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issue 05 august 2011


COVER STORY bank statements Gold lets the island’s bankers do the talking

+ opinion


Blast destroys Cyprus’s largest power station by the Strategy & Economic Research Division, NBG 24 The EAC looks to the Future by Costas Gavrielides


The Debate: “Do the Credit Rating Agencies do more harm than good?” by Dinos Andreou (Yes) and Marios Mavrides (No) 26 UCITS Funds: An Innovation in Modern Investment Management by Theodoros Costeas CFA 61 Cyprus Airways: The Future Is Ours by George Mavrocostas


Limassol belongs to everyone who feels it is theirs by Peter Economides 98

FEATURES 44 | Cypriot and Ukrainian businessmen meet Report from Kiev

48 | The China Miracle The Gold Guide to Investing in China

66 |Investing Defensively Protecting wealth during times of uncertainty


44 66 72 82 86 92

{money} {business} {economy} {tax&legal} {lifestyle}

the international investment, business & finance magazine of cyprus

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EvEry cloud...


uly has always been an eventful month for Cyprus. All historians know that on 2 July, 1570 some 60,000 Ottoman troops landed in Limassol at the start of a 300-year occupation; on 9 July 1821, Archbishop Kyprianos and other notables were executed; the considerably shorter British occupation began on 12 July, 1878; and of course every Cypriot, Greek or Turk, knows that the coup d’etat against Archbishop Makarios took place on 15 July 1974 and was followed by the Turkish invasion on 20 July. In the broader scheme of things, 11 July 2011 is clearly of lesser importance, though several billion euros worth of damage to the island’s biggest power station and the deaths of 13 people - and the subsequent public anger that they fuelled - cannot be dismissed lightly. Various individuals will doubtless be made accountable for the tragedy at the Mari naval base and in time the Electricity Authority of Cyprus will gradually regain its full generating capacity. However, the damage to the economy could hardly have come at a worse moment, given that the government and opposition parties have been attempting (and failing as gold went to press) to agree on a package of measures to ensure that the island does not go the way of Greece and require an EU bailout. Before the unexpected arrival of power cuts began to cause untold problems at the height of summer, we had decided that it was time to let the people in charge of the island’s banks express their views on the situation in their sector and on the broader economy. After successive downgrades by the main Credit Rating Agencies to a number of Cypriot banks and to Cyprus itself, based on concerns over the banks’ exposure to Greece in the light of its sovereign debt crisis and the possibility of a Greek default, it seemed to us that the bankers deserved a platform for their opinions. Eleven of them responded positively to the invitation and we present what they have to say in this month’s cover story. Given that most of them had formulated their replies before 11 July, they may appear to be unduly optimistic. However, let us not forget that in a recent issue of gold, we suggested that the ‘big three’ local banks ( Bank of Cyprus, Marfin Laiki Bank and Hellenic Bank) could survive even a 40% ‘haircut’ of Greek sovereign debt. And while successive governments have shown a rather hostile attitude towards the Central Bank of Cyprus and, in particular, towards Governor Athanasios Orphanides, the heads of the island’s banks are virtually unanimous in their belief that the comparatively strict supervisory regime maintained by the Central Bank is one of the reasons why the sector has remained robust and has why Cypriot banks have withstood the pressures that caused others to collapse or to require extreme government intervention. The bankers also view the results of the recent European stress tests as proof that their organisations are in a strong position and that depositors should not be panicked into withdrawing their money. Measures taken by the banks to reinforce their capital base appear to have reassured the market and investors alike for the time being. However, in yet another ‘black July’ for Cyprus, many people are asking whether the island can continue to attract international companies and high net worth individuals and encourage them to make it their base. Will the undoubted appeal of double tax treaties, EU membership, a flat rate of corporate tax and a winning geographical location, outweigh the inconvenience of power cuts and restricted electricity consumption, even on a temporary basis, not to mention certain inflation? It is hard to tell. The latest July tragedy may ultimately prove to be the shock required if essential structural reforms are to be implemented in order to ensure that confidence in the long-term economic stability of Cyprus and its banking system is to be maintained. Whether this particular black cloud has a silver lining remains to be seen.

John Vickers, Chief Editor


Published by iMh issn 1986 - 3543

Managing director:

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Angelos Angelodimou, Antonis Antoniou, Stella Mourettou, Maria Pilidou Contributors to this issue:

Dinos Andreou, Theodoros Costeas, Peter Economides, Isavella FrangouPavlou, Costas Gavrielides, Nathalie Kyrou, Richard Maino, Marios Mavrides, Dick Meredith, Dr. Savvas Savouri, George Savvides, Emma Thorne Art DireCtor:

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the international investment, business & finance magazine of cyprus

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7/30/11 1:47:12 PM’s about doing things differently

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{news briefing: global }

one PUBLIC SECTOR PAY HIGHER Britain’s Office for National Statistics reveals that state workers were paid nearly 8% more than their private sector counterparts last April. In 2010, 38% of public sector workers had a university degree compared with 23% in the private sector. HTC PROFITS DOUBLE Taiwanese smartphone maker HTC reports that its profits more than doubled in the three months to June. The world’s third-biggest mobile phone maker made a net profit of €422.8m; in the period IMF MUST AIM FOR CREDIBILITY Christine Lagarde, the new head of the International Monetary Fund (IMF), says she wants the fund to be more connected, credible and comprehensive, “and not ad-hoc, as sometimes has been the case in the past.” ECB RAISES INTEREST RATE The European Central Bank raises its key interest rate to focus on fighting inflation. The ECB’s key interest rate is now 1.50%, up from the previous 1.25% rate set in April. JACKPOT WINNERS A couple from Falkirk, Scotland, wins the €185m Euromillions jackpot. The prize is the biggest amount ever won on a European lottery. The winners matched all five main numbers and both Lucky Stars. IBM PROFITS RISE IBM reports second quarter net income up 8% on the same quarter last year. The rise was fuelled by strong growth in sales of both its computers and software. It made $3.66bn (€2.56bn), while revenue was 12% higher at $26.7bn (€18.69bn). CHINA URGED TO STRENGTHEN CURRENCY The IMF says that China should loosen its tight grip on the yuan. Over the past year, the currency has appreciated 5.5% against the weakening US dollar but when China’s rapid inflation is taken into account, the yuan has actually depreciated, the IMF says.

Murdoch closes News of the world


+ 3

In a shock move, Rupert Murdoch’s News Corporation, the parent company of News International, which runs the Sun, the Times and Sunday Times among others, closed the News of the World as a result of an ongoing scandal involving phone-hacking by its journalists. A week later, the Chief Executive of News International, Rebekah Brooks, resigned and was arrested on suspicion of conspiring to intercept communications and on suspicion of corruption. She was later released on bail. In another twist, Metropolitan Police Assistant Commissioner John Yates resigned,

8 banks fail eba stress test



n 22 July, the European Banking Authority (EBA) announced the results of its latest bank stress test. Eight banks out of 90 failed the test. The failing banks are from Spain (5), Greece (2) and Austria (1). In short, 91 banks, representing more than 65% of banking assets in the EU, were tested in baseline and adverse macroeconomic scenarios. Eight banks failed the test, in the sense that they did not meet the capital threshold of the EBA-defined “Core Tier 1 Capital Ratio” of 5%. A total of 82 banks passed the test, and 1 bank decided to pull the plug and withdraw from the test (German bank, Helaba). The Core Tier 1 Capital Ratio applied in this test is ‘custom-built’ for the purpose and the banks that failed are not insolvent from a legal perspective. The banks that failed the test are expected to agree with their respective supervisory authorities on appropriate remedial measures and execute them in due time. In addition, the EBA recommends the national supervisory authorities to take steps to ensure stronger capital positions for the banks that have Core Tier 1 Capital Ratios above but close to 5%, in combination with exposure to stressed EU sovereigns.

a day after his boss, Commissioner Sir Paul Stephenson, announced that he was standing down. Sir Paul, Britain’s most senior police officer, was criticised for hiring former News of the World executive Neil Wallis - who was questioned by police as part of the probe into hacking - as an adviser. To complicate the story even further, on 18 July a former News of the World reporter who had alleged that former editor Andy Coulson had encouraged him to hack phones was found dead at his home in Watford, Hertfordshire, after concerns were raised about his whereabouts. Police said that the death was being treated as “unexplained, but not thought to be suspicious”. News of the World, was the biggest selling English language newspaper in the world, was first published in 1843.

the international investment, business & finance magazine of cyprus

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The US technology giant Microsoft says that its annual revenues have hit a record of $69.94bn (€48.96bn) thanks to a great extent to sales of the company’s Xbox 360 videogame console and its Office software. The figures, which beat earnings estimates, also showed final quarter revenues reached a record high of $1.37bn (€959m) leading to profits of $5.87bn (€4.10bn) Sales rose 8% to $17.37bn (€12.16bn), a boosted chiefly by sales of Office, Xbox and server software behind Microsoft’s push into cloud computing. Microsoft’s business division, which sells the Office suite of programs, including Outlook, SharePoint and Excel, was the company’s biggest seller in the quarter, increasing sales by 7% to $5.8bn (€4.06bn). The company’s online services unit, which runs the Bing search engine and MSN internet portal, increased sales by 16.5% to $662m (€463m), but saw losses increase to $728m (€509m) as it struggled to fight Google. One weaker spot was sales of its widely-used Windows product, which are slowing as tablet PC sales eat into the demand for traditional PCs. Microsoft is itself expected to enter the tablet market next year with the launch of its next operating system, code-named Windows 8, which will be compatible with the lowpower chips commonly used by tablet and mobile phone makers. Microsoft is the latest technology company to exceed profit expectations. Google, Apple and IBM all reported strong earnings recently.

GREECE AID PACKAGE BOOSTS STOCK MARKETS Stock markets rose following the eurozone’s comprehensive 21 July agreement designed to resolve Greece’s debt crisis. The euro also rose further against the dollar. Eurozone leaders agreed to a further €109bn aid package, which will give Greece decades more to repay its debts and which will include contributions by private lenders. The Institute of International Finance - a global trade body representing big banks and other major lenders - said the planned debt restructuring would target participation by 90% of Greece’s private sector lenders while French President Nicolas Sarkozy said that private lenders would contribute a total of €135bn of financing to Greece.

5. GOLD PRICE CLIMBS TO NEW RECORD The price of gold hit a new record price of $1,610 an ounce in mid-July as debt worries in the US and Europe intensified. Gold is considered a safe investment and usually gains at times of global economic uncertainty. The record-breaking gold price came ahead of the 21 July Brussels summit of eurozone leaders at which they agreed on a new bailout package for Greece. As well as gold hitting a new record, silver also continued to climb, to above $40 an ounce, its highest price for two months.


The restructuring is widely expected to be declared a default by Greece on its debts by the Credit Rating Agencies but President Sarkozy said that the word ‘default’ “is not part of my vocabulary. Greece will pay its debt”. European Commission President Jose Manuel Barroso also indicated plans to rein in the power of the Credit Rating agencies. “We endorsed a plan of reducing overreliance on external credit ratings,” he said, adding that policymakers would come forward in the autumn “with further proposals”. Part of the bailout package (€20bn) will be used to recapitalise the Greek banks and €35bn to facilitate their continued borrowing from the ECB.

the international investment, business & finance magazine of cyprus

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{news briefing: global }


deals of the month News Corp sells MySpace

Six years after paying $580m for MySpace, News Corporation has sold the ailing social networking site to online advertising firm Specific Media for a reported $35m. According to an announcement from Specific media, singer and actor Justin Timberlake will take a stake in the business and play “a major role in developing the creative direction and strategy for the company moving forward”. MySpace was a leading social networking site when it was bought by Rupert Murdoch’s News Corp but the business was eclipsed by rivals, and despite attempts to revive MySpace’s fortunes the site has been a financial millstone. News Corp’s chief operating officer Chase Carey said last November that the losses at MySpace were “unsustainable”. According to tracking firm comScore, MySpace had 21.8 million unique monthly US visitors in August 2005 compared with Facebook’s 8.3 million. By May 2011, Facebook’s monthly US visitors had risen to 157.2 million compared with MySpace’s 34.9 million, comScore said. Facebook now has nearly 700 million members worldwide.

BHP Billiton Petroleum to buy Petrohawk Energy In a $12.1 billion all-cash deal that will make the Houston-based oil and gas arm of the Australian mining giant a much bigger player in the U.S. onshore oil and gas business, BHP Billiton Petroleum has agreed to buy Petrohawk Energy Corporation. The blockbuster deal, the firm’s second major US acquisition this year, will give BHP Billiton Petroleum access to highly sought-after acreage in the Eagle Ford and Haynesville shale formations and the oil-rich Permian Basin. Petrohawk’s assets cover approximately 1 million acres in Texas and Louisiana. The deal underscores the aggressive growth plans of a lesser-known unit of one of the world’s biggest companies, which is associated more with hunting for copper, iron and coal than oil and natural gas. “We try to do things that are large,” said J. Michael Yeager, CEO of BHP Billiton Petrolem, in an interview. “We look for things that are long-life where we can apply our technology and our capital, and clearly we think this checks all those boxes.”




Mention gambling and places like Las Vegas come to mind but you may be surprised to know that Americans are not the world’s biggest gamblers. Indeed, the US is not even in the top 10 biggest gambling nations published by the London-based consultancy H2 Gambling Capital which takes average gaming losses (the amount bet and never recovered) in a year and divides it by the adult population in over 200 countries. The numbers include money lost on all types of betting including horse racing, poker machines, lotteries and casinos during 2010.

1. Australia 2. Singapore 3. Ireland 4. Caanada 5. Finland 6. Italy 7. Hong Kong 8. Norway 9. Greece 10. Spain


Pfizer Acquires Icagen Pfizer Inc. has agreed to buy the remaining shares of biopharmaceutical company Icagen Inc. that it did not already own. The New York-based pharmaceutical giant, which currently owns an 11% stake in Icagen, will pay $56 million for the remaining 8.3 million shares at a price of $6 per share. The deal will “expand Pfizer’s position in the pain relief disease area and [its] ability to develop potential firstin-industry drugs for the treatment of pain and related disorders,” said Pfizer senior vice president Ruth McKernan in a prepared statement. Pfizer and Icagen’s relationship dates back to 2007 when the companies formed a joint venture to develop drugs. The transaction, expected to close before the end of the year, underscores Pfizer’s latest attempt at focusing on its core businesses. Earlier this month, it announced that that it was offering up for sale its animal health unit, as well as its nutrition business, as part of its restructuring. In March, Pfizer spent $3.6 billion on painkiller specialist King Pharmaceuticals.


GAMING LOSSES PER ADULT $1,288 $1,174 $588 $568 $553 $517 $503 $448 $420 $418

the international investment, business & finance magazine of cyprus

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Gold magazine ad C.pdf












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{news briefing: local }


BEFORE Vasilikos Power Station, once hailed at the biggest infrastructure project ever undertaken in Cyprus, was destroyed by an explosion at the nearby Evangelos Florakis Naval Base at Mari on 11 July. The Chairman of the Electricity Authority of Cyprus (EAC), Haris Thrassou, said that it will require billions of euros to repair the damage to the power station which supplied half the island’s electricity. The explosion, which killed 13 people and injured 62, occurred shortly before 6am, when 98 containers full of munitions blew up. Cyprus had confiscated the cargo of the M/V Monchegorsk, a vessel sailing from Iran to Syria, in 2009 and kept the

AFTER containers inside the naval base. Long exposure to high temperatures had led the chemicals in two of the containers to react and catch fire. Repeated warnings about the dangers of leaving the containers at the base had been ignored by the Ministry of Defence, the Ministry of Foreign Affairs and the Presidential Palace. The accident led to the immediate resignation of the Defence Minister and the Commander of the National Guard. Foreign Minister Marcos Kyprianou later resigned following the first of a series of hearings held by the House Defence Committee into the blast at the naval base. The EAC says that it expects to be able to

‘ZORBA’ DIRECTOR DIES Cyprus’s most successful filmmaker Michael Cacoyannis, best known as the director of the 1964 hit movie Zorba The Greek died on in Athens on 25 July. He was 90. Cacoyannis’s early work brought a new level of respect to Greek filmmaking in the 1950s, when postwar European cinema was dominated by the Italians and French. It also gave exposure to some of Greece’s finest performers. His 1955 film, Stella, which won the Golden Globe as best foreign film, featured Melina Mercouri in her first movie role. Irene Papas would also appear in many of his productions. But it was Zorba the Greek, his adaptation of the novel by Nikos Kazantzakis that created what the New York Times described as ‘a cultural phenomenon that transcended filmmaking’. The film won three Academy Awards but, although nominated for best director and best film, Cacoyannis and Zorba lost out to George Cukor’s adaptation of My Fair Lady.


meet power demand within the next few weeks pending a private sector agreement for the supply, installation, operation and maintenance of temporary generators. A decision to purchase electricity from the Turkish Cypriot community has come in for considerable criticism by those who claim that such a move amounts to recognition of the illegal regime in the occupied north of the island. However, the government has repeated that such an arrangement is perfectly in line with the EU’s Green Line regulation and noted that the deal was brokered between the Greek Cypriot and Turkish Cypriot Chambers of Commerce & Industry.

MoodY’s doWnGrades cYPrus bond ratinG Ratings Agency Moody’s downgraded its Cyprus government bond rating from A2 to Baa1 on 27 July, citing the island’s weakening medium-term credit fundamentals and the 11 July blast which took out its main power station. Moody’s also reduced its forecasts for Cyprus’s economic growth to 0% in 2011 and 1% in 2012. Moody’s also noted what it called the “increasingly fractious domestic political climate”. Indeed, the future of a series of austerity measures agreed by the government and opposition parties looked dim as Gold went to press after Finance Minister Charilaos Stavrakis allegedly reneged on many of the agreed steps and failed to propose additional ones in the light of the destruction to Vasilikos power station. The original deal included civil service staff cuts and the privatisation of the Cyprus Stock Exchange.

the international investment, business & finance magazine of cyprus

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7/30/11 1:48:17 PM


forex watch {commodities watch} By Isavella Frangou-Pavlou

Gold Risk-averse investors returned to gold as European debt worries and US debt ceiling tensions surged in July, leading the precious metal to a new record high above US$1620/oz. Europe’s sovereign debt issues persisted as Moody’s downgraded Ireland’s debt to junk status and Italy, economically the third largest country in the eurozone, is facing creditability problems. Italy’s parliament approved a €40 billion deficit-reduction package and the EU bailed out Greece with a €100 billion plan. The euro rallied on the news though there is still concern that Greece may engage in a selective default. US debt problems also triggered worries over July. Negotiations between US lawmakers wrapped up in Washington without a clear plan to lift the $14.3 trillion debt ceiling which needs to be raised by Aug. 2 or the government will be at risk of defaulting on its obligations. The European Central Bank and the Bank of England will decide on their rates on August 4 and the US Fed on August 9. All are expected to keep their current monetary policies unchanged.

US StockS

Source: kaB-Metatrader

oil Oil prices consolidated to rise in July amid debt worries and production uncertainty in Libya, retreating to US$93/barrel in the middle of July, followed by a rebound at the US$99/barrel level. The International Energy Agency’s (IEA) decision to release oil reserves in June weighted on oil prices at the beginning of July. But the Paris-based Agency announcement on July 22 that it would not continue to release oil reserves into the global oil market caused the downward pressure on oil prices to be short-lived. Debt problems weakened global fundamentals and China, as the second largest crude oil consumer, showed signs of economic contraction as its PMI fell below 50 in June. While Libya’s situation is not optimistic, the NATO coalition’s mission in Libya is now more than five months old, Colonel Gaddafi has not stepped down and the outcome remains unclear. Libya’s oil production may not resume in the short-term adding support to the oil price.

Source: kaB-Metatrader

US stocks were on a roller-coaster ride in July, dipping low to 1290, and then surging to 1350, mainly influenced by both US and European debt issues. It is almost certain that the US government will raise the debt ceiling before the August 2 deadline to avoid a default, making current negotiations seem a political show. Eurozone leaders finally accepted the possibility of a selective default on Greece’s bonds despite further downgrades. EU leaders agreed to extend the maturity of future loans to Greece to a maximum 30 years from the current 7.5 years while funds will be provided at 3.5% and these also apply to private investors. This greatly reduces Greece’s cost of capital and the burden on its repayment. Investors in August should keep an eye on debt progress on both continents as well as the Fed’s meeting minutes. Source: kaB-Metatrader

info: iSavella FranGoU-PavloU is Sales and Marketing Manager at KAB Strategy (Cyprus) Ltd (CySEC-License No. 058/05)


the international investment, business & finance magazine of cYPrus

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7/30/11 1:49:27 PM

{forex roundup}

GBPUSD The pound was stronger than the euro in July and pierced through the resistance line connecting highs between May and June. Fundamentally, Britain is rather quiet and sterling follows the euro’s trend. The BoE’s last meeting minutes revealed that the top officials in the central bank still favour a loose monetary policy and keeping both the interest rate and the asset buying program unchanged. Judging by the progress on economic recovery and votes on loose monetary policy, the BoE will not change the current stance in the short-term and therefore pound’s movement will be range-bonded. Traders should pay attention to the next BoE’s meeting minutes and see if there is any increase in votes refusing the current monetary policy. CPI and employment rates are the key data and the BoE will have a different tone if they deteriorate much. On the weekly chart, the pound has been climbing since May in 2010 but at a slow pace. Three consecutive higher lows and highs suggests a long uptrend for the pound but currently it stalls as the euro is near the resistance.


Source: KAB-MetaTrader

USDJPY Japan is still overcoming the aftermath of the earthquake and nuclear crisis and a third rescue capital injection worth US$13 billion will be released in August. Japanese economic data shows the economy is picking up bits and pieces and recovery is on track. The safe haven currency strengthened in July, with the USDJPY pair piercing the threshold at 80.0. The yen will continue to be favoured by investors given the uncertainty in both Europe and the US. And if Japan is able to keep the pace of recovery, then we may see further strengthening of the Japanese currency. Source: KAB-MetaTrader

The euro moved in a V-shape in July touching a low at 1.383. A Greek bailout package breakthrough was reached as the EU agreed on relaxing the terms for loans by extending the maturity of future loans to Greece to maximum 30 years (currently at 7.5 years), while funds will be provided at about 3.5%. The same terms will apply to private investors. This means that the EU accepts a selective default because the Rating Agencies will downgrade Greece’s bond as private investors are put into less favourable terms. In return, Greece will have a much lower capital cost, which is key to restoring its economy. Traders should focus on the ECB and Greece in August. The European Consumer Price Index and German inflation are expected to remain above the ECB’s official target of 2.0% through July and the ECB is prepared to take tough monetary policy measures to curb inflation. Any surprises in CPI and employment figures are likely to impact future ECB moves.

Source: KAB-MetaTrader

This research report or summary has been prepared by KAB Strategy (Cyprus) Ltd (CYSEC Licence No. 058/05) and KAB Financial Advisory Ltd from information believed to be reliable. Such information has not been independently verified and no warranty, representation or warranty, express or implied, is made as to its accuracy, completeness or correctness. This report is provided for information purposes only. Nothing in this report should be considered to constitute investment advice. It is not intended, and should not be considered, as an offer, invitation, solicitation or recommendation to buy or sell any of the financial instruments described herein. Leveraged products incur a high level of risk and can result in the loss of all your invested capital. KAB Strategy (Cyprus) Ltd and its affiliates accept no liability whatsoever for any direct or consequential loss arising from the use of this document or its contents. the international investment, business & finance magazine OF CYPRUS

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7/30/11 1:49:28 PM


Blast destroys Cyprus’s largest power station Worst peacetime disaster By the Strategy & Economic Research Division, National Bank of Greece


he July 11 explosion of 98 containers full of munitions, confiscated by Cyprus from a ship sailing from Iran to Syria in 2009 (in violation of UN sanctions on Iran), killed 13 people and knocked out the island’s largest power plant at Vasilikos, which provides half of the island’s power supply. The direct cost of reconstruction of the Vasilikos plant is expected to reach €0.9bn (5% of GDP), net of insurance coverage of €0.6bn (3.4% of GDP). The total economic cost from the disaster is, however, very hard to quantify at present. Provisional estimates see it in the range of €1.8bn-€2.5bn (10%-14% of GDP). Both the politics and economics of the island are set to be hit hardly by this event. President Christofias has already lost a key ally and the ruling coalition may lose its junior party. Foreign Minister Markos Kyprianou, an influential member of the Democratic Party, the junior partner in Christofias’s centre-left coalition, resigned over the blast. Worse, his departure could lead to the exit of his party from the coalition government, headed by


Christofias’ Communist AKEL party. markedly to 3.4% of GDP in H1:11 All the sectors of the economy, are set to from 1.9% of GDP in H1:10, while the suffer from the destruction of half of the 12-month rolling fiscal deficit accelerated island’s power supply. As a result, we see to 6.5% of GDP in June from 4.9% in the economy re-entering recession this December 2010. As a result, the authorities year, posting a real GDP growth of -0.5%, need to take tougher austerity measures rather than recovering steadily to 2% as in than those under discussion prior to the our previous scenario from 1% in 2010. blast (including a cut in the number The subsequent large power imbalance of civil servants, the abolition of some of supply and demand and the fact that semi-government corporations and the Vasilikos power introduction of small station was the scaled pay cuts in the The fiscal deficit could cheapest cost producer civil service). in the country are set reach 8% of GDP this year The poor y-t-d to lead to a significant against its target of 4.9% Current Account increase in electricity Deficit (CAD) prices - estimated performance and the at around €0.6bn-€0.7bn (3.4-3.9% anticipated weakening of tourism activity of GDP). This should keep inflation at and surging imports should result in a its highest levels in the past 16 years, at 3-year high CAD of 10% of GDP. The around 4.5% at end-December, up from latter will reflect the need to rebuild the 4% currently. In view of a worrying power plant. The CAD widened by 0.3 pps y-t-d performance and the anticipated y-o-y to 3.6% of GDP in Q1:11 while the adverse impact of the July 11 blast on 4-quarter rolling CAD reached 8.2% of both revenue and expenditure, the fiscal GDP at end-Q1:11 compared with 7.7% deficit could reach 8% of GDP this year at end-Q4:10. On the other hand, the against its target of 4.9% of GDP. Note loss for tourism activity is likely to hover that the cumulative fiscal deficit widened around EUR 0.2bn (1% of GDP).

the international investment, business & finance magazine of cyprus

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7/30/11 1:49:31 PM


By Costas Gavrielides

the EAC looks to the Future


mmediately after the tragic accident at the Zygi Naval Base at Mari, it was clear that Vasilikos power station had suffered such a degree of extensive damage that it could not be brought back into operation in the near future. Given that Vasilikos was responsible for the generation of more than 50% of the island’s electricity, it is difficult to imagine how much more devastating such a blow could be on people’s daily lives and on the broader economy, particularly at the height of summer when the demand for power is always at its peak. However, we have no choice but to take every possible measure to regain our generating capacity and ensure that we are once again in a position to provide an uninterrupted supply of electricity to every household and business in Cyprus. Prior to July 11, the main concern of the Electricity Authority of Cyprus (EAC) in recent years had been the long-awaited advent of natural gas on the island. Having succeeded in satisfying the growing demand for electricity, especially at peak times during the summer months, the Authority was looking forward to being able to put an end to the country’s dependence on petroleum products and to generate electricity with a cleaner, more environmentally-friendly fuel and, of course, at a lower charge to the consumer. Today, we face the totally unexpected and daunting task of rebuilding Vasilikos power station at an as yet unknown cost but one that may amount to as much as €2 billion. Next year the Electricity Authority of Cyprus is due to celebrate its 60th anniversary. While its achievements cannot and should not be overlooked, it will not be possible for the EAC to forget what has happened during its 59th year, a tragic event that has created a major setback to its ambitious development plans. However, despite the severity of the blow, everyone in Cyprus

is aware of how the Authority dealt with an even greater tragedy in 1974 and the public knows that the EAC has the capability of overcoming even the seemingly most insurmountable obstacles. The industriousness, experience and productivity of the Authority’s personnel will play a key role in the campaign that the EAC will be waging from now on with the objective of bringing the power supply in Cyprus back to its previous level. There is no doubt that the Authority will succeed in this extremely difficult task, especially with the support, understanding and help of its customers, the Cypriot public that has shown trust and confidence in the EAC’s expertise since the very early days of the country’s independence.

the EAC is counting on its customers’ sense of fairness and recognition of the common good to make the sacrifices that are necessary at this difficult time by taking measures such as reducing their overall consumption of electricity No-one wishes to experience power cuts, especially at the height of summer, but the EAC is counting on its customers’ sense of fairness and recognition of the common good to make the sacrifices that are necessary at this difficult time by taking measures such as reducing their overall consumption of electricity, resisting the urge to use airconditioning and, in general, saving energy wherever possible. This will help the Authority to ensure a return to normal at the earliest possible opportunity. Together we can and will succeed in bringing better days to the island.

info: Costas Gavrielides is the Press Officer of the Electricity Authority of Cyprus the international investment, business & finance magazine of cyprus

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7/30/11 1:49:34 PM

{the debate}

Do the CreDit rAting AgenCies Do More hArM thAn gooD?

Yes! By Dinos Andreou Barely three years after the scandal of 2007-08 which saw the Credit Rating Agencies reassure investors that buying into highly toxic CDOs and mortgage-backed securities was a safe bet, we are lamenting the fact that downgrading by these same Agencies has pushed peripheral EU countries to the brink of economic collapse. It’s blindingly obvious that the Rating Agencies have an inherent interest in issuing unwarranted high investment grades because they are invariably influenced by the organisation they rate (which wants the highest possible credit rating in order to have the lowest possible rates of borrowing) and by investors (whose interests are best served by extremely stable ratings that avoid declines or downgrades). Furthermore, the fact that rated organisations pay the Agencies for the ratings they receive inevitably means that the Agencies are competing with one another for clients. Higher ratings ensure that their services are retained.

agencies have an interest in issuing unwarranted high investment grades Reform to Credit Rating Agency operations has been severely tempered by the need for the regulating governments to continue the facilitation of their own borrowing activities in the international bond market. In other words, there is a critical conflict of interest when the West’s highly indebted governments are responsible for reforming the Credit Rating Agencies that facilitate their own borrowing needs. Any attempt to fix the flawed Rating Agency system in a way that truly protects investors is doomed from the outset due to the inherent political need to continue servicing the cycle of debt because this debt is critical to maintain the system and to continue propping up nations and corporations alike. As long as this system remains unchanged, the ultimate losers will continue to be private investors and/or the taxpayers who will inevitably be unaware of the true level of risk to which they are exposed. Whatever good the Credit Rating Agencies may do - by enabling otherwise unfit borrowers (whether corporations or governments) to access credit - is outweighed by the harm of maintaining a clearly flawed and bankrupt economic system. The longer we allow these Agencies to perpetuate the status quo by enabling access to the morphine of debt in order to alleviate the symptoms of a defunct socio-economic paradigm, the harder the transition will be towards a truly sustainable, equitable and solvent way of organising our nations and economies.

no! By Marios Mavrides Some people argue that Credit Rating Agencies are responsible for the financial crisis which started in the United States in the second half of 2007 and quickly spread around the world. It is true that the Agencies did a very bad job at that time and this was a major factor behind the world credit crisis. However, one needs to be careful to distinguish between the concept of credit rating as a useful tool to investors and borrowers and the credit reports themselves. In other words, just because the Credit Rating Agencies were wrong for a period of time, it doesn’t mean that we should abolish the concept of credit rating altogether. Credit rating is not simply a useful tool for borrowers and lenders; it is a must in the area of investments, it directs money to the best users and it generates the best possible investments for the good of the economy. If we didn’t have credit ratings we would basically have no guidance; there would be a great deal of confusion, many bad investments and a lot of fraud as well. Whether the main Credit Rating Agencies are reliable or not, time will decide. They may be wrong sometimes, but we cannot do without them. Credit rating is an essential element of investing. Borrowers need the Credit Rating Agencies to rate their debt so that they can get out in the markets and borrow. Investors also need credit rating reports in order to decide where to invest according to their profile: low expected returns for low risk investments or high expected returns for high risk. Most investors do not have much idea about finance or how to evaluate securities. That is why credit rating is important. The question then is whether we can and should rely on Credit Rating Agencies.

theY maY be wrong sometimes, but we cannot do without them I believe that, above all, the Credit Rating Agencies must be unbiased and independent. It is more important for an Agency to be objective and independent rather than correct in its evaluations. The markets can take care of that. If a Credit Rating Agency loses its reliability, it is probably in the wrong business. So, the Agencies have every reason to be unbiased and independent. They have no reason to be subjective because, if they are, they can say goodbye to investors. If they are objective and independent, they do far more good than harm.

info: Dinos AnDreou is a finance journalist and M.Sc. graduate in European Political Economy from the London School of Economics and Political Science. MArios MAvriDes M.P. is Chair of the Department of Accounting, Finance and Economics, School of Business Administration, European University Cyprus. 26

the international investment, business & finance magazine of cYPrus

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7/30/11 1:49:40 PM

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7/30/11 1:49:41 PM

cover story

BANK STATEMENTS Gold lets the island’s bankers do the talking


uccessive downgrades by the main Credit rating Agencies to a number of Cypriot banks and to the Republic itself have been based on concerns over the banks’ exposure to Greece in the light of its sovereign debt crisis and the possibility of a Greek default. In a recent issue of Gold, we suggested that the ‘big three’ local banks ( Bank of Cyprus, Marfin Laiki Bank and Hellenic Bank) could survive even a 40% ‘haircut’ of Greek sovereign debt but commentators have continued to voice their concerns, as indeed has Athanasios Orphanides, Governor of the Central Bank. Gold decided to give the bankers themselves the opportunity to clear the air and give their own views on the current state of the local banking sector, the situation that their organisations are facing, and how they wish international investors and companies to see the island in the light of recent developments. Eleven bank CEOs and senior officials responded to our questions and, as the following pages reveal, they share a fairly broad consensus of opinion. It is clear that because Cyprus has followed the traditional banking model, its banks have had virtually no exposure to toxic assets and, in this regard at least, have remained largely unaffected by the global financial crisis. Prudent risk management policies,


a relatively strict supervisory regime in Cyprus on the part of the Central Bank of Cyprus, and a balanced business expansion funded by customer deposits, have shielded the banks from the recent financial crisis. The robustness of the banking sector is also seen in the results of the recent European stress tests which saw the two banks involved (Bank of Cyprus and Marfin Laiki Bank) satisfying the minimum Core Tier I criterion of 5%. For all the Rating Agency-generated media talk of difficulties, Cyprus has not yet experienced any major outflow of deposits and measures taken by the banks to reinforce their capital bases would appear to have reassured the market and investors alike. The bankers are unanimous in their view that, thanks to over 40 double tax treaties with key countries, the skills and expertise in the professional services sector, the country’s EU membership and geographical location, coupled with the lifestyle benefits for those investors that locate their headquarters here, Cyprus will continue to be an attractive and competitive financial and services centre. Certain structural reforms to the island’s economy will be required, however, if confidence in the macroeconomic stability of Cyprus and its banking system is to be maintained.

the international investment, business & finance magazine of cyprus

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7/30/11 1:49:51 PM

pHotograpHy: micHael kyprianou, Jo micHaelides

What We asked


How robust is tHe banking sector in cyprus?


How is your bank dealing witH issues relating to growtH, strategy and tHe exposure to greeceâ&#x20AC;&#x2122;s sovereign debt and/or lending to companies and individuals in greece?


wHat is your message to international investors and HigH net wortH individuals about wHy cyprus sHould continue to be tHe cHosen destination for tHeir deposits, investments, corporate Headquarters, etc?

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7/30/11 1:49:58 PM

cover story Nicholas Beis

MaNagiNg director NatioNal BaNk of greece (cyprus)

the tragic accideNt of July 11 has had a MaJor Negative iMpact oN Both the cypriot ecoNoMy aNd society


The banking industry in Cyprus is considered to be the strongest pillar of the Cyprus economy, as a result of numerous factors. Particular mention should be made of the fact that over the last two decades, the country has taken advantage of favourable Double Tax Treaties signed with 44 countries, with the Russian Treaty prevailing. Capital inflow from these countries, mainly from Russia, has created substantial synergies, not only in terms of excessive liquidity and revenues for the banks but also on a wider scale of financial prosperity since part of this capital has been channeled back into the economy (mainly into the real estate industry, domestic consumption, financial services and tourism development). All of the above have contributed to the broader prosperity of the country which, in turn, has positively affected the development and profitability of the banking sector. During the last two years, despite the global financial recession, which inevitably affected the island’s economy, the banks have adjusted to the circumstances.


NBG Cyprus Ltd. is a purely Cypriot Bank that happens to have a Greek shareholder (NBG Group). The Bank’s portfolio includes numerous segments, the main being financing to Cypriot individuals and companies. A smaller part is to Greek customers with the full cover of the parent bank (NBG Athens). Further to the above, a portfolio of Greek Government Bonds appears in the Bank’s assets, which have been acquired from the parent bank. In turn the parent bank has undertaken the interest and credit risk. This sovereign debt


acquired from NBG was a strategic decision, favouring the liquidity and profitability of the Bank. The NBG Group reports the sovereign debt portfolio on a consolidation basis and, of course, has taken full responsibility for the management of the interest and credit risk for the entire portfolio. It should be noted that as we are listed on the New York Stock Exchange (NYSE) the NBG Group has a further obligation to report this on the SOX Yearly Report. The NYSE listings also mean we are very rigorously regulated. Consequently, NBG Cyprus Ltd., has complete confidence in the handling and management of the relevant specialized areas of the Group in Athens.


The main factors that make Cyprus attractive to depositors, investors and entrepreneurs, are the stable tax environment, which has remained almost unchanged, political stability and the general consensus of the political parties, the high security that the country provides, a superior standard of infrastructure and services and beneficial legislation for investments and finance activities. In addition to these are the environment, the hospitality and the high educational standard of the Cypriots. Unfortunately the tragic accident of July 11 has had a major negative impact on both the Cypriot economy and society. The numerous malfunctions that are occurring daily have both economic and social implications for the Cypriots, visitors and tourists. Fortunately it appears that every effort is being made for a rapid solution to these problems in order to stabilize their effect on the economy.

the international investment, business & finance magazine of cyprus

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7/30/11 1:50:02 PM

efthiMios Bouloutas ceo MarfiN laiki BaNk


Over the last 10-15 years and in tandem with the transformation and development of the Cyprus economy, its banking sector has experienced sustained growth rates and profitability, allowing it to build up strong capital buffers and liquidity. The local banking sector has been instrumental in supporting and encouraging Cyprus’ economic transformation into a regional financial & transactional hub. Cyprus’ high quality infrastructure, well-educated population and organised state, in combination with a thriving and growing middle class and a household sector enjoying a strong net financial position, have given the opportunity and impetus to the local banks to grow beyond the confines of the local economy by offering international business banking services to a growing customer base from key global emerging markets. Cyprus banks are characterized by strong capital and liquidity, equally matched by high profitability resulting from the existence of a highly concentrated banking sector. The local banking sector has been further supported and safeguarded by a proactive and conservative local regulator which has been instrumental in assuring adequate capital buffers and liquidity in the system in order to successfully shield it from global and European financial stresses.


As a leading bank in the local economy, Marfin Popular Bank is well-positioned to exploit the opportunities offered by the Cyprus economy’s further evolution into a regional financial and energy hub as well as related opportunities presented in the broader SE European region where MPB currently operates. MPB currently enjoys an international footprint across key geographical markets in emerging Europe and aims to further deploy additional resources in order to expand and develop a comprehensive services offering to its international business banking as well as to its international clients on the ground, including wealth and asset management, capital market products and services, specialized and bespoke deposit products. The Bank’s strong liquidity and capital position enables it to support and realize its medium-term business and strategic objectives with regards to its Cyprus and International presence.


Over the years Cyprus has evolved into one of the most attractive international financial transactional centres in the region. It has increasingly benefited from its growing links to key global emerging markets, its status as a knowledge-based economy and the resulting increase in global transactional flows through these markets. The country offers a benign and conducive business and economic environment, increasingly evolving into an attractive global destination for international businesses, investments, and financial services. Cyprus’ status as a knowledgebased economy, characterized by the availability of a highly specialized pool of financial and services-oriented professionals, is also being reinforced by its shift up the value chain, i.e. from a pure transactional services model into an advisory -based regional centre.

cyprus BaNks are characterized By stroNg capital aNd liquidity, equally Matched By high profitaBility

gold_28-43_inn.indd 31

the international investment, business & finance magazine of cyprus


7/30/11 1:50:03 PM

cover story

cyprus has proved to Be Well prepared to WithstaNd aN iNterNatioNal ecoNoMic crisis aNd preseNts a souNd ecoNoMic eNviroNMeNt


Cyprus has a well-regulated banking environment, which has safeguarded the robustness of the banking sector and limited the effects of the world economic crisis. Prudent risk management policies and banking practices applied over the years have helped our sound banking system to withstand the crisis and enabled the banks operating in Cyprus to successfully pass the strict stress scenarios both in 2010 and 2011. Emporiki Bank – Cyprus Ltd, a member of Emporiki Group which belongs to the leading French Group of Crédit Agricole – maintains the capital adequacy and liquidity requirements at the levels of the new stricter EU rules and Basel III Directive, which were adopted by the regulator in Cyprus earlier than in other European Countries. As a member of the largest banking Group in France, full support is provided to Emporiki Bank Cyprus at all levels, ensuring that all requirements are met and any adverse scenarios, foreseen or unforeseen, are confronted effectively.


We, as the subsidiary bank of Emporiki Group in Cyprus, enjoy the liquidity and support from the parent Group of Crédit Agricole and our Bank has no financial exposure to the Greek state and companies operating in Greece. I would like to emphasize the fact that during this difficult period of time for the Greek economy, our parent company, Emporiki Bank of Greece SA, with the strength of Crédit Agricole, is actively supporting the recovery efforts of Greece. Emporiki is both

able and willing to continue standing by the side of Greek households, professionals and businesses, providing them with substantial liquidity and real solutions to their needs. The sustained commitment of Emporiki and Crédit Agricole to supporting the recovery efforts of Greek economy is also demonstrated with the This is Greece initiative for the promotion of Greek entrepreneurship ( This initiative, which was recently presented by the top management of Emporiki in Athens, primarily aims at promoting the positive side of Greece to the domestic and international business and investment community, as well as public opinion, via examples of hard-working, productive and extrovert Greek companies and professionals.


Cyprus has always been selected by international investors for its sound banking system, professional environment, favourable tax regime, long list of double tax treaties, free zone and advanced services infrastructure, amongst other benefits. Furthermore, Cyprus has proved to be well prepared to withstand an international economic crisis and presents a sound economic environment. In this context, Emporiki Bank – Cyprus, as a member of one of the largest international banking groups, provides a full range of high quality and tailor-made banking products and services to our international clientele, which can really benefit from the synergies that we develop with the specialized business lines of Crédit Agricole Group, as well as from the Group’s advanced know how and experience in over 70 countries where it has market presence.

Maria dioNyssiades ceo eMporiki BaNk – cyprus ltd 32

the international investment, business & finance magazine of cyprus

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7/30/11 1:50:07 PM

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cover story

evaN gavas ceo Barclays Wealth



Barclays Bank has minimal exposure to Greece, both at Group level and at the local level in Cyprus and we are therefore in a very strong position in the Cyprus market from a strategic perspective. As a branch of Barclays Bank PLC we are the only bank in Cyprus with a AA- credit rating and we thus provide our customers with a safe and secure home for their deposits. We have defined a long-term strategy to increase our market share and customer base and have already achieved some solid growth. In particular our focus is 34



Concerns have been raised in recent months with regard to the size of the banking sector relative to the size of the economy, as well as the degree of exposure of Cyprus banks to Greece, which has come worryingly close to default. The banking sector in Cyprus can be divided into three segments: the major domestic banks which control a large share of the market, the Greek banks which have expanded their presence in Cyprus over recent years, and the remaining foreign banks, owned predominantly by groups in Eastern Europe and the Middle East, or in the case of Barclays Wealth, by one of the largest banks in the UK. Leaving aside the final group of foreign banks which make up a smaller portion of the market, it is clear that the first two segments are facing distinct challenges given their exposure to Greece. The key determinants of whether the sector remains robust are, firstly, continued investor confidence, since Cyprus-based banks are dependent to a large extent on foreign depositors and, secondly, the measures being taken by the banks themselves. Fortunately Cyprus has not experienced a major outflow of deposits at this stage. In addition, the large domestic banks have taken key measures to bolster their capital bases and these factors serve to reassure the market. However, the situation continues to remain fragile, and in particular for Greek banks.

the core BeNefits aNd fuNdaMeNtals Which Make cyprus a choseN destiNatioN for iNterNatioNal iNvestors reMaiN iN place

on the international corporate banking and wealth management segments in Cyprus and we are positive about our prospects in these areas. Over the last year we have recruited a number of talented individuals as part of this growth strategy. Globally, Barclays Wealth, the wealth management division of Barclays Bank PLC, has invested significant funds into building a state-of-the-art wealth management business and we are likely to benefit from this investment.


The core benefits and fundamentals which make Cyprus a chosen destination for international investors remain in place. These benefits include the range of over 40 double-tax treaties with key countries, the prevalence of skills and technical expertise in the professional services sector, the countryâ&#x20AC;&#x2122;s EU membership and geographical location, coupled with the lifestyle benefits for those investors that locate their headquarters here. In the short-term the country needs to address pertinent macroeconomic issues and to disentangle itself from the sovereign debt crisis. However, the latter should ideally serve as a catalyst to encourage some tough decisions to be made to ensure that Cyprus remains a chosen destination for international investors.

the international investment, business & finance magazine of cyprus

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7/30/11 1:50:25 PM



the sloWdoWN of the real ecoNoMy aNd the deterioratioN of puBlic fiNaNces iN cyprus are a source of coNcerN


The development of the banking sector in Cyprus has followed the traditional banking model and so the banks have not had any exposure to toxic assets. As a result, Cypriot banks remained largely unaffected in the early stages of the global financial crisis triggered by the collapse of Lehman Brothers. The influx of foreign deposits into the Cyprus banking system continued at a satisfactory pace. The slowdown of the real economy and the deterioration of public finances in Cyprus, as well as the challenges facing Greece, are a source of concern but according to the IMF the financial sector remains robust. Indeed, capital adequacy levels are fairly high due to capital increases as well as the dividend reinvestment schemes, which means that most dividends are reinvested. Despite the very strict criteria that the European Banking Authority imposed for the recent stress tests on 90 Banks across Europe, the Cyprus banks passed the tests successfully, satisfying the minimum Core Tier I criterion which was set at 5%.

george georgiou MaNagiNg director alpha BaNk cyprus ltd


Like all banks, Alpha Bank will follow a conservative strategy in the near future with considerable emphasis on cost containment and improving the quality of its lending portfolio. We would welcome any positive developments in, say, the energy sector or on the political front but we have to plan based on the current difficult situation in Cyprus and Greece, as well as in the UK market. Most specifically, our efforts will concentrate mainly on developing corporate relationship banking, expanding domestic retail and SMEs, and exploring opportunities relating to international business activities. It should be noted that Alpha Bank Cyprus has no exposure to Greeceâ&#x20AC;&#x2122;s sovereign debt and/or lending to companies and individuals in Greece.


As stated above, the financial sector remains robust while Cyprus continues to be a highly attractive place for the international investor. This reflects the strong positioning of Cyprus on the international political and economic stage, as a member of the European Union while maintaining strong ties with countries outside the EU. The current slowdown in the real estate sector has opened up a whole new spectrum of opportunities for an investor, especially at the high end of the market.

the international investment, business & finance magazine of cyprus

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7/30/11 1:50:33 PM

cover story

cyprus BaNks have little or No exposure to high risk toxic structured products or derivatives

kyriakos iakovides ceo cdB BaNk


Cyprus banks have traditionally focused on commercial banking activities with little or no exposure to high-risk financial instruments and derivatives. On the liability side, the banks have traditionally had low reliance on short-term interbank borrowing which is a volatile funding source during financial crises. In terms of their assets, Cyprus banks’ exposure is primarily customer loans, spread over different types of loans with varying risk profiles (personal loans, mortgages, credit cards, SME loans and corporate loans) which helps to spread risk via diversification. They have little or no exposure to high risk toxic structured products or derivatives and this helped to shield them from the recent financial crisis as their structured products writedowns were zero or minimal. This balance sheet composition has helped to contain risk and maintain confidence in the Cyprus banking sector, which has been reflected in the results of the Cyprus banks in the recent pan-European banking stress tests. The robustness and soundness of


the Cyprus banking sector is the direct outcome of a very tight, meticulous and comprehensive supervision process by the Central Bank of Cyprus and has also been influenced by cultural factors, since the “small society” culture in Cyprus has instilled a mentality of prudence and conservatism amongst Cypriot bankers.


CDB Bank has no presence in Greece and hence no Greek lending exposure. It only has a negligible exposure in Greek government bonds. In terms of CDB’s strategy, we are focused on the Cyprus and Russian markets via the boutique bank approach which entails exploring the advantages of small size, placing emphasis on customer relationships and value added services and repositioning the relationship between businesses and the bank. CDB will continue servicing its corporate and SME customers and aims to continue growing its deposit base. Other key focus areas for the bank are corporate advisory business and private banking services for high net worth individuals. In terms of international activities, CDB Bank is

currently expanding its Russian operations and is focusing on offering value added services via its International Banking Unit to Russian and other Eastern European companies. CDB’s second branch in Limassol will further assist these efforts.


As an EU member state, Cyprus has a regulatory and supervisory system identical and equivalent to that in other EU-member states. Full EU harmonisation and the adoption of European regulatory standards means the application of strict EU criteria regarding capital requirements for banks and depositor protection. Cyprus has a favourable corporate taxation regime compared to other European countries. There is a very good infrastructure in advisory and support services for international investors and offshore businesses wanting to do business in Cyprus. These services comprise accounting, audit, legal, tax advisory etc. Cyprus is a very safe and hospitable country and a modern society, making it particularly attractive for people wishing to relocate for business purposes.

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Judged by the two key risk measures of banking health – capital adequacy and liquidity – the banking sector in Cyprus appears to be quite robust. Cypriot banks have high capital ratios – well above the minimum required internationally – and they also have significant liquidity buffers. Their robustness and ability to withstand shocks is also confirmed by the recent EU-wide stress tests. In addition, the prudential supervisory regime in Cyprus is much stricter than the international norm with the Central Bank of Cyprus being a more hands-on regulator than other so-called, ‘light touch’ jurisdictions. Recent examples of this are the regulation that the Central Bank introduced in 2007 restricting the amounts banks could lend to the then-booming house property market in Cyprus, and the ‘step up’ core Tier 1 ratios that it imposed on banks two weeks ago to protect the system from getting ‘too big for Cyprus’. This is not to deny that there are challenges facing the banking system that have to do with its exposure to Greece and the problematic construction sector in Cyprus, etc.

2 Hellenic Bank has only a relatively small exposure to both Greek Sovereign Debt and loans to Greek companies. Our investment in Greek Sovereign Debt is only €110 million out of €2.9 billion in placements


cypriot BaNks have high capital ratios - Well aBove the MiNiMuM required iNterNatioNally - aNd they also have sigNificaNt liquidity Buffers

and investments. Similarly, less than one fifth of our loans represents lending to Greek companies. As a result of the crisis we had to rethink our strategy and we proceeded with a reorganisation and slight shrinking of our branch network as well as a voluntary redundancy scheme. However, we are still actively looking for good lending opportunities in the Greek market, which is characterized by shortage of liquidity, to capitalize on Hellenic Bank’s good liquidity position.


I would say to international investors not to be panicked about the situation in Cyprus by the various catastrophic scenarios that are being circulated by people who are too far away from Cyprus to understand what is happening. I would tell them to talk to the bankers themselves, talk to their accountants and lawyers to get a better view of the current situation. I would also caution them about blindly using the reports of rating agencies as basis for their decision, given that they do not seem to have very good predictive record.

Makis keravNos ceo helleNic BaNk

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cover story

deputy group ceo BaNk of cyprus


In this challenging environment the Cyprus banking sector has not remained unaffected. However, Cypriot banks have followed a balanced business expansion wholly funded by customer deposits, they have a limited reliance on wholesale funding and have liquid balance sheets enabling them to effectively face the economic crisis. Cyprus banks follow a traditional conservative commercial banking model based on long term customer relationships with no exposure to high risk activities such as investment banking and proprietary trading. This conservative banking model, together with the strict supervisory framework of the Central Bank of Cyprus, has enabled the banks to weather the macro challenges without any government support. The recently announced stress test results reflect the robustness of the Cypriot banking system. Current discussions by the Cyprus Government to address fiscal challenges and make structural reforms could have a positive impact on banks by promoting financial stability and by improving the macro environment.


Bank of Cyprus remains strong despite the continued negative environment in the main European markets in which it operates and it continues its selective business expansion. The 2011 strategic priorities of the Group focus not only on maintaining a strong balance sheet position by safeguarding liquidity, maintaining strong capital and achieving satisfactory profitability but also on selective lending expansion at appropriate pricing and enhancement of the presence of the Group in new markets with growth potential. As at 38

yiaNNis kypri

curreNt discussioNs By the cyprus goverNMeNt to address fiscal challeNges aNd Make structural reforMs could have a positive iMpact oN BaNks

31 March 2011 Group loans amounted to €29.14 bn, recording an annual increase of 7% compared to the first quarter of 2010. Loan growth was recorded in all the markets in which the Group operates with Cyprus recording growth of 8%, Greece 3% and Russia 18% on an annual basis. In Greece, despite the macro environment, Bank of Cyprus continues to grow its loan book selectively, while it constantly and cautiously monitors the quality of its overall loan portfolio. The branch network has expanded to 185 branches as at 30 March 2011 from 167 a year ago.


The role of Cyprus as an international financial centre remains unchanged. Cyprus provides a number of positive factors including EU and eurozone membership, high quality legal and accounting services and a low tax environment, which continue to attract clients with international activities. The increasing number of companies registered in Cyprus as well as the increasing deposit base which in May 2011 had reached €72.8 bn, recording a YOY increase of 13.9%, reflects the confidence that international clients place in the Cyprus banking system. Cyprus is the number one FDI provider into and out of Russia with inward FDI reaching $12 bn in 2010 representing 29% of total FDI. Cyprus is also the number one FDI provider into Ukraine.

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cover story

Piraeus Bank Cyprus has no exposure to Greek Sovereign Debt and no loan portfolio to speak of to Greek-based companies and individuals. We are lucky in this sense. Although we are Greek-owned, our strategy focuses on servicing local and international clients. More generally, our strategy of carefully controlled growth is serving us well and I do not anticipate a significant change in this in the foreseeable future. The advantages of Cyprus as a destination for international business are well established and much appreciated by the international business community. The Greek situation recently caused some concern but I believe the second Greek bailout is a positive development for Cyprus too and is comforting to all who do business with or through Cyprus. Cyprus, as a country, is sensitive to the needs of international businesses and the banking sector is fully committed to servicing international businesses. Perhaps it is worth emphasizing that, beyond day-to-day banking, Cyprus also offers international investors with investment services, especially custody, execution, fund management and fund registration services. It can be a one-stop shop for the businessman who wants to use it as such. The banking industry is particularly competitive and this competition is in the interests of clients who shop around, providing them with more options and, often, better terms. I expect Cyprus to remain a destination of choice.

1 2 3

In general terms, the Cyprus Banking sector is in reasonably good shape with strong capital adequacy and strong liquidity, a product of conservatism allied to tight regulation and significant recent capital increases. Although profitability has been hit in the aftermath of the tough environment of the last 2-3 years, it is a testament to the sector’s resilience that profits generally remained in positive territory. It is true that some banks have exposure to Greece through holdings of Greek Government Bonds and loans made by their subsidiaries in Greece which are likely to experience deteriorating delinquency but these issues should be manageable, especially after the recent agreement for a second round of financing for Greece by the European Union and the IMF which contained a number of positive aspects for the Greek situation.

the advaNtages of cyprus as a destiNatioN for iNterNatioNal BusiNess are Well estaBlished aNd Much appreciated By the iNterNatioNal BusiNess coMMuNity


coNstaNtiNos loizides MaNagiNg director & ceo piraeus BaNk (cyprus) ltd

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the goverNMeNt Needs to take decisive actioN iN order to iMprove puBlic fiNaNces aNd eNsure that cyprus’s credit ratiNg is upgraded

Michalis louis ceo euroBaNk efg


The banking sector in Cyprus has weathered the global financial crisis in the best possible way. It did not need or receive any assistance from the government because it is well and strictly regulated by the Central Bank; it is well capitalized, with ample liquidity and, to a very significant degree, self-funded without reliance on the capital markets. Cyprus and its banks were and continue to be a pillar of stability and safety to which foreign and local investors can trust their wealth. It is worth noting that as at 31 May 2011, total deposits in the Cyprus Banking sector stood at €72.8 billion, the highest figure recorded to date. In order to safeguard and enhance Cyprus’ image as an International Business Centre, continuous investments need to be made by both the private and public sector to increase and improve the products and services offered in the areas of mutual funds, the operating model of the Registrar of Companies, the working hours of government departments etc. In addition, the government needs to take decisive action in order to improve public finances and ensure that Cyprus’s credit rating is upgraded within the next few years to a significantly higher level that the current one. This can be achieved by running balanced budgets and reducing public debt to below 50% of the GDP.


Eurobank Cyprus started its operations in 2007, focusing on Private Banking, International Business Banking, Corporate & Investment Banking, Asset Management and Treasury Services, with the goal of becoming the primary bank of choice in Cyprus for


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clients in the market segments where it operates. By offering superior service that is timely, flexible, cost-efficient and customized, Eurobank Cyprus has become a key local player in the market catering for the banking and investment needs of high net worth individuals, international business clients as well as local and foreign corporate entities. Eurobank Cyprus operates through banking centres in all cities and, by growing organically; it has quickly managed to become one of the largest banks in Cyprus in terms of market share. In 2010 and 2011, Eurobank Cyprus was voted ‘Best Private Bank in Cyprus’ by the Euromoney Survey of Private Banking and Wealth Management. The Bank does not have any investments in Greek Government Bonds or lending exposure to Greece.


The lowest corporate tax rate in the EU, the wide range of double taxation treaties, probably the best legal framework for trusts around and the strategic geographical location at the crossroads of three continents, have helped Cyprus become a reputable international business centre. Coupled with the strength of the local banking sector, Cyprus is a ‘one-stop-shop’ for international businesses and serves as an important hub for investors in Central, Eastern Europe and the ex-CIS countries. We at Eurobank EFG, have invested time, effort and resources in order to make Private Banking one of the three main pillars of our operations in Cyprus. The results have been very satisfactory so far with Assets Under Management in excess of €1.3 billion at the end of June 2011.

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cover story

aNdreas theodorides ceo usB BaNk

the Market’s coNfideNce iN the MacroecoNoMic staBility of cyprus aNd the islaNd’s BaNkiNg systeM is esseNtial for groWth


The banking sector in Cyprus has sound foundations with high rates of capital adequacy and liquidity. The banking environment is highly regulated and supervised by the Central Bank of Cyprus which closely monitors international developments and takes measures to shield the Cypriot Banking sector even further. In addition to the above, the banks themselves are continuously evaluating the economic conditions and proactively taking measures such as the further enhancing of their capital base through the issue of Tier 1 instruments to respond to the challenges of the adverse operating environment. The recent results of the stress tests performed by the European Banking Authority have shown that the Cyprus banking system has strong resilience. However, the market’s confidence in the macroeconomic stability of Cyprus and the island’s banking system is essential for the growth and the prosperity of the country. We must all work in the same direction to handle the changes happening around us and there is an urgent need for immediate measures for structural reforms to the Cyprus economy.


In a period of economic crisis and instability, any actions taken must be carefully thought out and analysed. The maintenance of strong liquidity and an adequate capital base are one of our key objectives. USB Bank does not have any operations in Greece and therefore the bank has not proceeded with any lending to Greek companies and individuals. Furthermore, the bank’s exposure to Greece’s sovereign debt is minimal and any impact that may have to be absorbed by a possible Greek default has already been over-covered by the latest capital increase which took place in May 2011. Following the acquisition of 95.61% by BLC Bank SAL of Lebanon, the financial robustness of USB has become even more solid given BLC’s financial soundness, its remarkable average growth results that exceed the average of the Lebanese banking sector and the zero exposure to Greek sovereign debt and lending to Greek corporations and individuals. Furthermore, the geographical diversification of USB and BLC provides us with the advantage of being able to exploit opportunities arising from the international network of the Group. 42


Under existing law, corporate tax on profits for International Business Companies and for local companies is pegged at 10% which is the lowest rate in the European Union. Modern transport, housing and communications are additional reasons for treating Cyprus as a natural hub for companies doing business in the Middle East, Eastern Europe, the Russian Federation and North Africa. Cyprus has a well-developed and highly-regulated system of financial institutions and offers advanced professional business services such as legal, auditing, consulting, etc. Banks have established service centres with dedicated and highly-experienced personnel offering high-quality services to high net work individuals as well as institutions. A topclass education system provides the country with a qualified labour force of different levels, from workers to experts. All of the above make Cyprus a very attractive place for doing business.

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7/30/11 1:51:08 PM

Cypriot and Ukrainian businessmen meet

By Maria Pilidou


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n International Business Forum entitled Cyprus: An International Business and Financial Centre, attended by around 200 Cypriot and Ukrainian businessmen, was held on July 4 in Kiev, Ukraine. Organised by the Cyprus Chamber of Commerce and Industry (CCCI) and the Ministry of Commerce, Industry & Tourism in cooperation with the Cyprus-Ukraine Business Association and the Ukrainian Chamber, the forum, sponsored by Marfin Laiki Bank, aimed to promote Cyprus as a regional business service centre and an attractive destination for investment. Gold also attended the meeting.

The mission to Kiev coincided with an official visit to Ukraine by Cypriot President Demetris Christofias who inaugurated the new Cypriot Embassy in the capital. His counterpart Viktor Yanukovych said that Ukraine was interested in developing a comprehensive cooperation with Cyprus, and attached special importance to trade and economic cooperation. President Yanukovych accepted an invitation to visit Cyprus in October when a new double taxation agreement is expected to be signed between the two countries, whose bilateral trade totals $300m.

Cypriot investment in Ukraine is $11bn while Ukrainian FDI in Cyprus is estimated at $6.5bn. Among those addressing the Forum, Christis M. Christoforou (CEO of Deloitte) and Panicos Kaouris (partner at PwC) both spoke of the advantages that Cyprus offers as a regional business centre. Christoforou analyzed why Cyprus is an ideal base for Ukrainian companies and drew particular attention to the islandâ&#x20AC;&#x2122;s tax system. He pointed to, among many points, the

Cypriot investment in Ukraine is $11bn while Ukrainian FDI in Cyprus is estimated at $6.5bn exemption of dividend income and overseas PE profits from tax, the flat 10% corporate tax rate, unilateral credit relief for foreign tax and the lack of exchange controls. CCCI representatives described major investment opportunities and noted that there are positive prospects for further business cooperation between the two countries in the sectors of trade, services, renewable energy sources and shipping. CCCI President Manthos Mavromatis, spoke about the excellent economic,

Trade between Cyprus and Ukraine (2006 - 2010) 2006








































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political and cultural relations between the two countries and underlined the importance of signing a new double tax treaty, given that “uncertainty is the worst thing for business. “ He described the current treaty as “brilliant for Ukrainian investors” and expressed his conviction that the new one will be equally positive for them. Christos Rotsas, President of the Cyprus Ukraine Business Association praised the “exceptional business relationship between the two counties” and described Cyprus as “the gateway for Ukrainian investors to the European market.” Marfin Laiki Bank and Bank of Cyprus also attended the Forum. Miltos Michaelas (International Business Manager of Marfin Laiki Βank) stressed the stability in the Cypriot banking system and the island’s advantageous position as a reliable and attractive international financial centre. Marfin Popular Bank’s Ukrainian CCCI President Manthos Mavromatis with the President of the Ukrainian Chamber of Commerce and Industry, Sergey Skrypchenko and the First Vice President, Mr Victor Yanovsky. In the background Antonis Paschalides, Minister of Commerce, Industry & Tourism, Cyprus.

subsidiary has its head office in Odessa, and operates a network of 72 branches and points of sale in various other major cities across the country, including Kiev. Bank of Cyprus emphasized the further promotion of Cyprus as a financial centre and spoke of the Bank’s development in Ukraine where it has 27 branches and a Christis M. Christoforou, CEO of Deloitte representative office. and Manthos Mavromatis, CCCI President The EU is Ukraine’s biggest trading partner, representing one third of its total external trade. Total trade between Ukraine and the EU reached €17.8bn in 2009. Ukraine absorbs 1.2% of Cyprus’s domestic exports and is the 21st largest market for the exports of the island’s domestically produced goods. The main products exported from Cyprus to Ukraine in 2010 were pharmaceuticals (€5,856,000), citrus fruit (€590,000), and vegetables, fruits, nuts and their preparations (€492,000).

Cyprus is the gateway for Ukrainian investors to the European market The main products imported from Ukraine in 2010 were mineral fuels, oils & related products (€23,921,000), iron and steel (€22,547,000) and animal or vegetable fats and oils, etc. (€2,343, 000). Tourist arrivals from Ukraine have almost doubled since 2006, though they remain at an extremely low level (rising from 6,347 to 11,766 in 2010).

UKRAINE: FACTS & FIGURES • Ukraine is the largest country in Europe among those with entire boundaries within the European continent. Ukraine is about the size of Texas. The population is 46 million. • Ukraine's main trading partners are Russia, the EU, Turkey and the US. • Industry contributes more than 40% of GDP and accounts for more than one-fourth of the country's total employment. • Ukraine is mainly a vast plain with no natural boundaries except the Carpathian Mountains in the southwest and the Black Sea in the south. • The climate of Ukraine is mostly temperate continental. A subtropical Mediterranean climate is prevalent on the southern parts of the Crimean Peninsula. Average monthly temperatures in winter range from -8° to 2° C, and in summer from 17° to 25°C. • GDP in 2010 was $4,700 (€3,340). 46

• Ukraine only had only brief periods of independence before 1991. After the Russian Revolution, Ukraine declared its independence from Russia and several years of warfare ensued. The Red Army finally was victorious over Kiev and Ukraine became a Soviet republic in 1920. • Ukraine occupies only 0.45% of the planet's dry land but it actually possesses approximately 5% of the world's total mineral resources. • The world's worst nuclear accident took place at Chernobyl, Ukraine, in April 1986. • The President of Ukraine is the Head of State, Chief of the Executive Branch and acts on behalf of the State. The current president is Viktor Yanukovych. • Among the best-known people of Ukrainian descent are artist Andy Warhol, actor Tom Selleck and singer Michael Bolton.

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The China Miracle The Gold Guide to Investing in China By Isavella Frangou-Pavlou The countries conveniently referred to as the BRICs (Brazil, Russia, India, China and, more recently, South Africa) are collectively becoming an economic force that cannot be ignored by investors worldwide. By 2050, the BRICs, which are experiencing some of the fastest rates of growth anywhere, could become larger than the G6 (France, Germany, Italy, Japan, UK and USA) in dollar terms. In this issue of Gold we focus on China, which is expected to become the world’s largest economy by 2041. China currently enjoys the fastest GDP growth rate at 9.7% (9.5% in the second quarter of 2011) and is the most populous of the BRICs.


hile many investors are reluctant when it comes to investing in markets they do not know or understand, investing in emerging markets presents an excellent opportunity to diversify their portfolio beyond their own borders. Indeed, looking to invest beyond the traditional markets can bring some handsome returns. Many developing nations are big and growing at some of the fastest rates globally, information on them features prominently on all the news channels and while investing in emerging countries such as the BRICs may no longer be as exotic as it once was, globally the BRICs have become an established asset class. Indeed, fund managers around the world are increasing their exposure to emerging markets across different asset classes, including fixed-income, private equity, stocks and foreign exchange. And though there is talk of overheating in markets such as the BRICs along with inflationary concerns, the central banks of these nations have been very quick to adjust their monetary policies to curb any perceived problems, giving more confidence to global institutional investors to expand their exposure to these markets as part of their portfolio diversification. Among the most prominent examples of institutional investors allocating more of their portfolios to the BRICs are the California Public Employees’ Retirement System (CalPERS), which is the USA’s largest public pension fund, and Norway’s Public Pension Fund.

BRIC Total Population 2009 India


Russian Fed

194 Million

1.16 Billion

142 Million

Source: World Bank Data Bank 48


1.33 Billion

BRIC annual gdp growth 2001-2009 (%) 15 10 China


Russian Federation 0

Brazil India



2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: World Bank Data Bank

Why China?

Economic overview With a nominal GDP of US$5.87 trillion and a massive population of just over 1.3 billion people, China is the most populous, the second largest and one of the fastest growing economies in the world. Only last month, in July 2011, China was reclassified by the World Bank from a lower middle income class to an upper middle income class population. Every savvy investor looking to diversify his/her investments can see that opportunities for great returns abound in China. The country has been taking gradual steps to make its currency more open and accessible beyond its borders and international investors have increasingly been raising Renmimbi (RMB) funds through offshore RMB bonds, whose growth has been explosive in the last year. And with RMB deposits growing at an unprecedented rate of 10% per month, the RMB is well on its way to become the international reserve currency of the world some day.

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Heavy Industry






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The China Miracle PEOPLE’S REPUBLIC OF CHINA IN NUMBERS GNI per capita, PPP (current international $) Population, total, billion GDP (current US$, trillion) GDP growth (annual %) Life expectancy at birth, total (years) Inflation, consumer prices (annual %) Labour force, total, million Unemployment, total (% of total labour force)




2560 1.27 1.35 8.30 71.61 0.72 734.04 3.60

4130 1.30 2.26 11.30 72.58 1.82 760.63 4.20

6890 1.33 4.99 9.10 73.31 -0.70 783.16 4.30

While China’s economic growth was previously driven mainly by investments and exports, it is becoming more and more an internal consumer-driven economy. Take per capita income, for example: in 2001, China’s urban per capita disposable income was 6,860 CNY (approx. US$829) and the rural equivalent was 2,366 CNY (approx. US$278). In 2010 those incomes have increased to 19,109 CNY (approx. US$2,900) and 5919 CNY (approx. US$898) respectively. Indeed, in the last 10 years, the per capita income of both urban and rural residents has risen by nearly 300% and the number of millionaire households in China has jumped by 31% in 2010 to 1.11million. Chinese consumption levels have soared, a strong middle class has emerged, consumption patterns have changed and government policy has increasingly focused on a more powerful consumer role in the country’s economy. Changing internal consumption patterns and government policy provide good clues to growing sectors in which one can invest to capitalize on China’s explosive growth.

Outlook for 2011 and beyond The outlook for China’s economy and its different sectors is hugely influenced by government policy. Investors should look to China’s national development programme, announced in March 2011, which outlines the country’s plan until 2015. According to a report issued by KPMG, China’s 12th Five-Year Plan marks a turning point from the country’s previous emphasis on headline growth, to focusing on development, prioritizing strategies to ensure long-term prosperity for the entire country. The 12th Five-Year Plan aims to: Continue encouraging domestic consumption, shifting China's economy reliance from exports to internal consumption. Tackle the growing gap between rich and poor - China's minimum wage will grow by an average rate of at least 13% over the next five years according to the Ministry of Human Resources and Social Security. Upgrade social welfare by increasing state-supported education, health care and social security. These measures will reduce citizens' out-of-pocket expenses and boost disposable income and consumer spending. Reduce energy use by promoting the use of non-fossil fuels and alternative, more environmentally-friendly sources of energy. Fund key areas such as IT, environmental protection and scientific research. Develop service sector output. 50

Renmimbi (RMB) is the official Chinese currency and Yuan (CNY) is its base unit. (In the same way, in the UK, Sterling is the currency and the pound is its base unit.)

The plan also outlines seven priority industries, namely: 1. New Energy: nuclear, wind and solar power. 2. Energy conservation and environmental protection. 3. Biotechnology: drugs and medical devices. 4. New materials: rare earths and high-end semiconductors. 5. New IT: Broadband networks, Internet security infrastructure, network convergence. 6. High-end equipment manufacturing: Aerospace and telecom equipment. 7. Clean energy vehicles.

Chinese Consumer and Consumption Trends In the past, China’s Engel coefficient was extremely high, meaning that a large portion of Chinese income was spent on food and other basic clothing and housing needs. With rising incomes, the Engel coefficient has been lower both in urban and rural populations, meaning less money is spent on food in proportion to the rising incomes. The Chinese consumer is now spending beyond consumer staples, such as on consumer discretionary, health care, insurance, tourism, housing and education, more fitting of a growing middle-class population.

Growing Sectors Based on government policy and the changing Chinese consumer demographics and consumption trends, some industries and sectors are worth paying closer attention to.

In the last 10 years, the per capita income of both urban and rural residents has risen by nearly 300%

Automotive Industry According to KAB Research, a subsidiary of the Hong Kongbased investment firm KAB International, automotive presents a considerable investment prospect for those looking for China Investment opportunities. Assisted by China’s consistent economic growth, government policies supporting fuel-efficient car purchases and industrial growth, China is now the world’s largest car market, overtaking the USA with over 18 million cars sold in 2010. After two consecutive years of expansion, car sales in China settled into

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a subdued growth pattern at the beginning of 2011, with yearto-date sales up a mere 6.1%, having surged by almost two-thirds in 2010, amid increasing fuel prices and expiring government incentives. However, with Chinese automotive consumers at an infancy stage of only 27 vehicles per 1,000 people (compared with 462 in the UK, 451 in USA and 514 in Cyprus), and a rising middle class, the potential is enormous. Furthermore, the need to transport goods across the country will further boost sales in the truck category. Finally, government policy, particularly through subsidies toward more environmentally-friendly vehicles such as plug-in and battery-operated electric vehicles, might provide a boost to the environmentally-friendly vehicle market. KAB Research recommends keeping an eye on Geely Auto (175:HK) and Dongfeng Motor Group (489:HK). Geely, which bought Volvo last year, has carried out some major restructuring to its operations, has strengthened its competitiveness substantially, and with the company’s strategic plan it is expected that Geely will soon develop into an internationally competitive auto manufacturer. Dongfeng, on the other hand, has seen its earnings grow at a stable pace, and will focus on the continuous improvements in Dongfeng Peugeot Citroen Automobile Company Ltd and the commercial vehicles business, in order to achieve sustainable progress in operations management, production and sales and financial results.

aPPlianCes The appliance industry might seem minor at first glance. However, due to the change in lifestyles and upgraded consumption patterns in China, and China’s huge rural demand for electronic appliances, this is an industry with good investment return potential. A look at the company performance of GOME Electrical Appliances (493:HK), one of the largest privately-owned electrical appliance retailers in China, might be sufficient proof of the industry’s earning outlook. GOME is currently enjoying 20% growth in revenue and its net profit has grown at 43% YOY. The high growth potential of the appliance industry has attracted several other companies to enter, such as BYD, a company in which Warren Buffett owns a 10% stake. “NVC Lighting Holding Ltd (2222:HK), a leading supplier of lighting products, with is fast growing energy-saving lighting product line sales, in line with China’s new energy policy, investor capital flowing into the stock for a while now, and a reasonable PE of 19.48, is worth looking into,” says Sissi Wong, Head of Research at KAB Strategy (Cyprus) Ltd.

eduCaTion The Chinese government will be increasing its investment in the education sector from 1.9% to 4% of GDP by 2012. This comes as part of the government’s effort to increase the quality and skills of its workforce and to rectify the growing social inequality amongst its population. With the fast rate of urbanization and

the increasing amount of foreign direct investment (FDI) in China, the demand for more skilled personnel is exploding. Furthermore, in view of this, China’s government places a great deal of emphasis on education and offers considerable incentives in this regard in its quest to make its labour force more skilled. Finally, since more education means higher salaries, Chinese households are increasingly allocating a larger portion of their incomes to education. In post-secondary education enrolment, which has been experiencing very rapid growth in the past few years, one can see a trend that is expected to continue for quite a while. Modern Education (1082:HK), which has recently listed on the Hong Kong Stock Exchange, is planning to strategically position itself across China, both directly with its learning centres for children, and as a consulting service to educational institutions that provide test preparatory services for exams such as TOEFL. In its reports, the company expects a handsome return on this investment.

heavy indusTry The trend of urbanization in China is leading to huge investments in infrastructure, such as roads, airports and housing to host the massive populations as they move away from the rural areas and into China’s cities. Certain focus areas of the 12th Five Year plan will also tremendously boost heavy industry. Some key areas of the plan include further improvements in key manufacturing industries (such as shipbuilding, iron and steel and petrochemicals), the development of new strategic industries such as high-end equipment manufacturing (for example, satellites) and the construction of a comprehensive transportation system. Heavy equipment manufacturing, such as energy-related equipment, underground high-speed rail locomotive equipment, large agricultural machinery and equipment, hightech equipment and other measuring instruments are all expected to grow along with China’s overall growth to enable production and the development of its internal infrastructure. A good example of a heavy industry success story is Lonking Holdings Ltd (3339:HK), which engages in the manufacture and sale of construction machinery in the People’s Republic of China. Lonking saw its bottom line grow by over 125% in 2010 and, with a PE of only 10.76, its stock is priced at an appropriate level, according to KAB Research.

enTerTainMenT and Media

china’s minimum

Increasingly affluent wage will grow by Chinese consumers an average rate of at are spending more on least 13% over the next their entertainment and media needs. five years According to a recent PricewaterhouseCoopers report, overall entertainment and media spending in China grew by 13.9% in 2010 and it will continue to be among the the international investment, business & finance magazine of cyprus

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The China Miracle faster-growing countries during the next five years, with a projected 11.6% compound annual increase. China is expected to surpass Germany in 2011 to become the third-largest market entertainment and media market in the world. Spending on filmed entertainment, video games, television subscriptions and Internet advertising, are expected to continue to grow exponentially over the next five years, according to the same report. Moreover, demand for triple-play packages (voice, data and digital television) is increasing substantially among Chinese households. Finally, the entertainment and media sector has been attracting a lot of investor capital and, being a concept sector as well, it easily attracts capital from potential investors, both short-term and long-term, further supporting the prices of related stock. “In the entertainment and media industry, Mei Ah Entertainment Group (391:HK) and Imagi International (585:HK) seem to still provide buying opportunities for investors, as they indicate through their K-Lines and volumes that capital seems to have been flowing into their stocks for a while. The PE for Mei Ah is also quite appropriate. However, investors should be mindful of potential turbulence in their prices,” says Jason Liu, Research Analyst for Hong Kong Stocks at KAB Research.

Tourism revenues have increased by 12% annually and the country’s total tourism value added to GDP is 4.5%. Companies in the tourism sector have already seen impressive growth in recent years. China Travel International Investment HK Limited (308:HK), for example, has seen a bottom line growth of 439% YOY between 2009 and 2010, and is expected to continue seeing its earnings grow, given the consumption-related goals outlined in the 12th five-year plan, according to KAB Research.

Insurance General growth in the economies across the Asian Pacific region is expected to continue and develop as the wealth of the massive populations in these countries grows, creating an increased demand for insurance protection and wealth creation products. According to reinsurer Swiss Re, China leads the world in terms of insurance sales growth, with an increase in sales of 26.7% in 2010 alone. Currently the world’s sixth largest insurance market, China is expected to take the world number two position in the next 10 years, according to the same source. Despite the rapid growth in the insurance industry over the last 10 years, only a very small percentage of China’s population is covered by personal insurance;

China is now the world’s largest car market, overtaking the USA with over 18 million cars sold in 2010 Food As incomes grow, Chinese consumers are demanding more from food, both in terms of quantity and quality, leading to increases in agricultural production and food imports. Internally, the fast-food industry in China is experiencing rapid growth, as with higher disposable incomes the middle-class Chinese are consuming more fast food. Again the concept of consumption within the 12th FiveYear Plan supports this trend and companies such as Fairwood Holdings Ltd (52:HK), a Chinese-food chain operator, and Ajisen (China) Holdings Ltd (538:HK), a leading fast casual-restaurant chain operator selling Japanese food, have seen their bottom lines grow over 30% and 40% YOY respectively and expect to see the trend continue, based on KAB Research estimates.

Tourism With increasing disposable incomes, the Chinese are spending more on tourism, both inbound and outbound. Moreover, the Chinese government has developed national policies to encourage tourism. In the first quarter of 2011, total income from tourism was 590 billion yuan, an increase of 19% YOY. According to the National Tourism Administration of the People’s Republic of China, domestic tourists will expand to 33 million, an average annual growth of 10%, by 2015. Tourism consumption is increasing steadily as the average annual urban and rural residents travel more than twice a year and tourism consumption is taking up 10% of total consumption. 52

China is expected to surpass Germany in 2011 to become the third-largest market entertainment and media market in the world and with the Chinese government being very supportive of growth in the insurance industry, companies like China Pacific Insurance (Group) Co., Ltd. (2601:HK) and Ping An Insurance (Group) Company of China Ltd. (2318:HK) have seen their earnings grow steadily in the years following the most recent global financial crisis, according to KAB Research.

Healthcare The healthcare industry is also expected to flourish in China. With a growing middle class and higher incomes, the Chinese are now in a better position to seek more advanced medical care. Healthcare is also a major focus of the Chinese government’s 12th Five-Year plan, with the objective of developing an affordable and accessible healthcare system and infrastructure for the entire population. To achieve its objective the government will focus on strengthening public healthcare infrastructure as well as its healthcare service network, establishing medical insurance for the entire population, improving the drug supply system, reforming the public hospital system and supporting the further development of Chinese medicine. according to KAB Research, Guangzhou Pharmaceutical Company Ltd (874:HK) and Winteam Pharmaceutical Group Ltd (570:HK) have both enjoyed increases in their earnings of over 30% YOY, and their earning potential is expected to continue to increase steadily, supported by growing demand and policy, tax and R&D incentives by the government.

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Investing in China’s Economic Growth

“Bilateral relations between Cyprus and China have traditionally been strong and fruitful. In recent years, the relationship has developed even more dynamism, depth and importance, a fact reflected in the steadily growing cooperation between the two countries in the fields of trade and investment,” says Sotiris Sotiriou, Director General of the Cyprus Investment Promotion Agency (CIPA). Official statistics from the Central Bank of Cyprus indicate that in 2009, FDI from China to Cyprus reached €3.7 million, compared to just €1.4 million in 2008. The majority of Chinese investments are concentrated on trade and repairs. Notable examples of Chinese investment activities in Cyprus so far include a €20 million agreement signed in September 2009 between Huawei Technologies Co. Ltd and MTN, one of the largest telecommunications providers in Cyprus, for a network infrastructure upgrade. As part of this agreement, Huawei will supply core and radio access network equipment to facilitate MTN’s rollout of a fast mobile Internet service across Cyprus. In addition, The Bank of Cyprus Group signed a memorandum of cooperation with the China Development Bank for a five-year loan amounting to €300 million, marking the beginning of cooperation between the two banks with the co-financing of investments in the areas of shipping, renewable energy sources and development projects. In addition, Marfin Laiki’s opening of a Beijing branch provides further support to the fact that the China-Cyprus investment relationship will be growing stronger in the future. “Over the past couple of years, CIPA has actively pursued the Chinese market making it a priority geography for promoting Cyprus. CIPA has organized and participated in a number of seminars, exhibitions, investment and trade meetings in various cities in China. Recently, CIPA has proceeded with the development and opening of a representative office in Beijing. Given the size of the market, by bringing Cyprus closer to the Chinese, the hope is that the Chinese will view Cyprus as a real option for their investments,” explains Sotiris Sotiriou.

There are four main stock markets in China, three of which are among the 15 largest in the world, in terms of market capitalization:



FDI inflows from Cyprus to China

FDI inflows from China to Cyprus

1.4 2008

Source: CIPA from Central Bank of Cyprus Data

Hong Kong Stock Exchange With market capitalization of $2.711 trillion and 1,413 companies listed at the end of 2010, it is the 7th largest in the world in terms of market capitalization. It consists of two boards: the Main Board and the Growth Enterprise Market. To be listed on the Main Board, a company must fulfil certain minimum profit, revenue, cash flow and market capitalization requirements. Companies that do not fulfil those requirements but have growth potential are listed on the Growth Enterprise Market Board. H-Share companies are those established in Mainland China and are listed in Hong Kong. Red Chips are companies based on the Chinese mainland that are incorporated internationally and listed on the Hong Kong Stock Exchange. Anyone worldwide can invest in Hong Kong using a broker that is licensed by the Hong Kong Securities and Futures Commission.

In 2007, Hong Kong overtook London and, in 2009, it overtook New York as the world’s biggest IPO market

Shanghai Stock Exchange With market capitalization of $2.716 trillion and 894 companies listed at the end of 2010, it is the largest stock exchange in mainland China and the 6th largest in the world in terms of market capitalization according to the World Federation of Exchanges. The Shanghai exchange is not as open to foreign investors. It lists A and B shares. A-shares are denominated in renminbi, the local currency, and are restricted to domestic investors only. Since 2002, a very limited number of foreign institutional investors have limited access to A-shares under the Qualified Institutional Investor Programme but under strict conditions. B Shares are quoted in US dollars and are open to domestic and foreign investors. Most of the total market cap of the Shanghai Stock Exchange is made up of formerly state-run companies like major commercial banks and insurance companies. Many of these companies have only been trading on the exchange since 2001.

Shenzhen Stock Exchange With $ 1.3 trillion market


capitalization and 1,169 companies listed at the end of 2010, it is the 14th largest in terms of market capitalization, and operates in a similar way as the Shanghai Stock Exchange.



Taiwan Stock Exchange With $818.5 billion market capitalization and 784 companies listed at the end of 2010, it facilitates capital raising by both Taiwan and foreign companies. Mainland Chinese may not invest in shares listed on the Taiwan Stock Exchange, and due to currency risk and limitations, it has not been very attractive to international investors.

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The China Miracle

Hong Kong Stock Exchange The Hong Kong Stock Exchange and Hong Kong itself have traditionally been the region’s financial hub and the West’s gateway to Chinese investments. Several factors have made the Hong Kong Stock Exchange preferable to international investors versus its other Chinese exchange counterparts. Its openness to foreign investors is the main reason, as HK Ex is open to international investors whereas the other exchanges do not allow foreign investors for the most part, with the exception of B shares, which are quoted in USD on Shenzhen and Shanghai and shares on the Taiwan Stock Exchange. Furthermore, though very similar in value in terms of market capitalization with the Shanghai Stock Exchange, far more companies are listed in Hong Kong, including well-known foreign companies such as Rusal, L’Occitane, Glencore and, more recently, Prada and Samsonite. Currency rates and restrictions also influence international investors in preferring the Hong Kong Stock Exchange. The Hong Kong Dollar is pegged to the US dollar, it is traded freely in international markets and there are no capital controls imposed by the Hong Kong government. By contrast, China’s renminbi (RMB) is not fully convertible and there are exchange controls that restrict foreign investment flows in and out mainland China. What’s more, most investors consider Hong Kong’s regulatory system more autonomous and transparent than that of mainland China. While Hong Kong’s financial markets regulator, the Securities and Futures Commission (SFC) is an independent statutory body, Shanghai’s regulator is part of the government’s State Council. In terms of the legal system, Hong Kong has an independent legal system and all laws are governed by an autonomous constitution and English is the only language in which overseas rulings are reported. In China, the legal system is not independent, as the National People’s Congress has the power to enact laws and appoint the People’s Courts, and foreign investors frequently concern themselves with its partiality.

Hong Kong’s leading position in global IPO activity Hong Kong’s position as the world’s top IPO market is also testament to its status as the Exchange of preference when it comes

to investing in China. In 2007, Hong Kong overtook London and in 2009, it overtook New York as the world’s biggest IPO market. Last year, 102 IPOs raised a total US $57 billion on the HKSE versus US $39 billion on the NYSE and US $11 billion on the LSE. Two of the biggest IPOs in history completed very successfully in Hong Kong in 2010, namely that of Agricultural Bank of China Ltd, which raised US $22.1 billion, and that of AIA Group Ltd (an AIG spinoff), which raised US$20.5 billion. As global IPOs continue to rebound in 2011, Hong Kong is poised to maintain its leading IPO position and is expected to raise over US$50 billion in 2011. As global investors show a growing appetite for Chinese shares, given China’s strong economic fundamentals and huge market liquidity, more and more companies are listing in Hong Kong, not only fast-growing Chinese companies but also international companies that are looking to have a foothold in China.

Past performance and future outlook Despite a volatile start to the year and turbulence caused by global recovery concerns and the European debt crisis, Hong Kong has managed to pull its best performance for the last 10 years. In the first half of 2011, a total of HKD182.2 billion was raised from 33 IPO deals, compared to HKD50.3 billion from 27 deals a year ago. Furthermore, the popularity of Hong Kong IPOs can also be seen from the vast over-subscription rates that many have enjoyed. Milan Station (1150:HK), a retailer of unused and second-hand luxury branded handbags and apparel products, was the most oversubscribed IPO in Hong Kong’s history, with an over-subscription rate of 2,178 times recorded in May this year. Hong Kong IPOs have given investors some handsome returns, as most of the new listings have closed their first day of trading with a price above the IPO price, an indication that most IPOs issue shares at prices that are favourable to IPO investors in China. Despite a turbulent start to the year, so far about 62% of all Hong Kong IPOs have ended their first listing day in positive territory, with the biggest share price gain of 70% (vs. the biggest loss of -23.20%), along similar lines to the 2010 performance when about 57% of all Hong Kong IPOs ended their first listing day positively, with the biggest share price gain being 108.33% (vs. the biggest loss of -29.82%).

info: Isavella Frangou-Pavlou is Sales and Marketing Manager at KAB Strategy (Cyprus) Ltd. 54

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MAGAD 7/20/11 2:23 PM Page 1 C

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The China Miracle

aTTraCTing The CyprioT invesTor KaB sTraTegy (cyprus) lTd, a fully-owned suBsidiary of KaB inTernaTional holdings in hong Kong, was esTaBlished in cyprus in 2005. Gold spoke to alan chan (founder and executive director), K.c. chan (founder and chairman), charalambos frangos (general manager) and isavella frangou-pavlou (sales and marketing manager) about the company and what it offers those wishing to put money in what is, to many cypriot and european investors, still a relatively unknown market.

Gold: Tell us something about KAB’s history and its presence around the world and, in particular, how it came to have offices in Cyprus. Alan Chan (Founder and Executive director): KAB Strategy (Cyprus) Ltd is a fully owned subsidiary of KAB International Holdings in Hong Kong. It was established in Cyprus in 2005 when the parent company decided it wanted to expand its reach beyond China and the Middle East and into Europe. KAB Strategy (Cyprus) Ltd. is a licensed Cyprus Investment Firm, regulated by CySEC (License No. 058/05), which provides us with a passport to provide the full range of our investment services across all countries of the European Union, and that is another factor that led us to select Cyprus as our European Headquarters. Cyprus’s favourable tax regime and the country’s membership of the European Union were additional considerations in our decision. In general, KAB International’s global headquarters are in Hong Kong, and as well as the Cyprus office, we have 2 additional offices in China and an office in Kuwait. Additionally, our subsidiaries hold licenses from the Hong Kong SFC, the Chinese Gold and Silver Exchange Society and the Kuwait Chamber of Commerce and Industry.

Gold: What type of products does KAB Strategy (Cyprus) Ltd. give investors access to?

A.C.: KAB Strategy (Cyprus) Ltd. is a full service investment firm, providing a wide range of services. We offer access to commodities and FOREX, be it spot or CFDs, though our online platform. Most importantly, and what we consider to be our niche, is the direct access we offer to investors in many countries to securities (shares, IPOs, ETFs) on the Hong Kong Stock Exchange, either via our platform or our portfolio management services. Finally, via our IPO Portfolio Management product, our portfolio


management team, with the support of our world-class local research team, selects and invests our clients’ money in the highest potential Hong Kong IPOs, enabling investors to access China’s investment opportunities with enormous success, given that our returns for the past year have well surpassed even those of the Hang Send Index.

Gold: How have Cypriot investors reacted to the potential for investment in China?

Charalambos Frangos (General Manager): For the past five years, Cypriot investors have been very hesitant to invest in what is to them such a new market. Events like the Cyprus Stock Exchange crash of 2000, Greece’s current economic crisis, and real estate suffering from slowing demand are also making the Cypriot investor very sceptical when it comes to investing in such a new concept. In addition, a lot of Cypriot investors are locked in the above-mentioned investments, because of negative returns and a lack of confidence. However, after discussing the advantages of the Hong Kong market, current activity, performance and direct access to the Hong Kong Stock Exchange by us (we are probably the only Cypriot Investment Firm, regulated by CySEC that offers direct access to Hong Kong), we are starting to get the right attention. We are optimistic, that Cypriots, like the smart money around the world, will start pursuing markets with many more opportunities for returns. The media is full of news about the Chinese economy and its relentless growth in terms of GDP. And although there are also reports that argue that the Chinese economy is overheated, this is not the trend that we see in terms of where portfolio managers are allocating their investment funds. Not many economies can boast the growth potential of China, and we believe that from a market diversification point of view, Cypriot investors will start diversifying their portfolios to include exposure into the China market as well.

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k.C. Chan Founder and ChairMan CharalaMBos Frangos general Manager

isavella Frangou-Pavlou sales and MarkeTing Manager

alan Chan Founder and exeCuTive direCTor

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The China Miracle

Gold: How does investing in China compare to investing in

Gold: What can you tell us about the increasing number

Greece or Cyprus in terms of returns, processes, etc.? C.F.: For Cypriot or Greek investors, the logistical process of investing in the Hong Kong Stock Exchange is no different. They can buy any company or any product that is under the Hong Kong Stock Exchange such as IPOs and ETFs instantly by the click of a mouse or a phone call. Liquidity, market returns and opportunities are what make the Hong Kong Stock Exchange so different. Daily trading volume in CSE and ASE is decreasing by the day, for example CSE trading volume is €222,5 million less in the first six months of 2011 compared to last year (€665.4 in the first 6 months of 2010). On the other hand, the HSI average daily turnover for the first five months of 2011 was HK$74,395 million (€6,605 million approx.), an increase of 12% when compared with HKD$66,210 million for the same period last year. The HSI Index returned 26% compared to -42% and -40% for CSE and ASE respectively in the last two years. Finally, there are so many IPOs from mainland China that are listed or going to be listed on the Hong Kong Exchange with great potential, value and growth, whereas in Cyprus or Greece there are currently no such opportunities. Given the data above you don’t need to be an expert to see the difference. I am not saying that there are no opportunities in the Greek and Cypriot market, but certain market factors are not in favour of the Greek or Cypriot Investor.

of ‘gold bugs’ in China and the launch of the Hong Kong physical gold platform? K.C. Chan (Founder and Chairman): China is the world’s largest producer - and the world’s second largest consumer - of gold. With increasing incomes and a culturally embedded preference to hold physical gold, demand for it is simply surging amongst the Chinese. To keep pace with growing demand from China, Hong Kong launched its second platform for physical gold trading through the Hong Kong Mercantile Exchange in May 2011, the first one being the Chinese Gold and Silver Exchange Society. Upon maturity of their gold contracts, investors can take physical delivery at a government-operated gold depository at Hong Kong’s main airport. One of our subsidiaries, KAB Bullion Company, is a licensed member of the Chinese Gold and Silver Exchange Society (Member No. 009), through which we facilitate spot gold and silver trading for our clients worldwide. In addition, we are in a position to assist our investors around the world in trading physical gold.

Our returns for the past year have well surpassed even those of the Hang Seng Gold: What are the company’s future plans? A.C: After substantially growing our client base in Asia and the Middle East, the company will focus on penetrating the European market further, with the goal of bridging investment opportunities across continents and making access to Chinese investment opportunities more tangible to investors abroad. With more focus on educating the international investor in China’s markets, we believe that we shall become a valuable partner to those looking to decode investing in China. We are also assuming a bigger liaison role, assisting companies that want to do business in China to access appropriate contacts. 58

China is the world’s largest producer - and the world’s second largest consumer - of gold

Gold: What is the position of KAB in relation to companies that list IPOs in Hong Kong? K.C.C.: In the past few years, at KAB we have focused part of our strategy on helping our clients capitalize on Hong Kong’s IPO market, which is the number one in the world in terms of listings and funds raised for a few years now and its returns have been really impressive. We have created a specialized research team that supports our IPO Portfolio Management product, whereby we select the IPOs with the best potential for handsome returns upon listing, and indeed our returns on this product have surpassed those of the Hang Seng. We also provide direct access to our clients to the entire IPO market, if they wish to select the IPOs they would like to invest in themselves. Finally, we have also acted

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as underwriters to a few IPOs, such as Strong Petrochemical Holdings Ltd (Stock Code: 00852) and Vitar International Holdings Ltd (Stock Code: 00195), assisting Chinese companies to raise funds on the Hong Kong Stock Exchange. We have also participated in roadshows and served as joint bookrunners and lead generators on countless Hong Kong IPOs.

Gold: Why should someone come to you instead of opting for the services of one of your competitors?

Isavella Frangou-Pavlou (Sales and Marketing Manager): KAB has always

strived to provide a personal touch and niche positioning to its investors. We pride ourselves with being a full-service investment firm, offering access to a wide range of investment products, and a strong physical presence as well as an online presence. We specialize in the Chinese market, one of the fastest growing markets in the world, which presents countless investment opportunities to investors worldwide. That is our niche. And we ensure that we have the human capital and the local expertise to support investors investing not only in FOREX, CFDs and physical commodities but also in accessing the Hong Kong Stock Exchange as the gateway to Chinaâ&#x20AC;&#x2122;s investment opportunities. A wide selection of investment products is essential for investors. KAB, in line with leading international banks and exchanges, provides a back-to-back trading platform to investors. Meanwhile, we understand the importance of local intelligence, so KAB, with its headquarters in Hong Kong, opens the financial door to Greater China. The company has a full team of analysts and operators as well as state-ofthe-art trading platforms and these are just some of the reasons why we are the best option for investors looking to gain exposure in China.


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Global Banking Profits Approach Pre-crisis Peak The good times are back in the banking world - but not for everyone


ccording to the latest data gathered by The Banker, which has just published its Top 1,000 World Banks 2011 list, banks’ assets grew by 6.4% last year to pass the $100 trillion mark for the first time while profits soaried, up 77% to $709bn for the 2010 financial year, just $80bn short of the pre-crisis peak in 2007. Banks are also continuing to step up their capitalisation levels - among the 25 largest banks, Tier 1 capital was up 12.1%.

It is striking that only one of the top four Greek banks suffered a loss in 2010 Some of the largest losses in last year’s ranking were suffered by those top 25 banks and 2010 marked a significant turnaround for many of the most troubled players. The US in particular has enjoyed a much-improved performance, with Citigroup, Bank of New York Mellon, State Street, GMAC, Keycorp and Huntington Bancshares - all posting among the top 25 largest losses last year - recording substantial profits. Outside the US, other banks that jumped from biggest losers to big profits include UBS, Russia’s VTB, Dutch bank ING and two of Germany’s largest banks. However, there are also numerous lossmaking banks in the eurozone dragging down profit and capital figures. In


Germany, two of the major casualties of 16.1% for profits. For the largest European the financial crisis, IKB and Hypo Real banking markets, only France has enjoyed Estate, continue to haemorrhage money. an increase in its share of profits, while its So too does Royal Bank of Scotland, while asset share declined slightly. In Germany, Austria’s Hypo Alpe-Adria continues to be the UK and Italy, the share of profits has hit hard as a turnaround management team more than halved (to 1.7%, 5.1% and appointed by the government reclassifies its 2%, respectively), and asset shares have loan portfolio. also suffered. By contrast, China’s share of While these four banks are gradually global profits has more than doubled to narrowing their losses, the same cannot be 21% between 2007 and 2010, and Chinese said for those in Ireland, where Anglo and bank assets have grown by 44%. Last year, Allied Irish Banks between them suffered a Chinese bank, Industrial Commercial losses equivalent to three and a half times Bank of China, entered The Banker’s top their total Tier 1 capital. By contrast, with 10 listing for the first time. This year, attention firmly focused on Greece, it is there are already three other Chinese banks striking that only one of the top four Greek joining ICBC in the top 10 by profits. banks suffered a loss in 2010 - EFG, the Luxembourg-based holding company The World’s Top 25 Banks by Profits for Eurobank. This is a testament to 1. Industrial Commercial Bank of China China the conservative 2. China Construction Bank Corporation China underwriting and 3. JP Morgan Chase & Co USA funding strategies of 4. Bank of China China these banks prior to 5. HSBC Holdings UK the crisis, but it seems 6. Wells Fargo & Co USA unlikely to continue 7. Agricultural Bank of China China if a major sovereign 8. BNP Paribas France restructuring occurs 9. Banco Santander Spain in 2011. 10. Goldman Sachs USA 11. Citigroup USA Beneath these 12. Itau Unibanco Holding Brazil stories of individual 13. Banco do Brasil Brazil bank failures, there 14. Barclays UK are growing signs of 15. Mitsubish UFJ Financial Group Japan a deeper malaise for 16. Banco Bradesco Brazil Western Europe. 17. Credit Agricole France Since the peak of 18. Sumitomo Mitsui Financial Group Japan the market in 2007, 19. Banco Bilbao Vizcaya Argentaria Spain the US shares of 20. UBS Switzerland both global assets 21. Westpac Banking Corporation Australia and profits have 22. Groupe BPCE France actually grown - from 23. Sberbank of Russia Russia 11.9% to 12.9% in 24. Bank of Communications China the case of assets, 25. Société Générale France and from 14.5% to (Source: The Banker)

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UCITS Funds: An Innovation in Modern Investment Management


he advantages that UCITS funds offer to investors and how Marfin Capital Partners Ltd. has incorporated UCITS IV to its product offering. 2011 is proving to be a tough year for investors as geopolitical uncertainty is rife and is impacting markets on a daily basis: we have already experienced the Japan earthquake, political instability in the Middle East and the European crisis and a potential US debt crisis. Low deposit rates are prevalent against a background of rising inflation and negative real returns. The investor community is increasingly looking for ideas which will generate real returns whilst mitigating avoidable risks. Over the last 24 months, one of the key investment trends has been the acceleration in the adoption by institutional and retail investors of UCITS funds, which are viewed by many as vehicles that essentially de-risk the investment process, and the fact that €5.8 trillion has been invested in them so far suggests that there is a considerable amount of truth in this. A UCITS (Undertakings for Collective Investment in Transferable Securities) fund is a collective investment fund which falls under a set of European Union Directives. UCITS funds have hard rules concerning liquidity, diversification, risk management, eligible investment and regulation which are monitored by an independent party. This structure offers transparency in terms of what the underlying investments are and a much higher degree of confidence that the investments will behave in line with expectations because of the strict rules and the regulatory environment in which the UCITS structure must operate. Advantages of UCITS funds • Diversification - no single investment within the fund can be more than 10% of the total net asset value of the fund. • Liquidity - the maximum redemption period must be less than 14 days and many have daily liquidity. • Open-ended structure - trades at net-asset-value only and cannot trade at a discount. • Independent custodian - typically a large international custodian bank that mitigates fraud risk. • Independent administration - independent price verification

By Theodoros Costeas CFA

is sent directly to the shareholder mitigating performancemanipulation risk. • Independent audit. • Independent risk management through a trustee - ensures compliance with UCITS directives. • Capital advantage - insurance companies gain a capital advantage under Solvency II Our response at Marfin Capital Partners has been to incorporate the UCITS structure as part of our product suite. In November 2010 we launched our first UCITS fund, the Byron Fixed Income Alpha fund. The fund is domiciled in Ireland with BNP Paribas Securities Services acting as the fund’s independent custodian. With €6.1 trillion assets under custody, BNP is considered one of the top 4 strongest banks in the world (Aa1 by Moodys, AA+ by S&P and AA by Fitch). It is worth noting here that all the assets held under custody are held in the name of the fund (not BNP) and are in a segregated account - this is one of the most important rules governing UCITS.

Our rationale has been to provide our clients with a product which will generate real returns in these extremely volatile markets Our rationale behind the Byron Fixed Income Alpha fund has been to provide our clients with a product which, in these extremely volatile markets, will generate real returns within the UCITS regulatory environment mitigating a number of risks. The focus of the fund is on making real returns as opposed to simply tracking an index. Predominantly, the Byron Fixed Income Alpha fund is invested in a highly diversified international portfolio of bonds with specialist managers situated in London and New York. Being the ‘gold standard’ in the investment industry, the UCITS directive is evolving, following the recent transposition of the UCITS IV directive into European legislation which we implemented immediately in our Byron Fixed Income fund.

info: Theodoros Costeas CFA is an investment manager with MCP. He has 12 years of investment management experience in various international investment banks including Merrill Lynch, Deutsche Bank, and Kommunalkredit Int’l Bank. He holds a BSc from New York University, Stern School of Business and an MA from Columbia University. Email: the international investment, business & finance magazine

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By George Mavrocostas

Cyprus Airways: The Future Is Ours


urvival and steady progress are among Cyprus Airways’ key strategic objectives. We operate in an intensely competitive environment, directly affected by the global financial crisis and continuous oil price rises, and all our efforts and plans are focused on achieving these objectives: on how to make the most of our material-technical basis, our resources, human and otherwise, in order to deal with both our own internal deficiencies and the unfavourable circumstances created mainly by outside events. We need to ensure that the airline becomes more competitive, flexible, efficient and revitalized if it is to respond to the heightened demands of today’s passengers. This is no easy task. We face tough challenges but our shared desire to work to upgrade the company is much more powerful than any unfavourable conditions. Cyprus Airways personnel is increasingly aware that through proper, systematic work and rational, flexible planning, we can secure a future with good prospects. Cyprus Airways, as a basic pillar of tourism and, by extension, of the country’s economy, is already endeavouring to breathe new meaning into its nationally significant role. In our work, we take care to ensure that we are supporting our strategic aims. Last year we implemented a flexible action plan containing a series of measures based on market realities. Among them was an effort to rationalise our flights schedule, in the context of which we cut unproductive routes, taking care to achieve a better correlation between seat availability and demand, to increase occupancy levels and maximize fare income. We have paid particular attention to the Russian market, doubling the number of flights to Moscow and introducing daily flights to St. Petersburg. We are now studying certain Middle East destinations that look promising while on 1 July we inaugurated flights to and from Erbil in Northern Iraq which are expected to become more frequent in the near future Against the background of these developments and in recognition of the need to forge alliances, Cyprus Airways has entered into important partnerships with Olympic Air and Virgin Atlantic which offer benefits to both the travelling public and the company itself. Today the shared flight schedule of Cyprus Airways and Olympic Air represents more than 60% of the total

flights operated by the two airlines on a codeshare basis, making them dominant on these routes. Moreover, the extremely important agreement for codesharing with Virgin Atlantic which comes into effect in the middle of this month (August) will give Cyprus Airways passengers a chance to board our planes at Larnaca and, via London, to travel to New York, Boston or Los Angeles. Thanks to a second agreement with Virgin Atlantic which provides for the exchange of timeslots at Heathrow Airport, from October Cyprus Airways will be in a position to offer the most attractive take-off times for Heathrow on a daily basis with morning and afternoon flights.

Cyprus Airways has one of the most modern fleets in Europe today, which gives it a competitive advantage over rival airlines Of course, our efforts to transform Cyprus Airways do not end here. They extend to all areas of our operations with different measures being taken to reinforce competitiveness, raise productivity and reduce operating costs wherever possible. Another aspect that makes for a more comfortable and pleasant flight for passengers, while strengthening the company’s competitiveness, is the renewal of our fleet. Cyprus Airways has one of the most modern fleets in Europe today, which gives it a competitive advantage over rival airlines. All our aircraft are very new and in addition to the fact that they are much more economical, their advanced navigation systems and equipment offer even greater safety. Our renewed fleet also contributes to the significant reduction in operating costs thanks to greater accuracy regarding flight departure times. We are determined - we have no choice - to implement all the plans we have drawn up, amending them according to the realities of the market. By making the best of our technical know-how, our infrastructure and our renewed fleet and through the constructive collaboration between Board, Management and Personnel, we intend to lay claim to our share of the market and bring better days to Cyprus’s national carrier.

info: George Mavrocostas is Chairman and Chief Executive Officer of Cyprus Airways. 62

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magad NEW 7/28/11 12:48 PM Page 1 C

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{august 2011}

issue 05

+ BOok reviews



66 Investing Defensively Protecting wealth during times of uncertainty 69 The World’s Top Banks Which ones made the most profits last year? 71 London remains top international market for global business 71 CISI Gains Smart Technology Edge The launch of CISI TV



72 The Market that Never Sleeps A woman CEO Rises to the Challenge 76 Wadja Wanna Do Online? The hot new addition to the blogging and social networking scene 80 Real-ale Fans are Ideal Role Models for Economic Recovery



82 Duff, Poor and Moody Sometimes the clue is in the name 84 Shipping: Moody’s Predicts Negative Outlook for Global Shipping Too many ships and not enough cargoes 85 Maritime Cyprus Conference 2011 “The ?s in Shipping: Is it Safe Enough? Is it Sustainable? Is there enough Confidence?”



86 Increased Revenue + Enhanced Reputation = Success There are better ways of filling the state coffers than by the government’s proposed €1,000 tax 88 Managing Your Tax Obligations Responsibly Profile of Ernst & Young

money: More Money Than God: Hedge Funds and the Making of the New Elite by Sebastian Mallaby 70 BUSINESS: Business Model Generation by Alexander Osterwalde 81 ECONOMY: The Pursuit of Happiness: An Economy of Well-Being by Carol Graham 83 TAX&LEGAL: The Cyprus Issue: The Four Freedoms in a Member State Under Siege by Nikos Skoutaris 90 lifestyle: One Day by David Nicholls 97



92 Wanted: ‘Connoisseurs of Luxury’ The UK’s new high-end tourism marketing campaign 94 Extreme, Exclusive, Extravagant and…Expensive Holiday choices to make you feel better… and lighten your wallet

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Investing Defensively

Protecting wealth during times of uncertainty By K.Ioannides


hese are anxious times, and not only for those of us living in Cyprus. The massive damage to the island’s main power station has frayed the nerves of many who have remained calm despite continuing financial market volatility, sovereign debt concerns, bank stress tests and the prospect of that not far away from here the so-called Arab spring looks like evolving into a gruelling summer. Now may be a good time to make sure that your investment portfolio is getting the care and attention it needs in order to protect its real value and to alleviate your undoubtedly heightened financial concerns. On the following pages is a Gold checklist of things that concerned investors would do well to take care of.

Have you… looked into Gold and the Swiss Franc? During times of great uncertainty investors have tended to plough much of their liquid assets in to two things: gold and the Swiss franc. Gold reached an all-time peak (in real terms) three decades ago when inflationary fears were particularly intense. What followed was a long period of Swiss Franc strength which forced the Swiss


government to impose negative interest rates in order to dissuade foreigners from opening bank accounts. With investors now worried about European sovereign debt and the crisis over the American debt ceiling, it is not surprising that both gold and the Swiss franc are extremely popular with investors again. Gold has been reaching new nominal highs, while the Swiss franc has reached a record in real trade-weighted terms. In addition, Switzerland has both a fiscal and a currentaccount surplus as well as a low rate of inflation with a comparatively low debt-toGDP ratio.

Have you… looked into buying newly issued index/inflationlinked bonds? Governments and companies alike issue bonds that offer some level of inflationproofing. They usually provide an adjustment for inflation plus an additional return. In practice there can be many differences, the most crucial one being that Index-linked bonds are traded in the market and so the price will fluctuate as the outlook for inflation changes. For this reason you should buy them when they’re first issued and be prepared to hold them until they mature, otherwise you could lose money.

Major index/inflation-linked bond issuers and their corresponding indices COUNTRY



United States

US Treasury

US Consumer Price Index (NSA)

United Kingdom UK Debt Management Office Japan Ministry of Finance Bundesrepublik Deutschland Germany Finanzagentur France Agence France Tresor Italy Department of the Treasury Canada Bank of Canada Sweden Swedish National Debt Office

Retail Price Index Japan CPI EU HICP ex Tobacco France CPI ex-tobacco EU HICP ex Tobacco ACPI Swedish CPI

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Have you… made Sure you have a healthy level oF liquidity? Although interest rates are at exceptional lows it may still make sense to make sure that you have cash and short-term highly liquid investments. This is especially true if you are dependent on investment returns for your spending needs. By keeping a healthy level of liquidity, you avoid having to sell core buy-and-hold investments to fund your immediate spending. This may be essential in letting you maintain key assets that you plan to give a central role in the health of your future retirement portfolio. Furthermore, in times of crisis there may be exceptional bargains to be had if you can move fast. In such a market, cash is king so it helps to have plenty of it available in order to keep your options open.

Have you… Spread your inveStmentS Globally? Spreading investments around the world is an effective way of reducing risk from political, economic and financial uncertainty. The US Institute for Private Investors’ Family Performance Tracking survey, which looks at how its members invest, has found that the wealthiest people have at least a third of their portfolios outside their home country. Going even further, one in five has 50% of his/her investments allocated abroad.

Have you… inveSted in aSia yet? The last World Wealth Report (which provides analyses of High Net Worth Individuals (HNWIs) worldwide conducted by Capgemini and Merrill Lynch) found that wealthy Asians were the only ones confident in investing in their

own region. The report also estimated that Asians would maintain the current percentage of their money invested in the region through to 2012. By contrast the report found that HNWIs in Europe, North America and Latin America indicated that they were planning to reduce their allocations to their own regions.

in times of crisis there may be exceptional bargains to be had if you can move fast

Have you… remembered to truSt in time, not timinG? You may be taking a big gamble if you try to work out if this is the best time to buy or sell investments. The so-called art of ‘timing the market’, is riddled with risk and can be costly when you get it wrong. A good method of investing and avoiding the risks of timing the market is to spread your investment through a series of single lump sum investments or a regular monthly savings plan. This effectively cushions you from ups and downs in the stock market since you are buying your units at a variety of prices and over a prolonged period of time. Another marked benefit of this approach is that it takes the hassle out of trying to time market rebounds, which is a notoriously difficult to do and something even the experts frequently get wrong.

Have you… inveSted in property in a prime international location? Real assets are preferable to nominal assets in inflationary times, provided they retain their pricing power. Property is a so-called ‘real’ asset: a tangible good that does something useful, that you can see, touch, and use. The opposite would be a ‘nominal’ asset, like a pillowcase stuffed full of banknotes or a bond that pays a fixed income. As inflation continues to be a concern, property owners with a stake in key global hotspots (London, Paris, New York, Sydney, etc.) typically increase the cost of using that property (i.e. a landlord will increase rents, while a residential owner will judge that the next house buyer will pay more to ‘consume’ the accommodation provided by the property). Either way this pushes the purchase price up. In such key markets, tenants will typically be able to pay the higher rent because their salaries should have gone up too (part and parcel of inflation). Real assets are illiquid and their pricing is often opaque so the moves will be jumpy. Over the long term, assets that are useful, tangible, rare and/or precious usually retain or increase their value through uncertain and inflationary times.



1 2 3 4 5 6 7 8 9 10

Paris Hong Kong Helsinki Shanghai Beijing London Singapore Zurich Kiev Geneva

annual % increaSe in value 22.2% 15.0% 12.2% 11.0% 10.0% 8.6% 8.6% 8.0% 3.2% 1.6%

Source: Knight Frank Residential Research, Orava Funds (Oikotie Orava Index) the international investment, business & finance magazine of cyprus

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Key Traits of Defensive Stocks • They have strong brand recognition and none sell commodity-type products. • They sell products that are considered essential or non-luxury items, which should perform well even if the economy continues to struggle.

• They have a healthy level of Earnings Per Share. The consensus among market analysts is that such companies have shown strong earnings per share growth and will continue to do so over the next five years. • They have a strong balance sheet as regards interest coverage and debt-to-equity ratios.

Have you… demanded performance and service from your financial advisors? Given their experience of the past five years, investors have proven to be less trusting and loyal to their advisers. Demanding more service together with proven performance results is a rising trend, especially in the present uncertain times. As corroborated by Steven Crosby, US leader for PWC’s private banking and wealth management leadership division, “Two years ago, I would have said people would take performance over less than stellar service as long as they’re getting a good return…Now it’s, ‘I want quality service or I’m leaving.’

Have you… allocated sufficiently to defensive stocks? Equity markets worldwide have become more volatile in recent months due to the resurgence of the European debt crisis. At the same time, emerging markets are being affected by high inflation and rising interest rates. Fearing a collapse of the euro and its impact on European economies, some


investors are staying clear of European stocks altogether but this may not be the best approach. Scores of the world’s largest companies are based in Europe (especially in the UK) and earn a large portion of their revenues from outside the EU itself. For example, many large British mining, medical and retail companies have

the majority of their operations outside of the UK and the European continent. Some of these companies have strong presence in the BRICs as well as in other rapidlyexpanding markets such as Turkey and Indonesia, etc. Hence, investors can add some of these companies at current levels to gain exposure to emerging markets.

Examples of defensive stocks being bought in 2011 Company 3M Company AstraZeneca Diageo plc Johnson & Johnson Kellogg Company McDonald’s Corporation Pepsico, Inc. Reckitt Benckiser Group Scottish and Southern Energy plc Unilever plc

Sector Conglomerate Sector: Drugs Beverages (Alcoholic) Healthcare Consumer Goods Restaurants Beverages Consumer goods Electric Utilities Consumer Goods

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ciSi GainS Smart technology eDge one of the worlD’s biggest Professional boDies in the banking, securities anD investment inDustry has turneD to the latest anD smartest technology By Dick Meredith, London Press Service


he Chartered Institute for while they watch. This latest development Securities & Investment came not long after the CISI launched its (CISI) is the largest and first mobile application for smart phones most widely respected that allowed members to obtain their CPD professional body for those on the move. CPD is very significant for who work in the securities regulators in the financial services industry and investment industry in the UK and and in the UK, for example, the detail in a growing number of major financial can now be measured, monitored and centres across the world. Evolved from audited to comply with Financial Services the London Stock Exchange, it has more Authority requirements. The new app than 40,000 members in 89 countries. In allows members to download three of its the past year, the CISI set almost 40,000 publications, the Securities & Investment examinations in 75 countries, covering a Review, Regulatory Update, and range of vocational qualifications. CISI Investment Management Review directly exams are recognised by 92% of the to their smart phones. Members can then world’s banks. The CISI’s mission is to read the articles from these publications on help members attain, maintain and develop the go. The app then automatically uploads their knowledge and skills and to promote the time spent reading to the member’s the highest standards of ethics and integrity CPD log. CISI TV, which will be free to its in the securities and investment industry. members, will feature 60 new webcasts and Based in the City of London (the capital’s podcasts a year and record the CPD hours financial quarter), the CISI is a global that are earned while watching the webcasts organisation with representative offices in directly to their CISI CPD log. Because the financial centres service is available such as Dublin, via the internet, Singapore, Dubai, members can Mumbai and view the webcasts this important tool Colombo, and wherever they works in close reside throughout will help our global cooperation the UK, Ireland, membership enhance with regulators, Europe, the Middle their professional businesses and East, North other professional Africa, Asia and development bodies worldwide. South-East Asia. The institute has Simon Culhane, just launched its the institute’s latest continuing professional development chief executive officer, said: “This is tool, CISI TV. The television service an important tool to help our global will allow busy CISI members to catch membership to achieve their CPD up on the most popular continuous goals and keep up to date with industry professional development (CPD) events at developments. It will help enhance their a time convenient to them. Events can be professional development, improve their streamed from to a laptop or competence levels, thereby increasing their PC to allow members to earn CPD hours value to their employers.”

book review

more money than God: hedGe FundS and the makinG oF the new elite by SebaStian mallaby (bloomsbury Publishing) rrp: £10.99 (£6.37 from


n what is arguably the first authoritative history of hedge funds, journalist Sebastian Mallaby forcefully argues that hedge funds contribute to economic stability by chasing the true value of mispriced assets. Hedge funds reward risk-takers so they tend to attract larger-than-life personalities and this richly- detailed book centres on the successes and occasional missteps of famous hedge fund managers, including such luminaries as Stanley Druckenmiller, Paul Tudor Jones II, Michael Steinhardt, Julian Robertson and George Soros. Drawing on insights from mathematics, economics and psychology to crack the mysteries of the market, hedge funds have transformed the world, spawning new markets in exotic financial instruments and rewriting the rules of capitalism. And while major banks, brokers, home lenders, insurers and money market funds failed or were bailed out during the crisis of 2007-09, the hedge-fund industry survived. This is the inside story of the origins of hedge funds in the 1960s and 1970s, their explosive battles with central banks in the 1980s and 1990s, and finally their role in the recent global financial crisis.

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London remains top international market for global business Business fundraising on the London Stock Exchange rose by more than 500% in 2010


usiness fundraising on the issuers, looking to join our markets. As London Stock Exchange market conditions continue to improve, rose by more than 500% we are confident many more companies in 2010 as 89 companies will look to benefit from the unrivalled from across the globe liquidity and international profile that a raised more than £10 listing in London can provide.” billion through initial public offerings Essar Energy, one of India’s leading (IPOs) on the exchange’s markets. The private-sector power and oil and gas total money raised by IPOs during the year companies, raised £1.3 billion – the largest reached £10.1 billion, a 573% increase on ever Indian IPO in London. Betfair, 2009 (£1.5 billion), with the number of the world’s largest international online IPOs joining the exchange’s markets more sports betting provider, joined the main than quadrupling from 22 in 2009. market in October, with a total offer of Tracey Pierce, director of Equity Primary £234 million. Three Russian companies Markets at London – Transcontainer, Stock Exchange O’Key and Mail. Group, said: ru – raised a total In 2010, AIM proved it “We have seen of more than is the world’s leading rejuvenation in the £1.2 billion, and IPO market during Aluminium Bahrain growth market 2010. Whilst last become the 43rd year our markets company from the supported a Middle East on the significant amount stock exchange’s of fundraising through further issues, 2010 markets in November. injected some very positive signs of life into The Alternative Investment Market the new issues market, including a number (AIM) - the London Stock Exchange’s of major wins for London. international market for smaller growing “With high profile listings from India, companies - also enjoyed another strong Russia, Asia and the Middle East – plus year, raising a total of £6.3 billion, a 12% many other countries – the London Stock increase on 2009. The number of AIM Exchange remains the international market IPOs during the year more than tripled, of choice for companies with truly global reaching 43, with five companies from ambitions.” She added: “We believe that India joining the market in just 10 weeks these new floats are just the beginning of from September to November 2010. a growing, healthy, long-term pipeline of Marcus Stuttard, the head of AIM, said:


“Once again in 2010, AIM proved it is the world’s leading growth market. It gives companies from across the globe, from a broad range of sectors, access to a unique community of investors and analysts, capable of providing the capital they need to fund their expansion at IPO and beyond. The list of companies joining the market during the year demonstrates AIM’s unrivalled diversity. “Small and mid-cap companies will be central to economic recovery, and dynamic public markets like AIM – where companies can access equity finance on an ongoing basis – will continue to support jobs and drive entrepreneurial activity,” he added. A recent report by Cushman & Wakefield, international commercial real estate brokers and consultants, revealed that the take-up of office space in the City of London (the financial district) and London Docklands reached 7.6 million square feet (about 706,000 sq metres) in 2010, the highest figure for five years. This figure exceeds that of 2008 (6.6m sq ft) and 2009 (4.6m sq ft), giving encouragement to developers to push ahead with schemes over the next year. Bankers JP Morgan recently declared that the City of London will remain the headquarters for its European operations, with major investments including the acquisition of 25 Bank Street in Canary Wharf. Jamie Dimon, chairman and CEO, said these “long-term investments

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… represent our continued commitment to London as one of the world’s most important financial centres”. The Mayor of London, Boris Johnson, described JP Morgan’s decision as “a tremendous coup” for London and for the UK and rightly reflects the prevailing confidence in the capital. Meanwhile, London’s city skyline looks set to be transformed with developers reviving plans to create two of the most striking skyscrapers planned for the Square Mile since the development of Swiss Re’s iconic “Gherkin” building. The developers revived plans to build office towers after cancelling them two years ago because of the global financial crisis. In a move regarded as a renewed vote of confidence in the City as a global financial centre, British Land – one of the country’s largest property companies – has committed to construct its 740ft-tall office block (225 metres) with backing from one of Canada’s largest pension funds. The Leadenhall Building, known as the “Cheesegrater” because of its shape, will be completed in mid-2014 at a cost of £340 million. The 47-storey office tower building will be in the midst of the financial district and designed by renowned Lord (Richard) Rogers and his group. Land Securities, the UK’s largest

commercial property company, has also data was taken from 300 businesses that revealed plans to develop a new office space stated the main reason for taking London in London in the form of a skyscraper in office space was the close proximity to the heart of the capital. The development, customers. Among the latest in a string of which will be created in conjunction large office deals in London, being taken as with the Canary Wharf Group, will be a positive economic sign, is the Bloomberg constructed in Fenchurch Street and will media group’s acquisition of new office provide an avenue for the group to expand space with plans to build a fresh base in the its current office space into the major UK. The group purchased the site from financial district of London. Legal & General and has appointed leading Canary Wharf architect Lord owner Songbird (Norman) Foster’s revealed the plans practice to design to develop a new the building. The London Stock office space in “Bloomberg’s conjunction with London Exchange remains Land Securities. headquarters has the international The “Walkie always been an market of choice for Talkie” building, integral part of the so named because company. This new companies with truly of the innovative project underscores global ambitions shape of its design, our commitment by architect Rafael to London and Vinoly, will be to expanding a 160m-high our presence in skyscraper built on a site at 20 Fenchurch this world-class financial capital,” said Street. Bloomberg chairman Peter Grauer. “This The development news came as other shows that when it comes to financial research from pollsters Ipsos Mori and and media services, London continues Cushman & Wakefield revealed that 71% to lead the way in attracting the best in of large companies located in London are the business,” said Vince Cable, the UK looking to expand to bigger offices. The Business Secretary.

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The MarkeT ThaT Never SleepS a woMan Ceo rises To The Challenge Interview by John Vickers

Olga Rybalkina 72

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lpari Financial Services Ltd (Alpari FS) opened for business in Limassol on 23 May, 2011. It is a member of the Alpari Group of companies which has offices in over 20 countries. Combined, the companies look after over 440,000 customer accounts, generating monthly Forex trading volumes in excess of $160billion, and employ over 550 people worldwide. Olga Rybalkina, CEO of the latest addition to the Alpari family, spoke to Gold about the challenges involved in establishing the new firm in Cyprus.

Gold: Why has Alpari decided to set


Gold: So you chose Cyprus for the very same reasons that the island uses to promote itself. O.R.: Yes. Itâ&#x20AC;&#x2122;s a member of the EU, a well-known financial centre and it is regulated in accordance with MikFID (the Markets in Financial Instruments Directive) which is recognised all over Europe. Having a licence from CySEC (the Cyprus Securities & Exchange Commission) means that we can provide crossborder executions in all other European states and in some third countries as well.

Gold: Where do you expect the clients of your Cyprus branch to be based? O.R.: They could be from anywhere in the world but we will be concentrating on Eastern Europe, the states of the former USSR, Africa and parts of the Middle East. I should point out that the firm here is an independent entity, although we work under the same umbrella with the same brand name, we have the same ownership and we utilize the same technologies. We have a research and development team working for the whole Alpari group but each of our companies is independent.

up an office in Cyprus? regulation is Olga Rybalkina: Let me give you some necessary, both company history. In the beginning (1990) the company was based in for us as brokers Russia but when we decided to expand and for our into the global arena, we chose the UK clientsâ&#x20AC;&#x2122; protection as the most conservative, reputable and, at the time, most powerful jurisdiction and safety and we registered with the Financial Services Authority. Later we decided on New York as our next destination - I personally started that business and ran it for three years. So we had three pretty successful hubs covering Gold: The advantages to Alpari three different areas. In the past two years, however, regulation for being here are obvious but is your presence in Cyprus in the United States has become very tough and we were unable beneficial to people wishing to trade in the Forex market? to accommodate a lot of people in various countries which were O.R.: Definitely. Here, we have fairly strict KYC requirements not 100% compliant with those very strict rules. When we found but we are still able to accommodate people who have wanted to ourselves between the two extremes of Russia (which is totally trade with Alpari but have been rejected for compliance reasons unregulated) and America (which is now highly regulated), we elsewhere. At the same time, clients in Russia, for example, now started thinking about having something in between and that have greater reliability. Their funds are safe with us since, by law, is why we looked at Cyprus. Its geographical location, with the we have segregated accounts. This means that we must separate Middle East on one side and Eastern Europe on the other, means our own funds from those of our clients which are in dedicated that we can focus on these two regions as well as fulfilling demand bank accounts that cannot be accessed by anyone else. We are also from people in Russia and the former Soviet republics who wish to registered with the Investor Compensation Fund which means that work in a regulated sector. everybody is insured.

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Gold: The mere fact that you mention this suggests that bad things have happened to people’s money in the past. O.r.: Having worked in this industry for more than 12 years, I’ve seen a lot. Companies have collapsed and started up again under a different name; a lot of small companies advertise very aggressively and promise ridiculously high returns and, unfortunately, some people hand over their money, which they clearly have more of than they have sense. So yes, I’ve seen a lot of bad situations but thanks to regulation such situations are increasingly rare. Of course, regulation in some jurisdictions has become so tough that it has almost ruined the sector completely but moderate regulation is necessary, both for us as brokers and for our clients’ protection and safety.

Gold: Are all your clients individuals or do you have companies too?

O.r.: Until last year we were almost exclusively oriented towards the retail business - individuals and perhaps small corporations - but we have now established an institutional division and we’ve started working brokerage to brokerage so we can provide a full service to anyone from a small retail investor to a large brokerage company.

Gold: How do you go about marketing yourself to potential clients?

O.r.: Through clever and attractive advertising campaigns prepared by our excellent and very knowledgeable creative team! In addition to display campaigns, we usually promote ourselves through search engines, which is very important and we are coming to understand more and more the importance of social networking sites such as Facebook and Twitter. We’ve had some very nice ideas recently! One of our aims is to provide exceptional customer service, which is why we always make sure that we have as many different language speakers in the customer support and sales teams. We also have websites in different languages so we are not only promoting ourselves in English.

Gold: The idea of ‘exceptional customer service’ suggests personal contact. How is this possible in a business where everything is being done online? O.R.: First of all, anyone who wants to come and see us has the possibility to do so. After all, we have clients who live here. In practice, however, we have seen that this traditional mentality of meeting and becoming familiar with the people with whom we are


working is changing. For example, in London, where we have been open since 2006, only a handful of people have ever come to the office. But we understand the importance of personal relationships and those who request it can have it. Clients can call and speak to a specific person if they want or they can have their own dedicated account manager, accessible 24 hours a day. The Forex market never sleeps and sometimes people need to trade on a 24-hour basis. We also have phone dealing for those who, for some reason, can’t access the Internet at a particular time.

Gold: How can you help someone who has a certain amount of money to invest but who doesn’t understand the workings of the money markets? O.r.: Although we essentially provide a platform that enables people to manage their own accounts, we are in the process of preparing a project which will let investors choose from among numerous independent money managers. There is a great demand for PAMM (Personal Allocation Money Management) accounts and anyone who wishes to invest in this market but doesn’t know how to go about can choose to trade with one of these money managers. That said, we at Alpari also provide educational services to our clients. We have a lot of educational resources including stats, videos, webinars and trainings where they can ask about technical and fundamental analysis. We have a strong analytical team which generates reports on a daily, weekly and monthly basis for different types of products. In addition, we use very reputable resources such as Trading Central, which provides additional information on market movements.

Gold: If somebody said to you, ‘I have a certain amount of money which I want to invest but why should I try Forex dealing?’, how would you respond? O.r.: I would point out that this market is very liquid, so you can make profits very easily and very quickly. At the same time, it can be very volatile and price movements are sometimes unpredictable. This is why we advise people never to trade on news items which may affect price movements. When Alan Greenspan was in charge of the Federal Reserve, all he had to do was to appear in front of the cameras and people would start trading based on his facial expression! So market prices can go up and down very suddenly and that’s why it’s risky. Of course, we all know that the higher the risk, the greater the chance of making - or losing - a lot is going to be.

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Gold: But there are stable, reliable companies in which an investor could purchase shares. There seems to be a sizable speculative element to Forex trading. O.R.: In the end it is the investor who has to take a decision on what to do with his money. We don’t provide investment advice but we give our clients all the tools they need in order to take their decisions.

Gold: But if you tell them not to react to news, what are they

so we traded over the phone - a client on one line and a brokerage company on a second line. Spreads were huge so we needed a long time to execute trades, even though prices sometimes moved as quickly as they do now. It was a very interesting time!

Gold: What is the excitement - if that’s not too strong a word in this business that keeps you here and obviously enjoying it? O.R.: To me, Alpari is like a family. And ‘excitement’ is actually the right word. There is always something new, it never stops and I am a person who likes challenges. Every day, every minute is a new challenge, so that’s why I’m here in a new country once again. I joke with my colleagues that I have a new hobby: starting up new businesses in different countries!

supposed to base their decisions on? O.R.: Market trends. Sometimes a news item does not give a clear picture of a particular situation. Talk about whether something has been expected, unexpected, more or less than expected, etc. can cause a This market is very sudden spike in the price and oneliquid, so you can make second trading decisions can also cause such spikes. Investors need to profits very easily and see the true state of the market.

Gold: Did the fact that there is

a sizable Russian community in Limassol play a part in the decision to set up a business here? very quickly O.R.: No, I didn’t know about it. I knew Gold: There appears to be a large that Cyprus was a good place for banking and growing number of Forex and shipping, that it was a small island companies based in Limassol. with a long and interesting history but I What do you see as Alpari’s competitive advantage over your had no information about the number of Russians here. So it came competitors? as something of a surprise but not a big one as there are Russians O.R.: Our reputation. This word takes in everything: customer everywhere these days. support, exceptional, unique technology, our dedicated and loyal personnel, the recognition we have in the world, and the service we provide. Gold: Do you have any women clients?

Gold: How did you get involved in this business? O.R.: I was one of the company’s first employees. I graduated from the Faculty of Economics at the University of Kazan - yes, the same one where Lenin studied! - and a couple of months before I did my thesis I was invited by one of my friends (who later became one of the owners of the business) to work with what was then a small team of five people. So I actually joined the company before it was established and it was still a project. When we set up the company I became Head of the Operational Department which was a combination of dealing and back office, opening accounts, deposits and withdrawals. Since then I have grown with the company and I have worn many hats within it. I have come to know probably everything to do with the business, right down to the smallest nuances. In those early days there was no Internet

O.R.: We do but the majority are men. The typical client profile is of a university-educated man, aged 25-45, who trades at least three times a week.

Gold: I suspect that you are unique as a woman CEO in the Forex business. Are there any particular disadvantages to this? O.R.: On the contrary, I think it’s beneficial to be a manager and a woman. I have flexibility which sometimes men don’t have. It’s not hard for me to manage this business. It’s challenging but I like that.

Gold: You’ve been operating for just over two months now. Are you already planning where you’ll be going to next to open another independent Alpari branch? O.R.: No, I’m still enjoying Cyprus and the feeling of starting up the business here. I intend to be here for quite a while! the international investment, business & finance magazine of cyprus

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Wadja Wanna Do online? With 6 million users, Wadja is one of the hottest neW additions to the blogging and social netWorking scene. By K.Ioannides

alEx ChrIStOfOrOu CEO Of Wadja


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s one of Cyprus’ most technologically savvy and Media marketing was a $716m market in the US alone in 2009. It strategically connected entrepreneurs, American- will grow to a $3.1bn market by 2014. There are over 20 million born Alex Christoforou is the CEO of Wadja, bloggers in America and 1.7 million of them are getting paid for one of the hottest new social applications to hit blogging! By 2012, the expected growth rate of blogs is 75% the Internet. The son of a Cypriot diplomat and 67% of the US Internet population will be reading blogs at to the US, Christoforou spent his early years least once a month. A $40 bn online advertising market in 2014, between Washington D.C., New York, and Phoenix, Arizona where more than 70% of the target market is reading blogs, equals before finally settling in California. Following his studies and a very big market potential. Over the next three years, mobile extensive work experience in web and mobile solutions, he ended advertising is expected to jump by an average of 50% per year. On up accumulating over 15 years of experience in the Internet and the conservative side, we’re talking about a $500 million market Technology sectors. Now based ballooning to almost $3 billion. between Silicon Valley and Athens, And on the more aggressive side, His mission is to expand Wadja’s ABI Research pegs the mobile ad growing user base of over 6 million market at $24 billion by 2016. For entrepreneurship in users in the US and Europe. Gold a Cypriot company to go after such greece is something caught up with Christoforou during a huge market opportunity is really his latest visit to Cyprus to find out quite exciting and quite a challenge, i would not personally what Wadja is all about. to say the least.

go though again

Gold: Let’s start with the basics: What exactly is Wadja? alex Christoforou: Wadja is a visual, fast way to publish and share content online. It takes just seconds to create what we call a Wadja Instant Page and to start adding and sharing content. Instant Pages are a faster alternative to blogs, which are great for posting long-form content but they lack many built-in social hooks, they require a certain degree of technical know-how and take time to create. And unfortunately they don’t render well on smartphones. With Wadja Instant Pages, you can create web- and mobile-compliant pages anywhere, anytime with no technical skills whatsoever, and with dozens of social and visual features built right in from the start. You can also curate (bring in) content from Google, Facebook, Twitter and YouTube, and share content back out to your social network with a simple one-click action.

Gold: So you’re essentially combining social networking, mobile communications and blogging?

a.C.: Yes. The convergence of social, mobile and blogging is a big market opportunity. Let me give you an idea as to how big a pie we are talking about when these three industries converge: Social

Gold: Did the idea evolve slowly or arrive in a sudden lightningstrike of inspiration? a.C.: It definitely evolved and is still evolving. One thing that is important to remember in the Internet startup game is the ability to pivot and iterate your product and service quickly. A company rarely gets it right the first time. All the great sites - Twitter, YouTube, Paypal, Groupon and even Google - started out as one thing and evolved into what you see today. So we are still evolving and positioning the product with the speed that this industry demands. The philosophy of ‘Move forward or die’ very much applies to this business.

Gold: How does Wadja set itself apart from the likes of the market leaders such as Facebook, LinkedIn and Twitter?

a.C.: We like to consider ourselves more of a competitor to

traditional blogging than to social sites like those you mention. We actually work with and integrate with FB, Twitter and LinkedIn among others. The problem that Wadja solves is the ability to share quickly and visually with your social ecosystem. Facebook and Twitter are great for short spurts of content creation and blogging is a more thought-out, time-consuming type of

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Silicon Valley

content creation. Wadja Instant Pages let you share visual and contextual aspects of your life in real time, in a format that is Think big, neither 140 characters or 2 pages fail fast long. It is built around the way we live our lives, letting you capture and move your environment quickly with on to the photos, video and text content next idea! and very little headache putting all these formats together in a legible and consumable manner. Best of all, the content you create is easily distributed across the web and mobile worlds so we do a lot of the heavy lifting; users just need to focus on capturing the moments that matter.


Gold: The siteâ&#x20AC;&#x2122;s user base was recently estimated at over 6 million. How rapidly is it growing and where are the majority of your users based? A.C.: We are growing at a good clip! Of course, now we moderate the growth a lot because in the past we were growing so fast that technically we could not keep up (our systems were crashing under the weight of demand). Now we are a bit more cautious with our growth efforts, preferring to focus on product and monetization of the existing user base. We have zero spend on any types of marketing or PR activities, so our focus for growth going forward is purely on viral and word-of-mouth.

Gold: In terms of being able to operate freely as an entrepreneur how would you compare Cyprus, Greece and the US? A.C.: I would say that Cyprus and the US are very similar from a corporate structure and operations standpoint. I think it is

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probably easier to logistically set up shop in Cyprus but both countries have clearly defined rules and practices for starting a business and give entrepreneurs the most important thing, which is time: time to focus the product and the market instead of wasting days and months on bureaucracy and red tape. Of course the US is a massive market and provides so much in terms of know-how, partnership possibilities, monetization etc. but from a purely logistical standpoint, both Cyprus and the USA are straightforward and transparent in how they allow entrepreneurs to start their venture. Doing business in the US and Cyprus is really exciting and each has its own set of challenges, but the good part is that all of those challenges are centred around product and monetization. Greece, on the other hand, is a very tough place to start a business, grow it and innovate because so much of your time and energy is spent on dealing with endless red tape and grey areas, not to mention that Greek bureaucracy is a complete drain on a business’s cash flow and, as everyone knows, when you start out, cash flow is critical. The last place you want to spend your money is on government sinkholes. It should be spent on product, hosting, innovation etc. So Greece needs a lot of work and change if it wants to attract innovation and Venture dollars. Under the current laws and environment, entrepreneurship in Greece is something I would not personally go though again. The changes they need to implement are really quite simple. I won’t get into it here but by liberalizing 4-5 sticking points, innovation in Greece can become a reality.

way we pay for things and exchange money. It is a really amazing product that will revolutionize how money moves. I still feel that Twitter is just at the beginning of what it can become. I mean, Twitter is becoming very much a utility like SMS but for a oneto-many message distribution model. Facebook feels like a trend whereas Twitter feels like part of our social infrastructure. I also like what Yelp has done for recommendations on a local level and how Zynga has turned gaming upside down…the concept of what a ‘gamer’ or ‘online gaming’ is has changed significantly since Zynga started pushing games out to mass audiences. Evernote is also an amazing company that is changing how we save and archive our lives. Even new innovations like Lytro will change the way we view pictures and photography, something that has not changed in decades is about to undergo a massive overhaul as photos will soon be manipulated in ways we never even possibly imagined.

Gold: You recently wrote that in Silicon Valley failure is nothing to be ashamed of and that, in many ways, it is considered a badge of honour. What were your own most valuable failures before embarking on Wadja? A.C.: I have actually started many ventures that have failed. Some failed within a month - too many to go into! - but they were all learning experiences. I actually feel that Wadja is the result of many failures rolled into a success. As we have grown the business and evolved we have failed continuously on so many aspects, from hiring mistakes, to product mishaps, to partnership mistakes…all of which has helped us to refine and adjust to how we do things at Wadja. We are a much smarter and a more mature team now than we were 2 or 3 years ago. We are ready now to take this to the US and the world at full speed and this is due to, not in spite of, the failures along the way.

Gold: We live in difficult times. What is the key piece of

Cyprus and the US are very similar from a corporate structure and operations standpoint

Gold: Silicon Valley is a leader at building businesses that

advice that you would give to would-be entrepreneurs who are finding it difficult to secure an income? A.C.: I would tell any entrepreneur out there to take a risk and go for it. Think big, fail fast and move on to the next idea! This is how things work. Only by taking risks and being free enough to move forward can real innovation happen. Every entrepreneur needs to think big and tackle big market opportunities. In Europe we have a tendency to think locally and shortsightedly. Maybe it has to do with our fragmentation (culturally and geographically) but Americans think about how to conquer the world before they ever write the first line of code. If you don’t have a big idea then VCs will rarely take a look at what you are offering. So first you look at big markets and then you look to solve real or perceived problems. Big opportunities can arise from solving problems that we know we have or those we never thought we had until a great product came to market. So my advice is simple: go for it.

change the world. What are the latest ideas coming out of the valley that may revolutionise the world as we know it? A.C.: I would say that Square is a company that will change the

You can connect to Alex’s Pages on Wadja, (alex.pages) and can follow Alex on Twitter @alexwadja.

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Real-ale Fans are Ideal Role Models for Economic Recovery Britain’s beer drinkers can serve as role models for the nation as it emerges from recession, according to an academic study. By Emma Thorne, London Press Service


ritain’s real-ale fans represent the perfect example of how greater consumer awareness can revitalise a struggling industry, say economists. Equally, the ever-growing number of microbreweries satisfying their demanding palates offers hope for small businesses in the United Kingdom. Experts at the Nottingham University Business School collated the findings after examining the history of brewing in England. They believe the industry’s rebirth in the wake of the founding of the Campaign for Real Ale (Camra) in 1971 has implications for much of the wider UK economy. Professor Peter Swann, the study’s author, said, “The fact is that the business world can learn an enormous amount from our beer buffs. The range of products and the number of centres of production in brewing in England declined dramatically between 1900 and 1970. “As is widely accepted, that process began to reverse with the formation of Camra and its fight against bland, massproduced beers. This has led us to the position we are in now, with hundreds of 80

small breweries spread all over the country and making thousands of different beers,” he added. “In technical terms, this represents horizontal product differentiation and a reduction in the importance of the economies of scale. That’s basically a clever way of saying variety is the spice of life and that more discerning tastes can be good for the economy,” said Professor Swann. At the start of the 20th century many UK towns had breweries but their number and geographical spread went on to shrink alarmingly. Falling transport costs and technological advances gave big brewers a huge advantage over their rivals, forcing the latter out of business. By 1970 the number of breweries in England was only 141 - compared with 1,324 in 1900 - with most located in a few cities and towns. But Camra’s arrival and the group’s campaign for variety and quality raised consumer awareness and gradually ushered in a new era. The result was the continuing rise in microbreweries that specialise in small production runs that make no economic sense for large

breweries. By 2004 the number of breweries in England stood at 480 - about the same as in 1939 - many of them in small communities. Now, according to the Society of Independent Brewers, there are about 700 UK breweries. If the trend continues, the UK situation could one day rival that in Bavaria, where almost every village has a brewery.

The UK could one day rival Bavaria, where almost every village has a brewery Peter Swann, a professor of industrial economics, continued: “We are often told small businesses will be the key to the UK’s financial recovery. The fall and rise of the local brew offers us a perfect example of ‘small is beautiful’, so it’s vital to see what lessons we can learn from it. One of the most important is that a demand for the predictable can lead to the greater geographical concentration of an industry. “By contrast, a demand for

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book RevIeW

business model GeneRation: a Handbook FoR VisionaRies, Game cHanGeRs, and cHallenGeRs by alexandeR osteRwalde (John WIley & sons, 2010) RRP: £23.99 (£12.93 fRoM

D diversity can lead to greater geographic dispersion - which is the excellent position [that] brewing finds itself in now. Camra and the microbreweries should serve as an economic inspiration,” he added. Among those successfully leading the UK charge in microbreweries is master brewer Alastair Hook, who recently invested two million pounds to open a new ‘green’ business near the Peninsular in Greenwich, London, aptly named the Meantime Brewery (after the Greenwich mean time guide to time zones). As well as boasting firstclass beers, the brewery - through clever design and innovation - is able to heat the entire company premises directly from the brewing process. Hook has spent 20 years planning the quintessential English lager, and the popular quality beers from Meantime include London lager. The great European lager brewers use soft water and neutral yeasts to ensure that the flavours of locally-grown malt and hops come through. Learning from that, his reasoning is simple: East Anglia is home to the

world’s finest malting barley and Kent is home to some of the world’s best hops. Midway between the two, London is ideally placed to bring them together in a straightforward, clean, long-matured, unpasteurised lager - using local water, where all of the taste is malt and hop. In addition to his main brewery, Hook recently opened a new micro plant, the Old Brewery, in the Old Royal Naval College also in Greenwich. In the 18th century the college had its own small brewery where porter, a dark beer and the forerunner of stout, was made for injured seamen. Brewmaster Hook, whose training included the world-renowned brewing faculty of the Technical University of Munich, has recreated a porter for the Old Brewery and will dig into recipe books to make more lost or forgotten styles. His main operation, Meantime Brewery, also has room for expansion to keep up with demand for such brands as India Pale Ale, Coffee Beer (there is 20% in the mash), Chocolate Porter and Belgian-style fruit beers.

escribed a handbook for ‘those striving to defy outmoded business models and design tomorrow’s enterprises’, this book has been co-created by no fewer than 470 contributors from 45 countries. They clearly believe in the old saying that a picture is worth a thousand words: the book is packed with illustrations, sketches, designs and graphic displays and it covers most subjects in almost no space. It features a beautiful, highly visual, full-colour design that takes powerful strategic ideas and tools and makes them easy to implement in an organisation. It explains the most common business model patterns, based on concepts from leading business thinkers, and helps the reader to reinterpret them for their own context. There are pieces on Customer Segments, Value Propositions, Channels, Customer Relationships, Revenue Streams, Key Resources, Key Activities, Key Partnerships and Cost Structure and each of these elements is broken down into sub-segments. References to major companies such as Amazon, Apple, Flickr, France Telecom, Gillette, Glaxo SmithKline, Google, Microsoft, Vodafone and Yahoo ensure that there is a clear link between theory and practice.

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Duff, Poor and Moody SoMetiMeS the clue iS in the naMe By Dr. Savvas Savouri


n 1975 the US Securities and Exchange Commission anointed Fitch, Moody’s and Standard & Poor’s as Nationally Recognised Statistical Rating Organisations (NRSRO). Overnight the SEC bestowed considerable power and influence on a relatively lightly regulated group of institutions. Indeed, the three founding NRSROs enjoyed what was akin to judicial independence. The reasoning was that bodies vested with the responsibility to judge national budgets risked regulation becoming interference. I would argue that this flawed reasoning has contributed to the poor standards of the NRSRO community. Although there are now ten NRSROs, the original three remain the rating giants whose reach extends across practically all asset classes and geographies. As is the case with any giant, they move awkwardly and dangerously. I would argue that in exercising the commercial muscle given to them by the SEC, the rating agencies have been poor in their timing and analysis. Let me try to explain why I hold this less-thanflattering opinion.


youngest of the three agencies at just under I have to begin by pointing out how one hundred years old. I could focus on unfortunate the names of the three major ‘fitch’ being somewhat unflattering in a credit rating agencies are. Let us begin number of slang contexts. Let me point with Moody’s. This is a business formed to the 2000 Fitch acquisition of Duff over a century ago to analyse risk across the burgeoning US & Phelps. Here again, ‘duff’ hardly railroad market. carries positive Now, in the etymology of slang, connotations. the umbilical What is my point? ‘moody’ is the cord linking word of choice in Well, in the world of normative London’s cockney cyprus to greece vernacular for a determinism is hardly new companies named fake. This is rather Fitch, Moody or unsettling for an arbiter of quality. Standard & Poor’s Let us next would not be consider Standard terribly suitable in the world of rating quality. Sadly, when & Poor’s. This is a business whose origins, one inspects the track records of the three like Moody’s, lay in assessing risk across rating agencies, ‘duff’, ‘poor’ and ‘moody’ the US railroad sector, but one formed almost a half century earlier. Here again we seem uncannily apt. have an unfortunate name. The meanings Consider the ratings experience of the eurozone’s easternmost outpost, the of standard and poor are clear throughout the English speaking world: the former Republic of Cyprus. Over recent weeks this small nation has suffered at the hands suggesting uniformity and blandness, the latter for its part, a polite way to capture of S&P. The justification: its exposure to failure. This leaves us with Fitch, the Greece. Let’s think about this point. The

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umbilical cord linking Cyprus to Greece Eastern European economies. In their is hardly new. It was clear to see the efforts to hold their currencies broadly moment Greece fell into trouble, trouble stable relative to the euro, around a dozen that itself was telegraphed long before the of these intra- and extra-EU nations are ratings agencies hit it with downgrades. incubating serious currency and growth The certainty that Greek problems would shocks. The basis for this prediction is infect Cyprus was never new. Here is what simple economic logic and experience. we wrote in April 2010 (“Clouds darkening These are experiences that the rating over Cyprus”): agencies have shared but chosen to forget, “...austerity measures announced by because in all previous cases they proved Athens look certain to send Greece into way behind events. Bulgaria has not a protracted and deep deflationary spiral. seen the downgrade it surely warrants. Cuts to pensions, wages and public Consider the recent return of what should sector employment cannot fail to trigger be a shamed Iceland to the sovereign debt loan defaults, with spill-over damage to market. This only acted to remind me how wherever Greek banks have been active; the main agencies not only failed to offer across the Balkans, any timely warning of up into Ukraine and that nation’s financial out to Cyprus. There blow-up but actually will of course be those drew investors in by the rating confident that in being overly generous agencies have rescuing Greece the with their rating. EU and IMF have Having been gone to the indirectly contained woefully slow to extreme of the virus before it caution on the parlous exaggerating spread. Since we are plight of Greece et al, far from convinced I will argue that the eurozone that Greece has been rating agencies have default risk ‘rescued’, we cannot be gone to the extreme of confident the virus has exaggerating eurozone been contained. The default risk. Relegating reality is that the fiscal Greek sovereign debt medicine the EU and to non-investment IMF have demanded Greece swallow will grade not only exaggerates the risk of make its illness worse. To repeat, Greece default but adds to that nation’s problems, faces a prolonged period of deflation, problems that are of course extremely something that will hurt its banks and severe and of its own making. I for one all those economies into which they have am convinced that, as bad as things are exposure, not least Cyprus. Indeed, as its with Greek public finances, bondholders property prices fall Greece is set to become will have their obligations honoured. Sure, an ever fiercer rival to Cyprus for tourist Greece will borrow from Peter to pay and retirement custom. If the threat Paul. The point is that Paul will still be within the eurozone coming from Greece paid and paid far more handsomely than were not enough, the RoC has been and what he earns in lending to the likes of remains vulnerable to others within its Croatia. The scores that the main credit currency bloc, in general the Iberian agencies currently apply to most of central Peninsula but most significantly Spain.” and southern Europe are as over-generous Greece and Cyprus are just two as they are over-cautious of peripheral instances of S&P - the other two agencies eurozone nations. As for the repeated are equally culpable - reacting very late threats to strip the US and UK of their to events it should have cautioned on AAA status or to downgrade Italy, let me long in advance. If the ratings agencies say this; the ‘watch lists’ which the rating remain behind the curve with Cyprus, agencies are increasingly using in place they lag still further with the likes of of actual rating revisions, are part of the Croatia and other South, Central and problem, not its solution.

Boo BooK reVieW re

The PursuiT of haPPiness: TowarD an economy of well-Being By carol graham (BrookingS inStitution, 2011) rrP: £16.99 (£16.14 froM


he study of happiness was once of great interest to economists but as the profession turned more toward quantitative methods, the approach fell out of fashion. Today, economists are coming back to it and research on happiness has entered the mainstream. In this book, Carol Graham, a pioneer in the more recent economic study of happiness, explores what we know about the determinants of happiness across and within countries of different development levels and raises the challenges posed by the use of these measures as comparative indicators. Foremost among these are the extent to which people can adapt to adversity and still report to be happy (the ‘happy peasant and frustrated achiever’ problem) and the need for clarity on the definition of happiness. Any definition of well-being that is broader than income could lead to an improved understanding of poverty and the development process. What are the components of such a metric? Should greater happiness become a specific policy goal? Should happiness measures be used in development policies? These are just some of the critical issues addressed here.

info: Dr. savvas savouri is a Partner and chief economist of toscafund. the international investment, business & finance magazine of cyprus

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Moody’s Predicts Negative OutlOOk fOr glObal ShippiNg prOblemS cauSed by tOO maNy ShipS aNd NOt eNOugh cargOeS


ven though the demand for shipping services is likely to remain solid in 2011, underpinned by positive trends in world trade, the outlook for the industry over the next 1218 months is negative, primarily because of a continuing oversupply of vessels, says Moody’s Investors Service in an Industry Outlook report published in July. “Industry conditions are likely to deteriorate over the next 12-18 months, with the dry-bulk segment likely to be the hardest hit in 2011 because of the large size of its order book,” says Marco Vetulli, a Vice President - Senior Credit Officer in Moody’s Corporate Finance Group. “The current dry-bulk order book is equal to approximately 46% of the tonnage on the water, and around 80% of these vessels are due for delivery over the next two years, creating a supply-demand imbalance that will continue to depress freight rates,” adds Mr Vetulli. The dry-bulk companies that Moody’s rates are among the most efficient operators in the industry, and are therefore better positioned to manage these issues compared with peers that have higher cost bases. Moody’s expects that freight rates on average will be substantially lower in 2011 than in 2010, and consequently the degree of negative rating pressure that the players will face will depend on the degree of their spot-market exposure. Despite the increase in oil demand over the past 18 months, 2011 is likely


to be another challenging year for the in the container segment in 2011, although tanker segment. Moody’s believes that the balance will be very fragile. While there is unlikely to be a sustained recovery major industry players recorded acceptable in this segment until the latter half of financial performances in the first quarter 2012, or even 2013, when supply and of 2011, Moody’s expects earnings to have demand become more balanced. As with come under pressure in the second quarter the other shipping segments, there are because of softening demand and the large too many ships and not enough cargoes, number of scheduled vessel deliveries. notwithstanding Nevertheless, the recent growth Moody’s in daily oil expectations for demand. The end H2 2011 remain Despite the increase of a significant neutral. Moody’s in oil DemanD, 2011 is ‘contango’ in the believes that crude oil curve Japanese shipping likely to be another brought an end to conglomerates are challenging year for floating storage, being impacted to the tanker segment which had utilised a lesser extent by many large crude the negative trends carriers, reducing affecting other effective vessel global shipping supply. The return companies. of these vessels to the spot fleet exacerbates This is because their scale, diversification the pressure on supply that deliveries in and strong relationships with customers upcoming quarters will sustain. act as mitigating factors. However, the While the oversupply of vessels is credit earthquake and tsunami in Japan have negative for tanker operators, Moody’s disrupted freight flows, especially in the car sees no immediate downward pressure on carrier business, which is credit negative the ratings of its rated entities. Although for conglomerates. Nevertheless, Moody’s Moody’s recently downgraded these issuers, expects the effects of the disruption to those rating actions also factored in the be relatively short-lived and for volumes companies’ good liquidity profiles, which to recover to pre-earthquake levels in Moody’s would expect to mitigate pressure the fourth quarter of this year. Moody’s on earnings during the weak demand report, entitled Shipping Outlook Turns environment of next year, or beyond. Negative With Sustained Overcapacity, is Supply is likely to broadly match demand available on

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Maritime Cyprus Conference 2011


he Maritime Cyprus Conference, which takes place in Limassol on 2-5 October, is a biennial international Shipping Conference that has been organised in Cyprus since 1989 by the Ministry of Communications and Works, the Department of Merchant Shipping, and the Cyprus Shipping Chamber. Through the years, Maritime Cyprus has grown into one of the world’s most significant shipping conferences. Its status now gives it a prominent position on the calendar of many of those connected with the industry, including representatives of numerous international maritime organisations, shipowners, shipmanagers, bankers, brokers, lawyers and delegates from other shipping service organisations. The main aim of the Maritime Cyprus Conference is to operate as a forum where important and current issues relating to international shipping are presented by distinguished speakers and subsequently discussed by the international shipping community, thereby helping to formulate sound and well- balanced decisions and policies on crucial shipping issues.

Limassol is the largest third party shipmanagement centre in the European Union

The Conference also offers the opportunity to participants to become familiar with the strong maritime tradition of Cyprus and its people. Over the years, Cyprus has developed into a fully-fledged shipping centre combining both a sovereign Flag and a resident

Shipping Industry, which is renowned for its high quality services and standards of safety. Its complete shipping infrastructure constitutes an invaluable asset for Europe and for the international shipping community in general. Cyprus, and more particularly Limassol, is one of the largest third party shipmanagement centres globally and the largest in the European Union. The Cyprus Fleet is the 10th Largest Fleet in the world and the 3rd largest in the E.U. This year’s Conference at the Evagoras Lanitis Centre in Limassol is entitled “The ?s in Shipping: Is it Safe Enough? Is it Sustainable? Is there enough Confidence?” As the theme suggests, discussions will focus on issues such as countering piracy, seafarers and the human element, capital markets, energy and long-term sustainability, as well as forecasting and recovery from the crisis. Approximately 1,000 shipping executives from 40 countries around the world are expected to attend the Conference, which clearly shows the importance placed by the international shipping community on Maritime Cyprus and Cyprus Shipping at large. The Conference will be officially opened by the President of the Republic of Cyprus, Demetris Christofias, on Monday, 3 October. Distinguished quests include Efthymios Mitropoulos, IMO Secretary-General, Sim Kallas, VicePresident of the European Commission and EU Transport Commissioner,

Maria Damanakis, EU Maritime Affairs and Fisheries Commissioner, and the Minister of Communications and Works of Cyprus, Erato Kozakou Marcoullis, all of whom have all been invited to address the Conference. In addition, other personalities from the international shipping scene have been invited to attend and present their views on a number of current Shipping issues. The first day of the Conference also includes the official opening of the Maritime Services Exhibition at the Conference venue. On Sunday, 2 October 2011, all participants will attend a reception hosted by the Ministry of Communications and Works, the Department of Merchant Shipping, the Cyprus Shipping Chamber and the Cyprus Union of Shipowners, during which the Cyprus Maritime Awards will be presented on behalf of the government. A major part of the October issue of Gold will be devoted to Maritime Cyprus 2011 and the shipping issues with which it will be dealing.

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coMpanY proFILe


Increased revenue + enhanced reputatIon = success There are beTTer ways of filling The sTaTe coffers Than by The governmenT’s proposed €1,000 Tax.

By George Savvides


ast month the government same time has become even more urgent of Cyprus announced following the devastating damage to the its intention to impose island’s main power station on 11 July. At a tax of €1,000 on all a time when all efforts need to focus on companies which have increasing the quality of services offered been profitable for in the international business sector to the last three years. The measure came give Cyprus a competitive advantage, the as something of a shock and was, not idea of imposing some kind of tax on surprisingly, roundly criticised. In the businesses to improve public finances needs end the proposal was modified so that the to be worked out very carefully. There are tax will appear as a surcharge paid to the numerous examples of how a tax, levy, Registrar of Companies, relative to the duty or other kind of charge imposed by share capital of each company. However, the state could also help to improve the basing any kind of extra tax on share capital quality of the island’s services and enhance lacks commercial realism given that, in the the image of Cyprus in the eyes of the absence of any thin capitalisation rules (i.e. international business sector. restricting for tax purposes interest expense The most obvious example is the penalty on loans, usually based on a specific debt imposed by the Registrar of Companies to equity ratio), a large majority of the for the late submission of a company’s international business companies in Cyprus Annual Return. The duty of €17 is are mainly financed by debt and not by doubled to €34 even though the law share capital. Thus, basing any extra tax on enables the Registrar to impose a penalty share capital will not only fail to deliver the of up to €8,543, but this requires that desired outcome in terms of much-needed the Registrar’s systems identify the delay revenue but will also because there have be unfair towards been many cases those companies in the past where that do happen to be delayed Annual tax rulings are financed mainly by Returns have capital. been submitted provided at no cost, No-one would with the standard yet the time spent by argue against the duty. This highly senior staff of the view that the need immaterial penalty to take action to imposed for the late tax authorities can increase public submission of the be considerable revenue and reduce Return leads to so expenditure at the many instances of


neglecting the deadline and it is one of the major reasons why some corporate service providers do not prepare accounts for the companies they manage. An article in the July edition of Gold made a comparison with Luxembourg where accounts must be submitted six months after the year end. This is actually half the period required in Cyprus but the accounts of the vast majority of companies are still submitted on time. Why? Because the penalty for late submission of the accounts, if the matter goes to Court, can reach €12,500 as opposed to the standard fee for timely submission, which is €59.60. Two issues arise from this comparison: firstly, there is huge scope for increasing the standard fee for submission of the Annual Return in Cyprus and, secondly, the magnitude of the penalty for late filing can be increased enormously. While the Law in Cyprus may provide for significant penalties in case of the late filing of accounts, the reality is that nobody has ever been taken to Court because of failing to meet the deadline. The prospect of being taken to Court is a decisive factor ensuring that Luxembourg service providers start preparing accounts on time, not only because of the financial penalty but also (and perhaps more importantly) because of the damage that court proceedings are perceived to do to a company’s reputation. Tax rulings (or advanced opinions by the Tax Authorities as they are formally known) are a second clear example of where the government can increase revenue

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while improving professional standards. depending on the case, and receive specific Such rulings are used to indicate how amounts for them. The charge by the the Tax Authorities will be assessing a Ministry for the apostille for one document particular transaction or operation before is less than €7. It is clear that the amount it is carried out and they usually involve charged hardly covers the related costs some grey areas of the law, which make the of the service provided by the Ministry. tax treatment uncertain. Tax rulings are Furthermore, the respective charge in other currently provided at no cost, yet the time reputable jurisdictions competing with spent by senior staff of the Tax Authorities Cyprus is much higher. on examining and reporting on a case can Clearly, there are other ways of collecting be considerable, especially when such cases revenue from businesses rather than the involve complex matters. At the same time, one planned by the government, which international investors and their advisers would also avoid sending negative signals are in most cases more than willing to to foreign investors about the ability of the incur a certain cost for obtaining such a state to maintain a beneficial and stable ruling because of tax regime in the the investment future while not at stake. This is affecting local a tax, levy or duty also evident from businesses so much the considerable since many of the imposed by the fees charged by charges which state could also professional offices could be imposed enhance the image here in Cyprus or increased for their assistance relate mostly to of cyprus in the eyes in obtaining such international of the international rulings. companies. business sector. A third Furthermore, example of status the measures enhancement discussed above through increased could even collect charges concerns the charge made by more revenue for the public purse than the Certifying Officers for the legalisation of one proposed and they are certainly fairer documents and by the Ministry of Justice and more rational since they are based on for certifying the documents with the compliance with laws and regulations and apostille for the Hague Convention. The on the demand for certain services. The use of these two types of certification is greatest benefit, however, would be the extremely common for contracts and other enhancement of the status of Cyprus as an formal documents signed by international international business centre with regards business companies because of their dealings to the quality of services offered and its with foreign entities and the need for some adherence to laws and regulations. In the kind of authentication with regards to the medium- and long-term, this enhancement signing of these documents. The charge for of Cyprus’s reputation will bring financial Certifying Officers is left to the discretion benefits way above those that any tax, of each authorised person, whereas the surcharge or other kind of collecting policy state could actually set standard charges, can generate. info: george savvIdes is a chartered accountant, a member of the institute of chartered accountants in england and wales and of the institute of certified public accountants of cyprus, and he is a partner of fiducenter (cyprus) ltd. he is also an associated arbitrator member of the chartered institute of arbitrators (ciarb).

book review

the cYprus Issue: the Four FreedoMs In a MeMber state under sIege bY nIkos skoutarIs (harT publishing, 2011) rrp: £55 (£55 from


his latest addition to the huge bibliography on Cyprus addresses the issue of how the European Union deals with the de facto division of the island. It examines the most significant questions posed by island’s EU membership and explains how this has fundamentally altered the interaction between the two communities and affected the search for a solution. EU membership has led neither to reunification nor to the restoration of human rights and, ironically, it has actually added a new dimension to the ongoing division: the application of the acquis communautaire is ‘suspended in those areas of the Republic of Cyprus in which the Government of the Republic of Cyprus does not have effective control.’ Given this unprecedented situation of a member state not controlling part of its territory, the book analyses the limits of the suspension of the Union acquis in the occupied areas. It is required reading for anyone who wants to understand the new legal and political complexities of the Cyprus Issue that have arisen since the island joined the EU.

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Managing Your Tax Obligations Responsibly Managing your tax obligations responsibly and proactively can make a critical difference. The talented tax professionals at Ernst & Young in Cyprus will provide you with technical knowledge, business experience, consistent methodologies and an unwavering commitment to quality services.


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rnst & Young is a global leader in assurance, tax, transaction and advisory services, with over 141,000 people in 140 countries. The firm’s tax service line in Cyprus comprises approximately 40 highly-qualified Cypriot and foreign tax professionals based in Limassol and Nicosia who provide local and global clients with broad technical knowledge combined with all the benefits of their practical, commercial and industry experience. The firm builds proactive, truly integrated direct and indirect tax strategies that help its clients recognize the potential of business change and to build sustainable growth in Cyprus and anywhere else in the world. Its extensive accounting and compliance experience and tried-and-tested methodologies help its clients to manage their direct and indirect tax compliance and reporting obligations effectively. Board member Andreas Avraamides says: “We help them to assess, improve and monitor their tax function’s processes, controls and risk management and to maintain effective relationships with the tax authorities. This is how Ernst & Young makes a difference.” The company’s tax service line is divided into 3 sub-service lines: • business tax advisory and compliance services • international taxation and transaction tax services and • indirect tax services. The firm's partners are actively involved in the formulation of tax policy and practices and participate in various professional and governmental bodies where such policy is formulated. Ernst & Young is strongly committed to keeping its clients informed on all tax developments in Cyprus and internationally, by issuing tax alerts and bulletins and by holding presentations in which Cypriot tax experts, supported where necessary by experts on EU and other matters from the firm's international tax network, explain the developments and how they may affect the Cypriot business community.

Ernst & Young is also actively involved in the promotion of Cyprus as an international business and financial centre. In this respect it actively participates in international tax conferences, makes presentations to professionals of other Ernst & Young offices all over the world with particular emphasis on Russia, Ukraine, India, UK, Poland, USA and Scandinavia, where the advantages offered by Cyprus are explained to its associates and other business contacts. "At the same time we offer specialised seminars to the business community in many jurisdictions, where we update the participants on how changes to Cypriot tax legislation and/or international tax law may affect them," says Andreas Avraamides. "We also explain the competitive advantages offered by Cyprus compared to other jurisdictions, including the use of its double tax treaty network, the favourable business environment and the benefits of using companies based in an EU Member State such as Cyprus."

Business Tax Advisory and Compliance Ernst & Young’s tax professionals provide planning, financial accounting, tax compliance services and payroll services, they maintain effective relationships with the tax authorities, arrange for tax return preparation, statutory accounts preparation and provide tax accounting calculation support. The firm’s approach provides for professionally prepared returns, related calculations and advice, as well as integrated tax planning having prudent and well argued tax positioning as a leading principle. Its tax accounting and tax risk management advisory professionals provide supporting quarterly and annual tax provision calculations, validate tax balance sheet accounts and implement new accounting standards under IFRS, review tax process, controls, data and systems effectiveness and identify and prioritize key risks assisting with controls. Pre-filing controversy management services assist clients in properly and consistently filing their returns

and preparing the relevant back-up documentation using the company’s knowledge of how the tax authorities operate. “We increasingly work together with clients to help resolve difficult or sensitive tax disputes but we also have

THE FIRM’S partners are actively involved in the formulation of tax policy and practices

good relationships and discussions with the competent authorities on tax policy matters which provide us with valuable insights,” notes Andreas Avraamides.

International Taxation and Transaction Tax Ernst & Young’s integrated global network of international tax professionals helps its clients to manage their business tax burden by uncovering opportunities, managing global tax risks and meeting cross-border reporting obligations. In Cyprus a multi-disciplinary and multicultural team works with clients to manage global operational changes, manage tax risks and address transactions, capitalization and repatriation issues - from forward planning, through reporting, to maintaining effective relationships with the tax authorities. Transfer pricing professionals in Cyprus and abroad assist with reviewing, documenting, managing and defending transfer pricing policies and processes and aligning them with their clients’ business strategies. The firm’s international tax team works with some of the world’s largest multinational groups and private equity funds as well as high net worth individuals using Cyprus as an investment platform for their international investment strategies. The transaction tax team assists clients in

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[LEFT TO RIGHT] Anna Polydorou Sotiroulla Rossidou Alexia Ioannou Chryso Nicolaou

mitigating their transaction risk, enhances opportunities and provides crucial negotiation insights. It helps them take informed decisions and navigate through the tax implications of transactions. Members of the team work with clients throughout the transaction life cycle, from initial due diligence through postdeal implementation and clean-up. The purpose is to suggest structuring alternatives to balance investor sensitivities, to promote exit readiness and help improve prospective earnings or cash flows - raising opportunities for improved returns on the investment and reducing costs. The transaction tax team works closely with a global network of tax professionals and has vast experience in different types of 90

transactions, both local and global. The team comprises professionals of differing backgrounds and experience - both culturally and professionally - and this enables the firm to solve wide-ranging client challenges. Continuous services development and knowledge sharing ensure high-quality and leading solutions for Ernst & Youngâ&#x20AC;&#x2122;s clients.

Indirect Taxation The firmâ&#x20AC;&#x2122;s dedicated indirect tax services team advises on the VAT treatment of new and complex transactions and supplies and helps resolve classification or other disputes and issues with the authorities. It provides assistance in identifying risk areas and sustainable planning

opportunities for indirect taxes throughout the tax life cycle as well as effective processes to help improve day-to-day reporting for indirect tax, reducing attribution errors, reducing costs and ensuring that indirect taxes are handled correctly. In addition, the team supports full or partial VAT, VIES and Intrastat compliance outsourcing, identifies the right partial exemption method and reviews accounting systems. Ernst & Young pays special attention to its international clients and helps them to understand how VAT affects their business, so they can better plan their operations and minimise potential risks in the area of indirect tax.

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7/30/11 2:13:00 PM

LimAssoL Economic Forum



s reported in the July edition of Gold, the 2 Limassol Economic Forum takes take place at the Four Seasons Hotel in Limassol on Wednesday 19 October 2011. A provisional agenda for this prestigious meeting of political and business leaders has now been released and, once again, the organisers - IN Business in association with the London School of Economics (LSE) and Cyprus LSE Alumni - have drawn up a fascinating list of hot topics to be presented and discussed by an array of world-class speakers. The morning session will start with four Area Focus presentations: nd

wORLd ECONOMY The euro debt crisis, the rise of China and other emerging economies and the need for Europe to position itself strategically in a more multi-polar world. Speaker: Dr. Linda Yeuh, Economist, Author and Commentator, Correspondent of Bloomberg TV, one of the “Business Thinkers 50”, UK.


Is Asia-Pacific’s growth sustainable? What do China and its neighbours have to do to improve macroeconomic competitiveness? Is the region a threat to the established economies of the West? Speaker: Dr. Frank-Jürgen Richter, Former Director of World Economic Forum (Davos), Chairman of Horasis, Switzerland.


The Scandinavian countries (Sweden, Finland, Denmark and Norway) have outdone some of the world’s hottest and most stable economies. Will they lead Europe out of recession? Speaker: Henning Christophersen, Former: Vice President European Commission, Minister of Finance, Minister of Foreign Affairs, Deputy Prime Minister, Denmark.


What are the implications of the global financial crisis on the region? How does the current situation in the Middle East impact on the rest of the world? How can investors confront the challenges of doing business in the Gulf area? Speaker: Dr. Nasser Saidi, Former: Minister of Economy and Trade, Minister of Industry, First Vice-Governor of Central Bank, Chief Economist, Dubai International Financial Centre, Lebanon. In the CEOs dEBATE that follows, four distinguished speakers will cover specialist topics as part of the overall question on The Business Response to the Changing Economic Landscape. Among the panelists are Peter Ayliffe, President and CEO, Visa Europe; Efthimios

Bouloutas Bouloutas, Group Chief Executive Officer of Marfin Popular Bank Public Co Ltd.; Miltos Kambourides, Founder and Managing Partner of Dolphin Capital Partners (DCP). The debate is followed by three Panel Discussions. The MEdIA PANEL dIsCussION is on the subject European Economy: Back to the Drawing Board with Tony Barber, Europe Editor, the Financial Times, Dr. Linda Yeuh, Economist, Author and Commentator, Correspondent of Bloomberg TV, and Paul Wallace, Europe Economics Editor of The Economist. The debate will be moderated by John Vickers, Chief Editor of Gold. The MINIsTERIAL PANEL dIsCussION onThe state of the European Economy sees current and Former Ministers of Finance engaging in an in-depth discussion about the state of the European economy. Panellists include Elena Salgado Méndez, Second Vice President and Minister of Economy and Finance, Spain; Charilaos Stavrakis, Minister of Finance, Cyprus; Henning Christophersen, Former: Vice President European Commission, Minister of Finance, Minister of Foreigh Affairs, Deputy Prime Minister, Denmark; George Papaconstantinou, Minister of Environment, Energy and Climate Change, Former Minister of Finance, Greece; Michalis Sarris, Former Minister of Finance, Cyprus. This discussion will be followed by the ENERgY PANEL dIsCussION looking at Energy Exploration in the Eastern Mediterranean and its Geostrategic Significance for the Region. Among the speakers are Dr Uzi Landau, Minister of National Infrastructures, Ministry of National Infrastructures, Israel; George Papaconstantinou, Minister of Environment, Energy and Climate Change, Greece; Antonis Paschalides, Minister of Commerce, Industry and Tourism, Cyprus; Charles D. Davidson, Chairman and Chief Executive Officer, Noble Energy Inc, USA.

2nd LIMAssOL ECONOMIC FORuM date: 19 October 2011 Place: Four Seasons Hotel Organizers: In Business in association with the London School of Economics (LSE) and Cyprus LSE Alumni Coordination: ΙΜΗ supported by: The Cyprus Shipping Chamber, the Limassol Chamber of Commerce and Industry, Limassol Municipality sponsors: Andreas neocleous & Co LLC, deloitte, Marfin Laiki Bank For further information: IMH (Ourania Pavlou): 22505531 or the international investment, business & finance magazine of cyprus

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WAnTEd: ‘Connoisseurs of Luxury’ A high-end tourism mArketing CAmpAign hAs been LAunChed in ChinA, indiA, the uAe And singApore, Aimed At persuAding internAtionAL trAveLLers seeking the perfeCt ‘dreAm’ hoLidAy to find it in the uk. By Richard Maino, London Press Service


espite the world trade situation, the number of high net-worth individuals - people with more than a million dollars in disposable funds - grew by 17% in 2009 to 10 million. And for the first time there are as many of these individuals in Asia as in Europe and North America - about three million people. Now, a new high-end tourism marketing drive is being aimed at the United Kingdom’s growth markets. VisitBritain has joined forces with premier airline Emirates to launch the campaign ‘to enjoy the best of Britain’. The VisitBritain and Emirates project - called Britain, a Tradition of Luxury - is being launched in China, India, the United Arab Emirates and Singapore. The jointlyfunded campaign is aimed primarily at international travellers aged 35-55 who are ‘connoisseurs of luxury’, looking for


that perfect holiday. A recent VisitBritain report identified a fashion among welloff individuals for dream-like, ‘fairytale’ holidays. Many say they want fantasy experiences where, for example, guests relive the lives of residents in a British stately home. “Another trend is for frictionless ‘flow’ holidays, described as ‘turning the mute button on life’,” said a spokesperson. “It shows that the wealthy have a growing appetite for luxury holidays planned with the skill of an art curator or choreographer, full of surprises and a compelling story they can talk about to their friends. “What unifies this audience is the way they travel and the quality of product and service they expect to enjoy. They want high quality and service with authentic one-off experiences, personalised itineraries and to attend events they can tell their friends about, with brands they trust. “The UK has some great luxury experiences that can only be found there, many of which are built on centuries of

tradition. This multi-channel campaign showcases the very finest luxury products and experiences that can be had not just in London but across the UK, with the luxury experience extended by Emirates and the numerous benefits it has on offer.”

britain is already regarded by many as the original home of luxury These products include London’s May Fair hotel, situated in the heart of the city, and surrounded by some of the most distinguished fashion, art and theatre in the world; St Andrews, the home of golf, with its breathtaking championship golf courses, gourmet dining and exclusive spa in Scotland; and Bodysgallen Hall, a grade-

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St. Paul’s Cathedral, London [Opposite page]: May Fair Hotel, London

one listed house with 16 beautiful cottages in Llandudno, Wales. Emirates said that consumers can expect to experience the highest level of service and comfort available on board its flights. The first-class private suites offer exclusive shower spas, on-board lounge and awardwinning service. Each customer can also have their very own chauffeur-driven airport transfer, courtesy of Emirates that offers a choice of 98 flights a week to the UK. Laurence Bresh, director of VisitBritain’s Marketing, said, “I am delighted to announce Emirates as the lead partner in one of our most soughtafter campaigns of the year. It’s a great match - Emirates has perfected the art

of luxury over many years, as has Britain over the centuries. “Britain is already regarded by many of the international jet-set as the original home of luxury, thanks to our traditions and history of service,” he added. “Whether these visitors have a passion for rubbing shoulders with the British elite at Royal Ascot, shopping at Harrods, taking a journey on the Orient-Express or a stay at the May Fair London, we have many luxurious experiences just waiting to be enjoyed,” said Bresh. An Emirates spokesperson said: “Our worldwide network now spans over 110 destinations and with services to six British airports, Emirates is the ideal choice for visitors to Britain. We

have developed our services to the UK over more than 20 years, and earned a reputation for innovation and high standards of service. “We are pleased to be working with VisitBritain and look forward to welcoming more international visitors to the UK on board our flights.” VisitBritain, the national tourism agency, is responsible for inspiring the world to explore the UK and for developing the UK’s visitor economy. Every year 17 million visits are made by international consumers to the 57 websites that make up VisitBritain’s global family of websites ( that together provide information in 21 languages.

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ExTREmE, ExcLusiVE, ExTRAVAgAnT And… ExpEnsiVE By Nathalie Kyrou

Soneva Fushi, Maldives


ntil very expensive commercial flights into outer space become the norm, Japan is said to be the most expensive place to visit for a holiday, followed by Brazil and France. By contrast, Cyprus is one of the least expensive countries for a vacation, both before and after flights from different locations are taken into consideration, though much may depend on whether you stay at the Anassa Hotel (where a Junior Suite with private pool will cost you around €1,750 a night) or not. However, perception can be everything and in one recent survey, Aphrodite’s legendary birthplace was ranked the 14th most expensive country for a holiday out of 30 selected destinations. So if you want a really luxurious holiday and money’s no object (but you are extremely lazy indeed), you might as well stay here and save on the air fare. For everyone who believes in the old saying that a change is as good as a rest, however, we recommend the following holiday choices that are guaranteed to make you feel better and lighten your wallet considerably.

FouR HoLidAys in onE If you want to travel in absolute luxury and style, while exploring the best of the best in four very different parts of the world, look no further. This ultimate trip of a lifetime holiday (from onlyexclusivetravel. com) will introduce you to the tranquility of the Arabian desert, the majesty of the African bush, the beauty of the Maldives and the decadence of Dubai. Travel first class on this ultimate journey and experience four of the very best hotels the world has to offer. All you need to do is fly to London. On the first day, a chauffeur will take you to Heathrow Airport where


you will fly first class with Emirates to Dubai. After three nights at the Almaha Desert Resort in a Bedouin suite on a full board basis, you will again fly first class as Emirates delivers you to Johannesburg for an inspirational four-night stay in a luxury suite on an all inclusive basis at the Singita Boulders Safari Lodge, with return shared charter flights between Johannesburg and the Sabi Sand Game Reserve. On the ninth day, Emirates once again takes you to Male via Dubai, where you will stay five nights in an Ocean Bungalow with its own private luxury Dhoni on a full board basis at the heavenly Huvafen resort.

On Day 14, experience the delights of ultimate first class as Emirates takes you back to Dubai where you can indulge yourself at the Burj al Arab Hotel (see below) for three nights in a Panoramic Suite on a bed & breakfast basis (all return airport transfers are by luxury car). Finally on Day 17 (it may sound like a long time but you probably will want to stay longer), the same luxury airline will return you to Heathrow, where you will be chauffeur-driven back to your home address or left to catch a flight to Cyprus or wherever you live. How much? From €19,541.05 per person, based on 2 people sharing.

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Burj Al Arab Hotel, Dubai

UAE (Ultimate Arabian Experience) Living up to their reputation as leaders in style and affluence, the entrepreneurs of the United Arab Emirates are constantly taking their tourism products to new heights of luxury. One of the most iconic images of opulence is the Burj Al Arab Hotel, shaped like a sail in imitation of an Arabian vessel called a dhow. One of the world’s most luxurious (selfproclaimed 7-star) hotel, this shimmering tower exemplifies the ultimate in Arabian hospitality. Standing proud and 321m tall and located near the stunning Jumeirah beach, this structure offers top-class duplex suites with private business facilities and the very latest in technology. Take advantage of reception desks on every floor, rain showers and Jacuzzis in every suite, a Rolls-Royce fleet, butlers on call around the clock and dining not only under the stars but under the sea too. You can even have the services of a private shopper while you relax at the spa. Above all, delight in the details: perfect service within goldplated opulence. How much? The height of luxury naturally comes at a high price. A deluxe 2 bedroom suite can be booked for AED 11,976.00 (€2,308.53) and that’s actually a bargain at a hotel where the Presidential Suite is reputed to cost around AED 94,000 (€18,118.66) per night.

Rent Your Own Island! Tragically, the Maldives are disappearing at an alarming rate due to water levels rising from climate change…but what better incentive than this, to spend your money in a nation whose most iconic island resorts, Soneva Fushi and Soneva Gili, are top contenders for the world’s most extravagant island rental? The Soneva Fushi Resort on the island of Kunfunadhoo, is host to sixty-five residences and a Robinson Crusoe-style environment. Easily accessible from Male by a half-hour plane ride, this island is beautifully isolated from the rest of the ocean, and dotted with thirty-two private swimming pools and villas. It is claimed that these villas offer ‘intelligent luxury’ ranging from the Jungle Reserve

to The Retreats, all presided over by expert personal attendants. The Six Senses Spa, one of the island’s most famous attractions, invites visitors to a rejuvenating and utterly serene setting. For those less inclined to lay back, hidden jogging trails and bike paths winding through the rich vegetation offer a rare opportunity to explore the island’s tropical depths. The nearby Soneva Gili Resort, set on a tiny coral island, holds the distinction of being the first ever over-water resort in the Maldives (if you’re wondering what ‘over-water’ means, imagine an exotic, beautifully-designed stilted hideaway hovering over the still waters). Here, the Six Senses Spa has a 360-degree view of the crystal-clear sea. The small island is surrounded by 44 thatched bungalows, an innovative design that set off a trend for over-water resort developments in the Maldives. In keeping with the ‘intelligent luxury’ theme, guests are lavished with gourmet feasts, traditional Maldivian entertainments, and expert massages above a unique glass-floor spa. How much? Hosting almost 100 guests and ideal for a wedding or some other special celebration, these once-in-alifetime experiences are offered at a record-setting US$1,000,000 per week. Other expensive islands to check out (or rather, never check-out of!) are Musha Fay, and Isla-de-sa-Ferradura.

Luxury in London You don’t have to be some tropical paradise to indulge in luxury that some might consider ‘overboard’. The Langham and The Lanesborough hotels in London

offer the most expensive suites in the country. The Langham has enchanted royalty, dignitaries and celebrities since 1865, when it opened as Europe’s first ‘Grand Hotel’. Today, it continues to impress discerning travellers with its legendary ‘service with poise’. This Victorian hotel has an exceptionally rich heritage and a distinguished reputation which sets it apart from other everyday London hotels. A veritable icon, The Langham, located in Regent Street - one of the city’s premier locations - has undergone an £80m restoration and now has 380 luxurious guestrooms and suites and 15 function rooms. Palm Court, famed as the place where the tradition of afternoon tea was born, still continues to dazzle. The Lanesborough, a St. Regis Hotel, is ideally located in prestigious Knightsbridge opposite Hyde Park, and is another landmark in impeccable English accommodation. Home to visiting royalty or heads of state, the Royal Suite at The Lanesborough is designed for the most discerning guests. The extravagant layout includes stunning floor-to-ceiling windows that offer superb views of the Constitutional Arch and the manicured grounds of Buckingham Palace. This suite offers three bedrooms, a drawing room, a dining area, a study and a kitchen and is in the same price range as The Langham. After all, you are paying for location: next door to Harrods, Harvey Nichols and the international designer stores of Sloane Street… what more could you ask for? How much? Both hotels will set you back £5,000- £6,000 a night for a stay in one of their premier suites.

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The Langham Hotel, London

AmERicAn bEAuTy Fly across the ocean and ‘do’ New York in style by booking yourself into the Ty Warner Penthouse at the Four Seasons Hotel. This nine-room suite has walls inlaid with mother of pearl and is adorned with gold and platinum-woven fabrics. Perks include a butler, personal trainer, chauffeur and library. At the pinnacle of Manhattan’s tallest hotel, with cantilevered glass balconies and floor-to-ceiling bay windows, set beneath 7.6-metre cathedral ceilings, the Ty Warner Penthouse offers a breathtaking 360 degree view of the city. Custom-commissioned in every detail, it creates the sense of living within a multilayered work of art, raising the bar for even the most seasoned traveller. How much? A night’s stay costs $35,000 (€24,788.89).

c’mon oVER To my HousE If you are looking for something even more extravagant, you can do no better than the US$10 million Hugh Hefner Sky Villa which sits atop the Palms Casino Resort in the Palms Fantasy Tower. This ultimate in American excess offers the equivalent of a peek inside the Playboy mansion indeed, an extraordinary style of living. A private glass enclosed elevator lifts you to the entrance of your 9,000 square feet of exclusive living space, with amenities including pop-up plasma TVs, a fullyequipped gym with a sauna and spa-style treatment room, a media room, a full bar and an eight-foot round rotating bed. Invite


your closest playmates and end the night in your private outdoor, Playboy jacuzzi pool. You can even have your own butler…but you’ll have to provide your own Bunnies. How much? Ostentatious surroundings call for ostentatious prices: it costs US$40,000 (€28,323.23) a night to rent. Alternatively you could book the more excitingly named Erotic Suite - mirrored ceilings are de rigeur here - for a more affordable US$3,000 to US$4,000 (€2,131 - €2,842) a night.

swiss RoLL If you don’t want a long-haul flight (in which case you didn’t read our feature last month on first-class travel) and would prefer to stay a little closer to home, the Royal Penthouse Suite at the President Wilson Hotel in Geneva, Switzerland may be just the place for you. Close to one of the city’s most beautiful parks and facing the magnificent panorama of the lake and Mont-Blanc, it claims to be the most luxurious hotel suite in the world and boasts maximum security for its guests, including bulletproof windows (giving an indication of the kinds of people who stay there). With 12 rooms and 12 bathrooms, the suite covers the entire top floor of the hotel. It features a Bang & Olufsen BeoVision 4-103 flat screen TV and audio installation. You also get a billiards table and… a Steinway grand piano. Don’t forget the fitness centre, private elevator and private terrace. How much? Would you believe US$65,000 (€46,019.59) a night? Some

The Lanesborough Hotel, London

reports suggest that you can get it for around $35,000 at the right time of year. Either way, it’s worth noting that neither of these prices includes breakfast…

RoAming in RomE Still in Europe, why not stay at the Villa La Cupola Suite in The Westin Excelsior Hotel in Rome? This lavishly decorated accommodation boasts a butler, a Jacuzzi, a sauna, and an 8-screen cinema! Since 1906, this hotel has hosted celebrities, statesmen and artists visiting the Eternal City. It enjoys a prime location in the celebrated Via Veneto district, and it is known for outstanding service in an exceptional setting. Following its $7 million renovation, the Villa La Cupola claims to be the largest suite in Europe and its grand style is reflected throughout the hotel in the sumptuous furnishings of the recently remodeled 281 guest rooms and 35 suites. How much? $31,000 (€21,953.38) a night.

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Huvafen Resort, Fushi

ALL AT sEA Why stay on land when you can move around and enjoy ever-changing scenery in luxury accommodation at sea? The Annaliese is currently the most expensive private yacht charter in the world. Onboard facilities include a spa which boasts a marble Roman bath, saunas and steam rooms, Jacuzzis (yes, in the plural), a fullsize movie theatre, a business centre… and a helicopter landing pad. Custom itineraries include the Mediterranean, the Caribbean and the South Pacific. This $90-million super-yacht, owned by Greek entrepreneur Andreas Liveras, and its sister ship, the Alysia, each accommodate 36 people. How much? Yours for a mere $113,760 (€95,279) per day. Still at sea, a niche market of high-end cruise carriers, like Crystal Cruises, Silversea Cruises, Seabourn and Carnival Cruise Lines-owned Cunard, has emerged to cater for the growing demand for luxury cruises. On Cunard’s Queen Mary 2, a Canyon Ranch spa, seven restaurants and a nightly disco are available to all passengers, while those travelling in one of the Grand Duplex apartments, which have a private balcony and marble bathrooms, can also enjoy private butler service as well. How much? $24,249 (€17,231) per day.

big in JApAn Founded in 1890 at the urging of the Imperial Family, The Imperial has been the hotel of choice for royalty, celebrities and heads-of-state for over a century. Cuisine and service reflect global standards of unabashed excellence and Japanese precision. The Main Lobby is one of Asia’s most visibly glamorous crossroads. The hotel overlooks the palace gardens, housing relics of its former historic Frank Lloyd Wright building and within easy

walking distance of the central business district, Ginza and government offices. Personalized, highly-tailored attention, award-winning French food and Tokyo’s most elegant guestrooms are hallmarks of this legendary hotel. How much? For this kind of history and service, a night in one of the top suites at this oldest and special luxury hotel will cost you 1,050,000 yen (€7,431.05). If you want to explore more of this beautiful country, take an exclusive 11-day Japanese holiday from and visit Tokyo, Kanazawa, Kyoto, and Hakone. The tour includes some of Japan’s favourite destinations - all known for their exceptional hotels and ryokans, their natural beauty, and their unique artistic, culinary and cultural traditions. Start in Tokyo by visiting the city’s most interesting neighbourhoods and experiencing the characteristic architecture, high-end boutiques, interesting museums, important shrines and authentic restaurants. Continue to Kanazawa, located on the Sea of Japan and, with an expert guide, visit the famous Kenrokuen garden, the old Samurai and Geisha districts, and some of Japan’s most acclaimed museums. Included is a visit to the local pottery kiln and a tour of the fascinating Ninja temple. Browse the main market, and enjoy the excellent local seafood and refined cuisine at incredible restaurants. Then, travel to enchanting Kyoto for several days of private touring and exclusive access to the city’s most enchanting gardens, imperial villas, temples and shrines, local specialty shops and food markets, restaurants and residential districts. Finally, you move on to Hakone, a volcanic national park near Mt. Fuji, and stay in another luxury ryokan - this one with private outdoor hot springs. How much? $18,295 (€12,950.19) per person for 2 people sharing.

boo booK reVIeW re

onE dAy by dAVid nicHoLLs (Hodder PaPerbacks, 2010) RRp: £7.99 (£3.98 from


he book has been a huge success (and has inevitably been turned into a movie) and it’s easy to see why. It follows every 15th July from 1988 (end of their student days) to the present day in the lives of the two main characters, Emma and Dexter. She is warm, funny and directionless, he is confident, arrogant, and transparent. Their relationship treads its own path - there’s no inevitability to what the next year will bring - and their interactions with others take a similar course. The story moves with grace and humour through subtle and unexpected turns. The characters aren’t always ‘made for each other’ but it is perhaps because of, rather than in spite of, the characters’ genuine flaws that this books pulls so strongly at the reader’s heart. The ‘same day each year’ idea works wonderfully to drive the story forward through a clever mix of drama and the everyday - just like real life. Ultimately it is an easy-to-read but nonetheless profound tale woven from ordinary truths about love, life and feelings.

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{ the last word }

LimassoL beLongs to everyone who feeLs it is theirs By Peter Economides


am a brand strategist. I guess you would call me a creative person. I am not, however, a creator of brands. My role is to find out what has been, what is, and what can be. And to assemble this within a powerful brand strategy. I am a mirror. I reflect on brands as I reflect them. To do this, I need to know how they fit into the collective consciousness. Social media like Facebook and Twitter are social gathering places facilitated through technology. Where we would once gather in the town square, the coffee shops, the pubs, wherever ... we now gather online. And it’s at these ‘get-togethers on steroids’ that community is built. Community that implies shared values and shared culture and shared aspiration. Back to branding. A brand is precisely this. A community centered on an interest that matters. For example, photographers will agree that Leica (or Nikon or Canon) best represents the values and culture and aspirations of the community gathered around the common interest called photography. They may disagree about Coca-Cola and BMW. But probably not about Leica or Nikon or Canon. Social media allow people to connect. And they become friends. And they follow each other. And they like the same things. Or disagree about what they like but come to some kind of conclusion about what they agree about. What fertile ground for a brand strategist! As strategists, we would research, then analyze, then build brand architecture, then design messaging streams, then communicate. And now this can all be done through these ‘get-togethers on steroids’. Say hello to open source branding. Where communities express themselves and dream and imagine and create and get involved and disagree and agree and build common culture and values. Where they find the building blocks that create brands. Sounds too good to be true? It’s not.

It’s happening. The Limassol Branding Project is the world’s first interactive destination branding project involving anyone who has enough interest in this city to ‘join the conversation’ and ‘share today’ and ‘shape tomorrow.’ On Facebook. On Twitter. On blogs. And in live meetings. The project was launched on 7 July and the flood of interest was amazing. The launch presentation was the ninth most popular presentation on SlideShare on Saturday 9 July ... for a little city of 200,000 inhabitants. This is what I call engagement. Think about it. The brand we are developing is the city. But the city is the people. And the people are expressing themselves in this ‘get together on steroids’ facilitated by Facebook and Twitter, Slideshare and YouTube.

through the LimassoL branding Project, PeoPLe have the chance to shaPe the future Do you still want to do focus groups so you can manage your brand? It is not your brand. It belongs to everyone who feels it is theirs. Just four days after the Limassol Branding Project was launched, tragedy struck Cyprus and Limassol in particular. Much was lost as a result of this tragedy, most of all life ... which is irreplaceable. But tragedies such as this one highlight the need for projects such as these. Through the Limassol Branding Project, people have the chance to shape the future. And perhaps to ensure that something like this will never, ever happen again.

info: Peter economides is a Brand Strategist and founder of Felix BNI. He is a former Executive Vice President and Worldwide Director of Client Services at global advertising agencies McCann-Erickson Worldwide and TBWA\Worldwide. He has worked on some of the world’s most iconic brands including Coca-Cola, Apple, Absolut, illy, Audi and Nike. In Cyprus, he has been involved in branding projects for Bank of Cyprus, Sigma Television and easy-forex. Peter is based in Athens. 98

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More than just a holiday destination with pristine white beaches and 300 days of sunshine, Cyprus can also cater to your business needs ranging from registering and setting up your company’s operations to managing your EU, North African and Middle Eastern clients at a considerably lower cost. As well as being an EU country and a member of the European Monetary Union since 2008, Cyprus enjoys the lowest corporate tax rate in the EU of 10%. Cyprus belongs to those jurisdictions on the OECD White List which have substantially implemented the internationally agreed tax standard. In addition to this, Cyprus provides efficient business services, has a transparent legal and regulatory system and is committed to sustainable growth.

“Columbia’s growth and expansion over the years is attributed to the uniqueness of Cyprus; being the island’s strategic position at the crossroads of three continents, its comprehensive legal framework, double tax treaties regime,



banking system, infrastructure in general and last but not least its highly educated labor force.” Captain Dirk Fry, Managing Director Columbia Ship Management Ltd

“The the

favorable excellent




telecommunications the



and skilled human resources, the favorable tax rates and the proximity to the Middle East and Africa markets, were some of the key factors that enabled NCR to decide to move its regional offices to Cyprus in the 80’s.

Cyprus welcomes both visitors and investors to work here, so, if you are searching for a new business base, consider Cyprus. It’s more than just beaches and sun.

Cyprus Investment Promotion Agency Tel + 357 22 441133 Fax + 357 22 441134

The Ministry of Commerce, Industry and Tourism Tel + 357 22 867100 Fax + 357 22 375120

Gradually, NCR managed to expand the office in Cyprus to cover also all the African Countries.” Managing Director of NCR Cyprus, Mr. George Flouros

GOLD 05  


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