China Railway Group Limited - Proxy Solicitation & Information Statement 2020

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional advisers.

If you have sold or transferred all your shares in China Railway Group Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

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.

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中國中鐵股份有限公司 CHINA RAILWAY GROUP LIMITED

(A joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 390)

PROPOSED TRANSFER OF LISTING OF CRHEEC ON THE STAR MARKET OF THE SSE

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

AND

NOTICE OF 2020 SECOND EXTRAORDINARY GENERAL MEETING

A notice convening the EGM to be held at 9:00 a.m. on Friday, 30 October 2020 at the Conference Room, China Railway Square, No. 69 Fuxing Road, Haidian District, Beijing, PRC, is set out on pages N-1 to N-3 of this circular.

If you intend to appoint a proxy to attend the EGM, you are required to complete and return the accompanying proxy form in accordance with the instructions printed thereon. For holders of H Shares, the proxy form should be returned to Computershare Hong Kong Investor Services Limited in person, by post or by facsimile not less than 24 hours before the time appointed for holding the EGM or any adjourned meeting thereof. Completion and return of the proxy form will not preclude you from attending and voting in person at the EGM or at any adjourned meeting should you so wish, but in such event the proxy form shall be deemed to be revoked.

9 October 2020

TABLE OF CONTENTS

		Page
DEFINITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
LETTER	FROM THE BOARD
1	INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
2	PROPOSED TRANSFER OF LISTING OF CRHEEC ON THE STAR
	MARKET OF THE SSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
3	PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION . .	27
4	THE EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	27
5	FURTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	27
APPENDIX PROPOSED AMENDMENTS TO THE ARTICLES
	OF ASSOCIATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
NOTICE	OF 2020 SECOND EXTRAORDINARY GENERAL MEETING . . . . . .	N-1

– i –

DEFINITION

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

“A Shares” ordinary shares of RMB1.00 each in the share capital of the Company which are listed on the SSE and traded in RMB
“Articles of Association” the “Articles of Association of China Railway Group Limited” and its amendments from time to time
“Board” the board of directors of the Company
“Company” or “China Railway” 中國中鐵股份有限公司 (China Railway Group Limited), a joint stock limited company incorporated in the PRC and the H Shares and A Shares of which are listed on the Hong Kong Stock Exchange (stock code: 390) and the SSE (stock code: 601390), respectively
“Company Law” the Company Law of the People’s Republic of China
“CRHEEC” China Railway High-Speed Electrification Equipment Corporation Limited, an enterprise incorporated in the PRC and an indirect wholly-owned subsidiary of the Company
“CSRC” the China Securities Regulatory Commission
“Director(s)” the director(s) of the Company
“EGM” the 2020 second extraordinary general meeting of the Company to be held on Friday, 30 October 2020
“H Shares” overseas listed foreign shares of RMB1.00 each in the share capital of the Company which are listed on the Hong Kong Stock Exchange and traded in Hong Kong dollars
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“Hong Kong Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

“Hong Kong Stock Exchange” The Stock Exchange of Hong Kong Limited

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DEFINITION

“Latest Practicable Date“	6 October 2020, being the latest practicable date prior to
	the printing of this circular for ascertaining certain
	information contained herein
“New Third Board“	the National Equities Exchange and Quotations System
“PRC”	the People’s Republic of China
“Proposed Transfer of Listing”	proposed initial public offering of shares and listing of
or “Spin-off and Listing”	CRHEEC on the STAR Market of the SSE
or “Spin-off”
“Provisions on Spin-off and	Certain Provisions on Pilot Domestic Listing of Spin-off
Listing”	Subsidiaries of Listed Companies
“RMB”	Renminbi, the lawful currency of the PRC
“SASAC”	the State-owned Assets Supervision and Administration
	Commission of the State Council
“Securities Law”	the Securities Law of the People’s Republic of China
“Share(s)”	A Shares and/or H Shares
“Shareholder(s)”	holders of A Shares and/or H Shares
“SSE”	Shanghai Stock Exchange
“STAR Market”	the Science and Technology Innovation Board of the SSE
“State Council”	the State Council of the People’s Republic of China

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LETTER FROM THE BOARD

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中國中鐵股份有限公司 CHINA RAILWAY GROUP LIMITED

(A joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 390)

Executive Directors: Registered Office: Mr. ZHANG Zongyan (Chairman) 918, Block 1 Mr. CHEN Yun No. 128 South 4th Ring Road West Mr. WANG Shiqi Fengtai District Mr. ZHANG Xian Beijing 100070 PRC Independent Non-executive Directors: Mr. GUO Peizhang Principal Place of Business in Hong Kong: Mr. WEN Baoman Unit 1201-1203 Mr. ZHENG Qingzhi 12th Floor, APEC Plaza Mr. CHUNG Shui Ming Timpson 49 Hoi Yuen Road, Kwun Tong Kowloon Hong Kong

9 October 2020

To the Shareholders

Dear Sir or Madam,

PROPOSED TRANSFER OF LISTING OF CRHEEC ON THE STAR MARKET OF THE SSE PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION AND NOTICE OF 2020 SECOND EXTRAORDINARY GENERAL MEETING

1 INTRODUCTION

Reference is made to the announcement of the Company dated 29 April 2020 in relation to the Proposed Transfer of Listing of CRHEEC, an indirect wholly-owned subsidiary of the Company, on the STAR Market of the SSE. Reference is also made to the announcement of the Company dated 29 September 2020 in relation to the proposed amendments to the Articles of Association.

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LETTER FROM THE BOARD

At the EGM, among others, special resolutions will be proposed to approve the Proposed Transfer of Listing of CRHEEC and the proposed amendments to the Articles of Association. The notice of EGM is set out on pages N-1 to N-3 of this circular. The purpose of this circular is to provide you with information regarding resolutions to be considered at the EGM and to set out the notice of the EGM.

2 PROPOSED TRANSFER OF LISTING OF CRHEEC ON THE STAR MARKET OF THE SSE
2.1 The Proposal in Relation to the Initial Public Offering and Listing of the CRHEEC on the STAR Market
(1) The background, objective, commercial rationale and necessity of the Proposed Transfer of Listing

The Spin-off of CRHEEC onto the STAR Market is currently mature and feasible for China Railway. The implementation of the Spin-off is of great importance to both China Railway and CRHEEC and has commercial rationale and necessity. For details, please refer to the proposal in relation to the analysis of the background, objective, commercial rationale, necessity and feasibility of the Spin-off and Listing of CRHEEC on the STAR Market in this circular.

(2) The plan of the Proposed Transfer of Listing

(i) Type of shares to be issued: RMB ordinary share (A share).
(ii) Par value of shares: RMB1.00.
(iii) Number of shares to be issued: The number of shares to be issued will not exceed 94,100,000 shares (before exercising the over-allotment option), and at the same time, the sponsor(s) (main underwriter(s)) is granted an overallotment option of no more than 15% of the initial issuance size. If the over-allotment option is exercised in full, the total number of shares to be issued will be increased to 108,215,000 shares. The number of issuance will not be less than 25% of the total share capital of CRHEEC upon completion of the issuance. The final number of issuance will be negotiated and determined together by the board of directors of CRHEEC, as authorised by the shareholders’ general meeting of CRHEEC, and the main underwriter(s). If there are ex-rights issues such as the bonus issue, capitalization of capital reserve prior to the issuance of shares by CRHEEC, the total number of new shares to be issued will be adjusted accordingly. Upon consideration and approval of this resolution and prior to the issuance, the resolution will be adjusted by the board of directors of CRHEEC, as authorised by the

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LETTER FROM THE BOARD

shareholders’ general meeting of CRHEEC, in accordance with the laws and regulations then in force if there are new laws or regulations. The shareholders of CRHEEC have no acts of public offering of shares in the issuance.

(iv) Method of pricing: CRHEEC and the main underwriter(s) can negotiate and determine the issuance price through price inquiry from offline investors or other methods recognized by securities regulatory authority.
(v) Target subscribers: Qualified price inquiry participants, and natural persons, legal persons and other investors in the PRC who have opened securities account for A shares on China Securities Depository and Clearing Corporation Limited and meet the appropriate conditions of the STAR Market, or other subscribers as recognized by securities regulatory authority (except for persons prohibited by laws or regulations of the PRC).

If any of the aforesaid target subscribers is a connected person of the Company under the Hong Kong Listing Rules, the Company will take every reasonable step to comply with the relevant requirements under the Hong Kong Listing Rules.

(vi) Method of issuance: The issuance will be conducted by a combination of placement to strategic investors, offline placement to qualified price inquiry participants and online pricing and issuance to public investors who meet the appropriate conditions of the STAR Market and hold the non-restricted A shares or non-restricted depositary receipts in the Shanghai stock market.
(vii) Use of proceeds of the issuance: The proceeds from the issuance will be used for intelligent manufacturing project of high-speed railway network equipment, construction project of smart industrial park of rail transit power supply equipment, construction project of research and development center, replenishment of working capital and loan repayment.
(viii) Place of listing: STAR Market of the SSE.
(ix) Method of underwriting: Standby commitment.
(x) Validity period of resolution: The resolution shall be valid for 24 months from the date of this resolution being considered and approved at the EGM.

The proposal has been considered and approved at the 37th meeting of the fourth session of the Board held on 29 April 2020 and will be proposed at the EGM for the Shareholders to approve by way of a special resolution. The Proposed Transfer of Listing is subject to the approval of the EGM, as well as, among other things, the approval of the CSRC and the SSE.

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LETTER FROM THE BOARD

2.2 The Proposal in Relation to the “Preliminary Plan for the Spin-off and Listing on the STAR Market of China Railway High-Speed Electrification Equipment Corporation Limited, a Subsidiary of China Railway Group Limited (Revised Draft)”

The Preliminary Plan for the Spin-off and Listing on the STAR Market of China Railway High-Speed Electrification Equipment Corporation Limited, a Subsidiary of China Railway Group Limited (Revised Draft) was considered and approved at the 43rd meeting of the fourth session of the Board held on 28 September 2020 and will be proposed at the EGM for the Shareholders to approve by way of a special resolution.

Major contents of the Preliminary Plan for the Spin-off and Listing on the STAR Market of China Railway High-Speed Electrification Equipment Corporation Limited, a Subsidiary of China Railway Group Limited (Revised Draft) have been set out in the relevant sections of this circular. For the full text of which, please refer to the relevant announcement published by the Company on the website of the SSE on 30 September 2020.

2.3 The Proposal in Relation to the Spin-off and Listing of a Subsidiary in Compliance with Laws and Regulations such as the Provisions on Spin-off and Listing

In accordance with the relevant provisions of laws and regulations such as the Company Law, the Securities Law and the Provisions on Spin-off and Listing, after a careful self-examination and verification study on the actual situations of the Company and CRHEEC and the related matters involved therein, the Company is of the opinion that the Spin-off and Listing is in compliance with the provisions of relevant laws and regulations and is feasible, the details of which are as follows:

(1) Compliance with the requirement that “the listed company has been listed in Mainland China for 3 years.”

The shares of China Railway were listed on the Main Board of the SSE on 3 December 2007, which complies with the requirement set out in the Provisions on Spin-off and Listing.

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LETTER FROM THE BOARD

(2) Compliance with the requirement that “listed company has been profitable within the latest 3 accounting years consecutively, and the net profit attributable to the shareholders of the listed company shall not be less than RMB600 million (net profit shall be calculated at the lower value before and after deducting the non-recurring profit and loss) after deducting the net profit of the subsidiaries that is to be spun-off according to its interests in equity within the latest 3 accounting years.”

According to the financial reports of China Railway and the financial data set out in the audit reports of CRHEEC for the years of 2017, 2018 and 2019 and for the period from January to June 2020 issued by WUYIGE Certified Public Accountants LLP, after deducting the net profit of CRHEEC according to its interests in equity, the net profits attributable to the shareholders of China Railway within the latest 3 accounting years are as follows:

			_Unit: _	RMB’0,000
Item	2019	2018	2017	Total
I. Net profit attributable to the shareholders		of China Railway
Net profit	2,367,756.70	1,719,813.80	1,606,683.30	5,694,253.80
Net profit after deducting the	1,789,351.50	1,586,346.90	1,579,681.80	4,955,380.20
non-recurring profit and loss
II. Net profit attributable to the shareholders		of CRHEEC
Net profit	14,106.52	7,498.35	6,177.03	27,781.89
Net profit after deducting the	13,891.13	7,251.99	6,098.68	27,241.81
non-recurring profit and loss
III. China Railway’s percentage of equity interests in CRHEEC
Percentage of equity interests	100%	100%	100%
IV. Net profit of CRHEEC attributable to China Railway based on the equity interests
held
Net profit	14,106.52	7,498.35	6,177.03	27,781.89
Net profit after deducting the	13,891.13	7,251.99	6,098.68	27,241.81
non-recurring profit and loss
V. Net profit attributable to the shareholders of China Railway after deduction of the
net profit of CRHEEC based on the equity		interests held
Net profit	2,353,650.18	1,712,315.45	1,600,506.27	5,666,471.91
Net profit after deducting the	1,775,460.37	1,579,094.91	1,573,583.12	4,928,138.39
non-recurring profit and loss

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LETTER FROM THE BOARD

The aggregate net profit attributable to the shareholders of China Railway during the past 3 accounting years on a cumulative basis, after deducting the net profit of CRHEEC according to its interests in equity, are not less than RMB600 million (net profit shall be calculated at the lower value before and after deducting the non-recurring profit and loss), which complies with the requirements set out in the Provisions on Spin-off and Listing.

The listed companies that are subsidiaries of China Railway include China Railway Hi-Tech Industry Co., Ltd. (“ China Railway Industry ”, stock code: 600528) and China Railway Prefabricated Construction Co., Ltd. (“ CRPC ”, stock code: 300374). In July 2020, China Railway acquired the control of CRPC. As such, China Railway is not entitled to the net profit of CRPC for the years from 2017 to 2019.

After exclusion of China Railway Industry and CRHEEC, the net profits attributable to the shareholders of China Railway for the years from 2017 to 2019 are as follows:

				Unit: RMB’0,000	Unit: RMB’0,000
Item	2019	2018		2017	Total
I. Net profit attributable to the shareholders		of China Railway
Net profit	2,367,756.70	1,719,813.80	1,606,683.30		5,694,253.80
Net profit after deducting the	1,789,351.50	1,586,346.90	1,579,681.80		4,955,380.20
non-recurring profit and loss
II. Net profit attributable to the shareholders		of China Railway		Industry or CRHEEC
China Railway Industry:
Net profit	162,656.02	148,078.07	133,938.59		444,672.68
Net profit after deducting the	156,523.66	139,887.85	126,376.79		422,788.30
non-recurring profit and loss
CRHEEC:
Net profit	14,106.52	7,498.35		6,177.03	27,781.89
Net profit after deducting the	13,891.13	7,251.99		6,098.68	27,241.81
non-recurring profit and loss
III. China Railway’s percentage of equity interests in China			Railway Industry or
CRHEEC
China Railway Industry	52.13%,	50.13%,		50.01%,
	49.13%	50.46%,		60.42%,
		51.28%,		50.13%
		52.13%
CRHEEC	100%	100%		100%

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LETTER FROM THE BOARD

2019

Item

2018 2017 Total

IV. Net profit of China Railway Industry or CRHEEC attributable to China Railway based on the equity interests held China Railway Industry: Net profit 79,912.90 77,193.10 67,143.42 224,249.42 Net profit after deducting the 76,900.07 72,923.54 63,352.68 213,176.30 non-recurring profit and loss CRHEEC: Net profit 14,106.52 7,498.35 6,177.03 27,781.89 Net profit after deducting the 13,891.13 7,251.99 6,098.68 27,241.81 non-recurring profit and loss

V. Net profit attributable to the shareholders of China Railway after deduction of the net profits of such enterprises based on the equity interests held
Net profit 2,273,737.28 1,635,122.35 1,533,362.86 5,442,222.49 Net profit after deducting the 1,698,560.29 1,506,171.37 1,510,230.44 4,714,962.10 non-recurring profit and loss

Notes:

China Railway directly and indirectly through China Railway Erju Construction Co., Ltd. (“ China Railway Erju ”) (a wholly-owned subsidiary of China Railway) holds the equity interest in China Railway Industry. The reasons for the changes occurred during the years from 2017 to 2019 in the equity interests held by China Railway in China Railway Industry are as follows: in January and March 2017, China Railway Industry issued its shares respectively to China Railway in order to acquire assets and to other parties in order to raise the supporting funds; from February to August 2018, China Railway increased for several times its shareholding in China Railway Industry; in 2019, China Railway Erju disposed of the shares of China Railway Industry held by it.
The equity interests of China Railway Industry held by China Railway have been changed for several times with smaller range. The indicators in the above table were calculated based on the equity interests of China Railway Industry held by China Railway at the end of each year.

The aggregate net profit attributable to the shareholders of China Railway during the past 3 accounting years on a cumulative basis, after deducting the net profits of China Railway Industry and CRHEEC according to its equity interests, are not less than RMB600 million (net profit shall be calculated at the lower value before and after deducting the non-recurring profit and loss), which complies with the requirements set out in the Provisions on Spin-off and Listing.

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LETTER FROM THE BOARD

(3) Compliance with the requirement that “the net profit of the spun-off subsidiary that the listed company is entitled to according to the owner’s equity in the consolidated statements for the latest fiscal year shall not exceed 50% of the net profit in the consolidated statements of the listed company; and the net assets of the spun-off subsidiary that the listed company is entitled to according to the owner’s equity in the consolidated statements for the latest accounting year shall not exceed 30% of the net asset in the consolidated statements of the listed company.”

The net profit (net profit shall be calculated at the lower value before and after deducting the non-recurring profit and loss) attributable to shareholders of the listed company as realized by China Railway for 2019 amounted to RMB17.89352 billion and the net profit (net profit shall be calculated at the lower value before and after deducting the non-recurring profit and loss) attributable to shareholders of the parent company as realized by CRHEEC for 2019 amounted to RMB138.9113 million, and the percentage of the net profit (net profit shall be calculated at the lower value before and after deducting the non-recurring profit and loss) of the spun-off subsidiary that China Railway is entitled to according to the owner’s equity in the consolidated financial statements for the latest accounting year is 0.78% of the net profit (net profit shall be calculated at the lower value before and after deducting the non-recurring profit and loss) attributable to shareholders of the listed company, which complies with the requirements of the Provisions on Spin-off and Listing.

The net asset of China Railway attributable to shareholders of the listed company as at the end of 2019 amounted to RMB221.45784 billion; the net asset of CRHEEC attributable to shareholders of the parent company amounted to RMB620.1823 million, and the percentage of the net asset of CRHEEC that China Railway is entitled to according to the owner’s equity in the consolidated financial statements for the latest accounting year is 0.28% of the net asset of shareholders of the listed company, which complies with the requirements of the Provisions on Spin-off and Listing. The detailed calculation is as follows:

Unit: RMB’0,000

		Net profit after
		deduction of
		non-recurring
	Net profit	profit and loss	Net asset
Item	for 2019	for 2019	for 2019
China Railway	2,367,756.70	1,789,351.50	22,145,784.10
CRHEEC	14,106.52	13,891.13	62,018.23
Percentage of equity	100%		100%
interests of the Company
in CRHEEC

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LETTER FROM THE BOARD

		Net profit after
		deduction of
		non-recurring
	Net profit	profit and loss	Net asset
Item	for 2019	for 2019	for 2019
China Railway	2,367,756.70	1,789,351.50	22,145,784.10
Net profit or net asset of	14,106.52	13,891.13	62,018.23
CRHEEC attributable to
the Company’s
shareholders based on the
equity interests held
Percentage	0.60%	0.78%	0.28%

The listed companies that are subsidiaries of China Railway include China Railway Industry (600528) and CRPC (300374). In July 2020, China Railway acquired the control of CRPC. As such, China Railway is not entitled to the net profit or net asset of CRPC for 2019.

Percentage of net profit and net asset of China Railway Industry and CRHEEC in the total profit and total asset of China Railway for 2019 is as follows:

Unit: RMB’0,000

		Net profit after
		deduction of
		non-recurring
	Net profit	profit and loss	Net asset
Item	for 2019	for 2019	for 2019
China Railway	2,367,756.70	1,789,351.50	22,145,784.10
China Railway Industry	162,656.02	156,523.66	1,859,337.37
Percentage of equity	52.13%,		49.13%
interests of the Company	49.13%
in China Railway Industry
CRHEEC	14,106.52	13,891.13	62,018.23
Percentage of equity	100%		100%
interests of the Company
in CRHEEC

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LETTER FROM THE BOARD

		Net profit after
		deduction of
		non-recurring
	Net profit	profit and loss	Net asset
Item	for 2019	for 2019	for 2019
Combined net profit or net	94,019.42	90,791.21	975,510.68
asset of China Railway
Industry and CRHEEC
attributable to the
Company’s shareholders
based on the equity
interests held
Percentage	3.97%	5.07%	4.40%

Note: In 2019, China Railway Erju disposed of its shares of China Railway Industry. The equity interests of China Railway Industry held by China Railway had a slight change. The indicators in the above table were calculated based on the equity interests of China Railway Industry held by China Railway at the end of 2019.

As shown in the above table, the combined net profit or net asset of China Railway Industry and CRHEEC that China Railway is entitled to according to the equity interests for 2019 complies with the requirements of the Provisions on Spin-off and Listing.

(4) Compliance with the requirement that “the funds or assets of the listed company are not in the possession of the controlling shareholders, actual controllers and their related parties over the listed company, and there are no major related-party transactions that would prejudice the interests of the listed company. The listed company and its controlling shareholders, actual controllers have not received any administrative penalty from the CSRC in the past 36 months. The listed company and its controlling shareholders and actual controllers have not been publicly reprimanded by the stock exchanges in the past 12 months. The latest financial and accounting reports of the listed company for the past one year and one period were issued by certified public accountants without reservation.”

The funds or assets of the listed company are not in the possession of the controlling shareholders, actual controllers and their related parties over the listed company, and there are no major related-party transactions that would prejudice the interests of the listed company. China Railway and its controlling shareholders, actual controllers have not received any administrative penalty from the CSRC in the past 36 months; China Railway and its controlling shareholders and actual controllers have not been publicly reprimanded by the SSE and Hong Kong Stock Exchange in the past 12 months. The financial report of China Railway for the year 2019 has been audited by PricewaterhouseCoopers Zhong Tian LLP, who has issued the unqualified auditor report “PricewaterhouseCoopers Zhong Tian Shen Zi (2020) No. 10066”, which is in compliance with the Provisions on Spin-off and Listing. The financial report of China Railway for the

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LETTER FROM THE BOARD

first half of 2020 has been audited by Zhongxingcai Guanghua Certified Pubic Accountants LLP, which has issued the unqualified auditor report “Zhongxingcai Guanghua Shen Kuai Zi (2020) No. 207348”.

(5) Compliance with the requirement that “the businesses and assets in which the listed company has invested with the proceeds from its issuance of shares and fund raisings within the latest 3 accounting years shall not be used as principal business and assets of the proposed spin-off subsidiaries, excluding where the total amount of the proceeds utilized by the proposed spin-off subsidies does not exceed 10% of the its net assets within the latest 3 accounting years. The businesses and assets which were purchased through material asset reorganization within the latest 3 accounting years shall not be used as principal business and assets of the proposed spun-off subsidiaries. Subsidiaries which are primarily engaged in financial business shall not be spun off by the listed company.”

CRHEEC falls outside the businesses and assets of China Railway which were invested with the proceeds from issuance of shares and fund raisings within the latest 3 accounting years and falls outside the businesses and assets of China Railway which were purchased through material asset re-organization within the latest 3 accounting years. CRHEEC is mainly engaged in the research, development, design, manufacturing and sale of electrified railway catenary components and urban rail transit power supply products, and does not carry out any financial business. Therefore, CRHEEC does not fall under the business or asset which cannot be spun off, which complies with the requirement set out in the Provisions on Spin-off and Listing.

(6) Compliance with the requirement that “the shares of the proposed spun-off subsidiary held by directors, senior management personnel and related parties of the listed company shall not exceed 10% of the total share capital of the subsidiary before listing. The shares of the proposed spun-off subsidiary held by directors, senior management personnel and related parties of the proposed spun-off subsidiary shall not exceed 30% of the total share capital of the subsidiary before listing.”

As of 28 September 2020, none of the directors, senior management personnel or related parties of China Railway and of CRHEEC hold shares in CRHEEC, which complies with the requirement set out in the Provisions on Spin-off and Listing.

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LETTER FROM THE BOARD

(7) Compliance with the requirement that “the listed company shall fully disclose and explain: the spin-off will help the listed company to highlight its principal business and enhance its independence. After the spin-off, both the listed company and the proposed spun-off subsidiary are in compliance with the regulatory requirements for horizontal competition and related party transactions of the CSRC and the stock exchange, and are independent from each other in terms of assets, financial affairs and institutions. There is no cross appointment among senior management and financial personnel. There are no other serious deficiencies in terms of independence.”
(i) The Spin-off will help the Company to highlight its principal business and enhance its independence

As one of the largest multi-functional and comprehensive construction groups in the world, the Company can provide customers with full sets of engineering and industrial products and related services. It holds a leading position in infrastructure construction, survey, design and consulting services, engineering equipment and components manufacturing and other relevant sectors and is extending its industrial chain and expanding its value-added service by conducting such diversified businesses as real estate development, materials trade, infrastructure investment and operation, mineral resources development and finance and other relevant sectors. CRHEEC remains relatively highly independent of other business segments of the Company, and the Spin-off and Listing of CRHEEC on the STAR Market will have no material effect on the ongoing operation of other business segments of the Company.

After the Spin-off and Listing, the Company and its other subsidiaries (except CRHEEC) will continue to focus on the development of businesses other than the electrified railway and urban rail transit power supply equipment, highlighting the principal business of the Company, and further enhance independence of the Company.

(ii) After the Spin-off, both the Company and the proposed spun-off subsidiary are in compliance with the regulatory requirements for horizontal competition and related party transactions of the CSRC and the stock exchange

Both the Company and the CRHEEC are in compliance with the regulatory requirements for horizontal competition and related party transactions of the CSRC and the SSE.

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LETTER FROM THE BOARD

(iii) The listed company and the proposed spun-off subsidiary are independent from each other in terms of assets, financial affairs and institutions

The Company and CRHEEC have their own independent and complete operational assets with clear ownership; there are neither circumstances in which the Company occupies or controls the assets of CRHEEC nor the Company intervenes CRHEEC’s operation and management of its assets. The Company and CRHEEC have established an independent financial department and a system of financial management and have conducted the independent registration, accounts preparation, auditing and management of all of their assets, and the structural organizations of CRHEEC are independent of its controlling shareholder and other related parties. The Company and CRHEEC have their respective comprehensive functional departments and internal operation and management organizations, and such organizations exercise their functions and rights independently, and there is no convolution between CRHEEC and the Company or other enterprises controlled by the Company. There are neither circumstances in which the Company occupies or controls the assets of CRHEEC nor the Company intervenes CRHEEC’s operation and management of its assets. There is also no convolution between the organizations. After the Spin-off, the Company and CRHEEC will maintain asset, financial and institutional independence.

(iv) There is no cross appointment among senior management and financial personnel

CRHEEC employs its own independent senior management and financial personnel, who do not hold overlapping positions with the senior management and financial personnel of the Company. After the Spin-off, the Company and CRHEEC will continue to maintain the independence of their senior management and financial personnel, and avoid the cross appointment between them.

(v) There are no other serious deficiencies in terms of independence

The assets of the Company and CRHEEC are mutually independent and complete and remain independent in terms of financial, institutional, personnel and business aspects. Each of them has its own comprehensive business structure and direct market-oriented capability to operate independently, and there are no other serious deficiencies in terms of independence. The Spin-off will prompt CRHEEC to further improve its corporate governance structure and to continue to remain independent of the Company in terms of asset, business, institution, financial affairs and personnel, and will enhance its comprehensive business structure and direct market-oriented capability to operate independently.

In conclusion, the Spin-off and Listing of CRHEEC, a subsidiary of the Company, on the STAR Market complies with the relevant requirements of the Provisions on Spin-off and Listing, and the Spin-off is henceforth feasible.

The proposal has been considered and approved at the 43rd meeting of the fourth session of the Board held on 28 September 2020 and will be proposed at the EGM for the Shareholders to approve by way of a special resolution.

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2.4 The proposal in Relation to the Spin-off and Listing of CRHEEC on the STAR Market Which Benefits the Safeguarding of Legal Rights and Interests of Shareholders and Creditors

The Company intends to spin off its subsidiary, CRHEEC, applying for the initial public offering of RMB ordinary shares (A shares) and the listing on the STAR Market. Following the Spin-off and Listing, CRHEEC will remain a subsidiary included in the scope of the consolidated statements of the Company. Its revenue and profit will be reflected in the overall performance of the Company and contribute to the improvement of the overall financial performance of the Company. The Spin-off and Listing will result in further expansion of the financing channels of CRHEEC, give it direct access to the capital market and the ability to finance independently, which will better ensure the availability of funding for subsequent research and development and production, as well as improve the overall financing efficiency of the Company, lower the overall asset-liability ratio and enhance the comprehensive strength of the Company. It will also facilitate reasonable valuation of the various businesses of the Company by the capital market, giving a full reflection of the value of the Company’s quality assets in the capital market and maximizing the interests of all Shareholders. The Spin-off and Listing of CRHEEC on the STAR Market will therefore have a positive effect on the interests of Shareholders (in particular small and medium Shareholders), creditors and other interested parties of the Company and benefit the safeguarding of legal rights and interests of the Company’s Shareholders and creditors.

2.5 The Proposal in Relation to the Ability to Maintain Independence and Sustainable Operation Ability of the Company

As the Company and CRHEEC will continue to be independent from each other in the aspects of staff, asset, finance, institution, business and others, and they are able to perform accounting and undertake liabilities and risks independently, the Spin-off and Listing of CRHEEC on the STAR Market will have no adverse impact on the independent operation of other business sectors of the Company, nor will it affect the Company in maintaining its independence, which is in compliance with applicable laws, regulations, rules, regulatory documents as well as the requirements prescribed in the Provisions on Spin-off and Listing. The Company will, according to the requirements prescribed in the Provisions on Spin-off and Listing, engage independent financial advisors with sponsoring institution qualification, law firms and accountants with securities business qualification and other securities service institutions to provide advice in relation to the Spin-off.

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other relevant sectors and is extending its industrial chain and expanding its value-added service by conducting such diversified businesses as real estate development, materials trade, infrastructure investment and operation, mineral resources development and finance. CRHEEC is engaged in the manufacturing of railway, vessel, aerospace and other transportation equipment in the manufacturing industry and the scope of its core business is the research, development, design, manufacturing and sale of electrified railway catenary components and urban rail transit power supply products. After the Spin-off and Listing, the Company and its subsidiaries other than CRHEEC will continue focusing on their businesses other than the research, development, design, manufacturing and sale of electrified railway catenary components and urban rail transit power supply products, putting effort into exploiting its advantage in infrastructure construction, survey, design and consulting services and other relevant business and further enhancing the independence of the Company; therefore, the Spin-off and Listing of CRHEEC will have no substantive effect on the ongoing operation of other business sectors of the Company. CRHEEC is expected to further accelerate its development and innovation after the completion of the Spin-off and Listing, and its growth will be reflected in the overall performance of the Company to further improve the profitability and stability of the Company. Meanwhile, the Spin-off and Listing of CRHEEC will result in further expansion of financing channels, improve the overall financing efficiency of the Company, lower the overall asset-liability ratio and enhance the comprehensive strength of the listed company.

In conclusion, after the Spin-off and Listing of CRHEEC, the Company is able to maintain its independence and sustainable operation ability.

2.6 The Proposal in Relation to the Corresponding Standardized Operation Ability of CRHEEC

CRHEEC is a non-listed public company listed on the New Third Board. It has established the general meeting, the board of directors and the supervisory committee and appointed the general manager, deputy general manager, chief engineer, chief accountant, secretary to the board of directors and other senior management personnel in accordance with the Company Law and its current articles of association. It has sound organization structure, in which each department has clear staff arrangements and responsibilities and standardized operation system. The convening, voting procedures and resolutions of each of its general meetings and meetings of the board of directors and the supervisory committee complied with the then applicable laws, regulations and the articles of association of CRHEEC and were lawful, truthful and valid.

Pursuant to the requirements under the Company Law, the Securities Law, the Rules of Procedures for General Meetings of Listed Companies, the Guidelines for Corporate Governance of Listed Companies, the Guidelines for the Articles of Association of Listed

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Companies, the Listing Rules of Stocks on the STAR Market of the Shanghai Stock Exchange and other relevant laws, regulations and normative documents, CRHEEC has formulated the Articles of Association of China Railway High-Speed Electrification Equipment Corporation Limited (Draft), the Rules of Procedures for General Meetings of China Railway High-Speed Electrification Equipment Corporation Limited (Draft), the Rules of Procedures for Meetings of the Board of Directors of China Railway High-Speed Electrification Equipment Corporation Limited (Draft), the Rules of Procedures for Meetings of the Supervisory Committee of China Railway High-Speed Electrification Equipment Corporation Limited (Draft) and other relevant systems to be effective upon the Spin-off and Listing, considered and approved at the general meeting of CRHEEC and to be implemented upon its listing on the STAR Market.

In conclusion, CRHEEC will have the corresponding standardized operation ability after the Spin-off and Listing.

2.7 The Proposal in Relation to the Authorisation to the Board and Its Authorised Persons to Handle Matters Relating to the Listing of CRHEEC on the STAR Market at Their Sole Discretion

The Company intends to spin off CRHEEC, one of its subsidiaries, and list it on the STAR Market. For the purpose of facilitating the smooth progress of the Spin-off and Listing, the Board hereby proposed to the EGM to authorise the Board and its authorised persons to handle matters relating to the Spin-off and Listing at their sole discretion, specifically:

(1) The Board and its authorised persons are authorised to exercise, at their sole discretion, shareholders’ rights in CRHEEC on behalf of the Company to make the resolutions in relation to the matters concerning the Spin-off and Listing, which should have been resolved at the general meeting of the Company (other than those for which proposals must be resolved at a general meeting of the Company as required by the laws and regulations).
(2) The Board and its authorised persons are authorised to make adjustments and modifications to the matters and plans relating to the Spin-off and Listing based on the specific conditions.
(3) The Board and its authorised persons are authorised to handle, at their sole discretion, matters relating to submission of relevant applications to relevant authorities including the Hong Kong Stock Exchange, SASAC, CSRC and SSE for the purpose of the Spin-off and Listing, including but not limited to the submission of spin-off and listing application to the Hong Kong Stock Exchange, communication with domestic and overseas securities regulatory authorities in

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respect of the matters relating to the spin-off and listing application, as well as adjustments and modifications to the matters relating to the Spin-off and Listing in accordance with the requirements of domestic and overseas securities regulatory authorities, etc.

(4) The Board and its authorised persons are authorised to decide on other specific matters in connection with the Spin-off and Listing, including but not limited to the engagement of relevant intermediaries, execution, delivery and receipt of necessary agreements and legal documents and relevant information disclosure in accordance with applicable regulatory rules.

The abovementioned authorisation will remain valid for 24 months from the date of this proposal being considered and approved at the EGM.

2.8 The Proposal in Relation to the Analysis of the Background, Objective, Commercial Rationale, Necessity and Feasibility of the Spin-off and Listing of CRHEEC on the STAR Market

In accordance with the Provisions on Spin-off and Listing and other laws and regulations, the Company hereby provides an analysis of the background, objective, commercial rationale, necessity and feasibility of the Spin-off as follows:

(1) Background, objective, commercial rationale, necessity and feasibility of the Spin-off and Listing
(i) Background of the Spin-off and Listing
- (a) Proactively promoting the transformation of scientific and technological achievements, enhancing technological innovation capacity, further implementing the national innovation-driven development strategy, and using the capital market to enhance China’s key core technological innovation capacity

Since the 18th National Congress of the Communist Party of China, the Central Committee of the Communist Party of the PRC, with Comrade Xi Jinping as the core, has attached importance to scientific and technological innovation and institutional innovation, decided to implement an innovationdriven development strategy, and made a series of major decisions and deployments focusing on deepening the reform of the scientific and technological system. On 29 August 2015, the Standing Committee of the National People’s Congress amended and promulgated the Law of the People’s Republic of China on the Promotion of the Transformation of Scientific and Technological Achievements, stating that the state will improve the multi-level capital market and support enterprises in financing scientific and technological

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achievement transformation projects through direct financing such as equity transaction and the issuance of shares and bonds in accordance with the law; on 2 March 2016, the State Council issued the Certain Provisions on the Implementation of the Law of the People’s Republic of China on the Promotion of the Transformation of Scientific and Technological Achievements to encourage small- and medium-size enterprises that contribute scientific and technological achievements to the share capital of the investment targets to expand and enhance their business by making good use of the capital market. The promulgation of the new Law of the People’s Republic of China on the Promotion of the Transformation of Scientific and Technological Achievements and other relevant laws has key and far-reaching implications on significant improvement in the application of intellectual property rights in China, full implementation of the national innovation-driven development strategy and vigorous promotion of “widespread entrepreneurship and innovation”. The 2019 Central Economic Work Meeting proposed to deepen reform of the scientific and technological system, speed up the transformation and application of scientific and technological achievements, accelerate the enhancement of enterprises’ technological innovation capacity, give full play to the active role of State-owned enterprises in technological innovation, improve institutional mechanisms for encouraging and supporting basic research and original innovation, and improve mechanisms for the identification, development and incentives of scientific and technological professionals.

The Spin-off and Listing is an important measure to implement Xi Jinping’s Thought on Socialism with Chinese Characteristics for a New Era and the spirit of the 19th National Congress of the Communist Party of China, to conscientiously implement a series of important instructions of General Secretary Xi Jinping on the capital market, to further carry out the innovationdriven development strategy, to enhance the service level of the capital market in improving China’s key core technology innovation capability, and to improve the basic system of the capital market.

China Railway is a leader in infrastructure construction, survey, design and consulting services, engineering equipment and components manufacturing, etc. and the electrification equipment segment takes an important part in China Railway’s core competitiveness. Since its establishment, CRHEEC, one of the subsidiaries of the Company, has been developing its business independently and developed strong research and development and mass production capabilities with its production and sales scale ranking high in the domestic industry. CRHEEC has become one of the most competitive manufacturers of electrified railway catenary components and urban rail transit power supply products. The Spin-off and Listing of CRHEEC can provide direct finance to the proactive transformation of scientific and technological achievements by the Company through issuance of shares and establishment of funds, create a capital platform for the transformation of the Company’s scientific and technological achievements, and help to focus on core businesses, further enhance research and

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development innovation capabilities and professional management level, further motivate the Company to innovate, improve the mechanisms for the identification, development and incentives of scientific and technological professionals and respond to and implement the national innovation-driven development strategy. The Spin-off and Listing of CRHEEC can also help the Company to seize the historical opportunity in a new round of scientific and technological revolution and the business opportunities for vigorous promotion of high-speed rail, urban rail and other “new infrastructure” after the pandemic to vigorously promote the development of electrification equipment manufacturing industry and achieve the specialization of electrification equipment business.

(b) Actively implementing such national strategies as the “Three Changes” of Made in China and the Building of National Strength in Transportation

On 10 May 2014, General Secretary Xi Jinping made the important instruction of “Three Changes” when he inspected CRPC, the Company’s subsidiary, namely, “promoting the changes from ‘made in China’ to ‘created in China’, from Chinese speed to Chinese quality, and from Chinese products to Chinese brands”. On 23 October 2019, the Company issued the Opinions on Further Implementing the Spirit of General Secretary Xi Jinping’s Important Instructions on “Three Changes” and Promoting the Innovative Development of the Company”, in which it is proposed to “strengthen the innovation drive, activate the driving force of innovation leadership, stimulate the driving force of innovative development, break through major and key technology bottlenecks, develop ‘specialized, refined, special and new’ technologies and products with independent intellectual property rights, and make a number of achievements of vital importance to our country to form a strategic deployment oriented by international technical standards strengthening technological innovation, patent development and technical standard formulation in all aspects and to hold a leading position in science and technology”. It is also proposed in these Opinions to “stimulate the vitality of the mechanism in response to market changes and competition, increase the efforts in changing the organizational structure, operating model and business mechanism, release the initiative of subsidiaries and branches to promote rapid breakthroughs in related businesses, improve the incentive mechanism, implement equity incentives for state-controlled listed companies, and mobilize the management and employees to develop businesses through target incentives, performance incentives and growth incentives.”

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In addition, in September 2019, the Central Committee of the Communist Party of the PRC and the State Council issued the Outline for Building National Strength in Transportation, which sets out the goals of building national strength in transportation for the periods as of 2020, 2035 and mid-21st century respectively and the plans for building a convenient and smooth transportation networks in cities or city clusters, building integrated transportation networks of city clusters and promote the integration of mainline railways, intercity railways, urban or suburban railways, and urban rail transit. Building national strength in transportation is a major strategic decision made by the Central Committee of the Communist Party of the PRC with Comrade Xi Jinping as the core based on national conditions, the overall situation and the future developments. Such strategy is the forerunner in building a modernized economic system, an important support for building a modernized socialist country in all respects and the key to doing a good job in transportation in the new era. Focusing on the national strategy, China Railway strives to contribute its wisdom, solutions and strength to the global economic and social development. The Company actively implements the strategy of building national strength in transportation, and vigorously promotes the craftsmanship spirit. The Beijing Daxing International Airport, BeijingZhangjiakou High-speed Railway, Wuhan Yangsi Port Yangtze River Bridge and other key infrastructure projects in which the Company has participated constantly refreshed “Chinese business card” represented by the Chinese roads, bridges, high-speed railways. The business scope of CRHEEC is fully in compliance with the direction of development required by the “Three Changes” in China’s manufacturing industry and the strategy for building national strength in transportation; therefore, the Spin-off and the use of the capital market to increase quality, strength and scale will make due contribution to the realization of the above-mentioned national strategy.

(c) Continuously implementing the goal of deepening the reform of stateowned enterprises, exploring the reform of mixed ownership of subsidiaries and achieving high-quality development of enterprises

Since 2015, the CPC Central Committee and the State Council have issued the Guiding Opinions on Deepening Reform of State-Owned Enterprises and a series of supporting documents on SOE reform, forming a “1+N” policy system, proposing to vigorously promote the restructuring and listing of state-owned enterprises, emphasizing the improvement of the efficiency of state-owned capital allocation and operation and promoting the optimization and reorganization of state-owned capital.

On 15 March 2019, the Government Work Report of the State Council for 2019, adopted at the Second Session of the 13th National People’s Congress, proposed to accelerate the reform of state-owned capital and state-owned enterprises, strengthen and improve the supervision of state-owned assets, promote pilot reform of state-owned capital investment and operating companies and promote the preservation and augmentation of state-owned

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assets. The report also proposed to actively and steadily promote mixedownership reform, improve the corporate governance and the market-oriented management mechanism, and establish professional manager and other systems. State-owned enterprises will empower themselves and continue enhancing their vitality and core competitiveness through reform and innovation.

Since the deepening of the reform of state-owned enterprises, China Railway has continued to implement the deepened reform of state-owned enterprises, improve the efficiency of market-oriented resource allocation and take active measures for satisfying the strategic requirements for comprehensive and deepened reform, transformation and upgrade of stateowned enterprises, has made or will make certain achievements. The STAR Market has made flexible and differentiated institutional arrangements for corporate governance and equity incentives, which will remove institutional barriers to such reforms as equity incentives and the “Three Systems” of CRHEEC and provide a “testing ground” for the Company to deepen reforms in key areas and carry out mixed-ownership reform of its subsidiaries.

(ii) Objective, commercial rationale and necessity of the Spin-off and Listing
(a) Reshaping the Company’s valuation system, realizing the preservation and appreciation of state-owned assets and maximizing the overall interests of all shareholders.

China Railway is one of the world’s largest multi-functional and comprehensive construction groups with relatively diversified business scopes. The valuation given by the capital market does not fully reflect the Company’s intrinsic value in areas such as electrified railway catenary components and urban rail transit power supply products. Compared with listed companies with multiple main businesses, a listed company with a focused main business and clear positioning is more conducive to obtaining higher valuation premiums to reshape its asset valuation system.

After the Spin-off and Listing, the Company will continue to maintain absolute control over CRHEEC and benefit from the future growth of CRHEEC. Meanwhile, CRHEEC will become a publicly listed company independent from China Railway. Continuous and independent public information disclosure will provide a clearer and more complete presentation of its business operations and development, which is conducive to the professional analysis by the capital market and thus contributes to the full release of the intrinsic value of CRHEEC. The Company will achieve independent valuation through the Spin-off and Listing of CRHEEC in the capital market, which will help reshape the valuation system of the listed company, enhance the stock value of the listed company and CRHEEC, and thus obtain a capital premium, realize the preservation and appreciation of state-owned assets and maximize the overall interests of all Shareholders.

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(b) Contributing to the internal needs of the subsidiaries’ business development, and enhancing their research and development and innovation capabilities and professional operation level

Since its establishment, CRHEEC has insisted on the independent development of its electrified railway catenary components and urban rail transit power supply products, and has built relatively strong research and development strength and mass production capabilities. Its production and distribution scale ranks at the top among its domestic peers, making it one of the most competitive manufacturers of electrified railway catenary components and urban rail transit power supply products. Through the Spin-off and Listing, China Railway’s subsidiary businesses will have an independent listing platform, which is conducive to achieving business focus. Meanwhile, CRHEEC can further enhance its brand and market image, and consolidate its core competitiveness in the field of electrified railway catenary components and urban rail transit power supply products.

In recent years, benefiting from the vigorous development of China’s electrified railway and urban rail transit industries, CRHEEC has maintained a medium-to-high speed development in its main business of electrified railway catenary components and urban rail transit power supply products. In order to seize the opportunities of the industry development, CRHEEC expects to further promote the development of the Company through the Spin-off and Listing, expand production capacity, increase research and development investment, improve operational capability, and achieve mass production and intelligent manufacturing of production lines by expanding production scale so as to further reduce unit production costs and enhance market competitiveness.

(c) Increasing the market valuation of CRHEEC, increasing the equity financing quota and broadening the financing channels

Although CRHEEC has been listed on the New Third Board, it can no longer meet the needs of CRHEEC in terms of market valuation, liquidity and trading activity. The STAR Market, on the other hand, has introduced innovative regulations in terms of issuance, underwriting and trading, which will facilitate the rapid fundraising of science and technology enterprises and the rapid advancement of capitalization of scientific research results. Listing on the STAR Market will enable CRHEEC to raise more equity capital. In addition, under the rules of the STAR Market, merger and acquisition and reorganization are subject to the review and approval of SSE and a registrationbased IPO system has been implemented on a trial basis, making merger and acquisition and reorganization more convenient and efficient, which can help accelerate CRHEEC’s merger and acquisition and reorganization using the capital market.

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After the Spin-off and Listing, CRHEEC will be able to gain direct access to the capital market of a higher level, open up direct financing channels, raise funds for the development of the company and maximize the financing function of the capital market. CRHEEC may raise long-and-medium-term funds directly from the capital market through the Spin-off rather than only from the parent company, which may expand the financing channels and raise the financing flexibility. This will change the inadequacy of the funds owned by CRHEEC before the Spin-off and effectively decrease the fund cost, providing the sufficient capital guarantee for the future development of CRHEEC.

(d) Contributing to the improvement of corporate governance, providing an operating platform for the transformation of scientific and technological achievements, and enhancing the enthusiasm of management and employees.

After the listing, CRHEEC will become a listed public company, which will further promote CRHEEC to make its corporate governance regulated and modernized and urge it to raise the transparency and regulation level of its corporate governance. This will provide a strong guarantee of governance mechanism for the future high-quality development of CRHEEC. The flexible and differentiated arrangements of the STAR Market on such aspects as corporate governance and equity incentives break down the fence of rules related to such reforms as equity incentives, employees’ shares and “three rules”, which is helpful for CRHEEC in raising the initiative of the management and employees of the other business sectors in developing their respective business, attracting and retaining the talents of the respective area and promoting the continuous improvement of the performance of the subsidiaries. The Spin-off and Listing has also provided the operation platform for the transformation of scientific and technical results, improved the innovation mechanism and raised the capability of independent research and development and innovation and further activated the vitality of innovation.

(2) Feasibility of the Spin-off and Listing

The Spin-off complies with the relevant requirements of the Provisions on Spin-off and Listing on domestic listing of spin-off subsidiaries of listed companies, and is feasible. For details, please refer to the Proposal in Relation to the Spin-off and Listing of a Subsidiary in Compliance with Laws and Regulations such as Provisions on Spin-off and Listing in this circular.

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2.9 The Proposal in Relation to the Explanations on the Completeness and Compliance of the Statutory Procedures Undertaken and the Validity of the Documents Submitted for the Spin-off and Listing of a Subsidiary of the Company

CRHEEC, one of the Company’s subsidiaries, intends to apply for the initial public offering and listing of RMB-denominated ordinary shares (A share) on the STAR Market.

In accordance with the provisions of laws and regulations such as the Company Law, the Securities Law and the Provisions on Spin-off and Listing, as well as regulatory documents, and the Articles of Association, the Company has carefully reviewed the completeness and compliance of the statutory procedures and the validity of legal documents submitted by the Company. Explanations are as follow:

The Company has fulfilled the necessary statutory procedures at this stage on matters related to the Spin-off in accordance with the provisions of laws and regulations such as the Company Law, the Securities Law and the Provisions on Spin-off and Listing, as well as regulatory documents, and the Articles of Association. The statutory procedures performed in the Spin-off were complete and in compliance with the provisions of relevant laws, regulations and regulatory documents and the Articles of Association. The legal documents submitted to the SSE were legal and valid.

In accordance with the relevant laws, regulations and regulatory documents, the Board and all Directors hereby represent and warrant with respect to the legal documents to be submitted for the Spin-off and Listing that the Board and all Directors of the Company will strictly perform their statutory responsibilities and guarantee and bear several and joint legal liabilities for the truthfulness, accuracy, completeness and timeliness of the application documents for the Spin-off and Listing, which are free from false records, misleading statements or major omissions.

2.10 Hong Kong Listing Rules Implications

As at the Latest Practicable Date, the Company indirectly holds 95.21% equity interests in CRHEEC through its indirectly wholly-owned subsidiary, China Railway Electrical Industry Co., Ltd. (中鐵電氣工業有限公司) and indirectly holds the other 4.79% equity interests in CRHEEC through its indirectly wholly-owned subsidiary, Sichuan Aiderui Electrification Co., Ltd. (四川艾德瑞電氣有限公司). As far as the Proposed Transfer of Listing is concerned, CRHEEC intends to issue new shares and list on the STAR Market. The Proposed Transfer of Listing will result in a reduction in the Company’s interest in CRHEEC, and if implemented, the Proposed Transfer of Listing will constitute a deemed disposal by the Company under Rule 14.29 of the Hong Kong Listing Rules. Since none of the applicable percentage ratios (as defined under the Hong Kong Listing Rules) for the Proposed Transfer of Listing exceed 5%, the Proposed Transfer of Listing will not constitute a notifiable transaction of the Company under Chapter 14 of the Hong Kong Listing Rules.

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As stated in the announcements of the Company dated 19 June 2018, 17 September 2018 and 8 October 2018, the Company has obtained the approval on the spin-off regarding the quotation of CRHEEC on the New Third Board pursuant to Practice Note 15 to the Hong Kong Listing Rules from the Hong Kong Stock Exchange, and CRHEEC has been quoted on the New Third Board since 9 October 2018 for public transfer. As the Proposed Transfer of Listing would achieve a listing of CRHEEC on the STAR Market and delisting from the New Third Board, the Company would not be required to re-comply with Practice Note 15.

3 PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

Reference is made to the announcement of the Company dated 29 September 2020 in relation to the proposed amendments to the Articles of Association.

Based on the Implementing Rules for the Reduction of Shares by Shareholders, Directors, Supervisors and Senior Executives of Listed Companies issued by the SSE and the Company’s actual management needs, the Board proposed to make certain amendments to the Articles of Association, details of which are set out in the appendix to this circular.

The proposed amendments to the Articles of Association have been considered and approved at the 43rd meeting of the fourth session of the Board held on 28 September 2020 and will be proposed at the EGM for the Shareholders to approve by way of a special resolution.

4 THE EGM

A notice convening the EGM to be held at 9:00 a.m. on Friday, 30 October 2020 at the Conference Room, China Railway Square, No. 69 Fuxing Road, Haidian District, Beijing, PRC, is set out on pages N-1 to N-3 of this circular.

If you intend to appoint a proxy to attend the EGM, you are required to complete and return the accompanying proxy form in accordance with the instructions printed thereon. For holder of H Shares, the proxy form should be returned to Computershare Hong Kong Investor Services Limited in person, by post or by facsimile not less than 24 hours before the time appointed for holding the EGM or any adjourned meeting thereof. Completion and return of the proxy form will not preclude you from attending and voting in person at the EGM or at any adjourned meeting should you so wish, but in such event the proxy form shall be deemed to be revoked.

5 FURTHER INFORMATION

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

Yours faithfully, By Order of the Board of China Railway Group Limited Zhang Zongyan Chairman

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX

The Articles of Association are written in Chinese and have no formal English version, any English version thereof is for reference only. In case of any discrepancies between the Chinese version and the English version, the Chinese version shall prevail.

Details of the proposed amendments to the Articles of Association are set out as below:

Original articles Amended articles Article 25 Shares of the Company held by Article 25 Shares of the Company held by the promoter shall not be transferred within the promoter shall not be transferred within one year of the establishment date of the one year of the establishment date of the Company. Shares issued prior to the Company. Shares issued prior to the Company’s public offering of shares shall Company’s public offering of shares shall not be transferred within one year of the date not be transferred within one year of the date when the shares were listed for trading on a when the shares were listed for trading on a stock exchange. stock exchange. Directors, supervisors and senior Directors, supervisors and senior management personnel of the Company shall management personnel of the Company shall periodically report to the Company shares of periodically report to the Company shares of the Company held by them and any changes the Company held by them and any changes thereof, and shall not transfer more than thereof, and shall not transfer more than 25% of the shares held by them each year 25% of the shares held by them each year during their term of office. The shares of the during their term of office. The shares of the Company held by them must not be Company held by them must not be transferred within one year of the date on transferred within one year of the date on which the shares of the Company were which the shares of the Company were listed. The aforesaid persons shall not listed. The aforesaid persons shall not transfer the shares of the Company held by transfer the shares of the Company held by them within six months of the termination of them within six months of the termination of their service. their service ; where the aforesaid persons resign prior to the expiry of their term of office, the number of shares that may be transferred by such persons each year must not exceed 25% of the total number of shares of the Company held by them during their term of office and within 6 months after the expiry of their term of office .

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX

Original articles Article 153 The major duties of the nomination committee under the board of directors shall be:

Amended articles

Article 153 The major duties of the nomination committee under the board of directors shall be:

(1) To formulate the standards, procedures and methods for election of directors and senior management personnel of the Company and submit the same to the board of directors for consideration;
(1) To formulate the standards, procedures and methods for election of directors and senior management personnel of the Company and submit the same to the board of directors for consideration;
(2) To identify qualified individuals to (2) To identify qualified individuals to become directors and select and become directors and select and nominate such person as director and nominate such person as director and make recommendations to the board make recommendations to the board of directors, to review the candidates of directors, to review the candidates for directors and president and make for directors and president and make recommendations; recommendations;
(3) To review the structure, size and (3) To review the structure, size and composition (including the skills, composition (including the skills, knowledge and experience) of the knowledge and experience) of the board of directors at least annually board of directors at least annually and make recommendations on any and make recommendations on any proposed changes to the board of proposed changes to the board of directors to complement the directors to complement the Company’s corporate strategy; Company’s corporate strategy;
(4) To assess the independence of (4) To assess the independence of independent non-executive directors; independent non-executive directors;
(5) To make recommendations to the (5) To make recommendations to the board of directors on the appointment board of directors on the appointment and re-appointment of directors and and re-appointment of directors and succession planning for directors, in succession planning for directors, in particular the chairman and president; particular the chairman and president;
(6) To examine the candidates for other (6) To examine the candidates for other management personnel proposed by management personnel proposed by the president and provide opinion to the president and provide opinion to the board of directors; the board of directors;

– I-2 –

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX

Original articles Amended articles	Original articles Amended articles
(7) To make proposals regarding candidates for directors, shareholder representative supervisors and general managers of wholly-owned subsidiaries; to make proposals regarding candidates for directors, shareholder representative supervisors and general managers of subsidiaries controlled by the Company and subsidiaries where the Company has equity participation; (8) To propose the human resources retention scheme and provide recommendation to the Company; (9) To identify candidates in the domestic and overseas labour markets as well as within the Company and make proposals to the board of directors; (10) Other functions and powers delegated by the board of directors. ~~(7)~~ (~~8~~7) (~~9~~8) (~~10~~9)	~~To~~ ~~make~~ ~~proposals~~ ~~regarding~~ ~~candidates for directors, shareholder~~ ~~representative~~ ~~supervisors~~ ~~and~~ ~~general managers of wholly-owned~~ ~~subsidiaries;~~ ~~to~~ ~~make~~ ~~proposals~~ ~~regarding candidates for directors,~~ ~~shareholder~~ ~~representative~~ ~~supervisors and general managers of~~ ~~subsidiaries~~ ~~controlled~~ ~~by~~ ~~the~~ ~~Company and subsidiaries where the~~ ~~Company have equity participation;~~ To propose the human resources retention scheme and provide recommendation to the Company; To identify candidates in the domestic and overseas labour markets as well as within the Company and make proposals to the board of directors; Other functions and powers delegated by the board of directors.
Article 175 The Company shall have a management team which, under the direction of the board of directors, implements resolutions passed by the board of directors and takes charge of the day-to-day operation and management of the Company. Article 175 The Company shall have a management team which, under the direction of the board of directors, implements resolutions passed by the board of directors and takes charge of the day-to-day operation and management of the Company.

Original articles
Amended articles

(7)
To
make
proposals
regarding
candidates for directors, shareholder
representative
supervisors
and
general managers of wholly-owned
subsidiaries;
to
make
proposals
regarding
candidates
for
directors, shareholder representative
supervisors and general managers of
subsidiaries
controlled
by
the
Company and subsidiaries where the
Company has equity participation;
(8)
To
propose
the
human
resources
retention
scheme
and
provide
recommendation to the Company;
(9)
To identify candidates in the domestic
and overseas labour markets as well
as within the Company and make
proposals to the board of directors;
(10)
Other functions and powers delegated
by the board of directors.
~~(7)~~
(~~8~~7)
(~~9~~8)
(~~10~~9)

~~To~~
~~make~~
~~proposals~~
~~regarding~~
~~candidates for directors, shareholder~~
~~representative~~
~~supervisors~~
~~and~~
~~general managers of wholly-owned~~
~~subsidiaries;~~
~~to~~
~~make~~
~~proposals~~
~~regarding candidates for directors,~~
~~shareholder~~
~~representative~~
~~supervisors and general managers of~~
~~subsidiaries~~
~~controlled~~
~~by~~
~~the~~
~~Company and subsidiaries where the~~
~~Company have equity participation;~~
To
propose
the
human
resources
retention
scheme
and
provide
recommendation to the Company;
To identify candidates in the domestic
and overseas labour markets as well as
within
the
Company
and
make
proposals to the board of directors;
Other functions and powers delegated
by the board of directors.

Article 175 The Company shall have a
management team which, under the direction
of
the
board
of
directors,
implements
resolutions passed by the board of directors
and takes charge of the day-to-day operation
and management of the Company.
Article 175 The Company shall have a
management team which, under the direction
of
the
board
of
directors,
implements
resolutions passed by the board of directors
and takes charge of the day-to-day operation
and management of the Company.

The management team includes one president, several vice presidents, one chief accountant, one chief engineer, one chief economist and one general counsel. Other members in the management team shall provide assistance to the president, and may perform any function delegated by the president.

The management team includes one president, several vice presidents, one chief accountant, one chief engineer, one chief economist , ~~and~~ one general counsel and one chief supervisor of work safety . Other members in the management team shall provide assistance to the president, and may perform any function delegated by the president.

– I-3 –

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX

Original articles

Amended articles

Article 278 “Senior management personnel” Article 278 “Senior management personnel” referred to herein means the president, vice referred to herein means the president, vice president, chief accountant, secretary to the president, chief accountant, secretary to the board of directors, chief engineer, chief board of directors, chief engineer, chief economist and general counsel of the economist , ~~and~~ general counsel and chief Company. The “president” and “vice supervisor of work safety of the Company. president” referred to herein means the The “president” and “vice president” manager and deputy manager provided in the referred to herein means the manager and Company Law. The “chief accountant” deputy manager provided in the Company referred to herein means the financial Law. The “chief accountant” referred to director provided in the Company Law. herein means the financial director provided in the Company Law. Article 279 “Management team” referred to Article 279 “Management team” referred to herein means the president, vice president, herein means the president, vice president, chief accountant, chief engineer, chief chief accountant, chief engineer, chief economist and general counsel of the economist , ~~and~~ general counsel and chief Company. supervisor of work safety of the Company.

– I-4 –

NOTICE OF 2020 SECOND EXTRAORDINARY GENERAL MEETING

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中國中鐵股份有限公司 CHINA RAILWAY GROUP LIMITED

(A joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 390)

NOTICE OF 2020 SECOND EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that the 2020 Second Extraordinary General Meeting (“ EGM ”) of China Railway Group Limited (the “ Company ”) will be held at Conference Room, China Railway Square, No. 69 Fuxing Road, Haidian District, Beijing, PRC on Friday, 30 October 2020 at 9:00 a.m. to consider and approve the following as appropriate:

By way of special resolutions:

To consider and approve the proposal in relation to the initial public offering and listing of China Railway High-Speed Electrification Equipment Corporation Limited on the Science and Technology Innovation Board of the Shanghai Stock Exchange (“ STAR Market ”).
To consider and approve the proposal in relation to the “Preliminary Plan for the Spin-off and Listing on the STAR Market of China Railway High-Speed Electrification Equipment Corporation Limited, a Subsidiary of China Railway Group Limited (Revised Draft)”.
To consider and approve the proposal in relation to the spin-off and listing of a subsidiary in compliance with laws and regulations such as Certain Provisions on Pilot Domestic Listing of Spin-off Subsidiaries of Listed Companies.
To consider and approve the proposal in relation to the spin-off and listing of China Railway High-Speed Electrification Equipment Corporation Limited on the STAR Market which benefits the safeguarding of legal rights and interests of shareholders and creditors.
To consider and approve the proposal in relation to the ability to maintain independence and sustainable operation ability of the Company.
To consider and approve the proposal in relation to the corresponding standardized operation ability of China Railway High-Speed Electrification Equipment Corporation Limited.

– N-1 –

NOTICE OF 2020 SECOND EXTRAORDINARY GENERAL MEETING

To consider and approve the proposal in relation to the authorisation to the board of directors and its authorised persons to handle matters relating to the listing of China Railway High-Speed Electrification Equipment Corporation Limited on the STAR Market at their sole discretion.
To consider and approve the proposal in relation to the analysis of the background, objective, commercial rationale, necessity and feasibility of the spin-off and listing of China Railway High-Speed Electrification Equipment Corporation Limited on the STAR Market.
To consider and approve the proposal in relation to the explanations on the completeness and compliance of the statutory procedures undertaken and the validity of the documents submitted for the spin-off and listing of a subsidiary of the Company.
To consider and approve the proposed amendments to the articles of association of the Company as set out in the appendix to the circular of the Company dated 9 October 2020.

By Order of the Board of China Railway Group Limited He Wen Tam Chun Chung Joint Company Secretaries

Beijing, the PRC 9 October 2020

– N-2 –

NOTICE OF 2020 SECOND EXTRAORDINARY GENERAL MEETING

Notes:

1. Closure of register of members and eligibility for attending the EGM

Shareholders who submit their share transfer application forms to the Company’s share registrar before close of business on Friday, 23 October 2020 and become registered as shareholders on the register of members of the Company are entitled to attend the EGM.

Holders of the Company’s H shares are advised that the register of members will be closed from Monday, 26 October 2020 to Friday, 30 October 2020 (both days inclusive). Holders of H shares whose names appear on the register of members of the Company maintained in Hong Kong at the close of business on Friday, 23 October 2020 are entitled to attend the EGM.

Holders of H shares who wish to attend the EGM but have not registered the transfer documents are required to deposit the transfer document together with the relevant share certificates at the H share registrar of the Company, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong at or before 4:30 p.m., Friday, 23 October 2020.

2. Registration procedures for attending the EGM

Shareholders attending the EGM in person or by proxy shall present their identity certification. If the attending shareholder is the authorised legal representative of a company’s shareholder, the board of directors or other decision-making authority, then such attending shareholder shall present a copy of the relevant resolution of the board of directors or other decision-making authority appointing it as its authorised legal or official representative in order to attend the EGM on behalf of such company.

3. Proxy

Shareholders entitled to attend and vote at the EGM may appoint one or more proxies to attend and vote in their stead. A proxy need not be a shareholder of the Company.

The instrument appointing a proxy must be in writing under the hand of a shareholder or his attorney duly authorised in writing. If the shareholder is a corporate body, the proxy form must be either executed under its common seal or under the hand of its director(s) or duly authorised attorney(s). If the proxy form is signed by an attorney of the shareholder, the power of attorney authorising that attorney to sign or other authorisations document must be notarised.

To be valid, the proxy form (and if such proxy form is executed by a person under a power of attorney or other authorisation documents, then together with such power of attorney or authorisation documents, or a copy thereof certified by a notary) must be delivered to Computershare Hong Kong Investor Services Limited (for holders of H shares) not less than 24 hours before the designated time for the holding of the EGM.

Completion and return of a form of proxy will not preclude a shareholder from attending in person and voting at the EGM if he so wishes, but in such event the proxy form shall be deemed to be revoked.

4. Other business

Shareholders and their proxies attending the EGM shall be responsible for their own travelling and accommodation expenses.

– N-3 –

AI assistant

China Railway Group Limited — Proxy Solicitation & Information Statement 2020

49185_rns_2020-10-08_eaf71400-4b1f-469f-8fda-78aded5dee19.pdf

中國中鐵股份有限公司 CHINA RAILWAY GROUP LIMITED

(Stock Code: 390)

PROPOSED TRANSFER OF LISTING OF CRHEEC ON THE STAR MARKET OF THE SSE

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

AND

NOTICE OF 2020 SECOND EXTRAORDINARY GENERAL MEETING

DEFINITION

中國中鐵股份有限公司 CHINA RAILWAY GROUP LIMITED

(Stock Code: 390)

PROPOSED TRANSFER OF LISTING OF CRHEEC ON THE STAR MARKET OF THE SSE PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION AND NOTICE OF 2020 SECOND EXTRAORDINARY GENERAL MEETING

1 INTRODUCTION

(2) The plan of the Proposed Transfer of Listing

2.3 The Proposal in Relation to the Spin-off and Listing of a Subsidiary in Compliance with Laws and Regulations such as the Provisions on Spin-off and Listing

(1) Compliance with the requirement that “the listed company has been listed in Mainland China for 3 years.”

LETTER FROM THE BOARD

Item

2.5 The Proposal in Relation to the Ability to Maintain Independence and Sustainable Operation Ability of the Company

LETTER FROM THE BOARD

2.6 The Proposal in Relation to the Corresponding Standardized Operation Ability of CRHEEC

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

(2) Feasibility of the Spin-off and Listing

2.10 Hong Kong Listing Rules Implications

3 PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

4 THE EGM

5 FURTHER INFORMATION

Amended articles

Original articles

Amended articles

中國中鐵股份有限公司 CHINA RAILWAY GROUP LIMITED

(Stock Code: 390)

NOTICE OF 2020 SECOND EXTRAORDINARY GENERAL MEETING

By way of special resolutions:

1. Closure of register of members and eligibility for attending the EGM

2. Registration procedures for attending the EGM

3. Proxy

4. Other business

More from China Railway Group Limited

China Railway Group Limited Proxy Solicitation & Information Statement 2020