Unit 14 (3 in 12th edition)

Five important points to remember about REITs follow.: An owner of REITs holds an undivided interest in a pool of real estate investments. REITs are liquid because they trade on exchanges and OTC. REITs are not investment companies (mutual funds). REITs offer dividends and gains to investors but do not flow through losses like limited partnerships, and therefore are not considered direct participation programs (DPPs—Unit 17). The key numbers are: (1) at least 75% of a REIT's assets must be represented by real estate assets such as real property or loans secured by real property, cash, and U.S. government securities; (2) at least 75% of the REIT's annual gross income must be from real estate-related income, such as rents from real property and interest on obligations secured by mortgages on real property; and (3) in order to qualify as a REIT, the REIT must distribute at least 90% of its taxable income.

-An owner of REITs holds an undivided interest in a pool of real estate investments. -REITs are liquid because they trade on exchanges and OTC. -REITs are not investment companies (mutual funds). -REITs offer dividends and gains to investors but do not flow throughlosses like limited partnerships, and therefore are not considered directparticipation programs (DPPs—Unit 17). -The key numbers are: (1) at least 75% of a REIT's assets must be representedby real estate assets such as real property or loans secured by real property,cash, and U.S. government securities; (2) at least 75% of the REIT's annualgross income must be from real estate-related income, such as rents fromreal property and interest on obligations secured by mortgages on realproperty; and (3) in order to qualify as a REIT, the REIT must distribute atleast 90% of its taxable income.

Minimum net worth of registered investment company

100,000

A contract extended annually after an initial maximum term of two years

A mutual fund's investment advisory contract

An open-end investment company

Another name for a mutual fund is

Quantity purchase discounts for mutual fund offers

Breakpoints

Front-end loads (difference between POP and NAV)

Class A shares; : investors pay the charge at the time of purchase.

Classes of fund shares

Class B shares (back-end load): declines over time so investors pay the charge at redemption. Class C shares (level load): no sales charge to purchase, generally a 1% CDSC for one year, with a continuous 12b-1 charge. The class of shares determines the type of sales charge as well as operating expenses with Class A having lower costs (usually a low or no 12b-1 fee) than Class B and Class C shares. All other rights associated with mutual fund ownership remain the same across each class.

Investment Company with fixed offering of shares

Closed-end fund (CEF); do not carry sales charges. An investor pays a brokerage commission in an agency transaction or pays a markup or markdown in a principal transaction.

An Investment Company that the meets the 75-5-10 test

Diversified Management Company -75% of its assets in other issuers and cash, no more than 5% of assets in any one company, and no more than 10% ownership of any company's outstanding voting stock.

Market price determined by investment company's holdings and supply and demand

ETF

Convert investment for equal investment in new fund in the family at NAV; without incurring an additional sales charge

Exchange privilege

Orders to buy or redeem fund shares are priced on the next computed NAV

Forward Pricing; The valuation process for mutual fund shares, whereby an order to purchase or redeem shares is executed at the price determined by the portfolio valuation calculated after the order is received. Portfolio valuations occur at least once per business day.

Company limited to no more than 60% of interested persons on BOD

Investment company

Most common hedge fund business structure

Limited partnership

The period investors must maintain investment in hedge fund

Lock up; , during a certain initial period, an investor may not make a withdrawal from the fund

May not be made without a vote of the fund's shareholders

Major change in investment policy

Security backed by mortgages on commercial property

Mortgage REIT