Moody's rates 16 German open-ended real estate funds and their managers

MoodyÂ's Investors Service was appointed in the spring 2002, as the rating agency for the evaluation of German open-ended real estate funds. The appointment was made jointly by the Association of German Investment and Asset Management Companies (BVI Bundesverband Deutscher Investment- und Vermögensverwaltungs-Gesellschaften e.V.) and the open-ended real estate fund managers based on their view that the assignment of MoodyÂ's ratings for these funds will provide additional transparency for the investment community.

The German open-ended real estate fund market exceeded €55 billion in 2001. As of August 2002, investors have placed an additional €12.2 billion into German open-ended real estate mutual funds in an effort to find a safe haven from volatile equity markets. As such, focus on property funds is at an all-time high.

MoodyÂ's Real Estate Fund Ratings are designed for commingled open-ended and closed-ended funds, unit trusts, partnerships, joint ventures and similar funds that invest in real property and/or mortgages on real property. The ratings provide investors with an independent opinion on (1) the overall quality of the organisation, management abilities and operational practices of the real estate fundÂ's investment manager (a Management Quality Rating), and (2) the quality of the real estate portfolio (an Investment Quality Rating). In addition, MoodyÂ's will assign a Fund Performance Rating to each fund.

Unlike traditional ratings, MoodyÂ's Real Estate Fund ratings do not address a fundÂ's ability to repay a fixed obligation or to satisfy contractual financial obligations. Instead, the Management Quality component of the rating - ranging from Aaa(MQ) to B(MQ) - considers the overall fiduciary risk associated with the organisation, which includes an assessment of that entities management abilities and operational practices. More specifically, this includes an assessment of the companyÂ's: underwriting skills; asset management and loan servicing capacity; risk management and controls; information technology; operational controls and procedures; regulatory and internal/external compliance activities; decision-making processes including selection of assets that meet the fundÂ's investment objectives; client-servicing capabilities of fund managers and the structure of the fund.

The Investment Quality component of MoodyÂ's Real Estate Fund ratings has a rating scale ranging from Aaa(IQ) to B(IQ). The rating assesses the quality of the properties, including such criteria as asset modernity and location, tenant characteristics, diversification or alternatively geographical or property type concentrations, holding horizons and how well the property mix meshes with return objectives.

MoodyÂ's Fund Performance Ratings - ranging from five stars (MoodyÂ's *****) to one star (MoodyÂ's *) - are a measure of a fundÂ's historical total return performance consistency relative to its classification or investment objective. The ratings, which are applicable to long-term mutual funds and other, similar investment vehicles, including fixed income, equity, as well as various hybrid funds, are assigned using quantitative criteria that incorporate a fundÂ's relative risk adjusted total return performance and style of management. The ratings are not intended to consider the prospective performance of a fund with respect to appreciation or yield.

Today, MoodyÂ's has assigned ratings to sixteen funds managed by ten managers. These ratings will be continuously monitored and adjusted when necessary.

The Management Quality ratings of the 10 real estate fund managers are as follows:

Commerz Grundbesitz-Investmentgesellschaft mbH Aaa
Immobilien Kapitalanlagegesellschaft mbH (downgrade of existing rating) Baa1
DB Real Estate Investmentgesellschaft mbH A1
Deka Immobilien Investment GmbH (affirmation of existing rating) Aaa
DEGI Deutsche Gesellschaft für Immobilienfonds mbH Baa1
DIFA Deutsche Immobilien Fonds AG Aa1
HANSAINVEST Hanseatische Investment-GmbH A2
iii Internationales Immobilien-Inst

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