Additional instructions:
TMA01 tests your ability to:
– Discuss the fundamental concepts of an investment product covering risk and returns,
liquidity and basic analysis
– Describe the different life cycle stages of an investor and his or her investor profiling
analysis, with reference to the investment product suitability
– Compare and differentiate the various investment products with the ability to analyse
their relative merits and demerits
– Explain the investment environment issues in the context of ethics and the legal
– Illustrate the investment making decision process with regard to the asset allocation
and diversification, risks and returns, time horizon, liquidity needs and investment
objectives of the investor amongst the many considerations
– Appraise the assumptions and data presented in an investment product or offering
– Discuss the information from various sources the suitability of investment products
and proposals based on the learning concepts and applying the investment tools
– Identify the personal circumstances of an investor and the impact of external
considerations in the investment decision making process

GSP177e Tutor-Marked Assignment
Background information
Mr. Q, who in his mid-30s, is a very senior executive working for a multi-national corporation
with USD 15 billion in global sales. He has a son aged 6 and a daughter aged 4, both of whom
are being looked after by his parents-in-law as his wife is also working full time as an IT
professional. Mr. Q is aware that he will be promoted in the next 6 months. He believes that
both his and his wife’s jobs are relatively stable at least for the next 3-5 years.
Current situation
Mr. Q has recently received a lump sum distribution of SGD 1.2 million from the estate of his
deceased father. Together with his available family savings of SGD 300,000, Mr. Q reckons
that he now has cash funds totalling
SGD 1.5 million available to invest prudently to meet his
various needs.
Investment proposals
Mr. Q has over the past couple of weeks been busy meeting with executives from various
financial and investment firms with a view to deploying and investing the available funds rather
than just placing them with banks as time deposits given the current low interest rate
environment. Specifically, he has narrowed down his choice to the following 2 proposals:
r. Hanson, who is the Executive Director of State Prosper Development Pte. Ltd.
(‘SPD’), a privately held firm specialising in developing and refurbishing pre-war and
heritage buildings to turn them into residential housing in the major cities of Germany such
as Cologne, Hamburg and Leipzig. SPD, working with its parent company in Germany,
will identify suitable projects in these various cities for re-development. After winning the
bids and getting approvals from the relevant state and city authorities, the parent firm will
re-develop and/or re-furbish these older buildings and sell them to residents there for
considerable profits as there is a captive demand for good quality apartments especially in
well located urban centres across Germany. From past experience, the timeline from the
start of identification of suitable projects to the completion of the sales to end buyers
usually takes about 3 years. SPD’s role is to get well-heeled investors from Singapore to
provide capital funding and participate by investing their surplus funds for at least 1 year
or more and become “co-developers” in the building regeneration process across Germany.
According to Mr. Hanson, SPD will pay to investors returns amounting to 2.5 % every 3
months on the total funds invested under the scheme. At the end of the 12-month period,
besides the 10 % returns, there is an “incentive” payment of 2% to reward investors for
their patience and confidence so that investors actually obtain a total of 12% for the entire
one-year investment period. At the end of each 12-month period, all investors have the
option of exiting the investment or continuing to roll over with the investment until the
second and third year so that they are entitled to a final end-of-programme “bonus” of an
extra 3%. In other words, besides getting the 10 % plus 2 % bonus at the end of each of
the 3-year investment period, there is also a final bonus of 3% additional payment for
investors who stayed invested continuously throughout the entire 3 years. All investors
will also get a guarantee from the parent firm in Germany with regard to the invested
capital and the stipulated returns.

GSP177e Tutor-Marked Assignment
As an illustration, clients who invest SGD 100,000 at the beginning will receive SGD
2,500 every quarter or SGD 10,000 every year plus another SGD 2,000 as “incentive” to
make up a total of SGD 12,000 each year for 3 years. At the end of each year, investors
can choose to exit the investment or to continue and stay invested with the programme.
Finally, at the end of the third year, if they had stayed invested continuously for the past 3
years, they can expect to get returns totalling SGD 39,000 including the “bonus” at the end
of the investment period.
Mr. Hanson pointed out that such investments are relatively safe for investors as these are
backed and protected by strict housing development, mortgage protection and property
investment rights under German laws. In terms of documentation, all investors will receive
legal testimonials verifying the authenticity of the investments from established legal
representatives who are based in the cities that they are investing in. In addition, the parent
firm has also purchased international insurance coverage so that investors are protected
from losses with rights to claim if the expectations are not met in any way. Mr. Hanson
further gave the assurance that the original documents covering the above facts were all
available for inspection at their Singapore office.
The parent firm itself has been established for some 9 years. Most of Mr. Hanson’s clients
have invested at least SGD 500,000 on average with him over the past 5 years when it was
first established in Singapore. According to Mr. Hanson, if Mr. Q chooses to invest with
his firm an amount of at least SGD 600,000 for a period of 3 years, the burden of funding
his children’s future education can at least be taken care of. He further emphasized that the
investment duration with his firm is relatively short-term in nature, on a year-to-year basis,
and hence more liquid and better secured than other forms of investments such as land,
property or stocks.
Just a week ago, Mr. Q attended a private presentation held by SPD at the invitation of Mr.
Hanson and his top management team where he further learned of the following:
a. The minimum amount to invest is an affordable SGD 50,000. Most of Mr. Hanson’s
clients have invested amounts ranging from at least SGD 250,000 to SGD 1.5 million
each over the past 5 years. These clients preferred such investments due to the
relatively short duration and flexibility, considering that each investment period is only
12 months, unlike other investment products which may require longer periods of
commitment and digestion with much less certainty of returns. Most investors present
liked the special feature of a clear ‘exit’ strategy afforded to all investors be it 1, 2 or
3 years.
b. As an added assurance, the Managing Director of SPD explained to those present that
there were no currency risks at all for investors. This was because the returns and the
funds being invested would be denominated and paid back in SGD. The parent
company has been able to hedge and minimize all foreign exposure risks especially
with the stability and robustness of the German economy and housing market over the
past few years. These were some of the factors that have enabled them to have strong
projected cash flows following the timely completion of their past projects.

GSP177e Tutor-Marked Assignment
c. Some investors with prior experience of investing with SPD gave first-hand
testimonials and shared their investment experiences. Through the arrangements made
by SPD, some had gone on fact-finding field trips to the actual project sites in Germany
to witness for themselves the development of the projects they had previously invested
in. All these investors had successfully obtained the returns as promised and received
their invested principal amounts over the several years that they had invested with the
firm. These satisfied investors indicated to those present their intentions to either
continue or even make larger quantum of investments with the firm.
d. Most investors like the quarterly payment feature of the investment product as this
helps with their obtaining regular income and managing their cash flow without the
usual uncertainties and worries often associated with other forms of investment
As Mr. Hanson is aware of Mr. Q’s financial situation, he told him that if he were to invest
diligently and sufficiently through his recommendation, his children’s education needs and his
own financial requirements can be more than adequately taken care of. In view of the above
and considering that both Mr. Q and his late father have known and trusted Mr. Hanson for
more than 20 years (when Hanson was their immediate neighbour and Mr. Q’s late father had
bought insurance policies through him (Hanson) before he moved out of Mr. Q’s
neighbourhood), he is keen to take up this proposal to meet his investment and financial goals.
Ms. Hillary
, Executive Director in the Private Wealth Department of Provincial Wealth Bank
(its listed symbol on an overseas stock exchange is ‘PWB’), proposes that Mr. Q places
his available funds with PWB in a discretionary investment management account that can grow
steadily at an average of 6 – 18 % p.a. (the figures provided are based on the audited track
records of PWB for such similarly managed discretionary accounts over the past 40 years since
At a previous meeting with Mr. Q, Ms. Hillary had explained the workings of a discretionary
investment management account as one in which the investments for clients are specifically
tailored and managed by PWB for each investor who opens such accounts and are individually
segregated or separated. Its team of economic, stock and investment experts at PWB is given
full discretion or authority with regard to making all the necessary investment management
decisions such as allocation of assets, choice of stocks or bonds or currencies to invest in,
timing of buying and selling, etc. PWB will provide detailed records of all transactions and
send statements with regular reviews to all its clients.
All clients including Mr. Q can, if they wish, give specific instructions to override the
investment decisions, liquidate the securities, make partial withdrawals or even terminate the
account depending on the wishes of the clients themselves by giving due notice. In other words,
a discretionary investment management account is one in which the Bank is given a mandate
by the client to make investment decisions on his or her behalf and over which the client himself
or herself can still have full control over the funds at the same time.

GSP177e Tutor-Marked Assignment
As initially proposed by Ms. Hillary, the funds to be managed by PWB for Mr. Q will be
invested in a diversified portfolio that comprises traditional asset classes. After further
meetings with Mr. Q, Ms. Hillary highly recommended that the allocations of the portfolio for
him be proportionately weighted and diversified to comprise cash deposits and foreign
currencies (25%), local stocks (5%), bonds (65%) and foreign stocks including the US, EU and
Greater China (5%) given the forecasts and outlook by the expert panel of the Bank. While
PWB will have full discretionary power to manage the investments on his behalf as it sees fit,
Ms. Hillary reminded Mr. Q that the individual asset weightings can be adjusted to fit his
requirements. This is an ideal situation for him as he is freed from the hassles of the investment
decision making process and administrative chores, yet at the same time any of his specific
requests such as his wish not to invest in say, casino, gaming, tobacco or liquor stocks can be
accommodated if these and any other requests are made known either in advance or at any time
to PWB.
The minimum amount accepted by PWB for such a discretionary investment management
account or service is SGD 1 million and above with no minimum investment period or duration
except that to close the discretionary account a minimum notice period of 1 month is needed.
The corner terrace house in the west coast area off West Coast Highway that Mr. Q and his
family currently live in is fully paid for. He has more than adequate insurance policies to cover
his entire family for medical expenses, long term disability and premature death benefits as
various policies were purchased some years ago when he and his wife first started working.
Therefore, it can be assumed that insurance coverage will not be considered by Mr. Q in his
current investment decision deliberations. Also, it is highly likely that given his wife’s current
pay of about SGD12,000 per month, Mrs. Q will also likely continue in her present job for at
least the next three years barring any unforeseen circumstances such as her redundancy or her
need to look after the children.
For the purpose of this case study, please bear in mind the following:
1. Other than the two investment proposals above,
Mr. Q does NOT wish to consider
evaluating or investing directly by himself
(with all its hassles and administrative
requirements) in properties, annuities, listed equities, bonds, REITs and mutual funds
(unit trusts) with other insurance companies, banks, brokers, investment houses,
independent financial advisers or through online internet accounts.
2. For the sake of simplicity,
do not consider bank fees or charges, discretionary
investment management account fees, brokerages, stamp duties, commissions and
charges, capital gains taxes and income taxes etc. in Mr. Q’s investment decisionmaking process.
3. As for the economic environment in Singapore, you can assume that the interest rate
for short- to medium-term bank deposits is 1% p.a. while the annual inflation rate in
Singapore is in the region of 3% p.a.
Do not take into account the CPF balances and their effects on Mr. and Mrs. Q.
GSP177e Tutor-Marked Assignment
Based on your understanding of the investment tools and concepts that you have learned thus
far, examine and illustrate how you can use the same tools and concepts to advise Mr. Q on
allocating and utilising his investible funds of
SGD 1.5 million.
Describe and discuss your recommendation(s) (in
800 – 1,000 words) by analysing with whom
and how Mr. Q should or should not invest the cash he has on hand given his situation. Compare
the relative merits, demerits and risks involved and appraise the potential outcomes if Mr. Q
were to take up all your recommendations. You can also synthesise and give additional
suggestion(s) and/or alternative(s) where appropriate (after giving due consideration to the
various assumptions outlined above) all of which must be duly supported by sound and detailed
Additional Guidance Notes For Students
1. In presenting your recommendation(s) to Mr. Q, state the relevant steps involved in arriving
at such a conclusion(s). This should include providing details of your analysis in
determining Mr. Q’s various needs, requirements and objectives and how your
recommendation(s) meet these criteria.
2. Demonstrate your understanding of the investment concepts and tools that you have learned
about (refer to your course Study Guide) in preparing your recommendation(s) with sound
reasons and explanations. Consider the following in your write-up:
a. Have you conducted a thorough evaluation of Mr. Q’s investment circumstances
and requirements regarding his investment profile, stage of life cycle investing,
liquidity needs, risk tolerance, etc. before deciding what his investment objectives
should be?
Please note that mere listing or repeating of Mr. Q’s circumstances as provided in
the case is
NOT the same as profiling. Profiling requires you to analyse and come
to conclusions that fit his requirements regarding products, risk tolerance, time
horizon for investing, investment objectives, liquidity needs, etc.
b. Have you carried out a proper analysis of the proposals and considered the various
risk factors or possible alterations in terms of asset allocation and diversification to
meet Mr. Q’s needs as previously analysed by you under 2.a. above? Have you
considered the business environment, legal and regulatory framework in your
investment decision making process?
c. Have you prepared your recommendations based on your understanding and
analysis and showed Mr. Q the potential results or consequences of your
d. What potential issues or problems would Mr. Q face if he were to accept your
recommendations? Are there any other mitigating factors or actions that Mr. Q can
consider or take to reduce the uncertainties or risks if he were to fully accept your

GSP177e Tutor-Marked Assignment
3. Include additional assumptions which are reasonable and appropriate if these help you to
further enhance and make sense of your advice to Mr. Q.
Any assumptions made which are not directly given in the case study itself should be
relevant, reasonable and properly explained.
4. Use graphs, charts and tables, etc. where appropriate to clearly illustrate the various points
in your presentation. Bear in mind that such graphical representations not only save on the
words you use but also could be an efficient and effective means of communicating your
ideas to Mr. Q provided that they are relevant, up to date, and have clear explanations.
5. Use proper referencing and citation formats where applicable

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