It is of paramount importance that when dealing with other peoples money, proper and accurate records are kept and individual members can easily relate to the accounting procedures adopted. Ajee Investment Club has decided that the highest possible standards are met towards acheiving this ideal and not take member's financial contributions for granted. In order to attain the above stated goals, the club decided to adopt the unit average formula method of accounting, otherwise known as unit valuation system, the recommended choice of our trade association, Proshare Investment Clubs Ltd.

UNIT VALUATION SYSTEM

The unit valuation system is based on the concept of the unit average formula. This calls for regular contributions to be made (i.e. in the club's case, every month) to buy units irrespective of the state of the club's assets at any particular time. The three main advantages of this formula are the ease of implementation and understanding by club members, its proven success, so long as disciplined and regular contributions are maintained, no matter the state of the stockmarket and a long-term investment committment which should be the strategy of choice. All this should ensure that contributions would average out the potential volatile nature of the stockmarket. This formula is manifested in the form of a unit value.

WHAT IS UNIT VALUATION ?

Unit Valuation is a process where all the the club assets at any particular time are made denominated as units. This allows for the ease of buying and too a lesser extend, selling of the club assets. To make this system work efficiently, a median value (i.e. the middle value) is calculated on the basis of the listed closing share prices of the last working day of each month in the Financial Times. The unit value would be the total assets of the club(i.e. current value of the share holding PLUS cash on deposit) DIVIDED BY total current units in existence (i.e. made up of existing member subscriptions).

Unit Value = Total Assets of the club / Total units in existence

It is at this unit value that subsequent units are bought and sold either via monthly subscriptions or lump sum payments. In fact this method mimics the way Unit Trust works. If share prices of the club holdings go up in the preceeding month(s), the unit value calculated would tend to reflect that trend and vice- versa. In fact members that follow the stockmarket in general and the share prices of club holdings would be able to anticipate the unit value in advance and probably decide to make more than their statutory monthly subscriptions. This is entirely up to members to decide.

COMPUTERISATION OF CLUB ACCOUNTS

In order to spare our members and especially the treasurer the tedious task of calculating all these figures manually every month, we purchased the Proshare Investment Clubs Ltd. recommended software to handle our accounts in the manner of unit valuation called Computer Office Workshop : Administration and accounting systems for Investment Clubs version IV. This software does all the calculations on the input of the most essential data and all the necessary statistics would be generated and printed on request. This software package goes further to do a lot of other things.

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