This is a small scale example of how cash and investment units will flow and be handled in the pooled fund. The example is not indicative of the performance of the pooled fund.
January 1, 20X1 – investment by investors A and B
On January 1, 20X1, investors A and B each invest $300,000 in the pooled fund. They are issued 300,000 participation units of PARTEQ Angel Network Fund Inc. to represent the cash invested in an escrow account.
March 1, 20X1 – investment made by pooled fund into company LMN
On March 1, 20X1, the Investment Committee approves investing $100,000 into company LMN. There is $2,000 of legal fees not covered by the investee. The manager proceeds with forming PARTEQ Angel Network SPLP #1, Limited Partnership to make the investment in LMN. $102,000 of cash is transferred from the escrow account to SPLP #1. Each investor redeems 51,000 participation units in exchange for receiving 51,000 Class B units of SPLP #1. SPLP#1 then proceeds to pay legal fees of $2,000 and makes an investment in LMN of $100,000.
At this time, investors A and B each have: $249,000 held in the escrow account, and are limited partners of SPLP #1, holding 51,000 Class B units of SPLP #1.
April 1, 20X1 – investment by investor C
On April 1, 20X1, investor C invests $500,000 in the pooled fund. Investor C is issued 500,000 participation units. The balance of the escrow account is:
|
Investor |
Dollars / Units |
Pro-rata share |
|
A |
249,000 |
24.9% |
|
B |
249,000 |
24.9% |
|
C |
500,000 |
50.2% |
|
Total |
998,000 |
100.0% |
Note that investor C does not have any claim or ownership on the investment in SPLP #1 (LMN) as investor C made the investment in the pooled fund after the investment in SPLP #1 was made. This is due to the limited ability to reliably value the portfolio every time a participant enters or exits the fund.
May 1, 20X1 – investment made by pooled fund into company JKL
On May 1, 20X1, the investment Committee approves investing $150,000 into company JKL. The investee covers all legal fees associated with this investment. The manager proceeds with forming PARTEQ Angel Network SPLP #2, Limited Partnership to make the investment in JKL. $150,000 of cash is transferred from the escrow account to SPLP #2. Based on the pro-rata use of escrow cash, investors A and B each receive 37,425 Class B units of SPLP #2, while investor C receives 75,150 units.
Ownership at May 1, 20X1 is as follows:
|
Investor |
Participation Dollars / Units |
Participation pro-rata share |
Ownership of SPLP #1 (LMN) Class B units |
Ownership of SPLP #2 (JKL) Class B units |
|
A |
211,575 |
24.9% |
50.0% |
24.9% |
|
B |
211,575 |
24.9% |
50.0% |
24.9% |
|
C |
424,850 |
50.2% |
0.0% |
50.2% |
|
Total |
848,000 |
100.0% |
100.0% |
100.0% |
Note that investor C does not have any claim or ownership on the investment in SPLP #1 (LMN) as investor C made the investment in the pooled fund after the investment in SPLP #1 was made.
June 1, 20X3 – Investee LMN is acquired for cash
On June 1, 20X3, LMN is acquired for cash consideration. SPLP #1 receives $1,000,000 as proceeds on the investment in LMN.
On the first $102,000 proceeds, the proceeds are shared pro-rata by investors A and B (note that investor C does not participate). This represents the recovery of the investors’ cost base.
Of the remaining balance of $898,000, PARTEQ is entitled to receive 20% of the gain, or $179,600. The balance of $718,400 is split by investors A and B.
Of the $1,000,000 proceeds received, investors A and B each receive $410,200 (on $51,000 of the investors cash used to invest in LMN). The proceeds are distributed to the investors, and are not held in the pooled fund for reinvesting, unless directed otherwise by each individual investor. Investors A and B interest in SPLP #2 and the cash escrow account remains unchanged.