the reporting period, except for those disclosed in this annual report, the Company has no other
relationship with its employees, customers and suppliers apart from the relationship of employees, customers
and suppliers, and no other person had a significant impact on the business of the Company.
(15) Assessment of property interests or tangible assets
During the reporting period, the Company did not value its property interests or other tangible assets in
accordance with Chapter 5 of the Listing Rules of SEHK.
(16) Management contracts
During the reporting period, the Company did not enter into any contract containing the following term: the
counterparty of the contract undertakes the management and administration of the whole or any substantial
part of any business of the Company pursuant to the contract; and the contract is not a service contract
entered into with any director or full-time employee of the Company.
044
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
(17) Loans to entities
During the reporting period, the Company did not provide any loan to any entity.
(18) Permitted compensation provisions
At the end of the reporting period, the Company did not have any compensation provision for the benefit of
the directors (including former directors) of the Company, or any of the affiliated companies.
045
Annual report
Chapter 5
Matters of Importance
Chairman of the Supervisory Committee
I. PLANS FOR PROFIT DISTRIBUTION OF ORDINARY SHARES OR
COMMON RESERVE CAPITALIZATION
(1) Formulation, implementation and adjustment of cash dividend distribution policy
Pursuant to the related requirements of the “Notice on Further Implementing Issues concerning Cash
Dividends Distribution of Listed Companies” by CSRC and SSRB, the Company amended provisions related to
profit distribution in the Articles in 2012. The amended Articles clearly stipulate the standards, percentages
and related decision-making procedures for cash dividend distribution by the Company, and the detailed
conditions, decision-making procedures and mechanisms for adjustments to the profit distribution policy by
the Company, which will provide systematic guarantee of the due diligence of the independent directors, the
full expression of the minority shareholders’ requests, and full protection of the legal interests of minority
shareholders.
The principal requirements of cash dividends under the profit distribution policy of the Company are: where
the conditions for cash dividend distribution are met, the Company, principally, shall distribute dividends
in cash once a year, with the annual dividend distribution ratio being not less than 30%. Within three
consecutive years, the accumulated profits distributed in cash of the Company shall not be less than 30%
of the three-year annual average distributable profits. Unless otherwise stipulated by laws or administrative
regulations, the amount of interim dividends distributed shall not exceed 50% of the distributable profits as
stated in the interim profits statement of the Company. The Company may distribute interim dividends in the
form of cash.
Since its listing in 1996, the Company has consistently adhered to a sustained and stable profit distribution
policy, emphasized reasonable returns to investors and strived for the sustainable development of the
Company. During the reporting period, the Company implemented the profit distribution plan of 2017,
pursuant to which the Company distributed a cash dividend of RMB0.80 (tax inclusive) per 10 shares to all
shareholders of the Company, totaling RMB566,682,960 on the basis of the total share capital at the end of
2017.
046
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
(2) Plans or budgets for profit distribution of ordinary shares or common reserve
capitalization of the company for the past three years (including the reporting period)
Year of
distribution
2018
2017
2016
Number
of bonus
shares per
10 shares
(share)
0
0
0
Amount of
dividends
per 10
shares (incl.
tax)
0.60
0.80
0.80
Number
of scrip
shares per
10 shares
(share)
0
0
0
Amount
of cash
dividends
(incl. tax)
425,012
566,683
566,683
(Unit: RMB thousand)
Net profit
attributable
to the
ordinary
shareholders
of the listed
company
in the
consolidated
financial
statements
for the
year of
distribution
784,059
1,015,361
1,158,253
Percentage
of net profit
attributable
to the
ordinary
shareholders
of the listed
company
in the
consolidated
financial
statements
(%)
54.21
55.81
48.93
Explanation of the profit distribution plan for 2018: The Board recommended the payment of a final cash
dividend of RMB0.06 per share (including tax) for 2018 to all shareholders of the Company, based on the
total share capital of 7,083,537,000 shares as at December 31, 2018, totaling RMB425,012,220.
The above proposal is subject to approval at the 2018 annual general meeting. The Company will complete
the profit distribution within two months after the proposal has been approved.
Holders of A Shares of the Company are reminded to timely and carefully read the announcement to be
issued by the Company on the distribution of dividends for 2018, which contains details of the distribution of
the final cash dividends for 2018.
Holders of H Shares of the Company are reminded to timely and carefully read the notice of the 2018 annual
general meeting and the announcement of poll results of the 2018 annual general meeting to be issued
by the Company on the HKEXnews website of SEHK (http://www.hkexnews.hk) on the date of the annual
general meeting respectively, which contain details of the distribution of the final cash dividends for 2018.
The Company expects to complete the distribution of dividends within two months after the date of approval
at the general meeting.
To the best knowledge of the Company, as of the date of publication of this annual report, there are no any
arrangements of shareholders waiving or agreeing to waive the proposed distribution of final dividend for
2018.
(3) Repurchase offer by cash included in cash dividend
Applicable ✓Not applicable
(4) If earnings and distributable profits available for ordinary shareholders during the
reporting period are positive while the plan for profit distribution of ordinary shares
in cash is not yet proposed, the Company shall disclose in details the reasons and the
purposes and proposed applications of undistributed profits
Applicable ✓Not applicable
047
Annual report
Chapter 5
Matters of Importance
II. FULFILLMENT OF COMMITMENTS
(1) Commitments made by related parties of commitments, including de facto
controllers of the Company, shareholders, related parties, purchasers and the Company
during or continued into the reporting period
Date and
term of
commitment
Execution
time limit
Strict
compliance
—
No
Yes
Background
Type
Parties Contents of the commitment
Commitment
Resolve
related to IPO
industry
competitions
GRGC GRGC and any of its subsidiaries will not engage,
directly or indirectly, by any means, in any
business activities that may compete with the
railway transportation and related businesses
of the Company within the service territory
of the Company. After the acquisition of the
transportation operational assets and businesses
of Guangzhou-Pingshi section, GRGC and any
of its subsidiaries will not compete with the
Company either.
Resolve
GRGC GRGC will reduce the number of connected
—
No
Yes
connected
transactions
Other
Other
commitments
to minority
shareholders
Other
transactions as much as practicable in its
operation relations with the Company. For
necessary connected transactions, GRGC will
perform these connected transactions on the
basis of openness, justice and fairness without
abusing its position as the largest shareholder
and behaving in a manner that is detrimental to
the interests of the Company.
GRGC GRGC leased the occupied land in the
Guangzhou-Pingshi section to the Company after
acquiring of such land by means of authorized
operation. The leasing agreement entered into
by the Company and GRGC became officially
effective on January 1, 2007, pursuant to which,
the land use right for the Guangzhou-Pingshi
Railway line was leased to the Company by
GRCG for a leasing term of 20 years. It has been
agreed by the two parties that the annual land
rent should not exceed RMB74 million.
GRGC GRGC has issued a letter of commitment to the
Company in October 2007, in relation to the
enhancement of the management of undisclosed
information
20 years
Yes
Yes
October 2007
No
Yes
048
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
(2) The Company’s explanation of whether original profit forecast has been met with
respect to assets or projects and the related reasons for profit forecast of assets or
projects and in the event of reporting period being with the profit forecast period
Achieved
Not achieved ✓ Not applicable
(3) The accomplishment of results commitment and its impacts on impairment testing
on goodwill
Applicable ✓ Not applicable
III. APPROPRIATION OF FUND AND PROGRESS OF DEBT CLEARANCE
LISTING IN THE REPORTING PERIOD
Applicable ✓ Not applicable
IV. EXPLANATION OF ACCOUNTANT’S “NON-STANDARD AUDIT
REPORT” BY THE COMPANY
Applicable ✓ Not applicable
V. THE COMPANY’S ANALYSIS AND EXPLANATION OF ACCOUNTING POLICIES,
CHANGES IN ACCOUNTING ESTIMATES OR REASONS AND IMPACT OF
RECTIFICATION OF SIGNIFICANT ACCOUNTING ERRORS
(1) The Company’s explanation of accounting policies, reasons and impacts of changes
in accounting estimate
Details of the changes in the Company’s accounting policies during the reporting period are set out in Note
2.2 to the financial statements.
(2) The Company’s explanations of reasons and impact of rectification of significant
accounting errors
Applicable ✓ Not applicable
(3) The communication between predecessor accountant
Applicable ✓ Not applicable
049
Annual report
Chapter 5
Matters of Importance
VI. ENGAGEMENT AND DISMISSAL OF ACCOUNTING FIRMS
Name of domestic auditor
Remuneration of domestic auditor
Term of engagement of domestic
auditor
Name of international auditor
Remuneration of international Auditor
Term of engagement of international
auditor
PricewaterhouseCoopers Zhong Tian LLP
Currently engaged
(Unit: RMB ten thousand)
PricewaterhouseCoopers
500
11
310
16
Auditor for internal control
Financial adviser
PricewaterhouseCoopers Zhong Tian LLP
Deloitte Touche Tohmatsu
Name
Remuneration
30
77
Information of engagement and dismissal of accounting firms
Applicable ✓ Not applicable
Explanation on change of accountant during the audit period
Applicable ✓ Not applicable
VII. RISK OF SUSPENSION OF LISTING
Applicable ✓ Not applicable
VIII. INFORMATION AND REASON FOR DELISTING
Applicable ✓ Not applicable
050
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
IX. BANKRUPTCY AND RESTRUCTURING
Applicable ✓ Not applicable
X. MATERIAL LITIGATION AND ARBITRATION
The Company had material litigation and arbitration during the year
✓ The Company did not have material litigation and arbitration during the year
X I . P U N I S H M E N T O F T H E L I S T E D C O M P A N Y , I T S D I R E C T O R S ,
SUPERVISORS, SENIOR MANAGEMENT, CONTROLLING SHAREHOLDERS,
DE FACTO CONTROLLER, PURCHASER AND THE RECTIFICATION THEREOF
Applicable ✓ Not applicable
XII. EXPLANATION OF INTEGRITY OF THE COMPANY, ITS CONTROLLING
SHAREHOLDERS AND DE FACTO CONTROLLER DURING THE REPORTING
PERIOD
During the reporting period, there is no explanation of integrity of the Company, its controlling shareholders
and de facto controller.
XIII. THE COMPANY’S SHARE INCENTIVE SCHEME, EMPLOYEE STOCK
OWNERSHIP PLAN, OR OTHER EMPLOYEES’ INCENTIVE MEASURES
AND THEIR IMPACT
Applicable ✓ Not applicable
051
Annual report
Chapter 5
Matters of Importance
XIV. MATERIAL RELATED PARTY TRANSACTIONS
(1) Related party transactions related to daily operations
The related party transactions related to daily operations entered into by the Company during the reporting
period are set out in Note 39(c) to the financial statements. The Company confirms that the following
transactions are within the connected transactions (including continuing connected transaction) described
under Chapter 14A of the Listing Rules of SEHK, and at the same time constitute related party transactions
described under Note 39(c) to the financial statements. With regard to the following transactions, the
Company has complied with the rules and requirements of Chapter 14A of the Listing Rules of SEHK:
1. Transactions conducted with GRGC and its subsidiaries
(Unit: RMB thousand)
Parties
Relationship
Type of
transaction
Description of transaction
Basis of pricing for the transaction
GRGC and its
subsidiaries
Largest shareholder
and its subsidiaries
Provision of
service
Train service
By consultation according to full cost
pricing, or settle according to price
determined by CRC
Amount of
transaction
1,861,543
GRGC and its
subsidiaries
GRGC and its
subsidiaries
GRGC and its
subsidiaries
GRGC and its
subsidiaries
Largest shareholder
and its subsidiaries
Largest shareholder
and its subsidiaries
Largest shareholder
and its subsidiaries
Largest shareholder
and its subsidiaries
GRGC and its
subsidiaries
GRGC
GRGC and its
subsidiaries
GRGC and its
subsidiaries
GRGC and its
subsidiaries
Largest shareholder
and its subsidiaries
Largest shareholder
Largest shareholder
and its subsidiaries
Largest shareholder
and its subsidiaries
Largest shareholder
and its subsidiaries
Provision of
service
Provision of
service
Sale of goods
Railway network settlement
service through CRC
Railway operation service
Settle according to the prices determined by
1,357,512
CRC
Based on agreement according to cost plus
736,492
Sale of materials and supplies
Based on agreement
mark-up
Service received Train service
By consultation according to full cost
pricing, or settle according to price
determined by CRC
Service received Railway network settlement
Settle according to the prices determined by
1,898,623
through CRC
CRC
Lease of land
Service received Repair and maintenance service By consultation according to full cost pricing
Based on agreement
Land leasing
Purchase of
goods
Purchase of materials and
Based on agreement
supplies
Service received Construction work service
Settle according to the fixed amount
approved by national railway work
58,490
451,976
555,048
180,147
39,383
872,234
052
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
2. Transactions conducted with CRC and other enterprises related to railway transport
(Unit: RMB thousand)
Type of
transaction
Provision of
service
Description of transaction
Train service
Basis of pricing for the transaction
By consultation according to full cost
pricing, or settle according to price
determined by CRC
Amount of
transaction
63,364
Provision of
service
Railway network settlement
service through CRC
Settle according to the prices determined by
2,527,897
CRC
Provision of
service
Provision of
service
Railway operation service
Based on agreement according to cost plus
2,012,880
mark-up
Truck maintenance service
Settle according to the prices determined by
337,432
CRC
Sale of goods
Sale of materials and supplies
Based on agreement
9,099
Provision of
service
Apartment leasing service
By consultation according to full cost pricing
617
Service received Train service
By consultation according to full cost
pricing, or settle according to price
determined by CRC
283,490
Service received Railway network settlement
Settle according to the prices determined by
2,161,146
service through CRC
CRC
Service received Repair and maintenance service By consultation according to full cost pricing
9,440
Purchase of
goods
Purchase of materials and
Based on agreement
supplies
Service received Construction work service
Settle according to the fixed amount
approved by national railway work
27,743
1,417
Parties
CRC and its
transferred
subordinate
enterprise
CRC and its
transferred
subordinate
enterprise
CRC and its
transferred
subordinate
enterprise
CRC and its
transferred
subordinate
enterprise
CRC and its
transferred
subordinate
enterprise
CRC and its
transferred
subordinate
enterprise
CRC and its
transferred
subordinate
enterprise
CRC and its
transferred
subordinate
enterprise
CRC and its
transferred
subordinate
enterprise
CRC and its
transferred
subordinate
enterprise
CRC and its
transferred
subordinate
enterprise
Relationship
De facto controller
of the largest
shareholder and its
subsidiaries
De facto controller
of the largest
shareholder and its
subsidiaries
De facto controller
of the largest
shareholder and its
subsidiaries
De facto controller
of the largest
shareholder and its
subsidiaries
De facto controller
of the largest
shareholder and its
subsidiaries
De facto controller
of the largest
shareholder and its
subsidiaries
De facto controller
of the largest
shareholder and its
subsidiaries
De facto controller
of the largest
shareholder and its
subsidiaries
De facto controller
of the largest
shareholder and its
subsidiaries
De facto controller
of the largest
shareholder and its
subsidiaries
De facto controller
of the largest
shareholder and its
subsidiaries
053
Annual report
Chapter 5
Matters of Importance
(2) Related party transactions related to acquisition or disposal of assets or equity
Applicable ✓ Not applicable
(3) Material related party transactions in relation to joint external investment
Applicable ✓ Not applicable
(4) Related claims and debts
Related Parties
Relationship
Fund provided to related party
(Unit: RMB ten thousand)
Shenzhen Pinghu Qun Yi Railway
Store Loading and Unloading
Company Limited
Wholly-owned
subsidiary
Zengcheng Lihua Stock Company
Controlling subsidiary
Limited
Total
Impact of the related claim and debt on the Company
Opening
balance
908
1,231
2,139
Addition
—
—
—
Closing
balance
908
1,231
2,139
No significant impact on the operation results
and financial position of the Company
(5) Contracts entered into with the largest shareholder and its subsidiaries
Except as disclosed in this annual report, during the reporting period, none of the Company or its
subsidiaries have entered into other material contracts with the largest shareholder or its subsidiaries.
(6) Confirmation of continuing connected transactions by Independent Directors
The Company instituted its internal control procedures to ensure that continuing connected transactions were
conducted in compliance with the relevant connected transaction requirements pursuant to the Listing Rules
of SEHK. The internal audits of the Company also reviewed these transactions and ensured the adequacy
and effectiveness of the internal control procedures, and provided its findings to independent non-executive
directors. After making appropriate enquiries with the management, the independent non-executive directors
of the Company confirmed that the continuing connected transactions entered into by the Company during
the reporting period were entered into in the ordinary and usual course of its business and conducted on
normal commercial terms, in accordance with the relevant agreement governing them on terms that are fair
and reasonable and in the interests of the Company and its shareholders as a whole, and did not exceed the
caps disclosed in the previous announcements.
054
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
(7) Confirmation of continuing connected transactions by the auditor
The auditors of the Company have carried out procedures on the above connected transactions for the
year ended at the end of the reporting period in accordance with the Hong Kong Standard on Assurance
Engagements 3000 “Assurance Engagement Other Than Audits or Reviews of Historical Financial Information”
and with reference to Practice Note 740 ‘Auditor’s Letter on Continuing Connected Transactions under the
Hong Kong Listing Rules’ issued by the Hong Kong Institute of Certified Public Accountants, and reported
that, with respect to the above connected transactions:
(i) nothing has come to the Company’s auditors’ attention that would cause them to believe that the
disclosed continuing connected transactions have not been approved by the Board;
(ii) for transactions involving the provision of goods or services by the Company, nothing has come to the
Company’s auditors’ attention that would cause them to believe that such transactions were not, in all
material respects, in accordance with the pricing policies of the Company;
(iii) nothing has come to the Company’s auditors’ attention that would cause them to believe that such
transactions were not entered into, in all material respects, in accordance with the terms of agreements
governing such transactions;
(iv) with respect to the aggregate amount of each of the continuing connected transactions, nothing
has come to the Company’s auditors’ attention that would cause them to believe that the value of such
continuing connected transactions has exceeded the maximum aggregate annual caps disclosed in the
previous announcements.
XV. MATERIAL CONTRACTS AND THE IMPLEMENTATION THEREOF
(1) Trust, contracted businesses and leasing affairs
Applicable ✓ Not applicable
(2) Guarantees or financial assistance
Applicable ✓ Not applicable
(3) Entrusted cash asset management carried out by other person(s)
Applicable ✓ Not applicable
(4) Pledges
During the reporting period, the largest shareholder of the Company and its de facto controller have
not pledged the interests in all or part of the shares of the Company held as support for the Company’s
indebtedness, guarantees or other liabilities.
055
Annual report
Chapter 5
Matters of Importance
(5) Loan agreements and their performance
During the reporting period, the Company and its subsidiaries have not entered into any loan agreements
nor violated any terms of loan agreements which had significant impact on its operation.
(6) Other material contracts
On April 19, 2018, the Company entered into a resumption compensation agreement in relation to the land
use rights of Guangzhou East Shipai Old Goods Yard（廣州東石牌舊貨場）with Guangzhou Land Development
Center (the “GLDC”) (as purchaser) and the other relevant vendors. Pursuant to the Resumption
Compensation Agreement, the GLDC agrees to resume the land use rights over the relevant land with an
initial total compensation of RMB6 billion (subject to adjustments), of which the initial compensation amount
payable to the Company will be RMB1,304,717,363.49 (subject to adjustments). The Company convened the
2017 annual general meeting on June 6, 2018 to consider and approve the resumption of land use rights
over Guangzhou East Shipai Old Goods Yard. For further details, please refer to the announcement of the
Company dated April 19, 2018 regarding to the Resumption Compensation Agreement.
During the reporting period, except as disclosed in this annual report, the Company did not enter into any
other material contracts.
XVI. EXPLANATION OF OTHER MATERIAL EVENTS
Applicable ✓ Not applicable
XVII. ACTIVE FULFILLMENT OF SOCIAL RESPONSIBILITY
(1) Poverty alleviation by listed companies
Applicable ✓ Not applicable
(2) Social responsibility efforts
During the reporting period, the Company did not have significant environmental protection or other
significant social safety issues. For details concerning the Company’s fulfillment of social responsibilities
in the areas of transportation safety, environmental protection and social welfare in the reporting period,
please read the 2018 Social Responsibility Report disclosed on the website of SSE (http://www.sse.com.cn),
the HKEXnews website of SEHK (http://www.hkexnews.hk) and the website of the Company (http://www.
gsrc.com).
056
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
(3) Explanation of environmental protection efforts
1. Explanation of environmental protection efforts taken by companies and its substantial
subsidiaries which are the key discharging units announced by environmental protection
department
The Company’s locomotive maintenance depot in Guangzhou is the key waste discharging unit for water
environment and the key unit under supervision for soil pollution of Guangzhou for the year 2018 as
announced by the Bureau of Environmental Protection of Guangzhou Municipality, and the Guangzhou
vehicles section is a key waste discharging unit for water environment of Shenzhen for the year 2018 as
announced by the Human Settlements and Environment Commission of Shenzhen Municipality.
The environmental protection efforts related to the locomotive maintenance depot in Guangzhou have been
disclosed in accordance to the related requirements and the specific requirements of the local government
authorities. For more details, please visit the website of the Bureau of Environmental Protection of
Guangzhou Municipality at http://210.72.1.33:8013/gzydzf2-enterprise/qyhjbgs/list2018?openMsgTaskId=201
803271840545984275&year=2018.
The environmental protection efforts related to the locomotive maintenance depot in Guangzhou are as
follows:
i. Information related to discharge
Major pollutants and
the name of the
characteristic pollutants
Name of the
company
Guangzhou
vehicles
section
PH
Number of
discharge
outfall
1
Distribution
of discharge
outfall
The wastewater
treatment plan
at Sungang
passenger and
technology
station
Way of
discharge
Discharge
into the
municipal water
distribution
network after
the process
at wastewater
treatment plant
Intensity of
discharge
(Mg/L)
7.47
The discharge
standard in
force (Mg/L)
6-9
Total amount
of discharge
(tonnnes/
day)
300
The audited
total amount
of discharge
(tonnes/ day)
500
Excess
discharge
Nil
Petroleum-related
Synthetic anionic surfactants
Ammonia nitrogen
COD
BOD
0.06
0.19
9.49
3.4
1.6
5
5
10
90
20
057
Annual report
Chapter 5
Matters of Importance
ii. Pollution prevention and control measures and its implementation
The Sungang passenger and technology station of the Guangzhou vehicles section is supported by a
wastewater treatment plant built in 2008 with a daily wastewater processing capacity of 700 tonnes, where
hydrolysis acidification and SBR are adopted for wastewater treatment. The whole wastewater treatment
system can largely realize automatic control. Since its establishment, the wastewater treatment processing
facility at the Sungang passenger and technology station has been operating normally, with all treated
wastewater meeting discharge standards.
iii. The evaluation of environmental impacts from construction projects and the information
related to other administrative permissions for environmental protection
The wastewater treatment plant at the Sungang passenger and technology station of the Guangzhou vehicles
section has the pollutants discharge permit of Guangdong Province issued by the Human Settlements and
Environment Commission of Shenzhen Municipality, which will expire on September 25, 2022.
iv. The contingency plan for environmental emergencies
The Sungang passenger and technology station of the Guangzhou vehicles section has developed a detailed
and practical contingency plan (wastewater-specific) for environmental emergencies to ensure the efficient
process for the emergencies which may cause destruction to the environment and ecology and to minimize
the loss and damages to the community resulted from various environmental emergencies.
v. Automatic environmental supervision
The wastewater treatment plant at the Sungang passenger and technology station of the Guangzhou vehicles
section is equipped with automatic water quality monitoring equipment for real-time monitoring of water
quality. In addition, qualified supervisors are engaged to perform regular inspection on water quality.
vi. Other environmental information which should be disclosed
Applicable ✓Not applicable
(2) Explanation on the environmental protection efforts by the companies other than
the key discharging units
Applicable ✓Not applicable
(3) Explanation on the reasons for non-disclosure of environmental protection efforts
by the companies other than the key discharging units
Applicable ✓Not applicable
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Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
(4) Explanation on the follow-up plans or subsequent changes on the disclosure of
environmental protection efforts during the reporting period
Applicable ✓Not applicable
XVIII. CONVERTIBLE COMPANY BONDS
Applicable ✓Not applicable
059
Annual report
Chapter 6
Changes in Ordinary Share Capital and
Particulars of Shareholders
General Manager
I. PARTICULARS OF CHANGES TO ORDINARY SHARE CAPITAL
(1) Changes in ordinary share capital
During the reporting period, there was no change in the Company’s total number of ordinary shares or to
the structure of share capital.
(2) Changes in shares with selling restrictions
Applicable ✓ Not applicable
II. PARTICULARS OF SECURITIES ISSUED AND LISTINGS
(1) Particulars of securities issued up to the reporting period
The Company had not issued any securities for the 3 years prior to the end of the reporting period.
(2) Changes in the Company’s total number of ordinary shares and structure of
shareholder and changes in structure of asset and liability of the Company
During the reporting period, there was no change in the total number of ordinary shares and structure of
shareholder, asset and liability of the Company as a result of bonuses issued, increases in share capital,
placing, allotment of new shares or other reasons.
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Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
(3) Existing employee shares
The Company has not issued shares to any of its employees as of the end of the reporting period.
III. PARTICULARS OF SHAREHOLDERS AND DE FACTO CONTROLLERS
(1) Total number of shareholders
Total number of ordinary shareholders as of the end of the
reporting period (Number)
Total number of ordinary shareholders as of the end of the
previous month before the date of disclosure of the annual
report (Number)
227,901
223,414
(2) Shareholdings of the top ten shareholders and top ten holders of tradable shares (or
holders of shares without selling restrictions) as of the end of the reporting period
Particulars of the shareholding of the top ten shareholders
(Unit: share)
Name of shareholders (in full)
China Railway Guangzhou Group Co., Ltd.
Number of
shares held at
the end of the
period
2,629,451,300
HKSCC NOMINEES LIMITED (Note)
1,540,381,434
Lin Naigang
118,300,000
Central Huijin Investment Company Limited
85,985,800
New China Life Insurance Company Ltd. —
75,258,355
dividend — group dividend — 018L — FH001Hu
China Securities Finance Corporation Limited
53,883,592
Taiyuan Iron and Steel (Group) Co., Ltd.
30,620,289
Harvest Fund — Agricultural Bank of China —
28,101,600
Harvest CSI Financial Asset Management Plan
Yinhua Fund — Agricultural Bank of China —
Yinhua CSI Financial Assets Management
Scheme
26,814,300
Zhongou Fund — Agricultural Bank of China —
26,436,800
Zhongou CSI Financial Asset Management Plan
Number of
shares held
with selling
restrictions
Shares in pledge or
frozen
Status
Number
Nature of
shareholder
Percentage
(%)
37.12
21.75
1.67
1.21
1.06
0.76
0.43
0.40
0.38
0.37
— None
— State-owned legal
— Unknown
person
— Foreign legal
person
— Unknown
— Domestic natural
person
— Unknown
— State-owned legal
person
— Unknown
— State-owned legal
— Unknown
— State-owned legal
person
person
— Unknown
— State-owned legal
— Unknown
person
— Other
— Unknown
— Other
— Unknown
— Other
061
Annual report
Chapter 6
Changes in Ordinary Share Capital and
Particulars of Shareholders
Name of shareholder
China Railway Guangzhou Group Co., Ltd.
HKSCC NOMINEES LIMITED (Note)
Lin Naigang
Central Huijin Investment Company Limited
New China Life Insurance Company Ltd. — dividend — group dividend — 018L
— FH001Hu
China Securities Finance Corporation Limited
Taiyuan Iron and Steel (Group) Co., Ltd.
Harvest Fund — Agricultural Bank of China — Harvest CSI Financial Asset
Management Plan
Yinhua Fund — Agricultural Bank of China — Yinhua CSI Financial Assets
Management Scheme
Zhongou Fund — Agricultural Bank of China — Zhongou CSI Financial Asset
Management Plan
Statement regarding the connected relationship or concerted action of the
above shareholders
Top ten holders of shares without selling restrictions
Class and number of the Shares
Number of shares
held without selling
restrictions
2,629,451,300
1,540,381,434
118,300,000
85,985,800
Class
RMB ordinary shares
RMB ordinary shares
Overseas listed
foreign shares
RMB ordinary shares
RMB ordinary shares
75,258,355
53,883,592
30,620,289
RMB ordinary shares
RMB ordinary shares
RMB ordinary shares
Number
2,629,451,300
122,050,985
1,418,330,449
118,300,000
85,985,800
75,258,355
53,883,592
30,620,289
28,101,600
RMB ordinary shares
28,101,600
26,814,300
RMB ordinary shares
26,814,300
26,436,800
RMB ordinary shares
26,436,800
The Company is not aware of any of the other shareholders above are
connected or acting in concert as defined in “Administrative Measures on
Acquisitions of Listed Companies”.
Note: HKSCC NOMINEES LIMITED represents 香 港 中 央 結 算（代 理 人 ）有 限 公 司 , holding 122,050,985 A Shares and
1,418,330,449 H Shares of the Company. These shares were held on behalf of various clients respectively.
The shareholdings and selling restrictions of the top 10 shareholders with selling restrictions
Applicable ✓ Not applicable
062
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
(3) So far as the directors, supervisors and senior management of the Company
are aware, as of the end of the reporting period, the following persons, other than
Directors, Supervisors and senior management of the Company, held interests and
short positions in the shares and underlying shares of the Company as recorded in the
register required to be kept under Section 336 of Part XV of the SFO (Chapter 571 of
the Laws of Hong Kong), as follows:
Number of Shares
held
Capacity
(Unit: share)
Percentage
of issued
share capital
of the same
class (%)
Percentage
of total
share capital
(%)
2,629,451,300(L)
Beneficial owner
46.52(L)
37.12(L)
Class of
Shares
A share
Name of shareholder
China Railway
Guangzhou Group Co.,
Ltd.
BlackRock, Inc.
H share
225,930,089 (L)
BlackRock Global Funds
Pandanus Associates
Inc.
H share
H share
194,419,049 (L)
140,766,000(L)
FIDELITY FUNDS
Kopernik Global
Investors LLC
H share
H share
112,580,000(L)
108,763,554(L)
Note: The letter “L” denotes a long position.
Corporate
interest
controlled by
substantial
shareholder
Beneficial owner
Corporate
interest
controlled by
substantial
shareholder
Beneficial owner
Investment
manager
15.78(L)
3.19(L)
13.58(L)
9.83(L)
2.74(L)
1.99(L)
7.87(L)
7.60(L)
1.59(L)
1.54(L)
(4) Strategic investors or ordinary legal persons becoming top 10 shareholders by way
of placing of new shares
Applicable ✓ Not applicable
063
Annual report
Chapter 6
Changes in Ordinary Share Capital and
Particulars of Shareholders
IV. INFORMATION OF THE LARGEST SHAREHOLDER AND ITS DE FACTO
CONTROLLER
(1) Information on the largest shareholder
1. Legal person
Name
Person in charge or legal representative Wu Yong
Date of incorporation
Principal operations
GRGC
Equity interests in other domestic and
overseas listed controlling and invested
companies during the reporting period
2017-11-7
Organization and management of railway passenger and freight
transportation, technologies and other industrial development
etc.
Nil
2. Chart on the property rights and controlling relationship between the Company and the largest
shareholder
GRGC
37.12%
The Company
(2) Information on the de facto controller of the largest shareholder
1. Legal person
Name
Person in charge or legal
representative
Date of incorporation
Principal operations
Equity interests in other
domestic and overseas listed
controlling and invested
companies during the reporting
period
CRC
Lu Dongfu
2013-3-14
Diversified operations with railway transportation services of passengers
and freights as its main business
CRC is the de facto controller of Daqin Railway Co. Ltd. (“Daqin Railway”)
and China Railway Tielong Container Logistics Co. Ltd. (“Tielong Logistics”),
both of which are listed companies on SSE.
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Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
2. Chart on the property rights and controlling relationship amongst the Company, the largest
shareholder and its de facto controller
CRC
100%
GRGC
37.12%
The Company
V. OTHER CORPORATE SHAREHOLDERS WITH A SHAREHOLDING OF
10% OR ABOVE
As of the end of the reporting period, other than the aforementioned largest shareholder, there was no other
corporate shareholder with a shareholding of 10% or above in the Company (except for HKSCC NOMINEES
LIMITED).
VI. EXPLANATION OF REDUCED SHAREHOLDING
Applicable ✓ Not applicable
VII. PUBLIC FLOAT
As of the end of the reporting period, the public float of the Company was 4,454,085,700 shares,
representing 62.88% of the total share capital of the Company. Calculated at HK$2.95 per share, which is
equal to the closing price of the Company’s H shares as of December 31, 2018, the market capitalization of
the public float was approximately RMB13.14 billion. The public float of the Company was in compliance with
the requirements of the relevant rules on the sufficiency of public float.
VIII. DUPLICATION
During the reporting period, the directors, chief executives and such other persons of the Company did not
have duplicated interests.
IX. REPURCHASE, SALE OR REDEMPTION OF THE LISTED SHARES OF
THE COMPANY
As of the end of the reporting period, there was no repurchase, sale or redemption by the Company, or any
of its subsidiaries, of the listed shares of the Company.
065
Annual report
Chapter 6
Changes in Ordinary Share Capital and
Particulars of Shareholders
X. PRE-EMPTIVE RIGHT
Under the Articles of the Company and the PRC Laws, there is no pre-emptive right which requires the
Company to offer new shares to its existing shareholders on a pro rata basis.
XI. TRANSACTIONS INVOLVING ITS OWN SECURITIES
As of the end of the reporting period, neither the Company nor its subsidiaries has issued or granted any
convertible securities, options, warrants or other similar rights, and redeemable securities and share option
schemes.
XII. TAX DEDUCTION FOR HOLDERS OF LISTED SECURITIES
As of the end of the reporting period, holders of listed securities of the Company were not entitled to obtain
any tax relief due to their holding of such securities pursuant to the laws of the PRC.
066
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
Chapter 7
Information Regarding Preference Shares
Applicable ✓ Not applicable
067
Annual report
Chapter 8
Directors, Supervisors, Senior Management
and Employees
I. CHANGES IN SHAREHOLDINGS AND REMUNERATIONS
(1) Changes in shareholdings and remunerations of directors, supervisors and senior
management (current and resigned during the reporting period)
Number
of shares
held at the
beginning of
the year
—
Number of
shares held
at the end of
the year
—
Change
in share
number
during the
year
—
Reason
for the
change
—
End of engagement
period
June 15, 2020
(Unit: share)
Total
remuneration
received from
the Company
(before tax)
during the
reporting
period
(RMB ten
thousand)
—
Received
remuneration
from related
parties of
the Company
or not
Yes
Beginning of first
engagement period
December 18, 2014
December 16, 2014
May 26, 2016
December 9, 2015
June 6, 2018
May 22, 2012
June 26, 2008
June 6, 2018
May 28, 2015
June 25, 2009
May 29, 2014
June 15, 2020
June 15, 2020
June 6, 2018
June 15, 2020
June 15, 2020
June 6, 2018
June 15, 2020
June 15, 2020
May 29, 2014
June 15, 2020
May 29, 2014
June 15, 2020
May 29, 2014
June 15, 2020
June 2, 2011
June 26, 2008
May 12, 2005
May 28, 2015
June 15, 2020
June 15, 2020
June 15, 2020
June 15, 2020
May 29, 2014
June 15, 2020
April 2, 2018
Hu Lingling
Name
Wu Yong
Position (Note)
Chairman of the Board
Executive Director
Executive Director
General Manager
Non-executive Director
Guo Ji’an
Non-executive Director
Sun Jing (*)
Non-executive Director
Yu Zhiming
Non-executive Director
Chen Xiaomei
Chen Jianping (*) Non-executive Director
Luo Qing
Chen Song
Executive Director
Independent Non-executive
Director
Independent Non-executive
Director
Independent Non-executive
Director
Chairman of the Supervisory
Committee
Supervisor
Supervisor
Supervisor
Supervisor representing
Employees
Supervisor representing
Employees
Deputy Secretary of the Party and
Working Committee, and Secretary
of the Discipline Inspection and
Working Commission
Deputy General Manager
Deputy General Manager
Secretary of the Board
Chief Accountant
—
Jia Jianmin
Wang Yunting
Liu Mengshu
Shen Jiancong
Chen Shaohong
Li Zhiming
Zhou Shangde
Song Min
Gong Yuwen
Luo Jiancheng
Guo Xiangdong
Tang Xiangdong
Total
Gender
Male
Age
55
Male
Male
Male
Male
Female
Male
Male
Male
Male
Male
Male
Male
Male
Male
Male
Female
Male
Male
Male
Male
—
55
46
53
59
46
52
54
46
61
60
55
50
52
57
48
48
52
46
53
50
—
December 30, 2016
December 28, 2010
January 6, 2004
December 19, 2008
—
—
—
80,000
—
80,000
—
80,000
—
80,000
—
—
—
—
—
—
—
-
-
-
-
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
47.1
—
—
—
—
—
37.9
11.2
14.2
11.2
—
—
—
—
38.1
32.1
29.1
37.7
38.1
37.9
334.6
No
Yes
Yes
Yes
Yes
Yes
No
No
No
No
Yes
Yes
Yes
Yes
No
No
No
No
No
No
—
Note: (1) During the reporting period, except as information disclosed in the above table, none of the directors,
supervisors or senior management of the Company has held or dealt in the shares of the Company, or has held the
Company’s share option or has been granted any shares with selling restrictions.
(2) “*” means that the person had resigned during the reporting period.
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Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
Name
Biographies
Wu Yong
Male, born in June 1963, is the Chairman of the Board of the Company. Mr. Wu is a graduate with a bachelor’s degree
and a senior engineer with advanced remuneration. He had served successively as the deputy bureau chief of Benghu
Sub-bureau of Shanghai Railway Bureau, the commander chief of Hefei-Wuhan Railway Engineering Construction
Headquarters of Shanghai Railway Bureau, the bureau chief assistant and the deputy bureau chief of Wuhan Railway
Bureau, and the bureau chief and the deputy party secretary of Chengdu Railway Bureau, the chairman and the general
manager of GRGC and the deputy secretary of the party committee. He is currently the Chairman of GRGC and the
secretary of the party committee.
Hu Lingling Male, born in November 1963, is an executive director and the general manager of the Company. Mr. Hu is a graduate
with a bachelor’s degree and is an engineer. He had served successively as the deputy chief engineer and the deputy
station master of Shaoguan Station (the current Shaoguan East Station) of Yangcheng Company headquarter of GRGC,
the deputy chief engineer and the deputy general manager of Yangcheng Company headquarter of GRGC, and the
director of the transportation department and the deputy general manager of GRGC. He had also worked in the global
business department in the headquarters of International Union of Railways in Paris, France and served as the deputy
general manager of Guangzhou-Shenzhen-Hong Kong Express Rail Link Company Limited. He is currently an executive
director and the general manager of the Company.
Male, born in August in 1972, is a non-executive director of the Company. Mr. Guo is a bachelor graduate and is a senior
engineer. He had served successively as the vice director of the transportation department of GRGC, the general manager
of Guangzhou Branch of China Railway Container Transportation Limited, the director of the transportation department of
GRGC, the deputy chief engineer of GRGC, the deputy in charge of the preparation team of Beijing-Shanghai Passenger
Railway Line Company. He is currently the director and the deputy general manager of GRGC.
Guo Ji’an
Chen
Xiaomei
Yu Zhiming Male, born in April 1959, is a non-executive director of the Company. Mr. Yu is a graduate with a bachelor’s degree
and is a senior accountant. He had served successively as the deputy director of the Sub-division of Finance of Wuhan
Railway Sub-bureau of Zhengzhou Railway Bureau, the director of the finance department of Wuhan Railway Bureau and
the standing vice-director of capital settlement center of MOR. He is currently a director and the chief accountant of
GRGC.
Female, born in November 1972, is a non-executive director of the Company. Ms. Chen holds a
bachelor degree and is an engineer. She had served successively as the director of passenger
service technology in passenger service of GRGC, the assistant to director, the deputy director
and the director of passenger service of GRGC. She is currently the director of passenger service
of GRGC.
Male, born in September 1964, is an executive director of the Company. Mr. Luo is a graduate with a master’s degree
and is a political engineer. He had served successively as the secretary-general of Locomotive Sports Association
of Yangcheng Company of GRGC, the secretary-general of Locomotive Sports Association of GRGC, the chief of the
organization department of trade union of GRGC, the deputy secretary of the party and working committee, the secretary
of the discipline inspection and working commission and the chairman of the trade union of the Company. He is currently
the chairman of the trade union of the Company.
Luo Qing
075
Annual report
Chapter 8
Directors, Supervisors, Senior Management
and Employees
Name
Biographies
Chen Song Male, born in January 1973, is an independent non-executive director of the Company. Mr. Chen has a doctorate
degree majoring in finance and investment from Management School of Sun Yat-sen University, and is a certified public
accountant of China, and certified internal auditor registered in the US. He was the teacher in higher mathematics and
pharmaceutical machinery in Guangdong Food and Drug Vocational College, the external tutor for MBA and EMBA in
Management School of Sun Yat-sen University, a managerial trainee in P&G (China) Investment Limited Company, the
financial analysis manager in Crest Oral Department, the financial supervisor of business department, CFO and executive
director of Heinz (China) Investment Co., Ltd., the chief financial officer of Ren Coty (China) and a director and general
manager of its cosmetics division, the financial supervisor of Greater China Region in Boer Cmc Markets Asia Pacific
Pty Ltd., the deputy general manager and chief financial officer of Chongqing Brewery Co., Ltd. (a listed company on
the Shanghai Stock Exchange, stock code: 600132). He is currently a director and the general manager of Chongqing
Brewery Co., Ltd.
Jia Jianmin Male, born in August 1957, is an independent non-executive director of the Company. Mr. Jia is a master’s degree
graduate and holds a doctorate degree in Business School of the University of Texas at Austin, USA. He was a member of
advisory committee of experts of department of management of The National Natural Science Foundation, a member of
China National MBA Education Supervisory Committee, the Scholar Director of Marketing Science Institute (“MSI”) of the
US. He is currently a professor and the chairman of the Department of Marketing of Faculty of Business Administration of
The Chinese University of Hong Kong, and the “Changjiang Scholar Professor” of the Ministry of Education of PRC.
Male, born in July 1958, is an independent non-executive director of the Company. Mr. Wang is a graduate with a
bachelor’s degree and obtained an EMBA degree from the Guanghua School of Management, Peking University. He was
the vice general manager of China Commercial Foreign Trade Corporation, Ltd. (Shenzhen), the vice general manager of
Beijing Capital Huayin Group. He is currently the chairman of Shaanxi Fortune Investment Limited.
Wang
Yunting
Shen
Jiancong
Liu Mengshu Male, born in July 1963, is currently the chairman of the Company’s supervisory committee. Mr. Liu holds a bachelor’s
degree and is an engineer. He had served successively as the office director and the head of party committee’s
propaganda department of GRGC Changsha headquarters, and the chief of the party committee’s organization
department, the chief of the party committee’s propaganda department (head of corporate culture department) and the
director of the Party committee office of GRGC. He is currently a director, the deputy secretary of the party committee
and the secretary of Committee for Discipline Inspection of GRGC.
Male, born in September 1968, is a supervisor of the Company. Mr. Shen is a graduate with a bachelor’s degree and is
an economist. He had served successively as the director of division of personnel (party committee personnel) leading
personnel department under of GRGC, the deputy director of department of human resources of GRGC, the deputy
director of the organization department of Party Committee of GRGC, the secretary of the party committee and the vice
station master of Shenzhen station of the Company, the director of department of human resources, the director of the
organization department of party committee of GRGC. He is currently the employee director and the chairman of the
trade union of GRGC.
Male, born in January 1967, is a supervisor of the Company. Mr. Chen holds a bachelor’s degree and is a senior
economist. He had served successively in GRGC as the vice-director of corporate management office and the vice-director
and director of corporate management and legal affairs department of GRGC, the vice-chief economist and the director of
corporate and legal affairs department of GRGC, and the chief legal advisor and the chief of corporate and legal affairs
department of GRGC. He is currently the chief legal advisor and the director of corporate and legal affairs department of
GRGC.
Chen
Shaohong
Li Zhiming Male, born in May 1961, is a supervisor of the Company. Mr. Li graduated with a bachelor’s degree and is an accountant.
He had served as the deputy chief of finance sub-division of Changsha Railway Company of GRGC, the manager of the
finance office of GRGC Changsha headquarters, the deputy chief and the chief of the audit department of GRGC. He is
currently a supervisor and the manager of the audit department of GRGC.
076
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
Name
Zhou
Shangde
Song Min
Biographies
Male, born in December 1970, is the Company’s Supervisor representing employees. Mr. Zhou graduated with a
master’s degree and holds a political officer title. He had successively served in the Company as the deputy chief of the
organization and department of human resources, the director of the Party Committee office, the chairman of the trade
union of the integrated service center of the Company. He also served in GRGC as the deputy head of the department
of human resource, the deputy office manager and the director of the reception office, the chief party secretary of office
administration, the party secretary and station master of Shenzhen station of the Company, the station master of the
Shenzhen North Station and the deputy secretary of the party committee.
Female, born in November 1970, is the Supervisor representing employees of the Company. Ms. Song holds a bachelor’s
degree and is an accountant. She had served successively as the deputy manager of the operating finance office in the
department of finance of Qinghai-Tibet Railway Company, the deputy office director and the finance director of Qinghai-
Tibet Railway Public Security Bureau, the vice office supervisor of Qinghai-Tibet Railway Company Annuity Council, the
vice consultant of the department of financial management of the State Taxation Bureau of Qinghai Province, the senior
manager of Petrol China Guangdong Sales Company Shenzhen Branch and etc. She is currently the chief of Department
of Audit of the Company.
Luo
Jiancheng
Gong Yuwen Male, born in September 1966, is the deputy secretary of the party and working Committee, and the secretary of the
discipline inspection and working commission of the Company. Mr. Gong holds a bachelor’s degree and is an economist.
He had served successively as the deputy director and the director of department of human resources (party committee
organisation) leading personnel department of GRGC, the deputy director of the department of human resources of
GRGC and the deputy director of the organization department of party committee, the party deputy secretary and the
deputy station master of the Guangzhou East station of the Company, the secretary of the party committee and the
deputy station master. He is currently the deputy secretary of the party and working Committee, and the secretary of the
discipline inspection and working commission of the Company.
Male, born in January 1973, is a deputy general manager of the Company. Mr. Luo is a graduate with a bachelor’s
degree and is a senior engineer. He served successively as the chief of Investigation & Inspection Division of the General
Office of GRGC, the Shiweitang station master of SR, the deputy chief of the Transportation Department of GRGC, the
assistant of the general manager of the Company, the general manager of Guangzhou Tiecheng Industrial Company and
the deputy general manager of GMSR. He is currently the deputy general manager of the Company.
Male, born in November 1965, is the deputy general manager of the Company and the secretary of the Board. Mr. Guo
graduated with a bachelor’s degree and holds a MBA degree, and is an economist. He had been the deputy director, the
deputy head and the head of secretariat of the Board of the Company. He is currently the deputy general manager of the
Company and the secretary of the Board.
Male, born in September 1968, is the chief accountant of the Company. Mr. Tang graduated with a bachelor’s degree
and holds an MBA degree, and is a senior accountant. He had served as the office supervisor of the Revenue Settlement
Center and the director of Finance Department of the Company. He is currently the chief accountant of the Company.
Guo
Xiangdong
Tang
Xiangdong
(2) Share incentives granted to the Directors, Supervisors and Senior Management
during the reporting period
Applicable ✓ Not applicable
077
Annual report
Chapter 8
Directors, Supervisors, Senior Management
and Employees
I I . E N G A G E M E N T S O F D I R E C T O R S , S U P E R V I S O R S A N D S E N I O R
MANAGEMENT (CURRENT OR RESIGNED DURING THE REPORTING
PERIOD)
(1) Engagements in shareholders
Name
Wu Yong
Name of
shareholder
GRGC
Guo Ji’an
GRGC
Yu Zhiming
GRGC
Chen Xiaomei GRGC
Liu Mengshu
GRGC
Shen Jiancong GRGC
Chen Shaohong GRGC
Li Zhiming
GRGC
Position at shareholder
Beginning of
engagement
August 2014
November 2017
November 2017
April 2008
November 2017
April 2008
Chairman of the Board
Secretary of the Party Committee
Director
Deputy General Manager
Director
Chief Accountant
Chief of Passenger Transport Department November 2018
Director of Passenger Transport
Department
Director
Deputy Secretary of the Party Committee,
Secretary of the Discipline Inspection
Employee Director, Chairman of the Trade
Union
Director of Department of Human
Resources, Director of Organization
Department of the Party Committee
Chief Legal Adviser
Chief of Corporate and Legal Affairs
Department
Director of Corporate and Legal Affairs
Department
Supervisor
Chief of Department of Audit
Director of Department of Audit
November 2017
November 2018
April 2006
December 2017
November 2018
November 2017
December 2013
March 2011
April 2006
September 2018
End of
engagement
September 2018
November 2018
November 2018
December 2017 November 2018
078
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
(2) Engagements in other companies
Name
Wu Yong
Guo Ji’an
Yu Zhiming
Chen Xiaomei
Chen Song
Jia Jianmin
Name of other companies
Position at other companies
GMSR, SR, Shichang Railway Company Limited
GZIR, GZR, XSR, Ganzhou-Shenzhen Railway Company Limited
Shenzhen Pingnan Railway Co., Ltd.
GMSR, SR
China Railway (HK) Holdings Ltd.
Hainan Railway Company Limited, GZIR, MZR, PRDIR, Ganzhou-Shenzhen Railway
Company Limited
GMSR, SR, Shichang Railway Company Limited, Hukun Passenger Railway Line
(Hunan) Company Limited, Huai Shao Heng Railway Co., Ltd., Qian Zhang Chang
Railway Company Limited, GSR, China Railway Container Transportation Limited,
China Railway Special Goods Transportation Limited
GZR, China Railway Express Co., Ltd.
CYTS Tours Guangdong Railway Co., Ltd, Beijing Zhongtie Commemorate Ticket Co., Ltd. Director
Chongqing Brewery Co., Ltd.
The Chinese University of Hong Kong
Supervisor
Chairman of the Board
Chairman of the Board
Deputy Chairman of the Board
Director
Chairman
Chairman of the Supervisory
Committee
Director
Director, General Manager
Professor and Chairman of the
Department of Marketing of Faculty
of Business Administration and
“Changjiang Scholar Professor” of
the Ministry of Education
Chairman of the Board
Chairman of the Supervisory
Committee
Director
Chairman of the Supervisory
Committee
Supervisor
Director
Chairman of the Supervisory
Committee
Supervisor
Director
Director
Wang Yunting
Liu Mengshu
Shaanxi Fortune Investment Limited
GMSR, SR
Chen Shaohong
Li Zhiming
Luo Jiancheng
Tang Xiangdong
GMSR, Hainan Railway Co., Ltd., Qian Zhang Chang Railway Company Limited, XSR,
Jingyue Railway Company Limited, Guangdong Shenmao Railway Company Limited,
Guangdong Meishan Passenger Railway Line Company Limited, Ganzhou-Shenzhen
Railway Company Limited
Shichang Railway Company Limited, Hukun Passenger Railway Line (Hunan) Company
Limited, Guangdong Yangcheng Railway Enterprise Company Limited
SR, Hunan Inter-city Railway Company Limited, PRDIR, GSR, China Railway Express
Co., Ltd., Guangzhou Electric Locomotive Co., Ltd.
Hong Kong Qiwen Limited
Guangdong Shenmao Railway Company Limited, Guangzhou Tiecheng Enterprise
Company Limited, CYTS Tours Guangdong Railway Co., Ltd., Guangdong Meishan
Passenger Railway Line Company Limited
GMSR, SR, Shichang Railway Company Limited, Hainan Railway Co., Ltd., Hukun
Passenger Railway Line (Hunan) Co., Ltd., Huai Shao Heng Railway Co., Ltd., XSR,
GSR, GGR, NGR, Jingyue Railway Company Limited, GZR, Guangzhou Northeastern
Cargo Outer Ring Railway Company Limited, Guangzhou Nanshagang Railway
Company Limited, Ganzhou-Shenzhen Railway Company Limited
Guangzhou Tiecheng Enterprise Company Limited, Shenzhen Guangshen Railway Civil
Engineering Company
Guangzhou Tiecheng Enterprise Company Limited, Shenzhen Guangshen Railway Civil
Engineering Company
079
Annual report
Chapter 8
Directors, Supervisors, Senior Management
and Employees
III. REMUNERATION OF DIRECTORS, SUPERVISORS AND SENIOR
MANAGEMENT
Decision-making procedure of
the remuneration of directors,
supervisors and senior
management
Basis for determination of the
remuneration of the directors,
supervisors and senior
management
Actual payment of remuneration
of directors, supervisors and
senior management
Total actual amount of
remuneration received by all of
the directors, supervisors and
senior management at the end of
the reporting period
Remuneration or allowance standards of the directors and supervisors of the Company should
be submitted for approval at the general meeting of the Company after consideration and
discussion by the Board.
Determined with reference to the level of remuneration in Shenzhen where the Company is
located, the job nature of individual staff, as well as the annual objective of the Company, the
completion status of work targets and the operating results of the Company.
During the reporting period, none of the following directors, namely Wu Yong, Guo Ji’an, Sun
Jing, Yu Zhiming, Chen Xiaomei and Chen Jianping, and the following supervisors, namely
Liu Mengshu, Shen Jiancong, Chen Shaohong and Li Zhiming has received remuneration from
the Company. As far as the Company is aware, as at the date of disclosure of this report, the
Company had no arrangements of directors, supervisors and senior management having waived
or agreed to waive any plans of remuneration. For details of the payment of remuneration
to the directors, supervisors and senior management and details of remuneration by level of
remuneration, please see the section “Changes in shareholdings and remunerations of Directors,
Supervisors and senior management (current and resigned during the reporting period)” above
and the relevant contents of Note 42 to the financial statements of the Company prepared in
accordance with the International Financial Reporting Standards.
During the reporting period, all of the directors, supervisors and senior management received a
total remuneration of RMB3.346 million.
IV. CHANGES IN DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
Name
Guo Ji’an
Position held
Non-executive Director
Chen Xiaomei Non-executive Director
Sun Jing
Non-executive Director
Chen Jianping Non-executive Director
Gong Yuwen
Deputy Secretary of the Party and
Working Committee, and Secretary of
the Discipline Inspection and Working
Commission
Change
Elected
Elected
Resigned
Resigned
Engaged
Reason for Change
Election on general
meeting
Election on general
meeting
Adjustment of work
arrangements
Adjustment of work
arrangements
Engagement
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Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
V. EXPLANATION OF PUNISHMENT BY SECURITIES REGULATORY
BODIES FOR THE PAST THREE YEARS
Applicable ✓ Not applicable
VI. OTHER INFORMATION ON DIRECTORS AND SUPERVISORS AND
SENIOR MANAGEMENT
(1) Equity interests of Directors, Supervisors or Chief Executives
As of the end of the reporting period, there was no record of interests or short positions (including the
interests and short positions which were taken or deemed to have under the provisions of the SFO) of the
directors, supervisors or chief executives of the Company in the shares, underlying shares and debentures
of the Company or any associated corporation (within the meaning of the SFO) in the register required to be
kept under section 352 of the SFO. The Company did not receive any notification of such interests or short
positions from any directors, supervisors or chief executives of the Company as required to be made to the
Company and the SEHK pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers
(the “Model Code”) in Appendix 10 to the Listing Rules of SEHK.
During the reporting period, none of the Company or its subsidiaries had entered into any arrangement such
that Company’s directors, supervisors or chief executives or their respective spouses or children under the
age of 18 could obtain any right to subscribe for any shares or debentures of the Company and any other
legal entities.
Other companies in which directors and supervisors of the Company were directors or employees did not
have interests in shares and underlying shares of the Company required to be disclosed to the Company
under Sections 2 and 3 of Part XV of the SFO.
(2) Service contracts of Directors and Supervisors
Each of the directors and supervisors of the Company has entered into a service contract with the Company.
The Company and its subsidiaries did not enter into any director’s or supervisor’s service contract before
January 31, 2004 and was waived from complying with the requirements of shareholders’ approval under
Rule 13.68 of the Listing Rules of SEHK. None of the directors or supervisors has entered into any service
contract with the Company which is not terminable by the Company within one year without payment of
compensation (other than statutory compensation).
(3) Interests of Directors and Supervisors in contracts
None of the directors or supervisors of the Company had any direct or indirect interests in any transaction,
contract or arrangement of significance subsisting during the year to which the Company or any of its
subsidiaries was a party.
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Annual report
Chapter 8
Directors, Supervisors, Senior Management
and Employees
VII. INFORMATION OF EMPLOYEES
(1) Employee information
Total number of current employees
Number of disengaged and retired employees for whom the parent company and major
subsidiaries shall be liable to expenses
Professional constitution
Category of professional constitution
Passenger, freight transportation and transit operation personnel
Engineering personnel
Driving personnel
Public works personnel
Electricity personnel
Electricity and water supplies personnel
Building construction personnel
Various operations and other employees of subsidiaries
Technical and administrative personnel
Total
Level of education
Category of education level
Postgraduate or above
University graduate
College for professional training
Others (secondary vocational school, high school and vocational technical school, etc.)
42,738
58
Number of
professionals
19,406
5,587
4,070
3,788
1,901
2,115
1,244
123
4,504
42,738
Number of person
161
4,443
15,211
22,923
42,738
Total
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Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
(2) Remuneration policy
The Company conducts budget management in relation to remuneration issues, by jointly formulating the
annual salary budget with the budget department and labour department of the Company at the beginning
of each year. Such budget is first discussed and approved at the meeting of the general manager’s office,
and then is organized for implementation by the labor department of the Company after being considered
and approved by the Board of the Company.
Salary for the Company’s staff is mainly comprised of the basic salary, performance-based salary and benefit
plans. The basic salary includes post salary, skill salary and various allowances and subsidies accounted
for under salary payable as required. Performance-based salary refers to salary calculated on the basis of
economic benefits and social benefits, or piece rates calculated on the basis of workload, or performance
based salary calculated on the basis of the performance of the staff at the position. Benefit plans include
various social insurance and housing funds paid as required by the relevant policies. Please refer to Note 30
to the financial statements for the total wages and benefits paid by the Company to its employees during
the reporting period.
In the process of allocating staff salary, the Company always adheres to the principles of allocation
based on labor, efficiency-orientation and fairness. It follows that allocation of staff salary is determined
on the premises of macro-control, on the basis of post labor assessment, and on the foundation of staff
performance assessment, which fully bring out the importance of allocation arrangement in the incentive
system of the Company and motivate the staff’s initiative.
(3) Training Plan
During the reporting period, the Company had a total of 119 occupational education management
personnel and a total of 763,167 people participating in trainings, which mainly include trainings on post
standardization, adaptability, qualification and continuing education. The annual training plan of the
Company for the year was 100% completed and the training expenses amounted to approximately RMB48.03
million.
(4) Employee insurance and benefits plan
Pursuant to applicable national policies and industrial regulations, the Company provides its employees with a
series of insurance and benefits plan that mainly include: a housing fund, retirement pension (basic medical
insurance, supplemental retirement pension), medical insurance (basic medical insurance, supplemental
medical insurance, maternity insurance), work-related injury insurance and unemployment insurance.
(5) Retirement plan
As of the end of the reporting period, the Company has not implemented a retirement plan.
083
Annual report
Chapter 9
Corporate Governance
1. INFORMATION REGARDING CORPORATE GOVERNANCE
Since the listing of the Company on the SEHK and the NYSE in 1996 and on the SSE in 2006, the Company
has been continuously improving its corporate governance structure, perfecting the internal control and
management systems, enhancing information disclosures and regulating its operation in accordance with
the relevant domestic and overseas Listing Rules and regulatory requirements after taking into account of
the actual state of affairs of the Company. Participants in general meetings, the Board and the Supervisory
Committee of the Company have clearly defined powers and duties, each assuming and performing its
specific responsibilities and making its own decisions in an independent, efficient and transparent manner.
Currently, there are no material differences between the Company’s corporate governance structure and the
regulatory requirements as set by regulatory authorities in the place of listing of the listed company’s stocks.
During the reporting period, pursuant to the regulatory requirements for internal control of listed companies
set out by domestic and overseas securities regulatory bodies, the Company has completed the self-
assessment on internal control and relevant auditing for the year 2017, and has amended the Working Rules
of the Audit Committee, and at the same time established its Board Diversity Policy under the requirements
of SEHK, taking a further step to improve the Company’s corporate governance and internal controls, and
promoting the Company’s sound and sustainable development.
During the reporting period, in view of the highly centralized systematic transportation management on
the nationwide railway network, it was necessary for the Company’s largest shareholder, GRGC, to obtain
the Company’s financial information and the Company’s monthly financial data summaries during the
reporting period, in order to exercise its administrative function as an industry leader granted by the law
and administrative regulations. In view of this, the Company duly followed the regulations set out on the
System for the Management of Inside Information and Insiders, enhanced the management of unrevealed
information, timely reminded its shareholders of their obligations with respect to confidentiality and the
prevention of insider trading.
Improvement of corporate governance is a long-term systematic project, which needs continuous
improvement and enhancement. As it always has, the Company will continue to promptly update and improve
its internal systems according to the relevant regulations, timely discover and solve problems, strengthen its
management basis and enhance its awareness of standardized operation and level of governance to promote
the regulated, healthy and sustainable development of the Company.
Is there any significant difference between corporate governance and requirements of related regulations of
CSRCM? If there is significant difference, explanations shall be made.
Applicable ✓ Not applicable
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Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
II. SUMMARY OF GENERAL MEETINGS
(1) General meetings held during the reporting period
Session of meeting
Date
Annual General
Meeting of 2017
June 6, 2018
Media in which resolutions
were disclosed
Website of SSE (www.sse.com.cn)
HKEXnews Website of SEHK (www.
hkexnews.hk)
Date of
disclosure
June 7, 2018
June 6, 2018
(2) Important event for the attention of shareholders in the coming year
The Company plans to convene the annual general meeting of 2018, during which it will conduct votes and
make resolutions on issues including the profit distribution plan. With respect to the specific arrangements
for the annual general meeting for the year 2018, investors please timely note and carefully read the “Notice
of 2018 Annual General Meeting” which will be published on the website of the SSE (http://www.sse.com.
cn), the HKExnews website of the SEHK (http://www.hkexnews.hk) and the Company’s website (http://www.
gsrc.com) in due course.
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Annual report
Chapter 9
Corporate Governance
III. PERFORMANCE OF DUTIES BY DIRECTORS
(1) Attendance at Board meetings and general meetings by Directors
Number of Board
meetings to be
attended this
year
Number of
meetings
attended in
person
Independent
Director or not
Attendance at Board meetings
Number of
meetings
attended by
proxy
Number of
meetings attended
by way of
telecommunication
Number of
absence
Two consecutive
Board meetings
attended or not
Attendance at
general meetings
Number of
general
meetings
attended
No
No
No
No
No
No
No
No
Yes
Yes
Yes
5
5
3
2
5
3
2
5
5
5
5
5
5
3
2
5
3
2
5
5
5
5
5
5
3
2
5
3
2
5
5
5
5
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
No
No
No
No
No
No
No
No
No
No
No
1
1
1
0
1
1
0
0
1
1
0
Name
Wu Yong
Hu Lingling
Guo Ji’an
Sun Jing (*)
Yu Zhiming
Chen Xiaomei
Chen Jianping (*)
Luo Qing
Chen Song
Jia Jianmin
Wang Yunting
Note: “*” means that the person had resigned during the reporting period.
During the reporting period, there was no incident of non-attendance in person by Directors at two
consecutive Board meetings.
Number of Board meeting held during the year
Including: Number of on-site meetings
Number of meetings held by way of telecommunication
Number of meetings held in a mixed mode
5
0
5
0
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Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
(2) Performance of duties by independent directors
1. Attendance at meetings
During the reporting period, the Company has held 1 general meeting, 5 Board meetings and 7 audit
committee meetings. The Company did not hold any remuneration committee meeting. All independent
directors attended all the meetings either in person or by proxy. Please read the relevant part of “Attendance
at Board meetings and general meetings by Directors” and “Audit Committee” of this chapter for details.
2. Objection to related matters of the Company by independent directors
During the reporting period, the independent directors of the Company did not raise any objection to the
resolutions raised at the meetings of the Board or other matters which were not the resolutions of the Board
meetings.
3. Recommendations for the Company and approval
During the reporting period, all independent directors of the Company faithfully performed their
responsibilities and obligations stipulated by laws, regulations, the Articles and Working Rules of Independent
Directors with an attitude of responsibility towards all of the shareholders. They showed solicitude for the
Company’s operation and compliance with laws, proactively attended Board meetings and related meetings,
carefully reviewed resolutions of the meetings, made valuable suggestions and offered opinions on important
project investments, operations and management of the Company with their professional knowledge. They
also raised independent opinions, according to relevant rules and facts to their knowledge, on material
affairs of the Company, such as external guarantees, elections of directors and related party transactions.
During the preparation and disclosure process of the annual report, independent directors of the Company
fulfilled their duties required by the security regulatory authorities and the Annual Report Working Rules of
the Audit Committee and Independent Directors. They performed their duties in a proactive manner, and
communicated with the Company, finance and auditing firms adequately and carefully and raised useful
suggestions. The independent directors exerted their independent functions adequately and ensured the
legitimate rights and interests of the shareholders, especially minority shareholders, of the Company.
Firstly, they recommended the Company to cooperate with the external auditor in relation to the auditing of
the 2017 annual report in accordance with the agreed audit arrangements. The Company timely provided the
accounting information and other relevant information required for the audit to ensure the audit quality of
the 2017 annual report.
Secondly, they recommended the re-appointment of PricewaterhouseCoopers Zhong Tian LLP as the domestic
auditor and PricewaterhouseCoopers as the international auditor of the Company for 2018. The above
resolutions for the re-appointment of domestic and international auditors were passed upon consideration at
the fifth meeting of the eighth session of the Board and the 2017 annual general meeting of the Company.
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Annual report
Chapter 9
Corporate Governance
4. On-site working and inspection
During the reporting period, the independent directors of the Company mainly participated in on-site
meetings and inspections to have a knowledge of the Company’s daily operations. They also communicated
with other directors, senior management and related staff of the Company through phone and emails as
detailed below:
Time
June 6, 2018
Matter
Attended 2017 Annual General
Meeting
Venue
Headquarter of the
Company
Participant
Chen Song, Jia
Jianmin
June 6, 2018
Conducted on-site inspection
Shenzhen Train Station
Chen Song, Jia
for oversee the operation of
Guangzhou-Shenzhen inter-city
trains
Jianmin
5. Expression of independent opinions
During the reporting period, the independent directors of the Company expressed independent opinions as
follows:
Time
March 28, 2018
Meeting
The fifth meeting of
Matter
Explanation and
the eighth session of
the Board
independent opinion on
the external guarantees of
the Company
Type of Opinion
During the reporting period,
the Company had no external
guarantees.
Independent opinion
It was agreed that the
on the nomination of
Mr. Guo Ji’an and Ms.
Chen Xiaomei by GRGC
as the candidates of
the Company’s non-
independent directors of
the eighth session of the
Board
Independent opinion on the
Company’s entrustment
of Guangzhou Railway
Real Estate Construction
Engineering Co., Ltd
to commerce the
preliminary work for
the comprehensive
development project of
the goods yard land of
Guangzhou East Railway
Station
candidates of directors were
recommended to the general
meeting.
Such related party transaction
was conducted by the
Company under normal
commercial terms, with its
transaction conditions being
fair and reasonable, and in
the interests of the Company
and its shareholders as a
whole.
August 22, 2018
The seventh meeting
of the eighth session
of the Board
088
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
IV. IMPORTANT OPINIONS AND SUGGESTIONS OFFERED BY SPECIAL
COMMITTEES UNDER THE BOARD IN THE PERFORMANCE OF THEIR
DUTIES DURING THE REPORTING PERIOD, AND DISCLOSURES OF
DETAILS PROVIDED IN THE EVENT OF OBJECTION
During the reporting period, special committees under the Board did not make important opinions and
suggestions in the performance of their duties and there was not matter of objection.
V. EXPLANATION OF EXISTENCE OF RISKS BY THE SUPERVISORY
COMMITTEE
During the reporting period, the supervisory committee made no objection to the matters of supervision.
V I . I N A B I L I T Y O F T H E C O M P A N Y A N D I T S C O N T R O L L I N G
S H A R E H O L D E R S T O E N S U R E I N D E P E N D E N C E A N D M A I N T A I N
THEIR CAPACITY AS AN INDEPENDENT OPERATION IN TERMS OF
BUSINESS, PERSONNEL, ASSETS, ORGANIZATION AND FINANCE
During the reporting period, the Company maintained autonomy in operation and finance, and maintained
independence from the largest shareholder, GRGC, with respect to its business, staff, assets, organization
and finance.
Existing peer competitions and the corresponding resolutions, working progress and
follow-up works plan of the Company
Applicable ✓ Not applicable
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Annual report
Chapter 9
Corporate Governance
VII. ESTABLISHMENT AND IMPLEMENTATION OF THE COMPANY’S
APPRAISAL MECHANISM AND INCENTIVE MECHANISM FOR SENIOR
MANAGEMENT DURING THE REPORTING PERIOD
In order to strengthen the incentives and restrictions of senior management, motivate the senior
management to enhance their management capability and level, and review and evaluate the work and
performance of the individual members of senior management, the Company is implementing the objective
responsibility assessment mechanism of senior management, under which the Board and the senior
management of the Company and its subsidiaries enter into target assessment responsibility letters at
the beginning of every year, indicators for such assessment include passenger and freight transportation
volumes, revenues from transportation, safety, costs, profit and management. After the assessment period,
the Company provides its incentive awards on an individual basis based on the completion of targets and
tasks by individual members of senior management and assessment results.
V I I I . D I S C L O S U R E O F T H E R E P O R T O F S E L F - A S S E S S M E N T O N
INTERNAL CONTROL
During the reporting period, the Board complied with the relevant domestic and overseas requirements and
carried out a self-assessment of the effectiveness of internal control. For details of the assessment report,
please read the Report on Internal Control 2018 disclosed on the website of SSE (http://www.sse.com.cn),
the HKEXnews website of SEHK (http://www.hkexnews.hk) and the website of the Company (http://www.
gsrc.com).
Explanation on significant deficiencies in internal control during the reporting period
Applicable ✓ Not applicable
IX. INFORMATION ON AUDIT REPORT ON INTERNAL CONTROL
PricewaterhouseCoopers Zhong Tian LLP has assessed the efficacy of the internal control system related
to the financial reporting by the Board, and has issued an unqualified audit report. For details of the audit
report, please refer to the Audit Report of Internal Control disclosed on the website of SSE (http://www.sse.
com.cn), the HKEXnews website of SEHK (http://www.hkexnews.hk) and the website of the Company (http://
www.gsrc.com).
Will the Company disclose the audit report on internal control? Yes
090
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
X. CORPORATE GOVERNANCE REPORT
(1) Compliance with the Corporate Governance Code
Apart from the provision of the Corporate Governance Code regarding the establishment of a nomination
committee, as far as the Company and its directors are aware, during the reporting period, the Company
has complied with the relevant code provisions set out in the Corporate Governance Code in Appendix 14
to the Listing Rules of SEHK. Meanwhile, the Company has applied the principles set out in the Corporate
Governance Code in its corporate governance structure and practices.
As at the end of the reporting period, the Board of the Company decided not to set up a nomination
committee after prudent consideration of the policy environment and background of the industry to
which the Company engages in as well as the corporate governance structure over time. According to
the requirements of the Articles and the Procedures for Shareholders to Propose a Person for Election as
Director, upon expiration of the term of a director of the Company or in the event of vacancies for director,
shareholders individually or collectively holding three percent or more of the issued shares of the Company
may nominate a candidate for non-independent director by way of written proposal to the Company; and
shareholders individually or collectively holding one percent or more of the issued shares of the Company
may nominate a candidate for an independent director by way of written proposal to the Company. Directors
of the Company shall be elected at general meetings for a term of office of three years. Upon expiration of
his or her term, directors shall be entitled to be re-elected.
(2) Securities transactions by Directors, Supervisors and senior management and
interests on competitive business
The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as
set out in Appendix 10 of the Listing Rules of SEHK and the Administrative Rules on Shares Held by the
Directors, Supervisors and Senior Management Officers of Listed Companies and the Changes Thereof
(Zheng Jian Gong Si Zi [2007] No. 56) of CSRC as its own code of conduct regarding securities transactions
of the directors of the Company. The Company formulated the Administrative Rules on Shares Held by the
Directors, Supervisors and Senior Management Officers of Guangshen Railway Company Limited and the
Changes Thereof, which was approved at the twenty-second meeting of the fourth session of the Board.
After making specific enquiries with all the directors, supervisors and senior management, the Company
confirms that during the reporting period, all the directors, supervisors and senior management have
complied with the required standard set out in the above-mentioned code, rules and regulations and system
requirements.
After making specific enquiries with all the executive directors, non-executive directors and supervisors,
the Company confirms that during the reporting period, none of the directors, non-executive directors and
supervisors has held any interests in businesses that compete or may compete with the businesses of the
Company directly or indirectly.
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Annual report
Chapter 9
Corporate Governance
(3) The Board
The Board leads the Company in a responsible attitude and effective manner. The Board is responsible for
devising and reviewing the Company’s development strategies and planning, reviewing and approving the
annual budget and business plans, recommending the dividend proposal, ensuring the implementation of
effective internal control system and supervising the performance of the management in accordance with the
Articles, the rules of procedure of the general meetings and the rules of procedure of the Board meetings.
The management of the Company is led by the general manager, who is responsible for the daily operation
of the Company. The general manager supervises the daily business operations, development planning and
implementation under the assistance of the deputy general manager, and is liable for all businesses of the
Company to the Board.
The Board is comprised of nine members, including three independent non-executive directors. The directors’
diverse backgrounds reflect their different cultural and educational backgrounds and extensive experiences
in various industries. The directors, ranging from 40 to 60 years old, possess the appropriate qualifications
related to the businesses of the Company, and therefore are able to provide recommendations to the
management from multiple angles with diversified modes of thinking. The names, biographical details and
occupations of the directors of the Company are set out in the relevant part of the chapter “Directors,
Supervisors, Senior Management and Employees” in this annual report.
The Company provides information on business development to all directors of the Company, including
statements of various forms, documents and minutes of meetings. The independent directors timely obtain
in-depth knowledge of the operating situation of the Company through reports of the management of the
Company regarding production and on-site investigation. The Company undertakes to provide independent
directors with working conditions necessary for the performance of their duties. The secretary of the Board
actively assists independent directors in performing their duties, and other relevant people of the Company
cooperate with the independent directors as needed to perform their duties. The fees required for the
engagement of intermediaries and discharge of other duties by the independent directors are borne by the
Company so that independent directors can effectively perform their duties.
During the reporting period, the Board held 5 meetings in total. For details of the attendance of the directors
at the Board meetings, please read the relevant parts of “Performance of Duties by Directors” in this
chapter.
There is no financial, business, family or other material/connected relationship between members of the
Board and the chairman of the Board and the general manager.
The Board has established the audit committee and the remuneration committee to supervise relevant affairs
of the Company. Each committee has specific responsibilities and reports and gives advice to the Board on a
regular basis.
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Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
(4) Board diversity policy
In December 2018, the Company established its Board Diversity Policy. Under such policy, the Board shall
discuss on and adopt measurable objectives for achieving the diversity on the Board members each year.
When selecting candidates, the Board shall consider from a wide range of factors regarding diversity,
including but not limited to gender, cultural and educational background, region, industry and professional
experiences, acquired knowledge and length of service, during which the Company shall also incorporate its
corporate features and specific requirements to reach a final decision, having due regard to the candidates’
qualification level reflected by objective criteria and also the benefits of diversity on the Board members.
The Board will monitor the implementation of such policy, as well as the progress of those measurable
objectives in relation to the diversity and whether these objectives have been achieved. Meanwhile, it will
evaluate the policy in a timely manner in order to ensure the effectiveness of the policy. The Board will
discuss and adopt any possible necessary amendments.
(5) Chairman of the Board and General Manager
Mr. Wu Yong and Mr. Hu Lingling are the Chairman of the Board and the General Manager of the Company
respectively. The Chairman of the Board is responsible for leading the Board and ensuring that all key and
appropriate issues are discussed by the Board in a timely manner. The Company does not have a chief
executive officer and the relevant duties of a chief executive officer (including the implementation of annual
business plan and investment proposal of the Company and decision-making on production, operation and
management, etc.) are performed by the General Manager of the Company.
(6) Tenure of non-executive directors and confirmation of independence of independent
non-executive directors
For a discussion of the tenure of the existing non-executive directors of the Company, please refer to the
relevant part of the section “Directors, Supervisors, Senior Management and Employees” in this annual
report.
The Company has received annual confirmation letters for this year from all independent non-executive
directors, with respect to their independence pursuant to Rule 3.13 of the Listing Rules of SEHK. The
Company concurs with their finding of independence.
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(7) Remuneration committee and remuneration of Directors
Members of the remuneration committee of the Company are appointed by the Board. At present, the
committee consists of three independent non-executive directors and two executive directors, namely, Mr.
Chen Song (chairman of the remuneration committee), Mr. Jia Jianmin, Mr. Wang Yunting, Mr. Wu Yong and
Mr. Hu Lingling.
According to the requirements of the Terms of Reference of the Remuneration Committee of the Company,
the principal duties of the remuneration committee include reviewing and making recommendations to the
Board for the remuneration packages for the directors and the supervisors of the Company, as well as
approving the terms and conditions of the executive directors’ service contracts. The remuneration policy
of the Company seeks to provide, in accordance with the Company’s business development strategies,
reasonable remuneration to attract and retain high caliber executives. The remuneration committee shall
obtain the benchmark information from internal and external sources in relation to market remuneration
standard, packages offered in the industry and consider the overall performance of the Company when
determining the directors’ and the supervisors’ emoluments and recommending the directors’ and the
supervisors’ emoluments to the Board. The remuneration committee is provided with adequate resources
from the Company to perform its duties.
During the reporting period, the remuneration committee of the Company did not convene any meetings.
At the annual general meeting of 2016 held by the Company on June 15, 2017, it was considered and
approved that the remuneration and allowances of each domestic independent non-executive director would
be RMB100,000 and RMB12,000 per year respectively, and the remuneration and allowances of each of
overseas independent non-executive directors would be HK$150,000 and HK$18,000 per year respectively.
For details of remuneration of directors during 2018, please refer to the relevant parts of the section
“Directors, Supervisors, Senior Management and Employees” in this annual report.
(8) Audit committee
Members of the audit committee are appointed by the Board. At present, the committee consists of three
independent non-executive directors, namely, Mr. Chen Song (chairman of the audit committee), Mr. Jia
Jianmin and Mr. Wang Yunting. They possess appropriate academic and professional qualifications or related
financial management expertise. The secretary to the Board of the Company, Mr. Guo Xiangdong is the
secretary of the audit committee.
According to the requirements of the Working Rules of the Audit Committee of the Company, the principal
duties of the audit committee include but are not limited to reviewing the financial performance of
the Company and its subsidiaries, confirming the nature and scope of audit as well as supervising the
establishment of the internal control and compliance of the Company with the relevant laws and regulations.
It shall also discuss matters raised by the internal auditors, external auditors and regulatory authorities
to ensure that all appropriate recommendations are implemented. The audit committee has been provided
with adequate resources to perform its duties. The Board has no disagreement in relation to the audit
committee’s advice on the selection, appointment, resignation or removal of auditors.
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GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
During the reporting period, the audit committee held 7 meetings to examine, review and supervise the
Company’s internal control performance related to financial reporting, review the Company’s financial
statements and auditing results of the auditors, and recommend the appointment of external auditors to the
Board.
Attendance of each member of the audit committee is set out as below:
Name of member
Chen Song
Jia Jianmin
Wang Yunting
Number of
meetings to be
attended
7
7
7
Number of
meetings
attended in
person
7
7
7
Attendance
rate
100%
100%
100%
The Audit Committee discussed with external auditors on the audit plan of the annual report and urged the
external auditors to submit the auditing report timely. The Audit Committee reviewed the Company’s financial
and accounting statements before external auditors commenced their work and made written suggestions.
When the external auditors drafted an initial opinion, the Audit Committee reviewed the statements and
made written suggestions again. The Company’s 2018 quarterly financial statements, 2018 interim financial
statements, and 2018 annual financial statements and results announcements have been reviewed by the
Audit Committee.
(9) Auditors remuneration and related professional fee
The Company has appointed PricewaterhouseCoopers Zhong Tian LLP as its domestic auditor and
PricewaterhouseCoopers as its international auditor for 2018. As of the end of the reporting period, the
Company’s domestic auditor has served for a term of 11 consecutive years and its international auditor has
served for a term of 16 consecutive years. The rotation of people in charge of auditing affairs and endorsing
CPA is in compliance with the Requirements on the Regular Rotation of the Endorsing Accountants for
Securities and Futures Auditing Services of the CSRC and the Ministry of Finance of the PRC.
During the reporting period, the Company paid a remuneration of RMB5.30 million (including RMB300,000
as an audit fee for internal audit) to PricewaterhouseCoopers Zhong Tian LLP and RMB3.10 million to
PricewaterhouseCoopers respectively for their annual auditing services of 2018. In addition, the Company
paid a fee of RMB750,000 to PricewaterhouseCoopers Consultants (Shanghai) Limited Beijing Branch for its
non-audit services.
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(10) Training of directors and company secretary
The Company places high importance on the continuing training of the directors, supervisors and senior
management. Upon joining the Board, each director receives materials on training of directors which contains
guide on conduct and other important matters related to governance. Apart from this, the Company provides
the latest directors’ responsibilities handbook to all directors to inform them about the latest requirements
and amendments of the Listing Rules, and encourages all directors to participate in related training courses
and documents the training record of the directors. During the reporting period, Mr. Guo Xiangdong, the
deputy general manager and secretary of the Board, participated in a series of professional trainings jointly
organized by the SSE, SEHK and HK Institute of Chartered Secretaries, and participated in no less than 15
hours of relevant professional training.
(11) Corporate governance functions
The Board is responsible for the fulfillment of the following corporate governance responsibilities:
1.
2.
3.
4.
5.
developing and reviewing the Company’s corporate governance policies and practices;
reviewing and monitoring the training and continuing professional developments for the Company’s
directors and senior management;
reviewing and monitoring the Company’s policies and regulations with respect to its compliance
with the laws and regulatory requirements, which include the Listing Rules, applicable laws, other
regulatory requirements, and any policies and practices pertaining to the requirements, guidelines and
regulations of applicable organizational governance standards;
developing, reviewing and monitoring the code of conduct and compliance manual (if any) for the
Company’s employees and directors;
reviewing the Company’s compliance with the corporate governance code as adopted by the Company
from time to time, and the disclosure in the corporate governance report in the Company’s annual
report.
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GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
(12) Shareholders’ rights
In accordance with the requirements of the Articles, two or more shareholders holding, in aggregate, 10%
or more of the shares carrying the right to vote at the proposed general meeting shall have the right, by
delivery of one or more written requests signed in counterparts through mail or electronic mail to the Board
or the company secretary, to require an extraordinary general meeting or a class meeting to be called by the
Board for the business specified in such request. The Board shall proceed as soon as possible to convene the
extraordinary general meeting or a class meeting after receiving such request. Shareholder or shareholders
individually or collectively holding 3% or more of the shares carrying the right to vote at the proposed
general meeting shall have the right, by delivery of one or more written requests signed in counterparts
through mail or electronic mail to the Board or the company secretary, to require the proposal set forth in
the written request to be considered at the proposed general meeting.
Shareholders shall attend the general meetings to raise questions or opinions in relation to the results,
operation, strategies and/or management of the Company. The chairman or deputy chairman of the
Board, appropriate management and administrative personnel and the external auditors shall attend the
general meetings to answer questions from the shareholders. Each general meeting shall make reasonable
arrangements for a questioning session for the shareholders.
Shareholders may raise enquiries to the Board based on the contact information provided by the Company
and make proposals at the general meetings. For contact information, please read “Company Profile and
Major Financial Indicators” in this annual report.
(13) Investor relations
The secretary to the Board of the Company is in charge of the Company’s information disclosure and investor
relations. The Company has formulated Working Rules of Secretary to the Board, Management Method of
Information Disclosure and Management System for Investor Relations. The Company has strictly fulfilled the
obligation of information disclosure and commenced management of investor relations in accordance with
the relevant requirements.
The Company advocates a corporate culture that respects investors and holds itself accountable for
investors. The Company has established a smooth communication channel with investors and has enhanced
mutual trust and interaction by disclosing sufficient information to investors, initiating various investor
relations activities, and maintaining respect for investors’ rights of knowledge and option, and rewarding its
shareholders.
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1. Information disclosure
Credible information disclosure can effectively build a bridge of communication and understanding between
investors, regulatory authorities, the public and the Company. This can facilitate a broader and more
thorough understanding of the Company’s values. For years, according to the basic principles of openness,
impartiality and fairness, the Company has been striving to comply with the requirements of the relevant
laws and the Listing Rules, and fulfilling the information disclosure obligations in a timely and accurate
manner. The Company takes the initiative to understand investors’ concerns and voluntarily discloses
information in response to these concerns so as to increase its transparency.
In 2018, the Company timely completed the preparation and disclosure of its annual, interim and quarterly
reports and released various announcements and other shareholders’ documents and information, disclosing
in detail of the following information of the Company: operations of the Board, the Supervisory Committee
and general meetings, operating conditions, investment, dividends and distribution, corporate governance,
and so forth. Moreover, the Company consistently provided in-depth and comprehensive analyses on its
operating and financial positions as well as the major factors affecting its business performance in its annual
reports and interim reports with a view to strengthening investors’ understanding about the operation,
management, and development trends of the Company.
2. Ongoing communication
On the basis of a competent disclosure of information, the Company maintains an effective two-way
communication with investors through various channels and conveys information that investors are concerned
with, so as to boost their confidence in the Company’s future development. Meanwhile, the Company
extensively collects feedback from the market to elevate the standards of the Company’s governance and
operations management.
(i)
(ii)
(iii)
Making the investor hotline, investor relations e-mail box, and the Investors’ Message section on the
Company’s website publicly known, and promptly responding to investors’ enquiries.
Properly arranging investor visits and research requests, communicating with the investors with an
open-minded attitude, and building a direct communication mechanism between investors and the
Company.
Allowing investors and the public to check out information such as the Group’s basic information, rules
for the Company’s corporate governance, information disclosure documents and profiles of directors,
supervisors and the senior management at any time on the Company’s website.
(iv)
Timely handling and replying to investors’ messages through the “e-interaction” platform developed by
SSE for listed companies and investors.
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GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
3. Shareholder return
Since its listing, the Company has always insisted on rendering returns to shareholders and has been
distributing annual cash dividends for 22 consecutive years with an aggregate cash dividend payment of
approximately RMB11.5 billion. The chart of dividend and distribution over the years since the listing of the
Company in 1996 is as follows:
Year
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Total
(Unit: RMB)
Dividend
payout ratio
(dividend per
share/earnings
per share)
Earnings
per share
Dividend
per Share
0.28
0.19
0.15
0.12
0.11
0.12
0.13
0.12
0.13
0.14
0.16
0.20
0.17
0.19
0.22
0.25
0.19
0.18
0.09
0.15
0.16
0.14
3.59
0.10
0.12
0.10
0.12
0.10
0.10
0.10
0.105
0.11
0.12
0.08
0.08
0.08
0.08
0.09
0.10
0.08
0.08
0.05
0.08
0.08
0.08
2.035
35.71%
63.16%
66.67%
100.00%
90.91%
83.33%
76.92%
87.50%
84.62%
85.71%
50.00%
40.00%
47.06%
42.11%
40.91%
40.00%
42.11%
44.44%
55.56%
53.33%
50.00%
57.14%
56.69%
The Board of the Company has recommended the payment of cash dividend of RMB0.06 (including tax) for
2018. This recommendation shall be subject to approval at the 2018 annual general meeting. For details of
the dividends, the cash dividend policy of the Company and its implementation, please read the relevant part
in the section “Matters of Importance” in this annual report.
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(14) Accountability and auditing
The directors of the Company acknowledge their responsibility for preparing the accounts and supervising
the preparation of the accounts for each financial period, so that the accounts can truly and fairly reflect the
business position, results and cash flow of the Company during the period. During the preparation of the
accounts for the year ended December 31, 2018, the directors adopted and consistently applied appropriate
accounting policies, made scrupulous judgments and estimates, and prepared the accounts on a going
concern basis.
The Company announced its annual and interim reports in a timely manner within the limits of 3 months and
2 months respectively after the end of the relevant period in accordance with the Listing Rules of SEHK. The
Company also announced its annual, interim and quarter reports timely in accordance with the Listing Rules
of SSE.
The responsibility statements of the directors and the auditors as to the preparation of the financial
statements of the Company are set out in the “Audit Report” in Chapter 11 — Financial Statements in this
annual report.
(15) Risk management and internal controls
Optimized and practicable risk management and internal control system is the foundation of sound corporate
governance. The Board of the Company is responsible for the establishment of sound and effective of
internal controls, assessment of its effectiveness and true disclosures of internal control assessment report.
In accordance with the requirements of laws and regulations such as Company Law, Securities Law, the
Basic Regulations on Enterprise Internal Control and its related guidelines, Guidelines for Internal Control
of Listed Companies, and the United States Sarbanes-Oxley Act, the Board established and enhanced risk
control measures of each part of the operation and management of the Company on the basis of risk-
oriented approach, i.e. the internal control management system of risk management. Such system aims at
managing instead of eliminating the risk of failure to achieve business objectives, and the Board shall only
give reasonable but not absolute assurance against material misstatements or loss.
Under the risk management oriented approach, the Company has strived to establish an internal control
system in compliance with international standards and regulatory requirements. Since 2006, the Company
has started to establish and assessment of the efficacy of internal control related to financial reporting
in accordance with the requirements of the United States Sarbanes-Oxley Act. Since 2011, the Company
has started to consistently apply the Basic Regulations on Enterprise Internal Control and Implementation
Guidelines for Enterprise Internal Control jointly promulgated by five departments of the PRC, and has
formed an internal control system that centers around the different departments and units under the
group companies, encompassing finance management, information disclosure, budget management, fund
management, contract management, project management, procurement and payment, sales and payment
collection, costs and expenses, personnel management and preparation of financial reports. The Company
has basically built up an internal control system that strings up decision-making, implementation and
supervision, an equalizing system that separates different positions, and a management regulation and
workflow that adapts to the operation characteristics of the Company to form a relatively comprehensive
assessment system for internal control.
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The Board is responsible for continuous supervision over the Company’s risk management and internal
control system. The Board reviews the efficiencies of the Company and its subsidiaries, its internal control
system (including finance and budgeting matters, operation, compliance, and risk management) at least
once a year, ensures adequacy of resources, the qualification and experience of the accounting staff, the
internal audit functions and financial reporting functions, and the staff training sessions received by staff and
related budgets. Such systems seek to manage rather than eliminate the risk of failure in achieving business
objectives, and allow for only reasonable but not absolute assurance against material misstatements or loss.
The audit committee was established under the Board with the responsibilities of inspecting and supervising
the financial reporting and internal control of the Company, inspecting and assessing the overall risk
management of the Company (particularly risk management and risk control system of decision-markings,
events and business of significance), and supervising implementation thereof. In 2018, the audit committee
held 7 meetings in total, each with the attendance of senior management, external auditor and internal
auditor. The audit committee shall examine report results of external auditor and internal auditors, the
compliance of the accounting policies and internal controls adopted by the Company with requirements of
Listing Rules, as well as review of the audits, internal control, risk management and financial statements.
The Company’s 2018 first quarterly results, interim results, the third quarterly results and annual results will
be recommended to the Board for approval after the meeting and discussion of the audit committee.
The audit department was established by the Company to operate independence internal audit system.
Under the leadership of the Board and the supervision of the audit committee, the audit department of the
Company is responsible for supervision, examination, evaluation and implementation of internal controls for
risk management by the Company and its controlling subsidiaries coordination of internal control and audit,
and independent audit over the adequacy and effectiveness of the Company’s operating and managing
activities and internal control system. Audit plans for each year shall be discussed and determined by the
audit committee, and key auditing results shall be discussed with the audit committee each time. The audit
department principally must report to the general manager and may report to the Chairman of the audit
committee directly. All internal audit reports shall be submitted to the Chairman of the Board, general
manager, CFO, audited departments and related management of such departments. The Board and the audit
committee of the Company will actively monitor the quantity and significance of inspection results submitted
by internal audit department, and remedial actions adopted by relative departments.
The Company established an internal control system of material information, process and internal control
measures for addressing and disseminating price-sensitive information. The Company has established
systems relating to information disclosure, registration and management of inside information and prevention
of misuse and dissemination of sensitive information. The Company has established comprehensive
procedures and internal control measures ranging from report, identification, audit and disclosures to
the final announcement of inside information, for the purpose of inside information processing and
dissemination. The secretary of the Board assists the Board in managing relative information in relation to
inside information. Meanwhile, the Company carries out information disclosure in a true, accurate, complete,
and timely manner pursuant to the laws and regulations and requirements under the Listing Rules, the
Articles, and Administrative Measures for the Disclosure of Information of Listed Companies, so as to ensure
equal opportunities of all investors to timely access relevant Company information.
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Corporate Governance
In 2018, the Company continued to implement the coordination and corporation of the three lines of
defense: “the self-evaluation of the effectiveness of internal controls of business and functional departments,
the independent evaluation of the audit department, and the internal audit conducted by the appointed
auditors” in accordance with the requirements of laws and regulations of the State and various regulatory
institutions, coupled with its own management needs. Meanwhile, the Company provided trainings and
carried out tests for the staff as a whole regarding risk management and internal control system, in order to
enhance risk management awareness of the staff as a whole, strengthen the business departments’ ability to
directly assume the responsibilities of risk management and control and achieve a daily operation system for
internal control relating to risk management of “risk control awareness for all, internal control participation
for all, and compliance responsibility for all”, safeguarding the smooth operation of internal control system
as a whole.
During the reporting period, the Board confirmed that the Company has developed sufficient and adequate
identification, management and reporting systems and procedures for the material risks it is subjects to
in achieving it strategic objectives. The Board continued to monitor risks and receive support from various
professional committee and senior management.
(16) Material changes in the Articles of Association
During the reporting period, there were no material changes in the Articles of Association of the Company.
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GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
Chapter 10
Information Regarding Corporate Bonds
Applicable ✓ Not applicable
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Annual report
Chapter 11
Financial Statements
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Guangshen Railway Company Limited
(incorporated in the People’s Republic of China with limited liability)
OPINION
What we have audited
The consolidated financial statements of Guangshen Railway Company Limited (the “Company”) and its
subsidiaries (the “Group”) set out on pages 110 to 210, which comprise:
•
•
•
•
•
the consolidated balance sheet as at 31 December 2018;
the consolidated comprehensive income statement for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated cash flow statement for the year then ended; and
the notes to the consolidated financial statements, which include a summary of significant accounting
policies.
Our opinion
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial
position of the Group as at 31 December 2018, and of its consolidated financial performance and its
consolidated cash flows for the year then ended in accordance with International Financial Reporting
Standards (“IFRSs”) and have been properly prepared in compliance with the disclosure requirements of the
Hong Kong Companies Ordinance.
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GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the Group in accordance with the International Ethics Standards Board for
Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other
ethical responsibilities in accordance with the IESBA Code.
KEY AUDIT MATTER
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in the
context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
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Chapter 11
Financial Statements
A key audit matter is identified in our audit and our audit procedures performed to address this key audit
matter are set out as below:
Key Audit Matter
How our audit addressed the Key Audit Matter
Provision for impairment of trade receivables
The procedures we performed included:
Refer to notes 3.1(b)(ii), 4(a) and 19 to the
consolidated financial statements.
(i)
As at 31 December 2018, the Group had trade
r e c e i v a b l e s o f R M B 3 , 8 6 1 , 6 1 7 , 0 0 0 , a g a i n s t
which expected credit loss (“ECL”) provision of
RMB61,212,000 were held.
(ii)
Management categorised the trade receivables
portfolio based on credit risk characteristics, and
recognised provision for credit losses on the basis
of exposure at default and ECL rates which include
consideration of historical credit loss experience,
current status and forward-looking information.
Understood, evaluated and validated key
controls that the Groups have over trade
r e c e i v a b l e s p o r t f o l i o g r o u p i n g a n d E C L
calculation;
E v a l u a t e d w h e t h e r t h e m o d e l s a n d
m e t h o d o l o g i e s u s e d b y m a n a g e m e n t t o
c a l c u l a t e E C L w e r e i n a c c o r d a n c e w i t h
accounting standards;
(iii)
E v a l u a t e d t h e r e a s o n a b l e n e s s o f t h e
judgement management made in grouping
trade receivable portfolios and assessing
common risk characteristics;
We identified this as a key audit matter due to
the materiality of the trade receivables balance
and the assessment of the ECL involves significant
accounting estimations and judgements.
(iv)
Evaluated the appropriateness of historical
period selection, and evaluated the reliability
of the key data input to calculate historical
default rate, including historical credit loss
experience of each portfolio, trade receivables
l i f e t i m e r e c o v e r y i n f o r m a t i o n a n d o t h e r
relevant data.
(v)
Understood and evaluated the reasonableness
of the factors used in making forward-looking
e s t i m a t i o n , i n c l u d i n g c h a n g e s o f f u t u r e
economics, unemployment rate forecast,
market environment and customer portfolio;
(vi) Obtained ECL calculation documents of each
portfolio of trade receivables and examined
their accuracy.
Based on the work performed, management’s
judgments in making ECL provision and result of
such provisioning are supported by the available
evidences.
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GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
OTHER INFORMATION
The directors of the Company are responsible for the other information set out in the Company’s 2018
Annual Report. The other information comprises all of the information included in the annual report other
than the consolidated financial statements and our auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent with
the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be
materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
RESPONSIBILITIES OF DIRECTORS AND AUDIT COMMITTEE FOR THE
CONSOLIDATED FINANCIAL STATEMENTS
The directors of the Company are responsible for the preparation of the consolidated financial statements
that give a true and fair view in accordance with IFRSs and the disclosure requirements of the Hong Kong
Companies Ordinance, and for such internal control as the directors determine is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Audit Committee is responsible for overseeing the Group’s financial reporting process.
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Financial Statements
A U D I T O R ’ S R E S P O N S I B I L I T I E S F O R T H E A U D I T O F T H E
CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. We report our opinion solely to you, as a body, and for no other purpose.
We do not assume responsibility towards or accept liability to any other person for the contents of this
report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional
scepticism throughout the audit. We also:
•
•
•
•
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Group to cease
to continue as a going concern.
108
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
•
•
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
We communicate with Audit Committee regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide Audit Committee with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with Audit Committee, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore
the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would reasonably
be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Wenping Yao.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 27 March 2019
109
Annual report
Chapter 11
Financial Statements
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2018
(All amounts in Renminbi thousands)
ASSETS
Non-current assets
Fixed assets — net
Construction-in-progress
Prepayments for fixed assets and construction-in-
progress
Leasehold land payments
Goodwill
Investments in associates
Deferred tax assets
Long-term prepaid expenses
Financial assets at fair value through other
comprehensive income
Available-for-sale investments
Long-term receivable
Current assets
Assets classified as held for sale
Materials and supplies
Trade receivables
Prepayments and other receivables
Short-term deposits
Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES
Share capital
Share premium
Other reserves
Retained earnings
Capital and reserves attributable to the Company’s
equity holders
Non-controlling interests
Total equity
110
Annual report
Notes
2018
2017
As at 31 December
6
7
8
9
11
12
13
15
15
16
17
18
19
20
21
21
22
23
24,184,248
1,828,372
23,617,138
1,430,671
51,955
1,924,496
281,255
181,725
197,295
46,614
321,246
—
28,354
54,368
1,980,278
281,255
174,548
37,005
33,401
—
296,414
31,274
29,045,560
27,936,352
2,183
296,217
3,861,617
348,907
109,000
1,738,753
2,183
330,727
4,142,210
314,251
108,000
1,160,515
6,356,677
6,057,886
35,402,237
33,994,238
7,083,537
11,562,657
3,188,161
7,017,944
7,083,537
11,562,738
3,109,516
6,928,886
28,852,299
(35,970)
28,684,677
(27,596)
28,816,329
28,657,081
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
Liabilities
Non-current liabilities
Deferred tax liabilities
Deferred income
Current liabilities
Trade payables
Contract liabilities
Payables for fixed assets and construction-in-progress
Dividends payable
Income tax payable
Accruals and other payables
Total liabilities
Notes
2018
2017
As at 31 December
12
24
26
27
28
63,898
99,765
66,391
105,791
163,663
172,182
1,440,834
203,631
2,441,647
12,894
246,441
2,076,798
1,325,077
—
2,214,547
12,893
149,227
1,463,231
6,422,245
5,164,975
6,585,908
5,337,157
Total equity and liabilities
35,402,237
33,994,238
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
The financial statements on pages 110 to 210 were approved by the Board of Directors on 27 March 2019
and were signed on its behalf.
Wu Yong
Director
Hu Lingling
Director
111
Annual report
Chapter 11
Financial Statements
CONSOLIDATED COMPREHENSIVE INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2018
(All amounts in Renminbi thousands, except for earnings per share data)
Notes
30
38(b)
6
8
30
6
8
31
32
11
33
Revenue from Railroad Businesses
Passenger
Freight
Railway network usage and other transportation
related services
Revenue from Other Businesses
Total revenue
Operating Expenses:
Railroad Businesses
Business tax and surcharge
Employee benefits
Equipment leases and services
Land use right leases
Materials and supplies
Repairs and facilities maintenance costs,
excluding materials and supplies
Depreciation of fixed assets
Cargo logistics and outsourcing service charges
Amortisation of leasehold land payments
Utility and office expenses
Others
Other Businesses
Employee benefits
Materials and supplies
Depreciation of fixed assets
Amortisation of leasehold land payments
Utility and office expenses
Others
Total operating expenses
Reversal of impairment losses on financial assets, net
Other losses — net
Operating Profit
Finance costs — net
Share of results of associates, net of tax
Profit before income tax
Income tax expense
Profit for the year
112
Annual report
Year ended 31 December
2018
2017
8,108,384
1,849,360
8,865,635
18,823,379
1,004,639
19,828,018
(16,242)
(6,912,390)
(5,370,634)
(58,490)
(1,342,344)
(917,898)
(1,581,685)
(171,390)
(44,450)
(98,820)
(1,095,845)
7,757,077
1,893,594
7,644,230
17,294,901
1,036,521
18,331,422
(21,658)
(6,300,223)
(4,372,330)
(57,358)
(1,314,002)
(879,597)
(1,632,926)
(246,563)
(34,348)
(60,360)
(930,691)
(17,610,188)
(15,850,056)
(534,025)
(315,983)
(28,058)
(11,332)
(53,759)
(104,868)
(541,997)
(313,990)
(29,534)
(11,332)
(34,488)
(151,190)
(1,048,025)
(1,082,531)
(18,658,213)
(16,932,587)
1,061
(108,613)
1,062,253
(630)
7,177
1,068,800
(289,766)
779,034
—
(48,477)
1,350,358
(10,170)
6,944
1,347,132
(335,364)
1,011,768
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
Notes
2018
2017
Year ended 31 December
Profit for the year
779,034
1,011,768
Other comprehensive income
Items that may be reclassified to profit or loss
Changes in the fair values of available-for-sale
financial assets
Deferred tax liabilities for the changes in the fair
values of available-for-sale financial assets
Total comprehensive income for the year,
net of tax
Profit attributable to:
Equity holders of the Company
Non-controlling interests
Total comprehensive income attributable to:
Equity holders of the Company
Non-controlling interests
23
23
—
—
242,588
(60,647)
779,034
1,193,709
784,059
(5,025)
1,015,361
(3,593)
779,034
1,011,768
784,059
(5,025)
1,197,302
(3,593)
779,034
1,193,709
Earnings per share for profit attributable to the
equity holders of the Company during the year
Basic earnings per share
Diluted earnings per share
34
34
RMB0.11
RMB0.14
RMB0.11
RMB0.14
The above consolidated comprehensive income statement should be read in conjunction with the
accompanying notes.
Wu Yong
Director
Hu Lingling
Director
113
Annual report
Chapter 11
Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2018
(All amounts in Renminbi thousands)
Attributable to equity holders of the Company
Statutory
surplus
reserve
(Note 23)
Discretionary
surplus
reserve
(Note 23)
Other
reserves
(Note 23)
Retained
earnings
Total
Non-
controlling
interests
2,521,534
—
—
—
—
—
—
101,982
—
—
2,623,516
2,623,516
(4,967)
2,618,549
—
—
—
—
—
—
83,612
—
—
—
2,702,161
304,059
—
—
—
—
—
—
—
—
—
304,059
304,059
—
304,059
—
—
—
—
—
—
—
—
—
—
304,059
—
181,941
—
181,941
—
227,250
(227,250)
—
—
—
181,941
181,941
—
181,941
—
—
—
—
242,456
(242,456)
—
—
—
—
181,941
6,582,190
1,015,361
1,015,361
—
—
(227,250)
227,250
(101,982)
(566,683)
(566,683)
6,928,886
6,928,886
(44,706)
6,884,180
784,059
784,059
—
—
(242,456)
242,456
(83,612)
—
(566,683)
(566,683)
7,017,944
28,054,058
1,197,302
1,015,361
181,941
—
—
—
—
(566,683)
(566,683)
28,684,677
28,684,677
(49,673)
28,635,004
784,059
784,059
—
—
—
—
—
(81)
(566,683)
(566,683)
28,852,299
(24,003)
(3,593)
(3,593)
—
—
—
—
—
—
—
(27,596)
(27,596)
—
(27,596)
(5,025)
(5,025)
—
—
—
—
—
(3,349)
—
—
(35,970)
Share
capital
(Note 22)
7,083,537
—
—
—
—
—
—
—
—
—
7,083,537
7,083,537
—
7,083,537
—
—
—
—
—
—
—
—
—
—
7,083,537
Share
premium
11,562,738
—
—
—
—
—
—
—
—
—
11,562,738
11,562,738
—
11,562,738
—
—
—
—
—
—
—
(81)
—
—
11,562,657
Total
equity
28,030,055
1,193,709
1,011,768
181,941
—
—
—
—
(566,683)
(566,683)
28,657,081
28,657,081
(49,673)
28,607,408
779,034
779,034
—
—
—
—
—
(3,430)
(566,683)
(566,683)
28,816,329
Balance at 1 January 2017
Total comprehensive income
Profit for the year
Other comprehensive income (Note 23)
Special reserve — Safety Production Fund
(Note 23)
Appropriation
Utilisation
Appropriations from retained earnings (Note 23)
Transaction with owners:
Dividend relating to 2016 (Note 35)
Balance at 31 December 2017
Balance at 31 December 2017
Change in Accounting Policy (Note 2.2)
Balance at 1 January 2018
Total comprehensive income
Profit for the year
Other comprehensive income (Note 23)
Special reserve — Safety Production Fund
(Note 23)
Appropriation
Utilisation
Appropriations from retained earnings (Note 23)
Disposal of subsidiaries
Transaction with owners:
Dividend relating to 2017 (Note 35)
Balance at 31 December 2018
The above consolidated statement of changes in equity should be read in conjunction with the accompanying
notes.
Wu Yong
Director
Hu Lingling
Director
114
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2018
(All amounts in Renminbi thousands)
Notes
2018
2017
Year ended 31 December
Cash flows from operating activities
Cash generated from operations
Income tax paid
36(a)
3,600,022
(338,620)
2,962,704
(327,865)
Net cash generated from operating activities
3,261,402
2,634,839
Cash flows from investing activities
Proceeds from disposal of fixed assets
Advances received from disposal of assets classified as
held for sale
Payment of investment
Interest received
Dividends received
Decrease in short-term deposits with maturities more
than three months, net
Payments for acquisition of fixed assets and
construction-in-progress; and prepayments for fixed
assets, net of related payables
36(b)
392
587,123
(24,832)
1,765
6,473
(1,000)
527
—
—
1,779
6,473
—
(2,683,053)
(2,273,426)
Net cash used in investing activities
(2,113,132)
(2,264,647)
Cash flows from financing activities
Dividends paid to the Company’s shareholders
Transactions with non-controlling interests
(566,683)
(3,349)
(569,333)
—
Net cash used in financing activities
(570,032)
(569,333)
Net increase/(decrease) in cash and cash
equivalents
578,238
(199,141)
Cash and cash equivalents at beginning of year
1,160,515
1,359,656
Cash and cash equivalents at end of year
21
1,738,753
1,160,515
The above consolidated cash flows statement should be read in conjunction with the accompanying notes.
Wu Yong
Director
Hu Lingling
Director
115
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
1. GENERAL INFORMATION
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. On the same date, the
Company assumed the business operations of certain railroad and other related businesses (collectively
the “Businesses”) that had been undertaken previously by its predecessor, Guangshen Railway
Company (the “Predecessor”), certain subsidiaries of the Predecessor; and by Guangzhou Railway
(Group) Company (the “Guangzhou Railway Group”) and certain of its subsidiaries prior to the
formation of the Company.
The Predecessor was controlled by and was under the administration of the Guangzhou Railway
Group. Pursuant to a restructuring agreement entered into between the Guangzhou Railway Group,
the Predecessor and the Company in 1996, the Company issued to the Guangzhou Railway Group
100% of its equity interest in the form of 2,904,250,000 ordinary shares (the “State-owned Domestic
Shares”) for the exchange of assets and liabilities associated with the operations of the Businesses (the
“Restructuring”). After the Restructuring, the Predecessor changed its name to Guangzhou Railway
(Group) Guangshen Railway Enterprise Development Company. In 2017, its name was changed to
Shenzhen Guangzhou Railway Group Guangshen Railway Industry Development General Company (the
“GIDC”).
In May 1996, the Company issued 1,431,300,000 shares, representing 217,812,000 H Shares (“H
Shares”) and 24,269,760 American Depositary Shares (“ADSs”, one ADS represents 50 H Shares) in
a global public offering for cash of approximately RMB4,214,000,000 in order to finance the capital
expenditure and working capital requirements of the Company and its subsidiaries (collectively defined
as the “Group”).
In December 2006, the Company issued 2,747,987,000 A Shares on the Shanghai Stock Exchange
through an initial public offering of shares in order to finance the acquisition of the business and
related assets and liabilities associated with the railway transportation business (“Yangcheng Railway
Business”) of Guangzhou Railway Group Yangcheng Railway Enterprise Development Company
(“Yangcheng Railway”), a wholly owned subsidiary of Guangzhou Railway Group which operates a
railway line between the cities of Guangzhou and Pingshi in the Southern region of the PRC.
Before March 2013, the Ministry of Railway of the PRC (“MOR”) was the controlling entity of the
Company’s single largest shareholder (i.e. Guangzhou Railway Group). In addition, it was the
government authority which governed and monitored the railway business centrally within the PRC.
116
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
1. GENERAL INFORMATION (continued)
On 14 March 2013, pursuant to the approved plan of State Council Institutional Reform and
Transformation of Government Functions and Approval On Setting Up China Railway Company by the
State Council, the previous controlling entity of Guangzhou Railway Group, MOR, was dissolved. The
administrative functions of MOR were transferred to the Ministry of Transport and a newly established
authority called the National Railway Administration; while the business functions were transferred
to the China Railway Corporation (“CRC”). Accordingly, the equity interests of Guangzhou Railway
Group, which was wholly controlled by MOR previously, were also transferred to the CRC (“Reform”).
The Reform was completed on 1 January 2017 and CRC has become the controlling entity of the
Company’s principal shareholder since that date, Guangzhou Railway Group,CRC, together with
subsidiaries which were wholly controlled by MOR previously (hereinafter collectively as “CRC Group”)
became related parties of the Group.
In 2018, three subsidiaries of the Group, Shenzhen Nantie Construction Supervision Company Limited,
Shenzhen Railway Property Management Company Limited and Shenzhen Shenhuasheng Storage and
Transportation Company Limited, were liquidated and were no longer consolidated except for the
comprehensive income statements of these companies in 2018 (see note 10).
The principal activities of the Group are the provision of passenger and freight transportation on
railroads. The Group also operates certain other businesses, which principally include services offered
in railway stations; and sales of food, beverages and merchandises on board the trains and in the
railway stations.
The registered address of the Company is No. 1052 Heping Road, Luohu District, Shenzhen,
Guangdong Province, the People’s Republic of China.
The financial statements were authorised for issue by the board of directors of the Company on 27
March 2019.
The English names of all companies listed in the financial statements are direct translations of their
registered names in Chinese if no registered names in English are available.
117
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
2. PRINCIPAL ACCOUNTING POLICIES
This note provides a list of the significant accounting policies adopted in the preparation of these
consolidated financial statements. These policies have been consistently applied to all the years
presented, unless otherwise stated. The financial statements are for the Group consisting of
Guangshen Railway Company Limited and its subsidiaries.
2.1 Basis of preparation
(a) Compliance with IFRS and HKCO
The consolidated financial statements have been prepared in accordance with all
applicable International Financial Reporting Standards (“IFRS”) as issued by International
Accounting Standards Board (“IASB”) and requirements of the Hong Kong Companies
Ordinance (“HKCO”) Cap. 622.
(b) Historical cost convention
The consolidated financial statements have been prepared on a historical cost basis
except for financial assets at fair value through other comprehensive income (“FVOCI”)
and available-for-sale investments (“AFS”) are measured at fair value.
(c) Going concern basis
As at 31 December 2018, the Group had net current liabilities of RMB65,568,000 and
capital expenditure contracted for but not recognised as liabilities of RMB899,290,000
(see note 38(a)). Considering the current financial position, operating plan and usable
bank facilities amounting to RMB500,000,000 of the Group (note 40), the Board of
Directors believes that the Group has sufficient liquidity for the following 12 months. The
Group therefore continues to adopt the going concern basis in preparing its consolidated
financial statements.
(d) New and amended standards adopted by the Group
The Group has applied the following standards and amendments for the first time for
their annual reporting period commencing 1 January 2018:
•
•
•
•
•
•
IFRS 9 Financial Instruments;
IFRS 15 Revenue from Contracts with Customers;
Classification and Measurement of Share-based Payment Transactions –
Amendments to IFRS 2;
Annual Improvements 2014-2016 cycle;
Transfers to Investment Property – Amendments to IAS 40;
Interpretation 22 Foreign Currency Transactions and Advance Consideration
118
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.1 Basis of preparation (continued)
(d) New and amended standards adopted by the Group (continued)
Except for the impact of adopting IFRS 9 Financial Instruments and IFRS 15 Revenue
from Contracts with Customers, the other standards have no significant impact on the
consolidated financial statements for the year ended 31 December 2018. As IFRS 9
and IFRS 15 were generally adopted without restating comparative information, the
reclassifications and the adjustments arising from the new standards are therefore not
reflected in the restated balance sheet as at 31 December 2017, but are recognized in
the opening balance sheet on 1 January 2018. Details are set out in note 2.2(b) and (c)
below.
(e) New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not
mandatory for 31 December 2018 reporting periods and have not been early adopted by
the Group.
IFRS 16
Annual improvements
project (amendments)
IFRS 19 (amendments)
IFRS 28 (amendments)
IFRS 9 (amendments)
IFRIC 23
IFRS 3 (amendments)
Amendments to IAS 1
and IAS 8
IFRS 17
Amendments to IFRS 10
and IAS 28
Effective for
annual periods
beginning on or after
1 January 2019
1 January 2019
Lease
Annual improvements to 2015-
2017 cycle
Plan amendment, curtailment
1 January 2019
or settlement
Long-term Interests in
Associates and Joint
Ventures
Prepayment features with
negative compensation
Uncertainty over income tax
treatments
Definition of business
Definition of material
Insurance contracts
Sale or contribution of assets
between an investor and its
associate or joint venture
1 January 2019
1 January 2019
1 January 2019
1 January 2020
1 January 2020
1 January 2021
To be determined
119
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.1 Basis of preparation (continued)
(e) New standards and interpretations not yet adopted (continued)
Except for IFRS 16, there are no other standards that are not yet effective and that
would be expected to have a material impact on the Group in the current or future
reporting periods and on foreseeable future transactions. IFRS 16 was issued in January
2016. It will result in almost all leases being recognised on the balance sheet by lessees,
as the distinction between operating and finance leases is removed. Under the new
standard, an asset (the right to use the leased item) and a financial liability to pay
rentals are recognised. The only exceptions are short-term and low-value leases.
The Group has reviewed all of the Group’s leasing arrangements over the year ended 31
December 2018 in light of the new lease accounting rules in IFRS 16. The standard will
affect primarily the accounting for the Group’s operating leases.
As at 31 December 2018, the Group has non-cancellable operating lease commitments of
land, as mentioned in note 38(b). The Group’s operating leases mainly consisted of lease
of land for self-occupied purpose. The Group will apply the standard from its mandatory
adoption date of 1 January 2019. The Group intends to apply the simplified transition
approach and will not restate comparative amounts for the year prior to first adoption.
Management is yet assessing the impacts to the Group’s financial position and financial
performance for the coming year.
120
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.2 Changes in accounting policies
This note explains the impact of the adoption of IFRS 9 Financial Instruments and IFRS 15
Revenue from Contracts with Customers on the Group’s financial statements.
(a) Impact on the financial statements
The impact on the Group’s balance sheet on 1 January 2018 is as follows:
Balance sheet (extract)
Non-current assets
FVOCI (b(i))
AFS (b(i))
Deferred tax assets
Current assets
Trade receivables
Prepayments and other receivables
Non-current liabilities
Deferred income
Current liabilities
Contract liabilities
Accruals and other payables
Equity
Other reserves
Retained earnings
31
December
2017
As originally
presented
RMB’000
IFRS 9
RMB’000
IFRS 15
RMB’000
—
296,414
37,005
296,414
(296,414)
16,558
333,419
16,558
4,142,210
314,251
(60,704)
(5,527)
4,456,461
(66,231)
—
—
—
—
—
—
—
1 January
2018
Restated
RMB’000
296,414
—
53,563
349,977
4,081,506
308,724
4,390,230
105,791
—
1,463,231
1,463,231
—
—
—
—
(37)
105,754
135,499
(135,462)
135,499
1,327,769
37
1,463,268
3,109,516
6,928,886
(4,967)
(44,706)
10,038,402
(49,673)
—
—
—
3,104,549
6,884,180
9,988,729
121
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.2 Changes in accounting policies (continued)
(b) IFRS 9 Financial Instruments – Impact of adoption
IFRS 9 replaces the provisions of IAS 39 that relate to the classification and
measurement of financial assets and financial liabilities (see note 2.2(a)), impairment of
financial assets (see note 2.2(a)) and hedge accounting.
The adoption of IFRS 9 Financial Instruments from 1 January 2018 resulted in changes
in accounting policies and adjustments to the amounts recognised in the financial
statements. The new accounting policies are set out in below.
The impact on the Group’s retained earnings as at 1 January 2018 is as follows:
Notes
2018
RMB’000
Closing retained earnings 31 December 2017 –
IAS 39
Reclassify investments from AFS to FVOCI
Increase in provision for trade receivables, prepayments
and other receivables
Increase in deferred tax assets relating to impairment
provision
Decrease in statutory surplus reserve
(i)
(ii)
(ii)
6,928,886
—
(66,231)
16,558
4,967
Opening retained earnings 1 January 2018 — IFRS 9
6,884,180
122
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GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.2 Changes in accounting policies (continued)
(b) IFRS 9 Financial Instruments – Impact of adoption (continued)
(i) Classification and measurement
On 1 January 2018 (the date of initial application of IFRS 9), the Group’s
management has assessed which business models apply to the financial assets
held by the Group and has classified its financial instruments into the appropriate
IFRS 9 categories.
The Group elected to present in other comprehensive income (“OCI”) the changes
in the fair value of all its equity investments previously classified as available-
for-sale, because these investments are held as long-term strategic investments
that are not expected to be sold in the short to medium term. As a result, assets
with a fair value of approximately RMB296,414,000 were reclassified from AFS to
FVOCI.
On the date of initial application, 1 January 2018, the financial instruments of the
Group were as follows, with any reclassifications noted:
Measurement category
Original
(IAS 39)
New
(IFRS 9)
Carrying amount
Original
RMB’000
New
RMB’000
Difference*
RMB’000
Non-current financial assets
Equity investment
Current financial assets
Trade receivables
Prepayments and other
AFS
FVOCI
296,414
296,414
—
Amortised cost Amortised cost
4,142,210
4,081,506
(60,704)
receivables
Cash and cash equivalents
Short-term deposits
Amortised cost Amortised cost
Amortised cost Amortised cost
Amortised cost Amortised cost
314,251
1,160,515
108,000
308,724
1,160,515
108,000
(5,527)
—
—
*
The differences noted in this column are the result of applying the new expected
credit loss model.
123
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.2 Changes in accounting policies (continued)
(b) IFRS 9 Financial Instruments – Impact of adoption (continued)
(ii) Impairment of financial assets
The Group has three types of financial assets that are subject to IFRS 9’s new
expected credit loss model:
•
•
•
Trade receivables
Other receivables
Long-term receivable
The Group was required to revise its impairment methodology under IFRS 9
for each of these classes of assets. The impact of the change in impairment
methodology on the Group’s retained earnings is disclosed in the table in note
2.2(a) above.
While short-term deposits, cash and cash equivalents are also subject to the
impairment requirements of IFRS 9, the identified impairment loss was immaterial.
Trade receivables
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses which uses a lifetime expected loss provision for all trade receivables. This
resulted in an increase of the loss provision on 1 January 2018 by RMB60,704,000
for trade receivables. Note 3.1(b) provides for details about the calculation of the
provision.
The loss provision decreased by a further RMB5,695,000 for trade receivables
during the current reporting period.
124
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GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.2 Changes in accounting policies (continued)
(b) IFRS 9 Financial Instruments – Impact of adoption (continued)
(ii) Impairment of financial assets (continued)
Other financial assets at amortised cost
Other financial assets at amortised cost include other receivables, and long-term
receivable. Applying the expected credit risk model resulted in the recognition of
a loss provision of RMB18,852,000 on 1 January 2018 (previous loss provision was
RMB13,325,000) and a decrease in the provision by RMB8,262,000 in the current
reporting period.
Trade and other receivables are written off when there is no reasonable
expectation of recovery.
(c) IFRS 15 Revenue from contracts with customers – Impact of adoption
The Group has adopted IFRS 15 Revenue from Contracts with Customers from 1 January
2018 which resulted in changes in accounting policies and adjustments to the amounts
recognised in the financial statements.
The Group applies IFRS 15 retrospectively with the accumulated effect of initial
application recognised at 1 January 2018 without restating comparatives for the 2017
financial year. In summary, the following adjustments were made to the amounts
recognised in the balance sheet at the date of initial application (1 January 2018):
IAS 18
carrying
amount
31 December
2017
RMB’000
IFRS 15
carrying
amount
1 January
2018
RMB’000
Reclassi-
fication
RMB’000
Contract liabilities
Deferred income
Accruals and other payables
—
105,791
1,463,231
135,499
(37)
(135,462)
135,499
105,754
1,327,769
1,569,022
—
1,569,022
There was no impact on the Group’s retained earnings as at 1 January 2018.
125
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.2 Changes in accounting policies (continued)
(c) IFRS 15 Revenue from contracts with customers – Impact of adoption
(continued)
(i) Presentation of assets and liabilities related to contracts with customers
The Group has changed the presentation of certain amounts in the balance sheet
to reflect the terminology of IFRS 15:
•
•
Contract liabilities in relation to the frequent traveller program were
previously presented as deferred income.
Contract liabilities in relation to the advances received from customers were
previously included in accruals and other payables.
2.3 Subsidiaries
2.3.1 Consolidation
A subsidiary is an entity (including a structured entity) over which the Group has control.
The Group controls an entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. Subsidiaries are consolidated from the date on which
control is transferred to the Group. They are deconsolidated from the date that control
ceases.
Intercompany transactions, balances and unrealised gains on transactions between Group
companies are eliminated. Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the transferred asset. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the Group.
126
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GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.3 Subsidiaries (continued)
2.3.1 Consolidation (continued)
(a) Business combinations
The Group applies the acquisition method to account for business combinations.
The consideration transferred for the acquisition of a subsidiary is the fair
values of the assets transferred, the liabilities incurred to the former owners of
the acquiree and the equity interests issued by the Group. The consideration
transferred includes the fair value of any asset or liability resulting from a
contingent consideration arrangement. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are measured initially
at their fair values at the acquisition date.
The Group recognises any non-controlling interest in the acquiree on an
acquisition-by-acquisition basis. Non-controlling interests in the acquiree that are
present ownership interests and entitle their holders to a proportionate share of
the entity’s net assets in the event of liquidation are measured at either fair value
or the present ownership interests’ proportionate share in the recognised amounts
of the acquiree’s identifiable net assets. All other components of non-controlling
interests are measured at their acquisition date fair value, unless another
measurement basis is required by IFRS.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquirer shall remeasure its
previously held equity interest in the acquiree at its acquisition-date fair value and
recognise the resulting gain or loss, if any, in profit or loss.
Any contingent consideration to be transferred by the Group is recognised at
fair value at the acquisition date. Subsequent changes to the fair value of the
contingent consideration that is deemed to be an asset or liability is recognised in
accordance with IAS 39 in profit or loss. Contingent consideration that is classified
as equity is not remeasured, and its subsequent settlement is accounted for within
equity.
The excess of the consideration transferred and the acquisition-date fair value of
any previous equity interest in the acquiree over the fair value of the identifiable
net assets acquired is recorded as goodwill. If the total of consideration
transferred and previously held interest measured is less than the fair value of
the net assets of the subsidiary acquired in the case of a bargain purchase, the
difference is recognised directly in profit or loss (Note 2.10).
Intra-group transactions, balances and unrealised gains on transactions between
group companies are eliminated. Unrealised losses are also eliminated. When
necessary, amounts reported by subsidiaries have been adjusted to conform with
the Group’s accounting policies.
127
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.3 Subsidiaries (continued)
2.3.1 Consolidation (continued)
(b) Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are
accounted for as equity transactions — that is, as transactions with the owners in
their capacity as owners. The difference between fair value of any consideration
paid and the relevant share acquired of the carrying value of net assets of the
subsidiary is recorded in equity. Gains or losses on disposals to non-controlling
interests are also recorded in equity.
(c) Disposal of subsidiaries
When the Group ceases to have control, any retained interest in the entity is re-
measured to its fair value at the date when control is lost, with the change in
carrying amount recognised in profit or loss. The fair value is the initial carrying
amount for the purposes of subsequently accounting for the retained interest as
an associate, joint venture or financial asset. In addition, any amounts previously
recognised in other comprehensive income in respect of that entity are accounted
for as if the Group had directly disposed of the related assets or liabilities, which
means that amounts previously recognised in other comprehensive income are
reclassified to profit or loss.
2.3.2 Separate financial statements
Investments in subsidiaries are accounted for at cost less impairment. Cost also includes
direct attributable costs of investment. The results of subsidiaries are accounted for by
the Company on the basis of dividend received and receivable.
Impairment testing of the investments in subsidiaries is required upon receiving a
dividend from these investments if the dividend exceeds the total comprehensive income
of the subsidiary in the period the dividend is declared or if the carrying amount of the
investment in the separate financial statements exceeds the carrying amount in the
consolidated financial statements of the investee’s net assets including goodwill.
128
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.4 Associates
An associate is an entity over which the Group has significant influence but not control,
generally accompanying a shareholding of between 20% and 50% of the voting rights.
Investments in associates are accounted for using the equity method of accounting. Under
the equity method, the investment is initially recognised at cost, and the carrying amount is
increased or decreased to recognise the investor’s share of the profit or loss of the investee
after the date of acquisition. The Group’s investments in associates include goodwill identified
on acquisition. Upon the acquisition of the ownership interest in an associate, any difference
between the cost of the associate and the Group’s share of the net fair value of the associate’s
identifiable assets and liabilities is accounted for as goodwill.
If the ownership interest in an associate is reduced but significant influence is retained, only
a proportionate share of the amounts previously recognised in other comprehensive income is
reclassified to profit or loss where appropriate.
The Group’s share of post-acquisition profit or loss is recognised in profit or loss, and its
share of post-acquisition movements in other comprehensive income is recognised in other
comprehensive income with a corresponding adjustment to the carrying amount of the
investment. When the Group’s share of losses in an associate equals or exceeds its interest in
the associate, including any other unsecured receivables, the Group does not recognise further
losses, unless it has incurred legal or constructive obligations or made payments on behalf of
the associate.
The Group determines at each reporting date whether there is any objective evidence that the
investment in the associate is impaired. If this is the case, the Group calculates the amount
of impairment as the difference between the recoverable amount of the associate and its
carrying value and recognises the amount within ‘share of result of associates’, included in the
consolidated comprehensive income statement.
Profits or losses and other comprehensive income resulting from upstream and downstream
transactions between the Group and its associates are recognised in the Group’s financial
statements only to the extent of unrelated investor’s interests in the associates. Unrealised
losses are eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of associates have been changed where necessary to ensure
consistency with the policies adopted by the Group.
In the Company’s balance sheet, investments in associates are accounted for at cost less
provision for impairment losses. Cost also includes direct attributable costs of investment. The
results of associates are accounted for by the Company on the basis of dividend received and
receivable.
129
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.5 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to
the chief operating decision-maker. The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating segments, has been identified
as the senior executives of the Company that make strategic decisions.
2.6 Foreign currency transaction
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured
using the currency of the primary economic environment in which the entity operates
(“the functional currency”). The consolidated financial statements are presented in
Renminbi (“RMB”), which is the Company’s functional and the Group’s presentation
currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the
exchange rates prevailing at the dates of the transactions or valuation where items are
re-measured. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in profit or loss.
Foreign exchange gains and losses are presented in the consolidated comprehensive
income statement within “Finance cost-net”.
2.7 Fixed assets
Fixed assets are stated at historical cost less depreciation and impairment losses. Historical
cost includes expenditure that is directly attributable to the acquisition of the items (for the
case of fixed assets acquired by the Company from Predecessor during the Restructuring, the
revaluated amount in the Restructuring was deemed costs).
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured reliably. The carrying amount
of the replaced part is derecognised. All other repairs and maintenance are charged to profit or
loss during the financial period in which they are incurred.
130
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.7 Fixed assets (continued)
Depreciation is calculated using the straight-line method to allocate the cost amount, after
taking into account the estimated residual value of not more than 4% of cost, of each asset
over its estimated useful life. The estimated useful lives are as follows:
Buildings (a)
Tracks, bridges and service roads (a)
Locomotives and rolling stock
Communications and signalling systems
Other machinery and equipment
20 to 40 years
16 to 100 years
20 years
8 to 20 years
4 to 25 years
(a)
The estimated useful lives of some buildings, tracks, bridges and service roads exceed
the initial lease periods of the land use rights from operation lease (details contained in
note 38(b)); and the initial period of certain land use right acquired (note 2.9), on which
these assets are located.
The Group will renew the term of land use right upon its expiry in strict compliance
with requirements of relevant laws and regulations. There is no substantive impediment
for the renewal except for public interests. In addition, based on the provision of the
land use right operating lease agreement entered into with Guangzhou Railway Group
(note 38(b)), the Company can renew the lease at its own discretion upon expiry of the
operating lease term. Based on the above consideration, the directors of the Company
consider the current estimated useful lives of those assets to be reasonable.
The assets residual values and estimated useful lives are reviewed, and adjusted if
appropriate, at the end of each year.
An asset’s carrying amount is written down immediately to its recoverable amount if the
asset’s carrying amount is greater than its estimated recoverable amount (note 2.11).
Gains and losses on disposals are determined by comparing the proceeds with the
carrying amount and are recognised within “other losses — net”, included in the
consolidated comprehensive income statement.
131
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.8 Construction-in-progress
Construction-in-progress represents buildings, tracks, bridges and service roads under
construction, and mainly includes the construction related costs for the associated facilities
of the existing railway lines of the Group. Construction-in-progress is stated at cost, which
includes all expenditures and other direct costs, site restoration costs, prepayments attributable
to the construction and interest charges arising from borrowings used to finance the
construction during the construction period, less impairment loss. Construction-in-progress is
not depreciated until such assets are completed and ready for their intended use.
From time to time, certain railway assets of the Group require major modifications and
improvements. The carrying amounts are transferred from fixed assets to construction-in-
progress. The carrying amounts, including costs of modifications, are transferred back to fixed
assets upon completion of the improvement projects.
2.9 Leasehold land payments
The Group acquired the right to use certain pieces of land for certain of its rail lines, railway
stations and other businesses. The consideration paid for such land represents pre-paid lease
payments, which are amortised over the lease terms of 36.5 to 50 years using the straight-line
method.
2.10 Goodwill
Goodwill represents the excess of the consideration transferred, the amount of any non-
controlling interest in the acquiree and the acquisition-date fair value of any previous equity
interest in the acquiree over the fair value of the Group’s share of identifiable net assets
acquired. Goodwill arising from acquisitions of subsidiaries’ business is disclosed separately on
the consolidated balance sheet.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated
to each of the cash-generating units (“CGUs”), or groups of CGUs, that is expected to benefit
from the synergies of the combination. Each unit or group of units to which the goodwill is
allocated represents the lowest level within the entity at which the goodwill is monitored for
internal management purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken at least annually or more frequently if events or
changes in circumstances indicate a potential impairment. The carrying value of goodwill is
compared to the recoverable amount, which is the higher of value in use and the fair value less
costs to sell. Any impairment is recognised immediately as an expense and is not subsequently
reversed.
132
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.11 Impairment of non-financial assets other than goodwill
Assets that subjected to amortisation are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and
value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels
for which there are separately identifiable cash flows (CGUs). Non-financial assets other than
goodwill that suffered impairment are reviewed for possible reversal of the impairment at each
reporting date.
2.12 Financial assets
2.12.1 Classification
From 1 January 2018, the Group classifies its financial assets in the following
measurement categories:
•
•
those to be measured at amortised cost; or
those to be measured subsequently at FVOCI;
The classification depends on the entity’s business model for managing the financial
assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will be recorded in or OCI. For
investments in equity instruments that are not held for trading, the Group has made an
irrevocable election at the time of initial recognition to account for the equity investment
at fair value through other comprehensive income.
2.12.2 Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on the trade-date,
the date on which the Group commits to purchase or sell the asset. Financial assets are
derecognised when the rights to receive cash flows from the investments have expired or
have been transferred and the Group has transferred substantially all risks and rewards
of ownership.
133
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.12 Financial assets (continued)
2.12.3 Measurement
At initial recognition, the Group measures a financial asset at its fair value plus
transaction costs that are directly attributable to the acquisition of the financial asset.
Equity instruments
The Group subsequently measures all equity investments at fair value. For investments
in equity instruments that are not held for trading, over which the Group has no
control, joint control or significant influence are measured at FVOCI. Where the Group’s
management has elected to present fair value gains and losses on equity investments
in OCI, there is no subsequent reclassification of fair value gains and losses to profit or
loss following the derecognition of the investment, any related balance within the FVOCI
reserve is reclassified to retained earnings.
Dividends from such investments continue to be recognised in profit or loss as other
income when the Group’s right to receive payments is established.
Impairment losses (and reversal of impairment losses) on equity investments measured
at FVOCI are not reported separately from other changes in fair value.
Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model
for managing the asset and the cash flow characteristics of the asset. The Group
measures all of its debt instruments at amortised cost.
Assets that are held for collection of contractual cash flows where those cash flows
represent solely payments of principal and interest are measured at amortised cost.
Interest income from these financial assets is included in finance income using the
effective interest rate method. Any gain or loss arising on derecognition is recognised
directly in profit or loss and presented in other gains/(losses) together with foreign
exchange gains and losses. Impairment losses are presented as separate line item in the
consolidated comprehensive income statement.
134
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GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.12 Financial assets (continued)
2.12.4 Impairment
From 1 January 2018, the Group assesses on a forward looking basis the expected credit
losses associated with its debt instruments carried at amortised cost, including trade
receivables, other receivables and long-term receivable.
Management recognised provision for credit losses on the basis of exposure at default
and ECL rates which include consideration of historical credit loss experience, current
status and forward-looking information. For financial assets subject to ECL measurement
except trade receivables, on each balance sheet day, the Group assesses the significant
increase in credit risk since initial recognition or whether an asset is considered to be
credit impaired, ‘Three-stage’ expected credit loss models are established and staging
definition are set for each of these financial assets class.
A financial instrument which are not considered to have significantly increased in
credit risk since initial recognition is classified in ‘Stage 1’. The impairment provision is
measured at an amount equal to the 12-month expected credit losses for these financial
assets.
If a significant increase in credit risk since initial recognition is identified but the financial
instrument is not yet deemed to be credit-impaired, the financial instrument is moved to
‘Stage 2’. The impairment provision is measured based on expected credit losses on a
lifetime basis.
If the financial instrument is credit-impaired, the financial instrument is then moved
to ‘Stage 3’. The impairment provision is measured based on expected credit losses on
lifetime basis.
For the financial Instruments in Stage 1 and Stage 2, the Group calculates the interest
income based on its gross carrying amount (i.e. amortized cost) before adjusting for
impairment provision using the effective interest method. For the financial instruments in
Stage 3, the interest income is calculated based on the carrying amount of the asset, net
of the impairment provision, using the effective interest method. Financial assets that
are originated or purchased credit impaired are financial assets that are impaired at the
time of initial recognition, and the impairment provision for these assets is the expected
credit loss for the entire lifetime.
For trade receivables, the Group applies the simplified approach permitted by IFRS 9,
which requires expected lifetime losses to be recognised from initial recognition of the
receivables.
135
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.12 Financial assets (continued)
2.12.5 Accounting policies applied until 31 December 2017
The Group has applied IFRS 9 retrospectively, but has elected not to restate comparative
information. As a result, the comparative information provided continues to be accounted
for in accordance with the Group’s previous accounting policy.
(i) Classification
Until 31 December 2017 the Group classifies its financial assets in the following
categories: receivables and AFS. The classification depends on the purpose
for which the financial assets were acquired. Management determines the
classification of its financial assets at initial recognition.
(ii) Subsequent measurement
The measurement at initial recognition did not change an adoption of IFRS 9, see
description above.
Subsequent to the initial recognition, receivables are subsequently carried at
amortised cost using the effective interest method.
The measurement at initial recognition did not change an adoption of IFRS 9, see
description above.
Subsequent to the initial recognition, receivables are subsequently carried at
amortised cost using the effective interest method.
Available-for-sale financial assets are subsequently carried at fair value, except
for those investments in equity instruments that do not have a quoted market
price in an active market and whose fair value cannot be reliably measured, which
shall be measured at cost. Details on how the fair value of financial instruments is
determined are disclosed in note 3.3. Changes in the fair value of monetary and
non-monetary securities classified as available-for-sale are recognised in other
comprehensive income.
When securities classified as available-for-sale are sold or impaired, the
accumulated fair value adjustments recognised in equity are included in profit
or loss as “other gain/losses — net”. Dividends on available-for-sale equity
instruments are recognised in profit or loss when the Group’s right to receive
payments is established.
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Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.13 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet
when there is a legally enforceable right to offset the recognised amounts and there is an
intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
The legally enforceable right must not be contingent on future events and must be enforceable
in the normal course of business and in the event of default, insolvency or bankruptcy of the
Company or the counterparty.
2.14 Long-term prepaid expenses
Long-term prepaid expenses include the various expenditures that have been incurred but
should be recognised as expenses over more than one year in the current and subsequent
periods. Long-term prepaid expenses are amortised on the straight-line basis over the expected
beneficial period and are presented at actual expenditure incurred, net of accumulated
amortisation.
2.15 Non-current assets held for sale
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount
will be recovered principally through a sale transaction rather than through continuing use and
a sale is considered highly probable. They are measured at the lower of their carrying amount
and fair value less costs to sell, except for assets such as deferred tax assets, financial assets
and investment property that are carried at fair value, which are specifically exempt from this
requirement.
An impairment loss is recognised for any initial or subsequent write-down of the asset to
fair value less costs to sell. A gain is recognised for any subsequent increases in fair value
less costs to sell of an asset, but not in excess of any cumulative impairment loss previously
recognised. A gain or loss not previously recognised by the date of the sale of the non-current
asset is recognised at the date of derecognition.
Non-current assets are not depreciated or amortised while they are classified as held for sale.
Interest and other expenses attributable to the liabilities of a disposal group classified as held
for sale continue to be recognised.
Non-current assets classified as held for sale are presented separately from the other assets in
the balance sheet.
137
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.16 Materials and supplies
Materials and supplies are stated at the lower of cost and net realisable value. Cost is
determined using the weighted average method. Materials and supplies are charged as fuel
costs and repair and maintenance expenses when consumed. The cost of materials and supplies
may not be recoverable if they are damaged, become wholly or partially obsolete, or if their
selling prices have declined due to various reasons. When such circumstances happen, cost of
materials and supplies is written to net realisable value, which is the estimated selling price
less applicable variable expenses.
2.17 Trade and other receivables
Trade receivables are amounts due from customers for merchandise sold or services performed
in the ordinary course of business. If collection of trade and other receivables is expected in
one year or less (or in the normal operating cycle of the business if longer), they are classified
as current assets. If not, they are presented as non-current assets.
Trade and other receivables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method, less provision for impairment.
2.18 Cash and cash equivalents
Cash and cash equivalents include cash in hand; deposits held at call with banks; and other
short-term highly liquid investments with original maturities of three months or less.
2.19 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of
new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
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GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.20 Financial liabilities
The Group’s financial liabilities include trade payables, other payables (excluding other tax
payables, employee salary and benefits payables and advances), payables for fixed assets and
construction-in-progress and dividends payable.
Trade and other payables are presented as current liabilities unless payment is not due within
12 months after the reporting period. They are recognised initially at their fair value and
subsequently measured at amortised cost using the effective interest method.
Trade payable are classified as current liabilities if payment is due within one year or less (or in
the normal operating cycle of the business if longer). If not, they are presented as non-current
liabilities.
Financial liabilities are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method.
The Group derecognises financial liability when, and only when, the Group’s obligations are
discharged, cancelled or expired. The difference between the carrying amount of the financial
liability derecognised and the consideration paid and payable is recognised in profit or loss.
2.21 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in profit
or loss, except to the extent that it relates to items recognised in other comprehensive income
or directly in equity. In this case, the tax is also recognised in other comprehensive income or
directly in equity, respectively.
(a) Current income tax
The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the balance sheet date in the PRC where the Company’s
subsidiaries and associates operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation and establishes provision where
appropriate on the basis of amounts expected to be paid to the tax authorities.
139
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.21 Current and deferred income tax (continued)
(b) Deferred income tax
Inside basis differences
Deferred income tax is recognised, using the liability method, on temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the
consolidated financial statements. However, the deferred income tax is not accounted
for if it arises from initial recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects neither accounting nor
taxable profit nor loss. Deferred income tax is determined using tax rates (and laws) that
have been enacted or substantively enacted by the balance sheet date and are expected
to apply when the related deferred income tax asset is realised or the deferred income
tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that
future taxable profit will be available against which the temporary differences can be
utilised.
Outside basis differences
Deferred income tax liabilities are provided on taxable temporary differences arising
from investments in subsidiaries, and associates and joint arrangements, except for
deferred income tax liability where the timing of the reversal of the temporary difference
is controlled by the Group and it is probable that the temporary difference will not
reverse in the foreseeable future. Generally the Group is unable to control the reversal
of the temporary difference for associates. Only when there is an agreement in place
that gives the Group the ability to control the reversal of the temporary difference in
the foreseeable future, deferred tax liability in relation to taxable temporary differences
arising from the associate’s undistributed profits is not recognised.
Deferred income tax assets are recognised on deductible temporary differences arising
from investments in subsidiaries, and associates and joint arrangements only to the
extent that it is probable the temporary difference will reverse in the future and there is
sufficient taxable profit available against which the temporary difference can be utilised.
(c) Offsetting
Deferred income tax assets and liabilities are offset when there is a legally enforceable
right to offset current tax assets against current tax liabilities and when the deferred
income taxes assets and liabilities relate to income taxes levied by the same taxation
authority on either the taxable entity or different taxable entities where there is an
intention to settle the balances on a net basis.
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GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.22 Employee benefits
(a) Defined contribution plan
The Group pays contributions to defined contribution schemes operated by the local
government for employee benefits in respect of pension and unemployment. The Group
also pays contribution to defined contribution schemes operated by Guangzhou Railway
Group for employee supplementary pension benefit. The Group has no further payment
obligations once the contributions have been paid. The contributions to the defined
contribution schemes are recognised as staff costs when they are due.
(b) Termination benefits
Termination benefits are payable when employment is terminated by the Group before
the normal retirement date, or whenever an employee accepts voluntary redundancy in
exchange for these benefits. The Group recognises termination benefits at the earlier
of the following dates: (a) when the Group can no longer withdraw the offer of those
benefits; and (b) when the entity recognises costs for a restructuring that is within the
scope of IAS 37 and involves the payment of termination benefits. In the case of an offer
made to encourage voluntary redundancy, the termination benefits are measured based
on the number of employees expected to accept the offer. Benefits falling due more than
12 months after the end of the reporting period are discounted to their present value.
2.23 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 the amount has been reliably estimated. Provisions are not recognised for
future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required
in settlement is determined by considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to any one item included in the
same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to
settle the obligation using a pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the obligation. The increase in the provision
due to passage of time is recognised as interest expense.
141
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.24 Revenue recognition
Revenue of the Group comprise of revenue from railroad and related business and revenue
from other business.
(a) Revenue from railroad and related business
The operations of the railway business of the Group form part of the nationwide railway
system in the PRC and they are supervised and governed by CRC. The Group renders the
passenger transportation and freight transportation services, and the related service fees
and charges are collected from customer or other railway companies by the Group.
The respective fares and charges of the services, and processing of the respective
revenue and cost allocation among different railway companies are done centrally by a
central clearance system operated by CRC.
Revenue from passenger transportation
Passenger transportation generally include transportation business of Guangzhou-
Shenzhen inter-city express trains, long-distance trains and Guangzhou-Hong Kong city
through trains. These services are provided by the Group as the carrier in mainland
China and Hong Kong, and the corresponding revenue information is captured and
processed by CRC through the central clearance system.
Revenues are recognized overtime when the train transportation services are rendered.
The revenue is presented net of value-added tax but before deduction of any sales
handling commissions.
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GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.24 Revenue recognition (continued)
(a) Revenue from railroad and related business (continued)
Revenue from freight transportation
The Group also provides freight transportation services. Service information and
computation of the attributable revenues entitled by the Group are processed by the
central clearance system of CRC.
The revenues are recognised at gross amounts overtime in the accounting period in
which the services are rendered.
Revenue from railway network usage and other transportation related services
Revenue from railway network usage and other transportation related services, mainly
consist of network usage services (locomotive traction, track usage and electric
catenaries service, etc.) and railway operation services and other services, are rendered
by the Group together with other railway companies in the PRC. The information
relating to network usage service is captured and processed by the central clearance
system of CRC. The revenue from network usage services are recognized overtime in
the accounting period in which the services are rendered, and revenue can be reliably
measured. Railway operation services and other services are rendered solely by the
Group and all proceeds are collected by the Group directly.
When the services rendered by the Group exceed the payment, a contract asset
is recognised. If the payments exceed the services rendered, a contract liability is
recognised.
(b) Revenue from other businesses
Revenue from other business mainly consist of on-board catering services, leasing,
sales of materials, sale of goods and other businesses related to railway transportation.
Revenues from on-board catering services are recognised overtime when the related
services are rendered. Revenues from sales of materials and supplies and sale of goods
are recognised when the respective materials and goods are delivered to customers
at appoint in time Revenue from operating lease arrangements on certain properties
and locomotives is recognised overtime on a straight-line basis over the period of the
respective leases.
(c) Financing components
The Group does not expect to have any contracts where the period between the transfer
of the promised goods or services to the customer and payment by the customer exceeds
one year. As a consequence, the Group does not adjust any of the transaction prices for
the time value of money.
143
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
2. PRINCIPAL ACCOUNTING POLICIES (continued)
2.25 Interest income
Interest income is recognised using the effective interest method. When a loan and receivable
is impaired, the Group reduces the carrying amount to its recoverable amount, being the
estimated future cash flow discounted at original effective interest rate of the instrument, and
continues unwinding the discount as interest income. Interest income on impaired receivables
is recognised using the original effective interest rate.
2.26 Dividend income
Dividend income is recognised when the right to receive payment is established.
2.27 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 costs are deferred and recognised in profit or loss over the
period necessary to match them with the costs that they are intended to compensate.
Government grants relating to fixed assets are included in non-current liabilities as deferred
income and are credited to profit or loss on a straight-line basis over the expected lives of the
related assets.
2.28 Operating leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the
lessor are classified as operating leases. Payments made under operating leases (net of any
incentives received from the lessor) are charged to profit or loss on a straight-line basis over
the period of the lease.
2.29 Dividend distribution
Dividend distribution to the shareholders is recognised as a liability in the Group’s and the
Company’s financial statements in the period in which the dividends are approved by the
shareholders of the Company.
144
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GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
3. FINANCIAL RISK MANAGEMENT
3.1 Financial risk factor
The Group’s activities expose it to a variety of financial risks: market risk (including foreign
currency risk, cash flow and fair value interest rate risk and other price risk), credit risk and
liquidity risk. The Group’s overall risk management strategy seeks to minimise the potential
adverse effects on the financial performance of the Group.
(a) Market risk
(i) Foreign currency risk
The Group mainly operates in the PRC with most of the transactions settled
in RMB. RMB is also the functional and presentation currency of the Group.
RMB is not freely convertible into other foreign currencies. The conversion of
RMB denominated balances into foreign currencies is subject to the rates and
regulations of foreign exchange control promulgated by the PRC government. Any
foreign currency denominated monetary assets and liabilities other than in RMB
would subject the Group to foreign exchange exposure.
The Group’s objective of managing the foreign currency risk is to minimise
potential adverse effects arising from foreign transaction movements. Depending
on volatility of specific foreign currency being exposed, measures are taken by
management to manage the foreign currency positions.
The following table shows the Group’s foreign currency denominated monetary
assets (in RMB thousands equivalent):
Monetary assets
Cash and cash equivalents
Cash and cash equivalents
Other receivables
Currency
denomination
As at 31 December
2018
2017
HKD
USD
HKD
77,608
54
416
32,650
146
67
78,078
32,863
The Group may experience a loss as a result of any foreign currency exchange
rate fluctuations in connection with monetary assets shown above. The Group has
not used any means to hedge the exposure.
145
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
3. FINANCIAL RISK MANAGEMENT (continued)
3.1 Financial risk factor (continued)
(a) Market risk (continued)
(i) Foreign currency risk (continued)
As at 31 December 2018, if RMB had weakened/strengthened by 5% against the
HKD with all other variables held constant, profit after tax for the year would have
been RMB2,926,000 (2017: RMB1,227,000) higher/lower, mainly as a result of
foreign exchange gains/losses on translation of HKD-denominated cash in banks.
The impact of exchange fluctuations of USD is not expected to be significant.
(ii) Cash flow and fair value interest rate risk
Other than deposits held in banks and long-term receivable, the Group does not
have significant interest-bearing assets or liabilities. The average interest rate of
deposits held in banks in the PRC throughout the year was approximately 1.62%
(2017: 1.54%) per annum. Any change in the interest rate promulgated by the
People’s Bank of China from time to time is not considered to have a significant
impact to the Group.
As at 31 December 2018 and 2017, the Group had no interest bearing debts,
which may expose the Group to any interest rate risk.
(iii) Other price risk
The Group’s exposure to price risk arises from equity investments held by the
Group and classified FVOCI and AFS (note 15).
As at 31 December 2018, if the expected price of the equity investments held
by the Group increased/decreased by 5% with all other variables held constant,
other comprehensive income for the year would have been RMB12,047,000 (2017:
RMB10,503,000) higher/lower.
(b) Credit risk
Credit risk arises from cash and cash equivalents, short-term deposits, trade and other
receivables (excluding prepayments) and long-term receivable.
146
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GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
3. FINANCIAL RISK MANAGEMENT (continued)
3.1 Financial risk factor (continued)
(b) Credit risk (continued)
(i) Risk management
The credit quality of financial assets that are neither past due nor impaired can be
analysed by the identity of counterparties as follows:
Trade receivables
Due from Guangzhou Railway Group and
its subsidiaries
Due from CRC Group (excluding
Guangzhou Railway Group and its
subsidiaries)
Due from third parties
Other receivables excluding
prepayments
Due from Guangzhou Railway Group and
its subsidiaries
Due from CRC Group (excluding
Guangzhou Railway Group and its
subsidiaries)
Due from third parties
2018
RMB’000
2017
RMB’000
1,756,816
1,261,244
665,009
613,105
1,106,311
431,473
3,034,930
2,799,028
2018
RMB’000
2017
RMB’000
1,880
9,460
1,149
289,387
381
194,245
292,416
204,086
147
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
3. FINANCIAL RISK MANAGEMENT (continued)
3.1 Financial risk factor (continued)
(b) Credit risk (continued)
(i) Risk management (continued)
Long-term receivable
Due from a third party
2018
RMB’000
2017
RMB’000
28,354
31,274
For trade and other receivables, management performs ongoing credit evaluations
of its customers/debtors’ financial condition and generally does not require
collateral from the customers/debtors. After assessing the expected realisability
and timing for collection of the outstanding balances, the Group maintains a
provision for impairment of receivables and actual losses incurred have been
within management’s expectation.
2018
RMB’000
2017
RMB’000
Cash at bank and short-term deposits
Placed in listed banks in the PRC
1,847,723
1,268,478
Cash and short term deposits are placed with reputable banks. There was no
recent history of default of cash and cash equivalents and short-term deposits
from such financial institutions. There were no other financial assets carrying
a significant exposure to credit risk. None of the financial assets that are fully
performing has been renegotiated in the current year.
148
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
3. FINANCIAL RISK MANAGEMENT (continued)
3.1 Financial risk factor (continued)
(b) Credit risk (continued)
(ii) Impairment of financial assets
The Group has three types of financial assets that are subject to the expected
credit loss model: trade receivables, other receivables and long-term receivable.
While cash and cash equivalents are also subject to the impairment requirements
of IFRS 9, the identified impairment loss was immaterial.
Trade receivables
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses which uses a lifetime expected loss provision for all trade receivables.
The Group categorises the trade receivables into the following portfolios based on
credit risk characteristics:
•
•
•
Portfolio 1: receivable incurred from revenues collected and settled through
the CRC;
Portfolio 2: receivable incurred from revenue from railway operation; and
Portfolio 3: receivable incurred from revenue other than railway operation
and revenues collected and settled without the CRC.
Provision for credit losses are recognised on the basis of exposure at default and
ECL rates which include consideration of historical credit loss experience, current
status and forward-looking information.
On that basis, the loss provision as at 31 December 2018 and 1 January 2018 (on
adoption of IFRS 9) was determined for trade receivables (in RMB thousands):
As at 31 December 2018
As at 1 January 2018
Carrying
amount
ECL rates
Loss
provision
Carrying
amount
ECL rates
Loss
provision
Portfolio 1
Portfolio 2
Portfolio 3
248,481
3,560,959
113,389
—
1.66%
2.00%
—
(58,945)
(2,267)
636,686
3,444,463
67,264
—
1.90%
2.00%
3,922,829
(61,212)
4,148,413
—
(65,563)
(1,344)
(66,907)
149
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
3. FINANCIAL RISK MANAGEMENT (continued)
3.1 Financial risk factor (continued)
(b) Credit risk (continued)
(ii) Impairment of financial assets (continued)
The loss provision for trade receivables as at 31 December 2017 reconciles to the
opening loss provision on 1 January 2018 and to the closing loss provision as at
31 December 2018 as follows:
At 31 December 2017 — calculated under IAS 39
Amount restated through opening retained earnings
Opening loss provision as at 1 January 2018
— calculated under IFRS 9
Receivables written off during the year as uncollectible
Reversal of impairment loss provision
At 31 December 2018
Other financial assets at amortised cost
Trade
receivables
RMB’000
6,203
60,704
66,907
(6)
(5,689)
61,212
Other financial assets at amortised cost include other receivables, and long-term
receivable.
Impairment on other receivables and long-term receivable is measured as either
12-month expected credit losses or lifetime expected credit loss, depending
on whether there has been a significant increase in credit risk since the initial
recognition. If a significant increase in credit risk of a deposit or receivable has
occurred since the initial recognition, then the impairment is measured as lifetime
expected credit losses.
150
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GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
3. FINANCIAL RISK MANAGEMENT (continued)
3.1 Financial risk factor (continued)
(b) Credit risk (continued)
(ii) Impairment of financial assets (continued)
On that basis, the loss provision as at 31 December 2018 and 1 January 2018 (on
adoption of IFRS 9) for other receivables was as follows (in RMB thousands):
As at 31 December 2018
As at 1 January 2018
Carrying
amount
317,224
—
4,631
321,855
ECL rates
Loss
provision
1.88%
—
100%
(5,959)
—
(4,631)
Carrying
amount
275,541
—
12,891
(10,590)
288,432
ECL rates
Loss
provision
2.16%
—
100%
(5,961)
—
(12,891)
(18,852)
Stage 1
Stage 2
Stage 3
The loss provision for other financial assets at amortised cost as at 31 December
2017 reconciles to the opening loss provision on 1 January 2018 and to the closing
loss provision as at 31 December 2018 as follows:
Other
receivables
RMB’000
Long-term
receivables
RMB’000
At 31 December 2017 — calculated
under IAS 39
Amount restated through opening
retained earnings
Opening loss provision as at 1 January
2018 — calculated under IFRS 9
Increase in loss provision recognised in
profit or loss during the year
Receivables written off during the year
as uncollectible
Reversal of impairment loss provision
At 31 December 2018
13,325
5,527
18,852
4,631
(12,891)
(2)
10,590
—
—
—
—
—
—
—
151
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
3. FINANCIAL RISK MANAGEMENT (continued)
3.1 Financial risk factor (continued)
(b) Credit risk (continued)
(ii) Impairment of financial assets (continued)
Impairment losses on trade and other receivables and long-term receivable are
presented as net impairment losses within operating profit. Subsequent recoveries
of amounts previously written off are credited against the same line item.
Previous accounting policy for impairment of assets carried at amortised cost
In the prior year, the impairment of trade receivables was assessed based on
the incurred loss model. The Group assessed at the end of each reporting period
whether there was objective evidence that a financial asset or a group of financial
assets is impaired. A financial asset or a group of financial assets is impaired and
impairment losses are incurred only if there is objective evidence of impairment
as a result of one or more events that occurred after the initial recognition of
the asset (a “loss event”) and that loss event (or events) had an impact on the
estimated future cash flows of the financial asset or group of financial assets that
can be reliably estimated.
The criteria that the Group uses to determine that there is objective evidence of
an impairment loss include:
•
•
•
•
•
Significant financial difficulty of the issuer or obligor;
A breach of contract, such as a default or delinquency in interest or
principal payments;
The Group, for economic or legal reasons relating to the borrower’s
financial difficulty, granting to the borrower a concession that the lender
would not otherwise consider;
It becomes probable that the borrower will enter bankruptcy or other
financial reorganisation;
The disappearance of an active market for that financial asset because of
financial difficulties; or
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Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
3. FINANCIAL RISK MANAGEMENT (continued)
3.1 Financial risk factor (continued)
(b) Credit risk (continued)
(ii) Impairment of financial assets (continued)
Previous accounting policy for impairment of assets carried at amortised cost
(continued)
•
Observable data indicating that there is a measurable decrease in the
estimated future cash flows from a portfolio of financial assets since the
initial recognition of those assets, although the decrease cannot yet be
identified with the individual financial assets in the portfolio, including:
(i)
adverse changes in the payment status of borrowers in the portfolio;
(ii)
national or local economic conditions that correlate with defaults on
the assets in the portfolio.
Previous accounting policy for impairment of assets classified as AFS
In the prior year, the Group assesses at the end of each reporting period whether
there is objective evidence that a financial asset or a group of financial assets is
impaired.
For equity investments, a significant or prolonged decline in the fair value of the
security below its cost is also an evidence that the assets are impaired. If any
such evidence exists, the cumulative loss, which is measured as the difference
between the acquisition cost and the current fair value, less any impairment loss
on that financial asset previously recognised in profit or loss, is removed from
equity and recognised in profit or loss. Impairment losses recognised in profit or
loss on equity instruments are not reversed through profit or loss.
153
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
3. FINANCIAL RISK MANAGEMENT (continued)
3.1 Financial risk factor (continued)
(c) Liquidity risk
Prudent liquidity risk management includes maintaining sufficient cash and the ability
to close out market positions. Management monitors rolling forecasts of the Group’s
liquidity reserves (comprising cash and cash equivalents) on the basis of expected cash
flows.
As at 31 December 2018, the Group had net current liabilities of RMB65,568,000 and
RMB899,290,000 of capital expenditure contracted for at 31 December 2018 but not
recognised as liabilities (see note 38(a)). Taking into account of the factors mentioned in
note 2.1(c), the Board of Directors believes that the Group has sufficient liquidity for the
following 12 months.
The table below analyses the Group’s financial liabilities into relevant maturity groupings
based on the remaining period at the balance sheet to the contractual maturity date. The
amounts disclosed in the table are the contractual undiscounted cash flows. Balances
due within 12 months equal their carrying balances, as the impact of discounting is not
significant.
At 31 December 2018
Trade and other payables excluding non-financial liabilities
Payables for fixed assets and construction-in-progress
Dividends payable
At 31 December 2017
Trade and other payables excluding non-financial liabilities
Payables for fixed assets and construction-in-progress
Dividends payable
Less than
1 year
RMB’000
2,631,433
2,441,647
12,894
2,356,953
2,214,547
12,893
154
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
3. FINANCIAL RISK MANAGEMENT (continued)
3.2 Capital risk management
The Group’s objectives of managing capital are to safeguard the Group’s ability to continue as
a going concern in order to provide returns for shareholders and benefits for other stakeholders
and to maintain an optimal capital structure to reduce the cost of capital.
As at 31 December 2018 and 2017, the Group has no short-term loan, long-term loan,
bond payable or long-term payable. Management considered that such capital structure is
appropriate.
3.3 Fair value estimation
According to amendment to IFRS 7 for financial instruments that are measured in the balance
sheet at fair value, it requires disclosure of fair value measurements by level of following fair
value measurement hierarchy:
•
•
•
Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
Inputs other than quoted prices included within level 1 that are observable for the asset
or liability, either directly (that is, as prices) or indirectly (that is, derived from prices)
(level 2).
Inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs) (level 3).
As at 31 December 2018, the Group did not have any financial instruments that were measured
at fair value except for FVOCI (note 15). As at 31 December 2017, the Group did not have
any financial instruments that were measured at fair value except for certain available-for-sale
financial assets (note 15).
155
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
3. FINANCIAL RISK MANAGEMENT (continued)
3.3 Fair value estimation (continued)
The following table presents the Group’s assets that are measured at fair value at 31 December
2018:
Level 1
RMB’000
Level 2
RMB’000
Level 3
RMB’000
Total
RMB’000
Assets
Financial assets at FVOCI
—
—
321,246
321,246
The following table presents the Group’s assets that are measured at fair value at 31 December
2017:
Level 1
RMB’000
Level 2
RMB’000
Level 3
RMB’000
Total
RMB’000
Assets
AFS
—
—
280,088
280,088
There were no transfers between levels 1, 2 and 3 or changes in valuation techniques during
the year. There were no gains/(losses) recognised for the year ended 31 December 2018.
Financial assets and liabilities of the Group measured at amortised cost include trade and other
receivables, long-term receivable, short-time deposits, cash and cash equivalents, and trade
and other payables, of which the fair values approximate their carrying amounts.
156
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting
estimates will, by definition, seldom equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are addressed below.
(a) Provision for impairment of trade receivables
The provision for impairment of trade receivables are recognised on the basis of exposure
at default and ECL rates which include consideration of historical credit loss experience,
current status and forward-looking information. The assessment of the ECL involves significant
accounting estimations and judgements, including historical period selection by making
reference to historical credit loss experience of each portfolio, trade receivables lifetime
recovery information and other relevant data as well as forward looking estimates such as
changes of future economics, unemployment rate forecast, market environment and customer
portfolio at the end of each reporting period.
(b) Estimation of the fair value of FVOCI
The Group makes estimates of the fair value of the FVOCI with consideration of the assessed
value of the investees and the price from its recent financing, which is regarded as the best
estimate of the fair value. The assessment of fair value requires the use of judgement and
estimates. Where the expectation is different from the original estimate, such difference will
impact the carrying amount of FVOCI and changes in the fair value of FVOCI recorded in other
comprehensive income.
5. SEGMENT INFORMATION
The chief operating decision-makers have been identified as the senior executives of the Company.
Senior executives of the Company review the Group’s internal reporting in order to assess performance
and allocate resources. The operating segments were determined based on these management
reports.
Senior executives evaluate the business from a perspective of revenues and operating results
generated from railroad and related business conducted by the Company (“the Railway Transportation
Business”). Other segments mainly include on-board catering services, leasing, sales of materials, sale
of goods and other businesses related to railway transportation provided by the subsidiaries of the
Company. Senior executives of the Company assess the performance of the operating segments based
on a measure of the profit before income tax. Other information provided, except as noted below, to
senior executives of the Company is measured in a manner consistent with that in the consolidated
financial statements.
157
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
5. SEGMENT INFORMATION (continued)
The segment results during 2018 and 2017 are as follows:
The Railway
Transportation Business
2017
RMB’000
2018
RMB’000
All other segments
2018
RMB’000
2017
RMB’000
Eliminations
2018
RMB’000
2017
RMB’000
Total
2018
RMB’000
2017
RMB’000
Segment revenue
— Railroad Businesses
— Other Businesses
18,823,379
779,719
17,294,901
705,423
—
273,274
—
395,661
—
(48,354)
—
(64,563)
18,823,379
1,004,639
17,294,901
1,036,521
Total revenue
19,603,098
18,000,324
273,274
395,661
(48,354)
(64,563)
19,828,018
18,331,422
Timing of revenue recognition
— Overtime
— At a point in time
19,480,546
122,552
17,899,006
101,318
89,590
183,684
180,331
215,330
(48,354)
—
(64,563)
—
19,521,782
306,236
18,014,774
316,648
19,603,098
18,000,324
273,274
395,661
(48,354)
(64,563)
19,828,018
18,331,422
Segment result
1,120,148
1,341,601
(26,078)
14,519
(25,270)
(8,988)
1,068,800
1,347,132
Finance costs — net
Share of results of associates,
net of tax
Depreciation of fixed assets
Amortisation of leasehold land
payments
Amortisation of long-term prepaid
expenses
Impairment of fixed assets
Impairment of construction-in-
progress
Provision for impairment of
materials and supplies
451
10,011
7,177
1,603,106
6,944
1,655,657
179
—
6,637
159
—
6,803
44,450
34,348
11,332
11,332
12,596
10,364
—
3,256
11,185
—
11,361
7,844
313
—
—
—
(88)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
630
10,170
7,177
1,609,743
6,944
1,662,460
55,782
12,909
10,364
—
45,680
3,168
11,185
—
11,361
7,844
158
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
5. SEGMENT INFORMATION (continued)
A reconciliation of the segment results to profit for the year of 2018 and 2017 is as follows:
The Railway
Transportation Business
2017
RMB’000
2018
RMB’000
All other segments
2018
RMB’000
2017
RMB’000
Eliminations
2018
RMB’000
2017
RMB’000
Total
2018
RMB’000
2017
RMB’000
Segment result
Income tax expense
1,120,148
(291,202)
1,341,601
(328,727)
(26,078)
1,436
14,519
(6,637)
(25,270)
—
(8,988)
—
1,068,800
(289,766)
1,347,132
(335,364)
Profit/(loss) for the year
828,946
1,012,874
(24,642)
7,882
(25,270)
(8,988)
779,034
1,011,768
The Group is domiciled in the PRC. All the Group’s revenues were generated in the PRC, and the
assets of the Group are also located in the PRC.
The Railway
Transportation Business
2017
RMB’000
2018
RMB’000
All other segments
2018
RMB’000
2017
RMB’000
Eliminations
2018
RMB’000
2017
RMB’000
Total
2018
RMB’000
2017
RMB’000
Total segment assets
35,089,100
33,621,101
496,353
535,840
(183,216)
(162,703)
35,402,237
33,994,238
Total segment assets include:
Investment in associates
Additions to non-current
assets (other than financial
instruments and deferred tax
assets)
181,725
174,548
—
—
2,885,650
2,415,143
7,635
1,083
—
—
—
181,725
174,548
—
2,893,285
2,416,226
Total segment liabilities
6,163,507
4,908,103
571,273
545,500
(148,872)
(116,446)
6,585,908
5,337,157
Revenues of approximately RMB3,966,988,000 (2017: RMB3,595,959,000) were derived from
Guangzhou Railway Group and its subsidiaries. These revenues are attributable to the Railway
Transportation Business. Except that, no revenues derived from a single external customer have
exceeded 10% of the total revenues.
159
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
6. FIXED ASSETS — NET
At 1 January 2017
Cost
Accumulated depreciation
Impairment
Net book amount
Year ended 31 December 2017
Opening net book amount
Other additions
Transfer in from construction-in-progress (Note 7)
Transfer out to construction-in-progress for improvement/modifications (Note 7)
Transfer in from construction-in-progress after repair
Reclassifications
Reclassified to leasehold land payments
Disposals
Depreciation charges
Impairment charge
Closing net book amount
At 31 December 2017
Cost
Accumulated depreciation
Impairment
Net book amount
Year ended 31 December 2018
Opening net book amount
Other additions
Transfer in from construction-in-progress (Note 7)
Transfer out to construction-in-progress for improvement/modifications (Note 7)
Transfer in from construction-in-progress after repair
Reclassifications
Disposals
Depreciation charges
Impairment charge
Impairment write-off
Closing net book amount
At 31 December 2018
Cost
Accumulated depreciation
Impairment
Net book amount
160
Annual report
Tracks,
bridges and
service roads
RMB’000
Locomotives
and
rolling stock
RMB’000
Communications
and signalling
systems
RMB’000
Other
machinery and
equipment
RMB’000
14,887,093
(3,186,872)
—
11,700,221
11,700,221
—
179,842
—
—
7,116
(403,282)
(69,516)
(216,075)
—
11,198,306
14,588,338
(3,390,032)
—
11,198,306
11,198,306
—
277,739
(273,678)
324,386
—
(99,463)
(213,858)
—
—
11,213,432
14,735,949
(3,522,517)
—
11,213,432
8,557,841
(3,702,522)
—
4,855,319
4,855,319
69,311
843,489
(987,236)
875,497
25
—
(234,830)
(571,640)
(9,865)
4,840,070
7,903,204
(3,053,269)
(9,865)
4,840,070
4,840,070
712,632
127,805
(715,707)
1,414,100
—
(167,790)
(611,095)
—
9,865
5,609,880
8,218,284
(2,608,404)
—
5,609,880
1,917,478
(1,424,604)
—
492,874
492,874
13,086
80,867
(299)
299
—
—
(744)
(115,870)
—
470,213
1,993,168
(1,522,955)
—
470,213
470,213
22,784
28,629
(8,042)
40,026
—
(10,531)
(104,096)
—
—
438,983
2,034,318
(1,595,335)
—
438,983
6,514,493
(4,129,003)
(1,162)
2,384,328
2,384,328
123,436
203,557
(18,903)
16,697
(8,483)
—
(15,780)
(426,294)
(1,320)
2,257,238
6,628,084
(4,368,375)
(2,471)
2,257,238
2,257,238
115,526
133,089
(36,835)
76,003
5,631
(15,128)
(359,871)
(7,483)
2,471
2,170,641
6,631,867
(4,453,743)
(7,483)
2,170,641
Buildings
RMB’000
7,468,977
(2,623,687)
—
4,845,290
4,845,290
1,849
345,676
(305,208)
310,885
1,342
—
(15,942)
(332,581)
—
4,851,311
7,441,605
(2,590,294)
—
4,851,311
4,851,311
6,956
162,624
(60,507)
124,345
(5,631)
(4,082)
(320,823)
(2,881)
—
4,751,312
7,590,161
(2,835,968)
(2,881)
4,751,312
Total
RMB’000
39,345,882
(15,066,688)
(1,162)
24,278,032
24,278,032
207,682
1,653,431
(1,311,646)
1,203,378
—
(403,282)
(336,812)
(1,662,460)
(11,185)
23,617,138
38,554,399
(14,924,925)
(12,336)
23,617,138
23,617,138
857,898
729,886
(1,094,769)
1,978,860
—
(296,994)
(1,609,743)
(10,364)
12,336
24,184,248
39,210,579
(15,015,967)
(10,364)
24,184,248
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
6. FIXED ASSETS — NET (continued)
(a)
As at 31 December 2018, the ownership certificates of certain buildings of the Group with an
aggregate carrying value of approximately RMB1,676,711,000 (2017: RMB1,858,288,000) had
not been obtained by the Group.
These kind of buildings are classified as below:
Carrying value as at
31 December 2018
RMB'000
Reason for delay in
obtaining the ownership certificates
Certificates for buildings
under application
procedures
Certain buildings located
on the land of which
the land use right
certificates have not
been obtained
Certain buildings attached
to pieces of land which
is held by lease
1,067,076 The Group commenced such application procedures
with the respective authorities in China by the end
of 2017, and the Group’s management expects
that these procedures would be completed
within a short period of time and the ownership
certificates will be obtained.
53,392 According to relevant laws and regulations in China,
the land use right certificates of the land on which
these buildings are located must be obtained
before the Group can start the application for
the respective housing ownership certificates.
As a result, the Group will start to apply for the
ownership certificates of these buildings after they
have completed the procedures to obtain the land
use right certificates.
556,243 Such land is held by lease under certain operating
lease arrangements. Due to the fact that the
Group does not have the underlying land use
right certificates for such land, therefore, the
Group cannot apply for the respective ownership
certificates of the buildings constructed on top
of it. According to the lease agreements and
communication with the leasors, and as confirmed
by the Company’s legal counsel, the Group
possesses the right to use and/or own such
buildings without the certificates.
161
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
6. FIXED ASSETS — NET (continued)
After consultation made with the Company’s legal counsel, the directors of the Company
consider that there is no legal restriction for the Group to apply for and obtain the ownership
certificates of these buildings and it should not lead to any significant adverse impact on the
operations of the Group.
(b)
As at 31 December 2018, fixed assets of the Group with an aggregate net book value of
approximately RMB138,390,000 (2017: RMB155,125,000) had been fully depreciated but they
were still in use.
7. CONSTRUCTION-IN-PROGRESS
At 1 January
Transfer in from fixed assets for improvement/modifications
(Note 6)
Other additions
Transfer to fixed assets (Note 6)
Transfer out to fixed assets after improvement/modifications
(Note 6)
At 31 December
2018
RMB’000
2017
RMB’000
1,430,671
790,308
1,094,769
2,011,678
(729,886)
1,311,646
2,185,526
(1,653,431)
(1,978,860)
(1,203,378)
1,828,372
1,430,671
Construction-in-progress as at 31 December 2018 mainly comprise of improvement projects for road
existing railway equipment in the PRC.
For the year ended 31 December 2018, no interest expense (2017: nil) had been capitalised in the
construction-in-progress balance as there were no third party borrowings during the year.
As at 31 December 2018, the balance of the provision for writing down the construction-in-progress
was approximately RMB15,456,000 (2017: RMB15,456,000).
162
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
8. LEASEHOLD LAND PAYMENTS
The Group’s interests in leasehold land represent prepaid operating lease payments in the PRC and its
net book value are analysed as follows:
At 1 January 2017
Cost
Accumulated amortisation
Net book amount
Year ended 31 December 2017
Opening net book amount
Transfer from fixed assets (Note 6)
Assets classified as held for sale
Amortisation charges
Closing net book amount
At 31 December 2017
Cost
Accumulated amortisation
Net book amount
Year ended 31 December 2018
Opening net book amount
Amortisation charges
Closing net book amount
At 31 December 2018
Cost
Accumulated amortisation
Net book amount
163
Annual report
RMB’000
1,989,085
(364,226)
1,624,859
1,624,859
403,282
(2,183)
(45,680)
1,980,278
2,388,326
(408,048)
1,980,278
1,980,278
(55,782)
1,924,496
2,388,326
(463,830)
1,924,496
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
8. LEASEHOLD LAND PAYMENTS (continued)
As at 31 December 2018, the ownership certificates of land with an aggregate carrying value of
approximately RMB58,898,000 that was acquired through assets/business acquisition and group
restructuring have not yet been changed from the names of the respective original owners to the
name of the Company, and the ownership certificates of the land use rights of the Group with an
aggregate carrying value of approximately RMB1,227,820,000 (2017: RMB1,318,686,000) had not
been obtained by the Group.
Carrying value as at
31 December 2018
RMB’000
Reason for delay in
obtaining the ownership certificates
Certain pieces of land
associated with the
operations of Guangshen
Line IV, one of the railway
lines operated by the
Company
1,227,820 Due to the fact that Guangshen Line IV spans across
several cities, counties and villages in China, it is
practically cumbersome and time consuming for the
Group to coordinate and execute the procedures for
acquiring the respective land use rights certificates with
the respective local bureaus and authorities governing
the title registration and transfer, and therefore, the
progress of acquiring the formal title certificates has
been progressing slowly.
After consultation made with the Company’s legal counsel, the directors of the Company consider that
there is no legal restriction for the Group or the Company to apply for and obtain the land use right
certificates and it should not lead to any significant adverse impact on the operations of the Group or
the Company.
The remaining lease period of leasehold land as at 31 December 2018 was as follows:
Lease of between 10 to 20 years
Lease of between 20 to 30 years
2018
RMB’000
1,227,820
696,676
2017
RMB’000
1,257,346
722,932
1,924,496
1,980,278
164
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
9. GOODWILL
Year ended 31 December 2017 and 2018
Opening net book amount
Additions
Impairment
Closing net book amount
At 31 December 2017 and 2018
Cost
Accumulated impairment
Net book amount
RMB’000
281,255
—
—
281,255
281,255
—
281,255
As at 31 December 2018 and 2017, the outstanding balance of goodwill arose from the excess of a
purchase consideration paid by the Company over the aggregate fair values of the identifiable assets,
liabilities and contingent liabilities of the Yangcheng Railway Business acquired by the Company in
2007.
On 1 January 2009, the Group integrated the Yangcheng Railway Business with the Group’s railway
business in order to improve the operation efficiency. As a result, the management considers that
the Yangcheng Railway Business and the Group’s other railway business (collectively the “Combined
Railway Business”) represents the lowest level of CGUs within the Group at which goodwill is
monitored for internal management purposes. As a result, the goodwill balance has been allocated to
the CGU comprising the Combined Railway Business.
The recoverable amount of the CGU is determined based on higher of value-in-use and fair value
less costs to sell. These calculations use pre-tax cash flow projections based on financial forecasts
prepared by management covering a five-year period. Cash flows beyond the five-year period are
extrapolated using the estimated growth rates stated below.
At 31 December 2018, the recoverable amount calculated based on value-in-use exceeded carrying
value of the CGU by RMB5,514,738,000.
The key assumptions used for value-in-use calculations are as follows:
Railroad business
Gross margin
Growth rate
Discount rate
165
Annual report
2018
2017
16.73%
2.00%
12.44%
17.76%
2.00%
12.44%
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
9. GOODWILL (continued)
Management estimated the gross margin and growth rate based on past performance and its
expectations for the market development. The discount rate used is pre-tax and reflect specific risks
relating to the railroad business segment.
Even if the budgeted growth rate used in the value-in-use calculation for the CGU in railroad business
had been 10% lower than management’s estimates as at 31 December 2018, the Group would not
need to recognise impairment charges against goodwill.
Even if the estimated pre-tax discount rate applied to the discounted cash flows for the CGU in
railroad business had been 1% higher than management’s estimates as at 31 December 2018, no
impairment charges had to be recognised by the Group against goodwill.
10. SUBSIDIARIES
The following is a list of the principal subsidiaries at 31 December 2018:
Name of the entity
Place of incorporation and
nature of legal entity
Principal activities and place of
operation
Dongguan Changsheng Enterprise Company
China, limited liability
Warehousing in the PRC
Limited
company
Shenzhen Fu Yuan Enterprise Development
China, limited liability
Hotel management in the PRC
Company Limited
Shenzhen Pinghu Qun Yi Railway Store
Loading and Unloading Company
Limited
company
China, limited liability
Cargo loading and unloading,
company
warehousing, freight transportation in
the PRC
Shenzhen Guangshen Railway Economic
China, limited liability
Catering management in the PRC
and Trade Enterprise Company Limited
company
Shenzhen Railway Station Passenger
Services Company Limited
Guangshen Railway Station Dongqun
Trade and Commerce Service Company
Limited
China, limited liability
company
China, limited liability
company
Catering services and sales of
merchandise in the PRC
Sales of merchandises in the PRC
Guangzhou Railway Huangpu Service
China, limited liability
Cargo loading and unloading,
Company Limited
company
Zengcheng Lihua Stock Company Limited
China, limited liability
(“Zengcheng Lihua”)(i)
company
warehousing, freight transportation in
the PRC
Real estate construction, provision of
warehousing, cargo uploading and
unloading services in the PRC
Proportion
of equity
interests
held by the
Company (%)
Proportion
of equity
interests held
by the
Group (%)
51%
100%
100%
100%
100%
100%
100%
51%
100%
100%
—
100%
100%
100%
Proportion
of equity
interests
held by non-
controlling
interests (%)
49%
—
—
—
—
—
—
Registered
capital
RMB’000
38,000
18,500
10,000
2,000
1,500
1,020
379
44.72%
44.72%
55.28%
107,050
166
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
10. SUBSIDIARIES (continued)
(i)
According to the Articles of Association of Zengcheng Lihua, the remaining shareholders are
all natural persons and none of these individuals holds more than 0.5% equity interest in
Zengcheng Lihua. All directors of Zengcheng Lihua were appointed by the Company. After
considering all shareholders of Zengcheng Lihua other than the Company are individuals with
individual interest holding of less than 0.5% and such individuals do not act in concert, and also
all directors of Zengcheng Lihua were appointed by the Company, the directors of the Company
consider that the Company has the de facto control over the board and the substantial financial
and operating decisions of Zengcheng Lihua.
In 2018, three subsidiaries of the Group was liquidated. No amount was charged to
consolidated comprehensive income statement as the Group recovered the liquidated asset in
the same amount as the Group’s share of these companies’ net assets.
As at 31 December 2018, the non-wholly owned subsidiaries individually and in aggregate is not
significant to the Group. Therefore, financial information of the non-wholly owned subsidiaries
are not disclosed.
11. INVESTMENTS IN ASSOCIATES
Share of net assets
Less: provision for impairment
2018
RMB’000
181,725
—
2017
RMB’000
174,548
—
181,725
174,548
The movement of investments in associates of the Group during the year is as follows:
Beginning of the year
Share of results after tax
2018
RMB’000
174,548
7,177
2017
RMB’000
167,604
6,944
End of the year
181,725
174,548
167
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
11. INVESTMENTS IN ASSOCIATES (continued)
As at 31 December 2018, the Group had direct interests in the following companies which are
incorporated/established and are operating in the PRC:
Name of the entity
Guangzhou Tiecheng Enterprise
Company Limited (“Tiecheng”)
Shenzhen Guangzhou Railway Civil
Engineering Company (“Shentu”)
Percentage of equity
interest attributable to
the Company
Paid-in capital Principal activities
49%
49%
RMB343,050,000
Properties leasing and trading of
RMB64,000,000 Construction of railroad
merchandise
properties
The above associates are limited liability companies and are unlisted companies. There are no
significant contingent liabilities relating to the Group’s interest in the associates and there are no
significant restrictions on the transfer of assets or earnings from the associates to the Group.
Set out below are the summarised financial information for Tiecheng and Shentu which are accounted
for using the equity method in the consolidated financial statements.
Summarised balance sheets
Current assets
Non-current assets
Total assets
Tiecheng
Shentu
2018
RMB’000
2017
2018
RMB’000 RMB’000
2017
RMB’000
121,465
326,644
105,556 1,143,125
12,794
333,602
780,104
12,151
448,109
439,158 1,155,919
792,255
Current liabilities
208,458
210,546 1,024,702
664,646
Equity
239,651
228,612
131,217
127,609
Share of net assets
117,429
112,020
64,296
62,528
Carrying amount of interest in associates
117,429
112,020
64,296
62,528
168
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
11. INVESTMENTS IN ASSOCIATES (continued)
Reconciliation of the summarised financial information presented to the carrying amount of its
interests in associates as follows:
Tiecheng
Shentu
Total
2018
RMB’000
2017
2018
RMB’000 RMB’000
2017
2018
RMB’000 RMB’000
2017
RMB’000
Opening net assets
Profit for the year
228,612
11,039
216,387
12,225
127,609
3,608
125,662
1,947
356,221
14,647
342,049
14,172
Closing net assets
239,651
228,612
131,217
127,609
370,868
356,221
Percentage of ownership interest
49%
49%
49%
49%
49%
49%
Carrying value
117,429
112,020
64,296
62,528
181,725
174,548
12. DEFERRED TAX ASSETS/(LIABILITIES)
Deferred tax assets
Less: Offsetting of deferred tax liabilities
2018
RMB’000
273,022
(75,727)
2017
RMB’000
115,716
(78,711)
Deferred tax assets (net)
197,295
37,005
Deferred tax liabilities
Less: Offsetting of deferred tax assets
(139,625)
75,727
(145,102)
78,711
Deferred tax liabilities (net)
(63,898)
(66,391)
133,397
(29,386)
169
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
12. DEFERRED TAX ASSETS/(LIABILITIES) (continued)
The analysis of deferred tax assets and deferred tax liabilities is as follows:
Deferred tax assets:
— Deferred tax assets to be recovered after more than 12
months
— Deferred tax assets to be recovered within 12 months
Deferred tax liabilities:
— Deferred tax liabilities to be recovered after more than
12 months
— Deferred tax liabilities to be recovered within 12 months
2018
RMB’000
2017
RMB’000
124,666
148,356
114,387
1,329
273,022
115,716
(134,492)
(5,133)
(142,159)
(2,943)
(139,625)
(145,102)
170
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
12. DEFERRED TAX ASSETS/(LIABILITIES) (continued)
The movement in deferred tax assets and liabilities of the Group during the year, without taking into
consideration the offsetting of balances within the same tax jurisdiction, is as follows:
(Charged)/
Credited to the
comprehensive
income
statement
RMB’000
At 1
January
2017
RMB’000
At 31 December
2017
RMB’000
Deferred tax assets:
Impairment provision for
receivables
Impairment provision for fixed
assets and construction-in-
progress
Impairment provision for materials
and supplies
Differences in accounting base and
tax base of government grants
Differences in accounting base and
tax base of employee benefits
obligations
Loss on disposal of fixed assets
Difference in accounting base and
tax base of party organization
activity fee
Difference in accounting base and
tax base in the recognition of
land disposal proceed
Others
7,003
4,155
5,994
25,720
39,655
16,285
—
—
50
(2,230)
2,793
1,126
(201)
992
14,424
—
—
(50)
4,773
6,948
7,120
25,519
40,647
30,709
—
—
—
Change in
accounting
policy
(Note 2.2)
RMB’000
16,558
—
—
—
—
—
—
—
—
(Charged)/
Credited to the
comprehensive
income
statement
RMB’000
At 1
January
2018
RMB’000
At 31 December
2018
RMB’000
21,331
6,948
7,120
25,519
40,647
30,709
—
—
—
(3,490)
(493)
2,335
(90)
5,093
(17,361)
7,973
146,781
—
140,748
17,841
6,455
9,455
25,429
45,740
13,348
7,973
146,781
—
273,022
98,862
16,854
115,716
16,558
132,274
171
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
12. DEFERRED TAX ASSETS/(LIABILITIES) (continued)
Charged/
(Credited)
to the
comprehensive
income
statement
RMB’000
At 1
January
2017
RMB’000
Charged/
(Credited)
to the
comprehensive
income
statement
RMB’000
At 31
December
2017
RMB’000
At 31
December
2018
RMB’000
5,270
63,897
60,647
9,811
Deferred tax liabilities:
Differences in accounting base and tax base in
recognition of fixed assets
Differences in accounting base and tax base in
recognition of leasehold land payments
Changes in the fair value of available-for-sale
financial assets
Others
8,267
68,883
—
10,666
87,816
(404)
(2,493)
60,647
(464)
7,863
66,390
60,647
10,202
(2,593)
(2,493)
—
(391)
57,286
145,102
(5,477)
139,625
Deferred income tax assets are recognised for tax loss carry-forwards and other temporary difference
to the extent that the realisation of the related tax benefit through future taxable profits is probable.
The Group did not recognise deferred income tax assets in respect of tax losses and other temporary
difference amounting to RMB118,264,000 (2017: RMB95,370,000) arising from operations of
subsidiaries which do not foresee to have enough tax deductible assessable profits in the near future.
Tax losses that can be carried forward (a)
Deductible temporary differences
2018
RMB’000
2017
RMB’000
105,812
12,452
118,264
82,918
12,452
95,370
(a)
The tax loss carry-forwards in which no deferred income tax assets were recognised will expire
in the following years:
172
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
12. DEFERRED TAX ASSETS/(LIABILITIES) (continued)
2018
2019
2020
2021
2022
2023
2018
RMB’000
2017
RMB’000
—
6,371
18,478
22,325
22,245
36,393
13,499
6,371
18,478
22,325
22,245
—
105,812
82,918
13. LONG-TERM PREPAID EXPENSES
The long-term prepaid expenses represented staff uniforms. The movements of long-term prepaid
expenses are set forth as follows:
At 1 January
Cost
Accumulated amortisation
Net book amount
Year ended 31 December
Opening net book amount
Additions
Amortisation
2018
RMB’000
2017
RMB’000
92,822
(59,421)
64,077
(56,253)
33,401
7,824
33,401
26,122
(12,909)
7,824
28,745
(3,168)
Closing net book amount
46,614
33,401
At 31 December
Cost
Accumulated amortisation
Net book amount
173
Annual report
118,944
(72,330)
92,822
(59,421)
46,614
33,401
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
14. FINANCIAL INSTRUMENTS BY CATEGORY
Financial assets
Long-term receivable (Note 16)
Trade and other receivables excluding prepayments
(Notes 19 and 20)
Short-term deposits (Note 21)
Cash and cash equivalents (Note 21)
FVOCI (Note 15)
Available-for-sale investments (Note 15(e))
Total
Financial liabilities
Liabilities at amortised cost
Trade and other payables excluding non-financial liabilities
(Notes 26 and 28)
Payables for fixed assets and construction-in-progress
Dividends payable
Total
2018
RMB’000
2017
RMB’000
28,354
31,274
4,172,882
109,000
1,738,753
321,246
—
4,417,317
108,000
1,160,515
—
296,414
6,370,235
6,013,520
2018
RMB’000
2017
RMB’000
2,631,433
2,441,647
12,894
2,356,953
2,214,547
12,893
5,085,974
4,584,393
174
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
15. F I N A N C I A L A S S E T S A T F A I R V A L U E T H R O U G H O T H E R
COMPREHENSIVE INCOME
(a) Classification of financial assets at FVOCI
Financial assets at FVOCI are equity securities which are strategic investments not held for
trading, and which the Group has irrevocably elected at initial recognition to recognise in this
category.
(b) Equity investments at fair value through other comprehensive income
Non-current assets
Investments in unlisted companies
2018
RMB’000
2017
RMB’000
321,246
—
The FVOCI mainly represent equity interests held by the Group in certain unlisted companies
with percentage ownership less than 2% individually.
On disposal of these equity investments, any related balance within the FVOCI reserve is
reclassified to retained earnings.
Note 2.2 explains the change of accounting policy and the reclassification of certain equity
investments from AFS to FVOCI. Note 2.12 sets out the remaining accounting policies.
(c) Amounts recognised in profit or loss and other comprehensive income
During the year, the following gains were recognised in profit or loss and other comprehensive
income.
Change in fair value recognised in other comprehensive
income (Note 23; 2017 relating to available-for-sale
financial assets)
Dividends from equity investments at FVOCI recognised
in profit or loss in other losses — net
(Note 31)
– Related to investments held at the end
of the reporting period
2018
RMB’000
2017
RMB’000
—
242,588
6,473
6,473
175
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
15. F I N A N C I A L A S S E T S A T F A I R V A L U E T H R O U G H O T H E R
COMPREHENSIVE INCOME (continued)
(d) Fair value
Information about the methods and assumptions used in determining fair value is provided in
note 3.3.
(e) Financial assets previously classified as AFS (2017)
AFS included the following classes of financial assets:
Non-current assets
Investments in unlisted companies
2018
RMB’000
2017
RMB’000
—
296,414
Classification of financial assets as available-for-sale
Investments were designated as AFS if they did not have fixed maturities and fixed or
determinable payments, and management intended to hold them for the medium to long-
term. Financial assets that were not classified into any of the other categories (at FVPL, loans
and receivables or held-to-maturity investments) were also included in the available-for-sale
category.
The financial assets were presented as non-current assets unless they matured, or management
intended to dispose of them within 12 months of the end of the reporting period.
Impairment indicators for AFS
A security was considered to be impaired if there had been a significant or prolonged decline
in the fair value below its cost. See note 3.1 for further details about the Group’s previous
impairment policies for AFS.
176
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
16. LONG-TERM RECEIVABLE
The long-term receivable balance represents freight service fees receivable from a third party
customer which was acquired from Yangcheng Railway Business. On the acquisition date of Yangcheng
Railway Business, it was remeasured at its then fair value, which was assessed by the discounted cash
flow method by making reference to the repayment schedule agreed by both parties.
The balance is subsequently carried at amortised cost using an average effective interest rate of
6.54%.
The balance approximated its fair value as at 31 December 2018.
17 ASSETS CLASSIFIED AS HELD FOR SALE
By April 19, 2018, with the approval of the board of directors, the Group entered into an irrevocable
land use right transfer agreement with the Guangzhou Land Development Center (“GLDC”),
transferring the land to GLDC, and the transfer price was RMB1,304,717,000. The transfer of assets
was not completed in 2018 and the Group received RMB587,123,000 from GLDC in advance (Note 28).
18. MATERIALS AND SUPPLIES
Raw materials
Reusable rail-line track materials
Accessories
Retailing consumables
2018
RMB’000
160,048
75,415
59,261
1,493
2017
RMB’000
185,639
76,017
67,493
1,578
296,217
330,727
The costs of materials and supplies consumed by the Group during the year were recognised as
“operating expenses” in the amount of RMB1,658,327,000 (2017: RMB1,627,992,000).
As at 31 December 2018, the balance of the provision for writing down the materials and supplies to
their net realisable values was approximately RMB37,820,000 (2017: RMB28,466,000).During the year,
additional provision of RMB19,128,000 was made, RMB7,767,000 was reversed and RMB2,007,000 was
written off arising from realization of losses in the disposal of these assets (2017: RMB7,844,000, nil
and RMB3,354,000).
177
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
19. TRADE RECEIVABLES
Trade receivables
Including: receivables from related parties
Less: Provision for impairment of receivables
2018
RMB’000
3,922,829
2,949,492
(61,212)
2017
RMB’000
4,148,413
2,808,052
(6,203)
3,861,617
4,142,210
As at 31 December 2018 and 2017, the Group’s trade receivables were all denominated in RMB.
The majority of the trade receivable were from state-owned railroad companies or companies in
transportation industry.
The passenger railroad services are usually transacted on a cash basis. The Group does not have
formal contractual credit terms agreed with its customers for freight services but the trade receivables
are usually settled within a period less than one year. As a result, the Group regards any receivable
balance within one year being not overdue. The aging analysis of the outstanding trade receivables is
as follows:
Within 1 year
Over 1 year but within 2 years
Over 2 years but within 3 years
Over 3 years
2018
RMB’000
3,034,930
524,652
231,879
131,368
2017
RMB’000
2,799,028
763,812
522,122
63,451
3,922,829
4,148,413
178
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
19. TRADE RECEIVABLES (continued)
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a
lifetime expected loss provision for all trade receivables.
Movements on the provision for impairment of trade receivables are as follows:
At 31 December
Change of accounting policy (Note 2.2(a))
At 1 January
Provision for impairment
Reversal of impairment loss provision
Written-off
At 31 December
2018
RMB’000
2017
RMB’000
6,203
60,704
66,907
—
(5,689)
(6)
61,212
4,965
—
4,965
5,904
—
(4,666)
6,203
The maximum exposure to credit risk at the reporting date is the carrying value mentioned above.
The Group does not hold any collateral as security.
20. PREPAYMENTS AND OTHER RECEIVABLES
Due from third parties
Due from related parties
Other receivables
Less: Provision for impairment
Other receivables, net (a)
Prepayments (b)
179
Annual report
2018
RMB’000
313,801
35,106
2017
RMB’000
268,715
45,536
348,907
314,251
2018
RMB’000
321,855
(10,590)
311,265
37,642
2017
RMB’000
288,432
(13,325)
275,107
39,144
348,907
314,251
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
20. PREPAYMENTS AND OTHER RECEIVABLES (continued)
(a)
Other receivables mainly represent miscellaneous deposits and receivables arising from the
course of provision of non-railway transportation services by the Group. As of 31 December
2018, the input VAT with related invoices not been received or verified amounted to
RMB148,369,000 (2017: RMB122,190,000).
Movements on the provision for impairment of other receivables are as follows:
At 31 December
Change of accounting policy (Note 2.2(a))
At 1 January
Provision for impairment
Reversal of impairment loss provision
Written-off
2018
RMB’000
2017
RMB’000
13,325
5,527
18,852
4,631
(2)
(12,891)
13,336
—
13,336
—
(3)
(8)
At 31 December
10,590
13,325
(b)
Prepayments mainly represent amounts paid in advance to the suppliers for utilities and other
operating expenses of the Group.
The carrying amounts of the Group’s prepayments and other receivables are denominated in
the following currencies:
RMB
HKD
2018
RMB’000
348,491
416
2017
RMB’000
314,184
67
348,907
314,251
The maximum exposure to credit risk at the reporting date is the carrying value of each class
of receivable mentioned above. The Group does not hold any collateral as security.
180
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
21. CASH AND CASH EQUIVALENTS AND SHORT-TERM DEPOSITS
2018
RMB’000
Cash at bank and on hand
Term deposits with initial term not more than three months
1,686,253
52,500
Cash and cash equivalents
Term deposits with initial term of over three months (a)
1,738,753
109,000
2017
RMB’000
1,108,015
52,500
1,160,515
108,000
1,847,753
1,268,515
(a)
(b)
The original effective interest rate of term deposits was 1.62% per annum (2017: 1.54% per
annum).
The carrying amounts of the cash and cash equivalents and short-term deposits are
denominated in the following currencies:
RMB
HKD
USD
2018
RMB’000
1,770,091
77,608
54
2017
RMB’000
1,235,719
32,650
146
1,847,753
1,268,515
181
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
22. SHARE CAPITAL
As at 31 December 2018 and 2017, the total authorised number of ordinary shares is 7,083,537,000
shares with a par value of RMB1.00 per share. These shares are divided into A shares and H shares.
They rank pari passu against each other and they were fully paid up.
As at
31 December
2017
RMB’000
As at
31 December
2018
RMB’000
Movement
RMB’000
1,431,300
5,652,237
7,083,537
—
—
—
1,431,300
5,652,237
7,083,537
Authorised, issued and fully paid:
Listed shares
— H shares
— A shares
Total
23. RESERVES
According to the provisions of the Articles of Association of the Company, the Company shall first set
aside 10% of its profit after tax attributable to shareholders as indicated in the Company’s statutory
financial statements for the statutory surplus reserve (except where the reserve has reached 50% of
the Company’s registered share capital) in each year. The Company may also make appropriations
from its profit attributable to shareholders to a discretionary surplus reserve, provided that it is
approved by a resolution passed in 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 the prior approval obtained from the shareholders in a shareholders’ general meeting under
specific circumstances.
When the statutory surplus reserve is not sufficient to make good for any losses of the Company in
previous years, the current year profit attributable to shareholders shall be used to make good the
losses before any allocations are set aside for the statutory surplus reserve.
The statutory surplus reserve, the discretionary surplus reserve and the share premium account could
be converted into share capital of the Company provided it is approved by a resolution passed in a
shareholders’ general meeting with the provision that the ending balance of the statutory surplus
reserve does not fall below 25% of the registered share capital amount. The Company may either allot
newly created shares to the shareholders at the same proportion of the existing number of shares
held by these shareholders, or it may increase the par value of each share.
182
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
23. RESERVES (continued)
For the year ended 31 December 2018 and 2017, the directors proposed the following appropriations
to reserves of the Company:
2018
2017
Percentage RMB’000 Percentage
2018
2017
RMB’000
Statutory surplus reserve
10%
83,612
10%
101,982
In accordance with the provisions of the Articles of Association of the Company, the profit after
appropriation to reserves and available for distribution to shareholders shall be the lower of the
retained earnings determined under (a) PRC GAAP or (b) IFRS. Due to the fact that the statutory
financial statements of the Company have been prepared in accordance with PRC GAAP, the
retained earnings so reported may be different from those reported in the statement of changes in
shareholders’ equity prepared under IFRS contained in these financial statements. The main difference
between the retained earnings of the Company determined under PRC GAAP and those determined
under IFRS was relating to accounting policies in respect of investment in associates adopted under
PRC GAAP and IFRS.
For the year 2018 and 2017, the movement of “Special reserve — Safety Production Fund” of the
Group are as below:
Beginning of the year
Appropriation for retained earnings
Utilisation
2018
RMB’000
—
242, 456
(242,456)
2017
RMB’000
—
227,250
(227,250)
End of the year
—
—
The Company is engaged in passenger and freight transportation business. In accordance with the
regulations issued by Ministry of Finance and State Administration of Work Safety of the PRC, the
Company is required to establish a special reserve (“Safety Production Fund”) calculated based on the
passenger and freight transportation revenue of the previous year using the following percentages:
(a)
1% for regular freight business;
(b)
1.5% for passenger transportation, dangerous goods delivery business and other special
business.
183
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
23. RESERVES (continued)
The Safety Production Fund is mainly used for the renovation and maintenance of security equipment
and facilities. For the purpose of the consolidated financial statements under IFRS, such reserve is
established through an appropriation from retained earnings based on the aforementioned method.
When the Safety Production Fund is actually utilised, the actual expenses incurred are charged to
profit or loss.
For the year 2018 and 2017, the movement of other comprehensive income of the Group are as
below:
Beginning of the year
Addition due to fair value changes on available-for-sale
investments
Addition due to deferred liabilities related to fair value
changes on available-for-sale investments
2018
RMB’000
2017
RMB’000
181,941
—
—
—
242,588
(60,647)
End of the year
181,941
181,941
Financial assets at FVOCI
The Group has elected to recognise changes in the fair value of certain investments in equity
securities in OCI, as explained in note 2.12. These changes are accumulated within the FVOCI reserve
within equity. The Group transfers amounts from this reserve to retained earnings when the relevant
equity securities are derecognised.
Available-for-sale financial assets – until 31 December 2017
Changes in the fair value and exchange differences arising on translation of investments that were
classified as available-for-sale financial assets (e.g. equities), were recognised in other comprehensive
income and accumulated in a separate reserve within equity. Amounts were reclassified to profit or
loss when the associated assets are sold or impaired, see accounting policy note 2.12 for details.
184
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
24. DEFERRED INCOME
Government grants
Others
Total
2018
RMB’000
99,765
—
2017
RMB’000
105,754
37
99,765
105,791
Government grants relating to costs are deferred and recognised in the profit or loss over the period
necessary to match them with the costs that they are intended to compensate.
Government grants relating to the purchase of property, plant and equipment are included in non-
current liabilities as deferred income and are credited to profit or loss on a straight-line basis over the
expected lives of the related assets.
25. EMPLOYEE BENEFITS OBLIGATIONS
Employee benefits obligations
Less: current portion included in accruals and other payables
(Note 28)
2018
RMB’000
2017
RMB’000
28,389
30,745
(28,389)
(30,745)
—
—
Pursuant to a redundancy plan implemented by the Group in 2006, selected employees who had
met certain specified criteria and accepted voluntary redundancy were provided with an offer of
early retirement benefits, up to their official age of retirement. Such arrangements required specific
approval granted by management of the Group.
With the acquisition of the Yangcheng Railway Business in 2007 and Guangmeishan Railway Company
Limited (“GRCL”) Business and Guangdong Sanmao Railway Company Limited (“GSRC”) Business in
2016, the Group has also assumed certain retirement and termination benefits obligations associated
with the operations of Yangcheng Railway Business, GSRL Business and GSRC Business. These
obligations mainly include the redundancy termination benefits similar to those mentioned above, as
well as the obligation for funding post-retirement medical insurance premiums of retired employees
before the respective acquisitions.
185
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
25. EMPLOYEE BENEFITS OBLIGATIONS (continued)
The employee benefits obligations have been provided for by the Group at amounts equal to the
total expected benefit payments. Where the obligation does not fall due within twelve months, the
obligation payable has been discounted using a pre-tax rate that reflects management’s current
market assessment of the time value of money and risk specific to the obligation. The discount rate
was determined with reference to treasury bond yields in the PRC.
The movement in the employee benefits obligation during current year is as follows:
At 1 January
Additions
Payments
At 31 December
26. TRADE PAYABLES
Payables to third parties
Payables to related parties
The aging analysis of trade payables was as follows:
Within 1 year
Over 1 year but within 2 years
Over 2 years but within 3 years
Over 3 years
186
Annual report
2018
RMB’000
30,745
—
(2,356)
2017
RMB’000
34,043
—
(3,298)
28,389
30,745
2018
RMB’000
826,717
614,117
2017
RMB’000
614,822
710,255
1,440,834
1,325,077
2018
RMB’000
1,233,902
114,480
46,383
46,069
2017
RMB’000
1,075,298
180,294
49,359
20,126
1,440,834
1,325,077
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
27. CONTRACT LIABILITIES
Contract liabilities – advances received from customers
Contract liabilities – frequent traveller program
28. ACCRUALS AND OTHER PAYABLES
Due to third parties
Due to related parties
Advance received from disposal of assets classified as held
for sale (Note 17)
Advances received from others
Payables to GIDC assumed by business combination
Other deposits received
Salary and welfare payables
Deposits received for construction projects
Other taxes payable
Amounts received on behalf of Labour Union
Deposits received from ticketing agencies
Employee benefits obligations (Note 25)
Housing maintenance fund
Other payables
187
Annual report
2018
RMB’000
198,251
5,380
203,631
2017
RMB’000
—
—
—
2018
RMB’000
2017
RMB’000
1,586,277
490,521
1,017,309
445,922
2,076,798
1,463,231
2018
RMB’000
2017
RMB’000
587,123
—
368,560
213,056
203,791
209,245
66,896
96,523
32,448
28,389
15,741
255,026
—
152,010
377,703
226,453
178,427
203,886
70,173
73,463
34,298
30,745
15,740
100,333
2,076,798
1,463,231
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
29. AUDITORS’ REMUNERATION
Auditors’ remuneration in respect of audit and non-audit services provided by the auditors for the year
ended 31 December 2018 were RMB8,400,000 and RMB750,000 respectively (2017: RMB8,400,000
and RMB950,000 respectively).
30. EMPLOYEE BENEFITS
Wages and salaries
Provision for medical, housing scheme and other
employee benefits (a)
Contributions to the defined contribution scheme (b)
2018
RMB’000
2017
RMB’000
5,320,484
4,848,830
1,296,392
829,539
1,220,708
772,682
7,446,415
6,842,220
(a) Housing scheme
In accordance with the PRC housing reform regulations, the Group is required to make
contributions to a state-sponsored housing fund at 10% or 12% of the salaries of the
employees. At the same time, the employees are also required to make a contribution at 10%
or 12% of the salaries out of their payroll. The employees are entitled to claim the entire sum
of the fund under certain specified withdrawal circumstances. The Group has no further legal
nor constructive obligation towards housing benefits of these employees offered beyond the
above contributions made.
(b) Defined contribution pension scheme
All the full-time employees of the Group are entitled to join a statutory pension scheme. The
employees would receive pension payments equal to their basic salaries payable upon their
retirement up to their death. Pursuant to the PRC laws and regulations, contributions to the
basic old age insurance for the Group’s local staff are to be made monthly to a government
agency based on 26% of the standard salary set by the provincial government, of which 18%
is borne by the Company or its subsidiaries and the remainder 8% is borne by the employees.
The government agency is responsible for the pension liabilities due to the employees upon
their retirement. The Group accounts for these contributions on an accrual basis and charges
the related contributions to expense in the year to which the contributions relate.
188
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
30. EMPLOYEE BENEFITS (continued)
(c) Five highest paid individuals
The five individuals whose emoluments were the highest in the Group for the year include one
director (2017: one), three senior executives (2017: three) and one supervisor (2017: one). No
remuneration has been paid by the Group to the five highest paid individuals as an inducement
to join or upon joining the Group or as a compensation for loss of office.
The emolument range of each individual is within the band of Nil to RMB471,000 (2017: Nil to
RMB498,000).
31. OTHER LOSSES — NET
Loss on disposal of fixed assets — net
Interest income from banks
Government grants
Dividend income from FVOCI (2017: AFS)
Income from compensation
Impairment of fixed assets (Note 6)
Impairment of trade receivables (Note 19)
Unwinding of interest accrued on long-term receivable
Income from disposal of subsidiaries
Renovation cost for the separation and transfer of facilities
Others
2018
RMB’000
2017
RMB’000
(93,914)
25,209
15,223
6,473
2,176
(10,364)
—
4,080
81
(65,735)
8,158
(77,026)
18,974
13,272
6,473
295
(11,185)
(5,904)
2,868
—
—
3,756
(108,613)
(48,477)
189
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
32. FINANCE COSTS — NET
Net foreign exchange gains/(loss)
Bank charges
2018
RMB’000
1,044
(1,674)
2017
RMB’000
(7,304)
(2,866)
(630)
(10,170)
33. INCOME TAX EXPENSE
In 2018 and 2017, the applicable income tax rate of the Company was 25%.
An analysis of the current year income tax expense is as follows:
Current income tax
Deferred income tax (Note 12)
2018
RMB’000
435,991
(146,225)
2017
RMB’000
355,579
(20,215)
289,766
335,364
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the
tax rate of the home country of the Company as follows:
2018
RMB’000
2017
RMB’000
Profit before tax
1,068,800
1,347,132
Tax calculated at the statutory rate of 25% (2017: 25%)
Effect of expenses not deductible for tax purposes
Effect of income not subject to tax
Tax losses for which no deferred tax asset was recognised
Adjustments for current tax of prior periods
Utilisation of previously unrecognised tax losses
267,200
19,647
(3,432)
9,098
(2,335)
(412)
336,783
663
(3,354)
5,561
(3,886)
(403)
Income tax expense
289,766
335,364
190
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
34. EARNINGS PER SHARE
The calculation of basic earnings per share is based on the net profit for the year attributable to
equity holders of approximately RMB784,059,000 (2017: RMB1,015,361,000), divided by the weighted
average number of ordinary shares outstanding during the year of 7,083,537,000 shares (2017:
7,083,537,000 shares). There were no dilutive potential ordinary shares during both years.
2018
RMB’000
2017
RMB’000
Profit attributable to owners of the Company
784,059
1,015,361
Weighted average number of ordinary shares in issue
7,083,537
7,083,537
Basic and diluted earnings per share
RMB0.11
RMB0.14
35. DIVIDEND
Final, proposed, of RMB0.06
(2017: RMB0.08) per ordinary share
2018
RMB’000
2017
RMB’000
425,012
566,683
At the meeting of the directors held on 27 March 2019, the directors proposed a final dividend of
RMB0.06 per ordinary share for the year ended 31 December 2018, which is subject to the approval
by the shareholders in general meeting. This proposed dividend was not reflected as a dividend
payable in the Group’s and the Company’s financial statements as at 31 December 2018.
191
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
36. CASH FLOW GENERATED FROM OPERATIONS
(a) Reconciliation from profit before income tax to net cash generated from
operations:
Profit before income tax:
Adjustments for:
Depreciation of fixed assets (Note 6)
Impairment of fixed assets (Note 6)
Provision for impairment of materials and supplies
(Note 18)
Amortisation of leasehold land payments (Note 8)
Loss on disposal of fixed assets and costs on repairs
Amortisation of long-term prepaid expenses (Note 13)
Share of results of associates, net of tax (Note 11)
Dividend income on FVOCI/AFS (Note 31)
Investment income from liquidation of a subsidiary
(Note 31)
(Reversal of)/provision for impairment of receivables
Amortisation of deferred income
Interest income
Operating profit before working capital changes
Decrease/(increase) in trade receivables
Decrease in materials and supplies
Increase in prepayments and other receivables
Decrease in long-term receivable
Increase in trade payables
Increase/(decrease) in accruals and other payables
2018
RMB’000
2017
RMB’000
1,068,800
1,347,132
1,609,743
10,363
1,662,460
11,185
11,361
55,782
261,476
12,909
(7,177)
(6,473)
(81)
(1,061)
(5,988)
(5,845)
3,003,809
230,877
39,224
(17,218)
7,000
115,759
220,571
7,844
45,680
321,741
3,168
(6,944)
(6,473)
—
5,901
(3,282)
(4,647)
3,383,765
(419,349)
6,121
(12,975)
3,000
181,554
(179,412)
Net cash generated from operations
3,600,022
2,962,704
192
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
36. CASH FLOW GENERATED FROM OPERATIONS (continued)
(b) In the cash flow statement, proceeds from disposal of fixed assets comprise:
Net book amount (Note 6)
Payable arising from disposal of fixed assets
Transfer to materials and supplies
Loss on disposal of fixed assets and costs on repairs
2018
RMB’000
284,658
(6,715)
(16,075)
(261,476)
2017
RMB’000
336,812
(2,457)
(12,087)
(321,741)
Proceeds from disposal of fixed assets
392
527
37. CONTINGENCY
There were no significant contingent liabilities as at 31 December 2018 and up to the date of approval
of these financial statements.
38. COMMITMENTS
(a) Capital commitments
As at 31 December 2018, the Group had the following capital commitments:
2018
RMB’000
2017
RMB’000
Contracted but not provided for
899,290
1,341,055
Authorised but not contracted for
1,765,710
518,945
A substantial amount of these commitments is related to the reform of stations or facilities
relating to the existing railway lines of the Company, which would be financed by self-
generated operating cash flow.
193
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
38. COMMITMENTS (continued)
(b) Operating lease commitments
In connection with the acquisition of Yangcheng Railway Business, the Company signed an
agreement on 15 November 2004 with Guangzhou Railway Group for leasing the land use rights
associated with the land on which the acquired assets of Yangcheng Railway Business are
located. The agreement became effective upon the completion of the acquisition on 1 January
2007 and the remaining lease term is 20 years, renewable at the discretion of the Company.
According to the terms of the agreement, the rental for such lease would be agreed by both
parties every year with a maximum amount not exceeding RMB74,000,000 per year. During the
year ended 31 December 2018, the related lease rental paid and payable was approximately
RMB58,490,000 (2017: RMB57,358,000).
39. 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.
(a)
Related parties that control the Company or are controlled by the Company:
See note 10 for the principal subsidiaries.
None of the shareholders is the controlling entity of the Company.
194
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GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
39. RELATED PARTY TRANSACTIONS (continued)
(b) Nature of the principal related parties that do not control/are not controlled by the Company:
(i) Guangzhou Railway Group and its subsidiaries
Name of related parties
Relationship with the Company
Single largest shareholder and its subsidiaries
Guangzhou Railway Group
Guangzhou Railway Group YangCheng Railway
Enterprise Development Company
GRCL
GIDC
Guangzhou Railway Material Supply Company
Guangzhou Railway Station Service Centre
Changsha Railway Construction Company Limited
Guangdong Sanmao Enterprise Development
Company Limited
Single largest shareholder
Subsidiary of the single largest shareholder
Subsidiary of the single largest shareholder
Subsidiary of the single largest shareholder
Subsidiary of the single largest shareholder
Subsidiary of the single largest shareholder
Subsidiary of the single largest shareholder
Subsidiary of the single largest shareholder
Guangzhou Yuetie Operational Development Company Subsidiary of the single largest shareholder
Subsidiary of the single largest shareholder
Guangzhou Railway Rolling Stock Works
Subsidiary of the single largest shareholder
Foreign Economic & Trade Development
Corporation of Guangzhou Railway Group
Guangdong Tieqing International Travel Agency
Subsidiary of the single largest shareholder
Company Limited
Huaihua Railway Engineer Construction Company
Xiashen Railway Guangdong Company Limited
Ganshao Railway Company Limited
Hunan Changtie Industrial Development Co. Ltd.
Guangzhou Railway Real Estate Construction
Subsidiary of the single largest shareholder
Subsidiary of the single largest shareholder
Subsidiary of the single largest shareholder
Subsidiary of the single largest shareholder
Subsidiary of the single largest shareholder
Company
Guangzhou Beiyang Information Technology
Subsidiary of the single largest shareholder
Company Limited
Yuehai Railway Company Limited
Guangdong Sanmao Railway Capital Construction
Subsidiary of the single largest shareholder
Subsidiary of the single largest shareholder
Company
Construction Engineering Company, Yangcheng
Railway Industry Development Corporation
Subsidiary of the single largest shareholder
195
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
39. RELATED PARTY TRANSACTIONS (continued)
(b) Nature of the principal related parties that do not control/are not controlled by the Company:
(continued)
(ii) Associates of the Group
Name of related parties
Relationship with the Company
Associates of the Group
Tiecheng
Shentu
Associate of the Group
Associate of the Group
(iii) Relationship with CRC and other railway companies
On 14 March 2013, pursuant to the Approval, the previous controlling entity of
Guangzhou Railway Group, MOR, had been dismantled. The administrative function of
MOR were transferred to the Ministry of Transport and the newly established National
Railway Bureau, and its business functions were transferred to the CRC. Accordingly,
the equity interests of Guangzhou Railway Group which was wholly controlled by MOR
previously were transferred to the CRC (“Reform”). The Reform was completed since 1
January 2017 and the Company disclosed details of transactions undertaken with CRC
Group for both years of 2018 and 2017 for reference. Unless otherwise specified, the
transactions with CRC Group disclosed below have excluded transactions undertaken with
Guangzhou Railway Group and its subsidiaries.
196
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
39. RELATED PARTY TRANSACTIONS (continued)
(c)
In addition to those disclosed elsewhere in the financial statements, during the year, the Group
had the following material transactions undertaken with related parties:
(I) Material transactions undertaken with Guangzhou Railway Group and its
subsidiaries:
Provision of services and sales of goods
Transportation related services
Provision of train transportation services
to Guangzhou Railway Group and its
subsidiaries
Revenue collected by CRC for railway
network usage and related services provided
to Guangzhou Railway Group and its
subsidiaries
Revenue from railway operation service provided
2018
RMB’000
2017
RMB’000
1,861,543
1,505,348
1,357,512
1,428,752
to Guangzhou Railway Group’s subsidiaries
736,492
660,847
3,955,547
3,594,947
Other services
Sales of materials and supplies to Guangzhou
Railway Group and its subsidiaries
39,383
23,386
197
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
39. RELATED PARTY TRANSACTIONS (continued)
(c)
In addition to those disclosed elsewhere in the financial statements, during the year, the Group
had the following material transactions undertaken with related parties: (continued)
(I) Material transactions undertaken with Guangzhou Railway Group and its
subsidiaries: (continued)
Services received and purchases made
Transportation related services
Provision of train transportation services
by Guangzhou Railway Group and its
subsidiaries (i)
Costs settled by CRC for railway network usage
and related services provided by Guangzhou
Railway Group and its subsidiaries (ii)
Operating lease rental paid to Guangzhou
Railway Group for leasing of land use rights
(Note 38(b))
Other services
Provision of repair and maintenance services
by Guangzhou Railway Group and its
subsidiaries (iv)
Purchase of materials and supplies from
Guangzhou Railway Group and its
subsidiaries (iv)
Provision of construction services by Guangzhou
Railway Group and its subsidiaries (v)
2018
RMB’000
2017
RMB’000
872,234
1,048,524
1,898,623
1,720,849
58,490
57,358
2,829,347
2,826,731
451,976
298,040
555,048
180,147
455,716
272,390
1,187,171
1,026,146
198
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
39. RELATED PARTY TRANSACTIONS (continued)
(c)
In addition to those disclosed elsewhere in the financial statements, during the year, the Group
had the following material transactions undertaken with related parties: (continued)
(I) Material transactions undertaken with Guangzhou Railway Group and its
subsidiaries: (continued)
(i)
The service charges are determined based on a pricing scheme set by the CRC
or based on negotiation between the contracting parties with reference to actual
costs incurred.
(ii)
Such revenues/charges are determined by the CRC based on its standard charges
applied on a nationwide basis.
(iii)
The service charges are levied based on contract prices determined based on a
“cost plus a profit margin” and agreed between both contracting parties.
(iv)
The prices are determined based on mutual negotiation between the contracting
parties with reference to actual costs incurred.
(v)
Based on construction amount determined under national railway engineering
guidelines.
(II) Material transactions with CRC and other railway companies
When the passenger trains and freight trains operated by the Group pass through rail
lines owned by other railway companies controlled by the CRC, the Group need to pay
those companies for the services rendered (track usage, locomotive traction and electric
catenaries service, etc.), and vice versa. The charge rate of such services are instructed
by the CRC and are collected and settled by the CRC according to its central recording
and settlement systems (see details in note 2.24).
199
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
39. RELATED PARTY TRANSACTIONS (continued)
(c)
In addition to those disclosed elsewhere in the financial statements, during the year, the Group
had the following material transactions undertaken with related parties: (continued)
(II) Material transactions with CRC and other railway companies (continued)
In addition to those disclosed elsewhere in the financial statements, during the year, the
Group had the following material transactions undertaken with the CRC Group:
Provision of services and sales of goods
Transportation related services
Provision of train transportation services
to CRC Group (i)
Revenues collected by CRC for services
provided to CRC Group (ii)
Revenues from railway operation service
provided to CRC Group (iii)
Other services
Provision of repairing services for cargo trucks
to CRC Group (ii)
Sales of materials and supplies to CRC Group (iv)
Provision of apartment leasing services to
CRC Group (iv)
2018
RMB’000
2017
RMB’000
63,364
81,396
2,527,897
1,877,719
2,012,880
1,800,692
4,604,141
3,759,807
337,432
9,099
617
333,917
7,185
722
347,148
341,824
200
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
39. RELATED PARTY TRANSACTIONS (continued)
(c)
In addition to those disclosed elsewhere in the financial statements, during the year, the Group
had the following material transactions undertaken with related parties: (continued)
(II) Material transactions with CRC and other railway companies (continued)
Services received and purchases made
Transportation related services
Provision of train transportation services by
CRC Group (i)
Cost settled by CRC for services provided by
2018
RMB’000
2017
RMB’000
283,490
306,208
CRC Group (ii)
2,161,146
1,395,591
Other services
Provision of repair and maintenance services
by CRC Group (iv)
Purchase of materials and supplies from
CRC Group (iv)
Provision of construction services by CRC
Group (v)
2,444,636
1,701,799
9,440
27,743
1,417
31,089
19,258
—
38,600
50,347
(i)
The service charges are determined based on a pricing scheme set by the CRC
or based on negotiation between the contracting parties with reference to actual
costs incurred.
(ii)
Such revenue/charges are determined by the CRC based on its standard charges
applied on a nationwide basis.
(iii)
The service charges are levied based on contract prices determined based on a
“cost plus a profit margin” and explicitly agreed between both contracting parties.
201
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
39. RELATED PARTY TRANSACTIONS (continued)
(c)
In addition to those disclosed elsewhere in the financial statements, during the year, the Group
had the following material transactions undertaken with related parties: (continued)
(II) Material transactions with CRC and other railway companies (continued)
(iv)
The prices are determined based on mutual negotiation between the contracting
parties with reference to actual costs incurred.
(v)
Based on construction amounts determined under national railway engineering
guidelines.
(III) Revenues collected and settled through the CRC:
— Passenger transportation
— Freight transportation
— Other transportation related services
2018
RMB’000
7,532,999
1,849,360
78,935
2017
RMB’000
7,295,985
1,266,122
112,267
9,461,294
8,674,374
(d) Key management compensation
The compensation paid or payable to key management for employee services is shown in note
42.
202
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
39. RELATED PARTY TRANSACTIONS (continued)
(e) As at 31 December 2018, the Group had the following material balances maintained with
related parties:
(I) Material balances with Guangzhou Railway Group and its subsidiaries:
Trade receivables
— Guangzhou Railway Group (i)
— Subsidiaries of Guangzhou
Railway Group (i)
Prepayments and other receivables
— Guangzhou Railway Group
— Subsidiaries of Guangzhou Railway Group
Prepayments for fixed assets and
construction-in-progress
— Subsidiaries of Guangzhou Railway
Group (ii)
— Associates
Trade payables
— Guangzhou Railway Group (i)
— Subsidiaries of Guangzhou Railway
Group (ii)
— Associates
Payables for fixed assets and
construction-in-progress
— Guangzhou Railway Group
— Subsidiaries of Guangzhou Railway Group
— Associates
Contract liabilities
— Subsidiaries of Guangzhou Railway Group
— Associates
Accruals and other payables
— Guangzhou Railway Group
— Subsidiaries of Guangzhou Railway
Group (iii)
— Associates (iv)
2018
RMB’000
1,934,435
586,049
2017
RMB’000
1,435,421
132,830
1,348,386
1,302,591
33,957
231
33,726
2,489
329
2,160
597,050
95,048
500,385
1,617
388,482
42,604
211,486
134,392
1,100
1,096
4
454,670
9,212
443,391
2,067
44,329
3,277
41,052
4,352
4,352
—
681,587
61,899
619,509
179
342,519
53,821
220,377
68,321
—
—
—
439,509
7,390
430,041
2,078
203
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
39. RELATED PARTY TRANSACTIONS (continued)
(e) As at 31 December 2018, the Group had the following material balances maintained with
related parties: (continued)
(I) Material balances with Guangzhou Railway Group and its subsidiaries: (continued)
(i)
(ii)
The trade payables due to subsidiaries of Guangzhou Railway Group mainly
represent payables arising from unsettled fees for purchase of materials and
provision of other services according to various service agreements entered into
between the Group and the related parties.
The other payables due to subsidiaries of Guangzhou Railway Group mainly
represent the performance deposits received for construction projects and deposits
received from ticketing agencies.
(iii)
The other payables due to associates mainly represent the performance deposits
received for construction projects operated by associates.
As at 31 December 2018, all the balances maintained with related parties were
unsecured, non-interest bearing and were repayable on demand.
(II) Material balances with CRC Group:
Due from CRC Group
— Trade receivables
— Other receivables
As at 31 December
2018
RMB’000
2017
RMB’000
1,015,057
1,149
1,372,631
1,207
Due to CRC Group
— Trade payables and payables for fixed
assets and construction-in-progress
— Other payables
32,688
35,851
62,620
6,413
As at 31 December 2018, all the balances maintained with CRC Group were unsecured,
non-interest bearing and were repayable on demand.
204
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
40. SUBSEQUENT EVENTS
In addition to the disclosure in note 35, the Group obtained a bank facility amounting to
RMB500,000,000 on 15 March 2019. This bank facility was not recorded in the Group’s and the
Company’s financial statements as at 31 December 2018.
41. BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY
Balance sheet of the Company
ASSETS
Non-current assets
Fixed assets — net
Construction-in-progress
Prepayments for fixed assets and construction-in-progress
Leasehold land payments
Goodwill
Investments in subsidiaries
Investments in associates
Deferred tax assets
Long-term prepaid expenses
Available-for-sale investments
Long-term receivable
Current assets
Assets classified as held for sale
Materials and supplies
Trade receivables
Prepayments and other receivables
Short-term deposits
Cash and cash equivalents
As at 31 December
2018
2017
24,094,830
1,828,372
22,479
1,633,252
281,255
82,531
121,855
208,933
45,457
319,528
28,354
23,525,634
1,429,670
24,109
1,677,702
281,255
83,121
121,855
48,619
33,150
294,696
31,274
28,666,846
27,551,085
2,183
291,400
3,858,705
434,996
100,000
1,734,970
2,183
326,211
4,137,661
352,433
100,000
1,151,528
6,422,254
6,070,016
Total assets
35,089,100
33,621,101
205
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
41. BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY
(continued)
EQUITY AND LIABILITIES
Capital and reserves attributable to the
Company’s equity holders
Share capital
Share premium
Other reserves
Retained earnings
Total equity
Liabilities
Non-current liabilities
Deferred income
Current liabilities
Trade payables
Contract liabilities
Payables for fixed assets and construction-in-
progress
Dividends payable
Income tax payable
Accruals and other payables
Note
2018
2017
As at 31 December
(a)
(a)
(a)
7,083,537
11,564,462
3,188,161
7,089,433
7,083,537
11,564,462
3,109,516
6,955,483
28,925,593
28,712,998
99,765
105,791
99,765
105,791
1,426,092
203,429
2,441,627
20
246,453
1,746,121
1,308,263
—
2,214,547
18
141,749
1,137,735
6,063,742
4,802,312
Total liabilities
6,163,507
4,908,103
Total equity and liabilities
35,089,100
33,621,101
The balance sheet of the Company was approved by the Board of Directors on 27 March 2019 and
was signed on its behalf.
Wu Yong
Director
Hu Lingling
Director
206
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
41. BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY
(continued)
(a) Reserve movement of the Company:
At 1 January 2017
Total comprehensive income
Profit for the year
Other comprehensive income
Special reserve — Safety Production Fund
Appropriation
Utilisation
Appropriations from retained earnings
Transaction with owners:
Dividend relating to 2016
At 31 December 2017
Change in accounting policy
At 1 January 2018
Total comprehensive income
Profit for the year
Other comprehensive income
Special reserve — Safety Production Fund
Appropriation
Utilisation
Appropriations from retained earnings
Transaction with owners:
Dividends relating to 2017
At 31 December 2018
Share
premium
Other
reserves
Retained
earnings
11,564,462
—
—
—
—
—
—
—
—
—
11,564,462
—
11,564,462
—
—
—
—
—
—
—
—
—
11,564,462
2,825,593
181,941
—
181,941
—
227,250
(227,250)
101,982
—
—
3,109,516
(4,967)
3,104,549
—
—
—
—
242,456
(242,456)
83,612
—
—
3,188,161
6,611,274
1,012,874
1,012,874
—
—
(227,250)
227,250
(101,982)
(566,683)
(566,683)
6,955,483
(44,701)
6,910,782
828,946
828,946
—
—
(242,456)
242,456
(83,612)
(566,683)
(566,683)
7,089,433
207
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
42. BENEFITS AND INTERESTS OF DIRECTORS
(a) Directors’, supervisors’ and senior executives’ emoluments
For the year ended 31 December 2018
Emoluments paid or receivable in respect of a person’s services as a director, whether of the
Company or its subsidiary undertaking
Fee
RMB’000
Salary
RMB’000
Discretionary
bonuses
RMB’000
Housing
allowance
RMB’000
Allowances
and benefits
in kind
RMB’000
Employer’s
contribution
to a retirement
benefit scheme
RMB’000
Remunerations
paid or
receivable
in respect of
accepting office
as director
RMB’000
Total
RMB’000
—
—
—
—
—
—
—
112
142
112
—
—
—
—
—
—
—
—
—
—
—
—
238
—
—
—
—
—
—
—
—
—
—
—
—
208
302
333
245
243
242
181
—
50
—
—
—
—
—
—
—
—
—
—
—
—
28
4
51
51
51
50
44
—
34
—
—
—
—
—
—
—
—
—
—
—
—
34
34
34
34
34
34
26
—
15
—
—
—
—
—
—
—
—
—
—
—
—
11
16
12
9
11
13
9
—
42
—
—
—
—
—
—
—
—
—
—
—
—
40
25
41
38
40
42
31
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
379
—
—
—
—
—
112
142
112
—
—
—
—
321
381
471
377
379
381
291
Name
Directors
Wu, Yong
Luo, Qing
Sun, Jing (i)
Yu, Zhiming
Guo, Ji’an (ii)
Chen,Xiaomei (ii)
Chen, Jianping (i)
Chen, Song
Jia, Jianmin
Wang, Yunting
Supervisors
Liu, Mengshu
Chen, Shaohong
Shen, Jiancong
Li, Zhiming
Song, Min
Zhou, Shangde
Chief Executive
Hu, Lingling
Senior Executives
Luo, Jiancheng
Tang, Xiangdong
Guo, Xiangdong
Gong, Yuwen (iii)
(i)
Resigned from the position in June 2018.
(ii)
Appointed the position of director in June 2018.
(iii)
Appointed the position of senior executive in April 2018.
208
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
42. BENEFITS AND INTERESTS OF DIRECTORS
(a) Directors’, supervisors’ and senior executives’ emoluments (continued)
For the year ended 31 December 2017
Emoluments paid or receivable in respect of a person’s services as a director, whether of the
Company or its subsidiary undertaking
Fee
RMB’000
Salary
RMB’000
Discretionary
bonuses
RMB’000
Housing
allowance
RMB’000
Allowances
and benefits
in kind
RMB’000
Employer’s
contribution
to a retirement
benefit scheme
RMB’000
Remunerations
paid or
receivable
in respect of
accepting office
as director
RMB’000
Total
RMB’000
—
—
—
—
112
146
112
—
—
—
—
—
—
—
—
—
—
—
—
222
—
—
—
—
—
—
—
—
—
—
187
266
273
222
222
222
—
63
—
—
—
—
—
—
—
—
—
—
55
54
89
68
67
64
—
31
—
—
—
—
—
—
—
—
—
—
31
31
31
31
31
31
—
12
—
—
—
—
—
—
—
—
—
—
10
14
10
8
9
11
—
39
—
—
—
—
—
—
—
—
—
—
37
22
38
36
37
38
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
367
—
—
112
146
112
—
—
—
—
—
320
387
441
365
366
366
Name
Directors
Wu, Yong
Luo, Qing
Sun, Jing
Yu, Zhiming
Chen, Song
Jia, Jianmin
Wang, Yunting
Chen, Jianping
Supervisors
Liu, Mengshu
Chen, Shaohong
Shen, Jiancong
Li, Zhiming
Song, Min
Zhou, Shangde
Chief Executive
Hu, Lingling
Senior Executives
Luo, Jiancheng
Tang, Xiangdong
Guo, Xiangdong
209
Annual report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(All amounts expressed in Renminbi unless otherwise stated)
42. BENEFITS AND INTERESTS OF DIRECTORS
(a) Directors’, supervisors’ and senior executives’ emoluments (continued)
During the year ended 31 December 2018, no director received any emolument from the Group
as an inducement to join or leave the Group or compensation for loss of office; no directors
and senior management waived or has agreed to waive any emoluments (2017: Nil).
(b) Director’s retirement benefits
The retirement benefits paid to Luo Qing during the year end of 2018 by a defined contribution
pension plan (basic endowment insurance and enterprise annuity) in respect of his services as
director of the Company and its subsidiaries are RMB42,000 (2017: RMB39,000) respectively.
No other retirement benefits were paid to him in respect of his other services in connection
with the management of the affairs of the Company or its subsidiary undertaking (2017: Nil).
(c) Directors’ termination benefits
During the year ended 31 December 2018, no payments to the directors of the Company as
compensation for the early termination of the appointment (2017: Nil).
(d) Consideration provided to third parties for making available directors’
services
During the year ended 31 December 2018, the Company did not provide to third any party for
making available director’s services (2017: Nil).
(e) Information about loans, quasi-loans and other dealings in favour of
directors, controlled bodies corporate by and connected entities with such
directors
During the year ended 31 December 2018, no loans, quasi-loans or other dealings in favour
of directors of the Company, controlled bodies corporate by and connected entities with such
directors (2017: Nil).
(f) Directors’ material interests in transactions, arrangements or contracts
Except the transactions with Guangzhou Railway Group as disclosed in note 39, no significant
transactions, arrangements and contracts in relation to the Group’s business to which the
Company was a party and in which a director of the Company had a material interest, whether
directly or indirectly, subsisted at the end of the year or at any time during the year (2017:
Nil).
210
Annual report
GUANGSHEN RAILWAY 2018 • ANNUAL REPORT
Chapter 12
Documents Available for Inspection
DOCUMENTS AVAILABLE FOR INSPECTION
1.
2.
3.
4.
Accounting statements signed and stamped by the legal representative, person in charge of
accounting affairs and responsible person of the accounting firm;
The original audit report signed and stamped by PricewaterhouseCoopers Zhong Tian LLP and the
financial Statements prepared in accordance with China accounting standards, and the original audit
report signed and stamped by PricewaterhouseCoopers and the financial Statements prepared in
accordance with IFRS;
All the original of files and announcements disclosed in China Securities Journal, Securities Times,
Shanghai Securities News and Securities Daily during the reporting period;
The annual report published on Hong Kong’s security market and the annual report published in the
security market in United States (Form 20-F).
The documents are placed with the Secretariat to the Board.
Chairman of the Board: Wu Yong
Date of Approval from the Board: 27 March, 2019
211
Annual report
年
度
報
告
年 度 報 告
[STOCK CODE：00525]
Address: No. 1052, Heping Road, Shenzhen Postcode: 518010
Tel: (86)-755-25587920 Fax: (86)-755-25591480
Website: www.gsrc.com