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Key Messages:

  • Listed on the Main Board under Chapter 21 of the Stock Exchange's Listing Rules, investment companies aim primarily at making investments in listed or unlisted securities, or other collective investment schemes.
  • Investment companies are subject to different listing requirements and disclosure standards as compared to other listings. For example, neither track record nor minimum market capitalization is for these companies required at the time of listing.

Introduction

Some of the companies listed on the Main Board of the Stock Exchange of Hong Kong (SEHK) are classified as "investment companies". Given their specialised business nature, listed investment companies are subject to different regulations.

What are listed investment companies?

They are companies listed on the Main Board under Chapter 21 of the Stock Exchange's Listing Rules. These companies are investment vehicles whose primary objectives are making investments in listed or unlisted securities, including warrants, money market instruments, commodities, options and futures contracts. Investment companies may also invest in other collective investment schemes. They do not have any other active business. Therefore, the best that they can offer to shareholders is the appreciation in the value of their individual investments.

Investment activities of these companies are basically carried out by investment managers engaged by the management of these companies. In this regard, the quality, judgment and conduct of investment managers are important to the performance of these companies.

Are they subject to the same listing and disclosure requirements ?

Investment companies listed under Chapter 21 are subject to different listing requirements and disclosure standards as compared to other listings.

No track record is required for investment companies qualified to be listed on the Main Board, whereas other Main Board listings and the Growth Enterprise Market (GEM) listings must have three and two years track record respectively. While there is no minimum market capitalization requirement at the time of listing for investment companies, other Main Board and GEM listings must have a minimum public holding of $100 million and $30 million respectively.

Listed investment companies are only required to disclose "major transactions" and "connected transactions" but not other notifiable transactions as defined under the Listing Rules. Besides, they are only required to disclose their investment portfolio once a year to the public in their annual reports. They only have to disclose investments with value greater than 5% of the company's gross assets and at least the ten largest investments.