An Assignment About Principles Of Investment

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PRINCIPLES OF INVESTMENT

Level 5

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Coursework Assignment

2018/19

Due date: 29th April 2019

Principles of Investment Individual Assignment 2019

LACE AND HOSIERY WORKERS PROVIDENT CHARITY (LHWPC)

This charity was set up by a very wealthy Victorian industrialist in 1896 who made a fortune from lace-making and hosiery in the East Midlands area. It is dedicated to giving charitable financial support to widows and orphans living within a specific geographical area located around the City of Nottingham. It is run by a group of elected trustees and has investments and cash approaching £4.5million.

The Trustees donate the Charity’s income to deserving cases who are invited to apply following referral by social services and charitable organisations. These applications are then assessed by a panel, and in qualifying cases, financial assistance is offered to help with living costs, particularly in relation to education.

The Charity has approached you, as an independent financial advisor, to see if you can advise and assist them going forward.

Specifically and in confidence, the Trustees have asked for their investment portfolio to be reviewed and redesigned as they have concerns about its present structure. They feel that it should be more balanced; less exposed to investment risks and are seeking your advice in this respect.

In addition to the securities shown in the table, the Charity owned, until recently, a small portfolio of commercial retail units. These have now been sold and theproceeds (£960,000) are being held in a bank money market account, on one month’s notice of withdrawal. This cash balance is also available for new investment.

As there is an adequate cash balance in the Charity’s current account to cover everyday expenditure, you are reliably informed that there is no requirement for the Trustees to retain any further money in cash as an “emergency reserve”.

The chairman of the Trustees has also mentioned that, following the appointment of some new members, there has been some heated debate about the progress of the funds under their control. He says that the following views have been expressed at a recent meeting:

“The current investment prices and values are out of date by at least six months. Also they look very unbalanced. Look at all those damned bank shares. We’ve lost a fortune thanks to those bankers”.

“Financial advisors are just a bunch of rogues and charlatans and are only in it for the commission they make by churning investments around. The one thing that they cannot control is risk and, as a charity, security is clearly important to us.”

“The stock market is just a casino and is no place for a well respected charity such as ours. You might as well stick all the money on the National Lottery”.

“Our share investments seem to be concentrated in similar companies and not very well spread about. A friend of mine, who does a bit of investing in the stock market, tells me this can potentially be very dangerous, and quite risky, if anything goes wrong.”

Details of the Charity’s investments are shown in the following table. The Chairman of the Trustees apologises for the fact that the prices are a little out of date, they were last valued about six months ago. So the first request, from the Chairman is for you to calculate exactly what the total value of the investments is at the time of your review. The Trustee’s chairman has also expressed the following concerns to you:

– the possible exposure to risk that is inherent in such a relatively large portfolio of investments spread across various asset classes.

– the relatively high management fees which are payable for the Investment Trust shares. They are not happy about this. Some of the new trustees have even proposed that they should become more active in investment decisions themselves and not be reliant on professional advice with all the associated costs.

– a more transparent investment policy whereby it is clear exactly what shares are in the portfolio. The Investment Trusts appear to be very shadowy enterprises and the charity has over £1.2m invested in them.

– to ensure their investments can be justified from an ethical point of view. The chairman has indicated to you that this is a very important consideration from the perspective of the Charity.

– to address their fears about the level of inflation in the future and how they could mitigate any possible rises in the level of inflation. They have fears that both interest rates and inflation may rise during 2019.

The chairman and the treasurer of the Trustees have requested that you review the existing portfolio by updating the valuations and commenting on the range of investments held, initially, in terms of asset allocation and risk. And then to recommend, with reasons:

– how you would respond to the concerns of the Chairman, given above, and the views of the five new Trustee members.

– the changes you would make to their current portfolio in terms of asset allocation and diversification with your reasons in terms of investment theory and risk management.

– the construction of a new balanced investment portfolio for the Charity including your recommendations for the investment of the additional £960,000 currently held in cash.

ASSIGNMENT TASK:

Therefore; in summary, you are to write a 3,000 word report which:

1) Updates the investment totals and reviews the suitability of the present investment portfolio, with an analysis of the main risks.

2) Discuss briefly the theory behind portfolio planning and risk management.

You should also make reference to the relevance of the Trustee Act and the responsibilities of Trustees in this type of situation. *See note below.

3) Make recommendations for appropriate changes to create a new investment portfolio by applying relevant risk and return measures and showing how they have been used to evaluate the assets.

The new portfolio should meet the needs of the Charity and should include the investment of the additional cash holding. In creating the new portfolio you should address the concerns expressed by the Trustees.

Please refer to the attached marking grid for guidance as to the structure and mark weighting for the various learning outcomes.

* You should note that as a Charity, the LHWPC is governed by the Trustee Act 2000, and this should be taken into account in relation to any recommendations that you make to the Trustees.

CURRENT INVESTMENT PORTFOLIO

THE LACE AND HOSIERY WORKERS PROVIDENT CHARITY (LHWPC)

GILTS

Nominal Stock Description Price Value

£200,000 5.00% Treasury 2018 £117.61 £235,220

£150,000 1.50% Treasury 2021 £106.21 £159,315

£250,000 5.00% Treasury 2025 £121.00 £302,500

£175,000 3.50% Treasury 2068 £168.58 £295,015

Sub Total for Gilts £ 992,050

Investment Trusts

Shares Price (p) Value

50,000 Alliance Trust 454 £227,000

70,000 Monks Investment Trust 380 £266,000

120,000 Fidelity China Special Situations 98 £117,600

Sub Total for Investment Trusts £610,600

Ordinary Shares Price (p) Value

25,000 Tesco 302 £75,500

32,000 Sainsbury 346 £110,720

22,100 Morrisons 201 £44,421

18,500 RBS 345 £63,825

36,400 Barclays 248 £90,272

28,000 HSBC 630 £176,400

35,000 Lloyds Bank 78 £27,300

2,500 BAT 3325 £83,125

10,000 Imperial Tobacco 3616 £361,600

10,000 Diageo 1914 £191,400

10,000 BAE Systems 424 £42,400

19,800 Meggitt 486 £96,228

9,750 A.B.Foods 3028 £295,230

350,000 Premier Foods 60 £210,000

Sub Total for Ordinary Shares: £1,868,421

Total Investment assets held (excluding cash) : £3,471,071

PLUS £960,000 CASH HELD IN A LLOYDS MONEY MARKET ACCOUNT

Total Investment assets held (including cash) : £4,431,071

FURTHER IMPORTANT INFORMATION

Prices of the securities within the portfolio.

Choose a date on which you will do your research; use the date for updating asset prices in the portfolio and the same date for selling / buying new assets as a result of your recommended changes.

Derivatives:

The Fund is prohibited from entering into any derivative transactions.

Bibliography

You are reminded that you must include a full reference section at the end of the assignment and also include appropriate acknowledgements in the text of the assignment. You should follow normal academic conventions e.g. the APA system. Please obtain a leaflet on ‘Bibliography and Referencing’ from Adsetts to ensure you are familiar with the methods of referencing.

The WORD LIMIT for the assignment 3,000 words (+10% max). The word count (excluding bibliography and appendices) must be stated on the front sheet of the assignment. If the word count is exceeded the rules shown below will apply.

ASSIGNMENT WORD LIMIT PENALTY

If the word limit is exceeded. Your module learning scheme and assignment specifications set a word limit of 3,000 words, excluding appendices. Where the words exceed this by a 10% margin, work will be penalised for exceeding the word limit.

The penalty for exceeding the word limit is that 5 marks are deducted from the final tutor mark. So, if your word count exceeds 3,300, the penalty will be 5 marks deducted.

Note: it is anticipated that the Appendix will contain items such as tables / graphs / charts / articles etc. which support and help to evidence your work.

Note: Large sections of “free text” in the appendix will be treated as part of your main report and will be added to your word count.

The coursework deadline is 29th April 2019. Assignments should be submitted through the portal on the Module Blackboard site and via the turnitin link on the BB site.

Late submission of course work will be dealt with under standard University regulations which are available on the Registry part of the Student Intranet. Marks and feedback will be available via grade book.

TURNITIN

Overview of the system and rationale for using it.

Turnitin is a text-matching online service that can be used to teach about, detect, and deter plagiarism.  Students and staff can submit work to the service through Blackboard sites. 

Turnitin then generates an originality report based on how much text matches sources in Turnitin’s database.

The Turnitin database consists of the following sources:

· Many websites (several billion)

· Online journals

· All previously submitted papers in the UK

A report is generated which highlights all matches and strength of matches to other sources. Please note that Turnitin does not discriminate between properly referenced text and plagiarised text.  It just highlights text that staff (or students) should look at further and evaluate.

One main benefit of Turnitin is as a learning tool for students, because they can view the reports themselves.  Students can put their own work through the system and receive a report which can help point out to them areas where they may have referenced improperly.

It is strongly recommended that students submit a draft of their assignment to the system prior to the formal assignment hand-in deadline so they can see for themselves whether there is any evidence of plagiarism.

Students must submit their final version of the assignment into the Turnitin system by the published deadline date and time.

PRINCIPLES OF INVESTMENT – COURSEWORK ASSESSMENT CRITERIA 2018/19

STUDENT NAME / NUMBER……………………………………………………………………

Below 40% 40 – 49% 50 – 59% 60 – 69% 70% and above Max Mark Actual Mark
Outcome 1Evaluation of the suitability of the current portfolio with an analysis of the main risks Little attempt to analyse the suitability of the existing portfolio or to evaluate risks Some attempt at analysis of the suitability of the existing portfolio and risk evaluation. Reasonable attempt at analysis of the suitability of the existing portfolio and risk evaluation. Good attempt at analysis of the suitability of the existing portfolio and risk evaluation. An in depth analysis of the of the suitability of the existing portfolio and risk evaluation. 30
Outcome 2Analysis of the theoretical background to portfolio planning and risk management and appreciation of the Trustee Act 2000 on the investment strategy of the Trust Little or no attempt at this task A basic description of theory and the key points Reasonable description of theory, the key points and their implications Good description of theory, the key points and their implications A very clear understanding of theory and description of the key points and their implications 20
Outcome 3Draw up a new portfolio to meet the requirements of the charity giving suitable reasons for the recommendations and addressing the concerns of the trustees. Little or no attempt at a balanced portfolio. No reasons for choice of investments; trustees concerns not addressed. An attempt at a balanced portfolio. Reasons for choice of investments weak; some attempt to address trustees concerns. Reasonable attempt at a balanced portfolio. Incomplete reasons for choice of investments and some trustees concerns addressed. Good attempt at a balanced portfolio. Good reasons for choice of investments and trustees concerns substantially addressed. Work shows a very good attempt at a balanced portfolio. Reasons for choice of investments strongly argued and backed up; trustees concerns addressed. 35
Outcome 4Usage and critique of relevant literature, accuracy and quality of referencing in the text and bibliography.Written communication and cogency of arguments Little or no critical evaluation of the set literature. Referencing and bibliography very weak or non- existent.Poorly written, hard to follow, spelling and grammatical errors. Some usage of relevant literature, but weak on the critical evaluation. Referencing poor and inaccurate.Able to follow points made, some spelling and grammatical errors. Reasonable use of relevant literature, showing reading around the subject, but some weaknesses in evaluation. Referencing good.Reader friendly and few spelling and grammatical errors. Good review of available literature with good evidence of reading around the subject. Critical evaluation of literature good. Referencing and bibliography very good.Very reader friendly, few or no spelling and grammatical errors. Work shows strong evidence of depth of reading and in depth critical analysis. Referencing and bibliography excellent.Very reader friendly, few or no spelling and grammatical errors, imaginative / innovative approach to communication , 15

Cheating regulations

Introduction

Cheating happens when a student tries to obtain, or obtains, an unfair advantage. The University will not condone any act of cheating because the act undermines the mutual trust which is essential in an academic community. The procedures below define different forms of cheating and explain the processes that the University will follow if cheating is suspected. In addition to these procedures students on professional courses may also be subject to Professional Statutory Body regulations and procedures, these procedures will be specified in individual course documentation.

Principles Underpinning Actions Against Cheating

• The University wants everyone to value the quality and standards of its awards; this is undermined by cheating • Plagiarism and collusion are forms of cheating or ‘academic misconduct’ and all cases will be dealt with as such • Regulations and procedures for dealing with cheating should be as fair, transparent and consistent as possible • If plagiarism, collusion or other forms of cheating are alleged there must be sufficient evidence to substantiate the allegations on a balance of probability • Investigating and dealing with plagiarism and collusion mainly involves academic judgements • The University reserves the right to use any reasonable and fair means of identifying plagiarism and collusion • The investigation and consideration of all forms of cheating, and the consequences arising, should not be considered within the Assessment Board structure but by a separate panel • Decisions made under the University’s School Academic Conduct Panel procedure may not be changed by Assessment Boards • Information should be recorded to facilitate monitoring and review of the procedures • The length of time information is kept on individual student files should be determined by the severity of the cheating.

Different Forms of Cheating

1 The following gives examples of some forms of cheating: Plagiarism: this is where someone tries to pass off another’s work, thoughts or ideas as their own, whether deliberately or unintentionally, without appropriate acknowledgement. Plagiarism can take a number of forms, including:

complete plagiarism: the substantial and unauthorised use of the work or ideas of another person without acknowledgement of the source, including copying the work of another student, eg writing, computer programmes, designs, experiment results, music or copying of text directly from a website without acknowledgement.

partial plagiarism: the inclusion of several sentences or more from another person’s work which has not been referenced in accordance with SHU conventions on academic referencing and citation; the summarising of another person’s work by simply changing a few words or altering the order of presentation, without acknowledgement. This may be intentional with the aim being to deceive the marker, and unintentional as a result, for example, of poor study skills.

self plagiarism or duplication: copying work that was originally completed and submitted by the student and resubmitted for another purpose, without acknowledgement of this, unless resubmission is allowed.

collusion: this is where a student undertakes work with others, without acknowledgement, e.g. • submits as entirely his/her own work, work done in collaboration with another person, with the intention to gain an unfair advantage, or • colludes with another student to complete work which is intended to be submitted as that other student’s own unaided work or • knowingly permits another student to copy all or part of his/her own work and to submit it as that student’s own unaided work

If collusion is suspected and if after investigation it cannot be established which individual(s) is/are responsible, all students involved will be deemed responsible, provided there is sufficient evidence to substantiate the allegations on the balance of probability.

2 Falsifying data: this is where a student presents data in laboratory reports, projects, dissertations, etc based on experimental/ experiential work which the student claims to have carried out but which he/she has invented or obtained by unfair means.

3 Impersonation: this is the assumption by one person of the identity of another person with the intent to deceive or to gain unfair advantage.

4 Dishonest practice: this covers any form of dishonest practice not specifically identified by the above definitions, eg actual or attempted bribery, making false declarations to receive special consideration

 

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