Hedging
The prices of shares, bonds and currencies are subject to fluctuations that can be hedged against using modern financial instruments (futures, options, swaps) in fund assets.


Ad-hoc publicity
Obligation by a company whose securities are traded officially or in the controlled market on a stock exchange to notify the public without delay of unknown events that could affect its rate.


Share
Security that certifies the right to hold part of a public limited company (PLC). The holder of a share (shareholder) is a joint owner of the company's assets and participates in the profits (dividends). The share investment is subject to substantial rate fluctuations. From a long-term perspective the return from shares exceeds that of other investments.


Share analysis
Share analysis is the method used to value the profitability of a company or the upside potential of the relevant share. It is used as the basis for taking decisions on the purchase or sale of the share.


Equity fund
Investment funds that are mainly made up of shares. Equity funds are interesting to savers who with the primary objective of "increasing value". Although their risk is somewhat higher there is a greater chance of increasing the value. As a result of the wide diversification of the investment in an equity fund, investing in equity fund certificates is safer than direct investments. In addition, the investor can keep the specialist knowledge, time and relevant assets lower than for a direct investment. For equity funds there are a range of different investment focuses, e.g. funds that only buy shares in a particular industry, country, regions or shares in a particular stock exchange index.


Public limited company (PLC)
Capital company whose shareholders participate by buying shares in the share capital. Shareholders are only liable for the company's liabilities to the extent of their shareholding. With his voting right in the PLC's AGM the shareholder has the opportunity to affect company decisions to a limited extent. At AGMs such matters as membership of the supervisory board, the appropriation of net profit and exonerating the management and supervisory boards are decided.


Share index fund
Equity fund (see also index fund) that imitates a recognised share index (e.g. DAX, Dow Jones Euro STOXX 50, Dow Jones Industrial etc.).


Share price
The price of a share that depends on supply and demand and therefore can change each trading day. Supply and demand are influenced by the macro-economic situation, industry perspectives, the PLC's profit and future prospects as well as by currency fluctuations etc.


Fixed-term equity fund
Equity fund with a limited term (see fixed-term fund) After the fixed term the fund is dissolved and the fund's assets paid back to the shareholders.


Share market
General term for all organisational forms of share trading. The German stock exchange has reorganised the composition of the share indices using a modified index system. The changes were implemented to 24 March 2003. The basis for the index concept is the new structure of the share markets with two segments - General Standard and Prime Standard - which together form the CDAX.


KSO Appendix
The KSO appendix to the tax return (in Germany) lists the income from capital assets. This appendix must be completed if the income exceeded EUR 1,421 (saver's tax allowance of EUR 1,370 plus professional cost flat-rate sum of EUR 51.00) or EUR 2,842 for those assessed as a couple. For income below this limit it should be completed if corporation tax has been credited or a tax deduction has been made from the capital gain (e.g. interest discount) because, for example, no exemption request was made or the exemption request does not reach the appropriate level.


Investment policy
The investment policy determines the details of the investment to match the investment objectives (high dividends, high rate opportunities etc.) and the fund type (equity, pension fund etc.). It includes in particular: · the selection of securities by type, country, industry, · the setting of purchase and sale times · the calculation of the share of individual securities in the fund's assets and · calculating the liquid funds.


Investment return
Total percentage increase in the value of an investment fund over a particular period. This is comprised of dividends and price increases.


Investor protection
The basic concept of the Act on Capital Investment Companies (Gesetz über Kapitalanlagegesellschaften (KAGG)) is to protect investors from asset losses or incalculable risks.


Share
Also: Fund share. Smallest part of the fund's assets for which a share certificate is issued (value of the share: see share value).


Share certificate
Also: Investment certificate. Security that certifies the claims of the shareholder on the capital investment company. The share certificates are for one or more shares.


Share value
The value of a share is calculated from the value of the fund assets divided by the total number of shares issued and depends on the stock market rate of the securities that make up the fund. The share value is calculated and published every day; it represents the price that the investor would receive back if he returned the shares (return price). The share value plus the issue supplement represents the issue price and this is also published each trading day.


Employee savings bonus
No matter the income level each employees can invest in capital-forming investments (see capital-forming investments). The requirement for state subsidies for capital-forming investments in an equity fund or building loan agreement is compliance with the 7-year statutory commitment period. For this the deposit period for the investment savings plan is always 6 years and the subsequent waiting period up to another 12 months. If the taxable income is still a below the maximum of EUR 17,900 for single people and EUR 35,800 for jointly taxed married couples, the investor receives an employee savings bonus for capital-forming investments in productive assets - i.e. equity funds - of 18% in the old federal states and currently 22% (up to the end of 2004) in the new federal states - with a maximum annual investment sum of EUR 400. Building loans are only subsidised at 9% to EUR 470, i.e. EUR 43 per year. In order to receive the employee savings subsidy, gross income may not exceed the stated income limit. If there are children in the household the gross income limit increases. The employee savings subsidy must be applied for in the tax return. AL-Trust issues its capital-forming investors with a certificate on the capital-forming sums paid in and this must be included in the tax return. The subsidy approved is no longer paid annually rather all of the individual subsidies granted are paid to the investment company or bank holding the capital-forming securities at the end of the retention period.


Asset allocation
The strategic division of the available capital into various investment instruments: shares, bonds and money market instruments. The investments may then be divided up over various regions and currencies.


Issue supplement
Fee incurred by investors when buying fund shares and mainly used to cover the consulting and sales costs.


Distributing fund
Fund that distributes ordinary and any extraordinary returns to shareholders that have flowed into the fund at the end of the financial year (in contrast to reinvestment fund).


Payment plan
Also: withdrawal plan. With a payment plan the investor receives regular payments from a particular investment asset (usually for a securities account value over EUR 15,000). The sum to be paid is financed by selling the relevant number of shares. The investors either allow their capital plus returns to be paid out over a set period (payment plan with capital consumption) or they only remove the capital increases over an unlimited period of time (payment plan with capital retention). Whereas a payment plan with a pension fund usually meets the investment requirements of security-oriented customers, payment plans with share funds are only suitable to investors who are willing to take risks. In addition to the development of the fund's value, the level of payment selected is key to whether the capital paid in is gradually consumed, whether it can be retained over the long term or could even rise as a result of price increases. For a payment plan the value of the securities accounts can change substantially even in the short-term due to price changes that occur in particular in the share markets. For rates falling as part of a trend the desired payments could put the investment objective at risk and result in complete capital consumption that may occur earlier than expected and assumed when the application was made. In general a payment plan, especially one with equity funds, must be checked regularly, in order to recognise adverse developments and manage them as early as possible. For tax reasons (as at January 2004) it is appropriate to receive the initial payment after a year in order to prevent having to tax price increases using the personal tax rate.


Stock exchange
Trading location for commodities and securities. In Germany there are stock exchanges in Berlin, Bremen, Düsseldorf, Frankfurt/Main, Hamburg, Hanover, Munich and Stuttgart.


BAFin
Bundesanstalt für Finanzdienstleistungsaufsicht (Federal Financial Supervisory Authority) Investment companies are special banks and are subject to the supervision of the Federal Financial Supervisory Authority (BAFin), which is based in Bonn. BAFin combines the divisions of the former federal supervision offices for loans (banking supervision), insurance and securities trading (asset management) and continues their work. It gives banks permission to operate business and in addition must also monitor whether the investment companies are complying with the legal requirements for lending and the Capital Investment Companies Act (see Investment Modernisation Act - InvG).


Bear
Sustained fall in security prices


Benchmark
Comparison measure for the development of a fund's value (e.g. a particular index).


Beta factor
The beta factor states the average percentage change in the fund's returns if the market (benchmark) rises or falls by 1%. A value over (under) 1 means on average a stronger (weaker) movement of the fund compared with the benchmark.


Blue chips
Common term for shares in companies that have a strong substance and return with high stock market capitalisation and correspondingly high market weight. In Germany blue chips are summarised in the CDAX and TecDAX indices.


Bonds
Fixed-interest securities or bonds


Industry fund
Security fund that only invests in securities from a particular industry.


BVI
Bundesverband Investment und Asset Management e.V. (BVI) Established on 25 March 1970 in Frankfurt. Virtually all German investment companies are members of the BVI. The main objectives of the BVI are: · promoting the idea of investment and · promoting the common interests of its members.


CDAX
The basis for the index concept is the new structure of the share markets with two segments - General Standard and Prime Standard - which together form the CDAX. The General Standard is for smaller and medium-sized businesses who mainly attract national investors and are interested in a cost-effective listing. In this segment companies have to fulfil the minimum statutory requirements for the Official or Regulated Markets. The reporting duties include annual and half yearly reports as well as ad-hoc reports in German. The Prime Standard is for companies who also want to position themselves for international investors. In addition to the General Standard regulations, they also have to comply with high international standards (quarterly reporting, use of international accounting standards, implementation of at least one analysts' conference per year, publishing a corporate calendar with the most important deadlines, ad-hoc notifications and ongoing reporting in English).


Cost average effect
Also: average cost method. Fewer shares at higher prices and more shares at lower prices are purchased with an even savings rate, depending on the development of the fund's price. In the long term this gives the investor a lower average entry price.


Fund of funds
Securities fund that in turn invests in other funds. This achieves even wider distribution than for "conventional" funds. The fund management selects the relevant funds. The creation of a fund of funds is regulated in Sections 25k ff KAGG (see also KAGG version).


DAX
Abbreviation of the German Share Index (Deutscher Aktienindex). The selection indices of the Deutsche Börse exclusively depict the Prime Standard. The DAX covers the 30 largest companies in the Prime Standard - by stock market revenue and market capitalisation. Within the DAX share index the system differentiates between classical industries and technology companies; here all indices are open to international values.


Securities account
See: Investment account


Custodian bank
In order to guarantee increased investment protection, the capital investment company may not store the special assets it is required to hold itself but rather must instruct another bank to hold them as the custodian bank. This bank stores the fund's assets in specially set up locked accounts or locked securities accounts - separately from the investment company's assets. In addition, the custodian bank issues dividends, issues and returns share certificates and calculates issues and return prices. The custodian bank must be a bank that is under state supervision and authorised to operate in Germany with liable share capital of at least EUR 5 million. The custodian bank receives a fee paid for from the fund's assets for its activities. This is generally made up of a custodian fee for storing the fund's assets and a custodian bank fee for its implementation and management tasks.


Derivative funds
Funds (future/hedge funds) that mainly invest in such futures market instruments as futures, options, swaps and other derivatives. In addition to financial derivatives, future commodity transactions are also possible. Depending on the strategy both speculative and risk-minimising variants are possible. This type of fund is completely unsuitable for investors with little or no experience of the stock market.


Discount rate
Interest rate at which the Bundesbank buys bills of exchange from banks.


Diversification
The aim is a capital investment portfolio to distribute the assets over various investment types and values. The aim is a portfolio with a return that is as high as possible whilst keeping the risk as low as possible. With an investment fund it is very easy to distribute the risk over several companies, industries, countries and investment instruments.


Dividend capital gains tax
The paying organisation also pays the dividend capital gains tax on domestic dividends totalling 25% plus solidarity surcharge. If the investor issues an exemption request no deduction is made.


Dividend share
For German investment funds who have received German dividends, their share in the dividend is shown for each investment certificate. The investor needs this information to offset the corporate income tax in his income tax assessment.


Duration
Average commitment period for the capital invested in a security or securities assets. The duration is shorter than the remaining term of the titles due to the interest paid on the capital invested.


Income from capital assets
Investors in German funds receive income from the fund in the form of dividends or reinvestments. Dividends represent income from the capital assets. Investors must tax the income at their personal tax rates. A solidarity surcharge of currently 5.5% is charged on the capital gains tax. But the complete dividend is not subject to tax. Rate gains that have been paid out (except futures gains) and profits from the sale of preference right income are received by the investor without deduction. By issuing an exemption request for holding securities, income from capital assets is tax-free up to the saver's exemption levels including the professional cost flat-rates of EUR 1,421 or EUR 2,842 for joint tax assessment. Investors who are not resident in Germany for income tax purposes can alternatively present a non-assessment certificate instead of an exemption request. As the issue of a non-assessment certificate is linked to tight requirements expert advice should be obtained if there are any questions. As taxation takes place in Germany in two stages preliminary tax may be deducted for certain income. The retained deductible taxes represent advance an payment of income tax liability.


Income tax
Investors in German investment funds receive income from the funds, made up of dividends, interest, preference right income and/or rental income etc. annually in the form of dividends/reinvestments. The income must be taxed as "income from capital assets" in line with the person's income tax rate - no matter whether it has been received or re-invested. But the complete dividend is not subject to tax. Income from sales - no matter the length of time in the fund - and preference right income distributed by the fund are tax-free.


Single investment
The one-off payment of a larger sum to buy investment shares. The challenge and also the main difficulty of single investments is finding an attractive investment time because the success of the investment depends more heavily on this than for ongoing investment savings. For share funds an attractive investment time exists when the prices are low. You should ideally invest in pension funds when the interest on the capital market is high and the rates for fixed-income securities are low. You can make a single investment cheaper by consistently buying at lower share prices and thus increasing the success of the investment.


Emerging markets
Name for share markets in emerging countries. Emerging markets are in particular share markets in Central and Eastern Europe, South America as well as South and Eastern Asia.


Eurozone
Colloquial term for those countries using the euro as their currency. From January 1999 these are Portugal, Italy, Spain, France, Austria, Germany, Belgium, the Netherlands, Luxembourg, Ireland and Finland.


Fed rate
Standard money market interest rate in the US. The US Federal Reserve (abbreviated to Fed) controls this rate and uses it to manage liquidity, approximately equivalent to the discount rate in Germany.


Fixed interest securities
Securities with a fixed, unchanging interest rate (nominal interest rate). The investor virtually gives the issuer a loan for the nominal value and has a right to a fixed, nominal interest rate and 100% repayment at the end of the term.


Funds
See: Investment funds


Fund share
See: Share


Fund types
These are classified by · the type of income administration: reinvesting and dividend funds · the type of asset values: securities funds (e.g. equity, pension, mixed funds), property funds, speciality funds (e.g. country funds, money market funds, fund of funds) · by the target group: Public funds are open to all. Special funds have a limited group of maximum 10 institutional investors. These are usually industrial companies and insurance companies who have some of their money invested externally.


Fund company
See: Investment company


Fund management
Fund management is appointed by the capital investment company to make investment decisions on a fund's special assets. Here the capital investment company ensures that the statutory provisions are met. Fund management takes work away from the investors: It observes and analyses financial markets and their participants and invests its customers' money in line with the investment policy and the relevant situation such that the investments in the fund's assets complement each other in terms of the chance of making a return and potential risks and the investors benefit from good returns with security that is as high as possible.


Fund price
See: Share value


Exemption request
In order to exploit the saver's exemption without delay and not only in the income tax return, each investor can issue an exemption request to their investment company, bank or savings bank. If presented in good time the taxable parts of the dividends from the fund for storing securities share certificates are paid out without deduction up to the exemption request level (maximum EUR 1,421 per investor for individual assessment or EUR 2,842 for jointly assessed couples) or, for reinvestment funds, the interest deduction tax is repaid to the investors. If the investor stores their own shares it is only possible to consider the retained interest deduction tax in the tax return.


Guarantee fund
Investment funds that give a "particular guarantee". The purpose of guarantee funds, which have existed since the mid-1980s, was originally to offer the investor a capital-back guarantee with the prospect of a certain value development under the condition of long capital tie-up by the investor. The guarantee funds created by German investment companies are mainly managed by Luxembourg-based subsidiaries.


Money market funds
These invest 100% in pure money market instruments (i.e. fixed deposits, short-term fixed-income securities). Money market funds are particularly well suited to short-term investments and are hardly subject to any rate variations.


Mixed fund
Mixed funds can invest both in shares and bonds; they combine the growth chances of share involvement with the returns from fixed interest securities. This gives the fund manager greater freedom of investment. If share prices stagnate or fall he can switch to fixed interest securities; if the share market rises he can move the focus again to investing in shares.


German Investment Companies Act (KAGG)
With the enactment of the German Investment Modernisation Act (InvG) on 01.01.2004 the KAGG was combined with the Foreign Investment Act (AIG). The KAGG's main aim is to protect investors. It also regulates · the legal form of investment companies as banks who are therefore subject to BAFin, · the legal relationships between the investment company, investors and investment funds, · the use of a custodian bank, · the minimum content of the contractual conditions, · the composition of the supervisory board, · the auditing and publication regulations and · the tax issues. The KAGG may be used for existing investment funds up to 01.06.2006. The contractual conditions for certain fund types can be changed to arrange certain legal transactions as per the Investment Modernisation Act (InvG).


Growth approach
The growth manager expects above-average returns from companies with high profit expectations and solid business development. He assumes that the market will reward extraordinary future growth by the growth stock. The above-average return development of growth shares can be seen in a higher percentage change in historical profits as well as short-term and long-term analysts' forecasts.


Half-earnings procedure
The half-earnings procedure, which was introduced in the 2000/2001 tax reform, controls the taxation of dividends and speculation profits gained from shares. It envisages that half of both the rate gains achieved and the cash dividends distributed are taxed in line with your individual tax rate.


Bull
Longer lasting, strong rate rises in the stock market.


Hedge fund
Investment fund that uses frequent change to its investments especially for such speculative operations as futures transactions, short sales and borrowing, to achieve profits quickly. Hedge funds are not permitted in Germany. They have immense risks for investors.


Property fund
These funds mainly invest in land and property with the aim of producing an increase in the property's value that is as high as possible and high rents. Therefore commercially used rented properties are preferred. Property funds are often the only way for investors to invest in property without large amounts of capital. The fund's assets are distributed across Germany and vary in terms of size, location and usage type. Only an independent committee of experts is responsible for assessing the fund's assets. Property funds are also subject to the Capital Investment Company Act. In order to protect and immediately inform the investor about the funds operated by an investment company, the company must provide documents whose content is laid down precisely by the KAGG and each new publication must be approved by the authorities: · sales brochure (dated) with contractual conditions, · audited reports to the end of the financial year and every six months.


Index
Average calculated from the rates on the equity market. The best-known market barometer for the German equity market, the DAX, reflects the rate development of the 30 German share titles with the largest revenues.


Index fund
Funds that completely or mostly imitate the composition of a particular standard index. The fund's performance should reflect the index's development.


ISIN
International Securities Identification Number (ISIN) The ISIN is used as a globally unique code for securities and replaces the national securities codes (WKN). There is no common changeover date or obligation for changing the national WKN to the ISIN. After repeated delays the conversion from WKN to ISIN was agreed for Germany for 22.04.2003. Deutsche Börse had already introduced ISINs in October 2002.


Investment thought
Also: Investment idea. Many investors pay money into a large "pot", the investment fund. The investment company buys securities with the money or in the case of property funds land and buildings and takes on ongoing management. Advantages for the investor · Relatively even chances: Even with small sums the investor can participate in large, widely distributed assets and benefit from conditions, investments and risk reduction that otherwise are only available to large-scale investors. · Convenient and time-saving investment: The saver does not need to worry about the details of the capital asset; it is managed by experts. · Flexibility: Payments in and out can be varied as desired. · Liquidity: Fund shares can be sold quickly and easily at any time at the return price. · Transparency: The issue and return prices are published on each trading day. The investment company provides all of the important details of the fund on a regular basis.


Investment company
Also: Capital investment company. Capital investment companies are companies whose business operations aim to to invest money in its own name for the joint account of the investors using the principle of combining the risk of securities or properties separately from the company's own assets and issuing certificates (share certificates) to the investors (shareholders) (Section 1 KAGG).


Investment share
Calculation unit for measuring the share an investor holds in the assets of an investment fund. See: Share certificate


Investment funds
"Special assets" as defined by German law. Special assets are managed by an investment company and stored by a custodian bank that is independent of it. The term "special assets" means that they are to be kept in strict separation from the investment company's own assets. The risk associated with an individual security is thus reduced by holding many different securities. If one of a hundred securities has less positive development it influences the performance of the complete investment less than if this was the only financial investment.


Investment savings
Investing money in investment funds.


Annual report
See: Accountability report


Corporation tax credits
Shareholders receive a tax credit for the corporation tax deducted when receiving dividends. This is similar for German investment funds with German dividend income. This tax credit is also certified for the investor. The tax credit is 3/7 of the domestic dividend shares included in the fund income. The tax credit can be asserted as part of the income and corporate tax assessment. If the non-assessment certificate or exemption requested is presented in good time the tax is credited immediately with the dividend or reinvestment. Even then the credit should be stated in the KSO Appendix as the solidarity surcharge is measured by the income tax minus the corporation tax paid or credited and reimbursed corporate tax is only considered if it is stated in the KSO Appendix.


KAG
Abbreviation for capital investment company (Kapitalanlagegesellschaft). See: Investment company


Capital investment company
Official name for investment companies in the Capital Investment Company Act. See also: Investment company


Capital gains tax
Income from investment shares is not normally subject to capital gains tax. This applies to investment shares but not to interest income that is distributed or reinvested. For interest and other shares of dividends/reinvestments that are subject to interest deduction tax, such as rental income, the interest deduction tax must be retained if no exemption request exists.


Consolidation
Stabilisation of the rate development on the stock market after stronger fluctuations.


Costs
The costs of an investment include the issue supplement, administration fee, custodian bank fee and other costs (e.g. costs of reporting, securities account fees).


Country fund
Equity fund that sets the investment framework only as a particular country or several countries associated by particular characteristics (e.g. France, Great Britain or Italy funds).


Term
For fixed interest securities, bonds and loans, the time between creation and lapsing or repayment.


Term fund
In contrast to common fund types these funds have a final due date. The fund invests the investors' money in fixed-income securities with maturities fixed for a future date (usually the fund's final due date). For this the investor must buy the market rate of return that is current during the subscription period and is valid for the planned term. If the market interest rate falls the fund is closed as otherwise it is not possible to achieve the published rates of return. This ensures the repayment sum is relatively easy to calculate at the stipulated time.


Prime rates
The interest rates set by the Bundesbank for the supply of central bank money (discount, Lombard, securities pension rate). The prime rates affect the level of interest on the financial market.


Lombard rate
Bundesbank interest rate for giving loans to banks in return for pledged securities.


MDAX
The MDAX contains 50 companies whose size tracks the DAX values. It covers classical industries (including health, insurance, financial services) and also includes international companies.


Mixed fund
See: Mixed fund


Small caps
Shares of small and medium-sized companies


Non-investment certificate
Investors who are not liable for income tax - due to their low income - can request a non-investment certificate from the Tax Office where they live. If this is presented in good time before the dividend from the bank holding the securities account, this bank will not retain interest deduction tax for dividends and will pay the corporate tax credit immediately. For reinvestment funds these sums can be reinvested again immediately.


No-load funds
Funds that can be purchased without calculating the issue supplement. These funds are interesting for investors who change funds frequently or want to park their money "for the short-term".


Bonds
Fixed-interest securities.


Open fund
The capital investment company issues new shares in open funds on an ongoing basis. The number of circulating shares is not limited; the capital investment company is obliged to take back the shares again at any time.


Open-ended real estate funds
Investment fund that mainly invests its funds in offices and business premises whereby the number of shares issued - in contrast to closed property funds - is not limited.


Offshore fund
Investment fund where the main sales areas are outside the land of domicile. Offshore funds enjoy tax advantages in their countries where they have the status of so-called "non-resident companies" and are not subject to any supervision authority.


Warrant bond
Fixed-interest security that has additional rights - option certificates - that entitle the holder to purchase a number of shares set out in the option conditions within a particular period at a fixed option price.


OTC
Abbreviation for "over the counter". Refers to trading outside stock exchanges.


Performance
See: Value development


Portfolio
Composition of a capital investment. For security investment funds, in particular the composition of the security assets.


Prime Standard
See: CDAX


Mutual fund
Investment fund whose share certificates anyone can purchase. In contrast to: special fund


Withholding tax
Since 1 January 1993 a 30% interest deduction tax ("withholding tax") has been in force, whereby the exemption request means that EUR 1,421 for single people and EUR 2,842 for couples is tax-free. Income from securities is also subject to withholding tax in other countries. Investment funds that have such papers in their portfolio receive the income minus this withholding tax. The fund can not offset the withholding tax retained in the relevant dividend country. A certificate is issued for the tax that has been retained but can be offset. Therefore investors can offset the withholding tax retained on international gross income against their tax return or if desired deduct it when calculating their total income. It is not possible for it to be reimbursed using an exemption request or non-investment certificate.


Return price
Price that the investor receives on returning the fund shares. See also: Fund price


Return obligation
German investment funds are obliged by law to take back the shares at any time and to debit them from the fund's assets. The share value does not change by the return of investment shares.


Rating
Assessment and classification of the relative and absolute creditworthiness of debt instruments using common measures. Independent agencies use codes for this classification, so-called rating scales (e.g. AAA for the best creditworthiness to D for inability to pay). The AL-Trust pension funds only include bonds with the best rating.


Pension funds
Investment funds that only or mainly contain fixed-income securities such as Pfandbriefe (mortgage bonds), local authority bonds, bonds, euro bonds by international issuers and foreign currency bonds. The investors are savers with the investment aim of constant returns that are as high as possible. In contrast to direct investments, pension funds have a much restricted rate risk. The success of a pension fund investment is favoured by the constantly fixed income of the papers included in the pension fund, by the "right" term set and the fact that pension funds can only use the bonuses given to large-scale investors (reduced sale/purchase fees) for new issues. The fund management handles the management of many pension titles, pension markets, capital market returns, nominal interest rates, terms, termination deadlines and drawings for the investor.


Risk reduction/investment distribution
Investment companies are obliged to reduce risks/distribute the investment by the KAGG, which contains a number of investor protection regulations. Other financial instruments are also available to limit the risk.


SDAX
The SDAX with the next 50 values below the MDAX is reserved for small and medium-sized companies from classical industries.


Shareholder value
The shareholder value principle is a management concept that focuses the investment policy on the shareholders. The basis for this is shareholder friendly information policy, long-term above-average share capital returns and a targeted corporate strategy that focuses on the core competencies.


Sharpe ratio
The Sharpe ratio measures the excess return of a fund over the safe investment per risk unit. The volatility indicator is used to measure the risk. All factors are calculated on an annual basis.


Solidarity surcharge
Since 1 January 1998 an additional solidarity surcharge is collected on income; this is currently 5.5% of the relevant tax. For investment funds this is charged on the dividends/reinvestment shares that are subject to interest deduction tax. The interest deduction tax rises from 30% to 31.65% and for over-the-counter transactions from 35% to 36.925%.


Special assets
The capital invested by the investment company for the issue of shares and the assets thus created are special assets. The special assets must be kept separately from the investment company's own assets. Investment companies may establish several special assets that are differentiated by their names and must be kept separately. The special assets are not liable for the investment company's liabilities.


Saver's tax allowance
Each investor is entitled to a saver's tax allowance of EUR 1,370 and professional costs flat-rate of EUR 51.00. These sums double for couples who are assessed jointly. The upper limit is EUR 1,421/2,842 for each savings plan. See: Deposit plan


Savings plan
See: Deposit plan


Speculation period
If profits are realised from securities transactions in Germany before the end of a year (purchase and sale of the investment shares within this period) these profits are subject to income tax whilst noting the allowance limit (not allowance!) of EUR 512 per calendar year. The legislator assumes that such securities transactions as speculative (private sale transactions) and they are therefore subject to income tax. Profits from the sale (rate gains) that are achieved after the end of this speculation period are in contrast tax-exempt.


Speculation tax
If the period between purchasing and selling investment share certificates is 12 months or less, a profit from the sale is taxable as a speculative transaction if the total speculative profits of an investor exceed EUR 512 in a calendar year. Anyone exceeding this limit must tax the complete speculative profit at their personal tax rate. Speculation losses can be offset against speculation profits from later years.


Special fund
Investment fund that is restricted to a limited group of investors. These are usually institutional investors, such as insurance companies, pension funds, church organisations, foundations etc. Special funds may not be accessible to more than 10 shareholders. The special fund just like an open fund is also subject to the Investment Modernisation Act (InvG) and the special supervision of the Federal Financial Supervisory Authority (BAFin).


Speciality fund
Investment fund that invests in securities for particular industries or sectors, countries, regions or in particularly dynamic securities (also: special funds). With the targeted strategy for special values the requirements are created to achieve higher rate gains at higher risks, even if these funds are structured and managed using the risk minimisation principle by diversification. They generally require a certain investment know-how and can be used for shorter term fund involvements.


Tax statement
Investors in German investment funds usually receive a tax statement from the organisation holding their securities account annually that lists the share of income that is subject to interest deduction tax, the domestic dividend ratio and any retained interest deduction tax, solidarity surcharges, corporate tax credits and foreign withholding tax.


TecDAX
The TecDAX is a new blue chip index for the 30 largest technology stocks. It replaced the NEMAX 50 as the leading index for technology titles.


Reinvestment fund
Investment funds that do not distribute their returns to the investors but rather reinvest them again.


Reinvestment
The returns generated in the financial year are retained by reinvestment funds in the fund's assets and thus permanently increase the share value. They are not distributed to investors. The opposite of this is a dividend fund that generally distributes the returns generated to the investors one a year.


Trading
Short-term sales and purchases of securities with the aim of exploiting short-term rate fluctuations.


Trading fund
See: No-load funds


Umbrella fund
Investment fund structure that covers several fund assets. Similar to a fund of funds, but usually with the opportunity for the investor to decide which sub-funds are to be purchased. The structure forms a legal unit so that only one authorisation process with the relevant authority for the complete umbrella fund.


Net return
Return on all current fixed-income securities that is calculated regularly by the Bundesbank.


Value approach
The value managers attempt to identify undervalued companies and real values. These appear cheap when compared historically or to other alternative investments and should recover their valuation in the future. The following characteristics indicate a value share: · a low ratio of the market or book value to the profit, · a high dividend return and · ideally a positive trend reversal for the profit forecasts.


Profits from sale
When returning share certificates from the operating assets the difference between the purchase price/book value and the income from the sale is taxable income.


Sales prospectus
The Investment Modernisation Act stipulates that the buyer of investment shares must be given a sales prospectus with the investment fund's contractual conditions. It must contain all the information that is essential to assessing an investment in the investment fund. This includes notification of the investment company's name, legal form, headquarters and share capital, the custodian bank and the contractual conditions that are essential by law. The sales prospectus must be approved by BAFin.


Asset list
List of securities and other assets in the fund's assets on a particular key date. An investment company's accountability report contains such an asset list.


Asset tax
The ownership of shares in an investment fund is subject to the asset tax pursuant to the Asset Tax Act, which has not yet been repealed, if its value together with the investor's other taxable assets exceeds certain limits. The return value of the shares at the end of the calendar year preceding the investment key date is relevant for the asset tax value. But asset tax has not been collected since 01.01.1997.


Capital-forming savings (5th Capital-forming Act)
State subsidy programme for forming capital. The employer transfers capital-forming savings on behalf of the employee and these receive a subsidy up to a maximum of EUR 870. In various collective agreements it states that the employer will pay capital-forming savings in addition to the salary. The employee has the option to invest EUR 400 with a subsidy, e.g. in special securities assets (with the requirement that the share ratio is at least 60%). The state subsidy is paid by the employee savings subsidy.


Administration fee
Also: Administration charge. The capital investment company receives a set percentage of the fund's assets as an administration fee for its portfolio and administration services.


Administration charge
See: Administration fee


Professional costs flat-rate
In the tax return to simplify the professional costs it is possible to use a flat-rate of EUR 51 or EUR 102 for jointly assessed couples. This includes the costs incurred when investing money without the need for individual proof. Higher professional costs, if evidence is provided, can be asserted in the income tax return. The issue supplement is however not part of the professional costs.


Value development
There are various methods for managing the success of an investment fund. Each method is suitable for certain analyses. The BVI value development calculations compare the management performance and are used as a preliminary step for calculating the success of one's personal investment. BVI calculates the management performance of German investment funds for the one-off investment of a particular sum. The key to this is the share values of the fund at the beginning and end of the calculation period and the total dividends including corporate tax credits. Individual tax issues are not included in the calculation. The dividends made in the calculation period are always viewed as reinvested at the share value on the day they are distributed, as is the case for an investment account.


Security
Certificate that certifies a private right; the assertion of this right requires the ownership of the certificate. Securities often mainly refer to shares, debt securities and investment certificates.


Security fund
Fund whose fund assets are invested in securities.


Securities pension rate
This "third prime interest rate" is used by the Bundesbank to finely control the supply of money. Lombard securities that the banks return after 30 days are used.


Reinvestment
The reinvestment of returns is usually completed free of charge on the date they are distributed. New shares or fractions of shares are purchased for the annual returns, which in turn produce returns that are invested again. This cumulative effect is reinforced by the duration of the investment. For the holders of an investment securities account that is managed automatically by the investment company, the reinvestment in new shares or fractions of shares is automatic and free of charge.


WKN (Wertpapier-Kennummer)
Securities issue number. The securities issue number is a number with six digits that uniquely identifies each security - i.e. each fund - at a national level.


Xetra

Electronic stock market trading system that in 1997 replaced the Ibis system used in Germany.

In theory it is possible to trade shares around the clock using Xetra. In future the new system should also give private investors the opportunity to order securities outside normal stock market hours at cost-effective conditions. Supporters of the new trading system also believe that Xetra will give investors greater transparency and result in fairer pricing. In contrast critics fear that floor trading will be abolished completely by the increasing computerisation of stock market trading.






Zero bonds
Bonds that have no interest coupons, i.e. do not receive interest in an ongoing manner. Instead they are issued under "pari" - i.e. under 100% - and are redeemed at the nominal value (at 100%).


Certificate
Security that certifies the claims of the shareholder to the capital investment company. The share certificate or investment certificate certifies that the holder is a joint owner of the fund's assets.


Target fund
Fund designed for a specific investment objective, The various fund types are defined according to German law by the investment objects that must be main elements invested in.


Interest deduction tax
Interest deduction tax (ZASt) is payable for interest income, interest receivables and profits on futures. The organisation making the payment pays 30% ZASt directly to the Tax Office for storing securities accounts and 35% ZASt for storing its own assets. For reinvesting funds the 30% ZASt is taken from the fund and paid. A solidarity surcharge of currently 5.5% is charged on the interest deduction tax. If the investor provides an exemption certificate dividends can be paid out or the reinvestment can be given to the investor without deductions. For own storage this is only possible using the income tax return. On the share of dividends that are subject to interest deduction tax (these are mainly interest income or income from rental and leasing) 30% interest deduction tax must be paid, for over-the-counter transactions 35%. For reinvestments in general 30% of the part of the reinvested sums that is subject to interest deduction tax is retained. In all of the stated cases an additional solidarity surcharge of currently 5.5% is added to the interest deduction tax. It is fundamentally possible to refrain from deducting the tax if an exemption order or non-investment certificate is presented.


Compound interest
Interest calculated on interest that was not paid out. It is added to the capital and then the interest is added.


Intermediate profit taxation
So-called intermediate profit taxation does not apply from 2004. This substantially simplifies investment fund taxation. The consequences: only at the time the returns are distributed on the shares in the relevant customer securities account are the returns at the investor level relevant for taxation. For the 2003 tax return everything in these rules remains the same. The interest income earned on the sale of share certificates between two dividend/reinvestment deadlines was subject to income tax up to 2003 and was also subject to interest deduction tax. Intermediate profits paid in the share price when buying into the fund could be deducted as negative income from the intermediate taxable profits or other income from the same calendar year. If the investor holds his shares until the next dividend/reinvestment the intermediate profits profits would also be deducted from the total income that is subject to interest deduction tax.