Part

LR Listing Rules

Chapter

Closed-Ended Investment Funds

Printed on: 17/05/2024

Rulebook at: 28/09/2007

LR 15

Closed-Ended Investment Funds

LR 15.1

Application

  • 01/07/2005

LR 15.1.1

handbook-rule
This chapter applies to a closed-ended investment fund applying for, or with, a primary listing of equity securities.
  • 28/09/2007

LR 15.2

Requirements for listing

  • 01/07/2005

LR 15.2.1

handbook-rule

To be listed, an applicant must comply with:

  1. (1) LR 2 (Requirements for listing);
  2. (2) only the following provisions of LR 6 (Additional requirements for listing for equity securities);
    1. (a) LR 6.1.3 R (1)(d) and (e), if the applicant is a new applicant for the admission of shares or securities convertible into its own shares and it has published or filed audited accounts;
    2. (b) LR 6.1.3 R (2);
    3. (c) LR 6.1.16 R to LR 6.1.24 G; and
  3. (3) LR 15.2.2 R to LR 15.2.13 G.
  • 28/09/2007

Investment activity

LR 15.2.2

handbook-rule
An applicant must invest and manage its assets in a way which is consistent with its object of spreading investment risk.
  • 28/09/2007

Control of investee companies

LR 15.2.3

handbook-guidance

Although there is no restriction on a closed-ended investment fund taking a controlling stake in an investee company, to ensure a spread of investment risk a closed-ended investment fund should avoid:

  1. (1) cross-financing between the businesses forming part of its investment portfolio including, for example, through the provision of undertakings or security for borrowings by such businesses for the benefit of another; and
  2. (2) the operation of common treasury functions as between the closed-ended investment fund and investee companies.
  • 28/09/2007

Trading activity

LR 15.2.4

handbook-rule
  1. (1) A closed-ended investment fund and its subsidiaries must not conduct any trading activity which is significant in the context of its group as a whole.
  2. (2) This rule does not prevent the businesses forming part of the investment portfolio of the closed-ended investment fund from conducting trading activities themselves.
  • 28/09/2007

Cross-holdings

LR 15.2.5

handbook-rule
  1. (1) No more than 10%, in aggregate, of the value of the total assets of a closed-ended investment fund at admission may be invested in other listed closed-ended investment funds.
  2. (2) The restriction in (1) does not apply to investments in closed-ended investment funds which themselves have published investment policies to invest no more than 15% of their total assets in other listed closed-ended investment funds.
  • 28/09/2007

Feeder funds

LR 15.2.6

handbook-rule
If an applicant principally invests its funds in another company or fund ("A") and A invests in a portfolio of investments, the applicant must control the investment policy of A and ensure that A complies with the requirements relating to the spread of investment risk set out in this chapter (see LR 15.2.2 R to LR 15.2.5 R).
  • 28/09/2007

Investment policy

LR 15.2.7

handbook-rule
An applicant must have a published investment policy that contains information about the policies which the closed-ended investment fund will follow relating to asset allocation, risk diversification, and gearing, and that includes maximum exposures.
  • 28/09/2007

LR 15.2.8

handbook-guidance

The information in the investment policy, including quantitative information concerning the exposures mentioned in LR 15.2.7 R, should be sufficiently precise and clear as to enable an investor to:

  1. (1) assess the investment opportunity;
  2. (2) identify how the objective of risk spreading is to be achieved; and
  3. (3) assess the significance of any proposed change of investment policy.
  • 28/09/2007

Sufficient and appropriate experience of directors and investment managers

LR 15.2.9

handbook-rule
An applicant must ensure that, collectively, its directors and investment managers have sufficient and appropriate experience in the management of assets on a scale and type in which the applicant proposes to invest.
  • 28/09/2007

LR 15.2.10

handbook-guidance
  1. (1) An applicant is likely to have sufficient and appropriate experience if:
    1. (a) its assets are or will be managed by a person or persons who have permission from the FSA or from a competent authority to manage investments; or
    2. (b) it can otherwise demonstrate that the persons who will have responsibility for managing its assets have appropriate experience (over at least the preceding three years) of managing a portfolio of assets which is comparable to its portfolio.
  2. (2) An applicant will have appropriate experience under (1)(b) if the persons within the entity responsible for managing the assets have managed a portfolio of investments that has a value of at least 50% of the funds the applicant is proposing to raise.
  • 28/09/2007

Independence

LR 15.2.11

handbook-rule

The board of directors or equivalent body of the applicant must be able to act independently of any investment manager appointed to manage investments of the applicant.

  1. (1) [to follow]
  2. (2) [to follow]
  • 28/09/2007

LR 15.2.12

handbook-guidance

To satisfy LR 15.2.11 R a majority of the board or equivalent body of the applicant (including the Chairman) should not be:

  1. (1) directors, employees, partners, officers or professional advisers of or to:
    1. (a) an investment manager of the applicant; or
    2. (b) any other company in the same group as the investment manager of the applicant; or
  2. (2) directors, employees or professional advisers of or to other investment entities that are:
    1. (a) managed by the same investment manager as the investment manager to the applicant; or
    2. (b) managed by any other company in the same group as the investment manager to the applicant.
  • 28/09/2007

LR 15.2.13

handbook-guidance

To comply with LR 15.2.11 R:

  1. (1) the board of the applicant should have no more than one director who is also a director, partner, employee or professional adviser of or to:
    1. (a) the investment manager to the applicant; or
    2. (b) any other company in the same group as the investment manager to the applicant; and
  2. (2) a director described in (1) should be subject to annual re-election by shareholders.
  • 28/09/2007

LR 15.2.14

handbook-rule
The distribution of surpluses, as dividend, arising from the realisation of investments must be prohibited and a provision to this effect must be contained in the issuer's constitution.
  • 01/07/2005

LR 15.2.15

handbook-guidance

An open-ended investment company which does not regularly intervene in the market to keep the price of shares in line with net asset value and which:

  1. (1) redeems or purchases its own shares but does not do so at the request of shareholders; or
  2. (2) redeems or purchases its own shares but does so in accordance with the requirements of the Second Company Law Directive (Council Directive 77/91/EEC);

will be treated as an investment company that is closed-ended for the purposes of this chapter.

  • 01/07/2005

LR 15.2.16

handbook-rule

An open-ended investment company that:

  1. (1) is an unrecognised scheme; and
  2. (2) is treated as a closed-ended investment company;

must comply with the requirements for listing, the continuing obligations that are applicable to investment companies and the requirements set out in LR 15.3.2 G, LR 15.7.4 R and LR 15.7.10 G.

  • 01/07/2005

LR 15.2.17

handbook-rule

To be listed, an investment trust must comply with LR 2 and LR 6 with the following modifications and additional conditions:

  1. (1) the requirements set out in LR 15.2.2 R to LR 15.2.9 R;
  2. (2) LR 15.2.10R (1); and
  3. (3) LR 15.2.11 R.
  • 01/07/2005

LR 15.2.18

handbook-guidance

An investment company or an investment trust that invests or intends to invest 20% or more of its total assets in property must:

  1. (1) comply with the requirements for property companies set out in the listing rules; or
  2. (2) comply with the requirements for property investment companies set out in LR 15.5.
  • 01/07/2005

LR 15.3

Listing applications and procedures

  • 01/07/2005

LR 15.3.1

handbook-guidance
An applicant is required to comply with LR 3 (Listing applications).
  • 28/09/2007

Sponsors

LR 15.3.2

handbook-guidance
An applicant that is seeking admission of its equity securities is required to retain a sponsor in accordance with LR 8 (Sponsors).
  • 28/09/2007

LR 15.3.3

handbook-rule
In addition to the circumstances set out in LR 8.2.1 R when a sponsor must be appointed, an applicant must appoint a sponsor on each occasion that it makes an application for admission of equity securities which requires the production of listing particulars.
  • 28/09/2007

Multi-class fund or umbrella fund

LR 15.3.4

handbook-rule
An application for the listing of securities of a multi-class fund or umbrella fund must provide details of the various classes or designations of securities intended to be issued by the applicant.
  • 28/09/2007

LR 15.4

Continuing obligations

  • 01/07/2005

Compliance with LR 9

LR 15.4.1

handbook-rule
A closed-ended investment fund must comply with all of the requirements of LR 9 (Continuing obligations) subject to the modifications and additional requirements set out in this section.
  • 28/09/2007

Investment activity and compliance with investment policy

LR 15.4.2

handbook-rule

A closed-ended investment fund must, at all times, invest and manage its assets:

  1. (1) in a way which is consistent with its object of spreading investment risk; and
  2. (2) in accordance with its published investment policy.
  • 28/09/2007

Control of investee companies

LR 15.4.3

handbook-guidance
A closed-ended investment fund should have regard to the guidance in LR 15.2.3 G at all times.
  • 28/09/2007

Trading activity

LR 15.4.4

handbook-rule
A closed-ended investment fund must comply with LR 15.2.4 R at all times.
  • 28/09/2007

Cross-holdings

LR 15.4.5

handbook-rule
A closed-ended investment fund must, when making an acquisition of a constituent investment, observe the principles relating to cross-holdings in LR 15.2.5 R.
  • 28/09/2007

Feeder funds

LR 15.4.6

handbook-rule
If a closed-ended investment fund principally invests its funds in another company or fund ("A") and A invests in a portfolio of investments, the closed-ended investment fund must ensure that LR 15.2.6 R is complied with at all times.
  • 28/09/2007

Independence

LR 15.4.7

handbook-rule
  • 28/09/2007

Shareholder approval for material changes to investment policy

LR 15.4.8

handbook-rule
A closed-ended investment fund must obtain the prior approval of the holders of the majority of its ordinary equity shares to any material change to its published investment policy.
  • 28/09/2007

LR 15.4.9

handbook-guidance
In considering what is a material change to the published investment policy, the closed-ended investment fund should have regard to the cumulative effect of all the changes since its shareholders last had the opportunity to vote on the investment policy or, if they have never voted, since the admission to listing.
  • 28/09/2007

Conversion of an existing listed class of equity securities

LR 15.4.10

handbook-rule
An existing listed class of equity securities may not be converted into a new class or an unlisted class unless prior approval has been given by the holders of the majority of the closed-ended investment fund's ordinary equity shares in that existing class.
  • 28/09/2007

Further issues

LR 15.4.11

handbook-rule
  1. (1) Unless authorised by the holders of the majority of its shares, a closed-ended investment fund may not issue further shares of the same class as existing shares (including issues of treasury shares) for cash at a price below the net asset value per share of those shares unless they are first offered pro rata to existing holders of shares of that class.
  2. (2) When calculating the net asset value per share, treasury shares held by the closed-ended investment fund should not be taken into account.
  • 28/09/2007

LR 15.4.12

handbook-rule

In addition to the requirements of LR 9.8 (Annual report and accounts) an investment company must include in its annual report and accounts:

  1. (1) a statement, set out in a prominent position, as to whether in the opinion of the directors the continuing appointment of the investment manager on the terms agreed is in the interests of shareholders as a whole, together with a statement of the reasons for this view;
  2. (2) a summary of the principal contents of any agreements between the investment company and each of the investment managers, including but not limited to any provisions relating to compensation payable in the event of termination of the agreement;
  3. (3) the name of the investment managers together with an indication of the terms and duration of their appointment, the basis for their remuneration and any arrangements relating to the termination of their appointment; and
  4. (4) a list of all investments with a value greater than 5% of the investment company's investment portfolio, and at least the 10 largest investments.
  • 01/07/2005

LR 15.4.13

handbook-rule

The list described in LR 15.4.12R (4) should include, with comparative figures where relevant:

  1. (1) the value of each investment; and
  2. (2) for each investment which is not quoted on a stock exchange the following information:
    1. (a) a brief description of the business;
    2. (b) the proportion of capital owned or intended to be owned;
    3. (c) the cost of the investment and aggregate market value, if any, at the latest practicable date;
    4. (d) a director's valuation at the latest practicable date, if different from the value in paragraph (c) or if there is no market value;
    5. (e) the earnings per share for the latest audited financial year;
    6. (f) the dividend per share received in the most recent financial year, including any abnormal dividends or other payments;
    7. (g) dividend cover or underlying earnings for the latest audited financial year;
    8. (h) the net assets attributable to the investment as at the date of the latest audited balance sheet; and
    9. (i) an analysis of any provision for diminution in value of investments, naming the investments against which provision has been made and stating in respect of each investment:
      1. (i) the cost;
      2. (ii) any provision made;
      3. (iii) the book value; and
      4. (iv) the reason for the provision.
  • 01/07/2005

LR 15.4.14

handbook-rule

In addition to the requirements in LR 9 (Continuing obligations) for half-yearly reports and preliminary statements of annual results an investment company must include information showing the split between:

  1. (1) dividend and interest received; and
  2. (2) other forms of income (including income of associated companies).
  • 01/07/2005

LR 15.4.15

handbook-rule

For an investment company,

  1. (1) LR 9.8.8 R does not apply in respect of the Combined Code; and
  2. (2) LR 9.8.6R (6) does not apply in respect of principles B.1 to B.2 and provisions B.1.1 to B.1.6 and B.2.1 to B.2.4 of the Combined Code except to the extent that they relate specifically to non-executive directors.
  • 01/07/2005

LR 15.4.16

handbook-rule
LR 11 (Related party transactions) applies to an investment company.
  • 01/07/2005

LR 15.4.17

handbook-rule
In addition to the definition in LR 11.1.4 R a related party includes any investment manager of the investment company or investment trust.
  • 01/07/2005

LR 15.4.18

handbook-rule
  1. (1) An overseas investment company with a primary listing is not required to have a registrar situated in the United Kingdom if it has a transfer agent in the United Kingdom that has authority to remit transfers to the overseas registrar.
  2. (2) Any change in transfer agent must be notified to a RIS as soon as possible.
  • 01/07/2005

LR 15.4.19

handbook-rule
An investment trust must comply with LR 9 (Continuing obligations) subject to the modifications and additional conditions set out in LR 15.4.20 R to LR 15.4.25 R.
  • 01/07/2005

LR 15.4.20

handbook-rule

An investment trust must comply with:

  1. (1) LR 15.2.5 R to LR 15.2.9 R;
  2. (2) LR 15.4.4 R to LR 15.4.9 R; and
  3. (3) LR 15.4.11 R to LR 15.4.15 R.
  • 01/07/2005

LR 15.4.21

handbook-rule

In addition to the requirement set out in LR 15.4.12 R, an investment trust must include in its annual report and accounts:

  1. (1) an analysis of the investment portfolio by broad industrial or commercial sector;
  2. (2) an analysis of the investment portfolio between equity shares, convertible securities, fixed income securities and other investments;
  3. (3) an analysis of income between dividends, interest and other forms of income;
  4. (4) an analysis, where material to an appreciation of the investment trust's financial position, of realised and unrealised profits and losses as between investments quoted on a stock exchange and those that are not quoted on a stock exchange; and
  5. (5) either:
    1. (a) a statement confirming that:
      1. (i) HM Revenue and Customs has approved it as an investment trust for the purpose of section 842 of the Income and Corporation Taxes Act 1988, specifying the last accounting period in respect of which such approval has been given; and
      2. (ii) the investment trust has subsequently directed its affairs so as to continue to be so approved; or
    2. (b) a statement, in the case of a newly listed investment trust confirming that:
      1. (i) the investment trust has announced that it will direct its affairs so as to enable it to seek approval from the HM Revenue and Customs; and
      2. (ii) it has subsequently directed its affairs so as to enable it to be so approved.
  • 01/07/2005

LR 15.4.22

handbook-guidance
An investment trust that is newly admitted to listing may publish its first half-yearly report for a period that is either shorter or longer than six months in order to align the end of the first six-monthly reporting period with the normal reporting cycle for that investment trust.
  • 01/07/2005

LR 15.4.23

handbook-rule
  1. (1) Unless authorised by the shareholders, an investment company that is closed-ended may not issue further shares of the same class as existing shares for cash at a price below the net asset value per share of those shares unless they are first offered pro rata to existing holders of shares of that class.
  2. (2) When calculating the net asset value per share treasury shares held by the company should not to be taken into account.
  • 01/07/2005

LR 15.4.24

handbook-rule

LR 10 (Significant transactions) applies to:

  1. (1) investment trusts; and
  2. (2) closed-ended investment companies;

excluding any transaction that falls within the stated investment policies of the investment trust or closed-ended investment company.

  • 01/07/2005

LR 15.4.25

handbook-rule
  • 01/07/2005

LR 15.5

Transactions

  • 28/09/2007

Compliance with the Model Code

LR 15.5.1

handbook-rule
  1. (1) A closed-ended investment fund must comply with the provisions of the Model Code.
  2. (2) LR 9.2.7 R to LR 9.2.10 R do not apply to a closed-ended investment fund.
  3. (3) Paragraph (1) does not apply to:
    1. (a) dealings by persons discharging managerial responsibilities in the closed-ended investment fund;
    2. (b) purchases by the closed-ended investment fund of its own securities; and
    3. (c) sales of treasury shares for cash or transfers (except for sales and transfers by the closed-ended investment fund of treasury shares in the circumstances set out in LR 12.6.2 R);
  4. if the closed-ended investment fund satisfies the requirements of (4).
  5. (4) The transactions described in (3) may be entered into during a close period if:
    1. (a) the closed-ended investment fund is satisfied that all inside information which the directors and the entity may have in periods leading up to an announcement of results has previously been notified to a RIS; and
    2. (b) the closed-ended investment fund notifies a RIS that it is satisfied that all inside information has previously been notified.
  • 28/09/2007

Significant transactions

LR 15.5.2

handbook-rule
A closed-ended investment fund must comply with LR 10 (Significant transactions), except in relation to transactions that are executed in accordance with the scope of its published investment policy.
  • 28/09/2007

Transactions with related parties

LR 15.5.3

handbook-guidance
LR 11 (Related party transactions) applies to a closed-ended investment fund.
  • 28/09/2007

LR 15.5.4

handbook-rule
In addition to the definition in LR 11.1.4 R a related party includes any investment manager of the closed-ended investment fund.
  • 28/09/2007

LR 15.5.5

handbook-rule
[to follow]
  • 28/09/2007

LR 15.6

Notifications and periodic financial information

  • 28/09/2007

Changes to tax status

LR 15.6.1

handbook-rule
A closed-ended investment fund must notify any change in its taxation status to a RIS as soon as possible.
  • 28/09/2007

Annual financial report

LR 15.6.2

handbook-rule

In addition to the requirements in LR 9.8 (Annual financial report), a closed-ended investment fund must include in its annual financial report:

  1. (1) a statement (including a quantitative analysis) explaining how it has invested its assets with a view to spreading investment risk in accordance with its published investment policy;
  2. (2) a statement, set out in a prominent position, as to whether in the opinion of the directors, the continuing appointment of the investment manager on the terms agreed is in the interests of its shareholders as a whole, together with a statement of the reasons for this view;
  3. (3) a summary of the principal contents of any agreements between the closed-ended investment fund and each of the investment managers, including but not limited to any provisions relating to compensation payable in the event of termination of the agreement;
  4. (4) the name of the investment managers together with an indication of the terms and duration of their appointment, the basis for their remuneration and any arrangements relating to the termination of their appointment;
  5. (5) the full text of its investment policy; and
  6. (6) a comprehensive and meaningful analysis of its portfolio.
  • 28/09/2007

Annual financial report additional requirements for property investment entities

LR 15.6.3

handbook-rule
A closed-ended investment fund that, as at the end of its financial year, has invested more than 20% of its assets in property must include in its annual financial report a summary of the valuation of its portfolio, carried out in accordance with LR 15.6.4 R.
  • 28/09/2007

LR 15.6.4

handbook-rule

A valuation required by LR 15.6.3 R must:

  1. (1) either:
    1. (a) be made in accordance with the Appraisal and Valuation Standards (5th edition) issued by the Royal Institution of Chartered Surveyors; or
    2. (b) where the valuation does not comply in all applicable respects with the Appraisal and Valuation Standards (5th edition) issued by the Royal Institution of Chartered Surveyors, include a statement which sets out a full explanation of such non-compliance; and
  2. (2) be carried out by an external valuer as defined in the Appraisal and Valuation Standards (5th edition) issued by the Royal Institution of Chartered Surveyors.
  • 28/09/2007

LR 15.6.5

handbook-rule

The summary described in LR 15.6.3 R must include:

  1. (1) the total value of properties held at the year end;
  2. (2) totals of the cost of properties acquired;
  3. (3) the net book value of properties disposed of during the year; and
  4. (4) an indication of the geographical location and type of properties held at the year end.
  • 28/09/2007

Statement regarding compliance with Combined Code

LR 15.6.6

handbook-rule
  1. (1) This rule applies to a closed-ended investment fund that has no executive directors.
  2. (2) A closed-ended investment fund's statement required by LR 9.8.6R (6) need not include details about the following principles and provisions of the Combined Code except to the extent that those principles or provisions relate specifically to non-executive directors:
    1. (a) Principle B.1 (including Code Provisions B.1.1 to B.1.6): and
    2. (b) Principle B.2 (including Code Provisions B.2.1 to B.2.4).
  • 28/09/2007

Annual financial and half yearly report

LR 15.6.7

handbook-rule

In addition to the requirements in LR 9 (Continuing obligations), half-yearly reports and, if applicable, preliminary statements of annual results must include information showing the split between:

  1. (1) dividend and interest received; and
  2. (2) other forms of income (including income of associated companies).
  • 28/09/2007

Notification of investments

LR 15.6.8

handbook-rule

A closed-ended investment fund must notify a RIS of the following:

  1. (1) within two business days of the end of each calendar month, a list of all investments in other listed closed-ended investment funds, as at the last business day of that month, which themselves do not have stated investment policies to invest no more than 15% of their total assets in other listed closed-ended investment funds; and
  2. (2) within two business days of the end of each quarter, a list of all investments with a value greater than 5% of the closed-ended investment fund's total assets and at least the 10 largest investments as at the last business day of that quarter.
  • 28/09/2007