No 35 / July 2012

ACIIA NEWS

CONTENTS
1 The capital of Spain hosts the ACIIA Council Meeting & AGM 3 The Chartered Institute for Securities & Investment in the United Kingdom joins ACIIA 4 ACIIA Council News 5 New EFFAS Chairman Elected EFFAS Summer School (ESS) 2012, 5th edition 6 SAAJ 50th Anniversary on 15th October 2012 8 ACIIA News interviews HCMPS first CIIA-graduate Globalization Opportunities and Implications The ABCs to a Global Social Revolution 10 4th Annual East Africa Trade & Commodity Finance

Newsletter of the Association of Certified International Investment Analysts ACIIA

The capital of Spain hosts the ACIIA Council Meeting & AGM

On June 27th and 28th, the ACIIA Council Meeting and Annual General Meeting took place in the beautiful and vibrant city of Madrid. Delegates from around the world attended the meetings held in the elegant Hotel Hesperia Madrid. During the meetings the Council approved the membership of SRTC / SSC Vietnam as associate members and Hoang Manh Hung and Nguyen Thi Thanh Huong from the Vietnamese society were in attendance. Mr

Conference 11 Best Practice Investment Monitoring Seminars open to CIIA holders around the world 12 Attracting Retail Investors requires radical ideas like ACE & Compulsory Dividend Policy
SAAJ Senior Vice President Naoko Mori, ACIIA Deputy Chairman Kiyoto Hagiwara, ACIIA Chairman Fritz H. Rau, IEC Chairman Prof. Michael Theobald, ACIIA Secretary General Fiona Tween, ACIIA Council Member Jean-Claude Dufournet, ACIIA Council Member Yixiang Lin

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Continued from page 2

Sundae Kim from KCIAA Korea became the new ASIF representative on the ACIIA Council Key discussion topics included scholarships and grants as direct support for promotional activities of Member societies. The structure of the ACIIA was discussed and there was a report on the progress of the future Latin American Federation FLAF. In addition to the meetings, EFFAS held an Anniversary Cocktail dinner to celebrate its 50th Anniversary on Wednesday evening.
Delegates attending the ACIIA meetings held at the Hotel Hesperia Madrid

The Spanish Association of Financial Analysts IEAF organized the events superbly and the meetings culminated in a Tour and Gala dinner at the Prado Museum, attended to by representatives of ACIIA and EFFAS. Over 70 people, ACIIA members and guests and IEAF Board members attended the dinner and key speeches were given by IEAF Chairman Juan Carlos Ureta, ACIIA Chairman Fritz H. Rau and EFFAS Chairman Giampaolo Trasi. The Council meeting and AGM of 2013 will be held on 26th and 27th June in Portugal.

Attendees of the EFFAS Cocktail dinner

Attendees of the IEAF Gala dinner held at the Prado museum

ACIIA Chairman Fritz H. Rau, EFFAS Chairman Giampaolo Trasi and IEAF Chairman Juan Carlos Ureta

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UNITED KINGDOM

The Chartered Institute for Securities & Investment in the United Kingdom joins ACIIA

CISI evolved from the London Stock Exchange, so it has 200 years of heritage and 20 years as an independent body. The CISI is a registered Charity, i.e. is a not for profit organisation and a Chartered body, and has been approved by the Privy Council. It is a professional body offering qualifications, thought leadership, continuing professional development and the promotion of ethics, integrity and professionalism.

and promote such standards in the UK and overseas. We act as an authoritative body for the purpose of consultation and research in matters of education or public interest concerning investment in securities. Main activities of CISI In the past year we have had over 42,000 exams sat in 68 countries, covering a range of vocational qualifications. Members benefit from a variety of professional and social activities. In our latest financial year we had almost 11,000 bookings at more than 200 events from our regular series of continuing professional development seminars and other events. In the last year we sold more than 12,000 learning manuals and the CISI also develops e-based

learning materials. We publish a range of learning tools and case studies in Ethics for the sector, a magazine S & I Review, a regulatory update and an investment review. We have a strong regional presence in the UK, with 16 active branches across the British Isles and a fast growing presence internationally, served by offices in Dublin, Edinburgh, India, Singapore, Sri Lanka and the UAE. CISI has over 40,000 members in 89 countries. Motivation Joining the ACIIA is an important part of the CISIs strategy, both in terms of working collaboratively with other national societies, and offering a wider

range of benefits and support to members based in the UK and in other countries. Challenges The CISI has been in discussions with the ACIIA and the regional organisation EFFAS, the European Federation of Financial Analysts Societies, for a number of years. We became a full member of EFFAS, which is part of the ACIIA, last year. In both cases we forged strong relationships to ensure a healthy and strategic fit before joining. Equally, for EFFAS and ACIIA, they were keen for the CISI to join as the major UK professional organisation supporting many thousands of professionals in the worlds largest market and in other countries. From both perspectives, this is a federation which offers full

CISI Director, Ruth Martin

More formally our charitable objectives are: We promote, for the public benefit, the advancement and dissemination of knowledge in the field of securities and investments. We develop high ethical standards for practitioners in securities and investments

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ices is the fact that many investment professionals are keen to progress to advanced professional qualifications as they develop more experience. This also parallels the increasing complexity of finance-related products, risks and roles. While the basic professional- level qualifications provide a fundamental grounding in the allimportant facts, theories and processes, higher level qualifications provide additional opportunities to demonstrate expertise required to sustain a high-level career in todays industry. Importantly, CIIA acknowledges the relevance and importance qualifications approved by national regulators and often tailored to specific market practices and legislation. Instead of requiring several years of study towards a postgraduate level qualification which may involve examining previously acquired knowledge, CIIA offers only the higher level examinations which can raise the level and breadth of expertise of industry professionals to a globally accepted postgraduate level. It is an advanced programme spanning securities analysis, equity, bond and derivatives investment, performance analysis and reporting, and a host of other items related to private and institutional investment management and research. This approach offers the flexibility to top up existing CISI qualifications to gain the Level 7 ACIIA within a year. CIIA courses and examinations Eligible candidates will hold one of the following CISI qualifications: CISI Level 4 Investment Advice Diploma CISI Level 6 Diploma (including at least 2 investment-related units) CISI Level 7 Masters in Wealth Management Eligible candidates will also be required to have membership of the CISI at the appropriate membership level for their qualifications and industry experience. CIIA examinations in the UK CIIA examinations are held around the world in the spring and autumn each year. We are hoping to target spring 2013 for the first batch of UK candidates. Professional background of the target CIIA student They are most likely to be actively engaged in a money management, financial advice or investment research role, or working for a sell-side firm or agency.

4
Main motivation for professionals in the UK It is too early to tell how successful the CIIA will be in a market dominated by the CFA. However we will be advocating it to encourage candidates to gain an internationally recognised postgraduate qualification, building on their existing CISI qualification success. Future of CIIA in the UK These are early days yet and its too soon to offer any firm numbers. In the UK we believe that there will be a general upward trend towards higher level professional qualifications, partly to keep pace with the increasing complexity of the markets, and partly because the UK industry has always valued good-quality professional qualifications in addition to academic degrees. This is a highly competitive environment where career professionals value opportunities to develop their qualification portfolio incrementally and in parallel with their work experience. The CIIA model meets the important requirements for flexibility, self-study, and importantly, an accelerated learning programme which builds on existing national qualifications. The CIIA should appeal both to UK and non-UK professionals currently living and working here.

Continued from page 3

scope for collaboration without any national society having to change how it operates or fit within a particular mould: the CISI remains fully independent. CISI UK and ACIIA The City remains not only the largest global financial centre; traditionally it is also very resilient. However, there have been many significant events and developments in recent years such as the credit crunch, the Eurozone crisis and the global downturn - which have underscored the fact that the UK markets are increasingly influenced by situations and events happening around the world. Events since 2008 and the increase in volatility globally in the sector are indicators that our industry professionals would benefit from having access to a wider network of investment professionals, CPD events and study opportunities which will help to broaden their understanding and perspective about being in the centre of a global market. CIIA important for investment professionals in the UK Another hallmark of the UKs pre-eminence in financial serv-

ACIIA Council News

Sundae Kim from the Korean society KCIAA became the new ASIF representative on the ACIIA Council at the Council meeting in June in Madrid. Mr Kim is the CEO & President of KIS Pricing, Inc. which provides mark to market valuation of various kinds of bonds to Korean institutional investors. He has also worked for the Korea Accounting Standards Board (KASB) as an advisory committee member, and till 2011 as executive vice president of Korea Investors Service, Inc.,
Newly elected ACIIA Council member Sundae Kim

a Moodys affiliate. He was a founding member of the company in 1985, and has wide experience in the field of business analysis and evaluation. In 2004 Mr. Kim joined the Korea Certified Investment Analysts Association (KCIAA) taking on the role as Vice Chairman. He had also previously worked at the Bank of Korea (BOK) for over 10 years. Mr. Kim earned an MBA from Seoul National University.

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The newly elected Chairman of the organization, Jess Lpez Zaballos, holds a PhD in Business Administration and is currently General Manager of the Training & Qualification School of the IEAF, Spain. He is also the person responsible for international relations. In addition to that, he is a member of ACIIA Council, the Association of International Investment Analysts and member of its International Examination Committee (IEC). The newly elected Executive Management Committee (EMC) members are Jess Lpez Zaballos (IEAF, Spain), Frank Klein (DVFA, Germany), Hans Buysse (ABAF, Belgium) Vincent Bazi (SFAF, France), Fritz Mostbck (VFA, Austria) and Chris Golden (SFAA, Switzerland). Mr Zaballos commented it is important to convey to society what the work of financial ana-

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EFFAS

New EFFAS Chairman Elected

lysts is and to explain what we do well, when we do things right, and encourage better practices, when we think we should improve. The IEAF explained to the media that with this appointment, it intends to contribute towards strengthening the capacity of EFFAS in order to present proposals to the public administrations and international organizations, representing and speaking out publicly on behalf of the national member associations. IEAF also wants to raise the level of training and qualification in the field of financial analysis and investment, through the organization of educational activities, conferences and public events, such as technical publications or specific studies on economic and financial issues.

EFFAS Chairman Jess Lpez Zaballos with outgoing EFFAS Chairman Giampaolo Trasi

Jess Lpez Zaballos, IEAF Spain, has been unanimously elected as the new Chairman of the European Federation of Financial Analysts Societies (EFFAS). The appointment took place during the Annual General Meeting in Madrid, 29 June 2012. The outgoing Chairman Giampaolo Trasi thanked all

the participants for the support and confidence given by the members during the past years. My time as EFFAS Chairman definitely contributed to my professional and personal development, he also pointed out that, even if no longer a Board member, he will continue to support EFFAS whenever possible.

EFFAS Summer School (ESS) 2012, 5th edition

EFFAS Summer School attendees

On 11th, 12th and 13th of July 2012, the IEAF (Instituto Espaol de Analistas FinancierosSpanish Institute for Financial Analysts) and the EFFAS (European Federation of Financial Analysts Societies) organised,

for the fifth year running, the EFFAS Summer School - an event that enhances networking between CEFA and CIIA-holders in Europe and other investment professionals, candidates who are preparing for the diploma,

the alumni and the professors teaching the courses. As in the previous editions, it took place in the Santander Financial City and was a great success. For this reason, we are again very

grateful to Banco Santander for its generous support. Over 200 participants from 26 countries in Europe, Africa, Asia and Latin America attended this event: Andorra, Argentina, Aus-

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virtual tour through the modern facilities that Banco Santander has in Boadilla del Monte, to the north of Madrid. After Ms Ruizs speech, participants had the opportunity to listen to an outstanding lecture given by Professor Grzegorz W. Kolodko, former Polish Deputy Premier and Minister of Finance (1994-97, resp. 2002-03) on Globalization, Crisis and What next?. This year, in addition to the case studies that create synergies with the areas of knowledge for the CIIA certification, more topics were addressed through the conferences which took place on 12th July: Financial Reporting and Capital Markets; Banking crises, the Euro zone and the role of Derivatives; Horses for courses? Exploring the state of play of Integrated Reporting, Integrated Analysis and Behavioural Change. Jose Antonio Soler, Head of Financial Management of Banco Santander, and Juan Carlos Ureta, Chairman of the IEAF, closed this event. Once again, a big thank-you was passed on to Banco Santander for its continuous support of this initiative and

Continued from page 5

tria, Belgium, Bosnia-Herzegovina, Bulgaria, Croatia, Denmark, France, Germany, Great Britain, Hungary, Italy, Ireland, Korea, Lithuania, Netherlands, Nigeria, Norway, Portugal, Romania, Russia, Spain, Sweden, Switzerland and Tunisia. Silvia Ruiz, Senior Vice President and Director of the Corporate Area of Human Resources at Banco Santander opened the event, welcoming the attendees to the Financial City and presenting a corporate video that allowed the audience to take a

its invitation to all the attendees to participate in the next edition of the EFFAS Summer School.

SAAJ

50th

Anniversary on

15th

October 2012

JAPAN

of the Tokyo Security Analysts Association). They were very much impressed by the high quality of securities analysts, in particular, those working in U.S. securities firms. Through this visit, Mr. Koike had a firm idea that the foundation of an organization to train professional analysts was indispensable for the development of the securities industry in Japan. Responding to the visit, in April 1962, a mission of 131 members including 81 securities analysts from the U.S. visited Japan to see the amazing progress of various Japanese industries and securities firms (having meetings with 32 companies and visiting 12 factories), led by Mr. Donald B. Maccader, Chairman of the New York Society of Security Analysts. Induced by a series of these movements, finally on 15 October 1962, the Tokyo Security Analysts Association was established, and re-named as the Securities Analysts Association of Japan when reorganized into nationwide association in 1969. In 1977, the first educational program for Level 1 of the CMA (Chartered Member of SAAJ)

qualification was launched and now SAAJ has 25,000 CMA charter holders. In SAAJs history, EFFAS has always been a very important partner in enhancing solidarity among investment professional organizations on a global basis. Here, we recall SAAJs participation in the first international cooperative organization for financial analyst associations, the ICC (International Coordinating Committee), which was established under the initiative of EFFAS and FAF (now CFA Institute) in 1974; and then joint efforts through the ICC in such areas as providing a unified voice on behalf of financial analysts in the formulation of international accounting standards and considering a possible international common education scheme. And, most recently close cooperation with EFFAS in the establishment of the Association of Certified International Investment Analysts (ACIIA) in 2000 and success of the Certified International Investment Analyst (CIIA) qualification covering 37 members globally as well as the creation of ACIIA Principles of Ethical Conduct.

Mr Konosuke Koike, first Chairman of the Tokyo Security Analysts Association at its Inaugural General Meeting 15 October 1962

The year 1962 should be remembered as one of the most significant years in the history of the profession of financial analysts. In Europe, the European Federation of Financial Analysts Societies (EFFAS) was established. In the U.S., the Institute of Chartered Financial Analysts (ICFA) was incorporated to offer their exams. In Japan, the Tokyo Security Analysts Association, the predecessor of the Securities Analysts Association of Japan

(SAAJ), was established, triggered by the exchange of missions visiting the industries in each country between Japan and the U.S. In 1959, a mission of the leaders of major Japanese securities firms visited the securities industries in the U.S. and European countries taking more than two months, led by Mr. Konosuke Koike, Chairman of Yamaichi Securities (later the first Chairman

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Continued from page 6

SAAJ/ASIF 2012 Conference Celebrating 50th Anniversary Monday, 15 October, 2012 Keidanren Kaikan, Tokyo, Japan
English-Japanese simultaneous interpretation will be available for all programs except ceremonies for awards. Registration fee is exempted for members of ASIF/ACIIA/ EFFAS member societies. Program Outline SAAJ was introduced in the EFFAS publication in 1974 On 15 October 2012, SAAJ will celebrate its 50th anniversary by holding SAAJ/ASIF joint conference to commemorate the occasion at Keidanren Kaikan in central Tokyo. There are a number of distinguished speakers including two keynote speakers, Mr. Haruhiko Kuroda, President of the Asian Development Bank, and Dr. Aftab Seth, former Indian Ambassador to Japan, and there are speeches and panel discussions to celebrate the occasion (see the program outline). The members of ASIF/ACIIA/EFFAS member societies are exempted from the payment of the registration fee. SAAJ hopes to be able to welcome many participants from ACIIA member societies to celebrate the occasion. For registration visit: http://www.saa.or.jp/english/ Two Special Purpose Funds to Commemorate the 50th Anniversary of SAAJ SAAJ has established two special purpose funds, Asian Securities Analysts Education Supporting Fund and Securities Analysts Education Promotion Fund for Universities, as one of the commemorative activities of the 50th Anniversary of SAAJ. SAAJ has started a campaign of raising 100 million yen for each of these two funds, and income from the investments of the funds will be used for the promotion of the securities analysts education, both in the Asian region and the Universities. SAAJ contributed 10 million yen to each of the funds, and hope to be able to collect the full amount in about 5 years. SAAJ is happy to accept contributions to these funds from overseas, with minimum donation amount of USD 50 or Euro 50. Please visit SAAJs website http://www.saa.or.jp/english/ for more details. GIPS Special Seminar to be held 25 July in Tokyo SAAJ will hold GIPS Special Seminar on Wednesday 25 July in Tokyo. As the result of the recent AIJ scandal, the Japanese market has become aware that the compliance with the Global Investment Performance Standards (GIPS) and verification of the compliance conducted by the verifier would at least lessen probability of selecting fraudulent managers. Although usually SAAJs GIPS Seminars have been held mainly targeting the practitioners at asset management firms and auditing firms etc., this time the seminar will be focused on the fundamental basics of the GIPS Standards aiming for better understanding of the standards for the pension fund sponsors as well as those who have just started the practice in the GIPS compliant firms. In order to have wider audience and broadly contribute to the market, this seminar will be conducted free of charge for the first time as GIPS Seminar conducted by SAAJ. 10:00 Opening Addresses Kazutoshi Inano, SAAJ Chairman Kiyoto Hagiwara, ASIF Chairman Lin Yixiang, ASIF Deputy Chairman Hirohide Yamaguchi, Deputy President, Bank of Japan Manabu Morimoto, Director General, Financial Services Agency 11:00 Keynote Speech I Haruhiko Kuroda, President, The Asian Development Bank 12:00 Keynote Speech II Aftab Seth, Former Indian Ambassador to Japan 13:00 Ceremony for Awards: The Best Article Prize for Commemoration of SAAJs 50th Anniversary 13:15 Lunch 14:15 Speech by Mr. Yasuo Kuramoto, Vice Chairman, FIL Japan Holdings Moderated by Mr. Akiyoshi Oba, President & CEO, Tokio Marine Asset Management 15:15 Break 15:35 Panel Discussion Toward New Growth of Japanese Economy Function of IR and Securities Analysts Panelists: Naoki Izumitani, President & COO, Asahi Group Holdings Shuichi Kato, Chairman & CEO, Ks Holdings Corporation Keiji Kimura, Chairman, Mitsubishi Estate Co. Ltd Toshinori Ito, President & Analyst, Ito Research and Advisory Toru Ohara, Director, Okasan Asset Management Moderator: Noriyuki Matsushita, Managing Director, Citi Group Securities 17:15 Ceremony for Awards: Securities Analyst Journal Prize Awards for Excellence in Corporate Disclosure 18:15- Cocktail Reception Celebration of SAAJs 50th 20:30 Anniversary

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HUNGARY

ACIIA News interviews HCMPS first CIIA-graduate

working for a small, domestic owned broker firm, Hamilton Plc., whose profile included basically derivatives markets, forex speculation and international futures markets. Since 2010, I have been working for Solar Capital Plc. as portfolio manager in a young, continuously expanding and dynamic team. What made you start with the EFFAS diploma? Why did you feel the need for it? Having finished the university, I started to work as a broker. On the derivatives (especially forex) market, trading is generally based on short term technical analysis; fundamental analysis is no added value. I felt that my thinking was slowing down as I was not using what I previously studied; so I decided to brush it all up and further broaden my knowledge. I often had the feeling that EFFAS and CIIA diploma would be an advantage when applying for portfolio or fund manager positions. Did the two year EFFAS training meet your expectations? Certainly, as I could really refresh what I studied at the university. In addition, we built up or strengthened our professional relations to classmates and instructors. Some parts of the EFFAS training materials (e.g. corporate valuation) were more detailed and could be studied more deeply than at the university. The pricing of derivatives became even clearer to me after these courses. This qualification is well-recognised on the labour market, and overall, it was a useful time that I recall as a good investment. I did not regret my efforts. Why did you move forward and go for the CIIA? The CIIA diploma has a strong signaling value for employers and there was the opportunity to obtain it here in Budapest, at the ITCB. I still had the EFFAS course vividly in my mind, so I enrolled for both modules. I got the electronic CIIA material, including complex exercises in English. In addition, ITCB organized weekend consultations. We wrote the CIIA final level exam in English, which was first evaluated in Hungary and then again, in an additional two steps, in Switzerland. I passed the exam following a preparation period of 1.5-2 months and I became the first in the country who successfully mastered both exams. Could you provide us with some details concerning the invest-

CIIA holder Sndor Misik

Sndor Misik was the first student to be awarded the Certified International Investment Analyst (CIIA) diploma in Hungary in 2010. The CIIA diploma is increasingly attractive due to its worldwide recognition, even though its prerequisites are not to be taken lightly: the EFFAS diploma (European Federation for Financial Analysts Societies), and taking a complex exam in English at ITCB Budapest (International Training Center for Bankers). On this special occasion, Sndor was asked about his professional ACIIA News: Please could you tell us about your professional background and career path? Sndor Misik: I graduated in finance at the Corvinus University Budapest in 2005 and started

ment strategy you follow? How did you perform in you first year following the qualification? In the first year, I succeeded in approaching the performance of the best absolute return domestic funds by achieving a 20 percent pre-tax yield (expressed in HUF). This success was mainly the result of using HUF forex futures and options transactions. In addition, putting options for speculating on the fall of precious metal prices also had a significant contribution to the yield. My strategy is an attempt to capture the short and medium term market movements and produce an additional return above the corresponding T-bills rate. In fact, you have to be persistent; my goal is not to earn a fortune by one transaction but to regularly gain smaller amounts by taking less risk. In case I make 1% per capital unit each month, plus the T-bill yields 7%, it comes out at 19% per year. However, considering the costs, I need a monthly return of 2 percent in order to reach a net 20% p.a. The most important is the risk management: if you do not have leverage on the forex market, you will be able to manage any bad positions by a dilution strategy (average price improvement).

Globalization Opportunities and Implications The ABCs to a Global Social Revolution

It is particularly gratifying for IMA3, the Mexican society of the ACIIA, to announce the publication of a book in the international market that was born from a very interesting investment development in the Mexican market. Martin Marmolejo is the current Chairman of IMA3 and author of Globalization, a book that has already received a 5-star rating from ForeWord Clarion Review. Barry Silverstein of ForeWord Reviews gave the following review: The second section of Globalization titled Around the World in Ten Chapters should prove to be exceptionally useful to

MEXICO

IMA3 Chairman Martin Marmolejo

any corporate manager who needs insight into the economic viability of virtually every region of the world. Martin Marmolejo has done a masterful job of collecting, organizing, and distilling information in a volume that is easy to navigate. The breadth and depth of Globalization suggests this book could be the single reference required for

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ACIIA NEWS

better take full advantage of the great opportunity in front of me: write about globalization as a whole, not only about that particular sui generis and outstanding specific manifestation of globalization in the Mexican financial markets. The challenge then substantially evolved to how to board globalization from the most relevant, comprehensive, multidisciplinary angles: social, historical, philosophical, geo-political, economic, financial, and strategic. By that time, the books title was: Globalization, Opportunities and Implications. Fourth, and final, when analysing the brutal contrast in output per capita between the most developed and the poorest nations on earth, the customary powerful shock I always experienced when confronting that most sad reality, this time took a different turn. The inner social entrepreneur that started to grow inside me since the early 90s made a compelling demand: if globalization wont provide the solution to the world poverty monumental problem then, from the social entrepreneurship standpoint, globalization had a rather limited beneficial reach. Intuitively, I strongly felt that globalization had within itself the keys to solving that foremost challenge. Feeling so strongly about it, I took on the challenge to try to unlock the doors towards the solution of that paramount objective. At that point in time I added the second subtitle to the book: The ABCs to a Global Social Revolution, to reflect the new development, the books conclusion. Humbly, but with high confidence, I am profoundly convinced that the connectingthe-dots process I structured unlocks the doors towards solving the worlds poverty problem.

Continued from page 8

the reader who needs to know more about any aspect of the global economy. In the words of the author, Martin Marmolejo: A chain-sequence of external events in my professional life culminated with a most compelling urge to deal with that most fascinating, yet deeply heartbreaking reality: How to achieve real, systematic progress, in a self-sustainable way, in diminishing world poverty on a massive scale. This great challenge can also be visualized as how to achieve high worldwide socioeconomic growth in the most effective, lasting manner. Being external in nature, naturally I had no control over that chain-sequence of events. The most I could do, and did, was to react to them: First, in the summer of 2009 I was approached by the Mexico City office of Deutsche Bank, to jointly conduct an institutional promotion campaign about a remarkable global investment platform Deutsche Bank (DB), in a concerted effort with the Mexican Stock Exchange, developed and implemented, the SIC; through that investment platform, Mexican investors can directly invest in over 800 foreign securities (stocks, bonds, ETF) from the local bourse, settling those investments in Mexican Pesos, in their usual investment contracts. Second, a few months later, a publisher friend from Spain visited me; during the conversation, I commented about the joint institutional promotional campaign with DB; he strongly recommended me to write a book about it; I accepted, but Third, when getting started with the tentative table of contents, it occurred to me that I should

That strong confidence is based not upon my rather average intellectual abilities, but upon: 1) Basing the solution to the world poverty puzzle in extremely solid elements and pillars that have been developed and/or matured in the past three decades. That is, the solution to the world poverty challenge builds upon some of humanitys greatest intellectual assets and achievements in the socioeconomic area. 2) The proposed solution is based in a truly multidisciplinary approach, heavily relying, for instance, on very high calibre leadership and management inputs, in addition to the usual, indispensable tools and methodologies required in all socio-economic endeavours.

3) At present, the initiative I propose is a blueprint for action. Being a multidisciplinary enterprise, with multiple nations, institutions and specialists to be involved, it is only appropriate to leave all further planning, detailed work, and fine-tuning for the time when the first of the philanthropic institutions jump on board.

www.understandglobalization.com

/globalizationthebook

@globalmarmolejo

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KENYA

4th

Annual East Africa Trade & Commodity Finance Conference

Windsor Golf Hotel & Country Club, Nairobi, Kenya

On 22 May over 150 local and international delegates converged on Nairobi for Exportas 2012 East Africa Trade & Commodity Finance Conference, which consisted of prominent multinational and SME corporates, local and international financial institutions and all those trade finance practitioners involved in this exciting and dynamic region. As the economies of East Africa continue to rise and the world focuses on the abundant opportunities within

Africa, the conference was well timed to tackle key issues facing the region. The topics included whether or not the fundamentals are in place for East Africa to realize its potential, how the EAC should develop its energy sector in light of rising global energy demands, the perception of investment risk in East Africa, tea production capacity, risk appetite of trade and commodity financiers, collateral management best practices, challenges of intra-regional trade, the im-

portance of the ICT sector, as well as many other subjects covered over the course of the one day conference. The keynote address by Mr. Nick Mbuvi, Corporate Banking Director of Barclays Kenya, opened the conference with an informative macro outlook for the regions prospects. Highly respected corporate organizations, such as Engen Kenya, Ericsson, Gulf Power and DHL Express, also gave their unique perspectives into the financing priorities and operational challenges of undertaking business in East Africa. As with all Exporta events, networking was a key theme throughout the day. Special networking breaks, hosted by DHL Express, gave delegates the opportunity to build relationships with key partners. An evening drinks reception, hosted by Barclays, also enabled delegates to discuss the days agenda in a more informal setting.

ICSIA Secretary Peter Kegode at a panel discussion

Peter Kegode the secretary of the Institute of Certified Securities Investment Analysts represented the institute on a panel discussion How significant is the I.T. and telecom sector in boosting regional trade?. The conference welcomed support from eminent institutions, including Standard Bank, the Africa Finance Corporation (AFC), Nedbank Capital, Barclays Bank, DHL Express, the ITFC, FIMBank, Afreximbank, and Norton Ro.

Delegates attending the conference

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SWITZERLAND

Best Practice Investment Monitoring

SFAA Switzerland successfully held a one day seminar on Best Practice Investment Monitoring on 23 May 2012 at the Socit de Lecture, Geneva. The seminar was open to CIIA holders from abroad. Topic Current investment conditions for investment management organizations are very challenging due to increasing regulations, increasing complexity of the financial instruments, increasing uncertainty of the financial markets and with this, due to increasing difficulties, to meet the promised investment targets. The approaches for mastering these challenges are company specific but have to address some common as-

and accountability within investment management organizations. Efficient and effective investment monitoring is seen more and more as a precondition for long-term performance not only by asset management companies but also increasingly by investors like pension funds or family offices. The seminar focused on processes dealing with performance analytics and investment reporting as well as on the decision-oriented risk and return monitoring essential especially for complex and multistep investment processes. pects of high importance for the success of the whole organization transparency, accountability, integrity and ethical behaviour. Aim The aim of the seminar was to discuss and outline best practices to address two of these common aspects: transparency Speaker Dr. Stefan J. Illmer, Managing Director at Illmer Investment Performance Consulting AG, located near Zurich, Switzerland.

Seminars open to CIIA holders around the world

plete and send to the host society and an outline and overview of the topics. Seminars for 2012 So far in 2012, SAAJ Japan, and SFAA Switzerland have had seminars open to CIIA holders worldwide. Global calendar of seminar events, open to all CIIA graduates Individual ACIIA Associations are opening their seminars to CIIA graduates worldwide in order that diploma holders from abroad may attend along with the title holders registered with the Association in question. Participation is free to CIIA holders from abroad. A calendar of seminar events for 2012, open to all CIIA graduates, is available on the ACIIA website. Included in the calendar are registration forms for the interested title holders to comIn 2011, SFAF France, DVFA Germany, SAAJ Japan, IEAF Spain and SFAA Switzerland offered their seminars to CIIA holders worldwide. SFAA Switzerland had CIIA holders from Germany attend the Successful Investing Methodologies in Private Banking seminar held in Zurich in September. It is hoped that more societies will participate in this important initiative and service for CIIA title holders. To view the seminar details please visit the ACIIA website www.aciia.org

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Attracting Retail Investors requires radical ideas like ACE & Compulsory Dividend Policy
The Indian Equity market is plagued with low interest by retail investors and it is good to take note that the government is clearly concerned about their apathy towards equity markets; the measure taken by the Union budget 2012 is a testimony to this. I am a firm believer that equity markets provide an unparalleled opportunity to create wide spread prosperity in the country. However, the current measure looks like a baby step and does not appreciate the problem faced by the retail investor while investing in equities. The key reasons for Indian equity to remain underappreciated by domestic investors are; 1) Assets classes of choice; gold and real estate have given superlative returns with much lower volatility in comparison to Equity markets over the last few years. 2) Retail investors have to rely on kindness of strangers to scan profitable investing opportunity / stock while the other two asset classes have ease of investing 3) Corporate governance issues in corporate India have been overweighing in minds of retail investor while investing in domestic equities. Today, the controlling shareholders have large ownership of the firm as well as control over the cash flow of the firm thereby holding minority to ransom while sharing resources. If we intended to foster equity culture in India, the above mentioned problems require a radical solution; providing an incentive structure for Allowance of Corporate Equity (ACE), a form of taking charge on equity capital tax deductible coupled with a compulsory dividends pay out policy, around 25% or more by corporates. ACE, allows deduction on shareholder funds (long term bond rates of Govt. Securities) from corporate taxability. The compulsory pay-out of the profits will ensure that accounting profits are aligned with the cash generated by the company. In my opinion, this is the best way to separate the wheat from the chaff in corporate India, encouraging long term investment in Indian equities and channelizing domestic saving in the productive financial assets. understatement of the profit by the corporate which has suited their business and capital structure need. Minority Investor has to steer thorough layers of financial statement which usually results in the voluminous annual report but at the end of the day meagre pay outs and in few cases none. Last by not least, in the absence of strong compulsory dividend and allowance policy, investor is subject to vagaries of capital markets, as only measure of wealth creation and monetization. ACE coupled with compulsory dividend is a strong self-fulfilling mechanism that combines strong enforcement to incentivize the corporate towards fair accounting and eliminate debt bias thereby also progressing towards much a safer banking system in the country. The international experience of ACE or its variant has been very encouraging. Belgium, Chile, Greece, Columbia, Venezuela and Latvia have some variant of ACE and compulsory dividend system working while Austria and Italy adopted for some time and abandon in favour of broader corporate tax reforms. Brazil has successfully implemented ACE coupled with compulsory dividend since 1996, a model that should inspire India. In one its recent working paper, the IMF indicated that various governments across Europe are having discussions to adopt some form of ACE in order to reduce the debt bias that has led to meltdown of the global financial markets. Let me pre-empt some argument which may follow on issue of compulsory dividends; first, it reduces the ability of the corporate to reinvest as well as the cost of raising equity is quite high, especially for medium and small size firms. Study in Brazil has suggested that this had no impact on long term reinvestment capabilities of the firm. Moreover, cost of equity improves dramatically, as the inflow from institutional investors spreads across market capitalization thereby increasing the investible universe, which is usually quite concentrated in large cap stocks. Secondly, critiques also argue on impact of implementation on public finances. Statistics of BSE 500 companies (excluding 59 government owned companies) suggest that the total Profit after tax of around US$ 43.5 bn, tax collection of US$ 15 bn and dividends payment of US$ 8.5 bn for FY2011. A back of envelop calculation would suggest that the cost of implementing ACE with compulsory dividends, to public revenue, in terms of lower tax collection can be close to US $2bn p.a, a meagre number, considering the gains superior corporate governance can bring for all the stakeholders. In short run, it can be reduced further, by granting allowance to new or incremental investments, only. This implementation will bring economic benefits, such as increased investments, higher wages and higher economic growth, urgently needed by the country. If India responds during crises, only then lets not waste this opportunity in implementing this.

Manish Bhandari

A closer look at constituents of BSE 500 Index past fiscal results (excluding 59 government companies and smoothing of special dividends to get a factual picture), shows an interesting fact about the dividend policy of India. The average pay out is around 25% but this data is skewed by few companies having very high dividend pay outs. On aggregate, companies accounting for 50% of the total profit of the above mentioned universe pay just around 10% of profit as dividends while keeping balance 90% at disposal of controlling shareholders. Investors have witnessed huge volatility in the profitability of the company over a business cycle, partially explained by the cycle itself and partly due to corporate mis-governance. In a lay mans term, there is a possibility of an overstatement and

By Manish Bhandari, CEO and Managing Partner, Vallum Capital Advisors, an equity investment advisory firm based in Mumbai. Email: manish.bhandari@vallum.in

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No 35 / July 2012

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Agenda
Events
DVFA Small Cap Conference 2729th August 2012, Frankfurt EFFAS ESG Conference 11th October 2012, Paris ASIF/SAAJ Annual Conference Commemorating SAAJs 50th Anniversary 15th October 2012, Tokyo

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