DoJ approval for Deutsche Börse-NYSE merger

The US Department of Justice has approved a $9bn merger between the NYSE Euronext and Deutsche Börse contingent on divestitures.

For the deal to be fully permitted by the DOJ, Deutsche Börse will need to divest its 31.5 percent interest in stock exchange operator Direct Edge. It is also still awaiting the approval by the European Union.

Deutsche Börse agreed to acquire NYSE Euronext in February, which will create the world’s biggest stock exchange operator.

Areti Law: The advantages of Cyprus as a fund jurisdiction

As a globally recognised financial centre, a reputable service provider and a low tax jurisdiction, Cyprus is an ideal passporting jurisdiction for funds seeking EU investors.

The island benefits from the reliability of its own domestic regulatory framework, as well as that of Europe. In combination these have made Cyprus competitive with other EU fund jurisdictions such as the UK and Luxembourg, as well as being more advantageous than traditional offshore fund jurisdictions such as the Cayman Islands or the British Virgin Islands.

Legal Framework
In May 1999 Cyprus introduced Law 47(1) /1999, for the regulation of operations and supervision of International Collective Investment Schemes (ICIS). In 2004 Cyprus adopted the EU directives for Undertakings for Collective Investments in Transferable Securities (UCITS). The European regulatory framework currently consists of UCITS IV and the Alternative Investment Fund Managers directive.

Investors who choose an ICIS benefit from the fact that whereas an ICIS provides the opportunity to manage a European fund, it exempts such fund management from the burdensome requirements of EU legislation, applicable in the case of UCITS.

All the legal forms an ICIS may take enjoy the option of being established with limited or unlimited duration, and can vary in respect of their target group: they can be a private scheme, addressed to the general public, or open exclusively to experienced investors.

Types of ICIS
International investment companies (Fixed or Variable Capital)
A variable capital company benefits from not being subject to a minimum capital requirement; whereas an international investment company with fixed capital must fulfil the minimum capital criterion established by Cyprus’ central bank.

In contrast, a private ICIS enjoys no minimum capital requirement. A private ICIS is the scheme most commonly used by promoters in Cyprus, because it can benefit from a number of exemptions from administrative and compliance requirements.

International Unit Trusts
The main advantage of establishing a trust scheme is that Cyprus provides a legal framework which ensures the protection of the assets, and guarantees confidentiality – a highly desirable attribute. It is commonly accepted that confidentiality and asset protection are achieved as a result of Cyprus’ stable legal framework. Trusts established in Cyprus for the purposes of ICIS are defined as international trusts, and are governed by international trust law.

International Investment Limited Partnerships
Similar to ordinary limited liability partnerships, the partners of an international investment limited partnership enjoy limited liability equal to the amount they contributed to the capital of the scheme. A general partner is appointed, the code of conduct and obligations for whom are clearly indicated by the law.

Application procedure
The following documentation is required to be submitted to the Central Bank of Cyprus:
1.   The Standard Application Form duly completed and signed;
2.   A personal questionnaire for natural persons;
3.   A questionnaire for legal persons;
4.   A questionnaire completed by the manager;
5.   A questionnaire completed by the trustee;
6.   A personal questionnaire for persons who will be providing trustee services.

The objective of establishing a UCITS is the collective investment of funds raised by the public into transferable securities, 90 percent of which must consist of listed securities.

The aim of the UCITS directives is to allow collective investment schemes to operate freely throughout the EU on the basis that the fund is authorised by only one member state. Nevertheless, many of the EU member states introduced further regulatory requirements which have impeded free operation with the effect of protecting local asset managers.

In Cyprus, UCITS Law 59(I)/2008 was enacted and amended in order to comply with the EU Directives. The establishment of UCITS require licensing by the Cyprus Securities and Exchange Commission (CySEC), the relevant domestic regulatory authority.

Types of UCITS
UCITS can either take the form of a mutual fund company or a variable capital investment company, according to the nature of its operations. Depending on the form, the legal framework provides for the respective requirements. In both occasions, the entity benefits from the flexibility of consisting not only of a single fund, but also an umbrella fund including various other funds.

Mutual fund
The idea of a mutual fund focuses on establishing a pool of transferable securities and other liquid financial assets, as defined by the law, which belong either jointly or separately to unit holders, and whose operations are governed by the Common Fund regulation.

Since the mutual fund is not a legal personality, a management company is appointed in order to apply and obtain the licence to operate by CySEC.

If the fund is formed as a mutual fund, the following information must be submitted:
• Information about the applicant and the natural persons that will be responsible for the management of the common fund;
• The organisational measures taken for the common fund;
• Information about the depositary, including legal details, as well as details of the natural persons responsible for the monitoring of the common fund and the management company;
• Information about the representatives who will forward the application;
• Other supporting information required according to the law, as well as to the regulations issued by CySec.

Variable capital investment company
The investment company consists of a limited liability company with shares established in accordance with the provisions of the Companies Law. Its main objective is the collective investment in transferable securities or other liquid assets, as these are defined by the relevant legislation.

The investment company either appoints a management company or declares itself as ‘self-managed’ – but it cannot undertake the management of third parties’ assets.

The application for the licensing of a variable capital investment company by CySec must be accompanied by:
• Information about the applicant;
• Information about the depositary;
• Corporate information of the variable capital investment company;
• Information about the representatives, auditors, and legal consultants of the company;
• Special information in relation to the variable capital investment company: particularly financial information about the company, including its share capital and financial statements;
• Additional information about the company: a questionnaire that includes information in relation to the history of the company and its criminal record, if any;
• Certificates, statements, and other information;
• Additional supporting information as requested by the law and regulations.

The most attractive incentive for establishing collective investment schemes in Cyprus are the tax incentives which, during recent years, have become even more advantageous for prospective investors.

Fund taxation
Generally the net income of the fund is subject to 10 percent flat corporate taxation. Dividend income, profits from sale of shares and other financial instruments, and fair-value gains, are exempt from taxation. There is no withholding tax in Cyprus on any payments of dividends or interest abroad, irrespective of whether there is a double taxation treaty or not with the country involved.

Dividend income
Dividend income received by the fund from abroad is exempt from taxation in Cyprus, provided that either the company paying the dividend is not engaged directly or indirectly more than 50 percent in activities which lead to passive income, or that the rate on the taxable profits applicable in the country of the company paying the dividend is not substantially lower than the relevant tax rate that applies in Cyprus. For example, an effective tax rate of at least five percent in the country of the company paying the dividend satisfies this condition.

Investor taxation
Dividend distributions in respect of registered funds are taxed at three percent – only applicable to Cyprus tax resident unit holders. Thus dividends paid to non-Cyprus residents are totally exempt. Additionally, the redemption of units is considered as disposal of securities, subject to the provisions of the latest law amendments, and are exempt.

Double taxation treaties
The double taxation treaties signed between Cyprus and other countries encourage the establishment of Cyprus-registered funds. Since such treaties ensure the transfer of funds between the contracting countries with very low or even no further taxation, cheap or tax-free repatriation of funds is ensured.

Moreover, the fact that Cyprus retains double taxation treaties with non-EU countries gives the opportunity to the citizens of these countries to invest in Europe through Cyprus funds, and be treated as Europeans.

The fact that the schemes are supervised by a responsible regulatory authority aims to ensure that the involved parties meet the minimum requirements set by law, and that unit holders’ assets are handled with reasonable care and transparency, for the incomes and confidence of the promoters, unit holders and beneficiaries.

The common-law based legal system of Cyprus, in combination with the exceptional piece of legislation governing ICIS and the EU UCITS directives, provides a certain, stable, safe and predictable legal environment for the unit holders. The high level of professional services offered from Cyprus firms in reasonably low costs is another reason for choosing Cyprus over any other EU jurisdiction or offshore jurisdiction.

The above findings, along with the exceptional tax advantages, have undoubtedly rendered Cyprus an outstanding financial centre for the establishment of ICIS and UCITS.

Socrates Ellinas is an advocate at Areti Charidemou & Associates LLC.
For more information – Tel: + 357 25 50 80 00;;

Esin Attorney Partnership on business principles

Comprising 42 associates and four partners, Esin Attorney Partnership (EAP) is a member firm of Baker McKenzie International. A Swiss Verein (association), it is ideally positioned to assist clients in cross-border transactions.

The firm’s main practice areas are M&A, corporate law, dispute resolution, competition law, real estate and capital markets. The firm also works in other areas, and with prominent counsel and advisers, in Turkey and abroad.

The firm is creative, dynamic and solution-oriented and combines sound legal knowledge with a capacity for understanding business matters to serve its clients in the most effective manner. EAP has a passion for excellence in legal services and strives to create added value for its clients.

Tailor-made thinking
Led by Dr Ismail G. Esin, EAP’s general strategy is to provide high quality legal services to its clients in its core practice areas.

EAP’s services are its main marketing tool. An innovative and high-quality legal service at international standards, amplified by a distinguished business approach and ‘tailor-made’ thinking, makes it one of the preferred law firms in the market. 

EAP’s quality-oriented approach to rendering legal services distinguishes the firm from its competitors. In order to ensure quality, partners lead every transaction and are involved in every meeting and conference call. They are fully focused on each and every detail of the company’s projects.

The firm pays great attention to the training of its associates, and provides them with insights on risk assessment, risk calculation and risk management. To this end, EAP organises seminars with professors of the highest calibre in order to keep up with recent changes in the laws and regulations in Turkey.

Risk focus
EAP makes realistic risk assessments, helping to reduce commercial risk for its clients, and enabling them to concentrate on major business-related risks.

Thanks to EAP’s closing-oriented approach, the firm has closed approximately 90 percent of the deals in which it has been involved within the last three years.

Esin Attorney Partnership’s attitude towards negotiation is fully backed-up by comprehensive legal knowledge.

Esin Attorney Partnership is a member of Baker & McKenzie International, a Swiss Verein. For more information –
Tel: +902123766400; email:

All change for arbitration in Far East, says Mallesons Stephen Jaques

HONG KONG Premier arbitration centre
When it comes to arbitration, Hong Kong has reaped the rewards of an advanced arbitral regime that began with the UK’s accession to the New York Convention on its behalf in 1977 (when the territory was still a British colony). After that Hong Kong became something of a pioneer. In 1990, it became the first jurisdiction in Asia to enact the UNCITRAL Model Law to govern arbitration. It was also the first jurisdiction in Asia to implement an open legal services policy: meaning that lawyers from outside Hong Kong can practise on a level playing field with local lawyers.

Like all leading arbitral centres, it offers a combination that has enabled it to flourish: from an excellent Hong Kong International Arbitration Centre, its international airport, transport facilities, hotels and restaurants; to its English-based common law system, backed up by an independent judiciary. This legal system has deep roots in Hong Kong, and it remains in effect today, notwithstanding the reversion of Hong Kong to Chinese sovereignty in 1997.

There’s also the depth of expertise that Hong Kong has to offer. Hong Kong boasts a pool of professionals who are locally based and can be called upon to assist in international dispute resolution proceedings. The courts in Hong Kong will strive to give meaning to arbitration clauses, while in other Asian jurisdictions they can get struck down.

Hong Kong’s new arbitration ordinance
The new ordinance sets up a unitary system of arbitration based on the Model Law (UML), which is an internationally recognised model.

The previous regime was bifurcated: domestic and international (based on the UML). This caused confusion with foreign parties, or those who were governed by the domestic regime but were more familiar with the UML.

It is hoped that more international parties will find the regime more user-friendly, and either insert Hong Kong as the venue in the contracts, or hold the arbitration in Hong Kong.

It is based in part on additions to UML in 2006, and the notable changes are:
• a stay of court proceedings in breach of the arbitration agreement is compulsory;
• no right of appeal against award (only setting aside award under limited UML grounds based on the New York Convention);
• new interim measures and preliminary orders;
• tribunal will assess costs unless court taxation is agreed by the parties. No need to follow court scales and practices;
• opt-in provisions to previous domestic regime, for appointment of sole arbitrator, determination of preliminary question of law, challenging award on grounds of serious irregularity and appeal on question of law. Automatic opt-in where arbitration agreement entered into before new ordinance, or six years after.

State immunity – absolute
The recent decision of the Court of Final Appeal in the FG Hemisphere case affects the law on state immunity, but is unlikely to affect arbitrations in Hong Kong generally or its competitive edge as a pre-eminent venue.

The case rules that Hong Kong must follow China’s doctrine on absolute state immunity, and the Hong Kong Court can refuse execution of an arbitration award. This decision was referred by the Court of Final Appeal to the National People’s Congress Supreme Court, pursuant to the Basic Law.

Bearing in mind that Hong Kong is a Special Administrative Region of China, the decision was anticipated, as restricted immunity and absolute immunity are in conflict.

Most commentators agree that there is no question of the juridical autonomy of the Hong Kong Courts being compromised or harmed. And bearing in mind state arbitrations are very few, the decision will not affect the vast majority of commercial cases in Hong Kong.

Future trends
There will be an increase in cross-border and ISCID (Investor-State) arbitrations, and increasing use of Hong Kong as a venue – particularly for Chinese companies.

Furthermore, there will be an increase in financial institutions using arbitration for confidentiality and easier enforcement (instead of traditional litigation usually according to UK law). A financial dispute resolution centre is to be established to allow mediation / arbitration of consumer banking disputes.

Arbitration preferred
For disputes which involve an international party against a Chinese party, arbitration is preferred for these reasons:
• Arbitration is considered to be a fair and unbiased way of resolving disputes. While there have been improvements in the litigation process in China, particularly in the major cities, there remain doubts about the fairness of the process.
• In arbitration, one can choose the venue and the language. Even if the arbitration is held in China, the parties may still choose English as the language. Litigation in China obviously can only be conducted in Chinese, and is therefore less convenient for a foreign party.
• The parties may choose their own arbitrators. In a panel of three, each side will be able to choose its own arbitrator, with a third arbitrator acting as Chairman. At the very least, the party would feel that it is able to get on the panel someone that the party trust would be a fair arbitrator.
• Enforcement of arbitration awards is generally easier cross-border under the New York Convention than court judgments which depend upon reciprocal treaties between affected countries.

Changes to Arbitration Laws
There are many voices demanding that China should bring its civil procedure law and arbitration law more in line with international practice. It is expected changes will be introduced, in particular:
• There shall be greater flexibility for the parties to appoint arbitrators outside the panels for both domestic and foreign-related cases.
• China should open the door to foreign arbitration institutions and allow them to handle arbitration cases within China.
• Ad hoc arbitration should be allowed in China.
• The arbitrator or the tribunal should be allowed to rule on the validity of the agreement and on their own jurisdiction.
These changes will strengthen the independence of Chinese arbitration, and its legislation will be closer to international practice.

Enforcement of awards
Despite the increasing number of arbitrations conducted in China and improvements to the arbitration rules and regulatory framework, many foreign companies continue to be concerned about choosing China as a seat for arbitrations and enforcing foreign arbitral awards in China. However, such fears are on the whole unwarranted because, in general, foreign arbitration awards are enforced in China. Recently, if any provincial court decides not to enforce an award, it has to send its draft judgment to the Supreme People’s Court. This has stopped a lot of the previous problems. It should also be borne in mind that asset seizures are also possible in China, and should be utilised once award-enforced.

Recently, there have been some positive developments to the Chinese arbitration regime, including:
• The Supreme Peoples’ Courts’ Circular on Issues Relevant to the Enforcement of Hong Kong Arbitration Awards in Mainland China, published in December 2009, which clarifies the type of Hong Kong arbitral awards enforceable in China. In particular, arbitral awards rendered in Hong Kong (whether ad hoc or under the auspices of an institution) will be enforceable in China.
• The increased financial independence and flexibility of Chinese arbitration institutions: for example, the Beijing Arbitration Commission achieved financial independence from the government and operates as a public institution managed as an enterprise. It is expected that there will be increasing demand for the other Chinese arbitration institutions to operate independent from the government to gain international recognition.

• The planned review of the China International Economic and Trade Arbitration Commission rules. Hopefully, a rule will be introduced that the three arbitrators should have different nationalities, because currently the norm is two Chinese arbitrators, including the chairman.

These positive changes help increase credibility in China’s arbitration system and make arbitration in China more attractive to foreign companies interested in doing business in China. The arbitration commission has also evolved as one of the busiest arbitral institutions by number of cases worldwide.

For more information  Tel: +852 3442 1000; Email:

Brown Brothers Harriman: misuse of regulation is harming investors

The flight attendant’s safety speech has become so familiar and iconic that most air passengers know it by rote, and very few people ever take the time to listen to it – let alone consider if the safety measures described actually provide safety, as opposed to the illusion of safety. For example, the lifejackets that are conveniently placed underneath the seats are intended to be used in the event of an emergency landing on water – but in the history of commercial aviation, a wide-body plane has never successfully executed a deep water landing. Whereas the most mundane and most ignored part of the safety speech, which is to keep the seatbelt buckled at all times, offers proven security in the event of a sudden burst of turbulence or an emergency landing.

Following the cataclysm of 2008, there were calls for new and better financial regulation. Almost three years later, a number of new regulations have indeed been introduced. The intent of these regulations is to provide investors and markets with a safety net to prevent another financial crisis. But before the industry starts reciting these new regulations by rote, it makes sense to review some of these new safety mechanisms, to determine if they are merely symbolic lifejackets, or infinitely more useful seatbelts.

Remuneration policies
Regulating the remuneration of investment bankers, asset managers, hedge funds and private equity firms is a cornerstone of the regulatory push in Europe. Regulators in both Brussels and London have pushed through new remuneration rules which are designed to reduce risky behaviour. There are three key parts of the new rules:
• At least half of variable compensation must be paid in shares or an equivalent instrument;
• A large portion of the variable compensation (40-60 percent) must be deferred for three to five years;
• There must be claw-back measures to reduce compensation, if there is under-performance in the future, built into compensation schemes.

The regulations were drafted in the wake of the collapse of Lehman Brothers. The logic behind the new regulations is to reduce short-term thinking and align compensation models with risk-management principles and overall firm success. These are all well-meaning goals – but will the policies actually achieve them?

The lesson from history is that the answer is ‘no.’ If we look at what actually happened at Lehman Brothers, these policies would have changed nothing. A majority of Lehman Brothers’ staff’s variable compensation was in the form of restricted stock. This stock was priced at the market price (as of the date of issue) and took several years to vest. By any objective measure, this remuneration policy seems to be a model for the new regulations. Yet, it did nothing to forestall the risk-taking and ultimate collapse of Lehman Brothers. In fact, restricted stock is a mainstay of US financial firms’ compensation models – but the financial crisis happened in spite of it.

The idea of regulating remuneration policies to encourage more prudent risk-taking and long-term thinking is an attractive concept. However, it is likely that such policies will have little actual impact.

Dodd-Frank act: skin in the game
A key element of the US Dodd-Frank Wall Street Reform and Consumer Protection Act is the so-called ‘skin in the game’ provision. In fact, the co-author of the bill, Representative Barney Frank, has called the provision the “single-most important part of this bill.”

The skin in the game provision requires mortgage securitisers to retain five percent of the risk they create when packaging mortgages for sale. This provision was drawn up in the wake of the mortgage-backed security issues that are credited with triggering the great recession. The logic behind the provision is that if institutions are forced to retain some of the risk with mortgages, they will take a more prudent approach to risk management. This, in turn, will reduce the chances of repeating the issues that caused the great recession.

The ideas of encouraging better risk management and prudent lending are laudable goals. However, this provision, while correctly diagnosing one of the causes of the financial crisis, does not resolve the root issue – namely, that the vast majority of industry participants did not view securitised mortgages as risky.

In fact, according to the credit rating agencies, a majority of these securities had AAA ratings. Up until the moment that the crisis truly took hold they were prime investment vehicles. When the true depth of the problem was revealed, most banks and investment funds were pricing mortgage-backed securities at par. Therefore, the skin in the game provision would not have mitigated any risky behaviour because, until it was too late, the investment in mortgage-backed securities was not viewed as risky.

Much like the remuneration regulations in the EU, the logic behind the skin in the game provision appears sound. Unfortunately, the provision does not address the fundamental issue, which was the basic miscomprehension of the riskiness of mortgage-backed securities. The truth is that many banks in the US that issued bad mortgages had large amounts of skin in the game, which may be the reason for the record numbers of bank failures in 2008-9.

Regulation by subtraction
We tend to think of regulation in the context of new rules. However, regulatory change can also come in the form of the removal of regulation. A good example of this is the Dodd-Frank Act’s repeal of Regulation Q, which came into effect on July 21, 2011. Regulation Q was a 1930s-era banking regulation that restricted the interest rate that banks could pay on deposits. There were two main justifications for Regulation Q. First, there was a desire to boost banks’ profits. Second, there was a belief that competition to pay high deposit rates would encourage banks to take too many risks.

However, by artificially holding interest rates below their natural levels, Regulation Q has had some major unintended consequences. First was the development of the Euromarket in London, where lenders and borrowers were free to set rates between themselves. Second was that small investors and corporations moved their savings out of banks and thrifts and into money market funds, which did not face a limit on the rates they could pay.

The intended benefits of repealing Regulation Q are twofold: to create new jobs and help grow small businesses, and to improve the ability of community banks to compete for deposits against larger institutions. A secondary consequence of the repeal is the removal of an artificial distortion in the market. This, in theory, will increase competition between the so-called real banking sector and the shadow banking sector. This competition should prove beneficial to the industry and, in the long run, reduce the systemic importance of money-market funds and the commercial paper market.

Given the history of Regulation Q, it is quite likely that, as happens with all regulation, there will be unintended consequences. There is also an argument that the rise of the shadow banking system was more demand-driven than a result of the restriction of Regulation Q. Ultimately, the repeal may have very little practical impact. However, it is an example of regulatory change that reconsiders regulation rather than adding multiple layers of new regulation.

Drafting successful regulation
Drafting financial regulation can be a thankless task. No matter what decision is taken, it is likely to displease a vocal aggrieved party. To further complicate matters, major changes in financial regulations tend to follow traumatic market events, when emotions are running high. This often leads to the drafting of measures which, though they seem to appeal to the electorate on the surface, do not offer any additional level of safety.

It is said that capital is like water and tends to flow around obstacles. With this view, perhaps the key to drafting successful regulation may be to take measures which are designed less like dams, and more like canals.

For more information –

Union National Bank: Banking services in the UAE

Union National Bank, UNB is a UAE-based public joint stock company, established in 1982. UNB is one of the leading domestic banks in the UAE, and is headquartered in Abu Dhabi. Fifty percent of UNB’s shareholdings are owned by the government of Abu Dhabi, 10 percent by the government of Dubai, and the remaining 40 percent of the shares are publicly held. The board of directors consists of prominent business figures, headed by H.H. Sheikh Nahayan Mabarak Al Nahayan, UAE Minister of Higher Education and Scientific Research.

UNB offers a multitude of banking and financial products and services to individual and corporate clients, through a network of 54 branches and six corporate banking centres, besides a variety of alternate delivery channels such as call centres, internet banking and ATMs spread across the UAE. Drawing upon a rich experience of serving customers for more than 29 years, UNB has developed a strong presence in the UAE across all sectors of the economy, providing a range of services designed to be of assistance in various commercial endeavours. UNB has the right mix of talent and expertise, as well as the track record to provide aspiring entrepreneurs and businessmen with credit facilities to establish and expand their business in the UAE, besides offering multiple ways and means of making sound and safe investments with assured returns.

Subsidiary services
Union Brokerage Company is a UNB subsidiary which provides brokerage services for clients at the Abu Dhabi Securities Exchange, Dubai Financial Market. It is one of the oldest brokerage firms in the UAE and a leading player in the region. Besides its head office at Khalidiya in Abu Dhabi, it has a well diversified branch network.

Al Wifaq Finance Company is another subsidiary of UNB which has been established with the purpose of offering Sharia-compliant financial products and services to both organisations and individuals in compliance with the rules and principles of Islamic Sharia law.

A third subsidiary, INJAZ Marketing Management, provides marketing management related services, including the planning, execution and marketing of products and services for UNB through a dedicated team of professional sales and marketing representatives.

As part of the bank’s vision to be “a key player in the region,” UNB has a strong presence in the Egyptian banking sector through UNB-Egypt, with 27 fully fledged branches across the country. The bank also has a presence in Qatar, China and Kuwait, and is reviewing other geographic locations with a view to establishing a presence, or forming strategic alliances, to add to shareholder value.

Facts and figures
UNB’s operating income for the nine month period ending September 30 2011 was AED 2.2bn ($599m) – an increase of 11.4 percent over the same period from the previous year (AED 1.9bn, or $517m). This was led by an increase in net interest income and net income from Islamic financing, which was up by 21 percent to AED 1.8bn from AED 1.5bn ($481m from $398m).

The increase in net interest income and net income from Islamic financing was achieved by an expansion in the net interest margin, increase in loans and advances and optimisation of liquidity levels. The non-interest income for the period decreased by 14.9 percent from AED 534m to AED 454m ($145m to $123m), principally due a decrease in net fee and commission income which declined from AED 421m to AED 364m ($115m to $99m). The drop in fee and commission income was mainly due to the implementation of UAE Central Bank regulations regarding lending and other services offered to individual customers, which became effective in May 2011.

The loans and advances of AED 55.7bn ($15.1bn) as of September 30 2011 was up by 2.5 percent year-on-year. Customer deposits of AED 52.5bn ($14.3bn) were marginally lower (by 0.7 percent) year-on-year. The advances to stable resources ratio, computed in accordance with UAE Central Bank regulations, continued to remain well within the regulatory requirements.

The ratio of non-performing loans to gross loans and advances at the end of Q3 was up slightly to 1.7 percent from 1.5 percent at the end of 2010 Q3; loan loss coverage was 139.2 percent, up from 127.9 percent. The general provisions as a percentage of credit risk-weighted assets were 0.99 percent, reflecting an increase of over 50 percent compared to that for the prior year end.

Ongoing investment in key resources led to a marginal (2.4 percent) increase in operating expenses to AED 534m ($145m) by the end of 2011Q3, from AED 521m (£142m) at the same point in 2010. The efficiency ratio (cost to income) was 24.0 percent, down from the previous year’s 26.1 percent.

For the same period the annualised return on average equity, excluding the Tier 1 capital notes, was 17.7 percent (17.3 percent on an annualised basis for the same period 2010), with the annualised return on average assets being 2.3 percent (up from 2.1 percent).

Earnings per share were up 19 percent to AED 0.50 from AED 0.42 ($0.136 from $0.114). The overall Basel II capital adequacy ratio computed in accordance with the Central Bank of the UAE guidelines was strong at 22.7 percent at the end of 2011Q3, up from 20.1 percent 2010Q3. The Tier 1 Basel II capital adequacy ratio was further boosted by 210 basis points to 17.3 percent as of 30 September 2011 (15.2 percent as of year end 2010) after the payout of the cash dividend (AED 227m; $62m) and the interest on Tier 1 capital notes (AED 120m; $33m).

UNB has consistent ratings from three key agencies: Moody’s A1 long term and P-1 short term; Fitch A+ long term and F1 short term; and Capital Intelligence A+ long term and A1 short term. Together these consider the bank to have a “stable outlook.”

Bond success
In its first new bond issuance since 2005, UNB in November 2011 priced a successful $400m five-year bond due November 2016 under its $3bn Euro Medium Term Note Programme; with Citigroup, Deutsche Bank, HSBC, National Bank of Abu Dhabi and Standard Chartered Bank acting as joint-lead managers and joint-book runners, and Commerzbank AG acting as co-lead manager. The transaction was priced at a coupon of 3.875 percent with a spread of +287.5 basis points over the US dollar five-year mid swaps.

UNB’s credit story appealed to a high-quality investor base resulting in a well-diversified order book across geographies and investor types. The geographical distribution of the issue was 62 percent in the Middle East, 27 percent in Europe and 11 percent in Asia. Banks subscribed to 69 percent of the issue while the remaining distribution by investor type was private banks (15 percent), fund managers (14 percent) and insurance companies (two percent).

UNB successfully completed a well-received transaction amid turbulent market conditions, demonstrating the strength of its credit. The transaction achieved competitive pricing and delivered UNB’s primary aim of diversifying and lengthening the average maturity of its funding sources.

Corporate lawyers the new ‘quarterbacks’ of deal making, says WHD Partner

Engaging in business transactions in today’s rapidly evolving global marketplace demands superior ingenuity and attention to detail. Technology, new trade pressures, economic uncertainties, and cumbersome regulatory regimes (to name a few) have transformed the way large corporations approach transactions. This has, in turn, caused astute corporate lawyers to rethink their approach to corporate and M&A transactions. To better understand some of these changes and how they are impacting deal-making throughout the world, we asked the distinguished M&A lawyer, Richard W Silverthorn, to discuss his view of the deal world and his philosophy for approaching transactions. Silverthorn is a corporate and M&A specialist at the 68-year-old law firm of Whyte Hirschboeck Dudek S.C. (WHD), which is headquartered in Milwaukee, Wisconsin, US.

According to Silverthorn, “Now, more than ever before, the role of a corporate lawyer is similar to that of a quarterback in a game of American football. He is responsible for coordinating the entire transaction from inception to closing. He is also the primary person in charge of liaising directly with clients to assess their desires and objectives, and negotiate the transaction with these objectives in mind.”

With the increasingly complex issues that arise in today’s M&A transactions, the lead corporate lawyer in any transaction needs to be comfortable managing the many players involved in the deal. “It is not uncommon for a large M&A transaction to involve several area-specific experts, such as tax, employee benefits, labour/employment, antitrust, regulatory and environmental lawyers, as well as financial and insurance advisors,” says Silverthorn. “If the lead corporate lawyer mismanages any of these relationships, or fails to involve the appropriate legal specialists, the outcome of the transaction could suffer, and that is simply unacceptable.”

For this reason, he believes that clients should not look for a lawyer who simply “knows the law,” but instead find a lawyer who has also mastered the art of coordinating a transaction from start to finish.

Silverthorn knows a thing or two about M&A deals. For the past two decades he has represented several national and international companies in sophisticated corporate and M&A transactions, both domestically and internationally. Throughout this process, he has seen his practice evolve to match the demands of the marketplace and the needs of his clients. As Silverthorn explains, each transaction is different, and requires corporate practitioners to analyse the circumstances surrounding each deal before recommending the best way to proceed.

“Identifying up-front the issues inherent in a given transaction and the risks associated with those issues can be quite intricate, and requires continual monitoring of the legal landscape,” he says. “Certain issues are present in all transactions, but other issues arise on a case-by-case basis; and can be the result of a unique set of circumstances of a particular deal, or the result of new laws, new regulatory developments, environmental circumstances, or antitrust concerns. Being able to identify and effectively respond to these issues is what separates a good deal lawyer from a great one.”

Strategic considerations in M&A
The corporate lawyer is often the first point of contact for clients. Silverthorn believes it is that initial contact that helps congregate the various facets of a particular transaction. A good lawyer will be able to recognise the difference between a strategic and a financial buyer at the outset of a transaction, and plan accordingly. Silverthorn notes: “Understanding whether the transaction is being approached for long-term value creation as part of an overall strategic plan or for short-term financial gain will help a lawyer serve his client’s needs more effectively.”

It is the job of a transactional solicitor to craft and implement strategies to address fundamental tactical considerations, because “anticipating these issues and planning ahead is critical to a successful M&A transaction, and that’s why clients need experienced legal representation,” he says.

At the outset, the parties involved must weigh the advantages and disadvantages of the different possible structures of the transaction, as this decision will have an effect on several issues, including the assumption of liabilities, the tax consequences to the parties, and the requisite corporate, third party, and governmental consents and approvals necessary to consummate the transaction.

Also high on the list of priorities, according to Silverthorn, is performing a thorough due diligence review that will identify potential transaction risks, and help minimise or eliminate post-closing surprises. “Identifying the potential risks of a transaction is a critical function of the due diligence process, and the outcome of the negotiations over the allocation of these risks between the parties needs to be reflected in the definitive purchase agreement,” Silverthorn says.

Analysing the macro and micro elements of a transaction
Silverthorn truly knows how to structure and negotiate successful corporate transactions, and it is this awareness that wins him commendations from peers and clients alike. According to one, he “has an impressive command of corporate legal issues, and is a master of negotiation strategy.” Clients have also noted that “his pleasant demeanour is well-suited to conducting complex and long-winded contract negotiations.”

The WHD lawyer knows that clients do not just want to hear about laws and regulations: “What they need is a combination of highly technical yet practical legal counsel that fits the transaction at hand,” he says. “An in-depth understanding of the transaction is essential to ensure that the big picture, as well as the smaller details, are thought through and addressed properly.”

The distinguished Milwaukee-based lawyer has received accolades from clients who judge him to be “organised, determined and meticulous” in his approach to handling high-profile corporate and M&A transactions. Silverthorn knows today’s fast-moving economic climate well. He explains that many lawyers know and understand the law, but not all lawyers will look at an issue from all angles in order to deal with both the macro and the micro aspects of a business transaction. “The macro view revolves around the manner in which the transaction is structured, the overall allocation of risks and responsibilities between the parties, and the approach to significant regulatory hurdles.

The micro element, on the other hand, is the comprehensive analysis of deal-specific issues and how these issues are reflected in the definitive purchase agreement.”

Silverthorn is of the opinion that a comprehensive analysis is of extreme significance to a successful transaction, especially since the laws and regulations relating to M&A transactions are becoming increasingly complex. “There are more regulations than ever before, and the need for good corporate lawyers has never been greater.”

Hassan Radhi & Associates on the Bahraini legal sector

Hassan Radhi & Associates has carefully cultivated its reputation over a long period of time, progressing organically without the whistling of bells. Quick-fix solutions and bombastic marketing campaigns are certainly not this Bahrain-based firm’s preferred route to success; rather, it has armed itself with deeply rooted expertise and a high level of professionalism – a strategy that has attracted a respectable roster of clients including  Bahrain Mumtalakat Holding Company, Arab Insurance Group, BNP Paribas and Standard Chartered Bank.

The key figure of the firm is founding partner Hassan Ali Radhi, an esteemed attorney and lawyer with 37 years experience. Since establishing Hassan Radhi & Associates in 1974, he has represented a varied line-up of domestic and international clients across the spheres of banking, finance, telecommunication and construction. Aside from his commitments directly related to the firm that he heads, Radhi also sits on several boards, and is a member of many different bodies. Not only is he an ex-resident associate of the former Coudert Brothers, New York, he is also a member of organisations such as the Institute of World Business of Paris-based International Chamber of Commerce, and had sat on the Board of Trustees of the Bahrain Chamber for Dispute Resolution.

Highly specialised, Radhi chiefly deals with cases of commercial litigation and arbitration, and he serves as co-arbitrator, sole arbitrator as well as chairman of arbitral tribunal. Considered something of a big fish in the industry, he is a member of the LCIA Court in the London Court of Commercial Arbitration, and is also actively involved in a number of related bodies, both on his home turf and abroad. Since the head of the firm is so well-versed in arbitration, it is perhaps not surprising that the firm is often the first choice among clients looking for legal assistance in matters related to arbitration.

The arbitration expertise is not the firm’s only strong point – a pronounced talent for language is another of its strengths. The resident team of 17 lawyers covers several languages between them, including English, Arabic, French, Hindi and Bangla – an advantage that has seen the firm grow particularly popular among international clients.

A cut above
Although Hassan Radhi & Associates is indeed one of the most established firms operating in Bahrain, it is not entirely free of rivals. Other key players in the region include the international names Norton Rose, Baker & McKenzie and Trower Hamlins. What measure has the firm taken to heighten its appeal and beat the competition? “Hassan Radhi & Associates is a Bahraini law firm specialising, among others, in the field of  finance and banking, and we have honed our expertise over a substantial stretch of time,” says Radhi. “I believe that our success can be attributed to the fact that we always maintained a professional approach. We strive to provide quality and professional service according to Bahraini laws and court precedents, rather than trying to attract clients via business strategies and elaborate marketing campaigns.”

The quality of which the legal expert speaks is evident not only in the firm’s ability to carefully prepare and complete cases, but it also owes to the firm’s focus on training. “We recognise the importance of staff training, and we consider it imperative that our employees are highly qualified in their respective professional fields, which allows us to provide clients with the highest level of expertise and accuracy,” Radhi says. “It’s a costly approach, but we believe it’s the only way to be able to provide a highly specialised service to our clients and to render a sound legal opinion.”

As a result of the carefully applied training schemes, the firm’s lawyers offer consultation services on every facet of the law of Bahrain – and do so with complete confidence. Local expertise is another important factor at Hassan Radhi & Associates, and the firm would never attempt to diversify into unknown territories only to gain more clients.

Future prospects
Running a law firm focusing on finance and banking in Bahrain makes perfect sense, since the destination serves as the main financial centre in the Gulf Region. Hassan Radhi & Associates was one of the first firms to provide legal services specially catering to clients operating within the local banking sector, and just like the firm itself, Bahrain is well established. “While Bahrain’s roots as a financial hub are firmly established, the advance of Dubai and Qatar has been more instantaneous,” says Radhi. “Still going strong, Bahrain will continue to progress with confidence and astuteness and it will remain the most developed financial centre while at the same time move with the times. Today the market is open and flexible, and foreign investors are increasingly enjoying the privilege of doing business in the tax haven of Bahrain without restrictions.”

Recently, a trade agreement between the US and Bahrain was implemented, a development that reflects the newfound status of the country as a global player. The agreement has also cemented a high level of trust between the US and Bahrain. In terms of the country’s advance as a modern state, the democratic principles and the rule of law have been improved greatly in the past few years, resulting in comprehensive laws being introduced across areas such as banking and commercial activities.

Vision 2030 is another initiative forming part of Bahrain’s commitment to increase the Kingdom’s competitiveness as the financial hub of the Gulf.  “Vision 2030 is an initiative masterminded by Bahrain’s Crown Prince, and he remains the main player within the development of the initiative, personally handling the file,” says Radhi. “He is certainly competent enough to do so, as he is highly skilled and trained and educated in the US. We are very optimistic and confident that the vision will be achieved.”

The cross-section of positive change that has taken place in Bahrain lately has benefited Hassan Radhi & Associates greatly. The firm will no doubt continue to make its mark as a trusted legal force in Bahrain and beyond.

IGM Financial believes in good corporate governance

IGM Financial is one of Canada’s premier financial services companies, and one of the country’s largest managers and distributors of mutual funds and other managed asset products. It trades on the Toronto Stock Exchange (TSX: IGM) and has a market capitalisation of approximately €8bn as at October 31 2011. As such, it is the fourth-largest publicly traded asset manager in the world. Its majority shareholder is Power Financial Corporation.

IGM Financial builds its business through a strategic focus on multiple distribution opportunities delivering high-quality advice, innovative investment and service solutions for investors. Strong relationships are at the core of the company’s philosophy. At a time when Canadians are weathering market uncertainty, these relationships, combined with the company’s commitment to providing quality investment advice and financial products, have placed it in a position of leadership and strength in the financial services industry. The company had more than €85bn in total assets under management at October 31, 2011.

Investors Group Inc. and Mackenzie Financial Corporation, the company’s principal businesses, each operate distinctly, with their own leadership, products and brands.

In 1926, Investors Syndicate, a forerunner to Investors Group, opened its first office in Vancouver and began pioneering the concept of financial planning in Canada. The company’s product and service offerings now include a full range of planning options including investment management, securities, insurance, and other financial services, which are offered through a network of approximately 4,600 consultants to nearly one million Canadians.

Mackenzie Financial got its start in 1967 as a private investment advisory firm. The strength of Mackenzie’s retail distribution network is built on its long-standing relationships with financial advisors and representatives, as well as its partnerships with retail brokers, insurance agents, banks, and financial institutions. Its products are offered through approximately 30,000 third-party advisors to millions of clients.

Investing in communities
Investors Group is committed to supporting the communities in which its employees, advisors, and clients live and work. In 2010, contributions totalled more than $6.3m, with over 2,500 donations going to more than 1,400 organisations.

Mackenzie’s community investment focuses primarily on small social service organisations across Canada, particularly those with a focus on families and children at risk, and financial literacy. The Mackenzie Financial Charitable Foundation, which provides grants to 30 charities, provides a vehicle for employees to become active donors and volunteers.

Corporate governance
The company believes in the importance of good corporate governance. It is the company’s view that a financially strong, long-term oriented controlling shareholder can have a significant positive impact on a company’s long-term returns. The benefits include the ability to support management in the pursuit of long-term strategies and the provision of directors who are experienced and knowledgeable about the company’s business. In the case of IGM, these attributes are provided through a governance model developed over many years, which includes a group of directors who are also officers of the controlling shareholder.

Effective structures and procedures exist to ensure the board’s independence from management and to ensure that conflicts of interest between the company and its related parties, including Power Financial, are dealt with appropriately. Conflicts of interest are resolved through the Related Party and Conduct Review Committee, comprised of directors who are independent of the controlling shareholder. The committee approves only those transactions that it deems appropriate, and most committees of the board are composed entirely of directors who are independent of management.

Reflecting its commitment to good governance, IGM has adopted an extensive written code of conduct that governs its directors, officers and employees. This code of conduct covers all applicable policies and is reviewed annually with all individuals to whom it applies.

The board believes that the company’s governance system is effective and is appropriate to its circumstances. IGM’s governance practices consider the long-term returns to the company’s shareholders and its responsibilities to its clients – important indicators of the effectiveness of a governance system.

Pistiolis – Triantafyllos & Associates: New legislation will provide an incentive for FDI

Pistiolis-Triantafyllos & Associates law firm has one of the most dynamic and business-oriented corporate employment and labour law practices in Greece. We represent national and international corporations, and we make it our business to keep up with the ever-changing complexities of employment law, so corporations can focus on running their business.

Employment law is one of the most rapidly changing areas of our legal system. Against a backdrop of new legislation, regulations and reported cases, maintaining best practice is a real challenge.

Our firm’s goal is to provide immediate and pragmatic advice, regardless of where the issues arise; adopt a cost-effective approach aimed at helping our clients achieve results; and create the right framework for good employee relationships. We work side-by-side with corporations and business executives to implement the necessary methodology in respect to reducing labour costs and establishing efficient employment relationships.
We focus on understanding market needs; relating to large-scale restructurings, mergers and acquisitions, redundancies, business transfers and collective disputes; and the establishment of employee benefits and incentives.

Now more than ever corporations in Greece possess the tools and the know-how to reduce the labour cost. Day-by-day we regain the trust of both markets and investors.

An uncompetitive environment
Employment law in Greece is probably the most regulated employment framework – in terms of legislation – in the world. The legislative restrictions, in the creation, function and termination of the employment relationship led to a very cumbersome and therefore often problematic relationship.

This complex regulation was founded upon the idea that the employer-employee relationship is unequal. However this can only partially justify the multiplicity of regulations, which posed serious problems and large economic costs in doing business in Greece.

As a result, Greece had (until recent legislative developments) a key competitive disadvantage, which beyond anything else created an unattractive investment environment. It was widely accepted that services and products in Greece were expensive. The above fact, combined with the lack of innovation, turned away any possible investors.

The restrictions on the number of redundancies, the increased trade union freedoms and the high wages of employees are just some of the Greek peculiarities which caused intense scepticism in both domestic and foreign investors.

Thus the last few years’ corporations and their representatives required radical changes in employment law from the Greek government in order for Greece to attract investment and productive orientation.

Employment law previously
Beyond the national safety net which determines the minimum salary rates, in our country the minimum salary levels in each industry sector are being set beyond the level of agreement between employer and employee, and more often they are determined by industry trade and employers’ organisations – so these limits have been increased unnecessarily.

In addition, Greek legislation covers provisions for employment at weekends, off premises, in case of overtime, and more. Therefore, besides their legal or contractual salary, employees are entitled to an incremental increase if they provide labour in these circumstances.

The condition of four lay-offs each month for companies employing up to 200 employees and up to two percent for companies employing more than 200 was considered very restrictive by market experts.

Employment law today
Nevertheless, the recent labour legislation developments constitute a unique opportunity to change what was – until recently – an insufficient environment.

Throughout this year the legal framework has changed rapidly in order to meet the national and international investing requirements. The employment relationship has become more flexible and less cost-effective.

The so called Exceptional Company Collective Agreement, a contract between the management of the company and the company’s labour union, is a recent introduction to our legal system. In such an agreement the contractual parties could consent on salaries lower than those regulated by any sectoral collective agreements, but not less than the National General Labour Collective Agreement. Recently under consideration is the possibility for even lower salaries. It could be considered as a useful tool to decrease the labour cost.

In addition to this, and according to the terms of the new legislation, the right of the employer to conclude a single agreement or accumulatively successive fixed-term agreements (maximum three), has been increased from two to three years.

Moreover, Greek legislation allows a probationary employment period of 12 months for indefinite employment-term contracts, instead of the two months that was previously allowed. Within that period, a company is entitled to dismiss the employee without a compensation payment.

Furthermore, in case of collective dismissals, the total number of dismissed employees per month has been increased to six employees for companies employing 20 to 50 persons and up to five percent of the total number of employees and up to 30 employees for companies employing more than 150 people.

Finally, an employment agreement of an indefinite term can be terminated at any time without notice. In this instance the law provides the standard severance payment based on the years of service within the company (1-24 salaries).

However the severance payment could be half of the above in case of prior notice. Prior notice period is also based on the years of service within the company. Under the new legislation the prior notice period has been decreased to the maximum of six months instead of the maximum of 24 months.

Currently we face a rather hostile economic environment and the legal professionals specialising in employment law must provide effective solutions to ensure the viability or profitability of the investment. Now more than ever we possess the tools and the know-how for such a task. Day-by-day we regain the trust of both markets and investors. It has been a good start so far, but we still have a long way ahead.

Tsesnabank: ‘flexible’ mid-size banks key to growth

The economic challenges of the past decade have been especially difficult for emerging markets. This has been particularly true of the former Soviet republics, which did not have sufficient time to reach a critical economic mass that would have allowed them to fully capitalise on their huge economic potential.

The challenges these nations have faced have been mirrored in the varying fortunes of the banks that operate in the region. Many of the banks have faced difficulties, while some have been astute and prudent enough to have made the most of the conditions, and worked them to their advantage.

A fine example of this is Tsesnabank, a country-wide universal bank with a 20-year history offering a variety of banking services and products to clients spanning corporate, SME and retail. The bank was registered with the National Bank of Kazakhstan in 1992, and is headquartered in the capital city Astana.

A strong financial position
In 2010 Tsesnabank won more customer deposits than any other bank in the top 15 banks in Kazakhstan. “We became number one by customer deposit growth among the largest banks for last year, and I believe we have the potential to remain one of the most trusted banks in Kazakhstan going forward,” says Dauren Zhaksybek, the bank’s CEO.

Tsesnabank is the eighth largest bank in Kazakhstan by assets, up from fourteenth largest two years ago.

Overall, Tsesnabank is an important example of how mid-size banks in Kazakhstan recovered more rapidly from the banking crisis than larger banks, and were also able to become more potent drivers of growth, due to their greater flexibility and adaptability to new market conditions.

The bank’s growth achievements are all the more remarkable, given that Kazakhstan was one of the first emerging markets to be severely hit by the banking crisis.

So how was the bank able to recover so well? The main reason was that Tsesnabank has historically relied on domestic deposits, and had a comparatively low exposure to industries – such as construction and real estate – that proved to be toxic in financial terms over the past few years.

This focus on domestic deposits was no accident, but rather a deliberate business strategy pursued by the bank’s management board – a strategy which has been fully vindicated.

Tsesnabank was also among the first domestic banks in Kazakhstan to deploy a vigorous and effective technique for coping with a growing volume of non-performing loans.

Back in 2008, the bank established a large loan-loss provision. It is typical of Tsesnabank that it showed great foresight and swift action in dealing with this problem. This typifies the bank’s approach to business: spotting problems as soon as they occur and implementing prompt and vigorous solutions.

Because of its overall strategy, Tsesnabank has – throughout the banking crisis – been able to maintain full and on-time repayment of all its wholesale international borrowings, including its debut Eurobond and two syndicated loans.

The result? Today, only one percent of Tsesnabank’s total liabilities are with foreign financial institutions.

Growing market share
Tsesnabank’s ability to maintain a healthy balance sheet and strong overall financial position during a time of great crisis has helped it to win and retain high-quality customers from other banks. “We were not only able to repay all large wholesale foreign debts, but also to gain a market share by attracting viable corporate customers from our competitors,” Zhaksybek says.

These high-quality customers tend to be financially strong corporate clients that proved able to survive the economic crisis which claimed so many other organisations. Their survival is due to a number of important factors: they have robust business models, relatively low levels of leverage, exciting and readily realisable cross-sell opportunities, a good track record and an excellent credit history in terms of their exposure to top Kazakh banks.

Reflecting its success in attracting new clients, Tsesnabank has recorded growth of net income over recent quarters. As a result, in June 2011 the bank’s credit rating was upgraded by Standard & Poor’s to B on above-average resilience to the crisis.

Another recognition of the bank’s sucessful business efforts is the recent assignment of the Principal Member status by Visa International, the global payments company. This status is assigned exclusively to banks meeting stringent financial and technical conditions, and it entitles Tsesnabank to directly cooperate with Visa, expand its product range and provide new services to cardholders using a flexible tariff policy. With the Visa Principal Membership, Tsesnabank will compete with the largest Kazakh banks on equal terms.

Future plans
Although the bank has enjoyed several quarters of rapid growth by attracting these new high-quality corporate customers – a trend that is in fact continuing – the bank’s management board understands that this expansion can’t last forever.

Accordingly, Tsesnabank does not intend to focus on lending to major corporates alone. These clients will of course remain an important part of the bank’s clientele, but it plans to base more of its future growth on cross-selling its retail products and services to corporate clients, many of which have been derived from the expansion of its corporate loan portfolio. Tsesnabank has also noticed that this strategy has helped it gain access to good retail clientele through its corporate clients.

The bank’s other plans for the future include being more active in lending to SMEs and retail customers, most of whom are recovering gradually from the crisis.

This new approach will naturally lead to the bank further diversifying its loan portfolio

Tsesnabank is keenly aware of the need to perfect a continuous programme of improvements in the quality of the service it offers. The bank has recently implemented a SAP enterprise resource planning system, and has won an important award for rapid implementation of the project in the CIS and a SAP special award for quality. The bank has also had the distinction of launching what is widely regarded as Kazakhstan’s most modern call centre.

The bank is also implementing advanced rating models and scoring systems in its credit risk management department, with the help of PricewaterhouseCoopers. It is complementing this by applying powerful new solutions for credit risk management, supplied by leading vendor SAS. The bank has several other ongoing prjects that will enhance its competitive profile.

Tsesnabank has historically been strong in central and northern Kazakhstan, and plans to replicate the key contributors to this success across the rest of the country. It is also targeting Almaty – the nation’s largest city – and the other key cities in the west of the country. The bank sees huge potential in these areas.

After two successful years, in which it doubled its market shares in assets, loans and deposits, Tsesnabank believes it can make the most of all the potential it sees for growth.


January 1992 
Registered with the National Bank of Kazakhstan

October 2003 
Recognised by the European Bank for Reconstruction and Development for the high quality of its loan portfolio

May 2004 
Joins Visa International payment system as associate member

May 2007 
Wins Euromoney’s Best Managed Banks in Central and Eastern Europe and Central Asia 2007 award

June 2009 
- Establishes own card-processing centre

February 2010 
Repays in full its matured $125m Eurobond

July 2010 
Wins the STP Award 2009 given by Commerzbank and the 2009/2010 Quality Recognition Award by Citigroup Global Transaction Services

June 2011 
Becomes the first non-state-owned Kazakh bank over the past few years to be upgraded by Standard & Poor’s (from B- to B) on above-average resilience to the crisis

October 2011
Upgraded by Visa International to Principal Member

Expert legal advice in the UAE from Hadef & Partners

Hadef & Partners is a full-service business law firm, founded in 1980 by Dr Hadef Al Dhahiri, the current UAE Minister of Justice. It is among the oldest and largest law firms in the UAE, with offices in Abu Dhabi and Dubai.

The firm’s 75 lawyers are predominantly educated – and have practice experience – in the UK, the US, Canada, Australia, New Zealand and South Africa, as well as a range of Middle Eastern jurisdictions. The large team of advocates has rights of audience in all levels of UAE courts and tribunals, and members speak English, Arabic and most other leading business languages. It is this unique combination of local depth supported by a team of highly qualified, experienced and diverse lawyers that makes Hadef one of the UAE’s most trusted advisors, and a firm of choice.

Transparency and integrity
Working with commercial and governmental entities that are shaping the future of the Middle East requires a consistently sensitive and rigorous approach to legal service.

The Hadef & Partners practice is committed to transparency and the highest standards of professionalism, says Dr Faraj Ahnish, the firm’s managing partner. “Lasting relationships and a tradition of adherence to high principles are the foundations on which our firm was built,” he says. “We believe that the keys to successful outcomes are delivering the highest quality of work, building close relationships, being accessible, being commercially aware, and staying on top of market developments.”

Recognising the tougher legal, commercial and technical challenges that clients face, the Hadef team applies its strong legal and commercial acumen to assist clients in making sound decisions about their business objectives as they navigate through the UAE’s currently evolving regulatory regime.

The aim is to deliver the desired results. In the event an appropriate outcome cannot be achieved, the firm’s advocates can draw on strong dispute resolution support – vital in today’s business environment.

Helping the law evolve
Hadef & Partners’ work with the UAE federal government is of particular note: Hadef has been involved in the reviewing, analysing and drafting of major federal and local emirate-level legislation directly impacting the UAE’s commercial sector. As a premiere business law firm, Hadef also advises on a wide range of legal matters, including: corporate, commercial, maritime, aviation, dispute resolution, employment, banking and finance, oil and gas, energy, real estate and construction, M&A and private equity, as well as many others. Hadef has advised some of the UAE’s most prominent commercial entities as well as an impressive roster of Fortune 500 companies operating in the UAE.

“The legal landscape in the UAE continues to evolve, and we are experiencing a growing demand for our specialised legal service and depth of knowledge of local law and practice,” says Dr Ahnish.

“A large part of what we do is helping our clients navigate the laws and regulations of the UAE. We are regularly engaged by government authorities to advise on and prepare important legislation that helps shape the legal landscape of the UAE,” he says, “the relationships that we have developed over many years with UAE federal and local governments are much admired.”

For more information –
+971 2627 6622 (Abu Dhabi);
+9714 4429 2999 (Dubai);

JustCommodity: Software solutions for commodity trading and risk management

If you work in a firm that deals with the international trade of commodities and you have not yet heard of commodity trading and risk management (CTRM) systems, it’s about time you did.

Perhaps a decade or so ago, the use of IT in managing trading and risk exposures by commodity trading houses was limited to email and spreadsheets. Contracts were recorded by hand in trade journals, and shipments were managed through cumbersome contract files filled with trade documentation.

It was around this time that JustCommodity Software Solutions was established to comprehensively address the needs of commodity trading houses. The Singapore-based technology company developed a proprietary software solution originally intended for the edible oils market. The company’s current portfolio of customers reflects these origins – around 80 percent are involved in edible oil trading in Asia – but it has diversified and supports companies operating in many other commodities.

The company has seen stellar growth since 2008, achieving a compounded annual growth rate of 131.63 percent, as verified by the information and credit bureau DP Information Group. As the company grew, its product evolved into a flexible and user-friendly system which is able to support the trading of multiple commodities across various commodity exchanges.

Just like a living organism, the collective wisdom of more than 10 years of software development in consultation with industry leaders has allowed the best trade practices to be incorporated into the system.

Traditionally, the use of advanced software to manage trades has been the domain of large trading companies, which have the spending power and need to purchase such systems in order to manage their risk exposures – particularly in the energy market. Since the commodities boom in the last decade up to 2010, as emerging markets began demanding more raw materials, the rise in prices highlighted the need to better manage risk exposures.

Market size and demand
A market-sizing study, conducted by industry research firm CommodityPoint, estimates the total addressable market for CTRM software globally in 2011 is $452m, and that some $321m may be spent on the procurement of commercially available CTRM software this year. This represents robust overall growth (of 11 percent) over its estimate of $290m spent in 2010 on the procurement of commercially available CTRM software.

There is a technology gap between regions, with the Asian soft commodity sector – which is comprised mostly of family-run businesses – notably behind. However, a contributing factor to growth in the region is that control of business is being handed down to the younger, more technology-savvy generation of businesspeople. Other factors that dampened the demand in Asia include the relative strength of the US dollar (and the euro) to most Asian currencies – most proposals are quoted in either US dollars or euros – and the relatively stable commodity prices of yesteryear.

Also, as the commodities sector becomes more and more lucrative, there has been a growing trend for corporate institutions to diversify into commodity markets by buying up plantation space. As investors, these corporations will search for a measure of control, protection and visibility for their investments. Korean conglomerates like LG and Samsung Group, for example, have reportedly purchased palm oil plantations in Indonesia and Africa to support biofuel production.

Advancing in technology
As a web-based application, JustCommodity’s ContraXcentral is ideal for monitoring trade positions anywhere around the world. The system provides a secure, password-protected login which can be accessed through a VPN connection, providing decision-makers with access to live, up-to-date information at any time.

JustCommodity has a tradition of innovation and excellence. It incorporated a direct electronic reporting mechanism for its Malaysian clients to the Malaysian Palm Oil Board, the government body that collates economic statistics and deals with the overall regulation of the Malaysian palm oil industry. The benefit from this single reporting enhancement was immediately evident, as the time needed to produce this report was reduced from two onerous days to mere seconds.

While most CTRM systems offer some general ledger and accounting capabilities, the accounting function is typically handled by an accounting system through integration between the software suites. The understanding is that traditional enterprise resource planning (ERP) solutions are not intrinsically built to handle the nuances and complications of managing a large volume of physical and futures trades. Both specialised systems working in harmony ensures the best results: there is no sense in reinventing the wheel. What the finance users of a company can expect is the accuracy of data being communicated between systems, as well as the easily tracked audit trail recorded by the CTRM system.

This is where the software specialisation and expertise of CTRM vendors fits in to the organisation’s technology landscape. The various operational processes, trade documentation, reporting structures and security levels can gradually be developed by an ERP vendor. However, without the domain knowledge of trading and risk management, this is akin to constructing a house of cards. While handcuffed. In the dark. The man-hours and financial costs involved in documenting and building such customisations to a traditional ERP system are herculean.

Engaging external consultants, who may have the technical know-how to work on these projects, comes at a high price. Some companies that have embarked on internal CTRM projects have been in development for more than 48 months without a usable product in sight. Internally developed software suites, which JustCommodity consultants have seen and consistently replaced, are often lacking in features or flexibility which are easily met by its standard software package.

JustCommodity has worked closely with its clients, consulting on business process improvement, technology infrastructure and system integration. Just as each business faces its own unique set of challenges and customer requirements are constantly evolving, the software specialist provides a flexible platform that is scalable and grows with the needs of its users. After all, in the complex world of commodity trading, technology should be there to make commodity trading simple.

Kieran Bhogilal Shah: Supporting Seychelles business investment

The Seychelles consists of 115 islands in the Indian Ocean, hosting a population of about 88,000. Being an archipelago, the country is small on land-mass – but it controls a significant area of exclusive economic zone in the sea, which the government is hoping will prove a new source of wealth for the country.

Traditionally this natural resource meant the fishing industry contributed significantly to the Seychelles economy, but after promising exploration of the seabed, the government has starting issuing licences to search for petroleum and minerals.

In addition to fishing, the Seychelles economy has typically been driven by tourism. But over recent years the country has renewed its commitment to financial services, and has enjoyed significant growth in foreign direct investment inflows (see above). Seychelles has opened its doors, abolished foreign exchange control, and its currency is freely convertible.

Seychelles has a mixed legal jurisdiction based on French and English laws. Its civil law is mainly of French origin, and its penal and commercial laws are of English origin – a legacy of the country’s colonial history.

After gaining independence in 1976, the government embarked on a number of social projects to raise living standards. Today the state offers free education and health services, as well as pensions. International communications are good, and will improve in 2012 with the laying of a high-speed underwater cable linking Seychelles to Africa and Europe.

Independence also set the stage for the government to introduce legislation for financial services, and to create a climate to attract foreign direct investment. The Seychelles International Business Authority was established in 1994 to set up and regulate offshore business, and a number of laws were passed in subsequent years to enable the sector (see boxout).

Setting international standards
The Seychelles government is working to expand its network of double taxation treaties. Currently 13 treaties are in force, including one with key financial hub Cyprus, and several more have been signed but not enacted. In addition to the completed agreements, the country has approached or negotiated with another 40 countries.

Conscious of its international obligations, Seychelles has maintained a good reputation and is on the OECD’s tax cooperation ‘white list.’ There is also a continuous revision of the country’s laws to meet international norms. Seychelles plans to join the World Trade Organisation, and the agreement for accession is at an advanced stage. It is already a member of the Indian Ocean Rim and the Commission de l’Ocean Indien.

Recent recipients of foreign direct investment in Seychelles that my Law Chambers has represented include:
• Chelle Medical: Manufacturers of world-standard laryngeal masks used in operating theatres, invented in Seychelles;
• The Eden Island Marina: Reputed to be the best marina in the Indian Ocean, where investors can own luxury accommodation and moor their yachts;
• The BMI Offshore Bank: The first fully-fledged offshore bank in the Seychelles;
• Planned Fund Management: The first mutual fund licensed in the Seychelles;
• Leading hotel brands, including Berjaya, Starwood and Hilton;
• Lending institutions which have financed many Seychelles development projects.

For more information – Law Chambers of Kieran Bhogilal Shah, Tel: +248 461 1608;

Gruma to continue ‘acquisition’ growth model

Growing wild in Mexico’s Central Balsas River Valley is the biological ancestor of what has become one of the most important feed grains in the world. Anthropologists believe that Balsas Teosinte, a large wild grass, was first domesticated nearly 10,000 years ago; and the ground seeds, known as maize or corn, became an essential dietary ingredient for local people.

Due to its nutritional value – maize is rich in vitamins A, C and E, carbohydrates, essential minerals, dietary fibre and calories – cultivation and use of the grain spread rapidly through the indigenous cultures of Central, South and North America. In around 1500 CE it was first introduced to Africa, where it has become one of that continent’s dominant food crops, and its movement to Europe has been tracked through several routes during the 16th and 17th centuries. Today, in addition to being used for livestock feed and the production of both edible and industrial oil products, maize is an important staple food for well over one billion people globally.

Having introduced the world to this important foodstuff, Mexico is also home to the leading company in the production, marketing, distribution and sale of corn flour and tortillas (flatbread) globally. Gruma, based in Monterrey, Mexico, is also an important player in wheat flour and baked products such as wraps, pita bread, naan, chapatti, pizza bases and chips, among others. It has 98 production facilities and is present in 105 countries in the Americas, Europe, Asia and Oceania, under the global Mission and Maseca brands.

The maize challenge
Although maize contains many important dietary requirements, it is deficient in free niacin and some essential amino acids. A diet based almost exclusively on maize, as is often found among poor populations throughout the world, can lead to deficiency diseases such as pellagra (vitamin B3 deficiency) or kwashiorkor (insufficient protein, particularly in children), both of which can be fatal.

We may never know how they understood this problem or found a solution, but there is evidence that ancient peoples in Mesoamerica used a process called nixtamalisation to overcome the dietary deficiencies in maize as early as 1200-1500 BCE. The process involves cooking and soaking the whole grain in an alkaline solution before further preparation as fresh or dried meal. The chemical changes that take place during this process render the niacin content of the grain bio-available, improve the balance of amino acids, and increase the amount of calcium, iron, copper and zinc available.

Nixtamalisation also significantly reduces the possibility of the grain being infected with deadly mycotoxins.

The nixtamalisation process spread through the indigenous cultures of the Americas along with the cultivation of maize, although it did not accompany the grain to Europe and Africa, where several outbreaks of pellagra and kwashiorkor have been experienced. In Mexico, every household would process its daily grain using this method before pounding it to make flour or dough, even though the work was both labour- and energy-intensive.

This was still the case in the early 1940s, the beginning of Mexico’s economic miracle, when Roberto González Barrera discovered a rustic machine for grinding dry-cooked corn to be made into tortillas. “I was on a business trip to Reynosa, Tamaulipas when I saw this machine,” he recalls. “I looked at it for quite some time, and realised that it would be a hit product. This was an industry that wasn’t developed in Mexico, and it badly needed to be modernised.” González Barrera founded his company, Molinos Azteca, S.A. de C.V. (later Grupo Maseca, then Gruma) in 1949 when he built the world’s first industrial production facility for corn flour.

From those humble beginnings, the company has grown into a global food business, driven by the consistent vision of its founder, now Chairman, González Barrera: “Supporting those who have less, implementing environmentally-friendly processes, reinvesting profits, creating jobs, paying good salaries, favouring its personnel training and progress, and fostering continuous business growth, has been Gruma’s entrepreneurial philosophy since its foundation over 60 years ago,” he says.

Corn is now the number one grain grown around the world, due to its use as a foodstuff, feedstuff, industrial compound and bio-fuel.

It is not, however, an environmentally-friendly crop. A paper produced for the Global Development and Environment Institute states that the environmental costs of large-scale production of corn include high chemical use, water pollution due to runoff, unsustainable water use for irrigation, soil erosion and biodiversity loss.

By 2010, just 10 percent of global corn production was used for food, seed and industrial purposes; but as the leading processor of corn flour and corn-based food products, Gruma has placed environmental issues at the heart of its business. The company’s innovations in the nixtamalisation process transformed the artisan method that had existed since Pre-Hispanic times into a more efficient and environmentally-friendly industrial system.

Already, the Gruma technology has produced the following ecological advantages over traditional methods:
– Energy consumption: The Gruma process allows for 40 to 55 percent gas savings compared to cooking corn in the traditional process. Given the large production volumes involved, these savings amount to meeting the annual energy needs of approximately one million people.
– Water consumption: The Gruma corn flour technology allows for 67 percent reduction in water consumption, which would be sufficient for the annual supply of drinking water to a city of 162,500 inhabitants.
– Gas emissions: The Gruma technology allows for the reduction of greenhouse effect emissions into the atmosphere equal to the CO2 emissions of 49,000 new model vehicles driving two hours a day, for one year, at a speed of 80km an hour.
– Solid waste discharge reduction: The current Gruma process drastically reduces domestic drainage and sewerage problems, as a consequence of the elimination of 83 percent of all solid wastes. This amounts to the annual sanitary wastes of a city of 5.08 million inhabitants.
– Waste water discharge: The Gruma technology reduces waste water discharge by 70 percent. At the Evansville, Indiana plant alone, waste water discharges have been reduced by 88 percent, which amounts to 2,310 cubic metres a day, a volume that would supply potable water to a town of 16,500 inhabitants.

Acknowledging the importance of continued efforts to minimise environmental impact, Chairman González Barrera comments, “Every year, we seek to obtain higher yields in our world production processes, with less energy and water consumption, as well as less toxic emission impact on the environment.”

Continued research
Work on improving the production process and reducing its impact on the environment is mainly carried out in the company’s central research facilities in Monterrey, Mexico. The team includes PhDs in nutrition and equipment engineering, and is supported by local research groups in each of the four key market regions where Gruma is active.

One of the main areas of continuing research, of course, is on developing high efficiency processing equipment for wheat and corn flour production that will combine lower operating costs with environmental sustainability. Robotic automation is one key area that is being considered for its ability to sustainably increase efficiencies in the production process. Following years of constant improvement, Gruma’s tortilla machines now produce up to 1,200 corn or 400 wheat tortillas per minute, which compares favourably to the 30 to 50 per minute production rates achieved by traditional machines in Mexico.

Careful attention also goes into developing products that suit the health needs and changing tastes of consumers. In the 1990s, Gruma pioneered a process for enriching whole white corn flour to increase its vitamin and mineral content. As a result, corn tortillas offer a healthy alternative to white bread. They are sugar free; low in total and saturated fats, cholesterol and sodium; high in calcium, magnesium, potassium, phosphorus and fibre; and with added essential vitamins and minerals.

Building on this work, Gruma has developed a range of healthy products to meet specific needs, such as the Mission Foods Life Balance line in the US, which has less fat and sodium, but increased calcium and vitamins; the Mission Wholegrain Wraps developed for the health-conscious Australian market; the Mission trans-fat and preservative-free baked tostadas for the market in Central America; and a range of gluten-free White Corn Tortillas and Deli-Style Corn Chips for consumers who suffer with gluten intolerance.

Considerable work also goes into developing new corn- and flatbread-based products to suit regional and developing tastes. Corn flour and tortillas, the company’s main products for over 50 years, continue to enjoy market growth as population movements and the spread of fast food chains like Taco Bell introduce Mexican cuisine to new regions around the world. In 2010, after 10 years of lobbying by Mexico’s National Institute of Anthropology and History, and the Conservatory of Mexican Gastronómica Culture, with the support of Gruma, traditional Mexican cuisine became the first in the world to be considered ‘Intangible Cultural Heritage’ by UNESCO, further stimulating world interest.

Gruma has adapted the convenience of the traditional Mexican tortilla to wheat-based flatbreads, which combine easily with most global cuisines; from salads to sushi, curries to sweets. This allows them to place their products in two different aisles in retail stores: their wheat portfolio including wraps, wheat tortillas and other flatbreads go in the bakery aisle, and their Mexican portfolio of corn tortillas, tostadas and tex-mex kits can be found in the ethnic food section.

For the research team, the challenge is to further adapt the company’s corn and wheat products to suit the unique tastes of local cuisines in its many markets. They do this by incorporating different herbs, spices and other ingredients into the product. For example, wraps have been developed for the British market that include Moroccan spices, sun dried tomatoes and basil, and a new breakfast bread was launched recently with added cranberry and orange. In Australia the company offers a healthy line of wraps, including a Garden Spinach and Herb product, and another variation with rosemary and oregano has been developed for Costa Rica.

“It is important to mention that part of our success is that we have been working together for the last few years with the fast food chains, such as Kentucky Fried Chicken and McDonalds, to develop new options in their menus based on our products,” says González Barrera. “As an example, McDonalds is now launching a special promotion with our new Spinach Wrap in their Asian market.”

Social responsibility
In the 1940s, average life expectancy in Mexico was 40 years. The economy was largely agrarian-based, with the rural poor depending on self-subsistence agriculture, self-employment and non-agricultural cottage industry activities. The government’s so-called ‘Mexico Miracle’ was intended to lift many of these people out of the poverty trap by bringing them into urban areas where industrial jobs were being created; but with a population of over 26 million, it was a huge task.

For Roberto González Barrera, the discovery of the grinding machine and building of the first industrial corn processing plant was the beginning of his own journey to help the world’s poorest. “Poverty is a great teacher, a great university,” he says. “It used to speak to me with a lot of respect. That is why philanthropy is fundamental, because having known poverty at that level, I am very much aware about helping the neediest.”

As part of this commitment, he started the Gruma Foundation to channel support to people in need, through cash and in-kind donations, in a systematic and professional manner. The most recent Gruma Foundation programme donates a children’s nutritional supplement, called Nutre-Fácil Maseca (which translates as ‘Maseca nourishes easily’) to help fight malnutrition in children between one and five years of age.

Nutre-Fácil Maseca, containing corn flour, oat flour, rice flour and soy flour, is an easy-to prepare instant product, which significantly contributes to the daily recommended intake of energy, fibre, protein, vitamins and minerals for children. Since 2010, 10,000 Mexican children suffering from high levels of malnutrition have benefitted from this daily food supplement, of which more than four million packets have been distributed.

On the international scene, Gruma participates in several social responsibility programmes. Through its US subsidiary, Mission Foods, Gruma participated in the Share Our Strength’s No Kid Hungry Campaign, a national movement to fight hunger in that country. The company has also taken part in the Terra Cycle global movement which seeks to eliminate the problem of litter by sending out teams of volunteers to collect discarded product packaging.

The company is also quick to respond when natural disasters strike, donating products to affected areas where people need access to easy sources of nutrition and food energy. In Mexico, Gruma operates a fleet of mobile tortilla factories called ‘Tortimoviles,’ with enough capacity to process 90kg an hour, the equivalent of 2.1 tonnes of hot tortillas per day. These mobile units are self-sufficient for water and energy requirements, and can therefore operate in the most hostile conditions, ensuring that victims have three meals of hot tortillas each day.

Another example of Gruma’s work in disaster areas is in Venezuela, where, through its affiliate Monaca, the company delivered more than 55,000kg of food to aid centres for distribution to victims of the torrential 2010 rains. “As a responsible corporation, Gruma will continue collaborating for a better future, and working in support of sustainability in all the regions of the world where it operates,” says González Barrera.

Going global
From its simple beginnings as the world’s first industrial corn flour production facility, Gruma has grown to be a truly global business whose 20,000 employees worldwide generate annual turnover of nearly $4bn. The story of how it achieved this growth parallels the spread of its basic ingredient: corn.

Just as knowledge about the cultivation and use of corn travelled with indigenous cultures through Central America and then into both South and North American tribes, Gruma’s growth has followed corn consumption into these market areas. Initially, the company expanded through Central America and into Venezuela, where the corn consumption tradition was similar to that of Mexico. In 1973 the government of Costa Rica invited Gruma to build a plant in that country, and it continued with an organic growth strategy of building its own corn flour plants throughout Central America, while in Venezuela Gruma began a programme of acquisition.

Gruma’s international expansion was then driven by Hispanic population growth in North America. In 1900, when the population of the US was 76 million, there were already an estimated 500,000 Hispanic economic immigrants in the country. Starting in the early 1970s the Hispanic contingent became the fastest-growing population segment in the US, and forecasts by the Census Bureau anticipate that by 2050 around 25 percent of the US population will be of Hispanic descent. As the number of migrants and their descendants increase, so does the demand for tortillas.

In 1977 Gruma decided to acquire its first tortilla company in Los Angeles, California. The company then began an aggressive growth strategy which consisted of vertically integrating into corn flour production and expanding its tortilla footprint nationwide.

Today, Gruma is the market leader in the US with six corn flour mills, 19 tortilla plants and a national distribution system. The preferred overall growth strategy in the US has been organic, with approximately 20 to 30 percent of growth coming from acquisitions.

After its initial success abroad, Gruma started a global expansion initiative in the beginning of the new millennium. Gruma’s core business continues to be corn flour, wheat flour and value-added products such as tortillas, flatbreads (including wraps), and snacks (mainly corn chips) based on these grains. Country selection in Europe, Asia and Oceania is driven by the availability of raw materials (corn) and ready market access to major consumption centres.

Gruma’s relatively new dry corn milling operations, which are based in Italy, Ukraine and Turkey, cater to snack, beer and cereal producers in Europe, the Middle East and Africa. On the other hand, flatbread and chip manufacturing operations based in the UK, Holland, China, Australia and Russia (the most recent acquisition), are strategically located near these products’ largest consumption centres. The growth strategy in these countries has been mainly through acquisition in order to accelerate market access.

Crises provide opportunities
The global economic downturn has had a limited effect on Gruma sales, which continued to grow until 2011. The company, however, is conscious of the need for continued vigilance. “Crises provide growth opportunities,” the chairman says.

In 2012, Gruma is expecting to face various challenges, but anticipated its strategic business approach would allow it to move forward with great success. It was already aware of some of the problems it would encounter and took steps to be prepared. Grain price volatility; maintaining consumption levels – mainly in the US; and utilising optimal flow generation to maintain a healthy financial structure were all concerns.

The company announced the purchase of all the corn it needed to cover its production requirements in the US – the market with the greatest grain price volatility impact – at the beginning of the year. Having addressed that situation, it could then offer a competitive price strategy and continue growing in the tortilla market. As a result, its share price has outperformed the market during the year.

So with its core values of proximity to raw materials and markets, integrity and accountability, nourishment of consumers and the business, and excellence in all they do, the Gruma team is proud of its achievements. Its strategy for the future is rooted in its strong brands and will remain strongly based in its core products of corn and wheat flour, tortillas and flatbreads. It will, however, continue to evolve its products in line with consumer preferences and trends. Company analysts and enthusiastic foodies can expect to see more organic products, sauces and ready-to-eat kits being introduced in the near future.

As its motto says, Gruma nourishes the heart of Mexico and the world.