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					         CFA Review Course




             G. Kevin Spellman, CFA
Director, Hawk Center for Applied Security Analysis
         University of Wisconsin - Madison
   Schweser Study Program Seminar Series for
     University Faculty Provides Framework
Presentation Outline

          • Instructor
          • What is the CFA Institute?
          • Benefits of the CFA Program
          • What is the CFA Program?
          • Level I Curriculum
          • Preparation for the CFA Exams
          • CFA Examinations Miscellaneous
          • Registration/Requirements/Deadlines/Cost




2004-2005 CFA® Program          2
Instructor
Taught by: G. Kevin Spellman, CFA
• UW-La Crosse – BS in Finance w/ Mathematics minor; tutor for
Accounting, Economics, and Finance
• UW-Madison – MS in Finance; Applied Securities Analysis Program
• Madison Valuation Associates – Research Assistant
• STRS Ohio (10 years)
    • Analyst for five sectors/industries (domestic equities), REITs (real
    estate), Latin America (international equities) – 3 years
    • Assistant Portfolio Manager (domestic equities) – 2 years
    • Director of Research/Portfolio Manager (domestic equities) – 5 years
• Ohio State University – Adjunct Professor (Investments) – 3 ½ years
• CUNA Mutual - PM, Strategist, Quant (1.5 years)
• UW-Madison – Director, Hawk Center for Applied Security Analysis
• PhD Student in Finance at DBS – topic in Behavioral Corporate Finance

2004-2005 CFA® Program               3
Instructor

Experience of G. Kevin Spellman, CFA:

• All types of analysis – fundamental, quantitative, technical,
  behavioral
• All types of styles – small to large, value to growth
• All asset classes – domestic and international equity, real estate,
  fixed income, private equity
• All types of positions – analyst, PM, Director of Research
• Operator of investment organization
• Manager of 20 analysts and teacher of student investment programs
• Reported to boards
• Devoted to analysts and students – live by success of those who he
  mentors


2004-2005 CFA® Program             4
Presentation Outline


          • Instructor
          • What is the CFA Institute?
          • Benefits of the CFA Program
          • What is the CFA Program?
          • Level I Curriculum
          • Preparation for the CFA Exams
          • CFA Examinations Miscellaneous
          • Registration/Requirements/Deadlines/Cost




2004-2005 CFA® Program          5
                   Who We Are
What is the CFA Institute?

  The CFA Institute is a professional service
  organization:
   – Embodying the highest standards of
     ethics and integrity within the global
     investment community,
   – Constantly evolving to provide
     innovative and leading-edge ideas and
     services,
    – Dedicated to outstanding service and
        responsiveness to our constituents, and
    – Committed to developing global views,
        values, and products while delivering
        against local requirements, needs, and    * Source: J. Diermeir, CEO
        priorities.
         ®
 2004-2005 CFA Program               6            CFA Institute, presentation
What is the CFA Institute?
Why the CFA Institute Exists

                                          • To foster High Standards of
                                            Ethics and Fairness
                                          • To deliver programs and
                                            services for the pursuit of
                                            Educational and Professional
                                            Excellence
                                          • To develop and maintain a
                                            community of Constituent
                                            Fellowship with hallmarks of
                                            mutual trust and respect*
 This thought leadership is for the benefit of the capital markets and
                 the global investment community.
                                           7
* Source: CFA Institute Theory of the Organization
  2004-2005 CFA® Program
What is the CFA Institute?
CFA Institute’s Mission, Recognition, and Growth

   • The CFA Institute’s (http://www.cfainstitute.org/index.html) mission is
   to “To lead the investment profession globally by setting the highest
   standards of ethics, education, and professional excellence”
   (http://www.cfainstitute.org/support/about/mission.html).

   • The CFA Institute is an award granting body recognized by the UK
   Financial Services Skills Council (FSSC) (https://www.fssc.org.uk/cgi-
   bin/wms.pl/2) and is supported by the United Kingdom Society of
   Investment Professionals (UKSIP) (http://www.uksip.org/).

   • The Chartered Financial Analyst designation is one of the fastest
   growing professional credentials in the world and is a globally recognized
   standard for measuring the competence and integrity of investment
   professionals.

 2004-2005 CFA® Program                8
What is the CFA Institute?
Global Passport: The CFA Charter
76,521 Members and 87,409 Candidates Worldwide* and 67,000
Charterholders, up from 15,000 Members and 10,000 Charterholders in 1990
                                Europe                           Asia & Mainland China
United States & Canada          Members: 9,516                   Members: 627
Members: 56,211                 Candidates: 13,081               Candidates: 8,853
Candidates: 40,205




            Latin America
            Members: 751
            Candidates: 1,479
                                   Africa & Middle East
                                   Members: 1,407         Pacific Asia
                                   Candidates: 3,972      Members: 8,009
                                                          Candidates: 19,819



2004-2005 CFA® Program                         9                * as of June 2005
What is the CFA Institute?
CFA Institute Organization


               Client              Product             Infrastructure

                          Education
     Society Services     CFA Program                Finance
                          CGIPS
                                                     Information
                          Professional               Technology
                          Development
     Marketing
                                                     Human Resources
                          Ethics
                                                     General Counsel
                          CFA Centre for Financial
                          Market Integrity
     Client Support                                  Risk
                          Professional Conduct       Corporate Services


                             Society Integration
 2004-2005 CFA® Program               10
Presentation Outline


          • Instructor
          • What is the CFA Institute?
          • Benefits of the CFA Program
          • What is the CFA Program?
          • Level I Curriculum
          • Preparation for the CFA Exams
          • CFA Examinations Miscellaneous
          • Registration/Requirements/Deadlines/Cost




2004-2005 CFA® Program          11
Benefits of the CFA Program
Knowledge




2004-2005 CFA® Program        12
Benefits of the CFA Program




       “Whereas there are tens of thousands of finance
       degrees available around the world, ranging from the
       excellent to the worthless, there is only one CFA,
       managed and examined by an American association
       of financial professionals, the CFA Institute. It used to
       be just an American qualification. But explosive
       growth has made it, in effect, global currency.”
       The Economist
       Feb. 26-Mar 4, 2005       13
2004-2005 CFA® Program
Benefits of the CFA Program


                                 Switzerland




     CFA charterholders or
     candidates in the CFA
     program are to be favored
2004-2005 CFA® Program            14
Benefits of the CFA Program




                                   The Chartered
                                   Financial Analyst
                                   (CFA) designation is
                                   strongly preferred



2004-2005 CFA® Program        15
Benefits of the CFA Program
Respect and Credibility

Most common occupations of CFA charterholders
 • CEO/Principal               • Investment Counselor
 • Chief Investment Officer    • Investment Firm Manager
 • Equity Analyst              • Portfolio Manager
 • Fixed Income Analyst        • Portfolio Strategist
 • Investment Banker           • Sales/Marketing Professional




2004-2005 CFA® Program        16
Benefits of the CFA Program
Diverse Career Opportunities




Mutual Funds / Investment Companies   25%

Brokerage / Investment Banks          19%

Investment Management Counselors      14%

Commercial Banks / Trust Companies    13%

Consulting Firms                      6%

Insurance Companies                   5%

Other                                 18%




2004-2005 CFA® Program                      17
Benefits of the CFA Program
Opportunity – Top 24 Employers

 • Bank of America            • Mellon Financial Corporation
 • Barclays                   • Merrill Lynch & Co., Inc.
 • BMO Nesbitt Burns, Inc.    • Morgan Stanley
 • CIBC World Markets         • Northern Trust Corporation
 • Citigroup                  • PricewaterhouseCoopers
 • Credit Suisse Group        • Prudential Financial
 • Deutsche Bank              • Putnam Investments
 • Fidelity Investments       • RBC Financial Group
 • Goldman Sachs              • Scotia Capital
 • ING Groep N.V.             • State Street
 • J.P. Morgan Chase & Co.    • UBS AG
 • Lehman Brothers            • Wellington Management

2004-2005 CFA® Program       18
Benefits of the CFA Program
Earning Power – The CFA Premium

The CFA Premium: US$48,000
                           $248,000




           $200,000                        Median Total Compensation for U.S.-based CFA
                                           Institute members with 10+ years experience
                                           Source: 2005 Compensation Survey




             Non-              CFA
         Charterholders   Charterholders



2004-2005 CFA® Program                          19
Benefits of the CFA Program
Global Passport: The CFA Charter




2004-2005 CFA® Program      20
Presentation Outline


          • Instructor
          • What is the CFA Institute?
          • Benefits of the CFA Program
          • What is the CFA Program?
          • Level I Curriculum
          • Preparation for the CFA Exams
          • CFA Examinations Miscellaneous
          • Registration/Requirements/Deadlines/Cost




2004-2005 CFA® Program          21
What is the CFA Program?
Rigorous Study Program in Investments




      Kevin’s goal – Help with your “self” study by teaching
             main topics and providing helpful hints
2004-2005 CFA® Program           22
What is the CFA Program?
Three Levels and Three Exams

Level I – Knowledge and comprehension of fundamental
investment tools and concepts
Level II – Application and analysis focused on
asset valuation
Level III – Synthesis and evaluation of client needs and
portfolio management issues
Ethical and professional standards are emphasized at
every level.




2004-2005 CFA® Program        23
What is the CFA Program?
How created ? Practical, Relevant Education

Practitioners at every step of the process

      CCC                                                COE


             Curriculum                       Examinations


     Body of Knowledge                         Grading


                                         Setting of Minimum
         Practice Analysis
                                       Passing Score (MPS) by
                                       CFA Institute Governors



2004-2005 CFA® Program         24
What is the CFA Program?
The Practice Analysis Survey


 • Determines topics taught in the CFA Program

 • 2005-2006 Survey now underway

 • Involves investment practitioners worldwide:
     Regional Expert Panels and member surveys
 • “What knowledge and skills are needed by an
     investment professional?”
 • CBOK, curriculum, LOS and exams all based on
    what practitioners need to know


2004-2005 CFA® Program         25
What is the CFA Program?
CFA Body of Knowledge™

 • Ethical and Professional Standards
 • Quantitative Methods
 • Economics
                                         Investment Tools
 • Financial Statement Analysis
 • Corporate Finance
 • Analysis of Equity Investments
 • Analysis of Debt Investments
                                         Asset Valuation
 • Analysis of Derivatives
 • Analysis of Alternative Investments
 • Portfolio Management


2004-2005 CFA® Program         26
What is the CFA Program?
Three Levels – Topic Areas

Approximate Percentage Breakdown

            5%                            10%                        5%
 15%
                                  10%
                                                     40%                      35%

                           50%                             50%



 30%                                40%
                                                                        10%
           Level I                        Level II               Level III

       Investment Tools
       Asset Valuation
       Portfolio Management
       Ethics & Professional Standards

2004-2005 CFA® Program                          27
Presentation Outline


          • Instructor
          • What is the CFA Institute?
          • Benefits of the CFA Program
          • What is the CFA Program?
          • Level I Curriculum
          • Preparation for the CFA Exams
          • CFA Examinations Miscellaneous
          • Registration/Requirements/Deadlines/Cost




2004-2005 CFA® Program          28
Level I Curriculum




 2004-2005 CFA® Program   29
Level I Curriculum




 2004-2005 CFA® Program   30
                          Level 1 Curriculum
Level I Curriculum

  • The CFA program covers the Candidate Body of
  Knowledge (CBOK)
  • There are four functional areas – ethics and professional
  standards, investment tools and inputs, asset valuation, and
  portfolio management w/ Level I focused on tools and inputs
  • There are 18 study sessions and 79 readings
  • Each reading (from journals, texts, and other sources) has
  associated learning outcome statements (LOSs)
  • The questions on the examination come directly from one
  or more LOSs
  • The course will address most of the LOS statements and
  their various parts (e.g. a, b, c, etc. - noted on each slide)


 2004-2005 CFA® Program           31
Level I Curriculum          2006 Course Outline
                   Day Session                                                   Hours   Cum Hr

                   1    Introduction - Structure, Expectations, Etc.             0.8     0.8
                   1    Sample Examination                                       1.5     2.3
                   1    SS1: Ethical and Professional Standards                  3.0     5.3
                   1    SS7: Financial Statement Analysis Basic Concepts         3.0     8.3
                   2    SS8: Financial Ratios and Earnings Per Share             3.0     11.3
                   2    Ethics Questions                                         0.5     11.8
                   2    SS9: Financial Statement Analysis Assets                 3.0     14.8
                   2/3  SS10: Financial Statement Analysis Liabilities           3.0     17.8
                   3    Ethics Questions                                         0.5     18.3
                   3    SS2: Quantitative Methods                                3.0     21.3
                   3    SS3: Quantitative Methods                                1.0     22.3
                   3    SS4: Macroeconomic Analysis                              0.8     23.1
                   3    SS5: Microeconomic Analysis                              0.8     23.9
                   4    SS6: Global Economic Analysis                            0.8     24.8
                   4    SS11: Corporate Finance                                  2.0     26.8
                   4    Ethics Questions                                         0.5     27.3
                   4    SS12: Asset Valuation – Securities Markets               1.5     28.8
                   4    SS13: Asset Valuation – Equity                           2.0     30.8
                   4/5  SS14: Fixed Income Investments: Basic Concepts           2.0     32.8
                   5    SS15: Debt Investments: Analysis and Valuation           2.0     34.8
                   5    SS16: Derivatives                                        1.5     36.3
                   5    SS17: Alternative Investments                            1.5     37.8
                   5    SS18: Portfolio Management                               1.5     39.3
                   4    Ethics Questions                                         0.5     39.8
                   5    Wrap Up - Reminders, Etc.                                0.5     40.3
                                                                         Total   40.3
 2004-2005 CFA® Program                                      32
                                                                       ex Misc   37.5
Level I Curriculum
2006 Course vs Exam Weights


SS              Topic                                 % of Course % of Exam % Diff

1               Ethical and Professional Standards       13.3%      15.0%       -1.7%
                Investment Tools
4-6                         Economics                     6.7%      10.0%       -3.3%
2-3                         Quantitative Analysis        10.7%      12.0%       -1.3%
7-11                        FSA/Corporate Finance        37.3%      28.0%        9.3%
12-17           Asset Valuation/Derivatives              28.0%      30.0%       -2.0%
18              Portfolio Management                      4.0%       5.0%       -1.0%
                                                        100.0%     100.0%




    2004-2005 CFA® Program                       33
Presentation Outline


          • Instructor
          • What is the CFA Institute?
          • Benefits of the CFA Program
          • What is the CFA Program?
          • Level I Curriculum
          • Preparation for the CFA Exams
          • CFA Examinations Miscellaneous
          • Registration/Requirements/Deadlines/Cost




2004-2005 CFA® Program          34
Preparation for the CFA Exams
Self-Study Materials




2004-2005 CFA® Program      35
Preparation for the CFA Exams
2006 Level I Primary Textbooks

Standards of Practice Handbook 9e (AIMR, 2005)
Quantitative Methods for Investment Analysis 2e
         Defusco, McLeavey, Pinto, & Runkle (CFA Institute, 2004)
Economics: Private and Public Choice 10e
         Gwartney, Stroup, Sobel, & Macpherson (South-Western, 2003)
International Investments 5e              Solnik & McLeavey (Addison Wesley, 2003)

The Analysis and Use of Financial Statements 3e
         White, Sondhi, & Fried (Wiley, 2003)
Fundamentals of Financial Management 8e
         Brigham & Houston (Dryden, 1998)                                 Beginning in 2006, the
Investment Analysis and Portfolio Management 7e                           Level I Curriculum is
         Reilly & Brown (South-Western, 2003)                             modularized, with the
Fixed Income Analysis for the CFA Program 2e                              relevant readings for each
         Fabozzi (Frank J. Fabozzi Assoc., 2004)                          Study Session bundled
Analysis of Derivatives for the CFA Program                               with its topics and
         Chance (AIMR, 2003)                                              Learning Outcomes
                                                                          Statements.
2004-2005 CFA® Program                             36
Preparation for the CFA Exams
Schweser Study Program and
DBS Review Course
   • The class and Schweser notes summarize and answer
   directly the concepts in the LOSs and readings that make
   up the 1000s of pages on material in the CFA curriculum
       • CFA candidate readings contain information beyond what is
       necessary to answer the LOSs
       • Schweser reviews what is necessary to complete LOSs
       • Class highlights answers to LOSs
   • The class presentations, Schweser notes and the CFA
   materials include summary statements
   • The class, Schweser, and the CFA Institute provide
   practice exams




 2004-2005 CFA® Program           37
Presentation Outline


          • Instructor
          • What is the CFA Institute?
          • Benefits of the CFA Program
          • What is the CFA Program?
          • Level I Curriculum
          • Preparation for the CFA Exams
          • CFA Examinations Miscellaneous
          • Registration/Requirements/Deadlines/Cost




2004-2005 CFA® Program          38
The CFA Examinations Miscellaneous
2006 Exam Format

                            Multiple    Item Set   Constructed
                            Choice     (Objective) Response
                                                     (Essay)

                Level I       ●
                              100%



                Level II                    ●
                                            100%



                Level III                   ●          ●
                                            50%        50%




2004-2005 CFA® Program                 39
The CFA Examinations Miscellaneous
2006 Level I Exam Weights2006 Exam Weights


                                      240 Questions




           1.5 Minutes Each


2004-2005 CFA® Program           40
The CFA Examinations Miscellaneous
Graded with Great Care


 • 350+ CFA charterholders gathered in Charlottesville in
           2005 to grade the examinations
 • Teams of practitioners and academics
 • Rigorous and thorough process

 • Consistency and fairness across all papers




2004-2005 CFA® Program         41
The CFA Examinations Miscellaneous
Historic Pass Rates

              Pass Rates: 2005                         Pass Rates: 1963-2004
       100%
                                                       100%
        90%
                                                       90%
        80%
                                                       80%
        70%                                                                 68%
                                                       70%
        60%               56      55                   60%            52%
        50%               %       %                             49%
                                                       50%
        40%      36                                    40%
        30%      %
                                                       30%
        20%                                            20%
        10%                                            10%
         0%                                                0%
                  I        II     III                            I    II     III

                      100%


                         50%


                         0%
2004-2005 CFA® Program          '63     70s   80s
                                                42   90s    2005
Presentation Outline


          • Instructor
          • What is the CFA Institute?
          • Benefits of the CFA Program
          • What is the CFA Program?
          • Level I Curriculum
          • Preparation for the CFA Exams
          • CFA Examinations Miscellaneous
          • Registration/Requirements/Deadlines/Cost




2004-2005 CFA® Program          43
Registration/Requirements/Deadlines/Cost
Bachelor’s Degree Requirement

Candidates’ Highest Degree
                               2% 1%


                                                 Bachelor’s
                         31%
                                                 Master’s
                                                 Doctorate
                                                 Law


                                           66%




2004-2005 CFA® Program           44
Registration/Requirements/Deadlines/Cost
CFA Charter Requirements


 • Sequentially pass Level I, II, and III exams
 • Have four years of acceptable work experience
 • Provide professional references (Level III)

 • Join CFA Institute as a member and apply for membership
     in a local CFA Institute society
 • Submit professional conduct statement




2004-2005 CFA® Program          45
Registration/Requirements/Deadlines/Cost
1st Year Program Costs – 2006


Approximate Costs for New Level I Candidates
  Registration fee to enter CFA Program               US $375 *
  Enrollment fee for Level I examination              US $360 *
  Level I Curriculum (members’ and candidates price)  US $350
     Approximate Total Costs for Level I             US$1,085
*Registration & Enrollment by 1st fee deadline.
      Schweser Study Notes and Question CD           US $221
      DBS Course Fees                                   £300

This is not a cheap program, but the material is excellent
and designation is very important if you want to enter the
profession
2004-2005 CFA® Program         46
Registration/Requirements/Deadlines/Cost
Important Deadlines


December 2006 Examinations (Level I only)*
      17 March 2006 – Early registration deadline
      15 August 2006 – Second deadline
      15 September 2006 – Final deadline

Course Dates (Five Days)
  30th July, 9 & 10 September, and 11 & 12 November

Class Size Max = 50 Students
                                             * Check the CFA Institute
                                                 website for the most
                                           recently-announced dates.

2004-2005 CFA® Program          47
Registration/Requirements/Deadlines/Cost
Three Scholarship Programs


Student Scholarships – For New Level I Only*
   Awarded by CFA charterholders who are full-time faculty
   members
Faculty Scholarships – Available for Any Level*
   Awarded to full-time faculty directly by CFA Institute
Society Scholarships – Available for Any Level*
  Awarded to qualified candidates by local
  CFA Institute society
* Registration fees waived – candidate pays US$150
   for enrollment

2004-2005 CFA® Program         48
Registration/Requirements/Deadlines/Cost
Scholarships for the CFA Program - Deadlines


  • Scholarship Application Deadline
        31 January 2006 – Final Deadline: all forms received
        by CFA Institute
  • Student scholarships apply to June 2006 exam only


  • Faculty scholarships are also available for December 2005 exam

  • Society scholarships will be available for the December 2005 and/or
        June 2006 exams

  • For more information on the scholarship programs, see:
        http://www.cfainstitute.org/university/overview.html.



2004-2005 CFA® Program                 49
Registration/Requirements/Deadlines/Cost
More Information About the CFA Course


   CFA Institute -       www.cfainstitute.org
                         Europe
                         29th Floor
                         One Canada Square
                         Canary Wharf
                         London E14 5DY
                         United Kingdom

                         E-mail: infoeu@cfainstitute.org
                         Phone: 44-20-7712-1719
                         Fax:    44-20-7712-1601

   Kevin Spellman –      kspellman@bus.wisc.edu
                         608-262-9039
   Schweser –            http://www.schweser.com/faq/about_schweser.php).
2004-2005 CFA® Program             50
                         CFA Review Course




2004-2005 CFA® Program          51

				
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