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SECURITIES AND EXCHANGE COMMISSION
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Telephone: (86-755) 2558-7920 or (86-755) 2558-8146
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)
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 |
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 |
Large Accelerated Filer þ | Accelerated Filer o | Non-Accelerated Filer o |
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• | “Acquisition” means our acquisition of the railway transportation business between Guangzhou and Pingshi and the related assets and liabilities from |
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Yangcheng Railway Company according to the asset purchase agreement dated November 15, 2004 between Yangcheng Railway Company and us. | |||
• | “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. | ||
• | “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. | ||
• | “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. | ||
• | “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$”, “USD” or “U.S. dollars” means U.S. dollars, the lawful currency of the |
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United States. | |||
• | “Yangcheng Railway Company” means Guangzhou Railway Group Yangcheng Railway Enterprise Development Company, a wholly owned subsidiary of GRGC, or its predecessor, Guangzhou Railway Group Yangcheng Railway Company. |
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Year ended December 31, | ||||||||||||||||||||||||
2005 | 2006 | 2007(2) | 2008(2) | 2009(2) | 2009(2) | |||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | US$(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 |
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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 US$1.00 = RMB 6.83, which is rounded from 6.8259, the certified exchange rate for December 31, 2009 as published by the Federal Reserve Board of the United States. No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at that rate on December 31, 2009 or on any other date. | |
(2) | On January 1, 2007, we acquired the railway transportation business and related assets and liabilities associated with such railway transportation business, or the Yangcheng Railway Business, between Guangzhou and Pingshi from Yangcheng Railway Company. The Yangcheng Railway Business came under the control of our Company beginning on January 1, 2007. Accordingly, we consider January 1, 2007 as the effective date of the acquisition for accounting purposes. Prior to the initial public offering of our class A ordinary shares (the “A Shares”) in December 2006, or the A Share Offering, Yangcheng Railway Company and our Company were both controlled by GRGC, as GRGC held controlling interests in both companies. Subsequent to our A Share Offering, the equity interest of GRGC in our Company decreased to approximately 41% meaning that Yangcheng Railway Company and our Company were no longer deemed to be under common control. As a result, the Acquisition does not constitute a business combination under common control because our Company and Yangcheng Railway Company are not ultimately controlled by the same party both before and after the business combination. Accordingly, the transaction has been accounted for using the purchase method of accounting and the results of operations of Yangcheng Railway Business have been included in our consolidated comprehensive income statement starting from January 1, 2007. As a result, our consolidated financial information for each of the years ended December 31, 2007, 2008 and 2009 included in this annual report has reflected the impact arising from the Acquisition. |
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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 |
(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. |
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• | 18% for 2008; | ||
• | 20% for 2009; | ||
• | 22% for 2010; | ||
• | 24% for 2011; and | ||
• | 25% for 2012. |
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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 |
(1) | Prior to 2007, we recorded the aggregate of the passengers arriving at and departing from our railway stations as total passengers. As of January 1, 2007, we began recording only those passengers departing from our railway stations as our passengers. In order to make the presentation of our financial data in 2009 consistent with previous years, we have adjusted the numbers of total passengers for the years ended December 31, 2005 and 2006 to only include passengers departing from our railway stations. | |
(2) | Revenue per passenger is calculated by dividing the total passenger revenue (including revenue of long-distance passenger trains) by total number of passengers. 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. | |
(3) | 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. The decrease in revenue per passenger-kilometer in 2007, 2008 and 2009 from 2006 was primarily due to our acquisition of the railway transportation business between Guangzhou and Pingshi in 2007, whose passenger transportation business had lower pricing levels than the Guangzhou-Shenzhen Railway we operated before 2007. | |
(4) | 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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(5) | 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. The decrease in revenue per tonne-kilometer in 2007, 2008 and 2009 from 2006 was primarily due to our acquisition of the railway transportation business between Guangzhou and Pingshi in 2007, whose freight transportation business had lower pricing levels than the Guangzhou-Shenzhen Railway we operated before 2007. | |
(6) | Since our revenue from railway network usage and services was insignificant before the acquisition of the railway transportation business of Guangzhou-Pingshi Railway in 2007, we recorded such revenue into the revenue from passenger and freight transportation in previous years. Upon the acquisition of the railway transportation business of Guangzhou-Pingshi Railway, our revenue from railway network usage and services have become material. Our management decided to record the revenue from railway network usage and services separately starting from the year ended December 31, 2007. To conform to the current year presentation, we have adjusted the revenue of each of the years ended December 31, 2005 and 2006. | |
(7) | On January 1, 2007, the railway transportation business of the Guangzhou-Pingshi Railway came under the control of our Company. Accordingly, we consider January 1, 2007 as the effective date of the acquisition for accounting purposes. Prior to our A Share Offering, Yangcheng Railway Company and our Company were both controlled by the MOR, as the MOR indirectly held controlling interests in both companies. Subsequent to our A Share Offering, the equity interest of the MOR in our Company decreased to approximately 41%. On January 1, 2007, Yangcheng Railway Company and our Company were no longer deemed to be under common control. As a result, such transaction does not constitute a business combination under common control because our Company and Yangcheng Railway Company are not ultimately controlled by the same party both before and after the business combination. Accordingly, the transaction has been accounted for using the purchase method of accounting and the results of operations of Yangcheng Railway Business have been included in our consolidated comprehensive income statement starting from January 1, 2007. As a result, our consolidated financial information for each of the years ended December 31, 2007, 2008 and 2009 included in this annual report has reflected the impact arising from the Acquisition. |
• | intercity high-speed express trains between Guangzhou and Shenzhen; | ||
• | Hong Kong Through Trains between Hong Kong and Guangzhou; and | ||
• | domestic long-distance trains. |
• | 100 pairs were high-speed express passenger trains operating between Guangzhou and Shenzhen (including 15 stand-by pairs), representing a decrease of 20 pairs; | ||
• | 13 pairs were Hong Kong Through Trains, including 11 pairs of Hong Kong Through Trains, one pair of through train between Zhaoqing and Kowloon, and one through train that operates on alternating days either on the Beijing-Kowloon line or the Shanghai-Kowloon line; and |
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• | 105 pairs were domestic long-distance passenger trains, representing a decrease of 1.5 pairs from 106.5 pairs as of December 31, 2008, which included 16.5 pairs of long-distance passenger trains operated by us between Shenzhen and Yueyang, between Shenzhen and Shanghai South, between Shenzhen and Beijing West, between Kowloon and Beijing West, between Shenzhen and Shaoguan, between Guangzhou and Chongqing North, between Guangzhou and Wanzhou, between Guangzhou and Liuzhou, between Guangzhou and Xi’an, between Guangzhou and Taizhou, between Guangzhou and Shanghai South, between Guangzhou and Jiujiang, between Chenzhou and Foshan, between Guangzhou and Zhangjiajie, between Guangzhou and Lhasa and between Sanya and Beijing West, and 88.5 pairs of domestic long-distance trains, operated by other operators but originating or terminating on, or passing through, our railroad. |
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) |
(1) | The operation of Beijing-Kowloon Through Trains, which run between Beijing West and Kowloon, has been handed over to our Company since January 1, 2009. Before 2009, our Company’s revenue from Beijing-Kowloon Through Trains, excluding the revenue attributable to MTR in Hong Kong, was generated only from the Guangzhou East-Kowloon section that implemented a special pricing policy. Starting from January 1, 2009, all the revenue generated from the operation of Beijing-Kowloon Through Trains, excluding the revenue attributable to MTR in Hong Kong, became the revenue of our Company. We divide the revenue generated from the operation of Beijing-Kowloon Through Trains into two parts: (i) all the revenue generated from passengers departing for or from Hong Kong, excluding the revenue attributable to MTR, is accounted as revenue from Hong Kong Through Trains and (ii) the remaining revenue is accounted as revenue from long-distance trains. | |
(2) | 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. |
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• | inbound freight, which is primarily freight unloaded at freight stations and spur lines connected to ports on our rail line or in Hong Kong; | ||
• | 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 | ||
• | pass-through freight, which refers to freight that travels on our rail line, but which does not originate from or terminate at our rail line. |
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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 | % | ||||||||||||
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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 | |||||||||
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 | % |
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Country of | Percentage of Interest held | |||||||
Name | Incorporation | by our Company | ||||||
Guangshen Railway Dongqun Trade and Commerce Service Company | PRC | 100 | % | |||||
Shenzhen Fu Yuan Enterprise Development Company Limited | PRC | 100 | % | |||||
Shenzhen Guangshen Railway Travel Service Ltd. | 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 | 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 | % | |||||
Guangzhou Dongqun Advertising Company Limited | PRC | 100 | % | |||||
Shenzhen Shenhuasheng Storage and Transportation Company Limited | PRC | 100 | % |
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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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(1) | Prior to 2007, we recorded the aggregate of the passengers arriving at and departing from our railway stations as total passengers. As of January 1, 2007, we began recording only those passengers departing from our railway stations as our passengers. In order to make the presentation of our financial data in 2009 consistent with previous years, we have adjusted the numbers of total passengers for the years ended December 31, 2005 and 2006 to only include passengers departing from our railway stations. | |
(2) | Revenue per passenger is calculated by dividing the total passenger revenue (including revenue of long-distance passenger trains) by total number of passengers. 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. |
• | in 2009, our outbound freight tonnage was 17.6 million tonnes, representing an increase of 4.6% from 16.8 million tonnes in 2008. Our outbound freight revenue was RMB 285.2 million in 2009, representing an increase of 0.9% from RMB 282.7 million in 2008. Our outbound freight tonnage increased in 2009 due to (i) the partial recovery of our freight transportation business, along with the economic recovery of China, from the decline caused by the global financial crisis and economic downturn in 2008 and (ii) an increase in the freight transportation volume of our Beijing-Guangzhou line. | ||
• | in 2009, our inbound and pass-through freight tonnages were 44.4 million tonnes, representing a decrease of 16.8% from 53.3 million tonnes in 2008. Our inbound and pass-through freight revenue was RMB 836.4 million in 2009, representing a decrease of 11.8% from RMB 948.2 million in 2008. Our inbound and pass-through freight revenue decreased mainly because of the decrease in the inbound and pass-through freight tonnages, as a result of the decrease in freight transported to harbors for exportation, which was affected by the PRC government’s policy to encourage domestic enterprises to focus on meeting demand from the domestic market. |
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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 | — |
(1) | A portion of the revenue previously recorded as inbound freight revenue was recognized as revenue from outbound freight. |
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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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 | % |
(1) | Total railroad operating expenses as a percentage of railroad businesses revenue. |
• | 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 2009, our expenses relating to equipment leases and services amounted to RMB 2,974.8 million, representing an increase of 12.1% from RMB 2,653.2 million in 2008. This was mainly due to increased railway usage fees paid by us as result of (i) our takeover of the entire operation of Beijing-Kowloon Through Train since January 2009 and (ii) the change in the status of the Guangzhou-Xi’an trains from temporarily operated trains to regularly operated trains. | ||
• | Depreciation.Our depreciation expenses of fixed assets increased by 8.0% from RMB 1,145.6 million in 2008 to RMB 1,237.4 million in 2009, mainly due to the increase in depreciation expenses relating to the CRHs and the Fourth Rail Line between Guangzhou and Shenzhen. | ||
• | Labor and benefits. In 2009, our labor and benefits expenses amounted to RMB 2,277.1 million, representing an increase of 7.1% from RMB 2,125.4 million in 2008. The increase was mainly due to the increase in employees’ basic salaries, allowances and benefits. |
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• | Business tax. Our business tax in 2009 was RMB 267.0 million, representing an increase of 5.5% from RMB 253.0 million in 2008. The increase was mainly due to the increase in our operating revenue. |
• | Others. Our other railway operating expenses decreased by 13.8% from RMB 382.2 million in 2008 to RMB 329.6 million in 2009. This was mainly because we did not incur as severe weather conditions in the first quarter of 2009 as in the first quarter of 2008, and therefore did not spend the related operating costs. | ||
• | Repair (excluding materials and supplies). Our repair expenses decreased by 12.2% from RMB 670.2 million in 2008 to RMB 588.3 million in 2009, primarily because we completed most of our previously planned repair work in 2008 and therefore managed to reduce repair expenses in 2009. | ||
• | Utility and office expense. Our utility and office expense decreased by 7.9% from RMB 121.4 million in 2008 to RMB 111.8 million in 2009. This was mainly due to our efforts to control costs on administration and transportation in response to the recent global financial crisis and economic downturn. | ||
• | Social service expenses. Our social service expenses decreased by 6.8% from RMB 400.5 million in 2008 to RMB 373.3 million in 2009. This was primarily because (i) we did not experience as severe weather conditions in the first quarter of 2009 as in the first quarter of 2008 and therefore incurred less expenses for implementing security measures and (ii) in 2009, we were no longer required to implement the security measures required by the PRC government for the Beijing 2008 Olympic Games. |
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• | in 2008, our outbound freight tonnage was 16.8 million tonnes, representing a decrease of 11.6% from 19.1 million tonnes in 2007. Our outbound freight revenue was RMB 282.7 million in 2008, representing an increase of 30.3% from RMB 216.9 million in 2007. The Company’s outbound freight tonnage declined due to the freezing weather at the beginning of 2008, the upgrading of the industrial structure in the Pearl River Delta region and the global financial crisis and economic downturn. The increase in outbound |
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freight revenue was primarily due to (i) the increase in railway freight transportation tariffs in 2008 against 2007 as a result of the price adjustment in November 2007 and (ii) an increase in the delivery of higher value-added processed goods. | |||
• | in 2008, our inbound and pass-through freight tonnages were 53.3 million tonnes, representing an increase of 2.6% from 52.0 million tonnes in 2007, primarily due to the increase in the pass-through freight tonnages. Our inbound and pass-through freight revenue was RMB 948.2 million in 2008, representing a decrease of 6.1% from RMB 101.1 million in 2007, primarily due to the decrease in our inbound freight revenue as a result of the decrease in inbound freight tonnages. |
• | Business tax. Our business tax in 2008 was RMB 253.0 million, representing an increase of 14.1% from RMB 221.8 million in 2007. The increase was mainly due to the increase in our operating revenue. | ||
• | Labor and benefits. In 2008, our labor and benefits expenses amounted to RMB 2,125.4 million, representing an increase of 10.2% from RMB 1,928.2 million in 2007. The increase was mainly due to (i) the increase in employees’ basic salaries and benefits and (ii) the increase in the number of operating staff and workload as a result of the increase in the number of trains in operation during the year. |
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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 2008, our expenses relating to equipment leases and services amounted to RMB 2,653.2 million, representing an increase of 2.2% from RMB 2,595.2 million in 2007. This was mainly due to (i) the temporary change in locomotives and routes of the long-distance trains as a result of the freezing weather at the beginning of 2008, which led to the increase in railway network expenses; (ii) the operation of Guangzhou-Zhengzhou trains in July 2008 and the corresponding increase in railway network expenses and (iii) the change in electric locomotive routing, which led to the increase in locomotive traction expenses. Such increase was partially offset by the fact that we did not incur any expenses relating to the lease of “Blue Arrow” high-speed electric train-sets in 2008. | ||
• | Materials and supplies.Our materials and supplies expenses consist mainly of materials, fuel, water and electricity expenses. In 2008, our materials and supplies expenses were RMB 1,345.7 million, representing an increase of 8.5% from RMB 1,240.8 million in 2007. The increase was mainly due to (i) the increase in the prices of fuel, electricity and other railway-related materials and (ii) the increased consumption of materials, fuel, water and electricity as a result of the increase in the number of trains we operated in 2008. | ||
• | Repair (excluding materials and supplies).Our repair expenses increased by 45.7% from RMB 460.1 million in 2007 to RMB 670.2 million in 2008, primarily due to (i) an increase in repairs of locomotives, cars, buildings and structures as a result of the increase in the number of trains we operated in 2008 and the expansion of our business and (ii) the addition of new vegetation and tree planting along the rail lines to strengthen the roadbed. | ||
• | Depreciation.Our depreciation expenses of fixed assets increased by 13.8% from RMB 1,006.7 million in 2007 to RMB 1,145.6 million in 2008, mainly due to the increase in depreciation expenses relating to the CRHs and the Fourth Rail Line between Guangzhou and Shenzhen. | ||
• | Utility and office expense.Our utility and office expense increased by 10.6% from RMB 109.8 million in 2007 to RMB 121.4 million in 2008. This was mainly due to the increase in security expenses during the Beijing 2008 Olympic Games. | ||
• | Others. Our other railway operating expenses increased by 23.4% from RMB 309.9 million in 2007 to RMB 382.2 million in 2008. This was mainly due to the increase in communication fees as a result of the installation of the train monitoring system and the upgrade of communication technology. |
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Buildings (Note a) | 20 to 40 years | |
Leasehold improvements | Shorter of useful life or lease terms | |
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 |
Note a: | The estimated useful lives of buildings, tracks, bridges and service roads exceed the initial lease periods of the respective land use right lease grants (the “Lease Term”) and land use right operating leases (the “Operating Lease Term”) of the land on which these assets are located. Pursuant to the relevant laws and regulations in the PRC governing the land use right lease grant, we have the right to renew the leases to a period not less than 50 years after payment of additional cost. This right can be exercised within one year of the expiry of the initial Lease Term and can only be denied if such renewals are considered to be detrimental to the public interest. We consider the approval process to be perfunctory. In addition, based on the provision of the land use right operating lease agreement entered into with our substantial shareholder, we can renew the lease at our own discretion upon expiration of the Operating Lease Term. Based on these considerations, we determined the estimated useful lives of these assets to extend beyond the initial Lease Term as well as the Operating Lease Term. |
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• | repayment of borrowings of RMB 3,900 million; | ||
• | capital expenditures of approximately RMB 1,639.7 million, representing a decrease of 44.4% from RMB 2,947.8 million in 2008; and |
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• | payment of dividends of approximately RMB 566.7 million. |
• | purchasing 25G and 25T passenger trains; | ||
• | purchasing CRHs; | ||
• | constructing the Buji passenger station; and | ||
• | upgrading and expanding the transportation equipment for the Shenzhen-Guangzhou-Pingshi Railway. |
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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 | % |
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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 |
(1) | In connection with the Acquisition, we signed an agreement on November 15, 2004 with GRGC for leasing the land on which the acquired assets are located. The agreement became effective upon the completion of the Acquisition on January 1, 2007 and the lease term is 20 years, renewable at our discretion. According to the terms of the agreement, the rental for such lease will be agreed by both parties every year with a maximum amount not exceeding RMB 74.0 million. In the year ended December 31, 2009, the related rental cost paid and payable was RMB 51.2 million. |
• | constructing new ancillary facilities for the Guangzhou-Shenzhen Fourth Rail Line; | ||
• | constructing the Buji passenger station; and | ||
• | upgrading the supporting facilities to improve safety for railway transportation. |
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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 |
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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 |
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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 |
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Name | Position | |
Xu Xiaoming | Chairman of the Board of Directors of: | |
• GRGC | ||
• Guangdong Pearl Delta Inter-city Railway Transportation Company Limited | ||
• Guangmeishan Railway Company Limited | ||
• Sanmao Railway Company Limited | ||
• Shichang Railway Company Limited | ||
• Yuehai Railway Company Limited | ||
• Guangzhu Railway Company Limited | ||
• Hainan Donghuan Railway Company Limited | ||
• Xiashen Railway Guangdong Company Limited | ||
• Ganshao Railway Company Limited | ||
• China Railway (Hong Kong) Holdings Company Limited | ||
Guo Zhuxue | Chairman of the Board of Directors of: | |
• Hukun Railway Passenger Line Hunan Company Limited | ||
Vice Chairman of the Board of Directors and General Manager of: |
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Name | Position | |
• GRGC | ||
Shen Yi | Director of: | |
• Guangzhou Tiecheng Industrial Company Limited | ||
Li Liang | Executive Deputy General Manager of: | |
• GRGC | ||
Yu Zhiming | Chairman of the supervisory committee of: | |
• Yuehai Railway Company Limited | ||
• Guangshengang Passenger Line Company Limited | ||
• Guangdong Pearl Delta Inter-city Railway Transportation Company Limited | ||
• Maozhan Railway Company Limited | ||
Director of: | ||
• Guangmeishan Railway Company Limited | ||
• Sanmao Railway Company Limited | ||
• Shichang Railway Company Limited | ||
• Hainan Donghuan Railway Company Limited | ||
• Hukun Railway Passenger Line Hunan Company Limited | ||
• Ganshao Railway Company Limited | ||
• China Railway Container Transportation Company Limited | ||
• China Railway Special Goods Transportation Company Limited | ||
Supervisor of: | ||
• Guangzhu Railway Company Limited | ||
Chief Accountant of: | ||
• GRGC | ||
Xu Ling | Chairman of the supervisory committee of: | |
• Guangmeishan Railway Company Limited | ||
• Sanmao Railway Company Limited | ||
Supervisor of: | ||
• Guangzhu Railway Company Limited | ||
Chen Shaohong | Director of: | |
• Yuehai Railway Company Limited | ||
• Guangdong Tieqing International Travel Agency Limited | ||
• Guangmeishan Railway Company Limited | ||
• Xiashen Railway Guangdong Company Limited | ||
• Jinyue Railway Company Limited | ||
• Sanmao Railway Enterprise Development Company Limited | ||
Chairman of the supervisory committee of: | ||
• Shichang Railway Company Limited | ||
• Hukun Railway Passenger Line Hunan Company Limited |
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Name | Position | |
Supervisor of: | ||
• Hainan Donghuan Railway Company Limited | ||
• Ganshao Railway Company Limited | ||
• Sanmao Railway Company Limited | ||
• China Railway Express Co., Ltd. | ||
Li Zhiming | Chairman of the supervisory committee of: | |
• Guangdong Tieqing International Travel Agency Company Limited | ||
• Beijing Xingguangji Economy and Trade Company Limited | ||
• Guangzhou Tiecheng Industrial Company Limited | ||
Supervisor of: | ||
• Sanmao Railway Company Limited | ||
• Sanmao Railway Enterprise Development Company Limited | ||
• Guangmeishan Railway Company Limited | ||
• Hukun Railway Passenger Line Hunan Company Limited | ||
• Xiashen Railway Guangdong Company Limited | ||
• Ganshao Railway Company Limited | ||
• Guiguang Railway Company Limited | ||
• Nanguang Railway Company Limited | ||
• Jinyue Railway Company Limited | ||
• Yuehai Railway Company Limited | ||
• Shichang Railway Company Limited | ||
• Hong Kong Qiwen Company | ||
Tang Xiangdong | Supervisor of: | |
• Guangdong Tiecheng Industrial Company Limited |
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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. |
• | reviewing the annual financial statements and interim financial statements of the Company, including the disclosures made by the Company in this annual report; | ||
• | reviewing the financial reports and the reports of the Company prepared by the independent auditor and its supporting documents, including the review of the |
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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. |
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Function | Employees | |||
Passenger transportation personnel(1) | 8,901 | |||
Coordination personnel(2) | 1,950 | |||
Freight transportation personnel(3) | 1,497 | |||
Mechanical personnel(4) | 4,137 | |||
Power and water supply personnel(5) | 1,501 | |||
Vehicle personnel(6) | 2,905 | |||
Maintenance personnel(7) | 3,755 | |||
Power service personnel(8) | 1,200 | |||
Transportation supporting personnel(9) | 1,059 | |||
Diversified businesses and other supporting personnel(10) | 387 | |||
Technical and administrative personnel(11) | 4,044 | |||
Other personnel(12) | 1,834 | |||
Total | 33,170 |
(1) | Passenger transportation personnel mean those people that provide station boarding and train services. | |
(2) | Coordination personnel mean those people responsible for train coordination. | |
(3) | Freight transportation personnel mean those people responsible for organization of freight transportation. | |
(4) | Mechanical personnel mean those people responsible for train operation and overhaul. | |
(5) | Power and water supply personnel mean those people responsible for contact network operation and overhaul as well as power and water consumption maintenance. | |
(6) | Vehicle personnel mean those people responsible for vehicle operation and overhaul. | |
(7) | Maintenance personnel mean those people responsible for station track and railroad switch maintenance. | |
(8) | Power service personnel mean those people responsible for signal equipment maintenance. | |
(9) | Transportation supporting personnel means the supporting personnel of trains, machinery, works, power and vehicle organizations. | |
(10) | Diversified businesses and other supporting personnel mean all personnel involved in diversified businesses. | |
(11) | Technical and administrative personnel mean all managerial personnel other than the personnel of diversified businesses. | |
(12) | Other personnel include all personnel who have been sick, studying or early-retired. |
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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 |
(1) | On September 22, 2009, in accordance with relevant PRC regulations on transferring a portion of state-owned shares to the National Social Security Fund Council, the state-owned assets supervision and administration authority ordered China Securities Depository and Clearing Co., Ltd. to transfer 274,798,700 state-owned shares held by GRGC to the National Social Security |
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Fund Council, with an extended lock-up period of an additional three years following the expiry of the original three-year lock-up period. |
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 |
(1) | A shares held by GRGC are no longer restricted from sales and redemption starting from December 22, 2009. |
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 |
(1) | The letter “L” denotes a long position. The letter “S” denotes a short position. |
Name of related parties | Relationship with us | |
Substantial shareholder and fellow subsidiaries | ||
GRGC | Substantial shareholder |
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Name of related parties | Relationship with us | |
Yangcheng Railway Company | Subsidiary of GRGC | |
Guangmeishan Railway Company Limited | Subsidiary of GRGC | |
GEDC | Subsidiary of GRGC | |
Guangzhou Railway Material Supply Company | Subsidiary of GRGC | |
Guangzhou Railway Engineer Construction Enterprise Development Company | Subsidiary of GRGC | |
Yuehai Railway Company Limited | Subsidiary of GRGC | |
Shichang Railway Company Limited | Subsidiary of GRGC | |
CYTS Guangdong Railway Shenzhen Co., Ltd., or CYTS | Subsidiary of GRGC | |
Changsha Railway Construction Company Limited | Subsidiary of GRGC | |
Guangdong Sanmao Enterprise Development Company Limited | Subsidiary of GRGC | |
Guangzhou Qingda Transportation Company Limited | Subsidiary of GRGC | |
Yangcheng Construction Company of Yangcheng Railway Enterprise Development Company | Subsidiary of GRGC | |
Guangzhou Yuetie Operational Development Company | Subsidiary of GRGC | |
Guangzhou Railway Real Estate Construction Company | Subsidiary of GRGC | |
Guangdong Pearl River Delta Inter-city Railway Traffic Co., Ltd. | Subsidiary of GRGC | |
Guangzhou Railway Group Diversified Management Development Center | Subsidiary of GRGC | |
Guangzhou Railway Rolling Stock Factory | Subsidiary of GRGC | |
Guangzhou Railway Group Foreign Economic & Trade Development Corporation | Subsidiary of GRGC | |
Associates of our Company | ||
Guangzhou Tiecheng Enterprise Company Limited | Associate of our Company | |
Zengcheng Lihua Stock Company Limited | Associate of our Company | |
Shenzhen Guangshen Railway Civil Engineering Company | Associate of our Company |
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• | locomotives, railcars and operating personnel; | ||
• | leasing of passenger coaches; | ||
• | maintenance services for locomotives and passenger coaches; | ||
• | railroad transportation related services; | ||
• | fuel for the operation of locomotives; | ||
• | railway related materials; | ||
• | overhaul and emergency repair of our track and bridges; | ||
• | public security; and | ||
• | employee housing. |
• | prices for railroad transportation-related services are determined in accordance with the actual costs incurred in providing these services plus a profit margin of 8% of aggregate chargeable costs (fuel expenses, asset depreciation and water utility fees are not counted as chargeable costs for purposes of this calculation), or in accordance with the standard prices published by the MOR. We believe that the prices for the provision of these services are consistent with that which would be charged in an arm’s-length transaction; | ||
• | the rental fees for the high-speed passenger coaches leased to our Company by GRGC at approximately 6% of GRGC’s purchase price for the coaches, equivalent to GRGC’s depreciation expenses for the coaches; we also bear all costs of maintenance and overhaul of these coaches; | ||
• | the prices for social and related services provided by Yangcheng Railway Company and GEDC are determined based on the actual cost of providing these services plus a profit margin of 8%; | ||
• | the prices for social and related services, such as child care services and newspaper supply services, that are provided by GRGC are determined based on the actual cost of providing such services; | ||
• | the prices for the supply of railroad transportation related materials are determined in accordance with the relevant policies and regulations issued by GRGC (which regulations are applicable to other railroads under the jurisdiction |
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of GRGC); and | |||
• | the prices for the provision of overhaul and large scale maintenance services for our track and bridges are based on the relevant approved estimates plus a profit margin of 8%, and the prices for other maintenance services are to be agreed by the parties on a case-by-case basis. |
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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 | |||||||||
(1) | Such revenues/charges are determined by the MOR based on its standard charges applied on a nationwide basis. | |
(2) | The service charges are determined based on a pricing scheme set by the MOR or by reference to market prices with guidance provided by the MOR. | |
(3) | 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. | |
(4) | The service charges are determined based on negotiation between the contracting parties with reference to full cost principle. | |
(5) | The service charges are levied based on contract prices determined based on cost plus a profit margin and explicitly agreed between the contracting parties. | |
(6) | The prices are determined based on mutual negotiation between the contracting parties. | |
(7) | The prices are determined based on mutual negotiation between the contracting parties with reference to the “cost plus a management fee” model. |
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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 | ) | — |
(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. |
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(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) | Full impairment loss provision set up against a receivable balance due from Zengcheng Lihua, which was brought forward from prior years. |
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 | |||||||||
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As of December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
(RMB thousands) | ||||||||||||
Due from the MOR | ||||||||||||
— Trade receivables | 42,189 | 53,048 | 273,300 | |||||||||
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• | 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. |
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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 |
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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 |
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• | relevant transfer fees have been paid, if any; | ||
• | the instrument of transfer only involves H shares; | ||
• | the stamp duty chargeable on the instrument of transfer has been paid; | ||
• | 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 |
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• | we do not have any lien on the relevant shares. |
• | PRC accounting standards and regulations; and | ||
• | international accounting standards or the accounting standards of the countries in which our shares are listed. |
• | 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. |
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• | 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. |
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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. |
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• | 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. |
• | 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. |
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• | 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. |
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(1) | cancellation of shares for capital reduction; | ||
(2) | merging with another company that holds our shares; | ||
(3) | paying shares to our employees as bonus; or | ||
(4) | 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. |
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• | under a general offer; | ||
• | open offer on a stock exchange; or | ||
• | by off-market contract. |
• | 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 shall be made out of our distributable profits or out of proceeds of a new issue of shares made in respect of the repurchase, provided that the amount paid out of the proceeds of the new issue may not exceed the aggregate of premiums received by us on the issue of the shares repurchased or the current balance of our capital common reserve account (inclusive of the premiums from the new issue of shares). |
• | 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; |
• | 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. |
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• | 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. |
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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. |
• | 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 or any political subdivision thereof; | ||
• | 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. |
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• | 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, |
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• | 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. |
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• | are a corporation or 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. |
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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 | ) |
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• | a fee of US$1.50 per ADR for transfers of ADRs; | ||
• | a fee of $0.02 or less per ADS for any cash distribution made, or the cash distribution fee; | ||
• | a fee of US$5.00 for each 100 ADSs (or portion thereof) for any security distribution; |
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• | an administration fee of $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 $0.02 per ADS in any calendar year; | ||
• | reimbursement of fees and expenses incurred by the depositary and/or its agents in connection with the servicing and delivery of our H shares and compliance with applicable laws; | ||
• | stock transfer or other taxes and other governmental charges; | ||
• | cable, telex and facsimile transmission and delivery charges incurred at the request of the ADS holders; | ||
• | transfer or registration fees for the registration or transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities; and | ||
• | expenses of the depositary in connection with the conversion of foreign currencies into U.S. dollars. |
Category of Expenses | Amount (US$) | |||
Legal fees | 875.00 | |||
Investor relations | 14,969.00 | |||
Broker reimbursements | 37,981.00 | |||
Total | 53,820.00 | |||
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Category of Expenses | Amount (US$) | |||
Fees waived | 300,000.00 |
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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 | ||||||
Notes: | ||
1. | Traveling expenses and tax fees are included in the audit fees and do not require additional payment. | |
2. | As of December 31, 2009, there did not exist any amount that became payable but remained outstanding. | |
3. | PwC provided a consent letter for making reference to the auditor’s report on our consolidated financial statements for the year ended December 31, 2008 in the offering circular relating to our issuance of the Notes in December 2009. |
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• | 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; | ||
• | we do not have a nominating committee or a corporate governance committee similar to that required for U.S. domestic companies; | ||
• | 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. |
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Exhibit | ||
Number | Description | |
1.1 | Amended and Restated Articles of Association# | |
2.1 | Form of Amendment No. 1 to Deposit Agreement* | |
2.2 | Form of American Depositary Receipt* | |
4.1 | Land Lease Agreement dated November 15, 2004 between Guangshen Railway Company Limited and Guangzhou Railway (Group) Company** | |
4.2 | Master comprehensive services agreements dated November 5, 2007 between Guangshen Railway Company Limited and each of GRGC, GEDC and Yangcheng Railway Company*** | |
4.3 | 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, 2009 | |
11.1 | Code of Ethics for the Senior Management as amended on April 29, 2009# | |
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, 2009 | |
** | Incorporated by reference from the Registrant’s annual report on Form 20-F filed with the SEC on June 28, 2005 | |
*** | Incorporated by reference from the Registrant’s annual report on Form 20-F filed with the SEC on June 26, 2008 | |
# | Incorporated by reference from the Registrant’s annual report on Form 20-F filed with the SEC on June 25, 2009 |
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GUANGSHEN RAILWAY COMPANY LIMITED | ||||
Date: June 22, 2010 | By: | /s/ Xu Xiaoming | ||
Xu Xiaoming | ||||
Chairman of the Board of Directors | ||||
Page | ||||
GUANGSHEN RAILWAY COMPANY LIMITED AND SUBSIDIARIES | ||||
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PricewaterhouseCoopers
Hong Kong
June 22, 2010
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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 | |||||||||||||
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$1.00=RMB6.83, which is rounded from 6.8259, the certified exchange rates for December 31, 2009 as published by the Federal Reserve Board of the United States. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on December 31, 2009 or on any other date. |
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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$1.41 | ||||||||||||||||
* | Translation of amounts from Renminbi (“RMB”) into United States dollars (“US$”) for the convenience of the reader has been made at US$1.00=RMB6.83, which is rounded from 6.8259, the certified exchange rates for December 31, 2009 as published by the Federal Reserve Board of the United States. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on December 31, 2009 or on any other date. |
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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 | ||||||||||||||
* | Translation of amounts from Renminbi (“RMB”) into United States dollars (“US$”) for the convenience of the reader has been made at US$1.00=RMB6.83, which is rounded from 6.8259, the certified exchange rates for December 31, 2009 as published by the Federal Reserve Board of the United States. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on December 31, 2009 or on any other date. |
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(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 | ||||||||||||||
* | Translation of amounts from Renminbi (“RMB”) into United States dollars (“US$”) for the convenience of the reader has been made at US$1.00=RMB6.83, which is rounded from 6.8259, the certified exchange rates for December 31, 2009 as published by the Federal Reserve Board of the United States. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on December 31, 2009 or on any other date. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
1 | GENERAL INFORMATION | |
Guangshen Railway Company Limited (the “Company”) was established as a joint stock limited company in the People’s Republic of China (the “PRC”) on March 6, 1996. On the same date, the Company assumed the business operations of certain railroad and other related businesses (collectively the “Businesses”) that had been undertaken previously by its predecessor, Guangshen Railway Company (the “Predecessor”) and certain of its subsidiaries; and Guangzhou Railway (Group) Company (the “Guangzhou Railway Group”) and certain of its subsidiaries prior to the formation of the Company. | ||
The Predecessor is controlled by and is under the administration of the Guangzhou Railway Group. Pursuant to a restructuring agreement entered into between the Guangzhou Railway Group, the Predecessor and the Company in 1996 (the “Restructuring Agreement”), the Company issued to the Guangzhou Railway Group 100% of its equity interest in the form of 2,904,250,000 ordinary shares (the “State-owned Domestic Shares”) in exchange for the assets and liabilities associated with the operations of the Businesses (the “Restructuring”). After the Restructuring, the Predecessor changed its name to Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company (“GEDC”). | ||
In May 1996, the Company issued 1,431,300,000 shares, representing 217,812,000 H Shares (“H Shares”) and 24,269,760 American Depositary Shares (“ADSs”, one ADS represents 50 H Shares) in a global public offering for cash of approximately RMB4,214,000,000 in order to finance the capital expenditure and working capital requirements of the Company and its subsidiaries (collectively defined as the “Group”). | ||
In December 2006, the Company issued 2,747,987,000 A Shares on the Shanghai Stock Exchange through an initial public offering of shares in order to finance the acquisition of the business and related assets and liabilities associated with the railway transportation business of Guangzhou Railway Group Yangcheng Railway Enterprise Development Company (“Yangcheng Railway Business”), a wholly owned subsidiary of Guangzhou Railway Group which operates a railway line between the cities of Guangzhou and Pingshi in the Southern region of the PRC. | ||
The principal activities of the Group are the provision of passenger and cargo 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 until 2056. | ||
As of December 31, 2009, the Company had in total approximately 33,170 employees, representing a decrease of 609 as compared with that of December 31, 2008. | ||
The financial statements were authorized for issue by the board of directors of the Company on June 22, 2010. | ||
The English names of all companies listed in the financial statements are direct translations of their registered names in Chinese. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
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 presentation | |
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) as issued by International Accounting Standards Board (“IASB”). The 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 accounting pronouncements and amendments effective in 2009 |
• | IFRS 7 ‘Financial Instruments — Disclosures’ (amendment) — effective January 1, 2009. The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. As the change in accounting policy only results in additional disclosures, there is no impact on earnings per share. The Group has made relevant additional disclosures in these financial statements. | ||
• | IFRS 8, ‘Operating segments’. IFRS 8 replaces IAS 14, ‘Segment reporting’, and aligns segment reporting with the requirements of the US standard SFAS 131, ‘Disclosures about segments of an enterprise and related information’. The new standard requires a ‘management approach’, under which segment information is presented on the same basis as that used for internal reporting purposes. This has resulted in change of the reportable segments presented. In addition, the segments are reported in a manner that is more consistent with the internal reporting provided to the chief operating decision-maker. | ||
Goodwill is allocated by management to groups of cash-generating units at a segment level. Goodwill relating to a previous business combination remains in the Company’s Business segment. The change in reportable segments has not resulted in any additional goodwill impairment. | |||
Comparatives for 2008 and 2007 in note 5 have been restated. However, such restatement in note disclosure does not have any impact on the balance sheets. |
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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) | |
(a) | New accounting pronouncements and amendments effective in 2009 (continued) |
• | IAS 1 (revised). ‘Presentation of financial statements’ — effective January 1, 2009. The revised standard prohibits the presentation of items of income and expenses (that is, ‘non-owner changes in equity’) in the statement of changes in equity, requiring ‘non-owner changes in equity’ to be presented separately from owner changes in equity in a statement of comprehensive income. The Group has elected to present one performance statement: i.e. the statement of comprehensive income. These financial statements have been prepared under the revised disclosure requirements | ||
• | IAS 23 (amendment), ‘Borrowing costs’. The amendment requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs was removed. The Group adopted the relevant accounting policy consistent with the new requirements under revised IAS 23 in the past and therefore there was no substantial impact arising from this amendment. |
(b) | Accounting interpretations effective in 2009 but not relevant to the Group’s operations |
• | IFRS 2 (amendment), ‘Share-based payment’ (effective January 1, 2009) deals with vesting conditions and cancellations. It clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. These features would need to be included in the grant date fair value for transactions with employees and others providing similar services; they would not impact the number of awards expected to vest or valuation there of subsequent to grant date. All cancellations, whether by the entity or by other parties, should receive the same accounting treatment. |
(c) | Accounting standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group |
• | IFRS 3 (Revised), ‘Business Combination’ (effective from July 1, 2009). Management will apply IFRS 3 (Revised) for all business combinations to be undertaken. | ||
• | IAS 27 (Revised), ‘Consolidated and Separate Financial Statements’ (effective from July 1, 2009). Management does not expect the adoption of this new requirement will have a material impact on the Group’s financial statements. | ||
• | IAS 38 (amendment), ‘Intangible Assets’ (effective from July 1, 2009). The amendment is part of the IASB’s annual improvements project published in April/May 2009 and the Group will apply IAS 38 (amendment) from the date IFRS 3 (revised) is adopted. The amendment clarifies guidance in measuring the fair value of an intangible asset acquired in a business combination and it permits the grouping of intangible assets as a single asset if each asset has similar useful economic lives. Management will apply IAS 38 (amendment) to future deals. |
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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) | Accounting standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group (continued) |
• | IFRS 9 ‘Financial Instruments’ (effective from January 1, 2013). Financial assets are required to be classified into two measurement categories: those to be measured subsequently at fair value, and those to be measured subsequently at amortised cost. The decision is to be made at initial recognition. The classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. The expected impact of this new standard is still being assessed in details by management, but management does not anticipate that the application will result in a material impact on the Group’s financial statements. | ||
• | IFRIC 17 ‘Distribution of non-cash assets to owners’ (effective on or after July 1, 2009). The interpretation is part of the IASB’s annual improvements project published in April/May 2009. This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. IFRS 5 has also been amended to require that assets are classified as held for distribution only when they are available for distribution in their present condition and the distribution is highly probable. The Group will apply IFRIC 17 from January 1, 2010. It is not expected to have a material impact on the Group’s financial statements. | ||
• | IFRS 5 (amendment), ‘Measurement of non-current assets (or disposal groups) classified as held for sale’. The amendment is part of the IASB’s annual improvements project published in April/May 2009. The amendment provides clarification that IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations. It also clarifies that the general requirement of IAS 1 still apply, particularly paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty) of IAS 1. The Group will apply IFRS 5 (amendment) from January 1, 2010. It is not expected to have a material impact on the Group’s financial statements. | ||
• | IAS 1 (amendment), ‘Presentation of financial statements’. The amendment is part of the IASB’s annual improvements project published in April/May 2009. The amendment provides clarification that the potential settlement of a liability by the issue of equity is not relevant to its classification as current or non-current. By amending the definition of current liability, the amendment permits a liability to be classified as non-current (provided that the entity has an unconditional right to defer settlement by transfer of cash or other assets for at least 12 months after the accounting period) notwithstanding the fact that the entity could be required by the counterparty to settle in shares at any time. The Group will apply IAS 1 (amendment) from January 1, 2010. It is not expected to have a material impact on the Group’s financial statements. | ||
• | IFRS 2 (amendments), ‘group cash-settled share-based payment transactions’ (effective from 1 January 2010). In addition to incorporating IFRIC-Int 8, ‘Scope of IFRS 2’, and IFRIC-Int 11, ‘IFRS 2 — group and treasury share transactions’, the amendments expand on the guidance in IFRIC 11 to address the classification of group arrangements that were not covered by the interpretation. The new guidance is not expected to have a material impact on the Group’s financial statements. |
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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) | Accounting standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group (continued) |
• | IFRIC 19 ‘Extinguishing Financial Liabilities with Equity Instruments’ (effective from July 1, 2010). A debtor and creditor might renegotiate the terms of a financial liability with the result that the debtor extinguishes the liability fully or partially by issuing equity instruments to the creditor. These transactions are sometimes referred to as ‘debt for equity swaps’. IFRIC 19 provide further guidance for such transactions. The Group will apply IFRIC 19 from July 1, 2010. It is not expected to have a material impact on the Group’s financial statements. | ||
• | IFRIC 14 (amendment), ‘Prepayments of a Minimum Funding Requirement’(effective from January 1, 2011). The amendments apply in limited circumstances: when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover those requirements. The amendments permit such an entity to treat the benefit of such an early payment as an asset. The Group will apply IFRIC 14 from January 1, 2011. It is not expected to have a material impact on the Group’s financial statements. | ||
• | IFRS 1 (amendment), ‘Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters’ (effective from July 1, 2010). A first-time adopter may apply the transition provisions in paragraph 44G of IFRS 7. This standard is not relevant to the Group. | ||
• | IAS 24 (revised), ‘Related Party Disclosures’ (effective from January 1, 2011). This standard simplifies the definition of a related party, clarifies its intended meaning and eliminates inconsistencies from the definition. This standard also provides a partial exemption from the disclosure requirements for government-related entities. The Group will apply IAS 24 from January 1, 2011. | ||
• | The improved IFRS 1, ‘First-time Adoption of IFRS’, IASB’s Annual Improvements Project published in May 2010. According to the improved IFRS 1, the revaluated amount can become deemed costs so long as the revaluation takes place at periods before or during the first-time adoptors’ first set of IFRS financial statements. In addition, the IASB has made a special provision in this IFRS 1 exemption that existing IFRS preparers may also be able to retrospectively apply this. The Group is currently assessing the possible impact arising from the implementation of the improved IFRS 1. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) | |
2.2 | Consolidation | |
(a) | Subsidiaries |
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. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Details of the Company’s subsidiaries are set out in Note 10. | ||
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the Group’s share of the identifiable net assets of the subsidiary acquired, the difference is recognised directly in the comprehensive income statement. | ||
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. |
(b) | 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 and are initially recognised at cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss (Note 2.9). Details of the Group’s associates are set out in Note 11. | ||
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the comprehensive income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against 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 obligations or made payments on behalf of the associate. | ||
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also 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. | ||
Dilution gains and losses arising in investments in associates are recognised in the comprehensive income statement. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) | |
2.3 | Segment reporting | |
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the senior executives that make strategic decisions. | ||
2.4 | Foreign currency transactions | |
(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. 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. | ||
2.5 | Fixed assets | |
Fixed assets are stated at cost less accumulated depreciation and impairment losses. Cost represents the purchase price of the assets and other costs incurred to bring the assets into intended use. | ||
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. | ||
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 | |||
Leasehold improvements | Shorter of useful life or lease terms | |||
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 |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) | |
2.5 | Fixed assets (continued) | |
Note a: | ||
The estimated useful lives of buildings, tracks, bridges and service roads exceed the initial lease periods of the respective land use right lease grants (the “Lease Term”); and the initial period of land use right operating leases (the “Operating Lease Term”), on which these assets are located (Notes 2.7 and 36(b)). | ||
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 substantial 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. | ||
The assets’ residual values and estimated useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. | ||
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 2.9). | ||
Gains and losses on disposals are determined by comparing the sales proceeds with the carrying amount and are recognised within “other income/(expense) — net”, included in the comprehensive income statement. | ||
2.6 | 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. | ||
2.7 | Leasehold land payments | |
All land in the PRC is state-owned and no individual land ownership right exists. The Group acquired the right to use certain parcels of land for certain of its rail lines, stations and other businesses. The premium paid for such leasehold land payments represents pre-paid lease payments, which are amortised over the lease terms of 36.5 to 50 years using the straight-line method. Pursuant to the relevant laws and regulations in the PRC governing the land use right lease grant, the Group has the right to extend and renew the lease for a period not less than 50 years. 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 public interest. The Group considers the approval process to be perfunctory and the renewal is reasonably assured. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) | |
2.8 | Goodwill | |
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary/business at the date of acquisition. Goodwill arising from acquisitions of subsidiaries is disclosed separately on the 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 for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose identified according to operating segment. | ||
2.9 | 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 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. | ||
2.10 | Financial assets | |
2.10.1 | 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 2009 and 2008. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) | |
2.10 | Financial assets (continued) | |
2.10.1 | Classification (continued) | |
(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 maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The Group’s loans and receivables comprise “trade and other receivables” and “cash and cash equivalents” in the balance sheet (Notes 2.15 and 2.16). | ||
(b) | Available-for-sale financial assets | |
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. | ||
2.10.2 | 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, except for all financial assets carried at fair value through profit or loss. 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. Available-for-sale financial assets are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised 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. | ||
2.11 | Offsetting financial instruments | |
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) | |
2.12 | 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. | ||
The amount of the loss is measured as 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 financial asset’s original effective interest rate. The asset’s carrying amount of the asset is reduced and the amount of the loss is recognised in the comprehensive income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price. | ||
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. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) | |
2.12 | 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. For debt securities, the Group uses the criteria refer to (a) above. 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 separate comprehensive income statement. Impairment losses recognised in the separate comprehensive income statement on equity instruments are not reversed through the separate comprehensive income statement. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through the separate comprehensive income statement. | ||
2.13 | Deferred employee costs | |
The Group implemented a scheme (the “Scheme”) for selling staff quarters to its employees in 2000. Under the Scheme, the Group sold certain staff quarters to their employees at preferential prices in the form of housing benefits provided to these employees. The total housing benefits (the “Benefits”), which represent the difference between the net book value of the staff quarters sold and the proceeds collected from the employees, are expected to benefit the Group at least over 15 years, which was determined according to the contractual service period of the employees participating in the Scheme. Upon the implementation of the Scheme in 2000, the Benefits were recorded as deferred employee costs and the balance is then amortised over the contractual service period of the employees participating in the Scheme. | ||
At each balance sheet date, the Group reassesses whether there is any indication of impairment, taking into account the remaining service period of the employees and other qualitative factors. If such indication exists, a detailed analysis will be performed in order to assess whether the carrying amount of the deferred employee costs can be recoverable in full. A write-down is made if the carrying amount exceeds the recoverable amount. | ||
2.14 | Materials and supplies | |
Materials and supplies are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method. Materials and supplies are charged as fuel costs and repair and maintenance expenses when consumed, 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 selling expenses. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) | |
2.15 | Trade and other receivables | |
Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection of trade and other receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. | ||
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. | ||
2.16 | Cash and cash equivalents | |
Cash and cash equivalents include cash in hand; deposits held at call with banks; and other short-term highly liquid investments with original maturities of three months or less. | ||
2.17 | Share capital | |
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. | ||
2.18 | Trade payables | |
Trade payables are recognised initially at fair value and subsequently measured at amortised 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 presented as non-current liabilities. | ||
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. | ||
2.19 | Borrowings | |
Borrowings (including bonds payable) are recognised initially at fair value, net of transaction costs incurred. They are subsequently stated at amortised 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 amortised 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 balance sheet date. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) | |
2.20 | Current and deferred income tax | |
The tax expense for the period comprises current and deferred tax. Tax is recognised in the consolidated 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. | ||
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 countries where the Company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes 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 consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit nor loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. | ||
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. | ||
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 the Group and it is probable that the temporary difference will not reverse in the foreseeable future. | ||
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) | |
2.21 | Employee benefits | |
(a) | Defined contribution plan | |
The Group pays contributions to defined contribution schemes operated by the local government for employee benefits in respect of pension and 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) | Termination benefits | |
Termination benefits are payable when selected employees who meet certain criteria accept voluntary redundancy in exchange for these benefits, with specific approval granted by management of the Group. The Group recognises retirement benefits when it is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal or to provide retirement benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to present value. | ||
2.22 | 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. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses. | ||
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. | ||
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) | |
2.23 | 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 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 | |
Revenue from railway business includes revenue from passenger and freight services and revenue from railway network usage and services. Revenue from railway business is recognised when the services are rendered and revenue can be reliably measured. | ||
(b) | Revenue from other businesses | |
Revenue from other business is recognised once the related services or goods are delivered, the related risks and rewards of ownership have been transferred and revenue can be reliably measured. | ||
(c) | Interest income | |
Interest income is recognised using the effective interest method. When a 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. | ||
(d) | Dividend income | |
Dividend income is recognised when the right to receive payment is established. | ||
(e) | Rental income | |
Revenue from operating lease arrangements is recognized on a straight-line basis over the period of the respective leases. | ||
2.24 | 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 the purchase of fixed assets are deducted against the carrying amount of the fixed assets. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
2 | PRINCIPAL ACCOUNTING POLICIES (CONTINUED) | |
2.25 | 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. | ||
2.26 | 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. | ||
(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 done in accordance with the limits set by the Group. | ||
(b) | Foreign currency risk | |
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. |
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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) | |
(b) | Foreign currency risk (continued) | |
The following table shows the Group’s exposures to foreign currency rate fluctuation arising from foreign currency denominated monetary assets and liabilities: |
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 may experience a loss as a result of any foreign currency exchange rate fluctuations in connection with the deposits and other monetary assets and liabilities shown above. The Group has not used any means to hedge the exposure. | ||
As at December 31, 2009, if RMB had weakened/strengthened by 5% against the HKD with all other variables held constant, post-tax profit for the year would have been RMB3,390,000 (2008: RMB1,270,000) 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. | ||
(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 1.27% (2008: 1.10%). Any change in the interest rate promulgated by the People’s Bank of China from time to time is not considered to have significant impact to the Group. | ||
The Group’s interest rate risk which affects its income and operating cash flows mainly arises from bank borrowings and bonds payable. The Group’s bonds payable were at fixed rates, and expose the Group to fair value interest rate risk. All the Group’s bank borrowings were at floating rates (Note 23). Bank borrowings at floating rates expose the Group to cash flow interest rate risk. As of December 31, 2009, there were no bank borrowings (2008: borrowings of RMB3,900,000,000). | ||
As of December 31, 2008, if interest rates on bank borrowings had been 10 basis points higher/lower with all other variables held constant, post-tax profit for the year would have been approximately RMB2,574,800 lower/higher, mainly as a result of higher or lower interest expense. |
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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 | |
Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, trade and other receivables (excluding prepayments), short-term deposit, and long-term receivable. | ||
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/authority. The majority of the Group’s trade receivable balances and long term receivable balance are due from third party customers as a result of rendering of services or sales of merchandises. The Group’s other receivable balances mainly arise from services rendered other than the main railway transportation operations. The Group performs ongoing credit evaluations of its customers/debtors’ financial condition and generally does not require collateral from the customers/debtors’ account on the outstanding balances. Based on the expected realisability and timing for collection of the outstanding balances, the Group maintains a provision for doubtful accounts and actual losses incurred have been within management’s expectation. In view of the history of business dealings made with the customers and the sound collection history of the receivables due from them, management believes that there is no material credit risk inherent in the Group’s outstanding receivable balances. | ||
There were no other financial assets carrying a significant exposure to credit risk. | ||
With the consideration stated of the above and due to the fact that the majority of the Group’s revenue is derived from the railroad businesses which are cash transactions, the directors believe that there is no significant credit risk inherent in the Group’s business during the reporting period. | ||
(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. | ||
The directors are of the view that the following measures would be adequate to contain the Group’s liquidity risk at an acceptable level. |
(i) | Maintain and generate stable operating cash inflow from its profitable operations; | ||
(ii) | Undertake close monitoring process to control the magnitude and timing of the expected cash outlays associated with the construction of railway lines and the improvement of the existing operation equipments; and | ||
(iii) | Obtain new bank facilities and identify sources of medium term financing in order to finance the expected cash outlays associated with the expected capital expenditures. |
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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) | Liquidity risk (continued) | |
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant. |
Less than | Between 1 and 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 | |
The Group’s objectives of managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders; as well as to maintain an optimal capital structure to reduce the cost of capital. | ||
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt. | ||
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 borrowings (including current and non-current bank borrowings and bonds payable as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as ‘equity’, as shown in the consolidated balance sheet plus net debt. The gearing ratios as at December 31, 2009 and 2008 were as follows: |
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 | % | ||||
The gearing ratio as at end of 2009 had been maintained consistent as compared with 2008. The directors are of the view that current capital structure is within their expectation. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
3 | FINANCIAL RISK MANAGEMENT (CONTINUED) | |
3.3 | Fair value estimation | |
Effective January 1, 2009, the group adopted the amendment to IFRS 7 for financial instruments that are measured in the balance sheet at fair value, this requires disclosure of fair value measurements by level of the 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, 2008 and 2009, the Group did not have any assets or liabilities that were measured at fair value. | ||
The fair values of long-term receivable and long-term bank borrowings and 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. | ||
4 | CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS | |
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. | ||
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 outlined below. | ||
(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 the changes in market demand for, or legal or comparable limits imposed on, the use of such fixed assets. | ||
The current estimated useful lives are stated in Note 2.5. If the estimated depreciable lives of tracks, bridges and service roads had been increased/decreased by 10%, the depreciation of fixed assets would have been decreased/increased by approximately RMB17,832,000 and RMB21,795,000, respectively (2008: RMB15,901,000 and RMB19,435,000, respectively). |
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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 (continued) | |
(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 2.8. 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. | ||
(d) | Income taxes | |
The Group recognizes 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. | ||
5 | SEGMENT INFORMATION | |
The chief operating decision-makers have been identified as senior executives. Senior executives review the Group’s internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports. | ||
Senior executives consider the business from a perspective on revenues and operating results generated from railroad and related business conducted by the Company (“the Company’s Business”). Other segments mainly include provision of on-board catering services, warehousing services, hotel management services and sales of merchandises provided by the subsidiaries of the Group. | ||
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. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
5 | SEGMENT INFORMATION (CONTINUED) | |
The segment results for 2009 , 2008 and 2007 are as follows: |
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 | |||||||||||||||||||||
A reconciliation of the segment results to profit of 2009, 2008 and 2007 is as follows: |
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 | |||||||||||||||||||||||||||
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated)
5 | SEGMENT INFORMATION (CONTINUED) | |
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 | |||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||
There are approximately RMB10,400,548,000 (2008 and 2007: RMB9,776,261,000 and RMB8,884,413,000) of the revenues of the Group which were settled through the Ministry of Railway of the PRC (“MOR”). Except that, no revenues derived from a single external customer have exceeded 10% of the total revenues. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express 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 | |||||||||||||||||||||
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express 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 | ||||||
For the year ended December 31, 2009, no interest expenses (2008: RMB13,721,000) were capitalised in the construction-in-progress balance. A capitalisation rate of 6.55% in 2008 per annum was used to determine the amount of borrowing costs eligible for capitalisation. |
8 | LEASEHOLD LAND PAYMENTS |
RMB’000 | ||||
At January 1, 2008 | ||||
Cost | 791,018 | |||
Accumulated amortization | (183,047 | ) | ||
Net book amount | 607,971 | |||
Year ended December 31, 2008 | ||||
Opening net book amount | 607,971 | |||
Amortisation charges | (15,603 | ) | ||
Closing net book amount | 592,368 | |||
At December 31, 2008 | ||||
Cost | 791,213 | |||
Accumulated amortization | (198,845 | ) | ||
Net book amount | 592,368 | |||
Year ended December 31, 2009 | ||||
Opening net book amount | 592,368 | |||
Amortisation charges | (15,989 | ) | ||
Closing net book amount | 576,379 | |||
At December 31, 2009 | ||||
Cost | 791,213 | |||
Accumulated amortization | (214,834 | ) | ||
Net book amount | 576,379 | |||
As of December 31, 2009, land use right certificates (“Land Certificates”) of certain parcels of land of the Group with an aggregate area of 1,620,894 square meters (2008: same) had not been obtained. After consultation made with the Company’s legal counsel, the directors consider that there is no legal restriction for the Group to apply for and obtain the Land Certificates and it should not lead to any significant adverse impact on the operations of the Group. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
9 | GOODWILL |
RMB’000 | ||||
Year ended December 31, 2008 and 2009 | ||||
Opening net book amount | 281,255 | |||
Additions | — | |||
Closing net book amount | 281,255 | |||
At December 31, 2008 and 2009 | ||||
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. | ||
Prior to January 1, 2009, the goodwill had been allocated to a cash-generating units (“CGU”) comprising the Yangcheng Railway Business. The recoverable amount of that 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. | ||
No impairment had been recognised by the Group as at December 31, 2008. The key assumptions used for value-in-use calculations as of December 31, 2008 are as follows: |
Gross margin | 26.85 | % | ||
Growth rate | 2.0 | % | ||
Discount rate | 12.37 | % | ||
Management estimated the gross margin and growth rate based on past performance and its expectations for the market development. The growth rate did not exceed the long-term average growth rate for the industry in which the CGU operates and the weighted average growth rate used was consistent with the external sources of information available to management. The discount rate used was pre-tax and reflected specific risks relating to the railroad business segment. | ||
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. | ||
The recoverable amount of the CGU is mainly determined based on fair value less costs to sell. The assessment of fair value was performed based on the market price of the Company’s publicly traded shares as of December 31, 2009. | ||
Even if the market price of shares of the Company used in the assessment had been 10% lower than the price as of December 31, 2009, the Group still would not be required to recognize any impairment losses against goodwill. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in Renminbi unless otherwise stated
10 | INVESTMENTS IN SUBSIDIARIES | |
As of December 31, 2009, the Company had direct or indirect interests in the following subsidiaries which are incorporated/established and are operating in the PRC: |
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. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express 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 | |||||||
The movement of investments in associates of the Group during the year is 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 | ||||||
As of December 31, 2009, the Group had direct interests in the following companies which are incorporated/established and are operating in the PRC: |
Percentage of | ||||||||||
Date of | equity interest | |||||||||
incorporation/ | attributable to the | |||||||||
Name of the entity | establishment | Company | Paid-in capital | Principal activities | ||||||
Shenzhen Guangshen Railway Civil Engineering Company | March 1, 1984 | 49 | % | RMB55,000,000 | Construction of railroad properties | |||||
Zengcheng Lihua | July 30, 1992 | 26.98 | % | RMB107,054,682 | Real estate construction, provision of warehousing, cargo uploading and unloading services | |||||
Tiecheng | May 2, 1995 | 49 | % | RMB543,050,000 | Properties leasing and trading of merchandise |
All the above associates are limited liability companies. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express 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 | (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 | |||||||||||||||||
Note b: | ||
The carrying amount of the Group’s investment in Tiecheng as of December 31, 2009 was approximately RMB84,971,000 (2008: RMB85,732,000). | ||
In 1996, Tiecheng and a third party company jointly established a sino-foreign contractual joint venture, Guangzhou Guantian Real Estate Company (“Guangzhou Guantian”), in Guangzhou of the PRC for developing certain properties near a railway station operated by the Group. In 2000, Guangzhou Guantian together with two other parties, namely Guangzhou Guanhua Real Estate Company Limited (“Guangzhou Guanhua”) and Guangzhou Guanyi Real Estate Company Limited (“Guangzhou Guanyi”), undertook to act as joint guarantors (collectively the “Guarantors”) for certain payable balances (the “Payables”) due from Guangdong Guancheng Real Estate Company Limited (“Guangdong Guancheng”) to a third party creditor (the “Creditor”). | ||
Due to the fact that Guangdong Guancheng had failed to settle the Payables, as a result, the Guarantors were found to be jointly liable to the Creditor an amount of approximately RMB257,000,000 plus accrued interest (collectively the “Damages”) according to the court verdicts (the “Verdicts”). Guangzhou Guantian made an appeal to overturn the Verdicts. | ||
A final judgement on the appeal, which was in favour of Guangzhou Guantian, was obtained from the Supreme People’s Court of the PRC in March 2009. Accordingly, Guangzhou Guantian was not held liable to settle the Damages. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
12 | DEFERRED TAX ASSETS/LIABILITIES | |
The analysis of deferred tax assets and deferred tax liabilities is as follows: |
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 | ||||||
The gross movement on the deferred income tax account is as follows: |
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 | ||||||
The movement in deferred tax assets and liabilities of the Group during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows: |
Charged/ (Credited) | 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 | ||||||||||||||
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
12 | DEFERRED TAX ASSETS/LIABILITIES (CONTINUED) |
(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 | ||||||||||||||||
13 | DEFERRED EMPLOYEE COSTS | |
As disclosed in Note 2.13, the Group implemented a scheme (the “Scheme”) for selling staff quarters to its employees in 2000. The movement of deferred employee costs is set forth as follows: |
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 | ||||||
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
14 | FINANCIAL INSTRUMENTS BY CATEGORY | |
The accounting policies for financial instruments have been applied to the items tabulated below: |
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 | |||||||||
Other financial | ||||
liabilities | ||||
Liabilities as per consolidated balance sheet | ||||
As at December 31, 2009: | ||||
Bonds payable (Note 24) | 3,465,801 | |||
Trade and other payables excluding statutory liabilities (Notes 26 and 27) | 1,225,037 | |||
Payables for fixed assets and construction-in-progress | 674,652 | |||
Total | 5,365,490 | |||
As at December 31, 2008: | ||||
Bank borrowings (Note 23) | 3,900,000 | |||
Trade and other payables excluding statutory liabilities (Notes 26 and 27) | 1,189,912 | |||
Payables for fixed assets and construction-in-progress | 764,609 | |||
Total | 5,854,521 | |||
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
15 | CREDIT QUALITY OF FINANCIAL ASSETS | |
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to historical information about counterparty default rates: |
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 | |||||||
None of the financial assets that are fully performing has been renegotiated in the last year. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
16 | AVAILABLE-FOR-SALE INVESTMENTS |
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 Group’s equity ownership in each of these investments is 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 of December 31, 2009 and 2008, no impairment provision was considered necessary by the directors to write down the carrying amounts of these investments. | ||
17 | LONG-TERM RECEIVABLE |
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 | ||||||
The long-term receivable balance represents freight service fees receivable from a third party customer which was acquired from Yangcheng Railway Business (as mentioned in Note 1). The original gross value of the receivable is RMB140,400,000. On the acquisition date of Yangcheng Railway Business, it was remeasured at its then fair value, which was assessed by the discounted cash flow method, by making reference to the repayment schedule agreed by both parties. | ||
The balance is subsequently carried at amortised cost using an average effective interest rate of 6.54%. | ||
The balance approximated its fair value as of December 31, 2009 and 2008. |
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Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
18 | MATERIALS AND SUPPLIES |
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 | |||||||
The costs of materials and supplies consumed by the Group during the year were recognised as ‘operating expenses’ in the amount of approximately RMB1,713,456,000 (2008: RMB1,733,302,000). As of December 31, 2009 and 2008, there were no inventories stated at net realisable value. | ||
19 | TRADE RECEIVABLES, NET |
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 | |||||||
As of December 31, 2009 and 2008, the Group’s trade receivables are all denominated in RMB. | ||
The passenger railroad services are usually transacted on cash basis. The Group does not have formal contractual credit terms agreed with its customers for freight services but the trade receivables are usually settled within a period less than one year. As a result, the Group regards any receivable balance within a one-year credit period being not overdue. As of December 31, 2009 and 2008, the ageing analysis of the outstanding trade receivables was as follows: |
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 | |||||||
As of December 31, 2009 the Group’s trade receivables of approximately RMB35,971,000 (2008: RMB13,378,000) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows: |
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Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
19 | TRADE RECEIVABLES, NET (CONTINUED) |
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 | |||||||
As of December 31, 2009, the Group’s trade receivables of approximately RMB33,487,000 (2008: RMB11,924,000) had been impaired and provided for. The amount of the provision was approximately RMB9,151,000 as of December 31, 2009 (2008: RMB9,142,000). The impaired receivable balances were mainly related to the provision of freight transportation services. The related customers are in unexpected difficult financial conditions. Nevertheless, it was assessed that a portion of the carrying amount of the receivables would be recovered. The ageing analysis of these receivables is as follows: |
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 | |||||||
Movements on the provision for impairment of trade receivables are as follows: |
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 | ||||||
The creation and release of provision for impaired receivables have been included in utility and office 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. | ||
Concentration of credit risk with respect to trade receivables is low due to the fact that the Group has a large number of customers, which are widely dispersed. Accordingly, the directors of the Company believe that there was no additional significant credit risk beyond the amount that had already been provided for impairment losses as at December 31, 2009 and 2008. | ||
As of December 31, 2009 and 2008, the carrying amounts of the above trade receivables approximated their fair values. |
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Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
20 | PREPAYMENTS AND OTHER RECEIVABLES, NET |
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 | |||||||
Other receivables mainly represent miscellaneous deposits and receivables arising during the course of the provision of non-railway transportation services by the Group. Prepayments mainly represent amounts paid in advance to the suppliers for utilities and other operating expenses of the Group. | ||
As of December 31, 2009 and 2008, there were no significant balances of other receivables that were past due after the credit period that are not impaired. Provision for impairment loss of approximately RMB405,000 (2008: RMB391,000) has been included in the consolidated comprehensive income statement. | ||
Movements on the provision for impairment of other receivables are as follows: |
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 | ||||||
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
20 | PREPAYMENTS AND OTHER RECEIVABLES, NET (CONTINUED) |
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
RMB | 96,336 | 71,349 | ||||||
HKD | 529 | 994 | ||||||
96,865 | 72,343 | |||||||
21 | SHARE CAPITAL | |
As of December 31, 2009, the total authorised number of ordinary shares is 7,083,537,000 shares (2008: 7,083,537,000 shares) with a par value of RMB1.00 per share (2008: RMB1.00 per share). These shares are divided into A shares and H shares. Apart from certain A shares held by state-own legal person and legal persons which have sale restrictions (see details below), they rank pari passu against each other. |
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 | |||||||||
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
21 | SHARE CAPITAL (CONTINUED) | |
Note a: | ||
In December 2006, the Company issued 2,747,987,000 A shares on the Shanghai Stock Exchange through an initial public offering, among which 1,480,944,000 A shares held by state-owned legal persons were subject to a sale and transfer restriction period of 3-months or one year; In addition, at the time of this A shares offering, Guangzhou Railway Group also undertook to have its 2,904,250,000 A shares be subject to a 3-year sale and transfer restriction period. As of December 31, 2008, the number of shares that were subject to sale and transfer restriction was 2,904,250,000. | ||
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 (“SSF”) according to regulations issued by the relevant PRC authorities. Upon this transfer, SSF has voluntarily agreed to extend the transfer restriction period associated with these shares for another three years. Thus, the shares that are still subject to sale and transfer restriction were 274,798,700 as of December 31, 2009. | ||
22 | OTHER RESERVES | |
According to the provisions of the articles of association of the Company, the Company shall first set aside 10% of its profit after tax attributable to shareholders as indicated in the Company’s statutory financial statements for the statutory surplus reserve (except where the reserve has reached 50% of the Company’s registered share capital) in each year. The Company may also make appropriations from its profit attributable to shareholders to a discretionary surplus reserve, provided that it is approved by a resolution passed in a shareholders’ general meeting. These reserves cannot be used for purposes other than those for which they are created and are not distributable as cash dividends without the prior approval obtained from the shareholders in a shareholders’ general meeting under specific circumstances. | ||
When the statutory surplus reserve is not sufficient to make good for any losses of the Company in previous years, the current year profit attributable to shareholders shall be used to make good the losses before any allocations are set aside for the statutory surplus reserve. | ||
The statutory surplus reserve, the discretionary surplus reserve and the share premium account could be converted into share capital of the Company provided it is approved by a resolution passed in a shareholders’ general meeting with the provision that the ending balance of the statutory surplus reserve does not fall below 25% of the registered share capital amount. The Company may either allot newly created shares to the shareholders at the same proportion of the existing number of shares held by these shareholders, or it may increase the par value of each share. | ||
For the years ended December 31, 2009, 2008 and 2007, the directors proposed the following appropriations to reserves of the Company: |
2007 | 2008 | 2009 | ||||||||||||||||||||||
Percentage | RMB’000 | Percentage | RMB’000 | Percentage | RMB’000 | |||||||||||||||||||
Statutory surplus reserve | 10 | % | 139,778 | 10 | % | 121,444 | 10 | % | 134,902 | |||||||||||||||
Because of a change in the rules governing appropriations of statutory reserves of enterprises in the PRC effective from 2008, the Group had made appropriate changes to the reserve balances brought forward from 2007 and before during the year ended 31 December 2008. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
22 | OTHER RESERVES (CONTINUED) | |
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, (b) IFRS and (c) the accounting standards of the countries in which its shares are listed. 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. | ||
23 | BORROWINGS |
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 | — | ||||||
The borrowings in 2008 were mainly obtained for the financing of settlement of construction related costs of the fourth rail-line of the Group and purchase of locomotives of the Group. The carrying amounts of the Group’s borrowings are all denominated in RMB. | ||
The maturity of these borrowings is as follows: |
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 | — | ||||||
The interest rate exposure of the borrowings of the Group is as follows: |
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 | — | ||||||
The effective interest rate of the bank borrowings for the year ended December 31, 2009 was 5.91% (2008: 6.44%). The carrying amounts of the Group’s borrowings approximated their fair values as all the borrowings are at floating interest rates. | ||
As of December 31, 2009, the Group had unutilized banking facilities granted by various financial institutions amounting to approximately RMB1,500,000,000 (2008: RMB9,000,000,000). |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
24 | BONDS PAYABLE |
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 | ||||||||||||
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 reach maturity five years from the issue date at their nominal value of RMB3,500,000,000 and bear an annual interest rate with 4.79%. | ||
On the issue dates, the bonds are recognised based on the residual amounts of the principals after deduction of issuance costs of approximately RMB34,524,000. The bonds are subsequently carried at amortised cost using an average effective interest rate of 5.018%. | ||
As of December 31, 2009, the fair value of bonds payable approximates to their carrying amount. | ||
25 | EMPLOYEE BENEFITS OBLIGATIONS |
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 | |||||||
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. The amount mainly includes 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. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
25 | EMPLOYEE BENEFITS OBLIGATIONS (CONTINUED) | |
These 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). | ||
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 | |||||||
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 | |||||||
27 | ACCRUALS AND OTHER PAYABLES |
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 | |||||||
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
28 | LABOUR AND BENEFITS |
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 | ||||||||||
(a) | Pension scheme | |
All the full-time employees of the Group are entitled to join a statutory pension scheme. The employees would receive pension payments equal to their basic salaries payable upon their retirement up to their death. Pursuant to the PRC laws and regulations, contributions to the basic old age insurance for the Group’s local staff are to be made monthly to a government agency based on 26% of the standard salary set by the provincial government, of which 18% is borne by the Company or its subsidiaries and the remainder 8% is borne by the employees. The government agency is responsible for the pension liabilities due to the employees upon their retirement. The Group accounts for these contributions on an accrual basis and charges the related contributions to income in the year to which the contributions relate. | ||
(b) | Housing scheme | |
In accordance with the PRC housing reform regulations, the Group is required to make contributions to a State-sponsored Housing Fund at 7% or 13% of the salaries of the employees. At the same time, the employees are also required to make a contribution at 7% or 13% of the salaries out of their payroll. The employees are entitled to claim the entire sum of the fund under certain specified withdrawal circumstances. The Group have no further legal or constructive obligation for housing benefits of these employees beyond the above contributions made. | ||
29 | OTHER INCOME, NET |
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 | ) | |||||||||
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
30 | FINANCE COSTS |
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 | ||||||||||
31 | INCOME TAX EXPENSE | |
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 2009, 2008 and 2007, the applicable income tax rate is 20%, 18% and 15% respectively. | ||
An analysis of the current year taxation charges is as follows: |
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 | ||||||||||
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: |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
31 | INCOME TAX EXPENSE (CONTINUED) |
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 | |||||||||
Note a: | As explained above, the corporate income tax rate for enterprises in the PRC was changed with effect from January 1, 2008. As a result of such a change in enacted tax rate, additional deferred tax assets at approximately RMB30,413,000 was recognized by the Group in the comprehensive income statement within “income tax expenses” for the year ended December 31, 2007. | ||
In addition, additional deferred tax asset at approximately RMB92,021,000 arising from the change in enacted tax rate was recognized in the share premium by the Group for the year ended December 31, 2007 due to temporary differences arising from fixed assets contributed by GEDC into the Group during the Restructuring of the Group (see Note 1). |
The effective tax rate was 20.4% (2008 and 2007: 18.5% and 13.9%). 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 ordinary shareholders of approximately RMB1,364,521,000 (2008 and 2007: RMB1,224,129,000 and RMB1,431,415,000), divided by the weighted average number of ordinary shares outstanding during the year of 7,083,537,000 shares (2008 and 2007: 7,083,537,000 shares). There were no dilutive potential ordinary shares during both years. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
33 | DIVIDENDS | |
The dividends paid in 2009, 2008 and 2007 were RMB566,685,000 (RMB 0.08 per share), RMB566,683,000 (RMB 0.08 per share) and RMB566,711,000 respectively. |
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 | |||||||||
34 | CASH FLOW GENERATED FROM OPERATIONS |
(a) | Reconciliation from profit attributable to shareholders to cash generated from operations: |
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 | |||||||||
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
34 | CASH FLOW GENERATED FROM OPERATIONS (CONTINUED) | |
(b) | In the cash flow statement, proceeds from disposal of property, plant and equipment comprise: |
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 | |||||||||
(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 | |||||||
Note a: | Short term time deposits with maturities of no more than three months consist of deposits denominated in RMB. The original effective interest rate of RMB deposits is 1.35% (2008: 1.35%). |
35 | CONTINGENCY | |
There were no significant contingent liabilities as at the date of approval of these financial statements. | ||
36 | COMMITMENTS | |
(a) | Capital commitments | |
As of December 31, 2009 and 2008, the Group had the following capital commitments which are authorized but not contracted for, and contracted but not provided for: |
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 | ||||||
A substantial amount of these commitments as of December 31, 2009 is related to the reform of stations or facilities relating to the existing railway line of the Group. The related financing would be from self generated operating cash flow and bank facilities. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
36 | COMMITMENTS (CONTINUED) | |
(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, 2009, the related lease rental paid and payable was RMB51,200,000 (2008: 50,000,000). | ||
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 | |
Substantial shareholder and fellow subsidiaries | ||
Guangzhou Railway Group | Substantial shareholder | |
Guangzhou Railway Group YangCheng Railway Enterprise Development Company (“Yangcheng Railway”) | Subsidiary of the substantial shareholder | |
Guangmeishan Railway Company Limited (“Guangmeishan”) | Subsidiary of the substantial shareholder | |
Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company (“GEDC”) | Subsidiary of the substantial shareholder | |
Guangzhou Railway Material Supply Company | Subsidiary of the substantial shareholder | |
Guangzhou Railway Engineer Construction Enterprise Development Company (“Engineer Construction Enterprise”) | Subsidiary of the substantial shareholder | |
Yuehai Railway Company Limited | Subsidiary of the substantial shareholder | |
Shichang Railway Company Limited | Subsidiary of the substantial shareholder | |
CYTS Guangdong Railway Shenzhen Co., Ltd. (“CYTS”) | Subsidiary of the substantial shareholder | |
Changsha Railway Construction Company Limited | Subsidiary of the substantial shareholder | |
Guangdong Pearl River Delta Inter-city Railway Traffic Co., Ltd. | Subsidiary of the substantial shareholder | |
Guangdong Sanmao Enterprise Development Company Limited | Subsidiary of the substantial shareholder | |
Guangzhou Qingda Transportation Company Limited | Subsidiary of the substantial shareholder | |
Yangcheng Construction Company of YangCheng Railway | Subsidiary of the substantial shareholder | |
Guangzhou Yuetie Operational Development Company | Subsidiary of the substantial shareholder | |
Guangzhou Railway Real Estate Construction Company | Subsidiary of the substantial shareholder | |
Guangzhou Railway Group Diversified Management Development Center | Subsidiary of the substantial shareholder | |
Guangzhou Railway Rolling Stock Works | Subsidiary of the substantial shareholder | |
Foreign Economic & Trade Development Corporation of Guangzhou Railway group | Subsidiary of the substantial shareholder | |
Associates of the Group | ||
Guangzhou Tiecheng Enterprise Company Limited | Associate of the Group | |
Zengcheng Lihua Stock Company Limited | Associate of the Group | |
Shenzhen Guangshen Railway Civil Engineering Company | Associate of the Group |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express 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 | |||||||||
(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 by reference to current market prices with guidance provided by the MOR. | |
(iii) | 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. | |
(iv) | The service charges are determined based on negotiation between the contracting parties with reference to full cost principle. | |
(v) | The service charges are levied based on contract prices determined based on cost plus a profit margin and explicitly agreed between both contract parties. | |
(vi) | The prices are determined based on mutual negotiation between the contracting parties. | |
(vii) | The prices are determined based on mutual negotiation between the contracting parties with reference to cost plus a management fee. |
(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, 2009 and 2008, the compensation paid or payable to key management for employee services is RMB3,562,597 and RMB3,340,844 respectively. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
37 | RELATED PARTY TRANSACTIONS (CONTINUED) | |
(e) | As of December 31, 2009 and 2008, the Group had the following material balances maintained with related parties: |
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 | ) | — | |||||
(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 balances due to subsidiaries of Guangzhou Railway Group mainly represent payables arising from unsettled fees for purchase of materials and provision of other services according to various service agreements entered into between the Group and the related parties (see Note 37(c) above). |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
37 | RELATED PARTY TRANSACTIONS (CONTINUED) | |
(e) | As of December 31, 2009 and 2008, the Group had the following material balances maintained with related parties (continued): |
(iii) | The non-trade balances due to subsidiaries of Guangzhou Railway Group mainly represent the deposits of related parties maintained in the deposit-taking centre of the Company. | ||
(iv) | 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. | ||
(v) | Full impairment loss provision set up against a receivable balance due from Zengcheng Lihua, which was brought forward from prior years. |
As of December 31, 2009 and 2008, all the balances maintained with related parties are unsecured, non-interest bearing and are repayable on demand. | ||
38 | TRANSACTIONS WITH MOR | |
MOR is the controlling entity of the Company’s substantial 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. | ||
(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 | |||||||||
The service charges are determined based on a pricing scheme set by the MOR or by reference to current market prices with guidance provided by the MOR. |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts express in Renminbi unless otherwise stated)
38 | TRANSACTIONS WITH MOR (CONTINUED) | |
(b) | As of December 31, 2009 and 2008, the Group had the following material balances maintained with MOR: |
2008 | 2009 | |||||||
RMB’000 | RMB’000 | |||||||
Due from MOR | ||||||||
— Trade receivables | 53,048 | 273,300 | ||||||
39 | SUBSEQUENT EVENTS | |
Save as already disclosed in the notes to the financial statements, the Group had no other significant subsequent event. | ||
40 | COMPARATIVE FIGURES | |
Certain 2008 comparative figures have been reclassified as follows: | ||
(a) | Amount due from/to related parties which were separately disclosed in prior year have been recorded within the “Trade receivables, net”, amounting to RMB165,576,000, “Prepayments and other receivables, net”, amounting to RMB8,292,000, “Trade payables”, amounting to RMB224,630,000 and “Accruals and other payables” , amounting to RMB137,903,000 respectively on balance sheet in order to conform with current year presentation. | |
(b) | Amount of equity which were recorded within “Other Reserve” in prior year have been disclosed separately as “Share premium”, “Other reserves”, and “Retained earnings” on the balance sheet in order to conform with current year presentation. |
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