The Business Observer Newspaper - 24th September 2015

INTERVIEW

Issue 35

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September 24, 2015

Distributed with Times of Malta

KPMG partner Juanita Bencini sees this as a watershed year for banks – with regulatory developments propelling interest in mergers and acquisitions. see pages 10 and 11 >

NEWS A report by the Central Bank of Malta shows that the Maltese economy is more – not less – diverse as a result of the growth in the services sector. see pages 3 and 4 >

Exante tries to extricate innocent clients from SEC freeze Vanessa Macdonald Malta-based Exante is trying to extricate its clients from an asset freeze imposed by the American Securities and Exchange Commission (SEC) after it was implicated a month ago in a $100 million insider trading scandal.

In all, American investigators believe Exante could have made in excess of $24 million through the scam over the past five years – but the company is arguing that this was based on an incorrect understanding of its business model.

“The SEC has assumed that we are a ‘hedge fund’ and that we were making these trades for our own benefit. The reality – which is

very easy to prove from our MFSA licence and our audited financial reports – is that we are an executing broker,” Exante executive director Gatis Eglitis explained, holding up a detailed report drawn up by its lawyer Eric Benksy on the current situation.

Exante has around 400 active clients, split equally between corporates and individuals.

“What we do is provide direct market access to our clients via a platform that aggregates dozens of stock, futures and options exchanges all over the world and all their financial instruments – which is very cost-effective for our clients, all of whom are professionals. We could easily have explained

“Exante is not brushing off the allegations: it is claiming its own innocence”

NEWS

this to the SEC had they contacted us before they took action.”

Part of the SEC’s case is based on the fact that an IP address that turned up during their investigations was used by one of the Exante partners – but Mr Eglitis said that this address was the public Wi-Fi at Riga airport and it meant nothing more than using internet at the same airport within a few months of other defendants.

Exante is not brushing off the allegations: it is claiming its own innocence, pointing out that it does not make trades itself or advise clients, but it has freely admitted that some of its customers may have continued on page 5

Aim really high and you will still feel you succeeded if you only get a third of what you dreamed of. EY Entrepreneur of the Year Alexander Galitsky gives advice based on his personal experiences. see page 6 >

OPINION ere has not been much support for second pillar pensions so far – whether mandatory or not – but the secretary general of the UĦM, Josef Vella, argues that they are the way forward. see page 15 >

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A WORKER AT PLAYMOBIL. PHOTO: DARRIN ZAMMIT LUPI

Economy more diversified An assessment of Malta’s economy over the past decades has shown that it is more diversified, dispelling the impression that new activities like financial services and gaming have taken root at the expense of other sectors like manufacturing.

The paper, drawn up by Central Bank of Malta economist Aaron Grech, also concludes that the services sector exhibits a third of the volatility of industry – clearing up another misconception.

“The transformation of the Maltese economy is the result of the appearance of a large swathe of new services operators, rather than the disappearance of existing industrial operators,” the report stated.

SHARE OF GROSS VALUE ADDED BY BROAD ECONOMIC SECTOR 1980

1990

2000

2004

2014

Agriculture

4%

4%

3%

2%

2%

Industry

38%

31%

27%

28%

17%

Services

59%

65%

70%

70%

81%

Source: AAroN Grech (2015)

“The first decade post-EU accession for Malta was characterised by job-rich economic growth. The increase in employment was the largest in any decade since independence. By

contrast, the overall percentage growth in gross value added was below that in previous decades,” it continued, noting that between 1995-2004, gross value added (GVA) grew by 69 per cent, but

only by 62 per cent in the following decade.

Certain sectors have seen phenomenal growth: computer programming has grown its GVA more than sixfold in the past

decade, while the sector which includes gambling and betting saw its share of GVA increase from 2.1 per cent to 8.5 per cent.

In 2004, Malta had the eighth highest share of services in its GVA among the EU countries, but by 2014, it had the third highest.

However, in the last decade, industry’s GVA also rose – by 17 per cent – although its composition has changed remarkably. In the 1980s, 17 per cent of all industrial workers were involved in the manufacture of clothing and footwear; by 2014, the share had dropped to just four per cent – one-tenth its level in absolute terms. The largest five manufacturing sectors now continued on page 4

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Firms being more capital intensive and productive TOP 5 SECTORS FOR GVA INCREASE 1995 - 2004

2005 - 2015

Construction

Financial services

Real estate

Computer programming

Financial services

Legal and accounting services

Education

Gambling and betting

Public administration

Education

39% increase in value added

49% increase in value added

88% increase in employment

25% increase in employment

continued from page 3 account for 62 per cent of industrial jobs, down from 71 per cent in 1995.

The same thing applies to tourism: the share of employment was just 7.5 per cent in 2014, compared with 11.5 per cent in the 1980s, in spite of the fact that in absolute numbers employment was up by 50 per cent.

The report also found that employment in industry and agriculture as a share of total employment has declined – but that this is probably due to the firms becoming more capital intensive and productive.

Looking at the diversification of the economy, the report noted that the top five sectors by GVA

(see box) represented 43.2 per cent of the economy in 1995, but only 39.6 per cent in 2014.

“The expansion of labourintensive services activities has played an important role in the decline of the economy’s apparent labour productivity in recent years and the associated growth in unit labour costs, despite a relatively low rise in compensation,” Mr Grech wrote, casting light on yet another economic indicator that has been repeatedly raised as a red flag.

“More positively, the diversification towards services could help dampen cyclical fluctuations. The services sector exhibits a third of the volatility shown by the value added of industry.”

“e report also found that employment in industry and agriculture as a share of total employment has declined

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NEWS

Ensuring business continuity continued from page 1 been implicated in the case similarly to clients of other brokerage companies listed in the case. What Exante wants is to help the SEC focus on the right suspects and release the assets of its innocent customers.

The US District Court in Newark has indicated that it would be willing to release the assets in the frozen accounts within a few weeks “following the receipt of additional consistent information establishing that the assets’ owners are unrelated to the alleged illicit trading scheme”.

So far, Exante’s legal representative found that only a few Exante customers were involved in the alleged illicit trades, and that 99.9 per cent of the assets in Exante’s frozen accounts bear no connection to any of the defendants identified in the complaint. It also noted that 92 of the 102 customers whose assets were frozen never traded in any American securities during the period being investigated.

“We appreciate the SEC’s mission to protect honest investors from fraud and we fight for exactly the same thing, because our

core values stand for transparency and market accessibility,” Mr Eglitis said.

So far there is no evidence in the complaint or the SEC’s declarations that Exante or its customers received any inside information and there is no evidence that Exante ever traded US securities on its own account.

“Upon receipt of any evidence, we will review it rigorously and responsibly,” Mr Eglitis said. “We have checked all the information available and have sent thousands of documents to the SEC and MFSA. We are also collaborating with the local police who are investigating the claims.

“Since we opened in 2011 we have worked very hard to build up a presence for ourselves in the Maltese community and this has helped. Many of our clients and partners have remained loyal to us and we have even signed up new accounts. We are grateful to our employees that are working hard to ensure business continuity. But I cannot pretend that we have not been hit hard. Clearing our name is a matter of life and death for us,” he said.

“July 2015 was a record sales month in Exante, the result of years of hard work and we appreciate the cost of a lost reputation.

“The gains you can make out of doing something wrong can never make up for what you gain by building up a long-term portfolio based on people’s trust,” he said, looking wistfully out across the bay from his Portomaso Tower office.

As reported earlier in August, the SEC filed legal proceedings against 32 defendants, including Exante Ltd, after it found that between 2010 and 2015, hackers accessed the files of public relations companies and made a killing by trading based on price sensitive information that was not yet publicly available – in one dramatic case making €500,000 by acting on information just 36 minutes before company news was released.

“We have checked all the information available and have sent thousands of documents to the SEC and MFSA. We are also collaborating with the local police who are investigating the claims”

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NEWS ??

When failure can be the best option Europeans are far less tolerant of failure than American are, but Alexander Galitsky believes that failure might actually be the best thing that can happen to an entrepreneur.

Voted EY’s Entrepreneur of the Year and a venture capitalist who has invested in dozens of companies, he clearly speaks from experience.

“One of the five companies I set up myself failed, and another was not very successful.

But I always learned more from my failures than from my successes.

“When you are successful, you relax and enjoy the recognition – and overlook the small things you did wrong or could have done better,” he warned.

He is a managing partner at Almaz Capital, an early stage venture capital firm investing in high-growth tech sectors, and happily admits to having lost in three of the 15 companies they funded in the first tranche.

“In the second round of funding, we have not lost anyone; we were lucky. But in general you eventually realise that you made a mistake with regards to either the team or the product,” he said.

He is quick to point out that what sets the winners apart from the losers is how they deal with failure – whether they learn quickly and move on, and whether they are willing to tweak their original vision.

“It is rare to find a company which has still got the same vision it started out with 10 or 15 years ago. Everyone knows PayPal but do they realise that it started as a security company, not as a payment company?” he smiled.

ALEXANDER GALITSKY

Dr Galitsky, who was in Malta to deliver a speech on behalf of EY Malta, is not new to the island. Almaz Capital helped two of the most successful Russian tech companies to date: Yandex, which has a market cap of over $8 billion; and Parallels, a global software automation and virtualisation company which also has a presence in Malta.

He describes the venture capitalist as a “nanny”, there to help a struggling single mother cope with her new “baby” – with all that implies in terms of reluctance to accept help from others. This is why, he explained, venture capital firms need to resist the temptation to play god – even though they naturally want to protect their investment.

“Sometimes when you see an entrepreneur making mistakes, you want to push him out of the way and take over! This is their biggest fear when they seek external investors. And this is why you should only get on board with people that you really like and trust – and more importantly who trust you.

“If you build the right synergy then it means that you can fight and disagree, but still work together,” he said.

“This is why we select companies on the basis of the team and the people.

“Go ahead and do it.

We never listened to our parents; we always repeat our mistakes.

In business you also need to make mistakes and try to analyse what you did wrong”

Technology can change and products can be developed faster. But people do not change very much. The important thing is that they are willing to learn...”

He pointed out the importance of coaching – no matter what experience the entrepreneur has – adding that even his friend Eric Schmidt, who had considerable experience from Sun Microsystems, was coached when he became CEO of Google in 2001 “because he had to learn so much about the start-up community and working with such young guys”.

The advice he gives entrepreneurs is deceptively simple. His first maxim is that you should not be afraid of mistakes.

“Go ahead and do it. We never listened to our parents; we always repeat our mistakes.

In business you also need to make mistakes and try to analyse what you did wrong.”

His second suggestion was to get outside your comfort zone: “Normal people live normal lives. If you want to achieve something that normal people do not, then you need to get outside normal ways of thinking. You need to think out of the box,” he insisted.

“And thirdly, set your ambition so high that even if you achieve 30 per cent of it, you will feel proud.”

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INDUSTRY FOCUS

Recruitment firms tackling demand The thriving services sector has put considerable pressure on the recruitment industry, with local and foreign candidates being sought for vacancies – but they are trying to ensure that salary expectations remain realistic.

Patricia Tabone, the director of Personnel Resources Ltd, said in recent months the firm had seen a significant increase in what all candidates expect as far as salaries go.

“This is especially so when it comes to accounting personnel where applicants with very minimal qualification and/or experience are demanding salaries that way exceed what Maltese employers (especially within the profession) are willing to pay,” she said.

Vacancy Centre’s HR & training consultant, Robert Delia, said that on the whole, jobseekers considering alternative employment opportunities were aware of the financial packages on offer as they would have carried out research prior to applying.

“In growing sectors, particularly within the financial services sector, financial expectations vary according to the candidate’s personal attributes,” he admitted.

Another sector seeing phenomenal growth over the past years has been the

“We believe that in most cases the true personality of the individual reveals itself when a candidate is relaxed and relates to the interviewer”

gaming one, whose international clientele required multilingual employees as the companies, themselves international, operate in various jurisdictions.

One company that exploited this niche was Betting Connections, which had developed an international recruitment division within its first year of operation.

Duarte Amado, its managing director, said international recruitment already made up 40 per cent of its business.

“With over 30 recruiters, our team is made up of 13 different nationalities, servicing the industry in over 15 European countries!” he said.

However, this has its own challenges, and in 2015 the company dedicated an entire

section of its office for video chatting rooms to be able to interview foreign candidates online.

Mr Amado is also the managing director of Spot On Connections, a sister company which uses the same “30 Step” recruitment process, implemented successfully by a vast array of industries for over 30 years.

“Betting Connections was the first to use this process in Malta for the iGaming industry five years ago. SpotOn Connections effectively introduced this to the local market over three years ago, and it has been an incredible success ever since.

The 30-step method is, of course, only one of the many recruitment systems in

place. The VacancyCentre uses its own personality profiling using tried-and-tested techniques developed over 28 years of recruitment services.

But Mr Delia said that the process should not be one-way: “Our candidate testing is complemented by advice that recruiters provide to each individual candidate, thus enabling him/her to further adopt employability skills.”

While these systems might be sufficient for most positions, more senior positions may require a specialised approach.

However, the experience of the recruitment firm also plays a large role.

Patricia Tabone, the director of Personnel Resources Ltd, said that all candidates are given an in-depth interview where their experience and skills, likes, dislikes, strengths and weaknesses as well aspiration and how they see themselves is discussed so as to assess their aptitude and attitude.

“Only in the case of very senior positions do we do any psychometric testing or if a particular client request it.

“We believe that in most cases the true personality of the individual reveals itself when a candidate is relaxed and relates to the interviewer,” she said.

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CASE STUDY

Is Malta the new London?

There has been an influx of foreign candidates trying to find jobs in Malta – which is rapidly gaining a reputation as a more accessible London – with good weather thrown in for good measure.

Etienne Gatt, who manages the IT & iGaming team for recruitment agency Konnekt, said candidates see Malta as a cheaper alternative to London, but with a better quality of life.

“It is the only fully Englishspeaking, multilingual country in the EU. And even though salaries are lower here, when you look at the purchasing power, the better climate and the decent quality of life, Malta comes out ahead – especially for families. And for many of the more laid-back IT people, the island lifestyle complements that character,” he said.

“Of course, this is not the only factor. We have also seen other

economies struggle with high unemployment, so people then tend to look elsewhere.”

Finding placements for foreign candidates is more challenging for a recruitment company, requiring considerably more due diligence, research and reference checks. However, Alison Grech, who is one of three team leaders managing the generalist team, said technology has made a huge difference.

“We can now do an interview

by Skype, which is much better than telephone calls as you get much more insight from their facial expressions and body language,” she said.

This is just one of the areas on which the teams were trained during some 100 hours last year, along with industry insights.

“It helps to understand what our clients are looking for when

you learn the jargon – and it also helps us to evaluate the candidates’ background,” Ms Grech added.

The rapid growth of the finance and IT industries has led to an increase in demand rather than new skills. Since these industries are relatively young, Malta cannot yet offer enough qualified and experienced people, therefore employers need to source employees from other countries.

Isn’t Malta a very small pond for foreigners? Lara Camilleri, who manages the finance and legal recruitment team, said this is not that much of a deterrent.

“It might be true for some industries. But you often find candidates who want to be at the centre of a new company to grow with it, especially companies that open up back office functions in Malta.

“We do struggle at times, to find Maltese candidates for some of these niche areas but they have an advantage in other ways. In legal contexts, for example, it is difficult to have foreign candidates as they are not accustomed to local legislation,” Ms Camilleri said.

Another problem facing Konnekt is that many of their clients’ needs grow in quantum leaps.

“There are many companies in the IT and finance industries – such as corporate service providers and audit firms – that recruit in bulk as when they take on a new client, the workload increase is considerable.

It is very difficult to find that number of potential employees “In fact, auditors are bringing third-country nationals over at the moment as they do not find enough of the right people in either Malta or the EU,” Ms Camilleri added.

“But you often find candidates who want to be at the centre of a new company to grow with it, especially companies that open up back office functions in Malta”

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CASE STUDY

The situation is just as tough in Mr Gatt’s sector: “We are building two teams of 50 software developers for our clients. You don’t find those numbers here!”

Recruiting outside the EU is not without its problems. It takes six to seven months to get a third country visa – a delay he believes needs to be reduced if Malta wants to keep its competitiveness.

“I can see why the Maltese government and the EU would want to safeguard jobs within Europe.

But on the other hand, we need to also safeguard our own competitiveness,” he lamented.

Recruiting staff is only part of the equation, nowadays, retention being the other. People in Malta tend to change jobs every three to five years.

“There is no such thing as a job for life anymore,” Ms Grech said. “People keep moving until the later part of their careers.

Abroad job mobility is even more intense – they change every two to three years.

“Employers’ attitudes are changing too: before they would view an employee who had moved very often with suspicion. Now they not only accept that but consider the employee to have a wider scope of experience.”

This churn represents a tremendous cost for companies but organisations are already learning to keep this in mind, grooming other staff to move into new roles if they fall vacant.

“Clients are becoming much more aware of the dynamism of their workforce and their retention strategy is becoming much smarter. We always advise our clients to invest in retention as much as in recruitment – not only through the compensation package – guided by our in-house salaries and benefits report, Salariesinmalta.com – but also through profit sharing and flexibility. It is now a candidate’s market,” Mr Gatt said.

“If they have an issue or grievance, employees in sectors where there is very high demand do not always try to solve it. They just resign and know that within a

(FROM LEFT) ETIENNE GATT, LARA CAMILLERI AND ALISON GRECH

week they will find another job with another company with a few more thousand euros in their pocket,” Ms Camilleri added.

One retention strategy that is gradually taking root is working off-site – although this is still very much a minority option.

“Maltese companies are definitely more conservative about the place of work – while foreignowned ones tend to be more open to the idea of working remotely.

We had someone working for an IT company from the US and another from Germany. We are also recruiting someone who can work from wherever they want. It is no longer a problem – although the team culture will remain the way to go. Working remotely has its own challenges such as time zone differences and communication barriers,” Mr Gatt added.

Konnekt has some 30,000 candidates on its database and even a

“Clients are becoming much more aware of the dynamism of their workforce and their retention strategy is becoming much smarter”

cursory check of its website reveals a very different approach.

“We don’t send candidates to jobs just to give them the impression that we are working hard. We do not believe in recommending someone for a job unless they have a chance to succeed.”

Konnekt has other rules that set it apart from some of its peers. The company, which has seen an increase of 33 per cent in traffic on its website year-onyear, does not headhunt for example and has also not hesitated to recommend candidates it is familiar with – even when it does not represent them.

“The secret of our success is our guiding principle: doing what is right. The fact that we seek the interest of the candidates and the companies before our own interests has generated considerable loyalty,” Ms Grech said.

“We are not after short-term wins, but lasting placements.”

The 30-strong team is not paid a commission, but rather gets a performance bonus based on the quality – rather than the quantity – of their placements.

The company’s philosophy also puts emphasis on improving the candidate’s chance of success, whether sprucing up their CVs, diplomatically giving them feedback from the interviews they attend or advising them on salary expectations.

“One of the biggest struggles now that we are growing is to keep that personal touch. It was much easier when we were five or six,” Mr Gatt smiled wistfully.

And the company is growing.

It has just increased its footprint by 39 per cent and has just ventured into new territory – literally. A Maltese company set up operations in Hungary and Konnekt filled a vacancy there with a Hungarian Ms Camilleri was thrilled with the outcome. “It is a real success story as this is an unfamiliar market. It shows that our procedures and best practice could be applied in different markets – even competing against local agencies there!”

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INTERVIEW

Banking sector very dynamic Vanessa Macdonald Juanita Bencini has been involved in the banking sector for over a decade – but it is clear within minutes of sitting down to talk to her that she still finds it as exciting now as she did then. No; actually a lot more exciting.

The partner for risk consulting services at KPMG in Malta has been seeing considerable growth in this sector not only in terms of balance sheet size but also in the number of banks, with three new banks in 2014 alone.

Yet with 28 banks now licensed here, she still anticipates more activity. Why? Partly because it is one of the few jurisdictions in the EU still open for business.

“Other European jurisdictions are not keen to license new banks – especially if they are small or niche banks.

Promoters essentially find a closed door as regulators view banking as being heavily-demanding of resources.

New banks create new risks,” she said.

“But our regulator, the Malta Financial Services Authority (MFSA) has, thank heavens, still kept an open door policy. This is not to say, of course, that it will allow anybody to set up a bank – it has if anything heightened its due diligence procedures this last

year. But it is not a closed door and the MFSA will meet you to discuss whether your business model makes sense.”

Even a cursory look at the three banks which opened last year – retail bank Satabank, wealth management bank Pilatus Bank and Yapi Kredi Bank Malta, a subsidiary of a Turkish bank – shows how much banking business models have changed over the past 20 years.

A close analysis reveals that the new banks are very entrepreneurial in spirit and seeking to tap particular niches.

“The profile in the sector has totally changed over the last two years. Ten years ago, it was mainly driven by Austrian banks here because of the double taxation agreements and the tax benefits that gave to them. Now there are very few still here. The banking model that we saw a few years ago now no longer has a reason to exist.

“Today setting up a business for tax optimisation purposes is frowned upon and banks would definitely not set up in a jurisdiction because of tax reasons. They would be lambasted big time by their home country jurisdiction!” she said.

“But there are so many innovative models. It is a very dynamic

JUANITA BENCINI. PHOTO: CHRIS SANT FOURNIER

“e shareholder base, which has till now been mainly European, is now shifting eastwards to the Middle East, Hong Kong, Singapore and China”

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INTERVIEW

environment with drivers of change coming from it at all angles.”

She admits that it is difficult to say what lies ahead. The three banking licences last year were issued before the Single Supervisory Mechanism (SSM) came into force and the MFSA will now have to interact with the ECB on authorisation of new licences.

“Obviously the ECB will probably expect to be involved at all stages of the application process, to give its opinion on the due diligence done by the MFSA, and on whether the licence should be granted.

“Will the ECB have a veto at the end of the progress to overrule an MFSA decision? We are obviously all looking forward to having the first licence issued to see how it is going to work,” she admitted.

It is now taking about a year for a banking licence to be issued – considerably longer than before – but KPMG in Malta is certainly not arguing for the process to be speeded up.

“The MFSA is very thorough and keeps asking questions and coming back for more information. I for one, would not want it to be any other way. It can be frustrating for us and our clients but we don’t begrudge them the time it takes until they get comfortable. We have to really, really make sure that we never get it wrong,” she said.

She sees this year as a watershed for banking as a result of SSM, with banks split into ‘significant’ and ‘less significant’ banks.

The ECB directly supervises the significant banks in a jurisdiction while the rest are still left at the discretion of the local regulator with oversight from the ECB. “What we are seeing is that local regulators are noting what is happening with significant institutions, trying to impose some of that on the less significant institutions – as far as possible within the concept of proportionality – but you have to be very careful how to whittle that down to something that makes sense for the smaller banks,” she said.

For local retail banks, the limited market poses challenges

“Banking is a business like any other. It needs an entrepreneurial spirit with small banks that tap into niche areas” but the sector is far from dormant.

“There is a very active mergers and acquisitions market in Maltese banking and there are deals being negotiated as we speak. I can see that continuing in the near future,” she confirmed.

“It makes a lot of sense if there are synergies between what the new owner wants to do with the bank and the current operations.

Retail banking is very saturated and operating a branch network is very expensive: if you took it over, you would do so knowing that it would have to be reviewed and for more efficient channels to be pursued.”

One thing that has changed is that the shareholder base, which has till now been mainly European, is now shifting eastwards to the Middle East, Hong Kong, Singapore and China.

“They are looking to set up in Europe and Malta is an entry. I see tremendous growth and huge potential,” she said.

The sector is certainly booming: the National Statistics Office recently reported that financial services and insurance represent 98 per cent of stock of FDI on the island. But she does not see this as having all our eggs in one basket.

“I don’t see it as alarming. Malta has still got untapped potential in the financial services industry...

Even though people say that financial services can come and go – just as gaming can – I don’t believe it. It has much stronger roots than the gaming industry, for sure.

“We now have such a good track record with both the players and regulators. It can only grow although of course, there are things we need to do as a country to overcome the parochial mentality that sometimes takes over.

“But I think there is awareness within different associations like Finance Malta, the Institute of Financial Services Practitioners and the Malta Bankers Association, for example. We are in constant discussion about the need to come together and not have everyone pulling their own way and for their own agenda. It needs to be more of a concerted effort,” she lamented.

Her comments shed quite an optimistic light on a sector where headlines are often about doom and gloom. Heavy regulation has been throttling profits in banking – and entrepreneurship. But this is precisely why she believes that Malta’s open door approach is timely.

“Banking is a business like any other. It needs an entrepreneurial spirit with small banks that tap into niche areas. To me business is all about trying to meet your clients’ unmet – and even unknown – needs. And the larger banks are often too big to move.

You need these entrepreneurs who see a gap in the market and just go for it,” she said, referring to innovations like peer-to-peer lending and crowdfunding that were created from client frustration with the current system.

“Payment institutions have gnawed away at one of the most lucrative parts of banks’ operations: wire transfers and payments.

“Today, if your business is heavily involved in transferring payments between countries, most go to payment institutions rather than through banks.

Cards were historically issued by banks but even that is not the case any more.

“I still think that there are unmet needs that can only be met by an entrepreneur looking at something and coming up with solutions to make it happen.”

KPMG publishes banking sector oversight KPMG in Malta will shortly be publishing a study on banks in Malta which it believes will provide a user-friendly way to analyse the sector – with the added value of expert analysis of issues facing the sector.

Juanita Bencini, KPMG in Malta’s partner for risk consulting services, said that while there are commentaries on individual banks, there has never been a document which brought all the information together. It was only natural that such a publication should be tackled by KPMG, which has historically always been very strong in financial services, especially in banking.

Indeed, the global firm already has similar publications for other jurisdictions, so the local firm was able to benefit from the established methodology and format – with the added benefit that Maltese banks can be benchmarked.

The yearly publication wades through the reams of publicly available information, filtering out the background noise to present the most relevant figures and to pick up trends. It does not attempt to compare the banks, rather providing a format which allows the reader – who could be any stakeholder from investor to employee – to make up his or her own mind from the concise information provided.

That in no way implies that the information is sterile; quite the contrary. The 28 banks in Malta are remarkably diverse and any meaningful insight depends on understanding this.

“For example, we distilled the business model of each of the core banks and when you see it in black and white, you realise how different they are – even though they are operating in the same market,” she explained.

KPMG in Malta was also able to tap into its considerable expertise and compile “thought leadership” articles on issues that could affect local banks – in particular over the next few years.

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CASE STUDY

KARL NAUDI WITH MARGRITH LÜTSCHG-EMMENEGGER.

Hili Properties aiming high Hili Properties plc is aiming to increase its property portfolio from €66 million to €120 million, but chairman Margrith LütschgEmmenegger sees no reason why this could not grow even further by 2025.

“We have already identified €25 million worth of overseas property that we want to purchase in the near future. But if we can raise the funds, then there is no reason why the sky should not be the limit,” she said enthusiastically.

“Obviously the markets must be right and it will become more difficult with time to find the right properties. And of course, it depends on raising funds but we

have innovative ideas on how to do that.”

Hili Properties is one of the six divisions within Hili Ventures, managing a property portfolio that has doubled in the last year alone.

It started off quite logically. The group bought the office block in Floriana which housed the oldest company in the group, Carmelo Caruana Company Ltd. It also realised the added value that came from owning some of the properties used by McDonald’s across its licensee area.

“There were cases where it made sense to acquire, others where it made more sense to lease,” managing director Karl Naudi said.

However, it soon became obvious that the business model worked for third party tenants and Hili Properties set about acquiring buildings which were already fully occupied and managing them, a low-risk model which provides a steady cash flow. The company acquired nine retail complexes in Latvia earlier this year, adding 18,500 sq.m. to its portfolio, and also bought the Tower Business Centre in Swatar, which has a 4,600 sq.m. footprint and is also occupied by tenants with longterm contracts. Apart from the Hili Ventures headquarters in Marsa, the property division also owns the De Tigne complex in Sliema which houses McDonald’s plus 520 sq.m.

“Hili Ventures employs 3,500 people in 10 countries, with a strong focus on Eastern Europe so it is natural to explore these areas rather than places where we are not active”

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CASE STUDY

of office space, and also a fully occupied office block in Psaila Street, Sta Venera.

The tenants in the portfolio of properties is now fairly equally split between Hili Ventures’ operations and third parties.

“There are always going to be properties up for sale, possibly because the owners want cash flow, perhaps because they want it to invest in something bigger or to liquidate their assets. And the yields in some countries are much better than others, especially when you buy at the right time of the economic cycle,” he said.

Going forward, Hili Properties will move tentatively outside the three pillars of offices, retail complexes and food service outlets.

“We are also looking at logistics and warehousing parks overseas.”

It is also spreading its risk by looking at different geographical markets, expanding beyond Malta and the Baltics.

“Hili Ventures employs 3,500 people in 10 countries, with a strong focus on Eastern Europe so it is natural to explore these areas rather than places where we are not active,” Mr Naudi said.

“These are countries and cultures that we know and understand.”

Hili Properties is very clear about its business model: it is neither a speculator not a developer.

“We are property owners and

managers,” Ms Lütschg-Emmenegger said. “We want to add value to buildings by improving the maintenance, the environmental aspects like lighting and air conditioning.

“We can also add value by expanding, as many of the tenants are growing and many of the sites we own have underdeveloped potential.”

Hili Properties is run from the Malta head offices, with a central management team looking after strategy and acquisition. It then has country managers who either engage full-timers or outsource maintenance contracts.

“The model is not only based on retention of tenants but also on acquiring new ones and we firmly believe that tenants look for a good property management company. It is critical that the needs of the tenants are seen to immediately,” Mr Naudi said.

“Of course, they also consider other aspects like location, car parking, the quality of the property and its environmental footprint, and finally the logistics for access and connectivity.”

The tenants can be an attraction in themselves, drawing in new tenants just as surely as the building itself. They also provide fertile ground for Hili Properties’ future acquisitions. For example, the acquisition in Latvia brought it into contact with an international supermarket chain which uses seven

TOWER BUSINESS CENTRE IN SWATAR

RETAIL CENTRE IN LATVIA

of its locations – but which has 235 outlets in the Baltics.

The same applies to the Swatar building, which hosts well-established global brands.

One other change that it might consider would be to manage properties that it does not own, leveraging its experience and expertise.

“It is not part of our core model but it is something that we are considering, certainly in the Baltics,” Mr Naudi said.

Ms Lütschg-Emmenegger is one of the most passionate advocates for Malta as a centre to do business. In her role at Hili Properties, she still has that evangelical zeal, seeing it as not only something that will benefit Hili Ventures but also the island.

“We want to create something sustainable, with well-managed risks that will bring value to the shareholders, staff, and also tenants. But it will also help as it puts the name of Malta out there along with that of Hili Ventures.”

Hili Properties plc yesterday launched a €37 million bond issue, maturing in 2025. The unsecured bonds, at a nominal value of €100 per bond issued at par, bear an annual interest rate of 4.5 per cent. Proceeds from the bond issue will be directed to refinancing property acquisitions. The bond issue is guaranteed by Harbour (APM) Investments Ltd and Hili Estates Ltd.

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e Business Observer is Malta’s leading business newspaper distributed with Times of Malta every fortnight.

Editorial Vanessa Macdonald, Head of Content (Business), Times of Malta.

EDITORIAL

Secrecy over Electrogas fuels suspicion Recent energy projects being undertaken in the UK with Chinese investment and in Finland have once again underlined the Maltese government’s woefully inadequate handling of the Electrogas investment.

What should have been a straightforward sequence of events was shrouded in lack of information, misinformation and too much information. The presence of commercially-sensitive information is absolutely no excuse to reject calls to publish all the relevant agreements to clear suspicions once and for all.

The situation was actually quite clear: at the time Enemalta needed a new power station. It was groaning under accumulated debt and could not pay for it. The only option was to entice a private investor to build it.

The return on investment for a power station is not one that would have private investors queueing up, principally because electricity tariffs are tightly regulated, as they have major social and economic impact. It is a classic case of what economists like to call ‘market failure’.

So it is only natural that any investor would want to have a promise from the entity that will purchase its output. It would also want a promise from the government that if anything catastrophic should happen to this entity – Enemalta – it would step in to continue buying the electricity.

When Electrogas first came on to the scene, Shanghai Electric Power was not even a twinkle in Enemalta’s eye, and its debt put a serious question mark over its future. It is blindingly obvious that it would want a fallback position or would have otherwise withdrawn…

The long and complex negotiations involved dozens of lawyers, consultants and accountants, but in the meantime the clock was ticking.

Enemalta’s promise to buy an amount of electricity from Electrogas had to be vetted by the European Commission to ensure it is not state aid, just as the Finnish and British one were.

In the meantime, Electrogas put together its financing from four banks (including Bank of Valletta) for €360 million of the €450 million project, but with nothing to offer as security. If Enemalta did not promise to buy the electricity, the banks would basically be funding a very expensive pile of bricks and rapidly rusting metal.

While waiting for the Commission, the government provided a guarantee until the so-called ‘security of supply’ agreement between Enemalta and Electrogas was approved – so work on the plant could go ahead (with a political promise poised as a guillotine over the government’s head).

This was only revealed in dribs and drabs, inevitably raising suspicions that the government then had to try to correct.

Did the government have to issue the guarantee because the banks were wary about financing? No, we were told. It was just a temporary measure until the Commission did its work and the agreement details were worked painstakingly through the stakeholders.

Could the Commission say ‘no’? No, we were told. There is no apparent reason why it should – although it may tweak some of the details.

Ah, Gasol was in financial trouble and had to pull out of the Electrogas consortium, and did this force the government to step in? No, we were again told. The set-up of the consortium had always envisaged that in such a situation, the other two shareholders would buy up those shares.

Was the private investor saving millions by having the government provide this guarantee? No, we were told. Any possible saving was charged to them – an estimated €8.8 million – based on complex models of interest rates, administration fees and so on – and will be reviewed to make sure it is.

Wouldn’t it have been so much easier to have told the full story upfront rather than having to play defence all this time?

Publishers Allied Newspapers Ltd. Content House Group Ltd.

Allied

N E W S PA P E R S

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Advertising Enquiries Tel: 21 320713 Email: info@contenthouse.com.mt Advertising Sales Petra Urso Publications Sales Manager Mark Barbara Advertising Sales Executive Lindsey Ciantar Marvic Cutajar Advertising Sales Coordinators Printer Progress Press Ltd.

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A M E M B E R O F T H E A L L I E D G R O U P O F C O M PA N I E S

BUSINESS OPINION

UĦM’s case for second pillar pensions

Josef Vella Second pillar pensions, also known as occupational pensions, have been in existence for several years in countries like the UK, France and Italy.

Before 1979, we too had occupational pension schemes but with the so-called two-thirds pension scheme, any pension received from an employer had to be deducted from the national insurance pension. Inevitably, this led to the virtual prohibition of all private pension schemes and the burden of all retirement pensions fell on the national insurance account.

Thirty-five years have flown by since then and the pay-as-you-go pension scheme, despite generating windfall gains for pensioners in the earlier part of its life, has now proved to be inadequate for today’s and tomorrow’s pensioners. Besides being inadequate, the pay-as-you-go pension scheme is an increasing burden on public finances and, therefore, on the active labour force.

Despite all this, we seem to persist with the pay-as-you-go pension scheme while tinkering with reform and hoping that individuals

will take up private or third pillar pensions to address the inadequacy of pay-as-you-go pensions.

The latest ‘reform’ proposals, motivated by the need to address European Commission concerns with regard to the sustainability of State pensions, rule out an increase in the statutory retirement age and also rule out increasing social security contributions. They also rule out compulsory second pillar or supplementary pensions paid by State or private sector employers and employees.

UĦM assumes that the reason they are being ruled out by the Pensions Strategy Group is that stated by the Prime Minister: namely that thousands of households would not be able to afford paying part of their income towards an occupational pension scheme.

Whereas UĦM acknowledges that occupational pensions would appear unaffordable for lowincome households, the motivation for their reintroduction should be the same as the government’s stated objective for third pillar or individual pensions: prospective retirees topping up their pensions.

UĦM insists that this objective can equally be attained by second pillar pensions. Despite economic growth rates exceeding the EU average, the saving rate in our economy is lower today than in the past and a recent study by the Central Bank reaffirms that an important motivation for saving is the precautionary motive. In layman’s terms this refers to households’ attempt to save for a rainy day or – in the context of retirement – when

“e saving rate in our economy is lower today than in the past” household income falls. We know for a fact that the two-thirds pension scheme is a misnomer. When we retire we do not receive two-thirds of our income but much less than that and this proves again that the now ‘mature’ pay-as-you-go pension scheme is failing to provide adequate coverage for our pensioners.

Against this background, second pillar pensions, if carefully planned and structured to our specific context, could provide much-needed supplementary income for future retirees.

It should be stressed that in the UK, over five million workers are

today enrolled into second pillar pension schemes, and membership of workplace pension schemes stands at around 40 per cent for men and 31 per cent for women. In Italy in 2014, second pillar pension schemes recorded a third consecutive year of positive returns and Labour Minister Giuliano Poletti praised pension funds as an important source of finance.

True, there may be risks involved in second pillar pensions including State intervention as in the case of Hungary – where in 2011 pension reform sent shock waves across Europe. In order to reduce its

budget deficit, Hungary collapsed second pillar pensions into the State scheme and appropriated all private funds. Now there is no second pillar pension system and as a consequence the average consumer has little trust in saving at all.

UĦM is wary of this but we have confidence that no government in Malta would resort again to appropriation of private funds. We are, therefore, asking the government not to rule out the second pillar as an option for encouraging saving in the economy, at the same help addressing both the sustainability of state pensions and the question of adequacy for future retirees.

We are also asking the government to provide the funds for a study to assess the effectiveness or otherwise of second pillar pensions, its possible impact on public sector entities and private sector firms, and coverage. To rule it out by claiming that it does not help address either the adequacy question or the sustainability of pension in the long run, does not wash.

The Hungarian experience actually shows that by appropriating all second pillar pension funds to address its huge budget deficit, the Hungarian government destroyed in one swoop all that had been accumulated by individuals to live adequately once they retired. By implication, it resulted in a greater reliance on state pensions – causing further problems in terms of their financial sustainability.

We rest our case.

Josef Vella is the secretary general of the Union Ħaddiema Magħqudin.

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BUSINESS UPDATES

New comedy to debut in Malta Comedy specialists Mostly Harmless Productions are bringing a brand new, never-seenbefore play to the local stage this October.

The Trophy Room is a hilarious tale of football, sex, blackmail and relationships, set

against the backdrop of the richest league in the world. The play boasts a brilliant cast including John Montanaro as Ben, Julia Calvert as his wife Alice, Chiara Hyzler as a football agent and Steve Casaletto as Ben’s old school friend Harry.

The Trophy Room is being staged at the Blue Box Theatre in Msida from October 9 to 18.

Tickets, priced at €10 for opening night and €18 for all other shows, are on sale now. www.mostlyharmless.com.mt

RITA SCHEMBRI

Should you buy or lease a commercial property?

Rita Schembri When it comes to commercial property, an important option which your consultant will help you consider is whether to buy or to enter into a lease for a commercial property.

Commercial leases tend to be for longer time periods than residential property leases. The average tends to be three to five years for commercial spaces and one year for residential. Leasing may suit a business that is a start-up as it requires less up-front capital and a lower bank loan. It may also suit businesses that may be in Malta temporarily or those still considering whether or not to establish long-term roots here.

However, the property market being as lucrative as it is in Malta, and the fact that the island is small and limited in available space for development, it usually makes good business sense to purchase property since it is bound to increase in value in a few years, thereby adding to the overall value of the company’s assets.

The commercial property consultant works directly with the client to understand the particular specifics of the proposed business venture for the property required.

Purchasing or renting commercial space is an intricate part of a company’s business plan and the decision of what and where to buy can make or break a business. The more detailed the property negotiator’s understanding of your business venture, the better the property fit that can be located.

Rita Schembri is commercial division manager, www.franksalt. com.mt.

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APPOINTMENTS

CEE role for Microsoft New directors for country manager Island Hotels Group

Microsoft’s country manager for Cyprus & Malta, Adrianna Zammit, has joined the senior executive leadership team within Microsoft CEE Multicountry region, a hub managing 24 countries in Central Eastern Europe.

During the last months of Microsoft’s fiscal year, Ms Zammit has been acting as general manager of Microsoft Multicountry. Her new role will consist of business operations, strategy and marketing management for the 24 countries.

Microsoft will appoint George Petrakides as manager of Microsoft Malta and Cyprus and Panayiotis Ioannou as country manager for Malta.

Ms Zammit joined Microsoft in December 2010 as country manager for Malta after working in a similar role in sales management for Texas Instruments in the US.

ADRIANNA ZAMMIT

There are three new non-executive directors at the Island Hotels Group, co-opted to the post following the resignations of Michael Bonello, William Hancock, Gary Neville, John Bonello and Trevor Zahra.

The new directors, proposed to the board by Winston V. Zahra (chairman) and Winston J. Zahra (chief executive officer), are Joseph Fenech, Simon Naudi and Frank Xerri de Caro.

Mr Fenech is a former executive director of International Hotel Investments plc (IHI) and its joint chief executive officer since October 2014. Mr Fenech also serves as director on several Corinthia Group subsidiaries and affiliates.

New HSSEQ manager at Medserv

CFO for Grand Harbour Marina Jean Paul Saliba has taken over from Andrew Farrugia as the chief financial officer of Grand Harbour Marina.

The 27-year-old spent two years working as an auditor at KPMG, after which he moved to Grand Harbour Marina plc as an accountant and eventually financial controller.

Grand Harbour Marina plc forms part of Camper & Nicholsons Marina Investment Ltd registered in Guernsey. It owns 45 per cent of the IC Cesme Marina in Turkey.

Mr Naudi joined the Corinthia Group in a senior executive role in 1998. He is a former executive director of IHI, and currently the chief executive officer of CHI Limited, a company fully owned by IHI. Mr Naudi also serves as director on several Corinthia Group subsidiaries.

Mr Xerri de Caro joined IHI’s board of directors in 2004, having previously served as general manager of Bank of Valletta plc. In addition to serving on the boards of several major financial, banking and insurance institutions, Mr Xerri de Caro is also the chairman of IHI’s audit committee and several Corinthia Group and IHI subsidiaries.

JEAN PAUL SALIBA

Wayne Wrigley has been appointed HSSEQ manager for Medserv Group of Companies as the group continues to increase its concentration on quality, health, safety and environment.

Mr Wrigley spent the past eight years in the oil and gas production industry, with five years as a corporate regional manager responsible for floating offshore production facilities in the Asia Pacific region. Prior to this, he spent 20 years in the emergency services sector and carried out duties as a practitioner, trainer and consultant.

WAYNE WRIGLEY

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STOCK MARKET REVIEW

Another bond issue by Hili Ventures subsidiary

Edward Rizzo It was long rumoured within the business community that following the €36 million bond issue of PTL Holdings plc, the property subsidiary of the Hili Ventures Group would also be tapping the bond market.

Hili Properties plc, which was set up in October 2012 as the parent company of the property division of the Hili Ventures Group, issued a ‘formal notice’ yesterday confirming that it has launched a €37 million bond issue at a coupon of 4.5 per cent per annum. This is the first bond issue in many months which is on offer to the public at large since this year’s bond issues of International Hotel Investments plc, Mediterranean Investments Holding plc and 6pm Holdings plc were all targeted at existing bond-

holders or shareholders of the respective companies.

The Hili Ventures Group is involved in logistics and engineering, technology, property management, restaurant operations under the franchise of McDonald’s and retail operations in collaboration with Apple.

This is the third bond issue of the Hili Ventures Group following the €25 million 6.8 per cent Premier Capital plc 2017/20 bonds in 2010 and last year’s issue of €36 million

by PTL Holdings plc at 5.1 per cent per annum. Following the €37 million issue of Hili Properties, the total outstanding bonds of the Hili Ventures Group would amount to €98 million – the third largest issuer behind the Corinthia Group and Bank of Valletta plc.

Hili Properties’ focus is to acquire commercial properties with high rates of occupancy, providing a steady stream of cash flow through rental income. Its current property portfolio comprises 24 properties located across Malta, Latvia, Lithuania and Estonia valued at €64.9 million.

The total rentable area (presently 46,900sqm) generates an annual rent of €4.8 million, representing a gross rental yield of 7.3 per cent per annum and the weighted

average unexpired lease term is of eight years.

The diverse portfolio represents a mix of office spaces (40 per cent), retail outlets and shopping malls (32 per cent) as well as restaurants (25 per cent) spread across four jurisdictions: Malta (53.3 per cent of property value), Latvia (39.1 per cent), Lithuania (4.5 per cent) and Estonia (3.1 per cent). Latvia represents the lion’s share in terms of the total annual income (54.1 per cent) and rentable area (62.8 per cent). Meanwhile, the six properties located in Malta contribute 37.5 per cent of total annual income at an average yield of 5.2 per cent. The local property portfolio achieves the highest average rate of €151 per square metre.

Almost 42 per cent (equivalent to circa €2 million) of revenue is generated from Hili Ventures Group companies and other related parties. The largest property within the present portfolio is the Hili Building in Luqa with a total rentable area of 5,015sqm valued at €13.5 million (equivalent to €2,700 per sqm) generating annualised rent of €677,000 (gross yield of five per cent. This office block and warehousing facilities are leased to various Hili Ventures Group companies and other firms owned by the Hili family.

Meanwhile, the restaurant portfolio, which is almost entirely leased to Premier Capital plc (a sister company of Hili Properties), amounts to 14,675sqm. Premier Capital is the development licensee of McDonalds in Malta, Greece and the Baltic states. The other anchor tenants are supermarkets and convenience stores of chains well known in the Baltics and Northern Europe.

The average occupancy rate of the current property portfolio as at August 2015 was 93 per cent. Only three properties are vacant. Hili Properties owns a property in Floriana which has a total rentable area of 900sqm.

This property was originally used as the Hili Group’s head office for several years and the prospectus indicates that the company is in the process of concluding a lease agreement with a prospective tenant for an annual rental income of €70,000

“e total rentable area generates an annual rent of 4.8 million”

TUKUMS COMPLEX IN LATVIA

per annum which translates into a rental yield of only four per cent per annum based on the valuation attributed to this property of €1.75 million. A rate of €77 per square metre is on the low side given the strong demand for office facilities in Malta.

However, the reason for this could be due to the fact that the property is in dire need of a major refurbishment. Likewise, another property in Sliema is only half occupied. This building, which is currently valued at €6.8 million, is partly leased to Premier Capital plc until 2023 for use as a McDonald’s restaurant while the overlying level is an office area comprising 520sqm which is still vacant.

The remaining vacant property is a restaurant in Latvia which was previously leased to Premier Capital plc until December 2013. Hili Properties estimates that it should achieve annualised rent of €42,000 per annum which is rather immaterial to the overall income stream of the group.

Hili Properties is currently in discussions to acquire commercial properties valued at circa €26.9 million. The new properties being earmarked will be funded partly by the bond issue proceeds of €10.7 million while the balance will be

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STOCK MARKET REVIEW

raised through additional bank funding. The potential new acquisitions include retail outlets in Romania and Greece as well as logistics centres and office facilities in Lithuania. The overall aim is to generate an average portfolio yield of about eight per cent per annum.

Furthermore, the group plans to dispose of the land situated in Bengħajsa between 2018 and 2020 at the latest and the proceeds will be used to invest in additional properties overseas.

Although the bonds are unsecured, which could sound odd to some investors given that this is a property company, the two guarantors (Hili Estates Ltd & Harbour (APM) Investments Ltd) which own the head office in Luqa and a large parcel of land in Bengħajsa valued at €25 million, have committed to collectively ensure that their aggregate net asset value will amount to not less than €37 million at the end of each financial reporting period (being June 30 and December 30 of each year). These properties will become unencumbered following the repayment of certain bank loans following the bond issue. Nonetheless, bank borrowings totalling €19.4 million after the bond issue will rank senior to these bonds.

Since a number of properties were acquired during the current financial year, the 2015 forecasts published in the prospectus do not

provide a good overview of the financial performance of the company since the income generation of the properties acquired this year do not reflect a full 12-month period.

On the other hand, the financial analysis summary annexed to the prospectus provides the projections for 2016 which include a full-year contribution of the properties acquired in 2015 as well as anticipated contributions of new properties expected to be made in the coming months. The directors expect to generate €5.5 million in earn-

ings before interest, tax, depreciation and amortisation (Ebitda) in 2016 up from the €3 million forecasted for 2015. The Ebitda projection for 2016 should translate into an interest cover of 1.8 times, which can be considered to be adequate but not as attractive as many other bonds listed on the Malta Stock Exchange.

Although the gross rental yield of the property portfolio is 7.3 per cent, the reason behind the interest cover not exceeding two times is the high level of gearing. The projections as at December 31, 2016, indicate a

gearing ratio in excess of 70 per cent composed of equity of €30.4 million and net debt of €73.5 million.

Given the high gearing, further equity injections and/or property sales will eventually be necessary to enable Hili Properties to sustain its long-term strategy.

Following this bond issue, it is expected that other issuers will offer more fixed interest investment propositions in the coming months after a relatively weaker-than-expected flow of bond issues during the first half of 2015.

Rizzo, Farrugia & Co. (Stockbrokers) Ltd (RFC) is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the company/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent, and may also have other business relationships with the company/s. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results.

Neither RFC nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report. © 2015 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved.

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BUSINESS UPDATES

European Commissioners Cretu and Vella debate Europe with Maltese citizens On October 1 and 2, the European Commissioner responsible for Regional Policy, Corina Cretu, and the European Commissioner responsible for Environment, Maritime Affairs and Fisheries, Karmenu Vella, will visit Malta.

On October 1, the Commissioners will exchange views with the Maltese public in a Citizens’ Dialogue that will be held at the Hotel Phoenicia at 5.30pm. ese dialogues provide a great opportunity for people to give their opinion and for the European Commissioners to better understand what needs to be done to improve the daily lives of citizens around Europe. e two Commissioners will exchange views with citizens on a wide range of issues and EU policies which directly impact people’s lives. e dialogue is expected to focus on the current and future situation of the EU, topics that fall within the specific portfolios of the two Commissioners and any other questions that those present would like to discuss.

Everyone is invited to participate. One is encouraged to register in advance by calling on 2342 5100 or by sending an e-mail to comm-rep-mt@ec.europa.eu.

Questions and comments may also be submitted in advance on the Facebook page of the Representation of the European Commission in Malta or on Twitter using the hashtag #EUdialogues. e Citizens’ Dialogue will be streamed on the website of the European Commission Representation in Malta http://ec.europa.eu/malta/ on October 1 from 5.30pm onwards and will be followed by a press conference. http://ec.europa.eu/citizensdialogues/

“e two Commissioners will exchange views with the citizens on a wide range of issues and EU policies which directly impact people’s lives”

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BUSINESS UPDATES

THREE AIRCRAFT OPERATED BY AIRX AT LUTON AIRPORT: FROM LEFT LEGACY 600, BOEING 737 AND A CHALLENGER 850

AirX expands its fleet of private jets Malta-based executive air charter company AirX is expanding its fleet of aircraft after recently concluding a transaction to add a third Boeing 737 to its fleet, bringing the total number of aircraft to 12. AirX is also adding more of its aircraft to the Maltese aviation register.

“AirX is a living testimonial of Malta’s growing success as an aviation hub. Our fleet expansion programme is well under way, growing our fleet from five to 12 aircraft in one year. Aircraft registration is important for Malta to establish itself as a key player in aviation and creates employment opportunities for Maltese aviation professionals. We are proud to support Malta on the way to becoming a recognised global player in aviation” said John B. Matthews, chairman of AirX. AirX relocated its head office and operations to Malta in March 2013 and moved fast from a fresh start-up to a recognised private air charter provider in Europe, now employing over 130 personnel.

AirX provides luxury private charter flights across Europe to several clients who most regularly include A-list celebrities ranging from Hollywood movie stars to pop artists, members of royal families, top corporate executives, sport teams and government ministers. The company obtained its Air Operator’s Certificate (AOC) from the Civil Aviation Directorate and Transport Malta in May 2013. www.airx.aero

“AirX is a living testimonial of Malta’s growing success as an aviation hub”

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e Business OBSERVER

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BUSINESS UPDATES

inking of starting or growing a business?

Setting up a business can be very stressful: one may worry about where to get the money from, whether one’s loved ones will support him, how to cope with all the issues, and most importantly, questions about one’s ability to set up a business after all It’s normal to have these concerns, especially women business owners.

The Female Business café provides the opportunity for women to talk with a number of entities which can provide answers to their questions and give advice to aspiring women entrepreneurs and others who would like to expand their business horizons.

Interested individuals may also take advantage of a workshop on business modelling tools that provides practical advice and inspiration for women interested in becoming entrepreneurs.

The event is being held on October 1 at the Kitchen Garden, Attard, from 9.30am to 3pm and on October 2 at Tiġrija Palazz, Victoria from 10am till 2.30pm.

For more information send an e-mail to smeweek.meib@gov.mt or call 2220 9823 for more information and to book a place for the breakout sessions (Attard –10am and noon; Gozo – 11am and 1pm).