Guangshen Railway Company Limited Annual Report 2023

Plain-text annual report

2 0 2 3 Address: No. 1052, Heping Road, Shenzhen Postcode: 518010 Tel: (86)-755-25587920 Fax: (86)-755-25591480 Website: www.gsrc.com 2 0 2 3 1. 2. 3. 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. All Directors of the Company attended the meeting of the Board to consider this annual report. PricewaterhouseCoopers issued an audit report for the Company with standardized and unqualified audit opinions. 4. Wei Hao, 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 approved by the Board through resolution At the sixth meeting of the tenth session of the Board of the Company, a proposal for profit distribution for the reporting period was considered and approved on 28 March 2024. The Board proposed to distribute a final cash dividend for the year 2023 in the amount of RMB0.07 per share (inclusive of tax) to all shareholders on the basis of the total share capital of 7,083,537,000 shares as at 31 December 2023, amounting to RMB495,847,590 in total. The proposal is subject to the consideration and approval of the 2023 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 and personnel concerned shall stay adequately mindful of risks, and understand the difference between plans, projections and commitments. 7. Is there any non-regular appropriation of the Company’s fund by its controlling shareholder and other 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. Important NoticeTable of Contents Chapter 1 Definitions Chapter 2 Company Profile and Major Financial Indicators Chapter 3 Report of the Directors (Including Management Discussion and Analysis) Chapter 4 Corporate Governance Chapter 5 Environmental and Social Responsibilities Chapter 6 Matters of Importance Chapter 7 Changes in Shares and Particulars of Shareholders 3 4 9 34 84 87 98 Chapter 8 Information Regarding Preference 108 Shares Chapter 9 Information Regarding Bonds Chapter 10 Financial Statements 109 110 List of Documents Available for Inspection I. II. III. Accounting statements signed and sealed by the chairman, general manager, chief accountant and financial director of the Company; The original audit report with the seal of the accounting firm and the signature and seal of the certified public accountant; The originals of all corporate documents and announcements publicly disclosed during the reporting period; IV. Annual reports published in the stock markets in Shanghai. Place to maintain such documents: Board secretariat of the Company Definition of commonly used words Company Reporting period, this Guangshen Railway Company Limited 12 months from 1 January to 31 December 2023 12 months from 1 January to 31 December 2022 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 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 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. 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 Guangdong Railway Company Limited Guiyang-Guangzhou Railway Company Limited Nanning-Guangzhou Railway Company Limited Guangdong Pearl River Delta Inter-city Railway Traffic Company Limited MaoZhan Railway Company Limited Guangdong Shenmao Railway Company Limited Guangdong Meizhou-Shantou Passenger Railway Line Company Limited Guangzhou Northeast Freight Car Outer Winding Railway Co., Ltd. Ganzhou-Shenzhen Railway (Guangdong) Company Limited Guangzhou Nanshagang Railway Company Limited Maoming Bohe Gang Railway Co., Ltd. Guangdong Guangzhou-Shantou Railway Co., Ltd. period, this year Same period last year A Share(s) H Share(s) PRC CSRC SSRB SSE SEHK SFO Listing Rules Articles Company Law Securities Law CSRG GRGC GZIR WGPR GSHER GZR XSR GDR GGR NGR PRDIR MZR SMR MSR GSTR GSR NSGR MBGR GGSR 003 Annual reportChapter 1DefinitionsI. INFORMATION OF THE COMPANY (1) General information of the Company Chinese name Chinese name abbreviation English name Legal representative of the Company 廣深鐵路股份有限公司廣深鐵路 Guangshen Railway Company Limited Wei Hao (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@gstlgs.com Representative of Securities Affairs Deng Yanxia No. 1052 Heping Road, Luohu District, Shenzhen, Guangdong Province (86) 755-25588150 (86) 755-25591480 ir@gstlgs.com (3) Basic Information Registered Address No. 1052 Heping Road, Luohu District, Shenzhen, Guangdong Province Change of Registered Address in the Past None Place of Business Postal Code of the Place of Business Company Website E-mail No. 1052 Heping Road, Luohu District, Shenzhen, Guangdong Province 518010 http://www.gsrc.com ir@gstlgs.com (4) Places for Information Disclosure and Reserve Address Names and websites of the newspapers for the disclosure of annual reports by the Company China Securities Journal: https://www.cs.com.cn Securities Times: http://www.stcn.com Shanghai Securities News: https://www.cnstock.com Securities Daily: http://www.zqrb.cn Websites of stock exchanges for the disclose of annual reports by the Company SSE: http://www.sse.com.cn SEHK: http://www.hkexnews.hk Reserve address of annual report No. 1052 Heping Road, Luohu District, Shenzhen, Guangdong Province 004 Annual reportChapter 2Company Profile and Major Financial Indicators(5) Share Information of the Company Type of Shares A Shares H Shares Stock Exchange SSE SEHK Stock Short Name 廣深鐵路 GUANGSHEN RAIL Stock Code 601333 00525 (6) Other Information Auditor engaged by the Company (Domestic) Name Office Address Auditor engaged by the Company (Overseas) Legal advisor as to PRC law Name of signing auditors Name Office Address Name Office Address Legal advisor as to Hong Kong law Name Office Address Registrar for A Shares Name Registrar for H Shares Office Address Name Office Address Principal banker Name Office Address PricewaterhouseCoopers Zhong Tian LLP 11/F PricewaterhouseCoopers Center, 2 Corporate Avenue, 202 Hu Bin Road, Huangpu District, Shanghai, China Qiu Xiaoying, Guo Wen PricewaterhouseCoopers 22nd Floor, Prince’s Building, Central, Hong Kong Jia Yuan Law Offices Unit A/B, 45/F, Radio and Television Financial Center, Pengcheng 1st Road, Futian District, Shenzhen Jingtian & Gongcheng LLP Rooms 3203 to 3207, 32/F, Edinburgh Tower, The Landmark, 15 Queen’s Road Central, Central, Hong Kong China Securities Depository and Clearing Corporation Limited Shanghai Branch 36th Floor, China Insurance Building, No. 166, Lujiazui East Road, Pudong New District, Shanghai Computershare Hong Kong Investor Services Limited Rooms 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong Construction Bank of China Shenzhen Branch Jiabin Road Sub-branch 1st to 4th Floors, Jinwei Building, Jiabin Road, Shenzhen, China 005 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORTII. 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 H shares and ADSs issued by the Company were listed on the SEHK and the US New York Stock Exchange, respectively; in December 2006, the A Shares issued by the Company were listed on the Shanghai Stock Exchange; in January 2007, the Company used the proceeds from the issue of A Shares to acquire the railway of Guangzhou-Pingshi section (southern section of Beijing-Guangzhou line), taking the coverage of the Company’s operations into the national trunk line networks; in November 2020, the Company’s ADSs were delisted from the US New York Stock Exchange and transferred to the US OTC market; in October 2021, the trading of the Company’s ADSs was suspended in the US OTC market; in October 2022, the Company applied to the US Securities and Exchange Commission to withdraw the registration of ADSs and terminate the reporting obligation; and in January 2023, the deregistration of the Company’s ADSs was completed. So far, the Company is the only PRC railway transportation enterprise which has issued securities in Shanghai and Hong Kong. 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 main 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, Ganzhou-Shenzhen Railway, Guangdong Guangzhou-Shantou 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. 006 Annual reportChapter 2Company Profile and Major Financial IndicatorsFreight 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, GDR, NGR, GGR, PRDIR, MZR, SMR, MSR, GSTR, GSR, NSGR, MBGR and GGSR, 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 Income items 2023 2022 (Unit: RMB thousand) Year- on-year increase/ decrease (%) 2021 2020 2019 26,194,898 19,943,430 24,897,193 22,569,754 31.35 20,206,157 16,349,366 21,178,351 10.31 21,574,642 18,186,790 20,076,414 1,538,460 1,456,576 1,056,894 (2,552,035) (2,579,793) (1,993,647) N/A N/A N/A (1,193,154) (1,249,586) (973,963) (652,262) (690,745) (558,100) 1,072,841 1,009,092 747,964 1,058,289 (1,994,665) N/A (973,119) (557,876) 748,439 0.15 (0.28) N/A (0.14) (0.08) 0.11 Operating revenue Operating cost Profit/(loss) from operations Profit/(loss) before tax Profit/(loss) after tax Consolidated Profit/ (loss) attributable to shareholders Basic profit/(loss) per share (RMB per share) 007 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT Increase/ decrease as at the end of the year compared to the end of last year (%) At the end of 2021 At the end of 2020 At the end of 2019 Assets and liabilities At the end of 2023 At the end of 2022 Total assets Total liabilities Shareholders’ equity interests (excluding interests of minor shareholders) Net assets per share (RMB per share) 37,234,948 37,041,376 10,882,952 11,788,175 0.52 37,403,422 36,780,453 36,893,133 7,753,852 (7.68) 10,198,986 8,624,284 26,389,886 25,289,696 4.35 27,241,949 28,192,838 29,175,726 3.73 3.57 4.48 3.85 3.98 4.12 IV. DIFFERENCES IN ACCOUNTING DATA UNDER CHINESE AND INTERNATIONAL ACCOUNTING STANDARDS □ Applicable ✓ Not applicable V. ITEMS MEASURED AT FAIR VALUE Item Opening balance Closing balance (Unit: RMB thousand) Change in the current period Impact on the profit for the current period Financial assets at fair value through other comprehensive income Total 463,696 463,696 462,696 462,696 (1,000) (1,000) 16,285 16,285 008 Annual reportChapter 2Company Profile and Major Financial Indicators I. CHAIRMAN’S STATEMENT Dear shareholders, On behalf of the Board, I am pleased to present the audited operating results of the Company for 2023, and hereby extend my sincere gratitude to all the shareholders for your concern and support for the Company! (1) Business review The year 2023 was the first year to fully implement the spirit of the 20th National Congress of the CCP, as well as the year of economic recovery and development after three years of COVID-19 prevention and control. Under the strong leadership of the Party Central Committee with Comrade Xi Jinping as the core, the Board and the management of the Company united to lead the cadres and employees to adhere to Xi Jinping’s thought of Socialism with Chinese characteristics in the new era as the guidance, and took the spirit of General Secretary Xi Jinping’s important instructions on railway work as the fundamental guide. We also resolutely implemented the decisions and arrangements of the Party Central Committee and the State Council. Guided by strengthening the Party’s overall leadership and driven by the solid development of thematic education, we adhered to the general principle of seeking progress while maintaining stability and focused on serving and supporting the construction of Chinese modernization. The Company has successfully accomplished the annual objectives and tasks and achieved remarkable results in promoting the high-quality development of the Company, with the safety of the Company’s transportation continuing to be stable. The passenger business realized a substantial rebound; the freight business basically remained stable; the operating efficiency has significantly improved. 009 Annual reportChapter 3Report of the Directors(Including Management Discussion and Analysis)In 2023, the Company recorded an annual passenger delivery volume of 59,315,000 people, representing a year- on-year increase of 123.69%, while its freight delivery volume amounted to 16,032,500 tonnes, representing a year-on-year decrease of 3.27%. Additionally, the Company recorded an operating revenue of RMB26.195 billion, representing a year-on-year increase of 31.35%; consolidated profit attributable to shareholders amounted to RMB1.058 billion, turning losses into profits year-on-year (consolidated loss attributable to shareholders in the same period last year was RMB1.995 billion). Its basic profit per share amounted to RMB0.15. Throughout 2023, 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 improve its operations efficiency. During the year, the Company convened 1 general meeting, 6 Board meetings, 6 Audit Committee meetings, 2 Remuneration Committee meetings, and 2 Nomination Committee meetings. 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, corporate governance, establishment of systems and appointment of accountants. The Company also completed the election of the tenth session of the Board and the Supervisory Committee, and reformulate the “Work System for Independent Directors of the Company”, which effectively ensured the sustainable and stable development of the Company. The Company has always strived to enhance its enterprise value, and persists in ensuring a sustainable and stable profit distribution policy, and attaching importance to the reasonable returns to investors while focusing on the sustainable development of the Company. The Company distributed annual cash dividends for 24 consecutive years from 1996 to 2019, with an aggregate cash dividend amount of approximately RMB12.3 billion. However, since 2020, due to the continuous impact of the external environment, the Company has faced great operating pressure, and with comprehensive consideration of the Company’s profitability and the capital needs to maintain the Company’s normal operation, the Company did not distribute any cash dividend from 2020 to 2022. (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 2024 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. 010 Annual reportChapter 3Report of the Directors(Including Management Discussion and Analysis)The year 2024 is the 75th anniversary of the founding of New China. It is a critical year for the realization of the objectives and tasks of the 14th Five-Year Plan. It is also an important year for the railroad to comprehensively deepen the reform and innovation and accelerate the construction of the “Six Modernized Systems”. At the beginning of the year, the Central Economic Work Conference pointed out that the favorable conditions for China’s development were stronger than the unfavorable factors, and the basic trend of economic recovery and long-term improvement has remained promising. China will adhere to the principle of seeking progress amidst stability and promoting stability through progress, and will adopt more policies that are conducive to stabilizing the expectations, growth and employment. China will also actively make progress in transforming the development mode, adjusting the structure, improving the quality, and increasing the efficiency, so as to continuously consolidate the foundation for steady improvement. Therefore, we should have confidence that China’s economic structure will continue to improve; the growth momentum will continue to strengthen; the development trend will continue to improve. In 2024, the Company will adhere to the guidance of the Socialism with Chinese Characteristics in the New Era of Xi Jinping, and fully implement the spirit of the 20th National Congress of the CCP, the 2nd Plenary Session of the 20th Central Committee of the CCP and the Central Economic Work Conference. The Company will also take the spirit of the important instructions on railway-related work of General Secretary Xi Jinping as a fundamental guideline, adhere to the overall principle of “seeking advancement while maintaining stability”, and implement the new development concept in an integral, accurate and comprehensive manner. To comprehensively deepen reform and innovation as the driving force and accelerate the construction of the “Six Modernization System” as a carrier, the Company will implement major strategies for China, coordinate services to expand domestic demand and deepen the structural reform of the transportation supply side, coordinate high-quality development and high level of security, and unswervingly promote comprehensive and rigorous governance of the Party. The Company strives to promote the high-quality and sustainable development, and to serve and support the “locomotive” of Chinese modernization. We ride on the momentum to open up new horizons and strive to progress to a new chapter. The members of the Board and I believe that with the strong support of all shareholders and all sectors of the community, and with the joint efforts of the Board, Supervisory Committee, management and all employees, the Company will be able to make new progress in various businesses, create new value for shareholders and make new contributions to social development in the new year. Wei Hao Chairman of the Board 28 March 2024 011 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT II. FACT SHEET OF OUR INDUSTRY DURING THE REPORTING PERIOD 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 2023, the nationwide railways in operation reached 159,000 kilometers; among which, the high-speed railways in operation ran over 45,000 kilometers, indicating the increasing prominent key role of railways in the modernized comprehensive transportation system. According to industry statistics released by the National Railway Administration, in 2023, for railways nationwide, the passenger traffic volume was 3.855 billion people, representing a year-on-year increase of 130.4%, and the outbound freight tonnage reached 5.035 billion tonnes, representing a year-on-year increase of 1.0%. III. ACTIVITIES OF THE COMPANY DURING THE REPORTING PERIOD 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, GDR, NGR, GGR, PRDIR, MZR, SMR, MSR, GSTR, GSR, NSGR, MBGR and GGSR. IV. ANALYSIS OF CHANGE(S) IN THE COMPANY’S CORE COMPETITIVENESS DURING THE REPORTING PERIOD □ Applicable ✓ Not applicable 012 Annual reportChapter 3Report of the Directors(Including Management Discussion and Analysis)V. DISCUSSION AND ANALYSIS OF THE PRINCIPAL OPERATION OF THE COMPANY DURING THE REPORTING PERIOD In 2023, the operating revenue of the Company was RMB26,195 million, representing an increase of 31.35% as compared to RMB19,943 million for the same period of last year; operating cost amounted to RMB24,897 million, representing an increase of 10.31% as compared to RMB22,570 million for the same period of last year; profit from operation amounted to RMB1,538 million, turning from loss to profit on a year-on-year basis (loss from operation for the same period last year: RMB2,552 million); consolidated profit attributable to shareholders was RMB1,058 million, turning from loss to profit on a year-on-year basis (consolidated loss attributable to shareholders for the same period last year: RMB1,995 million). (1) Analysis of operating results 1. An analysis of changes in items of the income statement and the cash flow statement Item Current period Same period last year Change (%) (Unit: RMB thousand) Operating revenue Operating cost Derecognition of land use right Impairment losses on financial assets — net Other gains — net Finance costs — net Share of results of associates — net of tax Income tax expense Net cash flows from operating activities Net cash flows from investing activities Net cash flows from financing activities 26,194,898 24,897,193 93,440 5,506 152,821 105,338 23,454 399,682 1,116,365 (822,840) (110,697) 19,943,430 22,569,754 18,664 4,093 59,718 79,925 52,167 (586,146) (193,449) (1,425,870) 1,419,492 31.35 10.31 400.64 34.52 155.90 31.80 (55.04) N/A N/A N/A (107.80) 013 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT 2. Analysis of revenue and costs (1) Revenue from 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 2023 2022 Year-on-year increase/ decrease (%) 1,072,777 316,904 156,239 539,795 59,839 59,315,044 23,395,556 802,766 35,116,722 668,295 150,960 — 482,556 34,779 26,517,127 9,393,475 — 17,123,652 60.52 109.93 100.00 18.62 72.05 123.69 149.06 100.00 105.08 • The increase in revenue from passenger transportation and passenger traffic volume was mainly due to the following: During the reporting period, with the continuous improvement of the external business environment, the gradual resumption of normal customs clearance at the Shenzhen- Hong Kong ports, and the resumption of the through trains to Hong Kong, the passenger traffic volume at the stations under the Company’s management rebounded significantly on a year-on-year basis, thereby resulting in an increase in the revenue from passenger transportation. 014 Annual reportChapter 3Report of the Directors(Including Management Discussion and Analysis) (2) Revenue from 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: 2023 2022 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) 182,830 163,307 19,523 16,032,467 161,711 141,236 20,475 16,573,631 13.06 15.63 (4.65) (3.27) • The decline in outbound freight volume and the increase in revenue from freight transportation was mainly due to the following: During the reporting period, affected by the decline in national export growth and the slowdown in fixed asset investment growth, the Company’s outbound freight volume declined, but the Company actively implemented the structural reform on the supply side of transportation, and increased the transportation of high-value-added cargoes by upgrading the structure of products, enhancing the quality of services and improving the efficiency of transportation, which led to an increase in revenue from freight transportation. 015 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT (3) Revenue from 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: 2023 2022 Year-on-year increase/ decrease (%) 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 1,209,307 427,309 781,998 418,982 363,016 1,042,280 336,801 705,479 362,031 343,448 16.03 26.87 10.85 15.73 5.70 • • The increase in revenue from railway network usage services was mainly due to the following: During the reporting period, as the demand in the railway passenger transportation market continued to pick up, the number of passenger train pairs organized by other railway companies to the stations under the Company’s management increased on a year-on-year basis, thereby resulting in an increase in the Company’s revenue from railway network usage services. The increase in revenue from other transportation services was mainly due to the following: During the reporting period, as demand in the railway passenger transportation market continued to pick up, the workload of railway operation service and passenger service provided by the Company for other railway companies increased on a year-on-year basis, thereby resulting in an increase in the Company’s service revenue. (4) Revenue from 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 2023, revenue from other businesses was RMB1.546 billion, representing an increase of 26.64% as compared to RMB1.221 billion for the same period last year. The increase was mainly due to the following: (a) during the reporting period, new revenue was recorded from services such as sewage suction for stations and passenger trains and commissioned project construction; (b) during the reporting period, the number of operating trains and the passenger transportation traffic increased, thereby resulting in a year-on-year increase in the revenue from train maintenance, train catering and commodity sales. 016 Annual reportChapter 3Report of the Directors(Including Management Discussion and Analysis) (5) Analysis of costs By Industry Item 2023 2022 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 Impairment of fixed assets Cargo logistics and outsourcing service fees Utility and office expenses Others Subtotal Other businesses Business tax and surcharges Employee benefits Materials and supplies Depreciation of right-of-use assets Depreciation of fixed assets Utility and office expenses Others Subtotal Total 36,708 8,970,300 8,265,305 1,467,297 2,007 8,269,989 7,386,515 1,211,606 1,729.00 8.47 11.90 21.10 1,298,877 57,070 1,836,776 120,819 387,681 37,476 1,094,805 23,573,114 11,605 510,410 386,660 11,332 27,314 73,918 302,840 1,324,079 24,897,193 1,119,050 57,068 1,809,415 — 485,413 84,419 948,130 21,373,612 8,548 615,029 345,315 11,332 27,004 97,273 91,641 1,196,142 22,569,754 16.07 — 1.51 100.00 (20.13) (55.61) 15.47 10.29 35.76 (17.01) 11.97 — 1.15 (24.01) 230.46 10.70 10.31 017 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT • • The changes in costs of the railway business were mainly due to the following: (a) During the reporting period, the number of operating trains organized by the Company increased and the workload of railway operation service provided for other railway companies increased, thereby resulting in a year-on-year increase in equipment rental and service fees, material and supplies, maintenance costs, passenger service fees and other transportation expenses; (b) during the reporting period, the adjustment of employees’ basic salaries, the increase in the payment base and payment ratio of various social insurance and housing provident funds and other surcharges resulted in a year-on-year increase in the corresponding employee welfare expenses; (c) during the reporting period, the impairment losses on fixed assets increased; (d) during the reporting period, freight volume decreased, and the corresponding cargo handling charges decreased year-on-year; and (e) during the reporting period, the party organisation working expenses provided decreased. The increases in costs of other businesses were mainly due to the following: During the reporting period, new services were launched, such as sewage suction for stations and passenger trains and commissioned project construction, and the business volume of train maintenance, train catering and commodity sales increased, thereby resulting in a year-on-year increase in the corresponding business expenses. (6) Major sales customers and suppliers A. The Company’s major customers The sales from the top five customers amounted to RMB7.96663 billion, accounting for 30.41% of the total annual sales; of which the sales from related parties amounted to RMB7.96663 billion, accounting for 30.41% of the total annual sales. 018 Annual reportChapter 3Report of the Directors(Including Management Discussion and Analysis)B. The Company’s major suppliers The purchases from the top five suppliers amounted to RMB9.69879 billion, accounting for 73.00% of total annual procurement; of which purchases from related parties amounted to RMB9.69879 billion, accounting for 73.00% of the total annual procurement. 3. Expenses Item 2023 2022 decrease (%) Major reason for the change (Unit: RMB thousand) Year-on-year increase/ Derecognition of land use right Impairment losses on financial assets — net Other gains — net 93,440 18,664 400.64 5,506 4,093 34.52 152,821 59,718 155.90 Net gain from the disposal of intangible assets increased. Bad debt losses on accounts receivable increased. The government subsidies received and gain from retirement of fixed assets increased. Finance costs — net 105,338 23,454 79,925 52,167 31.80 Interest expenses on bank loans increased. (55.04) The investment gains recognized for long-term equity investment decreased. 399,682 (586,146) N/A Total profit turned from loss to profit during the reporting period, resulting in an increase in the income tax expenses calculated at applicable tax rate. Share of results of associates — net of tax Income tax expense 019 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT 4. Cash flow Year-on-year increase/ 2023 2022 decrease (%) Major reason for the change (Unit: RMB thousand) Net cash flows 1,116,365 (193,449) N/A from operating activities During the reporting period, the Company’s operating income increased, and the cash received increased accordingly. Net cash flows (822,840) (1,425,870) N/A During the reporting period, from investment activities Net cash flows from financing activities cash paid for the purchase and construction of fixed assets and other long-term assets decreased. (110,697) 1,419,492 (107.80) During the reporting period, cash paid for repayment of bank borrowings increased. 020 Annual reportChapter 3Report of the Directors(Including Management Discussion and Analysis) (2) Analysis of assets and liabilities (Unit: RMB thousand) Changes in amount from the end of previous period to the end of current period (%) Explanation Amount at the end of current period Amount at the end of previous period 22,786,696 561,178 23,430,371 1,112,582 (2.75) Fixed assets depreciated. (49.56) Construction in progress was completed and transferred to fixed assets. Item Fixed assets — net Construction in progress Deferred tax assets Trade receivables 883,835 6,239,552 1,284,105 4,656,294 (31.17) Deductible losses decreased. 34.00 Receivables for railway passenger and freight transportation and payments for provision of railway operation services increased. 784,787 578,557 35.65 Construction payment receivables 1,950 172,192 (98.87) increased. The 3-year term deposit was withdrawn upon maturity. 1,482,463 1,299,635 14.07 Bank deposits increased. 3,181,832 3,525,291 (9.74) Payables for material purchases 228,526 1,931,405 172,866 2,053,638 32.20 (5.95) decreased, and bank acceptance bills were paid upon maturity. Unused bonus points increased. Payables for construction and equipment decreased. Prepayments and other receivables Current portion of long-term deposits Cash and cash equivalents Trade and bill payables Contract liabilities Payables for fixed assets and construction-in- progress Accruals and other 1,868,854 2,323,722 (19.57) Social insurance and housing payables 021 provident fund deferred in the previous year were paid, and investment in other equity instruments payables and land resumption compensation received in advance decreased. Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT (3) Analysis of investment positions 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. 1. Significant investments in equity interests □ Applicable ✓ Not applicable 2. Significant non-equity investments □ Applicable ✓ Not applicable 3. Financial assets at fair value 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. Specific progress of major asset restructuring and consolidation during the reporting period □ Applicable ✓ Not applicable (4) Disposal of major assets and equity interests □ Applicable ✓ Not applicable (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. 022 Annual reportChapter 3Report of the Directors(Including Management Discussion and Analysis)VI. DISCUSSION AND ANALYSIS ON THE FUTURE DEVELOPMENT OF THE COMPANY (1) Industry development trend and competition landscape 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. Competition landscape: 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. 023 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT(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 GuangdongHong 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 sixth meeting of the tenth session of the Board of the Company held on 28 March 2024, the Board considered and approved the financial budget for the year of 2024. The Company plans to achieve a passenger delivery volume of 64.50 million people (excluding commissioned transportation) and outbound freight volume of 15.95 million tonnes. To achieve these objectives, the Company will focus its work on the following aspects: 1. 2. In terms of corporate governance: the Company will adhere to good corporate governance principles, further promote the deep integration of the Party’s leadership and corporate governance, continuously improve the corporate governance rules and various management systems, and enhance the corporate governance capabilities and levels. In terms of production safety: we will insist on giving priority to prevention and treatment. Firstly, we must consolidate and strengthen the safety foundation. Driven by the three-year action plan to tackle the root cause of production safety and the three-year action plan to deepen railway safety infrastructure, we comprehensively improve the intrinsic safety level. Secondly, we must improve our prevention and control capabilities. We adhere to the proactive prevention, advanced protection, and source control, control key situations, improve emergency response capabilities, and ensure security, stability, and controllability. 024 Annual reportChapter 3Report of the Directors(Including Management Discussion and Analysis)3. 4. In terms of passenger and freight transportation: We insist on deepening the structural reform of the transportation supply side. First, we will further promote the three-year action plan for improving passenger transportation quality, accurately implement passenger transportation quality improvement plan, enhance passenger transportation marketing mechanisms, insist on innovating supply, driving demand, enriching product supply, and improving the satisfaction of passenger services. Secondly, we will accelerate the construction of a modern logistics system, promote the transformation and upgrading of railway freight to modern logistics, and realize the transformation of railway freight from “transportation” to “logistics” and from “management” to “service”. Thirdly, we will build an intensive, efficient and powerful transportation organization system, with focuses on coordinating passenger and freight transportation, high-speed rail and ordinary rail transportation capabilities, so as to continuously improve the efficiency and effectiveness. In terms of operation and management: we will establish a modern operation philosophy. Firstly, we must strengthen comprehensive budget management, optimize the budget indicator system, and strengthen the entire process control of budget execution. Secondly, we must strengthen refined management, and focus on improving the quality and efficiency, saving expenditures and reducing consumption. We will also deepen the reform of employment system, personnel system, distribution system, production organization, labor organization and process repair to improve total factor productivity. Thirdly, we must adhere to standardized operations, focus on preventing and defusing business risks, and standardize the management of funds, contracts, material procurement, etc. (4) Potential risks Type of risk Description of risk Addressing measures Macro-economic risk Policy and regulatory risk 025 The railway transportation industry is highly related to the macro-economic development conditions and is greatly affected by the macro-economic atmosphere. If the macro-economic outlook declines in the future, the Company’s operating results and financial condition may be adversely affected. the The railway transportation industry is greatly affected by policies and regulations. With changes in the domestic and international economic environment, reform and and development of the railway transportation industry, corresponding adjustments in the 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. 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 policies 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. Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORTType of risk Description of risk Addressing measures Transportation safety risk Market competition risk is safety Transportation the prerequisite and foundation for the railway transportation industry in maintaining normal operations and a good reputation. Inclement weather, mechanical failures, human errors and other force majeure events may adversely affect the transportation safety of the Company. range of highspeed transportation methods Other (such as aviation, road and water) compete with railway transportation in certain markets. In addition, a railways and inter-city railways have been completed and commenced operation along with the development of the railway industry. transportation the Internal competition within 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. 026 The Company will consciously accept the safety supervision of industry authorities, actively participate in regular transportation safety meetings held by competent authorities of the industry to understand the transportation safety condition of the Company, provide for and utilize the expenses for safety production, and intensify the training of safety knowledge and capabilities of its transportation personnel. The Company will take proactive measures to address market competition. For passenger transportation, the 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 adverse impacts on the financial performance of the Company. For more detailed analysis, please refer to Note 3 to the financial statements. Annual reportChapter 3Report of the Directors(Including Management Discussion and Analysis) (5) Relevant measures to improve the Company’s investment value In accordance with the requirements of the “Opinions on Strengthening the Supervision of Listed Companies (Trial)” of the CSRC, the Company will further enhance its emphasis on its own investment value and actively take relevant measures that are conducive to improving the Company’s investment value. Firstly, the Company will uphold the stability, longevity and predictability of the Company’s dividend distribution. The Company has insisted on annual dividend distribution, continuous dividend distribution and dividend distribution at a relatively high rate since its listing in 1996, except for the period from 2020 to 2022 when the Company were affected by the pandemic. The Company has cumulatively distributed dividends amounting to approximately RMB12.3 billion. Secondly, the Company will insist on focusing on the main business of railroad passenger and freight transportation to further improve the quality of the Company’s operation. The Company will make full use of the development opportunities of the railroad network and railroad hubs in the Greater Bay Area, continue to enhance the Company’s market competitiveness and profitability, prioritize the interests of the investors, and share the achievement of the railway reform and development with the investors. Thirdly, the Company will maintain close contact with the investors to enhance the recognition of the Company’s investment value. By improving the quality of information disclosure, holding results presentations, setting up dedicated investor hotlines and SSE’s e-interaction, we will promote the investors’ understanding of the development prospects of the railway industry and the current development status of listed railway companies. 027 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORTVII. 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 VIII. BUSINESS REVIEW According to paragraph 28 (2) of Appendix D2 to the Listing Rules of SEHK, the Company is required to conduct a business review in accordance with Schedule 5 of the Companies Ordinance (Cap. 622 of Hong Kong laws) in the Report of the Directors. The details are as follows: (1) A fair review on the Company’s business Please refer to the “Business review” section under the “CHAIRMAN’S STATEMENT” and the “DISCUSSION AND ANALYSIS OF THE PRINCIPAL OPERATION OF THE COMPANY DURING THE REPORTING PERIOD” section in this chapter. (2) Major risks and uncertainties to which the Company is exposed Please refer to the “Potential risks” section under the “DISCUSSION AND ANALYSIS ON THE FUTURE DEVELOPMENT OF THE COMPANY” in this chapter. 028 Annual reportChapter 3Report of the Directors(Including Management Discussion and Analysis)(3) Important event affecting the Company after the reporting period None. (4) Future business development of the Company Please refer to the “DISCUSSION AND ANALYSIS ON THE FUTURE DEVELOPMENT OF THE COMPANY” section. (5) Analysis on the key financial indicators during the reporting period Please refer to the “DISCUSSION AND ANALYSIS OF THE PRINCIPAL OPERATION OF THE COMPANY DURING THE REPORTING PERIOD” section. (6) Environmental policies and performance of the Company Please refer to the “Environmental and Social Responsibilities” chapter in this annual report, as well as the 2023 Social Responsibility Report published by the Company on the website of the Shanghai Stock Exchange (http://www.sse.com.cn), the HKExnews website of the Stock Exchange (http://www.hkexnews.hk) and the Company’s website (http://www.gsrc.com). (7) Compliance with laws and regulations that have a significant impact on the Company During the reporting period, the Company complied with all relevant laws and regulations that have a significant impact on the Company. (8) Description of the Company’s significant relationships with its employees, customers, suppliers and others 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. 029 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORTIX. OTHER DISCLOSURES (1) Liquidity and source of funding During the reporting period, the principal sources of funding of the Company were revenue generated from its operating activities and bank borrowings. 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 at the end of the reporting period, the Company had short-term borrowings of approximately RMB700 million, with a weighted average annual interest rate of 2.52%; and had long-term borrowings of approximately RMB791 million, with a weighted average annual interest rate of 2.56%. The Company’s capital commitments and operating commitments as of the end of the reporting period are set out in Note 39 to the financial statements. As at 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 29.23%. (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. (3) Taxation Details of income tax applicable to the Company during the reporting period are set out in Note 34 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. 030 Annual reportChapter 3Report of the Directors(Including Management Discussion and Analysis)(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 23 to the financial statements. (8) Subsidiaries Details of the principal subsidiaries of the Company as at the end of the reporting period are set out in Note 10 to the financial statements. (9) Material investments held, material acquisitions and disposals of subsidiaries and associates, and future plans of material investments or acquisition of capital assets Except as disclosed in this annual report, during the reporting period, the Company had no material 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. (10) Contingent liabilities At the end of the reporting period, the Company had no contingent liability. (11) Fixed interest rate As at the end of the reporting period, the Company had short-term borrowings of approximately RMB700 million, with a weighted average annual interest rate of 2.52%; and had long-term borrowings of approximately RMB791 million, with a weighted average annual interest rate of 2.56%, details of which are set out in Note 25 to the financial statements. 031 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT(12) 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: Wei Hao, Hu Lingling, Zhou Shangde Non-executive Directors: Luo Jinglun, Hu Dan, Zhang Zhe Independent Non-executive Directors: Tang Xiaofan, Qiu Zilong, Wang Qin (13) 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 Company Limited Zengcheng Lihua Stock Company Luo Jiancheng, Chen Longwei, Liu Qiyi, Wan Deqiang, Ren Jiyao, Yin Jinwen, Yuan Jiansheng Luo Jiancheng, Chen Longwei, Liu Qiyi, Wen Yixin, Zhang Qingshan Limited (14) 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. (15) 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. (16) Loans to entities During the reporting period, the Company did not provide any loan to any entity. 032 Annual reportChapter 3Report of the Directors(Including Management Discussion and Analysis) (17) 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. Other parts, chapters or notes to this annual report referred to in this section form part of the report of the directors. By Order of the Board Wei Hao Chairman of the Board Shenzhen, China 28 March 2024 033 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT I. INFORMATION REGARDING CORPORATE GOVERNANCE Since the listing of the Company in 1996, 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 and audit on internal control for the year of 2022, conducted the general elections of the 10th Board of Directors and Supervisory Committee, and re-formulated the “Work System of Independent Directors”, 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 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. 034 Annual reportChapter 4Coporate GovernanceII. SPECIFIC MEASURES TAKEN BY THE CONTROLLING SHAREHOLDER AND ACTUAL CONTROLLER OF THE COMPANY TO ENSURE THE INDEPENDENCE OF THE COMPANY IN TERMS OF ASSETS, PERSONNEL, FINANCE, ORGANIZATION AND BUSINESS, AS WELL AS THE SOLUTIONS, WORK PROGRESS AND FOLLOW-UP WORK PLANS FOR ENSURING THE COMPANY’S INDEPENDENCE □ Applicable ✓ Not applicable Circumstances where the controlling shareholder, actual controller and other units under their control are engaged in the same or similar business as the Company, as well as the impact of horizontal competition or major changes in horizontal competition on the Company, the resolution measures that have been taken, the progress of resolution and the follow-up plan for resolution □ Applicable ✓ Not applicable 035 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORTIII. 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 Resolutions 2022 Annual General Meeting 15 June 2023 Website of SSE (www.sse.com.cn) HKExnews website of SEHK (www.hkexnews.hk) 16 June 2023 15 June 2023 A total of 10 resolutions were considered and passed at the meeting with no objection. (2) Important event for the attention of shareholders in the coming year The Company plans to convene the 2023 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 2023 Annual General Meeting, investors are advised to pay attention to and carefully read the “Notice of 2023 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. 036 Annual reportChapter 4Coporate Governance IV. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT (1) Changes in shareholdings and remunerations of Directors, Supervisors and senior management (current and resigned during the reporting period) Unit: RMB Total remuneration received from the Company (before tax) during the reporting period (RMB ten thousand) Whether receiving remuneration from related parties of the Company — 68.2 — — — 50.7 11.2 11.2 8.3 — — — — Yes No Yes Yes Yes No No No No Yes Yes Yes Yes No Name Position Gender Age Beginning of engagement period End of engagement period Wei Hao Hu Lingling Luo Jinglun Hu Dan Zhang Zhe Zhou Shangde Tang Xiaofan Executive Director, Chairman of the Board Executive Director General Manager Non-executive Director Non-executive Director Non-executive Director Executive Director Deputy Secretary of the Party Committee Employee Representative Supervisor (Resigned) Independent Non-executive Male Male Male Male Male Male Male Director Qiu Zilong Independent Non-executive Male Director 52 60 52 51 52 53 55 57 6 February 2024 15 June 2026 26 May 2016 9 December 2015 6 February 2024 17 June 2021 23 December 2019 17 June 2021 19 March 2021 15 June 2026 To present 15 June 2026 15 June 2026 15 June 2026 15 June 2026 To present 28 May 2015 17 June 2021 16 June 2020 15 June 2026 16 June 2020 15 June 2026 Wang Qin Independent Non-executive Female 53 15 June 2023 15 June 2026 Male 54 15 June 2023 15 June 2026 Huang Chaoxin Chen Shaohong Director Shareholder Representative Supervisor, Chairman of the Supervisory Committee Shareholder Representative Supervisor Male Li Songqing Shareholder Representative Male Supervisor Meng Yong Shareholder Representative Male Supervisor Lin Wensheng Employee Representative Male Supervisor 037 57 51 56 59 26 June 2008 15 June 2026 6 February 2024 15 June 2026 23 December 2019 15 June 2026 16 June 2020 15 June 2026 45.4 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORTName Position Gender Age Beginning of engagement period End of engagement period Song Min Employee Representative Female 53 15 June 2023 15 June 2026 Gong Yuwen Tang Xiangdong Luo Jiancheng Luo Xinpeng Huang Wu Wu Yong (Resigned) Guo Jiming (Resigned) Frederick Ma Si-Hang (Resigned) Lei Chunliang (Resigned) Xiang Lihua (Resigned) Huang Songli (Resigned) Total Supervisor Deputy Secretary of the Party Committee, Secretary of the Discipline Inspection Commission Chairman of Labor Union Deputy General Manager, Secretary of the Board Company Secretary Deputy General Manager Chief Accountant Deputy General Manager Chairman of the Board Executive Director Non-executive Director Male Male Male Male Male Independent Non-executive Male Director Chairman of the Supervisory Male Committee Shareholder Representative Male Supervisor Employee Representative Male Male 57 2 April 2018 To present Male 55 23 February 2024 29 October 2019 To present To present 3 December 2019 30 December 2016 29 October 2019 6 February 2024 18 December 2014 16 December 2014 23 December 2019 To present To present To present To present 6 February 2024 6 February 2024 31 October 2023 16 June 2020 15 June 2023 17 June 2021 15 June 2023 13 June 2019 22 December 2023 17 June 2021 15 June 2023 51 58 53 60 56 72 60 50 48 Supervisor Deputy General Manager Chairman of Labor Union ╱ 27 April 2021 13 April 2021 ╱ 15 June 2023 13 October 2023 ╱ ╱ ╱ Total remuneration received from the Company (before tax) during the reporting period (RMB ten thousand) Whether receiving remuneration from related parties of the Company 26.2 51.8 51.8 51.5 51.8 — — — 6.9 — — 17.6 452.6 No No No No No Yes Yes Yes No Yes Yes No ╱ Note: During the reporting period, none of the directors, supervisors and senior management held or traded the shares of the Company, nor did they hold any share options of the Company or were granted restricted shares. 038 Annual reportChapter 4Coporate Governance Name Biography Mr. Wei, male, born in October 1971, is an Executive Director, Chairman of the Board, and member of the Remuneration Committee and Nomination Committee of the Company. Mr. Wu holds a bachelor’s degree and is a senior engineer. Mr. Wei had previously served as the head of the Vehicle Division of the Shanghai Railway Branch, the Deputy Director and the head of the Vehicle Department of the Shanghai Railway Bureau, the head of the Vehicle Department of the Transport Bureau of the Ministry of Railways, the Deputy Secretary of the Transport Bureau of the China Railway Corporation and the Director of the Vehicle Department, the Deputy Secretary of the Party Committee, the Vice Chairman of the Board of Directors and the General Manager of the GRGC, the Director, General Manger and the Deputy Secretary of the Party Committee of the GRGC, and the Director of the Vehicle Department of the CSRG, and he is currently the Secretary of the Party Committee and the Chairman of the Board of Directors of the GRGC. Mr. Hu, male, born in November 1963, is an Executive Director, General Manager, and member of the Remuneration Committee and Nomination Committee 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 GSHER. He is currently the General Manager of the Company. Mr. Luo, male, born in August 1971, is a Non-executive Director of the Company. Mr. Luo. holds a master’s degree and is a senior accountant. Mr. Luo had previously served as the Chief Accountant of Diversified Operation Management Center (Diversified Operation Group Company) of Chengdu Railway Bureau, the Deputy Director of the Finance Department of Chengdu Railway Bureau and Deputy Secretary-General of the Financial Accounting Society of Chengdu Railway Bureau, the Secretary-General of the Financial Accounting Society of Chengdu Railway Bureau, the Deputy Director and the Director of the Finance Department (Revenue Department) of China Railway Chengdu Bureau Group Company Limited and is currently the Chief Accountant of the GRGC. Mr. Hu, male, born in June 1972, is currently a Non-executive Director of the Company. Mr. Hu holds a bachelor’s degree and is an engineer. Mr. Hu had previously served as the chief of the Integrated Analysis Division of the Safety Supervision Office, the deputy chief of the Safety Supervision Office, the secretary of the Party Committee of the Loudi Railway Depot, the head of the Loudi Railway Depot and the head of the Zhuzhou Railway Station of GRGC. He is currently as the chief of the Transportation Department of GRGC. Wei Hao Hu Lingling Luo Jinglun Hu Dan 039 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT Name Biography Zhang Zhe Zhou Shangde Tang Xiaofan 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. Zhou, male, born in December 1970, is currently an Executive Director and deputy secretary of party committee of the Company. Mr. Zhou holds a master’s degree and is a political officer. Mr. Zhou had previously served as the deputy head of the Organization and Human Resources Department, the chief of the Party Committee Office and the chairman of the union of the General Service Center of the Company; the deputy head of the Human Resources Department, the deputy office chief and chief of the Reception Office and the secretary of the Party General Branch of the Company Affairs Office of GRGC; and the secretary of the Party Committee and head of the Shenzhen Railway Station, the head and deputy secretary of the Party Committee of the Shenzhen North Railway Station of the Company, and an employee representative supervisor of the Company. He is currently the deputy secretary of the Party Committee of the Company. Mr. Tang, male, born in October 1968, is an Independent Non-Executive Director, and the chairman of the Audit Committee and the Remuneration Committee and the member of the Nomination Committee 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., a director and senior vice president of Jiangxi Geto New Materials Corporation Limited (a company listed on Shenzhen Stock Exchange), and a director and the general manager of Guangzhou Dening Investment Management Co., Ltd. He is currently the deputy general manager of Guangzhou Huizhi Venture Capital Co., Ltd.,and the independent non-executive director of Guangdong Qili Aomei High-tech Materials Co., Ltd. (廣東齊力澳美高新材料股份有限公司) and Guangzhou Haote Energy Saving and Environmental Protection Technology Co., Ltd. (廣州豪特節能環保科技股份有限公司). 040 Annual reportChapter 4Coporate Governance Name Biography Qiu Zilong Wang Qin Huang Chaoxin Mr. Qiu, male, born in March 1967, is an Independent Non-executive Director, chairman of the Nomination Committee and member of the Audit Committee and Remuneration Committee 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. Ms. Wang, female, born in April 1970, a permanent resident of Hong Kong, is an Independent Non-executive Director, and member of the Audit Committee, Remuneration Committee and Nomination Committee of the Company. Ms. Wang graduated from the University of Windsor, Canada with a Bachelor’s degree in Business Administration. She has worked for China Travel Service and Hongkong Post. She has previously served as the Vice President of the China (Overseas) Enterprises Reputation Association and is currently the General Manager of Centennial Chishui (Hong Kong) Wine Company Limited, Honorary Director of Hong Kong Famous Brand Technology Limited and Vice President of the Hong Kong Jiangsu Association. Mr. Huang, male, born in December 1969, is a Shareholder Representative Supervisor and the Chairman of the Supervisory Committee of the Company. Mr. Huang holds a bachelor’s degree and is a political engineer. Mr. Huang has previously served as the secretary of the delegation committee of Guangzhou Vehicle Section of Guangzhou Branch of Guangzhou Railway Bureau, the head of the Road Wind Supervision Office of the Discipline Inspection Committee and Supervision Department of Guangzhou Railway Group, the deputy secretary of the Party Working Committee and the secretary of the Discipline Inspection Committee of Guangdong Sanmao Railway Company Limited, the secretary of the Party Working Committee of Guangzhou Vehicle Section of the Company, the deputy secretary of the Discipline Inspection Committee and the head of the Supervision Department of GRGC, and currently serves as the deputy secretary of the Discipline Inspection Committee and the head of the Inspection Office of the Party Committee of GRGC. 041 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT Name Biography Meng Yong Li Songqing Chen Shaohong 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. Li, male, born in October 1972, is a Shareholder Representative Supervisor of the Company. Mr. Li holds a bachelor’s degree and is a senior political engineer. Mr. Li had previously served as the head of the political work section, the head and deputy director of the research and supervision section of the office of GRGC (Party Committee Office), the head (director) of the publicity department of the Party Committee (Corporate Culture Department) of GRGC, and is currently the manager (head) of the Personnel Department (Organization Department of the Party Committee) of the 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. 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, the head of the Planning and Finance Department and the head of the Audit Department of the Company. He is currently the director of the Audit Department of the Company. Ms. Song, female, born in November 1970, is an Employee Representative Supervisor of the Company. Ms. Song holds a bachelor degree and is an accountant. Ms. Song had served as the deputy manager of the operating finance office, department of finance of Qing-hai Tibet Railway Company, deputy office director and finance director of Qinghai Tibet Railway Public Security Bureau, vice officer supervisor of Qinghai-Tibet Railway Company Annuity Council, vice consultant of department of financial management of the State Taxation Bureau of Qinghai Province, senior manager of Petrol China Guangdong Sales Company Shenzhen Branch and the chief of Department of Audit of the Company and other posts. She is currently the director of the secretariat of the Board of the Company. Lin Wensheng Song Min 042 Annual reportChapter 4Coporate Governance Name Biography Gong Yuwen 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. Tang Xiangdong Mr. Tang, male, born in September 1968, is the Chairman of Labor Union, 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, the Chief Accountant, the Deputy General Manager and the Secretary of the Board of the Company. He is currently the Chairman of Labor Union, Deputy General Manager and the Secretary of the Board 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 and 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 Guangzhou- Meizhou-Shantou Railway Company Limited. He is currently the Deputy General Manager of the Company. Luo Jiancheng 043 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT Name Biography Luo Xinpeng Huang Wu 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. Mr. Huang, male, born in October 1970, is the Deputy General Manager of the Company. Mr. Huang holds a bachelor’s degree and a master’s degree in engineering and is an economist. Mr. Huang has served as an accountant in the finance office of the Guangzhou Railway Section of the Yangcheng company headquarters of the GRGC, an assistant accountant and deputy director of the Talent Exchange and Training Center of the Cadre Department of the GRGC (Party Committee Cadre Department), the director of the Political and Legal Comprehensive Management (Road Protection and Joint Defense) Office, and the director of the Human Defense and Preparedness Department, director of the Security Department and director of the Political and Legal Affairs Office of the GRGC. He is currently the Deputy General Manager of the Company. 044 Annual reportChapter 4Coporate Governance (2) Engagements of directors, supervisors and senior management (current and resigned during the reporting period) 1. Engagements in shareholders Name of personnel Name of shareholder Position at shareholder Beginning of engagement End of engagement Wei Hao Luo Jinglun Hu Dan GRGC GRGC GRGC Secretary of the Party Committee, October 2023 Chairman of the Board Chief Accountant Director of the Transportation August 2023 July 2020 Department Zhang Zhe GRGC Chief of the Passenger Transport April 2019 Department Huang Chaoxin GRGC Deputy secretary of the Discipline December 2019 Inspection Committee and the head of the Inspection Office of the Party Committee Chen Shaohong Li Songqing GRGC GRGC Chief Legal Adviser Director (Chief) of Human December 2017 December 2023 Resources Department (Party committee organization) Meng Yong GRGC Chief of the Finance Department May 2020 (Income Department) Huang Wu GRGC Director (Chief) of Protection November 2018 January 2024 Department (People’s Armed Forces Department) Chairman of the Board August 2014 October 2023 Secretary of the Party Committee Chief Accountant November 2017 October 2023 June 2019 July 2023 Outside Director February 2023 Secretary of the Committee for September 2020 February 2023 Discipline Inspection Director (Chief) of Human September 2018 August 2023 Resources Department (Party committee organization) Wu Yong GRGC (Resigned) Guo Jiming (Resigned) Lei Chunliang (Resigned) Xiang Lihua(Resigned) GRGC GRGC GRGC GRGC 045 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT 2. Engagements in other companies Name of personnel Luo Jinglun Name of company Position at company Shichang Railway Company Limited WGPR Hukun Passenger Railway Line (Hunan) Company Limited Hainan Railway Company Limited, GZIR, PRDIR Hu Dan Shenzhen Pingnan Railway Company Limited Zhang Zhe Tang Xiaofan Qiu Zilong Wang Qin Chen Shaohong Meng Yong Shichang Railway Company Limited PRDIR Beijing Zhongtie Commemorate Ticket Co., Ltd. Guangzhou Huizhi Venture Capital Co., Ltd. Guangdong Qili Aomei High-tech Materials Co., Ltd., Guangzhou Haote Energy Saving and Environmental Protection Technology Co., Ltd. Shenzhen Changshang Investment Management Co., Ltd. Shenzhen Beida Soft Bank Investment Corporation Limited Centennial Chishui (Hong Kong) Wine Company Limited Hong Kong Famous Brand Technology Limited The Hong Kong Jiangsu Association GDR, Hainan Railway Company Limited, XSR, MSR Shichang Railway Company Limited, Hukun Passenger Railway Line (Hunan) Company Limited Hong Kong Qiwen Trade Company Limited WGPR, GDR Chairman of the Board Vice Chairman of the Board Director Chairman of the Supervisory Committee Vice Chairman of the Board Director Supervisor Supervisor Deputy General Manager Independent Non-executive Director General Manager Director General Manager Honorary Director Vice President Director Chairman of the Supervisory Committee Director Chairman of the Supervisory Committee Hukun Passenger Railway Line (Hunan) Company Limited, Supervisor Huai Shao Heng Railway Co., Ltd. Tang Xiangdong Shenzhen Guangshen Railway Economic and Trade Supervisor Enterprise Company Limited Luo Jiancheng Dongguan Changsheng Enterprise Company Limited, Chairman of the Board Zengcheng Lihua Stock Company Limited Shenzhen Guangshen Railway Economic and Trade Executive Director Enterprise Company Limited, Shenzhen Pinghu Qun Yi Railway Store Loading and Unloading Company Limited Guangzhou Tiecheng Enterprise Company Limited Director 046 Annual reportChapter 4Coporate GovernanceName of personnel Name of company Position at company Luo Xinpeng Guangzhou Tiecheng Enterprise Company Limited Dongguan Changsheng Enterprise Company Limited, Director Chairman of the Zengcheng Lihua Stock Company Limited Supervisory Committee Shenzhen Pinghu Qun Yi Railway Store Loading and Supervisor Unloading Company Limited Zengcheng Lihua Stock Company Limited Yangtze River Coast Railway Group Co., Ltd. Supervisor Chief Accountant FWD Group COSCO SHIPPING Holdings Co., Ltd., HH&L Acquisition Co. Chairman Director and Unicorn II Holdings Limited China Railway Nanning Group Co., Ltd. GZIR Secretary of the Discipline Inspection Commission Deputy General Manager Lin Wensheng Guo Jiming (Resigned) Frederick Ma Si-Hang (Resigned) Xiang Lihua (Resigned) Huang Songli (Resigned) 047 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT (3) Remuneration of directors, supervisors and senior management Decision-making procedure of the remuneration of Directors, Supervisors senior management and The Remuneration Committee of the Board shall propose the criteria for the recommendation, which shall be submitted to the Company’s general meeting for review and approval after being reviewed and approved by the Board. Whether the directors recuse themselves from discussions on their own remuneration at the Board meeting No Details of recommendations issued by the Remuneration and Appraisal Committee or the Specialized Meeting of Independent Directors on matters relating to the remuneration of the Directors, Senior Supervisors Management and After taking into account the relevant national regulations, the remuneration packages of similar companies, the time commitment of the directors and their duties, etc., we have agreed on the standard remuneration (before tax) plan for the independent directors of the Board and submitted it to the Board for review. Basis for determination of the remuneration of the Directors, senior Supervisors management and 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 Jiming, Hu Dan, Zhang Zhe, and the following Supervisors, namely Lei Chunliang, Huang Chaoxin, 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 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)” in this chapter. During the reporting period, the Directors, Supervisors and senior management received a total remuneration of RMB4.526 million. 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 048 Annual reportChapter 4Coporate Governance(4) Changes in directors, supervisors and senior management Name Position(s) Change(s) Reason(s) for the changes Wei Hao Wu Yong Executive director, Chairman of the Board Executive director, Chairman of the Board Elected Resigned Board re-election Reaching the Luo Jinglun Guo Jiming Non-executive director Non-executive director Elected Resigned retirement age Board re-election Resignation due to change of employment Tang Xiaofan Chairmen of the Audit Committee and Elected Change of the Board Wang Qin Independent non-executive director, Elected Change of the Board Remuneration Committee Frederick Ma Si-Hang and members of the Audit Committee, Remuneration Committee and Nomination Committee Independent non-executive director, Chairmen of the Audit Committee and Remuneration Committee, and a member of the Nomination Committee Resigned Resignation due to contract expiration Huang Chaoxin Shareholder Representative Supervisor, Elected Change of the Supervisory Chairman of the Supervisory Committee Committee Lei Chunliang Shareholder Representative Supervisor, Resigned Resignation due to Chairman of the Supervisory Committee contract expiration Li Songqing Shareholder Representative Supervisor Elected Re-election of the Xiang Lihua Shareholder Representative Supervisor Resigned Supervisory Committee Resignation due to change of employment Song Min Employee Representative Supervisor Elected Change of the Supervisory Huang Songli Employee Representative Supervisor Resigned Resignation due to Committee Deputy General Manager Chairman of labor union Tang Xiangdong Chairman of labor union Dismissed Resigned Elected contract expiration Change of employment Change of employment Adjustment of division of labor Huang Wu Deputy General Manager Appointed Change of employment Save for the above disclosure, there is no other information required to be disclosed under Rule 13.51B(1) of the Listing Rules. 049 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT(5) Explanation of punishment by securities regulatory bodies for the past three years □ Applicable ✓ Not applicable (6) Other information on directors, supervisors and senior management 1. Equity interests of Directors, Supervisors or Chief Executives As of the end of the reporting period, there was no record of interests or short positions (including the interests and short positions which were taken or deemed to have under the provisions of the SFO) of the Directors, Supervisors or chief executives of the Company in the shares, underlying shares and debentures of the Company or any associated corporation (within the meaning of the SFO) in the register required to be kept under section 352 of the SFO. The Company did not receive any notification of such interests or short positions from any Directors, Supervisors or chief executives of the Company as required to be made to the Company and the SEHK pursuant to the Listing Rules of SEHK. 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. 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 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. 050 Annual reportChapter 4Coporate GovernanceV. BOARD MEETINGS HELD DURING THE REPORTING PERIOD Session of meeting Date Resolutions The sixteenth meeting of the ninth session of the Board The seventeenth meeting of the ninth session of the Board 29 March 2023 A total of 13 resolutions were considered and passed at the meeting with no objection. 27 April 2023 A total of 1 resolution was considered and passed at the meeting with no objection. The first meeting of the 15 June 2023 A total of 5 resolutions were considered and passed at tenth session of the Board The second meeting of the tenth session of the Board 29 August 2023 A total of 1 resolution was considered and passed at the the meeting with no objection. meeting with no objection. The third meeting of the 30 October 2023 A total of 1 resolution was considered and passed at the tenth session of the Board meeting with no objection. The fourth meeting of the tenth session of the Board 22 December 2023 A total of 4 resolutions were considered and passed at the meeting with no objection. 051 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT VI. PERFORMANCE OF DUTIES BY DIRECTORS (1) Attendance at Board meetings and general meetings by Directors Attendance at general 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 Board meetings Number of general meetings attended Whether two consecutive Board meetings were not attended in person Name of Director Wu Yong Hu Lingling Guo Jiming Hu Dan Zhang Zhe Zhou Shangde Frederick Ma Si-Hang Tang Xiaofan Qiu Zilong Wang Qin No No No No No No Yes Yes Yes Yes 6 6 5 6 6 6 2 6 6 4 6 6 5 6 6 6 2 6 6 4 6 6 5 6 6 6 2 6 6 4 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 Explanation on the failure to attend two consecutive Board meetings in person □ Applicable ✓ Not applicable 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 052 0 1 1 1 1 1 0 1 1 0 6 0 6 0 Annual reportChapter 4Coporate Governance (2) Directors’ objections to The Company-related matters □ Applicable ✓ Not applicable (3) Performance of duties by Independent Directors 1. Attendance at meetings During the reporting period, the Company held 1 general meeting, 6 Board meetings, 6 Audit Committee meetings, 2 Remuneration Committee meetings and 2 Nomination Committee meetings. 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”, “Audit Committee”, “Remuneration Committee” and “Nomination Committee” of this chapter for details. 2. 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, and carefully reviewed each of the resolutions proposed at the meetings. They also raised independent opinions according to relevant rules and facts according to their knowledge of the material affairs of the Company, such as the appointment of auditors, external guarantees, profit distribution and director nomination. 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. Firstly, the Independent Directors recommended the Company to cooperate with the external auditor in relation to the auditing of the 2022 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 2022 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 2023. The above resolutions for the re-appointment of domestic and international auditors were passed upon consideration at the Board meeting and the general meeting of the Company. 053 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORTThirdly, they recommended to nominate Wu Yong, Hu Lingling, Guo Jiming, Hu Dan, Zhang Zhe, Zhou Shangde, Tang Xiaofan, Qiu Zilong and Wang Qin as the director candidates of the 10th session of the Board and submit them to the Board and the general meeting for review. The Board and the general meeting successively reviewed and passed the resolution for the election of the next session of the Board. Fourthly, they recommended to nominate Wei Hao and Luo Jinglun as the director candidates of the 10th session of the Board and submit them to the Board and the general meeting for review. The Board and the general meeting successively reviewed and passed the resolution for the by-election of the Board. 3. 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 4 April 2023 Attendance at the Company’s 2022 Headquarters of the Qiu Zilong Annual Results Presentation Company 15 June 2023 Attendance at the Company’s 2022 Headquarters of the Annual General Meeting Company Tang Xiaofan, Qiu Zilong 31 August 2023 Attendance at the Company’s 2023 Semi-annual Results Presentation Headquarters of the Qiu Zilong Company 054 Annual reportChapter 4Coporate Governance 4. 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 R e c o m m e n d i n g auditor t h e Company re-appoint to P r i c e w a t e r h o u s e C o o p e r s the Zhong Tian LLP as domestic and PricewaterhouseCoopers as the international auditor of the Company for 2023, and agreeing to submit the relevant proposal to the Board and the general meeting for consideration. The Company had no external the during guarantee reporting period. This proposal is in compliance with the relevant regulatory rules and the Articles of Association, and in line with the Company’s actual situation at present, is conducive to the Company’s sustainable and stable development, and does not harm the interests of minority shareholders. Thus, it agreed to submit the proposal to the general meeting for consideration. 28 March 2023 Third meeting of Audit Committee meeting in 2023 Independent opinion on the Company’s appointment of auditor for 2023 29 March 2023 Sixteenth meeting Special explanation and of the ninth session of the Board independent opinion on the Company’s external guarantees in 2022 Independent opinion on the Company’s profit distribution proposal for 2022 055 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORTTime Meeting Matter Type of opinion 15 June 2023 2022 Annual General Meeting Independent opinion on the director candidates for After reviewing the personal information of the nine director candidates, we are of the view that the nine director candidates possess relevant knowledge professional and ability, and their qualifications for appointment meet the relevant regulatory requirements listed companies. We have not found any situation in which they are prohibited from acting as a director of a listed company as stipulated in the Company Law and other laws and regulations, normative documents as well as the Articles, and there is no such situation in which they have been determined by the CSRC to be banned from entering the securities market and such ban has not yet been lifted. We agree that we shall recommend the director candidates to the general meeting. 056 Annual reportChapter 4Coporate Governance VII. SPECIAL COMMITTEES UNDER THE BOARD (1) Members of the special committees under the Board Type of special committee Name of member Audit Committee Nomination Committee Remuneration Committee Tang Xiaofan (Chairman), Qiu Zilong, Wang Qin Tang Xiaofan (Chairman), Wei Hao, Hu Lingling, Qiu Zilong, Wang Qin Qiu Zilong (Chairman), Wei Hao, Hu Lingling, Tang Xiaofan, Wang Qin 057 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT Other performance of duties None. None. None. (2) The Audit Committee held 6 meetings during the reporting period Date Matters Key opinions and suggestions Suggesting the Company to provide information to the auditors in a timely manner according to the audit plan, cooperating for the completion of the audit work, and requiring the auditors to submit the audit report within the agreed time limit. Suggesting the Company to re- engage PricewaterhouseCoopers Zhong and PricewaterhouseCoopers as the Company’s domestic and foreign auditors in 2023, and requesting auditors to complete the audit work in accordance with the audit plan to ensure that the Company’s annual report is disclosed on time. None. Tian LLP 7 March 2023 14 March 2023 28 March 2023 Getting to know the Company’s audit work arrangements for 2022, initially reviewing the Company’s annual financial for 2022, and statements communicating with the Company’s auditors before the audit. the auditors’ Evaluating audit work in 2022, and recommending to the Board on the appointment of auditors for 2023. Reviewing the Company’s annual financial statements for 2022 for the second time, the communicating with Company’s auditors, and issuing the Audit Supervision Letter to the auditors. Reviewing the Company’s annual report for 2022, reviewing the independent directors’ work report for 2022 and the audit performance committee’s report, and getting to know the Company’s internal audit and internal control work report for 2022 and the internal audit plan for 2023. 058 Annual reportChapter 4Coporate GovernanceDate Matters 26 April 2023 28 August 2023 27 October 2023 Reviewing the financial report for the first quarter of 2023, and listening to the presentation of the Company’s management on the business operation in the first quarter of 2023. Reviewing the 2023 interim report, and listening to the presentation of the Company’s management on the business operation in the first half of 2023. Reviewing the financial report for the third quarter of 2023. Key opinions and suggestions Other performance of duties None. None. None. None. None. None. (3) The Remuneration Committee held 2 meetings during the reporting period Date Matters Key opinions and suggestions Other performance of duties 13 March 2023 28 August 2023 Reviewing the remuneration standard (before tax) plan for independent directors of the Board. the assessment Reviewing results the Company’s operating performance in 2022. for Agreeing to the remuneration standard plan for independent directors, and recommending it to the Board for review. None. None. None. 059 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT (4) The Nomination Committee held 2 meetings during the reporting period Date Matters Key opinions and suggestions 13 March 2023 Reviewing the “Report on the Demand for the Members of the Tenth Session of the Board” and making recommendations to the Board on the candidates for directorship. 15 December 2023 Making recommendations to the Board on the candidates for directorship. Recommending to nominate Wu Yong, Hu Lingling, Guo Jiming, Hu Dan, Zhang Zhe, Zhou Shangde, Tang Xiaofan, Qiu Zilong and Wang Qin as director candidates for the Company’s tenth session of the Board, and submitting them to the Board for review. Recommending to nominate Wei Hao and Luo Jinglun as director candidates for the Company’s tenth session of the Board, and submitting them to the Board for review. Other performance of duties None. None. (5) Explanation on the matters with objection □ Applicable ✓ Not applicable VIII. RISKS IDENTIFIED BY THE SUPERVISORY COMMITTEE IN THE COMPANY The Supervisory Committee had no objection to the supervisory matters during the reporting period. 060 Annual reportChapter 4Coporate Governance IV. EMPLOYEES OF PARENT COMPANY AND MAJOR SUBSIDIARIES AT THE END OF THE REPORTING PERIOD (1) Information of employees Total number of current employees Number of disengaged and retired employees for whom the parent company and major subsidiaries shall be liable to expenses Professional constitution 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 Education level Postgraduate or above University graduate College for professional training Other (secondary vocational school, high school and vocational technical school, etc.) Total 37,906 22 17,320 4,872 3,111 3,221 1,815 2,216 1,274 82 3,995 37,906 161 5,237 16,895 15,613 37,906 061 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT (2) Remuneration policy 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 30 to the financial statements for the total wages and benefits paid by the Company to its employees during the reporting period. The Company implements a salary distribution policy in which labor remuneration is closely linked to economic benefits, labor efficiency and personal performance, and the total amount of employees’ remunerations is closely linked to the Company’s operating efficiency. The salary distribution of employees is based on the post labor evaluation and the employee performance appraisal. That is, in the salary distribution, the basic labor factors such as labor skills, labor responsibilities, labor intensity and labor conditions of different positions are evaluated as the basis to determine the basic salary standards of employees, and to determine the actual remunerations of employees based on the technical and professional level of employees and the actual labor quantity and quality evaluation, thereby giving full play to the important role of the distribution system in the Company’s incentive mechanism, and mobilizing the enthusiasm of the employees. (3) Retirement plan The employees of the Company have participated in the basic pension insurance organized and implemented by the local labor and social security authorities, determines the base based on the average monthly income of the employees in the previous year within the upper and lower limits of the basic pension insurance payment bases stipulated by the local authorities, and pays monthly pension insurance premiums to the local basic pension insurance agencies according to the specified proportions. Except for the above-mentioned contributions, the Company will no longer undertake any further payment obligations, and the corresponding expenses shall be included in the current profit or loss when incurred. There are no forfeited contributions for basic pension insurance, as all contributions are fully vested in the employees upon payment. The employees of the Company also participate in the supplementary pension insurance organized and implemented by GRGC. The Company pays the supplementary pension insurance premiums to the GRGC on a monthly basis based on the payment bases and standards of the supplementary pension insurance stipulated by GRGC. The contributions from entities and the investment income therefrom in the individual account of the employee supplementary pension insurance shall be attributed to the individual employee according to the relevant rules. The part of the contributions of the supplementary pension insurance that is not attributed to the individual employee due to the employee’s resignation will not be used to offset the existing contributions, but will be transferred to the public account of the supplementary pension insurance fund, and then assigned to the members of the supplementary pension insurance fund after performing the approval procedures as required. 062 Annual reportChapter 4Coporate Governance(4) Training plan During the reporting period, the Company had a total of 102 occupational education management personnel and a total of 785,442 people participating in various vocational trainings, 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 RMB54.24 million. (5) Labor outsourcing □ Applicable ✓ Not applicable X. PLANS FOR PROFIT DISTRIBUTION 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. 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. The Company had distributed annual cash dividends for 24 consecutive years from 1996 to 2019, with an aggregate cash dividend amount of approximately RMB12.3 billion. However, during 2020 to 2022, due to the continuous impact of the external environment, the Company has faced great operating pressure, and with comprehensive consideration of the Company’s profitability and the capital needs to maintain the Company’s normal operation, the Company did not distribute any cash dividend. 063 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT(2) Specific explanation on cash dividend policy Whether it complies with the provisions of the Articles of Association or the requirements of the resolutions at general meetings Whether the dividend standards and ratios are definite and clear Whether the relevant decision-making procedures and mechanisms are sound Whether the independent directors performed their duties and played their roles Whether minority shareholders have the opportunity to fully express their opinions and demands, and whether their legitimate rights and interests have been fully protected ✓Yes □No ✓Yes □No ✓Yes □No ✓Yes □No ✓Yes □No (3) If profit was made during the reporting period and the parent company’s profit available to shareholders for distribution was positive, but no cash profit distribution plan or proposal has been made, the Company shall disclose the reasons in detail and the purpose and use plan of the undistributed profits □ Applicable ✓ Not applicable (4) Profit distribution and transfer of capital reserve to share capital for the reporting period Number of bonus shares for every 10 shares (share) Amount of dividend for every 10 shares (tax included) Number of shares converted for every 10 shares (share) Amount of cash dividend (tax included) Net profit attributable to ordinary shareholders of the Company in the consolidated financial statement during the year of dividend distribution Ratio of dividend amount to net profit attributable to ordinary shareholders of the Company in the consolidated financial statement (%) The amount of cash used for the Share repurchase which was included in cash dividend Total amount of cash dividend (tax included) Ratio of total dividend amount to net profit attributable to ordinary shareholders of the Company in the consolidated financial statement (%) (Unit: RMB thousand) 0 0.70 0 495,848 1,058,289 46.85 0 495,848 46.85 064 Annual reportChapter 4Coporate Governance XI. THE COMPANY’S SHARE INCENTIVE SCHEME, EMPLOYEE STOCK OWNERSHIP PLAN, OR OTHER EMPLOYEES’ INCENTIVE MEASURES AND THEIR IMPACT (1) Relevant incentives have been disclosed in temporary announcements and there has been no progress or change in subsequent implementation □ Applicable ✓ Not applicable (2) Incentives not disclosed in temporary announcements or with follow-up progress □ Applicable ✓ Not applicable (3) Share incentives granted to directors and senior executives during the reporting period □ Applicable ✓ Not applicable (4) 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. 065 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORTVII. CONSTRUCTION AND IMPLEMENTATION OF INTERNAL CONTROL SYSTEM DURING THE REPORTING PERIOD The Company has been striving 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 relevant requirements. 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. During the reporting period, in accordance with national laws and regulations and the requirements of various regulatory agencies, and in light of the Company’s own management needs, the Company continued to implement the work division and collaboration among the three lines of defense of “self-inspection of the effectiveness of internal control by business and functional departments, independent evaluation by the internal audit department, and engagement of accounting firms to conduct internal control audits. “, while organizing training and testing on risk management and internal control systems for all staff to consolidate their risk management awareness, strengthening the ability of business departments to directly undertake risk management and control, thereby realizing the daily operation mechanism of risk management internal control of “risk management awareness of all staff, everyone participating in the internal control and the responsibility of everyone to enforce compliance”, and promoting the overall sound operation of the internal control mechanism. 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 2023 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 066 Annual reportChapter 4Coporate GovernanceXIII. MANAGEMENT AND CONTROL OVER THE SUBSIDIARIES DURING THE REPORTING PERIOD □ Applicable ✓ Not applicable XIV. 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 2023 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 unqualified opinion XV. RECTIFICATION OF PROBLEMS IDENTIFIED DURING THE SELFEXAMINATION UNDER THE SPECIAL ACTION ON THE CORPORATE GOVERNANCE OF LISTED COMPANIES In 2021, in accordance with the requirements of the Notice of the CSRC on Carrying out Special Actions on the Corporate Governance of Listed Companies (Zheng Jian Ban Fa [2020] No. 69) (《中國證監會關於開展上市公司治理專項行動的通知》(證監辦發[2020]69號)), the Company carried out comprehensive self-examination on its corporate governance performance in 2018, 2019 and 2020, and no problems in corporate governance were found in the Company. The relevant self-examination checklist had been filled out on 29 March 2021 through the government service platform of the CSRC (http://neris.csrc.gov.cn/portal). XVI. CORPORATE GOVERNANCE REPORT 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 C1 to the Listing Rules of SEHK with no material deviation or breach of the code provisions occurred. Meanwhile, the Company has applied the principles set out in the Corporate Governance Code to corporate governance structure and practices. 067 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT(1) Corporate goal, strategy and governance 1. Corporate strategy, business model and culture The Company has set up a multi-tier corporate governance structure with the Board as the core. The Board of the Company exercises management and decision-making powers according to the authorisations granted at the general meeting in respect of development strategies, management structure, investment and financing, planning, financial control, human resources and corporate governance, and so forth. The Board is responsible for leading the Company’s development, ensuring the availability of necessary resources for the Company to achieve preset development goals and supervising and inspecting the Company’s development and operation. The governance rules of the Company is based on the “Articles of Association”, which covered overall policies, principles and standards on corporate governance, compliance and code of conduct, aiming to clearly define the duties, scope of authority and code of conduct of various parties, including the fiduciary and diligence duties of the Directors of the Company. The Company has discussed and analyzed the performance of the Company in its annual report every year, including the impact of internal and external environment on the operation of the Company and its movement trend, the actual operating results and its influencing factors for the year, the completion of business plan and the plan for next year etc., in order to ensure the achievement of the development goals of the Company. 2. Corporate governance function The Board is responsible for performing corporate governance responsibilities, including but not limited to: (i) establishing and reviewing the Company’s policies and practices on corporate governance; (ii) reviewing and monitoring the training and continuous professional development of Directors and senior management; (iii) reviewing and monitoring the Company’s policies and practices on compliance with legal and regulatory requirements; (iv) establishing, reviewing and monitoring the code of conduct and compliance manual applicable to employees and Directors; (v) reviewing the Company’s compliance with the Corporate Governance Code and disclosure in the Corporate Governance Report. 068 Annual reportChapter 4Coporate GovernanceThe Board has also established 3 specialised committees, namely Audit Committee, Remuneration Committee and Nomination Committee. The “Articles of Association” of the Company and “Rules of Procedures for the Board of Directors” have clearly defined the powers of the Board in respect of development strategies, management structure, investment and financing, planning, financial control, human resources and corporate governance, and so forth as well as the supervision and inspection of the Company’s development and operation. Each specialised committee has its terms of reference, which explicitly explains and defines its duties and powers, and has been approved by the Board or the general meeting. The committees shall be authorised by the Board to exercise their powers under the terms of reference. The committees shall be accountable to the Board but shall not enjoy exclusive powers. They shall not replace the Board in exercising their decision and management powers unless duly authorised. (2) Composition and Nomination of the Board 1. Composition, succession and appraisal of the Board According to the requirements of the “Articles of Association”, the Board of the Company comprises 9 Directors. The Board regularly evaluates its structure, number of members and composition (including their skills, knowledge, experience, etc.) through the Nomination Committee. As at the date of disclosure of this report end of the reporting period, the Board of the company comprised Wei Hao, Hu Lingling and Zhou Shangde as executive Directors, Luo Jinglun, Hu Dan and Zhang Zhe as non- executive Directors, and Tang Xiaofan, Qiu Zilong and Wang Qin as independent non-executive Directors. The members of the Board have various industry backgrounds and maintain diversity in terms of various aspects including experience, skills and judgment, allowing the Board to analyse and discuss issues from different perspectives and make decisions in a more cautious and careful manner. The Company has published the latest list of Board members in a timely manner, which stated their roles and functions, including their respective roles in each specialized committee, and indicated whether they are independent Directors. The capacity of each Director (Executive Directors, non-executive Directors or independent Non-executive Directors) is identified in all corporate communications that disclose the names of the Directors. The Board reviews and concludes the performance of the Board annually in terms of its major tasks, operation and financial information, as well as the actual implementation of corporate governance during the year, and ultimately formulates the Work Report of the Directors to report to shareholders at the general meetings. The independent non-executive Directors report their duties at the general meetings annually. The Work Report of the Directors is reviewed at the annual general meeting of the Company annually so as to evaluate the Board’s performance of duties. 069 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORTDuring the reporting period, the Board of the Company comprises 3 independent non-executive Directors, representing no less than one-third of the number of members of the Board, which complies with the relevant requirements. In accordance with the requirements under Rule 3.13 of the Listing Rules of SEHK, the Company believes that all Independent non-executive Directors have complied with the relevant guidelines as stipulated in such rule and are regarded as independent parties during the reporting period. 2. Appointment, re-election and removal In accordance with the Articles of Association, Directors are elected or replaced by general meetings. Directors serve for a term of 3 years, and upon expiry of the term, their appointments are subject to re-submission for consideration at a general meeting and they may offer themselves for re-election. Independent Directors are eligible for re-election, subject to a maximum term of 6 years. A cumulative voting system is adopted for the election of the Directors of the Company, and the Independent Directors and Non-independent Directors vote separately. The requirements of the Company on the qualifications and basic qualities of the Directors, the ways of nomination and the proposing procedures are set out in the Articles of Association of the Company. The Nomination Committee is responsible for qualification inspections and quality assessments on the candidates for directorship, as well as making proposals to the Board and providing explanations at the general meetings. 3. Nomination Committee The Board has established the Nomination Committee, whose members are appointed by the Board and the majority of which are independent Directors. It currently consists of three independent non-executive Directors and two executive Directors. The chairman of the committee is an independent Director. Mr. Tang Xiangdong, secretary to the Board of the Company, serves as the secretary to the Nomination Committee. The Work Rules of Nomination Committee approved by the general meeting has been published on the websites of the SEHK and the Company. According to the Work Rules of Nomination Committee, the main duties of the Nomination Committee are to discuss and make recommendations on the candidates, selection criteria and procedures for Directors, general managers and other senior management of the company. The Nomination Committee has obtained sufficient resources from the Company to perform its duties. During the reporting period, there was no circumstance where the Nomination Committee asked to seek professional independent advice for the purpose of performing duties. During the report period, the Nomination Committee held a total of 2 meetings, where all members attended all meetings in person to make recommendations to the Board on the candidates for directorship. For the composition of the Nomination Committee during the date of disclosure of this report and the annual performance of duties of the Nomination Committee during the reporting period, please refer to the “Special Committees under the Board” in this chapter. 070 Annual reportChapter 4Coporate Governance4. Diversity (1) Board diversity policy The Company has established the Board diversity policy. According to the policy, when the Board selects, evaluates and nominates Director candidates, it must consider, under the principle of meritocracy, a series of diversified factors, including but not limited to gender, cultural and educational background, region, industry and professional experience, knowledge reserve and service seniority, and take full consideration of the actual situation and development needs of the Company and follow the diversity principle when forming the Board. The Board authorizes the Nomination Committee to monitor the implementation of the policy and to review the policy, expand and review the measurable objectives when appropriate. As at the date of disclosure of this report, the diversity analysis of the nine members of the Board based on measurable objectives is set out as follows: Gender Age Position Region Cultural and educational background Industry and professional experience Male: 8 Female: 1 51-55: 7 56-60: 2 Executive Directors: 3 Non-executive Directors: 3 Independent non-executive Directors: 3 Mainland China: 8 Hong Kong: 1 Masters: 4 Undergraduates: 5 Accounting and finance: 2 Corporate management: 2 With experience related to the Company’s business: 5 After review, during the reporting period, the Company’s Board has demonstrated the principle of diversity relatively well in terms of professional experience and background, service term, age, cultural background and independence of the members, and met the Company’s goal for Board diversity. 071 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT (2) Gender diversity of staff The Company has been committed to the gender diversity of all staff (including senior management), and strives to achieve gender diversity and gender equality among the staff. As at the end of the reporting period, the total number of staff (including senior management) in the Company was 37,906, of which 75.21% (28,509) were male and 24.79% (9,397) were female. With consideration of the Company’s industry characteristics, after review, the Company had achieved gender diversity of the staff during the reporting period. (3) Responsibilities of Directors, delegation of powers and procedures of the Board 1. Responsibilities of Directors The Rules of Procedure of the Board Meetings, the work rules of each specialised committee and the Work Rules of Independent Directors prepared by the Company have clearly stated the responsibilities of the Directors to ensure their complete understanding on their roles and responsibilities. Please refer to “Performance of Duties by Directors” in this chapter for the details of the attendance of Directors and the annual overview of the performance of duties of the independent Directors during the reporting period. During the reporting period, the Company’s Directors attended Board meetings and specialised committee meetings in a prudent, responsible, proactive and serious manner. After gaining an understanding of the Company’s operation and operating development, they capitalised on their respective professional experience and expertise and provided independent judgments, knowledge and experience towards the matters discussed, thereby enabling the Board to carry out effective discussions and make prompt yet prudent decisions. They produced proactive and encouraging effect in ensuring the Board to work in the best interest of the Company as its objective. Upon the acceptance of the appointment and after the appointment, each Director and Supervisor of the Company has to provide the information about their services in other companies in time. The relevant information has been disclosed in the announcements and the shareholder documents relating to the nomination and election of the Directors/Supervisors, and is available in the “Directors, Supervisors, Senior Management” in this chapter. In accordance with Appendix C3 to the Listing Rules of SEHK titled “Model Code for Securities Transactions by Directors of Listed Issuers” and the relevant requirements of domestic securities regulatory authorities, the Board formulated the “Securities Transaction Code” of the Company as a written guideline for securities transactions of the Company by the Directors, the Supervisors and relevant staff members. After making specific inquiry to all of the Directors, Supervisors and senior management, the Company confirms that all of them have complied with the standards on securities transactions as stipulated in the aforementioned code during the reporting period. 072 Annual reportChapter 4Coporate GovernanceThe Company places high importance on the continuing training of the Directors. 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, Wang Qin, the newly appointed independent director of the Company, attended the “2nd Pre-appointment Training of the Main Board Independent Directors in 2023” organized by the SSE. Tang Xiaofan, Qiu Zilong and Wang Qin, the independent directors of the Company, attended the “6th Follow-up Training of the Listed Company Independent Directors in 2023” organized by the SSE. Tang Xiangdong, the Board secretary of the Company, attended the “4th Follow-up Training of the Listed Company Board Secretaries in 2023” organized by the SSE. 2. Chairman and Chief Executive Officer The Company does not establish the position of chief executive officer, and the duties of chief executive officer are in charge by the general manager of the Company. The Company clearly defines the duties between the Chairman and the general manager, so that the functions of the Board and management are separated to ensure the balance of power and authority. During the date of disclosure of this report, the Chairman of the Company is Mr. Wei Hao, and the general manager of the Company is Mr. Hu Lingling. There is no affiliation or interest relationship between the Chairman and the President, including financial, business, family or any other related relationships. The Chairman is responsible for taking charge and coordinating the operation of the Board, providing leadership in the Board to set the Company’s overall development strategies and directions and to achieve the Company’s goals, ensuring effective operation of the Board and assuring good corporate governance practices and procedures for the Company. The general manager, with the support and assistance of the Board and other senior management of the Company, is responsible for coordinating and managing the Company’s business and operation, implementing the strategies laid down by the Board and making day-to- day operating decisions. The Board has established information reporting and delivery mechanism to ensure that the Directors can obtain various information and messages required for their performance of duties on a timely basis. Please refer to “Procedures of Board meetings and provision of and access to data” in this chapter for details. The Board encourages the Directors to maintain a prudent and doubtful attitude as expected, to create an open-minded discussion atmosphere to encourage any dissenting Directors to fully express their point of views, and to motivate the Directors, especially Non-executive Directors to have effective contributions to the Board. The Company has set up a well-established governance structure and formulated multi-tier governance rules. Please refer to “Corporate Governance” in this chapter for details. 073 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT3. Management function The functions of the Board and senior management of the Company are separated (details are set out in the Articles of Association, the Rules of Procedure of the Board Meetings and the Work Rules of General Manager) to protect the relative independence of the decision-making of the Board and operating and management activities of the Company. The Board is responsible for leading the Company’s development, determining the strategic goals of the Company and ensuring the availability of necessary financial and other resources for the Company to achieve pre-set strategic goals. The Articles of Association of and the Rules of Procedure of the Board Meetings have clearly defined the powers of the Board in respect of development strategies, management structure, investment and financing, planning, financial control, human resources and corporate governance, and so forth as well as the supervision and inspection of the Company’s development and operation. Without material prejudice to or impairment of the overall capability to perform duties and authorities of the Board, the Board has granted Executive Directors and the management certain authorities, so as to enhance the overall quality and efficiency of decision-making of the Company. Specific information and management procedures relating to the authorisation have been clearly set out in the Articles of Association and the Rules of Procedure of the Board Meetings. 4. Committees under the Board Three specialised committees have been set up under the Board, namely the Audit Committee, Remuneration Committee and Nomination Committee, and each committee has its terms of reference, which explicitly explain and define their duties and powers, and they have been approved by the Board or general meeting. These committees are responsible for reviewing and monitoring specific matters of the Company, such as the financial reports, accounting policies, and the nomination, assessment and remuneration of the management, and making corresponding recommendations to the Board. Each specialised committee has appointed a designated member of the management to be the secretary of the committee and clearly defined the meeting and reporting procedures with reference to the rules of procedures for the Board. The meeting minutes of the committees contain the details of the matters discussed in the meetings and are maintained properly according to the file management system of the Company upon the confirmation of all members. Please refer to the “Special Committees under the Board” in this chapter for the composition of the special committees of the Company’s Board as at the date of disclosure of this report and the annual performance of duties of each specialised committee during the reporting period. 074 Annual reportChapter 4Coporate Governance5. Procedures of Board meetings and provision of and access to data The Board holds one regular meeting each quarter and convenes extraordinary meetings when necessary. Every regular Board meeting is convened with the active participation of a majority of Directors who are entitled to attend the meeting either in person or through electronic means of communication. Before a regular meeting is held, the Company sends out the date of the meeting and a list of matters to be submitted for consideration to all Directors to ensure that they have the opportunity to propose matters for discussion and include them in the meeting agenda. Formal notice of all regular meetings is sent to all Directors 14 days before the meeting and notice of extraordinary meetings is given within a reasonable time in advance. If substantial shareholders or Directors have material conflicts of interest in the matters discussed, the Company will hold a Board meeting for deliberation, and resolutions cannot be reached in the form of written resolutions. When deliberating related matters, Directors who are connected or have interests shall abstain from voting. The meeting minutes of the Board and Board committees contain the details of the matters discussed in the meeting, which include the factors taken into consideration, the questions proposed or the objection and the decision made by each Director. The draft of the meeting minutes should be delivered to all Directors for review within reasonable time after each meeting. The final version should be maintained properly according to the file management system of the Company and the copy of which should be delivered to all Directors for filing. The meeting minutes are also available for Directors’ access at any time through the secretary of the Board. According to the consideration and decision making needs, the Company may engage the professional institutions including the accountants firms, lawyers and assessment institutions based on the actual situation to issue written report for Directors’ review. In addition, in accordance with the Rules of Procedure of the Board Meeting and the relevant requirements, the Directors and the specialised committees may engage professional institutions or professionals through established procedures to obtain professional advice, and the fees so incurred shall be borne by the Company. To ensure the independence of the professional institutions, the specific selection and employment work is conducted by the independent Directors or Audit Committee for the engagement of independent financial advisor for the connected transactions. The selection and employment shall be determined by a majority of votes of the members and the members with connected relationship or conflict of interest shall avoid from voting and shall not constitute a quorum. The management of the Company has provided the Board, the specialised committees of the Board and the Supervisory Committee with the materials and information necessary for the consideration of each resolution within a reasonable period. After the Directors or Supervisors have raised reasonable inquiries, the management shall make appropriate response or provide further information as soon as possible. Under normal circumstances, the relevant documents containing the matters to be proposed for consideration and discussion on the Board shall be delivered to all Directors and Supervisors at least 3 days before the meetings. In addition, each Director and Supervisor is provided with channels to independently contact and communicate with the Company’s senior management and secretaries of the specialised committees when necessary. 075 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT6. Company Secretary The Secretary to the Board of the Company, who is appointed by the Board and reports to the Chairman of the Board for daily routines, is a senior management member of the Company. The Secretary to the Board is responsible for the communication and coordination among the Company, Directors and the shareholders, giving advice to the Board and the management on corporate governance, information disclosure and investor relationship management and the arrangement of specific matters. During the reporting period, the Secretary to the Board of the Company is Mr. Tang Xiangdong. During the reporting period, Mr. Tang Xiangdong had completed a total of not less than 15 hours of related training sessions so as to keep his professional knowledge and skills up-to-date and better support the operation of the Board. During their respective terms of office, all Directors of the Company are able to obtain from the Secretary to the Board the relevant information and updates on the statutory, regulatory and other continuing obligations of directors of listed companies on a timely manner, and directly contact the Secretary to the Board individually and independently when necessary to obtain more detailed information and opinions. (4) Audit, internal control and risk management 1. Financial reporting In the regular financial reporting over the years, the Board made efforts to comply with the requirements of the relevant laws and the Listing Rules and prepared documents and disclosed information under the principle of more and stricter as possible so as to fit the regulatory requirements of both Shanghai and Hong Kong markets. Apart from an in-depth analysis on the operational and financial positions and the major factors affecting the business performance, the Company also provided the information in relation to the risks that faced in operating activities, responsive measures, development strategies and plans, etc. in annual reports to enhance investors’ understanding on the Company’s business, management and development trends. The Company has also prepared and published reports on quarterly results within 1 month upon the conclusion of the first quarter and the third quarter each year in compliance with the requirements of the CSRC and the SSE. The Board shall be able to assess the Company’s performance and make decisions on the basis of fully understanding the required information. 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 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 10 “Financial Statements” in this annual report. 076 Annual reportChapter 4Coporate Governance2. Risk management and internal controls A sound and operable internal control system is the foundation of good corporate governance. The Board is responsible for the establishment and maintenance of the Company’s internal control system to review the effectiveness of all important control measures for finance, operation, compliance and risk management, and safeguard the rights and interests of shareholders and the Company’s assets. 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, and the Guidelines for Internal Control of Listed Companies (《上市公司內部控制指引》), 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. The Board is responsible for continuous supervision of the Company’s risk management and internal control system, and reviews the efficiency of the internal control systems of the Company and its subsidiaries at least once a year. During the reporting period, the Board reviewed the soundness and effectiveness of the Company’s internal control system and issued a self-evaluation report on internal control. The content of the review included but was not limited to the relevant code provisions set out in the Corporate Governance Code, Appendix C1 to the Listing Rules of the SEHK. In addition, the Company also engaged auditors to audit the effectiveness of internal control related to the Company’s financial reports, and provide independent and objective evaluations and suggestions in the form of audit reports. For the construction of the Company’s internal control and risk management system, the responsibility statement of the Board, self-evaluation, major defects (if any) and audit status, please refer to the relevant content of internal control in this chapter and the 2023 Evaluation Report on Internal Control and the Audit Report on Internal Control disclosed by the Company. 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. 077 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORTThe 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 of Association, and Administrative Measures for the Disclosure of Information (《信息披露管理辦法》) of the Company, so as to ensure equal opportunities of all investors to promptly access relevant Company information. The Company has established the Anti-fraudulent Work Regulation (《反欺詐舞弊工作條例》) and specified the key areas of anti-fraudulent work and the matters including the division of roles, fraud prevention and control, procedures for accusing, investigating, handling and reporting on fraud cases. The Company has set up independent hotlines and email boxes for reporting any suspected cases which are posted on the internal and external websites of the Company as channels for staff at all levels and stakeholders of the Company to reflect and report the violation of the ethical issues or suspected fraud cases in connection to the Company or its staff. 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. 3. Audit Committee The Board has established the Audit Committee, whose members are appointed by the Board, currently consisting of three independent non-executive Directors. All members of the Audit Committee have appropriate academic and professional qualifications or relevant financial management skills. Mr. Tang Xiangdong, secretary to the Company’s Board, is the secretary to the Audit Committee. 078 Annual reportChapter 4Coporate GovernanceThe Working Rules of the Audit Committee (《審核委員會工作條例》) approved by the Board of Directors has been published on the websites of the SEHK and the Company. According to the requirements of the Working Rules of the Audit Committee of the Company, the principal duties of the Audit Committee include but are not limited to reviewing the financial performance of the Company and its subsidiaries 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. During the reporting period, there was no circumstance where the Audit Committee asked to seek professional independent advice for the purpose of performing duties. During the reporting period, the Audit Committee held 6 meetings, where all members attended in person, 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. For the composition of the Audit Committee during the date of disclosure of this report and the annual performance of duties of the Audit Committee during the reporting period, please refer to the “Special Committees under the Board” in this chapter. 4. Auditor’s remuneration and auditor-related matters 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 16 consecutive years and its international auditor has served a term of 22 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 RMB3.25 million (including an internal control audit fee of RMB0.30 million) to PricewaterhouseCoopers Zhong Tian LLP and RMB2.00 million to PricewaterhouseCoopers for their annual auditing services. There were no non-audit business expenses. 079 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT(5) The Remuneration Committee and Remuneration The Board has established the Remuneration Committee, whose members are appointed by the Board and the majority of which are independent Directors, currently consisting of three independent non-executive Directors and two executive Directors, with an independent Director serving as the chairman. Mr. Tang Xiangdong, secretary to the Company’s Board, is the secretary to the Remuneration Committee. The Working Rules of the Remuneration Committee (《薪酬委員會工作條例》) approved by the Board of Directors has been published on the websites of the SEHK and the Company. According to the requirements of the Working Rules 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, there was no circumstance where the Remuneration Committee asked to seek professional independent advice for the purpose of performing duties. During the reporting period, the Remuneration Committee held 2 meetings, where all members attended in person, to review the remuneration standard (before tax) plan for the independent directors of the Board and examine the assessment results of the Company’s operating performance for 2022. For the composition of the Remuneration Committee during the date of disclosure of this report and the annual performance of duties of the Remuneration Committee during the reporting period, please refer to the “Special Committees under the Board” in this chapter. The Company discloses the remunerations of Directors, supervisors and senior management by name. For details, please refer to the “Directors, Supervisors and Senior Management” in this chapter. (6) Shareholder engagement 1. Effective communication 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》), Administrative Measures for the Disclosure of Information (《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. 080 Annual reportChapter 4Coporate GovernanceThe 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. (2) Shareholder communication policy 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. A. B. C. 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. Holding performance briefings on a regular basis to actively conduct positive interactions with investors, and earnestly responding to investors’ general concerns and the questions raised on site. Allowing investors and the public to check information such as the Company’s basic information, rules for corporate governance, information disclosure documents, and profiles of Directors, Supervisors and the senior management at any time on the Company’s website. 081 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORTD. Promptly handling and replying to investors’ messages through the “e-interaction” platform developed by SSE for listed companies and investors. The Board of the Company has reviewed the implementation of the Company’s shareholder communication policy during the reporting period. Considering the aforesaid communication channels with investors, the steps taken and the activities held by the Company, the Company believes that the shareholder communication policy of the Company has been effectively implemented during the reporting period. (3) Shareholders’ returns Since its listing, the Company has always insisted on rendering returns to shareholders. Save for 2020 to 2022 when no cash dividend was declared due to the continuous impact of the external environment, the Company has distributed annual cash dividends for 24 consecutive years from 1996 to 2019, with an aggregate cash dividend amount of approximately RMB12.3 billion. For details of the Company’s cash dividend policy, please refer to the “Profit Distribution or Common Reserve Capitalization” in this chapter. (4) Changes in the Articles of Association During the reporting period, there was no change in the Articles of Association of the Company. 2. General meetings The Company encourages all shareholders to attend the general meetings. During the reporting period, a total of 1 general meeting was held by the Company. For details, please refer to the “Summary of General Meetings” in this chapter. The Company serves a notice of at least 45 days prior to the date of the general meeting, and provides the shareholders with any information necessary for them to attend and make decision at the meeting. Each separate matter in substance submitted to the general meeting for consideration is put forth respectively as a separate resolution. 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. 082 Annual reportChapter 4Coporate GovernanceShareholders shall attend general meetings to raise questions or opinions in relation to the results, operation, strategies and/or management of the Company. The Chairman of the Board or authorized representatives, 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. At any other time other than at the general meeting, the shareholders may make their inquiries and express their opinions to the Board by calling the investor hotline of the Company or in writing (including facsimile, letter, e-mail, online message, etc.). The Company has published detailed methods of contact through its website, notices of the general meeting, circulars to the shareholders and annual reports for the shareholders to express their opinions or make any inquiries. The Company provides detailed explanations on the documents for convening a general meeting on such matters as the way of filling in voting forms, rights of the shareholders, voting procedures and method of vote counting to ensure that the shareholders are familiar with the voting procedures by way of poll. A shareholder who is unable to attend the general meeting in person may appoint his or her proxy (the proxy needs not to be a shareholder of the Company) to attend and vote at the general meeting. 083 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORTI. EXPLANATION OF ENVIRONMENTAL PROTECTION EFFORTS Whether relevant mechanism has been established for environmental protection Fund invested in environmental protection during the reporting period (unit: RMB ten thousand) Yes 2,313.10 (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 environment risks of Guangzhou for the year of 2023 as announced by the Bureau of Environmental Protection of Guangzhou Municipality. The locomotive maintenance depot in Guangzhou will strictly follow the requirements of relevant laws and regulations, fully implement the ecological environment protection measures and requirements, earnestly fulfill the main responsibility of ecological environment protection, and publicly disclose environmental information in accordance with the law and consciously accept social supervision. 1. Information on discharge For details of the information on discharge, construction and operation of pollution prevention and control facilities, environmental protection administrative license, contingency plan for environmental emergencies and environmental self-monitoring program of the locomotive maintenance depot in Guangzhou in 2023, please refer to the “2023 Environmental Information Disclosure Report” publicly disclosed by the locomotive maintenance depot in Guangzhou through the “Special Column for the Corporate Disclosure of Environmental Information” of the Guangdong Provincial Department of Ecology and Environment at the following website: https://www- app.gdeei.cn/gdeepub/front/dal/report/list. 2. Administrative penalties due to environmental issues during the reporting period In 2023, the locomotive maintenance depot in Guangzhou was administratively fined RMB72,000 by the Bureau of Environmental Protection of Guangzhou Municipality because its automatic wastewater monitoring could not work stably. (2) Explanation on the environmental protection efforts by the companies other than the key discharging units □ Applicable ✓ Not applicable (3) Relevant information conducive to protecting ecology, preventing pollution, and fulfilling environmental responsibilities □ Applicable ✓ Not applicable 084 Annual reportChapter 5Environmental and Social Responsibilities (4) Measures taken to reduce carbon emissions during the reporting period and their effects Whether carbon reduction measures are taken Emission reduction in carbon dioxide equivalent (unit: ten thousand tonne) Types of carbon reduction measures (such as using clean energy to generate electricity, using carbon reduction technologies in the production process, developing and producing new products that help reduce carbon emissions, etc.) Yes 4.20 Prioritize the use of electric locomotives during transportation, and minimize the use of diesel locomotives; replace more environmentally friendly facilities and equipment on trains and production sites, exert great efforts on the treatment of dirt, sewage, waste gas and noise; continue the greening and planting of trees along railway lines to increase carbon absorption through natural ecosystems; promote paperless office and paperless communication, advocate the use of double-sided printing paper to reduce paper consumption; continue saving electricity, strengthen the use of natural light in production and living places, install energy-saving lighting equipment, and advocate turning off lights at will to avoid unnecessary use of lights and effectively reduce electricity consumption; and advocate green travel, etc. II. INFORMATION ON THE WORK TO FULFILL SOCIAL RESPONSIBILITIES (1) Whether to separately disclose social responsibility report, sustainable development report or ESG report During the reporting period, the Company had no major environmental protection or other major social security issues. For the performance of the Company’s social responsibilities in transportation safety, environmental protection, social welfare and other aspects during the reporting period, please refer to the Social Responsibility Report 2023 disclosed by the Company on the website of SSE (http://www.sse.com.cn) and the HKExnews website of SEHK (http://www.hkexnews.hk) and the website of the Company (http://www. gsrc.com). (2) Social responsibility work □ Applicable ✓ Not applicable 085 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT III. PARTICULAR EFFORTS IN CONSOLIDATING AND EXPANDING THE ACHIEVEMENTS OF POVERTY ALLEVIATION AND RURAL REVITALIZATION □ Applicable ✓ Not applicable 086 Annual reportChapter 5Environmental and Social ResponsibilitiesI. 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 Date of commitment Execution time limit Term of commitment Strict compliance in time — No — Yes — No — Yes December 2006 Yes 20 years Yes October 2007 No — Yes Party GRGC Background Type Resolve industry competition Commitment related to initial public offering GRGC Resolve connected transactions Other Other GRGC commitments Other GRGC 087 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. Annual reportChapter 6Matters of Importance (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 (3) Fulfillment of performance commitment and its impact on goodwill impairment test □ Applicable ✓ Not applicable II. NON-REGULAR APPROPRIATION OF FUND BY CONTROLLING SHAREHOLDER AND OTHER RELATED PARTIES DURING THE REPORTING PERIOD □ Applicable ✓ Not applicable III. ILLEGAL GUARANTEE □ Applicable ✓ Not applicable IV. EXPLANATION OF ACCOUNTANT’S “NON-STANDARD AUDIT REPORT” BY THE BOARD OF 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 088 Annual reportChapter 6Matters of Importance VI. ENGAGEMENT AND DISMISSAL OF ACCOUNTING FIRM Name of domestic auditor Remuneration of domestic auditor Term of engagement of domestic auditor (years) Names of certified public accountants in domestic auditor Number of culminative years for providing audit services by the certified public accountants in domestic auditor Name of international auditor Remuneration of international auditor Term of engagement of international auditor (years) PricewaterhouseCoopers Zhong Tian LLP Qiu Xiaoying, Guo Wen PricewaterhouseCoopers (Unit: RMB ten thousand) Currently engaged 295 16 1 200 22 Name Remuneration Auditor for internal control Financial advisor PricewaterhouseCoopers Zhong Tian LLP Deloitte Touche Tohmatsu 30 96 VII. RISK OF DELISTING □ Applicable ✓ Not applicable VIII. BANKRUPTCY AND RESTRUCTURING □ Applicable ✓ Not applicable 089 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT IX. 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 X. PENALTIES IMPOSED ON THE LISTED COMPANY AND ITS DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT, CONTROLLING SHAREHOLDER, AND DE FACTO CONTROLLER, AND THE RECTIFICATION THEREOF □ Applicable ✓ Not applicable XI. EXPLANATION OF THE INTEGRITY OF THE COMPANY AND ITS CONTROLLING SHAREHOLDER AND DE FACTO CONTROLLER DURING THE REPORTING PERIOD □ Applicable ✓ Not applicable XII. MATERIAL RELATED PARTY TRANSACTIONS (1) Related party transactions related to daily operations To facilitate the operations of the Company, the Company has entered into a comprehensive service framework agreement with CSRG (including GRGC and its subsidiaries) on 28 September 2022 for a term of three years from 2023 to 2025, which had been approved by independent shareholders at the extraordinary general meeting of the Company on 6 December 2022. As the largest shareholder holding 37.12% shares of the Company, GRGC is the Company’s controlling shareholder according to the Listing Rules, and CSRG is the de facto controller of the Company, and is, therefore, a connected party of the Company. The related party transactions related to daily operations entered into by the Company during the reporting period are set out in Note 40(e) to the financial statements. The Company confirms that these transactions constitute connected transactions (including continuing connected transactions) described under Chapter 14A of the Listing Rules of SEHK, have complied with the rules and requirements of Chapter 14A of the Listing Rules of SEHK, and have been implemented in accordance with the comprehensive service framework agreement entered into between the Company and CSRG and strictly complied with the pricing principles of the relevant transactions. 090 Annual reportChapter 6Matters of Importance1. Transactions conducted with associates, 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 Controlling shareholder and its subsidiaries Provision of services Train services Associate Associate of the Company Provision of services Train services By consultation according to full cost pricing, or settled according to the prices determined by CSRG By consultation according to full cost pricing, or settled according to the prices determined by CSRG 3,775,837 2,870 GRGC and its subsidiaries Controlling shareholder and its subsidiaries Provision of services Subsidiaries of GRGC Subsidiaries of the controlling shareholder Controlling shareholder and its subsidiaries Associate of the Company Controlling shareholder and its subsidiaries Controlling shareholder and its subsidiaries Provision of services Sales of goods Sales of goods Others Receipt of services supplies Other services Train services Associate of the Company Receipt of services Train services Railway network Settled according to the prices 1,345,046 settlement services through CSRG Railway operation determined by CSRG Based on agreement according to 809,474 services cost plus pricing Sales of materials and By consultation according to full 119,883 supplies cost pricing Sales of materials and By consultation according to full 5,436 cost pricing — By consultation according to full cost pricing, or settled according to the prices determined by CSRG By consultation according to full cost pricing, or settled according to the prices determined by CSRG 29,502 721,819 3,688 Controlling shareholder and its subsidiaries Receipt of services Controlling shareholder and its subsidiaries Receipt of services Railway network Settled according to the prices 3,910,428 settlement services through CSRG Repair and maintenance services determined by CSRG By consultation according to full 509,436 cost pricing GRGC and its subsidiaries Associate GRGC and its subsidiaries GRGC and its subsidiaries Associate GRGC and its subsidiaries GRGC and its subsidiaries 091 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORTParties Relationship Type of transaction Description of transaction Basis of pricing for the transaction Amount of transaction Associate Associate of the Company GRGC and its subsidiaries Controlling shareholder and its subsidiaries GRGC and its subsidiaries Controlling shareholder and its subsidiaries Receipt of services Purchase of goods Receipt of services and supplies Construction work services Repair and maintenance services By consultation according to full 4,231 cost pricing Purchase of materials By consultation according to full 895,263 cost pricing Based on fixed budget amount approved for national railway works Based on fixed budget amount approved for national railway works 143,995 117,409 Associate Associate of the Company Receipt of services Construction work services 092 Annual reportChapter 6Matters of Importance 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 De facto controller and railway enterprises its subsidiaries Provision of services Train services By consultation according to full cost pricing, or settled according to the prices determined by CSRG 51,838 CSRG and other De facto controller and railway enterprises its subsidiaries CSRG and other De facto controller and railway enterprises its subsidiaries CSRG and other De facto controller and railway enterprises its subsidiaries CSRG and other De facto controller and railway enterprises its subsidiaries CSRG and other De facto controller and railway enterprises its subsidiaries CSRG and other De facto controller and railway enterprises its subsidiaries CSRG and other De facto controller and railway enterprises its subsidiaries Provision of services Provision of services Provision of services Provision of services Receipt of services Receipt of services Receipt of services Railway network Settled according to the prices 2,594,242 settlement services through CSRG Railway operation determined by CSRG Based on agreement according to 2,556,324 services cost plus pricing Truck maintenance and Settled according to the prices 823,325 other services Other services Train services determined by CSRG — By consultation according to full cost pricing, or settled according to the prices determined by CSRG 1,317 22,285 Railway network Settled according to the prices 1,802,763 settlement services through CSRG Repair and maintenance services determined by CSRG By consultation according to full 20,601 cost pricing CSRG and other De facto controller and railway enterprises its subsidiaries CSRG and other De facto controller and railway enterprises its subsidiaries Purchase of goods Receipt of services Purchase of materials By consultation according to full 36,151 and supplies Construction work services cost pricing Based on fixed budget amount approved for national railway 17,640 093 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT 3. Confirmation of continuing connected transactions by Independent Non-executive 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 Non-executive Directors of the Company confirmed that the continuing connected transactions entered into by the Company during the reporting period were entered into in the ordinary and usual course of its business and conducted on normal commercial terms, in accordance with the relevant 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. 4. 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) (ii) (iii) 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; 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; 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. 094 Annual reportChapter 6Matters of Importance(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 Unit: RMB ten thousand Fund provided to related parties Opening balance Amount incurred Closing balance Zengcheng Lihua Stock Controlling subsidiary 1,231 — 1,231 Company Limited Total Impact of related claims and debts on the Company 1,231 1,231 No material impact on the operating results and financial condition of the Company. — Note: Due to the deterioration of the operating conditions of Zengcheng Lihua Stock Company Limited, the Company expects that all the balances maintained with Zengcheng have become uncollectible, so full provision for bad debts has been made against it in previous years. (5) Financial business between the Company and any related financial company, any financial company controlled by the Company and any related party □ Applicable ✓ Not applicable 095 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT (6) Other material related party transactions □ Applicable ✓ Not applicable (7) Contracts entered into with the controlling shareholder and its subsidiaries During the reporting period, except as disclosed in this annual report, there was no other material contract between the Company or any of its subsidiaries and the controlling shareholder or its subsidiaries. XIII. MATERIAL CONTRACTS AND THE IMPLEMENTATION THEREOF (1) Trust, contracted businesses and leasing affairs □ Applicable ✓ Not applicable (2) Guarantees □ Applicable ✓ Not applicable (3) Entrusted cash asset management carried out by other person(s) □ Applicable ✓ Not applicable (4) Pledges During the reporting period, the controlling shareholder and the de facto controller of the Company had 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. 096 Annual reportChapter 6Matters of Importance(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 □ Applicable ✓ Not applicable XIV. PROGRESS OF THE USE OF PROCEEDS □ Applicable ✓ Not applicable XV. EXPLANATION OF OTHER MAJOR EVENTS OF SIGNIFICANT IMPORTANCE TO INVESTORS’ VALUE JUDGMENTS AND INVESTMENT DECISIONS □ Applicable ✓ Not applicable 097 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORTI. 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 □ Applicable ✓ Not applicable 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 170,804 169,649 098 Annual reportChapter 7Changes in Shares and Particulars of Shareholders (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 Unit: shares Particulars of the shareholding of the top ten shareholders (excluding shares loaned through refinancing) Increase/ decrease during the reporting period Number of shares held at the end of the period Number of shares held with selling restrictions Percentage (%) Shares in pledge or frozen Status Number Nature of shareholder Name of shareholder (in full) China Railway Guangzhou Group 0 2,629,451,300 Co., Ltd. HKSCC NOMINEES LIMITED 93,327,340 1,598,848,096 37.12 22.57 1.75 1.13 0 124,000,000 73,049,601 80,164,501 (Note) Lin Naigang Agricultural Bank of China Limited — Dacheng Rui Xian Mixed Securities Investment Fund Taiping Assets — ICBC — Taiping Star No. 19 Investment Products China Everbright Bank Corporation — Dacheng Strategic Return Mixed Securities Investment Fund Industrial and Commercial Bank of China Limited — Dacheng Competitive Advantage Mixed Securities Investment Fund Industrial Securities Asset Management — China Resources Trust Xingzheng Pengxi No. 1 Family Trust — Industrial Securities Asset Management Pengxi No. 1 Single Asset Management Scheme National Social Insurance Fund 117 Mix Zhao Kai 099 — 48,985,000 0.69 32,584,044 42,768,147 0.60 39,590,100 40,794,600 0.58 — 29,263,000 0.41 — 22,999,920 3,009,200 21,060,000 0.32 0.30 0 0 0 0 0 0 0 0 0 0 Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil 0 0 0 0 0 0 State-owned legal person Foreign legal person Domestic natural person Other Other Other 0 Other 0 Other 0 0 Other Domestic natural person Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT Taiping Assets — ICBC — Taiping Star No. 19 Investment 48,985,000 RMB ordinary shares Products China Everbright Bank Corporation — Dacheng Strategic 42,768,147 RMB ordinary shares 40,794,600 RMB ordinary shares Name of shareholder China Railway Guangzhou Group Co., Ltd. HKSCC NOMINEES LIMITED (Note) Lin Naigang Agricultural Bank of China Limited — Dacheng Rui Xian Mixed Securities Investment Fund Return Mixed Securities Investment Fund Industrial and Commercial Bank of China Limited — Dacheng Competitive Advantage Mixed Securities Investment Fund Industrial Securities Asset Management — China Resources Trust Xingzheng Pengxi No. 1 Family Trust — Industrial Securities Asset Management Pengxi No. 1 Single Asset Management Scheme National Social Insurance Fund 117 Mix Zhao Kai Explanation of designated repurchase account among the top ten shareholders Explanation on the above-mentioned shareholders’ voting rights by and on behalf of others, and abstention from voting rights Statement regarding the connected relationship or acting in concert arrangements of the above shareholders Top ten holders of shares without selling restrictions Number of shares held without selling restrictions Class and number of shares Class Number 2,629,451,300 1,598,848,096 124,000,000 80,164,501 RMB ordinary shares RMB ordinary shares Overseas listed foreign shares RMB ordinary shares RMB ordinary shares 2,629,451,300 181,404,797 1,417,443,299 124,000,000 80,164,501 48,985,000 42,768,147 40,794,600 29,263,000 RMB ordinary shares 29,263,000 22,999,920 21,060,000 RMB ordinary shares RMB ordinary shares 22,999,920 21,060,000 Nil. Nil. Among the top 10 shareholders mentioned above, except for “Agricultural Bank of China Limited — Dacheng Rui Xian Mixed Securities Investment Fund, China Everbright Bank Corporation — Dacheng Strategic Return Mixed Securities Investment Fund, and Industrial and Commercial Bank of China Limited — Dacheng Competitive Advantage Mixed Securities Investment Fund “, all of which belong to the funds under the management of Dacheng Fund Management Company Limited, the Company is not aware of any of the other 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: (1) HKSCC NOMINEES LIMITED represents 香港中央結算(代理人)有限公司, holding 181,404,797 A Shares and 1,417,443,299 H Shares of the Company. These shares were held on behalf of various clients respectively. (2) At the end of prior year, the ordinary accounts and credit account holdings of “Taiping Assets — ICBC — Taiping Star No. 19 Investment Products”, “Industrial Securities Asset Management — China Resources Trust Xingzheng Pengxi No. 1 Family Trust — Industrial Securities Asset Management Pengxi No. 1 Single Asset Management Scheme” and “National Social Insurance Fund 117 Mix” were not among the top 200 of the Company. 100 Annual reportChapter 7Changes in Shares and Particulars of Shareholders Particulars on the top ten shareholders participating in the refinancing and securities lending business □ Applicable ✓ Not applicable Changes of the top ten shareholders from the end of the previous period Changes of the top ten shareholders from the end of the previous period Unit: shares The outstanding shares of refinancing and securities lending business and not yet repaid at the end of reporting period The shares held by the shareholders through ordinary account and credit account as well as the outstanding shares of refinancing and securities lending business at the end of reporting period Add/Exit during the reporting period Aggerated number of shares Percentage (%) Aggerated number of shares Percentage (%) Add Add Add Add Add Add Add Exit Exit — — — — — — — — — — — — — — — — — — 80,164,501 48,985,000 42,768,147 40,794,600 29,263,000 22,999,920 21,060,000 18,230,400 — 1.13 0.69 0.60 0.58 0.41 0.32 0.30 0.26 — Name of shareholder (in full) Agricultural Bank of China Limited — Dacheng Rui Xian Mixed Securities Investment Fund Taiping Assets — ICBC — Taiping Star No. 19 Investment Products China Everbright Bank Corporation — Dacheng Strategic Return Mixed Securities Investment Fund Industrial and Commercial Bank of China Limited — Dacheng Competitive Advantage Mixed Securities Investment Fund Industrial Securities Asset Management — China Resources Trust Xingzheng Pengxi No. 1 Family Trust — Industrial Securities Asset Management Pengxi No. 1 Single Asset Management Scheme National Social Insurance Fund 117 Mix Zhao Kai Li Wei Agricultural Bank of China Co., Ltd. — China Securities 500 Trading Open-end Index Securities Investment Fund 101 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORTChanges of the top ten shareholders from the end of the previous period The outstanding shares of refinancing and securities lending business and not yet repaid at the end of reporting period The shares held by the shareholders through ordinary account and credit account as well as the outstanding shares of refinancing and securities lending business at the end of reporting period Aggerated number of shares Percentage (%) Aggerated number of shares Percentage (%) — — — — — — — — — — — 6,697,600 — — 8,859,599 — 0.09 — — 0.13 Name of shareholder (in full) Li Shengxi Southern Fund — Agricultural Bank of China — Southern CSI Financial Asset Management Plan Zhang Yanxia Dacheng Fund — Agricultural Bank of China — Dacheng CSI Financial Assets Management Scheme CITIC Securities Co., Ltd. Add/Exit during the reporting period Exit Exit Exit Exit Exit Note: During the current year, the ordinary accounts and credit account holding of Agricultural Bank of China Co., Ltd. — China Securities 500 Trading Open-end Index Securities Investment Fund, Li Shengxi, Zhang Yanxia and Dacheng Fund — Agricultural Bank of China — Dacheng CSI Financial Assets Management Scheme were not among the top 200 of the Company. The shareholdings and selling restrictions of top ten shareholders with selling restrictions □ Applicable ✓ Not applicable 102 Annual reportChapter 7Changes in Shares and Particulars of Shareholders (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 held Capacity Number of shares Unit: shares Percentage of share capital of the same class (%) Percentage of total share capital (%) China Railway Guangzhou Group Co., A Shares 2,629,451,300 (L) Beneficial owner 46.52(L) 37.12(L) Ltd. Kopernik Global Investors LLC H Shares 122,259,054 (L) Investment manager 8.54(L) 1.73(L) Note: The letter ‘L’ denotes a long position. (4) Strategic investors or ordinary legal person becoming top 10 shareholders by way of placing of new shares □ Applicable ✓ Not applicable 103 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT IV. INFORMATION OF THE CONTROLLING SHAREHOLDER AND DE FACTO CONTROLLER (1) Information on the controlling shareholder 1. Legal person Name Person in charge or legal representative Date of incorporation Principal operations Equity interests in other domestic and overseas listed controlling and invested companies during the reporting period China Railway Guangzhou Group Co., Ltd. Wei Hao 5 December 1992 Organization and management of railway passenger and freight transportation, technologies and other industrial development etc. Nil 2. Chart on the property rights and controlling relationship between the Company and the controlling shareholder China Railway Guangzhou Group Co., Ltd. 37.12% Guangshen Railway Company Limited 104 Annual reportChapter 7Changes in Shares and Particulars of Shareholders (2) Information on the de facto controller 1. Legal person Name Person in charge or legal representative Date of incorporation Principal operations Equity interests in other domestic and overseas listed controlling and invested companies during the reporting period China State Railway Group Co., Ltd. Liu Zhenfang 14 March 2013 Diversified operations with railway transportation services of passengers and freights as its main business. China Railway Tielong Container Logistics Co. Ltd. (600125), Daqin Railway Co. Ltd. (601006), Beijing-Shanghai High Speed Railway Co., Ltd. (601816), Beijing Tieke Shougang Railway-Tech Co., Ltd. (688569), Gemac Engineering Machinery Co., Ltd. (301048), China Railway Special Cargo Logistics Co., Ltd. (001213) and Harbin National Railway Technology Group Co., Ltd. (688459). 2. Chart on the property rights and controlling relationship between the Company and the de facto controller China State Railway Group Co., Ltd. 100% China Railway Guangzhou Group Co., Ltd. 37.12% Guangshen Railway Company Limited 3. Companies controlled by the de facto controller through trust or other asset management methods □ Applicable ✓ Not applicable (3) Other information on controlling shareholder and de facto controller □ Applicable ✓ Not applicable 105 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT V. CIRCUMSTANCES WHERE THE ACCUMULATIVE NUMBER OF PLEDGED SHARES OF THE COMPANY’S CONTROLLING SHAREHOLDER OR LARGEST SHAREHOLDER AND THE PERSONS ACTING IN CONCERT WITH IT ACCOUNTS FOR MORE THAN 80% OF THE SHARES HELD BY THEM IN THE COMPANY □ Applicable ✓ Not applicable VI. OTHER CORPORATE SHAREHOLDERS WITH A SHAREHOLDING OF 10% OR ABOVE □ Applicable ✓ Not applicable VII. EXPLANATION OF REDUCED SHAREHOLDING □ Applicable ✓ Not applicable VIII. PARTICULARS OF SHARE REPURCHASE DURING THE REPORTING PERIOD □ Applicable ✓ Not applicable IX. 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$1.52 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$6.770 billion. The public float of the Company was in compliance with the requirements of the relevant rules on the sufficiency of public float. X. DUPLICATION During the reporting period, the Directors, chief executives and such other persons of the Company did not have duplicated interests. 106 Annual reportChapter 7Changes in Shares and Particulars of ShareholdersXI. 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. XII. 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. XIII. 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. XIV. 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. 107 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT□ Applicable ✓ Not applicable 108 Annual reportChapter 8Information Regarding Preference SharesI. ENTERPRISE BONDS, CORPORATE BONDS AND DEBT FINANCING INSTRUMENTS OF NON-FINANCIAL ENTERPRISES □ Applicable ✓ Not applicable II. CONVERTIBLE CORPORATE BONDS □ Applicable ✓ Not applicable 109 Annual reportChapter 9Information Regarding BondsIndependent 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”) which are set out on pages 117 to 224 comprise: • • • • • the consolidated balance sheet as at 31 December 2023; 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, comprising material accounting policy information and other explanatory information. 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 2023, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with IFRS Accounting Standards and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance. 110 Annual reportChapter 10Financial StatementsBASIS 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. Key audit matters identified in our audit are summarised as follows: • • Provision for impairment of trade receivables Goodwill impairment assessment 111 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORTKey Audit Matter How our audit addressed the Key Audit Matter Provision for impairment of trade receivables The procedures we performed included: Refer to notes 3.1(b)(ii), 4(a) and 19 to the consolidated financial statements. (i) As at 31 December 2023, the Group had gross balance of trade receivables of RMB6,273,376,000 against which expected credit loss (“ECL”) provision of RMB33,823,000 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, including possibility of default and loss given default of each portfolio and forward- looking information. We identified this as a key audit matter due to the significance of the trade receivables balance and the determination of the ECL provision involves significant accounting estimations and judgements. (ii) (iii) (iv) (v) 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. Evaluated and validated key controls over trade receivables portfolio grouping and ECL determination. Evaluated whether the models and methodologies used by management to determine ECL were in accordance with accounting standards. Evaluated the reasonableness of the judgement management made in grouping trade receivable portfolios by assessing credit risk characteristics. Evaluated the reasonableness and accuracy of the key data input to calculate ECL rates, including possibility of default and loss given default of each portfolio. (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 estimates and judgments assessing ECL provision and result of the assessment are supported by the available evidences. 112 Annual reportChapter 10Financial StatementsKey Audit Matter How our audit addressed the Key Audit Matter Goodwill impairment assessment The procedures we performed included: Refer to notes 2.1.3, 4(b) and 9 to the consolidated financial statements. (i) As at 31 December 2023, the Group had a balance of goodwill of RMB 281,255,000 which has been allocated to the Group’s cash generating units (“CGU”) relating to the Railway Transportation Business. Goodwill impairment reviews are undertaken by 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 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. Management’s impairment assessment involves key assumptions, including revenue growth rate, long- term revenue growth rate, gross margin and pre-tax discount rate. (ii) (iii) (iv) 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) 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. 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. 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. Tested the reasonableness and relevancy of the underlying data used and the mathematical accuracy of the calculations in the cash flow projections. Evaluated the reasonableness of revenue growth rate, long-term revenue 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) Utilised 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 estimates and judgments in goodwill impairment assessment are supported by the available evidences. 113 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORTOTHER INFORMATION The directors of the Company are responsible for the other information. 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 IFRS Accounting Standards 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. 114 Annual reportChapter 10Financial StatementsAUDITOR’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. 115 Annual reportGUANGSHEN RAILWAY 2023 • 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 Yeung Yee Mau. PricewaterhouseCoopers Certified Public Accountants Hong Kong, 28 March 2024 116 Annual reportChapter 10Financial StatementsNotes 2023 2022 As at 31 December 6 8 7 9 11 12 13 15 16 17 18 19 20 16 21 22 23 22,786,696 2,993,887 561,178 58,926 281,255 298,743 883,835 32,709 462,696 60,000 16,744 23,430,371 3,046,599 1,112,582 64,816 281,255 274,601 1,284,105 41,796 463,696 60,000 12,232 28,436,669 30,072,053 289,527 6,239,552 784,787 1,950 1,482,463 262,645 4,656,294 578,557 172,192 1,299,635 8,798,279 6,969,323 37,234,948 37,041,376 7,083,537 11,562,657 3,472,256 4,271,436 7,083,537 11,562,657 3,331,067 3,312,435 CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2023 (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 Materials and supplies Trade receivables Prepayments and other receivables Current portion of long-term deposits Cash and cash equivalents Total assets EQUITY AND LIABILITIES Share capital Share premium Other reserves Retained earnings 117 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT Notes 2023 2022 As at 31 December Capital and reserves attributable to the Company’s equity holders Non-controlling interests Total equity Liabilities Non-current liabilities Borrowings Lease liabilities Deferred tax liabilities Deferred income related to government grants Current liabilities Trade and bill payables Contract liabilities Borrowings 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 25 8 12 24 26 27 25 8 28 26,389,886 (37,890) 25,289,696 (36,495) 26,351,996 25,253,201 780,000 1,326,892 51,434 702,384 775,000 1,324,231 53,927 747,585 2,860,710 2,900,743 3,181,832 228,526 710,952 1,931,405 13,744 1,840 65,539 1,868,854 19,550 3,525,291 172,866 721,268 2,053,638 13,746 2,660 64,498 2,323,722 9,743 8,022,242 8,887,432 10,882,952 11,788,175 Total equity and liabilities 37,234,948 37,041,376 The above consolidated balance sheet should be read in conjunction with the accompanying notes. The financial statements on pages 117 to 224 were approved by the Board of Directors on March 28, 2024 and were signed on its behalf. Wei Hao Director Hu Lingling Director 118 Annual reportChapter 10Financial Statements CONSOLIDATED COMPREHENSIVE INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2023 (All amounts in Renminbi thousands, except for earnings per share data) Year ended 31 December Notes 2023 2022 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 Impairment of fixed assets Cargo logistics and outsourcing service charges Utility and office expenses Others Other Businesses Business tax and surcharge Employee benefits Materials and supplies Depreciation of right-of-use assets Depreciation of fixed assets Utility and office expenses Others 10,727,769 1,828,302 6,682,952 1,617,110 12,093,070 10,422,800 24,649,141 1,545,757 18,722,862 1,220,568 26,194,898 19,943,430 (36,708) (8,970,300) (8,265,305) (1,467,297) (1,298,877) (57,070) (1,836,776) (120,819) (387,681) (37,476) (1,094,805) (2,007) (8,269,989) (7,386,515) (1,211,606) (1,119,050) (57,068) (1,809,415) — (485,413) (84,419) (948,130) (23,573,114) (21,373,612) (11,605) (510,410) (386,660) (11,332) (27,314) (73,918) (302,840) (8,548) (615,029) (345,315) (11,332) (27,004) (97,273) (91,641) (1,324,079) (1,196,142) 30 8 6 6 31 30 8 6 31 Total operating expenses (24,897,193) (22,569,754) 119 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT Derecognition of land use right Impairment losses on financial assets, net Other gains — net Operating profit/(loss) Finance costs — net Share of results of associates, net of tax Profit/(loss) before income tax Income tax (expense)/credit Profit/(loss) for the year Profit/(loss) for the year Year ended 31 December Notes 2023 2022 32 33 11 34 93,440 (5,506) 152,821 18,664 (4,093) 59,718 1,538,460 (2,552,035) (105,338) 23,454 (79,925) 52,167 1,456,576 (399,682) (2,579,793) 586,146 1,056,894 (1,993,647) 1,056,894 (1,993,647) Other comprehensive income Items that will not be reclassified to profit or loss Changes in the fair value of financial assests at fair value through other comprehensive income 23 10,590 — Total comprehensive income/(loss) for the year, net of tax 1,067,484 (1,993,647) Profit/(loss) attributable to: Equity holders of the Company Non-controlling interests Total comprehensive income/(loss) attributable to: Equity holders of the Company Non-controlling interests 1,058,289 (1,395) (1,994,665) 1,018 1,056,894 (1,993,647) 1,068,879 (1,395) (1,994,665) 1,018 1,067,484 (1,993,647) Earnings/(loss) per share for profit/(loss) attributable to the equity holders of the Company during the year Basic earnings/(losses) per share Diluted earnings/(losses) per share 35 35 RMB0.15 RMB(0.28) RMB0.15 RMB(0.28) The above consolidated comprehensive income statement should be read in conjunction with the accompanying notes. Wei Hao Director 120 Hu Lingling Director Annual reportChapter 10Financial Statements CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2023 (All amounts in Renminbi thousands) Share capital (Note 22) Share premium Attributable to equity holders of the Company Statutory surplus reserve (Note 23) Discretionary surplus reserve (Note 23) Other reserves (Note 23) Retained earnings Total Non- controlling interests Total equity Balance at 1 January 2022 Total comprehensive income Loss for the year Other comprehensive income (Note 23) Special reserve — Safety Production Fund (Note 23) Appropriation Utilisation Appropriations from retained earnings (Note 23) Others (Note 11) 7,083,537 — 11,562,657 — 2,780,425 — 304,059 — 204,171 — 5,307,100 (1,994,665) 27,241,949 (1,994,665) (37,513) 1,018 27,204,436 (1,993,647) — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 38,722 162,335 (123,613) — 3,690 (1,994,665) (1,994,665) 1,018 (1,993,647) — — — — — — — 38,722 162,335 (123,613) — 3,690 — — — — — — — 38,722 162,335 (123,613) — 3,690 Balance at 31 December 2022 7,083,537 11,562,657 2,780,425 304,059 246,583 3,312,435 25,289,696 (36,495) 25,253,201 121 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT Attributable to equity holders of the Company Share capital (Note 22) Share premium Statutory surplus reserve (Note 23) Discretionary surplus reserve (Note 23) Balance at 1 January 2023 Total comprehensive income 7,083,537 — 11,562,657 — 2,780,425 — 304,059 — Profit for the year Other comprehensive income (Note 23) Special reserve — Safety Production Fund (Note 23) Appropriation Utilisation Appropriations from retained earnings (Note 23) Transfer out from FVOCI reserve to retained earnings (Note 23) Others (Note 11) — — — — — — — — — — — — — — — — — — — — — 108,819 1,059 — — — — — — — — — Other reserves (Note 23) 246,583 10,590 — 10,590 30,623 159,485 (128,862) Retained earnings Total Non- controlling interests Total equity 3,312,435 1,058,289 1,058,289 — 25,289,696 1,068,879 1,058,289 10,590 (36,495) (1,395) 25,253,201 1,067,484 (1,395) — 1,056,894 10,590 — — — 30,623 159,485 (128,862) — (108,819) (10,590) 688 9,531 — — — 688 — — — — — — 30,623 159,485 (128,862) — — 688 Balance at 31 December 2023 7,083,537 11,562,657 2,890,303 304,059 277,894 4,271,436 26,389,886 (37,890) 26,351,996 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Wei Hao Director Hu Lingling Director 122 Annual reportChapter 10Financial Statements CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2023 (All amounts in Renminbi thousands) Year ended 31 December Notes 2023 2022 Cash flows from/(used in) operating activities Cash generated from operations Income tax paid 37(a) 1,119,089 (2,724) (191,456) (1,993) Net cash generated from/(used in) operating activities 1,116,365 (193,449) 37(b) Cash flows from investing activities Proceeds from disposal of fixed assets Advances from disposal of other long-term assets Proceeds from disposal of other long-term assets Interest received on term deposits with maturities more than three months Dividends received Redemption of term deposits with maturities more than three months Proceeds from sale of financial assets at fair value through other comprehensive income Payments for term deposits with maturities more than three months Payments for financial assets at fair value through other comprehensive income Payments for acquisition of fixed assets and construction-in-progress; and prepayments for fixed assets and construction-in-progress, net of related payables 65,430 — 5,831 12,192 16,285 160,000 5,795 — (66,065) 114,983 91,119 20,047 683 19,715 60,000 — (60,000) (20,000) (1,022,308) (1,652,417) Net cash used in investing activities (822,840) (1,425,870) 123 Annual reportGUANGSHEN RAILWAY 2023 • ANNUAL REPORT Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Interest paid Payment of lease liabilities Year ended 31 December Notes 2023 2022 37(c) 37(c) 37(c) 37(c) 1,200,000 (1,205,000) (41,285) (64,412) 1,500,000 (5,000) (12,250) (63,258) Net cash (used in)/generated from financing activities (110,697) 1,419,492 Net increase/(decrease) in cash and cash equivalents 182,828 (199,827) Cash and cash equivalents at beginning of year 1,299,635 1,499,462 Cash and cash equivalents at end of year 21 1,482,463 1,299,635 The above consolidated cash flows statement should be read in conjunction with the accompanying notes. Wei Hao Director Hu Lingling Director 124 Annual reportChapter 10Financial Statements 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” or “China”) 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 April 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. On 25 November 2020, the Company’s ADSs were delisted from the New York Stock Exchange. On 25 October 2022, the Company filed a Form 15F with the United States Securities and Exchange Commission to deregister all classes of its registered securities, including its equity securities and all classes of debt securities, and terminate its reporting obligations. Deregistration and termination of the Company’s reporting obligations became effective 90 days after the filing of Form 15F. 125 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report1 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. As at 31 December 2023, Guangzhou Railway Group holds 37.12% of the shares of the Company and is the largest shareholder of the Company. The financial statements were authorised for issue by the board of directors of the Company on 28 March 2024. 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 ACCOUNTING POLICIES This note provides a list of 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 the Company and its subsidiaries. 2.1 Summary of material accounting policies 2.1.1 Basis of preparation (a) Compliance with IFRS and HKCO The consolidated financial statements of the Group have been prepared in accordance with IFRS Accounting Standards (“IFRS”), interpretations issued by the IFRS Interpretations Committee (“IFRS IC”) applicable to companies reporting under IFRS and requirements of the Hong Kong Companies Ordinance (“HKCO”) Cap.622. The financial statements comply with IFRS as issued by the International Accounting Standards Board (“IASB”). (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. 126 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.1 Summary of material accounting policies (continued) 2.1.1 Basis of preparation (continued) (c) 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 2023: • • • • lFRS 17 Insurance Contracts — IFRS 17 Definition of Accounting Estimates — amendments to IAS 8 International Tax Reform — Pillar Two Model Rules — amendments to IAS 12 Disclosure of Accounting Policies — Amendments to IAS 1 and IFRS Practice Statement 2 The amendments listed above did not have any significant impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods. (d) New standards and interpretations not yet adopted Certain amendments to accounting standards and interpretation have been published that are not mandatory for 31 December 2023 reporting periods and have not been early adopted by the group. The assessment of the impact of these amendments on the entity in the current or future reporting periods and on foreseeable future transactions is in progress. 127 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.1 Summary of material accounting policies (continued) 2.1.1 Basis of preparation (continued) (d) New standards and interpretations not yet adopted (continued) Effective for annual periods beginning on or after Amendments to IAS 1 Classification of Liabilities 1 January 2024 Amendments to IAS 1 Amendments to IFRS 16 Amendments to IAS 7 and IFRS 7 as Current or Non-current (amendments) Non-current Liabilities with Covenants (amendments) Lease Liability in a Sale and Leaseback (amendments) Supplier finance arrangements (amendments) 1 January 2024 1 January 2024 1 January 2024 Amendments to IAS 21 Lack of Exchangeability 1 January 2025 Amendments to IFRS 10 and IAS 28 (amendments) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (amendments) To be determined 128 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.1 Summary of material accounting policies (continued) 2.1.2 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. 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 2.1.6), 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 management of the Company consider the current estimated useful lives of those assets to be reasonable. 129 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.1 Summary of material accounting policies (continued) 2.1.2 Fixed assets (continued) (a) (continued) 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 2.2.6). 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. 2.1.3 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. 130 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.1 Summary of material accounting policies (continued) 2.1.4 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. (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 and does not give rise to equal taxable and deductible temporary differences. 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. 131 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.1 Summary of material accounting policies (continued) 2.1.4 Current and deferred income tax (continued) (b) Deferred income tax (continued) Outside basis differences Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, and associates and joint arrangements, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Generally the Group is unable to control the reversal of the temporary difference for associates. Only when there is an agreement in place that gives the Group the ability to control the reversal of the temporary difference in the foreseeable future, deferred tax liability in relation to taxable temporary differences arising from the associate’s undistributed profits is not recognised. Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, and associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilised. (c) Offsetting Deferred 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. 132 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.1 Summary of material accounting policies (continued) 2.1.5 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. 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 recognised 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. 133 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.1 Summary of material accounting policies (continued) 2.1.5 Revenue recognition (continued) (a) Revenue from railroad and related business (continued) 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 recognised overtime in the accounting period in which the services are rendered, and revenue can be reliably measured. Railway operation services and other services are rendered solely by the Group and all proceeds are collected by the Group directly. When the services rendered by the Group exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is recognised. (b) Revenue from other businesses Revenue from other business mainly consist of on-board catering services, leasing, sales of materials, sale of goods and other businesses related to railway transportation. Revenues from on-board catering services are recognised overtime when the related services are rendered. Revenues from sales of materials and supplies and sale of goods are recognised when the respective materials and goods are delivered to customers at point 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. 134 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.1 Summary of material accounting policies (continued) 2.1.6 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. 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. 135 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.1 Summary of material accounting policies (continued) 2.1.6 Leases (continued) 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. 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, e.g. term, country, currency and security. 136 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.1 Summary of material accounting policies (continued) 2.1.6 Leases (continued) 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. 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. 137 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.1 Summary of material accounting policies (continued) 2.1.6 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. 138 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.1 Summary of material accounting policies (continued) 2.1.7 Impairment of trade receivables The Group assesses on a forward-looking basis the expected credit losses associated with trade receivables. 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. The Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables (note 3.1(b)(iii)). 2.2 Summary of other accounting policies 2.2.1 Subsidiaries 2.2.1.1 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. 139 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.2 Summary of other accounting policies (continued) 2.2.1 Subsidiaries (continued) 2.2.1.1 Consolidation (continued) (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. 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. 140 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.2 Summary of other accounting policies (continued) 2.2.1 Subsidiaries (continued) 2.2.1.1 Consolidation (continued) (a) Business combinations (continued) 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. (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. 141 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.2 Summary of other accounting policies (continued) 2.2.1 Subsidiaries (continued) 2.2.1.2 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. 2.2.2 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. 142 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.2 Summary of other accounting policies (continued) 2.2.2 Associates (continued) 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. 2.2.3 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. 2.2.4 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. 143 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.2 Summary of other accounting policies (continued) 2.2.4 Foreign currency transaction (continued) (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”. 2.2.5 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. 144 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.2 Summary of other accounting policies (continued) 2.2.6 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. 2.2.7 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 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. 145 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.2 Summary of other accounting policies (continued) 2.2.7 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. 146 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.2 Summary of other accounting policies (continued) 2.2.7 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 other receivables and long-term receivable) and contract assets. Management recognised provision for credit losses on the basis of exposure at default and ECL rates, including possibility of default, loss given default and forward-looking information. For financial assets subject to ECL measurement except trade receivables and contract assets, 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. For the financial Instruments in Stage 1 and Stage 2, the Group calculates the interest income based on its gross carrying amount (i.e., amortised 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. 2.2.8 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. 147 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.2 Summary of other accounting policies (continued) 2.2.9 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. 2.2.10 Materials and supplies Materials and supplies are stated at the lower of cost and net realisable value. Cost is determined using the first in first out 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. 2.2.11 Other receivables If collection of 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. Other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. 2.2.12 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. 2.2.13 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. 148 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.2 Summary of other accounting policies (continued) 2.2.14 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. 2.2.15 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. 149 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.2 Summary of other accounting policies (continued) 2.2.15 Employee benefits (continued) (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. 2.2.16 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. 150 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report2 SUMMARY OF ACCOUNTING POLICIES (continued) 2.2 Summary of other accounting policies (continued) 2.2.17 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. 2.2.18 Dividend income Dividends are recognised as other income in profit or loss when the right to receive payment is established. 2.2.19 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. 2.2.20 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. 151 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report3 FINANCIAL RISK MANAGEMENT 3.1 Financial risk factors 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 and liabilities (in RMB thousands equivalent): Monetary assets Currency denomination As at 31 December 2023 RMB’000 2022 RMB’000 Cash and cash equivalents HKD 13,067 22,639 152 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 3 FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factors (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 and liabilities are shown above. The Group has not used any means to hedge the exposure. As at 31 December 2023, if RMB had strengthened/weakened by 5% against the HKD with all other variables held constant, profit after tax for the year would have been RMB490,000 lower/higher (2022: loss after tax for the year would have been RMB849,000 higher/lower). (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. The average interest rate of cash and cash equivalents and long-term deposits in the PRC are 1.75% and 3.25% respectively (2022: 1.55% and 3.84% respectively) 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. The average effective interest rate of long-term receivable is 6.54%. The Group’s main interest rate risk arises from borrowings with variable rates, which expose the Group to cash flow interest rate risk, while borrowing with fix rates exposes the Group to fair value interest rate risk. As at 31 December 2023, the Group’s borrowings were long-term RMB denominated borrowings with variable rates of RMB790,000,000 and short-term RMB denominated borrowings with variable rates of RMB700,000,000. As at 31 December 2023, if the borrowing rates calculated by variable rate of one-year LPR increases/decreases by 50 basis points while all other variables held constant, the profit after tax for the year would have been RMB5,587,500 lower/higher (2022: the loss after tax for the year would have been RMB5,606,000 higher/lower). 153 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report3 FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factors (continued) (a) Market risk (continued) (iii) Other price risk The Group’s exposure to price risk arises from equity investments held by the Group and classified as FVOCI. As at 31 December 2023, 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 RMB17,351,000 higher/lower (2022: the other comprehensive loss after tax for the year would have been RMB17,389,000 lower/higher). (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. 154 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report3 FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factors (continued) (b) Credit risk (continued) (i) Risk management (continued) 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 reliability 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. As at 31 December 2023, the Group had no significant collateral held as a result of mortgages by debtors and other credit enhancements (31 December 2022: nil). (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. 155 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report3 FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factors (continued) (b) Credit risk (continued) (ii) Impairment of financial assets (continued) 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, including possibility of default and loss given default of each portfolio 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. 156 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report3 FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factors (continued) (b) Credit risk (continued) (ii) Impairment of financial assets (continued) Trade receivables (continued) On that basis, the loss provision as at 31 December 2023 and 31 December 2022 was determined for trade receivables (in RMB thousands): As at 31 December 2023 As at 31 December 2022 Carrying amount ECL rates Loss provision Carrying amount ECL rates Loss provision Portfolio 1 Portfolio 2 Portfolio 3 269,407 5,784,729 219,239 — 0.55% 0.97% — (31,688) (2,135) 230,613 4,273,061 181,056 — 0.58% 2.00% 6,273,375 (33,823) 4,684,730 — (24,815) (3,621) (28,436) The loss provision for trade receivables as at 31 December reconciles to the opening loss provision as follows: Trade receivables 2023 RMB’000 2022 RMB’000 Opening loss provision as at 1 January Impairment loss provision 28,436 5,387 23,751 4,685 Closing loss provision at 31 December 33,823 28,436 157 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 3 FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factors (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. 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. 158 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report3 FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factors (continued) (b) Credit risk (continued) (ii) Impairment of financial assets (continued) Other financial assets at amortised cost (continued) The loss provision as at 31 December 2023 and 31 December 2022 for other receivables was as follows (in RMB thousands): As at 31 December 2023 As at 31 December 2022 Carrying amount ECL rates Loss provision Carrying amount ECL rates Loss provision Stage 1 (Portfolio) Stage 1 (Individual) 505,078 128,903 0.24% — (1,220) — 334,626 128,903 0.38% — 633,981 (1,220) 463,529 (1,281) — (1,281) 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. (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. 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. 159 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 3 FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factors (continued) (c) Liquidity risk (continued) At 31 December 2023 Trade and bill payable and other payables excluding non-financial liabilities Payables for fixed assets and construction-in-progress Lease liabilities Short-term borrowings Long-term borrowings Dividends payable At 31 December 2022 Trade and bill payable and other payables excluding non-financial liabilities Payables for fixed assets and construction-in-progress Lease liabilities Short-term borrowings Long-term borrowings Dividends payable Less than 1 year RMB’000 Between 1 and 5 years RMB’000 Over 5 years RMB’000 Carrying amount RMB’000 4,541,730 1,931,405 65,539 711,362 30,689 13,744 — — 272,470 — 800,360 — — — 5,460,000 — — — 4,541,730 1,931,405 5,798,009 711,362 831,049 13,744 7,294,469 1,072,830 5,460,000 13,827,299 5,023,979 2,053,638 64,498 715,760 44,601 13,746 — — 268,220 — 811,070 — — — 5,529,790 — — — 5,023,979 2,053,638 5,862,508 715,760 855,671 13,746 7,916,222 1,079,290 5,529,790 14,525,302 160 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 3 FINANCIAL RISK MANAGEMENT (continued) 3.2 Capital risk management The Group’s objectives of managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Group is not subject to external mandatory capital requirements and uses gearing ratios to monitor capital. As at 31 December 2023 and 2022, the Group’s gearing ratios are presented below: As at 31 December 2023 As at 31 December 2022 Gearing ratios 29.23% 31.82% Management believes that the current 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 2023 and 2022, the Group did not have any financial instruments that were measured at fair value except for FVOCI (note 15). 161 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual 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 2023: Level 1 RMB’000 Level 2 RMB’000 Level 3 RMB’000 Total RMB’000 Assets Financial assets at FVOCI — — 462,696 462,696 The following table presents the Group’s assets that are measured at fair value at 31 December 2022: Level 1 RMB’000 Level 2 RMB’000 Level 3 RMB’000 Total RMB’000 Assets Financial assets at FVOCI — — 463,696 463,696 There were no transfers between levels 1, 2 and 3 or changes in valuation techniques during the year (2022: nil). The following table presents the changes in level 3 items for the periods ended 31 December 2023: Opening balance as at 1 January 2022 Acquisitions Closing balance as at 31 December 2022 Changes in fair value (Note 15(b)) Disposals Dividends received Closing balance as at 31 December 2023 Financial assets at FVOCI 463,696 — 463,696 10,590 (11,590) 16,285 462,696 Financial assets and liabilities of the Group measured at amortised cost include trade and other receivables, long-term receivable, term deposits, cash and cash equivalents, trade and other payables and borrowings, of which the fair values approximate their carrying amounts. 162 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below. (a) Provision for impairment of trade receivables The provision for impairment of trade receivables are recognised on the basis of portfolio grouping based on credit risk characteristics, exposure at default and ECL rates, including possibility of default and loss given default of each portfolio and forward-looking information, taking into account the customers/debtors’ credit records and financial conditions comprehensively. The Group reviews the key assumptions related to ECL calculation on a regular basis. The Group took into 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. 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. 163 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued) (c) Recognition of deferred tax assets 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. Future taxable profit includes taxable profit that the Group will realize through normal operation activities and future reversal of taxable temporary differences generated in prior periods. Estimates and judgements are involved in determing the amounts of future taxable profit and the periods in which the temporary differences can be utilised. Where the actual situation differs from estimates, such differences will impact the carrying value of deferred tax assets of the Group in future periods. (d) Depreciable lives of fixed assets The estimate of depreciable lives of fixed assets, especially tracks, bridges and service roads, was made by the directors with reference to the following: (1) the historical usage of the assets; (2) their expected physical wear and tear; (3) results of recent durability assessment performed; (4) technical or commercial obsolescence arising from changes or improvements in production of similar fixed assets; (5) the right of the Group to renew the land use right grants and the land use right lease on which these assets are located (note 8); (6) the changes in market demand for, or legal or comparable limits imposed on, the use of such fixed assets. The useful lives and residual values for the year have been reviewed by the directors and no change was made in current year. The current estimated useful lives are stated in Note 2.1.2. If the estimated depreciable lives of tracks, bridges and service roads had been extended/shortened by 10%, the depreciation expenses of fixed assets for the year ended 31 December 2023 would have been decreased/increased by approximately RMB19,320,000 and RMB23,613,000 respectively (2022: RMB19,032,000 and RMB23,262,000). 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. 164 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report5 SEGMENT INFORMATION (continued) The segment results during 2023 and 2022 are as follows: The Railway Transportation Business All other segments 2023 RMB’000 2022 RMB’000 2023 RMB’000 2022 RMB’000 Eliminations 2023 RMB’000 2022 RMB’000 Total 2023 RMB’000 2022 RMB’000 Segment revenue — Railroad Businesses — Revenue from external customers — Inter segment revenue — Other Businesses — Revenue from external customers — Inter segment revenue 24,649,141 24,649,141 — 1,493,231 1,493,231 — 18,722,862 18,722,862 — 1,145,413 1,145,413 — — — — 134,051 52,526 81,525 — — — 169,076 75,155 93,921 — — — (81,525) — (81,525) — — — (93,921) — (93,921) 24,649,141 24,649,141 — 1,545,757 1,545,757 — 18,722,862 18,722,862 — 1,220,568 1,220,568 — Total revenue 26,142,372 19,868,275 134,051 169,076 (81,525) (93,921) 26,194,898 19,943,430 Timing of revenue recognition — Overtime — At a point in time — Lease 25,967,175 139,040 36,157 19,770,846 83,705 13,724 36,391 75,864 21,796 52,313 99,314 17,449 (17,456) (54,535) (9,534) (93,921) — — 25,986,110 160,369 48,419 19,729,238 183,019 31,173 26,142,372 19,868,275 134,051 169,076 (81,525) (93,921) 26,194,898 19,943,430 Segment result 1,488,457 (2,459,701) (18,936) (111,694) (12,945) (8,398) 1,456,576 (2,579,793) 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 Provision for impairment losses on financial assets 105,173 23,454 1,860,060 57,070 22,605 120,819 — 5,506 79,793 52,167 1,912,497 57,068 23,135 — 37 4,093 165 — 4,030 11,332 349 — — — 132 — 4,029 11,332 460 — — — — — — — — — — — — — — — — — — — 105,338 23,454 1,864,090 68,402 22,954 120,819 — 5,506 79,925 52,167 1,916,526 68,400 22,954 120,819 — 5,506 165 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 5 SEGMENT INFORMATION (continued) A reconciliation of the segment results to profit for the year of 2023 and 2022 is as follows: The Railway Transportation Business All other segments 2023 RMB’000 2022 RMB’000 2023 RMB’000 2022 RMB’000 Eliminations 2023 RMB’000 2022 RMB’000 Total 2023 RMB’000 2022 RMB’000 Segment result Income tax expense/(credit) 1,488,457 (400,265) (2,459,701) 588,700 (18,936) 583 (111,694) (2,554) (12,945) — (8,398) — 1,456,576 (399,682) (2,579,793) 586,146 Profit/(loss) for the year 1,088,192 (1,871,001) (18,353) (114,248) (12,945) (8,398) 1,056,894 (1,993,647) 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 2023 RMB’000 2022 RMB’000 2023 RMB’000 2022 RMB’000 Eliminations 2023 RMB’000 2022 RMB’000 Total 2023 RMB’000 2022 RMB’000 Total segment assets 37,380,306 37,125,305 378,548 393,012 (523,908) (476,941) 37,234,947 37,041,376 Total segment assets include: Investment in associates Additions to non-current assets (other than financial instruments and deferred tax assets) Total segment liabilities 298,743 274,601 — — — — 298,743 274,601 960,035 10,470,676 1,049,828 11,345,768 668 863,863 1,074 859,971 — (451,587) — (417,564) 960,703 10,882,952 1,050,902 11,788,175 Revenues of approximately RMB6,077,868,000 (2022: RMB5,506,484,000) were derived from Guangzhou Railway Group and its subsidiaries, which was 23.2% of the Group’s total revenue (2022: 27.6%). 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. 166 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 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 9,428,440 (3,834,561) (23,257) 15,346,319 (4,048,162) (16,796) 6,981,827 (2,640,943) (11,835) 2,242,637 (1,411,662) — 7,062,632 (5,058,903) (5,575) 41,061,855 (16,994,231) (57,463) 5,570,622 11,281,361 4,329,049 830,975 1,998,154 24,010,161 5,570,622 2,058 113,763 (128) — (228) (11,787) (380,952) — 11,281,361 13,232 48,768 (187,332) 275,052 — (44,863) (266,615) — 4,329,049 8,105 3,187 830,975 — 404,206 1,998,154 67,662 229,079 24,010,161 91,057 799,003 (1,040,935) (936) (15,567) (1,244,898) 1,529,767 (72) (94,786) (672,490) — 16,099 — (6,083) (215,436) — 34,488 300 (6,313) (381,033) — 1,855,406 — (163,832) (1,916,526) — 5,293,348 11,119,603 4,061,825 1,028,825 1,926,770 23,430,371 9,473,196 (4,179,358) (490) 15,354,240 (4,234,637) — 6,534,798 (2,472,677) (296) 2,595,337 (1,566,512) — 7,196,602 (5,268,368) (1,464) 41,154,173 (17,721,552) (2,250) 5,293,348 11,119,603 4,061,825 1,028,825 1,926,770 23,430,371 6 FIXED ASSETS — NET At 1 January 2022 Cost Accumulated depreciation Impairment Net book amount Year ended 31 December 2022 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 (Note 7) Reclassifications Disposals Depreciation charges Impairment charge Closing net book amount At 31 December 2022 Cost Accumulated depreciation Impairment Net book amount 167 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 6 FIXED ASSETS — NET (continued) 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 Year ended 31 December 2023 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 (Note 7) Reclassifications Disposals Depreciation charges Impairment charge 5,293,348 7,240 54,061 11,119,603 414 179,024 4,061,825 10,413 240,546 1,028,825 1,707 10,683 1,926,770 64,576 696,193 23,430,371 84,350 1,180,507 (41,791) (523,470) (218,728) (16,878) (21,731) (822,598) 18,143 196 (32,964) (370,298) — 725,096 – (20,479) (233,342) (120,819) 67,147 328 (4,656) (673,853) — 58,084 (524) (6,245) (190,582) — 97,599 – (2,750) (396,015) — 966,069 — (67,094) (1,864,090) (120,819) Closing net book amount 4,927,935 11,126,027 3,482,694 885,922 2,364,118 22,786,696 At 31 December 2023 Cost Accumulated depreciation Impairment Net book amount 9,396,699 (4,468,274) (490) 15,586,508 (4,339,662) (120,819) 6,172,312 (2,689,322) (296) 2,434,889 (1,548,967) — 7,844,160 (5,478,578) (1,464) 41,434,568 (18,524,803) (123,069) 4,927,935 11,126,027 3,482,694 885,922 2,364,118 22,786,696 (a) As at 31 December 2023, the ownership certificates of certain buildings of the Group with an aggregate carrying value of approximately RMB1,628,856,000 (2022: RMB1,729,675,000) had not been obtained by the Group. 168 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 6 FIXED ASSETS — NET (continued) (a) (continued) These kind of buildings are classified as below: Carrying value as at 31 December 2023 RMB’000 Carrying value as at 31 December 2022 Reason for delay in obtaining the ownership RMB’000 certificates Certificates for buildings under 1,193,720 1,259,538 The Group commenced such application application procedures Certain buildings located on the land of which the land use right certificates have not been obtained 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. 42,823 45,840 According to relevant laws and regulations Certain buildings attached to pieces of land which is held by lease 392,313 424,297 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. (b) As at 31 December 2023, fixed assets of the Group with an aggregate net book value of approximately RMB143,269,000 (2022: RMB144,172,000) had been fully depreciated but they were still in use. 169 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report7 CONSTRUCTION-IN-PROGRESS At 1 January Transfer in from fixed assets for improvement (Note 6) Other additions Transfer to fixed assets (Note 6) Transfer out to fixed assets after improvement/modifications (Note 6) At 31 December 2023 RMB’000 2022 RMB’000 1,112,582 822,598 772,574 (1,180,507) 1,588,935 1,244,898 933,158 (799,003) (966,069) (1,855,406) 561,178 1,112,582 Construction-in-progress as at 31 December 2023 mainly comprise of improvement projects for tracks, bridges, service roads and equipment in the PRC. As at 31 December 2023, the balance of the provision for writing down the construction-in-progress was approximately RMB15,456,000 (2022: RMB15,456,000). 170 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 8 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (1) RIGHT-OF-USE ASSETS Cost As at 31 December 2021 Additions (b) Disposals 2022 Lease of Land use right (b) RMB’000 Land use right (a) RMB’000 Total RMB’000 2,399,215 — (2,531) 1,380,243 — — 3,779,458 — (2,531) As at 31 December 2022 2,396,684 1,380,243 3,776,927 Accumulated depreciation As at 31 December 2021 Depreciation charges Disposal (620,072) (52,154) 1,148 (43,004) (16,246) — (663,076) (68,400) 1,148 As at 31 December 2022 (671,078) (59,250) (730,328) Net book value As at 31 December 2022 1,725,606 1,320,993 3,046,599 As at 31 December 2021 1,779,143 1,337,239 3,116,382 171 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 8 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (continued) (1) RIGHT-OF-USE ASSETS (continued) Cost As at 31 December 2022 Additions Disposals 2023 Lease of Land use right RMB’000 Land use right (a) RMB’000 Total RMB’000 2,396,684 19,201 (7,541) 1,380,243 — — 3,776,927 19,201 (7,541) As at 31 December 2023 2,408,344 1,380,243 3,788,587 Accumulated depreciation As at 31 December 2022 Depreciation charges Disposal (671,078) (52,156) 4,030 (59,250) (16,246) — (730,328) (68,402) 4,030 As at 31 December 2023 (719,204) (75,496) (794,700) Net book value As at 31 December 2023 1,689,140 1,304,747 2,993,887 As at 31 December 2022 1,725,606 1,320,993 3,046,599 (2) LEASE LIABILITIES Lease liabilities Less: current portion of lease liabilities As at 31 December 2023 As at 31 December 2022 1,392,431 (65,539) 1,388,729 (64,498) 1,326,892 1,324,231 172 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 8 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (continued) (2) LEASE LIABILITIES (continued) The amounts recognised 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 (Note 33) Expense relating to short-term leases 2023 RMB’000 68,402 68,114 2,121,759 2022 RMB’000 68,400 67,903 2,139,333 2,258,275 2,275,636 The total cash outflow for leases in 2023 was RMB2,186,171,000 (2022: RMB2,202,590,000). The remaining lease period of right-of-use assets as at 31 December 2023 was lease of between 1 to 83 years. 173 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 8 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (continued) (2) LEASE LIABILITIES (continued) (a) As at 31 December 2023, the ownership certificates of land with an aggregate carrying value of approximately RMB30,385,000 (2022: RMB50,785,000 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 RMB1,090,493,000 (2022: RMB1,126,189,000) had not been obtained by the Group due to the following fact: Certain pieces of land associated with the operations of Guangshen Line IV, one of the railway lines operated by the Company Carrying value as at 31 December 2023 Reason for delay in obtaining the ownership RMB’000 certificates 1,090,493 Due to the fact that Guangshen Line IV spans across several cities, counties and villages in China, it is practically cumbersome and time consuming for the Group to coordinate and execute the procedures for acquiring the respective land use rights certificates with the respective local bureaus and authorities governing the title registration and transfer, and therefore, the progress of acquiring the formal title certificates has been progressing slowly. After consultation made with the Company’s legal counsel, the directors of the Company consider that there is no legal restriction for the Group or the Company to apply for and obtain the land use right certificates and it should not lead to any significant adverse impact on the operations of the Group or the Company. 174 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report9 GOODWILL Year ended 31 December 2022 and 2023 Opening net book amount Additions Impairment Closing net book amount RMB’000 281,255 — — 281,255 As at 31 December 2023 and 2022, 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 (“the 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 Railway Transportation Business. 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. Such impairment testing is executed by the annually or when there are signs of impairment. 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 2023. 175 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 9 GOODWILL (continued) 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. The Group estimated the growth rate and gross margin based on past experience and its expectations for the market development. Cash flows beyond the five-year period are extrapolated using the estimated growth rates, which does not 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. The key assumptions used for value-in-use calculations are as follows: Railroad business 2023 2022 Revenue growth rate (within the five-year period) Long-term revenue growth rate (beyond the five-year period) Gross margin Pre-tax discount rate 6% – 7% 3% 8% – 9% 11% 8% – 22% 3% 0% – 8% 11% As at 31 December 2023, the recoverable amount calculated based on value-in-use exceeded carrying value of the CGU by RMB4,867 million (2022: RMB3,387 million). Based on the assessment result, there is no need to recognise impairment charges against goodwill. 176 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 10 SUBSIDIARIES The following is a list of the principal subsidiaries at 31 December 2023: 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 Pinghu Qun Yi Railway Store Loading China, limited liability company Cargo loading and unloading, and Unloading Company Limited warehousing, freight transportation in the PRC Shenzhen Guangshen Railway Economic and China, limited liability company Catering management in the PRC Trade Enterprise Company Limited Guangzhou Railway Huangpu Service Company Limited China, limited liability company Cargo loading and unloading, 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 (%) Proportion of equity interests held by non- controlling interests (%) 51% 100% 100% 100% 51% 100% 100% 100% 49% — — — Registered capital RMB’000 38,000 10,000 2,000 379 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 2023, 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. 177 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report11 INVESTMENTS IN ASSOCIATES Share of net assets Less: provision for impairment 2023 RMB’000 298,743 — 2022 RMB’000 274,601 — 298,743 274,601 The movement of investments in associates of the Group during the year is as follows: Beginning of the year Share of results after tax Share of other reserve Dividends received End of the year 2023 RMB’000 274,601 23,454 688 — 2022 RMB’000 225,338 52,167 3,690 (6,594) 298,743 274,601 As at 31 December 2023, 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% RMB342,988,791 Properties leasing and trading of merchandise 24.42% RMB206,670,000 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. 178 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 11 INVESTMENTS IN ASSOCIATES (continued) Set out below are the summarised financial information for Tiecheng and Shentu which are accounted for using the equity method in the consolidated financial statements. Summarised balance sheets Tiecheng Shentu 2023 RMB’000 2022 RMB’000 2023 RMB’000 2022 RMB’000 Current assets Non-current assets 141,047 403,524 120,677 409,192 4,152,798 32,644 3,517,146 33,612 Total assets 544,571 529,869 4,185,442 3,550,758 Current liabilities 218,206 223,291 3,535,283 2,952,180 Non-current liabilities 21,412 21,412 38,708 46,287 Total liabilities 239,618 244,703 3,573,991 2,998,467 Equity 304,953 285,166 611,451 552,291 Share of net assets 149,427 139,732 149,316 134,869 Carrying amount of interest in associates 149,427 139,732 149,316 134,869 179 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 11 INVESTMENTS IN ASSOCIATES (continued) Reconciliation of the summarised financial information presented to the carrying amount of its interests in associates as follows: Tiecheng Shentu Total 2023 RMB’000 2022 2023 RMB’000 RMB’000 2022 2023 RMB’000 RMB’000 2022 RMB’000 Opening net assets Profit for the year Changes in other reserves for the year Dividends declared for the year 285,166 19,787 259,617 25,610 552,291 56,344 401,823 162,236 837,457 76,131 661,440 187,846 — — (61) 2,816 15,232 2,816 15,171 — — (27,000) — (27,000) Closing net assets 304,953 285,166 611,451 552,291 916,404 837,457 Percentage of ownership interest 49.00% 49.00% 24.42% 24.42% — — Carrying value 149,427 139,732 149,316 134,869 298,743 274,601 180 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 12 DEFERRED TAX ASSETS/(LIABILITIES) Deferred tax assets Less: offsetting of deferred tax liabilities 2023 RMB’000 2022 RMB’000 1,279,716 (395,881) 1,683,454 (399,349) Deferred tax assets (net) 883,835 1,284,105 Deferred tax liabilities Less: offsetting of deferred tax assets (447,315) 395,881 (453,276) 399,349 Deferred tax liabilities (net) (51,434) (53,927) 832,401 1,230,178 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 2023 RMB’000 2022 RMB’000 840,288 439,428 1,671,489 11,965 1,279,716 1,683,454 (433,547) (13,768) (441,297) (11,979) (447,315) (453,276) 181 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual 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 2022 RMB’000 (Charged)/ credited to the comprehensive income statement RMB’000 At 31 December 2022 RMB’000 At 31 December 2023 RMB’000 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 organisation activity fee Differences in accounting base and tax base of lease liabilities Others 392,753 7,563 18,230 915 194,451 96,298 24,672 23,629 339,736 5,974 604,896 (134) (13,804) (915) 997,649 7,429 4,426 — (428,231) 1,332 30,205 — 569,418 8,761 34,631 — (8,541) 185,910 (11,197) 174,713 (15,003) 1,258 10,004 7,446 (5,974) 81,295 25,930 33,633 347,182 — 7,478 (195) (4,056) 926 — 88,773 25,735 29,577 348,108 — 1,104,221 579,233 1,683,454 (403,738) 1,279,716 182 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 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 financial assets at FVOCI Differences in accounting base and tax base of right-of-use assets Others At 1 January 2022 RMB’000 Credited to the comprehensive income statement RMB’000 At 31 December 2022 RMB’000 (Charged)/ credited to the comprehensive income statement RMB’000 At 31 December 2023 RMB’000 3,230 56,420 60,647 334,310 7,638 462,245 (369) (2,493) — (4,062) (2,045) 2,861 53,927 60,647 330,248 5,593 (488) (2,493) — (4,061) 1,081 2,373 51,434 60,647 326,187 6,674 (8,969) 453,276 (5,961) 447,315 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 RMB385,186,000 (2022: RMB391,733,000) arising from operations of subsidiaries which do not foresee to have enough tax-deductible assessable profits in the near future. Tax losses that can be carried forward (a) Deductible temporary differences 2023 RMB’000 367,432 17,754 2022 RMB’000 373,761 17,972 385,186 391,733 183 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 12 DEFERRED TAX ASSETS/(LIABILITIES) (continued) (a) The tax loss carry-forwards in which no deferred income tax assets were recognised will expire in the following years: 2023 RMB’000 — 37,602 104,651 94,546 113,174 17,459 2022 RMB’000 23,435 37,602 105,003 94,547 113,174 — 367,432 373,761 2023 2024 2025 2026 2027 2028 184 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 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: 2023 RMB’000 2022 RMB’000 200,880 (159,084) 199,629 (135,489) 41,796 64,140 41,796 13,867 (22,954) 64,140 1,251 (23,595) 32,709 41,796 214,748 (182,039) 200,880 (159,084) 32,709 41,796 At 1 January Cost Accumulated amortisation Net book amount Year ended 31 December Opening net book amount Additions Amortisation Closing net book amount At 31 December Cost Accumulated amortisation Net book amount 185 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 14 FINANCIAL INSTRUMENTS BY CATEGORY Financial assets Financial assets at amortised cost Trade receivables and other receivables excluding prepayments (Notes 19 and 20) Term deposits (Note 16) Cash and cash equivalents (Note 21) Long-term receivable (Note 17) FVOCI (Note 15) Total Financial liabilities Liabilities at amortised cost Trade and bills payable and other payables excluding non-financial liabilities (Notes 26 and 28) Payables for fixed assets and construction-in-progress Dividends payable Borrowings (Note 25) Lease liabilities (Note 8(2)) Total 2023 RMB’000 2022 RMB’000 6,872,313 61,950 1,482,463 16,744 462,696 5,118,542 232,192 1,299,635 12,232 463,696 8,896,166 7,126,297 2023 RMB’000 2022 RMB’000 4,541,730 1,931,405 13,744 1,490,952 1,392,431 4,508,892 2,053,638 13,746 1,496,268 1,388,729 9,370,262 9,461,273 186 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 15 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (a) Classification of financial assets at FVOCI Financial assets at FVOCI related to equity securities that are strategic investments not held for trading, and 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 2023 RMB’000 2022 RMB’000 462,696 463,696 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. In 2023, the Group disposed of its investments in China Railway Information Computer Engineering Co.,Ltd (the “CRICEC”). The investment cost in CRICEC amounted to RMB1,000,000, and fair value change amounting to RMB10,590,000 was recognised in FVOCI in 2023. On the disposal of the investment at consideration of RMB11,590,000, the FVOCI reserve balance amounting to RMB10,590,000 was reclassified to retained earnings and statuory surplus reserve. (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. 2023 RMB’000 2022 RMB’000 Dividends from equity investments at FVOCI recognised in profit or loss within other gains — net (Note 32) — Related to investments held at the end of the reporting period 16,285 13,121 (d) Fair value 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). 187 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 16 TERM DEPOSITS Current assets Current portion of long-term deposits Non-current assets Long term deposits 2023 RMB’000 2022 RMB’000 1,950 1,950 172,192 172,192 60,000 60,000 The original effective interest rate of term deposits was 3.25% per annum (2022: 3.84% 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 in 2007. On the acquisition date of Yangcheng Railway Business, it was measured at fair value and subsequently carried at amortised cost using an average effective interest rate of 6.54%. The balance approximated its fair value as at 31 December 2023 and 31 December 2022. 18 MATERIALS AND SUPPLIES 2023 RMB’000 221,739 32,477 34,993 318 2022 RMB’000 204,831 26,403 31,034 377 289,527 262,645 Raw materials Accessories Reusable rail-line track materials Retailing consumables 188 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 18 MATERIALS AND SUPPLIES (continued) The costs of materials and supplies consumed by the Group of RMB1,853,957,000 (2022: RMB1,556,921,000) during the year were recognised as “operating expenses”. As at 31 December 2023, no provision was provided for writing down the materials and supplies to their net realisable values (2022: Same). During the year, no provision was made, reversed and written off (2022: RMB37,000, nil and RMB3,698,000). 19 TRADE RECEIVABLES Trade receivables Including: receivables from related parties Less: provision for impairment of receivables 2023 RMB’000 2022 RMB’000 6,273,375 5,350,421 (33,823) 4,684,730 4,008,569 (28,436) 6,239,552 4,656,294 As at 31 December 2023 and 2022, the Group’s trade receivables were all denominated in RMB. The majority of the trade receivable were from state-owned railroad companies or companies in transportation industry. The passenger railroad services are usually transacted on a cash basis. The Group does not have formal contractual credit terms agreed with its customers for freight services but the trade receivables are usually settled within a period less than one year. As a result, the Group regards any receivable balance within one year determined base on transaction date being not overdue. The aging analysis of the outstanding trade receivables determined base on transaction date is as follows: 2023 RMB’000 4,823,400 1,295,753 125,069 29,153 2022 RMB’000 3,122,287 1,497,790 64,653 — 6,273,375 4,684,730 Within 1 year Over 1 year but within 2 years Over 2 years but within 3 years Over 3 years 189 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 19 TRADE RECEIVABLES (continued) The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss provision for all trade receivables. The maximum exposure to credit risk at the reporting date is the carrying value mentioned above. The Group does not hold any collateral as security. 20 PREPAYMENTS AND OTHER RECEIVABLES 2023 RMB’000 388,724 396,063 2022 RMB’000 328,999 249,558 784,787 578,557 2023 RMB’000 633,981 (1,220) 632,761 152,026 2022 RMB’000 463,529 (1,281) 462,248 116,309 784,787 578,557 Due from third parties Due from related parties Other receivables Less: provision for impairment Other receivables, net (a) Prepayments (b) 190 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 20 PREPAYMENTS AND OTHER RECEIVABLES (continued) (a) Other receivables mainly represent miscellaneous deposits and receivables arising from the course of provision of non-railway transportation services by the Group. Movements on the provision for impairment of other receivables are as follows: At 1 January Provision for impairment loss Reversal of impairment loss provision Written off of impairment loss provision At 31 December 2023 RMB’000 2022 RMB’000 1,281 530 (411) (180) 1,220 6,503 — (591) (4,631) 1,281 (b) Prepayments mainly represent the input VAT with related invoices not been received or verified and amounts paid in advance to the suppliers for utilities and other operating expenses of the Group. As at 31 December 2023, the input VAT with related invoices not been received or verified amounted to RMB129,038,000 (2022: RMB105,538,000). The carrying amounts of the Group’s prepayments and other receivables are denominated in the following currencies: 2023 RMB’000 2022 RMB’000 RMB 784,787 578,557 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. 191 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 21 CASH AND CASH EQUIVALENTS Cash at bank and on hand 1,482,463 1,299,635 (a) The carrying amounts of the cash and cash equivalents are denominated in the following currencies: 2023 RMB’000 2022 RMB’000 RMB HKD 22 SHARE CAPITAL 2023 RMB’000 2022 RMB’000 1,469,396 13,067 1,276,996 22,639 1,482,463 1,299,635 As at 31 December 2023 and 2022, 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. Authorised, issued and fully paid: Listed shares — H shares — A shares Total As at 31 December 2022 RMB’000 Movement RMB’000 As at 31 December 2023 RMB’000 1,431,300 5,652,237 7,083,537 — — — 1,431,300 5,652,237 7,083,537 192 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 23 RESERVES (a) Statutory surplus reserve and discretionary surplus reserve 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. 2023 2022 Percentage RMB’000 Percentage RMB’000 Statutory surplus reserve 10% 109,878 — — For the year ended 31 December 2023, appropriations of RMB108,819,000 to reserves of the Company were proposed by the directors (2022: nil). In 2023, as the Group disposed its investment in China Railway Information Computer Engineering Co., Ltd., the Group classified RMB10,590,000 from FVOCI reserve to retained earnings, and 10% of which amounting to RMB1,059,000 was appropriated to reserve of the Company (note 15). 193 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 23 RESERVES (continued) (b) Retained earnings and other reserves (i) Retained earnings 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) Peoples Republic of China Generally Accepted Accouting Principles (“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. (ii) Special reserve — Safety Production Fund The Group 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 Group 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: i) 1% for regular freight business; ii) 1.5% for passenger transportation, dangerous goods delivery business and other special business. The Safety Production Fund is mainly used for improving, renovating and maintaining safety protection equipment and facilities, production safety inspection, evaluation, consultation and standardization construction expenses, etc. 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. 194 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report23 RESERVES (continued) (b) Retained earnings and other reserves (continued) (ii) Special reserve — Safety Production Fund (continued) For the year 2023 and 2022, the movement of “Special reserve — Safety Production Fund” of the Group are as below: At 1 January Appropriation for retained earnings Utilisation 2023 RMB’000 50,606 159,485 (128,862) 2022 RMB’000 11,884 162,335 (123,613) At 31 December 81,229 50,606 (iii) FVOCI reserve 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. For the year 2023 and 2022, the movement of “FVOCI reserve” of the Group are as below: At 1 January Changes in fair value Transfer to retained earnings (Note 15(b)) 2023 RMB’000 181,941 10,590 (10,590) 2022 RMB’000 181,941 — — At 31 December 181,941 181,941 195 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 23 RESERVES (continued) (b) Retained earnings and other reserves (continued) (iv) Others This reserve is used to record the differences which may arise as a result of equity transaction of investment in associates but significant influence is retained and share of other reserve of associates. As at 31 December 2023, the Group had a balance of such reserves of RMB10,346,000 and RMB4,378,000 respectively (2022: RMB10,346,000 and RMB3,690,000), as explained in note 11. 24 DEFERRED INCOME 2023 RMB’000 2022 RMB’000 Government grants 702,384 747,585 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. 196 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 25 BORROWINGS 2023 Non- Total current RMB’000 RMB’000 RMB’000 Current Current RMB’000 2022 Non- current RMB’000 Total RMB’000 Bank loans 710,952 780,000 1,490,952 721,268 775,000 1,496,268 Bank borrowings mature until 2026 and weighted average annual interest rate of short-term borrowings and long-term borrowings are 2.52% and 2.56% respectively (2022: Bank borrowings mature until 2025 and weighted average annual interest rate of short-term borrowings and long-term borrowings are 2.44% and 3.16% respectively). At 31 December, the Group’s borrowings were repayable as follows: Within 1 year Between 1 and 2 years Between 2 and 5 years 2023 RMB’000 710,952 280,000 500,000 2022 RMB’000 721,268 20,000 755,000 1,490,952 1,496,268 197 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 26 TRADE AND BILL PAYABLES Trade payables (a) Bill payables (b) (a) Trade payables Payables to third parties Payables to related parties (b) Bill payables 2023 RMB’000 2022 RMB’000 2,981,832 200,000 3,025,291 500,000 3,181,832 3,525,291 2023 RMB’000 2022 RMB’000 1,182,077 1,799,755 1,203,697 1,821,594 2,981,832 3,025,291 2023 RMB’000 2022 RMB’000 Bank acceptance bills 200,000 500,000 The aging analysis of trade and bill payables was as follows: 2023 RMB’000 2,583,521 535,412 47,296 15,603 2022 RMB’000 2,052,344 1,168,873 282,537 21,537 3,181,832 3,525,291 Within 1 year Over 1 year but within 2 years Over 2 years but within 3 years Over 3 years 198 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 27 CONTRACT LIABILITIES Advances received from customers Frequent traveller program 2023 RMB’000 86,234 142,292 2022 RMB’000 77,446 95,420 228,526 172,866 In 2023, contract liabilities of RMB160,616,000 (2022: RMB99,675,000) were brought forward from prior year and recognised as revenue, of which RMB65,196,000 (2022: RMB39,780,000) were advances received from customers, and RMB95,420,000 (2022: RMB59,896,000) were frequent traveller program. 28 ACCRUALS AND OTHER PAYABLES 2023 RMB’000 2022 RMB’000 1,242,912 625,942 1,751,944 571,778 1,868,854 2,323,722 2023 RMB’000 2022 RMB’000 351,558 238,970 406,679 118,747 67,798 88,782 73,423 1,665 73,713 2,005 — 445,514 354,560 282,604 688,626 134,969 107,749 40,612 76,954 91,119 17,314 2,891 66,065 460,259 1,868,854 2,323,722 Due to third parties Due to related parties Payables to GIDC assumed by business combination Other deposits received Salary and welfare payables Party organization funds Deposits received for construction projects Other taxes payable Amounts received on behalf of Labour Union Advance received from disposal of Land use right Deposits received from ticketing agencies Employee benefits obligations Payables assumed by capital increase in FVOCI Other payables 199 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 29 AUDITORS’ REMUNERATION Auditors’ remuneration in respect of audit and non-audit services provided by the auditors for the year ended 31 December 2023 were RMB5,250,000 and nil respectively (2022: RMB5,250,000 and RMB60,000 respectively). 30 EMPLOYEE BENEFITS Wages and salaries Provision for medical, housing scheme and other employee benefits (a) Contributions to the defined contribution scheme (b) 2023 RMB’000 2022 RMB’000 6,387,951 6,180,827 1,820,372 1,272,387 1,479,628 1,224,563 9,480,710 8,885,018 (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 endowment 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. 200 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 30 EMPLOYEE BENEFITS (continued) (c) Five highest paid individuals The five individuals whose emoluments were the highest in the Group for the year include one chief executive (2022: one), four senior executives (2022: four) and no supervisor (2022: nil), whose emoluments are reflected in the analysis shown in Note 42. 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 HKD1,000,000 (2022: nil to HKD1,000,000). 31 OTHER OPERATING EXPENSES Construction costs Passenger transportation facility maintenance Passenger security inspection expenses Carriage cleaning expenses Staff accommodation expenses Train station housekeeping expenses Bunk cleaning expenses Professional expenses Administrative expenses and others 2023 RMB’000 2022 RMB’000 262,514 163,184 134,017 120,149 88,768 78,840 4,554 8,834 536,785 108,599 171,777 124,242 88,023 83,679 86,304 5,388 11,191 360,568 1,397,645 1,039,771 201 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 32 OTHER GAINS/(LOSSES) — NET Loss on disposal of fixed assets — net Government grants Interest income from banks Dividend income from FVOCI Income from compensation Impairment of materials and supplies Unwinding of interest accrued on long-term receivable Write-back of outstanding of payables Others 33 FINANCE COSTS — NET Interest expense of lease liabilities Net foreign exchange gain Interest expenses Others 2023 RMB’000 2022 RMB’000 (12,912) 88,208 33,660 16,285 523 — 21,187 6,814 (944) (15,075) 46,116 26,377 13,121 199 (37) 7,226 1,361 (19,570) 152,821 59,718 2023 RMB’000 (68,114) 363 (40,969) 3,382 2022 RMB’000 (67,903) 1,959 (13,518) (493) (105,338) (79,925) 202 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 34 INCOME TAX EXPENSE/(CREDIT) In 2023 and 2022, the applicable income tax rate of the Company was 25%. An analysis of the current year income tax credit is as follows: Current income tax Deferred income tax (Note 12) 2023 RMB’000 1,905 397,777 2022 RMB’000 2,056 (588,202) 399,682 (586,146) The tax on the Group’s profits/(loss) before tax differs from the theoretical amount that would arise using the tax rate of the home country of the Company as follows: 2023 RMB’000 2022 RMB’000 Profit/(loss) before tax 1,456,576 (2,579,793) Tax calculated at the statutory rate of 25% (2022: 25%) Effect of tax rates differentials Effect of expenses not deductible for tax purposes Effect of income not subject to tax Tax losses and temporary differences in accounting base and tax base for which no deferred tax asset was recognised Adjustments for current tax of prior periods Utilisation of previously unrecognised tax losses and temporary differences 364,144 (262) 37,798 (9,935) 4,311 3,626 — (644,948) — 48,033 (16,322) 28,584 (792) (701) Income tax expense/(credit) 399,682 (586,146) 203 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 35 EARNINGS/(LOSSES) PER SHARE The calculation of basic earnings per share is based on the net profit for the year attributable to equity holders of approximately RMB1,058,288,000 (2022: net loss, RMB1,994,665,000), divided by the weighted average number of ordinary shares outstanding during the year of: 7,083,537,000 shares (2022: 7,083,537,000 shares). There were no dilutive potential ordinary shares during both years. 2023 2022 Earnings/(losses) attributable to owners of the Company (RMB’000) 1,058,289 (1,994,665) Weighted average number of ordinary shares in issue 7,083,537,000 7,083,537,000 Basic and diluted earnings/(losses) per share (RMB) 0.15 (0.28) 36 DIVIDEND At the meeting of the directors held on 28 March 2024, the directors proposed a final dividend of RMB0.07 per ordinary share for the year ended 31 December 2023 (2022: nil), which is subject to the approval by the shareholders in general meeting. This proposed dividend was not reflected as a dividend payable in the Group’s and the Company’s financial statements as at 31 December 2023. 204 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 37 CASH FLOW INFORMATION (a) Reconciliation from profit/loss before income tax to net cash generated from operations: Profit/(loss) before income tax: Adjustments for: Depreciation of fixed assets Depreciation of right-of-use assets (Note 8) Impairment of fixed assets (Note 6) Derecognition of land-use right Provision for impairment of materials and supplies (Note 32) 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 32) Impairment of receivables Write-back of outstanding of payables (Note 32) Amortisation of deferred income Interest expense on lease liabilities (Note 33) Interest paid Interest income Operating profit/(loss) before working capital changes Increase in trade receivables (Increase)/decrease in materials and supplies Increase in prepayments and other receivables Decrease in long-term receivable (Decrease)/increase in trade payables (Decrease)/increase in accruals and other payables 2023 RMB’000 2022 RMB’000 1,456,576 (2,579,793) 1,864,090 68,402 120,819 (93,440) — 1,664 22,954 (23,454) (16,285) 5,506 (6,814) (47,412) 68,114 40,968 (23,136) 3,438,552 (1,582,850) (26,882) (182,823) 16,675 (343,458) (200,125) 1,836,419 68,400 — (18,664) 37 48,849 23,595 (52,167) (13,121) 4,093 (1,361) (37,000) 67,903 13,518 (11,514) (650,806) (264,805) 8,901 (60,271) 15,220 412,581 347,724 Net cash generated from/(used in) operations 1,119,089 (191,456) 205 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 37 CASH FLOW INFORMATION (continued) (b) In the cash flow statement, proceeds from disposal of fixed assets comprise: Net book amount (Note 6) Loss on disposal of fixed assets and costs on repairs 2023 RMB’000 67,094 (1,664) 2022 RMB’000 163,832 (48,849) Proceeds from disposal of fixed assets 65,430 114,983 (c) Net debt reconciliation This section sets out an analysis of net debt and the movements in net debt for each of the periods presented. Borrowings (Note 25) Lease liabilities (Note 8) Net debt 2023 RMB’000 2022 RMB’000 1,490,952 1,392,431 1,496,268 1,388,729 2,883,383 2,884,997 Liabilities from financing activities Borrowings RMB’000 Leases RMB’000 Total RMB’000 Net debt as at 1 January 2022 Financing cash flows Interest accrued — 1,482,750 13,518 1,384,084 (63,258) 67,903 1,384,084 1,419,492 81,421 Net debt as at 31 December 2022 1,496,268 1,388,729 2,884,997 Financing cash flows Interest accrued (46,285) 40,969 (64,412) 68,114 (110,697) 109,083 Net debt as at 31 December 2023 1,490,952 1,392,431 2,883,383 206 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 38 CONTINGENCY There were no significant contingent liabilities as at 31 December 2023 and 31 December 2022 and up to the date of approval of these financial statements. 39 COMMITMENTS Capital commitments As at 31 December 2023 and 31 December 2022, the Group had the following capital commitments: Contracted but not provided for Authorised but not contracted for 2023 RMB’000 61,359 368,641 2022 RMB’000 47,025 272,975 430,000 320,000 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. 40 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) Principal subsidiaries See note 10 for the principal subsidiaries. (b) The single largest shareholder that holds 37.12% equity interest of the Company Guangzhou Railway Group is the single largest shareholder that holds 37.12% equity interest of the Company. 207 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 40 RELATED PARTY TRANSACTIONS (continued) (c) Associates See note 11 for the associates. (d) Other related parties (i) Guangzhou Railway Group and its subsidiaries Name of related parties Relationship with the Company Single largest shareholder and its subsidiaries Guangzhou Railway Group Single largest shareholder that holds 37.12% equity interest of the Company Subsidiary of the single largest shareholder Guangzhou Railway Real Estate Co., Ltd. Subsidiary of the single largest shareholder Guangdong Railway Company Limited. 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 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 Xiashen Railway Guangdong 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 Subsidiary of the single largest shareholder Company Guangzhou Railway Technology Development Co., Ltd. Guangzhou Anmao Railway Consulting Construction Company Subsidiary of the single largest shareholder Subsidiary of the single largest shareholder 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. Hainan Railway Company Limited Jiangxi Shenzhen Railway (Guangdong) Company Limited 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 Subsidiary of the single largest shareholder 208 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report40 RELATED PARTY TRANSACTIONS (continued) (d) Other related parties (continued) (ii) Relationship with CSRG and other railway companies On 14 March 2013, pursuant to the approval, the previous controlling entity of Guangzhou Railway Group, Ministry of Railways (“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 2023 and 2022 for reference. Unless otherwise specified, the transactions with CSRG Group disclosed below have excluded transactions undertaken with Guangzhou Railway Group and its subsidiaries. 209 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report40 RELATED PARTY TRANSACTIONS (continued) (e) 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 associates,Guangzhou Railway Group and its subsidiaries: 2023 RMB’000 2022 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) 3,775,837 3,557,523 Provision of train transportation services to associated companies (i) 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 Guangzhou Railway Group’s subsidiaries (iii) Other services Sales of materials and supplies to Guangzhou Railway Group and its subsidiaries (iv) Sales of materials and supplies to associated companies (iv) Others 2,870 1,685 1,345,046 1,158,823 809,474 768,443 5,933,227 5,486,474 119,883 5,436 29,502 154,821 85,892 4,796 — 90,688 Services received and purchases made Transportation related services Provision of train transportation services by Guangzhou Railway Group and its subsidiaries (i)(vi) 721,819 590,669 Provision of train transportation services by associated companies (i)(vi) Costs settled by CSRG for railway network usage and related services provided by Guangzhou Railway Group and its subsidiaries (ii) 3,688 2,460 3,910,428 3,093,132 4,635,935 3,686,261 210 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 40 RELATED PARTY TRANSACTIONS (continued) (e) 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 associates,Guangzhou Railway Group and its subsidiaries: (continued) 2023 RMB’000 2022 RMB’000 Other services Provision of repair and maintenance services by Guangzhou Railway Group and its subsidiaries (iv) 509,436 Provision of repair and maintenance services by associated companies (iv) Purchase of materials and supplies from Guangzhou Railway Group and its subsidiaries (iv) Provision of construction services by Guangzhou Railway Group and its subsidiaries (v) Provision of construction services by associated companies (v) 4,231 895,263 143,995 117,409 434,708 11,759 516,740 131,370 41,789 1,670,334 1,136,366 (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) The amount recognised in 2023 does not include the payment of short-term leases related to the lease of passenger trains paid to Guangzhou Railway Group amounting to RMB344,150,000 (2022: RMB266,981,000). 211 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 40 RELATED PARTY TRANSACTIONS (continued) (e) 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 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). 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: Provision of services and sales of goods Transportation related services Provision of train transportation services to CSRG Group (i) Revenues collected by CSRG for services provided to CSRG Group (ii) Revenues from railway operation service provided to CSRG Group (iii) Other services Provision of repairing services for cargo trucks and other services to CSRG Group (ii) Provision of apartment leasing services to CSRG Group (iv) Others 2023 RMB’000 2022 RMB’000 51,838 37,528 2,594,242 2,007,393 2,556,324 2,165,015 5,202,404 4,209,936 823,325 514,325 — 1,317 2,762 1,385 824,642 518,472 212 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 40 RELATED PARTY TRANSACTIONS (continued) (e) 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) Services received and purchases made Transportation related services Provision of train transportation services by CSRG Group (i)(v) Cost settled by CSRG for services provided by CSRG Group (ii) (v) 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 (vi) 2023 RMB’000 2022 RMB’000 22,285 33,879 1,802,763 1,481,845 1,825,048 1,515,724 20,601 36,151 17,640 74,392 41,394 25,260 — 66,654 213 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 40 RELATED PARTY TRANSACTIONS (continued) (e) 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) (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. (iv) The prices are determined based on mutual negotiation between the contracting parties with reference to actual costs incurred. (v) (vi) The amount recognised in 2023 does not include the payment of short-term leases related to the lease of passenger trains and freight trains to CSRG amounting to RMB1,777,609,000 (2022: RMB1,872,352,000). In 2023, Shenzhen Longgang Urban Renewal and Land Preparation Bureau and Shenzhen Longgang Administration of Planning and Natural Resources Bureau purchased land from the Group on behalf of Guangzhou Railway Group, and the Group recognized a gain on disposal of such assets of RMB93,440,100. 214 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report40 RELATED PARTY TRANSACTIONS (continued) (e) 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) (III) Revenues collected and settled through the CSRG: Passenger transportation Freight transportation Other transportation related services (IV) Lease — as lessee: 2023 RMB’000 10,612,449 1,633,074 2,399 2022 RMB’000 6,584,255 1,412,364 5,063 12,247,922 8,001,682 In 2023, the depreciation expense of the right-of-use assets was RMB16,246,000 (2022: RMB16,246,000), the interest expense of lease liabilities was RMB68,091,000 (2022: RMB64,151,000), and the actual payment to Guangzhou Railway Group was RMB64,151,000 (2022: RMB63,019,000). The payment of short-term leases to related parties are shown in notes 40(e)(I)(v) and 40(e) (II)(vi). (f) Key management compensation The compensation paid or payable to key management for employee services is shown in note 42. 215 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 40 RELATED PARTY TRANSACTIONS (continued) (g) As at 31 December 2023 and 31 December 2022, the Group had the following material balances maintained with related parties: (I) Material balances with associates, Guangzhou Railway Group and its subsidiaries: Trade receivables — Guangzhou Railway Group (i) — Subsidiaries of Guangzhou Railway Group (i) — Associates Less: Provision for impairment Prepayments and other receivables — Guangzhou Railway Group — Subsidiaries of Guangzhou Railway Group — Associates Less: Provision for impairment Prepayments for fixed assets and construction-in-progress — Subsidiaries of Guangzhou Railway Group (ii) Trade and bills payables — Guangzhou Railway Group (i) — Subsidiaries of Guangzhou Railway Group (ii) — Associates 2023 RMB’000 2022 RMB’000 4,312,911 1,804,644 2,506,833 1,434 (25,360) 3,211,496 545,889 2,665,218 389 (19,493) 4,287,551 3,192,003 144,621 9,991 132,828 1,802 (757) 143,864 26,951 26,951 1,754,399 25,198 1,700,257 28,944 87,411 7,505 79,843 63 (116) 87,295 29,459 29,459 2,020,174 5,138 1,961,015 54,021 216 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 40 RELATED PARTY TRANSACTIONS (continued) (g) As at 31 December 2023 and 31 December 2022, the Group had the following material balances maintained with related parties: (continued) (I) Material balances with associates, Guangzhou Railway Group and its subsidiaries: (continued) 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) 2023 RMB’000 2022 RMB’000 645,418 31,643 341,751 272,024 1,356 1,180 176 620,918 160,136 447,001 13,781 626,062 18,411 234,734 372,917 5,632 4,977 655 500,133 409 474,289 25,435 (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 2023, all the balances maintained with related parties were unsecured, non-interest bearing and were repayable on demand. 217 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report40 RELATED PARTY TRANSACTIONS (continued) (g) As at 31 December 2023 and 31 December 2022, the Group had the following material balances maintained with related parties: (continued) (II) Material balances with CSRG Group: Due from CSRG Group — Trade receivables Less: Impairment of receivables — Other receivables Less: Impairment of receivables As at 31 December 2023 RMB’000 2022 RMB’000 1,037,510 (4,676) 797,073 (3,439) 1,032,834 793,634 251,441 (1,469) 162,147 (3) 249,972 162,144 Due to CSRG Group — Trade payables and payables for fixed assets and construction-in-progress — Other payables 160,897 5,024 221,833 71,645 As at 31 December 2023, all the balances maintained with CSRG Group were unsecured, non- interest bearing and were repayable on demand. 218 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 41 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 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 Materials and supplies Trade receivables Prepayments and other receivables Current portion of long-term deposits Cash and cash equivalents Total assets As at 31 December 2023 2022 22,734,154 2,759,301 561,178 29,450 281,255 62,031 132,201 895,428 32,450 460,978 60,000 16,744 23,368,599 2,800,681 1,112,582 35,341 281,255 62,031 132,201 1,295,693 41,187 461,978 60,000 12,232 28,025,170 29,663,780 289,515 6,237,999 1,176,667 1,950 1,482,463 258,164 4,652,530 936,605 172,192 1,299,634 9,188,594 7,319,125 37,213,764 36,982,905 219 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 41 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 Borrowings Lease liabilities Deferred income related to government grants Current liabilities Trade and bill payables Contract liabilities Borrowings Payables for fixed assets and construction-in- progress Dividends payable Current portion of lease liabilities Accruals and other payables Other current liabilities Total liabilities Note 2023 2022 As at 31 December (a) (a) (a) 7,083,537 11,564,462 3,472,256 4,622,833 7,083,537 11,564,462 3,331,067 3,658,071 26,743,088 25,637,137 780,000 1,326,892 702,384 775,000 1,324,231 747,585 2,809,276 2,846,816 3,172,390 228,526 710,952 1,931,405 869 65,539 1,530,778 20,941 3,495,832 172,812 721,268 2,053,638 870 64,498 1,980,291 9,743 7,661,400 8,498,952 10,470,676 11,345,768 Total equity and liabilities 37,213,764 36,982,905 The balance sheet of the Company was approved by the Board of Directors on March 28, 2024 and was signed on its behalf. Wei Hao Director Hu Lingling Director 220 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report 41 BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY (continued) (a) Reserve movement of the Company: Share premium Other reserves Retained earnings At 1 January 2022 Total comprehensive income Loss for the year Other comprehensive income Special reserve — Safety Production Fund Appropriation Utilisation Appropriations from retained earnings Share of reserves of associates 11,564,462 — 3,288,655 — — — — — — — — — — 38,722 162,335 (123,613) — 3,690 5,578,335 (1,920,264) (1,920,264) — — — — — At 31 December 2022 11,564,462 3,331,067 3,658,071 At 1 January 2023 Total comprehensive income Profit for the year Other comprehensive income Special reserve — Safety Production Fund Appropriation Utilisation Appropriations from retained earnings Transfer from FVOCI reserve to retained earnings Share of reserves of associates 11,564,462 — — — — — — — — — 3,331,067 10,590 — 10,590 30,623 159,485 (128,862) 108,819 3,658,071 1,064,050 1,064,050 — — — — (108,819) (9,531) 688 9,531 — At 31 December 2023 11,564,462 3,472,256 4,622,833 221 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report 42 BENEFITS AND INTERESTS OF DIRECTORS (a) Directors’, supervisors’ and senior executives’ emoluments For the year ended 31 December 2023 Emoluments paid or receivable in respect of a person’s services as a director, whether of the Company or its subsidiary undertaking Fee RMB’000 Salary RMB’000 Discretionary bonuses RMB’000 Housing allowance RMB’000 Allowances and benefits in kind RMB’000 Employer’s contribution to a retirement benefit scheme RMB’000 Remunerations paid or receivable in respect of accepting office as director RMB’000 Total RMB’000 — — — — — 69 112 83 112 — — — — — — — — — — — — — — 384 — — — — — — — — — — — — 101 175 326 554 384 384 384 384 — 20 — — — — — — — — — — — — 50 30 21 9 23 23 19 19 — 44 — — — — — — — — — — — — 11 22 41 53 48 48 48 48 — — — — — — — — — — — — — — — — — — — — — — — 60 — — — — — — — — — — — — 14 35 66 66 60 63 66 66 — — — — — — — — — — — — — — — — — — — — — — — 507 — — — 69 112 83 112 — — — — — 176 262 454 682 515 518 518 518 Name Directors Wu, Yong Zhou, Shangde Guo, Jiming (i) Hu, Dan Zhang, Zhe Ma, Shiheng (ii) Tang, Xiaofan Wang, Qin (iii) Qiu, Zilong Supervisors Lei, Chunliang (ii) Huang, Chaoxin (iii) Chen, Shaohong Xiang, Lihua (iv) Meng, Yong Huang, Songli (v) Song, Min (iii) Lin, Wensheng Chief Executive Hu, Lingling Senior Executives Luo, Jiancheng Tang, Xiangdong Luo, Xinpeng Gong, Yuwen Resigned from the position in October 2023. (i) (ii) Resigned from the position in June 2023. (iii) Appointed the position of supervisor in June 2023. (iv) Resigned from the position in December 2023. (v) Resigned from the position in October 2023. 222 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report42 BENEFITS AND INTERESTS OF DIRECTORS (continued) (a) Directors’, supervisors’ and senior executives’ emoluments (continued) For the year ended 31 December 2022 Emoluments paid or receivable in respect of a person’s services as a director, whether of the Company or its subsidiary undertaking Fee RMB’000 Salary RMB’000 Discretionary bonuses RMB’000 Housing allowance RMB’000 Allowances and benefits in kind RMB’000 Employer’s contribution to a retirement benefit scheme RMB’000 Remunerations paid or receivable in respect of accepting office as director RMB’000 Total RMB’000 — — — — — 145 112 112 — — — — — — — — — — — — 342 — — — — — — — — — — 342 293 485 341 342 341 342 — 20 — — — — — — — — — — 30 27 21 28 29 26 26 — 41 — — — — — — — — — — 45 39 50 47 47 47 47 — — — — — — — — — — — — — — — — — — — — 57 — — — — — — — — — — 54 63 63 57 60 63 60 — — — — — — — — — — — — — — — — — — — — 460 — — — 145 112 112 — — — — 471 422 619 473 478 477 475 Name Directors Wu, Yong Zhou, Shangde (i) Guo, Jiming Hu, Dan Zhang, Zhe Ma, Shiheng Tang, Xiaofan Qiu, Zilong Supervisors Lei, Chunliang Chen, Shaohong Xiang, Lihua Meng, Yong Huang, Songli (ii) Lin, Wensheng Chief Executive Hu, Lingling Senior Executives Luo, Jiancheng Tang, Xiangdong Luo, Xinpeng Gong, Yuwen (i) Appointed the position of director in June 2022. (ii) Appointed the position of supervisor in June 2022. 223 GUANGSHEN RAILWAY 2023 • ANNUAL REPORTAnnual report42 BENEFITS AND INTERESTS OF DIRECTORS (continued) (a) Directors’, supervisors’ and senior executives’ emoluments (continued) During the year ended 31 December 2023, 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 (2022: nil). (b) Director’s retirement benefits The retirement benefits paid to directors during the year end of 2023 by a defined contribution pension plan (basic endowment insurance and enterprise annuity) in respect of their services as directors of the Company and its subsidiaries are RMB60,000 (2022: RMB57,000) 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 (2022: nil). (c) Directors’ termination benefits During the year ended 31 December 2023, no payments to the directors of the Company as compensation for the early termination of the appointment (2022: nil). (d) Consideration provided to third parties for making available directors’ services During the year ended 31 December 2023, the Company did not provide to third any party for making available director’s services (2022: 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 2023, no loans, quasi-loans or other dealings in favour of directors of the Company, controlled bodies corporate by and connected entities with such directors (2022: nil). (f) Directors’ material interests in transactions, arrangements or contracts Except the transactions with Guangzhou Railway Group as disclosed in note 40, 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 (2022: nil). 224 NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2023(All amounts expressed in Renminbi unless otherwise stated)Annual report2 0 2 3 Address: No. 1052, Heping Road, Shenzhen Postcode: 518010 Tel: (86)-755-25587920 Fax: (86)-755-25591480 Website: www.gsrc.com 2 0 2 3

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