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 001 1. The board of directors (“Director(s)”) 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 true, accurate and complete, and there are no misrepresentations, misleading statements or material omissions in this annual report, and jointly and severally accept the related legal responsibility. 2. All Directors of the Company attended the meeting of the Board to consider this annual report. 3. 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, Luo Xinpeng, Chief Accountant, and Liu Qiyi, Chief of Finance Department hereby warrant that the financial statements contained in this annual report are true, accurate and complete. 5. Plan for profits distribution for the reporting period or plan for Common Reserve Capitalization after consideration and discussion by the Board During the reporting period, affected by the COVID-19 pandemic, the Company faced great operating and financial pressure. With comprehensive consideration of the current operating status of the Company and the capital requirements for maintaining the normal operation of the Company, the Board proposed not to make profit distribution or capitalize capital reserve into share capital for 2020. This profit distribution proposal has been considered and approved at the seventh meeting of the ninth session of Board of the Company, and is subject to approval at 2020 Annual General Meeting of the Company. 6. Declaration of risks with respect to forward-looking statements Forward-looking statements, including future plans and development strategies contained in this 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. Whether more than half of the directors cannot guarantee the authenticity, accuracy and completeness of the annual report disclosed by the Company No 10. Notice of Material Risks This annual report contains details of future potential risks. Please read “Potential risks” in the chapter “Report of the Directors (Including Management Discussion and Analysis)” for details. GUANGSHEN RAILWAY 2020 ANNUAL REPORTImportant Notice Contents Chapter 1 Definitions Chapter 2 Company Profile and Major Financial Indicators 002 003 004 005 Chapter 3 Summary of the Company’s Business 010 Chapter 4 Report of the Directors (Including Management 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 012 032 044 051 052 066 087 088 192 ContentsGUANGSHEN RAILWAY 2020 ANNUAL REPORT Chapter 1 Definitions In this report, unless the context otherwise requires, the expressions stated below will have the following meanings: Company Reporting period, this period, Guangshen Railway Company Limited 12 months from 1 January to 31 December 2020 this year Same period last year A Share(s) H Share(s) ADS(s) PRC CSRC SSRB SSE SEHK NYSE SFO Listing Rules Articles Company Law Securities Law CSRG GRGC GZIR WGPR GSHER GZR XSR GSR GGR NGR PRDIR GMSR SR MZR SMR MSR 12 months from 1 January to 31 December 2019 Renminbi-denominated ordinary share(s) 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 share(s) 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 People’s Republic of China 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 Rules Governing the Listing of Securities on SEHK and/or the listing rules of SSE (as the case may be) The Articles of Association of the Company The Company Law of the PRC The Securities Law of the PRC China State Railway Group Co., Ltd. China Railway Guangzhou Group Co., Ltd., the largest shareholder of the Company Guangdong Guangzhu 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 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 Guangdong Shenmao Railway Company Limited Guangdong Meizhou-Shantou Passenger Railway Line Company Limited 004 005 I. GENERAL INFORMATION OF THE COMPANY (1) Company Information Chinese name Chinese name abbreviation English name Legal representative of the Company Wu Yong 廣深鐵路股份有限公司 廣深鐵路 Guangshen Railway Company Limited (2) Contact Person and Contact Information Name Address Tel. Fax. E-mail Company Secretary Tang 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 No. 1052 Heping Road, Luohu District, Shenzhen, Guangdong Province Postal Code of the Registered Address Place of Business 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 of the Company Websites specified by CSRC to publish the annual report Reserve address of annual report China Securities Journal, Securities Times, 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 GUANGSHEN RAILWAY 2020 ANNUAL REPORTChapter 2Company Profile and Major Financial Indicators (5) Share Information of the Company Type of Shares A Shares H Shares ADS Stock Exchange SSE SEHK NYSE (Note) Stock Short Name 廣深鐵路 GUANGSHEN RAIL — Stock Code 601333 00525 GSHHY Note: From 26 November 2020, the ADSs of the Company were delisted from the NYSE and traded on the over-the- counter (OTC) market with stock code changed from GSH to GSHHY. (6) Other Relevant Information Auditor engaged by the Company (Domestic) Name Office Address PricewaterhouseCoopers Zhong Tian LLP 11/F PricewaterhouseCoopers Center, 2 Corporate Avenue, 202 Hu Bin Road, Huangpu District, Shanghai, China Auditor engaged by the Company (Overseas) Legal advisor as to PRC law Name of signing Yao Wenping, Liu Jingping auditors Name Office Address PricewaterhouseCoopers 22nd Floor, Prince’ s Building, Central, Hong Kong Name Office Address Beijing Grandway Law Office 12/F, Block C, Skyworth Building, 8 South One Street, Hi- Tech Zone, Nanshan District, Shenzhen Legal advisor as to Hong Kong law Legal advisor as to United States law Name Office Address Name Office Address Cleary Gottlieb Steen & Hamilton (Hong Kong) 37th Floor, Hysan Place, 500 Hennessy Road, Hong Kong Jones Day 31st Floor, Edinburgh Tower, The Landmark, 15 Queen’ s Registrar for A Shares Name China Securities Depository and Clearing Corporation Road Central, Hong Kong Limited Shanghai Branch Office Address 36th Floor, China Insurance Building, No. 166, Lujiazui East Road, Pudong New District, Shanghai Registrar for H Shares Name Office Address Computershare Hong Kong Investor Services Limited Rooms 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’ s Road East, Wan Chai, Hong Kong Depository Principal banker Name Office Address Name JPMorgan Chase Bank, N.A. 13th Floor, No. 4 New York Plaza, New York, USA Construction Bank of China Shenzhen Branch Jiabin Road Office Address 1st to 4th Floors, Jinwei Building, Jiabin Road, Shenzhen, Sub-branch China 006 007 II. COMPANY PROFILE On 6 March 1996, the Company was registered and established in Shenzhen, the PRC in accordance with the Company Law. In May 1996, the Company issued H Shares and ADSs in Hong Kong and the United States, respectively. In December 2006, the Company issued A Shares in Shanghai. In January 2007, the Company used the proceeds from the issue of A Shares to acquire the railway of Guangzhou-Pingshi section, taking the coverage of the Company’s operations into the national trunk line networks. So far, the Company is the only PRC railway transportation enterprise which has issued securities in Shanghai, Hong Kong and the United States. The Company is mainly engaged in the 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 with the Xiamen-Shenzhen Railway, Guangzhou-Dongguan-Shenzhen Intercity Railway and the East Rail Line in Hong Kong, which form a key integral part of the railway transportation network in the PRC. Passenger transportation, which is the most important transportation business segment of the Company, includes the transportation businesses of Guangzhou-Shenzhen inter-city trains (including Guangzhou East to Chaozhou-Shantou cross-network electric multiple unit (“EMU”) trains), long-distance trains and Hong Kong Through 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 Trains are dispatched every 10 minutes on average during peak hours between Guangzhou and Shenzhen. The through trains passing through Hong Kong, jointly operated by the Company and MTR Corporation Limited, are an important means of transportation for travelling 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. GUANGSHEN RAILWAY 2020 ANNUAL REPORT Freight transportation is an important transportation business segment of the Company. The Company is not only well-equipped with comprehensive freight facilities which enable the efficient transportation of full load cargos, single load cargos, containers, bulky and heavy cargos, dangerous goods, perishable goods and oversized cargos, but also operates rail lines which are closely connected to major ports in Guangzhou and Shenzhen and are at the same time connected to several large industrial zones, logistics zones, and plants and mining enterprises in the Pearl River Delta region via railroad sidings. The major market of the Company’s freight transportation business is domestic mid-to-long-distance transportation, which is also an aspect that the Company enjoys competitive advantages in. Railway operation services are one of the extended passenger and freight transportation services that the Company has expanded since the commencement of operation of WGPR in December 2009. So far, the Company has provided this service to WGPR, GZIR, GSHER, GZR, XSR, GSR, NGR, GGR, PRDIR, MZR, SMR and MSR, where such railway operation service has also become a new area of business growth for the Company. With the successive completion and commencement of operation of a series of high-speed railways and inter-city railways in the “Guangdong-Hong Kong-Macau Greater Bay Area”, the geographical coverage of the Company’s railway operation services will be further expanded. III. MAJOR ACCOUNTING DATA AND FINANCIAL INDICATORS FOR THE PAST FIVE YEARS (Unit: RMB thousand) Income items 2020 2019 Year- on-year increase/ decrease (%) 2018 2017 2016 Total revenue Total operating expenses Profit from operations Profit before tax Profit after tax Consolidated profit attributable to shareholders Basic earnings per share (RMB) Earnings per ADS (RMB/Unit) 16,349,366 21,178,351 18,186,790 20,076,414 1,072,841 1,009,092 747,964 (652,262) (690,745) (558,100) (22.80) 19,828,018 18,331,422 17,280,504 (9.41) 18,658,213 16,932,587 15,637,999 1,534,235 1,544,009 1,153,700 1,062,253 1,068,800 779,034 1,350,358 1,347,132 1,011,768 (160.80) (168.45) (174.62) (557,876) 748,439 (174.54) 784,059 1,015,361 1,158,253 (0.08) 0.11 (172.73) (3.94) 5.28 (174.62) 0.11 5.53 0.14 7.17 0.16 8.18 008 009 Increase/ decrease as at the end of the year compared to the end of last year (%) At the end of 2018 At the end of 2017 At the end of 2016 (0.31) 35,402,237 33,994,238 32,870,258 4,840,203 11.23 5,337,157 6,585,908 (3.37) 28,852,299 28,684,677 28,054,058 3.96 (3.40) 4.07 4.05 Assets and liabilities At the end of 2020 At the end of 2019 Total assets Total liabilities Shareholders’ equity interests (excluding interests of minor shareholders) Net assets per share (RMB) 36,780,453 36,893,133 7,753,852 8,624,284 28,192,838 29,175,726 4.12 3.98 Note: During the reporting period, the profit from operations, profit before tax, profit after tax, consolidated profit attributable to shareholders and other indicators of the Company decreased dramatically year-on-year, mainly due to the decrease in the Company’s operating revenue which outweighed the decrease in operating expenses under the impact of the novel coronavirus (COVID-19) outbreak during the reporting period. For a detailed analysis of the Company's operating revenue and operating expenses for the reporting period, please refer to the chapter "Report of the Directors (including Management Discussion and Analysis)" in this annual report. IV. DIFFERENCES IN ACCOUNTING DATA UNDER CHINESE AND INTERNATIONAL ACCOUNTING STANDARDS □ Applicable ✓ Not applicable V. ITEMS MEASURED AT FAIR VALUE Opening balance Closing balance Change in the current period Impact on the profit for the current period (Unit: RMB thousand) Item Financial assets at fair value through other comprehensive income Total 351,045 377,631 26,586 351,045 377,631 26,586 7,735 7,735 GUANGSHEN RAILWAY 2020 ANNUAL REPORT 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 passenger and freight transportation businesses. 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, MZR, SMR and MSR. (2) Industry Fact Sheet Being the aorta of the nation’s economy, a key infrastructure, a significant project for people’s livelihood, the backbone of an integrated transportation system and one of the main means of transportation, the railway is of crucial importance for the nation’s economic and social development. Since the State Council of the PRC approved the implementation of the Medium to Long Term Plan for Railway Network Development (《中長期 鐵路網規劃》) in 2004, railways in China have experienced exponential development. On the whole, the tight capacity of the Chinese railways has now been alleviated, the bottle neck restriction has been eliminated, and economic and social development needs have been met. However, when benchmarking with the requirements for a new normal of economic developments, other transportation forms and the advanced levels of developed countries, China’s railway still faces deficiencies such as incomplete layout, low operational efficiency and rather severe structural conflicts. By the end of 2020, the nationwide railways in operation reached 146,300 kilometers; among which, the high-speed railways in operation ran over 37,900 kilometers. In 2020, under the impact of the COVID-19 outbreak, there was a significant decrease in passenger traffic volume of the railways nationwide, and the passenger traffic volume was 2.203 billion people throughout the year, representing a year-on-year decrease of 39.8%. However, the railway passenger volume had been recovering gradually since March 2020 as the COVID-19 pandemic was effectively controlled in China and enterprises gradually resumed operation and production. Meanwhile, the nationwide railways actively adopted the operating strategy of “replenishing customers with goods (以貨補客)”, to fully support the promotion of “Highway Transportation to Railway Transportation (公轉鐵)”, and to spare no effort in pandemic prevention and control and the transportation of essential supplies, and lowered freight and miscellaneous expenses to reduce the logistics cost of enterprises. With the formulation of transportation plans under the principle of “one enterprise, one policy” to safeguard the transportation of raw materials and finished goods required by enterprises for the resumption of operation and production, the freight transportation businesses of the nationwide railways had been on the right track. The outbound freight tonnage for the year reached 4.552 billion tonnes, representing a year-on-year increase of 3.2%. Chapter 3Summary of the Company’s Business 010 011 II. EXPLANATION OF SIGNIFICANT CHANGES IN THE MAJOR ASSETS OF THE COMPANY DURING THE REPORTING PERIOD For an explanation of the significant changes in the major assets of the Company during the reporting period, please see the section headed “Analysis of Assets and Liabilities” in the chapter “Report of the Directors (Including Management Discussion and Analysis)” in this annual report. III. SIGNIFICANT CHANGES IN CORE COMPETENCIES DURING THE REPORTING PERIOD □ Applicable ✓ Not applicable GUANGSHEN RAILWAY 2020 ANNUAL REPORT I. CHAIRMAN’S STATEMENT Dear shareholders, On behalf of the Board, I am pleased to present the audited operating results of the Company for 2020, and hereby extend my sincere gratitude to all the shareholders for your concern and support for the Company! (1) Business review 2020 is the last year for building China into a moderately well-off society in all aspects and the 13th Five-Year Plan, and also an extraordinary year since the founding of the PRC. Facing the severe and complex domestic and international political and economic situation, especially the severe impact of the COVID-19 outbreak, the Company has always adhered to the guidance of the Thought on Socialism with Chinese Characteristics for Xi Jinping Era, and thoroughly followed and implemented the decisions of and the tasks assigned by the Central Party Committee, the State Council and the competent industry authorities for railway work, and scientifically coordinated epidemic prevention and control and transportation safety production. With all employees working together and focusing on the Company’s business objectives, the Company put into practice the philosophy of “building up China’s strength in transportation with railway as the priority (交通強國、鐵路先 行)”, adhered to the vision of “strengthening the foundation, improving quality and efficiency (強基達標、 提質增效)”, exerted further efforts on the goals of “enhancing operation, increasing revenue and reducing expenses and energy consumption (增運增收，節支降耗)”, and implemented in depth the activities and campaigns to boost the capacity of its freight transportation and the quality of its passenger transportation services. With such efforts, the Company strongly and effectively coped with various risks and challenges, especially the impact and influence of the COVID-19 outbreak on railway transportation, which has ensured the transportation safety and the stable production and operation of the Company. Chapter 4Report of the Directors(Including Management Discussion and Analysis) 012 013 In 2020, the production and operation of the Company, especially the passenger transportation business, were severely impacted by the COVID-19 outbreak, and the Company recorded a passenger delivery volume of 42,853,500 people, representing a year-on-year decline of 49.66%, while its freight delivery volume amounted to 16,274,100 tonnes, representing a year-on-year increase of 0.21%. Additionally, the Company recorded an operating revenue of RMB16.349 billion, representing a year-on-year decrease of 22.80%; consolidated profits attributable to shareholders amounted to RMB-558 million, representing a year-on-year decline of 174.54%; and its basic earnings per share amounted to RMB-0.08. Throughout 2020, the Board duly performed its duties under the Articles. 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, 7 Board meetings and 6 Audit Committee meetings, at which the Company made sound decisions in relation to important matters of the Company, such as the Company’s profit distribution, financial budget, production and operation, establishment of systems, changes in accounting policies, re-election of Directors and Supervisors, and appointments of senior management so as to enhance the Company’s continuous development. The Company has always strived to enhance its enterprise value, where it persists in ensuring a long-term and stable cash dividend distribution policy, and safeguarding an ongoing favorable return to its shareholders. In 2020, the Company completed the profit distribution for 2019, and paid a cash dividend of RMB0.06 (tax included) per share in the total amount of approximately RMB425 million. Since its listing in 1996, the Company has distributed cash dividends for 24 consecutive years, with an aggregate cash dividend amount of approximately RMB12.3 billion and a dividend payout ratio of 56.56%. (2) Prospects Shareholders are reminded that the Company has made certain forward-looking statements in this annual report in relation to the national and overseas economic landscapes and the railway transportation market, as well as the Company’s work plans for the year of 2021 and the future. These forward-looking statements are subject to the influences of various uncertainties, where the actual outcome may be greatly different from these forward-looking statements of the Company. These statements do not constitute any commitments to the future operating results of the Company. Please be advised to consider the investment risks. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 2021 is the first year for China's new journey to comprehensively build a modern socialist country and the 14th Five-Year Plan. Although there are still many uncertainties in light of the COVID-19 pandemic and the external environment, China's economy has basically returned to normal, and the market demand of the national railway passenger and freight transportation is gradually picking up. The Company will seize the opportunities, adhere to the guidance of the Xi Jinping’s Thought on Socialism with Chinese Characteristics for the New Era, and thoroughly follow and implement the tasks assigned by and the requirements of the central government and the competent industry authorities for railway work, gain insight into the major trend, keep visionary and stick to the main tone of seeking development on the basis of stability in an environment of dramatic changes. Based on the new development stage, the Company will follow the new development philosophy and serve the new development landscape, bravely shoulder the historic mission of "building up China’s strength in transportation with railway as the priority (交通強國、鐵路先行)", and keep actively in line with the key national strategies such as the "Belt and Road (一帶一路)" initiative, Guangdong-Hong Kong-Macao Greater Bay Area and Shenzhen Pilot Demonstration Zone, consolidate and expand normalized epidemic prevention and control and transportation safety production, deepen its vision of “strengthening the foundation, improving quality and efficiency and reducing expenses and energy consumption (強基達標、提質增效、節支降耗)”, and thoroughly implement “activities and campaigns to boost the capacity of its freight transportation and the quality of its passenger transportation services (貨運增量行 動，客運提質計劃)”. Further, the Company will promote the structural reforms on the supply side of railway transportation, strengthen cost control, continue to improve transportation service quality and operation and management level, and comprehensively promote the Company to achieve the development of higher safety, higher quality, greater efficiency and stronger sustainability and security, with a view to making greater contributions for comprehensively building a modern socialist country, especially a country strong in modern railway transportation, and for the kick-off of the 14th Five-Year Plan. 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 29 March 2021 014 015 II. DISCUSSION AND ANALYSIS OF THE PRINCIPAL OPERATION OF THE COMPANY DURING THE REPORTING PERIOD In 2020, the operating revenue of the Company was RMB16,349 million, representing a decrease of 22.80% as compared to RMB21,178 million for the same period of last year. Of the Company’s operating revenue, revenue from passenger transportation, freight transportation, railway network usage and other transportation-related services, and other businesses were RMB4,115 million, RMB1,699 million, RMB9,572 million and RMB964 million respectively, accounting for 25.17%, 10.39%, 58.55% and 5.90% of the total revenue respectively. Profit from operations amounted to RMB-652 million, representing a year-on-year decrease of 160.80% as compared to RMB1,073 million in the previous year; consolidated profit attributable to shareholders was RMB-558 million, representing a year-on-year decrease of 174.54% as compared to the RMB748 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 Operating revenue Operating expenses Derecognition of land use right Other losses — net Finance costs — net Income tax expenses Net cash flows from operating activities Net cash flows from investing activities Net cash flows from financing activities Current period Same period last year Change (%) (Unit: RMB thousand) 16,349,366 18,186,790 1,188,645 3,841 60,645 (132,645) 1,336,173 (927,513) (485,762) 21,178,351 20,076,414 — 29,096 56,710 261,128 2,395,245 (2,087,032) (484,632) (22.80) (9.41) 100.00 (86.80) 6.94 (150.80) (44.22) (55.56) 0.23 GUANGSHEN RAILWAY 2020 ANNUAL REPORT 2. Analysis of revenue and costs (i) Passenger transportation Passenger transportation, which is the most important transportation business segment of the Company, includes the transportation businesses of Guangzhou-Shenzhen inter-city trains (including Guangzhou East to Chaozhou-Shantou cross-network EMU trains), long-distance trains and Hong Kong Through Trains. The table below sets forth the revenue from passenger transportation and passenger delivery volume for this period in comparison with those from the same period last year: Revenue from passenger transportation (RMB ten thousand) — Guangzhou-Shenzhen inter-city trains — Through trains — Long-distance trains — Other revenue from passenger transportation Passenger delivery volume (Persons) — Guangzhou-Shenzhen inter-city trains — Through trains — Long-distance trains Total passenger — kilometers (’00 million passenger-kilometers) 2020 2019 Year-on-year increase/ decrease (%) 411,452 164,857 1,453 210,612 34,530 42,853,492 18,081,964 104,998 24,666,530 800,959 310,199 26,117 411,184 53,459 85,130,541 40,031,110 1,858,093 43,241,338 129.31 240.58 (48.63) (46.85) (94.44) (48.78) (35.41) (49.66) (54.83) (94.35) (42.96) (46.25) • The decreases in revenue from passenger transportation and passenger delivery volume were mainly due to the following: Under the impact of the COVID-19 pandemic, passengers’ willingness of travelling had significantly reduced, resulting in a substantial reduction in the number of trains in operation and thus a significant decrease in the passenger traffic volume and revenue from passenger transportation accordingly. 016 017 (ii) Freight transportation Freight transportation forms an important part of the Company’s transportation business. The table below sets forth the revenue from freight transportation and outbound freight volume for this period as compared with the same period last year: 2020 2019 Year-on-year increase/ decrease (%) Revenue from freight transportation (RMB ten thousand) — Revenue from freight charges — Other revenue from freight transportation Outbound freight volume (tonnes) Full-distance volume of outbound freight traffic 169,858 145,660 24,198 16,274,073 211,260 174,091 37,169 16,240,502 (’00 million tonne-kilometers) 1,318.66 1,499.83 (19.60) (16.33) (34.90) 0.21 (12.08) • • The decrease in revenue from freight transportation was mainly due to the following: (a) Due to the COVID-19 pandemic and the slowdown in economic growth, the volume of bulk goods transported by rail decreased, and related revenue decreased accordingly; and (b) in order to support enterprises in fighting the pandemic and reduce their logistics costs, railway companies adopted a series of preferential freight measures, striving to help enterprises resume operation and production. The increase in outbound freight volume was mainly due to the following: In response to the decline in the number of passenger trains in operation and the decrease in the transportation volume of bulk goods, railway companies made full use of their transportation capacity to exert all efforts on transportation of pandemic prevention and living supplies, especially after the pandemic was under control, they actively implemented the operating strategy of "replenishing passengers with goods (以貨 補客)", and vigorously provided support for the national policy of “Highway Transportation to Railway Transportation (公轉鐵)” to ensure the transportation of raw materials and finished products required for enterprises to resume operation and production. GUANGSHEN RAILWAY 2020 ANNUAL REPORT (iii) Railway network usage and other transportation business Railway network usage and other transportation services provided by the Company mainly include passenger and freight transportation railway network usage, the provision of railway operation services, locomotive and passenger car leasing, passenger services and luggage transportation. The table below sets forth the revenue from railway network usage and other transportation services for this period in comparison with those of the same period last year: Revenue from railway network usage and other transportation related services (RMB ten thousand) (a) Railway network usage services (b) Other transportation services — Railway operation services — Other services 2020 2019 Year-on-year increase/ decrease (%) 957,233 375,766 581,467 366,454 215,013 990,338 420,689 569,649 379,043 190,606 (3.34) (10.68) 2.07 (3.32) 12.80 • • • The decrease in the revenue from railway network usage services was mainly due to the following: Under the impact of the COVID-19 pandemic, the number of trains in operation has significantly reduced, resulting in a decrease in the revenue from railway network usage. The decrease in the revenue from railway operation services was mainly due to the following: Under the impact of the COVID-19 pandemic, the workload of railway operation services provided by the Company to other railway companies has reduced, resulting in a decrease in the relevant revenue. The increase in the revenue from other services was mainly due to the following: The Company began to provide freight transportation services for GMSR and SR, and as a result, the relevant revenue from network usage has increased accordingly. (iv) Other businesses The Company’s other businesses mainly include train repairs, on-board catering services, leasing, sales of materials and supplies, sales of goods and other businesses that are related to railway transportation. In 2020, revenue from other businesses was RMB964 million, representing a decrease of 16.38% as compared to RMB1,153 million for the same period last year. The decrease was mainly due to the following: Under the impact of COVID-19 pandemic, the number of trains in operation has significantly reduced, resulting in a decrease in the revenue from train catering services, sales of materials and supplies and sales of goods. 018 019 (v) Analysis of costs By Industry Item 2020 2019 Year-on-year increase/ decrease (%) (Unit: RMB thousand) Railway business Business tax and surcharges Employee benefits Equipment leases and services Materials and supplies Repairs and facilities maintenance costs (materials and supplies excluded) Depreciation of right-of-use assets Depreciation of fixed assets Cargo logistics and outsourcing service fees Utility and office expenses Other Subtotal Other business Employee benefits Materials and supplies Depreciation of right-of-use assets Depreciation of fixed assets Utility and office expenses Other Subtotal Total 29,443 7,185,147 4,971,366 1,064,667 55,127 7,507,439 5,715,665 1,416,128 1,147,603 1,073,731 54,179 1,631,331 462,708 88,731 607,130 17,242,305 499,288 232,112 11,332 30,848 42,933 127,972 944,485 18,186,790 53,992 1,612,683 220,113 137,117 1,150,190 18,942,185 571,504 320,748 11,332 24,615 82,550 123,480 1,134,229 20,076,414 (46.59) (4.29) (13.02) (24.82) 6.88 0.35 1.16 110.21 (35.29) (47.21) (8.97) (12.64) (27.63) — 25.32 (47.99) 3.64 (16.73) (9.41) • • The changes in the costs of the railway business were mainly due to the following: (a) in order to support enterprises in fighting the COVID-19 pandemic, local governments reduced or exempted social insurance premiums in stages, resulting in a drop in wage surcharges; (b) under the impact of the COVID-19 pandemic, the Company’s business volume decreased, resulting in the decreases in the costs for equipment leases and services, materials and utilities consumption and passenger services; (c) the Company began to provide freight transportation services for GMSR and SR, and the related freight carriage, loading and uploading expenses increased accordingly; and (d) the Company carried out the construction of quality and standard lines in terms of railway safety, and the line maintenance expenses increased accordingly. The decrease in the costs of the other business was mainly due to the following: (a) in order to support enterprises in fighting the COVID-19 pandemic, local governments reduced or exempted social insurance premiums in stages, resulting in a drop in wage surcharges; (b) under the impact of the COVID-19 pandemic, the workload of other business was reduced, and related labor costs, materials, water and electricity consumption and other expenditures declined accordingly. GUANGSHEN RAILWAY 2020 ANNUAL REPORT (vi) Major sales customers and suppliers During the reporting period, the sales from the top five customers of the Company amounted to RMB4,159.26 million, accounting for 25.44% of the total annual sales; of which the sales from related parties amounted to RMB4,159.26 million, accounting for 25.44% of the total annual sales. During the reporting period, the purchases from the top five suppliers of the Company amounted to RMB1,865.43 million, accounting for 21.55% of total annual procurement; of which purchases from related parties amounted to RMB1,448.72 million, accounting for 16.74% of the total annual procurement. 3. Expenses (Unit: RMB thousand) Year-on-year increase/ Item 2020 2019 decrease (%) Major reason for the change Derecognition of land use right 1,188,645 — 100.00 Income was recognized after the transfer of the land use right for Guangzhou East Shipai Old Goods Yard was completed. Other losses — net 3,841 29,096 (86.80) The government grant received Finance costs — net Income tax expenses 60,645 (132,645) 56,710 261,128 increased. 6.94 — (150.80) The decrease in operating revenue resulted in a loss in total profit. 4. Cash flow Year-on-year increase/ 2020 2019 decrease (%) Major reason for the change (Unit: RMB thousand) Net cash flows 1,336,173 2,395,245 (44.22) The decrease in operating from operating activities Net cash flows from investment activities Net cash flows from financing activities (927,513) (2,087,032) revenue resulted in a decrease in the cash received from the sales of goods and the provision of services. (55.56) The cash paid for the acquisition and construction of fixed assets decreased. (485,762) (484,632) 0.23 — 020 021 (2) Analysis of assets and liabilities Item Amount at the end of current period Amount at the end of previous period (Unit: RMB thousand) Changes in amount from the end of previous period to the end of current period (%) Major reason for the change Deferred tax assets Trade receivables 422,954 3,721,677 291,250 4,502,084 45.22 Deductible loss increased. (17.33) The amounts receivable for Prepayments and other receivables 695,522 366,077 89.99 Balance of compensation passenger and goods transportation and railway operation services decreased. receivable for the acquisition of land use right for Guangzhou East Shipai Old Goods Yard. Trade payables 2,073,922 1,538,098 34.84 The amount payable for the Contract liabilities 215,305 458,820 purchase of supplies increased. (53.07) The amounts received in advance for passenger and goods transportation decreased. Payables from 2,914,696 1,802,592 61.69 The amounts payable for fixed assets and construction-in- progress construction and equipment increased. Income tax payable 697 250,594 (99.72) Enterprise income tax payable Accruals and other 1,849,656 2,355,560 (21.48) payables decreased. Income was recognized after the transfer of the land use right for Guangzhou East Shipai Old Goods Yard was completed. GUANGSHEN RAILWAY 2020 ANNUAL REPORT (3) Analysis of 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 in other listed companies and non-listed financial enterprises. Details of investments in 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. (ii) Significant non-equity investments During the reporting period, the significant non-equity investment projects of the Company mainly included: Project name Project amount (Unit: RMB ten thousand) Progress of project Invested amount during this year Actual amount invested in aggregate Improvements of automatic blocking and computer inter- locking equipment of the section from Guangzhou to Pingshi of Beijing- Guangzhou railway Improvements of system adaptability of the traction power supply system of the section from Pingshi to Guangzhou of Beijing- Guangzhou railway Construction of public rental houses for staff in Shipai of Guangzhou area 72,651 73% 4,024 53,385 58,499 73% 3,053 42,492 35,000 74% 7,180 25,917 022 023 (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) Disposal of major assets and equity interests During the reporting period, there was no disposal of major assets and equity interests by the Company. (5) Analysis on major subsidiaries and investee companies During the reporting period, the Company did not have net profit from a single subsidiary or investment income from a single investee company with an amount exceeding 10% of the Company’s net profit. III. DISCUSSION AND ANALYSIS ON THE FUTURE DEVELOPMENT OF THE COMPANY (1) Industry landscape and trend Industry development trend: Being the aorta of the nation’s economy, a key infrastructure, a significant project for people’s livelihood, the backbone of integrated transportation system and one of the main means of transportation, the railway is of crucial importance for the nation’s economic and social development. Since the State Council of the PRC approved the implementation of Medium to Long Term Plan for Railway Network Development (《中長期鐵路網規劃》) in 2004, railways in China have experienced exponential development. On the whole, the tight capacity of the Chinese railways has now been alleviated, the bottleneck restriction has been eliminated, and economic and social development needs have been met. However, when benchmarking with the requirements for a new normal of economic developments, other transportation forms and the advanced levels of developed countries, China’s railway still faces deficiencies such as incomplete layout, low operational efficiency and rather severe structural conflicts. To expedite the construction of a contemporary railway network with reasonable layout and wide coverage along with high efficiency, convenience, safety and economic efficiencies, the Medium to Long Term Plan for Railway Network Development (《中長期鐵路網規劃》) (2016–2025) had been jointly modified by the National Development and Reform Commission, Ministry of Transport and CSRG (formerly known as CRC) in July 2016, highlighting a more ambitious “Eight East-West Lines and Eight South-North Lines (八縱八橫)” high-speed railway network for the new era. As such, it is expected that the railway transportation industry will continue to develop rapidly in the long-run, and both railway passenger and freight transportation capacity and the competitive edge of the railway will continue to grow at a steady pace. GUANGSHEN RAILWAY 2020 ANNUAL REPORT Industry competition scenario: The national railway is highly concentrated with a unified transportation management system. Competition within the industry mainly arises as a result of external factors, such as by other transportation industries (including highways, aviation and water transportation), and this is expected to continue to exist in the long run. However, with the gradual deepening of market-oriented railway reforms (including reforms in the investment and financing system, transportation management system, and pricing mechanism), entry barriers to the railway industry will gradually be relaxed, and investment entities in the railway industry will become more diversified. Following the completion of construction and the commencement of operation of the State’s high-speed railway network with “Eight East-West Lines and Eight South-North Lines (八縱八橫)” and numerous inter-city railways, the competition structure of the railway transportation industry is expected to experience substantial changes; not only will competition with other industries (such as highways, aviation and water transportation) intensify, competition within the railway industry will also gradually increase. (2) Development strategies of the Company Under the sound leadership and scientific decision-making of the Board, the Company will capitalize on the historic opportunities presented by large-scale railway constructions, while proactively adapt to the policy direction of the railway system reform, in order to establish a steadfast foothold in the Guangdong-Hong Kong-Macao Greater Bay Area, and to optimize and enhance its business portfolio centered on railway passenger and freight transportation which are complemented by the railway-related businesses. Striving to become a first-class railway transportation services enterprise in the PRC and achieve its development objective of “scaling up and consolidating its strengths (做大做強)”, the Company will also focus on improving its quality of service and continuously advancing its innovations in management, services and technologies. (3) Operating plans At the seventh meeting of the ninth session of the Board of the Company held on 29 March 2021, the Board considered and approved the financial budget for the year of 2021. The Company plans to achieve a passenger delivery volume of 57.10 million people (excluding commissioned transportation) and outbound freight volume of 17.18 million tonnes. To achieve these objectives, the Company will focus on the following tasks: 1. Production safety: centering on the approach of “safety first, prevention-led, integrated governance (安 全第一、預防為主、綜合治理)” to carry out special safety education and optimize and improve the safety production responsibility management system, continuing to deepen the construction of high-quality safety standards, and solidly carrying out special rectifications on transportation safety and fire safety. 024 025 2. 3. Passenger transportation: Firstly, strictly implementing the centralized deployment and requirements of the national and industry authorities to exert continued and relentless efforts on the normalized measures for the prevention and control of the COVID-19 pandemic, strengthen the COVID-19 prevention and control for train stations, ports and cold chain transportation, and internal railway system to improve the emergency response level for COVID-19; secondly, precisely implementing the passenger transportation planning of “plan per day (一日一圖)”, adjusting the transportation organization in a timely manner according to the changes in the pandemic and passenger flow, to run necessary operations when there is passenger flow, and deploy transportation resources in a scientific way; thirdly, optimizing the structure of passenger transportation products, actively organizing the operation of cross-line EMU trains, and striving to explore the high-speed train market; fourthly, laying equal focus on traditional and intelligent services, accelerating the construction of a comfortable, fast and convenient passenger transportation service system, and improving the quality of passenger transportation services. Freight transportation: Firstly, continuing to implement the supply-side structural reform of railway transportation services, optimizing the pricing and marketing mechanisms of freight transportation, accelerating the construction of an intensive and efficient freight logistics system, and striving to reduce logistics costs; secondly, making full use of the transportation resources unused because of the decrease in passenger volume, implementing the operating strategy of “replenishing customers with goods (以貨補客)”, exerting great efforts on the program for increasing freight transportation volume, taking the initiative to connect with enterprise shippers, formulating transportation plans under the principle of “one enterprise, one policy (一企一策)”, optimizing the mechanism of differentiated products, and striving to expand the modern logistics markets. 4. Operational management: Firstly, deepening the comprehensive budget management, strengthening the coordinated management of assets and funds, and comprehensively preventing and controlling operating risks; secondly, facilitating the in-depth implementation of cost and energy consumption reduction, strictly controlling labor costs, indirect management expenses, and procurement expenditures, and reducing maintenance costs, striving to reduce costs and increase efficiency; thirdly, deepening all-asset operation and development, consolidating the presence in traditional industries such as extended passenger transport services and logistics services, expanding new businesses such as comprehensive land development, and striving to increase the return on the Company's assets. GUANGSHEN RAILWAY 2020 ANNUAL REPORT (4) Potential risks Type of risk Description of risk Addressing measures Macro-economic risk Policy and regulatory risk Transportation safety risk The railway transportation industry is highly related to the macro-economic development conditions and is greatly a f f e c t e d b y t h e m a c r o - e c o n o m i c atmosphere. If the macro-economic outlook declines in the future, the Company’s operating results and financial condition may be adversely affected. The railway transportation industry is greatly affected by policies and regulations. With changes in the domestic and international economic environment, and the reform and development of the railway transportation industry, c o r r e s p o n d i n g a d j u s t m e n t s i n t h e related laws, regulations and industrial policies may be required. These changes may give rise to uncertainties to the Company’s business development and operating results. Transportation safety is the prerequisite a n d f o u n d a t i o n f o r t h e r a i l w a y transportation industry in maintaining normal operations and a good reputation. Inclement weather, mechanical failures, human errors and other force majeure e v e n t s m a y a d v e r s e l y a f f e c t t h e transportation safety of the Company. The Company will pay close attention to the changes in international and domestic macro-economic conditions, strengthen its analysis and research on the contributing factors relating to the railway and transportation industry, adjust its development strategies in a timely manner in response to changes in the market environment, and strive to maintain the stability of the Company’s production and operation. The Company will proactively engage in various seminars on the formulation and improvement of industrial polices and regulations development, study the latest changes in policies and regulations, capture the development opportunities brought by the amendments of policies and regulations, and adopt a prudent approach in addressing uncertainties caused by changes in policies and regulations. The Company will actively participate in regular transportation safety 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 and capabilities of its transportation personnel. 026 027 Type of risk Description of risk Addressing measures Market competition risk Other transportation methods (such as aviation, road and water) compete with railway transportation in certain markets. In addition, a range of high- speed railways and inter-city railways have been completed and commenced operation along with the development of the railway transportation industry. I n t e r n a l c o m p e t i t i o n w i t h i n t h e railway transportation industry has also intensified. The Company may be subject to greater competitive pressure in the future, which in turn could impact the operating results of the Company. Financial risk The operating activities of the Company are subject to various financial risks, such as foreign exchange risks, interest rate risks, credit risks and liquidity risks. T h e C o m p a n y w i l l t a k e p r o a c t i v e measures to address market competition. F o r p a s s e n g e r t r a n s p o r t a t i o n , t h e Company will leverage the advantages of “safe, comfortable, convenient, on time (安全、舒適、方便、準點)” railway transportation, improve service facilities and enhance service quality. In respect of freight transportation, the Company is committed to increasing the loading and unloading efficiency and the turnover rate of its freight trains to improve the freight train frequency. In addition, the Company will strengthen its analysis and research on the railway transportation market, and proactively apply to competent authorities of the industry to add new long-distance trains in areas not yet covered by high- speed railways. 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 a d v e r s e i m p a c t s o n t h e f i n a n c i a l performance of the Company. For more detailed analysis, please refer to Note 3 to the financial statements. (5) Explanation on the COVID-19 pandemic and its impact Since the beginning of 2021, the COVID-19 pandemic has still been spreading overseas, and sporadic and locally clustered cases have been reported in various places in China, indicating that the pandemic situation is still severe and complicated. The Company expects that the pandemic will continue to have an adverse impact on the Company‘s production and operation. In this regard, the Company will make active response on the basis of exerting earnest efforts in normalizing the measures for pandemic prevention and control. On the one hand, it will precisely implement the passenger transportation planning of “plan per day (一日一 圖)”, adjust the transportation organization in a timely manner according to the changes in the pandemic and passenger flow, and arrange transportation resources reasonably, while making full use of the transportation resources unused because of the decrease in passenger volume, implementing the operating strategy of “replenishing customers with goods (以貨補客)”, exerting great efforts on the program for increasing freight transportation volume and striving to increase transportation volume and revenue; on the other hand, the Company will strictly control costs, charges and expenses, and significantly reduce temporary labor costs, indirect management expenses and maintenance and procurement costs, striving to reduce the Company‘s operating costs. GUANGSHEN RAILWAY 2020 ANNUAL REPORT IV. EXPLANATION OF CONDITIONS AND REASONS NOT DISCLOSED BY THE COMPANY IN ACCORDANCE WITH STANDARDS DUE TO NON-APPLICABLE STANDARDS AND REGULATIONS OR SPECIAL REASONS SUCH AS NATIONAL SECRETS, COMMERCIAL SECRETS □ Applicable ✓ Not applicable V. OTHER DISCLOSURES (1) Liquidity and source of funding During the reporting period, the principal source of funding of the Company was revenue generated from its operating activities. The Company’s capital was mainly used for operating and capital expenses, and the payment of taxes. The Company has stable cash flow and believes that it has sufficient working capital, bank loans and other sources of funding to meet its operation and development needs. As of the end of the reporting period, the Company had no borrowings of any form. The Company’s capital commitments and operating commitments as of the end of the reporting period are set out in Note 40 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, and had no entrusted deposits. The gearing ratio (calculated by the balance of liabilities divided by the balance of total assets as of the end of the period) of the Company was 23.45%. (2) Risk of foreign exchange rate fluctuations and related hedges The Company’s exposure to foreign exchange risks was mainly related to USD and HKD. Apart from payments for imported purchases and dividend paid to foreign investors, which are settled in foreign currencies, other major operational businesses of the Company are all settled in RMB. RMB is not freely convertible into other foreign currencies, and its conversion is subject to the exchange rates and regulations of foreign exchange control promulgated by the PRC government. Any foreign currency denominated monetary assets and liabilities are subject to the risks of foreign exchange rate fluctuations. The Company has not used any financial instruments to hedge its foreign exchange risks. Currently, its foreign currency risks are minimized mainly through monitoring the size of transactions in foreign currencies and foreign currency denominated assets and liabilities. 028 029 (3) Taxation Details of income tax applicable to the Company during the reporting period are set out in Note 35 to the financial statements. (4) Interest capitalized During the reporting period, no interest was capitalized in the fixed assets and 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 ratios (as defined in 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 Statement 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 Statement of Changes in Equity and Note 24 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 investments, had not carried out any material acquisition and disposal of subsidiaries and associates, and had no definite plan for material investment or acquisition of capital assets. GUANGSHEN RAILWAY 2020 ANNUAL REPORT (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 had no loan bearing fixed interest rates. (12) Laws and regulations During the reporting period, the Company complied with all relevant laws and regulations that have a significant impact on the Company. (13) Board of Directors of the Company As of the date of publication of this annual report, the Directors of the Company are as follows: Executive Directors: Wu Yong, Hu Lingling, Guo Xiangdong Non-executive Directors: Guo Jiming, Wang Bin, Zhang Zhe Independent Non-executive Directors: Frederick Ma Si-Hang, Tang Xiaofan, Qiu Zilong (14) Directors of subsidiaries At the end of the reporting period, except for Dongguan Changsheng Enterprise Company Limited and Zengcheng Lihua Stock Company Limited, none of the subsidiaries of the Company had set up their board of directors. The members of the boards of directors of the above subsidiaries are as follows: Name of Company Name of Board Member Dongguan Changsheng Enterprise Luo Jiancheng, He Shan, Chen Longwei, Liu Qiyi, Huang Ruibin, Company Limited Yin Jinwen, Ren Zhuoquan Zengcheng Lihua Stock Company Luo Jiancheng, Zhang Qingshan, Chen Longwei, Liu Qiyi, Huang Jian Limited 030 031 (15) Persons of significant relationship with the Company During the reporting period, except as disclosed in this annual report, the Company had 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. (16) Valuation of property interests or tangible assets During the reporting period, the Company did not conduct any valuation on its properties or other tangible assets in accordance with Chapter 5 of the Listing Rules of SEHK. (17) Management contracts During the reporting period, the Company did not enter into any contract containing the following terms: the counterparty of the contract undertakes to be responsible for 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. (18) Loans to entities During the reporting period, the Company did not provide any loan to any entity. (19) 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. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 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” (《關 於 進 一 步 落 實 上 市 公 司 現 金 分 紅 有 關 事 項 的 通 知》) 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 for 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 2019, pursuant to which the Company distributed a cash dividend of RMB0.60 (tax inclusive) per 10 shares to all shareholders of the Company, totaling RMB425,012,220 on the basis of the total share capital at the end of 2019. Chapter 5Matters of Importance 032 033 (2) Plans or budgets for dividend distribution of ordinary shares or common reserve capitalization of the Company for the past three years (including the reporting period) (Unit: RMB thousand) Net profit attributable to the ordinary shareholders of the listed company in the consolidated financial statements for the year of distribution Percentage of net profit attributable to the ordinary shareholders of the listed company in the consolidated financial statements (%) Number of bonus shares per 10 shares (share) Amount of dividend per 10 shares (incl. tax) (RMB) Number of scrip shares per 10 shares (share) Amount of cash dividends (incl. tax) 0 0 0 0 0.60 0.60 0 0 0 0 425,012 425,012 (557,876) 748,439 784,059 0 56.79 54.21 Year of distribution 2020 2019 2018 Explanation on the profit distribution proposal for 2020: Under the impact of the COVID-19 pandemic, the Company faced great operating and financial pressure. Taking into consideration the current operating position of the Company and the capital requirements for maintaining the normal operation of the Company, the Board proposed not to make profit distribution or capitalize capital reserve into share capital for 2020. This profit distribution proposal has been considered and approved at the seventh meeting of the ninth session of the Board of the Company, and is subject to approval at the 2020 Annual General Meeting of the Company. As for the aforementioned profit distribution proposal, the independent Directors of the Company unanimously agree that the proposal is in compliance with the relevant regulatory rules and the Articles, conforms to the Company’s current actual situation, will enhance the Company’s sustainable and stable development, and will not damage the interests of small and medium shareholders, and agree to submit the proposal to the Company‘s 2020 Annual General Meeting for consideration. (3) If a company was profitable in the reporting period, and the profit available for distribution to ordinary shareholders by the parent company is positive, but no proposal for the distribution of profits in cash on ordinary shares was put forward, the company shall disclose the reasons and the use and use plan of the undistributed profit in detail □ Applicable ✓ Not applicable GUANGSHEN RAILWAY 2020 ANNUAL REPORT II. FULFILLMENT OF COMMITMENTS (1) Commitments made by related parties, including de facto controllers of the Company, shareholders, related parties, purchasers and the Company during or continued into the reporting period Party GRGC Background Type Resolve industry competition Commitment related to initial public offering Resolve GRGC connected transactions Other Other GRGC commitments Other GRGC Contents of the commitment 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. GRGC will reduce the number of connected 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 of the Company and behaving in a manner that is detrimental to the interests of the Company. GRGC leased the occupied land in the Guangzhou-Pingshi section to the Company after acquiring such land by means of authorized operation. The leasing agreement entered into by the Company and GRGC became officially effective on 1 January 2007, pursuant to which the land use right for the Guangzhou-Pingshi Railway line was leased to the Company by GRGC for a term of 20 years. It has been agreed by the two parties that the annual land rent should not exceed RMB74 million. GRGC has issued a letter of commitment to the Company in October 2007, in relation to the enhancement of the management of undisclosed information. Date and term of commitment Execution time limit Strict compliance in time — No Yes — No Yes 20 years Yes Yes October 2007 No Yes 034 035 (2) The Company’s explanation of whether the original profit forecast has been met with respect to the assets or projects and the related reasons for such in the event that any profit forecast exists for the Company’s assets or projects and the reporting period is still within the profit forecast period □ Achieved □ Not achieved ✓ 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 THE REASONS FOR AND IMPACT OF CHANGES IN ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES OR RECTIFICATION OF SIGNIFICANT ACCOUNTING ERRORS □ Applicable ✓ Not applicable GUANGSHEN RAILWAY 2020 ANNUAL REPORT VI. ENGAGEMENT AND DISMISSAL OF ACCOUNTING FIRM (Unit: RMB ten thousand) Currently engaged Name of domestic auditor Remuneration of domestic auditor Term of engagement of domestic auditor (years) Name of international auditor Remuneration of international auditor Term of engagement of international auditor (years) PricewaterhouseCoopers Zhong Tian LLP PricewaterhouseCoopers 500 13 310 18 Name Remuneration Auditor for internal control Financial advisor PricewaterhouseCoopers Zhong Tian LLP Deloitte Touche Tohmatsu 30 19 VII. RISK OF SUSPENSION OF LISTING □ Applicable ✓ Not applicable VIII. INFORMATION AND REASON FOR DELISTING □ Applicable ✓ Not applicable IX. BANKRUPTCY AND RESTRUCTURING □ Applicable ✓ Not applicable 036 037 X. MATERIAL LITIGATION AND ARBITRATION □ The Company had material litigation and arbitration during this year ✓ The Company did not have any material litigation and arbitration during this year XI. PENALTIES IMPOSED ON THE LISTED COMPANY AND ITS DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT, CONTROLLING SHAREHOLDERS, DE FACTO CONTROLLER AND PURCHASER, AND THE RECTIFICATION THEREOF □ Applicable ✓ Not applicable XII. EXPLANATION OF THE INTEGRITY OF THE COMPANY AND ITS CONTROLLING SHAREHOLDERS AND DE FACTO CONTROLLER DURING THE REPORTING PERIOD During the reporting period, there were no matters requiring explanation of the integrity of the Company and 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 GUANGSHEN RAILWAY 2020 ANNUAL REPORT XIV. MATERIAL RELATED PARTY TRANSACTIONS (1) Related party transactions related to daily operations On 30 October 2019, the Company and CSRG (including GRGC and its subsidiaries) entered into a comprehensive services framework agreement for a term of three years. The agreement was approved by the independent shareholders at the extraordinary general meeting of the Company on 23 December 2019. The related party transactions related to daily operations entered into by the Company during the reporting period are set out in Note 41(c) to the financial statements. The Company confirms that the following transactions constitute connected transactions (including continuing connected transactions) described under Chapter 14A of the Listing Rules of SEHK, and at the same time constitute related party transactions described under Note 41(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 Parties Relationship Type of transaction Description of transaction Basis of pricing for the transaction Amount of transaction (Unit: RMB thousand) GRGC and its subsidiaries Largest shareholder and its subsidiaries Provision of services Train services GRGC and its subsidiaries Largest shareholder and its subsidiaries Provision of services Subsidiaries of GRGC Subsidiaries of the GRGC and its subsidiaries GRGC and its subsidiaries largest shareholder Largest shareholder and its subsidiaries Largest shareholder and its subsidiaries Railway network settlement services through CSRG Railway operation services Provision of services supplies Train services Receipt of services Sales of goods Sales of materials and By consultation according 34,705 By consultation according to full cost pricing, or settled according to the prices determined by CSRG Settled according to the prices determined by CSRG Based on agreement according to cost plus pricing 2,345,512 1,332,346 842,350 to full cost pricing By consultation according to full cost pricing, or settled according to the prices determined by CSRG Settled according to the prices determined by CSRG By consultation according to full cost pricing 753,288 1,985,768 297,809 GRGC and its subsidiaries Largest shareholder and its subsidiaries Receipt of services GRGC and its subsidiaries Largest shareholder and its subsidiaries Receipt of services GRGC and its subsidiaries GRGC and its subsidiaries Largest shareholder and its subsidiaries Largest shareholder and its subsidiaries Purchase of goods Receipt of services Railway network settlement services through CSRG Repair and maintenance services Purchase of materials By consultation according 722,487 and supplies Construction work services to full cost pricing Based on fixed budget amount approved for national railway works 285,616 038 039 2. Transactions conducted with CSRG and other railway enterprises Parties Relationship Type of transaction Description of transaction Basis of pricing for the transaction Amount of transaction (Unit: RMB thousand) CSRG and other railway enterprises De facto controller of the largest shareholder and its subsidiaries Provision of services Train services By consultation according to full cost pricing, or settled according to the prices determined by CSRG 57,349 CSRG and other railway enterprises CSRG and other railway enterprises CSRG and other railway enterprises CSRG and other railway enterprises CSRG and other railway enterprises CSRG and other railway enterprises CSRG and other railway enterprises CSRG and other railway enterprises CSRG and other railway enterprises CSRG and other railway enterprises CSRG and other railway enterprises 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 Provision of services Provision of services Provision of services Railway network Settled according to the prices 2,105,206 settlement services through CSRG determined by CSRG Railway operation services Based on agreement according 2,214,460 to cost plus pricing Truck maintenance Settled according to the prices 436,955 services determined by CSRG Sales of goods Sales of materials and By consultation according to supplies full cost pricing Provision of services Apartment leasing services By consultation according to Provision of services — Receipt of services Train services full cost pricing — By consultation according to full cost pricing, or settled according to the prices determined by CSRG — 456 887 18,872 Receipt of services Receipt of services Purchase of goods Receipt of services Railway network Settled according to the prices 1,506,541 settlement services through CSRG determined by CSRG Repair and maintenance By consultation according to 28,928 services full cost pricing Purchase of materials and By consultation according to 12,362 supplies full cost pricing Construction work services Based on fixed budget amount 2,662 approved for national railway works GUANGSHEN RAILWAY 2020 ANNUAL REPORT (2) Related party transactions related to acquisitions or disposals of assets or equity □ Applicable ✓ Not applicable (3) Material related party transactions in relation to joint external investments □ 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 Zengcheng Lihua Stock Company Limited Wholly-owned subsidiary Controlling subsidiary Total Impact of the related claim and debt on the Company Opening balance Addition Closing balance 908 1,231 (708) 200 — 1,231 2,139 1,431 No significant impact on the operation results and financial position of the Company. (708) (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 auditors of the Company also reviewed these transactions and ensured the adequacy and effectiveness of the internal control procedures, and provided its findings to the Independent Non-executive Directors. After making appropriate enquiries with the management, the Independent Nonexecutive 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 agreements 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. 040 041 (7) Confirmation of continuing connected transactions by the auditors The auditors of the Company have carried out procedures on the 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 attention of the Company’s auditors that would cause them to believe that the disclosed continuing connected transactions have not been approved by the Board of the Company; (ii) for transactions involving the provision of goods or services by the Company, nothing has come to the attention of the Company’s auditors 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 attention of the Company’s auditors that would cause them to believe that such transactions were not entered into, in all material respects, in accordance with the terms of the agreements governing such transactions; (iv) with respect to the aggregate amount of each of the continuing connected transactions, nothing has come to the attention of the Company’s auditors that would cause them to believe that the aggregate amounts of such continuing connected transactions have exceeded the maximum aggregate annual caps as disclosed in the previous announcements issued by the Company. 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 GUANGSHEN RAILWAY 2020 ANNUAL REPORT (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. (5) Loan agreements and their performance During the reporting period, the Company and its subsidiaries did not enter into any loan agreements or violate any terms of any loan agreements which had a significant impact on its operation. (6) Other material contracts 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 any significant environmental protection or other significant social safety issues. For details concerning the Company’s fulfillment of its social responsibilities in the areas of transportation safety, environmental protection and social welfare during the reporting period, please refer to the 2020 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). 042 043 (3) Explanation of environmental protection efforts 1. Explanation of environmental protection efforts taken by companies and their substantial subsidiaries which are the key discharging units announced by the environmental protection department The Company’s locomotive maintenance depot in Guangzhou is a key waste discharging unit for water environment and the key unit under supervision for soil pollution of Guangzhou for the year of 2020 as announced by the Bureau of Environmental Protection of Guangzhou Municipality, and has disclosed the environmental protection efforts 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://112.94.64.160:8013/gzydzf2-enterprise/qyhjbgs/list2018?open MsgTaskId=202004291808100414680&year=2020。 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 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 CORPORATE BONDS □ Applicable ✓ Not applicable GUANGSHEN RAILWAY 2020 ANNUAL REPORT I. PARTICULARS OF CHANGES TO ORDINARY SHARE CAPITAL (1) Changes in ordinary shares During the reporting period, there was no change in the Company’s total number of ordinary shares or to the structure of its share capital. (2) Changes in shares with selling restrictions □ Applicable ✓ Not applicable II. PARTICULARS OF SECURITIES ISSUED AND LISTINGS The Company did not issue any securities for the 3 years prior to the end of the reporting period. III. PARTICULARS OF SHAREHOLDERS AND DE FACTO CONTROLLER (1) Total number of shareholders Total number of ordinary shareholders as of the end of the reporting period Total number of ordinary shareholders as of the end of the previous month before the date of disclosure of the annual report 206,932 204,503 Chapter 6Changes in Ordinary Share Capital and Particulars of Shareholders 044 045 (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 Number of shares held with selling restrictions Number of shares held at the end of the period Percentage (%) Shares in pledge or frozen Status Number Name of shareholder (in full) China Railway Guangzhou Group Co., Ltd. HKSCC NOMINEES LIMITED (Note) Lin Naigang Central Huijin Investment Company Limited Li Haihong 2,629,451,300 1,513,926,080 124,000,000 85,985,800 28,776,161 Harvest Fund — Agricultural Bank of China — Harvest CSI 28,101,600 Financial Asset Management Plan Yinhua Fund — Agricultural Bank of China — Yinhua CSI 26,814,300 Financial Assets Management Scheme Zhong Ou AMC — Agricultural Bank of China — Zhong Ou CSI 26,436,800 Financial Assets Management Scheme Southern Asset Management — Agricultural Bank of China — 24,907,300 Southern CSI Financial Assets Management Scheme Taiyuan Iron and Steel (Group) Co., Ltd. 24,336,389 37.12 21.37 1.75 1.21 0.41 0.40 0.38 0.37 0.35 0.34 — — — — — — — — — — Nil Unknown Unknown Unknown Unknown Unknown Unknown Unknown Unknown Unknown — — — — — — — — — — Unit: shares Nature of shareholder State-owned legal person Foreign legal person Domestic natural person State-owned legal person Domestic natural person Other Other Other Other State-owned legal person GUANGSHEN RAILWAY 2020 ANNUAL REPORT Top ten holders of shares without selling restrictions Name of shareholder China Railway Guangzhou Group Co., Ltd. HKSCC NOMINEES LIMITED (Note) Lin Naigang Central Huijin Investment Company Limited Li Haihong Harvest Fund — Agricultural Bank of China — Harvest CSI Financial Asset Management Plan Number of shares held without selling restrictions Class and number of shares Class Number 2,629,451,300 1,513,926,080 124,000,000 85,985,800 28,776,161 28,101,600 RMB ordinary shares RMB ordinary shares Overseas listed foreign shares RMB ordinary shares RMB ordinary shares RMB ordinary shares RMB ordinary shares 2,629,451,300 96,733,781 1,417,192,299 124,000,000 85,985,800 28,776,161 28,101,600 Yinhua Fund — Agricultural Bank of China — Yinhua CSI 26,814,300 RMB ordinary shares 26,814,300 Financial Assets Management Scheme Zhong Ou AMC — Agricultural Bank of China — Zhong Ou 26,436,800 RMB ordinary shares 26,436,800 CSI Financial Assets Management Scheme Southern Asset Management — Agricultural Bank of China — Southern CSI Financial Assets Management Scheme Taiyuan Iron and Steel (Group) Co., Ltd. Statement regarding the connected relationship or acting in concert arrangements of the above shareholders 24,907,300 RMB ordinary shares 24,907,300 24,336,389 RMB ordinary shares 24,336,389 The Company is not aware of any of the above shareholders being connected or acting in concert as defined in the “Administrative Measures on Acquisitions of Listed Companies” (《上市公司收購管理辦法》) Note: HKSCC NOMINEES LIMITED represents 香 港 中 央 結 算（代 理 人）有 限 公 司, holding 96,733,781 A Shares and 1,417,192,299 H Shares of the Company. These shares were held on behalf of various clients respectively. The shareholdings and selling restrictions of the top ten shareholders with selling restrictions □ Applicable ✓ Not applicable 046 047 (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 or 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, as follows: Name of shareholder Class of shares Number of shares held Capacity Unit: shares Percentage of share capital of the same class (%) Percentage of total share capital (%) China Railway Guangzhou Group A Shares 2,629,451,300(L) Beneficial owner 46.52(L) 37.12(L) Co., Ltd. Pacific Asset Management Co., Ltd. Pandanus Associates Inc. H Shares H Shares 227,620,000(L) 157,416,000(L) Investment manager Interest of controlled Brown Brothers Harriman & Co. H Shares Kopernik Global Investors LLC FIDELITY FUNDS H Shares H Shares 126,429,600(L) 126,429,600(P) 118,339,054(L) 85,368,000(L) corporation Agent Investment manager Beneficial owner 15.90(L) 11.00(L) 8.83(L) 8.83(P) 8.27(L) 5.96(L) 3.21(L) 2.22(L) 1.78(L) 1.78(P) 1.67(L) 1.21(L) Note: The letter ‘L’ denotes a long position; the letter ‘P’ denotes a lending pool. (4) Strategic investors or ordinary legal person becoming top 10 shareholders by way of placing of new shares □ Applicable ✓ Not applicable GUANGSHEN RAILWAY 2020 ANNUAL REPORT 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 Date of incorporation Principal operations GRGC Wu Yong 5 December 1992 Organization and management of railway passenger and freight transportation, technologies and other industrial development etc. Equity interests in other domestic Nil and overseas listed controlling and invested companies during the reporting period 2. Chart on the property rights and controlling relationship between the Company and its largest shareholder GRGC 37.12% The Company 048 049 (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 CSRG Lu Dongfu 14 March 2013 Diversified operations with railway transportation services of passengers and freights as its main business. Equity interests in other domestic and overseas listed controlling and invested companies during the reporting period CSRG is the de facto controller of Daqin Railway Co. Ltd. (601006), China Railway Tielong Container Logistics Co. Ltd. (600125) and Beijing-Shanghai High Speed Railway Co., Ltd. (601816), all of which are companies listed on SSE. 2. Chart on the property rights and controlling relationship amongst the Company and the largest shareholder of the Company and its de facto controller CSRG 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 GUANGSHEN RAILWAY 2020 ANNUAL REPORT 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$1.40 per share, which is equal to the closing price of the Company’s H Shares as at the end of the reporting period, the market capitalization of the public float was approximately HK$6.236 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. X. PRE-EMPTIVE RIGHTS Under the Articles 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 had issued or granted any convertible securities, options, warrants or other similar rights, or had any redeemable securities or 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. 050 051 Chapter 7 Information Regarding Preference Shares □Applicable ✓Not applicable GUANGSHEN RAILWAY 2020 ANNUAL REPORT I. CHANGES IN SHAREHOLDINGS AND REMUNERATION (1) Changes in shareholdings and remunerations of Directors, Supervisors and senior management (current and resigned during the reporting period) Name Position (Note) Gender Age Beginning of engagement period End of engagement period Number of shares held at the beginning of the year Number of shares held at the end of the year Unit: shares Total remuneration received from the Company (before tax) during the reporting period (RMB ten thousand) Whether receiving remuneration from related parties of the Company Wu Yong Hu Lingling Guo Jiming Wang Bin Guo Ji’an(*) Zhang Zhe Guo Xiangdong Male Male Male Male Male Male Male Chairman of the Board Executive Director Executive Director General Manager Non-executive Director Non-executive Director Non-executive Director Non-executive Director Executive Director Chairman of Labor Union Deputy General Manager Frederick Ma Si-Hang Independent Non-executive Male Director 57 57 53 47 48 49 55 69 18 December 2014 16 December 2014 26 May 2016 9 December 2015 23 December 2019 16 June 2020 6 June 2018 23 December 2019 23 December 2019 25 September 2019 16 June 2020 16 June 2020 15 June 2023 15 June 2023 15 June 2023 15 June 2023 15 June 2023 16 June 2020 15 June 2023 15 June 2023 15 June 2023 Tang Xiaofan Independent Non-executive Male 52 16 June 2020 15 June 2023 Director Qiu Zilong Independent Non-executive Male 54 16 June 2020 15 June 2023 Director Chen Song(*) Independent Non-executive Male 48 29 May 2014 16 June 2020 Director Jia Jianmin(*) Independent Non-executive Male 63 29 May 2014 16 June 2020 Director Wang Yunting(*) Independent Non-executive Male 62 29 May 2014 16 June 2020 Director — — — — — — 80,000 — — — — — — — — — — — — 80,000 — — — — — — — 51.2 — — — — 42.1 7.9 6.1 6.1 5.6 7.6 5.6 Yes No Yes Yes Yes Yes No No No No No No No Chapter 8Directors, Supervisors, Senior Management and Employees 052 053 Total remuneration received from the Company (before tax) during the reporting period (RMB ten thousand) Whether receiving remuneration from related parties of the Company Name Position (Note) Gender Age Beginning of engagement period End of engagement period Number of shares held at the beginning of the year Number of shares held at the end of the year Liu Mengshu Chairman of the Supervisory Male 57 29 May 2014 15 June 2023 Committee Chen Shaohong Shareholder Representative Male 54 26 June 2008 15 June 2023 Supervisor Xiang Lihua Shareholder Representative Male 47 13 June 2019 15 June 2023 Supervisor Meng Yong Shareholder Representative Male 53 23 December 2019 15 June 2023 Supervisor Zhou Shangde Employee Representative Male 50 28 May 2015 15 June 2023 Supervisor Lin Wensheng Employee Representative Male 56 16 June 2020 15 June 2023 Supervisor Song Min(*) Employee Representative Female 50 29 May 2014 16 June 2020 Supervisor Deputy Secretary of the Party and Working Committee, and Secretary of the Discipline Inspection Commission Deputy General Manager Deputy General Manager, and Secretary of the Board Company Secretary Chief Accountant / Gong Yuwen Luo Jiancheng Tang Xiangdong Luo Xinpeng Total Notes: Male 54 2 April 2018 Male Male Male / 48 52 30 December 2016 29 October 2019 3 December 2019 29 October 2019 / 55 / / — — — — — — — — — — — — — — — — — — — — — — — — 37.8 19.7 15.0 41.3 41.1 41.6 — 80,000 — 80,000 40.9 369.6 Yes Yes Yes Yes No No No No No No No / (1) During the reporting period, except as 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 share options of the Company or has been granted any number of shares of the Company with selling restrictions. (2) “*” means that the person had resigned during the reporting period. GUANGSHEN RAILWAY 2020 ANNUAL REPORT Name Biography Wu Yong Hu Lingling Guo Jiming Wang Bin Mr. Wu, male, born in June 1963, is the Chairman of the Board of the Company. Mr. Wu holds a bachelor’s degree, and is a certified senior engineer. 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. Mr. Hu, male, born in November 1963, is an Executive Director and the General Manager of the Company. Mr. Hu holds 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 the Yangcheng company headquarters of GRGC, the deputy chief engineer and the deputy general manager of the Yangcheng company headquarters 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 the 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 the General Manager of the Company. Mr. Guo, male, born in December 1967, is a Non-executive Director of the Company. Mr. Guo holds a bachelor’s degree and is a certified senior accountant. He had previously served as the deputy head of the Finance Subsection of Wuhan Sub-bureau of Zhengzhou Railway Bureau, the head of the Finance Section and the director of Capital Settlement Center of Wuhan Railway Bureau, the chief accountant of Jinan Railway Bureau, the chief accountant of China Railway Jinan Group Co., Ltd and the director of GRGC. He is currently the chief accountant of GRGC. Mr. Wang, male, born in October 1973, is a Non-executive Director of the Company. Mr. Wang holds a bachelor’s degree and is a senior engineer. Mr. Wang had previously served as the deputy head of the Foshan Train Section of GRGC Yang Cheng Railway Company, the deputy director and director of the Dispatching Office of GRGC Yang Cheng Railway Company, the director of the Sunroof Repair and Management Sub-office of the Safety Supervision Office and the deputy director of the Dispatching Office of GRGC, the head of the Zhaoqing Train Section of SR, head of the Transportation Section and director of the Transportation Department of GRGC. He is currently the deputy general manager of China Railway Nanchang Group Co., Ltd. 054 055 Name Biography Zhang Zhe Guo Xiangdong Frederick Ma Si-Hang Mr. Zhang, male, born in October 1971, is a Non-executive Director of the Company. Mr. Zhang holds a bachelor’s degree and is a senior engineer. He had previously served as the station master of Tangxi Station and the director of the Subdivision of Freight Transportation Marketing of the Yangcheng company headquarters of GRGC, the deputy director of Safety Supervision Sub-office of Guangzhou Railway Office, the deputy station master of Jiangcun Station of the Company, the head of Zhaoqing Train Section of SR, and the station master of Guangzhou South Station of the Company. He is currently the director of Passenger Transport Department of GRGC. Mr. Guo, male, born in November 1965, is an Executive Director, the Chairman of Labor Union and Deputy General Manager of the Company. Mr. Guo holds a bachelor’s degree and an MBA degree, and is an economist. He had previously served as the Deputy Section Chief, the Deputy Director and the Director of the Secretariat of the Board, the Deputy General Manager of the Company and the Secretary of the Board. He is currently the Chairman of Labor Union and Deputy General Manager of the Company. Mr. Ma, male, born in February 1952, is an Independent Non-Executive Director of the Company. Mr. Ma holds a bachelor’s degree in economics and history from the University of Hong Kong. Mr. Ma is a honorary professor of the Faculty of Economics and Finance at the University of Hong Kong, a honorary professor of the Faculty of Business Administration at the Chinese University of Hong Kong, a honorary advisor of the School of Accountancy at Central University of Finance and Economics, a member of the Chief Executive’s Council of Advisers on Innovation and Strategic Development of the Hong Kong SAR Government, the chairman of the Council of the Education University of Hong Kong, a member of the International Advisory Council of China Investment Corporation, a member of the Global Advisory Council of Bank of America and a member of the International Advisory Council of Investcorp. Mr. Ma had been previously honored with a Gold Bauhinia Star and appointed as a Non-official Justice of the Peace. He had previously served as the managing director of the UK branch of RBC Dominion Securities, the deputy chairman and managing director of Kumagai Gumi (HK) Limited, the managing director and Asia manager of the Private Banking Department of Chase Manhattan Bank, the Asia Pacific CEO of Private Banking of JPMorgan Chase & Co., the CFO and executive director of PCCW Limited, the Secretary for Financial Services and the Treasury of Hong Kong SAR Government, the Secretary for Commerce and Economic Development of Hong Kong SAR Government, the non-executive chairman of China Strategic Holdings Limited, an independent nonexecutive director of China Resources Land Limited, an independent non-executive director of Hutchison Port Holdings Limited, an outside director of China Oil and Foodstuffs Corporation, an outside director of China Mobile Communications Group Co., Ltd, an independent non-executive director of Agricultural Bank of China Limited, an independent non-executive director of Aluminum Corporation of China Limited and the non-executive chairman of MTR Corporation Limited. He is currently a non-executive director of Husky Energy Inc., an independent non- executive director of FWD Group Limited and a director of New Frontier Corporation. GUANGSHEN RAILWAY 2020 ANNUAL REPORT Name Biography Tang Xiaofan Qiu Zilong Liu Mengshu Mr. Tang, male, born in October 1968, is an Independent Non-Executive Director of the Company. Mr. Tang holds a master’s degree in economics management from the School of Economics and Trade at Jiangxi Agricultural University and is a senior auditor, a PRC certified public accountant, an accountant certified by the Association of International Accountants and a certified internal auditor. Mr. Tang also obtained the qualification of secretary of the board of companies listed on the SSE and the securities and fund practitioner qualification in the PRC, and is a securities investment advisor. Mr. Tang had previously served as the deputy section chief of Yichun Audit Bureau of Jiangxi, the audit manager of Shenzhen Dahua Tiancheng Accounting Firm, the audit manager of BDO China Shu Lun Pan Certified Public Accountants LLP and Yangcheng (HK) CPA Limited, the vice president and CFO of Guangzhou Greenery Cafe Company Limited, the secretary of the board and CFO of Guangzhou Jiacheng International Logistics Co., Ltd. (a company listed on the SSE), the deputy general manager of Guangdong Xiyu Investment Management Co., Ltd. and a director and the senior vice president of Jiangxi Geto New Materials Corporation Limited. He is currently a director and the general manager of Guangzhou Dening Investment Management Co., Ltd. Mr. Qiu, male, born in March 1967, is an Independent Non-executive Director of the Company. Mr. Qiu holds a bachelor’s degree of physics in radio from Hunan Normal University and a master’s degree in business administration from Peking University Shenzhen Graduate School and is currently the executive vice president of Shenzhen Changsha Chamber of Commerce. Mr. Qiu had previously served as the assistant engineer, assistant factory director and deputy factory director of Guangdong Panyu Safety Equipment Factory, the deputy general manager of Shenzhen Xingelan Electronic Co., Ltd., the managing director of Shenzhen Guanzhong Xie’an Electronic Technology Co., Ltd. and the managing director of Shenzhen Xingguanzhong Electronic Technology Co., Ltd. He is currently the general manager of Shenzhen Changshang Investment Management Co., Ltd. and a director of Shenzhen Beida Soft Bank Investment Corporation Limited. Mr. Liu, male, born in July 1963, is 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 the party committee’s propaganda department of GRGC’s 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), the director of the party committee office of GRGC and a director, the deputy secretary of the party committee and the secretary of Committee for Discipline Inspection of GRGC. He is currently the secretary of Committee for Discipline Inspection of China Railway Nanchang Group Co., Ltd. 056 057 Name Biography Chen Shaohong Xiang Lihua Meng Yong Zhou Shangde Mr. Chen, male, born in January 1967, is a Shareholder Representative Supervisor of the Company. Mr. Chen holds a bachelor’s degree and is a certified senior economist. He had served successively in GRGC as the vice-director of the corporate management office and the vice-director and director of the corporate management and legal affairs department of GRGC, the vice-chief economist and the director of the corporate and legal affairs department of GRGC, the chief legal advisor and the chief of the corporate management and legal affairs department of GRGC, and the chief legal advisor and the director of the corporate management and legal affairs department of GRGC. He is currently the chief legal advisor of GRGC. Mr. Xiang, male, born in September 1973, is a Shareholder Representative Supervisor of the Company. Mr. Xiang holds a bachelor’s degree and is a political engineer. He had previously served as the secretary of the Board and the director of the general department of GZR, the deputy office director of GRGC, the Vice Secretary of the Party Committee and the Secretary of Committee for Discipline Inspection of the Company’s Communication and Signaling Section in Guangzhou, and the head of the marketing department of GRGC. He is currently the director (chief) of the human resources department (party committee organization) of GRGC. Mr. Meng, male, born in September 1967, is a Shareholder Representative Supervisor of the Company. Mr. Meng holds a bachelor’s degree and is an accountant. He had previously served as the head of the Finance Planning Division of the Finance Section and the deputy director of the Finance Section, the deputy director of the Finance Department (Revenue Division) of GRGC and the director of the Audit Department of GRGC. He is currently the director of the Finance Department (Income Department) of GRGC. Mr. Zhou, male, born in December 1970, is an Employee Representative Supervisor of the Company. Mr. Zhou graduated with a master’s degree and is a political engineer. He had successively served in the Company as the Deputy Chief of the Organizational Personnel Department, the Director of the Party Committee office, and 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 human resources department, the deputy office manager and the director of the reception office, and the chief party secretary of office administration. He also served in the Company as the Party Secretary and station master of Shenzhen Station, the station master of Shenzhen North Station and the Deputy Secretary of the Party Committee. He is currently engaged in special projects in the Company. Lin Wensheng Mr. Lin, male, born in December 1964, is an Employee Representative Supervisor of the Company. Mr. Lin holds a bachelor’s degree and is a senior accountant. Mr. Lin had previously served as the chief accountant of the Industrial and Electrical Business Department of the Company, the deputy chief economist of the Guangzhou Electricity Section and the head of the Planning and Finance Department of the Company. He is currently the head of the Audit Department of the Company. GUANGSHEN RAILWAY 2020 ANNUAL REPORT Name Biography Gong Yuwen Luo Jiancheng Tang Xiangdong Luo Xinpeng Mr. Gong, male, born in September 1966, is the Deputy Secretary of the Party Committee, and the Secretary of the Discipline Inspection 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 the human resources department (party committee organisation) leading the personnel department of GRGC, the deputy director of the human resources department of GRGC and the deputy director of the organizational department of the party committee. He also served in the Company as the Party Deputy Secretary and the deputy station master of Guangzhou East Station, the Secretary of the Party Committee and the deputy station master. He is currently the Deputy Secretary of the Party Committee, and the Secretary of the Discipline Inspection Commission of the Company. Mr. Luo, male, born in January 1973, is the Deputy General Manager of the Company. Mr. Luo graduated with a bachelor’s degree, a master's degree in engineering from Tsinghua University and is a senior engineer. He served successively as the chief of the Investigation & Inspection Division of the General Office of GRGC, the station master of Shiweitang Station 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 Enterprise Company Limited and the deputy general manager of GMSR. He is currently the Deputy General Manager of the Company. Mr. Tang, male, born in September 1968, is the Deputy General Manager and the Secretary of the Board 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, the Director of the Finance Department and the Chief Accountant of the Company. He is currently the Deputy General Manager and the Secretary of the Board of the Company. Mr. Luo, male, born in October 1965, is the Chief Accountant of the Company. Mr. Luo completed a part-time master’s degree and is a senior accountant. He had previously served as the vice director of the finance department of the Guangzhou Railway Works of the Ministry of Railways, the director of the finance department, the chief accountant and the director of the finance department of the Guangzhou Railway Rolling Stock Works of China National Railway Locomotive & Rolling Stock Industry Corporation, the chief accountant of GRGC’s Guangzhou railway rolling stock works, the chief accountant of Yuehai Railway Company Limited, and the chief accountant of Hainan Railway Company Limited. He is currently the Chief Accountant of the Company. (2) Share incentives granted to the Directors and Senior Management during the reporting period □Applicable ✓Not applicable 058 059 II. ENGAGEMENTS OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT (CURRENT AND RESIGNED DURING THE REPORTING PERIOD) (1) Engagements in shareholders Name of personnel Wu Yong Guo Jiming Wang Bin Zhang Zhe Name of shareholder Position at shareholder Beginning of engagement End of engagement GRGC GRGC GRGC GRGC Chairman of the Board Secretary of the Party Committee Chief Accountant Director Director of the Transportation Department November 2018 Chief of the Passenger Transport August 2014 November 2017 June 2019 June 2019 April 2019 March 2020 July 2020 Liu Mengshu GRGC Department Director Deputy Secretary of the Party Committee and Secretary of the Committee for Discipline Inspection November 2017 March 2020 December 2013 September 2020 Chen Shaohong GRGC Chief Legal Adviser Chief of the Corporate Management and December 2017 November 2018 April 2020 Xiang Lihua GRGC Legal Affairs Department Director (Chief) of Human Resources Department (Party committee organization) September 2018 Meng Yong GRGC Chief of the Finance Department (Income April 2020 Department) Chief of the Audit Department June 2019 April 2020 GUANGSHEN RAILWAY 2020 ANNUAL REPORT (2) Engagements in other companies Name of personnel Name of company Position at company Wu Yong Qian Zhang Chang Railway Company Limited, Huai Shao Heng Railway Chairman of the Board Guo Jiming Guangdong Railway Company Limited, Shichang Railway Company Chairman of the Board Co., Ltd. Limited WGPR Hukun Passenger Railway Line (Hunan) Company Limited GZIR, PRDIR and Hainan Railway Company Limited China Railway Nanchang Group Co., Ltd. Guangdong Tieqing International Travel Agency Company Beijing Zhongtie Commemorate Ticket Co., Ltd. Husky Energy, FWD Group and New Frontier Corporation Guangzhou Dening Investment Management Co., Ltd. Shenzhen Changshang Investment Management Co., Ltd. Shenzhen Beida Soft Bank Investment Corporation Limited China Railway Nanchang Group Co., Ltd. Wang Bin Zhang Zhe Frederick Ma Si-Hang Tang Xiaofan Qiu Zilong Liu Mengshu Vice Chairman of the Board Director Chairman of the Supervisory Committee Deputy General Manager Director Supervisor Director Managing Director General Manager Director Secretary of the Commission for Discipline Inspection Xiang Lihua Guangzhou Beiyang Information Technology Company Limited Chairman of the Supervisory Committee Chen Shaohong Guangdong Railway Company Limited, Hainan Railway Company Director Limited, Qian Zhang Chang Railway Company Limited, XSR, MSR Shichang Railway Company Limited, Hukun Passenger Railway Line Meng Yong (Hunan) Company Limited Hong Kong Qiwen Trade Company Limited WGPR, Guangdong Railway Company Limited Chairman of the Supervisory Committee Director Chairman of the Supervisory Committee Hukun Passenger Railway Line (Hunan) Company Limited, Huai Shao Supervisor Luo Jiancheng Heng Railway Co., Ltd. Dongguan Changsheng Enterprise Company Limited, Shenzhen Pinghu Qun Yi Railway Store Loading and Unloading Company Limited, Shenzhen Guangshen Railway Economic and Trade Enterprise Company Limited and Zengcheng Lihua Stock Company Limited Chairman of the Board Guangzhou Tiecheng Enterprise Company Limited, Shenzhen Director Guangshen Railway Civil Engineering Company Luo Xinpeng Guangzhou Tiecheng Enterprise Company Limited, Shenzhen Director Guangshen Railway Civil Engineering Company 060 061 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 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 objectives 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, Guo Jiming, Wang Bin, Zhang Zhe, and the following Supervisors, namely Liu Mengshu, Chen Shaohong, Xiang Lihua and Meng Yong, received any remuneration from the Company. As far as the Company is aware, as at the date of publication of this report, the Company had no arrangements under which the Directors, Supervisors and senior management had waived or agreed to waive any remuneration. For details of the actual payment of remuneration to the Directors, Supervisors and senior management and details of remuneration by level of remuneration during the reporting period, please see the section headed “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 43 to the financial statements of the Company prepared in accordance with the International Financial Reporting Standards. During the reporting period, the Directors, Supervisors and senior management received a total remuneration of RMB3.696 million. GUANGSHEN RAILWAY 2020 ANNUAL REPORT IV. CHANGES IN DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT Name Position held Change Reason for change Wang Bin Non-executive Director Elected Election on general Frederick Ma Si-Hang Tang Xiaofan Qiu Zilong Independent Non-executive Director and Chairman of Audit Committee and Remuneration Committee Independent Non-executive Director and Member of Audit Committee and Remuneration Committee Independent Non-executive Director and Member of Audit Committee and Remuneration Committee Lin Wensheng Employee Representative Supervisor Elected Guo Xiangdong Deputy General Manager Engaged meeting Elected Election on general meeting Elected Election on general meeting Elected Election on general meeting Election on employee representative meeting Engaged by the Board Guo Ji’an Non-executive Director Resigned Adjustment of work Chen Song Jia Jianmin Wang Yunting Independent Non-executive Director and Chairman of Audit Committee and Remuneration Committee Independent Non-executive Director and Member of Audit Committee and Remuneration Committee Independent Non-executive Director and Member of Audit Committee and Remuneration Committee Resigned arrangements Rotation of the Board Resigned Rotation of the Board Resigned Rotation of the Board Song Min Employee Representative Supervisor Resigned Adjustment of work arrangements V. EXPLANATION OF PUNISHMENT BY SECURITIES REGULATORY BODIES FOR THE PAST THREE YEARS □Applicable ✓Not applicable 062 063 VI. OTHER INFORMATION ON DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT (1) Equity interests of Directors, Supervisors or Chief Executives Save as disclosed below, 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 in Appendix 10 to the Listing Rules of SEHK. Name of the company/ associated corporation Name Position Capacity and nature of interest Number and class of shares held Percentage of shareholding in the total share capital of the Company (%) Percentage of shareholding in the relevant class of shares of the Company (%) Long/Short position Guo Xiangdong The Company Director Beneficial owner A Shares: 0.0011 0.0014 Long Position 80,000 shares Xiang Lihua The Company Supervisor Interest of spouse A Shares: 0.00026 0.00032 Long Position 18,200 shares During the reporting period, none of the Company or its subsidiaries had entered into any arrangement such that the 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 or any other legal entities. Other companies in which the Directors and Supervisors of the Company were directors or employees did not have interests in the shares and underlying shares of the Company that were required to be disclosed to the Company under Sections 2 and 3 of Part XV of the SFO. GUANGSHEN RAILWAY 2020 ANNUAL REPORT (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 prior to 31 January 2004 and were exempt from complying with the shareholders’ approval requirement 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 cannot be terminated 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. 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 41,286 39 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 Other (secondary vocational school, high school and vocational technical school, etc.) Total Number of professionals 19,214 5,491 3,497 3,422 1,841 2,138 1,246 114 4,323 41,286 Number of persons 157 4,826 15,686 20,617 41,286 064 065 (2) Remuneration policy The Company conducts budget management in relation to remuneration issues, and the annual salary budget is jointly formulated by the Budget Department and Labor 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 is then prepared 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 mainly comprises basic salary, performance-based salary and benefit plans. The basic salary includes salary in respect of the position, salary in respect of skills and various allowances and subsidies accounted for under salary payable in accordance with regulations. Performance-based salary refers to salary calculated on the basis of economic benefits and social benefits, or piece-rate pay calculated on the basis of workload, or performance-based salary calculated on the basis of job performance. Benefit plans include various social insurance and housing funds paid as required by relevant policies. Please refer to Note 31 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 distributing staff salaries, the Company always adheres to the principles of distribution based on labor, efficiency and fairness. It follows that distribution of staff salary is determined on the premise of macro-control, on the basis of job evaluation, and on the foundation of staff performance appraisal, which plays an important role in the distribution system of the Company’s incentive mechanism and mobilizing the initiative of employees. (3) Training Plan During the reporting period, the Company had a total of 118 occupational education management personnel and a total of 844,189 people participating in vocational training, which mainly include training on job 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 RMB51.09 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 plans that mainly include housing fund, retirement pension (basic retirement insurance and supplemental retirement insurance), medical insurance (basic medical insurance, supplemental medical insurance and 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 any retirement plan. GUANGSHEN RAILWAY 2020 ANNUAL REPORT I. 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 its 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 Company’s stocks. During the reporting period, pursuant to the regulatory requirements for the internal control of listed companies set out by domestic and overseas securities regulatory bodies, the Company completed the self-assessment on internal control and relevant auditing works for the year of 2019, amended the Articles, and conducted thorough self-inspection with reference to the requirements set forth in the Notice on Promoting the Listed Companies in the Jurisdiction to Fulfill Corporate Responsibilities and Enhance Corporate Governance to Achieve High-Quality Development (Shen Zheng Ju Gong Si Zi [2020] No. 128) (《關於推進轄 區上市公司落實主體責任提高治理水平實現高質量發展的通知》（深證局公司字[2020]128號）) issued by CSRC Shenzhen Branch in a bid to improve corporate governance of the Company and prevent risks and hazards, altogether further improving the Company’s corporate governance and internal controls to promote the sound and sustainable developments of the Company. During the reporting period, in view of the highly centralized systematic transportation management on the national 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 functions as an industry leader granted by laws and administrative regulations. In view of this, the Company duly complied with regulations set out in the Management Rules on Inside Information and Insiders (《內幕信息及知情人管理制度》), enhanced the management of non-public information, reminded its shareholders to promptly fulfill their obligations with respect to confidentiality and the prevention of insider trading. Improvement of corporate governance is a long-term systematic project, which requires continuous improvement and enhancement. As it always has, the Company will continue to promptly update and improve its internal systems in accordance with the relevant regulations, promptly identify and solve problems, strengthen its management foundation 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 the corporate governance and requirements of related regulations of CSRC? If there is significant difference, explanations shall be made. □Applicable ✓Not applicable Chapter 9Corporate Governance 066 067 II. SUMMARY OF GENERAL MEETINGS (1) General meetings held during the reporting period Session of meeting Date Media in which resolutions were disclosed Date of disclosure 2019 Annual General 16 June 2020 Meeting Website of SSE (www.sse.com.cn) HKEXnews website of SEHK 17 June 2020 16 June 2020 (www.hkexnews.hk) (2) Important event for the attention of shareholders in the coming year The Company plans to convene the 2020 Annual General Meeting, during which it will conduct votes and make resolutions on issues including the profit distribution plan. With respect to the specific arrangements for the 2020 Annual General Meeting, investors are advised to pay attention to and carefully read the “Notice of 2020 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. GUANGSHEN RAILWAY 2020 ANNUAL REPORT III. PERFORMANCE OF DUTIES BY DIRECTORS (1) Attendance at Board meetings and general meetings by Directors Attendance at Board meetings Whether the Director is an Independent Director Number of Board meetings to be attended this year Number of meetings attended in person Number of meetings attended by way of telecommunication Number of meetings attended by proxy Number of absences Attendance at general meetings Number of general meetings attended Whether two consecutive Board meetings were not attended No No No No No No No Yes Yes Yes Yes Yes Yes 7 7 7 5 2 7 7 5 5 5 2 2 2 7 7 7 5 2 7 7 5 5 5 2 2 2 7 7 7 5 2 7 7 5 5 5 2 2 2 0 0 0 0 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 No No 1 1 1 0 0 1 1 0 0 0 0 0 0 Name of Director Wu Yong Hu Lingling Guo Jiming Wang Bin Guo Ji’an(*) Zhang Zhe Guo Xiangdong Frederick Ma Si-Hang Tang Xiaofan Qiu Zilong 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 meetings held during the year Including: Number of on-site meetings Number of meetings held by way of telecommunication Number of meetings held on-site combined with telecommunication 7 0 7 0 068 069 (2) Performance of duties by Independent Directors 1. Attendance at meetings During the reporting period, the Company held 1 general meeting, 7 Board meetings and 6 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 see 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 the Work Rules of Independent Directors (《獨立董事工作條例》) with an attitude of responsibility towards all of the shareholders of the Company. They showed solicitude for the Company’s operation and compliance with laws, actively participated in Board meetings and related meetings, carefully reviewed each of the resolutions proposed at the meetings, made valuable suggestions and offered opinions on important project investments, operations and management of the Company based on their professional knowledge. They also raised independent opinions according to relevant rules and facts according to their knowledge of the material affairs of the Company, such as external guarantees, changes of directors and engagements of senior management. During the process of preparation and disclosure of the annual report, the Independent Directors fulfilled the duties required by the securities regulatory authorities and the Annual Report Working Rules of the Audit Committee and Independent Directors (《審 核 委 員 會 及 獨 立 董 事 年 報 工 作 制 度》). They performed their duties in a proactive manner, and communicated with the Company and finance and auditing firms adequately and carefully raised practical 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. GUANGSHEN RAILWAY 2020 ANNUAL REPORT Firstly, the Independent Directors recommended the Company to cooperate with the external auditor in relation to the auditing of the 2019 Annual Report in accordance with the agreed audit arrangements. The Company promptly provided the accounting information and other relevant information required for the audit to ensure the audit quality of the 2019 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 2020. The above resolutions for the re-appointment of domestic and international auditors were passed upon consideration at the fifteenth meeting of the eighth session of the Board and the 2019 Annual General Meeting of the Company. 4. On-site working and inspection During the reporting period, the Independent Directors of the Company mainly participated in on-site meetings to gain knowledge of the Company’s daily operations. They also communicated with other Directors, senior management and related staff of the Company through telephone and emails as detailed below: Time Matter Venue Participant 16 June 2020 Attendance of the 2019 Annual General Meeting Headquarters of the Company Tang Xiaofan, Qiu Zilong 070 071 5. Expression of independent opinions During the reporting period, the Independent Directors of the Company expressed independent opinions as follows: Time Meeting Matter Type of opinion 30 March 2020 The fifteenth meeting of the eighth session of the Board Explanation and independent opinion on the external guarantees of the Company During the reporting period, the Company had no external guarantees. 16 June 2020 2019 Annual General Independent opinion on GRGC’s nomination Meeting of Mr. Wu Yong, Mr. Hu Lingling, Mr. Guo Jiming, Mr. Wang Bin, Mr. Zhang Zhe and Mr. Guo Xiangdong as the candidates for the Non-Independent Directors of the ninth session of the Board of the Company, and nomination of Mr. Frederick Ma Si-Hang, Mr. Tang Xiaofan and Mr. Qiu Zilong as the candidates for the Independent Directors of the ninth session of the Board of the Company 16 June 2020 The first meeting of the ninth session of the Board Independent opinion on the engagement of Mr. Guo Xiangdong as the Deputy General Manager of the Company After reviewing the related nomination d o c u m e n t s a n d m a t e r i a l s o f t h e proposed personnel, they confirmed that their qualifications were legal and agreed to recommend these Director candidates at the general meeting. After reviewing the related nomination d o c u m e n t s a n d m a t e r i a l s o f t h e proposed personnel, they confirmed that their qualifications were eligible a n d t h e e n g a g e m e n t p r o c e s s e s were legal. Thus, it agreed to the engagement of these personnel by the Board. GUANGSHEN RAILWAY 2020 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 no 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. VI. INABILITY OF THE COMPANY AND ITS CONTROLLING SHAREHOLDERS TO ENSURE INDEPENDENCE AND MAINTAIN 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 competition and corresponding work progress and follow-up work plans of the Company □Applicable ✓Not applicable 072 073 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 to and restrictions on senior management, motivate the senior management to enhance their management capabilities and level, and review and evaluate the work and performance of the individual members of senior management, the Company implements an objective responsibility assessment mechanism for senior management, under which the Board and the senior management of the Company and its subsidiaries signed target assessment responsibility letters at the beginning of every year, and the indicators for such assessment include passenger and freight transportation volume, revenue from transportation, safety, costs, profit and management. After the assessment period, the Company provides incentive awards on an individual basis based on the completion of targets and tasks by individual members of senior management and the assessment results. VIII. DISCLOSURE OF THE REPORT OF SELF-ASSESSMENT ON INTERNAL CONTROL During the reporting period, the Board of the Company continued to comply with the relevant domestic and overseas requirements, and carried out a self-assessment of the effectiveness of its internal control. For details of the assessment report, please refer to the Report on Internal Control 2020 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 THE 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 Type of opinion on the Audit Report of Internal Control: Standard and unqualified opinion GUANGSHEN RAILWAY 2020 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 to 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 in which the Company operates, as well as the corporate governance structure over time. According to the requirements of the Articles and the Procedures for Shareholders to Nominate a Person for Election as a Director, upon the expiration of the term of a director of the Company or in the event of a vacancy following the resignation of a director of the Company, shareholders individually or collectively holding 3% or more of the issued shares of the Company may nominate a candidate to be a non-independent director by way of written proposal to the Company; and shareholders individually or collectively holding 1% or more of the issued shares of the Company may nominate a candidate to be 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, the director shall be entitled to be re-elected. (2) Securities transactions by Directors, Supervisors and senior management, and interests in competing 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 (《上市公司董事、 監事和高級管理人員所持公司股份及其變動管理規則》) (Zheng Jian Gong Si Zi [2007] No. 56) of the 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 (《廣深鐵路股份有限公司董事、監事 和高級管理人員持有公司股份及其變動管理制度》), 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 complied with the required standard set out in the abovementioned 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 held any interests in businesses that compete or may compete with the businesses of the Company directly or indirectly. 074 075 (3) The Board As of the date of this report, the Board of the Company is composed of nine Directors, including Mr. Wu Yong (Chairman of the Board and Executive Director), Mr. Hu Lingling (Executive Director), Mr. Guo Xiangdong (Executive Director), Mr. Guo Jiming (Non-executive Director), Mr. Wang Bin (Non-executive Director), Mr. Zhang Zhe (Non-executive Director), Mr. Frederick Ma Si-Hang (Independent Non-executive Director), Mr. Tang Xiaofan (Independent Non-executive Director) and Mr. Qiu Zilong (Independent Non-executive Director). 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 proposals of dividends, ensuring the implementation of an 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 daily business operations, development planning and implementation under the assistance of the Deputy General Manager, and is responsible to the Board for all businesses of the Company. The Board comprises 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, mostly ranging from 40 to 60 years old, possess the appropriate qualifications related to the businesses of the Company, and are therefore able to provide recommendations to the management from multiple perspectives with diversified modes of thinking. The names, biographical details and occupations of the Directors of the Company are set out in 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 promptly 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 the working conditions necessary for the performance of their duties. The Secretary of the Board actively assists the Independent Directors in performing their duties, and other relevant personnel of the Company would cooperate with the Independent Directors as needed to perform their duties. The fees required for the engagement of intermediaries and the discharge of other duties by the Independent Directors are borne by the Company so that the Independent Directors can effectively perform their duties. During the reporting period, the Board held 7 meetings in total. For details of the attendance of the Directors at the Board meetings, please refer to 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 the relevant affairs of the Company. Each committee has specific responsibilities, and reports and gives advice to the Board on a regular basis. GUANGSHEN RAILWAY 2020 ANNUAL REPORT (4) Board diversity policy In December 2018, the Company established its Board Diversity Policy. Under such policy, the Board shall consider and adopt measurable objectives for achieving diversity of Board members each year. When selecting candidates, the Board shall consider 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, and the Company shall also incorporate its corporate features and specific requirements to reach a final decision, having due regard to the candidates’ level of qualifications reflected by objective criteria and the benefits of diversity on the Board members. The Board will monitor the implementation of such policy, as well as the progress of measurable objectives in relation to the diversity and whether these objectives have been achieved. The Board will also evaluate the policy at appropriate times in order to ensure the effectiveness of the policy. The Board will discuss and adopt any 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 plans and investment proposals 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 headed “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. 076 077 (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. Frederick Ma Si-Hang (Chairman of the Remuneration Committee), Mr. Tang Xiaofan, Mr. Qiu Zilong, 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 in respect of 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 benchmark information from internal and external sources in relation to the market standard for remuneration and 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 2019 Annual General Meeting held by the Company on 16 June 2020, it was considered and approved that the remuneration and allowances of each of the domestic Independent Non-executive Directors would be RMB100,000 and RMB12,000 per year respectively, and the remuneration and allowances of each of the overseas Independent Non-executive Directors would be HK$150,000 and HK$18,000 per year respectively. For details of the remuneration of Directors in the reporting period, please refer to the relevant parts of the section headed “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. Frederick Ma Si-Hang (Chairman of the Audit Committee), Mr. Tang Xiaofan and Mr. Qiu Zilong. They possess appropriate academic and professional qualifications or related financial management expertise. Mr. Tang Xiangdong, who is the Secretary to the Board of the Company, is the secretary of the Audit Committee. According to the requirements of the Working Rules of the Audit Committee of the Company (《審核委員會 工作條例》), the principal duties of the Audit Committee include but are not limited to reviewing the financial performance of the Company and its subsidiaries and 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. The Audit Committee shall also discuss matters raised by the internal auditors and external auditors of the Company 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 of the Company. GUANGSHEN RAILWAY 2020 ANNUAL REPORT During the reporting period, the Audit Committee held 6 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. The attendance of each member of the Audit Committee is set out as below: Name Frederick Ma Si-Hang Tang Xiaofan Qiu Zilong Chen Song(*) Jia Jianmin(*) Wang Yunting(*) Number of meetings to be attended Number of meetings attended in person Attendance rate 2 2 2 4 4 4 2 2 2 4 4 4 100% 100% 100% 100% 100% 100% Note: “*” means that the person had resigned during the reporting period. The Audit Committee of the Company discussed the audit plan of the annual report with the external auditors of the Company and urged them to submit the audit report promptly. The Audit Committee reviewed the Company’s financial and accounting statements before the external auditors commenced their work and made written suggestions. After the external auditors drafted an initial opinion, the Audit Committee reviewed the statements and made written suggestions again. The Company’s quarterly financial report, interim financial report, and annual financial report and results announcement during the reporting period have been reviewed by the Audit Committee. 078 079 (9) Auditors remuneration and related professional fees During the reporting period, the Company appointed PricewaterhouseCoopers Zhong Tian LLP as its domestic auditor and PricewaterhouseCoopers as its international auditor. As of the end of the reporting period, the Company’s domestic auditor has served a term of 13 consecutive years and its international auditor has served a term of 18 consecutive years. The rotation of people in charge of auditing affairs and endorsing certified public accountant is in compliance with the Requirements on the Regular Rotation of the Endorsing Accountants for Securities and Futures Auditing Services (《關於證券期貨審計業務簽字註冊會計師定期輪換的 規定》) 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 an internal control audit fee of RMB0.30 million) to PricewaterhouseCoopers Zhong Tian LLP and RMB3.10 million to PricewaterhouseCoopers for their annual auditing services. In addition, the fee that the Company had paid for non-audit services amounted to RMB0.61 million. (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 guidance 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 of 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. Frederick Ma Si-Hang, Mr. Tang Xiaofan and Mr. Qiu Zilong, Independent Directors of the Company, participated in the SSE’s 71st session of Qualification Training for Independent Directors and obtained independent director qualification certificates. Mr. Tang Xiangdong, Deputy General Manager and Secretary of the Board of the Company, successively participated in a series of business trainings organized by domestic and foreign regulatory agencies and stock exchanges in addition to completing not less than 15 hours of relevant professional training. GUANGSHEN RAILWAY 2020 ANNUAL REPORT (11) Corporate governance functions The Board is responsible for the fulfillment of the following corporate governance responsibilities: 1. developing and reviewing the Company’s corporate governance policies and practices; 2. 3. 4. 5. reviewing and monitoring the training and continuing professional development of the Company’s Directors and senior management; reviewing and monitoring the Company’s policies and regulations with respect to its compliance with laws and regulatory requirements, which include the Listing Rules and other applicable laws and 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. (12) Shareholders’ rights In accordance with the requirements of the Articles, two or more shareholders holding, in aggregate, 10% or more of the shares of the Company carrying the right to vote at the meeting sought 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 an extraordinary general meeting or a class meeting after receiving such request. Shareholders individually or collectively holding 3% or more of the shares of the Company carrying the right to vote at the meeting sought 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 meeting sought. Shareholders shall attend 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 of the Company shall attend 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 the contact information, please refer to the chapter “Company Profile and Major Financial Indicators” in this annual report. 080 081 (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 (《董事會秘書工作條例》), Management Rules on Information Disclosure (《信息披露管理辦法》) and the Management System for Investor Relations (《投資者關係管理制度》). The Company has strictly fulfilled its disclosure obligations 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 to 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’ right to knowledge and freedom of choice, and rewarding its shareholders. 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 its 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. During the reporting period, the Company promptly 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, investments, 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 on the operation, management, and development trends of the Company. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 2. Ongoing communication On the basis of competent disclosure of information, the Company maintains 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) 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. (ii) Properly arranging investor visits and research requests, communicating with investors with an open-minded attitude, and establishing a direct communication mechanism between investors and the Company. (iii) Allowing investors and the public to check 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) Promptly handling and replying to investors’ messages through the “e-interaction” platform developed by SSE for listed companies and investors. 082 083 3. Shareholders’ returns Since its listing, the Company has always insisted on rendering returns to shareholders and has been distributing annual cash dividends for 24 consecutive years with an aggregate cash dividend payment of approximately RMB12.3 billion. The dividends and distributions of the Company over the years since its listing in 1996 are 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 2018 2019 Total Earnings per share Dividend per share (Unit: RMB) Dividend payout ratio (dividend per share/ earnings 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 0.11 0.11 3.81 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 0.06 0.06 2.155 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% 54.55% 54.55% 56.56% GUANGSHEN RAILWAY 2020 ANNUAL REPORT (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 accurately and fairly reflect the business position, results and cash flow of the Company during the period. In the course of preparing the accounts for the year ended at the end of the reporting period, 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 prescribed time 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 quarterly reports promptly in accordance with the Listing Rules of SSE. The responsibility statements of the Directors and the auditors in respect of 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 A sound and operable risk management and internal control system is the foundation of good corporate governance. The Board of the Company is responsible for the establishment of sound and effective internal controls, the assessment of the effectiveness of such controls, and making accurate disclosures of its internal control assessment report. In accordance with the requirements of laws and regulations such as the Company Law, Securities Law, the Basic Regulations on Enterprise Internal Control (《企業內部控制基本規範》） and its related guidelines, Guidelines for Internal Control of Listed Companies (《上市公司內部控制指引》), 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 based on a 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 assess 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 (《企業內部控制基本規範》) and Implementation Guidelines for Enterprise Internal Control (《企業內部控制配套指引》) jointly promulgated by five ministries and commissions of the PRC, and has formed an internal control system that centers on 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. 084 085 The Board is responsible for continuous supervision of 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 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 the risk management and risk control system for decision-marking, events and businesses of significance), and supervising implementation thereof. During the reporting period, the Audit Committee held 6 meetings in total, each with the attendance of senior management and the external auditor and internal auditor of the Company. The Audit Committee shall examine report results of the external auditor and internal auditors of the Company, the compliance of the accounting policies and internal controls adopted by the Company with the requirements of the Listing Rules, as well as review the audits, internal control, risk management and financial statements of the Company. The Company’s quarterly results, interim results and annual results during the reporting period will be recommended to the Board for approval after the meeting and discussions of the Audit Committee. The Audit Department was established by the Company to operate an independent 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 conducting independent audits on 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 must principally 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, Chief Financial Officer, 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 identification-sensitive information. The Company has established systems relating to information disclosure, registration and management of insiders and prevention of misuse and dissemination of sensitive information. The Company has established comprehensive procedures and internal control measures ranging from reporting, identification, auditing 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 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（《信息披露管理辦法》）, so as to ensure equal opportunities of all investors to promptly access relevant Company information. GUANGSHEN RAILWAY 2020 ANNUAL REPORT During the reporting period, the Company continued to implement 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 training and carried out tests for its staff as a whole regarding its 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 to realize “risk control awareness for all, internal control participation for all, and compliance responsibility for all”, and safeguard 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 subject 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 On 16 June 2020, the Company convened the 2019 Annual General Meeting, in which amendments to the Articles were considered and approved by the shareholders of the Company. For the specific amended Articles, please refer to the “Information of the 2019 Annual General Meeting” of the Company as disclosed on the website of SSE (http://www.sse.com.cn) on 29 April 2020, and the “Proposed Re-election and Appointment of Directors, Proposed Re-election of Shareholder Representative Supervisors, Proposed Amendments to the Articles of Association and Notice of 2019 Annual General Meeting” of the Company as disclosed on the HKEXnews website of SEHK (http://www.hkexnews.hk) on 28 April 2020. 086 087 Chapter 10 Information Regarding Corporate Bonds □Applicable ✓Not applicable GUANGSHEN RAILWAY 2020 ANNUAL REPORT 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 95 to 191, which comprise: • • • • • the consolidated balance sheet as at 31 December 2020; 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 2020, 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. Chapter 11Financial Statements 088 089 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 Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for 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. GUANGSHEN RAILWAY 2020 ANNUAL REPORT Key audit matters are identified in our audit and our audit procedures performed to address these key audit matters are set out as below: • • Provision for impairment of trade receivables Goodwill impairment assessment 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 20 to the consolidated financial statements. As at 31 December 2020, the Group had gross balance of trade receivables of RMB3,782,381,000, against which expected credit loss (“ECL”) provision of RMB60,704,000 were held. 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. We identified this as a key audit matter due to the significance of the trade receivables balance and the assessment of the ECL provision involves significant accounting estimations and judgements. (i) Obtained an understanding of the internal control and assessment process of provision for impairment of trade receivables and assessed the inherent risk of material misstatement by considering the degree of estimation uncertainty and level of other inherent risk factors such as complexity and subjectivity. (ii) Evaluated and validated key controls over trade receivables portfolio grouping and ECL determination. (iii) Evaluated whether the models and methodologies used by management to determine ECL were in accordance with accounting standards. (iv) Evaluated the reasonableness of the judgement management made in grouping trade receivable portfolios by assessing credit risk characteristics. (v) 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 and current status of each portfolio, trade receivables lifetime recovery information and other relevant data. (vi) Understood and evaluated the reasonableness of the factors used in making forward-looking estimation, including the risk of economy downturn, external market environment, technical environment and changes in, customer’s condition. (vii) Obtained ECL determination documents of each portfolio of trade receivables and examined their mathematical accuracy. Based on the work performed, management’s judgments assessing ECL provision and result of the assessment are supported by the available evidences. 090 091 Key Audit Matter How our audit addressed the Key Audit Matter Goodwill impairment assessment The procedures we performed included: Refer to notes 2.8, 4(b) and 9 to the consolidated financial statements. As at 31 December 2020, the Group had a balance of goodwill of RMB281,255,000 arising from the Company’s acquisition of Yangcheng Railway Business in 2007. (i) Obtained an understanding of the internal control and assessment process of goodwill impairment and assessed the inherent risk of material misstatement by considering the degree of estimation uncertainty and level of other inherent risk factors such as complexity and subjectivity. G o o d w i l l i m p a i r m e n t r e v i e w s a r e u n d e r t a k e n b y management at least annually or more frequently if events or changes in circumstances indicate a potential impairment. As a result of the impairment test at the year end, management determined that the recoverable amount of the cash generating unit (“CGU”), to which the goodwill was allocated, exceeded its carrying value and therefore no impairment was recorded. The recoverable amount of CGU was determined based on value-in-use using cash flow projections. (ii) Evaluated and tested the key controls over the impairment assessment of goodwill, including controls over the development of model and significant assumptions used in the impairment test. (iii) Evaluated the reliability of the plan and forecast by comparing the forecast used in the prior year model to the actual performance of the business in the current year. Management’s impairment assessment involves key assumptions, including revenue growth rate, long-term growth rate, gross margin and pre-tax discount rate. (iv) Tested the completeness, accuracy and relevancy of the underlying data used and the mathematical accuracy of the calculations in the cash flow projections. We identified this as a key audit matter due to the degree of the significant accounting estimations and judgements involved in the impairment assessment and the size of the goodwill. (v) Evaluated the reasonableness of revenue growth rate, long-term growth rate, gross margin based on historical business performance taking into account future business plan, the market developments and whether these assumptions were consistent with evidence obtained in other areas of the audit. (vi) Utilized specialists with specialised skill and knowledge to assist in the evaluation of the appropriateness of the impairment assessment methodology and pre-tax discount rate adopted by the management. Based on the work performed, management’s judgments in goodwill impairment assessment are supported by the available evidences. GUANGSHEN RAILWAY 2020 ANNUAL REPORT OTHER INFORMATION The directors of the Company are responsible for the other information set out in the Company’s 2020 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. 092 093 AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE 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. GUANGSHEN RAILWAY 2020 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, actions taken to eliminate threats or safeguards applied. 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, 29 March 2021 094 095 CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2020 (All amounts in Renminbi thousands) ASSETS Non-current assets Fixed assets — net Right-of-use assets Construction-in-progress Prepayments for fixed assets and construction-in- progress Goodwill Investments in associates Deferred tax assets Long-term prepaid expenses Financial assets at fair value through other comprehensive income Long-term deposits 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 Note 2020 2019 As at 31 December 6 8 7 9 11 12 13 15 16 17 18 19 20 21 16 22 23 24 23,016,415 3,183,470 2,778,676 23,566,081 3,037,618 2,378,974 36,744 281,255 196,848 422,954 43,889 377,631 160,000 23,734 41,377 281,255 174,686 291,250 40,807 351,045 – 26,103 30,521,616 30,189,196 – 296,406 3,721,677 695,522 60,000 1,485,232 2,183 271,259 4,502,084 366,077 – 1,562,334 6,258,837 6,703,937 36,780,453 36,893,133 7,083,537 11,562,657 3,266,425 6,280,219 7,083,537 11,562,657 3,266,425 7,263,107 28,192,838 (36,669) 29,175,726 (36,445) 28,156,169 29,139,281 GUANGSHEN RAILWAY 2020 ANNUAL REPORT Note 2020 2019 As at 31 December Liabilities Non-current liabilities Lease liabilities Deferred tax liabilities Deferred income related to government grants Current liabilities Trade payables Contract liabilities Payables for fixed assets and construction-in-progress Dividends payable Income tax payable Current portion of lease liabilities Accruals and other payables Other current liability Total liabilities 8 12 25 27 28 8 29 1,315,693 58,913 104,939 1,117,936 61,405 97,467 1,479,545 1,276,808 2,073,922 215,305 2,914,696 13,749 697 61,880 1,849,656 14,834 1,538,098 458,820 1,802,592 12,890 250,594 58,490 2,355,560 – 7,144,739 6,477,044 8,624,284 7,753,852 Total equity and liabilities 36,780,453 36,893,133 The above consolidated balance sheet should be read in conjunction with the accompanying notes. The financial statements on pages 95 to 191 were approved by the Board of Directors on 29 March 2021 and were signed on its behalf. Wu Yong Director Hu Lingling Director 096 097 CONSOLIDATED COMPREHENSIVE INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2020 (All amounts in Renminbi thousands, except for earnings per share data) Note Year ended 31 December 2020 2019 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 Materials and supplies Repairs and facilities maintenance costs, excluding materials and supplies Depreciation of right-of-use assets Depreciation of fixed assets Cargo logistics and outsourcing service charges Utility and office expenses Others Other Businesses Employee benefits Materials and supplies Depreciation of right-of-use assets Depreciation of fixed assets Utility and office expenses Others Total operating expenses Derecognition of land use right Reversal of impairment losses on financial assets, net Other losses — net Operating Profit Finance costs — net Share of results of associates, net of tax (Loss)/profit before income tax Income tax credit/(expenses) 31 8 6 32 31 8 6 32 18 33 34 11 35 4,114,522 1,698,576 9,572,330 15,385,428 963,938 16,349,366 (29,443) (7,185,147) (4,971,366) (1,064,667) (1,147,603) (54,179) (1,631,331) (462,708) (88,731) (607,130) (17,242,305) (499,288) (232,112) (11,332) (30,848) (42,933) (127,972) (944,485) (18,186,790) 1,188,645 358 (3,841) (652,262) (60,645) 22,162 (690,745) 132,645 8,009,590 2,112,596 9,903,382 20,025,568 1,152,783 21,178,351 (55,127) (7,507,439) (5,715,665) (1,416,128) (1,073,731) (53,992) (1,612,683) (220,113) (137,117) (1,150,190) (18,942,185) (571,504) (320,748) (11,332) (24,615) (82,550) (123,480) (1,134,229) (20,076,414) – – (29,096) 1,072,841 (56,710) (7,039) 1,009,092 (261,128) GUANGSHEN RAILWAY 2020 ANNUAL REPORT Note Year ended 31 December 2020 2019 (Loss)/profit for the year (558,100) 747,964 (Loss)/profit for the year Other comprehensive income (558,100) – 747,964 – Total comprehensive income for the year, net of tax (558,100) 747,964 (Loss)/profit attributable to: Equity holders of the Company Non-controlling interests Total comprehensive income attributable to: Equity holders of the Company Non-controlling interests (Loss)/earnings per share for (loss)/profit attributable to the equity holders of the Company during the year Basic (loss)/earnings per share Diluted (loss)/earnings per share (557,876) (224) 748,439 (475) (558,100) 747,964 (557,876) (224) 748,439 (475) (558,100) 747,964 36 36 RMB(0.08) RMB0.11 RMB(0.08) RMB0.11 The above consolidated comprehensive income statement should be read in conjunction with the accompanying notes. Wu Yong Director Hu Lingling Director 098 099 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2020 (All amounts in Renminbi thousands) Attributable to equity holders of the Company Share premium Statutory surplus reserve (Note 24) Discretionary surplus reserve (Note 24) Other reserves (Note 24) Share capital (Note 23) Retained earnings Total Non- controlling interests Total equity Balance at 1 January 2019 Total comprehensive income Profit for the year Other comprehensive income (Note 24) Special reserve — Safety Production Fund (Note 24) Appropriation Utilisation Appropriations from retained earnings (Note 24) Transaction with owners: Dividend relating to 2018 (Note 37) 7,083,537 – – – 11,562,657 – – – 2,702,161 – – – 304,059 – – – – – – – – – – – – – – – – – – 78,264 – – – – – – – – 181,941 – – – – 264,871 (264,871) – – – 7,017,944 748,439 748,439 – – (264,871) 264,871 (78,264) (425,012) (425,012) 28,852,299 748,439 748,439 – – – – – (425,012) (425,012) (35,970) (475) (475) – 28,816,329 747,964 747,964 – – – – – – – – – – – (425,012) (425,012) Balance at 31 December 2019 7,083,537 11,562,657 2,780,425 304,059 181,941 7,263,107 29,175,726 (36,445) 29,139,281 Balance at 1 January 2020 Total comprehensive income Loss for the year Other comprehensive income (Note 24) Special reserve — Safety Production Fund (Note 24) Appropriation Utilisation Appropriations from retained earnings (Note 24) Transaction with owners: Dividend relating to 2019 (Note 37) 7,083,537 – – – 11,562,657 – – – 2,780,425 – – – 304,059 – – – – – – – – – – – – – – – – – – – – – – – 181,941 – – – – 281,277 (281,277) – – 7,263,107 (557,876) (557,876) – – (281,277) 281,277 – 29,175,726 (557,876) (557,876) – (36,445) (224) (224) – 29,139,281 (558,100) (558,100) – – – – – – – – – – – – – – (425,012) (425,012) (425,012) Balance at 31 December 2020 7,083,537 11,562,657 2,780,425 304,059 181,941 6,280,219 28,192,838 (36,669) 28,156,169 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Wu Yong Director Hu Lingling Director GUANGSHEN RAILWAY 2020 ANNUAL REPORT CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2020 (All amounts in Renminbi thousands) Year ended 31 December Note 2020 2019 Cash flows from operating activities Cash generated from operations Income tax paid 38(a) 1,587,621 (251,448) 2,748,668 (353,423) Net cash generated from operating activities 1,336,173 2,395,245 Cash flows from investing activities Proceeds from disposal of fixed assets Proceeds from disposal of assets classified as held for sale Payment of investment Interest received Dividends received (Increase)/decrease in 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 38(b) 32,599 3,036 132,086 (26,586) – 7,735 263,943 (29,799) 857 7,047 (220,000) 109,000 (853,347) (2,441,116) Net cash used in investing activities (927,513) (2,087,032) Cash flows from financing activities Dividends paid to the Company’s shareholders Payment of lease liabilities (425,012) (60,750) (425,012) (59,620) Net cash used in financing activities (485,762) (484,632) Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year (77,102) 1,562,334 (176,419) 1,738,753 Cash and cash equivalents at end of year 22 1,485,232 1,562,334 The above consolidated cash flows statement should be read in conjunction with the accompanying notes. Wu Yong Director Hu Lingling Director 100 101 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. GUANGSHEN RAILWAY 2020 ANNUAL REPORTNotes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 1 GENERAL INFORMATION (continued) 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 29 March 2021. 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. 2 SUMMARY OF SIGNIFICANT 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”) are measured at fair value. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 102 103 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.1 Basis of preparation (continued) (c) Going concern basis As at 31 December 2020, the Group had net current liabilities of RMB885,902,000 and capital expenditure contracted for but not recognised as liabilities of RMB444,270,000 (see note 40). Considering the current financial position, operating plan and usable bank facilities amounting to RMB1,500,000,000 of the Group, 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 2020: • • • • COVID-19-Related Rent Concessions — amendments to IFRS 16 Definition of Material — amendments to IAS 1 and IAS 8 Definition of a Business — amendments to IFRS 3 Revised Conceptual Framework for Financial Reporting The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.1 Basis of preparation (continued) (e) New standards and interpretations not yet adopted Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2020 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. Amendments to IAS 16 Annual Improvements to IFRS Standards 2018–2020 Amendments to IFRS 3 Effective for annual periods beginning on or after 1 January 2022 1 January 2022 Property, Plant and Equipment: Proceeds before intended use Reference to the Conceptual 1 January 2022 Framework Amendments to IAS 37 Onerous Contracts — Cost of 1 January 2022 Amendments to IAS 1 Classification of Liabilities as 1 January 2023 Fulfilling a Contract Amendments to IFRS 10 and IAS 28 Current or Non-current Sale or contribution of assets between an investor and its associate or joint venture To be determined Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 104 105 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.2 Subsidiaries 2.2.1 Consolidation Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity where 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 to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. Inter-company 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. (a) Business combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the: • • • • fair values of the assets transferred; liabilities incurred to the former owners of the acquired business; equity interests issued by the group; fair value of any asset or liability resulting from a contingent consideration arrangement; and • fair value of any pre-existing equity interest in the subsidiary. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.2 Subsidiaries (continued) 2.2.1 Consolidation (continued) (a) Business combinations (continued) The group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. Acquisition-related costs are expensed as incurred. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised 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, amount of any non-controlling interest in the acquired entity, and the acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase. Intra-group 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. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 106 107 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.2 Subsidiaries (continued) 2.2.1 Consolidation (continued) (b) Changes in ownership interests in subsidiaries without change of control The group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity. (c) Disposal of subsidiaries When the Group ceases to have control, any retained interest in the entity is remeasured 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. 2.2.2 Separate financial statements Investments in subsidiaries are accounted for at cost less impairment. Cost also includes direct attributable costs 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. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.3 Associates Associates are all entities over which the group has significant influence but not control or joint control. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting after initially being 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. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 108 109 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.4 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. 2.5 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 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 of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or loss. Foreign exchange gains and losses are presented in the consolidated comprehensive income statement within “Finance costs – net”. 2.6 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 any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.6 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; and the initial period of certain land use right acquired (note 2.26), 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 8), 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 reporting period. 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. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 110 111 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.7 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. 2.8 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. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.9 Impairment of non-financial assets other than goodwill Assets that subjected to amortisation are tested 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 of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (CGUs). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting period. 2.10 Investments and other financial assets (a) Classification 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 profit or loss or other comprehensive income (“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. (b) 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 financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 112 113 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.10 Investments and other financial assets (continued) (c) 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. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.10 Investments and other financial assets (continued) (d) Impairment 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. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 114 115 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.11 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. 2.12 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. 2.13 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. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.14 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. 2.15 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. 2.16 Cash and cash equivalents Cash and cash equivalents include cash on hand; deposits held at call with banks; and other short- term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. 2.17 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. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 116 117 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.18 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, dividends payable and lease liabilities. 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. 2.19 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. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.19 Current and deferred income tax (continued) (b) Deferred income tax Inside basis differences Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the 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 by the end of the reporting period 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. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 118 119 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.19 Current and deferred income tax (continued) (c) Offsetting Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where the deferred tax balances relate to the same taxation authority. 2.20 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 when 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 present value. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.21 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 can be 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 management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense. 2.22 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 CSRG. 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 CSRG. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 120 121 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.22 Revenue recognition (continued) (a) Revenue from railroad and related business (continued) 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 CSRG 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. 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 CSRG. 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 CSRG. 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. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.22 Revenue recognition (continued) (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. 2.23 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. 2.24 Dividend income Dividends are recognised as other income in profit or loss when the right to receive payment is established. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 122 123 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.25 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. 2.26 Leases Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. The Group’s right-of-use asset mainly consisted of lease of land and leasehold land payments for self-occupied purpose. For the lease of land, 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 a parcel of 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 lease term is 20 years, renewable at the discretion of the Group. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.26 Leases (continued) 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; and the initial period of certain land use right acquired, on which these assets are located. Based on the provision of the land use right operating lease agreement entered into with Guangzhou Railway Group, the Company can renew the lease at its own discretion upon expiry of the operating lease term, and the Company expect to exercise the option to extend the lease within the remaining useful lives of those assets. Therefore the Group is reasonably certain to determine the lease term based on the remaining useful lives of those assets. For the land use rights, 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. Land use rights are derecognised when the Group has transferred substantially all the risks and rewards of ownership. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in derecognition of land use right. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • • • • • fixed payments (including in-substance fixed payments), less any lease incentives receivable; variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date; amounts expected to be payable by the group under residual value guarantees; the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and payments of penalties for terminating the lease, if the lease term reflects the group exercising that option. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 124 125 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.26 Leases (continued) Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the Group: • • where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group, which does not have recent third party financing, and • makes adjustments specific to the lease, eg term, country, currency and security. If a readily observable amortising loan rate is available to the individual lessee (through recent financing or market data) which has a similar payment profile to the lease, then the group entities use that rate as a starting point to determine the incremental borrowing rate. The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.26 Leases (continued) Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are measured at cost comprising the following: • • • • the amount of the initial measurement of lease liability; any lease payments made at or before the commencement date less any lease incentives received; any initial direct costs; and restoration costs. Right-of-use assets are generally depreciated over the shorter of the asset‘s useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life. Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less without a purchase option. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 126 127 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.26 Leases (continued) The Group as a lessee accounts for a lease modification when both of the following conditions are met: • • The modification increases the scope of the lease by adding the right to use one or more underlying assets. The consideration for the lease increases commensurate with the standalone price for the increase in scope and any adjustments to that stand-alone price reflect the circumstances of the particular contract. For a lease modification that is not accounted for as a separate lease, at the effective date of the lease modification the Group allocate the consideration in the modified contract and determine the lease term of the modified lease, and remeasure the lease liability by discounting the revised lease payments using a revised discount rate. For a modification that fully or partially decreases the scope of the lease, the Group decrease the carrying amount of the right-of-use asset to reflect partial or full termination of the lease. Any difference between those adjustments is recognised in profit or loss at the effective date of the modification. For all other lease modifications which are not accounted for as a separate lease, the Group recognise the amount of the remeasurement of the lease liability as an adjustment to the corresponding right-of-use asset without affecting profit or loss. Lease income from operating leases where the Group is a lessor is recognised in income on a straight-line basis over the lease term. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognised as expense over the lease term on the same basis as lease income. The respective leased assets are included in the balance sheet based on their nature. The Group did not need to make any adjustments to the accounting for assets held as lessor as a result of adopting the new leasing standard. 2.27 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. GUANGSHEN RAILWAY 2020 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 2020 2019 HKD USD HKD 27,003 88,892 29 – 8 713 27,032 89,613 Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 128 129 3 FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factor (continued) (a) Market risk (continued) (i) Foreign currency risk (continued) 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. As at 31 December 2020, if RMB had weakened/strengthened by 5% against the HKD with all other variables held constant, loss after tax for the year would have been RMB1,008,000 (2019: RMB3,360,000) 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 3.63% (2019: 1.53%) 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 2020 and 2019, 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 as FVOCI (note 15). As at 31 December 2020, 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 RMB14,161,000 (2019: RMB13,164,000) higher/lower. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 3 FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factor (continued) (b) Credit risk Credit risk arises from cash and cash equivalents, term deposits, trade and other receivables (excluding prepayments) and long-term receivable. The carrying amounts of each class of the above financial assets represent the Group’s maximum exposure to credit risk in relation to financial assets. (i) Risk management Cash and term deposits are placed with reputable banks. There was no recent history of default of cash and cash equivalents and term deposits from such financial institutions. The Group considers that there is no significant credit risk and is not subject to any material losses due to the default of the banks. For trade and other receivables as well as long-term receivable, the Group manages the credit risk exposure by setting related policies. The Group set credit period for its customers/debtors considering the customers/debtors’ financial conditions, the possibilities of obtaining collaterals from third parties, credit records and other factors comprehensively. The credit period are monitored on an ongoing basis by the management. For those customers/debtors with poor credit records, the Group mitigates credit risk by setting a shorter credit period or cancelling the credit period. The Group’s trade and other receivables as well as long-term receivable are mainly receivables and deposits incurred from provision of railway operation service or sales of goods. 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 reliasability and timing for collection of the outstanding balances, the Group maintains a provision for impairment of receivables. Taking into account the past experience with customers/debtors and the collection status , the Group considers that there is no significant credit risk . 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. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 130 131 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 and term deposits 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 CSRG; Portfolio 2: receivable incurred from revenue from railway operation; Portfolio 3: receivable incurred from revenue other than railway operation and revenues collected and settled without the CSRG; and • Portfolio 4: bank acceptance that represents lower credit risk. 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. In considering the forwarding-looking information, the Group considers the risk of economy downturn, external market environment, technical environment and changes in customer’s conditions. In 2020, the Group takes into consideration the uncertainty affected by the outbreak of Coronavirus Disease 2019 (“COVID-19 outbreak”). GUANGSHEN RAILWAY 2020 ANNUAL REPORT 3 FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factor (continued) (b) Credit risk (continued) (ii) Impairment of financial assets (continued) Trade receivables (continued) On that basis, the loss provision as at 31 December 2020 and 31 December 2019 was determined for trade receivables (in RMB thousands): As at 31 December 2020 As at 31 December 2019 Carrying amount ECL rates Loss provision Carrying amount ECL rates Loss provision Portfolio 1 Portfolio 2 Portfolio 3 Portfolio 4 202,484 3,429,198 150,699 – – 1.68% 2.00% – – (57,690) (3,014) – 232,848 4,033,727 196,694 99,950 – 1.42% 2.00% – 3,782,381 (60,704) 4,563,219 – (57,201) (3,934) – (61,135) The loss provision for trade receivables as at 31 December reconciles to the opening loss provision as follows: Trade receivables 2020 RMB’000 2019 RMB’000 Opening loss provision as at 1 January Receivables written off during the year as uncollectible Reversal of impairment loss provision 61,135 61,212 (73) (358) (77) – Closing loss provision at 31 December 60,704 61,135 Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 132 133 3 FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factor (continued) (b) Credit risk (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 receivables. Impairment on other receivables and long-term receivables 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. On that basis, the loss provision as at 31 December 2020 and 31 December 2019 for other receivables was as follows (in RMB thousands): As at 31 December 2020 As at 31 December 2019 Carrying amount ECL rates Loss provision Carrying amount ECL rates Loss provision Stage 1 Stage 2 Stage 3 601,821 – 4,631 606,452 0.99% – 100% (5,959) – (4,631) 250,863 – 4,631 2.38% – 100% (10,590) 255,494 (5,959) – (4,631) (10,590) Impairment losses on trade and other receivables and long-term receivables are presented as net impairment losses within operating profit. Subsequent recoveries of amounts previously written off are credited against the same line item. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 3 FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factor (continued) (c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and 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 2020, the Group had net current liabilities of RMB885,902,000 and capital expenditure contracted for but not recognised as liabilities of RMB444,270,000 (see note 40). 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. Less than 1 year RMB’000 Between 1 and 5 years RMB’000 Over 5 years RMB’000 Carrying amount RMB’000 At 31 December 2020 Trade and other payables excluding non- financial liabilities 3,417,934 — — 3,417,934 Payables for fixed assets and construction-in- progress Lease liabilities Dividends payable 2,914,696 61,880 13,749 — 258,820 — — 5,665,980 — 2,914,696 5,986,680 13,749 6,408,259 258,820 5,665,980 12,333,059 At 31 December 2019 Trade and other payables excluding non- financial liabilities Payables for fixed assets and construction-in- progress Lease liabilities Dividends payable 2,683,828 1,802,592 58,490 12,890 – – 2,683,828 – 233,960 – – 4,796,180 – 1,802,592 5,088,630 12,890 4,557,800 233,960 4,796,180 9,587,940 Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 134 135 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 2020 and 2019, the Group has no short-term loans, long-term loans, bond payables or long-term payables. 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 levels 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 2020 and 2019, the Group did not have any financial instruments that were measured at fair value except for FVOCI (note 15). The following table presents the Group‘s assets that are measured at fair value at 31 December 2020: Level 1 RMB’000 Level 2 RMB’000 Level 3 RMB’000 Total RMB’000 Assets Financial assets at FVOCI – – 377,631 377,631 GUANGSHEN RAILWAY 2020 ANNUAL REPORT 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 2019: Level 1 RMB’000 Level 2 RMB’000 Level 3 RMB’000 Total RMB’000 Assets Financial assets at FVOCI – – 351,045 351,045 There were no transfers between levels 1, 2 and 3 or changes in valuation techniques during the year (2019: nil). The following table presents the changes in level 3 items for the periods ended 31 December 2020: Opening balance as at 1 January 2019 Acquisitions Dividend received and recognised in other losses – net Closing balance 31 December 2019 Acquisitions Dividend received and recognised in other losses – net Closing balance as at 31 December 2020 Financial assets at FVOCI 321,246 29,799 7,047 351,045 26,586 7,735 377,631 Financial assets and liabilities of the Group measured at amortised cost include trade and other receivables, long-term receivable, time deposits, cash and cash equivalents, and trade and other payables, of which the fair values approximate their carrying amounts. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 136 137 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, taking into account the customers/debtors’ credit records, historical payment records, financial conditions and the capabilities of collaterals and guarantors comprehensively. The Group reviews the key assumptions related to ECL calculation on a regular basis. In 2020, the Group took into consideration the uncertainty affected by the COVID-19 outbreak, and incorporate relevant impacts into the key macro-economic assumptions and factors used in the forward-looking estimation, such as the risk of economy downturn, external market environment, technical environment and changes in customer’s conditions. Where the actual loss is different from the amounts that were initially recorded based on above estimate, such differences will impact the carrying value of trade receivables of the Group in future periods. (b) Goodwill Impairment Goodwill impairment reviews are undertaken at least annually or more frequently if events or changes in circumstances indicate a potential impairment. The recoverable amount of a cash- generating unit (“CGU”) or groups of CGUs when goodwill is included in the carrying amount of that unit or units is the higher of value in use and the fair value less costs to sell. In 2020, the Group’s transportation business was greatly affected by the COVID-19 outbreak and the relevant control and prevention measures. Recoverable amount of CGU when goodwill is included in the carrying amount of that unit based on value-in-use calculations which require the use of assumptions. The key assumptions used by the management is disclosed in note (9). The uncertainly of the development of COVID-19 epidemic and control measures have also increased the estimation uncertainty relating to the key assumptions used for cash flow projections, including growth rate, gross margin and pre-tax discount rate, which could lead to a different assessment result affected by the management judgement. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 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. The segment results during 2020 and 2019 are as follows: The Railway Transportation Business All other segments 2020 RMB’000 2019 RMB’000 2020 RMB’000 2019 RMB’000 Eliminations 2020 RMB’000 2019 RMB’000 Total 2020 RMB’000 2019 RMB’000 Segment revenue — Railroad Businesses — Other Businesses 15,385,428 859,658 20,025,568 938,066 – 144,203 – 271,452 – (39,923) – (56,735) 15,385,428 963,938 20,025,568 1,152,783 Total revenue 16,245,086 20,963,634 144,203 271,452 (39,923) (56,735) 16,349,366 21,178,351 Timing of revenue recognition — Overtime — At a point in time — Lease 16,139,060 85,664 20,362 20,826,847 136,787 – 47,619 74,118 22,466 110,214 161,238 – (39,923) – – (56,735) – – 16,146,756 159,782 42,828 20,880,326 298,025 – 16,245,086 20,963,634 144,203 271,452 (39,923) (56,735) 16,349,366 21,178,351 Segment result (584,770) 1,045,581 (105,975) (36,489) Finance costs — net Share of results of associates, net of tax Depreciation of fixed assets Depreciation of right-of-use assets Amortisation of long-term prepaid expenses Impairment of fixed assets Provision for impairment of materials and supplies Reversal of impairment losses on financial assets 60,464 22,162 1,657,475 54,179 18,886 11,835 – (78) 56,439 (7,039) 1,633,185 53,993 16,008 20,697 10,793 181 — 4,704 11,332 454 – – – (280) 271 — 4,113 11,331 430 – – – – – – – – – – – – – – – – – – – – – (690,745) 1,009,092 60,645 22,162 1,662,179 65,511 56,710 (7,039) 1,637,298 65,324 19,340 11,835 – (358) 16,438 20,697 10,793 - Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 138 139 5 SEGMENT INFORMATION (continued) A reconciliation of the segment results to profit for the year of 2020 and 2019 is as follows: The Railway Transportation Business All other segments 2020 RMB’000 2019 RMB’000 2020 RMB’000 2019 RMB’000 Eliminations 2020 RMB’000 2019 RMB’000 Total 2020 RMB’000 2019 RMB’000 Segment result Income tax expense (584,770) 130,468 1,045,581 (262,942) (105,975) 2,177 (36,489) 1,814 Profit/(loss) for the year (454,302) 782,639 (103,798) (34,675) — — — — — — (690,745) 132,645 1,009,092 (261,128) (558,100) 747,964 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 All other segments 2020 RMB’000 2019 RMB’000 2020 RMB’000 2019 RMB’000 Eliminations 2020 RMB’000 2019 RMB’000 Total 2020 RMB’000 2019 RMB’000 Total segment assets 36,573,556 36,691,272 443,479 485,891 (236,582) (284,030) 36,780,453 36,893,133 Total segment assets include: Investment in associates Additions to non-current assets (other than financial instruments and deferred tax assets) Total segment liabilities 196,848 174,686 — — — — 196,848 174,686 1,748,748 8,184,773 1,757,394 7,348,182 679 656,875 3,097 595,487 — (217,364) — (189,817) 1,749,427 8,624,284 1,760,491 7,753,852 Revenues of approximately RMB4,502,560,136 (2019: RMB4,400,273,000) 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. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 6 FIXED ASSETS — NET Buildings RMB’000 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 Total RMB’000 7,590,161 (2,835,968) (2,881) 14,735,949 (3,522,517) – 8,218,284 (2,608,404) – 2,034,318 (1,595,335) – 6,631,867 (4,453,743) (7,483) 39,210,579 (15,015,967) (10,364) 4,751,312 11,213,432 5,609,880 438,983 2,170,641 24,184,248 4,751,312 4,975 238,599 (10,523) 27,451 (102) (8,529) (321,779) (20,697) – 11,213,432 2,185 110,172 (44,034) 121,591 102 (87,439) (214,909) – – 5,609,880 948 65,903 (484,992) 716,082 238 (49,855) (661,484) – – 438,983 28 87,732 (24,994) 28,712 (412) (5,526) (87,880) – – 2,170,641 96,443 241,212 (27,658) 58,802 174 (17,468) (351,246) – 11 24,184,248 104,579 743,618 (592,201) 952,638 – (168,817) (1,637,298) (20,697) 11 At 1 January 2019 Cost Accumulated depreciation Impairment Net book amount Year ended 31 December 2019 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 4,660,707 11,101,100 5,196,720 436,643 2,170,911 23,566,081 At 31 December 2019 Cost Accumulated depreciation Impairment Net book amount 7,825,870 (3,141,585) (23,578) 14,817,730 (3,716,630) – 8,102,522 (2,905,802) – 1,852,565 (1,415,922) – 6,757,634 (4,579,251) (7,472) 39,356,321 (15,759,190) (31,050) 4,660,707 11,101,100 5,196,720 436,643 2,170,911 23,566,081 Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 140 141 6 FIXED ASSETS — NET (continued) Tracks, bridges and service roads RMB’000 Locomotives and rolling stock RMB’000 Buildings RMB’000 Communications and signalling systems RMB’000 Other machinery and equipment RMB’000 Year ended 31 December 2020 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 4,660,707 4,196 396,446 (129) 6,291 — (26,206) (335,123) — 11,101,100 — 198,800 (231,996) 292,244 — (95,020) (218,396) — 5,196,720 47,666 1,932 (434,216) 744,298 — (68,749) (669,210) (11,835) 436,643 2,178 28,733 (9,759) 38,726 45 (5,747) (90,451) — 2,170,911 98,138 154,590 (9,028) 20,241 (45) (29,281) (348,999) — Total RMB’000 23,566,081 152,178 780,501 (685,128) 1,101,800 — (225,003) (1,662,179) (11,835) Closing net book amount 4,706,182 11,046,732 4,806,606 400,368 2,056,527 23,016,415 At 31 December 2020 Cost Accumulated depreciation Impairment Net book amount 8,183,873 (3,454,113) (23,578) 14,896,863 (3,850,131) — 7,750,874 (2,932,433) (11,835) 1,829,279 (1,428,911) — 6,837,991 (4,773,992) (7,472) 39,498,880 (16,439,580) (42,885) 4,706,182 11,046,732 4,806,606 400,368 2,056,527 23,016,415 (a) As at 31 December 2020, the ownership certificates of certain buildings of the Group with an aggregate carrying value of approximately RMB1,518,731,000 (2019: RMB1,626,540,000) had not been obtained by the Group. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 6 FIXED ASSETS — NET (continued) These kind of buildings are classified as below: Carrying value as at 31 December 2020 RMB’000 Carrying value as at 31 December 2019 RMB’000 Reason for delay in obtaining the ownership certificates 980,689 1,040,897 The Group commenced such application Certificates for buildings under application procedures Certain buildings located on the land of which the land use right certificates have not been obtained 48,103 49,846 Certain buildings attached to pieces of 489,939 535,797 land which is held by lease procedures with the respective authorities in China, there has been progress made and the Group’s management does not expect any major difficulties in obtaining the remaining ownership certificates. 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. 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. 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. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 142 143 6 FIXED ASSETS — NET (continued) (b) As at 31 December 2020, fixed assets of the Group with an aggregate net book value of approximately RMB171,954,000 (2019: RMB172,218,000) 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 2020 RMB’000 2019 RMB’000 2,378,974 1,828,372 685,129 1,596,874 (780,501) 592,201 1,654,657 (743,618) (1,101,800) (952,638) 2,778,676 2,378,974 Construction-in-progress as at 31 December 2020 mainly comprise of improvement projects for road existing railway equipment in the PRC. For the year ended 31 December 2020, no interest expense (2019: nil) had been capitalised in the construction-in-progress balance as there were no third party borrowings during the year. As at 31 December 2020, the balance of the provision for writing down the construction-in-progress was approximately RMB15,456,000 (2019: RMB15,456,000). GUANGSHEN RAILWAY 2020 ANNUAL REPORT 8 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES Cost As at 1 January Additions (b) Land use right (a) RMB’000 2020 Lease of Land use right RMB’000 Total RMB’000 2,389,526 9,355 1,177,246 202,008 3,566,772 211,363 As at 31 December 2,398,881 1,379,254 3,778,135 Accumulated depreciation As at 1 January Additions (515,776) (52,133) (13,378) (13,378) (529,154) (65,511) As at 31 December (567,909) (26,756) (594,665) Net book value As at 31 December 1,830,972 1,352,498 3,183,470 As at 1 January 1,873,750 1,163,868 3,037,618 The amounts recognized in the Consolidated Comprehensive Income Statement for the year relating to the lease contracts are as follows: Depreciation charge of right-of-use assets Interest expense on lease liabilities Expense relating to short-term leases 2020 RMB’000 65,512 57,629 846,605 2019 RMB’000 65,324 57,670 684,037 969,746 807,031 The total cash outflow for leases in 2020 was RMB907,355,000 (2019: RMB743,657,000). The remaining lease period of right-of-use assets as at 31 December 2020 was lease of between 11 to 86 years. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 144 145 8 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (continued) (a) As at 31 December 2020, the ownership certificates of land with an aggregate carrying value of approximately RMB54,882,000 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 RMB1,182,379,000 (2019: RMB1,201,115,000) had not been obtained by the Group due to the following fact: Carrying value as at 31 December 2020 RMB’000 Reason for delay in obtaining the ownership certificates Certain pieces of land associated 1,182,379 Due to the fact that Guangshen Line IV spans across several with the operations of Guangshen Line IV, one of the railway lines operated by the Company 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. (b) As at 31 December 2020, the Group recognised an addition of right-of-use assets and lease liabilities amounted to RMB202,008,000 to reflect the latest lease payment arrangement with Guangzhou Railway Group (note 2.26). GUANGSHEN RAILWAY 2020 ANNUAL REPORT 9 GOODWILL Year ended 31 December 2019 and 2020 Opening net book amount Additions Impairment Closing net book amount Year ended 31 December 2018 and 2019 Opening net book amount Additions Impairment Closing net book amount RMB’000 281,255 – – 281,255 281,255 – – 281,255 On 31 December 2020 and 2019, 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 Transportation 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 Transportation 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-years period are extrapolated using the estimated growth rates stated below. Goodwill is allocated to CGU for the purpose of impairment testing, by comparing the carrying amount with the recoverable amount of Combined Railway Transportation Business. If the recoverable amount is lower than the carrying amount, the difference is recognised directly in profit or loss. The allocation is not changed in 2020. In 2020, the Group’s Combined Railway Transportation Business was greatly affected by the COVID-19 outbreak and the relevant control and prevention measures. Based on the assessment result, there is no need to recognise impairment charges against goodwill. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 146 147 9 GOODWILL (continued) By taking into consideration of the uncertainly of the development of COVID-19 outbreak and the relevant control and prevention measures, the Group estimated the growth rate and gross margin based on past experience and its expectations for the market development. The management expect the impact of the COVID-19 epidemic on the Group’s business would recover in the coming 1-2 years, and the revenue growth rate within the five-year period would reach up to 32%. Cash flows beyond the five-year period are extrapolated using the estimated growth rates, which doesn’t exceed the long-term average growth rate of the industry. The discount rate used is pre-tax and reflect specific risks relating to the railway transportation business segment. As at 31 December 2020, the recoverable amount calculated based on value-in-use exceeded carrying value of the CGU by RMB3,937 million (2019: RMB4,997 million). The key assumptions used for value-in-use calculations are as follows: Railroad business 2020 2019 Revenue growth rate (within the five-year period) Long-term growth rate (beyond the five-year period) Gross margin Pre-tax discount rate 8%–32% 3% 3%–8% 12% 8% 2% 8–16% 12% Even if the long-term growth rate used in the value-in-use calculation for the CGU in Combined Railway Transportation Business had been 10% lower than management’s estimates as at 31 December 2020, 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 Combined Railway Transportation Business had been 1% higher than management’s estimates as at 31 December 2020, the Group would not need to recognise impairment charges against goodwill. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 10 SUBSIDIARIES The following is a list of the principal subsidiaries at 31 December 2020: 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 company Warehousing in the PRC Limited Shenzhen Fu Yuan Enterprise Development China, limited liability company Hotel management in the PRC Company Limited Shenzhen Pinghu Qun Yi Railway Store China, limited liability company Cargo loading and unloading, Loading and Unloading Company Limited Shenzhen Guangshen Railway Economic and Trade Enterprise Company Limited warehousing, freight transportation in the PRC China, limited liability company Catering management in the PRC Shenzhen Railway Station Passenger China, limited liability company Catering services and sales of merchandise in the PRC China, limited liability company Sales of merchandises in the PRC Services Company Limited Guangshen Railway Station Dongqun Trade and Commerce Service Company Limited Guangzhou Railway Huangpu Service China, limited liability company Cargo loading and unloading, Company Limited Zengcheng Lihua Stock Company Limited China, limited liability company (“Zengcheng Lihua”) (i) 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% 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 (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. As at 31 December 2020, 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. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 148 149 11 INVESTMENTS IN ASSOCIATES Share of net assets Less: provision for impairment 2020 RMB’000 196,848 – 2019 RMB’000 174,686 – 196,848 174,686 The movement of investments in associates of the Group during the year is as follows: Beginning of the year Share of results after tax End of the year 2020 RMB’000 174,686 22,162 2019 RMB’000 181,725 (7,039) 196,848 174,686 As at 31 December 2020, 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% RMB343,050,000 Properties leasing and trading of merchandise 49% RMB64,000,000 Construction of railroad 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. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 11 INVESTMENTS IN ASSOCIATES (continued) Summarised balance sheets Tiecheng Shentu 2020 RMB’000 2019 RMB’000 2020 RMB’000 2019 RMB’000 Current assets Non-current assets 93,571 373,860 77,732 361,864 1,974,930 10,209 1,612,909 12,941 Total assets 467,431 439,596 1,985,139 1,625,850 Current liabilities 221,928 223,295 1,828,909 1,485,647 Equity 245,503 216,301 156,230 140,203 Share of net assets 120,296 105,987 76,552 68,699 Carrying amount of interest in associates 120,296 105,987 76,552 68,699 Reconciliation of the summarised financial information presented to the carrying amount of its interests in associates as follows: Tiecheng Shentu Total 2020 RMB’000 2019 2020 RMB’000 RMB’000 2019 2020 RMB’000 RMB’000 2019 RMB’000 Opening net assets Profit/(loss) for the year 216,301 29,202 239,651 (23,350) 140,203 16,027 131,217 8,986 356,504 45,229 370,868 (14,364) Closing net assets 245,503 216,301 156,230 140,203 401,733 356,504 Percentage of ownership interest 49% 49% 49% 49% 49% 49% Carrying value 120,296 105,987 76,552 68,699 196,848 174,686 Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 150 151 12 DEFERRED TAX ASSETS/(LIABILITIES) Deferred tax assets Less: Offsetting of deferred tax liabilities 2020 RMB’000 496,920 (73,966) 2019 RMB’000 366,348 (75,098) Deferred tax assets (net) 422,954 291,250 Deferred tax liabilities Less: Offsetting of deferred tax assets (132,879) 73,966 (136,503) 75,098 Deferred tax liabilities (net) (58,913) (61,405) 364,041 229,845 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 2020 RMB’000 2019 RMB’000 394,474 102,446 144,415 221,933 496,920 366,348 (127,105) (5,774) (133,854) (2,649) (132,879) (136,503) GUANGSHEN RAILWAY 2020 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 2019 RMB’000 At 31 December 2019 RMB’000 (Charged)/ Credited to the comprehensive income statement RMB’000 At 31 December 2020 RMB’000 302,586 17,794 14,585 — 302,586 (27) 2,959 (4,410) 2,015 25,266 35,317 (968) 86,120 24,147 10,146 26,422 Deferred tax assets: Deductible tax losses 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 – 17,841 6,455 9,455 25,429 45,740 13,348 7,973 146,781 – – (20) 5,171 (5,045) (2,178) 5,063 11,767 8,303 65,236 5,029 – 17,821 11,626 4,410 23,251 50,803 25,115 16,276 212,017 5,029 (212,017) (5,029) — — 273,022 93,326 366,348 130,572 496,920 Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 152 153 12 DEFERRED TAX ASSETS/(LIABILITIES) (continued) 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 Credited to the comprehensive income statement RMB’000 At 1 January 2019 RMB’000 At 31 December 2019 RMB’000 Credited to the comprehensive income statement RMB’000 At 31 December 2020 RMB’000 5,270 63,897 60,647 9,811 (19) (2,493) – (610) 5,251 61,404 60,647 9,201 (493) 4,758 (2,491) 58,913 – (640) 60,647 8,561 139,625 (3,122) 136,503 (3,624) 132,879 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 RMB247,705,000 (2019: RMB154,921,000) arising from operations of subsidiaries which do not foresee to have enough tax deductible assessable profits in the near future. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 12 DEFERRED TAX ASSETS/(LIABILITIES) (continued) Tax losses that can be carried forward (a) Deductible temporary differences 2020 RMB’000 235,403 12,302 2019 RMB’000 142,469 12,452 247,705 154,921 (a) The tax loss carry-forwards in which no deferred income tax assets were recognised will expire in the following years: 2020 2021 2022 2023 2024 2025 2020 RMB’000 2019 RMB’000 – 22,090 22,245 36,393 44,996 109,679 16,745 22,090 22,245 36,393 44,996 – 235,403 142,469 Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 154 155 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 2020 RMB’000 2019 RMB’000 129,575 (88,768) 118,944 (72,330) Net book amount 40,807 46,614 Year ended 31 December Opening net book amount Additions Amortisation 40,807 22,422 (19,340) 46,614 10,631 (16,438) Closing net book amount 43,889 40,807 At 31 December Cost Accumulated amortisation 151,997 (108,108) 129,575 (88,768) Net book amount 43,889 40,807 GUANGSHEN RAILWAY 2020 ANNUAL REPORT 14 FINANCIAL INSTRUMENTS BY CATEGORY Financial assets Financial assets at amortised cost Trade and other receivables excluding prepayments (Notes 20 and 21) Term deposits (Note 16) Cash and cash equivalents (Note 22) Long-term receivable (Note 17) FVOCI (Note 15) Total Financial liabilities Liabilities at amortised cost Trade and other payables excluding non-financial liabilities (Notes 27 and 29) Payables for fixed assets and construction-in-progress Dividends payable Lease liabilities Total 2020 RMB’000 2019 RMB’000 4,317,539 220,000 1,485,232 23,734 377,631 4,746,988 – 1,562,334 26,103 351,045 6,424,136 6,686,470 2020 RMB’000 2019 RMB’000 3,417,934 2,914,696 13,749 1,175,565 2,683,828 1,802,592 12,890 1,176,426 7,521,944 5,675,736 Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 156 157 15 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER 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 2020 RMB’000 2019 RMB’000 377,631 351,045 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. (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. 2020 RMB’000 2019 RMB’000 Dividends from equity investments at FVOCI recognised in profit or loss in other losses — net (Note 33) — Related to investments held at the end of the reporting period 7,735 7,735 7,047 7,047 (d) Fair value Information about the methods and assumptions used in determining fair value is provided in note 3.3. All of the financial assets at FVOCI are denominated in RMB. For an analysis of the sensitivity of the assets to price risk refer to note 3.1(a)(iii). GUANGSHEN RAILWAY 2020 ANNUAL REPORT 16 TERM DEPOSITS Current assets Short term deposits Non-current assets Long term deposits 2020 RMB’000 2019 RMB’000 60,000 160,000 – – The original effective interest rate of term deposits was 3.63% per annum (2019: 1.53% per annum). 17 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 2020 and 31 December 2019. 18 ASSETS CLASSIFIED AS HELD FOR SALE Out of the demand for urban planning, GLDC, the official land reserve institution of the People’s Government of Guangzhou Municipality, requested retrieval of the land owned by the Group together with two other independent third parties. On 19 April 2018, the Group together with two other independent third parties entered into a land use right transfer agreement with GLDC. According to the agreement, the land and the auxiliary facilities will be transferred to GLDC once the evacuation and demolition is complete. On the date of signing the agreement, the Group classified such assets as assets classified as held for sale. The transfer of assets was completed in 2020 and gains on disposal of such assets was recognised as “derecognition of land use right” in the amount of RMB1,188,645,000. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 19 MATERIALS AND SUPPLIES Raw materials Accessories Reusable rail-line track materials Retailing consumables 158 159 2020 RMB’000 197,242 54,704 43,584 876 2019 RMB’000 171,532 58,502 40,224 1,001 296,406 271,259 The costs of materials and supplies consumed by the Group during the year were recognised as “operating expenses” in the amount of RMB1,296,779,000 (2019: RMB1,736,876,000). As at 31 December 2020, no balance of the provision was provided for writing down the materials and supplies to their net realisable values (2019: RMB17,640,000). During the year, no additional provision was made, no balance was reversed as the recovery price increased and RMB17,640,000 was written off arising from realization of losses in the disposal of these assets (2019: RMB14,242,000, RMB3,449,000 and RMB30,973,000). 20 TRADE RECEIVABLES Trade receivables Including: receivables from related parties Less: Provision for impairment of receivables 2020 RMB’000 3,782,381 2,955,797 (60,704) 2019 RMB’000 4,563,219 3,477,558 (61,135) 3,721,677 4,502,084 As at 31 December 2020 and 2019, 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. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 20 TRADE RECEIVABLES (continued) 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 2020 RMB’000 2,773,713 653,062 306,410 49,196 2019 RMB’000 3,558,842 747,600 172,482 84,295 3,782,381 4,563,219 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 Reversal of impairment loss provision Written-off At 31 December 2020 RMB’000 2019 RMB’000 61,135 (358) (73) 61,212 – (77) 60,704 61,135 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. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 21 PREPAYMENTS AND OTHER RECEIVABLES Due from third parties Due from related parties Other receivables Less: Provision for impairment Other receivables, net (a) Prepayments (b) 160 161 2020 RMB’000 452,921 242,601 2019 RMB’000 282,229 83,848 695,522 366,077 2020 RMB’000 2019 RMB’000 606,452 (10,590) 595,862 99,660 255,494 (10,590) 244,904 121,173 695,522 366,077 (a) Other receivables mainly represent miscellaneous deposits and receivables arising from the course of provision of non-railway transportation services by the Group. Movements on the provision for impairment of other receivables are as follows: At 31 December Provision for impairment Reversal of impairment loss provision Written-off At 31 December 2020 RMB’000 2019 RMB’000 10,590 10,590 – – – – – – 10,590 10,590 (b) Prepayments mainly represent amounts paid in advance to the suppliers for utilities and other operating expenses of the Group. As at 31 December 2020, the input VAT with related invoices not been received or verified amounted to RMB94,536,000 (2019: RMB101,317,000). GUANGSHEN RAILWAY 2020 ANNUAL REPORT 21 PREPAYMENTS AND OTHER RECEIVABLES (continued) The carrying amounts of the Group’s prepayments and other receivables are denominated in the following currencies: RMB HKD 2020 RMB’000 695,522 – 2019 RMB’000 365,364 713 695,522 366,077 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. 22 CASH AND CASH EQUIVALENTS Cash at bank and on hand Term deposits with initial term not more than three months 1,485,232 – 2020 RMB’000 2019 RMB’000 1,562,334 – 1,485,232 1,562,334 (a) The carrying amounts of the cash and cash equivalents are denominated in the following currencies: RMB HKD USD 2020 RMB’000 1,458,200 27,003 29 2019 RMB’000 1,473,434 88,892 8 1,485,232 1,562,334 Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 162 163 23 SHARE CAPITAL As at 31 December 2020 and 2019, 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 2019 RMB’000 As at 31 December 2020 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 24 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. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 24 RESERVES (continued) For the year ended 31 December 2020, no appropriations to reserves of the Company were proposed by the directors (2019: 10% and RMB78,264,000). 2020 Percentage 2020 RMB’000 2019 Percentage 2019 RMB’000 Statutory surplus reserve – – 10% 78,264 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 2020 and 2019, the movement of “Special reserve — Safety Production Fund” of the Group are as below: Beginning of the year Appropriation for retained earnings Utilisation 2020 RMB’000 – 281,277 (281,277) 2019 RMB’000 – 264,871 (264,871) End of the year – – Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 164 165 24 RESERVES (continued) 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. 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. 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 2.10. 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. 25 DEFERRED INCOME 2020 RMB’000 2019 RMB’000 Government grants 104,939 97,467 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. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 26 EMPLOYEE BENEFITS OBLIGATIONS Employee benefits obligations Less: current portion included in accruals and other payables (Note 29) 2020 RMB’000 2019 RMB’000 24,487 26,345 (24,487) (26,345) – – 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, GRCL 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. 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 2020 RMB’000 2019 RMB’000 26,345 – (1,858) 28,389 – (2,044) 24,487 26,345 Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 27 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 28 CONTRACT LIABILITIES Advances received from customers Frequent traveller program 166 167 2020 RMB’000 812,629 1,261,293 2019 RMB’000 844,487 693,611 2,073,922 1,538,098 2020 RMB’000 1,874,224 146,717 8,993 43,988 2019 RMB’000 1,424,775 61,371 16,726 35,226 2,073,922 1,538,098 2020 RMB’000 186,959 28,346 2019 RMB’000 438,705 20,115 215,305 458,820 GUANGSHEN RAILWAY 2020 ANNUAL REPORT 29 ACCRUALS AND OTHER PAYABLES Due to third parties Due to related parties Advance received from disposal of assets classified as held for sale (Note 18) 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 26) Housing maintenance fund Other payables 2020 RMB’000 1,401,338 448,318 2019 RMB’000 1,895,881 459,679 1,849,656 2,355,560 2020 RMB’000 2019 RMB’000 – 360,560 308,890 418,214 131,965 62,942 87,566 25,408 24,488 2,480 427,143 848,066 368,560 199,483 222,684 145,446 109,735 95,206 30,298 26,345 2,431 307,306 1,849,656 2,355,560 30 AUDITORS’ REMUNERATION Auditors’ remuneration in respect of audit and non-audit services provided by the auditors for the year ended 31 December 2020 were RMB8,400,000 and RMB610,000 respectively (2019: RMB8,400,000 and RMB930,000 respectively). Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 168 169 31 EMPLOYEE BENEFITS 2020 RMB’000 2019 RMB’000 Wages and salaries Provision for medical, housing scheme and other employee benefits (a) Contributions to the defined contribution scheme (b) 5,949,037 5,726,123 1,326,476 408,922 1,353,800 999,020 7,684,435 8,078,943 (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 the standard salary set by the provincial government. 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. (c) Five highest paid individuals The five individuals whose emoluments were the highest in the Group for the year include one director (2019: one), four senior executives (2019: four) and no supervisor (2019: nil). 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 RMB512,000 (2019: Nil to RMB553,000). GUANGSHEN RAILWAY 2020 ANNUAL REPORT 32 OTHER OPERATING EXPENSES Passenger security inspection expenses Carriage cleaning expenses Train station housekeeping expenses Staff accommodation expenses Other safety maintenance expenses Bunk cleaning expenses Spring Festival related transportation expenses Passenger transportation facility maintenance Professional expenses Administrative expenses and others 33 OTHER LOSSES — NET Loss on disposal of fixed assets — net Government grants Interest income from banks Dividend income from FVOCI Income from compensation Impairment of fixed assets (Note 6) Unwinding of interest accrued on long-term receivable Others 34 FINANCE COSTS — NET Interest expense of lease liabilities Net foreign exchange (loss)/gains Bank charges 2020 RMB’000 2019 RMB’000 173,257 107,118 90,919 82,634 75,726 68,125 42,514 22,434 21,675 50,700 222,705 139,130 98,467 86,445 89,831 97,899 67,082 42,572 37,351 392,188 735,102 1,273,670 2020 RMB’000 (101,377) 63,061 30,811 7,735 115 (11,835) 3,786 3,863 2019 RMB’000 (103,560) 22,492 24,736 7,047 1,092 (20,697) 3,749 36,045 (3,841) (29,096) 2020 RMB’000 (57,629) (1,452) (1,564) 2019 RMB’000 (57,670) 2,592 (1,632) (60,645) (56,710) Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 170 171 35 INCOME TAX EXPENSE In 2020 and 2019, 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) 2020 RMB’000 1,551 (134,196) 2019 RMB’000 357,576 (96,448) (132,645) 261,128 The tax on the Group’s loss/profit before tax differs from the theoretical amount that would arise using the tax rate of the home country of the Company as follows: 2020 RMB’000 2019 RMB’000 (Loss)/profit before tax (690,745) 1,009,092 Tax calculated at the statutory rate of 25% (2019: 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 (172,686) 18,939 (7,474) 27,420 1,194 (38) 252,273 2,921 (1,762) 11,249 (2,410) (1,143) Income tax (credit)/expense (132,645) 261,128 GUANGSHEN RAILWAY 2020 ANNUAL REPORT 36 EARNINGS PER SHARE The calculation of basic earnings per share is based on the net loss for the year attributable to equity holders of approximately RMB557,876,000 (2019: net profit, RMB748,439,000), divided by the weighted average number of ordinary shares outstanding during the year of 7,083,537,000 shares (2019: 7,083,537,000 shares). There were no dilutive potential ordinary shares during both years. 2020 RMB’000 2019 RMB’000 Loss/(profit) attributable to owners of the Company (557,876) 748,439 Weighted average number of ordinary shares in issue 7,083,537 7,083,537 Basic and diluted (loss)/earnings per share RMB(0.08) RMB0.11 37 DIVIDEND No dividend was proposed for the year ended 31 December 2020 (2019: RMB425,012,000). Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 172 173 38 CASH FLOW GENERATED FROM OPERATIONS (a) Reconciliation from loss/profit before income tax to net cash generated from operations: Profit before income tax: Adjustments for: Depreciation of fixed assets (Note 6) Depreciation of right-of-use assets (Note 8) Impairment of fixed assets (Note 6) Gains on disposal of assets classified as held for sale 2020 RMB’000 2019 RMB’000 (690,745) 1,009,092 1,662,179 65,511 11,835 1,637,298 65,324 20,697 (Note 18) (1,188,645) – Provision for impairment of materials and supplies (Note 19) 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 (Note 33) Reversal of impairment of receivables Amortisation of deferred income Interest expense on lease liabilities 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 in accruals and other payables – 165,253 19,340 (22,162) (7,735) (358) (8,377) 57,629 (8,310) 55,415 780,765 2,005 (108,998) 6,155 701,825 150,454 10,793 161,435 16,438 7,039 (7,047) – (2,299) 57,670 (4,606) 2,971,834 (638,401) 16,438 (64,221) 6,000 98,393 358,625 Net cash generated from operations 1,587,621 2,748,668 GUANGSHEN RAILWAY 2020 ANNUAL REPORT 38 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 2020 RMB’000 225,003 – (27,151) (165,253) 2019 RMB’000 168,806 (2,063) (2,272) (161,435) Proceeds from disposal of fixed assets 32,599 3,036 39 CONTINGENCY There were no significant contingent liabilities as at 31 December 2020 and 31 December 2019 and up to the date of approval of these financial statements. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 174 175 40 COMMITMENTS (a) Capital commitments As at 31 December 2020, the Group had the following capital commitments: 2020 RMB’000 2019 RMB’000 Contracted but not provided for 444,270 804,298 Authorised but not contracted for 505,730 1,178,032 950,000 1,982,330 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. 41 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. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 41 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 Single largest shareholder Subsidiary of the single largest shareholder GRCL Subsidiary of the single largest shareholder GIDC Subsidiary of the single largest shareholder Guangzhou Railway Material Supply Company Subsidiary of the single largest shareholder Guangzhou Railway Station Service Centre Subsidiary of the single largest shareholder Changsha Railway Construction Company Limited Subsidiary of the single largest shareholder GSRC Subsidiary of the single largest shareholder Guangzhou Yuetie Operational Development Company Subsidiary of the single largest shareholder Guangzhou Railway Rolling Stock Works Company Limited Subsidiary of the single largest shareholder Guangdong Tieqing International Travel Agency Company Limited Subsidiary of the single largest shareholder Huaihua Railway Engineer Construction Company Subsidiary of the single largest shareholder Xiashen Railway Guangdong Company Limited Subsidiary of the single largest shareholder Ganshao Railway Company Limited Subsidiary of the single largest shareholder Guangzhou Railway Real Estate Construction Engineering Co., Ltd. Subsidiary of the single largest shareholder Subsidiary of the single largest shareholder Guangdong Yuetong Railway Logistics Company Limited Sanmao Railway Company Xiaotangxi Freight Field Service Company Subsidiary of the single largest shareholder Subsidiary of the single largest shareholder Guangzhou Railway Technology Development Co., Ltd. Subsidiary of the single largest shareholder Guangzhou Anmao Railway Consulting Construction Company Limited Guangzhou Beiyang Information Technology Company Limited Hunan Railway Lianchuang Technology Development Co., Ltd. Guangzhou Northeast Freight Car Outer Winding Railway Co., Ltd. Hunan Changtie Loading & Unloading Co., Ltd. Guangzhou Ruiwei Economy Development Co., Ltd Guangzhou Railway Technology Development Surveying Co., Ltd. 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 Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 176 177 41 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 Tiecheng Shentu Associate of the Group Associate of the Group (iii) Relationship with CSRG 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 CSRG. Accordingly, the equity interests of Guangzhou Railway Group which was wholly controlled by MOR previously were transferred to the CSRG (“Reform”). The Reform was completed since 1 January 2017 and the Company disclosed details of transactions undertaken with CSRG Group for both years of 2020 and 2019 for reference. Unless otherwise specified, the transactions with CSRG Group disclosed below have excluded transactions undertaken with Guangzhou Railway Group and its subsidiaries. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 41 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: 2020 RMB’000 2019 RMB’000 Provision of services and sales of goods Transportation related services Provision of train transportation services to Guangzhou Railway Group and its subsidiaries (i) 2,345,512 2,060,518 Revenue collected by CSRG for railway network usage and related services provided to Guangzhou Railway Group and its subsidiaries (ii) Revenue from railway operation service provided to 1,332,346 1,563,191 Guangzhou Railway Group’s subsidiaries (iii) 842,350 812,470 4,520,208 4,436,179 Other services Sales of materials and supplies to Guangzhou Railway Group and its subsidiaries (iv) 34,705 45,642 Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 178 179 41 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) (vi) Costs settled by CSRG for railway network usage and related services provided by Guangzhou Railway Group and its subsidiaries (ii) Other services Provision of repair and maintenance services by Guangzhou Railway Group and its subsidiaries (iv) Purchase of materials and supplies from Guangzhou 2020 RMB’000 2019 RMB’000 753,288 774,291 1,985,768 2,194,467 2,739,056 2,968,758 297,809 441,719 Railway Group and its subsidiaries (iv) 722,487 623,433 Provision of construction services by Guangzhou Railway Group and its subsidiaries (v) 285,616 363,424 1,305,912 1,428,576 GUANGSHEN RAILWAY 2020 ANNUAL REPORT 41 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 CSRG or based on negotiation between the contracting parties with reference to actual costs incurred. (ii) Such revenues/charges are determined by the CSRG 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. (vi) The amount recognised in 2020 does not include the payment of short term leases related to the lease of passenger trains paid to Guangzhou Railway Group amounting to RMB292,603,000 (2019: RMB247,714,000). (ii) Material transactions with CSRG 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 CSRG, 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 CSRG and are collected and settled by the CSRG according to its central recording and settlement systems (see details in note 2.22). Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 180 181 41 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 CSRG 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 CSRG Group: 2020 RMB’000 2019 RMB’000 Provision of services and sales of goods Transportation related services Provision of train transportation services to CSRG Group (i) 57,349 69,958 Revenues collected by CSRG for services provided to CSRG Group (ii) 2,105,206 2,479,015 Revenues from railway operation service provided to CSRG Group (iii) 2,214,460 2,392,333 Other services Provision of repairing services for cargo trucks to CSRG Group (ii) Sales of materials and supplies to CSRG Group (iv) Provision of apartment leasing services to CSRG Group (iv) Others 4,377,015 4,941,306 436,955 – 456 887 370,990 8,330 574 — 438,298 379,894 GUANGSHEN RAILWAY 2020 ANNUAL REPORT 41 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 CSRG and other railway companies (continued) 2020 RMB’000 2019 RMB’000 Services received and purchases made Transportation related services Provision of train transportation services by CSRG Group (i) (vi) 18,872 37,408 Cost settled by CSRG for services provided by CSRG Group (ii) (vi) 1,506,541 2,107,765 Other services Provision of repair and maintenance services by CSRG Group (iv) Purchase of materials and supplies from CSRG Group (iv) Provision of construction services by CSRG Group (v) 1,525,413 2,145,173 28,928 12,362 2,662 29,066 23,968 23,636 43,952 76,670 (i) The service charges are determined based on a pricing scheme set by the CSRG or based on negotiation between the contracting parties with reference to actual costs incurred. (ii) Such revenue/charges are determined by the CSRG 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. Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 182 183 41 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 CSRG 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. (vi) The amount recognised in 2020 does not include the payment of short term leases related to the lease of passenger trains and freight trains to CSRG amounting to RMB554,003,000 (2019: RMB436,323,000). (iii) Revenues collected and settled through the CSRG: Passenger transportation Freight transportation Other transportation related services (iv) Lease — as lessee: 2020 RMB’000 3,769,231 1,456,605 24,048 2019 RMB’000 7,475,003 1,740,907 74,870 5,249,884 9,290,780 In 2020, the depreciation expense of the right-of-use assets was RMB13,378,000 (2019: RMB13,378,000), the interest expense of lease liabilities was RMB57,629,000 (2019: RMB57,670,000), and the actual payment to Guangzhou Railway Group was RMB60,750,000 (2019: RMB59,620,000). In 2020, the payment of short term leases related to the lease of passenger trains to Guangzhou Railway Group was RMB292,603,000 (2019: RMB247,714,000), the payment of short term leases related to lease of passenger trains and freight trains to CSRG was RMB554,003,000 (2019: RMB436,323,000). GUANGSHEN RAILWAY 2020 ANNUAL REPORT 41 RELATED PARTY TRANSACTIONS (continued) (d) Key management compensation The compensation paid or payable to key management for employee services is shown in note 43. (e) As at 31 December 2020, 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) — Associates Prepayments and other receivables — Guangzhou Railway Group — Subsidiaries of Guangzhou Railway Group — Associates 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) 2020 RMB’000 1,853,846 208,024 1,645,822 – 59,580 431 59,106 43 – – – 1,243,372 85,076 1,147,912 10,384 876,031 122,684 376,569 376,778 436 341 95 443,754 5,104 429,442 9,208 2019 RMB’000 2,329,206 549,092 1,780,112 2 35,430 4 35,426 – 4,021 2,815 1,206 672,849 99,696 533,726 39,427 467,745 23,496 201,353 242,896 99 99 – 450,534 2,713 447,821 – Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 184 185 41 RELATED PARTY TRANSACTIONS (continued) (e) As at 31 December 2020, the Group had the following material balances maintained with related parties: (continued) (i) Material balances with Guangzhou Railway Group and its subsidiaries: (continued) (i) The trade balances due from/to Guangzhou Railway Group, subsidiaries of Guangzhou Railway Group mainly represent service fees and charges payable and receivable balances arising from the provision of passenger transportation and cargo forwarding businesses jointly with these related parties within the PRC. (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. (iii) 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. (iv) The other payables due to associates mainly represent the performance deposits received for construction projects operated by associates. As at 31 December 2020, all the balances maintained with related parties were unsecured, non-interest bearing and were repayable on demand. (ii) Material balances with CSRG Group: Due from CSRG Group — Trade receivables — Other receivables As at 31 December 2020 RMB’000 2019 RMB’000 1,101,951 183,021 1,148,352 48,418 Due to CSRG Group — Trade payables and payables for fixed assets and construction-in-progress — Other payables 71,082 4,564 69,335 3,466 As at 31 December 2020, all the balances maintained with CSRG Group were unsecured, non- interest bearing and were repayable on demand. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 42 BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY Balance sheet of the Company ASSETS Non-current assets Fixed assets — net Right-of-use assets 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 Financial assets at fair value through other comprehensive income Long-term deposits 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 2020 2019 22,947,270 2,914,888 2,778,676 7,268 – 281,255 82,531 121,855 434,550 42,614 375,913 160,000 23,734 23,491,187 2,757,705 2,378,974 11,901 – 281,255 82,531 121,855 302,888 39,723 349,327 – 26,103 30,170,554 29,843,449 – 292,269 3,716,035 849,475 60,000 1,485,223 2,183 266,664 4,493,385 470,436 – 1,562,324 6,403,002 6,794,992 Total assets 36,573,556 36,638,441 Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 186 187 42 BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY (continued) Balance sheet 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 Lease liabilities Deferred income related to government grants Current liabilities Trade payables Contract liabilities Payables for fixed assets and construction-in- progress Dividends payable Income tax payable Current portion of lease liabilities Accruals and other payables Other current liabilities Total liabilities Note 2020 2019 As at 31 December (a) (a) (a) 7,083,537 11,564,462 3,266,425 6,474,359 7,083,537 11,564,462 3,266,425 7,375,835 28,388,783 29,290,259 1,315,693 104,939 1,117,936 97,467 1,420,632 1,215,403 2,052,908 215,197 2,914,696 874 – 61,880 1,503,752 14,834 1,512,265 458,740 1,802,588 15 249,977 58,490 2,050,704 – 6,764,141 6,132,779 8,184,773 7,348,182 Total equity and liabilities 36,573,556 36,638,441 The balance sheet of the Company was approved by the Board of Directors on 29 March 2021 and was signed on its behalf. Wu Yong Director Hu Lingling Director GUANGSHEN RAILWAY 2020 ANNUAL REPORT 42 BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY (continued) (a) Reserve movement of the Company: Share premium Other reserves Retained earnings At 1 January 2019 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 2018 At 31 December 2019 At 1 January 2020 Total comprehensive income (Loss)/profit for the year Other comprehensive income Special reserve — Safety Production Fund Appropriation Utilisation Appropriations from retained earnings Transaction with owners: Dividends relating to 2019 At 31 December 2020 – – – – – – – – 11,564,462 – 3,188,161 – 7,089,433 789,678 789,678 – – (264,871) 264,871 (78,264) – – – 264,871 (264,871) 78,264 – – (425,012) (425,012) 11,564,462 3,266,425 7,375,835 11,564,462 – 3,266,425 – – – – – – – – – – – – 281,277 (281,277) – – – 7,375,835 (476,464) (476,464) – – (281,277) 281,277 – (425,012) (425,012) 11,564,462 3,266,425 6,474,359 Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 188 189 43 BENEFITS AND INTERESTS OF DIRECTORS (a) Directors’, supervisors’ and senior executives’ emoluments For the year ended 31 December 2020 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 Remunerations paid or receivable in respect of accepting office as director RMB’000 Employer’s contribution to a retirement benefit scheme RMB’000 Total RMB’000 – – – 56 76 56 79 61 61 – – – – – – – – – – – – – – 324 – – – – – – – – – – 111 286 154 419 327 288 317 321 – – 22 – – – – – – – – – – 8 26 10 20 20 22 20 20 – – 42 – – – – – – – – – – 17 42 19 42 42 42 42 42 – – 12 – – – – – – – – – – 5 7 6 12 8 47 11 11 – – 21 – – – – – – – – – – 9 17 8 19 14 17 19 19 – – – – – – – – – – – – – – – – – – – – – – – 421 56 76 56 79 61 61 – – – – 150 378 197 512 411 416 409 413 Name Directors Wu, Yong Guo, Ji’an (i) Guo, Xiangdong (ii) Chen, Song (i) Jia, Jianmin (i) Wang, Yunting (i) Guo, Jiming Wang, Bin (iii) Zhang, Zhe Ma, Shiheng (iii) Tang, Xiaofan (iii) Qiu, Zilong (iii) Supervisors Liu, Mengshu Chen, Shaohong Xiang, Lihua Meng, Yong Song, Min (i) Zhou, Shangde Lin, Wensheng (iii) Chief Executive Hu, Lingling (iv) Senior Executives Luo, Jiancheng Tang, Xiangdong Luo, Xinpeng Gong, Yuwen (iv) (i) Resigned from the position in June 2020. (ii) Appointed the position of senior executive in June 2020. (iii) Appointed the position of director in June 2020. (iv) Appointed the position of senior executive in May 2020. GUANGSHEN RAILWAY 2020 ANNUAL REPORT 43 BENEFITS AND INTERESTS OF DIRECTORS (continued) (a) Directors’, supervisors’ and senior executives’ emoluments (continued) For the year ended 31 December 2019 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 Remunerations paid or receivable in respect of accepting office as director RMB’000 Employer’s contribution to a retirement benefit scheme RMB’000 Total RMB’000 – – – – – – – – 112 148 112 – – – – – – – – – – – – – – 237 – – – – – 266 – – – – – – – 222 229 – – 380 272 269 67 271 – 73 – – – – – 72 – – – – – – – 54 52 – – 65 68 71 61 68 – 38 – – – – – 38 – – – – – – – 34 38 – – 38 38 38 10 38 – 25 – – – – – 23 – – – – – – – 21 27 – – 23 20 21 7 22 – 49 – – – – – 49 – – – – – – – 45 43 – – 47 43 45 37 47 – – – – – – – – – – – – – – – – – – – – – – – – – 422 – – – – – 448 112 148 112 – – – – 376 389 – – 553 441 444 182 446 Name Directors Wu, Yong Luo, Qing (i) Yu, Zhiming (i) Guo, Ji’an Guo, Jiming (iii) Zhang, Zhe (iii) Chen, Xiaomei (i) Guo, Xiangdong (iii) Chen, Song Jia, Jianmin Wang, Yunting Supervisors Liu, Mengshu Chen, Shaohong Shen, Jiancong (ii) Li, Zhiming (i) Song, Min Zhou, Shangde Meng, Yong (iv) Xiang, Lihua (v) Chief Executive Hu, Lingling Senior Executives Luo, Jiancheng Tang, Xiangdong Luo, Xinpeng (vi) Gong, Yuwen During the year ended 31 December 2020, 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 (2019: Nil). Notes to the Financial StatementsFor the year ended 31 December 2020(All amounts expressed in Renminbi unless otherwise stated) 190 191 43 BENEFITS AND INTERESTS OF DIRECTORS (continued) (b) Director’s retirement benefits The retirement benefits paid to directors during the year end of 2020 by a defined contribution pension plan (basic endowment insurance and enterprise annuity) in respect of their services as director of the Company and its subsidiaries are RMB143,000 (2019: RMB405,000) respectively. No other retirement benefits were paid to them in respect of their other services in connection with the management of the affairs of the Company or its subsidiary undertaking (2019: Nil). (c) Directors’ termination benefits During the year ended 31 December 2020, no payments to the directors of the Company as compensation for the early termination of the appointment (2019: Nil). (d) Consideration provided to third parties for making available directors’ services During the year ended 31 December 2020, the Company did not provide to third any party for making available director’s services (2019: 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 2020, no loans, quasi-loans or other dealings in favour of directors of the Company, controlled bodies corporate by and connected entities with such directors (2019: Nil). (f) Directors’ material interests in transactions, arrangements or contracts Except the transactions with Guangzhou Railway Group as disclosed in note 41, 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 (2019: Nil). GUANGSHEN RAILWAY 2020 ANNUAL REPORT DOCUMENTS AVAILABLE FOR INSPECTION 1. Accounting statements signed and stamped by the legal representative, person in charge of accounting affairs and responsible person of the accounting firm; 2. The original audit report stamped by PricewaterhouseCoopers Zhong Tian LLP and signed and stamped by the certified public accountants and the financial statements prepared in accordance with China accounting standards, and the original audit report stamped by PricewaterhouseCoopers and the financial statements prepared in accordance with IFRS; 3. The originals of all documents and announcements of the Company disclosed in the China Securities Journal, Securities Times, Shanghai Securities News and Securities Daily during the reporting period; 4. The annual report published on the website of SEHK and the annual report published on the website of NYSE (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: 29 March 2021 Chapter 12Documents Available for Inspection 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