Exhibit 99.1
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. 2021 ANNUAL RESULTS ANNOUNCEMENT The Board of Directors (the “Board”) of Guangshen Railway Company Limited (the “Company”) is pleased to announce the audited results of the Company and its subsidiaries for the year ended 31 December 2021. This announcement, containing the full text of the 2021 Annual Report of the Company, complies with the relevant requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“Hong Kong Stock Exchange”) in relation to information to accompany preliminary announcement of annual results. Both the Chinese and English versions of this results announcement are available on the website of the Company (www.gsrc.com) and the HKEXnews website of the Hong Kong Stock Exchange (www.hkexnews.hk). The Company’s 2021 Annual Report will be dispatched to holders of H shares and published on the website of the Company and the HKEXnews website of the Hong Kong Stock Exchange in due course. By Order of the Board Wu Yong Chairman Shenzhen, the PRC 30 March 2022 As at the date of this announcement, the Board consists of： Executive Directors Non-executive Directors Independent Non-executive Directors Wu Yong Guo Jiming Frederick Ma Si-Hang Hu Lingling Hu Dan Tang Xiaofan
Important Notice1. The Committee, board of Directors, directors Supervisors (“Director(s)”) and senior of the management Company (the of the “Board”), Company the warrant Supervisory that the misrepresentations, contents of this misleading annual report statements are true, or material accurate omissions and complete, in this annual and there report, are and no jointly and severally accept the related legal responsibility.2. report All Directors . of the Company attended the meeting of the Board to consider this annual 3. unqualified PricewaterhouseCoopers audit opinions issued . an audit report for the Company with standardized and 4. Wu Xinpeng, Yong, Chief Chairman Accountant, of the and Board Liu Qiyi, of the Chief Company, of Finance Hu Department Lingling, General hereby Manager, warrant that Luo the financial statements contained in this annual report are true, accurate and complete.5. Capitalization Plan for profits approved distribution by the Board for the through reporting resolution period or plan for Common Reserve In consideration of both the Company’s profitability in the past two years and the capital requirements for maintaining the normal operation of the Company, the Board of the Company proposed not to make profit distribution or capitalize capital reserve into share capital for 2021. This proposal has been considered and approved at the eleventh meeting of the ninth session of Board of the Company, and is subject to consideration and approval at the 2021 Annual General Meeting of the Company.6. Declaration of risks with respect to forward-looking statements Forward-looking statements, including future plans and development strategies contained in this annual report, do not constitute any actual commitments to the investors of the Company. Investors are advised to consider the risks.7. shareholders Is there any and non their -regular related appropriation parties? of the Company’s fund by its controlling No8. external Is there guarantee any violation by the of the Company? decision-making procedures with respect to the provision of No9. completeness Whether more of than the half annual of report the directors disclosed cannot by the guarantee Company the authenticity, accuracy and No10. 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.
目錄TABLE OF CONTENTS
Chapter 1 Definitions 004 Chapter 2 Company Profile and Major Financial 006 Indicators Chapter 3 Report of the Directors (Including 011 Management Discussion and Analysis) Chapter 4 Corporate Governance 034 Chapter 5 Environmental and Social 074 Responsibilities Chapter 6 Matters of Importance 075 Chapter 7 Changes in Shares Capital and 084 Particulars of Shareholders Chapter 8 Information Regarding Preference 091 Shares Chapter 9 Information Regarding Bonds 092 Chapter 10 Financial Statements 093List Available of Documents for I. Accounting statements signed and sealed by the chairman, general manager, Inspection chief accountant and financial director of the Company; II. The original audit report with the seal of the accounting firm and the signature and seal of the certified public accountant; III. The originals of all corporate documents and announcements publicly disclosed during the reporting period; IV. Annual reports published in the stock markets in Shanghai and the U.S. (Form 20-F).Place to maintain such documents: Board secretariat of the Company
Chapter 1DefinitionsIn this report, unless the context otherwise requires, the expressions stated below will have the following meanings:Company Guangshen Railway Company LimitedReporting period, this 12 months from 1 January to 31 December 2021 period, this year Same period last year 12 months from 1 January to 31 December 2020A Share(s) 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 H Share(s) 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 ADS(s) U.S. dollar-denominated American Depositary Shares representing ownership of 50 H Shares issued by trustees in the United States under the authorization of the Company PRC The People’s Republic of China CSRC The China Securities Regulatory Commission SSRB The Shenzhen Securities Regulatory Bureau of the China Securities Regulatory Commission SSE The Shanghai Stock Exchange SEHK The Stock Exchange of Hong Kong Limited SFO The Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) Listing Rules The Rules Governing the Listing of Securities on SEHK and/or the listing rules of SSE (as the case may be) Articles The Articles of Association of the Company Company Law The Company Law of the PRCSecurities Law The Securities Law of the PRC CSRG China State Railway Group Co., Ltd.GRGC China Railway Guangzhou Group Co., Ltd., the largest shareholder of the Company004 005
GUANGSHEN RAILWAY 2021 ANNUAL REPORTGZIR Guangdong Guangzhu Intercity Rail Transportation Company Limited WGPR Wuhan-Guangzhou Passenger Railway Line Co., Ltd.GSHER Guangzhou-Shenzhen-Hong Kong Express Rail Link Company Limited GZR Guangzhou-Zhuhai Railway Company Limited XSR Xiamen-Shenzhen Railway Company Limited GDR Guangdong Railway Company Limited GGR Guiyang-Guangzhou Railway Company Limited NGR Nanning-Guangzhou Railway Company Limited PRDIR Guangdong Pearl River Delta Inter-city Railway Traffic Company Limited MZR MaoZhan Railway Company Limited SMR Guangdong Shenmao Railway Company Limited MSR Guangdong Meizhou-Shantou Passenger Railway Line Company Limited GSR Ganzhou-Shenzhen Railway (Guangdong) Company Limited
Chapter 2Company Profile and Major Financial IndicatorsI. GENERAL INFORMATION OF THE COMPANY(1) Company InformationChinese name ?????????? Chinese name abbreviation ????English name Guangshen Railway Company Limited Legal representative of the Company Wu Yong(2) Contact Person and Contact InformationCompany Secretary Representative of Securities AffairsName Tang Xiangdong Deng YanxiaNo. 1052 Heping Road, Luohu District, No. 1052 Heping Road, Luohu District, Address Shenzhen, Guangdong Province Shenzhen, Guangdong Province Tel. (86) 755-25588150 (86) 755-25588150 Fax. (86) 755-25591480 (86) 755-25591480 E-mail ir@gsrc.com ir@gsrc.com(3) Basic InformationRegistered Address No. 1052 Heping Road, Luohu District, Shenzhen, Guangdong Province Change of Registered Address in the Past None Place of Business No. 1052 Heping Road, Luohu District, Shenzhen, Guangdong Province Postal Code of the Place of Business 518010 Company Website http://www.gsrc.com E-mail ir@gsrc.com(4) Places for Information Disclosure and Reserve AddressNames and websites of the newspapers for China Securities Journal: https://www.cs.com.cn the disclosure of annual reports by the Securities Times: http://www.stcn.com Company Shanghai Securities News: https://www.cnstock.com Securities Daily: http://www.zqrb.cn Websites of stock exchanges for the disclose SSE: http://www.sse.com.cn of annual reports by the Company SEHK: http://www.hkexnews.hk U.S. Securities and Exchange Commission: https://www.sec.gov Reserve address of annual report No. 1052 Heping Road, Luohu District, Shenzhen, Guangdong Province006 007
GUANGSHEN RAILWAY 2021 ANNUAL REPORT(5) Share Information of the CompanyType of Shares Stock Exchange Stock Short Name Stock Code A Shares SSE ???? 601333 H Shares SEHK GUANGSHEN RAIL 00525 ADS (note) — — GSHHYNote: From 22 October 2021, the ADSs of the Company were no longer traded on the over-the-counter (OTC) market in the U.S.(6) Other Relevant InformationAuditor engaged Name PricewaterhouseCoopers Zhong Tian LLP by the Company Office Address 11/F PricewaterhouseCoopers Center, 2 Corporate Avenue, 202 (Domestic) Hu Bin Road, Huangpu District, Shanghai, China Name of signing Yao Wenping, Liu Jingping auditors Auditor engaged Name PricewaterhouseCoopers by the Company Office Address 22nd Floor, Prince’ s Building, Central, Hong Kong (Overseas) Legal advisor as to Name Jia Yuan Law Offices PRC law Office Address Room 2511, Rongchao Economic and Trade Center, No. 4028, Jintian Road, Futian District, Shenzhen Legal advisor as to Name Jingtian & Gongcheng Hong Kong law Office Address 32/F, Edinburgh Tower, The Landmark, 15 Queen’s Road Central, Central, Hong Kong Legal advisor as to Name DLA Piper United States law Office Address 17/F, Edinburgh Tower, The Landmark, 15 Queen’s Road Central, Central, Hong Kong Registrar for Name China Securities Depository and Clearing Corporation Limited A Shares Shanghai Branch Office Address 36th Floor, China Insurance Building, No. 166, Lujiazui East Road, Pudong New District, Shanghai Registrar for Name Computershare Hong Kong Investor Services Limited H Shares Office Address Rooms 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’ s Road East, Wan Chai, Hong Kong Depository Name JPMorgan Chase Bank, N.A.Office Address 13th Floor, No. 4 New York Plaza, New York, USAPrincipal banker Name Construction Bank of China Shenzhen Branch Jiabin Road Sub-branch Office Address 1st to 4th Floors, Jinwei Building, Jiabin Road, Shenzhen, China
II. COMPANY PROFILEOn 6 March 1996, the Company was registered and established in Shenzhen, the PRC in accordance with the Company Law.In May 1996, the Company issued H Shares and ADSs in Hong Kong and the United States, respectively. In December 2006, the Company issued A Shares in Shanghai. In January 2007, the Company used the proceeds from the issue of A Shares to acquire the railway of Guangzhou-Pingshi section, taking the coverage of the Company’s operations into the national trunk line networks. So far, the Company is the only PRC railway transportation enterprise which has issued securities in Shanghai, Hong Kong and the United States.The Company is mainly engaged in the railway passenger and freight transportation businesses, the Hong Kong Through Train passenger services in cooperation with MTR Corporation Limited, and management services for commissioned transportation for other railway companies in the PRC. The Company is also engaged in the provision of integrated services in relation to railway facilities and technology, commercial trading and other industrial businesses that are consistent with the Company’s objectives.The Shenzhen-Guangzhou-Pingshi Railway, which is operated solely and independently by the Company, runs 481.2 kilometers long and connects the entire Guangdong Province vertically. The Guangzhou-Pingshi Railway is the southern part of Beijing-Guangzhou Railway, forming an aorta connecting northern and southern China; whereas the Guangzhou-Shenzhen Railway is one of the two railway passways from mainland China to Hong Kong, linking with the Beijing-Guangzhou, Beijing-Kowloon, Sanshui-Maoming, Pinghu-Nantou and Pinghu-Yantian lines, as well as with the Xiamen-Shenzhen Railway, Guangzhou-Dongguan-Shenzhen Intercity Railway, Ganzhou-Shenzhen 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.008 009
GUANGSHEN RAILWAY 2021 ANNUAL REPORTFreight 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 and GSR, where such railway operation service has also become a new area of business growth for the Company. With the successive completion and commencement of operation of a series of high-speed railways and inter-city railways in the “Guangdong-Hong Kong-Macau Greater Bay Area”, the geographical coverage of the Company’s railway operation services will be further expanded.III. MAJOR ACCOUNTING DATA AND FINANCIAL INDICATORS FOR THE PAST FIVE YEARS (Unit: RMB thousand)Year-on-year increase/ decrease Income items 2021 2020 (%) 2019 2018 2017Total revenue 20,206,157 16,349,366 23.59 21,178,351 19,828,018 18,331,422 Total operating expenses 21,574,642 18,186,790 18.63 20,076,414 18,658,213 16,932,587 Loss from operations 1,193,154 652,262 82.93 1,072,841 1,062,253 1,350,358 Loss before tax 1,249,586 690,745 80.90 1,009,092 1,068,800 1,347,132 Loss after tax 973,963 558,100 74.51 747,964 779,034 1,011,768 Consolidated loss attributable to shareholders 973,119 557,876 74.43 748,439 784,059 1,015,361 Basic loss per share (RMB per share) 0.14 0.08 75.00 0.11 0.11 0.14 Loss per ADS (RMB/Unit) 6.87 3.94 74.37 5.28 5.53 7.17
Increase/ decrease as at the end of the year compared to the end At the end At the end of last At the end At the end At the end Assets and liabilities of 2021 of 2020 year (%) of 2019 of 2018 of 2017Total assets 37,403,422 36,780,453 1.69 36,893,133 35,402,237 33,994,238 Total liabilities 10,198,986 8,624,284 18.26 7,753,852 6,585,908 5,337,157 Shareholders’ equity interests (excluding interests of minor shareholders) 27,241,949 28,192,838 (3.37) 29,175,726 28,852,299 28,684,677 Net assets per share (RMB per share) 3.85 3.98 (3.27) 4.12 4.07 4.05IV. DIFFERENCES IN ACCOUNTING DATA UNDER CHINESE AND INTERNATIONAL ACCOUNTING STANDARDS1⁄2 Applicable ? Not applicableV. ITEMS MEASURED AT FAIR VALUE (Unit: RMB thousand)Impact on the Change in the profit for the Item Opening balance Closing balance current period current periodFinancial assets at fair value through other comprehensive income 377,631 463,696 86,065 9,802 Total 377,631 463,696 86,065 9,802010 011
GUANGSHEN RAILWAY 2021 ANNUAL REPORTChapter 3Report of the Directors (Including Management Discussion and Analysis)ChairmanI. CHAIRMAN’S STATEMENTDear shareholders,On behalf of the Board, I am pleased to present the audited operating results of the Company for 2021, and hereby extend my sincere gratitude to all the shareholders for your concern and support for the Company!(1) Business review2021 is the first year for China’s new journey to comprehensively build a modern socialist country and the 14th Five-Year Plan. Under the strong leadership of the Central Committee of the Communist Party of China (CPC) with Comrade Xi Jinping as the core, the Board and the management of the Company worked together to lead the cadres and workers to fully implement the decisions and deployments of the CPC Central Committee, the State Council and the competent industry authorities on railway-related work under the guidance of Xi Jinping’s Thought on Socialism with Chinese Characteristics for a New Era, in the spirit of General Secretary Xi Jinping’s important instructions on railway-related work and under the strong political driving forces of the 100th anniversary of the founding of the CPC and the study and education of the party’s history, to bravely undertake the historical mission of building up China’s strength in transportation with railway as the priority. The Company exerted continued efforts in strengthening the foundation and meeting the standards, improving quality and efficiency, saving costs and reducing consumption, deepened the structural reform on the supply side of railway transportation, deeply implemented the business strategy of replenishing passengers with goods, strongly and effectively responded to the multiple challenges brought about by the epidemic, floods and market changes, and strived to promote the high-quality development of the Company, thereby enabling the Company to achieve transportation safety and production and operation stability, and further enhance the transportation guarantee capacity.
In 2021, despite that the Company’s passenger transportation business continued to be affected by the COVID-19 epidemic, the Company accurately carried out passenger and cargo transportation under the normalization of epidemic prevention and control, continued to implement in depth the activities and campaigns to boost the capacity of its freight transportation and the quality of its passenger transportation services, and vigorously implemented the business strategy of replenishing passengers with goods, thereby striving to improve the operation capacity of railway transportation services. The Company recorded a passenger delivery volume of 40,778,200 people, representing a year-on-year decline of 4.84%, while its freight delivery volume amounted to 18,836,500 tonnes, representing a year-on-year increase of 15.75%. Additionally, the Company recorded an operating revenue of RMB20.206 billion, representing a year-on-year increase of 23.59%; consolidated loss attributable to shareholders amounted to RMB973 million, representing a year-on-year increase of 74.43%; and its basic loss per share amounted to RMB0.14.Throughout 2021, the Board duly performed its duties under the Articles. With their meticulous and conscientious efforts, all Directors strived to enhance the Company’s corporate governance and regulate its operations management. During the year, the Company convened 1 general meeting, 5 Board meetings and 6 Audit Committee meetings, at which the Company made sound decisions in relation to important matters of the Company, such as the Company’s profit distribution, financial budget, production and operation, connected transactions, establishment of systems, changes of Directors and Supervisors, and appointments of senior management so as to enhance the Company’s continuous development.The Company has always strived to enhance its enterprise value, where it persists in ensuring a long-term and stable cash dividend distribution policy, and safeguarding an ongoing favorable return to its shareholders. Save for 2020 when no cash dividend was declared due to the impact of the COVID-19 epidemic, 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 and a dividend payout ratio of approximately 57.77%.(2) ProspectsShareholders 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 2022 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.012 013
GUANGSHEN RAILWAY 2021 ANNUAL REPORT2022 is the year to hold the 20th National Congress of the CPC and an important year for the 14th Five-Year Plan. Guided by Xi Jinping’s Thought on Socialism with Chinese Characteristics for a New Era, the Company will fully put into practice the spirit of the 19th National Congress of the CPC, the 19th Plenary Sessions and the Central Economic Work Conference, as well as the spirit of General Secretary Xi Jinping’s series of important instructions on railway work, carry forward the great spirit of party building, adhere to the general tone of seeking progress while maintaining stability, completely, accurately and fully implement the new development philosophy, consciously serve and integrate into the new development pattern, further focus on the targets and tasks in respect of building up China’s strength in transportation with railway as the priority, and coordinate epidemic prevention and control and railway transportation, make overall plans for development and safety, deepen the structural reform on the supply side of railway transportation, maintain the sound momentum of the Company in terms of transportation safety and production and operation stability, exerted continued efforts to strengthen the foundation and meet the standards, improve quality and efficiency, save costs and reduce consumption, and ensure the quality of services in particular to provide support for the work related to “six stables (??)” (namely stable employment, stable finance, stable foreign trade, stable foreign investment, stable investment and stable expectations) and “six guarantees (??)” (namely to guarantee the employment of residents, guarantee the basic livelihood of the people, guarantee the protection over the main body of the market, guarantee the security of food and energy, guarantee the stability of the industrial chain and the supply chain, and guarantee the operation of the grassroots), in order to promote the Company’s high-quality development to make new achievements, make due contributions for maintaining the economic operation within a reasonable range and maintain the overall social stability, and embrace the successful convening of the 20th National Congress of the CPC with fruitful results.I, together with the members of the Board, believe that in the forthcoming year, the Company is going to attain new achievements in different aspects and create new value for our shareholders. Together, we will make new contributions to the development of the society with the strong support of all shareholders and various sectors in the public, along with the joint efforts of the Board, Supervisory Committee, management and staff.Wu YongChairman of the Board30 March 2022
II. FACT SHEET OF OUR INDUSTRY DURING THE REPORTING PERIODBeing 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 ( ??? ?????‘) 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 2021, the nationwide railways in operation exceeded 150,000 kilometers; among which, the high-speed railways in operation ran over 40,000 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 2021, while normalizing epidemic prevention and control, both the railway passenger and freight volume achieved a growth. For railways nationwide, the passenger traffic volume was 2.612 billion people, representing a year-on-year increase of 18.5%, and the outbound freight tonnage reached 4.774 billion tonnes, representing a year-on-year increase of 4.9%.III. PRINCIPAL ACTIVITIES AND BUSINESS MODEL OF THE COMPANY DURING THE REPORTING PERIODDuring 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 and GSR.IV. ANALYSIS OF MAJOR CHANGE(S) IN THE COMPANY’S CORE COMPETITIVENESS DURING THE REPORTING PERIOD1⁄2 Applicable ?Not applicable014 015
GUANGSHEN RAILWAY 2021 ANNUAL REPORTV. DISCUSSION AND ANALYSIS OF THE PRINCIPAL OPERATION OF THE COMPANY DURING THE REPORTING PERIODIn 2021, the operating revenue of the Company was RMB20,206 million, representing an increase of 23.59% as compared to RMB16,349 million for the same period of last year. Of the Company’s operating revenue, revenue from passenger transportation, freight transportation, railway network usage and other transportation-related services, and other businesses were RMB6,169 million, RMB2,035 million, RMB10,815 million and RMB1,187 million respectively, accounting for 30.53%, 10.07%, 53.52% and 5.88% of the total revenue respectively. Loss from operations amounted to RMB1,193 million, representing a year-on-year increase of 82.93% as compared to RMB652 million for the same period of last year; consolidated loss attributable to shareholders was RMB973 million, representing a year-on-year increase of 74.43% as compared to the RMB558 million for the same period of last year.(1) Analysis of operating results1. An analysis of changes in items of the income statement and the cash flow statement (Unit: RMB thousand)Current Same period Change Item period last year (%)Operating revenue 20,206,157 16,349,366 23.59 Operating expenses 21,574,642 18,186,790 18.63 Derecognition of land use right — 1,188,645 (100.00) Reversal of impairment losses on financial assets — net 40,613 358 11,244.41 Other gains/(losses) — net 134,718 (3,841) —Finance costs — net 74,576 60,645 22.97 Income tax credit 275,623 132,645 107.79 Net cash flows from operating activities 1,002,468 1,336,173 (24.97) Net cash flows from investing activities (926,112) (927,513) (0.15) Net cash flows from financing activities (62,126) (485,762) (87.21)
2. Analysis of revenue and costs(1) Passenger transportationPassenger 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:Year-on-year increase/ 2021 2020 decrease (%)Revenue from passenger transportation (RMB ten thousand) 616,911 411,452 49.94— Guangzhou-Shenzhen inter-city trains 189,702 164,857 15.07— Through trains — 1,453 (100.00)— Long-distance trains 387,846 210,612 84.15— Other revenue from passenger transportation 39,363 34,530 14.00 Passenger delivery volume (Persons) 40,778,226 42,853,492 (4.84)— Guangzhou-Shenzhen inter-city trains 17,394,645 18,081,964 (3.80)— Through trains — 104,998 (100.00)— Long-distance trains 23,383,581 24,666,530 (5.20) Total passenger-kilometers (’00 million passenger-kilometers) 120.54 129.31 (6.78)• The increase in revenue from passenger transportation was mainly due to the following: (a) From 1 April 2021, the Company actively applied to the industry authorities to open 9 additional intercity trains from Guangzhou South (Foshan West) to Yangjiang and 10 additional cross-line long-distance EMU trains; (b) the domestic COVID-19 epidemic situation was relatively stable from January to May 2021, so the number of passengers delivered in January to May increased significantly year-on-year; and (c) on 10 December 2021, the Ganzhou-Shenzhen Railway was put into operation and realized interconnection with the Guangzhou-Shenzhen Intercity Railway, and the Company added certain cross-line EMU trains bound for the Ganzhou-Shenzhen Railway starting from Guangzhou East Station and Shenzhen Station.• The decrease in passenger delivery volume was mainly due to the following: Although the domestic COVID-19 epidemic situation was relatively stable from January to May 2021, and the number of passengers delivered during such period achieved a significant increase, but since June 2021, the domestic COVID-19 epidemic continued to rebound, and the Company’s passenger delivery volume fell sharply, resulting in a decline in the number of passengers delivered throughout the year.016 017
GUANGSHEN RAILWAY 2021 ANNUAL REPORT(2) Freight transportationFreight 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:Year-on-year increase/ 2021 2020 decrease (%)Revenue from freight transportation (RMB ten thousand) 203,544 169,858 19.83 — Revenue from freight charges 170,185 145,660 16.84 — Other revenue from freight transportation 33,359 24,198 37.86 Outbound freight volume (tonnes) 18,836,519 16,274,073 15.75 Full-distance volume of outbound freight traffic (’00 million tonne-kilometers) 1,497.35 1,318.66 13.55• The increases in revenue from freight transportation and outbound freight volume were mainly due to the following: During the reporting period, the Company made full use of the transportation capacity released by the decline in passenger flow, vigorously carried out the activities and campaigns to boost the capacity of its freight transportation, implemented the business strategy of “replenishing passengers with goods”, and actively implemented the national policy of “Highway Transportation to Railway Transportation (???)”, fully explored freight resources, and strengthened the organization of goods transportation, resulting in a significant year-on-year increase in outbound freight volume, and the according increase in the revenue from freight transportation.
(3) Railway network usage and other transportation businessRailway 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:Year-on-year increase/ 2021 2020 decrease (%)Revenue from railway network usage and other transportation related services (RMB ten thousand) 1,081,459 957,233 12.98 (a) Railway network usage services 378,829 375,766 0.82 (b) Other transportation services 702,630 581,467 20.84 — Railway operation services 377,557 366,454 3.03 — Other services 325,073 215,013 51.19• The increase in revenue from railway operation services was mainly due to the following: With the gradual recovery of railway passenger traffic nationwide, the workload of transportation services provided by the Company for other railway companies increased, resulting in the corresponding increase in the revenue therefrom.• The increase in revenue from other services was mainly due to the following: (a) The Company recorded new revenue from the settlement of transportation capability guarantee charges; and (b) during the reporting period, the workload of passenger and freight transportation services provided by the Company to related parties increased significantly, resulting in the corresponding increase in the revenue therefrom.(4) Other businessesThe 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 2021, revenue from other businesses was RMB1,187 million, representing an increase of 23.14% as compared to RMB964 million for the same period last year. The increase was mainly due to the increases in the revenue from the sales of materials and supplies and the revenue from train maintenance services.018 019
GUANGSHEN RAILWAY 2021 ANNUAL REPORT(5) Analysis of costs (Unit: RMB thousand)Year-on-year increase/ By Industry Item 2021 2020 decrease (%)Railway business Business tax and surcharges 43,289 29,443 47.03 Employee benefits 8,147,798 7,185,147 13.40 Equipment leases and services 6,749,319 4,971,366 35.76 Materials and supplies 1,190,697 1,064,667 11.84 Repairs and facilities maintenance costs (materials and supplies excluded) 1,189,762 1,147,603 3.67 Depreciation of right-of-use assets 57,078 54,179 5.35 Depreciation of fixed assets 1,755,502 1,631,331 7.61 Cargo logistics and outsourcing service fees 595,048 462,708 28.60 Utility and office expenses 89,491 88,731 0.86 Others 657,303 607,130 8.26 Subtotal 20,475,287 17,242,305 18.75 Other business Employee benefits 541,665 499,288 8.49 Materials and supplies 306,890 232,112 32.22 Depreciation of right-of-use assets 11,332 11,332 —Depreciation of fixed assets 30,608 30,848 (0.78) Utility and office expenses 37,762 42,933 (12.04) Others 171,098 127,972 33.70 Subtotal 1,099,355 944,485 16.40 Total 21,574,642 18,186,790 18.63• The increases in costs of the railway business were mainly due to the following: (a) In order to support enterprises in fighting against the COVID-19 epidemic, the local government adopted a preferential policy of reducing and exempting social security premiums in stages in 2020, while the relevant preferential policies were cancelled in 2021, resulting in an increase in wage surcharges; (b) during the reporting period, the number of operating passenger and freight trains organized by the Company, and the workload of passenger and freight transportation services provided to other railway companies increased, resulting in corresponding increases in related transportation expenses such as equipment rental and service fees, materials, water and electricity consumption, passenger service fees, and cargo loading and unloading fees; and (c) in order to support the normalized epidemic prevention and control, the related epidemic prevention expenditures increased.
The increases in costs of other business were mainly due to the following: (a) In 2021, the local government cancelled the preferential policy of reducing and exempting social security premiums in stages, resulting in an increase in wage surcharges; and (b) during the reporting period, with the development of other businesses of the Company, related materials, water and electricity consumption and other expenses increased.(6) Major sales customers and suppliersDuring the reporting period, the sales from the top five customers of the Company amounted to RMB5,068.15 million, accounting for 25.08% of the total annual sales; of which the sales from related parties amounted to RMB5,068.15 million, accounting for 25.08% of the total annual sales.During the reporting period, the purchases from the top five suppliers of the Company amounted to RMB2,188.64 million, accounting for 20.10% of total annual procurement; of which purchases from related parties amounted to RMB1,486.52 million, accounting for 13.65% of the total annual procurement.3. Expenses (Unit: RMB thousand)Year-on-year increase/Item 2021 2020 decrease (%) Major reason for the changeDerecognition of land — 1,188,645 (100.00) The net gain from the compensation use right for land expropriation of Guangzhou East Shipai was recognized last year.Reversal of impairment 40,613 358 11,244.41 Bad debt losses on receivables were losses on financial reversed. assets — net Other gains/(losses) — 134,718 (3,841) — The payments that need not to be net made increased, and the loss from the retirement of fixed assets and the government grants related to income included in the current profit and loss decreased.Finance costs — net 74,576 60,645 22.97 The interest expenses arising from lease liabilities increased. Income tax credit 275,623 132,645 107.79 The total loss increased.020 021
GUANGSHEN RAILWAY 2021 ANNUAL REPORT4. Cash flow (Unit: RMB thousand)Year-on-year increase/2021 2020 decrease (%) Major reason for the changeNet cash flows from 1,002,468 1,336,173 (24.97) During the reporting period, the operating activities operating cash outflow increased and the increase thereof exceeded the operating cash inflow.Net cash flows (926,112) (927,513) (0.15) —from investment activitiesNet cash flows from (62,126) (485,762) (87.21) The cash paid for dividend financing activities distribution during the reporting period decreased because no cash dividend was distributed in 2020.
(2) Analysis of assets and liabilities (Unit: RMB thousand)Changes in amount from the end of previous Amount Amount at period to at the end the end of the end of current previous of current Item period period period (%) ExplanationFixed assets—net 24,010,161 23,016,415 4.32% Construction in progress was completed and transferred to fixed assets.Construction in progress 1,588,935 2,778,676 (42.82) Construction in progress was completed and transferred to fixed assets.Deferred tax assets 698,396 422,954 65.12 The deferred tax assets recognised for receipt of asset-related government grants increased. Financial assets at fair 463,696 377,631 22.79 The Company increased the capital value through other contribution to China Railway comprehensive income Express Co., Ltd.Trade receivables 4,396,174 3,721,677 18.12 Receivables for railway operation services increased.Prepayments and other 508,294 695,522 (26.92) Receivables for land expropriation receivables and payments received or made on behalf of others for construction projects decreased. Deferred income related to 781,563 104,939 644.78 The Company received the assets government grants donated by the local government for the new Dongguan Station. Trade and bill payables 3,112,710 2,073,922 50.09 Payables for material purchases and repairs increased, and the Company applied to commercial banks for the issuance of bank acceptance bills.Contract liabilities 112,442 215,305 (47.78) The amounts received in advance for passenger and freight transportation services decreased. Payables for fixed assets and 2,776,708 2,914,696 (4.73) Payables for construction and construction-in-progress equipment decreased.Accruals and other payables 1,955,175 1,849,656 5.70 Payables for the expenses of employee education and trade union increased.022 023
GUANGSHEN RAILWAY 2021 ANNUAL REPORT(3) Analysis of investment positionsDuring 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 interests1⁄2 Applicable ? Not applicable2. Significant non-equity investments1⁄2 Applicable ? Not applicable3. Financial assets at fair valueDetails of financial assets at fair value which were held by the Company during the reporting period are set out in Note 15 to the financial statements.4. Specific progress of major asset restructuring and consolidation during the reporting period1⁄2 Applicable ? Not applicable(4) Disposal of major assets and equity interests1⁄2 Applicable ? Not applicable(5) Analysis on major subsidiaries and investee companiesDuring 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.
VI. DISCUSSION AND ANALYSIS ON THE FUTURE DEVELOPMENT OF THE COMPANY(1) Industry landscape and trendDevelopment 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 ( ????????‘) 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 ( ????????‘) (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 (????)” 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 (????)” 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.024 025
GUANGSHEN RAILWAY 2021 ANNUAL REPORT(2) Development strategies of the CompanyUnder the sound leadership and scientific decision-making of the Board, the Company will capitalize on the historic opportunities presented by large-scale railway constructions, while proactively adapt to the policy direction of the railway system reform, in order to establish a steadfast foothold in the Guangdong-Hong Kong-Macao Greater Bay Area, and to optimize and enhance its business portfolio centered on railway passenger and freight transportation which are complemented by the railway-related businesses. Striving to become a first-class railway transportation services enterprise in the PRC and achieve its development objective of “scaling up and consolidating its strengths (????)”, the Company will also focus on improving its quality of service and continuously advancing its innovations in management, services and technologies.(3) Operating plansAt the eleventh meeting of the ninth session of the Board of the Company held on 30 March 2022, the Board considered and approved the financial budget for the year of 2022. The Company plans to achieve a passenger delivery volume of 51.00 million people (excluding commissioned transportation) and outbound freight volume of 21.15 million tonnes. To achieve these objectives, the Company will focus its work on the following aspects:1. Production safety: centering on the approach of “safety first, prevention-led, integrated governance (ô ???e????e????)” to further promote the special rectification actions for safety production, deepen the construction of high-quality safety standards, and strengthen the modernization of safety governance system and governance capacity in a strict and pragmatic manner.2. Passenger transportation: Firstly, conducting in-depth research on the law of the passenger transport market under the condition of normalized epidemic prevention and control, and arranging the operation of trains according to changes and in response to the traffic flow, so as to ensure the maximum benefit of “plan per day (????)” and speed up the recovery and growth of passenger transportation; secondly, taking advantage of the opportunity of the interconnection between Ganzhou-Shenzhen high speed train and Guangzhou-Shenzhen intercity railway to actively organize the operation of cross-line high-speed trains from Guangzhou East Station and Shenzhen Station, and strengthening market promotion and passenger transportation marketing to promote the quality and efficiency of passenger transportation products; thirdly, adhering to the highest international and domestic standards, focusing on the change of service concept and hardware upgrade, improving basic services and creating new characteristic services, building a multi-level passenger service system, and improving the quality and efficiency of passenger services.
3. Freight transportation: Firstly, continuing to implement the supply-side structural reform of railway transportation services, adjusting the structure by centering on the market, aiming to enable freight trains for passenger transportation, organizing the operation of domestic and international freight trains on a large scale; secondly, conscientiously putting into practice the spirit of General Secretary Xi Jinping’s important instructions on adjusting the transportation structure, reducing road transportation traffic, and increasing railway transportation traffic, adapting to market needs, giving full play to the advantages of railways, actively improving quality and reducing costs, innovating in the products of “road-rail operation (????)”, and further promoting “Highway Transportation to Railway Transportation (???)”.4. Operational management: Firstly, strengthening comprehensive budget management, accelerating the establishment of a budget management system covering all professional systems and units, and achieving full-cost, full-caliber and whole-process budget control; secondly, continuing to deepen expenditure and consumption reduction, strictly controlling the size of non-productive expenditures, and tightening business outsourcing management; thirdly, strengthening the management of land and real estate, enhancing the development of land assets, and striving to realize the preservation and appreciation of asset value.(4) Potential risksType of risk Description of risk Addressing measuresMacro-economic risk The railway transportation industry is The Company will pay close attention highly related to the macro-economic to the changes in international and development conditions and is greatly domestic macro-economic conditions, a f f e c t e d b y t h e m a c r o—e c o n o m i c strengthen its analysis and research on the atmosphere. If the macro-economic contributing factors relating to the railway outlook declines in the future, the and transportation industry, adjust its Company’s operating results and financial development strategies in a timely manner condition may be adversely affected. in response to changes in the market environment, and strive to maintain the stability of the Company’s production and operation.Policy and regulatory The railway transportation industry The Company will proactively engage risk is greatly affected by policies and in various seminars on the formulation regulations. With changes in the domestic and improvement of industrial policies and international economic environment, and regulations development, study the and the reform and development of latest changes in policies and regulations, the railway transportation industry, capture the development opportunities corresponding adjustments in the related brought by the amendments of policies laws, regulations and industrial policies and regulations, and adopt a prudent may be required. These changes may give approach in addressing uncertainties rise to uncertainties to the Company’s caused by changes in policies and business development and operating regulations. results.026 027
GUANGSHEN RAILWAY 2021 ANNUAL REPORTType of risk Description of risk Addressing measuresTransportation safety Transportation safety is the prerequisite The Company will consciously accept risk a n d f o u n d a t i o n f o r t h e r a i l w a y the safety supervision of industry transportation industry in maintaining authorities, actively participate in regular normal operations and a good reputation. transportation safety meetings held by Inclement weather, mechanical failures, competent authorities of the industry human errors and other force majeure to understand the transportation safety e v e n t s m a y a d v e r s e l y a f f e c t t h e condition of the Company, provide transportation safety of the Company. for and utilize the expenses for safety production, and intensify the training of safety knowledge and capabilities of its transportation personnel.Market competition Other transportation methods (such The Company will take proactive measures risk as aviation, road and water) compete to address market competition. For with railway transportation in certain passenger transportation, the Company markets. In addition, a range of high- will leverage the advantages of “safe, speed railways and inter-city railways comfortable, convenient, on time (ô1⁄4e have been completed and commenced ??e??e~?)” railway transportation, operation along with the development improve service facilities and enhance of the railway transportation industry. service quality. In respect of freight Internal competition within the railway transportation, the Company is committed t r a n s p o r t a t i o n i n d u s t r y h a s a l s o to increasing the loading and unloading intensified. The Company may be subject efficiency and the turnover rate of its to greater competitive pressure in the freight trains to improve the freight train future, which in turn could impact the frequency. In addition, the Company will operating results of the Company. 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.Financial risk The operating activities of the Company The Company has established a set of are subject to various financial risks, such managerial procedures for financial risks as foreign exchange risks, interest rate with a focus on the uncertainties of the risks, credit risks and liquidity risks. 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.
(5) Explanation on the COVID-19 pandemic and its impactSince the beginning of 2022, the COVID-19 pandemic has continued to spread around the world, and the domestic epidemic situation has also rebounded locally. Various cases resulting from Omicron mutant strains with fast transmission speed and high infection risk have been reported in many places in China, and domestic and foreign pandemic prevention and control situation is still severe and complicated, with greater pressure for external defense against import cases and internal defense against rebound. The Company expects that the pandemic will continue to have an adverse impact on the production and operation of the Company. In this regard, the company will conscientiously exert great efforts on the normalized prevention and control of the pandemic, effectively curb the spread of the COVID-19 through railways, and take proactive measures to strengthen railway passenger and freight transportation operations, and improve the Company’s management level, thereby striving to reduce the impact of the pandemic on the Company’s production and operation. For the specific measures to be taken by the Company, please refer to the relevant content in the “Operating plans” section under the “DISCUSSION AND ANALYSIS ON THE FUTURE DEVELOPMENT OF THE COMPANY” in this chapter.VII. 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 SECRETS1⁄2 Applicable Not applicableVIII. BUSINESS REVIEWAccording to paragraph 28 of Appendix 16 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 the Laws of Hong Kong) in the Report of the Directors. The details are as follows:(1) A fair review on the Company’s businessPlease 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.028 029
GUANGSHEN RAILWAY 2021 ANNUAL REPORT(2) Major risks and uncertainties to which the Company is exposedPlease refer to the “Potential risks” section under the “DISCUSSION AND ANALYSIS ON THE FUTURE DEVELOPMENT OF THE COMPANY” in this chapter.(3) Important event affecting the Company after the reporting periodNone.(4) Future business development of the CompanyPlease refer to the “DISCUSSION AND ANALYSIS ON THE FUTURE DEVELOPMENT OF THE COMPANY” section.(5) Analysis on the key financial indicators during the reporting periodPlease 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 CompanyPlease refer to the “Environmental and Social Responsibilities” chapter in this annual report, as well as the 2021 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 CompanyDuring 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 othersDuring 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.
IX. OTHER DISCLOSURES(1) Liquidity and source of fundingDuring the reporting period, the principal source of funding of the Company was revenue generated from its operating activities. The Company’s capital was mainly used for operating and capital expenses, and the payment of taxes. The Company has stable cash flow and believes that it has sufficient working capital, bank loans and other sources of funding to meet its operation and development needs.As of the end of the reporting period, the Company had no borrowings of any form. The Company’s capital commitments and operating commitments as of the end of the reporting period are set out in Note 39 to the financial statements.As of the end of the reporting period, the Company had no charges on any of its assets and had not provided any guarantees, and had no entrusted deposits. The gearing ratio (calculated by the balance of liabilities divided by the balance of total assets as of the end of the period) of the Company was 27.27%.(2) Risk of foreign exchange rate fluctuations and related hedgesThe 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) TaxationDetails 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.030 031
GUANGSHEN RAILWAY 2021 ANNUAL REPORT(5) Properties and fixed assetsDuring 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 profitDetails 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 reserveDetails 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) SubsidiariesDetails 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 assetsExcept 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 liabilitiesAt the end of the reporting period, the Company had no contingent liability.(11) Fixed interest rateAt the end of the reporting period, the Company had no loan bearing fixed interest rates.
(12) Board of Directors of the CompanyAs of the date of publication of this annual report, the Directors of the Company are as follows:Executive Directors: Wu Yong, Hu Lingling, Zhou Shangde Non-executive Directors: Guo Jiming, Hu Dan, Zhang ZheIndependent Non-executive Directors: Frederick Ma Si-Hang, Tang Xiaofan, Qiu Zilong(13) Directors of subsidiariesAt 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 MemberDongguan Changsheng Enterprise Company Luo Jiancheng, He Shan, Chen Longwei, Liu Qiyi, Huang Limited Ruibin, Yin Jinwen, Ren Zhuoquan Zengcheng Lihua Stock Company Limited Luo Jiancheng, Zhang Qingshan, Chen Longwei, Liu Qiyi, Wen Yixin(14) Valuation of property interests or tangible assetsDuring 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 contractsDuring 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 entitiesDuring the reporting period, the Company did not provide any loan to any entity.032 033
GUANGSHEN RAILWAY 2021 ANNUAL REPORT(17) Permitted compensation provisionsAt 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 BoardWu YongChairman of the BoardShenzhen, China30 March 2022
Chapter 4Corporate GovernanceI. INFORMATION REGARDING CORPORATE GOVERNANCESince 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 2020, elected and changed certain directors and supervisors, re-enacted the Appraisal Measures for the Operating Results of the Company ( ??????? ???‘), altogether further improving the Company’s corporate governance and internal controls to promote the sound and sustainable developments of the Company.During the reporting period, in view of the highly centralized systematic transportation management on the national railway network, it was necessary for the Company’s largest shareholder, GRGC, to obtain the Company’s financial information and the Company’s monthly financial data summaries during the reporting period, in order to exercise its administrative functions as an industry leader granted by laws and administrative regulations. In view of this, the Company duly complied with regulations set out in the Management Rules on Inside Information and Insiders ( ????????????‘), enhanced the management of non-public information, reminded its shareholders to promptly fulfill their obligations with respect to confidentiality and the prevention of insider trading.Improvement of corporate governance is a long-term systematic project, which requires continuous improvement and enhancement. As it always has, the Company will continue to promptly update and improve its internal systems in accordance with the relevant regulations, promptly identify and solve problems, strengthen its management foundation and enhance its awareness of standardized operation and level of governance to promote the regulated, healthy and sustainable development of the Company.Is there any significant difference between the corporate governance and the requirements of laws, administrative regulations and the CSRC on the corporate governance of listed companies? If there is any significant difference, explanations shall be made1⁄2 Applicable ? Not applicable034 035
GUANGSHEN RAILWAY 2021 ANNUAL REPORTII. 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 independence1⁄2 Applicable ? Not applicableCircumstances 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 resolution1⁄2 Applicable ? Not applicableIII. SUMMARY OF GENERAL MEETINGS(1) General meetings held during the reporting periodMedia in which resolutions Date of Session of meeting Date were disclosed disclosure Resolutions2020 Annual General 17 June 2021 Website of SSE (www.sse.com.cn) 18 June 2021 A total of 11 resolutions Meeting HKExnews website of SEHK 17 June 2021 were considered and passed (www.hkexnews.hk) at the meeting with no objection .(2) Important event for the attention of shareholders in the coming yearThe Company plans to convene the 2021 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 2021 Annual General Meeting, investors are advised to pay attention to and carefully read the “Notice of 2021 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.
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: shares Total remuneration received from the Company Whether Increase/ (before tax) receiving Number of Number of decrease in during the remuneration shares held at shares held at the number of Reason for reporting period from related Beginning of End of engagement the beginning of the end of the shares during increase/ (RMB ten parties of the Name Position (note) Gender Age engagement period period the year year the year decrease thousand) CompanyWu Yong Chairman of the Board Male 58 18 December 2014 15 June 2023 — — — — — Yes Executive Director 16 December 2014 15 June 2023 Hu Lingling Executive Director Male 58 26 May 2016 15 June 2023 — — — — 60.98 No General Manager 9 December 2015 To present Guo Jiming Non-executive Director Male 54 23 December 2019 15 June 2023 — — — — — Yes Hu Dan Non-executive Director Male 49 17 June 2021 15 June 2023 — — — — — Yes Wang Bin Non-executive Director Male 48 16 June 2020 17 June 2021 — — — — — Yes (resigned) Zhang Zhe Non-executive Director Male 50 23 December 2019 15 June 2023 — — — — — Yes Zhou Shangde Executive Director Male 51 17 June 2021 15 June 2023 — — — — 41.26 No Deputy Secretary of 19 March 2021 To present the Party Committee Employee Representative 28 May 2015 17 June 2021 Supervisor (resigned) Guo Xiangdong Executive Male 56 23 December 2019 17 June 2021 80,000 60,000 20,000 Reduction in 10.62 Yes Director (resigned) shareholding in Chairman of Labor Union 25 September 2019 13 April 2021 the secondary (resigned) market Deputy General Manager 16 June 2020 27 April 2021 (resigned) Frederick Ma Independent Male 70 16 June 2020 15 June 2023 — — — — 13.87 No Si-Hang Non-executive Director Tang Xiaofan Independent Male 53 16 June 2020 15 June 2023 — — — — 11.20 No Non-executive Director036 037
GUANGSHEN RAILWAY 2021 ANNUAL REPORTTotal remuneration received from the Company Whether Increase/ (before tax) receiving Number of Number of decrease in during the remuneration shares held at shares held at the number of Reason for reporting period from related Beginning of End of engagement the beginning of the end of the shares during increase/ (RMB ten parties of the Name Position (note) Gender Age engagement period period the year year the year decrease thousand) CompanyQiu Zilong Independent Male 55 16 June 2020 15 June 2023 — — — — 11.20 No Non-executive Director Lei Chunliang Chairman of the Male 58 17 June 2021 15 June 2023 — — — — — Yes Supervisory Committee Liu Mengshu Chairman of the Supervisory Male 58 29 May 2014 17 June 2021 — — — — — Yes Committee (resigned) Chen Shaohong Shareholder Representative Male 55 26 June 2008 15 June 2023 — — — — — Yes Supervisor Xiang Lihua Shareholder Representative Male 48 13 June 2019 15 June 2023 — — — — — Yes Supervisor Meng Yong Shareholder Representative Male 54 23 December 2019 15 June 2023 — — — — — Yes Supervisor Huang Songli Employee Representative Male 46 17 June 2021 15 June 2023 — — — — 34.32 No Supervisor Chairman of Labor Union 13 April 2021 To present Deputy General Manager 27 April 2021 To present Lin Wensheng Employee Representative Male 57 16 June 2020 15 June 2023 — — — — 41.43 No Supervisor Gong Yuwen Deputy Secretary of the Male 55 2 April 2018 To present — — — — 47.46 No Party Committee, Secretary of the Discipline Inspection Commission Luo Jiancheng Deputy General Manager Male 49 30 December 2016 To present — — — — 47.09 No Tang Xiangdong Deputy General Manager, Male 53 29 October 2019 To present — — — — 47.95 No Secretary of the Board, and 3 December 2019 To present Company Secretary Luo Xinpeng Chief Accountant Male 56 29 October 2019 To present — — — — 47.42 No Total 80,000 60,000 20,000 / 414.80 /
Name BiographyWu Yong Mr. Wu, male, born in June 1963, is the Chairman of the Board of the Company. Mr. Wu holds a bachelor’s degree, and is a certified senior engineer. He had served successively as the deputy bureau chief of Benghu Sub-bureau of Shanghai Railway Bureau, the commander chief of Hefei-Wuhan Railway Engineering Construction Headquarters of Shanghai Railway Bureau, the bureau chief assistant and the deputy bureau chief of Wuhan Railway Bureau, and the bureau chief and the deputy party secretary of Chengdu Railway Bureau, the chairman and the general manager of GRGC and the deputy secretary of the party committee. He is currently the chairman of GRGC and the secretary of the party committee. Hu Lingling Mr. Hu, male, born in November 1963, is an Executive Director and the General Manager of the Company. Mr. Hu holds a bachelor’s degree and is an engineer. He had served successively as the deputy chief engineer and the deputy station master of Shaoguan Station (the current Shaoguan East Station) of the Yangcheng company headquarters of GRGC, the deputy chief engineer and the deputy general manager of the Yangcheng company headquarters of GRGC, and the director of the transportation department and the deputy general manager of GRGC. He had also worked in the global business department in the headquarters of the International Union of Railways in Paris, France and served as the deputy general manager of Guangzhou-Shenzhen-Hong Kong Express Rail Link Company Limited. He is currently the General Manager of the Company.Guo Jiming Mr. Guo, male, born in December 1967, is a Non-executive Director of the Company. Mr. Guo holds a bachelor’s degree and is a certified senior accountant. He had previously served as the deputy head of the Finance Subsection of Wuhan Sub-bureau of Zhengzhou Railway Bureau, the head of the Finance Section and the director of Capital Settlement Center of Wuhan Railway Bureau, the chief accountant of Jinan Railway Bureau, the chief accountant of China Railway Jinan Group Co., Ltd and the director of GRGC. He is currently the chief accountant of GRGC.Hu Dan 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.Zhang Zhe 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.038 039
GUANGSHEN RAILWAY 2021 ANNUAL REPORTName BiographyZhou Shangde 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.Frederick Ma Mr. Ma, male, born in February 1952, is an Independent Non-Executive Director of the Si-Hang Company. Mr. Ma holds a bachelor’s degree in economics and history from the University of Hong Kong. Mr. Ma is an honorary doctor of social sciences at Lingnan University and the City University of Hong Kong, respectively, an honorary professor of the Faculty of Economics and Finance at the University of Hong Kong, a member of the International Advisory Council of China Investment Corporation, a permanent honorary president of the Hong Kong Special Schools Council, a member of the Global Advisory Council of Bank of America Group, an honorary professor of the Faculty of Business Administration at the Chinese University of Hong Kong, an honorary advisor of the School of Accountancy at the Central University of Finance and Economics, the chairman of the Council of the Education University of Hong Kong, a member of the Chief Executive’s Council of Advisors on Innovation and Strategic Development of the Hong Kong SAR Government, and a member of the International Advisory Council of Investcorp. Mr. Ma had been previously honored with a Gold Bauhinia Star and appointed as a Non-official Justice of the Peace. He had previously served as the managing director of the UK branch of RBC Dominion Securities, the deputy chairman and managing director of Kumagai Gumi (HK) Limited, the managing director and Asia manager of the Private Banking Department of Chase Manhattan Bank, the Asia Pacific CEO of Private Banking of JPMorgan Chase & Co., the CFO and executive director of PCCW Limited, the Secretary for Financial Services and the Treasury of Hong Kong SAR Government, the Secretary for Commerce and Economic Development of Hong Kong SAR Government, the non-executive chairman of China Strategic Holdings Limited, an independent non-executive director of China Resources Land Limited, an independent non-executive director of Hutchison Port Holdings Limited, an outside director of China Oil and Foodstuffs Corporation, an outside director of China Mobile Communications Group Co., Ltd, an independent non-executive director of Agricultural Bank of China Limited, an independent non-executive director of Aluminum Corporation of China Limited, the non-executive chairman of MTR Corporation Limited, a non-executive director of Husky Energy Inc. and a director of New Frontier Corporation. He is currently an independent non-executive director of the Company, COSCO SHIPPING Holdings Co., Ltd., FWD Group Limited, HH&L Acquisition Co. and Unicorn II Holdings Limited.
Name BiographyTang Xiaofan Mr. Tang, male, born in October 1968, is an Independent Non-Executive Director of the Company. Mr. Tang holds a master’s degree in economics management from the School of Economics and Trade at Jiangxi Agricultural University and is a senior auditor, a PRC certified public accountant, an accountant certified by the Association of International Accountants and a certified internal auditor. Mr. Tang also obtained the qualification of secretary of the board of companies listed on the SSE and the securities and fund practitioner qualification in the PRC, and is a securities investment advisor. Mr. Tang had previously served as the deputy section chief of Yichun Audit Bureau of Jiangxi, the audit manager of Shenzhen Dahua Tiancheng Accounting Firm, the audit manager of BDO China Shu Lun Pan Certified Public Accountants LLP and Yangcheng (HK) CPA Limited, the vice president and CFO of Guangzhou Greenery Cafe Company Limited, the secretary of the board and CFO of Guangzhou Jiacheng International Logistics Co., Ltd. (a company listed on the SSE), the deputy general manager of Guangdong Xiyu Investment Management Co., Ltd. and a director and the senior vice president of Jiangxi Geto New Materials Corporation Limited. He is currently a director and the general manager of Guangzhou Dening Investment Management Co., Ltd.Qiu Zilong Mr. Qiu, male, born in March 1967, is an Independent Non-executive Director of the Company. Mr. Qiu holds a bachelor’s degree of physics in radio from Hunan Normal University and a master’s degree in business administration from Peking University Shenzhen Graduate School and is currently the executive vice president of Shenzhen Changsha Chamber of Commerce. Mr. Qiu had previously served as the assistant engineer, assistant factory director and deputy factory director of Guangdong Panyu Safety Equipment Factory, the deputy general manager of Shenzhen Xingelan Electronic Co., Ltd., the managing director of Shenzhen Guanzhong Xie’an Electronic Technology Co., Ltd. and the managing director of Shenzhen Xingguanzhong Electronic Technology Co., Ltd. He is currently the general manager of Shenzhen Changshang Investment Management Co., Ltd. and a director of Shenzhen Beida Soft Bank Investment Corporation Limited.Lei Chunliang Mr. Lei, male, born in April 1963, is currently the chairman of the Supervisory Committee of the Company. Mr. Lei holds a bachelor’s degree and is a senior political officer. Mr. Lei had previously served as the secretary of the Communist Youth League Committee of Xi’an Railway Sub-bureau under Zhengzhou Railway Bureau; the secretary of the Party Committee of the Xi’an Railway Station of Xi’an Railway Bureau; the vice chairman of the union, the deputy secretary of the Party Committee and the secretary of the Discipline Inspection Committee of Xi’an Railway Bureau; and the deputy secretary of the Party Committee, the secretary of the Discipline Inspection Committee and a director of China Railway Xi’an Bureau Group Co., Ltd. He is currently the secretary of the Discipline Inspection Committee of GRGC .040 041
GUANGSHEN RAILWAY 2021 ANNUAL REPORTName BiographyChen Mr. Chen, male, born in January 1967, is a Shareholder Representative Supervisor of the Shaohong 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.Xiang Lihua Mr. Xiang, male, born in September 1973, is a Shareholder Representative Supervisor of the Company. Mr. Xiang holds a bachelor’s degree and is a senior political engineer. He had previously served as the secretary of the Board and the director of the general department of GZR, the deputy office director of GRGC, the Vice Secretary of the Party Committee and the Secretary of Committee for Discipline Inspection of the Company’s Communication and Signaling Section in Guangzhou, and the head of the marketing department of GRGC. He is currently the director (chief) of the human resources department (party committee organization) of GRGC.Meng Yong 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.Huang Songli Mr. Huang, male, born in September 1975, is currently an Employee Representative Supervisor, chairman of labor union and deputy general manager of the Company. Mr. Huang holds a bachelor’s degree and is an assistant engineer. Mr. Huang had previously served as the deputy head of the Guangzhou South Railway Station, the head and deputy secretary of the Party Committee of the Tangxi Railway Station of Yang Cheng Railway Company under GRGC; the deputy head of the Guangzhou Railway Depot and the head of the Tangxi Railway Station of GRGC; the deputy head of the Guangzhou Railway Depot of the Company; the deputy general manager of Guangmeishan Railway Co., Ltd.; the head of the Preparation Group of the Guangzhou Junction Northeastern Truck Outer Ring Railway Construction of GRGC; and the deputy head of the Command Department of Guangzhou Project Construction and the deputy head of the Command Department of the Foshan West Railway Station Project Construction of GRGC. He is currently the chairman of labor union and the deputy general manager of the Company.
Name BiographyLin Wensheng Mr. Lin, male, born in December 1964, is an Employee Representative Supervisor of the Company. Mr. Lin holds a bachelor’s degree and is a senior accountant. Mr. Lin had previously served as the chief accountant of the Industrial and Electrical Business Department of the Company, the deputy chief economist of the Guangzhou Electricity Section and the head of the Planning and Finance Department of the Company. He is currently the head of the Audit Department of the Company.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.Luo Jiancheng Mr. Luo, male, born in January 1973, is the Deputy General Manager of the Company. Mr. Luo graduated with a bachelor’s degree, a master’s degree in engineering from Tsinghua University and is a senior engineer. He served successively as the chief of the Investigation & Inspection Division of the General Office of GRGC, the station master of Shiweitang Station of SR, the deputy chief of the Transportation Department of GRGC, the assistant of the General Manager of the Company, the general manager of Guangzhou Tiecheng Enterprise Company Limited and the deputy general manager of GMSR. He is currently the Deputy General Manager of the Company.Tang Mr. Tang, male, born in September 1968, is the Deputy General Manager and the Secretary Xiangdong of the Board of the Company. Mr. Tang graduated with a bachelor’s degree and holds an MBA degree, and is a senior accountant. He had served as the Office Supervisor of the Revenue Settlement Center, the Director of the Finance Department and the Chief Accountant of the Company. He is currently the Deputy General Manager and the Secretary of the Board of the Company.Luo Xinpeng 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.042 043
GUANGSHEN RAILWAY 2021 ANNUAL REPORT(2) Engagements of directors, supervisors and senior management (current and resigned during the reporting period)1. Engagements in shareholdersName of Name of Beginning of End of personnel shareholder Position at shareholder engagement engagementWu Yong GRGC Chairman of the Board August 2014 Secretary of the Party Committee November 2017 Guo Jiming GRGC Chief Accountant June 2019 Hu Dan GRGC Director of the Transportation Department July 2020Wang Bin GRGC Director of the Transportation Department November 2018 July 2020 (resigned) Zhang Zhe GRGC Chief of the Passenger Transport April 2019 Department Lei Chunliang GRGC Secretary of the Committee for Discipline September 2020 Inspection Liu Mengshu GRGC Deputy Secretary of the Party Committee December 2013 September 2020 (resigned) and Secretary of the Committee for Discipline Inspection Chen Shaohong GRGC Chief Legal Adviser December 2017 Xiang Lihua GRGC Director (Chief) of Human Resources September 2018 Department (Party committee organization) Meng Yong GRGC Chief of the Finance Department (Income April 2020 Department)
2. Engagements in other companiesName of personnel Name of company Position at companyWu Yong Qian Zhang Chang Railway Company Limited, Huai Shao Heng Railway Co., Chairman of the Board Ltd.Guo Jiming GDR, Shichang Railway Company Limited Chairman of the Board WGPR Vice Chairman of the Board Hukun Passenger Railway Line (Hunan) Company Limited Director GZIR, PRDIR and Hainan Railway Company Limited Chairman of the Supervisory Committee Hu Dan Shenzhen Pingnan Railway Company Limited Vice Chairman of the Board Shichang Railway Company Limited Director Hunan Intercity Railway Company Limited, PRDIR Supervisor Wang Bin (resigned) China Railway Nanchang Group Co., Ltd. Deputy General Manager Zhang Zhe Guangdong Tieqing International Travel Agency Company Director Beijing Zhongtie Commemorate Ticket Co., Ltd. Supervisor Guo Xiangdong GDR Deputy General Manager (resigned) Frederick Ma Si-Hang COSCO SHIPPING Holdings Co., Ltd., FWD Group Limited, HH&L Acquisition Director Co. and Unicorn II Holdings Limited Tang Xiaofan Guangzhou Dening Investment Management Co., Ltd. Managing Director Qiu Zilong Shenzhen Changshang Investment Management Co., Ltd. General Manager Shenzhen Beida Soft Bank Investment Corporation Limited Director Liu Mengshu China Railway Nanchang Group Co., Ltd. Secretary of the Commission (resigned) for Discipline Inspection Chen Shaohong GDR, Hainan Railway Company Limited, XSR, MSR Director Shichang Railway Company Limited, Hukun Passenger Railway Line (Hunan) Chairman of the Supervisory Company Limited Committee Meng Yong Hong Kong Qiwen Trade Company Limited Director WGPR, GDR Chairman of the Supervisory Committee Hukun Passenger Railway Line (Hunan) Company Limited, Huai Shao Heng Supervisor Railway Co., Ltd.Luo Jiancheng Dongguan Changsheng Enterprise Company Limited, Shenzhen Pinghu Chairman of the Board Qun Yi Railway Store Loading and Unloading Company Limited, Shenzhen Guangshen Railway Economic and Trade Enterprise Company Limited and Zengcheng Lihua Stock Company Limited Guangzhou Tiecheng Enterprise Company Limited Director Luo Xinpeng Guangzhou Tiecheng Enterprise Company Limited Director 044 045
GUANGSHEN RAILWAY 2021 ANNUAL REPORT(3) Remuneration of directors, supervisors and senior managementDecision-making procedure Remuneration or allowance standards of the Directors and Supervisors of of the remuneration of the Company should be submitted for approval at the general meeting Directors, Supervisors and after consideration and discussion by the Board. senior managementBasis for determination of Determined with reference to the level of remuneration in Shenzhen where the remuneration of the the Company is located, the job nature of individual staff, as well as the Directors, Supervisors and annual objectives of the Company, the completion status of work targets senior management and the operating results of the Company.Actual payment of During the reporting period, none of the following Directors, namely remuneration of Directors, Wu Yong, Guo Jiming, Hu Dan, Wang Bin, Zhang Zhe, and the following Supervisors and senior Supervisors, namely Lei Chunliang, Liu Mengshu, Chen Shaohong, Xiang management 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.Total actual amount of During the reporting period, the Directors, Supervisors and senior remuneration received by all management received a total remuneration of RMB4.148 million. of the Directors, Supervisors and senior management at the end of the reporting period
(4) Changes in directors, supervisors and senior managementName Position held Change Reason for changeHu Dan Non-executive Director Elected Election at general meeting Zhou Shangde Executive Director Elected Election at general meeting Lei Chunliang Shareholder Representative Supervisor, Elected Election at general Chairman of the Supervisory Committee meeting Huang Songli Employee Representative Supervisor Elected Election at employee representative meeting Huang Songli Deputy General Manager Engaged Engaged by the Board Wang Bin Non-executive Director Resigned Adjustment of work arrangements Guo Xiangdong Executive Director Resigned Adjustment of work arrangements Liu Mengshu Shareholder Representative Supervisor, Resigned Adjustment of work Chairman of the Supervisory arrangements Committee Zhou Shangde Employee Representative Supervisor Resigned Adjustment of work arrangements Guo Xiangdong Deputy General Manager Dismissed Adjustment of work arrangements (5) Explanation of punishment by securities regulatory bodies for the past three years1⁄2 Applicable ? Not applicable046 047
GUANGSHEN RAILWAY 2021 ANNUAL REPORT(6) Other information on directors, supervisors and senior management1. Equity interests of Directors, Supervisors or Chief ExecutivesSave as disclosed below, as of the end of the reporting period, there was no record of interests or short positions (including the interests and short positions which were taken or deemed to have under the provisions of the SFO) of the Directors, Supervisors or chief executives of the Company in the shares, underlying shares and debentures of the Company or any associated corporation (within the meaning of the SFO) in the register required to be kept under section 352 of the SFO. The Company did not receive any notification of such interests or short positions from any Directors, Supervisors or chief executives of the Company as required to be made to the Company and the SEHK pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers in Appendix 10 to the Listing Rules of SEHK.Percentage of Percentage of shareholding shareholding in the in the total relevant class Name of company/ Capacity and Number and share capital of shares of associated nature of class of shares of the the Company Long/short Name corporation Position interest held Company (%) (%) positionGuo Xiangdong The Company Director Beneficial A Shares: 0.00085 0.0011 Long position (resigned) owner 60,000 shares Xiang Lihua The Company Supervisor Interest of A Shares: 0.00026 0.00032 Long position spouse 18,200 shares During the reporting period, none of the Company or its subsidiaries had entered into any arrangement such that the Company’s Directors, Supervisors or chief executives or their respective spouses or children under the age of 18 could obtain any right to subscribe for any shares or debentures of the Company or any other legal entities.Other companies in which the Directors and Supervisors of the Company were directors or employees did not have interests in the shares and underlying shares of the Company that were required to be disclosed to the Company under Sections 2 and 3 of Part XV of the SFO.
2. Service contracts of Directors and SupervisorsEach of the Directors and Supervisors of the Company has entered into a service contract with the Company. The Company and its subsidiaries did not enter into any director’s or supervisor’s service contract prior to 31 January 2004 and were exempt from complying with the shareholders’ approval requirement under Rule 13.68 of the Listing Rules of SEHK. None of the Directors or Supervisors has entered into any service contract with the Company which cannot be terminated by the Company within one year without payment of compensation (other than statutory compensation).3. Interests of Directors and Supervisors in contractsNone 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.V. BOARD MEETINGS HELD DURING THE REPORTING PERIODSession of meeting Date ResolutionsThe sixth meeting of the 26 January 2021 A total of 1 resolution was considered and passed at ninth session of the Board the meeting with no objection.The seventh meeting of the 29 March 2021 A total of 10 resolutions were considered and passed ninth session of the Board at the meeting with no objection.The eighth meeting of the 27 April 2021 A total of 3 resolutions were considered and passed ninth session of the Board at the meeting with no objection.The ninth meeting of the 30 August 2021 A total of 2 resolutions were considered and passed ninth session of the Board at the meeting with no objection.The tenth meeting of the 28 October 2021 A total of 2 resolutions were considered and passed ninth session of the Board at the meeting with no objection.048 049
GUANGSHEN RAILWAY 2021 ANNUAL REPORTVI. PERFORMANCE OF DUTIES BY DIRECTORS(1) Attendance at Board meetings and general meetings by DirectorsAttendance at general Attendance at Board meetings meetings Whether two Number of consecutive Whether the Number of Number of meetings Number of Board meetings Number Director is an Board meetings meetings attended meetings were not of general Name of Independent to be attended attended in by way of attended by Number of attended in meetings Director Director this year person telecommunication proxy absences person attendedWu Yong No 5 5 5 0 0 No 0 Hu Lingling No 5 5 5 0 0 No 1 Guo Jiming No 5 5 5 0 0 No 1 Hu Dan No 2 2 2 0 0 No 1 Wang Bin (resigned) No 3 3 3 0 0 No 0 Zhang Zhe No 5 5 5 0 0 No 1 Zhou Shangde No 2 2 2 0 0 No 1 Guo Xiangdong (resigned) No 3 3 3 0 0 No 0 Frederick Ma Si-Hang Yes 5 5 5 0 0 No 0 Tang Xiaofan Yes 5 5 5 0 0 No 1 Qiu Zilong Yes 5 5 5 0 0 No 1Explanation on the failure to attend two consecutive Board meetings in person1⁄2 Applicable ? Not applicableNumber of Board meetings held during the year 5 Including: Number of on-site meetings 0 Number of meetings held by way of telecommunication 5 Number of meetings held on-site combined with telecommunication 0
(2) Performance of duties by Independent Directors1. Attendance at meetingsDuring the reporting period, the Company held 1 general meeting, 5 Board meetings and 6 Audit Committee meetings. The Company did not hold any Remuneration Committee meeting. All Independent Directors attended all the meetings either in person or by proxy. Please see the relevant part of “Attendance at Board meetings and general meetings by Directors” and “Audit Committee” of this chapter for details.2. Objection to related matters of the Company by Independent Directors1⁄2 Applicable ? Not applicable3. Recommendations for the Company and approvalDuring 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 ( ????????‘) 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 external guarantees, connected transactions, changes of directors and engagements of senior management. During the process of preparation and disclosure of the annual report, the Independent Directors fulfilled the duties required by the securities regulatory authorities and the Annual Report Working Rules of the Audit Committee and Independent Directors ( ????????????????‘). 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.050 051
GUANGSHEN RAILWAY 2021 ANNUAL REPORTFirstly, the Independent Directors recommended the Company to cooperate with the external auditor in relation to the auditing of the 2020 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 2020 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 2021. The above resolutions for the re-appointment of domestic and international auditors were passed upon consideration at the seventh meeting of the ninth session of the Board and the 2020 Annual General Meeting of the Company.4. On-site working and inspectionDuring 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 Participant17 June 2021 Attendance at the 2020 Annual Headquarters of the Tang Xiaofan, Qiu General Meeting Company Zilong17 June 2021 On-site inspection at the headquarters Headquarters of the Tang Xiaofan, Qiu and the transportation and Company, Guangzhou Zilong production sites of the Company East Station, Shenzhen Station and Guangzhou-Shenzhen Intercity Train
5. Expression of independent opinionsDuring the reporting period, the Independent Directors of the Company expressed independent opinions as follows:Time Meeting Matter Type of opinion26 January 2021 Sixth meeting Independent opinion on The capital increase proposal was entered of the ninth the Company’s increase into by the Company on normal session of the of capital contribution to commercial terms, the terms of which Board China Railway Express Co., were fair and reasonable and in the Ltd. interests of the Company and its shareholders as a whole.29 March 2021 Seventh meeting Special explanation and The Company had no external guarantee of the ninth independent opinion on during the reporting period. session of the the Company’s external Board guarantees29 March 2021 Seventh meeting Independent opinion on This proposal is in compliance with the of the ninth the Company’s profit relevant regulatory rules and the session of the distribution proposal for Articles of Association, and in line Board 2020 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 Company’s 2020 annual general meeting for consideration.27 April 2021 Eighth meeting Independent opinion on the After reviewing the related nomination of the ninth Company’s appointment documents and materials of the session of the of Mr. Huang Songli as proposed personnel, they confirmed Board deputy general manager that their qualifications and the engagement procedures were legal and agreed to the engagement of these personnel by the Board.17 June 2021 2020 Annual Independent opinion on the After reviewing the related nomination General nomination of Mr. Hu Dan documents and materials of the Meeting and Mr. Zhou Shangde by proposed personnel, they confirmed GRGC as the candidates that their qualifications were legal and for non-independent agreed to recommend these Director directors of the ninth candidates at the general meeting. session of the Board of the Company 052 053
GUANGSHEN RAILWAY 2021 ANNUAL REPORTVII. SPECIAL COMMITTEES UNDER THE BOARD(1) Members of the special committees under the BoardType of special committee Name of memberAudit Committee Frederick Ma Si-Hang (Chairman), Tang Xiaofan, Qiu ZilongRemuneration Committee Frederick Ma Si-Hang (Chairman), Tang Xiaofan, Qiu Zilong, Wu Yong, Hu Lingling (2) The Audit Committee held 6 meetings during the reporting periodDate Matters Key opinions and suggestions8 March 2021 Getting to know the Company’s audit work Suggesting the Company to provide arrangements for 2020, initially reviewing information to the auditors in a timely the Company’s annual financial statements manner according to the audit plan, and for 2020, and communicating with the cooperate for the completion of the audit Company’s auditors before the audit. work.16 March 2021 Reviewing the Company’s annual financial Requesting auditors to complete the audit statements for 2020 for the second time, work in accordance with the audit plan to communicating with the Company’s auditors, ensure that the Company’s annual report and issuing the Audit Supervision Letter to is disclosed on time. the auditors.26 March 2021 Reviewing the Company’s annual report for Suggesting the Company to re-engage 2020, evaluating the auditors’ audit work in PricewaterhouseCoopers Zhong Tian 2020, recommending to the Board on the LLP and PricewaterhouseCoopers as the appointment of auditors for 2021, reviewing Company’s domestic and foreign auditors the independent directors’ work report for in 2021.2020 and the audit committee’s performance report, getting to know the Company’s internal audit and internal control work report for 2020.26 April 2021 Reviewing the Form 20F for 2020 and the None. financial report for the first quarter of 2021.26 August 2021 Reviewing the interim results report for None.2021.27 October 2021 Reviewing the financial report for the third None. quarter of 2021.
(3) Explanation on the matters with objection1⁄2 Applicable ? Not applicableVIII. RISKS IDENTIFIED BY THE SUPERVISORY COMMITTEE IN THE COMPANY1⁄2 Applicable ? Not applicableIX. EMPLOYEES OF THE COMPANY AND ITS MAJOR SUBSIDIARIES AT THE END OF THE REPORTING PERIOD1. Information of employeesTotal number of current employees 40,616 Number of disengaged and retired employees for whom the parent company and major subsidiaries shall be liable to expenses 32 Professional constitution Category of professional constitution Number of professionals Passenger, freight transportation and transit operation personnel 18,283 Engineering personnel 5,547 Driving personnel 3,496 Public works personnel 3,431 Electricity personnel 2,009 Electricity and water supplies personnel 2,319 Building construction personnel 1,226 Various operations and other employees of subsidiaries 107 Technical and administrative personnel 4,198 Total 40,616 Level of education Category of education level Number of persons Postgraduate or above 161 University graduate 5,192 College for professional training 16,556 Other (secondary vocational school, high school and vocational technical school, etc.) 18,707 Total 40,616054 055
GUANGSHEN RAILWAY 2021 ANNUAL REPORT2. Remuneration policySalary 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 planThe 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 required4. Training planDuring the reporting period, the Company had a total of 104 occupational education management personnel and a total of 1,219,418 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 RMB41.5097 million.5. Labor outsourcing1⁄2 Applicable Not applicable056 057
GUANGSHEN RAILWAY 2021 ANNUAL REPORTX. PLANS FOR PROFIT DISTRIBUTION OR COMMON RESERVE CAPITALIZATION(1) Formulation, implementation and adjustment of cash dividend distribution policyPursuant to the related requirements of the “Notice on Further Implementing Issues concerning Cash Dividends Distribution of Listed Companies” (??????????????????????‘) by CSRC and SSRB, the Company amended provisions related to profit distribution in the Articles in 2012. The amended Articles clearly stipulate the standards, percentages and related decision-making procedures for cash dividend distribution by the Company, and the detailed conditions, decision-making procedures and mechanisms for adjustments to the profit distribution policy by the Company, which will provide systematic guarantee for the due diligence of the Independent Directors, the full expression of the minority shareholders’ requests, and full protection of the legal interests of minority shareholders.The principal requirements of cash dividends under the profit distribution policy of the Company are: where the conditions for cash dividend distribution are met, the Company, principally, shall distribute dividends in cash once a year, with the annual dividend distribution ratio being not less than 30%. Within three consecutive years, the accumulated profits distributed in cash of the Company shall not be less than 30% of the three-year annual average distributable profits. Unless otherwise stipulated by laws or administrative regulations, the amount of interim dividends distributed shall not exceed 50% of the distributable profits as stated in the interim profits statement of the Company. The Company may distribute interim dividends in the form of cash.Since its listing in 1996, the Company has consistently adhered to a sustained and stable profit distribution policy, emphasized reasonable returns to investors and strived for the sustainable development of the Company. Save for 2020 when no cash dividend was declared due to the impact of the COVID-19 epidemic, 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 and a dividend payout ratio of approximately 57.77%.(2) Specific explanation on cash dividend policyWhether it complies with the provisions of the Articles of Association or ?Yes 1⁄2No the requirements of the resolutions at general meetings Whether the dividend standards and ratios are definite and clear ?Yes 1⁄2No Whether the relevant decision-making procedures and mechanisms are sound ?Yes 1⁄2No Whether the independent directors performed their duties and played their roles ?Yes 1⁄2No Whether minority shareholders have the opportunity to fully express their opinions ?Yes 1⁄2No and demands, and whether their legitimate rights and interests have been fully protected
(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 profits1⁄2 Applicable ? Not applicable(4) Explanation on the profit distribution proposal for the reporting periodIn consideration of both the Company’s profitability in the past two years and the capital requirements for maintaining the normal operation of the Company, the Board of the Company proposed not to make profit distribution or capitalize capital reserve into share capital for 2021. This proposal has been considered and approved at the eleventh meeting of the ninth session of Board of the Company, and is subject to consideration and approval at the 2021 Annual General Meeting of the Company.Regarding the above profit distribution proposal, the independent directors of the Company agreed that: the 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 Company’s 2021 annual general meeting for consideration.To the knowledge of the Company, there is no arrangement under which the Company’s shareholders have waived or agreed to waive any dividends.XI. THE COMPANY’S SHARE INCENTIVE SCHEME, EMPLOYEE STOCK OWNERSHIP PLAN, OR OTHER EMPLOYEES’ INCENTIVE MEASURES AND THEIR IMPACT(1) Share incentive, employee stock ownership plan or other incentive measures1⁄2 Applicable ? Not applicable(2) Share incentives granted to directors and senior executives during the reporting period1⁄2 Applicable ? Not applicable058 059
GUANGSHEN RAILWAY 2021 ANNUAL REPORT(3) Establishment and implementation of the company’s appraisal mechanism and incentive mechanism for senior management during the reporting periodIn 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.XII. CONSTRUCTION AND IMPLEMENTATION OF INTERNAL CONTROL SYSTEM DURING THE REPORTING PERIODThe 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 the requirements of the United States Sarbanes-Oxley Act. Since 2011, the Company has started to consistently apply the Basic Regulations on Enterprise Internal Control ( ??????????‘) and Implementation Guidelines for Enterprise Internal Control ( ??????????‘) jointly promulgated by five 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 2021 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 period1⁄2 Applicable ? Not applicableXIII. MANAGEMENT AND CONTROL OVER THE SUBSIDIARIES DURING THE REPORTING PERIOD1⁄2 Applicable ? Not applicableXIV. INFORMATION ON THE AUDIT REPORT ON INTERNAL CONTROLPricewaterhouseCoopers Zhong Tian LLP has assessed the efficacy of the internal control system related to the financial reporting by the Board, and has issued an unqualified audit report. For details of the audit report, please refer to the Audit Report of Internal Control disclosed on the website of SSE (http://www.sse. com.cn), the HKExnews website of SEHK (http://www.hkexnews.hk) and the website of the Company (http:// www.gsrc.com).Will the Company disclose the audit report on internal control? YesType of opinion on the Audit Report of Internal Control: Standard unqualified opinionXV. RECTIFICATION OF PROBLEMS IDENTIFIED DURING THE SELF-EXAMINATION UNDER THE SPECIAL ACTION ON THE CORPORATE GOVERNANCE OF LISTED COMPANIESDuring the reporting period, 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) ( ?? ????????????????????‘€????[2020]69?), 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).060 061
GUANGSHEN RAILWAY 2021 ANNUAL REPORTXVI. CORPORATE GOVERNANCE REPORT(1) Compliance with the Corporate Governance CodeApart from the provision of the Corporate Governance Code regarding the establishment of a nomination committee, as far as the Company and its Directors are aware, during the reporting period, the Company has complied with the relevant code provisions set out in the Corporate Governance Code in Appendix 14 to the Listing Rules of SEHK. Meanwhile, the Company has applied the principles set out in the Corporate Governance Code to its corporate governance structure and practices.As at the end of the reporting period, the Board of the Company decided not to set up a nomination committee after prudent consideration of the policy environment and background of the industry in which the Company operates, as well as the corporate governance structure over time. According to the requirements of the Articles and the Procedures for Shareholders to Nominate a Person for Election as a Director, upon the expiration of the term of a director of the Company or in the event of a vacancy following the resignation of a director of the Company, shareholders individually or collectively holding 3% or more of the issued shares of the Company may nominate a candidate to be a non-independent director by way of written proposal to the Company; and shareholders individually or collectively holding 1% or more of the issued shares of the Company may nominate a candidate to be an independent director by way of written proposal to the Company. Directors of the Company shall be elected at general meetings for a term of office of three years. Upon expiration of his or her term, the director shall be entitled to be re-elected.(2) Securities transactions by Directors, Supervisors and senior management, and interests in competing businessThe Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules of SEHK and the Administrative Rules on Shares Held by the Directors, Supervisors and Senior Management Officers of Listed Companies and the Changes Thereof ( ??????e ???????????????????????‘) (Zheng Jian Gong Si Zi [2007] No. 56) of the CSRC as its own code of conduct regarding securities transactions of the Directors of the Company. The Company formulated the Administrative Rules on Shares Held by the Directors, Supervisors and Senior Management Officers of Guangshen Railway Company Limited and the Changes Thereof ( ????????????e?? ?????????????????????‘), which was approved at the twenty-second meeting of the fourth session of the Board.After making specific enquiries with all the Directors, Supervisors and senior management, the Company confirms that during the reporting period, all the Directors, Supervisors and senior management complied with the required standard set out in the abovementioned code, rules and regulations and system requirements.
After making specific enquiries with all the Executive Directors, Non-executive Directors and Supervisors, the Company confirms that during the reporting period, none of the Directors, Non-executive Directors and Supervisors held any interests in businesses that compete or may compete with the businesses of the Company directly or indirectly.(3) The BoardAs of the date of this report, the Board of the Company is composed of nine Directors, including Mr. Wu Yong (Chairman of the Board and Executive Director), Mr. Hu Lingling (Executive Director), Mr. Zhou Shangde (Executive Director), Mr. Guo Jiming (Non-executive Director), Mr. Hu Dan (Non-executive Director), Mr. Zhang Zhe (Non-executive Director), Mr. Frederick Ma Si-Hang (Independent Non-executive Director), Mr. Tang Xiaofan (Independent Non-executive Director) and Mr. Qiu Zilong (Independent Non-executive Director).The Board leads the Company in a responsible attitude and effective manner. The Board is responsible for devising and reviewing the Company’s development strategies and planning, reviewing and approving the annual budget and business plans, recommending proposals of dividends, ensuring the implementation of an effective internal control system and supervising the performance of the management in accordance with the Articles, the Rules of Procedure of the General Meetings and the Rules of Procedure of the Board Meetings.The management of the Company is led by the General Manager, who is responsible for the daily operation of the Company. The General Manager supervises daily business operations, development planning and implementation under the assistance of the Deputy General Manager, and is responsible to the Board for all businesses of the Company.The Board comprises nine members, including three Independent Non-executive Directors. The Directors’ diverse backgrounds reflect their different cultural and educational backgrounds and extensive experiences in various industries. The Directors, mostly ranging from 40 to 60 years old, possess the appropriate qualifications related to the businesses of the Company, and are therefore able to provide recommendations to the management from multiple perspectives with diversified modes of thinking. The names, biographical details and occupations of the Directors of the Company are set out in the relevant part of “IV. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT” in this chapter.The Company provides information on business development to all Directors of the Company, including statements of various forms, documents and minutes of meetings. The Independent Directors promptly obtain in-depth knowledge of the operating situation of the Company through reports of the management of the Company regarding production and on-site investigation. The Company undertakes to provide Independent Directors with the working conditions necessary for the performance of their duties. The Secretary of the Board actively assists the Independent Directors in performing their duties, and other relevant personnel of the Company would cooperate with the Independent Directors as needed to perform their duties. The fees required for the engagement of intermediaries and the discharge of other duties by the Independent Directors are borne by the Company so that the Independent Directors can effectively perform their duties.062 063
GUANGSHEN RAILWAY 2021 ANNUAL REPORTDuring the reporting period, the Board held 5 meetings in total. For details of the attendance of the Directors at the Board meetings, please refer to the relevant parts of “VI. PERFORMANCE OF DUTIES BY DIRECTORS” in this chapter.There is no financial, business, family or other material/connected relationship between members of the Board and the Chairman of the Board and the senior management.The Board has established the Audit Committee and the Remuneration Committee to supervise the relevant affairs of the Company. Each committee has specific responsibilities, and reports and gives advice to the Board on a regular basis.(4) Board diversity policyIn December 2018, the Company established its Board Diversity Policy. Under such policy, the Board shall consider and adopt measurable objectives for achieving diversity of Board members each year. When selecting candidates, the Board shall consider a wide range of factors regarding diversity, including but not limited to gender, cultural and educational background, region, industry and professional experiences, acquired knowledge and length of service, and the Company shall also incorporate its corporate features and specific requirements to reach a final decision, having due regard to the candidates’ level of qualifications reflected by objective criteria and the benefits of diversity on the Board members.The Board will monitor the implementation of such policy, as well as the progress of measurable objectives in relation to the diversity and whether these objectives have been achieved. The Board will also evaluate the policy at appropriate times in order to ensure the effectiveness of the policy. The Board will discuss and adopt any necessary amendments.(5) Chairman of the Board and General ManagerMr. Wu Yong and Mr. Hu Lingling are the Chairman of the Board and the General Manager of the Company respectively. The Chairman of the Board is responsible for leading the Board and ensuring that all key and appropriate issues are discussed by the Board in a timely manner. The Company does not have a chief executive officer and the relevant duties of a chief executive officer (including the implementation of annual business plans and investment proposals of the Company and decision-making on production, operation and management, etc.) are performed by the General Manager of the Company.
(6) Tenure of Non-executive Directors and confirmation of independence of Independent Non-executive DirectorsFor a discussion of the tenure of the existing Non-executive Directors of the Company, please refer to the relevant part of “IV. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT” in this chapter.The Company has received annual confirmation letters for this year from all Independent Non-executive Directors, with respect to their independence pursuant to Rule 3.13 of the Listing Rules of SEHK. The Company concurs with their finding of independence.(7) Remuneration Committee and remuneration of DirectorsMembers of the Remuneration Committee of the Company are appointed by the Board. At present, the committee consists of three Independent Non-executive Directors and two Executive Directors, namely, Mr. Frederick Ma Si-Hang (Chairman of the Remuneration Committee), Mr. Tang Xiaofan, Mr. Qiu Zilong, Mr. Wu Yong and Mr. Hu Lingling.According to the requirements of the Terms of Reference of the Remuneration Committee of the Company, the principal duties of the Remuneration Committee include reviewing and making recommendations to the Board in respect of the remuneration packages for the Directors and the Supervisors of the Company, as well as approving the terms and conditions of the Executive Directors’ service contracts. The remuneration policy of the Company seeks to provide, in accordance with the Company’s business development strategies, reasonable remuneration to attract and retain high caliber executives. The Remuneration Committee shall obtain benchmark information from internal and external sources in relation to the market standard for remuneration and packages offered in the industry, and consider the overall performance of the Company when determining the Directors’ and the Supervisors’ emoluments and recommending the Directors’ and the Supervisors’ emoluments to the Board. The Remuneration Committee is provided with adequate resources from the Company to perform its duties.During the reporting period, the Remuneration Committee of the Company did not convene any meetings.At the 2019 Annual General Meeting held by the Company on 16 June 2020, it was considered and approved that the remuneration and allowances of each of the domestic Independent Non-executive Directors would be RMB100,000 and RMB12,000 per year respectively, and the remuneration and allowances of each of the overseas Independent Non-executive Directors would be HK$150,000 and HK$18,000 per year respectively. For details of the remuneration of Directors in the reporting period, please refer to the relevant part of “IV. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT” in this chapter.064 065
GUANGSHEN RAILWAY 2021 ANNUAL REPORT(8) Audit CommitteeMembers of the Audit Committee are appointed by the Board. At present, the committee consists of three Independent Non-executive Directors, namely Mr. Frederick Ma Si-Hang (Chairman of the Audit Committee), Mr. Tang Xiaofan and Mr. Qiu Zilong. They possess appropriate academic and professional qualifications or related financial management expertise. Mr. Tang Xiangdong, who is the Secretary to the Board of the Company, is the secretary of the Audit Committee.According to the requirements of the Working Rules of the Audit Committee of the Company ( ????? ????‘), 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, the Audit Committee held 6 meetings to examine, review and supervise the Company’s internal control performance related to financial reporting, review the Company’s financial statements and auditing results of the auditors, and recommend the appointment of external auditors to the Board.The attendance of each member of the Audit Committee is set out as below:Number of Number of meetings meetings to be attended in Attendance Name attended person rateFrederick Ma Si-Hang 6 6 100% Tang Xiaofan 6 6 100% Qiu Zilong 6 6 100% The Audit Committee of the Company discussed the audit plan of the annual report with the external auditors of the Company and urged them to submit the audit report promptly. The Audit Committee reviewed the Company’s financial and accounting statements before the external auditors commenced their work and made written suggestions. After the external auditors drafted an initial opinion, the Audit Committee reviewed the statements and made written suggestions again. The Company’s quarterly financial report, interim financial report, and annual financial report and results announcement during the reporting period have been reviewed by the Audit Committee.
(9) Nomination CommitteeDuring the reporting period, GRGC, the largest shareholder of the Company, nominated Mr. Hu Dan and Mr. Zhou Shangde as non-independent directors of the Company, with the remaining term of the ninth session of the Board as their term of office. According to the Articles of Association and the Procedures for Shareholders to Nominate Director Candidates, the Board of the company submitted the proposal to the Company’s 2020 annual general meeting for consideration and approval after reviewing the qualifications of relevant director candidates.In order to regulate the selection and appointment of directors and senior management of the Company, optimize the structure of the Board, and improve corporate governance, the Company intended to establish a nomination committee according to the relevant rules in China and overseas and the provisions of the Articles of Association, which will be responsible for discussing and making recommendations on the candidates, selection criteria and procedures for the directors, general managers and other senior management of the Company. On 30 March 2022, the Proposal for Establishing a Nomination Committee and Submitting to the General Meeting for Consideration and Approval was considered and approved at the eleventh meeting of the ninth session of the Board of the Company. The proposal is also subject to consideration and approval at the Company’s 2021 annual general meeting. Upon the consideration and approval at the general meeting, the Company will set up a nomination committee and appoint suitable personnel to perform relevant duties as required.(10) Auditors remuneration and related professional feesDuring 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 14 consecutive years and its international auditor has served a term of 19 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 ( ???????????????????????‘?) of the CSRC and the Ministry of Finance of the PRC.During the reporting period, the Company paid a remuneration of RMB5.30 million (including an internal control audit fee of RMB0.30 million) to PricewaterhouseCoopers Zhong Tian LLP and RMB3.10 million to PricewaterhouseCoopers for their annual auditing services. In addition, the fee that the Company had paid for non-audit services in relation to business consulting amounted to RMB0.51 million.066 067
GUANGSHEN RAILWAY 2021 ANNUAL REPORT(11) Training of Directors and Company SecretaryThe Company places high importance on the continuing training of the Directors, Supervisors and senior management. Upon joining the Board, each Director receives materials on training of directors which contains guidance on conduct and other important matters related to governance. Apart from this, the Company provides the latest Directors’ responsibilities handbook to all Directors to inform them of the latest requirements and amendments of the Listing Rules, and encourages all Directors to participate in related training courses and documents the training record of the Directors. During the reporting period, Mr. Hu Dan and Mr. Zhou Shangde, the new Directors of the Company, and Mr. Lei Chunliang and Mr. Huang Songli, the new Supervisors of the Company, participated in the induction training provided by the compliance lawyer. Mr. Hu Lingling and Mr. Zhou Shangde, Directors of the Company, Mr. Huang Songli and Mr. Lin Wensheng, Employee Representative Supervisors of the Company, participated in the 2021 training for directors, supervisors and senior management of listed companies organized by Shenzhen Securities Regulatory Bureau. Mr. Tang Xiangdong, Deputy General Manager and Secretary of the Board of the Company, successively participated in a series of business trainings organized by domestic and foreign regulatory agencies and stock exchanges in addition to completing not less than 15 hours of relevant professional training.(12) Corporate governance functionsThe Board is responsible for the fulfillment of the following corporate governance responsibilities:1. developing and reviewing the Company’s corporate governance policies and practices;2. reviewing and monitoring the training and continuing professional development of the Company’s Directors and senior management;3. reviewing and monitoring the Company’s policies and regulations with respect to its compliance with laws and regulatory requirements, which include the Listing Rules and other applicable laws and regulatory requirements, and any policies and practices pertaining to the requirements, guidelines and regulations of applicable organizational governance standards;4. developing, reviewing and monitoring the code of conduct and compliance manual (if any) for the Company’s employees and Directors;5. reviewing the Company’s compliance with the Corporate Governance Code as adopted by the Company from time to time, and the disclosure in the corporate governance report in the Company’s annual report.
(13) Shareholders’ rightsIn accordance with the requirements of the Articles, two or more shareholders holding, in aggregate, 10% or more of the shares of the Company carrying the right to vote at the meeting sought shall have the right, by delivery of one or more written requests signed in counterparts through mail or electronic mail to the Board or the company secretary, to require an extraordinary general meeting or a class meeting to be called by the Board for the business specified in such request. The Board shall proceed as soon as possible to convene an extraordinary general meeting or a class meeting after receiving such request. Shareholders individually or collectively holding 3% or more of the shares of the Company carrying the right to vote at the meeting sought shall have the right, by delivery of one or more written requests signed in counterparts through mail or electronic mail to the Board or the company secretary, to require the proposal set forth in the written request to be considered at the meeting sought.Shareholders shall attend general meetings to raise questions or opinions in relation to the results, operation, strategies and/or management of the Company. The Chairman or Deputy Chairman of the Board, appropriate management and administrative personnel and the external auditors of the Company shall attend general meetings to answer questions from the shareholders. Each general meeting shall make reasonable arrangements for a questioning session for the shareholders.Shareholders may raise enquiries to the Board based on the contact information provided by the Company and make proposals at the general meetings. For the contact information, please refer to the chapter “Company Profile and Major Financial Indicators” in this annual report.(14) Investor relationsThe Secretary to the Board of the Company is in charge of the Company’s information disclosure and investor relations. The Company has formulated Working Rules of Secretary to the Board ( ?????????‘), Management Rules on Information Disclosure ( ????????‘) and the Management System for Investor Relations ( ?????????‘). The Company has strictly fulfilled its disclosure obligations and commenced management of investor relations in accordance with the relevant requirements.The Company advocates a corporate culture that respects investors and holds itself accountable to investors. The Company has established a smooth communication channel with investors and has enhanced mutual trust and interaction by disclosing sufficient information to investors, initiating various investor relations activities, and maintaining respect for investors’ right to knowledge and freedom of choice, and rewarding its shareholders.068 069
GUANGSHEN RAILWAY 2021 ANNUAL REPORT1. Information disclosureCredible 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. Ongoing communicationOn 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.(1) 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.(2) 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.(3) Allowing investors and the public to check information such as the Group’s basic information, rules for the Company’s corporate governance, information disclosure documents, and profiles of Directors, Supervisors and the senior management at any time on the Company’s website.(4) Promptly handling and replying to investors’ messages through the “e-interaction” platform developed by SSE for listed companies and investors.
3. Shareholders’ returnsSince its listing, the Company has always insisted on rendering returns to shareholders. Save for 2020 when no cash dividend was declared due to the impact of the COVID-19 epidemic, 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 and a dividend payout ratio of approximately 57.77%(15) Accountability and auditingThe Directors of the Company acknowledge their responsibility for preparing the accounts and supervising the preparation of the accounts for each financial period, so that the accounts can accurately and fairly reflect the business position, results and cash flow of the Company during the period. In the course of preparing the accounts for the year ended at the end of the reporting period, the Directors adopted and consistently applied appropriate accounting policies, made scrupulous judgments and estimates, and prepared the accounts on a going concern basis.The Company announced its annual and interim reports in a timely manner within the prescribed time of 3 months and 2 months, respectively, after the end of the relevant period in accordance with the Listing Rules of SEHK. The Company also announced its annual, interim and quarterly reports promptly in accordance with the Listing Rules of SSE.The responsibility statements of the Directors and the auditors in respect of the preparation of the financial statements of the Company are set out in the “Audit Report” in Chapter 10 “Financial Statements” in this annual report.(16) Risk management and internal controlsA sound and operable risk management and internal control system is the foundation of good corporate governance. The Board of the Company is responsible for the establishment of sound and effective internal controls, the assessment of the effectiveness of such controls, and making accurate disclosures of its internal control assessment report. In accordance with the requirements of laws and regulations such as the Company Law, Securities Law, the Basic Regulations on Enterprise Internal Control ( ‘and its related guidelines, Guidelines for Internal Control of Listed Companies ( ‘), and the United States Sarbanes-Oxley Act, the Board established and enhanced risk control measures of each part of the operation and management of the Company 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.070 071
GUANGSHEN RAILWAY 2021 ANNUAL REPORTUnder the risk management-oriented approach, the Company has strived to establish an internal control system in compliance with international standards and regulatory requirements. Since 2006, the Company has started to establish and assess the efficacy of internal control related to financial reporting in accordance with the requirements of the United States Sarbanes-Oxley Act. Since 2011, the Company has started to consistently apply the Basic Regulations on Enterprise Internal Control ( ??????????‘) and Implementation Guidelines for Enterprise Internal Control ( ??????????‘) 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.The Board is responsible for continuous supervision of the Company’s risk management and internal control system. The Board reviews the efficiencies of the Company and its subsidiaries, its internal control system (including finance and budgeting matters, operation, compliance, and risk management) at least once a year, ensures adequacy of resources, the qualification and experience of accounting staff, the internal audit functions and financial reporting functions, and the staff training sessions received by staff and related budgets. Such systems seek to manage rather than eliminate the risk of failure in achieving business objectives, and allow for only reasonable but not absolute assurance against material misstatements or loss.The Audit Committee was established under the Board with the responsibilities of inspecting and supervising the financial reporting and internal control of the Company, inspecting and assessing the overall risk management of the Company (particularly the risk management and risk control system for decision-marking, events and businesses of significance), and supervising implementation thereof. During the reporting period, the Audit Committee held 6 meetings in total, each with the attendance of senior management and the external auditor and internal auditor of the Company. The Audit Committee shall examine report results of the external auditor and internal auditors of the Company, the compliance of the accounting policies and internal controls adopted by the Company with the requirements of the Listing Rules, as well as review the audits, internal control, risk management and financial statements of the Company. The Company’s quarterly results, interim results and annual results during the reporting period will be recommended to the Board for approval after the meeting and discussions of the Audit Committee.
The Audit Department was established by the Company to operate an independent internal audit system. Under the leadership of the Board and the supervision of the Audit Committee, the Audit Department of the Company is responsible for supervision, examination, evaluation and implementation of internal controls for risk management by the Company and its controlling subsidiaries, coordination of internal control and audit, and conducting independent audits on the adequacy and effectiveness of the Company’s operating and managing activities and internal control system. Audit plans for each year shall be discussed and determined by the Audit Committee, and key auditing results shall be discussed with the Audit Committee each time. The Audit Department must principally report to the General Manager and may report to the Chairman of the Audit Committee directly. All internal audit reports shall be submitted to the Chairman of the Board, General Manager, Chief Financial Officer, audited departments and related management of such departments. The Board and the Audit Committee of the Company will actively monitor the quantity and significance of inspection results submitted by internal audit department, and remedial actions adopted by relative departments.The Company established an internal control system of material information, process and internal control measures for addressing and disseminating price identification-sensitive information. The Company has established systems relating to information disclosure, registration and management of insiders and prevention of misuse and dissemination of sensitive information. The Company has established comprehensive procedures and internal control measures ranging from reporting, identification, auditing and disclosures to the final announcement of inside information, for the purpose of inside information processing and dissemination. The Secretary of the Board assists the Board in managing information in relation to inside information. Meanwhile, the Company carries out information disclosure in a true, accurate, complete, and timely manner pursuant to the laws and regulations and requirements under the Listing Rules, the Articles, and Administrative Measures for the Disclosure of Information of Listed Companies ( ????????‘), so as to ensure equal opportunities of all investors to promptly access relevant Company information.072 073
GUANGSHEN RAILWAY 2021 ANNUAL REPORTDuring the reporting period, the Company continued to implement three lines of defense: “the self-evaluation of the effectiveness of internal controls of business and functional departments, the independent evaluation of the audit department, and the internal audit conducted by the appointed auditors” in accordance with the requirements of laws and regulations of the State and various regulatory institutions, coupled with its own management needs. Meanwhile, the Company provided training and carried out tests for its staff as a whole regarding its risk management and internal control system, in order to enhance risk management awareness of the staff as a whole, strengthen the business departments’ ability to directly assume the responsibilities of risk management and control and achieve a daily operation system for internal control relating to risk management to realize “risk control awareness for all, internal control participation for all, and compliance responsibility for all”, and safeguard the smooth operation of internal control system as a whole.During the reporting period, the Board confirmed that the Company has developed sufficient and adequate identification, management and reporting systems and procedures for the material risks it is subject to in achieving it strategic objectives. The Board continued to monitor risks and receive support from various professional committee and senior management.(17) Material changes in the Articles of AssociationDuring the reporting period, the Company did not make any amendments to the Articles of Association.
Chapter 5Environmental and Social ResponsibilitiesI. EXPLANATION OF ENVIRONMENTAL PROTECTION EFFORTSsubstantial (1) Explanation subsidiaries of environmental which are protection the key efforts discharging taken units by companies announced and by their the environmental protection departmentThe Company’s locomotive maintenance depot in Guangzhou is a key waste discharging unit for water environment and the key unit under supervision for soil pollution of Guangzhou for the year of 2021 as announced by the Bureau of Environmental Protection of Guangzhou Municipality, and has disclosed the environmental protection efforts in accordance to the related requirements and the specific requirements of the local government authorities. For more details, please visit the website of the Bureau of Environmental Protection of Guangzhou Municipality at http://112.94.64.160:8013/gzydzf2-enterprise/qyhjbgs/list2018?open MsgTaskId=202104251726051948641&year=2021.During the reporting period, the Company and its substantial subsidiaries were not subject to administrative penalties due to environmental issues. the (2) key Explanation discharging on the units environmental protection efforts by the companies other than 1⁄2Applicable ? Not applicable fulfilling (3) Relevant environmental information responsibilities conducive to protecting ecology, preventing pollution, and 1⁄2Applicable ? Not applicable(4) effects Measures taken to reduce carbon emissions during the reporting period and their 1⁄2Applicable ? Not applicableII. INFORMATION ON THE WORK TO FULFILL SOCIAL RESPONSIBILITIESDuring 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 2021 disclosed by the Company on the website of SSE (http://www.sse.com.cn) and the HKExnews website of HKSE (http://www.hkexnews.hk) and the website of the Company (http://www. gsrc.com).III. PARTICULAR EFFORTS IN CONSOLIDATING AND EXPANDING THE ACHIEVEMENTS OF POVERTY ALLEVIATION AND RURAL REVITALIZATION1⁄2Applicable ? Not applicable074 075
GUANGSHEN RAILWAY 2021 ANNUAL REPORTChapter 6 Matters of ImportanceI. 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 periodDate and Strict term of Execution compliance Background Type Party Contents of the commitment commitment time limit in timeCommitment Resolve GRGC GRGC and any of its subsidiaries will not — No Yes related to industry engage, directly or indirectly, by any initial public competition means, in any business activities that may offering compete with the railway transportation and related businesses of the Company within the service territory of the Company. After the acquisition of the transportation operational assets and businesses of Guangzhou-Pingshi section, GRGC and any of its subsidiaries will not compete with the Company either.Resolve GRGC GRGC will reduce the number of connected — No Yes connected transactions as much as practicable in its transactions 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.Other Other GRGC GRGC leased the occupied land in the 20 years Yes Yes commitments 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.Other GRGC GRGC has issued a letter of commitment to October 2007 No Yes the Company in October 2007, in relation to the enhancement of the management of undisclosed information.
(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 period1⁄2Achieved 1⁄2Not achieved ? Not applicableII. NON-REGULAR APPROPRIATION OF FUND BY CONTROLLING SHAREHOLDERS AND OTHER RELATED PARTIES DURING THE REPORTING PERIOD (Unit: RMB ten thousand)Additional amount of fund Total amount appropriated repaid during Balance as at Name of shareholder during the the reporting the date of or related party Relationship Opening balance reporting period period Closing balance annual reportShenzhen Pinghu Qun Yi Other related 200 — 100 100 100 Railway Store Loading party and Unloading Company Limited Zengcheng Lihua Stock Other related 1,231 — — 1,231 1,231 Company Limited party Total 1,431 — 100 1,331 1,331Percentage of the total closing balance to the latest audited net assets 0.05% Decision-making procedures for non-regular appropriation of fund by controlling Nil shareholders and other related parties Explanation on the reasons for the additional non-regular appropriation of fund by Not applicable controlling shareholders and other related parties in the period, the investigation on the responsible persons and the measures proposed by the Board Reasons for failure to eliminate the non-regular appropriation of fund as planned, Not applicable accountability and measures proposed by the Board Specific audit opinion, if any, of certified public account on the appropriation of fund No inconsistency was identified between the fund appropriation situation of the Company and the relevant disclosure in the accounting information and financial statements audited by it.076 077
GUANGSHEN RAILWAY 2021 ANNUAL REPORTIII. ILLEGAL GUARANTEE1⁄2Applicable ? Not applicableIV. EXPLANATION OF ACCOUNTANT’S “NON-STANDARD AUDIT REPORT” BY THE COMPANY1⁄2Applicable ? Not applicableV. 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 ERRORS1⁄2Applicable ? Not applicableVI. ENGAGEMENT AND DISMISSAL OF ACCOUNTING FIRM (Unit: RMB ten thousand)Currently engagedName of domestic auditor PricewaterhouseCoopers Zhong Tian LLPRemuneration of domestic auditor 500 Term of engagement of domestic auditor (years) 14 Name of international auditor PricewaterhouseCoopers Remuneration of international auditor 310 Term of engagement of international auditor (years) 19Name RemunerationAuditor for internal control PricewaterhouseCoopers Zhong Tian LLP 30 Financial advisor Deloitte Touche Tohmatsu 19VII. RISK OF DELISTING1⁄2Applicable ? Not applicable
VIII. BANKRUPTCY AND RESTRUCTURING1⁄2Applicable ? Not applicableIX. MATERIAL LITIGATION AND ARBITRATION1⁄2 The Company had material litigation and arbitration during this year? The Company did not have any material litigation and arbitration during this yearX. PENALTIES IMPOSED ON THE LISTED COMPANY AND ITS DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT, CONTROLLING SHAREHOLDERS, AND DE FACTO CONTROLLER, AND THE RECTIFICATION THEREOF1⁄2Applicable ? Not applicableXI. EXPLANATION OF THE INTEGRITY OF THE COMPANY AND ITS CONTROLLING SHAREHOLDERS AND DE FACTO CONTROLLER DURING THE REPORTING PERIOD1⁄2Applicable ? Not applicableXII. MATERIAL RELATED PARTY TRANSACTIONS(1) Related party transactions related to daily operationsTo facilitate the operations of the Company, on 30 October 2019, the Company and CSRG (including GRGC and its subsidiaries) entered into a comprehensive services framework agreement for a term of three years. The agreement was approved by the independent shareholders at the extraordinary general meeting of the Company on 23 December 2019. GRGC is the Company’s largest shareholder which owns 37.12% of the Company’s issued share capital. CSRG is the de facto controller of GRGC. Therefore, CSRG is a connected person of the Company according to the Listing Rules.The related party transactions related to daily operations entered into by the Company during the reporting period are set out in Note 40(c) to the financial statements. The Company confirms that the following transactions constitute connected transactions (including continuing connected transactions) described under Chapter 14A of the Listing Rules of SEHK, and at the same time constitute related party transactions described under Note 40(c) to the financial statements.078 079
GUANGSHEN RAILWAY 2021 ANNUAL REPORTWith regard to the following transactions, the Company confirmed that it has complied with the rules andrequirements of Chapter 14A of the Listing Rules of SEHK, and has been implemented in accordance withthe comprehensive service framework agreement entered into between the Company and CSRG and strictlycomplied with the pricing principles of the relevant transactions.1. Transactions conducted with GRGC and its subsidiaries(Unit: RM B thousand)Parties RelationshipType oftransactionDescription oftransactionBasis of pricing for thetransactionAmount oftransactionGRGC and itssubsidiariesLargest shareholder andits subsidiariesProvision ofservicesTrain services By consultation according tofull cost pricing, or settledaccording to the pricesdetermined by CSRG3,323,844GRGC and itssubsidiariesLargest shareholder andits subsidiariesProvision ofservicesRailway networksettlement servicesthrough CSRGSettled according to the pricesdetermined by CSRG1,325,614Subsidiaries of GRGC Subsidiaries of the largestshareholderProvision ofservicesRailway operation services Based on agreement accordingto cost plus pricing865,220GRGC and itssubsidiariesLargest shareholder andits subsidiariesSales of goods Sales of materials andsuppliesBy consultation according tofull cost pricing89,042GRGC and itssubsidiariesLargest shareholder andits subsidiariesReceipt ofservicesTrain services By consultation according tofull cost pricing, or settledaccording to the pricesdetermined by CSRG796,142GRGC and itssubsidiariesLargest shareholder andits subsidiariesReceipt ofservicesRailway networksettlement servicesthrough CSRGSettled according to the pricesdetermined by CSRG2,896,222GRGC and itssubsidiariesLargest shareholder andits subsidiariesReceipt ofservicesRepair and maintenanceservicesBy consultation according tofull cost pricing311,080GRGC and itssubsidiariesLargest shareholder andits subsidiariesPurchase ofgoodsPurchase of materials andsuppliesBy consultation according tofull cost pricing770,683GRGC and itssubsidiariesLargest shareholder andits subsidiariesReceipt ofservicesConstruction work services Based on fixed budget amountapproved for nationalrailway works172,592
080 0812. Transactions conducted with CSRG and other railway enterprises(Unit: RM B thousand)Parties RelationshipType oftransactionDescription oftransactionBasis of pricing for thetransactionAmount oftransactionCSRG and other railwayenterprisesDe facto controller of thelargest shareholder andits subsidiariesProvision ofservicesTrain services By consultation according tofull cost pricing, or settledaccording to the pricesdetermined by CSRG138,219CSRG and other railwayenterprisesDe facto controller of thelargest shareholder andits subsidiariesProvision ofservicesRailway networksettlement servicesthrough CSRGSettled according to the pricesdetermined by CSRG2,275,132CSRG and other railwayenterprisesDe facto controller of thelargest shareholder andits subsidiariesProvision ofservicesRailway operation services Based on agreement accordingto cost plus pricing2,232,346CSRG and other railwayenterprisesDe facto controller of thelargest shareholder andits subsidiariesProvision ofservicesTruck maintenanceservicesSettled according to the pricesdetermined by CSRG470,143CSRG and other railwayenterprisesDe facto controller of thelargest shareholder andits subsidiariesProvision ofservicesApartment leasing services By consultation according tofull cost pricing2,064CSRG and other railwayenterprisesDe facto controller of thelargest shareholder andits subsidiariesProvision ofservices— — 607CSRG and other railwayenterprisesDe facto controller of thelargest shareholder andits subsidiariesReceipt ofservicesTrain services By consultation according tofull cost pricing, or settledaccording to the pricesdetermined by CSRG58,121CSRG and other railwayenterprisesDe facto controller of thelargest shareholder andits subsidiariesReceipt ofservicesRailway networksettlement servicesthrough CSRGSettled according to the pricesdetermined by CSRG1,769,170CSRG and other railwayenterprisesDe facto controller of thelargest shareholder andits subsidiariesReceipt ofservicesRepair and maintenanceservicesBy consultation according tofull cost pricing28,185CSRG and other railwayenterprisesDe facto controller of thelargest shareholder andits subsidiariesPurchase ofgoodsPurchase of materials andsuppliesBy consultation according tofull cost pricing3,203
GUANGSHEN RAILWAY 2021 ANNUAL REPORT(2) Related party transactions related to acquisitions or disposals of assets or equity?Applicable ? Not applicable(3) Material related party transactions in relation to joint external investmentsOn 26 January 2021, the Proposal on the Increase of Capital Contribution to China Railway Express Co., Ltd.was considered and approved at the sixth meeting of the ninth session of the Board of the Company. Fordetails of such connected transaction, including the transaction parties and their related relationship, thetransaction and its purpose, the total consideration and the terms as well as the nature of interests of therelated parties in the transaction, please refer to the relevant announcements disclosed by the Company onthe website of SSE (http://www.sse.com.cn), the HKExnews website of HKSE (http://www.hkexnews.hk) andthe website of the Company (http://www.gsrc.com).(4) Related claims and debtsPlease refer to “II. NON-REGULAR APPROPRIATION OF FUND BY CONTROLLING SHAREHOLDERS AND OTHERRELATED PARTIES DURING THE REPORTING PERIOD” in this chapter for details.(5) Financial business between the Company and any related financial company, anyfinancial company controlled by the Company and any related party?Applicable ? Not applicable(6) Contracts entered into with the largest shareholder and its subsidiariesExcept as disclosed in this annual report, during the reporting period, none of the Company or its subsidiarieshave entered into other material contracts with the largest shareholder or its subsidiaries.(7) Confirmation of continuing connected transactions by Independent DirectorsThe Company instituted its internal control procedures to ensure that continuing connected transactionswere conducted in compliance with the relevant connected transaction requirements pursuant to the ListingRules of SEHK. The internal auditors of the Company also reviewed these transactions and ensured theadequacy and effectiveness of the internal control procedures, and provided its findings to the IndependentNon-executive Directors. After making appropriate enquiries with the management, the IndependentNonexecutive Directors of the Company confirmed that the continuing connected transactions entered into bythe Company during the reporting period were entered into in the ordinary and usual course of its businessand conducted on normal commercial terms, in accordance with the relevant agreements governing them onterms that are fair and reasonable and in the interests of the Company and its shareholders as a whole, anddid not exceed the caps disclosed in the previous announcements.
082 083(8) Confirmation of continuing connected transactions by the auditorsThe auditors of the Company have carried out procedures on the connected transactions for the year endedat the end of the reporting period in accordance with the Hong Kong Standard on Assurance Engagements3000 “Assurance Engagement Other Than Audits or Reviews of Historical Financial Information” and withreference to Practice Note 740 “Auditor’s Letter on Continuing Connected Transactions under the Hong KongListing Rules” issued by the Hong Kong Institute of Certified Public Accountants, and reported that, withrespect to the above connected transactions:(i) nothing has come to the attention of the Company’s auditors that would cause them to believe that thedisclosed continuing connected transactions have not been approved by the Board of the Company;(ii) for transactions involving the provision of goods or services by the Company, nothing has come to theattention of the Company’s auditors that would cause them to believe that such transactions were not,in all material respects, in accordance with the pricing policies of the Company;(iii) nothing has come to the attention of the Company’s auditors that would cause them to believe thatsuch transactions were not entered into, in all material respects, in accordance with the terms of theagreements governing such transactions;(iv) with respect to the aggregate amount of each of the continuing connected transactions, nothing hascome to the attention of the Company’s auditors that would cause them to believe that the aggregateamounts of such continuing connected transactions have exceeded the maximum aggregate annual capsas disclosed in the previous announcements issued by the Company.XIII. MATERIAL CONTRACTS AND THE IMPLEMENTATION THEREOF(1) Trust, contracted businesses and leasing affairs?Applicable ? Not applicable(2) Guarantees or financial assistance?Applicable ? Not applicable(3) Entrusted cash asset management carried out by other person(s)?Applicable ? Not applicable
GUANGSHEN RAILWAY 2021 ANNUAL REPORT(4) PledgesDuring the reporting period, the largest shareholder of the Company and its de facto controller havenot pledged the interests in all or part of the shares of the Company held as support for the Company’sindebtedness, guarantees or other liabilities.(5) Loan agreements and their performanceDuring the reporting period, the Company and its subsidiaries did not enter into any loan agreements orviolate any terms of any loan agreements which had a significant impact on its operation.(6) Other material contracts?Applicable ?Not applicableXIV. EXPLANATION OF OTHER MAJOR EVENTS OF SIGNIFICANTIMPORTANCE TO INVESTORS’ VALUE JUDGMENTS AND INVESTMENTDECISIONS?Applicable ?Not applicable
Chapter 7Changes in Ordinary Share Capital andParticulars of Shareholders084 085I. PARTICULARS OF CHANGES TO ORDINARY SHARE CAPITAL(1) Changes in ordinary shareDuring the reporting period, there was no change in the Company’s total number of ordinary shares or to thestructure of its share capital.(2) Changes in shares with selling restrictions?Applicable ?Not applicableII. PARTICULARS OF SECURITIES ISSUED AND LISTINGS?Applicable ?Not applicableIII. PARTICULARS OF SHAREHOLDERS AND DE FACTO CONTROLLER(1) Total number of shareholdersTotal number of ordinary shareholders as of the end of the reporting period 193,087Total number of ordinary shareholders as of the end of the previous month before thedate of disclosure of the annual report 186,755
GUANGSHEN RAILWAY 2021 ANNUAL REPORT(2) Shareholdings of the top ten shareholders and top ten holders of tradable shares (orholders of shares without selling restrictions) as of the end of the reporting periodUnit: sharesParticulars of the shareholdingof the top ten shareholdersName of shareholder (in full)Number ofshares heldat the end ofthe periodPercentage(%)Number ofshares heldwith sellingrestrictionsShares inpledge or frozen Nature ofStatus Number shareholderChina Railway Guangzhou Group Co., Ltd. 2,629,451,300 37.12 — Nil — State-owned legal personHKSCC NOMINEES LIMITED (Note) 1,467,668,629 20.72 — Nil — Foreign legal personHong Zejun 129,000,000 1.82 — Nil — Domestic natural personLin Naigang 124,000,000 1.75 — Nil — Domestic natural personLi Wei 48,290,901 0.68 — Nil — Domestic natural personTaiyuan Iron and Steel (Group) Co., Ltd. 29,528,189 0.42 — Nil — State-owned legal personHarvest Fund — Agricultural Bank of China —Harvest CSI Financial Asset ManagementPlan27,801,600 0.39 — Nil — OtherYinhua Fund — Agricultural Bank of China —Yinhua CSI Financial Assets ManagementScheme26,814,300 0.38 — Nil — OtherZhong Ou AMC — Agricultural Bank ofChina — Zhong Ou CSI Financial AssetsManagement Scheme26,436,800 0.37 — Nil — OtherSouthern Asset Management — AgriculturalBank of China — Southern CSI FinancialAssets Management Scheme24,907,300 0.35 — Nil — Other
086 087Top ten holders of shares without selling restrictionsName of shareholderNumber of sharesheld without sellingrestrictionsClass and number of sharesClass NumberChina Railway Guangzhou Group Co., Ltd. 2,629,451,300 RMB ordinary shares 2,629,451,300HKSCC NOMINEES LIMITED (Note) 1,467,668,629 RMB ordinary shares 50,612,330Overseas listedforeign shares1,417,056,299Hong Zejun 129,000,000 RMB ordinary shares 129,000,000Lin Naigang 124,000,000 RMB ordinary shares 124,000,000Li Wei 48,290,901 RMB ordinary shares 48,290,901Taiyuan Iron and Steel (Group) Co., Ltd. 29,528,189 RMB ordinary shares 29,528,189Harvest Fund — Agricultural Bank of China— Harvest CSI Financial Asset Management Plan27,801,600 RMB ordinary shares 27,801,600Yinhua Fund — Agricultural Bank of China— Yinhua CSI Financial Assets Management Scheme26,814,300 RMB ordinary shares 26,814,300Zhong Ou AMC — Agricultural Bank of China— Zhong Ou CSI Financial Assets Management Scheme26,436,800 RMB ordinary shares 26,436,800Southern Asset Management — Agricultural Bank of China— Southern CSI Financial Assets Management Scheme24,907,300 RMB ordinary shares 24,907,300Explanation of designated repurchase account amongthe top ten shareholdersNil.Explanation on the above-mentioned shareholders’voting rights by and on behalf of others, andabstention from voting rightsNil.Statement regarding the connected relationship or actingin concert arrangements of the above shareholdersThe Company is not aware of any of the above shareholders beingconnected or acting in concert as defined in the “AdministrativeMeasures on Acquisitions of Listed Companies (????????????)”.Note: HKSCC NOMINEES LIMITED represents ? ? ? ? ? ??? ? ??? ? ? ?, holding 50,612,330 A Shares and1,417,056,299 H Shares of the Company. These shares were held on behalf of various clients respectively.The shareholdings and selling restrictions of the top ten shareholders with selling restrictions?Applicable ?Not applicable
GUANGSHEN RAILWAY 2021 ANNUAL REPORT(3) So far as the Directors, Supervisors and senior management of the Companyare aware, as of the end of the reporting period, the following persons, other thanDirectors, Supervisors and senior management of the Company, held interests orshort positions in the shares and underlying shares of the Company as recorded in theregister required to be kept under Section 336 of Part XV of the SFO, as follows:Unit: sharesName of shareholderClass ofsharesNumber ofshares held CapacityPercentage ofshare capital ofthe same class(%)Percentageof total sharecapital (%)China Railway Guangzhou GroupCo., Ltd.A Shares 2,629,451,300 (L) Beneficial owner 46.52(L) 37.12(L)Pacific Asset Management Co., Ltd. H Shares 185,794,000 (L) Investment manager 12.98(L) 2.62(L)Kopernik Global Investors LLC H Shares 128,977,054 (L) Investment manager 9.01(L) 1.82(L)Pandanus Associates Inc. H Shares 128,512,000 (L) Interest of a corporationcontrolled by the largestshareholder8.98(L) 1.81(L)Brown Brothers Harriman & Co. H Shares 99,430,400 (L) Approved lending agency 6.95(L) 1.40(L)99, 430,400 (P) 6.95(P) 1.40(P)Note: The letter ‘L’ denotes a long position; the letter ‘P’ denotes a lending pool.(4) Strategic investors or ordinary legal person becoming top 10 shareholders by wayof placing of new shares?Applicable ?Not applicable
088 089IV. INFORMATION OF THE LARGEST SHAREHOLDER AND ITS DE FACTOCONTROLLER(1) Information on the largest shareholder1. Legal personName GRGCPerson in charge or legalrepresentativeWu YongDate of incorporation 5 December 1992Principal operations Organization and management of railway passenger and freighttransportation, technologies and other industrial development etc.Equity interests in other domesticand overseas listed controlling andinvested companies during thereporting periodNil2. Chart on the property rights and controlling relationship between the Company and its largestshareholderGRGC 37.12% The Company
GUANGSHEN RAILWAY 2021 ANNUAL REPORT(2) Information on the de facto controller of the largest shareholder1. Legal personName CSRGPerson in charge or legalrepresentativeLu DongfuDate of incorporation 14 March 2013Principal operations Diversified operations with railway transportation services ofpassengers and freights as its main business.Equity interests in other domesticand overseas listed controlling andinvested companies during thereporting periodCSRG is the de facto controller of China Railway Tielong ContainerLogistics Co. Ltd. (600125), Daqin Railway Co. Ltd. (601006), Beijing-Shanghai High Speed Railway Co., Ltd. (601816), Beijing TiekeShougang Railway-Tech Co., Ltd. (688569), Gemac EngineeringMachinery Co., Ltd. (301048), and China Railway Special CargoLogist ics Co., Ltd. (001213).2. Chart on the property rights and controlling relationship amongst the Company and the largestshareholder of the Company and its de facto controllerCSRG GRGC 100% 37.12% The CompanyV. CIRCUMSTANCES WHERE THE ACCUMULATIVE NUMBER OF PLEDGEDSHARES OF THE COMPANY’S LARGEST SHAREHOLDER AND THE PERSONSACTING IN CONCERT WITH IT ACCOUNTS FOR MORE THAN 80% OF THESHARES HELD BY THEM IN THE COMPANY?Applicable ?Not applicableVI. OTHER CORPORATE SHAREHOLDERS WITH A SHAREHOLDING OF 10%OR ABOVE?Applicable ?Not applicable
090 091VII. EXPLANATION OF REDUCED SHAREHOLDING?Applicable ?Not applicableVIII. PUBLIC FLOATAs 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$1.33 per Share, whichis equal to the closing price of the Company’s H Shares as at the end of the reporting period, the marketcapitalization of the public float was approximately HK$5.924 billion. The public float of the Company was incompliance with the requirements of the relevant rules on the sufficiency of public float.IX. DUPLICATIONDuring the reporting period, the Directors, chief executives and such other persons of the Company did nothave duplicated interests.X. REPURCHASE, SALE OR REDEMPTION OF THE LISTED SHARES OF THECOMPANYAs of the end of the reporting period, there was no repurchase, sale or redemption by the Company, or anyof its subsidiaries, of the listed shares of the Company.XI. PRE-EMPTIVE RIGHTSUnder the Articles and the PRC laws, there is no pre-emptive right which requires the Company to offer newshares to its existing shareholders on a pro rata basis.XII. TRANSACTIONS INVOLVING ITS OWN SECURITIESAs of the end of the reporting period, neither the Company nor its subsidiaries had issued or granted anyconvertible securities, options, warrants or other similar rights, or had any redeemable securities or shareoption schemes.XIII. TAX DEDUCTION FOR HOLDERS OF LISTED SECURITIESAs of the end of the reporting period, holders of listed securities of the Company were not entitled to obtainany tax relief due to their holding of such securities pursuant to the laws of the PRC.
Chapter 8Information Regarding Preference SharesGUANGSHEN RAILWAY 2021 ANNUAL REPORT?Applicable ?Not applicable
Chapter 9Information Regarding Bonds092 093?Applicable ?Not applicable
Chapter 10Financial StatementsGUANGSHEN RAILWAY 2021 ANNUAL REPORTIndependent Auditor’s ReportTo the Shareholders of Guangshen Railway Company Limited(incorporated in the People’s Republic of China with limited liability)OPINIONWhat we have auditedThe consolidated financial statements of Guangshen Railway Company Limited (the “Company”) and itssubsidiaries (the “Group”) which are set out on pages 100 to 196 comprise:• the consolidated balance sheet as at 31 December 2021;• the consolidated comprehensive income statement for the year then ended;• the consolidated statement of changes in equity for the year then ended;• the consolidated cash flow statement for the year then ended; and• the notes to the consolidated financial statements, which include a summary of significant accountingpolicies and other explanatory information.Our opinionIn our opinion, the consolidated financial statements give a true and fair view of the consolidated financialposition of the Group as at 31 December 2021, and of its consolidated financial performance and itsconsolidated cash flows for the year then ended in accordance with International Financial ReportingStandards (“IFRSs”) and have been properly prepared in compliance with the disclosure requirements of theHong Kong Companies Ordinance.
094 095BASIS FOR OPINIONWe conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilitiesunder those standards are further described in the Auditor’s Responsibilities for the Audit of the ConsolidatedFinancial Statements section of our report.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouropinion.IndependenceWe are independent of the Group in accordance with the International Code of Ethics for ProfessionalAccountants (including International Independence Standards) issued by the International Ethics StandardsBoard for Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordancewith the IESBA Code.KEY AUDIT MATTERKey audit matters are those matters that, in our professional judgment, were of most significance in our auditof the consolidated financial statements of the current period. These matters were addressed in the contextof our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and wedo not provide a separate opinion on these matters.
GUANGSHEN RAILWAY 2021 ANNUAL REPORTKey audit matters identified in our audit are set out as follows:• Provision for impairment of trade receivables• Goodwill impairment assessmentKey Audit Matter How our audit addressed the Key Audit MatterProvision for impairment of trade receivablesRefer to notes 3.1(b)(ii), 4(a) and 20 to the consolidatedfinancial statements.As at 31 December 2021, the Group had gross balanceof trade receivables of RMB4,419,925,000, against whichexpected credit loss (“ECL”) provision of RMB23,751,000were held.Management categorised the trade receivables portfoliobased on credit risk characteristics, and recognisedprovision for credit losses on the basis of exposure atdefault and ECL rates which include consideration ofhistorical credit loss experience, current status andforward-looking information.We identified this as a key audit matter due to thesignificance of the trade receivables balance and theassessment of the ECL provision involves significantaccounting estimations and judgements.The procedures we performed included:(i) Obtained an understanding of the internal controland assessment process of provision for impairmentof trade receivables and assessed the inherent risk ofmaterial misstatement by considering the degree ofestimation uncertainty and level of other inherent riskfactors such as complexity and subjectivity.(ii) Evaluated and validated key controls over tradereceivables portfolio grouping and ECL determination.(iii) Evaluated whether the models and methodologiesused by management to determine ECL were inaccordance with accounting standards.(iv) Evaluated the reasonableness of the judgementmanagement made in grouping trade receivableportfolios by assessing credit risk characteristics.(v) Evaluated the appropriateness of historical periodselection and evaluated the reliability of the key datainput to calculate historical default rate, includinghistorical credit loss experience and current statusof each portfolio, trade receivables lifetime recoveryinformation and other relevant data.(vi) Understood and evaluated the reasonableness of thefactors used in making forward-looking estimation,including the risk of economy downturn, externalmarket environment, technical environment andchanges in, customer’s condition.(vii) Obtained ECL determination documents of eachportfolio of trade receivables and examined theirmathematical accuracy.Based on the work performed, management’s estimatesand judgments assessing ECL provision and result of theassessment are supported by the available evidences.
096 097Key Audit Matter How our audit addressed the Key Audit MatterGoodwill impairment assessmentRefer to notes 2.8, 4(b) and 9 to the consolidated financialstatements.As at 31 December 2021, the Group had a balance ofgoodwill of RMB281,255,000 arising from the Company’sacquisition of Yangcheng Railway Business in 2007.Goodwill impairment reviews are undertaken bymanagement at least annually or more frequently ifevents or changes in circumstances indicate a potentialimpairment. As a result of the impairment test at the yearend, management determined that the recoverable amountof the cash generating unit (“CGU”), to which the goodwillwas allocated, exceeded its carrying value and thereforeno impairment was recorded. The recoverable amount ofCGU was determined based on value-in-use using cash flowprojections.Management’s impairment assessment involves keyassumptions, including revenue growth rate, long-termgrowth rate, gross margin and pre-tax discount rate.We identified this as a key audit matter due to the degreeof the significant accounting estimations and judgementsinvolved in the impairment assessment and the size of thegoodwill.The procedures we performed included:(i) Obtained an understanding of the internal controland assessment process of goodwill impairment andassessed the inherent risk of material misstatementby considering the degree of estimation uncertaintyand level of other inherent risk factors such ascomplexity and subjectivity.(ii) Evaluated and tested the key controls over theimpairment assessment of goodwill, includingcontrols over the development of model andsignificant assumptions used in the impairment test.(iii) Evaluated the reliability of the plan and forecast bycomparing the forecast used in the prior year modelto the actual performance of the business in thecurrent year.(iv) Tested the reasonableness and relevancy of theunderlying data used and the mathematical accuracyof the calculations in the cash flow projections.(v) Evaluated the reasonableness of revenue growthrate, long-term growth rate, gross margin based onhistorical business performance taking into accountfuture business plan, the market developments andwhether these assumptions were consistent withevidence obtained in other areas of the audit.(vi) Utilised specialists with specialised skill andknowledge to assist in the evaluation of theappropriateness of the impairment assessmentmethodology and pre-tax discount rate adopted bythe management.Based on the work performed, management’s estimatesand judgments in goodwill impairment assessment aresupported by the available evidences.
GUANGSHEN RAILWAY 2021 ANNUAL REPORTOTHER INFORMATIONThe directors of the Company are responsible for the other information. The other information comprises allof the information included in the annual report other than the consolidated financial statements and ourauditor’s report thereon.Our opinion on the consolidated financial statements does not cover the other information and we do notexpress any form of assurance conclusion thereon.In connection with our audit of the consolidated financial statements, our responsibility is to read theother information and, in doing so, consider whether the other information is materially inconsistent withthe consolidated financial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.If, based on the work we have performed, we conclude that there is a material misstatement of this otherinformation, we are required to report that fact. We have nothing to report in this regard.RESPONSIBILITIES OF DIRECTORS AND AUDIT COMMITTEE FOR THECONSOLIDATED FINANCIAL STATEMENTSThe directors of the Company are responsible for the preparation of the consolidated financial statementsthat give a true and fair view in accordance with IFRSs and the disclosure requirements of the Hong KongCompanies Ordinance, and for such internal control as the directors determine is necessary to enable thepreparation of consolidated financial statements that are free from material misstatement, whether due tofraud or error.In preparing the consolidated financial statements, the directors are responsible for assessing the Group’sability to continue as a going concern, disclosing, as applicable, matters related to going concern and usingthe going concern basis of accounting unless the directors either intend to liquidate the Group or to ceaseoperations, or have no realistic alternative but to do so.Audit Committee is responsible for overseeing the Group’s financial reporting process.
098 099AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATEDFINANCIAL STATEMENTSOur objectives are to obtain reasonable assurance about whether the consolidated financial statementsas a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’sreport 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 thisreport. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conductedin accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arisefrom fraud or error and are considered material if, individually or in the aggregate, they could reasonablybe expected to influence the economic decisions of users taken on the basis of these consolidated financialstatements.As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professionalscepticism throughout the audit. We also:• Identify and assess the risks of material misstatement of the consolidated financial statements, whetherdue to fraud or error, design and perform audit procedures responsive to those risks, and obtain auditevidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detectinga material misstatement resulting from fraud is higher than for one resulting from error, as fraud mayinvolve 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 proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Group’s internal control.• Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates 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 orconditions that may cast significant doubt on the Group’s ability to continue as a going concern. If weconclude that a material uncertainty exists, we are required to draw attention in our auditor’s report tothe 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 ourauditor’s report. However, future events or conditions may cause the Group to cease to continue as agoing concern.
GUANGSHEN RAILWAY 2021 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 underlyingtransactions and events in a manner that achieves fair presentation.• Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial statements. Weare responsible for the direction, supervision and performance of the group audit. We remain solelyresponsible for our audit opinion.We communicate with Audit Committee regarding, among other matters, the planned scope and timing of theaudit and significant audit findings, including any significant deficiencies in internal control that we identifyduring our audit.We also provide Audit Committee with a statement that we have complied with relevant ethical requirementsregarding independence, and to communicate with them all relationships and other matters that mayreasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threatsor safeguards applied.From the matters communicated with Audit Committee, we determine those matters that were of mostsignificance in the audit of the consolidated financial statements of the current period and are therefore thekey audit matters. We describe these matters in our auditor’s report unless law or regulation precludes publicdisclosure about the matter or when, in extremely rare circumstances, we determine that a matter should notbe communicated in our report because the adverse consequences of doing so would reasonably be expectedto outweigh the public interest benefits of such communication.The engagement partner on the audit resulting in this independent auditor’s report is Wenping Yao.PricewaterhouseCoopersCertified Public AccountantsHong Kong, 30 March 2022
100 101CONSOLIDATED BALANCE SHEETAS AT 31 DECEMBER 2021(All amounts in Renminbi thousands)As at 31 DecemberNotes 2021 2020ASSETSNon-current assetsFixed assets — net 6 24,010,161 23,016,415Right-of-use assets 8 3,116,382 3,183,470Construction-in-progress 7 1,588,935 2,778,676Prepayments for fixed assets and construction-in-progress 39,380 36,744Goodwill 9 281,255 281,255Investments in associates 11 225,338 196,848Deferred tax assets 12 698,396 422,954Long-term prepaid expenses 13 64,140 43,889Financial assets at fair value through othercomprehensive income 15 463,696 377,631Long-term deposits 16 160,000 160,000Long-term receivable 17 20,226 23,73430,667,909 30,521,616Current assetsMaterials and supplies 18 271,583 296,406Trade receivables 19 4,396,174 3,721,677Prepayments and other receivables 20 508,294 695,522Short-term deposits 16 60,000 60,000Cash and cash equivalents 21 1,499,462 1,485,2326,735,513 6,258,837Tota l assets 37,403,422 36,780,453EQUITY AND LIABILITIESShare capital 22 7,083,537 7,083,537Share premium 11,562,657 11,562,657Other reserves 23 3,288,655 3,266,425Retained earnings 5,307,100 6,280,219Capital and reserves attributable to the Company’sequity holders 27,241,949 28,192,838Non-controlling interests (37,513) (36,669)Total equity 27,204,436 28,156,169
GUANGSHEN RAILWAY 2021 ANNUAL REPORTAs at 31 DecemberNotes 2021 2020LiabilitiesNon-current liabilitiesLease liabilities 8 1,320,835 1,315,693Deferred tax liabilities 12 56,420 58,913Deferred income related to government grants 24 781,563 104,9392,158,818 1,479,545Current liabilitiesTrade and bill payables 26 3,112,710 2,073,922Contract liabilities 27 112,442 215,305Payables for fixed assets and construction-in-progress 2,776,708 2,914,696Dividends payable 13,746 13,749Income tax payable 2,597 697Current portion of lease liabilities 8 63,249 61,880Accruals and other payables 28 1,955,175 1,849,656Other current liability 3,541 14,8348,040,168 7,144,739Tota l liabilities 10,198,986 8,624,284Tota l equity and liabilities 37,403,422 36,780,453The above consolidated balance sheet should be read in conjunction with the accompanying notes.The financial statements on pages 100 to 196 were approved by the Board of Directors on 30 March 2022and were signed on its behalf.Wu Yong Hu LinglingDirector Director
102 103CONSOLIDATED COMPREHENSIVE INCOME STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2021(All amounts in Renminbi thousands, except for earnings per share data)Year ended 31 DecemberNotes 2021 2020Revenue from Railroad BusinessesPassenger 6,169,109 4,114,522Freight 2,035,437 1,698,576Railway network usage and other transportation relatedservices 10,814,585 9,572,33019,019,131 15,385,428Revenue from Other Businesses 1,187,026 963,938Total revenue 20,206,157 16,349,366Operating Expenses:Railroad BusinessesBusiness tax and surcharge (43,289) (29,443)Employee benefits 30 (8,147,798) (7,185,147)Equipment leases and services (6,749,319) (4,971,366)Materials and supplies (1,190,697) (1,064,667)Repairs and facilities maintenance costs, excludingmaterials and supplies (1,189,762) (1,147,603)Depreciation of right-of-use assets 8 (57,078) (54,179)Depreciation of fixed assets 6 (1,755,502) (1,631,331)Cargo logistics and outsourcing service charges (595,048) (462,708)Utility and office expenses (89,491) (88,731)Others 31 (657,303) (607,130)(20,475,287) (17,242,305)Other BusinessesEmployee benefits 30 (541,665) (499,288)Materials and supplies (306,890) (232,112)Depreciation of right-of-use assets 8 (11,332) (11,332)Depreciation of fixed assets 6 (30,608) (30,848)Utility and office expenses (37,762) (42,933)Others 31 (171,098) (127,972)(1,099,355) (944,485)Total operating expenses (21,574,642) (18,186,790)Derecognition of land use right — 1,188,645Reversal of impairment losses on financial assets, net 40,613 358Other gains/(losses) — net 32 134,718 (3,841)Operating Loss (1,193,154) (652,262)Finance costs — net 33 (74,576) (60,645)Share of results of associates, net of tax 11 18,144 22,162Loss before income tax (1,249,586) (690,745)Income tax credit 34 275,623 132,645Loss for the year (973,963) (558,100)
GUANGSHEN RAILWAY 2021 ANNUAL REPORTYear ended 31 DecemberNotes 2021 2020Loss for the year (973,963) (558,100)Other comprehensive income — —Tota l comprehensive income for the year, net of tax (973,963) (558,100)Loss attributable to:Equity holders of the Company (973,119) (557,876)Non-controlling interests (844) (224)(973,963) (558,100)Total comprehensive income attributable to:Equity holders of the Company (973,119) (557,876)Non-controlling interests (844) (224)(973,963) (558,100)Loss per share for loss attributable to the equityholders of the Company during the yearBa sic loss per share 35 RMB(0.14) RMB (0.08)Di luted loss per share 35 RMB(0.14) RMB (0.08)The above consolidated comprehensive income statement should be read in conjunction with theaccompanying notes.Wu Yong Hu LinglingDirector Director
104 105CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2021(All amounts in Renminbi thousands)Attributable to equity holders of the CompanyShare capitalSharepremiumStatutorysurplusreserveDiscretionarysurplusreserveOtherreservesRetainedearnings TotalNoncontrollinginterests Total equity(Note 23) (Note 23) (Note 23) (Note 23)Balance at 1 January 2020 7,083,537 11,562,657 2,780,425 304,059 181,941 7,263,107 29,175,726 (36,445) 29,139,281Total comprehensive income — — — — — (557,876) (557,876) (224) (558,100)Loss for the year — — — — — (557,876) (557,876) (224) (558,100)Other comprehensive income (Note 23) — — — — — — — — —Special reserve — Safety Production Fund(Note 23) — — — — — — — — —Appropriation — — — — 281,277 (281,277) — — —Utilisation — — — — (281,277) 281,277 — — —Transaction with owners: — — — — — (425,012) (425,012) — (425,012)Dividend relating to 2019 (Note 36) — — — — — (425,012) (425,012) — (425,012)Balance at 31 December 2020 7,08 3,537 11,56 2,657 2,78 0,425 30 4,059 18 1,941 6,28 0,219 28,19 2,838 (3 6,669) 28,15 6,169Balance at 1 January 2021 7,083,537 11,562,657 2,780,425 304,059 181,941 6,280,219 28,192,838 (36,669) 28,156,169Total comprehensive income — — — — — (973,119) (973,119) (844) (973,963)Loss for the year — — — — — (973,119) (973,119) (844) (973,963)Other comprehensive income (Note 23) — — — — — — —Special reserve — Safety Production Fund(Note 23) — — — — 11,884 — 11,884 — 11,884Appropriation — — — — 126,524 — 126,524 — 126,524Utilisation — — — — (114,640) — (114,640) — (114,640)Appropriations from retained earnings(Note 23) — — — — — — — — —Others (Note 11) — — — — 10,346 — 10,346 — 10,346Balance at 31 December 2021 7,08 3,537 11,56 2,657 2,78 0,425 30 4,059 20 4,171 5,30 7,100 27,24 1,949 (3 7,513) 27,20 4,436The above consolidated statement of changes in equity should be read in conjunction with the accompanyingnotes.Wu Yong Hu LinglingDirector Director
GUANGSHEN RAILWAY 2021 ANNUAL REPORTCONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2021(All amounts in Renminbi thousands)Year ended 31 DecemberNotes 2021 2020Cash flows from operating activitiesCash generated from operations 37(a) 1,002,880 1,587,621Income tax paid (412) (251,448)Net cash generated from operating activities 1,002,468 1,336,173Cash flows from investing activitiesProceeds from disposal of fixed assets 37(b) 29,196 32,599Proceeds from disposal of other long-term assets 93,802 132,086Payments for financial assets at fair value throughother comprehensive income — (26,586)Interest received on term deposits with maturities morethan three months 1,350 —Dividends received 9,802 7,735Decrease in term deposits with maturities more than threemonths 60,000 —Increase in term deposits with maturities more than threemonths (60,000) (220,000)Payments for acquisition of fixed assets and constructionin-progress; and prepayments for fixed assets andconstruction-in-progress, net of related payables (1,060,262) (853,347)Net cash used in investing activities (926,112) (927,513)Cash flows from financing activitiesDividends paid to the Company’s shareholders — (425,012)Payment of lease liabilities (62,126) (60,750)Net cash used in financing activities (62,126) (485,762)Net increase/(decrease) in cash and cashequivalents 14,230 (77,102)Cash and cash equivalents at beginning of year 1,485,232 1,562,334Cash and cash equivalents at end of year 21 1,499,462 1,485,232The above consolidated cash flows statement should be read in conjunction with the accompanying notes.Wu Yong Hu LinglingDirector Director
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2021(All amounts expressed in Renminbi unless otherwise stated)106 1071 GENERAL INFORMATIONGuangshen Railway Company Limited (the “Company”) was established as a joint stock limited companyin the People’s Republic of China (the “PRC”) on 6 March 1996. On the same date, the Companyassumed 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 theCompany.The Predecessor was controlled by and was under the administration of the Guangzhou RailwayGroup. 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 Group100% of its equity interest in the form of 2,904,250,000 ordinary shares (the “State-owned DomesticShares”) 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 toShenzhen Guangzhou Railway Group Guangshen Railway Industry Development General Company (the“GIDC”).In May 1996, the Company issued 1,431,300,000 shares, representing 217,812,000 H Shares (“HShares”) and 24,269,760 American Depositary Shares (“ADSs”, one ADS represents 50 H Shares) ina global public offering for cash of approximately RMB4,214,000,000 in order to finance the capitalexpenditure and working capital requirements of the Company and its subsidiaries (collectively definedas the “Group”).In December 2006, the Company issued 2,747,987,000 A Shares on the Shanghai Stock Exchangethrough an initial public offering of shares in order to finance the acquisition of the business and relatedassets and liabilities associated with the railway transportation business (“Yangcheng Railway Business”)of Guangzhou Railway Group Yangcheng Railway Enterprise Development Company (“YangchengRailway”), a wholly owned subsidiary of Guangzhou Railway Group which operates a railway linebetween the cities of Guangzhou and Pingshi in the Southern region of the PRC.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT1 GENERAL INFORMATION (continued)The principal activities of the Group are the provision of passenger and freight transportation onrailroads. The Group also operates certain other businesses, which principally include services offered inrailway stations, and sales of food, beverages and merchandises on board the trains and in the railwaystations.The registered address of the Company is No. 1052 Heping Road, Luohu District, Shenzhen, GuangdongProvince, the People’s Republic of China.The financial statements were authorised for issue by the board of directors of the Company on 30March 2022.The English names of all companies listed in the financial statements are direct translations of theirregistered names in Chinese if no registered names in English are available.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThis note provides a list of the significant accounting policies adopted in the preparation of theseconsolidated financial statements. These policies have been consistently applied to all the yearspresented, unless otherwise stated. The financial statements are for the Group consisting of GuangshenRailway Company Limited and its subsidiaries.2.1 Basis of preparation(a) Compliance with IFRS and HKCOThe consolidated financial statements have been prepared in accordance with all applicableInternational Financial Reporting Standards (“IFRS”) as issued by International AccountingStandards Board (“IASB”) and requirements of the Hong Kong Companies Ordinance(“HKCO”) Cap. 622.(b) Historical cost conventionThe consolidated financial statements have been prepared on a historical cost basis exceptfor financial assets at fair value through other comprehensive income (“FVOCI”) aremeasured at fair value.
108 1092 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.1 Basis of preparation (continued)(c) Going concern basisAs at 31 December 2021, the Group had net current liabilities of RMB1,304,655,000 andcapital expenditures contracted for but not recognised as liabilities of RMB46,553,000 (seenote 39). Considering the current financial position, operating plan and usable bank facilitiesamounting to RMB1,500,000,000 of the Group, the Board of Directors believes that the Grouphas sufficient liquidity for the following 12 months. The Group therefore continues to adoptthe going concern basis in preparing its consolidated financial statements.(d) New and amended standards adopted by the GroupThe Group has applied the following standards and amendments for the first time for theirannual reporting period commencing 1 January 2021:• Covid-19-Related Rent Concessions — amendments to IFRS 16;• Interest Rate Benchmark Reform Phase 2 — Amendments to IFRS 9, IAS 39, IFRS7,IFRS 4 and IFRS 16The amendments listed above did not have any impact on the amounts recognised in priorperiods and are not expected to significantly affect the current or future periods.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.1 Basis of preparation (continued)(e) New standards and interpretations not yet adoptedCertain new accounting standards and interpretations have been published that are notmandatory for 31 December 2021 reporting periods and have not been early adopted bythe Group. These standards are not expected to have a material impact on the entity in thecurrent or future reporting periods and on foreseeable future transactions.Effective forannual periodsbeginning on orafterAmendments to IAS 16 Property, Plant and Equipment:Proceeds before intended use1 January 2022Annual Improvements to IFRSStandards 2018–20201 January 2022Amendments to IAS 37 Onerous Contracts — Cost ofFulfilling a Contract1 January 2022Amendments to IFRS 3 Business Combination 1 January 2022Amendments to IAS 1 Classification of Liabilities asCurrent or Non-current1 January 2023IFRS 17 Insurance Contracts 1 January 2023Amendments to IAS 1 and IFRSPractice Statement 2Disclosure of Accounting Policies 1 January 2023Amendments to IAS 8 Definition of AccountingEstimates1 January 2023Amendments to IAS 12 Deferred Tax related to Assetsand Liabilities arising from aSingle Transaction1 January 2023Amendments to IFRS 10 and IAS 28 Sale or contribution of assetsbetween an investor and itsassociate or joint ventureTo be determined
110 1112 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.2 Subsidiaries2.2.1 ConsolidationSubsidiaries 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 returnsfrom its involvement with the entity and has the ability to affect those returns through itspower to direct the activities of the entity. Subsidiaries are fully consolidated from the dateon which control is transferred to the Group. They are deconsolidated from the date thatcontrol ceases.Inter-company transactions, balances and unrealised gains on transactions between Groupcompanies are eliminated. Unrealised losses are also eliminated unless the transactionprovides evidence of an impairment of the transferred asset. Accounting policies ofsubsidiaries have been changed where necessary to ensure consistency with the policiesadopted by the Group.(a) Business combinationsThe acquisition method of accounting is used to account for all business combinations,regardless of whether equity instruments or other assets are acquired. Theconsideration 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 considerationarrangement, and• fair value of any pre-existing equity interest in the subsidiary.Identifiable assets acquired and liabilities and contingent liabilities assumed in abusiness combination are measured initially at their fair values at the acquisition date.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.2 Subsidiaries (continued)2.2.1 Consolidation (continued)(a) Business combinations (continued)The Group recognises any non-controlling interest in the acquired entity on anacquisition-by-acquisition basis either at fair value or at the non-controlling interest’sproportionate 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 valueof the acquirer’s previously held equity interest in the acquiree is remeasured to fairvalue at the acquisition date. Any gains or losses arising from such remeasurement arerecognised in profit or loss.Any contingent consideration to be transferred by the Group is recognised at fairvalue at the acquisition date. Subsequent changes to the fair value of the contingentconsideration that is deemed to be an asset or liability is recognised in accordancewith IAS 39 in profit or loss. Contingent consideration that is classified as equity is notremeasured, and its subsequent settlement is accounted for within equity.The excess of the consideration transferred, amount of any non-controlling interest inthe acquired entity, and the acquisition-date fair value of any previous equity interest inthe acquired entity over the fair value of the net identifiable assets acquired is recordedas goodwill. If those amounts are less than the fair value of the net identifiable assetsof the business acquired, the difference is recognised directly in profit or loss as abargain purchase.Intra-group transactions, balances and unrealised gains on transactions between groupcompanies are eliminated. Unrealised losses are also eliminated unless the transactionprovides evidence of an impairment of the transferred asset. Accounting policies ofsubsidiaries have been changed where necessary to ensure consistency with the policiesadopted by the Group.
112 1132 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.2 Subsidiaries (continued)2.2.1 Consolidation (continued)(b) Changes in ownership interests in subsidiaries without change of controlThe Group treats transactions with non-controlling interests that do not result in a lossof control as transactions with equity owners of the Group. A change in ownershipinterest results in an adjustment between the carrying amounts of the controllingand non-controlling interests to reflect their relative interests in the subsidiary. Anydifference between the amount of the adjustment to non-controlling interests and anyconsideration paid or received is recognised in a separate reserve within equity.(c) Disposal of subsidiariesWhen the Group ceases to have control, any retained interest in the entity isremeasured to its fair value at the date when control is lost, with the change in carryingamount recognised in profit or loss. The fair value is the initial carrying amount forthe purposes of subsequently accounting for the retained interest as an associate,joint venture or financial asset. In addition, any amounts previously recognised inother comprehensive income in respect of that entity are accounted for as if the Grouphad directly disposed of the related assets or liabilities, which means that amountspreviously recognised in other comprehensive income are reclassified to profit or loss.2.2.2 Separate financial statementsInvestments in subsidiaries are accounted for at cost less impairment. Cost also includesdirect attributable costs investment. The results of subsidiaries are accounted for by theCompany on the basis of dividend received and receivable.Impairment testing of the investments in subsidiaries is required upon receiving a dividendfrom these investments if the dividend exceeds the total comprehensive income of thesubsidiary in the period the dividend is declared or if the carrying amount of the investmentin the separate financial statements exceeds the carrying amount in the consolidated financialstatements of the investee’s net assets including goodwill.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.3 AssociatesAssociates are all entities over which the Group has significant influence but not control or jointcontrol. This is generally the case where the Group holds between 20% and 50% of the votingrights.Investments in associates are accounted for using the equity method of accounting after initiallybeing recognised at cost, and the carrying amount is increased or decreased to recognise theinvestor’s share of the profit or loss of the investee after the date of acquisition. The Group’sinvestments in associates include goodwill identified on acquisition. Upon the acquisition of theownership interest in an associate, any difference between the cost of the associate and theGroup’s share of the net fair value of the associate’s identifiable assets and liabilities is accountedfor as goodwill.If the ownership interest in an associate is reduced but significant influence is retained, onlya proportionate share of the amounts previously recognised in other comprehensive income isreclassified 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 ofpost-acquisition movements in other comprehensive income is recognised in other comprehensiveincome with a corresponding adjustment to the carrying amount of the investment. When theGroup’s share of losses in an associate equals or exceeds its interest in the associate, including anyother unsecured receivables, the Group does not recognise further losses, unless it has incurredlegal or constructive obligations or made payments on behalf of the associate.The Group determines at each reporting date whether there is any objective evidence that theinvestment in the associate is impaired. If this is the case, the Group calculates the amount ofimpairment as the difference between the recoverable amount of the associate and its carryingvalue and recognises the amount within ’share of result of associates‘, included in the consolidatedcomprehensive income statement.Profits or losses and other comprehensive income resulting from upstream and downstreamtransactions between the Group and its associates are recognised in the Group’s financialstatements only to the extent of unrelated investor’s interests in the associates. Unrealised lossesare 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 withthe policies adopted by the Group.In the Company’s balance sheet, investments in associates are accounted for at cost less provisionfor impairment losses. Cost also includes direct attributable costs of investment. The results ofassociates are accounted for by the Company on the basis of dividend received and receivable.
114 1152 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.4 Segment reportingOperating segments are reported in a manner consistent with the internal reporting provided tothe chief operating decision-maker. The chief operating decision-maker, who is responsible forallocating resources and assessing performance of the operating segments, has been identified asthe senior executives of the Company that make strategic decisions.2.5 Foreign currency transaction(a) Functional and presentation currencyItems included in the financial statements of each of the Group’s entities are measuredusing the currency of the primary economic environment in which the entity operates (“thefunctional currency”). The consolidated financial statements are presented in Renminbi(“RMB”), which is the Company’s functional and the Group’s presentation currency.(b) Transactions and balancesForeign currency transactions are translated into the functional currency using the exchangerates at the dates of the transactions or valuation where items are re-measured. Foreignexchange gains and losses resulting from the settlement of such transactions and from thetranslation of monetary assets and liabilities denominated in foreign currencies at year endexchange rates are generally recognised in profit or loss.Foreign exchange gains and losses are presented in the consolidated comprehensive incomestatement within “Finance costs — net”.2.6 Fixed assetsFixed assets are stated at historical cost less depreciation and impairment losses. Historical costincludes expenditure that is directly attributable to the acquisition of the items (for the case offixed assets acquired by the Company from Predecessor during the Restructuring, the revaluatedamount 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 willflow to the Group and the cost of the item can be measured reliably. The carrying amount of anycomponent accounted for as a separate asset is derecognised when replaced. All other repairs andmaintenance are charged to profit or loss during the reporting period in which they are incurred.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.6 Fixed assets (continued)Depreciation is calculated using the straight-line method to allocate the cost amount, after takinginto account the estimated residual value of not more than 4% of cost, of each asset over itsestimated useful life. The estimated useful lives are as follows:Buildings (a) 20 to 40 yearsTracks, bridges, and service roads (a) 16 to 100 yearsLocomotives and rolling stock 20 yearsCommunications and signalling systems 8 to 20 yearsOther machinery and equipment 4 to 25 years(a) The estimated useful lives of some buildings, tracks, bridges and service roads exceed theinitial lease periods of the land use rights from operation lease; and the initial period ofcertain land use right acquired (note 2.26), on which these assets are located.The Group will renew the term of land use right upon its expiry in strict compliance withrequirements of relevant laws and regulations. There is no substantive impediment for therenewal except for public interests. In addition, based on the provision of the land useright operating lease agreement entered into with Guangzhou Railway Group (note 8), theCompany 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 currentestimated useful lives of those assets to be reasonable.The assets residual values and estimated useful lives are reviewed, and adjusted ifappropriate, at the end of each reporting period.An asset’s carrying amount is written down immediately to its recoverable amount if theasset’s carrying amount is greater than its estimated recoverable amount (note 2.11).Gains and losses on disposals are determined by comparing the proceeds with the carryingamount and are recognised within “other losses — net”, included in the consolidatedcomprehensive income statement.
116 1172 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.7 Construction-in-progressConstruction-in-progress represents buildings, tracks, bridges, and service roads underconstruction, and mainly includes the construction related costs for the associated facilities ofthe existing railway lines of the Group. Construction-in-progress is stated at cost, which includesall expenditures and other direct costs, site restoration costs, prepayments attributable to theconstruction and interest charges arising from borrowings used to finance the construction duringthe construction period, less impairment loss. Construction-in-progress is not depreciated untilsuch assets are completed and ready for their intended use.From time to time, certain railway assets of the Group require major modifications andimprovements. 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 uponcompletion of the improvement projects.2.8 GoodwillGoodwill represents the excess of the consideration transferred, the amount of any non-controllinginterest in the acquiree and the acquisition-date fair value of any previous equity interest in theacquiree over the fair value of the Group’s share of identifiable net assets acquired. Goodwillarising from acquisitions of subsidiaries’ business is disclosed separately on the consolidatedbalance sheet.For the purpose of impairment testing, goodwill acquired in a business combination is allocated toeach of the cash-generating units (“CGUs”), or groups of CGUs, that is expected to benefit fromthe synergies of the combination. Each unit or group of units to which the goodwill is allocatedrepresents the lowest level within the entity at which the goodwill is monitored for internalmanagement purposes. Goodwill is monitored at the operating segment level.Goodwill impairment reviews are undertaken at least annually or more frequently if events orchanges in circumstances indicate a potential impairment. The carrying value of goodwill iscompared to the recoverable amount, which is the higher of value in use and the fair value lesscosts to sell. Any impairment is recognised immediately as an expense and is not subsequentlyreversed.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.9 Impairment of non-financial assets other than goodwillAssets that subjected to amortisation are tested for impairment whenever events or changes incircumstances indicate that the carrying amount may not be recoverable. An impairment loss isrecognised 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 inuse. For the purposes of assessing impairment, assets are grouped at the lowest levels for whichthere are separately identifiable cash inflows which are largely independent of the cash inflowsfrom other assets or groups of assets (CGUs). Non-financial assets other than goodwill thatsuffered impairment are reviewed for possible reversal of the impairment at each reporting period.2.10 Investments and other financial assets(a) ClassificationThe 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 assetsand the contractual terms of the cash flows.For assets measured at fair value, gains and losses will be recorded in recorded in profitor loss or other comprehensive income (“OCI”). For investments in equity instruments thatare not held for trading, the Group has made an irrevocable election at the time of initialrecognition to account for the equity investment at fair value through other comprehensiveincome.(b) Recognition and derecognitionRegular 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 arederecognised when the rights to receive cash flows from the financial assets have expired orhave been transferred and the Group has transferred substantially all risks and rewards ofownership.
118 1192 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.10 Investments and other financial assets (continued)(c) MeasurementAt initial recognition, the Group measures a financial asset at its fair value plus transactioncosts that are directly attributable to the acquisition of the financial asset.Equity instrumentsThe Group subsequently measures all equity investments at fair value. For investments inequity instruments that are not held for trading, over which the Group has no control, jointcontrol or significant influence are measured at FVOCI. Where the Group’s managementhas elected to present fair value gains and losses on equity investments in OCI, there isno subsequent reclassification of fair value gains and losses to profit or loss following thederecognition of the investment, any related balance within the FVOCI reserve is reclassifiedto retained earnings.Dividends from such investments continue to be recognised in profit or loss as other incomewhen the Group’s right to receive payments is established.Impairment losses (and reversal of impairment losses) on equity investments measured atFVOCI are not reported separately from other changes in fair value.Debt instrumentsSubsequent measurement of debt instruments depends on the Group’s business model formanaging the asset and the cash flow characteristics of the asset. The Group measures all ofits debt instruments at amortised cost.Assets that are held for collection of contractual cash flows where those cash flows representsolely payments of principal and interest are measured at amortised cost. Interest incomefrom these financial assets is included in finance income using the effective interest ratemethod. Any gain or loss arising on derecognition is recognised directly in profit or lossand presented in other gains/(losses) together with foreign exchange gains and losses.Impairment losses are presented as separate line item in the consolidated comprehensiveincome statement.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.10 Investments and other financial assets (continued)(d) ImpairmentThe Group assesses on a forward-looking basis the expected credit losses associated with itsdebt instruments carried at amortised cost, including trade receivables, other receivables andlong-term receivable.Management recognised provision for credit losses on the basis of exposure at default andECL rates which include consideration of historical credit loss experience, current status andforward-looking information. For financial assets subject to ECL measurement except tradereceivables, on each balance sheet day, the Group assesses the significant increase in creditrisk since initial recognition or whether an asset is considered to be credit impaired, ‘Threestage’expected credit loss models are established and staging definition are set for each ofthese financial assets class.A financial instrument which are not considered to have significantly increased in credit risksince initial recognition is classified in ‘Stage 1’. The impairment provision is measured at anamount 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 financialinstrument 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 lifetimebasis.If the financial instrument is credit-impaired, the financial instrument is then moved to ‘Stage3’. The impairment provision is measured based on expected credit losses on lifetime basis.For the financial Instruments in Stage 1 and Stage 2, the Group calculates the interestincome based on its gross carrying amount (i.e., amortised cost) before adjusting forimpairment provision using the effective interest method. For the financial instruments inStage 3, the interest income is calculated based on the carrying amount of the asset, netof the impairment provision, using the effective interest method. Financial assets that areoriginated or purchased credit impaired are financial assets that are impaired at the time ofinitial recognition, and the impairment provision for these assets is the expected credit lossfor the entire lifetime.For trade receivables, the Group applies the simplified approach permitted by IFRS 9, whichrequires expected lifetime losses to be recognised from initial recognition of the receivables.
120 1212 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.11 Offsetting financial instrumentsFinancial assets and liabilities are offset and the net amount reported in the balance sheet whenthere is a legally enforceable right to offset the recognised amounts and there is an intentionto settle on a net basis, or realise the asset and settle the liability simultaneously. The legallyenforceable right must not be contingent on future events and must be enforceable in the normalcourse of business and in the event of default, insolvency or bankruptcy of the Company or thecounterparty.2.12 Long-term prepaid expensesLong-term prepaid expenses include the various expenditures that have been incurred but shouldbe recognised as expenses over more than one year in the current and subsequent periods. Longtermprepaid expenses are amortised on the straight-line basis over the expected beneficial periodand are presented at actual expenditure incurred, net of accumulated amortisation.2.13 Non-current assets held for saleNon-current assets (or disposal groups) are classified as held for sale if their carrying amountwill be recovered principally through a sale transaction rather than through continuing use anda sale is considered highly probable. They are measured at the lower of their carrying amountand fair value less costs to sell, except for assets such as deferred tax assets, financial assetsand investment property that are carried at fair value, which are specifically exempt from thisrequirement.An impairment loss is recognised for any initial or subsequent write-down of the asset to fair valueless costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sellof an asset, but not in excess of any cumulative impairment loss previously recognised. A gain orloss not previously recognised by the date of the sale of the non-current asset is recognised at thedate of derecognition.Non-current assets are not depreciated or amortised while they are classified as held for sale.Interest and other expenses attributable to the liabilities of a disposal group classified as held forsale continue to be recognised.Non-current assets classified as held for sale are presented separately from the other assets in thebalance sheet.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.14 Materials and suppliesMaterials and supplies are stated at the lower of cost and net realisable value. Cost is determinedusing the weighted average method. Materials and supplies are charged as fuel costs and repairand maintenance expenses when consumed. The cost of materials and supplies may not berecoverable if they are damaged, become wholly or partially obsolete, or if their selling prices havedeclined due to various reasons. When such circumstances happen, cost of materials and suppliesis written to net realisable value, which is the estimated selling price less applicable variableexpenses.2.15 Trade and other receivablesTrade receivables are amounts due from customers for merchandise sold or services performed inthe ordinary course of business. If collection of trade and other receivables is expected in one yearor less (or in the normal operating cycle of the business if longer), they are classified as currentassets. If not, they are presented as non-current assets.Trade and other receivables are recognised initially at fair value and subsequently measured atamortised cost using the effective interest method, less provision for impairment.2.16 Cash and cash equivalentsCash and cash equivalents include cash on hand; deposits held at call with banks; and other shorttermhighly liquid investments with original maturities of three months or less that are readilyconvertible to known amounts of cash and which are subject to an insignificant risk of changes invalue.2.17 Share capitalOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of newshares or options are shown in equity as a deduction, net of tax, from the proceeds.
122 1232 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.18 Financial liabilitiesThe Group’s financial liabilities include trade payables, other payables (excluding other taxpayables, employee salary and benefits payables and advances), payables for fixed assets andconstruction-in-progress, dividends payable and lease liabilities.Trade and other payables are presented as current liabilities unless payment is not due within 12months after the reporting period. They are recognised initially at their fair value and subsequentlymeasured 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 inthe normal operating cycle of the business if longer). If not, they are presented as non-currentliabilities.Financial liabilities are recognised initially at fair value and subsequently measured at amortisedcost using the effective interest method.The Group derecognises financial liability when, and only when, the Group’s obligations aredischarged, cancelled or expired. The difference between the carrying amount of the financialliability derecognised and the consideration paid and payable is recognised in profit or loss.2.19 Current and deferred income taxThe tax expense for the period comprises current and deferred tax. Tax is recognised in profit orloss, except to the extent that it relates to items recognised in other comprehensive income ordirectly in equity. In this case, the tax is also recognised in other comprehensive income or directlyin equity, respectively.(a) Current income taxThe current income tax charge is calculated on the basis of the tax laws enacted orsubstantively enacted at the balance sheet date in the PRC where the Company’s subsidiariesand associates operate and generate taxable income. Management periodically evaluatespositions taken in tax returns with respect to situations in which applicable tax regulation issubject to interpretation and establishes provision where appropriate on the basis of amountsexpected to be paid to the tax authorities.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.19 Current and deferred income tax (continued)(b) Deferred income taxInside basis differencesDeferred income tax is provided in full, using the liability method, on temporary differencesarising between the tax bases of assets and liabilities and their carrying amounts in theconsolidated financial statements. However, the deferred income tax is not accounted for ifit arises from initial recognition of an asset or liability in a transaction other than a businesscombination that at the time of the transaction affects neither accounting nor taxable profitnor loss. Deferred income tax is determined using tax rates (and laws) that have beenenacted by the end of the reporting period and are expected to apply when the relateddeferred 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 futuretaxable profit will be available against which the temporary differences can be utilised.Outside basis differencesDeferred income tax liabilities are provided on taxable temporary differences arising frominvestments in subsidiaries, and associates and joint arrangements, except for deferredincome tax liability where the timing of the reversal of the temporary difference is controlledby the Group and it is probable that the temporary difference will not reverse in theforeseeable future. Generally the Group is unable to control the reversal of the temporarydifference for associates. Only when there is an agreement in place that gives the Groupthe 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’sundistributed profits is not recognised.Deferred income tax assets are recognised on deductible temporary differences arising frominvestments in subsidiaries, and associates and joint arrangements only to the extent that itis probable the temporary difference will reverse in the future and there is sufficient taxableprofit available against which the temporary difference can be utilised.
124 1252 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.19 Current and deferred income tax (continued)(c) OffsettingDeferred tax assets and liabilities are offset where there is a legally enforceable right tooffset current tax assets and liabilities and where the deferred tax balances relate to thesame taxation authority.2.20 Employee benefits(a) Defined contribution planThe Group pays contributions to defined contribution schemes operated by the localgovernment for employee benefits in respect of pension and unemployment. The Group alsopays contribution to defined contribution schemes operated by Guangzhou Railway Group foremployee supplementary pension benefit. The Group has no further payment obligations oncethe contributions have been paid. The contributions to the defined contribution schemes arerecognised as staff costs when they are due.(b) Termination benefitsTermination benefits are payable when employment is terminated by the Group before thenormal retirement date, or when an employee accepts voluntary redundancy in exchangefor these benefits. The Group recognises termination benefits at the earlier of the followingdates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) whenthe entity recognises costs for a restructuring that is within the scope of IAS 37 and involvesthe payment of termination benefits. In the case of an offer made to encourage voluntaryredundancy, the termination benefits are measured based on the number of employeesexpected to accept the offer. Benefits falling due more than 12 months after the end of thereporting period are discounted to present value.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.21 ProvisionsProvisions are recognised when: the Group has a present legal or constructive obligation as aresult of past events; it is probable that an outflow of resources will be required to settle theobligation; and the amount can be reliably estimated. Provisions are not recognised for futureoperating losses.Where there are a number of similar obligations, the likelihood that an outflow will be requiredin settlement is determined by considering the class of obligations as a whole. A provision isrecognised even if the likelihood of an outflow with respect to any one item included in the sameclass of obligations may be small.Provisions are measured at the present value of the management’s best estimate of theexpenditure required to settle the present obligation at the end of the reporting period. Thediscount rate used to determine the present value is a pre-tax rate that reflects current marketassessments of the time value of money and the risks specific to the liability. The increase in theprovision due to the passage of time is recognised as interest expense.2.22 Revenue recognitionRevenue of the Group comprise of revenue from railroad and related business and revenue fromother business.(a) Revenue from railroad and related businessThe operations of the railway business of the Group form part of the nationwide railwaysystem in the PRC and they are supervised and governed by CSRG. The Group renders thepassenger transportation and freight transportation services, and the related service fees andcharges are collected from customer or other railway companies by the Group.The respective fares and charges of the services, and processing of the respective revenueand cost allocation among different railway companies are done centrally by a centralclearance system operated by CSRG.
126 1272 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.22 Revenue recognition (continued)(a) Revenue from railroad and related business (continued)Revenue from passenger transportationPassenger transportation generally include transportation business of Guangzhou-Shenzheninter-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 thecentral clearance system.Revenues are recognised overtime when the train transportation services are rendered. Therevenue is presented net of value-added tax.Revenue from freight transportationThe Group also provides freight transportation services. Service information and computationof the attributable revenues entitled by the Group are processed by the central clearancesystem of CSRG.The revenues are recognised at gross amounts overtime in the accounting period in which theservices are rendered.Revenue from railway network usage and other transportation related servicesRevenue from railway network usage and other transportation related services, mainlyconsist of network usage services (locomotive traction, track usage and electric catenariesservice, etc.) and railway operation services and other services, are rendered by the Grouptogether with other railway companies in the PRC. The information relating to network usageservice is captured and processed by the central clearance system of CSRG. The revenuefrom network usage services are recognised overtime in the accounting period in which theservices are rendered, and revenue can be reliably measured. Railway operation services andother services are rendered solely by the Group and all proceeds are collected by the Groupdirectly.When the services rendered by the Group exceed the payment, a contract asset isrecognised. If the payments exceed the services rendered, a contract liability is recognised.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.22 Revenue recognition (continued)(b) Revenue from other businessesRevenue from other business mainly consist of on-board catering services, leasing, sales ofmaterials, sale of goods and other businesses related to railway transportation. Revenuesfrom on-board catering services are recognised overtime when the related services arerendered. Revenues from sales of materials and supplies and sale of goods are recognisedwhen the respective materials and goods are delivered to customers at appoint in time.Revenue from operating lease arrangements on certain properties and locomotives isrecognised overtime on a straight-line basis over the period of the respective leases.(c) Financing componentsThe Group does not expect to have any contracts where the period between the transfer ofthe promised goods or services to the customer and payment by the customer exceeds oneyear. As a consequence, the Group does not adjust any of the transaction prices for the timevalue of money.2.23 Interest incomeInterest income is recognised using the effective interest method. When a loan and receivable isimpaired, the Group reduces the carrying amount to its recoverable amount, being the estimatedfuture cash flow discounted at original effective interest rate of the instrument, and continuesunwinding the discount as interest income. Interest income on impaired receivables is recognisedusing the original effective interest rate.2.24 Dividend incomeDividends are recognised as other income in profit or loss when the right to receive payment isestablished.
128 1292 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.25 Government grantsGrants from the government are recognised at their fair value where there is a reasonableassurance 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 periodnecessary 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 deferredincome and are credited to profit or loss on a straight-line basis over the expected lives of therelated assets.2.26 LeasesLeases are recognised as a right-of-use asset and a corresponding liability at the date at which theleased 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 forself-occupied purpose.For the lease of land, in connection with the acquisition of Yangcheng Railway Business, theCompany signed an agreement on 15 November 2004 with Guangzhou Railway Group for leasingthe land use rights associated with a parcel of land, on which the acquired assets of YangchengRailway Business are located. The agreement became effective upon the completion of theacquisition on 1 January 2007 and the lease term is 20 years, renewable at the discretion of theGroup.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.26 Leases (continued)The estimated useful lives of some buildings, tracks, bridges and service roads exceed the initiallease periods of the land use rights from operation lease; and the initial period of certain land useright acquired, on which these assets are located. Based on the provision of the land use rightoperating lease agreement entered into with Guangzhou Railway Group, the Company can renewthe lease at its own discretion upon expiry of the operating lease term, and the Company expect toexercise the option to extend the lease within the remaining useful lives of those assets. Thereforethe Group is reasonably certain to determine the lease term based on the remaining useful lives ofthose assets.For the land use rights, the Group acquired the right to use certain pieces of land for certain of itsrail lines, railway stations and other businesses. The consideration paid for such land representspre-paid lease payments, which are amortised over the lease terms of 36.5 to 50 years using thestraight-line method.Land use rights are derecognised when the Group has transferred substantially all the risks andrewards of ownership. Any gain or loss arising on derecognition is recognised directly in profit orloss and presented in derecognition of land use right.Assets and liabilities arising from a lease are initially measured on a present value basis. Leaseliabilities 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 theindex 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 thatoption, and• payments of penalties for terminating the lease, if the lease term reflects the Groupexercising that option.
130 1312 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.26 Leases (continued)Lease payments to be made under reasonably certain extension options are also included in themeasurement of the liability.The lease payments are discounted using the interest rate implicit in the lease. If that rate cannotbe readily determined, which is generally the case for leases in the Group, the lessee’s incrementalborrowing rate is used, being the rate that the individual lessee would have to pay to borrow thefunds necessary to obtain an asset of similar value to the right-of-use asset in a similar economicenvironment 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 astarting point, adjusted to reflect changes in financing conditions since third party financingwas received• uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk forleases 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.If a readily observable amortising loan rate is available to the individual lessee (through recentfinancing or market data) which has a similar payment profile to the lease, then the Group entitiesuse 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 indexor rate, which are not included in the lease liability until they take effect. When adjustments tolease payments based on an index or rate take effect, the lease liability is reassessed and adjustedagainst the right-of-use asset.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.26 Leases (continued)Lease payments are allocated between principal and finance cost. The finance cost is charged toprofit or loss over the lease period so as to produce a constant periodic rate of interest on theremaining 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 incentivesreceived• any initial direct costs, and• restoration costs.Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and thelease term on a straight-line basis. If the Group is reasonably certain to exercise a purchaseoption, 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 astraight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of12 months or less without a purchase option.
132 1332 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.26 Leases (continued)The Group as a lessee accounts for a lease modification when both of the following conditions aremet:• The modification increases the scope of the lease by adding the right to use one or moreunderlying assets.• The consideration for the lease increases commensurate with the standalone price for theincrease in scope and any adjustments to that stand-alone price reflect the circumstances ofthe particular contract.For a lease modification that is not accounted for as a separate lease, at the effective date of thelease modification the Group allocate the consideration in the modified contract and determine thelease term of the modified lease, and remeasure the lease liability by discounting the revised leasepayments using a revised discount rate.For a modification that fully or partially decreases the scope of the lease, the Group decrease thecarrying amount of the right-of-use asset to reflect partial or full termination of the lease. Anydifference between those adjustments is recognised in profit or loss at the effective date of themodification.For all other lease modifications which are not accounted for as a separate lease, the Grouprecognise the amount of the remeasurement of the lease liability as an adjustment to thecorresponding 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 astraight-line basis over the lease term. Initial direct costs incurred in obtaining an operating leaseare added to the carrying amount of the underlying asset and recognised as expense over thelease term on the same basis as lease income. The respective leased assets are included in thebalance sheet based on their nature. The Group did not need to make any adjustments to theaccounting for assets held as lessor as a result of adopting the new leasing standard.2.27 Dividend distributionDividend distribution to the shareholders is recognised as a liability in the Group’s and theCompany’s financial statements in the period in which the dividends are approved by theshareholders of the Company.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT3 FINANCIAL RISK MANAGEMENT3.1 Financial risk factorsThe Group’s activities expose it to a variety of financial risks: market risk (including foreigncurrency risk, cash flow and fair value interest rate risk and other price risk), credit risk andliquidity risk. The Group’s overall risk management strategy seeks to minimise the potentialadverse effects on the financial performance of the Group.(a) Market risk(i) Foreign currency riskThe 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 freelyconvertible into other foreign currencies. The conversion of RMB denominated balancesinto foreign currencies is subject to the rates and regulations of foreign exchangecontrol promulgated by the PRC government. Any foreign currency denominatedmonetary assets and liabilities other than in RMB would subject the Group to foreignexchange exposure.The Group’s objective of managing the foreign currency risk is to minimise potentialadverse effects arising from foreign transaction movements. Depending on volatility ofspecific foreign currency being exposed, measures are taken by management to managethe foreign currency positions.The following table shows the Group’s foreign currency denominated monetary assetsand liabilities (in RMB thousands equivalent):Monetary assetsCurrencydenominationAs at 31 December2021 2020Cash and cash equivalents HKD 23,122 27,003Cash and cash equivalents USD — 29Other receivables HKD 440 —23,562 27,032Monetary liabilitiesOthe r payables HKD — 132
134 1353 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 ratefluctuations in connection with monetary assets and liabilities are shown above. TheGroup has not used any means to hedge the exposure.As at 31 December 2021, if RMB had weakened/strengthened by 5% against the HKDwith all other variables held constant, loss after tax for the year would have beenRMB884,000 (2020: RMB1,008,000) higher/lower, mainly as a result of foreign exchangegains/losses on translation of HKD-denominated cash in banks and other receivables.The impact of exchange fluctuations of USD is not expected to be significant.(ii) Cash flow and fair value interest rate riskOther than deposits held in banks and long-term receivable, the Group does not havesignificant interest-bearing assets or liabilities. The average interest rate of cash andcash equivalents, short-term deposits and long-term deposits in the PRC are 1.35%,2.25% and 4.13% respectively (2020: 1.32%, 2.25% and 4.13% respectively) perannum. Any change in the interest rate promulgated by the People’s Bank of China fromtime to time is not considered to have a significant impact to the Group.As at 31 December 2021 and 2020, the Group had no interest-bearing debts, which maynot expose the Group to any interest rate risk.(iii) Other price riskThe Group’s exposure to price risk arises from equity investments held by the Group andclassified as FVOCI (note 15).As at 31 December 2021, if the expected price of the equity investments heldby the Group increased/decreased by 5% with all other variables held constant,other comprehensive income for the year would have been RMB17,389,000 (2020:RMB14,161,000) higher.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT3 FINANCIAL RISK MANAGEMENT (continued)3.1 Financial risk factors (continued)(b) Credit riskCredit 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 theabove financial assets represent the Group’s maximum exposure to credit risk in relation tofinancial assets.(i) Risk managementCash and term deposits are placed with reputable banks. There was no recent history ofdefault 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 anymaterial losses due to the default of the banks.For trade and other receivables as well as long-term receivable, the Group managesthe credit risk exposure by setting related policies. The Group set credit periodfor its customers/debtors considering the customers/debtors’ financial conditions,the possibilities of obtaining collaterals from third parties, credit records and otherfactors comprehensively. The credit period are monitored on an ongoing basis by themanagement. For those customers/debtors with poor credit records, the Group mitigatescredit risk by setting a shorter credit period or cancelling the credit period.The Group’s trade and other receivables as well as long-term receivable are mainlyreceivables and deposits incurred from provision of railway operation service or salesof 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 realisability and timing for collection of the outstandingbalances, the Group maintains a provision for impairment of receivables. Taking intoaccount the past experience with customers/debtors and the collection status, the Groupconsiders that there is no significant credit risk.There were no other financial assets carrying a significant exposure to credit risk. Noneof the financial assets that are fully performing has been renegotiated in the currentyear.
136 1373 FINANCIAL RISK MANAGEMENT (continued)3.1 Financial risk factors (continued)(b) Credit risk (continued)(ii) Impairment of financial assetsThe Group has three types of financial assets that are subject to the expected creditloss model: trade receivables, other receivables and long-term receivable.While cash and cash equivalents and term deposits are also subject to the impairmentrequirements of IFRS 9, the identified impairment loss was immaterial.Trade receivablesThe Group applies the IFRS 9 simplified approach to measuring expected credit losseswhich uses a lifetime expected loss provision for all trade receivables.The Group categorises the trade receivables into the following portfolios based on creditrisk characteristics:• Portfolio 1: receivable incurred from revenues collected and settled through theCSRG;• Portfolio 2: receivable incurred from revenue from railway operation;• Portfolio 3: receivable incurred from revenue other than railway operation andrevenues 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 ECLrates which include consideration of historical credit loss experience, current status andforward-looking information. In considering the forwarding-looking information, theGroup considers the risk of economy downturn, external market environment, technicalenvironment and changes in customer’s conditions.In 2021, the Group takes into consideration the uncertainty affected by the outbreak ofCoronavirus Disease 2019 (“COVID-19 outbreak”).
GUANGSHEN RAILWAY 2021 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 2021 and 31 December 2020 wasdetermined for trade receivables (in RMB thousands):As at 31 December 2021 As at 31 December 2020Carryingamount ECL ratesLossprovisionCarryingamount ECL ratesLossprovisionPortfolio 1 121,287 — — 202,484 — —Portfolio 2 4,145,617 0.50% (20,691) 3,429,198 1.68% (57,690)Portfolio 3 153,021 2.00% (3,060) 150,699 2.00% (3,014)4,41 9,925 (2 3,751) 3,78 2,381 (6 0,704)The loss provision for trade receivables as at 31 December reconciles to the openingloss provision as follows:Trade receivables2021 2020RMB’000 RMB’000Opening loss provision as at 1 January 60,704 61,135Receivables written off during the year asuncollectible — (73)Reversal of impairment loss provision (36,953) (358)Clos ing loss provision at 31 December 23,751 60,704
138 1393 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 costOther financial assets at amortised cost include other receivables, and long-termreceivables.Impairment on other receivables and long-term receivables is measured as either12-month expected credit losses or lifetime expected credit loss, depending on whetherthere has been a significant increase in credit risk since the initial recognition. If asignificant increase in credit risk of a deposit or receivable has occurred since the initialrecognition, then the impairment is measured as lifetime expected credit losses.On that basis, the loss provision as at 31 December 2021 and 31 December 2020 forother receivables was as follows (in RMB thousands):As at 31 December 2021 As at 31 December 2020Carrying amount ECL rates Loss provision Carrying amount ECL rates Loss provisionStage 1 (Portfolio) 289,495 0.65% (1,872) 379,116 1.57% (5,959)Stage 1 (Individual) 128,902 — — 222,705 — —Stage 2 — — — — — —Stage 3 (Individual) 4,631 100% (4,631) 4,631 100% (4,631)423,028 (6,503) 606,452 (10,590)Impairment losses on trade and other receivables and long-term receivables arepresented as net impairment losses within operating profit. Subsequent recoveries ofamounts previously written off are credited against the same line item.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT3 FINANCIAL RISK MANAGEMENT (continued)3.1 Financial risk factors (continued)(c) Liquidity riskPrudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Management monitors rolling forecasts of the Group’s liquidity reserves (comprising cash and cash equivalents) on the basis of expected cash flows.As at 31 December 2021, the Group had net current liabilities of RMB1,304,655,000 and capital expenditure contracted for but not recognised as liabilities of RMB46,553,000 (see note 39). Taking into account of the factors mentioned in note 2.1(c), the Board of Directors believes that the Group has sufficient liquidity for the following 12 months.The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant.Less than Between 1 and Carrying RMB’000 1 year RMB’000 5 years Over RMB’000 5 years RMB’000 amount At 31 December 2021Trade and bill payable and other payables excluding non-financial liabilities 4,483,180 — — 4,483,180 Payables for fixed assets and construction-in- 2,776,708 — — 2,776,708 progress Lease liabilities 63,249 263,961 5,598,450 5,925,660 Dividends payable 13,746 — — 13,746 7,336,883 263,961 5,598,450 13,199,294 At 31 December 2020Trade and other payables excluding non-financial liabilities 3,417,934 — — 3,417,934 Payables for fixed assets and construction-in-progress 2,914,696 — — 2,914,696 Lease liabilities 61,880 258,820 5,665,980 5,986,680 Dividends payable 13,749 — — 13,749 6,408,259 258,820 5,665,980 12,333,059
3 FINANCIAL RISK MANAGEMENT (continued)3.2 Capital risk managementThe Group’s objectives of managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.As at 31 December 2021 and 2020, the Group has no short-term loans, long-term loans, bond payables or long-term payables. Management considered that such capital structure is appropriate.3.3 Fair value estimationAccording 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 2021 and 2020, the Group did not have any financial instruments that were measured at fair value except for FVOCI (note 15).The following table presents the Group’s assets that are measured at fair value at 31 December 2021:Level 1 Level 2 Level 3 TotalRMB’000 RMB’000 RMB’000 RMB’000AssetsFinancial assets at FVOCI — — 463,696 463,696
GUANGSHEN RAILWAY 2021 ANNUAL REPORT3 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 2020:Level 1 Level 2 Level 3 TotalRMB’000 RMB’000 RMB’000 RMB’000AssetsFinancial assets at FVOCI — — 377,631 377,631 There were no transfers between levels 1, 2 and 3 or changes in valuation techniques during the year (2020: nil).The following table presents the changes in level 3 items for the periods ended 31 December 2021:Financial assets at FVOCIOpening balance as at 1 January 2020 351,045 Acquisitions 26,586Closing balance 31 December 2020 377,631 Acquisitions 86,065Closing balance as at 31 December 2021 463,696Financial assets and liabilities of the Group measured at amortised cost include trade and other receivables, long-term receivable, term deposits, cash and cash equivalents, and trade and other payables, of which the fair values approximate their carrying amounts.
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTSEstimates 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 receivablesThe provision for impairment of trade receivables are recognised on the basis of exposure at default and ECL rates which include consideration of historical credit loss experience, current status and forward-looking information, taking into account the customers/debtors’ credit records, historical payment records, financial conditions and the capabilities of collaterals and guarantors comprehensively. The Group reviews the key assumptions related to ECL calculation on a regular basis. In 2021, the Group took into consideration the uncertainty affected by the COVID-19 outbreak, and incorporate relevant impacts into the key macro-economic assumptions and factors used in the forward-looking estimation, such as the risk of economy downturn, external market environment, technical environment and changes in customer’s conditions.Where the actual loss is different from the amounts that were initially recorded based on above estimate, such differences will impact the carrying value of trade receivables of the Group in future periods.(b) Goodwill ImpairmentGoodwill impairment reviews are undertaken at least annually or more frequently if events or changes in circumstances indicate a potential impairment. The recoverable amount of a cash-generating unit (“CGU”) or groups of CGUs when goodwill is included in the carrying amount of that unit or units is the higher of value in use and the fair value less costs to sell.In 2021, the Group’s transportation business was greatly affected by the COVID-19 outbreak and the relevant control and prevention measures. Recoverable amount of CGU when goodwill is included in the carrying amount of that unit based on value-in-use calculations which require the use of assumptions. The key assumptions used by the management is disclosed in note (9).The uncertainly of the development of COVID-19 epidemic and control measures have also increased the estimation uncertainty relating to the key assumptions used for cash flow projections, including growth rate, gross margin and pre-tax discount rate, which could lead to a different assessment result affected by the management judgement.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT5 SEGMENT INFORMATIONThe chief operating decision-makers have been identified as the senior executives of the Company. Senior executives of the Company review the Group’s internal reporting in order to assess performance and allocate resources. The operating segments were determined based on these management reports.Senior executives evaluate the business from a perspective of revenues and operating results generated from railroad and related business conducted by the Company (“the Railway Transportation Business”). Other segments mainly include on-board catering services, leasing, sales of materials, sale of goods and other businesses related to railway transportation provided by the subsidiaries of the Company. Senior executives of the Company assess the performance of the operating segments based on a measure of the profit before income tax. Other information provided, except as noted below, to senior executives of the Company is measured in a manner consistent with that in the consolidated financial statements.The segment results during 2021 and 2020 are as follows: The Railway Transportation Business All other segments Eliminations Total RMB’000 2021 2020 2021 2020 2021 2020 2021 2020RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000Segment revenue— Railroad Businesses 19,019,131 15,385,428 — — — — 19,019,131 15,385,428— Revenue from external customers 19,019,131 15,385,428 — — — — 19,019,131 15,385,428— Inter segment revenue — — — — — — — —— Other Businesses 1,081,538 859,658 205,608 144,203 (100,120) (39,923) 1,187,026 963,938— Revenue from external customers 1,081,538 859,658 105,488 104,280 — — 1,187,026 963,938 — Inter segment revenue — — 100,120 39,923 (100,120) (39,923) — — Total revenue 20,100,669 16,245,086 205,608 144,203 (100,120) (39,923) 20,206,157 16,349,366 Timing of revenue recognition— Overtime 19,908,398 16,139,060 111,941 47,619 (100,120) (39,923) 19,920,219 16,146,756— At a point in time 154,811 85,664 71,895 74,118 — — 226,706 159,782 — Lease 37,460 20,362 21,772 22,466 — — 59,232 42,828 20,100,669 16,245,086 205,608 144,203 (100,120) (39,923) 20,206,157 16,349,366 Segment result (1,150,323) (584,770) (93,152) (105,975) (6,111) — (1,249,586) (690,745) Finance costs — net 74,382 60,464 194 181 — — 74,576 60,645 Share of results of associates, net of tax 18,144 22,162 — — — — 18,144 22,162 Depreciation of fixed assets 1,781,921 1,657,475 4,190 4,704 — — 1,786,110 1,662,179 Depreciation of right-of-use assets 57,078 54,179 11,332 11,332 — — 68,410 65,511 Amortisation of long-term prepaid expenses 26,760 18,886 620 454 — — 27,380 19,340 Impairment of fixed assets 16,796 11,835 — — — — 16,796 11,835 Provision for impairment of materials and supplies 5,695 — — — — — 5,695 —Reversal of impairment losses on financial assets (40,608) (78) 5 (280) — — (40,613) (358)
5 SEGMENT INFORMATION (continued)A reconciliation of the segment results to profit for the year of 2021 and 2020 is as follows:The Railway Transportation Business All other segments Eliminations Total 2021 2020 2021 2020 2021 2020 2021 2020RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000Segment result (1,150,323) (584,770) (93,152) (105,975) (6,111) — (1,249,586) (690,745) Income tax credit 272,442 130,468 3,181 2,177 — — 275,623 132,645 Loss for the year (877,881) (454,302) (89,971) (103,798) (6,111) — (973,963) (558,100) 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 Eliminations Total 2021 2020 2021 2020 2021 2020 2021 2020RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000Total segment assets 37,375,745 36,648,550 425,806 443,479 (398,129) (311,576) 37,403,422 36,780,453 Total segment assets include: Investment in associates 225,338 196,848 — — — — 225,338 196,848 Additions to non-current assets (other than financial instruments and deferred tax assets) 1,744,117 1,748,748 662 679 — — 1,744,779 1,749,427 Total segment liabilities 9,767,619 8,184,773 735,783 656,875 (304,416) (217,364) 10,198,985 8,624,284 Revenues of approximately RMB5,511,617,000 (2020: RMB4,502,560,000) were derived from Guangzhou Railway Group and its subsidiaries. These revenues are attributable to the Railway Transportation Business. Except that, no revenues derived from a single external customer have exceeded 10% of the total revenues.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT6 FIXED ASSETS — NETCommunications Tracks, bridges Locomotives and and signalling Other machinery Buildings and service roads rolling stock systems and equipment TotalRMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000At 1 January 2020Cost 7,825,870 14,817,730 8,102,522 1,852,565 6,757,634 39,356,321 Accumulated depreciation (3,141,585) (3,716,630) (2,905,802) (1,415,922) (4,579,251) (15,759,190) Impairment (23,578) — — — (7,472) (31,050) Net book amount 4,660,707 11,101,100 5,196,720 436,643 2,170,911 23,566,081 Year ended 31 December 2020Opening net book amount 4,660,707 11,101,100 5,196,720 436,643 2,170,911 23,566,081 Other additions 4,196 — 47,666 2,178 98,138 152,178 Transfer in from construction-in-progress (Note 7) 396,446 198,800 1,932 28,733 154,590 780,501 Transfer out to construction-in-progress for improvement/ modifications (Note 7) (129) (231,996) (434,216) (9,759) (9,028) (685,128) Transfer in from construction-in-progress after repair 6,291 292,244 744,298 38,726 20,241 1,101,800 Reclassifications — — — 45 (45) —Disposals (26,206) (95,020) (68,749) (5,747) (29,281) (225,003) Depreciation charges (335,123) (218,396) (669,210) (90,451) (348,999) (1,662,179) Impairment charge — — (11,835) — — (11,835) Closing net book amount 4,706,182 11,046,732 4,806,606 400,368 2,056,527 23,016,415 At 31 December 2020Cost 8,183,873 14,896,863 7,750,874 1,829,279 6,837,991 39,498,880 Accumulated depreciation (3,454,113) (3,850,131) (2,932,433) (1,428,911) (4,773,992) (16,439,580) Impairment (23,578) — (11,835) — (7,472) (42,885) Net book amount 4,706,182 11,046,732 4,806,606 400,368 2,056,527 23,016,415
6 FIXED ASSETS — NET (continued)Communications Tracks, bridges Locomotives and and signalling Other machinery Buildings and service roads rolling stock systems and equipment TotalRMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000Year ended 31 December 2021Opening net book amount 4,706,182 11,046,732 4,806,606 400,368 2,056,527 23,016,415 Other additions 5,122 — — 2,809 63,109 71,040 Government grant (c) 428,735 211,040 — 3,193 30,910 673,878 Transfer in from construction-in-progress (Note 7) 825,810 57,920 42,714 557,380 258,109 1,741,933Transfer out to construction-in-progress for improvement/ modifications (Note 7) — (489,377) (1,397,690) (15,344) (1,463) (1,903,874)Transfer in from construction-in-progress after repair 317 690,534 1,585,558 26,457 3,596 2,306,462 Reclassifications — — — (9,107) 9,107 —Disposals (13,250) (15) (59,370) (6,515) (15,856) (95,006) Depreciation charges (382,616) (218,677) (648,769) (128,266) (407,782) (1,786,110) Impairment charge — (16,796) — — — (16,796) Impairment write-off 322 — — — 1,897 2,219Closing net book amount 5,570,622 11,281,361 4,329,049 830,975 1,998,154 24,010,161 At 31 December 2021 Cost 9,428,440 15,346,319 6,981,827 2,242,637 7,062,632 41,061,855 Accumulated depreciation (3,834,561) (4,048,162) (2,640,943) (1,411,662) (5,058,903) (16,994,231) Impairment (23,257) (16,796) (11,835) — (5,575) (57,463) Net book amount 5,570,622 11,281,361 4,329,049 830,975 1,998,154 24,010,161 (a) As at 31 December 2021, the ownership certificates of certain buildings of the Group with an aggregate carrying value of approximately RMB1,903,653,000 (2020: RMB1,518,731,000) had not been obtained by the Group.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT6 FIXED ASSETS — NET (continued)These kind of buildings are classified as below:Carrying Carrying value as value as at 31 at 31 December December 2021 2020 Reason for delay in obtaining the ownership RMB’000 RMB’000 certificatesCertificates for buildings under 1,367,851 980,689 The Group commenced such application application procedures 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.Certain buildings located on the 47,656 48,103 According to relevant laws and regulations land of which the land use right in China, the land use right certificates certificates have not been obtained 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.Certain buildings attached to pieces of 488,146 489,939 Such land is held by lease under certain land which is held by lease 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.
6 FIXED ASSETS — NET (continued)(b) As at 31 December 2021, fixed assets of the Group with an aggregate net book value of approximately RMB175,184,000 (2020: RMB171,954,000) had been fully depreciated but they were still in use.(c) According to the agreements regarding on the relocation project of old Dongguan Station jointly signed by Dongguan Municipal People’s Government (the “Government”), the Guangzhou Railway Group and the Company, the Government transferred the asset rights of the New Dongguan Station funded by the Government to the Company for free in October 2021. Total value of the related assets was RMB673,878,000. Such government grants relating to fixed assets were recognised as deferred income (Note 24) and are credited to profit or loss on a straight-line basis over the expected lives of the related assets.7 CONSTRUCTION-IN-PROGRESS2021 2020RMB’000 RMB’000At 1 January 2,778,676 2,378,974 Transfer in from fixed assets for improvement/modifications (Note 6) 1,903,874 685,129 Other additions 954,780 1,596,874 Transfer to fixed assets (Note 6) (1,741,933) (780,501) Transfer out to fixed assets after improvement/modifications (Note 6) (2,306,462) (1,101,800) At 31 December 1,588,935 2,778,676 Construction-in-progress as at 31 December 2021 mainly comprise of improvement projects for road existing railway equipment in the PRC.For the year ended 31 December 2021, no interest expense (2020: nil) had been capitalised in the construction-in-progress balance as there were no third-party borrowings during the year.As at 31 December 2021, the balance of the provision for writing down the construction-in-progress was approximately RMB15,456,000 (2020: RMB15,456,000).
GUANGSHEN RAILWAY 2021 ANNUAL REPORT8 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES(1) RIGHT-OF-USE ASSETS2021Land useright (a)Leaseof Land useright (b) TotalRMB’000 RMB’000 RMB’000CostAs at 31 December 2020 2,398,881 1,379,254 3,778,135Additions (b) 334 989 1,323As a t 31 December 2021 2 ,399,215 1 ,380,243 3 ,779,458Accumulated depreciationAs at 31 December 2020 (567,909) (26,756) (594,665)Additions (52,163) (16,248) (68,411)As a t 31 December 2021 ( 620,072) (43,004) ( 663,076)Net book valueAs a t 31 December 2021 1 ,779,143 1 ,337,239 3 ,116,382As a t 31 December 2020 1 ,830,972 1 ,352,498 3 ,183,470(2) LEASE LIABILITIESAs at31 December2021As at31 December2020Lease liabilities 1,384,084 1,377,573L ess: current portion of lease liabilities (63,249) (61,880)1,320,835 1,315,693
8 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (continued) The amounts recognised in the Consolidated Comprehensive Income Statement for the year relating to the lease contracts are as follows: 2021 2020 RMB’000 RMB’000 Depreciation charge of right-of-use assets 68,411 65,512 Interest expense on lease liabilities 68,747 57,629 Expense relating to short-term leases 1,687,038 846,605 1,824,196 969,746 The total cash outflow for leases in 2021 was RMB1,749,164,000 (2020: RMB907,355,000) The remaining lease period of right-of-use assets as at 31 December 2021 was lease of between 3 to 86 years. (a) As at 31 December 2021, the ownership certificates of land with an aggregate carrying value of approximately RMB52,884,000 (2020:RMB54,882,000) that was acquired through assets/business acquisition and group restructuring have not yet been changed from the names of the respective original owners to the name of the Company; and the ownership certificates of the land use rights of the Group with an aggregate carrying value of approximately RMB1,154,591,000 (2020: RMB1,182,379,000) had not been obtained by the Group due to the following fact: Carrying value as at 31 December 2021 RMB’000 Reason for delay in obtaining the ownership certificates Certain pieces of land associated with the operations of Guangshen Line IV, one of the railway lines operated by the Company 1,154,591 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. (b) In 2021, the Group recognised an addition of right-of-use assets and lease liabilities amounted to RMB989,000 based on the lease agreement signed with Jiangcun Economic Union.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT9 GOODWILLRMB’000Year ended 31 December 2020 and 2021Opening net book amount 281,255Additions —Impairment —Clos ing net book amount 281,255Year ended 31 December 2019 and 2020Opening net book amount 281,255Additions —Impairment —Clos ing net book amount 281,255On 31 December 2021 and 2020, the outstanding balance of goodwill arose from the excess of apurchase 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 railwaybusiness in order to improve the operation efficiency. As a result, the management considers that theYangcheng Railway Business and the Group’s other railway business (collectively the “Combined RailwayTransportation Business”) represents the lowest level of CGUs within the Group at which goodwill ismonitored for internal management purposes. As a result, the goodwill balance has been allocated tothe CGU comprising the Combined Railway Transportation Business.The recoverable amount of the CGU is determined based on higher of value-in-use and fair value lesscosts to sell. These calculations use pre-tax cash flow projections based on financial forecasts preparedby management covering a five-year period. Cash flows beyond the five-years period are extrapolatedusing the estimated growth rates stated below.Goodwill is allocated to CGU for the purpose of impairment testing by comparing the carrying amountwith the recoverable amount of Combined Railway Transportation Business. Such impairment testingis executed by the annually or when there are signs of impairment. If the recoverable amount is lowerthan the carrying amount, the difference is recognised directly in profit or loss. The allocation is notchanged in 2021.
152 1539 GOODWILL (continued)In 2021 and 2020, the Group’s Combined Railway Transportation Business was greatly affected by theCOVID-19 outbreak and the relevant control and prevention measures. Based on the assessment result,there is no need to recognise impairment charges against goodwill.By taking into consideration of the uncertainly of the development of COVID-19 outbreak and therelevant control and prevention measures, the Group estimated the growth rate and gross marginbased on past experience and its expectations for the market development. The management expectthe impact of the COVID-19 epidemic on the Group’s business would recover in the coming 1–2 years,and the revenue growth rate within the five-year period would reach up to 10%. Cash flows beyond thefive-year period are extrapolated using the estimated growth rates, which doesn’t exceed the long-termaverage growth rate of the industry. The discount rate used is pre-tax and reflect specific risks relatingto the railway transportation business segment.As at 31 December 2021, the recoverable amount calculated based on value-in-use exceeded carryingvalue of the CGU by RMB3,495 million (2020: RMB3,937 million).The key assumptions used for value-in-use calculations are as follows:Railroad business 2021 2020Revenue growth rate (within the five-year period) 6%–10% 8%–32%Long-term growth rate (beyond the five-year period) 3% 3%Gross margin -1%–7% 3%–8%Pre- tax discount rate 12% 12%Even if the long-term growth rate used in the value-in-use calculation for the CGU in Combined RailwayTransportation Business had been 10% lower than management’s estimates as at 31 December 2021,the Group would not need to recognise impairment charges against goodwill.Even if the estimated pre-tax discount rate applied to the discounted cash flows for the CGU inCombined Railway Transportation Business had been 1% higher than management’s estimates as at 31December 2021, the Group would not need to recognise impairment charges against goodwill.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT10 SUBSIDIARIESThe following is a list of the principal subsidiaries at 31 December 2021:Name of the entityPlace of incorporation andnature of legal entityPrincipal activities and placeof operationProportionof equityinterestsheld by theCompanyProportionof equityinterests heldby the GroupProportionof equityinterestsheld by noncontrollinginterestsRegisteredcapital(%) (%) (%) RMB’000Dongguan Changsheng Enterprise CompanyLimitedChina, limited liability company Warehousing in the PRC 51% 51% 49% 38,000Shenzhen Fu Yuan Enterprise DevelopmentCompany LimitedChina, limited liability company Hotel management in the PRC 100% 100% — 18,500Shenzhen Pinghu Qun Yi Railway StoreLoading and Unloading Company LimitedChina, limited liability company Cargo loading and unloading,warehousing, freighttransportation in the PRC100% 100% — 10,000Shenzhen Guangshen Railway Economicand Trade Enterprise Company LimitedChina, limited liability company Catering management in the PRC 100% 100% — 2,000Shenzhen Railway Station PassengerServices Company LimitedChina, limited liability company Catering services and sales ofmerchandise in the PRC100% 100% — 1,500Guangshen Railway Station DongqunTrade and Commerce Service CompanyLimited (“Dongqun Trade andCommerce Service”) (ii)China, limited liability company Sales of merchandises in the PRC — — — 1,020Guangzhou Railway Huangpu ServiceCompany LimitedChina, limited liability company Cargo loading and unloading,warehousing, freighttransportation in the PRC100% 100% — 379Zengcheng Lihua Stock Company Limited(“Zengcheng Lihua”) (i)China, limited liability company Real estate construction, provision ofwarehousing, cargo uploading andunloading services in the PRC44.72% 44.72% 55.28% 107,050(i) According to the Articles of Association of Zengcheng Lihua, the remaining shareholders are all natural personsand none of these individuals holds more than 0.5% equity interest in Zengcheng Lihua. All directors ofZengcheng Lihua were appointed by the Company. After considering all shareholders of Zengcheng Lihua otherthan the Company are individuals with individual interest holding of less than 0.5% and such individuals do notact in concert, and also all directors of Zengcheng Lihua were appointed by the Company, the directors of theCompany consider that the Company has the de facto control over the board and the substantial financial andoperating decisions of Zengcheng Lihua.As at 31 December 2021, the non-wholly owned subsidiaries individually and in aggregate is not significant tothe Group. Therefore, financial information of the non-wholly owned subsidiaries are not disclosed.(ii) In 2021, Dongqun Trade and Commerce Service was liquidated.
154 15511 INVESTMENTS IN ASSOCIATES2021 2020RMB’000 RMB’000Share of net assets 225,338 196,848Less: provision for impairment — —225,338 196,848The movement of investments in associates of the Group during the year is as follows:2021 2020RMB’000 RMB’000Beginning of the year 196,848 174,686Share of results after tax 18,144 22,162Equity dilution (a) 10,346 —End of the year 225,338 196,848As at 31 December 2021, the Group had direct interests in the following companies which areincorporated/established and are operating in the PRC:Name of the entityPercentage ofequity interestattributable tothe Company Paid-in capital Principal activitiesGuangzhou Tiecheng EnterpriseCompany Limited (“Tiecheng”)49% RMB343,050,000 Properties leasing and trading of merchandiseShenzhen Guangzhou Railway CivilEngineering Company (“Shentu”) (a)24.42% RMB206,670,000 Construction of railroad properties
GUANGSHEN RAILWAY 2021 ANNUAL REPORT11 INVESTMENTS IN ASSOCIATES (continued)The above associates are limited liability companies and are unlisted companies. There are no significantcontingent liabilities relating to the Group’s interest in the associates and there are no significantrestrictions on the transfer of assets or earnings from the associates to the Group.(a) On March 2021, according to the resolution passed in the shareholders’ meeting of Shentu,Guangzhou Railway Group increased investment amounted to RMB156,200,000 to Shentu withthe equity interests of four subsidiaries, thus the proportion of equity interests in Shentu heldby Guangzhou Railway Group was changed from 51% to 75.58%, and the proportion of equityinterests in Shentu held by the Company was diluted from 49% to 24.42%. The Group recogniseddilution gain amounted to RMB10,346,000 in other reserve.Set out below are the summarised financial information for Tiecheng and Shentu which are accountedfor using the equity method in the consolidated financial statements.Summarised balance sheetsTiecheng Shentu2021 2020 2021 2020RMB’000 RMB’000 RMB’000 RMB’000Current assets 112,241 93,571 3,311,999 1,974,930Non-current assets 367,349 373,860 31,500 10,209Tota l assets 479,590 467,431 3 ,343,499 1,985,139Curr ent liabilities 219,973 221,928 2 ,941,676 1,828,909Equi ty 259,617 245,503 401,823 156,230Share of net assets 127,213 120,296 98,125 76,552Carrying amount of interest inas sociates 127,213 120,296 98,125 76,552
156 15711 INVESTMENTS IN ASSOCIATES (continued)Summarised balance sheets (continued)Reconciliation of the summarised financial information presented to the carrying amount of its interestsin associates as follows:Tiecheng Shentu Total2021 2020 2021 2020 2021 2020RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000Opening net assets 245,503 216,301 156,230 140,203 401,733 356,504Profit for the year 14,114 29,202 54,062 16,027 68,176 45,229Increase in net assetsarising from capitalinjection by othershareholder (a) — — 191,531 — 191,531 —Closing net assets 259,617 245,503 401,823 156,230 661,440 401,733Percentage ofownership interest 49.00% 49.00% 24.42% 49.00% — —Carry ing value 12 7,213 1 20,296 9 8,125 76,552 22 5,338 1 96,84812 DEFERRED TAX ASSETS/(LIABILITIES)2021 2020RMB’000 RMB’000Deferred tax assets 769,911 496,920Less: Offsetting of deferred tax liabilities (71,515) (73,966)Defe rred tax assets (net) 698,396 422,954Deferred tax liabilities (127,935) (132,879)Less: Offsetting of deferred tax assets 71,515 73,966Defe rred tax liabilities (net) (56,420) (58,913)641,976 364,041
GUANGSHEN RAILWAY 2021 ANNUAL REPORT12 DEFERRED TAX ASSETS/(LIABILITIES) (continued)The analysis of deferred tax assets and deferred tax liabilities is as follows:2021 2020RMB’000 RMB’000Deferred tax assets:— Deferred tax assets to be recovered after more than12 months 748,500 394,474— Deferred tax assets to be recovered within 12 months 21,411 102,446769,911 496,920Deferred tax liabilities:— Deferred tax liabilities to be recovered after more than12 months (122,034) (127,105)— Deferred tax liabilities to be recovered within 12 months (5,901) (5,774)(127,935) (132,879)
158 15912 DEFERRED TAX ASSETS/(LIABILITIES) (continued)The movement in deferred tax assets and liabilities of the Group during the year, without taking intoconsideration the offsetting of balances within the same tax jurisdiction, is as follows:At 1January2020(Charged)/Credited to thecomprehensiveincomestatementAt 31December2020(Charged)/Credited to thecomprehensiveincomestatementAt 31December2021RMB’000 RMB’000 RMB’000 RMB’000 RMB’000Deferred tax assets:Deductible tax losses — 302,586 302,586 90,167 392,753Impairment provision for receivables 17,821 (27) 17,794 (10,231) 7,563Impairment provision for fixed assets andconstruction-in-progress 11,626 2,959 14,585 3,645 18,230Impairment provision for materials and supplies 4,410 (4,410) — 915 915Differences in accounting base and tax base ofgovernment grants 23,251 2,015 25,266 169,185 194,451Differences in accounting base and tax base ofemployee benefits obligations 50,803 35,317 86,120 10,178 96,298Loss on disposal of fixed assets 25,115 (968) 24,147 525 24,672Difference in accounting base and tax base ofparty organisation activity fee 16,276 10,146 26,422 (2,793) 23,629Difference in accounting base and tax base in therecognition of land disposal proceed 212,017 (212,017) — — —Difference in accounting base and tax base ofsafety production reserve — — — 2,971 2,971Others 5,029 (5,029) — 8,429 8,429366,348 130,572 496,920 272,991 769,911
GUANGSHEN RAILWAY 2021 ANNUAL REPORT12 DEFERRED TAX ASSETS/(LIABILITIES) (continued)At 1January2020Credited to thecomprehensiveincomestatementAt 31December2020Credited to thecomprehensiveincomestatementAt 31December2021RMB’000 RMB’000 RMB’000 RMB’000 RMB’000Deferred tax liabilities:Differences in accounting base and tax base inrecognition of fixed assets 5,251 (493) 4,758 (1,528) 3,230Differences in accounting base and tax base inrecognition of leasehold land payments 61,404 (2,491) 58,913 (2,493) 56,420Changes in the fair value of available-for-salefinancial assets 60,647 — 60,647 — 60,647Others 9,201 (640) 8,561 (923) 7,638136,503 (3,624) 132,879 (4,944) 127,935Deferred income tax assets are recognised for tax loss carry-forwards and other temporary differenceto 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 temporarydifference amounting to RMB323,478,000 (2020: RMB263,450,000) arising from operations ofsubsidiaries which do not foresee to have enough tax-deductible assessable profits in the near future.
160 16112 DEFERRED TAX ASSETS/(LIABILITIES) (continued)2021 2020RMB’000 RMB’000Tax losses that can be carried forward (a) 306,669 235,403Deductible temporary differences 16,809 28,047323,478 263,450(a) The tax loss carry-forwards in which no deferred income tax assets were recognised will expire in the followingyears:2021 2020RMB’000 RMB’0002021 — 22,0902022 21,488 22,2452023 36,393 36,3932024 44,996 44,9962025 109,246 109,6792026 94,546 —306,669 235,403
GUANGSHEN RAILWAY 2021 ANNUAL REPORT13 LONG-TERM PREPAID EXPENSESThe long-term prepaid expenses represented staff uniforms. The movements of long-term prepaidexpenses are set forth as follows:2021 2020RMB’000 RMB’000At 1 JanuaryCost 151,997 129,575Accumulated amortisation (108,108) (88,768)Net book amount 43,889 40,807Year ended 31 DecemberOpening net book amount 43,889 40,807Additions 47,632 22,422Amortisation (27,381) (19,340)Clos ing net book amount 64,140 43,889At 31 DecemberCost 199,629 151,997Accumulated amortisation (135,489) (108,108)Net book amount 64,140 43,889
162 16314 FINANCIAL INSTRUMENTS BY CATEGORY2021 2020RMB’000 RMB’000Financial assetsFinancial assets at amortised costTrade receivables and other receivables excluding prepayments(Notes 19 and 20) 4,812,699 4,317,539Term deposits (Note 16) 220,000 220,000Cash and cash equivalents (Note 21) 1,499,462 1,485,232Long-term receivable 20,226 23,734FVOCI (Note 15) 463,696 377,631Tota l 7,016,083 6,424,1362021 2020RMB’000 RMB’000Financial liabilitiesLiabilities at amortised costTrade and bills payable and other payables excluding nonfinancialliabilities (Notes 26 and 28) 4,483,180 3,417,934Payables for fixed assets and construction-in-progress 2,776,708 2,914,696Dividends payable 13,746 13,749Lease liabilities 1,384,084 1,377,573Tota l 8,657,718 7,723,952
GUANGSHEN RAILWAY 2021 ANNUAL REPORT15 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVEINCOME(a) Classification of financial assets at FVOCIFinancial assets at FVOCI are equity securities which are strategic investments not held for trading,and which the Group has irrevocably elected at initial recognition to recognise in this category.(b) Equity investments at fair value through other comprehensive income2021 2020RMB’000 RMB’000Non-current assetsInve stments in unlisted companies 463,696 377,631The FVOCI mainly represent equity interests held by the Group in certain unlisted companies withpercentage ownership less than 2% individually.On disposal of these equity investments, any related balance within the FVOCI reserve isreclassified to retained earnings.(c) Amounts recognised in profit or loss and other comprehensive incomeDuring the year, the following gains were recognised in profit or loss and other comprehensiveincome.2021 2020RMB’000 RMB’000Dividends from equity investments at FVOCI recognisedin profit or loss in other gains/losses — net (Note 32) 9,802 7,735— Related to investments held at the end of thereporting period 9,802 7,735(d) Fair valueInformation about the methods and assumptions used in determining fair value is provided in note3.3.All of the financial assets at FVOCI are denominated in RMB. For an analysis of the sensitivity ofthe assets to price risk refer to note 3.1(a)(iii).
164 16516 TERM DEPOSITS2021 2020RMB’000 RMB’000Current assetsShort term deposits 60,000 60,000Non-current assetsLong term deposits 160,000 160,000The original effective interest rate of term deposits was 3.65% per annum (2020: 3.63% per annum).17 LONG-TERM RECEIVABLEThe long-term receivable balance represents freight service fees receivable from a third-party customerwhich was acquired from Yangcheng Railway Business. On the acquisition date of Yangcheng RailwayBusiness, it was remeasured at its then fair value, which was assessed by the discounted cash flowmethod by making reference to the repayment schedule agreed by both parties.The balance is subsequently carried at amortised cost using an average effective interest rate of 6.54%.The balance approximated its fair value as at 31 December 2021 and 31 December 2020.18 MATERIALS AND SUPPLIES2021 2020RMB’000 RMB’000Raw materials 190,328 197,242Accessories 41,918 54,704Reusable rail-line track materials 39,002 43,584Retailing consumables 335 876271,583 296,406
GUANGSHEN RAILWAY 2021 ANNUAL REPORT18 MATERIALS AND SUPPLIES (continued)The costs of materials and supplies consumed by the Group during the year were recognised as“operating expenses” in the amount of RMB1,497,587,000 (2020: RMB1,296,779,000).As at 31 December 2021, a balance of RMB3,661,000 of the provision was provided for writing down thematerials and supplies to their net realisable values (2020: nil).During the year, an additional provision of RMB5,695,000 was made, no balance was reversed andRMB2,034,000 was written off arising from realisation of losses in the disposal of these assets (2020:nil, nil and RMB17,640,000).19 TRADE RECEIVABLES2021 2020RMB’000 RMB’000Trade receivables 4,419,925 3,782,381Including: receivables from related parties 3,664,894 2,955,797Less: Provision for impairment of receivables (23,751) (60,704)4,396,174 3,721,677As at 31 December 2021 and 2020, the Group’s trade receivables were all denominated in RMB.The majority of the trade receivable were from state-owned railroad companies or companies intransportation industry.The passenger railroad services are usually transacted on a cash basis. The Group does not have formalcontractual credit terms agreed with its customers for freight services but the trade receivables areusually settled within a period less than one year. As a result, the Group regards any receivable balancewithin one year being not overdue. The aging analysis of the outstanding trade receivables is as follows:2021 2020RMB’000 RMB’000Within 1 year 3,655,942 2,773,713Over 1 year but within 2 years 762,258 653,062Over 2 years but within 3 years 1,725 306,410Over 3 years — 49,1964,419,925 3,782,381The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses alifetime expected loss provision for all trade receivables.The maximum exposure to credit risk at the reporting date is the carrying value mentioned above. TheGroup does not hold any collateral as security.
166 16720 PREPAYMENTS AND OTHER RECEIVABLES2021 2020RMB’000 RMB’000Due from third parties 337,235 452,921Due from related parties 171,059 242,601508,294 695,5222021 2020RMB’000 RMB’000Other receivables 423,028 606,452Less: Provision for impairment (6,503) (10,590)Other receivables, net (a) 416,525 595,862Prepayments (b) 91,769 99,660508,294 695,522(a) Other receivables mainly represent miscellaneous deposits and receivables arising from the course of provisionof non-railway transportation services by the Group.Movements on the provision for impairment of other receivables are as follows:2021 2020RMB’000 RMB’000At 1 January 10,590 10,590Provision for impairment — —Reversal of impairment loss provision (3,660) —Written-off of impairment loss provision (427) —At 31 December 6,503 10,590(b) Prepayments mainly represent amounts paid in advance to the suppliers for utilities and other operatingexpenses of the Group. As at 31 December 2021, the input VAT with related invoices not been received orverified amounted to RMB87,575,000 (2020: RMB94,536,000).
GUANGSHEN RAILWAY 2021 ANNUAL REPORT20 PREPAYMENTS AND OTHER RECEIVABLES (continued)The carrying amounts of the Group’s prepayments and other receivables are denominated in thefollowing currencies:2021 2020RMB’000 RMB’000RMB 507,854 695,522HKD 440 —508,294 695,522The maximum exposure to credit risk at the reporting date is the carrying value of each class ofreceivable mentioned above. The Group does not hold any collateral as security.21 CASH AND CASH EQUIVALENTS2021 2020RMB’000 RMB’000Cash at bank and on hand 1,499,462 1,485,232(a) The carrying amounts of the cash and cash equivalents are denominated in the followingcurrencies:2021 2020RMB’000 RMB’000RMB 1,476,340 1,458,200HKD 23,122 27,003USD — 291,499,462 1,485,232
168 16922 SHARE CAPITALAs at 31 December 2021 and 2020, the total authorised number of ordinary shares is 7,083,537,000shares with a par value of RMB1.00 per share. These shares are divided into A shares and H shares.They rank pari passu against each other and they were fully paid up.As at31 December2020 MovementAs at31 December2021RMB’000 RMB’000 RMB’000Authorised, issued and fully paid:Listed shares— H shares 1,431,300 — 1,431,300— A shares 5,652,237 — 5,652,237Tota l 7,083,537 — 7,083,53723 RESERVES(a) Statutory surplus reserve and discretionary surplus reserveAccording to the provisions of the Articles of Association of the Company, the Company shall firstset aside 10% of its profit after tax attributable to shareholders as indicated in the Company’sstatutory financial statements for the statutory surplus reserve (except where the reserve hasreached 50% of the Company’s registered share capital) in each year. The Company may alsomake 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. Thesereserves cannot be used for purposes other than those for which they are created and are notdistributable as cash dividends without the prior approval obtained from the shareholders in ashareholders’ general meeting under specific circumstances.When the statutory surplus reserve is not sufficient to make good for any losses of the Company inprevious years, the current year profit attributable to shareholders shall be used to make good thelosses before any allocations are set aside for the statutory surplus reserve.The statutory surplus reserve, the discretionary surplus reserve and the share premium accountcould be converted into share capital of the Company provided it is approved by a resolutionpassed in a shareholders’ general meeting with the provision that the ending balance of thestatutory surplus reserve does not fall below 25% of the registered share capital amount. TheCompany may either allot newly created shares to the shareholders at the same proportion of theexisting number of shares held by these shareholders, or it may increase the par value of eachshare.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT23 RESERVES (continued)(a) Statutory surplus reserve and discretionary surplus reserve (continued)For the year ended 31 December 2021, no appropriations to reserves of the Company wereproposed by the directors (2020: nil).(b) Other reserves(i) Special reserve — Safety Production FundIn accordance with the provisions of the Articles of Association of the Company, the profitafter appropriation to reserves and available for distribution to shareholders shall be thelower of the retained earnings determined under (a) PRC GAAP or (b) IFRS. Due to the factthat the statutory financial statements of the Company have been prepared in accordancewith PRC GAAP, the retained earnings so reported may be different from those reported inthe statement of changes in shareholders’ equity prepared under IFRS contained in thesefinancial statements. The main difference between the retained earnings of the Companydetermined under PRC GAAP and those determined under IFRS was relating to accountingpolicies in respect of investment in associates adopted under PRC GAAP and IFRS.For the year 2021 and 2020, the movement of “Special reserve — Safety Production Fund” ofthe Group are as below:2021 2020RMB’000 RMB’000At 1 January — —Appropriation for retained earnings 126,524 281,277Utilisation (114,640) (281,277)At 3 1 December 11,884 —
170 17123 RESERVES (continued)(b) Other reserves (continued)(i) Special reserve — Safety Production Fund (continued)The Company is engaged in passenger and freight transportation business. In accordancewith the regulations issued by Ministry of Finance and State Administration of Work Safety ofthe PRC, the Company is required to establish a special reserve (“Safety Production Fund”)calculated based on the passenger and freight transportation revenue of the previous yearusing the following percentages:(i) 1% for regular freight business;(ii) 1.5% for passenger transportation, dangerous goods delivery business and other specialbusiness.The Safety Production Fund is mainly used for the renovation and maintenance of securityequipment and facilities. For the purpose of the consolidated financial statements underIFRS, such reserve is established through an appropriation from retained earnings based onthe aforementioned method. When the Safety Production Fund is actually utilised, the actualexpenses incurred are charged to profit or loss.(ii) FVOCI reserveThe Group has elected to recognise changes in the fair value of certain investments in equitysecurities in OCI, as explained in note 2.10. These changes are accumulated within the FVOCIreserve within equity. As at 31 December 2021, the Group had a balance of FVOCI reserve ofRMB181,941,000 (2020: RMB181,941,000). The Group transfers amounts from this reserve toretained earnings when the relevant equity securities are derecognised.(iii) OthersThis reserve is used to record the differences which may arise as a result of reduction in theownership interest in an associate but significant influence is retained. As at 31 December2021, the Group had a balance of such reserve of RMB10,346,000 (2020: nil), as explained innote 11.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT24 DEFERRED INCOME2021 2020RMB’000 RMB’000Gove rnment grants 781,563 104,939Government grants relating to costs are deferred and recognised in the profit or loss over the periodnecessary 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 noncurrentliabilities as deferred income and are credited to profit or loss on a straight-line basis over theexpected lives of the related assets.25 EMPLOYEE BENEFITS OBLIGATIONS2021 2020RMB’000 RMB’000Employee benefits obligations 22,761 24,487Less: current portion included in accruals and other payables(Note 28) (22,761) (24,487)— —Pursuant to a redundancy plan implemented by the Group in 2006, selected employees who had metcertain specified criteria and accepted voluntary redundancy were provided with an offer of earlyretirement benefits, up to their official age of retirement. Such arrangements required specific approvalgranted by management of the Group.With the acquisition of the Yangcheng Railway Business in 2007 and Guangmeishan Railway CompanyLimited (“GRCL”) Business and Guangdong Sanmao Railway Company Limited (“GSRC”) Business in2016, the Group has also assumed certain retirement and termination benefits obligations associatedwith the operations of Yangcheng Railway Business, GRCL Business and GSRC Business. Theseobligations mainly include the redundancy termination benefits similar to those mentioned above, aswell as the obligation for funding post-retirement medical insurance premiums of retired employeesbefore the respective acquisitions.The employee benefits obligations have been provided for by the Group at amounts equal to thetotal expected benefit payments. Where the obligation does not fall due within twelve months, theobligation payable has been discounted using a pre-tax rate that reflects management’s current marketassessment of the time value of money and risk specific to the obligation. The discount rate wasdetermined with reference to treasury bond yields in the PRC.
172 17325 EMPLOYEE BENEFITS OBLIGATIONS (continued)The movement in the employee benefits obligation during current year is as follows:2021 2020RMB’000 RMB’000At 1 January 24,487 26,345Additions — —Payments (1,726) (1,858)At 3 1 December 22,761 24,48726 TRADE AND BILL PAYABLES2021 2020RMB’000 RMB’000Trade payables (a) 2,812,710 2,073,922Bill payables (b) 300,000 —3,112,710 2,073,922(a) Trade payables2021 2020RMB’000 RMB’000Payables to third parties 1,037,841 812,629Payables to related parties 1,774,869 1,261,2932,812,710 2,073,922(b) Bill payables2021 2020RMB’000 RMB’000Bank acceptance bills 300,000 —
GUANGSHEN RAILWAY 2021 ANNUAL REPORT26 TRADE AND BILL PAYABLES (continued)The aging analysis of trade and bill payables was as follows:2021 2020RMB’000 RMB’000Within 1 year 2,577,337 1,874,224Over 1 year but within 2 years 482,169 146,717Over 2 years but within 3 years 20,392 8,993Over 3 years 32,813 43,9883,112,710 2,073,92227 CONTRACT LIABILITIES2021 2020RMB’000 RMB’000Advances received from customers 52,546 186,959Frequent traveller program 59,896 28,346112,442 215,305In 2021, RMB211,219,000 (2020: RMB455,328,000) of last year’s contract liabilities were recognised inrevenue, of which RMB182,873,000 (2020: RMB435,213,000) were advances received from customers,and RMB28,346,000 (2020: RMB20,115,443) were frequent traveller program.
174 17528 ACCRUALS AND OTHER PAYABLES2021 2020RMB’000 RMB’000Due to third parties 1,367,508 1,401,338Due to related parties 587,667 448,3181,955,175 1,849,6562021 2020RMB’000 RMB’000Payables to GIDC assumed by business combination 357,560 360,560Other deposits received 297,736 308,890Salary and welfare payables 486,644 418,214Deposits received for construction projects 117,366 131,965Other taxes payable 75,286 62,942Amounts received on behalf of Labour Union 68,030 87,566Deposits received from ticketing agencies 30,078 25,408Employee benefits obligations (Note 25) 22,761 24,488Housing maintenance fund — 2,480Payables assumed by capital increase in FVOCI 86,065 —Other payables 413,649 427,1431,955,175 1,849,656
GUANGSHEN RAILWAY 2021 ANNUAL REPORT29 AUDITORS’ REMUNERATIONAuditors’ remuneration in respect of audit and non-audit services provided by the auditors for the yearended 31 December 2021 were RMB8,400,000 and RMB510,000 respectively (2020: RMB RMB8,400,000and RMB610,000 respectively).30 EMPLOYEE BENEFITS2021 2020RMB’000 RMB’000Wages and salaries 6,135,683 5,949,037Provision for medical, housing scheme andother employee benefits (a) 1,399,931 1,326,476Contributions to the defined contribution scheme (b) 1,153,849 408,9228,689,463 7,684,435(a) Housing schemeIn accordance with the PRC housing reform regulations, the Group is required to makecontributions 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% ofthe salaries out of their payroll. The employees are entitled to claim the entire sum of the fundunder certain specified withdrawal circumstances. The Group has no further legal nor constructiveobligation towards housing benefits of these employees offered beyond the above contributionsmade.(b) Defined contribution pension schemeAll the full-time employees of the Group are entitled to join a statutory pension scheme. Theemployees would receive pension payments equal to their basic salaries payable upon theirretirement up to their death. Pursuant to the PRC laws and regulations, contributions to thebasic old age insurance for the Group’s local staff are to be made monthly to a governmentagency based on the standard salary set by the provincial government. The government agencyis responsible for the pension liabilities due to the employees upon their retirement. The Groupaccounts for these contributions on an accrual basis and charges the related contributions toexpense in the year to which the contributions relate.
176 17730 EMPLOYEE BENEFITS (continued)(c) Five highest paid individualsThe five individuals whose emoluments were the highest in the Group for the year include onedirector (2020: one), four senior executives (2020: four) and no supervisor (2020: nil) ?whoseemoluments are reflected in the analysis shown in Note 42. No remuneration has been paid by theGroup to the five highest paid individuals as an inducement to join or upon joining the Group or asa compensation for loss of office.The emolument range of each individual is within the band of nil to RMB611,000 (2020: Nil toRMB512,000).31 OTHER OPERATING EXPENSES2021 2020RMB’000 RMB’000Passenger security inspection expenses 184,280 173,257Carriage cleaning expenses 113,617 107,118Train station housekeeping expenses 86,646 90,919Staff accommodation expenses 91,737 82,634Other safety maintenance expenses 115,489 75,726Bunk cleaning expenses 77,627 68,125Passenger transportation facility maintenance 20,471 22,434Professional expenses 14,984 21,675Administrative expenses and others 123,550 93,214828,401 735,102
GUANGSHEN RAILWAY 2021 ANNUAL REPORT32 OTHER GAINS/(LOSSES) — NET2021 2020RMB’000 RMB’000Loss on disposal of fixed assets — net (4,734) (101,377)Government grants 18,523 63,061Interest income from banks 29,716 30,811Dividend income from FVOCI 9,802 7,735Income from compensation 1,908 115Impairment of fixed assets, materials and supplies (22,491) (11,835)Unwinding of interest accrued on long-term receivable 4,515 3,786Reversal of renovation cost for the separation andtransfer of Facilities 65,937 —Write-back of outstanding of payables 20,354 2,903Others 11,188 960134,718 (3,841)33 FINANCE COSTS — NET2021 2020RMB’000 RMB’000Interest expense of lease liabilities (67,648) (57,629)Net foreign exchange loss (689) (1,452)Bank charges (6,239) (1,564)(74,576) (60,645)34 INCOME TAX CREDITIn 2021 and 2020, the applicable income tax rate of the Company was 25%.An analysis of the current year income tax credit is as follows:2021 2020RMB’000 RMB’000Current income tax 2,312 1,551Deferred income tax (Note 12) (277,935) (134,196)(275,623) (132,645)
178 17934 INCOME TAX CREDIT (continued)The tax on the Group’s loss/profit before tax differs from the theoretical amount that would arise usingthe tax rate of the home country of the Company as follows:2021 2020RMB’000 RMB’000Loss before tax (1,249,586) (690,745)Tax calculated at the statutory rate of 25% (2020: 25%) (312,397) (172,686)Effect of expenses not deductible for tax purposes 23,307 18,939Effect of income not subject to tax (6,986) (7,474)Tax losses and temporary differences in accounting base andtax base for which no deferred tax asset was recognised 20,827 27,420Adjustments for current tax of prior periods (77) 1,194Utilisation of previously unrecognised tax losses and temporarydifferences (297) (38)Inco me tax credit (275,623) (132,645)35 EARNINGS PER SHAREThe calculation of basic earnings per share is based on the net loss for the year attributable to equityholders of approximately RMB973,119,000 (2020: net loss, RMB557,876,000), divided by the weightedaverage number of ordinary shares outstanding during the year of 7,083,537,000 shares (2020:7,083,537,000 shares). There were no dilutive potential ordinary shares during both years.2021 2020RMB’000 RMB’000Loss attributable to owners of the Company (973,119) (557,876)Weighted average number of ordinary shares in issue 7,083,537 7,083,537Basi c and diluted loss per share RMB (0.14) RMB (0.08)36 DIVIDENDNo dividend was proposed for the year ended 31 December 2021 (2020: nil).
GUANGSHEN RAILWAY 2021 ANNUAL REPORT37 CASH FLOW GENERATED FROM OPERATIONS(a) Reconciliation from loss/profit before income tax to net cash generated from operations:2021 2020RMB’000 RMB’000Loss before income tax: (1,249,586) (690,745)Adjustments for:Depreciation of fixed assets (Note 6) 1,786,110 1,662,179Depreciation of right-of-use assets (Note 8) 68,410 65,511Impairment of fixed assets (Note 6) 16,796 11,835Gains on disposal of assets classified as held for sale — (1,188,645)Provision for impairment of materials and supplies(Note 18) 5,695 —Loss on disposal of fixed assets and costs on repairs 53,854 165,253Amortisation of long-term prepaid expenses (Note 13) 27,381 19,340Share of results of associates, net of tax (Note 11) (18,144) (22,162)Dividend income on FVOCI (Note 32) (9,802) (7,735)Reversal of impairment of receivables (40,613) (358)Reversal of renovation cost for the separation andtransfer of facilities (Note 32) (65,937) —Write-back of outstanding of payables (Note 32) (20,354) (2,903)Amortisation of deferred income (11,164) (8,377)Interest expense on lease liabilities (Note 33) 67,648 57,629Interest income (9,927) (8,310)Operating profit before working capital changes 600,367 52,512(Increase)/decrease in trade receivables (637,544) 780,765Decrease in materials and supplies 28,868 2,005Decrease/(increase) in prepayments and otherreceivables 94,431 (108,998)Decrease in long-term receivable 8,023 6,155Increase in trade payables 993,459 701,825(Decrease)/increase in accruals and other payables (84,724) 153,357Net cash generated from operations 1,002,880 1,587,621
180 18137 CASH FLOW GENERATED FROM OPERATIONS (continued)(b) In the cash flow statement, proceeds from disposal of fixed assets comprise:2021 2020RMB’000 RMB’000Net book amount (Note 6) 92,790 225,003Transfer to materials and supplies (9,740) (27,151)Loss on disposal of fixed assets and costs on repairs (53,854) (165,253)Proc eeds from disposal of fixed assets 29,196 32,59938 CONTINGENCYThere were no significant contingent liabilities as at 31 December 2021 and 31 December 2020 and upto the date of approval of these financial statements.39 COMMITMENTSCapital commitmentsAs at 31 December 2021, the Group had the following capital commitments:2021 2020RMB’000 RMB’000Contracted but not provided for 46,553 444,270Authorised but not contracted for 493,447 505,730540,000 950,000A substantial amount of these commitments is related to the reform of stations or facilities relating tothe existing railway lines of the Company, which would be financed by self-generated operating cashflow.40 RELATED PARTY TRANSACTIONSParties are considered to be related if one party has the ability, directly or indirectly, to control theother party or exercise significant influence over the other party in making financial and operatingdecisions.(a) Related parties that control the Company or are controlled by the Company:See note 10 for the principal subsidiaries.None of the shareholders is the controlling entity of the Company.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT40 RELATED PARTY TRANSACTIONS (continued)(b) Nature of the principal related parties that do not control/are not controlled bythe Company:(i) Guangzhou Railway Group and its subsidiariesName of related parties Relationship with the CompanySingle largest shareholder and its subsidiariesGuangzhou Railway Group Single largest shareholderGuangzhou Railway Group YangCheng Railway EnterpriseDevelopment CompanySubsidiary of the single largest shareholderGuangdong Railway Company Limited. Subsidiary of the single largest shareholderGIDC Subsidiary of the single largest shareholderGuangzhou Railway Material Supply Company Subsidiary of the single largest shareholderGuangzhou Railway Station Service Centre Subsidiary of the single largest shareholderGuangzhou Yuetie Operational Development Company Subsidiary of the single largest shareholderGuangzhou Railway Rolling Stock Works Company Limited Subsidiary of the single largest shareholderGuangdong Tieqing International Travel Agency Company Limited Subsidiary of the single largest shareholderXiashen Railway Guangdong Company Limited Subsidiary of the single largest shareholderGuangzhou Railway Real Estate Construction Engineering Co., Ltd. Subsidiary of the single largest shareholderGuangdong Yuetong Railway Logistics Company Limited Subsidiary of the single largest shareholderSanmao Railway Company Xiaotangxi Freight Field Service Company Subsidiary of the single largest shareholderGuangzhou Railway Technology Development Co., Ltd. Subsidiary of the single largest shareholderGuangzhou Anmao Railway Consulting Construction CompanyLimitedSubsidiary of the single largest shareholderGuangzhou Beiyang Information Technology Company Limited Subsidiary of the single largest shareholderHunan Railway Lianchuang Technology Development Co., Ltd. Subsidiary of the single largest shareholderGuangzhou Northeast Freight Car Outer Winding Railway Co., Ltd. Subsidiary of the single largest shareholderHunan Changtie Loading & Unloading Co., Ltd. Subsidiary of the single largest shareholderGuangzhou Ruiwei Economy Development Co., Ltd Subsidiary of the single largest shareholderGuangzhou Railway Technology Development Surveying Co., Ltd. Subsidiary of the single largest shareholder
182 18340 RELATED PARTY TRANSACTIONS (continued)(b) Nature of the principal related parties that do not control/are not controlled bythe Company: (continued)(ii) Associates of the GroupName of related parties Relationship with the CompanyTiecheng Associate of the GroupShentu Associate of the Group(iii) Relationship with CSRG and other railway companiesOn 14 March 2013, pursuant to the Approval, the previous controlling entity of GuangzhouRailway Group, MOR, had been dismantled. The administrative function of MOR weretransferred 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 ofGuangzhou Railway Group which was wholly controlled by MOR previously were transferredto the CSRG (“Reform”). The Reform was completed since 1 January 2017 and the Companydisclosed details of transactions undertaken with CSRG Group for both years of 2021 and2020 for reference. Unless otherwise specified, the transactions with CSRG Group disclosedbelow have excluded transactions undertaken with Guangzhou Railway Group and itssubsidiaries.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT40 RELATED PARTY TRANSACTIONS (continued)(c) In addition to those disclosed elsewhere in the financial statements, duringthe year, the Group had the following material transactions undertaken withrelated parties:(I) Material transactions undertaken with Guangzhou Railway Group and itssubsidiaries:2021 2020RMB’000 RMB’000Provision of services and sales of goodsTransportation related servicesProvision of train transportation services toGuangzhou Railway Group and its subsidiaries (i) 3,323,844 2,345,512Revenue collected by CSRG for railway networkusage and related services provided to GuangzhouRailway Group and its subsidiaries (ii) 1,325,614 1,332,346Revenue from railway operation service provided toGuangzhou Railway Group’s subsidiaries (iii) 865,220 842,3505,514,678 4,520,208Other servicesSales of materials and supplies to GuangzhouRa ilway Group and its subsidiaries (iv) 89,042 34,705
184 1852021 2020RMB’000 RMB’000Services received and purchases madeTransportation related servicesProvision of train transportation servicesby Guangzhou Railway Group and itssubsidiaries (i) (vi) 796,142 753,288Costs settled by CSRG for railway network usageand related services provided by GuangzhouRailway Group and its subsidiaries (ii) 2,896,222 1,985,7683,692,364 2,739,056Other servicesProvision of repair and maintenance services byGuangzhou Railway Group and its subsidiaries (iv) 311,080 297,809Purchase of materials and supplies from GuangzhouRailway Group and its subsidiaries (iv) 770,683 722,487Provision of construction services by GuangzhouRailway Group and its subsidiaries (v) 172,592 285,6161,254,355 1,305,91240 RELATED PARTY TRANSACTIONS (continued)(c) In addition to those disclosed elsewhere in the financial statements, duringthe year, the Group had the following material transactions undertaken withrelated parties: (continued)(I) Material transactions undertaken with Guangzhou Railway Group and itssubsidiaries: (continued)
GUANGSHEN RAILWAY 2021 ANNUAL REPORT40 RELATED PARTY TRANSACTIONS (continued)(c) In addition to those disclosed elsewhere in the financial statements, duringthe year, the Group had the following material transactions undertaken withrelated parties: (continued)(I) Material transactions undertaken with Guangzhou Railway Group and itssubsidiaries: (continued)(i) The service charges are determined based on a pricing scheme set by the CSRG or based onnegotiation 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 anationwide basis.(iii) The service charges are levied based on contract prices determined based on a “cost plus a profitmargin” and agreed between both contracting parties.(iv) The prices are determined based on mutual negotiation between the contracting parties withreference to actual costs incurred.(v) Based on construction amount determined under national railway engineering guidelines.(vi) The amount recognised in 2021 does not include the payment of short-term leases related to thelease of passenger trains paid to Guangzhou Railway Group amounting to RMB400,473,000 (2020:RMB292,603,000).(II) Material transactions with CSRG and other railway companiesWhen the passenger trains and freight trains operated by the Group pass through rail linesowned by other railway companies controlled by the CSRG, the Group need to pay thosecompanies for the services rendered (track usage, locomotive traction and electric catenariesservice, etc.), and vice versa. The charge rate of such services are instructed by the CSRGand are collected and settled by the CSRG according to its central recording and settlementsystems (see details in note 2.22).
186 18740 RELATED PARTY TRANSACTIONS (continued)(c) In addition to those disclosed elsewhere in the financial statements, duringthe year, the Group had the following material transactions undertaken withrelated parties: (continued)(II) Material transactions with CSRG and other railway companies (continued)In addition to those disclosed elsewhere in the financial statements, during the year, theGroup had the following material transactions undertaken with the CSRG Group:2021 2020RMB’000 RMB’000Provision of services and sales of goodsTransportation related servicesProvision of train transportation services toCSRG Group (i) 138,219 57,349Revenues collected by CSRG for services provided toCSRG Group (ii) 2,275,132 2,105,206Revenues from railway operation service provided toCSRG Group (iii) 2,232,346 2,214,4604,645,697 4,377,015Other servicesProvision of repairing services for cargo trucks toCSRG Group (ii) 470,143 436,955Provision of apartment leasing services toCSRG Group (iv) 2,064 456Others 607 887472,814 438,298
GUANGSHEN RAILWAY 2021 ANNUAL REPORT2021 2020RMB’000 RMB’000Services received and purchases madeTransportation related servicesProvision of train transportation services byCSRG Group (i) (vi) 58,121 18,872Cost settled by CSRG for services provided byCSRG Group (ii) (vi) 1,769,170 1,506,5411,827,291 1,525,413Other servicesProvision of repair and maintenance services byCSRG Group (iv) 28,185 28,928Purchase of materials and supplies fromCSRG Group (iv) 3,203 12,362Provision of construction services byCSRG Group (v) — 2,66231,388 43,952(i) The service charges are determined based on a pricing scheme set by the CSRG or based onnegotiation 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 anationwide basis.(iii) The service charges are levied based on contract prices determined based on a “cost plus a profitmargin” and explicitly agreed between both contracting parties.40 RELATED PARTY TRANSACTIONS (continued)(c) In addition to those disclosed elsewhere in the financial statements, duringthe year, the Group had the following material transactions undertaken withrelated parties: (continued)(II) Material transactions with CSRG and other railway companies (continued)
188 18940 RELATED PARTY TRANSACTIONS (continued)(c) In addition to those disclosed elsewhere in the financial statements, duringthe year, the Group had the following material transactions undertaken withrelated parties: (continued)(II) Material transactions with CSRG and other railway companies (continued)(iv) The prices are determined based on mutual negotiation between the contracting parties withreference to actual costs incurred.(v) Based on construction amounts determined under national railway engineering guidelines.(vi) The amount recognised in 2021 does not include the payment of short-term leases related tothe lease of passenger trains and freight trains to CSRG amounting to RMB1,286,566,000 (2020:RMB554,003,000).(III) Revenues collected and settled through the CSRG:2021 2020RMB’000 RMB’000Passenger transportation 6,054,100 3,769,231Freight transportation 1,701,842 1,456,605Other transportation related services 8,488 24,0487,764,430 5,249,884(IV) Lease — as lessee:In 2021, the depreciation expense of the right-of-use assets was RMB16,246,000 (2020:RMB13,378,000), the interest expense of lease liabilities was RMB67,605,000 (2020:RMB57,629,000), and the actual payment to Guangzhou Railway Group was RMB61,887,000(2020: RMB60,750,000).The payment of short-term leases to related parties are shown in notes 40(c)(I)(vi) and 40(c)(II)(vi).
GUANGSHEN RAILWAY 2021 ANNUAL REPORT40 RELATED PARTY TRANSACTIONS (continued)(d) Key management compensationThe compensation paid or payable to key management for employee services is shown in note 42.(e) As at 31 December 2021, the Group had the following material balancesmaintained with related parties:(I) Material balances with Guangzhou Railway Group and its subsidiaries:2021 2020RMB’000 RMB’000Trade receivables 2,881,069 1,853,846— Guangzhou Railway Group (i) 600,042 208,024— Subsidiaries of Guangzhou Railway Group (i) 2,281,027 1,645,822— Associates — —Less: Provision for impairment (16,028) (24,099)2,865,041 1,829,747Prepayments and other receivables 83,808 59,580— Guangzhou Railway Group 1,944 431— Subsidiaries of Guangzhou Railway Group 81,790 59,070— Associates 74 79Less: Provision for impairment (62) (51)83,746 59,529Prepayments for fixed assets and construction-inprogress7,270 —— Subsidiaries of Guangzhou Railway Group (ii) 7,270 —— Associates — —Trade and bills payables 1,882,872 1,243,372— Guangzhou Railway Group (i) 71,414 67,889— Subsidiaries of Guangzhou Railway Group (ii) 1,730,317 1,145,025— Associates 81,141 30,458Payables for fixed assets and construction-inprogress1,038,742 876,031— Guangzhou Railway Group 334,313 111,799— Subsidiaries of Guangzhou Railway Group 326,023 342,123— Associates 378,406 422,109Contract liabilities 4,346 436— Subsidiaries of Guangzhou Railway Group 3,940 297— Associates 406 139Accruals and other payables 495,930 443,754— Guangzhou Railway Group 8,600 4,379— Subsidiaries of Guangzhou Railway Group (iii) 468,064 426,821— Associates (iv) 19,266 12,554
190 19140 RELATED PARTY TRANSACTIONS (continued)(e) As at 31 December 2021, the Group had the following material balancesmaintained with related parties: (continued)(I) Material balances with Guangzhou Railway Group and its subsidiaries: (continued)(i) The trade balances due from/to Guangzhou Railway Group, subsidiaries of Guangzhou RailwayGroup mainly represent service fees and charges payable and receivable balances arising from theprovision of passenger transportation and cargo forwarding businesses jointly with these relatedparties within the PRC.(ii) The trade payables due to subsidiaries of Guangzhou Railway Group mainly represent payablesarising from unsettled fees for purchase of materials and provision of other services according tovarious service agreements entered into between the Group and the related parties.(iii) The other payables due to subsidiaries of Guangzhou Railway Group mainly represent theperformance deposits received for construction projects and deposits received from ticketingagencies.(iv) The other payables due to associates mainly represent the performance deposits received forconstruction projects operated by associates.As at 31 December 2021, all the balances maintained with related parties were unsecured,non-interest bearing and were repayable on demand.(II) Material balances with CSRG Group:As at 31 December2021 2020RMB’000 RMB’000Due from CSRG Group— Trade receivables 783,707 1,101,951— Other receivables 87,251 183,021Due to CSRG Group— Trade payables and payables for fixed assetsand construction-in-progress 114,481 71,082— Other payables 91,737 4,564As at 31 December 2021, all the balances maintained with CSRG Group were unsecured, noninterestbearing and were repayable on demand.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT41 BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANYBalance sheet of the CompanyAs at 31 December2021 2020ASSETSNon-current assetsFixed assets — net 23,944,890 22,947,270Right-of-use assets 2,859,132 2,914,888Construction-in-progress 1,588,935 2,778,676Prepayments for fixed assets and construction-in-progress 9,904 7,268Goodwill 281,255 281,255Investments in subsidiaries 82,031 82,531Investments in associates 132,201 121,855Deferred tax assets 706,993 434,550Long-term prepaid expenses 63,142 42,614Financial assets at fair value through other comprehensiveincome 461,978 375,913Long-term deposits 160,000 160,000Long-term receivable 20,226 23,73430,310,687 30,170,554Current assetsMaterials and supplies 267,903 292,269Trade receivables 4,394,292 3,716,035Prepayments and other receivables 750,266 849,475Short-term deposits 60,000 60,000Cash and cash equivalents 1,499,460 1,485,2236,971,921 6,403,002Tota l assets 37,282,608 36,573,556
192 19341 BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY (continued)Balance sheet of the Company (continued)As at 31 DecemberNote 2021 2020EQUITY AND LIABILITIESCapital and reserves attributable to theCompany’s equity holdersShare capital 7,083,537 7,083,537Share premium (a) 11,564,462 11,564,462Other reserves (a) 3,288,655 3,266,425Retained earnings (a) 5,578,335 6,474,359Total equity 27,514,989 28,388,783LiabilitiesNon-current liabilitiesLease liabilities 1,320,835 1,315,693Deferred income related to government grants 781,563 104,9392,102,398 1,420,632Current liabilitiesTrade and bill payables 3,083,929 2,052,908Contract liabilities 112,406 215,197Payables for fixed assets and construction-inprogress2,776,708 2,914,696Dividends payable 871 874Current portion of lease liabilities 63,249 61,880Accruals and other payables 1,624,517 1,503,752Other current liabilities 3,541 14,8347,665,221 6,764,141Total liabilities 9,767,619 8,184,773Tota l equity and liabilities 37,282,608 36,573,556The balance sheet of the Company was approved by the Board of Directors on 30 March 2022 and wassigned on its behalf.Wu Yong Hu LinglingDirector Director
GUANGSHEN RAILWAY 2021 ANNUAL REPORT41 BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY (continued)(a) Reserve movement of the Company:SharepremiumOtherreservesRetainedearningsAt 1 January 2020 11,564,462 3,266,425 7,375,835Total comprehensive income — — (476,464)Loss for the year — — (476,464)Other comprehensive income — — —Special reserve — Safety Production Fund — — —Appropriation — 281,277 (281,277)Utilisation (281,277) 281,277Appropriations from retained earnings — — —Transaction with owners: — — (425,012)Dividends relating to 2019 — — (425,012)At 3 1 December 2020 1 1,564,462 3,266,425 6,474,359At 1 January 2021 11,564,462 3,266,425 6,474,359Total comprehensive income — — (896,024)Loss for the year — — (896,024)Other comprehensive income — — —Special reserve — Safety Production Fund — 11,884 —Appropriation — 126,524 —Utilisation — (114,640) —Appropriations from retained earnings — — —Equity dilution — 10,346 —At 3 1 December 2021 1 1,564,462 3,288,655 5,578,335
194 19542 BENEFITS AND INTERESTS OF DIRECTORS(a) Directors’, supervisors’ and senior executives’ emolumentsFor the year ended 31 December 2021Emoluments paid or receivable in respect of a person’s services as a director, whether of theCompany or its subsidiary undertakingName Fee SalaryDiscretionarybonusesHousingallowanceAllowances andbenefits in kindEmployer’scontribution toa retirementbenefit schemeRemunerationspaid orreceivablein respect ofaccepting officeas director TotalRMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000DirectorsWu, Yong — — — — — — — —Guo, Xiangdong — 74 5 11 3 13 — 106Zhou, Shangde — 290 22 40 10 51 — 413Guo, Jiming — — — — — — — —Wang, Bin (i) — — — — — — — —Hu, Dan (iii) — — — — — — — —Zhang, Zhe — — — — — — — —Ma, Shiheng 139 — — — — — — 139Tang, Xiaofan 112 — — — — — — 112Qiu, Zilong 112 — — — — — — 112SupervisorsLiu, Mengshu — — — — — — — —Lei, Chunliang (iv) — — — — — — — —Chen, Shaohong — — — — — — — —Xiang, Lihua — — — — — — — —Meng, Yong — — — — — — — —Huang, Songli — 249 17 34 6 37 — 343Lin, Wensheng — 285 22 37 14 57 — 415Chief ExecutiveHu, Lingling (iv) — 472 22 47 13 57 — 611Senior ExecutivesLuo, Jiancheng — 346 22 45 10 49 — 472Tang, Xiangdong — 349 22 45 10 54 — 480Luo, Xinpeng — 340 22 45 13 54 — 474Gong, Yuwen (iv) — 341 22 45 12 54 — 474(i) Resigned from the position in June 2021.(ii) Appointed the position of senior executive in June 2021.(iii) Appointed the position of director in June 2021.(iv) Appointed the position of supervisors in June 2021.
GUANGSHEN RAILWAY 2021 ANNUAL REPORT42 BENEFITS AND INTERESTS OF DIRECTORS (continued)(a) Directors’, supervisors’ and senior executives’ emoluments (continued)For the year ended 31 December 2020Emoluments paid or receivable in respect of a person’s services as a director, whether of theCompany or its subsidiary undertakingName Fee SalaryDiscretionarybonusesHousingallowanceAllowances andbenefits in kindEmployer’scontribution toa retirementbenefit schemeRemunerationspaid orreceivablein respect ofaccepting officeas director TotalRMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000DirectorsWu, Yong — — — — — — — —Guo, Ji’an (i) — — — — — — — —Guo, Xiangdong (ii) — 324 22 42 12 21 421Chen, Song (i) 56 — — — — — — 56Jia, Jianmin (i) 76 — — — — — — 76Wang, Yunting (i) 56 — — — — — — 56Guo, Jiming — — — — — — — —Wang, Bin (iii) — — — — — — — —Zhang, Zhe — — — — — — — —Ma, Shiheng (iii) 79 — — — — — — 79Tang, Xiaofan (iii) 61 — — — — — — 61Qiu, Zilong (iii) 61 — — — — — — 61SupervisorsLiu, Mengshu — — — — — — — —Chen, Shaohong — — — — — — — —Xiang, Lihua — — — — — — — —Meng, Yong — — — — — — — —Song, Min (i) — 111 8 17 5 9 — 150Zhou, Shangde — 286 26 42 7 17 — 378Lin, Wensheng (iii) — 154 10 19 6 8 — 197Chief ExecutiveHu, Lingling (iv) — 419 20 42 12 19 — 512Senior ExecutivesLuo, Jiancheng — 327 20 42 8 14 — 411Tang, Xiangdong — 288 22 42 47 17 — 416Luo, Xinpeng — 317 20 42 11 19 — 409Gong, Yuwen (iv) — 321 20 42 11 19 — 413(i) Resigned from the position in June 2020(ii) Appointed the position of senior executive in June 2020(iii) Appointed the position of director in June 2020.(iv) Appointed the position of senior executive in May 2020.
19642 BENEFITS AND INTERESTS OF DIRECTORS (continued)(a) Directors’, supervisors’ and senior executives’ emoluments (continued)During the year ended 31 December 2021, no director received any emolument from the Groupas an inducement to join or leave the Group or compensation for loss of office; no directors andsenior management waived or has agreed to waive any emoluments (2020: Nil).(b) Director’s retirement benefitsThe retirement benefits paid to directors during the year end of 2021 by a defined contributionpension plan (basic endowment insurance and enterprise annuity) in respect of their services asdirectors of the Company and its subsidiaries are RMB64,000 (2020: RMB143,000) respectively. Noother retirement benefits were paid to them in respect of their other services in connection withthe management of the affairs of the Company or its subsidiary undertaking (2020: Nil).(c) Directors’ termination benefitsDuring the year ended 31 December 2021, no payments to the directors of the Company ascompensation for the early termination of the appointment (2020: Nil).(d) Consideration provided to third parties for making available directors’ servicesDuring the year ended 31 December 2021, the Company did not provide to third any party formaking available director’s services (2020: Nil).(e) Information about loans, quasi-loans and other dealings in favour of directors,controlled bodies corporate by and connected entities with such directorsDuring the year ended 31 December 2021, no loans, quasi-loans or other dealings in favourof directors of the Company, controlled bodies corporate by and connected entities with suchdirectors (2020: Nil).(f) Directors’ material interests in transactions, arrangements or contractsExcept the transactions with Guangzhou Railway Group as disclosed in note 40, no significanttransactions, arrangements and contracts in relation to the Group’s business to which the Companywas a party and in which a director of the Company had a material interest, whether directly orindirectly, subsisted at the end of the year or at any time during the year (2020: Nil).