China's listed companies have been asked to give explanations if they decide not to pay dividends when making profits.

The China Securities Regulatory Commission (CSRC) released a revised format of the annual report of listed companies in Shanghai and Shenzhen late on Sunday.

Regulators made some adjustments to the content of information disclosure in annual reports, including requiring listed firms making profits, that do not offer dividend payments, to clarify reasons and their planned usage of profits. The new format will be applied in 2004 annual reports.

In the past, domestic listed companies were not obliged to explain why they did not pay dividends.

Obviously, listed companies could not issue dividends when they suffered from losses. But there were many cases of dividend not being paid when the companies were actually making money. They certainly owe investors an explanation, said Wang Kai, an analyst with China Securities Co.

It is normal for listed companies to use profits for other uses, such as new projects and business expansion, but they should inform investors, who are entitled to know the business plans of the companies, Wang told China Daily yesterday.

The amendment of annual report content, though a regular practice each year, delivers the regulators' will of protecting investors' interest, he said.

Regulators also asked listed companies to disclose in detail the identity of the actual controller of the companies and relevant equity structure.

A listed company also has to tell if the top 10 shareholders of its floated shares are affiliated with the major shareholders.

A spokesman with the CSRC said the amendments, in line with changes in the stock market, are aimed at improving the quality of information disclosure and the transparency of the operation of the listed firms.

However, analysts also point out it is not enough just to add some items for information disclosure. How to build up the credit culture of the listed firms and improve their profitability and management are more crucial concerns.

It is easy for some listed companies to simply add an explanation and continue with their own plans without respecting the interests of the minority investors, said an analyst with CITIC Securities Co, who preferred not to be named.

Source: China Daily