Bonus share plan revised to two-for-10

CHINA Textile Machinery has revised its 1992 bonus share proposal from a four-for-10 to two-for-10, covering state-held shares as well.

In a statement from the Shanghai Securities Exchange yesterday, China Textile said all shareholders, including the state, would be entitled to the revised issue of bonus shares.

The manufacturer of weaving machines is listed in Shanghai with both A and B shares.

The company's original plan of a four-for-10 bonus issue was approved during a shareholders' meeting on April 12. However, the generosity of China Textile and many Shanghai-listed firms was greeted with dismay by B shareholders - overseas investors in China.

The bonus share issue was also widely reported to have upset the state because its entitlement, if any, would never be realised. State-held shares are not allowed to trade on the exchange.

Almost all Shanghai-listed firms had granted the entitlement to state-held shares to the bonus issue.

The Shanghai Securities Administration Commission demanded the companies revise their generous proposals which would have effectively diluted per-share earnings.

China Textile yesterday said the revision was made in accordance with a request from the Shanghai Securities Administrative Commission and followed approval by a board meeting on June 21 and the seeking of shareholder consent, via mail, on July 2.

The company said there would be two sources of funding for the two-for-10 bonus issue - 0.5 per cent of the bonus share of the company's 1992 net profit worth 10.4 million yuan (about $14.1 million at official rates) and 1.5 per cent of the bonus share from the company's provident fund worth 31.21 million yuan.

Ten per cent of the company's net profit per year will go to the provident fund which will be used for the employee retirement scheme and welfare services.

In Shanghai, company official Cai Zhenhua yesterday said the company's issued share capital would be boosted to 249.71 million yuan from 208.1 million yuan following the bonus share issue.

The ex-rights trading day for B shares would be July 26 and the bonus shares will begin trading on July 29, the company said.

Mr Cai said: ''The same class of shares should have equal rights, such as the right to have the bonus share issue, even though they are not bought at equal price.'' The state bought the company's primary shares at par value, instead of market prices paid by legal entities, individuals (A shareholders) and overseas investors (B shareholders).

The state holds 52.91 per cent of China Textile, followed by B shareholders with 33.63 per cent, A shareholders, 7.21 per cent, and legal entities shares with 6.25 per cent.

The company reported net profit of 52.4 million yuan for the past calendar year, the figures of which were made to the international accounting standards.

Information supplied by Standard Chartered Securities said that China Textile is the largest manufacturer of weaving machines in China, with a market share of 60 per cent.

The company planned to invest 410 million yuan in the next three years by introducing a new product line (air jet looms) to meet the demand in the replacement market.

On June last year, the company issued seven million B shares, before the one-to-10 split) to foreign investors, raising a net of 266.6 million yuan.