THURSDAY, JUNE 23, 2016 ~ VOL. XL NO. 207 WSJ.com

CONTENTSArts & Ent............... A9Business & Tech. B1-4Capital Account.... A2Crossword.............. A12Heard on Street. B10Markets Digest..... B8

Money & Inv... B7-10Opinion.............. A10-11Personal Journal A12Technology............... B3U.S. News............. A6-7Weather................... A12World News........ A2-5

s Copyright 2016 Dow Jones &Company. All Rights Reserved

What’sNews

� North Korea launched anew ballistic missile a signif-icant distance, raising con-cerns it is moving towardtesting a missile capableof threatening the U.S. A5�A vote by Britain to leavethe EU would shake the con-tinent, and the bloc maynever be the same even if thenation decides to stay. A1-A3� Cameron pledged topursue greater EU over-hauls if Britons back hiscall to stay in the bloc. A1� A U.S. federal judge inWyoming blocked a rulesetting stricter standardsfor hydraulic fracturing onpublic lands. A6� U.S. Sen. Rubio said hewould run for re-electionfor the seat he had previ-ously planned to give up. A6� Israel’s presidentwarnedthere is no prospect of apeace deal with the Palestin-ians in the near future. A4� French unions agreedto scale down a protestover a labor bill after thegovernment raised public-safety concerns. A4� Brazil’s acting leaderauthorized funds for Rio deJaneiro state, which is deal-ing with a fiscal crisis. A5� Scientists are trying tosave Indonesia’s clove plan-tations, which are under at-tack from insect larvae. A5

Shenzhen Baili, whichrecently won a patent

victory against Apple, ispart of a rapid boom andbust in China’s new waveof smartphone makers. A1� SoftBank’s shares roseafter CEO Masayoshi Sonsaid he would continue torun the company. B1, B10�Mitsubishi expects toswing to a net loss of $1.38billion this fiscal year as itgrapples with the fuel-economy data scandal. B1� Tesla offered to buy So-larCity, a deal that wouldunite the Elon Musk-backed electric-car and so-lar-energy firms. B1, B10� The percentage ofAmericans with subprimecredit scores has fallen tothe lowest level in years. B7� The Indian rupee, Asia’sworst-performing majorcurrency this year, looksset to fall further. B10� Facebook is paying anarray of media firms and ce-lebrities to create videos forits live-streaming service. B3� Foxconn said it plans toclose inefficient subsidiar-ies at Sharp after complet-ing its acquisition. B3� The dangers found withhoverboards are helpingthe U.S. set safety stan-dards with China. B2

Business&Finance

World-Wide

China: RMB28.00; Hong Kong: HK$23.00;Indonesia: Rp25,000 (incl PPN);Japan: Yen620 (incl JCT); Korea: Won4,000;Malaysia: RM7.50; Singapore: S$5.00 (incl GST)KDN PP 9315/10/2012 (031275); MCI (P)NO. 106/10/2015; SK. MENPEN R.I. NO: 01/SK/MENPEN/SCJJ/1998 TGL. 4 SEPT 1998

ASIA EDITION

Jack MaWhere I StandOn Fake Goods

OPINION | A11

DJIA 17845.72 À 0.09% S&P500 2094.48 À 0.27% NIKKEI 16065.72 g 0.64% STOXX600 341.32 À 0.38% OIL 49.13 g 1.44% GOLD 1268.70 g 0.14% EURO 1.1297 À 0.48% DLR ¥104.57 g 0.18%

When It’s OKTo Just LeavePERSONAL JOURNAL | A12

Fresh Concern in Asia Over North Korea

YONHAP/EUROPEANPRESSPHOTO

AGENCY

EXERCISE: A view of a helicopter attack exercise held Wednesday by South Korea and the U.S. nearSeoul, above. North Korea’s launch of a new ballistic missile raised concerns about its capabilities. A5

Dumbo Doesn’t Fly at Disney’sNew Shanghai Theme Park

i i i

Attractions get renamed to make sensein Chinese; Little Flying Elephant

and swashbuckler Jack Spar-row, which has cost morethan $5.5 billion and is ex-pected to attract more than10 million people in its firstyear.

It hasn’t beeneasy, though, totranslate the Disneymagic from Englishto Chinese. In orderto make sense tolocal visitors andmesh with theircultural sensibili-ties, the names ofsome attractions atShanghai Disney-land read very dif-

ferently in the two languagesposted on signs throughoutthe theme park.

Because the animated clas-sic “Dumbo” is little-known inChina, the Shanghai Disney-

Please see DISNEY page A8

SHANGHAI—When Qi Zhuvisited Shanghai Disneylandon a day of testing before thetheme park opened last week,she was confusedby its slogan: “Ig-nite the magicaldream within yourheart.” When trans-lated into Chinese,those words caneasily be read as“strange dream.”

“I was like:‘What is a strangedream?’ ” says Ms.Qi, a marketing em-ployee at a Shanghai com-pany. “Why would I want astrange dream in a park?”

Walt Disney Co. spentmore than six years planningevery detail of its new worldof princesses, superheroes

BY BEN FRITZ

Older TrumpChildren FlexMuscle InsideCampaign

models infringed on its smart-phone design patents, it hadbold aspirations, a big-nameinvestor in Chinese internet gi-ant Baidu Inc. and a team ofexperienced executives.

By the time regulatorsreached a decision this year,Digione had collapsed, broughtdown by buggy products, mis-management and fierce com-petition, according to formeremployees and investors. Di-gione has been absent fromChina’s mobile-phone marketfor at least a year and Baiduhas accused it of squanderingits investment.

Baili, its unit that registeredthe phone patents, will con-tinue to battle Apple in court,said Digione lawyer AndyYang, of Beijing Wis & Weals.

“Shenzhen Baili is still opera-tional in its necessary func-tions,” he said. Mr. Yang de-clined to comment on queriesabout Digione’s relationshipwith Baidu.

Digione, whose formal nameis Shenzhen City 100/100 Digi-tal Technology Co., and Bailiare both insolvent, their debtexceeding their total assets,according to the companies’annual financial reports.

The Beijing Intellectual Prop-erty Office last month grantedBaili a sales injunction in thecity on the iPhone 6 and iPhone6 Plus. The order has beenstayed as Apple appeals the de-

Please see APPLE page A8

BEIJING—When a Beijingregulator recently ruled againstApple Inc. in a patent dispute,it handed a victory to a Chinesecompany that barely exists.

Phone calls to the company,Shenzhen Baili Marketing Ser-vices Co., ring unanswered.Its websites have been de-leted. Visits to its three regis-tered addresses found nocompany offices.

Baili and its parent, Di-gione, are part of a rapidboom and bust in China’s newwave of smartphone makers.When Baili took on Apple inDecember 2014, telling Chi-nese regulators that the Cu-pertino, Calif., company’s new

BY EVA DOUAND ALYSSA ABKOWITZ

Apple’s Latest China Foe:It Exists, but Just Barely

� Heard: Apple’s next big iPhoneboost a long way away...... B10

When Republican presiden-tial candidate Donald Trump’sfamily gathered Sunday to cele-brate Father’s Day, three of hisadult children brought morethan cards. They pressed theirfather to dump one of his topaides as part of a reboot for thegeneral election.

On Monday, the candidate’sson, Donald Trump Jr., person-ally carried out the firing oflongtime campaign managerCorey Lewandowski, demon-strating the outsize influencewielded by Donald Jr., Ivankaand Eric Trump, who also aresenior executives of the Trumpreal-estate operations.

The move by the Trump sib-Please see FAMILY page A8

BY MONICA LANGLEY

� Rubio to run again in Florida,reversing stance....................... A6

Fracking Setback for Obama

JPA

TCARTE

R/G

ETT

YIM

AGES

DRILL DOWN: In the latest blow to President Barack Obama’senvironmental agenda, a federal judge blocked a rule settingstricter standards for hydraulic fracturing on public lands. A6

Wednesday ahead of a historicvote that is being closelywatched in financial markets,in European capitals, and be-yond. The most recent opinionpolls continued to show the

Please see U.K. page A3

LONDON—Prime MinisterDavid Cameron pledged in thefinal hours of campaigning topursue greater EuropeanUnion overhauls if Britonsbacked his call to stay in thebloc in Thursday’s referendum,though the European Commis-sion’s president ruled out fur-ther concessions.

Campaigners on opposingsides of the U.K.’s debate overits relationship with the Euro-pean Union made their lastpitches to British voters

BY JASON DOUGLAS

CameronVows FurtherEU Reforms

In or Out, VoteWill Alter Europe

growing geopolitical instabilityto its south and east.

At a minimum, politiciansand officials say, a British exitwould transform the bloc’sbalance of power. Negotiationsover a new relationship wouldconsume the EU’s energy at atime when European institu-tions are struggling to respondto the other problems. A U.K.exit also could disrupt finan-cial markets and fire up anti-EU forces in other countries.

Whether or not the U.K.leaves, change is coming. In

Please see VOTE page A2

BRUSSELS—If the U.K. de-cides in today’s referendum toleave the European Union, itwould shake the continent toits political foundations. Evenif it stays, the bloc may neverbe the same.

A decision to leave, whichwould be a first by a membernation, would deepen the cri-sis facing a continent alreadystruggling with economicweakness, debt problems,large-scale migration and

BY LAURENCE NORMANAND STEPHEN FIDLER

The U.K. Vote� Capital Account: ‘Brexit’

impact would be global... A2� Opinion: How the malaise

will end................................. A10� U.K. property market

braces for vote.................... B7

Copyright © 2016, Oracle and/or its affiliates. All rights reserved.

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A2 | Thursday, June 23, 2016 THEWALL STREET JOURNAL.

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WORLD NEWS

February, U.K. Prime MinisterDavid Cameron struck a dealwith the rest of the EU to re-strict migrant benefits and de-tach Britain from the bloc’spush for an “ever closerunion.” Mr. Cameron’s effortto claw back power from Brus-

sels, coupledwith the refer-endum at home,is an approach

that other European politi-cians are promising to follow,potentially fragmenting thebloc further.

The referendum, at a mini-mum, has delivered a shockto Europe’s political classes,calling into question whatsome had once regarded as aninevitable march toward afederal EU.

“Obsessed with the idea ofinstant and total integration,we failed to notice that ordi-nary people, the citizens ofEurope, do not share our Euro-enthusiasm,” European CouncilPresident Donald Tusk ob-served in a speech in late May.“The specter of a breakup ishaunting Europe, and a visionof a federation doesn’t seem tome like the best answer to it.”

Some see the U.K. referen-dum, no matter the outcome, asan opportunity to move towarda new EU treaty with a two-tierstructure—core countries thatare more integrated and pe-ripheral counties that aren’t.Former French President Nico-las Sarkozy, who is seeking areturn to office in next year’spresidential elections, advo-cates reinforcing the eurozonewith a finance minister and aEuropean monetary fund. Atthe same time, he wants tomaintain a broader EU, at 28nations, which focuses on a fewareas such as research, energyand agriculture.

ContinuedfromPageOne

Julie Ganis, an ad-blockingconsumer from Los Angeles, is48 years old. An Ad Revolu-tion article Wednesday aboutthe many faces of media con-sumers incorrectly said she is41 years old.

CORRECTIONS �AMPLIFICATIONS

Readers can alert The Wall StreetJournal to any errors in news articlesby emailing wsjcontact@wsj.com.

to more competition and ac-celerates the disseminationof new ideas via foreign in-vestment and immigration.In 2004, academic econo-mists Scott Bradford andRobert Lawrence estimatedthe world would be 7%poorer if it reverted to thetrade rules of the 1930s.

The British economy wasdeclining relative to France’sand Germany’s until it joinedthe EU in 1973. MargaretThatcher became prime min-

ister in 1979 and began loos-ening the state’s grip on theeconomy. Since then, Brit-ain’s per capita income hasgrown as fast, or faster, thanFrance’s and Germany’s.

T he soft underbelly ofthis economic successis its fragile political

legitimacy. Brexit advocateshave long chafed at the EU’sinterference in British af-fairs. Yet international trea-ties like the EU and the WTO

are by their nature undemo-cratic insofar as they compelsignatories to bind their ownhands for the common good.British businesses grouseabout EU meddling in theirmarkets but benefit whenthat meddling knocks downbarriers on the continent.

Critics say global integra-tion enriches elites at the ex-pense of the average worker.This, too, is off base. Moreskilled workers have gaineddisproportionately, but every

Impact of ‘Brexit’ Would Be Gradual, GlobalA nxious prognosticators

worry that a Britishvote to leave the Euro-

pean Union on Thursday willtank the country’s financialmarkets and precipitate a re-cession. Those predictionsare largely guesses, andprobably overwrought.

The greaterconsequencesare more sub-tle, gradualand global.

Brexitwould be thestarkest repu-diation yet ofthe postwarconsensus fa-

voring ever-deeper globalintegration. That consensusis already fraying in the faceof growing protectionismand anti-immigrant senti-ment world-wide. A furtherunraveling would undermineglobal growth prospects al-ready clouded by aging pop-ulations and miserable pro-ductivity.

The consensus for greaterintegration has been remark-ably durable to date. Sincethe EU’s founding in 1957, 28countries have joined andnone have left (other thanGreenland, a Danish terri-tory, and Algeria, a formerFrench colony). Indeed, it israre for any country to delib-erately withdraw from atrade pact except to join abetter one. Since the WorldTrade Organization’s incep-tion in 1948 (as the GeneralAgreement on Tariffs andTrade), 162 countries havejoined and none have left.

This is largely becausegoverning elites have cometo accept the economic ratio-nale for integration. It in-creases the size of the mar-ket, exposes local companies

worker is also a consumerand thus benefits when inter-national competition makesproducts better and cheaper.Doug Irwin, a trade historianat Dartmouth College, says iftwo million American work-ers lose $15,000 in annual in-come forever—an extremeestimate of the impact oftrade with China—while 320million American consumersgain just $100 from trade,the benefits to all of societystill exceed the costs.

Even immigration is, onbalance, probably a plus. TheCenter for Economic Perfor-mance at the London Schoolof Economics finds that EUimmigrants to Britain arebetter educated and morelikely to work than UK-bornnationals, and to pay more intaxes than they collect inbenefits.

If Britain leaves the EU itwouldn’t implode: It’s notabout to return to its over-protected, over-regulatedpre-Thatcher status.

T here would be costs toan exit; a review of 13separate studies found

eight saying Britain would beworse off and three saying itwould be better off. (The re-mainder saw mixed effects).Still, even the British govern-ment’s estimates of 0.2 to 0.6percentage points lowergrowth over 15 years maynot be enough for the aver-age Briton to notice.

Yet those costs are real.More important, pivotingfrom a path of more open toless open borders will chipaway at the margin to Brit-ain’s long-term growth path,which it can ill afford giventhat productivity growth hasrecently averaged aroundzero. Nor will the conse-

quences stop at Britain’sshores. If there is no seriousshort-term fallout from Br-exit, it might energize anti-EU politicians in France andthe Netherlands who, like Br-exit advocates, have bene-fited principally from anxietyabout immigration ratherthan economic concerns.

I t also would come asprotectionism creepsback world-wide. Global

Trade Alert, a Geneva-basedwatchdog group, counts 714government edicts to foreigncompanies to produce orsource locally in exchangefor market access or govern-ment contracts since 2008.Last month Jeffrey Immelt,the chief executive of Gen-eral Electric Co., said compa-nies were being forced to or-ganize their businessesaround such actions: “Weused to have one site tomake locomotives; now wehave multiple global sitesthat give us market access. Alocalization strategy can’t beshut down by protectionistpolitics.”

Spreading productionamong more plants may pro-tect a company from protec-tionist impulses, but it alsoreduces productivity andraises costs for its custom-ers. Multiplied across manycountries and companies, theeffects add up.

Gary Hufbauer, an econo-mist at the Peterson Institutefor International Economics,thinks the slowdown inglobal trade growth since2010, which he blames inpart on protectionism, hasleft world GDP 2.7% smallerthan otherwise

If Britain leaves the EU,expect that drag to grow inthe years ahead.

EU membership

EU, the Story So FarBritish exit from the European Union would interrupt nearly 60 years of expansion.For Britain, it could endanger the economic gains it has made since joining.

Sources: European Union (GDP, timeline of membership); Angus Maddison Project (per capita GDP) THEWALL STREET JOURNAL.

Ratio of U.K. to France and Germanyper capita GDP

2.0

0.6

0.8

1.0

1.2

1.4

1.6

1.8

’60s1950s ’70s ’80s ’90s ’00s ’10s

To France

To Germany

1957 1973 1981 1986 1995 2004 2007 2013Belgium, France,Germany, Italy,Luxembourg,Netherlands

Denmark,Ireland, U.K.

Portugal,Spain

Bulgaria,Romania

CroatiaAustria,Finland,Sweden

Cyprus, Czech Republic,Estonia, Hungary, Latvia,Lithuania, Malta, Poland,Slovakia, Slovenia

Greece

Britain joins EU

Notes: Greenland, a Danish territory, withdrew in 1985. €1 trillion=$1.13 trillion

Hannah McKay/European Pressphoto Agency

CAPITALACCOUNTGREG IP

Hungary’s Prime MinisterViktor Orban, who has accusedthe EU at times of behavinglike his nation’s former Sovietmasters, has welcomed Brit-ain’s push to win concessionsfrom the EU on issues such asmigration and has called a ref-erendum on the EU’s migrationpolicy for September. He ispressing for Britain to remain.

A British vote to leavewould likely bring far moredramatic change, along withmany uncertainties: questionsabout the timing and length ofnegotiations, the impact onthe U.K. government and thekind of relationship a departedU.K. would want with the bloc.

Fredrik Reinfeldt, Swedenprime minister from 2006 to2014, said an exit vote“weakens us and it drifts to-ward a more unbalanced Eu-ropean Union.” Economies onboth sides of the EnglishChannel, he predicted, wouldbe damaged.

David Owen, a former Brit-ish foreign secretary who sup-ports leaving, said a decisionto exit could end with an “ami-cable divorce,” in which theU.K. steps calmly away froman EU he believes is headed ina federalist direction.

“We take our time and wemake clear to Europe thatwe’re very open to discussionas to how this should be han-dled,” he said. “We have no in-terest in the unraveling of theEU, and we need to be ready tohelp as much as we can.”

A big unknown is how manyother countries would attemptto follow suit. A Pew ResearchCenter survey published thismonth showed levels of disap-proval of the EU in manycountries as high as or higherthan in the U.K. In the Nether-lands, 46% had an unfavorableview of the EU; in Germanyand the U.K., 48%; in Spain,49%; and in France, 61%.

Michael Gove, the Britishjustice secretary who is cam-

paigning to leave the EU, saida British departure wouldspark “a democratic liberationof a whole continent.”

Both France and the Neth-erlands hold elections by nextspring. Marine Le Pen’s Na-tional Front in France andGeert Wilders’s Party for Free-dom in the Netherlands areperforming strongly. Both poli-ticians have talked about hold-ing membership referendums.Mr. Wilders said this monththat a British exit vote wouldcreate “a patriotic spring” thatwould end the EU.

Such views aren’t widelyshared on the Continentamong politicians from tradi-tional parties, even those seek-ing a broad redesign of theway the bloc functions. Intheir view, a return to a Eu-rope of nation states increasesthe risk of the kind of cata-strophic conflicts seen in the20th century.

Former Greek Finance Min-ister Yanis Varoufakis, a fiercecritic of Brussels and Berlin,who once battled against whathe saw as unjustified austerityforced on his country, hascampaigned for the U.K. tostay.

Governments in newermember states such as Hun-gary, Slovakia and Poland, aswell as in founding nationssuch as Italy, have becomemore hostile to demands fromBrussels. A British exit votelikely would stiffen resistanceto EU efforts to uphold keyprinciples such as support forjudicial independence. Brusselsis trying to stop the new Pol-ish government’s bid to recon-stitute its top court.

Guntram Wolff, director ofBrussels-based think tankBruegel, said even among EU-hostile Central and EasternEuropean countries, there arepowerful financial, economic

and security incentives tostaying. For those in the euro-zone, the costs of exit andabandoning the single cur-rency could dwarf whateverprice the U.K. pays.

“Of course, you have politi-cal forces in France, Nether-lands, Austria and Italy tryingto focus on [doing] the same,”said Wolfgang Schüssel, Aus-tria’s chancellor from 2000 to2007. ”I think the debate willbe stronger, but it will wakeup other forces, hopefully,where politicians will stand upto defend” the EU.

Mr. Schüssel said other na-tions would be dissuaded fromleaving by the economic shockhe predicts the U.K. would suf-fer. “As an economist, I’m con-vinced that Brexit would havein the short-run and maybe inthe mid-run very negative con-sequences,” he said.

Senior European diplomatssaid that any post-Brexit ar-rangement with the U.K. mustensure that it doesn’t gainfrom walking out—that itdoesn’t draw the benefits ofmembership without payingthe price.

“When you are out, you areout,“ said Volker Rühe, Ger-many’s former defense minis-ter. “You can’t negotiate some-thing in between.”

He acknowledged the blocwould suffer and become moreinward looking. A British exitwould deprive Germany of abig contributor to the EU bud-get and a powerful pro-marketally in EU deliberations.

Without the U.K., whichalongside France dwarfs themilitary capacities of othermember states, the EU’s de-fense, security and diplomaticcapabilities would be hit. OnlyBritain and France have siz-able expeditionary forces, nu-clear weapons and United Na-tions Security Council vetoes.

“There is at least one placein Europe where a possibleBritish exit from the EU wouldbe applauded, and that’s theKremlin,” said Anders FoghRasmussen, former head of theNorth Atlantic Treaty Organi-zation and Danish prime min-ister from 2001 to 2009. “TheRussians would see the Britishexit as a weakening not only ofthe EU, but of the entire West-ern community.”

In the past, a U.K. departuremight have triggered a con-certed effort by France andGermany to deepen integrationin the EU. All the bloc’s politi-cal leaps, from the founding ofthe steel and coal communityin the 1950s to the drive tomonetary union, have emergedfrom Franco-German agree-ment. Yet there is no sign of abroad new plan from Paris orBerlin. Top officials say arange of responses to a poten-tial U.K. exit are under discus-sion. They include tighter jointEU work on security threats,aspirations for greater defensecooperation and a renewedpush to forge an EU-wide tele-communications market andcommon copyright rules.

With French and Germanelections next year, any ef-forts to deepen the euro-zone’s fiscal and monetary

union by pooling resourcesand drawing up stricter com-mon economic rules are offthe table, according to seniordiplomats and officials.

A move to deepen themonetary union would exposeanother consequence of anexit by the EU’s second-larg-est economy: a major shift inthe balance of power withinthe EU between the 19 coun-tries in the eurozone andthose outside.

Deepening economic tiesbetween the countries that usethe euro could present thecountries that don’t with a po-litically awkward choice be-tween jumping on board or be-ing permanently squeezed outof influence.

“I think it’s a fundamentalproblem,” said Mr. Wolff, theBrussels think-tank director.“Once the U.K., leaves, thenon-euro-area countries repre-sent 15% of EU [gross domes-tic product]. And that basicallymeans the eurozone is very,very dominant.”

“That’s what we worryabout,” said Mr. Reinfeldt, theformer Swedish prime minis-ter, whose country would bethe biggest non-eurozoneeconomy if Britain left.

VOTE

Whether or not the U.K. votes to leave the European Union, change is coming.

JUST

INTA

LLIS/A

GEN

CEFR

ANCE

-PRE

SSE/GET

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ANALYSIS

Mixed Reviews for EUViews of European Union, by country

THEWALL STREET JOURNAL.of 10,491 respondents, April 4 to May 12.Source: Pew Research Center Global Attitudes Survey

Poland

Hungary

Italy

Sweden

Netherlands

Germany

Spain

U.K.

France

Greece

22% 72%

37 61

39 58

44 54

46 51

48 50

49 47

48 44

61 38

71 27

Unfavorable Favorable

For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com

THEWALL STREET JOURNAL. Thursday, June 23, 2016 | A3

McGrath, a partner specializ-ing in competition law at Lon-don law firm Cooley LLP. Mr.McGrath said that while hehadn’t yet sought admission topractice in Ireland, he woulddo so if the U.K. voted to exitthe EU.

To register in Ireland, law-yers in England, Wales andNorthern Ireland must pro-duce proof of good standingand three character refer-ences, and pay a €300 ($340)fee. They then must pay an an-nual fee of €2,500 for the cer-tificate that lets them practicein Ireland. The process is morecomplicated for lawyers inScotland, because of its dis-tinctive legal system.

Among those registeringlawyers in Ireland ahead of thereferendum are some of Lon-don’s biggest law firms, in-cluding Freshfields BruckhausDeringer LLP, Slaughter andMay, Clifford Chance LLP andHogan Lovells InternationalLLP. A spokeswoman for Allen& Overy LLP said a small num-ber of lawyers there had ap-plied for admission in Ireland,though it wasn’t a firmwideinitiative.

Still, anyone hoping for aninflux of top law firms intoDublin will be disappointed:Lawyers who register in Ire-land don’t relinquish theirright to practice in the U.K.Mr. Murphy said the majorityof U.K.-based lawyers complet-ing the process didn’t intendto set up a physical presencein Ireland.

in France, Germany and otherEU countries from readyingred carpets to welcome whatthey say could be tens of thou-sands of new employees fortheir local economies if theU.K. votes to leave.

“Our message would besimple: welcome to Europe,welcome to Paris,” said AlainPithon, secretary-general ofParis Europlace, a group setup to promote French finance.

“Frankfurt will have all menon deck," said Hubertus Väth,managing director of Frank-furt Main Finance, a lobbygroup that promotes Frankfurtas a financial center. He saidhe wants the U.K. to stay inthe EU, but his organization ispreparing a roadshow to woobanks in case of a Brexit.

Some European business

leaders, meanwhile, say thatthe vote itself could be a bigger,much-needed shock to a regionwith too much bureaucracy andregulation in the first place.

“This Brexit vote is a reallyimportant wake up call,” saidMaurice Lévy, chief executiveof Paris-based advertising gi-ant Publicis SA. He is hopingBritain stays in, but says theEU has botched issues includ-ing the economy and what todo with refugees. “Europe isnot working well.”

Telecom Italia ChairmanGiuseppe Recchi said he didn’thave an opinion about whethera Brexit would be good or badfor businesses. But he said inan interview this week that“maybe a shock is needed.”The EU “doesn’t grow and itsgovernance isn’t efficient.”

WORLD NEWS

don. “He will have won anelection and managed to takethe U.K. out of the EU againsthis will.”

After his triumphant re-election, the prime ministerhimself has led the campaignto persuade Britons to stay inthe EU, arguing they would bebetter off staying in.

Mr. Cameron has said thathe contemplated resigning ifhe had lost on Scottish inde-pendence. On the EU vote, theprime minister has repeatedlysaid he would stay on regard-less of the results.

Some Conservative Partycolleagues and political ana-lysts say Mr. Cameron’s leader-ship style—more pragmaticthan ideological—helped bringhim to this point.

Michael Gove, a Conserva-tive government minister andprominent campaigner forBritain’s exit, said that Mr.Cameron is open to listeningto a wide range of ideas beforemaking a decision.

“There’s a focus that hebrings to the swift dispatch ofbusiness and to prioritizingwhat’s important,” Mr. Gove

said.In late 2012, the prime min-

ister told another governmentminister that he thought re-sentment toward the EU inBritain “would just get worse”

if left unaddressed, accordingto the minister.

“Look, this isn’t going to goaway as an issue,’” Mr. Cam-eron said, the minister re-called.

Weeks later, in January2013, Mr. Cameron took thepublic by surprise by promis-ing—if he won the 2015 gen-eral election—to negotiate a“better deal” for the U.K. and

then to hold a referendum onwhether to stay in the EU orleave. But he pegged the voteto concessions secured fromBrussels before he knew whatthose would be.

That left an opening for op-ponents in the debate to arguethat the deal he ultimately se-cured with other Europeanleaders in February didn’t rep-resent enough change for re-maining in the EU.

The prime minister ac-knowledges being a pragma-tist, a spokesman for him said.The spokesman added that theprime minister believed offer-ing the people a chance to voteon the important issue of Eu-rope was the right thing to doand that it is too early to talkabout Mr. Cameron’s legacy.

His opponents have accusedhim of scaremongering. Someanalysts also say his unfulfilledpromises to reduce immigra-tion—another key issue in thereferendum debate—has leftvoters distrustful.

Mr. Cameron has said helooks forward to the party uni-fying after the vote around itscommon goals.

LONDON—Prime MinisterDavid Cameron was on top ofthe world last year after lead-ing his Conservative Party toits best showing in more thantwo decades. On Thursday, acampaign promise could costhim his job.

A vote by Britons to remainin the European Union wouldmark Mr. Cameron’s third ma-jor victory in two years, in-cluding the 2014 referendumon Scottish independence. Awin for the Leave camp wouldmark a dramatic turnaround ofpolitical fortunes, meaning hewould either have to oversee aso-called Brexit—or possiblystep down.

“He will have transformedhimself from ‘hero’ to ‘zero’ injust over a year,” said PhilipCowley, politics professor atQueen Mary University of Lon-

BY JENNY GROSS

Cameron’s Gamble Puts Legacy at StakeIf he loses vote, primeminister faces choiceof stepping down oroverseeing ‘Brexit’

Mr. Cameron addressed pro-EU “Vote Remain” supporters during a rally in Bristol on Wednesday.

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Like many business leadersin Europe, Philippe Depouxsees the potential for an eco-nomic slowdown across thecontinent if the U.K. votes toleave the European Union.

But Mr. Depoux, chief exec-utive of Gecina SA, one of thebiggest owners of office spacein Paris, also sees opportunity:New tenants may come knock-ing in the event of a corporateexodus from London.

“What we can say for sureis that it is better to be in theParis office real-estate busi-ness than in any other” aheadof Thursday’s referendum oncontinued British membershipin the bloc, Mr. Depoux said.

Opinion polls show the votetoo close to call. Many smallBritish business owners, aswell as some hedge fund andprivate-equity managers, saythey are better off outside theEU’s regulatory regime. Butmost big firms that have spo-ken up on the issue—insideand outside the U.K.—arepushing a “remain” vote.

Executives forecast that adeparture would slow econo-mies on both sides of thechannel, complicate hiring andforce relocations of some em-ployees or entire operations.That view hasn’t stoppedsome cities and trade groups

By Sam Schechner inParis and Neanda

Salvaterra in London

SomeFirms in Europe SeeAnOpportunity in ‘Brexit’

LONDON—Lawyers fromsome of Britain’s largest firmsare flocking to register in Ire-land to protect their right topractice fully in the EuropeanUnion, in case the U.K. votesto leave the bloc.

U.K. lawyers enjoy certainbenefits related to EU member-ship, such as protection fromhaving to disclose the legal ad-vice they give to clients in theevent of a European Commis-sion antitrust investigation.Their right to represent clientsin EU courts also would be atstake in the event of a Britishexit, or “Brexit.”

The possibility of losingthese benefits has jolted doz-ens of lawyers to sign up inIreland ahead of the referen-dum on Thursday.

Ken Murphy, director-gen-eral of the Law Society of Ire-land, said a record 186 U.K.lawyers registered there thisyear, with dozens more appli-cations under way. “There’sbeen an unmistakable surge,”he said, adding that a largemajority cited the risk of aBritish exit as the main triggerfor their registration. By com-parison, 101 U.K. lawyers wereadmitted in 2015, and just 51in 2014.

“Ireland is the most obvi-ous choice for U.K. lawyers,due to the relatively simplerules for admission to the rollof solicitors that the Law Soci-ety of Ireland operates forEnglish solicitors,” said Becket

BY DENISE ROLAND

U.K. Lawyers PursueCertification in Ireland

Place d’Eymet in France’s Dordogne region, home to many Britons.

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outcome remained too close tocall.

The prime minister said inan interview with the BritishBroadcasting Corp. that he in-tended to reopen the issue offreedom of movement, a coreEU principle that allows citi-zens of member-states to liveand work freely in any countryin the bloc, with other leaders.His renegotiation of the termsof Britain’s membership inFebruary, which put new re-strictions on new arrivals’ ac-cess to welfare, was part of acontinuing process, he said.

“If we stay in the EuropeanUnion, reform continues onFriday,” Mr. Cameron saidWednesday before embarkingon a whistle-stop tour of theU.K. to encourage voters to re-ject a British exit from the EU,or “Brexit.”

Mr. Cameron’s pledge to re-turn to the negotiating tablerepresents a last-ditch effortto assuage concerns over im-migration that have helpedfuel anti-EU sentiment and putthe outcome of the referen-dum on a knife edge. The de-bate has exposed deep uneasein swaths of the U.K. over Eu-ropean free-movement rulesthat have helped fuel a years-long surge in immigration.

Shortly after, though, Jean-Claude Juncker, president ofthe European Commission,poured cold water on the ideaof reopening talks. “We haveconcluded a deal with theprime minister,” Mr. Junckersaid in Brussels, referring tothe February agreement. “Hegot the maximum he could re-ceive and we gave the maxi-mum we could give.”

The pro-Brexit camp, led inpart by senior Conservativefigures in Mr. Cameron’s ownadministration, has made con-trolling immigration a center-piece of its campaign. It hasalso portrayed the EU as dis-tant and undemocratic, andurged Britons to “take backcontrol” of their country andits economy.

Nigel Farage, leader of theanti-EU UK IndependenceParty and a prominent Brexitcampaigner, urged voters inhis final speech of the cam-paign to make Thursday theU.K.’s “independence day.”

The referendum debate hasanimated much of the Britishpublic and exposed deep divi-sions over Britain’s relation-ship with the EU that cutacross traditional party andsocio-economic lines. It hasalso torn apart Mr. Cameron’scenter-right ConservativeParty, pitting the prime minis-ter against some prominentcolleagues, including formerLondon Mayor Boris Johnson.

With less than a day to gountil voting began, opinionpolls showed the public re-mained split. A poll publishedby Opinium Research LLP onWednesday put support forleaving the EU at 45% andsupport for remaining at 44%,with the remainder undecidedon how to vote.

A record 46.5 million peo-ple have registered to vote inthe referendum, according tothe U.K.’s independent electionwatchdog.

ContinuedfromPageOne

U.K.SITTINGBOURNE, Eng-

land—Britain’s referendum onwhether to leave the EuropeanUnion marks the culminationof a crusade by Nigel Farage,the leader of the euroskepticUK Independence Party whoseanti-immigration stance hashelped fuel the country’s de-bate.

The polarizing politicianhas railed against the EU evenas he has been a member ofthe European Parliament since1999. For UKIP, the vote couldturn into an existential ques-tion: If Britons vote to leave,the party will have achievedone if its chief objectives. Ifthey vote to stay, his powersof influence will be on the line.

Organizers of Vote Leave,the official group campaigningfor withdrawal from the EU,saw their poll numbers rise asthey took a page from Mr.Farage’s playbook, turningfrom a largely economic argu-ment to one focused on immi-gration. At the same time theyhave kept him at arm’s length,for fear of alienating votersturned off by what they see ashis extreme stance.

Mr. Farage’s bluntness andfondness for a pint of ale anda cigarette has helped him cul-tivate a man-of-the-people im-age, but he has also angeredthose who say his campaign isdriven by hate.

If Britons vote to leave,UKIP would still have an im-portant part to play to keep uppressure as the country nego-tiates to extricate itself fromthe bloc, Mr. Farage told re-porters Wednesday. “Withinthis country we need to bethere posing a direct electoralthreat in case there was anybacktracking,” he said.

Like some other one-timefringe parties across Europe,

UKIP has gained popularitywith people disillusioned withglobalization and establishedpolitical parties, winning 3.9million votes—12.6% of the to-tal—in the 2015 elections.

He has sparked anger fromsome quarters by suggestingBritain could see a rise in sexcrime by migrants if the U.K.stayed in the EU. He has de-nied claims that his party isracist, saying his plan for a

points-based immigration sys-tem would pave the way forminorities to enter.

The UKIP leader has facedcriticism in recent days overan ad that featured a crowdedline of refugees of MiddleEastern appearance and themessage: “Breaking point—The EU has failed us all.” Thead was unveiled the same daypro-EU lawmaker Jo Cox waskilled in a gun and knife attack

that has fueled questionsabout the tone of the debate.

On the campaign trail inKent recently, Mr. Farageshouted “beep for Brexit” fromthe top deck of his open-topdouble-decker bus. A womandriving in the next lane wavedand honked her horn. “This isnot a British event, it’s noteven a European event—it’s abloody global event that’s go-ing on here,” he said.

BY NICHOLAS WINNING

Euroskeptic Leader’s Big Moment Arrives

UK Independence Party leader Nigel Farage arrived in his EU referendum campaign bus in Clacton-on-Sea earlier this week.

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A4 | Thursday, June 23, 2016 HK JP KO ML SI IN UK FR MN PR THEWALL STREET JOURNAL.

coming months to push Israeland the Palestinians to makepeace, after months of violencethat has left officials fearingthat the two sides are primedfor another full-scale conflict.

Neither Israeli nor Palestin-ian representatives attended.

Israel has returned the Eu-ropean criticism, with seniorofficials saying an EU move tolabel products produced in Is-raeli-occupied Palestinian ter-ritories was discriminatory.

In his speech on Wednes-day, Mr. Rivlin said any peacedeal was impossible for now,because of divisions betweenthe Palestinian Authority andHamas, which rules in theGaza strip, as well as regionalturmoil and the absence ofeconomic conditions to buildconfidence between the twosides.

Bemoaning the “total lackof trust between the parties onall levels,” the Israeli presidentcalled for the EU to focus itsefforts at this time on a pa-tient and methodical buildingof trust.

“If the international com-munity really wishes and trulyaspires to be a constructiveplayer [in building peace], itmust divert its efforts awayfrom the renewal of negotia-tions for negotiations’ sake,and toward building trust be-tween the parties,” Mr. Rivlintold European lawmakers.

Mr. Rivlin met on Tuesdaywith senior EU officials inBrussels. Palestinian AuthorityPresident Mahmoud Abbaswas due to arrive in Brusselson Wednesday for meetings.He will also speak in the Euro-pean Parliament on Thursday.

la Bastille for a little over halfa mile—a much shorter routethan originally intended. Localauthorities first sought to banthe demonstration, sayingit would have put too muchstrain on police.

“We were determined tomarch, we evaluated all the

proposals made by the minis-ter and we decided to accept”the shorter route, PhilippeMartinez, the leader of theCGT union, said.

France has dedicatedover 70,000 police and gen-darmes to policing Euro 2016and countering the heightened

towards Moscow,” he said.A spokesman for the union

said Mr. Shprygin had returnedon a plane from France on Sat-urday after being detained inFrance, but that he had madehis way back shortly thereafter.

The spokesman said hedidn’t know how Mr. Shrpyginreturned. “He was allowed toreturn to France. We don’tknow why he’s been detained.”

The union drew intense me-dia scrutiny after a busload offans he was leading to Russia’smatch with Slovakia in Lillewas stopped and searched byFrench authorities.

Days earlier, the RussianFootball Union was penalizedfor fan violence against Britishsupporters.

—Inti Landauroand William Horobin in Paris

contributed to this article.

BRUSSELS—Israel’s presi-dent warned on Wednesdaythat there is no prospect of apeace deal with the Palestin-ians in the near future andurged the European Union toshow patience and put itsweight behind measures to fa-cilitate future negotiations.

In a speech to the EuropeanParliament, Reuven Rivlin crit-icized France’s peace-confer-ence initiative, launched ear-lier this month, which he saidamounted to “negotiations fornegotiations’ sake” and wouldonly deepen divisions betweenIsraelis and Palestinians.

U.S.-brokered Israeli-Pales-tinian negotiations fell apart in2014 over disagreements onland swaps and prisoner ex-changes. The White House hasbeen working on options forreviving negotiations beforePresident Barack Obama leavesoffice, although it isn’t yetclear whether there will be afresh peace push from Wash-ington.

With no direct talks in thepast two years, some EU gov-ernments have been trying topush the two sides back intonegotiations. A range of EUleaders and foreign ministershave criticized Israel for con-tinued settlement-building andother measures, which theyclaim threaten a two-state so-lution, in which Israeli and Pal-estinian states would existside-by-side.

World powers meeting inParis on June 5 agreed to de-velop a package of economicand security incentives in the

BY JOSEPH ATAMANAND LAURENCE NORMAN

Israeli LeaderSays PeaceStill Far OffPresident urges European leaders to focus onbuilding trust between Palestinians and Israelis

Reuven Rivlin speaks at the EU Parliament on Wednesday.

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The main question whenPope Francis goes to theTsitsernakaberd MemorialComplex in the Armenian capi-tal of Yerevan on Saturday iswhether he will echo his de-scription last year of the masskillings by Ottoman forces asthe “first genocide of the 20thcentury.”

Turkey responded to the2015 statement, made during acommemorative Mass in St. Pe-ter’s Basilica, by immediatelyrecalling its ambassador to theVatican to Ankara for consulta-tions. It took 10 months beforethe ambassador returned. Turk-

ish President Recep Tayyip Er-dogan condemned the pope’sstatement and warned him “notrepeat this mistake.”

St. John Paul II used theword genocide in the Armeniancontext during his own 2001visit to Armenia, in a joint dec-laration with Catholicos KarekinII, head of the Armenian Apos-tolic Church, who will also hostPope Francis.

But Pope Francis went fur-ther by calling the massacre ofArmenians one of “three mas-sive and unprecedented trage-dies” in the 20th century, alongwith the Holocaust and the

1932-33 man-made famine inUkraine and other parts of theSoviet Union.

Pope Francis also linked the1915 killings to attacks else-where on “our defenselessbrothers and sisters who, on ac-count of their faith in Christ ortheir ethnic origin, are publiclyand ruthlessly put to death—decapitated, crucified, burnedalive—or forced to leave theirhomeland.” Armenia is predom-inantly Christian, although Ro-man Catholics are few.

The pope has been highly vo-cal about the persecution ofChristians, especially in Mus-

lim-majority countries, and hascalled on Muslim leaders to de-nounce the actions of IslamicState militants in Syria andIraq. However, he recently re-jected the term genocide for theplight of Christians in the Mid-dle East in favor of the religiousterm martyrdom.

Tensions between Armeniaand another neighbor—Azerbai-jan—will also hang over thevisit. The two former Soviet re-publics have fought over the Na-gorno-Karabakh region, an eth-nic Armenian enclave withinpredominantly Muslim Azerbai-jan that was overtaken by Ar-

menia during a six-year war thatended with a 1994 cease-fire.

The recent outbreak of fight-ing—the worst in decades—be-gan when Azeri forces brokethrough Armenian lines in a bidto retake strategic heights. Thetwo sides accuse each other ofcontinued shelling.

The pope will visit Azerbai-jan together with Georgia thisfall, Sept. 30-Oct. 2. The Vaticanis officially presenting the twotrips as parts of a single trip tothe Caucasus, which will becompleted in the fall.

—Laura Mills in Moscowcontributed to this article.

Pope Francis travels Fridayfor a three-day trip to Armenia,where he will visit the memo-rial to those who died in the1915 massacre of Armenians byTurks, potentially straining re-lations between the Vatican andAnkara again.

The trip also comes just af-ter a major outbreak of violencein the turbulent Caucasus re-gion, when ethnic Armenianseparatists fought Azerbaijaniforces for four days in Aprilover the breakaway region ofNagorno-Karabakh.

BY FRANCIS X. ROCCA

Pope to Visit Armenia Memorial to Victims of Massacre

MOSCOW—The head of Rus-sia’s national soccer fan clubwas deported for the secondtime since the beginning of theEuro 2016 soccer tournamentafter outbreaks of violence in-volving Russian fans, Frenchpolice said on Wednesday.

Alexander Shprygin, headof the All-Russian Union ofFans, was detained Mondayevening after being stopped bypolice in Toulouse stadium,where Russia was taking onWales in a match Wales won3-0, said the spokesman forthe French interior ministry,Pierre-Henry Brandet.

“Alexander Shprygin wasdeported from France. Theplane he is in took off fromParis Charles De Gaulle [air-port] shortly after midnight

BY THOMAS GROVE

France Deports HeadOf Russian Fan Groupterrorism threat hanging over

the tournament.Hooliganism has compli-

cated that task. Since the tour-nament began, police have de-tained over 550 peoplesuspected of violence, theftand vandalism.

Last week, there was a re-minder of the terror threatwhen a police captain and hiscompanion were killed in aParis suburb by a man pledg-ing allegiance to Islamic State.The assailant was shot dead bypolice.

The threatened ban hasdeepened the rift between Mr.Hollande’s Socialist govern-ment and labor unions, whosay the labor bill betrays theprinciples of the party.

The CGT and other unionsare seeking to ramp up pro-tests as the labor bill headsback to the national assemblyafter a vote in the Senate.

PARIS—French unionsagreed to scale down a demon-stration against PresidentFrançois Hollande’s labor billafter the government raisedconcerns that any violencecould overrun a police force al-ready stretched by the threatof terrorism and maintainingsecurity at the Euro 2016 soc-cer tournament.

Previous marches againstthe bill resulted in clashes be-tween police and protesters,leaving burned cars, brokenshop windows and injuries onboth sides. In a demonstrationlast week, a children’s hospitalin Paris was vandalized.

In talks Wednesday, unionsaccepted a proposal by InteriorMinister Bernard Cazeneuve tolet them march on Thursday incentral Paris near the Place de

BY INTI LANDAUROAND WILLIAM HOROBIN

French Unions Scale Down Protest

Labor-union members demonstrated in Nantes earlier this month.

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Israel’s new Jezreel railway line runs along an old route from the port city of Haifa to within 5 miles of the border with Jordan.

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Reviving a Historic Ottoman RailwayIsrael’s bid to boost commerce with Arab neighbors gets a frosty reception

JEZREEL VALLEY, Israel—More than a hundred yearsago, the Ottoman Empirebuilt a railway line that shut-tled goods on steam locomo-tives from the MediterraneanSea to the souks of Damas-cus and the Saudi holy cityof Medina.

Now Israel is poised toopen new tracks tracing theold line between the portcity of Haifa and a terminal 5miles short of the Jordanianborder. The effort is a bid toboost moribund commercewith the country’s Arabneighbors. But they have of-ficially given the project afrosty reception, hamperingits prospects even as tradeflourishes along the route.

The former Hejaz Railwayconnected the area that isnow Israel with the Arabworld further east, runningthrough territory now rivenby Middle East borders. Af-ter the establishment of Is-rael in 1948, it was disman-tled and regional trade wasblunted by a series of Arab-Israeli wars.

“We always thought thatthis line symbolizes peacewith the region,” said IlanRozenfeld, the project direc-tor for the new 40-mile rail-way line, as he rode in an

electric train carriagethrough the fertile greenplains of the Jezreel Valleysouthwest of the Sea of Gali-lee. “We have been waitingfor a long time.”

The new line, built at acost of roughly $1 billion andset to open in October, holdssome promise, Israel’s trans-portation ministry says.Trade through Israel via roadhas increased in recent yearsas shipping companies haveavoided Syria, where war hasbeen raging since 2011, ac-cording to Israeli and Jorda-nian officials and shippingcompanies.

Cargo handled at theSheikh Hussein border cross-ing between Israel and Jor-dan increased 65% between2010 and 2015, with thenumber of cargo and con-tainers trucks using theroute nearly quadrupling inthat time, according to theIsraeli Airports Authority.

More firms have beenbringing boats into Haifabearing containers andtrucks that then travel byroad to Jordan and on toSaudi Arabia, Iraq and theGulf, carrying Spanish or-anges, Jordanian textiles andcar parts from Europe.

On a recent morning atHaifa port, Turkish driverNazem Mohammed unloadedhis truck from a ship that

had come from Mersin inTurkey. He used to drivethrough Syria to get his veg-etables and fruits to Jordan’scapital, Amman. Now he hasto either go by sea via theSuez Canal to deliver goodsto Saudi Arabia, or over landthrough Israel to Jordan.

The Israeli route “is thebest way for business” as itis cheaper and takes lesstime, said Mr. Mohammed, a20-year veteran trucker,while playing cards with afellow driver in the shadowof his vehicle. “This makes ita promising route.”

Yet development of thetrade route is being ham-pered by competing eco-nomic and political interests,underscoring the obstaclesIsrael faces in becoming a

regional trade gateway.Israel’s Transportation

Minister Yisrael Katz said aproposal has been discussedwith Jordan’s King AbdullahII and Jordanian governmentofficials to eventually con-nect the new railway line toa network in Jordan, whichcould then link with railwaysSaudi Arabia plans to de-velop. Such ties would trulyrevive the Hejaz Railway,which first opened in 1908.

But the prospect of get-ting any goods out of Israelon the railway still appearshighly uncertain, at least inthe near term. Arab officialsare reticent to publicly dis-cuss ties with Israel, includ-ing transportation issues, forfear of alienating their pro-Palestinian public.

“There is nothing thatI’ve heard about a railwayproject to connect Israel andJordan,” said Ayman Hata-het, who was Jordan’s minis-ter of transportation untilrecently. Attempts to reachhis successor, part of a newJordanian government swornin earlier this month, wereunsuccessful.

Transferring Turkish ex-ports via Israel on rail orroad is impossible to Arabcountries with which Israeldoesn’t have diplomatic rela-tions, such as Saudi Arabia,Mr. Hatahet said.

BY ORR HIRSCHAUGEAND RORY JONES

Haifa

Proposedrailway

Jerusalem

Beit She'an

Tel Aviv

Med.Sea

WESTBANK

20 miles

20 km

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THEWALL STREET JOURNAL.

Source: Netivei Israel - National TransportInfrastructure Company

WORLD NEWS*

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THEWALL STREET JOURNAL. Thursday, June 23, 2016 | A5

WORLD NEWS

THAILAND

Benchmark RateKept Unchanged

Thailand’s central bank leftits benchmark interest rate un-changed Wednesday and main-tained its economic growth fore-casts for the year, sticking to acautious stance ahead of a U.K.referendum on European Unionmembership that could spark in-stability in global markets.

The Bank of Thailand’s Mone-tary Policy Committee votedunanimously to leave the one-day repurchase rate unchangedat 1.5% for the ninth straightmeeting.

The central bank’s decisionwas in line with the views of 21economists polled by The WallStreet Journal, who all expectedthe central bank would keep pol-icy on hold.

Among risks factors the Thaicentral bank mentioned are thefragile global economic recovery,monetary policy divergence, “Br-exit” effects and financial stabil-ity concerns in China. ON THE MOVE: An Iraqi soldier during an operation to retake the city of Qayyarah from Islamic State.

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target our territory with mis-siles,” said Japanese DefenseMinister Gen Nakatani. “Thisrepresents a grave threat to thesecurity of our country.”

A day earlier, Japan put itsmissile defense systems on alertafter detecting the possiblelaunch from North Korea. Mis-siles fired from North Korea’seast coast generally travel in thedirection of Japan, although thetrajectory of the missiles firedonWednesday wasn’t clear andneither traveled far enough to

threaten Japan.In 1998, North Korea fired a

ballistic missile that traveledover Japan and crashed into thePacific. Japan supports sanc-tions against Pyongyang for itsnuclear weapons program.

Jeffrey Lewis, an arms con-trol expert at the California-based Middlebury Institute ofInternational Studies, has exam-ined images released this yearby North Korean state mediaand believes the KN-08 uses apair of engines matching those

used on the Musudan.In April, North Korea said it

had successfully tested a newhigh-power engine for an inter-continental missile and releasedimages that appeared to showthe test-firing of a double-en-gine.

“The North Koreans aremak-ing progress toward a workableMusudan. If we do nothing, theywill move on to a missile, usingthe same technology, that canreach the U.S.,” said Mr. Lewis,who advocates trying to reach a

test moratoriumwith North Ko-rea on its missile program.

North Korea has made offersto suspend its nuclear and mis-sile program in return for a sus-pension of joint military drillsby the U.S. and South Korea.

However, Washington andSeoul insist Pyongyang mustmake the first move and rollback its nuclear program.

The U.S. State Departmentcondemned Wednesday’s testand said it would raise the issueat the United Nations. North Ko-

rea is banned by U.N. resolu-tions from testing ballistic-mis-sile technology.

South Korean President ParkGeun-hye called North Korea’smissile tests “grave provoca-tions,” while a Chinese govern-ment spokesman said all nationsshould try to avoid escalatingtension.

Both the Musudan andKN-08, as well as a modifiedversion called the KN-14, havebeen displayed by North Koreaon mobile launchers.

They are a bigger concernthanmissiles North Korea previ-ously launched from fixed sitesbecause they are harder to trackand destroy before takeoff.

North Korea has also recentlytested missiles launched fromsubmarines that, along withroad-mobile missiles, have thepotential to give North Korea a“second strike” capability to re-taliate to an initial major attackon its military bases.

North Korea has claimed theability to mount a nuclearweapon on a ballistic missile,but it is unclear if that is a bluff.In March, North Korean leaderKim Jong Un called for an accel-eration of missile and nucleartests.

Pyongyang gave no immedi-ate confirmation of the latesttest, which Japan’s defensemin-ister said sent the missile to analtitude above 600 miles. Ex-perts said the height and dis-tance of the missile test weresufficient for it to be consideredsuccessful.

The Musudan’s maximumrange covers U.S. bases in Japanand the Western Pacific islandof Guam.

SEOUL—North Korea suc-cessfully fired a new ballisticmissile a significant distance onWednesday, heightening con-cerns it is making progress to-ward testing a larger missile ca-pable of threatening the U.S.

South Korea’s military saidNorth Korea fired a Musudan-typemedium-rangemissile fromits east coast that traveledabout 250miles before it disap-peared from tracking deviceswhile over the Sea of Japan.

The Musudan, which has anestimated maximum range of1,800 to 2,500miles, was testedby North Korea for the first timeearlier this year.

But in five other launches, in-cluding one earlier Wednesday,it failed to take flight or ap-peared to travel a short dis-tance.

The Musudan is one of twotypes of missile that outsidershave been monitoring closelyfor flight tests by North Korea.A larger missile, known as theKN-08, has been displayed byPyongyang, but not tested. Itsestimated range of several thou-sand miles would include partsof the continental U.S.

The test alarmed Japan,which has been subjected tothreats fromNorth Korea beforeduring elevated tensions in theregion. “It appears [North Ko-rea] is increasing its ability to

BY ALASTAIR GALE

NorthKoreaTestLaunchAlarmsNeighborsTokyo protests afterPyongyang sendsprojectile 250 milesinto the Sea of Japan

A Seoul resident at a train station watching a news broadcast about North Korea’s missile launch on Wednesday.

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The central bank maintainedthis year’s gross domestic prod-uct growth forecast at 3.1%,though it lowered its exportforecast to negative 2.5% fromnegative 2.0%.

The U.S. Federal Reserve’smove dovish stance on raisingU.S. interest rates also offerscentral banks in emerging mar-kets in Asia more scope for eas-ing policy over the comingmonths without amplifying po-tential capital outflows.

—NopparatChaichalearmmongkol

CANADA

Retail Sales ReboundOn Higher Gas Prices

Canadian retail sales re-bounded in April, rising 0.9% onhigher consumer gas prices.

The value of retail sales roseto a seasonally adjusted 44.28billion Canadian dollars ($34.56billion) in the month, StatisticsCanada said Wednesday. Marketexpectations were for a 0.8% in-crease, according to economistsat Royal Bank of Canada.

The better-than-expected re-port follows a revised 0.8% de-cline in retail sales the previousmonth.

In volume terms, retail salesin April rose 0.1%, meaninghigher prices had a greater ef-fect on the overall increase.

Economists look at sales vol-umes to gauge the level of ac-tivity in the economy.

The Bank of Canada is antici-pating a weak second quarter, inpart because of significant dis-ruptions caused by wildfires innorthern Alberta.

“While much of this weak-ness promises to be transitory,the bigger uncertainty is the

ability of the economy to re-bound in [the third quarter] ifthe global backdrop remains pre-carious,” said Mr. Tulk, whosefirm expects Canada’s GDP todecline by as much as 1.0% inthe April-to-June period.

The biggest contributor tothe overall increase in retailsales was a 6% jump in sales atgasoline stations.

On a 12-month basis, retailsales advanced 4.6%.

—Kim Mackrael

BRAZIL

Acting PresidentApproves Rio Bailout

Acting Brazilian PresidentMichel Temer authorized onTuesday the transfer of 2.9 bil-

lion reais ($849.0 million) fromthe federal government to Riode Janeiro state, which is strug-gling with a fiscal crisis lessthan two months before theOlympic Games.

Rio declared a “public calam-ity” last week as a result of itsdeteriorating finances, whichhave forced deep cuts to crucialservices such as education,health care and policing in recentmonths.

According to a presidentialdecree published late Tuesday,the transfer is to be used forpublic security during the Olym-pics and Paralympics, set to beheld in August and September,respectively. But according to acommunications official in Bra-zil’s presidential palace, it shouldfree up funds within Rio’s statebudget to pay for other obliga-tions.

Aside from security, the stategovernment’s main commitmentfor the Games is to complete a10-mile extension to the subwaysystem in the state capital, Riode Janeiro. The 9.77 billion realproject is currently expected tobe finished at the beginning ofAugust, within days of the Aug.5 opening ceremony.

State officials have said theywould need 1 billion reais to fin-ish the extension, known asMetrô Linha 4.

—Paul Kiernan

AMBON, Indonesia—Thescent of cloves, wrapped upand smoked in cigarettes, haslong permeated daily life inthis archipelago, from urbancafes to far-flung tropicalspice islands like this one.

Now, clove plantations areunder attack by voracious in-sect larvae known as stemborers. And agricultural scien-tists are on a mission to savethem.

The urgency stems fromscientists’ discovery that morethan 1 million clove trees, orabout 15% of the total, are dy-ing here in Maluku Province, amajor producer. The predica-ment has driven up prices andhurt production of a major ag-ricultural industry that em-ploys more than a millionfarmers.

“If these current conditionspersist, we predict that in 10to 20 years the population ofmature clove trees will de-crease by more than 50%,”said J. Audrey Leatemia, wholed a team appointed by thelocal government to investi-gate the problem and proposesolutions.

Cloves and other spices areamong the country’s oldestsources of wealth, drawingDutch colonizers here in the17th century. Cloves were val-ued around the world for their

medicinal properties and as afood preservative. In Chinathey were used to freshen thebreath of people addressingthe country’s emperors.

Today, cloves are mixedwith tobacco and other addi-tives to produce so-calledkretek cigarettes that are soldin Indonesia and across South-east Asia. Experts say thehealth risks are equal to thatof smoking regular tobaccocigarettes.

Clove-based oils have otheruses: a natural analgesic fortooth aches, an antiseptic totreat aquarium fish, and evenin teas as an anti-flatulent.The industry employs 6 mil-lion people in Indonesia.

“This country wouldn’t be anation without cloves,” saidSimon Matakupan, whose fam-ily here grows several hectaresof the syzygium aromaticumtree, which produces the aro-

matic flower bud from whichthe spice is produced.

The scientists’ challenge isto halt the infestations fromspreading before local ciga-rette makers turn to countriessuch as Madagascar and Tan-zania to import cloves—anidea that some Indonesiansconsider a betrayal of theirpatrimony.

“Cloves originate here,”said Dahlan Said, chairman ofthe Indonesian clove farmersassociation, advocating importrestrictions. “Why would weneed to import them?”

But overcoming the clovefarming industry’s problems isa struggle.

Nurliani Bermawie, princi-pal researcher at the Ministryof Agriculture’s spice and me-dicinal crops research insti-tute, said more than 15% of thecountry’s 1.2 million acres ofclove plantations aren’t yield-

ing any cloves due to pest at-tacks and old age. And shesaid nearly two thirds of thecountry’s clove plantations areunder-producing due to poor

farming techniques.The issues come as demand

for the spice is growing fromkretek cigarette makers, whoseoutput of machine-rolled

kretek cigarette has grown onaverage about 7% annually inrecent years, buoyed by popu-lation and economic growth.

Enter the team led by Ms.Leatemia, who heads the plantpest laboratory at PattimuraUniversity in Ambon, the capi-tal of Maluku.

They are urging farmers toplant their trees farther apartto curb diseases and pests, touse more organic fertilizersand pesticides, to weed morefrequently and choose health-ier saplings. Maluku officialssuch as Mohamad Syuja Tu-anaya send teams to ensurefarmers are following theguidelines.

The scientists hope the na-tional government will act onits findings, too. Gamal Nasir,director-general for planta-tions at the agriculture minis-try, said he would send a teamto Maluku and Sulawesi towork on the problem. But headded that it would take timesince he is concerned with 126other commodities as well.

Meanwhile, Ms. Leatemia’steam is focusing on developingnew pesticides. It might seemstrange teaching seasonedfarmers how to grow a cropthat their ancestors have beencultivating for centuries, Ms.Leatemia said.

“But things are differentnow,” she said. “In the past,the pests weren’t like this.”

BY ANITA RACHMAN

Indonesia Tries to Puff Up Clove Cigarette Industry

A worker rolls clove-based cigarettes in Surabaya, Indonesia.

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For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com

A6 | Thursday, June 23, 2016 THEWALL STREET JOURNAL. THEWALL STREET JOURNAL. Thursday, June 23, 2016 | A7

Rubio Will PursueSenateRe-Election

WASHINGTON—Sen. MarcoRubio (R., Fla.) on Wednesdaysaid hewould run for re-electionfor the seat he had previouslyplanned to give up, energizingGOP leaders who are fighting toretain control of the Senate inthe November elections.

“In politics, admitting you’vechanged your mind is notsomething most people like todo. But here it goes,” Mr. Rubiosaid. “I have decided to seek re-election to the U.S. Senate.”

The former presidential can-didate’s decision is a boost forthe Republican Party, whichfears losing control of the Sen-ate, given its mathematical dis-advantage—it has 24 seats todefend, compared with 10 forDemocrats. Some Republicansare also concerned that havingpresumptive GOP presidentialnominee Donald Trump at thetop of the party’s ticket willhurt the election chances of Re-publicans lower on the ballot.

With his name recognitionand ability to raise money, Mr.Rubio is viewed as the party’sbest shot at holding on to theseat in Florida, a large state thatfavors well-funded candidates.

If he wins the Aug. 30 pri-mary, he is expected to face offagainst either Rep. PatrickMur-phy,who is backed by the SenateDemocrats’ campaign arm, orDemocratic Rep. Alan Grayson.

For weeks, Senate MajorityLeader Mitch McConnell (R.,Ky.) and other Republicans had

been pressing him to jump backinto the race, but Mr. Rubio in-sisted his plans hadn’t changed.

In recent days, though, hisresistance beganwearing down.He suggested that he wasmostly concerned about FloridaLt. Gov. Carlos Lopez-Cantera, afriend who had already enteredthe race. Then, Mr. Lopez-Can-tera told Mr. Rubio he shouldget into the contest. A well-funded outside group associatedwithMr. McConnell, the SenateLeadership Fund, said it wouldspend heavily to backMr. Rubio.

In reaching his decision, Mr.Rubio cited the recent shoot-ing in an Orlando, Fla., night-club that left 49 people deadand dozens injured. He hadearlier this week indicated thatthe massacre caused him to re-flect anew on the importanceof public service.

The decision was a turn-around for a politician who hadnever really expressed a pas-sion for the job. His attendancerecord last year was the worstin the chamber: of 339 votes inthe Senate, Mr. Rubio was therefor 65% of them, according toCQ Roll Call. As he campaignedfor the presidential nomination,Mr. Rubio sometimes spoke ofhis frustration with the tediumand stalemate in Congress, usu-ally by way of defending hismissed votes. He also said thevotes he missed were generallymeaningless.

But since he lost the GOPprimary in his home state inMarch, Mr. Rubio concentratedmore on his Senate work.

BY SIOBHAN HUGHESAND KRISTINA PETERSON

A hydraulic-fracturing site inthe Permian Basin in Texas.

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Fox Business Network.“Being perfectly honest, I

used to be chairman of a con-gressional committee, and if Ihad a House race today thatbasically came in with thatkind of figure in June, I’d takethem off the target list,” hesaid. He said Mr. Trump’s re-cent comments about a His-panic federal judge and the

shooting spree in Orlando, Fla.,have “put a spear through theheart of a lot of donors.”

Mr. Trump has struggled inparticular to widen his pool ofdonors willing to give the topamount. He drew about 140 do-nations of the maximum $2,700last month. Mrs. Clinton col-lected that many maxed-out do-nations on a single day: May 17.

U.S. NEWS

lion, was on payroll.The contrast between the

two candidates’ spending illus-trates the vastly different cam-paigns each has created. Mr.Trump, who largely self-fi-nanced his primary campaign,has forgone setting up aground-game operation and afinance team, in favor of relyingon free media. Mrs. Clinton hasassembled a large campaign or-ganization that raised morethan $240 million through May.Mr. Trump raised $14 million inthat period, on top of $45 mil-lion he lent to his campaign.

Mr. Trump is entering thegeneral election with the thin-nest campaign in modern polit-ical history, leaving him nearlyentirely reliant on RepublicanParty efforts, which currentlyfall short of the Democrats, andmaking it difficult for him tocompete with the former secre-tary of state in the complexgeneral-election environment.

Some of Mr. Trump’s topsupporters have voiced con-cern about his cash deficit. EdRollins, a co-chairman for a su-per PAC backing Mr. Trump,said the campaign was in “bigtrouble” in an interview with

The latest fundraising dis-closures showed that in May,the Clinton campaign paid 684staffers. Mr. Trump employed66. Corey Lewandowski, whowas fired as his campaignmanager on Monday, was paid$20,000 a month. Clinton Cam-paign Manager Robby Mookreceives about $7,200 a month.

Mrs. Clinton outspent Mr.Trump on payroll, travel andads last month, while he spentmore than her on consultingand direct mail, according totheir Federal Election Commis-sion reports. Mr. Trump alsodirected an unusually highlevel—nearly 20%—of his ex-penditures toward businesseshe owns or to reimbursing hischildren, who serve as cam-paign surrogates, for travel.

Mr. Trump on Tuesday re-leased a statement calling hiscampaign “leaner and more ef-ficient, like our governmentshould be.”

He defended his meager in-take in May—when he col-lected $3.1 million, to Mrs.Clinton’s $28 million—sayingthat June “represents the firstfull month of fundraising ac-tivity for the campaign.” He

has ramped up his activity inrecent weeks, holding an eventwith Wall Street donors inNew York on Tuesday evening.

While Mr. Trump spentabout half as much as Mrs. Clin-ton in May, he cut checks for $1million more than he raised, in-cluding the $2.2 million he lenthis campaign last month, leav-ing the campaign with just $1.3million in the bank.

On Tuesday, he said that hiscash-on-hand figure was irrel-evant, saying that “if need be,”he could finance the campaignhimself. But his loans havedwindled in recent months ashe has looked to more activelysolicit funds.

A Wall Street Journal analy-sis found he would likely nothave the ready cash to self-fi-nance an entire general-elec-tion campaign.

Mr. Trump has said that hewill rely on the Republican Na-tional Committee’s ground-game operation to bolster hisefforts. The party, unlike hiscampaign, has an establishedvoter-contact operation and afield organization in battle-ground states, but its efforts lagbehind those of the Democrats.

Traditional campaigns spendthe months leading up to thegeneral election pouring cashinto battleground states, hiringstaff and airing television ads.Presumptive Republican presi-dential nominee Donald Trumpspent the largest share of hismoney last month on T-shirts.

The businessman’s singlelargest expense in May—about$900,000—was on campaignmerchandise, a category thatalso includes hats, mugs andstickers. His second-largest ex-pense, about $840,000, was onair travel—roughly 40% ofwhich was paid to an airlineMr. Trump owns.

Democrat Hillary Clintondevoted her May spending tosalaries, travel and advertis-ing as she faced the finalweeks of her primary againstVermont Sen. Bernie Sanders.Her largest expense, $2.4 mil-

BY REBECCA BALLHAUS

TrumpTrails inStaffingandAdPurchasesRepublican lags behindClinton in typicalcampaign metrics; abig expense: T-shirts

Tale of Two OrganizationsDemocrat Hillary Clinton's spending on payroll, travel and ad buysoutpaced Republican Donald Trump's last month.

Source: Federal Election Commission filings THEWALL STREET JOURNAL.

Hillary Clinton

Payroll

Travel

Ad buy

Consulting

Campaign merchandise

Direct mail

Total spending in May

Number ofstaffers

Donald Trump

684

$14.1 million $6.7 million

66

$2.4 million

$1.6 million

$346,615

$1.5 million$180,496

$151,020

$1.3 million

$3,734

$901,864

$150,000

$227,504

$1.4 million

Expenses

til he made a final decision.Judge Skavdahl, whom Mr.

Obama nominated in 2011, saidthe issue wasn’t whether frack-ing—the shortened term for hy-draulic fracturing—“is good orbad for the environment or thecitizens of the United States,”but rather whether Congresshad given the Interior Depart-ment the authority to regulate it.

An Interior Departmentspokeswoman said it is “unfor-tunate that implementation ofthe rule continues to be de-layed, because it prevents reg-ulators from using 21st-cen-tury standards to ensure thatoil and gas operations are con-ducted safely and responsiblyon public and tribal lands.”

The government is expectedto appeal the ruling, whichwould send the case to a fed-eral appeals court and possi-bly to the Supreme Court.

The ruling is the latest set-back for President BarackObama’s environmental agenda,which he has pursued largelyby issuing regulations and by-passing Congress. Administra-tion officials have become frus-trated by what they see as GOPinaction in the face of pressingenvironmental issues, while Re-publicans accuse the WhiteHouse of overreaching.

In October, a federal appealscourt blocked an Environmen-tal Protection Agency rule thatsought to put more bodies of

water and wetlands under fed-eral protection. A final deci-sion on that matter is pending.

The Supreme Court in Febru-ary temporarily blocked a regu-lation limiting carbon emissionsfrom power plants, dealing a po-tentially fatal blow to a rule thatis central toMr. Obama’s effortsto address climate change.

Congressional Republicansand industry groups pointedto the latest ruling as evidencethat Mr. Obama has been over-stepping his authority.

“Only Congress can writelaws,” House Speaker Paul Ryan(R., Wis.), said Wednesday.

The fracking regulation ap-plies to oil and gas drilling onfederal lands, which produce

11% of the natural gas con-sumed in the U.S. and 5% ofthe oil, according to govern-ment data. States govern frack-ing on private and state lands.

Much of the drilling is con-centrated in Western statessuch as Colorado and Wyo-ming, two of the states chal-lenging the standards.

Industry trade groups ap-plauded the judge’s ruling.

The “decision demonstratesBLM’s efforts are not neededand that states are and havefor over 60 years been in thebest position to safely regulatehydraulic fracturing,” saidNeal Kirby, spokesman for theIndependent Petroleum Asso-ciation of America.

A federal judge in Wyominghas blocked an Interior Depart-ment rule setting stricter stan-dards for hydraulic fracturingon public lands, the latest blowto an administration environ-mental agenda that has drawnwide opposition from Republi-cans and industry officials.

U.S. District Judge ScottSkavdahl issued a ruling lateTuesday invalidating the regu-lation, saying the Interior De-partment lacked the authorityto issue it because Congresshadn’t given the agency thepower to do so. The same judgelast year issued a preliminaryinjunction blocking the rule un-

BY AMY HARDER

Judge Blocks Obama Fracking Regulation

GOP Sen. Marco Rubio had said he wouldn’t seek to retain his seat.

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University of California, LosAngeles after a 90-year-oldwater main broke nearby.

The U.S.’s more than52,000 water utilities neededat least $384 billion through2030 to repair and improvepipes and filtration systems,according to a 2013 EPA re-port. A Congressional BudgetOffice report from 2015 foundthat public spending on trans-portation and water infra-structure nationally as a shareof GDP fell to 2.4% in 2014from 3% in 1959.

State governments arestarting to push utilities to in-vest in water infrastructure.Georgia and California, statesboth hit by severe droughts inrecent years, have requiredutilities to submit annualthird-party verified water au-dits that detail how much wa-ter is being lost through leaksand main breaks, and inaccu-

rate meters. Other states areconsidering the idea.

In Hoboken, a bursting wa-ter main on March 14 turnedthe street in front of SparkleSalon into a small lake andsubmerged a parked car in asinkhole. Jassi Birk, the salon’sowner, estimates he lost atleast $1,500 during two daysthe store was closed, and moremoney in the next couple ofdays as customers were scaredoff by repair crews.

Under a 1994 agreement be-tween the city and United Wa-ter Resources Inc., the com-pany operates Hoboken’s watersystem, but the city is respon-sible for major repairs and up-grades. From 1994 to 2001,United Water, now a unit ofSuez Environnement SA ofFrance, paid the city $13.2 mil-lion total under its contract.But instead of using thatmoney to fix or replace pipes,

Cash-strapped cities arecontending with aging, leak-prone water systems thatwaste trillions of gallons ayear and result in damagingbreaks.

The approaches by Hobo-ken, N.J., and Syracuse, N.Y.,show how some cities haveturned to Band-Aid fixes to ad-dress the costly problem, whileothers are trying to deploymore permanent solutions.Hoboken, a city of brick rowhouses across the HudsonRiver from New York City, hasshelled out $2.8 million since2009 on emergency repairs toits crumbling pipes. The city of55,000 residents covers just1.28 square miles but sees25 water-pipe breaks a year onaverage.

Meantime, the water de-partment in Syracuse, N.Y., anupstate manufacturing city,spent $77 million from 2009 to2015 to repair and replacepipes and other water-relatedinfrastructure serving 145,000residents. As of this week, thecity had endured 137 water-main breaks this year, versus227 during the same period in2015. Syracuse recently beganinstalling acoustic sensors inpipes downtown so city work-ers can listen for leaks.

The nation’s utilities loseabout $2.6 billion annuallyfrom trillions of gallons ofleaked drinking water, accord-ing to an estimate by the Envi-ronmental Protection Agency.Roughly 240,000 water-main breaks are expected tohit the U.S. annually, accordingto the American Society ofCivil Engineers.

Much of the waste comesfrom ruptures or leaks thataren’t easy to spot. Otherbreaks are highly visible, in-cluding the July 2014 floodingof part of the campus of the

BY CAMERON MCWHIRTER

Water Leaks Plague Many CitiesBrittle, aging systemslose trillions of gallonsa year and result indamaging breaks

Employees of the Syracuse Water Department in upstate New York attach connectors to a broken water main last September.

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MEDICARE

Suspects ArrestedFor Alleged Fraud

Federal agents have arrestedroughly 300 suspects in what of-ficials call their largest crackdownon Medicare fraud, with chargesranging from taking illegal pay-ments for marketing medicationsto false physical-therapy claims.

Attorney General LorettaLynch on Wednesday announcedthe crackdown, citing cases inwhich prosecutors say theyfound health-care fraud that to-taled about $900 million.

Suspects charged include themanagers of physical-therapyclinics in New York City that al-legedly laundered money, paidkickbacks and billed Medicare forunnecessary treatments for pa-tients. Medicare is a federalhealth-insurance program thatapplies to people aged 65 andover and the disabled.

—Devlin Barrett

MICHIGAN

Lawsuit Filed OverFlint Water Crisis

Michigan’s attorney generalfiled a lawsuit Wednesday againsttwo companies that had beenhired to help Flint, Mich., fix itswater system, saying both com-panies instead contributed to thecity’s lead-tainted-water crisis.

Michigan sued Veolia NorthAmerica and its Paris-based par-ent company, alleging fraud, neg-ligence and public nuisance; italso sued Texas-based Lock-wood, Andrews & Newnam Inc.,an engineering consulting firmalso known as LAN.

Attorney General Bill Schuettesaid the companies had beenhired by Flint to help the city as-sess its water-distribution sys-tem and to improve its perfor-mance but failed to preventwidespread lead contamination. Arepresentative for Veolia said thecompany was checking into thelawsuit. A spokesman for LANcouldn’t be reached to comment.

—Kris Maher

The median sale price for existing homes rose to $239,700 in May.

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previous administrations usedthe money to plug budgetgaps, said Mayor Dawn Zim-mer.

When Ms. Zimmer, a Demo-crat, took office in 2009, thecity’s finances were so poor itwas under state fiscal supervi-sion. She said it took years toget the budget in order, andnow she is turning to infra-structure.

Suez is contractually obli-gated to spend only $300,000to $350,000 a year on mainte-nance—the cost of fixing sev-eral breaks. The company inthe past two years raised thatspending to about $500,000annually, Suez spokesman RichHenning said. That is still waybelow the level that expertssay is needed to bring the sys-tem up to snuff.

Ms. Zimmer, a Democrat,said she wants to spendabout $1 million to $2 million

annually on the city’s pipes.Syracuse, meantime, has

been trying to prevent water-main breaks for years. In thepast, the city’s approach was“like a game of Whac-A-Mole,”with crews rushing to re-pair breaks after they hadflooded a street, according toMayor Stephanie Miner, whodescribes herself as “the chiefnerd of infrastructure.”

In office since 2010, theDemocrat has been pushingfor water-system improve-ments—and money to pay forthem. Her current estimate ofall the repairs the systemneeds totals about $700 mil-lion—a figure exceeding Syra-cuse’s entire budget in fiscalyear 2015-16. She believes thecity can make improvementsusing revenue collected fromratepayers, along with federaland state funds and financingfrom bond issues.

roughly 90% of the housingmarket while new-home salesaccount for the remainingshare. In 2015, 5.25 million ex-isting homes were sold, thehighest level since 2006. NARpredicts the pace of existing-home sales will rise further thisyear. Before Wednesday’s re-lease, the group was forecast-ing a 3% gain to 5.41 million.

The rejuvenated housingmarket has provided a boost tothe economy, helping offset aslowdown in business spendingand a downturn in the energysector. Spending on home con-struction and remodeling grewat the fastest pace in more thanthree years at the start of 2016,helping support an otherwiseanemic quarter.

While the labor marketposted its weakest monthlygain in more than five years inMay, it continued a 75-monthstreak of private-sector job cre-ation. Wages were up 2.5%from a year earlier.

A 30-year fixed-rate mort-gage averaged 3.54% last week,down from 4% a year earlierand just over 6% during the2001-2007 expansion, accord-ing to Freddie Mac.

The Realtors’ group saidthere were 2.15 million existinghomes available for sale at theend of May, down 5.7% from ayear earlier and a 4.7-monthsupply at the current sales pace.News Corp, owner of The WallStreet Journal, also owns MoveInc., which operates a websiteand mobile products for the Na-tional Association of Realtors.

WASHINGTON—Sales of ex-isting homes rose to their high-est level in more than nineyears and prices climbed to anew peak in May, the latestsign of rising demand in theU.S. amid steady job creationand low interest rates.

Sales climbed 1.8% in Mayfrom the prior month to a sea-sonally adjusted annual rate of5.53 million, the National Asso-ciation of Realtors said Wednes-day. That was the strongest pacesince February 2007. April’ssales figure was revised down toa 5.43 million rate.

The national median saleprice for a previously ownedhome, meanwhile, was $239,700,up 4.7% from a year earlier andthe highest figure recorded bythe Realtors’ group. Homeprices are rising faster thanwages across much of the U.S.,potentially damping sales.

“Low inventory, especiallyfor starter and tradeup homes,continues to stifle home salesactivity,” said Ralph McLaugh-lin, chief economist at real es-tate website Trulia. “Finding ahome is increasingly a chal-lenge for both first and second-time home buyers.”

Demand for homes has beenespecially strong as more Amer-icans find work, wages edgehigher and mortgage rates re-main historically low. But homebuilders haven’t been keepingup, raising questions about fu-ture gains for the market.

Existing homes make up

BY JEFFREY SPARSHOTT

Existing-HomeSalesHit Nine-Year High

THERE ARE EXCEPTIONSTO EVERY RULE.

MILLENARYDIAMOND SETIN WHITE GOLD

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A8 | Thursday, June 23, 2016 THEWALL STREET JOURNAL.

FROM PAGE ONE

cision. “iPhone 6 and iPhone 6Plus products do not infringeupon the design patents” heldby Shenzhen Baili, Apple’s law-yers wrote in their appeal.

An appeal of a decision bythe regulatory body must go tothe courts, and Beijing’s Intel-lectual Property Court is ex-pected to hear the case in afew months.

The case comes as Chinesecompanies become more adeptat taking advantage of a ma-turing patent system and rep-resents a further complicationfor Apple, which is already fac-ing challenges in the countrywith slower sales and the sus-pension in April of its iTunesMovies and iBooks services.

Baili might consider ex-panding its suit to the iPhone6s and iPhone 6s Plus, said Mr.Yang. “The issue here is notwhether Digione makes phonesanymore, but whether theiPhone 6 infringes on this pat-ent,” he said.

With an expected long ap-peals process, the ruling isn’texpected to have an immediatesales impact on Apple.

“IPhone 6 and iPhone 6 Plusas well as iPhone 6s, iPhone 6SPlus and iPhone SE models areall available for sale today inChina,” Apple said in a state-

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lings was met with relief bymany nervous Republicans, whowere seeking a significantchange in the campaign. At thesame time, the fact that the ini-tiative fell to the children, whoreadily admit their experience isin business not politics, is beingseen by some Republicans as afurther sign that Mr. Trumphasn’t brought in enough politi-cal professionals to handle thepressures and demands of ageneral-election effort that inmany ways is still being run as afamily enterprise.

“In business and politics, weobviously influence our father’sthought process, but he alwaysmakes up his own mind,” saidDonald Trump Jr. in an inter-view. “Ivanka, Eric and I havethe ability to be very candidwith our father.”

The trio complained to theirfather that Mr. Lewandowskiwas such a “control freak” thathe couldn’t adapt to a new ar-rangement in which other man-agers, such as campaign Chair-man Paul Manafort, would havepower over key functions suchas adding new staff. In addi-tion, they observed firsthandthe manager’s hot temper.

Mr. Lewandowski said inbroadcast and cable interviewsMonday he had no regrets onhow he ran the campaign. Hesaid he preferred a “small andnimble” operation, and had a“great relationship” with theTrump adult children.

Typically, one, if not more ofthe adult children, have trav-eled on the campaign planewith their father, sitting with

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line-charged adventure whentranslated literally to Chinese,which is why it is called Roar-ing Mountain Rafting Jour-ney.

Disney’s theme-park de-signers in Shanghai realizedthat coming up with puns is aparticular challenge, sinceplayful misspellings aren’tpossible in a pictorial lan-guage.

Their solution was to relyon written Chinese charactersthat sound the same but havedifferent meanings. Hunny PotSpin, a Winnie the Pooh ride,is known here as SpinningHoney Pot, in which a Chinesecharacter used in the word for“honey” is replaced by the onemeaning “crazy” or “wild.”

“People look and theyknow it’s not a very rigidride, it’s something playful,”says Imagineering assistantproducer Chang Xu.

Opinions among the newpark’s first visitors about theeffectiveness of Chinesenames were mixed. Zhang An-zhi, a Shanghai-born businessconsultant, said the Fantasy-land area was “boring” be-cause he was so unfamiliarwith central characters likeAlice in Wonderland.

Zhao Siyu, who is fromShanghai and attends the Uni-versity of North Carolina atChapel Hill, says she appreci-ated little touches such astombstones in the Pirates ofthe Caribbean section writtenin ancient-style characters.

land ride inspired by themovie is Little Flying Ele-phant when written in thesimplified characters used onthe Chinese mainland.

Shipwreck Shore, a playarea for children, soundsmore ominous than fun inChinese, so it is called ShipWater Play Area instead.

The princess-themedbeauty salon known as Bib-bidi Bobbidi Boutique makesno sense in a literal transla-tion to Chinese, so Disney de-cided to call it the ColorfulMagical Fanciful Transforma-tion. The Chinese version alsohas an alliterative “B” sound.

“Every time we come upwith a name, we had to makesure it has a whimsical Disneyfeel, it resonates with Chinesepeople and it conveys whatthe experience is,” saysFangxing Pitcher, a writer forthe Disney Imagineeringtheme-park design group. “Ifyou just do a straight transla-tion, all of that gets lost.”

Ms. Pitcher is one of nu-merous Chinese natives hiredto work on Shanghai Disney-land from its earliest designs.Disney owns 43% of ShanghaiDisney Resort, with the ma-jority controlled by the localgovernment’s ShanghaiShendi Group Co.

Disney also hired as con-

ContinuedfromPageOne

DISNEY

At last week’s grand open-ing, visitors seemed to caremuch more about getting onthe most new popular ridesthan understanding howmuch effort went into thesurrounding signs.

“I don’t have much mem-

ory about the translations be-cause I spent most of the daywaiting in line,” said WangMengmeng, 24 years old,from Jiangsu province justnorth of Shanghai.

—Yang Jie and Zhou Weicontributed to this article.

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Names of some Shanghai Disneyland attractions read differentlyin Chinese and English posted on signs throughout the park.

sultants for the new park Chi-nese designers, cultural ex-perts and even comedians. InSouthern California, whereDisney is based, the companyused Chinese tourists as focusgroups while in the earlystages of planning ShanghaiDisneyland.

The focus groups showedthat instructions that seemedto make perfect sense in Eng-lish sometimes didn’t register.Words that sound whimsicaland inviting to Western earswere confusing or off-puttingin Chinese.

For its earlier foreigntheme parks in Paris andHong Kong, Disney did muchof the initial design work inEnglish, handling translationlater in the process. Disney-land Paris and Hong KongDisneyland, which opened in1992 and 2005, respectively,struggled at first to connectwith local audiences and havehad financial problems.

In Hong Kong, Chinese visi-tors sometimes complainedthat they couldn’t navigatethe theme park and didn’tknow what to do there.

“We’ve learned through theyears it’s always a good ideato be as accessible to yourguests as you can be,” saysStan Dodd, an Imagineering

creative director. “I think inprevious parks we may nothave thought that through asspecifically as we did here.”

Getting Chinese transla-tions just right is increasinglyimportant to Disney. China isthe world’s second-largestmovie box office, behind onlythe U.S. “Frozen,” the mostsuccessful animated motionpicture ever, is loosely trans-lated as “Enchanted Destinyof Snow.”

Disney park designers bor-rowed the name and songtranslations for a singalong

show at Shanghai Disneyland.Still, many Chinese names

for attractions at the newtheme park had to include lit-eral descriptions because themovie references that workfor Americans fly right overthe heads of visitors here.

Tron Lightcycle Power Runprobably doesn’t mean muchto anyone who didn’t see the1982 science-fiction movie“Tron” or its 2010 sequel,“Tron: Legacy,” featuringneon-colored electronic mo-torcycles.

In Chinese, though, Super-fast Speed Light Cycle getsacross the point of the thrillride loud and clear.

Roaring Rapids doesn’tquite sound like an adrena-

The company found that whimsical wordsin English were off-putting in Chinese.

him at his conference tablewhile Mr. Lewandowski and thefew other traveling staff sat atanother conference table.

They work on the 25th floor,one floor below his office inTrump Tower, and pop up tochat with him on business orthe campaign frequently. Cam-paign staffers, on the otherhand, are on the fifth floor andoccasionally must wait to gettime with him.

It isn’t unusual for a candi-date’s children to be deeply en-meshed in a presidential cam-paign; Chelsea Clinton,daughter of presumptive Demo-cratic nominee Hillary Clinton,also is heavily involved, as wereMitt Romney’s sons when heran as the 2012 Republicannominee. The difference in thiscase is that there are fewer lay-ers of political professionals in-volved alongside.

At the Father’s Day gather-ing at Trump National GolfClub in Bedminster, N.J., thosethree, as well as Ms. Trump’shusband, Jared Kushner, dis-cussed the “cumulative evi-dence” of Mr. Lewandowski’smissteps since the primary sea-son ended, from fighting withMr. Manafort to offering badpolicy advice, said a person fa-miliar with the discussion. Thesiblings framed the conversa-tion in business terms and re-inforced a conclusion Mr.Trump had been moving to-ward since hiring Mr. Manafortmonths earlier. What’s happen-ing in your campaign is nothow we run a business, one ofthem said. They cited Mr. Le-wandowski’s failure to hire tal-ent and scale the operation.

Others have begun to adaptto the influence the Trump sib-lings wield. Republican Na-

tional Committee Chairman Re-ince Priebus began calling Mr.Trump’s elder children or Mr.Kushner when he needed to getdirect answers or access to theparty’s presumptive nominee.Mr. Priebus “is in consistentcontact with the children andJared as much as he is with Mr.Trump,” said Sean Spicer, theRNC communications director.

Lawmakers on Capitol Hill,many of whom have met withDonald Trump Jr., check in withhim on the latest develop-ments. Also, former GOP candi-dates contact the adult chil-dren, rather than the campaign,because they are regarded ashonest brokers with Mr. Trump.All three are scheduled to de-liver major remarks at the RNCconvention in Cleveland in July.

The three adult Trump chil-dren, who had been working inthe business for years, stepped

in to run his real-estate empirewhile their father launched hiscampaign a year ago. But sincethen, they have gradually as-sumed greater responsibilityfor the campaign’s workings.

For at least the last twomonths, the three have at-tended weekly campaign meet-ings and offered pointed input,as well as holding their owngatherings about other deci-sions, attendees said. The sons,frequent guests on TV and ra-dio shows, went hunting withIowa politicians and hung outin New Hampshire coffee shops.

Ms. Trump made a series ofget-out-the-vote videos and,just a few days after the birthof her third child and Mr.Trump’s loss in the Wisconsinprimary, kicked off his NewYork primary campaign, whichhe won and followed with morevictories. Eric Trump person-

ally called every delegate inPennsylvania, a key state tolock up the nomination; onMonday night, he had dinnerwith several religious leaderswho were to meet with Mr.Trump the next day.

Mr. Kushner, a wealthy real-estate businessman himself, alsohas become a confidant to hisfather-in-law. He initially set upthe campaign’s digital operationand has since established theWashington office, a growingpolicy shop and the speechwrit-ing team—areas where otherRepublicans saw the campaignas sorely deficient.

The three are children fromthe first of Mr. Trump’s threemarriages, to Ivana Trump. Hisdaughter with ex-wife MarlaMaples, Tiffany, 22, just gradu-ated from college. Barron, hisson with his current wife,Melania Trump, is 10 years old.

The prominent campaignrole of Mr. Trump’s three olderchildren, all in their 30s withtheir own celebrity and busi-ness track records inside TrumpOrganization and independently,isn’t surprising to insiders. Mr.Trump has incorporated his el-dest two sons and older daugh-ter in all his business ventures,frommaking real-estate deals toappearing on the reality-TVshow “The Apprentice.”

“Not only are we his family,we also happen to be the peo-ple who have sat across theboardroom table from him forover a decade,” Eric Trumpsaid. “Very few people can rep-licate that level of trust.”

On weekends, the family of-ten gets together, especiallyMs. Trump and Mr. Kushner,who have a cottage next to Mr.Trump’s cottage at the Bedmin-ster Golf Club, where the candi-date relaxes and plays golf onSundays when possible.

Even as Mr. Trump has lis-tened to his three adult childrenmore on campaign matters,their forceful position on Mr.Lewandowski was the toughestto take. Their father told themhis campaign manager hadchanged in recent months sinceMr. Manafort usurped much ofhis responsibility. Yet he re-mained close to Mr. Lewan-dowski.Following the firing, Mr.Trump showed some discom-fort in the minutes immediatelyafterward. “It’s never easy,” hesaid in an interview. “But it’s adecision I had to make.” At thatmoment, Donald Trump Jr. re-mained with Mr. Lewandowskiuntil a security guard escortedhim out of the Manhattan highrise. Ms. Trump, Mr. Kushnerand Eric Trump joined Mr.Trump in his office.

FAMILY

ment to The Wall Street Jour-nal Wednesday.

Patent-infringement suitsare common in the high-techindustry. Apple and SamsungElectronics Co. have held a se-ries of private negotiationsabout their smartphone patentdisputes since 2011.

As the smartphone marketmatures, devices from differ-ent brands look increasinglysimilar, in China and othermarkets. A number of the fea-tures described in Baili’s de-sign are common in many ear-lier smartphones, and someindustry lawyers said an ap-peals court could decide thefeatures aren’t specific enoughto warrant a patent for Baili.

Baidu made a major invest-ment in Digione in 2013, ac-cording to people familiar withthe matter. The investmentcame as Baidu tried to grab ashare of the mobile marketwithout developing its ownsmartphone.

Dozens of Chinese startupspiled into the smartphone sec-tor after the success of $46billion smartphone startup Xi-aomi Corp., which Lei Jun, itsfounder, attributed to timing:“Even a pig can fly in a whirl-wind.”

Many have since gone bank-rupt. China’s smartphone mar-ket growth, in double digitsfor several years, slowed to2.5% in 2015 and is expected tobe flat this year, according to

market-research firm IDC.Digione was founded in

2006 by Xu Guoxiang, formerconsumer-product marketingdirector of Huawei Technolo-gies Co. Mr. Xu—a soft-spokenformer physics student with agoatee and a penchant for artand fine tea—built Digione tosell other brands’ smartphonesthrough mom-and-pop shopsin smaller cities. Later thecompany shifted to making itsown phones.

Baidu had expected Digione

to use its investment to de-velop a mobile-operating sys-tem to compete against rivalsystems from Alibaba GroupHolding Ltd. and others, butMr. Xu instead spent it onsmartphones and other ven-tures, according to people fa-miliar with the company.

Baidu discovered in 2014that Digione hadn’t used themoney as it had expected, andinitiated an arbitration caseagainst Digione, according to aperson familiar with the mat-

ter. Baidu won the private ar-bitration case last year, but hasyet to recoup its money, thisperson said. It has since aban-doned the operating-systemambitions, the person said.

Mr. Xu didn’t reply toemails or calls.

His brother, Xu Shunxiang,who also worked at Digione,declined to comment.

In March 2014, Baili wasgranted a patent from Chineseregulators for a smartphonedesign that had curved edgesand a rear camera in the left-hand corner. Leaked images ofApple’s coming iPhone 6 float-ing online at the time showeda similar design—curved edgesinstead of the straight ones ofprevious iPhone models. Therewere also some similarities inbutton placement.

Just months after thelaunch of the iPhone 6 in Sep-tember 2014, Digione went tothe Intellectual Property Officeand accused Apple of patentinfringement.

On Chinese social media,some people suggested at thetime that it was Digione copy-ing Apple, which the companydisputed.

“I am not Newton. I don’tneed Apple to give me inspira-tion,” a purported Digione em-ployee posted on Chinese socialnetworkWeibo on Nov. 18, 2014.Both Digione’s official Weibo ac-count and Mr. Xu’s own accountreposted the comment.

Digione hoped the contro-versy would boost sales, butthe company had already de-veloped a reputation forpoor-quality devices, saidEmen Zheng, a consultantwho had been hired by Di-gione to set up its e-com-merce platform.

“Digione cut too many costson production and naturallythere were quality problems,”he said. “The smartphoneswould overheat. They had allkinds of issues.”

Former employees and as-sociates said Digione had ahigh attrition rate because ofdisappointing products andMr. Xu’s failure to carrythrough with promises.

“He had this habit whenemployees talked to him ofleaning back his head, closinghis eyes and stroking hisgoatee,” said Mr. Zheng. “Itmade people feel like hewasn’t listening to them.”

Mr. Zheng and other formeremployees said the lawsuitwith Apple was always more amarketing ploy than a seriouscourt case, and that given theinherent limitations of smart-phone design, many devicesnow share similar physical fea-tures. “In truth, there areother smartphones that lookmore like the iPhone 6,” saidMr. Zheng.

—Yang Jie, Juro Osawaand Jenny W. Hsu

contributed to this article.

APPLE

Phone TagShenzhen Baili’s little-known 100C smartphone is at the center of apatent challenge to Apple’s iPhone 6 and iPhone 6 Plus.

Source: China’s State Intellectual Property Office database THEWALL STREET JOURNAL.

FRONT VIEW BACKRIGHTSIDE VIEW

LEFTSIDE VIEW

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ESS

Donald Trump’s children, Eric, Ivanka and Donald Jr., shown in April, have taken on larger campaign roles.

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THEWALL STREET JOURNAL. Thursday, June 23, 2016 | A9

Dodd.” Ms. Brown played the title role in theTV series about a divorced New Yorker look-ing for love and dealing with a meddlingmom. With no sitcom-style laugh track, it wasa comedy-drama hybrid and a forerunner to“Orange,” which has been nominated for Em-mys in both comedy and drama categoriesover the years.

After the death of her former partner, ac-tor Richard Jordan, in 1993, she says “thegods of show business” helped her with roleson three Broadway shows in a row, including“Cabaret,” which allowed her to stay in NewYork while their son finished school there. Af-ter that came a dry spell, which Ms. Brownchalks up to an awkward transition in casting.

Brooklyn, N.Y.As demonstrated on its newest

album, “By Default” (BMG), Bandof Skulls plays with unmitigatedauthority in a style mined by theBlack Keys, Jack White’s variousprojects and other contemporaryblues-based groups. In concert, itworks at maximum volume as Rus-sell Marsden demonstrates hecould be an old-school guitar godif he chose to.

But on Sunday, drummer MattHayward, Mr. Marsden and bassistEmma Richardson came fromSouthampton, England, to RoughTrade here and performed “un-plugged” for an audience of about60 people. In a seven-number, 30-minute set, the trio revealed thatsong craft as much as power is es-sential to its excellence. Themostly acoustic performance con-firmed that Band of Skulls, whenin its customary rock mode, usesvolume and force to give textureto its sound rather than to conceala lack of musicality.

But if Band of Skulls usuallyfeatures lots of big, bruising state-ments, it also enjoys abandoningthem in search of sonic diversity.In its arrangements on “By De-fault,” the trio mixes in dollops of’80s hard rock and fuzzy garage

ARTS & ENTERTAINMENT

HBO

“show and tell,” Mr. Haywardcalled these reunions—and workuntil songs and arrangementsemerge. “The best things we everdo are the purest collaborations,”he added.

At Rough Trade, Mr. Marsdenand Ms. Richardson played acousticguitars while Mr. Hayward, with adrum kit nowhere in sight, played aFender Jazzmaster to add colors toan environment that was far re-moved from wall-rattling rock. Thebrief set was a revelation: “SoGood” was conveyed as driving

folk-rock, “Bodies” as an amblingblues ballad. The trio went to pre-vious albums for “HoochieCoochie,” which was performed assomething akin to a folk-boogie,and a beautiful rendition of“Bruises” sung by Mr. Marsden.The “unplugged” performancessounded nothing like the recordedversions. Thus, the songwriting, asmuch as the three amiable musi-cians, was the afternoon’s star, andit was clear that if Band of Skullswanted to succeed as a folk-rocktrio, it could easily do so.

The group returns to its cus-tomary thunderous ways on Satur-day, playing at England’s mam-moth Glastonbury Festival, wheresome 200,000 music fans are ex-pected. Band of Skulls will returnto the U.S. and Canada in earlySeptember. “By Default,” theband’s reputation for live perfor-mance and Sunday afternoon’s de-light suggest those shows mightbe extra special.

Mr. Fusilli is the Journal’s rockand pop music critic.

Band of Skulls’smost recent album is‘By Default’ (BMG).

ANDY

COTT

ERILL

Warning: This story containsspoilers. Read at your own risk.“GAME OF THRONES” fandomerupted in joy earlier this week whenRamsay Bolton, one of the most hatedvillains in all of television, finally gothis comeuppance. Actor Iwan Rheonmight be sad that his four-season runis over, but he thinks fans are justifiedin their happiness. “I think Ramsay re-ally had it coming, didn’t he?” said the31-year-old Welsh actor.

Ahead of Sunday night’s season 6 fi-nale, Mr. Rheon talked about his tough-est scene, the most fun he had on setand how he brought out the dastardlyjoy in Ramsay. Edited from an interview:

Did you ever hear from anyone whoactually rooted for Ramsay?A lot of people put it up on Twitter orsay to me on the street, “I hope youwin.” It’s like, really?

What has been your most challeng-ing scene on “Game of Thrones”?The rape of Sansa [in season 5]. Itwas just not a very nice scene to haveto do. It’s a horrible thing to get yourhead into and portray truthfully.

What was the secret to cultivatingthis kind of performance? It’s almostgleefully evil, but there has to be an-other shade to it, right?That was one of the main things when...Imet the [showrunners] for the final au-dition. Their big note was...you have tofind the joy in him. He’s not just cold andjust horrible. He actually really enjoys do-ing this stuff. He enjoys life.... It wasfinding that kind of joy in it all which re-ally helped me. I think that’s what makeshim interesting. He wants his father’slove. He wants to be powerful. He’s beena bastard all his life, so he’s got all that.You can’t play that. You can only playhow he feels in what he’s doing.

What’s the most fun you had on set?That dinner party scene was really, reallygood..... We were giggling all the timebecause when you actually step out andlook at how ridiculously horrible they are,and how it’s presented in such a niceway…we just couldn’t keep it together.

—Read the full interview onWSJ.com/Speakeasy

TELEVISION

BY MICHAEL CALIA

Playing theVillain

Iwan Rheonas RamsayBolton.

rock while nodding toward funkand twang. “Killer” and “Embers”kick off with monster unison riffsbefore zooming toward moods thatare sly and slinky. Sung by Ms.Richardson, “So Good” profitsfrom her funky bass and Mr. Hay-ward’s patterns on the cymbals.On several tracks, Mr. Marsdenplays plucky single notes, the re-sult of which is an all-percussionunderpinning. Raspy and rocking,the high-energy “Back of Beyond”is as hooky as a pop hit.

“By Default” is the fourth studioalbum by Band of Skulls, whosename is nothing more sinister thana spoof on Talking Heads, a South-ampton club they’ve played manytimes. But Mr. Hayward said it con-siders itself a band best savored inconcert, and 2013’s “Live at Brix-ton” disc supports the contention.If “By Default” presents the groupas commanding, self-possessed yetperhaps a bit too tidy—more alt-rock than the White Stripes—on“Live at Brixton” it’s broody, brutaland daring, as if a live setting setsthe trio free. One beef with “By De-fault”: For the most part, Ms. Rich-ardson is relegated to the sidelinesas a lead vocalist. The trio’s earlieralbums suggest it profits from twodistinctive singers.

Mr. Hayward said the trio is “aband that operates as a band,”building sketches into composi-tions from the ground up. Theyseparate, return with their ideas—

MUSIC

With as MuchCraft as Power

REVIEWJIM FUSILLI

“ORANGE IS THE NEW BLACK” boasts the big-gest female ensemble on television: some 40regular and recurring cast members, and asmany as 200 extras in certain scenes of over-crowding in the show’s minimum-securityprison for women. The male cast membersnumber about 10.

For actress Blair Brown, 69 years old, join-ing the ranks of a Netflix series in high gearmarks a rewarding career phase, and a reasonto look back at how things have changed forwomen in Hollywood.

“Every time I was doing a job in California,I took a Valium,” says the star of the movie“Altered States” (1980), the TV series “TheDays and Nights of Molly Dodd” (1987-90) andthe recent play “Mary Page Marlowe,” recall-ing acting gigs from decades past. “I hatedbeing ‘the girl.’ As in, ‘The girl can stand hereand John will stand here,’ because the actorwould be named, of course. I was happy towork, but I didn’t like being trivialized.”

On “Orange is the New Black,” her charac-ter is a new kind of force among the inmates,most of whom are serving time for drugs,theft or violence. Judy King is a celebritycook who joins the population of LitchfieldPenitentiary after being convicted of tax eva-sion. The rap sheet is similar to Martha Stew-art’s and the southern accent sounds likePaula Deen’s, but the character is a uniquecreation. Judy is a self-described “polyamoryexpert” who lines up sex with a prison guard,spouts folk wisdom with a foul mouth, andjoins a scheme to sell scandalous prison pho-tos to the tabloids. Ms. Brown, who imitatedher mother’s Virginia accent for the role, callsJudy “an appalling human being” but got akick out of playing a “friendly narcissist.”

The fourth season of the series premieredJune 17 on Netflix in the usual fashion, withthe release of all 13 episodes at once. Somecritics are calling it one of the best of the se-ries in juggling multiple story lines and mir-roring the societal drama of real life. Theprison, having switched to a for-profit busi-ness, has increased the head count to boostrevenues. The crowding sharpens tensionsamong Hispanic, black and white inmates,including Piper, the protagonist played byTaylor Schilling, who went from a wide-eyed yuppie in season 1 to getting a swas-tika branded on her arm in the currentseason.

Judy King, who was introduced lastseason when the inmates followed her le-gal ordeal on TV, adds fame and privilegeto the mix. She receives special treatmentfrom the warden wary of bad press, in-cluding a private room away from the over-flowing dorms. Later, she has to scramblewhen an offensive video of hers from the1980s surfaces.

“Orange” casting director Jennifer Eustonsays Ms. Brown—and “her bright eyes” inparticular—left a deep impression on herfrom “Altered States.” The sci-fi movie withtrippy and cutting-edge special effects at thetime starred William Hurt as a professor wholoses himself in visions triggered by mind-al-tering drugs and a sensory deprivation tank.Ms. Brown played the hero’s wife, who pullshim back from the brink. She recalls research-ing the movie with Mr. Hurt by floating in atank in someone’s creepy house in a Los An-geles canyon. “I thought I was going to bemurdered,” she jokes, but gives the sensorydeprivation experience itself high marks:“Better than any massage.”

She says “Orange” creator Jenji Kohanchose her to join the series based on a differ-ent role, “The Days and Nights of Molly

“You get to certain ages where they don’tknow where to put you,” she says. “The hardpart [in the industry] is really being able togrow older, because nobody wants to seewhite hair. If you’re 50 and have white hairyou’ll be going after the same part that EllenBurstyn is at 80.”

Not long after shooting on “Orange” fin-ished for the season, Ms. Brown spent morethan two months in another show with strongfemale camaraderie behind the scenes: Shewas one of seven actresses playing the titlerole in “Mary Page Marlowe” at Chicago’sSteppenwolf Theatre. The play was written byTracy Letts, who also wrote the Pulitzer- andTony-winning play “August: Osage County.”Like the other actresses, Ms. Brown embodiesthe character, inspired by Mr. Letts’s mother,in various life stages, including a scene on herdeath bed. After the drama’s scheduled clos-ing this month, the cast is waiting to hear if itwill get a second life, perhaps in New York.

“The kids [in the play] might outgrow it,but I’m good to go. Mary Page is only a yearolder than I am, so clearly the role is mineuntil I die,” Ms. Brown jokes. “As you getolder there’s less work, but it’s better work.”

Blair Brown: A New Force

Blair Brown in ‘Orange Is The New Black,’ above,and with Alan Wilder in ‘Mary Page Marlowe.’

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A10 | Thursday, June 23, 2016 THEWALL STREET JOURNAL.

W hether Microsoft’s $26.2 bil-lion purchase of LinkedInmakes sense might depend

on where you look. Glancing atLinkedIn’s press release for the fullyear 2015, you will see a prominentprojection for “adjusted” earningsthis year of $950 million.

Yet if you read the press releaseand its appendix closely, you can fig-ure out that the company’s projected2016 earnings under GAAP, the gener-ally accepted accounting principlesrequired in securities filings, are mi-nus $240 million.

What accounts for that enormousdifference? Like many companies,LinkedIn reports one set of figures tothe U.S. Securities and ExchangeCommission but touts adjusted fig-ures elsewhere. LinkedIn’s adjustedprojection excludes large expenses:$630 million for stock awards to ex-ecutives and $560 million for depreci-ation and amortization.

This practice is widespread: Ac-counting Observer, a research newslet-ter for analysts, totaled up results for380 companies in the S&P 500 that useadjusted earnings. Under GAAP rules,their net income dropped 11% between2014 and 2015. But their press releasesproclaimed a combined 6.6% increasein adjusted earnings.

The average investor probablydoesn’t understand this distinction.That’s because companies typicallyemphasize adjusted measures at thefront of their releases, with a table inthe back that reconciles them to theGAAP numbers.

In May the SEC took a big step to-ward financial transparency by re-stricting the emphasis on adjusted fig-ures. Under updated guidance,companies that tout adjusted numbersmust give “equal prominence” to GAAPfigures. For example, a firm may nolonger include an adjusted number ina headline without citing the unad-justed one in the same place.

The SEC also outright prohibited es-pecially troublesome adjustments. Un-der GAAP, a company recognizes reve-nue when it delivers the product, notwhen it bills the customer. Therefore,the agency barred firms from adjusting

Modi’s Investment Progress

N arendraModi did right by India onMon-day by raising limits on foreign invest-ment in nine industries, including retail-

ing, which should allowcompanies such as Apple andIKEA to open stores in thecountry. It’s about time.

Critics are complaining thatthePrimeMinister’s liberaliza-tiondoesn’t go far enough, andit’s true plenty of red tape remains to hamperforeign investment. Yet Monday’s move buildson previous rule changes and more are in theplanning stage. Mr. Modi is gradually reducingthe ownership limits that have isolated India’seconomy since independence.

Foreignerswill soon be allowed to own 100%of Indian airlines, armsmakers and foodproces-sors, as well as 74% of pharmaceutical firms.Many stakes will enjoy automatic approval, in-steadof having to go through theForeign Invest-ment Promotion Board.

Mr. Modi exaggerates when he claims “Indiais now the most open economy in the world forforeigndirect investment.”Buthedeserves creditfor consistencyand follow-through. Shortly aftertaking office two years ago, he welcomed moreforeign investment in insurance, defenseandrail-way construction. A relaxation of local-sourcingrequirements for retailerswasproposed lastNo-vember and broadened Monday.

Themore apt criticism is that removing for-mal limits on new entrants won’t be enough toachieveMr.Modi’s “Make in India” goal of creat-ing a global manufacturing hub. He wants toraise manufacturing’s share of the economy to25% from 15%by2022—agoal that requires pro-duction to growabout 15%per year.Manufactur-ing had a banner year in 2015, but growth onlyjumped to 9.3% from 5.5%, and the past fewmonths have fallen short of that.

The climate for foreign investment inmanu-facturing also remains uncertain, mainly be-cause of the problems India’s own companies

face, such as restrictive laborregulations and difficulties inacquiring land. Service indus-tries remain the engine of theeconomy, and while they ac-count for more than half ofGDP, they employ amere quar-

ter of the workforce. A growing populationneeds the jobs that labor-intensivemanufactur-ing can provide.

Less than 10% of the workforce is formallyemployedwith a contract and social benefits. La-bor regulationsmake it almost impossible to fireworkers, so firms are reluctant to expand. Evenin the cities, about 70%of Indians haveno choicebut to work in the informal economy, wherewages and conditions are far worse than theycould expect in a foreign-owned factory.

Applewill nowget an eight-year reprieve onlocal-sourcing rules so it can open its ownstores. What happens when that runs out? Onpresent trend it’s unlikely Indiawill be viable fora Foxconn assembly plant tomake iPhones as ef-ficient as those it runs in China.

Mr. Modi has used executive orders to ac-complishmany of his reforms due to resistancefrom left-wing parties in Parliament. He is gain-ing politically, with his Bharatiya Janata Partyand its allies doing better than expected in fivestate elections last month. Some Indian politi-cal analysts estimate he is within 10 votes ofpassing a reform of the goods-and-services taxin the upper house.

This offers hope that the government willsoon be in a position to pushmore comprehen-sive reforms.Mr.Modi’s liberalizationMondaywas an important step that should encourageforeign investors. There’s more to do.

India wants foreignfirms, but it’s still a

tough place for business.

Treasury’s Inversion Scythe

I sU.S. Treasury Secretary JackLew trying toimpose a new tax burden on all businessesin theUnited States?Or is hemerely unable

to shoot at politically disfa-vored companies without hit-ting the rest of the economy?These questions arise becausebusinesses across the U.S. arelearning they’ll have to changehow theymanage their cash tosatisfy Mr. Lew’s latest regulatory diktat.

InAprilMr. Lewattempted for the third timeto rewrite longstanding federal rules to preventcorporate inversions. These are deals inwhich aU.S. companymergeswith a foreignpartner andadopts its overseas address to reduce tax bills.Mr. Lewachievedhis initial objective of blowingup the pending Pfizer-Allergan merger. But wewarned at the time that the Lew plan would be“ugly for everybody,” not only corporate invert-ers.That’s because companieswouldhave tonav-igate a newocean of compliance questions evenif they never considered inverting.

Businesses are now realizing how deep thisocean is. Caterpillar CEODougOberhelman saidon a conference call last week that this “veryonerous” regulation puts U.S. companies “at adistinct disadvantage to competitors.” Account-ing firmPricewaterhouseCoopers iswarning cli-ents that theproposed rules apply even topurelydomestic transactions.

Here’s the problem: Treasury presented itsplan as away tomake inversions less attractiveby prohibiting “earnings stripping,” in whichcompanies allegedlymake large loans from theiroverseas businesses to their U.S. subsidiariessimply to minimize taxes. The interest paid byonepart of the business is deductible in theU.S.,reducing the bite from the industrializedworld’shighest corporate-income tax rate,while the in-terest received by the other armof the companyis taxed at low rates overseas.

But Treasury aims to solve this alleged prob-lemby overturning decades-old interpretationsof tax law and forcingmany loans between re-lated businesses to be treated as equity insteadof debt. Businesses commonly pool the cashfrom various subsidiaries in one account, or

theymay fund one business with loans from anaffiliate that has available cash. Recasting thesetransferswithin a corporation as equity invest-

ments will trigger highertaxes for many firms unlessthey hire outside banks toprovide the financing theyused to do internally.

These rules cover everybusinesswith at least $50mil-

lionof such “intercompanydebt,” so theygowellbeyond largepublic companies. Additional rulesdemand new record-keeping requirements.

Treasury is also planning to empower Inter-nal Revenue Service auditors to declare instru-ments as part debt and part equity, addingmore complexity and fear to an already compli-cated process. And this new IRS power doesn’tappear to have any size threshold. Will anycompany be safe?

The S Corporation Association, which rep-resents many potentially affected companies,is saying the rules as proposed could forcesuch firms to change their structure becauseS corps are only allowed to have one class ofstock, and the new rules would force the cre-ation of a second.

One corporate-tax lawyer recently told a col-leaguenot toworry about thedraft rules becausethey’re sobad theywill surely be rewritten.We’dlove to be optimistic but this is the gang thatgaveusObamaCare andDodd-Frank, and contin-ues to treat both likeHolyScripturedespite theirevident economic harm. So far Treasury is onlypromising to perform its legal obligation to con-sider public comments, which are due by July 7,before crafting a final rule.

Sold as away toprevent corporate inversions,this Jack Lew instant regulatory classicmainlypunishes companies that aren’t leaving thecountry—or at least they weren’t planning onleaving before reading his new rules.

We’d love to write these off as more unin-tended consequences from theU.S. federal gov-ernment, but thenMr. Lewand the entire ObamaAdministration seem to be doing their best topunish as much of the economy as possible asthey head for the exits.

An Obama-Lew tax raidis now punishing firmsthat stay in the U.S.

Supreme RICO Rollback

TheU.S. justice systemhas increasinglybe-come the court of first resort for foreignlawsuits, which use broad statutes and

the threatofhighdamages to coerce settlements.TheSupremeCourt put a brake on thatMonday,ruling 4-3 that the EuropeanUnion couldn’t suetobacco company RJR Nabisco in U.S. court forinjuries that occurred outside the U.S.

The 1970 Racketeer Influenced and CorruptOrganizations Act, or RICO, was aimed at orga-nizedcrime.But the lawalso contains aprovisionthat allowsaprivateparty tobringa claimundercivil RICO to recover treble damages, making ita favorite tool of plaintiffs attorneys.

InRJRNabisco v. The EuropeanCommunity,the EU alleged the tobacco companywas part ofa scheme in which drug money run by Russianand Colombian criminal groups was launderedthrough the purchase of RJR cigarettes. WhileRICO criminal laws apply to some actions out-side the U.S., the Justices ruled that privateplaintiffs may only bring civil suit if their com-plaint contains a domestic injury.

“It is a basic premise of our legal system that,in general, ‘United States law governs domesti-callybutdoesnot rule theworld,’” JusticeSamuelAlitowrote for themajority. “Thequestion is notwhetherwe think ‘Congresswouldhavewanted’a statute to apply to foreign conduct ‘if it had

thought of the situation before the court,’ butwhetherCongresshasaffirmativelyandunmistak-ably instructed that the statute will do so.”

Plaintiffs attorneys havehad their eye on civilRICO laws as a way to go after claims that theCourt has recently foreclosed, notably inKiobelv. Royal Dutch Petroleum (2013), which endeda proliferation of extraterritorial claims underthe Alien Tort Statute. Over the years the tortbar has shoehorned an array of issues into civilRICO including a 2008 suit alleging companieswere complicit in South African apartheid andanotherwith claims against theU.S.military forabuses at a prison in Iraq.

The plaintiffs game is to leverage the RICOlaw’s treble damages to coerce companies to set-tle. The RJR case was a poster child for that, asothermajor tobacco companies paid substantialsums to get out of the headlines.

By requiring a domestic injury to support acivil RICO action, the 4-3 Court prevented U.S.courts from becoming a tort-lawyer version ofthe International Court of Justice. That’s goodnews but also a reminder of the stakes since thedeath of Justice Antonin Scalia. Justice SoniaSotomayor recused herself from the case, buthad she joined the dissent a 4-4 splitwould haveupheld the abysmal decision from the SecondCircuit Court of Appeals.

REVIEW & OUTLOOK

OPINION

How the Malaise Will EndThe European Unionhas never fared wellwhen presented di-rectly to voters. Thatputs the European to-getherness project ata disadvantage in thisweek’s British referen-dum, even weighedagainst the naturalimpulse of phlegmaticmiddle-class voters

(which we nevertheless expect to pre-vail) not to jump off any cliffs.

A larger fear is that an anti-EU votecould be the start of a cavalcade ofanti-status-quo elections. Spanish citi-zens vote on Sunday and may elect abrand-new populist party bent on tear-ing up debt-reduction agreements. Ital-ian voters in October may reject a con-stitutional referendum backed byreformist Prime Minister Matteo Renziaimed at making Italy governable. InAmerica’s own anti-status-quo election,Donald Trump may triumph in Novem-ber (assuming he doesn’t provoke GOPdelegates into throwing him overboardin Cleveland next month).

No, the world will not end. Ourtime’s biggest disturber of the peace,Vladimir Putin, favors Brexit, a Trumppresidency, any other vote that tends toupset Western apple carts, on groundsthat Russia gains when the West is de-stabilized. He may miscalculate. Rus-sian voters themselves may catch theanti-establishment bug when he facesthem in early 2018.

Throwing the chips up in the air, ofcourse, does not choose a path. It re-mains up to those who find themselvesin power to set a course that will causethe public to re-elect them.

Our guess is that Britain can’t savethe EU but gains nothing by contribut-ing to its unraveling. The march towardgreater centralism is already off; theEU’s attempts to expand its fiscal au-thority to address the euro crisis arestillborn; its immigration policies arebreeding dissension in its French andGerman heartland.

What’s really eating Western publicsis the lack of economic growth, the fearthat social relations are unsustainablegiven towering debts, endless commit-ments to spend money that doesn’t exist,and inexorable armies of unemployedyoung people and migrants.

George Soros is buying gold. DonaldTrump is talking about reneging on aportion of U.S. debt, which some of hisrationalizers interpret to mean un-leashing inflation to drive down itsvalue.

Bill Gross talks about a bond-marketsupernova getting ready to blow. PeterThiel speaks of an unsustainable gov-ernment debt bubble.

Today’s ultralow, even negative, in-terest rates and apparently low infla-tion are taken for granted by the secu-lar stagnation theorists, who believe

the status quo will persist for yearsand years. It’s a view that seems im-plausible in light of the industrialworld’s debts.

The path may be crooked, but theway ahead seems clear: Governmentswill increasingly pay their bills and ex-pand their spending not with thefruits of the productive labor of tax-payers but by printing money. Infla-tion is inevitable.

Let’s stop and notice we’ve beenhere before, and inflation was notwithout productive political effects.The inflationary crisis of the 1970s ledto the appointment of Paul Volckerand a revolution in monetary policy. Itwas instrumental in sparking a revolu-tion in tax policy (known as the sup-ply-side revolution, which cared aboutincentives and growth). And it madepossible sweeping deregulation of en-ergy and transportation, vital sectorsof the economy.

Inflation made a lot of things possi-ble that previously would have repre-sented too steep an attack on vested in-terests and the status quo. It wasn’tpublic outrage over rising prices; it wasthe prospect of mass bankruptciesamong regulated transportation compa-nies, as already seen in the Penn Cen-tral bankruptcy, that panicked policymakers into productive action on de-regulation. It was the prospect ofAmericans shivering in the dark fromthe collapse of domestic energy produc-tion, especially natural gas, under pricecontrols. One example: When PresidentCarter lobbied Congress to support theStaggers rail deregulation bill, hewarned that the alternative was a $300billion bill (in today’s dollars) for na-tionalizing the railroads.

The crisis of our own times has notyet become productive, but when and ifinflation comes, it will make interestpayments on government debts unsup-portable. It will cripple the ability ofWestern governments (and Japan) tomake good on promised health-care andpension benefits. There will be no alter-native, presumably, except policies aimedat getting economic growth and produc-tivity going again. Presumably.

Of course, accident can also play arole. If British voters thwart their bet-ters and actually vote to leave the EUon Thursday, a simple timeline perhapswill explain the outcome: The EU refer-endum was put forward in the Queen’sspeech to Parliament in May 2015; inAugust, Angela Merkel effectivelythrew open the EU to a flood of mi-grants from Syria and other failingMiddle East states.

Forget Brexit. The Westerngrowth crisis will only betackled when inflation hits.

BUSINESSWORLDBy Holman W.Jenkins, Jr.

Put an End to DizzyingEarnings Adjustments

to accelerate revenue recognition.Other inconsistent adjustments

have long been barred. In 2002 theSEC issued a cease-and-desist orderto Trump Hotels for a misleading1999 press release. The firm hadpumped up adjusted earnings by sub-tracting an $81 million one-time ex-pense without including a $17 millionone-time gain.

Companies generally exclude “non-cash” items from adjusted figures, butinvestors should realize that these of-ten require future outlays. Deprecia-tion and amortization might seem likemere book entries, but they representreal dollars needed to replace agingmachinery or expiring patents. Certaintypes of taxes may not be collectedimmediately but still constitute bind-ing obligations.

Adjusted measures can sometimeshelp investors better understand ac-tual performance. When exchangerates gyrate, multinationals can moreaccurately convey their operating per-formance by reporting figures in con-stant currency. A company involved ina megamerger can help investors as-sess the combined firm by providingadjusted measures.

Despite the new guidance, somecompanies will continue to play up ad-justed figures. Firms typically issuepress releases two to three weeks be-fore they file their quarterly SEC re-ports, so the less optimistic numberscan easily get lost in the shuffle.

The SEC should shorten that delayby mandating that companies filetheir quarterly reports within a fewdays of issuing their earnings re-leases. To make that feasible, theagency would have to pare back theinformation required in quarterly re-ports. This combination would keepinvestors focused on results, withoutbeing confused by creative adjust-ments to company earnings.

Mr. Pozen is a senior lecturer atMIT’s Sloan School of Management.

By Robert C. Pozen

Accounting tricks distortcompanies’ true values.

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THEWALL STREET JOURNAL. Thursday, June 23, 2016 | A11

OPINION

Counterfeit Goods Have No Place on Alibaba

I ncreased scrutiny is part of be-coming a global company. WhenAlibaba went public in 2014, I

told our customers, employees andinvestors that what we had earnedwas trust—in myself, my team, andour company’s mission, vision andvalues. With that trust comes greatresponsibility. So when I see reportsin the press taking my recent wordsabout counterfeit goods out of con-text, I feel compelled to set the re-cord straight. This is my responsibil-ity to all of our stakeholders.

What I shared with our investorslast week was an observation: thatthe dynamics between some brandsand their manufacturing partners,and brands and their customers, areshifting due to economic and techno-logical developments.

First, Chinese manufacturersface declining exports because de-mand from Western markets is notwhat it used to be. Every day, I see

small businesses in China suffer be-cause orders from their longtimecustomers are half of what theyonce were. Yet these businesseshave made investments in factories,equipment and people. They mustfind new ways to adapt to thischanging environment.

Second, the internet has givenconsumers ever-increasing access toproducts without the need for com-plex and costly distribution channels.Manufacturers in China are increas-ingly using the internet to tap intothe vast domestic market. Many ofthese firms have developed their ownonline-only brands with quality prod-ucts for Chinese consumers.

What I said last week was thatthese trends may challenge the busi-ness model of some establishedbrands. That’s reality.

I want to let you know where Istand on this: Counterfeit goods areabsolutely unacceptable, and brandsand their intellectual property mustbe protected. Alibaba is only inter-

ested in supporting those manufac-turers who innovate and invest intheir own brands. We have zero tol-erance for those who rip off otherpeople’s intellectual property.

Failing to protect original de-signs, trademarks and technology isakin to thievery, and it is detrimen-tal not only to innovation but alsoto the integrity of the marketplace.We do not and will never condoneany act of stealing.

Alibaba is 100% committed toleading the fight against globalcounterfeiting, online and offline. Wehave devoted an unparalleled level oftechnology, capital and people to-ward our anticounterfeiting work.Our robust data processing and ana-

lytics enable real-time scanning ofmore than 10 million new productlistings a day, looking at product at-tributes such as trademark, pricing,geolocation, buyer and seller iden-tity, consumer feedback and more.For every one takedown request wereceive from a brand, we have proac-tively removed eight.

Let’s not forget that this is a long-term crusade. There are no easy orshort-term fixes, because it is a bat-tle against human greed.

At Alibaba, we have built theworld’s largest platform that en-ables more than 10 million mer-chants and brands to directly engagewith hundreds of millions of con-sumers. Brands embrace our plat-form because consumers love ourmarketplaces.

We work hard every day to pro-tect our stakeholders and ensure thatconsumers are not hurt by shoddyfake products. We are committed tofighting the root causes of infringe-ment and to protecting creators and

innovators. And we not only complywith laws and regulations but alsoactively assist law enforcement incracking down on counterfeiters.

We do all of this because we careabout the sustainability of our busi-ness. I’ve been around long enoughto know that authenticity is theonly thing that sustains one’s char-acter and maintains trust in thelong run. I’m interested in tellingthe truth rather than glossing overdifficult subjects.

Alibaba always stands ready topartner with brands. As such, I seeit as my responsibility to tell themthat the world is changing. The in-ternet has enabled consumers toassert their preferences more thanever, and thus businesses must in-novate. The good news is that wehave an opportunity to work to-gether with brands to get ahead ofthese new trends.

Mr. Ma is the founder and execu-tive chairman of Alibaba Group.

By Jack Ma

Failing to protect brands isakin to thievery—and wehave zero tolerance for it.

PUBLISHED SINCE 1889 BY DOW JONES & COMPANY

Rupert Murdoch

Executive Chairman, News CorpGerard Baker

Editor in Chief

Robert Thomson

Chief Executive Officer, News CorpWilliam Lewis

Chief Executive Officer and Publisher

EDITORIAL AND CORPORATE HEADQUARTERS:1211 Avenue of the Americas, New York, N.Y., 10036Telephone 1-800-DOWJONES

DOW JONES MANAGEMENT:Ashley Huston, Chief Communications Officer;Paul Meller, Chief Technology Officer;Mark Musgrave, Chief People Officer;Edward Roussel, Chief Innovation Officer;Anna Sedgley, Chief Financial Officer;Katie Vanneck-Smith, Chief Customer Officer

OPERATING EXECUTIVES:Jason P. Conti, General Counsel;Nancy McNeill, Corporate Sales;Steve Grycuk, Customer Service;Jonathan Wright, International;DJ Media Group:Almar Latour, Publisher; Kenneth Breen,

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Rebecca Blumenstein, Matthew J. Murray

Deputy Editors in ChiefDEPUTY MANAGING EDITORS:Michael W. Miller, Senior Deputy;Thorold Barker, Europe; Paul Beckett, Asia;Christine Glancey, Operations; Jennifer J. Hicks,

Digital; Neal Lipschutz, Standards; Alex Martin,

News; Ann Podd, Initiatives; Andrew Regal, Video;Matthew Rose, Enterprise; StephenWisnefski,

Professional News; Jessica Yu, VisualsPaul A. Gigot, Editor of the Editorial Page;Daniel Henninger, Deputy Editor, Editorial PageWALL STREET JOURNAL MANAGEMENT:Trevor Fellows, Head of Global Sales;Chris Collins, Advertising;Suzi Watford, Marketing and Circulation;Joseph B. Vincent, Operations;Larry L. Hoffman, Production

Clinton, Obama, Trump and the Abuse of Power

will suspend immigration from ar-eas of the world when there is aproven history of terrorism againstthe United States, Europe or ourallies, until we understand how toend these threats.”

Like many Americans, I think thebetter course is to destroy IslamicState while also welcoming new-comers. But there’s nothing authori-tarian about trying to persuade vot-ers that the country should amendits immigration policies.

President Obama clearly knowsthis, because he spent much of hisanti-Trump rant last week criticiz-ing—not the temporary ban ad-vanced by Mr. Trump—but abusesagainst American citizens that Mr.Obama imagines will result fromthe Trump agenda.

Yet Americans don’t have toimagine the abuses of the Obamaadministration. Mr. Obama falselyclaimed the power to determinewhen Congress is in recess. Heasserted the ability to waive immi-

gration law for millions of people.Does using the IRS against philo-sophical opponents count asauthoritarian?

No evidence has been uncoveredtying Mr. Obama to the IRS target-ing scandal. But since he pro-claimed that it involved “not even asmidgen of corruption” long beforehis government had finished inves-tigating, and has made no seriouseffort to reform the agency, he nowbears some responsibility.

Mr. Trump has made inappropri-ate or mean-spirited remarks aboutall kinds of people. But does thismean he’s marching the U.S. to-ward Nuremberg? For the punditswho claim to worry, let’s hunt forsimilarities between Donald Trumpand the dictators so much on theminds of media folk.

One trait that ties DonaldTrump to some of recent history’smost significant authoritarians isthat they achieved many of theirgoals as relatively young men.

While in their 30s, Hitler tookover what would become known asthe Nazi party, Fidel Castro over-threw the Cuban government,Mussolini created the Fascistmovement in Italy and Mr. Trumppurchased the property on FifthAvenue between 56th and 57ththat would become Trump Tower,a mix of luxury retail, office spaceand residential condos.

By his early 60s Stalin had killedmillions of his countrymen. At thesame age, Mr. Trump had already of-fered a signature collection of shirts,ties, cuff links, eyewear and leathergoods. He has also peddled furni-ture, mattresses, bedding, lighting,home décor and more. Did Stalinever have his own fragrance?

Mr. Trump has produced plentyof failures, but they occurred inthe world of commerce, where cus-tomers get to decide whether aventure and its leader succeed. Au-thoritarians wouldn’t know muchabout that.

The rule of law and the honest,open government that Americanscherish, and that allow them tomake their own choices, are alwaysthreatened by those who seek do-minion over free people. But the U.S.has more than two centuries of con-stitutional order on its side.

Despite differences and evolvingviews on many issues, Americansstill love freedom. And thanks toits liberal political leanings, thefree press will be a much more re-liable check on a President Trumpthan it has been on Mr. Obama orwould be on another PresidentClinton.

The facts suggest that Mrs.Clinton is more likely to abuse lib-erties than Mr. Trump. Only onecandidate in this election cyclehas run for president while refus-ing to cooperate with a federal in-vestigation into her conduct in aprevious office.

Only one candidate is on recordopposing the First Amendment’sguarantee of free speech. Only onecandidate condemns the SupremeCourt for allowing a movie critical ofher to be distributed and advertised.

Besides seeking to silence crit-ics, another hallmark of authori-tarians is that they abhor honest,fair elections. Mr. Trump, unlikethe Democratic National Commit-tee of the Bill Clinton era, hasnever had to return more than $1million in donations because theywere tied to foreign sources andlikely illegal.

America managed to survive Mr.Clinton’s two terms, so it canstand the far less vulgar Mr.Trump. The question is how long itcan survive if it elects presidentswith a record of opposing constitu-tional rule of law.

Mr. Freeman is assistant editorof the Journal’s editorial page.

By James Freeman

EPA/G

ETTY

IMAGRE

S

T he authors of a widelyquoted study findingthat political conserva-tism is correlated withan authoritarian person-

ality have announced a correction.Turns out their article in theAmerican Journal of Political Sci-ence reported their findings exactlybackward. The academics now tellus that views on the left side ofthe political spectrum correlatewith authoritarian traits. Politicalpundits should consider runningsimilar corrections regarding Don-ald Trump.

It has been this year’s most pop-ular media cliché: casting the likelyRepublican presidential nominee asan aspiring tyrant who will trashconstitutional norms in his unend-ing quest for power. Political seersfrom Georgetown to Manhattanclaim to hear in Mr. Trump’s wordsdisturbing echoes of the 1930s.Columnists forecast a dark chapterof authoritarian rule in the U.S.should he be elected.

But Mr. Trump isn’t that bad.America isn’t that fragile. And foranyone concerned about Washing-ton tyranny, there are largerthreats—Hillary Clinton, for one—that deserve attention.

Mr. Trump has been under firelately for the temporary ban onMuslim immigrants that he pro-posed last year. Last week heseemed to refine the proposal, say-ing the U.S. should screen for ter-rorist links and also promising, “I

The media effort to labelDonald Trump as anauthoritarian is absurd.

The Shrinking of the Liberal OrderWhatever the out-come of the “Br-exit” vote—theU.K.’s referendumThursday on re-maining in the Eu-ropean Union—anera of Western his-tory is ending and anew one is strug-gling to be born.The liberal interna-

tionalist project of the past sevendecades is on the defensive, whileethno-nationalism (often illiberal)is surging.

The optimistic assumption thathistory’s arc is linear and progres-sive is being challenged by theolder, darker view that order islocked in a perpetual struggle withchaos, security with danger. If lib-eral means are no longer adequateto guarantee order and security, saythe challengers, they become nice-

ties we can no longer afford.In the U.S., support for the coun-

try’s postwar role as the lead guar-antor of peace and the liberal inter-national economic order is weak-ening. The Republican Party’s pres-idential nominee has rattled gov-ernments around the world with hisfrontal challenge to America’s mili-tary alliances.

Leaders in both parties have re-jected the Trans-Pacific Partnershiptrade deal, despite PresidentObama’s compelling geopolitical ar-gument that if the U.S. doesn’twrite the rules for East Asia in the21st century, the Chinese will.Long-suppressed ethno-nationalistsentiments within America’s agingand shrinking white majority havefound their public voice, blockinglong-overdue immigration reformand questioning the loyalty ofAmerican Muslims.

In Europe, illiberal majoritarian-

ism is on the rise. Hungary’s ViktorOrbán was the earliest example ofthis trend, which intensified withparliamentary inroads last year bythe extreme-right Jobbik party.Many other countries have followedin Hungary’s wake.

Meanwhile, support for the EU,the world’s most conspicuous exam-ple of liberal internationalism, iswaning. A survey released thismonth by the Pew Research Centerfound that the share of French citi-zens with a favorable view of the EUhas declined to 38% from 69% dur-ing the past decade, lower than eventhe U.K.’s 44%. In Germany, thelinchpin of the European project,support has declined to 50%, whiledisapproval has risen to 48%.

There are specific complaints be-hind these trends. Overwhelmingmajorities throughout Europe faultthe EU’s handling of the refugeecrisis and its response to the after-math of the Great Recession. Butthe objection goes deeper.

The founding document of whatbecame the EU pledged signatoriesto “lay the foundation of an ever-closer union among the peoples ofEurope.” For decades, leaders be-lieved that the cure for the Conti-

nent’s ills was “more Europe”—theprogressive deepening of economicand political integration.

Today, support for more Europehas all but collapsed. In everycountry Pew surveyed, a majorityor plurality said that some of the

EU’s current powers should be re-turned to national governments. Inno country did more than a third ofcitizens want more national powersgiven to the EU.

If European integration mustmove either forward or backward,as many analysts believe, then themost likely outcome is the latter. ABritish vote to leave the EU mighttrigger similar referendums inother countries.

This brings us to the U.K., theepicenter of the current crisis. TheRemain campaign, led by majorcorporations and financial institu-tions, has emphasized the economicbenefits of EU membership and the

risks of leaving it. But survey re-searchers and on-the-ground ob-servers have cast doubt on the ade-quacy of this strategy.

For much of the public, the keyissues are threats to British sover-eignty from Brussels and to Britishidentity from immigrants, whosemovement from the EU to the U.K.cannot be regulated as long as Brit-ain remains a member.

A former Conservative memberof Parliament summarized theseobjections to the New York Times:“People want to vote for the peo-ple who make our laws and setour taxes; they want to talk tothem and be able to throw themout; and they don’t want to giveup sovereignty, independence, anddemocracy to Brussels at anyprice.” There is a sense of loss ofcontrol that many find deeplytroubling.

Immigration crystallizes thissentiment. Longtime residents com-plain about the impact of un-checked immigration on schools,health care and social services.Many link immigrants to what theyperceive as rising crime and in-creased competition for jobs.

But more than that, they fear aloss of their national identity, theirtraditions, their history. One resi-dent of Essex told the Times that“other people can’t understand ourway of life as well as you can livingin your own country.” Another putit this way: “A lot of people feel ex-iled in their own country.” The slo-gan of the UK Independence Party—“We want our country back”—hasspread widely.

These sentiments could havecome, word for word, from sup-porters of Donald Trump.Throughout the West, internation-alists are in the same boat, whichis taking on water as the ethno-nationalist tide rises.

From Benjamin Franklin’s “Apol-ogy for Printers” in the PennsylvaniaGazette, 1731:

Printers are educated in the Be-lief that when Men differ in Opin-ion, both Sides ought equally tohave the Advantage of being heardby the Publick; and that when Truthand Error have fair Play, the formeris always an overmatch for the lat-ter. Hence they cheerfully serve allcontending Writers that pay them

well, without regarding on whichside they are of the Question inDispute. . . .

It is likewise as unreasonablewhat some assert, That Printersought not to print anything but whatthey approve, since if all of thatBusiness should make such a Resolu-tion, and abide by it, an End wouldthereby be put to Free Writing, andthe World would afterwards havenothing to read but what happen’dto be the Opinions of Printers.

Notable & Quotable

POLITICS& IDEASBy WilliamA. Galston ‘We want our country back’

is a slogan that holds forTrumpites and Brexiteers.

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A12 | Thursday, June 23, 2016 THEWALL STREET JOURNAL.

WeatherShown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day.

City Hi Lo W Hi Lo W City Hi Lo W Hi Lo WToday Tomorrow Today Tomorrow

Amsterdam 26 18 t 21 13 tAnchorage 19 11 s 19 13 cAthens 34 26 pc 33 25 sAtlanta 34 24 s 34 25 pcBaghdad 45 29 s 46 29 sBaltimore 29 17 t 28 17 pcBangkok 32 25 t 31 26 tBeijing 35 21 pc 33 19 sBerlin 30 19 pc 32 19 sBogota 18 10 pc 18 10 tBoise 32 14 s 23 9 pcBoston 24 16 sh 24 16 sBrussels 29 19 t 22 13 tBuenos Aires 16 8 s 16 7 sCairo 39 25 s 39 25 sCalgary 23 12 s 19 9 shCaracas 32 25 pc 31 25 pcCharlotte 36 23 pc 33 21 tChicago 23 14 pc 28 18 sDallas 36 25 s 35 25 sDenver 31 16 t 32 15 tDetroit 28 14 pc 29 15 sDubai 42 31 s 41 31 sDublin 19 10 sh 16 10 shEdinburgh 20 9 sh 17 10 shFrankfurt 32 19 s 31 19 t

Geneva 31 18 t 30 16 tHanoi 34 26 pc 34 26 tHavana 32 22 pc 31 23 pcHong Kong 34 29 s 34 29 pcHonolulu 29 23 sh 29 23 pcHouston 33 22 s 34 24 tIstanbul 31 23 s 31 23 sJakarta 32 24 s 32 24 tJohannesburg 17 4 pc 17 2 sKansas City 34 22 pc 31 23 tLas Vegas 42 28 pc 43 28 sLima 22 16 pc 22 16 pcLondon 23 14 t 20 12 shLos Angeles 26 15 pc 27 15 pcMadrid 35 18 s 34 17 sManila 32 26 t 33 26 tMelbourne 14 6 sh 10 6 shMexico City 22 12 t 23 14 tMiami 32 26 t 32 26 pcMilan 33 21 s 34 23 sMinneapolis 25 18 pc 30 23 pcMonterrey 34 22 s 34 21 pcMontreal 25 13 c 28 17 sMoscow 25 16 pc 25 16 pcMumbai 31 25 sh 31 26 shNashville 36 24 t 35 23 tNew Delhi 38 27 s 38 27 sNew Orleans 33 24 s 34 25 pcNew York City 25 18 r 29 17 sOmaha 32 21 pc 33 23 pcOrlando 34 24 t 34 24 t

Ottawa 25 11 pc 29 16 sParis 30 18 s 22 14 sPhiladelphia 25 18 t 29 17 sPhoenix 44 30 pc 43 31 sPittsburgh 27 16 t 28 17 sPort-au-Prince 34 22 t 35 21 tPortland, Ore. 18 12 sh 20 12 cRio de Janeiro 24 18 c 22 17 pcRiyadh 43 30 s 43 29 sRome 31 19 t 32 20 sSalt Lake City 36 20 pc 33 13 sSan Diego 23 18 pc 24 19 pcSan Francisco 22 14 s 23 14 sSan Juan 31 25 pc 31 26 pcSantiago 14 2 s 10 0 sSanto Domingo 31 22 t 32 22 tSao Paulo 20 12 c 18 12 sSeattle 19 12 sh 17 12 pcSeoul 30 21 pc 26 19 rShanghai 34 27 t 34 23 tSingapore 32 27 c 31 26 pcStockholm 23 15 sh 22 16 tSydney 18 12 s 17 8 sTaipei 35 27 t 34 27 tTehran 33 21 s 34 21 sTel Aviv 32 24 s 33 24 sTokyo 26 20 r 25 22 cToronto 27 15 pc 27 16 sVancouver 16 13 c 18 14 rWashington, D.C. 31 20 t 28 20 pcZurich 31 18 s 30 17 t

Global Forecasts

City Hi Lo W Hi Lo W

s...sunny; pc... partly cloudy; c...cloudy; sh...showers;t...t’storms; r...rain; sf...snow flurries; sn...snow; i...ice

Today Tomorrow

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Ban kk kk

Hong Kong

pT iy dhhD lh

hlk tk

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Sydney

Melbourne

Jakarta

Kuala Lumpur

Singapore

Bangkok ManilaHanoi

Hong Kong

TaipeiRiyadhNew Delhi

KarachiKolkata

Tokyo

Shanghai

BeijingSeoul

Warm

Cold

Stationary

Showers

Rain

T-storms

Snow

Flurries

Ice

-15-10-505101520253035

TheWSJ Daily Crossword | Edited by Mike Shenk

1 2 3 4 5 6 7 8 9 10 11 12

13 14 15 16

17 18 19

20 21 22 23

24 25 26 27 28

29 30 31 32 33

34 35 36 37

38 39 40

41 42 43 44

45 46 47 48 49 50

51 52 53 54 55

56 57 58 59 60

61 62 63 64 65

66 67 68

69 70 71

Across1 It’s Mongolian for“waterless place”

5 Gain competition

8 Swelters

13 Med. sch. course

14 Series of courses

16 Bear

17 Way of doingthings in theGateway to theWest?

19 Nation east ofTogo

20 On the edge of

21 Present

23 Mil. aide

24 Story told overseveral episodes

25 You might bemoved by it

Previous Puzzle’s Solution

27 WillametteValley surgerysite?

29 Utter rot

31 Scott Turow’sfirst book

33 Warrior armedwith a chakram

34 Teeming withsouvenir stands

36 Local order

38 Charm Cityphysician?

41 “Hoping to find,”in personal ads

42 Use the Jaws ofLife on

45 Texter’s sign-off

48 Disgustedoutbursts

50 Barber’s belt

51 License checkedin the GemState’s capital?

53 “Wow, that’spretty!”

55 Storage units:Abbr.

56 Serious vexation

57 When Iago badeCassio return

59 Very start

61 Moves, inrealty-speak

63 Military boss inthe Rockies?

66 Death RowRecordsco-founder

67 Under othercircumstances

68 Caustic soda,chemically

69 “Such a pity!”

70 Mule’s pop

71 One of tow inthis cule

Down1 Terrific time,informally

2 Londonsetting

3 Tigers, e.g.

4 “Same goesfor me,”tersely

5 Paloma’s pal

6 CBS honchoMoonves

7 One mightcontain lava

8 “The Lord didthere confoundthe language”

9 Prime ministeroverseeing theNaikaku

10 Checkerscommand

11 Tesla’s rival

12 Married mujer

15 Not 37-Down

18 Shows for thefirst time

22 Job interviewtopic

24 New York danceco.

26 Answer to theLittle Red Hen

28 Off the hook

30 Sought-afteritems

32 Calypso, e.g.

35 Pay a visit

37 Not 15-Down

39 Wordsfollowing anestimate

40 Charcoal

43 He wasoriginally OfficerAlex Murphy

44 Pranks withrolls, for short

45 Classic Fords

46 Ring star

47 Cedes the floor

49 Southwestconstruction

52 Lightened

54 Eyes

58 One of Emeril’srestaurants

60 It’s pitched inthe woods

62 “...blessing ___curse”

64 Battleshipletters

65 “Well, well,well!”

s

Solve this puzzle online and discuss it atWSJ.com/Puzzles.

P D Q S A Y I T P R O A MI O U T E E T H C O P T OP R O W A R S A W B L E E DP A T E R L A D F R A UI D E S P R O C U R E A L LN O D L E I K O I T O E

B O N G O P O E T SP R O S A N D C O N S

B E H A N S A L U TU S O I T S T A T D I VC O N T E S T B A N T U B EO B E R A I L F I V E RL E D E R C O N G O C A R TI S I A H K O R E A L I EC O N D O S M A L L L A X

ALTEREDSTATES | By Samuel A. Donaldson

mation, such as those working insales or new-product development,face a conflict of interest if theyaccept a job with a competitor.Employees in such cases typicallydepart right away—ideally, by mu-tual agreement.

Some employers invite fast ex-its by routinely dismissing employ-ees on the spot when they try togive notice and stopping their pay-checks the same day, says DavidLewis, president of OperationsInc.,a Norwalk, Conn., human-re-sources consulting firm. Their em-ployees wonder why they shouldbother giving notice, says Mr.Lewis, who advises employers topay departing employees throughthe notice period.

It can be best to exit quickly ifan employer is abusive, or if yoususpect your employer is doingsomething illegal. Erin Dean be-came physically sick with anxietyand stomach pain after she beganto suspect a former employer wasmisusing elderly clients’ money.Ms. Dean, of Santa Clarita, Calif.,was an administrative assistant atthe time. After seeing her boss fireanother employee on the spot be-cause she raised the same con-

cerns, Ms. Dean wrote a resigna-tion letter detailing her objections,left it on the boss’s desk when hewas out and departed for good.

Sometimes work conditionsmake it difficult for you to do yourjob. Dental hygienist Tonya Lan-thier says she had to cancel herfirst three appointments afterstarting work for a new owner of adental practice, because she lackedpassword access to the office com-puters and hadn’t been shown howto operate the dental equipment.The new owner brushed off herquestions about her pay and workschedule, says Ms. Lanthier of At-lanta, founder of DentalPost, a jobboard for dental professionals.“There was no doubt in my mindthat I couldn’t work for him,” shesays, and she quit after her firstday.

More often, quitting withoutnotice “is done in the heat of emo-tion, by someone who is com-pletely frustrated, angry, offendedor upset,” Mr. Lewis says. That ap-proach can burn bridges, generatebad references and leave employ-ers scrambling.

Changing jobs often isn’t neces-sarily bad; workers ages 20 to 24

change jobs about every 16 monthson average, the Bureau of LaborStatistics says. Those ages 25 to34 switch jobs every three years,compared with 5.5 years for allworkers 25 and over.

However, people sometimesexit without “stepping back andasking themselves, ‘Have I accom-plished anything?’ ” says Jill Tipo-graph, co-founder of Early StageCareers, of New York City, a coach-ing and advisory service for stu-dents and recent graduates.

Hasty exits can often beavoided if employees start jobswith realistic expectations, Ms. Ti-pograph says. She recommends re-searching prospective employersin advance, trying to figure outwhat it is going to be like to workthere and whether you’ll have theresponsibility and advancementopportunities you want.

Employees who are frustratedby management practices shouldtry talking with their managers.“You have a responsibility to try tocommunicate about what’s wrong,”says Phyllis Hartman, a Freedom,Pa., human-resources consultant.“The worst that can happen is thatnobody listens or they tell you no.”

Vanessa WadeMs. Wade in Houston quit her first jobwithout notice and wished later thatshe had stayed and tried harder to

build stronger skills and relationships.

Two Weeks’ Notice? More Say, ‘I’m Quitting Today’When it is OK—and whenit isn’t—to give into thetemptation to quit a job

For almost all of us, therecomes a moment when we aretempted to quit our jobs on thespot.

A growing number are actuallydoing it, many employers say.

Some bosses blame young em-ployees who feel frustrated by lim-

ited prospects orhave little sense ofattachment to theirworkplace. But em-ployment experts say

some older workers are quittingwithout notice as well. They feeloverworked or unappreciated afteryears of laboring under pay cutsand expanded workloads imposedduring the recession.

Others cite an increased ten-dency among employers to rescindjob offers, making new hires waryof giving notice at their old jobsbefore starting a new one.

Others don’t care enough togive the traditional two weeks’ no-tice—or don’t know it is expected,employers say. A burning need fora vacation was the excuse given byone employee who exited PierreTremblay’s company without no-tice last year. He said he was tak-ing another job and quitting im-mediately because he had justgotten a great deal on a vacationpackage to the Dominican Republicthat left the next morning, saysMr. Tremblay, director of humanresources for Dupray Inc. of Mon-treal, an international vendor ofsteam cleaners and irons.

Another employee at Dupray, acustomer-service rep, scheduled ameeting with Mr. Tremblay, an-nounced she was quitting, thenrose and headed for the exit. Sheseemed surprised when Mr. Trem-blay stopped her and explainedthat employees are expected togive two weeks’ notice, he says.“She said, ‘I’ve been watching‘Suits,’ and this is how it hap-pens,’ ” referring to the TV dramaset in a law firm.

Quitting without notice issometimes justified. Employeeswith access to proprietary infor-

Mr. Tremblay, the human-re-sources director, says the prob-lems that drove the customer-ser-vice representative to quit—stressfrom dealing with many difficultcustomers day after day—couldhave been resolved if she’d raisedthem with him or her manager.The company since has begun ro-tating customer-service represen-tatives among various jobs, so noone has to handle too many diffi-cult calls for too long. (The formercustomer-service rep declined tobe interviewed.)

Employees and employers alikehave the right under at-will em-ployment laws in almost all statesto end their relationship withoutnotice, for any reason, says Mi-chael Schmidt, vice chair of laborand employment practice in NewYork for the law firm Cozen O’Con-nor. The two-week rule is a widelyaccepted standard of workplaceconduct.

Some employers have writtenpolicies imposing penalties forquitting without notice, however,such as forfeiting educational ben-efits, Mr. Schmidt says. Employersmay also ask new hires to sign em-ployment contracts requiring themto forfeit pay for unused vacationor paid time off if they quit with-out notice. Before you announceyou are leaving, check your em-ployer’s handbook or any employ-ment contract you signed.

If a new job forces your hand,work overtime to repair your rela-tionship with your boss. AshleyStahl coached a manager who re-luctantly quit after getting a newjob offer. It included a 60% pay in-crease and promotion to a higherlevel of management but also anultimatum: “Either show up Mon-day and take this role, or don’tshow up at all.”

A vanishing act tends to stickwith people. Roshawnna Novellus,president of an Atlanta businessand financial-strategy consultingcompany, had a colleague in a pre-vious job whose office was linedwith photos and awards won dur-ing his 10-year career. He movedeverything out of his office oneweekend. The only thing many ofhis former colleagues rememberedabout him was the sight of hisbare office walls Monday morning,Ms. Novellus says.

BY SUE SHELLENBARGER

FROM

LEFT

:CHRIST

OPH

ERALLEN

;CHRISBA

LDER

AS;

MICHAEL

STOTH

ARD

WORK &FAMILY

PERSONAL JOURNAL.

Pierre TremblayThe human-resources director in

Montreal says three of his company's75 employees quit without notice

last year.

Tonya LanthierMs. Lanthier quit her dental-hygienistjob in Atlanta on the spot, saying herboss wouldn’t talk with her about

hours and job duties.

If your favorite LPis made of vinyl

this ad isn’t for you.

Sign up for a complimentary 14-day trial todayGo to WSJ.com/pro/privateequity

Introducing WSJ Pro Private Equity, a premium professional

membership that puts specially curated data, news and analysis

at your fingertips. Use our insight to your advantage.

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For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com

© 2016 Dow Jones & Company. All Rights Reserved. THEWALL STREET JOURNAL. Thursday, June 23, 2016 | B1

BUSINESS & TECH.Focus on Product SafetyU.S. creates template for improving standards BUSINESS NEWS | B2

Borrowers LeaveSubprime Ranks

MARKETS | B7

INSIDE:

MONEY&INVESTING

Elon Musk proposed com-bining the electric-car and so-lar-energy companies that hebacks, the latest in a series offinancial shuffles among dis-

parate firms of his empire.Tesla Motors Inc., Mr.

Musk’s Palo Alto, Calif., elec-tric-car company, on Tuesdayoffered to acquire SolarCityCorp. in an all-stock deal valu-ing it at up to $2.8 billion. Mr.Musk is the chairman andlargest shareholder of bothcompanies.

Tesla shares were off morethan 8% in early tradingWednesday before recoveringslightly, while SolarCity sharessurged 7.1%.

Tesla, in a letter to Solar-City Chief Executive LyndonRive—also Mr. Musk’s cousin—said its offer represented avalue of between $26.50 and$28.50 a share, or a premiumof roughly 21% to 30% over

ByMike Ramsey,Lynn Cook

andMike Spector

SolarCity’s Tuesday closingprice of $21.19. The mothers ofMessrs. Musk and Rive aretwin sisters.

“This is something that wehave been thinking about anddebated for many years,” Mr.Musk said in a call with re-porters Tuesday. “But the tim-ing seemed to be right now”because Tesla is ramping up

production of batteries used inconjunction with solar panels,SolarCity’s main business, hesaid. Mr. Rive on the same callsaid he was “very excited”about the potential deal,which still requires approvalfrom shareholders.

Mr. Musk, who has bor-rowed money and shuffledfunds among his companies,

Online-Video ViewersBreak Out Their WalletsO

nline video in China isstarting to look morelike Netflix and less

like YouTube, as more usersagree to pay for subscrip-tions.

In June 2015, iQIYI, thevideo arm of China search

companyBaidu, airedtwo episodes aweek of thefantasy onlineseries “TheLost Tomb.”Some fans ofthe popularonline noveloffered to pay

to see all the episodes atonce.

At the time, iQIYI said ithad about 500 million users,but only about five millionpaying subscribers. On July3, 2015, iQIYI posted all 10episodes in the first seasonof “The Lost Tomb” behindits paywall, which charges19.8 yuan ($3) a month or

198 yuan a year. More than2.6 million requests floodedin, disabling the site’s con-tent and payment systems.

Six months later, iQIYIhad grown to 10 million sub-scribers; earlier this month,the company said it reached20 million paying customers.Subscribers can view somenew movies and televisionseries ahead of nonpayingusers, bypass commercialsand enjoy higher video reso-lution and audio quality.Subscribers also are offeredoccasional access to meetwith stars.

The growth of paid onlinevideo subscribers is a depar-ture for Chinese online us-ers, who were notoriouslyreluctant to pay for contentand had easy access to pi-rated DVDs and onlinesources. It comes as majorChinese video websites seeknew revenue sources beyondadvertising, hoping to re-

Please see YUAN page B3

CHINACIRCUITLI YUAN

recused himself from votingon the deal at the Tesla boardmeeting at which it was ap-proved and will do so for anyvote on the SolarCity board aswell, the offer letter said. An-tonio Gracias, a director onthe boards of both companies,also recused himself, the lettersaid.

Tesla said the deal is sub-ject to approval of “a majorityof disinterested stockholders”of both companies. Mr. Muskwon’t vote his shares in eithercompany, a Tesla spokes-woman said.

In a letter to employees,Mr. Rive said: “You shouldknow that the board and theshareholders will be consider-ing this, and so while I ampersonally excited, I will be re-cusing myself from the deci-sion-making process. Ulti-mately, the shareholders willdecide.”

The acquisition aims to cre-Please see TESLA page B2

Tesla to Buy Solar Firm Tied to ElonMusk

Elon Musk is the largest shareholder of both Tesla and SolarCity.

BOBB

YYIP/RE

UTE

RS

� Heard on the Street: The dealdoesn’t make sense............. B10

Some carriers now say theywill hold off on booking voy-ages via Panama for theirlarger ships. Others are spend-ing millions to retrofit biggervessels they had already com-mitted to routes between Asiaand the East Coast, eating intothe expected savings fromsending those ships throughthe canal.

If New York isn't ready, it isunlikely that any U.S. EastCoast ports will see the big-gest ships either, according toMarc Bourdon, who heads the

U.S. operations of France’sCMA CGM Group, one of theworld’s largest shipping lines.

“With the Panama Canalopening, I think you’ll seesome…slightly larger vesselscoming through, but not thebiggest ones,” Mr. Bourdonsaid. “You need New York totake them. It’s the major port.None of the other ports alongthe coast would be able to sus-tain a vessel of that size.”

Shipping lines like CMACGM want to boost traffic ondirect routes between Asia and

the East Coast because theycan charge more to carry con-tainers greater distances andsave money by piling thou-sands more containers ontoone ship. Shippers would alsosave because they wouldn'tneed to book trains or trucksto carry their goods across thecountry. The cost of shipping acontainer from Hong Kong toNew York rises by more than50% if it is delivered to a WestCoast port and moved over-land the rest of the way, ac-cording to Catapult Interna-

Stock Exchange.The responses underscored

confidence in Mr. Son, the 58-year-old visionary founder ofSoftBank, whose unexpectedturnabout on his successionreflects the difficulty foundersoften face when trying to handover the reins of their compa-nies to outsiders.

The 2,000-plus sharehold-ers gathered at SoftBank’s an-nual general meeting Wednes-day welcomed Mr. Son’sdecision to stay on. Somecalled for him to keep workinguntil he is 200 years old.

Mr. Son said he reached thedecision several weeks ago, af-ter seeking the consultation offellow billionaire founders Ta-dashi Yanai, chief executive ofapparel retailer Fast RetailingCo., and Shigenobu Nagamori,

chief executive of precisionmotor maker Nidec Corp. Bothare external directors at Soft-Bank. “I told him you must bekidding to be think-ing of stepping downwhen you’re not even60,” Mr. Yanai said.

Mr. Son has gar-nered much respectover the years as hebuilt SoftBank intoone of Japan’s largestmobile-phone serviceproviders, while cre-ating an investmentcompany with asprawling portfoliothat includes signifi-cant stakes in Chinese e-com-merce behemoth AlibabaGroup Holding Ltd. and Japa-nese internet portal YahooJapan Corp.

In recent years, though, Mr.Son had begun pondering hissuccession, and wooed Mr.Arora from Google two years

ago with that inmind. Mr. Son namedhim as his likely suc-cessor last year, giv-ing him the No. 2spot.

Mr. Arora hadfaced criticism frominvestors over ques-tionable investments,as well as his com-pensation and quali-fications. But Mr. Sonsaid that played norole in his departure.

While Mr. Son had repeat-edly said he planned to retirein his 60s, he hadn’t given aspecific deadline. On Tuesday,he and Mr. Arora revealed the

two had agreed that if Mr. Sonwas satisfied with Mr. Arora’sperformance, Mr. Son wouldconsider giving him the topjob when Mr. Son turned 60next year. But as that mile-stone approached, Mr. Son hada change of heart.

“We had these discussionsfive or six weeks ago, and wewent back and forth,” Mr.Arora said. “And for me it wasa choice of, ‘Do I keep doingthis after he declares that hewants to be CEO for anotherfive to 10 years?’ ”

Mr. Son said Wednesday heregretted having to let Mr.Arora go, but wanted to keepworking for a while longer.

“I didn’t want an old manwho is nearing 60 to be a bot-tleneck to the company’s

Please see SON page B2

TOKYO—Investors cheeredthe decision by MasayoshiSon, chief executive of Soft-Bank Group Corp., to stay atthe helm of the Japanese in-ternet and telecommunicationscompany for years to come.

SoftBank’s shares gained2.6% Wednesday after Mr. Sonsaid Tuesday night that NikeshArora, a billionaire formerGoogle Inc. executive andheir-apparent to Mr. Son,would step down as president,and that Mr. Son would con-tinue to run the company.

Shares of Sprint Corp., thestruggling U.S. wireless carrierthat SoftBank acquired in2013, were up 5.3% at middayWednesday on the New York

BY ALEXANDER MARTINAND MAYUMI NEGISHI

SoftBank CEO Grips Job Tighter

Masayoshi Son

tional.The U.S. Coast Guard ap-

proved the $1.3 billion bridge-raising in 2013. The project,and a $1.6 billion deepening ofthe harbor, were meant to pre-pare the region for the arrivalof bigger ships.

Currently, the largest shipsthat can visit the New Jerseyterminals can accommodatebetween 9,000 and 10,000 20-foot equivalent units, or TEUs,a common measure of ship-ping container capacity. That

Please see BRIDGE page B2

Ports on the U.S. East Coasthave been hurrying to preparetheir harbors, terminals androads for the arrival of super-size container ships that areexpected to pass through thePanama Canal once its expan-sion is completed later thismonth.

But the East Coast’s busiestport won't be ready for them.

Late last year, the Port Au-thority of New York and NewJersey announced that a proj-ect to raise the BayonneBridge, an 83-year-old archthat spans the channel be-tween Bayonne, N.J., and NewYork’s Staten Island, would bedelayed until the end of 2017because of engineering miscal-culations and constructionwork slowed by inclementweather.

Until the project is com-pleted, larger ships passingthrough the Panama Canal willbe unable to visit the threelargest terminals at the Port ofNew York and New Jersey, lo-cated beyond the bridge inNewark and Elizabeth, N.J.

The delays undermine theeconomic rationale for the ex-pansion, and raise doubtsabout whether the wider canalwill lead to an immediatesurge in cargo headed for theEast Coast. New York, with itsbustling port and direct accessto the densely populatedNortheast corridor, was thedestination many Asian ex-porters and shipping lines hadin mind when they pushed fora wider canal.

BY ROBBIE WHELAN

New York Isn’t Ready for Expanded CanalDelayed bridge workmeans shipping linescan’t reap gains fromwider Panama Canal

A CMA CGM container ship passes under the Bayonne Bridge, which spans the channel to the busiest port on the U.S. East Coast.

MEL

EVANS/ASS

OCIAT

EDPR

ESS

TOKYO—Mitsubishi Mo-tors Corp. expects to report anet loss of $1.38 billion for thecurrent fiscal year as it grap-ples with a fuel-economy scan-dal that has led to surgingcosts and falling sales for theauto maker.

Japan’s sixth-biggest automaker by sales faces heftypayments to owners of af-fected vehicles, dealers andsuppliers, and to Nissan Mo-tor Co., with whom it jointlyproduced certain minicar mod-els that were among those forwhich Mitsubishi falsified datato make mileage appear better.Mitsubishi has also admittedto using unapproved testingmethods on certain vehiclesfor 25 years.

Mitsubishi on Wednesdayforecast a net loss of ¥145 bil-lion ($1.38 billion) in the 12months ending March 2017, afigure that includes ¥150 bil-lion of special losses related tothe mileage scandal.

The one-time charge wastriple the figure given at acompany announcement lastweek, when Mitsubishi said itwas still calculating the neces-sary charges.

They include ¥50 billion tocompensate owners of affectedvehicles and ¥100 billion forpayments to Nissan, dealersand suppliers, as well as feesneeded to suspend operationsat a minicar production site.

Declining sales and the costof free inspections for affectedvehicles are also likely to sub-tract about ¥55 billion from itsoperating profit, Mitsubishisaid. It expects car sales to de-cline 8% to 962,000 vehiclesthis fiscal year compared withthe previous year, with salesin Japan falling 41% to 60,000.

The company first admittedin April to falsifying data re-lated to fuel economy on fourmodels, so-called minicarssold only in Japan. Two ofthese minicars, with 0.66 literengines, were manufacturedby Mitsubishi and sold underNissan’s brand name. Mitsubi-shi President Tetsuro Aikawaresigned in the weeks follow-ing the revelations.

Mitsubishi has since admit-ted to falsifying data on 25

Please see LOSS page B2

BY MEGUMI FUJIKAWA

MitsubishiForecastsLarge LossFor Year

Charge for expectedcosts will pushMitsubishi into thered for the year.

For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com

B2 | Thursday, June 23, 2016 THEWALL STREET JOURNAL.

INDEX TO BUSINESSESThese indexes cite notable references to most parent companies and businesspeoplein today’s edition. Articles on regional page inserts aren’t cited in these indexes.

AAlibaba Group.............B3

Apple....................A1,B10

BBaidu......................A1,B1

Bank of America.........B7

CCriteo...........................A2

DDeutsche Börse.........B10

Digione........................A1

FFacebook......................B3

Fair Isaac.....................B7

Fiat ChryslerAutomobiles ...........B10

Foxconn Technology....B3

GGecina .........................A3

HHennes & Mauritz......B2

Hon Hai PrecisionIndustry.....................B3

I

iQIYI.............................B1

J

J.P. Morgan Chase......B9

L

London Stock ExchangeGroup.......................B10

N

Netflix....................B1,B7

S

Samsung Electronics..A8

Seaspan.......................B2

Shanghai Shendi

Group........................A8

Sharp...........................B3

Shenzhen BailiMarketing Services..A1

Shenzhen City 100/100Digital Technology....A1

SoftBank Group........B10

SolarCity..............B1,B10

Statoil .........................B9

Synchrony Financial....B9

TTastemade...................B3

Telecom Italia.............A3

Tencent Holdings........B3

Tesla Motors........B1,B10

T. Rowe Price..............B7

Twitter ........................B3

UUBS Group...................B7

VVox Media...................B3

WWalt Disney................A1

XXiaomi.........................A8

YYouku Tudou...............B3

BUSINESS NEWS

don’t have a New York call,you’re trying to justify theeconomics of the entire route.You have to calculate whetheror not you can cobble enoughdemand together to make upfor losing New York.”

Molly Campbell, the PortAuthority’s director of com-merce, said she is “heavily fo-cused on getting that bridgedone,” but added that shedoesn't expect the widenedPanama Canal to result inhigher volumes of imports.

“The carriers, their No. 1concern is the BayonneBridge,” said Gerry Wang,chief executive of SeaspanCorp., which owns one of thelargest fleets of containerships in the world and leasesthem to large shipping lines.

He said his company and

China’s Cosco Group arespending about $5 million tomodify 10 ships chartered forthe Asia-to-East Coast trade sothey will fit under the bridge.Each ship will have its funnel,a tube that discharges steamfrom its engine, cut down inheight, a process that requiresthe vessel to miss weeks ofservice, Mr. Wang said.

The delay in the Bayonneproject is “part of the reasonwhy the ship charter market isvery sluggish, this uncer-tainty,” he said.

Shipping-industry expertssay the delays may be a tem-porary setback, and that de-mand for Asia-to-East Coastshipments is sluggish due toother factors, including weakglobal economic growth. Manyof the improvements intended

to accommodate larger ships,such as the harbor deepeningand new equipment, will beneeded once the bridge projectis completed.

McAllister Towing andTransportation Co. Inc. or-dered three custom, high-pow-ered tug boats a year ago tohandle larger container shipsthat now may not call in NewYork Harbor for years. Eachcosts between $10 million and$15 million to build, said Capt.Steve Kress, vice president ofMcAllister’s New York opera-tions.

“The announcement of thedelay of the bridge was a sur-prise to us. It’s a disappoint-ment,” he said. “But eitherway, the newer tugs have tocome, if you want to stay com-petitive in this game.”

was more than enough beforethe Panama Canal expansion,when ships that could passthrough its locks topped out atfewer than 5,000 TEUs. But af-ter this month, ships carrying14,000 TEUs will be able topass through.

Delays have added hun-dreds of millions to the bridgeraising’s costs, according to aperson familiar with the mat-ter. Shipping lines are alsopaying a price.

“The delay takes away thebiggest market on the EastCoast,” said Paul Bingham, aport economist with EDRGroup Inc. “As soon as you

Continuedfromthepriorpage

BRIDGE

City, Mr. Musk is the largestshareholder and chief execu-tive of rocket maker Space Ex-ploration Technologies Inc.

SpaceX in 2014 was thelargest buyer of $214 millionin bonds SolarCity offered.

Mr. Musk has purchasedshares of both Tesla and So-larCity when they have neededcapital, and secured $475 mil-lion in personal credit lineswith his own shares in thecompanies. Mr. Musk has dis-closed the risks of margincalls related to the loans thatcan risk destabilizing the com-panies’ stocks.

While Mr. Musk has calledquestions about the financialmaneuvering “valid,” he hasdefended the transactionswith a philosophy that he hasa moral obligation to put hisown money at risk alongsidethose of other investors back-ing his companies.

“I don’t think this createsadditional financial risk forTesla,” Mr. Musk said on Tues-day of the proposed SolarCitytakeover. “It only amplifies thepossibilities for both compa-nies.”

Still, Tesla has burned bil-

its, and investors have closelywatched the company forsigns of dangerous cash burns.

Tesla’s proposed takeovercomes amid significant strug-gles for SolarCity, which hassuffered stock-price declinesexceeding 60% over the past12 months and lost $283 mil-lion during the first threemonths of this year.

The San Mateo, Calif., com-pany installs solar panels atresidences across the U.S. Thecompany stumbled as costsrose and it cut an importantgrowth target by half, a moveSolarCity attributed to a de-sire to focus on profitability.

Mr. Musk said the proposedtakeover wasn’t motivated bySolarCity’s declining stockprice.

SolarCity’s business modelis built on leasing rooftop pan-els to homeowners for as longas 20 years, but owning homesolar arrays can bring greatersavings so many consumersare opting to buy.

SolarCity’s competition hasintensified over the past yearas more upstart firms beganoffering homeowners low-costloans to kit out their roofs.

ate a company employingnearly 30,000 people with allproducts renamed “Tesla” thatwill package electric cars, bat-teries and solar panels for cus-tomers, Mr. Musk said.

But it would also add to thegrowing complexity and verti-cal integration of Tesla andadd an unprofitable operationto its already-strained fi-nances. Tesla, in a hugegrowth effort that includesbuilding a $5 billion batteryfactory in Nevada, isn’t ex-pected to be profitable until2020 at the earliest and re-cently launched a share sale toraise $1.7 billion for capital ex-penses.

Tesla, with a market capi-talization of $32.7 billion, is amuch larger company than So-larCity.

The proposal is also likelyto draw further scrutiny of Mr.Musk’s dealings with multiplecompanies he owns and helms,and their financial viability. Inaddition to Tesla and Solar-

Continuedfromthepriorpage

TESLA lions of dollars in cash build-ing expensive electric vehicleswith ambitious productiongoals.

Tesla aims to start selling amore modestly priced Model 3car starting at around $35,000in the second half of next year,for which it has receivednearly 400,000 reservations.“This does not impact Model 3in any way, shape or form,”Mr. Musk said of the proposedSolarCity takeover.

Mr. Musk has attracted acultlike following, making boldpredictions that include aneventual trip to Mars. Tesla’sstock price has surged morethan 500% since 2013, helpingit achieve a market capitaliza-tion of more than two thirdsthe current value of GeneralMotors Co.

But Tesla’s surging stockhasn’t yet translated to prof-

Tesla’s proposedtakeover comes amidsignificant strugglesfor SolarCity.

product-safety agency for re-sponding promptly to the U.S.commission’s concerns thatlithium-ion batteries in hover-boards were catching fire andtracking down some manufac-turers of the products.

When hoverboards becamepopular in mid-2015, safety

concerns focused on the haz-ards of users falling, not thefact that the boards mightcatch fire. That meant usersfaced two dangers, he said.

The electrical design in thescooters didn’t take into ac-count the weight of the user—meaning a 100-pound person

could get on a hoverboard cali-brated for a 250-pound personand the scooter may explodewhile being used.

Mr. Kaye said the commis-sion, along with the Chinesequality-supervision adminis-tration and the European com-mission for product safety,also expects e-commerce sites,including Amazon.com Inc. andAlibaba Group Holding Ltd.’sTaobao and Tmall market-places, to bear the safety bur-den to some extent by enforc-ing U.S. standards and stayingapprised of safety issues.“They make a lot of money offthese products,” he said.“We’ve put pressure on themto own some of this problem.”

Mr. Kaye said the commis-sion is thinking about safetyconcerns of items such aswearable technology and 3-Dprinters. “If you’re making atoy on your 3-D printer, howdo you know it’s compliantwith the federal toy stan-dard?” he asked.

He also pointed to hissmartwatch: “This thing mea-sures my heart rate, which isgreat and convenient, but ulti-mately is something going onwith this thing interactingwith me that’s not healthy?”

BEIJING—The quick surgein sales of hoverboards lastholiday season—and the sur-prising propensity for some ofthem to catch fire—are helpingU.S. regulators create a tem-plate for improving productsafety in the future.

The chairman of the U.S.Consumer Product SafetyCommission said Wednesdaythat lessons learned in theseveral months since theagency blocked the sale ofmany self-balancing scootersinclude the need for better in-formation on product develop-ment and an early buy-in fromChinese manufacturers onbuilding in safety standards.

Hoverboards “representedall of us getting caught offguard by a product that cameout of nowhere…with a hazardpattern that was not antici-pated,” commission chairmanElliot Kaye told reporters inBeijing, where he was discuss-ing product safety with Chi-nese officials. Mr. Kaye saidhis agency plans to announcean unspecified “major action”on hoverboards early nextmonth.

Mr. Kaye credited China’s

BY ALYSSA ABKOWITZ

U.S.: New Look at Product Safety

Hoverboards’ electrical design didn’t factor in the user’s weight.

LUCY

NICHOLS

ON/R

EUTE

RS

of interest.” Another askedwhether he felt certain hewouldn’t face criminalcharges.

Looking down from the po-dium, Mr. Pötsch didn’t re-spond. He was appointedchairman of the supervisoryboard by a court decision inSeptember, but shareholdersmust confirm his electionat Wednesday’s meeting.

“The election of Mr. Pötschnot only goes against best cor-

porate governance practice inGermany but gives rise to seri-ous conflicts of interest. Weare struggling to understandhow Mr. Pötsch will be able todischarge his duties as a mem-ber of the supervisory board,”said Hans-Christoph Hirt, co-head of the investment fundHermes EOS.

Despite the criticism, Mr.Pötsch is difficult to depose.More than 90% of Volks-wagen’s voting stock is held by

just three core investors: theheirs of Beetle designer Ferdi-nand Porsche, the state ofLower Saxony and Qatar’s sov-ereign-wealth fund, all ofwhich back Mr. Pötsch.

There was bad news thisweek when state prosecutorsopened an investigationagainst former CEO MartinWinterkorn and Herbert Diess,head of the Volkswagen pas-senger-car unit. Prosecutorsdidn’t rule out expanding theprobe to other former boardmembers, and said Mr. Pötschwasn’t under investigation.

The probe was prompted byGermany’s financial marketswatchdog, BaFin, which con-cluded there was evidenceVolkswagen’s managementboard “willfully withheld in-formation about the diesel is-sue from investors.”

In the face of the massivecriticism, CEO Matthias Mül-ler appealed to investors fortheir trust and confidence.

“Volkswagen is more thanthis crisis,” he said. “Now,more than ever, it is clear tous: trust is not a given, it mustbe earned.”

HANOVER, Germany—Volkswagen AG shareholdershave waited long for their daywith management over theemissions-cheating scandal,and when the auto maker’s an-nual meeting got under wayon Wednesday, they wasted notime venting their anger.

For months, investors havecriticized Volkswagen for slug-gish performance, shoddy cor-porate governance, big bo-nuses that seemed to ignorethe scandal, and the controlexercised by a clutch of coreshareholders.

Their main grievance cen-tered on the appointment ofHans Dieter Pötsch as chair-man of the supervisory board.As chairman, he is responsiblefor overseeing Volkswagen’sinvestigation into the dieselaffair, including his own ac-tions as finance chief whenthe scandal became public.

The first investors to takethe podium attacked manage-ment, calling on Mr. Pötsch tostep down. One called him the“personification of a conflict

BY WILLIAM BOSTON

VW Shareholders Blast Chairman

Investors were critical of VW Board Chairman Hans Dieter Pötsch

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head of consulting andinvestment firm Japan Flag-ship Project Co., has said oneof his first assignments fromMr. Son was to research thehistory of one of Japan’s old-est conglomerates, the Mit-subishi group, and to list fac-tors that catapulted a startupinto a multinational empirewith a history of more than100 years.

“From the beginning, Mr.Son was worried about how toensure the company wouldgrow when he was gone.”

Management of SoftBankhas gone back to company vet-erans. Ken Miyauchi will as-sume Mr. Arora’s title of presi-dent and chief operatingofficer, the company saidWednesday. Mr. Miyauchiheads the domestic mobile op-erations and has worked withMr. Son for more than threedecades.

Mr. Son said Ron Fisher, aSoftBank director who hasbeen with the company fortwo decades, will fill Mr.Arora’s role as head of Soft-Bank’s Silicon-Valley-basedoverseas investment opera-tions.

growth,” the 58-year-old said.“But then I became greedy andrealized I haven’t had enough.”

Messrs. Yanai and Nagamorihave also faced the successionquestion.

Mr. Yanai, the 67-year-oldboss of the popular fashionbrand Uniqlo, had himself at-tempted to hand over the reinsto someone else—only to takecharge again, unhappy withhow the company was beingoperated without him.

Mr. Nagamori, 71, said dur-ing the shareholder meetingthat age didn’t mean a lack ofcompetence. He cited himselfas an example and said he hadbelieved for some time Mr.Son wouldn’t quit at such ayoung age—a commentgreeted with applause. But in areflection of how delicate suc-cession can be, Nidec lists “De-pendence on Shigenobu Naga-mori” in earnings reports asone of its “business risks.”

Takenobu Miki, a formersecretary to Mr. Son and now

Continuedfromthepriorpage

SON

16% above the ministry’s owntest results.

The auto maker now hopesto get its production back tonormal.

Mitsubishi Chairman andChief Executive OsamuMasuko said on Tuesday thatthe company aims to resumeproduction and sales of theminicars around early July, af-ter they were suspended fol-lowing the fuel-economy datarevelations.

Shares of Mitsubishi Mo-tors ended 2.5% higher in To-kyo at ¥542 on Wednesday,partly boosted by Mr.Masuko’s comments. The automaker’s shares have lost about37% since the fuel-economyscandal emerged in April.

models, including those manu-factured and sold under theNissan brand. None of its vehi-cles sold overseas are affected,it said.

Last month, it reached anagreement for Nissan to take a34% controlling stake for morethan $2 billion, subject to reg-ulatory approval.

On Tuesday, Japan’s trans-port ministry released resultsof on-site inspections thatshowed Mitsubishi’s mileagedata on the four types of mini-cars, including two Nissanmodels, was between 5% and

Continuedfromthepriorpage

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tent mix so users want to payisn’t easy. IQIYI started bybuying classic Hollywood mov-ies and U.S. hit televisionshows. These appealed to pro-fessionals in big cities, butproved too foreign to manyChinese youth in smaller cit-ies, home to iQIYI’s biggestchunk of subscribers. Thecompany then bought Chinesemovies and produced manyshows on its own, incurringmore costs.

On top of better content,executives attribute some ofthe growth in video subscrib-ers to a crackdown on piracyand the rise of mobile pay-ments. Chinese video sitesused to be sources of piratedvideos, but now are among theleaders in battling piracy be-cause they have more to lose.IQIYI deploys about 100 peo-ple to hunt for pirated ver-sions of its videos; when itfinds them, it demands thathosts delete the content. Staff-ers also prowl social-mediasites for any mention of themovies’ or TV series’ names.

“We’re a lot more effectivein fighting piracy [in China]than all big Hollywood stu-dios,” says Yang Xiangdong,

senior vice president of iQIYI.Mobile payment services

such as Alibaba’s Alipay andTencent’s WeChat made it eas-ier to pay online becausemany Chinese still don’t havecredit cards and paying on apersonal computer can becumbersome.

For many viewers, though,it comes back to the content.Chen Siyao, a graduate stu-dent at China University of Po-litical Science and Law in Bei-jing, says the ability to watchshows first and bypass com-mercials motivated her to pay.

Ms. Chen, 26 years old,used to watch only free videos,some of them pirated. Sheagreed to pay after iQIYI inFebruary started airing aSouth Korean romance series,“The Descendants of the Sun,”featuring Song Joong-ki andSong Hye-kyo—actors who aremegastars in China.

“It used to be quite easy tofind any video online withouthaving to pay,” she says. “Nowit’s not easy anymore, but notexpensive to pay either.”

Follow Li Yuan on Twitter@LiYuan6 or write toli.yuan@wsj.com.

verse losses driven by spend-ing to acquire content.

The two other big videosites—Tencent Holdings’video division v.qq.com andAlibaba Group Holding’sYouku Tudou—don’t disclosetheir subscriber numbers. In-ternet research firm iResearchConsulting Group says thatthere were 28.8 million paidonline video subscribers inChina by the end of 2015.

That’s a small slice of the504 million online video usersin China in 2015, according tothe state-backed China Inter-net Network Information Cen-ter. But executives at majorvideo websites are hoping thatsubscriptions, which bring inat least 50% more annual reve-nue per user than advertising,will supplement slowing ad-vertising growth.

Subscription revenue ac-counted for 13% of the indus-try’s revenue of 40 billionyuan in 2015, up from 5.6% ayear earlier, says iResearch.The research firm believes

ContinuedfrompageB1

YUAN

that over the next few years,subscription revenue will be-come as important as adver-tising revenue for video com-panies.

The subscriber growth inthe past year came after videosites spent billions of dollarsimporting Hollywood movies

and South Korean soap operas,as well as acquiring and pro-ducing Chinese hits. The com-petition for better and exclu-sive content to attract usersled to big losses. Youku Tudouand iQIYI have never made aprofit.

Youku Tudou sold itself to

Alibaba earlier this year. Baidufounder Robin Li and iQIYIChief Executive Gong Yu madea buyout offer in Februarythat valued iQIYI at $2.8 bil-lion. Mr. Gong said last weekhe expects the sale to be com-pleted later this year.

Orchestrating the right con-

The online video-sharing site iQIYI on a smartphone. The site reaches 20 million paying customers.

DAQING/IMAGINEC

HINA/A

SSOCIAT

EDPR

ESS

the New York Times, which is toreceive $3.03 million for a 12-month deal. CNN is third, with a$2.5 million contract.

The document isn’t a full ac-counting of all of Facebook’sdealings with video creators,but it shows the broad scope ofthe tech giant’s efforts to pro-mote its Facebook Live product.

Facebook is already a majorvideo hub—its users watch 100million hours of video daily intheir news feeds. Chief Execu-tive Mark Zuckerberg is bettingthat live videos will provide afurther lift in user engagement,getting people to come to theservice more often and stay lon-ger.

One indication of the impor-tance of live video: When pub-lishers stream something live,Facebook automatically sends anotification to their Facebookfans.

Though Facebook is an ad-vertising powerhouse—it ac-counts for nearly 20% of U.S.mobile ad revenues, accordingto eMarketer—it has yet to tapinto digital video as a majorrevenue source, unlike AlphabetInc.’s YouTube. That market,which is worth $9.8 billion inthe U.S. alone, represents a bigopportunity.

Most publishers—traditionaland digital—already are pouring

resources into online video tocapture the attention of theiraudiences and grab high adver-tising prices. Facebook is a ma-jor source of traffic to theirproperties. Becoming one of itslive-streaming partners in theearly going could give their vid-eos enormous exposure, andcould be lucrative once sellingads in the platform is allowed.

In May, 44% of the top 500Facebook pages maintained bymedia companies posted atleast one live video on Face-book, up from 11% in January,according to an analysis by So-cialbakers, a social-media met-rics company.

Facebook is a “relativerookie” to live-streaming com-pared to rivals including disap-pearing messaging app Snap-chat, Twitter Inc.’s Periscopeapp and YouTube, RBC CapitalMarkets analyst Mark Mahaneyin a note this week. But givenits large user base, “Facebookshould be a viable competitorfor consumer attention,” Mr.Mahaney wrote.

Facebook invited publishersto be part of the program based,in part, on their track recordwith live video, Mr. Osofskysaid. Among other factors, Face-book also looked for public fig-ures who were able to “easilyproduce and test a variety of

live programming.”Facebook is “highly incentiv-

ized to get good content inthere,” said Jesse Hertzberg,chief executive of Livestream, alive-video company and makerof a $400 wide-angle Mevocamera that’s directly inte-grated with Facebook Live.

The contract values arebased on publishers’ popularityon Facebook and the number ofbroadcasts they are willing tostream, according to Facebookand people familiar with theterms of the deals. Some con-tracts include requirements re-lated to the length of individualbroadcasts; in other cases, someadditional payouts are availableto publishers who exceed theirminimum requirements.

The list reviewed by theJournal also includes theMetro-politan Museum of Art andAmerican Museum of NaturalHistory in New York; internetcelebrities like Logan Paul, An-drew Bachelor and Lele Pons;dance music DJs Armin VanBuuren and Hardwell; andsports teams such as FC Barce-lona.

Food-centric web video spe-cialist Tastemade, which inApril announced it would pro-duce more than 100 FacebookLive shows amonth, is set to re-ceive about $1 million fromFacebook for videos produced ina 12-month period ending inMarch 2017.

News Corp’s Dow Jones &Co., publisher of TheWall StreetJournal, has no arrangementwith Facebook to create videosfor Facebook Live, a companyspokeswoman said.

After a live video is over onFacebook, it is stored so Face-book users can watch it later.About two-thirds of the watchtime for a Facebook live broad-cast happen after the fact, Face-book executives say.

Live videos are intended tobe exclusive to the FacebookLive platform. Based on earlytesting, Facebook has said itfound that the average userwatches live video three timeslonger than other types ofvideo.

those battles—while creatingnew obstacles for them to dobusiness in the U.K., too.

At issue is a delicate politi-cal balance in the EU involvingtech policy among countries,including the U.K. and Nordicand Baltic nations, that favorlighter regulation and others,led by France and Germany,that argue the rise of bigglobal technology firms neces-

sitates new rules to help levelthe playing field.

While most large U.S. techfirms have declined to com-ment on the vote, some execu-tives acknowledge privatelythat if the U.K. were to removeor lighten some EU restric-tions on, for instance, the useof personal data or corporatetax rules, it might help theirU.K. operations. But they say a

change like that would dependon follow-through from U.K.policy makers. Any benefitalso could be outweighed byan increase in the regulatoryburden in the larger remainingportion of the EU, withoutwhat they describe as Lon-don’s moderating influence.

Some smaller, Europeantech companies echoed thoseconcerns.

“I would be worried aboutthe direction of European tech-nology policy,” said Dan Rog-ers, co-founder of Peakon, aDanish startup that offers em-ployee-analytics platforms.“Without the U.K. as a counter-balance, there’s a strong possi-bility that the EU would enactmore detrimental regulations.”

Politicians that align them-selves more frequently with

the U.K. in debates over tech-nology regulation and the EU’sambition to build a single digi-tal marketplace say the loss ofthe U.K. from the EU could al-ter an important balance.

“The U.K. is always a signif-icant partner for a progressiveEurope, for a pro-business Eu-rope and for job creation,”said Antanas Guoga, a Lithua-nian member of the EuropeanParliament. “Without the U.K.,it will be very complex I think.Germany and France can justdecide on everything.”

Officials in France and Ger-many, for their part, say thatregulatory proposals they havemade to rein in big internetplatforms are aimed at givingsmaller businesses more of ashot to compete against a newclass of gatekeepers.

Taxes also are an issue thattech companies have clashedwith the EU over. The body’sexecutive arm has alleged thatApple Inc. and Amazon.comInc. struck sweetheart deals,

respectively with Ireland andLuxembourg, that violate so-called state-aid rules—allega-tions the countries and thecompanies deny.

If the U.K. left the EU, itwouldn’t have to worry aboutsuch restrictions to give tar-geted tax relief to companiesand industries, said HeatherSelf, a partner at Pinsent Ma-sons. But Ms. Self said thereisn’t much difference betweenthe U.K.’s efforts to rein in cor-porate tax avoidance and thoserecently announced by the EU.

Hiring also is a big issue fortech firms, which are in a racefor skilled workers. Executivessay one appealing element forLondon is the ability to attractstaff from across the EU towork there without red tape. Ifthe U.K. leaves the EU, after acampaign that has focused onimmigration, it is unclear howeasy it would be to continuehiring foreigners.

—Natalia Drozdiakcontributed to this article.

Microsoft Corp. was for adecade pursued by EuropeanUnion antitrust cops, whofined it €2.2 billion ($2.48 bil-lion). But when customers andemployees last month askedexecutives whether the com-pany wanted the U.K. to leavethe bloc, the firm sent an openletter urging it to stay.

“Historically, the U.K. beingpart of the EU has been one ofseveral important criteria thatmake it one of the most at-tractive places in Europe,”wrote Microsoft’s U.K. chief,Michel Van der Bel.

Tech firms have clashedwith the EU on regulatory is-sues ranging from privacy totaxes to antitrust law. Butahead of a referendum on theU.K.’s continued membershipin the EU on Thursday, severaltechnology executives and lob-byists said that the U.K.’s leav-ing the bloc could deepen

BY SAM SCHECHNERAND MATTHIAS VERBERGT

Tech Firms Weigh Interests Before U.K. Vote

A British exit from the EU could increasehurdles for doing business, executives say.

Facebook Inc. is payingnearly 140 media companiesand celebrities to create videosfor its nascent live-streamingservice, as the social networkpositions itself to cash in on alucrative advertising market ithas yet to tap—and keep its 1.65billion monthly users engaged.

The company has agreed tomake payments to video cre-ators totaling more than $50million, according to a docu-ment reviewed by The WallStreet Journal. Its partners in-clude established media outfitslike CNN and the New YorkTimes; digital publishers likeVoxMedia, Tastemade, Mash-able and the Huffington Post;and celebrities including KevinHart, Gordon Ramsay, DeepakChopra and NFL quarterbackRussell Wilson.

The arrangements are a wayto encourage publishers to pro-duce a steady stream of high-quality videos until Facebookfigures out amore concrete planto compensate creators, such asthrough sharing of ad revenue.

In March, Facebook said itwould start paying some cre-ators to use its live-streamingproduct, and some publishershave acknowledged being paidby Facebook. But the documentreviewed by the Journal is themost comprehensive list so farof participating content provid-ers and their specific financialdealings with Facebook.

“We wanted to invite a broadset of partners so we could getfeedback from a variety of dif-ferent organizations about whatworks and what doesn’t,” JustinOsofsky, Facebook’s vice presi-dent of global operations andmedia partnerships, said in astatement.

The value of individual con-tracts varies widely, with 17worth more than $1 million, ac-cording to the document. Thehighest-paid publisher is Buzz-Feed, slated to receive $3.05million for broadcasting live be-tween March 2016 and March2017. Just behind BuzzFeed is

BY STEVEN PERLBERGAND DEEPA SEETHARAMAN

Facebook Shops for VideosNow Playing, Live on Facebook

Source: Document reviewed by the Journal THEWALL STREET JOURNAL.

A selection of companies and individuals paid by Facebook to providelive video content. Amount of contracts, in millions of dollars

BuzzFeedNew York Times

CNNHuffington PostNowThis Media

HearstVox Media

NPRFC Barcelona

Tastemade Inc.Vice Media Inc.Real MadridAl JazeeraMashableKevin Hart

Russell WilsonMichael PhelpsGordon Ramsay

$3.13.0

2.51.6

1.51.21.2

1.21.01.01.0

0.90.9

0.70.6

0.20.20.2

Twitter unveiled a new mo-bile application Tuesday de-signed to help video creatorsincrease their audiences on thesocial network and makemoney in the process.

The stand-alone app for Ap-ple iOS devices, called TwitterEngage, is designed to helpcreators post videos to Twit-ter. It also will give users liveinformation about how theirtweets are performing, andprovide tools to help identifymentions from “influential”users, among other things.

Videosposted throughEngagemay include pre-roll video adver-tising, sold tomarketers throughTwitter’s automated ad systems,provided the creator is enrolled

in Twitter’sA m p l i f yOpen adprogram.Around 120c o n t e n tpartners areenrolled inA m p l i f yOpen, in-c l u d i n gsome indi-vidual con-tent cre-

ators, but the company said itexpects that number to grow.

“Video is becoming increas-ingly central to the real-timeconversations happening onTwitter,” said Twitter CEO andco-founder Jack Dorsey, in astatement. “We’re investingheavily in videos and creators.We want to be the best place forcreators and influencers to buildan audience and make it easierfor creators to make money onTwitter, and soon, Vine.”

Video is now a focus forTwitter, as it is for rivals Face-book, Snapchat, Instagram,Google and others. The compa-nies increasingly are compet-ing to attract video content totheir respective services, andTwitter’s Engage app is de-signed to help its cause.

Video tweets have increasedmore than 50% since the begin-ning of 2016, the company said,and the new video updates aredesigned to make it easier andmore profitable for creators tomake videos and for fans todiscover and share them.

Starting Tuesday, all Twit-ter users will have the abilityto post videos of up to 140 sec-onds in length on Twitter, upfrom the previous limit of 30seconds. A select group of Vinecreators also will begin testinglonger videos on Vine.

Twitter said it is “exploringmonetization opportunities” tohelp creators make money onVine. This could involve sellingvideo advertising through itsTwitter Amplify Open auto-mated ad marketplace.

Some video creators re-cently have aired frustra-tions with Vine, saying theyfelt the app wasn’t supportiveof their work and hasn’t imple-mented a sustainable advertis-ing model. The new updatesand the Engage app might helpassuage those concerns.

BY JACK MARSHALL

Twitter AppFacilitatesPostingOf Videos

Jack Dorsey

TAIPEI—Foxconn Technol-ogy Group plans to close inef-ficient subsidiaries at SharpCorp. after completing its $3.5billion acquisition of the un-profitable Japanese electron-ics maker.

Terry Gou, Foxconn’sfounder and chairman, said atthe Taiwanese company’s an-nual shareholder meetingWednesday that he also plansto accelerate commercializa-tion of Sharp’s patents to helpturn the business profitable.

“Sharp has lots of technol-ogy but it isn’t able to marketit,” he said. “Turning patentsto technology, then turningtechnology to products, that’swhat we are good at.”

Foxconn, formally known asHon Hai Precision IndustryCo., is the world’s largestelectronics contract manufac-turer and a key supplier forApple Inc. and other majorbrands.

Mr. Gou said Foxconn hascompleted legal aspects of thetakeover and new manage-ment will oversee Sharp start-ing next month.

Foxconn plans to closesome of Sharp’s redundantand inefficient overseas opera-tions, including some salesjoint ventures, Mr. Gou said.

“Sharp has too many sub-sidiaries, which results in toomuch overhead,” he said.

BY EVA DOU

FoxconnPlans CutsAt Sharp

Foxconn Chairman Terry Gou

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B4 | Thursday, June 23, 2016 THEWALL STREET JOURNAL.

BUSINESS NEWS

FEDEX

Company to BoostSpending by 6%

It’s going to be another ex-pensive year for FedEx Corp., asthe delivery company again in-creases spending to accommo-date growth in e-commerce andto update its aircraft fleet.

The Memphis, Tenn., companysaid it would increase capitalspending for the year thatstarted June 1 by 6% to $5.1 bil-lion. That doesn’t include the costof incorporating and integratingits recent acquisition of Dutchparcel firm TNT Express NV.

The additional spending haspressured margins in some ofthe delivery giant’s business seg-ments, which drew questionsfrom analysts on a Tuesday earn-ings call with FedEx executives.

“We don’t manage FedExCorp. trying to maximize eachsegment margin each year and ifwe did that, we would never beable to take advantage of thisbroad portfolio and the crossselling that’s available to us,”said Chief Executive Fred Smith.“It would be wonderful if everyyear we could have maximummargins at all of our operatingcompanies, but that’s just notrealistic.”

FedEx issued guidance for itscurrent financial year, forecastingadjusted earnings of $11.75 to$12.25 a share excluding all ef-fects from its acquisition of TNT.Analysts polled by Thomson

Both the FAA and Boeing Co.initially were cool to the notion.But the latest move to developjoint U.S.-European standards,according to RTCA documents,is intended to eliminate “signif-icant variability in wirelesstechnology, application and pro-tection for aviation products.”

So far, most public attentionhas focused on en-hanced wireless technology toimprove connectivity for pas-sengers surfing the web duringflights. But the Airbus effortmove is part of a broader, lesswell-known initiative—whichincludes rival Boeing and sev-eral international avionics sup-pliers—to research use of onboard wireless signals forsafety-related applicationssuch as a backup for enginecontrols; monitoring the condi-tion of landing-gear systems;detecting dangerous icing onairplane surfaces; and alertingpilots about defective airspeedsensors. Some backers estimatethe result could be to eliminatesome 220 pounds of wiring onthe average jetliner.

European authorities already

are developing standards forsuch wireless applications out-side passenger cabins. Now, anRTCA-organized panel, led byofficials of Airbus and Honey-well International Inc., will seekto ensure there are commonstandards for safety-related useson both sides of the Atlantic.

Previously, Airbus indicatedthat company engineers envisionawider range of applications, po-tentially even as backup systemsformoving critical wing and tailsurfaces that control flight.

Proponents anticipate thatsuch wireless applicationswould be separate from signalsused by passengers for enter-tainment or communications.But one of the main issues theRTCA panel will study is howsafety-related wireless signalscould impact signals alreadyused for radio altimeters thattell pilots the aircraft’s altitude.

The proposed uses also raisesignificant issues about futureaircraft vulnerabilities to cyber-attacks. As a result, U.S. andEuropean experts have been in-structed to delve into thosematters.

Vice raised $250 million fromA+E, which is co-owned by Dis-ney and Hearst Corp., and $250million from Technology Cross-over Ventures.

Founded as a punk ‘zine inMontreal in 1994, Vice grewinto one of the largest digitalmedia companies through aheavy focus on video. It is nowmaking a major push into tra-ditional television.

As part of theWednesday an-nouncement,Mr. Smith unveileda joint venture with Indian me-dia conglomerate the TimesGroup that will involve launch-ing a Vice editorial operationbased inMumbai later this yearto create local programming foronline,mobile and broadcast au-diences. The partnershipwill in-volve the launch of Viceland as apaid TV channel in India with amix of local and internationalprogramming. It also will createa branch of Virtue—Vice’s in-house branded content agencythat produces content on behalfof marketers—in India.

A similar deal with the MobyMedia Group will build localproduction operations acrossthe Middle East and North Af-rica. The focus will at first beon creating local content for

H&MFretful onU.K.Exit

online and mobile audiences inthe region and will expand intotelevision in 2017.

In the two joint ventures,startup costs will be split withthe local partners who will han-dle marketing and ad saleswithin their regions, Vice said.

A deal with Singapore-based Multi Channels Asia willbring Viceland to channels in18 countries in Southeast Asia.Vice also has signed a similardeal with Econet Media tomake Viceland available viasatellite and online in 17 coun-tries in sub-Saharan Africa.

Viceland will begin airingon Australia’s SBS-TV and onSky New Zealand later thisyear. A French subtitled ver-sion of the channel also willstart airing in Quebec laterthis year as part of a deal withCanada’s Groupe V Media.

In these deals in SoutheastAsia, Africa and Australia, Vicewill receive licensing fees forits content.

The international broadcast-ing deals come just months af-ter Vice announced in Aprilthat it would begin broadcast-ing Viceland on France’s CanalPlus in the fall and on Sky TVin the U.K. in September.

Vice Media’s internationalrollout is in full swing, with themillennial-focused media com-pany announcing a raft of dealsthat will bring its programminginto dozens of new marketsacross three continents.

The deals, announcedWednesday by Vice’s founderand Chief Executive ShaneSmith at the Cannes Lions ad-vertising festival, include jointventures with media groups inIndia and the Middle East, andbroadcasting arrangements inAfrica, Southeast Asia, Canada,Australia and New Zealand.

Several of the new deals in-clude online and mobile compo-nents, but most focus on bring-ing Viceland, the company’scable network that launched inthe U.S. in February, to viewersin several international markets.

Vice’s rapid international ex-pansion follows a number oflarge-scale investments thathave valued the company at al-most $4.5 billion. Late lastyear, Walt Disney Co. invested$400 million ahead of thelaunch of Viceland, a 24-hourchannel that is a joint venturewith A+E Networks. In 2014,

BY LUKAS I. ALPERT

Vice toGrowGloballyMedia company announces joint ventures in dozens of new markets

Vice Media headquarters in New York. A company expansion will focus on its cable TV network.

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STOCKHOLM—The chief ex-ecutive of Hennes & MauritzAB warned against the effectsof the U.K.’s possible exit fromthe European Union, sayingeconomic uncertainty aroundThursday’s referendum mayhave already affected the Swed-ish fashion-retail giant’s profit.

“The clothing market in theU.K. has been poor during thefirst half-year in general,”Karl-Johan Persson said in aninterview on Wednesday, add-ing it may be in part the resultof “uncertainty connected toBrexit.”

While H&M’s second-quar-ter sales, including value-added tax and converted intoSwedish kronor, increased by2% to 54.34 billion kronor($6.56 billion) compared withlast year, it fell by 7% in theU.K.

Taking out the effects of lo-cal currencies against the kro-nor, sales in the U.K. were flat,compared with an increase of5% for all H&M’s markets.

Mr. Persson said a Brexitwould not only affect the U.K.negatively, but also the EU andworld economy. “I don’t thinkit’s a good thing,” he said.

With 3.73 billion kronor insales in this year’s secondquarter, the U.K. is H&M’sthird-largest market, afterGermany and the U.S.

H&M’s profit in the secondquarter, ending May 31, fell17% to 5.36 billion Swedishkronor from 6.45 billion Swed-ish kronor in the same period

last year. Analysts polled byFactSet had estimated netprofit of 5.46 billion Swedishkronor.

Next to a potential effect ofuncertainty around Brexit, Mr.Persson said profit was hurtby the strong U.S. dollar, in-vestments in new online andphysical stores, and coldspring weather, which resultedin higher markdowns.

“The second quarter wasn’tup to the expectations that wehad,” he said.

During the quarter, H&Mlaunched e-commerce in ninecountries, including Ireland,Japan and Greece, bringingthe company’s online pres-ence to 32 countries.

This autumn, H&M willopen online stores in Canadaand South Korea, the com-pany said. “The main develop-ment costs are connected to

online expansion”, Mr. Pers-son said.

Meanwhile, H&M continuedto expand its physical pres-ence.

On May 31, H&M had 4,077physical stores in 62 coun-tries, up from 3,639 on thesame date last year. The groupplans a net addition of around425 new stores for the2015/2016 financial year.

H&M said it plans to openstores in four to five new mar-kets, including Colombia, in2017.

Mr. Persson said he expectshigher profitability in thecoming quarters, as the nega-tive effect of the strong dollarwould disappear comparedwith the year before. “Istrongly believe that for thecoming second half and 2017we will again see good growthin offline and online,” he said.

BY MATTHIAS VERBERGT

H&M’s chief uncertainty over the U.K. vote may have hurt sales.

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U.S. aviation regulators haveteamed up with their Europeancounterparts to develop com-mon standards aimed at har-nessing wireless signals for apotentially wide array of air-craft-safety systems.

Nearly a year after AirbusGroup SE unsuccessfully urgedFederal Aviation Administrationofficials to join in such efforts,Peggy Gilligan, the agency’s se-nior safety official, has set up anadvisory committee to cooperatewith European experts specifi-cally to “provide general guid-ance to industry” on the topic.

The FAA’s decision becamepublic Tuesday during a meet-ing of the top policy-makingcommittee of RTCA Inc., an in-dustry-government group thatserves as the regulatoryagency’s primary think tank ontechnical issues. The goal, ac-cording to the FAA, is “to en-able improvements in safetyand a reduction in weight” byeliminating some of the wir-ing that now connects manysystems on board jetliners.

BY ANDY PASZTOR

Wireless Aviation Advances

BusinessWatch

Reuters expected profit of$12.05 a share.

For the first time, FedEx ex-ecutives revealed more details ofits acquisition of TNT Express,which the company has ownedfor 28 days. The executives saidsenior leadership had been in-stalled at TNT and so far thecompany expects capital spend-ing of $100 million related tothe acquisition, along with inte-gration costs of $200 million forfiscal 2017. The acquisition couldstart contributing to FedEx prof-its by its fiscal 2018.

—Laura Stevens

ALTICE

Cablevision PurchaseReaches Completion

Altice NV on Tuesday said itfinalized its roughly $10 billionacquisition of Cablevision Sys-tems Corp., forming a new tele-communications giant in the U.S.

The new Altice USA will bethe fourth-largest broadbandprovider in the country, servingmore than 4.6 million customersand spanning 20 states. Thecompany will be led by DexterGoei, chairman and chief execu-tive of Altice USA.

“The completion of the Cable-vision acquisition marks a criticalstep in the development of the

Altice Group,“ said Altice founderand controlling shareholder Pat-rick Drahi.

Specific conditions will requireAltice not to lay off any of itsconsumer-facing staff for thenext five years. The companyalso agreed to pass 25% of itsestimated $450 million savingsin operational costs onto cus-tomers and pledged to improveCablevision’s network.

—Nick Kostov

CITIC RESOURCES HOLDINGS

Pact With ItochuWill Explore M&A

Citic Resources Holdings Ltd.plans to cooperate with Japanesetrading house Itochu Corp. onpossible acquisitions and invest-ment in the oil and gas industry.

The Hong Kong-listed minersaid it has signed an memoran-dum of understanding with Itochuthat would enable the two com-panies to collaborate on the iden-tification, review and co-acquisi-tion and co-investment of suitableoil and gas assets and projects. Itdidn’t give further details.

—Joanne Chiu

NISSAN

Help May Be GivenTo Minicar Owners

Nissan Motor Co. is consider-ing providing additional supportto owners of two models ofminicars affected by MitsubishiMotors Corp.’s fuel economydata scandal.

“We are considering mea-sures so that owners of theminicars can receive vehicle in-spection and other supportwhen they visit our dealers,”said Nissan Senior Vice Presi-dent Asako Hoshino.

—Megumi Fujikawa

FedEx will increase its capitalspending to $5.1 billion.

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THEWALL STREET JOURNAL. Thursday, June 23, 2016 | B5

When it happens, it will be built by a team.

Atlassian’s collaboration tools give teams at more than 50,000 companiesvisibility, mastery, and control to make the stuff of their dreams a reality.

TeamUpJIRA Confluence HipChat Bitbucket

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B6 | Thursday, June 23, 2016 THEWALL STREET JOURNAL.

It’s getting harder for banks to keep pace with varyingregulations and changing jurisdictional requirements. Ourexpert researchers ensure you know the full picture so youcan confidently evaluate risk in customer onboarding.

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© 2016 Dow Jones & Company. All Rights Reserved. THEWALL STREET JOURNAL. Thursday, June 23, 2016 | B7

MARKETS DIGEST B8 | WEDNESDAY’S MARKETS B9 | FINANCE WATCH B10

Apple’s Next Big BoostFrom iPhone Is Far OffHEARD ON THE STREET | B10

India’s Rupee IsNow on the RopesCURRENCIES | B10

A U.K. vote to leave the EU could hurt the pound and spur foreign investors to step up buying in London real estate, analysts say.

PAULHACK

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ments in general, is that theyno longer reflect the realitiesof businesses. Instead, theyfollow an arcane set of ac-counting rules and regula-tions. An alternate realitywhich fails to illuminate es-sential factors that make anenterprise rise or fall, where,for example:

� The most important,value-creating investments in

patents, brands, IT and otherintangibles are considered reg-ular expenses, like salaries orrent, without future benefits.

� Reported earnings are amixed bag of long-term items(indicating sustained growth)and one-time, transitorygains/losses (restructuringcosts, for example), havingnegligible effect on corporate

Please see BOOK page B9

When Netflix’s quarterlyearnings announcement inApril fell short of the consen-sus estimate of analysts, itsshare price surprisingly rose

almost 18% onthe announce-ment. An inves-tor blackout?No. Investors

justifiably ignored the back-ward-looking accounting infor-mation, reacting enthusiasti-cally to a sharp rise in theforward-looking new-subscrib-ers indicator: 4.9 million vs.expected 4 million. Further-more, astute investors noticedthat a major reason for theearnings shortfall was Netflix’slarge investment in futuregrowth—technology develop-ment; 9% of sales—which ac-countants expense in the in-come statement.

Netflix isn’t an aberration.The problem with reportedearnings, and financial state-

BY BARUCH LEVAND FENG GU

Accounting Is Failing Investors

Earnings reports don’t reflect real businesses, the authors argue.

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The Securities and Ex-change Commission is prepar-ing a civil enforcement caseagainst Merrill Lynch over aninvestment that fell as muchas 95% in value and was mar-keted in a way that one of thefirm’s financial advisers called“borderline crooked,” peopleclose to the probe said.

The expected case againstthe brokerage arm of Bank ofAmerica Corp. underscoressome of the risks of struc-tured notes, securities cus-tom-built by banks out of op-tions and other derivativesand often sold to retail inves-tors.

It also brings to light a dis-pute between Merrill and twoof its brokers who sold struc-tured notes to their clients.

on behalf of Messrs. Partridgeand Ryan, who couldn’t bereached directly.

The advisers recorded thecalls in August 2011, whenthey were facing potentialcomplaints from investors inthe notes, which had lost morethan half their value. The two

brokers moved to UBS in July2012 and submitted a whistle-blower complaint to the SECthe following September alleg-ing defects in the Merrillnotes, according to their law-yer, Rebecca Katz. The advis-ers can claim a reward if theirPlease see MERRILL page B9

Asof 12 p.m. ET EUR/GBP 0.7693 À 0.25% YEN/DLR ¥104.57 g 0.18% GOLD 1268.70 g 0.14% OIL 49.13 g 1.44% 3-MONTHLIBOR 0.64010% 10-YRTREAS g 1/32 yield 1.701%

If Britons vote on Thursdayto leave the European Union,real-estate prices—fromhomes to London office tow-ers—are expected to drop.

But if sterling also losesvalue, as is widely expected,analysts say it could spur abuying spree from foreign

BY ART PATNAUDE

property hunters that havelargely retreated from themarket this year.

Any boost would be mostpronounced in London, wherethe property market has be-come increasingly under-pinned by demand from inter-national investors.

“The buying opportunitywill be ripe if there is any sig-nificant fall in the value ofsterling,” said Faisal Durrani,head of research at brokerCluttons LLP.

Mr. Durrani was referring inparticular to high-end homesin central London, where a

boom after the financial crisiswas largely driven by wealthyoverseas buyers looking for ahaven investment.

In the past year, demandfor prime Central Londonhomes has weakened, in partbecause of low oil prices,slowing global economicgrowth and stock-marketshocks. Transactions havedropped off, with prices fallingas well.

The drop-off in transactionvolumes hasn’t been exclusiveto prime London housing.Commercial-property inves-tors also have largely avoided

deal making ahead of the ref-erendum.

A sharp fall in sterlingcould see opportunistic inves-tors swoop in on both parts ofthe property market, analystssaid.

Nearly half of all home buy-ers in prime London are for-eign, Mr. Durrani said. MiddleEastern and Asian investorsaccount for 35% to 40% ofdeals. A “Brexit”-led drop insterling would encourage op-portunistic investors “sittingon the sidelines, waiting forthe outcome,” he said.

Please see VOTE page B10

U.K. Property Market Gets ReadyIf Britons vote to exit,downward pressureon real estate may beoffset by a sterling fall

The percentage of Ameri-cans with subprime creditscores has fallen to the lowestlevel in more than a decade, adevelopment that could givebank lending and the overalleconomy a boost.

The share of U.S. adultswith credit scores that areconsidered “subprime” fell to20.7% in April, the sixth con-secutive year-over-year de-cline and the lowest levelsince at least 2005, when FairIsaac Corp., or FICO, startedtracking the data. The ranks ofsubprime borrowers swelledduring the financial crisis,peaking at 25.5% in 2010 asmortgage payments, credit-card bills and other debtswent unpaid.

The improving trend couldbring relief to big banks,which tightened credit stan-dards in the wake of the crisis.An increase in more-credit-worthy borrowers could allowthem to increase lending with-out lowering standards. Banksare desperate for revenuegrowth since the same super-low rates helping borrowersare also squeezing their ownprofits.

“It will have a positive im-pact on loan volume, loangrowth and revenue,” saidMorgan Whitacre, a consumerclient underwriting executiveat Bank of America Corp.

Credit-card and auto lendingwould be the first areas tobenefit.

This, in turn, could bolsterconsumer spending and theU.S. As more people gain ac-cess to credit, consumerspending in the short termshould rise because borrowerscan use loans to make pur-chases they otherwisewouldn’t have been able tomake, said Rob Martin, U.S.economist at Barclays PLC. “Itfrees people from having tospend only the cash they haveon hand,” he said.

“It’s good for the economyin the sense that there’s a lotless risk in the credit that’s ex-tended,” he added.

In some ways, the improve-ment is natural as the housingdownturn and financial crisisfade further into the past. Af-ter a set number of years,foreclosures or missed debtpayments drop off consumers’credit reports, helping in-crease their scores and ex-panding their access to financ-ing. This is particularly truefor subprime borrowers, or

Please see CREDIT page B9

BY ANNAMARIA ANDRIOTIS

SubprimeBorrowers’Ranks Thin

With clients complaining afterthe value of the notes plunged,the brokers secretly tapedcalls with executives at Mer-rill, left the firm for rival UBSGroup AG and then filed awhistleblower complaint overthe notes with the SEC.

The probe involves a prod-uct called Strategic ReturnNotes that Merrill sold over anumber of months in 2010,raising about $150 million.Linked to a Merrill Lynch in-dex tracking the volatility ofthe S&P 500, the five-yearnotes lost value rapidly afterthey were issued, as marketvolatility fell and the cost ofbuying the options uponwhich the notes were basedrose sharply.

Those “roll costs” averagedabout 12% of the principal perquarter in the first half of

2011, before falling to an aver-age of less than 4% per quar-ter in the second half of theyear, according to Merrill. Inthe calls, the brokers allegethey were never told the costscould grow so large.

“The roll costs are farlarger than we ever under-stood or were disclosed to us,”Merrill broker Glen Ringwallsaid, according to the tran-scripts of the calls he tapedwith colleague Mark Manion.“This is borderline crooked.”

Brian Partridge, head ofU.S. product sales for Merrill’swealth-management divisionat the time, who wasn’t awarethe call was being taped,pushed back. He acknowl-edged the costs were higherthan expected but said thatwas due to market conditionsand that the product, designed

as a hedge, performed as in-tended, according to the tran-scripts. The problem, he said,was that the investors were onthe wrong side of the market.

“It is not a rigged game,”he said in the transcripts, add-ing that volatility had per-formed in the worst possibleway for the product. “We’vebeen, quite frankly, snake-bit-ten.”

The advisers were told onthe calls not to suggest totheir clients the product wasflawed.

“What you’d love to do isavoid customer complaint,”Mark Ryan, a manager at thefirm, told Messrs. Ringwalland Manion. “We can’t justtell everyone, ‘Hey this is adefective product.’”

Merrill spokesman WilliamHalldin declined to comment

BY JEAN EAGLESHAM

SEC Probes Merrill Notes That Slid

The $50 BillionResources BearB eing a bear can be

lonely. That isn’t ShawnDriscoll’s problem.

The natural-resourcesfund manager at T. RowePrice believes we are in a10- to 15-year bear market inenergy and commodities. Hehas positioned his own $5.2

billion in as-sets largelyagainst a risein prices. Sofar that hasworked outwell.

Mr.Driscoll’s influ-ence extendsfar beyond his

own funds, making him oneof the most important, if un-known, energy bears in themarket. T. Rowe Price collec-tively has about $50 billioninvested in energy and natu-ral resources across its di-

versified stock funds. Manyfund managers at the firm,impressed by Mr. Driscoll’sconviction and detailed his-torical work on commoditiesmarkets, have followed hisadvice.

That gives Mr. Driscolllots of company. And pres-sure.

T. Rowe Price, which had$765 billion in assets at theend of the first quarter, hasbet its own future on theability of fund managers tobeat the market. A big betfor or against a major sectorcan reverberate across thefirm.

At the end of the firstquarter, the firm’s 70 stockfunds, with $382 billion inassets, had just over half ofthe market’s 6.8% weightingin energy. That is a big nega-tive bet for a major main-stream firm.

As oil tumbled from $100to just over $30, Mr. Driscollwas a genius. Oil has sincerebounded to nearly $50. “Ijust don’t think we should behere,” he said, calling it a cy-clical rally amid a grim long-term trend. “We’re lookingat this as hope trade No. 2 ina long bear.”

The basis for Mr.Driscoll’s bearishness is ris-ing productivity in commodi-ties production, which re-

Please see BROWN page B9

T. Rowe Price’s Shawn Driscoll

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BOOKEXCERPT

UNHEDGEDKENBROWN

The share of U.S.adults with ‘subprime’credit scores fell to20.7% in April.

A dispute between Merrill Lynch and two brokers is in the spotlight.

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B8 | Thursday, June 23, 2016 THEWALL STREET JOURNAL.

Nikkei 225 Index16065.72 t103.39, or 0.64%High, low, open and close for eachtrading day of the past three months.

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15.59%t20868.03 14952.6138915.87 12/29/89

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tt

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STOXX 600 Index341.32 s1.28, or 0.38%High, low, open and close for eachtrading day of the past three months.

Year-to-date52-wk high/lowAll-time high

6.69%t406.80 303.58414.06 4/15/15

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65-day moving average

US$vs,Wed YTDchg

Country/currency inUS$ perUS$ (%)

AmericasArgentina peso-a 0.0713 14.0340 8.5Brazil real 0.2964 3.3743 –14.8Canada dollar 0.7806 1.2811 –7.4Chile peso 0.001486 673.00 –5.0Colombia peso 0.0003390 2950.00 –7.1EcuadorUSdollar-f 1 1 unchMexico peso-a 0.0539 18.5363 7.8Peru sol 0.3047 3.2819 –3.9Uruguay peso-e 0.0327 30.620 2.4Venezuela bolivar 0.100100 9.99 58.4

Asia-PacificAustralia dollar 0.7495 1.3342 –2.8China yuan 0.1521 6.5753 1.3

Global government bondsLatest, month-ago and year-ago yields and spreads over or under U.S. Treasurys on benchmark two-yearand 10-year government bonds around the world. Data as of 12 p.m. ET

Country/ SpreadOver Treasurys, in basis points YieldCoupon Maturity, in years Yield Latest Previous MonthAgo Year ago Previous Month ago Year ago

3.250 Australia 2 1.728 97.8 91.5 75.8 130.0 1.681 1.639 1.9624.250 10 2.230 53.5 46.2 47.2 58.5 2.171 2.315 2.9613.500 Belgium 2 -0.501 -125.1 -127.8 -136.9 -76.7 -0.512 -0.488 -0.1060.800 10 0.292 -140.3 -142.1 -143.8 -111.3 0.289 0.405 1.2631.000 France 2 -0.449 -119.9 -122.0 -128.6 -79.0 -0.454 -0.405 -0.1280.500 10 0.416 -127.9 -129.1 -133.3 -112.9 0.419 0.510 1.2480.000 Germany 2 -0.589 -133.9 -134.0 -137.7 -84.2 -0.574 -0.497 -0.1800.500 10 0.059 -163.7 -165.8 -167.6 -148.9 0.052 0.167 0.8874.500 Italy 2 -0.015 -76.5 -79.1 -92.2 -35.8 -0.026 -0.042 0.3042.000 10 1.358 -33.8 -33.5 -35.6 -20.5 1.375 1.487 2.1720.100 Japan 2 -0.239 -98.9 -101.0 -111.7 -65.2 -0.244 -0.237 0.0100.100 10 -0.144 -184.0 -184.9 -194.8 -194.9 -0.140 -0.105 0.4280.500 Netherlands 2 -0.525 -127.5 -130.2 -138.4 -83.6 -0.537 -0.504 -0.1750.250 10 0.156 -154.0 -155.6 -158.6 -126.0 0.154 0.257 1.1164.350 Portugal 2 0.444 -30.6 -35.5 -58.7 -61.4 0.411 0.294 0.0472.875 10 3.138 144.3 144.9 125.5 36.4 3.158 3.098 2.7404.500 Spain 2 0.001 -74.9 -76.9 -96.5 -35.2 -0.004 -0.085 0.3101.950 10 1.518 -17.7 -19.6 -26.2 -31.6 1.513 1.581 2.0604.250 Sweden 2 -0.576 -132.6 -135.3 -131.5 -93.9 -0.588 -0.435 -0.2771.000 10 0.582 -111.4 -112.8 -104.8 -131.5 0.582 0.795 1.0611.250 U.K. 2 0.499 -25.1 -25.9 -43.3 8.9 0.507 0.447 0.7502.000 10 1.311 -38.5 -41.9 -39.0 -26.0 1.290 1.453 2.1160.625 U.S. 2 0.750 ... ... ... ... 0.766 0.880 0.6621.625 10 1.696 ... ... ... ... 1.710 1.843 2.376

Cross rates London close on Jun 22

USD GBP CHF JPY HKD EUR CDN AUDAustralia 1.3342 1.9592 1.3926 0.0128 0.1720 1.5068 1.0412 ...Canada 1.2811 1.8812 1.3374 0.0123 0.1652 1.4469 ... 0.9603Euro 0.8852 1.3000 0.9243 0.0085 0.1141 ... 0.6910 0.6635HongKong 7.7579 11.3932 8.0980 0.0742 ... 8.7621 6.0550 5.8153Japan 104.5670 153.5700 109.1800 ... 13.4790 118.1200 81.6300 78.3900Switzerland 0.9580 1.4067 ... 0.0092 0.1235 1.0820 0.7477 0.7181U.K. 0.6810 ... 0.7109 0.0065 0.0878 0.7693 0.5315 0.5104U.S. ... 1.4685 1.0438 0.0096 0.1289 1.1297 0.7806 0.7495

Source: Tullett Prebon

US$vs,Wed YTDchg

Country/currency inUS$ perUS$ (%)

HongKong dollar 0.1289 7.7579 0.1India rupee 0.0148 67.5097 2.0Indonesia rupiah 0.0000754 13268 –4.1Japan yen 0.009563 104.57 –13.1Kazakhstan tenge 0.002943 339.74 0.3Macau pataca 0.1252 7.9895 –0.2Malaysia ringgit-c 0.2485 4.0244 –6.5NewZealand dollar 0.7167 1.3953 –4.7Pakistan rupee 0.0096 104.710 –0.2Philippines peso 0.0215 46.443 –0.9Singapore dollar 0.7466 1.3394 –5.6SouthKoreawon 0.0008700 1149.42 –2.3Sri Lanka rupee 0.0067926 147.22 2.1Taiwan dollar 0.03117 32.078 –2.6Thailand baht 0.02844 35.160 –2.4

US$vs,Wed YTDchg

Country/currency inUS$ perUS$ (%)

EuropeBulgaria lev 0.5775 1.7316 –3.8Croatia kuna 0.1502 6.657 –5.0Euro zone euro 1.1297 0.8852 –3.9CzechRep. koruna-b 0.0417 23.955 –3.7Denmark krone 0.1518 6.5873 –4.1Hungary forint 0.003594 278.25 –4.2Iceland krona 0.008179 122.26 –6.1Norway krone 0.1206 8.2898 –6.2Poland zloty 0.2576 3.8823 –1.1Russia ruble-d 0.01552 64.439 –10.4Sweden krona 0.1209 8.2691 –2.1Switzerland franc 1.0438 0.9580 –4.4Turkey lira 0.3453 2.8960 –0.7Ukraine hryvnia 0.0399 25.0560 4.4U.K. pound 1.4685 0.6810 0.3

Middle East/AfricaBahrain dinar 2.6521 0.3771 –0.01Egypt pound-a 0.1126 8.8771 13.4Israel shekel 0.2596 3.8518 –1.0Kuwait dinar 3.3215 0.3011 –0.8Oman sul rial 2.5977 0.3850 unchQatar rial 0.2747 3.640 –0.1SaudiArabia riyal 0.2666 3.7503 –0.1SouthAfrica rand 0.0683 14.6322 –5.5

Close Net Chg %Chg YTD%Chg

WSJDollar Index 85.50 –0.28 –0.33 –5.19Sources: Tullett Prebon,WSJMarketDataGroup

Stoxx 50Last: 2862.66 s 11.82, or 0.41% 7.7%tYTD

300029002800270026002500

24 1 8 15 22 29Apr.

6 13 20 27May

3 10 17June

Dow Jones Industrial Average P/E: 19Last: 17845.72 s 15.99, or 0.09% 2.4%sYTD

Note: Price-to-earnings ratios are for trailing 12 monthsSources: WSJ Market Data Group; Birinyi Associates

185001800017500170001650016000

24 1 8 15 22 29Apr.

6 13 20 27May

3 10 17June

KeyRatesLatest 52wks ago

LiborOnemonth 0.45205% 0.18650%Threemonth 0.64010 0.28075Sixmonth 0.92965 0.44680One year 1.25100 0.77575

Euro LiborOnemonth -0.35857% -0.07286%Threemonth -0.28500 -0.01571Sixmonth -0.16671 0.05500One year -0.03643 0.16929

EuriborOnemonth -0.35800% -0.06600%Threemonth -0.26800 -0.01400Sixmonth -0.16100 0.04900One year -0.02900 0.16300

YenLiborOnemonth -0.07614% 0.05929%Threemonth -0.03086 0.09571Sixmonth -0.00829 0.13786One year 0.08543 0.25400

Offer Bid

EurodollarsOnemonth 0.5000% 0.4000%Threemonth 0.6500 0.5500Sixmonth 1.0000 0.9000One year 1.3000 1.2000

Latest 52wks ago

Prime ratesU.S. 3.50% 3.25%Canada 2.70 2.85Japan 1.475 1.475HongKong 5.00 5.00

Policy ratesECB 0.00% 0.05%Britain 0.50 0.50Switzerland 0.50 0.50Australia 1.75 2.00U.S. discount 1.00 0.75Fed-funds target 0.25 0.00Callmoney 2.25 2.00

Overnight repurchase ratesU.S. 0.59% 0.17%Euro zone n.a. n.a.

Sources:WSJMarketDataGroup, SIXFinancial Information, Tullett

International Stock Indexes Data as of 12 p.m. NewYork time

Latest 52-WeekRange YTDRegion/Country Index Close NetChg % chg Low Close High % chg

World TheGlobalDow 2355.57 6.21 0.26 2033.03 • 2591.09 0.8MSCIEAFE 1662.37 3.33 0.20 1471.88 • 1956.39 –3.1MSCIEMUSD 831.55 6.20 0.75 691.21 • 1044.05 4.7

Americas DJAmericas 504.45 1.35 0.27 433.38 • 519.17 3.5Brazil SaoPauloBovespa 50667.32 –170.48 –0.34 37046.07 • 54977.70 16.9Canada S&P/TSXComp 14022.81 10.49 0.07 11531.22 • 14995.33 7.8Mexico IPCAll-Share 45668.26 –37.16 –0.08 39256.58 • 46545.32 6.3Chile Santiago IPSA 3114.76 5.53 0.18 2730.24 • 3243.62 5.8

U.S. DJIA 17845.72 15.99 0.09 15370.33 • 18167.63 2.4NasdaqComposite 4862.82 19.05 0.39 4209.76 • 5231.94 –2.9S&P500 2094.48 5.58 0.27 1810.10 • 2132.82 2.5CBOEVolatility 18.62 0.14 0.76 10.88 • 53.29 2.3

EMEA StoxxEurope600 341.32 1.28 0.38 303.58 • 406.80 –6.7StoxxEurope50 2862.66 11.82 0.41 2556.96 • 3541.18 –7.7

France CAC40 4380.03 12.79 0.29 3892.46 • 5217.80 –5.5Germany DAX 10071.06 55.52 0.55 8699.29 • 11802.37 –6.3Israel TelAviv 1433.58 4.95 0.35 1383.34 • 1728.89 –6.2Italy FTSEMIB 17323.27 –107.90 –0.62 15773.00 • 24157.39 –19.1Netherlands AEX 441.25 0.86 0.20 378.53 • 506.05 –0.1Russia RTS Index 927.29 –9.93 –1.06 607.14 • 974.63 22.5Spain IBEX35 8702.00 34.70 0.40 7746.30 • 11612.60 –8.8Switzerland SwissMarket 7972.14 36.39 0.46 7425.05 • 9537.90 –9.6SouthAfrica JohannesburgAll Share 53557.20 602.02 1.14 45975.78 • 54760.91 5.6Turkey BIST 100 77267.46 –263.91 –0.34 68230.47 • 86931.34 7.7U.K. FTSE 100 6261.19 34.64 0.56 5499.51 • 6873.43 0.3

Asia-Pacific DJAsia-Pacific TSM 1371.52 –0.69 –0.05 1188.42 • 1559.18 –1.3Australia S&P/ASX200 5270.90 –3.50 –0.07 4765.30 • 5706.70 –0.5China Shanghai Composite 2905.55 26.99 0.94 2655.66 • 4690.15 –17.9HongKong HangSeng 20795.12 126.68 0.61 18319.58 • 27404.97 –5.1India S&PBSESensex 26765.65 –47.13 –0.18 22951.83 • 28504.93 2.5Indonesia JakartaComposite 4896.85 18.14 0.37 4120.50 • 4982.91 6.6Japan Nikkei StockAvg 16065.72 –103.39 –0.64 14952.61 • 20868.03 –15.6Malaysia Kuala LumpurComposite 1637.69 … Closed 1532.14 • 1744.19 –3.2NewZealand S&P/NZX50 6781.74 –57.66 –0.84 5546.88 • 7039.41 7.2Pakistan KSE 100 38149.26 –266.05 –0.69 30564.50 • 38776.94 16.3Philippines PSEi 7756.37 –10.86 –0.14 6084.28 • 7767.23 11.6Singapore Straits Times 2786.13 –3.32 –0.12 2532.70 • 3373.48 –3.4SouthKorea Kospi 1992.58 9.88 0.50 1829.81 • 2107.33 1.6Taiwan Weighted 8716.25 31.40 0.36 7410.34 • 9476.34 4.5Thailand SET 1424.68 –6.12 –0.43 1224.83 • 1519.47 10.6

Source: SIX Financial Information;WSJMarketDataGroup

Currencies London close on June 22Yen, euro vs. dollar; dollar vs. major U.S. trading partners

–10

–5

0

5

10

15%

2015 2016

Euros

YensWSJ Dollar indexs

Asia Titans 50Last: 130.59 s 0.20, or 0.15% 4.2%tYTD

150140130120110

10025 1 8 15 22 29

Apr.6 13 20 27

May3 10 17

June

HighClose

Low

50–daymoving average

t

% YTD%Cur Stock Sym Last Chg Chg

% YTD%Cur Stock Sym Last Chg Chg

% YTD%Cur Stock Sym Last Chg Chg

Top Stock Listings 12 p.m. New York time

S&P 500 Index2095.32 s6.42, or 0.31%High, low, open and close for eachtrading day of the past three months.

Year agoLast

Trailing P/E ratio *P/E estimate *Dividend yieldAll-time high:

23.85 21.7317.87 17.902.19 1.98

2130.82, 05/21/15

1920

1960

2000

2040

2080

2120

2160

Mar. Apr. May June

* P/E data based on as-reported earnings from Birinyi Associates Inc.

65-day moving average

Data as of 12 p.m. New York time

MARKETS DIGEST

Commodities Prices of futures contracts with the most open interestEXCHANGELEGEND: CBOT:ChicagoBoard of Trade;CME:ChicagoMercantile Exchange; ICE-US: ICE FuturesU.S.; MDEX:BursaMalaysiaDerivativesBerhad;TCE:TokyoCommodity Exchange;COMEX: Commodity Exchange; LME: LondonMetal Exchange;NYMEX:NewYorkMercantile Exchange; ICE-EU: ICE Futures Europe. *Data as of 6/21/2016

One-DayChange Year YearCommodity Exchange Last price Net Percentage high low

Corn (cents/bu.) CBOT 405.00 2.75 0.68% 444.00 355.75Soybeans (cents/bu.) CBOT 1119.50 8.75 0.79 1,186.25 868.00Wheat (cents/bu.) CBOT 474.00 1.50 0.32 533.75 460.00Live cattle (cents/lb.) CME 111.975 0.525 0.47 125.350 109.575Cocoa ($/ton) ICE-US 3,158 12 0.38 3,241 2,745Coffee (cents/lb.) ICE-US 139.30 -1.65 -1.17% 146.85 117.15Sugar (cents/lb.) ICE-US 19.23 -0.11 -0.57 20.22 12.92Cotton (cents/lb.) ICE-US 64.73 0.34 0.53 66.64 54.19Robusta coffee ($/ton) ICE-EU 1709.00 -6.00 -0.35 1,748.00 1,400.00

Copper ($/lb.) COMEX 2.1265 0.0085 0.40 2.3295 1.9690Gold ($/troy oz.) COMEX 1269.50 -3.00 -0.24 1,318.90 1,065.70Silver ($/troy oz.) COMEX 17.355 -0.019 -0.11 18.070 13.930Aluminum ($/mt)* LME 1,634.00 15.50 0.96 1,675.00 1,451.50Tin ($/mt)* LME 16,950.00 -75.00 -0.44 17,500.00 13,225.00Copper ($/mt)* LME 4,597.00 2.00 0.04 5,070.50 4,320.50Lead ($/mt)* LME 1,706.00 -6.00 -0.35 1,888.00 1,598.00Zinc ($/mt)* LME 2,005.00 6.00 0.30 2,082.00 1,467.00Nickel ($/mt)* LME 9,240.00 -10.00 -0.11 9,575.00 7,750.00Rubber (Y.01/ton) TCE 156.40 0.70 0.45 165.00 147.20

Palmoil (MYR/mt) MDEX 2372.00 -2.00 -0.08 2,707.00 2,370.00Crude oil ($/bbl.) NYMEX 49.08 -0.77 -1.54 52.28 32.22NYHarborULSD ($/gal.) NYMEX 1.5077 -0.0186 -1.22 1.5876 0.9643RBOBgasoline ($/gal.) NYMEX 1.5950 -0.0084 -0.52 1.6591 1.1366Natural gas ($/mmBtu) NYMEX 2.809 -0.004 -0.14 2.8270 2.0090Brent crude ($/bbl.) ICE-EU 50.49 -0.77 -1.50 53.30 31.33Gasoil ($/ton) ICE-EU 447.00 -1.75 -0.39 472.50 285.50

Sources: SIX Financial Information; WSJ Market Data Group

12 p.m. New York time

AsiaTitansHK$ AIAGroup 1299 45.50 1.11 -2.36¥ AstellasPharma 4503 1626.50 1.34 -6.06AU$ AustNZBk ANZ 24.40 0.62 -12.64AU$ BHP BHP 18.71 0.11 4.76HK$ BankofChina 3988 3.07 1.32 -11.27HK$ CKHutchison 0001 90.75 -0.33 -13.07HK$ CNOOC 0883 9.73 1.46 20.57¥ Canon 7751 3099.00 -0.23 -15.67¥ CentralJapanRwy 9022 18180 -0.90 -15.83HK$ ChinaConstructnBk 0939 4.97 1.91 -6.40HK$ ChinaLifeInsurance 2628 16.84 0.60 -32.91HK$ ChinaMobile 0941 86.65 0.12 -0.97AU$ CmwlthBkAust CBA 75.07 -0.01 -12.23¥ EastJapanRailway 9020 9369.00 -0.32 -18.17¥ Fanuc 6954 16000 -1.75 -24.10¥ Hitachi 6501 466.90 -1.25 -32.48TW$ Hon Hai Precisn 2317 81.50 0.99 0.87¥ HondaMotor 7267 2697.50 -2.41 -31.01KRW HyundaiMtr 005380 140000 1.45 -6.04HK$ Ind&Comml 1398 4.38 2.10 -6.41¥ JapanTobacco 2914 4217.00 -1.40 -5.68¥ KDDI 9433 3156.00 1.32 0.06¥ Mitsubishi 8058 1794.50 -0.47 -11.51¥ MitsuUFJFin 8306 500.60 -1.07 -33.88¥ Mitsui 8031 1237.50 0.08 -14.39¥ Mizuho Fin 8411 160.20 -0.62 -34.21¥ NTTDoCoMo 9437 2722.00 0.89 9.58AU$ NatAustBnk NAB 25.62 -0.19 -15.17¥ NipponStl&SmtmoMtl 5401 1980.50 -2.27 -18.03¥ NipponTeleg 9432 4550.00 1.11 -5.91¥ NissanMotor 7201 1007.00 -0.79 -21.30¥ NomuraHldgs 8604 417.60 0.05 -38.51¥ Panasonic 6752 928.00 -1.25 -25.19HK$ PetroChina 0857 5.40 1.69 6.09HK$ PingAnInsofChina 2318 34.45 0.44 -19.70$ RelianceIndsGDR RIGD 28.80 -0.52 -5.88AU$ RioTinto RIO 44.58 0.84 -0.29KRW SamsungElectronics 005930 1445000 -0.21 14.68¥ Seven&I Hldgs 3382 4465.00 -0.65 -19.55¥ SoftBankGroup 9984 5994.00 2.60 -2.36¥ Sumitomo Mitsui 8316 3193.00 -1.48 -30.68HK$ SunHngKaiPrp 0016 89.00 0.06 -5.07TW$ TaiwanSemiMfg 2330 166.00 0.30 16.08

¥ TakedaPharm 4502 4412.00 -1.54 -27.25HK$ TencentHoldings 0700 177.10 2.43 15.98¥ TokioMarineHldg 8766 3497.00 -0.31 -25.79¥ ToyotaMtr 7203 5607.00 -0.53 -25.12AU$ Wesfarmers WES 40.34 -0.64 -3.05AU$ WestpacBanking WBC 29.67 -0.03 -11.59AU$ Woolworths WOW 21.00 -0.90 -14.29

Stoxx50CHF ABB ABBN 20.52 0.64 14.25€ AXA CS 20.91 0.65 -17.14€ AirLiquide AI 94.71 0.51 -8.63€ Allianz ALV 138.20 1.28 -15.50€ Anheuser Busch ABI 114.40 0.39 ...£ AstraZeneca AZN 3887.00 0.37 -15.80€ BASF BAS 70.52 1.02 -0.28€ BNP Paribas BNP 46.37 0.64 -11.23£ BT Group BT.A 430.65 1.03 -8.70€ BancoBilVizAr BBVA 5.62 0.79 -15.70€ BancoSantander SAN 4.05 0.62 -11.15£ Barclays BARC 183.95 2.00 -15.97€ Bayer BAYN 91.84 0.11 -20.69£ BP BP. 383.40 0.29 8.31£ BritishAmTob BATS 4254.50 0.16 12.82CHF FinRichemont CFR 59.70 0.93 -17.20CHF CreditSuisse CSGN 12.81 2.15 -40.35€ Daimler DAI 59.00 0.58 -23.95€ Deutsche Bank DBK 15.08 1.89 -33.05€ DeutscheTelekom DTE 14.46 0.07 -12.49£ Diageo DGE 1842.50 1.07 -0.75€ ENI ENI 14.12 -1.53 2.32£ GlaxoSmithKline GSK 1419.50 0.21 3.39£ HSBC Hldgs HSBA 444.00 0.95 -17.20€ INGGroep INGA 10.59 0.86 -14.98£ ImperialBrands IMB 3630.50 -0.98 1.23€ IntesaSanpaolo ISP 2.15 -0.09 -30.31€ LVMHMoetHennessy MC 142.75 -0.31 -1.48£ LloydsBankingGroup LLOY 70.55 0.31 -3.45€ LOreal OR 168.50 0.66 8.50£ NationalGrid NG. 983.80 0.21 4.94CHF Nestle NESN 71.70 -0.21 -3.82CHF Novartis NOVN 76.85 0.65 -11.46DKK NovoNordiskB NOVO-B 347.70 0.96 -13.05£ Prudential PRU 1322.00 0.95 -13.65£ ReckittBenckiser RB. 6807.00 -0.21 8.37

£ RioTinto RIO 2067.50 1.77 4.45CHF RocheHldgctf ROG 246.30 0.12 -10.89£ RoyDtchShell A RDSA 1810.50 0.11 18.64€ SAP SAP 70.09 -0.26 -4.48€ Sanofi SAN 71.17 1.63 -9.45€ SchneiderElectric SU 57.37 0.05 9.15€ Siemens SIE 96.10 0.36 6.92€ Telefonica TEF 8.96 0.66 -12.44€ Total FP 43.03 0.02 6.37CHF UBSGroup UBSG 15.05 1.62 -22.90€ Unilever UNA 40.35 0.47 0.61£ Unilever ULVR 3159.00 0.13 7.94£ VodafoneGroup VOD 216.45 0.89 -2.06CHF ZurichInsurance ZURN 237.60 2.02 -8.05

DJIA$ AmericanExpress AXP 62.24 -0.08 -10.51$ Apple AAPL 96.47 0.58 -8.35$ Boeing BA 132.55 0.78 -8.33$ Caterpillar CAT 76.63 0.18 12.76$ Chevron CVX 102.52 -0.70 13.96$ CiscoSystems CSCO 29.01 0.83 6.83$ CocaCola KO 45.03 -0.22 4.82$ Disney DIS 99.31 0.50 -5.49$ DuPont DD 67.73 0.26 1.69$ ExxonMobil XOM 91.27 -0.28 17.09$ GenElec GE 30.95 0.03 -0.64$ GoldmanSachs GS 149.03 0.46 -17.31$ HomeDepot HD 128.60 0.67 -2.76$ Intel INTC 32.52 0.62 -5.60$ IBM IBM 153.09 -0.62 11.24$ JPMorganChase JPM 63.25 0.48 -4.21$ JohnsJohns JNJ 116.72 0.46 13.63$ McDonalds MCD 120.55 -1.70 2.04$ Merck MRK 56.92 1.20 7.77$ Microsoft MSFT 51.22 0.05 -7.68$ NikeClB NKE 54.99 0.40 -12.02$ Pfizer PFE 34.69 -0.17 7.47$ Procter&Gamble PG 83.52 0.13 5.17$ 3M MMM 171.77 0.23 14.02$ TravelersCos TRV 112.44 -0.25 -0.37$ UnitedTech UTX 101.52 -0.05 5.67$ UnitedHealthGroup UNH 138.83 0.46 18.01$ VISAClA V 76.99 -0.44 -0.72$ Verizon VZ 54.24 0.27 17.36$ WalMart WMT 72.00 0.76 17.46

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THEWALL STREET JOURNAL. Thursday, June 23, 2016 | B9

MONEY & INVESTING

Credit-card and auto lending are expected to benefit first.

DANIELACK

ER/B

LOOMBE

RGNEW

S

selling.”Andrew Stoltmann, the Chi-

cago-based lawyer represent-ing investors who have filedFinra claims against Merrill,said firms “have a massive fi-nancial incentive to createthese complex, conflict-ladenand untested structured in-vestments.”

The recorded phone callsare cited in arbitration claimsfiled against Merrill in Marchand April on behalf of 44 in-vestors who lost a total of $1.2million.

One of those investors, TillBruett, a 78-year-old retiredbanker from Panama CityBeach, Fla., said he bought$109,545 of the notes. In aninterview, he said he was toldthe product would protect hisinvestments in a volatile mar-ket. But in the summer of2011, as the market was fall-ing, “I got a call from my in-vestment adviser who said,‘Till, this product is not work-ing at all. In fact it’s doing ex-actly the opposite, and weneed to sell it.’”

Mr. Bruett sold the notesfor $72,192, incurring a loss of$37,353, according to the arbi-tration claim. “I feel totallymisled by the information thatMerrill sent me,” he said.

The investors say in theclaims that they aren’t com-plaining about the conduct ofMessrs. Ringwall and Manion,who sold them the notes.

A handful of claims filed byother investors against Merrilland the two advisers in rela-tion to the notes have alreadybeen settled, according to aregulatory database.

In comments in the records,the brokers each denied anywrongdoing or liability.

tip leads the SEC to bring acase against Merrill and im-pose sanctions of more than$1 million.

Mr. Halldin, the Merrillspokesman, said the noteswere designed to be part of alarger portfolio and that therisks and costs were fully dis-closed to advisers and inves-tors.

He pointed to an email sentby Mr. Ringwall to a Merrillofficial in July 2011 thankingmanagers for a conference callthat had discussed the highroll costs. “VERY helpful ex-planation and rational,” Mr.Ringwall wrote, according to acopy reviewed by the Journal.

Ms. Katz, the lawyer repre-senting Messrs. Ringwall andManion, said the two menhoped Merrill would help theirclients and acted after it be-came clear the bank wouldn’t.

An SEC spokesman declinedto comment.

The $10 notes that maturedin November had a redemp-tion value from Merrill of 50cents, according to data pro-vider FactSet. The bank saidmost investors sold the notesin the first year.

Banks sell $40 billion to$50 billion of structured noteseach year. They rank amongthe most common types of se-curities in arbitration claimsfiled with the Financial Indus-try Regulatory Authority. AmyStarr, an SEC official, said in aspeech last year that she won-ders “how many brokers andadvisers who sell these prod-ucts to retail investors actu-ally understand what they are

ContinuedfrompageB7

MERRILL

duces costs and pushesproducers to drill more. Cou-ple that with fast turn-arounds in shale drilling,new near-shore projects inplaces like Norway and ris-ing production in Iran andother countries, and supplywill stay strong for years.

“We always say when theproductivity ends, that’swhen we get bullish,” Mr.Driscoll said.

Today’s near-$50 price al-ready is enticing companiesto start drilling again, andMr. Driscoll expects that tocontinue. It is a classic pris-oner’s dilemma among en-ergy companies. Being thefirst to start a new well is asign to investors that a com-pany believes it has the low-est costs. And drilling firstallows the company to reapthe benefits of low costsfrom contractors who aredesperate to put assets towork. “We think we’re veryclose to incentive pricing,that’s why rigs are comingback,” he said.

Then there are unexpectedprojects coming online in thenear future such as the Jo-han Sverdrup oil field justoff Norway. Unlike projectsin deep water or hostile en-vironments, this field sitsless than 100 miles from theheadquarters of Statoil,which will be one of thefield’s operators.

Mr. Driscoll runs the $3.3billion T. Rowe Price NewEra Fund, the firm’s 47-year-old natural-resources fund,which he took over nearlythree years ago. While hesits in the top 25% of hiscompetitors, the fund haslost an average of nearly 2%a year for the last threeyears. Assets are down byroughly a quarter since hetook over.

“We’ve prepared ourselvesfor what the bear marketwould be like,” he said. “Butliving through it is a lottougher.” Decades ago, someof his predecessors foughtlong bear markets by buyingthings like health-carestocks, but today clientswould howl if a managerveered from his mandate.

The fund has stayed ac-tive, buying on dips such aslast week when Mr. Driscoll,from vacation in Florida,picked up shares of Euro-pean oil companies after en-ergy prices fell. They soldout of heavily indebted com-panies when high-yield mar-kets started to tumble andbought specialty-chemicalsmakers.

He was on the wrong sideof a big rally in refiners. “Ittook every strand of my be-ing not to chase that,” hesaid. But this year the fundrode the oil rally and is up

ContinuedfrompageB7

BROWN

17.5%, well ahead of the over-all market and more than 2.5percentage points ahead ofhis peers.

Mr. Driscoll’s bigger re-sponsibility is to T. RowePrice’s other fund managers,and he is paid in part on theimpact his advice has on thefirm. With money pouringout of actively managedfunds, T. Rowe Price has heldup well compared with therest of the industry.

The next big test for thebear case is coming up asthe oil market gets closer tosupply-and-demand balance.If demand outstrips supply,as many investors believe,oil is likely to surge above$50 a barrel. Mr. Driscollsaid new supply, plus all ofthe oil in storage, will keepprices low.

Going against the crowdhas been fun so far. “Ask meagain in a few years,” Mr.Driscoll said. “I do thinkbear markets have a way ofgrinding people down.”

It’s Oil Relative

...dragging Shawn Driscoll'smutual fund below the broadermarket until this year.

Crude oil prices have more thanhalved in recent years...

Despite relatively strong resultscompared to similar funds...

...investors aren’t buying it.

THEWALL STREET JOURNAL.

40

–20

0

20

%

’142013 ’15 ’16

S&P 500 TR USD

Estimated Net Flows

Category Percentile Ranking

T. Rowe Price New Era

25 24 2924

Source: WSJ Market Data Group (oil);Morningstar (everything else)

$50 million

–250

–200

–150

–100

–50

0

’14 ’15 ’162013

$120 a barrel

0

30

60

90

’14 ’15 ’162013

value. (A case in point: Net-flix’s one-time foreign-ex-change loss had a major rolein its earnings shortfall.)

� Nontraded assets/liabili-ties, like privately placedbonds, which have no marketvalues are nevertheless re-quired to be marked-to-marketin the financial reports. This,of course, is an oxymoron.

If that isn’t bad enough, ac-counting earnings are basedon multiple subjective mana-gerial estimates and projec-tions (depreciation, stock-op-tion expense, asset write-offs,prospective bad debts, futurepension liabilities, etc.), proneto errors and manipula-tions. All this results in back-ward-looking accountingstatements that say littleabout an enterprise’s futuregrowth and ability to compete.Take Amazon, for example: Itsearnings fell short of analysts’consensus earnings estimatesin eight of the 16 quarters of2012-2015, alarming some in-vestors, yet obscuring its phe-nomenal growth and competi-tive prowess.

No wonder that researchshows an increasing gap be-tween reported earnings andshare prices, particularly fornew-economy technology andscience-based companies, andthat earnings have lost theirability to predict future corpo-rate performance—their main

ContinuedfrompageB7

credit score of about 712. Thatis up sharply from around 545in 2012, when she had roughly$50,000 in debt spread be-tween 25 to 30 credit cards,many of which were maxedout.

“I have suffered a reallylong time, and it was a crush-ing burden,” she said. Her goalis to buy a house in comingyears.

Meanwhile, as credit scoresare rising, defaults are nearrecord lows. Some 0.81% ofconsumer-loan dollars—in-cluding mortgages, auto loansand general-purpose creditcards—were in default as ofMay, the lowest level in re-

cords going back to 2004, ac-cording to the S&P/ExperianConsumer Credit Default Com-posite Index. This is downfrom 0.88% a year ago and apeak of 5.51% in May 2009.Much of that improvement isdue to plummeting mortgagedefaults in recent years.

“People are putting thosedelinquencies further and fur-ther in the rearview mirror,”said Ethan Dornhelm, seniordirector of scores and analyt-ics at FICO.

Borrowers also are manag-ing their debt more responsi-bly, with fewer incidences ofdefaults and collections. Some11.8% of borrowers were 90

days or more past due on atleast one debt obligation dur-ing the 12 months throughApril, down from 13.3% duringthe 12 months through Octo-ber 2013, according to FICO.

Already, consumers arestarting to borrow more again.Auto-loan balances surpassed$1 trillion for the first timeever this year, according tocredit-reporting firm Experian.Credit-card debt is on pace tohit $1 trillion this year. Stu-dent-loan debt continues toswell.

That does raise some causefor concern. J.P. MorganChase & Co. chief James Di-mon earlier this month calledthe auto-lending market “a lit-tle stretched.” As well, Syn-chrony Financial, the largestU.S. retail-store card issuer bypurchase volume and balances,recently increased its forecastfor credit losses for the next12 months. Separately, Maymarked the fifth consecutivemonth of higher defaults forgeneral-purpose credit cards.

Still, consumer-loan defaultlevels remain at historicallylow levels. And household bal-ance sheets have gone throughyears of postcrisis repair. U.S.household debt was equal to102% of disposable income atthe end of the first quarter,Fed data show, down markedlyfrom a peak of about 130% inlate 2007.

those whose FICO creditscores range from 300 to 599on a scale that tops out at 850.

There are other factors atwork: The economy has recov-ered since the financial crisisand the unemployment rate, at4.7%, is less than half of itslate-2009 peak. Wage growthof around 2% isn’t as high asthe Federal Reserve wouldlike, but it is still providingconsumers with more fire-power.

Superlow interest rateshave also played a big role byreducing the debt burden formillions of Americans.Monthly debt-service pay-ments accounted for 10.07% ofhouseholds’ disposable per-sonal income at the end of lastyear, down from a peak of13.21% at the end of 2007, ac-cording to Fed data. Low in-terest rates, which have less-ened required monthlypayments for many borrowers,have helped bring this figuredown.

Many borrowers have alsobeen paying down credit-carddebt, a move that can help in-crease their credit scores.Martha Souder, an administra-tive assistant in Silver Spring,Md., says she currently has a

ContinuedfrompageB7

CREDIT

“could have significant eco-nomic repercussions,” as shebegan two days of testimonyto Congress. She continued totestify on Wednesday.

Markets in the U.S. and Eu-rope rose modestly as well.Near midday in New York, theDow Jones Industrial Averagewas up 63 points, or 0.4%, to17893. The S&P 500 gained0.4% and the Nasdaq Compos-ite Index added 0.5%.

The Stoxx Europe 600gained 0.4% to 341.32.

In Japan, shares were pres-sured yet again by the stron-ger yen Wednesday. The yen,which has been trading closeto a 22-month high, was up

0.3% late in the Asian day,with the dollar at ¥104.50. Astronger yen hurts Japaneseexporters.

In corporate news, Japan’sSoftBank Group closed up2.7% after President NikeshArora said he would step downafter only two years with thecompany. The move came afterhe faced criticism from inves-tors about his performance atSoftBank. Some launched acampaign to oust Mr. Arora,questioning his record andsuggesting he faced a conflictof interest because he also ad-vises a private-equity firm.

Mr. Arora has said the in-vestors’ claims were ground-

less. Chief ExecutiveMasayoshi Son said that thecriticism played no role in Mr.Arora’s departure.

In U.S. trading, shares ofTesla Motors were down 7.2%at midday in New York afterElon Musk proposed combin-ing the company with solar-energy firm SolarCity, ofwhich he is also chairman andthe largest shareholder. Solar-City was up 8.4%.

U.S. crude oil fell 1.4% to$49.13 a barrel, while gold,which tends to gain in times ofmarket stress, pulled back0.2% to $1,269 an ounce.

—Alexander Martincontributed to this article.

Shares in Japan struggled,but most other markets madesmall gains Wednesday as theU.K.’s coming vote on its Euro-pean Union membership keptinvestors from making bigtrades.

The Nikkei Stock Averagefinished down 0.5% at

16065.72 ,and Austra-lia’s S&P/ASX 200s l i p p e d

0.1% to 5270.90. The ShanghaiComposite Index finished up0.9% at 2905.55, Hong Kong’sHang Seng Index gained 0.6%to 20795.12 and South Korea’sKospi was up 0.5% to 1992.58.

The region’s markets havelargely recovered from losseslast week after weekend pollsshowed Britain leaning towardstaying in the EU. Still, inves-tors remain mindful of sur-prises that could spark volatil-ity in markets. More polls onthe referendum are expectedbefore Thursday’s vote, the re-sults of which are expectedFriday morning in Asia.

“Large institutions aren’tgoing to make big bets on thevote because it’s a binary deci-sion,” said Andrew Sullivan,managing director at HongKong-based brokerage HaitongInternational.

Federal Reserve Chair-woman Janet Yellen said Tues-day that the U.K.’s decision

BY CHAO DENGAND RIVA GOLD

Investors Hold Their Fire

WEDNESDAY’SMARKETS

use by investors.Most analysts’ and institu-

tional investors’ questions inconference calls with corpo-rate managers and in “inves-tors’ days” are about the met-rics missing from financialreports precisely because ac-counting standards don’t re-quire them. It is metrics likecustomer growth and churnrate, test results of productsunder development, policy re-newal and cancellation ratesof insurers, or capacity utiliza-tion of transportation com-panies, that reflect the busi-ness strategy and itsexecution, rather than re-ported assets, liabilitiesor profits.

But rank-and-file investorsstill take reported earn-ings seriously, as clearly indi-cated by share-price declinesupon announcements of earn-ings missing consensus ana-lyst estimates (declines thatare often quickly reversed,locking in investors’ losses).Rather than leveling the play-ing field, deficient financial re-ports exacerbate informationdifferences and disparities ininvestment gains among inves-tors.

A few deep-pocketed in-vestors have direct access tocorporate managers and canafford research teams usingexpensive real-time data(weekly drug prescriptionsales, or satellite scanning ofretailers’ parking lots), whilemost investors still rely on de-ficient accounting reports.

The damage of the rele-

vance-challenged financialsisn’t restricted to investors.The obsession with quarterlyearnings hitting predeter-mined targets or beating theconsensus estimate infectsmanagers who waste precioustime and resources on “man-aging” reported earnings, oc-casionally postponing or cut-ting advertising, R&D,employee training or mainte-nance outlays to “make thenumbers.” A totally futile ef-fort, since a consensus misswill produce a mere 1.5%-2.0%share price drop, on average.

Moreover, the deficienciesof reported earnings make ithard for managers to conveyto investors the real perfor-mance of the enterprise. IsTesla a failing operation, asreflected by mounting losses($888 million and $294 mil-lion, respectively, for 2015 and2014), or an extremely suc-cessful innovator and mar-keter?

Managers often resort tonon-GAAP earnings to reportperformance more realisti-cally, but that generally cre-ates suspicion and even deri-sion (“the best non-GAAPearnings is EBE: earnings be-fore expenses”). Theremust be a better way to report

enterprise performance andgrowth prospects; and, indeed,there is.

The remedy for the corpo-rate earnings problem lies inthe systematic disclosure ofinformation that focuses onthe fundamentals of the busi-ness, such as customer acqui-sition costs, addi-tions and churn rate forinternet, telecom and mediacompanies; the progress andrisk diversification of theproduct pipeline of pharmaand biotech firms; capacityutilization and route changes(coverage) of transportationenterprises; or frequency andseverity of claims for insur-ance companies.

Unlike the backward-ori-ented financials, these are for-ward-looking indicators ofperformance and growththat highlight the strategy ofthe business and the successof its execution. Certain com-panies provide such informa-tion in conference calls or theManagement Discussion &Analysis, but in a haphaz-ard and inconsistent manner.Others don’t offer it at all,making it impossible to sys-tematically analyze and com-pare companies.

Excerpted from “The End ofAccounting and the Path For-ward for Investors and Man-agers” by Baruch Lev andFeng Gu, to be published June27 by Wiley Finance. Copyright©2016 by Baruch Lev and FengGu. Printed by permission ofWiley Finance, a division ofJohn Wiley & Sons Inc.

BOOK

Rank-and-fileinvestors stilltake reportedearnings seriously.

SolarCity was up 8.4% after Elon Musk proposed combining the company with Tesla Motors.

SERG

IOFLORE

S/BL

OOMBE

RGNEW

S

For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com

B10 | Thursday, June 23, 2016 THEWALL STREET JOURNAL.

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Standard & Poor’s Corp. saidproperty values are likely tofall if Britons vote to leave theEU. Property chiefs warnedthat London’s office market isespecially vulnerable.

As with housing, Londoncommercial property boomedafter the 2008 financial crisis.Global real-estate investorspiled into office buildings in ahunt for yield amid low inter-est rates.

If sterling becomes “signifi-cantly cheaper, certainly lon-ger-term investors will be inthe market,” said David Hutch-ings, head of EMEA Invest-

ment Strategy at broker Cush-man & Wakefield.

The buying opportunity hasbeen a big part of recent dis-cussions with pension funds,sovereign-wealth funds andhigh-net-worth individuals,Mr. Hutchings said.

Then again, investors want-ing to splash out on a U.K.buying spree might not findmuch for sale, with a Brexitencouraging current propertyowners “to sit on their hands,”Mr. Hutchings said.

“There is no guaranteethere will be an increase inavailable property,” he said.

Tesla’s SolarDeal Doesn’tMake Sense

Just a day after Tesla Mo-tors boss Elon Musk madethe odd boast that one of itscars “floats well enough toturn into a boat,” he didsomething even odder.Tesla’s bid for solar-panel-in-stallation firm SolarCity onTuesday afternoon is thesort of move that, even forthe most Panglossian SiliconValley investor, stretches thebounds of industrial logic. Italso stretches some ethicallimits given the fact that Mr.Musk is the largest, albeit aminority, shareholder in eachfirm. He also has borrowedpersonally to buy SolarCityshares, which are down 58%this year through Tuesday.

Although the offer is forshares, not cash, meaningthat Tesla won’t have to goback to the capital-marketswell quite yet, the deal is farfrom the “obvious thing todo” that Mr. Musk says it is.

In the past four quartersalone, Tesla burned upnearly 50 cents of cash forevery dollar of sales it made.But it was practically theU.S. Mint compared with So-larCity, which burned nearly$6 for each dollar of sales.

Tesla may be the less sus-tainable of the two becauseSolarCity auctions off the taxbreaks it gets for installingsolar panels on suburbanrooftops to outside investors.The auto maker, meanwhile,is about to ramp up spendingfor the project that will makeor break the company: itsmass-market Model 3 sedan.Its market value—some 3½times that of far larger FiatChrysler Automobiles—al-ready assumes wild success.

Mr. Musk has warnedabout his amphibious won-der car that such hare-brained plans can only float“for short periods of time.”

—Charley Grantand Spencer Jakab

HEARD ON THE STREETEmail: heard@wsj.com FINANCIAL ANALYSIS & COMMENTARY WSJ.com/Heard

share price is down 9% inthe past three months—atime that the stock typicallyposts gains heading into anew iPhone cycle. This maybe a buying opportunity de-

SoftBank is on a massiveasset-shedding spree, includ-ing its future chief executive.A leaner, meaner companyshould result.

Nikesh Arora, formerGoogler and heir apparent ofthe Japanese internet andtelecommunications giant,shocked investors Tuesdayby saying he would stepdown from his role as presi-dent and chief operating of-ficer. The official reason isthat SoftBank founder,Masayoshi Son, isn’t quiteready to relinquish the reins.

That probably isn’t theentire story. The departurecomes at the conclusion ofan internal investigation intoMr. Arora’s conduct on dealsin which SoftBank made in-vestments alongside a pri-vate-equity firm with whichMr. Arora maintained an af-filiation. SoftBank’s boardcleared him of misconduct.But his simultaneous depar-ture highlights the frictionshis management style mayhave caused.

From a company strategyperspective, his sudden de-parture perhaps isn’t so sud-

den. SoftBank seems to havetaken a different tack re-cently, shedding assets withthe aim of reducing its debtload.

That same day, SoftBankofficially announced the saleof its majority stake in Finn-ish game maker Supercell toChina’s Tencent, valuing thecompany at $10.2 billion,creating a handsome profit.SoftBank reportedly raisedits stake to 73% last year inthe maker of “Clash of

Clans” at a valuation of$5.25 billion. The Japanesefirm said earlier it would sellabout $10 billion of itsshares in Chinese e-com-merce giant Alibaba Group.It also will get rid of most ofits stake in Japanese gamemaker GungHo Online Enter-tainment.

These disposals hint thatSoftBank is turning awayfrom the investment spreespurred by Mr. Arora in thepast two years. Instead, the

nearly $20 billion raisedfrom asset sales could be putto fix the balance sheet ofdebt-laden Sprint. The U.S.telecom firm jumped nearly8% Tuesday.

SoftBank’s own shareprice has fallen 24% sinceMr. Arora joined fromGoogle in 2014. The strug-gling Sprint, an acquisitionmade before Mr. Arora ar-rived, was the main drag,but his investments in start-ups received heavy criticismfrom investors. SoftBank al-ready has invested $2 billionin India, Mr. Arora’s homecountry, with plans to put inmore than $10 billion overthe next decade. It was oneof those deals, in Indian real-estate portal Housing.com,for example, that a group ofSoftBank and Sprint inves-tors accused the company ina letter of engaging in “animprudent investment with-out adequate diligence,”something the firm disputed.

SoftBank’s shares roseWednesday. The more thecompany disposes, the morelove it wins back from inves-tors. — Jacky Wong

Apple’s Next Big iPhone Boost Is Still a Long Way AwaySeven apparently isn’t Ap-

ple’s lucky number, at leastwhen it comes to the iPhone.

The next one is still a fewmonths away, but isn’t shap-ing up to be a significant up-grade. What is expected tobe the iPhone 7 will featureonly “subtle” changes fromprevious versions, those fa-miliar with the matter toldThe Wall Street Journal onTuesday. Apparently, more-significant developmentswon’t be ready in time.

Luckily for Apple’s inves-tors, this news already waspriced in. Analysts have beenmoderating their hopes forthe next iPhone amid leaksthat the new device won’t of-fer much that is new. Apple’s

spite modest expectations.Analysts project only a 5%

uptick in iPhone unit salesfor the 2017 fiscal year end-ing next September, accord-ing to FactSet. That is theperiod that will be led by thenew device. It is an easycomparison; iPhone sales areexpected to fall 9% this fiscalyear as sales of the iPhone6s have been disappointingrelative to its predecessor.

Smartphone upgradesused to be a matter of clock-work as consumers typicallygot a new phone whenevertheir two-year contractended. But those plans arevanishing rapidly, with mostnew smartphones in marketslike the U.S. now sold on

monthly installment plans.That gives consumers an in-centive to hold on to theirdevices longer—especially ifnew smartphones don’t offersignificant improvements.

Apple isn’t the only oneaffected. Earlier this month,International Data Corp. re-vised its global smartphoneforecast for the year, project-ing growth of only 3% com-pared with 6% just threemonths ago. The researchfirm cited changes in “smart-phone buying behavior” indeveloped markets as a ma-jor factor.

But innovation isn’t dead,and consumers still are will-ing to shell out for signifi-cant improvements. A survey

by Morgan Stanley last weekshowed battery life to be thetop issue for smartphoneowners and a major driver ofupgrades. Features like OLEDdisplays and wireless charg-ing can extend battery lifefurther, as can improved chipdesigns. Morgan Stanley’sKaty Huberty sees iPhonesales rising 8% for Apple’s2018 fiscal year as such fea-tures get implemented.

Meanwhile, Apple has aloyal customer base it con-tinues to target with im-proved software and ser-vices. For investors feelingstretched by the iPhone’sslowdown, that should allevi-ate some pain.

—Dan Gallagher

SoftBank’s New Life After Arora

Reaching OutApple's iPhone unit sales

THEWALL STREET JOURNAL.Sources: FactSet; the company

Note: Fiscal year ends in September

240 million Forecast

0

60

120

180

’12FY’11 ’13 ’14 ’15 ’16 ’17 ’18

Never let it be said thatthe Saudis aren’t doing theirfair share to boost oil prices.Perhaps they failed to curb

output recently, but they arepulling their weight, and thensome, in the area of con-sumption. Statistics for Aprilshow that production was awhopping 10.26 million bar-rels in April but exports werejust 7.44 million, the lowestsince last October. Much ofthe rest goes to fuel cars inone of the countries with thecheapest pump prices in theworld, despite the fact thathalf of the adult population isforbidden to drive and subsi-dies were recently cut.Put it all together and

Saudi Arabia, with barely 30million people, is the world’sNo. 5 oil consumer—morethan fellow crude exportersBrazil or Russia with 200 mil-lion and 145 million people,respectively. It is as much asindustrialized Britain, Italyand Taiwan combined.If Saudi Arabia ever gets

serious about conservation,the result could be a lot morecrude for the rest of us.

OVERHEARD

Nikesh Arora departedSoftBank Tuesday.

Shooting StarSoftBank’s share price duringNikesh Arora’s tenure

THEWALL STREET JOURNAL.

Sources: SIX Financial Information;Bloomberg News (photo)

¥1,000 = $9.56

¥9,000

3,000

4,000

5,000

6,000

7,000

8,000

’15 ’162014

MONEY & INVESTING

Warnings about the impactof Brexit on property valueshave been stark. U.K. houseprices could fall as much as18% if the U.K. severs ties withthe EU, according to U.K. Trea-sury chief George Osborne.Property brokers, blaming un-certainty over the outcome ofthe referendum, expect houseprices to fall this summer forthe first time since 2012.

For commercial property,

ContinuedfrompageB7

VOTE

SINGAPORE

Yuan InvestmentsCounted in ReservesThe Monetary Authority of

Singapore said it would start in-cluding its yuan investments inits official foreign reserves fromJune as Chinese currency assetsgain acceptance with global in-vestors.The MAS has been investing

pected departure has raisedquestions about whether someof these policies will continue.

Meanwhile, the governmentis due to repay more than $20billion in foreign-currency de-posits to nonresident Indiansin coming months. The out-flow, to happen over a shorttime, is expected to cause vol-atility in the rupee market.

The rupee’s decline thisyear is in contrast to its per-formance in 2015, when thecurrency held up better thanits Asian and other emerging-market peers. At the time, in-vestors expected the govern-ment to deliver policy changesto boost the economy.

“We’ve had some portfoliooutflows this year as investorshave grown impatient aboutthe pace of economic reforms,so that has certainly weighed

on the rupee,” said KhoonGoh, Singapore-based seniorstrategist at Australia & NewZealand Banking Group Ltd.

A lackluster economy andpiles of bad debt on banks’books are also weighing on in-vestors’ minds and the rupee,said Mr. Goh.

In 2013, Mr. Rajan moved toraise foreign-currency depos-its from nonresident Indiansshortly after he took over asgovernor of the Reserve Bankof India. The rupee was at anall-time low of 68.80 rupeesfor one U.S. dollar in late Au-gust 2013, and the measurewas designed to stem furtherdeclines.

Those deposits are nowcoming due. India will have topay back most of the moneybetween September and No-vember.

MUMBAI—India’s rupee hasbeen the worst-performingmajor Asian currency thisyear, and, with a change com-ing atop the central bank andsizable foreign-currency re-payments pending, it is poisedto lose more value in comingweeks, analysts said.

The rupee has fallen about2% against the U.S. dollar sofar in 2016. Late Wednesday inMumbai, the currency wastrading at 67.50 per dollar, ac-cording to broker Tullett Pre-bon.

Some analysts expect therupee to go beyond 70 a dol-lar within a year—a level thatwould be its weakest yet.

Reserve Bank of India Gov.Raghuram Rajan’s abrupt an-nouncement on Saturday thathe would step down when histerm ends in September couldmake already-skittish globalinvestors more cautious to-ward India.

“With Rajan’s exit, the pres-sures will exaggerate,” saidSaurabh Mukherjea, chief ex-ecutive of the institutional eq-uities business at Mumbai bro-kerage Ambit Capital Pvt. Ltd.

The Indian currency hasfallen 0.7% since Mr. Rajan’sdeparture was announced.

Mr. Rajan has been creditedwith bringing down inflationand keeping the rupee rela-tively stable, but his unex-

BY SHEFALI ANAND

Rupee Is on the Ropes

The rupee is Asia’s worst-performing major currency this year.

AMIT

DAVE/R

EUTE

RS

FinanceWatch

in yuan assets through China’sQualified Foreign Institutional In-vestor and interbank bond-mar-ket programs since 2012, it said.

—Gaurav Raghuvanshi

DEUTSCHE BÖRSE

Proxy Advisers BackMerger With LSEThe proposed $30 billion

merger of Deutsche Börse AGand London Stock ExchangeGroup PLC has won backingfrom two influential shareholder-adviser services.Institutional Shareholder Ser-

vices Inc. and Glass Lewis in re-cent days sent notices to LSEinvestors supporting the deal,asserting that the stock-ex-

change operators are a good fit.LSE needs 75% of its share-holder base to approve of thetransaction at a July 4 meeting.“We consider the strategic

underpinnings [of the mergeras] relatively straightforward,”Glass Lewis said in a statementsent Tuesday, adding that LSEinvestors shouldn’t base theirvote on the uncertainties associ-ated with the U.K. referendumon EU membership Thursday.ISS on Friday called the ratio-

nale for the deal “compelling.”Deutsche Börse isn’t holding

a shareholder meeting over thetransaction, so Glass Lewis andISS are unlikely to publish rec-ommendations for the Germanside. —Eyk Henning

For information about listing your funds,please contact: Freda Fung tel: +852 2831

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