Wealth through conventional investment principles

Phoenix Agreement & Rules

This summary of the agreement and rules of Phoenix club serves purely as information and demonstration to the readers of the thought and planning that has to go into the setting up of an investment club. You are after all dealing with the money of others. More detail and information on the setting up and managing of a club is provided elsewhere on the site for readers interested in setting up an investment club.


PHOENIX INVESTMENT CLUB

Partnership Agreement and Rules

Formation of Partnership

The undersigned hereby form a General Partnership in accordance with the laws of the Republic of South Africa (RSA)

Name of Partnership

The name of the partnership shall be the Phoenix Investment Club, hereafter referred to as the “Club”.

Purpose

The purpose of the partnership is to invest the funds of the partnership solely in shares listed on the Johannesburg Securities Exchange (JSE) for the education and benefit of the partners.

Mission Statement

Phoenix Investment Club is a private family investment Club. The club only invests in shares listed on the JSE and follows proven conventional investment strategies with the aim to build capital over the long term.

Phoenix Investment Club;

  • Encourages saving from an early age to leverage the benefit of time
  • Shares investment costs and acquires capital for the purchase of blue chip shares on the Johannesburg Securities Exchange (JSE)
  • Favours long term financial planning
  • Manages a balanced / diversified investment portfolios to reduce risk
  • Follows proven approaches and strategies to successfully build capital through investment in shares

Meetings

The Club shall meet at least twice a year. One meeting shall be an ordinary meeting and one will be the Annual General Meeting (AGM) at year end.

 Minutes

Minutes of Club meetings shall be kept and issued promptly to partners within two weeks of any meeting.

Election of Office Bearers

The Club shall appoint / elect the following office bearers;

  • Chairperson
  • Treasurer
  • Secretary
  • Internal Auditor

a) The Club Treasurer at the AGM shall produce a statement of accounts. A report detailing the income, expenditure, investment club assets, arrears, end of year valuation of portfolio, and each partner’s total contribution / drawings with current value of holding shall be presented to investment club partners at all meetings.

b) An auditor’s report shall be presented to Club partners at the AGM.

c) The Club brokerage account shall be used to prepare the required financial statements.

d) The goals and financial aim of the Club shall be stated including a comprehensive review of Asset Allocation.

Sharing of Profits and Losses

Net profits and losses of the partnership shall be allocated to the partners in proportion to the value of their respective capital accounts i.e. in proportion to the number of investment units held by the respective partners.

 Deposits / Investments by Partners

The Club shall operate without a bank account. Deposits / investment amounts by Partners shall be paid directly into the Club’s Trading Account.

Voluntary Termination

The Club may be dissolved by agreement and decision at a special meeting. Notice of said decision to dissolve the Club shall be given to all the partners. The Club shall thereupon be terminated by the payment of all the debts and liabilities of the Club and the distribution of the remaining assets to the partners in proportion to their capital valuation accounts.

 Withdrawal by a Partner

Any partner may withdraw a part or all of his / her capital at any point in time. He / she shall give notice in writing to this effect. When a partner resigns they will receive their share of the Club holdings (minus legal & brokerage fees) in full payment within 90-days of resignation. In making payment the valuation statement prepared the previous Friday will be used to determine the value of the partner’s account. The Club shall pay the withdrawing partner the value of his / her interest in the Club as shown by the valuation statement.

Option to purchase from a withdrawing Partner

In the event of full / partial withdrawal by a partner, the other partners will have the option to purchase the shares of the withdrawing partner in proportion to the value of their capital accounts, of the partners wishing to exercise their option to purchase.

Taxation

The tax affairs of the club shall be dealt with in accordance with the tax law of the Republic of South Africa.

The “specific identification” method as opposed to the “first in, first out” and “weighted average”, will apply when shares are disposed of.

Operating Procedures of the Club

  1. Calculating the value of an investment unit
  • The value of a unit (investment unit / share) will be calculated by simply dividing the “total value of the portfolio of shares and cash” by the total units.
  • The value of a unit shall be calculated weekly on Fridays and the closing value of the portfolio will be used for the calculation

2. Trading of units

  • Units will be bought and sold at the most recent price i.e. price of the preceding Friday
  • Investments / purchase of units will be deemed to have been made on the day on which the investment amount has been paid into the trading account of the Club.

Good Governance

  1. A screen print of the portfolio will be made every Friday after the JSE has closed and be saved for future reference and audit purpose.
  2. Share certificates shall be issued to partners every time an amount is invested / withdrawn and also at the end of each financial year.
  3. Books of accounts:

Books of account of the transactions of the Club shall be kept and at all times be available and open to inspection and examination by any partner.

4. Capital Accounts

A capital account shall be maintained in the name of each partner. Any increase or decrease in the value of the partnership on any valuation date shall be credited or debited, respectively, to each partner’s capital account on said date. Any method of valuating each partner’s capital account may be used, provided that said methods always results in exactly the same valuation. Each partner’s contribution to, or withdrawals from the Club shall be credited or debited, respectively, to that partner’s capital account.

 5. Valuation

The current value of the assets and property of the Club, less the current value of the debts and liabilities of the Club, (hereinafter referred to as the “value of the Club”) shall be determined quarterly on the following dates;

Quarter 1           31 May

Quarter 2           31 August

Quarter 3           30 November

Quarter 4           28 February

The afore-mentioned date of valuation shall hereinafter be referred to as “valuation date.”

6. Annual Accounting

A full and complete set of accounts of the business of the Club shall be made available to the partners within 30 days of the end of the financial year which ends on the last day of February of each year.

Risk management

The investment portfolio shall consist of a minimum of eight (8) and not more than fifteen (15) shares of companies listed on the JSE. A minimum of twelve of these companies shall be from the Top 40 companies in market value on the JSE and all the companies shall be from different sectors on the JSE.

No single invested company (share) shall exceed 12% of total portfolio value and any three invested companies (shares) taken together shall not exceed 35% of the portfolio value.

A maximum of 10% of the portfolio value will be invested in growth shares

Assets of the Club.

The assets of the Club shall consist of cash and shares of companies listed on the JSE.

Investment Strategy

The Club only invests in shares listed on the JSE and follows proven conventional investment strategies with the aim to build capital over the long term.