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Glossary

A

Annualized yield

An indicator used to represent the annual compound return of a certain period in order to calculate an annualized return for the investor net of taxes and commissions.

Asset Allocation

Selection of activities in which to invest, determined in order to obtain the optimal composition of a portfolio, in accordance with the desired, and previously established, risk-return profile.

Asset Management

This term refers to investments made indirectly through financial institutions (banks, investment firms, mutual funds and insurance companies) that are authorized by law.

Asset management can take many forms, such as:

individual management, carried out by banks or investment companies. The managed asset can be bonds, stocks or equities and can be oriented to only Italian securities or only international securities. In practice, it is a very specific product that an investor chooses, entrusting his capital to professional and giving them broad freedom of choice in the framework of the direction indicated.

collective management by an insurance company or a mutual fund. Insurance companies use the instrument of "deferred capital" policies that allow, after a certain number years, withdrawing a certain amount of cash as a function of the yields achieved (with a guaranteed minimum); mutual funds do not guarantee anything, but their management (which is highly dynamic) generally provides satisfactory results in the medium to long term.    

Average daily transaction equivalent

This is calculated at the end of a day's trading on the Italian Stock Exchange and represents the value (expressed in euros) of the product of the number of shares traded and their official market price.


B

Benchmark

This is an objective reference parameter of mutual funds; it consists of an index, or a composition of financial indices, and helps investors understand the peculiar characteristics of certain types of investments, with particular reference to their riskiness. By comparing the yield of an investment with the performance of the benchmark over the same period, it is possible to evaluate the management skills of the manager.

Under Italian law mutual funds are obligated to indicate the benchmark in all documentation addressed to the public (prospectus, reporting and advertising) and to compare it with the performance of the fund.

The essential requirement that an objective reference parameter must have, according to CONSOB Regulation 10973/1997 on the provision of investment services and ancillary services, is its consistency with the risk underlying the management of the fund with which one makes the comparison.

The other necessary requirements are:

  • transparency, which consists in the clarity of the calculation rules used to construct the benchmark. This means that the mathematical formulas used by the management company must be simple and communicate clearly to investors;
  • Representativeness, which implies that the composition of the benchmark must be consistent with that of the fund's assets;
  • Replicability, i.e., it must be composed of financial assets that the investor can, at least in theory, buy directly on the market.

Borsa Italiana SpA (the Italian Stock Exchange)

The Italian Stock Exchange was formed through the privatization of the stock exchanges and, since 1998, it has been responsible for the organization, management and operation of the financial markets. On 1 October 2007, the Borsa Italiana Group merged with the London Stock Exchange Group, creating the leading market in Europe for trading in stocks, ETFs, covered warrants and certificates as well as fixed-income instruments.

The Italian Stock Exchange's main objective is to develop the markets and maximize their liquidity, transparency, competitiveness and efficiency.

http://www.borsaitaliana.it


C

Call of commitments

The call of commitments is the moment when, after the placement stage, the asset management company collects the sums due following a commitment made at the time the shares of the fund were subscribed. With regard to the contribution funds, the commitment call date coincides with the transfer of the assets.

Capital gains

This is the profit made from the sale of an asset at a higher price than its book value entered in the balance sheet. Capital gains may also be the result of the valuations made by the independent experts on based on market values and not an actual sale.

Capital loss

A loss of capital deriving (in the case of real estate funds) from a sale of real estate assets equal to the negative difference between the sale price and purchase price, purified of any accrued interest and additional charges.

Charges

These are the charges which apply to the fund, the subscriber or the asset management company established in the management regulations the various real estate funds.

Charges the fund is responsible for

The regulations generally provide for the following types (for official information, it is always recommended that you read the management report and listing/informational prospectus):

  • annual fee payable to the asset management company, equal to a percentage of the total value of the assets of the fund or its shareholders' equity, as indicated by the management statement, net of unrealized gains on the real estate and equity investments compared to their purchase value
  • annual fee due to the Custodian Bank for its supervision of the asset management company on behalf of the individual participants to protect them from losses due to the asset management company's breach of its obligations in discharging its functions
  • remuneration due to the independent experts for their valuation of the real estate assets
  • charges related to the purchase and sale of fund assets (brokerage fees and related taxes, notary and legal fees, etc.)
  • expenses for the administration, maintenance and renovation of the real estate of the fund
  • other expenses (insurance premiums, costs of publication, auditing, financial charges related to loans taken by the fund, legal fees, taxes, and supervisory fees)
  • overperformance commission (carried interest), the commission paid to managers based on the performance achieved at the maturity of the investment.

Charges the subscriber is responsible for

The regulations generally provide for the following types (for official information, it is always recommended that you read the management report and listing/informational prospectus):

subscription fees, either a fixed amount or a percentage of the amount invested

fixed fees

reimbursements for the out-of-pocket expenses of the asset management company

Collective Asset Management

First of all, article 1, lett. n, of the Consolidated Financial Act (CFA) defines collective asset management as a service that is provided through:

  • the promotion, establishment and organization of mutual funds and the administration of the relationship with the participants;
  • the management of its own assets, or those of another institution, through investments in financial instruments, receivables or other movable or immovable property.

The notion of a collective investment scheme (OICR, Organismi di Investimento Collettivo del Risparmio) is defined in the same article 1 of the CFA, which establishes that:

  • collective investment schemes are "mutual funds and SICAVs”;
  • a mutual fund consists of "autonomous assets, divided into shares, belonging to a plurality of participants, managed collectively", i.e., in the interest and on behalf of the community of investors; in a mutual fund, the investor participates in a "collective" for of investment by acquiring a share in collective assets, which are held proportionally by other investors; the investor does not give the manager an asset that remains separate from that of other investors who access the same form of investment: in fact, the contribution of the individual is mingled and merged wit the investments of the others subjects participating in the fund.

    However, each "fund" is an "autonomous" asset, separate from both the assets of the intermediary manager and the assets of other funds, even if managed by the same subject.
  • a SICAV is "a variable-capital stock company with registered office and general headquarters in Italy, having the sole object of the collective management of assets collected through the public offering of its own shares”.

    An investor who participates in a mutual fund thus adheres to a structured relationship that is standardized for all participants of the fund, without the possibility of customization: not surprisingly, one of the elements that distinguish individual from collective management has to do with the fact that, in individual management, the individual client can, at any time, give binding instructions to the manager, which the latter must obey (such as ordering that a specific investment be made, etc.)

CONSOB

The National Commission for Companies and the Stock Exchange (Commissione Nazionale per le Società e la Borsa, CONSOB) established by Law no. 216 of 7 June 1974, is an independent administrative authority, with legal personality and full autonomy pursuant to Law 281 of 1985, whose activities involve investor protection, efficiency, transparency and development of the Italian securities market.

The functions of the CONSOB, which extend to all aspects relevant for the efficient protection of investments, regard investment products and the related issuers, the brokers on which investors rely for making these investments and the markets in which they are made.

The control over financial products (stocks, bonds, government securities, mutual fund shares, etc.) is intended to provide investors all the information needed to make and manage informed investments (control of transparency).

The control over brokers involves issuing rules to protect investors from malpractice that could harm them (control of correctness).

Control over the markets is exercised to ensure: the maximum efficiency of trading, to allow investors to easily trade financial products; the quality of prices, which should reflect the actual components of the market; and the efficiency and certainty of the methods of executing concluded contracts.

In relation to its legally-established powers, the CONSOB:

  • regulates the provision of services and investment activities by brokers, the disclosure obligations of companies listed on regulated markets and public investment solicitations;
  • authorizes the publication of prospectuses relating to public offers of sale and offer documents for takeover bids, the operation of regulated markets, registrations in the Investment Company and Auditing Firm Registries;
  • supervises management companies operating in the markets, transparency and the orderly conduct of trading, as well as the transparency and correctness of the conduct of brokers and financial advisors;
  • sanctions the supervised subjects;
  • checks information provided to the market by the subjects that solicit public investments as well as the information in the financial reports of listed companies;
  • investigates abnormal trends in the trading of listed securities and takes any other action to investigate violations of rules on insider trading and market manipulation;
  • communicates with operators and the investing public for the more effective performance of its duties and the development of financial literacy among investors;
  • cooperates with Italian and international authorities responsible for the organization and functioning of financial markets.

http://www.consob.it

Contribution

The term contribution means the transfer by the owner of (immovable) property to the assets of a fund.

Contribution real estate fund

Contribution real estate funds are established, in whole or in part, through the contribution of assets represented by real estate, real property rights or investments in real estate companies in exchange for shares of the fund

The shares can then be placed on the market or with qualified investors..

Contribution real estate funds include:

  • public contribution funds, if the real estate is transferred to the fund by the state or other, even local, public entity;
  • private contribution funds, if the transferor is a private subject.

For potential investors, this type of fund, which has pre-established real estate assets, offers the advantage of knowing, before subscribing, the list of properties comprising it and their historical profitability: this allows making one's own assessment of the assets, the consequent potential for income, development and revaluation and deciding accordingly.

Corporate governance

A set of rules underlying the management of companies that defines the corporate bodies and their relations, for example, on the division of tasks, the assumption of responsibility and decision-making powers.

Custodian Bank

The custodian bank is the institution that monitors the operations of the fund and guarantees the separation of the fund's assets from those of the management company.

In article 38, the Consolidated Financial Act (Legislative Decree 58/1998), states that the Custodian Bank:- verifies the legitimacy of transactions involving the issuance and redemption of shares of the fund, the calculation of their value and destination of the fund's income;- verifies that, in transactions involving the fund, the consideration is redeposited in it according to the terms of use; - carries out the instructions of the asset management company if not contrary to law or the requirements of the supervisory bodies.

The statutory auditors and directors are required to report to the competent supervisory authorities on possible irregularities found in the management of the funds. Given the sensitivity of the function performed by the custodian bank, the Bank of Italy, after consulting the CONSOB, determines the conditions for assuming the appointment.


D

Dealing Code

A procedure for reporting transactions carried out by relevant persons and persons closely associated with them on shares of funds managed by the asset management company (SGR) traded on regulated markets.

This procedure is based on the provisions of articles 180 and following of Legislative Decree no. 58 of 24 February 1998, as subsequently amended by the Consolidated Financial Act (CFA), in compliance with article 114, paragraph 7, of the CFA and the implementing provisions set out in articles 152-sexies to 152-octies of the Regulations approved by the CONSOB with Resolution no. 11971 of 14 May 1999, as subsequently (the "Issuers Regulation”).

The relevant persons are broadly: members of the administrative and control bodies of the investment management company (SGR) and all those who have regular access to insider information and have the power to make management decisions that may affect the fund's assets as persons who perform management functions and executives of the SGR and the persons participating in the governance bodies of Funds. This category also includes those who hold an interest in the asset management companies equal to or greater than 10%.

The persons connected to these persons, who have reporting obligations, are parents, spouses, children and, in general, all relatives and in-laws. This same category includes legal persons directly or indirectly controlled by a relevant person or one of the persons connected with them.

Finally, relevant subjects include partnerships whose economic interests are substantially equivalent to those of a relevant person and trusts established for the benefit of a relevant person or one of the persons connected to them.

The "relevant" transactions that trigger the obligation to notify the market are purchases, sales, subscriptions or trades of shares made by relevant persons or by persons closely linked to them, directly or through third parties, with the exception of operations totalling less than 5,000 (five thousand) euros by the end of each calendar year (the "Relevant Amount”).

Dematerialization

The dematerialization of financial instruments is the transformation of the physical certificate into an accounting entry in an electronic register: as of 1 January 1999, all listed securities can no longer be on paper but the centralized Monte Titoli system guarantees all rights based on the accounting entry kept by the financial intermediary (SIM, Bank) at which the investor deposited their securities.

In this way, investors no longer run the risk of the theft of their securities or of receiving fake securities and, at the same time, issuers save printing costs; at a system level, handling costs are also reduced (consequent to the transfer of ownership) of the securities. The payment of interest and repayment of principal at maturity are no longer linked to the presentation of securities; these operations are carried out by crediting bank accounts and accounts held by the issuers at the central depository.

In Italy, Monte Titoli acts as the central depository for financial instruments (whether dematerialized or not) as well as the provider of clearing and settlement services for securities transactions, under the supervision of the Bank of Italy and the CONSOB.

http://www.borsaitaliana.it

Discount (on the NAV)

This is the value succinctly expresses the difference between the net book value of a share of the fund, as results from the annual/semi-annual report, and the price of the same share traded on the stock market. This discount mainly depends on the lower liquidity of the stock market.

Dividend Yield

An index that measures the profitability of the income distributed by comparing it with the cost of the initial investment (dividend/share issue value).

Due diligence

An investigative process focused on activities whose object is an in-depth understanding of the technical-construction, zoning, environmental, administrative, financial and market of a property, usually to be performed before an investment. It is mainly based on a comparison of the state of fact and the documentation relating to a property.


E

Explanatory Notes

This is the financial statement document in which the directors provide all the explanations necessary for a better interpretation of the Balance Sheet and Profit and Loss Account: it highlights the valuation criteria used, analyzes the main items in detail and presents the most important events that have characterized management.


F

Facility Management

This is the total of all the activities necessary to manage the full functionality of a building and/or real estate asset and to resolve any unforeseen and unforeseeable problems that may arise.

The scope of Facility Management includes: monitoring, planning and coordination of maintenance, the management of spaces and furniture as a function of changes in the internal layout, the definition of plans for both the safety and security of the workplace, the selection of external suppliers to provide the support services necessary for the real-estate management process (move-ins, maintenance work, cleaning services, reception, etc.), the management of all maintenance activities, both ordinary (upon breakdown or routine) and extraordinary and, finally, the management of design activities and works management for the carrying out of the procedures necessary for performing extraordinary maintenance.

Fund Manager

A subject appointed by the asset management company to identify strategies that will maximize the performance of the fund and minimize risk.


G

Global coordinator

The main partner of the issuing company during the process of listing on the stock exchange of the company itself or one of its funds. It performs the functions of coordination, organization and consultation.

This activity is carried out by Banks or Stock Brokerage Companies (SIM).


H

Half-yearly reopening of subscriptions

This is the characteristic of a particular type of real estate fund, whose assets are collected from investors through several issues of shares (whose value will correspond to the unit value established in the last available statement/report) . These new share issues will take place at the new subscription periods that the asset management company may open during the life of the fund until its maximum value is reached.

Participants may not request early redemption of the shares held, not even on the occasion of new issues.

The only fund managed by Fimit SGR with these characteristics is Gamma, a Closed Real Estate Fund reserved for qualified investors.


I

Income

Income consists of the profits generated by the fund, with the exclusion of unrealized capital gains, indicated in the annual and six-monthly statement of the fund.

Funds are divided into income-distribution and income-accumulation funds. In the first case, the asset management company has the right, with the methods provided for in the Fund Regulations, to distribute income from management; in the second case, income from management, including capital gains, if realized, is accumulated and distributed to the direct beneficiaries upon the liquidation of the fund.

Independent Auditors

Companies that audit the accounting records of the fund to ascertain that there are no irregularities. After its analysis, the company issues a certification report (usually attached to the annual/semi-annual report

Independent Experts

Current law on closed real-estate mutual funds requires asset management companies must use independent experts with the qualifications referred to in article 17 of Ministerial Decree 228/1999 for the valuation of real estate, real estate rights and investments in unlisted real estate companies.

 The appointed individuals or companies (meeting the requirements of the law) make appraisals and periodic valuations of the real-estate portfolio of a fund, in order to determine the book value of the property.

They also involved on the occasion of the sale or contribution for assets to the fund.

Intended use

The function (residential, office, manufacturing, etc.) for which a particular property is intended for use in accordance with zoning laws.

The main destinations of use, which then subdivided into additional complementary uses are: residential, industrial and craft activities, service industry activities, agricultural activities, public services and facilities or for public use.

Internal Rate of Return

This is the effective yield of the investment that takes into account the capital invested, all receipts subsequent to the investment and the different time points of these receipts. Technically, it is the discount rate at which the present value of the net cash flows expected over time is equal to the value of that assets that generate them.

IPO

Initial Public Offering, i.e., the offer to the public of shares of a company that is making recourse to the capital market for the first time. The Italian equivalent is OPV, which stands for Offerta Pubblica di Vendita.

This term also applies to real estate funds that are placed on the market.

ISIN

Securities are identified by an ISIN (International Securities Identification Number) assigned according to the ISO 6166 standard, which defines the coding criteria for coding and identifies the Agency competent to assign them.

For Italy, the role of the National Agency for the Coding of financial instruments, assigned beginning in 1991 to the Italian Foreign Exchange Office, since 1 January 2008 has been carried out by the Bank of Italy, into which the above-mentioned agency was merged. In this capacity, Bank of Italy is a member of the ANNA (Association of National Numbering Agencies). Data collected as part of this activity is recorded in the Securities Database, which is the complete and official source for Italian ISINs.


L

Leasing

A contract with which one party (lessor) grants to another (lessee) the use of an asset purchased or constructed by the lessor according to the choices and instructions of the lessee, for a determined time, with the right of the latter to purchase the asset at the end of the lease under conditions defined in the contract.

Leverage

This is the ratio between the net asset and net capital, including fiscal year dividends and the allocation of fiscal year profit; so, it indicates the ratio between the total debt of a business and the value of the business itself (share capital) at market prices.


M

M

Maintenance

Management of all activities necessary for the planning, execution and monitoring of "maintenance" interventions on real estate.

Management commission

or management fee: this is the manager's remuneration for its work and is normally calculated on the basis of a percentage (annual) compared to the daily net asset value of the fund.

Market discount

It is the discount that, due to low trading volumes, exists between the market price (determined by the intersection of supply and demand), and the net asset value (NAV) of the share, as determined in the six-monthly/annual report of the fund. As a consequence, a subscriber who wants to get out in advance of the maturity of the fund can do so at the current market price.

Market Volume

This is the total number of shares traded daily on the markets regulated by Borsa Italiana SpA (the Italian Stock Market).

Market reference price

This is the price that is calculated based on the last 10% of the trades of the day. The reference price helps understanding the real trend of the securities.

MIV

MIV (in Italian, Mercato Telematico degli Investment Vehicles) is the regulated Italian Stock Exchange market dedicated to investment vehicles. With the entry into force of amendments to Market Regulations on 24 May 2010, the Italian Stock Exchange changed the requirements for the admission of Investment Companies and Real Estate Investment Companies.

The market is now divided into 4 segments, which reflect the type of financial instruments traded:

  1. Closed Funds Segment, in which closed-end real-estate and securities funds are traded
  2. Investment Companies Segment, in which the shares of Investment Companies are traded
  3. Real Estate Investment Companies Segment, in which the shares of Real Estate Investment Companies (REICs) are traded
  4. Professional Segment, in which the financial instruments of Special Investment Vehicles (SIVs) are traded, i.e., the Investment Companies and Real Estate Investment Companies transferred pursuant to article 4.6.2 of the Regulations

In this segment, the shares of real estate funds are traded with the same trading methods provided for shares.

The trading hours for the segment of Closed Fund segment are as follows:

08.00 – 11.00 (11.00.00 – 11.00.59) opening auction (pre-auction, validation, opening)
11.00 – 16.30 (16.30.00 – 16.30.59) closing auction (pre-auction, validation, closing)
The closing pre-auction phase begins at the end of the opening auction phase

Monte Titoli SpA

A stock company that provides custodial and centralized administrative services for securities (stocks and bonds), founded in 1978 on the initiative of the Bank of Italy, the group of banks and industry associations making up CIPA (Convenzione Interbancaria per i Problemi dell’Automazione, a financial industry automation standards group) and exchange agents. Law no. 289 of 19 June 1986 transformed Monte Titoli has transformed from a trust company to a services company in order to rationalize the custody and administration of securities.


N

NAV

The Net Asset Value is the book value of a real estate fund derived from the six-monthly and annual report, given by the difference between the balance sheet assets and liabilities of a real estate fund, taking into account appraisals of the real estate made by independent experts. This is also the reference datum for reimbursement when the share is liquidated.

Net equity

The difference between the sum of the assets of a business and its liabilities, it represents the wealth belonging to the owners of the shares of the capital.


O

Offerta Pubblica di Vendita (the Italian equivalent of an IPO)

An OPV is any offer, invitation to offer or promotional message addressed to the public, in any form, aimed at the sale of financial products.

Official market price

The official daily price of each financial instrument is given by the weighted average price of the entire amount of the instrument traded in the market during the session.

OICR

Italian acronym for Undertakings for Collective Investment. The Consolidated Financial Act introduced the term OICR, which replaced the acronym OICVM (Organismo di Investimento Collettivo in Valori Mobiliari or undertaking for collective investment in transferable securities).

Ordinary real estate fund

A fund established by through the subscription of shares by investors. The financial resources collected from the public in this way are invested by the asset management company (SGR) in assets consisting of real estate, real property rights or interests in real estate companies.

However, in this type of fund profitability remains subordinate to the implementation of the planned real estate investments.

Overperformance commission

This is additional remuneration for the management company, due in the event that period results exceed a benchmark. The percentage is generally proportional to the increase in value of a share compared to an increase in of a benchmark called the "target yield". The target yield is the result that, when surpassed, triggers the payment of the overperformance commission to the investment management company (SGR). In other words, the "minimum" result is only the reference point for the calculation of the above-mentioned commission and not also a parameter representing the potentially achievable yield that investors can be induced to expect at the maturity of the fund.


P

Performance

Result obtained from the management of the fund. The performance of closed real estate funds is calculated by the Internal Rate of Return method, which takes into account any income distributed.

Periodic reports and statements

These are official documents certified by an independent auditing firm that explain to savers/investors the composition of the investments and the value of the fund, in addition to past and future strategic choices. They are filed and posted at the corporate headquarters and the offices of the Italian Stock Exchange (if the fund is listed) by the day following their approval and, within 30 days, at the custodian bank, as well as in special sections of the fund's website (for listed funds).

Placement

This is one of the investment services provided for in the Consolidated Financial Act (Legislative Decree no. 58/1998), which can only be performed by authorized brokers; it is the main way with which public sales offers (OPVs), public subscription offers (OPSs) and initial public offerings (IPOs) are made.

A placement can be public or private.

In the first case, since the operation is directed at the general public of investors, both retail and institutional, the operation is carried out by a group of brokers, known as a placement consortium. The Consolidated Financial Act provides for three types of consortia that differ as a function of the commitments assumed by the brokers:

  • simple placement. Each broker undertakes to sell the public a part of the securities that are the object of the offer;
  • guarantee. Each broker undertakes to subscribe to a share of the securities that remain unsold after the close of the offer period;
  • underwriting. The brokers of the consortium purchase the securities directly from the issuer and undertake to place them with the investing public within a certain period of time.

While a private placement is only intended for professional investors and is conducted through a book building mechanism.

Property Management

This is the sum of economic-management and administrative activities aimed at preserving and optimizing the profitability of real estate assets.

In particular, economic and administrative activities concern: the management and administration of economic flows (lease fees, personnel costs, energy costs, etc.), the management and administration of the personnel involved in the process of real estate management, carrying all permit, administrative and tax obligations of a real estate asset and the creation and management of the property archive consisting of updated documents, administrative data, permits and technical information.

Prospectus

Document approved by the Italian Stock Exchange and the CONSOB in which the asset management company provides investors all information about the characteristics of the product and to which the sale of the shares of mutual funds is subordinate. This document must be given to the customer before he participates in the fund through the subscription of shares. The prospectus must contain all the information necessary to allow the saver/investor to form an opinion on the characteristics of the investment that is offered. It contains three copies of the subscription sheet, one of which will be given to the subscriber when signed.


Q

Qualified/institutional investors

Article 1, par. 1, lett. h of Decree of the Ministry of the Treasury no. 228 24 May 1999, as amended, defines "qualified investors" as the following categories:

  • investment firms, banks, stockbrokers, asset management companies (SGRs), variable-capital investment companies (SICAVs), pension funds, insurance companies, financial parent companies of banking groups and the subjects enrolled in the registries provided for in articles. 106, 107 and 113 of the Consolidated Banking Act;
  • foreign subjects authorized to carry out, under law in their country of origin, the same activities carried out by the subjects referred to in the paragraph above;
  • banking foundations;

Quotation

The value of a stock in the market on which it is listed. For real estate funds, the reference market is the MIV (see). The quotation is a term that varies from day to day resulting from the intersection of "supply and demand”. It is a value different than NAV (see)


R

Rating

This is a valuation, made by a specialized private agency (Standard and Poor's, Moody's and Fitch are the most important) of the creditworthiness of a subject issuing financial products on international financial markets. Ratings provide operators with standardized financial information on the degree of risk of issuers and are very important for investors who are not able to make their own analyses of credit risk. In essence, it is a summary informational tool and a means for communicating to the market the results of a thorough investigation conducted by a qualified team of "authoritative and independent” economic, financial and management analysts.

Rating agency

An entity that assigns a rating to a bond issue or an asset management company by evaluating the characteristics of the securities and the management conditions of the issuer. In simpler words, it is a company that analyzes financial data, informing markets about the situation of the economy and public finances of a state or the value of specific companies.

Real Estate

A term that indicates all activities connected with real property: buildings and similar structures, also including the land, air and subsoil, whose ownership confers the right to build.

Real estate appraisal

This is the activity to determine the increase/decrease of the value of real estate over time. In a real estate fund, this value is determined on the basis of the appraisal carried out every six months by the independent experts.

Real estate fund

A real estate fund is a collective investment management product, i.e., a type of mutual fund. It is set up as a "closed mutual fund" and is characterized by the specific object of the investment, must be at least 2/3 of the total value of the fund: real estate, real property rights and investments in real estate companies and other interests in property companies and other real estate investment funds (OICR).

This minimum investment "threshold" can be reduced to 51% of the fund's assets if at least 20% is invested in financial instruments representing securitization transactions involving real estate, real property rights or receivables secured by real estate.

The term "closed" means that: the initial capital and the number of shares are pre-defined, shares may only be subscribed during the offering and redemptions are generally made at the maturity of the Fund (and/or at pre-defined dates).

These funds can also be classified according to their intended audiences (retail or reserved for qualified investors), the mode of acquisition of the properties (by contribution and not by contribution) and the dividend distribution policy (distribution or accumulation).

Real estate funds are thus investment instruments whose main purpose of is to transform direct real estate investments into financial assets: isolating the income stream generated by a portfolio of properties (rents and realized capital gains) incorporating it into shares (the shares of ownership in the real estate fund), all having the same rights. The advantage of this real estate finance operation lies in the possibility for investors to access a real estate investment, with limited capital.

Real Estate Fund Management

The set of activities and professional services aimed at maximizing the value and return of an investment property ("asset") that is part of the real estate fund from the time of its acquisition to its sale.

Real-estate income accumulation funds

A fund in which any gains achieved through sales of property or from the profitability of the fund are not distributed to the subscribers but increase the overall value of the fund. Subscribers only receive money when they sell their shares or the fund is liquidated. This mode applies mostly to development funds.

Real estate leasing

A financial leasing contract for a real estate asset. Its term is usually very long and the fee is indexed;

Reference time horizon

Due to the nature of the object of the investment, real estate funds have a medium to long-term perspective of about 10-15 years. In any case, the maturity of the real estate fund may not be greater than 30 years.

Regulations

A document that completes the information contained in the prospectus of a fund. The rules of a fund must be approved by the Bank of Italy and contain the operating methods of the fund.

It defines the operating methods of the fund, the tasks of the various subjects involved and relations with subscribers of the shares.

REITs

REITs (Real Estate Investment Trusts) are the most traded US real estate funds. They are divided into three main categories: equity funds (which manage purchased or constructed properties); mortgage funds (which acquire and manage mortgage loans); and hybrid funds (that combine the characteristics of the first two types).

Reserved real estate fund

Ordinary reserved funds are those exclusively dedicated to qualified investors: in this type of fund, because this category of investor is assumed to be more knowledgeable, the law waives some of the prudential limits established for funds also destined to non-professional investors.


S

Sale and lease back

A typical leveraged buy-out operation, it consists in the sale of equipment to a leasing company in order to obtain funds with which to reduce short-term bank debt and, thus, financial charges, and then repurchasing the equipment with the effect of classifying the lease payments as tax-deductible costs.

Securitization

Securitization is a technique with which provides real estate owners expected future cash flows from the building or real estate complex (rents).With securitization of real estate values are converted into financial instruments, which incorporate the value of the assets to then be sold. It converts a balance sheet asset into securities, which are placed with third parties.

Securitization provides the following positive effects:

  • one achieves greater liquidity;
  • real estate management is spun-off from the core business of the company;
  • there is an offering of alternative securities to government bonds.

Semi-open funds

the early repayment of shares to participants will occur with the same frequency, and at the time, as new issues of fund shares at the book value resulting from the last statement/report.

SGR

This is an acronym for the Società di Gestione del Risparmio or asset management company, a company authorized for the collective management of financial products (mutual funds) by the Consolidated Financial Act. The company's assets are kept separate from those of the fund. The asset management companies authorized in Italy are enrolled in a special register kept by the Bank of Italy.

Share

This is the smallest unit in which the fund is divided. At the time of subscription the participant in the fund is allotted a number of shares proportional to the amount paid in.

Speculative funds

These are funds characterized by high performance targets and the ability to waive many of the rules required for ordinary real estate funds. The main differences are the absence of a limitation of indebtedness, the ability to perform transactions in conflict of interest up to 100% of the value of the fund and having no limit on the maximum value of a single contributed asset.

Spin-off

A spin-off consists of dividing part of the assets of a company into a new legal entity. The shares of this new company are distributed to the shareholders of the original company.

Sponsor

A broker that works with the issuer during the procedure for listing financial instruments and guarantees to the quality of the information prepared by the issuer.

Subscription commission

This is the cost of entry into the fund and is usually commensurate to the gross amount of subscriptions, with a percentage that is fixed or, more often, decreases as the amount invested increases.

Supervisory Authority

The set of bodies, laws and tools that ensure the proper functioning and transparency of financial markets.

Among these, those involved in our industry are the CONSOB and the Bank of Italy.


T

Target yield

The target yield is the result that, when surpassed, triggers the payment of the overperformance commission to the investment management company (SGR). In other words, the "minimum" result is only the reference point for the calculation of the above-mentioned commission and not also a parameter representing the potentially achievable yield that investors can be induced to expect at the maturity of the fund.

Evaluations of the performance of real estate funds should take into account that yields are the result of estimates, that there is no guarantee of getting the same returns in for the future and that the right of reimbursement can only be exercise at maturity and under the conditions determined in the management regulations of the fund.


V

Vacancy rate

The percentage of "vacant"(i.e., not occupied/rented) building space offered for sale/lease.

Value of the fund

The fund's value is the result of total of the fund's assets minus all liabilities. It is determined by the Board of Directors within 60 days from the end of fiscal year and within 30 days from the first six months.

The individual components of the fund are valued through the application of the criteria established by the Supervisory Authority pursuant to the Consolidated Financial Act, Legislative Decree no. 58 of 24 February 1998. The unit value of the share is published twice a year in the newspapers listed in the Prospectus/Fund Regulations.

Value of the share

The unit value of the share is obtained by dividing the value of the fund by the number of shares. This book value of the share is the indicator to be considered for determining the assets of the fund held by the individual saver/investor.


Y

The yield of a real estate fund consists of the income from financial and real estate investments and their professional management. These are the result of two components: capital gains (realized upon the sale of the asset), and the yield from rents.