BEIJING, May 30 -- Shenzhen Development Bank Co. said in a statement yesterday it will give its A-share holders a maximum of 0.48 yuan in cash for every 10 shares they hold to compensate for floating its nontradable shares.

    The bank said that if the average closing price of its A shares is below 5.25 yuan in the last 60 trading sessions of the 12-month period following the share reform, it will give cash equivalent to the price difference for every 10 shares held, up to a maximum of 0.48 yuan per 10 shares.

    If the average closing price is above 10.75 yuan (US$1.34) in that period, the company will give cash equivalent to the surplus for every 10 A shares held, up to the 0.48 yuan maximum, Shenzhen Development Bank said in a statement.

    The bank, whose largest shareholder is U.S. private-equity company Newbridge Capital Ltd., didn't explain the significance of the two prices.

    An official at Shenzhen Development Bank's securities affairs office said there won't be any compensation if the average closing price is between 5.25 yuan and 10.75 yuan in the last 60 trading sessions of the 12-month period following the reform. He declined to give his name.

    The bank's A shares closed at 8.78 yuan Friday, and have risen 43 percent so far this year. Nontradable shareholders own 27.6 percent of Shenzhen Development Bank, with the remaining 72.4 percent held by A-share investors, said the Shenzhen-listed bank.

    Shenzhen Development Bank said it will hold a shareholders meeting to vote on the plan July 17. Investors can also vote online from July 13 to July 17, it said.

    The company's A shares will be suspended from trading from Monday pending discussions with shareholders. The shares will resume trading no later than June 8.

    Newbridge Capital took a 17.89 percent stake in the form of nontradable shares late 2004. Its shares in the bank will become tradable after the reform. Newbridge pledged that it won't sell the shares within 12 months of the reform, the statement said.

    The yuan-denominated A-share market is open to domestic investors and selected overseas investors under the Qualified Foreign Institutional Investor program.

    Regulators issued rules in January to allow foreign strategic investors to buy A shares in companies that have completed share reform and in future A-share issuances. Before that, foreigners could only buy strategic stakes in listed companies by purchasing nontradable shares.

    U.S. financial services and industrial giant General Electric Co. signed a deal with Shenzhen Development Bank last year to take a 7 percent stake in the bank for US$100 million. The deal is still pending approval by domestic regulatory authorities.

    Regulators began allowing listed companies to convert their nontradable shares into tradable stock in April last year.

    Nontradable shareholders have typically offered additional shares to tradable-share holders to compensate them for the increase in share supply and gain their approval for reform. This involves nontradable-share holders diluting their stake in the company.

    (Source: Shenzhen Daily/ Agencies)