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					                                                                                       P O Box 105 083
                                                                                   AUCKLAND CENTRAL

12 November 2007

                                         PRESIDENT’S REPORT

                                            To the members of

                                   CFA SOCIETY OF NEW ZEALAND

I am very pleased to present to you my report on my second and final year as President of the CFA Society
of New Zealand (“the Society”).

The success of any CFA Society is heavily dependant on the contribution from its volunteers and in New
Zealand we have again been well served over the last twelve months. Firstly, I would like to acknowledge
the support and assistance of my fellow Directors: Mark Brighouse CFA (Vice President/Secretary and
Advocacy Chair), Katrina Kruger CFA (Treasurer and Programme Chair), Louis Boulanger CFA, Dr Ian
Nield, David McCallum CFA (Membership Chair) and Simon Botherway CFA (in his role as Past-President).
I would also like to especially acknowledge the dedication and expert assistance provided by Ginette
Clarke, the Society‟s Administration Manager.

Simon Botherway is retiring as a Board Member after seven years of service since the foundation of the
Society, including two as President. On behalf of all members, thank you Simon for your efforts and your
strong ongoing support of the Society‟s goals.

Other members who volunteered their assistance during the year were Charles Widdicombe CFA, Peter
Lynn CFA, Penelope Tripp CFA, Jonathan Wall CFA and Cindy Hwang CFA to whom I offer my grateful
thanks. Also members Scott Chaput CFA and Rick Boebel CFA volunteered their services as graders to
assist with the marking of the June 2007 CFA exams.

It is important to always remind ourselves of the goals of the Society. The CFA Society of New Zealand was
formed to promote awareness of the aims of the CFA Institute and the CFA Program, and to lead the
investment profession in New Zealand by setting the highest standards of education, integrity and
professional excellence.
We promote:
       ethical and professional standards within the investment industry,
       encouragement of professional development through the CFA Program and continuing education,
       facilitation of the exchange of information and opinions among people within the local investment
        community and beyond, and
       increased public awareness and understanding of the CFA designation and investment industry.

The CFA Institute has become a global organisation, recognised around the world as setting the highest
standard in integrity and ethics in investment. Our flagship education program, The CFA Program, is
recognised for its practical, global curriculum and its high standards of practice.

It has been another busy twelve months for the Society. In November 2006, Dr Jan Squires CFA,
Managing Director, Asia-Pacific Operations for the CFA Institute and based in Hong Kong, visited Auckland
to attend our CFA Award Ceremony. Jan Squires presented charters to 13 of the new charterholders and
photographs were taken for publication in CFA Magazine. The following Friday an advertisement was
inserted in the National Business Review congratulating all those who passed Level III of the CFA exam in

The Society assisted candidates in forming their own study groups and, as in previous years, made
available to all candidates discounted Schweser Study Aids. New Zealand CFA pass rates were excellent
again this year. Pass rates for candidates who took the exam in New Zealand were: 37% at Level I, in line
with the global pass rates, 47% at Level II and 73% at Level III, well above the global pass rates of 40% and
50% respectively. Thanks to the support of Bob Johnson, Managing Director, Education Division, CFA
Institute, this December 176 New Zealand candidates will be able to take the Level I exam in Auckland for
the first time instead of having to travel to Australia. Over 250 candidates sat the June 2007 exams and we
already have over 150 enrolled in the June 2008 exams. Local events for candidates included social events
in Auckland and post-examination drinks for CFA candidates in Auckland and Wellington.

Thanks to the CFA Institute‟s Society Scholarship Programme, we can award up to 10 scholarships to
candidates per annum. In 2007 the Society again awarded its full quota of Scholarships. These were worth
approximately NZ$1,500 each and were awarded to James Yu, Callum Thomas, John Wang, Qin Zoe Chen
and Michael Eyre for the Level I exam in June 2007 and to Liuying Cao, Michael Kay, Monica Tong, Kartick
Gupta and David Weavers for the Level I exam in December 2007. As part of our marketing and
sponsorship agreement with Schweser, not only can candidates source discounted study aids, we were
able to award the five scholarship winners for the December 2007 exams Schweser Scholarships worth
approximately $500 each.

The first CIPM exam (Certificate in Investment Performance Measurement) was held in New Zealand in
April and Jeff Thompson from Arcus Investment Management was the first person in New Zealand to pass
the exam. The CIPM program covers the areas of ethics, performance evaluation and the application of
Global Investment Performance Standards (GIPS).

In February, Mark and David attended the Asia-Pacific Regional Leaders Meeting held in Bangkok. Louis
and I attended the CFA Institute‟s Society Leaders Meeting and Annual Conference held in New York in
May. In October Ian and Katrina attended CFA Institute‟s Society Leadership Conference held in
Washington DC. Ginette attended Administrators Briefings in Charlottesville in June and in Washington in
October, as well as the Society Leaders Conference. At the invitation of the Asia-Pacific Office of CFA
Institute, Ginette also assisted in staffing a Careers and Education Expo and underwent further
administration training in Hong Kong in February.

A key highlight in 2007 has been the establishment of University of Otago as a CFA Program Partner, the
first in New Zealand and one of only 45 Program Partners globally. To qualify a university degree program

must cover at least 70% of the CFA Program Candidate body of knowledge CFA ethical and professional
standards. I would like to congratulate member Scott Chaput CFA who was the driver behind Otago
achieving this. It is fitting that University of Otago achieve this as it has been a long-time supporter of the
CFA program. I would also like to thank Bob McLean, Director, University Relations at CFA Institute for his
support. The Society arranged meetings for Bob in 2006 to meet New Zealand universities to promote the
partner program.

In terms of our programme of events, I would like to thank Katrina, our Programme Chair for her efforts in
co-ordinating a range of events over the last 12 months. In March we held a very successful luncheon
presentation at which Robert Arnott, Editor Emeritus, Financial Analysts Journal presented on „Where does
Financial Theory Lead us Astray‟. I would like to thank the New Zealand Superannuation Fund for referring
Robert to us.

CFA Institute members celebrated Global CFA Day around the world on Monday, 11 June 2007 which
marked the 60th anniversary of the founding of the investment profession. We hosted cocktail functions in
Wellington at the Boatshed and Auckland at the Maritime Museum. Invited guests included members,
regulators, educators and the investment community. Dr Jan Squires CFA attended the Wellington
reception. A congratulatory advertisement was also placed in The National Business Review.

We hosted monthly CD Webcast viewings in Auckland as follows: Hirschey on “Market Anomaly: „January
Effect is Alive and Well”; Mauboussin on “Expectations Investing – Reading Stock Prices for Better
Returns”; Sloan on “Earnings Quality Analysis and Equity Valuations”; Kaasten on “Is It Time for Post-
Modern Portfolio Theory?”; McCulley on “Moral Hazard Interruptus”. Ian Nield hosted monthly CD Webcast
viewings at the Reserve Bank of New Zealand in Wellington as follows: Hirschey on “Market Anomaly:
„January Effect is Alive and Well”; Shiller on ”Irrational Exuberance Revisited”; Chincarini on “Stock
Screening and Ranking”; and McCulley on “Moral Hazard Interruptus” and R Edward Freeman on
“Establishing an Ethical Framework for Business Decisions”. I would like to acknowledge the assistance of
the Reserve Bank of New Zealand, Westpac Institutional Bank and Forsyth Barr in providing venues for
these viewings. Thank you, Katrina and Ian, for your efforts in co-ordinating our programme of webcast
viewings over the last 12 months.

A highlight of the year was the Third Annual Forecast Dinner held in early November which was another
successful event thanks to the efforts of Louis and his organising committee. I would particularly like to
thank the sponsor of the event, AMP Capital Investors (NZ) Limited, and our media partner, The National
Business Review. We were fortunate to this year secure Dr Marc Faber from the CFA Institute‟s Speaker
Retainer Program who visited New Zealand to speak at the Dinner which was attended by 350 people. A
charity auction was held during the evening raising funds for Rotary‟s various charitable initiatives.

Our ability to leverage off the CFA Institute Speaker Retainer Program is a key resource for the Society and
enables us to provide an impressive line-up of speakers on a cost effective basis. This would not be
possible without the support of the CFA Institute and the desire of the speakers to support the CFA Institute
by giving up their valuable time.

Our members participated in a range of investment and financial reporting related surveys over the last 12
months. There is increasing awareness of the quality of our membership base and its strong representation
of investment decision makers and I would like to thank our members who participated in these surveys.

I would now like to mention our advocacy initiatives which were led again by Mark. The growing list of failed
New Zealand finance companies has served to underscore the importance of advocating for greater
disclosure by issuers and better financial education for investors. Back in 2004 the Society contributed to
the Securities Commission‟s discussion paper on Disclosure by Finance Companies. We emphasised our
concerns regarding related party transactions, concentrated exposures and correlated exposures. Also in
our 2005 response to the Task Force on Financial Intermediaries we stressed that poorly capitalised finance
companies represent a source of systemic risk.

Over the past year we have submitted on the MED‟s Review of Financial Products and Providers where we
focused on the section on collective investment schemes.

Going forward, the regulation of financial advisers has significant implication for our members. As is the
case internationally, an increasing portion of CFA charterholders in New Zealand are involved in providing
services to members of the public as opposed to institutional investors. New rules will require these people
to be regulated by an Approved Professional Body (APB). We will be evaluating our potential role in the new
regime giving consideration to the portion of our membership that will come under the regulations and the
cost of us providing the functions of an APB. Thanks, Mark, for your leadership in this important area of
involvement by the Society.

The Society is the Country Sponsor of GIPS (“Global Investment Performance Standards”) in New Zealand.
Louis continues to serve as a member of the GIPS Executive Committee – he is also the Chair of the Asia-
Pacific Regional subcommittee of the GIPS Council and Peter Lynn CFA was appointed our Country
Representative on the Council. Louis and Peter attended the GIPS in person meetings in Hong Kong in
September and in Cape Town in March and the Society signed up to a new GIPS Country Sponsorship
agreement on 30 June.

The Society plans to continue promoting that local investment firms come into compliance with the GIPS
standards, as more and more firms do in 28 countries around the world. A local fund manager company,
MGH Asset Management (owned by member Mike Gibbs-Harris CFA), became the first company to be
verified GIPS-compliant in New Zealand.

The Society was mindful of all the reforms the investment industry has had to adjust to over the course of
the past year or so and, as a result, has not as actively promoted GIPS compliance. But this is expected to
change with the coming year, during which the directors are planning to hold seminars and promotional
campaigns on GIPS and will be working with the New Zealand Superannuation Fund on a plan for further
GIPS awareness and compliance in New Zealand. I would like to thank Louis and Peter for the many hours
of voluntary work they have done for the promotion of GIPS over the last 12 months.

CFA Institute Press Releases on the following topics were forwarded to the media: “Link to Bloomberg TV
Interview – Bob Johnson CFA on Money and Politics”; “38% of 28,082 Candidates passed December 06
Level I CFA exam”; “CFA Institute Recognises 7,736 CFA Charterholders with Annual Global
Announcement”; “Tomlinson, Terada Join CFA Centre for Financial Market Integrity Advisory Council”;
“Latest Inside Trading Case: Upcoming FAJ Webcast”; “Investment Industry Needs a Strong Reminder that
Insider Trading Damages Investor Trust and Is Always Wrong”; “Jonathan Boersma CFA to Direct
Management and Development of Global Investment Performance Standards”; Graham and Dodd Award
for Best Financial Analysts Journal Article of 2006 Presented to Claude B Erb CFA and Campbell R
Harvey”; “CFA Institute Survey Reports Investors in “BRIC” Economies See Domestic Political Risk as
Primary Investment Concern over Next Three Years”; “CFA Institute Centre and Business Roundtable

Institute for Corporate Ethics Release Quarterly Earnings Template”; “Survey Results Reveal Progress in
Reforms to Improve Disclosures, Raise Corporate Governance Practices in China”; “Emilio Gonzalez CFA
of Perpetual Investments Elected as Chair of CFA Institute Board of Governors”; “CFA Institute Announces
Results of Inaugural Global Investment Challenge”; “CFA Institute Presents Award for Professional
Excellence to Jack L Treynor”; “11 June Proclaimed CFA Day in Chicago by Mayor Daley”; “A Popular
Course that Complements Other Degrees – the CFA Qualification”; “CFA Institute Celebrates CFA Day with
Market Openings in London, New York, Toronto”; “51% of CIPM Candidates Passes Expert Exam”;
“Women Less Risky Than Men When Investing”; “CFA Institute Presents James R Vertin Award to
Campbell R Harvey of Duke University”: “For Financial Advice: CFP or CFA?”; and “Looking to Reduce
Investment Fees?”.

Coverage in NZ media included: “Keep Ahead of the Game” in NZ Herald (29.11.06); “Private Equity:
Relentless Hunt for Much Larger Prey” in Independent Financial Review (28.2.07); “Investment Industry
Professionals Look Back, Look Forward on Global CFA Day in NZPA”; “Non-Institutional Funds Boutique
Firms Offer Best of Both Worlds in Independent Financial Review, (27.6.07).

At the launch date of the Society in October 2000 there were 21 founding members and today membership
now stands at 166 including 134 CFA Charterholders. David has done a great job as Chair of the
Membership Committee, sponsoring new members and fielding calls from prospective members.

The CFA Society of New Zealand has an important role to play in the investment industry in New Zealand
and the CFA Program continues to grow in recognition by both employers and employees. This is reflected
in the ongoing growth in the number of CFA candidates within New Zealand and membership of the
Society. The Society is in a sound financial position and benefits from the very considerable resources
allocated by, or available from, the CFA Institute.

I encourage our members to become involved in the Society‟s various efforts. Volunteers are regularly
being sought for input into various sub-committees.

Thank you for your continued support for the Society.

Jeremy Simpson CFA