1. The Investment Challenge PresentedBy SOLENT SKILL QUEST

2. WARNING! DON’T TRY THIS AT HOME

3. WHY NOT! Jerome Kerviel January 2008 Société Générale £3.7Bn NICK LEESON 1995 Barings Bank $1.3Bn

4. How the Stock Market Works

5. The Stock Market Daily News Statements Daily News Statements Record Highs & Lows Record Highs & Lows Gains & Losses Gains & Losses Opening & Closing Indices Opening & Closing Indices

6. The Questions! What is Stock? What is Stock? What is the Stock Market? What is the Stock Market? Why do we need a Stock Market? Why do we need a Stock Market? Where does the Stock come from? Where does the Stock come from? Why do people want to Buy and Sell from it? Why do people want to Buy and Sell from it?

7. Determining Value ExampleA Restaurant Purchases Purchases –Building –Kitchen Equipment –Tables –Chairs –Staff –Supplies –Marketing Cost £500,000 Cost £500,000

8. Finances DescriptionCOSTSINCOME Building, Equipment & Purchases £500,000 1 st YEAR Expense£250,000 Sales£300,000 Profit/Loss£50,000

9. 2nd YEAR Finances 2 nd YEAR COSTSINCOME Expense£250,000 Sales£325,000 Profit/Loss£75,000

10. Sell the Company? What is it worth? No Further Trading Building and Equipment = £500,000 Building and Equipment = £500,000 Assets or Book Value Assets or Book Value Sell - Ongoing Business (Keeps trading) 1. £750,000 = 10% return (75,000 per year Profit) 2. £1.5M = 5% return (75,000 per year profit)

11. Selling the Business Value of Business = £1.5M Selling 10 Parts = £150,000 per share Selling 10 Parts = £150,000 per share Each Share entitled to 1/10 of profits Each Share entitled to 1/10 of profitsAlternatives 1. Sell 1500 Parts = £1000 per share 2. Divide into 3000 Shares – sell 1500 & keep 1500 (remain in control & bank £750,000)

12. Stock Ownership of Company Assets & Profits Ownership of Company Assets & Profits A Dividend = A share’s proportion of the Company’s profits A Dividend = A share’s proportion of the Company’s profits If Restaurant: 10 owners 10 owners makes £75,000 profit makes £75,000 profit then each share = £7,500 then each share = £7,500

13. The Stock Exchange Selling the Restaurant Selling the Restaurant 1. To local Community Word of mouth Word of mouth Advertise in Local Paper Advertise in Local Paper 2. To wider community – DIFFICULT! Stock Market (sometimes call Stock exchange) solves problem Stock Market (sometimes call Stock exchange) solves problem The LSE (London Stock Exchange) – The Supermarket for buying and selling shares The LSE (London Stock Exchange) – The Supermarket for buying and selling shares The LSE – Better known as FTSE (The Footsie) The LSE – Better known as FTSE (The Footsie) Use of Stock Brokers Use of Stock Brokers

14. The Stock Exchange Interesting Facts All buying & Selling in ONE Place – Share price known every second of the Day All buying & Selling in ONE Place – Share price known every second of the Day Price fluctuates based on: Price fluctuates based on: –Company News Media News Economic News Price of Stock reflects: Price of Stock reflects: –Projected dividend –Profits –Price of Commodities (Oil, Gas, Etc)

15. The FTSE Indices FTSE 100 FTSE 100 –100 largest quoted companies (usually over 2 billion in value) –Companies on index are changed quarterly FTSE 250 FTSE 250 –The 250 largest companies after FTSE 100 –Tracker Funds cant invest in these companies FTSE Small Cap FTSE Small Cap –About 550 Smaller Companies FTSE All Share FTSE All Share –About 900 Companies –Price calculated at end of each day

16. Remember The Questions! What is Stock? What is Stock? What is the Stock Market? What is the Stock Market? Why do we need a Stock Market? Why do we need a Stock Market? Where does the Stock come from? Where does the Stock come from? Why do people want to Buy and Sell from it? Why do people want to Buy and Sell from it?

17. Why Invest in Shares Interest Rate (5.25 %) Dividend (7 %) Share Price – Fluctuations FTSE 100 – 18%

18. INVESTMENT OPTIONS Cash ISA (TAX FREE!) Cash ISA (TAX FREE!) Capital Savings Bond (Guaranteed Return) Capital Savings Bond (Guaranteed Return)

19. Managing your Investment Yahoo Finance Yahoo Finance Yahoo Finance Yahoo Finance FT.Com FT.Com FT.Com Bloomberg.Com Bloomberg.Com Bloomberg.Com www.londonstockexchange.com www.londonstockexchange.com www.londonstockexchange.com

20. Share Price – The Influencing Factors The Economy The Economy Company News Company News Analyst Reports Analyst Reports Press Recommendation Press Recommendation Sentiment Sentiment Technology Technology

21. The Newspaper CompanyPriceChangeHighLow HBOS1139+81173881 Tesco433+3.5456313 Eurotunnel2503222 BP538+3723527 First Choice 305+2306194 ITV112+113094

22. Task – Understanding Information From the Daily Papers find the following information: 1. Identify Newspaper & Date 2. Identify FTSE 100 Price 3. Find Price of: 1.Prudential 2.Barclays 3.Sainsbury 4.Next 5.Mark & Spencer

23. Terminology Shares/Equities Shares/Equities Acquisition Acquisition Merger Merger Profit/Loss Profit/Loss Cash Flow Cash Flow Assets Assets

24. THE INVESTMENT CHALLENGE

26. The Investment Challenge Rules of the Game Each Team Has £100,000 to invest Each Team Has £100,000 to invest One days trading will last 20 mins One days trading will last 20 mins Day starts at 08:30am and closes at 4:30pm Day starts at 08:30am and closes at 4:30pm You can buy and sell at anytime You can buy and sell at anytime No Commission Charges No Commission Charges News Items will occur by Text and Radio News Items will occur by Text and Radio Winner = Highest Value (Closing Cash & Share Value) Winner = Highest Value (Closing Cash & Share Value) Bell will signify start and end of trading Bell will signify start and end of trading

27. The Investment Challenge To complete a Trade To complete a Trade Complete a Transaction Document Complete a Transaction Document Pass to Stock Broker Pass to Stock Broker Obtain Price Obtain Price Receive or Return a Certificate Receive or Return a Certificate Complete your Cash Flow Document Complete your Cash Flow Document PLEASE NOTE: Only 10 Transactions per Team allowed Mark your Transaction Document 1-10 in top right hand corner Use Transaction Documents in correct sequence

28. TRANSACTION DOCUMENT Sequence Number Buy or Sell Which Company? How many are you buying or selling Stock broker will provide a Buy or Sell Price The Total Price of Trade = Share Quantity x Price

29. CASH FLOW STATEMENT

30. The Investment Challenge Prepare your Strategy

31. The Investment Challenge The Game Begins

32. The Investment Challenge Thank You On behalf of Solent Skill Quest