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VOL XXXII NO 21 FRIDAY - SUNDAY, FEBRUARY 28 - MARCH 2, 2014

Who’s Your Money On?

PLUS: Will Lyons on releasing the potential of Barolo

DJIA 16272.71À0.46% Nasdaq 4318.93À0.63% Stoxx Eur 600 337.21g0.15% FTSE 100 6810.27À0.16% DAX 9588.33g0.76% CAC 40 4396.39g0.01% Euro 1.3718À0.36% Pound 1.6688À0.24%

EUROPE EDITION

WSJ.com

Missing in Barcelona: Genuine Innovation

BARCELONA—The hottestshowcase for new technology

at this year’s Mobile World

Congress wasn’t

in the event’scavernous exhi-bition halls It was actuallyabout 3 kilometers away, at

an affiliated show for startupsand venture capitalists

In a makeshift array ofstages, geodesic tents andseats made from beer crates,organizers of the spinoff gath-ering titled Four Years FromNow, or 4YFN, played host to

an array of mobile-relatedstartups with products likeGPS for motorcycle helmets,and an application for Google

glasses that lets users buythings with a nod of the head

“This is where the real

Christopher Pommerening,co-founder of venture-capitalfirm Active Venture Partners,

as a rock band blared on anearby stage “Over there, in-novation means having aphone that is a millimetersmaller than last year’s.”Innovation has been hard

to come by in Barcelona thisyear At over one millionsquare feet, Mobile WorldCongress is the mobile indus-try’s biggest yearly confer-ence But this year’s show of-fered another cascade ofglass-slab devices that varied

in size and, maybe, color.That stagnation reflects abroader shift in the mobilebusiness, as the smartphonerevolution nears the end of its

Please turn to page 16

Gold Bulls Come Back After Last Year’s Rout

Investors are buying goldagain

Gold is up 11% this year,and wagers on rising pricesare at a four-month high inthe futures market In Febru-ary, investors were net buyers

of SPDR Gold Shares, the

biggest exchange-traded fundthat buys gold, for the firsttime since December 2012

Gold has a long way to go

to recover from last year’srout, the metal’s worst annualperformance in more thanthree decades Gold futuresended Thursday at $1,331.60 atroy ounce on the Comex divi-sion of the New York Mercan-tile Exchange, up slightly for

the day but down 16% from ayear ago

Some money managers arebetting that the market hitbottom at the end of 2013

Risky assets that drew cashaway from gold last year, in-

stocks and bonds, are lookingless appealing Gold is also re-gaining its role as a hedgeagainst inflation as some in-vestors question the U.S Fed-eral Reserve’s commitment toending its economic stimulus

“A reset needed to happen

in gold,” said Michael mann, who manages $8.5 bil-

lion for 130 clients at

Tide-mann Wealth Management

in New York

Like many investors, Mr

Tidemann sold gold in

Decem-ber to lock in losses for taxpurposes However, he startedbuying shares of SPDR GoldShares in January and is rec-ommending that new clientshold gold He said he seesgold as a store of value shouldthe Fed’s stimulus policiestrigger higher inflation or aweaker dollar

SPDR Gold Shares, known

by its ticker symbol GLD, hasadded 10.54 metric tons to itsgold holdings for Februarythrough Wednesday, boostingits total to 803.7 tons Still,the month’s increase isdwarfed by last year’s decline

of 552.6 tons

Investors have had plenty

of reason to buy gold in thepast few months Doubts

up their looks to bring

a sexy spirit back to the runways

Personal Journal 25

Cypriot President Nicos Anastasiades sees an end to capital controls

by the end of this year

country’s legitimate leader

Both developments posed ous challenges to the provi-sional government as it tries

seri-to consolidate control

In a statement provided toRussian news agencies Thurs-day, deposed President ViktorYanukovych said that the vote

in parliament last week tostrip him of his powers was il-legal and that he remainedpresident

Arseniy Yatsenyuk, whowas confirmed as prime minis-ter in parliament Thursday,countered that Mr Yanuk-ovych is “no longer president,but a wanted man suspected

of mass murder and crimesagainst humanity,” the Russiannews agency Interfax reported

Mr Yanukovych also asked

Russia to ensure his personalsafety “against the actions ofextremists.” Russia responded

by agreeing to provide rity to Mr Yanukovych withinRussian territory, Russian

secu-state news agencies reported,citing unidentified govern-ment officials

Mr Yanukovych hasn’tbeen seen publicly since Satur-day Feb 22, when he was

driven from office following aweek of bloodshed in Kiev thatleft more than 80 dead

Russia had been muted inits support of Mr Yanukovychsince then, although officials

have argued that the ment taking form in Kievgained power illegally

govern-Russian President VladimirPutin, who had backed Mr

Ukraine’s new government

on Thursday set in motion quests for international finan-cial assistance as it attempts

re-to cement its standing ing the removal of the coun-try’s president last weekend

follow-The move comes amidgrowing pressure on theUkrainian government’s fi-nances, with the currency fall-ing sharply in recent days andforeign-exchange reserves de-clining

Ukraine hopes to secure abailout from the InternationalMonetary Fund, Russia andother countries willing to of-fer aid Ukraine’s newly ap-pointed finance minister Olek-sandr Shlapak said Thursdaythat the government will seek

at least $15 billion in aid fromthe IMF

The IMF separately said it

HEARD ON THE STREET

For Baidu, Growth in

Profit Is Elusive

China’s online-search

be-hemoth Baidu is doing what

it must to stay competitive

But in a theme Chinese net investors should get used

Inter-to, profit growth isn’t going

to be as bubbly as hoped

That was the company’smessage to investors Thurs-day Fourth-quarter revenuesurged by 50% from a yearearlier while profits were flat,

as expected But in a ence call with analysts, BaiduChief Financial Officer Jenni-fer Li dropped a bombshell,saying the company doesn’texpect any increase in profitthis year as it continues to in-vest Pity the analysts, whoaccording to FactSet had opti-mistically forecast a 31% rise

confer-in 2014 net profit Now theyare asking where the money

will be spent

The answer is on more ofthe same The company hasbeen spending heavily to mi-grate its desktop search ad-vertising prowess to mobile,such as by paying phone mak-ers to preinstall its searchapp Baidu also plunked down

$1.9 billion to acquire 91Wireless, a mobile-applicationstore The good news is thatBaidu’s toehold in the crucialmobile space is growing Mo-bile services accounted for20% of total revenue in thefourth quarter, compared with

10% just two quarters ago

Baidu has little choice but

to invest in mobile or risk coming a desktop dinosaur

be-The hope had been that lastyear’s investment would startyielding profits this year Butthe investment treadmill con-

tinues

Baidu has a leading mapapplication, but faces risingcompetition from AutoNavi,part-owned by e-commercegiant Alibaba Group, which isnow seeking full control

Games and messaging

colos-sus Tencent last year muscled

in on Baidu’s core business bybuying a stake in upstart

search engine Sogou

Investors are pricing highprofit growth into shares, butcompetitive pressures couldsqueeze margins across thesector as everyone is forcedinto defensive investments

Sina told investors this week

it also plans to step up ing on its portal business andits Weibo microblog Thestock fell 9% the followingday Baidu’s relatively modestratio of 26 times next year’searnings jumps to 35 times onthe company’s latest guid-

spend-ance

On the Chinese Internet,the profits needed to sustainsuch high valuations remain

No End for RBS’s Trouble

“Try again Fail again Fail

better.” Playwright Samuel

Beckett’s words might as well

be Royal Bank of Scotland’s

mission statement

Certainly, RBS

restructur-ing plans have joined death

and taxes among life’s

inevita-bilities The 81% state-owned

U.K bank’s latest

reorganiza-tion follows a monumental £9

billion ($15 billion) net loss

last year Whether new Chief

Executive Ross McEwan’s

re-vamp will work is anyone’s

guess, though investors are

skeptical—the bank’s shares

slumped another 9.3% on

Thursday

The new business plan

in-volves shrinking RBS’s seven

business lines into three, with

medium-term cost-cut targets

totaling £8 billion Head-count

reductions haven’t been

de-tailed, though previously

an-nounced spinoffs of RBS’s U.S

bank Citizens Financial

Group and its Williams &

Glynn retail branch network

in the U.K will take more

than 20,000 people off the

payroll, around a sixth of the

current total Even so, RBS

may not achieve a return on

tangible equity of 12% until

2020—a forecast too distant

to carry real meaning

Mr McEwan has at leastgrasped the nettle of RBS’sproblematic investment bank

Its risk-weighted assets will

be cut by £50 billion, a tion of almost 40% Thisshrinkage—in line with thegovernment’s wishes—at leastgives RBS more strategic clar-ity But it may hinder itsgrowth back to a size that willallow the U.K government tomake good on the £45 billion

reduc-it plowed into the bank

dur-ing the global financial crisis

Godot may yet arrive beforeRBS returns fully to the pri-

vate sector

RBS’s results, moreover,cap a dismal reporting seasonfor Europe’s major banks Fiveyears on from Lehman’s col-lapse, none of them—includ-

ing Barclays, HSBC, Credit

Suisse, UBS, BNP Paribas

and Deutsche Bank—are

making a return on equityabove 10% Sure, balancesheets have been strength-ened, but major banks’ core

Tier 1 equity hovers justabove 10% of their risk-weighted assets at best RBS’sstands at 8.6% The drip-drip

of scandal persists, withprobes into foreign-exchangetrading and Credit Suisse’s al-leged tax-evasion schemes the

latest examples

Against this background,calls from the likes of UBSChief Executive Sergio Er-motti to end bank bashingsound ludicrous The industryhas already moaned endlesslyabout capital rules that willstill allow banks to borrow 33times their equity And in-stead of taking the EuropeanUnion’s admittedly clumsy at-tempts to cap bonuses as asignal to show some pay re-straint finally, bank executiveshave spent the past fewmonths finding ways aroundthe new rules Despite its loss,RBS will pay out over £500million in bonuses for 2013

European banks’ sharesmay have risen 19% in thepast 12 months But an eve-ning of Beckettian existentialangst is more likely to be apleasurable experience than

following their fortunes

—Andrew Peaple

Europe Bond Juggernaut Rolls On

How low can you go?

Where other markets havefaltered so far this year, theeuro-zone government-bondmarket has just kept on rally-ing Yields have fallen acrossthe board, with the sharpestgains in southern Europe Lit-tle seems able to upset the

trend

Italian and Spanish 10-yearyields have both fallen bymore than 0.6 percentagepoint this year, to just under3.5%, and are now at levelsunseen since early 2006 InPortugal, the rally has beeneven sharper: 10-year yieldshave fallen more than a per-centage point and five-yearyields by about two points

That is generating strong turns Italian bonds are up3.5% in the year to date, ac-cording to Barclays indexes,while Spain is up 4% and Por-

re-tugal 7.7%

Importantly, the investorbase for euro-zone govern-ment bonds is deepening Atthe peak of the euro-zone cri-sis, domestic banks took thestrain and massively in-creased their home-sovereignbondholdings But while Ital-ian banks marginally reducedtheir holdings of Italian gov-ernment bonds in January, ac-cording to European CentralBank data, yields still fellsharply, indicating interest

from other buyers

Spanish banks did add

€18.1 billion ($24.77 billion) ofdomestic government bonds,but holdings are still well be-low their 2013 peak Encour-

agingly, French banks, whichdumped non-French govern-ment bonds as the crisisramped up in 2011, added

€14.6 billion of non-Frenchbonds in January Greatercross-border flows would be asign of healing in Europe’s

bond markets

So far, bond investorsdon’t seem worried about lowinflation, which stands at just0.8% in the euro zone Low in-flation or deflation wouldnormally be a bond investors’

friend—but it makes the cess of economic adjustmentharder, and may yet lead to

pro-concerns re-emerging aboutthe sustainability of some Eu-ropean governments’ debtloads The ultralow inflationlevels in Southern Europe alsomean that governments stillare paying relatively high real

debt yields

But the broadening of

in-vestor demand, along withEurope’s gradual recovery,means that euro-zone govern-ment bonds could yet offerfurther gains In Italy, there ishope that new Prime MinisterMatteo Renzi will succeed inintroducing overhauls InSpain and Portugal, there aresigns that structural change ispaying dividends in growth

Credit ratings have started tomove higher again after sev-eral years of steep down-

grades

Ultimately, euro-zone bondinvestors are sheltered fromthe debate about monetarypolicy tightening that is under

way elsewhere

Those hoping for radicaleasing from the ECB may yet

be disappointed, as none ofthe central bank’s optionscome without drawbacks Butinvestors can be sure the ECBwon’t be tightening policy for

a long time yet

%

’04 ’06 ’08 ’10 ’12 ’14

Italy Spain

Ultralow interest ratesand a rush of money intobond markets seeking re-turns: times should be good

for high-yield borrowers deed, they are Maybe they

In-are a bit too good

So far this year, defaultsamong high-yield corporate

borrowers are noticeable bytheir almost total absence

In the U.S., there were nodefaults until Feb 18, when

MModal Inc., a provider ofclinical documentation prod-

ucts, missed an interest ment, according to Standard

pay-& Poor’s Spay-&P says it hasbeen 30 years since the first

U.S corporate default arrived

so late in the year

Globally, there have beenjust three defaults year to

date, versus 13 in the sameperiod of 2013, the ratings

firm says And 2013 was agood year, too: S&P says the

global speculative-grade porate default rate was 2.3%

cor-That is music to the ears

of junk-bond investors, ofcourse But it also might

raise some concerns amongpolicy makers that loose

monetary policy is storing

up trouble for the future

OVERHEARD

Qantas Facing

Stormy Weather

More needs to be done to

get Qantas Airways out of its

tailspin

Australia’s biggest airline

announced Thursday that it

will cut 5,000 jobs, delay

or-ders for 11 jumbo jets and sell

airport leases after swinging

to a first-half net loss of 235

million Australian dollars

(US$211 million) Still, Qantas

shares fell 9% as investors

worried more was needed to

combat intense competition

from rival Virgin Australia.

mostly to itself after its sole

major competitor closed shop

in 2001 Then came Virgin,

which launched a fierce price

war in 2010 Qantas shares

have lost more than half their

value since then, while Virgin

Australia has amassed a third

of Australia’s flying market

Qantas remains at a

disadvan-tage as unit costs, excluding

fuel, were about 15% higher

than Virgin’s last financial

year, according to Macquarie

Virgin smells blood and

isn’t likely to back off Though

its own shares have been

bat-tered by the price war, they

trade at well above net

tangi-ble assets Qantas trades at

less than half that measure

Virgin has the financial

sup-port of shareholders Air New

Zealand, Singapore Airlines,

Etihad Airways and Richard

Branson’s Virgin Group, who

together own 70% of the rier They have a long-termstrategic interest in carvingout a strong position in Aus-tralia and destabilizing Qan-

car-tas

raises the question of whetherAustralia can support two ma-jor airlines That puts Austra-lia’s government under pres-sure to step in to maintaincompetition Qantas has re-quested state debt guaran-tees A more realistic optionmight be lifting a 49% govern-ment-imposed cap on foreign

ownership of the carrier

More drastic measuresmay be in the offing A spinoff

of Qantas’s Asia regional

bud-get carrier Jetstar would free

up capital and managementattention Macquarie esti-mates a spinoff could raiseabout A$400 million J.P

Morgan estimates selling a49% stake in Qantas’s fre-quent-flier program couldraise up to A$1.6 billion, but it

is one of Qantas’s more able units

profit-The clock is ticking forQantas to figure things out

While it does have A$2.4 lion of cash and A$630 mil-lion in standby bank facilities,losses are mounting Its fateseems increasingly tied towhether Australia’s govern-ment wants a two-carrier

bil-country —Rebecca Thurlow

The broadening of investor demand and Europe’s gradual recovery mean euro-zone

government bonds could offer further gains.

Cost incomeratio

Core Tier 1equity ratio

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2 | Friday - Sunday, February 28 - March 2, 2014 AM IM UK SW FR IT SP TK BR PL IS AE GR THE WALL STREET JOURNAL.

PAGE TWO

Usually, thebiggest questionahead of any vote

is who is going towin But for thisMay’s Europeanelections, there’s another issue:

What are the parties and theircandidates trying to win?

In the last European election in

2009, the answer to the secondquestion was clear—partieswanted to gain seats in theEuropean Parliament that wouldhelp them shape new laws

This time around, the answerisn’t so obvious

That’s because mainstreamEuropean parties, including thecenter-left Party of EuropeanSocialists and the center-rightEuropean People’s Party, or EPP,are for the first time eachappointing a candidate to headtheir campaigns

These so-called lead candidatesaim to do more than bring outvotes across the European Union’s

28 member states They areseeking a personal prize: tobecome the president of theEuropean Commission, the EU’sexecutive arm and the onlyinstitution with the right toinitiate policies

Until now, the commissionpresident has been selected by thebloc’s prime ministers andpresidents in closed-doormeetings after parliamentaryelections, with the new parliamentgetting only a yes-or-no vote

Giving voters more say on whogets the EU’s top job seems like asmart move at a time when thebloc is facing a legitimacy crisisafter years of economic turmoil

Yet the way this new system isunrolling threatens to confusevoters

“If you try to introduce anelement of direct democracy intothe system without doing itproperly it will look like a stitch-up,” says Heather Grabbe, director

of EU affairs at Open SocietyFoundations, a pro-democracypressure group

The biggest problem withmodeling the selection of a newcommission president after theway a prime minister is chosen in

parliamentary democracies such

as the U.K or Germany is that thisnew process hasn’t been endorsed

by EU leaders Some, includingGermany’s Chancellor AngelaMerkel, have openly questionedthe link between lead candidatesand the top commission job

That matters because EUleaders still have to nominate thenew commission president andsend that person and othercommissioners for approval toParliament While the legislaturecan block their appointments,there is no legal obligation forleaders to select a winningcandidate

The results of this indecisionhave been obvious as Europeanparties select their candidates Nohigh-profile sitting politicianshave been willing to give up theirposts for the insecurity of having

to win an election and then riskseeing it ignored by EU leaders

As a consequence, whenEurope’s top Socialists travel toRome this weekend to formallyappoint their lead candidate, theonly contender will be MartinSchulz, the little-known president

of the European Parliament, whofaces skepticism even amongthose in his own party in Germany,the Social Democrats

At the EPP’s congress in Dublinnext week, center-right delegateswill choose between formerLatvian Prime Minister ValdisDombrovskis and Jean-ClaudeJuncker, the former primeminister of tiny Luxembourg

The small crop of contendersisn’t the only symptom of theuncertainty over the new system

The candidates themselves havebeen hazy on what positionthey’re actually running for

“Currently we’re talking aboutpresident of the EuropeanCommission,” Mr Dombrovskissaid last week when askedwhether he would be content withanother top job at the commission

Similarly, when Ms Merkel’sparty, the Christian Democrats,endorsed Mr Juncker earlier thisweek, it made no mention of thecommission

Yet, despite the lukewarmresponse to the idea of an electedpresident, the process may already

be too far along to stop In Romeand Dublin, national party leaderswill take the stage alongside theirlead candidates—a photo

opportunity that may be hard toerase when the election resultscome out on May 25

“In my opinion, the trainalready left months ago,” saysKostas Sasmatzoglou, the EPP’scampaign manager

Brian Synnott, his counterpart

at the European Socialists, said,

“This is really happening.”

They have already scheduledtwo debates between leadcandidates that will be shown live

on major national broadcastersand believe big channels inGermany and France may evenwant to stage their own debates

“When the media starts writingabout them, they suddenly have aback story,” Simon Hix, professor

of European and ComparativePolitics at the London School ofEconomics and Political Science,says of the candidates

Whether coverage picks upbeyond broadsheet newspapersand political television shows willmostly depend on whethernational parties embrace theircandidates in their owncampaigns The EPP has onlyabout €1.6 million ($2.2 million) topromote its lead candidate, notenough to run TV spots ornewspaper ads The Socialists,says Mr Synnott, have even less

ReadyorNot,HereComes TheNextBrusselsLeader

[ Brussels Beat ]

B Y G ABRIELE S TEINHAUSER

Note: During the last European elections, PollWatch correctly predicted 98% of seats won by each political group.

Source: Polls from all 28 EU member states conducted in the two weeks leading up to Feb 19 and aggregated by PollWatch The Wall Street Journal

Progressive Alliance

of Socialists &

Democrats European Conservatives & Reformist(EU-skeptic)

Europe of Freedom & Democracy

(far right)

The GreensAlliance of Liberals & Democrats for Europe Group

European People's Party (conservative)

Other

56 217

42 30 92

i i i

Business & Finance

n Allianz SE backed the new

management team at Pacific

Investment Management Co.,

even as the performance of the

U.S fund manager weighed on

the German insurer’s

fourth-quarter earnings 15

n Royal Bank of Scotland

an-nounced a plan to cut about £5

billion ($8.3 billion) in costs

over the next four years as the

state-controlled bank posted

its second-largest ever full-year

net loss 15

n The European Commission

has sent a complaint to

Telefónica over its bid for the

German unit of Royal KPN,

raising the specter of tough

regulatory obstacles to

consoli-dation in the telecom sector 15

n Gianni Versace SpA agreed

to sell a 20% stake to

private-equity firm Blackstone Group

LP in a deal that aims to fund

growth at the Italian fashion

house and could prompt a

pub-lic offering in a few years 17

n WPP PLC became the latest

firm to be hit by turmoil in

emerging-market currencies,

which weighed on profit

mar-gins and prompted a cautious

outlook for the year ahead 18

n A record $14 million

whis-tleblower award paid by the

SEC last year was for a tip

about an alleged Chicago-based

scheme to defraud foreign

in-vestors seeking U.S residency,

according to people familiar

with the payment 21

i i i

World-Wide

n Cypriot President Nicos

An-astasiades said all capital trols on the island would belifted by the end of the year 5

con-n North Korea laucon-nched four

short-range missiles into thesea off the eastern coast of theKorean peninsula, stirring ten-sions after a naval incursion

earlier this week 8

n Federal Reserve

Chair-woman Janet Yellen said theFed might consider a pause inits reduction of bond buying ifthe recent deterioration in U.S

economic growth persists 7

n Spain’s regional and central

governments may have to fund as much as €13 billion($17.8 billion) in fuel tax toconsumers and businesses af-ter the European Union’s high-est court said the tax violated

re-European law 5

n Colombia’s finance minister

said some $12 billion in ment on infrastructure projectsthis year will boost this An-dean country’s gross domestic

invest-product 9

n The new conservative

gov-ernment, under pressure torein in its budget, will reviewplans to double Australia’s

fleet of submarines 8

n Germany wants Britain to

be a strong player in the EU,Angela Merkel told U.K parlia-mentarians, stressing that itsmembership was needed to

help Europe be competitive 6

What’s News—

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THE WALL STREET JOURNAL. Friday - Sunday, February 28 - March 2, 2014 | 27

OFF THE WALL

Hello to Arms:

Marines Bring Back a Tradition

There were grumbles in 2009

when the U.S Marine Corpsordered troops to keep theirhands out of their pockets except

to quickly “retrieve something.”

But when the Corps’ commandantlater decreed that Marines had tostop rolling up their sleeves, alongtime fashion statement, theleathernecks went into action

“That’s what separated us fromevery other branch, our sleeves,”

said First Sgt Shawn Wright, acareer Marine who was a drill in-structor Troops launched petitiondrives and peppered superiorswith questions Some complained

it hid their tattoos

The top brass did an face this week and returned theright to bare arms, starting March9

about-“I can’t tell you how manytimes we have been asked the per-sistent question,

‘Commandant, are weever going to return

to SLEEVES UP?’”

said Gen JamesAmos, commandant ofthe Marine Corps, in aFacebook post on theMarines account lateTuesday “I’ve thought

a lot about this overthe past 2.5 years; Irealize that it’s impor-tant to you Sleeves up clearly andvisually sets us apart WE HEARYOU MARINES!”

The general’s Facebook postgarnered more than 30,000 likesand nearly 3,000 comments inless than a day “The roar of ap-proval from across the Corps hasbeen deafening,” said Lt Col Da-vid Nevers, a Marines spokesman

“In the four years since we beganusing social media we haven’tseen any post generate such anoverwhelmingly positive reac-tion.”

Not every reaction has beengung-ho One Facebook commentpooh-poohed the hoopla: “This iswhy nobody takes the USMC seri-ously.”

Rolled sleeves had long been apoint of pride Even the highest-ranking Marines could toil at fold-ing, ironing and even starchingsleeves into a crisp flattened roll

on their woodland-green flage and their desert-brown uni-forms Rolls could once be foundeven in combat zones, but thepractice was slowly curtailed untilthe 2011 order eliminated it en-tirely

camou-First Sgt Wright recalled howpreparing uniforms and shiningboots could take troops an hour

or more, especially for new

Ma-rines learning the ropes under thetutelage of drill instructors likehim “You could make your shoesshine like glass,” he said nostalgi-cally

The sleeve rolls had to be justright The official Marine order atthe time said: “When authorized,utility sleeves will be rolled withthe inside out, forming a rollabout three inches wide, and ter-minating at a point about twoinches above the elbow.”

Sloppily folded sleeves wereknown as “Gunny Rolls,” aftergunnery sergeants—salty seniorenlisted Marines known more fortheir hard-bitten practicality thanspit-and-polish looks

Marines’ sleeves stood outfrom those in other services be-cause, when rolled, the undyedbackside of the camouflage mate-rial would show, making the rolllook white Those in the Navy andAir Force can still roll their

sleeves at certaintimes, while theArmy also nixedrolled-up sleevesabout a decade ago

Unlike otherbranches, Marinesrolled their combatsleeves the same asdress-shirt sleeves

“The Army would roll

up their sleeves in anaccordion way, so thebutton and cuff would end up onthe outside,” said Owen Conner,the uniforms and heraldry curator

at the National Museum of theMarine Corps

The Marines’ precisely rolledsleeves were a holdover of thecare put into their old-style uni-forms—before a uniform overhaul

10 years ago “I understand itsounds petty to some people,”

said Sgt Steven Hoffman, 28,from Freehold, N.J “But it comesback to tradition.”

The former Battle Dress forms were starched and ironed,with some troops even applyingglue or melting a bit of plasticinto trouser creases to keep themrazor sharp Fastidious troopswould put their camouflage caps

Uni-on a metal frame after starchingthem at night to help retain a per-fect shape

In 2004, the Marine Corpsswitched to camouflage combatuniforms made of wrinkle-freematerial that don’t require iron-ing In fact, “the use of starch,sizing and any process that in-volves dry-cleaning,” according toMarine orders, “is not autho-rized.”

Marines also got new combatboots around the same time

Made of suede, they can’t be ished The former Marine bootswere often spit-shined daily

pol-Some troops groused in 2007when then-Commandant Gen

James Conway announced thatonly the summer-season, desert-brown camouflage utility uni-forms could have rolled sleeves

In October 2011, Gen Amos clared all Marine Corps CombatUtility Uniforms would be worn

de-“sleeves down” all year, no matter

the clime or place

Marines are known for beingparticularly ornery when it comes

to uniforms Their camouflagepattern has a U.S patent, prevent-ing other military branches fromcopying

In October, Gen Amos quashed

a proposal that would have quired male and female Marines

re-to wear the same “unisex” white

cap with their traditional blue uniforms after Marines, and

dress-a few members of Congress, plained

com-Attention then returned to theban on rolled sleeves “Americansalways like a touch of individual-ism with our uniforms,” said Mr

Conner with the Marines museum

“We’re not the Prussian Army.”

“We’re definitely glad to be

able to get it back, it was a goodcall,” said First Sgt Wright, whoadded he can hardly wait until theorder takes effect “I’m like a kid

at Christmas.”

Marines must continue to wearsleeves down in combat zones,during training and in wintermonths They still are forbidden

to keep their hands in their form pockets

The U.S Marines’

precisely rolled sleeves were a holdover of the care put into their old- style uniforms.

lord snowdon in the spotlight with the wall street journal next friday.

Trang 3

NEWS Venezuelan Rebellion Spawns Folk Hero

Former General Who Resists Arrest Gains Support in Deeply Split Nation; ‘He’s a One-Man Military Rebellion’

CARACAS, Venezuela—A ing retired Venezuelan general hasbecome a folk hero to the country’sopposition and galvanized a protestmovement by defying the govern-ment of President Nicolás Maduro,engaging in a Rambo-like standoffwith security forces sent by thepresident to arrest him

gun-tot-Angel Vivas has been holed up inhis home in a hilly Caracas suburbsince last weekend, when Mr Ma-duro, on live television, ordered hisarrest for having backed studentprotests that have convulsed thisoil-rich nation When black-clad of-ficers from military intelligencewent to the retired Army general’shouse Sunday morning, he emergedwearing a flak jacket and armedwith a semiautomatic rifle and pis-tol, warning that the only way hewould be taken was in a body bag

Scores of neighbors came out insupport of Gen Vivas and heckledsecurity forces, who eventuallybacked down

“I have a right to self-defense,”

Gen Vivas said in an interview side his bunkerlike home, which isdecorated with family pictures andmementos to his 40-year career inthe army, including old rifles andswords “At no time did I order any-one to commit violence,” he said, af-ter the government said his tweetgiving defense advice caused adeath “I was helping unarmed civil-ians defend themselves….A priestrecommends prayer, a doctor rec-ommends medicine, a military manrecommends how to defend.”

in-In the days since, Gen Vivas hasbecome an inspiration to many ofthe protesters, who have risen up inpast weeks against what they see as

an increasingly authoritarian ernment and an economy savaged

gov-by high inflation and scarcity Theviolence has killed more than adozen people, mostly protestersshot by either security forces orpro-government militias, oppositionmembers say

Venezuela’s Attorney General’soffice said Wednesday it had ar-rested five members of the state in-telligence division Sebin for their al-leged involvement in the deaths oftwo protesters

Gen Vivas’s Twitter account,where he regularly blasts the Ma-duro government as “illegitimate”

and a stooge for Cuba, which hasclose ties to Caracas, surged to233,000 on Wednesday from some50,000 followers on Saturday

His 16-year-old daughter lia’s account went to 15,000 follow-ers, from 200, after she posted You-Tube videos of the standoff

Nata-“He has the guts that a lot ofpeople lack,” said Anessa Cafferata,

a 21-year-old engineering studentwho takes part in daily protestsacross the capital “He’s protectinghis home, and we students are pro-tecting the country.”

The short and stocky 57-year-oldgeneral symbolizes some of Venezu-ela’s deep divisions that have onlyhardened in recent weeks as pro-testers—largely backed by the mid-dle and upper class—square offagainst a populist government

In the upper-middle class enclavewhere the general lives, there is lit-tle affection for the government,blamed for a crumbling economywhere ordinary goods are scarce onstore shelves One neighbor com-

plained that he went four monthswithout toilet paper Another saidcar batteries were now a favoritetarget for thieves because Venezuelalacks the dollars to import new carbatteries The local school has beenclosed for two weeks due to the pro-tests Neighbors take turns standingguard outside the general’s home,ready to raise the alarm if the gov-ernment returns to arrest him Ac-cess to the neighborhood is cut off

by barricades manned by protesters,who have piled garbage, old tiresand tree branches at main intersec-tions to stop government officersfrom returning

“He’s a one-man military lion,” said Ivan Monroy, an amateurhistorian who visited the general’shouse this week to deliver a copy ofhis book None of the neighborswanted to say their full names, fear-ing reprisals from a governmentthat in the past has fired public em-ployees for supporting the opposi-tion and in recent weeks jailed op-position leader Leopoldo López forsupporting the protests

rebel-Several former senior militaryofficers also stopped by the gen-eral’s home in a show of support, in-cluding Fernando Ochoa Antich, whowas defense minister during thefailed 1992 coup by then-Lt Col

Hugo Chávez, who eventually went

on to win the presidency and rulefor 14 years until his death last yearfrom cancer “He’s making a heroicstand,” said Mr Ochoa, who camealong with three other retired mili-

tary men to chat with Gen Vivas,whose neighbors awarded him themoniker of “Rambo.”

Venezuela’s army has a long tory of political activism In 2002,army and navy officers brieflybooted Mr Chávez from power, but

his-he returned thanks to massive port from the poor and parts of thearmy that disagreed with the coup

sup-Mr Chávez then purged the military

Venezuela’s state-run television,and private broadcasters who backthe government, have criticized Gen

Vivas Retired Lt Esaul Olivar, whoheads a group calling itself MilitaryRevolutionary Front, called him a

“traitor” on state television and said

he was trying to organize a coup

Experts say the military is likely

to stay on the sidelines of the rent showdown between protestersand the government, but that itwould become increasingly disgrun-tled if called on to use widespreadforce against civilians “When youspeak with some active officers, theyexpress their discontent; they do notlike the politicization of the mili-tary,” said retired Gen Raul Salazar,who was Mr Chávez’s first defenseminister but who is now seen as op-position-leaning “But, of course,there is fear of speaking out.”

cur-Gen Vivas first gained nence when he refused orders from

promi-Mr Chávez to have his troops usethe Cuban slogan “Patria o Muerte,Venceremos,” translated as “Father-land or Death, We Will Overcome.”

Instead, the general stepped downfrom his post in 2007

Ever since, he has used the net as a soapbox to decry what hesees as Cuba’s takeover of Venezu-ela’s military and other institutions

Inter-Gen Vivas came of age in the tary at a time when Cuba was seen

mili-as the enemy for having backed twosmall-scale guerrilla invasions in

1967 that led to several years of lent fighting

vio-“We fought against them for

eight years, and then Chávez handedthe country over to them,” he said

Gen Vivas calls Cuba a “terrorist”

state, and Mr Maduro the Cuban

he offered practical advice on how

to defend against attacks, larly by gangs of pro-governmentthugs on motorcycles that wereblamed for the shooting deaths ofseveral protesters The general rec-ommended stringing up nylon orwire across streets to prevent ridersfrom crossing

particu-Venezuela’s government says a21-year-old died last Saturday aftergetting knocked off his motorcyclelate Friday by one such trap

The government quickly blamedthe general for the death “I havegiven the order to seek out the re-tired general, Gen Angel Vivas, whocalled for these tactics and trainedthese fascists Get him and bringhim in Murderer!” Mr Maduro told

a rally of supporters last Saturday

Gen Vivas was gardening when

his wife rushed outside and toldhim, “The president is talking aboutyou on TV He’s ordering your ar-rest.”

The general says he and his ily prayed, and then decided hewould resist arrest He took to Twit-ter and sent a flurry of messages

fam-“This genocidal dictatorship wants

me to surrender and hand me over

to Fidel Castro I WILL NOT RENDER!” he wrote

SUR-Gen Vivas’ lawyer, MercedesContreras, said the officials had noproper arrest warrant “The onlyway you’re getting in here is with aletter signed by Pope Francis,” shesays she told them

Then the general reappeared,toting a Colt 223 semiautomatic ri-fle, several bands of ammunitionand a holster carrying his Beretta.9mm pistol He said goodbye to hisfamily, and gave a long soliloquy, in-voking his pledge to defend Venezu-ela from foreign enemies and saidthe men were being used as tools bythe Cuban government

The crowd of neighbors erupted

in applause One began shouting at

a dark-skinned agent that he was ally a Cuban in disguise

re-B Y D AVID L UHNOW

A ND E ZEQUIEL M INAYA

Above, neighbors of retired Army General Angel Vivas block their Caracas street with a makeshift barricade to try to protect him from arrest Right, Gen Vivas stands outside his house with an automatic weapon and wearing a flak jacket.

HEARD ON THE FIELD SPORT

Bowled Over by the Oscars Again

With Parallels Between Sport and Film’s Hype-Fests, Here’s a Guide to the Party

The Oscars are Sunday, and I am not

the first or last idiot to draw a

par-allel to major sporting events like

the Super Bowl Both spectacles get

massive TV ratings, there’s a lot of

group viewing with pithy comments

and mediocre nachos, and the

Cleve-land Browns have never come close

to winning either

This is the part where you

ex-claim: I am not going to watch the

Oscars this year! And yet you do

Come on You’re not fooling anybody

You’re even picking “Monsters,

Inc.”—though it came out 13 years

ago

The Academy Awards—that’s

fan-cypants-speak for Oscar—are a

com-forting if maddening routine The

audience begins excitedly, and

slowly loses its mind The

unen-thused fall asleep The masochists

slog all the way to the end It’s like

being a Knicks season-ticket holder

Here are some rules for a

memora-ble Oscars viewing experience:

1 You might want to

double-check this, but I believe these

Os-cars—televised live from Ralph

Wil-son Stadium in Orchard Park, N.Y.—

are the first Oscars held outdoors at

a cold-weather stadium How will

the weather impact the favorites?

Will it snow in the second half?

Tune in

2 Warning: An Oscars telecast is

long Like, brutally long Tennis long

Please hydrate This year’s Academy

Awards telecast begins sometime

around 6 a.m on Sunday and the

fi-nal award—Best Picture—is

pre-sented sometime around 4 p.m on

Thursday, March 13

3 By the way, there are nine BestPicture nominees now Nine nomina-tions! It is now harder to not benominated for Best Picture than it is

to not make the NHL playoffs

4 There are four stages of the

Os-cars telecast Stage 1: This year’s show isn’t actually so bad Stage 2:

OK, this is getting bad Stage 3: I ally should do my laundry but I can’t…stop…watching Stage 4: (Falls asleep for 38 minutes.) Stage 5:

re-(Wakes up mid-speech of Best tor, yells at TV, falls back asleep.)

Direc-5 You do not need to watch all ofthe nominated movies in order towatch the Oscars If you find yourselfsitting next to someone who haswatched all of the nominated movies,congratulations, because you are sit-

ting next to Martin Scorsese

6 If you think the Oscars aresome kind of logical endeavor, con-sider that Scorsese’s “Hugo” wonmore Oscars than “Goodfellas” and

“Raging Bull” combined

7 If anyone at your Oscars partyrefers to Scorsese as “Marty,” it’s OK

to ask them to leave

8 Same with anyone who saysyou didn’t really see “Gravity” unlessyou saw the IMAX 3-D Experience

9 Somebody at work is going toask you to join an Oscar Pool Jointhe Oscar Pool! It’s fun! Just knowthat the Oscar Pool will be won by aco-worker who hasn’t seen a moviesince “Harold and Maude” in 1971

10 If you are throwing an Oscarsparty, you need to decide if it’s go-ing to be a cinema lover’s party or

an Oscars party At a cinema lover’sparty, people dress up and havethoughtful conversations about thenominees and the year in cinema At

an Oscars party, everyone sits intheir sweatpants and trashes everysingle thing that happens for four

left-freezer!

14 Ellen DeGeneres is your cars host this year but please nextyear can it be Tara Lipinski andJohnny Weir? Also please let TaraLipinski and Johnny Weir host theSuper Bowl And the Final Four Andthe Masters And the State of theUnion Basically would like Tara andJohnny to host everything from

Os-here on out Thanks

15 For fun, divide up your OscarsParty between people who were into

“Her” and not into “Her.”

16 No “True Detective” bickering

at your Oscars Party Save it for theInternet!

17 Do not get crazy with teem issues watching celebrities ar-rive on the red carpet You wouldlook like that, too, if you ate only

self-es-kale and sand for six months

18 Whenever you see a bad fit at the Oscars, do not despair for

out-the celebrity wearing it Despair forthe soon-to-be-former friend whosaid, walking out the door to the

limo: “Yup Looks amazing.”

19 Men have it easy at the cars Basically there’s one rule: Don’t

Os-show up looking like Mr Peanut

20 Yes: Those short films all lookamazing and you really should watchthem Also: you’re never going towatch them Who is kidding whom?

21 It would be cool if MatthewMcConaughey won an Oscar But not

as cool as if he pulled up to the cars in a 1970 Chevy Chevelle Super

Os-Sport

22 There’s always somebody atevery Oscars party who tells a longstory about the time they saw Rich-ard Dreyfuss at the airport and he

was totally a nice guy

23 Rule No 1 of Oscars tance speeches: Thank your mother

accep-There is no rule No 2

24 The above is also a usefulrule for life in general

25 Oscars insight: the fartheraway from the stage a winner is, thelonger it takes them to get to thepodium, the happier, nicer and morewell-adjusted they are Also morelikely they have half a turkey sand-

wich in their pocket

26 The greatest pay-per-view ofall time would be an Oscars telecast

in which sensors inside Brad’s andAngelina’s heads told you what theyreally think about everybody in Hol-

lywood

27 Let’s face it: This year, youhave seen three movies And 3,508

YouTube cat videos

28 Good luck everybody! member: Thank your mom And

Re-your agent’s mom!

B Y J ASON G AY

Seattle Seahawks quarterback Russell Wilson waves the Vince Lombardi Trophy at a Feb 5 rally and Jennifer Lawrence grasps her 2013 Best Actress Oscar.

Warning: An Oscars telecast is long Like,

brutally long Tennis long.

Five-Match Ban for Anelka Over ‘Quenelle’ Gesture

West Bromwich Albion playerNicolas Anelka was given a five-game ban and $133,000 fine by

England’s Football Association afterfinding him guilty of causing racial

offense with a goal celebrationdeemed anti-Semitic Anelka denied

his use of the gesture, known inFrance as a “quenelle” and de-

scribed as an “inverted Nazi salute,”

Olym-or pirate streams showing tion during the Sochi Games

competi-Broadcasters pay big money tothe International Olympic Commit-tee in return for exclusive TV and

streaming rights and guard that clusivity keenly In NBC’s case, the

ex-network paid $775 million for theSochi rights

Officials estimated Thursdaythat some 20,000 Olympics videos

were kept off YouTube and 20,000more off other video-sharing sites

around the world The antipiracypolice also said they located andstopped an estimated 5,000 illegal

streams of Olympics material,

much of it live competition —AP

Australia’s Warner Fined

Australia batsman David Warnerwas fined by the International

Cricket Council on Thursday for appropriate” comments suggesting

“in-South Africa wicketkeeper AB deVilliers was ball-tampering in the

second Test in Port Elizabeth

Warner said in a radio interviewthat de Villiers regularly wiped the

ball with his glove in Australia’ssecond innings Australia lost by

231 runs, with South Africa fastbowler Dale Steyn getting the ball

to reverse swing extensively for hisfour wickets

The ICC said Warner was fined15% of his match fee after admit-

HEARD ON THE PITCH

Agence France-Presse/Getty Images

Nicolas Anelka denied that his gesture was anti-Semitic.

Trang 4

4| Friday - Sunday, February 28 - March 2, 2014 THE WALL STREET JOURNAL.

Interim Government Under Pressure

Yanukovych, has made no public

comment on Ukraine since the

gov-ernment there collapsed His

spokes-man didn’t respond Thursday to calls

seeking comment

Mr Yanukovych’s whereabouts

wasn’t immediately known and it

wasn’t possible to verify whether the

statement was authentic

Two of Russia’s leading news

agencies said they had received the

statement from an aide for Mr

Yanu-kovych, but declined to provide a

copy Neither said they had seen Mr

Yanukovych

Interfax later reported, citing a

source close to Mr Yanukovych, that

he would hold a news conference

late Friday in Rostov-on-Don, a

Rus-sian city close to Ukraine and the

Black Sea

Hours earlier, dozens of armed

men took control of the parliament

and a nearby executive building in

the capital of the Ukrainian region of

Crimea, barricading themselves

in-side and raising a Russian flag above

the building Ukraine’s acting

inte-rior minister, Arsen Avakov, said the

country’s military and police had

been put on alert

Taken together, the moves raised

the volume on threats of secession in

Ukraine’s eastern regions, which are

dominated by ethnic Russians, and

where Mr Yanukovych drew most of

his support

Some more hard-line Russians in

Crimea—a Black Sea peninsula that

belonged to Russia until 1954 and

re-tains a degree of autonomy—are

de-manding that the region secede or

once again become part of Russia

Crimea also is home to Russia’s Black

Sea Fleet

In his statement, Mr Yanukovych

said that people in Crimea and

across Ukraine’s southeast “don’t

ac-cept the anarchy and lawlessness in

the country,” nor do they want a new

government elected by “a mob in a

square.”

His reference was to Kiev’s

Inde-pendence Square, where the

pro-Eu-ropean uprising was centered

Pro-testers remain gathered there and

have been weighing in on the

selec-tion of a new government

“I officially declare my intention

to fight to the end for the

implemen-tation of important compromise

agreements to bring Ukraine out of

its deep political crisis,” he said,

re-ferring to a pact reached with the

political opposition, brokered by

Eu-ropean diplomats, on Feb 21—a day

before he fled Kiev

Continued from first page

Crimea has become the flashpointfor a backlash against the pro-West-ern protesters that drove Mr Yanuk-ovych from power Despite the occu-pation of the local parliament,Crimea’s legislature met Thursday tofire the government and called a re-gionwide referendum on May 25 tovote on further autonomy from Kiev

“They are accusing us of ism But we have a feeling that theywant to separate from us,” said theparliament’s speaker, Vladimir Kon-stantinov “The Crimean parliament

separat-is the only legitimate institution inCrimea.”

Anatoly Mogilyov, the chairman

of Crimea’s Council of Ministers, saidthe gunmen were asked to leave thebuildings but refused, saying theyweren’t authorized to negotiate

A possible outbreak of violence inthe region has led to worries aboutRussian military intervention Rus-sian officials have said there are noplans to do so, but others have saidRussia has an obligation to protectits military installations and citizens

if need be

On Wednesday, President Putinordered military preparedness test-ing for 150,000 Russian soldiers, in-cluding some stationed not far fromthe Ukrainian border

Adding to the uncertainty, nian officials said Russian armored

Ukrai-personnel vehicles were detectedoutside their naval base in the Cri-mean port of Sevastopol

Russia’s Deputy Defense MinisterAnatoly Antonov was quoted later assaying that the Black Sea Fleet is notthreatening Ukraine

“Currently, all formations andunits are doing their daily activities,including those associated with com-bat training Such actions pose nothreat There are no legal limitations

on that,” the minister told reporters,according to Interfax

He also was quoted as saying that

“places of deployment, personnelnumbers and the number of weap-ons” are well below levels allowedunder a 1997 agreement over thebase with Ukraine

A group of Russian ans also arrived in Crimea to assessthe situation, Russian officials said

parliamentari-Sergei Mironov, leader of the

pro-Kremlin Just Russia party, who wasamong the group, said, “Everyoneshould know that Russians don’tabandon their own during wartimeand it looks like things are headedfor war.”

Ukraine’s acting President sander Turchynov warned againstany breaches of Ukrainian territory

Olek-by Russian military forces, larly those stationed in Sevastopol,which he said would considered anact of aggression

particu-The seizure of the two buildingscame a day after dueling demonstra-tions erupted outside the parliamentbetween thousands of pro-Russianprotesters and Crimean Tatars, whohad backed the protest movementthat forced Mr Yanukovych frompower

The occupation drew deep cern in the West, with the top offi-cial from the North Atlantic TreatyOrganization, Anders Fogh Rasmus-sen, calling it “dangerous and irre-sponsible.”

con-He said that “I urge Russia not totake any action that could escalatetension or create misunderstanding.”

Russia’s Foreign Ministry said in

a statement that NATO’s focus onUkraine “sent the wrong message”

and it “strongly advised” the zation to respect Ukraine’s neutral-ity

organi-New Prime MInister Arseniy Yatsenyuk, left, speaks Thursday with Vitali Klitschko, another former opposition leader, during a parliament session in Kiev.

Source: Ukrainian Census & Election Commission

Sevastopol Crimea National

84%

78 49

Ukrainians

24.4% Russians

Totalpopulation

of Crimea

2 million

58.5%

CrimeanTartarsOthers

CRIMEA

100 miles

100 km

Storied Past

Crimea’s turbulent history

 From 700 BC Greeks settle along the coast of Crimea; their colonies are subsequently absorbed into the Roman Empire The peninsula is later overrun by a succession of nomadic tribes.

Merchants from Venice, then Genoa, control main trading posts.

 1441 Tatars, ruled by descendants of Genghis Khan, establish Crimean Khanate, a protectorate of the Ottoman Empire.

 1783 Russia, under Catherine the Great, annexes the Khanate, and establishes a naval base at Sevastopol.

 1854 Britain, France and the Ottoman Empire launch Crimean War to thwart Russian ambitions.

The Charge of the Light Brigade at Balaclava, and the yearlong Siege

of Sevastopol, are immortalized by Tennyson and Tolstoy.

 1941-42 In another epic siege, Sevastopol holds out for eight months before falling to the Nazis.

 1944 After liberating Crimea, Stalin orders the deportation of Crimea’s 200,000 Tatars on a false pretext of having collaborated with the Nazis According to Tatar estimates, over 40% of the deportees die en route or in exile.

 1954 Nikita Khrushchev, Stalin’s successor and a Ukrainian, orders the transfer of Crimea to the Ukrainian Soviet Socialist Republic, after a mere 15 minutes of discussion in the Communist Party’s central committee.

 1991 Ukraine becomes independent of the U.S.S.R Crimea, excluding the municipality of Sevastopol, becomes an autonomous republic of Ukraine.

Tatars begin to return.

 1997 Russia and Ukraine divide the Soviet Black Sea Fleet Russia gets to lease the Sevastopol naval base for a minimum of 20 years.

 2010 Russia and Ukraine extend lease on Sevastopol base to 2042.

 2014 Armed men proclaiming loyalty to Russia take control of the Crimean parliament in the capital, Simferopol after the ousting of President Yanukovych.

Kiev Looking In All Directions for Financial Assistance

received a bailout request from

Ukraine “We are ready to respond

and in the coming days will send an

IMF fact-finding mission team to

Kiev to undertake a preliminary

dia-logue with authorities,” IMF

manag-ing director Christine Lagarde said

in a written statement

She said the IMF is in talks with

other countries as part of a larger

fi-nancing package

Meanwhile, Russian President

Vladimir Putin ordered his

govern-ment to consult with foreign capitals

and the IMF on aid for Ukraine, the

Interfax news agency quoted his

spokesman as saying late Thursday

Russia suspended a $15 billion

aid package for Kiev after

pro-Rus-sian President Viktor Yanukovych

was deposed last week by

pro-West-ern demonstrators Russia doesn’t

Continued from first page recognize the new government in

Kiev, and there was no indicationthat the Kremlin would lift the sus-pension of its own money

But Western officials have saidthat Russia must be part of any newassistance package

Mr Putin ordered his ment to continue talks on buildingtrade ties with Ukraine Russian offi-cials in recent days have threatened

govern-to limit Ukrainian imports if Kievdraws closer to Europe

The IMF aid request came shortlyafter an interim government was ap-pointed in Ukraine Mr Shlapak, thenew finance minister, said that hewould continue talks with Russiaabout credit line extensions and adiscount on gas supplies

Ukraine is seeking aid to help itpay existing foreign debt, finance re-forms and stabilize its currency, the

hryvnia Officials engaged in sions with Ukraine said the countryneeds $4 billion immediately By theend of 2015, Ukraine hopes to raisesome $35 billion

discus-The European Union and the U.S

are exploring aid packages—bothshort-term and longer-term—butsome of the assistance will likely belinked to an IMF loan deal beingagreed upon first

“We are looking to provide mediate assistance for urgent needs

im-in the next couple months, im-in closecooperation with an IMF reformpackage In the medium term we willalso look into combined interna-tional efforts in support of biggerreform programs,” a senior EU dip-lomat said

Among the short-term optionsunder review by the U.S and EU aresmall bilateral bridge loans, loan

guarantees and a short-term gency credit line from the IMF thatisn’t tied to the strict conditions alarge-scale bailout requires

emer-Ms Lagarde said the IMF wouldfirst assess the economic situationand Ukraine’s needs and start dis-cussing with the transitional govern-ment “the policy reforms that couldform the basis of a Fund-supportedprogram.”

The IMF has said it would quire extra conditions for any bail-out because of the failure of Kiev tolive up to previous financing pro-gram requirements

re-IMF spokesman Gerry Rice saidKiev has indicated it will commit towide-ranging changes as part of itsbailout request

Mr Rice said he couldn’t addresspossible timing of an IMF bailout orwhether the fund would consider a

short-term emergency credit line inthe meantime

The IMF has previously pushedfor Kiev to depreciate its currency,phase out fuel subsidies and tightengovernment spending

On Wednesday U.S Secretary ofState John Kerry said Washingtoncould provide some $1 billion in loanguarantees for Ukraine to help theeconomy The EU is also exploring anumber of steps—from possible fi-nancial assistance to help with en-ergy security and improved marketaccess—in parallel to an IMF-led in-ternational package

Mr Yanukovych was in talks withthe IMF for much of last year con-cerning extending a loan programbut he rejected the Washington-based lender’s demands that Ukrainecut energy subsidies and devalue itscurrency

de-Up-and-coming fashion housessuch as Marco De Vincenzo, FaustoPuglisi, Au Jour Le Jour featuredshort skirts and plenty of skin inthe Milan collections, whichwrapped up Monday They teased

up their looks with glittery

sur-faces and ages of puppiesand the Statue

im-of Liberty onthe clothes

By contrast,many older,more estab-lished houses—even those such asGucci, Versace and Dolce & Gab-bana that built their aesthetic withsafety-pin and bustier dresses—

toned it down with covered-upfashions Turtlenecks, blanketcapes and jeweled cowls maskedthe body’s curves

While the big labels havestaged daring shows in recent sea-sons, the new designers bring ayouthful allure that has been miss-ing for a while The emergence ofnew designers—with their freshand humorous take on sexiness—isessential for Milan’s reputation as

a fashion capital In recent years,the city has lost its edge to Lon-don, Paris and New York as a stagefor fresh talent

Retailers, publisher Condé Nast,the Italian fashion-industry tradegroup and designers such as Dolce

& Gabbana and Giorgio Armanihave all undertaken initiatives toscout and support up-and-comingdesigners Now, the new names aregiving editors and buyers a newreason to see the collections

Voluptuous appeal has beenwoven into Italian style for de-cades—think of the starlets of Ital-ian cinema in the 1960s Milanfashion has long celebrated curves

(A new exhibition encapsulatingthe history of Italian fashion willopen at London’s Victoria & AlbertMuseum this spring.)

But sexiness has become moresubtle among veteran designers

There wasn’t a bare midriff insight on the Milan catwalk Ver-sace and Pucci, two of Milan’s raci-est houses, put a woman’s backand legs on display—hardly themost risqué zones

“Sexiness is the attitude andsense of style that every womanhas,” Alessandra Facchinetti saidafter her second collection forTod’s “That doesn’t mean youhave to show legs or breasts.”

Ms Facchinetti has found asweet spot designing a wardrobe

to go along with Tod’s shoes Afterstints at Valentino and Gucci, Ms

Facchinetti was picked by Tod’s tobroaden its product offering Thisseason she crossed Tod’s knowhow

in leather with interior-design tifs Never has matching the carpetlooked as good as it did on a coatmimicking the lozenge pattern onthe runway A silver leather skirt,perforated with an oversize check,looked effortlessly casual, a toughfeat for the material Skirts hit be-low the knee and collars werehigh

mo-Prada remains the unchallengedtop draw at Milan Fashion Week

Designer Miuccia Prada’s dictable swings in style from oneseason to the next are closelywatched Her fall collection wasmore overtly sexual—but darkly

unpre-so—than recent creations, such asthe art-inspired items now instores Models wore sheer sheathsover deep-cut sweaters, withgaudy shearlings and fierce rub-berized boots Oversize chains onthe bags added to the show’s in-dustrial feel

Gucci and Versace, two warts of Milanese sultriness,swayed conservative this season

stal-At Gucci, designer Frida Gianniniput away the flowing tunics andnavel-grazing V-necks to return tothe Mod era of the 1960s, a favor-ite inspiration Ms Giannini spoke

of a return to “glamour at its est.” Gucci’s icy pink, blue andgreen car coats were prim overleather blouses buttoned up to thetop Her go-go boots with a loaferfront could be a commercial hitlike Valentino’s hybrid Mary Janebootie this past winter

pur-Buttons were big at Versacetoo: military fastenings and epau-lets on dresses with asymmetricalhems that dipped below the knee.Donatella Versace (whose ramrod-straight platinum hairdo appeared

on some of the runway models)spiced up double-breasted coatswith lace-up stiletto boots Sharpshoulders channeled a self-assuredwoman who could still vamp it up

in a shaggy blood-red alpaca fur.Powerful women also chargedthe runway at Dolce & Gabbana.The design duo took a Sicilianfairy tale as a starting point, but asoften as not, the models playedknights in shining armor instead ofdamsels in distress Rich velvetsand brocades were worn over leg-gings with jeweled flats The onlyvisible lingerie from the brand thatpopularized bustiers was obscured

by a black lace gown

Leave it to the newest ers to play to Italy’s love of bareflesh and curves Fausto Puglisi, inhis second runway show, openedhis collection with a body-con-scious top and miniskirt patchedwith embroidery Mr Puglisi alsodesigns for Emanuel Ungaro, buthis colorful style seems to comemore easily to his eponymous col-lection Triangles of harlequin col-ors provided a barely-there top on

design-a minidress A bodysuit wdesign-as cutdaringly high over the hips Hisfun side came through with theStatue of Liberty’s likeness printed

on shirts Like Salvatore amo, Antonio Marras and Fendi,

Ferrag-Mr Puglisi played with pleats inskirts But his lengths went fromshort to shorter

Marco De Vincenzo also splicedpleats into his glittery rainbow-colored collection, using a mix ofleather and chiffon for swingy vol-ume Mr De Vincenzo, whose mainjob is on Fendi’s design team, pre-sented his collection a day beforeluxury-goods giant LVMH MoëtHennessy Louis Vuitton, the owner

of Fendi, announced it has taken aminority stake in his house Hisuse of leather in wavy strips was afunky alternative to the bourgeoisuse of leather at Tod’s

At Au Jour Le Jour, a youngbrand that Giorgio Armani sup-ported by letting it stage its show

in his Milan theater, the collectionopened with chunky sweaters overstraight skirts—a popular silhou-ette that also appeared at BottegaVeneta and others But the shortpinafores, tunics overwrought withruffles and drop-waist baby-dolldresses in puppy and kitten printswere kitschy It was like watching

a little girl playing dress-up assexy—which can be a little creepy

B Y C HRISTINA P ASSARIELLO

Puppy Love

Young brand Au Jour Le Jourcreated a girly-sexy look with shortskirts and kitschy touches such aspuppy and kitten prints

Sheer Style

Far from girlish, Prada offered adarkly provocative show thatincluded see-through sheaths with

fur accents

Armor for Winter

Dolce & Gabbana offered fairy-taleimagery of cloaked knightsand rich gowns Body-conscious

it was not

Visual Effects

Up-and-comer Marco De Vincenzoplayed with blocks of differenttextures, colors and materials

Interior Design

At Tod’s, long known for leathergoods, a bold coat echoed a carpetpattern on the runway itself

Vamping It Up

Versace’s women looked glamand powerful with lace-upboots and shaggy red fur Get

Trang 5

EUROPE NEWS Cyprus to End Capital Controls

President Says Curbs to Be Lifted by End of Year; Government Dealt Setback on Privatizations

Nicos Anastasiades said all capitalcontrols on the island would belifted by the end of the year, a stepthat would remove a symbol of hiscountry’s isolation from the rest ofthe euro area

The controls have been in placealmost a year, since Cyprus agreed

to a €10 billion ($13.7 billion) bailoutfrom its European partners and theInternational Monetary Fund inMarch 2013

“The timeline is that we’ll lift ternal restrictions very soon, and forall other banking activities—includ-ing with abroad—by the end of theyear,” Mr Anastasiades said thisweek in an interview with The WallStreet Journal

in-In a separate interview, FinanceMinister Harris Georgiades said thatrestrictions on internal transactionswould be lifted in April

Cypriot banks underwent an precedented overhaul as part of thebailout process: the second-largestwas closed and the largest radicallyrestructured To pay for the fallout,big depositors were “bailed in,”

un-meaning part of their deposits wereconverted into bank shares

The country’s once-dominant nancial sector is still threatened

fi-Officials from the so-called troika

of lenders—the European sion, the European Central Bank andthe International Monetary Fund—

Commis-estimate that about 45% of all loansare nonperforming That means thatpayments on the loans haven’t beenmade for three months, with the ra-tio at Bank of Cyprus, the island’slargest, being 50%

Mr Anastasiades is also facingpolitical trouble The governing co-alition lost its majority in parlia-ment this week when the juniorpartner withdrew On Thursday, law-makers narrowly rejected a bill toprivatize the state-owned power,telephone and ports companies—akey condition of the bailout—afterdays of strikes and street protests

by angry workers

Government lawmakers weresearching afterward for a compro-mise that could allow a fresh vote onthe bill in the coming days However,the loss of the coalition partner willrequire a cabinet shuffle

The Cypriot economy shrunk by

6% last year and is set to lose other 4.8% of its output this year ac-cording to the European Commis-sion That drop, though sharp, is lessthan had been forecast a year ago

an-Nonetheless, signs of financialtrouble are plain to see On Arch-bishop Makarios Avenue, the maincommercial road in the capital Nico-sia, roughly every other is closedand for-rent signs are a fixture

Mr Anastasiades said the recentresumption of talks to resolve the is-land’s partition provided hope for theeconomy Turkey invaded in 1974 fol-lowing a coup attempt aimed at uni-fying the island with Greece Thecoup failed but Turkey has controlledthe northern third of the island eversince “The solution to the Cyprusproblem is, I believe, an importantfactor in the recovery of our economy

It can boost the recovery,” he said

Since a plan to reunite the twocommunities was resoundingly re-jected by the Greek Cypriots in a ref-erendum in 2004, talks have beenintermittent and fruitless

But there is optimism here thatthis time may be different Mr Anas-tasiades and the Turkish Cypriotleader Dervis Eroglu issued a jointdeclaration in February setting out anew road map for talks, in the pres-ence of U.S Deputy State Secretary

for Europe Victoria Nuland

“There are so many benefits forall those involved,” Mr Anastasiadessaid, noting especially the potential

to exploit offshore natural-gas posits, which could be exported toTurkey through a pipeline

de-For that to happen, Turkey wouldhave to recognize Cyprus, which isunlikely without a solution to thepartition of the island

The companies exploring thefields off the coast of Cyprus haven’tdetermined whether it would beworth drilling, in part because send-ing it anywhere but Turkey could beforbiddingly expensive

Phidias Pilides, president of theCyprus Chambers of Commerce, isthrowing his weight behind the newpeace talks

“If there is an agreement I think

it is now clear that the financial vantages are massive,” he said in aninterview, citing trade with Turkey,natural-gas exploitation and tourismdevelopment on a reunified island

ad-A 2008 report by think tank

PRIO Cyprus, currently being

up-dated, showed that the “peace dend” from reunifying the islandcould raise the real growth rate by 3percentage points on average for atleast the first five years

divi-Alex Apostolides, a member ofthe National Board of financial ad-visers, said he thinks the benefitswould be even larger now, especiallybecause of the gas finds

—Alkman Granitsas and Michalis Persianis contributed to this article.

Spain’s regional and central ernments may have to refund asmuch as €13 billion ($17.8 billion) infuel tax to consumers and busi-

gov-nesses after the European Union’s

highest court said the tax violatedEuropean law

In its ruling Thursday, the

Euro-pean Court of Justice refused to

limit the impact of its decision forfear such a refund could threatenSpain’s fragile state finances Thecourt said the central governmenthad been warned repeatedly by theEU’s executive not to proceed withthe levy, which was in effect from

petroleum-The court, following the advice

of its advocate general last October,said the tax breached an EU lawthat seeks to prevent the levying ofindirect taxes that create obstacles

to EU trade The court said itbreaches part of the law that sayssuch taxes should only be levied for

a specific, non-budgetary purpose

A spokesman for Spain’s budgetministry said that it was unclearhow much money the governmentwould have to refund but that it islikely to be much less than the totalrevenue raised through the tax Thecountry’s tax agency and localcourts may have to examine each re-fund request individually, and onlythose plaintiffs who can substanti-ate they paid the tax are likely tohave a case, he said

The decision comes as Spain’scentral government is struggling torein in its budget deficit The EUsaid this week that Spain’s fiscalgap was likely to be much higherthan its EU-mandated target thisyear as the economy struggles to re-bound from a protracted recession

—Ilan Brat contributed to this article.

B Y L AURENCE N ORMAN

Stopping the Stampede

Capital controls imposed duringCyprus’s ﬁnancial crisis sharplycurtailed how much cash depositorscould take out of the country

Net outﬂows from Cypriot banks,

’142013

▼ March 27, 2013:

Capital controlsintroduced

Dip in Private Lending Adds to Pressure on ECB

Lending to the private sector inthe euro zone fell again at the start

of the year, a development that creases the likelihood that the Euro-pean Central Bank will take furtheraction to support the financial sys-tem and growth

in-Adding to the impetus for furtherstimulus measures, a survey con-ducted by the European Commissionfound that consumers’ inflation ex-pectations weakened in February tothe lowest since November 2010

The annual rate of inflation inthe euro zone was 0.8% in January,well below the ECB’s target of justunder 2.0% Figures for Germanyand Belgium released Thursday sug-gested it is unlikely that the rate ofinflation picked up in February, and

it may have fallen

Figures released by the ECBThursday showed that loans to firmsdeclined by €6 billion ($8.2 billion)after an unchanged reading in De-cember That may come as a disap-pointment to ECB President MarioDraghi, who said in early Februarythat weak lending toward the end oflast year may have been the result ofcommercial banks holding backahead of the Dec 31 cutoff for theECB’s Asset Quality Review

“Given hopes that the ECB’s set Quality Review had temporarilydepressed lending last year, Janu-ary’s weak euro-zone monetary datawill keep pressure on the ECB toloosen policy further,” said JamesHowat, an economist at Capital Eco-nomics

As-The continued decline in banklending doesn’t appear to havepunctured a slow recovery in busi-ness confidence The commission’s

survey found that businesses acrossthe 18 countries that share the eurowere at their most upbeat since July

2011 during February

The bolstered confidence in allfour business sectors improves theprospect of a pickup in growth thisyear, since it suggests they will bemore willing to invest and hire

The commission Thursday saidits headline Economic Sentiment In-dicator—which measures confidence

in a number of business sectors andamong consumers—rose to 101.2from 101.0 to reach its highest levelsince July 2011 That was a surprise,with the consensus forecast of 17economists surveyed by The WallStreet Journal last week having beenfor a decline to 100.5

The pickup in confidence ued to be patchy, with the ESI for It-aly surging, while the ESIs for Ger-many and the Netherlands rose

contin-more modestly, and France’s fell

“While the weak money andcredit growth figures argue in favor

of further monetary easing, the timent improvement in Februarygives the hawks on the ECB’s gov-erning council some ammunition tomake the case for a continued wait-and-see stance,” said Martin vanVliet, an economist at ING Bank

sen-However, the measure for sumer confidence fell, in line with apreliminary estimate released ear-lier this month That contained awarning for the ECB, since the mea-sure for consumers’ expectations ofinflation over the next 12 monthsfell sharply, and now stand at 13.6,well below the average going back to

con-1990 of 20.7 and at its lowest levelsince the end of 2010

The ECB has said it is worried bythe fact that the annual rate of infla-tion in the euro zone is well below

its target But it has said there is tle risk of deflation—or a period offalling prices—as long as consumersdon’t expect low inflation rates tocontinue into the future

lit-Germany’s statistics agencyThursday said that measured ac-cording to the common EuropeanUnion methodology, the annual rate

of inflation in the euro zone’s largestmember fell to 1.0% in Februaryfrom 1.2% in January

That figure will feed into stat’s estimate of inflation for thecurrency area, which will be pub-lished Friday The consensus fore-cast of 24 economists surveyed byThe Wall Street Journal last weekwas for a reading of 0.7%, downfrom January and the same level as

Euro-in October

—Monica Houston-Waesch

in Frankfurt contributed to this article

B Y P AUL H ANNON AND T ODD B UELL

Major players & benchmarks

Credit derivatives

Spreads on credit derivatives are one way the market ratescreditworthiness Regions that are treading in rough waters

can see spreads swing toward the maximum—and vice versa

Indexes below are for five-year swaps

Markit iTraxx Indexes SPREAD RANGE, in pct pts.

Mid-spread, since most recent roll Index: series/version in pct pts Mid-price Coupon Maximum Minimum Average

for corporatedebt; based on

Markit iTraxxindexes

In percentage points

2.00 1.25 0.50 -0.25 –1

Index roll

Source: Markit Group

Behind Europe's deals: Bank revenue rankings, Eurozone

Behind every IPO, bond offering, merger deal or syndicated loan is one or more investment banks Here areinvestment banks ranked by year-to-date revenues from recent deals

PERCENTAGE OF TOTAL REVENUE Revenue, Equity Debt Mergers &

in millions share capital markets capital markets acquisitions Loans

14500

29 6 13 20 27 Dec Jan.3 10 17 24 31Feb.7 14 21

HighClose

Low

50–daymoving average

t

Stoxx Europe 50: Thursday's best and worst

Previous close, in STOCK PERFORMANCE

Company Country Industry Volume local currency Previous session YTD 52-week

And the rest of Europe's blue chips

Latest,

in local STOCK PERFORMANCE Company/Country (Industry) Volume currency Latest YTD 52-week

United Kingdom (Banks)

United Kingdom (General Mining)

France (Clothing & Accessories)

United Kingdom (Banks)

United Kingdom (Distillers & Vintners)

Switzerland (Full Line Insurance)

Netherlands (Life Insurance)

United Kingdom (Integrated Oil & Gas)

ABB 4,436,066 22.47 -0.79 -4.3 6.2 Switzerland (Industrial Machinery)

AXA 8,696,815 18.91 -0.87 -6.4 43.4 France (Full Line Insurance)

Sweden (Telecommunications Equipment)

United Kingdom (Nondurable Household Products)

Sources: SIX Financial Information

DJIA component stocks

Source: WSJ Market Data Group

Credit-default swaps: European companies

Atitsmostbasic,thepricingofcredit-defaultswapsmeasureshowmuchabuyerhastopaytopurchase-andhow much a seller demands to sell-protection from default on an issuer's debt The snapshot below gives a

sense which way the market was moving yesterday

Showing the biggest improvement

CHANGE, in basis points

Yesterday Yesterday Five-day 28-day

CIR SpA CIE Industriali

And the most deterioration

CHANGE, in basis points

Yesterday Yesterday Five-day 28-day

Source: Markit Group

BLUE CHIPS & BONDS

Below, a look at the Dow Jones Stoxx

50, the biggest and best knowncompanies in Europe, including the U.K

Trang 6

EUROPE NEWS

French Artists Protest Benefit Cut Plan

PARIS—French actors and

musi-cians took to the streets Thursday

to protest proposed changes to their

unemployment benefits, the latest

pushback against plans to chip away

at France’s generous welfare state

The protests coincide with

nego-tiations between labor unions and

business groups on how to repair

France’s heavily indebted

jobless-in-surance program

As part of the talks, Medef, the

country’s largest business lobby, has

proposed scrapping a system that

allows performing artists to receive

unemployment benefits for longer

and after working a smaller number

of hours

Ludovic Koutchinsky, who joined

demonstrators outside the Louvre,

said that without the special

treat-ment, he would have given up long

ago on his career as a technician in

television

“Quite simply, what the Medef is

demanding would endanger French

cultural production,” he said

The CGT union estimated 7,000people took part in the protests inParis Police estimates weren’t avail-able

The performing artists’ protestsunderscore the stiff resistance tochanging France’s welfare system asthe country’s unemployment ratehovers close to a 17-year high of 11%

and shows little sign of declining

But there is a growing need tooverhaul the state-backed unem-ployment insurance system Its debt

is set to reach €22 billion ($31 lion) by the end of the year if noth-ing is done

bil-The beneficiaries of the specialprogram for performing-arts work-ers make up less than 5% of claim-ants but account for a large share ofthe deficits In 2012, they made

€240 million in contributions andreceived €1.32 billion in payouts

Labor unions and businessgroups are responsible for definingthe rules of the system that paysout overall €30 billion a year in job-

less benefits But the debt mately weighs on state public fi-nances and the government, whichhas to sign off on any changes tothe system It has already budgetedfor the talks to result in a narrowing

ulti-of the system’s deficit this year

The French system is generouscompared with European peers

Workers get up to two years of efits at around 70% of their finalsalary On average, that works out atjust over €1,100 a month, but pay-ments can go up to a limit fixed atjust over €6,100 a month In Ger-many, the maximum monthly pay-ment is less than €2,000, according

ben-to Unédic, which manages France’sunemployment insurance system

The talks haven’t gotten off to agood start Unions say they can’tagree to such cuts when unemploy-ment is so high and have rebuffedother proposals, such as one thatwould reduce payouts as unemploy-ment comes down

Employers argue the ment system should provide the

unemploy-same benefits as for other workersunemployed between temporarycontracts If the state believes work-ers in the arts should get extra sup-port, it should directly finance theadvantages, the employers say

For the moment, the governmenthas sided with performing artists “Iadvise the Medef not to persist withthis error,” French Prime MinisterJean-Marc Ayrault said in a radiointerview earlier in February

LONDON—Germany wants

Brit-ain to be a strong player in the

Eu-ropean Union, Chancellor Angela

Merkel told U.K parliamentarians

Thursday, stressing that its

mem-bership was needed to help Europe

be more competitive

Ms Merkel’s six-hour visit to

London, during which she had talks

and a news conference with Prime

Minister David Cameron and

after-noon tea with Queen Elizabeth II at

Buckingham Palace, attracted little

attention in advance in Germany By

contrast, it was the focus of keen

media interest in Britain for any

sign she would comment on Mr

Cameron’s plans to give Britons a

vote on whether to remain in the

EU In the end, she gave little away

Germany and Britain have

differ-ent views on the detail of how the

EU should operate, but the two

countries shared the same goal of

wanting a strong and competitive

bloc, she said in a speech to British

lawmakers Together, she said,

Ger-many and Britain could defend their

economic and social model andbring about necessary overhaulswithin the bloc

“In order to attain this goal, weneed a strong United Kingdom with

a strong voice inside the EuropeanUnion,” she said in English after de-livering the bulk of her remarks inGerman “If we have that, we will beable to make the necessary changesfor the benefit of all.”

Mr Cameron has pledged that if

he wins a second term in 2015 hewill renegotiate Britain’s ties withthe bloc and then hold a nationalreferendum on the country’s mem-bership by the end of 2017 Thestrategy has raised concerns inother European countries and thebusiness community about the time-line and the possibility that Britaincould eventually exit the EU

The prime minister has said hewants Britain to remain in a re-formed EU But a vocal and rebel-lious wing of his traditionally euro-skeptic center-right ConservativeParty believes the U.K would bebetter off leaving the bloc Theprime minister also faces an elec-

toral threat from the small anti-EUUnited Kingdom IndependenceParty, which is threatening to splitthe right-wing vote in the 2015 gen-eral election and make it harder for

Mr Cameron to win a second term

Mr Cameron has yet to set out infull which areas of Britain’s relation-ship with Europe he wants tochange, and he offered no furtherclues Thursday Nevertheless, both

he and Ms Merkel pointed to anagreement to cut the EU’s budget as

an example that change was ble

possi-Ms Merkel said the two leadersdidn’t get into specifics in theirtalks but agreed there was commonground in their overriding goals

However, she acknowledged thatchange in the EU wouldn’t be a

“piece of cake” and would need thesupport of all 28 member states

“That means that we each stand

up for our own interests, I do it, vid does it…the task is alwaysweighing the pros and cons of acompromise that by nature we have

Da-to enter inDa-to,” she said, adding that

“a lot of hot potatoes have been

solved in this way.”

Ms Merkel’s backing is likely to

be crucial to Mr Cameron’s EU form agenda and referendum bidshould he win a second term Thetwo leaders, who are widely ac-knowledged to have a warm andsolid working relationship, looked atease at the news conference Duringthe afternoon, Mr Cameron tweeted

re-a photo of them sitting on re-a sofre-a inwhat appeared to be the kitchen ofhis Downing Street residence

The contrast with last month’svisit by French President FrançoisHollande, who was received by Mr

Cameron at an air base and treated

to a pub lunch, was palpable

Messrs Cameron and Hollande agreed politely about the future ofthe EU, and the British prime minis-ter insisting there should bechanges to treaties governing thebloc while the French president said

dis-it wasn’t a priordis-ity and Europeshouldn’t change to suit one coun-try

Ms Merkel has called forchanges in Europe’s treaties to allowfor closer economic coordinationand integration among euro-zonecountries Britain, which hasn’t ad-opted the euro, has argued thatchanges in the euro zone must notjeopardize the European single mar-ket or disadvantage the EU membersthat don’t use the common currency

Such changes are an opportunity forthe U.K to redraw its ties with the

EU, Mr Cameron has said

Ms Merkel told the tarians that she was aware of theexpectations ahead of her speech,but she was going to disappointboth those who hoped she wouldsay something to support Britain’salleged or actual wishes for EU re-form, and those hoping she wouldsay the rest of Europe wasn’t pre-pared to pay almost any price tokeep the U.K in the bloc

parliamen-Europe’s political structureneeded reform so it could fulfill itspromise of freedom of opinion, faithand press, Ms Merkel said, as well

as freedom of trade, capital andpeople She also said Brusselsshould only regulate where memberstates haven’t passed sufficient reg-ulations themselves, words likely to

be well received by British skeptics who have long complained

euro-of excessive European rules

LONDON—U.K Prime MinisterDavid Cameron looked to head off apossible political crisis in NorthernIreland on Thursday by announcing

an independent judicial review into

an administrative process that hadallowed a man suspected of killingfour soldiers in an Irish RepublicanArmy bombing in 1982 to walk free

Peter Robinson, the first minister

of Northern Ireland’s regional ernment, welcomed the announce-ment and said he was withdrawinghis threat to resign over the matter

gov-He had said Wednesday that hewould quit if the government didn’tlaunch a judicial inquiry

The case has highlighted one ofthe most contentious areas of thepeace process in Northern Irelandand similar conflicts around theworld: how to hold suspects of sec-tarian violence to account afterpeace has broken out

Four counts of murder againstIrishman John Downey, 62 years old,related to a bomb attack in London’sHyde Park 32 years ago, weredropped Tuesday after it emerged

he had received a letter of assurancefrom the government that he wasn’twanted for arrest, questioning orcharge in Northern Ireland and theprovince’s police weren’t aware ofany interest in him in the U.K

Theresa Villiers, secretary ofstate for Northern Ireland, saidTuesday that Mr Downey had re-ceived the letter in error because hewas wanted by London police

She said some 200 individualswere given similar assurances,mostly by letter, as part of a processset up by the previous government

to deal with so-called on-the-runs—

people who believed they might facearrest or questioning in connectionwith sectarian or criminal offenses

in Northern Ireland before the 1998Good Friday peace agreement

Mr Cameron said Thursday that

it was clear there had been a ful mistake in the Downey case

dread-B Y N ICHOLAS W INNING

Major stock market indexes Stock indexes from around the world, grouped by region Shown in local-currency terms

PREVIOUS SESSION PERFORMANCE Region/Country Index Close Net change Percentage change Yr.-to-date 52-wk.

EUROPE Stoxx Europe 600 337.21 -0.49 -0.15% 2.7 % 17.4 %

Stoxx Europe 50 2965.99 -6.33 -0.21 1.6 13.2

Euro Zone Euro Stoxx 320.89 -0.99 -0.31 2.1 21.5

Euro Stoxx 50 3134.94 -13.25 -0.42 0.8 20.0 Austria ATX 2642.75 -34.23 -1.28 3.8 8.6 Belgium Bel-20 3073.61 17.81 0.58% 5.1 20.8 Czech Republic PX 1014.43 -5.34 -0.52 2.6 1.9 Denmark OMX Copenhagen 652.88 -4.24 -0.64 15.4 30.9 Finland OMX Helsinki 7512.77 -9.67 -0.13 2.4 20.8 France CAC-40 4396.39 -0.52 -0.01 2.3 19.1 Germany DAX 9588.33 -73.40 -0.76 0.4 24.9 Hungary BUX 17376.42 -418.46 -2.35 -6.4 -6.1 Ireland ISEQ 5135.96 32.34 0.63 13.1 38.0 Italy FTSE MIB 20320.98 -77.12 -0.38 7.1 28.4 Netherlands AEX 398.28 -0.36 -0.09 -0.9 18.1 Norway All-Shares 608.68 -0.51 -0.08 1.0 17.1 Poland WIG 52906.04 -77.93 -0.15 3.2 14.4 Portugal PSI 20 7303.68 49.44 0.68 11.4 21.7 Russia RTSI 1260.95 -25.12 -1.95% -12.6 -17.8

PREVIOUS SESSION PERFORMANCE Region/Country Index Close Net change Percentage change Yr.-to-date 52-wk Spain IBEX 35 10164.10 -60.20 -0.59 2.5 24.9 Sweden OMX Stockholm 441.28 -1.39 -0.31 4.2 18.1 Switzerland SMI 8470.90 -62.09 -0.73 3.3 11.6 Turkey BIST 100 61779.24 276.2 0.45% -8.9 -21.0

ASIA-PACIFIC DJ Asia-Pacific TSM 1421.84 1.07 0.08 -1.8 4.0 Australia SPX/ASX 200 5411.40 -25.60 -0.47 1.1 6.0 China Shanghai Composite 2047.35 6.10 0.30 -3.2 -13.5 Hong Kong Hang Seng 22828.18 390.74 1.74 -2.1 -0.8 India S&P BSE Sensex 20986.99 Closed -0.9 9.6 Japan Nikkei Stock Average 14923.11 -47.86 -0.32 -8.4 29.1 Singapore Straits Times 3096.74 8.49 0.27 -2.2 -5.3 South Korea Kospi 1978.43 7.66 0.39 -1.6 -2.4

AMERICAS DJ Americas 466.77 1.41 0.30 0.2 19.1 Brazil Bovespa 47609.42 1010.21 2.17 -7.6 -16.9 Mexico IPC 38997.81 392.19 1.02 -8.7 -10.9

Note: Americas index data are as of 3:00 p.m ET Sources: SIX Financial Information; WSJ Market Data Group

Cross rates U.S.-dollar and euro foreign-exchange rates in global trading

yield ratio MSCI Index Last Daily YTD 52-wk 2.50% 16 MSCI ACWI* 407.37 0.24% -0.3% 14.7%

2.50 17 World (Developed Markets) 1,664.85 0.27 0.2 18.5 2.40 17 World ex-EMU 202.63 0.19 0.1 18.1 2.40 17 World ex-UK 1,675.59 0.23 0.1 19.0 3.10 16 EAFE 1,925.86 0.65 0.5 14.1 2.70 11 Emerging Markets (EM) 956.26 -0.07 -4.6 -10.5

3.20 18 EMU 200.49 0.85 1.4 20.5 3.20 18 Europe ex-UK 123.97 -0.18 3.1 18.5 4.20 13 Europe Value 117.14 -0.22 3.2 17.2 2.40 21 Europe Growth 108.86 -0.18 2.1 15.4 2.30 23 Europe Small Cap 276.85 -0.12 6.2 34.7

3.60 13 UK 2,003.43 -0.45 0.5 7.8 3.30 17 Nordic Countries 211.57 -0.20 4.9 16.3

3.00 18 South Africa 1,136.13 -0.21 -0.2 13.1 3.00 13 AC ASIA PACIFIC EX-JAPAN 460.07 -0.22 -1.7 -3.8

*Twenty-four developed and 21 emerging markets Source: MSCI

S&P Dow Jones Indices

yield* ratio* S&P Dow Jones Index Last Daily 52-wk Last Daily 52-wk.

6.35%14.98 Global Select Div 251.86 0.06 12.9

6.71 14.35 Asia/Pacific Select Div 282.09 -0.38% -9.9% 330.29 -0.28 -5.7

3.29 29.14 S&P Glb Nat Resources 1986.81 -0.40 -7.2 2706.13 -0.09 -2.7

*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

GLOBAL MARKETS LINEUP

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Commodities Prices of futures contracts with the most open interest

EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.MDEX: Bursa Malaysia

Derivatives Berhad; LIFFE: London International Financial Futures Exchange; COMEX: Commodity Exchange; LME: London Metals Exchange;

NYMEX: New York Mercantile Exchange;ICE-EU: ICE Futures Europe *Data as of February 26, 2014

ONE-DAY CHANGE Year Year Commodity Exchange Last price Net Percentage high low

Corn(cents/bu.) CBOT 455.75 -5.25 -1.14% 465.00 414.50

Soybeans(cents/bu.) CBOT 1388.25 -8.75 -0.63 1,445.50 1,247.50

Wheat(cents/bu.) CBOT 590.75 -14.75 -2.44 620.00 553.75

Live cattle(cents/lb.) CME 144.425 -0.100 -0.07 145.975 135.375

Cocoa($/ton) ICE-US 2,945 13 0.44% 3,002 2,636

Coffee(cents/lb.) ICE-US 178.40 0.70 0.39 181.25 112.50

Sugar(cents/lb.) ICE-US 18.08 0.41 2.32 18.13 14.92

Cotton(cents/lb.) ICE-US 87.70 1.33 1.54 90.44 82.60

Rapeseed(euro/ton) LIFFE 397.00 2.50 0.63 398 349

Cocoa(pounds/ton) LIFFE 1,838 11 0.60 1,871 1,674

Robusta coffee($/ton) LIFFE 2,031 35 1.75 2,045 1,575

Copper($/lb.) COMEX 3.2025 -0.0130 -0.40 3.4110 3.1775

Gold($/troy oz.) COMEX 1329.60 1.60 0.12 1,345.60 1,203.70

Silver($/troy oz.) COMEX 21.265 -0.024 -0.11 22.215 19.030

Aluminum($/ton)* LME 1,780.00 25.00 1.42 1,813.00 1,686.50

Tin($/ton)* LME 23,575.00 425.00 1.84 23,575.00 21,410.00

Copper($/ton)* LME 7,076.50 21.50 0.30 7,422.00 7,051.00

Lead($/ton)* LME 2,130.50 -1.50 -0.07 2,242.00 2,097.50

Zinc($/ton)* LME 2,062.50 17.50 0.86 2,110.00 1,964.00

Nickel($/ton)* LME 14,325 80 0.56 14,730 13,425

Crude oil($/bbl.) NYMEX 102.27 -0.32 -0.31 103.45 91.48

Heating oil($/gal.) NYMEX 3.0092 -0.0291 -0.96 3.0901 2.8758

RBOB gasoline($/gal.) NYMEX 2.9593 -0.0264 -0.88 3.0394 2.7831

Natural gas($/mmBtu) NYMEX 4.480 -0.061 -1.34 5.2090 3.8580

Brent crude($/bbl.) ICE-EU 108.55 -0.49 -0.45 110.47 104.33

Gas oil($/ton) ICE-EU 916.25 -8.00 -0.87 940.50 890.00

Sources: SIX Financial Information; WSJ Market Data Group

Currencies London close on Feb 27

EUROPE Per euro In euros U.S dollar U.S dollars

1-mo forward 1.0000 1.0000 0.7290 1.3718 3-mos forward 1.0000 1.0000 0.7289 1.3718 6-mos forward 0.9999 1.0001 0.7289 1.3720

Czech Rep koruna-b 27.345 0.0366 19.934 0.0502

Turkey lira 3.0448 0.3284 2.2195 0.4505

U.K pound 0.8220 1.2165 0.5992 1.6688 1-mo forward 0.8222 1.2162 0.5994 1.6684 3-mos forward 0.8226 1.2157 0.5996 1.6676 6-mos forward 0.8232 1.2148 0.6001 1.6664

MIDDLE EAST/AFRICA Bahrain dinar 0.5171 1.9339 0.3769 2.6529

Saudi Arabia riyal 5.1443 0.1944 3.7500 0.2667

South Africa rand 14.7158 0.0680 10.7273 0.0932

United Arab dirham 5.0387 0.1985 3.6731 0.2723

a-floating rate b-financial c-government rate c-commercial rate d-Russian Central Bank rate.

Source: ICAP Plc.

Trang 7

U.S NEWS Food Nutrition

Labeling Is Set For a New Look

First lady Michelle Obama saidThursday that newly proposed foodnutrition labels will mean consumerswill no longer have to ask, “Howcould this teeny little package con-tain five servings?”

“We’re overhauling these labels tomake them easier to read and under-stand,” Mrs Obama said to an audi-ence of several hundred food-safetyadvocates at the White House Theadvantages of the Food and Drug Ad-ministration’s proposed new label, shesaid, include a far larger font display

of total calories and more realistic—

often larger—estimated serving sizes

In recent years, she said, “yousquinted at that little tiny label andyou were utterly lost You’d ask, ‘Isthis too much sugar in this prod-uct?’ ”

The new label would include aline for “added sugars” to distinguishfrom sugars that appear naturally infood It would list nutritional valuesfor vitamin D and potassium, whichbenefit bone health and blood-pres-sure control

Ice cream, which can now have bels listing half a cup as the averageserving, would have to list it as a fullcup on the new label, and “the caloriedeclaration will reflect that,” an ad-ministration official said

la-The proposed new food-packagelabels wouldn’t do several things thatconsumer groups had wanted Theywouldn’t emphasize in colorful typewhen added sugars or saturated fatare relatively high in a food Norwould they disclose the percentage ofgrains that are healthful whole grains

The proposed labels, produced bythe FDA with input from industry andconsumer groups, aren’t slated totake effect for at least two years In-dustry groups are expected to pushfor changes, and the proposal is open

to a 90-day comment period beforebeing finalized

The FDA took the unusual step ofalso printing up an “alternate” newlabel that appears potentially morehelpful to the average family than theofficially proposed one This labelspecifically lists items where peopleshould “Avoid too Much,” and others

to “Get Enough,” along with the dailypercentages that food would contrib-ute

The alternate label isn’t part ofthe FDA’s formal proposal But itcould serve to gauge whether thepublic wants more robust changes—

and warn the industry that tougherlabels aren’t off the table

Nutritional labels have remainedessentially unchanged since 1994, ex-cept for an addition in 2006 of heart-risky trans fats, which appear insome prepared baked goods and mi-crowave popcorn but have beenphased out by many companies

The Grocery Manufacturers ciation, an industry group, said itlooks forward to helping with theproposed changes “It is critical thatany changes are based on the mostcurrent and reliable science,” thegroup’s president and CEO, PamelaBailey, said in a statement “Equally

Asso-as important is ensuring that anychanges ultimately serve to inform,and not confuse, consumers.”

Consumer advocates have beenpushing for changes in what counts

as a “serving size,” saying the mates that are now used are mislead-ing in that they are smaller thanwhat people actually eat in one sit-ting

esti-For example, soft-drink portionsare often listed as eight ounces,which means a 20-ounce soda wouldrepresent 21/2servings In the pro-posed label, administration officialssaid, a 20-ounce drink would now listthat as one serving

Darren Seifer, a

food-and-bever-age analyst at research entity NPDGroup, said research on frozen pack-aged meals found that even when thecontainer was divided into three orfour servings, one person was eatingall of it He said that changing theserving sizes to better reflect howAmericans eat today “might helpconsumers understand better.”

But industry analyst Robert erson of Consumer Edge Researchsuspects the food companies may ar-gue that if they have to list a wholebag of chips or bottle of soda as oneserving, they would reduce the size,and food in smaller packages is moreexpensive per ounce, so it ultimately

Dick-takes away value from consumers

Food companies—especially soda,ice cream and dessert makers—areexpected to take issue with the dis-tinction of “added sugars” on the nu-trition label They contend there is noway to distinguish added sugar fromnatural sugar in testing they conduct

to ensure the accuracy of labels

Food makers also are expected topush back against having to changetheir serving sizes, or add a columnfor nutrition facts for the wholepackage on larger packages, also part

of the proposed changes Making ories and other key facts more prom-inent also could create an industry

cal-backlash if it requires the label totake up any more real estate on thefood packages, industry experts say.Burkey Belser, principal at brand-design agency Greenfield/Belser Ltd.and designer of the current nutritionlabel, said anything that requiresfood companies to give up space ontheir packages for nutrition factswould likely face resistance.Consumer groups also had hopedfor a sharp reduction in the amount

of sodium listed as the daily valuebecause of the chemical’s link to highblood pressure But the administra-tion plans just a slight decrease, to2,300 from 2,400 milligrams daily

B Y T HOMAS M . B URTON

A ND A NNIE G ASPARRO

Serving sizes would aim

to be more realistic.

The ‘calories from fat’

column would be removed.

Total calories would appear in a larger font.

An ‘added sugars’

category would be added.

Potassium and vitamin D content would be added.

Yellen, Eye on Growth, Says Bond Cuts Could Be Slowed

Federal Reserve Chairwoman JanetYellen said she isn’t sure how much ofthe recent deterioration in U.S eco-nomic growth is due to weather, add-ing the central bank might consider apause in its reduction of bond buying

if the weakness persists

“Asset purchases are not on a set course, so if there’s a significantchange in the outlook, certainly wewould be open to reconsidering, but Iwouldn’t want to jump to conclusionshere,” Ms Yellen told the Senate Bank-ing Committee on Thursday, in thesecond day of congressional hearings

pre-Since Feb 13, U.S economic datahave shown signs of weakness, withretail sales falling 0.4% and indus-trial production declining 0.3% inJanuary The recovery in housinghas also shown signs of fraying

Ms Yellen said officials would betracking the data carefully to estimatewhether a shift in their outlook is war-ranted “A number of data releases

have pointed to softer spending thananalysts had expected,” she said “Thatmay reflect in part adverse weatherconditions, but at this point it is diffi-cult to discern exactly how much.”

The Fed’s bond-buying programwas designed to drive faster growth

by lowering borrowing costs to courage more spending, hiring andinvestment The central bank de-cided in January to trim its pur-chases by $10 billion to $65 billion

en-a month, en-and Fed officien-als hen-ave naled they’ll likely continue reduc-ing the purchases this year if theeconomy improves as they expect

sig-Ms Yellen played down ers’ concerns about the Fed’s largebalance sheet, which now exceeds

lawmak-$4 trillion Some economists worrythat by creating new money to buythe bonds now on the balance sheet,the Fed has sown the seeds of finan-cial bubbles or higher inflation oncethe economy picks up steam But

Ms Yellen said the Fed still has themeans to tighten monetary policydespite the size of its holdings

B Y P EDRO N ICOLACI DA C OSTA

A ND B EN L EUBSDORF

the singular style

of wes anderson with the wall street journal next friday.

Europe Flex-Cap Equity

Funds that invest in equities of all sizes, which leads to a mid-cap profile, or focus solely

on mid-caps At least 75% of total assets are invested in equities Ranked on % totalreturn (dividends reinvested) in Euros for one year ending February 27, 2014

Leading 10 Performers

FUND FUND LEGAL % Return in $US **

RATING* NAME FUND MGM'T CO CURR BASE YTD 1-YR 2-YR 5-YR

5 BSF European BlackRock EURLUX 9.60 50.00 32.58 26.81 OpportunitiesExtnA2 (Luxembourg) S.A.

5 Digital J.Chahine Capital EURLUX 8.01 40.37 29.61 23.63 Stars Europe Acc

5 Fundquest BNP Paribas IP EURIRL 7.20 38.27 26.88 NS

Growth Value Z Stonex Partners

ArgoPanEurAlphaIEURAcc Management Limited

Focus A (acc)-EUR Mgmt (Europe) S.a.r.l.

Zukunftsfonds Luxembourg S.A.

NOTE: Changes in currency rates will affect performance and rankings Source: Morningstar, Ltd KEY: ** 2YR and 5YR performance is annualized 1 Oliver’s Yard, 55-71 City Road

NS-fund not in existence for entire period www.morningstar.co.uk; Email: mediaservice@morningstar.com

three times this past week

The advance carried the indexinto positive territory for the year as

investors digested nomic signals and theFederal Reserve chief’stestimony to Congress

eco-The S&P rose 9.13 points, or 0.5%,

to 1854.29, while the Dow Jones dustrial Average gained 74.24points, or 0.5%, to 16272.65 and theNasdaq Composite Index advanced26.87 points, or 0.6%, to 4318.93

In-In Europe, The Stoxx Europe 600index slipped 0.2% to 337.21 amidrising political tensions in Ukraine

Those jitters sent investors intogovernment bonds Yields on the 10-year U.S Treasury fell to a three-week low of 2.642%, as did those onGerman and U.K government bonds,which fell to 1.55% and 2.65%, re-

spectively

Lower-rated Italian and Spanishbonds, which in the past have stum-bled in times of market stress, alsorallied The yield on the 10-yearItalian government bond fell to3.46%, its lowest level in eightyears The corresponding Spanishbond yield fell to 3.49%, an eight-and-a-half-year low Yields fall as

bond prices rise

Europe’s major national indexeswere mixed The U.K.’s FTSE 100rose 0.2% to 6810.27 despite a 7.7%

drop in shares of Royal Bank ofScotland Group, which reported awider loss in 2013 France’s CAC 40gained 0.01% to 4396.39, but Ger-many’s DAX shed 0.8% to 9588.33

German inflation edged higher inFebruary, mostly because of price in-creases for food, according to a flashestimate from the federal statisticsagency February’s consumer-priceindex gained 0.5% from January andwas 1.2% higher from a year earlier

A U.S economic report showedthat durable-goods orders for Janu-ary fell 1% on the month, less than

expectations of a 2% decline Initialclaims for jobless benefits in the lat-est week rose by 14,000 to 348,000,

above expectations for 335,000

In a discussion with the SenateBanking Committee, Federal ReserveChairwoman Janet Yellen said thecentral bank could reconsider the re-duction of the monthly asset-pur-chase program if its economic out-

look changes significantly

After hitting its record in ary, the S&P 500 swiftly fell 5.8% butbounced back despite a string of dis-appointing U.S economic data,which many economists have

Janu-chalked up to poor weather

Paul Nolte, portfolio manager atChicago’s Kingsview Asset Manage-ment, said he expects more languidtrading sessions until investors havegreater clarity on the state of the

economy

J.C Penney led U.S retail shareshigher, jumping 25% after the com-pany said late Wednesday it posted

a profit over the holidays and pects sales to continue to improve in

ex-the current quarter

Best Buy surged 4.4% after theretailer reported fiscal fourth-quar-ter adjusted earnings that exceededrecently lowered expectations, al-though sales fell short of forecasts

Through Wednesday, the stock hadtumbled 35% year to date

In currency markets, Ukraine’sfractious politics sent the hryvnia torecord lows against the dollar, whilethe Russian ruble fell to the weakestpoint against the dollar since 2009

But the dollar fell against majorrivals Late Thursday in New York,the euro was fetching $1.3708 from

$1.3687 late Wednesday, while theBritish pound was at $1.6684 from

$1.6671 The dollar was buying

on the Nymex

B Y C HIARA A LBANESE

MARKET REPORT

Some Firms Alter Recipe

In the Bonus Cookbook

U.S companies increasingly are

using unconventional earnings

mea-sures in determining bonuses,

mak-ing it easier for them to appear more

profitable when they reward

execu-tives with big paydays

Last year, 542 companies said

they determine compensation using

financial measurements that differ

from U.S accounting standards,

ac-cording to an analysis performed by

consultant Audit Analytics for The

Wall Street Journal That is more

than double the 249 companies that

did so in 2009 The practice can be

controversial because it strips out

various costs—from employee stock

payments to asset write-downs—

that can depress profits

Such moves are on the rise at a

time when the Securities and

Ex-change Commission has said it is

scrutinizing nonstandard earnings

measures The commission declined

to comment on their use in

execu-tive-pay decisions

“Everything you can think of to

manipulate this has been done,” said

Gary Hewitt, head of research at GMI

Ratings, a corporate-governance

re-search firm

U.S companies report quarterly

results based on generally accepted

accounting principles, or GAAP, but

regulators also allow them to

pro-vide non-GAAP adjusted measures as

long as they provide proper

disclo-sure Some companies use the

non-GAAP measures as the basis for the

profit targets they must hit to award

incentive bonuses to executives

Companies are allowed to use

nonstandard measures in setting

ex-ecutive pay, and some observers said

they better represent a company’s

health and its executives’

perfor-mances by excluding items the

com-panies don’t see as relevant to their

core operations Others disagree

“We’re very frustrated with

that,” said Michael Pryce-Jones, a

senior governance analyst at CtW

Investment Group, which works

with union pension funds on

share-holder initiatives When companies

use such customized measures, he

said, investors “are being given the

upside, but they’re not being given

the downside.”

For its analysis, Audit Analytics

examined public firms with $700

million or more in stock not under

the company’s control The results

showed the use of nonstandard

measures for executive pay has

risen steadily each year since 2009

The 542 companies represent 28%

of the 1,957 firms examined by

Au-dit Analytics for 2013

One example cited by some

cor-porate-governance advocates:

medi-cal-products distributor McKesson

Corp., which awarded Chief

Execu-tive John Hammergren $51.7 million

in compensation for fiscal 2013

To help determine the $3.7

mil-lion he received in short-term

incen-tive pay, McKesson used a measure

of its earnings it adjusted not once

but twice It took the nonstandard

earnings measures it disclosed to

in-vestors in its earnings reports, which

already had stripped out a variety of

expenses, to boost the year’s

earn-ings by 74 cents a share, to $6.33,

and then stripped out more costs to

increase earnings an additional 88

cents, to $7.21

Activist shareholders have

com-plained about McKesson’s pay

struc-ture, including its use of handpickedmetrics Shareholders voted “no” bymore than a 3-to-1 margin last year

on a nonbinding resolution to prove the company’s executive-com-

Street views its profits

Some others think the non-GAAPuse is justified “I really don’t seethe sort of blatant attempt to jiggerthe numbers so that someone getsmore compensation than they’re en-titled to,” said Charles Vaughn, alawyer at Nelson Mullins Riley &

Scarborough LLP in Atlanta who vises boards on compensation

ad-But other observers think somecompanies exclude some expensesfrom nonstandard measures that re-ally shouldn’t be excluded, like stockcompensation, which they contend

is a legitimate cost

Business-software maker

Sales-force.com Inc posted a $110.7

mil-lion operating loss in fiscal 2013 der standard accounting rules, but itstripped out $379.4 million in stock-compensation expense to help it get

un-to a $379.8 million operating profitthat the company’s board used for

incentive-pay purposes

Salesforce awarded CEO MarcBenioff $1.3 million in cash incen-tive pay as part of a $22.1 millionpay package The company declined

to comment on its pay practices

The concerns over nonstandardaccounting measures are reinvigorat-ing a debate that raged during thetail end of the 1990s stock boom

Back then, Internet companies oftenpresented different sets of numberssuch as “core earnings” or “operating

earnings excluding special items”

that purportedly offered investors atruer picture of their growth poten-tial, even as the companies racked upsubstantial losses under traditional

accounting measures

After the market’s 2000 crash andthe corporate accounting scandalsover the following few years, the SECrequired companies to disclose more

about their nonstandard metrics

The SEC has questioned somecompanies’ use of nonstandard mea-sures in pay decisions Last year, theSEC asked building-products maker

Trex Co to justify its exclusion from

its pay metric of a big 2012 increase

in its reserve for defective-productsclaims The move boosted pretax in-come nearly sevenfold, and Trex CEORonald W Kaplan was awarded in-centive pay of more than $1 million

in part based on that number, tributing to his total compensation

con-of $3.7 million

Trex said its current ment joined the company after theproblems leading to the reserve in-crease, and that it was “necessary”

manage-and “fair” to exclude it from bonusdeterminations

Some observers said goodwillwrite-downs shouldn’t be strippedout Goodwill is the intangible asset

a company carries to account for theexcess of what it paid for an acquisi-tion over the net value of the ac-quiree’s hard assets Many observersregard goodwill write-downs as ac-knowledgment that the companyoverpaid, and so they shouldn’t beexcluded from a measure used toevaluate management’s performance

Medical-device maker Boston

Sci-entific Corp had goodwill

write-downs in five of the last six years, butgranted incentive pay to its CEO eachyear The company had a $4.1 billion

2012 loss under standard accountingmeasures, but after excluding a $4.4billion goodwill write-down and othercharges, it had a $933 million profitused to set short-term incentive pay

Citing confidentiality, a woman said the company doesn’tcomment on specifics about execu-tive performance beyond its filings

spokes-B Y M ICHAEL R APOPORT

Steady Rise

More companiesare using earnings

measures thatdon’t follow

generally acceptedaccounting

principles to helpdetermine

executives’ pay

Ways companies stray from generally accepted accounting principles

to bolster executives’ pay

Stock compensation

Many companiesexclude stock

payments toemployees even

though critics say theyare real expenses

related toacquisitions, but

count the higherearnings generated

Trang 8

WORLD NEWS

MissileLaunchings

RaiseKoreaTension

SEOUL—North Korea on

Thurs-day launched four short-range

mis-siles into the sea off the eastern

coast of the Korean peninsula,

stir-ring tensions after a naval incursion

earlier this week

South Korea’s Defense Ministry

said the firings appear to have taken

place at 5:42 p.m local time from

the Kittae-ryong hills in North

Ko-rea’s southeast, but couldn’t

imme-diately provide more details

Given their range of around 100

miles (160 kilometers), the missiles

are unlikely to have posed any

dan-ger to neighboring countries North

Korea routinely launches short- and

medium-range missiles during its

military drills, which are also seen

by some as a protest against U.S

and South Korea military exercises

Seoul and Washington began

their biggest annual joint exercises

on Monday

North Korea’s last known firings

took place in May when Pyongyang

launched a series of short-range

missiles over several days, seen by

analysts as an objection to South

Korean-U.S naval drills at the time

The latest firings come after a

North Korean warship strayed into

South Korean waters from late

Mon-day to early TuesMon-day, the first

re-ported maritime incursion this year

The missile firings and naval

in-cursion follow an apparent easing in

inter-Korean tensions Senior-level

bilateral meetings were followed by

reunions of families separated ing and since the 1950-1953 KoreanWar from last Thursday to Tuesday

dur-The Japanese Red Cross tion said Thursday it would holdtalks in China next week with itsNorth Korean counterpart for thefirst time since 2012, raising hopesthe meeting could open the path forTokyo and Pyongyang to discuss is-sues that have stood in the way ofnormalizing diplomatic relations

associa-North Korea’s ties with the Westremain sour Pyongyang blasted aUnited Nations report that saidPyongyang has committed crimesagainst humanity, calling it a con-spiracy by the U.S and its allies

U.S Secretary of State John Kerry

on Wednesday dubbed the secludednation “an evil, evil place” whilespeaking about the human-rightsabuses detailed in the 400-pagecondemnation by the U.N

On Thursday, the North’s statemedia broadcast footage of a de-tained South Korean missionarywho said he worked under Seoul’sorders to topple the North’s regime

Kim Jung-wook said in a statement

he was arrested in early Octoberwhile trying to build undergroundChristian churches in North Korea

“I wanted to let others know thatI’ve done something very wrong,”

said Mr Kim, who is among threeknown missionaries detained by theNorth Some of the video wasshown on South Korean television

—Alexander Martin contributed to this article.

Somalia Car Bomb Kills 12

As Attacks Are Stepped Up

A car bomb exploded near the

headquarters of Somalia’s

intelli-gence agency Thursday, killing at

least 12 people, witnesses and

offi-cials said

The blast was the third deadly

attack to hit the Somali capital in as

many weeks Mogadishu has been

touted as a success story for the

So-mali government since its forces

re-gained control of the city from

mili-tants in 2011 Still, bombings and

kidnappings of government officials

remain common in the city

There was no immediate claim

for responsibility for Thursday’s

at-tack, but it bore the characteristics

of the many bombings in the city

claimed by al Shabaab, an al linked militant group that controlsmuch of the Somali countryside and

Qaeda-is waging a campaign to regain trol of the capital

con-The attack took place aroundmidday, when a white sports-utilityvehicle exploded into flames nearthe headquarters of the National Se-curity Services, witnesses said

“I saw the white car burning asthe flames and smoke went on thesky,” said Mohamed Nur, 35 yearsold, who was sitting in a nearby res-taurant He said he saw three bodies

on the ground It wasn’t ately clear if the driver died insidethe vehicle or had parked and fled

immedi-Abukari Ali, the district sioner who oversaw the evacuation

commis-of survivors commis-of the blast, said 12people had been killed, not includ-ing the attackers

By Abdalle Ahmed Mumin

in Mogadishu, Somalia,

and Heidi Vogt in Nairobi

Australia Reviews Plan

To Double Its Sub Fleet

CANBERRA, Australia—The newconservative government, underpressure to rein in its budget even

as Asian neighbors dramaticallyramp up military spending, will re-view plans to double Australia’sfleet of submarines

Defense Minister David Johnstonsaid he was unconvinced that Aus-tralia needed as many as 12 newconventional submarines currentlyforeseen by military planners Thereview comes as regional neighbors,led by China, build up their navaland air arsenals amid disputes overterritorial waters, especially inNorth Asia

At a cost of as much as 36 billionAustralian dollars (US$32.28 bil-lion), doubling the submarine fleetwould be the country’s largest sin-gle military purchase

“It’s a mystery to me [where thatnumber of 12 came from],” said Mr

Johnston, who has called for a view of military-equipment spend-ing as part of a yearlong strategic-planning process launched by theconservatives, who swept to power

re-in September elections on a promise

of fiscal restraint

“That is a technical issue thatthe current circumstances will dic-tate and I want [the] navy to tell mewhat they foresee is the way for-ward It might be more than 12, itmight be less I’m not sure,” he said

in an interview

Australia’s former Labor ment in 2009 released a defense-planning paper that called for adozen large, conventionally poweredsubmarines to replace the country’sexisting fleet of six Collins classsubmarines

govern-Although much larger than marines operated by regional neigh-bors, the Collins class submarineshave been plagued by technicalproblems On Thursday, a fireerupted on the submarine HMASWaller off the West Australiancoast, Australia’s Defense Depart-ment said There were no casualties

sub-A new fleet of larger, more erful and longer-range submarineswould counter a growing underseapresence in Asia Singapore, Indone-sia, Vietnam and Malaysia are field-ing new submarines to counterthreats to some of the world’s mostimportant energy-trade routes, aswell as to hedge against Chineseambitions

pow-China in January sent a surfacewarship fleet—possibly backed by asubmarine—into waters between In-donesia and Australia, demonstrat-ing Beijing’s naval reach The moveprompted some alarm in Canberra,which sent a maritime patrol air-craft to keep watch

Southeast Asian nations typicallyoperate submarines of about 2,000submerged tons, while Australia en-visages boats of 4,000 tons or more,possibly equipped with submarine-launched cruise missiles for land at-tack and capable of deploying spe-cial-forces soldiers

Australia’s ment program, no matter how ambi-tious it turned out to be, wouldn’tadd to regional rivalries, with theclose U.S ally having long fielded asmall but highly capable militarythat was well respected regionally,

submarine-replace-Mr Johnston said

“For many, many years we haveowned and operated the world’slargest conventionally powered sub-marine, so the neighborhood is wellused to us having a large and uniquediesel-electric submarine,” he said

Australia already has embarked

on an expensive buildup of militaryequipment, including two 27,000-tonamphibious assault ships, new at-tack and transport helicopters,guided-missile destroyers, tanks andSuper Hornet strike and electronicattack aircraft

Australia has a defense budget ofsome A$26 billion in the year end-ing in June, or 1.6% of gross domes-tic product The government plans

in the next few years to buy asmany as 100 F-35 Lightning jointstrike fighters to provide radar-evading air power, at a cost of asmuch as A$16 billion

But the military has come underpressure to reduce costs as theworld’s 12th-largest economy re-treats from a mining boom, driving

up joblessness and eating into ernment revenue The government

gov-in December forecast budget deficitstotaling A$123 billion over the nextfour fiscal years to June 2017, andsaid it would cut billions fromspending

But this week the country, whichtwo years ago agreed to rotate thou-sands of U.S Marines and their air-craft through Australia’s north, said

it would buy A$4 billion of new

Boeing Co.-built P-8A Poseidon

maritime patrol aircraft capable ofranging well into Asia Those air-craft are likely to be joined laterthis year by a A$2.9 billion fleet ofseven long-range MQ-4C Tritondrones

Mr Johnston said he was open

to the idea of Australia’s far-flungCocos islands, in the Indian Oceansouthwest of Indonesia, being devel-oped as a base for U.S or AustralianTritons But he said there was noproposal currently to upgrade theislands’ dilapidated airstrip to ex-pand maritime reach, as Chinesevessels increasingly patrol furtherfrom home

China’s growing assertiveness inthe East China Sea and elsewherewas to be expected of any countrywith growing energy needs, Mr

Johnston said, including a demandfor Australian oil and gas resources

China is Australia's largest tradingpartner “They are hostage to theimportation of food and energy Ithink they would be dilatory werethey not to want to protect thosesea lanes,” he said “I’m not reactive

to these things that are happening

in the South China Sea.”

For information about listing your funds, please contact: Lauren Berkemeyer tel: +44 20 7572 2102; email: lauren.berkemeyer@dowjones.com

Data as shown is for information purposes only No offer is being made by Morningstar, Ltd or this publication Funds shown aren’t registered with the U.S Securities and Exchange Commission and aren’t 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.

NAV —%RETURN—

FUND NAME GF AT LB DATE CR NAV YTD 12-MO 2-YR FUND NAME GF AT LB DATE CRNAV NAV YTD 12-MO 2-YR—%RETURN— FUND NAME GF AT LB DATE CRNAV NAV YTD 12-MO 2-YR—%RETURN— FUND NAME GF AT LB DATE CRNAV NAV YTD 12-MO 2-YR—%RETURN—

INDICES

NAV ——————%RETURN —————— FUND NAME GF DATE CR NAV 1-WK 1-MO 1-Q 1-YR 2-YR

n ARIX ABSOLUTE RETURN INVESTABLE INDEX

Feri Institutional Advisors, www.feri.de

ARIX Composite Gross USD OT OT GBR 01/31.00 USD1603.72 0.1 5.8 6.1

n CG Portfolio Fund Ltd

NAV OT OT CYM 06/07.00 GBP25839.68 5.3 10.9 9.8

The Fraud Behind a $14 Million Tip

A record $14 million blower award paid by the Securitiesand Exchange Commission last yearwas for a tip about an alleged Chi-cago-based scheme to defraud for-eign investors seeking U.S residency,according to people familiar with thepayment

whistle-The award is by far the biggestarising from a 2010 law designed inpart to encourage tipsters to comeforward with information about fi-nancial fraud The SEC announcedthe payment in October withoutnaming the whistleblower or thecase, as the law gives tipsters theoption to remain anonymous

The SEC’s whistleblower gram, established under the Dodd-Frank financial-overhaul law, hasn’tproduced many payouts: The U.S

pro-agency has paid a total of about

$225,000 in five other awards sincethe program began operating in Au-gust 2011, according to the SEC

“We’re confident there will bemore-frequent and numerous pay-outs as the program continues togain momentum,” SEC enforcementchief Andrew Ceresney said in writ-ten remarks

The case that led to the $14 lion-plus payment centers on allega-tions last year that about 250 inves-

mil-tors, mostly Chinese, were “duped”

by 30-year-old Anshoo R Sethi andhis two Chicago-based companiesinto paying a total of more than

$155 million for a supposed plan tobuild a hotel and conference center,said the people familiar with thematter The SEC said the investorswere led to believe they were boost-ing their chances of green cards, be-cause the scheme was designed toqualify for an immigration programthat offers U.S residency for job-creating investments

In fact, the agency alleged, Mr

Sethi and his companies lacked thenecessary building permits, theirclaims to have the support of majorhotel chains were false and the doc-umentation they gave to the immi-gration authorities was phony

A lawyer representing Mr Sethiand his companies declined to com-ment, and an SEC spokesman de-clined to comment on the award

The SEC program is among eral U.S government mechanismsfor making payments to those whohelp identify frauds In 2012, theInternal Revenue Service paid for-

sev-mer UBS AG banker Bradley

Birkenfeld $104 million for ing prosecutors with evidenceabout the firm’s efforts to promotetax evasion That is believed to bethe largest whistleblower award

provid-paid by the U.S government to anindividual

Before 2010, the SEC had a tleblower program that was limited

whis-to insider trading and had been icized by lawmakers for paying rela-tively few awards

crit-The agency has received morethan 6,500 whistleblower tips sincethe revamped program began, ac-cording to SEC figures The SEC’s

Mr Ceresney said that the agency is

“encouraged by the success flected in the whistleblower pay-outs” made thus far

re-The SEC brought civil chargesagainst Mr Sethi in February 2013 InApril, a federal court ordered the re-turn to the investors of $147 million,which was being held on their behalf

in U.S bank accounts Mr Sethi andhis companies agreed to return thefunds, according to court filings

The SEC is continuing its ment action over $11 million of “ad-ministrative fees” paid by investors,most of which the agency alleged has

enforce-been misappropriated Settlementtalks to resolve the case are continu-ing, according to court filings

The SEC decided the blower deserved 10% of the $147million returned to investors, thebottom of the range established bythe program, according to the peo-ple familiar with the matter Tip-sters who lead to a successful en-forcement action, with SECsanctions of more than $1 million,can receive as much as 30% of themoney collected

whistle-The SEC’s new rules allow theagency to make awards based onany money “ordered to be paid” in

an enforcement action Paying awhistleblower based on the return

of investors’ frozen funds “showshow aggressive the SEC is willing to

be in applying its rules to makeawards,” said Christian Bartho-lomew, a former SEC trial lawyerand now a partner at law firm Weil,Gotshal & Manges LLP

SEC officials say if a tip leads to anew investigation, it typically takestwo or more years for that probe to

be concluded Even if there is an forcement action with sanctions ofmore than $1 million, it is likely totake several more months for thewhistleblower claim to be approved

en-“It’s rare to get the perfect tleblower—someone in the belly of

whis-the beast, who provides a previouslyunknown blueprint to a fraud thatfalls within the SEC’s jurisdiction,”said Thomas Sporkin, a partner atlaw firm BuckleySandler LLP andformer head of the SEC’s office ofmarket intelligence

An SEC spokesman declined tosay how many of the tips have led

to investigations, or give details onhow many claims for awards havebeen submitted and rejected.But the new figures for a whis-tleblower program run by the Com-modity Futures Trading Commissionoffer a peek into some of the rea-sons awards may be denied.The CFTC has received 255 tipsand 55 claims for awards under itswhistleblower program, set up un-der the same law as the SECscheme All 25 of the whistlebloweraward applications the regulator hasruled on to date have been rejected,according to CFTC figures.Some were denied because the tipwas first made before the July 2010legal start date Other claims failedbecause the information didn’t lead

to a successful enforcement action orwas provided under compulsion,rather than voluntarily as the awardrules require An additional 30 claimsare awaiting a decision, the newCFTC figures show A spokeswomanfor the CFTC declined to comment

n BANC INTERNACIONAL D'ANDORRA BANCA MORA.

Avgd Meritxell 96, Andorra la Vella Andorra Ph +376.884884 www.bibm.ad

Andfs Anglaterra UK EQ AND 11/16 GBP 8.47 2.8 3.6 14.9 Andfs Borsa Global GL EQ AND 02/26 EUR 6.70 0.7 11.3 5.5 Andfs Emergents GL EQ AND 11/02 USD 14.77 -20.4 -19.2 -4.7 Andfs Espanya EU EQ AND 02/26 EUR 15.89 12.5 53.9 24.6 Andfs Estats Units US EQ AND 02/26 USD 21.17 1.3 27.4 14.4 Andfs Europa EU EQ AND 02/26 EUR 8.04 6.8 29.8 13.2 Andfs Franca EU EQ AND 02/24 EUR 10.98 0.2 17.7 13.7 Andfs Japo JP EQ AND 02/26 JPY 670.95 -3.8 25.6 21.8 Andfs Plus Dollars US BA AND 10/22 USD 9.66 2.3 3.0 6.2 Andfs RF Dolars US BD AND 02/26 USD 12.24 0.7 0.2 1.4 Andfs RF Euros EU BD AND 02/26 EUR 11.73 0.7 1.5 1.8 Andorfons EU BD AND 02/26 EUR 15.81 1.0 3.2 3.0

AndorfonsAlternativePremium GL EQ AND 12/31 EUR 109.45 16.9 16.9 8.3 Andorfons Mix 30 EU BA AND 02/26 EUR 10.41 0.9 6.1 3.6 Andorfons Mix 60 EU BA AND 12/19 EUR 8.96 4.4 7.1 -2.5

n CG Portfolio Fund Ltd

NAV OT OT CYM 06/07 GBP 25839.68 5.3 10.9 9.8

n CHARTERED ASSET MANAGEMENT PTE LTD - TEL NO: 65-6835-8866

Fax No: 65-6835 8865, Website: www.cam.com.sg, Email: cam@cam.com.sg

CAM-GTF Limited OT OT MUS 02/21 USD 341538.08 2.8 -19.6 -1.8

n Citadele

Republikas square 2a, Riga, LV-1522, Latvia

Citadele Eastern Europ Bal EU BD LVA 02/26 EUR 16.58 0.0 1.2 5.7 Citadele Eastern Europ Bd EU BD LVA 02/26 USD 20.41 0.1 2.1 5.8 Citadele Russian Eq EE EQ LVA 02/26 USD 19.67 -12.5 -13.5 -8.2

n DJE INVESTMENT S.A.

internet:www.dje.lu email:info@dje.luphone:+0035226925220fax:+0035226925252

DJE Real Estate P OT OT LUX 02/27 EUR 4.31 -0.7 -8.0 -6.9 DJE-Absolut P OT OT LUX 02/27 EUR 253.80 0.7 7.2 8.0 DJE-Alpha Glbl P OT OT LUX 02/27 EUR 187.32 -3.6 7.2 5.6 DJE-Div& Substanz P OT OT LUX 02/27 EUR 280.82 -0.7 7.0 9.8 DJE-Gold&Resourc P OT EQ LUX 02/27 EUR 130.11 7.3 -16.3 -18.8 DJE-Renten Glbl P EU BD LUX 02/27 EUR 150.89 1.4 3.3 4.5 LuxPro-Dragon I AS EQ LUX 07/20 EUR 144.57 -8.5 5.0 7.6 LuxPro-Dragon P AS EQ LUX 07/20 EUR 140.29 -8.8 4.4 7.0 LuxTopic-Aktien Europa EU EQ LUX 02/27 EUR 20.29 -0.4 7.4 5.2 LuxTopic-Pacific OT OT LUX 02/27 EUR 19.76 -0.9 -8.2 -0.1

n OTHER FUNDS

Forinformationaboutthesefunds,pleasecontactusonTel:+44(0)2078429694/9633

Medinvest Plc Dublin OT EQ IRL 09/30 USD NS.00 NS 1.3 -4.4

n WINTON CAPITAL MANAGEMENT LTD

Tel: +44 (0)20 7610 5350 Fax: +44 (0)20 7610 5301

Winton Evolution EUR Cls H GL OT CYM 01/31 EUR NS.00 -3.1 7.2 1.5 Winton Evolution GBP Cls G GL OT CYM 01/31 GBP NS.00 -3.1 7.6 1.9 Winton Evolution USD Cls F GL OT CYM 01/31 USD NS.00 -3.1 7.6 1.8 Winton Futures EUR Cls C GL OT VGB 01/31 EUR 245.63 -2.4 3.8 0.9 Winton Futures GBP Cls D GL OT VGB 01/31 GBP 267.48 -2.4 4.1 1.3 Winton Futures JPY Cls E GL OT VGB 01/31 JPY 17199.60 -2.3 4.4 1.0 Winton Futures USD Cls B GL OT VGB 01/31 USD 876.58 -2.4 4.2 1.2

Pictet-Brazil Index-P USD OT OT LUX 02/26 USD 62.51 -8.8 -23.3 -21.3 Pictet-CHF Bonds-P CH BD LUX 02/26 CHF 466.39 1.2 1.3 2.5 Pictet-China Index-P USD AS EQ LUX 02/26 USD 99.04 -5.9 -0.2 0.9 Pictet-Clean Energy-P USD OT OT LUX 02/26 USD 87.44 2.4 32.9 13.4 Pictet-Digital Comm-P USD OT EQ LUX 02/26 USD 215.28 4.3 41.7 23.2 Pictet-Eastern Europe-P EUR EU EQ LUX 02/26 EUR 315.44 -8.6 -14.2 -5.3 Pictet-Em Corp Bds-P USD OT OT LUX 02/26 USD 100.95 1.3 -1.7 NS Pictet-Em Loc Curr Dbt-P USD OT OT LUX 02/26 USD 175.85 -1.6 -13.2 -3.9

Pictet-Em Mkts Hgh Div-P USD GL EQ LUX 02/27 USD 105.92 -5.7 -8.0 NS Pictet-Em Mkts Index-P USD GL EQ LUX 02/26 USD 233.82 -4.5 -6.7 -3.7

Pictet-Em Mkts Sust Eq-P USD GL EQ LUX 02/26 USD 90.78 -6.2 -10.5 NS

Pictet-Emerging Markets-P USD GL EQ LUX 02/27 USD 492.44 -5.3 -6.8 -4.2

Pictet-Envir Megatr Sel-P EUR OT OT LUX 02/26 EUR 123.03 1.6 13.4 11.1 Pictet-Eu Equities Sel-P EUR EU EQ LUX 02/26 EUR 541.85 -1.0 8.1 10.3 Pictet-EUR Bonds-P EU BD LUX 02/26 EUR 477.64 2.8 3.9 6.3 Pictet-EUR Corp Bds Ex Fin-P EU BD LUX 02/26 EUR 133.31 1.9 3.6 4.6

Pictet-EUR Corporate Bonds-P EU BD LUX 02/26 EUR 179.41 1.8 4.1 6.2

Pictet-EURGovernmentBonds-P EU BD LUX 02/26 EUR 139.51 2.8 5.1 6.0 Pictet-EUR High Yield-P EU BD LUX 02/26 EUR 222.07 2.0 11.3 12.9

Pictet-EUR Inflation Lkd Bds-P EU BD LUX 02/26 EUR 117.21 1.1 -1.8 0.8 Pictet-EUR SM-Term Bds-P EU BD LUX 02/26 EUR 132.21 0.6 2.6 2.6 Pictet-EUR ST High Yld-P EU BD LUX 02/26 EUR 115.74 0.7 6.0 6.8 Pictet-Euroland Index-P EUR EU EQ LUX 02/26 EUR 116.56 2.4 26.1 17.0 Pictet-Europe Index-P EUR EU EQ LUX 02/26 EUR 149.14 2.8 20.8 15.5

Pictet-European Sust Eq-P EUR EU EQ LUX 02/26 EUR 190.16 3.2 18.9 14.2 Pictet-Generics-P USD OT EQ LUX 02/26 USD 213.41 11.8 35.9 24.9

Pictet-GloBdsFundamental-PUSD OT OT LUX 02/26 USD 128.75 0.7 -3.3 -1.1

Pictet-Glo Em Currencies-P USD OT OT LUX 02/26 USD 103.87 -1.1 -4.3 -1.8

Pictet-GloEmergingDebt-PUSD GL BD LUX 02/26 USD 308.94 0.7 -4.7 2.8

Pictet-GloMegatrendSel-PUSD GL EQ LUX 02/26 USD 212.46 4.2 27.4 18.5 Pictet-Greater China-P USD AS EQ LUX 02/27 USD 384.79 -4.1 0.3 2.9

Pictet-High Dividend Sel-P EUR OT OT LUX 02/26 EUR 130.25 1.3 12.3 13.5 Pictet-India Index-P USD EA EQ LUX 02/26 USD 82.13 -1.4 -5.1 -4.1 Pictet-Indian Equities-P USD EA EQ LUX 02/27 USD 305.37 0.9 -1.9 -0.7 Pictet-Japan Index-P JPY JP EQ LUX 02/27 JPY 12557.03 -6.7 29.7 23.0

Pictet-Japanese Eq Opp-P JPY JP EQ LUX 02/27 JPY 6934.99 -7.5 29.0 24.5 Pictet-Japanese Eq Sel-P JPY JP EQ LUX 02/26 JPY 10628.71 -7.9 25.7 21.8 Pictet-Latam Index-P USD GL EQ LUX 02/26 USD 71.37 -9.1 -21.4 -15.7

Pictet-LatinAmLocCurrDbt-PUSD OT OT LUX 02/26 USD 136.21 1.0 -12.6 -5.5 Pictet-Pac (ExJpn) Idx-P USD AS EQ LUX 02/27 USD 361.19 0.6 -0.2 8.2 Pictet-Piclife-P CHF OT OT LUX 02/26 CHF 907.07 0.8 5.5 6.9

Pictet-Premium Brands-P EUR OT EQ LUX 02/26 EUR 125.60 -1.3 15.3 13.1 Pictet-Quality Gl Eq-P USD GL EQ LUX 02/25 USD 124.07 0.3 17.6 NS Pictet-Russia Index-P USD EE EQ LUX 02/26 USD 73.42 -11.0 -11.3 -10.6

Pictet-Russian Equities-P USD EE EQ LUX 02/26 USD 60.19 -11.7 -9.1 -9.0 Pictet-Security-P USD GL EQ LUX 02/26 USD 168.71 2.2 21.9 14.6

Pictet-Short-TMoneyMktCHF-P CH MM LUX 02/26 CHF 124.24 0.0 0.0 0.0

Pictet-Short-TMoneyMktEUR-P OT OT LUX 02/26 EUR 137.73 0.0 0.0 0.0

Pictet-Short-TMoneyMktJPY-P OT OT LUX 02/26 JPY 10127.54 0.0 0.0 0.0

Pictet-Short-TMoneyMktUSD-P OT OT LUX 02/26 USD 132.30 0.0 0.1 0.2

Pictet-Small Cap Europe-P EUR EU EQ LUX 02/26 EUR 864.07 5.2 31.6 23.8

Pictet-Sov.STMoneyMkt-PEUR OT OT LUX 02/26 EUR 102.68 0.0 -0.1 -0.1

Pictet-Sov.STMoneyMkt-PUSD OT OT LUX 02/26 USD 102.02 0.0 0.1 0.1 Pictet-Timber-P USD GL EQ LUX 02/26 USD 151.12 0.3 8.3 14.9 Pictet-US Eq Grwth Sel-P USD US EQ LUX 02/26 USD 174.02 2.7 34.3 18.7 Pictet-US Eq Value Sel-P USD US EQ LUX 02/26 USD 186.18 -0.3 22.5 15.4 Pictet-US High Yield-P USD US BD LUX 02/26 USD 145.78 2.0 6.3 8.3 Pictet-USA Index-P USD US EQ LUX 02/26 USD 157.55 0.0 24.9 17.7

Pictet-USDGovernmentBonds-P US BD LUX 02/26 USD 581.97 1.8 -1.6 0.3

Pictet-USDShortMid-TermBds-P US BD LUX 02/26 USD 125.87 0.3 0.3 0.3 Pictet-Water-P EUR OT OT LUX 02/26 EUR 199.67 1.9 12.8 12.0

Pictet-World Gvt Bonds-P EUR OT OT LUX 02/26 EUR 133.17 3.3 -4.5 -1.6 PTR-Banyan-P USD OT OT LUX 02/20 USD 95.94 -6.5 -9.2 -4.5 PTR-Corto Europe-P EUR OT OT LUX 02/26 EUR 131.64 4.9 17.3 16.2 PTR-Kosmos-P EUR OT OT LUX 02/26 EUR 107.13 0.8 1.4 1.7 PTR-Mandarin-P USD OT OT LUX 02/27 USD 104.25 -1.8 7.8 4.2

n POLAR CAPITAL PARTNERS LIMITED

InternationalFundManagers(Ireland)LimitedPH-3531670660Fax-35316701185

Global Technology OT EQ IRL 02/26 USD 23.82 4.3 33.0 15.3 Japan Fund USD JP EQ IRL 02/27 USD 21.06 -6.7 11.9 5.5 Polar Healthcare Class I USD OT EQ IRL 02/26 USD 34.03 20.0 72.9 47.1 Polar Healthcare Class R USD OT EQ IRL 02/26 USD 33.37 19.9 72.3 46.6

n Hemisphere Management (Ireland) Limited

Discovery USD A GL OT CYM 12/31 USD 101.35 NS NS NS Elbrus USD A OT OT CYM 01/31 USD 10.10 NS NS NS Europn Conviction USD B EU EQ CYM 01/31 USD 161.54 0.3 1.1 5.3 Europn Forager USD B EU EQ CYM 01/31 USD 324.09 2.6 11.7 11.9 Latin America USD A GL EQ CYM 06/30 USD NS.00 NS NS NS

n HERMITAGE CAPITAL MANAGEMENT LTD.

Tel: +7501 258 3160 www.hermitagefund.com

The Hermitage Fund GL EQ JEY 03/12 USD 963.12 4.5 105.6 -23.2

n HORSEMAN CAPITAL MANAGEMENT LTD.

T: +44(0)20 7838 7580, F: +44(0) 20 7838 7590, www.horsemancapital.com

Horseman EurSelLtd EUR EU EQ GBR 01/31 EUR 349.13 4.3 31.3 29.1 Horseman EurSelLtd USD EU EQ GBR 01/31 USD 349.13 NS NS NS Horseman Glbl Ltd EUR GL EQ CYM 01/31 USD 577.71 NS NS NS Horseman Glbl Ltd USD GL EQ CYM 01/31 USD 577.71 NS NS NS

n HSBC ALTERNATIVE INVESTMENTS LIMITED

T +44 20 7860 3074 F + 44 20 7860 3174 www.hail.hsbc.com HSBC ALTERNATIVE STRATEGY FUND

Special Opp EUR OT OT GGY 12/31 EUR 122.21 14.2 14.2 17.0 Special Opp Inst EUR OT OT GGY 03/31 EUR 88.51 0.7 -0.3 13.3 Special Opp Inst USD OT OT GGY 03/28 USD 123.18 4.2 18.5 10.6 Special Opp USD OT OT GGY 12/31 USD 129.13 14.0 14.0 17.3

n HSBC Portfolio Selection Fund

GH Fund CHF Hdg OT OT GGY 01/31 CHF 125.95 0.5 6.7 6.1

GH Fund EUR Hdg (Non-V) OT OT GGY 01/31 EUR 140.23 0.5 6.3 6.0

GH Fund GBP Hdg OT OT GGY 01/31 GBP 154.96 0.5 6.9 6.7

GH Fund Inst USD OT OT GGY 01/31 USD 133.63 0.6 7.3 7.0

GH FUND S EUR OT OT CYM 01/31 EUR 156.05 0.6 7.7 7.2

n HSBC Trinkaus Investment Managers SA

E-Mail: funds@hsbctrinkaus.lu Telephone: 352 - 47 18471

HSBCTrinkausGoldenOpportunities OT OT LUX 02/26 USD 84.01 20.0 -28.3 -23.5 Prosperity Return Fund A JP BD LUX 12/06 JPY 8577.68 -9.3 -8.4 0.3 Prosperity Return Fund B EU BA LUX 12/06 JPY 9032.12 4.6 11.0 13.2 Prosperity Return Fund C EU BA LUX 12/06 USD 79.01 -12.2 -11.1 -1.0 Prosperity Return Fund D EU BA LUX 12/06 EUR 121.37 -9.0 -8.8 8.1 Renaissance Hgh Grade Bd A EU BA LUX 12/06 JPY 10807.34 3.5 5.1 11.3 Renaissance Hgh Grade Bd B EU BA LUX 12/06 JPY 11130.39 17.9 25.6 23.9 Renaissance Hgh Grade Bd C EU BA LUX 12/06 USD 96.94 -0.9 0.7 8.4 Renaissance Hgh Grade Bd D EU BA LUX 12/06 EUR 102.83 -4.6 -4.1 6.9

n MP ASSET MANAGEMENT INC.

Tel: + 386 1 587 47 77

MP-BALKAN.SI EE EQ SVN 08/12 EUR 19.29 -1.9 -8.4 -10.9 MP-TURKEY.SI OT OT SVN 02/26 EUR 31.62 -12.7 -35.2 -7.4

Paragon Limited USD A EU EQ CYM 12/31 USD NS.00 12.7 12.7 14.2

UK Fund USD A OT OT CYM 04/13 USD 157.94 1.8 NS NS

n PT CIPTADANA ASSET MANAGEMENT

Tel: +6221 25574 883 Fax: +6221 25574 893 Website: www.ciptadana-asset.com

Indonesian Grth Fund GL EQ BMU 02/19 USD 154.09 13.0 -16.5 -10.2

n THE NATIONAL INVESTOR

PO Box 47435, Abu Dhabi, UAE Web:www.tni.ae

MENA Special Sits Fund OT OT BMU 01/31 USD 1127.97 1.1 5.8 6.7 MENA UCITS Fund OT OT IRL 02/20 USD 1393.41 7.5 30.0 19.1 UAE Blue Chip Fund OT OT ARE 02/20 AED 10.81 15.9 81.3 52.9

n YUKI MANAGEMENT & RESEARCH

n YMR-N Series

YMR-N Growth Fund JP EQ IRL 02/27 JPY 13423.00 -6.7 38.8 26.0

n Yuki Asia Umbrella Series

Yuki Rebounding Gro Fd JP EQ IRL 02/27 JPY 16561.00 -3.9 53.3 34.9

n Yuki Mizuho Series

Yuki Mizuho Jpn Dyn Gro JP EQ IRL 02/26 JPY 5757.00 -6.4 35.9 25.6 Yuki Mizuho Jpn Inc JP EQ IRL 02/27 JPY 10018.00 -3.9 28.9 21.1 Yuki Mizuho Jpn Lg Cap JP EQ IRL 02/27 JPY 6141.00 -8.8 26.5 17.6 Yuki Mizuho Jpn LowP JP EQ IRL 02/27 JPY 18582.00 -5.8 48.6 33.7 Yuki Mizuho Jpn Val Sel AS EQ IRL 02/27 JPY 9151.00 -4.1 50.2 38.2

GH FUND S GBP OT OT CYM 01/31 GBP 163.37 0.6 7.8 7.6

GH Fund S USD OT OT CYM 01/31 USD 183.43 0.6 7.8 7.6

GH Fund USD OT OT GGY 01/31 USD 318.33 0.5 6.5 6.4 Hedge Investments OT OT GGY 08/16 USD 158.48 NS NS 3.6 Leverage GH USD OT OT GGY 01/31 USD 148.62 0.9 11.1 10.7 MultiAdv Arb CHF Hdg OT OT JEY 01/31 CHF 100.74 0.8 3.6 3.9 MultiAdv Arb EUR Hdg OT OT JEY 01/31 EUR 112.34 0.8 4.0 4.2 MultiAdv Arb GBP Hdg OT OT JEY 01/31 GBP 122.34 0.8 4.4 4.7 MultiAdv Arb S EUR OT OT JEY 01/31 EUR 126.73 1.0 5.3 5.6 MultiAdv Arb S GBP OT OT JEY 01/31 GBP 133.92 0.9 5.6 6.0 MultiAdv Arb S USD OT OT JEY 01/31 USD 144.88 0.8 5.2 5.7 MultiAdv Arb USD OT OT JEY 01/31 USD 212.29 0.8 4.1 4.5

n HSBC Uni-folio

Asian AdbantEdge EUR OT EQ JEY 01/31 EUR 97.06 -0.4 4.9 4.0 Asian AdvantEdge OT EQ JEY 01/31 USD 181.80 -0.4 5.0 4.7 Emerg AdvantEdge OT EQ JEY 09/28 USD 151.22 3.4 -2.4 -5.5 Emerg AdvantEdge EUR OT EQ JEY 09/28 EUR 82.99 2.8 -3.0 -5.9 Europ AdvantEdge EUR OT EQ JEY 06/30 EUR 127.84 -3.4 -1.3 2.2 Europ AdvantEdge USD OT EQ JEY 06/30 USD 135.07 2.0 4.3 5.1 Real AdvantEdge EUR OT OT JEY 04/30 EUR 104.69 1.3 -9.5 -1.9 Real AdvantEdge USD OT OT JEY 04/30 USD 105.31 1.5 -8.8 -1.7 Trading AdvantEdge OT OT GGY 01/31 USD 126.86 -2.6 -12.0 -8.6 Trading AdvantEdge EUR OT OT GGY 01/31 EUR 114.61 -2.2 -12.0 -8.6 Trading AdvantEdge GBP OT OT GGY 01/31 GBP 122.37 -2.6 -12.0 -8.5

n MERIDEN GROUP

Tel: + 376 741 175 Fax: + 376 741 183 Email: meriden@meriden-ipm.com

Antanta Combined Fund EE EQ AND 02/21 USD 208.41 -0.7 -22.8 -19.2 Antanta MidCap Fund EE EQ AND 02/21 USD 353.52 -2.1 -15.4 -17.2 Meriden Opps Fund GL OT AND 02/05 EUR 22.68 0.0 -11.2 -11.0 Meriden Protective Div GL EQ AND 11/24 EUR NS.00 -2.8 NS NS

n Pictet Funds (Europe) SA, ROUTE DES ACACIAS 60, CH-1211 GENEVA 73

Tel: + 41 (58) 323 3000 Web: www.pictetfunds.com

Pictet-Abs Ret Gl Div-P EUR GL OT LUX 02/26 EUR 114.55 0.6 -3.3 -0.7 Pictet-Agriculture-P EUR OT OT LUX 02/25 EUR 150.01 -1.9 -1.0 3.8 Pictet-Asian Eq ExJpn-P USD OT OT LUX 02/27 USD 181.26 -1.5 1.2 2.7

Pictet-Asian Loc Cur Dbt-P USD AS BD LUX 02/27 USD 143.73 0.8 -7.4 -1.7 Pictet-Biotech-P USD OT EQ LUX 02/26 USD 663.36 19.8 74.7 45.0

Investors believed they were boosting their chances of green cards.

Trang 9

WORLD NEWS

Runner’s Murder Case Puts Focus on South Africa

JOHANNESBURG—The trial offormer Olympian and accused mur-derer Oscar Pistorius that startsMonday is driving business, drawingjournalists from around the globeand holding up a gigantic mirror toSouth Africa

In some ways, the trial exposeshow the country has fallen short ofsome of its earlier promise

Violence against women andgaping divides between rich andpoor—and whites and blacks—per-sist two decades after South Africabecame a democracy Those issuesare expected to surface in the trial

of Mr Pistorius, one of South rica’s richest athletes He says hemistakenly shot his girlfriendthrough a locked bathroom in thegated and largely white luxury es-tate where he lived

Af-“Yes, it’s Oscar on trial But alsoSouth Africa,” says Aletta Alberts,head of content at South African ca-ble network Multi-Choice, which isselling advertising for a 24-hourchannel it is launching to run duringthe trial A court ruled Tuesday thatparts of the Pistorius trial can bebroadcast live One book already hasbeen published on the case Moreare in the works

Other businesses see opportunity

in the trial as well

Cricklewood Manor and BoutiqueHotel has hosted globe-trottingguests who come because of its se-cure location and country manor dé-cor Now, the hotel hopes the trialwill be its next big draw

Cricklewood Hotel is about 800feet from the well-secured housewhere Mr Pistorius has stayed withhis uncle in the country’s capital ofPretoria The hotel’s marketing de-

partment this month sent out geted emails to journalists and oth-ers close to the trial that highlightits proximity to the home

tar-“Our marketing strategy hasshifted to focus on everyone in-volved in the trial,” said Shaun Wil-son, the operations manager atCricklewood, which hosted eightpresidents during the memorial forSouth Africa’s late president, NelsonMandela, in December

The Pistorius family said theywere aware of the Cricklewood mar-keting campaign, but declined fur-ther comment

At the time of his arrest last

year, pictures of a teary-eyed Mr

Pistorius riveted the country—andthe world He was the homegrownhero who, after being born withoutfibulas in both legs, fought to be-come the first Paralympian to com-pete in the able-bodied Games inLondon 2012 His girlfriend, ReevaSteenkamp, was a model and an as-piring actress with a law degree Hekilled her in the early hours of Val-entine’s Day

On Monday, the South Africanstate will formally charge Mr Pisto-rius with murder He is expected toplead not guilty to intentionally kill-ing Ms Steenkamp

In addition to his lawyers, Mr

Pistorius’s star-studded legal teamincludes a forensic geologist, ballis-tics expert and an expert who repli-

scenes

The case has devastated his mercial empire, but his ability to af-ford a high-price defense—a luxurymost South Africans don’t have—

com-also illustrates disparities in thecountry, said Michael Goldman, aprofessor at Johannesburg-basedbusiness school Gordon Institute ofBusiness Science

“The two South Africas will come very clear again with this

Days after the shooting, Nike

Inc and Oakley sunglasses pended lucrative sponsorship dealswith the athlete In papers filed dur-ing Mr Pistorius’s bail hearing, theathlete said he made 5.6 millionrand ($521,920) a year To help payhis legal bills, the athlete sold hisshares in some racehorses and willsell the house in a gated communitywhere Ms Steenkamp was killed af-ter the trial ends

sus-The murder he is accused ofcommitting hits closer to home

On average, 42 people are dered each day in South Africa—roughly the same as the U.S., acountry with more than six times asmany people Meanwhile, onewoman is killed by a partner everyeight hours in South Africa, accord-ing to a 2012 study by the South Af-rican Medical Research Council Thestudy found that while the murderrate for women declined—alongwith the overall murder rate in thecountry—a greater proportion of fe-male murders in 2009 were caused

mur-by an intimate than 10 years prior

Mr Pistorius’s uncle’s house, inthe same upscale neighborhood asthe Cricklewood, is a large brickmansion protected by electric fenc-ing and a wrought-iron gate

“There are a lot of murders here.This is just one,” said Tedius, a se-curity guard down the street fromthe house “It’s not right that it getsall the attention when there are somany other problems.”

in-In an interview, Finance MinisterMauricio Cárdenas said Colombiawill make enough updates to its lag-ging infrastructure to eventuallyadd one percentage point to annualGDP growth

Growth will also be bolstered byabout one percentage point a year ifthe government achieves a peaceagreement with the country’s maininsurgency group, the RevolutionaryArmed Forces of Colombia, or FARC,

he said The negotiations have been

a focus of the administration of lombian President Juan Manuel San-tos, who is up for re-election in May

Co-“Colombia will become a countrythat can grow at 7% on a sustainedbasis,” said Mr Cárdenas “It doesn’tnecessarily mean we will achievethis every single year but potentially

we could be growing at that if weachieve these two big goals.”

Mr Cárdenas projects an nomic expansion of 4.7% this year,based on the public-works spendingand a recovery in the U.S., Colom-bia’s biggest trade partner That ishigher than the official estimate for

eco-2013 GDP growth, which is between4.3% and 4.5%

He said the country has nine

ten-ders open for road projects that willbring in an estimated $6 billion inprivate investment and should breakground in 2015 He said more proj-ects, adding another $6 billion, arecoming up in the next three months

Mr Cárdenas said that ment and other factors make Colom-bia less vulnerable than other devel-oping nations to what manyeconomists say is an impending

invest-“double-whammy,” meaning thewind-down of the U.S Federal Re-serve’s policy of quantitative easingand a drop in the prices of commod-ities

The concern is that high demandfor commodities from China—thebackbone of Latin America’s eco-nomic boom overt the past decade—

is waning In addition, the U.S.’squantitative-easing stimulus pro-gram, which pushed up manyemerging-market currencies andushered in a flood of foreign money,

is being tapered as the U.S economyshows signs of stronger growth Al-ready, many developing countrieshave started seeing capital outflows,and their currencies have been hit

Mr Cárdenas said Colombia will

be little affected by the tapering, inpart because the country has de-pended very little on portfolio flows

Portfolio flows are investments inassets like stocks and governmentbonds that came into emerging mar-kets during the easy-money times of

QE, but that can be easily reversed

He said that in Colombia, most tal has been foreign direct invest-ment in sectors such as mining,which is a more stable source of

capi-funds

“I think we have more to gainthan to lose [from QE pullback] be-cause what tapering shows is thatthe U.S economy is recovering Be-ing our largest trading partner,that’s good news for our exports,”

ones with the European Union andthe U.S., and the recent deepening

of ties within the Pacific Alliance, atrade bloc made up of Colombia,Chile, Mexico and Peru In February,the alliance said it would lift tariffs

on 92% of all goods

Like other currencies, Colombia’speso has depreciated recently, fall-ing nearly 7% over the past twomonths, to around 2,050 per dollar

Mr Cárdenas said it is a “breath offresh air” for the Colombian econ-omy, especially helping the coun-try’s hard-hit export sector

He said the government doesn’thave an exchange-rate target, and heand other officials say the peso canfall further before posing a problem

to the central bank’s inflation target

of 2% to 4%

Augusto de la Torre, the WorldBank’s chief economist for LatinAmerica and the Caribbean, said Co-lombia—along with Chile and Peru—

is well-positioned to weather theend of quantitative easing and aChina slowdown He points to robustmonetary-policy frameworks withflexible currencies and room to de-value if an economic boost isneeded, as well as relatively strongfiscal position and low public-sectordebt

“These factors taken together flect a strong macroeconomic im-mune system,” said Mr de la Torre.Colombia’s situation stands incontrast to that of its neighbor, Ven-ezuela, which is beset by soaring in-flation and is expected to enter re-cession this year, and wheremassive, violent protests thaterupted in February are leavingmost of the country at a standstill.Once a key trading partner, Co-lombia is much less exposed to Ven-ezuela than it was in the past, be-cause of fewer ties after delays inpayment to Colombian exporters,

re-Mr Cárdenas said

But Colombia has been affected

by the differential between ela’s official exchange rate and itswidely used, black-market exchangerate Colombians can enter Venezu-ela with highly prized dollars andbuy goods cheaply, many of whichare resold in Colombia

Venezu-“That’s bad for the authorities inVenezuela, and that’s bad for us inColombia, because these goods cre-ate competition for our producers,”

Mr Cárdenas said

B Y S ARA S CHAEFER M UÑOZ

Mauricio Cárdenas, seen in October, said Colombian GDP can grow 7% annually.

Spain Starts Unloading Stake in Rescued Bank

MADRID—Spain launched theprivatization of its largest bailed-out lender, Bankia SA, marking aturning point in the country’s re-

vamp of its banking industry

The Spanish government planned

to sell 7.5% of its stake in Bankia byFriday, according to a regulatory fil-ing posted after the close of tradingThursday in Madrid The sale is afirst step as the government seeks

to whittle down its 68% holding inthe bank

Deutsche Bank AG, UBS AG andMorgan Stanley were leading thesale and seeking qualified investors,rather than retail buyers, for 864million shares in Bankia, the filing

said

By assigning that role to tional investment banks rather thanSpanish banks, the government wasseeking investors abroad, somebankers said International investorsnearly tripled their stake in Bankiastock during the past year, to 10.4%

interna-as of January, Bankia said thismonth

Bankia was formed in 2010 viathe merger of seven savings banksthat helped finance a property boomthat went bust in 2008 Bankia andits parent company received €22.4billion ($31 billion) in EuropeanUnion bailout funds in 2012 aftersnowballing losses on real-estateloans triggered the biggest loss in

Spanish corporate history

Just as it came to symbolizeSpain’s financial crisis of recentyears, Bankia is now a bellwether ofits nascent recovery Investor re-sponse to the sale was being closelywatched in Madrid financial and po-litical circles as a test of thestrength of Spain’s restructuring ofits banks, which got a total of €41

billion in EU bailout money

Bankia was at the “epicenter” ofSpain’s financial crisis and now “it’s

an attractive investment nity,” said Fernando Alonso, a law-yer with Hunton & Williams LLP inMiami, who works with Spanish fi-

opportu-nancial sector companies on theirU.S operations

Jaime Carvajal, chief executiveofficer of Arcano Group, a Madrid-based boutique investment bank,said: “A bet on Bankia is a bet onthe Spanish economy, which is in a

full recovery process.”

A question hanging over theprivatization of Bankia is whetherthe government will earn back allthe funds that Spanish and other EUtaxpayers poured into the lender

The government valued Bankia

at €1.35 per share at one point ing the nationalization of the bank

dur-Bankia’s share price closed at €1.58

on Thursday, nearly triple its value

in the summer of 2013 The increasehas accelerated in recent weeks,promoting expectations that Spainwould soon start to privatize the

lender

Bankia Chairman José IgnacioGoirigolzarri said earlier this monththat it was “not impossible” that the

€22.4 billion injected into Bankiawould be recovered

B Y J EANNETTE N EUMANN

Allianz CEO Michael Diekmann said he expects Fed tapering ‘will make the first half of the year not easy’ for Pimco. Re

RSA Insurance Sets

Plan to Slim Down

LONDON—After a money-losing

year, RSA Insurance Group PLC will

sell new shares, cut dividends and

unload businesses to puff up a

capi-tal cushion thinned by problems at

its Ireland operation

New Chief Executive Stephen

Hester said the company will offer

£775 million ($1.29 billion) of stock

to existing shareholders at a

dis-counted rate in March The insurer

posted a £347 million net loss for

2013 Thursday

“RSA’s 2013 results are poor and

we need to grasp the nettles of both

underperformance and

undercapital-ization,” Mr Hester said

Mr Hester joined the insurer

three weeks ago in a surprise turn

after having overseen one of the

world’s largest corporate

restructur-ings as CEO of Royal Bank of

Scot-land Group PLC until September.

The bank is 81% owned by the

Brit-ish government; it received a £46

billion bailout during the financial

crisis

In an interview, Mr Hester said

the advantages in overseeing RSA’s

attempted turnaround are that “it is

smaller, it is less messed up and

there isn’t all the complexity of

gov-ernment and public opinion.”

RSA shares fell 5% in response to

news of the loss and in anticipation

of the share sale The so-called

rights issue had been widely

ex-pected but nevertheless will dilute

shareholders who don’t take the

op-portunity to buy new stock

RSA issued a series of profit

warnings last year after finding its

Ireland unit didn’t have enough

re-serves Former CEO Simon Lee and

Ireland CEO Philip Smith resigned

while two other top Ireland

execu-tives were fired in January over

ac-counting irregularities at the unit

Net profit in 2012 had been £320

million

Mr Hester said the insurer has

no choice but to cancel its final 2013dividend, and warned that futuredividends will depend upon its re-turn to financial health He said RSAaims to raise at least £300 millionthis year by selling “selected” busi-nesses outside of its four core re-gions: the U.K and Ireland; Canada;

Scandinavia; and Latin America, andthat some business lines withinthose main markets will be shutdown The company also will cutcosts, in part by eliminating jobs,

Mr Hester said

In addition to the Ireland lems, RSA was hit by unusually badweather last year as floods and icestorms battered the U.K., Denmarkand Canada Weather-related insur-ance payouts amounted to 3.5% ofthe year’s premiums, “significantlyhigher” than the five-year average

prob-The company said it increased itsassumptions for such costs thisyear, but that more bad weather inJanuary and February didn’t bode

well

Operating profit, a key measurefor the insurance industry, was £286million for the year ended Dec 31,

2013, compared with £601 million in

2012 Net written premiums rose to

£8.66 billion from £8.35 billion, butare likely to fall by up to 10% in

2014 as disposals are made, thecompany said

After the Ireland accountingscandal raised questions around thecompany’s reporting, Mr Hestersaid the company wants to rebuildinvestor confidence in its reserving

To that aim, it released a review

made by Towers Watson of its

claims reserves that found they arereasonable estimates A £550 millionreinsurance contract RSA has en-

tered into with Berkshire

Hatha-way also “required them to crawl

over our reserves,” which shouldgive investors additional comfort,

BUSINESS & FINANCE

Allianz Backs New Pimco Team

and a head of strategic businessmanagement Mr Gross remains

CIO

Mr El-Erian is set to leave Pimco

in March, but he will continue toserve as chief economic adviser for

Allianz

On Thursday, Mr Diekmann saidthe management changes reflecteddeeper diversification of assetclasses at Pimco and waved off callsfor Allianz to exercise more control

at the fund manager

“We are very active in the nance issues, but we’re not gettinginvolved in investment decisions be-cause those are third-party assets,”

segment had a 23% drop in ing profit in the fourth quarter anddeclines in both assets under man-agement and third-party assets un-der management Pimco contributesabout 80% of Allianz’s asset-man-agement revenue The rest comes

operat-from Allianz Global Investors

The asset-management tions had a €12 billion ($16.4 billion)net outflow in third-party assets un-der management in 2013 comparedwith an inflow of €113.6 billion ayear earlier That reversed steadyincreases in previous years andhelped fuel tension among Pimco se-nior management beginning last

opera-summer

Analysts at Landesbank Württemberg noted that the netoutflows “are the second highest Al-lianz has ever reported in a quar-

Baden-ter.”

Allianz said the asset declinesstemmed from a combination of theweaker U.S dollar against the euro,net outflows at Pimco, uncertainty

over the U.S Federal Reserve’s tinuing support of the bond market,and higher Treasury yields U.S re-tail customers shunning Pimco’smainstay products also contributed

of the year not easy for the TotalReturn Fund,” Mr Diekmann said,referring to Pimco’s flagship fund

The Fed has begun reducing, or pering, its monthly bond purchases

ta-Shares in Allianz fell 2.3% day despite news of a higher divi-dend and guidance targeting an in-crease in operating profit this year

Thurs-Allianz forecast 2014 operatingprofit between €9.5 billion and €10.5billion, compared with €10.07 billion

in 2013 Asset-management tions are expected to contribute be-tween €2.5 billion and €2.9 billion,

opera-down from €3.16 billion in 2013

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Trang 10

Tensions Around Asia Stoke

Rising Nationalism in Japan

Worries Over Economy, Fears of Beijing’s Muscle-Flexing Spur Feelings of Mistrust and Outright Hostility

Amovie glorifying the life of a World

War II kamikaze pilot recently

topped the box-office charts in Japan

for two months Tokyo book stores have set

up corners for titles disparaging Japan’s

neighbors Anonymous authors with radical

nationalist views, known as neto uyo, short

for “right-wingers on the Internet,” are

thriving on Twitter and chat pages

Across Japan, there are signs that the

collective mood—long shaped by pangs of

regret over World War II—is in the midst of

a shift as tensions with rivals, especially

China and South Korea, escalate

Fearful of Beijing’s muscle-flexing in

nearby waters and worried about Japan’s

economic future, more people are

express-ing feelexpress-ings of nationalism, mistrust and

sometimes outright hostility toward their

neighbors

“Ideas that have long been suppressed

and locked away, like the desire to hate

and discriminate, are now pouring out

from many corners of the country and

amplifying each other in an echo chamber,”

says Kiyomi Tsujimoto, a veteran opposition

lawmaker “That’s fueling anti-Korea

and anti-China sentiment.”

Pacifism still runs deep in Japan, and theshift to the right is in its early stages Butthe tone is already influencing Japanesepolitics, with the emergence of a new wave

of candidates—mainly in their 30s and40s—who hold staunchly conservativeviews similar to those of America’s teaparty

In a Tokyo gubernatorial election in ruary, Gen Toshio Tamogami, a former air-force chief who heads a right-wing groupknown for its xenophobic rallies, snared anunexpectedly large share of votes, eventhough the country’s traditional media hadall but written him off as a fringe figure Anexit poll by the Asahi Shimbun daily indi-cated that 24% of respondents in their 20shad voted for Mr Tamogami, who lost therace

Feb-The rise of a more-vocal nationalist nority in Japan is cause for concern amongforeign officials not just in East Asia, butalso in the U.S Some leaders fear it couldexacerbate regional tensions and increasethe odds of a confrontation between Chinaand Japan—the world’s second-largest andthird-largest economies after the U.S

mi-Daniel Russel, Assistant Secretary ofState for East Asia, said in recent congres-

sional testimony that the U.S remainedconcerned about a “serious downturn” inChina-Japan relations He called on the na-tions to “lower tensions” and “turn downthe rhetoric.”

With Japanese and Chinese fighter jetsand patrol ships continuing cat-and-mousechases near disputed islands in the EastChina Sea, other U.S officials, includingVice President Joe Biden, have warned ofthe risk of dangerous clashes

Many Japanese officials and lawmakersinterpret the changes differently They saythat citizens are finally responding to whatthey see as persistent and unjustified at-tacks from China and South Korea over war-time-legacy issues They say those countrieshave refused to acknowledge Japan’s re-peated efforts to apologize and to atone forits wartime atrocities

Chinese and South Korean officials miss such notions Criticizing Tokyo forwhat they see as revisionist history, leaders

dis-of the two countries have refused to meetprivately with Prime Minister Shinzo Abesince he took office 14 months ago

“It is deplorable that leading Japanesepoliticians have recently been attempting todeny and even justify past wrongdoing with

an attitude of historical revisionism,” Kim

Jung-ha, a senior South Korean diplomat,said at a United Nations meeting in January

Japan under Mr Abe seems to be ing the mistakes of Germany before WorldWar I and those of Japan before World War

repeat-II, said Yang Bojiang, a Japan expert at thegovernment-backed Chinese Academy of So-cial Sciences, in a commentary on Monday

in the People’s Daily, the Communist Party’snewspaper “This must arouse the vigilance

of peace-loving countries of the world toprevent humanity from being dragged onceagain into the abyss of war,” he said

China and South Korea have also seennationalist bumps in recent years But thetrend in Japan is especially sensitive, givenits historical role as an aggressor in WorldWar II The last time Japan saw a sharp rise

in nationalism was in the 1920s and 1930s,the period leading up to war At the time,the country was struggling amid the after-math of a huge Tokyo earthquake and theglobal depression

Unlike in that era, today’s Japan is a ture democracy that has contributed to in-ternational peace for decades Its military istightly under civilian control Many politicalscientists say that Japanese society has theflexibility to push back the pendulum if itkeeps swinging toward nationalism, as it

Danish shipping and oil

conglom-erate A.P Møller-Maersk A/S said

Thursday that stringent cost cutsand increased volume helped boostits container business in the fourthquarter

But the world’s biggest tainer-shipping company warned ofunstable freight rates as new capac-ity comes online Like other ship-ping companies, Maersk Line, thegroup’s container-shipping business,has been hit by weak freight de-mand at the same time as the indus-try struggles with overcapacity onthe busiest shipping routes

con-For the fourth quarter of 2013,Maersk posted a net profit of 5.13billion Danish kroner ($941 million),down 7.4% from 5.54 billion kroner

a year earlier, but beating analystexpectations of 4.5 billion kroner

Fourth-quarter revenue totaled65.67 billion kroner, down 5.6% from69.56 billion kroner a year earlier

Net profit for the full year, whichMaersk reports in dollars, was $3.78billion, slightly above the company’sown forecast of $3.5 billion but be-low last year’s $4.03 billion

Underlying group net profit thisyear is expected to be similar to lastyear’s figure of $3.6 billion fromcontinued businesses, Maersk said

But a previously announced sale ofits holding in supermarket chain

Dansk Supermarked A/S means the

group result will be higher in 2014

Maersk Line—the group’s largestbusiness, which accounts for abouthalf of its revenue and makes up

about 15% of global ping capacity—reported a $1.5 bil-lion net profit, more than threetimes the $446 million it made in

container-ship-2012 The increase derived mostlyfrom lower fuel consumption, whichfell 12% in 2013 That came in partthrough slow steaming, a process inwhich more ships are deployed atspecific trade routes but sail at slowspeeds, consuming less fuel

Maersk said it expects MaerskLine to deliver similar earnings thisyear but with fewer cost reductionsthan in 2013 Global demand for sea-borne container transportationshould increase by a modest 4% to5%, the company said

“The challenging demand side iscoupled with a significant amount ofnew tonnage delivered, correspond-ing to a capacity increase of 9.8%”

in 2014, Maersk said “Thus, withoutsignificant capacity adjustments, thecontainer-shipping market is mostlikely expected to see a continueddownward pressure on freight rates

in-The Triple-E’s will sail the to-Europe trade route, where ana-lysts say overcapacity is running at10% or more “We expect freightrates to go up and down and overca-pacity will continue to 2016,”

Asia-Maersk Chief Executive Nils sen said in an interview

Ander-B Y C OSTAS P ARIS

A ND C LEMENS B OMSDORF

Gold Bugs Reset Their Bets

about the financial stability of key and Argentina, and fears of adefault by Ukraine more recently,prompted some investors to seeksafety in gold alongside the U.S.’sdollar and Treasury bonds

Tur-Meanwhile, the U.S economy isunderperforming, with indicatorsfor employment, consumer confi-dence and manufacturing coming inbelow expectations in recent weeks

Gold rose Thursday after FederalReserve Chairwoman Janet Yellensaid the central bank might consider

a pause in its reduction of bondbuying if weakness in the U.S econ-omy persists

As the Fed reduces the amount

of money it pumps into the

econ-Continued from first page omy every month, rates are

ex-pected to rise, making holding lars a more attractive alternativeand reducing the allure of invest-ments such as gold Much of gold’sfall in 2013 came after the Fed be-gan signaling in May it was consid-ering an end to bond purchases

dol-To be sure, most investors lieve the Fed would need to see sev-eral more months of weak data toslow the cuts to its asset-purchaseprogram If the Fed stays on course,bond yields are likely to rise, put-ting downward pressure on gold,which yields nothing, said Mary AnnBartels, chief investment officer forportfolio strategies at Merrill LynchWealth Management, which has $1.9trillion in assets under management

be-“If you’re expecting gold to earn

a return, we’re asking clients to consider owning it,” she said Ms.Bartels expects gold prices to endthe year at $1,100 an ounce, a levelnot seen since April 2010

re-Still, there are plenty of tors looking for safe places to parktheir cash, and gold is one of thecheapest forms of protection, saidWilliam Larkin, portfolio manager

inves-with Cabot Wealth Management

Inc., in Salem, Mass., with $550 lion under management

mil-“Gold had a miserable 2013—thisthing has been taken out to thewoodshed, so I see some valuehere,” Mr Larkin said He has beenpurchasing shares of SPDR GoldShares over the past two months

Sources: SPDR Gold Shares (holdings); CFTC (bets); SIX Financial Information (prices) The Wall Street Journal

Bullion Bounce

Gold prices have risen this year, reﬂecting increased investor demand, following a steep 2013 decline

SPDR Gold Shares holdings, monthly change Investors’ net bullish bets on gold, weekly Gold futures price, daily

50 metric tons

–200–150–100–500

’142013

100,000 contracts

020,00040,00060,00080,000

’142013

a troy ounce

 PHARMACEUTICALS

Bayer Acquires Chinese Firm

Bayer AG will acquire China’s Dihon Pharmaceutical Group Co for an

undisclosed amount, continuing aseries of bolt-on acquisitions aimed atstrengthening its health-care business,the German drug and chemicalscompany said Thursday

“This acquisition moves us into aleading position among multinationals

in the over-the-counter industry inChina,” Chief Executive Marijn Dekkerssaid

Dihon is a privately held drug makerthat specializes in OTC drugs andtraditional Chinese herbal medicine,with annual sales of €123 million($168 million) and 2,400 employees

Its products, which include scalptreatments and skin creams for acneand dermatitis, are also sold in otherAsian markets outside China

Neetha Mahadevan

 BANKING

Ahold Pledges Cost Cuts

Ahold NV will continue cutting

costs to offset pressure on itsbusiness as bargain-huntingconsumers in its main markets keep alid on their spending

Ahold, which generates around 60%

of its sales in the U.S., said Thursdaythat fourth-quarter net profit fell 10%

because of divestments and pressure

on volumes and prices

Net profit was €215 million ($294million), compared with €240 million ayear earlier Last year’s figures includedincome of €59 million from Ahold’sformer ICA joint venture in Sweden

Sales for the quarter ended Dec 31

were down 4.2% at €7.47 billion from

€7.80 billion in the year-earlier period

Excluding the impact of exchange rates, sales fell 1.1%

foreign-“What you’re actually seeing is thatduring 2013 consumers have becomeeven more aware of the pressure ontheir income,” Chief Executive DickBoer said in an interview, adding thatthis became especially visible in thesecond half of the year

Robin van Daalen

 FASHION

Tax Charges Hit Luxottica

Italian eyewear maker Luxottica

SpA said its net profit fell 65% to

€25.9 million ($35.5 million) in the lastquarter of 2013 because of a tax auditthat resulted in increased charges of

€26.7 million

Yet, the company’s board proposed

to raise its dividend to 58 Europeancents a share from 49 European cents

a share

Full-year net profit increased by 2%

compared with 2012, at €544.7 million,but the adjusted net profit rose 10%

compared with the previous year, to

€617.3 million Luxottica said that theadjustment is related to the tax auditconcerning the year 2007, whichresulted in increased charges of €26.7million for the company The group hasdecided to pay the charges andallocate provisions of €40 million forany future similar situation

U.S District Court for the Southern District of New York

Literary Works in Electronic Databases Copyright Litigation

To: Freelance authors of English language literary works

This is a summary notice of a revised class action settlement Please read this notice It may affect your legal rights

What is this proposed settlement about?

A settlement has been reached in a class action lawsuit alleging that commercial electronic databases and newspapers andmagazines infringed the copyrights of freelance authors The lawsuit alleges that newspapers and magazines, after publishingthe works with the authors’ permission, then sold them to the electronic databases without the authors’ permission The currentsettlement is a revision of a previous proposed settlement that was reached in 2005

The settlement applies to English language literary works that were reproduced on a commercial electronic database withoutthe authors’ permission Works may still be eligible even if not registered with the U.S Copyright Office, and even if they wereoriginally published outside the U.S Excluded are works for hire and works for which the author granted electronic rights to theoriginal publisher

Freelance authors were notified of the previous settlement, and the deadline for submitting compensation claims under that settlement was September 30, 2005 Additional details about eligible works and your options are contained in the full Notice

of Revised Class Action Settlement, available at www.copyrightclassaction.com

What do I need to do?

Class members have three options: (i) do nothing; (ii) exclude yourself from the settlement; (iii) object to the settlement

To remain a class member, you do not need to do anything To be eligible for a settlement payment, you must have already submitted a timely, valid claim under the previous settlement in 2005 If you did so, then you need to do nothing further to

participate in the settlement (You will eventually hear from the Claims Administrator about the validity of your claim.)You may still exclude yourself from the settlement You must (1) mail a written request for exclusion, postmarked by

May 9, 2014, Electronic Databases Copyright Litigation, EXCLUSION REQUEST, c/o GCG, PO Box 10033, Dublin, OH

43017-6633, or (2) submit an exclusion request online at www.copyrightclassaction.com by that date.

To object to the settlement, you must file a written objection by May 9, 2014

Further information on each option is available at www.copyrightclassaction.com

Final Fairness Hearing

A hearing on the proposed settlement will be held June 10, 2014 at 10:00 a.m by U.S District Judge George B Daniels, U.S.

District Court, 500 Pearl Street, New York, NY 10007, to determine whether the settlement should be approved Class members

or their counsel may appear in Court

I have new contact information, whom should I contact?

If you have changed your mailing or e-mail address since the original settlement in 2005, you should notify the ClaimsAdministrator, whose contact information is in the full Notice of Revised Class Action Settlement If the Claims Administratordoes not have your correct contact information, you may not receive your settlement payment (assuming you already submitted avalid claim in 2005) or notice of important developments in this class action

Please do not contact the Court

Dated: January 22, 2014

By Order of the CourtThe Honorable George B Daniels

www.copyrightclassaction.com

Trang 11

did during similar episodes of regional sions in the 1980s and 1990s

ten-Regional confrontation isn’t the biggestpreoccupation for most Japanese A NihonKeizai Shimbun daily survey released Feb

24 showed only 6% of its respondents sawnational security as the most important pol-icy priority for Mr Abe, compared with 38%

who mentioned social security and 30% whocited economic overhaul

And yet, it appears that many Japaneseare feeling more vulnerable A governmentsurvey in October found a record 81% of re-spondents said they didn’t feel friendly to-ward China, up from 59% just four yearsearlier and 40% two decades ago In an-other survey last year, 40% said their atti-tude toward South Korea had deterioratedover the previous year, with many citingKorean criticism of Japan over wartime-leg-acy issues

Such angst is spilling into popular ture Weekly magazines are outdoing oneanother with sensational headlines attack-ing South Korea and China “Uncover theDark Side of Korea,” was the title of a re-cent cover story in Weekly Bunshun

cul-“China’s Anti-Japan Propaganda, Big tional Lies,” said a headline in Weekly Shin-cho

Inten-Books predicting doomsday for the nese and Korean economies, such as “Chinathat Collapses, Japan that Prospers” and

Chi-“Truth about Samsung,” are flying off theshelves, according to best-seller lists in thecountry

Also slowly emerging: hostility towardthe U.S Given America’s growing economicties with China, some Japanese officials andlawmakers are skeptical as to whetherAmerica would come to its rescue if theircountry comes under China’s attack

Some find it troublesome that ton has kept pressure on Tokyo to show re-straint Many were particularly irked by theObama administration’s scolding of Mr

Washing-Abe’s recent visit to a shrine that honorsJapan’s war dead, including convicted warcriminals

“The U.S said it was disappointed,” saidSeiichi Eto, a special adviser to Mr Abe, in

a video that was posted on YouTube andlater deleted “I must say it was we whowere disappointed How can the U.S fail tosuch a degree to treat Japan, a significantally, in the right way?”

“The United States remains committed

to our deep and long-standing alliance withJapan,” a State Department official said onWednesday, adding that the U.S has made

its position on Mr Abe’s visit to the shrine

“China Crosses the Line,” has seen its lation grow 30% to nearly 100,000 over thepast two years Now, people in their 20sand 30s—including large numbers ofwomen—make up 40% of its readership,which was previously predominantly maleand over 50, according to Kazuyoshi Han-ada, its editor

circu-Meanwhile, the emerging cadre of young,conservative politicians is backing Mr Abe

Among them is Kensuke Miyazaki, whogave up running a career-placement com-pany to become a politician

“There are so many people in our younggeneration who can’t have pride in ourcountry and feel negative about its future,”

says the 33-year-old lawmaker “It has a lot

to do with our experience of being taught aself-torturing view of the history that wewere a country of aggressors.”

Though most of the novice politicianshave limited influence as individuals, their

collective ranks, now in the dozens, giveclout to Mr Abe’s aggressive diplomatic anddefense stance Japan’s constitution limitsits military strictly to self-defense; Mr Abe

is pushing to allow troops to fire back iffriendly forces, such as from the U.S., comeunder enemy attack

Mr Abe’s recent visit to the Yasukuniwar shrine offered further evidence of hispopularity with young people Although themove angered Japan’s neighbors, one recentpoll by the Asahi Shimbun daily showed60% of respondents in their 30s supportedsuch a visit, far higher than the overall pop-ulation

A record 168 lawmakers also visited theshrine during the religiously-importantspring festival this year, up from 81 a yearearlier

Then there’s the kamikaze-pilot movie.Called “Eternal Zero,” the hit film depictsfictional events and is named after the Mit-subishi A6M Zero fighter plane flown byJapanese World War II suicide pilots Itheld the No 1 spot at box offices for eightweeks until earlier in February, making itamong the best-performing movies in Japan

in a decade, according to Kogyo Tsushinsha,

a trade publication

Fans, including Mr Abe himself, havepraised it as an opportunity to teach youngpeople about the brutality of war

Critics have said the movie glorifies thefutile deaths caused by tragic policy errors.The film’s popularity has also spawned aminiboom in kamikaze exhibits catering toJapanese who want to view the nation’swartime image in a more positive light AWorld War II-era Air Force facility used as

a location for the movie has been turnedinto a museum It boasts a cartoon mascot

of an airman and has drawn over 10,000visitors since opening in late December.Naoki Hyakuta, the author of a best-sell-ing novel on which the movie is based and afriend of Mr Abe’s, was recently appointed

to the board of governors at NHK, the tional broadcaster Within weeks, he cameunder criticism by opposition lawmakers af-ter slamming the U.S for what he called the

na-“massacre” of Japanese through the 1945nuclear bombs and the bombing of Tokyo,among other issues

The changing social tide has helped tress support for Mr Abe in parliament af-ter his party’s landslide victory in Decem-ber 2012 Many of the 119 freshmanmembers of his Liberal Democratic Party,

but-or LDP, who were swept into parliament’slower house now respond with loud cheersand clapping whenever Mr Abe gives hisviews on Japan’s relations with China andKorea in chambers

Those members help ensure Mr Abe’sruling coalition has a comfortable majority

in Japan’s parliament With historicallyhigh approval ratings of 50% to 60%, hefaces little pressure on all but the mostcontroversial of his policies, even fromthose in his party’s liberal wing, who havetraditionally supported close ties withChina

“Right now, the entire LDP does what

Mr Abe wants to do,” says Tomoaki Iwai, apolitical-science professor at Nihon Univer-sity “Policies are adopted smoothly, as veryfew people talk back to Mr Abe.”

One newcomer is Takaya Muto The year-old entered politics after giving up anacademic career Calling himself “amongthe most hawkish” in parliament, Mr Mutosays he thinks Japan should be fully capable

34-of defending itself against China and NorthKorea, without relying on the U.S

“The era when the U.S was a power has ended,” he says “We need to beable to protect ourselves.”

super-Asked how Japan would do that, Mr.Muto gives an answer that remains highlyunconventional even among nationalist pol-iticians: “nuclear armament.”

—Rebecca Ballhaus and Olivia Geng

contributed to this article.

In Tokyo’s gubernatorial race, right-wing candidate Toshio Tamogami, above, lost but attracted young voters Posters, left, tout a hit movie that glorifies a World War II kamikaze pilot.

Source: Government of Japan Cabinet Ofﬁce surveys

The Wall Street Journal

Note: Japan Cabinet Ofﬁce polls, most recent of 1,848 adults age

20 and older conducted Sept 2013; margin of error: +/-2.3 pct pts.

%

1980 ’90 2000 ’1025

5075

2550

China: 81%

South Korea: 58%

Books predicting doomsday for the Chinese and Korean economies are flying off Japanese shelves.

SYDNEY—Qantas Airways Ltd.

backed away from plans to take on

Asian budget carriers as steep

losses forced the carrier to lay off

about 5,000 workers and suspend

nearly a dozen aircraft orders

Australia’s flag carrier has been

expanding its budget offshoot

Jet-star into Asia over the past decade,

setting up joint ventures in

Singa-pore, Vietnam and Japan as the

re-gion’s growing middle class takes

to the skies But like many global

airlines, Qantas’s full-service brand

has grappled with high jet-fuel

costs, sluggish international

de-mand and competition from Middle

Eastern carriers, leading to losses

on international routes

“Australians love to have an

icon, but only 16% of people leaving

Australia fly Qantas,” said Neil

Hansford, chairman of consulting

firm Strategic Aviation Solutions

The so-called Flying Kangaroo

also is fighting a price war on

once-lucrative domestic routes

with Virgin Australia Holdings

Ltd., which is backed by

state-funded carriers Air New Zealand

Ltd., Singapore Airlines Ltd and

Etihad Airways of Abu Dhabi.

Qantas on Thursday reported a

net loss of 235 million Australian

dollars (US$210.7 million) for its

fiscal first half, which ran through

December The company posted a

A$109 million profit a year earlier

Revenue fell 4.1% to A$7.9 billion

The airline’s shares fell 9.1% to

close at A$1.16 (US$1.04) in Sydney

“When it comes to Jetstar in

Asia, we need to take the right

de-cisions in accord with current

mar-ket circumstances and our balance

sheet,” Qantas Chief Executive Alan

Joyce said “There are many

exam-ples of Australian companies that

have failed because they weren’t

able to make hard decisions

Qan-tas isn’t one of them.”

In one of the darkest days since

the airline was privatized in 1995,

Qantas said it would reduce its

workforce of 33,000 people by

about 15% by fiscal 2017 Qantas

also will extend its existing wage

and bonus freeze for executives

companywide Qantas deferred

Jet-star orders for eight Airbus Group

NV A380s and three Boeing Co 787

Dreamliners

B Y R OSS K ELLY

GDF Takes $20.4 Billion Write-Down

PARIS—GDF Suez SA wrote

down €14.9 billion ($20.4 billion) in

assets, a glaring example of how

Eu-rope’s large-scale power-generation

industry has been crippled by wind

and solar electricity

“We consider that the

deteriora-tion of gas storage and

thermal-en-ergy production in Europe is deep

and long-lasting,” Chief Executive

Gérard Mestrallet said Thursday as

the company reported a loss for last

year

Even for a large company with

global reach and annual revenue of

almost €90 billion, the impairment

charge was huge, erasing 12% from

the value of GDF’s total assets

GDF, German rivals RWE AG and

E.ON SE and other big utilities

dom-inated Europe’s power market for

decades, until the growth of

subsi-dized renewable energy undermined

their traditional business models

Mr Mestrallet repeatedly has

said that subsidies for renewable ergy are turning traditional powerproduction into a losing proposition

en-He heads a group of utility CEOswho are lobbying to phase out subsi-dies to solar and wind power in Eu-rope GDF invests in renewablesources, but aging, traditional plantsmake up the vast majority of its ca-

pacity

European wind- and solar-powerproducers benefit from priority ac-cess to the electricity grid and guar-anteed prices well above the marketprice, regardless of demand The dif-ference is paid for through taxes andhigher retail prices for electricity

from traditional sources

Gas-fired power plants are themost vulnerable Coal-fired plantshave fared better—an unexpectedresult of the U.S shale-gas boom aspower producers in the country haveswitched from coal That hasspurred U.S exports of coal, sending

its price lower world-wide

By the end of last year, GDF hadmothballed around 10 gigawatts ofcapacity Another five gigawatts are

under review for closure

The situation began to sour forutilities with the 2008 financial cri-sis, when electricity demand slowedacross Europe and more solar panelsand wind farms sprang up, furtherweakening wholesale power prices

The bloodletting has been heavyacross Europe RWE in Januarywrote down $4.5 billion on power-generation assets across the Conti-nent The utility said it would reportits first annual loss Tuesday because

of the charge

E.ON has written down the value

of its power plants by several

bil-lions of euros over the past twoyears

GDF on Thursday reported a netloss of €9.3 billion for last year,compared with a €1.54 billion netprofit a year earlier Excluding theeffects of the write-down and assetsales, the company posted earnings

of €3.4 billion for last year

GDF’s shares rose 6% in Paristrading as analysts welcomed themove to clean the slate GDF had al-ready warned that it would take theimpairment charge The company onThursday also raised its forecast for

2014 net recurring income to tween €3.3 billion and €3.7 billion

be-GDF earlier had forecast between

€3.1 billion and €3.5 billion

Mr Mestrallet has said that thecompany’s future lies in emergingmarkets “We want to become theleading power company in countries

with strong growth,” he said

—Géraldine Amiel and Jan Hromadko contributed to this article.

B Y I NTI L ANDAURO

Canberra WESTERN AUSTRALIA

NORTHERN TERRITORY

MINING/COMMODITIES

Rio Tinto

Glencore Xstrata

WesTrac

Forge Group

Boart Longyear

General Motors

Toyota

Alcoa

Ford

MACHINERY AUTOMOBILE

SOUTH AUSTRALIA

QUEENSLAND

NEW SOUTH WALES

VICTORIA

TASMANIA

A.C.T.

SydneyPerth

140 1,000

NUMBER OF JOBS CUT

Layoffs Up Down Under

Australian job losses have been mounting

in recent months as a decadelong miningboom loses steam Some of the deepest

cuts are shown below, including those ofQantas, which on Thursday announced

5,000 layoffs

Qantas*

Brindabella Airlines

Transﬁeld Services

*Qantas total includes 1,000 job cuts announced last year.

Source: staff reports The Wall Street Journal

WPP, Hit

By Currency Moves,Plans

Expansion

WPP PLC Thursday became the

latest firm to be hit by turmoil inemerging-market currencies, whichweighed on profit margins andprompted a cautious outlook for the

year ahead

WPP—still the world’s largest vertising group until it will be de-throned by the merger between ri-

ad-vals Publicis Groupe SA and

Omnicom Group Inc later this

year—said the depreciation of manyemerging-market currencies againstthe pound dented its operating mar-gins last year and predicted this toremain an issue throughout 2014

“In the short-term, currencymoves will limit growth,” Chief Ex-ecutive Martin Sorrell said on a con-

ference call

WPP said continuing pressurefrom companies on ad agencies to of-fer “more for less” should also weigh

on the group’s profitability this yearand beyond As clients remain fo-cused on savings, tough competition

is pushing many agencies to offer counts to clients, sometimes to an

dis-“unreasonable extent,” Mr Sorrellsaid

Still, the executive said the sure on pricing and currency volatil-ity doesn’t alter its long-term goals

pres-The group still wants to grow inemerging markets, where it alreadymakes around a third of its revenue

“Our view is this is an opportunity

to buy, not a reason to curb sion,” Mr Sorrell said in an interview

expan-”If we could go faster, we would.”

WPP, along with rivals, has beenboosting its footprint in markets such

as China and Brazil in recent years,mainly through acquisitions The Lon-don-based owner of ad agencies such

as Ogilvy & Mather and Grey has

again set aside a budget of between

£300 million and £400 million ($500million and $667 million) for acquisi-tions in 2014 mainly in digital and

emerging markets

With the currency weakness,prices for assets in some marketssuch as Brazil may come down a bit,which could help WPP accelerate its

buying spree, Mr Sorrell said

In China, WPP’s No 3 marketwhere many consumer companies

such as Nestle SA and Pernod

Ri-card SA have shown weakness in

re-cent quarters, WPP has seen only amodest slowdown

“Is it slowing? Yes, but not to theextent of our competitors,” Mr Sor-rell said WPP said organic sales—akey ad industry metric stripping outcurrency swings, acquisitions anddisposals—grew 4% in China in 2013,down from over 12% growth in 2012

Publicis said many clients in Chinahad postponed ad campaigns in thelast quarter of the year, dragging

down full-year growth

WPP said its operating marginwould improve only 0.3 percentagepoint this year and, excluding cur-rency shifts, a cut from its long-termgoal of a 0.5 percentage point in-crease a year In 2013, it reached amargin of 15.1%, below its target of15.3%, as the stronger pound com-pared with emerging-market curren-

cies weighed on profitability

WPP shares fell over 5%, the ond-biggest decliner on the FTSE

sec-100, as analysts said they wouldlower estimates to take into account

the lower margin expectation

leases

“Given the situation Qantas hasfound itself in, it’s understandablethey’re slowing things down in Asia

at this point,” said Mark Williams, aSydney-based analyst at CIMB “It’spretty competitive, and there’s a fair

amount of capacity out there.”

Asia now is home to about 75budget carriers, including Malay-

sia’s AirAsia Bhd., Singapore lines’ Scoot unit and Peach Avia-

Air-tion Ltd., which is partly backed by

Japan’s ANA Holdings Inc The

In-ternational Air Transport tion forecasts that passengergrowth will average 5.7% annuallyover the next four years—secondonly to the Middle East—but com-petition is fierce Discount carriers,almost unheard of in Asia a decadeago, now account for more thanone-quarter of the region’s airlineseats Qantas’s international divi-sion recorded a A$262 million first-half loss, a wider loss than analysts

Associa-had expected

The battle for internationaltravelers has bloodied other carri-ers, as well AirAsia on Wednesdayreported a 19% drop in fourth-quar-ter earnings after it was forced tosell cheaper tickets to fill planes

Singapore’s Tiger Airways

Hold-ings Ltd and India’s SpiceJet Ltd.

have posted losses in the past two

to three years

Qantas had been awaiting latory approval for a Jetstar joint

regu-venture in Hong Kong with China

Eastern Airlines Corp and

gam-bling tycoon Stanley Ho’s shipping

and property company Shun Tak

Holdings Ltd.

Qantas said growth has beensuspended at its Jetstar joint ven-ture in Singapore, which is the old-est and most established of thecarrier’s Asian offshoots Qantascouldn’t be reached to elaborate on

Jetstar Hong Kong

Expanding into Asia had been aplank of Mr Joyce’s push to trimoverhead by setting up joint ven-tures in lower-cost countries Butthe strategy experienced a signifi-cant setback in 2012 when talks toform a new premium carrier with

Malaysian Airlines Systems Bhd.

broke down

Mr Joyce has been lobbying theAustralian government for assis-tance, such as a debt guarantee orremoving a 49% cap on foreignownership that he said has limited

the airline’s access to capital

The government is draftingchanges to the Qantas Sale Act tolift the ownership cap, but Mr

Joyce said Thursday that the movewas likely to be blocked by opposi-

tion parties in the Senate

In addition to hemorrhagingmoney on international routes,Qantas has been fighting a costlybattle to defend its 65% share of itshome market First-half profit inthe airline’s domestic unit fell 74%

to A$57 million

Virgin Australia, a former count carrier, has put business-class seats on flights and addedservice to small towns in the west-ern part of Australia, where peoplefly to work at remote mines Qan-tas has responded by adding capac-ity, leading to a glut of seats andforcing both airlines to discount

dis-prices

Qantas Retrenches, Will Cut Jobs

Trang 12

OPINION: REVIEW & OUTLOOK

A s to how Vladimir Putin might

re-spond to his humiliation last week

in Ukraine, the answers came in

rough and rapid succession on Thursday.

At least the U.S and the European Union

can’t harbor any more doubts about the

Russian leader’s intention to provoke a

possibly violent conflict in Europe.

Overnight in Ukraine’s Crimean

penin-sula, dozens of armed and well-organized

men overpowered guards at the

autono-mous region’s parliament and regional

government and raised a Russian flag

above both buildings in the capital

Sim-feropol Seven armored personnel

carri-ers attached to Russia’s Black Sea Fleet at

the same time left their base outside the

capital but turned back once the

occupi-ers were safely inside Separately,

Cri-mea’s elected parliament voted to hold a

referendum on the region’s “status” in

May The operation had the trademarks

of Russian special forces.

Later in the day, Ukraine’s deposed

President Viktor Yanukovych emerged

from nearly a week out of view with a

declaration to two Russian state-run

news agencies Calling himself the

“law-ful” leader of Ukraine, he wrote, “I am

compelled to ask the Russian Federation

to ensure my personal security from the

actions of extremists.” Russia appeared

to oblige A Yanukovych press conference

is scheduled for Friday in a southern Russian city.

Mr Yanukovych fled Kiev last Friday after his allies and security services abandoned him Parliament then voted him out of office Prosecutors want to try him for the murder of some 100 protesters The evidence of corruption that has since been uncovered has turned him into the Ukrainian Bokassa, complete with a golden throne for a

toilet at his private dence outside Kiev.

resi-Mr Putin isn’t picky about his company Mr.

Yanukovych may be a pawn-in-exile in the Rus- sian’s game of destabilizing Crimea, and perhaps also the eastern, Russian-speaking regions of Ukraine that were the ousted leader’s political base The Ukrai- nian turned on the protesters with live ammunition last week at Moscow’s be- hest and with direct help from Russian military advisers, as documents found in the aftermath of his downfall show Mr.

Putin might figure that if he lets Mr.

Yanukovych’s ouster stand, he could lose his sway over his authoritarian comrades

in Belarus and Central Asia too.

As long feared, Crimea has now come the flashpoint for conflict between two large neighbors A majority of Cri-

be-mea’s residents are ethnic Russians, but

a significant Ukrainian and Crimean tar minority lives there The region has long been sleepy, but a pro-Russian dem- onstration was held last weekend and on Wednesday the Tatars put on a larger counter-protest Now there are reports of

Ta-“volunteers” headed to Crimea from sia and armed checkpoints on important access routes in the peninsula manned by

Rus-Russian loyalists.

This manufactured sis catches Ukraine at its most vulnerable moment.

cri-A transitional cabinet was only voted in on Thursday

in Kiev The interim dent, who took over Sunday, warned against “military aggression” and told Russian troops to stay in their bases.

presi-Ukraine has police and other security forces in Crimea But the troubles there distract Ukraine’s new rulers from making good on promises to clean up government and save a sinking economy As Mr.

Putin no doubt intends.

The Kremlin is testing the Western sponse as much as Ukraine’s Mr Putin saw that Washington and Europe did little to help Georgia when Russia invaded

re-in 2008 and were phlegmatic durre-ing Ukraine’s three months of protests This week’s moves suggest he is now contem-

plating a territorial carve up of Ukraine, which is one way to ensure it stays out of the EU and NATO.

It would be out of character, but ident Obama could put Mr Putin on notice that he would pay a considerable price for doing so The ruble hit new lows this week and Russia’s economy is vulnerable to Western sanctions Any violent provocation in Ukraine, a European state of 46 million, should render Russia unwelcome at the G-8 and other civilized places.

Pres-As an authoritarian leader, Mr Putin

is unpredictable But he can de-escalate

as easily as he decided to confront the new Ukrainian government this week.

The problem is that on every front, whether missile defense in Eastern Eu- rope or Syria, this White House has yielded to his wishes and never given him a reason to respect American will A tweet from NATO headquarters and a statement from John Kerry on Thursday about Crimea won’t change that.

The future of democracy in Ukraine, and as of Thursday perhaps peace in Eu- rope, is on the line here The Obama Ad- ministration finally awakened to the Kremlin challenge on Ukraine in the last two weeks, but now Mr Putin is raising the stakes again The alarm is ringing in Crimea.

I s “jihad in self-defense

antitheti-cal to human rights? Our answer is

no.” That was how Claudio Cordone,

then Amnesty International’s interim

secretary-general, responded in February

2010 to criticism after the human-rights

group made ex-Guantanamo detainee

Moazzam Begg its poster child in protest

of the alleged horrors of U.S antiterror

detention policies.

That’s worth recalling now that

Brit-ish authorities have arrested Mr Begg on

suspicions of attending terrorist training

camps and facilitating terrorism in Syria.

Local police in Birmingham arrested Mr.

Begg on Tuesday He hasn’t been

charged, but under a British antiterror

statute he can be detained for up to 14

days.

Mr Begg, a British-Pakistani citizen, was captured in Pakistan in 2002 and transferred to Guantanamo as an enemy combatant Soon after his release in

2005, Amnesty began sharing platforms with Mr Begg, describing his U.K.-based Cageprisoners advocacy group as a

“leading human rights organization” and inviting him to deliver the 2006 Amnesty International Annual Lecture in Belfast.

Amnesty ignored that Mr Begg had written of his admiration for the Taliban.

Nor was Amnesty bothered that, side his “human-rights” work, Mr Begg was conducting fawning interviews with

along-al Qaeda propagandists such as the late terrorist imam Anwar al-Awlaki.

In 2010, Gita Sahgal, who at the time headed Amnesty’s gender unit, broke ranks by making public her opposition to promoting the views of “Britain’s most famous supporter of the Taliban.” Am- nesty responded by suspending Ms Sah- gal, and she was eventually pushed out.

“I don’t see Amnesty International and other human rights organizations coming

to grips with the fact that their research and campaigning have been tainted” by their association with Mr Begg, Ms Sa- ghal told us this week In a statement, Amnesty told us that its “relationship with Moazzam Begg was as a victim of human-rights violations.” It added that

“everyone has the right to be presumed innocent until they are charged and

proven guilty in a fair trial.”

That’s true Then again, if the cions about Mr Begg are proved in court

suspi-he would join a long list of known Gitmo recidivists—including Said al-Shihri, a Saudi Arabian who co-founded al Qaeda

in the Arabian Peninsula, Turkish terror facilitator Ibrahim Sen and dozens more who have returned to waging jihad since their release It’s a reminder of why the detention center was necessary and shouldn’t be closed.

The story is also a reminder of the anti-American fervor and intellectual confusion that led Amnesty to team up with Mr Begg The world needs morally credible human-rights organizations.

Amnesty too often isn’t one of them.

O n Thursday German Chancellor

Angela Merkel received the royal

treatment in London, quite

liter-ally—she took tea with the queen She

addressed both houses of Parliament, too.

Ms Merkel’s visit to London brought

into focus what she and British Prime

Minister David Cameron might achieve

together Some reform of the European

Union is possible Rewriting of treaties to

satisfy British euroskeptics is not The

goal, she said, is “a strong United

King-dom with a strong voice inside the

Euro-pean Union.” From being a spoiler on the

edge of the continent, Britain has a

chance to lead at Germany’s side.

Some of London’s broadsheets had a

more provincial view, predicting that Ms.

Merkel was coming to help claw back

Britain’s sovereignty from Brussels That

certainly would have helped Mr Cameron politically in the short term Polls in the last couple of months show the U.K Inde- pendence Party, whose platform calls for Britain withdrawing from Europe, as the most popular party in the country, eclips- ing Mr Cameron’s Conservatives Elec- tions in May for local governments and European MPs could turn into an embar- rassing UKIP rout.

Such a ground-shaker from the cellor was never realistic Ms Merkel may be the most powerful leader in Eu- rope, but even she cannot grant dispensa- tions like a medieval pope Her own domestic considerations are also a consideration, since other members of Germany’s ruling coalition favor more political integration within Europe, not less.

Chan-But at least she and Mr Cameron share ambitions to refocus the EU on the need for economic growth and return specific powers to the sovereign governments In Berlin last April they strate- gized about “the urgent need to make Eu- rope more competitive and flexible,”

according to a Downing Street statement.

Both countries have an interest in strengthening the single market because domestic reforms and restructuring have made their industries competitive And

as the home to the two main financial centers of Europe, they benefit from the free movement of capital and goods.

Reforming the EU means first ing the reality is that the institution is reaching maturity: It is not likely to un- dergo a revolution in its basic methods or reach The pressing work concerns how

accept-to make Europe live up accept-to its promises accept-to integrate Europe economically, facilitate rather than complicate business and job creation, and resist the endless tempta- tions to meddle in the democratic decisions of its still-sovereign member states.

Euroskeptics in Britain and elsewhere seize on the EU’s manifest failures to argue that their citizens were better off before Brussels Mr Cameron is right to argue that Britain benefits from being a member of the EU and ought to be steering its future If he and Ms Merkel can improve its functioning, he should be able to win this domestic debate without false hopes of treaty reforms Ms.

Merkel’s visit helped to reset tions and lay out a realistic agenda for the two most important leaders in Eu- rope.

expecta-Crimean War Games

Amnesty International’s Jihad Problem

The Anglo-German Alliance

Putin moves to carve

up Ukraine if he can get away with it.

Blackstone Seals Deal For a Stake in Versace

MILAN—Gianni Versace SpA

agreed to sell a 20% stake to

pri-vate-equity firm Blackstone Group

LP in a deal that aims to fundgrowth at the Italian fashion houseand could prompt a public offering

in a few years

Under the deal, which values sace at around €1 billion, or roughly

Ver-$1.4 billion, Blackstone will inject

€150 million of capital into the ion house The firm will acquire €60

fash-million in stock from GIVI Holding

SpA, the holding company that trols the house Blackstone will haveone seat on Versace’s board and oneseat on its steering committee

con-“The strategy of the family mains one of going public at a cer-tain point,” Versace Chief ExecutiveGian Giacomo Ferraris said Thurs-day “But before the initial public of-fering, we need to become stronger.”

re-The IPO, which he said is likely three

to five years away, would allowBlackstone to exit its investment

The Versace family decided to

sell a minority stake to enhance thecompany’s e-commerce business, ex-pand in emerging markets,strengthen in mature ones and add

to its products for sale, focusingmore on accessories

The company will increase itsnumber of directly operated stores

to more than 200 in 2016 from 137today It aims to increase revenue toaround €800 million in 2016 from anestimated €480 million last year

Versace, which generates 60% ofits revenue from its top line, willbroaden its product range in part bypromoting menswear, which haspicked up pace and now accounts fornearly half of the business

“We are even considering tolaunch a bespoke line at somepoint,” Mr Ferraris said

The label remains a minnowcompared with houses such as

Prada SpA and LVMH Moët nessy Louis Vuitton SA, however.

Hen-And it remains to be seen whetherthe Blackstone funding—to be in-jected over the next three years—

will be enough to make Versace

more competitive against far-largercompanies with the deep pocketsneeded to open flashy new stores,which can cost tens of millions ofdollars apiece

Mr Ferraris called the expansionplan “ambitious” but feasible

Versace is focused on increasingits presence in emerging marketssuch as Turkey but also on expand-ing in the U.S., where the companyplans to open 13 new stores for a to-tal of 26 by 2016 Versace also willattempt a return to some of the U.S

department stores that dropped thelabel when the company was floun-dering a decade ago

“When you lose credibility,American department stores oftendrop your brand, not because of theproduct, but because you’re no lon-ger credible,” Mr Ferraris said “Soeven when we restored our businessand regained credibility, they firstneeded to see a recovery in our di-rectly operated stores to be con-vinced of carrying the lines again.”

Blackstone had been in talks withVersace for months

LONDON—Rebekah Brooks, the

former News Corp executive facing

a raft of charges in a long-runningphone-hacking trial here, saidThursday she authorized payments

to public officials in exchange for formation on “half a dozen occa-sions” during her time as a newspa-per editor—but did so only in whatshe said was the public interest

in-None of the instances she ferred to in testimony before jurorsare among those related to charges

re-in the current case Ms Brooksstands accused of one count of con-spiring to commit misconductthrough bribing public officials forinformation She also stands ac-cused of three others charges re-lated to the illegal interception ofphone messages and obstruction ofjustice Ms Brooks denies allcharges

On the stand, Ms Brooks, whoedited News Corp’s Sun newspaperand its now-closed News of theWorld sister title, said the paymentswere made for good reasons, anddone so on rare occasions and aftercareful consideration

“My view at the time was thatthere had to be an overwhelmingpublic interest to justify payments

in the very narrow circumstances of

a public official being paid for mation directly in line with theirjobs,” said Ms Brooks

infor-She denied knowledge of ments to a senior U.K defense offi-cial by the Sun newspaper, an inci-dent at the root of the singlebribery charge against her Lastweek, the presiding judge ruled she

pay-be acquitted of a second bripay-berycharge, related to allegations sheauthorized a payment for an embar-rassing photo of Prince Williamwhile she was editor at the Sun

The charges against Ms Brooksstem from a wide-ranging probe ofalleged phone hacking centered onthe News of the World tabloid Sheand six other defendants have

pleaded not guilty to all counts.The long-simmering phone-hack-ing scandal erupted in July 2011 af-ter disclosures that employees atthe News of the World tabloid, onceone of the most popular Sunday pa-pers in Britain, had hacked the voicemail of a missing teenager, who waslater found dead

That triggered widespread publicoutrage, prompting News Corp toclose the tabloid Ms Brooks, whowas editor of the News of the Worldwhen the teenage girl’s phone washacked, was arrested several dayslater

News Corp, which owns The WallStreet Journal, declined to com-ment

Taking the stand in a patternedblue dress with her flame-red hairdraped over one shoulder, Ms.Brooks answered questions put toher by defense counsel JonathanLaidlaw

The court listened as Mr Laidlawread aloud email correspondencebetween Ms Brooks and one of hersenior reporters at the Sun The re-porter asks for, and is granted, per-mission to pay one of his sources

Ms Brooks said she didn’t knowthat the source was a defense minis-try official but that if she had, insome cases, she may still have sanc-tioned the payment Prosecutorshave already shown the jury whatthey said were records of paymentsmade to military officials by the Sunduring the period of Ms Brooks’seditorship

Mr Laidlaw read out loud tracts of the Sun articles that hadresulted from payments to officialsand asked his client if she wouldstill have approved the paymentshad she known that the source was,

ex-in fact, a government employee

In each example, Ms Brooks plained where, if any, the public in-terest lay One, a paid-for scoopabout the bullying of recruits at anarmy barracks would have passedmuster even if she had known theidentity of the source, she said

ex-B Y A LEXIS F LYNN

As Growth Slows, Lego Aims to Build Up China Sales

Lego A/S, pressured by stagnant

toy demand in mature markets, issharpening its focus on emergingeconomies, where hundreds of mil-lions of potential customers have yet

to buy the company’s interlockingbricks

The Danish toy maker has corded breakneck growth in recentyears, becoming the world’s No 2toy maker by revenue, behind U.S.-

re-based Mattel Inc but ahead of bro Inc Lego’s relatively narrow

Has-product lineup has remained populareven as children have gravitated to-ward digital games and mobile apps

But the closely held company’srapid growth in recent years, whichhelped it leapfrog Hasbro, moder-ated last year Net profit grew 9% in

to increase by low single-digit centages in the years ahead, andLego said it expects to grow “moder-

per-ately” ahead of the market

“When the company is gettingbigger and the market isn’t growing,it’s a pure mathematical conse-quence that growth rates will have

to reach a more sustainable level,”

Mr Vig Knudstrop said in a phoneinterview

He is now looking East, trying toreplicate in Asia the success Legohas long enjoyed in the West In

2013, Lego invested 2.6 billion

Dan-ish kroner ($486.9 million) in newcapacity and added more than 1,300employees The company has openednew factories in lower-cost coun-tries and is expanding its white-col-lar staff in the U.K., the U.S., Shang-hai and Singapore

Mr Vig Knudstorp already hassteered the 82-year-old companythrough challenging times About adecade ago, with operations in dis-array and facing financial uncer-

tainty, he slimmed down Lego’sproduct line and focused on profit-able ventures

Lego quickly became known fortying its sets of bricks to popularmovie franchises, such as Star Warsand Harry Potter Now, it is banking

on a hit, “The Lego Movie,” to makethe most of its Hollywood connec-tion The film’s popularity is likely

to boost 2014 sales

Mr Vig Knudstorp is turning

at-tention to new markets where Lego

is largely unknown Last year, he ited Chinese families in Jinan, andsaid the urbanization that hasboosted that city’s population to sixmillion will continue, underscoringthe need to broaden the company’sfocus “The product is universallyapplicable,” he said

vis-Mr Vig Knudstorp said the nextdecade could bring 600 million Chi-nese into Lego’s target group In

2013, its China sales grew more than50%, albeit from a small base.Asia represents only a sliver ofLego’s overall revenue, but Chief Fi-nancial Officer John Goodwin saidthat China “has got to a size nowwhere if it doesn’t have a good year,

it will impact our global results.”

On Thursday Lego reported 2013net profit of 6.12 billion Danish kro-ner ($1.12 billion), up from 5.61 bil-lion kroner a year earlier, on reve-nue of 25.38 billion kroner.According to data from market-research firm NPD Group, Lego sales

in the U.S edged up 1% last year, but

Mr Vig Knudstorp said Lego’s owndata show that it achieved “healthysingle-digit growth” in the U.S

—Jens Hansegard contributed to this article.

Trang 13

OPINION

Kiev

In Poland in 1989, there was the satisfaction of a long struggle against Soviet domination com-pleted In Serbia in 2000, the relief

of an end to Slobodan Milosevic’s wars and isolation In Egypt in

2011, euphoria and chaos

Every revolution has different mood music What’s Ukraine like now? Somber Anxious Wary

Tough days are ahead, but this is the attitude that Ukraine will need

to make its revolution a success

There’s no euphoria here The regime of Viktor Yanukovych crum-bled in hours on Friday after three hard months of street protests, but the aftermath has been marked by funereal religious chants coming from Kiev’s Independence Square,

or the Maidan Mounds of flowers and red candles, too many to count, mark the spots nearby where some 77 people were killed

by snipers and riot police in last week’s clashes No one here ex-pected such brute violence, and the experience has changed this place

On television news, the images

of crassly lavish Yanukovych presi-dential palaces are followed by re-ports from funerals for the “victims

of the regime.” Eulogizing one of them, an Orthodox priest wonders:

“Why? So one ‘Family’ can hold on

to power?” The Family is the Yanu-kovych clan, now on the run, like their leader

Across Ukraine, statues of Lenin are falling A few pro-Russian towns are holding out, butSome 22 years after the Soviet Union’s col-lapse—an entire generation—

there’s a previously missing con-sensus about the disastrous toll from Moscow’s domination over the past century Millions of Ukrai-nians were killed in Stalin’s man-made famine in 1932-33 The lan-guage and culture were decimated

as well

Vladimir Putin’s television chan-nels call this awakening “neo-fas-cism” and “ultranationalism” and a threat to Russians here The Krem-lin won’t accept the fluidity and di-versity of Ukrainian identity A local channel last weekend started run-ning short films of famous and ran-dom Ukrainians, speaking in Russian and Ukrainian about their back-grounds At the end, all hold hands while standing on a bridge and say

in unison: “We are one country.”

Repeated assertions of the need for national unity come from anxi-ety over Russia’s intentions The Maidan uprising stopped the Krem-lin from steering Ukraine away from the European Union and into

Mr Putin’s Eurasian Union, other-wise known as the club of corrupt autocrats His failure last week set

in motion the contingency plan for Crimea, Ukraine’s sole majority-Russian region

Crimea has been the dog that barely ever whimpered and never

bit after the Soviet collapse Aside from a large bastion of Russian Black Sea Fleet servicemen in the port of Sevastopol, the ethnic Rus-sians in Crimea are mostly retirees and cranks—not exactly a rebel vanguard The hardest-working and most organized ethnic group is the Crimean Tatars On Wednes-day, they held a large pro-Ukrai-nian counterprotest in Simferopol, the regional capital The Tatars were expelled from their homeland

en masse by Stalin and returned only in the past two decades Like the ethnic Ukrainians, they have reason to fear an assertion of Rus-sian influence

Mr Putin can make life difficult for Ukraine’s leaders just by raising the prospect of violence or a terri-torial carve-up On Wednesday the Russian president ordered a test of

“battle readiness” of 150,000 troops along Ukraine’s border On

Thursday, dozens of armed men stormed the regional parliament and administration buildings in Simferopol and raised Russian flags above them Soon after, Mr

Yanukovych turned up in Moscow, via a statement to Russian news agencies, asking for the Kremlin’s protection from “extremists” in Kiev and calling himself Ukraine’s

“lawful” leader

Any trouble in Crimea has a Moscow return address Mr Putin can’t afford a democratic, pro-Western success story in a country that Russians consider so similar

to their own

But Kiev has a long way to go

on that score Ukrainians distrust, with good reason, the entire politi-cal class Mr Yanukovych wasn’t the only greedy or incompetent pol here But the Maidan crowds can’t rule the country, and in the past five days parliament has assumed

that role On Wednesday the names of those who would lead a proposed new transitional govern-ment were announced before thou-sands packed in at the Maidan Some were booed, others were cheered

Behind closed doors, politicians are “trying to recreate the old sys-tem,” says Mustafa Naim, an Af-ghan-Ukrainian journalist furious

at the signs of deal-making by the same old faces “You can see it in their eyes We may need to go out

on the Maidan again.” He says Ukraine needs to clean the political slate by scheduling a parliamen-tary election to coincide with the planned presidential vote in May

Mr Naim started all this in late November by calling a meeting on the Maidan to protest Mr Yanuk-ovych’s decision to abandon an EU

“association” pact Now he hosts a show on a new television channel, Hromadske, created out of the Maidan movement and funded by donations “I think it’s very good that people don’t believe the politi-cians,” he says “It means they won’t allow them to disappoint us again.”

Nine years ago, the Orange Rev-olution here overturned a fraudu-lent election result but failed to change Ukraine’s political ways The recent revolt pitted a grass-roots movement against a Kremlin desperate to save its favorite em-bezzler in Kiev The Maidan won Another hard battle has just begun, but I wouldn’t bet against these determined people

Mr Kaminski is a member of the Journal’s editorial board.

The Western media has bought into the notion that a new wave of Western boycotts against Israel is underway But like so many trend stories, this one doesn’t stand up

to scrutiny

For Israelis, talk of boycotts brings back bad memories of the 1970s and ’80s After the Yom Kip-pur War and the Arab oil embargo, scores of countries severed diplo-matic relations with the Jewish state Europe turned a cold shoul-der and many of the world’s big-gest companies refused to do busi-ness with it Israel’s pariah status not only hurt the economy, it dealt

a blow to the Zionist dream of normalizing the Jews by giving them their own country

The supposed new wave of boy-cotts began last December when the Dutch water company Vitens severed ties with its Israeli coun-terpart Mekorot Next came a loudly proclaimed boycott of Is-raeli universities by the American Studies Association

Then in January, Dutch pen-sion fund PGGM said it would sell holdings in five Israeli banks, cit-ing their role in helpcit-ing to fi-nance construction of West Bank settlements Denmark’s Danske Bank was reported to have sold shares in Israel’s Bank Hapoalim, and Sweden’s Nordea was threat-ening to do the same to two other Israeli lenders Norway’s

sover-eign wealth fund was said to have begun boycotting the property de-veloper Africa Israel Investments and its Danya Cebus subsidiary

When SodaStream, a manufac-turer of devices for making car-bonated drinks at home, hired Scarlett Johansson to appear in Super Bowl ads, anti-Israel activ-ists found a juicy target: an A-list celebrity and Oxfam ambassador endorsing a company with a plant

in the West Bank Ms Johansson has since resigned from Oxfam

More recently it was reported that Deutsche Bank blacklisted

Hapoalim, and that the Dutch com-pany Boskalis pulled out of an Is-raeli port-construction tender due

to boycott pressures

These reported boycott actions even prompted an Israeli cabinet meeting in February on how to re-spond There were countless edito-rials for and against the boycott in newspapers around the world, strategies offered up on how to stop it and speculation about who would blacklist Israel next Some commentators suggested the boy-cott was driving down the value of the Israeli shekel as well as SodaS-tream’s share price

But as soon as one examines these cases individually, the boy-cott story melts away They are ei-ther not new, not motivated by the boycott movement or have limited impact

For instance, Danske will main-tain its banking relationship with

Hapoalim It simply stopped buy-ing shares in Hapoalim as a de-fault policy for its investment banking clients; if a client wants the shares, Danske will happily buy them for the account In any case, Danske made the decision al-most a year ago and announced it

in September, so it could hardly be part of a boycott “wave.”

Nordea will take a few months

to decide on divesting bank shares and says no other Israeli compa-nies are candidates for its “exclu-sion” list Norway’s sovereign wealth fund banned Africa Israel Investments from its portfolio nearly five years ago and was sim-ply renewing the policy

Deutsche Bank has excluded Hapoalim from a single investment fund it set up for a specific client;

otherwise, it is doing business with Israel as usual Boskalis says that far from dropping out of the port tender, Israel disqualified it from the bidding

So how did this become an “ex-odus” from Israel, as the Financial Times headlined it in a February article?

For the Western media, the boycott and all the ideological

baggage it carries makes it irre-sistible But the hysterical cover-age was mostly a function of lazi-ness (almost no one was fact-checking) and ignorance (boycott stories are typically covered by political reporters who know noth-ing about business, trade or in-vestment)

Even in Israel, the boycott is just too compelling a story for the facts to get in the way For Israeli politicians on the left and their al-lies abroad, it serves as a useful stick for urging talks with the Pal-estinians On the right, the boycott talk provides more proof that the world is arrayed against Israel and the Jews

The true story is that after nearly 10 years of campaigning, the global BDS (boycott, divest-ment and sanctions) movedivest-ment has not had the slightest economic impact Its victories have con-sisted of coaxing a handful of pop stars and academics to cancel ap-pearances in Israel, and winning empty, sanctimonious declarations

of support from the likes of stu-dent governments, cooperative grocery stories and leftish church groups

Far from being isolated, Israel’s exports are reaching record highs and it attracts billions of dollars in foreign investment In the weeks that Israel was supposedly under a boycott siege, Japan’s Rakuten agreed to buy the start-up Viber for $900 million and Ireland’s

Co-vidien sealed a deal to buy Given Imaging for $860 million China’s Bright Food was in talks to buy control of Israel’s biggest food maker Tnuva, and IBM, Lockheed-Martin and ERM all announced plans to open research and devel-opment centers in Israel The Jew-ish state became the first non-Eu-ropean member of the nuclear research consortium CERN and was admitted as an observer to the Pacific Alliance, a free-trade bloc of five Latin American coun-tries

A real boycott wave would be devastating for Israel both eco-nomically and morally Indeed, the cost would be many times higher than it was a generation ago be-cause the country’s economy is more reliant on international trade and cross-border investment But for now the boycott is nothing more than a creature of the me-dia’s imagination

Mr Rosenberg is the economics editor and a columnist for the Haaretz daily’s English-language edition.

B Y D AVID R OSENBERG

Ukraine’s Revolution: Triumphant—and Wary

Don’t Buy the Boycott Hype

The protesters mourn their dead, worry about the Kremlin menace and mistrust their country’s putative new leaders.

A protester in front of parliament in Kiev on Feb 27.

A real divestment wave could devastate Israel.

Happily, it’s not happening.

B Y M ATTHEW K AMINSKI

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

INDEX TO BUSINESSES

AirAsia 18

Airbus Group 18

Air New Zealand 18

Allianz 15

ANA Holdings 18

A P Moller-Maersk 19

Baidu 28

Bankia 20

Barclays 28

Berkshire Hathaway 20

Blackstone Group 17

BNP Paribas 28

Boeing 8,18 Boston Scientific 22

Bouygues S.A 16

China Eastern Airlines.18 Citizens Financial Group 28

Credit Suisse 28

Dansk Supermarked 19

Deutsche Bank 20,28 Dihon Pharmaceutical Group 19

E.ON SE 18

Etihad Airways 18

GDF Suez 18

Gianni Versace 17

GIVI Holding 17

Hasbro 17

HSBC 28

Iliad 16

Jetstar 28

KPN 15,16 Lego 17

LVMH Moet Hennessy Louis Vuitton 17

Malaysian Airlines Systems 18

Mattel 17

McKesson 22

Mitsubishi 11

Morgan Stanley 20

Nestle 18

News Corp 17

Nike 9

Numericable Group 16

Ogilvy & Mather and Grey 18

Omnicom Group 18

Orange 16

Pacific Investment Management 15

Peach Aviation 18

Pernod Ricard 18

Prada 17

PRIO Cyprus 5

Publicis Groupe S.A 18

Qantas Airways 18,28 Royal Bank of Scotland 15,20,28 RSA Insurance Group 20

RWE 18

Salesforce.com 22

Samsung Electronics 11

Shun Tak Holdings 18

Sina 28

Singapore Airlines 18

SPDR Gold Shares 1

SpiceJet 18

Telecom Italia 16

Telefonica 15,16 Tencent Holdings 28

Tiger Airways Holdings 18

Towers Watson 20

Trex 22

Twitter 10

UBS 20,21,28 Virgin Australia Holdings 18

Virgin Australia 28

Vivendi 16

Vodafone 16

WhatsApp 16

WPP 18

Businesses

This index of businesses

mentioned in today’s

issue of The Wall Street

Journal is intended to

include all significant

reference to companies.

First reference to the

companies appears in

bold face type in all

articles except those

on page one and the

editorial pages.

Corrections  Amplifications

Venture funding for Singapore’s

tech-nology sector soared to $1.71 billion last year from $27.9 million in 2011 A Busi-ness & Finance article Thursday about Singapore’s plans to create a startup hub for Southeast Asia incorrectly said it was

$27.3 million in 2011

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.

BUSINESS & FINANCE Vivendi Lures Mobile Inquiries

PARIS—In a struggling French

telecommunications market, one

company has become very popular

Vivendi SA said this week it had

been approached by investment firm

Altice, the largest shareholder of

French cable company Numericable

Group SA, about a tie-up with its

mobile unit, SFR, the country’s No

2 operator by subscribers

It isn’t alone French

conglomer-ate Bouygues SA also has

ap-proached Vivendi about a possible

tie-up with SFR, people familiar

with the matter said

“There have been informal

con-tacts but nothing is very advanced,”

one of the people said “For now,

these are more reflections than

ne-gotiations.”

Chairman and Chief Executive

Martin Bouygues declined to

com-ment when asked Wednesday if he

was considering making an offer for

SFR “We are following the

evolu-tion of the situaevolu-tion in the telecoms

industry very closely,” Mr Bouygues told journalists at the group’s

an-nual results presentation

A spokesman for Bouygues de-clined to comment on Thursday, re-ferring to Mr Bouygues’s comments

France’s mobile operators

Or-ange SA, SFR and Bouygues are

looking for ways out of a desperate situation They have been hurting from a tough price war that was set

in motion about two years ago when

Iliad SA’s Free entered the mobile

market Free introduced rock-bot-tom rates on the mobile-telephone market, forcing larger competitors

to follow suit and eating into their profits

In a recent attempt to save costs, SFR and Bouygues Telecom agreed

on a deal to share parts of their mo-bile networks

Many industry analysts say the French market is now ripe to move from four to three operators, espe-cially as price wars have intensified further At the end of last year, op-erators raced to include

fourth-gen-eration services—a new technology that allows for faster data service—

free into mobile-phone packages to attract new customers

And this week, price wars ex-tended into the fixed-line business with Bouygues Telecom launching a less-costly bundle of Internet, tele-vision and phone services, which immediately prompted a response

from Free

“As competitive pressure acceler-ates, we argue operator desire to consolidate is growing and believe the French authorities are more open to consolidation,” Goldman Sachs said in a note to investors

Thursday

Vivendi last year announced plans to spin off its mobile unit as part of a move to focus on media and content activities, which it aims

to present to shareholders for ap-proval in June

France’s industry minister, Ar-naud Montebourg, earlier this year signaled that he might be open to a shake-up “We want to moderate,

temper excesses of competition,”

Mr Montebourg said, pointing to the case of Germany, where a pro-posed takeover by Telefónica

Deutschland AG of KPN NV’s

Ger-man unit would reduce the number

of operators to three

But that deal appeared to run into obstacles Thursday, with the European Commission, the Euro-pean Union’s executive arm, sending

a formal complaint to Telefónica, citing the potential fallout on

com-petition in the German market

In France, antitrust chief Bruno Lasserre also has indicated that he would oppose attempts to shrink

the number of mobile operators

“It’s the competition authority that will be the impartial arbitrator

of the reconfiguration of the tele-com sector,” Mr Lasserre said dur-ing an interview with French daily

Le Monde on Thursday “To date, no one has presented any merger or

ac-quisition project.”

—Inti Landauro contributed to this article.

B Y R UTH B ENDER

Telefónica Has Received

Complaint on E-Plus Bid

ber of companies in the market has multiplied with the rise of virtual network providers, which pay the big telecom firms to use their networks

But these firms are trying to meet growing consumer appetite for pack-ages that include pay-TV and

fixed-line high-speed Internet access

Telefónica Chief Operating Of-ficer José María Alvarez-Pallete said Thursday that Europe has more than

70 separate telecom networks, com-pared with nine in the U.S and three

in China He used the comparison to defend a common position among telecom firms that they must be al-lowed to grow in order to bargain for deeper discounts from suppliers such as Nokia Corp., Siemens AG and China’s Huawei Technologies Co

that build the expensive equipment they use

The stakes are higher for Telefónica than many of its competi-tors In recent years, it became an aggressive buyer and turned itself into Europe’s second-largest telecom

firm by market value—after

Voda-fone PLC—a position that has

al-lowed it to weather a deep economic downturn in its home market and a

heavy debt load

Telefónica said Thursday it could now afford to slow the pace of debt-cutting this year, and focus on vari-ous challenges in markets where it is

trying to expand

Officials said the company is looking to make significant invest-ments in the TV sectors of Brazil and Spain—where it has a buy op-tion over a controlling stake in

pay-TV platform Digital Plus—and main-tain financial flexibility, with an eye

on possible acquisitions in Mexico

Besides its offer for KPN’s E-Plus, Telefónica last year agreed to take on

a bigger stake in the holding company

that controls Telecom Italia SpA.

Telefónica says the cost of these deals would be offset by already-agreed disposals of small units in

the Czech Republic and Ireland

The deal involving Telecom Italia has raised concerns among regulators

in Italy, who worry that Telefónica may be conducting a slow-motion takeover of company, and in Brazil, where Telefónica and Telecom Italia have been competing head-to-head

Bankers say a selloff of Telecom Italia’s unit, to be split among other players in Brazil, is the most likely outcome—but one that would be complicated by many factors, includ-ing a slowdown in Brazil’s economy

Continued from previous page

Missing in Barcelona: Innovation in Tech

first wave, with penetration

begin-ning to plateau in developed

coun-tries New advances are coming

companies developing new

Web-and location-enabled services, or

even tiny makers of apps and

gadgets far away from the main

ac-tion

“Device innovation is maturing,

and by definition slowing,” said Rick

Clemmer, chief executive of chip

maker NXP Semiconductors NV

To be sure, this year’s confab

highlighted the growing number of

nonphone gadgets that connect to

the Internet, from cars that run

apps to wearable devices that track

your daily activity But the advances

on display were largely incremental

Sony Corp and Huawei

Technol-ogies Co launched “smart bands”

similar to existing connected

bracelets from companies like Fitbit

Samsung Electronics Co.’s new

ver-sions of its Gear smartwatch were

notable mainly because the Korean

company decided to forgo Google’s

dominant mobile operating system,

Android

Some of the boldest new

smart-phone bets this year came from

companies trying to make existing

technology less expensive to boost

sales in the developing world Nokia

Corp this week introduced a new

line of phones starting at around

$120 Mozilla made waves with

plans for a $25 smartphone The in-novation there isn’t in the device, but in the context—expanding the

reach of the Web

“If we look at the perception of consumers, they are feeling innova-tion on devices has been slowing down in the last couple of years,”

said Eric Xu, one of three rotating chief executives at Huawei, one of the world’s largest smartphone makers “They don’t feel strongly that there has been compelling

in-novation in devices.”

The slowing pace of change comes as the relationship between

telecom firms and technology giants

is becoming increasingly tense Car-riers chafe at paying to roll out ex-pensive broadband networks, only for tech firms like Google and Apple Inc to gobble up most of the value through mobile advertising and app

revenue

At the same time, carriers know that pure tech companies, with their apps and services, help lure sub-scribers This year, they invited Facebook Inc CEO Mark Zuckerberg

to give a keynote address on Monday night Many like Telefónica

SA have set up their own incubators

to help nurture startups that they hope could turn into the next

Face-book

“The next innovation might not

be the size and shape of the smartphone but what you do with it,” said Anne Bouverot, director general of the GSMA, which represents mobile operators and

runs the conference

The sister 4YFN event is another effort by the telecom world to reach out to the tech community—to bring

it into the tent, albeit a tent part-way across town Organizers created

it less than a year ago, as the

increasingly important part of the ecosystem around the yearly

conference

The new event generated some buzz Jan Koum, founder of

messaging service WhatsApp Inc.,

which Facebook agreed last week to buy for $19 billion, stopped by for a panel on Tuesday On Wednesday evening, Intel Corp was among the companies wooing startups as part

of a cocktail-hour discussion dubbed

“Wearable Wednesday,” dedicated to gadgets and apps that you wear

“They call it ‘Four Years From Now,’ but it should be called ‘Two Years From Now,’” said Miron Perel,

an Israeli entrepreneur who was there to promote his startup “Some

of the companies here are going to change the world.”

—Thomas Gryta contributed to this article.

WhatsApp founder Jan Koum stopped by for a panel at 4YFN on Tuesday.

Trang 14

OPINION

With parliamentary elections

coming up in April, Hungarian

Prime Minister Viktor Orban’s

center-right Fidesz party is

lead-ing in the polls Yet the bold,

Oxford-educated reformer of the

late 1990s has become an

out-cast among Central European

politicians, and for good reason

In the last four years, Mr

Or-ban’s government has overseen

one of the most important

eco-nomic and political backslides in

Jobbik’s leader, MartonGyongyosi, urged the govern-ment in November 2012 to draw

up lists of Jews who “pose a tional security risk,” includingparliamentarians

na-Within Hungary, Jobbik hassucceeded in diminishing thestigma that accompanies racism;

the term “gypsy criminality” isnow a buzzword among Hungar-ian pundits, politicians and themainstream press These devel-opments on Mr Orban’s watch

do nothing to improve Hungary’sreputation around the world, butit’s hard to blame the primeminister for his opponents’ plat-form

Nor can one blame Mr Orbanfor the rise of racist militias Af-ter a court in Budapest bannedone group calling itself the Hun-garian Guard (initially founded

by Jobbik) in 2009, the NewHungarian Guard was establishedalmost immediately In the town

of Gyongyospata, uniformed tiamen threatened and chasedRoma residents, including a child

mili-and a pregnant woman

Yet Mr Orban cannot duckblame for these developmentsentirely Fearing a backlash fromhis nationalistic electorate, hehas done little to confront theextremist groups Instead hefans nostalgia for the era that

preceded the 1920 TrianonTreaty, when Hungary controlledterritory stretching from mod-ern-day Slovakia to Serbia, Ro-mania and Ukraine

Mr Orban’s catering to pettynationalism often borders on se-lective amnesia about certainparts of Hungarian history Re-cently the Federation of Hungar-ian Jewish Communities, theMazsihisz, announced it wouldnot take part in the Orban gov-ernment’s Holocaust commemo-rations According to the Mazsi-hisz, the framing of the

ceremonies whitewashes the rolethat the Hungarian governmentplayed and focuses exclusively

on the crimes perpetrated by theGermans—despite the fact thatHungary adopted its first anti-Jewish laws as early as 1938

Mr Orban’s tone-deafnesswhen it comes to historical sym-bols goes hand in hand with aconcerted effort to underminethe foundations of liberal de-mocracy and rule of law in Hun-gary Since Mr Orban came tooffice four years ago, Fidesz hasconsolidated its political powerand used it to pass controversiallegislation tightening mediaoversight, as well as constitu-tional changes that curb judicialpower and restrict political ad-vertising, among other measures

In 2011, the Orban governmentseized $14 billion worth of as-sets from private pension funds

to fix Hungary’s ailing public nances, and adopted ad-hoc lev-ies on the financial, telecommu-nications and retail sectors

fi-When the country’s dent fiscal council criticized agovernment budget in 2010, Mr

indepen-Orban stripped the watchdog ofits powers A 2011 reform of theHungarian National Bank gavegovernment appointees (cur-rently all members of Fidesz) agreater say in setting interestrates and other aspects of mone-tary policy—a move that inspireslittle confidence in the indepen-dence of the central bank frompolitical pressures

Mr Orban’s euroskeptic oric appeals to his electorate,and he does have a valid point—

rhet-Brussels is often intrusive andlacks democratic accountability

But make no mistake, Mr Orban

is not in the business of ing the flaws of European inte-gration If anything, his winner-takes-all politics and hisreceptiveness to nationalistideas do a greater disservice toHungary’s political and economicfuture than Brussels ever could

rectify-Mr Rohac is a policy analyst at the Center for Global Liberty and Prosperity at the Cato Insti- tute He tweets at @daliborro- hac.

Hungary’s Goulash Authoritarianism

B Y D ALIBOR R OHAC

‘Do we want science at any

price?” asked Hans

Bethe—dis-tinguished physicist, Manhattan

Project luminary, future Nobel

laureate—during one of the

peri-odic controversies surrounding

Operation Paperclip, a U.S

pro-gram that employed German

sci-entists, physicians and

techni-cians after the defeat of the

Third Reich Some of them were

war criminals Annie Jacobsen’s

“Operation Paperclip” is, in

ef-fect, a gloss on Bethe’s question

It is a flawed work, but the

moral issues it raises are

dis-turbing and perhaps even

pro-found

The rationale for Operation

Paperclip was simple Near theend of the war, the Americangovernment and military wereconvinced that the U.S neededGerman expertise in aeronautics,particularly the V-2 rocket, andbiological and chemical warfare

to help defeat the Japanese and

to prepare for an inevitable warwith the U.S.S.R

Even before the shootingstopped in Europe, Allied intelli-gence teams were vacuuming upenemy data, materiel and scien-tists In July 1945, the JointChiefs of Staff issued amemorandum outlining proce-dures for “the utilization andcontrol of [German] specialists,”

with the proviso that “no known

or alleged war criminals should

be brought to the United States.”

That instruction was violatedfrom the first The program’svery name came from the factthat the files of problematic Ger-mans, i.e., probable war crimi-nals, were marked with paperclips

In September 1945, Wernhervon Braun and six fellow rocketengineers arrived in this country

By the early 1950s, there wereabout 600 German rocketeers, bi-ologists, chemists, physicists anddoctors in the U.S working un-der Paperclip auspices, some ofwhom eventually became citi-zens (Paperclip also supervisedscientists in West Germany.) Theproject slowly lost its importance

as the 1950s progressed; Ms cobsen’s account focuses on theyears through 1952, the esti-mated start date of the “totalwar” with the U.S.S.R for whichthe Joint Chiefs were preparing

Ja-At least one of Paperclip’s

en-deavors was a great success VonBraun and other Germans wereintegral to the design of therocket that lofted America’s firstsuccessful satellite into orbit in

1958 and played a key role inbuilding the Saturn rockets thatcarried American astronauts tothe moon Ms Jacobsen writes,however, that “the chemical andbiological weapons programs cannow be looked back upon as dis-tinct failures and the product of

vague and often wrong gence.” In 1969, President Nixondeclared that the nation would

intelli-no longer work on offensive logical-warfare projects and thatexisting stockpiles would be de-stroyed; he believed the weap-onry could have “uncontrollableconsequences.”

bio-The author states that thebeneficiaries of Paperclip were “atawdry group of amoral war op-portunists, many of whom werelinked to war crimes.” I think

“immoral” is more apposite than

“amoral.” The term “war nal” has become trivialized, ap-plied, ingenuously or otherwise,

crimi-to people who don’t warrant it

But numerous individualscosseted by Paperclip were thereal thing: despicable ideologues,apparatchiks and technocrats

Wernher von Braun and his

col-league Arthur Rudolph were plicated in the horrors inflicted

im-on slave labor at Nordhausen,the complex where V-2s were as-sembled (Rudolph fled America

in 1984, after details about hispast surfaced.) Walter Schreiber,who had been involved in repel-lent medical experiments on con-centration-camp inmates, wasemployed at the Air Force School

of Aviation Medicine, in Texas

When the press learned ofSchreiber’s wartime activities, anAir Force general, Otis Benson,privately blamed the resultantcommotion on “an organizedmedical movement againsthim by medical men of Jewishancestry,” and the Pentagon ulti-mately arranged for Schreiber toflee to Argentina Not every Pa-perclip hire was a war criminal,but enough were to make Ms Ja-cobsen cast a very cold eye onthe entire project

Ms Jacobsen gathered anenormous amount of informationabout her subject and was appar-ently determined to use it all

The result is sprawling and fuse Her material would havebeen better served if she had de-voted discrete chapters to theimportant Germans or even tothe germane sciences Instead,she tells the story chronologi-cally, constantly discussing anddropping topics and then pickingthem up again There are otherpuzzling authorial choices Ms

dif-Jacobsen focuses mostly on perclip’s biologists, chemists anddoctors, presumably because sheassumed that the project’s rocketscientists have already beenwidely written about But therocketeers attained significant

Pa-status in the U.S.—von Braun came a popular hero—and therelative lack of attention af-forded them here results in adistorted representation of Pa-perclip The editing could alsohave been more alert Ms Jacob-sen writes, “When the Pentagonignored [Col Donald] Putt’s con-cerns, he appealed to MajorHugh Knerr, his commandinggeneral”—a sudden demotion forthe officer correctly identifiedelsewhere as Maj Gen Knerr

be-“Operation Paperclip” is theless lucid enough to allow thereader to ponder the ethical im-plications of the project Ms Ja-cobsen is conscientious in pre-senting the reasons that theprogram was implemented, butshe clearly believes that the taint

none-of Nazi-era atrocities fatally promised it I’m sympathetic toher conclusion, but I can’t trulysay whether or not the venturewas prudent The Soviet Unionwas, in fact, an evil empire, par-ticularly under Stalin If Ameri-can policy makers saw a conflictwith the U.S.S.R as inescapable,couldn’t co-opting German warcriminals seem a reasonable,even necessary, measure for thenation’s self-defense?

com-A more subtle issue, however,

is that too many American reaucrats in the military and ci-vilian branches of the govern-ment were ignorant of, orindifferent to, the ethical dilem-mas that pervaded Operation Pa-perclip National security re-quires hard moral choices, notmoral obtuseness

bu-Mr Schneider reviews books for magazines and newspapers.

(Little, Brown, 576 pages, £12.99)

Viktor Orban has gone from bold reformer to promoter

of petty nationalism.

Thorold Barker, Editor,

Europe, Middle East & Africa

Bruce Orwall, Senior Editor, Europe Gren Manuel, Executive Editor, Europe Terence Roth, Managing Editor, Europe Lauren Berkemeyer, Marketing Kate Dobbin, Communications Florence LeFevre, Institutional Sales Europe Michael Lloyd, Institutional Sales U.K.

Jonathan Wright, Circulation Sales Kelly Leach, Publisher

Published since 1889 by

Dow Jones & Company

Walter Schreiber, who had conducted repellent medical experiments in German death camps, was hired by the U.S Air Force postwar.

“About the merger, please

don’t use the words ‘takeover’

or acquisition.”

Pepper and Salt

THE WALL STREET JOURNAL

Friday - Sunday, February 28 - March 2, 2014

Pound/Euro 0.8220À0.12% Yen/$ ¥102.13g0.23% Global Dow 2476.84À0.44% Gold 1331.60À0.27% Oil 102.40g0.19% 3-month Libor 0.23610 10-year TreasuryÀ9/32 yield 2.642%

Versace Sells Minority Stake

As It Aims to Fund Growth

BUSINESS & FINANCE 17

The European Bond Juggernaut Rolls On

HEARD ON THE STREET 28

RBS Posts Second-Largest Annual Loss

LONDON—Royal Bank of land Group PLC announced a plan

Scot-to cut about £5 billion ($8.3 billion)

in costs over the next four years asthe state-controlled bank posted itssecond-largest ever full-year netloss

The 81% state-owned lender ported a £9 billion net loss for 2013

re-on Thursday, compared with a £6.06billion net loss the year before, hit

by soaring impairments and turing charges Revenue sagged 12%

restruc-to £19.44 billion RBS sharesslumped 7.7% in London trading

To quell political discontent overthe time it is going to take to re-privatize the bank, RBS outlined astrategic plan broadly based on cut-ting costs and refocusing the fran-chise on its U.K activities

“We need to change We are tooexpensive, and we are too bureau-cratic,” Chief Executive Ross McE-wan said in a conference call

Mr McEwan announced a review

of RBS’s sprawling business after his

appointment last October RBS now

is focusing on a cost-to-income get of 55% by 2017, down fromabout 73% currently

tar-The plan announced Thursdayinvolves merging seven internalunits into three, with the aim of cre-ating a simpler, more customer-friendly bank The vast majority ofthe cuts will come by slicing back-office costs and selling businesses

For example, £2.2 billion of savingswill come from cutting, among otherthings, some of the 16 U.K corpo-rate call centers and 11 offices thebank has in London RBS hopes tosave a further £3.1 billion throughsales and restructuring, includingits U.S retail franchise RBS Citizensand chopping £50 billion of risk-weighted assets from its markets di-vision The bank didn’t outline anystaff reductions or specify any busi-nesses from which it would exit

In Ireland, the bank plans to structure its franchise to challengeincumbents there RBS said that im-plementing the plan would cost £5billion over the next five years

re-The huge net loss, combined

with the renewed vows to focus onthe U.K., underscores the pressurethe bank is under Unable to justify

to its political owners the merit of

being a global, universal bank, RBS

is having to retrench Since its out in 2008, the bank has more thanhalved its balance sheet The newplan would see it cut its assets byroughly 20% more

bail-Meanwhile, the bank is having tocontend with allegations that it ispaying its employees too much andnot treating its smaller customersfairly

“We are the least-trusted pany in the least-trusted sector ofthe economy,” Mr McEwan said

com-In a move that will likely stokethe debate on pay, the bank doledout £576 million in bonuses to bank-ers, down from £679 million theyear before “I need to keep peopleengaged,” Mr McEwan said The ex-ecutive also outlined plans to treatcustomers better, including stoppingthe practice of enticing borrowerswith attractive interest rates thatthen are raised a few months later

“The plan, announced by RossMcEwan and the board today, deliv-ers that vision and is further evi-dence of RBS’s new managementgetting to grips with the problems

of the past and taking the bank inits new direction,” Treasury chiefGeorge Osborne said in written re-marks

In January, the bank warned thatits full-year results would include a

£3 billion provision and a drop in itscapital levels This included settingaside an extra £1.9 billion to coverlitigation and other claims sur-rounding mortgage-backed securi-ties sold before the financial crisis

It added £465 million to its funds torepay customers who bought pay-ment-protection insurance on creditcards and loans, and said it wouldtake a further £500 million in provi-sions to make payments to smallbusinesses that bought interest-ratehedging products on loans

“Our initial reaction is the cial targets are potentially realistic,but probably too distant to driveconsensus upgrades,” Citigroup ana-lysts said in a note

finan-B Y M AX C OLCHESTER

RBS's daily share price

The Wall Street Journal Source: FactSet

380 pence

320330340350360370

Telefónica SA over its €8.55 billion

($11.70 billion) bid for the German

unit of Royal KPN NV, raising the

specter of tough regulatory cles to a much-anticipated wave ofconsolidation in the European tele-com sector

obsta-The commission has serious cerns over the proposed deal be-cause of its impact on competition

con-in Germany’s market, and may askTelefónica to sell some of its Ger-man assets as a condition for ap-proving it, according to people fa-miliar with the confidentialcomplaint Regulators have said theproposed merger, involving thecountry’s third- and fourth-largestmobile operators, could harm com-petition and lead to price increasesfor German mobile-phone users aswell as for mobile phone companiesseeking access to the network

Madrid-based Telefónica and thecommission, which acts as the Euro-pean Union’s antitrust watchdog, ac-knowledged that the complaint wassent but declined to comment on itscontent

The complaint kicks off a process

of negotiations between regulatorsand the company, with a decision bythe commission expected by May 14

The opening of a complaint doesn’tprejudge the outcome of an investi-gation, and Telefónica will have thechance to address the commission’sobjections

Speaking Thursday after ing the company’s fourth-quarter re-sults, Telefónica Chairman César

releas-Alierta said he is “absolutely vinced” that the commission wouldeventually approve the deal and that

con-it would be completed in the secondhalf of the year

The investigation of Telefónica’splanned takeover of E-Plus, the Ger-man unit of the Netherlands’ KPN, isbeing closely monitored by rivalsand telecom market observers for

signals on the commission’s ance for big in-market mergers

toler-This kind of merger has beenfrowned upon in the past, and theEU’s antitrust chief, Joaquín Almu-nia, has urged firms to go for cross-border mergers instead, out of con-cern that in-market consolidationcould raise prices and diminish qual-ity of service

Telecom firms say national kets in Europe, particularly big ones,need a degree of consolidation be-cause they often were developed bymultiple providers for services such

mar-as cable and satellite TV The

num-Please turn to next page

FRANKFURT—Allianz SE backed

the new management team at its

Pacific Investment Management

Co unit, even as the performance ofthe U.S fund manager weighed onthe German insurer’s fourth-quarterearnings

“We are very happy with Pimco’snow broader-based leadership andinvestment management, which ad-dresses the long-term questionwhether Pimco is a Bill Gross one-man show or more than that,” Alli-anz Chief Executive Michael Diek-mann said on Thursday, referring toPimco’s co-founder

The world’s biggest bond-fundmanager has faced some turmoil inrecent months as pressure in thebond market last summer led tolosses and a decline in assets undermanagement

The Wall Street Journal has viously reported that tensions hadbeen rising between Mr Gross, whoco-founded Pimco in 1971, and thecompany’s chief executive and co-chief investment officer, MohamedEl-Erian In January, Mr El-Eriansaid he was quitting his post forpersonal reasons

pre-Pimco has since then widened itsportfolio-management and executiveteam, naming six new deputy CIOs

as well as a new CEO, a president

B Y U LRIKE D AUER

Trang 15

OPINION

With parliamentary elections

coming up in April, Hungarian

Prime Minister Viktor Orban’s

center-right Fidesz party is

lead-ing in the polls Yet the bold,

Oxford-educated reformer of the

late 1990s has become an

out-cast among Central European

politicians, and for good reason

In the last four years, Mr

Or-ban’s government has overseen

one of the most important

eco-nomic and political backslides in

ence after this year’s elections

Jobbik’s leader, MartonGyongyosi, urged the govern-

ment in November 2012 to draw

up lists of Jews who “pose a tional security risk,” including

na-parliamentarians

Within Hungary, Jobbik hassucceeded in diminishing the

stigma that accompanies racism;

the term “gypsy criminality” isnow a buzzword among Hungar-

ian pundits, politicians and themainstream press These devel-opments on Mr Orban’s watch

do nothing to improve Hungary’sreputation around the world, but

it’s hard to blame the primeminister for his opponents’ plat-

form

Nor can one blame Mr Orbanfor the rise of racist militias Af-ter a court in Budapest banned

one group calling itself the garian Guard (initially founded

Hun-by Jobbik) in 2009, the NewHungarian Guard was established

almost immediately In the town

of Gyongyospata, uniformed tiamen threatened and chased

mili-Roma residents, including a child

and a pregnant woman

Yet Mr Orban cannot duckblame for these developments

entirely Fearing a backlash fromhis nationalistic electorate, he

has done little to confront theextremist groups Instead he

fans nostalgia for the era that

preceded the 1920 TrianonTreaty, when Hungary controlled

territory stretching from ern-day Slovakia to Serbia, Ro-

mod-mania and Ukraine

Mr Orban’s catering to pettynationalism often borders on se-

lective amnesia about certainparts of Hungarian history Re-

cently the Federation of ian Jewish Communities, the

Hungar-Mazsihisz, announced it wouldnot take part in the Orban gov-

ernment’s Holocaust rations According to the Mazsi-

commemo-hisz, the framing of theceremonies whitewashes the role

that the Hungarian governmentplayed and focuses exclusively

on the crimes perpetrated by theGermans—despite the fact that

Hungary adopted its first Jewish laws as early as 1938

anti-Mr Orban’s tone-deafnesswhen it comes to historical sym-

bols goes hand in hand with aconcerted effort to underminethe foundations of liberal de-

mocracy and rule of law in gary Since Mr Orban came to

Hun-office four years ago, Fidesz hasconsolidated its political power

and used it to pass controversiallegislation tightening media

oversight, as well as tional changes that curb judicial

constitu-power and restrict political vertising, among other measures

ad-In 2011, the Orban governmentseized $14 billion worth of as-sets from private pension funds

to fix Hungary’s ailing public nances, and adopted ad-hoc lev-ies on the financial, telecommu-

fi-nications and retail sectors

When the country’s dent fiscal council criticized a

mone-dence of the central bank frompolitical pressures

Mr Orban’s euroskeptic oric appeals to his electorate,

rhet-and he does have a valid point—

Brussels is often intrusive andlacks democratic accountability

But make no mistake, Mr Orban

is not in the business of ing the flaws of European inte-

rectify-gration If anything, his takes-all politics and his

winner-receptiveness to nationalistideas do a greater disservice to

Hungary’s political and economicfuture than Brussels ever could

Mr Rohac is a policy analyst at the Center for Global Liberty

and Prosperity at the Cato tute He tweets at @daliborro-

Insti-hac.

Hungary’s Goulash Authoritarianism

B Y D ALIBOR R OHAC

‘Do we want science at any

price?” asked Hans

Bethe—dis-tinguished physicist, Manhattan

Project luminary, future Nobel

laureate—during one of the

peri-odic controversies surrounding

Operation Paperclip, a U.S

pro-gram that employed German

sci-entists, physicians and

techni-cians after the defeat of the

Third Reich Some of them were

war criminals Annie Jacobsen’s

“Operation Paperclip” is, in

ef-fect, a gloss on Bethe’s question

It is a flawed work, but the

moral issues it raises are

dis-turbing and perhaps even

pro-found

The rationale for Operation

Paperclip was simple Near theend of the war, the American

government and military wereconvinced that the U.S needed

German expertise in aeronautics,particularly the V-2 rocket, and

biological and chemical warfare

to help defeat the Japanese and

to prepare for an inevitable warwith the U.S.S.R

Even before the shootingstopped in Europe, Allied intelli-

gence teams were vacuuming upenemy data, materiel and scien-

tists In July 1945, the JointChiefs of Staff issued a

memorandum outlining dures for “the utilization and

proce-control of [German] specialists,”

with the proviso that “no known

or alleged war criminals should

be brought to the United States.”

That instruction was violatedfrom the first The program’svery name came from the fact

that the files of problematic mans, i.e., probable war crimi-

Ger-nals, were marked with paperclips

In September 1945, Wernhervon Braun and six fellow rocketengineers arrived in this country

By the early 1950s, there wereabout 600 German rocketeers, bi-

ologists, chemists, physicists anddoctors in the U.S working un-

der Paperclip auspices, some ofwhom eventually became citi-

zens (Paperclip also supervisedscientists in West Germany.) The

project slowly lost its importance

as the 1950s progressed; Ms cobsen’s account focuses on the

Ja-years through 1952, the mated start date of the “total

esti-war” with the U.S.S.R for whichthe Joint Chiefs were preparing

At least one of Paperclip’s

en-deavors was a great success VonBraun and other Germans were

integral to the design of therocket that lofted America’s first

successful satellite into orbit in

1958 and played a key role inbuilding the Saturn rockets that

carried American astronauts tothe moon Ms Jacobsen writes,however, that “the chemical and

biological weapons programs cannow be looked back upon as dis-

tinct failures and the product of

vague and often wrong gence.” In 1969, President Nixon

intelli-declared that the nation would

no longer work on offensive logical-warfare projects and thatexisting stockpiles would be de-

bio-stroyed; he believed the onry could have “uncontrollable

op-linked to war crimes.” I think

“immoral” is more apposite than

“amoral.” The term “war nal” has become trivialized, ap-plied, ingenuously or otherwise,

crimi-to people who don’t warrant it

But numerous individualscosseted by Paperclip were the

real thing: despicable ideologues,apparatchiks and technocrats

Wernher von Braun and his

col-league Arthur Rudolph were plicated in the horrors inflicted

im-on slave labor at Nordhausen,the complex where V-2s were as-

sembled (Rudolph fled America

in 1984, after details about hispast surfaced.) Walter Schreiber,

who had been involved in lent medical experiments on con-

repel-centration-camp inmates, wasemployed at the Air Force School

of Aviation Medicine, in Texas

When the press learned ofSchreiber’s wartime activities, an

Air Force general, Otis Benson,privately blamed the resultant

commotion on “an organizedmedical movement against

him by medical men of Jewishancestry,” and the Pentagon ulti-

mately arranged for Schreiber toflee to Argentina Not every Pa-

perclip hire was a war criminal,but enough were to make Ms Ja-

cobsen cast a very cold eye onthe entire project

Ms Jacobsen gathered anenormous amount of information

about her subject and was ently determined to use it all

appar-The result is sprawling and fuse Her material would have

dif-been better served if she had voted discrete chapters to the

de-important Germans or even tothe germane sciences Instead,she tells the story chronologi-cally, constantly discussing and

dropping topics and then pickingthem up again There are other

puzzling authorial choices Ms

Jacobsen focuses mostly on perclip’s biologists, chemists and

Pa-doctors, presumably because sheassumed that the project’s rocket

scientists have already beenwidely written about But the

rocketeers attained significant

status in the U.S.—von Braun came a popular hero—and the

be-relative lack of attention forded them here results in a

af-distorted representation of perclip The editing could also

Pa-have been more alert Ms sen writes, “When the Pentagon

Jacob-ignored [Col Donald] Putt’s cerns, he appealed to Major

con-Hugh Knerr, his commandinggeneral”—a sudden demotion for

the officer correctly identifiedelsewhere as Maj Gen Knerr

“Operation Paperclip” is theless lucid enough to allow thereader to ponder the ethical im-

none-plications of the project Ms cobsen is conscientious in pre-

Ja-senting the reasons that theprogram was implemented, but

she clearly believes that the taint

of Nazi-era atrocities fatally promised it I’m sympathetic to

com-her conclusion, but I can’t trulysay whether or not the venture

was prudent The Soviet Unionwas, in fact, an evil empire, par-

ticularly under Stalin If can policy makers saw a conflict

Ameri-with the U.S.S.R as inescapable,couldn’t co-opting German war

criminals seem a reasonable,even necessary, measure for the

nation’s self-defense?

A more subtle issue, however,

is that too many American reaucrats in the military and ci-

bu-vilian branches of the ment were ignorant of, or

govern-indifferent to, the ethical mas that pervaded Operation Pa-

dilem-perclip National security quires hard moral choices, not

(Little, Brown, 576 pages, £12.99)

Viktor Orban has gone from bold reformer to promoter

of petty nationalism.

Thorold Barker, Editor,

Europe, Middle East & Africa

Bruce Orwall, Senior Editor, Europe Gren Manuel, Executive Editor, Europe

Terence Roth, Managing Editor, Europe Lauren Berkemeyer, Marketing

Kate Dobbin, Communications Florence LeFevre, Institutional Sales Europe

Michael Lloyd, Institutional Sales U.K.

Jonathan Wright, Circulation Sales Kelly Leach, Publisher

Published since 1889 by

Dow Jones & Company

Walter Schreiber, who had conducted repellent medical

experiments in German death camps, was hired by

the U.S Air Force postwar.