WHAT IS PARTNERSHIP?

Investment partnerships are capital markets institutions established as joint investment and on registered capital basis to manage portfolio of gold and other valuable metals that are transacted in national and international stock exchange markets or organized markets other than stock exchange. Main function of investment partnerships is collecting owner’s small savings in a pool and investing to a portfolio composed of several securities and distributing profit earned to the partners in proportion to their shares. Difference of investment partnerships from other partnerships is that its field of operation is not limited to the management of a portfolio composed of just capital markets instruments together with gold and other valuable metals.

Investment partnership portfolio is managed by specialists, so that risk of saving owner is reduced, on the other hand effective use of resources is sustained by investing savings to securities. Because of that, establishing and developing investment partnerships are supported with incentives in our country like other countries.

WHAT ARE THE BASIC PRINCIPLES RULING INVESTMENT PARTNERSHIPS?

Basic principles ruling investment partnerships are as follows:

Distribution of Risk Principle

By this principle, distribution of risk beyond what individuals could do with their own resources is provided. Think about having 100 million TL. You can only invest on some stocks (because stocks in the exchange market cannot be transacted below certain amounts -lot-) and this increases your risk. For example, possibility of a negative change in the financial situation of two companies that you have stocks and a decrease in the price of stocks is much higher than the possibility of a decrease in the prices of 25 companies’ stocks. Investment partnerships can form portfolios worth trillions TL by collecting money from thousands of people; so that they can invest on more numbers of stocks and at the same time invest on other financial instruments such as stock share and bonds, as a result they have the least chance of being affected in case of a decrease.

Professional Management

Securities markets are technical markets requiring certain level of information because of their characteristics and developments in this market should be followed closely. Naturally, it is difficult for the individuals to follow up systematically and predict the effects of developments in the market on the prices of the securities and act accordingly on time. Investment partnerships collect money from several individuals in high amounts, so they may have necessary equipments and trained personnel on securities markets. In this way, they follow continuously the meanings of acts occurred in the markets and they realize necessary acts (like buy/sale).

Managing Securities Portfolio

Investment partnerships sometimes can invest on cash and valuable metals, however they are institutions mainly aiming purchase and sell securities and provide income from the positive difference between purchases and sales and from securities profit shares and their interests.

Rights Occurred in Partnerships

A savings owner investing on the stock of an investment partnership has some financial and non-financial rights. They are mainly profit share right, stock warrant and voting right in the general meetings. Savings owners give the right to execute operations related to investment partnership portfolio to the founder. This authority transfer is exercised by partnership main contract. Founding partnership should manage/ have someone manage its portfolio in the context of this contract and while protecting the rights of savings owners.

Protecting Owned Assets

Securities in the partnership portfolio should be kept in a place away from founding partners and portfolio managers. Securities mentioned are saved in ISE (Istanbul Stock Exchange) Settlement and Custody Bank, Inc. based on a contract signed between partnership and ISE Settlement and Custody Bank, Inc.

WHICH ADVANTAGES DO INVESTMENT PARTNERSHIPS PROVIDE?

• Capital brought out, meaning savings, is managed by professional and trustable managers.

• Risk could be reduced to minimum by diversification of securities to be taken to investment partnership portfolio with instruments such as fixed income, exchange-based and stock exchange.

• Valuation and control of securities together with coupon, interest and dividend collection is executed by partnership management, so that date follow could be protected from operations requiring use of time and resource, such as collection.

• It would provide opportunity to invest on securities with high profit potential that could not be get from small savings.

• Investors could cash totally or partially investment partnership stocks they bought by selling in the Stock Exchange.

• Time and money saving is sustained by huge amount of tradings to the portfolio.

WHAT ARE THE LEGAL REGULATIONS OF INVESTMENT PARTNERSHIPS?

It entered into our legal system with Capital Markets Law (CML) No.2499. Detailed regulations on Investment Partnerships are made in the Board Communiqués. Investment Partnerships are established as incorporated company, so that on the subjects not regulated in Capital Markets Law, they are object to the regulations related to incorporated company stocks in Turkish Trade Law (TTL).

WHAT ARE THE RULES OF ESTABLISHING INVESTMENT PARTNERSHIPS?

Investment partnerships should;

• be established based on registered capital basis and as incorporated company,

• have beginning capital less than amount determined by the Board,

• issue cash return of stocks,

• have “investment partnership” title in their trade name,

• have main contract in consent with regulations of Capital Markets Board,

• not have founders that are bankrupt and sentenced from a infamous crime.

WHO CAN ESTABLISH INVESTMENT PARTNERSHIP?

A special regulation is not made on who can establish investment partnership. So that, a real or legal person who can be founder in the incorporated company can establish and manage investment partnership. However, in the Regulation, some conditions are required for the founders. These are mainly conditions towards judicial record such as not having bankrupt founders, not being sentenced from infamous crimes such as bribe, forgery, smuggling and also not acting against capital markets regulation.

Real and legal person bearing above-mentioned qualifications could establish investment partnership by getting permission from Ministry of Industry and Trade and CML.

WHERE CAN INVESTMENT PARTNERSHIPS INVEST?

• foreign private and government bonds and stocks to be traded based on regulations (up to 25 % of sum of capital reserve funds),

• stocks, bonds and government bonds of partnerships established in Turkey,

• foreign futures and options,

• gold and other valuable metals.

Investment partnership portfolio could be formed by taking above-mentioned each type of asset as basis and also by a mixture of assets, being obeyed to the boundaries determined by Regulation and having an article in the main contract. In other words, investment partnership portfolio can be composed of only government bonds or stocks, composition of them in different proportions, too.

WHAT ARE THE OPERATIONS INVESTMENT PARTNERSHIPS CANNOT DO?

Operations given below are forbidden for investment partnerships to do. These are as follows;

• They do not deal with lending money, in other words, they cannot operate in giving credit or borrowing,

• Banks cannot collect deposit and do operations resulting deposit collecting,

• They cannot do industrial and agricultural activities,

• They cannot mediate trading of securities in the name of third persons.

WHAT ARE THE TYPES OF INVESTMENT PARTNERSHIPS?

Investment partnerships, like in investment funds, could be formed in two different types, Type A and B. Investment partnerships continuously invested 25% of portfolio value on partnership stocks established in Turkey including Public Economic Enterprises in the scope of privatization are called as Type A, other than this are called as Type B. According to the legislation on tax in effect, Type B partnerships are subject to 10% over profits earned from portfolio management tax liability, tax burden in Type A partnerships is 0%.

WHERE BASIC INFORMATION IS GET ABOUT INVESTMENT PARTNERSHIP?

During and after serving stocks of investment partnerships, investors can get information they need from the documents given below:

Main Contract:

It is document prepared on the establishment of investment partnership in the context of Turkish Trade Law and comprises subjects such as corporate name, aim and field of operation, duration, authorized bodies. Company acquires a legal personality by registration of the main contract.

Prospects:

It is a public informing instrument aiming to inform the investors who will be partners after purchase of investment partnership stocks in the public offering, and it informs investors about the aim of the company, duration, corporate name, registration date and number, sum and ratio of stocks to be offered to the public, operations and investments of the company, financial statements of the company, privileged shares etc.

Circular:

It is an announcement published to invite investors who will be partners after purchase of investment partnership stocks to the serving to the public. In this announcement, numbers and dates of the newspapers prospects declared should be written.

Monthly Portfolio Statements:

Investment partnerships should prepare monthly portfolio statements based on Board standards in monthly periods related to their assets in their portfolio and they should send to the Board and the Stock Exchange that partnership stocks traded within six days following the end of the month. Investors, with these statements, get information on the investment partnership’s portfolio structure and the value of the assets in the portfolio.

HOW FINANCIAL INFORMATION ABOUT INVESTMENT PARTNERSHIPS IS GET?

Partnerships that have stocks traded in the stock exchange, meaning investment partnerships, are obliged to prepare financial statements in three month periods and send detailed balance sheet they prepared in 10 weeks following the end of end of account period, and income statements together with independent auditing report to the Board and related stock exchange to be published in the stock exchange bulletin. In the accounting processes and the preparation of financial statements, regulations of Capital Markets Law on the standard financial statement and reports together with regulations of accounting standards are being followed.

Investment partnerships should publish their financial statements in the Turkey Trade Registry Gazette every year in 30 days following ordinary general meetings. In addition to this announcement requirement, in 30 days following the general meeting, financial statements, should be declared in a newspaper distributed in nationwide and in one of the two local newspapers with high circulation in where their head office is located.

ARE INVESTMENT PARTNERSHIPS SUBJECT TO INDEPENDENT AUDITING?

Investment partnership is subject to independent auditing by the period of account that it is offered to the public. As a result of that, financial statements of the company are audited by an independent auditing company taken into the list by the Board in the ends of the 6th and 12th months.

HOW IS INVESTED ON INVESTMENT PARTNERSHIPS?

It is obligatory to establish investment partnerships in incorporated company status, so that in the establishment of these partnerships, TTL’s regulations on the establishment of incorporated companies are applied. Investment partnerships, like all joint stocks partnerships, issues stocks to represent capital deposited by founders.

Stocks of new investment partnership could be sold to the public by the institutions in the primary market within selling time. Stocks of these partnerships are traded in the Stock Exchange within one or two weeks after selling time ends and liquidity opportunity occurs. In the primary market, in order to buy investment partnership stock, circular announcements in the newspapers should be followed and one should apply to the selling points.

In the first public offering following the establishment of the investment partnership nominal sum of stocks to be offered to the public should be at least 49% of the issued capital of the investment partnership.

Investment partnership stocks are purchased and sold in the stock exchanges. So that, saving owners want to invest on the stocks of this partnership give order to a dealer company authorized to transact in the Stock Exchange and can purchase stock exchange of a partnership in the secondary market or they can sell their stocks again in the Stock Exchange.


IN WHICH HOURS STOCKS ARE PURCHASED AND SOLD?

Your application to dealer company to buy or sell investment partnership stock is sent to the stock market of the stock exchange. Trading of the stock is done in the stock exchange between 10.00 a.m.-12.00 a.m. and 14.00 p.m.-16.00 p.m. Beyond these hours, your orders can be realized in the following day.

HOW IS INVESTED ON FOREIGN INVESTMENT PARTNERSHIPS?

In order to buy stocks of the investment partnerships established in abroad and transacted in the foreign stock exchanges, application to the Turkish representative of a dealer company operating in abroad should be made.

Sometimes, an investment partnership founded by a foreigner want to sell their stocks in Turkey. That time, it is possible to buy through dealer companies in Turkey.

WHAT SHOULD BE CONSIDERED WHILE INVESTING ON INVESTMENT PARTNERSHIP STOCKS?

Investor should watch information on the profitability, type, financing structure, operations and investment of the investment partnership to be invested on, also should follow company capital, management, portfolio structure and financial situation together with announcements made by the company to the stock exchange on the changes about its operations.

WHAT ARE THE RIGHTS OF INVESTMENT PARTNERSHIP SHAREHOLDERS?

Saving owner invested on the investment partnership stock acquires financial and non-financial rights given below. The source of these rights is TTL’s rules on stocks. Rights are as follows;

• Profit share right from the partnership profit of the period,

• Liquidation share right in case of the liquidation of partnership,

• Stock warrant to acquire new shares in case of an increase in partnership capital,

• Right to buy stocks issued because of capital increase from internal resources, for free,

• Right to vote in the general meetings,

• Right to get information on the operations and financial statements of the partnership and evaluate them.


HOW ARE STOCK PRICES DETERMINED?

Investment partnership stocks are transacted in the stock exchange, so that price of these stocks is determined by supply and demand in the stock exchange.

In addition to portfolio value, the price of the stocks changes based on the partnership management, future expectations. So that, while investing on investment partnership stock, investors should follow partnership portfolio together with price movements occurred in the stock exchange and other economic and political developments that may affect the prices of the stocks.

HOW TAX IS LEVIED ON THE INVESTMENT PARTNERSHIPS?

Current tax legislation supports stock investment of a company offered to the public from the tax point of view and wants to have small investors benefit from the portfolio profits of stocks as dividend, so that it supports Type A investment partnerships composed of at least 25% of portfolio stocks with tax incentives.

Taxation from the Investment Partnership Point of View

• Portfolio management incomes of Type A and B investment partnerships are exempt from corporate taxes.

• Stoppage ratio of portfolio management incomes of Type A is 0%, 10% for Type B.

From the View Point of Real Persons Acquiring Investment Partnership Profit Share

Real persons acquiring investment partnership profit share will calculate tax receivable in 1/5 proportion over this income and also apply discount rate determined by Ministry of Finance on profit shares in order to clean their income from inflation. Then, tax will be implied on the calculated profit shares in tax rates determined in the context of Income Tax Law. So that, after the tax receivable and discount rate implied on profit shares, statement will be given if the rest is over 4 billion 900 million TL for year 2001. Also, tax receivable of real persons will be deducted to the income tax calculated over statement.

From the View Point of Institutions Acquiring Investment Partnership Profit Share

Tax will be levied on the profit shares for full and narrow taxpayer institutions by declaring as commercial profit.

WHAT ARE THE DIFFERENCES BETWEEN INVESTMENT PARTNERSHIPS AND INVESTMENT FUND?

• While the legal structure of investment partnership is established as separate and independent legal personality as incorporated company, investment fund does not have a separate legal personality. Investment fund is an asset founded by a legal personality in the context of a contract.

• Only banks, dealer companies, insurance companies or retirement funds found investment fund, there is no certain limitation for the founders of investment partnerships.

• Investment fund participation documents are get from ATM machines, investment partnership stocks is only purchased with orders given to the authorized dealer companies.

• Investment funds do not distribute profit, while investment partnerships distribute profit like other companies;

• Investment fund partnership document can be turned into cash by selling back to the fund, investment partnership stocks could not sold to the investment partnership but could be sold in the stock exchange.

• Portfolio limitations differ on certain subjects.

• While figure get by dividing net active value of fund to the number of shares gives the unit price of participation document; in the investment partnerships, contrary to the funds, portfolio value is not single criteria determining stock price.