Contents

• Page 1. World News

• Page 2. Companies

• Page 3. Features

• Page 4. Editorials

• Page 5. Post Mortem

Editorial
Deregulated Markets to become Fully Regulated similar to Exchanges.
SME Advisers look to Stock Exchange for legislative compliance protection.

The writing has been on the wall for about five years since 2003/2004, that deregulated exempt markets will eventually become regulated under ASIC or will have to become part of the Stock Exchange System with greater transparency and accountability. 

     This also follows a trend and recommendation presented in Europe for one Euro Capital Market to house all small national Exchanges and emerging markets, however, anti-monopoly legislation will permit more than one Market similar that has happened in US, UK and Australia. The main emphasis is for aligning multiple Stock Exchanges into one or two mega exchanges with divisonal niche type markets. This is similar to what occurred with the advent of the Euro dollar when some 20 odd currencies were collapsed into one unit. There is good reason why legislators see a common market to be established in Europe, Asia-Pacific and US, mainly as small Exchanges have trouble making enough profits due to a fragmented industry, to control and regulate the emergence of SME traded securities, stop director meddling with investors shares and tighten up disclosure rules, plus the advent of mega-trans-national markets like the London AIM concept.

     Australia has reputedly had the greatest financial and securities exemptions of all Countries for the establishment of emerging Capital Markets has essentially now closed these exemption. Although the legislation has been beneficial and quite successful, all persons who advice or offer advice, deal in securities or trade securities on behalf of another person must be licensed. SME Advisers (or Consultants) since 2005 have been caught in this compliance net, subsequently over the last decade the rise of quassi emerging capital markets (or 'grey' markets) have been mostly absorbed and being absorbed into various Stock Exchanges or have closed their operations.

    The past decade since the creation of exempt Advisers soliciting "professional" investors to buy high risk SME stocks is now effectively ended, all operators must be licensed in one way or the other to act as broker, market maker, dealer, adviser, operator, agent for either Buyer, Seller or the Issuer. Share hawking and soliciting globably is now a very large problem with many un-savory persons acting like con artists and capet-baggers.
    Many Advisers in the business consultants or finance brokers industry were attracted to look seriously at the new emerging capital markets as a means to make a fast dollar by 'hawking securities' under the guise of an except deal, few had the skill sets to remain and build a dedicated business, thus most drifted off as financial advisers, with little of no knowledge or training as to what was a good or poor investment, many investors lost money. The legislation also stopped Solicitors and Accountants acting as investment advisers, the same applied to Real estate Agents and other professionals who had to cease the practice of advising on investment strategies.
     Today, all countries are tightening their legislation on those who want to 'play the market' game, severe penalties are imposed for operation without a licence or even out side their licence parameters. In Australia, eventually only Stock Exchanges will prevail as the ultimate organization to 'handle' tradeable and non-tradeable securities of Micro companies, emerging SMEs, mature SME and the larger corporation.
     Hence we now see a new direction that Stock Exchanges are developing, namely a suite of micro and emerging markets where most unlicensed advisers can refer their clients. This development has occurred mainly due to the inability for advisers to group together and attain a higher level of licensing similar to the established Stock Brokers have done long ago. But can these micro and SME markets survive the current economic forces for the next five years?

Fraudster set up Fake Markets
Companies getting duped by a new breed of Financial Adviser
    
     The idea of easy corporate finance or loans have cost emerging companies millions of dollars, and made the fraudsters millionaires.
     Nearly everyone has heard of the "Nigerian Scam" which is now operated out of many African countries where so called lost millions can be earned from deceased estates, failed oil companies, lotteries by simply paying for the small cost to access Aladdin's Treasure, many Consumer fell for this scam and handed over tens of thousands of dollars which evaporated into thin air of fake names, alias, bank accounts. Most Policing Authorities and Interpol have repeatedly warned of this scam.
   
     Now there is the new corporate scam, which could be dubbed, the "Liechtenstein Scam", which like the Nigerian Scam, is operated out of many European countries, the scam is based on targeting  juvenile and immature emerging company directors who want to raise millions of dollars to finance a factory or develop their business. The Fraudsters act as Financiers and Advisers even as Insurance Companies by suggesting that the emerging company sell (issue) some corporate bonds to raise the money, however, the emerging company is so juvenile or backward or has no creditability it needs an Insurer to facilitate. Next the Fraudsters convince the company to sign up a complex contract so they can 'wrap' the high risk corporate bond (junk bond) to be placed into the capital market or money market, all at the price of a hefty fee up front. 
      The company then waits, and waits, for months even years, but nothing happens, except the Fraudster state the emerging company cannot maintain compliance according to the contract, which happens to be so burdensome and excessive that not even a well managed bank could achieve could comply, or there is a never ending series of problems.
     Reports of  fees range from $50,000 to $250,000 up front and are non refundable, there is no guarantee of loan funding, the company cannot sue because the contract says it is the one in breach, the company cannot get out of the contract since there in no close-out clause or has no maturity, plus the company usually sells off part of its equity and the Fraudsters are now sitting on the Board of Directors. The next target is to 'gut' the company of moey, IP and seize its assets and sell of the technology then throw the corporate shell with its investors and shareholders onto the corporate scrap heap, penniless.
     This type of Scam is pure 'Gordon Gecko' stuff seen at the top end, but now the Liechtenstein Scam is becoming more prevalent as SME directors who have few corporate skills get mesmerised by the lure of easy money. Also since the scam is so complex, few Accountants or Solicitors are ever exposed to this type of sophisticated funding, neither can advise their clients.

     Liechtenstein gained a reputation like many tax havens such as Nauru and other micro nations of the Caribbean. Liechtenstein is only 62 square miles area, a GDP of $25,000 per capita, uses Swiss Frank as its currency. It has easy incorporations and has some 73,000 "letter box" companies which provides about 30% of State revenue. It has low taxes, recently Liechtenstein has increased compliance to promote itself as a 'legitimate' finance centre after its major bank was implicated in major German tax fraud in February 2008. Australians may remember the tax scam headlined in Newspapers concerning Peter Clyne many years ago who reputedly fled to Liechtenstein. (see Encyclopaedia Britannica and Wikipedia for more info)

Editorial: Looking into the future.
Global Warming or Earth Axis Tilt?
What does it mean for Business?
  Is the globe heating up,.. is man the cause,... has industrialisation gone too far,... is the green house effect caused from CO2,... are we told the truth,... is carbon trading just a tax offset for defunct inefficient companies to stay in business or is carbon trading a method to transfer capital, these are important questions.
    Lets look at some facts and the state of nature which will then answer all other secondary questions. It is a fact that about every 6,000 to 7,000 years the earth tilt axis changes, it is well known that the magnetic poles reverse, iit is also the earths elliptical path around the sun is not steady, it is equally well known that the earth has warmed and cooled before.
     Studying the statistics of global temperature since the invention of the thermometer in the 1700s clearly shows a steady rise in global temperature since the mid to late 1800s, this was in a period when the global  population was around a 1 billion and well before the oil age, so why should it rise?. Also in the early 1800s there was a mini cool period that slowed global warming, which was due to a series of massive volcanoes eruptions that threw up substantial dust, ash, sulphur reducing the sun's heat, in fact the world suffered the effects of grey days, red skies for about 12 months. This was part of the cause of the Irish Potatoes famine and England and Europe missed a whole summer of crops which caused collapse in agriculture, food chain, resulting in famine. 
    In the late 1883 another series of volcanoes eruptions at the island of Krakatoa in Indonesia and New Zealand's Mt Tarawera sent the globe into another artificial climate change that lasted for 20 to 50 years. The Krakatoa eruption blew a a whole 6,000 foot mountain 50 km into the air, it is estimated 21 cubic Km of ash was thrown into the atmosohere, changing the climate at the time, by the 1930s the globe was changing again, did any one think the world has come out of that long period cool period even though the earths axis was in state motion change?
     Obviously our modern day generation is ignorant to all this including our noble scientists. So from these natural events we can see the earth has been warming for the last 200 or more years, excluding a recent period of volcanoes activity, hence, if these volcanoes did not erupt at that time, would the earth be say 2 degrees warmer than now?  
what about magnetic reverals in the future north maybe south and the poles move and the compass changes course, will this cause massive climate change, is it happening now, will it be gradual or quick?

    Now what about earth axis tilt, every school child is taught the earth rotates on its axis within a few degrees off parallel to the sun, what they don't emphasise is the earth actually wobbles like top, up and down, in and out, off its axis as its gyrates like a drunken sailor around the sun. Scientists have measured this and observed the phenonomen for hundreds of years, so it's not new. Yes, the earths wobbles or oscillates on its axis between 5-7 degrees over about seven thousands years, causing polar ice melts, climate change, and drifts in and out closer to the sun on its elliptical path. Obviously this movement would have significant effect on global warming or cooling today.
      Has any one ever promoted this in the media, which scientist has stood up and said, "global warming maybe natural", and now we come to mankind who can neither create matter nor destroy matter, could he influence the whole globe atmospheric temperature, doubtful, America cannot even solve a hurricane problem in New Orleans. Whatever happened to the cuffel about the Ozone hole? Oh, that's right the refrigerant gas patents ran out of time, then industry need an excuse to blame ozone depleting refrigerants which are mostly locked in a sealed unit, so the major refrigeration companies brought out a new patented refrigerant and had the old one banned. Its like governments permitting manufacture of land mines, then banning them after their use, it just doen't wash, who's telling the truth.
    Sure, burning fossil fuel adds to the environment and yes it would be better to have an alternative such as hydrogen, but , the idea that even the worlds cattle herds are adding too much methane has got to be bunkum, they are natural, besides all the buffalo were killed off and relaced by cattle, its almost equal. Now concerning carbon credits, is this a practical way to reduce carbon, or is it another method to shift low polluter credits to heavy polluters thus retaining the status quo, will they eventually ban petrol in favour of hydrogen fuel, probably will once the oil conglomerates can gain control of production, distribution and use.

      So here is the million dollar questions, Global Warming or Earth Axis Tilt, I favour the latter, but lets say for now the smarties in academia are right, after all they never got anything wrong, or did they?

Editorial
Looking for Investors - 
There's $12 trillion in your own back yard.

     It's amazing how many emerging company executives complain about not being able to find Investors.  Well here are some recent statistics on High Net Worth Investors (HNWIs), namely those with excess of $30 million in assets.
     In the Asia -Pacific region, HNWIs' wealth will reach US$12 trillion by 2011, growing at a rate of 8.5% per annum which is exceeding the global rate of HNWIs at 6.8%. It is well understood that the majority of the HNWIs re-invest back into their own region, that 25% of their investments are in equity securities. Throughout the region, demand for alternative investments is increasing as investments opportunities become accessible to investors. Investors in this bracket number about 9.5 million individuals or families. The three main brackets are sub-HNWI, prime-HNWI and ultra-HNWI.
    Globally, wealth continues to consolidate at the highest levels, which means about 1% of the world individual investors are classed as Ultra-HNWIs who exceed $30mil in assets. This means that SMEs need to be very presentable and attractive to capture the sub-category of HNWIs who are under $30 mil in asset value. Few SMEs will attract the Ultra -HNWIs who are effectively the billionaires are mega $100s millionaires. Big money is simply attracted to bigger projects outside the scope of SMEs ability, logic or have the skill sets to deal at the upper level.

     The good news for emerging companies is,  it means the investor pool is increasing both in size, value and numbers in the sub $30 mil bracket, it also means that maturing companies start to become attractive to the over $30mil investor prime-HNWIs bracket.
     The nine principle markets for Asia-Pacific SMEs are Australia, China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan. Hence, astute SME Directors need to make their companies investment opportunities known further aboard in order to scale up. 
      Even in China there is special treatment and incentives fore SME type emerging companies to start up with tax incentives, exemptions, credit guarantee assistance and a very wide variety of government sponsored assistance programs.

     It is also a remarkable situation when we consider Australia's Superannuation assets have just topped $1 trillion, unfortunately SME generally cannot access large chunks of professional superannuation capital until they get listed on a Stock Exchange, although private operated supper is available, thus this is the reason why the individual investors and business angels or corporate mentors are more accessible to SMEs. Although these numbers of trillions may sound unfamiliar to the average person,  there is a lot of capital in the system that still seeks new places to invest, as the world's new rich get richer and the up coming wealthy hit the next level, higher demand will on new and emerging enterprises with good potential.
     When we consider the minor recent Stock Market convulsions of a few billion or the US sub-prime hiccup of a few billion more or the other fiscal adjustments various countries are going through, it is relatively insignificant compared to the total wealth of individuals, families and corporations, including the average worker and home owner, is staggeringly vast and probably its base is indestructible.

Why SMEs Fail: Its due to the Z-factor.

     The answer is simple,... its a management mental block and lack of skills at the corporate level. Contrary to certain opinions, serious and astute Investors operate at the corporate level, they want to see companies enter markets and have the ability to stay listed, adhere to general corporate compliance, have third party independent advisers, they look for companies with strong share or portfolio growth, they want dividends, seek well experienced management with timely reporting and executive accountability. 
    Unfortunately, many SME directors see the company as their own, fall in love with the product instead of romancing the Investor and attending to their desires. 

     Lets look at some facts, SMEs as an industry block equate to about 30% of GDP, ASX listed companies account for 32% of GDP. Many SMEs are successful, the fact is in Australia SME with employees under 20 equates to about 1,100,000 enterprises, the block with less than 100 employees is about 35,000 and SME with more than 100 employees is a paltry 6,000 companies. So this show a huge success rate in SMEs getting started, obtaining capital and becoming commercialised. The statistics are probably similar in other countries.

     The most vulnerable SMEs are those in the $1mil to $10mil bracket and Start up with in 24 months. Executives wonder why they cannot raise anymore capital after the first round or two, well it is usually because they are too introverted, lack basic corporate skills or incorrectly delegate to an non practical Business Adviser or Accountant or Solicitor who has never run a business except his own practice, and its debatable if a Practice is actually a business, many times its like talking to stunned plovers who have little real corporate knowledge.
    Many emerging SME executive get too smart for their own good and fail to foresee the repercussions of their actions, don't see the fine detail, or rattle on about the big picture, fail to plan well enough in advance to resolve ongoing or developing complications and problems. Often executives are working in the Z-Factor which in the Bankruptcy Industry is known as the zone-of-ignorance.

     This is a critical situation that at some stage all executive get into, even the big corporate moguls, the Z-Factor is when executives keep trading prior to the company becoming inadvertently insolvent, by then they realise it is hopelessly insolvent, there is a backlog of creditors, sales plummeting, inventory decreasing and then all it takes is one false move, and it's all over, bankrupted. Pilots have a similar problem called disorientation and must be trained to recognise the signs before crashing the plane, ship captains also train for disorientation in fog, however directors are not trained, they are permitted to fail blindly.
      Many times we see top ideas, good businesses and profitable companies simply run into the ground by management incompetence or penny pinching, over reliance on introverted accounting or legal fraternity who contribute little real advice to fix the actual bottom line, or a banking industry too willing to encumber everything til there is nothing left. Generally its a small debt of $2000 under a Court Order that brings the house (company) down.
    There are many options and alternatives for executives who find themselves in an insolvent company, however, it is extremely complex and sophisticated to restructure any company and best left to a person with vast experience and skills in the area, otherwise, executives and directors could commit fraudulent actions against the company and its shareholders. Few directors, if any have the disciplines, skills or guts to trade an insolvent business back onto an even keel.

Companies who enter the Australian Unlisted Capital Market gain a vast depth of associated skills, advisors and reputable personal who advance the interests of company, executive and shareholder (see diagram).