Glossary of terms

Application
Investors who wish to buy a bond must complete an application form based on the terms of the offer document. The bond is officially purchased on the issue date, or if for any reason the bonds are not issued, the money is returned to investors. Applicants can change their mind at any point up to the issue date and receive their investment back in full.

Beneficiary
The charity or organisation that receives a grant as a result of money invested in a Bond.

bond
A contract that is bought by an investor from an organisation, in which the organisation promises to repay the value of the bond at a later date on certain terms and conditions.

Bond
The collective term used in this document to refer to a particular offer of bonds.

Bondholder
The investor, whether an individual or company, who buys a bond.

Capital
The money invested in a Bond.

Charitable Bond
A type of Bond offered uniquely by Citylife to support social causes.

Closing date
The end of the offer period during which investors may subscribe. The date is published in the offer document but may be extended at the discretion of Citylife’s trustees by notice in writing to each applicant.

Commercial rate
The agreed rate of interest that the housing provider will pay on the loan it borrows from the capital raised by the Bond. The rate is comparable to rates available to housing providers from other lenders, and is calculated by an agreed formula based on a standard measure which will vary according to market conditions. This means the actual interest rate, and therefore the percentage of the Bond fund given to the beneficiary, cannot be specified exactly in advance.

Compound interest
Interest that is calculated on both the original sum and the interest already accumulated. So if £100 is loaned at 5% annual interest, after one year the amount owed would be £105. After two years a further 5% on the £105 is owed, i.e. £110.25. Therefore if £100 is loaned for five years at an annual rate of 5%, the total amount owing after five years is £128, which is equivalent to 28% interest over five years.

Credit rating
The credit rating of a company is an evaluation from an independent ratings agency that states the risk of lending to that company. It measures the ability and willingness of the company to meet its financial obligations in full and on time.

Default
In financial terms this means a failure to satisfy the terms of a loan obligation or pay back a loan.

Financial Services Authority (FSA)
The FSA is an independent body that regulates the financial services industry in the UK. It is also the registering authority for societies which register under the Industrial and Provident Societies Act 1965.

Financial Services and Markets Act 2000
The Act that currently governs UK financial market regulation, under which Citylife is permitted to offer certain bonds to the public in the UK.

Fixed-term
Citylife’s bonds have a fixed term of five years, meaning that investments will be repaid five years after bonds are issued. This period is fixed, meaning that Citylife cannot retain the investment longer than five years, and investors cannot withdraw their money during the period except by negotiation with Citylife.

Guarantee
The proportion of the loan to Places for People Homes which backs the Series I bonds will be supported by a guarantee from either or both Barclays Bank PLC and The Co-operative Bank PLC. In the event that Places for People Homes does not pay some or all of the loan which backs the Series I bonds when it is due then the guarantors will be liable to pay Citylife. The funds received by Citylife from the guarantors will go to repay the Series I bonds (but not the Series II bonds).

Guarantor
The provider of a guarantee. The guarantor for the East London Bond will be either or both Barclays Bank PLC and The Co-operative Bank PLC

Industrial and Provident Society
An industrial and provident society (IPS) is an organisation conducting an industry, business or trade, either as a co-operative or for the benefit of the community, and is registered under the Industrial and Provident Societies Act 1965.

Issue
The issue of bonds is the point at which the bonds are officially purchased. The decision for Citylife to issue bonds must be approved by its trustees, and the offer of bonds does not guarantee that they will be issued.

Limited recourse
The East London Bond is limited recourse to the proceeds of the loan to Places for People Homes. This means that Citylife is only liable to repay the bonds to the extent that it has received repayments under the loan and, in the case of the Series I bonds only, the guarantee. The general assets of Citylife are not available to make payments to bondholders.

Maturity
Maturity is the end of the fixed-term of the bond when money is returned to investors.

Money laundering
Money laundering is the criminal practice of disguising illegally obtained funds so that they seem legal. Citylife has obligations under the Money Laundering regulations, the Proceeds of Crime Act, and The Terrorism Act to report any suspicious or unusual transactions to the authorities. Applicants for a bond on the basis of the offer document to be issued by Citylife may therefore be required to provide evidence of identity, address or both.

Offer document
A legally authorised document that sets out the information that potential investors need to know about a Bond before applying to invest. Applications for a Bond can only be made on the basis of an offer document.

Offer period
The period in which investors can apply to purchase a bond on the basis of the offer document. This period can be extended at the discretion of the trustees of Citylife. After the offer period closes, no further investments can be made in a Bond.

Redemption
The act of paying money back to investors.

Register
The bonds are in registered form. This means that ownership of the bonds will be recorded by the registrar in a register. The name of the bondholder, or in the case of joint bondholders the first named bondholder, as recorded in the register will be conclusive as to the owner of the bonds.

Registered provider
A registered provider of social housing, approved and regulated by the Government through the Tenant Services Authority (TSA). Registered providers typically support people in need through provision of low-cost rental accommodation and through financial schemes, such as shared ownership, to help those who cannot afford to buy their own homes outright. They may also offer other services such as sheltered housing or at home care.

Registrar
The registrar of a Bond holds all the records of investors and should be contacted in the event of any change of details. For the East London Bond the registrar will be Wrigleys Solicitors LLP, a Limited Liability Partnership registered in England under No. OC318186, regulated by the Solicitors Regulation Authority and authorised and regulated by the Financial Services Authority. The registered office of Wrigleys Solicitors LLP is 19 Cookridge Street, Leeds, LS2 3AG.

Roll over
At the end of the fixed term of a Bond, bondholders may be offered the opportunity to roll all or part of their investment over into a subsequent Bond.

Subscription list
A financial term to describe the list of investors applying to buy bonds. The start and end of the offer period may be referred to as the opening and closing of the subscription lists.

Tenant Services Authority (TSA)
The regulator for affordable housing, which was set up as a result of the 2008 Housing and Regeneration Act. Its purpose is to protect the interests and needs of tenants, and part of its role is to monitor the performance of registered providers and ensure that they remain financially viable.

Transfer
The East London Bond is transferable, meaning you could sell your bond to someone else and that person would be paid the value of the bond at maturity.

Trustee
The trustee for a Bond is an independent organisation offering trustee services, which holds rights to the loan, and any connected guarantee, made by Citylife to the housing provider under trust for the bondholders. This means that even if Citylife were to stop trading, the trustee is in place to receive repayment from the housing provider and then to pay monies it receives to bondholders. The trustee for the East London Bond is Royal Bank of Canada Trust Corporation Limited.

The trustee for a Bond should not be confused with Citylife’s trustees, a board of volunteers who are legally responsible for the overall management and decision-making of the charity.

Zero interest
The East London Bond is zero interest, meaning that investors get back after five years exactly what they put in.