FINANCIAL AND MONETARY AFFAIRS
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managed by the EFIL through external managers. The remainder of the Exchange Fund's Hong Kong equity portfolio will be disposed of.
The EFIL launched this disposal programme with the Tracker Fund of Hong Kong (TraHK) in October 1999. The TraHK is an Exchange Traded Index Fund constituted as a unit trust, authorised by the Securities and Futures Commission and listed on the Stock Exchange of Hong Kong (SEHK). Dealings in TraHK units began on the SEHK on November 12, 1999. The TraHK's investment objective is to track the Hang Seng Index by holding a portfolio of shares substantially replicating the composition and weighting of the Hang Seng Index. Units in the TraHK can be created or redeemed in kind by delivery or receipt of baskets of Hang Seng Index shares. The TraHK units can also be created for cash using the Tap Facility. Under the Tap Facility, the Manager of the TraHK uses investors' cash to acquire Hang Seng Index shares from the Exchange Fund to create the TraHK units for delivery to the investors. Such a mechanism enables the Government to continue passively selling more shares into the TraHK in response to investor demand. A quarterly limit is placed on the amount of shares sold through the Tap. The Hong Kong Monetary Authority announces the Tap Limit before the commencement of each quarter.
The Tap Facility has proved to be effective and popular. The value of shares sold via the Tap in the fourth quarter 1999 was $3.4 billion. The value of shares sold via the Tap in the first, second, third and fourth quarters of 2000 was $12.2 billion, $11.4 billion, $12.2 billion and $10.8 billion respectively. By December 31, therefore, the Exchange Fund had disposed of about $83.3 billion of shares via the Initial Offer of the TraHK and the subsequent Tap Facility.
The post-listing performance of the TraHK has been satisfactory. The TraHK has been actively traded at a price close to its net asset value. The closing price of a TraHK unit on December 29 was $15.2, compared with the Initial Offer price of $12.88 per unit. On November 13, the first Loyalty Bonus Units were allocated to 131 110 qualified investors who were still holding their TraHK units. Loyalty Bonus Units were designed as an additional incentive for Hong Kong identity card holders who continuously held their original units for one and two years. The EFIL continues to consider further opportunities for the disposal of shares while bearing in mind its mandate of minimising disruption to the market.
Companies Registry
The Companies Registry administers and enforces certain sections of the Companies Ordinance. It incorporates local companies, registers oversea companies, registers documents required to be submitted by registered companies and provides facilities for the search of company records. It also administers and enforces several other ordinances including the Trustee Ordinance, insofar as it relates to trust companies, the Registered Trustees Incorporation Ordinance and the Limited Partnerships Ordinance.
Since 1993, the Companies Registry has operated as a trading fund department. As a trading fund, the Registry can keep most of its income and apply it flexibly, having regard to its needs, business turnover and its customers' demands and expectations. After two years (1997-98 and 1998-99) in which the Companies Registry's business volumes and financial results were adversely affected by the economic downturn, 1999-2000 has seen clear evidence of an improvement in these areas reflecting the gradual economic recovery. As a result, the Registry achieved a surplus of $49.60