Republic of the Philippines

City of Olongapo

GORDON COLLEGE
College of Business and Accountancy
Tapinac Oval Sports Complex, East Tapinac, Olongapo City

INVESTMENT AND PORTFOLIO

MANAGEMENT
FRIDAY 6:00-9:00PM
FINAL EXAMINATION

Submitted By:
Joem S. Samson

December 12, 2019

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Requirement 1
After finishing college, you were able to get a job as Assistant Financial Manager of a
newly organized and registered locator in Subic Bay Freeport Zone. The company is engaged in
Hotel and Restaurant business and is owned by a Filipino millionaire. After a year of working,
your immediate supervisor was promoted as the Director for Finance and his position was
vacated. The owner together with the new Director for Finance will be conducting a test among
the candidates to see who will be appointed as the new Financial Manager. As the Assistant
Financial Manager, you are one of the candidates. This is the case given as part of the test:

Case: The owner of the company was able to secure a business loan of P50, 000,000. Having the
said additional capital, he is thinking of ways on how and where to use the fund. He has
primarily two thoughts: one is to allot all of his funds in expanding his current hotel and
restaurant business and the other is to invest into another business. If he will invest into another
business, he wants it to be in SBFZ also so he can manage the hotel and the new business easily.
He also asked you to recommend what business he should invest on. In addition, he is also open
to divide the fund between these alternatives provided
Pros and cons if the owner of the company will allot all of his funds in expanding his hotel
and restaurant business:
https://www.berley.co.uk/business-growth-specialists/pros-cons-growing-business/
For the most part, business growth is a natural process and is a positive thing if you manage it
right. When making a decision on business growth, the key is to review the pros and cons, use
the time to examine your vision and goals and identify any potential issues. A general view of
the pros and cons of business growth is as follows:
PROS
 More diverse audience
 Increased income
 More opportunities for your business and partnerships
 Increase in brand awareness
 More money to improve quality of products

CONS

 Moving too fast can be detrimental to your business

 Your business’s finances could suffer
 You may not be in full control anymore
 More complex logistics
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Pros and cons if the owner of the company wants to invest into another business within
SBFZ so he can manage the hotel and restaurant business easily:

https://www.practicalecommerce.com/pros-and-cons-of-running-2-businesses

PROS

 Tap different markets

 Cross sell
 Reach multiple geographical areas
 Tap different peak seasons
 Maximize inventory
 More revenue

CONS

 Higher expenses
 More product sourcing
 Inventory management challenges
 Time constraints
 Delivery challenges

Requirement 2

As the Head of the Investment Department of a car distribution company, one of your
tasks is to deeply and carefully analyze the current condition of the economy and the industry to
drive the Board of Directors into investment opportunities that will benefit the company. Your
company’s annual planning for the year 2020 is set to happen one month from now. The VP for
3 Finance tasked you to make an analysis of Philippine economy as a whole in 2019 based on
your own observations. In addition, he asked you to list down your expectations for 2020 based
on your analysis and how will it affect your company.

https://www.worldbank.org/en/country/philippines/publication/philippines-economic-update-
october-2019-edition

Macroeconomic Analysis 2019

 Economic growth slowed in the first half of 2019, driven by a rapid deceleration in
investment growth due to contraction in public spending and weaker global economy.
Nevertheless, the Philippines expects to sustain progress in poverty reduction.

 Amidst rising global uncertainties, the Philippine economy remains strong and is projected to
grow 5.8% in 2019, before recovering to 6.1% and 6.2% in 2020 and 2021, respectively.
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 In the short term, fast tracking the implementation of recently approved game-changing
reforms would help to achieve inclusive growth. In the long-term, promoting competition to
generate quality jobs will enhance the impact of growth on poverty reduction in the
Philippines.

Recent Economic Developments

 In the first half of 2019, economic growth slowed to its lowest level in eight years amid
challenging external environment and a significant slowdown in investment growth.

 Private consumption was the main growth driver, as growth recovered to 5.8% year-on-year
in the first half of 2019 from 5.3% during the same period last year, driven by moderating
inflation, steady remittance inflows, an improving job market, and an increase in economic
activity from election-related spending.

 Declining inflation driven by stabilizing prices of food and energy prompted the Bangko
Sentral ng Pilipinas (Central Bank of the Philippines) to adopt a more accommodative policy
stance in 2019. Inflation fell to 1.7% in August 2019, the lowest in almost 3 years.

 The Philippine government’s expansionary fiscal policies for 2019 was put on hold as the
delayed passage of the 2019 public budget impacted the pace of public spending significantly
in the first half of the year, resulting in substantial underspending. Nevertheless, the
implementation of previous tax-policy reforms led to robust revenue, resulting in a lower than
programmed fiscal deficit for the first half of 2019.

 Improving labor market conditions, and sustained growth in real household incomes, led to
progress in poverty reduction.

Outlook and Risks

 The Philippines’ growth outlook is weakened by a difficult external environment and

domestic challenges, as growth is expected to slow from 6.2% in 2018 to 5.8% in 2019,
before recovering to 6.1% in 2020 and 6.2% in 2021. Both fiscal and monetary policy remain
supportive of growth, while a weak global economic environment and a slow recovery in
public investments, constitute the main downside risks.

 Poverty reduction is expected to continue based on the current economic outlook. The
country’s poverty rate measured by the World Bank middle-income poverty line of
US$3.20/day is estimated to have declined from 26% in 2015 to 20.8% in 2019, and further
declining to 19.7% in 2020, and 18.7% in 2021.

 In the short-term, resuming public investment and fast tracking the effective implementation
of game-changing reforms such as the Ease of Doing Business Law, the Rice Tariffication
Law, the creation of a foundational ID system, and other such transformational policy
changes would be critical to set the country to a higher path toward accelerating inclusive
growth. While in the long-term, promoting competition to foster quality job creation will
enhance the impact of economic growth on poverty reduction and shared prosperity.
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Fostering Competition and the Challenge of Restrictive Regulations

 Philippine markets are highly concentrated limiting market competition.

 The lack of competition in key sectors has negatively impacted Philippine firms and
consumers, resulting in sub-optimal outcomes in key sectors such as electricity,
telecommunications, transport and logistics.

 Reducing restrictions to market competition would yield significant payoffs for households
and firms in the country to boost the economy’s overall competitiveness.

 Implementing these reforms will be critical:

 Address unclear or restrictive regulations in infrastructure sectors and professional services

to create more competitive conditions;

 Eliminate restrictions on foreign and domestic investors to help level the playing field;

 Minimize the scope of controlled prices to incentivize firms to compete;

 Lessen the involvement of state-owned enterprises and other operations in typically

competitive markets to promote a more effective use of public funds; and

 Streamline burdensome administrative procedures for businesses to make it easy to enter

the market.

Expectation for 2020

My expectation based on the macroeconomic analysis of 2019. 2020 will be more

enhanced in technology that will help the company grow even more. The country’s budget will
go higher. Then it can be also possible that the poverty will be reduced through the enhancement
of the employment. And there is also a possibility that the investments will be more productive
because the more the investment is, the higher the potential that the economy will grow higher.

Requirement 3

You were employed by Gordon College as a lecturer for Investment and Portfolio
Management. The first thing Professor Merlin De Gracia, your program head, asked you to do is
to make a material to be used in GC’s campaign against investment scams:

As a lecturer of Gordon College this would be the material I would make to help educate
the students of Gordon College and staff on how to fight investment scams.

https://www.investor.gov/protect-your-investments/fraud/how-avoid-fraud/what-you-can-do-
avoid-investment-fraud
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WHAT YOU CAN DO TO AVOID INVESTMENT FRAUD

 Ask questions - Fraudsters are counting on you not to investigate before you invest. Fend
them off by doing your own digging. It’s not enough to ask for more information or for
references – fraudsters have no incentive to set you straight. Take the time to do your
own independent research.

 Research before you invest - Unsolicited emails, message board postings, and company
news releases should never be used as the sole basis for your investment decisions.
Understand a company’s business and its products or services before investing. Look for
the company’s financial statements on the SEC’s EDGAR filing system.

 Know the salesperson - Spend some time checking out the person touting the investment
before you invest – even if you already know the person socially. Always find out
whether the securities salespeople who contact you are licensed to sell securities in your
state and whether they or their firms have had run-ins with regulators or other investors.
You can check out the disciplinary history of brokers and advisers for free using the
SEC’s and FINRA’s online databases.

 Be wary of unsolicited offers - Be especially careful if you receive an unsolicited pitch to

invest in a company, or see it praised online, but can’t find current financial information
about it from independent sources. It could be a “pump and dump” scheme. Be wary if
someone recommends foreign or “off-shore” investments. If something goes wrong, it’s
harder to find out what happened and to locate money sent abroad.

 Protect yourself online - Online and social marketing sites offer a wealth of opportunity
for fraudsters.

 Know what to look for - Make yourself knowledgeable about different types of fraud and
red flags that may signal investment fraud.
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RED FLAGS FOR FRAUD AND COMMON PERSUASION TACTICS

How do successful, financially intelligent people fall prey to investment fraud? Researchers have
found that investment fraudsters hit their targets with an array of persuasion techniques that are
tailored to the victim’s psychological profile. Here are red flags to look for:

 If it sounds too good to be true, it is. Watch for “phantom riches.” Compare promised
yields with current returns on well-know stock indexes. Any investment opportunity that
claims you’ll receive substantially more could be highly risky – and that means you
might lose money. Be careful of claims that an investment will make “incredible gains,”
is a “breakout stock pick” or has “huge upside and almost no risk!” Claims like these are
hallmarks of extreme risk or outright fraud.

 “Guaranteed returns” aren’t. Every investment carries some degree of risk, which is
reflected in the rate of return you can expect to receive. If your money is perfectly safe,
you’ll most likely get a low return. High returns entail high risks, possibly including a
total loss on the investments. Most fraudsters spend a lot of time trying to convince
investors that extremely high returns are “guaranteed” or “can’t miss.” They try to plant
an image in your head of what your life will be like when you are rich. Don’t believe it.

 Beware the “halo” effect. Investors can be blinded by a “halo” effect when a con artist
comes across as likeable or trustworthy. Credibility can be faked. Check out actual
qualifications.

 “Everyone is buying it.” Watch out for pitches that stress how “everyone is investing in
this, so you should, too.” Think about whether you are interested in the product. If a sales
presentation focuses on how many others have bought the product, this could be a red
flag.

 Pressure to send money RIGHT NOW. Scam artists often tell their victims that this is a
once-in-a-lifetime offer and it will be gone tomorrow. But resist the pressure to invest
quickly and take the time you need to investigate before sending money.

 Reciprocity. Fraudsters often try to lure investors through free investment seminars,
figuring if they do a small favor for you, such as supplying a free lunch, you will do a big
favor for them and invest in their product. There is never a reason to make a quick
decision on an investment. If you attend a free lunch, take the material home and research
both the investment and the individual selling it before you invest. Always make sure the
product is right for you and that you understand what you are buying and all the
associated fees.