Member Article

Following the SFC’s consultation paper in February 2005 proposing to allow SFC authorised collective investment schemes to invest in Real Estate Investment Trusts (REITs), the Code was amended in late April. Chapter 7.14 of the Code has been revised to allow SFC authorised collective investment schemes to invest in listed REITs, subject to compliance with the investment limits as set out in Chapters 7.1 and 7.2. (i.e. 7.1 - the value of a scheme's holding of securities issued by any single issuer may not exceed 10% of a scheme's total net assets and 7.2 - a scheme may not hold more than 10% of any ordinary shares issued by any single issuer). SFC authorised funds may also invest in unlisted REITs. If the unlisted REITs are in the form of unit trusts then the fund must comply with the investment restriction under Chapter 7.11 (which prohibits investing more than 10% of a fund’s total net assets in another collective investment scheme) whereas for unlisted REITs that are structured as corporate vehicles, the fund must comply with the investment restriction under Chapter 7.3 (which prohibits a fund’s holding more than 15% of its total net assets in securities neither listed nor quoted on a market). Also, in June the SFC announced that under the REITs Code the geographic restriction on Hong Kong REITs investing only in Hong Kong property is now removed.