Guangshen Railway Company Limited (GNGYF) 6-KCurrent report (foreign)

Exhibit 99.2

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a stock broker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Guangshen Railway Company Limited, you should at once hand this circular and the accompanying proxy form to the purchaser(s) or the transferee(s) or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

(a joint stock limited company incorporated in the People’s Republic of China)

(Stock Code: 00525)

(1) CONTINUING CONNECTED TRANSACTIONS

AND

(2) NOTICE OF EGM

Independent financial adviser

to the Independent Board Committee and the Independent Shareholders

A letter from the Board is set out on pages 4 to 23 of this circular. A letter of recommendation from the Independent Board Committee to the Independent Shareholders is set out on pages IBC-1 to IBC-2 of this circular. A letter of advice from VBG Capital to the Independent Board Committee and the Independent Shareholders is set out on pages IFA-1 to IFA-21 of this circular.

A notice convening the EGM to be held at the Meeting Room, 3/F, No. 1052 Heping Road, Luohu District, Shenzhen, Guangdong Province, the PRC on Tuesday, 6 December 2022 at 9:30 a.m. is set out on pages EGM-1 to EGM-3 of this circular.

Whether or not you propose to attend the EGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon. The form of proxy should be returned to the registered office of the Company at No. 1052 Heping Road, Luohu District, Shenzhen, Guangdong Province, the PRC as soon as possible but in any event not less than 24 hours before the time appointed for holding of the EGM or any adjournment thereof. If you intend to attend the EGM in person or by proxy, you are required to complete and return the reply slip to the registered office of the Company at No. 1052 Heping Road, Luohu District, Shenzhen, Guangdong Province, the PRC on or before Wednesday, 16 November 2022.

20 October 2022

CONTENTS

- i -

DEFINITIONS

In this circular, the following expressions have the following meanings, unless the context requires otherwise:

- 1 -

DEFINITIONS

- 2 -

DEFINITIONS

- 3 -

LETTER FROM THE BOARD

(a joint stock limited company incorporated in the People’s Republic of China)

(Stock Code: 00525)

20 October 2022

To the shareholders of the Company

Dear Sir and Madam,

(1) CONTINUING CONNECTED TRANSACTIONS

AND

(2) NOTICE OF EGM

The purpose of this circular is to provide you with (a) further details of the Comprehensive Services Framework Agreement, the Continuing Connected Transactions and the Proposed Annual Caps; (b) a letter from VBG Capital containing its advice to the Independent Board Committee and the Independent Shareholders; (c) a letter from the Independent Board Committee with its recommendation to the Independent Shareholders; and (d) the notice of the EGM.

- 4 -

LETTER FROM THE BOARD

References are made to (i) the announcement of the Company dated 30 October 2019 and the circular of the Company dated 8 November 2019 in respect of the Existing Comprehensive Services Framework Agreement; and (ii) the announcement of the Company dated 28 September 2022 in respect of the Comprehensive Services Framework Agreement, the Continuing Connected Transactions and the Proposed Annual Caps.

At the extraordinary general meeting of the Company held on 23 December 2019, the then independent shareholders approved the Existing Comprehensive Services Framework Agreement, the Existing Continuing Connected Transactions and the annual caps for the Existing Continuing Connected Transactions for the three financial years ending 31 December 2022. Such approval will expire on 31 December 2022.

On 28 September 2022 (after trading hours), the Company and CSRG entered into the Comprehensive Services Framework Agreement to set out a framework for the mutual provision of services between the Group and the CSRG Group for the three financial years ending 31 December 2025.

Comprehensive Services Framework Agreement

The principal terms of the Comprehensive Services Framework Agreement are set out below:

- 5 -

LETTER FROM THE BOARD

- 6 -

LETTER FROM THE BOARD

- 7 -

LETTER FROM THE BOARD

- 8 -

LETTER FROM THE BOARD

- 9 -

LETTER FROM THE BOARD

- 10 -

LETTER FROM THE BOARD

The Company has adopted the following internal control procedures to constantly supervise and monitor transactions under the Comprehensive Services Framework Agreement and to ensure that such transactions are conducted in accordance with their respective terms on normal commercial terms or better and will not be prejudicial to the interests of the Company and the Shareholders as a whole:

- 11 -

LETTER FROM THE BOARD

- 12 -

LETTER FROM THE BOARD

Historical Figures and the Proposed Annual Caps

The table below sets out the historical figures in respect of the mutual provision of services for each of the two years ended 31 December 2021 and the six months ended 30 June 2022 between the Group and the CSRG Group:

- 13 -

LETTER FROM THE BOARD

The Proposed Annual Caps for each of the three years ending 31 December 2025 between the Group and the CSRG Group shall be as follows:

The Group will satisfy all the fees payable to CSRG Group by internal resources.

- 14 -

LETTER FROM THE BOARD

During the two years ended 31 December 2021 and the six months ended 30 June 2022, the production and operation of the Company, especially the passenger transportation business was affected by the COVID-19 outbreak. Since the beginning of the outspread of the COVID-19 pandemic, measures in relation to the prevention and control of the epidemic had been put in place and with such awareness in mind, people had minimised unnecessary travel in support of containing the epidemic. A significant amount of travel plans had been canceled during the peak seasons, such as Chinese New Year holidays and the “Golden Week” holidays in October. Thus, the number of cross-network EMU trains in operation had decreased within the Group’s Guangzhou-Shenzhen inter-city network and long distance network within the PRC. The through train between Hong Kong and Guangzhou had been suspended since the implementation of the border control in Mainland China and Hong Kong which also had an adverse effect to the passenger delivery volume. In 2020 and 2021, the Company recorded a consecutive year-on-year decrease in passenger delivery volume, where the passenger delivery volume decreased from approximately 85.13 million in 2019 to 40.78 million in 2021, representing a decrease of 52.1%. Furthermore, the passenger delivery volume for the six months ended 30 June 2022 had also decreased by 37.2% as compared to the same period in 2021. As such, the outbreak of COVID-19 had affected the utilization of the annual caps of the mutual provision of services between the Group and the CRC Group during the two years ended 31 December 2021 and the six months ended 30 June 2022.

Estimation basis of the Proposed Annual Caps

In determining the Proposed Annual Caps, the Company took into consideration the following general factors:

- 15 -

LETTER FROM THE BOARD

- 16 -

LETTER FROM THE BOARD

Specifically, the Company also took into account the following factors in determining the Proposed Annual Caps:

- 17 -

LETTER FROM THE BOARD

- 18 -

LETTER FROM THE BOARD

In calculating the above Proposed Annual Caps, a buffer of approximately 1% to 3% has been added to the estimated transaction amounts to allow room for any further unexpected increase in transaction volume. Such buffer for the Proposed Annual Caps has been determined with reference to the following factors:

Information on CSRG and the Company

CSRG (formerly known as CRC) is a solely state-owned enterprise under the management of the central government with registered capital of RMB1.7395 trillion. CSRG focuses on railway passenger and freight transport services and carries out diversified business operation. Its responsibilities include: unified control and command of railway transport, unified allocation of transport capacity of the network, public welfare transport specified by national regulations and railway revenue clearing and income management.

- 19 -

LETTER FROM THE BOARD

The Company is mainly engaged in railway passenger and freight transportation business, the Hong Kong Through Train passenger transportation business in cooperation with MTR Corporation Limited and provision of railway management services for other railway companies in the PRC. The Company is also engaged in provision of integrated services in relation to railway facilities and technology, commercial trading and operation of other industrial businesses that are consistent with the Company’s objectives.

Reasons for Entering into the Continuing Connected Transactions

It is not only beneficial but also necessary for the Company to enter into the Continuing Connected Transactions in order to facilitate the operations of the Company for the following reasons:

Listing Rules Implication

GRGC is the largest Shareholder and owns an aggregate of 37.12% of the issued share capital of the Company as at the date of this circular. CSRG (formerly known as CRC) is the de facto controller of GRGC and therefore a connected person of the Company under the Listing Rules. The transactions between the CSRG Group and the Group under the Comprehensive Services Framework Agreement will constitute continuing connected transactions of the Company under the Listing Rules.

- 20 -

LETTER FROM THE BOARD

As one or more of the applicable Percentage Ratios in respect of the Continuing Connected Transactions exceed 5%, the Continuing Connected Transactions will be subject to the reporting, annual review, announcement, circular and Independent Shareholders’ approval requirements pursuant to Chapter 14A of the Listing Rules.

The Directors (excluding the independent non-executive Directors whose views will be given after taking into account the advice from the IFA) consider that the Comprehensive Services Framework Agreement is entered into in the usual and ordinary course of business of the Group, is negotiated on an arm’s length basis and on normal commercial terms or on terms no less favorable than those available to or from independent third parties under prevailing local market conditions. The Continuing Connected Transactions and the Proposed Annual Caps are fair and reasonable and in the interests of the Group and the Shareholders as a whole.

The Company will comply with the relevant provisions under Chapter 14A of the Listing Rules in the event that the aggregate service fees under the Comprehensive Services Framework Agreement shall exceed the Proposed Annual Caps or if there is any material amendment to the terms of the Comprehensive Services Framework Agreement.

Mr. Wu Yong, Mr. Guo Jiming, Mr. Hu Dan and Mr. Zhang Zhe were considered to have material interests in the transactions contemplated under the Comprehensive Services Framework Agreement by virtue of being employed by GRGC and had thus had abstained from voting on resolutions of the Board in respect of the foregoing transactions. Save as disclosed above, none of the Directors has any material interests in the Continuing Connected Transactions or is required to abstain from voting on resolutions of the Board in respect of the foregoing transactions.

A notice convening the EGM at which ordinary resolution will be proposed to the Independent Shareholders to consider and, if thought fit, to approve the Comprehensive Services Framework Agreement, the Continuing Connected Transactions and the Proposed Annual Caps and all matters relating thereto, and the notice of the meeting is set out on pages EGM-1 to EGM-3 of this circular. Whether or not you propose to attend the EGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon. The form of proxy should be returned to the registered office of the Company at No. 1052 Heping Road, Luohu District, Shenzhen, Guangdong Province, the PRC as soon as possible but in any event not less than 24 hours before the time appointed for holding of the EGM or any adjournment thereof. If you intend to attend the EGM in person or by proxy, you are required to complete and return the reply slip to the registered office of the Company at No. 1052 Heping Road, Luohu District, Shenzhen, Guangdong Province, the PRC on or before Wednesday, 16 November 2022.

- 21 -

LETTER FROM THE BOARD

Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

GRGC, which directly held an aggregate of 2,629,451,300 Shares, representing approximately 37.12% of the total issued share capital of the Company as at the Latest Practicable Date, and its associates, will abstain from voting on Resolution No. 1. As at the Latest Practicable Date, GRGC is entitled to exercise or control the exercise of the voting rights in respect of all its Shares, representing approximately 37.12% of the voting rights in respect of the total issued Shares.

Save as disclosed above, to the extent that the Company is aware and having made all reasonable enquiries, as at the Latest Practicable Date, there is no voting trust or other agreement, arrangement or understanding entered into by or binding upon any Shareholders and none of the Shareholders is subject to any obligation or entitlement, whereby such Shareholder has or may have temporarily or permanently passed control over the exercise of the voting right in respect of its Shares to a third party, whether generally or on a case-by-case basis.

An announcement will be made by the Company following the conclusion of the EGM to inform you of the results of the EGM.

An Independent Board Committee, comprising Mr. Frederick Ma Si-Hang, Mr. Tang Xiaofan and Mr. Qiu Zilong, has been established to advise the Independent Shareholders in relation to the Comprehensive Services Framework Agreement, the Continuing Connected Transactions and the Proposed Annual Caps. None of the members of the Independent Board Committee is interested or involved in the Continuing Connected Transactions. Your attention is drawn to the letter from the Independent Board Committee dated 20 October 2022 set out on pages IBC-1 to IBC-2 of this circular.

VBG Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Comprehensive Services Framework Agreement, the Continuing Connected Transactions and the Proposed Annual Caps. Your attention is drawn to the letter from VBG Capital to the Independent Board Committee and the Independent Shareholders dated 20 October 2022 set out on pages IFA-1 to IFA-21 of this circular.

The Independent Board Committee recommends the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Comprehensive Services Framework Agreement, the Continuing Connected Transactions and the Proposed Annual Caps.

- 22 -

LETTER FROM THE BOARD

Having taken into account the advice of VBG Capital, the Directors (including the independent non-executive Directors) consider that (i) the terms of the Continuing Connected Transactions are fair and reasonable; (ii) the Continuing Connected Transactions are entered into on normal commercial terms or better and in the ordinary and usual course of business of the Group; and (iii) the Comprehensive Services Framework Agreement, the Continuing Connected Transactions and the Proposed Annual Caps are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM in respect of the Comprehensive Services Framework Agreement, the Continuing Connected Transactions and the Proposed Annual Caps.

Your attention is also drawn to the general information set out in the appendix to this circular.

- 23 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

(a joint stock limited company incorporated in the People’s Republic of China)

(Stock Code: 00525)

20 October 2022

To the Independent Shareholders

Dear Sir and Madam,

CONTINUING CONNECTED TRANSACTIONS

We refer to the circular of the Company to the Shareholders dated 20 October 2022 (the “Circular”), of which this letter forms part. Unless the context requires otherwise, capitalized terms used in this letter will have the same meanings given to them in the section headed “Definitions” of the Circular.

As the Independent Board Committee, we have been appointed to advise you as to whether, in our opinion, (a) the terms of the Continuing Connected Transactions are fair and reasonable; (b) the Continuing Connected Transactions are entered into on normal commercial terms or better and in the ordinary and usual course of business of the Group; and (c) the Comprehensive Services Framework Agreement, the Continuing Connected Transactions and the Proposed Annual Caps are in the interests of the Company and the Shareholders as a whole.

VBG Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Comprehensive Services Framework Agreement, the Continuing Connected Transactions and the Proposed Annual Caps.

- IBC-1 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered the Comprehensive Services Framework Agreement, the Continuing Connected Transactions, the Proposed Annual Caps, and the opinion and advice of VBG Capital in relation thereto, which are set out on pages IFA-1 to IFA-21 of the Circular, we are of the opinion (a) that the terms of the Continuing Connected Transactions are fair and reasonable; (b) that the Continuing Connected Transactions are entered into on normal commercial terms or better and in the ordinary and usual course of business of the Group; and (c) that the Comprehensive Services Framework Agreement, the Continuing Connected Transactions and the Proposed Annual Caps are in the interests of the Company and the Shareholders as a whole. We therefore recommend you to vote in favour of the ordinary resolution to be proposed at the EGM to approve the Comprehensive Services Framework Agreement, the Continuing Connected Transactions and the Proposed Annual Caps.

Yours faithfully,

For and on behalf of

Independent Board Committee

- IBC-2 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

Set out below is the text of a letter received from VBG Capital Limited, the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Comprehensive Services Framework Agreement, the Continuing Connected Transactions and the Proposed Annual Caps for the purpose of inclusion in this circular.

				21/F., Low Block Grand Millennium Plaza 181 Queen’s Road Central Hong Kong   20 October 2022

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Comprehensive Services Framework Agreement, the Continuing Connected Transactions and the Proposed Annual Caps, details of which are set out in the letter from the Board (the “Letter from the Board”) contained in the circular dated 20 October 2022 issued by the Company to the Shareholders (the “Circular”), of which this letter of advice forms part. Capitalised terms used in this letter of advice shall have the same meanings as ascribed to them under the section headed “Definitions” in the Circular unless the context requires otherwise.

On 28 September 2022, the Company and CSRG entered into the Comprehensive Services Framework Agreement to set out a framework for the mutual provision of services between the Group and the CSRG Group for the three years ending 31 December 2025.

According to the Letter from the Board, the Continuing Connected Transactions constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules, and are subject to the reporting, announcement, circular and independent shareholders’ approval requirements.

- IFA-1 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee comprising Messrs Frederick Ma Si-Hang, Tang Xiaofan, Qiu Zilong (all being the independent non-executive Directors) has been established to advise the Independent Shareholders on (i) whether the terms of the Comprehensive Services Framework Agreement and the Proposed Annual Caps are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; (ii) whether the Continuing Connected Transactions are in the interests of the Company and the Shareholders as a whole and are conducted in the ordinary and usual course of business of the Group; and (iii) how the Independent Shareholders should vote in respect of the resolution(s) to approve the Comprehensive Services Framework Agreement, the Continuing Connected Transactions and the Proposed Annual Caps at the EGM. We, VBG Capital Limited, have been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this respect.

OUR INDEPENDENCE

As at the Latest Practicable Date, we did not have any business relationship with the Company within the past two years. Save for the normal fees payable to us in connection with this appointment, no arrangement exists whereby we shall receive any fees or benefits from the Company and its subsidiaries or the Directors, chief executive or substantial shareholders (as defined in the Listing Rules) of the Company or any of their associates. We consider ourselves independent to form our opinion in respect of the Comprehensive Services Framework Agreement, the Continuing Connected Transactions and the Proposed Annual Caps.

BASIS OF OUR OPINION

In formulating our opinion with regard to the Comprehensive Services Framework Agreement, the Continuing Connected Transactions and the Proposed Annual Caps, we have relied on the information and facts supplied, opinions expressed and representations made to us by the management of the Company (including but not limited to those contained or referred to in the Circular). We have assumed that the information and facts supplied, opinions expressed and representations made to us by the management of the Company were true, accurate and complete at the time they were made and continue to be true, accurate and complete in all material aspects until the date of the Circular. We have also assumed that all statements of belief, opinions, expectation and intention made by the management of the Company in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Company, its management and/or advisers, which have been provided to us.

- IFA-2 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

The Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and have confirmed, having made all reasonable enquiries, which to the best of their knowledge and belief, that the information contained in the Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement in the Circular or the Circular misleading. We, as the independent financial adviser, take no responsibility for the contents of any part of the Circular, save and except for this letter of advice.

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent investigation into the business and affairs or future prospects of the Group, the GRGC Group, the CSRG Group or their respective shareholders, subsidiaries or associates, nor have we considered the taxation implication on the Group or the Shareholders as a result of the Comprehensive Services Framework Agreement and the Continuing Connected Transactions. Our opinion is necessarily based on the market, financial, economic and other conditions in effect and the information made available to us as at the Latest Practicable Date. Shareholders should note that subsequent developments (including change in market and economic conditions) may affect and/or change our opinion and we have no obligation to update this opinion to take into account events occurring after the Latest Practicable Date or to update, revise or reaffirm our opinion. Nothing contained in this letter of advice should be construed as a recommendation to hold, sell or buy any Shares or any other securities of the Company.

Where information in this letter of advice has been extracted from published or otherwise publicly available sources, we have ensured that such information has been correctly and fairly extracted, reproduced or presented from the relevant sources but we did not conduct any independent investigation into the accuracy and completeness of such information.

Shareholders should note that as the Proposed Annual Caps are relating to future events and were estimated based on assumptions which may or may not remain valid for the entire period up to 31 December 2025, and they do not represent forecasts of revenues or costs to be recorded from the Comprehensive Services Framework Agreement and the Continuing Connected Transactions. Consequently, we express no opinion as to how closely the actual revenue and cost to be recorded under the Comprehensive Services Framework Agreement and the Continuing Connected Transactions will correspond with the Proposed Annual Caps.

- IFA-3 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the Comprehensive Services Framework Agreement, the Continuing Connected Transactions and the Proposed Annual Caps, we have taken into consideration the following principal factors and reasons:

Information on the Group

The Company is mainly engaged in railway passenger and freight transportation business, the Hong Kong Through Train passenger transportation business in cooperation with MTR Corporation Limited and provision of railway management services for other railway companies in the PRC. The Company is also engaged in provision of integrated services in relation to railway facilities and technology, commercial trading and operation of other industrial businesses that are consistent with the Company’s objectives.

Information on CSRG

As extracted from Letter from the Board, CSRG is a solely state-owned enterprise under the management of the central government with registered capital of RMB1.7395 trillion. CSRG focuses on railway passenger and freight transport services and carries out diversified business operation. Its responsibilities include: unified control and command of railway transport, unified allocation of transport capacity of the network, public welfare transport specified by national regulations and railway revenue clearing and income management.

Reasons for and possible benefits of the Comprehensive Services Framework Agreement

As advised by the Directors, it is not only beneficial but also necessary for the Company to conduct the Continuing Connected Transactions in order to facilitate the operations of the Company for the following reasons:

- IFA-4 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

In view of (i) the well-established cooperative relationship between the Group and the CSRG Group for mutual provision of services; (ii) the CSRG Group’s good understanding of the service requirements of the Group; (iii) the revenue transactions under the Comprehensive Services Framework Agreement have generated considerable income to the Group; (iv) the Continuing Connected Transactions are indispensable to the Group’s principal business given that the CSRG Group controls and administers the operations of relevant railway lines in the PRC; and (v) the absence of alternative provider in the railway industry for certain services, we are of the opinion that the Continuing Connected Transactions are in the interests of the Company and the Shareholders as a whole and are conducted in the ordinary and usual course of business of the Group.

Summarised below are the principal terms of the Comprehensive Services Framework Agreement as extracted from the Letter from the Board:

- IFA-5 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

- IFA-6 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

- IFA-7 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

- IFA-8 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

- IFA-9 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

In connection with the aforesaid pricing basis under the Comprehensive Services Framework Agreement, we noted that prices of the services shall be determined firstly based on the Government Prescribed Prices, followed by the Guidance Prices and the Industry Rules. We have studied those pricing standards. In light of that those standards are legitimate and impartial for the entire railway industry, we consider such pricing basis to be fair and reasonable. As for situation (d) and (e) above where the Government Prescribed Prices, the Guidance Prices and the Industry Rules are all unavailable, we have requested and obtained (i) the standard price lists of the Group for various railway transportation services; and (ii) around 15 samples of tender documents in relation to certain large scale railway transportation projects conducted by the Group from 2019 to 2021. The samples were selected by us on a random basis and we consider them to be sufficient, fair and representative. We understand from the Directors that based on market research and industry knowledge, the Group would set the standard reference prices for various railway transportation services, and ensure that the mutual provision of services between the Group and the CSRG Group pursuant to the Comprehensive Services Framework Agreement would follow those standard reference prices. In the case of large scale railway transportation projects, the Company would carry out an open tender to ensure that only the most competitive service provider is selected through public procurement. Thus, the pricing basis for situation (d) and (e) above is also fair and reasonable. Lastly, with regard to the special entrusted railway transportation services provided by the Group to the CSRG Group, we noted that prices shall be determined on actual cost basis plus reasonable profits. Taking into account that as represented by the Directors, the profit margin adopted is comparable to the market profit margin of relevant services, we are of the view that such pricing basis is fair and reasonable.

With the above being the case, we concur with the Directors that the terms of the Comprehensive Services Framework Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.

- IFA-10 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

The below table illustrates the Proposed Annual Caps for the expenditure transactions and revenue transactions contemplated under the Comprehensive Services Framework Agreement:

- IFA-11 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

Notes:

Our assessment on the Proposed Annual Caps

For our due diligence purpose, we have discussed with the Directors and obtained the following supporting information in relation to the basis of determination of the Proposed Annual Caps:

In particular: (1) it is expected that the unit price for certain railway transportation services provided by the CSRG Group may be raised in the coming years; (2) under the condition that the impact of the Covid-19 pandemic (the “Pandemic”) is substantially eliminated and the operation of the ordinary passenger trains has returned to the normalized level without the Pandemic, the trains passing through Hong Kong may resume operation at any time. The Company also plans to run more cross-network EMU trains through the high-speed railway network which have been interconnected with its other railways lines. Accordingly, the service fees (including the fees for railway network settlement) to be paid to the CSRG Group by the Group will increase; and (3) it is expected that the volume of high-speed rail cross-line business may increase year by year, resulting in an increase in the fees for usage of high-speed rail trains.

- IFA-12 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

In particular: (1) it is expected that the unit price for certain railway transportation services provided by the Group may be raised in the coming years; and (2) certain new cross-network EMU trains have commenced operations, resulting in a continuous increase in the frequency of operations of EMU trains.

In particular: (1) according to the “Medium to Long Term Plan for Railway Network Development”《中長期鐵路網規劃》and the Greater Bay Area development plan, it is expected that more newly constructed railway lines in the Greater Bay Area will commence operations in the coming years and the Group may be entrusted to operate certain newly constructed railway lines and hub stations from 2023 to 2025, including the Xintang-Shantou, Shantou-Shanwei, Shenzhen-Jiangmen, and Guangzhou-Zhanjiang lines and hub stations such as Guangzhou Baiyun Station and Guangzhou Xintang Station. In 2023, cross-network EMU trains through two of the high-speed railway network, namely Xintang-Shantou and Shantou-Shanwei, will commence operation; and (2) the existing and newly constructed railway lines will have synergistic effect, thereby further expanding and improving the railway network, resulting in an increase of trains in operations.

- IFA-13 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

After analyzing the basis of determination of the Proposed Annual Caps for the expenditure transactions and revenue transactions contemplated under the Comprehensive Services Framework Agreement as detailed above, we noted that the Company’s estimation of the Proposed Annual Caps rely largely on three crucial factors, namely (1) the future development blueprint of the Group and prospects of the railway industry, especially under the supportive policies of the PRC government; (2) the expected industry recovery after the Pandemic; and (3) the possible inflation and rise in prices of the railway services. We have therefore performed the related independent market research and further dug into the Group’s operation and future development blueprint to assess the fairness and reasonableness of the Proposed Annual Caps:

The Group’s operation and future development blueprint

As aforementioned, the Company is mainly engaged in the railway passenger and freight transportation businesses. The Company solely operates the Shenzhen-Guangzhou-Pingshi Railway, which is approximately 481.2 kilometers long and connects the entire Guangdong province vertically. The Guangzhou-Pingshi Railway is the southern part of Beijing-Guangzhou Railway, forming an aorta connecting northern and southern China; whereas the Guangzhou-Shenzhen Railway is one of the two railway pass ways from Mainland China to Hong Kong, linking the Beijing-Guangzhou, Beijing-Kowloon, Sanshui-Maoming, Pinghu-Nantou and Pinghu-Yantian lines, as well as the Xiamen-Shenzhen Railway, Guangzhou-Dongguan-Shenzhen Intercity Railway, Guiyang-Guangzhou Railway, Nanning-Guangzhou, Ganzhou-Shenzhen Railway and the East Rail Line in Hong Kong, which forms a key integral part of the railway transportation network in the PRC.

The passenger transportation business of the Company includes the transportation businesses of Guangzhou-Shenzhen inter-city trains (including Guangzhou East to Chaozhou-Shantou cross-network EMU trains), long-distance trains and Hong Kong Through Trains. The Company adopts an “as-frequent-as-buses” operation for Guangzhou-Shenzhen inter-city trains, meaning that one pair of China Railway High-speed Trains are dispatched every ten minutes on average during peak hours between Guangzhou and Shenzhen. The through trains passing through Hong Kong, jointly operated by the Company and MTR Corporation Limited, are an important means of transportation for travelling between Guangzhou and Hong Kong. The Company also operates a number of long-distance trains running from and to Guangzhou and Shenzhen, connecting most of the provinces, autonomous regions and municipals across the PRC. Taking the advantage of commencement of operation of the Guiyang-Guangzhou Railway, Nanning-Guangzhou and Ganzhou-Shenzhen Railway to interconnect with the Guangzhou-Shenzhen Intercity Railway, the Company will actively organise the operation of cross-line high-speed trains from Guangzhou and Shenzhen.

- IFA-14 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

As regards the freight transportation business, the Company is not only well-equipped with comprehensive freight facilities which enable the efficient transportation of full load cargos, single load cargos, containers, bulky and heavy cargos, dangerous goods, perishable goods and oversized cargos, but also operates rail lines which are closely connected to major ports in Guangzhou and Shenzhen and are at the same time connected to several large industrial zones, logistics zones, and plants and mining enterprises in the Pearl River Delta region via railroad sidings. The major market of the Company’s freight transportation business is domestic mid-to-long-distance transportation. With the successive completion and commencement of operation of a series of high-speed railways and inter-city railways in the Greater Bay Area, it is expected that the Company will release more common line railway cargo transportation capacity. Going forward, the Company will actively implement the national policy of switching “Highway Transportation to Railway Transportation (公轉鐵)”, and fully explore the freight resources.

Prospects of the railway industry

Based on our independent research, on top of the “Medium to Long Term Plan for Railway Network Development”《中長期鐵路網規劃》and the Greater Bay Area development plan, the PRC government has promulgated a series of favourable policies to support the ongoing advancement of the railway industry, a summary of which is as follows:

- IFA-15 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

- IFA-16 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

Industry recovery in 2021

We noted from our independent research that the national railway industry had been adversely affected by the initial outbreak of the Pandemic in 2020. Based on the data released by the Ministry of Transport of the PRC, in 2020, notwithstanding that freight transportation was relatively stable nationwide, passenger transportation was hit hard by the Pandemic, with the total passenger volume and passenger turnover being approximately 2.2 billion and 826.6 billion passengers per kilometers, decreasing substantially by approximately 39.8% and 43.8%, respectively, as compared to 2019. Nevertheless, soon after the outbreak, the PRC government has imposed effective measures to combat the Pandemic. As a result of the successful combat of the Pandemic by the PRC government, the national railway industry experienced prompt recovery in 2021, with the total passenger volume and passenger turnover surging substantially by approximately 18.5% and 15.7%, respectively, as compared to 2020.

- IFA-17 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

Moreover, with reference to our independent research, alike the situation faced by national railway industry, the railway industry of Guangdong province has experienced similar ups and downs during the past few years. As revealed by the data released by the Guangdong Statistics Department, the province’s total freight volume and freight turnover reduced by approximately 4.2% and 6.4%, respectively, in 2020 as compared to 2019. The reduction was even more extensive for passenger transportation, whereby the total passenger volume and passenger turnover reduced by approximately 40.9% and 38.4%, respectively, in 2020 as compared to 2019. Despite the said downturn, the Guangdong railway industry recovered shortly in 2021 owing to the successfully combat of the Pandemic by the PRC government. Its total freight volume and freight turnover mounted robustly by approximately 26.4% and 28.0%, respectively, in 2021 as compared to 2020. At the same time, its total passenger volume and passenger turnover also mounted by approximately 6.1% and 6.4%, respectively, in 2021 as compared to 2020.

For instance, set out below are the historical transactions amounts of the continuing connected transactions between the Group and the CSRG Group during the past 5-year period as provided by the Company:

As depicted by the above table, the historical transactions amounts of the continuing connected transactions between the Group and the CSRG Group had demonstrated a steady year-on-year growth of between 9.4% and 16.1% before the initial outbreak of the Pandemic in early 2020. Due to the detrimental impact of the Pandemic, the size of both the expenditure transactions and revenue transactions shrank in 2020. However, amid the industry recovery in 2021, the actual amounts of the expenditure transactions and revenue transactions jumped significantly by approximately 31.2% and 14.4%, respectively, in 2021 as compared to 2020.

- IFA-18 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

During the first half of 2022, the repeated outbreaks of the Pandemic had affected the passenger transportation business of the Group. Consequently, the historical transactions amounts of the Existing Connected Transactions for the six months ended 30 June 2022 remained relatively stagnant. Notwithstanding this, with the improvement of the Pandemic situation in the PRC, especially that according to news commentaries Hong Kong and Mainland China have been working together on fully reopening their border and it is expected that the travel restrictions between the border will be relaxed. Once the border is reopened, the Group’s Hong Kong Through Trains shall resume its operation. Such expected recovery will lead to an expected increase in passenger delivery volume and freight delivery volume. Coupled with the commencement of operation of the cross-network EMU trains through two of the high-speed railway network, namely Xintang-Shantou and Shantou-Shanwei, in 2023, the actual amounts of the expenditure transactions and revenue transactions are likely to increase in the second half of 2022 and 2023.

Possible inflation and rise in prices of railway services

To understand the possible inflation and rise in prices of railway services, we found the following relevant data released by the National Statistics Bureau of the PRC:

It is noted that each of the consumer price, producer price and purchase price indices had been climbing in 2017 and 2018. Again, as disrupted by the Pandemic, inflation in the PRC was slightly curbed in 2020. Nonetheless, the said three price indices have already picked up the upward moving momentum in 2021, with the positive change in the producer price and purchase price indices surpassing 8% and 10%, respectively. For this reason, we are of the view that the Directors’ prediction on the possible inflation and rise in prices of railway services in future is justifiable.

- IFA-19 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

After considering the above factors, we are of the view that the Proposed Annual Caps are fair and reasonable estimation of the future amounts of the Continuing Connected Transactions judging from the historical transactions amounts of the continuing connected transactions between the Group and the CSRG Group, the recovery of the railway industry in 2021 and the possible future inflation and rise in prices of railway services. In addition, the expected surging demand for mutual services under the Comprehensive Services Framework Agreement is well substantiated by the Group’s massive operation scale and development potential, together with the positive outlook of the railway industry leveraging on the government’s supportive policies. As such, we concur with the Directors that the Proposed Annual Caps are fair and reasonable so far as the Independent Shareholders are concerned.

As referred to in the Letter from the Board, the Group has adopted a series of internal control measures to supervise the Continuing Connected Transactions.

In addition, the Directors confirmed that the Company shall comply with the requirements of Rules 14A.53 and 14A.55 of the Listing Rules pursuant to which (i) the total amounts of the Continuing Connected Transactions must be restricted by the Proposed Annual Caps for the three years ending 31 December 2025; (ii) terms of the Comprehensive Services Framework Agreement (together with the Proposed Annual Caps) must be reviewed by the independent non-executive Directors annually; and (iii) details of independent non-executive Directors’ annual review on the terms of the Comprehensive Services Framework Agreement (together with the Proposed Annual Caps) must be included in the Company’s subsequent published annual reports and financial accounts. As also stipulated under Rule 14A.56 of the Listing Rules, auditors of the Company must provide annually a letter to the Board confirming, among other things, that the Continuing Connected Transactions are carried out in accordance with the terms under relevant agreements and the pricing policies of the Company in all material respects, and the Proposed Annual Caps are not being exceeded. In the event that the total amounts of the Continuing Connected Transactions exceed the Proposed Annual Caps, or that there is any material amendment to the terms of the Comprehensive Services Framework Agreement, the Company, as confirmed by the Directors, shall comply with the applicable provisions of the Listing Rules governing continuing connected transaction.

For our due diligence purpose, we have requested and obtained (i) the annual work report of the audit committee of the Company; (ii) the annual review opinion regarding the Continuing Connected Transactions from the independent non-executive Directors; and (iii) the annual confirmation letter regarding the Continuing Connected Transactions from the auditors of the Company. We noted from the aforesaid reports/confirmation letter that under the internal control measures of the Group, the Continuing Connected Transactions are subject to regular supervision by the senior officials of the Company who are independent, as well as the external auditors of the Company.

- IFA-20 -

LETTER FROM INDEPENDENT FINANCIAL ADVISER

Having the internal control measures of the Group and the stipulated requirements for continuing connected transaction of the Listing Rules in place, the Continuing Connected Transactions will be monitored and hence the interest of the Independent Shareholders would be safeguarded.

RECOMMENDATION

Having taken into consideration the factors and reasons as stated above, we are of the opinion that (i) the terms of the Comprehensive Services Framework Agreement and the Proposed Annual Caps are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the Continuing Connected Transactions are in the interests of the Company and the Shareholders as a whole and are conducted in the ordinary and usual course of business of the Group. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolution(s) to be proposed at the EGM to approve the Comprehensive Services Framework Agreement, the Continuing Connected Transactions and the Proposed Annual Caps and we recommend the Independent Shareholders to vote in favour of the resolution(s) in this regard.

Ms. Doris Sing is a licensed person and responsible officer of VBG Capital Limited registered with the Securities and Futures Commission to carry on Type 6 (advising on corporate finance) regulated activity under the SFO and has over 17 years of experience in corporate finance.

- IFA-21 -

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

As at the Latest Practicable Date, none of the Directors, Supervisors or chief executive of the Company or their respective associates had any interests or short positions in the Shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were (a) required to be notified to the Company and the HKSE pursuant to Divisions 7 and 8 of Part XV of the SFO; or (b) required to be recorded in the register kept by the Company pursuant to Section 352 of the SFO; or (c) required to be notified to the Company and the HKSE pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers in Appendix 10 of the Listing Rules.

The Company has not granted to any of the Directors, Supervisors or chief executive of the Company or their spouses or children under the age of 18 any right to subscribe for any Shares or debentures of the Company.

- A-1 -

So far as is known to the Directors, as at the Latest Practicable Date, Shareholders (other than the Directors, Supervisors or chief executive of the Company) who had interests or short positions in the Shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company under Section 336 of the SFO were as follows:

The letter “L” denotes a long position.

As at the Latest Practicable Date, each of Mr. Wu Yong, Mr. Guo Jiming, Mr. Hu Dan and Mr. Zhang Zhe as Directors, and Mr. Lei Chunliang, Mr. Chen Shaohong, Mr. Xiang Lihua and Mr. Meng Yong as Supervisors is a director and/or an employee of GRGC.

Save as disclosed in this circular, as of the Latest Practicable Date, so far as is known to the Directors, no other person had an interest or short position in the Shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or had any option in respect of such capital.

- A-2 -

As at the Latest Practicable Date, none of the Directors, Supervisors or chief executive of the Company had any direct or indirect interest in any assets which have been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2021 (being the date to which the latest published audited financial statements of the Company were made up).

As at the Latest Practicable Date, none of the Directors, Supervisors or chief executive of the Company is materially interested in any contract or arrangement subsisting as at the Latest Practicable Date which is significant in relation to the business of the Group and to which the Company was a party.

As at the Latest Practicable Date, so far as the Directors were aware, none of the Directors, Supervisors or chief executive of the Company or their respective close associates had any interest in a business which competes or may compete with the business of the Group.

As at the Latest Practicable Date, none of the Directors or Supervisors had entered or was proposing to enter into any service contracts with any member of the Group which does not expire or is not determinable by such member of the Group within one year without payment of compensation (other than statutory compensation).

The following is the name and qualification of the expert who has given opinion or advice contained in this circular:

- A-3 -

As at the Latest Practicable Date, VBG Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and references to its name in the form and context in which it appears.

As at the Latest Practicable Date, VBG Capital has confirmed that:

As at the Latest Practicable Date, the Directors were not aware of any material adverse changes in the financial or trading position of the Group since 31 December 2021 (being the date to which the latest published audited financial statements of the Group were made up).

A copy of the Comprehensive Services Framework Agreement will be available on the websites of the Stock Exchange (http://www.hkexnews.hk) and the Company (http://www.gsrc.com) from the date of this circular and for a reasonable period of time (not less than 14 days).

- A-4 -

NOTICE OF EGM

(a joint stock limited company incorporated in the People’s Republic of China)

(Stock Code: 00525)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting or any adjournment thereof (the “EGM”) of the shareholders of Guangshen Railway Company Limited (the “Company”) will be held at the Meeting Room, 3/F, No. 1052 Heping Road, Luohu District, Shenzhen, Guangdong Province, the PRC on Tuesday, 6 December 2022 at 9:30 a.m. to consider and, if thought fit, pass the following ordinary resolution of the Company:

ORDINARY RESOLUTION

- EGM-1 -

NOTICE OF EGM

Notes:

To the extent permitted by law, the Company reserves the right to deny entry into the EGM venue by attendees who do not comply with the precautionary measures above.

- EGM-2 -

NOTICE OF EGM

The company reminds shareholders who intend to attend the EGM in person that they should carefully consider the risks of attending the EGM in person, taking into account their own personal circumstances. Furthermore, the Company encourages shareholders to exercise their voting rights at the EGM by appointing the Chairman of the EGM as their proxy and to return their proxy forms by the time specified, instead of attending the EGM in person.

Registered office of the Company:

No.1052 Heping Road, Luohu District

Shenzhen, Guangdong Province

The People’s Republic of China

Telephone: 86-755-25588150

Facsimile: 86-755-25591480

Shenzhen, the PRC

20 October 2022

As at the date of this notice, the executive directors are Mr. Wu Yong, Mr. Hu Lingling and Mr. Zhou Shangde; the non-executive directors are Mr. Guo Jiming, Mr. Hu Dan and Mr. Zhang Zhe; and the independent non-executive directors are Mr. Frederick Ma Si-Hang, Mr. Tang Xiaofan and Mr. Qiu Zilong.

- EGM-3 -