UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 20-F
(Mark One)
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
or
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2009
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
or
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report
Commission file number: 1-14362
广深铁路股份有限公司
(Exact name of Registrant as specified in its charter)
GUANGSHEN RAILWAY COMPANY LIMITED
(Translation of Registrant’s name into English)
People’s Republic of China
(Jurisdiction of incorporation or organization)
No. 1052 Heping Road, Shenzhen, People’s Republic of China 518010
(Address of Principal Executive Offices)
Mr. Guo Xiangdong
Telephone: (86-755) 2558-7920 or (86-755) 2558-8146
2558-8150
Email:ir@gsrc.com
Facsimile: (86-755) 2559-1480
No. 1052 Heping Road, Shenzhen, People’s Republic of China 518010
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of Each Class | ||||
Name of Each Exchange on which Listed | ||||
American Depositary Shares, each representing 50 Class H ordinary shares | New York Stock Exchange, Inc. | |||
Class H ordinary shares, nominal value RMB 1.00 per share | The Stock Exchange of Hong Kong Limited |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the Registrant’s classes of capital or common stock as of December 31, 2009:
Domestic shares (A shares), par value RMB 1.00 per share | 5,652,237,000 | |||
H shares, par value RMB 1.00 per share | 1,431,300,000 |
(including 229,144,050193,138,850 H shares in the form of American Depositary Shares)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer x Accelerated Filer ¨ Non-Accelerated Filer ¨
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ¨ | International Financial Reporting Standards as issued by the International Accounting Standards Board x | Other ¨ |
o
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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Certain information contained in this annual report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. These forward-looking statements can be identified by the use of words or phrases such as “is expected to”, “will”, “is anticipated”, “plan to”, “estimate”, “believe”, “may”, “intend”, “should” or similar expressions, or the negative forms of these words, phrases or expressions, or by discussions of strategy. Such statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from our historical results and those presently anticipated or projected. You are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date on which such statements were made. Among the factors that could cause our actual results in the future to differ materially from any opinions or statements expressed with respect to future periods include changes in the economic policies of the PRC government, an economic slowdown in the Pearl River Delta region and elsewhere in mainland China, increased competition from other means of transportation, delays in major development projects, a recurrenceoccurrence of the Severe Acute Respiratory Syndrome, or SARS, epidemic or other similar health epidemics or outbreaks such as avian flu and H1N1 influenza, in Hong Kong or China, foreign currency fluctuations and other factors beyond our control.
When considering such forward-looking statements, you should keep in mind the factors described in “Item 3D.“ITEM 3. KEY INFORMATION—D. Risk Factors” and other cautionary statements appearing in “ITEM 5. Operating and Financial Review and Prospects”OPERATING AND FINANCIAL REVIEW AND PROSPECTS” of this annual report. Such risk factors and statements describe circumstances which could cause actual results to differ materially from those contained in any forward-looking statement.
Solely for the convenience of the reader, this annual report contains translations of amounts from RMB into U.S. dollars and vice versa at the rate of RMB 6.83RMB6.23 to US$1.00, which is rounded from 6.8259, which wasRMB6.2301, the certified exchange rate for December 31, 20092012 as published by the Federal Reserve Board of the United States, except where we specify that a different rate has been used. You should not construe these translations as representations that the RMB amounts actually represent U.S. dollar amounts or could be converted into U.S. dollars at that rate or at all. See “Item 3A.“ITEM 3. KEY INFORMATION—A. Selected Consolidated Financial and Other Data—Exchange Rate Information” for information regarding the certified exchange rates for U.S. dollar/RMB conversions from January 1, 20052007 through June 11, 2010.
We prepare and publish our consolidated financial statements in RMB.
Various amounts and percentages set out in this document have been rounded and, accordingly, may account for apparent discrepancies in the tables appearing herein.
Unless the context otherwise requires or otherwise specified:
“Acquisition” means our acquisition of the railway transportation business between Guangzhou and Pingshi and the related assets and liabilities from
1
“China” or “PRC” means the People’s Republic of China.
“CEPA” means the Closer Economic Partnership Arrangement between Hong Kong and Chinese Mainland entered into on October 27, 2004, as amended.
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“GEDC” means Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company, a wholly owned subsidiary of GRGC.
“GRGC” means Guangzhou Railway (Group) Company, our largest shareholder.
“China Railway Corporation” means the entity set up on March 14, 2013 by the First Session of the 12th National People’s Congress of the PRC to perform the commercial functions formerly performed by the MOR;
“Company”, “we”, “our”, “our Company” or “us” means Guangshen Railway Company Limited, a joint stock limited company incorporated in Shenzhen, China with limited liability, and its subsidiaries on a consolidated basis.
“HKSE” means the Stock Exchange of Hong Kong Limited.
“HKSE Listing Rules” means the Rules Governing the Listing of Securities on the HKSE.
“Hong Kong” means The Hong Kong Special Administrative Region of the PRC.
“Hong Kong dollars” or “HKD” means Hong Kong dollars, the lawful currency of Hong Kong.
“Macau” means the Macau Special Administrative Region of the PRC.
“MOR” means the Ministry of Railways, which was dissolved by the First Session of the 12th National People’s Congress of the PRC.
“MOT” means Ministry of Transport.
“Pearl River Delta” means the area in and adjacent to the southern part of Guangdong Province, PRC, surrounding the mouth of the Pearl River and its lower reaches.
“RMB” means Renminbi Yuan, the lawful currency of the PRC.
“Restructuring” means the restructuring conducted in connection with our initial public offering in 1996 during which we succeeded to the railroad and certain other businesses of our predecessor company and certain assets and liabilities of GRGC.
“SEC” means the U.S. Securities and Exchange Commission.
“tonne” means metric tonne; and one tonne is approximately 2,205 pounds in weight.
“US$”, “USD” or “U.S. dollars” means U.S. dollars, the lawful currency of the United States.
“Yangcheng Railway Company” means Guangzhou Railway Group Yangcheng Railway Enterprise Development Company, a wholly owned subsidiary of GRGC, or its predecessor, Guangzhou Railway Group Yangcheng Railway Company.
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Not applicable.
Not applicable.
The following selected consolidated data relating to our consolidated balance sheetsConsolidated Balance Sheets as of December 31, 20082011 and 2009,2012, and our consolidated comprehensive income statement, changesConsolidated Comprehensive Income Statement, Consolidated Statement of Changes in equityEquity and cash flowsConsolidated Cash Flow Statements for each of the years ended December 31, 2007, 20082010, 2011 and 20092012 are derived from and are qualified by reference to our audited consolidated financial statements included elsewhere in this annual report and should be read in conjunction with “ITEM 5. Operating and Financial Review and Prospects”OPERATING AND FINANCIAL REVIEW AND PROSPECTS”. The following selected consolidated data relating to our consolidated balance sheetsSelected Consolidated Balance Sheet Data as of December 31, 2005, 20062008, 2009 and 2007,2010 and our consolidated income statement, changesConsolidated Income Statement, Consolidated Statement of Changes in equityEquity and cash flowsConsolidated Cash Flow Statements for each of the years ended December 31, 20052008 and 20062009 are derived from our previously published audited consolidated financial statements that are not included in this annual report.
The audited consolidated financial statements from which the selected consolidated financial data set forth below have been derived were prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB.
Year ended December 31, | ||||||||||||||||||||||||
2005 | 2006 | 2007(2) | 2008(2) | 2009(2) | 2009(2) | |||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | US$(1) | |||||||||||||||||||
(in thousands except for per share data) | ||||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||
Revenue from railroad businesses | ||||||||||||||||||||||||
— Passenger | 2,253,335 | 2,608,838 | 5,833,538 | 6,759,229 | 7,195,717 | 1,053,546 | ||||||||||||||||||
— Freight | 540,341 | 565,557 | 1,326,450 | 1,324,701 | 1,210,118 | 177,177 | ||||||||||||||||||
— Railway network usage and services | 305,790 | 291,489 | 2,659,529 | 2,738,425 | 3,105,654 | 454,708 | ||||||||||||||||||
Subtotal | 3,099,466 | 3,465,884 | 9,819,517 | 10,822,355 | 11,511,489 | 1,685,431 | ||||||||||||||||||
Revenue from other businesses | 177,462 | 128,590 | 688,987 | 866,300 | 874,268 | 128,004 | ||||||||||||||||||
Total revenue | 3,276,928 | 3,594,474 | 10,508,504 | 11,688,655 | 12,385,757 | 1,813,435 | ||||||||||||||||||
Railroad operating expenses | (2,339,384 | ) | (2,527,907 | ) | (8,334,293 | ) | (9,162,278 | ) | (9,620,732 | ) | (1,408,599 | ) | ||||||||||||
Other businesses operating expenses | (190,347 | ) | (166,011 | ) | (458,819 | ) | (829,077 | ) | (797,367 | ) | (116,745 | ) | ||||||||||||
Other income/(expense) | 51,628 | 64,648 | 49,816 | 17,703 | (19,765 | ) | (2,894 | ) | ||||||||||||||||
Profit from operations | 798,825 | 965,204 | 1,765,208 | 1,715,003 | 1,947,893 | 285,197 | ||||||||||||||||||
Profit attributable to shareholders of the Company | 646,960 | 771,513 | 1,431,415 | 1,224,129 | 1,363,458 | 199,784 | ||||||||||||||||||
Profit from operations per share | 0.18 | 0.22 | 0.25 | 0.24 | 0.27 | 0.04 | ||||||||||||||||||
Earnings per share for profit attributable to shareholders of the Company |
4
Year ended December 31, | ||||||||||||||||||||||||
2008 | 2009 | 2010 | 2011 | 2012 | 2012 | |||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | US$(1) | |||||||||||||||||||
(in thousands except for per share data) | ||||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||
Revenue from railroad businesses | ||||||||||||||||||||||||
- Passenger | 6,500,521 | 6,841,659 | 7,377,145 | 8,026,512 | 7,841,091 | 1,258,602 | ||||||||||||||||||
- Freight | 1,269,781 | 1,164,851 | 1,315,347 | 1,386,753 | 1,344,113 | 215,749 | ||||||||||||||||||
- Railway network usage and other transportation related services | 3,052,053 | 3,504,979 | 3,888,367 | 4,255,996 | 4,890,640 | 785,014 | ||||||||||||||||||
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Subtotal | 10,822,355 | 11,511,489 | 12,580,859 | 13,669,261 | 14,075,844 | 2,259,365 | ||||||||||||||||||
Revenue from other businesses | 866,300 | 874,268 | 903,589 | 1,021,574 | 1,016,042 | 163,089 | ||||||||||||||||||
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Total revenue | 11,688,655 | 12,385,757 | 13,484,448 | 14,690,835 | 15,091,886 | 2,422,454 | ||||||||||||||||||
Railroad operating expenses | (9,203,347 | ) | (9,651,278 | ) | (10,481,496 | ) | (11,123,133 | ) | (12,263,021 | ) | (1,968,382 | ) | ||||||||||||
Other businesses operating expenses | (829,077 | ) | (797,367 | ) | (845,774 | ) | (977,868 | ) | (966,377 | ) | (155,117 | ) | ||||||||||||
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Other income/(expense) and other gains/(losses)-net | 21,623 | (16,808 | ) | (47,060 | ) | (25,786 | ) | 71,815 | 11,527 | |||||||||||||||
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Profit from operations | 1,677,854 | 1,920,304 | 2,110,118 | 2,564,048 | 1,934,303 | 310,482 | ||||||||||||||||||
Profit attributable to equity holders of the Company | 1,193,668 | 1,342,450 | 1,486,062 | 1,804,107 | 1,318,938 | 211,707 | ||||||||||||||||||
Profit from operations per share | 0.24 | 0.27 | 0.30 | 0.36 | 0.27 | 0.04 | ||||||||||||||||||
Earnings per share for profit attributable to equity holders of the Company | ||||||||||||||||||||||||
- Basic and diluted | 0.17 | 0.19 | 0.21 | 0.25 | 0.19 | 0.03 | ||||||||||||||||||
Dividends declared per share | 0.08 | 0.08 | 0.09 | 0.10 | 0.08 | 0.01 | ||||||||||||||||||
Earnings per ADS for profit attributable to shareholders of the Company | 8.43 | 9.48 | 10.49 | 12.73 | 9.31 | 1.49 | ||||||||||||||||||
Balance Sheet Data (at year end): | ||||||||||||||||||||||||
Working capital | (616,158 | ) | 31,118 | 1,576,567 | 3,064,855 | 3,254,818 | 522,443 | |||||||||||||||||
Fixed assets | 24,922,566 | 25,036,329 | 24,466,130 | 23,987,080 | 24,524,248 | 3,936,476 | ||||||||||||||||||
Leasehold land payments | 592,368 | 576,379 | 560,391 | 544,403 | 528,296 | 84,799 | ||||||||||||||||||
Total assets | 29,011,095 | 29,427,247 | 30,604,502 | 32,207,347 | 32,867,182 | 5,275,631 | ||||||||||||||||||
Equity attributable to equity holders of the Company | 22,472,791 | 23,248,638 | 24,168,017 | 25,334,606 | 25,945,190 | 4,164,557 | ||||||||||||||||||
Share capital, issued and outstanding (domestic shares 5,652,237; H shares 1,431,300), RMB 1,00 per value | ||||||||||||||||||||||||
domestic shares | 5,652,237 | 5,652,237 | 5,652,237 | 5,652,237 | 5,652,237 | 5,652,237 | ||||||||||||||||||
H shares | 1,431,300 | 1,431,300 | 1,431,300 | 1,431,300 | 1,431,300 | 1,431,300 | ||||||||||||||||||
Cash Flow Statement Data: | ||||||||||||||||||||||||
Net cash generated from operating activities | 1,641,069 | 2,617,533 | 3,331,458 | 3,329,058 | 2,177,673 | 349,546 | ||||||||||||||||||
Net cash used in investing activities | (2,915,785 | ) | (2,096,154 | ) | (1,188,763 | ) | (3,983,623 | ) | (2,160,895 | ) | (346,853 | ) | ||||||||||||
Net cash generated from /(used in) financing activities | 483,317 | (966,680 | ) | (599,288 | ) | (637,736 | ) | (708,522 | ) | (113,727 | ) | |||||||||||||
Purchase of fixed assets and payment for construction-in-progress | (2,947,804 | ) | (1,639,674 | ) | (1,158,399 | ) | (943,390 | ) | (1,836,154 | ) | (294,727 | ) | ||||||||||||
Dividends paid to shareholders of the Company | (566,683 | ) | (566,685 | ) | (566,683 | ) | (637,533 | ) | (708,354 | ) | (113,700 | ) | ||||||||||||
Other Data: | ||||||||||||||||||||||||
Railroad transportation operating income | 1,619,008 | 1,860,211 | 2,099,363 | 2,546,128 | 1,812,823 | 290,983 | ||||||||||||||||||
Other businesses operating income | 37,223 | 76,901 | 57,815 | 43,706 | 49,665 | 7,972 |
Year ended December 31, | ||||||||||||||||||||||||
2005 | 2006 | 2007(2) | 2008(2) | 2009(2) | 2009(2) | |||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | US$(1) | |||||||||||||||||||
— Basic and diluted | 0.15 | 0.17 | 0.20 | 0.17 | 0.19 | 0.03 | ||||||||||||||||||
Dividends declared per share | 0.12 | 0.08 | 0.08 | 0.08 | 0.08 | 0.01 | ||||||||||||||||||
Earnings per ADS for profit attributable to shareholders of the Company | 7.46 | 8.73 | 10.10 | 8.64 | 9.63 | 1.41 | ||||||||||||||||||
Balance Sheet Data (at year end): | ||||||||||||||||||||||||
Working capital | 467,124 | 4,249,117 | 433,615 | (616,158 | ) | 31,118 | (4556 | ) | ||||||||||||||||
Fixed assets | 6,346,822 | 6,738,477 | 19,995,286 | 23,903,846 | 24,048,573 | 3,521,021 | ||||||||||||||||||
Leasehold land payments | 620,798 | 625,628 | 607,971 | 592,368 | 576,379 | 84,389 | ||||||||||||||||||
Total assets | 11,683,057 | 24,139,331 | 26,689,929 | 28,221,826 | 28,662,614 | 4,196,576 | ||||||||||||||||||
Equity attributable to shareholders of the Company | 9,796,076 | 20,169,008 | 21,125,761 | 21,783,207 | 22,581,125 | 3,306,168 | ||||||||||||||||||
Share capital, issued and outstanding, RMB 1.00 per value, | ||||||||||||||||||||||||
domestic shares | 2,904,250 | 5,652,237 | 5,652,237 | 5,652,237 | 5,652,237 | 827,560 | ||||||||||||||||||
H shares | 1,431,300 | 1,431,300 | 1,431,300 | 1,431,300 | 1,431,300 | 209,561 | ||||||||||||||||||
Cash Flow Statement Data: | ||||||||||||||||||||||||
Net cash generated from operating activities | 1,380,147 | 1,112,004 | 1,957,645 | 1,641,069 | 2,617,533 | 383,240 | ||||||||||||||||||
Net cash used in investing activities | (820,915 | ) | (7,833,331 | ) | (5,585,414 | ) | (2,915,785 | ) | (2,096,154 | ) | (306,904 | ) | ||||||||||||
Net cash (used in)/generated from financing activities | (491,733 | ) | 11,461,030 | 128,289 | 483,317 | (966,680 | ) | (141,534 | ) | |||||||||||||||
Purchase of fixed assets and payment for construction-in-progress | (1,588,374 | ) | (3,202,670 | ) | (1,107,320 | ) | (2,947,804 | ) | (1,639,674 | ) | (240,070 | ) | ||||||||||||
Dividends paid to shareholders of the Company | (476,904 | ) | (520,655 | ) | (566,711 | ) | (566,683 | ) | (566,683 | ) | (82,970 | ) | ||||||||||||
Other Data: | ||||||||||||||||||||||||
Railroad transportation operating income | 808,613 | 999,968 | 1,538,053 | 1,660,077 | 1,890,757 | 276,832 | ||||||||||||||||||
Other businesses operating income/(loss) | (9,788 | ) | (34,764 | ) | 277,155 | 37,223 | 76,901 | 11,259 |
(1) | Translation of amounts from RMB into US$, for the convenience of the reader has been made at RMB6.23 to US$1.00, | |
Exchange Rate Information
We derive a majority of our revenue and incur most of our expenses in RMB. In addition, we maintain our books and records in RMB and our financial statements are prepared
5
Effective January 1, 2009, the Federal Reserve Bank of New York discontinued publication of foreign exchange rates certified for customs purposes. Effective January 5, 2009, the Federal Reserve Board of the United States reinstituted the publication of the daily exchange rate data in a weekly version of the H.10 release. The certified exchange rate for RMB published by the Federal Reserve Board of the United States was RMB 6.8320 = US$1.00 = RMB 6.1772 on June 11, 2010.
The following table sets forth information for the RMB concerning (i) the noon buying rate in New York City for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York for the period from January 1, 2005 to December 31, 2008 and (ii) the certified exchange rates as published by the Federal Reserve Board of the United States for the period subsequent to and including January 5, 2009, expressed in RMB per U.S. dollar, for the periods indicated:
Certified Exchange Rate | ||||||||||||
Period | Average(1) | High | Low | |||||||||
(RMB per U.S. dollar) | ||||||||||||
2005 | 8.1826 | 8.2765 | 8.0702 | |||||||||
2006 | 7.9579 | 8.0702 | 7.8041 | |||||||||
2007 | 7.5806 | 7.8127 | 7.2946 | |||||||||
2008 | 6.9193 | 7.2946 | 6.7800 | |||||||||
2009 | 6.8295 | 6.8470 | 6.8176 | |||||||||
December | 6.8275 | 6.8299 | 6.8244 | |||||||||
2010 | ||||||||||||
January | 6.8269 | 6.8295 | 6.8258 | |||||||||
February | 6.8285 | 6.8330 | 6.8258 | |||||||||
March | 6.8262 | 6.8270 | 6.8254 | |||||||||
April | 6.8256 | 6.8275 | 6.8229 | |||||||||
May | 6.8275 | 6.8310 | 6.8245 | |||||||||
June (through June 11) | 6.8294 | 6.8322 | 6.8268 |
Period | Period End | Average(1) | High | Low | ||||||||||||
(RMB per US$1.00) | ||||||||||||||||
2008 | 6.8225 | 6.9193 | 7.2946 | 6.7800 | ||||||||||||
2009 | 6.8259 | 6.8295 | 6.8470 | 6.8176 | ||||||||||||
2010 | 6.6000 | 6.7603 | 6.8330 | 6.6000 | ||||||||||||
2011 | 6.2939 | 6.4475 | 6.6364 | 6.2939 | ||||||||||||
2012 | 6.2301 | 6.3043 | 6.3879 | 6.2221 | ||||||||||||
October | 6.2372 | 6.2627 | 6.2877 | 6.2372 | ||||||||||||
November | 6.2265 | 6.2338 | 6.2454 | 6.2221 | ||||||||||||
December | 6.2301 | 6.2328 | 6.2502 | 6.2251 | ||||||||||||
2013 (through April 19, 2013) | ||||||||||||||||
January | 6.2186 | 6.2215 | 6.2303 | 6.2134 | ||||||||||||
February | 6.2213 | 6.2323 | 6.2438 | 6.2213 | ||||||||||||
March | 6.2108 | 6.2154 | 6.2246 | 6.2105 | ||||||||||||
April (through April 19, 2013) | 6.1772 | 6.1927 | 6.2078 | 6.1720 |
(1) | The average rate for a year means the average of the exchange rates on the last day of each month during a year. The average rate for a month means the average of the daily exchange rates during that month. |
Dividends
At a meeting of the directors held on April 22, 2010,March 26, 2013, the directors proposed a final dividend of RMB 0.08 per ordinary share for the year ended December 31, 2009,2012, which was approvedis to be voted up on at our annual general meeting of shareholders heldscheduled on June 22, 2010. May 23, 2013.
This proposed dividend has not been reflected as a dividend payable in the financial statements as of December 31, 2012, but instead as equity attributable to equity holders of our Company.
In accordance with our Articles of Association, dividends for our domestic shares will be paid in RMB while dividends for our H shares will be calculated in RMB and paid in Hong Kong
6
Not applicable.
Not applicable.
Risks Relating to Our Business
Any recurrence of a global financial crisis or economic downturn similar to that which occurred in 2008 and early 2009 could materially and adversely affect our business, financial condition, results of operations and prospects.
The global financial markets experienced periods of extreme volatility and disruption in 2008 and early 2009. The global financial crisis, concerns over inflation or deflation, energy costs, geopolitical risks, and the availability and cost of financing contributed to the unprecedented levels of market volatility and adversely affected the expectations for the continuous growth of the global economy, the capital markets and the consumer industry. These factors, combined with others, resulted in a severe global economic downturn and also a slowdown in the PRC economy. This change in the macro-economic conditions had an adverse impact on our business and operations by causing a decrease in the number of passengers and the volume of freight that we transported in 2009.transported. Although the global and PRC economies began to show signs of recovery insince the second half of 2009, anythe sustainability of these recoveries is uncertain due to escalating concerns regarding Europe’s sovereign debt crisis, the stability of the Eurozone and concerns regarding the decreased growth rate of China’s economy. In particular, we experienced decreased inbound freight volume and revenue in 2011 and 2012, partially due to diminished export of PRC commodities affected by the slowdown of the global economic growth and international trades and decelerating economic growth in China, overall downward demand on the transportation market and diversion of customers away to high-speed railways for the passenger and freight transportation business. Any recurrence of a global financial crisis as a result of the recent market volatility arising from the concerns over among other issues, the fiscal stability of certain European countries, may adversely affect the growth of the PRC economy, which could adversely affect our business, financial condition, results of operations and prospects.
We face competition, which may adversely affect our business growth and results of operations.
Our passenger and freight transportation businesses face competition from other means of transportation, such as road, air and water transportation. In our passenger transportation business, we compete with the bus and ferry services operating within Hong Kong, Guangzhou, Shenzhen and elsewhere in our service region. We compete for passengers with bus and ferry services in terms of price, speed, comfort, reliability, convenience, service quality, frequency of service and safety. In our freight transportation business, we primarily compete with water, truck and air transportation services operating within our service region. We increasingly compete for freight business with truck operators, shipping companies and airline companies on
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We expect competition to increase in the commencementfuture as the marketization reform of operationsthe railway industry (including the reformation of the investment and financing system, the transportation management system and the pricing system) gradually deepens. With the Wuhan-Guangzhou passenger line commencing operations in December 2009, the MOR restructured theGuangzhou-Shenzhen-Hong Kong passenger train services provided by our Company or by other railway companies (bureaus) whose trains pass through our service territory to enhance the operational efficiency ofline commencing operations in December 2011 and the Beijing-Guangzhou passenger line and for better allocation of railway transportation capacity. Such restructuring has resultedcommencing operations in a slight decrease inDecember 2012, the number of passengers using our long-distance train services in 2009 and, althoughthe past years has decreased. Although we commenced the operation of one pair of passengermore long-distance trains from Guangzhou to Tongren in March 2010 and another pair of passenger trains from Guangzhou to Xinyang in April 2010the newly-built Shenzhen East Station to increase our passenger transportation capacity, we may continue to experience a decrease in the number of passengers using our long-distance train services in the future. Furthermore, the completion of the Guangzhou-Shenzhen section of the Guangzhou-Shenzhen-Hong Kongfuture, which could materially and adversely affect our revenue from railway passenger transportation expressservices. Furthermore, improvements in the high-speed railway which is under construction and is expected to be completed by December 2010,network in China may further increase the competition we face. Increased competition against us mayface and materially and adversely affect our revenue and results of operations. We believe that the entry barrier to the industry will decrease, investors of the industry will become more diversified and the State’s high-speed railway network with Four East-West Lines and Four South-North Lines and numerous inter-city railways will complete construction and commence operation, leading to increased competition within the industry itself.
See “Item 4B.“ITEM 4. INFORMATION ON THE COMPANY—B. Business Overview — Overview—Competition” for additional information regarding our competition.
Any significant decrease in the overall levels of business, industrial, manufacturing and tourism activities within the Pearl River Delta region and elsewhere in China may have a material adverse effect on our revenue and results of operations.
The volume of freight and the number of passengers we transport are affected by the overall levels of business, industrial, manufacturing and tourism activities within the Pearl River Delta region, especially Guangdong and Hong Kong, which is our main service region, and elsewhere in China, which is in turn affected by many factors beyond our control, such as applicable policies and regulations of the PRC government, perceptions regarding the attractiveness of investing or operating a business within our service region, consumer confidence levels and interest rate levels. Any significant decrease in the overall levels of passenger travel or freight transportation, whether due to an economic slowdown or other reasons, such as freezing weather, floods, earthquake and other natural disasters or a recurrence of the SARS epidemic or outbreaks of avian flu or H1N1 or H7N9 influenza or other similar health epidemics, may have a material adverse effect on our business, results of operations and financial condition. FollowingFor example, we experienced decreased inbound freight volume and revenue in 2011 and 2012, partially due to the State’s tightened policies on property and infrastructure investment projects, which led to a decrease in market demand for steel, cement and other raw materials. Furthermore, following China’s accession to the WTO, the policy advantages that Shenzhen currently enjoys due to its status as a special economic zone may be phased out, and its economic growth rate may not be sustained in the long run. Other coastal regions and ports in China may develop at a faster pace and become more competitive than Shenzhen. As a result, part of the freight currently imported or exported through ports in Hong Kong, Shenzhen or Guangzhou may be shipped through other ports in China, which may adversely affect our freight transportation business.
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We are subject to extensive PRC laws and regulations relating to the railway transportation industry. Chinese governmental authorities currently regulate pricing, speed, train routes, new railway construction projects, and investment in the railway transportation industry.
Any significant change in the relevant regulations of the PRC government as a result of these reforms or for any other reason is likely to have a material impact on our business and results of operations. In addition, our ability to respond to changes in our market conditions may be limited by those regulations set by the MOT, State Railway Administration and other Chinese governmental authorities.
Significant changes with respect to the PRC railway industry could adversely affect our business and results of operations
From 2005 to 2010, the PRC railway industry experienced rapid growth in terms of total investment in infrastructure construction from RMB 88 billion to RMB 707 billion, representing a CAGR of 52%, according to statistics published by the MOR. However, after the occurrence of the Wenzhou Railway Accident (defined below) on July 23, 2011, the MOR have adjusted the development scheme of the railway industry for the period from 2011 to 2016 to reduce the budgeted total investment budget in infrastructure construction from the proposed RMB 3.5 trillion to RMB 2.8 trillion. As the railway industry is heavily reliant on capital expenditures on infrastructure construction, the reduced investment in infrastructure construction may have material adverse impact on our future development and results of operations. In addition, to ensure the safe operation of high-speed railway transportation, the MOR also set speed limits on certain high-speed railways. Corresponding with the reduced speed limits, the ticket fare of the affected high-speed railways may be reduced. Although the speed limits do not affect the railways we operate, we cannot assure you that the future policies of the PRC government authorities in relation to railway speed limits will not affect us.
Changes in freight composition in our freight transportation business may adversely affect our results of operations.
Historically, our freight transportation revenue was derived mainly from the transportation of construction materials, coal, iron ore, oil, steel and chemicals, in which our railroad transportation services have an advantage over other means of transportation, such as road transportation services. With the restructuring of these industries, the movement of labor, the upgrading of the industrial structure and shift in manufacturing focus in the Pearl River Delta region, we may experience reduced demand for our freight transportation services. For example, some products and materials, such as advanced technological products, which tend to be compact, may be instead shipped by road or air. We face significant competition in the transportation of such low-volume, high-value products. For example, in 2009, the aggregate weight of goods we transported decreased by 11.6% from 2008. Changes in freight composition may affect the usage volume and pricing of our freight transportation services and adversely affect our results of operations.
Our railroads connect with the railroads of other operators and any disruption in the operation of those railroads, or our cooperation with other operators, could have a material adverse effect on our business and operations.
Our railroads are an integral part of the PRC national railway network. Our railroads connect with the Beijing-Guangzhou line in the north, the Shenzhen-Kowloon rail line in the south, the Guangzhou-Maoming rail line in the west, and the Guangzhou-Meizhou-Shantou rail line in the east, all of which are owned and operated by other operators. See “Item 4A.“ITEM 4. INFORMATION ON THE COMPANY—A. History and Development of the Company — Company—Service Territory” for additional information. Our train services use these other railroads to carry passengers and freight to locations outside of our service territory. The performance of our domestic long distance trains services and our Hong Kong Through Trains depends on the smooth operation of these railroads and our cooperation with the operators of these railroads. Any disruption in the operation of these railroads, or our cooperation with any one of these railroad operators for any reason, could have a material adverse effect on our business and results of operations.
A change to our preferentialChanges in the income tax statusrate applicable to us as a result of a change of law could have a material adverse effect on our results of operations.
Before January 1, 2008, as a company located in the Shenzhen Special Economic Zone, we had enjoyed a preferential income tax rate of 15%, rather than the 33% income tax rate then generally applicable to domestic companies in the PRC.
On March 16, 2007, the National People’s Congress of the PRC promulgated the PRC Enterprise Income Tax Law, or the new EIT Law, which has takentook effect fromon January 1, 2008. According to the new EIT Law, the preferential income tax rate of 15% that was previously applicable to companies incorporated in Shenzhen (like us) and other special economic zones is beingwas gradually phased out inover the five years beginning from January 1, 2008, and effective from January 1, 2012, the applicable tax rate applicable to us will becomeis 25%, i.e., the unified income tax rate applicable to all domestic companies in the PRC with some minor exceptions. According to the Notice Regarding Implementation of Preferential Enterprise Income Tax in the Transition Period issued by the State Council of the PRC, or the State Council, companies which
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Any changes in our right to own and operate our business and assets, our right to profit and our right of asset disposal as previously granted by the MOR and the State Council may have a material adverse effect on our business and results of operations.
We have been granted certain rights by the MOR and the State Council, with respect to certain aspects of our railroad businesses and operations, and also received legal clarification and confirmation of our asset ownership, corporate powers and relationships with service providers and other entities in the national railway system, in connection with our Restructuring. These rights include the right to own and operate our business and assets, the right to profit and the right of asset disposal. Although these rights were granted to us indefinitely, we cannot assure you that these rights will not be affected by future changes in PRC governmental policies or regulations or that other railway operators will not be granted similar rights within our service region. For example, since the MOT and State Railway Administration will be assuming the administrative duties formerly performed by the MOR, there may be changes in the regulatory landscape for such rights. If another railway operator is granted similar rights within our service region, the level of competition we face will increase significantly.
Guangzhou Railway (Group) Company, as our largest shareholder and one of our major service providers, may have interests that conflict with the best interests of our other shareholders and our Company.
Before our A Share Offering, in December 2006, Guangzhou Railway (Group) Company, or GRGC, held 67% of our issued share capital and was our controlling shareholder. Although the equity interest held by GRGC in our Company decreased to approximately 41% after the completion of the A Share Offering and further to approximately 37.1% as a result of the transfer by GRGC of a portion of its equity interest in our Company to the National Social Security Fund Council in September 2009, GRGC can still exercise substantial influence over our Company. GRGC’s ownership percentage enables it to exercise substantial influence over (i) our policies, management and affairs; (ii) our determinations on the timing and amount of dividend payments and our adoption of amendments to certain of the provisions of our Articles of Association and (iii) the outcome of most corporate actions. Subject to the requirements of applicable laws and regulations in China and the HKSE Listing Rules, GRGC may also cause us to effect certain corporate transactions.
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We have very limited insurance coverage.
We do not maintain any insurance coverage against third party liabilities, except compulsory automobile liability insurance. In addition, we do not maintain any insurance coverage for most of our property, for business interruption or for environmental damage arising from accidents that occur in the course of our operations. As a result, we have to pay for financial and other losses, damages and liabilities, including those caused by natural disasters and other events beyond our control, out of our own funds, which could have a material adverse effect on our results of operations and financial condition.
We could incur significant costs for violations of applicable environmental laws and regulations.
Our railroad operations and real estate ownership are subject to extensive national and local environmental laws and regulations concerning, among other things, gaseous emissions, wastewater discharge, disposal of solid waste and noise control. In addition, environmental liabilities may arise from claims asserted by adjacent landowners or other third parties. As of December 31, 2009,2012, we had not incurred any such liabilities and therefore, had not made any provision for such liabilities. We may also be required to incur significant expenses to remediate any violation of applicable environmental laws and regulations. In 2009,2012, our environmental protection-related expenses were approximately RMB 1.0 million.
Technological problems attributable to accidents, human error, severe weather or natural disasters could affect the performance or perception of our railway and result in decreases in customers and revenue, unexpected expenses and loss of market share.
Our operations may be affected from time to time by equipment failures, delays, collisions and derailments attributable to accidents, human error or natural disasters, such as typhoons or floods.
As our high-speed train service becomes technologically more complex, it may become more difficult for us to upkeep and repair our equipment and facilities as well as to maintain our service and safety standards. Furthermore, as we heavily rely on third parties for technical
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If we experience any equipment failures, delays, temporary cancellations of schedules, collisions and derailments, or any deterioration in the performance or quality of any of our services, it could result in personal injuries, damage of goods, customer claims of damages, customer refunds and loss of goodwill. These problems may lead to decreases in customers and revenue, damage to our reputation, unexpected expenses, loss of passengers and freight customers, incurrence of significant warranty and repair costs, diversion of our attention from our transportation service efforts or strained customer relations, any one of which could materially adversely affect our business. For example, in January and February 2008, certain regions in southern China experienced extraordinary harsh winter weather, which caused equipment failures and delays and cancellations of some of our scheduled trains. As a result, during such period of freezing weather, our cost for repair of equipment increased and our revenue decreased. We cannot assure you that such events will not happen again in the future.
The revenue or charges settled by the MOR for certain long-distance passenger train and freight transportation businesses are finally determined by the MOR.
As described in “Item 7B“ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS—B Related Party Transactions” and Notes 3937 and 4038 to our audited consolidated financial statements included elsewhere in this annual report, due to the fact that the railway business is centrally managed by the MOR within the PRC, we work in cooperation with the MOR and other railway companies owned and controlled by the MOR for the operation of certain long-distance passenger train and freight transportation businesses within the PRC. The revenue generated from these long-distance passenger and freight transportation businesses is collected and settled by the MOR according to its settlement systems. The charges for the use of the rail lines and services provided by other railway companies are also settled by the MOR based on its systems. Although we can, to a certain extent, calculate the revenue and charges settled by the MOR based on our own data and information, the amount of settlement is finally determined by the MOR.
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The United States Securities and Exchange Commission, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company in the United States to include a management report on such company’s internal control over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal control over financial reporting. In addition, an independent registered public accounting firm must report on the effectiveness of the company’s internal control over financial reporting. These requirements first applied partially to our annual report on Form 20-F for the year ended December 31, 2006 by requiring our management to provide a report regarding the assessment of the effectiveness of our internal control over financial reporting. Although we have concluded that we maintained effective internal control over financial reporting for each of the years ended December 31, 2007, 20082010, 2011 and 2009,2012, we may not be able to conclude in future years that we have effective internal control over financial reporting, in accordance with the Sarbanes-Oxley Act of 2002. See “Item“ITEM 15. ControlsCONTROLS and Procedures.PROCEDURES.”
Moreover, in future years, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may disagree. If our independent registered public accounting firm is not satisfied with our internal control over financial reporting or the level at which our internal control over financial reporting is designed or operated, or if the independent registered public accounting firm interprets the requirements, rules or regulations differently than we do, then they may issue an adverse opinion. Any of these possible outcomes could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of our reporting processes, which could adversely impact the market price of our H shares and ADSs. In addition, we will continue to incur significant costs and use significant management and other resources in order to comply with Section 404 of the Sarbanes-Oxley Act of 2002.
Risks Relating to Conducting Business in China
Substantially all of our assets are located in China and substantially all of our revenue is derived from our operations in China. Accordingly, our results of operations and prospects are subject, to a significant extent, to the economic, political and legal developments in China.
China’s economic, political and social conditions, as well as government policies, could affect our business.
As we are established, and operate substantially all of our businesses, in China, any changes in the political, economic and social conditions of the PRC or any changes in PRC governmental policies or regulations, including a change in the PRC government’s economic or monetary policies or railway or other transportation regulations, may have a material adverse effect on our business and operations and our results of operations. The economic environment in the PRC differs significantly from the United States and many Western European countries in terms of its structure, stage of development, capital reinvestment, growth rate, level of government involvement, resource allocation, self-sufficiency, rate of inflation and balance of payments position. The PRC government’s economic reform policies since 1978 have resulted in a gradual reduction in state planning in the allocation of resources, pricing and management of
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Government control of currency conversion may adversely affect our operations and financial results.
Our books and records are maintained and our financial statements are prepared and presented in RMB, which is not a freely convertible currency. All foreign exchange transactions involving RMB must be transacted through banks and other institutions authorized by the People’s Bank of China, or PBOC. We receive substantially all of our revenue in RMB. We need to convert a portion of our revenue into other currencies to meet our foreign currency obligations, such as payment of cash dividends on our H shares and equipment purchases from overseas regions. In addition, the existing foreign exchange limitations under PRC law could affect our ability to obtain foreign currencies through debt financing, or to obtain foreign currencies for capital expenditures or for distribution of cash dividends on our H shares.
Fluctuation of the RMB could adversely affect our financial condition and results of operations.
The value of the RMB fluctuates and is subject to changes in market conditions as well as China’s political and economic conditions. Since 1994, the conversion of RMB into foreign currencies, including Hong Kong and U.S. dollars, has been based on rates set by the PBOC, which are set daily based on the previous day’s inter-bank foreign exchange market rates and current exchange rates on the world financial markets. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar. Under the new policy, the RMB is permitted to fluctuate within a narrow and managed floating band against a basket of certain foreign currencies. On April 14, 2012, the PRC government further allowed the floating band of RMB’s trading prices against the U.S. dollar to widen from 0.5% to 1% on each business day effective from April 16, 2012. As of June 11, 2010,April 19, 2013, this change in policy has resulted in a more than 20%30% appreciation of the RMB against the U.S. dollar ever since July 2005. While the international reaction to the RMB revaluation has generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant appreciation of the RMB against the U.S. dollar. We have certain U.S. dollar-denominated and HK dollar-denominated assets and the appreciation of RMB could result in a decrease of the value of these assets. For further information on our foreign exchange risks and certain exchange rates, see “Item 3A.“ITEM 3. KEY INFORMATION—A. Selected Consolidated Financial and Other Data” and “ITEM 11. Quantitative and Qualitative Disclosures About Market Risk — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK—Currency Risks.” We cannot assure you that any future movements in the exchange rate of RMB against the United States dollar or other foreign currencies will not adversely affect our results of operations and financial condition.
The differences with respect to the PRC legal system could limit the legal protections available to you.
As the PRC and the U.S. have different legal systems and the court decisions in China do not have binding force on subsequent cases, there are significant differences between the PRC legal system and the U.S. legal system. In addition, because the PRC Company Law is different
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We face risksThe audit report included in this annual report is prepared by an auditor who is not inspected by the Public Company Accounting Oversight Board and, as such, you may be deprived of the benefits of such inspection.
Auditors of companies that are registered with the SEC and traded publicly in the United States, including our independent registered public accounting firm, must be registered with the US Public Company Accounting Oversight Board (United States) (“the “PCAOB”) and are required by the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States and professional standards. Because we have substantial operations within the PRC and the PCAOB is currently unable to conduct inspections of the work of our auditors as it relates to those operations without the approval of the Chinese authorities, our auditor’s work related to health epidemics and other outbreaks.
This lack of avian flu, H1N1 influenza, SARS or other epidemics or outbreaks.PCAOB inspections of audit work performed in China reported a numberprevents the PCAOB from regularly evaluating audit work of cases of SARSany auditors that was performed in April 2004. In 2005 and 2006, there were reports of occurrences of avian flu in various parts of China including that performed by our auditors. As a few confirmed human cases. In 2009, China reported a few occurrencesresult, investors may be deprived of H1N1 influenza in several provinces. Any prolonged recurrencethe full benefits of avian flu, H1N1 influenza, SARS or other adverse public health developmentsPCAOB inspections.
The inability of the PCAOB to conduct inspections of audit work performed in China makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures as compared to auditors in other jurisdictions that are subject to PCAOB inspections on all of their work. Investors may lose confidence in our reported financial information and procedures and the quality of our financial statements.
The SEC has recently initiated proceedings against five PRC-based accounting firms, including an independent registered public accounting firm which has a substantial role in the audit of our company, and as a result, we may become noncompliant with the requirements for our financial statements under the Exchange Act.
In December 2012, the SEC initiated administrative proceedings against five PRC-based accounting firms, including an independent registered public accounting firm which has a substantial role in the audit of our Group. The SEC alleges that these firms have violated U.S. securities laws and the SEC’s rules and regulations thereunder by failing to provide the SEC with work papers related to their audits of certain PRC-based companies. These companies are publicly traded in the United States and are the subjects of ongoing SEC investigations. We were not and are not the subject of any SEC investigations, nor are we involved in the proceedings brought by the SEC against these accounting firms.
If the SEC is successful in the proceedings, these accounting firms, including the independent registered public accounting firm which has a material adverse effect onsubstantial role in the audit of our business operations, including ourcompany, may temporarily or permanently lose the ability to travel or ship productspractice before the SEC. While we cannot predict the outcome of the SEC’s proceedings, if the independent registered public accounting firm which has a substantial role in Southern China, as well as temporary closurethe audit of our business. Such closurescompany was temporarily or travelpermanently unable to practice before the SEC and we were unable to find another registered public accounting firm which could perform such substantial role in the audit of our company in time, we may become noncompliant with the requirements for our financial statements under the Exchange Act. Failure to promptly remedy such noncompliance could ultimately lead to our deregistration or shipment restrictionsthe delisting of our common stock from the NYSE, or both, which would severely disruptsubstantially reduce or effectively terminate the trading of our business operations and adversely affect our results of operations. We have not adopted any written preventive measures or contingency plans to combat any future outbreak of avian flu, H1N1 influenza, SARS or any other epidemic.
Overview
We were established as a joint stock limited company under the Company Law of the PRC on March 6, 1996, and have conducted our business for fourteensixteen years. Our legal name is 广深铁路股份有限公司, and its English translation is Guangshen Railway Company Limited. Our registered office is located at No. 1052 Heping Road, Shenzhen, Guangdong Province, The People’s Republic of China, 518010. Our telephone number is (86-755) 2558-7920 or 2558-81462558-8150 and our fax number is (86-755) 2559-1480.
In May 1996, our H shares (stock code: 00525) were listed on the HKSE and our American Depositary Shares, or ADSs (ticker symbol: GSH), were listed on the New York Stock Exchange, Inc., or the NYSE. Our A shares (stock code: 601333) were listed on the Shanghai Stock Exchange in December 2006. We are currently the only PRC railway enterprise with shares concurrently listed in Shanghai, Hong Kong and New York.
We are mainly engaged in passenger and freight transportation businesses on the Shenzhen-Guangzhou-Pingshi Railway, which is 481.2 kilometers long, running vertically through Guangdong Province. The Guangzhou-Pingshi Railway is the southern part of Beijing-Guangzhou Railway, which connects Northern China with Southern China. The Guangzhou-Shenzhen Railway is strategically located and links with major railway networks in China, including the Beijing-Guangzhou, Beijing-Kowloon, Sanshui-Maoming, Pinghu-Nantou, and Pinghu-Yantian lines, as well as to the Kowloon-CantonKowloon Canton Railway in Hong Kong, which is an important component of the transportation network of southern China, as well as the only
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Passenger transportation is our principal business. As of December 31, 2009,2012, we operated 218233.5 pairs of passenger trains in accordance with our daily train schedule,each day, including 100105 pairs of inter-city expressintercity high-speed passenger trains between Guangzhou and Shenzhen (including 19 stand-by pairs), 13 pairs of Hong Kong Through Trains (including 11 pairs of Guangzhou-KowloonCanton-Kowloon Through Trains, one pair of Zhaoqing-Kowloon Through Trains and one pair of Beijing/Shanghai-Kowloon Through Trains) and 105115.5 pairs of long-distance passenger trains. WithWe have successfully carried out our efforts to promote the development“As-Frequent-As-Buses” operating model by dispatching one pair of high-speed passenger trains, our domestically manufactured electric multiple units trains, known as “China Railway High-Speed” or “CRHs”, with a top speed of 200 kilometers per hour, transported most of our passengers between Guangzhou and Shenzhen. One pair of CRHs between Guangzhou and Shenzhen is dispatched every 10 minutes on average during peak hours in accordance with our “As-Frequent-As-Buses” operating model.
Freight transportation is another important segment of our business. Our railways are closely linked with, and we have developed business partnerships with, neighbouring ports, logistic bases, building materials markets, large factories and mines. We are also well-equipped with various freight facilities and can efficiently transport full load cargo, single load cargo, containers, bulky and overweight cargo, dangerous cargo, fresh and live cargo and oversized cargo. Our partnerships and facilities provide us with competitive advantages in transporting freight for medium to long distances in the PRC.
We have extended our passenger and freight transportation business to include railway operation services with the commencement of WGPR in December 2009. So far, we have provided such service to WGPR, GZIR and GSHER. With the completion and commencement of operation of a series of high-speed railways and inter-city railways in the “Pan Pearl River Delta” in the future, our geographical coverage of railway operation service will be more extensive. We also intend to grow our business through railway operation services.
Background, Restructuring and Acquisition
The railroad system between Guangzhou and Shenzhen was part of the original “Canton-Kowloon” railroad, which began operations in 1911. In 1949, following the establishment of the PRC, the railroad was divided into two sections, with the first linking Guangzhou and Shenzhen, and the second, across the Hong Kong border and separately owned, linking Luohu and the Kowloon peninsula in Hong Kong. The Guangzhou to Shenzhen railroad has been operated since 1949 by a sub-division of the Guangzhou Railway Bureau, a predecessor to GRGC.
In 1979, Guangshen Railway Company, our predecessor, in conjunction with KCR, which has been merged into the MTR Corporation Limited, or MTR, was engaged in the joint operation of Hong Kong Through Train passenger services between Guangzhou and Hong Kong.
In 1984, to exploit the rapid growth in the Pearl River Delta, Guangshen Railway Company, our predecessor, was established pursuant to the approval of the State Council as a state-owned enterprise administered by the Guangzhou Railway Bureau. At that time, Guangshen Railway Company had only a single-line railroad. Since then, large capital expenditures have been made to expand and upgrade its facilities and services. In 1987, construction of the second line was completed. In 1991, Guangshen Railway Company began the construction of a semi- high-speed rail line and purchased high-speed locomotives and passenger coaches, which can provide passenger train services at speeds of more than 160 kilometers per hour. Our high-speed line was the first of its kind in China. Commercial
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We were established as a joint stock limited company on March 6, 1996 following the Restructuring, which was carried out to reorganize the railroad assets and related businesses of Guangshen Railway Company and certain of its subsidiaries. As part of the Restructuring, 2,904,250,000 state legal person shares, par value RMB 1.00 per share, of our Company were issued to GRGC, a state-owned enterprise controlled by the MOR. Guangshen Railway Company retained the assets, liabilities and businesses not assumed by us, including units providing staff quarters and social services such as health care, education, public security and other ancillary services, as well as subsidiaries or joint ventures whose businesses do not relate to railroad operations and do not compete with our businesses. As part of our Restructuring, Guangshen Railway Company was renamed Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company, or GEDC.
Since April 1, 1996, we have been able to set our own prices for our high-speedEMU train services and charge a premium over average national prices for our other passenger and freight train services. See “Item 4B.“ITEM 4. INFORMATION ON THE COMPANY—B. Business Overview — Overview—Regulatory Overview — Overview—Pricing” for a more detailed description of our pricing scheme.
We completed our initial public offering of class H ordinary shares, or H shares, and our American depositary shares, or ADSs, in May 1996. In that offering, we issued a total of 1,431,300,000 H shares, par value RMB 1.00 per share. Our H shares are listed for trading on the HKSE and our American depositary shares, or ADSs, each representing 50 H shares, are listed for trading on the NYSE.
On November 15, 2004, we entered into an asset purchase agreement with Yangcheng Railway Company to acquire the railway transportation business between Guangzhou and Pingshi and related assets and liabilities, or the Acquisition. In order to finance such Acquisition, on December 13, 2006, we issued 2,747,987,000 A shares that are now listed for trading on the Shanghai Stock Exchange (stock code: 601333) and raised approximately RMB 10.0 billion from the A Share Offering. After the A Share Offering, approximately 41% of our issued and outstanding shares were owned by GRGC, while institutional and public shareholders own approximately 59% of our issued and outstanding ordinary shares, including A shares, H shares and ADSs.
On December 28, 2006, we paid RMB 5.27 billion out of the proceeds raised from the A Share Offering to Yangcheng Railway Company. On January 1, 2007, the railway transportation business of the Guangzhou-Pingshi Railway came under our control as a result of the Acquisition. As a result, our operations expanded from a regional railway to a national trunk line network and our operating railway distance extended from 152 kilometers to 481.2 kilometers, running vertically through the entire Guangdong Province. In June 2007, we paid the remaining balance in the amount of RMB 4.87 billion to Yangcheng Railway Company.
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Service Territory
Our rail lines traverse the Pearl River Delta and also run vertically through Guangdong Province, an area which benefited early from the PRC economic reform policies that began in the late 1970s. Throughout the 1980s and early 1990s, the economy of the Pearl River Delta, fueled by foreign investments, grew rapidly. The Pearl River Delta is currently one of the most affluent and fastest growing areas in China.
As of June 11, 2010,April 19, 2013, we had 4847 stations situated on our rail lines, providing passenger and freight transportation services for cities, towns and ports situated along the Shenzhen-Guangzhou-Pingshi corridors and Hong Kong (whichThrough Train passenger service, which we serve in conjunction with MTR). In additionthe MTR. We also provide railway operation services to our Hong Kong Through Train passenger service in conjunction with the MTR, we also allow Hong Kong-bound freight trains to use our railroad.
The Shenzhen-Guangzhou-Pingshi railroad is an integral component of the PRC national railway network, and provides nationwide access to passenger and freight traffic from southern China to other regions of mainland China as described below:
Northbound. At Pingshi, our rail line connects with the Beijing-Guangzhou line, which is one of the major trunk lines linking southern China with Beijing and northern China. Another trunk line connecting northern and southern China, the Beijing-Hong Kong rail line, includes the section of our line from Dongguan to Shenzhen.
Southbound. Our line connects at Shenzhen with the rail line owned by the MTR that runs to Kowloon, Hong Kong.
Westbound. Our line connects with the Guangzhou-Maoming rail line operated by Sanmao Railway Company, a company in which GRGC holds a 49%49.1% equity interest, that runs through the western part of Guangdong Province, connecting with other rail lines that continue on into the Guangxi Zhuang Autonomous Region, which provides access to southwestern China.
Eastbound. Our rail line intersects at Dongguan with the Guangzhou-Meizhou-Shantou rail line operated by Guangmeishan Railway Company, a company jointly established by GRGC, the Guangdong Provincial Railway Company and other public investors. A section of this line forms, along with our Dongguan to Shenzhen segment, a part of the Beijing-Hong Kong rail line, which terminates in Kowloon, Hong Kong.
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Business Operations
Our principal businesses are railroad passenger, and freight transportation, and railway network usage and other transportation-related services, which collectively generated 92.9%93.3% of our total revenue in 2009.
On January 1, 2007, we acquired the railway transportation business of Guangzhou-Pingshi Railway. The Acquisition was financed with the proceeds from the A Share Offering.
On April 18, 2007, after the national railway system of China implemented its sixth large-scale railway speed-up project, we commenced operation of the Fourth Rail Line between Guangzhou and Shenzhen. The Guangzhou-Shenzhen Railway is the first wholly fenced four-line railway in China that enables passenger trains and freight trains to run on separate lines. The start-up of the Fourth Rail Line has enhanced our transportation capacity.
In February 2009, we launched the Finance IC card and Fastpass card systems at stations along the Guangzhou-Shenzhen line, which enabled the passengers to board the trains by flashing the cards without having to queue for tickets. This has led to an increase in the passenger volume along the Guangzhou-Shenzhen line as it brings more convenience to our customers. From May 1, 2009, we began to operate our Guangzhou-Shenzhen inter-city trains under a stop-at-all-stations operating model, which allows passengers to get on and off the trains at all intermediary stations on that line, including Dongguan, Shilong and Zhangmutou stations. In addition, in order to increase the transportation capacity of our long-distance
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In 2009,June 2011, stations along the Guangzhou-Shenzhen line implemented the real-name ticketing system, allowing passengers to use their identification cards to purchase tickets and board trains without customer service representatives. We have installed 121 real-name ticketing machines along the Guangzhou-Shenzhen line which are capable of selling tickets to customers who provide their 2nd generation China identification cards or Hong Kong and Macau identification cards. Customers can also purchase tickets for our Guangzhou-Shenzhen inter-city trains online. In 2012, we installed an additional 40 real-name ticketing machines along the Guangzhou-Shenzhen line. We now have a total revenue wasof 161 ticketing machines along the Guangzhou-Shenzhen line.
In 2012, in spite of a series of ‘growth stabilization’ control policies successively adopted by the PRC government in face of complex and changing economic environment both in China and overseas, the Chinese economy tumbled downwards with the GDP growth rate going down to 7.8%, whereas the railway transportation business also merely maintained truncated growth despite being a fundamental industry. For the entire year, all railways in the nation recorded a passenger delivery volume of 1,893 million persons, representing a year-to-year increase of 4.8%, while the tonnage of freight maintained at similar level as last year at 3,892 million tonnes. Facing an unfavorable operating environment comprising decelerating economic growth, overall downward demand on the transportation market and diversion of customers away to high-speed railways, our Board, management and entire staff persisted in following the spearhead of scientific development, strictly upheld the our operating objectives, accelerated migration of operation development mode, vigorously improved infrastructure safety proactively promoted the strategy of diversified operation, stepped up regulation of operation management, strived to enhance the quality of services, improved the production and living environments for its staff in real terms, and catalyzed the harmonic stability and our healthy development. All these enabled the us to achieve a passenger delivery volume of 84.6 million persons, a tonnage of freight of 21.4 million tonnes for the entire year, generating operating revenues of RMB 12,385.815,091.9 million, consolidated profit attributable to equity holders of RMB1,318.9 million, and basic earnings per share of RMB0.19.
In 2012, our operating revenues were RMB15,091.9 million, representing an increase of 6.0%2.7% from RMB 11,688.7RMB14,690.8 million in 2008. Our revenueof the same period of last year, among which revenues from railroad passenger transportation, service, freight transportation, service, railway network usage and other transportation related services, and other businesses was RMB 7,195.7were RMB7,841.1 million, RMB 1,210.1RMB1,344.1 million, RMB 3,105.6RMB4,890.6 million and RMB 874.3RMB1,016.1 million, respectively, accounting for 58.1%52.0%, 9.8%8.9%, 25.1%32.4% and 7.0%, respectively,6.7% of ourthe total revenue in 2009. Ourrevenues, respectively. Profit from operation was RMB1,934.3 million, representing a year-on-year decrease of 24.6% from RMB2,564.0 million; consolidated profit attributable to shareholdersequity holders was RMB 1,364.5RMB1,318.9 million, representing an increasea year-on-year decrease of 11.5%26.9% from RMB 1,224.1 million in 2008. The revenue from our other businesses was RMB 874.3 million, representing an increase of 0.9% from RMB 866.3 million in 2008.
The table below summarizes our railroad transportation revenue and traffic volume in each of the five years ended December 31, 2005, 2006, 2007, 2008, 2009, 2010, 2011 and 2009.
Year ended December 31, | ||||||||||||||||||||
2005 | 2006 | 2007(7) | 2008(7) | 2009(7) | ||||||||||||||||
Passenger Transportation | ||||||||||||||||||||
Total passenger revenue (RMB millions) | 2,253.34 | 2,608.84 | 5,833.54 | 6,759.23 | 7,195.71 | |||||||||||||||
Total passengers (millions)(1) | 33.00 | 35.98 | 73.05 | 83.82 | 81.84 | |||||||||||||||
Revenue per passenger (RMB)(2) | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Total passenger-kilometers (millions) | 4,539.10 | 4,842.7 | 26,278.2 | 27,923.70 | 27,233.10 | |||||||||||||||
Revenue per passenger-kilometer (RMB)(3) | 0.50 | 0.54 | 0.22 | 0.24 | 0.26 | |||||||||||||||
Freight Transportation | ||||||||||||||||||||
Total freight revenue (RMB millions) | 540.34 | 565.56 | 1,326.45 | 1,324.70 | 1,210.12 | |||||||||||||||
Total freight tonnes (millions) | 31.89 | 30.71 | 71.01 | 70.14 | 61.99 | |||||||||||||||
Revenue per tonne (RMB)(4) | 16.94 | 18.42 | 18.68 | 18.89 | 19.52 | |||||||||||||||
Total tonne-kilometers (millions) | 2,294.80 | 2,276.3 | 15,306.9 | 15,557.37 | 13,446.70 | |||||||||||||||
Revenue per tonne-kilometer (RMB)(5) | 0.24 | 0.25 | 0.09 | 0.09 | 0.09 | |||||||||||||||
Railway Network Usage and Services(RMB millions)(6) | 305.79 | 291.49 | 2,659.53 | 2,738.43 | 3,105.65 |
Year ended December 31, | ||||||||||||||||||||
2008 | 2009 | 2010 | 2011 | 2012 | ||||||||||||||||
Passenger Transportation | ||||||||||||||||||||
Total passenger revenue (RMB millions) | 6,500.52 | 6,841.66 | 7,377.14 | 8,026.51 | 7,841.09 | |||||||||||||||
Total passengers (millions) | 83.82 | 81.84 | 84.92 | 90.83 | 84.60 | |||||||||||||||
Total passenger-kilometers (millions) | 27,923.70 | 27,233.10 | 27,472.00 | 28,523.99 | 26,788.80 | |||||||||||||||
Revenue per passenger-kilometer (RMB)(1) | 0.23 | 0.25 | 0.27 | 0.28 | 0.29 | |||||||||||||||
Freight Transportation | ||||||||||||||||||||
Total freight revenue (RMB millions) | 1,269.78 | 1,164.85 | 1,315.35 | 1,386.75 | 1,344.10 | |||||||||||||||
Total freight tonnes (millions) | 70.14 | 61.99 | 67.93 | 68.70 | 62.70 | |||||||||||||||
Revenue per tonne (RMB)(2) | 18.10 | 18.79 | 19.36 | 20.18 | 21.45 | |||||||||||||||
Total tonne-kilometers (millions) | 15,557.37 | 13,446.70 | 15,191.43 | 15,519.10 | 14,620.5 | |||||||||||||||
Revenue per tonne-kilometer (RMB)(3) | 0.08 | 0.09 | 0.09 | 0.09 | 0.09 | |||||||||||||||
Railway Network Usage and other transportation-related services (RMB millions) | 3,052.05 | 3,504.98 | 3,888.37 | 4,256.00 | 4,890.64 |
(1) | ||
Revenue per passenger-kilometer is calculated by dividing total passenger revenue by total passenger-kilometers. Management believes that revenue per passenger-kilometer is a useful measure for assessing the revenue levels of our passenger transportation business. |
(2) | Revenue per tonne is calculated by dividing total freight revenue by total freight tonnes. Management believes that revenue per tonne is a useful measure for assessing the revenue levels of our freight transportation business. |
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(3) | Revenue per tonne-kilometer is calculated by dividing total freight revenue by total tonne-kilometers. Management believes that revenue per tonne-kilometer is a useful measure for assessing the revenue levels of our freight transportation business. | |
Passenger Transportation
Passenger transportation is our largest business segment, accounting for 58.1%52.0% of our total revenue and 62.5%55.7% of our railroad transportation revenue in 2009.2012. Our passenger train services can be categorized as follows:
transportation business of Guangzhou-Shenzhen inter-city express trains;
long-distance trains; and
Through Trains in Hong Kong.
As of December 31, 2009,2012, we operated 218 pairsa total of 233.5 of passenger trains per day (each pair of trains meaning trains making one round-trip between two points), representing a decreasean increase of 21.52.5 pairs from 239.5231 pairs as of December 31, 2008,2011, of which:
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13 pairs of Hong Kong Through Trains (including 11 pairs of Guangzhou-Kowloon Through Trains, one pair of Zhaoqing-Kowloon Through Trains and one pair of Beijing/Shanghai-Kowloon Through Trains); and
115.5 pairs of long-distance passenger trains, representing a decreasean increase of 1.57.5 pairs from 106.5108 pairs as of December 31, 2008, which2011. Long-distance trains included 16.5 pairs of long-distance passenger trains operated by us betweenbetween: Shenzhen and Yueyang, betweenYueyang; Shenzhen and Shanghai South, betweenSouth; Shenzhen and Shaoguan East; Shenzhen and Beijing West, betweenWest; Shenzhen East and Shanghai South; Kowloon and Beijing West, between ShenzhenWest; Guangzhou and Shaoguan, betweenPingshi; Guangzhou and Chongqing North, betweenNorth; Guangzhou and Wanzhou, betweenDazhou; Guangzhou and Liuzhou, betweenLiuzhou; Guangzhou and Xi’an, betweenXi’an; Guangzhou and Taizhou, betweenTaizhou; Guangzhou and Shanghai South, betweenJiujiang; Guangzhou and Jiujiang, between Chenzhou and Foshan, betweenWenzhou; Guangzhou and Zhangjiajie, betweenYantai; Guangzhou and LhasaZhangjiajie; and between SanyaGuangzhou and Beijing West, and 88.5 pairs ofLhasa. Long-distance trains also included domestic long-distance trains that are operated by other operators but originating or terminating on, or passing through, our railroad.
The table below sets out passenger revenue and volumes for our Hong Kong Through Trains and domestic trains in each of 2007, 20082010, 2011 and 2009:
Total passenger revenue | Total passengers | Revenue per passenger | ||||||||||||||||||||||||||||||||||
2007 | 2008 | 2009 | 2007 | 2008 | 2009 | 2007 | 2008 | 2009 | ||||||||||||||||||||||||||||
(RMB millions) | (millions) | (RMB) | ||||||||||||||||||||||||||||||||||
Guangzhou-Shenzhen Trains | 1,494.2 | 1,973.1 | 2,046.6 | 24.7 | 32.1 | 33.5 | 60.5 | 61.5 | 61.1 | |||||||||||||||||||||||||||
Hong Kong Through Trains(1) | 430.5 | 380.3 | 378.4 | 3.2 | 3.1 | 2.8 | 134.5 | 122.1 | 135.2 | |||||||||||||||||||||||||||
Long-distance Trains(1) | 3,908.8 | 4,405.8 | 4,770.6 | 45.1 | 48.6 | 45.5 | N/A | (2) | N/A | (2) | N/A | (2) | ||||||||||||||||||||||||
Combined passenger operations | 5,833.5 | 6,759.2 | 7,195.6 | 73.0 | 83.8 | 81.8 | N/A | (2) | N/A | (2) | N/A | (2) |
Total passenger revenue | Total passengers | Revenue per passenger | ||||||||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2010 | 2011 | 2012 | 2010 | 2011 | 2012 | ||||||||||||||||||||||||||||
(RMB millions) | (millions) | (RMB) | ||||||||||||||||||||||||||||||||||
Guangzhou-Shenzhen Trains | 2,361.3 | 2,606.5 | 2,373.6 | 36.9 | 39.0 | 35.8 | 63.9 | 66.8 | 66.3 | |||||||||||||||||||||||||||
Hong Kong Through Trains | 413.7 | 461.0 | 480.2 | 3.1 | 3.7 | 3.8 | 133.7 | 125.9 | 127.6 | |||||||||||||||||||||||||||
Long-distance Trains(1) | 4,602.1 | 4,959.0 | 4,987.3 | 44.9 | 48.1 | 45.0 | N/A | (1) | N/A | (1) | N/A | (1) | ||||||||||||||||||||||||
Combined passenger operations | 7,377.1 | 8,026.5 | 7,841.1 | 84.9 | 90.8 | 84.6 | N/A | (1) | N/A | (1) | N/A | (1) |
(1) | ||
Our revenue of long-distance passenger trains includes both the revenue from the passengers arriving at our railway stations and the revenue from the passengers departing from our railway stations. However, the number of our long-distance passengers only includes the passengers departing from our railway stations. As a result, we believe that the “per passenger revenue” cannot fairly reflect the financial status of our passenger transportation business. |
Guangzhou-Shenzhen Trains. In 2009,2012, our passenger transportation services on the trains between Guangzhou and Shenzhen contributed a substantial portion toaccounted for 30.3% of our railroad passenger transportation revenue. In 2009,Since July 2012, we did not operate anyhave operated a pair of regular speed inter-city traintrains between Guangzhou and Shenzhen. As of December 31, 2009,2012, we operated on average, a total of 100105 pairs of CRH high-speed passenger trains between Guangzhou and Shenzhen daily.Shenzhen. Such CRH high-speedpassenger trains are capable of running at abouta top speed of 200 kilometers per hour. The number of passengers traveling on our Guangzhou-Shenzhen trains increaseddecreased by 4.4%8.4% from 32.139.0 million in 20082011 to 33.535.8 million in 2009.2012. The revenue from our Guangzhou-Shenzhen trains increaseddecreased by 3.7%8.94% from RMB 1,973.12,606.5 million in 20082011 to RMB 2,046.62,373.6 million in 2009.2012. The increasedecrease in passenger volume and revenue of Guangzhou-Shenzhen trains was primarily due to (i) the implementation of a stop-at-all-stations operating model from May 2009, which enables the passengers to get on or off our trains at intermediary stations, such as Dongguan, Shilong and
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Hong Kong Through Trains.Trains. In 2012, our passenger transportation services on Hong Kong through trains accounted for 6.1% of our railroad passenger transportation revenue. We currently operate, jointly with the MTR, 13 pairs of Hong Kong Through Trains, including 11 pairs of Guangzhou-Kowloon Through Trains, one pair of Zhaoqing-Kowloon Through Trains, and another pair of through train that operates on alternate days either on the Beijing-Kowloon line or the Shanghai-Kowloon line. We operate certain Hong Kong Through trains in cooperation with MTR. We are responsible for the operation of the Beijing-Kowloon Through Trains and eight pairs of Guangzhou-Kowloon Through Trains while MTR is responsible for the operation of three pairs of Guangzhou-Kowloon Through Trains. In addition, we also provide railway network usage services to MTR for the Hong Kong Through Trains it operates.
The Hong Kong Through Train services beyond Guangzhou to Foshan, Zhaoqing, Beijing and Shanghai are provided by GRGC and Shanghai Railway Bureau. Revenue from these Hong Kong Through Trains on the Guangzhou-Hong Kong section areis shared between MTR and us, in proportion to our track mileage for the Hong Kong Through Train services, with 81.2% accruing to us and 18.8% to MTR. In addition, we share all related costs with MTR at the same rate for the Hong Kong Through Train services.
Most of the passengers taking our Hong Kong Through Trains are from Hong Kong, Macau, Taiwan and foreign countries, and many are business travelers. As the prices for our Hong Kong Through Train services are higher than the prices we charge for our domestic train services, these Hong Kong Through Train services produce higher per-passenger revenue than our other passenger train services.
In 2009,2012, the volume of passengers who traveled on the Hong Kong Through Trains decreasedincreased by 2.4%2.8% from 3.1153.7 million in 20082011 to 2.7993.8 million in 2009. The decrease was mainly due to (i) the global financial crisis and economic downturn; (ii) the outbreak of H1N1 influenza and the freezing weather around the end of 2009 and (iii) the increased frequency of Guangzhou-Shenzhen inter-city express trains which has diverted a portion of the Hong Kong Through Train passengers.2012. The revenue from Hong Kong Through Trains decreasedincreased by 0.5%4.2% from RMB 380.3461.0 million in 20082011 to RMB 378.4480.2 million in 20092012. The increase was mainly due to (i) the fact thatsteady and rapid growth of China’s economy with a sustained rise in commodity prices and moderate appreciation of the operation of Beijing-Kowloon Through Trains has been handed overRMB; (ii) Hong Kong and Macau have become preferred traveling destinations for mainland citizens due to our Company since January 1, 2009, leading to growththe turmoil in many other places around the world, stimulating an increase in the revenue attributablepassenger flow to our Company, which partially offset the decrease in revenueHong Kong and Macau from mainland China; and (iii) an increasingly larger number of group passengers who travel on the Hong Kong Through Trains caused byunder the decline instrengthened cooperation arrangements between the volume of passengers.
Domestic Long-distance Trains.Trains. In 2012, our passenger transportation services on domestic long-distance trains accounted for 63.6% of our railroad passenger transportation revenue. As of December 31, 2009,2012, we operated on a daily basis 105115.5 pairs of domestic long-distance passenger trains on our rail lines to cities in Guangdong,
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Major Stations.Stations. The following are the major train stations owned and operated by us as of December 31, 2009:
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Station | Location | Connected Railways | Passenger Transportation Business | Total Passengers for 2012 (millions) | ||||||
Guangzhou Station | Yuexiu District, Guangzhou | Beijing-Guangzhou Railway, Guangzhou-Maoming Railway, Guangzhou-Shenzhen Railway, Line 2 and Line 5 of Guangzhou’s subway system | Long-distance trains, inter-city trains between Guangzhou and Shenzhen | 27.91 | ||||||
Guangzhou East Station | Tianhe District, Guangzhou | Beijing-Guangzhou Railway, Guangzhou-Shenzhen Railway, Line 1 and Line 3 of Guangzhou’s subway system | Long-distance trains, inter-city trains between Guangzhou and Shenzhen, Hong Kong Through Trains | 19.74 | ||||||
Shenzhen Station | Luohu District, Shenzhen | Guangzhou-Shenzhen Railway, Hong Kong railway, Luobao Line of Shenzhen’s subway system | Long-distance trains, inter-city trains between Guangzhou and Shenzhen | 20.84 | ||||||
Dongguan Station | Changping Town, Dongguan | Guangzhou-Shenzhen Railway | Long-distance trains, inter-city trains between Guangzhou and Shenzhen, Hong Kong Through Trains | 4.72 | ||||||
Shaoguan East Station | Shaoguan | Beijing-Guangzhou Railway | Long-distance trains | 3.27 |
Revenue from our freight transportation accounted for 9.8%8.9% of our total revenue and 10.5%9.5% of our railroad transportation revenue in 2009.2012. Our principal market for freight is domestic medium and long-haul freight, originating and/or terminating outside the Shenzhen-Guangzhou-Pingshi corridor. We are well equipped with various freight facilities and can efficiently transport full load cargo, single load cargo and containers. We have established business cooperation with ports, logistics bases and specialized building materials markets in our service region.
The majority of the freight we transport is high-volume, medium to long-distance freight received from and/or transferred to other rail lines. A portion of the freight we transport both originates and terminates in the Shenzhen-Guangzhou-Pingshi corridor. We classify our freight business into three categories:
inbound freight, which is primarily freight unloaded at freight stations and spur lines connected to ports on our rail line or in Hong Kong;
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outbound freight, which is primarily freight bound for other regions in Mainland China as well as foreign countries loaded at our train stations and spur lines connected to ports on our rail line or in Hong Kong; and
frail recovery in developed countries such as Europe and theUnited States coupled with a slowdown of business activities in the Pearl River Delta region.economic growth in China that led to a decrease in freight going through railway transportation; and
the opening and operation of the Yi (Yiyang)-Zhan (Zhanjiang) railway subsection has diverted some of the freights that originally transported by the Beijing-Guangzhou railway.
We serve a broad customer base and ship a wide range of goods in our freight transportation business. We are not dependent upon any particular customers or industries.
We transport a broad range of goods, which can generally be classified as follows: metal ores, coal, containers, construction materials, steel, petroleum, and other goods. The majority of our inbound freight consists of raw materials and essential production materials for manufacturing, industrial and construction activities, while the majority of our outbound freight consists of imported mineral ores as well as coal and goods produced or processed within our service territory, for customers throughout China and abroad.
Outbound Freight | Inbound (and Pass-through) Freight | |||||||||||||||||||||||
2007 | 2008 | 2009 | 2007 | 2008 | 2009 | |||||||||||||||||||
As a Percentage of Total Inbound | ||||||||||||||||||||||||
As a Percentage of Total Outbound Freight | (and Pass-through) Freight | |||||||||||||||||||||||
Construction materials | 44.9 | % | 40.6 | % | 37.7 | % | 36.5 | % | 34.7 | % | 37.0 | % | ||||||||||||
Energy products | 27.3 | % | 26.0 | % | 25.6 | % | 24.7 | % | 22.9 | % | 22.1 | % | ||||||||||||
Food products | 2.8 | % | 3.1 | % | 3.4 | % | 14.9 | % | 15.3 | % | 11.7 | % | ||||||||||||
Chemicals | 3.2 | % | 3.3 | % | 2.8 | % | 9.3 | % | 10.1 | % | 11.1 | % | ||||||||||||
Manufactured goods | 2.1 | % | 3.0 | % | 4.0 | % | 1.3 | % | 1.7 | % | 1.6 | % | ||||||||||||
Containers | 13.2 | % | 17.5 | % | 20.0 | % | 9.6 | % | 11.8 | % | 13.4 | % | ||||||||||||
Other goods | 6.5 | % | 6.5 | % | 6.5 | % | 3.7 | % | 3.5 | % | 3.1 | % | ||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Railway Network Usage and other Transportation-Related Services Business
Revenue from our railway network usage and other transportation-related services accounted for 25.1%32.4% of our total revenue and 27.0%34.7% of our railroad transportation revenue in 2009.2012. Railway network usage and services mainly include the locomotive traction, track usage, electric catenaries (overhead wires used to transmit electrical energy to trains), vehicle coupling and other services.services; other transportation-related services include railway operation services and lease of locomotive and passenger trains. In 2009,2012, our revenue from railway network usage and other transportation-related services was RMB 3,105.74,890.6 million, representing an increase of 13.4%14.9% from RMB 2,738.44,256.0 million in 2008.2011. The increase in revenue from railway network usage and other transportation-related services was principally due to the increase in the number of long-distance trains that are operated by other railway companies (bureaus) that usetraveled on our tracks and services as a result of the adjustment of the national railway operating diagram in April 2009.
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2007 | 2008 | 2009 | ||||||||||
(RMB millions) | ||||||||||||
Locomotive traction | 1,155.3 | 1,114.2 | 1,359.9 | |||||||||
Track usage | 919.7 | 953.5 | 1,026.7 | |||||||||
Electric catenaries | 211.2 | 281.8 | 283.3 | |||||||||
Vehicle coupling | 216.6 | 224.0 | 275.4 | |||||||||
Other services | 156.7 | 164.9 | 160.4 | |||||||||
Total | 2,659.5 | 2,738.4 | 3,105.7 | |||||||||
2010 | 2011 | 2012 | ||||||||||
(RMB millions) | ||||||||||||
Railway Network Usage | 3,115.9 | 3,254.5 | 3,474.2 | |||||||||
Locomotive traction | 1,372.6 | 1,413.0 | 1,549.5 | |||||||||
Track usage | 965.4 | 1,021.1 | 1,059.9 | |||||||||
Electric catenaries | 282.9 | 302.4 | 337.9 | |||||||||
Vehicle coupling | 307.6 | 313.8 | 326.6 | |||||||||
Other services | 187.4 | 204.2 | 200.3 | |||||||||
Railway Operation Service | 469.2 | 717.3 | 1,078.2 | |||||||||
Other Transportation Services | 303.3 | 284.2 | 338.2 | |||||||||
Total | 3,888.4 | 4,256.0 | 4,890.6 | |||||||||
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Other Businesses
Revenue from our other businesses accounted for 7.0%6.7% of our total revenue in 2009.2012. Our other businesses mainly consist of salesales of materials and supplies, maintenance and repair of trains, on-board catering services, labor services operation of restaurants, hotels and warehouses, and other businesses related to railway transportation.
Revenue from our other businesses in 20092012 was RMB 874.31,016.0 million, representing an increase of 0.9% fromcompared to RMB 866.31,021.6 million in 2008. The increase in revenue from other businesses was mainly due to the increase in demand for our train maintenance services.
As a Percentage of Total Revenue | ||||||||||||||||||||||||
Revenue | from Other Businesses | |||||||||||||||||||||||
2007 | 2008 | 2009 | 2007 | 2008 | 2009 | |||||||||||||||||||
(RMB millions) | ||||||||||||||||||||||||
Sale of materials and supplies | 103.8 | 227.7 | 154.1 | 15.1 | % | 26.3 | % | 17.6 | % | |||||||||||||||
Maintenance of trains | 239.2 | 225.5 | 241.4 | 34.7 | % | 26.0 | % | 27.6 | % | |||||||||||||||
On-board catering services | 67.3 | 106.5 | 118.5 | 9.8 | % | 12.3 | % | 13.5 | % | |||||||||||||||
Labor services | 49.7 | 62.2 | 67.8 | 7.2 | % | 7.2 | % | 7.8 | % | |||||||||||||||
Other services related to railway transportation | 229.0 | 244.4 | 292.5 | 33.2 | % | 28.2 | % | 33.5 | % | |||||||||||||||
Total | 689.0 | 866.3 | 874.3 | 100 | % | 100 | % | 100 | % |
Seasonality of Our Railway Transportation Business
There is some seasonality in our businesses. The first quarter of each year typically contributes the highest portion of our annual revenue, mainly because it coincides with the Spring Festival holidays (Chinese New Year holidays) when Chinese people customarily travel from all over the country back to their hometowns. In addition, the New YearSpring Festival holidays, the Qingming Festival Holidays,holidays, the Labor Day holidays, the Dragon Boat Festival Holidays,holidays, summer holidays and the National Day holidays in China are also high travel seasons. During these holidays, we usually operate additional passenger trains to meet the increased transportation demand.
Sales
Passenger Transportation
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Hong Kong Through Train tickets are sold in Guangdong Province through our own ticket outlets,railway stations, as well as through various ticket outlets, hotels and travel agents. In Hong Kong, these tickets are sold exclusively by the MTR. As MTR’s sales network for these tickets is relatively limited, MTR has engaged the China Travel Service (HK) Ltd., or CTS, as the primary agent for such sales on a non-exclusive basis. In 2003, we established an online ticket sales system with MTR for the Hong Kong Through Trains.
In February 2009, we launched the Finance IC card and Fastpass card systems at stations along the Guangzhou-Shenzhen line, which enabled the passengers to board the trains by flashing the cards without having to queue for tickets.
The current settlement method stipulated by the MOR for passenger transportation provides that all revenue from passenger train services (including revenue generated from luggage and parcel services) is considered passenger transportation revenue and belongs to the railway bureau that operates that train. The railway bureau in turn pays other railway bureaus the fees for the use of their rail lines, hauling services, in-station passenger services, water supply, electricity for electric locomotives and contact wire use fees, etc. Under this settlement method, the railway bureaus operating the long-distance train services are required to pay us the following fees: (i) the portion of the revenue from the sale of tickets that is higher than the PRC national railway standards due to our special pricing standards and (ii) other fees including those for railroad line usage, in-station passenger service, haulage service, power supply for electric locomotives, usage fees of contact wires and water supply. This settlement method does not apply to the settlement of our revenue from the passenger trains between Guangzhou and Shenzhen, between Beijing and Hong Kong, between Shanghai and Hong Kong, between Zhaoqing and Hong Kong and the Hong Kong Through Trains. See “Item 4B.“ITEM 4. INFORMATION ON THE COMPANY—B. Business Overview — Overview—Regulatory Overview — Overview—Pricing.”
Freight Transportation
Generally, we collect payment for our freight service directly from our customers. For inbound freight, we collect transportation fees incurred on our line from the receiving party prior to the release of the freight. For outbound freight, we collect the total transportation fees from the dispatching party, retain the portion allocated to us and remit the remainder to the other railroad operators on a monthly basis either directly or through a national settlement procedure administered by the MOR. These collection procedures also apply to freight transported to or from Hong Kong.
For pass-through freight, payments are collected at the originating stations, and allocated
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Freight customers in the Guangzhou-Shenzhen area either deal directly with us or use shipping agents. As a practical matter, we have been able to meet demands for outbound freight transportation services on a short notice.
Pursuant to the settlement methods issued by the MOR, which became effective from January 1, 2005, all freight transportation fees relating to post parcels and luggage, containers and special goods shall be collected by Zhongtie Parcels Courier Company Limited, Zhongtie Container Transportation Company Limited and Zhongtie Special Goods Transportation Company Limited, or collectively the Professional Transportation Companies. The Professional Transportation Companies shall pay railway usage fees to relevant railway bureaus and companies, including us. In order to make itemized revenue from freight match freight volume, and remain comparable with previous years, these railway usage fees have been recorded, as appropriate, as revenue generated from freight dispatch, as well as freight reception and transit, based on the freight dispatched or received and transited.
Competition
We provide passenger and freight transportation services on the Shenzhen-Guangzhou-Pingshi Railway. We expect competition to increase in the future as the marketization reform of the railway industry (including the reformation of the investment and financing system, the transportation management system and the pricing system) gradually deepens. As the Wuhan-Guangzhou passenger line commenced operation in December 2009, which passes through our service territory, we compete for long-distance travelling passengers against other railway service providers.providers operating within our service territory. Furthermore, the operation of the Guangzhou-Shenzhen-Hong Kong passenger line, which commenced on December 26, 2011, may further increase the competition we face and materially and adversely affect our revenue and results of operations. In addition, in areas where our railroad connects with lines of other railway companies, such as in the Guangzhou area where our railroad connects with the Guangzhou-Maoming Line, and in the Dongguan area where our railroad connects with the Guangzhou-Meizhou-Shantou Line, we face competition from the railway companies operating in these areas. We believe that the entry barrier to the industry will decrease, investors of the industry will become more diversified and the State’s high-speed railway network with Four East-West Lines and Four South-North Lines and numerous inter-city railways will complete construction and commence operation, leading to increased competition within the industry itself.
We also face competition from the providers of a variety of other means of transportation within our service territory.
With respect to freight transportation, we face increasing competition from truck transportation in the medium- and short-distance freight transportation market as the expressway and highway networks in our service region and neighboring areas have increasingly improved. By comparison, in the long-distance freight transportation market, especially in the areas where
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Equipment, Tracks and Maintenance
As of December 31, 2009,2012, we owned 12 high-speed151 diesel locomotives, 56 regular-speed passenger diesel68 electric locomotives, 55 freight diesel locomotives, 50 shunting locomotives, 73 high-speed electric passenger train, 74 regular-speed electric passenger train, 29 high speed CRHs, 1,431 regular-speed22 EMUs and 1,402 passenger coaches and seven trial locomotives. We currently use 20 high speed CRHs for our passenger transportation business between Guangzhou and Shenzhen.
The freight cars we use are all leased from the MOR, to which we pay uniform rental fees based on the national standards set by the MOR. The amounts of such usage fees and depreciation charges we paid to the MOR in 2007, 20082010, 2011 and 20092012 were approximately RMB 156.6178.9 million, RMB 176.9200.7 million and RMB 162.7201.2 million, respectively.
From 2007, we started the operation of our CRHs, which we bought from Bombardier Sifang Power (Qingdao) Transportation Ltd. and Bombardier Sweden Transportation Ltd. Each CRH has theis designed to have a top speed of 200 kilometers per hour and we believe that the introduction of CRHs has strengthened our capability to deliver safety, speed, comfort and quality in our transport services and increased our efficiency and competitiveness.
Our repair and maintenance facilities, including our Guangzhou passenger vehicle maintenance facility, Shipai passenger vehicle maintenance facility, Shenzhen North passenger vehicle maintenance facility, Guangzhou vehicle maintenance facility and Guangzhou North vehicle maintenance facility, provide services for general maintenance and routine repairs on our coaches and locomotives. Major repairs and overhauls are performed by manufacturers or qualified railway bureaus or plants. The repair and maintenance services for the CRHs are provided by our Guangzhou East Concord operation department.
We believe that our existing tracks and equipment meet the needs of our current business and operations. Most of the rails and ties on our main lines have been installed within the last decade and are maintained and upgraded on an ongoing basis as required. In 20062010, 2011 and 2007, as part of our Fourth Rail Line construction, we made improvements to 24.6 kilometers of railroad. In 2008 and 2009,2012, we made improvements to approximately 73120 kilometers, 216 kilometers and 141133 kilometers of railroad, respectively.
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GRGC our locomotivessingle largest shareholder, and coaches, as well as most other railway equipmentits subsidiaries are major suppliers of our materials and materials, directly from China Northern Locomotive & Rolling Stock Industry (Group) Corporation, China Southern Locomotive & Rolling Stock Industry (Group) Corporation and China Railway Materials and Supplies Corporation, all of which are state-owned enterprises.supplies. In addition,2012, we purchased the CRHs from Bombardier Sifang Power (Qingdao) Transportation Ltd., a Sino—foreign equity joint venture,RMB766.3 million in materials and Bombardier Sweden Transportation Ltd. We also purchase equipment from foreign vendors or other domestic suppliers. We are not materially dependent upon any domestic or foreign suppliers.
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The MOR or bureaus owned or controlled by the MOR, including the GRGC, our single largest shareholder are our major customers. In 2012, we collected RMB12,008.8 million from the GRGC (and its subsidiaries) and other railway companies or bureaus owned or controlled by the MOR, which represented 79.6% of our operating revenues.
The electricity we use, including electricity used for our lines, is supplied through various entities under the jurisdiction of the Guangdong provincial power bureau on normal commercial terms. In 2007, 20082010, 2011 and 2009,2012, we paid approximately RMB 402.6552.3 million, RMB 606.9611.1 million and RMB 561.5660.7 million, respectively, in electricity charges.
Regulatory Overview
As a joint stock limited company with publicly traded shares, we are subject to regulation by the PRC securities regulatory authorities with respect to our compliance with PRC securities laws and regulations. We are also subject
Prior to industry regulationMarch 14, 2013, we were regulated by the MOR. However, on March 14 2013, the First Session of the 12th National People’s Congress of the PRC considered and approved the plan on State Council institutional reform and transformation of government functions, pursuant to which the MOR was dissolved. According to this plan, administrative functions pertaining to railway development planning and policies will be performed by the MOT. In addition, the State Railway Administration was formed to perform the other administrative functions of the MOR under the supervision of the MOT, including setting railway technology standards and monitoring compliance with safety, transportation quality and railway construction standards. The China Railway Corporation was formed to perform the commercial functions previously performed by the MOR, withinincluding the overall frameworkcentralized coordination of train routing and scheduling nationwide, operation of the passenger and freight transportation business, transporting special shipments, railway construction and bearing legal responsibility for railway safety. The details of this plan have not yet been announced. Therefore, the following discussion regarding the regulation of the PRC national railway system.
National Railway System
Railroads in the PRC fall largely into three categories: state-owned railroads, jointly owned railroads and local railroads. State-owned railroads are invested by theThe PRC central government ofholds the PRC.equity interests in state-owned railroads. The state-owned railway system comprises over 70% of all rail lines, including all trunk lines, and operateslines. Prior to the dissolution of the MOR, the state-owned railway system was operated as a nationwide integrated system under the supervision and management of the MOR..MOR. Jointly owned railroads are jointly invested and operated by the central government of the PRC, the local government and other foreign or domestic investors. Local railroads consist of regional lines usually within provincial or municipal boundaries that have been constructed under the sponsorship of local governments or local enterprises to serve local needs. Although the MOR doesdid not operate other railroads, it providesprovided guidance, coordination, supervision and assistance with respect to industry matters to such other railroads. The MOR’s responsibilities include the centralized coordination of train routing and scheduling nationwide, planning of freight shipments and freight car allocations, overseeing equipment
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Prior to March 18, 2005, the MOR divided the national railway system into 15 regions, each overseen and operated by a separate railway bureau or railway group company. Ten of these 15 administrations were further subdivided on a geographical basis into 41 railway sub-administrations or railway general companies. On March 18, 2005, the MOR issued a notice, pursuant to which all railway general companies were dissolved and three new railway group companies were established. As a result, the number of railway group companies increased to 18. Railway group companies are directly responsible for passenger and freight transportation as well as the coordination and supervision of operations carried out by train stations within their respective service territory.
Transport Operations
Prior to the dissolution of the MOR, the transport operations of the PRC national railway system arewere organized under the centralized regulation of the MOR. In order to promote efficient utilization of the railroad network nationwide, the MOR supervisessupervised and coordinatescoordinated traffic flow on national trunk lines and through any connection points, where two rail lines operated by different companies connect to each other, in the system. Based on route capacity, available equipment and national priorities, the MOR formulatesformulated and issuesissued the plans to the railway bureaus or railway group companies regarding routings on trunk lines, allocation of transportation capacities between railway bureaus or railway group companies at the connection points and allocation of freight cars to railway bureaus or railway group companies. The MOR also regulatesregulated the dispatch of empty freight cars to designated locations in order to enhance the utilization rate of the freight cars within the national railway system. Within the plans set forth by the MOR, each railway bureau and railway group company supervisessupervised and coordinatescoordinated traffic within its own jurisdiction.
Prior to the dissolution of the MOR, our passenger and freight operations that involveinvolved long-distance routing beyond our own lines, arewere conducted, in general, pursuant to quota allocations from GRGC based on the quota allocations GRGC receivesreceived from the MOR. The plans and schedules for our passenger and freight services that arewere conducted solely on our own lines arewere determined by us; while our passenger and freight services that runran beyond our own lines arewere subject to overall planning and scheduling of GRGC and/or the MOR.
Since March 1996, the MOR and GRGC have provided us with substantially greater latitude in our transportation operations. In particular, we were granted sufficient autonomy over passenger services on our own line, including autonomy over speed, frequency and train car mix. Pursuant to this authority, we have implemented a strategy of scheduling more high-speed trains, running shorter passenger trains more frequently, and adjusting the train schedules on our line to meet passenger demand. On October 21, 2001, we successfully launched our “As-Frequent-As-Buses” operating model, which provides intercityinter-city express train services. As of December 31, 2009,2012, the total number of inter-city high-speed passenger trains running daily between Guangzhou and Shenzhen was 100 pairs (including 15105 pairs of stand-byGuangzhou-Shenzhen inter-city express trains (including 19 pairs of back up trains). We currently have 105 pairs of long-distance trains and 13 pairs of Hong Kong Through Trains.
Where our service runs beyond our own line, clearance by and coordination with GRGC
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Pricing
Prior to the dissolution of the MOR, isthe MOR was generally responsible for preparing a proposal for the baseline pricing standards for the nationwide railway system with respect to freight and passenger transportation. Such proposed pricing standards willwould take effect after being approved by and/or filed with relevant PRC government authorities.
Pursuant to relevant approvals from the MOR and other relevant PRC government authorities, we have some discretion to adjust and determine our service price. With respect to our freight transportation services within our Guangzhou-Shenzhen lines, we may set our prices within a range between 50% and 150% of national price levels. With respect to our passenger transportation services, we may set the prices for our regular speed Guangzhou-Shenzhen trains within a range between 25% and 225% of national price levels, and may freely determine the prices for our high-speed express trains between Guangzhou and Shenzhen. In addition, we set the prices for our Hong Kong Through Trains in consultation with MTR, our business partner and the prices for our Hong Kong Through Trains are higher than the prices we charge for our domestic train services.
Environmental Protection
We believe that we are in material compliance with all applicable PRC national and local environmental protection laws and regulations. We have not been fined or cited for any activities that have caused environmental damages. We have 14 wastewater treatment facilities used for purposes of treating wastewater generated from cleaning of special cargo freight cars, locomotives, coaches and from residential use of our employees. We pay regular fees to local authorities for the discharge of waste substances. In 2009,2012, our environmental protection-related expenses remained stable at RMB 1.0were approximately RMB13.0 million, as in 2008.
Insurance
Before January 1, 2013, with respect to loss of or damage to baggage, parcels and freight, our customers may elect to purchase insurance administered by the MOR for up to their declared value. Passengers who do not elect to purchase insurance in respect of their baggage and/or parcels may nevertheless recover up to RMB 15 for each
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We do not currently maintain any insurance coverage with third party carriers against third party liabilities. Consistent with what we believe to be the customary practice among railway operators in the PRC, we do not maintain insurance coverage for our property and facilities (other than for our automobiles), for business interruption or for environmental damage arising from accidents on our property or relating to our operations. As a result, in the event of an accident or other event causing loss, destruction or damage to our property or facilities, causing interruption to our normal operations or causing liability for environmental damage or clean-up, we will have to cover losses and damages out of our own pockets. See “Item 3D.“ITEM 3. KEY INFORMATION—D. Risk Factors — Factors—Risks Relating to Our Business — Business—We have very limited insurance coverage”.
In addition, we have taken out basic retirement insurance, basic medical insurance, work-related personal injury insurance policies and child-bearing insurance for our employees.
The following table lists the significant subsidiaries of our Company as of December 31, 2009:
Name | Country of Incorporation | Percentage of Interest held by our Company | ||||||||||
Guangshen Railway Station Dongqun Trade and Commerce Service Company Limited | PRC | 100 | % | |||||||||
Shenzhen Fu Yuan Enterprise Development Company Limited | PRC | 100 | % | |||||||||
Shenzhen Guangshen Railway Travel Service | PRC | 100 | % | |||||||||
Shenzhen Pinghu Qun Yi Railway Store Loading and Unloading Company Limited | PRC | 55 | % | |||||||||
Dongguan Changsheng Enterprise Company Limited | PRC | 51 | % | |||||||||
Shenzhen Railway Station Passenger Services Company Limited | PRC | 100 | % | |||||||||
Guangzhou Tielian Economy Development Company Limited | PRC | 50.5 | % | |||||||||
Shenzhen Nantie Construction Supervision Company Limited | PRC | 76.66 | % | |||||||||
Guangzhou Railway Huangpu Service Company Limited | PRC | 100 | % | |||||||||
Shenzhen Guangshen Railway Economic and Trade Enterprise Company Limited | PRC | 100 | % | |||||||||
Shenzhen Railway Property Management Company Limited | PRC | 100 | % | |||||||||
Shenzhen Shenhuasheng Storage and Transportation Company Limited | PRC | |||||||||||
100 | % |
We occupy a total area of approximately 39.7 million square meters, among which, we own the land use right of approximately 11.7 million square meters on which our buildings and facilities of Guangzhou-Shenzhen railway are located, and we lease approximately 28.0 million square meters from GRGC for the Guangzhou-Pingshi Railway.
With respect to the land for which we hold the land use rights, the terms range from 36.5 to 50 years, terminating between 2031 and 2055. Pursuant to relevant PRC regulations currently in effect, these land use rights are renewable at the end of their terms upon execution of relevant documentation and payment of applicable fees. With respect to the land leased from GRGC, the
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As of December 31, 2009,2012, we had not obtained the land use right certificates, or Land Certificates, of certain parcels of land of our Company with an aggregate area of approximately 1,620,8941,280,231 square meters. After consultation with our Company’s PRC legal counsel, we believe there is no legal hurdle for us to apply for and to obtain the Land Certificates and we do not believe the current lack of Land Certificates will lead to any material adverse impact on the operation of our business. Accordingly, we do not consider any provision for impairment necessary.
As of December 31, 2009,2012, we had not obtained the ownership certificates of certain buildings, or Building Ownership Certificates, with an aggregate area of approximately 252,247592,504 square meters, which had an aggregate carrying value of approximately RMB1,329.8RMB 1,615.0 million. After consultation with our Company’s legal counsel, we believe that there is no legal hurdle for us to apply for and obtain the Building Ownership Certificates and it should not lead to any material adverse impact on the operation of our business. Accordingly, we do not consider any provision for impairment necessary.
Railroad operators typically require substantial land use rights for track, freight and maintenance yards, stations and related facilities. The availability of convenient rail transportation generally enhances the value of land along a rail line. We have not engaged and do not have any current plans to engage in commercial development of any of our land use rights for use other than in connection with our existing businesses. We do not at present intend to contribute capital to engage in any land development projects in the future. However, we may contribute land use rights not otherwise being fully utilized by us for equity stakes in these projects if we believe these opportunities are economically viable. Any development projects will require approval from PRC government authorities responsible for regulating land development.
As of June 11, 2010,April 19, 2013, we had 4847 stations situated on our rail line, of which the Guangzhou East Station is the largest, occupying an area of 402,438 square meters.
For additional information regarding our property, plantplants and equipment, see “Item 4B.“ITEM 4. INFORMATION ON THE COMPANY—B. Business Overview — Overview—Equipment, Tracks and Maintenance” and NotesNote 6 and 8 to our audited consolidated financial statements included elsewhere in this annual report.
We do not have any unresolved Staff comments that are required to be disclosed under this item.
This discussion and analysis should be read in conjunction with our audited consolidated financial statements included elsewhere in this annual report. Our audited consolidated financial statements are prepared in accordance with International Financial Reporting
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Overview
Our principal businesses are railroad passenger and freight transportation as well as railway network usage and other transportation-related services on the Shenzhen-Guangzhou-Pingshi railway and certain long-distance passenger transportation services. We also operate the Hong Kong Through Trains under a cooperative arrangement with MTR in Hong Kong. Prior to the Acquisition, our key strategic focus in recent years was to provide high-speed passenger train services in the Guangzhou-Shenzhen corridor. After the Acquisition, we aim to establish ourselves as a comprehensive railway service provider on the Shenzhen-Guangzhou-Pingshi corridor by providing passenger transportation, freight transportation and railway network usage and other transportation-related services to our customers. In addition to our core railroad transportation business, we also engage in other businesses that complement our core businesses, including on-board and station sales, restaurant services, as well as advertising and tourism.
For the year ended December 31, 2009,2012, our total revenue was RMB 12,385.815,091.9 million, profit attributable to shareholders was RMB 1,364.51,318.9 million, and earnings per share were RMB 0.19. Railroad business revenue accounted for 93.4%93.3%, 92.6%93.0% and 92.9%93.3% of our total revenue in 2007, 20082010, 2011 and 2009,2012, respectively.
Passenger transportation is our principal business. In 2009,2012, the total number of our passengers was 81.884.6 million, representing a decrease of 2.4%6.9% from 83.890.8 million in 2008. However, due to the handover of operation of Beijing-Kowloon Through Trains to our Company beginning on January 1, 2009 and the implementation of the Finance IC card and Fastpass card systems, we achieved an increase in our2011. Our passenger transportation revenue was RMB 7,841.1 million in 2012, representing a decrease of 2.3% from RMB 6,759.28,026.5 million in 2008 to RMB 7,195.7 million in 2009, representing an increase of 6.5%.
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Revenue from our railway network usages and other transportation-related services business was RMB 3,105.74,890.6 million in 2009,2012, representing an increase of 13.4%14.9% from 2008.
Revenue from our other businesses was RMB 874.31,016.0 million in 2009, representing an increase of 0.9% from 2008.
Principal Factors Affecting Our Results of Operations
Economic Development in the Pearl River Delta Region and the PRC.We are mainly engaged in railway transportation services on the trains between Pingshi, Guangzhou and Shenzhen,Guangzhou-Shenzhen intercity trains, certain long-distance trains and Hong Kong Through Trains. Our results of operations relating to passenger transportation are influenced by the economic development in the Pearl River Delta region. The level of economic activities in the Pearl River Delta region, including the economic cooperation among Hong Kong, Macau and mainland China, affects the number of business people and migrant workers traveling in this region. In addition, the average income levels of residents in this region and elsewhere in the PRC affects the number of the tourists departing from or arriving at our train stations. The majority of the freight we transport is large-volume, medium- to long-distance freight received from and/or transferred to other railway lines. Economic development in the PRC, including but not limited to the Pearl River Delta region, determines the market demand for such goods as coal, iron ore, steel and therefore indirectly affects the market demand of freight train transportation service. Furthermore, the recent global financial crisis and economic downturn had adversely affected economies and businesses around the world, including in China. Due to the global economic downturn, the economic situation in China was severe in the second half of 2008. This change in the macro-economic conditions had an adverse impact on our business and operations by causing a decrease in the number of passengers and the volume of freight that we transported in 2009. Although the economy in China, as well as in many other places around the world hashave recovered since the second half of 2009, the global financial crisis and economic downturn, Europe’s sovereign debt crisis, the stability of the Eurozone and the decreased growth rate of China’s economy may continue to have a material and adverse effect on our businesses, results of operations and financial condition.
Competitive Pressure from other Railway Operators and other Means of Transportation.Sales for our passenger transportation services are also affected by the competitive pressure from other railway operators and other means of transportation, such as the automobile, bus, ferry and airplane services. For example, the operation of the Guangzhou-Shenzhen-Hong Kong passenger line, which commenced on December 26, 2011, may further increase the competition we face and materially and adversely affect our revenue and results of operations. In addition, the fast growth in the number of privately owned vehicles and a higher penetration of bus services affect the number of train passengers traveling short distances and any significant decrease in the air transportation prices affects the number of train passengers traveling long distances. Our sales of the freight transportation services are also affected by the competition from other means of transportation, such as water, truck and freight transportation services.
We believe that the entry barrier to the industry will decrease, investors of the industry will become more diversified and the State’s high-speed railway network with Four East-West Lines and Four South-North Lines and numerous inter-city railways will complete construction and commence operation, leading to increased competition within the industry itself.
PRC Policies.We are allowed to be more flexible in setting the prices of both passenger transportation and the freight transportation services as compared to other domestic railroad
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Year ended December 31, 20092012 compared with year ended December 31, 2008
Revenue
In 2009,2012, our total revenue was RMB 12,385.815,091.9 million, representing an increase of 6.0%2.7% from RMB 11,688.714,690.8 million in 2008.2011. Our revenue from railroad passenger transportation service, freight transportation service, railway network usage and other transportation-related services and other businesses was RMB 7,195.77,841.1 million, RMB 1,210.1 million, RMB 3,105.71,344.1 million and RMB 874.34,890.6 million, respectively, accounting for approximately 58.1%52.0%, 9.8%, 25.1%8.9% and 7.0%, respectively,32.4% of our total revenue in 2009.
Passenger transportation. Revenue from passenger transportation service.Passenger transportation remainsaccounted for 52.0% of our most important business.total revenue and 55.7% of our railroad business revenue in 2012. As of December 31, 2009,2012, we operated 218233.5 pairs of passenger trains daily, representing a decreasean increase of 21.52.5 pairs from the number in operation as of December 31, 2008. There were 1002011, including 105 pairs of intercity high-speed passenger trains between Guangzhou and Shenzhen a decrease of 20 pairs compared to 2008,(including 19 stand-by pairs), 13 pairs of Hong Kong Through Trains (including 11 pairs of Guangzhou-Kowloon Through Trains, one pair of Zhaoqing-Kowloon Through Trains and 105one pair of Beijing/Shanghai-Kowloon Through Trains) and 115.5 pairs of long-distance passenger trains, a decrease of 1.5 pairs compared to 2008.
In 2009,2012, our total number of passengers was 81.884.6 million, representing a decrease of 2.4%6.9% from 83.890.8 million in 2008.2011. Our revenue from passenger transportation was RMB 7,195.77,841.1 million in 2009,2012, representing an increasea decrease of 6.5%2.3% from RMB 6,759.28,026.5 million in 2008.2011. The decrease in the totalpassenger volume and revenue from passenger volume was primarily due to (i) decrease in number of passengerstrains in 2009 was mainlyoperation due to thesome CRHs being successively sent back to depot for inspection and repair as they required phase 4 repairs, leading to a more significant decrease in the numbertransportation capacity of passengers using our Hong Kong Through Trainsinter-city trains; (2) passenger overload was subject to new regulations and long-distance trains services, which was a resultregular management by the industry responsible bureaus since the spring peak season of 2012 to ensure the operating safety of the reduced number of people travelling in the Pearl River Delta region caused by the financial crisis and economic downturntrains and the outbreakquality of H1N1 influenza in China in 2009. Despite theservice of train stations and trains that led to a decrease in the total numberpassenger flow to a certain extent; (3) the diversion of passengers, our revenue from passenger transportation increased in 2009, primarily due to our effective marketing efforts in 2009customers away upon the opening and operation of the Beijing-Guangzhou high-speed railways and the fact that our long-distance passenger transportation was not adversely affected by extreme weather conditions such as severe snow storms that occurred in 2008. The increase in our revenue from passenger transportation in 2009 was also due to the increase in the revenue generated from the Guangzhou-Shenzhen inter-city trains as a resultcommencement of the implementationoperation of a stop-at-all-stations operating model for the Guangzhou-Shenzhen inter-city trains from May 2009, as well as the introduction of the Finance IC card and Fastpass card systems since February 2009.
The following table sets forth our revenue from passenger transportation and the number of passengers for the three years ended December 31, 2009:
Year ended December 31, | Change in 2009 from | |||||||||||||||
2007 | 2008 | 2009 | 2008 | |||||||||||||
Revenue from passenger transportation (RMB thousands) | 5,833,538 | 6,759,229 | 7,195,717 | 6.5 | % | |||||||||||
Total passengers (thousands) (1) | 73,053 | 83,825 | 81,838 | (2.4 | %) | |||||||||||
Revenue per passenger (RMB)(2) | N/A | N/A | N/A | N/A | ||||||||||||
Total passenger-kilometers (millions) | 26,278.2 | 27,923.7 | 27,233.1 | (2.5 | %) | |||||||||||
Revenue per passenger-kilometer (RMB) | 0.22 | 0.24 | 0.26 | 8.3 | % |
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Year ended December 31, | Change in 2012 from 2011 | |||||||||||
2011 | 2012 | |||||||||||
Revenue from passenger transportation (RMB thousands) | 8,026,512 | 7,841,091 | (2.3 | %) | ||||||||
Total passengers (thousands) | 90,828 | 84,599 | (6.9 | %) | ||||||||
Total passenger-kilometers (millions) | 28,524 | 26,789 | (6.1 | %) | ||||||||
Revenue per passenger-kilometer (RMB) | 0.28 | 0.29 | 3.6 | % |
The following table sets forth our revenue from freight transportation and the volumes of commodities we shipped for the three years ended December 31, 2009:
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Year ended December 31, | Change in 2012 from 2011 | |||||||||||
2011 | 2012 | |||||||||||
Revenue from freight transportation (RMB thousands) | 1,386,753 | 1,344,113 | (3.1 | %) | ||||||||
- Revenue from outbound freight transportation | 417,149 | 461,793 | 10.7 | % | ||||||||
- Revenue from inbound and pass-through transportation | 913,564 | 831,917 | (8.9 | %) | ||||||||
- Revenue from other freight transportation services | 56,040 | 50,403 | (10.1 | %) | ||||||||
Total freight tonnes (thousands of tonnes) | 68,703 | 62,671 | (8.8 | %) | ||||||||
- Outbound freight tonnage | 22,331 | 21,373 | (4.3 | %) | ||||||||
- Inbound and pass-through freight tonnage | 46,372 | 41,298 | (10.9 | %) | ||||||||
Revenue per tonne (RMB) | 20.18 | 21.45 | 6.3 | % | ||||||||
Total tonne-kilometers (millions) | 15,519.1 | 14,620.5 | (5.8 | %) | ||||||||
Revenue per tonne-kilometer (RMB) | 0.09 | 0.09 | — |
Year ended December 31, | Change in 2009 from | |||||||||||||||
2007 | 2008 | 2009 | 2008 | |||||||||||||
Revenue from freight transportation (RMB thousands) | 1,326,450 | 1,324,701 | 1,210,118 | (8.7 | %) | |||||||||||
— Revenue from outbound freight transportation(1) | 216,888 | 282,678 | 285,186 | 0.9 | % | |||||||||||
— Revenue from inbound(1) and pass-through transportation | 1,010,665 | 948,177 | 836,408 | (11.8 | %) | |||||||||||
Revenue from other freight transportation services | 98,897 | 93,848 | 88,524 | (5.7 | %) | |||||||||||
Total freight tonnes (thousands of tonnes) | 71,010 | 70,141 | 61,987 | (11.6 | %) | |||||||||||
— Outbound freight tonnage | 19,056 | 16,847 | 17,622 | 4.6 | % | |||||||||||
— Inbound and pass-through freight tonnage | 51,955 | 53,295 | 44,365 | (16.8 | %) | |||||||||||
Revenue per tonne (RMB) | 18.68 | 18.89 | 19.52 | 3.3 | % | |||||||||||
Total tonne-kilometers (millions) | 15,306.9 | 15,557.4 | 13,446.7 | (13.6 | %) | |||||||||||
Revenue per tonne-kilometer (RMB) | 0.09 | 0.09 | 0.09 | — |
Other Businesses.Our other businesses mainly consist of the sale of materials and supplies, maintenance of trains, on-board catering services, labor services operation of restaurants, hotels and warehouses, and other businesses related to railway transportation. Revenue from other businesses in 20092012 was RMB 874.31,016.0 million, representing an increase of 0.9% fromcompared to RMB 866.31,021.6 million in 2008.
Year ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
(RMB millions) | ||||||||||||
Revenue from other businesses | 689.0 | 866.3 | 874.3 | |||||||||
— Sale of materials and supplies | 103.8 | 227.7 | 154.1 | |||||||||
— Maintenance of trains | 239.2 | 225.5 | 241.4 | |||||||||
— On-board catering services | 67.3 | 106.5 | 118.5 | |||||||||
— Labor services | 49.7 | 62.2 | 67.8 | |||||||||
— Other railway transportation related businesses | 229.0 | 244.4 | 292.5 |
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In 2009,2012, our total operating expenses were RMB 10,418.113,229.4 million, representing an increase of 4.3%9.3% from RMB 9,991.412,101.0 million in 2008. 2011.
The following table sets forth the principal operating expenses associated with our railroad businesses, as a percentage of our railroad business revenue, for 2007, 20082011 and 2009:
Year ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
Railroad businesses revenue (RMB millions) | 9,819.5 | 10,822.4 | 11,511.5 | |||||||||
Business tax | 2 | % | 2 | % | 2 | % | ||||||
Labor and benefits | 20 | % | 20 | % | 20 | % | ||||||
Equipment leases and services | 26 | % | 25 | % | 26 | % | ||||||
Lease of land use right | 0.51 | % | 0.46 | % | 0.45 | % | ||||||
Materials and supplies | 13 | % | 12 | % | 12 | % | ||||||
Repair costs, excluding materials and supplies | 5 | % | 6 | % | 5 | % | ||||||
Depreciation and amortization of leasehold land payments | 10 | % | 11 | % | 11 | % | ||||||
Fee for social services | 4 | % | 4 | % | 3 | % | ||||||
Utility and office expenses | 1 | % | 1 | % | 1 | % | ||||||
Others | 3 | % | 4 | % | 3 | % | ||||||
Operating expenses ratio(1) | 85 | % | 85 | % | 84 | % | ||||||
Railroad businesses operating margin | 15 | % | 15 | % | 16 | % |
Year ended December 31, | ||||||||
2011 | 2012 | |||||||
Railroad businesses revenue (RMB millions) | 13,669.3 | 14,075.8 | ||||||
Business tax | 2.70 | % | 2.42 | % | ||||
Labor and benefits | 21.75 | % | 24.98 | % | ||||
Equipment leases and services | 26.37 | % | 28.58 | % | ||||
Lease of land use right | 0.39 | % | 0.39 | % | ||||
Materials and supplies | 11.20 | % | 10.89 | % | ||||
Repair costs, excluding materials and supplies | 4.73 | % | 4.95 | % | ||||
Depreciation and amortization of leasehold land payments | 9.95 | % | 9.76 | % | ||||
Fee for social services | 0.84 | % | 0.66 | % | ||||
Utility and office expenses | 0.94 | % | 0.76 | % | ||||
Others | 2.49 | % | 3.74 | % | ||||
Operating expenses ratio(1) | 81.36 | % | 87.13 | % | ||||
Railroad businesses operating margin | 18.67 | % | 12.77 | % |
(1) | Total railroad operating expenses as a percentage of railroad businesses revenue. |
Railway Operating Expenses.Our total railway operating expenses increased by 5.0%10.2% to RMB 12,263.0 million in 2012 from RMB 9,162.311,123.1 million in 2008 to RMB 9,620.7 million in 2009.2011. The following sets forth a breakdown of major changes by line item:
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Equipment leases and services. Our expenses for equipment leases and services mainly consist of railway line usage fees, train hauling fees and train leasing fees paid to other railway bureaus. In 2012, our operating revenue.expenses relating to equipment leases and services amounted to RMB 4,022.5 million, representing an increase of 11.6% from RMB 3,604.4 million in 2011. This was mainly due to (i) the opening of our Shenzhen-Shanghai South and Guangzhou-Yantai long distance trains in 2012; (ii) increases in the unit settlement prices for train hauling fees and electric catenary fees; and (iii) increases in the railway operation services in 2012 provided to Wuhan-Guangzhou high-speed railway, Guangzhou-Zhuhai inter-city railway and GSHER.
Materials and supplies. Our materials and supplies consist of materials, fuel, water and electricity expenses. In 2012, our materials and supplies amounted to RMB 1,532.6 million, compared to RMB 1,530.7 million in 2011.
Repairs and facilities maintenance costs, excluding materials and supplies. In 2012, our repairs and facilities maintenance costs, excluding materials and supplies, amounted to RMB 696.9 million, representing an increase of 7.7% from RMB 647.1 million in 2011. The increase was mainly due to phase 4 repairs for our CRH EMUs.
Other than the above increases, certain line items of our operating expenses decreased in 2009:
Business tax. In 2012, our business tax amounted to RMB 340.0 million, representing a decrease of | |||
Social service expenses. In 2012, our social service expenses amounted to RMB 93.1 million, representing a decrease of 19.2% from RMB 115.2 million in 2008 to RMB 1,947.9 million in 2009 primarily2011. This was mainly due to (i) an increase in our revenue from long-distance train services, (ii) an increase in revenuethe decrease of relevant expenses as a result of our implementationacquisition of the stop-at-all-stations operating model for Guangzhou-Shenzhen inter-city trains from May 1, 2009,assets and (iii)business of related parties which had provided us with social services. See “ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS—B. Related Party Transactions “ and Note 37 to our audited consolidated financial statements included elsewhere in this annual report.
Utility and office expenses. In 2012, our utility and office expenses amounted to RMB 107.2 million, representing a decrease of 16.8% from RMB 128.8 million in our non-operating expenses2011. This was mainly due to improvements in monitoring and control of such expenses.
Profit from Operations
Our profit from operations decreased by 24.6% to RMB 1,934.3 million in 2012 from RMB 2,564.0 million in 2011, primarily due to the effective cost controlsincrease of our Company.
Taxation
The EIT Law which has takentook effect fromon January 1, 2008. According to the new EIT Law, the preferential income tax rate of 15% that was previously applicable to companies incorporated in Shenzhen (like us) and other special economic zones are beingwas gradually phased out in five years beginning from January 1, 2008. During the five years, the applicable tax rates will bewere 18%, 20%, 22%, 24% and 25% for 2008, 2009, 2010, 2011 and 2012, respectively. After such five-year period and effective fromsince January 1, 2012, the tax rate
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As we are registered and established in the Shenzhen Special Economic Zone, we were subject to income tax in 20092012 at a rate of 25%. According to relevant tax regulations, our subsidiaries were subject to income tax at the rate of 20%, 24% or 25%, depending on the location of incorporation. Our income tax expense was RMB 441.2 million in 2012, representing an effective tax rate of 25.1% and a decrease of RMB 134.8 million compared to RMB 576.0 million in 2011. The decrease was mainly due to the decrease in our profit from operations.
Profit attributable to shareholders of the Company
As a result of the above, our consolidated net profit decreased by 26.9% to RMB 1,317.0 million in 2012 from RMB 1,802.4 million in 2011.
Year ended December 31, 2011 compared with year ended December 31, 2010
Revenue
In 2011, our total revenue was RMB 14,690.8 million, representing an increase of 8.0% from RMB 13,484.4 million in 2010. Our revenue from railroad passenger transportation service, freight transportation service, railway network usage and other transportation-related services and other businesses was RMB 8,026.5 million, RMB 1,386.8 million, RMB 4,256.0 million and RMB 1,021.6 million, respectively, accounting for approximately 54.6%, 9.4%, 29.0% and 7.0% of our total revenue in 2011, respectively.
Passenger transportation. Passenger transportation remains our most important business. As of December 31, 2011, we operated 231 pairs of passenger trains daily, representing an increase of 7 pairs from the number in operation as of December 31, 2010. There were 110 pairs of inter-city passenger trains between Guangzhou and Shenzhen, 13 pairs of Hong Kong Through Trains, and 108 pairs of long-distance passenger trains, an increase of 7 pairs compared to 2010.
In 2011, our total number of passengers was 90.8 million, representing an increase of 7.0% from 84.9 million in 2010. Our revenue from passenger transportation was RMB 8,026.5 million in 2011, representing an increase of 8.8% from RMB 7,377.1 million in 2010. The increase of total number of passengers and our revenue from passenger transportation was mainly due to: (i) our inter-city trains benefited from the sustained and steady growth of China’s economy and the 26th Universiade held in Shenzhen in August 2011; (ii) as road transportation is subject to increasing costs due to the continuous rise in oil prices, toll fees and parking fees and worsening traffic congestion, passengers are increasingly attracted to taking the inter-city trains that are characterized by “safety, timeliness, comfort and convenience”; (iii) we increased the number of runs of temporary trains during the peak seasons during the Spring Festival, students’ summer break and other public holidays, leading to a year-to-year increase in our transportation capacity; (iv) in view of the relatively high number of long-distance trains departing from the Guangzhou station, we increased the number of pairs of inter-city trains stopping at the Guangzhou station to attract transit passengers; and (v) the fare per ticket of the inter-city trains has increased by RMB 5 as of June 18, 2010.
The following table sets forth our revenue from passenger transportation and the number of passengers for 2010 and 2011:
Year ended December 31, | Change in 2011 from 2010 | |||||||||||
2010 | 2011 | |||||||||||
Revenue from passenger transportation (RMB thousands) | 7,377,145 | 8,026,512 | 8.8 | % | ||||||||
Total passengers (thousands) | 84,923 | 90,828 | 7.0 | % | ||||||||
Total passenger-kilometers (millions) | 27,472.0 | 28,524 | 3.8 | % | ||||||||
Revenue per passenger-kilometer (RMB) | 0.27 | 0.28 | 3.7 | % |
Freight transportation. Freight transportation is another important business segment for us. The total tonnage of freight we transported in 2011 was 68.7 million tonnes, representing an increase of 1.1% from 67.9 million in 2010. Revenue from our freight transportation business in 2011 was RMB 1,386.8 million, representing an increase of 5.4% from RMB 1,315.3 million in 2010. The increase of revenue from freight transportation is mainly due to the following factors: (i) the steady growth of the Chinese economy, which resulted in strong demand for our railway freight transportation services for coal, coke and petroleum products; (ii) we conducted effective market research, strengthened our relationships with key customers and enhanced our marketing strategies; and (iii) the increase in the national basic freight transportation price by RMB 0.002 per tonne kilometer from April 1, 2011, which also contributed to the increase in the revenue of our freight transportation business.
The following table sets forth our revenue from freight transportation and the volumes of commodities we shipped for 2010 and 2011:
Year ended December 31, | Change in 2011 from 2010 | |||||||||||
2010 | 2011 | |||||||||||
Revenue from freight transportation (RMB thousands) | 1,315,347 | 1,386,753 | 5.4 | % | ||||||||
- Revenue from outbound freight transportation | 339,956 | 417,149 | 22.7 | % | ||||||||
- Revenue from inbound and pass-through transportation | 925,608 | 913,564 | (1.3 | %) | ||||||||
- Revenue from other freight transportation services | 49,783 | 56,040 | 12.6 | % | ||||||||
Total freight tonnes (thousands of tonnes) | 67,932 | 68,703 | 1.1 | % | ||||||||
- Outbound freight tonnage | 20,963 | 22,331 | 6.5 | % | ||||||||
- Inbound and pass-through freight tonnage | 46,969 | 46,371 | (1.3 | %) | ||||||||
Revenue per tonne (RMB) | 19.36 | 20.18 | 4.2 | % | ||||||||
Total tonne-kilometers (millions) | 15,191.4 | 15,519.1 | 2.2 | % | ||||||||
Revenue per tonne-kilometer (RMB) | 0.09 | 0.09 | — |
Railway network usage and other transportation-related services. Revenue from our railway network usage and other transportation-related services accounted for 29.0% of our total revenue and 31.1% of our railroad business revenue in 2011. Railway network usage and other transportation-related services mainly include locomotive traction, track usage, electric catenaries, vehicle coupling and other services. In 2011, our revenue from railway network usage and other transportation-related services was RMB 4,256.0 million, representing an increase of 9.5% from RMB 3,888.4 million in 2010. The increase of revenue from our railway network usage and other transportation-related services was mainly due to (i) the increase in the sales of materials and supplies to the increased number of trains that are operated by other railway companies that traveled on our railway lines; and (ii) the increase in the operation consignment services provided by us for the increased Guangzhou-Zhuhai inter-city trains on the Guangzhu-Shenzhen inter-city trains of Guangzhou-Shenzhen-Hong Kong passenger line.
Other Businesses. Our other businesses mainly consist of the sale of materials and supplies, maintenance of trains, on-board catering services, labor services and other businesses related to railway transportation. Revenue from other businesses in 2011 was RMB 1,021.6 million, representing an increase of 13.1% from RMB 903.6 million in 2010.
Operating Expenses
In 2011, our total operating expenses were RMB 12,101.0 million, representing an increase of 6.8% from RMB 11,327.3 million in 2010. The following table sets forth the principal operating expenses associated with our railroad businesses, as a percentage of our railroad business revenue, for 2010 and 2011:
Year ended December 31, | ||||||||
2010 | 2011 | |||||||
Railroad businesses revenue (RMB millions) | 12,580.9 | 13,669.3 | ||||||
Business tax | 2 | % | 3 | % | ||||
Labor and benefits | 21 | % | 22 | % | ||||
Equipment leases and services | 26 | % | 26 | % | ||||
Lease of land use right | 0.42 | % | 0.39 | % | ||||
Materials and supplies | 12 | % | 11 | % | ||||
Repair costs, excluding materials and supplies | 7 | % | 5 | % | ||||
Depreciation and amortization of leasehold land payments | 11 | % | 10 | % | ||||
Fee for social services | 1 | % | 1 | % | ||||
Utility and office expenses | 1 | % | 1 | % | ||||
Others | 3 | % | 2 | % | ||||
Operating expenses ratio(1) | 83 | % | 81 | % | ||||
Railroad businesses operating margin | 17 | % | 19 | % |
(1) | Total railroad operating expenses as a percentage of railroad businesses revenue. |
Railway Operating Expenses. Our total railway operating expenses increased by 6.1% from RMB 10,481.5 million in 2010 to RMB 11,123.1 million in 2011. The following sets forth a breakdown of major changes by line item:
Business tax. In 2011, our business tax amounted to RMB 369.1 million, representing an increase of 18.2% from RMB 312.3 million. The increase was due to the increase in our operating income.
Labor and benefits. In 2011, our labor and benefits expenses amounted to RMB 2,973.5 million, representing an increase of 11.7% from RMB 2,662.3 million in 2010. The increase was mainly due to the increase in employees’ basic salaries, allowances and benefits.
Equipment leases and services. Our expenses for equipment leases and services mainly consist of railway line usage fees, train hauling fees and train leasing fees paid to other railway bureaus. In 2011, our expenses relating to equipment leases and services amounted to RMB 3,604.4 million, representing an increase of 11.4% from RMB 3,235.9 million in 2010. This was mainly due to (i) the increase in railway network usage and other transportation service fees due to the increased number of pairs of long-distance trains; and (ii) the increase in leasing fees as a result of our lease of an additional 45 HXDC3 high power AC freight electric driven trains.
Materials and supplies. Our materials and supplies consist of materials, fuel, water and electricity expenses. In 2011, our materials and supplies amounted to RMB 1,530.7 million, representing an increase of 5.0% from RMB 1,457.8 million in 2010. This was mainly due to (i) the increase in material consumption cost as a result of the increase in the number of pairs of trains and the workload of our railway operation services and (ii) the increase of electricity expenses as a result of the significant increase in the workload of our electric driven trains.
Other than the above increases, certain line items of our operating expenses decreased in 2011:
Repairs and facilities maintenance costs, excluding materials and supplies. In 2011, our repairs and facilities maintenance costs, excluding materials and supplies, amounted to RMB 647.1 million, representing a decrease of 21.9% from RMB 828.4 million in 2010. This was mainly because we did not incur any expenses relating to the repair and maintenance for the majority of our CRHs which had been done and incurred expenses in 2010.
Social service expenses. In 2011, our social service expenses amounted to RMB 115.2 million, representing a decrease of 20.4% from RMB 144.8 million in 2010. This was mainly due to the decrease of relevant expenses as a result of our acquisition of assets and business of related parties which had provided us with social services. See “ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS—B. Related Party Transactions” and Note 37 to our audited consolidated financial statements included elsewhere in this annual report.
Profit from Operations
Our profit from operations increased by 21.5% from RMB 2,110.1 million in 2010 to RMB 2,564.0 million in 2011, primarily due to the increase of our revenue, which exceeded the increase in our operating expenses.
Taxation
The EIT Law took effect on January 1, 2008. According to the EIT Law, the preferential income tax rate of 15% that was previously applicable to companies incorporated in Shenzhen (like us) and other special economic zones was gradually phased out in five years beginning from January 1, 2008. During the five years, the applicable tax rates were 18%, 20%, 22%, 24% and 25% for 2008, 2009, 2010, 2011 and 2012, respectively. After such five-year period and since January 1, 2012, the tax rate applicable to us has been fixed at 25%, i.e., the unified income tax rate applicable to all domestic companies in the PRC (with limited exceptions).
As we are registered and established in the Shenzhen Special Economic Zone, we were subject to income tax in 2011 at a rate of 24%, which was 5%1% lower than the standard income tax rate of 25% generally applicable to PRC companies. According to relevant tax regulations, our subsidiaries were subject to income tax at the rate of either 20%, 24% or 25%, depending on the location of incorporation. Our income tax expense was RMB 348.9576.0 million in 2009,2011, representing an effective tax rate of 20.4%24.2% and an increase of RMB 71.6135.6 million compared to RMB 277.3440.4 million in 2008.2010. The increase was mainly due to the overall increase in our effective income tax rate.
Profit attributable to shareholders of the Company
As a result of the above, our consolidated net profit increased by 11.4%21.4% from RMB 1,224.11,484.9 million in 20082010 to RMB 1,364.51,802.4 million in 2009.
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Our audited consolidated financial statements have been prepared in accordance with IFRS. Our principal accounting policies are set out in Note 2 to our audited consolidated financial statements.statements included elsewhere in this annual report. IFRS also requires us to exercise our judgment in the process of applying our accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4 to our audited consolidated financial statements included elsewhere in this annual report. Although these estimates are based on our best knowledge of current events and actions, actual results ultimately may differ from those estimates.
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of our business activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within our Company.
We recognize revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity, and specific criteria have been met for each of our business activities as described below. We base our estimates on historical results, taking into consideration the type of customers, the type of transactions and other specifics of each arrangement.
Revenue from railway business:business: revenue from railway business includes revenue from passenger and freight services and revenue from railway network usage and other transportation-related services. Other transportation-related services include the railway operation service provided to other railway companies and other service provided in relation to passenger and freight transportation. Revenue from railway business is recognized when the services are rendered and revenue can be reliably measured.
Revenue from other businesses:businesses: revenue from other businesses principally includes services offered in railway stations, sales of food, beverages and merchandise on board the trains and in the railway stations. Revenue from other businesses is recognizedrecognised once the related services or goods are delivered, the related risks and rewards of ownership have been transferred and revenue can be reliably measured.
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Dividend income:income: dividend income is recognized when the right to receive payment is established.
Rental income:income: revenue from operating lease arrangements is recognized on a straight-line basis over the period of the respective leases.
Fixed assets
The railway industry is capital intensive. Under IFRS, fixed assets are initially recorded at historical cost less accumulated depreciation and impairment loss. CostHistorical cost represents expenditure that is directly attributable to the purchase priceacquisition of the asset and otheritems (for the case of fixed assets acquired by us from GRGC during the Restructuring, the revaluated amount in the Restructuring was deemed costs). We have early adopted the amended IFRS 1, “First-time Adoption of IFRS” beginning from January 1, 2010. With the amended IFRS 1, the revaluated amount can become deemed costs incurredso long as the revaluation takes place at periods before or during the first-time IFRS adoptors’ first set of IFRS financial statements. In addition, the IASB has made a special provision in this IFRS 1, which allows existing IFRS preparers to bring the asset into intended use. retrospectively apply this rule.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the asset will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the comprehensive income statement during the financial period in which they are incurred.
Depreciation is calculated using the straight-line method to write off the cost amount, after taking into account the estimated residual value of not more than 4% of cost, of each asset over its estimated useful life. The estimated useful lives are as follows:
Buildings(Note | 20 to 40 years | |
Track, bridges and service roads (Note a) | 16 to 100 years | |
Locomotives and rolling stock | 20 years | |
Communications and signaling systems | 8 to 20 years | |
Other machinery and equipment | 4 to 25 years |
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Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.
Gains and losses on disposals are determined by comparing the sales proceeds with the carrying amount and are recognized within “other (expense)/income — and other (loss)/gains—net” included in the comprehensive income statement.
Government grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and we will comply with all attached conditions.
Government grants relating to costs are deferred and are recognized in the comprehensive income statement over the period necessary to match them with the costs that they are intended to compensate.
Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants and are credited to the comprehensive income statement on a straight-line basis over the expected lives of the related assets.
Trade and other receivables
Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection of trade and other receivables is expected to be completed within one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are recorded as non-current assets.
Trade and other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. A provision for impairment of receivables is established when there is objective evidence that we will not be able to collect all amounts due according toprove the original termsfollowing:
significant financial difficulty of the receivables. Significant financial difficultiesissuer or obligor;
a breach of the debtor, probability that the debtor will enter into bankruptcy or financial reorganization, andcontract, such as a default or delinquency in payments are considered indicatorsinterest or principal payments;
we, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the receivablelender would not otherwise consider;
it becomes probable that the borrower will enter bankruptcy or other financial reorganization;
the disappearance of an active market for that financial asset because of financial difficulties; or
observable data indicating that there is impaired. a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including:
(i) | adverse changes in the payment status of borrowers in the portfolio; and |
(ii) | national or local economic conditions that correlate with defaults on the assets in the portfolio. |
The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred), discounted at the original effective interest rate.
Trade payables
Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are recorded as non-current liabilities.
Goodwill
Goodwill represents the excess of the costconsideration transferred, the amount of an acquisitionany non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of our share of theidentifiable net identifiable assets of the acquired subsidiary/associate at the date of acquisition.acquired. Goodwill arising from acquisitions of subsidiariessubsidiaries’ business is disclosed separately on our balance sheet. Goodwill is tested for impairment annually or, whenever there is an indication of impairment, and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units at a segment level for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-
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Impairment of investment in subsidiaries, associates and non-financial assets
Assets that have an indefinite useful life, for example goodwill, are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
Impairment testing of the investments in subsidiaries or associates is required upon receiving dividends from these investments if the dividend exceeds the total comprehensive income of the subsidiary or associate in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.
Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognized in the consolidated comprehensive income statement, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the PRC where our subsidiaries and associates operate and generate taxable income. We periodically evaluate positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establish provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided, in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the audited consolidated financial statements included elsewhere in this annual report.statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by us and it is probable that the temporary difference will not reverse in the foreseeable future.
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Employee benefits
We make contributions to employee benefit funds operated by the local governments for pension, housing, safety and other employee benefit matters. We have no payment obligations once the contributions have been paid according to the relevant laws and regulations. The contributions to such statutory employee benefit funds are recognized as staff costs when they are due.
Termination benefits are payable when qualified employees accept voluntary redundancy in exchange for such benefits, subject to approval by our management. We recognize retirement benefits after forming a formal final decision to terminate an employee or to provide retirement benefits after an employee accepts an offer for voluntary redundancy. Benefits due more than 12 months after the balance sheet date are discounted to present value.
Critical Accounting Estimates and Assumptions
We make estimates and assumptions concerning the future. Estimates and judgments 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 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 as follows:
Estimates of the depreciable lives of fixed assets
The estimate of depreciable lives of fixed assets, especially tracks, bridges and service roads, was made by our Directors with reference to the historical usage of the assets; their expected physical wear and tear; results of recent durability assessment performed; technical or commercial obsolescence arising from changes or improvements in production of similar fixed assets, the right of our Company to renew the land use right grants and the land use right lease on which these assets are located, and the changes in market demand for, or legal or comparable limits imposed on, the use of such fixed assets.
See “ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS—A. Operating Results—Critical Accounting Policies and Estimated—Fixed Assets” Note 2.6 to our consolidated financial statements included elsewhere in this annual report for the current estimated useful lives of fixed assets. If the estimated depreciable lives of tracks, bridges and service roads had been increased/decreased by 10%, the depreciation expenses of fixed assets for the year ended December 31, 2012 would have been decreased/increased by approximately RMB18.5 million and RMB22.6 million, respectively (2011: RMB18.4 million and RMB22.4 million, respectively).
Estimated impairment of goodwill
We test whether goodwill has suffered any impairment annually or, whenever there is an indication of impairment, in accordance with the accounting policy stated in Note 2.9 to our consolidated financial statements included elsewhere in this annual report. The recoverable amounts of cash-generating units have been determined based on the higher of an asset’s fair value less costs to sell and value in use. These calculations require the use of estimates. See Note 9 to our consolidated financial statements included elsewhere in this annual report.
Estimated impairment of non-financial assets (other than goodwill)
In determining whether an asset is impaired or the event previously causing the impairment no longer exists, management has to exercise judgment, particularly in assessing: (1) whether an event has occurred that may affect the asset value or such event affecting the asset value has not been in existence; (2) whether the carrying value of an asset can be supported by the net present value of future cash flows which are estimated based upon the continued use of the asset or derecognition; and (3) the appropriate key assumptions to be applied in preparing cash flow projections including whether these cash flow projections are discounted using an appropriate rate. Changing the assumptions selected by management to determine the level of impairment, including the discount rate or the growth rate assumptions in the cash flow projections, could materially affect the net present value used in the impairment test.
Income taxes
We recognize liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.
Our principal source of capital has been cash flow from operations and cash flow from financing activities, and our principal uses of capital are to fund capital expenditures, investment and payment of taxes and dividends.
We generated approximately RMB 2,617.52,177.7 million of net cash flow from operating activities in 2009.2012. Substantially all of our revenue was received in cash, with accounts receivable arising primarily from long-distance passenger train services provided and pass-through freight transactions originating from other railway companies whose lines connect to our railroad. Similarly, some accounts payable arise from payments for railroad transportation services that we collect on behalf of other railroad companies and should pay to these companies. Accounts receivable and payable were generally settled either quarterly or monthly between us and the other railroad companies. Most of our revenue generated from our other businesses was also received in cash. We also have accounts payable associated with the purchase of materials and supplies in our other businesses.
In 2009,2012, other than operating expenses, our cash outflow mainly related to the following:
capital expenditures of approximately RMB 1,836.2 million, representing an increase of 94.6% from RMB 943.4 million in 2011;
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income tax expenses of approximately RMB 529.7 million.
Our capital expenditures for 20092012 consisted primarily of the following projects:
the purchase of two CRH1 EMUs and 50 25T passenger trains;
constructing the Buji passenger station (for example, the Shenzhen East Station);
replacing rails for the main track of Beijing-Guangzhou Railway; and
upgrading the supporting facilities to improve the safety for railway transportation.
Funds not required for immediate use are kept in short term investments and bank deposits. We had cash and cash equivalents of approximately RMB 1,115.7675.0 million as of December 31, 2009.
As of December 31, 2009, we had an overdue time deposit in the amount of approximately RMB 31.4 million placed with Zengcheng Licheng Urban Credit Cooperative, or Licheng, which we were unable to recover before the fixed deposit term that expired in 1998. We had initiated legal proceedings and obtained a judgment against Licheng in our favor regarding the repayment. The court ordered a stay of execution of the judgment obtained by our Company because Licheng was undergoing its liquidation process. The amount of the fixed deposit remained unpaid as of December 31, 2009. The said overdue time deposit has no material impact on the capital usage and operations of our Company. We had presented the gross outstanding balance in other receivables and full provision had been made for impairment in prior years. Except for such overdue time deposit, we have no other overdue time deposit that has not been repaid. We have not encountered any difficulty in withdrawing deposits. We have placed most of our deposits with commercial banks in the PRC.
In order to satisfy our operational needs, to supplement our working capital and to improve our debt structure, our Company issued RMB 3.5 billion 4.79% fixed rate notes due 2014, or the Notes, on December 16, 2009. The Notes were issued at face value and bear fixed interest at 4.79% per annum. As of December 31, 2009,2012, we had unsecured notes payable of RMB 3,465.83,485.5 million in connection with our issuance of the Notes. See Exhibit 4.3 to this annual report for the material terms of the Notes. As of December 31, 2009,2012, we had approximately RMB 1.5 billion in unutilizeddid not have any banking facilities.
Cash Flow
Our net cash and cash equivalents in 2009as of December 31, 2012 decreased by approximately RMB 445.3691.7 million from 2008. December 31, 2011.
The following table below sets forth certain items in our consolidated cash flow statements for 20082010, 2011 and 2009,2012, and the percentage change in these items from 20082011 to 2009.
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Year ended December 31, | Change in 2012 from 2011 | |||||||||||||||
2010 | 2011 | 2012 | ||||||||||||||
(RMB thousands) | ||||||||||||||||
Net cash generated from operating activities | 3,331,458 | 3,329,058 | 2,177,673 | (34.6 | %) | |||||||||||
Net cash used in investing activities | (1,188,763 | ) | (3,983,623 | ) | (2,160,895 | ) | (45.8 | %) | ||||||||
Net cash used in financing activities | (599,288 | ) | (637,736 | ) | (708,522 | ) | 11.1 | % | ||||||||
Net increase/(decrease) in cash and cash equivalents | 1,543,407 | (1,292,301 | ) | (691,744 | ) | (46.5 | %) |
Year ended December 31, | Change in 2009 | |||||||||||
2008 | 2009 | from 2008 | ||||||||||
(RMB thousands) | ||||||||||||
Net cash generated from operating activities | 1,641,069 | 2,617,533 | 59.5 | % | ||||||||
Net cash used in investing activities | (2,915,785 | ) | (2,096,154 | ) | (28.1 | %) | ||||||
Net cash (used in)/generated from financing activities | 483,317 | (966,680 | ) | (300.0 | %) | |||||||
Net decrease in cash and cash equivalents | (791,399 | ) | (445,301 | ) | 43.7 | % |
In 2012, our net cash used in 2009,investment activities decreased to RMB 2,160.9 million from RMB 3,983.6 million, representing an increasea decrease of RMB 976.51,822.7 million, mainly due to an increase in capital expenditures.
In 2012, our operating profit.
In 2009,2011, our net cash used in investment activities increased from RMB 1,188.8 million in 2010 to RMB 3,983.6 million, representing an increase of RMB 2,794.8 million, mainly due to the increase in time deposit of more than three months during the year. In 2011, our net cash used in financing activities increased from RMB 599.3 million in 2010 to RMB 637.7 million, representing an increase of RMB 38.4 million, because although our payments for management fee relating to the bonds payable decreased by 32.4 million, we had an increase of 70.9 million in the distribution of cash dividend to the shareholders in 2011.
In 2010, our net cash used in investment activities decreased from RMB 2,915.82,096.2 million in 20082009 to RMB 2,0961,188.8 million, representing a decrease of RMB 820907.4 million, mainly due to the decrease in expenses in connection withpayments relating to the purchase of CRHs and the construction of certain fixed assets and construction-in-progress relating to the Fourth Rail Line.
Our working capital was mainly used for capital expenditures, operating expenses and payment of taxes and dividends and temporary cash investments. In 2009,2012, our expenses for the purchase of fixed assets and payments for construction-in-progress totalled RMB 1.639.71,836.2 million. In addition, we paid RMB 270.6529.7 million for income taxes and approximately RMB 566.7708.4 million for dividends.
We believe we have sufficient financial resources to meet our operational and development requirements in 2010.
We do not generally conduct our own research and development with respect to major capital projects. In the past, in connection with our high-speed train and electrification projects, our predecessor relied upon the engineering and technical services of various research and design institutes under the MOR. In recent years, we conducted limited research and development activities in connection with the implementation of automated ticket sales,ticketing, including the development of related computer software.
We do not anticipate a significant need for research and development services in the foreseeable future, and do not expect to require any such services in connection with our other businesses. To the extent that these services are needed, we expect to engage outside service providers to satisfy this need. In connection with major engineering and construction projects, as well as major equipment acquisitions, we intend to conduct technical research and feasibility
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.
The Pearl River Delta has been one of China’s fastest growing economic regions. We believe that various factors, including the increasing economic cooperation within the Pearl River Delta region and its adjacent areas, the “Relaxed Individual Travel” program, the improvement of the subway system in Shenzhen and Guangzhou, will continue to increase passenger travel and freight transportation within our service region. We expect the PRC government’s current economic, import and export, foreign investment and infrastructure policies to generate additional demand for transportation services in our service areas. These policies and measures may have both positive and negative effects on our business development. They are expected to promote economic growth and create new demand for our transportation services.
At the same time, however, with the improvement of highway and waterway transportation facilities, we anticipate additional competition. In addition, the economic measures PRC government implemented to manage its economy may have ancontinue to impact on our business and results of operations in 2010.2013. In addition, any change of the benchmark interest rates set by the PRC government and the implementation of other applicable policies may have an impact on our business and results of operations in 2010.
While the PRC government is in the progress of lessening restrictions on foreign investment, the opening up of domestic railway transportation will be gradual and we expect competition from foreign and domestic railway to be limited in the short term. However, China’s entry into the WTO may increase other Chinese coastal cities’ significance in trading. As a result, part of the freight currently transferred through ports in Hong Kong and Shenzhen may be diverted to other ports in the PRC, which could adversely affect our freight transportation business. In addition, as the PRC government lifts control over foreign investments, including allowing foreign participation in railway construction, our railway monopolycompetitive position in our service region may be challenged by foreign strategic investment. We believe thatFurthermore, the operation of the Guangzhou-Shenzhen-Hong Kong passenger line, which commenced on December 26, 2011, may further increase the competition we are prepared for the challenges as well as the opportunities that have arisen or will arise with China’s accession to the WTO.
In addition, the recent global financial crisis and economic downturn since 2008 had adversely affected economies and businesses around the world, including in China. Due to the global economic downturn, the economic situation in China was severe in the second half of 2008. This change in the macro-economic conditions had an adverse impact on our business and operations by causing a decrease in the number of passengers and the volume of freight that we transported in 2009. Although the economy in China, as well as in many other places around the world, has recovered since the second half of 2009, the global financialsustainability of these recoveries is uncertain due to escalating concerns regarding Europe’s sovereign debt crisis, the stability of the Eurozone and economic downturn may continue to havesustainability of high rates of growth in China.
Looking into 2013, China remains in a material and adverse effect on our businesses, resultsstrategic opportunity phase for its development. Under the background of operations and financial condition.
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There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
The following table sets forth our contractual obligations, capital commitments and operating lease commitments as of December 31, 20092012 for the periods indicated.
Payment due by period | ||||||||||||||||||||
(RMB thousands) | ||||||||||||||||||||
Less than 1 | ||||||||||||||||||||
Contractual Obligations | Total | year | 1-3 year | 3-5 year | More than 5 years | |||||||||||||||
Long-Term Debt Obligations | 4,331,942 | 167,650 | 335,300 | 3,828,992 | — | |||||||||||||||
Capital Expenditure Obligation | 248,630 | 236,898 | 11,732 | — | — | |||||||||||||||
Operating Lease Obligations(1) | 1,258,000 | 74,000 | 148,000 | 148,000 | 888,000 | |||||||||||||||
Other Long-Term Liabilities Reflected on the Company’s Balance Sheet under IFRS | 231,939 | 57,172 | 101,650 | 70,342 | 2,775 | |||||||||||||||
Total | 6,070,511 | 535,720 | 596,682 | 4,047,334 | 890,775 |
Payment due by period | ||||||||||||||||||||
(RMB thousands) | ||||||||||||||||||||
Contractual Obligations | Total | Less than 1 year | 1-3 year | 3-5 year | More than 5 years | |||||||||||||||
Long-Term Debt Obligations (including interests)(1) | 3,828,410 | 167,650 | 3,660,760 | — | — | |||||||||||||||
Capital Expenditure Obligation(2) | 176,038 | 176,038 | — | — | — | |||||||||||||||
Operating Lease Obligations(3) | 1,036,000 | 74,000 | 148,000 | 148,000 | 666,000 | |||||||||||||||
Other Long-Term Liabilities reflected on the Company’s balance Sheet under IFRS(4) | 246,617 | 125,106 | 120,890 | 621 | — | |||||||||||||||
Total | 5,287,065 | 542,794 | 3,929,650 | 148,621 | 666,000 |
(1) |
(2) | See Note 36(a) to our audited consolidated financial statements, “Capital Commitments”. |
(3) | See Note 36(b) to our audited consolidated financial statements, “Operating Lease Commitments”. |
(4) | See Note 25 to our audited consolidated financial statements, “Employee Benefits Obligations”. |
Based on the current progress of our new projects, we estimate that our capital expenditures for 20102013 will amount to approximately RMB 2.01.87 billion, which consists primarily of the following projects:
improvements in the infrastructure of the Beijing-Guangzhou line;
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upgrades to stations and freight yards;
Safe Harbor
See “Forward-Looking Statements.”
Directors
Our board of directors is composed of six non-independent directors and three independent directors. Except for Mr. Xu Xiaoming, Mr. Guo Zhuxue, Mr. Li Liang, Mr. Luo QingWenxin and Mr. Shen Yi,Sun Jing, all the other currentof our directors were elected or re-elected at our annual shareholders’ general meeting held on June 26, 20082, 2011 by cumulative voting. Mr. Xu Xiaoming and Mr. Guo Zhuxue wereLi Wenxin was elected as directors at our annual shareholders’ general meeting held on June 22, 2010. Mr. Li Liang and Mr. Luo Qing were elected as directors at our annual shareholders’ general meeting held on June 25, 2009 and Mr. Shen Yi was elected asa director at our shareholders’ extraordinary general meeting held on December 4, 2008.November 10, 2011 and then the Chairman of the Board of Directors at a Board meeting on January 31, 2012. Mr. Sun Jing was elected as a director at our annual shareholders’ general meeting on May 22, 2012. The business address of each of our directors is No. 1052 Heping Road, Shenzhen, People’s Republic of China 518010.
The table below sets forth the information relating to our directors as of June 22, 2010:
Date First Elected or | ||||||||||
Name | Age | Position | Appointed | |||||||
Xu Xiaoming | 55 | Chairman of the Board of Directors | 2010 | |||||||
Guo Zhuxue | 43 | Director | 2010 | |||||||
Shen Yi | 55 | Director and General Manager | 2008 | |||||||
Li Liang | 50 | Director | 2009 | |||||||
Yu Zhiming | 51 | Director | 2008 | |||||||
Luo Qing | 45 | Director | 2009 | |||||||
Dai Qilin | 42 | Independent Director | 2008 | |||||||
Wilton Chau Chi Wai | 48 | Independent Director | 2004 | |||||||
Lv Yuhui | 55 | Independent Director | 2008 |
Name | Age | Position | Date First Elected or Appointed | |||||||
Li Wenxin | 49 | Chairman of the Board of Directors | 2011 | |||||||
Shen Yi | 57 | Director and General Manager | 2008 | |||||||
Sun Jing | 47 | Director | 2012 | |||||||
Yu Zhiming | 54 | Director | 2008 | |||||||
Li Liang | 52 | Director | 2009 | |||||||
Luo Qing | 48 | Director | 2009 | |||||||
Lo Mun Lam | 59 | Independent Director | 2011 | |||||||
Liu Xueheng | 39 | Independent Director | 2011 | |||||||
Liu Feiming | 43 | Independent Director | 2011 |
Li Wenxin, aged 49, joined our Company in June 2010November 2011 and is the Chairman of the Board and a Director of our Board of Directors. Mr. Xu holds a bachelor’s degree andCompany. He is a postgraduate with a master degree, a senior engineer. Mr. Xu started working inengineer and an associate researcher. He has worked at the railway industry in 1973 and has more than 35 years’ experience in transportation management. Prior to joining our Company, Mr. Xu has served various senior management positions with ZhengzhouScience Research Institute of the Ministry of Railways, Guangzhou Railway Bureau, GRGC, Qingzang Railway Company, transportation command center of the MOR, and the TransportTransportation Bureau of the MOR. ImmediatelyMOR before joining our Company, Mr. Xu worked2007. From January 2007 to August 2009, he served as the Chief Dispatch Officersecretary of party committee and deputy dean of Railway Science Research Institute. He served as chief of diversified operation development center of MOR from September 2009 to May 2011. From June 2011 to November 2011, he has served as deputy chairman of the MOR. In May 2010, Mr. Xu was appointedboard of directors, general manager and deputy secretary of party committee of GRGC. Since December 2011, he has served as Chairman of GRGC.
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Shen Yi, age 55,aged 57, joined our Company in October 2008 and is a Director and the General Managergeneral manager of our Company. Mr. Shen graduated from the Northern Jiaotong University (currently known as(now, Beijing Jiaotong University) withand holds a bachelor’s degree in Transportation.railway transportation. Mr. Shen has overmore than 30 years of experience in railway transportation management in China.and has served at different railway stations and sections, Railway Sub-bureaus and Railway Bureaus. He previously was the general manager of Hong Kong Qiwen Trade Company Limited, Guangmeishan Railway Company Limited and Huaihua Railway Company.Company of GRGC successively. Before joining our Company in October 2008, he was the general manager of Shichang Railway Company Limited.
Sun Jing, aged 47, joined our Company in May 2012 and is a director of our Company. He is a graduate with a bachelor degree, an engineering master degree holder and also a senior engineer. Before June 2004, Mr. Sun has successively worked at the northern locomotive section of Zhengzhou Sub-bureau of Zhengzhou Railway Bureau, locomotive department of Zhengzhou Railway Bureau and Yueshan locomotive section of Zhengzhou Sub-bureau of Zhengzhou Railway Bureau. From June 2004 to March 2007, he has served as division chief of locomotive department of Zhengzhou Railway Bureau. He was an assistant to the director of Zhengzhou Railway Bureau from April 2007. He has been served as deputy general manager of GRGC since May 2007. Mr. Sun is now a director of Guangzhou Electric Locomotive Co., Ltd.
Yu Zhiming, aged 54, joined our Company in June 2008 and is now a director of our Company. Mr. Yu is a graduate with a bachelor degree, obtained a master degree of engineering and is a senior accountant. He has many years of experience in the financial field. Before April 2008, he has successively served as director of the Sub-division of Finance of Wuhan Railway Sub-bureau of Zhengzhou Railway Bureau, the director of the finance department of Wuhan Railway Bureau, director of capital settlement center of Wuhan Railway Bureau, and the standing vice-director of capital settlement center of MOR. Since April 2008, he has been chief accountant of GRGC. Currently, Mr. Yu is also the chairman of the board of China Railway (HK) Holdings Ltd, chairman of the supervisory committee of Yuehai Railway Company Limited, Guangdong Guangzhou–Zhuhai Inter-city Railway Traffic Co., Ltd. and MaoZhan Railway Company Limited. Mr. Yu is the director of Guangmeishan Railway Company Limited, Sanmao Railway Company Limited, Shichang Railway Company Limited, Hukun Passenger Railway Line (Hunan) Co., Ltd., Guangdong Pearl River Delta Inter-city Railway Traffic Co., Ltd., Hainan Eastern Ring Railway Company Limited, Ganshao Railway Company Limited, China Railway Container Transportation Limited and China Railway Special Goods Transportation Limited and a supervisor of Guangzhou–Zhuhai Railway Company Limited.
Li Liang, age 50,aged 52, joined our Company in June 2009 and is a Directordirector of our Company. He is a graduate of university graduatespecialty education and is an engineer. Mr. Li previously served in various positions including headBefore December 2006, he has been section chief of Anyang Engineering Sectionengineering section and Xinxiang Engineering Sectionengineering section of Xinxiang Railway Sub-bureau of Zhengzhou Railway Bureau, deputy headdeputy-director of Zhengzhou Sub-bureau and WuhanRailway Sub-bureau of Zhengzhou Railway Bureau, and deputy headdeputy-director of Wuhan Railway Sub-bureau of Zhengzhou Railway Bureau, deputy-director of Wuhan Railway Bureau. He has been an executivestanding deputy general manager of GRGC sincefrom December 2006.
Luo Qing, aged 48, joined our Company in JuneDecember 2008 and is a Director of our Company. He has a university qualification and a master’s degree in Engineering. He is a senior accountant with numerous years of experience in finance. He was the director of the finance sub-division of Wuhan Railway Sub-bureau of Zhengzhou Railway Bureau. From 2005 to 2006, he was the director of the finance division and capital settlement center of Wuhan Railway Bureau. He was a standing vice director of the capital settlement center of the MOR from September 2006 to April 2008. Mr. Yu has been the chief accountant of GRGC since April 2008.
Lo Mun Lam, aged 59, joined our Company in June 20082011 and is an independent non-executive Directordirector of our Company. Mr. Dai holds a master’s degree in Accounting. Mr. Dai is a senior accountantLo graduated from University of Wisconsin-Madison and is qualified to practice as a PRC certified public accountant and a PRC certified public appraiser. Mr. Dai has served in various professional positions in the finance department of the MOR from 1986 to 1997. Mr. Dai is currently the managing director of Beijing Zhongluhua Certified Public Accountants Limited and also a supervisor of Beijing Zhongluhuafeng Project Consultancy Co., Ltd. Prior to his joining Beijing Zhongluhua Certified Public Accountants in April 2001, he was an accountant, senior accountant and deputy head of Beijing Huafeng Certified Public Accountants Limited from 1997 to 2001.
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Liu Xueheng, aged 39, joined our Company in June 20082011 and is an independent non-executive Directordirector of our Company. Mr. Lv holds a postgraduateLiu obtained an MBA degree from Cambridge University in the Department of Finance and Trading of the Chinese Academy of Social Science.UK in 1999. Mr. Lv isLiu has served as a senior accountant. Mr. Lv is currently the deputy generalassistant manager of DBS Bank, Hong Kong since 2000, an executive director of Partners Capital International Limited since 2002, an executive director of Vision Finance Group Limited since June 2006 and chief accountantan executive director of Beijing Jingtie North Investment ManagementProperties (Holdings) Limited since January 2011 which is listed in Hong Kong.
Liu Feiming, aged 43, joined our Company chief financial officerin June 2011 and deputy generalis an independent director of our Company. Ms. Liu graduated from Hefei Industrial University in 1989, majoring in management engineering. Ms. Liu obtained a master’s degree in economics from Nankai University in July 1997 and a doctor’s degree in international economics from Nankai University in July 2007. From August 1989 to February 1994, she worked in the business administrative office of Anhui Huainan Chemistry Industrial Company. She served as finance manager of Hengxing Electronic Science (Shenzhen) Co., Ltd. since March 1994, finance manager of China Railway Joint Logistics CompanyMotion Telecom Group Limited since May 1996 and vice president of China Motion Telecom International Limited since October 2002. She has been a director and finance president of Inner Mongolia China Railway Tailida Joint LogisticsShangkai Group (Shenzhen) Limited Company Limited. Mr. Lv also served as general manager of Beijing Railway International Travel Agency Company Limited, as chief accountant of Beijing Jingtie International Travel Agency Company Limited and as chief accountant of Huayun Travel Investment (Group) Company Limited.
Supervisors
The table below sets forth the information relating to our supervisors as of June 22, 2010:
Date First Elected | ||||||||||
Name | Age | Position | or Appointed | |||||||
Xu Ling | 54 | Chairman of the supervisory committee | 2010 | |||||||
Chen Shaohong | 43 | Supervisor | 2008 | |||||||
Wang Jianping | 53 | Supervisor | 2008 | |||||||
Li Zhiming | 49 | Supervisor | 2005 | |||||||
Xu Huiliang | 47 | Supervisor | 2010 | |||||||
Liu Xilin | 54 | Supervisor | 2008 |
Name | Age | Position | Date First Elected or Appointed | |||||
Xu Ling | 57 | Chairman of the supervisory committee | 2010 | |||||
Chen Shaohong | 46 | Supervisor | 2008 | |||||
Shen Jiancong | 44 | Supervisor | 2011 | |||||
Li Zhiming | 51 | Supervisor | 2005 | |||||
Xu Huiliang | 49 | Supervisor | 2010 | |||||
Chen Jianping | 46 | Supervisor | 2011 |
Xu Ling, age 54,aged 57, joined our Company in June 2010 and is the Chairman of the Supervisory Committee of our Company. He graduated with a bachelor degree and is a senior political engineer. Mr. Xu holds a bachelor’s degree. Mr. Xu started his career inLing joined the railway industry in 1977 and has more than 30 years’years of experience in railway transportation management. He previously held various managerial positions withserved as the vice-secretary of the Party Committee of Guangzhou Railway Bureau, general party branch secretary of Guangzhou Railway Material Factory of Guangzhou Railway Bureau, chairman of the Trade Union of departments directly under GRGC, vice secretary of the Disciplinary Committee and head of the Supervisory Department of GRGC. Mr. Xu served as the secretary of the party committee in the Huaihua Railway Company of GRGC and the director and secretary of the Party Work Committee in the Huaihua Railway Company.Office of GRGC; director and secretary of the Party Work Committee in the Changsha Railway Office of GRGC. Since March 2010, he has been serving as the vice-secretary of the Party Committee and the secretary of the disciplinary committee of GRGC. Mr. Xu has been a memberalso serves as the Chairman of supervisory committee of Guangmeishan Railway Company Limited and Guangdong Sanmao Railway Company Limited and also the senior managementsupervisor of GRGC since March 2010.
Chen Shaohong, age 43,aged 46, joined our Company in June 2008 and is a Supervisorsupervisor representing shareholders of our Company. Mr. Chen graduated from South China Normal Universityholds a bachelor degree and is an economist. From 2001,Mr. Chen has been engaged in the research and practice of enterprise management for a long time. Before April 2006, he was a deputyhas been vice-section chief and alsosection chief of the structuralmechanism reform divisionsection of the corporate
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Shen Jiancong, aged 44, joined our Company in June 20082011 and is a Supervisor representing shareholders of our Company. He is a graduate with a bachelor degree and an economist. Before March 2011, Mr. Wang graduated fromShen has worked as secretary of Chinese Youth League of the Guangzhou mechanical refrigerator car depot of Guangzhou Sub-bureau of Guangzhou Railway Bureau, deputy director and director of division of personnel of GRGC, deputy director of Division of Human Resources of GRGC, concurrently as deputy director of organization department of Party SchoolCommittee of GRGC, and secretary of CPC majoring in Economicscommittee and Management. In 1974, Mr. Wang joined the railway departmentsvice stationmaster of Shenzhen station of our Company. He has been director of division of human resources and served in various managerial positions indirector of organization department of party committee of GRGC since then. Since June 2007, Mr. Wang has been the director of the human resources department of GRGC.
Li Zhiming, age 49,aged 51, joined our Company in May 2005 and is a Supervisor representing shareholders of our Company. Mr. Li graduated from the Party School of CPC, is a bachelor majoring in Economicseconomics and Managementmanagement and is an accountant. Since 1981,Before 1996, Mr. Li hashad served in various managerial positions in Hengyang Railway Sub-administrationSub-bureau of Guangzhou Railway Bureau and Changsha Railway Company.Company of GRGC. From 1996 to March 2005, he served as thewas chief of the finance sub-divisionFinance Sub-division of Changsha Railway Company.Company of GRGC. Since April 2005, Mr. Li has been the headdeputy chief and chief of the audit department of GRGC.
Xu Huiliang, age 47,aged 49, joined our Company in 1992 and is a Supervisor representing employees of our Company. Mr. HuangXu graduated from the Southwest Jiaotong University, majoring in Computer Scienceelectronic computer technology, and Technology. Mr. Xuis a graduate with a bachelor degree and holds a master’smaster degree in engineering and is a senior engineer. Mr. Xu has extensive experience in workingbeen engaged in the railway-relatedrailway information and technology industry and has developed and completed numerousvarious computer engineering projects. Mr. Xu was namedentitled to enjoy special subsidies awarded by the State Council in 2001. Since March 2009, he served as the “Expert entitled to Special Allowance from the State Council” in 2001. Mr. Xu has been the chiefdirector of theinformation technology divisiondepartment of our Company since March 2009. Mr. Xuand has been elected as a Supervisor by the employee representativessupervisor representing employees of our Company sincefrom June 2010.
Chen Jianping, aged 46, joined our Company in January 2007 and is a Supervisor representing employees of our Company. Mr. Liu graduated fromChen worked with the PartyFirst High School of the CPCGuangzhou Railway and majored in EconomicsLocomotive Sports Association of GRGC and Management. He hasis working with GRGC and our Company. Mr. Chen served as the deputy station masteroffice secretary of Dalang,the trade union of GRGC, director of Enterprise Management Officethe logistic department of Yangcheng Railwayour Company, deputy secretary of the party committee and section headconcurrently the secretary of Guangzhou North Rolling Stock Section. Mr. Liucommittee for disciplinary inspection of the passenger transportation business unit of our Company, deputy office manager of our Company, chairman of the trade union of the mechanized line center of GRGC. From 2007 to October 2012, he has served as the section headchief of Guangzhou Rolling Stock SectionPassenger Transportation Division, and since January 2007 andNovember 2012, he has been elected asthe general manager of diversified operation and development center, deputy secretary of the party committee and director of various operation and management offices of GRGC. Since June 2011, he has been a Supervisor by the employee representativesrepresenting employees of our Company since April 2008.
Senior Management
The table below sets forth information relating to our senior management as of June 22, 2010:
Name | Age | Position | Date First Elected or Appointed | |||
Shen Yi | 55 | General Manager | 2008 | |||
Mu Anyun | 50 | Deputy General Manager | 2009 | |||
Tang Xiangdong | 41 | Chief Accountant | 2008 | |||
Guo Xiangdong | 44 | Company Secretary | 2004 |
Name | Age | Position | Date First Elected or Appointed | |||||||
Shen Yi | 57 | General Manager | 2008 | |||||||
Mu Anyun | 52 | Deputy General Manager | 2009 | |||||||
Guo Xiangdong | 47 | Deputy General Manager and Company Secretary | 2004 | |||||||
Tang Xiangdong | 44 | Chief Accountant | 2008 |
Shen Yi is our Director and General Manager.
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Guo Xiangdong, aged 47, joined our Company in 1991 and is the Deputy General Manager and secretary of our Company.
Tang Xiangdong, age 41,aged 44, joined our Company in June 1990 and is Chief Accountant of our Company. Mr. Tang obtained a master’s degree in Business Managementgraduated from Jinan University majoring in business administration and is a graduate with a bachelor degree and holds an MBA degree, and is a senior accountant. In June 1990, Mr. Tang joined the railway departments andBefore March 2006, he has served in various managerialprofessional management positions in the laborLabor and capital department, diversified business departmentCapital Department, Diversified Business Department and capital settlement center.Revenue Settlement Center of our Company. From March 2006 to DecemberNovember 2008, he served as thewas director of the accounting department.Finance Department of our Company. Since December 2008, Mr. Tang has served asbeen the Chief Accountantchief accountant of our Company.
Additional Information
Our non-independent directors, members of our supervisory committee and senior management also serve as the directors, supervisors or senior management members in other companies as follows:
Name | Position | |
Li Wenxin | ||
Chairman of the Board, General manager and Deputy Secretary of Party Committee of: GRGC Chairman of the Board of Directors of: | ||
Guangmeishan Railway Company Limited | ||
Guangdong Sanmao Railway Co., Ltd. Yuehai Railway Company Limited | ||
Shichang Railway Company Limited | ||
Shen Yi | Director of: Guangzhou Tiecheng Industrial Company Limited | |
Sun Jing | Director of: Guangzhou Electric Locomotive Co., Ltd. Deputy General Manager of: GRGC | |
Yu Zhiming | ||
Chairman of the Board of Directors of: | ||
China Railway | ||
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(HK) Holdings Ltd Chairman of the | ||
Yuehai Railway Company Limited | ||
Guangdong Guangzhou–Zhuhai Inter-city Railway Traffic Co., Ltd. MaoZhan Railway Company Limited. Director of: Guangmeishan Railway Company Limited Guangdong Sanmao Railway Co., Ltd. Shichang Railway Company Limited Hukun Passenger Railway Line | ||
Guangdong Pearl River Delta Inter-city Railway | ||
Hainan Eastern Ring Railway Company Limited | ||
Ganshao Railway Company Limited | ||
China Railway Container Transportation Company Limited | ||
China Railway Special Goods Transportation Company Limited | ||
Supervisor of: | ||
Guangzhou–Zhuhai Railway Company | ||
Limited. Chief Accountant of: GRGC | ||
Li Liang | Standing Deputy General Manager of: Guangdong Pearl River Delta Inter-city Railway Traffic Co., Ltd. | |
Lo Mun Lam | Independent Non-executive Director of: Luk Fook Holdings (International) Limited Shanghai Zendai Property Limited Non-executive Director and Vice Chairman of: Asian Capital Resources (Holdings) Limited | |
Liu Xueheng | Executive Director of: Vision Finance Group Limited Beijing Properties (Holdings) Limited | |
Liu Feiming | Director and Finance President of: Shangkai Group (Shenzhen) Limited Company |
Name | Position | |
Xu Ling | Vice-Secretary of the Party Committee and the Secretary of the Disciplinary Committee of GRGC Chairman of Supervisory Committee of: Guangmeishan Railway Company Limited Guangdong Sanmao Railway Co., Ltd. Supervisor of: Guangzhou–Zhuhai Railway Company Limited | |
Chen Shaohong | Vice-chief Economist and Director of Corporate and Legal Affairs Department of: GRGC Chairman of Supervisory Committee of Shichang Railway Company Limited Hukun Passenger Railway Line (Hunan) Co., Ltd. Hainan Railway Economic and Technological Development Corporation Company Director of Guangmeishan Railway Company Limited Guangdong Sanmao Railway Enterprise Development Company Yuehai Railway Company Limited Xiamen- Shenzhen Railway (Guangdong) Company Limited Jingyue Railway Company Limited Supervisor of: Guangdong Sanmao Railway Co., Ltd. Hunan Inter-city Railway Company Limited Guangzhou Electric Locomotive Co., Ltd. Guangdong Pearl River Delta Inter-city Railway Traffic Co., Ltd. Hainan Eastern Ring Railway Company Limited Ganshao Railway Company Limited China Railway Express Co., Ltd. | |
Shen Jiancong | Director of Division of Human Resources and Director of Organization Department of party committee of: GRGC | |
Li Zhiming | Deputy Chief and Chief of the Audit Department of: GRGC Chairman of the | |
Guangzhou Tiecheng Enterprise Company Limited Xingguangji Trade Company Limited Director of: Hong Kong Qiwen Company Limited Hainan Railway Economic Technological Development Corporation Supervisor of: Guangmeishan Railway Company Limited | ||
Guangdong Sanmao Railway | ||
Guangdong | ||
Yuehai Railway Company Limited Shichang Railway Company Limited Hukun Passenger Railway Line (Hunan) Co., Ltd Xiamen-Shenzhen Railway (Guangdong) Company Limited Ganshao Railway Company Limited Guiyang-Guangzhou Railway Co., Ltd Nanning -Guangzhou Railway Co., Ltd Jingyue Railway Company Limited. |
Name | Position | |
Chen Jianping | General Manager of Diversified Operation and Development Center, Deputy Secretary of the Party Committee and director of various operation and management offices of GRGC Chairman of the Hainan Railway Economic Technology Development Company | |
Tang Xiangdong | ||
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Supervisor of: | ||
Guangdong Tiecheng Industrial Company Limited |
Note: | ||
Directors and Senior Management
Total remuneration of our directors, supervisors and senior management members during
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The aggregate amount of cash remuneration paid by our Company in 20092012 to all individuals who are our directors, supervisors and senior management members was approximately RMB 3.63.116 million, of which approximately RMB 3.21.457 million was paid to our non-independent directors and supervisors and approximately RMB 0.40.386 million was paid to the independent non-executive directors.
Interests of Our Directors, Supervisors and Other Senior Management in Our Share Capital
As of December 31, 2009,2012, there was no record of interests or short positions (including the interests or short positions which were taken or deemed to have under the provisions of the Hong Kong Securities and Futures Ordinance) held by our directors or supervisors in our shares, debentures or other securities, or securities of any of our associated corporation (within the meaning of the Hong Kong Securities and Futures Ordinance) in the register required to be kept under section 352 of the Hong Kong Securities and Futures Ordinance. We had not received notification of such interests or short positions from any of our directors or supervisors as required to be made to us and the HKSE pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in Appendix 10 to the HKSE Listing Rules. We have not granted any of our directors or supervisors, or any of their respective spouses or children under the age of 18, any right to subscribe for any of our shares or debentures.
Service Contracts of Our Directors and Supervisors
Each of our directors and supervisors has entered into a service agreement with us. Except as disclosed, no other service contract has been entered into between any of our subsidiaries or us on one hand, and any of our directors or supervisors on the others, that cannot be terminated by us within one year without payment of compensation (other than statutory compensation).
Contracts Entered into by Our Directors and Supervisors
None of our directors or supervisors had any direct or indirect material interests in any contract of significance subsisting during the year ended on December 31, 20092012 or atas of December 31, 20092012 to which we or any of our subsidiaries was a party.
Remuneration of Our Directors and Supervisors
The level of remuneration of our directors and supervisors was determined by reference to various factors, including the prevailing rates of remuneration in Shenzhen, where we are located, and the job nature of each of our directors and supervisors. The remuneration and
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Board of Directors
In accordance with our currently effective Articles of Association, our board of directors comprises nine directors, one of whom is the chairman. Directors are appointed at our shareholders’ general meeting through voting, and serve for a term of three years. Upon the expiration of the term of their office, they can serve consecutive terms if re-appointed at the next shareholders’ general meeting. The service contracts that we have entered into with our directors do not provide for any payment of compensation upon termination.
Supervisory Committee
We have a supervisory committee consisting of five to seven supervisors. Supervisors serve a term of three years.years . Upon the expiration of their terms of office, they may be re-appointed to serve consecutive terms. The supervisory committee is presided over by a chairman who may be elected or removed with the consent of two-thirds or more of the members of the supervisory committee. The term of office of the chairman is three years, renewable upon re-election. Our supervisory committee currently consists of four representatives of the shareholders who may be elected or removed by our shareholders’ general meeting, and two representatives of our employees who may be elected by our employees at the employees’ congress or employees’ general meeting or through any other democratic means. Members of our supervisory committee may also attend meetings of the board of directors. The current members of our supervisory committee are: Xu Ling, Wang Jianping, Chen Shaohong, Li Zhiming, Shen Jiancong, Xu Huiliang and Liu Xilin. Mr. Xu Ling was elected as a Supervisor of our Company as a shareholder representative at our annual shareholders’ general meeting held on June 22, 2010. The other threeChen Jianping. All shareholder representatives of our supervisory committee were elected or re-elected at the annual shareholders’ general meeting held on June 26, 2008.2, 2011. Mr. Liu XilinXu Huiliang and Mr. Xu HuiliangChen Jianping were elected as the Supervisors of our Company as employee representatives at the employees’ congress held in April 20082010 and June 2010,2011, respectively. The term of these supervisors is 3 years. Our supervisory committee held four meetings during the year ended December 31, 2009,2012, at which resolutions concerning identified key issuesour periodic reports, internal control evaluations and our dividend policy were passed and notified to our board of directors.ratified. Our supervisors attended shareholders’ general meetings, meetings of our board of directors and other important meetings concerning our operation during the year ended December 31, 2009.2012. Our supervisory committee reviews the report of our directors, the financial report and proposed profit distribution presented by our board of directors at our annual general meeting of shareholders.
Supervisors attend board meetings as non-voting members. The supervisory committee is accountable to the shareholders’ general meeting and has the following duties and responsibilities:
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to examine the Company’s financial situation;
to supervise the performance of duties of the directors, general manager, deputy general managers and other senior management; to propose the dismissal of directors, general manager, deputy general managers and other senior management who have violated any law, administrative regulations, the Articles of Association or resolutions of the shareholders’ general meetings;
to demand a director, general manager, deputy general manager or any other senior management to rectify such breach when the acts of such persons are harmful to the Company’s interest;
to propose the convening of shareholders’ general meetings, and to convene and chair the shareholders’ general meetings if the board of directors fails to perform this duty as stipulated in the Articles of Association;
to propose motions to shareholders’ general meetings; and
to initiate legal proceedings against any director, general manager, deputy general manager and other senior management in accordance with Article 152 of the Company Law.
Supervisors may attend meetings of the board of directors and question or give advice on the resolutions of the board of directors.
The supervisory committee may conduct investigation if they find the operation of the Company unusual and may engage professionals such as lawyers, certified public accountants or practicing auditors to assist if necessary. All reasonable fees so incurred shall be borne by the Company.
Audit Committee
We have an audit committee consisting of three independent non-executive directors. The current members of our audit committee, appointed by the Board of Directors, are: Mr. Dai QilinLo Mun Lam (Chairman), Dr. Wilton Chau Chi WaiMr. Liu Xueheng and Ms. Liu Feiming. Mr. Lv Yuhui.Lu, Mr. Dai, Dr. ChauLiu and Mr. LvMs. Liu are “independent directors” of our Company as defined in Section 303A.02 of the New York Stock Exchange’s Listed Company Manual. The audit committee must convene at least four meetings each year, and may invite the executive directors, persons in charge of the financial and audit departments and our independent auditors to participate. The audit committee must have at least two meetings with management and at least two meetings with the auditors each year without any executive directors present. The duties of the audit committee include:
reviewing the annual financial statements and interim financial statements of the Company, including the disclosures made by the Company in this annual report;
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reviewing the financial reports and the reports of the Company prepared by the independent auditor and its supporting documents, including the review of the internal control and disclosure controls and procedures, and to discuss with the auditor the annual audit plan and solutions to problems in the previous year;
reviewing and approving the selection of and remuneration paid to the independent auditor;
pursuant to the resolutions of the annual general meeting, determining with the Board of Directors the annual auditing fees paid to our independent auditor;
reviewing with the management and the independent auditor the performance, adequacy and effectiveness of the internal controls and risk management, as well as any material deficiencies and weakness existing in the internal controls;
evaluating the Company’s performance in complying with industrial practices, market rules, and statutory duties, and the safeguarding of its own interests and the interests of its shareholders;
considering and determining whether any senior executive officer or senior financial personnel is in violation of their code of conduct, and the consequences for such a violation; and
overseeing the management of the retirement pension fund of the Company.
Remuneration Committee
We have a remuneration committee consisting of two executive Directors and three independent non-executive Directors, namely, Mr. Xu XiaomingLo Mun Lam (Chairman), Mr. Li Wenxin, Mr. Shen Yi, Mr. Dai Qilin, Dr. Wilton Chau Chi WaiLiu Xueheng and Mr. Lv Yuhui.Ms. Liu Feiming. The remuneration committee will meet from time to time when required to consider remuneration-related matters of the Company.
The principal duties of the remuneration committee include reviewing and making recommendations to the Board for the remuneration packages for the Directors and the Supervisors of our Company. The remuneration policy of our Company seeks to provide, in the context of our business strategy, reasonable remuneration to attract and retain high caliber executives. The remuneration committee obtains benchmark information from internal and external sources in relation to market conditions, packages offered in the industry and the overall performance of our Company when determining the Directors’ and the Supervisors’ emoluments.
As of December 31, 2007, 20082010, 2011 and 2009,2012, we had approximately 33,000, 33,779,32,179, 33,379 and 33, 17034,573 employees, respectively. The increase in the number of our employees in 2012 was due to an increase in passenger transportation personnel. The following chart sets forth the number of our employees by function as of December 31, 2009:
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Function | Employees | |||
Transportation personnel(1) | 14,583 | |||
Mechanical personnel(2) | 4,302 | |||
Power and water supply personnel | ||||
Vehicle personnel | ||||
Maintenance personnel | ||||
Signal service personnel | ||||
Construction and apartment personnel | ||||
Diversified businesses and other supporting personnel | ||||
Technical and administrative personnel | ||||
Other personnel | ||||
Total |
(1) | ||
(2) | Mechanical personnel mean those people responsible for |
(3) | Power and water supply personnel mean those people responsible for contact network operation and overhaul as well as power and water consumption maintenance. |
(4) | Vehicle personnel mean those people responsible for vehicle operation and overhaul. |
(5) | Maintenance personnel mean those people responsible for station track and railroad switch maintenance. |
(7) | Construction and apartment personnel mean those people responsible for construction, apartments and dining halls. |
(8) | Diversified businesses and other supporting personnel mean all personnel involved in diversified businesses. |
(9) | Technical and administrative personnel mean all managerial personnel other than the personnel of diversified businesses. |
(10) | Other personnel include all personnel who have been sick, studying or early-retired. |
All of our employees are located in Guangzhou, Shenzhen, Pingshi and the area adjacent to our Shenzhen-Guangzhou-Pingshi line. The number of our employees decreased by 609 in 2009, mainly due to the decrease in the number of the trains operated by us and natural attrition.
We have established a trade union to protect employees’ rights, assist in the fulfillment of their economic objectives, encourage employee participation in management decisions and assist in mediating disputes between the management and union members. Each of our train stations and railway units has a separate branch of the trade union. Most of our employees belong to the trade union. We have not experienced any strikes or other labor disturbances that have interfered with our operations in the past, and we believe that our relations with our employees are good.
We have implemented a salary policy which links our employees’ salaries with results of operations, labor efficiency and individual performance. Employees’ salaries distribution is subject to our overall operational results and is based on their performance records and reviews. In addition, pursuant to applicable government policies and regulations, we set aside statutory funds for our employees and also maintain various insurance policies for the benefits of our employees, including housing fund, retirement insurance, supplemental retirement insurance, basic and supplemental medical insurance, pregnancy-related medical insurance and other welfare programs. In 2009,2012, we paid approximately RMB 2,634.93,974.9 million in aggregate salaries and benefits to our employees.
In addition, pursuant to an early retirement scheme implemented by our Company, certain employees who meet certain specified criteria were provided with the option to retire early and enjoy certain early retirement benefits, such as payments of the basic salary and other
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Details of our statutory welfare fund and retirement benefits are set out in Notes 25 and 2928 to our audited consolidated financial statements included elsewhere in this annual report.
As of June 11, 2010,April 19, 2013, none of our directors, supervisors or senior management owned any interest in any shares or options to purchase our shares.
We are a joint stock company organized under the laws of the PRC in March 1996. Before the A Share Offering, GRGC, a state-owned enterprise under the administration of the MOR, owned approximately 66.99% of our outstanding ordinary shares. Although the equity interest held by GRGC decreased to approximately 41% after the completion of our initial public offering of A shares in December 2006 and further reduced to 37.1% as a result of the transfer by GRGC of a portion of its shares to the National Social Security Fund Council in September 2009, GRGC can still exercise substantial influence over our Company. In addition, GRGC also acts as an administrative agent of the MOR that controls and coordinates railway operations in Guangdong Province, Hunan Province and Hainan Province. As an instrumentality of the MOR, GRGC performs direct regulatory oversight functions with respect to us, including determining and enforcing technical standards and implementing special transportation directives.
Shareholding Structure of our Company
Set out below is the current shareholding structure of our Company as of June 11, 2010:
Types | Shareholding | |||||||||||
Name of Shareholders | of Shares | Number of Shares Held | Percentage % | |||||||||
Public Shareholders of H shares (including ADSs) | H shares | 1,431,300,000 | 20.2 | |||||||||
Guangzhou Railway (Group) Company | A shares | 2,629,451,300 | 37.1 | |||||||||
National Social Security Fund Council(1) | A shares | 274,798,700 | 3.9 | |||||||||
Other Public Shareholders of A shares | A shares | 2,747,987,000 | 38.8 | |||||||||
Total | 7,083,537,000 | 100.0 |
Name of Shareholders | Types of Shares | Number of Shares Held | Shareholding Percentage % | |||||||||
Public Shareholders of H shares (including ADSs) | H shares | 1,431,300,000 | 20.2 | |||||||||
Guangzhou Railway (Group) Company | A shares | 2,629,451,300 | 37.1 | |||||||||
National Social Security Fund Council(1) | A shares | 274,798,700 | 3.9 | |||||||||
Other Public Shareholders of A shares | A shares | 2,747,987,000 | 38.8 | |||||||||
Total | 7,083,537,000 | 100.0 |
(1) | On September 22, 2009, |
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Percentage | ||||||||||||||||
Identity of Person | of Class of | Percent of Total | ||||||||||||||
Title of Class | or Group | Amount Owned | Shares | Capital | ||||||||||||
Ordinary Shares (A shares)(1) | GRGC | 2,629,451,300 | 46.5 | 37.1 |
Title of Class | Identity of Person or Group | Amount Owned | Percentage of Class of Shares | Percent of Total Capital | ||||||||||
Ordinary Shares (A shares)(1) | GRGC | 2,629,451,300 | 46.5 | 37.1 |
(1) | A shares held by GRGC are no longer restricted from sales and redemption starting from December 22, 2009. |
The following table sets forth all persons who were known by us to beneficially own five percent5% or more of our issued and outstanding H shares as of June 11, 2010.
Percentage of | ||||||||||||
Identity of Person or Group | Shares Owned | H Shares | Percent of Total Capital | |||||||||
Credit Suisse Group AG | 82,763,665 | (L)(1) | 5.78 | 1.17 | ||||||||
81,976,950 | (S)(1) | 5.73 | 1.16 |
Identity of Person or Group | Shares Owned | Percentage of H Shares | Percentage of Total Capital | |||||||||
The Bank of New York Mellon Corporation | 89,237,571 | (L) | 6.23 | (L) | 1.26 | |||||||
60,639,071 | (P) | 4.24 | (P) | 0.86 | ||||||||
Credit Suisse Group AG | 87,916,155 | (L) | 6.14 | (L) | 1.24 | |||||||
146,993,089 | (S) | 10.27 | (S) | 2.07 | ||||||||
FIL Limited | 86,646,000 | (L) | 6.05 | (L) | 1.22 | |||||||
BlackRock, Inc. | 86,441,890 | (L) | 6.03 | (L) | 1.22 | |||||||
0 | (S) | 0.00 | (S) | 0 | ||||||||
Hillhouse Capital Management, Ltd. | 86,286,000 | (L) | 6.03 | (L) | 1.22 | |||||||
Gaoling Fund, L.P. | 86,026,000 | (L) | 6.01 | (L) | 1.21 |
(1) | The letter “L” denotes a long position. The letter “S” denotes a short position. The letter “P” denotes lending pool. |
As of the date of this annual report, we are not aware of any arrangement that may at a subsequent date result in a change of control of our Company.
In accordance with our Articles of Association, each share of our capital stock has one vote and the shares of the same class have the same rights. Other than restrictions on the controlling shareholder as described under “Item 10B.“ITEM 10. ADDITIONAL INFORMATION—B. Memorandum and Articles of Association—Restrictions on Controlling Shareholders”, the voting rights of our major holders of domestic shares are identical to those of any other holders of our domestic shares, and the voting rights of our major holders of H shares are identical to those of our other holders of H shares. Holders of domestic shares and H shares are deemed to be shareholders of different classes for some matters, which may affect their respective interests. Holders of H shares and domestic shares are entitled to the same voting rights.
Under IAS 24, parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence.
The following table sets forth our principal related parties included:
Name of related parties | Relationship with | |
Single largest shareholder and | ||
GRGC |
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Guangzhou Railway Group YangCheng Railway Enterprise Development Company | Subsidiary of GRGC | |
Guangmeishan Railway Company Limited | Subsidiary of GRGC | |
Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company (“GEDC”) | Subsidiary of GRGC | |
Guangzhou Railway Material Supply Company | Subsidiary of GRGC | |
Guangzhou Railway Engineer Construction Enterprise Development Company | Subsidiary of GRGC | |
Yangcheng Construction Company of YangCheng Railway Enterprise Development Company | Subsidiary of GRGC | |
Guangzhou Railway Real Estate Construction Company | Subsidiary of GRGC | |
Yuehai Railway | Subsidiary of GRGC | |
Shichang Railway | Subsidiary of GRGC | |
Guangzhou Railway Station Service Centre | Subsidiary of GRGC | |
Changsha Railway Construction Company Limited | Subsidiary of GRGC | |
Guangdong Sanmao Railway Company | Subsidiary of GRGC | |
Guangzhou | Subsidiary of GRGC | |
Guangzhou | Subsidiary of GRGC | |
Guangzhou Railway | Subsidiary of GRGC | |
Foreign Economic & Trade Development Corporation of Guangzhou Railway | Subsidiary of GRGC | |
Shenzhen Guangshen Railway | Subsidiary of GRGC | |
Guangzhou | Subsidiary of GRGC | |
Pajiangkou Stone Pit | Subsidiary of GRGC | |
Guangdong Tieqing International Travel Agency Company | Subsidiary of GRGC | |
Guangdong Sanmao Enterprise Development Company Limited | Subsidiary of GRGC | |
Guangshengang Passenger Special Line Company Limited (i) | Subsidiary of GRGC | |
Guangdong Guangzhu Intercity Rail Transportation Company Limited (ii) | Subsidiary of GRGC | |
Huaihua Railway Engineer Construction Company | Subsidiary of GRGC | |
Lechang Anjie Railway Sleeper Company Limited | Subsidiary of GRGC | |
Associates of the Group | ||
Zengcheng Lihua Stock Company Limited | Associate of the Group | |
Guangzhou Tiecheng Enterprise Company Limited | Associate of | |
Shenzhen Guangshen Railway Civil Engineering Company | Associate of | |
Other related party | ||
Guangzhu Railway Company Limited (iii) | Entity supervised by the chairman of the Company |
(i) | In March 2012, the Guangzhou Railway Group disposed of its investment in Guangshengang Passenger Special Line Company Limited. As a result, Guangshengang Passenger Special Line Company Limited was no longer considered as a related party of the Group since the day Guangzhou Railway Group lost control of Guangshengang Passenger Special Line Company Limited. However, the transactions with Guangshengang Passenger Special Line Company Limited during the period from January 1, 2012 to the date loss of control were still disclosed as related party transactions. |
(ii) | In November 2012, the Guangzhou Railway Group disposed of its investment in Guangdong Guangzhu Intercity Rail Transportation Company Limited. As a result, Guangdong Guangzhu Intercity Rail Transportation Company Limited was no longer considered as a related party of the Group since the day Guangzhou Railway Group lost control of Guangdong Guangzhu Intercity Rail Transportation Company Limited. However, the transactions with Guangdong Guangzhu Intercity Rail Transportation Company Limited during the period from January 1, 2012 to the date loss of control were still disclosed as related party transactions. |
(iii) | On January 30, 2012, the former chairman of the Company, Xu Xiaoming, resigned from his position. Since that date, Xu Xiaoming also no longer served as the chairman of the Guangzhu Railway Company Limited. Therefore, Guangzhu Railway Company Limited was no longer considered as a related party of the Group since January 31, 2012. |
Since the Restructuring carried out in 1996 in preparation for our initial public offering, we assumed from Guangshen Railway Company, our predecessor, and GRGC, our largest shareholder, assets and liabilities that relate to the businesses now conducted by us, including the high-speed passenger train project and equity interests in subsidiaries and joint ventures engaged in the operation of warehouses or freight yards. We also assumed from Yangcheng Railway Company certain assets, including 14 shunting locomotives and passenger coaches that Yangcheng Railway Company had previously leased to us. Guangshen Railway Company retained the assets, liabilities and businesses not assumed by us, including units providing staff quarters and social services such as health care, education, public security and other ancillary services, as well as subsidiaries or joint ventures whose businesses do not relate to railroad operations and do not compete with our businesses. As part of our Restructuring, Guangshen Railway Company was renamed Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company, or GEDC.
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We previously entered into inter alia, two conditional comprehensive services agreements with GRGC and Yangcheng Railway Company in relation to certain continuing connected transactions. Such agreements could only become effective upon the completion of the Acquisition. As it was anticipated that the Acquisition would not be completed before March 2006, we, on January 13, 2006, entered into the GRGC provisional comprehensive services agreement to govern certain continuing connected transactions between GRGC and its associates during the period between March 2006 and the completion of the Acquisition. In addition, we entered into the GEDC comprehensive services agreement in January 2006. These two agreements were been entered into on a continuing and regular basis, in the ordinary and usual course of business of our Company and its subsidiaries, and on an arm’s length basis between the relevant parties. The GEDC comprehensive services agreement and the GRGC provisional comprehensive services agreement replaced and superseded all the previous agreements or arrangements that had been entered into between our Company and GRGC, its subsidiaries and controlled entities, including Yangcheng Railway Company, to the extent that they covered the same services, including the master agreements entered into when our Company was listed on the HKSE in 1996. Each of the GRGC Provisional comprehensive services agreement and the GEDC comprehensive services agreement became effective from March 3, 2006, after being approved by our shareholders.
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production coordination, safety management and scheduling;
leasing of locomotives;
railway communications;
railway network services (including but not limited to passenger coordination, provision of water to trains, locomotive traction and electricity provision and ticket sale services;
passenger agency services;
maintenance service of large scale railroad machinery, track replacement and overhauling services for railroads and bridges, and locomotive and train repair and maintenance services;
agency services for purchase of railway transportation -related materials;
security services;
hygiene and epidemic prevention services;
property management, construction and maintenance services and leasing of properties; and
construction project management and supervision services.
In addition, under the Framework Agreement, the principal goods and services provided by us to GRGC and some of its subsidiaries including Yangcheng Railway Companyinclude railway network services, locomotive leasing and GEDC, include railroadmaintenance services, transportation agency services for passenger lines and other related services and the sale of duty free goods on-board our Hong Kong Through Trains and at Guangzhou station.
The prices at which these goods and services are provided for us by GRGC and its subsidiaries are determined according to the following principles:
for production coordination, safety management and scheduling, the prices will be determined with reference to the unit cost (which is in turn calculated with reference to the total cost incurred by GRGC for the provision of the relevant services, divided by the total amount of services provided during certain period) and the actual volume of services provided by GRGC;
for leasing of locomotives, if the MOR settlement method is available, the prices will be determined in accordance with the settlement price lists issued by the MOR. If the MOR settlement method is not available, the prices will be determined in accordance with the settlement price lists agreed after arm’s length negotiations between the parties. Such prices shall not be higher than (i) those offered by the GRGC and its subsidiaries to the other GRGC subsidiaries, any enterprises invested by GRGC and any independent third party, or (ii) those offered by independent third parties in the market;
for railway communication services and railway network services, the prices will be determined based on the settlement method or pricing standards issued by the MOR;
for passenger agency services, the prices will comprise a service contract fee (which is determined with reference to the total cost incurred by GRGC and/or its subsidiaries for the provision of such passenger services and the workload incurred) and a portion of revenue from ticket sales on the trains, which are determined after arm’s length negotiations between the parties;
for maintenance services, the prices will be determined with reference to the costs incurred by the GRGC and/or its subsidiaries for the provision of such services plus a profit margin of 8% (if there is no MOR standard available for charging fees regarding track replacement and overhauling services or locomotive or train repair and maintenance services);
for agency services, the prices of the materials will not be higher than those offered by the GRGC and its subsidiaries to the other GRGC subsidiaries, any enterprises invested by GRGC and any independent third party, or those offered by independent third parties in the market; and the service fees shall not be (i) not more than 0.3% of the total purchase price in the case of the purchase of diesel; (ii) not more than 1% of total purchase price in the case of the purchase of steel tracks; and (iii) not more than 5% of the total purchase price in the case of other materials. Such service fees will be determined on an arm’s length basis by taking into account the historical transactions between the parties;
for security services, the service fees have been and will continue to be determined with reference to the actual costs incurred by GRGC and/or its subsidiaries for the provision of such services plus a profit margin of 8%;
for hygiene and epidemic prevention services, the prices will be calculated based on the kind of services provided and the relevant standard prices set by the relevant provincial government without any adjustments;
for property management, construction and maintenance services, the prices of most of such services will continue to be determined with reference to the actual costs incurred by GRGC and/or its subsidiaries for the provision of such services plus a profit margin of 8%. For leasing of properties, the rental shall not exceed the market price or an amount payable by any independent third parties to GRGC and/or its subsidiaries for the same properties; and
for construction project management and supervision services, the prices will be determined in accordance with the settlement method issued by the MOR.
The prices at which these goods and services are provided by us for GRGC and its subsidiaries are determined according to the following principles:
for railway network services, the prices will be determined in accordance with the settlement method issued by the MOR; and
for transportation services other than railway network services, the prices will be determined in accordance with the following principles:
market price (if available);
if market price is not available, settlement method or pricing standards issued by the MOR; and
if neither market price nor MOR standard is available, the prices shall be determined between the parties based on arm’s length negotiations in each case.
The profit margin of 8% as mentioned above was determined by the Company and GRGC Yangcheng Railway Companyafter negotiations with regard to: (i) the guideline issued by the local taxation authority in Guangdong Province that suggests that the profit rate for the purpose of calculating enterprise’s business tax should be 10%; and GEDC, are different in each case. In general:
73(ii) the fact that such pricing policy is the same as the past pricing arrangement.
74
Year ended December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
(RMB thousands) | ||||||||||||
Provision of Services | ||||||||||||
Revenue collected by the MOR for services provided to GRGC and its subsidiaries | 1,115,028 | 1,155,391 | 1,238,431 | |||||||||
Revenue collected through GRGC for provision of repairing services for cargo trucks | 191,369 | — | — | |||||||||
Provision of train transportation services to GRGC and its subsidiaries | 347,849 | 407,220 | 352,973 | |||||||||
Revenue from railway operation service provided to Guangzhou Railway Group’s subsidiaries | — | 273,460 | 278,669 | |||||||||
Receipt of Services | ||||||||||||
Cost settled by the MOR for services provided by GRGC and its subsidiaries | 1,367,444 | 1,488,224 | 1,578,108 | |||||||||
Train transportation services provided by GRGC and its subsidiaries | 428,288 | 637,099 | 653,787 | |||||||||
Social services (employee housing and public security services and other ancillary services) provided by GEDC and Yangcheng Railway Company | 144,750 | 115,190 | 93,090 | |||||||||
Provision of construction services by GRGC and its subsidiaries | 115,075 | 224,892 | 287,903 | |||||||||
Provision of repair and maintenance services by GRGC and its subsidiaries | 171,154 | 260,118 | 240,761 | |||||||||
Purchase | ||||||||||||
Purchase of materials and supplies from GRGC and its subsidiaries | 431,988 | 709,014 | 766,309 | |||||||||
Sales | ||||||||||||
Sales of materials and supplies to GRGC and its subsidiaries | 17,827 | 23,696 | 11,218 | |||||||||
Others | ||||||||||||
Operating lease rental paid to GRGC for the leasing of land use rights | 52,400 | 53,600 | 54,800 | |||||||||
Acquisition of certain assets and liabilities from GRGC’s subsidiaries | — | 14,920 | — | |||||||||
Compensation of loss on construction-in-progress from Guangzhu Railway Company Limited | — | 17,039 | — |
Year ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
(RMB thousands) | ||||||||||||
Provision of Services | ||||||||||||
Revenue collected by MOR for services provided to GRGC and its subsidiaries(1) | (1,005,505 | ) | (1,038,611 | ) | (1,069,053 | ) | ||||||
Provision of repairing services for cargo trucks of GRGC and its subsidiaries(2) | (175,248 | ) | (148,322 | ) | (220,000 | ) | ||||||
Provision of train transportation services to GRGC and its subsidiaries(3) | (183,989 | ) | (265,998 | ) | (208,860 | ) | ||||||
Receipt of Services | ||||||||||||
Cost settled by MOR for services provided by GRGC and its subsidiaries(1) | 1,105,890 | 1,218,138 | 1,530,479 | |||||||||
Train transportation services provided by GRGC and its subsidiaries(4) | 213,388 | 235,303 | 347,969 | |||||||||
Social services (employee housing and public security services and other ancillary services) provided by GEDC and Yangcheng Railway Company(5) | 429,655 | 440,602 | 369,257 | |||||||||
Provision of construction services by GRGC and its subsidiaries(2) | 61,950 | 259,787 | 241,753 | |||||||||
Provision of repair and maintenance services by GRGC and its subsidiaries(3) | 104,111 | 115,568 | 115,455 | |||||||||
Provision of turnkey service by CYTS(6) | 50,569 | 15,280 | — | |||||||||
Purchase | ||||||||||||
Purchase of materials and supplies from GRGC and its subsidiaries(7) | 577,352 | 398,230 | 631,149 | |||||||||
Others | ||||||||||||
Payment for the acquisition of net assets of Yangcheng Railway Business | 4,873,332 | — | — | |||||||||
Operating lease rental paid to GRGC for the leasing of land use rights | 50,000 | 50,000 | 51,200 | |||||||||
75
As of December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
(RMB thousands) | ||||||||||||
Due from GRGC | — | 155,034 | 113,195 | |||||||||
— Trade receivables(1) | — | 150,066 | 108,341 | |||||||||
— Other receivables | — | 4,968 | 4,854 | |||||||||
Due to GRGC | (78,262 | ) | (35,209 | ) | (63,396 | ) | ||||||
— Trade payables(1) | (96,995 | ) | (25,787 | ) | (53,955 | ) | ||||||
— Other payables(3) | 18,733 | (9,442 | ) | (9,441 | ) | |||||||
Due from subsidiaries of GRGC | 39,911 | 16,815 | 28,733 | |||||||||
— Trade receivables | 17,843 | 15,354 | 13,126 | |||||||||
Less:impairment provision | — | (4 | ) | (113 | ) | |||||||
— Other receivables | 22,068 | 1,465 | 15,720 | |||||||||
Due to subsidiaries of GRGC | (940,928 | ) | (302,206 | ) | (230,260 | ) | ||||||
— Trade payables(2) | (198,843 | ) | (198,843 | ) | (174,054 | ) | ||||||
— Other payables(3) | (783,927 | ) | (103,363 | ) | (56,206 | ) | ||||||
Due from an associate | 1,825 | 2,019 | 1,312 | |||||||||
— Trade receivables | — | 160 | — | |||||||||
— Other receivables | 14,137 | 14,171 | 13,624 | |||||||||
Less: impairment provision(5) | (12,312 | ) | (12,312 | ) | (12,312 | ) | ||||||
Due to an associate | (2,935 | ) | (25,118 | ) | (9,534 | ) | ||||||
— Trade payables | — | — | (135 | ) | ||||||||
— Other payables(4) | (2,935 | ) | (25,118 | ) | (9,399 | ) | ||||||
Prepayment for fixed assets and construction-in-progress | 12,617 | 31,012 | — | |||||||||
— GRGC and its subsidiaries | 12,617 | 31,012 | — | |||||||||
Payables for fixed assets and construction-in-progress | (53,546 | ) | (125,487 | ) | (101,316 | ) | ||||||
— GRGC and its subsidiaries | (45,496 | ) | (95,498 | ) | (101,316 | ) | ||||||
— Associates | (8,050 | ) | (29,989 | ) | — |
As of December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
(RMB thousands) | ||||||||||||
Due from GRGC | 299,400 | 309,159 | 194,679 | |||||||||
|
|
|
|
|
| |||||||
- Trade receivables(1) | 292,504 | 296,449 | 189,307 | |||||||||
- Prepayment and other receivables | 6,896 | 12,710 | 5,372 | |||||||||
|
|
|
|
|
| |||||||
Due to GRGC | 18,408 | 37,374 | 22,914 | |||||||||
|
|
|
|
|
| |||||||
- Trade payables(1) | 9,694 | 36,105 | 21,679 | |||||||||
- Prepayment and other payables(3) | 8,714 | 1,269 | 1,235 | |||||||||
|
|
|
|
|
| |||||||
Due from subsidiaries of GRGC | 33,629 | 219,188 | 67,321 | |||||||||
|
|
|
|
|
| |||||||
- Trade receivables | 26,682 | 191,230 | 37,631 | |||||||||
Less: impairment provision | (19 | ) | (19 | ) | (19 | ) | ||||||
- Prepayment and other receivables | 6,966 | 27,977 | 29,709 | |||||||||
|
|
|
|
|
| |||||||
Due to subsidiaries of GRGC | 158,522 | 187,499 | 314,856 | |||||||||
|
|
|
|
|
| |||||||
- Trade payables(2) | 135,999 | 164,221 | 282,266 | |||||||||
- Other payables(3) | 22,523 | 23,278 | 32,590 | |||||||||
|
|
|
|
|
| |||||||
Due from an associate | 1,451 | 1,733 | 1,784 | |||||||||
|
|
|
|
|
| |||||||
- Trade receivables | 22 | — | — | |||||||||
- Other receivables | 13,741 | 14,045 | 14,096 | |||||||||
Less: impairment provision(5) | (12,312 | ) | (12,312 | ) | (12,312 | ) | ||||||
|
|
|
|
|
| |||||||
Due to an associate | 6,991 | 5,803 | 5,376 | |||||||||
|
|
|
|
|
| |||||||
- Trade payables | — | 2 | 2,152 | |||||||||
- Other payables(4) | 6,991 | 5,801 | 3,224 | |||||||||
|
|
|
|
|
| |||||||
Due from Guangzhu Railway Company Limited | — | 17,039 | — | |||||||||
|
|
|
|
|
| |||||||
- Prepayment and other receivables | — | 17,039 | — | |||||||||
|
|
|
|
|
| |||||||
Prepayment for fixed assets and construction-in-progress | — | — | 32,417 | |||||||||
|
|
|
|
|
| |||||||
- GRGC and its subsidiaries | — | — | 1,092 | |||||||||
- Associates | — | — | 31,325 | |||||||||
|
|
|
|
|
| |||||||
Payables for fixed assets and construction-in-progress | 96,328 | 145,416 | 224,968 | |||||||||
|
|
|
|
|
| |||||||
- GRGC and its subsidiaries | 77,423 | 123,107 | 45,883 | |||||||||
- Associates | 18,905 | 22,309 | 179,085 | |||||||||
|
|
|
|
|
|
(1) | The trade balances due from/to GRGC and subsidiaries of GRGC mainly represented service fees and charges payable and receivable balances arising from the provision of passenger transportation and cargo forwarding businesses jointly with these related parties within the PRC. | |
(2) | The trade balances due to subsidiaries of GRGC mainly represent payables arising from unsettled fees for purchase of materials and provision of other services according to various service agreements entered into between us and the related parties. | |
(3) | The non-trade balances due to subsidiaries of GRGC mainly represent the deposits of related parties maintained in the deposit-taking center of our Company. |
76
(4) | The non-trade balance due to an associate mainly represents the payable balance arising from unsettled balance for the construction project services undertaken by an associate. | |
(5) |
As of December 31, 2009,2012, all the balances maintained with related parties are unsecured, non-interest bearing and are repayable on demand.
Our related party transactions have been carried out on normal commercial terms according to the HKSE Listing Rules and the contracts we entered into with our related parties. Except for the transactions discussed in this section, no other material related party transactions were entered into in 2009.2012. Our independent non-executive directors have confirmed that these transactions (which are “connected transactions” as defined in the HKSE Listing Rules) entered into by us in 20092012 were entered into in the ordinary and usual course of our business on normal commercial terms and in accordance with the terms of an agreement governing such transactions.
Transaction with the MOR
The MOR iswas the controlling entity of GRGC, the substantialsingle largest shareholder of our Company and also centrally managesmanaged the railway business within the PRC. We workworked in cooperation with the MOR and other railway companies owned and controlled by the MOR in order to operate certain long-distance passenger train transportation and freight transportation services within the PRC. The related revenue iswas collected by other railway companies, which arewas then remitted to the MOR and centrally processed. A certain portion of the revenue so collected iswas allocated to our Company for the use of our rail lines or for services rendered by us in connection with the delivery of these services. On the other hand, our Company iswas also allocated by the MOR certain charges for the use of the rail lines and services provided by other railway companies. Such allocations arewere determined by the MOR based on its standard charges applied on a nationwide basis.
The chart below sets forth the material transactions our Company undertook with the MOR in 2007, 20082010, 2011 and 2009:
Year ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
(RMB thousands) | ||||||||||||
Recurring Transactions: | ||||||||||||
Income | ||||||||||||
Revenue collected from the MOR, including revenue collected by the MOR for services provided to GRGC and its subsidiaries | ||||||||||||
— Passenger transportation | (5,318,369 | ) | (6,196,596 | ) | (6,542,333 | ) | ||||||
— Freight transportation | (906,516 | ) | (841,240 | ) | (752,561 | ) | ||||||
— Railway network usage and services | (2,659,529 | ) | (2,738,425 | ) | (3,105,654 | ) | ||||||
Charges and Payments | ||||||||||||
Services charges allocated from the MOR, including cost settled by the MOR for services provided to GRGC and its subsidiaries | 1,990,297 | 2,179,407 | 2,404,966 | |||||||||
Operating lease rentals paid/payable to the MOR | 156,628 | 176,880 | 162,651 | |||||||||
77
Year ended December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
(RMB thousands) | ||||||||||||
Recurring Transactions: | ||||||||||||
Income | ||||||||||||
Revenue collected from the MOR, including revenue collected by the MOR for services provided to GRGC and its subsidiaries | ||||||||||||
- Passenger transportation | 7,569,570 | 7,769,115 | 7,522,886 | |||||||||
- Freight transportation | 835,216 | 831,860 | 764,359 | |||||||||
- Railway network usage and services | 3,115,911 | 3,254,511 | 3,474,241 | |||||||||
- Repairing services for cargo trucks(1) | — | 221,386 | 247,335 | |||||||||
Charges and Payments | ||||||||||||
Services charges allocated from the MOR, including cost settled by the MOR for services provided to GRGC and its subsidiaries | 2,487,995 | 2,721,039 | 3,003,520 | |||||||||
Operating lease rentals paid/payable to the MOR | 178,917 | 200,693 | 201,151 |
(1) | Such revenue was collected through Guangzhou Railway Group before 2011. Since 2011, such revenue has been collected through the MOR. |
As of December 31, 2007, 20082010, 2011 and 2009,2012, we had the following material balances maintained with the MOR:
As of December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
(RMB thousands) | ||||||||||||
Due from the MOR | ||||||||||||
— Trade receivables | 42,189 | 53,048 | 273,300 | |||||||||
As of December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
(RMB thousands) | ||||||||||||
Due from the MOR(1) | ||||||||||||
- Trade receivables | 24,805 | 18,017 | 159,074 | |||||||||
Due to the MOR(1) | ||||||||||||
- Trade payables | 166,271 | 193,856 | — |
(1) | We expect that the outstanding amounts due from the MOR and due to the MOR will be transferred to the China Railway Corporation. |
The MOR was dissolved in March 2013 during the First Session of the 12th National People’s Congress of the PRC. The China Railway Corporation will perform the commercial functions previously performed by the MOR. We intend to engage the China Railway Corporation in transactions similar to those engaged in by the MOR.
Not applicable
See pages F-1 to F-60F-76 following ITEM 19.
We have been unable to recover the deposit from Li Cheng Credit Cooperative (“Li Cheng”) upon maturity. We have initiated several legal proceedings against Li Cheng in order to enforce recovery but so far have not succeeded. As ofa result, for the year ended December 31, 2009, our investment interest in an associated company, Guangzhou Tiecheng Enterprise Company Limited, or Tiecheng, amounted to approximately2011 and 2012, we had a provision for impairment loss of RMB 85.0 million.
78
We make decisions concerning the payment of dividends on an annual basis. Any dividends are paid at the discretion of our board of directors, which makes a recommendation in this regard that must be confirmed at our annual general meeting. Our Articles of Association permit us to distribute dividends from profits more than once a year. The amount of these interim dividends cannot exceed 50% of our distributable income as stated in our interim profit statements. In accordance with our Articles of Association, the amounts available for the purpose of paying dividends will be deemed to be the lesser of:
net after-tax income determined in accordance with PRC accounting standards and regulations; and
net after-tax income determined in accordance with either international accounting standards or the accounting standards of the countries in which our shares are listed.
See “Item 10E.“ITEM 10. ADDITIONAL INFORMATION—E. Taxation” for a discussion of the tax consequences related to the receipt of dividends.
Our Articles of Association prohibit us from distributing dividends without first making up for cumulative losses from prior periods (determined in accordance with PRC accounting standards) and making all tax and other payments required by law. Further, prior to the payment of dividends, our profits are subject to deductions such as allocations to a statutory common reserve fund. The common reserve fund may be used to make up losses or be converted into share capital or reinvested.
Our Articles of Association require that cash dividends in respect of H shares be declared in RMB and paid in Hong Kong dollars at the average of the exchange rate as published by the People’s Bank of China for each day of the calendar week preceding the date of the dividend declaration. To the extent that we are unable to pay dividends in Hong Kong dollars from our own foreign exchange resources, we will have to obtain Hong Kong dollars through the inter-bank system or by other permitted means. Hong Kong dollar dividend payments will be converted by the depositary and distributed to holders of ADSs in U.S. dollars.
On April 22, 2010,March 26, 2013, our Board of Directors proposed a final dividend distribution of RMB 0.08 per share to our shareholders for the year ended December 31, 2009.2012. The final dividend
79
Other than events already mentioned in this annual report, there have been no significant changes since December 31, 2009.
80
Price Range of our H shares and ADSs
As of December 31, 20092012 and June 11, 2010,April 19, 2013, there were 1,431.3 million H shares issued and outstanding. As of December 31, 20092012 and June 11, 2010,April 19, 2013, there were, respectively, 4,582,8813,862,777 ADSs and 4,112,8463,439,381 ADSs outstanding held by 182169 and 181168 registered holders.
The HKSE is the principal non-US trading market for our H shares. The ADSs, each representing 50 H shares, have been issued by JPMorgan Chase Bank as depositary and are listed on the NYSE. The following table sets forth, for the periods indicated, the reported high and low closing sales prices for our securities on each of these stock exchanges:
New York Stock Exchange | HKSE | |||||||||||||||
Calendar Period | High | Low | High | Low | ||||||||||||
(USD per ADS) | (HKD per H share) | |||||||||||||||
2005 | 20.50 | 13.07 | 3.225 | 2.00 | ||||||||||||
2006 | 35.24 | 14.70 | 5.41 | 2.30 | ||||||||||||
2007 | 45.22 | 27.11 | 6.91 | 4.40 | ||||||||||||
2008 | ||||||||||||||||
January to March | 37.02 | 24.25 | 5.83 | 3.70 | ||||||||||||
April to June | 30.01 | 21.00 | 4.65 | 3.31 | ||||||||||||
July to September | 25.55 | 19.45 | 3.95 | 3.00 | ||||||||||||
October to December | 26.11 | 13.05 | 3.93 | 2.00 | ||||||||||||
2009 | ||||||||||||||||
January to March | 20.1 | 13.83 | 3.09 | 2.23 | ||||||||||||
April to June | 25.52 | 17.58 | 3.93 | 2.66 | ||||||||||||
July to September | 25.28 | 20.05 | 3.93 | 3.13 | ||||||||||||
October to December | 23.00 | 19.46 | 3.49 | 3.00 | ||||||||||||
December | 21.11 | 19.46 | 3.24 | 2.98 | ||||||||||||
2010 | ||||||||||||||||
January | 21.91 | 20.19 | 3.48 | 3.11 | ||||||||||||
February | 20.94 | 19.88 | 3.30 | 3.07 | ||||||||||||
March | 20.73 | 19.83 | 3.19 | 3.07 | ||||||||||||
April | 20.49 | 19.38 | 3.14 | 3.03 | ||||||||||||
May | 19.37 | 16.03 | 3.00 | 2.56 | ||||||||||||
June (through June 11) | 17.20 | 16.22 | 2.66 | 2.57 |
New York Stock
Exchange | HKSE | |||||||||||||||
Calendar Period | High | Low | High | Low | ||||||||||||
(USD per ADS) | (HKD per H share) | |||||||||||||||
Annual highs and lows | ||||||||||||||||
2008 | 36.45 | 13.72 | 5.71 | 2.10 | ||||||||||||
2009 | 25.52 | 13.83 | 3.93 | 2.23 | ||||||||||||
2010 | 22.26 | 16.03 | 3.48 | 2.56 | ||||||||||||
2011 | 21.67 | 13.82 | 3.40 | 2.22 | ||||||||||||
2012 | 21.38 | 13.97 | 3.37 | 2.19 | ||||||||||||
Quarterly highs and lows | ||||||||||||||||
First Quarter 2011 | 20.98 | 18.03 | 3.30 | 2.80 | ||||||||||||
Second Quarter 2011 | 21.38 | 19.00 | 3.37 | 2.98 | ||||||||||||
Third Quarter 2011 | 21.30 | 14.81 | 3.32 | 2.36 | ||||||||||||
Fourth Quarter 2011 | 18.26 | 14.26 | 2.82 | 2.19 | ||||||||||||
First Quarter 2012 | 19.76 | 17.43 | 3.08 | 2.73 | ||||||||||||
Second Quarter 2012 | 20.12 | 14.72 | 3.02 | 2.29 | ||||||||||||
Third Quarter 2012 | 15.90 | 13.97 | 2.51 | 2.19 | ||||||||||||
Fourth Quarter 2012 | 19.74 | 15.79 | 3.08 | 2.50 | ||||||||||||
Monthly highs and lows | ||||||||||||||||
October 2012 | 18.28 | 15.79 | 2.85 | 2.50 | ||||||||||||
November 2012 | 17.81 | 16.40 | 2.74 | 2.57 | ||||||||||||
December 2012 | 19.74 | 16.47 | 3.08 | 2.55 | ||||||||||||
January 2013 | 21.96 | 19.52 | 3.42 | 3.02 | ||||||||||||
February 2013 | 23.66 | 20.43 | 3.71 | 3.27 | ||||||||||||
March 2013 | 26.40 | 23.90 | 4.15 | 3.73 | ||||||||||||
April (through April 19, 2013) | 24.77 | 22.29 | 3.89 | 3.50 |
During the year ended December 31, 2009,2012, we did not purchase, sell or redeem any of our H shares.
In addition to our H Shares, our A shares have been listed for trading on the Shanghai Stock Exchange starting from December 22, 2006.
Not applicable.
81
Not applicable.
Not applicable.
Not applicable.
82
We were established as a joint stock limited company under the Company Law of the PRC on March 6, 1996. Our legal name is 广深铁路股份有限公司, and its English translation is Guangshen Railway Company Limited.
We issued a total of 2,747,987,000 A shares in our initial public offering of A shares on the PRC domestic market in December 2006, and raised proceeds of approximately RMB 10.0 billion. Each A share has a par value of RMB 1.00 and has been listed for trading on the Shanghai Stock Exchange.
The total number of shares of our Company after the A Share Offering is 7,083,537,000.
As of December 31, 2009,2012, our issued share capital consisted of:
Percentage | ||||||||
Number | of shares | |||||||
Type of share capital | of shares | (%) | ||||||
Domestic tradable shares with restriction on sales (A shares) | 274,798,700 | 3.88 | ||||||
Domestic tradable shares without restriction on sales (A shares) | 5,377,438,300 | 75.91 | ||||||
H shares | 1,431,300,000 | 20.2 | ||||||
Total | 7,083,537,000 | 100.00 |
Type of share capital | Number of shares | Percentage of shares (%) | ||||||
Domestic tradable shares without restriction on sales (A shares) | 5,652,237,000 | 79.80 | ||||||
H shares | 1,431,300,000 | 20.20 | ||||||
|
|
|
| |||||
Total | 7,083,537,000 | 100.00 |
Public Float
As of June 11, 2010,April 19, 2013, at least 25% of our total issued share capital was held by the public, as required under the HKSE Listing Rules.
Pre-Emptive Rights
There is no provision in our Articles of Association or under the laws of the PRC which provides for pre-emptive rights of our shareholders.
Described below is a summary of the significant provisions of our Articles of Association as currently in effect. As this is a summary, it does not contain all the information that may be important to you. A copy of our completeOur current Articles of Association that took effect on June 25, 2009, is attached heretothe full text of which was filed as Exhibit 1.1.
General
We are a joint stock limited company established in accordance with the Company Law of China, the Rules of the State Council on the Overseas Issuance and Listings and other relevant laws and regulations of the PRC. Our Company was established by way of promotion with
83
Significant Differences between H shares and A shares
Holders of H shares and A shares (also referred to as domestic shares), with minor exceptions, are entitled to the same economic and voting rights. However, our Articles of Association provide that holders of H shares will receive dividends in Hong Kong dollars while holders of A shares will receive dividends in RMB. Other differences between the rights of holders of H shares and A shares relate primarily to ownership and transferability. H shares may only be subscribed for and owned by legal and natural persons of any country other than the PRC (excluding Taiwan, Hong Kong, and Macau), and must be subscribed for, transferred and traded in a foreign currency. Other than the limitation on ownership, H shares are freely transferable in accordance with our Articles of Association. A shares may only be subscribed for and owned by legal or natural persons in the PRC (excluding Taiwan, Hong Kong and Macau), and must be subscribed for and traded in RMB. Transfers of A shares are subject to restrictions set forth under PRC rules and regulations, which are not applicable to H shares. Transfers of A shares owned by our directors or employees are also subject to restrictions under PRC rules and regulations. A shares and H shares are also distinguished by differences in administration and procedure, including provisions relating to notices and financial reports to be sent to shareholders, dispute resolution, registration of shares on different parts of the register of shareholders, the method of share transfer and appointment of dividend receiving agents.
Restrictions on Transferability
H shares may be traded only among foreign investors, and may not be sold to PRC investors (except investors from Hong Kong, Macau and Taiwan). PRC investors (except investors from Hong Kong, Macau and Taiwan) are not entitled to be registered as holders of H shares. Under our Articles of Association, we may refuse to register a transfer of H shares unless:
relevant transfer fees have been paid, if any;
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the instrument of transfer only involves H shares;
the relevant share certificate and, upon the reasonable request of the board of directors, any evidence in relation to the right of the transferor to transfer the shares have been submitted;
if the shares are being transferred to joint owners, the maximum number of joint owners does not exceed four; and
we do not have any lien on the relevant shares.
Dividends
Unless otherwise resolved by a shareholders’ general meeting, we may distribute dividends more than once a year, provided that the amount of interim dividends to be distributed shall not exceed 50% of the distributable profit as stated in our interim profit statement. In accordance with our Articles of Association, our net profit for the purpose of profit distribution will be deemed to be the lesser of the amount determined in accordance with:
PRC accounting standards and regulations; and
international accounting standards or the accounting standards of the countries in which our shares are listed.
Our Articles of Association allow for distributions of dividends in the form of cash or shares, and encourage the Board to first consider a payment of cash dividends as opposed to share dividends. In particular, according to our Articles of Association, interim dividends may be distributed by way of cash dividends. Dividends may only be distributed, however, after allowance has been made in the following sequence:
making up losses;
allocations to the statutory common reserve fund;
allocations to the discretionary common reserve fund upon the approval of shareholders at a general meeting; and
payment of dividends in respect of ordinary shares.
The board of directors shall, in accordance with the laws and administrative regulations of the State (if any) and the Company’s operation and development requirements, determine the proportions of allocations to the discretionary common reserve fund and payment of ordinary share dividends subject to approval of shareholders at the general meeting. The Company may not distribute any dividend before making up for its losses and allocating funds to the statutory common reserve fund.
Our Articles of Association require us to appoint on behalf of the holders of H shares a receiving agent to receive on behalf of these shareholders dividends declared and all other moneys in respect of the H shares. The receiving agent appointed shall be a company that is registered as a trust company under the Trustee Ordinance of Hong Kong. Our Articles of Association require that cash dividends in respect of H shares be declared in RMB and paid by us in Hong Kong dollars. If we record no profit for the year, we may not normally distribute dividends for the year.
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Shareholders’ general meetings can be annual shareholders’ general meetings or extraordinary general meetings. Shareholders’ meetings shall be convened by the board of directors. The board of directors shall convene an annual shareholders’ meeting within six months from the end of the preceding accounting year. The shareholders provide us with principal authority at general meetings. We exercise our functions and powers in compliance with our Articles of Association.
We are not permitted to enter into any contract with any person other than a director, supervisor, general manager, deputy general manager, or other senior officers of the Company whereby the management and administration of the whole of the Company or any material business of the Company is to be handed over to such person without the prior approval of the shareholders in a general meeting.
The board of directors shall convene an extraordinary shareholders meeting within two months if any one of the following circumstances occurs:
the number of directors falls short of the number stipulated in the Company Law of the PRC or our by-laws or is below two-thirds of the number required in our Articles of Association;
our unrecovered losses that have not been made up amount to one-third of our paid-in share capital;
shareholder(s), severally or jointly, holding 10% or more of our issued shares carrying the right to vote make a request in writing to convene an extraordinary general meeting;
the board of directors considers it necessary; or
the supervisory committee proposes to convene such a meeting.
Where we convene a shareholders’ general meeting (when we have more than one shareholder), we shall give not less than 45 days prior public notice or other means as specified in our Articles of Association to all shareholders whose names appear in the share register of the items to be considered and the date and venue of the meeting. Any shareholder intending to attend the shareholders’ general meeting shall give us a written reply stating his or her intention to attend the meeting 20 days prior to the date of the meeting.
Where the Company convenes an annual general meeting, shareholders who severally or jointly hold more than 3 percent3% of the Company’s shares, may present an extraordinary proposal for the shareholders’ general meeting in written form to the Company. If the subject of the extraordinary proposal falls within the functions and powers of a shareholders’ general meeting, then it should be included in the agenda of the meeting.
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be given by way of public notice or other means as specified under our Articles of Association;
specify the place, date and the time of the meeting;
state the motions to be discussed at the meeting;
provide such information and explanations as are necessary for the shareholders to exercise an informed judgment on the proposals before them. Without limiting the generality of the foregoing, where a proposal is made to merge the Company with another entity, to repurchase the shares of the Company, to reorganize its share capital or to restructure the Company in any other way, the terms of the proposed transaction must be provided in detail, together with copies of the proposed agreement, if any, and the cause and effect of the proposal must be properly explained;
contain disclosure of the nature and extent, if any, of material interests of any director, supervisor, general manager, deputy general manager or other senior officers of the Company in the transaction proposed and the effect of the proposed transaction on them in their capacity as shareholders in so far as it is different from the effect on the interests of other shareholders of the same class;
contain the full text of any special resolution proposed to be approved at the meeting;
contain conspicuously a statement that a shareholder entitled to attend and vote is entitled to appoint one or more proxies to attend and vote instead of him or her and that a proxy need not also be a shareholder; and
state the time within which and the address to which voting proxies for the meeting are to be delivered.
The Company may send the notice to the domestic shareholders by way of public notice published in one or more newspapers designated by the securities regulatory authority under the State Council at least forty-five (45) days before the date of the meeting. After the publication of such notice, all holders of domestic shares shall be deemed to have received the notice of the relevant shareholders’ general meeting. Notice of a shareholders’ general meeting to holders of overseas-listed foreign-invested shares shall be published on our Company’s website (www.gsrc.com)(www.gsrc.com) at least forty-five (45) days prior to the date of the meeting. After the publication of such notice, all holders of overseas-listed foreign-invested shares shall be deemed to have received the notice of the relevant shareholders’ general meeting. The accidental omission to give notice of a meeting to, or the non-receipt of notice of a meeting by any person entitled to receive notice, shall not invalidate the meeting or the resolutions adopted therein.
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The following matters shall be resolved by way of ordinary resolution of the shareholders’ general meeting:
work reports of the board of directors and the supervisory committee;
profit distribution proposals and loss recovery proposals formulated by the board of directors;
removal of members of the board of directors and the supervisory committee, their remuneration and methods of payment;
our annual financial budget, final accounts, balance sheet, income statement and other financial statements; and
matters other than those that are required by laws, administrative regulations or our Articles of Association to be adopted by way of special resolution.
The following matters shall be resolved by way of special resolution of the shareholders’ general meeting:
increase or reduction of our share capital and the issuance of shares of any class, warrants and other similar securities;
issuance of Company debentures;
division, merger, dissolution and liquidation of the Company;
amendment to our Articles of Association;
alteration to the form of the Company;
acquisition or disposal within one year of material assets exceeding 30% of the total assets of the Company; and
any other matter that, according to an ordinary resolution of the shareholders meeting, may have a significant impact on the Company and requires adoption by way of a special resolution.
Shareholders have the right to attend general meetings of shareholders and to exercise their voting rights, in person or by proxy, in relation to the amount of voting shares they
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At any meeting of shareholders a resolution shall be decided by a show of hands unless a poll is demanded before or after any vote by show of hands:
by the chairman of the meeting;
by at least two shareholders who possess the right to vote, present in person or by proxy; or
by one or more shareholders (including proxies) representing either separately or in aggregate, not less than one-tenth of all shares having the right to vote at the meeting.
Unless a poll is demanded, a declaration by the chairman of the meeting that a resolution has on a show of hands been carried and an entry to that effect in the minutes of the meeting shall be conclusive evidence of the fact, without proof of the number or proportion of the votes recorded in favor of or against that resolution, that the resolution has been carried. A demand for a poll may be withdrawn. A poll demanded on the election of the chairman, or on a question of suspension of the meeting, shall be taken at the meeting immediately. A poll demanded on any other questions shall be taken at such time as the chairman of the meeting directs, and any business other than that on which the poll has been demanded may be proceeded with. The result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. On a poll taken at a meeting, a shareholder (including their proxies) entitled to two or more votes need not cast all his or her votes in the same way. In the case of a tie, the chairman of the meeting shall be entitled to one additional vote.
Board of Directors
Where a director is interested in any resolution proposed at a board meeting, the director shall not be present and shall not have a right to vote at the meeting. That director shall also not be counted in the quorum of the relevant meeting.
Our directors’ compensation is determined by resolutions approved at shareholders’ general meetings. Our directors have no power to approve their own compensation.
Our directors are not required to hold shares of our Company. There is no age limit requirement with respect to retirement or non-retirement of our directors.
At least one-third of our board members shall be independent directors. An independent director is a director who does not act in other capacities in our Company other than as a director, and who does not have any relationship with our Company or our Company’s substantial shareholders which may affect the director in making independent and objective judgment. An independent director shall have certain special duties, including, among others, to approve a connected transaction of which the total consideration accounts for more than five percent5% of the latest audited net asset value of our Company before submission to the board of
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Liquidation Rights
In the event of the termination or liquidation of our Company, our shareholders shall have the right to participate in the distribution of surplus assets of our Company in accordance with the type and number of shares held by those shareholders.
Liability of Shareholders
The liability of holders of our shares for our losses or liabilities is limited to their capital contributions in our Company.
Increases in Share Capital and Preemptive Rights
Our Articles of Association require that approval by a special resolution of the shareholders and by special resolution of holders of domestic shares and H shares at separate shareholder class meetings be obtained prior to authorizing, allotting, issuing or granting shares, securities convertible into shares or options, warrants or similar rights to subscribe for any shares or convertible securities. No approval is required to be obtained from separate class meetings if, but only to the extent that, we issue domestic shares and H shares, either separately or concurrently, in numbers not exceeding 20% of the number of domestic shares and H shares then in issue, respectively, in any 12-month period, as approved by a special resolution of the shareholders. New issues of shares must also be approved by relevant PRC authorities.
Reduction of Share Capital and Purchase by Us of Our Shares
We may, following the procedures provided in the Articles of Association and subject to the approval of the relevant governing authority of the State, repurchase any of our issued shares under the following circumstances:
cancellation of shares for capital reduction;
merging with another company that holds our shares;
paying shares to our employees as bonus; or
repurchasing, upon request, any shares held by any shareholder who is opposed to the Company’s resolution for merger or spin-off at a shareholders’ general meeting.
Any repurchase of shares under items (1) to (3) of the foregoing paragraph shall be approved by shareholders’ general meeting of the Company. After repurchase of the shares according to the foregoing paragraph by the Company, the shares repurchased under item 1 shall
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The shares repurchased by the Company under item 3 may not exceed five percent5% of the total of the Company’s issued shares. Such repurchase shall be financed by the Company’s profit after tax. The shares so repurchased shall be transferred to the employees within one year.
We may not accept our shares as the subject of any pledge.
In the event that the regulatory authorities at the place of listing of our overseas-listed foreign shares have different requirements, such requirements shall prevail.
Subject to approval by PRC securities regulatory authorities and compliance with applicable law, we may carry out a share repurchase by one of the following methods:
under a general offer;
open offer on a stock exchange; or
by off-market contract.
We may, with the prior approval of shareholders in general meeting obtained in accordance with our Articles of Association, repurchase our shares by an off-market contract, and we may rescind or vary such a contract or waive any of our rights under the contract with the prior approval of shareholders obtained in the same manner. A contract to repurchase shares includes (without limitation) an agreement to become obliged to repurchase and an agreement to acquire the right to repurchase our shares. We may not assign a contract to repurchase our own shares or any rights provided thereunder.
Shares repurchased by us shall be canceled and the amount of our registered capital shall be reduced by the par value of those shares. The amount of our registered capital so reduced to the extent that shares are repurchased out of an amount deducted from our distributable profits, shall be transferred to our capital common reserve account.
Unless we are in the process of liquidation:
where we repurchase our shares at par value, the amount of the total par value of shares so repurchased shall be deducted from our book balance distributable profits or out of the proceeds of a new issue of shares made in respect of the repurchase; and
where we repurchase our shares at a premium, an amount equivalent to their total par value shall be deducted from our book balance distributable profits or the proceeds of a new issue of shares made in respect of the repurchase. Payment of the portion in excess of their par value shall be effected as follows:
if the shares being repurchased were issued at par value, payment shall be made out of our book balance distributable profits; and
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if the shares being repurchased were issued at a premium, payment |
Payment by us in consideration for:
the acquisition of rights to repurchase our shares;
the variation of any contract to repurchase our shares; or
the release of any of our obligations under any contract to repurchase our shares;
shall be made out of our distributable profits.
Restrictions on Controlling Shareholders
In addition to obligations imposed by law or required by the stock exchanges on which our shares are listed, a controlling shareholder (as defined below) shall not exercise his or her voting rights in respect of the following matters in a manner prejudicial to the interests of the shareholders generally or any part of our shareholders:
to relieve a director or supervisor of his or her duty to act honestly in our best interests;
to approve the expropriation, by a director or supervisor (for his or her own benefit or for the benefit of another person), in any guise, of our assets, including without limitation opportunities advantageous to us; or
to approve the expropriation by a director or supervisor (for his or her own benefit or for the benefit of another person) of the individual rights of other shareholders, including without limitation rights to distributions and voting rights, save and except where it was done pursuant to a restructuring submitted to and approved by our shareholders in accordance with our Articles of Association.
“Controlling shareholder” means a shareholder whose shareholdings represent over 50% of the total share capital of the Company, or if less than 50%, whose entitlement to voting rights is sufficient to materially affect the resolutions at general meetings of the Company.
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Rights conferred on any class of shareholders in the capacity of shareholders may not be varied or abrogated unless approved by a special resolution of shareholders at a general meeting and by holders of shares of that class at a separate class meeting conducted in accordance with our Articles of Association.
Duties of Directors, Supervisors and Other Senior Officers in Interested Transactions
Where any director, supervisor, general manager, deputy general manager or other senior officers (or an associate thereof) is in any way materially interested in a contract or transaction or arrangement or proposed contract or transaction or arrangement with us (other than his or her contract of service with us), he or she shall declare the nature and extent of his or her interest to the board of directors at the earliest opportunity, whether or not the contract, transaction or proposal or arrangement is subject to the approval of the board of directors.
Unless the interested director, supervisor, general manager deputy general manager or other senior officers has disclosed his or her interests and the contract or transaction is approved by the board of directors at a meeting in which the interested director, supervisor, general manager, deputy general manager or other senior officers has not been counted in the quorum and has refrained from voting, a contract or transaction in which that director, supervisor, general manager, deputy general manager or other senior officers is materially interested is voidable except as against a bona fide party to the contract or transaction acting without notice of the breach of duty by the interested director, supervisor, general manager, deputy general manager or other senior officers.
We shall not directly or indirectly make a loan to or provide any guarantees in connection with a loan to a director, supervisor, general manager, deputy general manager or other senior officers of our Company or of GRGC or any of their respective associates. However, the following transactions are not subject to this prohibition:
the provision by us of a loan or a guarantee of a loan to one of our subsidiaries;
the provision by us of a loan or a guarantee in connection with a loan or any other funds to any of our directors, supervisors, general managers, deputy general managers or other senior officers to pay expenditures incurred or to be incurred on our behalf by him or her or for the purpose of enabling him or her to perform his or her duties properly, in accordance with the terms of a service contract approved by the shareholders at a general meeting; and
the provision by us of a loan or a guarantee in connection with a loan to any of our directors, supervisors, general managers, deputy general managers or other senior officers or their respective associates on normal commercial terms, provided that the ordinary course of our business includes the lending of money or the giving of guarantees.
Recent Amendments to Our Articles of Association
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All material contracts we entered into during the fiscal years of 20082011 and 20092012 were made in the ordinary course of business.
The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. Effective January 1, 1994, the dual foreign exchange system in China was abolished in accordance with the notice of the People’s Bank of China concerning future reform of the foreign currency control system issued December 1993. The conversion of RMB into U.S. dollars in China currently must be based on the People’s Bank of China rate. The People’s Bank of China rate is set based on the previous day’s Chinese inter-bank foreign exchange market rate and with reference to current exchange rates on the world financial markets. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar. Under the new policy, RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. On April 14, 2012, the PRC government further allowed the floating band of RMB’s trading prices against the U.S. dollar to widen from 0.5% to 1% on each business day effective from April 16, 2012. As of June 11, 2010,April 19, 2013, this change in policy has resulted in a more than 20%30% appreciation of the RMB against the U.S. dollar ever since July 2005.
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We have been, and will continue to be, affected by changes in exchange rates in connection with our ability to meet our foreign currency obligations and will be affected by such changes in connection with our ability to pay dividends on H shares in Hong Kong dollars and on ADSs in U.S. dollars. As of December 31, 2009,2012, we maintained the equivalent of approximately RMB 67.260.9 million in U.S. dollar and Hong Kong dollar-denominated balances for purposes of satisfying our foreign currency obligations (e.g.(e.g., to purchase foreign equipment) and paying dividends to our overseas shareholders. See Note 3 ofto our audited consolidated financial statements included elsewhere in this annual report. We believe that we have or will be able to obtain sufficient foreign exchange to continue to satisfy these obligations. We do not engage in any financial contract or other arrangement to hedge our currency exposure.
PRC Taxation
Tax Basis of Assets
As of June 30, 1995, our assets were valued in conjunction with the Restructuring. This valuation, which was confirmed by the State Assets Administration Bureau, establishes the tax basis for these assets.
Income Tax
From January 1, 1994 to December 31, 2007, income tax payable by PRC domestic enterprises (other than foreign-invested enterprises), including state owned enterprises and joint stock companies, hashad been governed by the PRC Enterprise Income Tax Provisional Regulations and its implementation measures, or EIT regulations,Regulations, which provideprovided for an income tax rate of 33%, unless a lower rate was provided by law or administrative regulations. Our Company was generally subject to tax at a rate of 33% pursuant to the EIT Regulations. However, as a result of our incorporation in the Shenzhen Special Economic Zone, our corporate income tax rate was reduced to 15%. Pursuant to an approval from the Shenzhen Local Tax Bureau dated November 12, 1997, our Company was also entitled to a 50% further reduction of income tax arising from our high-speed train services in 1997, 1998 and 1999. To the extent that our Company engagesengaged in other businesses through its subsidiaries, those other companies were subject to corporate income tax rates of either 15% (Shenzhen or other special economic zones) or 33% (applicable to places other than Shenzhen), depending mainly on their places of incorporation.
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Value Added Tax
Pursuant to the Provisional Regulations of the PRC Concerning Value Added Tax effective from January 1, 1994, which was amended by the State Council on November 10, 2008 and the related implementing rules, our passenger and freight transportation businesses are not subject to value added tax, while our other businesses, such as retail sales of food, beverages and merchandise aboard our trains and in our stations, and some of the businesses conducted by our subsidiaries are subject to value added tax at the rate ranging from 3% to 17%, depending on the scale and nature of the businesses.
Business Tax
Pursuant to the Provisional Regulations of the PRC Concerning Business Tax effective from January 1, 1994, which was amended by the State Council effective from January 1, 2009 and its implementing rules, business tax is imposed on enterprises that provide transportation services in the PRC. Business tax is levied at a rate of 3% or 5% on the revenue of the transport of passengers and goods in or out of the PRC.
Tax on Dividends
For an Individual Investor. According to the Individual Income Tax Law of the PRC, an income tax of 20% shall be withheld on dividend payments from PRC enterprises to an individual. For a foreign individual who is not a residentresidents of the PRC. According to the Notice on the Issues Concerning the Collection and Administration of Individual Income Tax Following the Repeal of Circular 45 issued by the PRC State Tax Bureau, the receipt of dividends from a company in the PRC by foreign individuals of countries which have entered into a double taxation agreement with the PRC is normally subject to thisthe treaty rate in the relevant tax treaty. A foreign individual of countries which have not entered into any double taxation agreement with the PRC or in any other case will be subject to 20% PRC withholding tax unless reduced by an applicable double-taxation treaty. However,tax.
According to the Notice on July 21, 1993, the Issues concerning the Implementation of Differential Individual Income Tax Policies on Dividends and Bonuses of Listed Companies: individual PRC State Tax Bureau issued a Notice Concerning the Taxationresident holders of Gains on TransfersA Shares who have held shares for one month or less shall include all cash and Dividends fromshare distributions in their taxable income; individual PRC resident holders of A Shares (Equities) Received by Foreign Investment Enterprises, Foreign Enterpriseswho have held shares for more than one month and Foreign Individuals, referred to herein as the Tax Notice, which stipulates that dividends from anot more than one year shall temporarily include 50% of all cash and share distributions in their taxable income; and individual PRC company onresident holders of A Shares who have held shares listed on an overseas stock exchange, or overseas shares, such as H shares (including H shares represented by ADSs), would befor more than one month and not more than one year shall temporarily exempted from the withholdinginclude 25% of individual income tax. The relevant tax authority has thus far not collected any withholding tax on dividend payments on overseas shares.
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Capital Gains Tax
For An Individual Investor. TheAccording to the Notice Concerning the Continuation of Exemption from Individual Income Tax Notice provides thaton the Income from Stocks Transfer issued by the PRC Ministry of Finance and the PRC State Tax Bureau on March 30, 1998, effective from January 1, 1997, gains realized by foreign individual holdersindividuals from transferring stocks of H shares or ADSs willlisted companies are still not be subject to income tax.
For An Enterprise. Pursuant to the new EIT lawLaw and its implementing rules, when a non-PRC-resident enterprise with no establishment or office in the PRC receives capital gains from its sale of H shares issued by PRC domestic companies, or a non-PRC-resident enterprise with establishment or office in the PRC receives capital gains from its sale of H shares issued by PRC domestic companies but such capital gains so received are not effectively connected with such establishment or office, the non-PRC-resident enterprise is subject to a 10% withholding tax on such capital gains.
Tax Treaties
For non-PRC-resident enterprises with no establishment in the PRC and individuals not resident in the PRC, if their home countries or jurisdictions have entered into double taxation treaties with the PRC, such enterprises and individuals may be entitled to a reduction of any withholding tax imposed on the payment of dividends from a PRC company. The PRC currently has double taxation treaties with a number of countries, including Australia, Canada, France, Germany, Japan, Malaysia, the Netherlands, Singapore, the United Kingdom and the United States.
The Agreement Between the Government of the United States of America and the PRC Government for the Avoidance of Double Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income, together with related protocols, referred to herein as the US-PRC tax treaty, currently limit the rate of PRC withholding tax upon dividends paid by our Company to a United StatesU.S. holder who is a United States resident for purposes of the US-PRC tax treaty to 10%. It is uncertain if the US-PRC tax treaty exempts from PRC tax the capital gains of a U.S. holder arising from the sale or disposition of H shares or ADSs. U.S. holders are advised to consult their tax advisors with respect to these matters.
United States Federal Income Taxation
The following is a general discussion of the material United States federal income tax consequences of purchasing, owning and disposing of the H shares or ADSs if you are a U.S. holder, as defined below, and hold the H shares or ADSs as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended, or the Code. This discussion does not address all of the United States federal
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banks, insurance companies and financial institutions;
United States expatriates;
tax-exempt entities;
certain insurance companies;
broker-dealers;
traders in securities that elect to mark to market;
U.S. holders liable for alternative minimum tax;
U.S. holders that own 10% or more of our voting stock;
U.S. holders that hold the H shares or ADSs as part of a straddle or a hedging or conversion transaction; or
U.S. holders whose functional currency is not the U.S. dollar.
This discussion is based on the Code, its legislative history, final, temporary and proposed United States Treasury regulations promulgated thereunder, published rulings and court decisions as in effect on the date hereof, all of which are subject to change, or changes in interpretation, possibly with retroactive effect. In addition, this discussion is based in part upon representations of the depositary and the assumption that each obligation in the deposit agreement and any related agreements will be performed according to its terms.
You are a “U.S. holder” if you are a beneficial owner of H shares or ADSs and are:
a citizen or resident of the United States for United States federal income tax purposes;
a corporation, or other entity treated as a corporation for United States federal income tax purposes, created or organized under the laws of the United States, any state thereof or the District of Columbia;
an estate the income of which is subject to United States federal income tax without regard to its source; or
a trust:
subject to the primary supervision of a United States court and the control of one or more United States persons; or
that has elected to be treated as a United States person under applicable United States Treasury regulations.
If a partnership holds the H shares or ADSs, the tax treatment of a partner generally will depend on the status of the partner and the activities of the partnership. If you are a partner of a partnership that holds the H shares or ADSs, we urge you to consult your tax advisors regarding
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This discussion does not address any United States federal estate or gift tax consequences, or any state, local or non-United States tax consequences of the purchase, ownership and disposition of the H shares or ADSs.
We urge you to consult your tax advisors regarding the United States federal, state, local and non-United States tax consequences of the purchase, ownership and disposition of the H shares or ADSs.
In general, if you hold ADRs evidencing ADSs, you will be treated as the owner of the H shares represented by the ADSs. The following discussion assumes that we are not a passive foreign investment company, or PFIC, as discussed under “PFIC Rules” below.
Distributions on the H shares or ADSs
The gross amount of any distribution (without reduction for any PRC tax withheld) we make on the H shares or ADSs out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes) will be includible in your gross income as dividend income when the distribution is actually or constructively received by you, in the case of the H shares, or by the depositary in the case of ADSs. Subject to certain limitations, for taxable years beginning prior to January 1, 2011, dividends paid to non-corporate U.S. holders, including individuals, may be eligible for a reduced rate of taxation if we are deemed to be a “qualified foreign corporation” for United States federal income tax purposes. A qualified foreign corporation includes:
a foreign corporation that is eligible for the benefits of a comprehensive income tax treaty with the United States that includes an exchange of information program; and
a foreign corporation if its stock with respect to which a dividend is paid (or ADSs backed by such stock) is readily tradable on an established securities market within the United States,
but does not include an otherwise qualified foreign corporation that is a PFIC in the taxable year the dividend is paid or the prior taxable year. We believe that we will be a qualified foreign corporation so long as we are not a PFIC (and were not a PFIC for our prior taxable year) and we are considered eligible for the benefits of the Agreement between the Government of the United States of America and the Government of the People’s Republic of China for the Avoidance of Double Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income, or the Treaty.US—PRC tax treaty. Our status as a qualified foreign corporation, however, may change.
Distributions by a corporation that exceed its current and accumulated earnings and profits (as determined for United States federal income tax purposes) generally are treated as a return of capital to the extent of a shareholder’s basis in the corporation’s shares, and thereafter as capital gain. We do not maintain calculations of our current and accumulated earnings and profits as determined for United States federal income tax purposes, and you should expect that the full amount of any distribution to you will be treated as a return of capital to you to the extent of your basis in the H shares or ADSs and thereafter as capital gain.dividend for United States federal income tax purposes. Any dividend will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from United States corporations. The amount of any distribution of
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If we make a distribution paid in Hong Kong dollars, you will be considered to receive the U.S. dollar value of the distribution determined at the spot HK dollar/U.S. dollar rate on the date such distribution is received by you or by the depositary, regardless of whether you or the depositary convert the distribution into U.S. dollars on such date. Any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is includible in your income to the date you or the depositary convert the distribution into U.S. dollars will be treated as foreign currency exchange gain or loss that is United States source ordinary income or loss for foreign tax credit limitation purposes.
Subject to various limitations, any PRC tax withheld from distributions in accordance with PRC law, as limited by the Treaty,US—PRC tax treaty, may be creditable against your United States federal income tax liability. For foreign tax credit limitation purposes, dividends paid on the H shares or ADSs will be foreign source income, and will be treated as “passive category income” or, in the case of some U.S. holders, “general category income.” You may not be able to claim a foreign tax credit (and instead may claim a deduction) for non-United States taxes imposed on dividends paid on the H shares or ADSs if you (i) have held the H shares or ADSs for less than a specified minimum period during which you are not protected from risk of loss with respect to such shares, or (ii) are obligated to make payments related to the dividends (for example, pursuant to a short sale).
Sale, Exchange or Other Disposition
Upon a sale, exchange or other disposition of the H shares or ADSs, you will recognize a capital gain or loss for United States federal income tax purposes in an amount equal to the difference between the U.S. dollar value of the amount realized and your tax basis, determined in U.S. dollars, in such H shares or ADSs. Any gain or loss will generally be United States source gain or loss for foreign tax credit limitation purposes. Capital gain of certain non-corporate U.S. holders, including individuals, is generally taxed at reduced laterrates where the H shares or ADSs have been held more than one year. Your ability to deduct capital losses is subject to limitations.
If any PRC tax is withheld from your gain on a disposition of H shares or ADSs, such tax would only be creditable against your United States federal income tax liability to the extent that you have foreign source income. However, in the event that PRC tax is withheld, a U.S. holder that is eligible for the benefits of the TreatyUS—PRC tax treaty may be able to treat the gain as foreign source income for foreign tax credit limitation purposes.
If you are paid in a currency other than U.S. dollars, any gain or loss resulting from currency exchange fluctuations during the period from the date of the payment resulting from sale, exchange or other disposition to the date you convert the payment into U.S. dollars will be treated as foreign currency exchange gain or loss that is United States source ordinary income or loss for foreign tax credit limitation purposes.
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In general, a foreign corporation is a PFIC for any taxable year in which, after applying relevant look-through rules with respect to the income and assets of subsidiaries:
75% or more of its gross income consists of passive income, such as dividends, interest, rents and royalties; or
50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income.
We believe that we willwere not meet either of thea PFIC tests in the current or subsequentfor our taxable yearsyear ended December 31, 2012 and thereforedo not currently believe that we will not be treated as a PFIC for such periods.the current or subsequent taxable years. However, PFIC status cannot be determined until the close of a taxable year and, accordingly, there can be no assurance that we will not be a PFIC in the current or subsequent taxable years.
If we were a PFIC in any taxable year that you held the H shares or ADSs, you generally would be subject to special rules with respect to “excess distributions” made by us on the H shares or ADSs and with respect to gain from a disposition of the H shares or ADSs. An “excess distribution” generally is defined as the excess of the distributions you receive with respect to the H shares or ADSs in any taxable year over 125% of the average annual distributions you have received from us during the shorter of the three preceding years or your holding period for the H shares or ADSs. Generally, you would be required to allocate any excess distribution or gain from the disposition of the H shares or ADSs ratably over your holding period for the H shares or ADSs. The portion of the excess distribution or gain allocated to a prior taxable year, other than a year prior to the first year in which we became a PFIC, would be taxed at the highest United States federal income tax rate on ordinary income in effect for such taxable year, and you would be subject to an interest charge on the resulting tax liability, determined as if the tax liability had been due with respect to such particular taxable years. The portion of the excess distribution or gain that is allocated to the current year, together with the portion allocated to the years prior to the first year in which we became a PFIC, would be included in your gross income for the taxable year of the excess distribution or disposition and taxed as ordinary income.
The foregoing rules with respect to excess distributions and dispositions may be avoided or reduced if you are eligible for and timely make a valid “mark-to-market” election. If your H shares or ADSs were treated as shares regularly traded on a “qualified exchange” for United States federal income tax purposes and a valid mark-to-market election was made, in calculating your taxable income for each taxable year you generally would be required to take into account as ordinary income or loss the difference, if any, between the fair market value and the adjusted tax basis of your H shares or ADSs at the end of your taxable year. However, the amount of loss you would be allowed is limited to the extent of the net amount of previously included income as a result of the mark-to-market election. Your basis in the H shares or ADSs will be adjusted to reflect any such gain or loss. The New York Stock Exchange on which the ADSs are traded is a qualified exchange for United States federal income tax purposes.
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If you own the H shares or ADSs during any year that we are a PFIC and you recognize gain on a disposition or receive a distribution with respect to the H shares or ADSs, or make a reportable election with respect to such H shares or ADSs, you must file Internal Revenue Service, or IRS, Form 8621. You would also be required to file any other information that is required by the United States Treasury Department. We encourage you to consult your own tax advisor concerning the United States federal income tax consequences of holding the H shares or ADSs that would arise if we were considered a PFIC.
Backup Withholding and Information Reporting
In general, information reporting requirements will apply to dividends in respect of the H shares or ADSs or the proceeds of the sale, exchange, or redemption of the H shares or ADSs paid within the United States, and in some cases, outside of the United States, other than to various exempt recipients, including corporations.recipients. In addition, you may, under some circumstances, be subject to “backup withholding” with respect to dividends paid on the H shares or ADSs or the proceeds of any sale, exchange or transfer of the H shares or ADSs, unless you
fall within various other exempt categories, and, when required, demonstrate this fact; or
provide a correct taxpayer identification number on a properly completed IRS Form W-9 or a substitute form, certify that you are exempt from backup withholding and otherwise comply with applicable requirements of the backup withholding rules.
Any amount withheld under the backup withholding rules generally will be creditable against your United States federal income tax liability provided that you furnish the required information to the IRS in a timely manner. If you do not provide a correct taxpayer identification number, you may be subject to penalties imposed by the IRS.
Certain U.S. holders who are individuals that hold certain foreign financial assets (which may include the H shares or ADSs) are required to report information relating to such assets, subject to certain exceptions. You should consult your own tax advisors regarding the effect, if any, of this legislationthese requirements on your ownership and disposition of the H shares or ADSs.
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The following discussion summarizes the material Hong Kong tax provisions relating to the ownership of H shares or ADSs held by you.
Dividends
Under current practice, no tax will be payable by you in Hong Kong in respect of dividends paid by us.
Taxation of Capital Gains
No capital gain tax is generally imposed in Hong Kong in respect of capital gains from the sale of shares (such as the H shares). However, if trading gains from the sale of property by persons as part of profit making are regarded as carrying on a trade, profession or business in Hong Kong, where such gains are derived from or arise in Hong Kong from such trade, profession or business, such trading gains will be chargeable to Hong Kong profits tax, which is currently imposed at the rate of 16.5% on corporations and at a maximum rate of 15% on unincorporated businesses. Certain categories of taxpayers are likely to be regarded as deriving trading gains rather than capital gains (for example, financial institutions, insurance companies and securities dealers) unless these taxpayers can prove that the investment securities are held for long-term investment. Gains from sales of the H shares affected on the Hong Kong Stock Exchange will be considered to be derived from or arise in Hong Kong. Liability for Hong Kong profits tax would thus arise in respect of trading gains from sales of H shares realized by persons carrying on a business of trading or dealing in Hong Kong in securities.
There will be no liability for Hong Kong profits tax in respect of profits from the sale of ADSs (i.e., the profits derived abroad), where purchases and sales of ADSs are effected outside Hong Kong, e.g. on the New York Stock Exchange.
Hong Kong Stamp Duty
Hong Kong stamp duty will be payable by each of the seller and the purchaser for every sale and purchase, respectively, of the H shares. An ad valorem duty is charged at the rate of 0.2% of the consideration of the fair value of the H shares transferred and the relevant contract notes shall be stamped (the buyer and seller each paying half of such stamp duty). In addition, a fixed duty of HKD 5 is currently payable on an instrument of transfer of H shares.
The withdrawal of H shares when ADSs are surrendered, and the issuance of ADSs when H shares are deposited, may be subject to Hong Kong stamp duty at the rate described above for sale and purchase transactions, if the withdrawal or deposit results in a change of legal and beneficial ownership under Hong Kong law. The issuance of ADSs for deposited H shares issued directly to the depositary or for the account of the depositary should not lead to a Hong Kong stamp duty liability. You are not liable for the Hong Kong stamp duty payable on transfers of ADSs outside of Hong Kong.
Hong Kong Estate Duty
Prior to February 11, 2006, estate duty iswas levied on the value of property situated in Hong Kong passing or deemed passing on the death of a person. H shares are regarded as property situated in Hong Kong for estate duty purposes. Estate duty was abolished effective from
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Not applicable.
Not applicable.
We filed with SEC in Washington, D.C. a registration statement on Form F-1 (Registration No. 333-3382) under the Securities Act of 1933, as amended, in connection with our global offering in May 1996. The registration statement contains exhibits and schedules. For further information with respect to our Company and our ADSs, please refer to the registration statement and to the exhibits and schedules filed with the registration statement.
Additionally, we are subject to the informational requirements of the Exchange Act of 1934, as amended, or the Exchange Act, and, in accordance with the Exchange Act, we file annual reports on Form 20-F within sixfour months of our fiscal year end, and we will furnish other reports and information under cover of Form 6-K with the SEC. You may review a copy of the registration statement and other information without charge at the public reference facilities maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also inspect the registration statement and its exhibits and schedules at the office of the New York Stock Exchange, 11 Wall Street, New York, New York 10005. You may also get copies, upon payment of a prescribed fee, of all or a portion of the registration statement from the SEC’s public reference room or by calling the SEC on 1-800-SEC-0330 or visiting the SEC’s website at www.sec.gov.
As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements to shareholders.
Not applicable.
104
The following paragraphs describe the various market risks to which we were exposed as of December 31, 20082011 and 2009.
Currency Risks
We mainly operate in the PRC with most of the transactions settled in RMB. RMB is also the functional currency of our Company. RMB is not freely convertible into other foreign currencies. The conversion of RMB denominated balances into foreign currencies is subject to the rates and regulations of foreign exchange control promulgated by the PRC government. Any monetary assets and liabilities denominated in currencies other than RMB would subject our Company to currency risks. In addition, we are required to pay dividends in Hong Kong dollars in the future when dividends are declared.
The monetary assets and liabilities held by us that are denominated in U.S. dollars and Hong Kong dollars as of December 31, 20082011 and 20092012 are set forth below.
As of December 31, | ||||||||||||
Currency | 2008 | 2009 | ||||||||||
Monetary assets and liabilities | denomination | (RMB thousands) | ||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | USD | 3,176 | 455 | |||||||||
Cash and cash equivalents | HKD | 30,452 | 66,801 | |||||||||
Other receivables | HKD | 529 | 994 | |||||||||
Trade payables | USD | (940 | ) | (939 | ) |
As of December 31, | ||||||||||||
Monetary assets and liabilities | Currency Denomination | 2011 | 2012 | |||||||||
(RMB thousands) | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | USD | 261 | 39 | |||||||||
Cash and cash equivalents | HKD | 106,054 | 60,910 | |||||||||
Other receivables | HKD | 244 | 234 |
We may experience a loss as a result of any foreign currency exchange rate fluctuations in connection with our deposits. We have not used any means to hedge the exposure to foreign exchange risk.
We incurred a foreign exchange lossgain of RMB 47,0000.5 million for the year ended December 31, 2009.2012. As of December 31, 2009,2012, our assets denominated in Hong Kong dollars and U.S. dollars were translated into RMB at the applicable market exchange rates as of that date and amounted to approximately RMB 68.261.2 million. If the applicable market exchange rates were to change by 5%, this would result in a change in fair value of approximately RMB 3.43.6 million in these balances.
While our foreign currency deposits are relatively stable, they are insufficient to pay all dividends and operating expenses, therefore, we bear the risk of exchange rate fluctuations when we convert RMB to pay foreign-currency denominated dividends and operating expenses.
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Interest Rate Risks
As of December 31, 2009,2012, funds that we do not need in the short term are generally kept as temporary cash deposits in commercial banks in the form of fixed-term deposits. We do not hold any market risk-sensitive instruments for trading purposes. As we have no significant interest-bearing assets (except for deposits held in banks), our income and operating cash flows are not materially affected by the changes of market interest rates. Our interest rate risk arises mainly from the bonds payable in connection with our issuance in December 2009 of RMB 3.5 billion 4.79% fixed rate notes due 2014, which were issued at a fixed interest rate and exposed us to fair value interest rate risk.
Credit Risks
The carrying amount of cash and cash equivalents, trade and other receivables (excluding prepayments), short-term deposits, and long-term receivables represent our maximum exposure to credit risk in relation to financial assets.
Cash and short term liquid investments are placed with reputable banks. No significant credit risk is expected.
The majority of our accounts receivable balance relate to the rendering of services or sales of products to third party customers. Our other receivable balances mainly arise from services other than the main railway transportation services. We perform ongoing credit evaluations of our customers/debtors’ financial condition and generally do not require collateral from the customers/debtors’ account on the outstanding balances. Based on the expected reliability and the timing for collection of the outstanding balances, we maintain a provision for doubtful accounts and actual losses incurred have been within management’s expectation.
No other financial assets carry a significant exposure to credit risk.
Liquidity Risks
Prudent liquidity risk management includes maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, our Company’s treasury function allows flexibility in funding by maintaining committed credit lines.
We monitor rolling forecasts of our liquidity reserves (comprises undrawn borrowing facilities and cash and cash equivalents on the basis of expected cash flows). on a regular basis. See Note 3 to our audited consolidated financial statements included elsewhere in this annual report, analyzingwhich analyzes our
106
Except as described above and in Note 3 to our audited consolidated financial statements included elsewhere in this annual report, our management believes that as of December 31, 2009,2012, at present and in our normal course of business, we are not subject to any other material market-related risks.
107
Not applicable.
Not applicable.
Not applicable.
JPMorgan Chase Bank, N.A. is the depositary for our ADSs. The Depositary’sdepositary’s office is located at No.13 Building, 4 New York Plaza, New York, NY 10004. On April 25, 2008, JPMorgan Chase Bank, N.A. signed an agreement with Wells Fargo Bank, pursuant to which Wells Fargo Bank will provide the depositary service for our ADSs on behalf of JPMorgan Chase Bank, N.A. Each of our ADRs represents 50 H shares of par value RMB1.00 per share.
In April 2009, we entered into an amendment to our deposit agreement with JPMorgan Chase Bank, N.A., which we initially entered into on May 10, 1996. The revisions include allowing the depositary, in line with the current market practice, to charge the holders of the ADSs a cash distribution fee and an annual administrative fee, the aggregate of which should not exceed US$0.02 per ADS in any calendar year. The amendment of the deposit agreement became effective on May 25, 2009. At such effective date, every holder of our ADSs shall be deemed by holding our ADSs to consent and agree to such amendment and to be bound by the deposit agreement and the American Depositary Receipts as amended by such amendment. For further information, see the Form F-6EF we filed with the SEC on April 24, 2009 and the Form 6-K we furnished on April 28, 2009.
Fees Payable by ADS holders
The Depositary may charge each person, US$5.00 for each 100 ADSs (or portion thereof) for ADRs issued, delivered, reduced, cancelled or surrendered, as the case may be.
The following additional charges may be incurred by holders of our ADSs:
a fee of US$ 1.50 per ADR for transfers of ADRs;
a fee of US$ 0.02 or less per ADS for any cash distribution made, or the cash distribution fee; | |||
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a fee of US$ 5.00 for each 100 ADSs (or portion thereof) for any security distribution;
an administration fee of US$ 0.02 per ADS per calendar year (or portion thereof), provided, however, that the aggregate amount of such administration fee and the cash distribution fee shall not exceed US$ 0.02 per ADS in any calendar year;
stock transfer or other taxes and other governmental charges;
cable, telex and facsimile transmission and delivery charges incurred at the request of the ADS holders;
transfer or registration fees for the registration or transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities; and
expenses of the depositary in connection with the conversion of foreign currencies into U.S. dollars.
We will pay all other charges and expenses of the depositary and its agents (except the custodian) pursuant to the agreements between us and the depositary. The fees described above may be amended from time to time.
Payments Received by Foreign Private Issuer
The depositary has agreed to reimburse certain expenses incurred by us in connection with our ADR program. The depositary reimbursed us, or waived its fees and expenses, of $353,820.00approximately US$107,792.89 for the year ended December 31, 2009.
Direct Payments
The table below sets forth the types of expenses that the depositary has reimbursed us for the year ended December 31, 2009:
Category of Expenses | Amount (US$) | |||
Investor relations | 10,410.60 | |||
Broker reimbursements | ||||
NYSE listing fee | ||||
Total | ||||
Indirect Payments
The depositary has also agreed to waive certain fees for standard costs associated with the administration of our ADS program. The table below sets forth those expenses that the depositary waived in the year ended December 31, 2009:
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Category of Expenses | Amount (US$) | |||
Fees waived | ||||
None.
None.
Disclosure Controls and Procedures
Our Chairman of the Board, General Manager, Chief Accountant and Company Secretary, evaluated the effectiveness of the design and operation of our Company’s disclosure controls and procedures (as defined in the U.S. Securities Exchange Act of 1934, as amended (“Exchange Act”) Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Form 20-F. Based on this evaluation, our Chairman of the Board, General Manager, Chief Accountant and Company Secretary concluded that our Company’s disclosure controls and procedures were effective as of December 31, 2009.2012. Our Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file and furnish under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and regulations and such information is accumulated and communicated to our Company’s management including the Chairman of the Board, General Manager, Chief Accountant and Company Secretary, as appropriate, to allow timely decision regarding required disclosures.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in U.S. Securities Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of our Company are being made only in accordance with authorizations of management and directors of our Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our Company’s assets that could have a material effect on the financial statements.
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For the year ended December 31, 2009,2012, under the supervision, and with the participation, of our Chairman of the Board, General Manager, Company Secretary and Chief Accountant, and Company Secretary, our management has conducted an assessment of the effectiveness of our internal control over financial reporting based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission inInternal Control — Control—Integrated FrameworFrameworkk.. Based on this evaluation, our Company’s management has concluded that its internal control over financial reporting was effective as of December 31, 2009.
The effectiveness of our Company’s internal control over financial reporting as of December 31, 20092012 has been audited by PricewaterhouseCoopers (Certified Public Accountants, Hong Kong), an independent registered public accounting firm, as stated in their report which is included elsewhere in this annual report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 20092012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Our board of directors has determined that Dr. Wilton Chau Chi WaiMr. Lo Mun Lam is an “audit committee financial expert” as defined in Item 16A of Form 20-F. Mr. ChauLo Mun Lam and each of the other members of the Audit Committee is an “independent director” as defined in Section 303A.02 of the NYSE Listed Company Manual.
We have adopted a code of ethics that applies to our Chairman, General Manager, Company Secretary, Chief Accountant Company Secretary and other senior officers, or the Code of Ethics for Senior Management, on April 20, 2004. On April 23, 2008, we amended the Code of Ethics for Senior Management pursuant to Section 404 of the Sarbanes-Oxley Act. On April 29, 2009, we further amended the Code of Ethics for Senior Management in order to further strengthen our corporate governance, regulate the acts of our executive officers and ensure the better performance of duties by our executive officers. According to the amended Code of Ethics for Senior Management, each of our senior officers is required to sign a certificate for the compliance with the Code of Ethics for Senior Management at his/her initial or subsequent election or engagement, and to submit an annual certificate with respect to his/her compliance with the Code of Ethics for Senior Management. A copy of this amended Code of Ethics for Senior Management is filed as Exhibit 11.1 to our annual report on Form 20-F filed with the SEC on June 25, 2009.
111
Resolutions to appoint PricewaterhouseCoopers (certified public accountants in Hong Kong), or PwC, as our auditor for 20102012 have been approved at the annual general meeting of our shareholders held on JuneMay 22, 2010.
The following table presents the aggregate fees for professional services and other services rendered by PwC to us in 20082011 and 2009.
2008 | 2009 | |||||||
(RMB millions) | ||||||||
Audit Fees | 9.6 | 9.6 | ||||||
Audit-related Fees | — | 0.15 | ||||||
Tax Fees | — | — | ||||||
All Other Fees | — | — | ||||||
Total | 9.6 | 9.75 | ||||||
2011 | 2012 | |||||||
(RMB millions) | ||||||||
Audit Fees | 7.80 | 7.70 | ||||||
Audit-related Fees | — | — | ||||||
Tax Fees | — | — | ||||||
All Other Fees | — | 0.25 | ||||||
|
|
|
| |||||
Total | 7.80 | 7.95 | ||||||
|
|
|
|
Notes:
1. | Traveling expenses and tax fees are included in the audit fees and do not require additional payment. | |
2. | As of December 31, | |
All non-audit services to be provided by our independent registered public accountants, PwC, must be approved by our audit committee.
Not applicable.
During the year ended December 31, 2009,2012, there was no purchase, sale or redemption of our H shares or ADSs by us, or any of our subsidiaries.
Not applicable.
Under the NYSE’s corporate governance listing standards, we are required to disclose any significant ways in which our governance practices differ from those followed by U.S. domestic
112
we do not have the majority of our board of directors comprised of independent directors as defined under Section 303A.02 of the NYSE Manual; | |||
113
we do not have a nominating committee or a corporate governance committee similar to that required for U.S. domestic companies;
we do not have a compensation committee wholly made up of independent directors. Our remuneration committee currently consists both executive directors and independent non-executive directors with the independent non-executive directors making up the majority of such committee;
instead of having formal corporate governance guidelines similar to those required for U.S. domestic companies, we have, in accordance with applicable PRC laws and regulations and the HKSE Listing Rules, adopted the Articles of Association, the General Meeting System, the Working Ordinance for the Board of Directors, the Working Ordinance for the supervisory committee, the Working Ordinance for the General Manager, the Capital Management Measures, the Investment Management Measures, the Code of Ethics for Senior Officers and the Audit Committee Charter that contain provisions addressing (i) director qualification standards and responsibilities; (ii) key board committee responsibilities; (iii) director access to management and, as necessary and appropriate, independent advisors; (iv) director compensation; (v) management succession and (vi) director orientation and continuing education;
as a company listed on the HKSE, we are required to comply with applicable corporate governance and other related requirements of the HKSE Listing Rules, including the Corporate Governance Code, unless an exemption is available; and
we have not adopted a set of formal code of business conduct and ethics for our directors, officers and employees similar to that required for U.S. domestic companies. We have implemented code of business conduct and ethics for senior management, including our General Manager, Deputy General Manager, Chief Accountant and Company Secretary. In addition, our directors are required to comply with the Model Code for Securities Transactions by Directors of Listed Companies set out in the HKSE Listing Rules, which sets out standards with which directors are required to comply with respect to transactions involving our securities.
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
We have elected to provide the financial statements and related information specified in ITEM 18 in lieu of ITEM 17.
See pages F-1 to F-60F-76 following ITEM 19.
(a) | See pages F-1 to F-76 following this item. |
(b) | Index of Exhibits |
Documents filed as exhibits to this annual report:
Exhibit | Description | ||
1.1α | Amended and Restated Articles of | ||
Form of Amendment No. 1 to Deposit | |||
Form of American Depositary | |||
Land Lease Agreement dated November 15, 2004 between Guangshen Railway Company Limited and Guangzhou Railway (Group) | |||
Master comprehensive services agreements dated November 5, 2007 between Guangshen Railway Company Limited and each of GRGC, GEDC and Yangcheng Railway | |||
4.3α | English summary of certain material terms of the RMB 3.5 billion of 4.79% fixed rate notes due 2014 | ||
7.1 | Statements explaining how certain ratios are calculated in this annual report | ||
8.1 | List of subsidiaries of Guangshen Railway Company Limited as of December 31, | ||
11.1¥ | Code of Ethics for the Senior Management as amended on April 29, | ||
12.1 | Section 302 principal executive officers’ and principal financial officer’s certifications | ||
13.1 | Certifications of principal executive officers and principal financial officer pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the U.S. Sarbanes-Oxley Act of 2002 |
* | Incorporated by reference from the Registrant’s Form F-6EF filed with the SEC on April 24, | |
** | Incorporated by reference from the Registrant’s annual report on Form 20-F filed with the SEC on June 28, | |
*** | Incorporated by reference from the Registrant’s annual report on Form 20-F filed with the SEC on June 26, |
¥ | Incorporated by reference from the Registrant’s annual report on Form 20-F filed with the SEC on June 25, |
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α | Incorporated by reference from the Registrant’s annual report on Form 20-F filed with the SEC on June 22, 2010. |
SIGNATURE
GUANGSHEN RAILWAY COMPANY LIMITED | |||||||
Date: | |||||||
April 24, 2013 | By: | /s/ Li Wenxin | |||||
Li Wenxin | |||||||
Chairman of the Board of Directors | |||||||
Page | ||||
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES | ||||
F-2,3 | ||||
F-4 | ||||
F-8 | ||||
F-9 |
F-1
To the Board of Directors and Shareholders of Guangshen Railway Company Limited
In our opinion, the accompanying consolidated balance sheets and the related consolidated comprehensive income statements, consolidated cash flow statements and the consolidated statements of changes in equity present fairly, in all material respects, the financial position of Guangshen Railway Company Limited (the “Company”) and its subsidiaries (the “Group”) at December 31, 20082011 and 2009,2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 20092012 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as ofat December 31, 2009,2012, based on criteria established in Internal Control —– Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s managementManagement is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report On Internal Control over Financial Reporting in Item 15 appearing on pages 110100 and 111101 of the 20092012 Annual Report. Our responsibility is to express opinions on these financial statements and on the Group’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
F-2
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
PricewaterhouseCoopersPricewaterhouseCoopers
Hong KongJune 22, 2010
F-3
CONSOLIDATED BALANCE SHEETS
AS OFAT DECEMBER 31, 20092011 AND 2008
(Amounts in thousands)
December 31, | ||||||||||||||||
Note | 2008 | 2009 | 2009 | |||||||||||||
RMB | RMB | US$* | ||||||||||||||
(Note 40) | ||||||||||||||||
ASSETS | �� | |||||||||||||||
Non-current assets | ||||||||||||||||
Fixed assets | 6 | 23,903,846 | 24,048,573 | 3,521,021 | ||||||||||||
Construction-in-progress | 7 | 504,775 | 662,183 | 96,952 | ||||||||||||
Prepayment for fixed assets and construction-in-progress | 151,972 | 60,134 | 8,805 | |||||||||||||
Leasehold land payments | 8 | 592,368 | 576,379 | 84,389 | ||||||||||||
Goodwill | 9 | 281,255 | 281,255 | 41,179 | ||||||||||||
Investments in associates | 11 | 120,705 | 119,547 | 17,503 | ||||||||||||
Deferred tax assets | 12 | 331,738 | 320,430 | 46,915 | ||||||||||||
Deferred employee costs | 13 | 99,614 | 79,736 | 11,674 | ||||||||||||
Available-for-sale investments | 16 | 48,326 | 53,826 | 7,881 | ||||||||||||
Long-term receivable | 17 | 48,136 | 44,229 | 6,476 | ||||||||||||
26,082,735 | 26,246,292 | 3,842,795 | ||||||||||||||
Current assets | ||||||||||||||||
Materials and supplies | 18 | 201,923 | 231,110 | 33,838 | ||||||||||||
Trade receivables, net | 19 | 272,051 | 483,218 | 70,749 | ||||||||||||
Prepayments and other receivables, net | 20 | 96,865 | 72,343 | 10,592 | ||||||||||||
Short-term deposits | 7,300 | 514,000 | 75,256 | |||||||||||||
Cash and cash equivalents | 34 | (c) | 1,560,952 | 1,115,651 | 163,346 | |||||||||||
2,139,091 | 2,416,322 | 353,781 | ||||||||||||||
Total assets | 28,221,826 | 28,662,614 | 4,196,576 | |||||||||||||
Equity | ||||||||||||||||
Capital and reserves attributable to the Company’s equity holders | ||||||||||||||||
Share capital | 21 | 7,083,537 | 7,083,537 | 1,037,121 | ||||||||||||
Share premium | 10,294,490 | 10,294,570 | 1,507,258 | |||||||||||||
Other reserves | 22 | 1,797,229 | 1,932,131 | 282,889 | ||||||||||||
Retained earnings | 2,607,951 | 3,270,887 | 478,900 | |||||||||||||
- Proposed final dividend | 566,683 | 566,683 | 82,970 | |||||||||||||
21,783,207 | 22,581,125 | 3,306,168 | ||||||||||||||
Minority interests | 55,948 | 55,717 | 8,157 | |||||||||||||
Total equity | 21,839,155 | 22,636,842 | 3,314,325 | |||||||||||||
Liabilities | ||||||||||||||||
Non-current liabilities | ||||||||||||||||
Borrowings | 23 | 3,390,000 | — | — | ||||||||||||
Bonds payable | 24 | — | 3,465,801 | 507,438 | ||||||||||||
Employee benefits obligations | 25 | 237,422 | 174,767 | 25,588 | ||||||||||||
3,627,422 | 3,640,568 | 533,026 | ||||||||||||||
Current liabilities | ||||||||||||||||
Trade payables | 26 | 640,856 | 791,355 | 115,865 | ||||||||||||
Payables for fixed assets and construction-in-progress | 764,609 | 674,652 | 98,778 | |||||||||||||
Dividends payable | 47 | 45 | 7 | |||||||||||||
Income tax payable | 48,977 | 116,036 | 16,989 | |||||||||||||
Accruals and other payables | 27 | 790,760 | 803,116 | 117,586 | ||||||||||||
Borrowings | 23 | 510,000 | — | — | ||||||||||||
2,755,249 | 2,385,204 | 349,225 | ||||||||||||||
Total liabilities | 6,382,671 | 6,025,772 | 882,251 | |||||||||||||
Total equity and liabilities | 28,221,826 | 28,662,614 | 4,196,576 | |||||||||||||
December 31 | ||||||||||||||
Note | 2011 RMB | 2012 RMB | 2012 US$* | |||||||||||
ASSETS | ||||||||||||||
Non-current assets | ||||||||||||||
Fixed assets | 6 | 23,987,080 | 24,524,248 | 3,936,476 | ||||||||||
Construction-in-progress | 7 | 911,962 | 679,528 | 109,074 | ||||||||||
Prepayments for fixed assets and construction-in-progress | 16,986 | 49,336 | 7,919 | |||||||||||
Leasehold land payments | 8 | 544,403 | 528,296 | 84,799 | ||||||||||
Goodwill | 9 | 281,255 | 281,255 | 45,145 | ||||||||||
Investments in associates | 11 | 125,920 | 136,826 | 21,962 | ||||||||||
Deferred tax assets | 12 | 108,079 | 109,161 | 17,522 | ||||||||||
Deferred employee costs | 1,800 | — | — | |||||||||||
Long-term prepaid expenses | 13 | — | 40,120 | 6,440 | ||||||||||
Available-for-sale investments | 15 | 53,826 | 53,826 | 8,640 | ||||||||||
Long-term receivable | 16 | 34,108 | 30,863 | 4,954 | ||||||||||
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26,065,419 | 26,433,459 | 4,242,931 | ||||||||||||
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Current assets | ||||||||||||||
Materials and supplies | 17 | 330,736 | 437,297 | 70,192 | ||||||||||
Trade receivables | 18 | 613,999 | 1,000,025 | 160,518 | ||||||||||
Prepayments and other receivables | 19 | 144,436 | 147,388 | 23,657 | ||||||||||
Short-term deposits | 20 | 3,686,000 | 4,174,000 | 669,984 | ||||||||||
Cash and cash equivalents | 20,34(c) | 1,366,757 | 675,013 | 108,349 | ||||||||||
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6,141,928 | 6,433,723 | 1,032,700 | ||||||||||||
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Total assets | 32,207,347 | 32,867,182 | 5,275,631 | |||||||||||
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EQUITY AND LIABILITIES | ||||||||||||||
Equity | ||||||||||||||
Capital and reserves attributable to the Company’s equity holders | ||||||||||||||
Share capital | 21 | 7,083,537 | 7,083,537 | 1,137,004 | ||||||||||
Share premium | 11,564,581 | 11,564,581 | 1,856,273 | |||||||||||
Other reserves | 22 | 2,269,095 | 2,402,266 | 385,596 | ||||||||||
Retained earnings | 4,417,393 | 4,894,806 | 785,684 | |||||||||||
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25,334,606 | 25,945,190 | 4,164,557 | ||||||||||||
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Non-controlling interests | 52,802 | 50,849 | 8,162 | |||||||||||
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Total equity | 25,387,408 | 25,996,039 | 4,172,719 | |||||||||||
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Liabilities | ||||||||||||||
Non-current liabilities | ||||||||||||||
Deferred income related to government grants | 23 | 96,022 | 92,864 | 14,906 | ||||||||||
Bonds payable | 24 | 3,478,568 | 3,485,473 | 559,466 | ||||||||||
Employee benefits obligations | 25 | 168,276 | 113,901 | 18,283 | ||||||||||
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3,742,866 | 3,692,238 | 592,655 | ||||||||||||
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Current liabilities | ||||||||||||||
Trade payables | 26 | 1,064,741 | 1,131,624 | 181,641 | ||||||||||
Payables for fixed assets and construction-in-progress | 814,129 | 915,081 | 146,883 | |||||||||||
Dividends payable | 25 | 15 | 2 | |||||||||||
Income tax payable | 316,731 | 229,271 | 36,801 | |||||||||||
Accruals and other payables | 27 | 881,447 | 902,914 | 144,930 | ||||||||||
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3,077,073 | 3,178,905 | 510,257 | ||||||||||||
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Total liabilities | 6,819,939 | 6,871,143 | 1,102,912 | |||||||||||
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Total equity and liabilities | 32,207,347 | 32,867,182 | 5,275,631 | |||||||||||
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The accompanying notes are an integral part of these consolidated financial statements.
* | Translation of amounts from Renminbi (“RMB”) into United States dollars (“US$”) for the convenience of the reader has been made at US$1.00= |
F-4
Chairman | General Manager | Chief Accountant |
CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 20082010, 2011 AND 2007
(Amounts in thousands, except per share and per ADS data)
Years ended December 31, | ||||||||||||||||||||
Note | 2007 | 2008 | 2009 | 2009 | ||||||||||||||||
RMB | RMB | RMB | US$* | |||||||||||||||||
Revenue from railroad businesses | ||||||||||||||||||||
Passenger | 5,833,538 | 6,759,229 | 7,195,717 | 1,053,546 | ||||||||||||||||
Freight | 1,326,450 | 1,324,701 | 1,210,118 | 177,177 | ||||||||||||||||
Railway network usage and services | 2,659,529 | 2,738,425 | 3,105,654 | 454,708 | ||||||||||||||||
9,819,517 | 10,822,355 | 11,511,489 | 1,685,431 | |||||||||||||||||
Revenue from other businesses | 688,987 | 866,300 | 874,268 | 128,004 | ||||||||||||||||
Total revenues | 10,508,504 | 11,688,655 | 12,385,757 | 1,813,435 | ||||||||||||||||
Operating expenses | ||||||||||||||||||||
Railroad businesses | ||||||||||||||||||||
Business tax | (221,820 | ) | (253,001 | ) | (266,951 | ) | (39,085 | ) | ||||||||||||
Labour and benefits | 28 | (1,928,171 | ) | (2,125,376 | ) | (2,277,057 | ) | (333,391 | ) | |||||||||||
Equipment leases and services | (2,595,181 | ) | (2,653,188 | ) | (2,974,805 | ) | (435,550 | ) | ||||||||||||
Land use right leases | 36 | (b) | (50,000 | ) | (50,000 | ) | (51,200 | ) | (7,496 | ) | ||||||||||
Materials and supplies | (1,240,801 | ) | (1,345,651 | ) | (1,395,333 | ) | (204,295 | ) | ||||||||||||
Repair and facilities maintenance costs, excluding materials and supplies | (460,133 | ) | (670,209 | ) | (588,331 | ) | (86,139 | ) | ||||||||||||
Depreciation of fixed assets | (1,006,728 | ) | (1,145,624 | ) | (1,237,361 | ) | (181,166 | ) | ||||||||||||
Amortisation of leasehold land payments | (15,002 | ) | (15,001 | ) | (15,001 | ) | (2,196 | ) | ||||||||||||
Social services charges | (396,789 | ) | (400,546 | ) | (373,321 | ) | (54,659 | ) | ||||||||||||
Utility and office expenses | (109,792 | ) | (121,436 | ) | (111,816 | ) | (16,371 | ) | ||||||||||||
Others | (309,876 | ) | (382,246 | ) | (329,556 | ) | (48,251 | ) | ||||||||||||
(8,334,293 | ) | (9,162,278 | ) | (9,620,732 | ) | (1,408,599 | ) | |||||||||||||
Other businesses | ||||||||||||||||||||
Business tax | (17,611 | ) | (20,846 | ) | (24,671 | ) | (3,612 | ) | ||||||||||||
Labour and benefits | 28 | (171,921 | ) | (312,333 | ) | (347,842 | ) | (50,928 | ) | |||||||||||
Materials and supplies | (161,719 | ) | (387,651 | ) | (318,123 | ) | (46,577 | ) | ||||||||||||
Depreciation of fixed assets | (10,372 | ) | (26,418 | ) | (24,783 | ) | (3,629 | ) | ||||||||||||
Amortisation of leasehold land payments | (1,019 | ) | (602 | ) | (988 | ) | (145 | ) | ||||||||||||
Utility and office expenses | (96,177 | ) | (81,227 | ) | (80,960 | ) | (11,854 | ) | ||||||||||||
(458,819 | ) | (829,077 | ) | (797,367 | ) | (116,745 | ) | |||||||||||||
Total operating expenses | (8,793,112 | ) | (9,991,355 | ) | (10,418,099 | ) | (1,525,344 | ) | ||||||||||||
Other income / (expense), net | 29 | 49,816 | 17,703 | (19,765 | ) | (2,894 | ) | |||||||||||||
Profit from operations | 1,765,208 | 1,715,003 | 1,947,893 | 285,197 | ||||||||||||||||
Finance costs | 30 | (98,487 | ) | (213,469 | ) | (236,287 | ) | (34,596 | ) | |||||||||||
Share of results of associates | 11 | 1,830 | 128 | 773 | 113 | |||||||||||||||
Profit before income tax | 1,668,551 | 1,501,662 | 1,712,379 | 250,714 | ||||||||||||||||
Income tax expense | 31 | (232,349 | ) | (277,294 | ) | (348,921 | ) | (51,086 | ) | |||||||||||
Profit for the year | 1,436,202 | 1,224,368 | 1,363,458 | 199,628 | ||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | ||||||||||||||||
Total comprehensive income for the year | 1,436,202 | 1,224,368 | 1,363,458 | 199,628 | ||||||||||||||||
Profit attributable to: | ||||||||||||||||||||
Equity holders of the Company | 1,431,415 | 1,224,129 | 1,364,521 | 199,784 | ||||||||||||||||
Minority interests | 4,787 | 239 | (1,063 | ) | (156 | ) | ||||||||||||||
1,436,202 | 1,224,368 | 1,363,458 | 199,628 | |||||||||||||||||
Total comprehensive income attributable to: | ||||||||||||||||||||
Equity holders of the Company | 1,431,415 | 1,224,129 | 1,364,521 | 199,784 | ||||||||||||||||
Minority interests | 4,787 | 239 | (1,063 | ) | (156 | ) | ||||||||||||||
1,436,202 | 1,224,368 | 1,363,458 | 199,628 | |||||||||||||||||
Earnings per share for profit attributable to the equity holders of the Company during the year | ||||||||||||||||||||
- Basic and diluted | 32 | RMB0.20 | RMB0.17 | RMB0.19 | US$0.03 | |||||||||||||||
Earnings per equivalent ADS | ||||||||||||||||||||
- Basic and diluted | RMB10.10 | RMB8.64 | RMB9.63 | US$1.41 | ||||||||||||||||
Years ended December 31 | ||||||||||||||||||
Note | 2010 RMB | 2011 RMB | 2012 RMB | 2012 US$* | ||||||||||||||
Revenue from Railroad Businesses | ||||||||||||||||||
Passengers | 7,377,145 | 8,026,512 | 7,841,091 | 1,258,602 | ||||||||||||||
Freight | 1,315,347 | 1,386,753 | 1,344,113 | 215,749 | ||||||||||||||
Railway network usage and other transportation related services | 3,888,367 | 4,255,996 | 4,890,640 | 785,014 | ||||||||||||||
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12,580,859 | 13,669,261 | 14,075,844 | 2,259,365 | |||||||||||||||
Revenue from other businesses | 903,589 | 1,021,574 | 1,016,042 | 163,089 | ||||||||||||||
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Total revenue | 13,484,448 | 14,690,835 | 15,091,886 | 2,422,454 | ||||||||||||||
Operating expenses | ||||||||||||||||||
Railroad businesses | ||||||||||||||||||
Business tax | (312,265 | ) | (369,115 | ) | (340,035 | ) | (54,580 | ) | ||||||||||
Labour and benefits | 28 | (2,662,299 | ) | (2,973,529 | ) | (3,516,589 | ) | (564,461 | ) | |||||||||
Equipment leases and services | (3,235,868 | ) | (3,604,408 | ) | (4,022,514 | ) | (645,668 | ) | ||||||||||
Land use right leases | 36(b) | (52,400 | ) | (53,600 | ) | (54,800 | ) | (8,796 | ) | |||||||||
Materials and supplies | (1,457,769 | ) | (1,530,659 | ) | (1,532,559 | ) | (245,997 | ) | ||||||||||
Repair and facilities maintenance costs, excluding materials and supplies | (828,438 | ) | (647,120 | ) | (696,884 | ) | (111,859 | ) | ||||||||||
Depreciation of fixed assets | (1,325,032 | ) | (1,344,927 | ) | (1,358,527 | ) | (218,062 | ) | ||||||||||
Amortisation of leasehold land payments | (15,001 | ) | (15,001 | ) | (15,001 | ) | (2,408 | ) | ||||||||||
Social services charges | (144,750 | ) | (115,190 | ) | (93,090 | ) | (14,942 | ) | ||||||||||
Utility and office expenses | (125,989 | ) | (128,795 | ) | (107,216 | ) | (17,210 | ) | ||||||||||
Others | (321,685 | ) | (340,789 | ) | (525,806 | ) | (84,399 | ) | ||||||||||
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(10,481,496 | ) | (11,123,133 | ) | (12,263,021 | ) | (1,968,382 | ) | |||||||||||
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Other businesses | ||||||||||||||||||
Business tax | (26,359 | ) | (32,148 | ) | (32,845 | ) | (5,272 | ) | ||||||||||
Labour and benefits | 28 | (373,420 | ) | (414,326 | ) | (458,349 | ) | (73,572 | ) | |||||||||
Materials and supplies | (334,501 | ) | (391,673 | ) | (317,738 | ) | (51,001 | ) | ||||||||||
Depreciation of fixed assets | (24,178 | ) | (25,034 | ) | (23,877 | ) | (3,833 | ) | ||||||||||
Amortisation of leasehold land payments | (987 | ) | (987 | ) | (987 | ) | (158 | ) | ||||||||||
Utility and office expenses | (86,329 | ) | (113,700 | ) | (132,581 | ) | (21,281 | ) | ||||||||||
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(845,774 | ) | (977,868 | ) | (966,377 | ) | (155,117 | ) | |||||||||||
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Total operating expenses | (11,327,270 | ) | (12,101,001 | ) | (13,229,398 | ) | (2,123,499 | ) | ||||||||||
Other (expenses)/income and other (losses)/gains - net | 29 | (47,060 | ) | (25,786 | ) | 71,815 | 11,527 | |||||||||||
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Profit from operations | 2,110,118 | 2,564,048 | 1,934,303 | 310,482 | ||||||||||||||
Finance costs | 30 | (186,172 | ) | (190,970 | ) | (187,073 | ) | (30,028 | ) | |||||||||
Share of results of associates | 11 | 1,361 | 5,259 | 10,906 | 1,751 | |||||||||||||
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Profit before income tax | 1,925,307 | 2,378,337 | 1,758,136 | 282,205 | ||||||||||||||
Income tax expense | 31 | (440,389 | ) | (575,965 | ) | (441,151 | ) | (70,811 | ) | |||||||||
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Profit for the year | 1,484,918 | 1,802,372 | 1,316,985 | 211,394 | ||||||||||||||
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012
(Amounts in thousands, except per share and per ADS data)
Years ended December 31, | ||||||||||||||||||
Note | 2010 RMB | 2011 RMB | 2012 RMB | 2012 US$* | ||||||||||||||
Profit for the year | 1,484,918 | 1,802,372 | 1,316,985 | 211,394 | ||||||||||||||
Other comprehensive income | — | — | — | — | ||||||||||||||
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Total comprehensive income for the year, net of tax | 1,484,918 | 1,802,372 | 1,316,985 | 211,394 | ||||||||||||||
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Profit attributable to: | ||||||||||||||||||
Equity holders of the Company | 1,486,062 | 1,804,107 | 1,318,938 | 211,707 | ||||||||||||||
Non-controlling interests | (1,144 | ) | (1,735 | ) | (1,953 | ) | (313 | ) | ||||||||||
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1,484,918 | 1,802,372 | 1,316,985 | 211,394 | |||||||||||||||
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Total comprehensive income attributable to: | ||||||||||||||||||
Equity holders of the Company | 1,486,062 | 1,804,107 | 1,318,938 | 211,707 | ||||||||||||||
Non-controlling interests | (1,144 | ) | (1,735 | ) | (1,953 | ) | (313 | ) | ||||||||||
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1,484,918 | 1,802,372 | 1,316,985 | 211,394 | |||||||||||||||
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Earnings per share for profit attributable to the equity holders of the Company during the year | ||||||||||||||||||
- Basic and diluted | 32 | RMB | 0.21 | RMB | 0.25 | RMB | 0.19 | USD | 0.03 | |||||||||
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Earnings per equivalent ADS | ||||||||||||||||||
- Basic and diluted | 32 | RMB | 10.49 | RMB | 12.73 | RMB | 9.31 | USD | 1.49 | |||||||||
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The accompanying notes are an integral part of these consolidated financial statements.
* | Translation of amounts from Renminbi (“RMB”) into United States dollars (“US$”) for the convenience of the reader has been made at US$1.00= |
F-5
Chairman | General Manager | Chief Accountant |
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 20082010, 2011 AND 2007
(Amounts in thousands)
Year ended December 31, | ||||||||||||||||||||
Note | 2007 | 2008 | 2009 | 2009 | ||||||||||||||||
RMB | RMB | RMB | US$* | |||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||
Cash generated from operations | 34 | (a) | 2,430,689 | 2,173,685 | 3,108,375 | 455,106 | ||||||||||||||
Interest paid | (173,515 | ) | (221,488 | ) | (220,288 | ) | (32,253 | ) | ||||||||||||
Income tax paid | (299,529 | ) | (311,128 | ) | (270,554 | ) | (39,613 | ) | ||||||||||||
Net cash generated from operating activities | 1,957,645 | 1,641,069 | 2,617,533 | 383,240 | ||||||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||
Payments for acquisition of fixed assets and construction-in-progress and prepayment for fixed assets, net of related parties | (1,107,320 | ) | (2,947,804 | ) | (1,639,674 | ) | (240,070 | ) | ||||||||||||
Payment for business combination, net of cash acquired | (4,781,633 | ) | — | — | — | |||||||||||||||
Proceeds from sales of fixed assets | 34 | (b) | 83,701 | 11,358 | 28,349 | 4,151 | ||||||||||||||
Interest received | 57,183 | 24,321 | 24,440 | 3,578 | ||||||||||||||||
Addition on available-for-sale investments | — | — | (7,500 | ) | (1,098 | ) | ||||||||||||||
Decrease/(Increase) in short-term deposits with maturities more than three months | 169,739 | (7,300 | ) | (506,700 | ) | (74,187 | ) | |||||||||||||
Dividends received | — | 4,475 | 4,931 | 722 | ||||||||||||||||
Disposal of subsidiaries, net of cash received | (7,084 | ) | (835 | ) | — | — | ||||||||||||||
Net cash used in investing activities | (5,585,414 | ) | (2,915,785 | ) | (2,096,154 | ) | (306,904 | ) | ||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||
Proceeds from borrowings | 695,000 | 1,050,000 | — | — | ||||||||||||||||
Proceeds from bonds issuance | — | — | 3,499,093 | 512,312 | ||||||||||||||||
Repayments of borrowings | — | — | (3,900,000 | ) | (571,010 | ) | ||||||||||||||
Addition from minority interest | — | — | 1,000 | 147 | ||||||||||||||||
Dividends paid to minority interests’ shareholders | — | — | (88 | ) | (13 | ) | ||||||||||||||
Dividends paid to the Company’s shareholders | (566,711 | ) | (566,683 | ) | (566,685 | ) | (82,970 | ) | ||||||||||||
Net cash generated from / (used in) financing activities | 128,289 | 483,317 | (966,680 | ) | (141,534 | ) | ||||||||||||||
Net decrease in cash and cash equivalents | (3,499,480 | ) | (791,399 | ) | (445,301 | ) | (65,198 | ) | ||||||||||||
Cash and cash equivalents, at beginning of year | 5,851,831 | 2,352,351 | 1,560,952 | 228,544 | ||||||||||||||||
Cash and cash equivalents, at end of year | 34 | (c) | 2,352,351 | 1,560,952 | 1,115,651 | 163,346 | ||||||||||||||
Year ended December 31, | ||||||||||||||||||
Note | 2010 RMB | 2011 RMB | 2012 RMB | 2012 US$* | ||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||
Cash generated from operations | 34(a) | 3,889,382 | 3,933,083 | 2,875,017 | 461,479 | |||||||||||||
Interest paid | (167,650 | ) | (167,650 | ) | (167,650 | ) | (26,910 | ) | ||||||||||
Income tax paid | (390,274 | ) | (436,375 | ) | (529,694 | ) | (85,023 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||||
Net cash generated from operating activities | 3,331,458 | 3,329,058 | 2,177,673 | 349,546 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Cash flows from investing activities: | ||||||||||||||||||
Payments for acquisition of fixed assets and construction-in-progress, and prepayment for fixed assets, net of related payables | (1,158,399 | ) | (943,390 | ) | (1,836,154 | ) | (294,727 | ) | ||||||||||
Proceeds from disposal of fixed assets; leasehold land and construction-in-progress | 34(b) | 31,156 | 557 | 41,071 | 6,592 | |||||||||||||
Proceeds from disposal of subsidiary | — | 144 | — | — | ||||||||||||||
Government grants received | — | 4,100 | — | — | ||||||||||||||
Interest received | 29,127 | 28,203 | 116,688 | 18,730 | ||||||||||||||
Increase in short-term deposits with maturities more than three months, net | (94,500 | ) | (3,077,500 | ) | (488,000 | ) | (78,331 | ) | ||||||||||
Dividends received | 3,853 | 4,263 | 5,500 | 883 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Net cash used in investing activities | (1,188,763 | ) | (3,983,623 | ) | (2,160,895 | ) | (346,853 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||||
Cash flows from financing activities: | ||||||||||||||||||
Dividends paid to non-controlling interests | (5 | ) | (36 | ) | (10 | ) | (2 | ) | ||||||||||
Dividends paid to the Company’s shareholders | (566,683 | ) | (637,533 | ) | (708,354 | ) | (113,700 | ) | ||||||||||
Payments for management fee of bond payables | (32,600 | ) | (167 | ) | (158 | ) | (25 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||||
Net cash used in financing activities | (599,288 | ) | (637,736 | ) | (708,522 | ) | (113,727 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||||
Net increase/(decrease) in cash and cash equivalents | 1,543,407 | (1,292,301 | ) | (691,744 | ) | (111,034 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||||
Cash and cash equivalents at beginning of year | 1,115,651 | 2,659,058 | 1,366,757 | 219,383 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Cash and cash equivalents at end of year | 34(c) | 2,659,058 | 1,366,757 | 675,013 | 108,349 | |||||||||||||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
* | Translation of amounts from Renminbi (“RMB”) into United States dollars (“US$”) for the convenience of the reader has been made at US$1.00= |
F-6
Chairman | General Manager | Chief Accountant |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2009, 20082010, 2011 AND 2007
2012
(Amounts in thousands)
Attributable to equity holders | ||||||||||||||||||||||||||||
Discretionary | ||||||||||||||||||||||||||||
Statutory surplus | surplus | |||||||||||||||||||||||||||
Share capital | reserve | reserve | Minority | Total | ||||||||||||||||||||||||
RMB | Share premium | RMB | RMB | Retained earnings | interest | equity | ||||||||||||||||||||||
(Note 21) | RMB | (Note 22) | (Note 22) | RMB | RMB | RMB | ||||||||||||||||||||||
Balance at January 1, 2007 | 7,083,537 | 10,202,469 | 1,268,683 | 346,034 | 1,268,285 | 50,922 | 20,219,930 | |||||||||||||||||||||
Total comprehensive income | — | — | — | — | 1,431,415 | 4,787 | 1,436,202 | |||||||||||||||||||||
Adjustment to deferred tax arising from group reorganisation brought forward due to change of income tax rate (Note 31) | — | 92,021 | — | — | — | — | 92,021 | |||||||||||||||||||||
Appropriation from retained earnings | — | — | 139,778 | — | (139,778 | ) | — | — | ||||||||||||||||||||
Reversal of appropriations | — | — | (2,766 | ) | — | 2,766 | ||||||||||||||||||||||
Dividends relating to 2006 | — | — | — | — | (566,683 | ) | — | (566,683 | ) | |||||||||||||||||||
Balance at December 31, 2007 | 7,083,537 | 10,294,490 | 1,405,695 | 346,034 | 1,996,005 | 55,709 | 21,181,470 | |||||||||||||||||||||
Balance at January 1, 2008 | 7,083,537 | 10,294,490 | 1,405,695 | 346,034 | 1,996,005 | 55,709 | 21,181,470 | |||||||||||||||||||||
Total comprehensive income | — | — | — | — | 1,224,129 | 239 | 1,224,368 | |||||||||||||||||||||
Appropriation from retained earnings (Note 22) | — | — | 121,444 | — | (121,444 | ) | — | — | ||||||||||||||||||||
Reversal of appropriations (Note 22) | — | — | (33,969 | ) | (41,975 | ) | 75,944 | — | — | |||||||||||||||||||
Dividends relating to 2007 | — | — | — | — | (566,683 | ) | — | (566,683 | ) | |||||||||||||||||||
Balance at December 31, 2008 | 7,083,537 | 10,294,490 | 1,493,170 | 304,059 | 2,607,951 | 55,948 | 21,839,155 | |||||||||||||||||||||
Balance at January 1, 2009 | 7,083,537 | 10,294,490 | 1,493,170 | 304,059 | 2,607,951 | 55,948 | 21,839,155 | |||||||||||||||||||||
Total comprehensive income | — | — | — | — | 1,364,521 | (1,063 | ) | 1,363,458 | ||||||||||||||||||||
Appropriation from retained earnings (Note 22) | — | — | 134,902 | — | (134,902 | ) | — | — | ||||||||||||||||||||
Dividends relating to 2008 | — | — | — | — | (566,683 | ) | (88 | ) | (566,771 | ) | ||||||||||||||||||
Addition from minority interests | — | 80 | — | — | — | 920 | 1,000 | |||||||||||||||||||||
Balance at December 31, 2009 | 7,083,537 | 10,294,570 | 1,628,072 | 304,059 | 3,270,887 | 55,717 | 22,636,842 | |||||||||||||||||||||
Balance at December 31, 2009 (*) | US$ | 1,037,121 | US$ | 1,507,258 | US$ | 238,371 | US$ | 44,518 | US$ | 478,900 | US$ | 8,157 | US$ | 3,314,325 | ||||||||||||||
Attributable to equity holders | ||||||||||||||||||||||||||||||||||||
Share capital (Note 21) | Share premium RMB | Statutory surplus reserve RMB (Note 22) | Discretionary surplus reserve RMB (Note 22) | Other reserve | Retained earnings | Total RMB | Non-controlling interests RMB | Total equity RMB | ||||||||||||||||||||||||||||
Balance at January 1, 2010 | 7,083,537 | 11,564,581 | 1,628,072 | 304,059 | — | 2,668,389 | 23,248,638 | 55,717 | 23,304,355 | |||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | — | 1,486,062 | 1,486,062 | (1,144 | ) | 1,484,918 | ||||||||||||||||||||||||||
Appropriations from retained earnings | — | — | 155,826 | — | — | (155,826 | ) | — | — | — | ||||||||||||||||||||||||||
Dividends relating to 2009 | — | — | — | — | — | (566,683 | ) | (566,683 | ) | (14 | ) | (566,697 | ) | |||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance at December 31, 2010 | 7,083,537 | 11,564,581 | 1,783,898 | 304,059 | — | 3,431,942 | 24,168,017 | 54,559 | 24,222,576 | |||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance at January 1, 2011 | 7,083,537 | 11,564,581 | 1,783,898 | 304,059 | — | 3,431,942 | 24,168,017 | 54,559 | 24,222,576 | |||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | — | 1,804,107 | 1,804,107 | (1,735 | ) | 1,802,372 | ||||||||||||||||||||||||||
Appropriations from retained earnings (Note 22) | — | — | 181,138 | — | — | (181,138 | ) | — | — | — | ||||||||||||||||||||||||||
Dividends relating to 2010 | — | — | — | — | — | (637,518 | ) | (637,518 | ) | (22 | ) | (637,540 | ) | |||||||||||||||||||||||
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|
|
|
|
|
|
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|
|
|
|
|
| |||||||||||||||||||
Balance at December 31, 2011 | 7,083,537 | 11,564,581 | 1,965,036 | 304,059 | — | 4,417,393 | 25,334,606 | 52,802 | 25,387,408 | |||||||||||||||||||||||||||
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|
|
|
|
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|
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|
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|
|
|
| |||||||||||||||||||
Balance at January 1, 2012 | 7,083,537 | 11,564,581 | 1,965,036 | 304,059 | — | 4,417,393 | 25,334,606 | 52,802 | 25,387,408 | |||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | — | 1,318,938 | 1,318,938 | (1,953 | ) | 1,316,985 | ||||||||||||||||||||||||||
Special reserve-Safety Production Fund (Note 22) | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Appropriation | — | — | — | — | 134,265 | (134,265 | ) | — | — | — | ||||||||||||||||||||||||||
Utilization | — | — | — | — | (134,265 | ) | 134,265 | — | — | — | ||||||||||||||||||||||||||
Appropriations from retained earnings (Note 22) | — | — | 133,171 | — | — | (133,171 | ) | — | — | — | ||||||||||||||||||||||||||
Dividends relating to 2011 | — | — | — | — | (708,354 | ) | (708,354 | ) | — | (708,354 | ) | |||||||||||||||||||||||||
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| |||||||||||||||||||
Balance at December 31, 2012 | 7,083,537 | 11,564,581 | 2,098,207 | 304,059 | — | 4,894,806 | 25,945,190 | 50,849 | 25,996,039 | |||||||||||||||||||||||||||
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| |||||||||||||||||||
Balance at December 31, 2012(*) | US$ | 1,137,004 | US$ | 1,856,273 | US$ | 336,790 | US$ | 48,806 | — | US$ | 785,684 | US$ | 4,164,557 | US$ | 8,162 | US$ | 4,172,719 | |||||||||||||||||||
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|
|
|
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|
|
The accompanying notes are an integral part of these consolidated financial statements.
* | Translation of amounts from Renminbi (“RMB”) into United States dollars (“US$”) for the convenience of the reader has been made at US$1.00= |
F-7
Chairman | General Manager | Chief Accountant |
================================================================================
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
1 | GENERAL INFORMATION | |
F-8
In May 1996, the Company issued 1,431,300,000 shares, representing 217,812,000 H Shares (“H Shares”) and 24,269,760 American Depositary Shares (“ADSs”, one ADS represents 50 H Shares) in a global public offering for cash of approximately RMB4,214,000,000 in order to finance the capital expenditure and working capital requirements of the Company and its subsidiaries (collectively defined as the “Group”).
The principal activities of the Group are the provision of passenger and freight transportation on railroad. The Group also operates certain other businesses, which principally include services offered in railway stations; and sales of food, beverages and merchandises on board the trains and in the railway stations.
The registered address of the Company is No. 1052 Heping Road, Shenzhen, Guangdong Province, the People’s Republic of China. The business license for the Company will expire in 2056.
As at 31 December 2012, the Company had in total approximately 34,600 employees, representing an increase of 1,200 as compared with that of 31 December 2011.
The financial statements were authorised for issue by the board of directors of the Company on April 24, 2013.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
GENERAL INFORMATION (CONTINUED) |
The English names of all companies listed in the financial statements are direct translations of their registered names in Chinese.
2 | PRINCIPAL ACCOUNTING POLICIES |
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
2.1 | ||
Basis of | ||
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by International Accounting Standards Board (“IASB”). The consolidated financial statements have been prepared under the historical cost convention.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4.
(a) | New |
F-9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
2.1 | Basis of preparation (continued) | |
(b) |
F-10
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
2.1 | Basis of preparation (continued) | |
(c) |
Effective for annual periods beginning on or | |||||
IAS 1 | |||||
1 July 2012 | |||||
IFRS1 ‘First time adoption’, on government loans - Amendment | 1 January 2013 | ||||
IFRS 10 ‘Consolidated financial statements’ - Amendment | 1 January 2013 | ||||
IFRS 11 ‘Joint arrangements’ - Amendment | 1 January 2013 | ||||
IFRS 12 ‘Disclosures of interests in other entities’ - Amendment | 1 January 2013 | ||||
IFRS 13 ‘Fair value measurement’ - Clarification | 1 January 2013 | ||||
IAS 19 ‘Employee benefits’ - Amendment | 1 January 2013 | ||||
IAS 28 ‘Investment in associates and joint ventures’ - Amendment | 1 January 2013 | ||||
IAS 27 (revised 2011) ‘Separate financial statements’ | 1 January 2013 | ||||
IFRS 7 ‘Financial instruments: Disclosures - Offsetting financial assets and financial liabilities’ - Amendment | 1 January 2013 | ||||
IFRIC- Int 20 ‘Stripping costs in the | |||||
IAS 32 ‘Financial instruments: Presentation - Offsetting financial assets and financial liabilities’ - Amendment | 1 January 2014 | ||||
IFRS | 1 January 2015 | ||||
IFRS 7 and | 1 January 2015 |
F-11
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) | |
2.2 | |||
F-12
2.2.1 | Consolidation |
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The Group also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de-facto control. De-facto control may arise from circumstances such as enhanced minority rights or contractual terms between shareholders, etc.
Inter-company transactions, balances, income and expenses on transactions between group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
(a) | Business combinations |
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquirer shall remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognise the resulting gain or loss, if any, in profit or loss.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
2.2 | Subsidiaries (continued) |
2.2.1 | Consolidation (continued) | |
(a) |
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.
(b) |
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
(c) | ||
F-13
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
2.3 | Associates |
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The Group’s investment in associates includes goodwill identified on acquisition.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.
The Group’s share of post-acquisition profit or loss is recognised in the comprehensive income statement, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.
The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to ‘share of result of associates’ in the comprehensive income statement.
Profits or losses and other comprehensive income resulting from upstream and downstream transactions between the Group and its associate are recognised in the Group’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.
Segment reporting |
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the senior executives that make strategic decisions.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
2.5 | ||
Foreign currency | ||
(a) | Functional and presentation currency | |
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Renminbi (“RMB”), which is the Company’s functional and the Group’s presentation currency.
(b) | Transactions and balances |
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the comprehensive income statement.
Foreign exchange gains and losses are presented in the consolidated comprehensive income statement within ‘Finance costs’.
2.6 | ||
Fixed assets |
Fixed assets are stated at historical cost less depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items (for the case of fixed assets acquired by the Company from Predecessor during the Restructuring, the revaluated amount in the Restructuring was deemed costs).
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the comprehensive income statement during the financial period in which they are incurred.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
2.6 | Fixed assets |
Depreciation is calculated using the straight-line method to allocate the cost amount, after taking into account the estimated residual value of not more than 4% of cost, of each asset over its estimated useful life. The estimated useful lives are as follows:
Buildings (Note a) | 20 to 40 years | |||
Tracks, bridges and service roads (Note a) | 16 to 100 years | |||
Locomotives and rolling stock | 20 years | |||
Communications and signalling systems | 8 to 20 years | |||
Other machinery and equipment | 4 to 25 years |
F-14
Pursuant to the relevant laws and regulations in the PRC governing the land use right lease grants, the Group has the right to renew the respective leases up to a period not less than 50 years with additional cost paid. This right can be exercised within one year before the expiry of the initial Lease Term, and can only be denied if such renewals are considered to be detrimental to the public interest. Accordingly, the directors of the Company consider that the approval process to be perfunctory. In addition, based on the provision of the land use right operating lease agreement entered into with the single largest shareholder (details contained in Note 36(b)), the Company can renew the lease at its own discretion upon expiry of the Operating Lease Term. Based on the above considerations, the directors have determined the estimated useful lives of these assets to extend beyond the initial Lease Term as well as the Operating Lease Term.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2.10).
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within “other (expenses)/income and other (losses)/gains – net”, included in the comprehensive income statement.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
2.7 | Construction-in-progress |
Construction-in-progress represents buildings, tracks, bridges and service roads, mainly includes the construction related costs for the associated facilities of the existing railway line of the Group. Construction-in-progress is stated at cost, which includes all expenditures and other direct costs, site restoration costs, prepayments attributable to the construction and interest charges arising from borrowings used to finance the construction during the construction period, less impairment loss. Construction-in-progress is not depreciated until such assets are completed and ready for their intended use.
Leasehold land payments | ||
F-15
2.9 | Goodwill |
Goodwill represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of identifiable net assets acquired. Goodwill arising from acquisitions of subsidiaries’ business is disclosed separately on the Balance Sheet.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units (“CGUs”), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
Impairment of investment in subsidiaries, associates and non-financial assets |
Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that subjected to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
Impairment testing of the investments in subsidiaries or associates is required upon receiving dividends from these investments if the dividend exceeds the total comprehensive income of the subsidiary or associate in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.
2.11 | ||
Financial assets |
2.11.1 | Classification | |
The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available-for-sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Other than loans and receivables and available-for-sale financial assets, the Group did not hold any financial assets carried at fair value through profit or loss during the year ended December 31, 2011 and 2012.
(a) | Loans and receivables |
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets except for the amounts that are settled or expected to be settled more than 12 months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise “long-term receivables”, “trade and other receivables”, “short term deposits” and “cash and cash equivalents” in the balance sheet (Notes 2.16 and 2.17).
(b) | Available-for-sale financial assets |
F-16
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
Financial assets (continued) |
2.11.2 | Recognition and measurement |
Regular way purchases and sales of financial assets are recognised on the trade-date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Available-for-sale financial assets are subsequently carried at fair value, except for those investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, which shall be measured at cost. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Loans and receivables are subsequently carried at amortized cost using the effective interest method.
Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognised in other comprehensive income.
When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the comprehensive income statement as ‘gains and losses from investment securities’.
Dividends on available-for-sale equity instruments are recognised in the comprehensive income statement as part of other income when the Group’s right to receive payments is established.
The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group established fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models, making maximum use of market inputs and relying as little as possible on entity-specific inputs. In case of unlisted equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably determined via valuation techniques, they are measured at cost, subject to impairment review.
2.12 | ||
Offsetting financial instruments | ||
F-17
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
Impairment of financial assets | ||
(a) | Assets carried at amortised cost | |
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:
Significant financial difficulty of the issuer or obligor;
A breach of contract, such as a default or delinquency in interest or principal payments;
The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider;
It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;
The disappearance of an active market for that financial asset because of financial difficulties; or
Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including:
(i) | adverse changes in the payment status of borrowers in the portfolio; | ||
(ii) | national or local economic conditions that correlate with defaults on the assets in the portfolio. |
The Group first assesses whether objective evidence of impairment exists. | ||
F-18
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the comprehensive income statement.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
Impairment of financial assets (continued) | ||
(b) | Assets classified as available for sale |
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in the consolidated comprehensive income statement. Impairment losses recognised in the consolidated comprehensive income statement on equity instruments are not reversed through the consolidated comprehensive income statement.
2.14 | Long-term prepaid expenses |
Long-term prepaid expenses include the various expenditures that have been incurred but should be recgonised as expenses over more than one year in the current and subsequent periods. Long-term prepaid expenses are amortized on the straight-line basis over the expected beneficial period and are presented at actual expenditure net of accumulated amortisation.
2.15 | ||
Deferred employee costs | ||
F-19
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
2.16 | Materials and supplies |
Materials and supplies are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method. Materials and supplies are charged as fuel costs and repair and maintenance expenses when consumed, or capitalised to fixed assets when the items are installed with the related fixed assets, whichever is appropriate. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable expenses.
Trade and other receivables |
Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection of trade and other receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.
Trade and other receivables are recognised initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment.
2.18 | ||
Cash and cash equivalents |
Cash and cash equivalents include cash in hand; deposits held at call with banks; and other short-term highly liquid investments with original maturities of three months or less.
2.19 | ||
Share capital |
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
2.20 | ||
Trade payables | ||
F-20
The Group derecognises financial liability when, and only when, the Group’s obligations are discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
2.21 | Borrowings |
Borrowings (including bonds payable) are recognised initially at fair value, net of transaction costs incurred. They are subsequently carried at amortized cost; and any difference between proceeds (net of transaction costs) and the redemption value is recognised in the comprehensive income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortized over the period of the facility to which it relates.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.
Borrowing costs |
General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
2.23 | Current and deferred income tax |
The tax expense for the period comprises current and deferred tax. Tax is recognised in the consolidated comprehensive income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
(a) | ||
F-21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
2.23 | Current and deferred income tax (continued) | |
(b) | ||
F-22
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
(c) | Offsetting |
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
2.24 | Employee benefits | |
(a) | ||
The Group pays contributions to defined contribution schemes operated by the local government for employee benefits in respect of pension and housing, etc. The Group has no further payment obligations once the contributions have been paid. The contributions to the defined contribution schemes are recognised as staff costs when they are due.
(b) | ||
F-23
2.25 | Provisions |
Provisions for environmental restoration, restructuring costs and legal claims are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
2.26 | Revenue recognition | |
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. The Group bases its estimates of return on historical results, taking into consideration the type of customer, the type of transactions and the specifics of each arrangement.
(a) | ||
Revenue from railway business includes revenue from passenger and freight services, revenue from railway network usage and other transportation related services. Other transportation related services include the railway transportation management service provided to other railway companies and other service provided in relation to passenger and freight transportation. Revenue from railway business is recognised when the services are rendered and revenue can be reliably measured.
(b) | ||
F-24
(c) | Rental income |
Revenue from operating lease arrangements is recognised on a straight-line basis over the period of the respective leases.
2.27 | Interest income |
Interest income is recognised using the effective interest method. When a loan and receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired receivables is recognised using the original effective interest rate.
2.28 | Dividend income |
Dividend income is recognised when the right to receive payment is established.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
2.29 | Government grants |
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognised in the comprehensive income statement over the period necessary to match them with the costs that they are intended to compensate.
Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants and are credited to the comprehensive income statement on a straight-line basis over the expected lives of the related assets.
2.30 | Operating leases |
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the comprehensive income statement on a straight-line basis over the period of the lease.
2.31 | Dividend distribution |
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders.
3 | FINANCIAL RISK MANAGEMENT |
3.1 | Financial risk factor |
The Group’s activities expose it to a variety of financial risks: price risk, foreign currency risk, cash flow and fair value interest rate risk, credit risk, and liquidity risk. The Group’s overall risk management strategy seeks to minimise the potential adverse effects on the financial performance of the Group.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
3 | FINANCIAL RISK MANAGEMENT (CONTINUED) |
3.1 | Financial risk factor (continued) |
(a) | Price risk |
The Group is exposed to price risk because of investments held by the Group and classified as available-for-sale on the consolidated balance sheet.
To manage its price risk arising from investments in equity interests, the Group diversifies its portfolio. Diversification of the portfolio is made in accordance with the limits set by the Group.
(b) | Foreign currency risk | |
Currency | As of December 31, | |||||||||||
denomination | 2008 | 2009 | ||||||||||
Monetary assets and liabilities | (RMB’000) | (RMB’000) | ||||||||||
Cash and cash equivalents | USD | 3,176 | 455 | |||||||||
Cash and cash equivalents | HKD | 30,452 | 66,801 | |||||||||
Other receivables | HKD | 529 | 994 | |||||||||
Trade payables | USD | (940 | ) | (939 | ) |
The Group mainly operates in the PRC with most of the transactions settled in RMB. RMB is also the functional currency of the Company and its subsidiaries. RMB is not freely convertible into other foreign currencies. The conversion of RMB denominated balances into foreign currencies is subject to the rates and regulations of foreign exchange control promulgated by the PRC government. Any foreign currency denominated monetary assets and liabilities other than in RMB would subject the Group to foreign exchange exposure.
The Group’s objective of managing the foreign currency risk is to minimise potential adverse effects arising from foreign transaction movements. Depending on volatility of specific foreign currency exposed, measures are taken by management to manage the foreign currency positions.
The following table shows the Group’s exposures to foreign currency rate fluctuation arising from foreign currency denominated monetary assets and liabilities:
Currency | As at December 31, | |||||||||
Monetary assets and liabilities | denomination | 2011 | 2012 | |||||||
RMB’000 | RMB’000 | |||||||||
Cash and cash equivalents | USD | 261 | 39 | |||||||
Cash and cash equivalents | HKD | 106,054 | 60,910 | |||||||
Other receivables | HKD | 244 | 234 |
The Group may experience a loss as a result of any foreign currency exchange rate fluctuations in connection with monetary assets shown above. The Group has not used any means to hedge the exposure.
As at December 31, 2012, if RMB had weakened/strengthened by 5% against the HKD with all other variables held constant, profit before tax for the year would have been RMB3,057,000 (2011: RMB5,300,000) higher/lower, mainly as a result of foreign exchange gains/losses on translation of HKD-denominated cash in banks. The impact of exchange fluctuations of USD is not significant.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
3 | FINANCIAL RISK MANAGEMENT (CONTINUED) |
3.1 | ||
(c) | Cash flow and fair value interest rate risk |
Other than deposits held in banks, the Group does not have significant interest-bearing assets. The average interest rate of deposits held in banks in the PRC throughout the year was approximately 2.86% (2010: 0.87% and 2011: 2.12%). Any change in the interest rate promulgated by the People’s Bank of China from time to time is not considered to have a significant impact to the Group.
The Group’s interest rate risk which affects its income and operating cash flows mainly arises from bonds payable. The bonds bear interest at fixed rates, and expose the Group to fair value interest rate risk.
(d) | ||
F-25
As at December 31, | As at December 31, 2012 | |||||||
RMB’000 | RMB’000 | |||||||
Trade receivables | ||||||||
Due from MOR | 18,017 | 159,074 | ||||||
Due from related parties | 475,643 | 182,408 | ||||||
Due from third parties | 103,120 | 597,896 | ||||||
|
|
|
| |||||
596,780 | 939,378 | |||||||
|
|
|
| |||||
Other receivables excluding prepayments | ||||||||
Due from related parties | 13,897 | 2,114 | ||||||
Due from third parties | 66,801 | 77,541 | ||||||
|
|
|
| |||||
80,698 | 79,655 | |||||||
|
|
|
| |||||
Long-term receivable | ||||||||
Due from third parties | 34,108 | 30,863 | ||||||
|
|
|
|
For trade and other receivables, management performs ongoing credit evaluations of its customers/debtors’ financial condition and generally does not require collateral from the customers/debtors. After assessing the expected realisability and timing for collection of the outstanding balances, the Group maintains a provision for impairment of receivables and actual losses incurred have been within management’s expectation.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
3 | FINANCIAL RISK MANAGEMENT (CONTINUED) |
3.1 | Financial risk factor (continued) | |
(d) | ||
Credit risk | ||
As at December 31, | As at December 31, 2012 | |||||||
RMB’000 | RMB’000 | |||||||
Cash at bank and short-term bank deposits | ||||||||
Placed in listed banks in the PRC | 5,052,672 | 4,848,956 | ||||||
Placed in unlisted banks in the PRC | 35 | — | ||||||
|
|
|
| |||||
5,052,707 | 4,848,956 | |||||||
|
|
|
|
Cash and short term liquid investments are placed with reputable banks. There was no recent history of default of cash and cash equivalents and short-term deposits from such financial institutions.
There were no other financial assets carrying a significant exposure to credit risk.
(e) | Liquidity risk | |
Prudent liquidity risk management includes maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Management monitors rolling forecasts of the Group’s liquidity reserves (comprising undrawn borrowing facilities and cash and cash equivalents) on the basis of expected cash flows.
F-26
Group | Less than 1 year | Between 1 and 2 years | Between 2 and 5 years | |||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
As at December 31, 2011 | ||||||||||||
Bonds payable (including interests) (Note 24) | 167,650 | 167,650 | 3,660,760 | |||||||||
Trade and other payables excluding statutory liabilities and advance (Notes 26 and 27) | 1,496,980 | — | — | |||||||||
Dividends payable | 25 | — | — | |||||||||
Payables for fixed assets and construction-in-progress | 814,129 | — | — | |||||||||
|
|
|
|
|
| |||||||
As at December 31, 2012 | ||||||||||||
Bonds payable (including interests) (Note 24) | 167,650 | 3,660,760 | — | |||||||||
Trade and other payables excluding statutory liabilities and advance (Notes 26 and 27) | 1,565,391 | — | — | |||||||||
Dividends payable | 15 | — | — | |||||||||
Payables for fixed assets and construction-in-progress | 915,081 | — | — | |||||||||
|
|
|
|
|
|
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
3 | FINANCIAL RISK MANAGEMENT (CONTINUED) | |
Less than | Between 1 and 2 | Between 2 and 5 | ||||||||||
1 year | years | years | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
At December 31, 2009 | ||||||||||||
Bonds payable (including interests) (Note 24) | 167,650 | 167,650 | 3,996,642 | |||||||||
Trade and other payables excluding statutory liabilities (Notes 26 and 27) | 1,225,037 | — | — | |||||||||
Payables for fixed assets and construction-in-progress | 674,652 | — | — | |||||||||
At December 31, 2008 | ||||||||||||
Borrowings (including interests) (Note 23) | 737,185 | 188,704 | 3,559,551 | |||||||||
Trade and other payables excluding statutory liabilities (Notes 26 and 27) | 1,189,912 | — | — | |||||||||
Payables for fixed assets and construction-in-progress | 764,609 | — | — | |||||||||
3.2 | Capital risk management | |
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Total bank borrowings and bonds payable (Notes 23 and 24) | 3,900,000 | 3,465,801 | ||||||
Less: Cash and cash equivalents (Note 34(c)) | (1,560,952 | ) | (1,115,651 | ) | ||||
Net Debt | 2,339,048 | 2,350,150 | ||||||
Total Equity | 21,839,155 | 22,636,842 | ||||||
Total capital | 24,178,203 | 24,986,992 | ||||||
Gearing ratio | 10 | % | 9 | % | ||||
F-27
The Group monitors capital by regularly reviewing the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total bonds payable less cash and cash equivalents. Total capital is calculated as ‘equity’, as shown in the consolidated balance sheet plus net debt.
As at December 31, 2011 | As at December 31, 2012 | |||||||
RMB’000 | RMB’000 | |||||||
Total bonds payable (Notes 24) | 3,478,568 | 3,485,473 | ||||||
Less: Cash and cash equivalents (Note 34(c)) | (1,366,757 | ) | (675,013 | ) | ||||
|
|
|
| |||||
Net debt | 2,111,811 | 2,810,460 | ||||||
Total equity | 25,387,408 | 25,996,039 | ||||||
|
|
|
| |||||
Total capital | 27,499,219 | 28,806,499 | ||||||
Gearing ratio | 8 | % | 10 | % | ||||
|
|
|
|
The increase in the gearing ratio in 2012 is primarily due to the decrease in cash and cash equivalents, as more cash and cash equivalents were invested in the form of time deposits in 2012.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
3 | FINANCIAL RISK MANAGEMENT (CONTINUED) |
3.3 | Fair value estimation | |
According to amendment to IFRS 7 for financial instruments that are measured in the balance sheet at fair value, it requires disclosure of fair value measurements by level of following fair value measurement hierarchy:
Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
As at December 31, 2011 and 2012, the Group did not have any financial instruments that were measured at fair value.
The fair value of bonds payable for disclosure purposes are estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. As at December 31, 2012, the fair value of bonds payable was approximately RMB3,463,237,000 (December 31, 2011: RMB3,405,771,000). The fair values are determined by discounted cash flow method using a discount rate of 5.36% (2011: 5.79%).
As at December 31, 2011 and 2012, the fair values of other financial instruments approximated their carrying values.
4 | |||
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS |
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
4.1 | ||
Critical accounting estimates and assumptions | ||
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.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
4 | CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) |
4.1 | Critical accounting estimates and assumptions |
(a) | The estimates of the depreciable lives of fixed assets | |
The estimate of depreciable lives of fixed assets, especially tracks, bridges and service roads, was made by the directors with reference to the historical usage of the assets; their expected physical wear and tear; results of recent durability assessment performed; technical or commercial obsolescence arising from changes or improvements in production of similar fixed assets, the right of the Group to renew the land use right grants and the land use right lease on which these assets are located (Notes 2.5 and 36(b)), and service roads, was made by the directors with reference to the following: (1) the historical usage of the assets; (2) their expected physical wear and tear; (3) results of recent durability assessment performed; (4) technical or commercial obsolescence arising from changes or improvements in production of similar fixed assets; (5) the right of the Group to renew the land use right grants and the land use right lease on which these assets are located (Notes 2.8 and 36(b)); (6) the changes in market demand for, or legal or comparable limits imposed on, the use of such fixed assets.
F-28
(b) | Estimated impairment of goodwill | |
The Group tests whether goodwill has suffered any impairment annually or, whenever there is an indication of impairment, in accordance with the accounting policy stated in Note 2.9. The recoverable amounts of cash-generating units have been determined based on the higher of an asset’s fair value less costs to sell and value in use. These calculations require the use of estimates (Note 9).
(c) | Estimated impairment of non-financial assets (other than goodwill) | |
In determining whether an asset is impaired or the event previously causing the impairment no longer exists, management has to exercise judgement, particularly in assessing: (1) whether an event has occurred that may affect the asset value or such event affecting the asset value has not been in existence; (2) whether the carrying value of an asset can be supported by the net present value of future cash flows which are estimated based upon the continued use of the asset or derecognition; and (3) the appropriate key assumptions to be applied in preparing cash flow projections including whether these cash flow projections are discounted using an appropriate rate. Changing the assumptions selected by management to determine the level of impairment, including the discount rate or the growth rate assumptions in the cash flow projections, could materially affect the net present value used in the impairment test.
F-29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
5 | SEGMENT INFORMATION | |
The Company’s Business | All other segments | Total | ||||||||||||||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | ||||||||||||||||||||||||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | ||||||||||||||||||||||||||||
Total revenue (all from external customers) | 12,212,031 | 11,530,435 | 10,365,956 | 173,726 | 158,220 | 142,548 | 12,385,757 | 11,688,655 | 10,508,504 | |||||||||||||||||||||||||||
Segment result | 1,690,726 | 1,493,926 | 1,661,254 | 21,653 | 7,736 | 7,297 | 1,712,379 | 1,501,662 | 1,668,551 | |||||||||||||||||||||||||||
Finance costs | (236,437 | ) | (213,376 | ) | (98,597 | ) | 150 | (93 | ) | (110 | ) | (236,287 | ) | (213,469 | ) | (98,487 | ) | |||||||||||||||||||
Share of results of associates | 773 | 128 | 1,830 | — | — | — | 773 | 128 | 1,830 | |||||||||||||||||||||||||||
Depreciation | (1,257,432 | ) | (1,167,462 | ) | (1,012,396 | ) | (4,712 | ) | (4,580 | ) | (4,704 | ) | (1,262,144 | ) | (1,172,042 | ) | (1,017,100 | ) | ||||||||||||||||||
Amortization of leasehold land payments | (15,001 | ) | (15,001 | ) | (15,002 | ) | (988 | ) | (602 | ) | (1,019 | ) | (15,989 | ) | (15,603 | ) | (16,021 | ) | ||||||||||||||||||
Amortization of deferred employee costs | (20,048 | ) | (31,867 | ) | (24,339 | ) | (108 | ) | (138 | ) | — | (20,156 | ) | (32,005 | ) | (24,339 | ) | |||||||||||||||||||
Recognition of employee benefits obligations | — | (76,382 | ) | (63,347 | ) | (1,200 | ) | (9,606 | ) | (1,909 | ) | (1,200 | ) | (85,988 | ) | (65,256 | ) | |||||||||||||||||||
Impairment of fixed assets | — | — | (6,359 | ) | — | — | — | — | — | (6,359 | ) | |||||||||||||||||||||||||
Impairment of construction-in-progress | (448 | ) | — | — | — | — | — | (448 | ) | — | — | |||||||||||||||||||||||||
Provision/(reversal of provision) for doubtful accounts | (299 | ) | (2,280 | ) | 8,236 | (115 | ) | (486 | ) | 24 | (414 | ) | (2,766 | ) | 8,260 | |||||||||||||||||||||
The Company’s Business | All other segments | Total | ||||||||||||||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | ||||||||||||||||||||||||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | ||||||||||||||||||||||||||||
Segment result | 1,690,726 | 1,493,926 | 1,661,254 | 21,653 | 7,736 | 7,297 | 1,712,379 | 1,501,662 | 1,668,551 | |||||||||||||||||||||||||||
Income tax expense | (343,207 | ) | (274,263 | ) | (227,876 | ) | (5,714 | ) | (3,031 | ) | (4,473 | ) | (348,921 | ) | (277,294 | ) | (232,349 | ) | ||||||||||||||||||
Profit for the year | 1,347,519 | 1,219,663 | 1,433,378 | 15,939 | 4,705 | 2,824 | 1,363,458 | 1,224,368 | 1,436,202 | |||||||||||||||||||||||||||
F-30
Senior executives 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 is measured in a manner consistent with that in the financial statements.
The Company’s Business | All other segments | Elimination | Total | |||||||||||||||||||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2010 | 2011 | 2012 | 2010 | 2011 | 2012 | 2010 | 2011 | 2012 | |||||||||||||||||||||||||||||||||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | |||||||||||||||||||||||||||||||||||||
Segment revenue | 13,249,298 | 14,339,356 | 14,697,073 | 245,977 | 351,479 | 394,813 | — | — | — | 13,495,275 | 14,690,835 | 15,091,886 | ||||||||||||||||||||||||||||||||||||
Inter-segment revenue | — | — | — | (10,827 | ) | — | — | — | — | — | (10,827 | ) | — | — | ||||||||||||||||||||||||||||||||||
Total revenue | 13,249,298 | 14,339,356 | 14,697,073 | 235,150 | 351,479 | 394,813 | — | — | — | 13,484,448 | 14,690,835 | 15,091,886 | ||||||||||||||||||||||||||||||||||||
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Segment result | 1,921,229 | 2,377,270 | 1,757,476 | 19,527 | 9,974 | 1,048 | (15,449 | ) | (8,907 | ) | (388 | ) | 1,925,307 | 2,378,337 | 1,758,136 | |||||||||||||||||||||||||||||||||
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Finance costs | (186,101 | ) | (190,832 | ) | (186,916 | ) | (71 | ) | (138 | ) | (157 | ) | — | — | — | (186,172 | ) | (190,970 | ) | (187,073 | ) | |||||||||||||||||||||||||||
Share of results of associates | 1,361 | 5,259 | 10,906 | — | — | — | — | — | — | 1,361 | 5,259 | 10,906 | ||||||||||||||||||||||||||||||||||||
Depreciation | 1,344,525 | 1,365,364 | 1,377,855 | 4,685 | 4,597 | 4,549 | — | — | — | 1,349,210 | 1,369,961 | 1,382,404 | ||||||||||||||||||||||||||||||||||||
Amortisation of leasehold land payments | 15,001 | 15,001 | 15,001 | 987 | 987 | 987 | — | — | — | 15,988 | 15,988 | 15,988 | ||||||||||||||||||||||||||||||||||||
Write-down and amortisation of deferred employee costs and amortisation of long-term prepaid expenses | 73,804 | 4,286 | 7,132 | 107 | 23 | 105 | — | — | — | 73,911 | 4,309 | 7,237 | ||||||||||||||||||||||||||||||||||||
Recognition of employee benefits obligations | 97,930 | — | 66,650 | 3,059 | 3,464 | — | — | — | — | 100,989 | 3,464 | 66,650 | ||||||||||||||||||||||||||||||||||||
Impairment of fixed assets | — | 4,709 | — | — | — | — | — | — | — | — | 4,709 | — | ||||||||||||||||||||||||||||||||||||
Impairment of materials and supplies | — | 21,590 | — | — | — | — | — | — | — | — | 21,590 | — | ||||||||||||||||||||||||||||||||||||
(Reversal of provision)/provision for doubtful accounts | (1,659 | ) | 106 | 1,464 | (2 | ) | — | 112 | — | — | — | (1,661 | ) | 106 | 1,576 | |||||||||||||||||||||||||||||||||
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GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
5 | SEGMENT INFORMATION (CONTINUED) | |
The Company’s Business | All other segments | Elimination | Total | |||||||||||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | |||||||||||||||||||||||||
Total segment assets | 28,605,980 | 28,147,670 | 239,228 | 223,247 | (182,594 | ) | (149,091 | ) | 28,662,614 | 28,221,826 | ||||||||||||||||||||||
Total segment assets include: | ||||||||||||||||||||||||||||||||
Investment in associates | 119,547 | 120,705 | — | — | — | — | 119,547 | 120,705 | ||||||||||||||||||||||||
Acquision of Yangcheng Railway Business | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Additions to non-current assets (other than financial instruments and deferred tax assets) | 1,536,507 | 3,479,126 | 6,705 | 1,432 | — | — | 1,543,212 | 3,480,558 | ||||||||||||||||||||||||
Total segment liabilities | 6,048,524 | 6,380,140 | 73,800 | 66,743 | (96,552 | ) | (64,212 | ) | 6,025,772 | 6,382,671 | ||||||||||||||||||||||
F-31
The Company’s Business | All other segments | Elimination | Total | |||||||||||||||||||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2010 | 2011 | 2012 | 2010 | 2011 | 2012 | 2010 | 2011 | 2012 | |||||||||||||||||||||||||||||||||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | |||||||||||||||||||||||||||||||||||||
Segment result | 1,921,229 | 2,377,270 | 1,757,476 | 19,527 | 9,974 | 1,048 | (15,449 | ) | (8,907 | ) | (388 | ) | 1,925,307 | 2,378,337 | 1,758,136 | |||||||||||||||||||||||||||||||||
Income tax expense | (434,752 | ) | (571,154 | ) | (436,671 | ) | (5,637 | ) | (4,811 | ) | (4,480 | ) | — | — | — | (440,389 | ) | (575,965 | ) | (441,151 | ) | |||||||||||||||||||||||||||
Profit for the year | 1,486,477 | 1,806,116 | 1,320,805 | 13,890 | 5,163 | (3,432 | ) | (15,449 | ) | (8,907 | ) | (388 | ) | 1,484,918 | 1,802,372 | 1,316,985 | ||||||||||||||||||||||||||||||||
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The Group is domiciled in the PRC. All the Group’s revenues were generated in the PRC, and the total assets are also located in the PRC.
The Company’s Business | All other segments | Elimination | Total | |||||||||||||||||||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2010 | 2011 | 2012 | 2010 | 2011 | 2012 | 2010 | 2011 | 2012 | |||||||||||||||||||||||||||||||||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | |||||||||||||||||||||||||||||||||||||
Total segment assets | 30,555,755 | 32,158,429 | 32,818,371 | 249,132 | 233,638 | 229,613 | (200,385 | ) | (184,720 | ) | (180,802 | ) | 30,604,502 | 32,207,347 | 32,867,182 | |||||||||||||||||||||||||||||||||
Total segment assets include: | ||||||||||||||||||||||||||||||||||||||||||||||||
Investment in associates | 120,661 | 125,920 | 136,826 | — | — | — | — | — | — | 120,661 | 125,920 | 136,826 | ||||||||||||||||||||||||||||||||||||
Additions to non-current assets (other than financial instruments and deferred tax assets) | 953,938 | 1,274,896 | 1,921,215 | 4,831 | 2,126 | 9,210 | — | — | — | 958,769 | 1,277,022 | 1,930,425 | ||||||||||||||||||||||||||||||||||||
Total segment liabilities | 6,410,992 | 6,845,068 | 6,892,559 | 94,864 | 88,895 | 99,595 | (123,930 | ) | (114,024 | ) | (121,011 | ) | 6,381,926 | 6,819,939 | 6,871,143 | |||||||||||||||||||||||||||||||||
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Revenues of approximately RMB12,008,821,000 (2010 and 2011: RMB11,520,697,000 and RMB12,076,872,000) of the Group were settled through the Ministry of Railway of the PRC (“MOR”)(Note 38). Except that, no revenues derived from a single external customer have exceeded 10% of the total revenues.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
6 | FIXED ASSETS |
Tracks, | Locomotives and | Communications and | ||||||||||||||||||||||||||
Leasehold | bridges and | rolling | signalling | Other machinery and | ||||||||||||||||||||||||
Buildings | improvements | service roads | stock | systems | equipment | Total | ||||||||||||||||||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | ||||||||||||||||||||||
At January 1, 2008 | ||||||||||||||||||||||||||||
Cost | 3,363,597 | 38,500 | 11,929,430 | 3,859,566 | 1,194,756 | 3,515,465 | 23,901,314 | |||||||||||||||||||||
Accumulated depreciation | (495,898 | ) | (38,500 | ) | (1,109,165 | ) | (727,703 | ) | (396,834 | ) | (1,131,215 | ) | (3,899,315 | ) | ||||||||||||||
Impairment | (6,359 | ) | — | — | — | — | (354 | ) | (6,713 | ) | ||||||||||||||||||
Net book amount | 2,861,340 | — | 10,820,265 | 3,131,863 | 797,922 | 2,383,896 | 19,995,286 | |||||||||||||||||||||
Year ended December 31, 2008 | ||||||||||||||||||||||||||||
Opening net book amount | 2,861,340 | — | 10,820,265 | 3,131,863 | 797,922 | 2,383,896 | 19,995,286 | |||||||||||||||||||||
Additions | 2,425 | — | — | 2,626,286 | 38,421 | 103,836 | 2,770,968 | |||||||||||||||||||||
Transfer from construction-in-progress (Note 7) | 326,841 | — | 1,634,785 | 13,363 | 219,002 | 173,079 | 2,367,070 | |||||||||||||||||||||
Government grants received | (8,675 | ) | — | (5,550 | ) | — | — | — | (14,225 | ) | ||||||||||||||||||
Reclassifications | (3,774 | ) | — | 1,002 | (13 | ) | (75,334 | ) | 78,119 | — | ||||||||||||||||||
Disposals | (3,867 | ) | — | (36,258 | ) | — | (1 | ) | (2,774 | ) | (42,900 | ) | ||||||||||||||||
Depreciation charges | (116,008 | ) | — | (174,916 | ) | (369,163 | ) | (166,678 | ) | (345,588 | ) | (1,172,353 | ) | |||||||||||||||
Closing net book amount | 3,058,282 | — | 12,239,328 | 5,402,336 | 813,332 | 2,390,568 | 23,903,846 | |||||||||||||||||||||
At December 31, 2008 | ||||||||||||||||||||||||||||
Cost | 3,686,870 | — | 13,519,696 | 6,499,176 | 1,364,722 | 3,900,756 | 28,971,220 | |||||||||||||||||||||
Accumulated depreciation | (622,229 | ) | — | (1,280,368 | ) | (1,096,840 | ) | (551,390 | ) | (1,509,991 | ) | (5,060,818 | ) | |||||||||||||||
Impairment | (6,359 | ) | — | — | — | — | (197 | ) | (6,556 | ) | ||||||||||||||||||
Net book amount | 3,058,282 | — | 12,239,328 | 5,402,336 | 813,332 | 2,390,568 | 23,903,846 | |||||||||||||||||||||
Year ended December 31, 2009 | ||||||||||||||||||||||||||||
Opening net book amount | 3,058,282 | — | 12,239,328 | 5,402,336 | 813,332 | 2,390,568 | 23,903,846 | |||||||||||||||||||||
Additions | 27,802 | — | 102 | 366,342 | 24,262 | 143,204 | 561,712 | |||||||||||||||||||||
Transfer from construction-in-progress (Note 7) | 129,520 | — | 261,192 | 41,287 | 60,045 | 423,438 | 915,482 | |||||||||||||||||||||
Reclassifications | (16,491 | ) | — | — | — | (14 | ) | 16,505 | — | |||||||||||||||||||
Disposals | (4,989 | ) | — | (62,330 | ) | — | — | (2,665 | ) | (69,984 | ) | |||||||||||||||||
Depreciation charges | (133,249 | ) | — | (196,154 | ) | (405,905 | ) | (174,958 | ) | (352,217 | ) | (1,262,483 | ) | |||||||||||||||
Closing net book amount | 3,060,875 | — | 12,242,138 | 5,404,060 | 722,667 | 2,618,833 | 24,048,573 | |||||||||||||||||||||
At December 31, 2009 | ||||||||||||||||||||||||||||
Cost | 3,808,046 | — | 13,704,120 | 6,945,305 | 1,449,108 | 4,427,459 | 30,334,038 | |||||||||||||||||||||
Accumulated depreciation | (740,812 | ) | — | (1,461,982 | ) | (1,541,245 | ) | (726,441 | ) | (1,808,578 | ) | (6,279,058 | ) | |||||||||||||||
Impairment | (6,359 | ) | — | — | — | — | (48 | ) | (6,407 | ) | ||||||||||||||||||
Net book amount | 3,060,875 | — | 12,242,138 | 5,404,060 | 722,667 | 2,618,833 | 24,048,573 | |||||||||||||||||||||
Buildings | Tracks, bridges and service roads | Locomotives and rolling stock | Communications and signalling systems | Other machinery and equipment | Total | |||||||||||||||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | |||||||||||||||||||
At January 1, 2011 | ||||||||||||||||||||||||
Cost | 4,832,566 | 14,593,786 | 6,873,927 | 1,522,555 | 4,716,620 | 32,539,454 | ||||||||||||||||||
Accumulated depreciation | (1,229,350 | ) | (1,995,990 | ) | (1,921,437 | ) | (721,077 | ) | (2,205,422 | ) | (8,073,276 | ) | ||||||||||||
Impairment | — | — | — | — | (48 | ) | (48 | ) | ||||||||||||||||
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Net book amount | 3,603,216 | 12,597,796 | 4,952,490 | 801,478 | 2,511,150 | 24,466,130 | ||||||||||||||||||
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Year ended December 31, 2011 | ||||||||||||||||||||||||
Opening net book amount | 3,603,216 | 12,597,796 | 4,952,490 | 801,478 | 2,511,150 | 24,466,130 | ||||||||||||||||||
Additions | 38,871 | — | 33,804 | 25,799 | 168,866 | 267,340 | ||||||||||||||||||
Transfer from construction-in-progress (Note 7) | 200,499 | 345,425 | 10,165 | 65,513 | 209,294 | 830,896 | ||||||||||||||||||
Reclassifications | (9,318 | ) | 1,549 | — | 85 | 7,684 | — | |||||||||||||||||
Disposals | (1,096 | ) | (168,927 | ) | (19,140 | ) | (4,105 | ) | (9,348 | ) | (202,616 | ) | ||||||||||||
Impairment | — | — | (1,957 | ) | — | (2,752 | ) | (4,709 | ) | |||||||||||||||
Depreciation charges | (182,744 | ) | (208,503 | ) | (402,186 | ) | (169,197 | ) | (407,331 | ) | (1,369,961 | ) | ||||||||||||
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Closing net book amount | 3,649,428 | 12,567,340 | 4,573,176 | 719,573 | 2,477,563 | 23,987,080 | ||||||||||||||||||
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At December 31, 2011 | ||||||||||||||||||||||||
Cost | 5,059,618 | 14,756,797 | 6,874,014 | 1,510,971 | 4,994,334 | 33,195,734 | ||||||||||||||||||
Accumulated depreciation | (1,410,190 | ) | (2,189,457 | ) | (2,298,881 | ) | (791,398 | ) | (2,513,980 | ) | (9,203,906 | ) | ||||||||||||
Impairment | — | — | (1,957 | ) | — | (2,791 | ) | (4,748 | ) | |||||||||||||||
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Net book amount | 3,649,428 | 12,567,340 | 4,573,176 | 719,573 | 2,477,563 | 23,987,080 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Year ended December 31, 2012 | ||||||||||||||||||||||||
Opening net book amount | 3,649,428 | 12,567,340 | 4,573,176 | 719,573 | 2,477,563 | 23,987,080 | ||||||||||||||||||
Additions | 361 | — | 565,143 | 33,157 | 122,082 | 720,743 | ||||||||||||||||||
Transfer from construction-in-progress (Note 7) | 818,849 | 290,042 | 42,685 | 63,510 | 149,123 | 1,364,209 | ||||||||||||||||||
Reclassifications | (535 | ) | 1,286 | — | — | (751 | ) | — | ||||||||||||||||
Disposals | (497 | ) | (120,562 | ) | (44,904 | ) | (63 | ) | (1,329 | ) | (167,355 | ) | ||||||||||||
Impairment | — | — | 1,957 | — | 18 | 1,975 | ||||||||||||||||||
Depreciation charges | (193,813 | ) | (208,439 | ) | (414,260 | ) | (159,939 | ) | (405,953 | ) | (1,382,404 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Closing net book amount | 4,273,793 | 12,529,667 | 4,723,797 | 656,238 | 2,340,753 | 24,524,248 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
At December 31, 2012 | ||||||||||||||||||||||||
Cost | 5,876,441 | 14,917,817 | 7,374,288 | 1,607,556 | 5,217,526 | 34,993,628 | ||||||||||||||||||
Accumulated depreciation | (1,602,648 | ) | (2,388,150 | ) | (2,650,491 | ) | (951,318 | ) | (2,874,000 | ) | (10,466,607 | ) | ||||||||||||
Impairment | — | — | — | — | (2,773 | ) | (2,773 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net book amount | 4,273,793 | 12,529,667 | 4,723,797 | 656,238 | 2,340,753 | 24,524,248 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
As ofat December 31, 2009,2012, the ownership certificates of certain buildings (“Building Ownership Certificates”) of the Group with an aggregate carrying value of approximately RMB1,329,751,000 (2008: RMB2,000,621,000)RMB1,614,967,000 (December 31, 2011: RMB992,588,000) had not been obtained by the Group. 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 Building Ownership Certificates and it should not lead to any significant adverse impact on the operations of the Group.
As ofat December 31, 2009,2012, fixed assets of the Group with an aggregate net book value of approximately RMB27,190,000 (2008: RMB26,894,352)RMB46,876,000 (December 31, 2011: RMB35,482,000) had been fully depreciated but they were still in use.
F-32
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
7 | CONSTRUCTION-IN-PROGRESS |
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
At January 1 | 1,422,635 | 504,775 | ||||||
Additions | 1,449,210 | 1,073,338 | ||||||
Impairment | — | (448 | ) | |||||
Transfer to fixed assets (Note 6) | (2,367,070 | ) | (915,482 | ) | ||||
At December 31 | 504,775 | 662,183 | ||||||
2011 | 2012 | |||||||
RMB’000 | RMB’000 | |||||||
At January 1 | 752,862 | 911,962 | ||||||
Additions | 1,014,201 | 1,131,775 | ||||||
Disposals | (24,205 | ) | — | |||||
Transfer to fixed assets (Note 6) | (830,896 | ) | (1,364,209 | ) | ||||
|
|
|
| |||||
At December 31 | 911,962 | 679,528 | ||||||
|
|
|
|
Construction-in-progress as at December 31, 2011 and 2012 mainly comprises the construction of new railway stations and improvement on the existing railway equipments in the PRC.
For the year ended December 31, 2012, no interest expenses (2011: Nil) were capitalised in the construction-in-progress balance.
8 |
LEASEHOLD LAND PAYMENTS |
RMB’000 | |||||||
At January 1, | |||||||
Cost | |||||||
791,213 | |||||||
Accumulated | ( | ) | |||||
Net book amount | 560,391 | ||||||
Year ended December 31, 2011 | |||||||
Opening net book amount | |||||||
Amortisation charges | ( | ) | |||||
Closing net book amount | |||||||
At December 31, | |||||||
Cost | 791,213 | ||||||
Accumulated | ( | ) | |||||
Net book amount | 544,403 | ||||||
Year ended December 31, 2012 | |||||||
Opening net book amount | |||||||
Amortisation charges | (15,988 | ) |
Disposal | (119 | ) | ||
Closing net book amount | 528,296 | |||
At December 31, | ||||
Cost | 791,054 | |||
Accumulated amortisation | (262,758 | ) | ||
Net book amount | 528,296 | |||
F-33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
9 | GOODWILL |
RMB’000 | |||||||
Year ended December 31, | |||||||
Opening net book amount | 281,255 | ||||||
Additions | — | ||||||
Closing net book amount | 281,255 | ||||||
At December 31, | |||||||
Cost | 281,255 | ||||||
Accumulated impairment | — | ||||||
Net book amount | 281,255 | ||||||
The goodwill balance arose from the excess of a purchase consideration paid by the Company over the aggregate fair values of the identifiable assets, liabilities and contingent liabilities of the Yangcheng Railway Business acquired by the Company. | ||
F-34
On January 1, 2009, the Group integrated the Yangcheng Railway Business with the Group’s railway business in order to improve operation efficiency. As a result, the management considers that the Yangcheng Railway Business and the Group’s remaining railway business (collectively the “Combined Railway Business”) represents the lowest level of cash-generating units within the Group at which goodwill is monitored for internal management purposes. In addition, the Combined Railway Business is not larger than an operating segment determined under with IFRS 8. Therefore, the Group has reallocated the goodwill to the cash generating unit (“CGU”) comprising the Combined Railway Business.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated
GOODWILL (CONTINUED) |
The recoverable amount of the CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial forecasts prepared by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below.
The key assumptions used for value-in-use calculations as at December 31, 2011 and 2012 are as follows:
Railroad business | 2011 | 2012 | ||||||
Gross margin | 26.50 | % | 26.73 | % | ||||
Growth rate | 2 | % | 2 | % | ||||
Discount rate | 11.21 | % | 11.26 | % | ||||
|
|
|
|
Management estimated the gross margin and growth rate based on past performance and its expectations for the market development. The discount rate used is pre-tax and reflect specific risks relating to the railroad business segment.
If the budgeted growth rate used in the value-in-use calculation for the CGU in railroad business had been 10% lower than management’s estimates as at December 31, 2011 and 2012, the Group would have no impairment recognised against goodwill.
If the estimated pre-tax discount rate applied to the discounted cash flows for the CGU in railroad business had been 1% higher than management’s estimates as at December 31, 2011 and 2012, the Group would have no impairment recognised against goodwill.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
10 | INVESTMENTS IN SUBSIDIARIES |
(i) | As |
Date of | Percentage of equity | |||||||||||||
incorporation/ | interest attributable to | |||||||||||||
Name of the entity | establishment | the Company | Paid-in capital | Principal activities | ||||||||||
Directly | Indirectly | |||||||||||||
Dongguan Changsheng Enterprise Company | May 22, 1992 | 51 | % | — | RMB38,000,000 | Warehousing | ||||||||
Shenzhen Fu Yuan Enterprise Development Company(“Fu Yuan”) | November 1, 1991 | 97.3 | % | 2.7 | % | RMB18,500,000 | Hotel management | |||||||
Shenzhen Pinghu Qun Yi Railway Store Loading and Unloading Company | September 11, 1993 | 55 | % | — | RMB10,000,000 | Cargo loading and unloading, warehousing, freight transportation | ||||||||
Shenzhen Railway Property Management Company Limited | November 13, 2001 | — | 100 | % | RMB3,000,000 | Property management | ||||||||
Shenzhen Guangshen Railway Travel Service Ltd. | August 16, 1995 | 75 | % | 25 | % | RMB2,400,000 | Travel agency | |||||||
Shenzhen Shenhuasheng Storage and Transportation Company Limited | January 2, 1985 | 41.5 | % | 58.5 | % | RMB2,000,000 | Warehousing, freight transport and packaging agency services | |||||||
Shenzhen Nantie Construction Supervision Company | May 8, 1995 | 67 | % | 9 | % | RMB3,000,000 | Supervision of construction projects | |||||||
Shenzhen Guangshen Railway Economic and Trade Enterprise Company Limited | March 7, 2002 | — | 100 | % | RMB2,000,000 | Catering management | ||||||||
Shenzhen Railway Station Passenger Services Company | December 18, 1986 | 100 | % | — | RMB1,500,000 | Catering services and sales of merchandise | ||||||||
Guangshen Railway Station Dongqun Trade and Commerce Service Company | November 23, 1992 | 100 | % | — | RMB1,020,000 | Sales of merchandises | ||||||||
Guangzhou Tielian Economy Development Company Limited (“Tielian”) | December 27, 1994 | 50.50 | % | — | RMB1,000,000 | Warehousing and freight transport agency services | ||||||||
Guangzhou Dongqun Advertising Company Limited | March 6, 1996 | — | 100 | % | RMB500,000 | Advertising service | ||||||||
Guangzhou Railway Huangpu Service Company | January 2, 1985 | 100 | % | — | RMB379,000 | Cargo loading and unloading, warehousing, freight transportation |
All the above subsidiaries are limited liability companies. |
F-35
In 2012, the Company acquired additional 2.7% interest of Shenzhen Fu Yuan from Shenzhen Guangshen Railway Travel Service Ltd, another subsidiary of the Company. After the acquisition, the interest in Shenzhen Fu Yuan held directly by the Company has increased from 97.3% to 100%.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
11 | INVESTMENTS IN ASSOCIATES |
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Share of net assets | 150,394 | 149,236 | ||||||
Less: provision for impairment in value (a) | (29,689 | ) | (29,689 | ) | ||||
120,705 | 119,547 | |||||||
As at December 31, | As at December 31, | |||||||
RMB’000 | RMB’000 | |||||||
Share of net assets | 155,609 | 166,515 | ||||||
Less: provision for impairment in value (Note a) | (29,689 | ) | (29,689 | ) | ||||
|
|
|
| |||||
125,920 | 136,826 | |||||||
|
|
|
|
Note a:
The impairment provision at the Group level as at December 31, 20092012 represents provision for full impairment lossesloss in investment in Zengcheng Lihua Stock Company Limited atof approximately RMB29,689,000 (December 31, 2011: RMB29,689,000) made in prior years (“Zengcheng Lihua Provision”).
The movement of investments in associates of the Group during the year is as follows:
2011 | 2012 | |||||||
RMB’000 | RMB’000 | |||||||
Beginning of the year | 120,661 | 125,920 | ||||||
Share of results after tax | 5,259 | 10,906 | ||||||
|
|
|
| |||||
End of the year | 125,920 | 136,826 | ||||||
|
|
|
|
As at December 31, 2012, the Group had direct interests in the following companies which are incorporated / established and are operating in the PRC:
Name of the entity | Date of incorporation/ | Percentage of equity interest attributable to the Company | Paid-in capital | Principal activities | ||||||||
Shenzhen Guangshen Railway Civil Engineering Company | March 1, 1984 | 49 | % | RMB | 64,000,000 | Construction of railroad properties | ||||||
Zengcheng Lihua | July 30, 1992 | 26.98 | % | RMB | 107,054,682 | Real estate construction, provision of warehousing, cargo uploading and unloading services | ||||||
Tiecheng | May 2, 1995 | 49 | % | RMB | 343,050,000 | Properties leasing and trading of merchandise |
All the above associates are limited liability companies and they are unlisted companies.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
11 | INVESTMENTS IN ASSOCIATES (CONTINUED) |
The Group’s share of the results with its percentage ownership of its principal associates, and its share of the related assets and liabilities, net of applicable impairment provision are as follows:
Assets | Liabilities | Revenue | Profit | % interest held | ||||||||||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | |||||||||||||||
2011 | ||||||||||||||||||
Tiecheng | 209,058 | 123,220 | 14,262 | 1,713 | 49% | |||||||||||||
Other associates | 236,145 | 256,137 | 312,093 | 3,546 | 27%~49% | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||
445,203 | 379,357 | 326,355 | 5,259 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
2012 | ||||||||||||||||||
Tiecheng | 218,692 | 124,098 | 23,523 | 8,756 | 49% | |||||||||||||
Other associates | 366,266 | 395,712 | 307,684 | 2,150 | 27%~49% | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||
584,958 | �� | 519,810 | 331,207 | 10,906 | ||||||||||||||
|
|
|
|
|
|
|
|
12 | DEFERRED TAX ASSETS/(LIABILITIES) |
The analysis of deferred tax assets and deferred tax liabilities is as follows:
As at 2011 | As at 2012 | |||||||
RMB’000 | RMB’000 | |||||||
Deferred tax assets: | ||||||||
- Deferred tax assets to be recovered after more than 12 months | 113,610 | 108,170 | ||||||
- Deferred tax assets to be recovered within 12 months | 22,138 | 29,744 | ||||||
|
|
|
| |||||
135,748 | 137,914 | |||||||
|
|
|
| |||||
Deferred tax liabilities: | ||||||||
- Deferred tax liabilities to crystallise after more than 12 months | (27,367 | ) | (28,399 | ) | ||||
- Deferred tax liabilities to crystallise within 12 months | (302 | ) | (354 | ) | ||||
|
|
|
| |||||
(27,669 | ) | (28,753 | ) | |||||
|
|
|
| |||||
Deferred tax assets (net) | 108,079 | 109,161 | ||||||
|
|
|
|
The gross movement on the deferred income tax account is as follows:
2011 | 2012 | |||||||
RMB’000 | RMB’000 | |||||||
At January 1 | 112,621 | 108,079 | ||||||
Charged to the comprehensive income statement (Note 31) | (4,542 | ) | 1,082 | |||||
|
|
|
| |||||
At December 31 | 108,079 | 109,161 | ||||||
|
|
|
|
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
12 | DEFERRED TAX ASSETS/(LIABILITIES) (CONTINUED) |
The movement in deferred tax assets and liabilities of the Group during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:
At January 1, 2011 | Charged/ (Credited) to the comprehensive income statement | At December 31, 2011 | Charged/ (Credited) to the comprehensive income statement | At December 31, 2012 | ||||||||||||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | ||||||||||||||||
Deferred tax assets: | ||||||||||||||||||||
Impairment provision for receivables | 21,106 | (668 | ) | 20,438 | 365 | 20,803 | ||||||||||||||
Impairment provision for fixed assets and construction-in-progress | 1,964 | 1,075 | 3,039 | (493 | ) | 2,546 | ||||||||||||||
Impairment provision for interests in associates | 7,422 | — | 7,422 | — | 7,422 | |||||||||||||||
Impairment provision for materials and supplies | — | 5,398 | 5,398 | (887 | ) | 4,511 | ||||||||||||||
Difference in accounting base and tax base of government grants | 23,440 | (727 | ) | 22,713 | (728 | ) | 21,985 | |||||||||||||
Difference in accounting base and tax base of employee benefits obligations | 84,609 | (10,836 | ) | 73,773 | 3,909 | 77,682 | ||||||||||||||
Loss on disposal of fixed assets | — | 2,915 | 2,915 | — | 2,915 | |||||||||||||||
Other | 50 | — | 50 | — | 50 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
138,591 | (2,843 | ) | 135,748 | 2,166 | 137,914 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
At January 1, 2011 | Credited/ (Charged) to the comprehensive income statement | At December 31, 2011 | Credited/ (Charged) to the comprehensive income statement | At December 31, 2012 | ||||||||||||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | ||||||||||||||||
Deferred tax liabilities: | ||||||||||||||||||||
Difference in accounting base and tax base of fixed assets | 19,235 | (4 | ) | 19,231 | (58 | ) | 19,173 | |||||||||||||
Others | 6,735 | 1,703 | 8,438 | 1,142 | 9,580 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
25,970 | 1,699 | 27,669 | 1,084 | 28,753 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
12 | DEFERRED TAX ASSETS/(LIABILITIES) (CONTINUED) |
Deferred income tax assets are recognised for tax loss carry-forwards and other temporary difference to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Group did not recognise deferred income tax assets in respect of tax losses and other temporary difference amounting to RMB11,475,000 (December 31, 2011: RMB8,499,000) that can be carried forward against future taxable income as follows:
As at December 31, | As at December 31, | |||||||
RMB’000 | RMB’000 | |||||||
Tax losses can be carried forward (Note a) | 4,728 | 7,895 | ||||||
Deductible temporary differences | 3,771 | 3,580 | ||||||
|
|
|
| |||||
8,499 | 11,475 | |||||||
|
|
|
|
Note a:
The tax loss carry-forwards in which no deferred income tax assets were recognised amounting to RMB31,581,000 (2011: RMB18,911,000) will expire in the following years:
As at December 31, 2011 | As at December 31, 2012 | |||||||
RMB’000 | RMB’000 | |||||||
2014 | 3,521 | 2,022 | ||||||
2015 | 4,071 | 3,169 | ||||||
2016 | 11,319 | 10,985 | ||||||
2017 | — | 15,405 | ||||||
|
|
|
| |||||
18,911 | 31,581 | |||||||
|
|
|
|
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
13 | LONG-TERM PREPAID EXPENSES |
The movement of long-term prepaid expenses is set forth as follows:
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Beginning of the year | 124,350 | 120,705 | ||||||
Share of results after tax | 128 | 773 | ||||||
Dividends received and receivable from the associates | (2,055 | ) | (1,931 | ) | ||||
Reclassifications (Note 16) | (1,718 | ) | — | |||||
End of the year | 120,705 | 119,547 | ||||||
2012 | ||||||||||
RMB’000 | ||||||||||
At January 1 | ||||||||||
Cost | — | |||||||||
Accumulated amortisation | — | |||||||||
Net book amount | — | |||||||||
Year ended December 31 | ||||||||||
Opening net book amount | — | |||||||||
Additions | 45,557 | �� | ||||||||
Transfer | 1,800 | |||||||||
Amortisation | (7,237 | ) | ||||||||
Closing net book amount | 40,120 | |||||||||
At December 31 | ||||||||||
Cost | 48,397 | |||||||||
Accumulated amortisation | (8,277 | ) | ||||||||
Net book amount | 40,120 | |||||||||
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
14 | FINANCIAL INSTRUMENTS BY CATEGORY |
Loans and receivables | Available- for-sale | Total | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Assets as per consolidated balance sheet | ||||||||||||
As at December 31, 2011: | ||||||||||||
Available-for-sale investments (Note 15) | — | 53,826 | 53,826 | |||||||||
Long term receivable (Note 16) | 34,108 | — | 34,108 | |||||||||
Trade and other receivables excluding prepayments (Notes 18 and 19) | 733,419 | — | 733,419 | |||||||||
Short-term deposits (Note 20) | 3,686,000 | — | 3,686,000 | |||||||||
Cash and cash equivalents (Note 20) | 1,366,757 | — | 1,366,757 | |||||||||
|
|
|
|
|
| |||||||
Total | 5,820,284 | 53,826 | 5,874,110 | |||||||||
|
|
|
|
|
| |||||||
As at December 31, 2012: | ||||||||||||
Available-for-sale investments (Note 15) | — | 53,826 | 53,826 | |||||||||
Long-term receivable (Note 16) | 30,863 | — | 30,863 | |||||||||
Trade and other receivables excluding prepayments (Notes 18 and 19) | 1,124,127 | — | 1,124,127 | |||||||||
Short-term deposits (Note 20) | 4,174,000 | — | 4,174,000 | |||||||||
Cash and cash equivalents (Note 20) | 675,013 | — | 675,013 | |||||||||
|
|
|
|
|
| |||||||
Total | 6,004,003 | 53,826 | 6,057,829 | |||||||||
|
|
|
|
|
|
Other financial liabilities | |||||||||||
RMB’000 | |||||||||||
F-36
Assets | Liabilities | Revenue | (Loss)/Profit | |||||||||||||||||
Rmb’000 | Rmb’000 | Rmb’000 | Rmb’000 | % interest held | ||||||||||||||||
2008 | ||||||||||||||||||||
Tiecheng (b) | 190,783 | 105,051 | 11,158 | (2,018 | ) | 49 | % | |||||||||||||
Other associates | 172,808 | 137,835 | 128,466 | 2,146 | 27%~49 | % | ||||||||||||||
363,591 | 242,886 | 139,624 | 128 | |||||||||||||||||
2009 | ||||||||||||||||||||
Tiecheng (b) | 192,703 | 107,732 | 10,813 | (761 | ) | 49 | % | |||||||||||||
Other associates | 191,666 | 152,229 | 185,668 | 1,534 | 27%~49 | % | ||||||||||||||
384,369 | 259,961 | 196,481 | 773 | |||||||||||||||||
F-37
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Deferred tax assets: | ||||||||
- Deferred tax assets to be recovered after more than 12 months | 337,893 | 331,676 | ||||||
- Deferred tax assets to be recovered within 12 months | 18,848 | 14,451 | ||||||
356,741 | 346,127 | |||||||
Deferred tax liabilities: | ||||||||
- Deferred tax liabilities to crystallise after more than 12 months | (24,802 | ) | (25,435 | ) | ||||
- Deferred tax liabilities to crystallise within 12 months | (201 | ) | (262 | ) | ||||
(25,003 | ) | (25,697 | ) | |||||
Deferred tax assets (net) | 331,738 | 320,430 | ||||||
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
At January 1 | 338,921 | 331,738 | ||||||
Comprehensive income statement charge (Note 31) | (7,183 | ) | (11,308 | ) | ||||
At December 31 | 331,738 | 320,430 | ||||||
Charged/ (Credited) | Charged/ (Credited) | |||||||||||||||||||
to the | to the | |||||||||||||||||||
At January 1, | comprehensive | comprehensive | ||||||||||||||||||
2008 | income statement | At December 31, 2008 | income statement | At December 31, 2009 | ||||||||||||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | ||||||||||||||||
Deferred tax assets: | ||||||||||||||||||||
Impairment provision for receivables | 20,363 | 1,088 | 21,451 | 73 | 21,524 | |||||||||||||||
Impairment provision for fixed assets | 1,928 | (39 | ) | 1,889 | 75 | 1,964 | ||||||||||||||
Impairment provision for interests in associates | 7,422 | — | 7,422 | — | 7,422 | |||||||||||||||
Difference in accounting base and tax base of fixed assets | 257,384 | (3,925 | ) | 253,459 | (6,193 | ) | 247,266 | |||||||||||||
Difference in accounting base and tax base of employee benefits obligations | 75,159 | (2,639 | ) | 72,520 | (4,594 | ) | 67,926 | |||||||||||||
Other | — | — | — | 25 | 25 | |||||||||||||||
362,256 | (5,515 | ) | 356,741 | (10,614 | ) | 346,127 | ||||||||||||||
F-38
(Credited)/ Charged | (Credited)/ Charged | |||||||||||||||||||
to the | to the | |||||||||||||||||||
At January 1, | comprehensive | comprehensive | At December | |||||||||||||||||
2008 | income statement | At December 31, 2008 | income statement | 31, 2009 | ||||||||||||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | ||||||||||||||||
Deferred tax liabilities: | ||||||||||||||||||||
Difference in accounting base and tax base of fixed assets | 20,074 | (229 | ) | 19,845 | (201 | ) | 19,644 | |||||||||||||
Others | 3,261 | 1,897 | 5,158 | 895 | 6,053 | |||||||||||||||
23,335 | 1,668 | 25,003 | 694 | 25,697 | ||||||||||||||||
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
At January 1 | ||||||||
Cost | 271,369 | 243,102 | ||||||
Accumulated amortization | (129,978 | ) | (143,488 | ) | ||||
Net book amount | 141,391 | 99,614 | ||||||
Year ended December 31 | ||||||||
Opening net book amount | 141,391 | 99,614 | ||||||
Additions | 16,733 | 278 | ||||||
Amortization (Note 28) | (32,005 | ) | (20,156 | ) | ||||
Offset against employee benefits obligation provision (Note 25) | (26,505 | ) | — | |||||
Closing net book amount | 99,614 | 79,736 | ||||||
At December 31 | ||||||||
Cost | 243,102 | 243,380 | ||||||
Accumulated amortization | (143,488 | ) | (163,644 | ) | ||||
Net book amount | 99,614 | 79,736 | ||||||
F-39
Loans and | Available- | |||||||||||
receivables | for-sale investment | Total | ||||||||||
Assets as per consolidated balance sheet | ||||||||||||
As at December 31, 2009: | ||||||||||||
Available-for-sale investments (Note 16) | — | 53,826 | 53,826 | |||||||||
Long-term receivable (Note 17) | 44,229 | — | 44,229 | |||||||||
Trade and other receivables excluding prepayments (Notes 19 and 20) | 527,210 | — | 527,210 | |||||||||
Short-term deposits | 514,000 | — | 514,000 | |||||||||
Cash and cash equivalents (Note 34(c)) | 1,115,651 | — | 1,115,651 | |||||||||
Total | 2,201,090 | 53,826 | 2,254,916 | |||||||||
As at December 31, 2008: | ||||||||||||
Available-for-sale investments (Note 16) | — | 48,326 | 48,326 | |||||||||
Long term receivable (Note 17) | 48,136 | — | 48,136 | |||||||||
Trade and other receivables excluding prepayments(Notes 19 and 20) | 337,920 | — | 337,920 | |||||||||
Short-term deposits | 7,300 | — | 7,300 | |||||||||
Cash and cash equivalents (Note 34(c)) | 1,560,952 | — | 1,560,952 | |||||||||
Total | 1,954,308 | 48,326 | 2,002,634 | |||||||||
Liabilities as per consolidated balance sheet | |||||||
As at December 31, | |||||||
Bonds payable (Note 24) | 3,478,568 | ||||||
Trade and other payables excluding statutory liabilities (Notes 26 and 27) | |||||||
Dividends payable | 25 | ||||||
Payables for fixed assets and construction-in-progress | |||||||
Total | |||||||
As at December 31, | |||||||
Bonds payable (Note 24) | 3,485,473 | ||||||
Trade and other payables excluding statutory liabilities (Notes 26 and 27) | |||||||
Dividends payable | 15 | ||||||
Payables for fixed assets and construction-in-progress | |||||||
Total | |||||||
F-40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
15 | ||
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Trade receivables | ||||||||
Due from MOR | 53,048 | 273,300 | ||||||
Due from related parties | 165,576 | 121,354 | ||||||
Due from third parties | 53,427 | 88,564 | ||||||
272,051 | 483,218 | |||||||
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Other receivables excluding prepayments | ||||||||
Due from related parties | 8,292 | 7,185 | ||||||
Due from third parties | 57,577 | 36,807 | ||||||
65,869 | 43,992 | |||||||
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Long-term receivable | ||||||||
Due from third parties | 44,229 | 48,136 | ||||||
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Cash at bank and short-term bank deposits | ||||||||
Balance placed in listed banks | 1,568,098 | 1,629,575 | ||||||
Balance placed in unlisted banks | 104 | 42 | ||||||
1,568,202 | 1,629,617 | |||||||
2011 | 2012 | |||||||
RMB’000 | RMB’000 | |||||||
Beginning and the end of the year | 53,826 | 53,826 | ||||||
|
|
|
|
The equity interests held by the Group in most of these investments are less than 10%. The directors of the Company are of the opinion that no quoted market price in an active market was available for these investments and their fair values could not be reliably measured by alternative valuation methods. In accordance with the provisions under IFRS, the above non-current available-for-sale investments are carried at cost subject to review for impairment loss. As at December 31, 2011 and 2012, no impairment provision was considered necessary by the directors.
16 |
F-41
2011 | 2012 | |||||||
RMB’000 | RMB’000 | |||||||
Opening net book amount | 35,122 | 34,108 | ||||||
Unwinding of interest accrued (Note 29) | 6,986 | 4,755 | ||||||
Repayment received | (8,000 | ) | (8,000 | ) | ||||
|
|
|
| |||||
Closing net book amount | 34,108 | 30,863 | ||||||
|
|
|
|
The long-term receivable balance represents freight service fees receivable from a third party customer which was acquired from Yangcheng Railway Business. On the acquisition date of Yangcheng Railway Business, it was remeasured at its then fair value, which was assessed by the discounted cash flow method, by making reference to the repayment schedule agreed by both parties.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Beginning of the year | 46,608 | 48,326 | ||||||
Additions | — | 7,500 | ||||||
Disposal | — | (2,000 | ) | |||||
Reclassifications (Note 11) | 1,718 | — | ||||||
End of the year | 48,326 | 53,826 | ||||||
The costs of materials and supplies consumed by the Group during the year were recognised as ‘operating expenses’ in the amount of approximately RMB1,850,297,000 (2010: RMB1,792,270,000 and 2011: RMB1,922,332,000). | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Opening net book amount | 48,547 | 48,136 | ||||||
Release of accrued interest (Note 29) | 7,589 | 4,093 | ||||||
Repayment received | (8,000 | ) | (8,000 | ) | ||||
Closing net book amount | 48,136 | 44,229 | ||||||
F-42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
18 |
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Raw materials | 139,497 | 137,328 | ||||||
Accessories | 52,794 | 75,108 | ||||||
Reuseable rail-line track materials | 5,741 | 15,277 | ||||||
Retailing Materials | 3,891 | 3,397 | ||||||
201,923 | 231,110 | |||||||
As at December 31, 2011 and 2012, the Group’s trade receivables were | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Trade receivables | 281,193 | 492,369 | ||||||
Including: receivables from related parties | 165,580 | 121,467 | ||||||
Less: Provision for impairment of receivables | (9,142 | ) | (9,151 | ) | ||||
272,051 | 483,218 | |||||||
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Within 1 year | 255,961 | 445,668 | ||||||
Over 1 year but within 2 years | 6,333 | 23,241 | ||||||
Over 2 years but within 3 years | 9,445 | 4,931 | ||||||
Over 3 years | 312 | 9,378 | ||||||
272,051 | 483,218 | |||||||
F-43
As at December 31, 2011 | As at 2012 | |||||||
RMB’000 | RMB’000 | |||||||
Within 1 year | 596,780 | 939,378 | ||||||
Over 1 year but within 2 years | 7,245 | 48,881 | ||||||
Over 2 years but within 3 years | 1,607 | 6,653 | ||||||
Over 3 years | 13,611 | 11,020 | ||||||
|
|
|
| |||||
619,243 | 1,005,932 | |||||||
|
|
|
|
As at December 31, 2012, the Group’s trade receivables of approximately RMB60,646,000 (December 31, 2011: RMB17,219,000) were past due but not impaired. These relate to a number of independent customers for whom there is no significant financial difficulty and based on past experience, the overdue amounts can be recovered. The aging analysis of these trade receivables is as follows:
As at December 31, 2011 | As at 2012 | |||||||
RMB’000 | RMB’000 | |||||||
Over 1 year but within 2 years | 7,245 | 48,881 | ||||||
Over 2 year but within 3 years | 1,607 | 6,653 | ||||||
Over 3 years | 8,367 | 5,112 | ||||||
|
|
|
| |||||
17,219 | 60,646 | |||||||
|
|
|
|
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
TRADE RECEIVABLES |
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Over 1 year but within 2 years | 3,888 | 21,840 | ||||||
Over 2 year but within 3 years | 9,445 | 4,863 | ||||||
Over 3 years | 45 | 9,268 | ||||||
13,378 | 35,971 | |||||||
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Within 1 year | 629 | 23,100 | ||||||
Over 1 year but within 2 years | 2,565 | 1,475 | ||||||
Over 2 years but within 3 years | — | 76 | ||||||
Over 3 years | 8,730 | 8,836 | ||||||
11,924 | 33,487 | |||||||
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
At January 1 | 6,767 | 9,142 | ||||||
Provision for impairment loss | 2,630 | 368 | ||||||
Reversal of impairment loss provision | (255 | ) | (359 | ) | ||||
At December 31 | 9,142 | 9,151 | ||||||
F-44
As at December 31, | As at December 31, | |||||||
RMB’000 | RMB’000 | |||||||
Over 5 years | 5,244 | 5,907 | ||||||
|
|
|
|
Movements on the provision for impairment of trade receivables are as follows:
2011 | 2012 | |||||||
RMB’000 | RMB’000 | |||||||
At January 1 | 7,251 | 5,244 | ||||||
Provision for impairment loss | 110 | 663 | ||||||
Receivables written off during the year as uncollectible | (2,117 | ) | — | |||||
|
|
|
| |||||
At December 31 | 5,244 | 5,907 | ||||||
|
|
|
|
The creation and release of provision for impaired receivables have been included in operating expenses in the comprehensive income statement. Amounts charged to the allowance account are generally written off against the gross accounts receivable balances when there is no expectation of recovering additional cash.
The maximum exposure to credit risk at the reporting date is the carrying value mentioned above. The Group does not hold any collateral as security.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
PREPAYMENTS AND OTHER RECEIVABLES |
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Receivables from third parties | 88,573 | 50,457 | ||||||
Receivables from related parties | 8,292 | 21,886 | ||||||
96,865 | 72,343 | |||||||
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Other receivables | 132,461 | 110,983 | ||||||
Less: Provision for impairment loss (Note a) | (66,592 | ) | (66,991 | ) | ||||
Other receivables, net | 65,869 | 43,992 | ||||||
Prepayments | 30,996 | 28,351 | ||||||
96,865 | 72,343 | |||||||
As at December 31, | As at December 31, 2012 | |||||||
RMB’000 | RMB’000 | |||||||
Due from third parties | 84,977 | 110,523 | ||||||
Due from related parties | 59,459 | 36,865 | ||||||
|
|
|
| |||||
144,436 | 147,388 | |||||||
|
|
|
|
As at December 31, | As at December 31, 2012 | |||||||
RMB’000 | RMB’000 | |||||||
Other receivables | 186,634 | 192,229 | ||||||
Less: Provision for impairment loss (Note a) | (67,214 | ) | (68,127 | ) | ||||
|
|
|
| |||||
Other receivables, net (Note b) | 119,420 | 124,102 | ||||||
Prepayments (Note c) | 25,016 | 23,286 | ||||||
|
|
|
| |||||
144,436 | 147,388 | |||||||
|
|
|
|
(a) | Included in the amount was a provision of approximately RMB31,365,000 set up by the Group in prior years, against the principal balance of a deposit placed with a deposit-taking agency, Zeng Cheng City Li Cheng Credit Cooperative (“Li Cheng”). The Group was unable to recover the deposit from Li Cheng upon maturity and the Group has initiated several legal proceedings against Li Cheng in order to enforce recovery but without success. |
(b) | Other receivables mainly represent miscellaneous deposits and receivables arising during the course of the provision of non-railway transportation services by the Group. |
(c) | Prepayments mainly represent amounts paid in advance to the suppliers for utilities and other operating expenses of the Group. | |
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
At January 1 | 66,248 | 66,592 | ||||||
Provision for impairment loss | 553 | 498 | ||||||
Reversal of impairment loss provision | (162 | ) | (93 | ) | ||||
Receivables written off during the year as uncollectible | (47 | ) | (6 | ) | ||||
At December 31 | 66,592 | 66,991 | ||||||
F-45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
PREPAYMENTS AND OTHER RECEIVABLES |
Movements on the provision for impairment of other receivables are as follows:
2011 | 2012 | |||||||
RMB’000 | RMB’000 | |||||||
At January 1 | 67,218 | 67,214 | ||||||
Provision for impairment loss | — | 914 | ||||||
Reversal of impairment loss provision | (4 | ) | (1 | ) | ||||
|
|
|
| |||||
At December 31 | 67,214 | 68,127 | ||||||
|
|
|
|
The carrying amounts of the Group’s prepayment and other receivables are denominated in the following currencies:
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
RMB | 96,336 | 71,349 | ||||||
HKD | 529 | 994 | ||||||
96,865 | 72,343 | |||||||
As at December 31, | As at December 31, | |||||||
RMB’000 | RMB’000 | |||||||
RMB | 144,192 | 147,154 | ||||||
HKD | 244 | 234 | ||||||
|
|
|
| |||||
144,436 | 147,388 | |||||||
|
|
|
|
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security.
Opening | Closing | |||||||||||
balance at | balance at | |||||||||||
January 1, | December 31, | |||||||||||
2008 | Transfers | 2008 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Authorised, issued and fully paid: | ||||||||||||
A shares subject to sale restrictions | ||||||||||||
- shares held by state-owned legal person (Note a) | 2,904,250 | — | 2,904,250 | |||||||||
Listed shares | ||||||||||||
- H shares | 1,431,300 | — | 1,431,300 | |||||||||
- A shares | 2,747,987 | — | 2,747,987 | |||||||||
4,179,287 | — | 4,179,287 | ||||||||||
Total | 7,083,537 | — | 7,083,537 | |||||||||
Opening | Closing | |||||||||||
balance at | balance at | |||||||||||
January 1, | December 31, | |||||||||||
2009 | Transfers | 2009 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Authorised, issued and fully paid: | ||||||||||||
A shares subject to sale restrictions | ||||||||||||
- shares held by state-owned legal person (Note a) | 2,904,250 | (2,904,250 | ) | — | ||||||||
- shares held by the National Council for Social Security Fund of the PRC (Note a) | — | 274,799 | 274,799 | |||||||||
2,904,250 | (2,629,451 | ) | 274,799 | |||||||||
Listed shares | ||||||||||||
- H shares | 1,431,300 | — | 1,431,300 | |||||||||
- A shares | 2,747,987 | 2,629,451 | 5,377,438 | |||||||||
4,179,287 | 2,629,451 | 6,808,738 | ||||||||||
Total | 7,083,537 | — | 7,083,537 | |||||||||
F-46
As at December 31, | As at December 31, | |||||||
RMB’000 | RMB’000 | |||||||
Cash on hand | 50 | 57 | ||||||
Cash at bank | 1,366,707 | 674,956 | ||||||
Term deposits with initial term of over three months (Note a) | 3,686,000 | 4,174,000 | ||||||
|
|
|
| |||||
5,052,757 | 4,849,013 | |||||||
|
|
|
|
Note a: The original effective interest rate of time deposits was 3.21% (2011: 3.1%).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
CASH AND CASH EQUIVALENTS AND SHORT-TERM DEPOSITS (CONTINUED) |
The carrying amounts of the cash and cash equivalents and short-term deposits are denominated in the following currencies:
As at December 31, 2011 | As at December 31, 2012 | |||||||
RMB’000 | RMB’000 | |||||||
USD | 261 | 39 | ||||||
HKD | 106,054 | 60,910 | ||||||
RMB | 4,946,442 | 4,788,064 | ||||||
|
|
|
| |||||
5,052,757 | 4,849,013 | |||||||
|
|
|
|
21 | SHARE CAPITAL | |
2007 | 2008 | 2009 | ||||||||||||||||||||||
Percentage | RMB’000 | Percentage | RMB’000 | Percentage | RMB’000 | |||||||||||||||||||
Statutory surplus reserve | 10 | % | 139,778 | 10 | % | 121,444 | 10 | % | 134,902 | |||||||||||||||
F-47
As at December 31, 2011 | Movement | As at December 31, 2012 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Authorised, issued and fully paid: | ||||||||||||
A shares subject to sale restrictions | ||||||||||||
- shares held by the National Council for Social Security Fund of the PRC | 274,799 | (274,799 | ) | — | ||||||||
Listed shares | ||||||||||||
- H shares | 1,431,300 | — | 1,431,300 | |||||||||
- A shares | 5,377,438 | 274,799 | 5,652,237 | |||||||||
|
|
|
|
|
| |||||||
6,808,738 | 274,799 | 7,083,537 | ||||||||||
|
|
|
|
|
| |||||||
Total | 7,083,537 | �� | — | 7,083,537 | ||||||||
|
|
|
|
|
|
On September 22, 2009, Guangzhou Railway Group transferred 274,798,700 A shares held by it to the National Council for Social Security Fund in the PRC (“NCSSF”) according to regulations issued by the relevant PRC authorities. Upon this transfer, NCSSF has voluntarily agreed to extend the transfer restriction period associated with these shares for another three years. The transfer restriction of these 274,798,700 shares was expired on December 21, 2012. No shares were subject to sale restriction and all the shares achieved full circulation on December 24, 2012.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
22 | ||
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Non current | ||||||||
Unsecured bank borrowings | 3,390,000 | — | ||||||
Current | ||||||||
Unsecured bank borrowings | 510,000 | — | ||||||
Total borrowings | 3,900,000 | — | ||||||
2008 | 2009 | ||||||
RMB’000 | RMB’000 | ||||||
Within one year | 510,000 | — | |||||
Within 1 to 2 years | 10,000 | — | |||||
Within 2 to 5 years | 3,380,000 | — | |||||
3,900,000 | — | ||||||
2008 | 2009 | |||||||
Rmb’000 | Rmb’000 | |||||||
At floating rates (at relevant prevailing interest rates with a maximum range of downward adjustment up to 10%) | 3,900,000 | — | ||||||
F-48
The statutory surplus reserve, the discretionary surplus reserve and the share premium account could be converted into share capital of the Company provided it is approved by a resolution passed in a shareholders’ general meeting with the provision that the ending balance of the statutory surplus reserve does not fall below 25% of the registered share capital amount. The Company may either allot newly created shares to the shareholders at the same proportion of the existing number of shares held by these shareholders, or it may increase the par value of each share.
2011 | 2012 | |||||||||||||||
Percentage | RMB’000 | Percentage | RMB’000 | |||||||||||||
Statutory surplus reserve | 10 | % | 181,138 | 10 | % | 133,171 | ||||||||||
|
|
|
|
|
|
|
|
In accordance with the provisions of the articles of association of the Company, the profit after appropriation to reserves and available for distribution to shareholders shall be the lower of the retained earnings determined under (a) PRC GAAP or (b) IFRS. Due to the fact that the statutory financial statements of the Company have been prepared in accordance with PRC GAAP, the retained earnings so reported may be different from those reported in the statement of changes in shareholders’ equity prepared under IFRS contained in these financial statements. The main difference between the retained earnings of the Company determined under PRC GAAP and those determined under IFRS was relating to accounting policies in respect of investment in associate adopted under PRC GAAP and IFRS.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
At 1 January | At 31 December | |||||||||||||||
2009 | Addition | Amortisation | 2009 | |||||||||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | |||||||||||||
09 Guangshen Tie MTN1 | — | 3,465,476 | 325 | 3,465,801 | ||||||||||||
For the year 2012, the movement of ‘Special reserve - Safety Production Fund’ of the Group and Company are as below:
At January 1, 2012 | Appropriation | Utilisation | At December 31, 2012 | |||||||||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | |||||||||||||
Other reserve | ||||||||||||||||
- Special reserve - Safety Production Fund | — | 134,265 | (134,265 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
The Company is engaged in passenger and freight transportation business. In accordance with the regulation issued by Ministry of Finance and State Administration of Work Safety, the Company is required to establish a special reserve (“Safety Production Fund”) calculated based on the passenger and freight transportation revenue of the previous year using the following percentages:
(a) | ||
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
At January 1 | 377,409 | 288,541 | ||||||
Additions (Note 28) | 85,988 | 1,200 | ||||||
Interest unwound | 3,417 | 6,510 | ||||||
Payment | (151,768 | ) | (64,312 | ) | ||||
Offset against deferred employee costs (Note 13) | (26,505 | ) | — | |||||
At December 31 | 288,541 | 231,939 | ||||||
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Employee benefits obligations | 288,541 | 231,939 | ||||||
Less: current portion included in accruals and other payables (Note 27) | (51,119 | ) | (57,172 | ) | ||||
237,422 | 174,767 | |||||||
(b) | ||
F-49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
DEFERRED INCOME RELATED TO GOVERNMENT GRANTS |
2011 | 2012 | |||||||
RMB’000 | RMB’000 | |||||||
At January 1 | 95,093 | 96,022 | ||||||
Additions | 4,100 | — | ||||||
Amortisation (Note 29) | (3,171 | ) | (3,158 | ) | ||||
|
|
|
| |||||
At December 31 | 96,022 | 92,864 | ||||||
|
|
|
|
24 | BONDS PAYABLE |
At January 1, 2012 | Addition | Amortisation | At December 31, 2012 | |||||||||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | |||||||||||||
09 Guangshen Tie MTN1 | 3,478,568 | — | 6,905 | 3,485,473 | ||||||||||||
|
|
|
|
|
|
|
|
The Company issued 3,500,000,000 bonds of medium terms at a nominal value of RMB3,500,000,000 on December 17, 2009. The bonds will be matured in five years from the issue date at their nominal value of RMB3,500,000,000 and bear a coupon interest rate with 4.79% per annum.
On the issue date, the bonds were recognised based on the residual amounts of the principal after deduction of issuance costs of approximately RMB34,524,000. The bonds are subsequently carried at amortized cost using an average effective interest rate of 5.018% per annum.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
25 | EMPLOYEE BENEFITS OBLIGATIONS |
As at December 31, 2011 | As at December 31, 2012 | |||||||
RMB’000 | RMB’000 | |||||||
Employee benefits obligations | 237,613 | 229,966 | ||||||
Less: current portion included in accruals and other payables (Note 27) | (69,337 | ) | (116,065 | ) | ||||
|
|
|
| |||||
168,276 | 113,901 | |||||||
|
|
|
|
Pursuant to a redundancy plan implemented by the Group in 2006, selected employees who had met certain specified criteria and accepted voluntary redundancy were provided with an offer of early retirement benefits, up to their official age of retirement. Such arrangements required specific approval granted by management of the Group.
With the acquisition of the Yangcheng Railway Business in 2007, the Group has also assumed certain retirement and termination benefits obligations associated with the operations of Yangcheng Railway Business. These obligations mainly include the redundancy termination benefits similar to those mentioned above, as well as the obligation for funding post-retirement medical insurance premiums of retired employees before the acquisition.
The employee benefits obligations have been provided for by the Group at amounts equal to the total expected benefit payments. Where the obligation does not fall due within twelve months, the obligation payable has been discounted using a pre-tax rate that reflects management’s current market assessment of the time value of money and risk specific to the obligation (the discount rate was determined with reference to market yields at the balance sheet date on high quality investments in the PRC).
The movement in the employee benefits obligation over the year is as follows:
2011 | 2012 | |||||||
RMB’000 | RMB’000 | |||||||
At January 1 | 269,180 | 237,613 | ||||||
Additions (Note 28) | 3,464 | 66,650 | ||||||
Unwinding of interest (Note 30) | 12,066 | 9,415 | ||||||
Payment | (47,097 | ) | (83,712 | ) | ||||
|
|
|
| |||||
At December 31 | 237,613 | 229,966 | ||||||
|
|
|
|
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
26 | ||
TRADE PAYABLES |
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Payables to third parties | 416,226 | 563,211 | ||||||
Payables to related parties | 224,630 | 228,144 | ||||||
640,856 | 791,355 | |||||||
As at December 31, | As at December 31, | |||||||
RMB’000 | RMB’000 | |||||||
Payables to third parties | 864,413 | 825,527 | ||||||
Payables to related parties | 200,328 | 306,097 | ||||||
|
|
|
| |||||
1,064,741 | 1,131,624 | |||||||
|
|
|
|
The aging analysis of trade payables was as follows:
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Within 1 year | 628,405 | 782,594 | ||||||
Over 1 year but within 2 years | 10,565 | 7,589 | ||||||
Over 2 years but within 3 years | 66 | 211 | ||||||
Over 3 years | 1,820 | 961 | ||||||
640,856 | 791,355 | |||||||
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Payables to third parties | 652,857 | 728,070 | ||||||
Payables to related parties | 137,903 | 75,046 | ||||||
790,760 | 803,116 | |||||||
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Deposits received for construction projects | 264,922 | 155,030 | ||||||
Other taxes payable | 44,256 | 152,763 | ||||||
Salary and welfare payables | 70,806 | 80,388 | ||||||
Other deposits received | 43,688 | 68,124 | ||||||
Advance received from customers | 58,237 | 61,934 | ||||||
Deposits received from ticketing agencies | 50,297 | 22,441 | ||||||
Employee benefits obligations (Note 25) | 51,119 | 57,172 | ||||||
Housing maintenance fund | 17,286 | 17,177 | ||||||
Other payables | 190,149 | 188,087 | ||||||
790,760 | 803,116 | |||||||
F-50
As at December 31, | As at December 31, | |||||||
RMB’000 | RMB’000 | |||||||
Within 1 year | 979,116 | 1,050,233 | ||||||
Over 1 year but within 2 years | 83,080 | 50,645 | ||||||
Over 2 years but within 3 years | 1,093 | 29,168 | ||||||
Over 3 years | 1,452 | 1,578 | ||||||
|
|
|
| |||||
1,064,741 | 1,131,624 | |||||||
|
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
2007 | 2008 | 2009 | ||||||||||
RMB’000 | Rmb’000 | Rmb’000 | ||||||||||
Wages and salaries | 1,388,342 | 1,661,325 | 1,835,560 | |||||||||
Provision for medical and other employee benefits | 325,438 | 306,282 | 326,018 | |||||||||
Contributions to a defined contribution pension scheme (a) | 220,856 | 260,014 | 316,640 | |||||||||
Contributions to the housing scheme (b) | 75,861 | 92,095 | 125,325 | |||||||||
Amortisation of deferred staff cost (Note 13) | 24,339 | 32,005 | 20,156 | |||||||||
Retirement benefit obligations (Note 25) | 65,256 | 85,988 | 1,200 | |||||||||
2,100,092 | 2,437,709 | 2,624,899 | ||||||||||
2007 | 2008 | 2009 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Interest income from bank | 61,063 | 24,321 | 24,440 | |||||||||
Unwinding of interest accrued on long-term receivable (Note 17) | — | 7,589 | 4,093 | |||||||||
Write-back of long outstanding payables | — | 21,562 | 1,932 | |||||||||
Loss on disposal of fixed assets | (3,335 | ) | (31,542 | ) | (41,635 | ) | ||||||
Loss on disposal of subsidiaries | (1,063 | ) | (188 | ) | — | |||||||
Dividends income on available-for-sale investments | — | (2,420 | ) | (3,000 | ) | |||||||
Others | (6,849 | ) | (1,619 | ) | (5,595 | ) | ||||||
49,816 | 17,703 | (19,765 | ) | |||||||||
F-51
As at December 31, | As at December 31, | |||||||
RMB’000 | RMB’000 | |||||||
Due to third parties | 851,099 | 865,865 | ||||||
Due to related parties | 30,348 | 37,049 | ||||||
|
|
|
| |||||
881,447 | 902,914 | |||||||
|
|
|
|
As at December 31, | As at December 31, | |||||||
RMB’000 | RMB’000 | |||||||
Other taxes payable | 166,930 | 166,992 | ||||||
Other deposits received | 126,549 | 130,566 | ||||||
Deposits received for construction projects | 124,258 | 117,577 | ||||||
Advances received from customers | 108,329 | 83,489 | ||||||
Salary and welfare payables | 104,612 | 102,601 | ||||||
Employee benefits obligations (Note 25) | 69,337 | 116,065 | ||||||
Deposits received from ticketing agencies | 30,006 | 29,426 | ||||||
Housing maintenance fund | 16,089 | 15,987 | ||||||
Other payables | 135,337 | 140,211 | ||||||
|
|
|
| |||||
881,447 | 902,914 | |||||||
|
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
2007 | 2008 | 2009 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Interest expenses | 173,515 | 221,488 | 227,178 | |||||||||
Less: interest capitalized in construction-in-progress (Note 7) | (79,438 | ) | (13,721 | ) | — | |||||||
Amortization of bonds payable (Note 24) | — | — | 325 | |||||||||
Interest unwound for employee benefit obligations (Note 25) | (1,988 | ) | 3,417 | 6,510 | ||||||||
Bank charges | 3,930 | 2,311 | 2,227 | |||||||||
Net foreign exchange losses | 2,468 | (26 | ) | 47 | ||||||||
98,487 | 213,469 | 236,287 | ||||||||||
2010 | 2011 | 2012 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Wages and salaries | 2,004,467 | 2,399,028 | 2,786,721 | |||||||||
Provision for medical and other employee benefits | 365,689 | 447,283 | 507,962 | |||||||||
Contributions to a defined contribution pension scheme (a) | 342,002 | 373,200 | 429,721 | |||||||||
Contributions to the housing scheme (b) | 148,661 | 160,571 | 183,884 | |||||||||
Write-down and amortisation of deferred employee costs | 73,911 | 4,309 | — | |||||||||
Employee benefits obligations (Note 25) | 100,989 | 3,464 | 66,650 | |||||||||
|
|
|
|
|
| |||||||
3,035,719 | 3,387,855 | 3,974,938 | ||||||||||
|
|
|
|
|
|
2007 | 2008 | 2009 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Current income tax | 255,749 | 270,111 | 337,613 | |||||||||
Deferred income tax (Note 12) | (23,400 | ) | 7,183 | 11,308 | ||||||||
232,349 | 277,294 | 348,921 | ||||||||||
All the full-time employees of the Group are entitled to join a statutory pension scheme. The employees would receive pension payments equal to their basic salaries payable upon their retirement up to their death. Pursuant to the PRC laws and regulations, contributions to the basic old age insurance for the Group’s local staff are to be made monthly to a government agency based on 26% of the standard salary set by the provincial government, of which 18% is borne by the Company or its subsidiaries and the remainder 8% is borne by the employees. The government agency is responsible for the pension liabilities due to the employees upon their retirement. The Group accounts for these contributions on an accrual basis and charges the related contributions to expense in the year to which the contributions relate.
(b) |
F-52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
OTHER (EXPENSES)/INCOME |
2007 | 2008 | 2009 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Profit before tax | 1,668,551 | 1,501,662 | 1,712,379 | |||||||||
Tax calculated at the statutory rate of 20% (2008 and 2007: 18% and 15%) | 250,283 | 270,299 | 342,476 | |||||||||
Effect of change of income tax rate on deferred taxation previously recognised (Note a) | (30,413 | ) | — | — | ||||||||
Effect of tax rates differentials | 1,137 | (3,652 | ) | (996 | ) | |||||||
Effect of share of results of associates | (275 | ) | (23 | ) | (155 | ) | ||||||
Effect of expenses not deductible for tax purposes | 5,462 | 10,686 | 7,411 | |||||||||
Effect of income not subject to tax | — | (436 | ) | (590 | ) | |||||||
Tax losses for which no deferred tax asset was recognized | 380 | 420 | 775 | |||||||||
Reversal of deferred tax assets due to changes in tax law | 5,775 | — | — | |||||||||
Income tax expense | 232,349 | 277,294 | 348,921 | |||||||||
2010 | 2011 | 2012 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Loss on disposal of fixed assets, leasehold land and construction-in-progress | (95,849 | ) | (129,153 | ) | (90,024 | ) | ||||||
Interest income from banks | 41,510 | 95,612 | 152,803 | |||||||||
Dividend income on available-for-sale investments | 3,853 | 4,263 | 5,254 | |||||||||
Amortisation of government grants (Note 23) | 3,388 | 3,171 | 3,158 | |||||||||
Unwinding of interest accrued on long-term receivable (Note 16) | 2,893 | 6,986 | 4,755 | |||||||||
Write-off of long outstanding payables | 537 | 66 | 3,134 | |||||||||
Others | (3,392 | ) | (6,731 | ) | (7,265 | ) | ||||||
|
|
|
|
|
| |||||||
(47,060 | ) | (25,786 | ) | 71,815 | ||||||||
|
|
|
|
|
|
30 | |||
F-53
2010 | 2011 | 2012 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Interest expenses | 167,650 | 167,650 | 167,650 | |||||||||
Unwinding of interest for employee benefit obligations (Note 25) | 7,609 | 12,066 | 9,415 | |||||||||
Amortisation of bonds payable (Note 24) | 6,193 | 6,574 | 6,905 | |||||||||
Bank charges | 2,325 | 1,901 | 3,609 | |||||||||
Net foreign exchange losses/(gains) | 2,395 | 2,779 | (506 | ) | ||||||||
|
|
|
|
|
| |||||||
186,172 | 190,970 | 187,073 | ||||||||||
|
|
|
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
2007 | 2008 | 2009 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Final, proposed, of RMB0.08 (2007 and 2008: RMB0.08) per ordinary share | 566,683 | 566,683 | 566,683 | |||||||||
Before 2008, enterprises established in the Shenzhen Special Economic Zone of the PRC were subject to income tax at a reduced preferential rate of 15% as compared with the standard income tax rate for PRC companies of 33%. The Company and the subsidiaries located in Shenzhen were subject to income tax rate of 15%, while those subsidiaries located outside Shenzhen were subject to income tax rate of 33%.
On March 16, 2007, the National People’s Congress approved the Corporate Income Tax Law of the People’s Republic of China (the “new CIT Law”), which became effective on January 1, 2008. Under the new CIT Law, the enterprise income tax rate was changed from 33% to 25% from January 1, 2008 onwards. While the enterprise income tax rate applicable to the Company and the subsidiaries located in Shenzhen would increase gradually to 25% within 5 years from 2008 to 2012. In 2010, 2011 and 2012, the applicable income tax rate was 22%, 24% and 25% respectively.
An analysis of the current year taxation charges is as follows:
2010 | 2011 | 2012 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Current income tax | 455,703 | 571,423 | 442,233 | |||||||||
Deferred income tax (Note 12) | (15,314 | ) | 4,542 | (1,082 | ) | |||||||
|
|
|
|
|
| |||||||
440,389 | 575,965 | 441,151 | ||||||||||
|
|
|
|
|
|
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
31 | INCOME TAX EXPENSE (CONTINUED) |
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the tax rate of the home country of the Company as follows:
2010 | 2011 | 2012 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Profit before tax | 1,925,307 | 2,378,337 | 1,758,136 | |||||||||
|
|
|
|
|
| |||||||
Tax calculated at the statutory rate of 25% (2010 and 2011: 22% and 24%) | 423,567 | 570,801 | 439,534 | |||||||||
Effect of tax rates differentials | 118 | 42 | 28 | |||||||||
Effect of income not subject to tax | (1,147 | ) | (2,285 | ) | (4,040 | ) | ||||||
Effect of expenses not deductible for tax purposes | 16,955 | 5,237 | 2,462 | |||||||||
Tax losses for which no deferred tax asset was recognised | 896 | 2,717 | 3,851 | |||||||||
Utilization of previously unrecognised tax losses | — | (547 | ) | (684 | ) | |||||||
|
|
|
|
|
| |||||||
Income tax expense | 440,389 | 575,965 | 441,151 | |||||||||
|
|
|
|
|
|
The effective tax rate was 25.1% (2010 and 2011: 22.9% and 24.2%). The increase was mainly caused by the increase in statutory tax rate as explained above.
32 | EARNINGS PER SHARE |
The calculation of basic earnings per share is based on the net profit for the year attributable to equity holders of approximately RMB1,318,938,000 (2010 and 2011: RMB1,486,062,000 and RMB1,804,107,000), divided by the weighted average number of ordinary shares outstanding during the year of 7,083,537,000 shares (2010 and 2011: 7,083,537,000 shares). There were no dilutive potential ordinary shares during each of the three years in the period ended December 31, 2012. The calculation of earnings per equivalent ADS is based on the net profit for the year attributable to equity holders of approximately RMB1,318,938,000 (2010 and 2011: RMB1,486,062,000 and RMB1,804,107,000), divided by the weighted average equivalent ADSs (one ADS represents 50 H Shares) outstanding during the year of 141,670,740 ADSs (2010 and 2011: 141,670,740 ADSs).
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
33 | DIVIDENDS |
The dividends paid to the ordinary shareholders of the Group in 2010, 2011 and 2012 were RMB566,683,000 (RMB0.08 per share), RMB637,518,000 (RMB0.09 per share) and RMB708,354,000 (RMB0.1 per share) respectively.
2010 | 2011 | 2012 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Final, proposed, of RMB0.08 (2010: RMB0.09 2011: RMB0.10) per ordinary share | 637,518 | 708,354 | 566,683 | |||||||||
|
|
|
|
|
|
At a meeting of the directors held on April 22, 2010,March 26, 2013, the directors proposed a final dividend of RMB0.08 per ordinary share for the year ended December 31, 2009,2012, which is subject to the approval by the shareholders in general meeting. This proposed dividend has not been reflected as a dividend payable in the financial statements, but will be reflected as an appropriation of retained earnings for the year ending December 31, 2009.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
34 | CASH FLOW GENERATED FROM OPERATIONS |
(a) | Reconciliation |
2007 | 2008 | 2009 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Profit before income tax: | 1,668,551 | 1,501,662 | 1,712,379 | |||||||||
Adjustments for: | ||||||||||||
Depreciation of fixed assets | 1,017,100 | 1,172,042 | 1,262,144 | |||||||||
Impairment of fixed assets and construction-in-progress | 6,359 | — | 448 | |||||||||
Amortization of leasehold land payments (Note 8) | 16,021 | 15,603 | 15,989 | |||||||||
Loss on disposal of fixed assets (Note 29) | 3,335 | 31,542 | 41,635 | |||||||||
Amortization of deferred employee costs (Note 13) | 24,339 | 32,005 | 20,156 | |||||||||
Recognition of employee benefits obligations (Note 25) | 65,256 | 85,988 | 1,200 | |||||||||
Interest unwound for employee benefit obligations (Note 25) | (1,988 | ) | 3,417 | 6,510 | ||||||||
Share of results of associates (Note 11) | (1,830 | ) | (128 | ) | (773 | ) | ||||||
Loss on disposal of subsidiaries (Note 29) | 1,063 | 188 | — | |||||||||
Dividend income on available-for-sale investment (Note 29) | — | (2,420 | ) | (3,000 | ) | |||||||
(Reversal of provision)/provision for doubtful accounts | (8,260 | ) | 2,766 | 414 | ||||||||
Write-back of long outstanding of payables (Note 29) | — | (21,562 | ) | (1,932 | ) | |||||||
Amortization of bonds payable (Note 24) | — | — | 325 | |||||||||
Interest expenses (Note 30) | 173,515 | 207,767 | 227,178 | |||||||||
Interest income (Note 29) | (61,063 | ) | (31,910 | ) | (28,533 | ) | ||||||
Operating profit before working capital changes | 2,902,398 | 2,996,960 | 3,254,140 | |||||||||
Increase/(decrease) in trade receivables | 115,407 | (143,200 | ) | (211,176 | ) | |||||||
Increase in materials and supplies | (31,637 | ) | (48,249 | ) | (29,187 | ) | ||||||
Decrease/(increase) in prepayments and other receivables | (46,175 | ) | 51,335 | 24,117 | ||||||||
Decrease in long-term receivable | 6,000 | 8,000 | 8,000 | |||||||||
(Decrease)/increase in trade payables | (174,639 | ) | 95,438 | 150,499 | ||||||||
Decrease in employee benefits obligations | (112,526 | ) | (126,179 | ) | (64,312 | ) | ||||||
Decrease in accrued expenses and other payables | (228,139 | ) | (660,420 | ) | (23,706 | ) | ||||||
Cash generated from operations | 2,430,689 | 2,173,685 | 3,108,375 | |||||||||
F-54
2010 | 2011 | 2012 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Profit before income tax: | 1,925,307 | 2,378,337 | 1,758,136 | |||||||||
Adjustments for: | ||||||||||||
Depreciation of fixed assets (Note 6) | 1,349,210 | 1,369,961 | 1,382,404 | |||||||||
Impairment of fixed assets | — | 4,709 | — | |||||||||
Impairment of materials and supplies | — | 21,590 | — | |||||||||
Amortisation of leasehold land payments (Note 8) | 15,988 | 15,988 | 15,988 | |||||||||
Loss on disposal of fixed assets and construction-in-progress (Note 29) | 95,849 | 129,153 | 90,024 | |||||||||
Write-down and amortisation of deferred employee costs and amortisation of long-term prepaid expenses | 73,911 | 4,309 | 7,237 | |||||||||
Recognition of employee benefits obligations (Note 25) | 100,989 | 3,464 | 66,650 | |||||||||
Unwinding of interest for employee benefit obligations (Note 25) | 7,609 | 12,066 | 9,415 | |||||||||
Share of results of associates (Note 11) | (1,361 | ) | (5,259 | ) | (10,906 | ) | ||||||
Dividend income on available-for-sale investments (Note 29) | (3,853 | ) | (4,263 | ) | (5,254 | ) | ||||||
(Reversal of provision)/Provision for doubtful accounts | (1,661 | ) | 106 | 1,576 | ||||||||
Write-back of long outstanding of payables (Note 29) | (537 | ) | (66 | ) | (3,134 | ) | ||||||
Amortisation of bonds payable (Note 24) | (6,193 | ) | 6,574 | 6,905 | ||||||||
Amortisation of government grants (Note 23) | (3,388 | ) | (3,171 | ) | (3,158 | ) | ||||||
Interest expenses | 167,650 | 167,650 | 167,650 | |||||||||
Interest income | (44,403 | ) | (67,955 | ) | (129,688 | ) | ||||||
|
|
|
|
|
| |||||||
Operating profit before working capital changes | 3,675,117 | 4,033,193 | 3,353,845 | |||||||||
Increase in trade receivables | (107,701 | ) | (9,599 | ) | (386,690 | ) | ||||||
Increase in materials and supplies | (23,969 | ) | (28,976 | ) | �� | (72,158 | ) | |||||
(Increase)/decrease in prepayments and other receivables | (6,448 | ) | (24 | ) | 4,135 | |||||||
Decrease in long-term receivable | 12,000 | 8,000 | 8,000 | |||||||||
Increase/(decrease) in trade payables | 383,289 | (113,660 | ) | 66,883 | ||||||||
Decrease in employee benefits obligations | (71,357 | ) | (44,785 | ) | (54,375 | ) | ||||||
Increase/(decrease) in accrued expenses and other payables | 28,451 | 88,934 | (44,623 | ) | ||||||||
|
|
|
|
|
| |||||||
Cash generated from operations | 3,889,382 | 3,933,083 | 2,875,017 | |||||||||
|
|
|
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
34 | CASH FLOW GENERATED FROM OPERATIONS (CONTINUED) | |
(b) | In the cash flow statement, proceeds from disposal of |
2007 | 2008 | 2009 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Net book amount (Note 6) | 113,236 | 42,900 | 69,984 | |||||||||
Receivable arising from disposal of property, plant and equipment | (26,200 | ) | — | — | ||||||||
Loss on disposal of fixed assets | (3,335 | ) | (31,542 | ) | (41,635 | ) | ||||||
Proceeds from disposal of fixed assets | 83,701 | 11,358 | 28,349 | |||||||||
2010 | 2011 | 2012 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Net book amount (Note 6, 7 and 8) | 127,005 | 226,821 | 165,499 | |||||||||
Receivable arising from disposal of fixed assets; leasehold land and construction-in-progress | — | (28,913 | ) | — | ||||||||
Transfer to inventories | — | (68,198 | ) | (34,404 | ) | |||||||
Loss on disposal of fixed assets, leasehold land and construction-in-progress | (95,849 | ) | (129,153 | ) | (90,024 | ) | ||||||
|
|
|
|
|
| |||||||
Proceeds from disposal of fixed assets, leasehold land and construction-in-progress | 31,156 | 557 | 41,071 | |||||||||
|
|
|
|
|
|
(c) | Analysis of the balance of cash and cash equivalents: |
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Cash at bank and in hand | 618,877 | 432,651 | ||||||
Short-term deposits with original maturities no more than three months (Note a) | 942,075 | 683,000 | ||||||
1,560,952 | 1,115,651 | |||||||
As at December 31, 2010 | As at December 31, 2011 | As at December 31, | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Cash at bank and in hand | 729,058 | 1,076,757 | 427,513 | |||||||||
Short-term deposits with original maturities of no more than three months | 1,930,000 | 290,000 | 247,500 | |||||||||
|
|
|
|
|
| |||||||
2,659,058 | 1,366,757 | 675,013 | ||||||||||
|
|
|
|
|
|
35 |
There were no significant contingent liabilities as at the date of approval of these financial statements. | ||
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Authorised but not contracted for | 2,530,325 | 1,357,620 | ||||||
Contracted but not provided for | 390,691 | 248,630 | ||||||
F-55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
36 | COMMITMENTS |
(a) | |
As at December 31, 2011 and 2012, the Group had the following capital commitments which are authorized but not contracted for, and contracted but not provided for:
As at December 31, | As at December 31, | |||||||
RMB’000 | RMB’000 | |||||||
Authorised but not contracted for | 1,717,800 | 1,690,080 | ||||||
|
|
|
| |||||
Contracted but not provided for | 283,880 | 176,038 | ||||||
|
|
|
|
A substantial amount of these commitments is related to the reform of stations or facilities relating to the existing railway line of the Company. The related financing would be from self generated operating cash flow.
(b) | Operating lease commitments |
In connection with the acquisition of Yangcheng Railway Business, the Company signed an agreement on November 15, 2004 with Guangzhou Railway Group for leasing the land use rights associated with the land on which the acquired assets of Yangcheng Railway Business are located. The agreement became effective upon the completion of the acquisition on January 1, 2007 and the remaining lease term is 20 years, renewable at the discretion of the Company. According to the terms of the agreement, the rental for such lease would be agreed by both parties every year with a maximum amount not exceeding RMB74,000,000 per year. During the year ended December 31, 2012, the related lease rental paid and payable was RMB54,800,000 (2010 and 2011: RMB52,400,000 and RMB53,600,000).
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
37 | ||
RELATED PARTY TRANSACTIONS | ||
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions.
(a) | Related parties that control the Company or are controlled by the Company: | |
See Note 10 for the subsidiaries.
None of the shareholders is the controlling entity of the Company.
(b) | Nature of the principal related parties that do not control/are not controlled by the Company: |
Name of related parties | Relationship with the Company | |
Single largest shareholder and | ||
Guangzhou Railway Group | ||
Guangzhou Railway Group YangCheng Railway Enterprise Development | Subsidiary of the | |
Guangmeishan Railway Company Limited | Subsidiary of the | |
Guangzhou Railway (Group) Guangshen Railway Enterprise | Subsidiary of the | |
Guangzhou Railway Material Supply Company | Subsidiary of the | |
Guangzhou Railway Engineer Construction Enterprise Development | Subsidiary of the | |
Yangcheng Construction Company of YangCheng Railway Enterprise Development Company | Subsidiary of the | |
Guangzhou Railway Real Estate Construction Company | Subsidiary of the | |
Yuehai Railway | Subsidiary of the | |
Shichang Railway | Subsidiary of the | |
Guangzhou Railway | Subsidiary of the | |
Changsha Railway Construction Company Limited | Subsidiary of the | |
Guangdong Sanmao Railway Company Limited | Subsidiary of the | |
Guangzhou Qingda Transportation Company | Subsidiary of the | |
Guangzhou Yuetie Operational Development Company | Subsidiary of the | |
Guangzhou Railway | Subsidiary of the | |
Foreign Economic & Trade Development Corporation of Guangzhou Railway | Subsidiary of the |
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
37 | RELATED PARTY TRANSACTIONS (CONTINUED) |
(b) | Nature of the principal related parties that do not control/are not controlled by the Company (continued): |
Shenzhen Guangshen Railway Living Service Centre | Subsidiary of the single largest shareholder | |
Guangzhou Yangcheng Living Service Centre | Subsidiary of the single largest shareholder | |
Pajiangkou Stone Pit | Subsidiary of the single largest shareholder | |
Guangdong Tieqing International Travel Agency Company Limited | Subsidiary of the single largest shareholder | |
Guangdong Sanmao Enterprise Development Company Limited | Subsidiary of the single largest shareholder | |
Guangshengang Passenger Special Line Company Limited (i) | Subsidiary of the single largest shareholder | |
Guangdong Guangzhu Intercity Rail Transportation Company Limited (ii) | Subsidiary of the single largest shareholder | |
Huaihua Railway Engineer Construction Company | Subsidiary of the single largest shareholder | |
Lechang Anjie Railway Sleeper Company Limited | Subsidiary of the single largest shareholder | |
Associates of the Group | ||
Zengcheng Lihua Stock Company Limited | Associate of the Group | |
Guangzhou Tiecheng Enterprise Company Limited | Associate of the Group | |
Shenzhen Guangshen Railway Civil Engineering Company | Associate of the Group | |
Other related party | ||
Guangzhu Railway Company Limited (iii) | Entity supervised by the chairman of the Company |
F-56
(i) | In March 2012, the Guangzhou Railway Group disposed of its investment in Guangshengang Passenger Special Line Company Limited. As a result, Guangshengang Passenger Special Line Company Limited was no longer considered as a related party of the Group since the day Guangzhou Railway Group lost control of Guangshengang Passenger Special Line Company Limited. However, the transactions with Guangshengang Passenger Special Line Company Limited during the period from January 1, 2012 to the date loss of control were still disclosed as related party transactions. |
(ii) | In November 2012, the Guangzhou Railway Group disposed of its investment in Guangdong Guangzhu Intercity Rail Transportation Company Limited. As a result, Guangdong Guangzhu Intercity Rail Transportation Company Limited was no longer considered as a related party of the Group since the day Guangzhou Railway Group lost control of Guangdong Guangzhu Intercity Rail Transportation Company Limited. However, the transactions with Guangdong Guangzhu Intercity Rail Transportation Company Limited during the period from January 1, 2012 to the date loss of control were still disclosed as related party transactions. |
(iii) | On January 30, 2012, the former chairman of the Company, Xu Xiaoming, resigned from his position. Since that date, Xu Xiaoming also no longer served as the chairman of the Guangzhu Railway Company Limited. Therefore, Guangzhu Railway Company Limited was no longer considered as a related party of the Group since January 31, 2012. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
37 | RELATED PARTY TRANSACTIONS (CONTINUED) | |
(c) | Save as disclosed in other notes to the Financial Statements, during the year, the Group had the following material transactions undertaken with related parties: |
2007 | 2008 | 2009 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Provide Services | ||||||||||||
Revenue collected by MOR for services provided to Guangzhou Railway Group and its subsidiaries (i) (Note 38) | (1,005,505 | ) | (1,038,611 | ) | (1,069,053 | ) | ||||||
Provision of repairing services for cargo trucks of Guangzhou Railway Group and its subsidiaries (ii) | (175,284 | ) | (148,322 | ) | (220,000 | ) | ||||||
Provision of train transportation services to Guangzhou Railway Group and its subsidiaries (iii) | (183,989 | ) | (265,998 | ) | (208,860 | ) | ||||||
Receive Services | ||||||||||||
Cost settled by MOR for services provided by Guangzhou Railway Group and its subsidiaries (i) (Note 38) | 1,105,890 | 1,218,138 | 1,530,479 | |||||||||
Provision of train transportation services provided by Guangzhou Railway Group and its subsidiaries (iv) | 213,388 | 235,303 | 347,969 | |||||||||
Social services (employee housing and public security services and other ancillary services) provided by GEDC and Yangcheng Railway (v) | 429,655 | 440,602 | 369,257 | |||||||||
Provision of construction services of Guangzhou Railway Group and its subsidiaries (ii) | 61,950 | 259,787 | 241,753 | |||||||||
Provision of repair and maintenance services by Guangzhou Railway Group and its subsidiaries (iii) | 104,111 | 115,568 | 115,455 | |||||||||
Provision of turnkey service by CYTS (vi) | 50,569 | 15,280 | — | |||||||||
Purchase | ||||||||||||
Purchase of materials and supplies from Guangzhou Railway Group and its subsidiaries (vii) | 577,352 | 398,230 | 631,149 | |||||||||
Others | ||||||||||||
Payment for the acquisition of net assets of Yangcheng Railway Business | 4,873,332 | — | — | |||||||||
Operating lease rental paid to Guangzhou Railway Group for the leasing of land use rights (Note 36(b)) | 50,000 | 50,000 | 51,200 | |||||||||
2010 | 2011 | 2012 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Provide Services | ||||||||||||
Revenue collected by MOR for services provided to Guangzhou Railway Group and its subsidiaries (i) (Note 38) | 1,115,028 | 1,155,391 | 1,238,431 | |||||||||
Revenue collected through Guangzhou Railway Group for provision of repairing services for cargo trucks ((ii) and (vii)) | 191,369 | — | — | |||||||||
- For Guangzhou Railway Group and its subsidiaries | 6,173 | — | — | |||||||||
- For other companies | 185,196 | — | — | |||||||||
Provision of train transportation services to Guangzhou Railway Group and its subsidiaries (ii) | 347,849 | 407,220 | 352,973 | |||||||||
Revenue from railway operation service provided to Guangzhou Railway Group’s subsidiaries (iv) | — | 273,460 | 278,669 | |||||||||
|
|
|
|
|
| |||||||
Receive Services | ||||||||||||
Cost settled by MOR for services provided by Guangzhou Railway Group and its subsidiaries (i) (Note 38) | 1,367,444 | 1,488,224 | 1,578,108 | |||||||||
Provision of train transportation services by Guangzhou Railway Group and its subsidiaries (ii) | 428,288 | 637,099 | 653,787 | |||||||||
Social services (employee housing and public security services and other ancillary services) provided by GEDC and Yangcheng Railway (iv) | 144,750 | 115,190 | 93,090 | |||||||||
Provision of repair and maintenance services by Guangzhou Railway Group and its subsidiaries (iii) | 171,154 | 260,118 | 240,761 | |||||||||
Provision of construction services by Guangzhou Railway Group and its subsidiaries (viii) | 115,075 | 224,892 | 287,903 | |||||||||
|
|
|
|
|
| |||||||
Purchase | ||||||||||||
Purchase of materials and supplies from Guangzhou Railway Group and its subsidiaries (vi) | 431,988 | 709,014 | 766,309 | |||||||||
|
|
|
|
|
| |||||||
Sales | ||||||||||||
Sales of materials and supplies to Guangzhou Railway Group and its subsidiaries (v) | 17,827 | 23,696 | 11,218 | |||||||||
|
|
|
|
|
| |||||||
Others | ||||||||||||
Operating lease rental paid to Guangzhou Railway Group for the leasing of land use rights (Note 36(b)) | 52,400 | 53,600 | 54,800 | |||||||||
Compensation of loss on construction-in-progress from Guangzhu Railway Company Limited | — | 17,039 | — | |||||||||
|
|
|
|
|
|
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
37 | RELATED PARTY TRANSACTIONS (CONTINUED) |
(c) | Save as disclosed in other notes to the Financial Statements, during the year, the Group had the following material transactions undertaken with related parties (continued): |
(i) | Such revenues/charges are determined by the MOR based on its standard charges applied on a nationwide basis. |
(ii) | ||
The service charges are determined based on a pricing scheme set by the MOR or based on negotiation between the contracting parties with reference to full cost principle. |
(iii) | The service charges are determined based on negotiation between the contracting parties with reference to full cost principle. |
(iv) | The service charges are levied based on contract prices determined based on cost plus a profit margin and explicitly agreed between both contract parties. |
(v) | The prices are determined based on mutual negotiation between the contracting parties with reference to full cost principle. |
(vi) | The prices are determined based on mutual negotiation between the contracting parties with reference to procurement cost plus a management fee. |
(vii) | Such revenue collected through Guangzhou Railway Group for provision of repairing services for cargo trucks was collected through MOR from 2011. |
(viii) | Determined by the budget under the national railway engineering quota. |
(d) | Key management compensation | |
Key management includes directors (executive and non-executive), general manager and vice general managers, assistant of general manager, chief financial officer and the company Secretary. During the year ended December 31, 2010, 2011 and 2012, the compensation paid or payable to key management for employee services is RMB4,093,000, RMB4,140,000 and RMB3,116,000 respectively.
F-57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
37 | RELATED PARTY TRANSACTIONS (CONTINUED) | |
(e) | As |
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Due from Guangzhou Railway Group | 155,034 | 113,195 | ||||||
— Trade receivables (i) | 150,066 | 108,341 | ||||||
— Other receivables | 4,968 | 4,854 | ||||||
Due to Guangzhou Railway Group | (35,209 | ) | (63,396 | ) | ||||
— Trade receivables (i) | (25,787 | ) | (53,955 | ) | ||||
— Other payables (iii) | (9,422 | ) | (9,441 | ) | ||||
Due from subsidiaries of Guangzhou Railway Group | 16,815 | 28,733 | ||||||
— Trade receivables | 15,354 | 13,126 | ||||||
Less: impairment provision | (4 | ) | (113 | ) | ||||
— Other receivables | 1,465 | 15,720 | ||||||
Due to subsidiaries of Guangzhou Railway Group | (302,206 | ) | (230,260 | ) | ||||
— Trade payables (ii) | (198,843 | ) | (174,054 | ) | ||||
— Other payables (iii) | (103,363 | ) | (56,206 | ) | ||||
Due from an associate | 2,019 | 1,312 | ||||||
— Trade receivables | 160 | — | ||||||
— Other receivables | 14,171 | 13,624 | ||||||
Less: impairment provision (v) | (12,312 | ) | (12,312 | ) | ||||
Due to an associate | (25,118 | ) | (9,534 | ) | ||||
— Trade payables | — | (135 | ) | |||||
— Other payables (iv) | (25,118 | ) | (9,399 | ) | ||||
Prepayment for fixed assets and construction-in-progress | 31,012 | — | ||||||
— Guangzhou Railway Group and its subsidiaries | 31,012 | — | ||||||
Payables for fixed assets and construction-in-progress | (125,487 | ) | (101,316 | ) | ||||
— Guangzhou Railway Group and its subsidiaries | (95,498 | ) | (101,316 | ) | ||||
— Associates | (29,989 | ) | — | |||||
As at December 31, | As at December 31, | |||||||
RMB’000 | RMB’000 | |||||||
Due from Guangzhou Railway Group | 309,159 | 194,679 | ||||||
- Trade receivables (i) | 296,449 | 189,307 | ||||||
- Prepayments and other receivables | 12,710 | 5,372 | ||||||
Due to Guangzhou Railway Group | 37,374 | 22,914 | ||||||
- Trade payables (i) | 36,105 | 21,679 | ||||||
- Other payables | 1,269 | 1,235 | ||||||
Due from subsidiaries of Guangzhou Railway Group | 219,188 | 67,321 | ||||||
- Trade receivables | 191,230 | 37,631 | ||||||
Less: impairment provision | (19 | ) | (19 | ) | ||||
- Prepayments and other receivables | 27,977 | 29,709 | ||||||
Due to subsidiaries of Guangzhou Railway Group | 187,499 | 314,856 | ||||||
- Trade payables (ii) | 164,221 | 282,266 | ||||||
- Other payables (iii) | 23,278 | 32,590 | ||||||
Due from associates | 1,733 | 1,784 | ||||||
- Prepayments and other receivables | 14,045 | 14,096 | ||||||
Less: impairment provision (v) | (12,312 | ) | (12,312 | ) | ||||
Due to associates | 5,803 | 5,376 | ||||||
- Trade payables | 2 | 2,152 | ||||||
- Other payables (iv) | 5,801 | 3,224 | ||||||
Due from Guangzhu Railway Company Limited | 17,039 | — | ||||||
- Prepayments and other receivables | 17,039 | — | ||||||
Prepayment for fixed assets and construction-in-progress | — | 32,417 | ||||||
- Guangzhou Railway Group and its subsidiaries | — | 1,092 | ||||||
- Associates | — | 31,325 | ||||||
Payables for fixed assets and construction-in-progress | 145,416 | 224,968 | ||||||
- Guangzhou Railway Group and its subsidiaries | 123,107 | 45,883 | ||||||
- Associates | 22,309 | 179,085 |
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
37 | RELATED PARTY TRANSACTIONS (CONTINUED) |
(e) | As at December 31, 2011 and 2012, the Group had the following material balances maintained with related parties (continued): |
(i) | The trade balances due from/to Guangzhou Railway Group, subsidiaries of Guangzhou Railway Group mainly represented service fees and charges payable and receivable balances arising from the provision of passenger transportation and cargo forwarding businesses jointly with these related parties within the PRC as described in 37(c)(i). |
(ii) | The trade |
F-58
(iii) | The | ||
(iv) | The | ||
(v) |
As at December 31, 2011 and 2012, all the balances maintained with related parties were unsecured, non-interest bearing and were repayable on demand.
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
38 | ||
TRANSACTIONS WITH MOR | ||
MOR is the controlling entity of the Company’s single largest shareholder (i.e. Guangzhou Railway Group). In addition, it is the government authority which governs and monitors the railway business centrally within the PRC. The Company works in cooperation with the MOR and other railway companies owned and controlled by the MOR for the operation of certain long distance passenger train and freight transportation businesses within the PRC. The revenues generated from these long-distance passenger and freight transportation businesses are collected and settled by the MOR according to its settlement systems. The charges for the use of the rail lines and services provided by other railway companies are also instructed by the MOR and settled by the MOR based on its systems.
In March 2013, the First Session of the 12th National People’s Congress of the PRC considered and approved the plan on State Council institutional reform and transformation of government functions, pursuant to which, the MOR was dismantled. The administrative functions pertaining to railway development planning and policies will be transferred to the Ministry of Transportation. The proposed State Railway Administration, to be supervised by the Ministry of Transportation, will run the other administrative functions of the MOR. The proposed China Railway Corporation will carry out the commercial function of the MOR.
(a) | Save as disclosed in other notes to the Financial Statements, during the year, the Group had the following material transactions undertaken with MOR: |
2007 | 2008 | 2009 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Recurring Transactions: | ||||||||||||
Income | ||||||||||||
Revenue collected from the MOR, including revenue collected by MOR for services provided to Guangzhou Railway Group and its subsidiaries (Note 37(c)) | ||||||||||||
— Passenger transportation | (5,318,369 | ) | (6,196,596 | ) | (6,542,333 | ) | ||||||
— Freight transportation | (906,516 | ) | (841,240 | ) | (752,561 | ) | ||||||
— Railway network usage and services | (2,659,529 | ) | (2,738,425 | ) | (3,105,654 | ) | ||||||
Charges and Payments | ||||||||||||
Services charges allocated from the MOR, including cost settled by MOR for services provided by Guangzhou Railway Group and its subsidiaries (Note 37(c)) | 1,990,297 | 2,179,407 | 2,404,966 | |||||||||
Operating lease rentals paid/payable to the MOR | 156,628 | 176,880 | 162,651 | |||||||||
2010 | 2011 | 2012 | ||||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Recurring Transactions: | ||||||||||||
Income | ||||||||||||
Revenue collected from the MOR | ||||||||||||
- Passenger transportation | 7,569,570 | 7,769,115 | 7,522,886 | |||||||||
- Freight transportation | 835,216 | 831,860 | 764,359 | |||||||||
- Railway network usage and services | 3,115,911 | 3,254,511 | 3,474,241 | |||||||||
- Repairing services for cargo trucks (i) | — | 221,386 | 247,335 | |||||||||
|
|
|
|
|
| |||||||
11,520,697 | 12,076,872 | 12,008,821 | ||||||||||
|
|
|
|
|
| |||||||
Charges and Payments | ||||||||||||
Services charges allocated from the MOR for equipment lease and services | 2,487,995 | 2,721,039 | 3,003,520 | |||||||||
Operating lease rentals paid/payable to the MOR | 178,917 | 200,693 | 201,151 | |||||||||
|
|
|
|
|
| |||||||
2,666,912 | 2,921,732 | 3,204,671 | ||||||||||
|
|
|
|
|
|
(i) |
F-59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressexpressed in Renminbi unless otherwise stated)
38 | TRANSACTIONS WITH MOR (CONTINUED) | |
(b) | As |
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Due from MOR | ||||||||
— Trade receivables | 53,048 | 273,300 | ||||||
As at December 31, | As at December 31, | |||||||
RMB’000 | RMB’000 | |||||||
Due from MOR | ||||||||
- Trade receivables | 18,017 | 159,074 | ||||||
Due to MOR | ||||||||
- Trade payables | 193,856 | — | ||||||
|
|
|
|
39 | SUBSEQUENT EVENTS | |
F-60Save as already disclosed in the notes to the financial statements, the Group had no other significant subsequent event.
F-76