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Those Ace Argentine Strikers SPORTS 30

EUROPE EDITION VOL. XXXIII NO. 36 $1.75 (C/V) - KES 250 - NAI 375 - 1.70

MONDAY, MARCH 23, 2015 WSJ.com

Investors U.S. Troops Pulled Out as Rebels Expand Operations in Yemen

Pour Assets
Out of Euro
BY TOMMY STUBBINGTON
A major shift in the flow of
money around the globe is
driving down the euro at a
rapid clip, boosting the U.S.
dollar and leaving smaller
countries to struggle with the
consequence of an extraordi-
nary flood.
A wave of cash is leaving
the eurozone, where returns
on safe assets are infinitesi-
mal, if they are positive at all,
and headed to the U.S. and to
refuges such as Denmark and
Switzerland.
Europes common currency
portfolios away from Europe
and into the U.S. in search of
returns.
Big central banks appear
to be following suit, with
China and the oil-rich Middle
Eastern countries that had
poured some of their foreign
reserves into euros changing
course.
Its all about the flows,
said Roger Hallam, chief in-
vestment officer for currency
at J.P. Morgan Asset Manage-
ment, which oversees $1.7 tril-
lion. The firm has bet on a
weaker euro throughout the
recent decline and believes it

has fallen 22% against the
dollar in less than a year, from
$1.39 to $1.08. The euro
touched a 12-year low of less
than $1.05 this month. The
European Central Bank is
holding interest rates, while
the U.S. Federal Reserve is
Reuters
can fall further.
The ECB pushed interest
rates down to nearly zero and
the rate it pays on commer- Anti-Houthi protesters flee as police loyal to Houthi rebels in Yemen fire tear gas to disperse them in the southwestern city of Taiz on
cial-bank deposits below Sunday. As rebels stepped up their advance toward the south, the U.S. withdrew its final 100 military personnel. Article on page 8
zero last summer. This year,
it started quantitative easing,
in which it prints euros to buy

In U.S., Adidas Strives to Be Cool

looking to raise thema com-
bination that pushes the euro
down against the dollar.
But the fall, many analysts
said, has been exacerbated by
the willingness of big inves-
tors to move their assets out
of euros, not just by specula-
tors placing bets that the euro
will fall. The diverging paths
of European and U.S. mone-
tary policy have been a cata-
lyst for European savers and
investors to reallocate their
bonds.
Since the ECB brought in
negative deposit rates in June,
more cash has flowed out of
the eurozone to buy foreign
stocks and bonds than has
flowed in, ECB data show. Re-
cently, a steady trickle has be-
come a torrent. In the final
quarter of 2014, the gap was
Please turn to page 20
Strong dollar hammers U.S.
corporate earnings.................. 17
BY ELLEN EMMERENTZE JERVELL
AND SARA GERMANO
Adidas AG notched a big
win when it signed a deal in
January to sponsor University
of Miami sports. The school
had been rival Nike Inc.s turf
for decades, a perfect place to
show that Adidass new U.S.
chief was breaking its long
slump in America.
But many fans of The U
balked, starting anti-Adidas
chatter on social media. Mi-
amis coaches seemed excited,
says Mark King, Adidass new
North America president. But
at the kid level, he says of
students, theyre like, Why
would you sign with Adidas?
Thats been a recurring
question about Adidas in
America, and it speaks to the
hurdles facing the worlds
second-biggest sports brand
as it tries to regain footing in
the biggest sports market.
Mr. Kings challenge, sim-
ply put: Adidas isnt cool in
America, and cool is what
sells sports gear.
At stake are huge U.S.
salesand the hearts of
sports fans globally, who in-
creasingly take their cues
from American pop culture.
U.S. sports apparel and foot-
wear wholesale revenues were
Please turn to page 12

Athens Renews Probe Inside

Into Statistics Chief
BY NEKTARIA STAMOULI
AND STELIOS BOURAS
ATHENSGreek authori-
ties are escalating a criminal
investigation against the head
of the countrys official statis-
tics service, whom critics ac-
cuse of inflating Greeces bud-
get deficit to help justify the
countrys deeply unpopular
bailout.
The countrys chief statis-
tician, Andreas Georgiou, was
summoned to testify to prose-
cutors late last week and
faces further questioning on
Monday, according to people
familiar with the proceedings.
The move reactivates a prose-
cution that was thought to be
dormant and indicates that
the case is likely headed for a
trial, these people say.
The revival of the case
comes as Greeces new gov-
ernmenta coalition of the
radical-left Syriza party and
the right-wing nationalist In-
dependent Greeksseeks to
challenge the tough austerity
and free-market overhauls im-
Please turn to page 4
Reality check for Greece at
EU summit.................................... 4
Texas Senator Ted Cruz
lines up presidential
candidacy
U.S. News ............... 7
ECB has fight on its
hands with securities
Heard .................... 32
Obama Aims to Work
With Chinese-Led Bank
BY IAN TALLEY
WASHINGTONThe
Obama administration, facing
defiance by allies that have
signed up to support a new
Chinese-led infrastructure
fund, is proposing the bank
work in a partnership with
Washington-backed develop-
ment institutions such as the
World Bank.
The collaborative approach
is designed to steer the new
bank toward economic aims of
the worlds leading economies
and away from becoming an
instrument of Beijings foreign
policy. The banks potential to
promote new alliances and
sidestep existing institutions
has been one of the Obama
administrations chief con-
cerns as key allies including
the U.K., Germany and France
lined up in recent days to be-
come founding members of
the new Asian Infrastructure
Investment Bank.
The Obama administration
wants to use existing develop-
ment banks to co-finance
projects with Beijings new or-
ganization. Indirect support
would help the U.S. address
another long-standing goal:
ensuring the new institutions
standards are designed to pre-
vent unhealthy debt buildups,
human-rights abuses and en-
vironmental risks. U.S. sup-
port could also pave the way
for American companies to
bid on the new banks proj-
Please turn to page 10
China seeks to develop
global seed power................... 17
2 | Monday, March 23, 2015
Whats News
i i
Business & Finance
n Two new German govern-
i i
ment reports are stoking fears
that energy companies cant
shoulder the cost of a govern-
ment plan to close the coun-
trys nuclear-power plants. 17
n The soaring dollar is
crunching profits at giant U.S.
multinationals and boosting
the appeal of smaller, domesti-
cally focused companies. 17
n A fight over a small maker
of crop seeds in China sheds
light on how Beijing plans to
secure food resources: building
an answer to Monsanto. 17
n Companies hoping to use
drones to deliver small pack-
ages are confronting technical
hurdles as vexing as proposed
U.S. regulatory limits. 18
n Emirates Airline, fighting
off rivals accusations that it
benefits from state subsidies,
is facing an unusual headwind
at home: labor trouble. 19
n French cement giant Lafarge
and Swiss rival Holcim agreed
to alter the terms of their
planned $44 billion merger. 21
n A new effort by Hong Kongs
exchange to overcome one of
the major obstacles to trading
on the Shanghai-Hong Kong
Stock Connect appears unlikely
to entice more investors in. 23
n Cocoa prices have fallen
7.7% this month, hit by the
prospect of a big crop in the
worlds top cocoa grower. 24
Whats Online
Final Farewell to an English King
Philippa Langley, who led the quest to find the remains of King Richard III,
places a rose on his coffin, more than 500 years after his death. wsj.com
i
World-Wide
i
n French President Hollandes
Socialist Party suffered a set-
back as the center-right alliance
of former President Sarkozy
came out on top in the first
round of local elections and the
far-right National Front took
about a quarter of the vote. 3
n Greek Prime Minister Alexis
Tsipras came to Brussels hop-
ing to secure desperately
needed financial support but
instead got a splash of cold
water, or reality check. 4
n NATOs top military com-
mander said that not deliver-
ing weapons to Ukraine carries
risks, and registered concerns
about the implementation of
the Minsk cease-fire. 6
n The Obama administration
issued comprehensive rules on
hydraulic fracturing, trying to
set a national standard for con-
troversial drilling practices
that have helped fuel the U.S.
oil and natural-gas boom. 7
n Afghan President Ashraf
Ghani will showcase a country
under the leadership of a pol-
icy wonk when he visits Wash-
ington this week. 9
n Soldiers battling Boko
Haram in Nigeria have uncov-
ered a mass grave of the Is-
lamic militants victims. 9
n As the cleanup begins after
the worst cyclone to hit Vanu-
atu in recent history, fears are
growing about how the Pacific
nation will recover. 11
Getty Images
AM IM UK SW FR
PAGE TWO
Oils Price Decline Spurs
Cutbacks by Energy Firms
[ The Outlook ]
BY NICK TIMIRAOS
Prospects for an
uptick in business
investment this
year are facing a
major drag: The
collapse in oil
prices is spurring significant
cutbacks for the energy-
production industry, which had
been a standout in an otherwise
lackluster U.S. expansion.
Business capital spending
increased 6% last year due to
gains from a broad base of U.S.
industries. The drag from energy
this year could cut that growth
rate in half in 2015, according to
economists at Goldman Sachs.
Moreover, equity analysts at
the bank estimate capital spending
globally by energy companies in
the S&P 500 will fall 25%, leading
to the first annual decline in
overall capital investment by big
firms in many sectors since 2009.
Already, energy companies in the
S&P 500 have announced about
$8.3 billion in spending cuts.
The energy cutbacks come
when exporters and manufacturers
more broadly face headwinds from
a strengthening dollar, which
makes U.S. goods more costly
abroad.
The U.S. economy still comes
out a big winner with cheaper oil.
Consumers who spend less on gas
generally spend more at retailers
and restaurants. Companies also
benefit from lower materials costs.
But big capital-investment cuts
in energy production underscore
how the economy has been
transformed by a domestic energy
boom that reached deep into the
industrial economy during the
current expansion.
For steel producers, its a very
clear case of short-term pain and,
we hope, long-term gain, said Bill
Hutton, president of Titan Steel
Corp. in Baltimore.
Energy has been as big a
domestic consumer of steel as the
automotive industry in recent
years and helped compensate for a
still-ailing construction sector,
said Mr. Hutton. The hope now is
that consumers will pick up the
slack as they spend more on cars,
refrigerators and washing
machines.
Between 2009 and 2014,
investment in structures and
equipment for oil- and gas-field
exploration accounted for 70% of
net industrial investment in the
U.S., according to Jason Thomas,
director of research at Carlyle
Group. That represented an
estimated $245 billion in
investment last year, or 11% of
total nonresidential investment.
Still, such investment accounts
for a relatively small slice of the
U.S. economy, or less than 2% of
gross domestic product.
Economists at J.P. Morgan
expect energy capital spending
cutbacks to subtract 0.3
percentage point from GDP growth
this year. The boost from cheaper
oil to consumer spending, which
accounts for two-thirds of GDP,
should add one percentage point,
according to the J.P. Morgan
forecast.
IT SP TK BR PL IS AE GR
Capex Crunch
A swift plunge in oil prices has led to a severe drop in new rig exploration...
300%
Percentage change
since 2010
200
100
0
100
2010 11 12
.....and energy-related business investment, a standout during an otherwise
lackluster expansion, could face a big pullback.
50%
25
0
Change from a year earlier in private
25
xed investment for oil and
gas companies
50
2010 11 12
Sources: Baker Hughes (rigs); Energy Dept. (oil); U.S. Commerce Dept and Goldman Sachs (investment)
THE WALL STREET JOURNAL.
Other industries eventually could
compensate for the energy cutbacks.
Excluding energy, capital
spending growth of 4% for S&P
500 companies this year will be
down from a 5% forecast last fall,
said Tobias Levkovich, chief U.S.
equity strategist at Citi. That
would mark the sixth straight
annual gain in business
investment for the sectors
excluding energy and finance.
The problem is it could take
time for airlines, trucking firms
and agribusiness to turn energy
savings into new investment.
On one hand, were talking
about an ant. On the other, were
talking about an elephant, said
Philip Verleger, an energy
economist in Carbondale, Colo.
That is cold comfort, of course,
to energy companies being forced
to conserve cash while losing
access to cheap financing as oil
prices have plunged. Executives
have announced budget cuts on
earnings calls during the past two
months. It is bare bones, but we
can get barer, John Rynd, chief
executive of Hercules Offshore Inc.,
told investors last month.
Investors also are looking for
clues of energy losses rippling
beyond the factory floor. One area
of attention is finance. The energy
sector accounts for about 17% of
high-yield debt outstanding, or
$178 billion, making it the largest
single sector, according to Goldman
Sachs. Just three years ago, it
accounted for 5.9% of such debt.
The housing market in energy-
industry regions represents
another pressure point. Houston
issued 38,300 single-family
building permits last year, just 300
fewer than the state of California.
For now, the city is holding up
just fine, said Richard Campo,
chief executive of Camden
Property Trust, a national
THE WALL STREET JOURNAL.
U.S. rig count
WTI oil price
13 14 15
Actual
Forecast
13 14 15
apartment company based in
Houston that has 9,000 units
there. But he said if oil prices stay
at their current levels for three or
four years, well definitely have
some serious white-collar layoffs.
Letters have poured in this
year from customers of Loadcraft
Industries Ltd., a Texas maker of
parts for oil rigs, informing them
that they need to cut costs by up
to 25%. We just cant do that,
said Terry McIver, chief executive
and owner of Loadcraft.
Ramping up manufacturing for
other industries, such as custom
trailers, isnt a slam dunk either. Our
main issue there is the value of the
dollar, he said, given that Canadian
exporters have an advantage because
of the exchange rate.
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THE WALL STREET JOURNAL. Monday, March 23, 2015 | 3

NEWS

Hollandes Party Loses Out to the Right

BY WILLIAM HOROBIN
PARISFrench President Fran-
ois Hollandes Socialist Party suf-
fered an electoral setback Sunday as
the center-right alliance of former
President Nicolas Sarkozy came out
on top in the first round of local
elections and the far-right National
Front took about a quarter of the
vote.
The Socialist Partys share of the
vote dropped to 20.9% from 24.9% in
a comparable election in 2011, ac-
cording to early estimates from poll-
ing companies Ifop and Fiducial. Mr.
Sarkozys UMP party and its centrist
allies took 29.7% of the vote and the
for representatives at Frances 101 derline Ms. Le Pens success to feed
local jurisdictions known as dparte- off those poor economic results. She
ments showed a political landscape has bolstered the National Fronts
strongly shifting toward the right support by restraining its controver-
just over half way through Mr. Hol- sial far-right elements and focusing
landes five-year term. party vitriol against the European
Mr. Sarkozy, whose UMP did bet- Union and mainstream parties. The
ter than many opinion polls had pre- party came out on top in European
dicted, said the result showed voters elections in May last year after tak-
are exasperated with the Socialist ing control of 11 towns in municipal
government. Masses of our citizens elections in March. The National
have turned away from the left be- Front is taking root election after
cause they think they have been lied election, Ms. Le Pen said.
to for the last three years, Mr. Candidates with the support of
Sarkozy said. more than 12.5% of registered voters
Mr. Hollandes popularity has col- on Sunday still have to get through
lapsed as he struggled to deliver on in run-offs a week from now.
his 2012 campaign pledges to re- Socialist Prime Minister Manuel

anti-immigration, anti-European Na-
tional Front took 26.4% of the first-
round vote, a jump of almost 11
points from 2011.
With about one in two voters ab-
staining, the first round of elections
Associated Press
store growth and reduce unemploy- Valls called on voters to block the
ment while persistent budget defi- National Front by casting their bal-
cits have pushed public debt to over lot for what he called Republican
95% of annual economic output. parties in the second round, even if
The strength of the National that means voting for the center National Front leader Marine Le Pen votes in Henin-Beaumont, northern France
Front in the first round of voting un- right. on Sunday. Her party took 26.4% of the first-round vote.

Spanish
Socialists
Take Lead
In Andalusia
BY DAVID ROMN

MADRIDSpains two establish-

ment parties, the Socialists and the
conservative Popular Party, ap-
peared to stave off a challenge by a
pair of insurgent parties in Sundays
regional election in Andalusia,
which was widely seen as a litmus
test of recent political discontent in
Spain.
Early returns and exit polls
showed the recently launched leftist
party Podemos coming in a respect-
able third in its initial domestic
electoral test, right behind the So-
cialists and the Popular Party. Ciu-
dadanos, a fast-rising party that is
viewed as socially liberal and con-
servative in economic policy, was in
fourth place.
The Socialists have long domi-
nated politics in Andalusia, Spains
most populous region and one of
the poorest. They now appear on
track to secure an estimated 56
seats in the 109-seat parliament, ac-
cording to the early results. The
conservative Popular Party, which
controls the national parliament,
Photograph: Ernest H. Brooks II, Blue in Profile , Edition Fifty Fathoms 2008

would come in second in Andalusia

with 28 seats.
Podemos appeared on track to
gain 14 seats and Ciudadanos seven
seats. The early results show a
much stronger showing for the So- MISSION PARTNER OF
cialists than anticipated by earlier
exit polls, and may change signifi-
cantly as more votes are counted.
Exit polls predicted a narrow Social-
ist win over the Popular Party. Fifty Fathoms Bathyscaphe
If the Socialists fail to win an
outright majority, the results
would set the stage for a minority
Socialist government without a Pristine Seas Expeditions
stable partner in a highly frag-
mented parliament. That may be a
harbinger of things to come at the
national level.
Andalusias election marks the
start of a busy electoral season in
Spain.
Local government elections are
scheduled to be held May 24, and a
BLANCPAIN BOUTIQUES ABU DHABI BEIJING CANNES DUBAI GENEVA HONG KONG LAS VEGAS LONDON MACAU
Catalan election that many see as a
MADRID MANAMA MOSCOW MUNICH NEW YORK PARIS SEOUL SHANGHAI SINGAPORE TAIPEI TOKYO ZURICH
quasi-referendum on independence
there is scheduled for Sep. 27. A www.blancpain.com
general election is likely to be held
in November or December.
4 | Monday, March 23, 2015 THE WALL STREET JOURNAL.

EUROPE NEWS

Reality Check for Greece at EU Summit

BY MATTHEW DALTON

BRUSSELSAlexis Tsipras, the

new Greek prime minister, came to
Brussels on Thursday hoping to se-
cure offers of desperately needed fi-
nancial support from the currency
bloc during a meeting with euro-
zone leaders.
What he got instead was a splash
of cold water from the two people
who control the eurozones purse
strings: German Chancellor Angela
Merkel and European Central Bank
chief Mario Draghi. They said the
eurozone wont give Athens more
money until it passes into law much
of the bailout program the new
Greek government signed up to late
last month, according to people
briefed on the meeting.
This wasnt a meeting to make
decisions, but to have a reality
check, European Council President
Donald Tusk, who organized the
meeting, told reporters Friday, and
Agence France-Presse/Getty Images

to avoid misunderstandings at the

highest political level.
The tough message renews pres-
sure on Mr. Tsipras to execute a dra-
matic turnaround in talks on a re-
vised bailout program at a time when
clashes between his government and
the eurozone are flaring up daily.
Technical discussions in Athens Greeces Alexis Tsipras, center, and Germanys Angela Merkel, right, take part in discussions during a summit in Brussels on Thursday
over the past week have accom-
plished nothing. Experts represent- But he could find himself facing French President Franois Hollande Greek government, as the central fresh funding.
ing the governments creditors from a political revolt within his leftist- were the only national leaders Mr. bank already did in August 2012. Mr. Other officials said it was possi-
the eurozone and International Syriza party if the eurozone and the Tsipras asked to meet. The prime Draghi again replied no, saying cir- ble that loans could be paid out in
Monetary Fund were blocked from IMF insist on some of the old pro- ministers of Belgium, the Nether- cumstances were different then: The installmentsif tangible progress
accessing government ministries, EU grams most controversial measures, lands and Luxembourg complained bailout program was still more-or- was madebecause Greece couldnt
officials said, and some have re- such as cuts to Greeces pension sys- that they and others should have less on track, according to the offi- wait even until the end of April be-
ceived death threats. tem. been in the room, but Mr. Tusk also cial. Now, the entire eurozone is fore running out of money.
You crucified our people there The Syriza-led coalition is favored a smaller meeting to avoid skeptical that Greece will ever fol- Thursday nights meeting came
in Athens, Jean-Claude Juncker, trapped between a rock and a hard a likely confrontation if all eurozone low the conditions of the bailout. after a week of fruitless negotia-
president of the European Commis- place, said Diego Iscaro, senior members were present. Mr. Tsipras asked that a final tions in Athens between the Greek
sion, told Mr. Tsipras in the meet- economist at the consulting firm After sitting down at a small, statement include a pledge to hand government and experts represent-
ing, according to an official briefed IHS Global Insight. Even if an round table with the others, Mr. over 1.9 billion in profits earned by ing its creditors from the European
on the exchange. Mr. Draghi also agreement is reached, there will Tsipras accused the ECB of asphyxi- the ECB from buying Greek bonds if Commission, the ECB and the IMF.
forcefully complained about the continue to be significant uncer- ating the Greek economy and asked progress is made in the talks, offi- Greek officials refused to allow the
treatment of the experts. tainty regarding Syrizas ability and for more financing with easy condi- cials briefed on the discussions said. experts into government ministries
Mr. Tsipras agreed in the coming willingness to comply. tions from the central bank, an offi- Ms. Merkel said no: First implement to meet with Greek bureaucrats, EU
days to present a list of legislative Officials said a list of overhauls cial briefed on the discussions said. the program, then the eurozone will officials said. After names and pho-
overhauls the government wants to could be presented by Athens, in the Mr. Draghi brushed those criti- discuss giving Greece money. tographs of commission staff ap-
pursue, and more important which best case, in seven to 10 days. cisms aside. He said the ECB has al- But Ms. Merkel did appear to peared in the Greek media, a num-
provisions of the old bailout it Mr. Tsipras sought the meeting ready lent 104 billion ($111.6 bil- open the door to paying out some ber of them started receiving death
wants to scrap. He told reporters on on the sidelines of Thursdays Euro- lion) to Greece, the most in the money before the entire program threats, EU officials said.
Friday that the meeting was key to pean Union summit to discuss the eurozone as a percentage of gross has been passed through the Greek Declan Costello, the official who
put Greeces agreement with its dire situation facing the govern- domestic product, the official said. parliament, telling reporters on Fri- leads the commissions oversight of
partners back on track, adding ment, which is rapidly running out Mr. Tsipras asked him to raise day that the countrys creditors the Greek bailout program, is now
that the atmosphere was warm and of cash. The request itself proved the ceiling on the amount of short- could set out some prior actions being protected by bodyguards, EU
friendly. controversial, since Ms. Merkel and term debt that can be issued by the that need to be implemented to get officials said.

Deficit Drama: Athens Steps Up Probe of Statistics Chief

Continued from first page trys economic depression on the tion. and the IMF that included drastic said Mr. Georgiou had no idea of
posed by Greeces main lenders: the terms of the bailout since 2010, The already heavily indebted austerity measures. statistics; he was just doing what-
rest of the eurozone and the Inter- rather than Greeces fiscal loss of country soon found itself shut out of Mr. Georgiou, a former IMF offi- ever Eurostattold him to.
national Monetary Fund. control in the years up to 2009. The international bond markets, forcing cial and martial-arts teacher, took It is high time that the case
The renewed pressure on Mr. new government has announced it to sign a bailout deal in May 2010 over Elstat three months after the goes to court, she said: This way
Georgiou is likely to add to the acri- parliamentary inquiries into who with other eurozone governments bailout. In November 2010, Elstat the whole of Europe will find out
mony between Athens and its Euro- saddled Greece with the bailout plan said the deficit for 2009 deficit had about Eurostats maneuvers to get
pean and IMF creditors, which de- and whether all of its massive na- in fact been over 15% of GDP, a fig- rid of GreeceThis was part of a
manded a politically independent tional debt was incurred legally by Ruinous ure verified by Eurostat. Mr. Geor- plan against Greece.
statistics service as part of Greeces previous Greek governments. Greece's budget decit giou has said he faced resistance Ms. Georganta said Greeces true
overhauls under the bailout. The Independent Greeks have as a percentage of GDP within Elstat to reporting such a deficit in 2009 was a mere 4% of
The EUs statistics arm, Eurostat, called for Mr. Georgious resigna- high figure. GDP, according to her calculations.
has approved the deficit numbers tion, blaming his statistical revi- 16% 2014: 1.6% A former Elstat board member, She now heads the committee at
from the Hellenic Statistical Author- sions for abetting the countrys Ger- Zoe Georganta, accused Mr. Geor- Greeces defense ministry that au-
ity, known as Elstat, which has been man-led creditors. giou in 2011 of overstating the defi- dits spending on military systems,
under Mr. Georgious leadership Both parties in the coalition be- 12 cit under pressure from German-led following her appointment by Panos
since late 2010. In previous years, lieve these issues help their cause, creditors to justify the austerity Kammenos, defense minister and
the EU body often expressed reser- because it helps them to show that plan. A public prosecutor filed fel- head of the Independent Greeks. Ms.
vations about the accuracy of Greek Greece was a victim over the past 8 ony charges against Mr. Georgiou Georganta was an unsuccessful can-
fiscal data. few years and that the lenders have and two other Elstat officials for fal- didate for the party in last years
But Mr. Georgious strict applica- taken advantage of Greece, said sifying data and breach of duty. The European Parliament elections.
tion of Eurostats standards to Nick Malkoutzis, founder of analysis 4 charges carry prison terms of five to Mr. Kammenos last year called
Greeces public finances has angered site MacroPolis.gr. 10 years. The on-again, off-again for Mr. Georgiou to resign from El-
some Greek politicians and Elstat Greeces debt crisis erupted in probe appeared to stall last summer. stat. From the moment there is a
colleagues, who argue that an exag- late 2009, when a change of govern- Mr. Georgiou has vigorously de- final court decision on the alteration
0
gerated deficit served the interests ment prompted a new budget calcu- nied the allegations, saying he sim- of statistics, no lending agreement
of Greeces foreign creditors. lation that projected a deficit of 2006 10 14 ply applied EU accounting stan- and no (bailout) memorandum will
The populist rhetoric of many over 12% of gross domestic product, Source: European Commission dards, a stance backed by Eurostat. be valid and Greece will be free,
Greek politicians blames the coun- double the last governments projec- THE WALL STREET JOURNAL. In an interview, Ms. Georganta Mr. Kammenos said.
THE WALL STREET JOURNAL. Monday, March 23, 2015 | 5

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6 | Monday, March 23, 2015 THE WALL STREET JOURNAL.

EUROPE NEWS

Far-Right Convenes in Russia

BY ALAN CULLISON
U.K. to Join
In Training
ST. PETERSBURG, RussiaFor
more than a year now, the Kremlin
Of Syrian
has warned of a resurgence of fas-
cism in Europemeaning the pro-
Western government in Ukraine.
Opposition
But on Sunday, a lawmaker BY NICHOLAS WINNING
whose party cooperates with the
ruling United Russia in parliament, LONDONBritain plans to par-
hosted a foreign legion of politicians ticipate in a U.S.-led effort to train
too far to the right for most of Eu- Syrian opposition troops, according
rope. to people familiar with the matter,
For fringe politiciansand some but it will stop short of joining its
ex-fringe politiciansthe trip let closest ally in conducting airstrikes
them do something they say they against Islamic State in Syria.
cant back home: sound off against The U.K. government will an-
what they call the monolithic mes- nounce in the coming days its role
sage of Washington and Brussels. in training moderate Syrian opposi-
If you tried to have a conference tion forces in neighboring countries
like this in the U.S. or the U.K., it with the aim of bolstering their abil-
wouldnt be allowed, said Nick Grif- ity to fight the extremist group, the
fin, the expelled former leader of the people said. Turkey and Jordan will
anti-immigrant British National be involved in the plan, one of the
European Pressphoto Agency

Party. Russia has shown it is more people said.

free than the West. The expected announcement
President Vladimir Putin has marks an escalation of Britains in-
been trying to exploit political rifts volvement in the international effort
in Europe by forging alliances with against Islamic State after its moves
what were regarded in their home to join airstrikes against the mili-
countries as fringe political move- tant group in Iraq and carry out aer-
ments on the left and right. Some Nick Griffin, former member of the far-right British National Party, at the conservative forum in St. Petersburg on Sunday. ial surveillance missions over Syria.
have grown in popularity in coun- Some British politicians, though, say
tries such as Hungary and France, 70th anniversary of the defeat of Invitees included Udo Voigt, a se- only fascists were in Ukraine. the U.K.s military response hasnt
giving the Kremlin a lever to pry Nazi Germany, speakers vehemently nior figure in Germanys extreme- All that is in Donbasthat is an- gone far enough and that Islamic
against European economic sanc- denied any connection to Nazism. right National Democratic Party, tifascism, and everything in Ukraine State, also known as ISIS or ISIL,
tions for the war in Ukraine. I dont find it defamatory to be who drew rounds of applause with is fascism, he said. There isnt any can only be defeated by tackling the
In Greece, the new defense minis- called a fascist, said Roberto Fiore, calls to oppose U.S. hegemony and other fascism anywhere. extremists with airstrikes in Syria
ter in the leftist government has leader of Italys far-right party Forza to denounce homosexuality. Other Cas Mudde, a political scientist as well as Iraq.
close ties to Russian hard-liners. Nuova, who spoke at the conference invitees included members of the ul- who specializes in extremism at the Prime Minister David Cameron
For the Kremlin, the tactic is a Sunday. But I do find it defamatory tra-right Greek party Golden Dawn. University of Georgia, said the has repeatedly vowed to destroy the
familiar one. In Soviet times, Mos- if you call me a Nazi. Mr. Fiore, of Italys Forza Nuova, lineup was puzzling because Kremlin militant group, arguing that it also
cow tinkered with the internal poli- The forums website recalled an said Moscow is now the sole guard- has plenty of right-wing allies in Eu- poses a threat to security in Britain.
tics of the West by funding and even address of Mr. Putin at a conference ian of Western values, in the way rope who control large parliamen- Adding to the pressure on him to re-
controlling left-wing groups. Today, for foreigners in the provincial re- Rome once was. Its not me saying tary factions. None was at the con- spond are the beheadings of two
as Mr. Putin tries to position himself sort of Valdai, where he warned the thisits God saying it, he said. ference, however. kidnapped Britons by Islamic State,
as steward of conservatism, the alli- West faced a profound demo- Among participants, there was You dont need to go to the gut- which is believed to be holding at
ances are mostly with the right. graphic and moral crisis because of discussion over who could be called ter to find some pro-Putin right- least one other British man captive.
Billed as the International Rus- the collapse of traditional values, re- a fascist, since the Kremlin has de- wing parties, but they did for some But public opinion in the U.K. is
sian Conservative Forum, organizers ligion and rise of same-sex marriage. nounced the Ukrainian government reason, said Mr. Mudde. divided over whether the British
struck a defiant tone against West- Speakers echoed Mr. Putins mes- in Kiev as such, while others insisted He suggested that some conser- military should join the U.S. in
ern political correctness, calling the sage, but added attacks on other al- the fascists were in Brussels and vatives may not have shown up at bombing in Syria, especially after
event something that enemies of leged ills, including abortion, athe- Washington. the party because they dont want the loss of British soldiers lives in
Russia cant stop. ism, Freemasonry, and unbridled Aleksei Zhilov, an organizer for to be tainted, and the Kremlin itself campaigns in Iraq and Afghanistan.
As Moscow prepares for grandi- immigration that, if unchecked, will pro-Russian fighters in eastern may not have been involved in much Mr. Cameron suffered an embarrass-
ose celebrations in May to mark the snuff out the Caucasian race. Ukraines Donbas region, said the of the planning. ing parliamentary defeat on the is-
sue in 2013 when he sought to se-
cure parliaments backing for

NATO General Sees Risks for Ukraine

launching airstrikes in Syria in re-
sponse to claims that Syrian Presi-
dent Bashar al-Assad used chemical
weapons.
BY LAURENCE NORMAN past year. larus, especially on the destination border, so there are concerns Mr. Cameron faces a general
But the U.S. has held off supply- of heavy weapons that have been whether Minsk is being followed or election in May in which his Conser-
BRUSSELSThe North Atlantic ing lethal aid amid opposition from withdrawn from combat zones. not. vative Party faces a close-fought
Treaty Organizations top military most European countries, including We do see the weapons moving. Gen. Breedlove also addressed race with the opposition Labour
commander said Sunday that not Germany and France, and a lull in We do not know that they are the Russian threat to Denmark if the Party, which voted against Mr. Cam-
delivering weapons to Ukraine car- violence in eastern Ukraine. moved off the battlefield but we country joins NATOs missile de- eron in the 2013 vote on Syrian in-
ries risks, and registered continued Russia denies it is supplying or know that they are moving, he fense system. tervention.
concerns about the implementation supporting the rebels in eastern said. This is just the next step, he If the Conservatives win the
of the truce Kiev signed in February Ukraine. We continue to see disturbing said, noting previous great pres- election on May 7, it will ask Parlia-
with pro-Moscow rebels. Gen. Breedlove echoed NATOs evidence of air defense, command sure from Russia on Romania and ment to approve joining the U.S. and
U.S. Air Force General Philip concerns about implementation of and control, resupply equipment Poland. Anyone else who wants to its allies in carrying out airstrikes in
Breedlove reiterated the need to the cease-fire signed in Minsk, Be- coming across a completely porous join into this defensive capability Syria, the U.K.s Defense Secretary,
counter Russian diplomatic, eco- will come under this diplomatic and Michael Fallon, a Conservative law-
nomic and military tools being used political pressure. maker, said in an interview with The
to back separatists in eastern Speaking earlier at the Brussels Wall Street Journal this month.
Ukraine. Forum, Polish President Bronislaw The prime minister has always
So we, I think, in the West Komorowski said NATO faces a criti- been clear that ISIL has to be de-
should consider all our tools in re- cal credibility test over implement- feated in both countries, he said.
ply. Could it be destabilizing? The ing its pledges at last Septembers Mr. Fallon said in the interview
answer is yes. Also inaction could be summit in Wales to improve the alli- that the U.S. and Britain had been
destabilizing, he said at the Brus- ances readiness and responsiveness, looking at a number of possible lo-
sels Forum meeting of the German including a new rapid reaction force cations to carry out the training of
Marshall Fund. So I think thats the for the alliance. Syrian opposition troops and that
other question that our nation Mr. Komorowski said NATO three or four countries had stepped
should look at. Is inaction an appro- members are in a long and uneasy forward, but declined to specify
priate action? wait to follow whether those deci- which. He said that Britain was con-
U.S. officials have said the sions are implemented...It is about sidering sending fewer than 100
Obama administration is consider- the credibility of the alliance. military trainers.
ing delivering weapons, including Mr. Komorowski warned that He added that the effort pre-
possible antitank missiles and more making concessions to Russia in sented challenges, saying the pro-
sophisticated radar systems, to the face of violence in Ukraine cess had been frustratingly slow.
Ukrainian government forces, who could merely encourage further ag- We have to be sure that the people
Reuters

are seeking to hold back the sepa- gression. He described Western were training are the right people
ratists in a conflict that has killed sanctions on Russia as relatively who are going to carry the fight to
more than 5,000 people over the Soldiers of the U.S. Army 2nd Cavalry Regiment on exercise Sunday in Estonia. mild. ISIL, said Mr. Fallon.
THE WALL STREET JOURNAL.
Texas Senator
Set to Declare
His 2016 Bid
BY JANET HOOK
Texas Sen. Ted Cruz, a champion
of the tea-party movement who
hopes to woo the Republican Partys
most conservative voters, is due to
announce Monday that he is a candi-
date for his partys presidential
nomination in 2016, Cruz campaign
aides said on Sunday.
Mr. Cruz would be the first major
Republican candidate to officially
announce a start to his campaign in
what is sure to be a crowded field.
Cruz has the potential to take
up quite a bit of space on the right
in the conservative primary, said
Kevin Madden, a veteran GOP cam-
paign strategist.
The candidates looking to grab
the mantle of being the antiestab-
lishment choice for voters will cer-
tainly start to feel pressure to match
Cruz step for step and not allow
themselves to get outflanked to
their right, Mr. Madden added.
He is scheduled to speak Monday
at Liberty University, a Christian
school in Lynchburg, Va. The news
was earlier reported by the Houston
Chronicle, and confirmed by Jason
Johnson, a senior Cruz political ad-
viser.
Another Republican strategist,
Energy Industry Criticizes Federal Fracking Rules
BY AMY HARDER
AND DANIEL GILBERT
WASHINGTONThe Obama ad-
ministration issued comprehensive
rules on hydraulic fracturing, trying
to set a national standard for con-
troversial drilling practices that
have helped fuel the U.S. oil and
natural-gas boom.
Fridays move sparked immedi-
ate criticism from energy companies
that claimed the rules are too oner-
ous. Two industry groups filed a
lawsuit minutes after the announce-
ment, seeking to block the rules in a
federal court. Environmental groups
said the rules dont go far enough.
The new regulations from the In-
terior Department have been in the
works since 2012 and apply to oil-
and-gas drilling on federal lands,
which produce 11% of the natural
gas consumed in the U.S. and 5% of
the oil, according to data from the
agency. More than 90% of new land-
based wells in the U.S. use hydraulic
fracturing, known as fracking.
Drilling on private or state-
owned land wont be subject to the
new federal standards, but states
and companies could move to bring
their practices in line with the U.S.
While big energy-producing states
such as Colorado, North Dakota,
Pennsylvania and Texas regulate
fracking already, there have been no
overarching standards.
Its a complex matrix of regula-
tions out there, said Neil Kornze, di-
rector of the Interior Departments
Bureau of Land Management. Weve
attempted to build a rule that will in-
terface in a positive way with those
states that have moved forward and
will provide a common baseline
across the country in all states.
who has discussed the announce-
ment with the senator, said the tim-
ing was designed to capitalize on the
advantage of getting out early.
Why not be first? the strategist
said.
With a formal declaration of can-
didacy, Mr. Cruz would be free to
raise money for his presidential
campaign directly, rather than rely-
ing on donations to a political-action
committee supporting him. Some
donors are reluctant to make contri-
Reuters
butions to candidates before they
formally announce.
Mr. Cruzs announcement would
be the first in a cascade of expected
entries into the presidential race
over the next few weeks.
Republican Sen. Rand Paul of
Kentucky is expected to launch his
bid for the White House on April 7,
with other contenders to follow,
among them former Florida Gov. Jeb
Bush.
First elected to the Senate in
2012, Mr. Cruz has been trying to
define a place for himself in the
right wing of the emerging presiden-
tial field.
He has cast himself as more ag-
gressive than party leaders and
other candidates in the fight for
conservative causes. In 2013, he de-
Fracking involves blasting a
slurry of water, sand and chemicals
into a well to break up dense rock
and allow the outward flow of oil
and gas. The process has unlocked
vast reserves of oil and gas across
the U.S. But fracking is controversial
because of qualms about environ-
mental impact, especially the poten-
tial to contaminate drinking-water.
There is a lot of fear and public
concern, particularly about the
safety of groundwater and the im-
pact of these operations, Interior
Secretary Sally Jewell said Friday.
Parts of the federal regulations
are as strict as or stricter than what
many states have implemented,
though state rules vary, analysts said.
For example, the new federal
rules require more stringent stan-
dards than many states have for
storage of toxic fluids recovered
from a fracking well. U.S. officials
said companies must secure waste-
water in covered tanks before per-
manent disposal, instead of using
pits dug in the ground.
While some energy firms have
objected to the higher costs of stor-
ing fracking-related wastewater in
tanks, federal officials concluded that
it would help guard against spills.
Eric Kraus, a spokesman for
Clean Harbors Inc., a Norwell,
Mass., provider of wastewater treat-
ment and other oil-and-gas-industry
services, said the storage rules
would be a significant change to
methods employed today.
Ten states now require at least
some of the fluids used in fracking
to be stored in covered tanks, said
Resources for the Future, an envi-
ronmental think tank in Washington.
Storing leftover liquids in open pits
has been common in Texas and
U.S. NEWS
After he declares his candidacy, Ted Cruz, above, would be free to directly raise money for his White House campaign.
livered an all-night, 21-hour speech
on the Senate floor to dramatize his
opposition to funding for the 2010
health-care law.
Mr. Cruz spotlighted that theme
in a recent video he called Truth,
which implies that other Republican
candidates are all talk and no action
on key issues.
Obamacare: When have you
stood up and fought against it? Mr.
Cruz said in the video.
President Obamas illegal and
unconstitutional executive amnesty:
When have you stood up and fought
against it? he asked, referring to
President Barack Obamas actions,
without congressional approval, to
North Dakota, which recently out-
lawed the practice.
We think this is going to be a
template for how the federal govern-
ment expects the states to regulate
water as part of their own oversight
of fracking, said Kevin Book, man-
aging director of energy research
firm ClearView Energy Partners.
The Interior Department esti-
mated that complying with the new
rules will cost $11,400 per drilling
operation, or less than 1% of the
cost of drilling a well. The figure
roughly doubled from an earlier
proposal. The government estimated
an industrywide cost of $32 million
a year, up from an earlier estimate
of $12 million to $20 million.
The likelihood of higher fracking
costs comes as U.S. oil and gas pro-
ducers are struggling with persis-
tently low natural-gas prices and a
roughly 50% drop in the price of
crude in the past year. The collapse
A derrick outside Watford City, N.D., in 2013 is set up to tap the Bakken Shale.
shelter many illegal immigrants
from deportation.
While Mr. Cruz has emerged
quickly in recent years as a national
tea party hero, his rivals and other
Republicans question his ability to
reach beyond his conservative base
to be a strong general-election can-
didate.
His supporters, however, see
great potential in Mr. Cruz to appeal
to bipartisan disillusionment with
the political system.
There is clearly a frustration in
this country with the status quo, and
people are looking for something
new and something different, said
Saul Anuzis, former chairman of the
in oil prices has prompted many
drillers to slash their budgets and
lay off workers.
Exxon Mobil Corp. and other en-
ergy companies have expressed con-
cerns that new federal rules would
increase how long it takes to pro-
cess drilling applications. But the
drilling slowdown as a result of low
oil prices might ease some of those
concerns as companies apply for
fewer permits. The number of rigs
drilling on land in the U.S. fell to a
six-year low on Friday, according to
oil-field services company Baker
Hughes Inc.
Under the Interior Department
rules, energy companies also will be
required to test the quality of ce-
ment work designed to prevent nat-
ural gas from seeping outside a well.
The rule will require companies
seeking drilling permission to pro-
vide more information about exist-
ing wells nearby. In some cases,
Madeleine Foote, legislative repre-
Getty Images
Monday, March 23, 2015 | 7
Michigan Republican Party. Ted
Cruz is a U.S. senator who is
uniquely positioned to run against
Washington.
Before winning election to the
Senate, Mr. Cruz served in the Jus-
tice Department and the Federal
Trade Commission under former
President George W. Bush. He was
later appointed solicitor general of
Texas, holding the post from 2003 to
2008.
Mr. Cruz was elected to the Sen-
ate in 2012, defeating an establish-
ment-backed primary opponent.
During his tenure, he consistently
has been pushing against Washing-
ton.
drilling near old, abandoned wells
has caused gas to pollute aquifers.
Barry Russell, president and
chief executive of the Independent
Petroleum Association of America,
said the federal governments so-
called baseline standards will
threaten Americas economic up-
turn, while further deterring energy
development on federal lands.
The trade group, which says it
represents producers that drill 95%
of the oil and natural-gas wells in
the U.S., and regional group the
Western Energy Alliance sued the
Interior Department in U.S. District
Court in Wyoming. The plaintiffs
said the new rules are a reaction to
unsubstantiated concerns and
should be thrown out. Interior De-
partment officials said they expect
the rules to withstand challenges.
In a move that upset environ-
mental groups, the new regulations
require companies to publicly dis-
close chemicals they use through an
industry-run website called FracFo-
cus within 30 days of completing
the fracking process.
Environmental groups had
pushed for upfront disclosures di-
rectly to the Interior Department.
While this proposal has im-
proved from previous versions, it
represents a missed opportunity to
set a high bar for protections that
would truly increase transparency
and reduce the impacts, said
sentative for the League of Conser-
vation Voters.
Companies have been fracking
for decades, but the practice has
come under scrutiny in recent years
as its use skyrocketed.
Erin Ailworth
contributed to this article.
8 | Monday, March 23, 2015
Yemeni Militants Advance Southward
The militant group that controls
Yemens capital moved to extend its
power southward with an attack on
a major city, deepening chaos that
has given terror groups greater room
to proliferate and has halted U.S. op-
erations against al Qaeda inside the
country.
By Hakim Almasmari
in Sana, Yemen,
and Asa Fitch in Dubai
After the American Embassy in
the capital Sana closed in February,
the U.S. withdrew its remaining 100
military personnel from a base in
southern Yemen, American officials
said Sunday. Special Operations
Forces had to suspend training of
Yemeni troops and help with opera-
tions against one of the worlds
most dangerous al Qaeda offshoots.
The offensive by hundreds of
Houthi militants on the southern city
of Taiz, Yemens third-largest, came
two days after coordinated bombings
in two provinces targeted the
Houthis Zaidi sectan offshoot of
Shiite Islamand killed 152 people.
A previously unknown Islamic State
affiliate calling itself Sana Province
claimed responsibility, introducing
another dangerous new player into a
conflict lurching toward a civil war
involving the countrys besieged
president, a former president and a
patchwork of militant groups.
Houthi leader Abdel Malik Al
Houthi warned Sunday that Yemen
was becoming another Syria or
Iraqtwo countries where the Sunni
radicals of Islamic State have taken
hold and seized large tracts of terri-
tory.
What is happening in Iraq and
Syria should be examples for Yemen.
And sadly, we are starting to face
what those countries faced, he said
in an address on the Houthi-run Al
Masirah television station.
The United Nations Security
Council met in an emergency meet-
ing on Sunday to discuss Yemens
crisis.
It condemned the unilateral ac-
tions taken by the Houthis in Yemen,
including its attack on the temporary
presidential compound and the air-
port in Aden, and blamed it for un-
dermining the political transition
and jeopardizing the countrys stabil-
ity.
In a unanimously adopted state-
ment, the 15-member council de-
plored that the Houthis had ignored
earlier Security Council demands and
Long Islamic State Fight Seen
BY STEPHANIE ARMOUR
Central Intelligence Agency Direc-
tor John Brennan said the reach of
the militant group Islamic State is
spreading beyond Syria and Iraq, and
that it would take a combined and
possibly extended international effort
to beat back the threat.
His comments on Sunday came
amid reports that a group calling it-
self the Islamic State Hacking Divi-
sion posted online the alleged names
and addresses of personnel in the Air
Force, Army and Navy.
It called on Muslims in the U.S. to
kill them, according to SITE Intelli-
gence Group, a monitoring service for
Jihadist threats.
SITE said the Islamic State affili-
ate posted the information on March
20 and distributed a link to it on a
Twitter account on Friday.
Lt. Col. John Caldwell, a Marine
Broadening Fray
Beyond Islamic States control of swaths of Syria and Iraq, its afliates have claimed
responsibility for attacks elsewhere, including this week in Tunisia and Yemen.
Tunis
Islamic State claimed responsibility for Wednesdays
museum attack that killed 21 people. Tunisian ofcials
said the attackers were lone wolves inspired by the group.
Sirte
Islamic State took over
parts of the city recently.
TUNISIA
Tripoli
An Islamic State afliate Egypts air force
claimed responsibility
for a January hotel
attack that killed nine
to the beheadings.
people and for
beheading 21 Egyptian
Christians in February.
L I B YA
NIGER
CHAD
Sources: Institute for the Study of War
(Islamic State in Iraq and Syria); staff reporting
called on the rebel group to with-
draw from government installations
and return looted government weap-
ons.
Yemen was the scene of an Arab
Spring revolt that ousted longtime
dictator Ali Abdullah Saleh in 2012.
He was replaced by President Abed
Rabbo Mansour Hadi, who main-
tained his predecessors antiterror
cooperation with the U.S.
The Houthis took over the capital
and the government last month and
Mr. Hadi fled from Sana to his
stronghold in the southern port city
of Aden, about 60 kilometers from
Taiz. Now an array of fragmented
sects and political factions are com-
peting for power and territory
across the country of 26 million peo-
ple.
The Houthis are locked in a fight
with Mr. Hadi. On the sidelines,
other powerful interests are at play
in the tangled fight over Yemens fu-
ture. Neighboring Saudi Arabia sup-
ports Mr. Hadi, while Shiite Iran,
Saudi Arabias main regional rival,
backs the Houthis.
Corps spokesman, said Marines and
their families should take precautions
by limiting the amount of personal
information that is available online.
Vigilance and force protection
considerations remain a priority for
commanders and their personnel
world-wide, he said.
This is very disconcerting to the
specific families that were identified
in this release, but more broadly
across the armed services, Retired
Army Gen. Carter Ham said Sunday
on ABC.
Islamic State has been weakened
in Syria and Iraq, Mr. Brennan said
on Fox.
The U.S. has pushed back al
Qaeda, but groups such as Islamic
State will prompt a hard fight over
the next decade, he said.
It is a very twisted, perverted in-
terpretation of a religion that they
purport to represent but in no way
WORLD NEWS
TURKEY
LEBANON
M e d i te r ra n e a n S e a
ISRAEL
Derna Cairo JORDAN
struck Islamic State
targets near the city
last month in response
EGYPT
SUDAN
Sana
Islamic State claimed responsibility
for suicide bombings that killed at
least 135 people. But its role hasnt
been conrmed.
Yemen is of particular concern to
American officials because its al
Qaeda franchise, al Qaeda in the
Arabian Peninsula or AQAP, has
claimed responsibility for some of
the most high-profile international
terror attacks. One of them was the
deadly January attack on the Paris
offices of satirical magazine Charlie
Hebdo.
Because of Yemens central role
as a staging ground for anti-Ameri-
can operations, the U.S. military has
tried to maintain its presence in the
country even as the political vio-
lence has spread.
The U.S. has long cooperated
with Mr. Hadi on counterterrorism
operations including drone strikes
and considers him the legitimate
president.
Defense officials said the U.S. de-
cided to pull the forces out of al-An-
nad air base in the south after al
Qaeda targeted the nearby city of al-
Houta. Its a very unstable situation
in Yemen, a U.S. defense official
said. There was no direct threat
against these guys, but the security
do they represent, said Mr. Brennan,
adding that they are a distortion of
the Islamic faith. It is an ideology of
violence.
An Islamic State division in Yemen
has taken responsibility for a pair of
suicide bombings on two mosques in
Yemens capital that killed more than
100 people on Friday. The bombings
marked the deadliest terrorist attacks
in the countrys history.
An Islamic State unit claimed re-
sponsibility for an attack Wednesday
on a museum in the capital of Tunisia
that killed more than 20 people.
The U.S. cant relent on its contin-
ued work with partners in the region,
Mr. Brennan said.
ISIS momentum inside of Iraq
and Syria has been blunted, and it
has been stopped, said Mr. Brennan.
So, they are not on the march as
they were several months ago. We
are working with the Iraqis, and
AREAS OF
ISLAMIC STATE
Control
Support
SYRIA
IRAN
Damascus
Baghdad
IRAQ
Sinai Peninsula
An Islamic State offshoot
claimed responsibility for
attacks in January on
police and military sites in
and near Rafah.
SAUDI ARABIA
YEMEN
THE WALL STREET JOURNAL.
situation had deteriorated to the
point where the decision was made
that it was time to bring these guys
out of there before it got too bad.
The U.S. ability to carry out drone
strikes in Yemen suffered a serious
setback with the evacuation, officials
said. It definitely makes our pursuit
of al Qaeda in Yemen more difficult,
the defense official said. It affects
our ability to interact on the ground
with people who are friendly to us,
which impacts our ability to gather
information, and it affects our eyes
on the ground.
But the defense official said the
U.S. still has some ability to carry
out drone strikes in Yemen as part of
its counterterrorism program.
We still, of course, retain the ca-
pability to do unilateral counterter-
rorism strikes anywhere in the
world, the official said.
The State Department described
the withdrawal of all remaining U.S.
personnel from Yemen as temporary,
but it was unclear Sunday when the
U.S. military and diplomatic person-
nel will be able to return.
Reuters
CIA Director John Brennan said the group has been weakened in Syria and Iraq.
theyre trying to push back against it
is having some great, I think, prog-
ress.
A U.S. led coalition has been car-
rying out airstrikes against Islamic
State, which gained a foothold in
large parts of Syria and Iraq last
summer. Republicans have criticized
THE WALL STREET JOURNAL.
Last month, the U.S. Marines pro-
tecting diplomatic personnel in Ye-
men destroyed their weapons at the
airport before flying out of the coun-
try when the American embassy was
closed and most staff relocated to
Saudi Arabia. But the U.S. military
kept about 100 personnel in Yemen.
Hundreds of Shiite-linked Houthi
forces were involved in the assault
on Taiz and by Sunday morning, they
had taken the airport and some gov-
ernment buildings in the city, said
Houthi security officials. They took
over the intelligence headquarters
and court buildings, and surrounded
the governors residence, the officials
said.
The Houthi leader said the Taiz
offensive aimed at rooting out al
Qaeda terrorists. He tried to reassure
residents that his group didnt intend
to target our brothers in the south.
He denounced the U.N. Security
Council by saying it was on the side
of the oppressor and alleged
wealthy Gulf states Saudi Arabia and
Qatar were funding the regions de-
struction.
Shortly after they overtook the
city, anti-Houthi protests erupted
there. Protest organizers claimed the
Houthis fired live rounds to disperse
them, but that couldnt be indepen-
dently verified.
Houthi militants in military uni-
forms fired at us directly, said Sami
al-Ghobari, an anti-Houthi protester.
They seek bloodshed, since they
want to enter Taiz by force, a prov-
ince they are unwanted in.
Marwan al-Munaifi, a local busi-
nessman, predicted the Houthis
would fall quickly in Taiz because of
their lack of experience in governing.
The Houthis, who are estimated
to make up about 30% of Yemens
population, have long had a power
base in northern Yemen. They began
extending their control southward
last year and overran Sana in Sep-
tember to demand a greater say in
government under Mr. Hadi.
U.N.-brokered talks for a political
compromise failed, and the Houthis
took over government in early Feb-
ruary. They put Mr. Hadi under
house arrest, but he soon fled to
Aden, where he has since been trying
to make a comeback.
The conflict between Mr. Hadi
and the Houthis has grown increas-
ingly violent over the past week,
raising concern that Yemen is sliding
into a civil war.
Dion Nissenbaum
contributed to this article.
President Barack Obamas strategy of
relying largely on airstrikes to
weaken Islamic State militants.
Mr. Brennan said it was wrong to
blame the rise of Islamic State on the
pullout of U.S. troops from Iraq. In-
stead, he said, Iraqis had squandered
opportunities to establish stability.
THE WALL STREET JOURNAL.
Afghan Leaders Visit
To U.S. Stresses Policy
BY NATHAN HODGE
KABULFor decades, Afghani-
stan has been under the sway of
warlords. This month, Afghan Presi-
dent Ashraf Ghani will showcase a
country under the leadership of a
policy wonk.
Mr. Ghani, a former anthropology
professor and World Bank official, is
scheduled to meet President Barack
Obama at the White House on Tues-
day, the first meeting between the
two since the Afghan president took
office in late September.
The stakes are high for the Af-
ghan government. Mr. Ghani is head-
ing to Washington to make the case
for continued aid to his country,
which depends on international sup-
port to pay the army and police
forces that are the main line of de-
fense against Taliban insurgents.
Tapering Off
U.S. funds appropriated for Afghan reconstruction, by program
Security Governance and
development
$175 billion
150
125
100
75
50
25
0
FY2003 04 05 06 07 08
Note: Fiscal year ends Sept. 30 *Estimate
Source: Special Inspector General for Afghanistan Reconstruction
Soldiers Uncover Mass Grave
BY PATRICK MCGROARTY
Soldiers battling Boko Haram in
northern Nigeria have uncovered a
mass grave of the Islamic militants
victims, officials said Friday, a
grim sign of the reckoning to come
as troops from four countries fight
to secure the region ahead of elec-
tions at the end of this week.
Commanders from Chad and Ni-
ger said that their soldiers had un-
covered about a hundred bodies in
a shallow grave outside Damasak, a
town near Nigerias destitute
northern border with Niger that
they reclaimed from Boko Haram
over the past week.
The militants had been killing
people before they fled, said one
military leader. Possibly they didnt
have food to feed these potential
captives or a way to move them.
Damasak is one of several key
towns retaken in an intensifying
assault against Boko Haram this
month. Of the Belgium-sized swath
of impoverished farmland that the
group controlled earlier this year,
Nigerias military says it has cor-
ralled Boko Haram fighters into
just three areas now.
A spokesman for Nigerias mili-
tary didnt immediately respond to
requests for comment on the mass
Mr. Ghani, who once lived in the
Washington suburb of Bethesda,
Md., has a key advantage: He speaks
the same language as Washington
policy makers, something Afghan
and international officials say will
be important for courting support
from the White House and Capitol
Hill.
But the Afghan presidents lead-
ership style, they say, has also
shaken up Kabuls political culture.
Afghan officials privately complain
they are working long hours. People
who work closely with Mr. Ghani,
who boasts of sleeping only five
hours a night, describe him as a mi-
cromanager who is quick to dismiss
people he sees as underperforming.
He fires more people than he
appoints, said an associate of Mr.
Ghani.
Khan Afzal Hadawal, the acting
Humanitarian International
Affairs Operations
09 10 11 12 13 14 15* ghan president since he was a grad-
THE WALL STREET JOURNAL.
Reuters
Chadian soldiers in the recently retaken town of Damasak, Nigeria, last week.
graves found in Damasak, or progress
in the broader military campaign.
Nigeria is eager to show prog-
ress in the fight against Boko
Haram before national elections
Saturdaythe reason officials gave
for postponing the vote from its
long-scheduled date of Feb. 14.
The arrival of troops from Cam-
eroon, Chad and Niger appears to
have turned the fight in Nigerias fa-
vor. Boko Harams unprecedented
retreat from more than 30 north-
eastern towns and areas this month
comes after six years in which the
WORLD NEWS
governor of Da Afghanistan Bank,
the countrys central bank, described
Mr. Ghani as a man absorbed in the
finer details of fiscal policy, a
marked departure from the ways of
his predecessor, former President
Hamid Karzai.
Ghani first contacted the central
bank in his first week in office ask-
ing about the health of the financial
sector, Mr. Hadawal said, adding
Reuters
that Mr. Ghani has met with the
chief executives of every Afghan
bank, asking them to submit action
plans to push the institutions into
having top positions staffed and
meeting international compliance
rules to combat money laundering.
Despite his finance experience,
Mr. Ghani has an often adversarial
relationship with the international
advisers who oversee billions of dol-
lars in aid to his country. His book
Fixing Failed States, published in
2008, took international develop-
ment experts to task for ignoring
the needs of the worlds poorest and
most marginalized peopleand for
squandering billions of dollars in
poorly conceived aid projects.
More recently, Mr. Ghani has
moved to wrest control of a $500-
million-a-year fund administered by
the United Nations Development
Program to pay for the Afghan po-
lice. Close advisers say he has clear
ideas how aid should workand
wants greater Afghan control over
spending foreign cash.
Mr. Ghani has followed an un-
usual career trajectory. Trained as
an anthropologist, he left academia
in 1991 to join the World Bank, and
he still works closely with a small
group of trusted advisers from his
career in international development.
Scott Guggenheim, a develop-
ment expert who has known the Af-
through force of intellect but doesnt
uate student, said Mr. Ghani was
part of the the opposition from
group killed more than 20,000 peo-
ple and staged attacks in the far-off
capital, Abuja, and beyond. After so
much turmoil, many pro-democracy
advocates are skeptical that Nige-
rias government will be able to as-
sure the safety of nearly 70 million
voters who could show up at the
more than 100,000 polling stations.
We have not seen the neces-
sary security, said Zik Ibrahim,
chairman of the Transition Moni-
toring Group, a constellation of
civic organizations that plans to
monitor the voting.
Ashraf Ghani will make the case for continued aid on his Washington trip.
within at the World Bank, studying
the social impact of big infrastruc-
ture projects in the developing
world. Ashraf was sort of fasci-
nated by how power gets wielded,
said Mr. Guggenheim, who fre-
quently visits Kabul to advise the
president on development policy.
Its a lot more fun to be watching
that up close than from far away.
A return to Afghanistan didnt
seem likely in the mid-1990s, when
Afghanistan was largely under Tali-
ban control. Development expert
and author Michael Fairbanks re-
called meeting Mr. Ghani at his
small, neatly appointed office in
Washington in 1997 at the World
Bank and asking if he planned to re-
turn soon to Afghanistan, then iso-
lated from the rest of the world.
No, Mr. Ghani replied, accord-
ing to Mr. Fairbanks. I wont, be-
cause there will never be that op-
portunity. My kids are being raised
in America and they are culturally
American.
Mr. Fairbanks, who worked with
Mr. Ghani at the World Bank and in
Afghanistan, said Mr. Ghanis trans-
formation from policy wonk to pres-
ident showed his evolution from an
indirect leaderone who leads
compromised government.
control people or budgetsto a tra-
ditional direct leader.
U.S., Iran Nuclear Talks
Move Into Crucial Phase
BY LAURENCE NORMAN
LAUSANNE, SwitzerlandIranian
President Hasan Rouhani said Satur-
day that a political deal between his
government and six world powers
was within sight, but U.S. Secretary
of State John Kerry said the two
sides hadnt yet reached the finish
line after five days of negotiations
in Switzerland.
In Iran, Mr. Rouhani won fresh
backing for the diplomacy from the
countrys Supreme Leader Ayatollah
Ali Khamenei.
Still, in tough remarks that
brought fresh cries of Down with
America from the public at his Ira-
nian new years speech, Mr. Khame-
nei demanded that any deal must
lift sanctions on his country imme-
diately and said Iran and the U.S.
were set to remain foes.
Mr. Kerry met Saturday evening
in London with the U.K., French,
German and European Union foreign
ministers to discuss the latest devel-
opments. Russia and China complete
the six-power group that negotiates
with Iran.
Late Saturday, the Obama admin-
istration and its European diplo-
matic partners vowed to remain
Monday, March 23, 2015 | 9
I really dont know anyone who
has gone from thought leader and
indirect leadership to direct leader-
shipand been good at both, he
said.
The Afghan president must com-
pete for the attention of Washington
policy makers who face crises on
multiple fronts, including the con-
frontation with Russia and the rise
of Islamic State in the Middle East.
Mr. Ghani took office after a pro-
tracted election crisis that ended
with the formation of a national
unity government. His rival for the
presidency, former Foreign Minister
Abdullah Abdullah, serves as the
countrys chief executive officer.
Mr. Ghanis government isnt a
complete break with the past: He
won office by forging an alliance
with Abdul Rashid Dostum, an eth-
nic Uzbek and former warlord with
a large vote bank in the countrys
north. Disagreements within the
unity government have delayed the
formation of a cabinet.
He obviously had to make a lot
of compromises, said Idrees Zaman,
an independent Afghan political ana-
lyst, of Mr. Ghani. He enjoys as an
academic and a thinker a very good
reputation, but he is running a very
Margherita Stancati
contributed to this article.
united in their positions as negotia-
tions with Iran over its nuclear pro-
gram moved into their final days
ahead of a March 31 deadline.
We reaffirmed that we are all
equally committed to finding a solu-
tion that ensures that Irans nuclear
program remains exclusively peace-
ful in line with its stated commit-
ment, said a statement released by
the four Western diplomats. Any
solution must be comprehensive,
durable and verifiable, they said.
The talks with Iranian Foreign
Minister Javad Zarif are expected to
resume Thursday in Lausanne.
The two sides have set a June 30
deadline to complete a detailed, fi-
nal agreement that seeks to ensure
Iran cant quickly amass enough nu-
clear fuel for a bomb, in exchange
for the lifting of sanctions.
In my conversations with For-
eign Minister Zarifwe have made
genuine progress in the talks, Mr.
Kerry said Saturday. But we recog-
nize that fundamental decisions
have to be made now and they dont
get any easier as time goes by.
We have not yet reached the
finish line, but make no mistake: we
have the opportunity to try to get
this right, he said.
10 | Monday, March 23, 2015
Border Conflict
Tests Beijings
Commitments
BY CHUN HAN WONG
LINCANG, ChinaWhen war-
planes involved in fighting over
northern Myanmar streaked across
the border into China, an errant
bomb killed Chinese farmers and
put Beijing in a bind over a conflict
it has tried to avoid.
The explosion a week and a half
ago came after jets had circled the
frontier for days, occasionally bomb-
ing targets in the Myanmar region of
Kokang. Yang Jinrong and other Chi-
nese farmers living along the border
had looked on from afar with little
concern. Fighting between Kokang
rebels and Myanmar government
troops has ebbed and flowed for
years, with little violent spillover.
On March 13, however, ordnance
fell in a sugar cane field where Mr.
Yang and two-dozen other farmers
were working. Mr. Yang saw his
younger brother crumple onto the
ground, blood pouring from wounds
on his left torso. Yards away, his
mother grabbed the mangled re-
mains of her left leg.
I was terrified. People all
around us were scampering for
cover, Mr. Yang said.
The blast killed five Chinese na-
tionals and injured eight others, in-
cluding Mr. Yangs mother and
brother, who were eventually taken
to a hospital in the city of Lincang,
more than five hours drive away.
Those lot fighting in Myanmar,
U.S. Proposes Partnership With New China-Led Bank
Continued from first page
ects.
The U.S. would welcome new
multilateral institutions that
strengthen the international finan-
cial architecture, said Nathan
Sheets, U.S. Treasury Under Secre-
tary for International Affairs. Co-fi-
nancing projects with existing insti-
tutions like the World Bank or the
Asian Development Bank will help
ensure that high quality, time-tested
standards are maintained.
Mr. Sheets argues that co-fi-
nanced projects would ensure the
bank complements rather than com-
petes with existing institutions. If
the new bank were to adopt the
same governance and operational
standards, he said, it could both bol-
ster the international financial sys-
tem and help meet major infrastruc-
ture-investment gaps.
No decision has been made by
the new Chinese-led bank about
whether it will partner with existing
multilateral development banks, as
the facility is still being formed,
though co-financing is unlikely to
face opposition from U.S. allies.
Zhu Haiquan, a spokesman at
Chinas embassy in Washington, said
Beijing is open to collaboration with
the existing institutions and that the
new bank is built in the spirit of
openness and inclusiveness and will
follow high standards.
It will effectively cooperate with
and complement the existing multi-
lateral development banks such as
the World Bank and the Asian Devel-
opment Bank to provide investment
THE WALL STREET JOURNAL.
WORLD NEWS
why did they bring the war to us or-
dinary folk in China? his mother,
48-year-old Zhang Xiaowu, said from
her hospital bed this week, after her
left leg was amputated. Our military
Chun Han Wong/The Wall Street Journal
hasnt offended you. We ordinary
folk havent offended you. What
grievances do you have against us?
Beijings quandary lies in trying
to balance its commitment to pro-
tecting Chinese lives around the
world with its aim to avoid exacer-
bating an already rocky relationship
with Myanmar.
On the national level, Chinas
bottom-line interests are border se- Chinese air force J-7 interceptors were parked on the tarmac at Lincang airport, near the border with Myanmar.
curity and its broader aspirations in
Myanmar, but Beijing will not sacri- a business opportunity to extract camps set up by Chinese authorities. media, many users have appealed
fice either one for the other, said minerals, timber and other re- Many Burmese see Kokangese as for ethnic solidarity and support for
Yun Sun, an expert on the region at sources. Twin Chinese oil and gas foreigners and Chinese invaders, Kokang independence.
the Henry L. Stimson Center, a pipelines snake across from Myan- and social media has been rife with Options for Beijing are limited. A
Washington-based think tank. mars coast to Chinas landlocked messages of support for Myanmar severe response such as sealing the
Beijing reacted angrily to the Yunnan province. But relations have troops, known as the Tatmadaw. border could curb spillover from the
bombing. It dispatched fighter jets soured since Myanmars transition The Myanmar government has capi- fighting and placate Myanmar. But
and ground forces to patrol the bor- away from decades of military talized on this show of anti-Chinese it may also anger Yunnan businesses
der area and issued well-publicized rulea decision by Myanmars gov- sentiment, drumming up nationalis- and residents with Kokang ties, or
dmarches to Myanmars govern- ernment to, among other things, di- tic support by accusing Chinese citi- create a humanitarian issue if refu-
ment and military. Myanmar offi- versify foreign relations and scale zens of aiding the rebels. gees are forced to leave China.
cials were initially quick to blame back their dependence on China. China has rebuffed accusations Pressing Myanmar to pursue
Kokang rebels, saying that they had A complicating factor for Beijing from Myanmar that Chinese citizens peace talks with the rebels, mean-
no records of their warplanes cross- is that Kokang is mainly populated are sheltering and offering supplies while, could be seen as interference
ing the border, and have agreed to a by ethnic Chinese who have mi- to the Kokang rebels. Chinas foreign in the countrys internal affairs and
joint investigation with the Chinese. grated across the border over centu- ministry said Friday that it respects further strain ties. The policy is ba-
The casualties in Mr. Yangs village ries. Today, the Kokangese maintain Myanmars sovereignty and sically to muddle through. No one is
on the hilly, subtropical frontier, are strong ties of commerce and kinship wouldnt allow Chinese territory to happy, yet no one is pushed over the
the first reported deaths on the Chi- with residents in Yunnan. Tens of be used to undermine relations. edge, said Ms. Sun, of the Stimson
nese side of the border. thousands, in the estimates of some Still, Beijing faces growing calls Center.
China sees Myanmar as a strate- aid groups, have flooded across the to help ethnic Chinese who face per- Olivia Geng
gic gateway to the Indian Ocean and border, with many now living in secution overseas. On Chinese social contributed to this article.
and financing for the infrastructure ing smaller countries. welcome the entry of the Asian In-
building in Asia, he said. Beijing has struggled to increase frastructure Investment Bank, Mr.
World Bank President Jim Yong its influence within the World Bank, Kim said.
Kim said through a spokesman that the Asian Development Bank and the The brouhaha over the new bank
he and his lieutenants are already in worlds emergency lender, the Inter- highlights the growing complexity of
deep discussions with the new national Monetary Fund. But as the the Wests relationship with Chinas
Asian Infrastructure Investment founder and one of the new banks emerging power.
Bank on how we can closely work largest shareholders, it will have the In the European countries, there
together. greatest say in which projects to were often divides between the fi-
The U.S. suffered a diplomatic pick. nance ministries that saw commer-
embarrassment last week after sev- Infrastructure needs around the cial opportunities and the foreign
eral of its key European allies pub- world are enormous. Emerging ministries that have some of the
licly rebuffed Washingtons pleas to countries need new ports, railways, same concerns we do, a senior U.S.
snub Beijings invitations to join the bridges, airports and roads to sup- administration official said.
bank and instead said they would be port faster growth. Developed econ- Beijing has set up more than a
founding members. omies, meanwhile, must replace ag- dozen parallel structures that chal-
Backing the new bank through ing infrastructure. The Asian lenge the established international
co-financing could also help the U.S.
Zuma Press
Development Bank estimates its re- order, from the Chiang Mai Initia-
move past the diplomatic mess, re- gion alone faces an annual financing tive, a regional currency swap facil-
unite with its trans-Atlantic allies on shortfall of $800 billion a year. The ity designed to mimic the Interna-
this issue and counter any percep- World Bank President Jim Yong Kim consulting firm McKinsey & Co. esti- tional Monetary Fund, to the Brics
tions that the U.S. is wholly opposed mates global infrastructure-invest- bank, an infrastructure bank named
to the institution as part of a China- international development institu- ment needs through 2030 total $57 after the worlds largest emerging
containment strategy. tion with 188 nations as members. trillion. market economies.
Our concern has always But others have emerged amid con- By comparison, the Asian Devel- But without the standards that
beewill it adhere to the kinds of cerns about drawing more invest- opment Bank has just $160 billion in the World Bank and other U.S.-influ-
high standards that the interna- ment and attention to fast-growing capital and the World Bankwhich enced lending facilities have devel-
tional financial institutions have de- regions. Those include the Asian De- has co-financed with other regional oped over decades, Chinas new
veloped? U.S. Treasury Secretary velopment Bank, the African Devel- institutions for yearshas around bank risks fomenting distrust with
Jacob Lew told U.S. lawmakers last opment Bank, European Investment $500 billion. The China-led bank the U.S. and creating a host of social
week. Bank and the Inter-American Devel- plans to have a $50 billion fund to and economic issues. It could also
Co-financing, combined with Eu- opment Bank. start. help subsidize Chinese corporate in-
ropean membership, will make it The banks loans are designed to We have every intention of terests.
more likely this institution largely foster infrastructure and develop- sharing knowledge and co-investing But while wary of China, Wash-
conforms to the international stan- ment projects that are often high- in projects throughout Asia, said ington has at the same time been
dards, said Matthew Goodman, an risk and long-term, helping to lower Mr. Kim, who was picked by Presi- trying to pull the country into the
Asia expert at the Center for Strate- the costs for governments that dent Barack Obama in 2012 as the global political and economic archi-
gic and International Studies adviser couldnt afford borrowing from the U.S. nominee to lead the World tecture based on the theory that
and former economics director at private sector. For the most power- Bank. Beijings participation cultivates
the U.S. National Security Council. ful lending countries, they cultivate From the perspective simply of greater responsibility. Co-financing
The World Bank, forged out of regional growth prospects and can the need for more infrastructure could become a steppingstone for
World War II, remains the leading provide a political tool for influenc- spending, theres no doubt that we the U.S. to join in a few years.
 THE WALL STREET JOURNAL.
OBITUARY | Lee Kuan Yew 1923-2015
Singapore Founding
Father Dies at 91
BY CHUN HAN WONG
Lee Kuan Yew, who dominated
Singapore politics for more than
half a century and transformed the
former British outpost into a global
trade and finance powerhouse, set-
ting a template for emerging mar-
kets around the world, died Mon-
day. He was 91 years old.
Mr. Lee had been battling se-
vere pneumonia, a condition the
government disclosed in late Febru-
ary after he was admitted to Singa-
pore General Hospital on Feb. 5. Mr.
Lee had been in intensive care and
was put on mechanical ventilation.
Last week, the government, now
led by Mr. Lees son, Prime Minister
Lee Hsien Loong, said the elder Mr.
Lees condition had worsened due
to an infection. On Sunday, the gov-
ernment said that his condition had
weakened even further.
Agence France-Presse/Getty Image
Lee Kuan Yew died at 91 on Monday.
Mr. Lees core principlesin-
cluding a focus on clean and effi-
cient government, business-friendly
economic policies, and social or-
derhelped attract massive invest-
ment and many of the worlds big-
gest companies to Singapore after
he became prime minister in 1959,
catapulting living standards to First
World status from Third World lev-
els in hardly more than a genera-
tion.
Leaders of other countries
rushed to copy his model, with
some success, though they often
fell short because they didnt rein
in corruption or were governing
states too big to manage as easily.
Along the way Singapore, now
one of the worlds richest nations,
drew criticism from rights groups
that said it attained its developed-
world living standards without
adopting full Western-style democ-
racy or some of the freedoms taken
for granted in Western societies.
Although Singapore held regular
free elections under Mr. Lee, laws
proscribing public gatherings and
limiting other civil liberties ham-
pered the development of a power-
ful opposition. Western media
called Singapore a nanny state
and lampooned its attempts to cre-
ate an orderly society through
rules, incentives and ad campaigns,
including a famous ban on the sale
of chewing gum that was relaxed
slightly in 2004.
Mr. Lee argued that Western-
style democracy just wasnt suit-
able for all nations, and that young
countries needed stability and eco-
nomic development before they
could afford the luxuries of democ-
racy and personal liberty in a West-
ern mold.
Writer T.J.S. George, in a biogra-
phy of Mr. Lee, saw it another way:
For Mr. Lee, he wrote, means
never mattered so long as the ends
he desired were reached. He ran
Singapore like a tightly managed
private corporation, paying what he
considered good dividends to the
shareholders.
When Mr. Lee assumed power,
Singapore was saddled with huge
income disparities and a fragile
economy as an entrept, or trading
post. By the mid-1960s, its neigh-
bors, including Malaysia and Indo-
nesia, were turning hostile.
Mr. Lee sought to assert Singa-
pores relevance by becoming glob-
ally important in certain sectors,
with state investments in strategic
industries such as ports, shipping,
construction and airlines, though
he pressured local companies to be-
come efficient enough to compete
with their global peers. Many, such
as Singapore Airlines and Singa-
pore Telecommunications, became
highly profitable.
As other Asian economies in the
1960s and 1970s were plagued by
social and political upheaval, Mr.
Lees comparatively stable govern-
ment was able to establish indus-
trial zones, training colleges for
workers, first-class infrastructure
and business tax breaks, notably for
electronics companies, powering
the city-states growth as an export
hub.
Hundreds of Western companies
set up regional headquarters there,
with Hewlett-Packard Co. and Gen-
eral Electric Co. among the early
investors. Gross domestic product
per capita, which stood at $512 in
1965, grew to more than $56,000 in
recent yearssimilar to levels in
the U.S. and surpassing those of Ja-
pan and Germany.
The government transferred
some of the wealth to Singaporeans
in the form of subsidized housing
and other benefits. Rather than
give money directly to the poor and
unemployed, Mr. Lee supplied af-
fordable state-built apartments that
he encouraged citizens to buy. To-
day, 90% of Singaporean resident
households own their homes, one of
the highest rates in the world.
Mr. Lee, who was influenced by
socialism in his youth, argued his
hard-nosed policies were born of
necessity, because tiny Singapore
lacked many of the material advan-
tages enjoyed by countries like the
U.S., China or even Indonesia, with
their vast natural resources, abun-
dant farmland and large popula-
tions. What Singapore did have was
a prime location along one of the
worlds busiest shipping lanes,
which argued for doing everything
possible to make it a global trade
hub attractive to investors, he rea-
soned. His philosophies were fur-
ther influenced by Confucian ideals,
which called for thrift, self-reliance
and respect for elders, education
and social order. I stressed that
freedom could only exist in an or-
derly state, he wrote in a memoir,
From Third World to First.
Mr. Lees success meant that his
name became synonymous with
Singapore. The political party he
co-founded, the Peoples Action
Party, or PAP, has won every elec-
tion since 1959when Singapore
became self-governingand has al-
most always controlled the vast
majority, and at one point all, of
the countrys parliamentary seats.
WORLD NEWS
A woman and her child sit amid the ruins of their home on Tanna Island, Vanuatu, on Thursday.
Cyclone-Hit Vanuatu
Faces Uncertain Future
BY LUCY CRAYMER
TANNA, VanuatuBefore a
deadly cyclone struck this remote
South Pacific island chain, Joseph
Komisak ran a reasonably successful
business renting out tourist bunga-
lows at the base of Mount Yasura
live volcano with bubbling lava that
constantly booms across the valleys.
Mr. Komisak had plowed every-
thing hed saved from his gardening
job to build four bungalows and a
tree hut, as well as a new horse-
riding business. But the Category-5
tropical storm that swept through
Vanuatu just over a week ago wiped
all of that out.
The only income here is tour-
ism, said the 45-year-old father of
three, as he surveyed the ruins.
When we have money, this is for
paying school fees and helping our
community. Its a real worry.
As the cleanup begins following
the worst cyclone to hit Vanuatu in
recent history, fears are growing
among the population here about
how the Pacific nationlying 2,236
miles east of Australiawill recover
and entice foreign visitors so crucial
to the local economy to return.
An exotic destination cherished
by divers and adventure seekers, the
archipelago faces a long path of re-
building from two days of devasta-
tion wrought by Cyclone Pams 250-
kilometer-per-hour (155mph) winds.
The death toll from the storm
stands at 24, far smaller than simi-
lar-sized Pacific storms, such as last
years Typhoon Haiyan, which killed
6,000 people in the Philippines. But
the infrastructure damage has been
overwhelming.
More than half of Vanuatus build-
ings have been badly damaged
many having their roofs blown off
leaving up to a third of the countrys
266,000 people homeless. Forests,
where holidaymakers were fond of
trekking, were shredded by the
storm, while crops such as coffee
across the island were destroyed.
Authorities and aid agencies are
hesitant to estimate how much re-
construction will cost, as much of the
damage still hasnt been fully as-
sessed. But Sune Gudnitz, head of the
United Nations Office of Humanitar-
ian Affairs in the Pacific, said rebuild-
ing costs were expected to be high
based on the extent of the damage.
Aid agencies including Oxfam,
Red Cross International, CARE and
World Vision are all working to
meet the emergency needs of locals,
while the New Zealand and Austra-
lian defense forces and New Caledo-
nias security force are on the
ground offering services.
A number of governments have
offered initial relief packages. New
Zealand pledged US$1.8 million and
Australian offered US$3.8 million.
One of the worst hit among Van-
uatus dozens of islands was Tanna
in the south, where residents still
lack access to electricity, phone
lines or the Internet.
Unless the all-important tourist
dollars return, its inhabitants will
struggle to feed their families once
aid agencies call a halt to supplying
emergency relief.
Tourists tend to choose
safer destinations for a
long time after a disaster.
Its bad for the economy, particu-
larly for tourism, Joe Natuman, Van-
uatus prime minister, told reporters
at Tanna airport after arriving on an
aid plane from the New Zealand air
force. On this island, tourism is the
main industry and all the bungalows
have been blown away.
Most holidaymakers arrive here
from New Zealand, the French terri-
torial island of New Caledonia and
Australia. But the cyclone halted all
inbound tourism, causing immediate
economic pain when the country is
facing a costly recovery. Tourism
dominates the nations underdevel-
oped economy, contributing about
40% of its gross domestic product. In
2013, Vanuatus per capita GDP was
US$3,082, with 12.7% of the popula-
tion living below the poverty line ac-
cording to Asian Development Bank.
Many Ni-Vanuatu, as the locals
are known, live in thatched houses
Monday, March 23, 2015 | 11
European Pressphoto Agency
and maintain a traditional lifestyle
based on subsistence farming, grow-
ing crops like breadfruit and a local
banana. Some continue to live under
the rule of a chief, much like their
ancestors have lived for generations
and never venturing far afield.
While English and French are spo-
ken, there are 113 distinct dialects of
the local language.
Many locals were struggling
even before the storm hit. Evidence
of hunger is everywhere in Tanna,
where barely clothed children with
distended bellies can be seen in
dusty villages alongside roaming
pigs, chickens and dogs. Access to
water has also become a major
problem since the storm, which con-
taminated supplies and tipped over
many of the islands rain-gathering
tanks.
Mr. Komisak and other locals are
anxious over the pace of recovery,
particularly as they head into
Tannas traditionally busiest
months, April through July, knowing
that tourists tend to choose safer
destinations for a long time after a
natural disaster strikes an area.
It took the Maldives, an island-
nation in the Indian Ocean torn
apart by the 2004 Asian tsunami,
three years to attract well-heeled
vacationers once again. Maldivian
national income fell 40% in the year
following the disaster, which also
devastated parts of Thailand, Sri
Lanka and Indonesia,
Even before the cyclone, Vanu-
atus tourist industry was being
slugged by sharp falls in the Austra-
lian dollar, which has encouraged
more Australians to stay at home
and persuaded many New Caledo-
nians to visit Australia instead of
neighboring Vanuatu.
John Nicholls, owner of Ever-
green Resort and Tours on Tanna,
said the number of visitors to his
resort were shrinking even before
the cyclone left the resort unviable.
Commercially, we are all gone,
New Caledonian-born Mr. Nicholls
said. Firstly all the forest is gone,
most of the buildings are defunct.
The main structure is still there so
we could rebuild, but we dont have
the money.
12 | Monday, March 23, 2015
Mark King, left, Adidass North America president since June, says he has been given leeway to craft a U.S.-specific strategy. Herbert Hainer, right, CEO since 2001, is under investor pressure to improve results.
In U.S., Adidas Strives to Be Cool
Continued from first page
$51.6 billion in 2013, 43% of global sales, esti-
mates industry tracker Sporting Goods Intelli-
gence.
The U.S. is 40% of the worlds sneaker
market and 100% of the worlds sneaker cul-
ture, says Matt Powell, a sporting-goods-in-
dustry analyst. To win the world, you need to
win the U.S.
Adidas was dominant in the U.S. sports-
shoe market in the 1970s; its retail market
share was about 7% in 2014, according to
Sterne Agee and SportScanInfo. For Mr. Kings
boss, Adidas Chief Executive Herbert Hainer,
the failure to reverse the German companys
U.S. market-share slide is a big blemish on his
14 largely successful years running the brand.
Adidass share price more than quadrupled
from 2002 through 2013. In March 2014, the
company extended Mr. Hainers contract to
2017.
Then results soured. Adidass stock fell
38% to 57.6 last year, recovering to about
70 ($76 ) last week ahead of a five-year-
strategy launch this week. Adidas reported
2014 net income of 490 million, down 38%
from 2013, on sales of 14.5 billion, up 2%.
An acute problem last year was turmoil in
Russia, a big Adidas market. But a deeper woe
is the U.S., where sales have fallen since 2012.
Adidas reported 2014 North American sales of
2.97 billion, down 7% from 2013. Nike posted
$12.3 billion in fiscal 2014 North America
sales, up 10% from 2013. Some investors are
questioning Mr. Hainers leadership.
The 60-year-old Mr. Hainer, known for his
analytical approach, has lifted Adidass market
share over much of the globe. Much of his
success traces to a centralized strategy of
dominating soccer markets with the brand.
But his approach hasnt fixed a problem
that predated his ascension: Adidas has often
been off-mark among American shoppers,
whose sports-gear tastes can shift unpredict-
ably and whose spending is swayed by sports
other than soccer.
U.S.-based Nike long ago outpaced Adidas
in American sales and is gaining in Western
Europe, Adidass home turf. Last year, Adidas
fell to No. 3 in the U.S. behind Under Armour
Inc. in retail sales of sports apparel and foot-
IN DEPTH
wear, according to Sterne Agee and SportS-
canInfo.
When Herbert took over, America was a
problem, says Christophe Bezu, former head
of Adidas Asia Pacific, who left in 2011 after
almost 24 years with the company. America
has always been a problem, and despite seri-
ous efforts nobody has been able to fix it.
Mr. Hainer declines to be interviewed. In a
financial presentation this month, he said Adi-
das underperformed in North America and
we are all disappointed.
Mr. Hainer wants to reboot in the U.S. with
Mr. King, an Adidas-group veteran who took
over North American operations last June. Mr.
King, an American, says headquarters in Her-
zogenaurach, Germany, has given him more
leeway than predecessors to craft a U.S.-spe-
cific strategy.
America is a very different mind-set from
Germany, Mr. King says. Thats really the
epiphany.
Branding and product creation for most
products sold in America will originate in the
U.S. for the first time, Mr. King says. Last
year, he announced plans to hire three Nike
shoe designers for a new Brooklyn, N.Y., stu-
dioAdidass first American design outpost
outside U.S. headquarters in Portland, Ore.
Mr. King in December signed a sponsorship
with Arizona State University, a Nike school.
He persuaded headquarters to let him sponsor
up to 500 National Football League and Major
League Baseball players over the next few
years, up from the few dozen Adidas sponsors
today. I know were a soccer brand globally,
he says, but in the U.S. we have to be about
U.S. sport.
Some retailers are skeptical Adidas has
changed its stripes. Christine Noh, who runs
Nohble, a New York area chain of street-wear
stores, says she has cut back Adidas allot-
ments. Its representatives arent as attentive
as rivals to her input on what shoes will reso-
nate with consumers, she says, and Adidas
tends to flood the market when it has a hit,
depressing prices.
If your upper management is in Germany,
and they dont know Flatbush from Harlem
from Virginia, she says, its hard to have
that information percolate back up to the top
Point Spread
North American sales,
change from a year earlier
40% Adidas
Nike
30 Under Armour
20
10
0 ground in America and in Herzogenaurach
10
2011 12 13 14
Note: Nike scal years end May 31. Adidas and Under Armour
operate on a calendar year. Percentages reect currency-neutral
change in sales for Nike and Adidas, change in sales for Under
Armour.
Source: the companies
THE WALL STREET JOURNAL.
and have that action executed.
The Adidas spokeswoman says: We listen
to retailers and consumers every day and
make our business decisions based on that
collective insight. She says Adidas has re-
cently reorganized its sales teams to have
dedicated reps for its Adidas and Reebok
brands.
A picture of upper managements U.S. mis-
steps emerges from interviews with more than
20 current and former Adidas executives.
Founded by German athlete and shoemaker
Adolf Dassler in 1949, Adidas turned sneakers
into mainstream-fashion items. Its three-
striped shoes were everywhere in America in
the 1970s. Industry veteran John Horan,
Sporting Goods Intelligences publisher, esti-
mates Adidas had the majority U.S. sports-
footwear market share at the time.
In 1984, Adidas made a misstep that pre-
saged others. A University of North Carolina
basketball star named Michael Jordan wanted
a sponsorship deal with Adidas when he went
professional, say people familiar with the mat-
ter.
Adidas distributors wanted to sign Mr. Jor-
dan, says someone who was an Adidas distrib-
THE WALL STREET JOURNAL.
Getty Images (far left); Agence France-Presse/Getty Images
utor then. But executives in Germany decided
shoppers would favor taller players and
wanted to sponsor centers, the person says,
adding: We kept saying, Nono one can re-
late to those guys. Who can associate with a
seven-foot-tall guy?
Adidas signed centers of the era, including
Kareem Abdul-Jabbarit still sells sneakers
named for him. Mr. Jordan in 1984 signed
with Nike, which built his name into a block-
buster basketball business. Mr. Jordan and
Adidas decline to comment.
Tensions between Adidass people on the
would continue for decades, say company vet-
erans. The Americans always asked to be al-
lowed to do what they wanted, says Mr. Bezu,
the former Adidas executive, while headquar-
ters was maybe a bit too dogmatic.
An Adidas spokeswoman says each U.S.
leader had a long and successful track re-
cord.
Adidas got a pop-culture boost in 1986
when hip-hop group Run-DMC released My
Adidas, a song lauding the rap worlds favor-
ite shoes. But the boost diverted Adidas from
its sports markets, hurting business when the
trend waned, say former executives and dis-
tributors.
The spokeswoman says Adidas is first and
foremost a sports brand but says its fusion of
sports and lifestyle is a unique attribute.
By the 1990s, Nike was gaining as its
swoosh adorned a broad range of stars, from
Olympian Carl Lewis to tennis champ Andre
Agassi. It began designing an annual signature
shoe for Mr. Jordan, driving consumers to buy
again and again.
When Mr. Hainer ascended in 2001, Adi-
dass market share was rising globally but fall-
ing in the U.S. He became known as a disci-
plined CEO who focused on spreadsheets,
several Adidas executives say.
Erich Joachimsthaler, a business consul-
tant who has worked with Adidas, says Mr.
Hainers analytical, long-term view has helped
walk a fine line between stability and re-
sponding to the latest fashion trends. Run-
ning almost 54,000 employees in 160 coun-
tries, you need strategic planning and an
approach like Hainers.
 THE WALL STREET JOURNAL. Monday, March 23, 2015 | 13

IN DEPTH
Some former Adidas executives say that
analytical style could sometimes keep German
headquarters out of touch with U.S. consum-
ers.
During Mr. Hainers tenure, Adidas had
four U.S. bosses before Mr. King. In 2005, Adi-
dass U.S. retail market share had fallen to
about 10% in sports shoes, says industry re-
searcher SportsOneSource, versus Nikes
roughly 35% and Reeboks 8%.
That year, Mr. Hainer agreed to buy Ree-
bok for roughly $3.8 billion. In 2006, he
signed a deal, estimated at $400 million, to
supply the National Basketball Associations
jerseysrights previously belonging to Ree-
bokthrough 2017.
Mr. Hainer boasted Adidas was gaining on
Nike, telling a German newspaper that year:
They feel us breathing down their back.
The Reebok deal surprised top staff in
America, say former U.S. executives. From
the moment we started looking at the num-
bers, we knew it was a screwed-up business
and that wed paid too much, says a former
Adidas executive involved in handling the af-
termath.
Efforts to fix Reebok diverted resources
from the Adidas brand, say several former ex-
ecutives.
The Adidas spokeswoman says that like
all deals of this size, only a small amount of
Bloomberg News

people worked on the preparation, adding

that Reebok was not at its top when we ac-
quired it, but we believed and firmly believe
in the long-term growth potential of the
brand.
Having the NBA logo deal didnt stop the
long-term market-share slide. American shop-
pers tend to choose shoes based on what stars
wear, not on what a team wears. Adidas did
sign some stars, such as Kobe Bryant. But
Nike was particularly adept at landing top
current-talent endorsements and had a deep
vault of signature shoes for former stars it
could reintroduce. Nike now has more than
90% of the U.S. basketball-shoe retail market,
SportsOneSource says.
In 2005, Adidas agreed to buy
Reebok for roughly $3.8 billion.
Efforts to fix Reebok diverted
resources from the Adidas
brand, former executives say.
In 2010, Mr. Hainer unveiled a five-year
plan to make Adidas the leading sports brand
in the world, projecting sales growth of more
than 45%. One target was underpenetrated
markets such as the United States.
The plan called for winning U.S. share by
converting Reeboka sports brandinto a fit-
ness brand. Adidas also set aggressive targets
in American basketball shoes, says Robert
Cape Capener, who ran Adidass U.S. basket-
ball division then. His division hit its goals in
the first few years, but momentum slowed and
executives lost enthusiasm, he says. He says
Getty Images
A woman wheels a rack of Adidas sportswear
at company headquarters in Herzogenaurach,
Germany. America is a very different mind-set
from Germany, Mr. King says.
Adidas has very strong assets, very strong
athletes, very smart people but needs to fix
whats happening in the U.S.
The Adidas spokeswoman says it hit North
America targets from 2010 through 2012.
Meanwhile, the U.S. market was shifting
toward athleisure, in which workout clothes
became everyday wear. Companies like Lulu-
lemon Athletica Inc. made pricey yoga pants
desirable, and niche sportswear competitors
began filling retailers racks.
And Adidas faced new competition in Ske-
chers USA Inc., which has became the No. 4
sports-footwear brand, according to Sterne
Agee and SportScanInfo.
Last year, Patrik Nilsson, then Adidass
North America chief, invited CEOs from three
U.S. sports retailers to Germany to convey
shoppers tastes, say people familiar with the
trip. Among their messages: Make more prod-
uct variations, more quickly. Adidas product
cyclefrom drawing board to marketis
about 18 months.
Ken Hicks, who retired as Foot Locker
Inc.s CEO in December and was on the trip,
says Adidas managers were successful and
they took their eye off the ball a bit and didnt
keep the next generation coming.
The Adidas spokeswoman says Mr. Hainer
has a long-standing personal relationship
with all our major retail partners.
Competitive Field
Adidas boosted sales by buying Reebok, but its shoe market share resumed its decline as Nikes rose,
and it faced a new apparel competitor in Under Armour.
U.S. athletic footwear wholesale market share U.S. athletic apparel wholesale market Nike
share 10.3%
50% 10%
40 8
Nike 47.1%
30 6 Under Armour 4.9%
20 4
Adidas 9.7%
10 2
Adidas 4.5%
0 0
2000 05 10 2000 05 10
Note: From 2004, Nike includes Converse. From 2005, Adidas includes Reebok. 2014 data not available.
Source: Sporting Goods Intelligence THE WALL STREET JOURNAL.
Adidas has had notable successes like its This year, it introduced a much-anticipated
ZX Flux and Boost shoes and in signing young sneaker, the Yeezy Boost, designed with rap-
guards like Portland Trail Blazers star Damian per Kanye West. The initial run sold out.
Lillard. Reebok is showing signs of growth. Adidas plans to bring more American fla-
Adidas last week said it wont renew its vor to products, Mr. King says.
NBA contract and will instead focus on youth We have so many assets that nobody
basketball, developing new products and dou- knows about, and if we could tell those stories
bling its NBA-player roster. in a much better, U.S.-centric way, this brand
Mr. King says Adidas is working to shorten in a very short time could definitely change
product cycles to no more than six months. its cool factor, he said.

Founded by German athlete and shoemaker Adolf Dassler in 1949, Adidas turned sneakers into mainstream-fashion items. Its three-striped shoes were everywhere in America in the 1970s.
14 | Monday, March 23, 2015
I
ts the hottest trend among tax
collectors, raising a gusher of rev-
enue for spendthrift governments
worldwide. We refer to the value-
added tax (VAT), and a new report
from accounting firm Ernst & Young
says that VAT systems are spreading
around the world and rates are ris-
ing. Americans, be warned.
The VAT is a sort of turbo-charged
national sales tax on goods and serv-
ices that is applied at each stage of
production, not merely on retail trans-
actions. Politicians love it because it is
the most efficient revenue-raiser
known to man, and its rates can be
raised gradually to finance new enti-
tlements or fill budget holes. The VAT
is typically introduced with a low rate
but then moves up over time until it
swallows huge chunks of national
economies.
E&Y finds that rates have been ris-
ing again, especially since the financial
panic and recession. E&Y says stan-
dard VAT rates now average a knee-
buckling 21.6% in the European Union,
up from 19.4% in 2008. Average stan-
dard rates in the industrial countries
of the Organization for Economic Co-
operation and Development have
climbed to 19.2% from 17.8% in 2009.
Japan is another example of the
VAT upward ratchet. The Liberal Dem-
ocratic Party tried to introduce the tax
for years and finally succeeded with a
O
nce again President Obama is
betting on the youth vote. In
this case, Irans. On Thursday
the president released a video timed
for Nowruz, the Persian new year. Mr.
Obama extends his greetings on the
holiday and goes on to urge Irans
people to push the regime in Tehran
to agree to the reasonable deal that
he is offering them on its nuclear
weapons program.
Irans leaders have a choice between
two paths, Mr. Obama says on the
The IRS Gets Out the Vote
T
he U.S. is going to need more IRS
agents. Thats the gist of Presi-
dent Obamas latest bid to im-
pose yet another mandate on the Amer-
ican people. This time he wants to
require all Americans to vote, whether
they want to or not.
In Cleveland on Wednesday the Pres-
ident called for compulsory voting in
response to a question from the audi-
ence. What, the questioner inquired, is
the best way to limit money in elec-
tions and overturn the Supreme Courts
decision in Citizens United, in which the
Comments? The Journal welcomes
readers responses to
all articles and editorials. It is important to
include your full name, address and
telephone number. Please send letters to
the editor to: Letters@WSJ.com
THE WALL STREET JOURNAL.
OPINION: REVIEW & OUTLOOK
The Global VAT Craze
3% rate in 1989. Eight years later it the big VAT mistakean all-time high, ton Friedman often said that the best
was raised to 5%. Last year it climbed according to E&Y. The number of VAT taxes were those that taxpayers could
to 8%, whacking consumption and countries has tripled since 1990. And feel so they would be difficult to raise.
sending the economy back to negative the report clarifies how unkind such We miss those guys.
growth. The rate was scheduled to hit tax regimes can be to taxpayers. Some Liberals also love the VAT because
10% later this year, though the govern- economists promote VATs as efficient of the way it makes every business an
ment has delayed that until 2017. Rest replacements for corporate or personal aggressive tax collector. Businesses
assured the 10% rate is still coming. income taxes. But Mr. Bulk reports pay the tax when they buy things, and
And it will keep climb- that most of the time a then collect it from the next purchaser
ing. A new study shows VAT is introduced it is in the supply chain. The businesses
We say standard
rates because while VAT
the value-added tax in addition to other
taxes, not as a replace-
get a rebate on the portion they paid
when they remit to the government
systems are often pre- is rising world-wide. ment. the sums they collected, so the system
sented as models of sim- Take Italy. E&Y re- motivates all companies to ensure
plicity that theoretically ports that the standard taxes are paid in full.
treat all goods and services alike, poli- VAT rate will rise to 24% in 2016 from The U.S. is a rare industrial nation
ticians cant resist picking winners 22% if Italy fails to meet certain finan- that doesnt have a VAT, though dont
and losers, creating higher or lower cial targets, with further potential in- think it cant happen there. Liberals
rates for industries at their whim. creases planned in 2017 and 2018 campaign on soaking the rich, but they
The politicians always start running that could take the rate beyond 25%. know theres only so many rich to
with exemptions, says E&Ys Gijsbert But Italy still also suffers from one of soak. To finance the growing entitle-
Bulk. the highest corporate tax rates in Eu- ment state, they need a new broad-
In Luxembourg, renovation of rope at roughly 31%. based tax that hits the middle class,
rented dwellings triggers a relatively Because VATs are embedded in the where the big money is. That means
low 3% VAT, though the countrys price of products, they can often rise either a VAT or a new energy tax, like
standard rate has recently moved to unnoticed by the consumer, which is the BTU tax Bill and Hillary Clinton
17% from 15%. Following a court fight why liberals love them as a vehicle for proposed in 1993 or the cap-and-tax
in Ireland, the VAT exemption for golf periodic stealth-tax hikes. While retail scheme that President Obama wanted.
greens fees has recently been ex- sales taxes applied by states and local- Well think about supporting a VAT
panded to cover visitors at nonprofit ities in the U.S. are generally made ex- when liberals vote to repeal the 16th
clubs. Meanwhile, cleanliness is now plicit to the consumer, it is customary Amendment that allowed the income
more expensive in Spain, as E&Y re- in many VAT jurisdictions overseas to tax. Barring that, like the rest of the
ports that the VAT rate on certain prohibit shoppers from seeing the por- world, Americans would get a VAT in
sanitary products has been lifted to tion of their bill that goes to funding addition to the countless taxes they al-
21% from 10%. government. ready pay. We can see where that
As of 2014, 164 countries had made This is why Ronald Reagan and Mil- leads.
Pleading With Iran
video. They can accept his deal, or stay election was stolen from them by then- was seeing.
on a path that has isolated Iran, and President Mahmoud Ahmadinejad and Then again, the reality is that the
the Iranian people, from so much of the the mullahs who run the country. In re- timing of Mr. Obamas video has noth-
world, caused so much sponse, Iranians took to ing to do with Norwuz celebrations and
hardship for Iranian fami- Obama appeals to the streets in numbers is not really meant for Irans young,
lies, and deprived so
many young Iranians of
the people he failed revolutionand
not seen since the 1979
were
who have no say over what their lead-
ers do. The timing has everything to do
the jobs and opportuni- to speak for in 2009. ruthlessly crushed even with the fast-approaching March 31
ties they deserve. as they looked to Amer- deadline for a nuclear deal, and Mr.
The President no ica for moral support. Obamas real audience is the regimes
doubt hopes young Iranians have for- Not until the violence became too bla- leadership. Theyll make their choice
gotten how in June 2009 he met their tant to ignore did President Obama say based on cold realpolitik, not pleas to
appeals for his support after the Iranian he was deeply troubled by what he their powerless people.
Pepper . . . and Salt
THE WALL STREET JOURNAL
Justices declaredrightlythat limits taste of what President Obamas fond-
on union and corporate spending on ness for government by mandate
campaigns was a limit on free speech? means. Before it won its Supreme
The President invoked Australia and Court case, the crafts chain Hobby
went on to recommend Lobby was faced with
that the U.S. require The President fines of $1.3 million for
Americans to vote as
they do Down Under. It
has another offer every day it refused to
obey the contraceptive
would be transformative you cant refuse. mandate. This year, with
if everybody voted, said the April 15 tax deadline
Mr. Obama. That would approaching, many
counteract money more than anything. young and healthy Americans who
Hes surely wrong about the money have disobeyed the Obama mandate to
point. Politicians would have to spend buy health insurance from the govern-
as much as ever to sway more voters. ments limited menu are going to have
But it would be transformative. By defi- to deal with the IRS.
nition a legal mandate requires enforce- Everything not forbidden is compul-
ment. Even the good-natured Aussies sory. That line comes from British
impose a fine for not voting, which can writer T.H. White, in his novel re-
expand to include court costs and jail creating the life and times of King Ar-
time if you dont cough up. thur. White meant it as mockery. Presi-
Some Americans have already got a dent Obama doesnt get the joke. Whats with all the sleeping at night?
THE WALL STREET JOURNAL.
[ Journal Interview ]
with Abdel Fattah
Al Sisi
BY BRET STEPHENS
Cairo
When Mohammed Morsi,
Egypts president at the time, ap-
pointed a little-known general
named Abdel Fattah Al Sisi to be
his new defense minister in Au-
gust 2012, rumors swirled that the
officer was chosen for his sympa-
thy with the teachings of Mr.
Morsis Muslim Brotherhood. One
telltale sign, people said, was the
zabiba on the generals forehead
the darkened patch of skin that is
the result of frequent and fervent
prayer.
A pious Muslim must surely
also be a political Islamistor so
Mr. Morsi apparently assumed.
But the general would soon give
the world a lesson in the differ-
ence between religious devotion
and radicalism.
There are misconceptions and
misperceptions about the real Is-
lam, now-President Sisi tells me
during a two-hour interview in his
ornate, century-old presidential
palace in Heliopolis. Religion is
guarded by its spirit, by its core,
not by human beings. Human be-
ings only take the core and devi-
ate it to the right or left.
Does he mean to say, I ask, that
members of the Muslim Brother-
hood are bad Muslims? Its the
ideology, the ideas, he replies.
The real Islamic religion
grants absolute freedom for the
whole people to believe or not be-
lieve. Never does Islam dictate to
kill others because they do not be-
lieve in Islam. Never does it dic-
tate that [Muslims] have the right
to dictate [their beliefs] to the
whole world. Never does Islam say
that only Muslims will go to para-
dise and others go to hell.
Jabbing his right finger in the
air for emphasis, he adds: We are
not gods on earth, and we do not
have this right to act in the name
of Allah.
i i i tian foreign policy, despite sugges-
When Mr. Sisi took power in
July 2013, following street pro-
tests against Mr. Morsi by an esti-
mated 30 million Egyptians, it
wasnt obvious that he would
emerge as perhaps the worlds
most significant advocate for Is-
lamic moderation and reform. His
personal piety aside, Mr. Sisi
seemed to be a typical Egyptian
military figure. Unflattering com-
parisons were made to Hosni
Thorold Barker, Editor,
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2015 Dow Jones & Company. All Rights Reserved
Islams Improbable Reformer
Mubarak, a former air-force gen-
eral and Egypts president-for-life
until his downfall in 2011.
The similarities are misleading.
Mr. Mubarak came of age in the
ideological anticolonialist days of
Egypts President Gamal Abdel
Nasser, trained in the Soviet
Union and led the air campaign
against Israel in the 1973 Yom Kip-
pur War. Anwar Sadat elevated
him to the vice presidency in 1975
as a colorless second-fiddle, his
very lack of imagination being an
asset to Sadat. He became presi-
dent only due to Sadats assassi-
nation six years later.
Mr. Sisi, now 60, came of age
in a very different era. When he
graduated from the Military Acad-
emy, in 1977, Egypt was a close
U.S. ally on the cusp of making
peace with Israel. Rather than be-
ing packed off to Russia, he
headed for military training in
Texas and later the infantry
course at Fort Benning, Ga. He re-
turned for another extended stay
in the U.S. in 2005 at the Army
War College in Carlisle, Pa.
Recalling the two visits, he
notes the difference. The U.S. had
been a community that had been
living in peace and security. Be-
fore 9/11, even the military bases
were open. There was almost no
difference between civilian life
and life on a military base. By
2005, I could feel the tightening.
We are keen on a strategic
relationship with the U.S.
above everything else,
says Egypts new president.
And we will never turn our
backs on youeven if you
turn your backs on us.
The remark is intended to un-
derscore to a visiting American
journalist his deep sympathy with
and admiration for the U.S. He
also goes out of his way to stress
that he has no intention of alter-
ing the pro-American tilt of Egyp-
tions that he is flirting with
Russias Vladimir Putin for poten-
tial arms purchases and the con-
struction of Egypts first nuclear
power plant.
A country like Egypt will
never be mischievous with bilat-
eral relations with America, he
insists. We will never act fool-
ishly. When I ask about the deliv-
ery of F-16 fighters to Egyptsus-
pended by the U.S. after Mr.
Morsis overthrow, and now pend-
ing a decision by President
Obamahe all but dismisses the
matter.
You can never reduce our rela-
tions with the U.S. to matters of
weapons systems. We are keen on
a strategic relationship with the
U.S. above everything else. And
we will never turn our backs on
youeven if you turn your backs
on us.
There is also a deeper purpose
to Mr. Sisis pro-American entreat-
ies and his comments on 9/11: He
wants to remind his critics of the
trade-off every country strikes be-
tween security and civil liberties.
Its a point he returns to when
I note the anger and disappoint-
ment that so many Egyptian liber-
alsmany of whom had backed
him in 2013now feel. New laws
OPINION
Zina Saunders
that tightly restrict street protests
recall the Mubarak era. Last June
several Al Jazeera journalists, in-
cluding Australian reporter Peter
Greste, were sentenced to lengthy
prison terms on dubious charges
of reporting that was damaging
to national security, though they
have since been released. The
Muslim Brotherhood has been
banned, Mr. Morsi is in prison and
on trial, and Egyptian courts have
passed death sentences on hun-
dreds of alleged Islamists, albeit
mostly in absentia.
My message to liberals is that
I am very keen to meet their ex-
pectations, Mr. Sisi rejoins. But
the situation in Egypt is over-
whelmed. He laments the Al
Jazeera arrests, noting that the in-
cident damaged Egypts reputation
even as thousands of international
correspondents are working very
freely in this country.
Later, while addressing a ques-
tion about the Egyptian economy,
he offers a franker assessment. In
the last four years our internal
debt doubled to $300 billion. Do
not separate my answer to the
question regarding disappointed
liberals. Their country needs to
survive. We dont have the luxury
to fight and feud and take all our
time discussing issues like that. A
country needs security and order
for its mere existence. If the world
can provide support I will let peo-
ple demonstrate in the streets day
and night.
Sensing my skepticism, he
adds: You cant imagine that as
an American. You are speaking the
language of a country that is at
the top of progress: cultural, fi-
nancial, political, civilizational
its all there in the U.S. But if
American standards were imposed
on Egypt, he adds, it would do his
country no favors.
I talk about U.S. values of de-
mocracy and freedom. They
should be honored. But they need
the atmosphere where those val-
ues can be nurtured. If we can
bring prosperity we can safeguard
those values not just in words.
All of this seems in keeping
with Mr. Sisis military upbringing
and reminds me of Pervez
Musharraf, the former Pakistani
general turned president. But the
comparison is fundamentally in-
apt. Under Mr. Musharraf, Paki-
stan continued to make opportu-
nistic deals with terrorists while
giving safe harbor to leaders of
the Afghan Taliban.
By contrast, its impossible to
doubt the seriousness of Mr. Sisis
opposition to Islamic extremism,
or his aversion to exporting insta-
bility. In late February he ordered
the bombing of Islamic State tar-
gets in neighboring Libya after Is-
lamic State decapitated 21 Egyp-
tian Coptic Christians. Egypts
security cooperation with Israel
has never been closer, and Mr. Sisi
has moved aggressively to close
the tunnels beneath Egypts bor-
der with Gaza, through which
Hamas has obtained its weapons.
Later this month, Mr. Sisi will
host an Arab League summit, the
centerpiece of which will be a joint
Arab antiterrorism task force. He
says he wont put Egyptian boots
on the ground to fight Islamic
State in Iraq, which he says is a
job for Iraqis with U.S. help. And
he takes care to avoid mentioning
Irans regional ambitions or saying
anything critical of its nuclear ne-
gotiations, which he says he sup-
ports while adding that I under-
stand the concern of the Israelis.
But he does say the new force
is needed to preserve what is
left of the stable Arab world. In
particular, he stresses that there
shouldnt be any arrangements at
the expense of the Gulf states. The
security of the Gulf states is indis-
pensable for the security of
Egypt.
He also decries the Western
habit of intervening militarily and
then failing to take account of the
consequences. Look, NATO had a
mission in Libya and its mission
was not accomplished, he says of
the North Atlantic Treaty Organi-
zation. The United Nations contin-
ues to impose an arms embargo
on Libya that adversely affects the
legitimate, non-Islamist govern-
ment based in Tobruk while
armed militias obtain an unstop-
pable flow of arms and muni-
tions.
I wasnt with the Gadhafi re-
gime, he says, but there is a dif- colloquial American English, You
ference between taking an action
and being aware of what that ac-
tion will bring about. The risks of
extremism and terrorism werent
Monday, March 23, 2015 | 15
clear in the minds of the U.S. and
Europe. It is really dangerous if
countries lose control because ex-
tremists will cause them problems
beyond their imagination. The
same lesson, he emphasizes, ap-
plies to the U.S. invasion of Iraq.
But Mr. Sisi is not a dogmatic
critic of muscular U.S. involve-
ment in the Middle East. Ponder-
ing the prospect of a broad U.S.
retreat from the region, Mr. Sisi
sounds like the most enthusiastic
proponent of Pax Americana.
The United States has the
strength, and with might comes
responsibility, he says. That is
why it is committed and has re-
sponsibilities toward the whole
world. It is not reasonable or ac-
ceptable that with all that might
the United States will not be com-
mitted and have responsibilities
toward the Middle East. The Mid-
dle East is passing through the
most difficult and critical time
and this will only entail more in-
volvement, not less.
Meantime, Mr. Sisi sees it as
his personal mission to save
Egypt, even as he insists he has no
intention of becoming another
president-for-life. When I ask him
to name Mr. Mubaraks biggest
mistake, he says simply: He
stayed in power for a long time.
A day before our interview, I
watched him close an investment
conference in the resort town of
Sharm el-Sheikh, where he cele-
brated General Electrics decision
to invest to ease Egypts chronic
power outages. He describes his
economic philosophy as the need
to encourage the business commu-
nity to come here and invest. He
constantly stresses the imperative
of acting swiftly: The magnitude
of the effort needed to secure the
needs of 90 million people is huge
and beyond any one mans effort.
Hes also aware that the most
important work will take time. In
January Mr. Sisi went before the
religious clerics of Cairos Al-
Azhar university to demand a
revolution in Islam. The follow-
through wont be easy. The most
difficult thing to do is change a
religious rhetoric and bring a shift
in how people are used to their re-
ligion, he says. Dont imagine
the results will be seen in a few
months or years. Radical miscon-
ceptions [about Islam] were in-
stilled 100 years ago. Now we can
see the results.
Thats not to say he doesnt
think its doable. Popular sympa-
thy with the idea of religion was
dominating the whole scene in
Egypt for years in the past. This
does not exist anymore. This is a
change I consider strategic. Be-
cause what brought the Muslim
Brotherhood to power was Egyp-
tian sympathy with the concept of
religion. Egyptians believed that
the Muslim Brothers were advo-
cates of the real Islam. The past
three years have been a critical
test to those people who were
promoting religious ideas. Egyp-
tians experienced it totally and
said these people do not deserve
sympathy and we will not allow
it.
Throughout our interview, Mr.
Sisi has been speaking in Arabic
through an interpreter. But after
delivering this point, he said in
got that?
Mr. Stephens writes the Jour-
nals Global View column.
16 | Monday, March 23, 2015
Only Technocrats Can Save Greece Now
BY YANNIS PALAIOLOGOS
On Monday in Berlin, Greeces
prime minister, Alexis Tsipras, will
have his first meaningful bilateral
meeting with Germanys chancellor,
Angela Merkel. The omens are not
encouraging.
Video emerged last week of
Greeces current Finance Minister,
Yanis Varoufakis, raising his middle
Associated Press
finger at Germany during a speech
in 2013. Greeces demands for World
War II reparations from Germany,
among other provocations, seem to
have turned the German public deci-
sively in favor of a divorce. In a You-
Gov poll last week, 59% of Germans
said they would prefer that Greece
leave the eurozone, up from 48% a
month earlier.
After the miniature summit in
Brussels in the early hours of Friday
in which they both participated, Mr.
Tsipras and Mrs. Merkel seemed to
emerge with very different under-
standings of what they had agreed
Athens will wrest further
concessions from creditors
only if it can convince them
its numbers add up.
to. The same divergence of interpre-
tation has plagued Greeces Feb. 20
agreement to extend its bailout by
four months.
This is no accident. The new
government in Athens is trapped
between its pre-election promises to
voters and the demands of its credi-
tors. Under the specter of a shut-
down of the banks and the imposi-
tion of capital controls, Mr.
Varoufakis signed on to the Febru-
ary deal, which left the bailout in-
frastructure essentially in place if
Big Pharma Needs to Get Busy
BY GARY PISANO
The average cost of developing a
single new drug has reached $2.6
billion, according to a 2014 study
by the Tufts Center for the Study of
Drug Development. Is this figure ac-
curate? It depends who you ask:
Critics of the drug industry say
companies use the expense num-
bers to justify high prices. But drug
companies defend the estimates.
A March 4 event offered a new
data point. The biotech firm Phar-
macyclics agreed to be purchased
by drug maker AbbVie for $21 bil-
lion after a heated bidding process.
Pharmacyclics has one drug ap-
proved by the U.S. Food and Drug
AdministrationImbruvicafor
various blood cancers. Its other
drugs are in the early stages of de-
velopment, so AbbVie in essence
paid $21 billion for Imbruvica. No
one really knows whether this price
is too high. That will depend on
how much AbbVie can expand the
market for Imbruvica.
As expensive as the Pharmacy-
clics deal may be, it reflects a
broader trend of pharmaceutical
companies acquiring drugs instead
of developing them. In the past
few years, pharmaceutical compa-
nies desperate to refill thinning
pipelines have forked over several
NUMBERS AND FIGURES From left, Germanys Chancellor Angela Merkel, Frances
President Franois Hollande and Greeces Prime Minister Alexis Tsipras in Brussels
last week.
under different names. (The troika
of the European Central Bank, Euro-
pean Commission and the Interna-
tional Monetary Fund became the
institutions, the new program to
be agreed by June would be a con-
tract, and so on.)
Since then, the Greek govern-
ment has pretended that what it
agreed to was something com-
pletely different from the continua-
tion and completion of the existing
program. That program, within the
vague limits of flexibility set out by
the February deal, is a necessary
condition for any new funding to be
released to Athens.
Yet the prime minister and his
top lieutenants keep insisting to
their domestic audience that auster-
ity is over, that the oversight of fis-
cal data and policy proposals by the
creditors staff is a thing of the past,
and that national sovereignty has
been reclaimed. They have obsessed
over where negotiations will take
place and whether a Greek photog-
rapher will be able to spot some
member of the institutions techni-
cal teams entering a ministerial of-
fice in Athens. They have done too
little on the only front that matters:
hundred billion dollars on acquisi-
tionsmany times more than what
they spent on their own research
and development. In December, for
instance, Merck acquired antibiotic
company Cubist Pharmaceuticals
for $8.4 billion. These acquisitions
are not accounted for as R&D on
the income statement, but eco-
nomically they amount to R&D ex-
penditures.
This raises the question: Are
pharmaceutical companies paying
more for R&D by acquiring compa-
nies than by carrying out the R&D
themselves? The acquisitions would
suggest they are.
Consultants, Wall Street analysts
and pundits have long urged phar-
maceutical companies to cut back
on internal research and buy drugs
from small biotech companies in-
stead. Invoking various theories
about economies of specialization
and the efficiency of small firms,
theyve argued that it is cheaper
and less risky to buy from the out-
side than to develop on the inside.
This argument has been repeated
so often and for so longI first
heard it in 1985that it has almost
become beyond dispute.
Theres just one problem: Its
wrong. In my own research, I com-
pared the costs over a 20-year pe-
riod of drug development at large
OPINION
constructing a fully fledged, meticu-
lously budgeted reform program
that creditors will approve, leading
to the release of the 7.2 billion
($7.79 billion) without which Greece
will likely default by mid-April.
As leader of the opposition, Mr.
Tsipras made much of the perceived
national humiliation involved in the
troika review process. He harped on
the horror of having what they de-
scribed as low-level pencil-pushers
question ministers about the prog-
ress of measures mandated by the
bailouts.
Athens was caught in a negative
feedback loop. The unwillingness
and inability of the Greek political
system and the bureaucracy to im-
plement the agreed-upon reforms
made the troika particularly inva-
sive in its inspections. That kind of
micromanagement was bound to
lead to a backlash.
But when Mr. Tsipras contrasts
technical reviews unfavorably with
his preferred methodthat of a
political negotiationhe misses
the point. A political negotiation
can lead to concessions by Greeces
creditors on the targets of the pro-
gram, something already achieved
pharmaceutical companies and
biotech firms. I found no meaning-
ful difference on average between
what large pharmaceutical compa-
nies and biotech companies spent
to successfully develop a drug. The
blanket generalizations about bio-
tech firms being more efficient are
unfounded.
Generalizations about
biotech firms being more
efficient are unfounded.
Beyond that, the cost of buying
a company that owns a desirable
drug depends on supply and de-
mand of drug assets. Those urging
pharmaceutical companies to scale
back on drug discovery have as-
sumed that the supply of available
new-drug candidates would be high
enough to keep prices low. The
price of the Pharmacyclics acquisi-
tion, however, suggests that this as-
sumption was badly off base. The
supply of high-quality assets like
Imbruvica is actually quite scarce,
while a surging demand for block-
busters is coming from pharmaceu-
tical companies with few of their
own discoveries in stock.
Pharmaceutical companies thus
with the February agreements flexi-
bility on the level of the primary fis-
cal surplus Athens must achieve.
But the Germans will never allow
the political to operate indepen-
dently of the technical.
They will not grant any leeway
without having a full picture of the
economic and fiscal situation in
Greece, and of how it is projected to
evolve under concrete policies pro-
posed by Athens. That is why Mrs.
Merkel got the IMF involved to be-
gin withso that their objective,
politics-free assessments could en-
sure a rigorous process, which in
her view was unlikely under the
faint-hearted tutelage of the Euro-
pean Commission.
Mr. Tsipras needs to explain very
specifically why he believes Greek
growth will be at 1.5% or higher this
year, and how he arrived at an esti-
mate for this years primary fiscal
surplus of 1% to 1.5% of gross domes-
tic product, both numbers he men-
tioned in his Friday press conference
in Brussels. Greeces creditors will be
particularly keen to find out how
that primary surplus level can be
achieved without recessionary mea-
sures (again, Mr. Tsiprass formula-
tion), given that it came in below
target last year at 0.3% of GDP.
In a speech to Parliament last
week, the prime minister proudly
announced that his government was
putting an end to the practice of
having technocrats write legislative
bills. He should reconsider. Politics
has taken him as far as it can. To
move forward, and keep at bay a ca-
tastrophe of historic proportions for
Greece, it is the technocrats skills
that he now needs.
Mr. Palaiologos, a journalist at Ka-
thimerini newspaper in Athens, is
the author of The Thirteenth La-
bour of Hercules (Portobello
Books, 2014).
increasingly find themselves in bid-
ding wars to acquire the most
prized external assets, a process
that will inevitably increase what
they must pay to acquire these
drugs. And who ultimately pays the
price for these higher costs? Under
the current system, they are passed
along to patients in the form of
higher prices.
Clearly, patients, society and
pharmaceutical companies would
all be better off if there were more
investment in drug research; gov-
ernment can do its part by revers-
ing funding cuts for basic biomedi-
cal research and streamlining
regulatory processes. Pharmaceuti-
cal companies can do their part.
While they still need to collaborate
with partners like biotech firms and
universities, no pharmaceutical
company will survive without
strong internal science and re-
search. Those with such capabilities
will not only benefit their bottom
line over the long term but make a
much greaterand much needed
contribution to society.
Mr. Pisano, a professor of business
administration at Harvard Business
School, is the author of Science
Business: The Promise, the Reality,
and the Future of Biotech (Har-
vard Business School Press, 2006).
THE WALL STREET JOURNAL.
Fed Forecast:
Cloudy With
A Chance
Of Slowdown
BY DAVID MALPASS
Financial markets applauded the
U.S. Federal Reserve last week
when it straddled the fence on rate
hikes, but the bigger message was
the downgrade in its growth fore-
cast to 2.5% in 2015. That means
another year stuck in the weak
new normal that began in 2009.
Yes, the stock market has
reached record highs. But real me-
dian household income has fallen to
below $52,000 in 2011-13 from
more than $56,000 in 2007.
Near-zero rates and the Feds
rapidly expanding regulatory con-
trol of finance have put the Fed at
the center of capital allocation.
This has caused credit to gravitate
to well-established borrowers at
the expense of more growth-ori-
ented savers and borrowers.
The Feds belief that near-zero
rates lead to growth is deeply em-
bedded, but experience shows that
growth comes from private-sector
dynamism, which thrives on market
pricing, not artificially low rates.
The Fed stopped saying it
would be patient about hiking
rates. Thats a nod to the interest-
rate normalizers, who argue that
small rate hikes will increase loan
demand (to get ahead of rate
hikes), incentivize saving and lend-
ing, unfreeze the moribund inter-
bank market and begin to unwind
the Feds takeover of the markets
role in capital allocation.
While that part of the Feds state-
ment was good, the Federal Open
Market Committee (FOMC) had to
lower its view of appropriate 2015-16
interest rates due to falling expecta-
tions for growth and inflation.
Wednesdays new Fed view showed
slower growth and roughly one less
hike each year than in December. It
pointed to a 2% Fed-funds rate at the
end of 2016 rather than 2.5% in the
Feds previous view. That would still
be pro-growth, but theres a risk the
Fed wont be able hike rates in 2015.
Fed Chair Janet Yellen empha-
sized that the Fed is data depen-
dent, implying that the economy
will have to do better to win rate
hikes. The voting members of the
FOMC are particularly inclined to
keeping rates low. The problem is
that the Feds track record since
2011 has been to lower its forecast
during the calendar year rather than
raise it. If the economy again disap-
points, the decision to hike rates will
get harder as the year progresses.
The latest waffling over the
timing of rate hikes has another
negative effect. The Fed says it
wants to keep reinvesting its stag-
gering $4.5 trillion bond portfolio
until after rate hikes get under
way. That means the Fed buying
massive amounts of long-term
bonds as short-term bonds mature.
Any delay in rate hikes keeps the
Fed at the center of bond-market
distortions, slowing growth.
This is all happening in the con-
text of weak foreign currencies and
growth rates. That provides an-
other excuse for delay.
Last but not least, there was no
hint in Wednesdays statement
that the Fed recognizes its policies
havent worked well. By itself, that
mental block adds to the risk of
slower growth and further delays
in rate hikes.
Mr. Malpass is president of Encima
Global LLC.
Pound/Euro 0.7247 0.26%
Monday, March 23, 2015
Germanys Nuclear Costs Trigger Fears
BY NATALIA DROZDIAK
AND JENNY BUSCHE
FRANKFURTA new German
government report is stoking fears
that the countrys energy companies
cant shoulder the cost of a govern-
ment plan to close the countrys nu-
clear-power plants.
Germany aims to phase out its
nine remaining reactors by 2022,
faster than almost any country. But
nobody knows exactly how much it
costs to shut and clean up atomic-
power plants and all the facilities
used over decades to store radioac-
tive waste. Building a depository for
the waste deep underground and
delivering the waste add additional
Dinged by the Dollar
A surging U.S. currency is taking a bite out of prot expectations, steering investors toward sectors that have the least foreign exposure.
WSJ Dollar Index
100
Friday:
90
80
70
60
2011 12 13 14
*Latest data, from 2013
Sources: WSJ Market Data Group (WSJ dollar index); FactSet (prot growth); S&P Capital IQ (foreign exposure)
Strong Dollar Hammers U.S. Earnings
BY DAN STRUMPF
The soaring dollar is crunching
profits at giant U.S. multinationals,
prompting Wall Street analysts to
make their deepest cuts to earnings
forecasts since the financial crisis
and boosting the appeal of smaller,
domestically focused companies.
The dollar has jumped 12% in
2015 against the euro and is up 27%
from a year ago. The WSJ Dollar In-
dex, which mea-
ABREAST OF sures the dollar
THE MARKET against a basket
of currencies, is
up 5.3% this year. The dollars surge
against the euro has been driven by
an aggressive European Central
Bank monetary-easing program that
has come as the U.S. central bank is
preparing to raise interest rates.
Analysts, citing the dollars
strength as a key factor, are predict-
ing that profits at S&P 500 firms for
the first quarter will show their big-
gest annual decline since the third
quarter of 2009.
As a result, investors are keeping
a continued bias toward U.S.-based
stocks that do less business abroad,
such as shares of small companies
that tend to be more domestically
Yen/$ 120.13 g 0.53% Global Dow 2563.92 1.40%
Prize in Caesars Fight:
Data on Its Customers
BUSINESS & FINANCE 20
unknown costs.
Berlin promises utilities will foot
the bill but the new report, released
Friday, raises the prospect of Ger-
man taxpayers ending up on the
hook.
The issue is acute because Ger-
man power companies are already
struggling financially. Chancellor
Angela Merkels campaign to wean
Germany off nuclear and fossil fuels
in favor of environmentally friendly
renewables has gutted utilities tra-
ditional business model.
Utility executives say more spe-
cifics on plans are needed.
There are still no clear answers
to many fundamental questions in-
volving final and intermediate stor-
Expected prot growth in 2015 from
a year ago, S&P 500 companies
15%
Estimates as of:
Dec. 31, 2014
March 18, 2015
87.4 10
5
0 Consumer staples
5
15 1Q 2Q 3Q 4Q
focused, and on companies outside
the U.S. that stand to benefit from a
weakening of their home currency
as the dollar strengthens, particu-
larly European manufacturers.
What is remarkable is the speed
with which the dollar has acceler-
ated, and that speed brings with it
some complications, said Anwiti
Bahuguna, senior portfolio manager
on Columbia Managements global
asset allocation team, which over-
sees $68 billion. The dollar
strength is moving at a much, much
faster pace than youve seen in his-
tory.
Many investors say the dollars
rise is behind the relatively strong
performance of smaller-company
stocks, which are often more domes-
tically focused than large-company
stocks. The Russell 2000 index of
small-capitalization shares is up
5.1% this year and 10% in the last six
months. That compares with gains
in the S&P 500 index of 2.4% in 2015
and 4.9% over six months.
The dollars jump has come as
the ECB embarked on a new, aggres-
sive easing of monetary policy. In-
vestors expect the Fed to respond to
a healthier U.S. economy by raising
rates later this year, though many
Gold 1184.80 1.34% Oil 45.72 4.00%
THE WA L L STR E ET JOU RNAL.
age, dismantling [reactors] and
transporting radioactive waste,
said Frank Mastiaux, chief executive
of EnBW Energie Baden-Wrttem-
berg AG, one of Germanys largest
utility companies. Concrete con-
cepts have long been promised, but
there is nothing yet in sight.
Nuclear energy accounts for 16%
of German electricity production,
down from a peak of 31% in 1997, ac-
cording to the federal statistics of-
fice. France gets roughly 75% of its
electricity from nuclear energy and
the U.S. around 20%, according to
the World Nuclear Association.
The issue of Germanys decom-
missioning became urgent in 2011,
after the disaster at Japans Fuku-
Foreign sales as a percentage of total,
by S&P 500 sector*
Information technology
Energy
57%
55
Materials 54
Health care 51
S&P 500 46
Industrials 46
Consumer discretionary 41
40
Financials 32
Utilities Less than 1
Telecommunication services 0 Co.
full-year
2015
analysts are expecting later, slower
increases following Wednesdays
dovish Fed policy statement.
The complications of dollar
strength have been visible in corpo-
rate profit reports.
On Friday, Tiffany said sales fell
1% in the January quarter, but
would have risen 3% if not for cur-
rency moves. It expects minimal
growth in earnings this year, in part
due to the stronger dollar. Oracle
said Tuesday that net income would
have risen 7% in the February quar-
ter if not for dollar strength. In-
stead, it fell 3%.
This is the most significant fis-
cal-year currency impact we have
ever incurred, Jon Moeller, chief fi-
nancial officer of Procter & Gamble,
told investors in late January. The
consumer-products maker expects
currency swings to curb after-tax
profits by $1.4 billion, or 12%, this
fiscal year, ending in June.
Corporate managements have
been caught off guard by the speed
of the dollars rise, said Brian Lazor-
ishak, portfolio manager of the $103
million Chase Growth Fund. If you
have a gradual move, its easier for
managements to adjust to, to pre-
pare for, to hedge if they want to.
3-month Libor 0.26680
Rio Tinto and BHP
Face Frank Questions
HEARD ON THE STREET 32
shima power plant, when Ms.
Merkel decided to accelerate the
shutdown of all German reactors by
as much as 14 years, to 2022.
That move forced EnBW and
Germanys other big utilitiesE.ON
SE, RWE AG and a unit of Swedens
Vattenfall ABto book billions of
euros in write-downs on nuclear as-
sets and increase their provisions
for early decommissioning of the fa-
cilities. The provisions now total
about 37 billion ($40 billion).
The cost could ultimately top
50 billion, estimates Gerald Kirch-
ner, a nuclear expert previously at
Germanys federal office for radia-
tion protection.
And that money might have to
THE WALL STREET JOURNAL.
Mr. Lazorishak has reduced his
position in shares of Microsoft,
which generates half of its sales
overseas. He has bought shares of
Southwest Airlines, which draws
less than 2% of its sales from over-
seas, and other firms that are more
U.S.-focused.
Karl Schamotta, director of cur-
rency research at Cambridge Global
Payments, a Toronto firm that helps
corporations employ strategies in
the currency market to protect for-
eign revenue from currency swings,
is telling clients to prepare for the
value of one euro to fall to parity, or
$1. A euro bought $1.0821 Friday.
Many large firmsare now try-
ing to recover exchange-rate-related
losses, he said.
Against this backdrop, analysts
are slashing profit forecasts. Back in
September, analysts expected S&P
500 profits to grow at 9.5% in the
first quarter from a year earlier and
at 11.6% for all of 2015, according to
FactSet.
Today, analysts expect first-quar-
ter profits to fall by 4.9%. For all of
2015, profits are expected to grow
just 2.1%.
The last time analysts cut their
Please turn to page 22
10-year Treasury 13/32 yield 1.932%
europe.WSJ.com
be covered by taxpayers if a power
company faces insolvency or some
other scenarios, the government re-
port warned.
Based on the current legal situ-
ation, there are risks that the finan-
cial provisions set aside by the nu-
clear operating companies arent
sufficient and therefore it cant be
ruled out that, in a worst-case sce-
nario, significant costs...could fall on
the public, said the report commis-
sioned by the economy ministry and
prepared by lawyers, auditors and
tax consultants.
Utilities are seeking to reassure
investors that the companies finan-
cial liability isnt crippling.
Please turn to page 24
China Seeks
To Develop
Seed Maker
With Sway
BY CHUIN-WEI YAP
BEIJINGA fight over a small
maker of crop seeds in China last
year sheds light on how Beijing
plans to secure its food resources:
by building an answer to Monsanto
The worlds second-largest econ-
omy needs a seed developer that
can hold its own in the countrys
$17 billion seed market against
global agribusiness giants including
DuPont Co. and Syngenta AG.
Last year state-backed Hunan
Xindaxin Co. launched an unsolic-
ited $60 billion bid for Origin
Agritech Ltd., a Nasdaq-listed seed
developer that controls the rights to
Chinas first genetically modified
corn.
Agritech eventually rejected the
bid in November. But the Beijing
companys top executives believe
Xindaxin is readying another at-
tempt as China looks to find a na-
tional champion that can keep for-
Please turn to page 22
Growing Ambition
Domestic takeover values are on the
rise in China's seed sector
$800 million
600
400
200
0
2010 11 12 13 14
Source: Dealogic
THE WALL STREET JOURNAL.
18 | Monday, March 23, 2015 THE WALL STREET JOURNAL.

BUSINESS & FINANCE

Tech Hurdles Delay Drone Deliveries

Amazon, Alibaba and others face technical challenges such as battery life and weather, not just pending regulation
BY JACK NICAS
AND GREG BENSINGER
Companies hoping to use drones
to deliver small packages are con-
fronting technical hurdles such as
battery life and weather that are at
least as vexing as proposed U.S. reg-
ulatory limits.
Retail and shipping companies
including Amazon.com Inc., Alibaba
Group Holding Ltd., and Deutsche
Post DHL AG have been among the
most enthusiastic supporters, seeing
drones as potentially transforming
their businesses.
But hurdles including short bat-
tery life and unreliable location data
suggest it could be years before
armies of drones replace FedEx and
UPS vans. Companies also face ob-
stacles such as bad weather, aggres-
sive birds and gun-toting neighbors.
Delivery drones are absolutely
viable, but there are a lot of techni-
cal hurdles that have to be crossed,
said Nicholas Roy, a robotics profes-
sor at the Massachusetts of Institute
of Technology and the former head
of Google Inc.s drone-delivery proj-
ect. We are very much in the proto-
type stage.
The top two U.S. private package
delivery companies think drone de-
livery wont fly soon. FedEx Corp.
and United Parcel Service Inc. say
the technology remains far from
market ready. There remain numer-
ous reasons why drones are not a
feasible delivery technology at this
time, UPS said last month.
Experts say the most pressing
challenge to deliveries is battery
power. Like makers of laptops,
smartphones and electric cars,
drone are trying to pack more en-
ergy into smaller batteries. The is-
sue is especially acute for drones:
the bigger the package, the more
power needed to fly.
Amazon wants its drones to be
able to carry 5-pound packages on a
20-mile round trip route. That per-
formance is almost certainly impos-
sible today with the eight-rotor pro-
totype Amazon demonstrated in late
2013, said Raffaello DAndrea, a ro-
botics professor at the engineering
university ETH Zurich and co-inven-
tor of the robots that help sort Ama-
zons warehouses.
An alternative is the approach
Google unveiled last Augusta hy-
brid drone with propellers and
wings that takes off like a copter
and glides like a plane, increasing its
range. Yet that design is generally
less wind-resistant, agile and reli-
able than a copter drone. Indeed,
Google this month said it scrapped
that initial design because it was too
designed and manufactured to sup-
Air Mail port moving from a hobbyist flying
on the weekend in a park to a 24/7
Companies are testing a variety of drones to deliver small packages. delivery service flying over your
highways, said Mr. Roy.
Then there is how to drop off a
package. Some companies have
tested landing on a customers door-
step while others have tried lower-
ing packages down on a line. But
global-positioning-system data can
be inaccurateenough to put a
drone at the wrong house or over a
swimming pool.
A person familiar with Amazons
thinking said that to simplify deliv-
ery, its drones could deliver to stor-
3.4 feet wide age lockers, accessed through a code
sent to customers.
DHL and Amazon have tested copter drones that take
4.9 feet wide And delivery drones would have
off vertically and hover. They are more wind resistant, to fly autonomously, which requires
agile and reliable than winged drones. Google tested a drone that takes off like a copter and sensors and software that can three-
glides like a plane. Such a design increased its range, dimensionally map the environment
but Google said it was difcult to control. and navigate it on the fly. Such tech-
nology isn't yet ready, though a
handful of companies, including chip
makers Intel Corp. and Qualcomm
Delivery methods Inc. say theyre getting closer to
solving it.
If and when these technical limi-
tations are overcome, regulators
might not allow drone deliveries.
Last month, the FAA proposed rules
that would require one pilot to mon-
Copter drones generally land to Google and others have
itor each drone, limit flights to
drop off packages. tested lowering within sight of the operator, and bar
Amazon and others have tested packages on a line. flights over bystanders. The agency
drones that deliver directly to The method protects said the proposed rules, which are
customers. customers from expected to be completed next year,
wouldnt allow drones carrying an
DHLs prototype lands at a spinning propellers but
external load.
central point where a courier raises questions about
The FAA said it would likely al-
collects the packages. accuracy. low drone flights beyond operators
eyeshot if companies demonstrate
reliable collision-avoidance technol-
ogy. It is unclear if the agency would
consider authorizing large-scale au-
tonomous drone operations over-
seen by just a few humans, as com-
panies currently envision.
Still, companies are zooming
ahead. Amazon and Google are
working on drones that could deliver
Photos: the companies (drones); E+/Getty Images (house) Source: the companies THE WALL STREET JOURNAL. small packages in less than 30 min-
utes. A DHL drone has delivered
ministration to test its drones out- medicine to an island in the North
doors. The company has developed Sea, and Alibaba, the Chinese e-com-
nearly a dozen aircraft as part of its merce giant, last month delivered
Prime Air project. tea with drones.
Were testing a range of vehicle The technology is challenging,
capabilities, Gur Kimchi, Amazon but totally doable, Amazon Chief
Prime Air vice president, said in a Executive Jeff Bezos said last year.
statement. We wont launch Prime Mr. DAndrea, the robotics ex-
Air until we are able to demonstrate pert, predicts the technology for
safe operations. large-scale drone deliveries would
Experts say a trickier challenge is take about five years to develop.
ensuring drones can make deliveries People underestimate the tech-
without incident almost 100% of the nical difficulties.... Folks watch vid-
time. Delivery drones must be cheap eos on YouTube and think, Wow, this
to be commercially viable, develop- is great. Why isnt somebody deliv-
ers say, and exceptionally reliable to
Zuma Press

ering my pizza?, Mr. DAndrea said.

difficult to control. pass muster with regulators and the It takes time and effort to make
Amazon last week received ap- public. A sea change is going to be something the public doesnt have to
proval from the Federal Aviation Ad- required in how these vehicles are A worker takes a package from a drone in Leipzig, Germany. think twice about.

Businesses AbbVie...........................32
This index of businesses Adidas.............................1
mentioned in todays Aer Lingus Group ......... 19
issue of The Wall Street Alibaba Group..........18,19
Journal is intended to Allianz...........................23
Amazon.com ............ 18,19
include all significant
Amgen...........................32
reference to companies.
Ant Financial ................ 19
First reference to the
Apollo Global
companies appears in Management..............20
bold face type in all Apple.............................19
articles except those BaFin.............................23
on page one and the Baker Hughes.................7
editorial pages. Bank of America...........24
Barclays.........................32
BHP Billiton..................32
Bilfinger........................20
BlackRock......................23
BlueScope Steel ........... 32
Caesars Entertainment 20
Citigroup ....................... 24
Clean Harbors.................7
CVS Health ................... 32
Dart Group....................19
Deutsche Bank..............23
Deutsche Post .............. 18
DuPont .......................... 17
eBay .............................. 19
Emirates Airline ........... 19
EnBW Energie Baden-
Wrttemberg.............17
E.ON..............................17
INDEX TO BUSINESSES
European Central Bank 32
Express Scripts
Holding.......................32
Exxon Mobil....................7
Federal Trade
Commission...............21
Flipkart Internet...........19
General Electric............24
Gilead Sciences.............32
Google......................18,21
Harvey Norman
Holdings.....................32
Holcim...........................21
Hong Kong Exchanges &
Clearing......................23
Hon Hai Precision
Industry ..................... 19
HTC................................22
Hunan Xindaxin............17
Intel...............................18
Jasper Infotech.............19
Lafarge..........................21
Microsoft.......................21
Monsanto......................17
News Corp.....................21
Nike.................................1
Novartis ........................ 32
One97 Communication.19
Oracle............................21
Origin Agritech.............17
Pfizer.............................32
Prudential Financial ..... 24
Qualcomm.....................18
Rio Tinto.......................32
RWE .............................. 17
Ryanair Holdings..........19
Snapdeal.com................19
SoftBank.......................19
Syngenta.......................17
TABCorp Holdings ........ 32
UniCredit.......................23
United Parcel Service...18
Vattenfall......................17
Wizz Air Holdings........19
Yelp................................21
Yuan Longping High-Tech
Agriculture.................22
Corrections Amplifications
The second part of Miguel de Cer-
vantess magnum opus Don Quixote
was published in 1615. A Europe News
article Wednesday about researchers
possible identification of the authors re-
mains incorrectly implied the entire
book was published in that year.
Readers can alert the London newsroom of The
Wall Street Journal to any errors in news articles
by emailing wsjcontact@wsj.com or by calling
+44 (0)20 7842 9901.
THE WALL STREET JOURNAL.
Regulator
Takes Action
Against
Airlines
BY ROBERT WALL
LONDONBritains aviation reg-
ulator is taking action against Aer
Lingus and two other European car-
riers regarding their treatment of
passengers when flights are dis-
rupted, and expressed concern over
the actions of Ryanair Holdings
PLC.
Aer Lingus and budget airlines
Wizz Air and Jet2 now are subject
to enforcement action, the U.K.s
Civil Aviation Authority said on Sat-
urday. The CAA said the move
comes after a six-month review of
how carriers act on issues, such as
how they deal with passengers when
flights are delayed.
The aviation regulator said the
three airlines are failing to meet Eu-
ropean Union rules on passenger
rights. It also said it was reviewing
how Ryanair, Europes biggest dis-
count carrier by traffic, deals with
passenger claims when flights are
hit by technical problems.
Airlines are well aware of the
support they must provide when
there is disruption, CAA Chief Exec-
utive Andrew Haines said. The issue
was clarified last year when airlines
challenging payment requirements
lost their case, he said.
The regulator said Aer Lingus,
Wizz Air and Jet2 will need to make
changes to their policies, or face
the prospect of a court order.
Jet2, a unit of Dart Group PLC,
and Hungarian carrier Wizz Air are
failing to make required payments
for flight disruptions and cutting
short the period during which pas-
sengers can make their claims, the
regulator said. Aer Lingus and Jet2
were separately accused of not pro-
viding passengers information about
their rights under EU rules.
Aer Lingus said it was working
with the CAA and that its proce-
dures, relating to the provision of
information to customers affected
by operational disruption, are fully
compliant with all the relevant regu-
lations. Ryanair said it complies
fully with European air-passenger-
rights rules.
The aviation regulator
said the three airlines
are failing to meet
European Union rules
on passenger rights.
Wizz Air spokesman Daniel de
Carvalho said in a witten statement,
The U.K. CAA is well aware that
Wizz Air is reassessing these cases
and has confirmed to the U.K. CAA
itself, some time ago, that it will ap-
ply the U.K. CAAs own list of ex-
traordinary circumstances in the rel-
evant cases. The airline said it took
the decision to reassess the cases af-
ter a recent court ruling.
In its response, Jet2 called the
aviation regulators announcement
materially inaccurate. The airline
said it paid compensation for dis-
rupted flights and that it abides by
court decisions and complies with
the law.
The aviation regulator said it
would publish more information on
airline performance Monday.
BUSINESS & FINANCE
Labor Strife at Emirates Airline
BY RORY JONES
DUBAIEmirates Airline is
fighting an unusual headwind: labor
trouble.
In the U.S. and Europe, the
Dubai-owned carrier is fighting ac-
cusations by rivals that it benefits
from unfair government subsidies.
Back home, however, Emirates, the
worlds largest international airline
by traffic, is engaged in a rare tussle
with its own cabin-crew staff.
According to current and former
staff, cabin-crew employees have
been complaining internally about a
host of issues, including accusations
the airline is asking crew to work
more hours and shortening layovers
between connecting flights. In re-
sponse, Emirates is holding a series
of meetings where staff can air
grievances directly to senior man-
agement. It also recently suspended
a performance-evaluation system of
cabin staffconducted after each
flightthat employees complained
was too critical.
Labor trouble is a frequent head-
ache for global carriers, where
strikes and other job action can dis-
rupt service. But in Dubai, a semiau-
tonomous monarchy that is part of
the United Arab Emirates, strikes
and unions are banned.
Emirates has long been a de-
manding employer, especially for
cabin-crew personnelrequiring rig-
orous training, including in etiquette
and grooming. But cabin-crew staff
Startup Snapdeal Is in Fundraising Talks
BY DHANYA ANN THOPPIL
AND LORRAINE LUK
Snapdeal.com, an e-commerce
startup backed by eBay Inc. and
SoftBank Corp., is looking to raise
as much as $1 billion of fresh capital
from investors including Foxconn,
the worlds largest contract manu-
facturer of electronics.
If successful, the latest fundrais-
ing could make Snapdeal Indias sec-
ond-most-valuable startup. Its valu-
ation could reach nearly $7 billion,
according to people familiar with
the situation.
Global investors have been pour-
ing billions of dollars into Indias
fast-growing e-commerce market,
which Morgan Stanley predicts will
expand to more than $100 billion by
2020 from $3 billion in 2013.
Last year, the countrys largest
online marketplace, Flipkart Inter-
net Pvt., raised $2.5 billion from in-
vestors, while U.S. giant Ama-
Reuters
zon.com Inc. pledged to invest $2
billion.
Snapdeal, owned by Jasper Info-
tech Pvt., connects buyers and sell-
ers. Founded in 2010 by two
friendsKunal Bahl and Rohit
Bansalit started as a coupon web-
site, but has since changed its busi-
ness model. It has about 40 million
members and 100,000 merchants
selling things as diverse as mobile
phones, cars and houses.
Last year, Snapdeal received an
investment of nearly $1 billion from
U.S.-based eBay and Japan-based
SoftBank, giving the company a val-
uation of $2 billion.
Foxconns talks with Snap-
deal.com are preliminary and center
on forming a strategic partnership
that could involve an equity invest-
ment, the people say.
It isnt clear how much Taiwan-
based Foxconn might invest in Snap-
deals latest funding round. People
Taking Off
Passenger growth is taking off at
Emirates Airline
50 million
44.5 million passengers carried
40
30
20
10
0 0
FY2004 06 08 2010 12
-05 -07 -09 -11 -13
Note: Fiscal years end March 31 Source: the company
also enjoy benefits not typical at
many other airlines, including free
accommodation and transportation
to and from work. That has all
helped keep a lid on labor strife
among its roughly 20,000 cabin-
crew employees until now.
The dissent comes as the airline
is growing rapidly and recruiting ag-
gressively to fill its cabins. Emirates
carried 44.5 million passengers in
its latest financial year, and fore-
casts 70 million passengers by 2020.
It plans to hire 5,000 more cabin
staff this year, to accommodate
growth and attrition. That fast clip
Snapdeal employees sort out delivery packages at a facility in Mumbai. The online marketplace has 100,000 merchants.
familiar with the matter say Fox-
conn, officially known as Hon Hai
Precision Industry Co., would be
one of many potential investors in
the funding round.
One potential thorny issue is
whether Chinese e-commerce giant
Alibaba Group Holding Ltd. will
participate.
Alibaba had been in talks to in-
vest in the current round, but after
due diligence, it is unlikely that the
Chinese company will put money
into Snapdeal, which could reduce
the amount raised, these people say.
Potential investors in Snapdeals lat-
est round include private-equity
firms and other institutional inves-
tors, one of the people said.
The people involved in the talks
cautioned that the deals final struc-
as overall employees and cabin-crew
staff soar.
50 thousand
41,471 employees
40
30
20
Rest of employees
10
Cabin crew
FY2004 06 08 2010 12
-05 -07 -09 -11 -13 nior vice president of service deliv-
THE WALL STREET JOURNAL.
is straining current staff, according
to some employees.
Flight attendants say they are
having to work more shifts, with
shorter layovers. First-class atten-
dants, who typically work their way
up to their postings in premium cab-
ins, are being asked to work in econ-
omy to make up for shortages there,
according to these employees. Many
cabin-crew staff had some annual
leave allocation deferred last year,
they said.
Emirates said in a statement that
it hasnt shortened layover times,
and any changes to staff routines are
ture remains fluid, and final terms
and participants are likely to be de-
cided in the coming weeks.
They said the funding could be
as small as $500 million, depending
on the lineup of investors, and that
could reduce the final price tag on
Snapdeal.com to about $6 billion.
Foxconn has been expanding
into the e-commerce market with its
new online marketplaces in China
and Taiwan, as part of its efforts to
find new growth avenues.
A partnership with Snapdeal
would give the company a foothold
in India. Foxconn has been looking
to invest in emerging markets, the
people said.
Foxconn has collaborated with
Snapdeal to sell some Foxconn-made
electronic products, including
Monday, March 23, 2015 | 19
exceptions that comply with safety
rules. Staff have to work in other
cabins at times, the carrier said.
Emirates didnt immediately re-
spond to a request seeking comment
about deferred leave.
The company declined to com-
ment generally about cabin-crew
complaints, and to make executives
available for interviews. Saif Al Su-
waidi, director general of the Gen-
eral Civil Aviation Authority, the
U.A.E.s airline regulator, said issues
about airline labor conditions are a
matter to be sorted out between
staff and management.
The sessions initiated this year
are one way Emirates is trying to
manage the complaints. In an email
in January to staff announcing the
meetings, Terry Daly, Emirates se-
ery, wrote he was aware that there
are a number of subjects that are
causing concern at the moment. He
called the meetings an opportunity
to talk about these directly with
me, according to a copy of the
email reviewed by The Wall Street
Journal.
Emirates has held three sessions
so far. In a statement, Emirates said
the forums last month were just one
of many ways employees could com-
municate with management.
Emirates Chief Executive Tim
Clark has weighed in. Late last year,
he started to send a quarterly up-
date email to employees, soliciting
feedback from staff.
phones, on the Indian companys e-
commerce platform.
Alibaba has been gearing up for
expansion into India. Its financial-
services affiliate, Ant Financial,
took a 25% stake in the online-pay-
ment business of India-based One97
Communication Ltd. last month.
Foxconns interest in Snapdeal
comes as the 41-year-old company,
which assembles most of Apple
Inc.s iPhones and iPads, has been
struggling to find new growth op-
portunities as revenue from its con-
tract manufacturing business slows.
Rising wages in China and com-
petition for Apples orders have
weighed on Foxconns earnings
growth over the past several years.
Gillian Wong
contributed to this article.
20 | Monday, March 23, 2015
Caesars Real Prize: Player Data
BY KATE OKEEFFE
The most valuable asset in the
bitter bankruptcy feud at Caesars
Entertainment Corp. isnt the casino
operators opulent Roman-themed
resort at the heart of the Las Vegas
Strip. Its the companys big-data
customer loyalty program, valued at
$1 billion by creditors.
Caesars chief executive Gary
Loveman said he devised the Total
Rewards program in 1998 as a way
to attract customers to the com-
panys casinos without breaking the
bank to upgrade them.
Mr. Loveman said he purposely
made it quick and easy for custom-
ers to earn and redeem points, un-
like airline loyalty programs requir-
ing several flights to get a free trip.
In our world, you gamble tonight,
you eat dinner tonight, said the ex-
ecutive, who is stepping down as
CEO on June 30 but keeping his
Associated Press
other position as chairman.
Caesars, in turn, uses the data it
collects from the program to target
its marketing campaigns and keep
customers playing within its sprawl-
ing network of around 50 casinos,
driving up overall revenue at the
company.
Among the loyalty programs 45
million members are some particu-
larly loyal fans. Darryl McEwen,
whom Mr. Loveman knows by name,
runs a website called Seven Stars
Insider, named after the top tier of
the program. He offers tips on ev-
erything from redeeming big-ticket
items to the pork chops at Caesars
Philadelphia casino.
But Total Rewards has also be-
come an obsession for a less
friendly groupthe creditors of
Caesars largest unit. The unit,
buckling under an $18.4 billion debt
load, filed for Chapter 11 bankruptcy
protection in Chicago in January.
In multiple lawsuits ahead of the
filing, creditor groups alleged trans-
actions involving the loyalty program
were part of a series of improper in-
sider deals engineered by the Cae-
sars parent company and its private-
Money Pours Out of Eurozone
Continued from first page
124.4 billion ($134.35 billion). The
euro has fallen, but European stocks
and bonds have rallied. That is
largely thanks to quantitative eas-
ing, which should push investors to
buy riskier assets such as stocks,
while the ECBs own heavy buying of
bonds keeps that market supported
even as some investors move out-
side the eurozone.
The starkest consequences of
these flows have been seen in the
eurozones small neighbors. The
Danish central bank has cut interest
rates four times this year to discour-
age foreigners from piling into the
krone. To keep the currency, which
is pegged to the euro, from climbing,
it has printed huge volumes of kro-
ner to sell for euros.
Switzerland was so swamped by
inflows that the central bank
abruptly lifted its cap on the Swiss
franc in January, leading to a dra-
matic one-day surge of more than
40% in the francs value.
But even the U.S. has been far
from immune. Massive demand from
European investors has helped drive
the dollar higher this year. The rush
into the dollar has also fueled a rally
in U.S. Treasurys despite expecta-
tions that the Fed will raise interest
rates this year. Foreign investors in-
Creditors value Caesars customer loyalty program ahead of various Las Vegas properties like Caesars Palace.
equity sponsors Apollo Global
Management LLC and TPG Capital.
The goal of these deals, which
also included property sales from the
now-bankrupt unit to other Caesars
units that remain financially stable,
was to keep the units best assets for
themselvesand out of bondholders
reachcreditors alleged.
Caesars says that while the
transactions reduced revenue at the
now-bankrupt unit, they were nec-
essary for the unit to get cash, pay
creditors, and keep its properties
within the Total Rewards network
to maximize performance.
Representatives for Apollo, TPG
and junior and senior credit groups
declined to comment.
The Total Rewards transactions
robbed the now-bankrupt units cred-
itors of at least $1 billion, alleged se-
nior bondholders in a November law-
suit. Total Rewards is the single most
valuable asset under dispute in the
creased their holdings of Treasury
bonds by $374.3 billion in 2014, Fed-
eral Reserve data show. That trend
has continued this year.
Another effect has made the
flood out of Europe especially pow-
erful. Unlike the Feds three waves
of quantitative easing, the ECBs
version is coming as European gov-
ernments are trimming budgets.
That means they issue fewer bonds,
and European investors have more
reason to look abroad for returns in-
stead of paying dearly for relatively
scarce assets at home or having
cash in euros that they might need
to pay to hold on to.
There are more and more euros
being printed, but these are hot-po-
tato euros, Mr. Hallam said.
January data showed a net in-
flow of 29.8 billion, which was
composed of a big rush into Euro-
pean stocks in anticipation of quan-
titative easing and a continued flow
out of bonds. Market participants
say most non-European equity in-
vestors who buy eurozone stocks
also simultaneously bet on a weaker
currency, canceling out any upward
pressure on the euro. Debt investors
typically dont.
ECB demand has driven up bond
prices, pushing yields, which fall
when prices rise, to record lows.
BUSINESS & FINANCE
bankruptcy fight, according to the
creditors valuations, trumping vari-
ous Las Vegas properties and Cae-
sars online gambling business.
The practical effect of the Total
Rewards transactions was to transfer,
for free, virtually all of the attri-
butes of ownership and control of To-
tal Rewards from the now-bankrupt
unit to the Caesars parent company,
alleged junior creditors in a February
filing in the bankruptcy case.
The Caesars parent said in a
statement: The structure the Cae-
sars companies established ensures
that Total Rewards will have the re-
sources it needs for maintenance and
growth, that the program is available
on fair terms to every Caesars-affili-
ated property, including [the now-
bankrupt entity], and that each of
the Caesars companies makes a fair
contribution to the expenses of the
system. The company has also
said the bankruptcy wont affect
German 10-year debt now yields just
0.18%, and German yields are nega-
tive to maturities up to seven years.
APG Groep NV, which oversees
415 billion of pension investments
in the Netherlands, has been shifting
more of its investments overseas in
recent months.
As interest rates in the eurozone
are so low and the euro is dropping,
its sensible for us to look outside
the eurozone to U.K. and U.S. [gov-
ernment bonds] because theyve be-
come more attractive than they used
to be, both from a capital preserva-
tion and a return perspective, said
Harmen Geers, spokesman for asset
management at the firm.
European investors face a choice,
said Stephan Hirschbrich, a fixed-in-
come portfolio manager at Ger-
manys Union Asset Management
Holding AG, which manages 232.1
billion: shift into longer-dated or
riskier debt, or look overseas.
For our clients that are able to,
weve been moving into the U.S.
where we can benefit from a rising
dollar and higher yields, he said.
Some analysts think the big out-
flows from the euro area will con-
tinue. Deutsche Bank forecasts a fall
as far as 85 cents for the euro by the
end of 2017 as a large and persistent
excess of savings particularly in
the loyalty programs operations.
Of all of the transactions that
have been disputed by creditors, the
ones involving Total Rewards are
among the most controversial, said
Chris Snow, an analyst at research
firm CreditSights. The various prop-
erty sales creditors dispute at least
involved cash payments, he said.
Though over 80% of senior credi-
tors ended up signing on to Caesars
restructuring plan, a speedy bank-
ruptcy seems increasingly unlikely,
said Fitch Ratings analyst Alex Bu-
mazhny. Junior bondholders and
bank lenders have still not signed on
to the plan, and the judge presiding
over the bankruptcy case recently
gave the examiner more scope than
the casino companys parent wanted
to investigate the deals disputed by
the bankrupt units creditors, includ-
ing the Total Rewards transactions.
Matt Jarzemsky
contributed to this article.
Whats Ahead for the Euro
Cash is owing out of eurozone debt faster than it is owing into stocks.
Cumulative net portfolio ows since December 2012
300 billion
200
100
0
100
200
300
2013
Note: Through January 2015; monthly data
Source: European Central Bank
northern European economies like
Germany and the Netherlands looks
for a home overseas.
The effect of such flows appears
more decisive than speculative bets
that the euro will fall.
The euro slumped substantially
in March, even though speculators
slightly trimmed their wagers on a
euro decline, data from the U.S.
Commodity Futures Trading Com-
mission show.
The euros fall is also linked to a
THE WALL STREET JOURNAL.
Bilfinger Is
Probing
Possible
Bribery
BY SARAH SLOAT
FRANKFURTGermanys Bilfin-
ger SE said on Sunday it is investi-
gating allegations that employees at
a Brazilian subsidiary participated
in bribery involving orders related
to last years World Cup soccer
tournament.
The engineering and services
company was informed in 2014 of
potential compliance violations re-
lated to orders valued at about 6
million, or $6.5 million, for monitors
for security control centers in Brazil,
it said. Bilfingers Mauell subsidiary
provided the monitors and software
that helped oversee traffic flow at
several of the World Cup venues in
Brazil.
Bilfinger said it launched an in-
vestigation directly after learning of
the allegations, which relate to sus-
pected payments to public officials
and employees of state companies.
As a first step, Bilfinger com-
missioned auditors Ernst & Young to
conduct a comprehensive securing
of data in Germany and Brazil and,
subsequently, auditors Deloitte and
a specialized law office in Brazil
with the further clarification of the
incident, Bilfinger said.
A Bilfinger spokesman said the
investigation isnt yet complete, in-
cluding the question of what
amounts may have been paid and to
whom. He said the subsidiary had
no direct business with soccers
world governing body FIFA.
Should the accuracy of the alle-
gations be confirmed, Bilfinger will
take action with regard to personnel
and will initiate legal steps, the
company said.
Bilfinger said it pursues informa-
tion on possible violations through
its own investigations and notifies
the relevant authorities.
Net inows
into stocks and
investment funds
Net outows
from bonds
14 15
THE WALL STREET JOURNAL.
shift in the behavior of the investors
with the deepest pockets of all: cen-
tral banks.
Before the financial crisis, cen-
tral banks led by the Peoples Bank
of China bought up huge piles of
dollars to keep their own currencies
from climbing. After the euros
launch in 1999, they gradually began
to diversify into the new currency,
which looked set to become a seri-
ous rival to the buck as a global re-
serve.
THE WALL STREET JOURNAL.
Cement Firms Alter Deal Terms
BY SHAYNDI RAICE
AND ANDREW MORSE
French cement giant Lafarge SA
and Swiss rival Holcim Ltd. agreed
on Friday to alter the terms of their
planned $44 billion merger, ending
a fight over financial terms and
leadership at the combined entity
that threatened to derail one of Eu-
ropes biggest recent deals.
The boards of the two companies
agreed late Thursday on a new
share-swap ratio, in which Holcim
shareholders will offer nine of their
shares for 10 of Lafarges. That al-
ters the one-to-one exchange ratio
first agreed upon last year. The two
boards also agreed on the most con-
tentious issue: the fate of Lafarge
Chief Executive Bruno Lafont.
As the two companies fortunes
Bloomberg News
diverged after the merger agree-
ment, with Lafarge underperform-
ing, the Holcim side started to ques-
tion whether Mr. Lafont was the
right person to lead the new entity.
In two days of meetings recently, di-
rectors at each firm convened sepa-
rately to hash out a compromise.
They ultimately agreed to appoint
Mr. Lafont as nonexecutive co-chair-
man of the combined firm, alongside
Holcim Chairman Wolfgang Reitzle.
Lafarge will officially propose a
new CEO for the merged company in
coming weeks. The two companies
have already tentatively agreed on a
candidate, a Lafarge executive cho-
sen by Mr. Lafont, according to peo-
ple familiar with the matter. The de-
cision isnt final, however, and a few
other candidates are still being con-
sidered, these people said.
Shares in both companies rose
Friday after the deal was an-
nounced. Swiss billionaire Thomas
Schmidheiny, who owns about a
fifth of Holcim, praised the deal and
the concession made by Mr. Lafont.
All people involved attached
more importance to the interests of
the new corporation than to their
own ambitions, Mr. Schmidheiny
said.
But key questions about the fu-
Google Avoided One Probe; Others Loom
BY ROLFE WINKLER
Google Inc. escaped a U.S. anti-
trust investigation nearly unscathed
in 2013, but the company isnt out
of the regulatory woods.
Disclosures that some staffers at
the U.S. Federal Trade Commission
had recommended charging Google
with violating antitrust laws are
adding fuel to a long-running Euro-
pean probe into the same practices.
U.S. rivals continue to complain
to regulators about some of Googles
search and advertising practices.
Meanwhile, Google may face a new
antitrust fight, as regulators probe
how Google manages its Android
mobile-operating system.
An FTC staff report in 2012 de-
tailed several ways in which Google
appeared to have altered search re-
sults to favor its own services, al-
though staffers in the agencys bu-
reau of competition didnt
recommend filing suit over those is-
sues, The Wall Street Journal re-
ported Thursday. The commission
concluded its investigation in early
2013 without taking action.
Google executives have long ar-
gued that their responsibility is to
provide relevant search results, not
promote websites, and if users dont
like those results there are other
The role of Lafarge Chief Executive Bruno Lafont emerged as a sticking point to the proposed Lafarge-Holcim merger.
ture of the deal remain. The chal-
lenge now before the two boards is
to quickly complete a decision on
the CEO, mend any personal animos-
ity triggered by the fight over Mr.
Lafonts role and restore a sense of
purpose on integrating the two op-
erations.
Mr. Lafont, who is 58 years old,
emerged as a sticking point to the
Franco-Swiss merger aimed at cre-
ating a globe-spanning construction
behemoth. Over the 11 months since
the deal was announced, Holcim ex-
ecutives grew uncomfortable with
Mr. Lafont running the combined
company as a result of Lafarges
weak performance and his handling
of the merger process, people famil-
iar with the matter said.
The implementation of such a
merger is not possible without creat-
ing tension and frustration, Mr. La-
font told reporters this past Friday.
Since Sunday, my attitude showed
individuals shouldnt stand in the
way of the realization of the merger.
As Lafarge and Holcim diverged
search engines just a click away.
Following the FTCs decision,
Googles rivals turned their atten-
tion to Europe, where officials have
been investigating similar com-
plaints against Google for five years
and have rejected three Google set-
tlement proposals. European Com-
mission antitrust officials are ex-
pected to file formal charges against
Google about its search practices,
perhaps as soon as next month.
Regulators in Argentina, Brazil,
Canada, Taiwan and India also are
investigating Googles business
practices, according to the com-
panys annual financial filing. Until
now, though, Google has largely
beaten back regulatory reviews of
its business practices; in 2014, at-
torneys general in Texas and Ohio
closed investigations.
One EU lawmaker said Friday that
commission officials should consider
the newly revealed evidence from the
U.S. case in weighing charges against
Google. This new... evidence is cru-
cial and could not come at better
time, said Ramon Tremosa I Balcells,
a lawmaker who represents the Span-
ish region of Catalonia.
Google Executive Chairman Eric
Schmidt on Friday declined to com-
ment on the European investigation
or the potential impact of the U.S.
BUSINESS & FINANCE
in performance, the one-for-one eq-
uity swap didnt sit well with Hol-
cim directors and shareholders. The
financial balance tilted further when
the Swiss franc soared against the
euro, meaning Holcim shares were
suddenly worth more Lafarge
shares, when converted into euros.
Distrust ratcheted up in February,
when Lafarge said it was increasing
its dividend despite weak results.
In February, Holcims board ap-
pointed Perella Weinberg Partners
banker Dietrich Becker to serve as an
independent adviser on renegotiating
some elements of the deal. He
worked alongside Goldman Sachs
banker Franois-Xavier de Mallmann,
who was sole adviser to Holcim on
the original merger. Lafarge was rep-
resented by investment banking
brothers Michael and Yoel Zaoui of
Zaoui & Co. Investment bank Roth-
schild also worked for Lafarge.
The Holcim demands prompted
11th-hour efforts by top executives
from both companies this past week
to keep the tie-up on track. The bat-
disclosures. At end of the day, the
FTC commission made their deci-
sion and we agree with that, Mr.
Schmidt said in an interview.
Google rivals havent let up on
the search issue. Local-services
guide Yelp Inc. and Microsoft Corp.
have been particularly active behind
the scenes, trying to coordinate op-
position to the search giant.
Yelp last year launched a web-
site, FocusOnTheUser.eu, that
charges Google with favoring its
own services in search results and
asks website visitors to contact Eu-
ropean legislators. The company
may be preparing to air similar ob-
jections in the U.S.
But some observers think the
complaints are misplaced. Danny Sul-
livan, the founding editor of Search
Engine Land and a close Google
watcher, says criticizing Google for
favoring its own services is a waste
of time, like complaining that one TV
network doesnt favor another TV
networks show enough.
Beyond search, other complaints
loom about Googles business prac-
tices. In Europe, antitrust regulators
have begun an inquiry into whether
Google improperly requires the
makers of devices that use its An-
droid mobile-operating system to
use certain Google services. Google
tle over Mr. Lafont created tension
on both sides. Lafarge employees
largely rallied behind Mr. Lafont in
the past few days, said one person
familiar with the matter. There was
massive solidarity behind him, this
person said.
On the Holcim side, too, there
were efforts to assuage Mr. Lafont.
Mr. Reitzle, who will be serving as
co-chairman with Mr. Lafont, told
some people privately that he is
counting on the Lafarge boss to help
make the merger a success, said an-
other person familiar with the mat-
ter. Holcim CEO Bernard Fontana
will be stepping down after the
merger.
Still, the deal isnt done yet. The
merger is subject to a vote by the
companies shareholders at their re-
spective meetings later this year. In
the wake of the squabble, the two
companies have delayed the ex-
pected completion of the deal by
one month to the end of July.
Inti Landauro
contributed to this article.
makes Android available free to
makers of smartphones and tablets
as a way to deliver services like
search and YouTube, which generate
advertising revenue, and the Play
Store, where Google makes money
selling apps and games.
Google rivals including Microsoft
and Oracle Corp. last year filed a
formal complaint with the European
Commission, claiming that makers
of Android devices that want popu-
lar Google apps, including Maps, are
required to preload a suite of
Google mobile services and give
them prominent placement.
The Wall Street Journal first re-
ported secret contracts that Google
had drawn up laying out those re-
quirements.
Mr. Sullivan, while skeptical of
the antitrust claims around search,
says Google deserves attention
from antitrust regulators on its An-
droid dealings. I think thats much
harder to defend, he says.
Google has another victory to
point to. A Google spokesman said
on Friday that the company was in-
formed last year by the FTC that the
Commission had closed an investi-
gation, first reported in 2013, into
its display advertising practices.
Tom Fairless
contributed to this article.
Monday, March 23, 2015 | 21
Journalists
Cleared in
Bribery Case
In the U.K.
Reuters
LONDONFour senior journalists
at the News Corp-owned Sun news-
paper were cleared on Friday of
making illegal payments to public
officials, the latest reporters to be
exonerated after a massive police
probe.
The journalists the tabloids ex-
ecutive editor, deputy editor, chief
reporter and royal editorwere
found not guilty of paying military
figures for information, including de-
tails about Queen Elizabeths grand-
sons, Princes William and Harry.
However, one former Ministry of
Defense employee who was paid
100,000 pounds ($149,000) by the
paper for passing on stories was
jailed for one year.
The issue of whether journalists
should face criminal action for pay-
ing for stories they deem to be in
the public interest has been contro-
versial. Critics argue that such cases
should never be brought to court.
There is no celebration whilst
this witch hunt continues against my
colleagues who are still facing the
nightmare that I hopefully one day
will wake up from, Duncan Lar-
combe, the papers royal editor, told
reporters after being found not guilty.
The investigation arose
out of an inquiry into
phone hacking.
The police investigation into ille-
gal payments arose out of an inquiry
into phone hacking by journalists on
the Suns sister paper, the News of
the World, which led to the jailing of
ex-editor Andy Coulson and a num-
ber of other senior staff last June.
News UK, the British newspaper
arm of Rupert Murdochs News
Corp, handed over a huge trove of
emails to detectives investigating
the hacking offenses, resulting in
the arrest of dozens of Sun journal-
ists for payments to officials.
News Corp is also the owner of
The Wall Street Journal.
So far only two former News of
the World reporters have been
found guilty for such payments. For-
mer police officers and prison offic-
ers have also been convicted and are
serving jail terms.
The Suns Mr. Larcombe, chief
reporter John Kay, executive editor
Fergus Shanahan and deputy editor
Geoff Webster had argued in their
defense that payments made to sol-
diers and Ministry of Defense offi-
cials had been for stories in the
public interest.
Outside court on Friday, Mr. Kay
said, Its a great relief that a three-
year ordeal is over. I just hope that
this result bears fruit for other col-
leagues in a similar predicament.
The four men were found not
guilty by a jury at Londons Old Bai-
ley criminal court after 10 days of
deliberations. After the verdict, re-
porting restrictions were lifted on
the jailing of Ministry of Defense of-
ficial Bettina Jordan-Barber, who
was sentenced to a year in prison in
January. She had admitted passing
information to Mr. Kay, who called
her his number one military
source, between 2004 and 2012.
 22 | Monday, March 23, 2015
Bloomberg News
HTC Chairwoman Cher Wang will take over as the companys chief executive from her co-founder, Peter Chou.
Struggling HTC Corp.
Shuffles Its Top Ranks
BY JENNY HSU
AND EVA DOU
HTC Corp., whose share of the
smartphone market has shrunk to
under 2% from double digits within
three years, is replacing its longtime
chief executive with its chairwoman
in an attempt to revive its fortunes.
The Taiwanese company said on
Friday that Cher Wang will take over
from Peter Chou, who has served as
CEO for more than a decade. But ob-
servers warned that the move in-
volving HTCs two founders is un-
likely to solve a fundamental
problem: how to contend with the
onslaught of Chinese competition.
The rise and fall of HTCs hand-
set business is an example of how
fast-moving and competitive the
global smartphone market has be-
come. The company was founded by
Ms. Wang and Mr. Chou in 1997 as a
contract manufacturer of notebook
computers and personal digital as-
sistantsthe precursors to todays
smartphones. It started to sell
phones under its own brand in 2006,
and made its name designing high-
end smartphones. At its peak in
2011, HTC was the leading vendor of
devices based on Google Inc.s An-
droid operating system.
But HTCs sales started to slide in
2012 as the company struggled to
find its place in a smartphone mar-
ket where the high-end was cap-
Strong Dollar Slams U.S. Multinationals
Continued from page 17
outlook on annual profit growth by
that scale was in the six months
leading to March 2009, according to
FactSet, as stocks were tumbling to
their crisis-era lows. And should
profit growth come in at the 2.1%
rate for all of this year, it would be
slowest pace of earnings growth
since profits shrank 7.9% in 2009.
David Kostin, chief U.S. equity
strategist at Goldman Sachs Group
Inc., said that when the dollar has
rallied in the past, consumer-discre-
tionary and consumer-staples stocks
have fared better than the broader
market. These sectors have relatively
low exposure to overseas markets.
Goldman Sachs expects the euro
to fall an additional 12% against the
tured by Apple Inc., while more re-
cently other segments have been
targeted by low-cost Chinese manu-
facturers.
Inside HTC, a rift began to
emerge between supporters and crit-
ics of Mr. Chou, people familiar with
the matter said. Mr. Chou will remain
involved in product development at
the Taipei-based company.
In an interview Friday, Ms. Wang
said she plans to be CEO for the
long-term while Mr. Chou heads the
companys innovation lab.
Ms. Wang, who will continue as
chairwoman, said HTC would em-
phasize technological innovation,
but gave few details. She said the ex-
ecutive change was mutually agreed
upon and wasnt a demotion for Mr.
Chou, adding that she took on the
CEO role because she wanted to be
more involved.
We are refocusing on our prod-
uct advantageand moving beyond
the smartphone business, she said.
The company didnt make Mr. sung Electronics Co.s operating
Chou available for comment.
Ms. Wang returned to day-to-day
operations last year as sales fell, al-
though she reiterated staunch sup-
port of Mr. Chou as CEO. She also
shifted more responsibilities to
Chief Financial Officer Chialin
Chang, making him head of sales
and of the smartphone business. Mr.
Chang said in an interview Friday
that he would hand off CFO duties
dollar over the next 12 months.
Thats an enormous headwind for
companies that are selling interna-
tionally, Mr. Kostin said.
According to FactSet, companies
that generate more than 50% of
sales outside the U.S. are expected
to post an earnings decline of 11.6%
in the first quarter when results
start rolling in next month.
Companies that generate less
than half of sales outside the U.S. are
expected to post flat earnings for the
quarter, according to FactSet.
Companies in the S&P earned
46% of their sales outside the U.S. in
2014, according to S&P Dow Jones
Indexes. By contrast, 19% of sales
for Russell 2000 companies comes
from outside the U.S., according to
BUSINESS & FINANCE
when a successor is found.
Over the last two years, Ms.
Wang had been increasingly in-
volved in the running of various as-
pects of the business, to allow Mr.
Chou to focus on product develop-
ment, a role in which he has demon-
strated world-class design and cut-
ting-edge technology expertise, the
company said in a statement Friday.
There have been tentative signs
of recovery after HTC slashed costs
and added lower-priced devices to
its lineup. The companys share of
the global smartphone market rose
from 1% in last years first quarter to
1.4% in the fourth quarter, according
to analysts from BNP Paribas. In the
fourth quarter, HTCs revenue rose
after 12 consecutive quarters of de-
cline, and the company is expecting
another rise in the current quarter.
HTC isnt alone as an established
smartphone maker struggling with
the emergence of low-cost competi-
tors like Chinas Xiaomi Corp. Sam-
profit has fallen for five straight
quarters. Google sold its smartphone
business Motorola Mobility to Len-
ovo Group Ltd. last year after failing
to make it profitable.
Analysts said the management
changes at HTC are unlikely to
provide it much of a boost this
year as the smartphone market is
expected to be even more satu-
rated.
Bank of America Merrill Lynch.
The flip side of the stronger dollar
is the boost to non-U.S. stocks. Most
notably, Germanys DAX, with its high
concentration of manufacturing ex-
porters, is up 23% this year. In dollar
terms, the index has gained 9.2%.
European companies will be in a
much better situation as the cur-
rency weakens, said William Ken-
nedy, who manages the $11.5 billion
Fidelity International Discovery
Fund. Mr. Kennedy has tilted the
foreign-stock fund to shares of com-
panies that stand to benefit the
most from a weakening euro, such
as German auto makers and other
exporters as well as hotel operators.
James Ramage
contributed to this article.
Beijing Seeks to Grow
Seed Firm With Sway
Continued from page 17
eign giants at bay while
significantly increasing the coun-
trys spending on research and de-
velopment.
Xindaxin has its strengthsthe
question is whether its able to give
Origin any margin, Origin
Agritechs chairman, Han Gengchen,
said in an interview. Xindaxin didnt
respond to a request for comment.
For two decades, foreign seed
majors have beaten a path to China,
lured by a market so big that it is
projected to eclipse the U.S. as the
worlds largest food consumer by
2018, according to the Association
of Food Industries.
The worlds second-largest seed
market, after the U.S., limits foreign
producers to minority stakes in joint
ventures. Seeds from foreign ven-
tures supply about 20% of the mar-
ket, but that is likely to rise as a
gulf in quality widens between local
and foreign products, growers and
analysts say. Theres a concern that
Chinese seed companies wont be
able to compete with Monsanto, Du-
Pont, Syngenta, because they dont
have the stamina and the technol-
ogy, said Loren Puette, director of
agricultural consulting firm Chi-
naAg.
Heavily overworked arable land
and slowing yields from local seeds
have raised questions among offi-
cials about the viability of meeting
Chinas food demand by domestic
means alone. But Beijing wants its
producers to be in a position to
make seeds that can compete with
foreign products before the market
opens up, officials say.
Despite the countrys consump-
tion heft, Chinas seed makers are
too small and scattered for the gov-
ernment to corral in pursuit of con-
trolling the biotechnology that un-
derpins the competitive power of
global seed manufacturers.
China will open upthe ques-
tion is when, said Pierre Cohadon,
Syngentas regional head for China.
It will probably be when China is
sufficiently confident it has the
technology and capability.
Beijings development blueprint for human use is likely to be al-
calls for the countrys top 50 seed
makers to double their share of the
Chinese market to 60% by the end
of this decade. By 2020, a new sys-
tem will be formed to breed new
seed varieties with high yield, good
quality and disease resistance, the
State Council, Chinas cabinet, said
last year.
The shake-up is under way. Bei-
jing has slashed the number of do-
mestic seed companies to about
5,200 last year from 8,700 in 2011. It
is pushing companies to triple their
Young hybrid corn stalks at Origin Agritech, a Beijing-based seed developer.
THE WALL STREET JOURNAL.
number of patents in agricultural
technology by 2020 compared with
2013. State companies, Beijing says,
will lead the charge.
The number of domestic seed-
sector acquisitions last year tripled
from 2012, according to research
firm CCM. Shenzhen-listed Yuan
Longping High-Tech Agriculture
Co. was among the most aggressive,
buying out at least three smaller
seed makers since 2013. Still, it is
unrealistic to expect the dawn of a
Chinese Monsanto within five years,
according to ChinaAg.
But Chinas size confers an ad-
vantage. Its largest producer, Long-
ping, has a market value of 20.2 bil-
lion yuan ($3.26 billion), making it
the worlds fourth-biggest seed
maker by that measure. The prob-
lem is that Longpingwhose parent
is Hunan Xindaxinacts as a loose
patchwork of related producers,
rather than a single corporate giant,
said Syngentas Mr. Cohadon.
Longping didnt respond to a call
for comment.
Chinas key deficit is in research
and development, analysts say.
Local seed makers didnt give re-
search much shrift until around
2011, when a state directive forced
seed companies to list R&D spend-
ing in annual reports. Longping said
its R&D in 2013 totaled $15 million
less than 1% of what Monsanto
spends.
Unless Chinese seed makers
catch up, analysts say the compa-
nies will be reduced to middlemen
when China opens its seed market.
Once [GMO corn] is introduced,
we will be more than happy to be
part of the game, said Thierry
Boyer, head of China for Monsanto,
which estimates its corn market
share in China at 3%. For now, we
play within the existing rules.
Chinas seed companies view
themselves as holding reservoirs of
value. China currently allows im-
ports of genetically modified animal
feed and bans genetically modified
organisms, save papayas, for human
consumption. Executives project
commercial production of GMO food
lowed by 2020; domestic producers
are primed to benefit from their ac-
cess to homegrown GMO strains.
I tell people the value of this
company is Monsanto multiplied by
Baidu divided by Google, said
James Chen, Agritechs chief finan-
cial officer. He laughed, but the im-
plication is serious: Agritech views
itself in relation to Monsanto as the
Chinese search-engine giant Baidu
Inc. is to Google Inc.
Jacob Bunge in Chicago
contributed to this article.
Huang Menglin
THE WALL STREET JOURNAL. Monday, March 23, 2015 | 23

MARKETS

Doubts Over Stock Connect Fix Big Fine for

BlackRock
Settlement rules unlikely to be the ultimate solution that fund managers are looking for
BY GREGOR STUART HUNTER trade delivery issues arising from
In Germany
Slow Connection the different settlement systems be- BY EYK HENNING
As inflows into Shanghais stock The total daily inows into Shanghai through the Hong Kong stock link slowed in tween Shanghai and Hong Kong,
market through its Hong Kong trad- February and March, in part because of market holidays. Investors say they are Mr. Au said. But it has yet to be FRANKFURTGerman financial
ing link continue to languish, some still facing hurdles. seen whether this enhanced model watchdog BaFin on Friday slapped a
banks say a new effort by Hong will face hurdles from trustees and record fine of 3.25 million ($3.5
Kongs exchange to overcome one of 8 billion yuan regulators where the funds are do- million) on BlackRock Inc. for mis-
the major obstacles to trading activ- miciled. representing its stakes in almost 50
ity appears unlikely to entice more 6 Fund managers are lobbying the of the countrys largest companies
investors in. Friday Hong Kong exchange for amend- over several years.
Inaugurated last November, the 1.55 billion ments to the rules prior to the BlackRock, the worlds largest
4
Shanghai-Hong Kong Stock Connect launch of the new plan, according to asset manager by assets under man-
was designed to allow all global in- three people with knowledge of the agement, restated its holdings in the
vestors for the first time to easily 2 matter. relevant companies last September.
buy into mainland Chinas stock A spokesman for Hong Kong Ex- At the time, it said a review con-
market, trumping a previous pro- 0 changes & Clearing Ltd., the mar- ducted with BaFin led to its having
gram that permitted investment ket operator, said new enhanced to amend information on voting
only by pre-selected large fund pre-trade checking scheme was a rights and holdings in financial in-
managers with approval from Bei- 2 response to investor concerns, but struments since individual disclo-
jing. Nov. 14 Dec. Jan. 15 Feb. March the trade and settlement cycle cant sures made in the past were not
But a rushed schedule to pull the Note: Quota usage below zero indicates outows. be changed. He added that the correct or had been omitted.
trading link together and differences Source: Thomson Reuters THE WALL STREET JOURNAL. changes would increase convenience BlackRock corrected disclosures
in market regulations between for investors and level an uneven on its holdings in 48 companies
Shanghai and Hong Kong have left a cumbersome to use because many mate solution that fund managers playing field for brokerages without listed on Germanys benchmark DAX
host of problems for investors and fund managers dont keep all their are looking for, he said. custody businesses. and midcap MDAX indexes, including
kept activity at disappointing levels. shares with the same brokerage or Investors making use of the new Banks with both custody and Allianz SE and Deutsche Bank AG.
Inflows to Shanghai during the bank. system will still have to process brokerage businesses have enjoyed BlackRock holds around 6.2% in
links fourth month of operation, Hong Kongs exchange has pro- their trades faster than most global a competitive advantage over inde- Deutsche Bank, and is the largest in-
through March 17, at 15 billion yuan posed a work-around starting March investors are used to, said Lawrence pendent brokerages. They could see vestor in German blue-chip compa-
($2.42 billion), are only a fraction of 30, offering special accounts for Au, head of BNP Paribas Securities some lost business as a result of the nies included in the DAX, the inves-
the amount of stock investors are fund managers that will permit set- Services Asia Pacific. Settlement changes. tor relations association, DIRK, said
allowed to buy. tlement after the trade is executed, will have to take place during the Some investors said the upgrade in a note published last June.
One of Chinas rules, in particu- as is common in other markets. was a good sign. For one thing, it BlackRock accepts the fine an-
lar, has kept fund managers from Fund managers will also be allowed shows that Hong Kongs stock ex- nounced today and is pleased to
making greater use of the link: a to use multiple brokerages and cus- Beijings market rule is change is trying to lift barriers for have fully resolved this matter, the
requirement that investors transfer todian firms, a relief for those firms frustrated fund managers, said company said in a statement.
shares to the Hong Kong exchange wondering whether their existing
in place to prevent failed Brendan Ahern, chief investment of- The BlackRock fine is the largest
before the trading day commences networks of business relationships trades. ficer at KraneShares, which man- BaFin has ever imposed, and comes
if they wish to sell. Beijings mar- will have to be redrawn for the sake ages a China exchange-traded fund after recent regulatory changes gave
ket rule is in place to prevent of Chinese regulators. that is yet to make use of the pro- it the power to impose fines of up to
failed trades, but the system is The move is a step in the right gram. 1 million for each instance in which
used in few other markets and direction, but investors will likely be day a trade is made, rather than the Were the ideal candidate to use an investor violates notification
loathed by investors because it left with more concerns to deal usual two or three days in most Stock Connect, but there has been a rules on voting rights.
limits their ability to react to mar- with, said Andrew Lawson, an exec- markets. The trades will have to be number of impediments that really BlackRock has been punished for
kets quickly. In most other mar- utive director and senior product settled within a matter of hours af- prevented someone outside of the misrepresenting stakes in European
kets, a fund manager is able to de- manager for global custody, Asia Pa- ter the exchange closes, at a time of Asia time zone, somebody who man- companies before. Italian regulator
cide on a trade and execute it cific, at J.P. Morgan Chase & Co., day when most people in the U.S. ages an ETF or mutual fund, to be Consob imposed a 150,000 fine on
immediately, and then has two or one of the worlds biggest custody are asleep. able to utilize the connect pro- BlackRock last summer for misrep-
three days to settle the trade. In- banks that help facilitate trades. The enhanced model is a good gram, he said. Some of the linger- resenting its stake in lender Uni-
vestors say Chinas system is also This is unlikely to be the ulti- attempt to work around the pre- ing concerns are going away. Credit SpA back in 2011.

INTERNATIONAL INVESTMENT FUNDS

Data provided by:

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NAV %RETURN NAV %RETURN NAV %RETURN NAV %RETURN
FUND NAME GF AT LB DATE CR NAV YTD 12-MO 2-YR FUND NAME GF AT LB DATE CR NAV YTD 12-MO 2-YR FUND NAME GF AT LB DATE CR NAV YTD 12-MO 2-YR FUND NAME GF AT LB DATE CR NAV YTD 12-MO 2-YR
n ALEXANDRA INVESTMENT MANAGEMENT n HERMITAGE CAPITAL MANAGEMENT LTD. n HSBC Trinkaus Investment Managers SA Latin America USD A GL EQ CYM 06/30 USD NS.00 NS NS NS
AlexandraConvertibleBondFundI,Ltd.(ClassA) OT OT VGB 08/31 USD 2155.22 NS NS NS Tel: +7501 258 3160 www.hermitagefund.com E-Mail: funds@hsbctrinkaus.lu Paragon Limited USD A EU EQ CYM 12/31 USD NS.00 12.7 12.7 14.2
The Hermitage Fund GL EQ JEY 03/12 USD 963.12 4.5 105.6 -23.2 Telephone: 352 - 47 18471 UK Fund USD A OT OT CYM 04/13 USD 157.94 1.8 NS NS
HSBC Trinkaus Golden Opportunities OT OT LUX 03/19 USD 55.00 0.1 -33.3 -30.4
n HORSEMAN CAPITAL MANAGEMENT LTD. Prosperity Return Fund A JP BD LUX 12/06 JPY 8577.68 -9.3 -8.4 0.3 n PT CIPTADANA ASSET MANAGEMENT
T: +44(0)20 7838 7580, F: +44(0) 20 7838 7590, www.horsemancapital.com Prosperity Return Fund B EU BA LUX 12/06 JPY 9032.12 4.6 11.0 13.2
Horseman EurSelLtd EUR EU EQ GBR 02/28 EUR 360.26 NS NS NS
Tel: +6221 25574 883 Fax: +6221 25574 893 Website: www.ciptadana-asset.com
Prosperity Return Fund C EU BA LUX 12/06 USD 79.01 -12.2 -11.1 -1.0 Indonesian Grth Fund GL EQ BMU 03/11 USD 162.58 -3.9 2.5 -8.3
Horseman EurSelLtd USD EU EQ GBR 02/28 USD 392.54 NS NS NS Prosperity Return Fund D EU BA LUX 12/06 EUR 121.37 -9.0 -8.8 8.1
Horseman Glbl Ltd EUR GL EQ CYM 02/28 USD 605.47 NS NS NS Renaissance Hgh Grade Bd A EU BA LUX 12/06 JPY 10807.34 3.5 5.1 11.3
n BANC INTERNACIONAL D'ANDORRA. BANCA MORA. Horseman Glbl Ltd USD GL EQ CYM 02/28 USD 605.47 NS NS NS Renaissance Hgh Grade Bd B EU BA LUX 12/06 JPY 11130.39 17.9 25.6 23.9
Avgd. Meritxell 96, Andorra la Vella. Andorra. Ph. +376.884884 www.bibm.ad Renaissance Hgh Grade Bd C EU BA LUX 12/06 USD 96.94 -0.9 0.7 8.4
Andfs. Anglaterra UK EQ AND 11/16 GBP 8.47 2.8 3.6 14.9 n HSBC ALTERNATIVE INVESTMENTS LIMITED Renaissance Hgh Grade Bd D EU BA LUX 12/06 EUR 102.83 -4.6 -4.1 6.9
Andfs. Borsa Global GL EQ AND 03/19 EUR 6.58 15.8 0.7 2.9 T +44 20 7860 3074 F + 44 20 7860 3174 www.hail.hsbc.com
Andfs. Emergents GL EQ AND 11/02 USD 14.77 -20.4 -19.2 -4.7 HSBC ALTERNATIVE STRATEGY FUND
Andfs. Espanya EU EQ AND 03/19 EUR 15.19 11.5 -6.9 21.9 Special Opp EUR OT OT GGY 02/27 EUR 131.14 2.4 5.4 9.1
Andfs. Estats Units US EQ AND 03/19 USD 21.01 -7.0 -1.8 10.0 Special Opp Inst EUR OT OT GGY 03/31 EUR 88.51 0.7 -0.3 13.3 n THE NATIONAL INVESTOR
Andfs. Europa EU EQ AND 03/19 EUR 7.60 12.3 -4.3 9.2 Special Opp Inst USD OT OT GGY 03/28 USD 123.18 4.2 18.5 10.6 PO Box 47435, Abu Dhabi, UAE Web:www.tni.ae
Andfs. Franca EU EQ AND 02/24 EUR 10.98 0.2 17.7 13.7 MENA Special Sits Fund OT OT BMU 02/26 USD 1012.08 4.7 -9.7 -2.2
Special Opp USD OT OT GGY 02/27 USD 138.65 2.5 5.4 9.1
Andfs. Japo JP EQ AND 03/19 JPY 817.66 9.5 27.9 19.2
Andfs. Plus Dollars US BA AND 10/22 USD 9.66 2.3 3.0 6.2 MENA UCITS Fund OT OT IRL 03/16 USD 1333.23 1.3 -3.8 11.6
n HSBC Portfolio Selection Fund n MP ASSET MANAGEMENT INC.
Andfs. RF Dolars US BD AND 03/18 USD 12.52 0.3 2.2 1.1 UAE Blue Chip Fund OT OT ARE 03/18 AED 9.86 -4.8 -9.4 26.8
GH Fund CHF Hdg OT OT GGY 02/27 CHF 133.17 1.7 5.4 6.0 Tel: + 386 1 587 47 77
Andfs. RF Euros EU BD AND 03/19 EUR 12.13 1.0 3.3 2.3 GH Fund EUR Hdg (Non-V) OT OT GGY 02/27 EUR 148.89 1.9 5.8 6.0 MP-BALKAN.SI EE EQ SVN 08/12 EUR 19.29 -1.9 -8.4 -10.9
Andorfons EU BD AND 03/19 EUR 15.93 1.1 0.5 1.8 GH Fund GBP Hdg OT OT GGY 02/27 GBP 165.23 1.9 6.3 6.5 MP-TURKEY.SI OT OT SVN 03/19 EUR 43.85 -4.1 37.1 -8.1
Andorfons Alternative Premium GL EQ AND 12/31 EUR 109.45 16.9 16.9 8.3 GGY
GH Fund Inst USD OT OT 02/27 USD 143.03 2.0 6.6 7.0 n OTHER FUNDS
Andorfons Mix 30 EU BA AND 03/19 EUR 9.55 -6.5 -7.9 -1.8
GH FUND S EUR OT OT CYM 02/27 EUR 167.97 2.1 7.2 7.4 For information about these funds, please contact us on Tel: +44 (0) 207 842 9694/9633
Andorfons Mix 60 EU BA AND 12/19 EUR 8.96 4.4 7.1 -2.5
GH FUND S GBP OT OT CYM 02/27 GBP 176.40 2.1 7.5 7.6 Medinvest Plc Dublin OT EQ IRL 09/30 USD NS.00 NS 1.3 -4.4
n CG Portfolio Fund Ltd GH Fund S USD OT OT CYM 02/27 USD 197.40 2.1 7.2 7.5
NAV OT OT CYM 06/07 GBP 25839.68 5.3 10.9 9.8 GH Fund USD OT OT GGY 02/27 USD 338.14 1.9 5.9 6.2 n WINTON CAPITAL MANAGEMENT LTD
Hedge Investments OT OT GGY 08/16 USD 158.48 NS NS 3.6 Tel: +44 (0)20 7610 5350 Fax: +44 (0)20 7610 5301
n CHARTERED ASSET MANAGEMENT PTE LTD - TEL NO: 65-6835-8866 Leverage GH USD OT OT GGY 02/27 USD 164.14 3.5 9.8 10.5 Winton Evolution EUR Cls H GL OT CYM 02/27 EUR 1425.23 3.3 20.9 15.2
Fax No: 65-6835 8865, Website: www.cam.com.sg, Email: cam@cam.com.sg MultiAdv Arb CHF Hdg OT OT JEY 02/27 CHF 104.24 0.2 3.3 3.2
n MERIDEN GROUP CYM
Winton Evolution GBP Cls G GL OT 02/27 GBP 1447.12 3.3 21.3 15.6
CAM-GTF Limited OT OT MUS 03/13 USD 323131.76 -5.0 -3.9 -12.1 MultiAdv Arb EUR Hdg OT OT JEY 02/27 EUR 117.09 0.7 4.0 3.7
Tel: + 376 741 175 Fax: + 376 741 183 Email: meriden@meriden-ipm.com Winton Evolution USD Cls F GL OT CYM 02/27 USD 1812.57 3.2 20.6 15.3
JEY Antanta Combined Fund EE EQ AND 02/20 USD 166.78 5.8 -20.0 -21.4
MultiAdv Arb GBP Hdg OT OT 02/27 GBP 128.30 0.9 4.6 4.2 Winton Futures EUR Cls C GL OT VGB 02/27 EUR 294.58 2.8 17.0 11.5
n Citadele Antanta MidCap Fund EE EQ AND 02/20 USD 166.68 9.5 -52.8 -36.8
MultiAdv Arb S EUR OT OT JEY 02/27 EUR 133.39 0.8 4.9 4.8 Winton Futures GBP Cls D GL OT VGB 02/27 GBP 321.70 2.8 17.4 11.8
Republikas square 2a, Riga, LV-1522, Latvia MultiAdv Arb S GBP OT OT JEY 02/27 GBP 141.34 0.9 5.3 5.1
Meriden Opps Fund GL OT AND 02/05 EUR 22.68 0.0 -11.2 -11.0
Winton Futures JPY Cls E GL OT VGB 02/27 JPY 20624.60 2.6 17.0 11.8
Citadele Eastern Europ Bal EU BD LVA 03/19 EUR 15.44 1.7 -5.2 -3.1 Meriden Protective Div GL EQ AND 11/24 EUR NS.00 -2.8 NS NS
MultiAdv Arb S USD OT OT JEY 02/27 USD 152.40 0.8 4.9 4.8 Winton Futures USD Cls B GL OT VGB 02/27 USD 1049.65 2.7 16.8 11.6
Citadele Eastern Europ Bd EU BD LVA 03/19 USD 19.25 2.4 -3.9 -2.1
Citadele Russian Eq EE EQ LVA 03/19 USD 12.71 11.8 -28.4 -24.0 MultiAdv Arb USD OT OT JEY 02/27 USD 221.52 0.7 4.1 3.9
n POLAR CAPITAL PARTNERS LIMITED
INDICES
n DJE INVESTMENT S.A. n HSBC Uni-folio
internet: www.dje.lu email: info@dje.lu phone:+00 352 269 2522 0 fax:+00 352 269 25252 Asian AdbantEdge EUR OT EQ JEY 06/30 EUR 91.36 -6.2 -4.5 2.5 International Fund Managers (Ireland) Limited PH - 353 1 670 660 Fax - 353 1 670 1185
DJE Real Estate P OT OT LUX 03/20 EUR 2.95 0.7 -10.7 -9.1 Asian AdvantEdge OT EQ JEY 06/30 USD 171.19 -6.2 -4.4 2.8 Global Technology OT EQ IRL 03/19 USD 25.67 5.7 8.5 18.9
DJE-Absolut P OT OT LUX 03/20 EUR 303.13 17.9 23.3 11.9 Emerg AdvantEdge OT EQ JEY 09/28 USD 151.22 3.4 -2.4 -5.5 Japan Fund USD JP EQ IRL 03/20 USD 21.71 6.1 11.3 4.1
DJE-Alpha Glbl P OT OT LUX 03/20 EUR 217.24 12.4 21.1 9.2 Emerg AdvantEdge EUR OT EQ JEY 09/28 EUR 82.99 2.8 -3.0 -5.9 Polar Healthcare Class I USD OT EQ IRL 03/19 USD 40.72 13.2 21.1 41.6 NAV %RETURN
DJE-Div& Substanz P OT OT LUX 03/20 EUR 367.60 17.0 33.1 16.3 Europ AdvantEdge EUR OT EQ JEY 06/30 EUR 127.84 -3.4 -1.3 2.2 Polar Healthcare Class R USD OT EQ IRL 03/19 USD 39.69 13.1 20.4 40.9 FUND NAME GF DATE CR NAV 1-WK 1-MO 1-Q 1-YR 2-YR
DJE-Gold&Resourc P OT EQ LUX 03/20 EUR 125.52 11.9 0.6 -9.8 Europ AdvantEdge USD OT EQ JEY 06/30 USD 135.07 2.0 4.3 5.1
DJE-Renten Glbl P EU BD LUX 03/20 EUR 157.20 3.6 7.7 4.9 Real AdvantEdge EUR OT OT JEY 04/30 EUR 104.69 1.3 -9.5 -1.9 n Hemisphere Management (Ireland) Limited
LuxPro-Dragon I AS EQ LUX 07/20 EUR 144.57 -8.5 5.0 7.6 Real AdvantEdge USD OT OT JEY 04/30 USD 105.31 1.5 -8.8 -1.7 n ARIX ABSOLUTE RETURN INVESTABLE INDEX
Discovery USD A GL OT CYM 12/31 USD 101.35 NS NS NS
LuxPro-Dragon P AS EQ LUX 07/20 EUR 140.29 -8.8 4.4 7.0 Trading AdvantEdge OT OT GGY 02/27 USD 154.27 2.1 21.8 4.0 Feri Institutional Advisors, www.feri.de
Elbrus USD A OT OT CYM 02/28 USD 9.12 NS NS NS ARIX Composite Gross USD OT OT GBR 02/28.00 USD1706.18 1.6 5.1 6.1
LuxTopic-Aktien Europa EU EQ LUX 03/20 EUR 23.84 14.0 17.8 12.5 Trading AdvantEdge EUR OT OT GGY 02/27 EUR 139.88 2.1 22.2 4.2
LuxTopic-Pacific OT OT LUX 03/20 EUR 22.21 7.7 11.3 0.8 Europn Conviction USD B EU EQ CYM 01/31 USD 160.39 -3.2 -0.7 0.2 n CG Portfolio Fund Ltd
Trading AdvantEdge GBP OT OT GGY 02/27 GBP 149.38 2.0 22.2 4.2
Europn Forager USD B EU EQ CYM 01/31 USD 319.76 -3.3 -1.3 5.0 NAV OT OT CYM 06/07.00 GBP25839.68 5.3 10.9 9.8
Data as shown is for information purposes only. No offer is being made by Morningstar, Ltd. or this publication. Funds shown arent registered with the U.S. Securities and Exchange Commission and arent available for sale to United States citizens and/or residents
except as noted. Prices are in local currencies. All performance figures are calculated using the most recent prices available. 12-month and 2-year returns may be calculated over 11- and 23-month periods pending receipt and publication of the last month end price.

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24 | Monday, March 23, 2015
BofA Bows to Pressure
On Board Nominations
BY CHRISTINA REXRODE
Bank of America Corp. said Fri-
day it would allow certain investors
to nominate their own directors,
bowing to pressure from three large
shareholders.
Bank of Americas concession is
part of a larger shift this year as a
number of U.S. corporations, includ-
ing General Electric Co. and Pru-
dential Financial Inc., embrace a
shareholder-friendly nominating
processknown as proxy access
after years of opposing it. Generally,
Getty Images
at U.S. public companies, only direc-
tors who are supported by the com-
pany are nominated to the board.
The changes could give pension
funds, unions and other big inves-
tors more influence over U.S. com-
panies. Bank of Americas agreement
requires that shareholders own at
least 3% of the shares for at least
three years, though up to 20 inves-
tors will be allowed to pool their
holdings to reach that threshold.
The shareholders that helped
push for the changethe California
Public Employees Retirement Sys-
tem, the California Teachers Retire-
ment System and the adviser to New
York Citys five pension fundscol-
lectively own about 90 million
shares, or about 0.9% of the total.
Giving shareholders more say
over who is on the board is a fun-
damental shareholder right and
necessary for making board mem-
bers accountable to shareholders,
said Anne Simpson, senior portfolio
manager of Calpers, the biggest pub-
lic pension fund in the U.S.
Germanys Coming Nuclear Costs Spark Fears
Continued from page 17
We are convinced, to the best of
our knowledge, that the provisions
are sufficient, said RWE executive-
board member Rolf Martin Schmitz.
He said costs directly linked to de-
commissioning are fairly predict-
able. Less certain are costs depen-
dent on political conditions,
particularly related to final disposal
of waste.
The energy companies are being
pummeled by falling electricity de-
mand in Europe and billions of eu-
ros in government-subsidized, so-
called green energy flooding the
power grid. Both effects are eroding
wholesale power prices, leaving con-
ventional power stations unprofit-
able. And because big, complex proj-
ects often go over budget, pledging
that decommissioning wont cost
taxpayers any money is very opti-
mistic, said Equinet analyst
Michael Schaefer.
Germany isnt alone in tackling
decommissioning. The International
Energy Agency says roughly half of
the worlds 434 nuclear-power
plants will be retired by 2040. Most
are in Europe, the U.S., Russia and
Japan.
Despite this global trend, no
country yet has a site ready for final
disposal of radioactive waste.
Germany is trying to find a deep
geological site suitable to store
highly radioactive waste for about
one million yearsthe time waste
needs to become safe to most living
organisms. The country expects
about 600,000 cubic meters of ra-
dioactive waste by 2080.
And that doesnt include more
BofA CEO Brian Moynihan. Taking the
chairmans role has been faulted.
Citigroup Inc. recently decided
to support a similar shareholder
proposal, though its strategy differs
slightly from Bank of Americas.
While Bank of America already
changed its bylaws, Citigroup is sup-
porting a shareholder amendment
that investors can vote on at the an-
nual meeting.
Bank of America had previously
opposed similar proxy-access pro-
posals filed by activist investor John
Harrington, including one filed for
this years ballot.
The bank said it had numerous
discussions this year with a range of
shareholders on the issue of giving
investors more say over who joins
the board before making the change.
The pension funds victory Friday
came after an unsuccessful effort on
another governance change last fall,
Energy Source
Germanys share of electricity from nuclear power has declined, and the
country aims to phase out its nine remaining nuclear reactors by 2022.
Share of electricity from
nuclear power in Germany
40%
30
20
10
0 Yield K USD Dis Management (Europe)
1994 2000 05
Sources: Germanys Federal Statistical Ofce (historic); International Atomic Energy Agency (countries)
THE WALL STREET JOURNAL
highly radioactive waste slated to be
shipped back soon from France and
Britain, where German nuclear fuel
had been sent for reprocessing.
There has been no outward, vis-
ible progress on the question of
where to store the nuclear waste,
said Matthias Lang, a Dsseldorf-
based attorney at law firm Bird &
Bird.
In 2013 Germany restarted its
long-running site search because of
public concerns about a tentative
selection. The government now aims
to designate a disposal site by 2031,
though subsequent geological explo-
ration and construction could delay
any opening to about 2050.
Until a final disposal site is
MARKETS
when the pension funds made clear
that they were unhappy with the
boards decision to give the chair-
man role to Chief Executive Officer
Brian Moynihan, which overrode a
2009 shareholder vote requiring the
bank to give the jobs to different
people.
One of the funds signaled Friday
it will continue to engage with board
members on their decision related to
Mr. Moynihan. We believe that
shareowners are best served by a
board led by an independent chair,
said New York City Comptroller
Scott Stringer, the adviser to the
citys pension funds.
Another shareholder group that
had opposed combining the chair-
man and CEO jobs, the Interfaith
Center on Corporate Responsibility,
had filed a proposal on separating
the two roles. But it dropped the
proposal after the bank promised to
instead issue a report on its busi-
ness principles.
The bank worked out a separate
compromise this year with another
shareholder group, the UAW Retiree
Medical Benefits Trust, which had
proposed that the bank disclose
each year whether it had clawed
back pay from top executives. The
bank agreed to adopt a similar mea-
sure. The bank had opposed another
shareholder proposal, by the con-
sumer-advocacy group Public Citi-
zen, asking for a report on whether
the bank should sell off more units.
The Securities and Exchange Com-
mission ruled last week that it
would allow that proposal to appear
on the ballot at the annual meeting.
Compared to other countries
in 2013
France
Belgium
Switzerland 36.4
U.S. 19.4
Germany 15.4
China 2.1
10 14
found, all waste will be stored tem-
porarily. Keeping interim facilities
safe is expensive. E.ON has said de-
lays in finding a disposal site will
cost the German nuclear industry
2.6 billion.
Utilities have sued the German
government to recover some
cleanup costs, but verdicts could be
years away. And their efforts face
political opposition.
The government needs to wake
up and prevent the companies from
relegating their nuclear legacy to us
taxpayers, said Sylvia Kotting-Uhl,
a parliamentarian representing the
Green party.
Christian Grimm
contributed to this article.
THE WALL STREET JOURNAL.
Pressure on Cocoa:
Crop Looks Flush
As Demand Fades
BY JULIE WERNAU Hackett, president of Hackett Finan-
cial Advisors, a brokerage and con-
When it comes to cocoa, inves- sultancy in South Florida.
tors are seeing too much of a good The most actively traded cocoa
thing. contract on the ICE Futures U.S. ex-
Prices for the main ingredient in change fell for 12 straight sessions,
chocolate have fallen 7.7% this the longest losing streak ever, ac-
month as investors cording to FactSet data going back
COMMODITY encountered a fa- 30 years. It recovered on Friday as
MARKETS miliar scenario: the the contract for May delivery rose
prospect of a bum- 2.8% to $2,790 a ton.
per crop in Ivory Coast, the worlds Money managers are pulling
top cocoa grower. back on their bets on higher prices.
The nation produced a record 1.7 As of March 17, bullish hedge funds,
million metric tons of cocoa in the pension funds and others outnum-
year ended September, according to bered those betting on lower prices
the International Cocoa Organiza- by 34,539 contracts, the smallest
tion in London. Market watchers say gap since July 2013, according to
Ivory Coast cocoa output is on track data from the U.S. Commodity Fu-
to be about the same this year, at a tures Trading Commission.
time when the world is consuming That said, the prospect that by
less chocolate. 2020 there could be a global cocoa
Reports indicate a good mid- shortage is still on some investors
crop coming on, which should keep minds. With about 70% of global co-
selling pressure on, said Jack
Scoville, vice president of Price Fu-
tures Group in Chicago. Higher wages for cocoa
Ivory Coast produces two cocoa
crops a yeara main harvest that
farmers in Ivory Coast
begins in October and a smaller and wet weather are
mid-crop that is reaped starting in
April. Higher wages for cocoa farm-
making for increased
ers in Ivory Coast and wet weather bean production.
are are making for increased bean
production, while demand for choc-
olate has been less than some inves-
tors had expected. coa production in West Africa, the
Global demand, as measured by crop is vulnerable to plant diseases
the amount of cocoa processed, is or civil strife. In addition, many of
likely to decline this year in every the trees there are older and less-
region except Africa, the ICCO said. productive.
Demand in Europe, the biggest choc- There are a number of potential
olate-consuming region, and the threats to cocoa production over the
Americas are expected to fall 2%
each, while consumption in Asia,
once seen as the region with the
next five years, but the market has
baked a lot of that risk in, said Hec-
tor Galvan, senior market strategist
most growth potential, could fall at RJO Futures in Chicago. You can
4%, according to the ICCOs fore- only beat a dead horse for so long
casts. before you come up empty.
Asia is pulling back, everyone is Also, while demand has declined,
pulling back from cocoa because the it doesnt stay down for long, Mr.
price got really high and chocolate Galvan said. The worlds craving for
is a luxury, not a need, said Shawn chocolate always bounces back.
73.3%
Fund Scorecard
52.1 EUR High Yield Bond
Fundsthatinvestinhigheryieldingsecuritiesdenominated/hedgedinEuropeancurrencies
40%ofassetsinsecuritieswithacreditqualityequivalenttoBB,orlower.Rankedon%total
return (dividends reinvested) in Euros for one year ending March 20, 2015
Leading 10 Performers
FUND FUND LEGAL % Return in $US **
RATING * NAME FUND MGM'T CO. CURR. BASE YTD 1-YR 2-YR 5-YR
NS YCAP High YCAP Asset USDLUX 16.07 34.86 NS NS
4 Banque Carnegie Fund EURLUX 9.17 15.96 11.09 9.03
CarnegieHighYieldBondC Services S.A.
NS Pictet-EUR Pictet Funds CHFLUX 15.58 15.63 10.99 NS
ShortTermHighYieldHICHF (Europe) S.A.
NS Ampega Ampega Investment EURLUX 3.57 10.70 NS NS
CrossoverPlusRentenfondsI GmbH
4 Aberdeen Aberdeen Global GBPLUX 6.25 9.87 10.10 11.26
GlobalSelHighYieldBdD1 Services SA
NS Petercam L Petercam EURLUX 4.21 9.72 NS NS
Bonds EUR Corp Hi Yld A Institutional Asset Management
2 Petercam L Petercam EURLUX 3.94 9.25 6.43 7.64
Bonds Higher Yield A Institutional Asset Management
2 Accent Yield Socit Gnrale EURBEL 4.66 9.22 5.82 4.22
Opportunities Acc Private Banking NV
4 Regard Haut Pro BTP Finance EURFRA 3.05 8.39 9.61 NS
Rendement
NS Indep Haut Indep'AM EURFRA 4.30 7.14 9.67 5.58
Rendement A/I
NOTE: Changes in currency rates will affect performance and rankings. Source: Morningstar, Ltd
KEY: ** 2YR and 5YR performance is annualized 1 Olivers Yard, 55-71 City Road
NA-not available due to incomplete data; London EC1Y 1HQ United Kingdom
NS-fund not in existence for entire period www.morningstar.co.uk; Email: mediaservice@morningstar.com
Phone: +44 (0)203 107 0038; Fax: +44 (0)203 107 0001
THE WALL STREET JOURNAL. Monday, March 23, 2015 | 25

GLOBAL MARKETS LINEUP

Major stock market indexes Stock indexes from around the world, grouped by region. Shown in local-currency terms.
PREVIOUS SESSION PERFORMANCE PREVIOUS SESSION PERFORMANCE
Region/Country Index Close Net change Percentage change Yr.-to-date 52-wk. Region/Country Index Close Net change Percentage change Yr.-to-date 52-wk.
EUROPE Stoxx Europe 600 404.01 3.18 0.79% 17.9% 23.2% Russia RTSI 862.14 14.15 1.67% 9.0 -24.1
Stoxx Europe 50 3505.06 37.93 1.09 16.7 22.6 Spain IBEX 35 11419.60 328.60 2.96 11.1 13.6
Euro Zone Euro Stoxx 380.65 4.69 1.25 19.1 20.3 Sweden OMX Stockholm 551.90 1.56 0.28 16.5 26.9
Euro Stoxx 50 3726.07 55.34 1.51 18.4 20.3 Switzerland SMI 9396.29 67.81 0.73 4.6 13.3
Austria ATX 2528.60 18.41 0.73 17.1 2.2 Turkey BIST 100 82506.35 584.33 0.71 -3.8 27.8
Belgium Bel-20 3765.80 31.45 0.84 14.6 22.1 U.K. FTSE 100 7022.51 60.19 0.86 7.0 7.1
Czech Republic PX 1044.90 2.35 0.23 10.4 5.4 ASIA-PACIFIC DJ Asia-Pacific TSM 1521.12 8.69 0.57 6.7 10.7
Denmark OMX Copenhagen 828.81 4.18 0.51 22.7 33.0 Australia SPX/ASX 200 5975.50 24.70 0.42 10.4 11.9
Finland OMX Helsinki 9245.57 46.95 0.51 19.2 28.7 China Shanghai Composite 3617.32 35.05 0.98 11.8 76.7
France CAC-40 5087.49 50.31 1.00 19.1 17.4 Hong Kong Hang Seng 24375.24 -93.65 -0.38% 3.3 13.7
Germany DAX 12039.37 139.97 1.18 22.8 28.9 India S&P BSE Sensex 28261.08 -208.59 -0.73 2.8 29.9
Hungary BUX 19226.03 310.29 1.64 15.6 14.7 Japan Nikkei Stock Average 19560.22 83.66 0.43 12.1 37.5
Ireland ISEQ 6183.88 107.18 1.76 18.4 25.8 Singapore Straits Times 3412.44 26.28 0.78 1.4 11.0
Italy FTSE MIB 23176.68 371.51 1.63 21.9 10.5 South Korea Kospi 2037.24 -0.65 -0.03 6.4 5.3
Netherlands AEX 499.12 3.11 0.63 17.6 27.5 AMERICAS DJ Americas 517.58 5.09 0.99 2.1 10.1
Norway All-Shares 668.54 11.16 1.70 7.9 8.7 Brazil Bovespa 51966.58 1013.05 1.99 3.9 9.7
Poland WIG 54477.36 328.88 0.61 6.0 7.8 Mexico IPC 43968.15 -150.02 -0.34 1.9 9.9
Portugal PSI 20 5986.51 114.96 1.96 24.7 -19.8 Note: Americas index data are as of 3:00 p.m. ET. Sources: SIX Financial Information; WSJ Market Data Group

S&P Dow Jones Indices MSCI indexes

Price-to- Price-to-
Dividend earnings PERFORMANCE (euros) PERFORMANCE (U.S.dollars) Dividend earnings PERFORMANCE (euros) PERFORMANCE (U.S.dollars) Developed and emerging-market regional and country indexes
yield* ratio* S&P Dow Jones Index Last Daily 52-wk. Last Daily 52-wk. yield* ratio* S&P Dow Jones Index Last Daily 52-wk. Last Daily 52-wk. from MSCI as of March 20, 2015
2.26%20.45 Global TSM 3420.24 1.21% 6.4% Turkey Titans 20 -c 828.99 0.76% 25.8% Price-to- LOCAL-CURRENCY
2.79 18.19 Global DOW 2236.50 -0.20% 33.6% 2563.92 1.40 4.6 4.93%18.19 Global Select Div 261.19 0.11% 22.5% 241.28 1.72 -4.1 Dividend earnings PERFORMANCE
yield ratio MSCI Index Last Daily YTD 52-wk.
2.76 16.75 Global Titans 50 299.63 -0.47 34.3 241.56 1.13 5.2 5.30 17.78 Asia/Pacific Select Div 339.39 -0.54 22.0 313.53 1.07 -4.4
2.40% 18 MSCI ACWI 426.62 0.06% 2.3% 4.0%
2.98 22.03 Dev Europe TSM 3284.03 2.40 -3.4 U.S. Select Dividend -d 1775.37 -0.40 44.8 1431.29 1.20 13.4
2.30 18 World (Developed Markets) 1,751.31 0.16 2.4 4.5
2.21 21.22 Developed Markets TSM 3466.75 1.27 6.8 3.33 20.28 S&P Glb Nat Resources 2202.80 0.51 13.7 2362.46 2.12 -11.0
2.30 18 World ex-EMU 217.33 0.17 2.3 6.7
2.64 15.61 S&P BMI Emg Markets 251.69 0.82 3.8 1.96 21.14 Islamic Market 2979.86 1.06 8.4
2.20 19 World ex-UK 1,787.15 0.22 2.6 6.0
3.14 21.91 S&P Europe 350 1651.02 0.80 23.8 1608.74 2.80 -2.8 2.28 18.66 Islamic Market 100 3575.75 -0.44 40.9 3303.25 1.17 10.3
2.90 17 EAFE 1,851.01 -0.32 4.3 -4.4
2.78 24.85 S&P Euro 1629.07 1.30 21.5 1608.66 3.30 -4.5 Islamic Turkey -c 4407.78 1.28 10.8
2.60 13 Emerging Markets (EM) 964.97 -0.85 0.9 -0.1
3.57 22.42 Europe Dow 1617.41 1.18 16.3 1854.20 2.81 -8.9 3.16 20.52 Sustainability Europe 134.36 1.03 24.6 159.42 2.66 -2.5
3.10 18 EUROPE 136.43 0.55 16.9 18.5
2.98 11.37 BRIC 50 489.37 -1.05 39.6 503.63 0.54 9.3 3.56 39.20 S&P Glb Infrastructure 2014.98 0.05 32.8 2456.87 1.66 4.0
2.90 21 EMU 183.64 0.06 3.4 -9.5
1.86 22.19 U.S. TSM 22098.01 0.89 12.2 1.92 18.51 Luxury 2198.34 -0.15 27.6 2011.79 1.45 -0.1
2.90 20 Europe ex-UK 148.24 0.46 18.3 19.5
3.17 21.10 DJ Global Select RESI 4264.54 0.51 51.8 3806.54 2.12 18.9 DJ Commodity 542.94 1.71 -24.1
4.00 14 Europe Value 132.63 0.53 14.3 13.3
*Fundamentals are based on data in U.S. dollar. Footnotes: a-in US dollar. b-dividends reinvested. c-in local currency. Note:All data as of 2 p.m.ET. Source: S&P Dow Jones Indices 2.20 24 Europe Growth 134.86 0.56 19.4 23.8
2.20 22 Europe Small Cap 321.36 0.85 18.2 14.9
Cross rates U.S.-dollar and euro foreign-exchange rates in global trading 3.50 9 EM Europe 239.47 1.50 13.0 -5.8
3.60 14 UK 2,045.71 0.26 5.9 1.9
USD GBP CHF SEK RUB NOK JPY ILS EUR DKK CDN AUD 2.90 18 Nordic Countries 253.12 1.05 20.0 19.2
Australia 1.2845 1.9240 1.3182 0.1494 0.0217 0.1606 1.0695 0.3170 1.3942 0.1830 1.0220 ... 4.20 7 Russia 756.69 -1.05 14.3 1.3
Canada 1.2567 1.8822 1.2898 0.1461 0.0213 0.1571 0.0105 0.3101 1.3640 0.1870 ... 0.9785 2.70 20 South Africa 1,372.43 1.36 6.5 19.8
Denmark 6.8687 10.2895 7.0492 0.7990 0.1162 0.8587 5.7150 1.6952 7.4559 ... 5.4654 5.3480 2.90 14 AC ASIA PACIFIC EX-JAPAN 483.60 -1.20 3.5 4.5
Euro 0.9213 1.3802 0.9456 0.1072 0.0156 0.1152 0.0077 0.2273 ... 0.1341 0.7331 0.7172 1.70 17 Japan 970.22 -0.39 12.0 29.8
Israel 4.0523 6.0701 4.1588 0.4713 0.0685 0.5066 0.0337 ... 4.3990 0.5899 3.2244 3.1547
2.90 10 China 69.68 1.14 5.5 15.2
Japan 120.1250 179.9500 123.3100 13.9740 2.0315 15.0190 ... 29.6451 130.3900 17.4893 95.5954 93.5400
1.30 20 India 1,079.96 -0.22 6.3 32.9
Norway 7.9984 11.9820 8.2085 0.9304 0.1353 ... 6.6557 1.9741 8.6816 1.1645 6.3644 6.2276
1.40 11 Korea 568.27 0.10 5.9 -1.6
Russia 59.1374 88.5906 60.6890 6.8777 ... 7.3924 0.4922 14.5932 64.1926 8.6085 47.0542 46.0369
2.80 15 Taiwan 361.16 0.87 5.2 19.3
Sweden 8.5969 12.8786 8.8249 ... 0.1454 1.0749 7.1562 2.1218 9.3317 1.2516 6.8406 6.6935
Switzerland 0.9743 1.4594 ... 0.1133 0.0165 12.1811 0.0081 0.2405 1.0576 0.1419 0.7753 0.7586
1.90 20 US BROAD MARKET 2,380.14 0.39 2.3 11.7
U.K. 0.6675 ... 0.6852 0.0776 0.0113 0.0835 0.0056 0.1647 0.7247 0.0972 0.5313 0.5198 1.50 29 US Small Cap 3,521.21 0.01 4.3 6.2
U.S. ... 1.4981 1.0264 0.1163 0.0169 0.1250 0.0083 0.2468 1.0855 0.1456 0.7958 0.7785 3.20 18 EM LATIN AMERICA 2,400.24 0.71 -12.0 -18.4
Source: Tullett Prebon Source: MSCI

Commodities Prices of futures contracts with the most open interest Currencies London close on March 20
EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.MDEX: Bursa Malaysia Per In Per In
Derivatives Berhad; LIFFE: London International Financial Futures Exchange; COMEX: Commodity Exchange; LME: London Metal Exchange; AMERICAS Per euro In euros U.S. dollar U.S. dollars Per euro In euros U.S. dollar U.S. dollars
NYMEX: New York Mercantile Exchange;ICE-EU: ICE Futures Europe. *Data as of March 19, 2015 Per In
ONE-DAY CHANGE Year Year Argentina peso-a 9.5500 0.1047 8.7974 0.1137 EUROPE Per euro In euros U.S. dollar U.S. dollars
Commodity Exchange Last price Net Percentage high low Brazil real 3.4871 0.2868 3.2123 0.3113 Bulgaria lev 1.956 0.5112 1.8019 0.5550
Corn (cents/bu.) CBOT 385.00 11.50 3.08% 418.25 367.00 Canada dollar 1.3640 0.7331 1.2567 0.7958 Croatia kuna 7.631 0.1310 7.042 0.1420
Soybeans (cents/bu.) CBOT 972.50 10.75 1.12 1,067.00 953.50
Chile peso 685.52 0.001459 631.50 0.001584 Euro zone euro 1 1 0.9213 1.0855
Wheat (cents/bu.) CBOT 530.00 18.00 3.52 607.50 478.25
Colombia peso 2795.00 0.0003578 2574.55 0.0003884 Czech Rep. koruna-b 27.494 0.0364 25.327 0.0395
Live cattle (cents/lb.) CME 150.825 0.600 0.40 158.250 138.575
Cocoa ($/ton) ICE-US 2,764 49 1.80 3,038 2,674 Ecuador US dollar-f 1.0855 0.9213 1 1 Denmark krone 7.4559 0.1341 6.8687 0.1456
Coffee (cents/lb.) ICE-US 142.80 -1.35 -0.94% 187.40 128.75 Mexico peso-a 16.3077 0.0613 15.0225 0.0666 Hungary forint 303.25 0.003298 279.35 0.003580
Sugar (cents/lb.) ICE-US 12.70 0.08 0.63 16.27 12.39 Peru sol 3.3520 0.2983 3.0878 0.3239 Iceland krona 148.79 0.006721 137.06 0.007296
Cotton (cents/lb.) ICE-US 62.61 -0.34 -0.54 66.24 57.95 Uruguay peso-e 27.844 0.0359 25.650 0.0390 Norway krone 8.6816 0.1152 7.9984 0.1250
Rapeseed (euro/ton) LIFFE 371.00 unch. unch. 374 340
U.S. dollar 1.0855 0.9213 1 1 Poland zloty 4.1320 0.2420 3.8064 0.2627
Cocoa (pounds/ton) LIFFE 1,944 21 1.09 2,046 1,864
Venezuela bolivar 6.83 0.146362 6.29 0.158883 Russia ruble-d 64.193 0.01558 59.137 0.01691
Robusta coffee ($/ton) LIFFE 1,820 5 0.28 2,077 1,685
ASIA-PACIFIC
Copper ($/lb.) COMEX 2.7570 0.0970 3.65 2.8380 2.4200 Sweden krona 9.3317 0.1072 8.5969 0.1163
Australia dollar 1.3942 0.7172 1.2845 0.7785
Gold ($/troy oz.) COMEX 1181.90 12.90 1.10 1,308.80 1,141.60 Switzerland franc 1.0576 0.9456 0.9743 1.0264
Silver ($/troy oz.) 16.745 0.631 18.535 15.260 China yuan 6.7387 0.1484 6.2022 0.1612
COMEX 3.92 Turkey lira 2.7928 0.3581 2.5727 0.3887
Aluminum ($/ton)* LME 1,781.50 5.00 0.28 1,889.50 1,746.50 Hong Kong dollar 8.4200 0.1188 7.7568 0.1289
Ukraine hryvnia 25.0190 0.0400 23.4315 0.0427
Tin ($/ton)* LME 16,875.00 -300.00 -1.75 19,750.00 16,875.00 India rupee 67.5510 0.0148 62.2275 0.0161
U.K. pound 0.7247 1.3802 0.6675 1.4981
Copper ($/ton)* LME 5,812.00 137.00 2.41 6,247.00 5,369.00 Indonesia rupiah 14118 0.0000708 13005 0.0000769 MIDDLE EAST/AFRICA
Lead ($/ton)* LME 1,698.00 -22.00 -1.28 1,894.00 1,698.00 Japan yen 130.39 0.007668 120.13 0.008325 Bahrain dinar 0.4093 2.4434 0.3770 2.6523
Zinc ($/ton)* LME 2,011.50 5.50 0.27 2,196.50 2,005.00
Kazakhstan tenge 200.44 0.004990 186.01 0.005376 Egypt pound-a 8.2867 0.1207 7.6343 0.1310
Nickel ($/ton)* LME 13,685 80 0.59 15,540 13,600
Macau pataca 8.6579 0.1155 7.9756 0.1254 Israel shekel 4.3990 0.2273 4.0523 0.2468
Crude oil ($/bbl.) NYMEX 46.41 0.88 1.93 56.75 44.03
Malaysia ringgit-c 4.0274 0.2483 3.7100 0.2695 Kuwait dinar 0.3251 3.0760 0.2994 3.3396
Heating oil ($/gal.) NYMEX 1.7099 0.0072 0.42 1.9384 1.5550
RBOB gasoline ($/gal.) NYMEX 1.7882 0.0167 0.94 1.9795 1.5188 New Zealand dollar 1.4319 0.6984 1.3189 0.7582 Oman sul rial 0.4181 2.3921 0.3851 2.5967
Natural gas ($/mmBtu) NYMEX 2.811 -0.018 -0.64 3.2000 2.6200 Pakistan rupee 110.615 0.0090 101.898 0.0098 Qatar rial 3.953 0.2530 3.642 0.2746
Brent crude ($/bbl.) ICE-EU 55.16 0.73 1.34 63.66 48.95 Philippines peso 48.655 0.0206 44.833 0.0223 Saudi Arabia riyal 4.0717 0.2456 3.7509 0.2666
Gas oil ($/ton) ICE-EU 521.75 4.50 0.87 584.25 462.75 Singapore dollar 1.4966 0.6682 1.3787 0.7253 South Africa rand 13.0464 0.0766 12.0187 0.0832
Sources: SIX Financial Information; WSJ Market Data Group South Korea won 1208.01 0.0008278 1112.81 0.0008986 United Arab dirham 3.9872 0.2508 3.6730 0.2723
Sri Lanka rupee 144.40 0.0069252 133.02 0.0075177

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26 | Monday, March 23, 2015 THE WALL STREET JOURNAL.

BLUE CHIPS & BONDS

Dow Jones Industrial Average P/E: 17
Major players & benchmarks
Below, a look at the Dow Jones Stoxx
50, the biggest and best known
companies in Europe, including the U.K. LAST: 18127.65 s 168.62, or 0.94%
YEAR TO DATE: s 304.58, or 1.7%
Stoxx Europe 50: Friday's best and worst... OVER 52 WEEKS s 1,824.88, or 11.2%

Previous High
close, in STOCK PERFORMANCE
Company Country Industry Volume local currency Previous session YTD 52-week
Close 18500
Banco Santander S.A. Spain Banks 202,431,380 6.80 4.83% -1.8% 8.6%
Low
Glencore PLC United Kingdom General Mining 64,726,445 299.30 4.74 0.2 -0.7
BHP Billiton United Kingdom General Mining 16,195,909 1,539 3.60 10.8 -14.2 18000
ENI Italy Integrated Oil & Gas 35,153,520 16.25 3.44 12.0 -9.7
Banco Bilbao Vizcaya Argn Spain Banks 48,991,862 9.37 3.23 19.3 10.7 t
17500
50day
Diageo United Kingdom Distillers & Vintners 6,509,933 1,924 -0.85% 4.1 7.4 moving average
Reckitt Benckiser Grp United Kingdom Nondurable Household Products 1,987,326 5,960 -0.50 14.4 23.0 17000
British American Tobacco United Kingdom Tobacco 6,144,310 3,657 -0.30 4.5 13.8
Siemens Germany Diversified Industrials 7,312,596 100.65 -0.30 7.4 3.0
16500
Prudential United Kingdom Life Insurance 7,732,973 1,748 -0.26 17.1 29.5

...And the rest of Europe's blue chips 16000

26 2 9 16 23 30 6 13 20 27 6 13 20
Latest, Latest, Jan. Feb. Mar.
in local STOCK PERFORMANCE in local STOCK PERFORMANCE
Company/Country (Industry) Volume currency Latest YTD 52-week Company/Country (Industry) Volume currency Latest YTD 52-week Note: Price-to-earnings ratios are for trailing 12 months
Telefonica S.A. 55,341,893 13.46 3.02% 12.9% 21.8% HSBC Hldgs 42,496,431 584.70 1.32 -3.9 -1.6
Spain (Fixed Line Telecommunications) United Kingdom (Banks) DJIA component stocks
Credit Suisse Group AG 14,239,307 25.80 2.87 2.9 -7.0 AstraZeneca 5,511,467 4,847 1.29 6.4 23.0
Switzerland (Banks) United Kingdom (Pharmaceuticals) Volume, CHANGE
Stock Symbol in millions Latest Points Percentage
BG Grp 17,467,899 884.00 2.85 2.2 -17.0 Bayer 5,318,228 143.95 1.09 27.4 46.7
United Kingdom (Integrated Oil & Gas) Germany (Specialty Chemicals) AmExpress AXP 8.6 $82.70 1.16 1.42%
BASF 6,945,820 92.33 2.67 32.1 18.4 Royal Dutch Shell A 16,619,009 2,064 1.08 -4.2 -4.2 Apple AAPL 62.2 125.90 1.60 1.25
Germany (Commodity Chemicals) United Kingdom (Integrated Oil & Gas) Boeing BA 4.0 154.50 0.39 0.25
Total 14,032,253 47.64 2.50 12.0 0.8 Vodafone Group 148,013,820 228.25 1.04 2.5 0.6 Caterpillar CAT 7.9 81.19 1.10 1.37
France (Integrated Oil & Gas) United Kingdom (Mobile Telecommunications)
Chevron CVX 12.8 107.03 2.28 2.18
Rio Tinto 8,435,540 2,915 2.42 -2.9 -7.7 ABB 13,570,409 20.91 1.01 -1.1 -5.7
United Kingdom (General Mining) Switzerland (Industrial Machinery) CiscoSys CSCO 35.0 28.44 0.18 0.64
BP PLC 107,732,982 451.00 2.29 9.7 -3.7 Barclays 61,802,208 255.30 0.99 4.8 7.0 CocaCola KO 29.9 40.65 0.63 1.57
United Kingdom (Integrated Oil & Gas) United Kingdom (Banks) Disney DIS 8.3 108.43 1.06 0.99
AXA 10,990,531 23.83 2.14 24.1 25.2 Roche Holding Part. Cert. 3,532,970 274.90 0.95 1.9 4.8 DuPont DD 8.3 74.34 0.17 0.23
France (Full Line Insurance) Switzerland (Pharmaceuticals)
ExxonMobil XOM 34.0 84.54 0.13 0.15
Allianz SE 4,352,792 161.75 2.08 17.8 34.8 Sanofi SA 5,632,034 93.63 0.70 23.8 27.8
Germany (Full Line Insurance) France (Pharmaceuticals) GenElec GE 47.1 25.40 0.07 0.28
Deutsche Bank 14,086,137 31.65 2.01 26.7 -2.1 LVMH Moet Hennessy 1,540,391 169.25 0.56 28.0 45.2 GoldmanSachs GS 3.4 193.13 3.16 1.66
Germany (Banks) France (Clothing & Accessories) HomeDpt HD 8.1 117.49 2.33 2.02
Standard Chartered 21,352,394 1,072 2.00 11.3 -9.5 Novartis AG 10,980,086 99.70 0.50 8.0 38.5 Intel INTC 54.3 31.31 0.57 1.85
United Kingdom (Banks) Switzerland (Pharmaceuticals)
IBM IBM 8.7 162.88 3.07 1.92
BNP Paribas 7,651,280 53.98 1.93 9.6 -5.1 BT Group PLC 55,623,893 465.40 0.47 15.9 18.9
France (Banks) United Kingdom (Fixed Line Telecommunications) JPMorgChas JPM 17.2 61.75 0.55 0.90
Zurich Insurance Group 1,227,953 332.00 1.78 6.5 26.2 GlaxoSmithKline 22,954,710 1,635 0.31 18.8 0.4 JohnsJohns JNJ 11.5 102.40 0.71 0.70
Switzerland (Full Line Insurance) United Kingdom (Pharmaceuticals) McDonalds MCD 8.8 97.05 1.07 1.11
Schneider Electric SE 2,316,851 74.18 1.69 22.4 16.7 L'Air Liquide 1,554,366 121.80 0.25 18.4 26.7 Merck MRK 23.3 58.58 0.37 0.64
France (Electrical Components & Equipment) France (Commodity Chemicals) Microsoft MSFT 66.5 42.88 0.60 1.41
ING Groep 25,614,434 13.75 1.59 26.9 32.7 Unilever 2,752,693 2,900 0.10 10.4 22.0 Nike B NKE 14.7 101.98 3.66 3.72
Netherlands (Banks) United Kingdom (Food Products)
UBS Group 24,240,838 18.32 1.55 7.2 -0.5 National Grid 13,235,254 889.20 0.10 -3.1 8.7 Pfizer PFE 50.0 34.25 0.10 0.29
Switzerland (Banks) United Kingdom (Multiutilities) ProctGamb PG 21.4 84.74 1.36 1.63
Deutsche Telekom 23,336,296 16.99 1.52 28.2 49.2 Unilever CVA 20,891,956 39.82 -0.03 22.0 43.2 3M MMM 4.0 166.49 0.83 0.50
Germany (Mobile Telecommunications) Netherlands (Food Products) TravelersCos TRV 3.8 109.73 0.62 0.57
SAP 7,686,252 67.10 1.51 15.2 18.6 Nestle 13,599,235 76.50 -0.07 4.9 18.5 UnitedTech UTX 7.2 119.46 0.08 0.07
Germany (Software) Switzerland (Food Products)
UtdHlthGp UNH 6.9 119.14 1.62 1.34
Lloyds Banking Group PLC 316,386,458 80.63 1.42 6.3 2.4 Financiere Richemont 2,580,788 84.05 -0.18 -5.3 2.1
United Kingdom (Banks) Switzerland (Clothing & Accessories) Verizon VZ 24.8 49.56 0.26 0.53
Daimler 8,552,918 91.51 1.40 32.7 38.8 Anheuser-Busch InBev 2,891,999 113.85 -0.22 21.3 56.2 VISA ClA V 15.0 67.41 0.60 0.90
Germany (Automobiles) Belgium (Brewers) WalMart WMT 11.8 83.24 1.72 2.11
Sources: SIX Financial Information Source: WSJ Market Data Group

Tracking Credit derivatives

Spreads on credit derivatives are one way the market rates
Credit-default swaps: European companies
At its most basic, the pricing of credit-default swaps measures how much a buyer has to pay to purchase-and

credit
creditworthiness. Regions that are treading in rough waters how much a seller demands to sell-protection from default on an issuer's debt. The snapshot below gives a
can see spreads swing toward the maximumand vice versa. sense which way the market was moving yesterday.
Indexes below are for five-year swaps.

markets & Markit iTraxx Indexes

Index: series/version
Mid-spread,
in pct. pts. Mid-price Coupon
SPREAD RANGE, in pct. pts.
since most recent roll
Maximum Minimum Average
Showing the biggest improvement... And the most deterioration

dealmakers
CHANGE, in basis points CHANGE, in basis points
Europe: 22/1 0.52 102.26% 0.01% 0.78 0.48 0.60 Yesterday Yesterday Five-day 28-day Yesterday Yesterday Five-day 28-day
Eur. High Volatility: 20/1 0.52 101.79 0.01 0.84 0.48 0.64 CABLE WIRELESS Hellenic Telecom 602 77 124 168
WORLDWIDE 51 3 4 1
Europe Crossover: 22/1 2.65 110.18 0.05 4.05 2.50 3.25 Deutsche Bk 68 4 8 2
Lafarge 70 3 5 6
Asia ex-Japan IG: 22/1 1.02 99.91 0.01 1.28 0.97 1.09 HSBC Bk 54 3 6 4
Airbus Group 50 1 3 ...
Japan: 22/1 0.55 102.13 0.01 0.79 0.55 0.65 Deutsche Lufthansa 106 5 10 6
SABMiller 53 1 2 8
Note: Data as of March 19 Portugal Telecom Intl Fin 478 24 102 122
LVMH Moet Hennessy 23 1 ... 3
In percentage points
Spreads Louis Vuitton Carrefour 45 2 4 1
Index roll Stmicroelectronics 60 2 4 23 LLOYDS BK 51 2 5 3
Spreads on 2.00
Fresenius 65 2 ... 7 Commerzbank 78 3 7 4
ve-year swaps t Europe Sub Financials
1.50 Stora Enso 106 3 3 13 UPM Kymmene 76 3 7 6
for corporate Deutsche Bahn 18 ... 1 4 WENDEL 79 3 12 3
debt; based on 1.00
Glencore Intl 175 4 15 15 Source: Markit Group
Markit iTraxx t Europe Senior Financials
0.50
indexes.
0
Oct. Nov. Dec. Jan. Feb. Mar. Behind US deals: Bank revenues from equity capital markets
2014 2015
Source: Markit Group Behind every IPO, n Equity capital markets n Debt capital markets (both in billions, left axis)
follow-on or
convertible equity ECM as a percentage of total
6 (right axis) 75%
offering is one or t
more investment
banks. At right, 4 50
investment banks
historical and
year-to-date
WSJ.com>> revenues from global
2 25
Follow the markets throughout the day, with updated equity-capital-market
stock quotes, news and commentary at WSJ.com. (ECM) deals 0 0
Also, receive emails that summarize the days trading in 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
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THE WALL STREET JOURNAL. Monday, March 23, 2015 | 27

PERSONAL JOURNAL

What If We All Bought Organic?

Coke, General Mills and Kellogg are taking Honest Tea, Annies and Kashi products mass market
Test Your Kale Cred
BY SARAH NASSAUER
Kashi Go Lean Honest Tea Peach
She serves her children organic
food. She swears she would never Big food companies want to Parent: Kellogg Co. Parent: Coca-Cola Co.
open a can of soup for a toddlers Family Harmony: Be in most Family Harmony: More sugar
lunch. grow sales of their natural grocery stores, pitching the high protein cereal with added gradually over the past
She is Plum Organics core cus-
tomer. And Plum hopes she will
brands without alienating loyal ber twigs. decade.
buy its new pouches of organic to- customers. How some products Kale cred: Sales have fallen as its base wants Kale cred: Too much
mato meatball soup with kale and non-GMO and organic food. Kellogg plans to make all sugar for some original Honest
spinach even if it got help from are faring, with their kale Kashi non-GMO and add more organic varieties. Tea fans even if its less than
owner Campbell Soup Co. to make
them.
credibility rating on a highly most bottled tea.
Plum used Campbell research to unscientic scale of 1 to 5 leaves,
learn childrens favorites are
chicken noodle and tomato and
then reworked recipes in a Plum Simple Truth
way, adding more vegetables, says
Neil Grimmer, co-founder and chief
Organic creamy
executive of Plum. The 8-year-old peanut butter
companys research and develop- Parent: Kroger Co.
ment team in California built on
classic Campbells formulas from Family Harmony: Less
more than 100 years of selling expensive than many oth-
soup. For tomato meatball soup, er smaller organic brands,
Plum chopped kale and spinach Krogers organic and
finely so children arent scared natural food brand hit $1.2
away by the huge leafy greens,
billion in sales in 2014. Plum Tomato Meatball Soup
Mr. Grimmer says.
The Plum shopper and others Kale cred: Parent: Campbell Soup Co.
like her are becoming the darlings Organic wins, but some Family Harmony: Use Campbell data to pinpoint a childhood
of the food industry. Food giants core customers prefer favorite, make it organic, add undetectable kale shreds.
such as Coca-Cola Co., General the happy halo of a small,
Mills Inc. and Kellogg Co. are Kale cred: Moms love a convenient organic tot
looking to the smaller food brands
family-run business. meal, but not as good as homemade for some.
theyve purchased such as Honest
Tea, Annies Inc. and Kashi, which
sell food perceived as healthy or looked at the companys $134 mil- traction, Mr. Goldman says. Today, halved the cans cost, Mr. Goldman store brand for natural and organic
labeled organic. Their goal: to lion in sales last year and its Peach Tea, Raspberry Tea and says. foods, reached $1.2 billion in sales
drive sales to this desirable, loyal growth plans and said, Great. How other flavors are 100 calories a bot- Shannon Blankenship, a human in 2014 after two years on shelves,
consumer willing to pay up in the do we double or triple this? says tle. resources manager from Raleigh, according to a company spokes-
name of organic or natural, as Seth Goldman, co-founder and chief Its sweeter drinks mostly come N.C., says she stopped drinking Diet man. Pantry staples such as organic
sales of soup, soda and cereal executive of Honest, who was in in plastic bottles and have sold Coke three years ago, but buys no-stir creamy peanut butter and
stagnate. the meeting. best overall, while its unsweetened Honest Teas organic root beer ev- free-range organic chicken broth
These shoppers are easily of- Honest Teas sales have in- and low-sugar drinks, in glass bot- ery week. Ms. Blankenship are best sellers, he says.
fended by too much sugar, artificial creased each year since the com- tles, sell well in natural and spe- switched after deciding to stop Moms gravitate to Annies artifi-
ingredients or brands that ignore pany started in 1998, says Mr. Gold- cialty stores, says Mr. Goldman. consuming aspartame, a sweetener cial-ingredient-free cheddar crack-
seemingly niche issues like con- man. Now Honest Tea is aiming for Just Green Tea, without any sugar, in Diet Coke. ers shaped like bunnies and boxed
cerns about genetically modified $500 million in sales in five years, is the companys best seller at nat- Organic root beer is still a treat macaroni and cheese made with
ingredients or artificial food dyes. he says. ural grocers like Whole Foods, he and more expensive than a Coke, some organic ingredients because
In the age of social media, one per- Honest Tea has played with the says. she says, but if I know Im not the foods are convenient and the
ceived misstep can quickly dent level of sweetness in its drinks and Hoping to grab lapsed soda putting a whole can of chemicals in tastes are familiar. But, moms feel
sales. Big companies need to tread has added new products. In 1998 drinkers, Honest made its zero-cal- my body I feel a little better. better about giving it to the their
carefully to bring in more shoppers most Honest Tea drinks had 9 orie carbonated Honest Fizz drinks In recent years Kashi consumers children, says John Foraker, presi-
without losing the base. grams of sugar, or about 35 calo- certified organic earlier this year. have taken to the companys Face- dent of Annies, which General Mills
Last month, Coca-Cola execu- ries a bottle and sold well in natu- To partially make up for the higher book page and other social media bought last year for $820 million.
tives met with executives from ral and specialty grocers. In 2003, cost of adding organic sweeteners to complain that some of its cereals For many consumers there are
Honest Tea, a seller of organic, before being acquired by Coke, the stevia and erythritol, a sugar alco- have GMO ingredients or arent or- limits to their healthy shopping.
fair-trade and low-sugar drinks company added another teaspoon hol, Honest switched from pricey ganic. Children reject food that veers too
bought by Coca-Cola in 2011. At of sugar to some varieties, labeling tall cans that give the drink a pre- The bashing contributed to a far toward a dull, healthy taste, Mr.
Honest Teas headquarters in them Just a tad sweet. At 60 cal- mium look to the same shorter sales slump. The brand of high-pro- Foraker says. Annies whole wheat
Bethesda, Md., Coke executives ories a bottle, we started to get cans as Coke. The changes almost tein, high-fiber cereals, snacks and macaroni and cheese isnt a best
frozen food owned by Kellogg lost seller, but has a strong fan base
about $200 million in sales over among progressive eaters so the
How Sweet It Is the last five years, according to
company filings and analyst esti-
company keeps it, he says.
Annies started selling frozen
Honest Tea has found ways to take advantage of cost savings that come with its large parent corporation, Coca Cola Co., mates. Kellogg Chief Executive pizza made with organic ingredi-
such as aluminum cans, without alienating its core, health-focused, consumer. John Bryant told analysts in a con- ents in 2013, but shoppers balked
Honest Teas strategy over time ference call last July its sales were at about $9 a pie, says Mr. Foraker.
about $400 million. We havent Most frozen pizza sells for a few
2003 To appeal to more consumers, Just a tad sweet 1998 $0.25 million kept Kashi focused enough on pro- dollars less, he says. So last fall,
drinks are sold, teas with slightly more sugar, about 60
calories a bottle. The change pushes the company into gressive nutrition, he said. Annies started selling frozen mini
more grocers.
Honest Fizz A Kellogg spokeswoman says pizza bagels and poppers for about
comes in the the $400 million doesnt include $4 a box. At the lower price, sales
2006 Introduced two unsweetened teas, Just Green Tea and cheaper squat away-from-home specialty chan- of the snacks are taking off, Mr.
Just Black Tea. Today Just Green is the top seller in grocery nels and non-U.S. business. She Foraker says.
stores that focus on selling organic and natural foods.
can (right), but
is now certied declined to comment further. Alanna Miller, a strategist for a
2007 Company introduces Honest Kids, watered down juice All Kashi products will be Non- bank who lives in Phoenix, buys
Organic.
pouches with fewer calories than competitors. Honest Kids GMO Project Verified by early 2016, mostly organic food and looks for
now makes up over a 1/3 of company sales. said David Denholm, Kashis chief convenient health snacks to feed
executive, in an email statement. her two daughters.
2011 Coca-Cola purchases Honest Tea. Only a handful of organic and But they still have to taste good.
natural brands have approached $1 A fan of Annies macaroni and
2012 Honest Kids become sweetened with fruit juice, not
sugar, which boosts distribution and sales. billion in annual sales, a level that cheese, graham cracker cookies and
signals a mass-market food found gummy-fruit snacks in mini pack-
2013 Introduces steviasweetened carbonated in many homes. Horizon Organic, ages, Ms. Miller once bought an-
Honest Fizz, competing with traditional soda. In 2015 the the largest seller of organic milk in other brand of organic fruit snacks
line becomes organic. the country and owned by White- for her 3-year-old daughter as an
2014 Some Just a tad sweet drinks have up to 100
Wave Foods Co., hit $644 million experiment.
calories per bottle like Peach Tea. sales last year, according to a com- She took one bite and spit it
2014 $134 million
pany spokeswoman. Milk is often a back out in her hand, says Ms.
0 25 50 75 100 $125 million consumers first organic food pur- Miller. Just because it says organic
Source: Honest Tea THE WALL STREET JOURNAL. chase. Simple Truth, Kroger Co.s doesnt mean it tastes good.
28 | Monday, March 23, 2015
The Death of Caesar
By Barry Strauss
Simon & Schuster, 323 pages, 17.83
BY GREG WOOLF
Delving into the history of the Ro-
man Republic is like exploring a vast,
ruined house. In the dingiest of cel-
larsthe eighth and seventh and
sixth centuries B.C., when Rome was
ruled by kingswe can barely make
out the shape of the rooms. Were
there really seven kings? How many
of the names we have are real? Can
we trust any of the dates? Climb the
rickety stairs a few centuries and we
pass through other empty rooms.
Hannibal and his elephants stand out
in a pool of light cast mostly by the
historian Livy, but he was writing
two centuries later. There are de-
cades after Hannibal when we do not
have much more than lists of names.
But cross these last dingy corridors
and suddenly, in the last decades B.C.,
also the last generation of the free
Republic, we emerge into brilliant
daylight.
Now at last we hear the Romans
in their own words. Caesar tells
(carefully edited) stories of his cam-
paigns in Gaul. Sallust describes Cati-
lines great conspiracy when Cicero
was consul in 63 B.C. Caesar himself
was nearly implicated in that botched
coup dtat. And most of all we hear
Cicero: Cicero making passionate
speeches in the courts, Cicero the
self-made man struggling to get the
aristocratic senators to put aside
their differences and band together
for Rome, Cicero uncomfortably try-
ing to rally the Roman mob, Cicero
corresponding with all the great fig-
Mayakovsky: A Biography
By Bengt Jangfeldt
Chicago, 610 pages, 24.50
BY ROSAMUND BARTLETT
Mayakovskys poetry is very
loud, very unrefined, and stands ab-
solutely outside the distinction be-
tween good and bad taste, wrote years later he was dead. In April
the migr critic Dmitry Mirsky in
his 1926 seminal survey of contem-
porary Russian literature. This was
not a criticism. Mirsky was quick to
recognize what Vladimir Mayakovsky
had achieved over the course of the
previous decade in revolutionizing
the language and craft of poetry and
taking it out onto the street.
Mayakovsky called his poetic will
and testament At the Top of My
Voice, and the full-throttle way in
which he lived his life was more
than a match for the hyperbole of
his writing. Everything was extrava-
gant about Mayakovsky, from his
size 12 shoes and towering physical
presence (his surname is derived
from mayak, the Russian word for
lighthouse) to his desperate gam-
bling habit, neurotic hypochondria
and enormous need for love. As he
wrote in his diary in 1923, after his
jealousy compelled his paramour,
Lili Brik, to impose a two-month
moratorium on their relationship: I
love you, I love you, despite every-
thing and because of everything. I
have loved you, I love you and I will
love you. . . . Is love the total sum of
everything to me? Yes, only in an-
other sense. Love is life, love is the
main thing. My poetry, my actions,
everything else stems from it. Love
is the heart of everything.
A Vast Roman Conspiracy
ures of the day. Last we have philo-
sophical Cicero in forced retirement,
composing works of cool reason
tinted by despair. For Caesar was
now dictator and Cicero, whose life
Caesar had spared, could do nothing
about it. Some modern historians
have despaired, too, that we see the
Republic clearly only on its death
bedthat after we stumble through
its 700-year history, the light, when it
does come, reveals such a bloody
end.
The historian Barry Strauss works
in the light, but he does not do de-
spair. In The Death of Caesar he
tells the kind of vivid story that is al-
most always out of reach of histori-
ans of ancient times. At the center of
this page-turner are the months that
lead up to Caesars assassination on
the Ides of March, 44 B.C., and the
story of what happened next to those
who killed him. So far so Shakespear-
ean, although Mr. Strauss gives us a
little more background than the Bard
and follows the story a little further.
The Shakespeare play begins just be-
fore Caesar was offered a crown by
Mark Antony, almost exactly a month
before the assassinationone of a se-
ries of scandals that hardened the
hearts of the conspirators. Mr.
Strauss starts six months earlier, as
Caesar returns to Rome in triumph
from his last campaign. And where
Shakespeare ends with the suicides
of Brutus and Cassius on the battle-
field of Philippi and with Antonys ep-
itaph for Brutus (this was the no-
blest Roman of them all), Mr.
Strauss follows the story until Antony
too is dead by his own hand, defeated
in battle by Caesars grand-nephew,
the future emperor Augustus.
This is no trivial variation. By
A Slap in the Face of Public Taste
With his unique oratorical gifts
and flamboyant persona, Mayak-
ovsky was the first to turn poetry
into an art for the masses. He was
also one of the first to embrace the
Bolshevik cause in 1917, and his pop-
ularity brought him the rare free-
dom to travel. Even in New York in
1925 an audience of 2,000 came to
hear him declaim his verse. A few
1930, at the age of 36, Mayakovsky
shot himself.
According to Boris Pasternak,
Mayakovsky suffered a second death
when Stalin anointed the poet with
canonical status in 1935, which led
to the refashioning of his image ac-
cording to the ideology of the Com-
munist Party. Once read with genu-
ine enthusiasm, he came to be
HIP / Art Resource, NY
studied dutifully after his death.
Bengt Jangfeldt suggests in this bi-
ography that Mayakovskys poetry is
now studiously neglected in his
homelandexcept, ironically, in the
sort of professional milieus he once
expressly forswore.
Mayakovskys tumultuous and
fascinating life, replete with pas-
sionate love affairs, artistic quarrels
and political intrigue, is a biogra-
phers dream. Born a provincial for-
est rangers son in 1893, he began
writing poems while imprisoned for
seditious political activity in his
teens. During his impoverished
years at art school in Moscow, he
was drawn into the citys avant-
garde and rapidly became one of the
leaders of the nascent Russian Fu-
turist movement. Mayakovsky was
an enthusiastic contributor to its
notorious 1912 manifesto, A Slap in
the Face of Public Taste, which
called for Pushkin, Dostoevky, Tol-
BOOKS
showing how the apparent resolution
at Philippi unraveled again into fresh
betrayals and a new round of civil
war, Mr. Strauss presents a cast of
Romans who are a good deal less he-
roic than Shakespeares. Mr. Strausss
Caesar is opportunistic, arrogant,
greedy: All his life Caesar loved risk
and embraced violence. His Brutus is
certainly no saint and perhaps not
even as central a figure in the con-
spiracy as most believe. Mr. Strauss
makes a good case for the impor-
tance of another BrutusDecimus
Brutuswhose more essential but
How did they manage to get
60 people involved and keep
it secret? What had Caesar
done to alienate so many?
less high-profile part was forgotten
when later generations idolized more
philosophical tyrannicides. Decimus
was a former protg of Caesars
passed over in favor of Octavian, and
it was he who persuaded Caesar to
attend the Senate on the Ides of
March.
Mr. Strauss prowls around the
central playersconveniently pre-
sented in the opening pages as a cast
of characterslooking for the jealou-
sies and resentments that motivated
each of them, digging into their back
stories of betrayals and adulteries,
ambitions thwarted and insults not
forgotten. There are two strange fea-
tures of the plot to murder Caesar.
First, the conspirators seemed to be
drawn from every possible group
old friends of Caesars, bitter ene-
RED LETTERS Mayakovskys Caricature Against the Constituent Assembly (1921).
stoy, etc. to be thrown from the
ship of modernity.
But beneath Mayakovskys brash
and anarchic posturing was a sensi-
tive, lyrical nature, unleashed when
he met the supremely self-assured
and captivating Lili Brik, who would
become his muse and paramour. Lili
and her husband, Osip, a cutting-
edge critic, immediately recognized
Mayakovskys talent when he read
his first major poem to them in
1915. They began championing his
work and also welcomed him into
their marriage, which was a model
of emancipated sexual mores.
The Briks remained important
figures in Mayakovskys life even af-
mies, disdainful patricians, violent
soldiers, poets and orators. How was
it possible to create such a broad alli-
ance against one man, who had
spared many and bestowed his gener-
osity on quite a few? Second, how did
they manage to get 60, maybe 80,
people involved and yet keep it se-
cret? What on earth had Caesar done
to alienate so many? And was there
anything the conspirators agreed on
other than that Caesar must die?
A different kind of history can ex-
plain the crisis of the Roman state.
Rapid imperial expansion enriched
too few. Hugely extended frontiers
demanded the creation of armies
greater than ever before, legions of
impoverished soldiers who hoped
their generals would look after their
interests when the fighting was done.
A political culture based on competi-
tion overheated when so much
wealth and so much violence were at
hand. Global problems necessitated
the empowerment of brilliant but
self-serving generals like Pompey and
Caesar who could not be contained in
civil society. But none of this explains
the psychology of a political elite
turned into murderers. The Ides of
March brought together members of
every faction, and once Caesar was
dead they immediately sprang apart
and became enemies once again.
What had Caesar done?
Strictly, of course, we can never
know, any more than we can under-
stand the mind of any dead assassin
today. Social factors and political
contexts explain a little but not what
it was like to be among the killers.
Mr. Strausss reconstructions are
imaginative ones, solidly founded on
the source material he knows so well,
informed by the most recent schol-
greatest allegiance were alien to the
ter his affair with Lili ended in 1923.
Along with their entourage, which
included the brilliant literary schol-
ars Roman Jakobson and Viktor
Shklovsky and Lilis sister, Elsa, they
occupy a large amount of space in
Mayakovsky: A Biography. Much
of this is justified, particularly
where it concerns Osips coopera-
tion with the secret police, which
appears to have played no small role
in facilitating all of their extensive
foreign travel in the early 1920s. But
this background comes at the ex-
pense of other figures who might
have cast Mayakovskys life in
greater perspective.
The iconoclastic poet was natu-
THE WALL STREET JOURNAL.
arly discussions. For each of the cen-
tral players he offers a sketch of their
motivations: Brutus, who mistook his
self-interest for idealism; Cassius,
driven by a potent cocktail of ambi-
tion and principle; Decimus, by ha-
tred well concealed. Jealously and re-
sentment at Caesars many alleged
affairsBrutus mother, possibly Cas-
sius wifesimmered beneath the
surface. But our most ancient sources
cannot agree on whether Caesar went
to the Senate House that morning ar-
rogantly disregarding every warning
or whether he fatalistically felt he
had lived long enough. How can we
do better at guessing his mental
state?
What Mr. Strauss is really brilliant
at is the evocation of place. As Caesar
prepares to walk his last paces to his
chair in the Senate, Mr. Strauss con-
jures up the last things he saw: be-
yond the double row of plane trees
their branches still bare on the cusp
of springPompeys Temple of Venus
the Victorious. When we approach
the fatal stabbing Mr. Strauss tells us
what Roman daggers looked like, how
heavy they were, how long the blades
were, how easy they were to conceal
and how hard to push through a hu-
man rib cage. Detail after detail
clothes the familiar facts of Caesars
seemingly inevitable murder with
fresh images. There wouldnt be
much blood on the conspirators dag-
gers, Mr. Strauss surmises, given how
much the thick folds of a toga would
soak up. The last bloody day of the
Republic has never been painted so
brilliantly.
Mr. Woolf, the director of the
Institute of Classical Studies at the
University of London, is the author
of Rome: An Empires Story.
rally drawn to the Communist
dream of rebuilding society, but his
interest in the Bolshevik cause per
se was only skin-deep. Like many
members of the Russian avant-
garde, he made the fatal error of
equating political and artistic revo-
lution; already in the early 1920s, he
began to discover that the Futurist
aesthetics to which he owed his
new regime. Increasing criticism,
led by Lenin himself, induced Maya-
kovsky to abandon the intense indi-
vidualism of his early lyrics and, as
he put it, set my heel / at the
throat / of my own song. Harness-
ing his creative talents to serve and
promote a state that, after all, sup-
pressed artists like him, left him
steadily more isolated and unhappy.
It led, as Mr. Jangfeldt takes pains
to show us, to the tragic end that
his poetry had predicted from the
very beginning. If you wish, he
had written in 1915, I shall rage on
raw meat / or, as the sky changes
its hue / if you wish, I shall grow
irreproachably tender: / not a man,
but a cloud in trousers!
Since the lifting of Cold War cen-
sorship, many revelatory books and
articles have shed light on the leg-
acy of a poet whose name had been
devalued through ubiquitous associ-
ation with metro stations, statues
and streets. With this biography, the
fruit of a lifetime of research, Maya-
kovsky takes his rightful place as
one of the most important and rep-
resentative artists of his age.
Ms. Bartletts books include
Victory Over the Sun: The
Worlds First Futurist Opera, as
well as biographies of Chekhov
and Tolstoy.
THE WALL STREET JOURNAL.
ISIS: The State of Terror
By Jessica Stern & J.M. Berger
William Collins, 385 pages, 14.99
ISIS: Inside the Army of Terror
By Michael Weiss & Hassan Hassan
Regan Arts, 270 pages, 9.99
The Rise of Islamic State
By Patrick Cockburn
Verso, 172 pages, 9.99
BY JAMES TRAUB
Islamic State is scaring the day-
lights out of us. Al Qaeda announced
itself to the world with an unspeak-
able bang but over time retreated
(and regrouped) in the face of drone
attacks and heightened surveillance
and law-enforcement efforts. Islamic
State, also known as ISIS, seems only
to proliferate, like a lethal virus that
has escaped from the lab and begun
madly self-replicating. Already estab-
lished across a chunk of Iraq and
Syria equal in size to Great Britain, it
has begun to colonize Libya, almost
a thousand miles away, and perhaps
also the Sinai, Afghanistan and Ye-
men. Kurdish soldiers and American
pilots are killing hundreds or thou-
sands of Islamic State warriors, but
still more thousands stream across
the Turkish border to die a glorious
death. Islamic State seems to be
nourished from a demonic well-
spring.
Unlike al Qaeda, which offers
victory in some remote era,
ISIS, in occupying territory
and declaring the caliphate,
invites its followers to live in
the prophesied paradise now.
Islamic State has advanced to the
center of our lives, and our night-
mares, with astonishing speed. In
January 2014, Barack Obama called
the organization the junior varsity
team to al Qaedas varsity. Within six
months of that ill-considered taunt,
Islamic State had routed the Iraqi
army; conquered Mosul, Iraqs sec-
ond largest city; gained control over
a vast swath of Syria; and declared a
caliphate in its territory. Islamic
State is a much better organized,
more adaptive and more media-savvy
organization than almost anyone
very much including U.S. intelli-
genceunderstood. The president
had his metaphor backward. On the
strength of three recent books about
this new generation of extremists, I
would say that al Qaeda is IBM and
Islamic State is Apple.
One of these works, ISIS: The
State of Terror, by Jessica Stern and
J.M. Berger, reads at times like a
Harvard Business School case study
on developing organizational culture
in the digital world. After al Qaeda
leader Ayman al-Zawahiri formally
disavowed it in February 2014, Is-
lamic State launched a Twitter cam-
paign through its base of online fol-
lowers imploring its leader, Abu Bakr
al-Baghdadi, to declare the caliphate.
The groups publicists then took to
social media to turn the demand
into a groundswell. Instead of the ji-
hadi elite, Ms. Stern and Mr. Berger
write, living (sometimes literally) on
a mountaintop, reading The New
York Times and watching al Jazeera
to gauge the mood of the Muslim
masses, the newly rechristened Is-
lamic State had adopted a feedback
loop model. Earlier this month, Is-
lamic State was reported to have es-
The Demonic Wellspring
tablished its own version of Face-
book, whose name translates
idiomatically as Caliphatebook. If
its any consolation to President
Obama, Zawahiri had misread Islamic
State as badly as he had.
Zawahiri thought, not unreason-
ably, that indiscriminate brutality
was a poor business model. He urged
Baghdadi to stop murdering any
Sunni who refused to join their anti-
Shiite cause. Muslims around the
world, he wrote, will not accept the
slaughtering of hostages. He was
wrong, of course. Islamic States
snuff films have proved to be an ef-
fective marketing tool, especially
with foreign audiences. Important Is-
lamic State messages are simultane-
ously released in English, French and
German and then translated into fur-
ther languages. Beheading British
and American prisoners enacts a
deeply satisfying drama of vengeance
and power-reversal to those who feel
crushed by, and in, the West.
But Islamic State would not be
nearly so powerful, or so protean, an
organization if it appealed only to
bloodlust. Unlike al Qaeda, which of-
fers the possibility of victory only in
some remote era, Islamic State, by
occupying territory and declaring the
caliphate, invites its followers to live
in the prophesied paradise. It offers
destruction right now, redemption
right now. Ms. Stern, a lecturer on
terrorism at Harvard who served in
the Clinton administration, and Mr.
Berger, a Brookings fellow specializ-
ing in studying extremism, describe
a high-definition video released by
Islamic State at the end of Ramadan
last year in which foreign fighters
urge Muslims everywhere to emi-
grate to the land of Khilafah. A
chant plays in the background: Our
state was established upon Islam, /
and although it wages jihad upon the
enemies, / it governs the affairs of
the people. / It looks after its flock
with love and patience. The camera,
the authors note, lingers on a child
holding a realistic-looking subma-
chine gun.
The caliphate constitutes an exer-
cise in nation-building and a viable
alternative to the apostate regimes
otherwise covering the face of the
earth. In a recent report for the
Brookings Institution, the Middle
East analyst Charles Lister notes
that, within two days of the conquest
of Mosul, Islamic State had issued a
16-point document laying out its gov-
erning principles. Elsewhere in Iraq,
he writes, Islamic State has filled the
vacuum of authority with policing,
education, Sharia courts, humanitar-
ian aid and the like. A favorite data
point of terrorism experts is the con-
sumer protection bureau that Islamic
State has established in Raqqa, its
Syrian capital. Islamic State promises
slaughter to angry young men and a
Salafist kibbutz to their sisters.
If Islamic State really were a busi-
ness-school case, we would want to
understand how its distinctive cul-
ture evolved. On this subject, Ms.
Stern and Mr. Berger largely rely on
second-hand sources. We must turn
instead to ISIS: Inside the Army of
Terror, by Michael Weiss and Has-
san Hassan, who have talked to a
great many of the jihadists them-
selves and tell a far more detailed
and nuanced story. Islamic State,
they note, traces its origin to an en-
trepreneur of violence very different
from Osama bin Laden, a child of
Saudi privilege who grew up to be-
come an austere ideologue. Abu
Musab al-Zarqawi, the founder of Is-
lamic State, was a semiliterate but
very charismatic Jordanian thug.
His first stint in prison was for drug
possession and sexual assault, the
BOOKS
ROLE MODELS Two boys in Suru, Turkey, restage one of the beheadings seen in
the videos distributed by ISIS. Suru is on the Syrian border, near intense fighting.
authors, a fellow at the Institute of
Modern Russia in New York and an
analyst at the Delma Institute in Abu
Dhabi, respectively, write. He boot-
legged alcohol and may have been a
pimp. Zarqawi had the makings of an
Al Capone until his desperate mother
enrolled him in religious classes at a
mosque. He emerged a committed
Salafist and warrior for Islam. After
five years in a Jordanian jail for mili-
tant activities, Zarqawi traveled to
Afghanistan in 1999. When bin Laden
asked him to make bayatto pledge
allegiancehe refused. This ruthless
jihadist was a born schismatic.
Zarqawi moved to Iraq in the af-
termath of the U.S. invasion. It was
he who masterminded the truck-
bomb attack in Baghdad in 2003 that
killed Sergio Vieira de Mello, the
chief United Nations representative
in the country, and 21 others. In this
and other spectacular killings, the
authors note, Zarqawi had help from
Iraqs dethroned Baathist leaders.
The central role that Baathists have
played in the rise of Islamic State is
seen as both a paradox and a poten-
tial source of weakness. How long,
after all, can secularists and millena-
rians make common cause? The an-
swer seems to be: longer than we
think. Messrs. Weiss and Hassan
point out that in his last years Sad-
dam Hussein organized an Islamic
Faith campaign designed to give reli-
gious legitimacy to his secular totali-
tarianism and create a new category
of Salafist-Baathists. Zarqawi was
himself a point of contact between
the groups, for his long career of
crime had introduced him to a highly
differentiated violent underworld.
Most fundamentally, Zarqawi was
motivated by the same hatred of Shi-
ism that had moved Iraqs Sunnis to
rise up in rebellion against the Shiite
government installed by the U.S. In a
letter Zarqawi wrote to bin Laden in
2004, he described Shiismnot the
West, not secularismas the loom-
ing danger and the true challenge.
His goal was to provoke a civil war
by hitting Shiites and their holy
places. Single-minded sectarianism is
the common coin of jihadists and
Baathists.
In 2004, Zarqawi finally made
bayat to bin Laden and renamed his
organization al Qaeda in Iraq (AQI).
In 2006, four AQI operatives blew
up the al-Askari Mosque in Samarra,
triggering the civil war Zarqawi
sought. Four months later, he was
killed by an American airstrike. But
AQI had momentum, and the organi-
zation was earning as much as $200
million a year in criminal enter-
prises that ranged from kidnapping
to oil smuggling. Its new leader, Abu
Ayyub al-Masri, rechristened the
group the Islamic State of Iraq, pre-
figuring the goal of the caliphate,
and embarked on a ferocious cam-
paign of car bombs to kill both Shi-
Associated Press
ites and Sunni rivals.
Jihadist atrocities finally trig-
gered the Sunni backlash known as
the Awakening. This was the moment
when Islamic State could have been
destroyed. The 2007 surge brought
an interval of peace and hopes for a
nonsectarian Iraq. But Iraqs prime
minister, Nouri al-Maliki, a Shiite tri-
umphalist with the same zero-sum
worldview as his Sunni enemies,
turned on the Sons of Iraq who had
helped the U.S. defeat the terrorists.
Mr. Maliki, in effect, proved that
what the Sunni extremists had been
saying about Iraqs Shiite rulers was
true.
Could anything have been done to
prevent this slide back into sectarian
violence? Messrs. Weiss and Hassan
argue that both the Bush and the
Obama administrations, equally ea-
ger to see the last of Iraq, disengaged
politically as well as militarily, aban-
doning the Sunni tribes to Mr. Ma-
likis Shiite mercies. Its true, at the
very least, that neither foresaw the
maelstrom that Iraq would become.
And that was all the space the su-
premely adaptive Islamic State jihad-
ists needed. Ayyub al-Masri was
killed in a U.S.-led raid in April 2010,
and Islamic State regrouped under
Abu Bakr al-Baghdadi. He formed ad-
ditional alliances with Baathist lead-
ers while adding to Islamic States
ranks through a series of deftly exe-
cuted attacks on prisons in Iraq hold-
ing veteran jihadists. Mr. Maliki was
Islamic States first gift; the next was
Bashar Assad, whose savage cam-
paign to liquidate what began as a
peaceful uprising turned Syria into a
charnel house.
Since Islamic State is not actually
a flourishing high-tech startup but a
band of apocalyptic murderers, it is
very much to the point to ask who, or
what, should be blamed for its devel-
opment. This is a bitterly contested
question. If we understand Islamic
State essentially as an extremist reli-
gious organization, then the problem
presumably lies with Islam itself and
must be addressed by the Islamic
world. I was recently on a talk show
with Asra Nomani, an Indian-Ameri-
can journalist and self-described
Muslim feminist and reformer. She
brandished a copy of the hadiths
the teachings of Muhammadand
observed that many of the most hor-
rible acts committed by Islamic
State, including slavery and the kill-
ing of apostates, enjoyed religious
sanction. This is also the theme of a
much-discussed recent essay in the
Atlantic Monthly in which the jour-
nalist Graeme Wood observes that Is-
lamic State, far from being un-Is-
lamic, as both Muslim scholars and
President Obama insist, relies for its
doctrine upon coherent and even
learned interpretations of Islam.
This is self-evidently true. Messrs.
Weiss and Hassan point out that
Monday, March 23, 2015 | 29
Baghdadi holds a doctorate from the
University of Islamic Sciences in Iraq.
Like Zarqawi before him, he takes the
doctrine of takfirof treating non-
Sunni and non-Salafist Muslims as
apostates deserving deathto an ex-
treme. But takfir is by no means ob-
scure or rare in the Islamic world: It
is embedded, for example, in the
Wahhabism that is the official faith
of Saudi Arabia. And millions of
peace-loving Egyptians hold to the
Salafist view that the words of the
prophet and the two generations that
followed him constitute the sole
guide to religious truth. Islamic State
is not Islam, but it is certainly Is-
lamic. This is not an observation
about ancient scripture but about
current practice. Extremist Chris-
tians or Jews or Hindus might be
able to point to similar justifying
passages in their own sacred texts,
but they would not gain much trac-
tion because far fewer of their coreli-
gionists would sympathize with their
views.
But Islamic State is also a prob-
lem in geopolitics. The war in Iraq
crystallized for many Muslims the
long-standing sense of insult that
came of Western incursions into the
Middle East. Islamic State was born
in Iraq. Should we say, then, that it
constitutes a particularly virulent re-
sponse to the U.S. invasion? That is,
would a less bellicose U.S. policy
have deprived Islamic State of a cen-
tral grievanceindeed, of a reason
for being? Many on the left make this
argument. Neither of these books
even addresses it, chiefly because,
unlike al Qaeda, Islamic State seems
only passingly interested in the iniq-
uities of the West. One of the distin-
guishing features of the groups ob-
sessive takfiri culture is a relentless
focus on the near enemy of Islamic
regimes rather than the far ones of
the Western democracies. Messrs.
Weiss and Hassan argue that Zarqawi
and his allies gave little thought to
fighting the Americans until the Bush
administration installed a Shiite gov-
ernment in Baghdad. Of course, if Mr.
Bushs fatal mistake was not invading
Iraq but opening the Pandoras box of
sectarianism, thats still a very big
mistake.
In The Rise of Islamic State: ISIS
and the New Sunni Revolution, a
quickie book rushed into print to ride
the wave of Islamic State anxiety (en-
tire sentences are repeated in several
different chapters), Patrick Cockburn
makes a different case for U.S. re-
sponsibility. In the aftermath of 9/11,
he argues, the U.S. should have con-
fronted Saudi Arabia and Pakistan,
the true sponsors of Islamist extrem-
ism. Instead, those countries became
allies in the war on terror. This may
well be true, though Mr. Cockburn, a
Mideast correspondent for the Inde-
pendent newspaper, does not say
what the U.S. could have or should
have done to change Saudi or Paki-
stani behavior.
Containment requires patience,
and patience is very hard to muster
in the face of persistent savagery. We
will need to remind ourselves that Is-
lamic State is not Nazism or Soviet
Communism. It is terrifying, but it
does not threaten our civilization.
Jessica Stern and J.M. Berger offer
an admonition that we should keep
in our wallet and pull out whenever
the anxiety level gets too high: You
are significantly more likely to die in
a car accident, especially if you fail to
wear a seat belt, than to be attacked
by ISIS. Wear a seat belt.
Mr. Traub writes a weekly
column for ForeignPolicy.com. His
biography of John Quincy Adams,
Militant Spirit, is forthcoming
from Basic Books.
30 | Monday, March 23, 2015
Juventus super striker Carlos Tevez eludes Genoas Andrea Bertolacci and Facundo Roncaglia, right, in Sundays Serie A match. He scored the only goal in a 1-0 win.
Why Argentine Strikers Are Ace
Around the world, scoring lists are topped by these South American exports
BY GABRIELE MARCOTTI
Goal scorers
have joined soy
and beef among
Argentinas princi-
pal exports.
The South
American nationrunner-up at last
summers World Cuphas a long
and storied soccer tradition. But
right now it seems to be exporting
one genre of footballer, the goal-
scoring forward, like never before.
Its gotten to the point where you
will find Argentines at or near the
top of the scoring chart in leagues
all over the world.
Start at the top. Heading into
the weekends games, Manchester
Citys Sergio Agero was the Eng-
lish Premier Leagues second-high-
est scorer (though he has since
slipped to third). Over in Spain,
Barcelonas Lionel Messi once
again is La Ligas pacesetter with
32 goals in 27 appearances. Villar-
reals Luciano Vietto is in eighth
place. And in Italys Serie A, the
joint top scorers were both Argen-
tineJuventuss Carlos Tevez and
Inters Mauro Icardias were two
others in the top five, Gonzalo
Higuan of Napoli and Paulo Dy-
bala of Palermo.
Europes two other top leagues
are somewhat lighter in the Ar-
gentine scoring department, but
Germanys Bundesliga still offers
up Werder Bremens Franco Di
Santo, fifth in the scoring charts,
while Montpelliers Lucas Barrios
is seventh in Frances Ligue 1.
(Barrios was born and raised in
Argentina, but plays for Paraguay,
the country of his mothers birth.)
The leading scorer in Greece,
Jernimo Barrales of Asteras Trip-
olis, is also Argentine, and the
country is also represented in Por-
tugal by Benficas Eduardo Salvio,
who is ninth.
Head toward Asia and youll
find Al-Wakrahs Jorge Sebastin
Sez (10th in Qatar) and, down
under, Adelaides Marcelo Carr-
usca, eighth in the A-League.
Cross the Pacific and while
Mexico has had a fine goal-scoring
tradition since the days of Hugo
Snchez, the men dominating the
scoring charts these days are Ar-
gentines such as Julio Furch of
Veracruz (first), Matas Alustiza
of Puebla (second) and the trio of
Santos Lagunas Diego Gonzlez,
Tijuanas Gabriel Hauche and
UNAMs Ismael Sosa (all in joint
third place).
In South America, theyre even
more ubiquitous. Outside their
home nation, youll find Argen-
tines leading the league in scoring
in Chile (OHigginss Pablo Calan-
dria) and Ecuador (Rivers Daniel
Neculmn). In Venezuela, Tulio
Etchmaite of Portuguesa ranks
third, while in Bolivia, Universi-
tarios Martn Palavicini is in sec-
ond with San Joses Mauro Busta-
mante in fourth. Theyve even
occupied rival and fellow power-
house Brazil. Last season, Gre-
mios Hernn Barcos finished fifth,
while Fluminenses Daro Conca
was 10th.
How to explain this?
Once youve accounted for the
somewhat slim possibility that it
could merely be a gigantic global
SPORTS
coincidence, other factors come
into play.
Argentina, of course, is a soc-
cer powerhouse and generates
large numbers of players in gen-
eral, not just forwards. But with
the Argentine economy hiccuping
and not much money in the do-
mestic game, theres an incentive
for both clubs and players to
move abroad.
Theres a similar dynamic at
work in Brazil, though in Argen-
tina its more pronounced, in part
because the internal market is
smaller and its more difficult to
retain top players.
Selling Argentine players
abroad is a good way to
bring in hard currency.
A study by the sports market-
ing firm Euromericas released in
November revealed that a whop-
ping 2,715 Argentines played pro-
fessional soccer abroad. More
than any other nation and more
than Brazils 2,356, despite the
fact that its population is almost
five times as large as Argentinas.
Put another way, when you
consider that Argentinas top
league, the Primera A, is made up
of 30 clubs each with between 25
and 30 Argentine professionals on
its books, you realize that there
are almost three times as many
Argentines playing soccer for a
living outside the country.
THE WALL STREET JOURNAL.
HEARD ON
THE PITCH
Manchester United Seizes
Advantage Over Liverpool
Steven Gerrards tumble in a de-
cisive home game against Chelsea
last spring went down as the mo-
ment the Premier League title
slipped away from Liverpool. His
40 seconds of madness on Sunday
afternoon could prove almost as
costly to the clubs main objective
this season: a top-four finish.
With Liverpool trailing 1-0 to
Manchester United at Anfield, Ger-
rard was sent off less than a min-
ute after coming on for stamping
on Ander Herrera. That left his side
to play the entire second half with
10 men on its way to a 2-1 defeat.
The result put five points of
daylight between United in fourth
and Liverpool in fifth with eight
games remaining in the season.
Gerrard, of course, wasnt en-
tirely to blame for the result. He
wasnt even in when Juan Mata
scored his first of two goals in the
14th minute. But without a full
side, Liverpool never quite worried
United late in the game.
The first half was very good
because I knew in advance that
Liverpool would press us and they
did, but we played them off the
Agence France-Presse/Getty Images
pitch in the first half, United man-
ager Louis van Gaal said.
Liverpools Brendan Rodgers rec-
ognized that the odds were against
his team now. But the schedule
could yet play a major factor. Both
sides must still play Chelsea and
Arsenal this season, while United
also has a Manchester derby in the
mix. Joshua Robinson
In Final Sprint, Degenkolb
Wins Milan-San Remo
After almost seven hours and
293 kilometers between Milan and
San Remo, the first of the cycling
seasons five Monument races was
settled in the final yards on the Via
Selling Argentine players Roma. John Degenkolb, riding for
abroad is obviously a good way to Giant-Alpecin, emerged from the
bring in hard currency. And, possi- bunch sprint on Sunday to win
bly because clubs often pay a pre- ahead of defending champion Alex-
mium for prolific scorers, selling ander Kristoff, Michael Matthews
Argentine strikers is more lucra- and Peter Sagan.
tive than dealing in defenders. The field might have been more
That might explain why the coun- crowded at the finish, but the peril-
try produces more forwards than ous descent off the Poggio whit-
other positions, although in the tled down the number of contend-
past it was known for outstanding ers. At least three potential
central defenders and holding winners, including Philippe Gilbert
midfielders. and road-racing world champion
Theres also natural turnover Michal Kwiatkowski, crashed out in
at work here. You produce a wet conditions. I managed to
striker in Argentina and, as soon make it into a good position over
as you can get a decent price for the top of the Poggio and avoid
him, sell him. That clears space the crashes, Degenkolb said, and
for his replacement who, you then in the final two kilometers it
hope, will develop into a player was just fighting for position and
worth selling at a high price in a relying on instinct. J.R.
few years time.
Argentine players have gener-
ally shown themselves to be quite
adaptable abroad. Unlike Brazil-
ians or most Africans, they are
raised speaking Spanish, which
makes it easier to do business not
just in lucrative markets like
Spain or Mexico, but across the
rest of South and Central America.
Because so many Argentines can
easily trace their ancestry to
Spain or Italy, its also simpler for
them to gain a Spanish or Italian
passport, which, in turn, gives
them access to employment in
European leagues.
So the ubiquity of Argentine
goal scorers owes as much to eco-
nomic factors as it does to techni-
European Pressphoto Agency
cal ones. And as long as they con-
tinue to prove their worth to Steven Gerrard leaves the field
employers, its hard to imagine after his red card Sunday.
the assembly line stopping.
THE WALL STREET JOURNAL. Monday, March 23, 2015 | 31

OFF THE WALL

Paleoartist Puts a Face on Ancient Bones

Tyler Keillor builds own 4-year-old son, meanwhile, pre-
fers to stay upstairs.
full-flesh models Its like a painter owning a van
Gogh, says Tylers wife, Kari.
based on fossils Theyre part of the family. Mr.
Keillor took them to be appraised on
the popular TV series Antiques
BY TYLER J. KELLEY Roadshow, but the experts didnt
Chicago see a market for 5-foot plaster Ne-
anderthals. I paid $75 each for the

A
fter careful consideration, Ty- large statues, and I have a child that
ler Keillor made a decision: T. I paid $25 for, he says. I think I got
rex had lips. In the debate a great deal. When he has time, he
over dinosaurs oral margin, one of plans to construct a little bit of
the countrys top paleoartists has cave wall and a prop campfire with
taken sides. Mr. Keillors job is to flickering lights so theyll feel more
create flesh models of dinosaurs at home.
Bob Stefko for The Wall Street Journal

and other prehistoric animals based Lips aside, Hes one of the best
on fossil evidencegiving creatures sculptors out there, says Dr. Carr,
that died millions of years ago a who considers Mr. Keillor a master
face, a story and sometimes lips. of realistic painting and scales. Ty-
Using traditional mediums like ler has little competition at the pres-
clay and resin, as well as CT scan- ent time, he adds.
ning and 3-D printing, he is at the An example is his baby sauropod,
forefront of incorporating digital art just hatched from its egg, about to
and technology into paleontology. be eaten by a snake. Mr. Keillor
Mr. Keillor works at the Univer- Paleoartist Tyler Keillor at his home studio with a Herrerasaurus he sculpted, based on fossil evidence. made the diorama for the University
sity of Chicago Fossil Lab under ce- of Michigan and is marketing a min-
lebrity paleontologist Paul Sereno. tistic decisions come from fossils ger, Mr. Keillor read technical papers pect it to breathe, to blink. iaturized version of it in Prehistoric
His work, found in museum collec- and from studying dinosaurs near- about the animals nearest relative. Whenever Mr. Keillor needs en- Times magazine. The scene, discov-
tions around the world, is often the est living relatives: reptiles and He concluded the texture was an al- couragement, he can turn to the ered by paleontologist Jeff Wilson,
publics first look at a newly discov- birds. He decided to give his Hetero- most perfect match for a bag of dry roommates who inhabit the base- was preserved in one fossilized mo-
ered species, as with the pebbly- dontosaurus a fleshy protuberance lentils. So he fashioned the crea- ment of his suburban Chicago home. ment. I followed the bones and did
faced predator Rugops primus, over its nose like a turkey because tures pebbled, scaly skin out of len- Posed in a semicircle are nine cave what they told me to do, says Mr.
which was unveiled in 2004. A of an indentation in the fossil skull. tils pressed into clay. For the skin of man sculptures from the 1930s, dis- Keillor. Yet the pathos on the face of
plain fossil doesnt look like a heck He also gave it a beak, fangs, molars, a little head-butting dinosaur, which carded when Chicagos Field Mu- the little green sauropod is enough
of a lot to the average person, Mr. cheeks and fiendish-looking eyes. is so new it has yet to be named, he seum, where Mr. Keillor once to melt the most rigorous of hearts.
Keillor says. But he is quick to point out, Theres used impressions from dried avo- worked, eliminated its beloved Hall
Instead of studying science, he a bone above the eye that makes it cado skins. of Man exhibit.
cut his teeth working in a dental lab- look evil. Its not me, its the bone. Tyler has a level of exacting de- Details like the bloody knuckles Online>>
oratory, doing special-effects Much of a paleoartists work is tail and creativity thats really re- on one of the cave men have a vis- Watch a video and see more photos
makeup and studying wig making at determining textures, colors and tis- markable, Dr. Sereno says. Adds Mr. ceral narrative quality Mr. Keillor of Tyler Keillor at work at
Chicagos Lyric Opera. As a child, he sues not preserved, or barely pre- Borucki, of Acme Design, You ex- brings to his own work. The Keillors WSJ.com/OffTheWall.
would try to make little puppets of served, in the fossil record. I have
the alien from Alien, he says. He to be able to justify every choice, ev-
dropped out of college to work on ery millimeter of the sculpture, Mr.
low-budget horror movies, commer- Keillor says. He concedes that he is Photography by Brigitte Lacombe
cials and stage productions. willing to find a feasible way to
His skill set was well-suited to Dr. make the thing more visually inter-
Serenos team. After another pa- esting.
leoartist struggled with the hair of a His boss is emphatic about see-
7,000-year-old beautiful woman, ing the balance and the beauty in
Dr. Sereno says, he turned her over the animals his lab animates. (Dr.
to Mr. Keillor. When you see it in Sereno himself was named one of
the ground in the field, you need to People Magazines 50 Most Beautiful
have the mind and eye of an artist, People in 1997.)
he says. Paleontology is about envi- Usually, I give my dinosaurs
sioning things and bringing them lips, Mr. Keillor says. An animal
back to life. living in an arid terrestrial climate
On a recent Thursday, the soft- would have had lips, he reasons,
spoken Mr. Keillor, 42 years old, was pointing to carnivorous reptiles like
painting orange silicone over pieces Komodo dragons as living examples.
of a 95-million-year-old rib, the last But the oral margin remains contro-
of about 100 Spinosaurus bones he versial.
was reproducing for the University Thomas Carr, director of the Car-
of Chicago before it repatriated the thage Institute of Paleontology at
originals back to Morocco. Carthage College in Kenosha, Wis., is
The Sereno teams work on staunchly opposed. If artists put
Spinosaurus, a carnivorous, semi- lips on a dinosaur reconstruction I
aquatic theropod, was detailed in know that theyre doing so without Mike McCue. CEO, entrepreneur, innovator and Wall Street Journal reader.
the recent Nova film Bigger Than T. any evidence to support that idea,
rex. Among other reasons, the proj- he says, Theyre simply not playing
ect is exceptional for being the first by the rules of rigor. Dr. Carr con-
life-size skeleton produced from a siders birds and crocodiles, who are

PEOPLE WHO DONT HAVE TIME

three-dimensional digital model. Dif- lipless, to be the only acceptable liv-
ferent sets of bones were scanned, ing references for dinosaur features.

MAKE TIME TO READ

resized and arranged to make a Reptiles like Komodo dragons are
complete digital skeleton, with Mr. too distantly related, he says, Dino-
Keillor and the paleontologists filling saurs are interesting enough that
in any missing bones using what Mr.
Keillor calls informed speculation.
they dont need to be sexed up.
But Dr. Carr is a fan of showing THE WALL STREET JOURNAL.
A computerized mill then cut the dinosaurs in nontraditional poses,
bones out of foam, which were like the hulking yet subtle Drypto-
molded and cast in resin. The 50- saurus Mr. Keillor did for the Lake
foot skeleton was mounted for exhi- County Discovery Museum in Wau-
See what Mike McCue makes time to read at WSJ.com/Mike
bition in a swimming pose. Acme conda, Ill. It is a departure from
Design Inc., in Elgin, Ill., made the 5- what Mr. Keillor calls the running,
foot skull. Its pretty wild, making roaring clich. He portrayed it with
something really old using new tech- eyes narrowed and mouth almost
nology, says Acme founder Clint shut. It looked like it was thinking,
Borucki. he explains. He wants viewers to
The Fossil Labs next project in- wonder, Is this thing satiated and
volves 3-D printing the articulated, calmly looking at me, or is it about #MakeTime
mountable skeleton of a birdlike di- to eat me? 2015 Dow Jones & Co. Inc. All rights reserved. 3DJ2253
nosaur from CT-scanned fossils, While trying to decide on the
which has never been done before. proper skin for Rugops primus,
Mostly, however, Mr. Keillors ar- which Dr. Sereno discovered in Ni-
32 | Monday, March 23, 2015
Email: heard@wsj.com
ECBs Hard Task to Revive Securitization
The European Central
Banks power to steer mar-
kets is undeniablejust look
at the euro or eurozone-gov-
ernment-bond yields. But it is
finding it trickier to get a
grip on purchases of asset-
backed securities. The ECBs
efforts to revitalize Europes
securitization market are
falling short of its rhetoric.
The ECB started buying
asset-backed securities
which bundle together pools
of underlying loansin late
November. But as of March
13, it had bought just 3.8
billion ($4.05 billion) of these
securities. By contrast, the
ECB bought 9.8 billion of
government and public-sec-
tor bonds in the first three
days of its expanded asset-
purchase program. Purchases
of securitizations were never
going to be the driving force
behind expanding the ECB
balance sheet, of course, but
the result is still disappoint-
ing.
Rio Tinto and BHP Face
Some Frank Questions
It should be useful to
have a few billion in your
back pocket. But it may not
do Rio Tinto much good.
Franking credits are an
Australian obsession that
has dogged Anglo-Australian
miners Rio and BHP Billiton
for years. The companies get
credits as they pay Austra-
lian tax.
When they shell out divi-
dends, or do off-market buy-
backs, the franking credits
are effectively distributed to
Australian investors to avoid
double taxation. Assuming a
dividend is fully franked at
Australias corporate tax
rate of 30%, that is lucrative
for pension funds that pay
tax at 15%.
The stock of credits has
been rising: As of December,
Rio Tinto had sufficient
credits to frank dividends of
$18.3 billion, nearly five
years worth of payments.
BHP last June had credits
worth $13.4 billion that
could frank about $31 billion
of dividends.
And with weak commodi-
ties prices weighing on the
sector, investorsat least in
Australiawould like to see
the miners free up the value
of franking credits, which
goes unrecognized in the
stock market.
Adding to the pressure to
do this, other Australian
companies have found ways
to unlock their credits. Gam-
ing company Tabcorp said
in February it would pay
shareholders a special divi-
dend, alongside a matching
rights issue, which effec-
HEARD ON THE STREET
Both internal and external
factors are at play here. First,
the purchase program itself
is somewhat cumbersome.
The ECB makes use of four
external asset managers to
suggest potential purchases.
But the due diligence re-
quired and the time taken for
the ECB to decide on whether
to buy a security means that
actual purchases are a slow
process. The system might
yet be streamlined. At some
point national central banks
will take over the purchases,
but it hasnt been decided
when.
Second, there has been
relatively little new issuance
of securitizations, which
might provide better oppor-
tunities for purchases. One
concern is that the massive
provision of liquidity by the
ECB through other channels,
such as long-term loans,
means that banks have no in-
centive to turn to securitiza-
tion, as funding is plentiful
Buried Resource
Rio Tinto dividends that could
be fully franked from credits
$20 billion
15
10
5 U.K. investors a distribution
0
2009 10 11 12 13
Source: the company
THE WALL STREET JOURNAL.
tively provided the funds to
be distributed.
Raising money from in-
vestors just to hand it back
seems nonsensical. But nota-
bly it was blessed by the
Australian tax authorities,
said Peter OConnor at Shaw
Raising money from
investors to return it
seems nonsensical.
Stockbroking in Sydney, and
allowed shareholders to ben-
efit through franking cred-
its. Retailer Harvey Norman
used the same trick last
year.
This is challenging for
the miners, though, thanks
to their dual-listed struc-
ture. Were Australian inves-
tors to benefit in this way,
U.K. shareholders would
FINANCIAL ANALYSIS & COMMENTARY
No Boom
European securitizations placed with investors, in billions
500
400
300
200
100
0 helping banks transfer risk
2000 05
Source: Barclays
and cheap. In the first two
months of the year, securiti-
zations placed with investors
totaled 7.6 billion, according
to Barclays, the slowest start
to a year since 2009.
Third, the regulatory
treatment of asset-backed
securities is in flux and is
still deterring both issuers
have to be treated equally.
It isnt really clear what
equal means in this case.
U.K. shareholders could get
cash as compensation. But
neither miner has much
money to throw around. An-
other option might be for
U.K. investors to receive a
matching payout in shares.
When BHP spun off Blue-
Scope Steel in 2002, it gave
of BHP shares to compen-
sate.
That would be tricky for
14 Rio. The U.K. listing ac-
counts for more than 75% of
its equity base, despite the
bulk of earnings coming
from Australia. It would be
expensive to compensate the
larger U.K. shareholder base
for a benefit conferred in
Australia. And issuing
shares to U.K. investors
would exacerbate the imbal-
ance.
BHPs weighting is about
60% in favor of its Austra-
lian company, which may
mean more options. Andrew
Mackenzie, chief executive,
last month said the issue
would be a top priority for
BHPs new head of tax.
Either miner would likely
get a rapturous reception
Down Under if they managed
to release franking credits in
size. But reverse engineering
a transaction to fit idiosyn-
cratic tax rules is fraught at
the best of times. Throw in
the complexities of a dual-
listed company and this,
frankly, still looks a tough
nut to crack.
Helen Thomas
10 15 by buying lower-rated slices
YTD
THE WALL STREET JOURNAL.
and investors. A key attrac-
tion of securitization for is-
suers is the ability to trans-
fer risk to investors, freeing
up capital, but regulation has
made this difficult. This isnt
the ECBs fault but does em-
phasize that the central bank
cant do everything on its
ownas it has made clear
Big Pharmas Biosimilar Threat
In the perpetual battle
over U.S. prescription drug
prices, pharmacy-benefit
managers may have found a
potent new weapon: biosimi-
lars. Pharma investors look ill
prepared.
Biosimilars are analogous
to generic versions of tradi-
tional small-molecule phar-
maceuticals. A biosimilar isnt
an exact copy of the treat-
ment it mimics and requires
considerably more resources
and expertise to develop than
a generic drug. One reason
for that is, unlike generics, bi-
osimilars need to go through
clinical trials to win approval
from the Food and Drug Ad-
ministration.
The first biosimilar has example, a liver transplant in
been approved, and more are
on the way. There are 11 bio-
logic drugs that will face bio-
similar competition in the
next several years, according
to data compiled by analysts
at Evercore ISI.
These drugs, which treat
ailments from cancer to rheu-
matoid arthritis, raked in
more than $50 billion com-
bined in 2014.
Competitive pressure will
vary in intensity for each
treatment. For instance, there
are 11 biosimilars in develop-
ment to compete with Abb-
Vies Humira, the best-selling
drug in the world last year
and which is due to lose U.S.
patent exclusivity in 2016.
Four of the competing prod-
ucts are now in Phase III clin-
ical trials. In contrast, other
drugs face competition from
only one or two biosimilars.
The arrival of biosimilars
coincides with a period of
surging drug prices. Express
Scripts said earlier this
month that U.S. drug spend-
ing per member increased by
THE WALL STREET JOURNAL.
more generally.
Part of the problem may
be that the ECBs asset-
backed securities program
has to serve two ends. It is
part of monetary-policy oper-
ations, but has an aim be-
yond that to develop a dura-
ble market that could help
fund Europes small busi-
nesses better in the future.
That creates conflicts: A pro-
gram to get the market back
on its feet might work much
better if it was aimed at
2014, it was 27 times. The
of securitizations; as a mone-
tary-policy operation the ECB
is focused on low-credit risk
securities.
The hope remains that a
brighter eurozone outlook,
greater borrowing and lend-
ing and regulatory compro-
mise could yet lift issuance of
asset-backed securities. But
for now, the market appears
beyond even the long arm of
the ECB. Richard Barley
13.1% in 2014, the largest sin-
gle increase since 2003.
Spending in the specialty
category was up 31%, driven
primarily by price increases.
This has been great news
for biotech shareholders, of
course, but less so for those
paying for treatment. In the
most high-profile example,
Gilead Sciences hepatitis C
drug Sovaldi came to market
in 2013 with a list price of
$84,000 for a round of treat-
ment.
Specialty drug manufac-
turers argue that high prices
reflect their value to the
health-care system as a whole
by helping to avoid more
costly expenses such as, for
ing heavily in a portfolio of
the case of hepatitis C. But
payers nevertheless have
clear incentives to get prices
reduced.
It is early days for biosim-
ilars in the U.S. Many regula-
tory issues have yet to be re-
solved, and doctors will need
to become comfortable with
the cheaper options as well.
But how the drugs are even-
tually priced will have a big
Bioshock
Express Scripts drug spending
per member, change from
previous year
15% 2014
13.1%
12
9 stocks. The Street expects ag-
6 sales and earnings to grow by
3 across the next three years.
0 come down in response to
2005 10
Source: the company
THE WALL STREET JOURNAL.
WSJ.com/Heard
OVERHEARD
By many familiar mea-
sures, stock valuations ap-
pear reasonable. Yet things
look very different when
viewed through the lenses of
some lesser-known metrics.
A recent paper from the U.S.
Treasury Departments Office
of Financial Research fo-
cuses on three where devia-
tions are extreme enough to
cause concern. The CAPE ra-
tio measures the S&P 500
against long-run profit mar-
gins. The historical average
is 17 times. At the end of
Q-Ratio measures the mar-
ket value of nonfinancial
firms against an estimate of
their net worth. And the
Buffett Indicator sets market
value against GDP. Both are
near levels usually seen in
periods of extreme valuation,
the OFR says. Still, they all
have seen higher levels than
todays at least once. So a
crash isnt in sightyet.
impact on the pharma indus-
try.
Wall Street expects bio-
similars to sell at discounts to
their original reference drugs
of between 20% and 30%.
If that proves accurate,
first movers on biosimilars,
such as Pfizer and Novartis,
are poised to benefit.
This would come at the
expense of those companies
that have blockbuster drugs
facing loss of exclusivity but
which havent invested in bio-
similars, such as AbbVie and
Roche.
Meanwhile, Amgens posi-
tion looks more hedged, fac-
ing the loss of exclusivity for
some drugs while also invest-
biosimilar products.
Yet danger still lurks for
the industry as a whole.
On March 11, the chief
medical officer of CVS Health
suggested biosimilar dis-
counts could be much larger
than expected, on the order of
40% to 50%. That would still
be a lighter price break than
is typical for generic drugs.
But it would be a much bigger
figure than what analysts and
investors seem to expect.
Should this scenario come
to pass, investor enthusiasm
for drug developers in general
could decline along with
those price tags.
Right now, a sea change in
drug pricing dynamics com-
ing soon isnt priced in to
gregate biotech per-share
44% and 76%, respectively,
But if specialty drug prices
new competition, share prices
should follow suit.
Charley Grant