CFA 2011 Annual Report

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2011 Annual Report | 1

2011 Annual Report

Our work.

Our voice.

Our community.

Worldwide.

This document in PDF ormat

represents the CFA Institute

2011 annual report online at

annualreport.cainstitute.org.


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About CFA Institute

CFA Institute a global, not-or-prot proessional association administers the Chartered Financial

Analyst (CFA) and Certicate in Investment Perormance Measurement (CIPM) curricula and

examination programs worldwide. We publish research, conduct proessional development programs,

and set voluntary, ethics-based proessional and perormance reporting standards or the investment

industry. CFA Institute is aliated with 135 proessional societies in 58 countries/territories and

operates CFA China, a member service initiative in Beijing and Shanghai.

We oer a range o educational and career resources or investment proessionals and are a leading

voice on global issues o airness, market eciency, and investor protection.

CFA Institute Mission

To lead the investment proession globally by setting the highest standards o ethics, education, and

proessional excellence.

Our Vision

Our vision builds on our belies that:

Financial markets should be equitable, free, and efcient so that every investor has a chance to earn

a air return;

The interests of the ultimate investor must take precedence over the interests of all other market

participants; and

High ethical principles and self-regulatory standards are as important to market efciency and

airness as rules and regulations.

Emerging Latin American Opportunities

In recent years, CFA Institute has recognized the great potential in the developing economies o

Latin America and is making a long-term investment in this region o the world. These countries have

experienced a wave o democratization and open-mindedness in government, and many countries

have started to view opportunities in a new way. The establishment o common market areas,

combined with government interest in ree markets and modernization, has made this part o the

world an important region or the global investment community and CFA Institute.

As in other developing markets, the opportunity or CFA Institute is to acilitate growth in the region

by educating knowledgeable and ethically centered investment proessionals through the CFA

Program. By educating investment proessionals in these countries, we can help raise standards in the

investment management proession and encourage urther development o capital markets grounded

in global best practice. This will bring strength to these economies and help build markets that will

attract investors and increase the growing importance o Latin America in the world economy.


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The Latin American ofce o CFA Institute is located in Buenos Aires, Argentina.

Recognizing that we are grossly underrepresented in the region, CFA Institute initiated its rst Latin

American strategy two years ago. Our strategy calls or building awareness o CFA Institute and the

CFA Program and attracting more CFA candidates. We have received strong media attention rom

respected outlets over the past year, almost tripling media coverage rom scal year 2010 to 2011.

Our staff has spent quite a bit of time establishing and deepening relationships with Latin American

regulators, employers, and universities. We have a dozen CFA Program Partners, prestigious

universities that embed 70 percent o the CFA Program into their curricula and work with us on

providing leadership in investment management education and supporting our members proessional

development through education. Our work with these universities includes the CFA Institute Research

Challenge, an initiative described in this annual report. And we are working closely with our member

societies in Argentina and Uruguay, Brazil, and Mexico.

We are also encouraging the adoption o the Global Investment Perormance Standards throughout

the region. In September o 2011, Procapitales, a Peruvian organization, was approved as the rst

country sponsor in Latin America.

The volunteer work o our members in Latin America is greatly appreciated, especially in places

such as Colombia, Chile, Peru, and Central America, where CFA Institute member societies have yet

to be established.

About CFA Institute


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Sustainability

To succeed in todays economy, organizations

are instituting business approaches that

generate long-term customer and employee

value. The sustainability approach ocuses not

only on green strategies aimed at the natural

environment, but also takes into consideration

all aspects o how a business operates in social,

cultural, and economic environments. It is a

holistic approach that considers the longevity

o an organization and ties its goals to the

goals o the societies and environments in

which it operates.

At CFA Institute, a group o 40 sta members volunteered over the past year to consider the benets

o and opportunities to engage in a sustainability initiative. The committee identied ways the

organization can take a long-term view o nancial, social, and environmental sustainability. The team

is working on an action plan inormed by hundreds o objectives, strategies, activities, and metrics.

Goals either underway or under consideration include measuring and reducing the organizations

carbon ootprint, improvements related to procurement and post-use disposition, and product

delivery options. Sustainability is also a ocus or the design o a new building that will serve as the

international operations hub o CFA Institute.

The CFA Institute Research Challenge

The CFA Institute Research Challenge is a

global annual competition that provides

university students with unparalleled real-world

experience in equity research and company

analysis. The Challenge offers students a unique

opportunity to learn rom leading industry

experts and their peers rom the worlds top

business schools. This educational initiative is

designed to promote ethical and proessional

standards as well as the best practices in equity

research among the next generation o analysts

through hands-on mentoring and intensive training in company analysis and presentation skills.

Politecnico di Milano rom Italy was named the winner o the th annual CFA Institute Research

Challenge. Regional competitions took place in the Americas, Asia Pacic, EMEA, and New York to

determine the our teams that competed in the Global Finale, which was held in April 2011 in Omaha,

Nebraska, USA. Warren Buett served as keynote speaker at the event and students participated in an

extended Q&A session with him. The winning team (pictured above let to right: Marco Jean Aboav,

Initiatives

About CFA Institute


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Global Investment Perormance Standards

In the early 1990s, CFA Institute created and

began administering the Global Investment

Perormance Standards (GIPS standards) a

set o standardized, industry-wide ethical

principles that provide investment rms with

guidance on how to calculate and report their

investment results to prospective clients. We

partner with local country sponsors around the

world to promote and maintain the relevance

o the GIPS standards. The success o the

Standards is the result o an alliance among

experts within the global investment industry

and partnerships with country sponsors.

During the past year, the latest edition o the GIPS standards became eective 1 January 2011,

representing the most comprehensive review and revision o the Standards to date. Thirty-our

countries have been ocially endorsed as GIPS Country Sponsors, rmly establishing the GIPS

standards as the premier global investment perormance standard. Already the 2010 Standards have

been translated into Spanish, Japanese, and Korean with additional translations in Russian and

German expected soon. Peru became the 34th GIPS Country Sponsor in September 2011 and the

rst in Latin America. Industry organizations in Argentina, Brazil, Chile, Colombia, and Mexico have

expressed interest in bringing the GIPS standards to their respective countries as the global expansion

and adoption o the GIPS standards continues.

Steano Vigan, Anna Belli, Nicol Rolando, Francesca Maria Claudio, Giacomo Saibene, Andrea Dal

Santo, CFA) overcame tough competition rom the University o Southern Caliornia, representing the

Americas Region; Rutgers University rom the New York Region; and Thammasat University (Bangkok,

Thailand) rom the Asia Pacic Region. In honor o this great achievement, the team rom Politecnico

di Milano received US$10,000 or their university.

The sixth Research Challenge, which runs until April 2012, is expected to attract over 3,000 students

globally and 700 universities rom over 50 countries. This year, more than 100 CFA Institute

member societies will participate with approximately 2,200 volunteers supporting all aspects o the

competition. Local challenges will be held or the rst time in Colombia, Central America, Vietnam,

Jordan, Egypt, Lebanon, and Kenya.

About CFA Institute


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CFA Program Partners

Over the past ve years, through the

CFA Program Partners initiative, we have

partnered with 137 globally diverse, high-

prole institutions to bring the CFA Program

Candidate Body o Knowledge and the

organizations Code o Ethics and Standards

o Proessional Conduct to university students

around the world. At the close o scal year

2011, 33 partners are located in Asia Pacic;

47 are in Europe, the Middle East, or Arica;

and 46 are based in North America. With the

organizations increased commitment in Latin America, we are now partnering with 11 institutions

throughout that region.

Recognition as a CFA Program Partner signals to students and the marketplace that the university

curriculum is closely tied to proessional practice and prepares students to sit or the CFA exams,

which include the study o ethics and proessional conduct. Beyond incorporating the Candidate

Body o Knowledge into their degree programs, CFA Program Partners enjoy a position o thought

leadership in the proession and agree to contribute to CFA Institute strategic objectives, such as

meeting the lielong learning needs o our members. The initiative contributes to our organizations

ability to deliver on its mission to develop and promote the highest educational, ethical, and

proessional standards in the investment industry.

A new initiative the CFA Program Associates was recently announced and will allow CFA Institute

to introduce the CFA Program to more students by engaging with a broader array o universities.

The CFA Program Partners initiative is part o the organizations University Relations department.

In scal year 2011, this team increased the number o CFA Program Partners, and brought the CFA

Institute Research Challenge and Executive Education partnerships into its old. University Relations

is also taking advantage o social networks to more ully engage prospective CFA candidates through

the Research Challenge and the CFA Program Partners initiative. Pictured above are Lakshmi Bohjraj,

MBA, (let) o Cornell University and Douglas Foster, PhD, o the Australian National University. Both

universities are CFA Program Partners.

About CFA Institute


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Career Resources

Although hiring in the nancial services

industry has rebounded and job postings on

the CFA Institute JobLine have increased, the

need or career resources remains strong. In FY

2011, CFA Institute enhanced its career services

oerings by initiating career management and

job search-ocused webinars and podcasts

or members and candidates. Specically,

we hosted ve webinars which are available

to replay and produced nine podcasts o

interviews with recruiters and career coaches.

Employers have told us that strong communication skills are a key consideration when interviewing

and hiring nance proessionals. For this reason, several o our new oerings ocus on interviewing,

persuasion, presentation, and communication skills. Other resources cover resume writing, working

with recruiters, using social media or career management, and navigating generational dierences in

the workplace.

About CFA Institute


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Views o Leadership

Daniel S. Meader, CFA

Chair, Board o Governors

As this years chair, I have been asked by our membership to lead an organization that continues to

exhibit great passion or its work through the eorts o volunteers and sta around the world. As a

longtime volunteer or CFA Institute and my local society based in Texas, I applaud all o you who are

ullling our global mission by building local communities o investment proessionals and impacting

the development o markets in your countries. Our community o more than 100,000 members is

growing and with this growth we are playing a greater role in the global capital markets.

Its not the same world it was just ve years ago. As citizens, investors, and investment proessionals,

we are acing a new reality. From all corners o the world, market volatility is shaking investor

condence and risk tolerance thresholds. These conditions, in turn, inspire investors to seek more rom

their investment managers even as we must all adjust our expectations to the reality o lower return

markets. Finally, investment managers are under increased scrutiny to deend the value o their eorts

or the client. This chain reaction leaves many o us looking in the mirror and wondering i we are truly

adding value to our clients and putting the clients interest ahead o our own.

Its not the same world it was just ve years ago. As citizens,

investors, and investment proessionals, we are acing a new reality.

Given this dicult environment serious investment proessionals can turn to CFA Institute. With our

commitment to thought leadership and lielong learning, we advance a vibrant and dynamic global

body o knowledge that provides education and insight to the investment industry. I encourage you to

learn more about the CFA Institute Global Body o Knowledge which is available on our website, ree

o charge.


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Our challenge as an organization and as a community is to lead the investment proession globally

by setting the highest standards o ethics, education, and proessional excellence. The tasks at hand

vary rom country to country, but the commitment to our mission is the same everywhere in the world.

With the engagement o 135 member societies worldwide, we are building a network o competent

investment proessionals, giving voice to the issues o the day, and preparing the next generation to

lead the proession.

Certainly our industry is under stress and there will be dicult times ahead. Even as our member and

candidate populations grow we must challenge ourselves to meet these tough times with a spirit o

innovation and a continued commitment to our belies. Perhaps Steve Jobs said it best. Find what you

love and do what you believe is great work and the only way to do great work is to love what you do,

so keep looking and dont settle. And so, I say to you now, here at CFA Institute we keep striving to

accomplish our mission and we wont settle.

With each member society I visit, I am energized by the dedication and passion o members who

take the time to give back to their proession. In a perect world I would be sitting across rom you

at the kitchen table saying thank you or your devotion to the high standards o our proession and

or conducting yourselves in an ethical manner. I urge you to reach out to the leaders in your local

community to share our mission with them. To all investment proessionals around the world, I hope

you will reach out to CFA Institute or education and guidance as we work to achieve our mission o

providing air and transparent markets or all investors. As always, your board o governors welcomes

your inquiries and ideas.

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John Rogers, CFA

President and Chie Executive Ofcer

It is my pleasure to report that the past year has been one o great progress in delivering on the

mission o our organization. In this years annual report, Id like to ocus on our work as education

leaders within the investment proession, our voice in regulatory and policy arenas, and our growing

worldwide community.

The investment proession continues to be deeply aected by the allout rom the 2008 global

nancial crisis. Investment proessionals around the world are working to regain the trust o investors.

Many rms and their employees have been displaced due to challenging economic conditions. Volatile

markets create anxiety or investors and investment proessionals alike.

The need or globally relevant and high-quality proessional

accreditation in investments is important. And that is why the CFA

Institute long-term strategy includes program innovations that make

investment education more accessible.

In such times, the value o truly relevant proessional education and credentials comes to the ore.CFA Institute is committed to the highest standards o excellence, rigor, and relevance in nancial

education. Our programs and credentials, led by the Chartered Financial Analyst designation,

are known worldwide as both challenging and relevant. And, through conerences, lectures, and

publications, our members are oered thousands o hours o continuing education opportunities to

keep their knowledge current.

Along with education, proessional ethics are at the heart o the CFA Institute mission. Our 100,000

plus members renew their pledge to practice ethically every year and are subject to rigorous standards

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o practice, with a proessional conduct program in place to deal with violations. Many actors

contribute to the creation o an ethical proession, including advocacy or airness and transparency

in global capital markets. Over the years, CFA Institute has served as a trustworthy and insightul

participant in regulatory and policy discussions around the world. The voice o our members carries

weight in these circles and we use that platorm judiciously and in keeping with our mission.

The need for globally relevant and high-quality professional accreditation in investments is important.

And that is why the CFA Institute long-term strategy includes program innovations that make

investment education more accessible. At the same time, this strategy raises industry standards in

ethics and proessional competence. We are currently working on a certicate program that will serve

existing demand or undamental investment knowledge among industry participants at all levels.

We expect that by promoting common understanding o how the industry works and the essential

elements o ethical conduct, this program will increase proessional excellence in the industry.

I encourage you to read this years annual report to learn more about CFA Institute. In pursuit o

our mission to lead the investment proession globally by setting the highest standards o ethics,

education, and proessional excellence CFA Institute is nancially healthy and investing in the uture.

Please take a moment to view the video o our Chie Financial Ocer, Tim McLaughlin, to learn about

our operating results or the most recent scal year.

I thank our sta and volunteers or their many contributions and I thank all o our members or

upholding the high standards o our proession.

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Kurt Schacht, JD, CFA

Managing Director, Standards and Financial Market Integrity Division

As we know, the nancial services industry continues to struggle with its reputation. Whether its the

2008 nancial crisis, the Mado scandal, or a variety o other ethical shortcomings, the perception

o our industry has never been more challenged. I there were ever a time or an ethical champion in

our industry it is now. Thanks to the eorts o many sta and CFA Institute volunteers, our progress in

becoming that champion continues to fourish.

Here are just a few examples of our strong and collective voice. First, as global regulatory reform

enters the rule-making phase, many important questions remain: Will proposed reforms reduce

systemic risk? Will they close gaps in regulation? Will reorm eorts be collaborative worldwide, or

will we continue to be highly ragmented? Over the past year, we have oered regular commentary on

these and other issues aected by the rule-making process.

I there were ever a time or an ethical champion in our industry

it is now. Thanks to the eorts o many sta and CFA Institute

volunteers, our progress in becoming that champion continues to

fourish.

And, thanks to member surveys, weve heard your concerns as well. Youve told us that derivatives

regulation and mis-selling by nancial advisers are key issues in nearly all markets. Your insights have

shaped our response to the debates concerning OTC derivatives manager registration, creating a

better early warning system to detect and mitigate speculative bubbles such as sub-prime. We

continue to engage in the global debate over convergence to IFRS nancial reporting standards and

the challenge o many regional dierences.

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In our codes and standards area, we are promoting additional guidance or applying the Global

Investment Perormance Standards, or GIPS, to alternative investment space, including hedge unds.

Most importantly, we are asking or your help in promoting our Asset Manager Code o Proessional

Conduct. Its based on exactly the same ethical principles that apply to us as individual CFA

charterholders, but at the rm level.

Finally, better awareness o CFA Institute positions and standards o proessional conduct is important

generally to the goal o creating markets and products that serve the best interest o clients and

the public.

We have added sta and resources globally to help achieve this goal. In Washington, London, Brussels,

Hong Kong, and other regulatory centers around the world, we continue to expand the reach and

impact o CFA Institute.

Until next time, keep track o our global advocacy eorts online and at our new blog site Market

Integrity Insights. Remember, you are part o our important voice and we welcome your comments

and assistance.

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Nitin Mehta, CFA

Managing Director or Europe, Middle East, and Arica (EMEA)

Id like to share with you what CFA Institute is doing to create a global community o investment

proessionals.

Our association has come a long way since its inception over six decades ago. Today, we have

members, candidates, volunteers, and partners in more than 130 countries around the world, spread

rom New York to New Delhi, Santiago to Stockholm, Shanghai to Sydney, and beyond. In the process,

we have become a global organization. But perhaps even more importantly, we are now a global

community. Like other successul communities, we share a common mission, common values, and

many common experiences. Together, our collective purpose and eort benets us all.

Today, our community o over 300,000 members and CFA

Program candidates represents a thriving network with a wide reach.

Its the biggest global community o investment proessionals, and it

promises to grow bigger still.

We recognize that our network o member societies in over 50 countries provides or localcommunities. These societies which are part o the CFA Institute amily are led by dedicated

volunteers and sta. We work with them to meet with local employers, educators, and regulators

in order to address issues o local interest. Societies also provide opportunities to meet with other

community members at a variety o events. And with rapid advances in technology, we have new

opportunities or connecting members o our diverse community. Last year, we invested in social

media orums, such as Facebook, LinkedIn, Twitter, and blogs, to create virtual sub-communities, oten

ocused on specialist interests.

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Learning rom each other, discussing issues o common interest, and solving problems together this

has always been an important aspect o being a proessional. Perhaps the best example is provided

by our Annual Conerence. At the last one in May 2011, delegates rom around the world came to hear

some o the leading opinion-ormers in our industry. One speaker, in particular the governor o the

Central Bank o Nigeria, Mr. Lamido Sanusi spoke about the wide-scale changes he implemented

in the banking system following his appointment at the height of the global nancial crisis. His

intelligence, his boldness, and his ethical leadership stunned the audience. It was an electric speech.

At the end, a thousand delegates rose spontaneously and provided a rare standing ovation. As I

applauded and looked around, I was reminded o the power o the global community we had orged,

where like-minded proessionals come together and leave better inormed, challenged by resh ideas,

and with lasting new riendships.

Today, our community o over 300,000 members and CFA Program candidates represents a thriving

network with a wide reach. Its the biggest global community o investment proessionals, and it

promises to grow bigger still. We are working hard to strengthen it urther so that it becomes even

more valuable to our members. I hope you will join us in that mission with your participation.

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Thomas R. Robinson, PhD, CFA

Managing Director, Educational Division

In an ever-changing investment landscape, CFA Institute keeps you current and knowledgeable

through its certication programs, such as the CFA and CIPM Programs, and its lielong learning

programs, such as conerences, publications, webcasts, and podcasts. Each year we bring hundreds o

new programs to our members and others.

CFA Institute benets rom a continuous, global practice analysis that identies the knowledge, skills,

and abilities necessary to practice in todays environment. This inormation, gleaned rom ocus groups

comprised o members and employers, is combined with other input to dene the Global Body o

Investment Knowledge. The GBIK, as we call it, guides all o our educational programs. For example,

today more than 80% o the CFA Program curriculum has been custom written or CFA Institute. The

curriculum presents a global perspective that can be updated on a timely basis and keeps pace with

trends in practice. Ownership o this curriculum enables us to deliver it to candidates at a much lower

cost and in easy-to-access ormats, such as an e-book which can be used online, remotely on a laptop,

or even on an iPad.

The strength o our educational programs comes rom their

relevance to practicing investment proessionals today and we

appreciate the eorts o thousands o practitioner-members who

help make this possible.

The relevance o our bodies o knowledge enables us to reach investment proessionals, universities,

and regulators around the world. Many universities have adopted our bodies o knowledge as the basis

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for their curricula. Regulators often require or encourage investment professionals to participate

in the CFA Program. And commercial organizations have adopted the ramework o the GBIK as

their taxonomy.

Our fagship CFA Program continues to be strong. This scal year we had about 210,000 exam

registrations rom around the world a 5% increase over last year.

And our candidate population is truly global in nature. In scal year 2011, more than 40% o

registrations came rom the Asia Pacic region, more than 20% were rom the Europe, Middle East and

Arica region, and the balance came rom the Americas.

We are building awareness o our programs and standards through advertising and social media,

which allows us to distribute inormation in new and exciting ways. For example, i you are unable

to attend one o our conerences, you can ollow Twitter conerence eeds. You can also access

publications, webcasts, and podcasts rom these conerences on Facebook as well as through iTunes.

Weve heard rom employers and members that our standards and bodies o knowledge could be used

to provide other participants with an understanding o the essential components o investments, the

investment industry, and the importance o high ethical standards. CFA Institute sta, working with

members and societies, is tackling this need by creating and launching an Investment Fundamentals

certicate aimed at the wider investment industry. Unlike the CFA Program, the certicate will not lead

to a designation. Look or details on this in 2012.

The strength o our educational programs comes rom their relevance to practicing investment

proessionals today and we appreciate the eorts o thousands o practitioner-members who help

make this possible.

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Strategic Perspectives

Investment proessionals around the world rely on CFA Institute. Our bodies o knowledge, imparted

through the CFA Program and continuing education opportunities, help inorm the work o our

members. We speak on their behal in policy and regulatory circles as an advocate or investor

protection, market eciency, and airness. And we provide opportunities or investment proessionals

to learn rom each other, discuss issues o common interest, and contribute to solving the issues o

the day. This has always been an important aspect o being a proessional.

Our work

Jayesh Gandhi, CFA, believes the economic

growth in the world is shiting and will continue

to change in avor o emerging markets in

general and the BRICS countries, such as India,

in particular.

Our voice

Kerstin Dodel, CFA, says charterholders

need to bring attention to our role and

responsibilities towards investors, clients, the

nancial markets, and the economy as a whole.

We can impact change by giving voice to our

members and ocusing on important issues.

Our community

Olivia Engel, CFA, says being part o this

community makes her eel like it is her

responsibility and the responsibility o

members to not just blame the markets. She

believes members are the market.


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Jayesh Gandhi, CFA

Portolio Manager, Morgan Stanley, Mumbai, India

Ater ve years in the industry as an analyst, I recognized the need to enhance my knowledge o the

global investment management world. The CFA charter was my rst step.

The most important thing about the CFA charter is that you have to be sel motivated to do it. You

have to learn everything on your own and do it while on the job, so the motivation levels have to be

much higher compared to the average. And I was motivated: When I started the CFA Program in 1998,

I instantly loved the books. The curriculum and body o knowledge are just incredible.

I you like the subject and have passion or the knowledge, all you need is proper planning and

dedication to earn the charter. The way I managed it all was to work and study over the weekend,

which, o course, my wie did not like. But, she was supportive as she understood the importance o

this eort to my career.

As a lead portolio manager at Morgan Stanley Investment Management in Mumbai, India, I am

entrusted with pursuing and leading an independent investment strategy. Proessionally, the charter

has been important. Apart from the knowledge, it earns you respect and the standing required to

command a certain level o access to the organizations you want to be part o.

Indias progress in the nancial services industry is truly remarkable. India is now to the services sector

what China is to manuacturing. We are setting global standards in sotware services, telecom services,

and banking and nancial services, and we are a model or cutting costs and providing services at

price points that other countries are not able to aord.

I believe the economic growth in the world is shiting and will continue to change in avor o emerging

markets in general and the BRICS countries, such as India, in particular. It is up to Indias proessionals

to participate in shiting the wealth, improving the fow o capital, and increasing GDP through


Our work


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business growth. By taking advantage o the shit, we can improve the living conditions and the

welare o our people here. This is a big shit thats taking place in the world today.

In the context o this global shit, the CFA charter has become one o the most important, sought-ater

designations in the Indian nancial services industry. Its relevant and signicant because the global

nancial services industry is integrating at a ast pace. The charter provides nance proessionals with

relevant knowledge and access, as well as an understanding o the dynamism o the global nancial

markets and how to unction eciently in them. And they also stay current with the new products,

ideas, and orces changing the industry.

Jayesh Gandhi, CFA, an active volunteer or his member society.

The Charter conveys that the holders have a body o knowledge, that they are considered experts

with knowledge o a particular eld. Even ater youve earned the charter, youre trained to take up

other studying while youre working, which I feel is very important. My job requires a fair amount of

learning and reading on a continuous basis to stay inormed about changing macroeconomic actors

in the world and a strategy to navigate through the turbulent nancial markets. My regular interaction

with the corporate and banking world also helps me to stay well inormed and ocused. CFA Institute

publications the Financial Analysts Journal and CFA Magazine are good resources.

Im also a ounding member and now serve on the Board o our Mumbai-based member society that

we call IAIP, the Indian Association o Investment Proessionals. I head the Programming Committee,

so that entails inviting experts rom various segments o the nancial markets to speak to our

members. And, as members, we also have the chance to learn rom each other.

All o this learning pays o in terms o my work perormance and the value I can bring to the

investment strategy I manage. The endeavor is to become one o the most trusted and respected

names in India in the area o investment management, which would be a very meaningul achievement.



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Kerstin Dodel, CFA

Financial Consultant, Chair, Advocacy Committee, German CFA Society, Siegenburg, Germany

The investment community has come under a great deal o scrutiny as a result o the credit crisis and

the global economic slowdown we are experiencing. As investment proessionals, we always need

to put the client rst, comply with the highest ethical standards we learned rom the CFA Program,

and never orget that our decisions might have a great impact not only on the client but also on our

proession and the economic environment in which we live and work.

As charterholders, we have a certain responsibility to get involved in our environment because the

charter represents a high level of professional qualication and it also stands for ethical behavior,

which or me includes the responsibility to act in the best interest o the investment community. It

takes all sorts o investment proessionals, clients, regulators, and private and institutional investors to

create capital markets that oer the possibility to earn a air return on investments on a sustainable

basis, and to do this with integrity and honesty. I am not a blind do gooder. I know that peoples

intrinsic motivation is to earn money, and this is ne with me, but this must be possible without doing

harm to other individuals, groups, markets, or the environment.

I am especially proud o my work or the German CFA Society (GCFAS) as a board member and

chair o our advocacy committee. In this role, I participate in working groups ocused on standard

setting and commenting on regulatory issues. In Germany, we promote dialogue among investors,

regulators, and nancial proessionals. We do this by organizing discussions, ostering communication

about theory versus practice, and also by bringing attention to ethical conduct and the integrity o

the capital markets. This is a long-term process, and the results are not always visible. Changing the

mindset o people is oten intangible.

My colleagues and I are working on several topics in the area o corporate, environmental, and

social governance (ESG). Why is it important? The majority o institutional owners believe that the

inclusion o ESG actors in the investment process constitutes a trustees duciary duty; the aim is to


Our voice


22/54


develop investment strategies that generate both nancial rewards and sustainable values. In times o

increasing regulatory and environmental risk, ESG actors represent mispriced opportunities and risks

and can capture the next drivers o economic change.

We have held speaker events and media seminars on ESG and recently organized a traveling

conerence series in Germany and Switzerland. Materials or all events are available on the internet,

and we blog about this content as well. We were invited as experts to a roundtable by a well-

known German nancial newspaper to discuss the integration o ESG into the investment process.

We also participated in discussions and roundtables that contributed to the development o the

German Sustainability Code, which is now ready or review by the German Federal Government. The

code is a transparency instrument that makes sustainability eorts o companies visible, relevant,

and comparable.

Kerstin Dodel, CFA, at work in her ofce

The issue o improving the proessionalism o supervisory boards o listed companies is at the top o

the political agenda ater experiences with the subprime crisis and, especially in Europe, the recent

euro crisis. We are interested in increasing the qualications of supervisory boards in general and

voicing the need to expand the group o suitable candidates, by possible supervisory and diversity

mandates in the uture. The GCFAS encourages these initiatives, and we have placed some articles in

newspapers on this issue. We also are organizing a lecture event on this topic.

As charterholders, we need to understand these and other issues and bring attention to our role and

responsibilities toward others, investors, clients, the nancial markets, and the economy as a whole.

We need to act as good examples and inspire others. Personally, I like to create and drive a topic

agenda and work through the angles o a specic issue. I like to talk to people, present my views, and

generate interesting discussions that raise peoples awareness.

We can impact change in our countries and markets by giving voice to our members and ocusing on

specic, important issues.



23/54


Olivia Engel, CFA

Head, Active Australian Equities, State Street Global Advisors, Sydney, Australia

As an investment proessional working in Sydney, the CFA charter speaks to me because it is in line

with my way o thinking, and maybe that is why I like the community because the people who are

drawn to it are those who really want to behave ethically and want the world to know that they are

ethical. This is really, truly important.

I like the act that CFA Institute and its culture always remind me o why our community is here

and what it is meant to be doing. I appreciate that the CFA charter is globally recognized. Having a

uniform, standard global qualication is benecial for employers as well as for people who want to

go overseas and have their qualications recognized. It is a win-win situation for both employee and

employer not to mention the broader implications or the investment industry as a whole.

As my career has progressed, I have discovered that despite having earned the charter in 2000,

while in my early 20s, I need to remain current on new market developments so I can answer those

unpredictable client questions that often arise. It isnt just what Ive learned as a CFA candidate

that keeps my perspective resh. The educational resources and events available to charterholders

and the opportunities to connect with other investment proessionals keep me on top o the latest

developments in an ever-changing industry. Ive met people I can really share investment ideas with.

I can talk about Australian equities, they can talk about U.K. equities, and were not competing in the

same market, so you dont eel like you have to hide anything.

The thing I love about investing is theres never really a right answer. Theres always another way o

approaching an idea, an investment program, or an investment issue. The market is always changing,

so theres always a new pattern or a new market reaction to observe to a particular set o economic

data. The market is ever-changing, so research is un in that you never eel like youre doing the same

old thing.


Our community


24/54


I never thought Id want to be part o a club. Thats not what I had in mind, but I like how its turned

out. We go to society gatherings and conerences, and it does bring people together. You look at each

other and know youve all studied the same CFA exams; youve done that hard slog, and its this thing

you have in common. And not only that, Ive been surprised at how riendly and open this group o

people is. Even beore I joined the board o my local society, I always met great people at conerences.

Olivia Engel, CFA, on a day o in Sydney, Australia.

As part o this community, I dont eel like I am just working or the society as a volunteer or just

a proessional who happens to be viewing it rom the sidelines. Im probably one o the more

active people with regards to the CFA Program. Im a bit o an advocate in that sense. Im always

encouraging people to come along to our society seminars and get involved in that way. One o the

younger guys in my rm is thinking about doing the CFA Program, and so Im denitely giving him a

nudge in that direction.

Being part o this community makes me eel like it is my responsibility it is our responsibility not to

just blame the market. We are the market.



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CFA Institute is governed by its Board o Governors, which is composed o volunteers elected or

three-year terms. The 20102011 Board included 18 governors rom eight countries: Canada, China,

Japan, Singapore, Switzerland, the United Arab Emirates, the United Kingdom, and the United States.

Selection o governors is based on investment industry and leadership experience, participation in and

commitment to CFA Institute and its activities, and the degree to which a governor can represent the

geographic and proessional diversity o our membership.

Our Board o Governors is the highest governing authority o the organization and is responsible

or dening our vision, mission, and strategies. The board works closely with the Presidents

Council representatives, a leadership group o member volunteers rom our local societies, and the

organizations Leadership Team, a group o managing directors who oversee the achievement o

strategic objectives and the day-to-day work o our sta.

Our 18-member Board o Governors, composed o investment proessionals rom eight countries

Seated, let to right: James Jones, CFA; Beth Hamilton-Keen, CFA; Alan Meder, CFA, vice chair; Daniel

Meader, CFA, chair; Margaret Franklin, CFA, immediate past chair; John Rogers, CFA, President and

CEO; Jane Shao, CFA; and Giuseppe Ballocchi, CFA; Standing, let to right: Aaron Low, CFA; Frederic

Lebel, CFA; Mark Anson, CFA; Charles Yang, CFA; Pierre Cardon, CFA; Saeed Al-Hajeri, CFA; Jeffrey

Lorenzen, CFA; Attila Koksal, CFA; Matthew Scanlan, CFA; and Roger Urwin.

Governance


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In 58 countries, volunteers o 135 proessional member societies manage the daily activities o their

local organizations. At CFA Institute, we believe that eective societies enable us to achieve our

strategic objectives, and we engage with society leaders throughout the year. Member societies are

integral to the investment proession in many locations, with society leaders oten playing critical

leadership roles in their local investment communities.

Member Societies


27/54


The Year in Summary

CFA Institute had a positive year in scal year 2011 and

maintained a ocus on sustainable nancial perormance

in support o advancing the mission o the organization.

To CFA Institute, sustainability is a natural evolution that

describes ethical corporate practice rom a broader, longer-

term view. Within this context, the organization is managed

with a ocus on nancial viability and robustness. This

includes eective business processes and operations; quality

inrastructure, including human capital, inormation tech-

nology, and physical environment; and an embedded risk

management culture that promotes risk awareness in pursuit

o our mission objectives. This broader view o sustainability

osters the longevity and health o our organization. It drives

investments in resource eciencies and corporate citizenship

while improving the corporate environmental ootprint.

In terms o nancial sustainability this year, the mission was

advanced through the delivery o a wide array o products

and services, and signicant investments were made in

inrastructure, such as the delivery o more localized ser-

vices through our regional oces. This included the launch

o a new call center in Asia Pacic, among other initiatives.

These investments will provide or a higher level o service

or members both now and into the uture. CFA Program

candidate registrations, which are the primary revenue stream

or CFA Institute, increased 4 percent rom last year to reach

nearly 210,000 registrations. The volume o those candidates

rst entering the CFA Program is a leading indicator o both

current and uture nancial perormance. These new Level I

enrollments increased 9 percent to over 82,000 in scal year

2011 and are expected to grow through scal year 2012.

Although a negative operating margin was initially expected

or scal year 2011, actual operating results have provided

both a positive operating margin and a positive cash fow or

the organization. Investment income and gains also exceeded

budgeted expectations, and nancial reserves are sucient

to provide or continuation o services in the event o a large-

scale disruption to the CFA Program. Overall, CFA Institute

is well positioned nancially to continue to protect and

enhance the CFA Program and to support increased levels

o member-ocused activities as development begins on the

next long-term strategic plan. This new strategic plan will

guide the organization toward scal year 2015 and beyond.

Timothy McLaughlin, CPA, CFA

Chie Administrative Ocer and Chie Financial Ocer


28/54


About the Organization

CFA Institute is a global, not-or-prot organization and is

the worlds largest association o investment proessionals.

With over 100,000 members and 135 local member societ-

ies around the world, we are dedicated to developing and

promoting the highest educational, ethical, and proessional

standards in the investment industry.

We oer a range o educational and career resources,

including the Chartered Financial Analyst (CFA) and the

Certicate in Investment Perormance Measurement (CIPM)

designations, and are a leading voice on global issues

o airness, market eciency, and investor protection.

Although CFA Institute began operations primarily in the

United States and Canada many years ago, more than

one-third o members are now located outside North America

in over 130 countries. The global distribution o new candi-

dates entering the CFA Program in scal year 2011, with less

than one-third rom North America and almost one-hal rom

the Asia-Pacic region, is likely indicative o the uture mem-

bership composition o the organization.

FY90 FY95 FY00 FY05 FY11

60,000

75,000

90,000

105,000

120,000

45,000

30,000

15,000

Member growth

FY90 FY95 FY00 FY05 FY11

75,000

100,000

125,000

175,000

150,000

200,000225,000

50,000

25,000

10,000

Candidate registrations


29/54


Our mission is to lead the investment proession globally by setting the

highest standards o ethics, education, and proessional excellence.

CFA Institute eects positive change in the global investment community

through its certication programs, education o investment proessionals,

and promulgation o standards intended to help create markets where

every investor has a air chance to earn a risk-appropriate return. We

measure our success by the achievement o mission objectives developed

within the ramework o our long-term Vision 2012 Strategic Plan.

At a high level, the ollowing charts show the basic sources o revenues

and the strategic allocation o ully allocated expenses or scal year

2011 (FY2011). Additional inormation on these strategic unding areas is

included later in this report.

Consolidated Financial Results

% Change

($ in millions) FY11 FY10 11 vs.10

CFA Program

Registrations 209,500 200,700 4%

CFA Institute Members 107,800 102,800 5%

Operating Revenues* $ 211.5 $ 193.1 10%

Operating Expenses 210.9 187.7 12%

Rounding Adj. (0.1)

Income From Operations 0.5 5.4 -91%

Realized Gains (Losses),

Interest and Dividends 9.2 7.6 21%

Change in Unrestricted Net

Assets rom Operations 9.7 13.0 -25%

Unrealized Gains (Losses)

on Investments 10.9 5.3 106%

Change in

Net Assets $ 20.6 $ 18.3 13%

*Includes net assets released rom program restrictions

Fiscal Year 2011 Financial Highlights

Note that portions o these expenses could easily be allocated to more

than one category, but here they have been assigned to the most readily

attributable strategic objective. For example, the Certication and

Certicate Programs category includes global aspects, and the Technology

and Global Capabilities and Relationships categories include eorts dedi-

cated to society support, advocacy, and other services.

In a mission-driven organization, nancial perormance exists to enable

mission achievement. The nancial inormation that ollows refects the

mission investments made this year and demonstrates the capacity to

make additional mission investments in the uture.

FY2011 Fully Allocated Operating

Expenses by Strategic Objective

*Includes curriculum-related expenses

FY2011 Revenues by Source

*Includes curriculum-related revenues

83% Certification and

Certificate Programs*

17% Members Dues, Events, and

All Other

40% Certification and

Certificate Programs*

8% Lifelong Learning

12% Technology

7% Advocacy and Professional

Conduct

19% Global Capabilities and

Relationships

14% Marketing, Society Support,

Career, and Other Services


30/54


CFAInstitutemembershipincreased5percentinFY2011to107,800,

and the active charterholder member attrition o 3.6 percent is a slight

improvement rom 4.2 percent in FY2010.

HighercandidateandmembervolumesalongwithCFAProgram

pricing changes and a member dues rate adjustment approved by the

Board o Governors increased revenues by $18.4 million.

Incomefromoperationsdeclinedto$0.5millionwithgrowthinmission-

related activities and investments slightly outpacing revenue growth.

Oftotalinvestmentsof$226.3million,$216.0millionisavailablefor

contingency and business opportunity purposes, which is sucient to

provide or a multiple-year continuation o services in the event o a

large-scale disruption to the CFA Program.

ThestrongoverallnancialpositionofCFAInstituteprovidesasolid

oundation rom which to pursue mission objectives into the next long-

term strategic planning cycle rom FY2013 to FY2015 and beyond.

Revenues

CFAProgramrevenuegrowthisaresultofincreasedcandidatevolume

and normal program pricing infation adjustments.

Over4,300CFAProgramscholarshipswereawardedinFY2011tostudents,

regulators, educators, and others involved in the investment proession.

Totalmemberduesrevenueincreasedwithoverallmembershipgrowth

and the member dues rate increase approved in FY2010.

Worldwideeducationaleventsincludedconferencesforthersttimein

Latin America and increased revenues rom regional investment coner-

ences in the Middle East, Europe, and Asia.

CerticationandCerticateProgramsrevenueaccountsfor83percentof

total operating revenues, down slightly rom 85 percent last year primari-

ly as a result o the increased member dues rate and associated revenues.

Expenses

TheoveralldeclineinCerticationandCerticateProgramcostswas

due to the widespread adoption o electronic curriculum and the result-

ing decrease in physical distribution costs.

SubstantialtechnologyinvestmentsweremadetosupportMyCFA,

enhance member engagement, and improve the reliability, stability, and

scalability o the technology inrastructure.

Advocacyworkexpandedinaddressingissuesaffectingtheindustry,

and the Proessional Conduct Program increased expenses with higher

candidate and member volumes.

MarketingandGlobalCommunicationactivitiesexpandedrobustlyto

urther develop the CFA Institute brand and broaden recognition o the

CFA charter.

Thefocusonregionalserviceswasfurtherexpandedthroughincreased

capabilities and activities o the global oces.

Operating Revenues Excluding Investments

% Change


Certication and

Certicate Programs* $ 180.1 $ 168.3 7%

Certication

Program Scholarships (3.6) (3.4) 6%

Member Dues 28.2 22.1 28%

Lielong Learning, Ed

Products, and Other 6.7 6.0 12%

Research Foundation 0.1 0.1 0%

Total $ 211.5 $ 193.1 10%

*Includes curriculum

Includes net assets released rom program restrictions


Fully Allocated Operating Expenses by

Strategic Objective

% Change


Certication and

Certicate Programs* $ 85.1 $ 87.7 -3%

Lielong Learning 17.0 16.5 3%

Technology 24.9 18.8 32%

Advocacy and

Proessional Conduct 14.6 11.7 25%

Global Capabilities and

Relationships 39.8 28.2 41%

Marketing, Society

Support, Career and

Other Services $ 29.5 $24.8 19%

Rounding Adj 0.1

Total Expenses $210.9 $187.8 12%

*Includes curriculum-related expenses


31/54


Cash Flow

Most revenues are generated in the rst hal o the annual operating

cycle and in advance o the cash outlays needed to support these sales.

As a result, aggregate expenses can be managed throughout the year

to ensure adequate cash fow to support organizational objectives while

maintaining an appropriate nancial position or the organization.

Becauseofthelackofpositiveyieldsavailablearoundthescalyear-

end or Treasuries with maturities ewer than 90 days, $25.9 million

was invested in Treasuries with maturities greater than 90 days and

was thus classied with short-term investments rather than cash.

This accounts or the apparent decline in year-end cash above and

the increase in Other Current Assets below.

Cash Flow

% Change

($ in millions) FY11 FY10 11 vs. 10

Cash Infows rom Operations $ 236.2 $ 215.0 10%

Cash Outlays rom Operations 213.0 189.5 12%

Rounding Adj (0.1)

Net Cash rom Operations 23.1 25.5 -9%

Net Cash rom Investing Activities (45.2) (20.9) 116%

Net Increase in Cash (22.1) 4.6 N/A

Cash, Beginning o Year 35.7 31.1 15%

Cash, End o Year $ 13.6 $ 35.7 -62%

Financial Position

Currentassetsaremanagedtocoveroperationalneeds,whereas

investments provide protection against business disruptions and provide

a unding source or large new and long-term business initiatives.

DeferredrevenueincreasedbecauseofthestrengtheninginnewLevelI

CFA Program candidate registrations or the December 2011 exam.

In accordance with U.S. GAAP, revenue collected or an exam oered the

ollowing scal year is deerred to that year. CFA Institute also applies

U.S. SEC SAB 104 and recognizes the one-time CFA Program enrollment

ees over 3.5 years: the mean time spent in the program by those candi-

dates who pass the Level III exam.

Cash and Investment Detail

Contingencyreservesareinplacetoprovideforoperationalcontinuity

in the event o a considerable disruption to normal business activities.

This reserve category has a unding target o 65 percent o the upcom-

ing scal year operating budget. Consideration is given to the allocation

Financial Position

% Change


Cash and

Cash Equivalents $ 13.6 $ 35.7 -62%

Other Current Assets 45.5 14.5 214%

Total Current Assets 59.1 50.2 18%

Investments 226.3 198.2 14%

Net Equipment and

Improvements 15.0 16.6 -10%

Other Assets 1.6 1.4 14%

Total Assets $ 302.0 $ 266.4 13%

Accounts Payable $ 29.2 $ 22.0 33%

Deerred Revenue 118.4 111.2 6%

Other Liabilities 2.1 1.4 50%

Total Liabilit ies 149.7 134.6 11%

Net Assets 152.3 131.8 16%

Total Liabilities and

Net Assets $ 302.0 $ 266.4 13%

Cash and Investment Portolio Balance

($ in millions at air market value) % Change

FY11 FY10 11 vs.10

Operating Fund and

Short-Term

Investments $ 39.5 $ 35.7 11%

Contingency Reserve 158.5 144.3 10%

Business Opportunity

Reserve 57.5 44.3 30%

Rounding Adj. (0.1)

CFA Institute Subtotal 255.5 224.2 14%

Research Foundation* 9.6 8.8 9%

11 September

Scholarship Fund* 0.8 0.9 -11%

Total Cash, Short,

and Long-Term

Investments $ 265.9 $ 233.9 14%

*Please see notes to audited fnancial statements

or additional inormation



32/54


o contingency reserve investments to maintain purchasing power and

provide sucient liquidity to meet potential obligations, even in times

o general economic distress. Contingency reserves are invested in a

diversied indexed mutual und portolio consisting o 30 percent global

equity and 70 percent xed income.

Businessopportunityreservesconstitutetheremainderofinvestments

and serve as a unding source or long-term initiatives and potential

member benets. The primary investment goals o these reserves are to

und CFA Institute initiatives as appropriate, maintain purchasing power,

and grow reserves through capital appreciation. Business opportunity

reserves are invested in a diversied indexed mutual und portolio

consisting o 80 percent global equity and 20 percent xed income.

ThereservesareinvestedincompliancewiththeCFAInstituteInvest-

ment Policy Statement, which was developed by the CFA Institute

Investment Committee according to principles taught in the CFA

Program curriculum. The Investment Policy Statement is approved

by the Executive Committee o the CFA Institute Board o Governors

and can be ound on the CFA Institute website (www.cainstitute.org).

Reservesareevaluatedthroughouttheyeartoensurethattheapproxi-

mate targets o 65 percent o scal year operating expenses and 25

percent o scal year operating expenses are maintained or the contin-

gency reserve and business opportunity reserve, respectively.

Operating Expense Ratios

The ollowing expense ratios give additional insight into the aggregate

level o strategic investments made in FY2011 relative to the growth o

candidates, members, and organizational sta. Note that these gures

include both CFA and CIPM candidates and members.

Investmentsinexpandedglobalexamdevelopmentandsecurity

initiatives were made to urther strengthen the CFA Program in FY2011.

Lifelonglearninginvestmentspermemberdeclinedslightlyasincreases

in content production were oset by increased membership and

savings generated through electronic content delivery.

Technologycostspermemberandcandidateincreased25percent

with released enhancements to the My CFA web portal and additional

inrastructure investments.

Advocacyandprofessionalconductcostpermemberandcandidate

increased with additional global advocacy activities and higher

investigative and resulting caseload volumes or the Proessional

Conduct Program.

Operating Expense Ratios

(Includes allocated support expenses) % Change

FY11 FY10 11 vs10

Certication Development

and Administration Cost

per Registration* $ 239 $ 222 8%

Net Lielong Learning

Cost per Member $ 95 $ 102 -7%

Technology Cost

per Member

and Candidate $ 84 $ 67 25%

Advocacy and Proessional

Conduct Cost per Member


Global Capabilities and

Relationships Cost

per Member


Marketing and Stakeholder

Services Cost

per Member


CFA Registrations and

Members per

Sta Full-Time

Equivalent (FTE) 714 727 -2%

*Excluding curriculum cost o sales

Expenses partially oset by event and

publication revenues

http://www.cfainstitute.org/http://www.cfainstitute.org/


33/54


Investmentinglobalcapabilitiesandrelationshipspermemberand

candidate increased 34 percent as new brand development campaigns

were launched and additional sta and resources were dedicated to

regional oces and initiatives.

CFAregistrationsandmembersperFTE(equivalentfull-timestaff

member) declined slightly as the organization realized ull-year stang

or positions lled in FY2010 and hired a number o new positions

in FY2011 while experiencing moderate member and candidate growth.

CFA Institute Strategic Investments

The nancial inormation that ollows provides additional insight into

mission investments made this year. This inormation and analysis are

provided to help CFA Institute stakeholders gain greater insight into

CFA Institute strategic priorities and operations.

As a mission-driven organization, our strategic success depends on

a strong platorm o enabling capabilities: nancial strength, great

people, operational excellence, and eective societies. Developing these

capabilities is an important component o our long-term strategic plan.

For this reason, additional inormation is provided in this section about

the investments made in these enabling capabilities.

Note that portions o these expenses could easily be allocated to

more than one category, but here they have been assigned to the most

readily attributable strategic objective. For example, the Certication

and Certicate Programs category includes global initiatives, and the

Technology and Global Capabilities and Relationships categories include

eorts dedicated to society support, advocacy, and other services.

Certication and Certicate Programs

Curriculumcostofsalesexpensedecreased19percentasasign-

icant portion o candidates adopted the electronic (eBook)

version o the curriculum, thereby decreasing distribution expenses.

Additional negotiated fexibility with the publisher and improved

inventory practices also reduced the obsolete inventory write-down.

ExamDevelopmentexpandeditsglobal(non-U.S.)activities,

including exam writer and reviewer meetings and a standard-setting

workshop. The team also added writers and sta to increase capacity

and production.

ExamAdministrationexpensesincreasedrelativetoFY2010asthe

larger candidate population drove additional test administration and

Level III exam-grading expenditures.

Operating Expenses by Strategic Area

% Change

($ in Millions) FY11 FY10 11 vs.10

Certication and

Certicate Programs* $ 80.2 $ 81.5 -2%

Lielong Learning 12.6 12.9 -2%

Technology 21.6 15.2 42%

Advocacy and Proessional

Conduct 11.1 9.2 21%

Global Capabilities

and Relationships 32.7 24.0 36%

Marketing, Society

Support, Career, and

Other Services 23.3 19.4 20%

Support Services $ 29.4 $ 25.5 15%

Rounding Adj 0.1

Total Expenses $ 210.9 $ 187.8 12%

*Includes curriculum


Certication and Certicate Programs

% Change


Curriculum Development $ 2.4 $ 2.4 0%

CFA Curriculum Production

and Distribution 29.8 36.6 -19%

Exam Development 7.5 7.0 7%

Exam Admin,

Grading and Other 40.7 35.5 15%

Rounding Adj (0.2)

Total Certication and

Certicate Programs $ 80.2 $ 81.5 -2%


34/54


Lielong Learning

ContinuedemphasiswithinProductStrategytodevelopnewmember

products and provide relevant content or the My CFA member web

portal resulted in higher expenses in FY2011.

Expensesforeducationaleventsmanagedoutsidetheglobalofces

(shown above) decreased as responsibility or regional events was

transerred to the respective global oces. Worldwide, educational

events expenses increased 24 percent and were partially oset by a

13 percent increase in revenues.

Publicationsexpensesdecreasedasthecontinuedshifttoelectronic

publications reduced printing and postage expenditures.

Additionalinternalresourcesprovidedtosupportandoverseethe

Research Foundation resulted in a $0.2 million increase over last year.

Technology

GeneralInformationTechnologycostsgrewsubstantiallythisyearas

depreciation expenses related to the My CFA web portal were realized.

Higheroverallconsultingandstaffcostsassociatedwiththefurther

development o IT business unctionality and inrastructure also contrib-

uted to the increased IT costs.

ExpensesforWebStrategyandServicesincreasedinFY2011because

o increased activity levels in support o the My CFA web portal and to

implement other website enhancements.

Advocacy and Proessional Conduct

TheStandardsandFinancialMarketIntegrity(SFMI)divisioncontinued

the work o setting and advocating the adoption o the Code o

Ethics and Standards o Proessional Conduct, the Global Investment

Perormance Standards (GIPS), and numerous positions related to

capital market and nancial reporting policy. Increased expenses include

additional sta to support expanding global activities and costs o op-

erations in New York.

TheProfessionalConductProgram(PCP)andtheDisciplinaryReview

Committee (DRC) processed higher case volume and expanded sta in

response to global growth in both CFA Institute membership and the

CFA Program.

Lielong Learning

% Change


Product Strategy,

Development,

and Other $ 6.0 $ 5.7 5%

Educational Events 4.8 5.1 -6%

Publications 1.2 1.7 -29%

Research Foundation $ 0.6 $ 0.4 50%

Total Lielong Learning $ 12.6 $ 12.9 -2%

Technology

% Change


Inormation

Technology $ 18.6 $ 14.3 30%

Web Strategy

and Services $ 3.0 $ 0.9 233%

Total Technology $ 21.6 $ 15.2 42%


Advocacy and Proessional Conduct

% Change


Standards and Financial

Market Integrity $ 7.9 $ 7.0 13%

Proessional Conduct

Program and DRC* $ 3.2 $ 2.2 45%

Total Advocacy and

Proessional Conduct $ 11.1 $ 9.2 21%

*Disciplinary Review Committee


35/54


Global Capabilities and Relationships

Thelong-termstrategicplanfortheAsia-Pacicregionresultedin

increases in stang and capabilities to source and deliver timely and

locally relevant lielong learning content or members, among other

initiatives. Expenditures increased or regional education events as well

asfortheestablishmentofaHongKongcallcenterforcandidateand

member support.

TheEMEAregionalofcecontinuedtoexpanditscapacityandcap-

abilities or delivering greater local value or members. The expanded

team moved into new, larger oces in London and Brussels in order

to support uture growth.

LatinAmericaactivitiesandgrowthremainapriorityfortheorgan-

ization, and additional expenditures supported a Latin America

traveling conerence and additional outreach to regulators and societies

in the region.

GlobalCommunicationsexpandedbranddevelopmentactivitiesin

key markets and supported numerous awareness campaigns, including

private wealth and global employer awareness.

Marketing, Society Support, Career, and Other Services

Marketingactivitiesandsupportincreasedasglobalactivities

increased, including activities within market research, corporate sales,

and the development o global marketing products and collateral.

OverallSocietySupportincreased11percentrelativetoFY2010.

Additional support services provided to societies not captured in the

above gures include dues and event revenue transaction support, tech-

nology resources and support, and insurance services, among others.

These subsidies are designed to support the local delivery o education,

career development, and networking services to individual members.

ClientServicesincreasesincludedbankfeesformemberduesaswell

as additional membership retention activities.

Additionalresourcesweredevotedtostrengtheningsupportof

members seeking new career opportunities in a challenging global

economic environment.

Global Capabilities and Relationships

% Change


Asia Pacic

Regional Oce $ 8.1 $ 6.6 23%

EMEA Regional Oce 7.0 5.0 40%

Latin America Initiative 0.7 0.5 40%

Global Communications 13.9 9.0 54%

Industry and University

Relations $ 2.9 $ 2.8 4%

Rounding Adj 0.1 0.1

Total Global Capabilities

and Relationships $ 32.7 $ 24.0 36%


Marketing, Society Support, Career, and

Other Services

% Change


Marketing $ 8.3 $ 6.3 32%

Society Support 9.4 8.5 11%

Client Services 5.1 4.3 19%

Career Services

and Other $ 0.5 $ 0.3 67%

Total Marketing, Society

Support, Career and

Other Services $ 23.3 $ 19.4 20%


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Support Services

% Change

($ in Millions) FY11 FY10 11 vs. 10

Board o Governors, Strategy,

and Executive $ 7.1 $ 6.9 3%

HumanResources 4.7 3.5 34%

Financial Operations 6.8 5.0 36%

Oce o General Counsel 3.3 3.7 -11%

Facility Rent, Planning and Operations 5.8 4.9 18%

Travel Support and Event Management $ 1.7 $ 1.4 21%

Rounding Adj 0.1

Total Support Services $ 29.4 $ 25.5 15%

Support Services

ExpensesfromtheHumanResourcesfunctionincreased34percent

in FY2011 because the organization executed a comprehensive global

HRstrategy,whichincludedhigherrecruitingcosts,increasedcorp-

orate training activities, and additional consulting costs. The higher

recruiting costs supported the signicant increase in hiring activity or

new positions.

OfceofGeneralCounsellitigationexpensesdecreasedrelative

to FY2010.

FinancialOperationsexpensesincreasedprimarilybecauseofadd-

itional insurance coverage acquired during the scal year. Other cost

increases were made to maintain and develop nance capabilities,

such as risk management, procurement, and payroll, among others.



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Risks

As a service organization, the dedication and expertise o

CFA Institute sta and volunteers embody the organizations

most valuable asset and remain an essential ingredient or

long-term success. As a result, CFA Institute has an exposure

to the risks associated with dependence on these individuals.

With the goal o maximizing return on mission and value or

its global membership, CFA Institute makes extensive invest-

ments in volunteer engagement and sta training, retention,

and succession planning.

CFA Institute continues to make investments in technology

and processes to connect with members and provide them

with lielong learning tools and content. This increasing

dependence on inormation technology to achieve strategic

objectives makes this area a critical risk actor or the organi-

zation as well.

Underlying the risk management process, CFA Institute

nancial reserves are structured to provide protection rom

possible disruptions that may aect candidate registrations.

To determine an appropriate reserve level, various scenarios

are considered, rom those o localized exam disruptions

(such as one caused by a communicable disease outbreak or

natural disaster) to the cancellation o an entire June exam.

Contingency reserve levels are estimated to provide or a

multiple-year operating buer during which time member

and other services are maintained while the organization re-

covers rom the disruption. Reserves are susceptible to market

fuctuations, and the potential impact o market volatility in

conjunction with large-scale business disruptions is consid-

ered in the ormulation o reserve investment policy. At the

time this report was published, the air value o reserve invest-

ments satises the targeted level or the contingency reserve.

CFA Institute supports a culture o inormed risk aware-

ness in pursuit o mission achievement. The organization

employs a ormalized enterprise risk management (ERM)

process across the organization that is designed to identiy

and understand potential risk scenarios that may prevent

or constrain the achievement o the organizations strategic

objectives. CFA Institute manages these risks using a return

on mission approach to provide reasonable assurance that

its objectives will be met within the limits o its risk tolerance.

A key component o that risk tolerance evaluation is main-

taining the appropriate level o comprehensive insurance

coverage. Formal risk management reports are generated

and periodically reviewed by senior management and the

Audit and Risk Committee o the Board o Governors.

The assessment o risks by country is a prominent component

o CFA Institute ERM activities. These eorts are designed to

better understand global operating environments and ocus

on regulatory, legal, and tax issues. Ultimately, the organiza-

tion recognizes it would be impossible to provide complete

assurance against all such potential risks, but the country risk

management process is intended to provide a reasonable

person approach to identiying and addressing risks in the

various countries where CFA Institute operates.

The CFA Institute business model continues to be primarily

dependent on CFA Program exam ees and related revenue,

which constitute approximately 83 percent o total operating

revenue (excluding investment income). This revenue is ully

susceptible to fuctuations in the number o CFA Program

candidates and, thereore, represents a sizeable risk to the

organization. New Level I candidate demand tends to be

the most elastic in response to industry conditions, whereas

candidates who have passed the Level I exam, and thus have

more eort and resources invested in the program, tend

to exhibit less demand elasticity as they move through the

remainder o the program.


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Conclusion

Initial expectations or FY2011 were or a signicant

strengthening o CFA Program registration volume because

o stabilization in the nancial markets and renewed

demand or educational oerings. Demand did increase,

and supported by strong growth in developing markets, the

organization realized 209,500 CFA Program registrations.

New Level I registrations increased 9 percent, with 82,300

new candidates, up rom 75,400 in FY2010. The organization

successully advanced the portolio o strategic initiatives

or the year and achieved both a positive operating margin

and cash fow rom operations.

Projecting the trends observed in FY2011 orward into

FY2012 resulted in a total orecast o 222,300 CFA Program

registrations, a 6 percent increase rom the prior year. Early

registrations or FY2012 currently trend to year-over-year

growth o approximately 5 percent.

CFA Institute remains well positioned, both nancially and

within the industry, to make the investments necessary to

achieve its Vision 2012 strategic objectives o delivering value

to its members, the investment proession, and broader soci-

ety through the combination o educated, ethical investment

proessionals and nancial markets that refect CFA Institute

belies. Although a continuation o recent volatility in global

nancial markets was experienced during FY2011, industry

practitioners the world over remained steadast in their com-

mitment to the CFA Program and the CFA Institute mission to

lead the investment proession globally by setting the highest

standards o ethics, education, and proessional excellence.


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Consolidated Financial Statements

Consolidated Statements o Financial Position

As o 31 August 2011 and 2010

(in thousands) 2011 2010

Assets

Current assets

Cash and cash equivalents $ 13,630 $ 35,698

Investments, current at air value 25,895

Accounts receivable, net 1,021 583

Prepaid expenses 7,196 6,631

Publication inventory 10,517 6,215

Other current assets 812 1,044

Total current assets 59,071 50,171Non-current assets

Investments, non-current at air value 226,298 198,238

Restricted cash 743 494

Property and equipment, net 8,231 6,800

Intangibles, net 6,720 9,942

Other non-current assets 941 717

Total non-current assets 242,933 216,191

Total assets $ 302,004 $266,362

Liabilities and net assets

Liabilities

Current liabilities

Accounts payable $ 29,152 $ 21,951

Current deerred revenue

Member dues 19,825 17,606

Subscriptions 195 194

Candidate ees 66,168 63,266

Program income and other 1,131 1,101

Total current deerred revenue 87,319 82,167

Total current liabilities 116,471 104,118

Non-current liabilities

Deerred revenue candidate ees 31,115 28,990

Deerred revenueother 9 14

Other non-current liabilities 2,063 1,482

Total non-current liabilities 33,187 30,486Total liabilities 149,658 134,604

Net assets

Unrestricted

Undesignated 150,621 129,945

Designated11 September Memorial

Scholarship Fund 775 863

Designatedother 950 950

Total net assets 152,346 131,758

Total liabilities and net assets $ 302,004 $266,362

The accompanying notes are an integral part o these consolidated fnancial statements


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Consolidated Statements o Activities

For the years ended 31 August 2011 and 2010


Changes in net assets

Operating revenues

Candidate ees $ 130,000 $ 122,861

Educational products 52,137 47,199

Member dues and other 29,295 23,008

Contributions 23 33

Total operating revenues 211,455 193,101

Operating expenses

Program services

Certication and certicate programs 47,169 41,488

Educational content and products 49,485 55,520

Member and society services 19,670 16,188

Standards and Financial Market Integrity 8,025 7,007

International operations 12,659 11,199

Marketing and communications 23,923 14,793

Scholarships11 September Memorial Fund 123 149

Support services

Management and general 49,857 41,407

Total operating expenses 210,911 187,751

Income rom operations 544 5,350

Realized gains, interest and dividends 9,195 7,666Change in net assets rom operations 9,739 13,016

Other changes

Unrealized gains on investments 10,849 5,255

Change in net assets 20,588 18,271

Net assets, beginning o year 131,758 113,487

Net assets, end o year $ 152,346 $ 131,758

The accompanying notes are an integral part o these consolidated fnancial statements


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Consolidated Statements o Cash Flow, Direct Method

For the years ended 31 August 2011 and 2010


Cash fows rom operating activities

Cash infows:

Candidate ees $ 135,045 $ 126,500

Educational products 51,567 47,060

Member dues, and society dues, and other 43,085 36,057

Contributions 35 33

Interest and dividends 6,460 5,348

Total cash infows 236,192 214,998

Cash outlays:

Program services

Certication and certicate programs 45,358 42,586

Educational content and products 52,173 53,288

Member dues, and society dues, and other 29,601 23,948

Standards and nancial market integrity 7,781 6,788

International operations 11,999 11,031

Marketing and communications 21,473 14,101

Scholarships11 September Memorial Fund 126 149

Support Services

Inormation technology 12,409 10,658

Financial operations and executive 15,325 11,439Facility, rent, planning and operations 5,047 4,201

Oce o general counsel 3,210 3,755

Humanresources 4,310 3,607

Travel support and event management 1,698 1,449

Publishing and content services 1,549 1,380

Fundraising 12 20

Other support services 975 1,086

Total cash outlays 213,046 189,486

Net cash provided by operating activities 23,146 25,512

Cash fows (used in) provided by inve

CFA 2011 Annual Report

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Transcript of CFA 2011 Annual Report