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FINANCIAL TIMES (* 




v 3 ,} 


ITT Sheraton may 
seek control of 
Ciga hotel group 

ITT Sh eraton of the US is expected to seek e&ctive 
control of luxury Italian hotel group Ciga after 
acquiring a 14 per cent state. ITT confirmed it 



shares last month, but refused to' comment on 
whether it planned to increase its stake further. 
H owev er, Italian regulations require a shareholder 
in HTs position to mate a public offer in g for 
a further stake equivalent to the one it already 
bolds. This would bring TIT’S bolding up to 28 
per cent Gtednlng control of the luxury chain 
would be. a coup for ITT, whose anddtions to 
acquire the group appeared to have been thwarted 
last April. Page 16 

EU urged to act on iwtwwfa B The European 
Union must act now to ensure that there win 
be no shortage of finawr» for constructing large 
transport, energy and c omm unications networks 
in Europe, said European Commission vice-presi- 
dent Henning Ghristophereen. Page 14 

Australian growth rata surges: Australia's 
economic growth rate surged to an apniuiH«eri 
5 per cent In the March quarter, well in «w»aa 
of forecasts and prompting a fall in bond prices 
and a sharp rise mthe local dollar. Page 5 

Seagram wants Tima Warner board seat 

International drinks 
company Seagram 
hag mrKre^t'ft fl that 
it wants a seat on Time 
Warner's board, but 
has no plans to raise 
its 143 per cent state 
in tile US entertainment 
and publishing group. 
The issue of Seagram's 
representation on the 
Time .Warner board 
■ - * has contributed to 

an awkward relationship between the two. Edgar 
Bronfman Jr (left), who took over yesterday as 
Seagram’s chief executive from his father, said: 

“We would prefer to be in v i ted M . Page 15 

Reforms create now tmflan elite: Financial 
reforms are creating a new elite in India, bringing 
Wall Street investment banks, aggressive headhunt- 

big awri gqlnr y parfrapgg that *Qwt»r ftwpr fo* onm. 

ings of . tank cfeks of Bombay. Page 14 

SBC backs d«riv*thr®« regulation: Swiss 

field, has hacked 


Accounting Office Ibr regulation « the sector. 
Pages • ■_* -, r .. . 

Hndi Ac wh s double: Worldwide sales 
of pirate eomp&ct discs doubled to 75m units 
last year. ahnost exchjsrvriy due to unauthorised 
productteiln China, according to the International 
Federation of the Phonographic Industry. Page 4 

Catted* tap* *qM*dWyof tile* Index: A United 
Nations index pf quality of life - measuring life 
espectahcyi edocationtuidpurchasing power 
- put Canada Drat, ahead of Switzerland ahd 
Japan. Index points to future civil wars. Page 5 

UK idtt^ luraHPkflS change: British 
consumers foco coats of £78m<$ll7m) a year for 
40 years if tiie UK backs a changeover to European 
electrical plugs and sockets, according to a Depart- 
ment of Trade and Industry report. Page 7 

Zurich totmmncw, one of Europe's largest 
insurance ;4»mpsme&, is to branch a telephone- 
based dimisa^ operation nest rmmth in prepara- 
tion for the imminent deregulation of the European 
insurance market Page 15 

Dwarf creates food dlitrftiutlon Isadora 

Fleming, second biggest wholesale food distributor 
in the US, is lo buy Scrivener, the country's third 
biggesfi, flom its German parent for Jl.lbn cash. 
The combined companies will be the biggest food 
distribution group in the US. 15 

Bosnian talks to nopm: Bosnia’s warring 
parties ware due in Geneva today for talks on 
the republic's fixture which diplomats are describ- 
ing as virtually the last chance for a negotiated 
settlement. Page* 

UN meeting ott M Kotmr The US, South Korea 
and Japan will consult tomorrow at the United 
Nations to discuss their response to North Korea's 
refit&al tip allow full fatwnatfonal inspection of 
its nuclear programme. Page 5 

Workplace tanrfon ‘growing •; Growing 
pressures on business during Britain's economic 
recovery are increasing tensions in the workplace, 
the Independent Advisory Canrihattan and Arbitra- 
tion Service warned. Page 7 


THURSDAY JUNE 2 1994 


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Lubbers urges resistance to Franco-German alliance over European Commission presidency 

Dutch premier warns on Delors job 


By Lionel Berber and Ronald van 
do Krol h The Hague 

Mr Ruud Lubbers, Dutch prime 
minister and candidate for the 
presidency of the European Com- 
mission. gave a warning yester- 
day against the dangers if Ger- 
many and France should dictate 
the choice of a successes' to Mr 
Jacques Delors. 

In the face of dear signals that 
Paris and Beam favour Mr Jean- 
Luc Dehaene, prime minister of 
Bdgtum, Mr Lubbers appealed to 
an other EU member states to 
make up their own mindly on who 
should win the top executive post 
in Brussels. 

Mr Lubbers, the longest- 


serving prime minister in Dutch 
history, praised Franco-German 
co-operation but told the F inan - 
c ial Times he had no plans to 
drop out of the race, in spite of 
the Franco-German snub. 

His determination to carry on 
may deadlock the European sum- 
mit in Corfu on June 24-25, when 
the EU heads of government are 
to choose unanimously a succes- 
sor to Mr Delors. But it might 
also open the way for a compro- 
mise candidate to emerge, such 
as Britain's Sir Leon Brlttan, 
chief EU trade negotiator, or 
Ireland’s Mr Peter Sutherland, 
outgoing head of the General 
Agreement cm Tariffs and Trade. 

In the interview, Mr Lubbers 


Spoiler in the Euro 

contest Page 12 

Editorial Comment Page 13 


paid tribute to the Franco- 
German axis for giving direction 
to the European Union. But he 
also said that the political bal- 
ance of the EU depended on all 
member states feeling that their 
views were being taken seriously. 

Earlier this week. Mr Francois 
M i tt e rr an d and Mr Helmut Kohl 
agreed at a Franco-German sum- 
mit on a joint candidate for the 
presidency of the Commission. 
The two leaders did not disclose 


their preference, but senior offi- 
cials in both camps said they 
backed Mr Dehaene, who has yet 
to declare publicly. 

“Chancellor Kohl and Presi- 
dent Mitterrand also have a 
responsibility themselves in the 
balancing act," Mr Lubber said. 

He said his candidacy had 
moved beyond the issue of per- 
sonalities. It also touched upon 
the place of the Netherlands in 
the Union and its status as a 
founder member. 

Warning that Dutch enthusi- 
asm for Europe was waning, Mr 
Lubbers noted that there had 
been an outcry in the Dutch 
press this week about reports of 
French and German opposition to 


his candidacy. 

“1 have invested a lot in good 
relations with neighbouring 
countries, especially Germany 
and France. I would hate to have 
a false tone [injected]," he said. 

Mr Lubbers said the Belgian 
premier had “excellent qualities”, 
but emphasised that Mr Delors' 
successor should be chosen by 
consensus among the 12 EU 
member states. “The choice that 
has to be made now is not only a 
choice by Bonn and Paris,” he 
said 

The Dutch prime minister, 
tipped for years as the next Com- 
mission president, waited until 
the close of last month's general 
election nampaign in the Nether- 


lands to launch his bid for the 
job. “I did it because I really 
believe in Europe. Tm a Euro- 
pean.** 

The contest for Mr Delors' suc- 
cession is complicated by poten- 
tial horse-trading over several 
other top international posts, 
jnpluriing those at the Nato alli- 
ance, the Paris-based Organisa- 
tion for Economic Co-operation 
and Development, the new World 
Trade Organisation, the Western 
European Union, the EU's emerg- 
ing defence arm, as well as the 
head of the European Council 
secretariat 

Neither the OECD post nor the 
Nato post is within the gift of the 
Europeans. 


Schneider 
chief to 
stay in jail 
as probe 
continues 


by John Ridding in Paris and 
Emma Tucker in Brussels 

A Brussels court yesterday 
ordered Mr DSdier Pinean-Valen- 
cienne, chairman of France's 
Gronpe Schneider, to remain in 
prison firflowing a decision to 
confirm charges of fraud and 
swindling relating to two Bel- 
gian subsidiaries of the electrical 
engineering group. 

Hie continued detention of Mr 
Pinenu-'Valendenne Is expected 
to exacerbate strains between 
France and Belgium over the 
affair. French business leaders 
were shocked by the detention of 
the Schneider chairman, a prom- 
inent industrialist, while politi- 
cians have expressed concern 
about the rase. 

Mr Pineau-Valencienne, who 
has been detained in Brussels’ 
Forest prison since last Friday, 
fores up to a month of detention 
while the investigation contin- 
ues. He has 24 hours to appeal 
against yesterday's ruling. Mr 
Valentino Foti, an Italian busi- 
nessman who faces the same 
charges as the Schneider chair- 
man, has also been farther 
detained. 

Belgian prosecutors yesterday 
clarified their charges against 
Schneider. They claim that 
assets worth about BFr4.8bn 
(Si 39m) had been concealed from 
regulators and shareholders In 
Cofibel and Cofimines, the two 
Schneider subsidiaries at the 
centre of the investigation. The 
p r osecut o rs also charge that div- 
idends from offshore companies 
belonging to the subsidiaries 
were not distributed to all share- 
holders. The non-payment of div- 
idends amounted to BFrlJBbn, 
the prosecutors claim. 

Minority shareholders in the 
two subsidiaries had claimed 
that their companies had been 
undervalued when Schneider 
launched its 1992 offer to buy 
them out. Schneider reached 
agreement with minority share- 
holders earlier this year, but pre- 
vious legal complaints by the 
minority shareholders triggered 
the investigation by Belgian 
judicial authorities. 

Schneider said it deplored the 


It denies harming minority 


The case has prompted concern 



.-V - « . .M i 

*>• ; ^V-r_. • 


w - . 

Tony Blair (left) yesterday became the favourite to lead the British 
Labour party when his colleague, Gordon Brown, pulled out of the 
race and backed his camfidacy. Details, Page 14 pctaM^Mwod 


Bonds fall further 
on inflation fears 


By Comer Mddelmann In 
London and Frank McGurty 
in New York 

European and US government 
bond markets fell further yester- 
day as sentiment worsened on 
fears that economic recovery 
may fan inflationary pressures. 

Dealers reported selling mainly 
by institutional investors who 
had been ratting au loss-making 
positions for months. This com- 
bined with technically driven 
selling in the futures markets to 
push prices in many markets to 
new lows for the year. 

Shares in London and Paris 
were dragged lower by weaker 
band prices, although there were 
small gains elsewhere. US shares 
lost ground but mainly in 
response to domestic factors. The 
FT-SE 100 index dared down 3S.6 
to 2481.9, its lowest finish since 
July. 

French shares ended with 
sharp losses, with the CAC40 
dosing 50.22 lower at 1,972.18, 
below 2.000 for the first time 
since July. German stocks edged 
higher but finished well below 
their best 

A strong report from the US 
National Association erf Purchas- 
ing Managers and higher-than- 
expected German industrial pro- 
duction data contributed to the 
fall in European and US bond 
prices. Tomorrow's publication of 
US May jobs data is widely 


CONTENTS 


London 

UK gfit price 
Treasury 9% 2003 
125 



2.500 1 * 1 1 1 1 1 * 1 
1993 

Scmck Dataemam 


94 


awaited for further clues on the 
direction of US interest rates. 

The UK gilts market was one of 
the worst performers, plagued by 
fears that the economic recovery 
will fuel inflation pressures and 

Continued on Page 14 

Lex, Page 14 
Government bonds, Page 20 


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Saudi noble to take big stake in ailing theme park 

Euro Disney’s 
prince has come 


By Alice Rawsthom in Paris 

Prince Al-Waleed Bin TalaL, the 
Saudi prince who is one of the 
Middle East's most aggressive 
investors, yesterday came to the 
rescue of Euro Disney, the 
stricken leisure group, by 
annnainring plans to buy up to 
24A per cent of the company on 
the eve of its emergency finanrial 
restructuring. 

The prince, who is also pre- 
pared to invest $ 100 m to build a 
second conference centre at the 
EuroDvm‘»r 1 n-id £heme park near 
Paris, has for been in negotia- 
tions the past six weeks with 
Euro Disney and Walt Disney, its 
US parent company, to thrash 
out the terms of a deal. 

Prince Al-Waleed. 37, a nephew 
of King Fahd, first surfaced on 
the international investment 
scene in 1991 by buying a 1488 
per cent stake in Citicorp, the US 
banking group. He has interests 
in finance, media, construction 
and recently joined forces with 
Accor, the French hotel com- 
pany, in its effort to buy the Mer- 
idien luxury hotel chain from Air 
France. 

The prince, with United Saudi 
Commercial Bank, of which he is 


fthairmnw, has negotiated a com- 
plex deal with Walt Disney 
whereby he can buy between 13 
per cent and 24 per cent of Euro 
Disney's shares after the comple- 
tion of its forthcoming FFrl3bn 
(S2-27bn) emergency financial 
restructuring. 

He has offered to buy any 
shares left on the market after 
Euro Disney's imminent FFrfbn 
rights issue. He will be allowed to 
retain only up to 248 per rent of 
the group, so that his holding is 
no more than SO per rent of that 
of Walt Disney's 49 per cent 
stake. 

If the rights issue is heavily 
subscribed - which is considered 
to be unlikely, given the gravity 
of Euro Disney’s recent financial 
difficulties and the steep fall in 
its share price - Prince Al-Wal- 
eed will be able to acquire a 
stake of up to 13 per cent from 
Disney. 

The US group, which has 
already sustained heavy losses 
on its Euro Disney holding, is 
willing to reduce its investment 
to 36 per cent, providing the 
prince's stake is worth no more 
than half that. 

The prince's emergence comes 
only a few days before Euro Dis- 


ney’s extraordinary general meet- 
ing next Wednesday at the 
EuroDisneyland theme park. 
Euro Disney is then expected to 
announce the terms of its FFr6bn 
rights issue. 

Ms Rebecca Wizmington-In- 
gram, leisure analyst at Morgan 
Stanley, the securities house, 
described Prince Al-Waleed's 
appearance as “a great relief” to 
Walt Disney and the Euro Disney 
banks, which have offered to 
underwrite the rights issue. She 
said, however, it would mako “no 
difference at 2 ll" to ordinary 
shareholders, who stili face 
heavy dilution. 

The rights issue will form the 
final stage of the Euro Disney 
restructuring, which also 
involves the company in dramat- 
ically reducing the value of its 
FFr20.3bn net debt by repaying 
FFrlQbn of its loans to the hanks. 
Euro Disney is expected to price 
the shares in the issue at 
between FFr5.00 and FFr10.00, 
thereby creating up between 
600m and L2bn new shares. 

The news that Prince Al-Wal- 
eed is willing to invest 8 100m in a 
new conference centre might pro- 
vide a lucrative new source of 
revenue for Euro Disney. 


Q TBK WNANCIAL TIMES LIMITED 1994 No 32.382 Week No 22 


LONDON - PARIS - FRANKFURT - NEW YORK - TOKYO 


This announcement appears as a matter of record only 

CINVen 

and 

Thomas J C Matzen 

jointly led the Management Buyout of 

A & S Bader Gmbh 

Equity provided by 
CINVen Funds 

Thomas J C Matzen 

The Management 

Senior Debt provided by 
B H F Bank & Landesgirokasse 


Having the capital to back a big idea is only half the secret. 
Having the vision to spot one is the other half. 


CINVen 


CCT/tnLznBMJeantMiirctlvnO 




/ 








NEWS: EUROPE 


Move to cool I VW pressure on Madrid over Seat funding 


Crimea row 
thrown out 


By J3I Barshay in Kiev 

Ukraine's divided parliament 
yesterday rejected a proposal 
by President Leonid Kravchuk 
to set up a constitutional court 
to resolve the status of the dis- 
puted Crimean peninsula. 
Instead, it voted for a four- 
point resolution which 
suspended the quasi-indepen- 
dence constitution reintrod- 
uced by Crimea two weeks ago 
and called on the president to 
come up with a list of "con- 
crete measures" by June 6 to 
ensure Crimea's compliance 
with Kiev's wishes. 

It also set up a parliamen- 
tary commission to seek ways 
of harmonising Ukrainian and 
Crimean legislation within the 
next month. 

The rejection of Mr Krav- 
chuk’s proposals was another 
step in the internal power 
struggle between parliament 
and president but merely led to 
the search for another formula 
which gave the semblance of 
activity while holding back 
from actions which carry the 
risk of conflict between 
Ukrainians and etbnic Rus- 
sians. 

The long-standing dispute 
between Kiev and the ethnic- 
Russian dominated Crimean 
parliament reignited earlier 
this month when the latter 
unilaterally reintroduced a 
constitution which barely 
stops short of bestowing full 
sovereignty on the region. 

The peninsula, a holiday 
area, was part or Russia for 
two centuries until transferred 
to Ukraine in 1954. A 10-day 
Ukrainian-imposed deadline to 
rescind the constitution passed 
unobserved two days ago. 

Mr Kravchuk's attempt to 
cool the temperature of a dis- 
pute which threatens to grow 
into violent conflict between 
Russians and Ukrainians 
earned a contemptuous 
response from many Ukrainian 
nationalist MPs in the deeply 
divided Ukrainian parliament. 
It was interpreted as a sign of 
weak leadership from a lame 
duck president hobbled by the 
proximity of presidential elec- 


tions on June 26. 

The Crimean dispute is 
closely linked to the status of 
the former Soviet Black Sea 
fleet, which is based in the 
peninsula. Three days of talks 
between the Russian and 
Ukrainian prime minis ters last 
week failed to remove the 
impasse. 

Mr Kravchuk stated yester- 
day that while Russia had no 
objective need for a fleet based 
on Ukrainian territory it was 
unrealistic for it to be with- 
drawn immediately. 

Yesterday was doubly humil- 
iating for Mr Kravchuk as 
rejection of his constitutional 
court proposal by the bitterly 
divided Ukrainian parliament 
was matched by the studied 
indifference on the part of the 
Crimean parliament to his 
repeated call for Crimea to 
rescind its quasi-independence 
constitution. 

During hours of heated and 
often confused debate several 
nationalist MPs in the Kiev 
parliament demanded the 
establishment of direct presi- 
dential rule over the peninsula, 
while Mr Serhiy Holovaty, 
from the democratic opposi- 
tion, summed up the attitude 
of many to the president's pro- 
posals when he complained 
that “one month is a long time 
and we have no guarantee that 
the court will be formed in that 
tune or that it will carry 
authority". 

Mr Holovaty advocated the 
calling of a state of emergency, 
while MPs from eastern 
Ukraine, where separatist 
demands similar to those of 
Crimea are brewing among the 
many Russian-speakers. 
argued that Ukraine should 
move, like Russia, towards a 
federal structure in which all 
regions would have more 
autonomy. 

Mr Gennady Ugarov, an MP 
from of the “Unity* 1 faction 
spoke for many ethnic Rus- 
sians when he told the parlia- 
ment “We must take reality 
Into account and accept Cri- 
mea as it is. whether we like it 
or not." The stand-off contin- 
ues. 


Ely Michael Undefnam 
In Hamburg and David White 
bi Madrid 

Volkswagen said yesterday it hoped 
to end talks with the Madrid govern- 
ment “in the next two weeks’* to 
clear the way for further restructur- 
ing at Seat, its loss-making Spanish 
subsidiary. 

The company said it wanted Spain 
to contribute DM82 Om ((500m) to 
fund redundancies at Seat It claimed 
there were “positive signals” that the 
government would make funds avail- 
able and a further meeting was 
scheduled for next week. 

However, in Madrid, the industry 
ministry said it would only be willing 
to pump more money into the Barce- 


lona-based car company for new 
development projects. The govern- 
ment also argues that its scope for 
providing help is limited by Euro- 
pean Union rules. 

Mr Juan Ignacio Moltd, secretary of 
state for industry, told VW represen- 
tatives on Tuesday the government 
was not prepared to fond redundancy 
packages. Excess labour was “a prob- 
lem for private sector management”. 
However, the Spanish authorities are 
anxious to see Seat maintained as a 
separate company within the VW 
group. The regional government of 
Catalonia, also under pressure to 
assist the loss-making company, has 
criticised Madrid for delay in resolv- 
ing the issue. 

Meanwhile, VW announced that it 


bad had “positive results” at com- 
pany and group level in April and 
May but would not give details of 
profits. The company has already 
said it hopes to improve on its 1993 
profit of DMTlm at company level 
this year and to break even at group 
level following a loss of DMl.4bn last 
year. 

Worldwide deliveries in the first 
five months rose 6.1 per cent over the 
year before to total 1.4m units. Ger- 
many was the only market where 
deliveries fell - by 4.1 per cent - a 
fact VW blamed on weak demand 
there generally and poor sales at 
Audi. 

Several shareholders were angry 
that the VW management had not 
foreseen the DMlJUbn losses at Seat 


last year but there was broad support 
among the 3,500 shareholders for Mr 
Josd Ignacio Ldpcz de Arriortiia, the 
VW production chief at the centre of 
suspicions about industrial espio- 
nage. 

Both Mr Ferdinand PiSch, the chief 
executive, and Hr Klaus Liesen, the 
chairman of the supervisory board, 
made impromptu comments alter pre- 
pared speeches, reflecting the anger 
about Opel allegations in the days 
before the annual meeting. “There is 
up to now no evidence which would 
justify the charge of industrial espio- 
nage ,** Mr Liesen told applanding 
shareholders. Mr Picch. in turn, 
denied all suggestion that Mr Ldpez 
would move to Seat 

Seat lost DM35Qm in the first quar- 


ter of this year and VW hopes the 
group will end the year with a loss of 
around DM1 bn, compared with a kiss 
of DH1.84bn in 1993. The company is 
expected to become profitable again 
in 1995. 

Mr PiSch said there were two solu- 
tions at Seat. A “friendly" one would 
be to leave Seat as an Independent 
subsidiary. A more drastic alterna- 
tive would involve merging Seat with 
other VW operations, leaving only an 
independent sales unit. It has asked 
the Spanish government to fund the 
redundancy of older workers, who 
are entitled to three years' redun- 
dancy payment which will cost about 
DM 820m. Otherwise, VW says It will 
spend DM 160m to shed the same 
number of younger workers. 


Lines open up to Europe’s information society 



The long-awaited Bangemann report says liberalisation 
of telecoms is unstoppable, writes Emma Tucker 


Martin Bangemann: “Our purpose is to make clear that we 
cannot hold up this process. Nobody can.” 


I t is too late for member 
states of the European 
Union to stand in the way 
of telecommunications liberal- 
isation, Mr Martin Rangwnann 

the industry commissioner, 
insisted yesterday. 

Presenting a summary of 
recommendations from his 
long-awaited “Information 
Society" report, Mr Bange- 
mann said: “Our purpose is to 
make clear that we cann ot 
hold up this process. Nobody 
can." 

To be presented to EU lead- 
ers at next month's summit in 
Corfu, the report says m anli er 
states must accelerate the 
process of liberalisation by 
opening up to competition 
those infrastructures and 
services that remain monopo- 
listic. 

Flanked by senior figures 
from the electronics industry, 
Mr Bangemann said: “Private 
investors win only get involved 
in a market which promises a 


retur n on their investment.” 

The report highlights some 
of the challenges that lie ahead 
for the Union if it is to keep 
abreast of rapid developments 
in the field of telecommunica- 
tions. For example, it raises 
the prospect that out-dated and 
anachronistic laws in areas 
such as media ownership, 
intellectual property rights and 
security of information will 
have to be replaced if the EU is 
to have an appropriate regula- 
tory framework. 

It identifies a number of 
areas where cross-border differ- 
ences could continue to hinder 
an internal market in telecom- 
munications. It recommends, 
for Instance, that urgent atten- 
tion be paid to the problem of 
media ownership, where diver- 
gent national legislation could 
undermine the free movement 
of Information. 

Currently, rules governing 
media ownership between the 
member states differ widely. 


With different media services 
gliding ever more easily across 
frontiers, failure to harmonise 
these rules could lead to prob- 
lems of access. The report adds 
that effective rules to ensure 
that ownership is not concen- 
trated in one or two powerful 
hands must also be put in 
place. 

On intellectual property 
protection, the report lacks 
specifics but highlights the 
need to adjust the present out- 
dated rules, many of which 
were invented before informa- 
tion and creative products 
could be dispersed as easily as 
they are now. 

The report also urges the EU 
to speed up the process of 
European standardisation, 
making interconnection of 
networks a primary objective. 
And. as a matter of urgency, 
international long-distance and 
leased-line tariffs should be 
adjusted to bring them into 
line with rates practised in 


Bosnian talks to reopen amid warnings 


Bosnia's warring parties were 
due in Geneva today for talks 
on the republic's future which 
diplomats are describing as vir- 
tually the last chance for a 
negotiated settlement. 

While Mr Radovan Karadzic, 
the Bosnian Serb leader, and 


his military chief Radko Mladic 
said they would certainly 
attend, there was uncertainty 
up to the last moment as to 
whether, and at what level, the 
Moslem-led government would 
be represented. 

The talks have been 



Minitry ofTmek and Tourism 


SPAIN 

THE INVESTMENT LOCATION 

London, 16 th June 1994 

THE SPANISH EMBASSY COMMERCIAL OFFICE in London in association with HAMBROS 
BANK LIMITED, has pleasure in inviting you to the seminar "Spain. The Investment Location". This 
seminar offers you the chance to hear eminent business people and public administration representatives 
talk in depth on different aspects of Spain's economy and business opportunities in sectors such as 
Automotive Components, Tourism-Leisure and the Environmental Industry. 


arranged amid warnings from 
western observers that the con- 
flict could soon escalate, and a 
series of grim new revelations 
about the scale on which eth- 
nic cleansing has been prac- 
tised in Bosnia. 

“People who are dose to the 
peace process give the current 
talks about a one-in-four 
chance of succeeding." said Mr 
Michael Clark, director of the 
Centre for Defence Studies in 
London. He said the window of 
opportunity for a negotiated 
partition was closing steadily 
as France, and to a lesser 
extent Britain, were growing 
doubtful about the feasibility 
of retaining troops in Bo snia 
for another winter. 

Meanwhile, the latest revela- 
tions about ethnic cle ansing 
were reinforcing the determi- 
nation of the Moslems and 
their international sympathis- 
ers to resist any settlement 
that appeared to reward Serb 
military gains. 

The UN said 550 people 
crossed into Croatia yesterday, 
the latest in a stream of Croats 


Our Foreign 
Staff reports 
on the latest 
peace moves 
and fears of 
more fighting 


and Moslem dvilians who have 
been leaving the Serb strong- 
hold of Banja Luka under pres- 
sure from local warlords. 

Separately, a UN commission 
on war crimes, in a report pub- 
lished In part by Reuters news 
agency, said 50,000 people had 
been killed or deported in one 
relatively small area or 
north-west Bosnia, around Pri- 
jedor. “It is unquestionable 
that the events in the Prtjedor 
region since April 30 1992 qual- 
ify as crimes against human- 
ity- Furthermore, it la likely to 
be confirmed in court under 


due process of law that these 
events constitute genocide," 
the commission found. 

Despite the gloomy back- 
ground, Mr Vitaly Churkin, the 
Russian special envoy to Bos- 
nia. sounded a more optimistic 
note after two rounds of talks 
with Serbia's President Slobo- 
dan Milosevic in Belgrade. He 
said he thought the Geneva 
talks would lead to a ceasefire. 

However, the government in 
Sarajevo, bolstered by the new 
alliance between Croats and 
Moslems, has expressed reluc- 
tance to take part in further 
talks unless the Serbs with- 
draw fully from the UN “safe 
area” of Gorazde in eastern 
Bosnia. 

The Bosnian government 
suspects Mr Yasushi Akashi, 
the UN diplomat who convened 
today's talks, of being too soft 
on Serb violations of ceasefire 
arrange m ents in Sarajevo and 
elsewhere. The Serbs say their 
troops in the Gorazde area 
have a legitimate function of 
maintaining order and protect- 
ing Serb refugees. 


other advanced Industrialised 
regions, it says. 

The group of industrialists 
that helped Mr Bangemann 
have also recommended that 
tariffs for mobile telecommuni- 
cations be reduced, and that a 
regulatory framework for satel- 
lite be established. 

As for funding, the report 
says that "the creation of the 
information society should be 
entrusted to the private sector 
and to market forces”. How- 
ever. the recommendations are 
vague on the issue of existing 
public funding, saying only 
that it should be “refocused 
more specifically to target the 
requirements of the informa- 
tion society”. 

Finally, it recommends that, 
given the urgency of the tasks 
ahead, member states should 
now nominate individual 
ministers to represent it at a 
new council of ministers dedi- 
cated to the information soci- 
ety. 


THE FINANCIAL TIMtS 
PnhWml b) TUc Fnuno.il Trmo lEvropc) 
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S5U. Fax W SW44SI. Men 41*1*0 
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GdcteuiMohrcr and in by Dj\u! 

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Druck-Vcrtneb mid Miukeun; GmbH. 
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RciponuWe Editor. RnrhanJ Lambert, du The 
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Number One Sou! Wart Bridge, London SEI 
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PROGRAMME: 

9:05 Welcome Address 
by the Chairman 

Lord Nicholas Gordon Lennox 
KCMG. KCVO 

9:15 Perspectives on the Spanish 
Economy and Reforms of the 
Labour Market 

Mr Federico Prades - 
Economic Adviser. 

Spanish Association of Private Banking 
AEB 

9:45 Investment Support Measures 
within Spain's Industrial Policy 

Mr Eugenio Triana - 

Secretary General of Industrial & Technological 
Promolion. 

Ministry of industry & Energy 

10:45 The Automotive Component 
Sector 

Mr Juan L Lore ns - 
Chairman of SEA I' 


11:05 The Environmental Industry 

Mr William J. Whitley BSc - 
Managing Director of Watson Espana SA. 

11:25 The Tourism-Leisure Industry 

Mr German Porras - 

Director of Spanish Tourist Office in London, 
Ministry of Trade and Tourism 

11:45 Practical Aspects of 
Investing in Spain 

Mr Colin Blessley - 
Partner of Cbopers & Ly brand 

12:30 Close 

Mr Apolonio Ruiz Ligero - 
Secretary of Stale for Foreign Trade. 

Ministry of Trade & Tourism 

12:45 Buffet Lunch 
14:15 Workshop Sessions 


SPAIN 


THE INVESTMENT LOCATION 

SPANISH EMBASSY COMMERCIAL OFFICE - 1CEX 
Investment Department: Wt On Item Sued. London W1M IPR 
Tel: iV?l-o.vs So55 . 486 U 101 Fax: 071-224 6409 

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i v 








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FINANCIAL TIMES THURSDAY JUNE 2 1994 


NEWS: EUROPE 


EUROPEAN-NEWS DIGEST 

Man held over 



A former business colleague of Mr JtlrgEn Schneider, the 
Gerara property eatrepreneor whose disappearance in April 
triggered Germany’s biggest property crash since the second 
world war, has been arrested on suspicion of asai sting Mr 
Schneider transfer up to DMTSOm (£300m) of company funds 
out of Germany. 

The Cologne-based businessman, who was not nampd , is 
believed , to be an Iranian who was manag in g director of a 
company within the Schneider group up to March this year. 
According the the state prosecutor’s office in Frankfurt, the 
person arrested had established contacts with an unnamed 
Swiffl bank and had allegedly helped Mr Schneider transfer 
the funds. He was arrested an Tuesday morning. Mr Schnei- 
der. whose whereabouts are still unknown after he failed to 
came hack from holiday in Tuscany at Easter, has been 
accused by the Deutsche Bank, the proper t y group's biggest 
creditor, of misappropriating at least DMSISm of the group's 
funds. -Other estimates suggest that he took up to DMTSOm 
from the group, which collapsed with DMSbn debts. David 
Waller. Frankfurt 

Poland stays on reform course 

Poland is to press ahead with painful reforms of the welfare 
system, aimed at cutting budget spending, as wen as the 
consol i da ti on and privatisation of the hanfcmg system. The 
capital market is to be strengthened through the develop men t 
of investment and pension funds, according to a medium- term 
plan prepared by Mr Grzegoxz Kotodk o , the new deputy pre- 
mier and finance minister. 

The outlines of the plan were published yesterday as Poland 
started talks with a team from the intpu-natinnai Monetary 
Fund on a new one-year standby agreement The government 
plan, which runs until 1997, foresees an average annual 
growth rate of 5 per cent It forecasts the achievement of 
single-figure inflation in 1997. compared with its present 25 per 
cent rate. The government also wants to see a reduction in the 
spread between lending and deposit rates. The unemployment 
rate is forecast to fall from 16 per cent to 14 per cent, while the 
budget deficit will reach no more than 3 per cent of GDP in 
1997 from its present 4 per cent Christopher Botrinski, Warsaw. 

Pension rush as Italians fear cut 

Employees on the Italian state payroll are rushing to cash in 
on early retirement pensions for fear of cuts in the current 
generous! system of benefits. In the first four months of this 
year JNPBtAP, the entity responsible for public sector employ- 
ees* pensions, yesterday reported it had received 29,260 
requests for retirement. This compared with estimates, drawn 
up for budgetary purposes, of 14580 and 43,700 for the year as 
a whole. The increase has been caused by the previous govern- 
ment’s warnings on cuts is pension benefits and the new 
government's alactjop p fcdg p to generous early retirement 
pensions. INPDAP, said more than 90 per cent of the requests 


came mainly from people working in local government arid 
municipally run bodies who bad been working an average for 
only 20 years. Robert Graham. Rome. 

General’s killing blamed on Eta 

A Spanish general was shot deal outside his home in central 
MathM yesterday in an attack suspected to have been carried 
out by the Basque separatist organisation, Eta. The defence 
minister, Mr Julian Garda Vargas, said the shooting con- 
firmed his “worst fear” that Eta has a well organised unit 
operating in Madrid. General Juan Jose Hemdndez Rovira, 58, 
a widower and the fatherof six children, held a senior admin- 
istrative post in the -Defence. Ministry and had responsibility 
for general services teal supplies to file Spanish forces. Tom 
Burns, Madrid. 

Euronews financial relaunch 

The 15 public television companies which own Euronews said 
they had derided on a rebranch of the satellite news 

-channel, and if tins failed to materialise by October they 
would- reconsider their investment in it Lyon&hased Euro- 
news said shareholders wanted to prevent last year’s start-up 
loss of FFtSQm (£S.8m) continuing. David Buchan, Paris. 

ECONOMIC WATCH 


West German output up 2.5% 


tndusbM output, «mual % dh$ng* 

a -<?■ -- -j~-— — —— •. 



-12 * 


Industrial production in 
western Germany rose by 2L5 
par cent in April compared 
with the previous month, 
with the main sectors show- 
ing signs of emerging from 
the recession, the Federal sta- 
tistics office reported yester- 
day. The sharpest increases 
occured in mining, which 
rose by 5.5 per cent over the 
same period. Electricity and 
gas grew by 4.5 per cent 
Even in the manufacturing 
sector, one of the areas worst 
hit by the recession, there 
was an increase of 3 per cent 
The combined industrial pro- 
duction figures for March and 


wn _ K 

SoumfcpKMtnwm 

April also compare favourably over the corresponding period 
of 1993, with overall growth rising by 15 per cent and the 
manufacturing sector increasing by 2J per cent However, 
utilities fell by 4.5 per cent largely due to weather conditions 
and high prices, JfaKfe Dempsey, Berlin. 

■ Dutch consumer borrowing rose 7.7 per cent year-on-year to 
FI aj&rn (£L2bq) in the first quarter of 1994, the Central 
Bureau of Statistics said. 

■ Spain’s trade deficit widened to Pta273-4bn (£L3Sbn) in April 
from Ptai63276bn in March and was up 302 per cent year-on- 
year.tbe Economics Ministry said. 


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Scalfaro denies misuse of secret funds 


By Robert Graham In Rome 

President Oscar Luigi Scalfaro 
is becoming increasingly 
embroiled in a controversy 
over the use of secret funds 
during his time as interior 
minister in the 1980$. 

Bather than stay aloof from 
damaging allegations that he 
was aware of the misuse of the 
secret funds by the security 
services, President Scalfaro 
has been drawn into malting a 
series of rebuttals. These 
rebuttals have in turn raised 
more questions than answers. 

The alleged misuse of these 
funds by interior ministers 
over the past decade has been 
under Investigation by Home 
magistrates for a year, and 
seven former top domestic 
intelligence officials are on 


trial for embezzlement At var- 
ious stages all the accused 
have sought to implicate four 
former Christian Democrat 
interior ministers, including 
Mr Scalfaro, for operating a 
secret payments system from 


angry unprepared statement 
to journalists. 1 defy anyone 
to prove a single lira was 
spent by me or other interior 
ministers for anything other 
than institutional purposes." 

Ever since then the opposi- 


‘I defy anyone to prove a single lira was 
spent by me or other interior ministers 
for other than institutional purposes’ 


unaccountable ministry funds. 
Mir Scalfaro held the portfolio 
from 1983 to 1987. 

The Rome magistrates last 
week issued a statement say- 
ing they were not investiga- 
ting the president after farther 
accusation had been made in 
court This prompted Presi- 
dent Scalfaro to make an 


tion Party of the Democratic 
Left (PDS), the former commu- 
nists, as well as the governing 
Northern League and the neo- 
fascist MSI/National Alliance, 
have been calling for explana- 
tions of what these “institu- 
tional purposes” w ere. Having 
admitted he knew about the 
use of these finds it will be 


difficult for him to avoid 
demands to be more specific. 
No one has denied the need for 
discretionary funds at the inte- 
rior ministry, bat the presi- 
dent's critics argne there 
should be some proof the mon- 
ies were not being misused. 

The raising of the tempera- 
ture on this issue could make 
the president vulnerable on 
the question of his tenure. 
Even before the elections, poli- 
ticians across the political 
spectrum had started to ques- 
tion whether Mr Scalfaro, 
elected by the discredited ohl 
parliament, should be allowed 
bis full seven-year term, both 
the Northern League and the 
MSI have been giving ever 
stronger messages that the 
president can only remain as 
long as parliament deems fit 



President Scalfaro faces allegations from his days as a minister 


Top Swiss banker backs derivative regulation 


By Ian Rodger hi St GaBen 

The chief executive of Swiss 
Bank Corporation has backed 

tha main r wnmmonria Hfins of 

the US General Accounting 
Office for regulation of the con- 
troversial ffwmraai derivatives 
sector. 

SBC, one of the top interna- 
tional hanks in the mushroom- 
ing derivatives field, has thus 
distanced itself from US bank- 


ing and securities industry rep- 
resentatives, who condemned 
the GAO's report. 

The report came at a time of 
growing alarm that the 
increasing complexity, lever- 
age and volume of futures, 
options and swaps contracts 
could in extreme circum- 
stances lead to a collapse of 
the world financial system. 

According to one estimate, 
the volume of contracts out- 


standing exceeded $18,000bn 
(£12,0Q0bn) at the end of last 
year. Several industrial compa- 
nies have reported huge losses 
in the past year arising from 
the unexpected behaviour of 
derivative contracts. 

Echoing the GAO. Mr 
Georges Blum, SBC chief exec- 
utive, said in a speech at the 
International Management 
Symposium in St GaBen that 
supervisors and regulators in 


different countries "needed to 
be more in line with each other 
on what their aims and instru- 
ments should be". 

Mr Blum also supported the 
GAO call for identical regula- 
tion of all types of firms active 
in derivatives. 

He criticised regulators and 
supervisors everywhere for 
dragging their feet on agreeing 
accounting and disclosure 
rules on derivatives, and for 


not legislating to reduce the 
risk in so-called netting of con- 
tracts. "If lawmakers are con- 
cerned about derivatives, these 
are the obvious areas they 
should look at first" 

Mr Blum also denounced 
those financial companies who 
claimed that only low levels of 
capital were needed to cover 
their derivatives activities, say- 
ing they were “wishing to have 
your cake and eat it too". “If 


the stress tests advocated by 
traders as a way to simulate 
the extent of the risks occur- 
ring in unusual circumstances 
have any utility, capital must 
cover the losses derived by the 
simulations," he said. 

“We agree with the regula- 
tors when they say that the 
system should be able to 
weather a severe storm, even if 
there is only a remote possibil- 
ity that it will occur." 


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FINANCIAL TIMES THURSDAY JUNE 2 1994 


4 

NEWS: WORLD TRADE 


CHINA MAINLY TO BLAME 

Worldwide pirate disc 
sales double to 75m 



By Michael Ska pinker. Leisure 
Industries Correspondent 

Worldwide, sales of pirate 
compact discs doubled to Tom 
units last year, almost exclu- 
sively as a result of unauthor- 
ised production in China, 
according to the International 
Federation of the Phono- 
graphic Industry. 

The IFPI said it expected CD 
piracy to increase further, 
unless China took steps to 
enforce copyright law. 

The federation, along with 
Philips, the Dutch electronics 
group, has proposed that legiti- 
mate manufa cturers mark CDs 
with a four-digit code which 
would indicate where they 
were made. 

Sales of unauthorised music 
cassettes fell last year, how- 
ever. to 675m units from 680m 
in 1992. There were substantial 
falls in pirate cassette sales in 
Mexico and Poland. The level 
of pirate music sales in both 
countries remained high. 
Unauthorised sales accounted 
for 62 per cent of all recordings 
sold in Mexico last year and 67 
per cent in Poland. 

The value of pirate record- 
ings sold last year on either 


Growth In CD piracy 

Estimated sales, mill ton units 



O’ 1 1 1 

1991 92 93 

Source: Inumabonai Federation at the 
Phonographic industry 

CDs or cassettes fell to $l-9bn 
from $2.1 bn in 1992. The federa- 
tion said it would be wrong to 
draw any comfort from the 
decline, which was the result 
of lower retail prices and 
exchange rate movements. 

The federation said the 
pirates appeared to be getting 
less for their recordings. The 
average worldwide price of a 
pirate cassette, outside China, 
fell 10 per cent to about $2.70 
last year. The price of a CD 
outside China fell from just 
under $13 in 1992 to just under 
$12 last year. 


Chinese pirate producers saw 
CD prices fall even more 
sharply, from nearly $11 in 
1992 to $460 last year. 

Despite the activities of 
unauthorised Chinese manu- 
facturers, the US was the big- 
gest market for pirate products 
last year in value terms. 
Although pirate sales 
accounted for only 4 per cent 
of the US market, their total 
value was $4l3.4m, compared 
with $3476m in China. Chinese 
pirate sales by value accounted 
for half the country's music 
market 

Mexico was the third biggest 
pirate market at $196m. fol- 
lowed by Germany at $132 6m 
and Italy at $ 111 . lm. Pirate 
sales accounted for only 5 per 
cent of the German market by 
value. In Italy, they repre- 
sented 20 per cent of sales. 

The federation said a change 
in piracy in recent years had 
been that unauthorised record- 
ings were increasingly being 
sold in countries other than 
those in which they were man- 
ufactured. “Such product has 
been traced, for example, from 
its point of manufacture in 
China through Europe to its 
destination in South America.” 


Back on 
track in 
Romania 

By Virginia Marsh and Cftrystia 
rrooland, recently ki Arad 

I n the 1980s, Astra. Roman- 
ia's leading railway rolling 
stock manufacturer, helped 
the country fill its export 
quotas to the Soviet Union by 
designing special freight wag- 
ons strong enough to with- 
stand Siberia's sub-zero tem- 
peratures. 

Then came the collapse of 
communism and Comecon, the 
former East Bloc trading 
organisation, and Astra discov- 
ered that its expertise in build- 
ing made-for-Siberia rolling 
stock was no longer of any 
value. To survive. Astra, like 
most factories in eastern 
Europe, had to make a radical 
turn to the west 
As it turned out. Astra - still 
owned by the state and run by 
its old managers - is one of the 
rare Romanian heavy indus- 
trial companies that is success- 
fully making this switch. 
Before 1989, about 90 per cent 
of Astra's exports went to 
Comecon countries. Now, 
around 90 per cent of its 
exports go to western markets. 
And the company will export 
more than 70 per cent of the 
450 wagons it expects to pro- 
duce fids year. 

Under licence from French 


company De Dietrich, Astra, 
based in Arad, on the border 
with Hungary. 300 miles east of 
Bucharest will begin produc- 
tion this year of Corail cars - 
top of the range passenger 
coaches capable of travelling at 
125m ph an hour -which it 
plans to export to western 
Europe, once it has built 200 
for the Romanian railway com- 
pany. 

"It all started in 1990 when 
we were allowed to make con- 
tracts on our own and not 
through the ministry of trade 
or foreign trade companies as 
before." says Mr Sandu Albu- 
lescu. trade manager. “Until 
then, we were obliged to give 
priority to Comecon countries. 
Now*, we make deals on a com- 
mercial basis. We had to find 
new markets in the west due to 
the severe recession in this 
region.” 


U nlike their comrades in the 
former Soviet Union. Astra's 
managers do not long for the 
“good old days” of central 
planning, but they say their 
new freedom has its costs. 

"We prefer the current condi- 
tions - we have got rid of a lot 
of the bureaucracy - the party, 
the ministries, the trade 
unions," says Mr Georghe 
Toduta, deputy manager. Dur- 
ing President Nicolae 
Ceausescu's iron reign, manag- 
ers had to report production 
levels daily to Bucharest and. 
as Mr Toduta says, "the stress 
was much greater then". 

The challenge for post- 
communist managers now. Mr 
Toduta says, is that while "the 
degree of freedom is much 
greater, so is the responsibil- 
ity. If we work badly and make 
bad decisions, the factory will 
dose down." 


Astra already has contracts 
with German, Swiss. Austrian 
and Kazakh railways for 1.000 
light oil transport wagons, a 
new model which it developed 
after 1989. To keep up with 
demand. Mr Albulescu says the 
company needs to set up a new 
production line for the wagon 
and for a similar model for 
heavier oil products. 

Western contracts mean that 
Astra, which first started man- 
ufacturing rolling stock in 
1891. has had to upgrade its 
production to meet the high 
technical quality and environ- 
mental standards required by 
its new customers. 

Under the deal with De Die- 
trich, the French company has 
begun to transfer technology to 
Astra in Arad where the com- 
pany can draw on a pool of 
some 300 engineers and design- 
ers at the local rail engineering 


institute. De Dietrich Is supply- 
ing Astra with a new produc- 
tion line, machine tools and 
components for the first 50 
Corail coaches. U is also train- 
ing Astra stall at its headquar- 
ters near Strasbourg. 

Mr Albulescu says the com- 
pany's competitive edge comes 
from the labour force: "Wages 
for skilled workers are a frac- 
tion of those in France. The 
average wage in tiiis country is 
less than $100 a month.” 

He says the company has 
also become much tougher on 
its domestic suppliers, fre- 
quently sending back sub-stan- 
dard goods. It sources the 
majority of its inputs locally 
with just some liigb-technology 
parts imported from abroad. 

Mr Albulescu says the new 
technology and emphasis on 
quality have lifted tiie value of 
Astra's exports even though it 
has shed a third of its work- 
force. produces fewer wagons 
than in 1989 and is working at 
just 60 per cent capacity. 
Exports were $19. 7m in 1990, 
up from $166m in 1989. 

The management, which has 
begun a restructuring plan, 
says it would like to see the 
company privatised, preferably 
by bringing in a strategic part- 
ner to help it update its tech- 
nology. This is likely to take 
some time under Romania's 
slow-moving, bureaucratic pri- 
vatisation programme, but Mr 
Albulescu says De Dietrich and 
Bombardier of Canada are 
already interested. 

“The west is scared that 
Astra will soon be serious com- 
petition.” Mr Toduta says with 
a grin. 



If you think Airbus Industrie makes only one aircraft, maybe this will 
change your view. 

Airbus Industrie has achieved a 30% share of the international civil aviation market because its long-term business strategy, based on a clear vision of the 
world’s air transport needs, has created not just one aircraft but a family of seven: including the world’s largest twin-aisle twin and the longest range jetliner in 
aviation history. Sales of all seven members of the Airbus family now total nearly 2000 aircraft worldwide. 




A .mV' 


A3 20 


A330 


A340 


A3I9 


A310 


Japanese trade 
surplus forecast 
to fall by 6.1% 


By WlMam Dawkins in Tokyo 

Japan’s politically troublesome 
trade surplus will shrink by 6.1 
per cent in 1994, the first drop 
in four years, according to the 
Country's nine largest t rariinp 
companies. 

A survey by the Foreign 
Trade Council, the trading 
groups' industry body, predicts 
the trade surplus will fall to 
$1146hn (£766bn) in the year 
to next March. 

The forecast, a welcome sign 
as the US and Japan make a 
fresh attempt to break the 
deadlock in trade talks, is how- 
ever a slight Increase on the 
council’s estimate in December 
of a $1136bn surplus. 

This reflects the fact that 
Japan's main foreign markets 
are recovering faster than 
domestic demand The council 


based its forecast on 1 per cent 
economic growth this year - 
and that is well above average 
market expectations. 

The surplus started to fall 
from the third to the fourth 
quarter of last year, but picked 
up again slightly, to the Japa- 
nese authorities' concern, in 
the first three months of 1994. 

Exports will rise by 2.8 per 
cent to $3766bn this year, the 
council forecasts. The yen's 
strength will stimulate demand 
for imports, expected to rise by 
7.4 per cent to $2626bn. 

Seml conductor sales to US 
and Asian computer makers 
will be the star export perform- 
ers. up 126 per cent, according 
to the survey. But it predicts 
that car exports will rise by a 
mere 0.4 per cent, due to the 
shift in production to 
lower-cost foreign plants. 


Motorola 
to expand 
plant in 
Ireland 

By Tim Coone in DtfoSn 

Motorola, the U8 electronics 
and wireless communications 
manufacturer, has announced 
a I£nOm (£lG8m) investment 
in the Republic of Ireland, to 
expand its operations serving 
the European market 
Its Dublin plant, making 
pagers and two-way radios, 
wiD be extended to include the 
manufacture of batteries and 
battery chargers, as well as 
crystal oscillators which are 
also nsed in the company's 
communications equipment 
The project has been backed 
by Ireland's Industrial Devel- 
opment Authority and is 
expected to create 2,000 jobs 
over the next five years, one of 
the largest projects In job- 
creating terms that the IDA 
has been able to attract to 
Ireland in recent years. As 
much as a third of the addi- 
tional workforce being taken 
on is expected to be made up 
of university graduates. 

Mr Dominic Layden, Moto- 
rola country manager in 
Ireland, said that workforce 
skills were an important foo- 
ter in choosing Ireland. 

The IDA does not release 
details of grant support to 
individual projects nntD the 
publication of Its annual 
repor t hot, in general, grant 
support tends to average about 
25-30 per cent of overall 
investment in a project and 
will be directly linked to the 
achievement of job-creation 

targets. 

In announcing details of the 
project, Mr Roar! Quinn, min- 
ister for employment and 
enterprise, said that the IDA 
had succeeded in creating 
nearly 4.000 new Jobs in 
Ireland’s electronics sector 
last year through attracting 
new investments, and that 
some 30,000 people are now 
employed in the sector In more 
than 300 companies. Output 
from the sector now accounts 
for more than a quarter of 

Ireland's manufactured 
exports. 


Ruggiero 
backed to 
head 
WTO 

By Frances Vrfffliams to Geneva 

The Italian government 
yesterday said it would be 
nominating Mr Renato Ruggi- 
ero, a director of Fiat since 
1991 co-ordinating the group's 
international activities and for- 
mer Italian trade minister, as 
the head of the World Trade 
Organisation to be set up wort 
year In succession to the Gen- 
eral Agreement on Tariffs and 
Trade. Mr Ruggiero is the first 
publicly to throw his hat in the 
ring. 

Sir Leon Brittan, the Euro- 
pean Union's trade commis- 
sioner, is understood to have 
been notified of the Italian 
nomination decision yesterday. 
It appears possible that Mr 
Ruggiero win become the ELTs 
official candidate. 

Mr Ruggiero, who is 64, was 
Italy's trade minister between 
1967 and 1991, critical years for 
the Uruguay Round of global 
trade liberalisation talks. He 
was one of the first to espouse 
the notion of a powerful world 
trade organisation to replace 
Gatt, an idea subsequently 
taken up by the European 
Union. 

A career diplomat, Mr Ruggi- 
ero had a spell In the European 
Commission in the 1979 s, 
where he was in charge of 
regional policy, and in the mid- 
1980s was the Italian “sherpa" 
for the G7 summits. 

On past form Mr Ruggiero 
would seem to have a good 
chance. All the directors- 
general of Gatt have been 
Europeans. Mr Peter Suther- 
land. the present incumbent, 
was an EU nominee last year 
and is a former EU competition 
commissioner. 

However, there is a growing 
feeling within Gatt that the 
time has come to break with 
tradition. Developing nations, 
who make up the bulk of Gatt 
members, believe they have a 
strong claim to provide the 
first WTO head. Mr Rubens 
Ricupero, Brazil's finance min. 
ister and a former Gatt ambas- 
sador. is being canv assed . 




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FESANCIAL TIMES THURSDAY JUNE 2 1994 


Australian growth 
rate surges to 5% 


By N1KM Tatt In Sydney 

Australia’s economic growth 
rate surged to 5 per cent on an 
annualised basis in the March 
quarter, weB in excess of both 
federal government and pri- 
vate sector economists’ fore- 
casts. 

The previous set of data, for 
the 1993 calender year, had 
indicated that the economy 
was growing at 4 per cent - 
itself the best figure docked up 
for five years. But, according 
to data published by the Aus- 
tralian Bureau of Statistics 
yesterday, there was even 
stronger growth in the March 
quarter, with gross domestic 
product rising by 1.9 per cent 
in that three-month period 
alone. 

The first quarter increase 
was driven primarily fay gov- 
ernment. »nd private consump- 
tion, rather .than business 
investment or net export per- 
formance. 

The government’s own bud- 
get estimates, published last 
month, suggested an annual 
growth rate of 4 per cent for 
the year to end-June, followed 
by 45 per cent in 199495. 

News of the surging econ- 
omy exacerbated worries that 
interest rates might have to 
rise fairly soon, prompting a 


fall in bond prices and a sharp 
rise in the Australian dollar. 
The dollar reached a 20-month 
high, closing in London at 
74.07 US cents, up from 73.83 
cents. 

Interest rate policy, the pes- 
simists argue, could become a 
d il e mm a for the government, 
since business Investment 
remains at very low ebb (and 
actually fell in the March quar- 
ter). The government, there- 
fore, could have difficulties 
restraining private consump- 
tion without choking off busi- 
ness expansion. 

Yesterday, however, Mr 
Ralph Willis, the federal trea- 
surer, claimed that there were 
no signs that inflationary pres- 
sures were increasing, and 
hence that the data had no 
implications for interest rates. 

“One can determine move- 
ments In interest rates as 
when we see a likely pick-up in 
inflation. We are not looking at 
anything here which shows 
you some pick-up In inflation.” 
he said. The government was 
still comfortable with its infla- 
tion forecast of around 2 per 
cent in. .1993-94,. Mr Willis 
added. 

The treasurer also noted 
that the "early” Easter had 
affected consumption data, 
and contributed to the unex- 


pectedly high growth figure. 

The federal government 
meanwhile announced yester- 
day that it had readied agree- 
ment with the Australian 
Council of Trade Unions, the 
umbrella body for labour 
organisations, on minimum 
national wage increases to 
apply in 1994 and 1995. The 
deal was reached under an 
accord unveiled in early 1993 
and the lates t in a series of 
compacts between the ruling 
Labor government and Actu. 

The agreement provides for a 
A$16-a-week “safety net" wage 
rise to be paid to low income 
earners, spread across two 
years. This follows an A$8 
“safety net” increase awarded 
in last October’s national wage 
decision - representing a A$24- 
a-week wage rise over three 
years for workers who are not 
covered by Individual “enter- 
prise-based” agreements. 

Mr Paul Keating prime min- 
ister. said the deal should 
“deliver wage restraint that 
Will lock in the low inflation 
rate”. But the Australian 
Chamber of Manufacturers 
attacked the deal, saying the 
across-the-board rises, unre- 
lated to productivity gains, 
would discourage business 
from employing more people or 
investing. 


Resignation of 
party leader 
may help Hata 


Manila 
GNP up 
4.8% in 
quarter 


By Wilfiara Dawkins bi Tokyo 

A leading member of the 
Japanese minority coalition is 
to resign his party post 
because of supporters’ anger 
over bis part in the Socialists’ 
departure from the govern- 
ment' ' 

Mr Eeigo Ouchi said yester- 
day he would step down as 
chairman of the Democratic 
Socialist party, a small centre- 
right party, because of criti- 
cism over his support for the 
recent ben Ind-the-scenes cre- 
ation of a conservative alliance 
called Kaishin (innovation). He 
will, however, stay on as 
health and welfare minister. 

The gesture is a step in the 
government’s strategy of try- 
ing to win back the much 
larger Social Democratic party, 
the key to its hopes of surviv- 
ing for more than a few 
months. 

The walk-out by the socialist 
SDP in April, in protest at 
what it saw as a conservative 
bid to dominate policy, 
deprived the government of a 
majority, so paralysing such 
crucial but controversial legis- 
lation as plans fee a permanent 
cut in income tax and a rise in 
sales tax. Without the social- 
ists’ support, Mr Tsutomu 
Hata, prime minister, had at 
the latest count just 202 seats 
in the -511-seat parliament, 54 
short of a majority. 

Mr Ichiro Ozawa, a dose and 
powerful ally of Mr Hata. is 
generally accepted as the inspi- 
ration for Kaishin. 

Even so, Mr Ouchi's move fa 
likely to help assuage socialist 
ire, the latest in a series of 
surprisingly favourable devel- 
opments for the five-week-old 
Hata administration, 

Socialist leaders have hinted 
in recent days that they might 
consider rejoining the coalition 
if Mr Hata first resigned, in a 
symbolic act of contrition for 
allowing the Kaishin grouping 
to be formed, and then stood 
again for the leadership. 

The prime minister’s recent 
decision to freeze a planned 
rise in utility prices has gone 
down well with SDP support- 
ers. He yesterday vowed to pro- 
duce plans this month to 


streamline the administration 
and cut state spending, 
another popular policy. 

Japanese businesses will wel- 
come any si gn that- Mr Hata 
can delay another political cri- 
sis. They need a stable govern- 
ment to engineer a recovery 
and resolve the trade dispute 
with the US, on which the 
yen’s value partly hangs. Yes- 
terday’s restart of shelved 
trade talks in Washington has 
done no harm to Mr Hata’s 
standing in that respect. 

The new government has 
also managed to unblock prog- 
ress on the long-delayed 
national budget for the current 
year, another obvious concern 
for business. This is now head- 
ing for passage this month. 

But to unfreeze the budget. 



Hata: price freeze popular 


Mr Hata has riskily had to 
agree to opposition demands to 
step up a parliamentary 
inquiry into political corrup- 
tion. This will probably entan- 
gle Mr Ozawa and so risk giv- 
ing the opposition an excuse to 
initiate a no-confidence vote. 

The three main opposition 
parties, the Liberal Democratic 
party. SDP and Communists, 
yesterday agreed that Mr 
Ozawa should be called to tes- 
tify before parliament on alle- 
gations of illicitly receiving 
political funds from construc- 
tion companies. Their demand 
is hard to resist, given the gov- 
ernment's minority position. 


By Jose Galang In Mania 

Philippine gross national 
product grew by 4.8 per cent 
in the first quarter over the 
comparable period last year, a 
leap from the previous 0.3 per 
cent rise, government data 
published yesterday show. 

The growth rate surpassed 
earlier estimates of 3 to 3J> per 
cent, and gave rise to expecta- 
tions of exceeding the 4£ per 
cent target for all 1994. 

The report confirms recent 
observations of a revival hr 
the Philippine economy, fol- 
lowing enhanced political sta- 
bility and an end to the elec- 
tric power shortages that 
bedevilled industries last year. 

The policy-setting National 
Economic and Development 
Authority said a surge in 
industrial activity, along with 
increased remittances from 
Filipinos working overseas, 
spurred the first-quarter 
advance. 

The internal economy, as 
measured by gross domestic 
product, went up by 3J per 
cent, a turnround from a 0.01 
per cent decline the year 
before. 

Industry output rose 7.6 per 
cent, behind brisker activity in 
construction and manufactur- 
ing. This is largely attributed 
to the restoration of normal 
electric power supply daring 
the period, in contrast to the 
power disruptions of up to 10 
hours a day last year. 

A number of new power star 
tions were put np last year, 
mostly undertaken by private 
groups nnder build-operate- 
transfer schemes with die gov- 
ernment to ping the supply 
shortages. 

The agriculture and fishery 
sector provided the dampener, 
dedining by 04) per cent in the 
quarter as the effects of the 
typhoons that pummelled 
many parts of the country in 
late 1993 lingered in the first 
three months of 1994. 

Mr Clelito Habito, 
Socio-Economic Secretary, said 
with the early onset of the 
local rainy season the agricul- 
ture sector should be able to 
recover and help “further 
accelerate GNP growth®. 


NEWS: INTERNATIONAL 


UN meeting on N Korea reactor rods 


By John Burton In Seoul 

The US, South Korea and Japan will 
consult tomorrow at the United Nations 
to discuss their response to North 
Korea's refusal to allow full interna- 
tional inspection of its nuclear pro- 
gramme. 

North Korea has so far failed to com- 
ply with a statement issued by the UN 
Security Council on Monday urging it 
to stop removing spent fuel rods from 
its 5MW reactor. 

The International Atomic Energy 
Agency wants to select and examine 
the spent nuclear fuel to determine 
whether North Korea has diverted plu- 
tonium from the reactor for its sus- 
pected nuclear weapons programme. 


In an apparent show of force, North 
Korea on Tuesday conducted a test 
launch of a domestic version of the Chi- 
nese-designed Silkworm anti-ship mis- 
sile. 

Meanwhile, South Korean armed 
forces were placed on a routine high 
state of alert following the departure of 
President Kim Young-sam on a week- 
long visit to Russia and Uzbekistan. 

North Korea may be within days of 
completing the removal of the fuel rods 
■mil ending any chance of the IAEA 
conducting an independent analysis of 
them to trace past nuclear activities. 

The US has warned if North Korea 
passes this threshold, its negotiations 
with Pyongyang will he broken off and 
Washington will ask the UN Security 


Council for economic sanctions against 
the North. 

The North has warned that sanctions 
would he considered “an act of war”. 

The IAEA on Tuesday urged North 
Korea to accept "technical options 
which might still at this late stage of 
discharge. . . preserve the agency’s abil- 
ity to verify the history of the [reac- 
tor’s] core.” 

The IAEA rejected North Korea’s pro- 
posed procedures to select and store the 
fuel rods for later examination, explain- 
ing that it “would not enable the 
agency to Identify” where the rods had 
been located in the reactor core. 

“Without such identification, future 
measurements [of the fuel rods] would 
be mpflnmgiRM and the agency’s ability 


to verify non-diversion would be lost,” 
it said. 

North Korea is putting the discharged 
fuel rods into a storage tank "after writ- 
ing the location and serial numbers on 
the rods, with monitoring cameras oper- 
ating”, a North Korean diplomat was 
quoted as saying in Vienna. 

The IAEA will be able to examine the 
fuel rods once North Korea and the US 
conclude a package deal on diplomatic 
normalisation and economic aid, he 
added. 

North Korea is refusing the IAEA s 
demands because it claims a special sta- 
tus under the nuclear safeguards treaty 
sinrp it has only “suspended” its threat- 
ened withdrawal from the treaty last 
year. 


New central bank governor wants to make island a regional financial centre 



Taiwanese opposition member Sn Chib-yang (left) perches on the podium in the National Assembly in Taipei yesterday, and other 
opposition members pull the hair of a clerk to stop her reading an agenda, in a dispute over the size of the quorum. ap 


Taiwan 

promised 

liberalised 

markets 

By Laura Tyson En Taipei 

Taiwan’s new central bank 
governor, Mr Liang Kuo-shu, 
took over yesterday with a 
pledge to liberalise Taiwanese 
finan c ial markets with the aim 
of transforming the island into 
a regional flnanriai centre dur- 
ing his five-year term. 

He promised to push on with 
reforms in order to upgrade 
Taiwan’s regulatory frame- 
work and bring more foreign 
financial institutions, capital 
and expertise into the country. 

Mr Liang - who in his previ- 
ous position as fthairman of 
Chiao Tung Bank, a state- 
owned development institu- 
tion, last year scuppered a 
planned joint venture between 
British Aerospace and Taiwan 
Aerospace to produce short- 
haul passenger jets - vowed to 
boost lending to local manufac- 
turing and industry. 

The arcpcsinn of Mr Liang , 

63, who holds a doctorate in 
economics from Vanderbilt 
University in the US, to the top 
banking job is viewed favoura- 
bly by analysts and bankers. 
His experience in commercial 
banking was acquired during 
stints at the helm of each of 


the three leading state-run 
commercial banks. Mr Liang 
also served as deputy central 
bank governor from 1975 to 
1979. 

Known for speaking his 
mind, Mr Liang might have 
become central bank governor 
several years ago had he not 
made enemies along the way. 
Soft-spoken but strong-willed, 
he is likened by one financial 


sector operator in Taipei to a 
“thunderstorm” when angered. 

IBs predecessor, Mr Samuel 
Shi eh. at times become 
embroiled in public stand-offs 
with the Finance Ministry and 
other government agencies. 
However, Mr Liang has close 
personal ties to President Lee 
Teng-hui, under whose aus- 
pices the central bank falls. He 
has been a financial adviser to 


Mr Lee for some time. Mr 
Liang’s wife, Ms Hou Chin-y- 
ing, is an economics professor 
and belongs to one of Taiwan's 
most influe n tial families. 

Analysts cautioned that 
while Mr Liang was firmly in 
the camp of the reformers, it 
would be difficult to change 
quickly the thinking of the 
central bank bureaucracy. 

Saying that “we have to 


invite more international 
financial institutions to intro- 
duce more financial products 
to Taiwan”. Mr Liang told a 
news conference yesterday: 
“To do so. we have to acceler- 
ate revising many out-of-date 
rules and establish new 
systems to attract them. 

“The first step is to expand 
our foreign exchange market 
as a regional funding centre." 


OECD pressed on Pergau Dam document 

No political reason behind the delay, says directorate official, Jimmy Burns reports 


The Organisation for Economic 
Co-operation and Development 
was yesterday coming under 
pressure to publish a long-de- 
layed report thought to be crit- 
ical of the controversial Pergau 
Dam project 

Mr Bernard Wood, director of 
the OECD’s Development Cor- 
porate Directorate, justified the 
delay on “production difficul- 
ties" and said there were no 
other “sinister" or “political" 
reasons behind it 

But the World Development 
Movement a lobby group for 
the Third World which has 
strong parliamentary ba ckin g, 
described the delay as 
“extraordinary", given the con- 
tinuing public interest in 
debating the Pergau project 

The OECD has been officially 
reluctant to fuel the trade row 


between the UK and Malaysia 
by being drawn publicly into 
the Pergau project. 

Privately however, some 
senior OECD aid officials are 
believed to be sympathetic 
with the domestic UK criticism 
of the Pergau project which 
involved a linkage between aid 
and militar y contracts. 

The OECD report is thought 
to have identified the conflict 
of interests that arose in the 
decision by the British govern- 
ment to approve the Pergau 
project after overruling advice 
from its own civil servants 
responsible for aid. 

The Overseas Development 
Administration, the govern- 
ment department responsible 
for overseeing the UK’s aid 
programme, said: “We are 
happy for the OECD report to 


be published as soon as pos- 
sible." 

An ODA official said it was 
pressing the OECD to explain 
what the production difficul- 
ties involved. 

The OECD's report was com- 
pleted in March, following a 
critical review from Finnish 
and Belgian examiners 
appointed by the organisation’s 
development assistance com- 
mittee (DAC). A draft report 
was circulated soon afterwards 
and approved by member coun- 
tries with minor amendments 
to its wording. 

In the OECD's latest newslet- 
ter, Mr James Michel, DAC 
chairman, refers to strong sup- 
port among members for the 
principle that all aid be sub- 
jected to the full standards of 
normal assessment, and that 


“aid quality should predomi- 
nate" in decisions. 

A report by the House of 
Commons foreign affairs com- 
mittee is in process of being 
completed and is due to be 
published before the start of 
the summer. 

Kieran Cooke adds from Kuala 
Lumpur After several months' 
negotiations, Malaysia says it 
is ready to sign an agreement 
with Russia on the sale of 18 
M1G-29S for use by the Malay- 
sian air force. 

Mr Najib Abdul Razak. 
Malaysian defence minister, 
said the purchase agreement 
would be signed with the Rus- 
sians next Tuesday. 

Malaysia originally 
announced plans to buy the 
MiGs in the middle of last year. 
But final negotiations were 


complicated by Malaysia’s 
wish for extensive technology 
transfer and a stipulation that 
part of the purchase would be 
paid for in palm oiL 

It is believed about a quarter 
of the $615m (£41 Qm) cost of 
the MiGs will be covered by 
Malaysian palm oil exports to 
Russia. The Russians are said 
to be offering a maintenance 
and training package with the 
MiGs. Malaysian companies 
will also be Involved in some 
parts manufacturing for the 
fighters. 

The first MiGs are likely to 
be delivered to Malaysia by 
mid-1995. The deal is the first 
big arms sale by Russia in the 
Asean region. 

Malaysia's armed forces are 
going through an extensive 
modernisation programme. 


Britain, Iran exchange diplomat expulsions 


By Roger Matthews, 

Middle East Editor 

Relations between Britain and 
Iran deteriorated further yes- 
terday as both governments 
announced the expulsion of a 
diplomat. 

The Foreign Office in Lon- 
don yesterday made public its 
decision to expel Mr Vahid 
Belourchi, a first secretary at 
the Iranian embassy, for alleg- 
edly distributing forged docu- 


ments about British policy in 
Bosnia. Iran had been told of 
the British decision last week, 
when it was agreed that no 
publicity would be given to the 
expulsion in the hope of avoid- 
ing further repercussions. 

However, Tehran said yester- 
day it was retaliating by expel- 
ling Mr Hamish Cowell, the 
deputy head of the British mis- 
sion in Tehran. No further offi- 
cial explanation was offered by 
the Iranian government, but 


Iranian newspapers linked the 
expulsion to “extensive British 
propaganda against Iran, 
designed to please the US”. 

The latest downward turn in 
relations between the two 
countries began in April when 
Britain accused Iran of estab- 
lishing links with the IRA, and 
of planning to provide weapons 
and training for Irish republi- 
can extremists. Iran denied 
that any contacts had taken 
place and suggested instead 


that a listening device had 
been found implanted in the 
wall of its refurbished embassy 
in London. 

The Foreign Office said the 
Iranian diplomat had been 
asked to leave “because mem- 
bers of the Iranian embassy 
had been involved in attempt- 
ing to distribute forged docu- 
ments purporting to show that 
Britain’s policy in Bosnia was 
directed against the Moslems". 

Iran has become frustrated 


at its inability to aid Moslems 
in Bosnia and the refusal by 
western powers to accept the 
deployment of Iranian peace- 
keeping forces in the former 
Yugoslavia. 

The regime in Tehran also 
believes that Britain is playing 
a key supporting role in the US 
policy of denying Iran access to 
international financial markets 
at a time of growing economic 
difficulties in the Islamic 
republic. 


{-• 

firr-.*.' 


tic-i . 




-t 


o; 


-£ 


t 


UN index points way to future civil wars 


Canada tops quality of life assessment, but many other 
countries are heading for disaster, reports James Harding 


Madhm 


Low 


Biggest advances In human development! 1960-02 
Hunan development Max 

0.9 - 

High 

08 . . . - - j 

0 7 I •’ "■,.■» » 

0.6 
0.5 

0.4 

0.3 - ■ 

0.2 - 
OlI 


; Portugal 


Malaysia 


S, Korea i • * • 

Thafland ^ • 

- V 

; Syria 


> 

Iran • 


Tunisia 


Botswana 


“ 1992 > 
• 1960 


P ersistent threats from 
hunger, violence and ill- 
ness to individuals' secu- 
rity in their daily lives are the 
root cause of increasing num- 
bers of internal conflicts world- 
wide. according to a report 
released yesterday by the 
United Nations Development 
Programme. 

The Human Development 
Report 1994, the fifth annual 
assessment of quality of life in 
173 countries, draws its conclu- 
sions from its key instrument, 
the Human Development Index 
(HDIL A total of 1? countries 
axe heading for the kind of 
national breakdown witnessed 
in Somalia as a result of criti- 
cally low levels of human 
development, it says. 

The HD1, which ranks coun- 
tries by a measure combining 
life expectancy, educational 
attainment and basic purchas- 
ing power, is intended to add 


another dimension to World 
Bank reports on economic indi- 
cators by seeing how economic 
growth translates into people's 

fives. 

This year, Canada tops the 
HDI list - scoring 0.932 on a 
scale of 0 to 1 - up from second 
place behind Japan in 1993, 
and Barbados, on 0.894, is 
ranked first for developing 
countries. A new measure 
showing HDI progress between 
2980 and 1992 reveals that 
among the U4 countries where 
data were available, Malaysia, 
Botswana, South Korea, Tuni- 
sia am! Thailand showed the 
most progress. 

Life expectancy in the devel- 
oping world rose from 46 years 
in 1960 to 63 years in 1992 and 
the infant mortality rate was 
halved. The adult literacy rate 
in the same countries 
increased from 48 per cent to 
69 per cent. 


But Afghanistan. Angola, 
Haiti. Iraq. Mozambique. 
Burma (Myanmar). Sudan and 
Zaire face disaster as a conse- 
quence of critical levels of 
socio-economic deprivation. A 
bloodbath has happened in 
Rwanda while other countries 
which could face national 
breakdown include Algeria, 
Burundi, Ivory Coast. Liberia, 
Nigeria and Sierra Leone. 

Of the 82 conflicts between 
1989 and 1992, 79 wars have 
been within nation states and 
the report argues that national 
collapse has tended to follow 
persistent threats to the 
human security of the people. 
In the 1990s, military spending 
to social spending ratios were 
among the highest in Iraq (&1), 


Somalia (5:l) and Nicaragua 
(3.51). 

Current patterns of aid dis- 
tribution promise little rem- 
edy. Many nations have sacri- 
ficed h uman security for more 
sophisticated weaponry. India 
ordered 20 advanced MiG-29 
fighters at a cost that could 
have provided basic education 
to all the 15m girls now out of 
school the report says. Though 
global military spending has 
been falling 3.6 per cent a year 
since 1987, the cumulative 
“peace dividend" estimated at 
$935bn (£623bn) has not been 
harnessed for human develop- 
ment needs. 

Patterns of development 
funding still bear the scars of 
the cold war. reflecting donors' 


strategic interests rather than 
development requirements. On 
average, high military spend- 
ers receive about 2'/i times as 
much per capita as low mili- 
tary spenders. El Salvador, for 
example, gets 16 times more 
aid per person than Bangla- 
desh, even tho u g h Bangladesh 
has just half the per capita 
gross domestic product 

The report suggests new 
financial arrangements for 
human development to be put 
into action at the World Sum- 
mit for Social Development in 
March 1995, hosted by Den- 
mark on behalf of the UN. 

The core proposals are: 

• A cut of 3 per cent a year in 
future global military spend- 
ing, with a fifth of the savings 


by rich nations and a tenth by 
poor nations earmarked for 
global human security. 

• A global compact to provide 
basic education, primary 
health care, safe drinking 
water and family planning ser- 
vices by earmarking at least 20 
per cent of the existing devel- 
oping country budgets and 20 
per cent of donor aid alloca- 
tions to these human develop- 
ment projects. 

• A global human security 
fund, financed from means 
such as a tax on the specula- 
tive movement of international 
funds, as suggested in a contri- 
bution to the report by Profes- 
sor James Tobin, 1981 Nobel 
prizewinner for economics. 

The report also proposes the 


SCHtfCK UNDP 

establishment of an Economic 
Security Council in the United 
Nations to become the highest 
decision-making forum to con- 
sider issues such as poverty, 
unemployment, food security', 
drug trafficking, pollution and 


population migration. 

The Human Development 
Report. Oxford University 
Press. 2001 Evens Rd. Cary, NC 
27512. US. Telepkone (919) 677 
0977. fax (919) 677 1303. Price 
S17.95 


1 

»4 

j-; 





FINANCIAL TIMES THURSDAY JUNE 2 1994 


i\t' to 


NEWS: THE AMERICAS 


Every day is Clinton’s D-Day 

Jurek Martin tells of misgivings as the US president visits Europe 


T his ought to have been 
one of Bill Clinton’s 
easier trips abroad. 
When he made his maiden 
presidential voyage to Europe 
in January, he was a man with 
a discernib le and difficult mis- 
sion - to set Nato on a new 
path and to stiffen the forces of 
reform in Russia - and at least 
he achieved mixed results. 

This time, nothing on the 
agendas with the Italian. Brit- 
ish and French governments, 
and even the Pope, compares 
in weightiness, unless it be 
Bosnia. Instead, his principal 
purpose is ceremonial, to rep- 
resent his country at the com- 
memoration of the 50th anni- 
versary of the Normandy 

landing s 

But there is an edgy sense of 
foreboding in the Clinton camp 
about the week that begins in 
Rome today and then bops 
back and forth across the 
English Channel. This Is a 
president with a multitude of 
problems on his back. His opin- 
ion poll ratings have started to 
slip a g ain, a White House aide 
has resigned for improper use 
of the presidential helicopter, 
his personal life and character 
are under legal and populist 
attack, his foreign policy (on 
his own admission) is subject 
to “relentless criticism’’, and 
the centrepiece of his domestic 
programme, healthcare reform, 
has just been deprived of the 
foil services of the redoubtable 
Congressman Dan Rosten- 
kowskL 

The last thing Mr Clinton 
needs in these circumstances is 
a foreign foray that can be por- 
trayed as a foul-up by increas- 
ingly hostile US media eager to 
pounce on any pratfalL In this 
respect, the ceremonial aspects 
of this visit are the most 
fraught with danger. 

To put it crudely, the con- 
cern is whether Mr Clinton - 
who never served in uniform, 
was bom three years after 
D-Day and opposed the Viet- 
nam Conflict - can play the 
public part of commander-in- 
chief as well as did President 
Reagan on the Normandy 
beaches 10 years ago, even 
thnngh he fought the last war 
in the studios of Hollywood. 

Late changes in Mr Clinton’s 
itinerary demonstrate high 
sensitivity by White House 
planners. His first British land- 




Remembrance: Mr and Mrs Clinton at a World War 11 memorial early yesterday in Washington* 


fall is to be at Cambridge, 
where there is a DS military 
cemetery, not, as first 
intended, at Oxford, from 
where in 1969 he wrote his 
famous letter explaining why 
he did not want to be drafted. 

Every move he makes will be 
watched for signs of unease or 
disaffection between him and 
the old soldiers gathered to cel- 
ebrate a great expedition; Mr 
Clinton's natural milieu is not 
that of men in uniform, nor do 
such men miT easily with him 

The White House is also 
patently nervous about his 
treatment in the British press, 
particularly its lurid emphasis, 
far greater than most of its US 
counterparts, on the sexual 
harassment suit against hhn_ 
Aides recently surveyed sev- 
eral weeks of UK cuttings and 
found virtually nothing posi- 
tive. They fear an eruption of 
bimbo stories while Mr Clinton 
is in Britain - but at least they 
now accept that would not be 


orchestrated by Conservative 
Party central office. 

Even the session with the 
Pope today is not risk-free 
from a mpHifl standpoint Mr 
Reagan was once able to nod 
off with impunity in a Vatican 
exchange but the pontiff is 
prpprtpri this time to complain 
loudly about US abortion poli- 
cies, Hparififfgliy the more lib- 
eral approach the US is recom- 
mending for adoption at the 
UN population conference in 
Cairo in September. The 
nuances of any presidential 
meeting with new neo-fascist 
members of the Berlusconi 
government of Italy will also 
be closely watched. 

Beyond the particular and 
the ceremonial, Mr Clinton 
must have a broader purpose 
in all his pablic comments 
while in Europe - which is to 
give a sense that he does have 
a coherent foreign policy. Mr 
Henry Kissing er, whose own 
reputation for a cool, calm and 


collected strategic vision has 
just taltwn a fear some haltering 
in H R Haldeman’s diaries of 
the first Nixon persidential 
term, was still able to write, in 
the current Newsweek maga- 
zine, in ter ms tha t resonate in 
Washington and around the 
w orld. 

“Will we be driven to deci- 
sions in a way that makes us 
appear weak and rudderless - 
and tempts intransigent for- 
eign leaders to tes t us — or ran 
we formulate a basis of US pol- 
icy that allows us to anticipate 
the rfiaTiang na of the new inter- 
national situation before they 
erupt into crisis? Most of toe 
adminis tration’s shortcomings 
are remediable _ but answer- 
ing that basic question 
requires more discipline, 
organisation and focus than 
has been demonstrated so far." 

Senator Sam Nunn of Geor- 
gia, chairman of the S enat e 
armed services committee, was 
more to the point. Mr Clinton 


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“IS involving hhncnlf more, and 

that is essential. But we expect 
too much of the president- If 
he’s not going to spend a great 
deal of Hmp on for eign policy 
he’s got to designate one per- 
son to be in charge — and that 
hasn’t happend yet" 

The target of both was Mr 
Warren Christopher, secretary 
of state, now under fire yet 

again for what Is sppti as bun- 
gling of policy on China. But 
the president told the Los 
Angeles Times last Friday: 
“The last thing I need to be 
doing is considering dunging 
my team." Mr Christopher is 
going to be doing most of the 
technical heavy lifting an this 
European trip, after Mr Clinton 
bps returned homp L at ministe- 
rial meetings of the Organisa- 
tion for Economic Co-operation 
and Development, Nato and 
the North Atlantic Coopera- 
tion TVainriT on th rpp CDDSeCU- 
tive days. 

To be fair, Mr Clinton, whose 

dp rlglnn-TnalriTig processes ran 

he as agonisingly slow as his 
mind and month ran be fast 
and loose, recognises the prob- 
lem - “lack of mnfjdenna in 
me," he t old the Los Angeles 
Times. He has also begun to 
speak more frequently about 
the US role in the world - on 
Monday, for example, a gnaHng 
past sacrifices and present 
challenges. 

Clear contradictions persist 
even so. The recent presiden- 
tial directive on peace-keeping 
was more intent an defining : 
where US troops would not he ! 
used rather than where they 
might- Yet the administration 
seems to be now investigating 
an invasion of Haiti, mostly on 
the grounds that it is in the US 
backyard and because the 
domestic pressure for interven- 
tion hac heen rising 

If US critics are frustrated, 
and if toe Senate is so confused 
that it passes contradictory 
motions on the Bosnian arms 
embargo, it is hardly surpris- 
ing that a rudderless Europe, 
accustomed to the lead and 
protection of the US, wonders 
what to expect 

Presidential foreign trips are 
usually good for domestic rat- 
ings. But this time, Mr Clinton 
had better not put even the 
occasional foot wrong on a 
beach, in a pub, or in palaces 
and boats beyond number. 


Indictment seen as a 
blow to ‘politics the 
old-fashioned way’ 


C ongressman Dan Ros- 
tenkowski has never 
made any secret of his 
belief that he is worth a great 
deal more than his congressio- 
nal salary of (133^00. 

“In befog shy about declar- 
ing our worth in an honest 
way," he said some years ago 
in a rare speech on. the floor of 
the House of Representatives 
defending a pay rise for mem- 
bers of Congress, “all we are 
doing is reinforcing toe impres- 
sion that that is all we are 
worth." 

He has frequently taken 
steps to stretch his congressio- 
nal salary: in 1990, before new 
rules on members of Congress 
accepting fees for speeches to 
private groups, Mr Rosten- 
kowski set a record with 
$3104X10 of honoraria. 

Other members have their 
own techniques for making a 
dollar go further. Congressman 
Newt Gingrich of Georgia, the 
deputy Republican leader and 
one of the House’s most out- 
spoken critics of ethical lapses, 
uses a private political action 
committee to finance his trips 
to lengthy seminars and brain- 
storming sessions in holiday 
resorts. 

Mr Rostenkowski could have 
retired in 1992 and pocketed 
more than yim from his cam- 
paign funds perfectly legally 
under now-expired rules that 
left long-serving members of 
Congress subject to older, 
looser campaign finance 
restrictions. 

But a 17-count indictment 
filed in Washington DC on 
Tuesday by the US prosecutor 
charges that Mr Rostenkows- 
ki’s efforts to stretch bis salary 
went for outside the law. 

“The allegations contained 
in today's indictment," raid Mr 
Eric Holder, the US district 
attorney, “represent a betrayal 
of the public trust for personal 
gain. Mr Rostenkowski used 
his congressional office to per- 
petrate an extensive fraud on 
the American people." 

Among other charges, Mr 
Rostenkowski is accusal of 
drawing cash in exchange for 
stamp purchase vouchers at 
the House of Representatives 


post office, of padding his con- 
gressional payroll with people 
whose taste were to mow the 
lawn at his hoUday home in 
Wisconsin or take photographs 
at his daughter’s wedding, and 
of buying expensive gifts for 
friends and political allies on 
his office stationery account. 

Mr Holder rejected sugges- 
tions that Mr Rostenkowski. 
who has sat in the House for 35 
years, was simply doing busi- 
ness the old-fashioned way. 

“This is not, as some have 


Every aspect of 
Congressman 
Rostenkowski’s 
personality and 
career reflected 
the old ways, writes 
George Graham 


suggested, a petty matter.... 
This was not conduct that was 
ever acceptable," he said. 

Yet every aspect of Mr Ros- 
tenkowski’s personality and 
career represent politics the 
old-fashioned way. and that is 
the main reason why the 
sweeping indictment filed on 
Tuesday caused such distress 
among his fellows on Capitol 
HilL 

Congressman Charles Ran- 
gel, a colleague on the Ways 
and Means committee which 
Mr Rostenkowski has chaired 
for the last 13 years, said yes- 
terday that the indictment had 
“hurt the committee and the 
Congress". 

“He is the best there is,” 
added Congressman Michael 
Andrews of Texas, another 
member of the Ways and 
Means committee, in which 
all US tax legislation must 
start 

What made Mr Rostenkowski 
so good was his ability to 
gauge exactly how far each 
member could be pushed or 
pulled to put together a major- 
ity for legislation. 

Even political opponents, 
such as Mr Gingrich, acknowl- 
edge Mr Rostenkowski's skill 


at getting bills through the 
House. 

That skill existed before be 
took the Ways and Means 
chairmanship - then -Speaker 
Tip O’Neill relied on him in the 
1970s to take the pulse of the 
House on important issues - 
but it has been reinforced by 
his ability as chairman to 
return favours and settle 
scores. 

Congressman Sam Gibbons, 
a courtly 7-1-year-old Floridian 
who took over the chairman- 
ship yesterday after Mr Rosten- 
kowski’s indictment, has nei- 
ther his predecessor’s political 
sense nor his ruthlessness. 

But dire predictions that Mr 
Rostenkowski’s fall wonld 
doom the Clinton administra- 
tion’s efforts to draw up 
healthcare reform legislation 
have, as is usual in Washing- 
ton. been exaggerated. 

The heart of the healthcare 
battle is, in any case, the Sen- 
ate. not the House, and partic- 
ularly the Senate Finance com- 
mittee. the House Ways and 
Means’ counterpart 

The tax lawyers who throng 
the lobbies outside the Ways 
and Means and Finance com- 
mittee rooms always complain 
that everything will foil apart 
under a new chairman; yet 
business continues. 

Similar forebodings pre- 
vailed a year and a half ago 
when Senator Pat Moynihan 
took over the chai rmanshi p of 
the Finance committee from 
Mr Lloyd Bentsen, who left 
Congress to become Treasury 
secretary. 

Although Mr Moynihan has 
not himn exactly the chairman 
the White House might have 
hoped for, thwarting the 
administration on several 
issues, he has certainly not 
been an incompetent flop. 

The same is likely to be true 
of Mr Gibbons. The institution 
of the Ways and Means com- 
mittee carries an authority 
that transcends each succes- 
sive chairman. 

Tbat is, perhaps, as Mr Ros- 
tenkowski, long one of the 
staunchest defenders of Con- 
gress as an institution, would 
like it. 


Industrial price increases 
revive fears of inflation 


By George Graham 
in Washbigton 


NAPM index 


A new survey from the 
National Association of Pur- 
chasing Managers yesterday 
showed prices in the manufac- 
turing sector continued to rise 
last month. 

The NAFM said its compos- 
ite index of activity in 
the manufacturing sector 
remained steady last month at 
57.7, the same as April and a 
level t hat generally indicates 
an expanding economy. 

But another sharp jump in 
the price component of the 
closely watched survey helped 
to revive inflation fears In a 
nervous bond market. The 
NAPM price index rose last 
month to 71.5, its highest level 
in four years and a marked 
increase from 6331 in April and 
493) six months ago. 

“Economic growth continued 
at the same strong rate in May 
as in April, resulting in the 
broadest increase In manufac- 
turing employment since lata 
1968 and the most widespread 
price increases paid by the 


1983=100 

. SO- 



• 1998 
SpucoK Oafamraam 


manufacturing sector since 
October 1990,” said Mr Ralph 

Rflnffmpn , chairman of tha 

NAPM’s business survey com- 
mittee and manager of procure- 
ment at Oryx Energy. 

Although the price index 
showed a sharp Increase, econ- 
omists cautioned that that does 
not necessarily indicate 
sharply higher prices. Rather, 
the survey assesses how wide- 
spread higher prices are across 
the economy by measuring the 


percentage of purchasing man- 
agers questioned who reported 
that they were paying higher 
prices for their raw materials. 

Nevertheless, some analysts 
said the NAPM’s supplier 
deliveries index rose in May to 
60.7. its highest level in six 
years, pointing to the difficulty 
suppliers are experiencing in 
meeting their customers' 
orders. Although same of this 
increase may be attributed to a 
road hauliers' strike, it could 
also herald price pressures. 

Many stock market econo- 
mists had anticipated an 
increase in the broader com- 
posite NAPM index, so yester- 
day’s stable result provided 
less fuel for fears of overheat- 
ing in the economy. 

Meanwhile, the Commerce 
Department reported that con- 
struction spending rose in 
April by 0.6 per cent to a sea- 
sonally adjusted annual rate of 
$50&5bn. The department also 
revised upwards Its estimate of 
March construction spending 
to an annual rate of $505 .ton, a 
L9 per cent jump from Febru- 
ary. 


Chileans 
start 
US trade 
talks 


By David Pttng in Santiago 


Jamaica likely to help with US 
processing of Haitian refugees 


By George Graham 
In Wa shington 


Jamaica was expected to 
announce yesterday that it will 
allow the US to set up facilities 
to process refugees from Haiti, 
becoming the first country to 
help the US out of its predica- 
ment over the Haitian boat 
people. 

Mr Strobe Talbott, US deputy 
secretary of state, was to 
arrive in Jamaica yesterday for 
talks with the g n va ra ment , and 
US nfflriak said an announce- 


ment was Hkdy later In the 
day. 

The most probable arrange- 
ment would involve anchoring 
a large vessel, possibly a US 
naval hospital ship or a char- 
tered Ukrainian cruise ship, in 
a Jamaican port to serve as a 
processing centre. 

Haitian refugees picked up 
by the US Coast Guard as they 
attempted to cross to the US by 
boat would have their asylum 
riafms hand! pH there. 

Those deemed to have a 
well-founded fear of persecu- 


tion would be transferred to 
the US mainland or to the US 
military base at Guantdnamo 
Bay, on the island of Cuba. 


Others would be returned to 
Haiti. 


The Clinton administration 
recently modified its policy on 
Haitian refugees in response to 
intense domestic and interna- 
tional pressure, abandoning 
the practice of automatically 
returning all refugees to Haiti 
without hearing their asylum 

plarms 


if Rmi 
Mlitp 


^ I > i k 


LA police in mass absenteeism 


Hundreds of Los Angeles police 
officers called in sick again 
yesterday, the third day in a 
row of mass “sick-outs", as an 
acrimonious contract dispute 
with the city continued. AP 
reports from Los Ange les. 

Mayor Richard Randan has 
urged the officers to accept 
mediation. The Police Protec- 
tive League, the officers' 
union, did not favour this but 


was expected to reply later yes- 
terday to the mayor's offer. 

Only 105 of the 317 officers 
and sergeants scheduled for 
the early shift yesterday 
arrived, the police department 
said. 

Officers from the Tuesday 
evening shift were kept at 
work to cover. 

The city estimates that the 
“sick-outs” are costing it 


nearly $Xm (£682,000) a day In 
overtime. 

The city has nearly 7,700 offi- 
cers who have worked without 
contract for two years. Los 
Angeles has been reluctant to 
offer police more money 
because of budget constraints. 
Last week, they rejected a 6 
per cent rise over two years. 

Starting pay for a new officer 
is $33,157 a year. 


Preliminary talks about the 
possibility of Chile's accession 
to the North American Free 
Trade Agreement, or of a bilat- 
eral trade accord with the US, 
are due to start in Washington 
today. 

Discussions between the 
five-member Chilean mission 
and the US trade representa- 
tive’s team will focus on 
investment protection issues. 
Although Chile has signed 
investment protection agree- 
ments with several countries, 
a US official doubted whether 
these met the stringent crite- 
ria demanded by Washington. 

Mr Eduardo Anmai, Chile’s 
finance minister, stressed that 
today's talks were strictly 
technical and that formal 
negotiations could not begin 
until the US Congress had 
passed enabling, fast-track leg- 
islation. Once that had been 
done, Mr Aninat experts nego- 
tiations will proceed much 
more rapidly than they did 
with Mexico. “We can learn 
from the Mexican negotia- 
tions,” he said. 

The US administration hopes 
to add Cast-trade to ratification 
of the Gatt Uruguay Round, 
now before Congress, bnt con- 
troversy over approval of the 
round could overshadow dis- 
cussion of Chile. 

Die Clinton administration, 
which has repeatedly stressed 
its commitment to sign an 
accord with Chile, has not yet 
decided whether this should 
take the form of a bilateral 
agreement or frill access to 
Nafta. 

Canada, now the second 
most active foreign investor in 
Chile after the US, has pushed B 
for Chile's integration to ■ 
Nafta. Mexico, which already ■ 
has a free trade agreement 
with Chile, in principle W 
favours extending Nafta to S 
other lathi American states. ■ 

Th e AFL-GZO, the US labour I 
orga ni sa ti on, has come out in 9 
favour of a bilateral accord cm ft 
the grounds that protection of m 
labour rights contained in B 
Nafta is not sufficiently rigor- S 
ous. Mr Richard Gephardt, T? 
Democratic leader in the *4 

n<meo ■ ■- ■ “ 




C o 


House of Rep r e se ntatives, 
proposed that labour clauses 
be written into the text of any 
agreement with Chile rather 
than negotiated as side issues. 






FINANCIAL TIMES THURSDAY JUNE 2 1994 


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NEWS: UK 



BjrJfimqrUMSby 

British coasumere face costs of 
£78m a year for 40 years if the 
UK backs a changeover to con- 
tinental European electrical 
plugs and sockets, according to 
an independent report commis- 
sioned by the Department of 
Trade and Industry. 

The report by the Building 
Services Research and 
Information Association 
estimates that a “big bang” 
changeover, backed by tegisla- 


to Euro-plugs could 


tion, would cost consumers: 

• £5&n a year for rewiring. 

• firm a year for the replace- 
ment of old plugs. 

• £15m a year in conversion 
costs passed on to the con- 
sumer by industry. 

An alternative would be a 
voluntary changeover, which 
would take longer but be 
cheaper to the consumer, at an 
estimated cost erf £l9m a year 
over the next 40 -years. 

The DTI commissioned the 
report because it is considering 


whether appliance manufactur- 
ers should be required to fit 
British or continental Euro- 
pean plugs to products sold in 
the UK. It makes little sense to 
Gt appliances with British 
plugs if a changeover to Euro- 
pean standards is only just 
around the comer. 

Cenelec. the European stan- 
dardwnakmg body, was yester- 
day meeting to approve the 
final draft of the standard for 
harmonised plugs and sockets 
across Europe. The standard 


will then go to national stan- 
dards councils for approval. - 

In assessing the overall bene- 
fits of a changeover, the Build- 
ing Services Research and 
Information Association con- 
cludes that the Cenelec system 
would eventually mean 
cheaper plugs, but the con- 
sumer unit - at the point that 
the mains electricity enters the 
home - would be more expen- 
sive. 

British homes are wired in 
rings, with the numerous sock- 


cost billions 


ets on each ring' made safe 
through a fuse in every three- 
pin plug. The continental Euro- 
pean system is a radial system. 
Each socket is connected 
directly to the consumer unit 
by its own lead, removing the 
need for fuses in the two-point 
plugs, but also preventing the 
fitting of different fuses to suit 
each appliance. 

To convert to the European 
system, every house in the UK 
would need to be rewired. 

Once the transition is com- 


plete, appliance manufacturers 
would need to fit only one type 
of plug to supply markets 
throughout Europe. Consum- 
ers would also save on any 
purchases of loose plugs. 

But building contractors 
would face higher costs in 
i n s t al l i n g the new type of con- 
sumer units, and the makers of 
plugs, sockets and leads for the 
British market - which cur- 
rently benefit from a protected 
market - would face much 
greater competition. 


Tax threat 
warning 
to pension 
funds 

By Pfiffip Coggan, 

Economics Correspondent 

Abolition of the tax credit on 
dividends would “blow a £50bn 
hole in pension funds”, says 
research published today by 
KLeinwort Benson, the mer- 
chant banlr 

City concern about govern- 
ment taxation policy has risen 
in the wake of speeches from 
Mr Stephen DorreR, the finan- 
cial secretary to the Treasury, 
Knifing hi gh dividend payouts 
to a lack of UK investment 

Investors fear that the tax 
credit on dividends, which was 
cut from 25 per cent to 20 per 
cent in the March 1993 Budget, 
might be reduced further or 
even abolished altogether. 

“Abolition of the tax credit 
on dividends would slash 20 
per cent off the gross yield on 
the UK equity market," says 
Kleinwort Benson. The average 
pension fund holds 56 per cent 
of its assets In UK equities, and 
so such a change would knock, 
about 11 per cent off the actu- 
arial value of the fond. 

As the current market value 
of UK pension funds is about 
£500bn, this would create a 
shortfall of about £50bn. 

Kleinwort says UK compa- 
nies would have to increase j 
p ension- fund cont ribu tions to ! 
fill this hole, which would 
reduce their ability to invest 
The fall in equity markets that 
would follow would also make 
equity fonding mare expensive: 


Rover increases 
output by 26 % 


By Kevin Done, 

Motor Industry Correspondent 

Roves- increased car production 
by 26 per cent year-on-year in 
the first quarter, according to 
figures from the Society of 
Motor Manufacturers and 
Traders. 

Overall UK car output was 
virtually unchanged in the 
first three months at 362£36. a 
decline of 0.5 per cent from the 
same period a year ago. 

Higher output by Rover, the 
iwiiBng UK vehicle a nd 
a subsidiary of BMW of Ger- 
many. together with the rapid 
build-up of production by 
Toyota and Honda at their UK 
assembly plants, helped to off- 
set ttarfinaa at Ford and Vaux- 
baR «>d a sharp fill at Nissan. 

The rise in Rover output lias 
been driven by the introduc- 
tion of its Rover 600 executive 
car range, launched last 
spring, as well as by rising 
sales of the Land Rover Discov- 
ery and the Rover 200/400. 
The company recently intro- 
duced a Sunday shift to 


increase output of the 200/400. 

Production at Nissan’s £900m 
Sunderland plant fell by 45 per 
cent year-on-year in the first 
quarter. The company was 
forced to halve production for 
nearly four months until early 
Biarch in order to cut stocks 
and bring output into line with 
lower demand in continental 
Europe. 

Luxury carmaker Jaguar, a 
subsidiary of Ford of the US, 
and Rolls-Royce Motor Cars, a 
subsidiary of Vickers, the UK 
engineering group, are both 
regaining ground lost during 
the US and UK recessions. 

Jaguar, which increased out- 
put by 4&5 per cent last year, 
raised production by 11 per 
cent year-on-year in the first 
quarter, while the maker of 
Rolls-Royce and Bentley cars 
increased output by 44 per cent 
in the first three months. 

Production of commercial 
vehicles has begun to rise 
slowly, albeit from a very low 
level Output in the first four 
months was 5 per cent higher 
than a year ago. 



Willie Carson steered 7-2 favourite Erhaab to win a sprint finish to the Derby at Epsom, southern 
England yesterday. Pictured leading after die final bend is Mister Baileys, with Erhaab in the 
middle of the chakng pack. Erhaab won £470,000 for owner Hamdan ALMaktoum in the biggest 
event in the flat racing calender, beating Bing’s Theatre (14-1) with Colonel Collins (10-1) third and 
Mister Baileys (14-1) fourth. The horse is framed in En gland by John Dunlop. Bookmaker 
Ladbrokes reported turno ver up 20 per cent on 1992 and 50 per emit on last year when a popular 
favourite depressed the market Some 5m British punters staked up to £40m on yesterday’s race. 


Work tensions increasing, says conciliator 


Tensions are increasing in the 
workplace because of growing 
pressures on business in 
Britain’s economic recovery, 

Acas, the indapandgnt concilia- 
tion and arbitration service, 
warned yesterday, writes Rob- 
ert Taylor. 

The service said the number 
of conciliation cases had 


reached record levels for the 
third consecutive year. There 
had been a 4 per cent rise in 
such cases to 75,181 from 72466 
in 1992. 

“If not rhannpUpd into cre- 
ative ends, these tensions 
could increa s ** the level of con- 
flict. Often during 1993 man- 
agements were compelled to 


deal with immediate pressures 
rather than managing change 
in a positive way. In such situ- 
ations tensions were almost 
inevitable” it said. 

Mr John Hougham, chair- 
man. said: “Industrial tribunal 
work shows no signs of any 
downward trend. We remain 
very busy." 


In 67 per cent of cases a set- 
tlement was reached or an 
application to an industrial tri- 
bunal withdrawn. Only one in 
three cases proceeded to an 
industrial tribunal. As many as 
62 per emit of cases concerned 
unfair dismissal. There were 
1852 race discrimination cases, 
the highest ever and a 6 per 


cent increase from 1992. Sex 
discrimination cases totalled 
5.772, six fewer than in the pre- 
vious year. 

The government has 
announced that Acas’s budget 
is to be cut by nearly 15 per 
cent over the next four years 
from £23m in 1993-1994 to £20m 
in 1996-1997. 


Britain in brief 



Social chapter 
‘opposed by 
big companies’ 

Britain’s big companies are 
overwhelmingly opposed to 
the social chapter of file 
Maastricht treaty, according 
to a Gallop poll for the 
Conservatives. 

The survey of 801 top 
mmpaniea also reveals strong 
opposition to proposals by the 
European socialist group for 
a firnihnnm wage and CUtS tn 
working hours to reduce 
unemployment. 

Mr John Major, prime 
minister, s ai d the poD showed 
the social chapter was “a 
licence to mess up the British 
recovery, a chapter of 
accidents waiting to happen”. 
He said labour mid the 
Liberal Democrats, which 
support the social chapter, 
were “stuck in the groove of 
the old corporate, centralised, 
over-regulated Europe". 

However, Labour said the 
economy was being severely 
damaged by the gover n ment’s 
lack of concern for public 
health and social welfare. 


Double blow to 
ethnic women 

Women from ethnic minorities, 
regardless of the status of their 
jobs, face discrimination 
hprangp of fhwr gender and 
their race. Consequently, they 
are more likely to work longer 
hours than white women and 
work in lower paid and lower 
status join, a report by the 
Equal Opportunities 
Commission hag found. 

While six per cent of white 
women were jobless, as many 
as 16 per cent of ethnic 
minority women faced 
unemployment The 
commission said one of the 
most startling findings was 
that this higher rate of 
unemployment existed despite 
the fact that ethnic minority 
women were more likely to 
continue in higher ed ucation 
than their white counterparts. 
When it came to 


unemployment levels of hi^7 
qualified women, ethnic 
minority women were twice 
as likely to be unemployed as 
white, women. 


Phone bills cut 

British Telecommunications 
announced price cots worth 
£4 6m tn a foil year, mainly 
benefiting heavy residential 
phone users and businesses 
making international calls- 
BT is cutting the cost (rf 
calls to Japan, the Republic 
of Ireland, Israel, Hong Konfr 
Bahrain, and some European 
countries outside the EU an* 

cutting biUs for residential 

customers paying more than 
£100 a quarter, a large 
proportion of whom have - 
moved their long-distance - 
calls to Mercury, BTs main 
competitor. Mercury 
responded by pledging to 

maintain Its guaranteed 

savings on long-distance and 
international calls. 


Oil database 

Oil companies active in the 
UK are to set up a common 
database of geotechnical data 
in a move towards greater 
cooperation where there is 
no competitive advantage at 
stake. Such schemes exist in 
Norway and Canada. 


Fewer failures 

Business failures last month 
fell to the lowest level since 
December 1989, according to . 
information collected by 
Touche Ross, the accountancy 
firm. Corporate collapses in 
May were 157, down from 171 
in April and 229 In May last 
year. The report predicted tint 
total failures for the year 
would be as low as 2,000, 
compared with 3^26 last year. 


QE2 refit plan 

The QE2 luxury liner, which 
has just celebrated its 25th 
year in service, is to undergo 
a £30m refurbishment The 
work will involve redecora tion 
of every cabin on the ©,000-ton 
Cunard ship. 

A derision on where the 
work, to take place in 
November and December, will 
be done is expected by the end 
of this month. Seven years ago 
Cunard chose a yard in 
Bremerhaven, Germany, for 
a £110m refit 


Locked in a poisonous embrace 


W e should never have 
expected enlighten- 
ment. British elec- 
tion campaigns have long since 
lost the central democratic 
purpose of illuminating the 
choices before the electorate. 
That sort of politics is too cam- 
ples for a generation weaned 
on the tabloid press and the 
15-second television sound-bite. 

But even by the standards of 
the recent past the European 
election campaign has been an 
unedifying spectacle. 

Around foe country, candi- 
dates for the Strasbourg assem- 
bly have dutifully knocked on 
doors, climbed on to platforms 
in village halls and picked up 
babies in market squares. 

But at a national level the 
campaign has produced an 
entirely predictable game of 
charge and counter -charge in 
which Important issues have 
been trivial is ed and trivial 
issues elevated. 

So for the voters have been 
offered a synthetic dispute 
about the national veto, a 
protracted row over begging 
and a fruitless argument about 
the definition of federalism. 

Other, real European issues 
have occasionally intruded - 
the social chapter, the path 
towards a single currency, the 
shape of Europe's future 
defence among them. But the 
tactics adopted by all three 
parties have ensured that 


rational debate is minimised in 

favour Of cheap filo ganiging . 

So nobody one should be sur- 
prised if, once a g ain, the great 
mass of the electorate decides 
on June 9 that there is noth- 
ing. or nobody, worth taking 
the trouble to vote for. 

The Labour campaign under- 
standably has lacked focus. 
The death of John Smith left 
the party’s leading figures pre- 
occupied with his succession. 

In any event Labour has yet 
to work out the difference 
between a strategy of attacking 
the Conservatives for leaving 
Britain in Europe’s slow lane 
and a discriminating approach 
to the policies of. other Euro- 
pean Union govemments- 

After some initial slip-ups. 
Mr Paddy Ashdown’s Liberal 
Democrats have looked effec- 
tive in promoting themselves 
as the party to beat the Conser- 
vatives in the south-west But 
like Labour, the party has been 
wary of sounding too positive 
about Europe. It has looked 
more comfortable attacking Mr 
John Major on domestic policy. 

On a technical rather than 
intellectual level foe Conserva- 
tive campaign cannot be 
faulted. The strategy has been 
to prevent a bad result from 
turning into a catastrophe. The 
judgment from the outset was 
that the party needed to 
counter the disgruntled apathy 
of its hard-core supporters. 


The instincts of these voters 
are those of the Tory Euro- 
sceptics. They are reflex chau- 
vinists, suspicious of most 
things foreign and of all things 
emanating from Brussels. They 
believed Baroness Thatcher 
when she told them that a 
Britain free of the shackles of 
Europe could rediscover its 
past greatness. Coincidentally 
they also favour a hard line 
against beggars. 

T o win them back, the 
Conservatives con- 
cluded their best role in 
this campaign was not that of 
a government but of an opposi- 
tion party. The central mes- 
sage has been constant: Mr 
Major would persuade the 
Europeans from doing that, 
would veto this, and would opt 
out of whatever else proved 
unpalatable. 

If Conservative Central 
Office is to be believed, the 
strategy is working. Even 
those Tory MEPs who find foe 
focus of the campaign distaste- 
ful are acknowledging that 
many of the punters like what 
they are hearing. 

It is against this backdrop 
that Mr Major sketched out the 
possibility of a multi-speed, 
multi-track Europe. This 
so-called variable geometry - a 
ghastly phrase first uttered in 
public by Mr Douglas Hurd, 
the foreign secretary - would 


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allow a wider, more flexible 
union to operate with the grain 
of public opinion. 

All would participate in core 
activities such as the single 
market. In other areas - 
defence, monetary union, 
social policy - individual 
nations would choose whether 
or not to enhance cooperation. 

It is an idea with merit. In 
some respects it is a reflection 
of the status quo. In any event 
the cohesion possible among 12 
states win not be so once it 
becomes a union of 20. 

But the context and tone in 
which such arguments are 
framed are as important as thp 
actual words. In Mr Hurd's 
multi-speed Europe, Britain 
would play a positive part, set- 
ting the pace of co-operation in 
defence and foreign policy. 

Mr Major, locked in the poi- 
sonous embrace of bis party’s 
Euro-sceptics, appears more 
interested in opting out than 
opting in when the union 
reshapes its future in 1996. The 
national veto - threatened by 
nobody in Europe - has 
become a virility symbol. 

The prime minister is right 
to argue that Europe torn 
changed during foe past few 
years. But scoring easy points 
with Essex man sits uneasily 
alongside a pledge to keep 
Britain at the heart of Europe. 

Philip Stephens 



plans to pahnih a 
Sorvoyoa 


Britain's j 
Ethnic 
Businesses 

0riTft&rsdajr f 

October 13, 

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hooa m>6 bora abort, aod Mw 
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FT Surveys 






FINANCIAL TIMES THURSDAY JUNE - 1994 


MANAGEMENT: MARKETING AND ADVERTISING 


Freebies through the door can exert a powerful 
influence on consumers. Diane Summers reports 

Sample the soap, 

the brand 


S elling soap does have Its 
glamorous side - at least 
that is what the advertising 
agencies claim. The current 
television campaign which heralds 
the UK launch of the soap powder 
Persil Power "captures all the 
drama, suspense and intrigue of a 
big epic movie 1 *, enthuses agency J 
Walter Thompson. 

Radio-controlled puppets, special- 
ly-composed music and a 60ft-by- 
100ft model village, have all gone 
into the advertisement for the prod- 
uct which recently found itself at 
the centre of a row between its cre- 
ator. Unilever, and soap war rivals 
Procter & Gamble. Procter 
suggested that Persil Power's 
patented “Accelerator" action 
would rot fabrics - a charge 
responded to with outrage by Uni- 
lever. 

But while the Titans clashed, and 
the TV “epic" was completed and 
then beamed to a waiting nation, a 
far more prosaic marketing exercise 
was also beginning. Thousands of 
men and women were being 
recruited to deliver free samples of 
Persil Power door-to-door so that 
consumers could actually try the 
stuff- 

in one of the largest sampling 
programmes ever attempted, it is 
estimated that more than two-thirds 
of all UK households will receive 
trial packs of the soap powder over 
the coming weeks. Sampling, says 
Ed Lyons, the marketing manager 
in charge of the project, is central 
to the soap powder’s £25m launch 
campaign. 

The challenge is “to ensure that 
the highest levels of awareness and 
interest are created and then con- 
verted into brand trial”, he says. 


buy 

Sampling gives consumers “the 
all-important opportunity to experi- 
ence the brand and judge for them- 
selves that the promise is deliv- 
ered". 

There is evidence that, for con- 
sumers, sampling is rated above all 
other forms of marketing communi- 
cation, according to the Human 
Factor, a consultancy which has 
conducted market research for the 


two leading sample distribution 
companies. Circular Distributors 
and MRM Distributions. 

Elaine Hunt, research director, 
says: “Sampling is the only form of 
unsolicited communication which is 
received without suspicion or 
annoyance. Psychologically, sam- 
pling creates an unusual climate in 
these days of the cynical consumer, 


who prides herself on seeing 
through all the wiles of the adver- 
tiser. 

“The sample appears more in the 
nature of a gift - something for 
nothing - and the recipient seems 
to feel a more personal gratitude 
and pleasure than is inspired by 
most other forms of media activity.** 

Consumer enthusiasm is mark- 
edly stronger for genuinely “free" 


samples, rather than those which 
require the consumer to expend 
effort or cash. 

The acceptability of a freebie Is 
hardly surprising, but does sam- 
pling actually work? Hunt says that 
both for new products and those 
that have been around for some 
time, consumers cite sampling as 
the most powerful influence on 


whether they purchase, “easily out- 
weighing advertising, money-off 
offers, or couponing”. 

Nick Wells, sales and marketing 
director of Circular Distributors, 
the company which is carrying out 
the Persil Power door-to-door deliv- 
eries, estimates that sampling has 
grown five-fold in the UK over the 
past decade, with a total of about 
250m samples delivered through the 
door last year. While volumes have 
Increased, the sophistication of sam- 
pling techniques has also developed 
since the 1950s, when the first exer- 
cise. for Omo soap powder, was car- 
ried out 

There are two basic methods of 
sampling: letterbox and personal 

ran. The first is suitable for items, 
which fit through the door and are 
non-toxic (there are Advertising 
Standard Authority rules to protect 
against for example, children pick- 
ing up and eating samples of house- 
hold cleaning products). The sam- 
ples may go out on their own or be 
delivered with other items, which 
makes the exercise cheaper. CD 


'Sampling is the only form of unsolicited 
communication which is received 
without suspicion or annoyance’ 


What influences the buyer? 

% Claiming to have bought a new product because oft 

Free sample to try ‘ 85 

Recommendation by friends or relatives 83 

Money-off offer .... 75 

Television advertisement 67 

Saw in a shop 67 

Money-off coupon or voulcher 62 

Advertising leaflet through the door 56 

Source: MRM. 71» Human Factor 1983 

• NSsMw « 














says it would charge about £17 per 
1,000 for the delivery of 30g samples 
if they were delivered with other 
items, while “solus** distribution 
would cost about £35. 

P ersonal call sampling costs 
about 10 times more, says 
Wells. Delivery staff ring at 
the door and ask the householder 
questions to establish whether they 
have a use for the sample before 
handing it over. This helps cut 
down waste by ensuring, for exam- 
ple, that dog food only goes to dog 
owners. But the personal call also 
provides an opportunity for market 
research data to be collected, cou- 
pons to be handed out or a database 
of customers interested in future 


promotions to be assembled. MRM 
Distributions is even experimenting 
with the direct input of data on the 
doorstep, using laptop computers. 

Wells’s tips for sampling success 
i nrinrig make sure, if it is a letter- 
box delivery, that the sample is 
strong enough to withstand the 
family dog; make the packaging 
look as much like the real thing as 
possible; and avoid looking mean 
with samples which are too small to 
allow a proper trial 

Sampling would rarely be used in 
isolation, says Phil Annett, new 
products marketing manager for 
Cereal Partners UK, the joint ven- 
ture between Nestlfe and General 
Mills. He is particularly interested 
In targeting children for many of 


the company's new product 
launches, which have included the 
cereals Golden Grahams and Lucky 
Charms. As well as door-to-door 
sampling. Cereal Partners looks for 
distribution at toy shop checkouts 
and with doorstep milk deliveries. 
"If you can do it through a third 
party It adds endorsement." says 
Annett 

Sampling is unlikely to be effec- 
tive on its own. says Annett "We 
believe it should be used as part of 
a programme which includes adver- 
tising and promotion. But it is the 
ultimate form of product communi- 
cation - actually to receive and 
taste the product You can only do 
so much on television," he con- 
cludes. 


Number fever leaves Pepsi drinkers cold 

Victor Mallett on why 349 was so unlucky for the drinks company in the Philippines 


A lbert Yeban lives in hope. 
Yeban. who works in the 
canteen at a Manila golf 
dub. has nine Pepsi-Cola bottle 
tops with “349" printed on the 
underside. 

That number was announced 
as a winner in a Pepsi promotion 
in the Philippines two years ago. 
and Yeban reckons his bottles tops 
are worth a total of 4.4m pesos 
(£108,000) in cash prizes. He has 
joined a group of thousands of 
other 349-claimants and is hoping 
that an American lawyer will be 
found to win the money far him 
in a court case against PepsiCo 
in the US. 

PepsiCo wishes it had never 
heard of 349. In one of the more 
ill-fated announcements in 
marketing history, the number 
was declared a winner on May 25 
1992, at the height of a highly 
successful I “under the crown" 
promotion called Number Fever. 

Printed on each bottle top was 
a three-digit number, a sum of 
prize money to be won if the 
number turned out to he a winner. 


and a security code. 

Such was the campaign's success 
in Us first three months that It 
had been extended for a farther 
five weeks. Unfortunately for Pepsi, 
and for thousands of Filipinos who 
thought they had become peso 
millionaires overnight, the number 
349, chosen by a computer as a 
winner in the second stage, turned 
out to be a common non-winning 
number from the dint stage. 

There were no fewer than 800,000 
bottle tops Imprinted with 349, 
of which half carried im peso 
prizes. Pepsi-Cola Products 
Philippines Inc (PCPPI), 19 per 
cent owned by PepsiCo, could not 
possibly pay; the sum would 
amount to more than $15bn, 
dwarfing the £4Sm lost by Maytag, 
parent of Hoover of the UK. in its 
disastrous “free flights" offer to 


boost sales of vacuum cleaners. 

Amid angry demonstrations in 
which several people were injured 
and Pepsi trucks were vandalised, 
Pepsi officials explained that there 
had been a “computer glitch" and 
insisted that only 349 numbers 
with the correct security codes 
(in other words those from the new 
series) would be honoured as 
winners. 

PCPPI decided to pay each “old” 
349 crown holder 500 pesos as a 
goodwill gesture, an offer which 
cost tiie company S10m, in addition 
to the |4m of prize money and 
advertising spent on the whole 
campaign. 

But many Filipinos, including 
Yeban, refused to accept the offer, 
joining pressure groups such as 
“United 349” and “349 Consumers 
Organisation" that have sought 


payment in full and tried to keep 
the issue alive hi the Philippine 
courts and in the media. 

Claimants also believe that 
wealthy PepsiCo in the US is a 
better target than its relatively 
insignificant affiliate PCPPI. One 
group has sought help from Robert 
Swift, a US lawyer who helped to 
win a class suit (a case brought 
by a class of people who share a 
grievance) in Honolulu on behalf 
of 10,000 victims of the regime 
of the late dictator Ferdinand 
Marcos; the jury awarded $l-2bn 
from the Marcos estate to the 
victims, although the money has 
yet to be paid. 

Vicente del Fierro, a former 
advertising executive who heads 
another group called “Coalition 
349” from a house in the Manila 
suburbs, says he represents 3,000 


of the 349ers. “It’s about third 
world countries being exploited 
by multinationals,” he declares, 
saying he is on a “crusade for 
justice" over the company’s 
“deception” and “malice". 

Del Fierro charges the 349ers 
an annual fee and says he plans 
to file a class suit in the US against 
PepsiCo, although Jeffrey Glen, 
the New York lawyer with whom 
he is in contact, says that his 
company Berwin Leighton has done 
only “a little preliminary work” 
and that no derision has been 
taken on whether to pursue the 
matter in the US. 

In the Philippines, which 
inherited a habit of litigiousness 
from the US, its former colonial 
power, more than 15,000 cases have 
been filed against PCPPI, but 
almost all have been dismissed. 


In one case earlier this year, a 
provincial court ordered the 
company to pay l.lm pesos to a 
21-year-old claimant, but the 
judgment is being appealed. 

PepsiCo - as keen to distance 
itself from the 349 affair as 
claimants are to implicate it - says 
Number Fever was “a local 
promotion". There haven’t been 
any suits filed In the US, according 
to Ken Ross, PepsiCo's 
vice-president for public relations. 
“It's not the proper venue.” 

During Number Fever, Pepsi 
increased its share of the soft 
drinks market in the Philippines 
from 19 per cent to 25 per cent, 
luring customers from the 
dominant Coca-Cola brands and 
smaller local manufacturers. After 
the 349 fiasco, however, Pepsi's 
share plunged to 16 per cent 


Now the company's market share 
Is recovering, although Pepsi-Cola 
Uself, perhaps because it is 
Identified by name with the 349 
affair, has not done as well as 
□on-cola drinks such as 7-Up or 
Mirlnda. Pepsi says sates In the 
Philippines rose 40 per cent in the 
year to April, and market share 
is back to about 20 per cent 

Filipinos say they are great ones 
for forgiving, whether it involves 
political enemies or companies 
such as Pepsi. Asked about Pepsi, 
one Manila stockbroker said: “We 
even forgave Imelda (Marcos’s 
notoriously extravagant wife] and 
let her stand in the presidential 
election.” 

PepsiCo, locked in combat with 
Coca-Cola for dominance in Asia's 
East-growing markets, is keen to 
lay the 349 controversy to rest 
"Vae vast majority of consumers 
in the Philippines understand that 
this was an honest mistake," says 
Ross. "A small but vocal minority 
of people have chosen to pursue 
the matter. That’s their right and 
the matter Is in the courts." 



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TIMES THURSDAY JUNE 2 W 


TECHNOLOGY 


Christopher Brown-Humes concludes a series on research by looking 
at the links between industry and academia in Sweden 

An adjunct to success 



Changing the donate: Sweden does not lack Ideas, just ways to develop them 


Hakan Mogren, 
president of Swe- 
den's high-flying 
pharmaceuticals 
group Astra, last 
week launched a 
wide-ranging 
assault on the state 
of the country's 
research industry. 
There were too few qualified 
researchers in Sweden, he said. The 
education system was insufficiently 
pared to industry. Astra was 
increasingly having to locate 
research capability abroad. 

Mogren, one of the country's most 
respected business leaders, should 
know what he is talking about. Not 
only is Astra the country's biggest 
company judged by market capital- 
isation. but it has done as much as 
auy Swedish company to foster 
links between industry and aca- 
demia. 

Is the picture fair? Sweden spends 
2.9 per cent of its annual GDP on 
R&D, a level which puts it towards 
the top of the world league. It also 
has a well-developed framework for 
contacts between' industry and uni- 
versities. Is it simply that the coun- 
try is not getting value for money? 

One must first consider the dis- 
torted structure of Swedish indus- 
try. The big multinationals, where 
the country’s industrial strength is 
concentrated, have built up good 
contacts with universities. They are 
led by Astra and Pharmacia in 
pharmaceuticals, Ericsson in tele- 
communications, ABB in engineer- 
ing and the vehicle groups Volvo 
and Saab. But Sweden does not 
have enough medium-sized compa- 
nies and it is at this level (and the 
small company level) that contacts 
are much less well developed. 

Camille Modeer, a director of the 
Federation of Swedish Industries, 
says: “The problem in Sweden is 
not lack of ideas. The problem is 
lack of possibilities to develop 
them." She attributes the lack of 
entrepreneurial activity to a cul- 
tural and political environment 
which has favoured development of 
the welfare state and eschewed risk- 
taking for the last half century. 

Turning the situation round will 
not be easy. For Modeer, a key pri- 
ority is getting more people with 
PhDs into industry and particularly 
into small and medium-sized compa- 
nies. Modeer also says Sweden must 
make more use of its research. Aca- 


demics have not always been com- 
mercial enough in their approach, 
stopping “when they have had an 
article printed in some distin- 
guished scientific journal”. 

It is not that Sweden is short of 
mechanisms for promoting collabo- 
rative research, nor does it lack pri- 
vate-sector funding. More than 60 
per cent of R&D expenditure is 
financed privately, with the govern- 
ment accounting for 35 per cent It 
also has the advantage of being a 
small country where people tend to 
know everyone else in their field. 

A system of "adjunct professor- 
ships" is one way the cross-fertilisa- 
tion works. An adjunct professor 
will typically spend SO per cent of 
their time with a company and 20 
per cent at a university. 

But adjunct professors are just 
one strand in a web of industry and 
academic ties embracing science 


parks, industrial research insti- 
tutes, industrial liaison offices and 
strategic research foundations. The 
research foundations are relative 
newcomers: endowed with SKrlObn 
(£850m) after the break-up of the old 
wage earner funds, their task is to 
create centres and fields of research 
excellence over the next 15 years. 

Astra is particularly sensitive to 
the Swedish research climate 
because it has placed strong empha- 
sis on contacts with universities 
and medical schools. The basis for 
the company’s rapid development 
was its acquisition of the rights to 
the compound Xylocaine, a pain- 
killer developed by two researchers 
at Stockholm University. 

Claes Wllhelmsson. Astra’s head 
of R&D, says a free flow of ideas is 
vital for keeping the company in 
the front line of medical knowledge. 
The group has SO adjunct professor- 


ships and stresses physical proxim- 
ity to academic centres not just in 
Sweden but abroad. It already bas 
four overseas centres - in Montreal, 
London. Bangalore and Brisbane - 
and plans to expand to six. At the 
University of Montreal. Astra is 
looking to tap the institution's spe- 
cific expertise in the field of pain 
research and it talks of having a 
unit of up to 100 researchers there 
eventually. 

Wilhelmsson says that only by 
having a large number of small 
units working in different areas will 
Astra get access to the broadest pos- 
sible range of new ideas for treat- 
ments. Besides, he argues, small 
decentralised units are more inno- 
vative and cre ativ e than big ones 
encumbered by bureaucracy. 

But he accepts there are draw- 
backs to the approach. One is dupli- 
cation of cost. The other is the risk 
of jyimma r rifll SCCZetS 1 pairing out. 

Ericsson also stresses academic 
contacts, although Bengt Gallmo at 
the group's university liaison office 
cannot link one specific product 
directly to the collaboration. "We 
wouldn’t get a complete product 
from a university system. What we 
would get is a solution to a particu- 
lar problem," be says. 

In Sweden, Ericsson bas devel- 
oped close ties with the Chalmers 
University of Technology in Goth- 
enburg and Lund University. 
Abroad, it has set up laboratories 
near universities in Germany, the 
Netherlands, and North Caro lina. 

The contacts with Lund are a 
good example of the way collabora- 
tion has worked to the advantage of 
both parties. A few years ago. Erics- 
son decided analogue electronics 
were being neglected and estab- 
lished an adjunct professorship in 
the field at Lund. The move helped 
attract PhD students to the univer- 
sity. The professor took on a 
full-time role at Lund and was hired 
back by Ericsson as a consultant 
The relationship continues today. 

Gallmo says Ericsson is big 
enough to build up its own relations 
with universities. But he thinks 
links between Swedish industry and 
research centres are "generally 
rather weak", particularly at the 
level of small and medium-sized 
companies. 

Other articles in this series appeared 
arc April 14. 21 and 2Sth and May 5. 
U 19 and 26. 



Good ideas stay out 
of the drain 


Andrew Fisher reports on a programme which aims 
to close the gap between inspiration and profit 


I n the endless debate about 
British industrial performance 
and its gradual decline relative 
to other countries, there Is rarely 
any complaint about a shortage 
of ideas. The problem lies not so 
much in inventiveness as in the 
ability to make money out of new 
products and technologies. 

"We’re actually a small and 
very inventive country,” says Sir 
Ronald Oxburgfa, rector of 
Imperial College of Science, 
Technology and Medicine, part 
of London University. "It could 
be argued that we’re almost too 
i n venti v e for oar own good.” 

Whether the fault lies in lade 
of money, a cultural and 
educational bias against industry 
or an unwillingness by enough 
companies to take risks, there 
are numerous examples of UK 
ideas that have been successfully 
exploited abroad. 

To help close the gap between 
inspiration and eventual profits. 
Imperial College has embarked 
on a venture which it believes 
is unique among British 
universities. 

Called IC Parc, it is a 
partnership between Imperial’s 
own research staff and resources 
and companies such as British 
Airways, British 

Telecommunications and ICL (the 
UK-based computer subsidiary 
of Japan's Fujitsu). Its purpose 
is to find solutions for the 
complex computer needs of its 
clients stretching into the next 
century. Barry Richards, director 
of IC Parc and professor of 
computing science at the college, 
says it was set up "to remove the 
problem of a good idea which 
doesn't go forward". 

IC Parc works on medium- term 
problems - such as complex 
aircraft scheduling for BA, data 
delivery for the videoconferencing 
and other visual broadcast 
services planned by BT, and 
telepublishing (with text stored 
di gitally ) - which companies 
understand but need extra help 
to solve. "IC Parc is seen as 
addressing the task of ensuring 
that ideas don’t go down the drain 
or across the Atlantic,” he adds. 

It focuses on the development 


of advanced software in areas 
of vital importance for future 
applications of information 
technology: planning, scheduling 
and decision Support- 

Launched last month and 
arising out of Imperial's computer 
forum linking academia and 
industry. H stresses the 
establishment of strong 
relationships with the partner 
companies, which it calls 
technology clients. 

Catherine Griffiths, a research 
fellow at IC Parc, says the forum 
showed "companies had special 
needs that were not being 
addressed”. Their problems were 
of a complexity that could not 
be simply solved by consultants. 
Solutions have to be developed 
in such a way that they can be 
int egra t ed easily into companies' 


It’s one thing to 
conceive what 
technology might be 
useful and another 
to work out how 
to apply it 


differing organisations. 

"Some companies are very clear 
about their problems," says 
Richards. "In other cases, they 
say *we know broadly what we 
want to achieve in the medium 
term but we’re not clear how to 
do that’. It’s one thing to conceive 
what technology might be useful 
and another to make something 
out of that technology and work 
out how to apply 2L You have to 
know the company very well and 
assess the likely impact.” 

BA. for example, knows it will 
be scheduling aircraft in the 
future, says Griffiths. "They want 
to know how to do it better; they 
want to build on the need that 
they have.” Bill Teather, BA’s 
head of information management, 
is enthusiastic about IC Parc’s 
potential benefit for the airline 
and other companies. 

"For a university to organise 
itself so it can present a 
business-oriented front to business 


- as a planning rather than a 

computer department - makes 
a tremendous difference for the 
senior managers in the airline 
by helping them understand what 
Is on offer.” 

FOr BA. IC Pore offers the 
opportunity to schedule aircraft 
in an even more complex way 
than at present. “We have 
enormous assets in onr aircraft.” 
says Teather. “A small percentage 
rise In aircraft utilisation can 
save money and help ns deliver 
customer service better." 

If aircraft have to be 
rescheduled because of bad 
weather, for example, the new 
software systems being developed 
at 1C Parc could enable BA to do 
this more efficiently by taking 
into account n greater range of 
factors (including other flight 
schedules and passenger 
connections) than at present. 

"This offers potentially the next 
step change in how to tackle 
planning problems." he says, "ft 
should allow us to do what wc 
do now more generally - to do 
it on a bigger scale.” Teather 
hopes such software solutions 
can also be applied to other 
scheduling tasks such as the 
deployment of maintenance staff 
in airports. 

"There are complicated 
scheduling problems for which 
IC Parc is in a position to provide 
general solutions as opposed to 
specific home-grown ones which 
can be expensive and need lots 
of changes to meet different 
situations,” explains Teather. 

The question of scalability is 
a big problem in innovation, not 
just in the IT field. What works 
in a limited environment may 
not translate easily to the wider 
practical world. 

Sir Ronald recalls from his days 
as chief scientific adviser with 
the Ministry of Defence that some 
of the biggest problems arose with 
software. Systems which worked 
beautifully in small-scale 
demonstrations could throw up 
new problems when developed 
on a much bigger scale. “You’re 
building systems that are too big 
for individuals to get their minds 
round." he says. 


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James Dawnay (above), a 
former head of Mercury Asset 
Management's unit trust 
operations, is starting to put 
his stamp on the unit trust 
operations of Martin Currie, 
the Scottish fund manager 
that he joined a couple of 
years ago. 

Dawnay, 47, has taken over 
as chairman of Martin Currie 
Unit Trusts, replacing Michael 
Kennedy, 58, the chairman 
and chief executive of the pri- 
vately-owned Martin Currie 
group. Kennedy remains on 
the unit trust company board 
but is starting to hand over 
some of bis responsibilities as 
he approaches retirement 

Sandy Dudgeon, 37, amateur 
jockey and former deputy 
managing director of Adam & 
Co, the Edinburgh private 
bank, has been brought in to 
replace Alan Maidment, 58, 
who retires as managing direc- 
tor of Martin Currie’s unit 
trust business in September. 
George Tsergas, 48, who joined 
Martin Currie last year after 
nine years with the Fidelity 
fund management group, 
been appointed sales director. 

Since Dawnay arrived at 
Martin Currie, which has £4hn 
under management, he has 
been involved in building up 
the group’s overseas institu- 
tional business. He now 
intends to devote more time to 
its unit trust business which 
has doubled in size over the 
past couple of years, to £430m. 
Dawnay gays it is still too 
small and hopes to double its 
size again in three years. 

■ Martin Greig and Yvonne 
Savage have been appointed to 
the board of HODGSON 
MARTIN. 

■ John Rae has been 
appointed vice-president In 
BANK OF AMERICA’S export 
finance group; he moves from 
Samuel Montag u 

■ Brian Primrose, formerly 
operations director of Schroder 
Unit Trusts, has been 
appointed a divisional director 
of MARLBOROUGH 
MANAGEMENT GROUP. 


PEOPLE 


Holder moves up at 
General Accident 


Barrie Holder. 48, General 
Accident’s finance director, 
has been appointed a deputy 
chief ex e cu tive. This increases 
speculation that he might take 
over as chief executive of Scot- 
land’s largest insurer when 
Nelson Robertson, 60, retires. 

Holder, a Yorkshire-born 
accountant, joined GA in 1967. 
He spent a year in New Zea- 
land in 1989 stating out GA’s 
expensive acquisition of New 
Zealand Insurance. Hie is the 
group's finan ce director and 
has now added responsibility 
for the group's fast-growing 
life operations to his portfolio. 

Australian Bob Scott. 52, 
who has been responsible fin- 
reorganising the group's slug- 

Baird returns 
to Edinburgh 

Grant Baird, the former chief 
economist of the Royal Bank 
of Scotland who for the past 
three years has run Scotland 
Europa, which represents 
Scottish organisations and 
businesses in Brussels, is 
returning to Edinburgh* 

He is to become executive 
director of Scottish Financial 
Enterprise, the private sector 
body which promotes the 

Rrmnria l wi mmnnft y 

Baird takes up his post in 
September, when James Scott, 
a farmer senior Scottish Office 
official who has directe d SF E 
since 1991. steps down. SFE 
was founded in 1986 to bolster 
the Scottish financial 
community when London was 


gisb UK business, has also 
been appointed a deputy chief 
executive. His responsibilities 
have been extended to include 
the international division. 
Although Scott only joined GA 
following its I9S7 takeover of 
NZt, his rapid promotion sug- 
gests that he has Impressed the 
group’s traditionally conserva- 
tive directors. 

Meanwhile, New Zealander 
Russell Evans, 55, another NZI 
veteran who is now in charge 
of GA’s corporate planning, 
has been appointed a general 
manager. GA Life’s general 
manager. Bill Jack, a 49-year- 
old Glaswegian, has been 
appointed general manager 
(life) of the parent company. 


blowing its trumpet in the 
run-up to Big Bang. Its 220 
members include all the major 
banks, life assurance 
companies and fund manag ers 
north of the border, as well 
as providers of professional 
services. 

■ John Strudwick has been 
appointed client services 
directo r of Club 24, part of 
NEXT. 

■ John Patterson has been 
appointed to the new position 
of director of operational 
performance fro BRITISH 
AIRWAYS. 

■ Michael AverilL group chief 
operating officer, has been 
appointed to the board of 
SHANKS & McEWAN. 

■ Ian Burton has been 
promoted to md of NATIONAL 
TRUST Enterprises. 


Non-executive 


directors 



■ John Kemp- Welch (above), 
chairman-elect of the Stock 
Exchange and former senior 
partner of Cazenove, at SUN 
ALLIANCE GROUP and Sun 
Affiance and London 
Insurance. 

■ Richard Giordano, chairman 
of BOC and British Gas, has 
resig ned fr om LUCAS 
INDUSTRIES. 

■ Sr Geoffrey Holland, former 
permanent secretary at the 
Department for Education, at 
SHELL UK 

■ Kathleen O’Donovan, 
finance director of BTR, at 
ARDAGH. 

■ Sir James Ball and Lord 
Peter Rees have resigned from 
LASMO. 

■ David Wathen, former chief 
executive of Haemocell, at 
OPTOMETRICS 
CORPORATION. 

■ George Hayter, deputy 
chairman of Unipalm, at 
PEGASUS GROUP. 

■ Sir Anthony Take and Sir 
Thomas Risk have retired from 
The MERCHANTS TRUST. 

■ Peter Harrop as chairman 
at PLASMEC; he is therefore 
resigning from DENSITRON 
INTERNATIONAL. 


Ford puts Gillitzer in the hot seat 


Ford, basking in the success of 
Michael Schumacher and his 
Benetton Ford in grand prix, 
and enjoying something of a 
renaissance in European tour- 
ing car racing and rallying, has 
created a new top motonsport 
post. It is aimed at giving 
long-term strategic direction to 
one of the car industry’s most 
valuable marketing tools. 

Perhaps surprisingly, the 
chosen candidate is not a 
dyed-in-the-wool career motor- 
sport figure but a 56-year-old 
former product planner and 
design and development engi- 
neer, in the form of Australian 
Peter Gfitifaer. 

He has had just three years' 



of motor-racing experience, as 
manager of Ford's motorsport 
programme in Australia, where 


market. 

Giliitzer's task will b 
evaluate and advise where 
in what categories Ford sfa 
be competing in order to 
imise the promotional ben 
of competition. 

Gillitzer, who will be re 
ing directly to Ford of Eu 
vice-president of marke 

Ingvar Sviggum, did not he 
great deal to celebrate ivhe 
formally started the job ye 
day - less than 24 hours ea 
Ford had only manage) 
come fifth In the Acroi 
rally. 1 






11 



FINANCIAL. TIMES THURSDAY JUNE 2 1994 

ARTS 


Cinema/Nigel Andrews 


Turkey feathers to tickle our fantasies 



Strong on style bat weak on content: Joliet Stevenson and Joanne WhaHey-Kiliner fail to light any fires in The Secret Rapture’ 


T here is a funny joke in The 
Secret Rapture about the 
difference between erotic 
and perverted sex. In the 
first, gurgles raconteur Joanne 
Whailey-KUmer to a trio of tired 
business colleagues in a bar. you 
use a leather. In the second yon use 
the whole chicken. Hilarity all 
around. Then seconds later Miss 
W-K is lunging across the table 
with a steak knife, trying to stab 
First Businessman. 

It is that kind of film. Gestures 
and apocalypses come from 
nowhere. David Hare's stage play 
was an odd, feathery thing. 
Addressing matters such as grace, 
faith and the quality of life, it made 
attractive tickling motions in the 
direction of our consciences. The 
film, by contrast, is a turkey, a 
whole turkey and a plucked turkey. 
And since this turkeyisatian pro- 
cess has happened to Hare before - 
when Plenty moved from play to 
film, and when Paris By Night and 
Strapless trailed clouds of staginess 
on to tl» screen - we should ask: 
What is going wrcmg? 

The Secret Rapture has one of 
those plots, full of designer meta- 
phor, that (me accepts while sitting 
in the hothouse of a theatre. An old 
bookseller has died, leaving his two 
daughters to cope with the dear old 
farmhouse and the deadly young 
widow: Catherine (Miss W-K), a sort 
of Hell’s Angel on heels; younger 
daughter Isobel (Joliet Stevenson), 
good and kind, runs a small graphic 
design shop; older daughter Marion 
(Penelope Wilton}, more venal, is 
first caught trying to reclaim a ring 
from dead Dad’s bedside. 

But there is one thing that plays 
can get away with and films cannot 
Circumstantial vagueness. We do 
not expect the stage to rotate 45 
degrees towards us, exposing the 
designs on top of Isobel’s work- 
tables. But in a movie we ask, 
“What are these people designing?", 
apart from the single lurid book- 
jacket being worked over by Isobel’s 
partner-boyfriend (Neil Pearson). 

So when well-heeled Marion buys 
into the firm and tries to expand it 
with harpy Catherine's help, we are 
meant to cry "Tak! Tskl Do not sell 
out, Isobel"; but instead we feel, 
“What a good idea." Perhaps the 
firm wiU now take on a graspable 
identity. 

More vagueness: Penelope Wil- 
ton’s Marion, who clarion-an- 
nounced herself as a Tory minister 
in the play, here seems vocationally 
less specific. And her husband, a 
lay preacher an stage full of chortle- 
some pieties, is played by Alan 
Howard in the movie as an odd. 
mute bird with a crick in his neck 
and few lines of dialogue. 

Director Howard Davies pushes 


THE SECRET RAPTURE (15) 

Howard Davies 


NO ESCAPE (15) 

Martin Campbell 


DANGEROUS GAME (18) 

Abel Ferrara 


INTERSECTION (15) 

Mark RydeU 


bits of style at Hare's screenplay as 
if hoping that they will peck it into 
life. A moment of emotion produces 
a tilted angle. A love scene stripes 
two bodies with Venetian-blind 
shadows. 

But when a bird is dead, as Monty 
Python proved, no amount of shock 
treatment can help. Plucked of its 


wit and thrust into the “real" world, 
the moral schematic of Hare’s play 
seems trite and sanctimonious. 
Hold on to that cottage industry. 
Hug that parental farmhouse 
(shades, nay swathes, of Howards 
End , X And nbpngh the mentally dis- 
tressed. who might be well-inten- 
tioned (Catherine), while sh unning 
the mercantile (Marion), who can- 
not ever be. 

Nothing is more dopily conserva- 
tive than some writers with 
left-wing sympathies. People often 
ask why British films cannot get 
their act together. - 

The reason is that modem British 
cinema, like so modi modem Brit- 
ish life, is one long apology pro 
sua vita. “We have never had it 
so bad." And (corollary) “we shall 
never bave it so good again", 
unless, quoth Hare, we put a mora- 
torium on all that might expand 
people's lives, ambitions and 

imaginatinnq and thereby thrpatgn 


tight little, green little England. 

♦ 

Now a much-needed change of 
scene. “The nearest aspirin is 2,000 
miles away," says the doctor (lan 
McNiece) on the subtropical island 
in No Escape. We have an known 
holiday spots like this, but “Abso- 
lom” is an atoll of a different 
aspect. Even though the jokey con- 
victs' leader (Stuart Wilson) says 
“Welcome to vacation paradise" to 
the newly arrived hero (Ray Liotta) 
- and Liotta, picking up the mood, 
replies “Hope you take plastic" - 
this is a futuristic penal colony 
(year 2022) where torture, riot and 
sudden death are rife. 

Can Liotta, sent here after threat- 
ening a previous warden with an 
electric cattle-prod, escape - or at 
least find a more pleasant part or 
the island? He does the latter, fall- 
ing down a mile-high cliff into a 
river from which the Good Con- 
victs. led by white-haired father fig- 


ure Lance Henriksen, rescue him 
But will Wilson pursue and avenge? 

The film is a re-tread of Papillon 
with camp dialogue, wild scenery 
and costumes that look as if they 
were designed by Mad Max's aunt 
Present is a platoon of British act- 
ors, led by Wilson and McNiece, 
playing the nasties and ranging us 
to ask: What is it with Hollywood 
and the British? Can America not 
get one of its own kind to curl a lip. 
quiver a nostril and deliver a well- 
egged epigram? Perhaps not. Wil- 
son’s jokes steal the movie. 

* 

Abel Ferrara’s Dangerous Game 
used to be called Snake Eyes. But 
like last week's Hostile Hostages (US 
title The Ref) it has been re-baptised 
for Britain by the banal minds who 
do these things. No title, though, 
could do justice to this transport- 
ingly batty film about film-making 
from the writer-director of Driller 
Killer and Bad Lieutenant. An ear- 



A change of scenery: Ray Liotta in 
the futuristic No Escape 


nest Mftdnnna and a more earnest 
James Russo act out a tale of mari- 
tal hell before the cameras of Active 
fflmer Harvey KeiteL 

Whose are the snake eyes? Per- 
haps Madonna’s; but it is mostly too 
dark to tell on this soundstage 
within a soundstage. Or maybe they 
are Keitel's, who has long, writhing 
Medina locks to match. The film 
replays the contest between vice 
and virtue that we saw in Lieuten- 
ant. only with Madonna as the wife 
who is getting religion and Russo as 
the man bu rning out on sex and 
drugs. 

No one seems more obsessional, 

tjny n g h, than the man behind the 

camera, OD.-ing on celluloid and 
Stanislavski- babble. Like any 
genius director Keitel wants more. 
“Smell her, Frank, smell her"; “Dig 
down into hell, Frank”; “Piss an the 
floor". The audience, on the other 
hand, wants less. But it has an eerie 
feeling that this is what life is like 
on a Ferrara set, and we might as 
well have the ugly truth while it is 
offered. 

* 

Intersection also comes from the 
world's psychodrama storage-room. 
Richard Gere takes the Michel Pic- 
coli role in this Hollywood defrost- 
ing of the 1970 French film Les 
Chases De La Vie. Mark Rydeil {The 
Rose ) replaces Claude Sautet in the 
director's chair, blowing warm air 
all over the tale of a man whose life 
is torn between two women and 
whose min d replays that life, in 
fiaghhaefcg just as his car is about 
to be tom between two trucks. 

Gere’s past career as a Vancou- 
ver-based architect flashes before 
him Hzs affair with redheaded Lol- 
ita Davidovich flashes before him. 
And the blonde, curvaceous Sharon 
Stone flashes before him - but this 
is not Basic Instinct. Stone, playing 
Mrs Gere, gets to expose nothing 
lower than a quivering chin and a 
pair of Joan Crawford cheekbones. 
The film is minor but enjoyable. 


Opera/Martin Hoyle 

Playing Away fails to score 


R emember Damn Yankees? 
An American musical of 
the 1950s that enjoyed a 
Drury Lane run, it retold 
the Faust legend against the back- 
ground of professional football. 

Howard Brenton’s libretto for 
Benedict Mason’s opera Playing 
Away combines the Faust myth 
with football; not hard to do when 
most successful players look like 
mafiosi. The musical's most divert- 
ing character was a temptress 
called Lola. Consciously or not. 
Brenton echoes this with another 
sultry Lola, the footballer-hero’s 
wife. Alas, she has nothing so enter- 
taining to ring as What Lola wants, 
as immortalised by Gwen Verdon. 

The direction by David Pountney, 
which won a prize for Opera North 
at the world premiere at the 
Munich Biennale a fortnight ago, 


can be seen at the Grand Theatre, 
Leeds, this week and then in Hull. 
Nottingham and Manchester. 

As a production it has all the 
theatrical audacity and exuberance 
of Pountney at his best He turns an 
opera chorus into a mob of soccer 
rowdies charging into Munich (very 
self-referential, this piece) with the 
topical cry of “My team is fed on 
British beef!" He can, with Quinny 
Sacks’ choreography, depict the 
relationship between star player 
and anthropomorphic ball (soprano 
Nicola Sharkey in a piebald body- 
stocking) as a tenderly manipula- 
tive ballroom dance. A bierkeller 
scene evokes those Gennanicisms 
so wickedly caricatured in ENO’s 
KBnigskinder. Like Huntley Muir’s 
award-winning sets and costumes, 
the production deserved its prize. 

The work itself is more problem- 


atic. Brenton’s libretto is too wordy 
for opera, especially with the com- 
pany’s less than perfect diction. 
After the acid test of seeing the 
piece without reference to cast or 
synopsis, I was startled to see I had 
missed a singing dachshund, not to 
mention the universal issues of 
morality, power-play and the 
unsuitability of women in the play- 
ers’ baths. The production’s swish 
and style fails to disguise the epi- 
sodic, undeveloping nature of the 
first half, or the delay in getting to 
grips with the Mephistophelean de- 
ment until well Into the second. 

Mason’s score is a cheerful kalei- 
doscope of allusions, quotations and 
parodies where the listener, how- 
ever fleetingly, snatches fragments 
of everything from Humperdinck 
and Wagner to Bernstein and “The 
Stripper". Even Terry Bond, the 


golden-hoy of the pitch, suggests 
vulnerability with a stammer that 
recalls Billy Budd. Philip Sheffield 
makes the most of the one ade- 
quately-characterised role, oddly 
resembling Tony Blair, who doubt- 
less also has various diabolical 
pacts to consider. 

As a spectacle the work is ftm, 
with its vivid if obvious depiction of 
tabloid hacks (who end up briskly 
copulating) and its excitingly cho- 
reographed soccer match. 

But for the most part the charac- 
ters remain tokens, fleshed out nei- 
ther with words nor music. Richard 
Suart as the manager could turn to 
juggling, soft-shoe shuffles or Gil- 
bert) an patter at the drop of a 
trilby: splendid stuff, but better 
than the work deserves. 


Grand Theatre, Leeds. 



A football extravaganza looking for goals: as a spectacle Playing Away is 
ftm but as an opera it is far too wordy and episodic 


Theatre 

Acclaimed 


King Lear 
cuts the 
deepest 


T railing a wake of acclaim 
from last year at Strat- 
ford-upon-Avon, Adrian 
Noble's Royal Shakespeare 
Company production has reached 
London, still with Robert Stephens 
as the King. 

The acclaim was deserved. If a 
“complete" representation of King 
Lear is a will-o'-the-wisp ideal, 
th is one cuts deeper than most, and 
more consistently. No other that I 
have seen has laid the chill meta- 
physical bleakness of the play so 
bare, nor made so strong a case for 
recognising that as its central 
theme. 


What do you want from a King 
Lear? If it is tender, heart-rending 
moments. Noble is brusque with 
those. On his view of the play, they 
would be sentimental cheats. 
Instead, all the lusty intrigues are 
set in a coolly distant (but beady- 
eyed) focus. The human twitchings 
and cavortings serve only to con- 
firm Lear’s ultimate discovery: that 
scarcely anything in this indifferent 
world matters much, nor suggests 
anything else for our consolation. 

As a mere poetical message, that 
might ring dully; but Noble sees to 
it that all the dramatic action is 
superbly clear and vivid Lear has a 
complicated story and leads inexo- 
rably towards the cruel final vision. 
Anthony Ward’s designs reduce the 
earthy details to bare symbols, but 
his churning astronomical back- 
drops stress the inhuman grandeur 
of a “real", space-eye setting. The 
experience is worth it, despite some 
calculated losses along the way. 

Nothing becomes Stephens' Lear 
like going mad. From there he 
expands into profound, shattered 
insights hugely indulged by the 
production, and quite rightly. Ear- 
lier he has to play his King to 
daughterly stereotypes: Abigail 
McKern’s Cordelia (dressed as a 
goody-two-shoes with pigtail and 
chaste tunic), Jenny Quayle’s Regan 
(a sexy, overly bright-eyed hostess) 
and Janet Dale’s anxious little 
Goneril, who looks like something 
between Goldie Hawn and the ex-Is- 
lington leader Margaret Hodge. 

At the start, their daughterly effu- 
sions pretty set-speeches, every one 
(even Cordelia’s) are urged on by 
sympathetic chuckles from Lear’s 
courtiers. It is shocking and irratio- 
nal, then, that the King should 
reject Cordelia's plainer homage so 
violently, without warning; but 
SUCh things do happen, and the play 
goes on to record much nastier 
twists among its personnel. Little 
by little the sharpest vicissitudes 
fade Into temperate blurs, because 
the overwhelming pointlessness of 
life swallows them up without nam- 
ing favourites. 

Along the way the RSC players 
supply vital flashes: David Brad- 
ley’s Douglas Hurd-like Gloucester 
(prissy, decent and politic), David 
C alder’s staunch old Kent, Ian 
Hughes' archly androgynous Fool, 
Mark Lockyer’s repellently oily 
Oswald. Simon Russell Beale's 
saintly Edgar is perhaps elevated a 
touch too far. John Normington 
keeps his Albany down to a level of 
intense decency, and Owen Teale 
plays the bastard brother Edmund 
with expansive relish, while Simon 
Donnandy taps an authentic, even 
psychopathic vein for his horrifying 
Cornwall. One way and another, the 
icy, colossal scale of the play makes 
itself felt as I have never met it 
before. 


David Murray 


Barbican Theatre, in repertory 
until August 30. 


1 international | 


AR 

IS 

GUI 

DE 


■ ATHENS 

Megaron Tonight, tomorrow: 
Alexandras Myrat conducts La 
Camerata in orchestral works by 
Mozart anti Tchaikovsky, with piano 
soloist Bruno Leonardo Getoer. Next 
Wed: first of four concerts by 
Orchestra National du Capitole de 
Toulouse conducted by Me he! 
Ptasson. including two performances 
of Berlioz’s Les Troyens (01-728 
2333/01-722 5511) 


■ BERGAMO 

The annual festival at Bergamo and 
Smstia runs tifl June 1 1 with an 
gniphasis un the piano music of 
Bach, Mendelssohn. Schumann 
and Reger. Highlights of toe final 
week fndude recitals by AJida de 
Lamocha in Brescia on Mon and 

Befla Davidovich m Bergamo on 

Tues (Bergamo: 035-249631. 
Brescia: 030-375 7974) 


■ BOLOGNA 

Teatro Communal® The season 
ends with concerts tomorrow and 


Sat conducted by Etiahu Inbal, with 
a programme consisting of 
Petrassi's Magnificat and Ravel's 
Daphnis et Chloe (051-529999) 


■ FLORENCE 

MAGGIO MUSJCALE 
Semyon Bychkov conducts the 
Maggio Orchestra tonight at the 
Teatro Communale in Beethoven's 
Fourth Piano Concerto (Maria Tipo) 
and Stravinsky’s complete baHet 
music for PuldneUa. Roberto 
Cominati gives a piano recital on 
Tues. Later in June there will be 
a Japanese operatic double- bill 
devised by Bob Wilson, concert 
performances of Lady Macbeth of 
Mtssnsk. a MaggtoOanza triple bin 
and a concert by the Dresden 
SteatekapeUe under Sincpoli. The 
festival runs till July 1 (055-277 
9236) 


■ GENOA 

Teatro Carlo Fefice There is a final 
performance tomorrow of Lucia 
di Lammermoor, with cast headed 
by Marietta Devta. The next 
production is Leoncavallo's three-act 
operetta La regmetta deffe rose, 
opening June 14 (010-589329) 


■ LONDON 

THEATRE 

• Rutherford & Son: the National 
revives Gifts Sowerby's 1912 
portrait of suffocating Victorian 
values. Bob Peck plays John 
Rutherford, a man obsessed with 
the running of his factory at toe 
expense of all compassion. Katie 
Mitchell directs in the Cottestoe. 


Opens tonight (National 071 -928 
2252) 

• Murder m the Cathedral: 
Stephen Prmlotl directs this new 
RSC production of T.S. Biot's 
greatest play, inspired by the story 
of Thomas Becket Opened last 
night (The Pit 071-638 8891) 

• King Lear Robert Stephens 
plays Lear In Adrian Noble’s RSC 
production, transferred from 
Stratford. Just opened (Barbican 
071-638 8891) 

• A Midsummer Night's Dream: 
the summer season in Regent’s 
Park is now under way with Deborah 
Paige's new production of 
Shakespeare’s supernatural tale 
{Open Air 071-486 2431} 

• Pericles: the National’s new 
production of Shakespeare's magic 
epic is directed by Phylfida Lloyd, 
with Dougas Hodge in the title role. 
In repertory at the Olivier with Alan 
Bennett's acclaimed stage 
adaptation of Kenneth Grahame’s 
novel The Wind in the WHIows 
(National 071-928 2252) 

• A Month in the Country; Helen 
Mirren is in dazzling form as the 
bored Russian housewife of 
Turgenev’s toiguid masterpiece. 
Ends June 11 (Albery 071-867 1115) 

• Arcadia: West End transfer of 
Trevor Nunn's National Theatre 
production of Tom Stoppard’s 
complex but often funny drama 
(Haymarket 071-930 8800) 

• Dead Finny: Terry Johnson’s 
new comedy of sexual impotence 
has nudity, swearing, tension and 
bite. With Zoe Wanamaker and 
David Haig (Vaudeville 071-928 
2252} 

OPERA/DANCE 

Covent Garden The Royal Opera 
has MosA m Egrtto with Ruggero 


Raimondi (tifl June 11) and a new 
production of Aida with Cheryl 
Studer (first night June 16). The 
Royal Ballet has Don Quixote with 
Sylvie Guillem and Vtviana Durante 
alternating as prima ballerina in 
Anthony Dowell's staging of the 
Baryshnikov production (till June 
25). A mixed bill including 
MacMtflan’s Winter Dreams opens 
on June 18 (071-240 1066) 
Coliseum ENO’s new production 
of Jen ufa, staged by Lucy Bailey 
and conducted by Sian Edwards, 
opens next Wed with cast headed 
by Susan Bullock, Josephine 
Barstow and Kim Begley. Repertory 
also indudes Peter Grimes starring 
Philip Langridge and Cosi fan tutte 
with cast headed by Vivian Tierney 
(071-836 3161) 

Sadler’s Wells Washington Ballet 
presents two programmes next 
week, opening on Tues, with 
choreographies by Nils Christe, 
Monica Levy and Choo-San Goh 
(071-278 8916) 

CONCERTS 

South Bank Centre Tonight 
Krystian 2 merman piano recital. 

Sat Daniel Barenboim conducts 
Chicago Symphony Orchestra in 
first UK performance of Elliott 
Carter's Partita, plus works by 
Strauss and Brahms. Sun: Algerian 
Rai musician Cheb Khaled. Tues: 
Muse Theatre Wales present s Peter 
Maxwell Davies' The Lighthouse. 
Wed: Murray Perahia piano recital. 
Next Thurs and Sat: John Eliot 
Gardiner conducts Don Giovanni 
(071-928 8800) 

Wigmore Hall Sat: Nash Ensemble 
and baritone Frangois La Roux in 
an 80th birthday concert for Felix 
Aprahamian (071-935 2141) 
Barbican Sun, next Thurs: Kent 


Nagano conducts LSO in two 
programmes with violin soloist 
Viktoria Mullova. Tues: Midori viofln 
recital (071-638 8891) 


■ MADRID 

Teatro Lirico La Zarzuela Tonight 
and Sun: Odon Alonso conducts 
Emilio Sagi's new production of 
Emilio Am'eta’s 1871 opera Marina, 
with cast headed by Alfredo Kraus 
and Ana Maria Gonzalez (01-429 
8225) 

Auctitorio National de Mustca 
Tonight: Spanish National Chorus 
in contemporary Spanish works. 
Tomorrow, Sat, Sun: Antoni Wit 
conducts Spanish National 
Orchestra in works by Lutoslawski, 
Mozart and Musorgsky-Ravel, with 
piano soloist Ewa Pobiocka (01-337 
0100 ) 


■ MILAN 

Teatro aSa Scala Tonight, Sat, next 
Tues. Wed and Fri: Giuseppe 
Sinopoli conducts Luca Ronconl's 
production of Etektra, with cast 
headed by Sabine Hass/Jans 
Martin. Reinhild Runkel/Hanna 
Schwarz and Horst Hiestermann. 
Tomorrow. Mon (with seven further 
performances till June 30): Riccardo 
Muti conducts Gilbert Defio's 
production of Rigoletto, with cast 
headed by Leo Nucci, Roberto 
Alagna and Ruth Ann Swenson 
(02-7200 3744) 

Teatro Nuovo Tonight, tomorrow: 
Ballet of La Scala in Roland Petit's 
Tout Satie (02-7200 3744) 


■ NAPLES 

Teatro San Carlo Tonight, Sun, 


next Wed: Manon Lescaut with 
Miriam Gauci and Nicola Martinucti 
(081-797 2331) 


■ ROME 

Teatro Valle Tomorrow: Edita 
Gruberova song recital. Sat, Sun, 
Mon, Tues: Daniels Gatti conducts 
Orchestra deii'Accademta di Santa 
Cecilia in works by Tchaikovsky 
and Prokofiev, with mezzo soloist 
Olga Borodina (06-678 0742/ 
06-6880 3794) 


■ SPOLETO 

This year's festival runs from June 
22 to July 10. Highlights include 
a staging of Wozzeck by 
avant-garde German producer 
GOnter Kramer and a Poulenc 
doubte-biU pairing his surreal opera 
Les mamelles de Tiresias with a 
reconstruction of Nijinska's original 
choreography for Les Biches. There 
will also be performances by Martha 
Graham Dance Company and 
Roland Petit’s Ballet National de 
Marseille (Associazione Festival dei 
Due Mondi, Via Cesare Beccaria 
18, 00196 Rome. Tel 06-321 0288 
Fax 06-320 0747. Tickets can be 
bought at toe Teatro Olimpico in 
Rome 06-323 4890 and at the 
Teatro Nuovo in Spoleto 
0743-40265) 


■ TURIN 

Teatro Regio Edita Gruberova gives 
a song recital on Mon. The next 
opera production is La Cenerentola, 
opening on June 14 and running 
till June 30 (011-881 5214) 


ARTS GUIDE 

Monday: Berlin, New York and 
Paris. 

Tuesday: Austria. Belgium, 

Netherlands, Switzerland, Chi- 
cago, Washington. 
Wednesday: France, Ger- 
many, ScarKfirtavta. 

TTtursday: Italy, Spain, Athens, 
London, Prague. 

Friday: Exhibitions Guide. 

Enropean Cable and 
Satellite Business TV 
(Central European Time) 
MONDAY TO FRIDAY 
NBGfSuper Channel: FT Busi- 
ness Today 1330; FT Business 
Tonight 1730, 2230 

MONDAY 

NBC/Super Channel: FT 
Reports 1230. 

TUESDAY 

Euronews: FT Reports 0745. 
1315, 1545, 1815, 2345 

WEDNESDAY 

NBC/Super Channel: FT 
Reports 1230 

FRIDAY 

NBC/Super Channel: FT 
Reports 1230 

Sky News: FT Reports 0230, 
2030 

SUNDAY 

NBC/Super Channel: FT 
Reports gpan 

Sky News: FT Reports 0430, 
1730; 









FINANCIAL. TIMES THURSDAY JUNE 2 1994 


12 


Small, trendy but 
imperfectly formed 



book 

review 


For the past 15 
years, conven- 
tional wisdom 
has been that 
small is both 
bountiful and 
beautiful in 
business. With 
large compa- 
nies - from IBM to Kodak, 
General Motors to Westing- 
house finding it ever harder 
to adjust to an era of radical 
c hang e their days are num- 
bered. the argument runs. 
Instead, small companies have 
become the prime driver of job 
creation, technological innova- 
tion and economic growth. For 
every Microsoft, Benetton or 
Body Shop, surging from small 
to large with remarkable 
speed, there are thousands of 
agile minn ows which will 
never grow so big, but which 
are tbe economy’s powerhouse. 

Nonsense, says Bennett Har- 
rison. a Pittsburgh professor of 
political economy who, as the 
author of recent books on 
American “deindustrialisation" 
and “working poverty", is no 
stranger to controversy. 

Instead, he argues that the 
prime motor of economic 
growth is becoming flexible, 
worldwide “networks of pro- 
duction". These are dominated 
by large companies but contain 
dependent minnows with a 
“dark side": unskilled, low-paid 
and unprotected workforces. 

Even in vibrant local regions 
and districts such as those in 
northern Italy and Silicon Val- 
ley. the idealised picture of 
clusters of interdependent, 
innovative small companies 
sparking each other’s growth 
is incorrect, says Harrison. 
Such districts are coming 
increasingly under the influ- 
ence of large companies, from 
Benetton to Japan's Fujitsu. 
He complains that their global 
networks are wreaking havoc 
with traditional government 
policies for regulating big busi- 
ness. 

To back his case against 
what he calls "the myth of 
small firms", Harrison has cer- 
tainly done his homework: a 
fifth of his 300-page book con- 
sists of references to research 
by others in economics, social 
science, technology and busi- 
ness strategy. He has, it seems, 
examined almost every side of 
every argument about the sub- 
ject Almost, but not quite. 

His evidence on the over- 


LEAN AND MEAN: 
The Changing Landscape 
of Corporate Power 
in the Age of Flexibility 
By Bennett Harrison 

Basic Books. New York. $25 


stated role of small companies 
is important, but less forceful 
than it looks at first sight. This 
is partly because his definition 
of “small” is inconsistent: 
sometimes he confines It to 
organisations of less than 20 
employees, sometimes of under 
100 and occasionally higher 
still. Most of the research 
studies he collates and com- 
pares have also already been 
published, notably the work of 
a team which includes Profes- 
sor Janies Medoff, an influen- 
tial Harvard economist. 

In simple terms - though the 
statistics are far from simple, 
hence the continuing contro- 
versy - Harrison argues that 
there has been no upward 
trend whatever over the past 
quarter century in small com- 
panies' share of employment in 
Japan and western Germany, 
the world's two most success- 
ful large economies. In the US, 
a modestly growing relative 
share of smaller units of pro- 
duction is discernible - not all 
of them owned by smaller com- 
panies. however - but only for 
manufacturing; in services, the 
average size of unit has grown. 

Only in the UK. Harrison 
argues, is there uniform and 
unambiguous evidence that 
s mall is becoming increasingly 
bountiful, both for individual 
plants and for whole compa- 
nies. But, as he says, that may 
be more a function of the fail- 
ure of large manufacturers 
than a gauge of the real 
vibrancy of s mall enterprises. 

Against the belief that small 
companies are more innovative 
than large ones, Harrison cites 
studies which suggest that this 
is definitely not true of process 
innovation (in production, 
information technology and so 
on) and is questionable in 
product innovation. 

Harrison's corrective to the 
“s mall is beautiful" doctrine is 
especially timely in American 
political terms. Debate about 
the justification for a new 
industrial policy, and the 
shape it should take, has been 
under way ever since President 
Bin Clinton took office. 


But that debate has encour- 
aged Harrison to take a polar- 
ised position on several counts. 
First, most of the book is about 
manufacturing; there is too lit- 
tle discussion of the implica- 
tions of the rapid recent Amer- 
ican (and British) shift to 
services. Nor does he examine 
property whether the acceler- 
ated pace of information tech- 
nology and large company sub- 
contracting favours only big 
service providers, or also speci- 
alised enterprises on a smaller 
scale. 

Second, in his haste to refo- 
cus attention from small com- 
panies on to large ones, he falls 
into the common trap of 
almost ignoring those in the 
middle. The real story of Ital- 
ian and especially German 
industrial success has not been 
very small companies, but spe- 
cialised medium-sized ones. In 
a world of global networks, 
small may not be as powerful 
as was once thought, but 
medium size may remain so in 
certain products and services. 

Third, in spite of his evident 
and interesting expert know- 
ledge of the real workings of 
Italy's (government-supported) 
“industrial districts”, some of 
his other perceptions about 
Europe are superficial. To cite 
the recent spate of cross-border 
takeovers and alliances as a 
sign of future strength in Euro- 
pean big business is to ignore 
not just the weakness of some 
of those large companies, but 
also the evidence that most 
such takeovers fail 

On the other hand. Harrison 
provides plenty of meat for 
business people and politicians 
to chew on in the juxtaposition 
of his two main themes: the 
changing shape of concen- 
trated corporate power, from 
centralised to dispersed; and 
the political, economic and 
social riiiammaa which this cre- 
ates for both national and state 
governments. 

Oddly, in spite of all his con- 
cern about the socially "dark 
side” of global network produo 
tion, he offers few specific pol- 
icy recommendations, other 
than better enforcement of 
existing labour laws, and the 
provision of greater technical 
assistance to small and medi- 
um-sized companies. 

Christopher 

Lorenz 


THE FT INTERVIEW: Ruud Lubbers, Dutch prime mimster 


Spoiler in the 
Euro contest 



Ruud Lubbers: no longer favourite to be Commission president 


Mr Ruud 
Lubbers ought 
to be feeling 
very sore. This 
week, the 
Dutch prime 
minister saw 
his bid to succeed Mr Jacques 
Delors as president of the 
European Commission blocked 
by a Franco-German steam- 
roller in favour of Mr Jean-Luc 
Dehaene, prime minister of 
neighbouring Belgium. Once 
the favourite, Mr Lubbers finds 
hiwiswif scrambling to salvage 
his candidacy. 

The Franco-German prefer- 
ence for Mr Dehaene is a clear 
snub; but Mr Lubbers appeared 
unruffled yesterday morning 
as he sipped black coffee in his 
office in the centre of the 
Hague. “The choice that has to 
be made now is not only a 
choice to be made by Bonn and 
Paris, ... it is. of course, up to 
all other countries [of the 
European Union].” 

His appeal to a broader con- 
stituency remains his strongest 
card; but it poses an explicit 
challenge to the Franco-Ger- 
man axis which has set the 
direction of the Union for the 
past 30 years. Unless he or Mr 
Dehaene withdraws, there 
could be an unseemly row at 
the European summit in Corfu 
on June 24-25, when EU leaders 
are set to decide in secret on 
the successor to Mr Delors. 

For Mr Lubbers, this is a 
painful prospect A consensus- 
seeker schooled in the art of 
coalition-building in Dutch pol- 
itics, he has spent 12 years bro- 
kering compromises inside the 
EU with German Chancellor 
Helmut Kohl and French Presi- 
dent Francois Mitterrand - on 
issues ranging from the mind- 
numbing detail of the EU bud- 
get to German unification and 
the Maastricht treaty, which 
he pulled off at the end of the 
1991 Dutch presidency. 

Yet the Lubbers candidacy 
now transcends personalities. 
It is about the place of the 
Netherlands inside the Union, 
and the dile mma of smaller 
states struggling to preserve 
their influence ahead of the 
prospective entry of four new 
members from Austria, Swe- 
den, Finland and Norway. 

The Dutch dilemma is poi- 
gnant because the Netherlands 
has never won its fair share of 
Euro-spoils, despite being an 
EU founder member. Unlike 
Belgium or Luxembourg, it has 
failed to secure Euro-institu- 
tions such as the European 
Parliament, the European 
Commission or the European 


Court of Justice, which are 
money-spinners for the local 
economy. Only last year, the 
Dutch bid to put the European 
Monetary Institute in Amster- 
dam was dashed by Mr Kohl’s 
insistence mi locating the fore- 
runner of the European central 
h ank in Frankfurt. 

The Lubbers candidacy was 
supposed to redress the bal- 
ance. Here was a prestigious 
post which Mr Delors has 
changed beyond recognition 
since he first arrived in Brus- 
sels almost 10 years ago. 
Thanks to Mr Delors, the presi- 
dent of the Commission is not 
just a top-flight bureaucrat, he 
is the public face of the Union. 
With his Christian Democrat 
background, and 12-year mem- 
bership of the club of EU lead- 
ers, Mr Lubbers looked like a 
shoe- in. So what went wrong? 

Mr Lubbers concedes be may 
have alienated the French and 
the Germans earlier this year 
by refusing to co mmit himself 
to entering the race. He was 
wonted about distracting pub- 
lic attention from last month's 
Dutch general election at a 
time When Mr El CO B rinkman , 
his hand-picked successor, was 
struggling to take over his 
mantle. He had also pledged to 
Queen Beatrix to serve out his 
term as prime minister, which 
precluded a public campaign 
for the Brussels post of the 
kind waged by Sir Leon Brit- 
tan, chief EU trade negotiator. 
Sir Leon and Mr Peter Suther- 
land. former head of Gatt. are 
long-shot contenders. 

In retrospect. Mr Lubbers's 
reticence looks like a miscalcu- 
lation. The French seized on 
Mr Dehaene. a French-speaker 
on the left wing of the Chris- 
tian Democrat party, who had 
impressed during last year's 
Belgian presidency of the EU. 
Mr Kohl, who favoured ini- 
tially Mr Wilfried Martens, a 
former Belgian premier, fell 
into line. 

Mr Martens did not com- 
mand the support of his own 
government, so "Kohl feared 
that he was empty-handed", 
says Mr Lubbers, adding mis- 
chievously that the rotund Mr 
Dehaene had the goesting 
(appetite) for the top job. 

That may not be the whole 


story. Mr Lubbers and Mr Kohl 
have never been close. Nor did 
the German chancellor appre- 
ciate the Dutchman's call for 
clarity about the German-Pol- 
ish border during German uni- 
fication, challenging Mr Kohl's 
preference for leaving the 
question open in order to pla- 

'We should not 
accept too easily 
lots of exceptions 
and differences 
in speeds 1 

cate the German right ahead of 
the 1990 general election. So Is 
he too independent-minded for 
Mr Kohl? The Dutch prime 
minister pauses: “Perhaps." 

There is no question that Mr 
Lubbers has his own views on 
the future of Europe. He is 
keen on a common European 
defence evolving under the 


umbrella of the Nato alliance, 
and is frustrated with the UK 
government for dragging its 
feet. He also supports Euro- 
pean monetary union, mainly 
because the Dutch are certain 
to be in the vanguard -along 
with the Germans. 

Yet he is sympathetic to Brit- 
ish warnings about the risks of 
integration moving too far 
ahead of European public opin- 
ion. Even in his owu country, 
he feels that enthusiasm for 
Europe is diminishing. Hence 
the need for Europe's leaders 
to restore a sense of mission. 
He offers three slogans: 

• Efficiency. Mr Lubbers, who 
comes from a line of Rotterdam 
industrialists, wants tighter 
controls on the Ecu70bn 
annual EU budget and a bigger 
role for the Court of Auditors, 
the spending watchdog. “Peo- 
ple must have the feeling that 
resources are well spent." 

• Democracy. He wants more 
transparency in decision-mak- 


ing. He favours a bigger rote 
for the European Parliament In 
shaping legislation, more pub- 
lic debates with the Commis- 
sion. and more involvement by 
national parliaments in areas 
of inter-governmental coopera- 
tion under the second and 
third pillars of the Maastricht 
treaty, such as foreign policy, 
security and justice matters. 

• Credibility. He is worried 
about the EU stretchiug its 
ombitiuns. He cautions against 
a “Big Bang” conference to 
review Maastricht in 1996 
which could introduce more 
qualified majority voting in an 
expanded union. He welcomes 
the "inevitable” EU member- 
ship of the central European 
countries such as Poland, Hun- 
gary and the Czech Republic; 
but he warns against arousing 
unrealistic expectations about 
the timing of entry. 

Y et Mr Lubbers wants 
the EU to work. With- 
out criticising Mr John 
Major's rail this week 
for a multi-speed Europe, he 
says the principle of opting out 
should apply only to the sec- 
ond and third pillars. On Emu, 
he concedes that some coun- 
tries may move faster than oth- 
ers. “but there must be a lim- 
ited time difference. We should 
not accept too easily ail sorts 
of exceptions and differences 
in speeds.” 

On the other hand. Mr Lub- 
bers has little sympathy for 
French calls for a club of 
"founder members" led by 
France. Germany, the Benelux 
and Italy - an idea floated 
again this week by Mr Alain 
Lamassoure, France's minister 
for European affairs. 

“I find this fascinating. Why? 
Because he suggests that the 
old Six should give a new 
example of what to do. But lie 
[Lainassourel writes the article 
on the very same day as two or 
them. France and Germany, 
come out of the preparations 
for the next [European | Coun- 
cil not as Six but as Two. Italy 
and the Netherlands arc 
included in his architecture, 
but are excluded from consen- 
sus-seeking." 

There is a firmness in tone 
which suggests that Mr Lub- 
bers is loath to let a Franco- 
German diktat push him out of 
the race. So is he ready to take 
his candidacy “down tu the 
wire" at Corfu? “Yes." came 
the unequivocal response. 

Lionel Barber and 
Ronald van de Krol 




]§jmjbpris§(^ 


npiie a ris r e ad t he r es u I ts of our unique 
So^-f o r the late s||s 
antf how ther eventual 
_ f^pt:you, buy^THe European this ; > 


THEWEEKLY NEWSPAPER FOR' EUROPE- 


LETTERS TO THE EDITOR 

Number One Southwark Bridge, London SE1 9HL 

Fax 071 873 5938. Letters transmitted should be clearly typed ana not hand written. Please set fax for finest resolution 


India’s policy right for monetary growth 


From MrSKRao. 

Sir, Martin Wolfs report on 
India (“India resists IMF pres- 
sure over currency”, May 26) 
illustrates the type of dile mma 
which liberalising economies 
face in the management of 
exchange rate policy. 

India's exchange reserves 
accumulated to present levels 
mainly on account of portfolio 
flows, which can easily flow 
out again should the foreign 
investors reassess the relative 


attraction of India as a market. 
Adjusting exchange rates to 
the size or reserves could thus 
run the risk of introducing a 
degree of exchange rate volatil- 
ity which could undermine 
investor confidence. Surely, 
what the government of India 
is doing Is right to try to ster- 
ilise foreign exchange reserves 
to ensure that monetary 
growth is stable. 

India's fiscal deficit had been 
high partly because of reduced 


revenues from customs duties 
which was in turn due to 
reduced tariffs combined with 
low level of imports and invest- 
ment The trick is to find ways 
of promoting investment. 
Under the present conditions, 
by throwing open infrastruc- 
ture projects (communications, 
power, etc) to private sector 
investment in a much more 
vigorous fashion, it might be 
possible to Induce a revival of 
private sector investment. 


Including foreign. Investment 
in infrastructure is import-in- 
tensive and the present 
reserves should provide the 
cushion needed for it 
Improving incentives for 
investment rather than adjust- 
ing exchange rates, will be tbe 
key for improving growth, fis- 
cal balance and reserve man- 
agement 
S K Raa 

7 Mansfield Gardens. 

London NW3 5SJ 


Not just great - but ‘The Master’ 


FYwn Professor J R Pole. 

Sir, Your correspondent 
Laura Thompson needs to do 
some serious reading. She says 
(“Brian Lara - the dream 
machine". May 30) that Jack 
Hobbs was “another great 
cricketer, but not in the race- 
horse class” - meaning (appar- 
ently) not in tbe highest class. 
Hobbs, the first cricketer to be 
knighted, was certainly the 
only cricketer to share with 
Henry James the accolade of 
“The Master”. 

I would submit that he was 
the greatest batsman, and 
probably tbe best cover point, 
between the age of W G Grace 
and that of Don Br adman - a 
very long innings, which took 
in the profound alteration in 


From Lord Moore and others. 

Sir, As independent direc- 
tors, we should like to correct 
two of the points made in your 
editorial, “The cost of saving 
energy” (May 25), on the objec- 
tives and organisation of the 
Energy Saving Trust. 

You state that the trust is 
intended to subsidise house- 
hold improvements such as 
low-energy light bulbs, effi- 
cient boilers and loft and wall 
Insulation. While the trust 
does plan schemes that involve 
these measures, our objective 
is to nurture and stimulate 
embryonic markets to sustain- 
ability so that resultant prod- 
ucts and services can replace 
their more inefficient counter- 
parts. The success of our gas 
condensing boiler scheme illus- 
trates this principle, with 
nearly 10.000 applications for a 
£200 rebate on the cost of 
installing this type of boiler 
received during the scheme’s 


the way the game was played 
after the first world war. 

Hobbs mastered the mystery 
of the googly, which I believe 
Grace considered an “unfair” 
delivery. He scored 197 first- 
class centuries, incredibly hit- 
ting 100 of them when more 
than 40 years of age. which 
Bradman could not have done. 
He and Herbert Sutcliffe once 
batted all day on a sticky Mel- 
bourne wicket, a project in 
which Bradman would not 
even have been interested. 

Hobbs was not only the 
greatest but also tbe best-loved 
player of his era. If be did not 
often amass the very high 
scores which became more 
common in the Bradman era, it 
was at least partly because he 


one year pilot. Resulting com- 
petition and volume produc- 
tion have already led to a 10 
per cent reduction in the aver- 
age price of such boilers, with 
several new producers and sup- 
pliers entering the market As 
with all of our schemes, the 
level of rebate provided will be 
reduced progressively as the 
price differential decreases 
over time. 

You also comment that “the 
trust lacks the administration 
to disburse £300m a year in 
parcels of several hundred 
pounds, let alone to identify 
which households should bene- 
fit”. As we explain in our stra- 
tegic plan, the trust does not 
intend directly to manage any 
schemes itself. Instead, it will 
determine the most effective 
method of delivering each 
scheme and then select the 
appropriate delivery mecha- 
nism. Some will operate at a 
national level, others will be 


tended, soon after getting his 
100, to present his wicket to 
the bowler he had flogged the 
most (or so I've heard). 

He was supremely elegant 
and someone (Card us? Swan- 
ton?) once remarked that he 
never played an ungrammati- 
cal stroke. 

Incidentally, Brian Lara has 
not come out of tbe blue. 
Everyone in Kingston, 
Jamaica, was talking about 
him when the Australians 
were last there. They were 
impatient for Greenidge to 
retire - to which Greenidge 
replied by hitting 215 or so in 
the fifth test 
J R Pole. 

20 Divinity road. 

Oxford 0X4 1LJ 


implemented regionally within 
a national framework, while 
some will be best run indepen- 
dently and locally. Project 
implementation will be carried 
out by tbe most appropriate 
external body, either through a 
contractual agreement with 
the trust or under the trust's 
monitoring and evaluation pro- 
cedures. 

The trust wishes to be a focal 
point for energy efficiency 
work In the UK but has no 
wish to duplicate expertise 
already developed over many 
years. Instead, our intention is 
to remain a small organisation, 
dedicated to catalysing new 
ideas into practical schemes. 
Moore of Lower Marsh, 

Sir Frank Gibb. 

Jim Potter, 

Dr Dickson Mabon, 

Usha Prashar, 

Energy Saving Trust, 

11-12 Buckingham Gate, 

London SW1E SLB 


A limit to 

options 

excess 

From Mr Peter Broum. 

Sir, We would support David 
Rhoads’s warnings ('Letters, 
May 27) of legislative action, 
based on US experience, if 
aspects of executive pay are 
seen to be excessive. The pen- 
sions “cap" is a recent UK 
example and some elements of 
option awards must be in the 
sights of future ministers and 
their advisers. 

The accusations of excess lie 
not in exercising options but 
immediately selling tbe entire 
holding, and it is this aspect of 
scheme design that is princi- 
pally exercising remuneration 
committees and investors. 

If on exercise of ait option 
worth more than 30 per cent of 
current salary an executive 
could only sell enough shares 
to allow him/her to reinvest in 
purchasing the remainder or 
the option entitlement for a 
further period of, say, three 
years, the danger of the 
“inspired" sales of option 
shares would be reduced. 

The trouble with 1984 execu- 
tive option legislation was its 
uneasy balance between the 
concepts of long-term perfor- 
mance awards and sharehold- 
ing democracy as many more 
holders have used options as a 
one-way bet on a bundle of 
cash rather than becoming real 
shareholders. 

Option rights restricted to 
the reinvestment of cash in 
some retained shares would 
restore the concept of share- 
holding executives without any 
knock-on effect on revenue or 
other related legislation. 

Peter Brown, 
chairman, 

Top Pay Research Group. 

9 Savoy Street. London WC2 


Focal point for energy efficiency 







13 




FINANCIAL TIMES THURSDAY JUNE 2 1994 


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FINANCIAL TIMES 

?; 'Niraber <^e SouthwarkBridge, London SE1 9HL 
; Tel: 071-873 3000 Telex: 922186 Fax: 071-407 5700 

Thursday June 2 1994 


Case for global 
social security 


The richest fifth of the world's 
population generates - and enjoys 
- 85 . per cent of world output The 
poorest fifth prefaces - and strug- 
gles to survive on - just 1.4 per 
cent. TWs extrawHnary maldistri- 
bution of global prosperity seems 
difficult to justify. But it also 
means that a great deal can be 
done for the poorest at relatively 
limited cost' to the richest To the 
credit of Its authors, at least parts 
of die agenda put forward in this 
year’s United. Nations Human 
Development Report for next 
year's -World Summit for Social 
Development meet that test of 

practicality. 

One of the peculiarities of 20th.- 
century .social security, systems is 
that what might seem a universal 
moral obligation upon the rich to 
help the poor has been turned into 
a narrower obligation to help fel- 
low citizens. The treatment of 
national income as a form of pri- 
vate property is politically inevita- 
ble. Its moral justification Is 
harder to detect 
It also has very practical conse- 
quences. At present the industrial . 
countries; allocate 15 per. cent of 
their Combined national fn fnririptf 
to providing social security at 
home, while only 03per cent goes 
on foreign aid. TOe domestic social 
safety net helps those 100m fellow 
citizens who receive average 
incomes ' of less than *5,000. But 
the poor in developing countries 
number some LSbn, with average 
incomes of less than $300 a year. 
Yet, incredibly, the impression 
persists, particularly in the US, 
that foreign aid is a major diver- 
sion of resources from the more 
deserving at home to the undes- 
erving abroad. 

Tricky choices . 

The challenge of securing what 
the report calls “sustainable 
human development" is ther efore 
just as much to the supposedly 
caring left; of the political spec- 
trum of the advanced countries as 
to the- allegedly tmfeaHpg right 
Everyone would, have to accept 
large changes to their normal way 
of looking at things. . 

The report alsoshowsthatonca . 
wealthy cbtoitries.nndfir : the influ- 
ence of their powerful environ- 
mental lobbies, have raised the 
standard of global sustainable 
development, it is. they, once 
again, who wiH face the tricky 


moral choices. “The north has 
roughly one-fifth of the world’s 
population. ..and consume; 70 per 
cent of the world’s energy, 75 per 
cent cf its metals and 85 per cent 
of its wood.” If global resources 
and carrying capacity are indeed 
limited, as environmentalists 
. insist, then the north’s free access 
to these globally scarce assets can- 
not be justified. If, for example, 
the environment were correctly 
priced and permits issued on the 
bads of population, as weQ as of 
gross domestic product, rich 
nations might have to t ransfer 5 
per cent of their combined 
national incomes to tike poor. 

Human development 

When confronting people with 
choices this painful, it is wise to 
offer an escape. The report's way 
out is a specific practical proposal, 
justified under the label “human 
security”. It argues inter aUa for a 
compact on human development, 
aimed- at meeting the hasfe needs 
of everyone: access to primary 
'education arid health care, clean 
drinking water and sanitation; 
TTTrmimigflHmi of all children; halv- 
ing of m a ternal mortality; access 
to. family planning services fin* aD 
who want them, halving of adult 
illiteracy and elimination of 
severe malnutrition. Among the 
benefits of this programme could 
be a malted reduction in fertility. 

This programme, it argues, 
would cost a mere $30bn440bn a 
year, about a third of what devel- 
oping countries spend on their 
military and 5 per cent of the 
global arms budget This could be 
provided by devoting 20 per cent 
of total developing country bud- 
gets and 20 percent of industrial 
country aid to these objectives. 

This compact is, of course, a far 
cry from the report’s more ambi- 
tious ideas for a “global human 
security fund", financed by some 
. form of global taxation It would 
not of itself necessarily halt the 
political and social disintegration 
that now threatens the survival of 
countries such as Afghanistan, 
An gola, Haiti, Iraq Mozambi- 
que. But the merit of this report is 
that it does more ^ read- 
ers think large thnng tits about the 
peculiar world in which we all 
live. It also presents politically 
and organisationally practical 
ways, of making it somewhat less 
peculiar. 


A Europe of 




Purists might query whether Mr 
John Major is well-advised to dis- 
cuss the future of Europe in lan- 
guage reminiscent of that of a For- 
mula One racing commentator. 
Yet the UK prime minister's 
speech on '.Tuesday night, espous- 
ing a “multi-track, multi-speed” 
Europe, was in many ways a state- 
ment of the obvious. The Maas- 
tricht treaty endorses the concept 
of European integration proceed- 
ing at varying paces. By gaining 
exemptions ^from the Maastricht 
arrangements over social policy 
and monetary union, the UK has 
already enshrined the principle in 
Etaopeahtew. 

Since the 1992-S3 collapse of the 
narrow-margin ERM. patterns of 
EU monetary cooperation, for 
instance, have became still more 
heterogeneous. Over home affairs, 
as well aa defence and foreign pol- 
icy. different EU groupings are 
carrying out intergovernmental 
cooperation' in different ways. As 
the EU grows, perhaps to 16 coun- 
tries next year and more than 20 
by early text century, the ten- 
dency towards greater diversity is 
likely to strength en. 

At * thte -of rampant eteddon- 
rina it. was perhaps not surpris- 
ing mat fib- Major’s self-evident 
remarks should have been seized 
on as a novel statement of govern- 
ment poUcy Almost inevitably the 
prime minister's remarks 
attracted catcalls from the opposi- 
tion that Hie & irredeemably aban- 
doning tire UK to the “slow lane" 
of Eun^fc; 

Hr Major's problems are partly 
of his- own making, but they also 
reveri how Britain is ensnared by 
contradictory fears about the 
devel<g®*&t of Europe. The chief 
difficulty with the prime minis- 
ter’a rhetoric is that he is trjtng to 
send different messages to sepa- 
rate audiences. As a result, both 
messages .and audiences become 
confte&v. 

Overt.xpove 

’ndkteout opting out oflayers 
of European integration may 
assuage Earosceptics' concern 
that Britain’s interests could be 
imdeemmedby poiidas foisted on 


ttinm ^to .Ctmtinextt. Yet such 
comremta disconcert those who 


are 


wonted that an overt move 
towarte poUthal and monetary 
ratal by a group of countries led 
by Fn&ce and Germany could 
cause Britain serious economic 


damage. Equally, Mr Major’s 
trumpeting of a “multi-speed" 
Europe conflicts with his insis- 
tence during the last three years 
that Britain maintains a well-re- 
garded place at the topmast tables 
of European decision-making. 
Even in the contorted world of 
Europolitics, theories of black hole 
physics do not apply. Mr Major 
cannot both be “at the heart of 
Europe" and simultaneously walk 
away from it. 

Independent policies 

At a broader level, Mr Major’s 
statements over Europe mirror 
ambivalence in many EU capitals 
over the continent’s future. By 
underscoring the advantages of 
Britain’s retention of more inde- 
pendent social and monetary poli- 
cies, Mr Major wants to lend 
weight to those in other EU coun- 
tries who doubt the wisdom of a 
federal Europe. 

These doubts certainly exist, 
and they have grown since 199L 
As demonstrated by the opinion 
poll in yesterday’s Financial 
Times carried out across the 12 EU 
members, the German, electorate, 
in particular, has become increas- 
ingly opposed to closer integration 
as laid down by Maastricht 

Recent French government pro- 
posals far intensified cooperation 
by a Franco-German “core" 
appear, at least in part to reflect 
worries in Paris about a slippage 
in Germany's Maastricht commit- 
ment, above all over monetary 
union. Some of these German 
doubts are, it seems clear, also felt 
at the highest level in Paris. It is 
worth recalling that, before he 
became prime minister. Mr 
Edouard BaBadnr publicly voiced 
scepticism about attempts to 
“bind” Germany to western 
Europe through devices such as 
Maartricht 

In view of the .elections in Ger- 
many and France ever, the next 12 
months, the clouds which hang 
over tiie direction of European 
policies are unlikely to lift until 
the EU is much doser to the Maas- 
tricht review conference in 1596. 
hi the meantime, the EU will be 
well served if a consensus gains 
ground that, to many spheres, the 
degree of integration should be 
closely tailored to Individual mem- 
bers’ political preferences and eco- 
nomic capacities. Whatever his 
motives. Mr Major has made a 
sound paint 


A lthough most of the jun- 
kets which economic 
scribes are attending 
this summer relate to 
the 50th anniversary of 
the Bretton Woods institutions - 
the IMF and World Rank - and the 
300th anniversary of the Rank of 
England, it is arguable that another 
anniversary is almost as important 
I refer to that last week, of the 1944 
white paper on unemployment pol- 
icy by toe UK's wartime coalition 
government. This expressed the 
determination of British leaders not 
to return to toe horrors of interwar 
unemployment In the UK. as else- 
where, fUD employment was once 
an uncontrovereial bipartisan objec- 
tive. actually achieved between toe 
mid of the war and toe early 1970s. 

A common feature of the platform 
of all toe candidates for the Labour 
leadership is their expressed deter- 
mination to restore full employ- 
ment This, of course, is easier said 
than done, as can be seen from the 
example of France, which has been 
mostly under Socialist rule since 
toe early 1980s, but where unem- 
ployment is 2% percentage points 
higher than in the UK; or Sweden, 
which maintained low unemploy- 
ment for much longer than most 
countries, but where the jobless 
rate has now soared to 8ft per cent 
It is, indeed, now quite usual for 
historically minded economists of 
all schools of thftnght to pay justi- 
fied tribute to the wisdom and pre- 
science of the white paper, which 
warned - decades in advance - of 
the difficulties that m i g ht occur. 
But at the time it was a compromise 
document It trod a middle way 
between toe apostles of Keynesian 

demand management in toe eco- 
nomic section of the Cabinet Office 
and Treasury Affinals concerned to 
balance the budget at least over a 
business cycle, worried that the UK 
was at the mercy of world economic 
forces and anxious that the UK 
should pay its way in a harshly 

competitive postwar world. 

The white paper's famous first 
sentence began: “The government 

accepts as nng of tboir p rimar y almg 

and responsibilities the mainte- 
nance of a high and stable level of 
employment after the war.* Keynes 
thought thfe more important 
the whole of the rest of the paper. 

But did the government accept 
such a commitment? It accepted 
responsibility for maintaining “total 
demand for goods and services at a 
high level”. But tins was coupled 
with the now-famous warning that 
“policies to maintain demand will 
not work in securing high employ- 
ment unless employers and workers 
exercise moderation in wage mat- 
ters so that increased expenditure 
at the onset of a depression goes to 
increase employment rather 
pay and prices”. Bat the white 
paper had few suggestions for 
ensuring moderation other than 
whorfaiHnm of the fcfarf rp w nrfed to 

by pjatwar governments. 

Even when it camp to maintain- 
ing total spending, the white paper 
bad a l ess Hwn total commitment. 
The authors were, for instance, 
obsessed with the external compo- 
nent of demand, white was not 
under British control. It is also easy 
to read back too mute into toe 
white paper. Its authors did not dis- 
cuss clearly the choice between 

maintaining ncyptinal and mamtairv 

ing real demand. But read in con- 
text with the warnings about pay 
and prices, it is natural to interpret 
it in terms of maintaining demand 
in money terms, that is nominal 
demand. Demand managPTnpnt to 
real terms and “funny money" con- 
trol of public expenditure intruded 
as the official forecasters and statis- 
ticians began to cope with creeping 
postwar inflation. 

The aim of controlling aggregate 
expenditure needs to be reinstated. 
There is nothing to thfe aim which 
a common-sense monetarist should 
reject. After all, why does he believe 
in monetary targets? It is because 
he asserts that there is a stable rela- 
tionship between the money supply, 
M, and total spending measured by 
MV (money x velocity) - white 
implies that he values a stable 
growth in the latter. 

Unfortunately the recent move to 
define macroeconomic policy 
entirely to terms of an inflation tar- 


Wry bread for 
Danes 

■ Now it seems increasingly likely 
that the unwell Manfred Wtener, 
Nato’s 59-year-old secretary general, 
will soon retire - he is not chairing 
a meeting of Nato foreign ministers 
in Istanbul next week - the hounds 
are already ssi£5ng at the gate. 

But although he has all the right 
credentials, one hopeful is faring 
df fsi ppn intnvmt Denmark's uffe 
EUeroann-Jeasen, leader of the 
Danish liberal party, has already 
had bis card marked by none other 
than a fellow Dane, Foul Nyrup 
Rasmussen, leader of the Social 
Democratic party and head of the 
present government 

p. |]fHMnn J ww(m is the owp 
D anish politician who easily strides 
across toe international arena. 
Foreign minister between 
September 1982 and January 1993, 
he is revered in many east 
European countries for having 
stock bis neck out in support of 
their anti-communist independence 
drives. 

But at home EBemannJensen’s 
habit of shaip-toagued 
straigfat-talldng has e a rn ed hhn 
powerful enemies. Rasmussen has 
let it be known - via that trusted 
method, the mriia - that his 
government will not support 
EDemann-Jensen, should he want 
the job. 

still, Eflemann -Jensen will only 
be available if be is still to 


Economic Viewpoint 

Sad jubilee of a 
white paper 

By Samuel Brittan 


UK unemployment takes a turn for the worse . 

Unemptayrra rt frnffipn) • _• r. .. taBatiorTflfi) 



Soroc Martmm iMOgmnAplwhN * ufcBcn - Cot* of fcitopjndwc upta tMTHW«g< r— d » 


get is a step backwards. This is 
explained well by James Meade in 
his new pamphlet. Full Employment 
without Inflation (Social Market 
Foundation, £6). Suppose output 
were to drop In one year by 10 per 
cent, white inflation was just over 1 
per cent There would be no breach 
of the government’s stated objective 
of keeping inflation in the 1 to 4 per 
cent band and no obligation to take 
countervailing action. Such action 
would - at least an present official 
doctrine - have to await evidence of 
actual deflation. An objective for 
total expenditure would lead to ear- 
lier offsetting action. 

Maintaining adequate, but not 
excessive, monetary demand has 


The aim of 
controlling aggregate 
spending should be 
reinstated. No 
rational monetarist 
should object 


two main functions. One is, as the 
last example shows, to prevent a 
downward spiralling slump; the 
other is to prevent a serious infla- 
tionary takeoff by putting a lid on 
growth of total spending. Thus one 
big switch in thinking, compared to 
the white paper, is that demand 
management is today used to con- 
tain inflation, in place of the jaw- 
boning or industry-union talks the 
1944 document envisaged. 

The term “structural” - or, bet- 
ter, “bard core" - can legitimately 
he used for that part of unemploy- 
ment white cannot be permanently 
reduced by maintenance of demand. 
It is this element white has been 
rising from one business cycle to 
the next, and which is especially 
bad in Europe. The proximate 


explanation for this hard core is 
that pay and related costs make 
workers unprofitable to employ. 

With the clear failure of demand 
deficiency to account for the bulk of 
toe rise in European unemployment 
since the early 1970s, attention has 
naturally turned to this aspect If 
toe price of any particular service is 
raised, less win be bought - both 
because purchasers can afford less 
and because they have an incentive 
to substitute s omething else. 

The emphasis of economists such 
as Patrick Mmford of Liverpool Uni- 
versity has been, however, not an 
monopoly labour pricing, as such, 
but an the level of benefit when out 
of work. These economists mate toe 
benefit ratio - that is, the ratio of 
benefits to average pay - the ful- 
crum of their whole explanation. 
The benefit level is supposed to pro- 
vide the floor or reserve wage below 
which it does not pay to take a 
registered job. 

The pricing-out-of-work and bene- 
fit-level explanations come together 
to toe assertion that, without toe 
dole, pay rates would drop, as peo- 
ple would have to price themselves 
into work to survive. I prefer the 
pricing-out formulation because it 
leaves grace for institutional, psy- 
chological and even moral forces, 
which - quite apart from the dole - 
stop pay from shifting to market 
clearing levels. 

If governments rightly hesitate to 
attack the benefit floor, the one 
weapon with which they are left is 
sufficient flexibility in wages and 
other labour costs to price people 
into work. This is not a policy to 
the direct instrumental sense; but it 
involves taking every opportunity 
to break down labour market barri- 
ers of white union pay-setting is 
only one example. It is more or less 
consistent with the British govern- 
ment’s approach to European 
labour markets, as oppose! to pro- 


ponents of the Social Chapter. 

Accepting toe priring-outof-work 
explanation does not entail the 
advocacy. of starvation wages. If 
market clearing pay rates are 
regarded as intolerably low, at least 
three courses are open. The first - 
the counsel of despair - is to accept 
High 1 mpypp i oym^nt as an alterna- 
tive. The second - counsel of perfec- 
tion - is to try to raise the market 
value of workers' services by the 
nostra Of education and t raining so 
that customary pay rates are no 
longer a threat to employment The 
third is supplementary payments to 
lowly paid families. 

The real weakness of the pricing- 
out-of-work thesis, as often 


The recent move 
to define 
macroeconomic 
policy only in terms 
of an Inflation target 
is a step backwards 


expounded, is its timelessness - a 
weakness rarely spotted by the crit- 
ics. Why should there be so much 
more pricing-out-of-work to some 
periods than in others? Or, to put it 
in macroeconomic terms, why 
should the rate of unemployment 
consistent with non-accelerating 
inflation (the “Naim”) have appar- 
ently been so low in the 1950s and 
1960s and then risen so much in the 
later 1970s and in the 1980s? 

There are at least two reasons 
why unemployment could have 
remained so low to the early post- 
war decades. First there was the 
persistence of “money illusion" - 
the surviving prewar belief that a 
pound was a pound and a dollar a 
dollar. Insufficient allowance was 
made for inflation to pay and price 


Observer 


opposition after this autumn's 
general election to the Folketing. 
And no-one is ready to place bets 
on. Rasmussen’s being around by 
Christmas. 


Mile high club 

■ KUA Royal Dutch Airlines is 
p y pp ripnring an nmi<nial industrial 
hiccup - an unexpected cabin crew 
shortage because of stewardess 
pregnancies. 

Apparently toe pregnancy rate 
flu ffin g flight attendant this year 
has jumped 31 per cent - to 275 
- from the usual figure of about 
210 pregnancies annually among 
the airiine's 4,400 stewardesses. 
Don’t panin. KLM says no fli ght* 
will be cancelled becanse of the 
staff shortage; a recruitment effort 
is under way. 


Piers ploughman 

■ The die is cast Clearly Alan 
Clark - whose sexual exploits with 
two women and their mother have 
vitalised an otherwise enervated 
week for the British tabloid press 

- will be made to wriggle awhile 
on the book. 

For toe acting editor who “broke" 

- or is it brokered? - the story in 
The News of toe World, Britain's 
largest circulation tabloid 
newspaper, youthful Piers Morgan, 
29, has been promoted to full editor. 
Patricia (ubiquitously known as 
Patsy) Chapman. 45, who has been 



on sick leave since January, is 
stepping down permanently. 
Evidently Rupert Murdoch, who 
owns the paper, likes what he sees 
in Morgan. 


Downbeat daub 

■ Poor old Denis. Lady Thatcher’s 
husband should have been in his 
element at Tuesday night’s bash 
at the Royal Academy, laid on by 
Guinness to celebrate its 
sponsorship of the RA’s Summer 
E xh i b ition. Sir Denis's old golfing 
chum. Lord MacFarlane. chairman 
of Guinness's United Distillers, 
had asked him along as guest of 


honour, to frhanfc him for all his 
help over toe years, opening 
factories and suchlike. 

But when it came to the highlight 
of toe evening - the gift of a special 
bottle of hooch to mark the 500th 
anniversary of Scotch whisky - 
up popped toe lady herself to accept 
the gift 

With her usual aplomb, Britain's 
ex-prime minister went on to argue 
that the RA was a “pure 
Thatcherite" organisation, because 
it was not supported by a “penny 
piece of taxpayers’ money". 

As for the exhibits, she opined 
that she shared Sir Winston 
Churchill's view: modem artists 
should not be let loose until they 
had proved they could paint a real 
picture. 


Pehr pressure 

■ Six months after his 29-year rule 
over Volvo collapsed, we are still 
in the dark about Pehr 
QyUenhammar’s precise role in 
the final days up to the Volvo 
management and shareholder revolt 
against his plan to merge with 
Renault 

But yesterday he decided to give 
a sneak preview, through a letter 
sent to the chairman of the Swedish 
parliament's constitutional 
committee. 

Before the fateful board meeting 
on December 2, according to the 
letter. PG was uncertain if toe 
merger would be torn up. Such 
was the “drama” surrounding the 




behaviour; and so U was possible to 
mn watinrial economies with mute 
tighter labour markets than before 
or afterwards without triggering 
accelerating inflation. 

The second, and perhaps more 
interesting, reason is that postwar 
growth was a fairly straightforward 
process involving other countries 
catching up with best-practice, 
dTnortean techniques. Modest tradi- 
tional pay relativities between 
industries, and between skilled and 
unskilled workers, were sufficient 
to haiarrm the labour market 
The inflationary outbreak of toe 
1970s shattered remnants of money 
illusion for generations to come. A 
slacker labour market was now 
needed to prevent pay and prices 
tearing each other upwards. The 
relative demand for different types 
of labour was still for a time stable 
enough for central European and 
Scandinavian countries with strong 
traditions of social solidarity to 
hold real wages in check at modest 
levels of unemployment 

T hus demand manage- 
ment - whatever label 
was attached to it - 
could be switched to the 
struggle against infla- 
tion without large job losses. As the 
1980s proceeded, however, the con- 
ditions required for these central- 
ised agreements to work began to 
disappear. Traditional relativities 
between different industries and 
skills, or between areas of declining 
old-fashioned manufacturing indus- 
try and high-technology growth 
areas (for example, between north 
and south Germany), were no lon- 
ger s uffici ent to clear labour mar- 
kets. Meanwhile the rigidities 
imposed to obtain union consent for 
national economic policies became 
to some Continental countries an 
increasing drag on performance. 

The pressures that have come to 
the surface to Europe to unemploy- 
ment and non-employment have 
expressed themselves in the US in 
pay stagnation and downward abso- 
lute movements among the lowest 
20 or 30 per cent of wage earners. 
No wonder Meade suggested that, to 
create 2m more jobs in Britain, 
average real wages would not 
merely have to be “restrained" but 
actually to felL 

How, then, can the rest of us top 
up the wages of the lower paid so 
that they can price themselves into 
work? The high marginal cut-off 
rates which create the poverty trap 
stem from the speed at white bene- 
fits taper off as incomes rise. If the 
. system aims for the greatest gener- 
osity at lowest cost, the withdrawal 
rate is likely to be extremely high. 
On toe other hand t if benefits are 
tapered off very gradually, poverty 
trap effects are reduced; hut either 
the cost is prohibitively expensive 
or toe benefits are for too low. 

The best chance of advance is to 
act where the social security system 
unnecessarily discourages workers 
from accepting low-paid jobs or 
employers from offering them. 

• Any government could quite 
inexpensively take a first step and 
extend the top-up for low income 
earners, known as family credit, to 
stogie people and childless house- 
holds. This move would cost it 
about £350m a year in 1994 - trivial 
by the standards of modem public 
fmanrp- 

• It would also help if the with- 
drawal rate for income support for 
adults of working age could be 
reduced below 100 per cent and 
brought in line with the TO per cent 
taper used for other income-related 
benefits. Specifically, it would 
encourage people to take spas- 
modic, casual or part-time jobs that 
did not qualify them for family 
credit, and to do so on a legal basis. 

• Changes could also be made so 
that assessment for income-related 
benefit resembled tax assessment 
rather than a medieval inquisition. 

This discussion has moved from 
monetary policy via labour market 
details to the arcane area of social 
security. The range indicates a little 
of the ground a new employment 
white paper would have to cover. I 
would feel more comfortable if we 
could replace all this with one big 
idea. But modest ideas with a 
chance of being right are better 
than big ideas white are wrong. 


affair, he says, that his position 
as chairman was neither “the only 
nor the best source of information” 
on the outcome. Instead he refers 

- somewhat darkly - to “powerful 
Interests" who decided to dump 
toe project 

The constitutional committee 
has stirred controversy by 
suggesting that a cabinet minister 

- Ulf Dinkelspiel, minister for 
European affairs, whose company 
profited from trading to Volvo 
shares at the time - may have had 
inside knowledge from briefings 
Gyllenhammar gave toe 
government on the affair that the 
merger was doomed. 

So what did happen, PG? 


Shaggy tail 

■ Eugene Rotberg, former 
treasurer of the World Bank, has 
a tall tale concerning a banker, 
a corporate treasurer and a dog. 

The banker and treasurer 
perambulate past a pet shop 
window and spy a dog for rale. The 
banker buys it for $5, then sells 
it to the treasurer for $10. A few 
days later, the banker wants it 
back, so he bids $20. The dog keeps 
changing hands until the banker 
buys it for Sim. 

Then the dog escapes from the 
bank and is killed by a car. The 
treasurer is fhrious: “Couldn’t you 
have been more careful?" he 
complains to the tanker. “Don't 
you rea li se how much money we 
were making on that dog?" 







14 


WBES A 

Carrying the 0 
nation's goods w 


FINANCIAL TIMES 

Thursday June 2 1994 



wenowioe expertise amd resources 


European Commission seeks private financing 

EU must find funds 
for Euro-networks 


By Emma Tucker in Brussels 

The European Union must act to 
ensure that there will funds to 
build large transport, energy and 
co mmuni cations networks in 
Europe. Mr Henning Chris topher- 
sen, vice-president of the Euro- 
pean Commission, said yester- 
day. 

In a report to be presented to 
□ext week's meeting of EU eco- 
nomics and finan ce minis ters on 
the funding of so-called trans-Eu- 
ropean networks, Mr Chris- 
tophersen said possible financing 
problems for the projects were 
already alarming. He invited 
member states, EU institutions 
and private operators to consider 
how to maintain an adequate 
pace of investment 

Mr Christopherson stressed 
again the need to attract private 
finance to fund very large infra- 
structural projects. His com- 
ments came in the wake of 
another recent sharp rise in 
long-term European interest 


rates, pushed higher by 
investors' nervousness about 
inflation. 

He said market trends this 
week made it ever more impor- 
tant to get a clear signal from 
next week's Ecofln meeting, and 
from the Corfu summit of Union 
leaders later this month, that 
ministers are planning to step np 
their anti-inflationary policies. 

“This message is even more 
important than two weeks ago 
because the market fears that 
inflation is going to come back." 

The recent rise in long-term 
borrowing rates will strengthen 
the position of those member 
states that are wary of proposals 
to raise extra funds through the 
issue of “Union bonds”. 

Mr Christopherson said the EU 
might consider co-financing with 
the European Investment Bank 
for priority projects . 

Another option for capital mar- 
ket funding would be for the 
union to underwrite or guarantee 
private sector projects. Such 


guarantees could be made avail- 
able to loans specific to projects 
that were co-financed with the 
European Investment Bank. 

Mr Christophersen also pointed 
out that there was likely to be a 
shortfall in financing of up to 
Ecuti.4bn ($7.42bn) for Europe's 
10 priority transport projects. 

Projects receiving public assis- 
tance will have to satisfy eco- 
nomic viability tests. “They 
should be expectd to produce a 
substantial net benefit to society, 
taking into account also the 
external costs and benefits,” he 
said. 

He added that at Union level 
the European Investment Bank 
would be the largest single 
source of finance for the transeu- 
ropean networks. In addition, the 
European Investment Fund, now 
operational, will work with the 
private sector in helping to allo- 
cate and manage risks. 


Warning on finance for 
EU networks. Page 2 


Reforms 
bring 
Wall St 
salaries to 
Bombay 

By Naazneen Karmafi in Bombay 
1 and Stefan Wagstyl in New Delhi 

Financial reforms are creating a 
new elite in India, bringing Wall 
Street investment banks , aggres- 
sive headhunting and salary 
packages that tower over the 
earnings of the hank clerks of 
Bombay. 

Salaries for the sought-after 
have risen 300 per cent in the 
past year and could climb fu rther 
as US and European investment 
banks rush to set up shop in 
India's commercial capital to 
take advantage of the govern- 
ment's liberalisation drive. 

Morgan Stanley and Salomon 
Brothers of the US have recently 
hired senior managers for sala- 
ries estimated at $400X100 includ- 
ing bonuses. 

At that rate, the pay is at least 
five times more than these bank- 
ers were paid at their previous 
jobs at the old-established foreign 
banks in Bombay, and at least 
100 times more than the salar y of 

a typical Indian bank clerk. 

“The cost of hiring in India is 
hitting international levels,” Mor- 
gan Stanley Asset Managamant 
said. Mr Rafiq Dossam. a director 
of Jardine Fleming's Indian affili- 
ate. added: "The difference 
between India and the rest of the 
world is narrowing sharply.” 

The differences are also being 
reduced by the arrival of non-res- 
ident Indians from the US, the 
UK and elsewhere. Companies 
are finding it difficult to pay 
their locally-hired top executives 
less than the non-residents who 
are also brin g in g with them a 
modem work culture. 

Lap-top computers, digital dia- 
ries, and Mont Rlanr. pens have 
become commonplace among the 
financial elite. *1116 top earners 
are beginning to imitate the life- 
styles of the city's established 
business families. Taxes on 
imported cars are still prohibi- 
tively expensive, but owning two 
or three Indian models is well 
within the reach of bankers on 
better salaries. 

Clothes are mostly bought 
abroad. Slick gelled-back hair- 
styles are the order of the day. 
Membership of Bombay's top din- 
ing clubs - the Belvedere at the 
Oberoi Hotel and the Chambers 
at the Taj Hotel - has become 
almost mandatory. 

Women as well as men are get- 
ting top jobs, though not in the 
numbers. Ms Ratna Kakkar, who 
has recently joined Smith New 
Court, the British stockbroker, 
says: 'Things are definitely more 
fast-paced.” 

Salaries are being pushed up 
by foreign companies establish- 
ing offices or increasing their 
staff. The arrivals are hiring mid- 
dle- and junior-level staff includ- 
ing research analysts, corporate 
financiers and fund managers. 

Median annual salaries for 
such people have hit $30,000- 
$40,000, a senior executive at one 
foreign broker said. 


Brown out of race to 
lead UK Labour party 


By Philip Stephens, 

Political Editor, in London 

One of the main contenders for 
the leadership of Britain's main 
opposition Labour party with- 
drew form the race last night - 
strengthening the position of the 
favourite, Mr Tony Blair. 

Mr Gordon Brown, the Labour 
party's Treasury spokesman and 
a close friend and ally of Mr 
Blair’s, bowed out of the race to 
succeed Mr John Smith, who died 
last month. 

The Labour party leads the 
Conservative government by a 
wide margin in current opinion 
polls, and is seen to be well- 
placed to take power at the next 
general election, which must be 
held by spring 1997. 

Mr Brown's decision means he 
will now give his full backing to 


Bonds drop 

Continued from Page 1 


lead to monetary tightening. 

The June contract of the UK 
government bond future traded 
on Uffe. the London futures and 
options exchange, broke through 
100 and fell as low as 993 before 
closing around 99g. down 1£. 

In spite of a small reduction in 
the Bundesbank's securities 
repurchase rate, which fell 5 
basis points to 5.15 per cent. This 
rate is used as a benchmark for 
interest rates in Germany. 


Mr Blair and will be guaranteed 
his current post of shadow chan- 
cellor of the exchequer. 

It is understood in talks 
between the two men - the par- 
ty’s leading “modernisers" - Mr 
Brown has been promised the 
pivotal role in shaping policy in 
any future Labour government 
led by Mr Blair. 

Mr Blair, whose political 
instincts are in tune with main- 
stream European social democ- 
racy. has strong electoral appeal 
in Britain's key southern constit- 
uencies which Labour must win 
to beat the Conservatives. Cur- 
rently shadow home secretary, he 
has the overwhelming support of 
the shadow cabinet and or 
Labour MPs. A substantial major- 
ity of trades union leaders also 
support him. 

If he wins the leadership, the 


further 


German government bonds 
were also sold following remarks 
by Mr Gun tram Palm, a member 
of the Bundesbank's policy mak- 
ing council, indicating that fur- 
ther interest rate cuts in the near 
term were unlikely. 

However. German bonds did 
not suffer as much as other Euro- 
pean bonds. The June Bund 
futures contract on Liffe fell to 
around 92.30, down 0.54. Bond 
markets in Scandinavia and 
southern Europe were also badly 
hiL 


41-year-old Mr Blair could 
become the youngest party leader 
this century with only a token 
contest. One member of the 
shadow cabinet said last night 
that the party's choice was now 
“a formality”. 

Mrs Margaret Beckett, acting 
Labour leader. Mr John Prescott, 
shadow employment secretary, 
and Mr Robin Cook, shadow 
trade and industry secretary, are 
all potential contenders for the 
leadership. Mr Cook was last 
night understood to be keeping 
his options open and Mrs Beckett 
has said she will not reveal her 
intentions until after the 
European elections on June 9. 

But senior figures in the party 
last night appeared confident 
that both Mr Cook and Mrs Beck- 
ett would decide eventually not 
to run against Mr Blair. 

That left Mr Prescott, the stan- 
dard-bearer of the party’s "tradi- 
tionalist” wing, with a difficult 
decision of whether to contest 
the leadership or whether to 
stand against Mrs Beckett for the 
post of deputy leader. 

Mr Brown said last night that 
he had taken his decision to dear 
up "the confusion" over whether 
he would fight Mr Blair for the 
leadership. He had only one con- 
sideration in mind - “to ensure 
the election of a Labour govern- 
ment to improve and regenerate 
our country”. 

He had brought forward his 
announcement to prevent specu- 
lation about his position detract- 
ing from the party's European 
elections campaign. 


Europe today 

A frontal zone over Germany, marking the 
boundary between hot air over the continent 
and much cooler air in the west, will produce 
thunder storms over the Alps and much of 
Germany- Some thunder storms could be 
heavy with hail. The Netherlands, Belgium 
and western France will have sunny spells 
and scattered showers. The UK win have 
sunny periods in the easL A frontal system 
will approach western areas bringing cloud 
and rain to Ireland. Italy, Greece and eastern 
Europe will be sunny and dry. Most of 
Scandinavia win be cool and changeable with 
temperatures ranging from 10C in the north 
to 20C in southern Sweden. 

Five-day forecast 

Western Europe will become cooler as 
depressions and frontal systems cross the 
region. The Alps, the Balkans and much of 
eastern Europe will be near a boundary 
between cool and hot air and several thunder 
storms can be expected. Greece and Italy will 
continue warm and sunny with Isolated 
thunder storms in central areas. Southern 
Scandinavia win become cooler. 


TODAY’S TEMPERATURES 



Situation at 12 GMT. Temperatures maximum for day .Forecasts by Metao Consult of the Nefftertoxis 


Maximum 

Celafus 


Beijing 

Belfast 


Abu Dhabi 

sun 

42 

Brtg rade 

Accra 

shower 

32 

Baffin 

Algiers 

loir 

33 

Bermuda 

Amsterdam 

shower 

IS 

Bogota 

Athena 

Ml 

29 

Bombay 

Atlanta 

(air 

31 

Brussels 

B. Aires 

sun 

23 

Budapest 

B.hnm 

shower 

19 

CJugen 

Bangkok 

cloudy 

36 

Cairo 

Barcelona 

sun 

28 

Cope Town 


fair 

34 

Caracas 

fab- 

28 

CdbibunJi 

shower 

16 

CarcSff 

shower 

17 

Faro 

sun 

32 

Casablanca 

fair 

21 

Franfcftot 

shower 

33 

Chicago 

lab 

19 

Geneva 

fair 

28 

Cologne 

thwid 

23 

Gibraltar 

cloudy 

18 

Dakar 

fair 

28 

Glasgow 

fair 

38 

Dolus 

ttnnd 

31 

Hamburg 

shower 

T8 

DefiS 

fair 

45 

Helsinki 

sun 

30 

Djakarta 

far 

32 

Hong Kong 

shower 

19 

Dubai 

Ml 

43 

Hon ol Liu 

sun 

32 

OibJn 

shower 

16 

istsnbu 

(air 

21 

Dubrovnik 

sun 

31 

Jersey 


Lufthansa Express. 

© The best connection in Germany 

Lufthansa 

German Airlines 


Karachi 
Kuwait 
L. Angeles 
Las Palmas 
Lima 
Lisbon 
London 
Lunboug 
Lyon 
Madeira 


shower 

17 

Madrid 

sun 

29 

Rangoon 

shower 

29 

Mr 

22 

Majorca 

tab 

33 

Reykjavik 

shower 

10 

thund 

30 

Malta 

sun 

31 

Rio 

dowdy 

26 

Shower 

27 

Manchesto 

shower 

19 

Rome 

sun 

29 

sun 

28 

Manila 

cloudy 

35 

S. Fraco 

fair 

21 

shower 

18 

Melbourne 

-fan- 

22 

Seoul 

sun 

29 

thund 

25 

Mexico City 

fair 

28 

Sfergapore 

cloudy 

33 

fair 

20 

Moral 

fair 

32 

Stockholm 

cloudy 

21 

fair 

29 

MBan 

sun 

34 

Strasbourg 

shower 

28 

Cab- 

28 

Montreal 

shower 

12 

Sydney 

fab 

18 

sun 

24 

Moscow 

fab 

18 

Tangier 

tab 

19 

shower 

17 

Mimfch 

thund 

35 

TelAvtv 

an 

28 

fab 

36 

Nabob! 

tab 

24 

Tokyo 

tab 

27 

sun 

48 

Naples 

sun 

32 

Toronto 

fair 

17 

fair 

22 

Nassau 

far 

30 

Vancouver 

dbudy 

19 

fair 

24 

New York 

fab- 

15 

Venice 

sun 

29 

fab- 

23 

Mcs 

tab 

28 

Vienna 

tab 

33 

fas 

22 

Nfcosta 

sin 

18 

Warsaw 

tab 

26 

tar 

21 

Oslo 

shower 

22 

WasMngton 

sun 

22 

thtmd 

21 

Paris 

shower 

IS 

WeHIngton 

tab- 

10 

shower 

26 

Perth 

cloudy 

17 

Wrrtpeg 

fair 

22 

fair 

22 

Prague 

cloudy 

35 

Zurich 

shower 

29 


THE LEX COLUMN 

Granada grows 


FT-SE Index: 2931.9 (-38-6J 


Granada’s ambitions to expand its 
television and catering arms look sen- 
sible enou gh, while it is still too soon 
to know whether the LWT acquisition 
will enhance shareholder wealth, 
Granada was bullish yesterday at its 
interim results on haw things are 
progressing so far. There would be an 
opportunity to apply the same ration- 
alisation formula on another ITV com- 
pany, with Yorkshire Tyne-Tees Tele- 
vision the group's favoured target. 

Similarly, there is presumably scope 
for rationalising Britain's fragmented 
catering industry. Granada has 
already proved it can manage such 
businesses. Margins at Sutcliffe, 
bought last year, are up 60 per cent 
Chief executive Mr Gerry Robinson 
retains an affection for the industry 
from his days at Compass. And while 
there is nothing obvious on the mar- 
ket at the moment to bid for. Gardner 
Merchant could become av ailab le in a 
couple of years. 

Financing further acquisitions 
should not be a big problem. The 
group as a whole, and the rental ride 
in particular, are strongly cash- 
generative. Though the LWT deal has 
temporarily pushed gearing above 100 
per cent, the more important measure 
of Granada's financial strength is its 
interest cover of 6.6. As cash from the 
BSkyB refinancing flows in, group 
gearing and interest cover will 
improve. If Granada is able to sell its 
BSkyB stake, worth about 1500m, the 
position would be stronger stOL 

The longer-term question is whether 
there is any point in keeping TV. 
rental and catering operations in the 
same group. Mr Robinson shows no 
desire to split them. But investors 
watching Thom EMI inch its way 
towards a demerger may have other 
ideas. 

UK gilts 

The UK gilts mar ket passed another 
milestone yesterday when the June 
future slipped through par for the first 
time since January 1993. Those grop- 
ing for reasons may cite the steep 
growth in M0 money supply and evi- 
dence that the economy is continuing 
to grow despite April's tax increases. 
Such factors may indeed prompt the 
Bank of England to start wondering 
about when it should tighten mone- 
tary policy again. But cash selling has 
been limited Gilts’ weakness has been 
above all driven by speculative selling 
of the futures. That in turn leaves 
markets looking prey to some pretty 
irrational fears. 


Granada 

Share price rotative to the 
FT-SE-A Afl-Share index 



The short sterling contract, for 
example, su gg ests that base rates will 
be as high as 6.5 per cent by December 
and that they will rise by a total of 
two percentage points between Sep- 
tember and June next year. That 
might just happen with a sudden 
resurgence of inflation and a sharp fall 
in sterling. The balance of probability 
is that it will noL 

Cooler heads might prefer to con- 
sider yields of almost 9 per cent avail- 
able on 10-year conventional gilts and 
nearly 4 per cent in index-linked 
paper. Gilts yield nearly two full per- 
centage points more than their Ger- 
man equivalent That is a rare pre- 
mium which compares with a 
differential of only around 50 basis 
points when the market peaked. The 
water may still be choppy but funda- 
mental value is discernible on the 
shore. 

Wolseley 

Wolseley’s addiction to equity shows 
no sign of abating. Yesterday's placing 
of shares to fund a US acquisition is 
its third in little over a year. The 
company has raised around £220m - 
equivalent to more than a tenth of its 
market capitalisation - in that time 
by spiling share s to institutional inves- 
tors or the vendors of businesses it 
bought. Since Wolseley is one of the 
most tightly-held stocks in the FT-SE 
100 index, the market is hardly awash 
with paper as a result Even so. one 
might question whether Wolseley’s 
aversion to debt is really necessary. 

With the proceeds of the latest plac- 
ing tucked away, the company will 
have around £80m net debt against 
shareholders’ funds of £560m at the 


hungry 

last count. White borrowings could 
rise in line with working capital as 
organic growth comes through, gear- 
ing of around 30-40 per cent would not 
look Irresponsible at this point in the 
business cycle. The stronger argument 
is that equity is a perfect match for 
the kind of risks being assumed 
through acquisitions. But It takes a 
leap of logic to conclude that all ocqui 
ritions should be immediately funded 
by a matching issue of shares. 

True, Wolseley’s sequence of plat- 
ings has saved it the bother and 
expense of a rights issue. But share 
holders not on the list of privileged 
institutions have seen their stake in 
the business diluted over time. Given 
its relatively small circle of institu- 
tional investors - and exemplary 
record of growth - there is no ques- 
tion of shareholder revolt. As Wolseley 
matures and increases its interna- 
tional reach, though, old habits may 
have to change. 

Anglo American 

The 55 per cent increase in net 
assets per share reported by Anglo 
American Corporation is indeed stri- 
king. But it is also a reflection of the 
strength of the Johannesburg stock 
market on which many of its invest- 
ments are quoted. That strength con- 
tributed to earnings as well, since 
high stock market values allowed 
Anglo to raise more from sales of 
investments. The R250m increase in 
the surplus on such sales offset set- 
backs in both coal and platinum. One 
issue raised by Anglo's results is thus 
whether buying in anticipation of the 
change in government pushed the 
stock market to levels that now limit 
its attraction. 

Having more than doubled in the 
final quarter of last year. Anglo's 
share price needs more good news to 
propel it forward. The group may have 
difficulty repeating Last year's strong 
performance in diamonds, but there is 
a chance of gold adding some further 
lustre. Though the dollar price of gold 
has been slow to respond to the 
revival of inflationary fears in the US. 
a weaker rand and careful cost con- 
tainment have helped boost mining 
margins. One risk is that high wage 
demands following the elections could 
undermine these cost advantages. It 
would help if the international bullion 
price were to show signs of stirring. 
Since they are subject to the vagaries 
of the financial rand, foreign investors 
in particular may increasingly need 
comfort on this score. 


TAKING THE LEAD 
IN STERLING 
FLOATING RATE NOTES 


MEDIUM TERM NOTES 


MEDIUM TERM NOTES 




Cheltenham & Gloucester 


Cheltenham & Gloucester 

Budding Society 


Butting Society 

£150,000,000 


£100,000,000 

Floating Rate Notes due 1999 


Floating Rate Notes due 1999 

Issue Price 99.64 per cent. 

Lead Manager 


To be consolidated and form a 
Single Series with £150,000,000 
Floating Rate Notes due 1999 

Issue Rice 99.81 per cent. 

Lead Manager 

Kleinwort Benson 


Kleinwort Benson 

January 1994 


Rbriwry IWt 


Anglo Finance No.2 pic 




MEDIUM TERM NOTES 

m 

£45,000,000 

Senior Secured 

Floating Rate Notes due 2004 

£4,600,000 
Mezzanine Secured 
Floating Rate Notes due 2004 


3i International B.V. 

£150,000,000 

Floating Rate Notes due 1999 


NORTHERN ROCK 

£100,000,000 

Floating Rate Notes due 1998 

Issue Price 100.00 per cent 


Issue Price 100.00 per cent 


Issue Price 100.00 per cent. 

Lead Manager 


Joint Lead Manage 


Joint Lead Manager 

Kleinwort Benson 

February 1V91 


Kleinwort Benson 

AfRUIVM 


Kleinwort Benson 

April 1494 


Kleinwort Benson 

Sales and Trading: Telephone: 071 623 9140 

Issued by Kleinwort Benson Limited, a member of 5FA and ISMA. 


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MAKING 
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GO ROUND. 


FINANCIAL TIMES 


/Bfwd I engine* .from 5-1500 bhp. 

. feitef Group Kc*dqnanepi.Tfl; 0733 6?4?< 

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COMPANIES & MARKETS 


©THE FINANCIAL TIMES LIMITED 1994 


Thursday June 2 1994 


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IN BRIEF 


Endesa issue 
price raises doubt 

Ite issue price for the partial privatisation, of 
Ehdesa, Spain's electricity utility, has ft ife n below 
expectations, raising doubts about future public 
equity offerings. “We’ve had really bad luck with 
the markets over the past three mnnrtue and our 
subscription closed on a particularly criminal 
day for equities," said Endesa. Page 16 

Polish hank to be privatised 

One of Poland's largest banks is to be privatised 
this year through a stock exchange flotation of 
SO per cent of the equity, the Finance Ministry 
announced. Page 18 

Matra sells part of US arm 

Matira, the military arm of France’s Lagarddre 
group-, has agreed the partial sale of its US subsid- 
iary, FairchiM Space and Defense Corporation, 
to Orbital Sciences Carp of the TJS. Page 17 

A question for Phffip Morris 

Is Philip Morris,, the US food and tobacco group, 
going to spin off its cigarette making operations? 
The stock market was left guessing after the 
unusual corporate turnabout that took place 
last week. Page 18 

Anglo American ahead 23% 

Anglo American, South Africa’s largest corporation, 
reported a 23 per cent increase in total net earnings 
fbr the year. Page 19 ..J 

US marker! debate heats up 

The debate over the quality of US stock markets 
heated up last week when an academic study 
sharply criticised dealers an the Nasdaq market 
for maintaining unnecessarily wide spreads 
between buy andaefl prices. Page 19 

MMn fiwii raliM oa Lonfenrilng 

Lawyers acting fbr News Corp. the media, film 
and pidjhshinggroim controlled by Mr Rupert 
Murdoch; are retying on a landmark ruling by 
the House of Lends to limit their cfimFs liability 
in a potentially cosily dispute stemming from 
the pubBcatiosi of ah emmeousnoticaPage SO 

Kenyan crop replaces Rwandan pyrethrum 

A record Kenyan crop erf pyrethrum, a vital ingredi- 
ent in many-msect-control formulations, will 
more than compensate fbr losses arising from 
the cataclysm in Rwanda, fbnoerly the' world’s . 
third largest producer of this natural pesticide. 

Page 24 

Wobetaybva US man cider skill 

WolSftie?, the UK heating and plumbing merchant, 
isCTpnfHting its photographic equipment distribu- 
tion business with the acquisition of Calumet 
Holdings of the US. C3hcago4wsed Calumet's 
expertise In mail order made it particularly attrac- 
tive fbr Walselay. Page 22 . 

gbrnw vWrirwo* dafti uptagumpa . 

The European operatkm ^ WaruQ^Welkxane, 
the consumer health jaktf venture between Well- 
come oftfceUK and Warner-Lambert of the US, 
came into being two weds, after being given 
the go-ahead from, the European Commission. 

Page 23. 


Compauilu fai thta toque 


Abe«fe«n TrUat . 
Alpha Airports 
Angfo American - 
Astra 

Austrian AUnts - 
Avesco 

BATInds • -■ 

BPH •. 

' Bcwrtbarefler' v . .- 
BORtlWiCfcl 
British Qas‘ ; 

BrftWi hO&ad - 
Buhfw (Edmund) 

Burt Software Libs 
Ceiumat . . 

■ Gswdur. 

Channel HoMlnga ' 

ChestsrtsrvMt 
Ofla ... 

Coiqfbq 
Conrat ngtt' 

Dafly MuB & Gar» Tat 

Osutachs TaWton 
Btdsss 
EntarprisaOB 
Excaffiur .* . 

F&CPcp tnvTruA - 

Fanner 

Fleming • 

Fort : 

QECWsthom 
Genaral Accident . 
Granada Qroup . ■ 
Qradm tndusMes 

Hanods - .v . . 

HartcM ■ 

ICt AuStraU : 

«- i 

rrrstwwon: 


23 tonka 

23. Kail Rausch 

tS Kngbher 

ie Kmwt 

S3 Kona 

23 Lasmo - 

2Z Unko-Hoffmao Busch 

16 LonJon City Eqiritias 

17 LoeSare 
22 MAI 

22 MAS 

.23 Matra ■ 

23 MeKCchnia. • 

22 Mere Focus 
m NtE 

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■ US hotels group has 14% stake in Italian target and nears its ambition 

ITT close to control of Ciga 


By Michael Skapbitor. Leisure 
Industries Correspondent 

ITT Sheraton of the US is 
expected to seek effective control 
of Ciga, the luxury Italian hotel 
group, after acquiring a 14 per 
cent stake. 

ITT confirmed yesterday that it 
acquired the stake during an auc- 
tion of Ciga shares last month. 
The US group refused to com- 
ment on whether it planned to 
increase its stake further. 


However. Italian regulations 
require a shareholder in ITTs 
position to make a public offering 
for a further stake equivalent to 
the one it alrea dy holds. This 
would bring ITTs holding up to 
28 per cent 

Gaining control of the luxury 
chain would be a coup for ITT. 
Its ambitions to acquire the Ital- 
ian group appeared to have been 
thwarted last April by a success- 
ful Ciga rights issue and a rise in 
its share price. 


Acquiring Ciga now would be 
significantly more expensive fix' 
ITT than it originally envisaged. 
Its initial offering for Ciga, made 
last February, valued the group 
at L740bn ($4 65m). although 
observers believe the assumption 
of the group’s iiahiimeg and pay- 
ment of bankers’ fees would have 
brough t the total to L900bn. 

At current share price levels, a 
bid from ITT is likely to value 
Ciga at more than Ll^OObn. 

ITT emerged as a surprise 


buyer for Ciga earlier in the year 
when it edged out Forte of the 
UK, then the front runner. Fol- 
lowing ITT’s bid, Ciga launched 
the rights issue and share auc- 
tion. At L 1.000 a share, the rights 
issue was expected to falL This 
would have delivered the hotel 
group to the group’s creditor 
banks as underwriters and they 
would then sell it to ITT at L740a 
share. 

The rights .issue was a success, 
however, as was the subsequent 


share auction. Ciga's shares have 
bear trading consistently above 
LI, 000. 

Ciga said yesterday that the 
rights issue and auction had 
brought in Ll,003bn. It said this 
would cover its short-term debt 
The group owes L950bn to banks 
and a further L50bn to suppliers 
whose payments are overdue. 

Italian observers said they did 
not believe Ciga could continue 
as a quoted company with a 
diverse group of shareholders. 


Seagram 
seeks seat 
on Time 
Warner 

E(y Bernard Simon in (Montreal 

Seagram, the international 
drinks company, has indicated 
that it wants a seat on Time 
Warner’s board, but has no plans 
to raise its 1-L9 per cent stake in 
the US entertainment and pub- 
lishing group- 

The issue of Seagram's repre- 
sentation on the Time Warner 
board has contributed to an awk- 
ward relationship between the 
two companies in the 16 months 
since Seagram began building up 
its stake. 

Mr Edgar Bro nfman Jr, who 
took over as Seagram’s chief 
executive from bis father yester- 
day, said that “we would prefer 
to be invited”. 

Although Mr B ronfman speaks 
to Time Warner chairman Mr 
Gerald Levin once a week and. 
the two men have met regularly, 
Mr Rronflhan said “The request 
far a board seat will not come 
from Seagram". Time Warner has 
so far indicated a reluctance to 
invite Seagram on to its board, 
apparently, fearing- that the 
drinks company would use its 
position to acquire control. 

Mr Edgar Bronfman Snr, who 
remains phairpian, described the 
purchase erf the stake in Time 
Warner as a calculated decision. 
“That was our decision and 
remains oar decision,” he said. 

His son told the annnai meet- 
ing that the main purpose of the 
$2bn investment was to generate 
fends to expand Seagram’s core 
beverages businesses. 

He compared the Time Warner 
investment with Seagram's for- 
ays into oil and gas and its exist- 
ing 25 per cent stake in Du Pont, 
the US chemicals group. 

Mr Bronfman Jr, aged 39. pre- 
dicted that the value of Sea- 
gram's stake in Time Warner 
would rise “dramatically" over 
the next five to 10 years. 
“Patience will he our reward with 
Time Warner as it was with Du 
Pont,” he said. 

Seagram yesterday reported a 
22 per cent rise in first quarto: 
earnings to $197m, or S3 cents a 
share, in the three months to 
April 30. from $162m. or 43 cents 
a share, a year earlier. Operating 
Income rose to S162m from 
1148m. The figure exdudes a one 
time accounting charge of 575m, 
or 20 cents a share. 

Sales rose 3.5 per cent to 
SlJtira. North American Spirits 
and Wine income rose in the first 
quarter, in part reflecting the 
contribution of Absolut Vodka, 
far which Seagram bought mar- 
keting rights in January. A dou- 
ble digit improvement in earn- 
ings from Aria was offset by a 
sharp fall in the contribution 
from Latin America, especially in 
Brazil and Venezuela. Earnings 
were bolstered by a $16m gain 
from a disposal in Argentina. 


The Johannesburg buB run 


Norma Cohen and Mark Suzman report on foreign investment in South Africa 

Floodgates 
open to admit 
a steady trickle 
W 


hen South Africa’s 
soon-to-be president Mr 
Nelson Mandela issued 
his public plea last autumn for 
foreign investment in bis coun- 
try, it created a frisson within 
the global investment commu- 
nity. US institutional investors 
generally »r»rt pension fends in 
particular, barred for more than 
a decade from investing in South 
Africa, seemed poised to rise to 
thp challenge. 

So faff, of the near 180 US cities, 
counties and states which had 
imposed bans on pension fend 
investment tn South Africa, all 
bat 35 have acted to lift them, 
according to the Washington- 
based Investor Responsibility 
Research Center. Meanwhile, sev- 
eral leading US money managers, 
including Morgan Stanley and 
Alliance Capital, have set up spe- 
cialist fends for South African 
investment 

Wilshire Associates, the Calif- 
ornia-based pension scheme con- 
sultants. will lead a group of 
investment directors and money 
managers on a South African 
tour later this month. And just 
last week, two leading UK firms. 
Smith New Court and S£. War- 
burg, announced ties with South 
African stockbroking firms to 
help them sell specialist services 
to US investors. 

But far all the cheerleading, it 
is not dear how modi money US 
institutions are prepared to 
invest in South Africa. Mr Paul 
Moses, who monitors South Afri- 
can investment for the IRRC, 
says those who count an a sud- 
den inflow of funds are probably 
mistaken. "Institutions are 
thrilled that they are allowed to 
invest in South Africa again. But 
they feel no moral obligati cm to 
do so." 

Most investors are likely to 
take the line of the Ford Founda- 
tion. Mr Clint Stevenson, invest- 
ment director, says that while 
the fund is now allowed to invest 
in South Africa, it will be up to 
the external managers of its 
international portfolio to decide 
whether to do so. The TIAA- 
CREF pension scheme, with more 
than $i25bn in assets, has simi- 
larly lifted its ban on South Afri- 
can investment but mart** no for- 
mal commitment to investi 

Investznent bankers concede 
they may be gearing up fbr a 
boom which wifi never come. Mr 
Steve Oke, head of South African 
research and sales at Smith New 
Court, says that only when South 
African stocks and bonds look 
like a good buy will cash migrate 
there. 

But investment experts point 
to two imminent developments 
likely to encourage foreign port- 
folio investment in South Africa. 


First, two leading world stock 
mriirM — by Morgan Stanley and 
the International Finance Corp. 
the private sector arm of tlm 
World Bank - are to include a 
South Africa country weighting 
for the first time. “This means 
that passively managed funds 
which track indices wifi have to 
invest in South. Africa," says Mr 
Oke. A spokeswoman far Morgan 
Stanley said it would probably be 
included in the emerging mar- 
kets index, rather than its coun- 
try index, “because of the politi- 
cal uncertainties”. 

With a mar ket capi talisation of 
roughly $200bn. South Africa is 
the world’s 10th largest stock 
market, according to Mr Ken 
Costa, manag in g director at S.G. 
Warburg. It could account for 
15-20 per of the emerging 
markets indar and, at that level, 
US fund managers would need to 
pot up to $6bn into the country 
to maintain a neutral weighting. 

Second, a credit rating for the 
country's debt end a debut on the 
world capital markets are likely 
this autumn. The government 
has retained Goldman g^chs to 
assist in gaming a rating. 

Investment bankers expect 
South Africa to win the mini- 
mum investment grade rating of 
BBB. While the rating will mean 
more for fixed interest investors, 
an investment grade would pro- 
vide some comfort to equity 
investors debating the political 
and economic risks. 

But even investors happy with 
the country’s future will find 
portfolio investment problematic. 
Years of economic isolation have 
led to structural shortcomings in 
the South African stock market 

“You can’t buy anything,” Mr 
Moses says. The top handful of 
companies own large stakes in 
each other, leaving little avail- 
able for institutional investors. 
The cross-holdings were encour- 
aged by local rules forbidding 
investment outside the country. 

Data from the Johannesburg 
Stock Exchange show that total 
turnover in 1992 was 4 per cent, 
rising to 7 per cent in 1993. Since 
the early part of 1994, aided 
partly by "unbundling” by some 
conglomerates, turnover has 
risen to around 11 per cent 

Although there are 638 compa- 
nies listed on the JSE, buying 
shares below the 30 largest wifi 
be problematic, Mr Oke says. “It 
will be difficult for an Institution 
to get a line in any of the 
medium-sized stocks." 

Moreover, the pattern of cross- 
holdings raises questions about 
co rpo rate governance and man- 
agement accountability to share- 
holders. Mr Moses points out that 
while an institutional investor 
with a 5 per cent stake may have 



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consider able influence over a US 
corporate board, "a 5 per cent 
stake in Johannesburg is nothing 
because there is somebody else 
who has 30 per cent”. 

The JSE has appointed a panel 
to examine corporate gover- 
nance. Mr Michael Katz, a part- 
ner at the Johannesburg law firm 
of Edward, Nathan and Freed- 
lund and chai rman of the pannl 
says: “There are issues of corpo- 
rate governance which arise from 
a stock market with such low 
turnover. The disinvestment rem- 


edy for shareholders unhappy 
with managements is limited in 
Johannesburg." 

One remedy, he suggests, may 
be the abolition of exchange con- 
trols which force large domestic 
corporations to invest in each 
other. If Mr Mandela's govern- 
ment lifts these, as expected, 
liquidity in shares should 
improve. However, the govern- 
ment would have to be convinced 
that domestic corporations would 
not respond by instantly sending 
their cash abroad. 


Zurich 
Insurance 
goes for 
direct sell 

By Richard Lapper in Zurich 


Zurich Insurance, one of 
Europe’s largest insurance com- 
panies, is to launch a telephone- 
based direct sales operation next 
month in preparation for the 
imminent deregulation of the 
European insurance market 

The new service, called Znritel, 
will be launched in Switzerland 
and then extended. 

Mr Rolf Hflppt, president and 
chief exe c utiv e, expects competi- 
tion to increase as a result of 
liberalisation, especially in 
motor, home and life insurance. 
“The opening of the market will 
mean an enormous pressure on 
business costs. This is one of the 
reasons why we are introducing 
low-cost distribution systems.” 

EU member states must imple- 
ment new rules, the so-called 
framework directives, by July 1. 
These will abolish the system of 
minimum prices which still 
applies in some markets. Insur- 
ers will no longer need approval 
from local regulators for new 
policies or changes in policy 
wording. 

One of Zurich’s German sub- 
sidiaries, Deutsche Allgemeine, 
already sells some insurance 
direct to the public through a 
chain of 42 shops. But the mar- 
ket for so-called “personal lines” 
insurance in Germany, Switzer- 
land and some other EU states is 
still dominated by networks erf 
agents selling exclusively for one 

Cnrapany 

Mr Hflppt believes this pattern 
is likely to change and predicts 
telephone-based direct writers 
will win a market share of up to 
50 per cent of the private motor 
insurance market in some coun- 
tries, citing recent developments 
in the UK, the US and the 
Netherlands. 

Znritel, to be based near Zur- 
ich airport, will reach its cus- 
tomers through a combination of 
mass media advertising and tele- 
phone sales, as do direct writers 
in the UK and elsewhere. Sales 
personnel win underwrite poli- 
cies with the help of sophisti- 
cated computer software. 

Winterthur, another large 
Swiss company, has been one erf 
the pioneers of direct writing 
through its UK subsidiary Chur- 
chill. It has also recently 
launched a direct writer in the 
Danish insurance market 

Zurich also announced the 
launch of a new life insurance 
policy, again with an eye on 
European developments. It will 
invest premiums from the new 
policy in equities and real estate 
as well as in bonds. 


US food distribution deal 
will create market leader 


By Richard Tomkins In New York 

Fleming, the second biggest 
wholesale food distributor in the 
US, is to buy Scrivener, the coun- 
try’s third biggest from its Ger- 
man parent for $l.lbn in cash. 

The purchase, announced yes- 
terday, wifi turn tire combined 
companies - coincidentally, 
close neighbours in Oklahoma 
City - into the biggest food dis- 
tribution group in the US. push- 
ing the Minneapolis-based Super 
Vriu Stores into the number two 
JSlOt. 

Since 1977 Scrivener has been 
_ subsidiary of Franz Haniel - a 
large, family-owned German con- 
glomerate with interests in 
transport, trading and pharma- 
ceuticals. Franc Haniel is under- 
stood to have agreed the sale to 
pay off debt incurred last year 
when it bouaht Office Commer- 


cial Phannaceutlque. a French 
pharmaceuticals company. 

Fleming said its purchase of 
Scrivener would create a group 
with combined annual sales of 
$19bn. It would significantly 
strengthen Fleming's customer 
base in the Midwest and east, 
and take the group into seven 
new markets: Iowa, both Carofi- 
nas. Western Pennsylvania, New 
York, Illinois and Minnesota. 
The enlarged Fleming wifi serve 
more than 5,800 independent and 
chain supermarkets and more 
than 2 £00 convenience stores in 
the US. In addition, Fleming wifi 
operate 315 of its own stores. 

Of the Sl.lbn purchase price, 
some $388m is for Scrivener’s 
equity and most of_the rest wifi 
he usd to pay off Scrivener's 
loans. Fleming said Scrivener 
made operating profits of Sl06m 
last year. The deal, expected to 


be completed in the summer, will 
be financed through syndicated 
debt 

Fleming has been suffering 
from static or declining profits 
caused by weak retail food sales 
and a lack of food price jnflafion- 
Exdudlng extraordinary items, 
net profits fell from Sll&Sm to 
399.3m last year on a I J per cent 
increase in turnover to $13.1bn. 

At the beginning of this year 
Sr Robert Stranth, who took 
over as chairman and chief exec- 
utive last October, announced 
♦bw* Fleming was embarking on 
a radical reorganisation to cut 
the workforce by 2,000 employ- 
ees, or about 9 per cent, and 
reduce operating costs by at 
least $65m a year. 

Yesterday he indicated that a 
similar “reengineering” process 
and could take some $2 0m out of 
Scrivener's operating costs. 


This announcement appears as a matter of record only 


MERCURY 

DEVELOPMENT CAPITAL 
£33,000,000 

Management Buy-Out 


of 




VERO 


VERO ELECTRONICS 


Senior debt arranged by: 

THE ROYAL BANK 
OF SCOTLAND pic 

Reporting accountants: 

ERNST & YOUNG 

Legal advisers to the company: 

LOVELL WHITE DURRANT 


Mercury Developmeni Capital is a division ol Mercury Asset Management pic, a member ot LMRO 









FINANCIAL. TIMES THURSDAY JUNE 2 W 


16 

INTERNATIONAL COMPANIES AND FINANCE 


GEC Alsthom buys rail 
operation from Preussag 


By John Ridding 
In Paris 

GEC Alsthom. the Anglo- 
French transport and engineer- 
ing group yesterday said it bad 
taken control of Linke-Hoff- 
man-Busch. the German rail 
equipment manufacturer. 

GEC Alsthom said it bought 
51 per cent of the shares from 
Preussag for an undisclosed 
sum. The acquisition is the 
first by the Anglo-French 
joint venture in the railway 
sector in Germany and is 
aimed at strengthening its 


By Christopher Bob inski 
in Warsaw 

Bank Przemyslowo H audio wy 
iBPH), one of Poland’s largest 
banks, is to be privatised by 
the end or this year through a 
stock exchange flotation of 50 
per cent of the equity, the 
finance ministry announced. 

The sale of the Krakow-based 
bank will be followed next year 
by an invitation to foreign and 
domestic investors to take up a 
targe share of the remaining 
equity in 1995. Three per cent 
of the bank's shares are to 
offered to management and 
employees. 

The bank, which reported a 


Kingfisher 
sales slow 

By Neil Buckley 

Shares in Kingfisher the UK 
retailing group fell a further 
2lp to 522p yesterday, after it 
said sales growth in the first 
quarter of this year had been 
slower than in 1993. 

Kingfisher's shares have 
fallen from 77Sp at the end of 
December, amid City nervous* 
□ess about Kingfishers strat- 
egy under the chairmanship of 
Sir Geoffrey Mulcahy. 

Sir Geoffrey's comments to 
the annual meeting yesterday 
did little to allay those fears. 
He said sales in two of King- 
fisher's businesses had fallen, 
although gross margins were 
generally improving. 


presence in European markets. 

“It fills an important gap far 
us." the company said. GEC 
Alsthom has large operations 
in Germany in two other core 
divisions - power generation 
and power distribution. GEC 
Alsthom has sales of about 
DM1.2bn (3706m) in Germany 
and employs about 4.000. 

LHB, which has annual sales 
of about DM450m and a work- 
force of 2,000. is based in Satz- 
gitter, near Hanover. It is 
involved in the design and 
manufacture of trains, trams, 
electric and diesel locomotives. 


773bn zloty (,$35 ,5m) net profit 
last year on a balance sheet 
worth 33.071bn zlotys, was 
originally to have been sold by 
the middle of this year to a 
strategic investor and through 
a public share offer. 

However, this method was 
used for the sale earlier this 
year of Bank Slaski, the last 
state-owned bank to be priva- 
tised. It led to the resignation 
of Mr Marek Borowski, finance 
minis ter, and the ministry's 
top banking officials, awri put 8 
question mark over the BPH 
disposal. 

Critics charged that Bank 
Slaski had been sold at an 
excessive discount. 


By Raymond Snoddy 

Granada Group, the UK 
television group, has identified 
Yorkshire-Tyne Tees as its 
next target if. as seems likely, 
the government decides on a 
further liberalisation of the 
rules on television ownership. 

Mr Gerry Robinson, chief 
executive of the broadcasting, 
leisure, rental and business 
services group, yesterday iden- 
tified Yorkshire as a possible 
acquisition target 

The group also announced a 
51 per cent increase in pre-tax 
profits to £l03m (8155m). 

A takeover of Yorkshire 
would create a greater north- 


freight wagons, bogles and cou- 
plers. 

LHB participates in the man- 
ufacture of the ICE, the 
high-speed train which has 
been developed and bufit by a 
consortium led by Siemens. 
The ICE is the principal Euro- 
pean competitor for the Train a 
Grande Vitesse, built by GEC 
Alsthom. 

GEC Althom said the deal 
would extend its European 
manufacturing presence. 
Under the terms of the deal, 
Preussag will retain 49 per cent 
of LHB 's capital. 


Meanwhile, Mr Janusz 
Quandt, the BPH chairman 
who has in the past five years 
built a nationwide retail net- 
work and who seas the hank 
combining this with an invest- 
ment banking role, has been 
urging for a capital increase 
for the bank through a sale of 
new shares to selected domes- 
tic investors. He has argued 
against having one strategic 
investor buy into the bank. 

The finance ministry has 
chosen to auction half of the 
bank's equity through the 
bourse and then search for a 
strategic investor once a mar- 
ket price has been established 
for the BPH. 


ern television empire, plus 
London Weekend Television - 
acquired for about £760m early 
this year. 

The government is looking 
into the issue of cross-media 
ownership and plans to report 
later this year. 

Mr Alex Bernstein, Granada 
chairman, said yesterday the 
group's principal businesses 
had improved profits in the 26 
weeks to April 2, with £11.3m 
of the growth in profit before 
interest coming from organic 
growth. A total of £27.lm came 
from acquisitions, mainly from 
Sutcliffe Catering and Spring 
Grove Services. 

Lex, Page 14 


Prodi may 
stay on as 
interim Iri 
chairman 

By Robert Graham 
in Rome 

The resignation of Mr Romano 
Prodi as chairman of Iri, the 
Italian state holding company, 
has given the Berlusconi gov- 
ernment a free hand to 
reshape and accelerate privati- 
sation policy. 

Mr Prodi resigned on Tues- 
day after the Iri board had 
approved 1993 results which 
showed losses had more than 
doubled to L10,230bn ($6.4bn). 
Yesterday the four other mem- 
bers of the board announced 
their resignations. 

The government has yet to 
accept the resignations. Mr 
Prodi indicated yesterday he 
would not change his mind. Iri 
has debts of L75.000bn, almost 
5 per cent of GDP. 

U I returned to Iri to deal 
with its finances and impose a 
restructuring plan with a view 
to privatisation. Now it is the 
time, after the presentation of 
the awnnai accounts, to hand 
over matters to the new gov- 
ernment,'’ Mr Prodi said yes- 
terday. 

Mr Silvio Berlusconi, the 
prime minister, commenting 
on the resignation yesterday 
said: “This is a problem which 
we still have to work on." 

This suggests that Mr Prodi 
will stay on in an interim 
capacity until the June 30 
shareholders meeting before 
formally stepping down.- This 
would enable him to approve 
the privatisation of Ilva's spe- 
cial steel operations. 

Iri became a public company 
with the treasury as the stogie 
shareholder in August 1992. 
At present the government 
appears Inclined to appoint a 
new chairman whose basic 
task will be to act as a kind of 
“liquidator". The chairman 
would sell off or re-distribute 
all worthwhile assets while 
the remainder would be gradu- 
ally liquidated. 

The procedure could be simi- 
lar to that applied to Efim, the 
industrial holding company 
placed in liquidation in July 
1992. However, government 
officials insist If snch a proce- 
dure were adopted, they would 
seek to avoid the mistakes of 
Efim - in particular antagon- 
ising foreign creditors. 


Polish bank to be sold this year 


Granada Group eyes 
TV takeover target 


Endesa price fall clouds offerings 


By Tom Bums 
in Madrid 

The issue price for the partial 
privatisation of Endesa, the 
state electricity utility, has 
fallen below expectations, rais- 
ing doubts about future public 
equity offerings. 

The offering in Endesa, 
which reduced the state hold- 
ing by 9 per cent to 65 per cent, 
realised only Ptal44bn 
(Sl.06bn). This compared with 
Pta200bn that had been antici- 
pated when the disposal was 
planned to. February. 

“We’ve had really bad luck 
with the markets over the past 
three months and our subscrip- 


tion closed on a particularly 
criminal day for equities," said 

The offer was priced at 
Pta6.450 per share, a price that 
was set by Endesa's closing 
price in New York on Tuesday 
and which was down on its 
earlier Tuesday Madrid close of 
Pta6£50. 

Yesterday, as the Spanish 
stock exchange continued to 
foil, the utility's share price 
dropped further to Pta6,400 in 
Madrid as a heavy volume of 
about 2m wnfiasa shares were 
traded. 

The price falls came as a 
shock. In the past, equity offer- 
ings by Spanish public compa- 


nies - including Endesa, which 
first tapped the international 
markets tn 1989 - had been 
unqualified successes. 

The only comfort for Endesa 
was that the offering, which 
was co-ordinated by Goldman 
Sachs, had performed some- 
what better in Its domestic 
retail tranche, where the offer 
was 3.25 times subscribed with 
200,000 applications for an 
average of 100 shares each. 

The utility had purposely- 
weighted the offering towards 
Spanish investors, and the 
demand from domestic retail- 
ers meant that it was able to 
exercise Its clawback option 
and reduce shares offered to 


institutions by 16 per cent. 

Analysts in Madrid said yes- 
terday that the ill-fortune sur- 
rounding Endesa’s equity offer 
was bound to influence other 
public disposals tiiat are in the 
pipeline. 

These include an equity 
offering by RepsoJ. the oiL gas 
and chemicals group, which is 
tentatively planned for the end 
of the year, and possibly one 
by Argentaria. the state hank- 
ing corpora tinn. 

“It’s quite dear that partial 
privatisations are no longer a 
well spring on which ilie gov- 
ernment can rely." said Mr 
Juan Bast os, chief executive of 
brokers Tbersercurities. 


Deutsche Telekom takes £50m Astra stake 


By Raymond Snoddy 

Deutsche Bundespost Telekom, 
the German state-owned tele- 
communications and post 
office group, has bought a 
large stake m Astra, the satel- 
lite television company, in a 
deal believed to be worth £50m 
($75.2m). 

The German company has 
bought 25 per cent of the pri- 
vately-held share capital of 
Sotiefe Buropeenne des Satel- 
lites, the Astra holding 
company. 

Two-thirds of SES is held by 
private European investors 
including Thames Television, 
which along with the Financial 
Times is a subsidiary of Pear- 
son. the Tnarifr and entertain- 
ment group. 

The other third of SES is 
owned by Luxembourg state- 


Deutsche Bundespost Telekom, 
preparing for privatisation in 
1996, lifted profits before 
taxes, write-offs and govern- 
ment transfers to DM7. 6bn 
($4-5m) last year, up from 
DM7bn, writes David Waller in 
Frankfurt. 

After special write-offs of 
DM3.2bn and and t rans - 
fers to the state of DM6bn, the 

owned financial Institutions. 

Although it is most unlikely 
that SES will be sold - the 
Luxembourg government will 
want to keep its stake and its 
control - the deal would give a 
notional value for SES of more 
than £500m. SES declined to 
reveal the purchase price of 
the Telekom stake. 

The deal suggests that 
Thames Television's 10 per 


group reported a net loss of 
mw?..Q hn_ Telekom said yester- 
day. Group sales rose by 9.3 
per cent, to DM59bn Tram 
DM54bn, reflecting a surge in 
business in eastern German 
states where turnover rose to 
DM4.5 bn from DM3.5bn. 

The law for privatisation is 
expected to come into force in 
1995, providing for the trans- 

cent stake in SES could be 
worth more than EoOm. Pear- 
son paid £100m for Thames, 
and in addition to the SES 
stake, the deal included the 
company's continuing pro- 
gramme supply business with 
Independent Television, its 
Teddington studios, pro- 
gramme library and stakes in 
satellite channels. 

SES has three Astra satel- 


formation of Telekom into 
three operating companies. It 
will be Germany’s biggest pri- 
vatisation to date. 

The first tranche to the tele- 
communications arm will be 
offered in mid-1996 with a 
market value of DMIObu* 
DM1 5b n- The market capitalis- 
ation of the group as a whole 
is set to be about DMGObn. 


lites broadcasting 50 television 
channels to cable television 
networks and satellite dishes 
across western Europe. A 
fourth satellite capable or 
broadcasting u further 16 chan- 
nels is due to be launched In 
September. 

SES revenues in 1993 
increased 23 per cent over 1992 
to £12Sm. Profits rose 19 per 
cent to £55m. 


Finnish lift maker in 


further big 

By Christopher Brown-Humes 
In Stockholm 

Finland's Kone yesterday 
extended its concentration on 
its core elevator operations by 
announcing the sale of Kone 
Wood, a supplier of wood han- 
dling equipment, to Andritz 
AG of Austria. 

The sale, on undisclosed 
terms, is Kone’s third big dis- 
posal in the last nine months. 
Last September it sold Mac- 
Gregor-Navire, the world's 
leading supplier of shipboard 
cargo handlin g equi pment, to 


disposal 

Sweden's Incentive for about 
SKr500m ($6&3m) and to March 
it sold its cranes unit for more 
than FM600m (gllOm). 

Kone’s majority owner, the 
Herlin family , recently rejected 
an offer from Germany's Thys- 
sen group for its entire share- 
holding . It controls about 40 
per cent of Kone’s capital and 
70 per cent of the votes. 

Kbne, one of the world's 
three leading elevator manu- 
facturers. says its remaining 
non-core activities, Kone 
Instruments, GS-Hydro and a 
steel foundry are also for sale. 


Loss at Postipankki 
widens to FM163m 


By Christopher Brown-Humes 

Pre-tax losses at Postipankki, 
the Finnish state-owned bank- 
ing group, rose to FMl63m 
($29.6m) from FMlOlm in the 
first four months as higher 
costs and reduced income off- 
set a reduction in credit losses. 

Mr Seppo Llndblom, chief 
executive, said the bank would 
make another loss in 1994, 
after last year's FM353m defi- 
cit 

Rising long-term interest 
rates and reduced foreign 
exchange income helped lower 


group income to FM1.20bu 
from FMlJSbn. The foil would 
have been greater but for last 
year's purchase of Savings 
Bank of Finland assets, 
although costs associated with 
the acquisition helped drive 
expenses up 30 per cent to 
FM934m. Credit losses fell to 
FM369m from FM599m. 

Last weds Unites. Finland's 
second largest banking group, 
said it had cut pre-tax losses by 
18 per cent to FM444m in the 
first four months, in spite of a 
15 per cent increase in credit 
write-offs to FM976m. 


New paths, 

NEW PARTNERSHIPS. 


BHF-SANK 

conducts the individual large 
customer business of a 

Merchant Bank. 

Its customers are 
medium-sized and targe 
companies, financial institutions, 
government organisations 
and private customers 
within Germany and abroad. 

AN international markets 
are directly accessed via a 
worldwide network. 


BHF-BANK in 1993 suc- 
ceeded in mastering the com- 
plex challenges of a highly 
competitive business year. In 
an environment marked by far- 
reaching structural and cyclical 
adaptation difficulties, our flex- 
ible, risk-conscious business 
policy enabled us to expand the 
Group's operating result by 
20.5% to DM 323 million. Net 
income for the year of the bank 
rose by 25.1 %, and the cash 
dividend was increased to 
DM 14.50 per share. 

For BHF-BANK 1993 was 
a year of new partnerships. 
In-depth cooperation with 
IKB Deutsche Industriebank AG 
in nearly all sectors further 
strengthened our competitive 
stance. 



At the European level 
BHF-BANK, together with Credit 
Commercial de France (CCF), 


OpsrattagBesaftm 
ERF4WHK GoMsi 

1993 

ndkn 

0* 

1992 
— I0M 
bet 

PwiKBtiff 

duns* 

Net Interest urane 

619 

538 

*J£I 

«« conmsstoo Income 

351 

300 

♦17.0 

Admrtstratwe expenses 

600 

MS 

+ 9.5 

Partial ooeratng 'Mi* 

370 

290 

♦Z7.6 

Netsiccmean 
financial operations 

127 

96 

♦32J 

Prvmsxm lor risks 

169 

116 


Operating rea* 

323 

268 

*20.5 


took a stake in British mer- 
chant bank Charterhouse pic, 
opening new prospects for 
cross-border corporate finance 
business with internationally- 
oriented customers. 

Head office: D-60302 Frankfurt a. M„ 
Telephone (-4969) 7 18 0, Fax (-4969) 
7 18-22 96. Tx 4 11 026 (general). Lon- 
don branch: 61 Queen Street, London 
EC4R 1AE, Telephone (O 71) 6 34 23 00. 
BHF-BANK London branch is a mem- 
ber of the SFA. Branches in Hong 
Kong, New York, Singapore and Tokyo. 


BHF-BANK 

Merchant Bankers by Tradition 


The Stock Exchange of Hong Kong Limited talk's w* responsibility for the contents of this 
announcement, makes no representation us to its accuracy or cnmpUtene\< and expnsslv 
disclaims any liability ivbatsoeivr fur any Irus bawsovtw arising /mm or in nuance upon tin: 
whole or any part of lint contents of this announcement. 

CmC Telecommunications Limited 

t Incorporated tn the Cayman IsLmds tmb limileil ILihUuyt 

Warrants entitling the holders 
to purchase ordinary shares of HK$0.50 each in 
Hong Kong Telecommunications Limited expiring on 
10th February, 1995 
(“Warrants") 

ANNOUNCEMENT 

The directors of CIT1C Telecommunications Limited are aware that the register of mouthers 
of Hong Kong Telecommunications Limited «“HK Telecom*) will he closed from i Hmig 
Kong lime) 6th June, 1994 to lOch June, 1994. both days inclusive, ithe "Book CIom? Period*) 
for the purpose of determining the entitlements to HK Telecoms final dividend of IlKSn.’^u 
per HK Telecom ordinary share for tile year ended 31« Match. 199-t. Holders of the 
Warrants are reminded that according to the terms and conditions of the Warrants, the right 
to exercise the Warrants -shall be suspended if the Exercise- Date «:is defined in the 
conditions endorsed on the Warrant certificates i. "Conditions ' ji shall fail less than 10 
Business Days las defined in the Conditions) prior to the first day of the period during 
which the register of members of HK Telecom is closed or during the Book Close Period. 

Accordingly if an Exercise Date relating to the exercise of any Warrants shall fall within the 
period from 24th May. 1994 to lOthJune. 199 ). such Exercise Date shall he postponed until 
the first Business Day after the expiry of such period. 

Holders oF the Warrants are Further reminded Unit according to the terms and conditions of 
the Warrants, holders of Bearer Warrants who have delivered duly completed _ Exercise 
Wocice (as defined in rhe Conditions! containing payment instruction for ihe Exercise Price 
(as defined in the Conditions) and Exercise Expenses (as defined in the Conditions) to 
Eurocloar or Cede] not later than 10:00 a.m. on 20th May. 1994 i Brussel* time or Luxemburg 
time, as the case may be) and registered Insiders of Registered Warrant who have delivered 
duly completed Exercise Notice, together with the Warrant certificate! m and payment for die 
Exercise Price and Exercise Expenses to Central Registration Hong Kong ‘ Limited, the 
Registrar, at 17th Floor. Hopewell Centre, 183 Queens Road East. Hong Kong not Unci' I ha n 
KMX) a.m. on 20th May. 1994 (Hong Kong time) will be registered as a shareholder of HK 
Telecom before the register of members of HK Telecom closes and will be qualified for the 
proposed final dividend of HK Telecom. 

By order of the board 

Amy Wong Ring Hung 

Secnieuy 

Hong Kong. 20th May, 1994 



3i International B.V. 

S150.0Q0.000 
Guaranteed floating rate 
notes 1999 

The nates will bear interest at 
5. 4375 % per annum forthe 
Interest penod 31 May 1994 to 
31 August 1994. Interest payable 
on 31 August 1994 will amount to 

SI37.05peril0.mnoK and 
Sl.370.55 per &100.000 note. 

Agent: Morgan Guaranty 
Trust Company 

JPMorgan 



mmm 

ii 


3i International B.V. 

(Fonurij tautwn <u /uuMon in tnduitry Inurmuiomal B.V.) 

£125,000,000 

GUARANTEED 

FLOATING RATE NOTES 1994 


In accordance with the provisions of the 
Notes, notice Is hereby given that the rate oF 
Interest has been Hated at 5 */■ per cent, 
per annum and that the Lucres* payable oa 
Ihe relevant interest payment date 
Si si August, 1994 against Coupon No. 27 ’will be 
£1S&48 from Notes of £10,000 nominal 
and £13.55 from Notes of £1,000 «ic.i*,inaL 


S.G. WARBURG & CO. LTD. 

(Agent Bank) 






\ 


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FINANCIAL TIMES THURSDAY JUNE 2 1994 


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INTERNATIONAL COMPANIES AMD FINANCE 


Matra agrees part-sale of US unit 


By bawld Buchan In Paris ’• 

Matra, the military arm of 
France's Lagaxd&re group, has 
agreed the partial sale of its US 

subsidiary. Fafrth&d 3pace and 
Defense Corporation, to Orbital 
Sciences Corp of the OS in a 
SiOSm deal. - 

Matra is to be paid in cash, 
and shares, giving it a stake of 
more than 15 per cent in 
Orbital. The French company 
will still own Fairchild's bond- 
ings, worth $39m, which it wQl 
tease .to Orbftai. 

Matra bought Fairchild in 


1989. It said yesterday the deal 
was prompted by the "almost 
unavoidable necessity" of 
mergers because of the cuts in 
OS military and space spend- 
ing. 

Orbital is a fast-growing 
spue company, with a turn- 
over of 5190m last year. Its 
technology includes Orbcomm 
mini-telecom . satellites, the 
Pegasus system of launching 
the mini-satellites from air- 
craft, anrt taphT)]^ in map . 

malting from pictures taken 
from space. 

Fairchild had a large amount 


of government business, 
including work an the US Air 
Force’s F-22 advanced tactical 
fighter. 

Matra said its interest in the 
deal was primarily product- 
related.. It wanted to associate 
Its own French-based space 
business and that of Fairchild 
with Orbital. 

Orbital Sciences, based in 
Fairfax, Virginia, earned $A6m 
last year, up from earnings of 
$3&n on revenues of 5174.6m 
in 1998. 

The company has success- 
fully launched 16 space mis- 


sions, including the Pegasus 
rocket and suborbital launch 
vehicles. 

Mr David Thompson, chief 
executive of Orbital, said ear- 
lier thfe year the company had 
been exploring ways to apply 
its Space launch and satellite 
systems technologies to higher- 
growth comm ercial markets. 

Separately, Matra has been 
negotiating for many months 
with British Aerospace to buy 
the BAe’s space business. It 
wants to merge the two compa- 
nies’ missile activities in a 
joint venture. 


Czech 

brewer seeks 
to raise up 
to Kc3bn 

fly Vincent Boland fa Prague 

Prazske Pivovary, the four t h - 
largest Czech brewer. Is- to 
raise up to KcSbn ($i07m> to 
fund a five-year modernisation 
of its three brewing divisions 
and expand overseas sales of 
Its leading brand. 

Mr Alfie Vaughan, a director 
of Prazske Pivovary, said that 
the aim was to improve effi- 
ciency and modernise brewing 
methods. 

Prazske Pivovary, in which 
Bass of the OK has a 34 per 
cent stake, expects to tap the 
Czech capital markets far the 
ftmds. However, the technical 
problems of raising long-term 
capital in . the Czech Republic 
will have to be overcome. “Our 
debt profile is very short-term, 
which must change,” Mr 
Vaughan said. . 

The main beneficiary of new 
investment will be the compa- 
ny's Smichov brewery, which 
makes Staropramen. its lead- 
ing brand with an estimated 10 
per cent of the Czech market 

Staropramen is to be mar- 
keted abroad as a premium 
lags*. It will be launched in 
some HE pubs owned by Bass 
from October: backed up by "a 
very substantial marketing 
budget*, Mr Vaughan said. 

Bass paid £9m ($&8m) for 
its stake in Prazske Pivovary 
late last year. 


US copper 
producer sells 
gold interest 

Phelps Dodge, the US copper 
producer, has sold its 7225 .per 
cent interest in the Seven-Up 
Pete joint venture gold project 
in Lincoln, Montana, for 
5150m, Beater reports from 
Phoenix, Arizona. 

ft said it agreed to sett the 
stake to a unit of Echo Bay 
Mines and a unit of Canyon 
Resources. - 

Echo JBay said separately it 
was acquiring from Phelps a 55 
per cent interest in the gold 
project for 5114m. 

It said Canyon Resources, 
which owns a 27.75 per. cent 
interest in the venture, would 
increase this to 45 per cent 


Compaq reduces prices in 
campaign to topple rivals 

Ru I Ank. «> AM.» IMm. Mtn — I TDUI. 1... 


By Louise Kehoe 
in San Francisco ‘ 

Compaq Computer has sharply 
reduced the prices of several of 
its personal computer products 
in a bid to expand market 
share. The Texas-based com- 
pany has set its sights on over- 
taking IBM and Apple Com- 
puter to become the PC 
market-leader by 1996. 

The price reductions range 
from 4 to 29 per cent, with the 
deepest cuts applying to its 
sub-notebook PC, the Centura 
Aero, which will sell in the US 
at $599 for the basic model. 

Compaq also lowered prices 
on its multimedia Prasario 
models, which incorporate a 
CD-ROM player, by about 13 


per cent Prices win now start 
at $1,299. High-performance 
Pentium-based desktop PCs 
and servers were reduced by 
rip to 18 per cent 

With its latest price cuts, 
Com pad Is moving aggres- 
sively to undercut its largest 
competitors. “With this move 
we [will] set the pace for value 
leadership in the PC industry,” 
said Mr Ross Cooley, senior 
vice-president 

Compaq's US shipments out- 
stripped those of IBM and 
Apple in t he PS market for the 
first time dining the first quar- 
ter of this year, according to 
Dataquest, the US market 
research group. 

“Compaq advantage of 
Apple's PowerPC transition 


and IBM’s traditionally slow 
first quarter to jump out to an 
early US PC shipment lead - 
but we expect it to be a close 
three-way race by year-end,” 

ftaifl Mr Philippe de Mm-ffiTlan , 
director of Dataquest's PC 
group. 

Compaq captured the first- 
quarter lead by shipping 
nearly 55 per cent more PCs in 

the US then hi the period 

last year, he said. 

The US PC market as a 
whole showed strong growth, 
with shipments up by more 
than 17 per cent over tire first 
quarter of 1993. The top 10 PC 
manufacturers accounted for 
all of the growth, with sales by 
smaller PC makers declining, 
according to Dataquest. 


Norway warned on banking 


By Karen Fosefl bi Oslo 

The Norwegian government’s 
CPBBnMd control of commer- 
cial hanirB risked distorting 
competition in the sector, Mr 
Finn Hvlstendahl, Norwegian 
Bankas Association chairman 
yesterday warned. 

Mr Hvlstendahl, who is also 
president of Den no ryV" flgnic 
Norway’s biggest commercial 
bank, said the government 
should make It an objective to 
re-privatise state-owned com- 
mercial hawks 

“The government stake in 
the major Norwegian commer- 
cial hanks will inevitably affect 
compe ti tion, in. the ..[domestic] . 
banking industry,” he told the 


association’s animal meeting 
in Bergen. 

Norway’s banks last year 
returned to pro fit for the first 
time in several years, after 
emerging from the country’s 
worst banking crisis since the 
second world war. 

The crisis forced the govern- 
ment to undertake a far- 
reaching rescue oper a tion, in 
which it became the single big- 
gest owner of the capital of the 
top three commercial banks. 
DnB received more than 
NErTbn ($98lm) in state cash, 
while Christiania Rank-, the 
second biggest bank, received a 
NKrSbn injection. 

. .The Labour government has 
repeatedly stressed its inten- 


tion to maintain a minimum" 50 
per cent shareholding in DnB 

anH fflirigtiania Rank, at least 

for now. 

Last year, the state boosted 
its stake in DnB, to 87.5 per 
cent from 69 per cent, by con- 
verting NKr3-5fm in preference 
capital in the back to 350m 
new shares. 

The state reduced its stake 

in nhrigtiania to 689 per c en t 
from 969 per cent last Decem- 
ber. It remains the sole owner 
of Fokus Bank 
hi March, the Organisation 
for Rmnfimic Cooperation, and 
Development warned against 
continued dominant govern- 
ment involvement in the bank- 
ing industry. 


Indian industrial group plans issue 


By Peter John 

Grasim Industries, one of 
India’s leading industrial 
companies, plans a $10Qm issue 
of global depositary shares 
(GDSX. 

It is the first Indian company 
to receive government 
approval to tap the interna- 
tional capital markets since 
the failed $Ibn euro-equity 
offering by VSNL, the state- 
controlled telecommunications 
group, a month ago. 

Part of an industrial group 
run by Mr Adilya Birla, Gra- 


sim is the largest manufac- 
turer of viscose fibre in India, 
and a big cement and steel pro- 
ducer. 

The shares, which will be 
priced next week, will be fungi- 
ble with an existing $9Qm GDS 
issue. The money will go 
towards the company’s $387m 
capital expenditure programme 
over the next three years. 

The company is building a 
cement works and a power 
plant, as well as expanding tex- 
tile production. 

Mr Birla said: "This is impor- 
tant for me and for the coun- 


try. Grasim was the first com- 
pany to come successfully to 
the international market in 
1992, and the first after the 
VSNL failure. A lot of people 
will be watching us very care- 
fully * 

The postponement of VSNL’s 
offering was the country’s big- 
gest setback in the interna- 
tional capital markets since 
Indian issuers first borrowed 
funds in late 1992, when the 
government's liberalisation 
programme permitted 
increased foreign trade and 
i n vestment 


Kmart loses 
backing of 
investor for 
stake sales 


By Richard TomKns 
In New York - 

Wall Street’s biggest 
institutional investor is join- 
ing a rebellion against plans 
by Smart, the troubled US dis- 
count store group, to sell 
stakes of up to 30 per cent in 
its four specialty retafflng sub- 
sidiaries. 

The influential College 
Retirement Equities Fund 
(CREF), which holds Llhn of 
Smart’s 455-9bn issued shares, 
said ft wanted Kmart to sett 

the subsidiaries completely, so 

that management could con- 
centrate on im p ro ving the core 
discount store business. 

It also said ft would with- 
hold support for all five of 
Smart's 13 directors seeking 
re-election this year, citing the 
company’s “significant 
long-term decline in market 
share, profitability, operating 
earnings and share price”. 

With only a day to go before 
the company’s annual meeting 
on Friday, the CREF is the big- 
gest of five investors to have 
spoken oat against Kmart* s 
strategy. 

The others are file State of 
Wisconsin Investment Board, 
one of the 10 largest US pen- 
sion funds; the Florida State 
Board of A^ m li ih l i a li nn; the 
Ohio State Teachers Retire- 
ment System; and the Amal- 
gamated Clothing and Textile 
Workers Union. 

Between them, these inves- 
tors co n trol only a small per- 
centage of Kmarfs shares. 
However, they are hoping 
their public opposition to 
Kmarfs plans will swing other 
shareholders against the 
company. 

Kmart, which has been 
struggling to compete with its 
more successful rival, Wal- 
Mart ended five years of stag- 
nant earnings by pl umm e ting . 
into net losses of S947m last 
year. Plans for recovery 
include the creation of new 
shares in Hs specialty retailing 
subsidiaries the sale of up 
to 80 per cent of the shares in • 
the marketplace. 


Bombardier 
advances 33.7% 
in first quarter 

By Robert Gibbens 
In Montreal 

Bombardier, the Canadian 
aerospace and transport equip- 
ment group reported a sharp 
rise in profits and sales for the 
first quarter. Rising deliveries 
of its 50-passenger regional jet 
and strong demand for snow- 
mobiles and watercraft 
resulted in a 83.7 pm* cent gain 
in first-quarter net profit 
while sales advanced 27 per 
cent. 

Bombardier earned C$52.4m 
(US$37. 9m), or 31 cents a 
share, against C$399m or 25 
cents a year earlier, on sales of 
CS1.17bn, against C$993m. 


Standard % Chartered 


Standard Chartered PLC 


£150 miHIon Subordinated Boating 
Rate Notes due 1996 

In accordance with the provisions of the 
Notes, notice is hereby given that for the 
three month period from 31st May 1994 to 
3ist August 1994 the Notes will bear interest 
at. the rate of 5.35 per cent pier annum. 

interest per £5,000 Note will amount to 
£67.42 and will be prod for value 31st August 
1994 against surrender of Coupon No 33. 

West Merchant Bank Limited 
. Agent Bank 


SmfthKIhw P each am PLC 
Floating Rate Unsecured 
- ■ ■ Lean Stock ■ 
1990/2010 

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bttoNKPariod tJconlSMta 

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. 065^00,000 

CARPS HI Limited 
Saeured AmortMng Floating 
Ram Notes due 1990 
For ftoUwM fDOMR IMMittl period 

M SI. ISM W August 31. 1»4, 
Sw rate has been datonnfcwd at 
5*5%. Tbs in terest payable on 
tee ratewni fewest payment (two 
August 31. 1984 wS be EB30L24 par 
£67.717.81 prMdpH amount of 
Notes. 

»Tli ttMe i e» i — I L IA _ 
u «a t , » s i i ni Q 

Junea.lM4 


CgnKitaeNefa 

Union Bank of Swiecerhnd 
. finance N.V. . 

UA 5150^00,000 
Guaranteed Routes Rase 
Notts doe 1996 ' 

luaccordancr with the pipeisionsof 
. die Notes, nonee is herebv given 
that the Rate of Interest toe the 
ducc month period betinning 33rd 
May. 1994 hasheen toed at 5.625% 
pcrwmwn- 

Uateaki nfcofSwtmrtaag 
Leodoe Brandi Agent Sank 
KfcMer.994. 


THERE’S A 
HANGING 
EVERY 
MONTH 

Great Art demands the 
greatest space; that’s 
why on the first 
Saturday of each 
month the FT 
publishes a full colour 
Art section devoted to 
art and antiques. 
The weekend FT is 
read by an estimated 1 
million people in 160 
countries, reaching 
affluent international 
investors and 
collectors; providing 
the Art world with 
exceptional and 
effective advertising 
opportunities. 

37% of Saturday FT 
readers have bought 
paintings or antiques 
in the last two years 

(FT Rasdar Sumy 1998) 

Fur more b i ton w Hon about 
adCT rt teta flp t— w corWcfc 

Genevieve MarenghI 
(071)3733185 
James Burton . 
(071)8734677 

The Financial Tates - 
Putting the colour 
back am) Ant 


(Thte axncaem appear! as a oarer of rceonl only) 

CRESTCo 

TteflttfcrfEfl^Bdilptetedtemawe tot. by fr?d«tm<teEof3l Miy 1W4. 7« firm hwe given ciwimlnnmn in 

w renfffy PWlhjOl f pwl H-jiiiiMl n/ffimn ^|- ■T B ‘*£ l r. -T’**"''* 1 -'— 

K>led down, ud no nan ■ dc fetch bkfcMJ beta* fcr neb of the torn but at eaamhaat. Um group of 74 firm* ii 

wMaly nyiLitnnrtw of the ntWr am of the cgniiy mate to ball ito retag and tnBlMiwBl rectoat. 

Wf wffi bo cwnptord h Ocwbci. after Ob nen 

sage of indeprades udk. ui win be used to Kftmd B«k of Easkod 

mjihiw la rad CREST, the nee ,l<wimii urt-im m lysem fix tqaiia. CREST wQl hs 

natty Ibr prattdpmt tnaffing taarty 1996, and teotid bo iaasnaul befcra ite ad of 1996. 

Tin JbQowiag txsu rad nterisas Jnw gtven dx-fernmuiiniiwit m pnictpfc 

Tier 1 

Commitment £375^00 

Abbey Nnioad Pie 

Hriowori Benun Grenppte 

Brat cf Scodud 

Lbyds Bud: pfc 

BedqiBmkpb 

Imrifli SBCfc F«rlMWy 

CBcaore&Oo 

Nnural WafitjiiHicr Brah pfc 

Hn CfaUB Mnduttn Bank NA 

The Royil Bank of Saxiand pfc 

CbakA Bade 

Sneth New Court Secnribffl Limited 

CtebrakNA 

SocW GWiaie Scacg Tsmban Secnritia Lfil 

OaBt Lynmii Sfrnrirint 

Swta Bank Ctxpanacn 

Sobtsl BmmS nnbtmgl linidqt 

TSB Catty pfc 

Gtddnra Sacte Bqnity SeeatWei (OK) 

UBS Lid 

Heete OoteU Secoritira Lid 

S G Waring A Cb Ltd 

HSBC HobHags pie 


Tier 2 

Commitment £200,000 

Burets Dotptea Wtiep Liaatad 

Uoigu Saoley A Cn rmwiyaiWuwI T imilwt 

Lehran Brahes Secorida 


Tier 3 

Commitment £100,060 

The Beak at New York 

JPMorgasftCb 

Brakes Tnra Cbapray 

Maya GrcaMl Asset Maragrmrai LU 

aydodrie Bank pfc 

MTT Ibwihiw 

CtnitmLn-isl Omob Aaoua Cnquy pic 

Mwmnrt InfiJiira<fcowa| pjp 

(Vdrt gypyff Acsef i 

Ptwmif £ Co IjwlteH 

Ons Bsrape Liamed 

Feel Ann A On Limited 


hashing iBwitwd 

Tllnihm rVnAlj TJmhivj 

Silmunn BlQdlCA P»"Ppe t 

ImlipiiAw fTwnp T Hi 

BHmtwW taiMUffKIH Lid 

Ere-Asociaiie NV 

Wairiinlf 

MfiCfPisfOB BnliUty (UK) UiHikfri 

Aflnt E Strap A Ck> 

UmtH Lynch Intanakwll IjimwI 

Wimcsflood J 

Tier 4 

Conunttment £3^000 

B WD Secuddei pie 

The Nonhen Trim Compray 

CapeLGae Mytn Oqant Umnnild 

Bahtane Bntters pfc 

drafca Straley A Co Lai 

Redmayne Besdey 

Oty Deal Services Limbed 

Rowan A Cb United 

Cbdragln Onuft i i^«inwi 

Setigmrao. tferrif & Cb 

G^I A Hke Limited 

Seymour Plata ifcmtflriii I imio.l 

fWriwii tViMiwp Ijmited 

The Share Centre Lid 

Hnkau OouLwiiK t 

Sobbig StoekbraUng Undad 

SBOdxjrae ACo 

Tilnry Led 

John SUdiU * Sen Lid 

TnUea A Tokyo Fare* Imeiradonil Lot 

HUcfcCo 

Ttedepoitt nnmeU Networks pk 

Mwhpa^w -SftlllifM T li|>(md 

Wtoe Speke 


Mortgage Funding 
Corporation No 2 Pic 
SI 15.000.000 Class B-l 
SI 1,000,000 Class B-2 
Mortgage backed floating 
rate notes August 2023 

For the interest period 31 May 
19941031 August 1994 the 
Class B-l notes mil bear 
Interest at 5L575X per artman. 
Interest payable on 
31 August 1994 will amount to 
51.40321 per 5100.000 note. 
The Class B-2 notes util bear 
interest at 5.75% per annum. 
Interest payable on 
31 August 1994 util amount to 
51.449.32 per 5100,000 note. 
Agent: Morgan Guaranty 
Trust Company 

JPMorgan 


CREDIT LOCAL DE 
FRANCE -CAECLS A. 

U3.$2.000,000,000 
Euro-Medium Term Notes 
SERIES NO.12 
FPC 725,000,000 Inverse 
floating rate notes 1996 
TRANCHE NO.l 

Notice is hereby given that for 
the interest period I June 1994 
to I September 1994 the notes 
mill beer interest at 25.168% 
per annum. Interest payable on 
I September 1994 will amount 
to FF32.159.il per FF500.000 
denomination. 

Agent: Morgan Guaranty 
Trust Company 

JPMorgan 


Correction Notice 
due to a misprint 



European Investment 
Bank 

Yen 35,000,000,000 
Floating rate notes due 
2008 

Notice is hereby giuen that the 
notes will bear interest at 
210% per annum fmm 
31 May 1994 to 30 November 
1994. Interest payable on 
30 November 1994 mill 
amount to Yen 533,750 per 
Yen 50.000.000 note. 

Agent: Morgan Guaranty 
Trust Company 

JPMorgan 


TOSH OKU FINANCE NETHERLANDS B.V. 
US$10000,000 
Floating Rata Notes T998 
IntmuParfad 2ml Jure, 19M to 

2nd Decani bar, IBM 
burarRn S.7DK per annum 

frnaram Payment dim 

2nd December. IBM 

perUSSTODOOMots USS3N.7S 
rSpponCtetftfcitei naU t ma i Lunitod 
London 
AgmtBank 
2nd June. -B94 



fair game keeper. 

We support the National Grid International Panel oF umpires; 
not just as a good thing for cricket, but because the umpire reflects one of 
the National Grids own values. 

• I 

■ - — As wefi-as onming and operating-the high -voltage-ele ctrici t y — - • 

transmission system. National Grid maintains a fair market .in electricity, 
and encourages competition that is fair to each and every player. 

We'll work hard to keep die playing field leveL 



National Grid 

MAKING ELECTRICnV WORK 

THE NATIONAL GRID COMPANY pie. NATIONAL GRID HOUSE. KIRBY CORNER ItOAO. COVENTRY CV-1 SJY 


To the holders of 

Mortgage Capital Trust I 
Collateralized Mortgage Obligations, Series A 
Class A-l Bonds Due 1st June, 2017 
Notice is hereby given that the interest rate on the Class A- 1 Bonds for 
the Interest period 1st June, 1994 through 1st September, 1994 is 
5. 225% per annum. 

By: Bankers Trust Company, as Trustee. 






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18 




TOTAL 

NOTICE TO SHAREHOLDERS 

PAYMENT OF DIVIDEND 

The Annual tieiKT.il Meeting of Shareholders held on 
May 3u. IWM ha* set the 14*0 dividend at FF 7.SU per share 
payable :is Irom June 14. I*W. 

A tax credit of FF 3 "5 « ill be added to this dividend. 

Payment of the dividend, the amount uf which will be 
dependent on the term- of the double lav convention between 
France and Great Britain, will he settled upon presentation uf the 
coupon and completion of form RF 4GB. 

Residents m.iy lodge this form with the Bonk acting a* their 
agent, either in France or in the United Kingdom, at any time 
up to December 31 of the second year following the collection 
date ol die coupons. As a m.ull of French legislation on the 
"deniaienalisouon" ol jccuriliex. payment of tile coupons wilt hr 
made through the banks with which the securities have been 
deposited 

The Annual General Meeting ha* decided to offer each 
.shareholder the option to receive the W3 dividend either in cash 
»<r in shares: ilw iisue priit .•/ sm Is shares - tarrying dividend 
and \i ‘tin g rights erfes tire from January 1. I0'*4 - has been 
tet ai FF 2‘*~ per \luire. 

Shareholders opting tu receive the dividend in the form of 
shares will he required ui make such election between June 13. 
I*JU4. tire dividend payment Jalc. and 

Any shareholder who has not made ■MMMHBI ra 
such election by July s. shall | U liAL 

automatically receive the div idend inc:i»h. jBBf 

payable js ol July 2S. IW. BBS Bm 

TOTAL - M Gums Micliclel - cedes 47. oTOfto Paris l.i Defense France 




FORD CREDIT EUROPE PLC 
£200,000,000 FLOATING RATE NOTES DUE 1996 

Notice is hereby given that the Bale or interest has been fixed at 
S.67344% and that ihe interest payable on the relevant Interest 
Payment Date December 1. 1994 against Coupon No. 2 will be 
£28.44 in respect of USS1 .000 nominal of the Notes and £284.45 In 
respect of USS1 0.000 nominal ol the Notes. 


June 2. 1994 _ ..._ 

| By. Citibank. NA (Issuer Services). Agent Bank CrlllBAN\*9 




FXNANCIALTIM^^^1 ^ SPA ^ 2 l< * i>4 

INTERNATIONAL. COMPANIES AND FINANCE 


Philip Morris keeps the markets guessing 

Food and tobacco group has made an about-turn over a spin-off, writes Richard Tomkins 


Signal 


Q <30+ software applications Q 
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I s Philip Morris, the US 
food and tobacco group, 
going to spin off its ciga- 
rette making operations? The 
stock market was left guessing 
after the unusual corporate 
turnabout that took place last 
week. 

Last week Philip Morris put 
out a terse statement after a 
six-and-a-half-hour board meet- 
ing saying it had decided to 
take no action on the possibil- 
ity of separating the company's 
food and tobacco businesses. 

But bow were shareholders 
to reconcile this with an 
announcement just six weeks 
earlier saying that a spin-off of 
the tobacco operations was 
being considered? 

In mid-April, Mr Hans Stoir, 
the company's chief financ ial 
officer, said that Philip Morris 
was looking at the possibility 
of a spin-off as one option for 
increasing shareholder value. 

The move appeared to make 
sense. Philip Morris - like RJR 
Nabisco, the next biggest US 
food and tobacco group - had 
long believed its share price 
was unduly depressed because 
of adverse sentiment about cig- 
arette manufacturing. 

The downward pressure 
increased last year when Philip 
Morris started a bruising price 


Negara sells 
MAS stake 

Bank Negara. Malaysia's 
central bank, has sold its 
shareholding in Malaysia 
Airlines (MAS), the national 
carrier with the exception of 
one “golden share", writes 
Kieren Cooke from Kuala 
Lumpur. 

It sold 11.5 per cent of MAS 
to the state run Pensions Trust 
Fund at the beginning of this 
year. 


war to win back market share 
from low-cost brands. More 
recently, US cigarette makers 
have faced an unprecedented 
wave of attacks hum the anti- 
smoking lobby, government 
officials and Congress. 

Meanwhile investors fear 
that, one day, someone will 
win a multi-million dollar law- 
suit against US cigarette mak- 
ers requiring them to pay com- 
pensation for suffering caused 
by smoking-related diseases. 
So far. the cigarette makers 
have successfully defended 
themselves against every 
action, but one success could 
open the floodgates. 

When the Financial Times 
reported Mr Storr's remarks, 
the company was flooded with 
requests from stock market 
analysts and the media for con- 
firmation of a possible split 

Philip Morris duly obliged, 
saying it was “currently study- 
ing such a separation”. And 
during the next two weeks, as 
analysts sent out “buy” recom- 
mendations to their clients, the 
stock price rose by more than 
10 per cent. 

On April 25, Philip Morris 
said it was continuing to study 
a possible demerger, so when 
the board met Last Wednesday, 
expectations for an announce- 


By Conner Middelmann 

For the fourth consecutive 
month, most government bond 
markets fell in May, according 
to J.P. Morgan’s government 
bond index. 

Japan was the only excep- 
tion, topping the local cur- 
rency performance charts for 
the second straight month with 
a return of 1.2 per cent Japa- 
nese bonds have been sup- 
ported by the country's slug- 


ment were running high. 
Instead, the company said the 
board had rejected a split - 
and the next day further 
dashed hopes by saying: “It is 

Philip Morris 

Share price ($) 

65 



Source: Dgnstream 


not anticipated that this issue 
will be before the hoard in the 
foreseeable future." 

Philip Morris declined last 
week to elaborate on its brief 
announcements, so analysts 
were left to speculate on the 
reasons for the turnabout. 
Some believed the plan was a 
dead duck: others thought it 
needed more work. 

But Philip Morris had always 
emphasised that a spin-off was 


gish economy, low interest 
rates and rec eding inflation. 

European government bonds 
were worst hit, falling 1.75 per 
cent on the month, bringing 
the year-to-date performance to 
minus 5.22 per cent, compared 
with minus 3.5 per cent in the 
year to date for the US bond 
market and minus 4.08 per cent 
on the global index. 

European falls were caused 
by concern that monetary eas- 
ing may be coming to an end. 


only one of the options for 
enhancing shareholder value, 
and could involve problems. 
Among the difficulties that 
could have confronted the 
board were: 

• A reluctance to overturn 
the logic that originally 
brought the tobacco and food 
operations together - that is. 
the idea that the cashflow from 
the tobacco operations should 
be used to fund the expansion 
of the food operations. 

• Uncertainty that a split 
could protect the demerged 
food operations from a success- 
ful lawsuit against the tobacco 
operations if the courts saw 
the demerger as an attempt to 
circumvent liability. 

• Hie possibility that a free 
distribution of shares in a 
demerged tobacco business 
would give shareholders an 
unwelcome tax liability. 

• Fears of an adverse political 
reaction from the anti-smoking 
lobby in Washington to a move 
that could be seen as confer- 
ring benefits an the country's 
biggest cigarette maker. 

On the other hand, experi- 
ence from other recent US 
demergers suggests that most 
of these problems could have 
been overcome. 

So analysts like Ms Becky 


Germany was Europe's top per- 
former, with a loss of 0.66 per 
cent in May in spite of the half- 
point cut in the Bundesbank's 
discount rate to 4Vi per cent 

In spite of a spate of corrup- 
tion scandals which caused the 
10-year yield to vault to 9.8 per 
cent, Spain was the second- 
strongest European market, 
losing 0.71 per cent in May. 

Europe's worst performer 
was tiie UK market, which lost 
3.78 per cent on inflation 


Barfield of CS First Boston, the 
Wall Street Investment bank, 
wonder if there is a simpler 
explanation for what 
happened. 

Clearly, the management 
favoured a demerger - because 
it would not have published 
statements saying it was being 
considered; equally clearly, the 
board was against the plan - 
because it turned it down. “It 
sounds to me like there was a 
fight," Ms Barfield says. 

Whatever the explanation, 
the debacle has done Philip 
Morris - and its languishing 
share price - little credit. But 
where does it go from here? 

One likely option is to boost 
warnings per share by acceler- 
ating the current stock repur- 
chase programme. 

Another possibility would be 
to Increase the proportion of 
earnings paid out in dividends. 

On the other hand, one posi- 
tive outcome of last week’s 
meeting was the elevation to 
the hoard of Mr Geoffrey Bible, 
head of Philip Morris's world- 
wide tobacco operations. Some 
analysts thought that could he 
a first, tentative step towards a 
future demerger - once the 
board felt it could decently 
come back to the plan without 
losing face. 


expectations, bringing the 
year-to-date loss to 11.29 per 
cent 

US bonds only shed 0D6 per 
cent in May, but the market 
remains nervous. "With jobs 
growth replacing interest rates 
as the force behind increased 
spending in the US economy, 
investors are becoming 
increasingly concerned with 
the Fed’s ability to contain the 
risk of upward price pres- 
sures." the report states. 


Ireland set 
to overhaul 
trading 
in gilts 

By Tim Coono In DubHn 

Ireland's National Treasury 
Management Agency- (NTMA) 
plans an overhaul of govern- 
ment bond trading which 
would replace the order-driven 
system with market-making. 

NTMA says the shift to a 
market-making system would 
improve liquidity, reduce the 
cost of borrowing to the Irish 
exchequer and improve the 
market for financial deriva- 
tives. 

The changes are expected to 
increase annual turnover of 
the I£l4.55n ($2l.5bn) stock of 
gilts from three to six times. 

The proposals would create 
a new tier of primary dealers, 
which would be separately 
incorporated from existing 
brokers. They would have cap- 
ital resources of at least l£4m 
each, and quote firm two-way 
prices in nlue designated 
benchmark stocks. 

Deals would be in minimum 
units of l£2m for shorter 
maturities up to five years, 
and In minimum units of l£lm 
for longer maturing stocks. 
Maximum spreads would be 
between 0.1 and 0.3 per cent, 
depending on stock maturity. 

NTMA says it would give 
exclusive access to market 
makers to tap sales, would 
provide them with stock- 
switching arrangements, 
would facilitate the develop- 
ment of stock lending and 
repurchase arrangements, and 
would be prepared to inter- 
vene in secondary markets "in 
times of major financial turbu- 
lence". 

The average gross issuance 
of new government bonds is 
around I£2bn per year, of 
which I£1.7bn Is in respect of 
refinancing maturing debt 



1 

r-iTV . ?T'h e ci t Y’S" boo K M AV.4=j$*l8B 

__ Tlr VtdiUi Lexfaf! . n -p. ca-I talma - Fmjndil and Spent F'Jf a 

J TJJfT l»k,huic4ii.J cm dpptn.-ili-.fi f mm cU >171 2 A'. SP-.7 

Iccouid' die rt,ninalt> -ipcwl isnlun nan 
_fl tar ..mil up-iL-Jdie. ra-fc.es P» m Kispm un l>bfiCTn pd(« u"» 


Japan bucks trend in government bond markets 


TOTAL- ANNUAL AND EXTRAORDINARY GENERAL SHAREHOLDERS’ MEETINGS ON MAY 30, 1994 

if 


TOTAL is on target” 


SERGE TCHURUK, CHAIRMAN AND CEO. 


TOTAL shareholders met on May 30. 1994 in annual and 
extraordinary general meetings under the chairmanship of 
Serge Tchuruk. Chairman and Chief Executive Officer. 

Shareholders approved all of the resolutions submitted to the 
annual meeting. The 1993 accounts were approved, as well 
at the payment of a dividend net of lax credit of FF 750 a 
dia re. up T r .c from 1992. plus a tin credit of FF 3.75 a share. 
This year again shareholders were given the option of 
reinvesting their dividend in new shares with dividend rights 
tis of January I. 1999. at a unit price of FF 297. 

Shareholders elected to the Board of Directors Antoine 
Jcancourr-Gnltgihini. Chairman of Soviere Cent rale des 
Assurances Generates de France, to replace Pierre Vaillaud, 
who did not wish to have liis mandate renewed. The mandate of 
Fninyois-Xavier Onoli was renewed. 

Shan’lmhicrs also approved all of the resolutions submitted to 
the extraordinary meeting. 

Chairman's Address 

"Ladies and Gentlemen. Dear Shareholders. 

Unce again. «e have gathered for our yearly meeting to review 
the business aciivuies and results of your Company. Your 
aik-ndance .inJ loyalty bear wilnes< in the importance you attach 
in the life »l the Group. ! thunk you ail for it. 

First ol' -ill. I would like lo say a few words about 1993. the 
highlights of which ha\e jusi hewn presented in you. The year 
was marked hy an unfavourable economic climate in Europe and 
by depressed conditions in lire world oil industry. At year-end. 
oil prices had dropped in real terms lo their lowest level for the 
past twenty years. In ihe lace of these dill! cullies. TOTAL 
managed in steer unwaveringly towards its objectives. The 
implementation uf its strategic development was pursued and 
•lie Company reacted to the fall in crude oil prices by redoubling 
its el fort-, !•» increase productivity. The Group was. therefore, 
able to impaw e ns earnings. This attests to the quality of its 
pun folio of assets jnd the inmivarion of its employees. 

Net income was FT million, up 4*7- over the previous 
year, despite an inventory loss of FF SI 5 million. Not including 
non-recurring items, net income Mood at FF 3.5f>9 million, a rise 
ol 5 4'T . Cash How rose more than 2l! r o before inventory loss. 
The debl-to-eqmly raitu improved further In 23 C J. reflecting the 
Group's -ound financial structure. Earnings per share reached 
FF 13.SU versus FF D.Kil in |*W2. 

Consequently, your Board of Directors is asking you to 
approve a increase in the dividend net of tax credit to FF 
7.SO front FF 7. ■» i last year. Raising the dividend is proof of your 
Group’s confidence in its ongoing development. It also brings 
TOTAL'S distribution policy in line with that of global oil 
companies, while ensuring sufficient resources to fund future 
growth. In four years, therefore, the dividend will have risen 
50'*-. You are also being asked to renew the option for 
.-hare holders to chouse between reinvesting rheir dividends in 
shares or receiving pay mem in cash. 

Allow me to draw your attention to three salient features which 
stand out .lining the many developments of 1993: 

• the Group’s hydrocarbon reserves increased further and are 
currently over four billion barrels of nil equivalent, or around 
55l» million tonnes. Reserves are particularly high in the 
Middle East, the Far E-t>t and in Latin America thanks to the 
many discoveries and iield extensions. 

• in geographical terms, our development is more and more 
toe used on regions of the world with high economic growth, 
especially Asia and the Mediterranean basin. In 1993. for 
example. « e considerably strengthened our positions in China. 
Spain. Tunisia, and Lebanon. 

• in financial terms, the Group increased its equity and 
strengthened its .shareholder base with the entry of new 
investor, and the success of the dividend reinvestment option. 


Copies of the 1 991 ANNUAL REPORT may be obtained upon request from TOTAL - Investor Relations - 
2-i Cours Michelet - 92069 Paris La Defense - France. 


At approximately FF 75 billion, our market value has practically 
quadrupled in four years. Taking a longer view, the gross yield 
before tax on an investment in TOTAL shares amounts to 36% 
over the past five yearn and lo 16% over the past twenty years, 
a filling return for our loyui shareholders. 

What is the outlook for the near future? 

In the first quarter of 1994. oil prices stayed very low and 
refining margins in Europe remained at the average level of 
1993. Early in the second quarter, the rise in crude prices was 
accompanied by u fall in refining margins, while demand for 
petroleum products stayed low. particularly in France. In this 
still deteriorated economic environment, our operating income 
for the first six months of 1 994 should slay at a level fairly close 
to last year’s corresponding period. 

in the longer term, the Group's growth strategy established in 
1990 is being pursued along the course originally charted and 
should have a significant effect on earnings. 

At the end of 1995, TOTAL will be producing 40% more oil 
and gas outside the Middle East than in 1993. By 1996. our 
productivity enhancement programmes should lead to a sizeable 
reduction in costs. The consolidation of teams and the 
implementation of specific measures to reduce overheads and 
optimize purchasing all point to the Group's commitment to 
continually improve its competitiveness and performance. 


I would also like to say a few words about the efforts that 
have been made in the past year to deepen dialogue and 
communication with our shareholders. This is a subject that I 
consider to be of particular importance and which took on a new 
dimension in 1993. 

A year ago, I announced that a Shareholder's Advisory 
Committee was to be set up. It is now operational and several 
of its members are with us today. You will be able to talk with 
them after the meeting. The Committee met on two occasions, 
in October and April, and made a number of suggestions on our 
financial communication activities. At its requesL a simplified 
version of the Annual Report was published and widely 
circulated in the form of a “Letter to Shareholders". I would like 
to take this opportunity to thank the members of the Committee 
for their very valuable contribution lo this work. 


Finally, before answering your questions, I would like to 
comment briefly on the two resolutions concerning the 
composition of the Board of Directors that are submitted to you 
today. The first relates to the mandate of Mr. Francois- Xavier 
Ortoli whose term of office is coming to an end. Your Board is 
asking you to renew it. The second concerns the mandate of 
Mr. Pierre Vaillaud who does not wish to have it renewed. I 
would like to convey my sincere thanks to Mr. Pierre Vaillaud 
for the contribution he has made to TOTAL. To replace him. 
you are asked to appoint a new director, Mr. Antoine 
Jeancoun-Galignani. Chairman of Sociftd Centrale des 
Assurances Generates de France. His experience in banking 
and finance will undoubtedly be very useful to the Board. 

Ladies and gentlemen, dear shareholders, as you have seen, 
your Group can successfully respond both to the challenges it 
faces and to the goals it has set. Our ambition is to create a new 
TOTAL, more balanced in its business activities, and more 
diversified in terms of geographical spread. This new TOTAL is 
currently being shaped through the 
joint efforts of the Group's employees 
and with your confidence and _ 

ongoing support, which we hope to ■ I Ol 

have the honour of deserving long 
into the future". j 


All of these securities having bean sold, this announcement appears as a matter of record only. 


May 1994 


4,000,000 Shares 



CORPORATION 


Common Stock 


700,000 Shares 

The above shares were offered outside the United States and Canada by the undersigned. 

Donaldson, Lufkin & Jenrette 

Securities Corporation 

Merrill Lynch International Limited 

Wertheim Schroder International Limited 

Cazenove & Co. Credit Lyonnais Securities Daiwa Europe Limited 

Paribas Capital Markets N M Rothschild and Smith New Court Sodete Generate 
Swiss Bank Corporation S.G. Warburg Securities 


3,300,000 Shares 

The above shares worn offered in the United States and Canada by the undersigned. 


Donaldson, Lufkin & Jenrette 

Securities Corporation 


Merrill Lynch & Co. 


A.G. Edwards & Sons, Inc. 
Lehman Brothers 
PaineWebber Incorporated 


CS First Boston 
Kidder Peabody & Co. 

Incorporated 

Morgan Stanley & Co. 

Incorporated 

Salomon Brothers Inc 

Equitable Securities Corporation 

Furman Selz Interstate/Johnson Lane 

Incorporated Corporation 

Jensen Securities Co. 

ScotiaMcLeod (USA) Inc. 


Wertheim Schroder & Co. 

Incorporated 

Goldman, Sachs & Co. 
J.P. Morgan Securities Inc 
Robertson, Stephens & Company 
S.G. Warburg & Co. Inc 
Genesis Merchant Group 

Sccnrlt re n 

The Robinson-Humphrey Company, Inc 
Luther, Smith & Small, Inc 
Steiner Diamond & Co. 

Incoiporatcd 


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FINANCIAL TIMES THURSDAY JUNE 2 1994 


INTERNATIONAL COMPANIES AND CAPITAL MARKETS 



earnings at Anglo American rise 23% 


By Marie Suzman 
In Johannesburg 

Anglo American, . South 
Africa’s largest corporation, 
yesterday reported a 23 per 
cent increase. in net earnings 
lor the year ending til March to 
RJLSSbn up from 

KUabn a year ago* 

Net income after tax rose 19 
per cent to R2.24bn from 
R1.83bn, while attributable 
earnings rose to Rl.68bu from 
jRL40bn, a gain of 20 per cent 
A final dividend of 300 cents 
was declared, bringing the 
total - for the year to 395 cents, 
up from 3$5 cents last year and 
above market expectations of 
around 370 cents. 

The company's net asset 
value after rthe dividend 


Anglo American 


Sector 

1904 

K of total 

1993 % of total 

Mining finance 

754 

2 S3 

617 

2&S 

Odd & uranium 

400 

m 

277 

11 £ 

Diamonds 

642 

21.5 

463 

19.2 

Goal 

134 

4£ 

240 

9.9 

Platinum & other mining 

127 

L3 

155 

84 

Industry & commerce 

529 

17.7 

381 

15.8 

RnaneW services & property 

268 

9.B 

238 

3.8 

Investment surpluses & 





other net Income 

110 

3.7 

47 

1.9 

Sam : ampmw itfian 


recorded a substantial 55 per 
cent jump to R54J8bn, 
reflecting the continued buoy- 
ancy. of the Johannesburg 
stock exchange. 

The results have been modi- 
fied in accordance with the 
international moves towards 
greater accounting comparabil- 


ity and provide for stricter 
treatment of extraordinary 
items, but the effect on earn- 
ings figures has not been mate- 
rial, resulting in a 3 per cent 
increase In 1994’s net earnings 
and a 2 per cent decline in 
1993’s restated figures. 

Of the group's divisions. 


mining finance remained the 
most profitable, accounting for 
R754m of total net earnings, up 
from R617m last year, while 
gold rose to R400m from R277m 
on the back of the higher gold 
price. 

Industry and commerce 
recorded a 17.7 per cent 
increase to R529m from R381m, 
while diamonds rose to R642m 
from R463m, but platinum and 
other mining declined slightly 
to R127m from Rl55m. Coal's 
contribution also dipped to 
Risim from R240m, although 
this was largely a reflection of 
the disappearance of last year's 
Rll4m tax rebate from the fig- 
ures. 

Mr Julian Ogilvie Thompson, 
chairman, said he was confi- 
dent the earnings improve- 


ment would carry through to 
the current year as a result of 
the continued improvement in 
both the South African econ- 
omy and the international 
trading environment He also 
expressed confidence in the 
country's new government, 
praising both its “welcome 
commitment to reconciliation" 
and President Nelson Mand- 
ela's “commitment to prudent 
economic policies". 

However, he refused to be 
drawn on a time frame fm the 
corporation's planned unbundl- 
ing of its interests in rival min- 
ing house Johannesburg Con- 
solidated Investments and the 
anti ci pated sale of some of that 
company's largest divisions to 
black shareholders. 

See Lex 


Academics take issue with Nasdaq spreads 


T he long-simmering 
debate over the quality 
of. US stock markets 
heated up last week when an 
acntemic study, sharply critic- 
ised dealers oh the Nasdaq 
market for mainfednirip unnec- 
essarily wide spreads between 
buy and sell prices. 

Wide spreads are bad for 
investors, because they are 
denied the opportunity to pay 
a little less when baying a 
stock, or receive a fittls more 
when selling. Dealer firms http 
wide spreads, because they 
translate into bigger profits - 
the wider the spread, the mare 
money, the dealer can make on 
the difference between, the 
price he pays and the price at 
which he sdls. 

The study - conducted by 
two college finance professors, 
William Christie of Vanderbilt 
University and Paul Schultz of 
Ohio State University - found 
that for 71' of the 100 most 
actively traded Nasdaq stocks 
of 1991, dealers rarely, if ever, 
listed stock quotes ending in 
an odd-eighth of a dnhar when 
posting bid (bay) and offer 
(sell) prices on their computer 
screens. 

Instead of using the full 
range nf eighths, such as 
$%, $% and $%, the study 
found that dealers almost 
always quoted spreads of even- 
eighths, such as $54, $55 or 

a whole dollar. In contrast, 
spreads quoted on the New 
York Stock Exchange (NYSE) 
and the American Stock 
Exchange (ASK) were found to 


be consistently narrower than 
those an the Nasdaq, with the 
exchanges’ “specialists", or 
dealers, regularly using odd- 
eighths as well as even-eighths 
when quoting prices. 

Nasdaq, Hie large screen- 
based dealer market, run by 
the National Association of 


tem of allowing the flow of 
orders to set prices - with spe- 
cialists ready to step in and 
participate in a trade only 
when necessary - provides 
Investors with a better service 
than Nasdaq’s system of let- 
ting dealers set prices to 
attract orders. Although the 


dealers in the mark** 

It argues that tighter spreads 
would, by cutting into dealers’ 
profits, deter dealers from 
mairing a market In many 
stocks and reduce liquidity. 

While this argument makes 

sense when discussing the 
liquidity of small, lightly- 


A study which sharply criticised dealers on the screen-based 
Nasdaq market has reopened the issue of the quality 
of US stock markets, writes Patrick Harverson 


Securities Dealers (NASD) is 
the second-largest forum for 
trading equities in the US after 
the NYSE, and its system of 
competing dealers posting buy 
and sell prices on computer 
screens has been duplicated by 
exchanges around the world, 

fachvting 

The study has attracted 
attention because the authors 
not only criticised the wide 
spreads posted by Nasdaq deal- 
ers, but also argued that the 
extremely rare use of odd- 
eighth quotes suggested deal- 
ers may be working in concert 
to keep spreads wide. 

“Despite extensive research, 
there is little explanation as to 
why as many as 50 dealers, an 
in competition, would 
one-half of all possible price 
options if not for implicit collu- 
sion,” said Mr Christie and Mr 
Schultz. 

The study was immediately 
seen as providing support for 
the long-held view , of floor- 
bated exchanges that their sys- 


NYSE declined to comment, 
sources at the exchange said 
privately that the finding s 
proved the Nasdaq system did 
not encourage competition. 

The NASD quickly «ff»clrpd 
the study’s findings, arguing 
that there was no evidence of 
collusion between dealers. 
While he did not dispute the 
study’s facts on spread sizes, 
Mr Richard Ketchum, 
vice-president, said the wide 
spreads were a reflection of 
one of Nasdaq’s strengths, "a 
great deal of liquidity at a sin- 
gle price”. 

This has always been the 
main argument put forward for 
the Nasdaq system: that what 
investors lose from adder 
spreads, they more than get 
back from the guarantee of 
liquidity afforded by the multi- 
ple dealer system. 

By allowing dealers to main- 
tain, and profit from, qurnada 
of a quarter of a dollar, die 
NASD says it is ensuring that 
'there will always be enough 


traded stocks, it carries less 
weight when it c**" 1 **** to 
biggest stocks on the Nasdaq 
system, fike Apple Computer, 
Intel and Lotus Development 
Even with flnw three gfantn, 
which in theory should attract 
a multiplicity of dealers eager 
to compete for business, 
the Chris tle-Schultz study 
found that spreads were 
almost never quoted in odd- 
eighths. 

The study on Nasdaq 
spreads, however, does raise 
file wider issue of the quality 
of US stock markets, and 
whether they provide investors 
with the best possible service. 
Mr Junius Peake, professor of 
finance at the University of 
Northern Colorado and a long- 
time observer of US stock mar- 
ket practices, says dealers are 
able to keep spreads wide to 
maximise their profits because 
the systems are designed fim* 
way. 

“As long as the trading 
systems are built by entities 


controlled by market-makers, 
such as the NASD and the 
exchanges, they will be built to 
serve those interests first. Only 
when we have independent 
commercial operators trying to 
serve the best Interests of the 
end-user, the Investor, will the 
system be designed to best 
serve investors.” 

Systems which do not rely 
on intermediaries to bring buy- 
ers and sellers together do 
exist The majority of trades an 
the NYSE and ASE, for exam- 
ple, are completed without a 
specialist becoming involved. 
Yet the specialist, through his 
monopoly on the trading of 
each stoCk, still exerts consid- 
erable control over pricing In 
the "wriwt and the wnhangiy , 
like Nasdaq, are controlled by 
their communities of dealers 
and brokers. 

T here are a handful of 
trading systems and 
markets run by indepen- 
dent entftlga — indiiHing Tngfci- 

net (run by Reuters), Posit (run 
by Jeffries & Co), and the Ari- 
zona Stock Exchange - which 
allow investors to deal exclu- 
sively with each other, but 
they account for only a frac- 
tion of all trading on US stock 

mar kets. 

They are growing as more 
investors find they prefer non- 
dealer systems in w>rt«rn cir- 
cumstances, but the lack of 
liquidity restricts their useful- 
ness to investors, particularly 
individuals. 


Ethane deal 
prompts ICI 
Australia to 
plan pipeline 

By Nikki Taft In Sydney 

IQ Australia, a subsidiary of 
the UK-based group but traded 
separately on the Australian 
stock exchange, looks set to go 
ahead with a A$250m to 
AS300m (US$184m-US$22lm), 
ethane pipeline connecting the 
South Australia gasflelds to its 
Botany Bay petrochemical 
plant 

The company has reached an 
outline ethane supply agree- 
ment with Santos, the 
Adelaide-based oil and gas 
group, for 10 years. The vol- 
ume of ethane concentrate 
would be around 310,000 
tonnes a year and, according 
to Santos, “based on the cur- 
rent structure of prices in the 
oil futures market, the price 
formula agreed is economi- 
cally equivalent to the current 
natural gas price with CPI 
Indexa tion". 

The deal also includes a pos- 
sible extension for a further 
five years, on terms to be 
negotiated at that stage. The 
two companies aim to sign a 
formal contract within two 
months, and ICI hopes to set 
up similar arrangements with 
other producers in the Cooper 

Banin. 

ICI Australia said yesterday 
tint it hoped to construct the 
1300km pipeline between 
Moomba and Botany, which 
would come into operation in 
May 1996. The cost of the pipe- 
line is put at more than 

A j»mf mmiifiraitinn« to 

the Botany plant will take 
total project costs to more 

than ApAflni 

The new pipeline will follow 
a similar route to the existing 
Moomba-Sydney pipeline, 
which is being sold tor the fed- 
eral government to AGL, the 
Australian utility, Canada’s 
Nova and Petronas, the state- 
owned Malaysian oil company. 
• Commonwealth Bank of 
Australia has sold its 50 per. 
cent shareholding in stock- 
broking firm Burdett Bucker- 
idge & Young for an undis- 
closed sum, Reuter reports 
from Sydney. The purchasers 
were US Institutional stock- 
broking firm Jefferies Group 
and Hong Kong-based joint 
venture investment bank 
Asian Capital Partners. 


IIIIIlIIllIllllllllfVHIilllllllllfllllllllinilllllll 

Residential Property 
Securities No, 1 PLC 
£200,000,000 

Mortgage Backed Floating Kate Notes 201 S 

The rare of inrercsr for the three month period 31« May, 1994 to 
31« August, ISM has been fixed at 5. SO per cent, per annum. 
Coupon No. 25 will therefore be payable On 31st Avgutt, 1994 at 
£1,411.51 per coupon. 

Aggregate interest charging balances of Mortgages redeemed during the 
previous Interest Period: £3,433,274.17 
Aggregate interest charging balances of Mortgages redeemed as ar 
31st May, 1994: £226,598,71932 
lire aggregate principal amount of Notes outstanding as at 
31st May, 1994: £82,800,000 

S.G.Warbuig Sc Co. Ltd. 

Agent Bank 

iinminnniiin»iminiiimimiiiimmiHm 


The Mortgage Bank and Financial 
Administration Agency of the 
Kingdom of Denmark 

(Kongeriger Durumn-Ju HypoteUunJt og Frmsu/tnwx/ming) 

U.S. $100,000,000 

Guaranteed Floating Rate Notes due 2005 
unconditionally and irrevocably guaranteed by 
The Kingdom of Denmark 

For the six month Interest Period Ut June, 1994 to 1st December, 1994 
the Notes will carry a Rate of Interest of 5 per cent, per annum, 
with Coupon Amounts of U.S. $127.08 and U.S. $2,541-67 per 
U-S- $5,000 and U.S. $100,000 Notes respectively- The relevant 
Interest ftiymem Dare will be 1st December, 1994- 


I Bankers Trust 
I Company, London 


Agent Bank 


LOW COST 1)04 0111 

SHARE DEALING SERVICE ”, 1 1 1 


i M 1 S — I -r 1 I ROM tin Mi M\". 
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The Bank of New \brk is proud to 
announce the opening of a new office in 
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Our Shangha office also offers access 
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To see how we can help your business 
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MANUFACTURERS HANOVER 
TRUST COMPANY 
GBP75,000,000 

FLOATING RATE SUBORDINATED 
’ CAPITAL NOTES DUE 19M 

In accordance with the provisions 
of the Notes, notice ta hereby £vea 
that the Bate of Interest for the 
Interest Period Born 31 May 18B4 
to 31 Angus ISM has been Bred at 
5H per cent per anpum. 
The Coupon Amounts will be 
£67.74 for the £6,000 denomination 
and £677.40 for the £50,000 
denomination and will be payable 
on 31 Auguat 1904 against 
surrender of Coupon No. 37. 

jBfOffMWt 
Aa Agent Bank 


Electridte de Fiance 
U.S. $150,000,000 
Floating Rate Notes doe 2002 
In accordance with the provisions of 
the Notes, notice is hereby given 
that the Rare of Interest lor the six 

per annum. The interest accruing 
for such six month period win be 
U.S. $26.05 per US. $1,000 Bearer 
Note, and OS. $260.52 per U.S. 
$10,000 Bearer Note and U.S. 
$2,605.21 per U.S. SLOO.OOO Bearer 
Note on 30th November, 1994 
apinsr presentation of Coupon 

Union Bank of Switzerland 
London Branch Agent Bank 
26th May, 094 



Established 1784 


Wookiy Petroleum Argus 


Petroleum Argus 


CALL v. 











•a 


> 






eCUTwnfcimaiRC 


London SWttSW. 
Tie *71 MS DM 
Fax: *71 330 MW 
Mo m barSPA 


$32 


ROUND 

TRIP 




Olivetti 


Olivetti International S.A. 


U.S.$280, 000, 000 

Multicurrency Revolving Credit Facility 


Arranged by 

J.P. Morgan Securities Lid. 

Participating Rank* 

Buuca Com mere iulc llulionn 

I^xtdon Branch 

Banco di Uomu 

l.omlon Brunch 
Chemical Bank 
Crcdito Italiano 

I jondoa Branch 

Istifuto Bancario Sun Paolo di Torino, S.p.A. 

1 .proton Branch 

Morgan Guaranty Trust Company of New York 

Soci6tc Generate 

Union Bank of Switxerland 

Agent 

Istituto Bancario San Paolo di Torino, S.pj\. 

Iraulen Branch 

Swingline Agent 

Morgan Cuaranty Trust Company of New York 


JPMorgan 


April 1994 


'I'hix announcement appear x ax a mailer of record only 



trn^AMr-yAi.TIMESTHURSDAY JUNE 2 1994 


20 

INTERNATIONAL CAPITAL MARKETS 

Investors stay on sidelines despite higher yields 


By Conner Mddelntann in 
London and Frank McGurty 
in New York 

European government bonds 
took another tumble on contin- 
ued futures and cash selling, 
and although long yields have 
risen sharply in recent days, 
they failed to lure investors 
back into die market 
“It is increasingly unclear 
what is pushing the markets 
down," said Mr Peter Kerger, 
head of futures and options at 
Nat West Markets in Frankfurt 
but after the recent heavy 
losses, “there is a lot of fear, 
and a self-feeding downward 
momentum in the market" 

In addition to technical sell- 
ing in the futures pits, traders 
reported significant sales of 
cash bonds by institutions opt- 
ing to end the pain of watching 
their long-term positions go 
deeper into the red. 

"People who have held on 
and on since February are fed 
up and have begun offloading 
loss-making positions," said 
one dealer. 


Higher than expected Ger- 
man production data and the 
release of a strong US National 
Association of Purchasing 
Management index also pres- 
sured prices. 

■ German bunds opened 
slightly higher on early short- 
covering after Tuesday's 
sell-off. The Bundesbank low- 
ered Us securities repurchase 
rate by five basis points to 5.15 
per cent but that failed to give 
prices a lift, especially after 
earlier rumours of a larger cut 
Stronger-th an -expected Indus- 
trial production further pres- 
sured prices, fanning fears that 
economic recovery might hiel 
inflation pressures. 

Contradictory comments 
from Bundesbank council 
members added to the market's 
confused state. While Mr Gun- 
tram Palm, president of the 
state central bank of Baden- 
WOrttemberg, said that recent 
cuts in the discount and Lom- 
bard rates mark at least a stop- 
ping point and “maybe even a 
turning point" in monetary 


policy, Mr Olaf Sievert, presi- 
dent of the state central bank 
of Saxony -Turingia. said that 
“a definite end of Urn monetary 
easing by no means been 
indicated, and has certainly 
not been agreed upon”. 

Activity is expected to be cal- 
mer today with large parts of 
Germany closed for the Corpus 
Christ! holiday. 


GOVERNMENT 

BONDS 


The June bund future fell to 
around 92JJ0, down 0.54 points 
on the day. France heavily 
underperformed Germany, 
with the June notional bond 
contract cm Matif falling by 
1.16 point to 1I&56. 

■ Plagued by inflation fears 
and weakness in neighbouring 
markets, UK gilts were one erf 
the day’s worst performers. 

The June long gilt futures 
contract fall through the psy- 
chologically important 100 
level - the lowest level for the 


front-month contract since 
January 1993 - to dose around 
993. down on the day. 

Traders reported selling of 
cash bonds by institutions and 
no buying interest, even 
though current yields are seen 
to offer good value. The 10-year 
gilt currently yields 8.79 per 
cent, some 191 basis points 
above its German counterpart. 

■ Europe's peripheral markets 
also fell sharply, with Den- 
mark and Sweden again sev- 
eriy weakened by heavy for- 
eign selling, which also 
weakened their curre ncies . 

hi Italy, the June BTP con- 
tract dropped 1.13 points to 
107.04 and in Spain, which 
faces a government bond auc- 
tion today, the June bond 
future fell 007 points to 33.7L 

■ Even in Japan, which has 
held up well recently, prices 
were hit by stronger economic 
data, causing the September 
JGB contract to fall by l.ll 
points in Tokyo, and another 
0.49 points in London to 110.82. 


■ US Treasury bonds suffered 
a further setback yesterday 
morning as traders reacted 
badly to fresh signs of Infla- 
tion. 

By midday, the benchmark 
30 -year government bond was 
£ lower at 85S, with the yield 
rising to 7.468 per cent. At the 
short end, the two-year note 
was down & at 9951, to yield 
6.027 per cent 

The market's fear of inflation 
was reignited when the 
National Association of Pur- 
chasing Management released 
the results of its May survey. 
The overall Index came in at 
57.7, unchanged from the April 

reading and a bit hi gher fhan 

the consensus forecast of 57. 
Bat the prices index, which is 
viewed by economists as an 
accurate indicator of inflation, 
was up sharply at 7L5, against 
612 the previous month. 

The data showed economic 
expansion over the past six 
months was Anally creating 
shortages of raw materials, 
which were feeding through to 
prices paid by manufactureres. 


As a result, bonds across the 
board lost ground quickly. Lon- 
ger-dated securities, whose 
value is eroded by inflation, 
suffered the worst damage, 
dropping by nearly Y* points 
wi thin minutes of the mid- 
mo ming announcement Later, 
prices stabilised and recovered 
amid speculation that the Fed- 
eral Reserve was making an 
unannounced purchase of 
three-year and five-year notes. 

The release of the NAPM 
survey, one erf the most impor- 
tant of the month, overshad- 
owed one shred of favourable 
economic news on offer yester- 
day. The Commerce Depart- 
ment said construction spend- 
ing had risen 0.6 per cent In 
April, against expectations of a 
1.0 per cent gain. 

As the afternoon session 
opened, traders were already 
gd jncfirtg their positio ns ah gad 
of Friday's crudal data on May 
employment. An increase in 
non-farm payrolls which 
exceeds thg consensus estimate 
of 285,000 could send bonds 
into a fresh tail-spin. 


Banks follow corporates into short-dated dollar sector 


By Peter John 

D emand for short-dated dollar 
denominated debt finally per- 
suaded some banks to follow 
the lead taken by the big cor- 
porates. 

Deutsche Bank and JJ>. Mor- 
gan both tapped the market 
pushing the total raised via 
two-year and three-year dollar 
debt since AT&T’s successful 
issue last week to $2bn. 

Syndicate managers at the 
two banks were nervous about 
whether there was still enough 
appetite, but said they had 
been persuaded to issue by 
other banks who were continu- 
ing to see strong demand from 
continental Europe. 

Private investors who had 
liquidated their holdings in 


long-dated bonds to escape 
from volatile price moves at 
that end of the yield curve 
have recently been looking for 
a home for their dollars. 

J.P. Morgan served up the 
big deal of the day, raising 
$3 00m via three-year paper 
priced to yield 11 basis points 


INTERNATIONAL 

BONDS 


above Treasuries. When the 
syndicate broke, the spread on 
the bonds widened to 14 basis 
points on the bid and some 
rivals argued that that niche 
had already been saturated 
and the US bank had come to 
the market too late. 

Syndicate managers were 


also bemused that a bank with 
such a high-profile name would 
need to joint-lead the Issue 
with Morgan Stanley. 

J.P. Morgan said its hanlriTifr 
arm was keen to m aintain 
Impartiality over the choice of 
syndicate managers and that 
Mor gan Stanley had fllan bid 
aggressively for the business. 

In its view, the three-year 
debt offered a coupon of 6.5 per 
cent, compared with only 6% 
per cent for the two-year area, 
and demand was still strong. 

Deutsche Bank chose the 
two-year maturity for Us 8200m 
Issue which was priced to yield 
5 basis points over Treasuries 
and which maintained the 
spread after trading hpgan 
The bank, which arranged 
the issue with Goldman Sachs, 


NEW INTERNATIONAL BOND ISSUES 

Domawer 

US DOLLARS 

JP Morgan 0 Co. 

Oauacha Bank Fkwnoa 
Hyundai MLMerchant Banyan 

Amount 

RL 

300 

200 

60 

Coigian 

% 

830 

8125 

« 

Price 

99L88R 

99.B3R 

iooto 

Maturity 

Jua1997 
JuL19B6 
Jun. 1999 

Fees Spread Book rumor 

16 bp 

Q.1375H +11 18)696-07) JP Motgan/Morgan Stanley 
0.I2SR +5 (77696-90) Doufecha Bank London 

0^7 KEB Mamreknl 

YB4 

PCBCJ 

15bn 

» 

loaoaR 

JUL2001 

CL275R - SJ Asia 

ITALIAN URE 

Oteefti(c)5 

400bn 

330 

100.00 

Doc. 1999 

250 - Morgan Starrtey faitt. 

SWISS FRANCS 
Sudwwtdautscho LB Itft* 

100 

8125 

102.00 

Fob. 1997 

standard Marti Lynch CapLMds. 

Final terms and non-ccUbla uniaaa abated. The yield spread (over relevant government bond) at launch is swipHad by Ihs toad 
manager. ^Private ptacamant SCamwtteia. {FkMtlng rate nat& Ft (bead ra-oflar price: fees are shown at the re-offer level si Ratable 
In Juv97 el pw. b) 6-mHi Lteor *45bp. c) Ruing wMn a weak. Corrv pramkan InJcatad at 1096 and yield 7-7V596. CaMteda offer 2 yrs 
wflh one yr of 14096 pratacitan; re auread value theraaBar. 4 Short 1st coupon. 


said: “We were sceptical but 
we calls from intermedi- 
aries who had sold out of previ- 
ous issnas and wanted BOOTO 
and we got confirmation of 


the demand from our own 
investors.’' 

Elsewhere, Olivetti raised 
L400bn through a five-year 
bond convertible into ordinary 


shares from January next year 
and offering an indicated yield 
of 7 to 7.5 per cent The Issue 
was targeted at Italian. US and 
European Institutions. 


News Corp relies 
on Lords ruling 


By Antonia Sharps 

Lawyers acting for News Corp. 
the media . Film and publishing 
group controlled by Mr Rupert 
Murdoch, are relying on a 
landmark ruling by the House 
of Lords to limit their client's 
liability in a potentially costly 
dispute stemming from the 
publication of an erroneous 
notice. 

The notice, published in the 
Financial Times last December 
on behalf of a subsidiary of 
News Corp, advised holders of 
News Corp preference shares, 
which were exchangeable into 
shares which the company had 
bought in Pearson in the 1980s. 
that they were also entitled to 
shares in Royal Doulton, the 
fine china manufacturer, as 
part of the exchange property. 

When Pearson, the media, 
banking and entertainment 
group which publishes the 
Financial Times, demerged 
Royal Doulton last year, it 
offered its shareholders one 
Royal Doulton share for every 
10 held in the parent 

At the time, dealers esti- 
mated that holders of News 
Corp's preference shares, 
denominated in sterling and 
guilders, and News Corp's 
D-Mark convertible bonds 
would receive 5Vim Royal Doul- 
ton shares worth £15m. 

However, in January. News 
Corp stunned the market with 
another notice which said it 
was taking legal advice over 
whether the Royal Doulton 
shares were part of the 
exchange property, in Febru- 
ary, News Corp said holders 
were not entitled to the Royal 
Doulton shares because, in its 
view, there had not been a 
change in the composition of 
flie exchange property. 

Since then, a number of 
investment banks have been 
seeking compensation from 
News Corp for the financial 
losses which they and their cli- 


ents incurred as a result of the 
first notice. The losses could 
run Into millions of dollars. 

Claimants say while News 
Corp’s I«ouduii-based solicitors. 
Alkm & Overy. are taking . a 
sympathetic approach to 
claims by individuals who 
were holders at the time of the 
erroneous notice, they arc tak- 
ing a much tougher line with 
those who dealt in the .shares 
as a result of the notice, citing 
the legal precedent set in Cap- 
aro Industries v Dickman. 

In 1990, the House of Lords 
ruled that auditors had no 
“duty of care" to individual 
shareholders or other users of 
accounts, and only to tho com- 
pany and to shareholders os a 
collective body. 

Allen & Overy are drawing 
an analogy between the Caparo 
ruling and News Corp's posi- 
tion since the company gave 
notice to persons registered as 
holders of the preference 
shares, not the whole market 
Therefore, in their view, News 
Corp’s duty is only to them 
and not to anyone else who 
relied on the notice to make 
investment decisions. 

The claimants, some of 
whom are also believed to be 
contesting News Corp’s claim 
to the Royal Doulton shores, 
say it is by no means clear that 
the Caparo principle will apply 
in News Corp's case. For exam- 
ple, News Corp had called the 
issues around the same time as 
the erroneous notice was pub- 
lished. forcing the market to 
act. 

News Corp declined to com- 
ment on the matter apart from 
to confirm that it was corre- 
sponding with a number of 
people who had written to 
Allen & Overy to make claims. 
“We don't feci that It will be 
useful for us to make general 
statements about the claims In 
the press in view of this ongo- 
ing correspondence," News 
Corp said. 


WORLD BOND PRICES 


BENCHMARK GOVERNMENT BONDS 

Red Day's 

Coupon Data PrtCS change 

Yield 

Week 

ago 

Month 

ago 

Australia 

9.000 

09AM 

100.7700 

-1.490 

80S 

8.75 

8.77 

Barium 

7250 

04AM 

93.0000 

-1.400 

832 

738 

730 

Canada * 

8.900 

00AM 

843500 

-0.600 

8.85 

8.48 

836 

Denmark 

7.000 

12AM 

90.4500 

-1320 

039 

739 

732 

France BTAN 

8.000 

05/98 

104.3750 

-0300 

639 

838 

nag 

OAT 

5300 

04AM 

88.4800 

-a 890 

7.48 

7.13 

7.05 

Germany 

0.750 

05AM 

973500 

-0M40 

704 

6.91 

837 

Italy 

8500 

01/04 

90.5000 

-a 500 

iao7t 

9M8 

9.14 

Japan No 110 

4300 

00/98 

1083440 

-0.700 

3-29 

3.08 

333 

No 157 

4.S00 

06/03 

102.1070 

-2.330 

4.17 

3.73 

338 

Netherlands 

5.750 

01/04 

00.1200 

-0-900 

720 

833 

630 

Spain 

10300 

10TO3 

102.7000 

-1300 

iao2 

932 

9.71 

UK GDIs 

8300 

06/99 

89-27 

-31/32 

046 

7.79 

7.77 


8750 

11/04 

88-05 

-29/32 

079 

037 

8.12 


9.000 

10*00 

101-28 

-17/32 

8.77 

038 

833 

US Treasury * 

5.075 

02AM 

90-24 

-5/32 

732 

7.19 

7.10 


0250 

08/23 

05-14 

-7/32 

7M8 

7.44 

732 

ECU (French Govt) 

0.000 

04AM 

883400 

-0.920 

738 

735 

733 


Italy 

■ NOTIONAL ITALIAN GOVT. BOND (BTP) FUTURES 


FT-ACTUARIES FIXED INTEREST INDICES 


Prioa Mom 


Tue 


Accrued xd ac|. 


— Low coupon yMd- 


(UFFQ* Lira 200m lOOtha of 100H 





UK GltS 

Jun i 

change 96 

Mey 31 

tatreest 

ytd 


Jrei 1 

May 31 

Yr. ago 

Jun 1 

May 31 

Yr. ago 

Jim 1 

May 31 

Yr. ago 

Opan 

Sett plica 

Change 

High 

Low 

Eat voi 

Opan M. 

1 

Up to 5 years p4) 

12132 

-0.47 

121.69 

234 

434 

5 yre 

8.48 

838 

7.13 

870 

850 

735 

881 

858 

7.58 

Jut 106.50 

107.16 

-1.08 

10839 

10830 

64830 

53397 

2 

5-16 years (22) 

137.78 

-138 

13937 

234 

532 

15 yre 

079 

863 

005 

892 

875 

845 

034 

9.07 

8.71 

Sep 10735 

105.82 

-136 

107.70 

10630 

22458 

28958 

3 

Over 15 years (9) 

15238 

-1-28 

15436 

334 

4.08 

20 yre 

076 

859 

828 

892 

875 

834 

9.05 

887 

878 

Dec 

10532 

-135 



0 

0 

4 

liiedeamaofea (6) 

189.95 

-Z46 

174.48 

1.02 

Hftft 

kred-f 

836 

862 

860 














5 

Al stocks (61) 

13832 

-0.93 

13730 

2.47 

432 











■ ITALIAN GOVT. BOND (BTP) FUTURES OPTIONS (UFFE) Ura200m lOOtha of 10096 










— britaik 

at 596 — 




-Matter 

l 1096- 

_ 



Sbflca 


PUTS 


Price 

Sep 

Dec 

Sep 

Dec 

10680 

234 

866 


333 

10600 

236 

830 

244 

338 

10000 

231 

807 

239 

275 


London doriig. Ttem York mxJ-ttey 
T Gross ttadUong WWhoMto g tux at 125 par 
Prtoas: US. OK *1 32nda, othara n decanal 

US INTEREST RATES 


M payable by nonrekdam) 


ESL *aL UHL ceta 2323 Rita 3708. Previous fey's open H. Cade 15488 PUN 128B3 


Spain 

■ WQTIIOMAI. 9PAM9H BOND HJIUHE8 (MEFF) 


Saana: MMS Wm H an rf 


UmcNbne 



Treasuy Bila 

and Bond YtaWa 




Ore north 



004 

Prkwiato 

7*4 

ike rate 

* no 


043 

fttte tom rate 

Fnl fmffl 

s 

Three note — 

6k -KVlffl 

_ 431 

A Ofl 

Ffe|w 

m mu 

— 080 
T U 

FedJunk a kdavantga- 

OH MIHII 

Oaaywr-— . 

- 041 

»yer 

730 


Jura 

Sep 


UK 


Open Sett price Change High Low Eat voL Open Int 
9*96 99.75 -097 86-08 8066 98,899 110432 

94.50 9036 -090 9480 93.18 9,849 10849 


■ MOTIONAL UK Ofl-T FUTURES [LIFFQ* £60,000 32nda of 100% 


BOND FUTURES AND OPTIONS 
France 

■ NOTIONAL FRB4CH BOND FUTURES (MATT) 



Open 

Soft price 

Change 

Mgh 

LOW 

ere. vre 

Open InL 

Jut 

101-02 

9934 

-1-02 

101-14 

99-17 

78252 

56191 

Sep 

100-00 

9830 

-1-04 

100-10 

98-11 

42062 

78763 

Dae 

- 

97-20 

-1-04 

- 

-■ 

0 

0 


■ LONG Gfl-T FUTURES OPTIONS (UFFQ E5Q£00 64tha of 100% 


Jkfli 

Sep 

Dae 


Open 

11800 

117.02 

118.12 


Sen price Change 

118TO -1.18 

115.60 -1.18 

114.70 -1.18 


Hflh 

110.16 

117.23 

11824 


Low 

11054 

115-66 

115.10 


Eat ML Open InL 
287.208 105.337 

31.916 38089 

364 8.482 


■ LONG TERM FRENCH BOND OPTIONS (MATIF) 


3Hw 

Mca 


99 

100 


Sep 

2-57 

2-24 

1-59 


CALLS 


Dec 

3-15 

2-51 

2-26 


Sep 

2-17 

2- 48 

3- 19 


Dec 

3- 39 

4- 11 


SW» 

Price 


f*ai | q _ 



nsin) 


Jul 

%aW 1 T 

Sep 

Dec 

Jul 

^ rUlti 

Sep 

Dec 

119 

0.27 

870 

. 

- 

894 

- 

120 

0.14 

8*0 


. 

4.68 

- 

121 

0.06 

037 

0.37 

. 

851 

- 

122 

033 

0.17 

. 

_ 

_ 

_ 

123 

- 

810 

815 

- 

7.40 

- 


E «t ML Mri. Coat 1732 Put* 2980. Previous day* open w, Cade 20061 Putt 18723 


Ecu 

■ ECU BOND FUTURES (MATIF) 


E*. VOL w Cafe SM63 Pife 101. *08. PraMoua fey's open W. Can 214388 PuB SORfOS. 

Germany 

■ NOTIONAL GERMAN BUND FUTURES (UFFE)" DM250.000 lOOths of 100% 



Open 

Sett price 

Change 

Mgh 

Low 

Eat. vat 

Open InL 

Jun 

92.87 

9232 

-0.62 

9818 

9218 

188483 

117360 

Sep 

9231 

01 50 

-881 

02.57 

91.48 

89183 

54219 

Dec 

91.52 

91.10 

-887 

9164 

91.32 

94 

406 


Jun 


US 


Opan Salt price Change 
84.90 8332 -1-38 


Hgh 

65-04 


Low 

83.78 


Eat voL Opan InL 
1.478 9.491 


■ BUND FUTURES OPTIONS (UFFE) DM250,000 poHs of 100% 


Strike 

Price 

Jut 

Au9 

GALLS — 
Sep 

Dec 

Jul 

Aug 

PUTS 

Sep 

Dec 

9150 

887 

122 

1.49 

1.76 

0.87 

122 

1M9 

2.18 

9200 

033 

0.99 

1 24 

135 

1.13 

1.49 

1.74 

2M5 

9260 

0.44 

a 78 

1.02 

136 

1.44 

1.78 

2.02 

2.76 


EM. vo i. tout. Cafe 13840 Pud I7IM. Pnmauo day's opal InL. Cafe 13*135 Puri 193300 

■ NOTIONAL MEDIUM TERM GERMAN GOVT. BOND 
(BOBIHUFFE)- DM2SO.OOO lOOtha of 100% 


Jun 

5ep 


Cfeen 
99 JO 
98.63 


Sett price Change 
98.63 -0.40 

97.87 -0.78 


High 

9020 

98.63 


Low 

96.73 

98.63 


Eat Open M. 
295 1128 

60 0 


■ US TREASURY BOND FUTURES (CgQ $100,000 32nda of 100% 

Open Latest Change Hgh Low Eat vd. Opan bit 
Jun 103-21 103-20 +0-02 10343 103-07 88£98 257.897 

Sep 102-24 102-20 - 102-24 102-08 312,134 168,107 

Dec 102-02 102-00 +0-01 102-02 101-21 2ft34 38.050 


Japan 

■ NOTIONAL LONG TERM JAPANESE GOVT. BOM) FUTURES 

(UFFE) YlOQm lOOtha of 100% 

Open Close Change High Low EaL uol Opan M. 
Jun 1 12.08 - - 112.14 111.60 697 0 

Sap 11131 - 111.41 110L82 4648 0 

■ UFFE ca fe ea mead on APT. M Open Kereel ape. am Ur previous <*W- 


UK GILTS PRICES 


-WeW.- 
W dad PrfceE 


— 199* 

or- Hfp La* 


_YMd_ — 1904 _ 

H Rad Prteat+or- ttgs in 


Shane” (Una is to Fka Yean) 
Ireas. 1 0pe In lSMtL- 1000 

tea I2%pe 189* 1229 

Tran 9pc 19#*# ass 

UK 1995 1131 

tea he Baa 90-85 LOS 

l«.pc 1905 078 

Tim 12 Vpc I99S&. ... 11 n 

T*PC 1898 12.S9 

KfepcIWSt* 1132 

tefl I3kpc 1996*$ 11.82 

Ctmeraka lOpc 199G 949 

Con* 7pc 1997)3 7.11 

Ttara 131*04 1897# 11.71 

tefl lOhepe 1997 985 

heat BLpg 198793 858 

tea ISee 1897 1252 

Mine 1998 9)4 

Treat 71.PC 1S88& 7.49 

TroasGltK 1996-9813- 7.10 

14eC9B~1 11.85 

T*eaei5JaBC-«tt (238 

Eros 12sc 1MB - 1088 

TteaaijBC 19SB& 9.17 


Id __ __ 1994 

0 Plica E + w— w Life 


RntoRRemnwi 

tea ia**pe 1999 

Trees io%pe 1999 

mm Ape 19893$ 

Cnrwerton lOUpc 1999 _ 
Trees RtoFkWW 


Tran i3pc 2900 

10BC 2001 „ 

n*xi»3» 

TPCUI A. 

8%{C2002 

Sgczamt 


1078 

979 

8.07 

084 

890 

1098 

tu 

7.78 

T.77 

440 

190 


- load 
*40 101 J$ 
SJJ8 lOlfc 
129 104U 
8.05 90 

S99 104(J 
430 108% 
8.73 111 A 

7.08 11*5 

70S mil 
757 105U 
759 9BU 
771 1131, 
753 108ft 
858 101 U 
823 1l9f] 
857 10U| 
829 Ofifl 
829 Mft 
853 1181, 
4*4 I2SA 
886 112 ft 
058 1033, 


074 I13U 
889 1Q7,*, 
045 00 

078 108% 
-100AM 
078 101 It 
9.05 HBU 
002 10*53 
08* SQft 
097 

010 I03U 
094 9*44 


— 102ft 

I04U 

— 10313 
-ft 107ft 
-% 981. 
-A 107R 
-it U3% 
-ft 117ft 
-ft 12111 

-ft TI7SJ 

-A ”2 A 
-11 I00A 
-A 121 H 
-A IMA 
-ft iioS 

-L 13ti] 
-« ii*(l 
-a me a 
-% i« 
-% I3lft 
-I* 140ft 
-B «S(l 
-« 110ft 


-U 128ft 
-11 121ft 
-H 101 U 
HI 121H 

100ft 

HI USA 

-I 136Q 
HI 122ft 
-1 108ft 
-I 101, 


10PC2Q03. 


100 froa, 1 1 >iBC 2D01-* 

lOlfi fwnSqg l*apc D&~* 

101% CUnaokn 9%pe 2004 

'2*1* TnasMrteaoott* 

C*"8%pc2D05 

Sf Traaa 124PC 2003-6 — 

200033 

IlS Spe 2002-8*3 

Tma 1 1 Lsc 2003-7 — 

^ riansiape200733 

134pC0*-8. 


rawflpcOTjt 


10513 
98B 
113% 

HMft 
10111 
1MH 

104% 

559 owmmrM 


047 

105* 

4S3 

020 

7* 

018 

1050 

047 

850 

1034 

877 

1073 

091 


005 105% 
024 111% 
791 71ft 
090 103ft 
079 88 

084 10345 

038 119ft 

087 91% 
095 93ft 

039 113% 

088 9SU 
038 125(1 
U* 101 


-1ft 127ft 
-1% 12JJ5 
-1ft 86ft 
-1ft 12Sft 
-1ft 105% 
-1ft 125% 

-1H I*3ft 
-1ft llm 

-B m% 

-IB 138ft 
-m 1 19ft 
-1% 151 ft 
-1ft 124B 


105% 

111 % 

71ft 

103ft 

86 

HUJJ 

119ft 

91% 

93ft 

113% 

9GQ 

•25B 

101 


ISA 

107(J 

1SI 



Tires fee 2KB 

060 

884 

93ft 

“1ft 

115.’. 

93 

Trees fll/*pc 2010 

726 

070 

TBftJd 

-1ft 

98ft 

78ft 

0m* fee in Mil# — . 

089 

084 

101ft 

-m 

12S» 

101ft 

Tim, fee 2012ft 

088 

082 

101% 

-itt 

127% 

101,1 

Tnaa9%0cZDO8-l2ft_ 

ixa 

038 

72% 

-a 

937, 

72ft 

TUM fee 201 3ft 

08S 

070 

82% 

-ift 

117H 

92% 

7kpC2012-15»__ 

081 

078 

91/, 

-i 

114% 

91ft 

Treat S^pc 201 7ft 

077 

078 

90S 

-i% 

128% 

Kfl 

&cfl 12BC 13--17 

042 

B87127HM 

-Hi 

1SB% 

127% 


Red MeEta- 


_19B*_ 
M* Lew 


-IA 123ft 103U 
-1% 113(1 94ft 


113(1 
IWA 
00 

108% 

100 

WJ% 

1181} CmM4pc 

104(1 ftalan3%9E»- 
90ft Cewr3%pc 91 Aft., 
soft Trw*e'»NL_ 

103(1 C0«M2%pc 

nw.l'wc 


000 

- 44(1 

-1ft 

99% 

«*U 

079 

- 391U 

-1 

54H 

3BU 

01 B 

- 58% 

-1% 

71 

56% 

073 

- 34% 

-ft 

4*% 

3*% 

081 

- ZB%id 

-% 

38% 

28% 

012 

- Z7H 

-1ft 

37% 

Z7U 


Aftkfei Da* 11% 2810. 
AdM0e*i0%gear~ 

Bton 1I%9B 2012 

Hood Cap 6%pc'ia 

9pCCd 1990 

l3pcW-2 

HjPoOuabN ispe 2011- 

LeedilS tee 2006 

UMPMSUtim 

UX^eWINL. 


11%po20Q7_ 

N%MiAi8ta3%iio2021. 

4%ptl20M 

inMfeSKam^pBjaas 


818 

885 

119 


142ft 

US 

013 

878 

112% 



138% 

112% 

870 

038 

118% 

n „, 

ire 

118% 

874 

- 

87% 

-% 

118% 

97% 

080 

— 

101% 

-% 

103% 

100% 

1125 

— 

108% 

*% 

a 

108% 

1048 

HL42 

072 

1S§ 


sa 

048 

- 

37 

nlr 

«* 

33% 

923 

— 

32% 



40% 

28% 

HUM 

939 

114% 


138% 

114% 

448 

011 

87% 

-- 

71 

87% 

- 

4*1 

133% 

„ , 

150% 

133% 

- 

4.43 

137% 

— 

148% 

127% 

11-74 

- 

140% 

— 

158% 

140% 


Indux-lWced 


8 Up to 5 ywan (2) 

7 Over 5 yvn flTJ 
B All a*x*»(13) 

Debontras and Loana 


184.46 

-a 06 

184 57 

aro * 

2TO 

Up to 5 yre 

3.94 3.90 

2.92 

2.95 

2.91 

Z.K 

170.77 

-0^8 

171^5 

iro 

1.89 

Over 6 yre 

3.93 3SO 

3TO 

174 

3.72 

3.38 

171 J2 

HL26 

171.78 

1^1 

1.77 

— a year ytetd — 



-15 jrare y*eW — 

__ - 

-29 year yield 


Jui 1 May 31 Yr. ago Jun 1 May 31 Yr. ago Jun 1 May 31 Yr. ago 


9 Data & Loans (76) 124.57 

Awdb* qum rvtompOon yMUi M Jfwwi'i 


-1.08 12033 230 4.92 9.95 083 &60 930 

*6ov*. Coup* Bnh Love OW-714%; Mafem BK-iOW%: High: 11% and o*w. t Rat yMd- ytd Yaw b3 i 


9.77 8.42 


934 


471 


938 


FT FIXED INTEREST INDICES 

June 1 May 31 May 27 May 28 May 26 Yr ago FBgh' Low* 


OfiLT EDGED ACTIVITY INDICES 

May 31 May 27 May 28 


Mpy 25 May 24 


Govt Soca. (UK) 9134 91.73 93.08 9330 93.79 96.04 10734 91.04 
10833 11030 111.15 111.78 112L74 11132 13337 10B33 


863 83.0 132.0 127.1 

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. 21 


FINANCIAL TIMES THURSDAY JUNE 2 1994 



Wouldn’t the speculators love to know where your DM 2.5 billion is right now. 


Your government has just raised DM2.5 billion. Your task is to convert those Deutsche marks 
into the currency of your country And a whole world of speculators can’t wait. They know they can 
make money at your expense by detecting and anticipating such a laige currency shift. 

But you have a surprise for them. Your currency is moving through the international markets 
right now — right under the speculators’ noses — and they haven’t a clue. 

Because you’ve -found a firm that is more than a leading international trader. It’s a select group 
of professionals — strategists, researchers and economists with their own technology, their own global 
network and a distinctive approach to foreign exchange. 

They monitor the capital markets, not just trade flows, to get a more accurate picture of 
currency trends. Their strategic thinking helps pinpoint when — and when not — to make certain 
currency moves. 

And while they deal in all currencies, all markets and all size transactions, large positions such 
as yours are handled with special discretion. That’s why, right now, your DM2.5 billion has been 
divided up — into trades small enough to be undetected but large enough to be cost-efficient — and 
blended strategically into the firm’s daily global business. 

Most importantly, when the trading becomes fast and furious, these people make sure your 
transactions come first. You know they’ll see you through it all. 


Chkigo 


Frankfurt 


Hong Kong 


London 


Los Angeles 


Luxembourg 


Melbourne Milan 


MORGAN STANLEY 



Parts Sas Francisco Seoul Singapore Taipei Tokyo Toromo 


Madrid 


New York 


Zurich 











giMAivf-lAL TIMES THURSDAY JUNE 2 tW4 


COMPANY NEWS: UK 


Wolseley 
expands with 
$42m US buy 


By David Wlghton 

Wolseley, the heating and 
plumbing merchant, is expand- 
ing its photographic equipment 
distribution business with the 
purchase of Calumet Holdings 
of the OS for $42Jm (£28m). 

Wolseley is already the lead- 
ing distributor of professional 
photographic equipment in 
Europe and believes the deal 
will make it the largest sup- 
plier in the world. 

Mr Jeremy Lancaster, chair- 
man, said that Chicago-based 
Calumet's expertise in mail 
order made it particularly 
attractive for Wolseley. "We 
are interested in developing 
mail order and believe it may 
be appropriate for some of our 
other businesses." 

Calumet, which is being 
acquired debt-free, made an 
operating profit of $5.0Sm on 
sales of $62£m last year. Mr 
Lancaster said that Wolseley 


was paying about 12.5 tunes 
after tax profits and that the 
deal would enhance group 
gaming s per share. 

Wolseley. which has a policy 
of funding acquisitions with 
shares, is raising £55m from a 
placing of shares with institu- 
tions at 748p. The new shares, 
which represent almost 2J) per 
cent of the share capital, will 
also fund a number of further 
bolt-on acquisitions. 

Wolseley first moved into 
photographic equipment distri- 
bution in 1986 when it acquired 
Grove wood Securities from 
BAT Industries. This included 
a leading distributor, Felling, 
which Wolseley subsequently 
expanded with the purchase of 
its rival Keith Johnson. 

Mr Lancaster said buying 
Calumet would improve the 
group’s purchasing terms and 
make it a more attractive out- 
let for manufacturers. 

See Lex 


Harrods agrees deal 
with former director 


By Nefl Buckley 

Harrods. the Knightsbridge 
department store, has 
"resolved amicably all differ- 
ences" with its former manag- 
ing director Mr Peter Bolliger, 
whose departure from the com- 
pany in April provoked a bitter 
war of words. 

Mr Bolliger insisted he had 
resigned after it became impos- 
sible for him to work with Mr 
Mohamed al-Fayed, the store's 
“hands-on" coowner. 

“He likes to feel he is run- 
ning the store. He will even go 
behind a counter and cut 
salami,” Mr Bolliger said at the 
time. 

Harrods claimed Mr Bolliger 
had been sacked Tor his unsa- 
tisfactory performance, in par- 
ticular in his running of the 


Kurt Geiger shoe chain, and 
handling of the dismissal of a 
senior manager. 

The company later said it 
was suing Mr Bolliger for 
breach of contract and lodged a 
writ with the High Court. 

Mr Bolliger moved out of his 
Knightsbridge home and 
returned to his native Switzer- 
land, but his solicitors have 
released a statement saying 
that “Harrods have resolved 
amicably all differences with 
Peter Bolliger on terms accept- 
able to all parties." 

Neither side would comment 
on the terms of the agreement 
Harrods had also passed on a 
dossier detailing alleged irregu- 
larities by Mr Bolliger to Chel- 
sea CID, but it is thought the 
police investigation is unlikely 
to proceed. 


Lasmo bid extended 
as controversy grows 


Enterprise Oil yesterday 
extended its hostile bid for 
rival explorer Lasmo until 
June 17 amid increasing 
controversy over the target’s 
allegations that It had 
breached accounting stan- 
dards. 

Officials from the Takeover 
Panel are believed to have dis- 
cussed the accusations with 
Lasmo as part of their on-go- 
ing examination of the bid. 

Separately, Lasmo is 
believed to bave written to 
both the Financial Reporting 
Review Panel, the UK accounts 


watchdog, and the US Securi- 
ties and Exchange Commis- 
sion, to complain about Enter- 
prise’s accounting policies. 

It claims that Enterprise 
contravened SSAP 23, the 
standard on acquisitions and 
mergers, in its treatment of 
the acquisition of the Beryl oil 
field properties in 1988 and 
Texas Eastern in 1989. 

Enterprise is offering 27 
Enterprise A shares and 12 
warrants for every 80 of Las- 
mo’s. Any revised offer most 
be made by Jane 17. 

See accounting column 


Life Style postpones 
float in weak market 


By David Wlghton 

The tumbling stock market 
claimed another new issue vic- 
tim yesterday when the flota- 
tion of Life Style Care, the 
nursing home group, was post- 
poned. Albert E Sharp, the 
company's sponsor, had been 
marketing the shares to insti- 
tutions for a couple of weeks 
and the issue was set to be 
priced next week. 

“The reaction from institu- 
tions was very positive but in 
view of the incredibly volatile 
market conditions it was 
decided it was not the right 
cLimate to go ahead,” the com- 
pany said. 

Several new Issues were pul- 
led lost week and sponsors are 


now looking hard at some com- 
panies In their pipelines. "I 
would be very surprised if all 
ours went ahead on schedule," 
said one corporate broker. 

Life Style Care, which has 14 
homes with 564 beds, was plan- 
ning a £10m share placing 
which would have valued it at 
between £20m and £25 m. 

The family of Mr Ramesh 
Sachdev, the founder, which 
owns 85 per cent of the equity, 
was looking to sell about £2m 
worth of shares with the rest 
of the money going to the com- 
pany to pay off borrowings. 

life Style Care, which speci- 
alises in caring for the elderly 
mentally infirm, made pre-tax 
profits of £1.2m on turnover of 
£5.3m In the year to last June. 


Pentland acquires Reusch 


By Peggy Holllnger 

Pentland yesterday made a 
small dent in Its £I85m cash 
pile with the acquisition tor up 
to £20m of a German sports 
goods company. 

The group is paying DM30m 
f£12m> for Karl Reusch Hand- 
schufabrlk, which markets, 
licenses and manufactures spe- 


cialist sports clothing and 
equipment. A further DM20m 
will be paid in 2000 if Reusch 
meets profits targets between 
1997 and 1999. 

Reusch is perhaps best 
known for Its goalkeeping 
gloves. Pentland estimates that 
75 per cent of the goalkeepers 
at the World Cup this month 
will be wearing Reusch gloves. 


1 DIVIDENDS ANNOUNCED ^ 1 


Carres - 

Total 

Total 

Current Date of 

ponding 

for 

last 

payment payment 

dividend 

year 

year 


Aberdeen Trust — 

Int 

0.6 

July 27 

0.5 

. 

1A 

Borthwicks 

fin 

O.B 

Aug 3 

0.7 

1.3 

1.2 

Channel Hldgs — 

(In 

0.7f 

July 14 

1 

1.2 

U 

Granada 

Int 

3433f 

Oct 3 

3.025 

- 

8.75 

Kembray . „ 

fin 

0.1 S5 

Aug 24 

0.156 

0.155 

0.155 

Loslsera 

— Int 

2.4 

Sept 30 

2 

- 

BJ5 

N1E - 

— fin 

8 

Oct 3 

- 

11.39 


Ramco Ofl § — __ 

fin 

0.5t 

July 29 

1 

0-5 

1 


An 

2-®t 

July 22 

2 

3.2 

3 

Sturge 

.—int 

1 

Sept 2 

1 

- 

3 


—.Int 


“ 

0.2 

- 

0.8H 


Dividends shown pence per share net except where otherwise stated. tOn 
increased capital. §USM stock. JFor IS months. ffRviS months. 


Tapping into a seam of experience 

Andrew Taylor on the south Wales coal interests of Powell Duffryn and Wimpey 



Wlmpey Mining operates three opencast sites in south Wales 


British Gas 
asks for 
time on 
Manila bid 

By Robert Corzine 

British Gas has asked the 
Philippines government for 
more time to consider a possi- 
ble bid for tbe state-owned 
Manila Gas Corporation. 

The company, which was 
due to be sold last Monday, 
distributes natural gas to 
industrial, commercial and 
residential users in Manila. 

Reuters yesterday reported 
tbat tbe government had 
deferred the sale In order for 
the National Development 
Company, the state owner of 
Manila Gas, to evaluate new 
offers from British Gas and 
two Japanese companies. 

But British Gas said it had 
not yet decided whether to go 
ahead with a bid. 

The government wants to 
sell its 90 per cent holding in 
Manila Gas. 

The remainder will be sold 
to s mall investors. 

A government official yes- 
terday said the Interest of Brit- 
ish Gas and tbe Japanese com- 
panies was “an Improvement 
over the 20 or so potential 
buyers who expressed interest 
only in the real estate 
assets”. 

Expansion in south-east Asia 
is known to be a priority for 
British Gas. 


I t Is almost impossible to 
consider tbe south Wales 
coal industry operating 
without Powell Duffryn or 
George Wlmpey. The two com- 
panies between them have 
more than 150 years experience 
of digging, washing, grading 
and transporting coal from the 
region. 

It seems perfectly natural, 
therefore, tbat Powell Duffryn, 
now a diversified engineering 
and distribution company, 
should seek to join forces with 
Wimpey, a large construction, 
housebuilding and opencast 
mining group, to bid for Brit- 
ish Coal’s south Wales 
operations. 

For Powell Duffryn it would 
maintain a 130-year link with, 
the region. The company, 
founded in 1864 by a south 
Wales family, claimed to be the 
world's largest independent 
coal raining company before 
the British coal industry was 
nationalised in 1947. 

Wimpey, which currently 
operates three of the region's 
ninp opencast mines, has oper- 
ated in the area for more than 
40 years. 

The companies' experience 
may prove invaluable given 
the extreme geological com- 
plexity of the region: "God put 
the coal in, then he trod on it. 
Seams double back on them- 
selves making even opencast 
mining difficult," said png coal 
board official. 


The joint venture will 
include all erf 1 the two compa- 
nies’ British coal operations 
which last year had a com- 
bined turnover of about £80m, 
generating pre-tax profits of 
about £4m. 

Turnover is expected to rise 
to more than £2Q0m if the joint 
venture acquires all of British 
Coal's south Wales interests. 
The companies have not ruled 
out taking a stake in other 
regional coal companies and 
axe also seeking to prequalify 
as a bidder in north-east 


!• > * ... 

•# 

BRITISH COAL: 
THE BIDDERS 1 


England. 

Their greatest interest, how- 
ever, Is in south Wales. The 
companies, in addition to the 
nine opencast sites on offer, 
could also acquire one remain- 
ing deep mine. Tower colliery, 
placed on care and mainte- 
nance, and which is being sold 
separately. 

The three sites operated by 
Wlmpey produced about half of 
the region’s opencast output of 
more than 2m fnnnns during 
the 12 months to the end of 


March, accounting for about a 
sixth of British coal produc- 
tion- Tower's production added 
another 900,000 tonnes. 

About half tbe region's coal 
production Is anthracite, a nat- 
ural smokeless Aral which com- 
mands a premium price and is 
sold mainly for burning in 
homes and. according to Wim- 
pey, has a strong export poten- 
tial including to Germany. 

Powell Duffryn operates 
three of the region's five coal 
distribution sites where it also 
washes and grades coal ready 
tor sale to customers. Its Brit- 
ish coal operations, which have 
shrunk in recent years, 
accounted tor about 6 per cent 
of the company's £28.6m pre- 
tax profit in the year to March. 
31 1993. 

It sells about 500,000 tonnes 
of coal nationally on its own 
behalf as well as providing pro- 
cessing and distribution ser- 
vices to British Coal. 

Three years ago it sought to 
sell its British coal interests to 
concentrate on its other engi- 
neering and distribution activi- 
ties, including transport and 
storage of bulk liquid chemi- 
cals. It subsequently withdrew 
the coal businesses from the 
market because the offers it 
had received were too low. 

Wlmpey, by comparison, has 
remained steadfastly commit- 
ted to its opencast mining 
operations started in Britain 
during the second world war as 


a means of Increasing coal pro- 
duction by using machines 
rather than valuable man- 
power. It was one of the first 
private sector contractors to 
move into this market 

The company regards mining 
as an important diversification 
away from its cyclical con- 
struction and housebuilding 
business. It remains one of the 
country’s biggest opencast con- 
tractors. producing 2.5m 
tonnes of cool last year. 

The two companies employ 
about 600 people in various 


coal operations in south Wales, 
including 200 at Ftos Las. the 
region's biggest opencast rite. 
South Wales sells about lm 
tonnes of coal a year to Aber- 
tbaw power station. The 
region's opencast mines have 
proven reserves of 7.9m tonnes 
and fully and partly proven 
reserves at prospective open- 
cast sites of 45m tonnes, says 
British. Coal. 

Previous articles in Ms series 
appeared on May SO and June 
1 . Further articles trill appear 
this teeek and next 


Sketchley bolstered by Supasnaps 


By Peggy Holllnger 

A move into the photographic film 
business helped Sketchley, the dry 
cleaning and photo processing group, 
increase pre-tax profits by 6 per cent 
before exceptional to £5-lm in the year to 
April 1. 

Supasnaps, the photo processor acquired 
tor a total cash payment of £6m in 1993, 
offset a difficult year in the core dry 
cleaning business. 

The new division contributed £L4m to 
operating profits of £6.6m. This compared 
with a total operating return of £5 .8m tost 
time, which was depressed at the pre-tax 
level by a £l.7m exceptional charge. 


Sales were also boosted on the back of 
the acquisition, rising by 37 per cent to 
£l42Jm. Excluding Supasnaps, sales fell 
by 3 per cent to £10L4m. 

Mr John Richardson, deputy chairman, 
said that he was optimistic about the 
current year, particularly given the 
recent Increase In dry cleaning 
volumes. 

In four of the first five months of 1994. 
there had been a rise In sales of about 2 
per cent 

An increase in the dividend was 
Intended to pass that confidence on to 
shareholders, he said. 

The pay-out is increased by 10 per cent 
to 2^p, for a total up 7 per cent at 3J2p, 


payable from earnings per share ahead 
from 49p to 6.7p. 

The integration of Supasnaps was going 
forward as planned, with substantial cost 
savings yet to be realised. Sketchley had 
cut £L2m In costs last year and expected a 
further £800,000 in savings this year. 

The group merged 40 Supasnaps outlets 
with dry cleaning shops, and planned to 
combine a further 50 this year. 

Textile rental suffered an £800.000 drop 
in operating profits, due to the accelerated 
closure of British. Coal pits. 

Mr Richardson said Warrender Aircraft 
Services, purchased six weeks ago for £8m, 
was expected to contribute more than £im 
this year. 


Daily Mail pays £6.8m 
for local radio portfolio 


Revamped Borthwicks 
returns to the black 


Racal expands 
in Singapore 
via £9.7m buy 

By Paid Taylor 

Racal Electronics has paid 
S$22.4m i£9.7m) cash to 
acquire an 80 per cent stake in 
Techno Transfer Industries, a 
Singapore-based group which 
builds and operates remotely 
controlled submarines. 

Hie acquisition includes Asi- 
atic Underwater Contractors, a 
Techno subsidiary which pro- 
vides remotely operated sub- 
mersible vehicle services to 
the offshore industry and to 
more than half of the (frill rig 
support market in east Asia. 

Techno, which has a modem 
fleet of 11 remotely operated 
submarines, will become part 
of tbe Racal Energy division. 

Mr David Elsbury, Racal 
Electronic's chief executive, 
said the acquisition “provides 
us with a cost effective entry 
in a market which is currently 
worth £100m a year and is 
expected to increase.” 

Techno made pre-tax profits 
of SS844.000 on turnover of 
S37.5m In the year to last June 
In the current year pre-tax 
profits of S51.97m are expected 
on turnover of SS9.5m- Net 
assets are about S$6.5m. 


By Raymond Snoddy 

The Daily Mail and General 
Trust, owner of the Daily Mall, 
yesterday increased its pres- 
ence in commercial radio with 
the purchase of a portfolio of 
radio investments previously 
owned by MAI, the broadcast- 
ing and financial services 
group. 

The purchase by Harm- 
sworth Media, a subsidiary 
of Daily Mail and General 
Trust, was for a total of 
£&8m. 

MAI had gained tbe stakes 
through its purchase of Anglia 
Television and did not see 
itself as a player in the radio 
market. 

As a result Hannsworth now 
holds 18-5 per cent of Chfltem 


Stag Furniture Holdings, part 
of Spring Ram, the lossmaking 
kitchens and bathrooms group, 
is acquiring Rest Assured and 
five properties used by it for 
£5m from BTR, the industrial 
conglomerate. 

Rest Assured is a branded 


Radio, 19.2 per cent of 
East Anglian Radio and 
13.3 per cent of Essex 
Radio. 

The company already owned 
19 per cent of GWR, the Bris- 
tol-based group; 4 per cent of 
Classic FM, 39 per 
cent of Radio Trust; a collec- 
tion of stakes under 10 per 
cent and 18 per cent of Swan- 
sea Sound. 

At the moment Hannsworth, 
as the subsidiary of a national 
newspaper group, is unable to 
own stakes of more than 20 
per cent In commercial radio 
stations. 

The government is, however, 
in the middle of a reviewing 
cross-media ownership rules 
and some degree of liberalisa- 
tion is likely. 


ture maker. Stag has pur- 
chased net assets of about £3m 
in respect of the business and 
£1.75m for the properties. 

Spring Ram said that Rest 
would break even over the cur- 
rent year, after costs. 


US software 
purchase for 
Micro Focus 

By Alan Cane 

Micro Focus Group, the 
Berkshire-based computing 
services company which has 
seen Its share price slide 
sharply over the past year, is 
to pay up to $I3£m (£8 9m) to 
acquire Burl Software Labora- 
tories, a North Carolina soft- 
ware house. 

The deal calls for the 
exchange of between 490,000 
and 800,000 of Micro Focus 
ADRs and possibly some cash. 
It will be treated as a pooling 
of Interests under US account- 
ing rules. 

Micro Focus, a developer of 
software for personal comput- 
ers which makes large scale 
software easier to write, has 
seen the value of its shares toll 
from £30 to less than £10 on 
fears that growth was slowing. 
Excellent first quarter results 
partly reversed the trend. Yes- 
terday the shares stood at 
£10.7Sp. 

Burl, established two years 
ago, now has 12 employees 
and negligible assets and prof- 
its. It makes a software tool 
for the analysis of existing 
systems written in CoboL 


By Caroline Southey 

Borthwicks mounted a sharp 
recovery in the first full year 
following disposal of its loss- 
making meat interests, with 
pre-tax profits of El.Tlm for the 
12 months to April 2. against 
losses of £1.99m. 

The natural flavours com- 
pany achieved sales of £29.2m. 
up 1L5 per cent on last time's 
£25. 6m from continuing 
operations. 

The outcome took in losses 
of £117,000 on disposals; the 
previous year’s deficit was 
struck after £3.08m of losses on 
disposals and reorganisation 
costs. 

"This year saw Borthwicks 
for the first time focused on its 
future as an international fla- 
vours business and we are 
pleased with the turaround to 
profit In operating terms this 
side of our business has always 


Lookers, one of the top 10 UK 
motor dealer groups, more 
than doubled interim pre-tax 
profits thanks largely to buoy- 
ant used car sales, writes Caro- 
line Southey. 

Pre-tax rose from £l-54m to 
£3.09m in the six months to 
end-March on turnover ahead 
by 14.2 per cent to £187m 
(£164m). 

The group raised its interim 
dividend by 20 per cent from 2p 
to 2.4p. The pay-out is covered 
more than three times by earn- 
ings of 7.8p (2.6p) per share. 

Mr Ken Martindale, chair- 
man, said that profits had 
increased chiefly as a result of 
a 19 per cent Increase in used 
car sales coupled with 
improved margins. 

Sales of new cars to the fleet 
sector foil slightly, he said, but 


made money and we will con- 
tinue to build on its reputa- 
tion.” Mr Peter Brackenridge. 
chief executive, said yesterday. 

Operating profits from con- 
tinuing operations rose 12 per 
cent from £L03m to £2 .27m, but 
rose only 2.8 per cent if losses 
by F&C Hong Kong, a flavours 
and fragrance maker acquired 
in July, were taken into 
account 

Sales in the UK market, 
which account for two thirds of 
turnover, remained flat 
although exports showed an 
increase of 14 per cent 

Trading remained strong in 
the US where sales of Borth- 
wicks Flavours USA rose by 16 
per cent in dollar terms and 28 
per cent in sterling terms. 

Earnings per share were 2L5p 
compared with losses of 18p. A 
recommended final dividend of 
0.8p lifts the total by S per cent 
to 1.3p. 


sales to retail customers had 
risen by 13.5 per cent 

“We felt that margins at the 
top end of the fleet market 
were not worth getting into 
and we did not get into deep 
discounting. But with constant 
hard work I am confident we 
will be able to hold our 
improved margins," Mr Martin- 
dale said. 

Increased personal taxation 
from April had interrupted the 
rising sales trend, but Mr Mar- 
tindale predicted a steady 
increase through to the end of 
the year. 

He said the company would 
be looking at expansion oppor- 
tunities next year in tbe light 
of a further reduction in its 
gearing, which had fallen to 36 
per cent at the end of March 
from 53 per cent a year ago. 


Spring Ram buys Rest Assured 

bedding, upholstery and fumi- 


Buoyant used car sales 
behind rise at Lookers 


NEWS DIGEST 


Low prices 
hold back 
Ramco Oil 

Pre-tax profits of Ramco Oil 
Services, - the USM-quoted 
energy services group, slipped 
from £349.000 toS^.OOO in the 
year to eud-Decembjsr. Turn- 
over fell from £5.43m to £4.78m. 

Earnings emerged at 0.6p 
(1.88p) and the dividend for the 
year is halved to 0.5p. 

The directors said the fall in 
turnover reflected lower levels 
of activity related to declining 
oil prices. 

In December last year Ramco 
commissioned its one-stop 
tubular service centre at Bad- 
entoy. near Aberdeen, and 
completed the sale of its for- 
mer site at Aliens. 

A placing of 800,000 new 
shares at 121 lip took place in 
May 1993, and a further 485,000 
were placed at 125p in August. 
The funds raised helped enable 
the completion of the first 
phase of the Badentoy facility. 

Sturge advances to 
£493,000 at midway 

Sturge Holdings, the Lloyd's 
underwriting agency, reported 
pre-tax Up from £325,000 to 
£493,000 in the six months 
ended March 31 1994. 


The directors said an 
Increase of £1.6m in stockbrok- 
ing income to £7J35m was more 
than offset by a reduction of 
£2.9m in insurance agency 
income to £4 .85m, which 
resulted from lower capacity 
under management and 
reduced levels of run-off man- 
agement fees. 

The operating loss of Insur- 
ance agencies was £1.84m 
(£ l.99m) while stockbroking 
profit was £l-37m (£951,000). 

Net profit emerged at 
£243,000 (£1964)00) and earnings 
per sfaare were 0.5p (0.4p). 
The interim dividend Is held 
at lp. 

Fenner plans to buy 
oat S African arm 

Fenner, the specialist engineer- 
ing group, proposes to acquire 
the balance or the shares in 
Fenner Group SA - its South 
African subsidiary. 

FGSA, which Is quoted on 
the Johannesburg Stock 
Exchange, makes and distrib- 
utes a range of power trans- 
mission equipment, conveyor 
belting and polymer products 
together with industrial pumps 
and specialised foundry cast- 
ings. 

Fenner, which has a 50 per 
cent interest in FGSA, intends 
to offer bo acquire the minority 
shares at R4J56 apiece - a total 
consideration of R34.2m 
(£5.5m). 


The offer price represents 
the net asset value of the shar- 
esas at February 28 this year. 

BAT concludes 
South Africa deal 

BAT's South African subsid- 
iary has concluded the sale of 
its Willards Foods division to 
National Brands, part of Anglo- 
vaal Industries, for about E55m 
cash. 

BAT said the disposal of Wil- 
lards, which makes snack 
foods, allowed it to concentrate 
on tobacco and financial ser- 
vices in South Africa. 

Winchester 
Multimedia expands 

Winchester Multimedia, traded 
under Rule 535. announced pre- 
tax losses of £354,630 for the 
year ended March 31 and has 
entered the music business by 
acquiring Meridian Music. 

The terms of the deal, com- 
pleted earlier this week, are 
150.000 new Winchester shares, 
with further shares due if pre- 
tax profits reach £100,000 for 
the year to March 31 1995. The 
maximum number of total 
shares payable is 400.000, 
equalling £200,000 on Tuesday’s 
closing price. 

As stated at the time of Win- 
chester's £L5m share issue in 
January, there is no dividend 
payment. The proceeds are 


being used to develop the busi- 
ness, which is engaged in film 
production, television, con- 
sumer products and publish- 
ing. 

Turnover in the 12 months 
came to £43,227. There was an 
operating loss of £364^58. 

Mexico link helps 
lonica raise £30m 

lonica, the private Cambridge- 
based telecommunications 
company pioneering radio 
access technology, has raised 
£30m this year. . 

A strategic partnership with 
Pulsar, the Meriram conglom- 
erate, accounts for most of the 
investment, which takes loni- 
ca's equity base to £45m. 

lonica aims to offer a tele- 
coms service for “fixed" 
phones In. competition with 
BT, using radio links for its 
local network instead of under- 
ground cable. It is piloting its 
technology in East AngHa and 
plans to launch its service next 
year. 

Pulsar plans to use the tech- 
nology to offer a similar ser- 
vice in Mexico. 

Hartons acquisition 
talks terminated 

Shares of Hartons slipped 2p to 
5p after the Sheffield-based 
plastics distributor said that 
discussions relating to a "pos- 


sible substantial acquisition” 
had been terminated. 

The group announced that 
the talks were under way in 
early March when It also 
released annual results for the 
1993 year showing reduced pre- 
tax losses of £4£2m on turn- 
over from continuing 
operations of £47m. 

F&C Pep lifts 
net asset value 

Foreign & Colonial Pep Invest- 
ment Trust reported net asset 
value per share, taking prior 
charges at nominal value, of 
121 _3p as at March 3L 

The value compared with 
107p a year earlier arid 116. 9p 
at the trust's September year- 
end. 


Available revenue for the si 
months amounted to £746,00 
(£292,000) for earnings of 1.65j 
(0-99p) per share. As alread; 
announced, the Interim dlvi 
dend increases from 0.9p to lp 

McKechnie sells La 
Cornubia for £4.7m 

McKechnie, the plastics am 
metal components group, ha 
sold La Cornubia, a coppe 
sulphate and copper-based fun 
gicides producer, to LC Hold 
togs, a company controlled b; 
Phillip Chemicals of Nev 
York. 

The consideration ii 
FFr40.3m (£4J38m) to be paid ii 
cash and the purchaser wil 
also assume FFr8.8m o 
debt 


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FtNANCIAL TIMES THURSDAY JUNE 2 1994 


COMPANY NEWS: UK 


Some 510 staff leave core business, further reductions planned 

Cost cuts help NIE to £75m 


By Mtehaef Smith 

Job cats and above average 
' sates growth, belped Northern 
Irelacd -Etectrlctty , which was 
: privatised last Jane, to 
increase annual pre-tax profits 
by 28 “per cent, from £58An to 

vmsm. 

■ ■ ■ Ite comparative figures are 
- xm a pro forma basis, 
r- NE-oot 510 staff from Its' 
core business in the 12 months . 
to- Mach Si; leaving 2,756 in 


■ . It plans to lose at. least 
. another .jtOO by Marph 1996. 

- v.Tfc* Jotescots were one of the 
: factora.behind -a 5 per cent 

redndSon mcontroHable costs 

doringthe year. 

- Ttw company, also hen^S£eh 
froffl ft 2.4 per ceit growth in 
unit sales for the year, com- 
pared with an average, of u 
per cent achieved by power 
distributers in Great Britain. 

Operating.profit increased to 
£8LSm (£72^n) on turn o ver of 
£482m (£458m). The pre-tax 
line, however, was depressed 
by an £&2m exertional Item 
for reorganisation and restruct- 
uring costs mainly incurred in 
reducing staff. 

Earnings per share wgre 
ahead 32 per cent at_S6.7p. 


Towles 
rejects 
Australians 

Towlea, the lossmaking’ - 
clothing manufacturer which 
last week was the subject of a 
£422m cash bid from London 
City Equities, yesterday dis- 
missed the offer, saying it 
“undervalued the company’’. 

London CSty, an Australian 
investment group which has 51 
per cent of the equity but only 
14 pec cent of the votes, said it 
made the offer because it was 
“outraged’’ at Towles’ continu- 
ing losses. 

The offer^aimoimced last 
Friday, comprises 265p for each 
ordinary shape, ll&p for each A 
ordinary share, 52p for each A 
preference share, and 78p for 
each B preference share. 

Towles reported losses of 
£286,000 . from ' turnover of 
El6.7in.for tire jear to and-Feb- = 
ruary„ London City said it ’ 



FWBUaWMa 

Sr Desmond Lorimer (left), and Patrick Harem ddcf executive 


(27^>). A proposed final divi- 
dend of 8p gives a total of 
lL39p. 

Sir Desmond Lorimer, outgo- 
ing chairman, said the com- 
pany had told the .industry reg- 
ulator that it favoured the 
-introduction of competition 
into the market 

The regulator has already 
tabled proposals for the 
creation of a pool trading sys- 
tem 

Sir Desmond said NIE had 


“highlighted the need to avoid 
structures which are uneco- 
nomic or which might compro- 
mise staMbty”. 

• COMMENT 

The pattern is farnillw en^ n gt 
A recently privatised company 
finds the scope for cutting 
costs is far greater thaw it had 
imagined when, it was negotia- 
ting with the government on 
setting the price for the sale. It 
happened when the power 


NEWS DIGEST 


planned to introduce new man- 
agement if it was successfuL 
The Towles board yesterday 
said it would provide detailed 
advice in due course. Mean- 
while, shareholders were 
advised to take no action. 

Alpha Airports 
Australian venture 

Alpha Airports Group has 
formed a joint venture with 
Counat Flight Services, Austra- 
lia's largest independent flight 
caterer, through the acquisi- 
tion of 49 per cent of the com- 
pany for same A|75m {£3. 7m). 

Connat serves Quantas and 
Ansett, Australia’s two inter- 
national afritnas. fo 1392-93 it 
made gi-ftm protax. 

The r emaining 51 per cent of 
the company will continue to 
be held by (he founders. 

Nortfamnbrian 
Water DM15m buy 

Northumbrian Water Group 


hfl gj through its MHw Inter- 
national subsidiary, paid 
DM15 2m C£6J2m) to acquire the 
waste water campling yrd dis- 
tribution activities of Edmund 
Buhler. 

The company, based south of 
Stuttgart in Baden Wfirttem- 
berg, claims to be the Euro- 
pean market leader in the man- 
ufacture and distribution of 
waste water sampling equip- 
ment 

Cedardata ahead of 
forecast with £2.71m 

In its first set of results since 
flotation in March, Cedardata. 
the Surrey-based supplier of 

fmanriaT p raYimrifrig arid com- 
mercial computer software, 
lifted pre-tax profits by 52 per 
cent from £L78m to £2.7lm for 
the year ended March 31 - just 
ahead of forecast 

Turnover expanded 16 per 
cent to £6.12m (£5-2&n). Earn- 
ings per share were 6Jp (4_2p). 

At its Share placing ~ prided 
at l05p valuing the company at 


industry in (En gland ? n| i .Wales 
was privatised four years ago 
and it hHfi ha pjyned ftgain with 

NIE. Consumers and taxpayers 
will no doubt complain, but 
shareholders need not worry 
too much. They can rejoice 
that, wnHlra (he Fngfand anfl 
Wales power companies, NIE 
will escape major regulatory 
reform this summer. They 
should also congratulate the 
management whose control on 
job numbers and ca pital expen- 
diture should ensure that gear- 
ing will re&cb nnflrfng lifca thf » 
60 per cent levels once pre- 
dicted for the Late 1990s; even 
40 per cent may seem excessive 
now. With dividend cover last 
year at 3J2 times, there is 
plenty cf scope to increase the 
distribution to shareholders. 
This year could see about L3p, 
putting the shares cm a pro- 
spective yield on a fully paid 
basis of 46 per cent, nearly a 
percentage point lower than 
the England and Wales power 
companies. Nonetheless, the 
shares have been strongly out- 
performing recently. In the 
short term their progress will 
be arrested as the June 28 
deadline approaches for paying 
the second instalment for the 
shares. 


£322m - the directors forecast 
pre-tax profits of £2.65m. 

Mr Leon Fattal, manag in g 
director, said that sales pros- 
pects were significantly ahead. 

Acquisitions help 
Channel to £1.7m 

Channel Holdings, a maker of 
security products and anti- 
theft devices for cars, achieved 
pre-tax profits of £L7m for the 
year to March 31 against 
£308,000 for the previous 15 
months. 

The result includes a full 12- 
month contribution from Car- 
flow Products and a maiden 
contribution from CQR Secu- 
rity Components, consolidated 
from April 19 1993. 

Turnover amounted to £L5m 
(£1.62m). Acquisitions gener- 
ated sales of ei2-im and con- 
tributed 9i iim to operating 
profits af£L68m. 

Earnings were 35p (24p) and 
a final dividend of 0.7p is pro- 
posed for a L2p total (Ip for 15 
months). - 


Expanding 
Aberdeen 
Trust ahead 
to £3.5m 


By Graham Defter 

An expanding range of 
investment trusts and substan- 
tially Improved margins lay 
behind an Impressive first-half 
performance from Aberdeen 
Trust 

Turnover at the fund man- 
agement and acco un t a ncy ser- 
vices group improved by 25 
per cent daring the six months 
to March 31 - from £7.ifim to 
£&96m - but pre-tax profits 
advanced to £3J>lm, a figure 
that compared with £961,000 
last time and exceeded the out- 
come of £3.15m achieved in 
the group’s last foil year. 

Tim advance was attributed 
to increased income growth 
and reduced fixed overheads 
resulting from the rationalisa- 
tion j inu f p ™™** implemented 
last year. 

Directors said that a further 
£74m had been co mmttted by 
investors in 1994 following the 
launch of Abtrust High 
Income Trust and capital 
issues from Abtrust New 
Dawn Investment Trust and 
Abtrust Scotland Investment. 
Total funds under manage- 
ment at the period-end 
amounted to £2.33bn, a rise of 
22 per cent 

The group has used the size- 
able gain in operating cash 
flow to reduce borrowings; 
gearing was 32 per cent at end- 
March, down from 45 per cent 
at the September year-end and 
67 per cent at (he same stage 
of 1993. 

The interim dividend rises 
20 per cent to 0.6p, payable 
from earnings of 2 Jl 2 p (0-81p). 


Warner- Wellcome starts 
its European operations 


By Dared Green 

The European operations of 
Warner- Wellcome, the new 
consumer health joint venture 
between Wellcome of the UK 
and Warner-Lambert of the US, 
came into being yesterday, two 
weeks after being given the 
go-ahead from the European 
Commission. 

“We received a ‘comfort let- 
ter' from the Commission 
indicating that there were no 
objections,” said Mr James 
Cochran. European operations 
director of Wellcome. 

The Commission said in 
March that it was reviewing 
the dual 

A letter of intent was signed 
by the two companies in July 
1993 and the North American 
arm of the operation came into 
existence in January 1994. 


Wamer-Welicome is 50-60 
owned by the two partners in 
Europe and 70 per cent owned 
by Warner-Lambert in the US. 

Mr John Walsh, president of 
Waraer-Lambert’s consumer 
products division, said the ven- 
ture phonid double its world- 
wide sales of over-the-counter 
irmriirines from a current level 
of $L6bn (£l.lbn) in the next 
five years. 

The European operation wiQ 
sell a range of products includ- 
ing Listerine mouthwash, 
Actifed cold treatment and 
Zovirax, WeUcome’s anti-viral 
drag for use on cold sores. 

Mr Walsh said that the mar- 
ket for OTC products would 
grow from JSfibn to $4Dtm a 
year by 2000. The joint ven- 
ture’s sales would double over 
five years thanks to “switch 
products" - prescription drags 


such as Zovirax that receive 
approval for OTC sales. 

The venture has a licence 
from Oaxo to sell an OTC ver- 
sion of the world’s biggest sell- 
ing proscription drug - Zantac, 
the ulcer treatment. 

Zovirax is yet to receive OTC 
approval in the US. The terms 
of the contract between Well- 
come and Warner-Lambert pro- 
vide for a review of the joint 
venture if the drug foils to 
secure approval. 

The company will be seeking 
further licences to sell OTC 
versions of prescription drugs, 
said Mr Cochran, although 
none were close to being 
secured. The OTC market 
would grow quickly because 
individuals wanted to be able 
to treat themselves without 
having to consult a doctor, be 
added. 


Chesterton sees 34% rise 


By Simon Davies 

Chesterton International, the 
property consultancy, is pre- 
dicting a 34 per cent increase 
to £5.Lm in profits before tax 
for the year to end-June, 
helped by a strong increase in 
property activity in southern 

England. 

Chesterton issued its path- 
finder prospectus yesterday for 
a flotation which will value the 
group at more than £5Qm and 
offer about 40 per cent of its 
enlarged share m ptoi through 
a placing. 

About 25 per cent of the offer 
will comprise new shares, rais- 
ing £5m for the group to lower 


debt and fund future expan- 
sion. 

Two thirds of the old shares 
being placed will come from 
former employees and "near- 
term retirees". The remainder, 
amounting to approximately 
£5m of shares, will be be sold 
by current employees, who will 
retain more than 50 per cent of 
the company's shares. 

At the Current minimum 
issue price of I00p, the shares 
would be issued on a p/e of 
about 14. 

Chesterton, like most consul- 
tancy businesses, has few 
assets, and post flotation, 
shareholders funds will 
amount to some £10m_ 


Employees are its key asset, 
and a costly one to maintain. 
Staff costs amounted to £25 An 
in the year to June 1993, up 
from £21. 7m. 

The company has already seen 
significant improvement in 
profit margins from its core 
consultancy businesses. 

Advisory fees accounted for 
72 par cent of last year's reve- 
nue, and Chesterton tntgnda to 
build up further its consul- 
tancy business to maintain a 
more consist ent naming s base 
in a business renowned for vol- 
atility. 

The flotation is sponsored by 
Robert Fleming; pricing will be 
announced on June 15. 


Avesco sells part of AYS 


Avesco, the broadcast 
equipment and services group, 
is selling the television stan- 
dards convertor part of the 
television products business 
carried on by A VS Broadcast 
to Elm view Properties for 
about £23m. 

The consideration is made 
up of £L5m cash with the bal- 
ance by the allotment of 
397,482 ordinary £1 Elm view 
share s 

Avesco has also condition- 
ally agreed to buy a further 


496,856 shares from other Ehn- 
view shareholders for £lm cash 
and, in connection with the 
merger of Ehnview with Rou- 
tine Data, to sell its sharehold- 
ing in Elm view to Routine. 

As a result, Avesco will 
receive £500,000 rash in addi- 
tion to its Routine shares, rep- 
resenting an 18 per emit stake 
in the company. 

The above transactions are 
conditional an the acquisition 
by Ehnview of another televi- 
sion products company. 


British Midland growth 


British Midland Airways, the 
UK’s second largest scheduled 
airline, yesterday further 
extended its network of inter- 
national partnerships by forg- 
ing a ticket code-sharing 
agreement with Austrian Air- 
lines, writes Paul Betts. 

Undo- the deal, the Austrian 
flag carrier will offer seats on 
British Midland services to 
Belfast, Dublin, Glasgow and 
Edinburgh, Teesskle and Leeds 
Bradford via London's Heath- 
row airport 


In turn, British Midland pas- 
sengers win be able to make 
twice daily connections into 
Austrian’s hub in Vi enna. 

Code sharing allows two air- 
lines to use their respective 
ticket codes on each other's 
flights. 

The British Midland-Aus- 
trian agreement wiD start on 
July l and travellers will be 
issued with connecting flight 
hoarding passes and advance 
seat selection at their point of 
departure. 


' '■Hf 

z 

IP ■■ ‘ 


e s u Its 



for the year and final di 

• Total net earnings up by 2396 to R2 984 million (1 282 cents per share) • 

• Dividends increased by 14% to 395 cents — a R919 million distribution • 

• Net asset value per share rises 5496 to 23 622 cents • 

• Increased contribution from gold, diamond and industrial interests • 
Good prospects for sustained growth both locally and in export markets * 


v I d e n d 


ABRIDGED CONSOLIDATED INCOME STATEMENT 


SEGMENTAL ANALYSIS OF TOTAL MET EARNINGS* 


ABRIDGED CONSOLIDATED BALANCE SHEET 


(RmHtkm) 

Tear 

ended 

3L&M 

Year 
. ended 
3L353 

% 

Change 

Nettacvme . 

-hunt mails 

IMS 

1464 

•15 

-trading 

5M 

521 

- 4 

-auptwon reafluttoaol InvestaeBts 

259 

9 


-other 

35 

. .S3 

-58 

Net boar hefcre mteten 

2477 

2077 

-IS 

Ikotion 

236 

242 

- 2 

M huaae after toadoi 

2 Ml 

IKS 

.22 

Attributable to outside sbwthoWeti 

SCO 

431 

•30 

Attributable ran lags 

i«i 

1404 

.20 

Retained cwutBgs of undated companies 

1303 

900 

•45 

EqattysccMMcdamlnp 

ZMt 

2304 

.30 

Abnormal Item 

- 

114 


IfatalMtecntep 

2384 

2418 

•23 

Emiafi per dare - «M 
-mrttaaWe catalogs 

722 

60S 

♦19 

•total net earaingi . 

1282 

1042 

•23 

UvMeeda per share -ctwi 

395 

345 

-14 

-ttorior 

JT5) 

m 

* 6 

-ftaaf ’ 

139*1 

12551 

.18 

OttMesd cover 
-actrfbndrtcearaHgs 

183 

1.7S 

.5 

-total oat nrnfctgs- 

125 

302 

. 8 


AMHDGttCONttOiMIIVBSCAaHOWSTKrBMHIT 



□ 


{Rmdbon) 

At 

. 31.13* 

At 

31AM 

OpcnttagadMUe* 

Operation . . 

Tuatiooptid 

2353 

035) 

2389 

{941 

Anfefcfe fate operation - - 

DMJttftllrtU 

■ 2228 
(1194) 

2295 

(1184) 

MriratHrttere Oran operation 

in 

i m 

tavMhf and flnwfaf 

(*») 

(J»3) 

Mtlnda P*»»ied 

(powe to iostti fare assorUfed companies and others 

Net cmh resources at 31 March 1993 

499 

741 

17H 

(5821 

300 

1983 

Nrion renoarces at 31 Koch 139* 

2838 

1791 


Mining finance R754 million 25-3% 

(1998- R6I7 mQtim 255*) 

Cold and uranium: R400 rnBBoo 13.4% 

(1993: R277 mOBoo 11.595) 

Diamonds: R642 nHBlnn ZIS% 

(1993: R463 mllHoa 193X) 

Coat RlMmfflfan 4.55 
(1933: RZ«DtnOBoa9a%) 

Platinum, base metals and other mining 
R127 rnUHon 4.3% (1993: R155 minion 6.4S) 

Industry and commerce R529 27.7% 

(1993:1081 mfflton 1595) 

financial Mnfces and property: R288ntQBon 9.65 
(1993. R238 mISkm 985) 

bnnaxmeni surpluses and other net Income 
Rl 10 mils on 3.7% (1993: R47 mUtton 195) 


Tbe focal net earning: hast been analysed on a segmsria! bask to show tht 
rpfariog m ari ta ri on of dte hbwbs sedne m gftich (tie Cfopcatfiofl is inceg- 
cd This anafysis a bated on tbe principal harness aairify of each hwe&am 
g ad so does not miicoSe tbe diversity of tftc aattofoBig to t liw t deuBsof 
mtocii tali be $uxn.in the mood repon 


(RbUOoo) 

At 

3IJJ4 

At 

3U53 

SharehoMerx’ equity 

28349 

18176 

In subsidiary companies 

2369 

2233 

Deferred lax benefit 

937 

929 

Lean fan aasoclaied compude* nod others 

2 398 

1892 

Other Hah ntrtfs 

2132 

1777 


28185 

25007 

Represented by 

Investments 

28114 

18423 

Fixed assets 

3748 

3302 

Inventories and actionals receivable 

1473 

1581 

Deposits and cash 

2 858 

1701 


28 IBS 

25 007 

Ruber of shares In taae - mlBkus 

233 

232 

Net m valoe per sharef - teals 

23622 

15 300 


t aha pmakhng for final dtoitkisd 


COMMENT 

Tbe CorporaUon reports a significant Improvement In earnings 
demonstrating again that geographic and prod act diversity underscore 
its inherent (Inancial strength and resilience. Business and investor 
confidence In South Africa has been enhanced by the momentous political 
developments, combined with the long awaited domestic economic upswing 
and an expected gradual acceleration in global growth. These factors have 
helped re-rate the South African stock market and accordingly the 
Corporation's Investments appreciated substantially. This permitted the reali- 
sation ol certain investments, materially boosting current earnings. 

Tbe Corporation supports the endeavours of the International Accounting 
Standards Committee towards achieving a greater comparability ol account- 
ing practice*. Certain modificaU o ns in the Corporation's accounting policies 
have been Introduced to incorporate the requirements of International 
accounting standards, adapted to suit the circumstances of a South African 
raining finance house. The financial statements reflect these changes and . 
comparative figures have been appropriately restated. 

Against this background, the Corporation's total net earnings amounted to 
82 984 million (1 282 cents per share), an Increase of 23% from last year's 


restated earnings of R2 418 mOlkm (1 042 cents per share) which included an 
abnormal deferred tax credit of Rl 14 million. Attributable earnings, 
which exclude retained earnings of associated and abnormal Items, 
Increased by 20% to Rl 681 million £722 cents per share). The effect of the 
change In accounting policies referred to above was io increase 
current total net earnings by 3% and to decrease the prior 
year's earnings per share by 2%. These adjustments were largely 
the result of adopting a much more restrictive definition of extraordinary 
items. Dividends were increased by 14% to 39S cents 
per share and were covered lw83 times by attributable earnings and 5.25 
times by total net earnings. 

The higher dividend Income From gold, diamond and Industrial Interests, 
partly offset by lower dividends from platinum interests, contributed 
to a 15% Increase in Income from Investments to Rl 683 million. 
The re-organisation ol the Corporation’s non-South African Investments 
resulted in a smaller Increase in contributions from the financial sendees 
sector and, owing to a lag In the timing of dividend receipts, from the mining 
finance sector. 

Trading Income I ram coal and to a lesser extent hom property interests was 
adversely affected by difficult conditions In each of these sectors, and 
decreased by 4% from RS21 midi on to R500 milDoo. The surplus on realisation 
ol investments Increased from R9 million to R259 million 
largely Irani the sale of certain tun-strategic gold holdings. The proceeds are 
being re-lnvested mainly in new mining ventures and in undervalued 
gold mines with long lives. 

Other net Income was R48 million lower at R35 million as a result of reduced 
net fee and Interest income, compensated to some extent by lower 
prospecting costs. The taxation charge of R23G million Is R6 million lower 
than last year. The outside shareholders’ interests In earnings of subsidiary 
companies rose from R43] million to R560 million reflecting their share 
ol the Increase in Amgold's earnings and in Anamlnt's Income from Its 
diamond interests. 

Retained earnings of associates, which are transferred to non-dkstributable 
reserves, Increased fay 45% from R900 million to Rl 303 million. 
This reflects the improved earnings mainly of the group's diamond and 
Industrial associates, Including those In the pulp and paper industry. 

The Corporation's net asset value at 31 March 1994, adjusting the carrying 
value of Investments for their market or directors' valuation and after 
providing for the final dividend, was 55% up at R54 982 milnoa or R236.22 per 
share. 

The successful general election, the Installation of a government of national 
unity under President Mandela, marked by a commitment to reconcUlatio- 
nand prudent economic policies, augur well for the future. 


Rr&it n vd Office- 
denote Srefr 
JbhamsfargJEW 

. I June 1994 - 


NOTICE OF DIVIDEND 

Dividend No. 1 16 of 300 cents per share has been declared payable on Tuesday 2 August 1994 to sbareboldero registered at the dose of business on Friday 17 June 1994. The register of members will be dosed from Saturday 
18 June 1994 to Saturday 25 June 1994. Tbe hiB conditions renting to the dividend may be inspected a the Johannesburg and London offices of the Corporation and Its transfer secretaries. 

The annual report am be pasted to slumhoUus on or about 27 June 1991 ana the dumnan's statement an or about IS July 1999 


London Office 
19 Charterhouse Street 
London ECIN6QP 






TIMES THURSDAY JUNK 2 I** 


24 . 

COMMODITIES AND AGRICULTURE 


Selling spree hits 
copper and coffee 


By Our Commodities Staff 

Commodities and precious 
metals prices tumbled yester- 
day in Chicago, Loudon and 
New York as investment funds 
and speculators sold heavily. 

However, maize and soya- 
bean prices, which rose so 
strongly in Chicago on Tues- 
day, held on to most of those 
gains yesterday after early set- 
backs. 

Coffee and copper prices, 
which have been the main ben- 
eficiaries of the recent buying 
spree in London, went into 
reverse. Copper for delivery in 
three months on the London 
Metal Exchange dropped by 
$39.50 a tonne to close at 
$2,227.50. Traders suggested 
that a slowing in copper's 
rally, and its failure to move 
close to recent 16-month highs 
after a short, downward move- 
ment last week, possibly unset- 
tled some speculators. 

Coffee prices slid by $56 a 
tonne in London in a round of 
profit-taking with the Septem- 
ber futures contract at the Lon- 
don Commodity Exchange 
down at $2,035 a tonne. The 


market was led down by an 
early slump in New York 
where traders were concerned 
about Friday's expiry of 
options contracts. 

But London trading was thin 
and volatile and in this case 
speculators and hedge funds 
were absent from the market. 
Ms Judy Canes, soft commodi- 
ties analyst at Merrill Lynch in 
New York, said that a combi- 
nation of Tuesday's auction of 
stocks in Brazil which had 
failed to sell as much as expec- 
ted, and a lower than expected 
drop in US stocks, had unset- 
tled the market 

US maize and soyabean 
futures dipped at yesterday's 
opening at the Chicago Board 
of Trade as speculators took 
profits after a weather-induced 
rally Tuesday. However, evi- 
dence that unseasonably 
warm, dry weather was persist- 
ing in the upper Midwest crop 
areas bolstered prices after the 
opening. 

At midday, maize futures 
were little changed from Tues- 
day's strong closes, and soya- 
bean futures were only 4 to 5 
cents per bushel lower. 


Sweden tries to halt 
Norway’s oil drilling 


By Hugh Camegy 
in Stockholm 

Sweden yesterday called on 
Norway not to proceed with 
plans to drill oil exploration 
wells in the Norwegian sector 
of the Skagerrak. saying the 
project could damage its fish- 
eries and tourism industries 
and threaten its nigged west 
coast. 

The plan to allow four explo- 
ration wells in the Skagerrak 
is part of a wider project to 
increase offshore exploration 
acreage by 16 per cent in a bid 
to offset a steep decline in 
crude oil production expected 
after 1996 by Norway. 

The proposals ore due to be 


voted on by the Norwegian 
Storting by June 15. But oppo- 
sition is also mounting within 
the parliament to allowing any 
dr illin g in the Skagerrak. 
about 50km off the southern 
Norwegian coast. 

Environmentalists and 
fishermen have rallied support 
for their objections, despite the 
government’s intention to 
restrict drilling to one well 
at a hiw» and to bar d rilling 
during the summer prawn har- 
vest. 

Opposition has been voiced 
from within the r anks of the 
minority ruling Labour party 
as well as by the chief opposi- 
tion parties and the state pollu- 
tion control authority. 


Platinum 
market 
moves into 
balance 

By Kenneth Gooding, 

Mining Correspondent 

Hie platinum market , having 
suffered a supply surplus for 
some years, is now moving 
back Into balance. 

Prices should show strong 
gains during the next 18 
months and consolidated in a 
range between $450 and $500 a 
troy ounce, according to ana- 
lyst Ms Rhona O’Connell in a 
special report for T Hoare and 
Co. 

Platinum closed last night in 
London at $401.90 an ounce. 

Ms O'Connell points out that 
there is an estimated 700,000 
ounces of an^ ^i platinum 
production capacity in South 
Africa alone that could be 
brought into operation if 
prices were right But she sug- 
gests prices will not go high 
enough to trigger all of this. 

Nevertheless, she would 
“not be at all surprised to see 
Impala reinstate .shelved 
expansion plans and Rusten- 
burg implement its Lebowa 
expansion or. more impor- 
tantly. expand output at the 
low-cost PP Rust mine.” 

Mr O'Connell suggests, how- 
ever, that even higher prices 
will not save Gold Fields of 
South Africa's new North am 
mine which is likely to be 
closed because of technical 
mining problems. 

If Northam does remain 
open there wonld be a plati- 
num supply surplus of 136,000 
ounces this year, she forecasts, 
and one of 54.000 ounces in 
1995. Ms O’Connell points oat 
that investment activity over 
the past six years has 
accounted for 328,000 ounces 
annually and the lowest level 
in 1989 was 160,000 ounces. 
“In theory, therefore, the mar- 
ket should start to see above- 
gound, industrial stocks 
drawn down during this year 
and, all other things being 
equal, for that drawdown to be 
relentless.** 


Kenya’s pyre thrum dominance challenged 

. • j 


lVIiphiipl Oriffin nn nrnsrwtc fnr thpi 




j trnp nroamc nesticide 


restaurants and airplanes; and Roussel, Bayer, Sarah Lee and 
in a variety of veterinary applt_— Sumitomo. As the producer of 

a raw material which can be 
utilised or omitted as they see 


A record Kenyan crop or 
pyrethrum, a vital 
ingredient in many 
insect-control formulations, 
will more than compensate for 
losses arising from the cata- 
clysm In Rwanda, formerly the 
world's third largest producer 
of this natural pesticide. But 
the further concentration of 
supplies in a drought-prone 
region with its own record of 
recent ethnic violence Is cause 
for concern among the prod- 
uct's few big buyers. 

Pyrethrum first surfaced 
commercially in Dalmatia and 
Japan before being trans- 
planted in the 1920s to the Ken- 
yan Highlands, where it is 
grown as a cash crop by over 
40,000 small-scale farmers. 
Since then, Kenya has regu- 
larly produced 60-70 per cent of 
annnal world demand of 20- 
22,000 tonnes, processing It for 
export Into powdered or liquid 
concentrates at a refinery in 
Nakuru on the edge of the Rift 
Valley. 

Despite a nation wide failure 
of the r ains earlier this year, 
the statncontrolled Pyrethrum 
Board of Kenya (PBK) has 
reported a harvest of 18,000 
tonnes of dried Sowers, 45 per 
cent up on the previous sea- 
son's 12,400 tonnes. “To have a 


stockpile puts us in a position 
of being able to promote pyre- 
thrum and its level of usage," 
says Mr Job Wainaina, PBK's 
chief executive. 

With prices remaining firm 
at $60 per kilogram of extract, 
the new crop gives Kenya a 
co mmanding 80 percent share 
of world production. 

The existence of this daisy- 
like flower lends support to the 
belief that the divine plan, 
with its generous provisions 
for cockroaches, mosquitoes, 
house flies fleas, may have 
been subject to later, more 
thoughtful revision. For pro- 
cessed pyrethrum yields the 
world's only truly organic pes- 
ticide. a quick-acting, bio-de- 
gradable powder that is non- 
car cinogenic, non-toxic to 
humans and animals and has 
no history of Insect resistance. 

Ninety per cent of all pyre- 
thrum is used in the control of 

llww four main pests, usually 
through aerosol formulations. 
But pyrethrins, the active 
ingredient, are deployed wher- 
ever human or animal health 
are more important consider- 
ations than kill ratio; the pro- 
tection of stored grain, bever- 
ages and fruits; food 
preparation anrf canning; pest 
control in kitchens, gardens, 


cations. colBut where pyre- 
thrum fans fatally short, in sci- 
entific and commercial terms, 
is that it has nn staying power, 
breaking down rapidly under 
ultra-violet light 

With the growth of a mass 
market for household insecti- 
cides in the 1950s there came a 
demand for the development of 
cheaper, long-lasting alterna- 
tives to pyrethrum. There are 
now over 40 synthetically-pro- 
duced substitutes. 

With Kenyan independence a 
second reason for diversifica- 
tion emerged: the fear that 
political instability or poor 
management would choke off 
deliveries from the world's 
largest producer. 

“If it were not for doubts 
over the regularity of supplies, 
I think the invasion by syn- 
thetic pyrethroids would not 
have been as intense as It has 
become.” says Mr Wainaina, 

As it is, the PBK will be 
lucky to lift exports beyond 
last year's ElOm, in spite of the 
record crop. Pyrethrins touch 
the lives of everyone but 80 per 
cent of the trade is controlled 
by a handful of large insecti- 
cide manufacturers - among 
them Johnson and Johnson, 


fit. the PBK has an almost 
apologetic relationship with 
the buyers, aware that they 
need its unique product but 
conscious too that they will cut 
and run as soon as proprietary 
substitutes can be found. 

U ntil recently, shoppers 
for pyrethrum had lit- 
tle alternative but to 
troop up to Nakuru, the Ken- 
yan market town at the heart 
of the industry. The cool, sur- 
rounding highlands allow flow- 
ers to be picked for nine 
months of the year elsewhere 
they yield just a single bloom. 
The PBK headquarters has a 
down-at-heel, faintly academic 
atmosphere not Inappropriate 
to a colonial institution that 
has mysteriously survived into 
the present day. With a 90 per 
cent recovery rate, no fresh 
investment is envisaged in the 
existing processing technology. 

Two factors have now come 
to disturb this complaceucy. 
For the past 18 months, the 
Rift Valley has been the scene 
of a low-intensity range war in 
which Kalenjin and Masai peo- 
ple, loyal to President Daniel 


arap Moi. hare driven Kikuyu 
supporters of the opposition 
from their farms and busi- 
nesses. Though the violence 
clearly did not effect this 
year’s crop, it has had an 
impact upon growers In the 
Mau Escarpment. 

A greater challenge to Ken- 
yan pre-eminence is emerging 
on the other side of the world 
in Tasmania. In collaboration 
with large-scale fanners, Com- 
monwealth Industrial 
GasseslCIG). a British Oxygen 
Group subsidiary. 15 conduct- 
ing field trials on the viability 
of intensively-produced pyre- 
thrum. using high-quality 
clones on Irrigated land. The 
acreage is still small and the 
climate not as suitable as Nak- 
uru’s, but Tasmania is already 
in a position “to influence the 
supply", according to the Mr 
Wainaina. 

If trials show that, despite 
the shorter season, mechanised 
farming can be profitable, 
nothing would then prevent 
pesticide manufacturers from 
bringing py rethrum-growing 
back to Europe where it 
started more than 150 years 
ago. EC regulations on “set- 
aside" land already permit the 
cultivation of crops with an 
Industrial, non-food end-use. 


Producers ‘lose out’ on futures 


By Deborah Hanpeaves 

Commodity producers in third 
world countries are losing out 
from the roller-coaster ride on 
the world's futures markets 
and not seeing much benefit 
from higher prices, according 
to Mr Carl Greenidge, deputy 
secretary general of the Afri- 
can, Caribbean and Pacific 
group of countries. 

Mr Greenidge is in London to 
lobby candidates in the forth- 
coming European parliamen- 
tary elections. 

“We hope to press European 
countries to look more sympa- 
thetically at commodity proto- 
cols with economic clauses," 
he will tell a conference organ- 


ised to the World Development 
Movement today. 

“The markets that will allow 
the sort of chaos we've seen 
over the last Eve-to-six years 
are clearly not the sort of mar- 
kets that will facilitate invest- 
ment in industry or stable 
incomes for producers, 1 * he 
stresses 

The WDM, a third- world 
campaign organisation, has 
calculated that from a £1 choc- 
olate bar. a cocoa farmer 
receives only 8p, whilst the UK 
Treasury eats up double that 
amount in taxes. 

In addition, the movement 
says that EU tariffs imposed on 
third world producers 
discourage them from 


manufacturing finished prod- 
ucts. 

The Lom$ Convention, a 
preferential trading agreement 
between the European Union 
and ACP countries is being 
reviewed this year and Mr 
Greenidge says there are some 
clauses that need tightening 
up. 

He highlights the problems 
many African countries experi- 
ence in repaying debts and 
calls for better returns for 
these countries from the basic 
commodities they selL 

“The unpredictability of the 
markets makes it impossible 
for producers to plan ahead in 
a sensible fashion." Mr Green- 
idge emphasises. 


Gaviria accepts as ‘fair’ 
EU banana import plan 


By Canute James 
in Kingston 

Mr Cesar Gaviria. the 
president of Colombia, has said 
that the European Union's 
banana import regime is fair to 
both Latin American and 
Caribbean exporters, and that 
this was the reason for his gov- 
ernment's acceptance of it 
despite continuing criticism 
from some Latin American pro- 
ducers. 

“Colombia considered the 
Lome Convention convenient 
and good, and understood why 
Caribbean countries had spe- 
cial access to the European 
market," Mr Gaviria told a 


radio station in Barbados. 

"We wanted an agreement 
with the European Union in 
relation to bananas. That's 
why we accepted the EU pro- 
posal." Latin American produc- 
ers had attacked the EU's 
import regime which allows 
duty free access for fruit from 
traditional suppliers in the 
Caribbean and other countries 
in the African. Caribbean and 
Pacific (ACP) group, while 
imposing duties on the quota 
granted Latin exporters. 

The EU has proposed 
increasing Latin American 
imports from 2m tonnes per 
year to 2.1m tonnes this year, 
and to 22m tonnes next year. 


COMMODmESri?RICES? v, 




BASE METALS 

LONDON METAL EXCHANGE 

(Prices from Amalgamated MeUJ Tracing) 

■ ALU MM HIM, 99.7 PURITY (S per lonne) 


Coat) 

Close 1319-20 

Previous 1337.5-8.5 

Hk^i/low 

AM CWkUl 1335.5-6.0 

Kart) dose 

Open im. 254,679 

Total daily turnover 55.478 

■ ALUMINIUM ALLOY (S per tome) 

3 mths 

1348-9 

1367-8 

137071340 

1385.5-6.0 

1343-4 

Close 

1335-45 

1335-40 

Previous 

1350-60 

1350-60 

HJgh/low 

1340/1335 

1363/1326 

AM Official 

1338-42 

1350-6 

Kert) dose 


1335-40 

Open Im. 

3.471 


Total dafy turnover 
■ LEAD (S per tonne) 

883 


Close 

500-1 

517-8 

Previous 

505 6 

523-4 

High/low 

502 

525/517 

AM Official 

502-2.5 

519.5-20.0 

Kerb dose 


516-7 

Open wl 

38.599 


Total djtfy turnover 

6.989 


■ NICKEL (S per lonne) 


Close 

6110-20 

8305-10 

Previous 

6230-40 

6320-30 

rtgivVw 

6252/6250 

6370/6 7 70 

AM Official 

6252-3 

8345-50 

Kurt) dose 


6190-200 

CVv.vi ml. 

58.157 


Total daffy Turnover 
■ TIN (3 per lonne) 

13*78 


Close 

5505-15 

5585-90 

Previous 

5520-5 

5800-5 

Htgh/low 

5530 

5630/5580 

AM Olftd.ri 

5520-30 

5800-10 

Kerb dow 


5550-60 

Open mt. 

16*30 


Told daily lumovcr 

5.402 


■ ZINC, apodal high grade IS per lonne) 

Cfosa 

954-5 

980-1 

Previous 

957-8 

983-4 

High/low 

955 

983/978 

AM Official 

954.6-S.S 

980-1 

Kerf dose 


978-80 

Open rrt. 

105.269 


Told darfy turnover 

23.779 


■ COPPER, grade A (5 per lomn) 


dose 

2213-4 

2227-8 

Previous 

2256-8 

2266-8 

hkgTvlow 

2252 

2285/221 1 

AM Official 

2252-3 

2282-3 

Kerb dose 


2215-6 

Open mt 

213.699 


Told daily turnover 

65.937 



■ LME AM Official E/8 rate: 1.5-149 

LME Chwlng C/S rate 1-5162 

Spot 151 75 3 mvts.1.5153 6mt«:l.Sl->0 9 matt I SIM 

■ HIGH GRADE COPPER (COM EX) 



Ona 

Days 

change 


lew 

Opal 

M 

Vot 

An 

10100 

-2*5 

10225 

101*9 

1544 

351 

JM 

>01*0 

-275 

10255 

99*0 

39.922 

JM 

teg 

100.90 

■250 

10240 

10050 

501 

32 

Sep 

100.85 

■220 

102 SO 

99 90 

9.751 

81 

Oct 

100.45 

■220 



228 

_ 

Nn 

10025 

-2*0 



3C 


Total 





62*05 

950 


PRECIOUS METALS 

■ LONDON BULLION MARKET 

(Prices supplied by N U Rorhsomrdl 


Gold (Troy ci) 

Close 
Opening 
Morning 
Afternoon ru 
Day's High 
Day's Low 
Previous dose 
LocoLdn Mean 

1 month 

2 morula .... 

3 months . ... 
Silver Fix 
Spot 

3 months 
6 months 
1 year 
GoW Coins 
Krygerraw 
Map)? Lea) 
f*fW Sovflinrgn 


Coquhr M 


265.962 

254.S30 


5 price 
365.50- 385.90 
JB7 50-387.90 
387.25 
386.30 
387*0-388*0 
38520-385.60 
387.60-388 00 

Odd Lending Rates (Vs US3J 

....J.OG 6 months 4.45 

— 4.13 12 maims 4.95 

,....4.20 


Drtrav o z. 
365.90 
370.70 
37555 
387.45 
S price 
393-386 
396.00-39325 
91-94 


US cts eqMv. 
55425 
560.60 
566.90 
58420 
C eqirfv. 
280-263 

GO-63 


Precious Metals continued 

□OLD COM EX (100 Troy <x.; Sftroy at.) 


GRAINS AND OIL SEEDS 

■ WHEAT LCE (C per lame) 


SOFTS 

■ COCOA LCE (EftmnM 


MEAT AND LIVESTOCK 

■ LIVE CATTLE CME (40.0001m; anMb4 



Sett 

Day's 






Sett 

Doyto 



Opea 



Sot 

Oafs 


Open 



Ssti 

Days 

Open 



prica 

Chop 

«9* 

low 

tat 

(PL 


price 

dongs 


Lor 

tat 

Sal 


price 

etange 

M|h 

Lew M 

VM 


price 

cfcanga 8&> Lon 

tat 

Sol 

Jun 

3815 

3.6 

388.1 

381* 

6.158 

5*49 

Jm 

114*0 

-025 

114*0 

114*0 

577 

32 

JM 

1011 

-16 

1030 

1010 26470 

1.103 

■tea 

64.775 

-1*00 66475 6L775 

18*59 

9*08 

Jtd 

384* 

-36 

- 

- 


- 


9660 

-060 

9670 

9670 

521 

5 

Sep 

1031 

•18 

1048 

1030 17*91 

1*08 

Aug 

64750 

•1*00 66000 64750 23,374 

7,466 

tea 

386J 

-3.7 

3910 

3815 

77.491 

24*56 

So* 

99*3 

-050 

99*0 

99*0 

1,870 

84 

Ok 

1060 

•13 

1068 

1049 25.661 

1*70 

Oct 

67325 

-1.450 68*75 67*00 

12*7S 

2*25 

Od 

389.4 

-3.7 

393* 

387* 

*264 

118 

im 

101*0 

-050 


- 

1*33 

- 

Mar 

1060 

■12 

1087 

1068 27.050 

1*45 

Dec 

66725 

-1700 70200 66500 

9*44 

1*68 

Dac 

3927 

-17 

397* 

390.0 24*82 

409 

Mta 

102*0 

-046 

102*0 

10270 

358 

3 

May 

1081 

-10 

1090 

1080 45 

115 

P eh 

69.450 

•1.125 70700 69.200 

5*00 

786 

Feb 

3962 

-3.7 

- 

- 

5*98 

326 

■toy 

1DL46 

-085 

10475 

10475 

275 

7 

JM 

1090 

-11 

1090 

1090 3747 

6 

Apr 

71750 

-0675 72.100 70650 

2*30 

232 

ToM 




148,143 31,139 

Taw 





4*32 

141 

Total 




112,760 5,716 

TeM 



72*23 20*70 

■ PLATMUM NYMEX (50 Troy oz.; S/boy or) 

■ WHEAT CHT (S.OOObu min; certaAWb bushel} 

■ COCOA CSCE (10 tonnes; S/tonnes) 


■ LIVE HOGS CME (AO.CXXKm; oenca/Rn) 



JI4 

4004 

-18 

4050 

3905 

15*10 

1*40 

Oct 

402.7 

-3* 

407* 

400* 

4*99 

311 

Jan 

404* 

-3* 

4070 

4050 

1*65 

21 

Apr 

4069 

-17 

4065 

408* 

1.073 

2 

Total 





22.157 

1*B3 

■ PALLADIUM NYMEX (100 Troy SAroy ozj 

Jun 

134*0 

-1.55 

137*0 

13150 

258 

168 

Sep 

134*0 

-1*0 

137 00 

134.50 

3*87 

224 

Dec 

135*5 

-1.80 

137*0 

13550 

748 

10 

Mar 

135.05 

-1*0 

- 


6 

- 

ToM 





4*99 

400 

■ SILVER CQMEX (100 Troy cm; Centaflroy cm) 

Jan 

533* 

-107 

. 


2 

2 

JM 

535.0 

-200 

557* 

530* 93.376 20.000 

Abb 

537* 

-200 



- 

- 

Sri 

5397 

-203 

5625 

5380 

12.317 

851 

Doc 

5477 

•20.7 

570* 

542.0 

17*62 

1*14 

Jm 

548.9 

•20.7 

- 

- 

32 

- 


TaW 


128229 22*78 


ENERGY 

■ CRUDE on. NYMEX (42.000 US galta- S/bamel) 


Sep 

Oct 


DM 

Total 


Latest Day's 
prica cha nge 
1823 -008 1832 

U.1J8 -005 17.95 

1772 -0 05 1720 

1782 -0.05 17.65 

17.58 -406 17.64 

I7.S2 -007 1/82 


Open 

Im lot Vai 
1819110,445 42274 
1784 84.044 18.735 
17.89 35232 8659 
17.60 22284 1.719 

I7J6 15.887 1.315 
1722 2ft487 2284 
4234328 74^48 


■ CRUDE OIL IPE (EfoureO 



LMDSt 

Day's 






price 

Manga 

Won 

Ism 

tat 

VM 

JM 

1654 

*0*9 

16*8 

1647 63*00 

>6*78 

A»B 

16.46 

♦0*4 

18.47 

16*4 

35.261 

8*80 

Sep 

16.40 

*0 03 

18.41 

1030 

13*90 

1.445 

Oct 

18*8 

>41.08 

1838 

1828 

7.785 

548 

So* 

16*6 

-0.04 

1630 

1625 

5318 

105 

Dec 

16*0 

+0*3 

1630 

1625 

5761 

321 

TOW 




136,128 26034 

■ HEATING OIL NYMEX (42*00 US gfltA. C/US gaBU 


Latest 

Bays 



0PM 



price 

Manga 

MM 

Law 

tat 

VM 

JM 

49*5 

-ate 

4975 

49.15 

5363 

17.516 

#09 

49*0 

-0*4 

50.15 

49.70 

52862 

24.481 

Sep 

50.70 

-0.24 

50*0 

5085 

17.407 

5^282 

Oct 

51*5 

029 

51.70 

51*5 

12005 

2,664 

Nm 

5240 

-029 

5280 

5240 

7.204 

790 

Dac 

S3J5 

-029 

5245 

5215 

5.581 

145 

Total 




138208 52401 

■ GAS OIL PE (Stew) 





son 

Day's 



apn 



price 

ctunge 

*** 

tow 

tat 

VM 

Jun 

153*0 

♦200 

1S32S 

15225 

27.442 

51« 

JM 

154*5 

♦200 

15425 

15325 20.194 

4,395 

Asp 

15575 

♦200 

15600 

154.75 

9,023 

808 

Sep 

157.75 

♦223 

15600 

158*0 

6*77 

480 

Oct 

160*5 

♦2*0 

1B025 

159*0 

6782 

180 

HOT 

16225 

♦200 

16200 

18125 

4*54 

284 

Total 





33,783 

12*89 

■ NATURAL GAS NYMEX 110*00 mflBBj.: Sfo*n8tU) 


Latest 

Day's 



Open 



prica 

ebango 

»B& 

Low 

K 

VM 

JM 

I.W5 

-0*17 

1*15 

1*82 

26374 

10.588 

Aug 

1 990 

-com 

2010 

1270 

13*37 

4,994 

Sap 

2050 

-atm 

2060 

2031 

12212 

2032 

Oct 

2118 

♦0010 

2120 

2100 

6369 

297 

tan 

2206 

>0008 

2210 

2198 

10*57 

T.126 

Dec 

2320 

♦0 008 

2320 

2J05 

14.153 

1,555 

TOW 




128,828 w ow 


■ UNLEADS) GASOLINE 

WTCX (42.000 US g8L CWS gdu 



itatoU 

Day's 



Open 



prica 

Manga 

Hlgb 

Low 

tat 

VM 

JUi 

53*5 

♦O.04 

5385 

5305 

4.551 

16838 

teg 

5120 

•004 

5330 

5300 

53*71 

22240 

Sep 

5220 

-0.18 

5240 

5ZZ0 

16911 

5*31 

Oct 

50*0 


5080 

5080 

10,908 

1.689 

Noe 

49 50 

-005 

4870 

4850 

3*25 

512 

Deo 

Total 

Kisn 

♦90S 

5380 

5350 

2.799 28 

98*82 43*47 


JM 329(0 *1/4 332/4 323(2127,455 57.470 

Sep 3348) 40(2 337/4 3290 38,990 9.170 

D(C 345(0 -012 348/4 340(4 51855 21.105 

RV 348(4 -Q/B 361/0 344/0 6,820 885 

May 340(4 -2(6 341/0 339(4 280 

M 325/2 *2(4 327/0 320/4 980 235 

1*M 234,180 88*85 

■ MAIZE CUT (SnOObunAv oants/56fc bushel) 


JM 281/0 

Sap 275(4 

Dec 268/4 

Mar 273(8 

May Z78/0 

JM 278/0 

Total 

■ BARLEY LCE (£ par tome) 


*2/2 285/0 274/4 575830 156*10 
+2* 278/0 2892 174.685 22.885 
+2/2 271/0 2834)431,095 78,475 

+0(4 277/0 289(4 50*15 3*90 

- 2800 275(4 6.860 675 

-1/4 281/4 2750 14290 3.790 

1*8718 267,450 


Sep 

97*0 

-0*0 

. 

- 170 


Hat 

9600 

■0.75 


- 295 


Jan 

101.00 

-030 


30 


Mar 

10285 

- 

- 

10 


•ter 

Tefcd 

10478 


" 

« 

909 



■ SOYABEANS CUT ROOOiti nfn; cento/®* tuM) 


JM 

700/4 

■w 

707/0 

692/0280880152,185 

Aag 

639/ B 

■VO 

706m 

892/2 80*55 20*55 

Sta» 

685/0 

-0/0 

691 m 

6794) 46,725 

4,185 

Hot 

673/6 


8800 

6674283,995 61.130 

Jan 

67Bfl] 

-im 

884/4 

872(4 

23*50 

1*95 

Mar 

682A) 

-0/4 

607/0 

678(4 

9.760 

435 

Total 




753*00246200 

■ SOYABEAN OH. CST (60,0000*: cenbrib) 

JM 

2605 

♦029 

?«in 

28.10 27*24 

110 

Aug 

28*8 

♦025 

2675 

2615 

14*75 

12*42 

S«P 

26*2 

+027 

MW 

2605 

10*33 

3*75 

Oct 

27*0 

♦015 

27*5 

27*0 

7.131 

1.197 

Dec 

27*7 

♦015 

27*5 

27*5 

19,778 

347 

jaa 

277a 

+0.10 

27.32 

27*0 

2 *ar 

4*83 

ToM 





85,108 22*43 

■ SOYABEAN MEAL CST (100 tons; S/tan) 


JM 

2023 

■0* 

an* 

200* 

31*29 

13,158 

teg 

2020 

-06 

203.4 

200* 

16*42 

5*M 

Sep 

201.3 

-07 

9Q75 

199* 

9*16 

1*01 

OM 

199.4 

-0.7 

2007 

197* 

5*70 

782 

Dec 

1963 

-07 

2000 

196* 

17*27 

3*41 

Jaa 

1963 

-1.0 

mo 

1967 

1.739 

42 

Total 





84,701 

24*88 

■ POTATOES LCE (E/kmre) 




Jot 

260.0 



W 


• 

How 

90* 

. 

. 

. 

. 

. 

Star 

105,0 


- 

- 

. 


Apr 

129 5 

-23 

132* 

129* 

681 

48 

May 

140.0 

- 

- 


w 

- 

An 

107* 

. 


. 

• 


Total 





681 

45 

■ meQHT CBIFFEX) LCE (SlQ/todn point) 


An 

1303 

♦19 

1308 

12S 

770 

42 

JM 

1230 

♦20 

1230 

1215 

948 

40 

teg 

12*2 


1245 

1230 

- 

58 

OM 

1308 

♦ 13 

1310 

1300 

219 

23 

j* 

1331 

+8 

1330 

1330 

80 

2 

Apr 

1350 

♦12 

1360 

1355 

60 

3 

Total 

QOS8 

ftp* 



2*74 

168 

BFI 

1437 

1485 






Cation 

LArerpool- Spot and Mlpment solas amounted 
to 407 lames (or the week ended 27 May. 
against 166 tonnes m the previous week. 
Improved demand brought moderate pur- 
chases, mainly In Tanzanian and American 
d e scrip tio ns. West African growths mode some 
headway. 


1J74 

-14 

1385 

1358 34*54 6*39 

Jan 

47*00 

-0*00 47*25 

47*25 

7*51 

1*0B 

1399 

-15 

1410 

1383 21*27 3.717 

JM 

48*50 

-0275 47.450 

46700 

9.483 

1,438 

1428 

-20 

1445 

1416 9,185 238 

Aug 

45*35 

-0725 46350 45*00 

62W 

832 

1465 

-15 

1470 

1450 a3B8 197 

Oct 

42.930 

-0*25 41400 

42*50 

2*58 

242 

1490 

-22 

1500 

1500 3,186 2 

Dec 

41850 

-0.175 44*00 

41525 

2*30 

281 

1512 

-22 


• 2*81 

Frt 

44*00 

-0550 44*50 

43*00 

686 

32 




83*40 10,793 

Total 




29*71 

4*83 


May 
JM 

Total 

■ COCOA pCCO) (SDR'Xtonna) 


■ PORK BELLIES CME (40.00QB»; centa/tre) 


Hay 31 
Daly_ 


Prica 

.1054*5 


fm. day 

1015.71 


10 day 

■ COFFEE ICE (S/tormay 


JM 

2060 

-57 

2100 

2044 12,480 1*95 

Sep 

2038 

-56 

2D7S 

2020 

15*99 2474 

Wn 

2010 

-38 

2045 

1990 

fl*!B 771 

Jat 

1981 

-43 

2025 

I960 

0*43 128 

Mr 

1831 

-36 

I97D 

1850 

2.441 38 

•far 

1950 

-168 

1959 

1958 

13 5 

Total 





41177 4*10 

■ COFFB2 tT CSCE (37*009)3; canta/toa) 

JM 

12100 

-100 

12520 

120*0 21,773 5,779 

Ste 

120*0 

*25 

123*0 

118.40 

15*53 2787 

Dac 

118.10 

-2.70 

12050 

116*0 

11,783 958 

liar 

115*5 

-4*0 

119*0 

115l50 

8,443 278 


11&75 

-275 

11725 

115*0 

680 7 

JM 

115J5 

-1.75 

11725 

115.75 

91 1 

Total 





9B*6B 9*11 

■ COFFEE (ICO) (US canta/pound 


•ter 31 



Price 


pm. day 

•ten.! hly 


. 118*1 


111*5 

IS day anraga 


. 114*4 


11128 


■ No7 P nO MUM RAW SUGAH LCE (centa/Tba) 


JM 

1243 

+0.09 


w 

2712 


Od 

124S 

. 

- 


1*96 

. 

Jan 

11*2 

- 

- 

- 


- 

Mar 

1210 

♦0*2 

- 


60 

- 

Total 





1888 

- 

■ WHITE SUGAR LCE (SAormeS 



Aug 

348*0 

-0*0 

349*0 

346*0 

12*88 

398 

OM 

328*0 

+020 

329*0 

32850 

9.463 

014 

Dm 

31850 

♦870 

31800 

318*0 

700 

49 

Msr 

3172D 

♦0.70 

317*0 

316*0 

2062 

115 

Hay 

317*0 

+0.70 

. 

- 

205 

- 

teg 

319*0 

- 

- 

- 

235 

- 

Total 





25*74 1,178 

■ SUGAR *11* CSCE (112000Ras; centa/ba) 


JM 

1219 

♦015 

1220 

11*7 42*52 9*08 

0M 

1221 

+0*6 

1224 

1208 54*19 80S9 

U ar 

11.94 

♦0*3 

11*8 

11*2 

23,965 

2*45 

■te 

11.91 

♦0*1 

11*5 

11*0 

1425 

227 

JM 

11*8 

. 

11.78 

11J9 

1.484 

51 

OM 

11.79 

- 

11.74 

11 JO 

687 

50 

Total 




127*6917,749 

■ COTTON NYCE (SajOOttw; cenW/tas) 


JM 

81.72 

-1.77 

8325 

81.70 

19*58 

4*84 

Oct 

77*5 

-0JD 

7855 

77*0 

5*80 

597 

Dac 

78.08 

-040 

7859 

75*0 23.908 2798 

Her 

7896 

-843 

77.45 

78*8 

2*70 

im 

iter 

77*0 

-835 

77*8 

77*0 

1*80 

41 

JM 

7800 

■823 

7825 

7800 

276 

25 

TOtxl 





54,120 7*54 

■ ORANGE JUICE NYCE (15*00*0; cents/tesl 

JM 

100*0 

-1*5 

101*5 

99.75 

12405 

2*82 

Sep 

103*0 

-875 

104.00 

10280 

4.921 

814 

taw 

105*0 

-850 

105*0 

104*0 

1*56 

15 

Jaa 

108*0 

-1.10 

10625 

105.00 

2*18 

113 

Her 

107 JO 

■830 

107.70 

106-30 

1*52 

101 

■te 

10870 

-830 

109.70 

10870 

24 

- 


22*78 3*26 


VOLUME DATA 

Open Merest and Vbfcone data shown for 
co nt racts haded on COe*X NYMEX. CST. 
NYCE. CME, CSCE and IPE Crude 08 ora one 
day In 


INDICES 

■ REUTER3 (Be as: ISAM I-IOO) 


Jun 1 
1674* 

■ CRB Fututw CBosa; 4B/S6-100) 


May 31 
1955.1 


month ago year ago 
1855* 1680.3 


M 

teg 

Mi 

Mar 

JM 

Total 


40*75 -0525 41.700 40800 
40*00 -0750 41.500 40300 
49*75 -0175 50100 49*00 
40000 -0-250 49.750 49.000 
51.125 -1*73 51*50 51*00 
50500 -0500 51*00 50500 


4*73 1.728 
2*23 1*48 
409 76 

35 5 

31 8 

11 7 

8,184 3,160 


LONDON TRADED OPTIONS 

Slitae price S tonne — Calls Puts — 


(99-7%) LME 

Aug 

Mov 

Auo 

Nov 

1326 

49 

84 

34 

43 

1375 

27 

58 

81 

67 

1425 

13 

39 

97 

97 

■ COPPER 





(Grade A) LME 

Aiq 

Nov 

(teg 

Nov 

22D0 . — 

85 

98 

89 

104 

2250 _ „. 

62 

77 

96 

132 

2300 . __ . 

44 

59 

127 

164 

■ COFFEE LCE 

JM 

Sep 

JM 

Sep 

2100 

71 

178 

111 

240 

2160 

54 

159 

144 

273 

2200 

• 40 

143 

180 

307 

■ COCOA LCE 

JM 

Sap 

Jul 

Sep 

950 

88 

104 

5 

23 

975- 

48 

87 

10 

31 

1000 

30 

72 

IS 

41 

■ BRENT CRUDE IPE 

JM 

Aug 

JM 

Aug 

1550- 

102 

- 

4 

23 

10OO — 

- 

- 

11 

40 

1650 

34 

61 

33 

- 


LONDON SPOT MARKETS 

■ CRUDE OIL FOB (per bamVJuq +ar 


Dubai 

SI 6.48-6*2* 

+0*2 

Brent Blend (dated) 

*18*4-6.37 

♦0.145 

Brent Blend (JM) 

516*1-8*4 

+0.165 

W.TX (1pm 831) 

*18*7-8 *8w 

♦0225 

■ OIL PRODUCTS NWEpnvrtat deBvary CtF (tome) 

Promhan Gasoline 

SI 87-188 

+3* 

Gas 06 

SI 52-154 

♦2* 

Heavy Fuel CH 

S82-85 


Naphtha 

*168-161 

+06 

Jet Fuel 

Si 63- Its 

♦2.0 

Ptmtam At pa CsBnmn 



■ OTHER 



Gold (pa* troy az}$ 

$388.70 

-2.10 

S*var (per troy oz)« 

540.50c 

-1900 

Ptstkvn (per boy ozj 

■ $401*0 

- +2.90 

PaftaMum (per troy azj 

SI 35. 75 

♦1*5 

Copper (US prodj 

107.00a 


Lead (US prodj 

35.00c 


Tin (Kuala LumpM) 

14.07 m 

-0*4 

Tin (New Yort) 

265.00c 

-1.80 

23nc (US Prime WJ 

Urn). 


Cdtte (Sve wMghOt 

128.72P 

♦1.17- 

Sheep (live wMghtJt* 

132.4Sp 

-1.10- 

Plga (Rue welgW 

88.78P 

+0*2- 

Lon. day sugar (raw) 

*288*0 

♦6.80 

Lon. day sugar (wtat 


♦1.00 

Tata 8 Lyle export 


+4.00 

Bariey (Eng. feed) 

£104*01 


liaise (US No3 Veflow) 

$1400 


Wheal (US Doric North) 

£1800 


RUfear (JMW 

72*5p 

♦075 

Rubber (AugW 

72-50P 

+075 

Rutt»(KLRS3No1 Jun) 

255*011 

♦1*0 

Coconut 08 (PtM)§ 

*630.02 


Palm 02 (Malay. /§ 

semoy 

-Z-5 

Copra (PUqS 

34Q2.6y 


Soyabeans (US) 

£200. Oz 

♦6.0 

Cotton Outlook A Index 

87.00c 

+0*0 

Wootops (846 Super) 

428p 



May 31 

235*5 


May 27 
230*8 


month ago year aga 
224.74 207.00 


C per wan i rteaa ot ian la a aamd. p pwicwfcq. c arttrib. 
t nogaWha ™ i Muriel ertsAg. t OcKtae z JwVJuL y 
Jm. w JJ. V Unarm fta yM cji . 6 OF Ram a n t BuSon 
marker asm. * Swep ■ rig ht pfce*. * Chenge on 

■Mb, p+cy Wo nrrt price*. 


CROSSWORD 

No. 8,469 Set by ALAUN 



ACROSS 

l Also the rug comes in a bright 
red (6) 

4 Imprison to sflence (4J2) 

8 Ran out and rushed the sick 
inside (7) 

9 Can be seen, it seems (7) 

XI A priest who's into day-mod- 
elling? Exactly! (10} 

12 Either way. is out to get vari- 
ety (4) 

13 Belts in men’s wear (5) 

14 Residing terribly close to 
where the fighting is (8) 

18 Has nights of tossing and 
turning but doesn’t give up 
( 6 . 2 ) 

18 Food chart (5) 

20 With "cordial", you’re getting 
dose (4) 

21 Finished the race after ail 
(4A4) 

23 Soft soap stone (7) 

24 They’re so painful it puts 
years on one going through 
them (7) 

25 More moist than a wet blan- 
ket (6) 

26 Certainly will (fine out with 
the editor (6) 

DOWN 

1 In bed I quietly raise the sub- 
ject (5) 


cious squid (7) 

3 People in general are, 
them, fools (3,6) 


5 With the softest of fodder all 
about, like a pig in dover? (5) 

6 With difficulty, steer the ves- 
sel through the locks (7) 

7 That’s the name of the game! 
(9) 

10 A bar counter (9) 

13 Went round and inspired 
everybody (9) 

15 As the nudist who’s not busy 
has? (7,2) 

17 Sing to a rhythm accompani- 
ment that's monotonous (7) 

19 Make both sides agree to have 
what’s left (7) 

21 Make a loss in a Mediterra- 
nean holiday resort (5) 

22 Go shopping to while away 
the time? (5) 

Solution 8,468 








25 






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suffer •-: : 

Hi S': 



S2if, 



FINANCIAL TIMES THURSDAY JUNE 2 1994 


HAAKST REPORT 


LONDON STOCK EXCHANGE 


FT-S&A Alt-Stara index 


Inflation concerns bring a renewed downturn 


Egirity Sharas Traded 

TtfM^byvcKirwSftaiert, EaetkiSnij; 
tato-nwk*tburfne»artdovBm«»lumow 

IJMO 



ByT«rry Bytond, . 

UK Stock Marfcat Ecfitor 

Inflation worries caught hold 
strongly on both sides of the Atlan- 
tic yesterday, prompting another 
savage: setback in the UK equity 
market Heavy losses in British gov- 
ernment bonds increased the pres- 
sure on share prices, with the June 
Aitsres contract on the FT-SE 100 
Index again taking much of the 
strain. ' 

Tbs first hour of official trading 
saw the stock market edge higher, 
with the Footsie storing 15 points 
ahead as London responded to 
improvement on . other. European 
bourses.. But when stock index 
futures foiled to' hold faitfai gams 
and UK bonds reacted to a reversal 
of fortune in Gorman bonds, share 
prices began to fall steeply. 


At the close the FT-SE 100 was 
down 3&6 at 253L9. virtually the 
lowest point of the session, follow- 
ing a final extinction of the last of 
two attempts to rally. The broader 
market followed suit, the FT-SE Mid 
250 Shedding 26.6 to 3,537.7 as prof- 
its were token and share prices 
were marked lower. 

Traders commented that while 
selling pressure in equities had not 
been heavy, the marketmakers had 
suffered severely from the renewed 
volatility in both gilts and equities. 
The Footsie 2,900 mark remained 
dearly at hazard in a stock market 
now a long way from the nearest 
support levels on the analysts' 
charts. 

These charts show the market 
possibly unsupported above the 
Footsie 2£00 mark, a level still Iden- 
tified as a potential low point last 


Account Pealing DnfeM 

-MlMgt 
fctey IB 

Jol 6 

JMl 20 

OpBan. DarteraBreir 
Jun 2 

JMl 16 

JMl 30 

tainato 

Jun 3 

JMl 17 

JuM 

4unmn Day: 

Jim 13 

Jun 27 

JM 11 

*Naw tana daMtegt rear taka tfaca hem tent 
butanaa day* whr. 


weekend by Mr Nicholas Knight, 
international equity strategist at 
Nomura Research. 

Howver, many analysts continued 
to main tain that equities should be 
bought at current levels. The first 
half of the session appeared to con- 
firm that selling pressure is still 
light, although this was counter- 
balanced by renewed pressure in 
stock index futures, which have 
become the first forum for fund 


managers seeking to change stance 
in the stock market 

Volume in equities increased 
towards the close, when Wall Street 
was 13 Dow points lower in 
response to the sharp Increase in 
the May pricing index of the US 
National Association of Purchasing 
Managers. For the full session, Seaq 
volume in UK stocks reached 
530.7m shares, against 505.2m on 
Tuesday when retail business 
dipped to £l.lbn. 

There was some disa pp ointment 
that the Bundesbank trimmed its 
weekly repo money market rate by 
only 5 -basis points , although uncer- 
tainty was also fuelled by com- 
ments expressed by Bundesbank 
m uncil m ember s. 

But the first blow to confidence 
came when bond markets turned off 
as news that German industrial out- 


put had risen sharply in May 
increased inflation concerns. UK 
markets reacted badly when the 
September long-dated gilt-edged 
futures fell below par. The further 
blow, from the US purchasing man- 
agers' report, hit UK gilts hard 
again and completed the rout in 
share prices. 

The general weakness in equities 
overshadowed trading statements 
from several leading names. The 
market took a very bearish view of 
Comments at the annual m Rating of 
Kingfisher, the retail group with 
interests encompassing the Darty 
group in France and the Woolworth 
and Comet groups in the UK 

The UK stock market appeared 
highly nervous at the close and 
traders said that the near term 
directum must depend on develop- 
ments in UK government bonds. 



a Key Indicators 
ImSoes and ratios 


FT-SE 100 

29315 

-385 

FT Ordinary Wax 

2321J2 

-332 

FT-SE Md 250 

3537.7 

-26-6 

FT-SE-A Non Fms p/e 

19.04 

(1 9.24) 

FT-SE-A350 

1489.1 

-17.8 

FT-SE 100 Fut Jun 

2906.0 

-51.0 

FT-SE- A Al- Share 

1484.63 

-1650 

10 yr Gilt yield 

8.94 

{8.77) 

FT-S&AAR-Shsre yield 

3.96 

(351) 

Long gHt/equity ytd ratio: 

229 

(257) 

Bast performing sectors 


Worst porfermtog sectors 


1 IMptar 


+04 

1 Bectronic & Sec Eqpt 


-2.7 

o UooM. rjm 


+05 

2 Tatecommunlcations „ 


-2L3 

3 Engineering, Vehicles 


+0.1 

3 Gas Distribution 


-2.0 

4 Merchant Banks — ~ 


-ai 

4 Retailers, General 


-L0 

5 Ufa Asauranea 


-0.1 

5 Sectridty . _ 


-1.9 


Water 


alert 


Water shares outpaced the rest 
of the utilities as dealers 
picked up whispers that the 
indicative “K factors" passed 
by Ofwat, the industry regula- 
tor, to the water companies 
three weeks ago may be more 
generous than originally 
feared. 

The “K factor” is the amount 
by which 'Ofwat allows water 
companies to raise prices every . 


year, over and above tnfiaHrm 

Fears that the regulator might 
impose negative factors on 
some water companies lay 
be hind , steep falls in water 
shares earlier this year. 

Although the K factors 
passed to the companies are 
strictly confidential, market 
rumours have suggested that 
there will be be no negative K 
factors and that the overall 
range will be from zero to 4 per 
cent This would be better than 
the market had been expecting, 
and would compare favourably 
with the treatment meted out 
to British Gas,, which was 
given an inflation wifwme 5 
- points formula, and BT, which 
has to wink under an inflation 


minus 7.5 points formula. After 
consultation s with the individ- 
ual water companies, Ofwat 
win announce its final decision 
on K factors on July 28. 

The rumours triggered keen 
demand fnr many of the water 
stocks, with South West lead- 
ing the sector and closing a net 
6 higher at 508p. Anglian. 475p, 
Southern, 512p, and Wessex, 
495p, rose 5 apiece, while North 
West edged up 2 to 497p. as did 
Severn Trent, to 497p. York- 
shire put on 5 afr495p ahead of 
today’s preliminary figures. 

Kingfisher weaker 

Retailing conglomerate Kmg- 
fisher suffered a volatile day’s 


EQUITY FUTURES AND OPTIONS TRADING 


Worries on inflation sent bonds 
tumbling and led to another 
sharp setback in stock index 
futures, writes Joel KBxtza. 

The firm opening of the June 


contract on the FT-SE 100 at 
2^70 was described by 
traders as foRow-through 
buying after the late recovery 
towards the dose of business 


■ FT-SE too MDOt FUTURES QJFFQ £25 pwMMn point 


(APT) 


Open Salt price ' Change tflgh .Low Eatvol Open krL 
Jin .2970.0 29000 -Sin 28740 28880 18273 50185 

Sep . . 29780 28205 -510 28600 29100 838 8705 

tec 2828.0 ’ -505 ' - ■ - 0 251 

■ FT-SE MB) 280 »gex FUTURES QJffq £10per Mi Index port 

Jun ' 9545JD 35100 -27-0 S546JD 3545.0 13 3737 

Sep 36800 3533.0 -27.0 35600 ' 35600 13 808 

■Fr-scMm-25oemexwntJBEetOMuqgioper3aindwpc8it 

An--' T" 3517.5 - ' - 1 I " • I " TTt 

AB open fcitaare l\ju u» an far failure day. f Bwo> votma atwanv 

1 FT-aeitoitoCTOPnowg^mc293qeiop»iuin8eKpotat 

27*0 .- 2800 2890 . 2800 ' ' 2950 3000 3050 3100 

c p c p c p e pcpcpcpop 

Jkn U3 9 133 1ft O 27 52 4ft ST 7ft 1ft 10ft 8 15ft 2 2Dft 

JU 1ST 24 150 38 Itt 52 87 74 ft *9 41 130 28 167 17% 208 

A* 2fl7Jj39V f7ft5ft13ft 7ft ttftaft 81 »j Tift Sfc Wft 4ft 17ft 27*j 21ft 
S« 2M51 s i 179 64 14ft 8ft Sf 101 98 12ft 75*158 5ft 18ft 4ft 227 
DKt . . 22ft 84 - . 102 135 116 18ft 77 24ft 

oatsjwNaiasn 

■ EURO STYLE FP-SE 100 eaiEXOPliOweJTOglO per Mlnclexpclnl 


2725 - 2778 2828. 2875 2928 2875 3025 8075 

JOH tSft 5 Ift 3ft3ft 5ft 2ft 8ft ft IZft 4 17ft 

JBI ' 2» 18. W5 26 128 33 98 58 M 78 47 106 38 13B 18 177 
Aug 22ft 31k 188 81% »ft Sft 5S>i 15ft 

5«p ZS .4ft MS 72 lift 114 Oft 16ft 

OKt .288 68> 2 20ft10ft M7 144 19019ft 

Ofa 92 Ml 7.m * UpdBdPm Wan v*e. tarnkm Mum an bMdee mtivmtt prtos*. 

t lmo m/tt BWBti*, 

■ BUBO STYLE FT-SE M2> 850 WD£X OPTIOW (OMUQ £10 per tul Index point 

3750 3300 3880. 3800 


3800 3080 . SltO 

AO 2ft 8ft IX 8ft 7 139 3 132 
cm o an o SMSMt nfennd M*mn tan a 430 pbl 


K1 - SE Actuaries Shore Indices 


on Tuesday. The improvement 
in European bond markets also 
did much to boost sentiment 
in the tost hour of trading. 

However, the decline in 
German bonds following worse 
than a ntic ip ated output figures 
brought a reversal in the 
fortunes of June, and the 
contract came under heavy 
selling pressure, pulling the 
underlying cash market lower. 

A brief respite over the lunch 
tone period was undermined 
by the release of US 
purchasing managers’ data. 
This led to renewed seBing 
and the contract feti to the 
day’s low of 2,899. At one 
point Jiaie was trading at a 
discount of 30 points to cash. 

June ended at 2,908, down 
51 from its previous dose and 
around 27 points below its fair 
value premium to cash of 
about minus 3 points. Volume 
was 18^78 lots. 

Turnover in traded options 
Improved to 38^389 co n t ra ct s , 
with most of the sector’s 
activity concentrated in the 
index options. The FT-SE 100 
option saw business of 18.189 
tots and the Euro FT-SE 7.433 
tots. Marks and Spencer was 
the most active stock option, 
with 1.417 contracts dealt 


! be UK Series 


trading, ending the session 
sharply lower as a cautions 
agm statement was com- 
pounded by renewed worries 
over a potentially acute stock 
overhang. 

Dealers said the fear that 
some shareholders In Darty, 
the French electrical retailer 
boogbt by KhuMwr last year, 
might exercise their option 
from tomorrow to sell some 
20m Kingfisher shares had hit 
the stock in afternoon trading. 
“No one wa n ts to chase the 
stock if a few minion shares 
are about to come into the 
market," cnrnmentpri one sea- 
soned trader. 

Having started the session 
weak. Kingfishe r shares rallied 


TRADING VOLUME 


■ Motor Stocks Yesterday 

VOL Cfavne Day* 
000» onct tf—a 

ASCAOroupt 5.200 fit* -lit 

Mft«y NutaaTf 5JX» 395 44 

Atoort FWmt 429 54 

AOarUjoa>t 2JXJ0 674 -4 

tagtanVM* 1.2OT 476 46 

Aigoi UOO 363 -S 

4.100 231 -9 

2.100 270 -4 


;MfM 

OAAt 
MT h*.t 
BET 


sr 

BPB *“ 

IT 


1,000 247 

834 BOB 
1700 402 

SAO 122*2 
1.200 


1.000 

«3DD 


- 1*2 

-20 


-ft 


Bank o( fioottanlt 


70S 
354 

698 279 

R2Q0 353»|i -9 

2J00 230*2 -ft 

SJBOO 367 


BMt 
BkaCbcttt 


BooHt 


Blit. A4fOSp«DBt 
UHillM 
“ " iQwt 
llind 


BubI 
BrartiCMoTt 


1/«0 
ns 

2J00 
HUSO 
790 
&B0D 
102 
aoe 
4J00 

CabtoSWkvt 4400 

,J, 3 

C«MlcBt ^ 913 

CctaoConmt 996 

CoiaWyAt 1.700 

Comm. Untarf 1J00 

Cootaco 1fl» 

Coirt»uttlt B29 

SKU £ 

05m 313 

EmraBKL 204 

EMIMadElta 260 

1.200 


961 174*2 -ft 

3AXS 
1.900 
2200 
775 
van 


519 


-6 
4-1 

-6 

-3 

505 -4*2 


417 -3 

495 -8 

374 -4 

259 -6*2 

379 -9 

134 -a 

158 43 


57 

424 

454 

305 

305 


223 

516 

249 

SIS 

413 

856 

*55 

SK 

570 


EmtonmiiMi 

na 

H*on» 

i&CdLlX 


710 393 


-1 
-1 
-IB 
• S 

-a 


-6 

-a 

-13 

-3 


as the agm imfoidad , with the 
market cheered by positive 
news on gross margins. How- 
ever, subsequent revelations 
ova: sluggish sales growth and 
cautious comments from the 
chairman renewed *ha pres- 
sure and tha shares continued 
to slide. They eventually closed 
21 down at 522p after 2.3m 
traded. 

Granada advances 

Shares in Granada firmed 10 
to SOlp after unveiling results 
at the top end erf market expec- 
tations. Profits came in at 
£103m. a jump of 51 per cent, 
with turnover up from £640 Jim 
to £S4L4m. 

Granada shares have been a 
weak feature in recent sessions 
as rumours in the market 
suggested merger problems 
with LWT. Yesterday the 
stock’s supporters were quick 
to point out the £4. 7m contri- 
bution among the 64 per cent 
rise In television profits. Smith 
New Court and NatWest Secu- 
rities both reiterated their buy 
r ecomm endati ons 

A number of prominent 
retail stocks weakened in the 
face of a couple of large pro- 
gramme trades. Among these. 
Great Universal Stores slid 20 
to 559P. WJ. Smith “A" 10 to 
465p and Marks and Spencer 
11% to 380p. Rank Organisa- 
tion receded 19 to 359p. 

Hoare Govett reiterated its 
po sitive Staneg on MFI alwad 
of preliminary results due 
shortly. The shares hardened a 
penny to 156p. Laundry group 
Sketehley moved forward 5 to 
llOp after good results, boosted 


NEW HIGHS AND 

LOWS FOR 1994 

MEW M0M8 (19). 

BAWCS n BMUjma 6 CMSTRM CD DlMon. 
BLDQ MAILS! MCHTS (1) *MW1 H. 
BSCTTWC 6 ELOCT SOUP 0 Fi#*i, ICC. 
ENOM&BWQ (1) ExcaBjur. EXnUCTIVE 

ims n ManENriniRS fi) oil 
expurahon i prod m onn hmancml 
( t| 1EXT1LB8 ! APPARB. (f) Totsy, 
AIBCAMR 
MOV LOWS P03^ 

aora m other ms> mibcbt (i) 

BAMCS (6) BMDMERES (4| Fi*er 8TA. 
Q « w — \ ScoCMH ! Haw B b , Vto. 

mm nun i rrrmrn m flwr mm. 

E k rtMM y. Lalng U) A W. Paatrmon. WC. 

Wtaon Bomfcn. BLDQ MAILS ! BKHT8 fit) 
CHFMTJM S m ABA. CiHMtens. 
DtSTROUTORS n DVSnRED MDLS (5 
ELB C TMCnY (1) 8outtl WMI4 B-ECTRNC 6 
ELECT EQUP « Jotraon KmmoiL 
Beartrertc. DWirano 5) Bit Aarar 7.75p 
W. Cook (W), ML IMK Mogn Ctutt. 

Do 7Mpe Rt, Pnxpeca. QuadnmalfCL Whosaoe, 
EXTRACTIVE MDS (l> FOOO MANUP (7) 

A— o. Ml Foods BSW, Cadbury Scluwappm. 
DBkMr. Dmd hnL, Hadewood. Untad BbgiMa, 
OAS DfSTRS/nON (1) BrOBh On. HEALTH 
CMENHCUtnOIOGOOOIWMMUV. 
J4f4". LBfcub SMnBV^n. WBURANCSfKQ 
mvesnen-TRusiBdnniVEsnwMr 
COMRAMBS (7) LEBURE ! HOTELS (5 Rah 
rw* oo. Do aup pil. Lire assurance n 
MEDIA m FtaaacH. Pattwn, Road W. ealacTV, 
TkWly M- UnBadNBwm. MBICHANT BANKS 
OQ OR. EXPLORATION M PROD (5 05, 
WTEQRAT6D P} OTHBI RNANCIAL (B) 

OTHER SS4VS 4 BU3NS £9 Capa Bangs, 
FkxBnv, PHARMACBOT1CALS (1) Zanaca, 
PRTNQ. PAPB1 6 PACXO H) CkaxMon. Jams 
PortBr. Lmmi MBdon. 8CA B, PROPERTY fM| 
HETAURS, POOD (5 ASOA. tadnd. KMk 
8H renVLBB, QBERAL (16) SPIRITS, 
HONS & carats (1) an) Mac. SUPPORT 

CaBta A VAotau, Do 7pc Cnv, 20DB, TEXTILES 

! ARRARB. n RMdkuE netad! ssr. 
SMBMOd TOBACCO |f) TRANSPORT » BAA. 
MM) Docki & Hatnr. P * O Wpc Pit, 
A MPdC AHS CT CAWAMA WS (Q. 

by the first contribution from 
Snpasnaps, bought in April 
last year. 

There was an pigment of dis- 
appointment in the market 
with the 13.7 per cent increase 
in Northern Ireland Electrici- 
ty's dividend total Some of the 
utilities sector’s super-opti- 


mists were said to have been 
looking for an increase in the 
region of 15 to 16 per cent, a 
figure which would match 
potential increases by the 
regional electricity companies. 
Switching from Northern 
Ireland to the Tecs” left the 
former 19 lower at 222p. 

The building sectors of the 
market were hit by the general 
pessimism on domestic interest 
rates, which many analysts 
expect to move up later this 
year. 

There were very few pockets 
of resistance in the house- 
builders/contractors, where 
Bryant Group dipped 3 to 147p, 
Whnpey 5 to 165p, John Laing 
“A" 6 to 292p and Persimmon 
the same amount to 250p. 

CAMAS, the demerged con- 
struction materials division of 
English China Clays, began 
tr ailing at 73p and gradually 
improved to end the session at 
76p. English China Clays, 
whose shareholders were given 
one CAMAS share for every 
English China held, com- 
menced trading in ex-CAMAS 
form at 355p and settled at 
360p. 

Wolseley, fh p builders mer- 
chant g rou p, Was nnflarminHl 
by news of a placing of around 
7.4m new shares at 748p a 
share to fund the purchase of 
US photographic equipment 
group Calumet for cwm 

Brewers were generally firm 
as bargain hunting was 
encouraged with some broker 
recommendations. Bass, up a 
penny at 5l9p. and recom- 
mended by SG Warburg on 
Tuesday, was reported to be 
also tipped by Hoare Govett, 


the broker advising a switch 
out of Guinness, down 5 at 
472p. Having held up well on 
Tuesday, Grand Metropolitan 
retreated 14 to 425p. Elsewhere, 
Whitbread gained 5 to 519p and 
Scottish and Newcastle a 
penny to 5l5p. 

Engineering group Siebe 
gave up the previous day’s 
advance to close 9 lower at 
547p in volume of lAm in ner- 
vous trading ahead of today's 
figures. 

NatWest Securities urged 
investors to look closely at the 
margins in the controls divi- 
sion when the figures are pub- 
lished. The engineers tpam at 
the securities house said: 
“However good the 1994 results 
due and however well sup- 
ported the shares seem to be 
on fundamentals, the scope for 
share price outperfo nnance 
will be dictated by how well 
Siebe "s controls margins 
responds. " NatWest expects 
frill year profits for the year to 
March 1994 to be ca t asm. 

A stock overhang was 
reported in British Aerospace 
where the shares gave up 6 to 
455p. Powell Duffryn which 
reports figures today, closed 12 
down at 621p. 

Worries about increasing 
competition in the bread mar- 
ket weakened Tomkins, owner 
of food manufacturer RHM. 
The shares relinquished 7 to 
214p in trade of L8m. 

MARKET REPORTERSs 

Christopher Price, 

Steve Thompson, 

Joel Kbazo. 

■ Other statistics. Page 20 


LONDON EQUITIES 


LIFFE EQUITY OPTIONS 


RISES AND FALLS YESTERDAY 


Some 


Us PUS 

JM Oct JBl Jtf Oct JMl 


FofWgn 

ftntf 
On ‘ 


Ouut 

O ynutd 


v 


teyte Year 

Dhr. 

Earn. 

WE 

Xd 04 . 

Total 


Jun 1 

chgeK May 31 May 27 May 28 bqo 

yWdN 

ytatdW 

ratio 

ytd 

Rotun 

FT-wioe.V: - 

2931 £ 

-12 29702 2988.4 9018.7 2883.0 

4 2D 

7.04 

1826 

40.79 

109029 

FT-Se IM 280 •• 

3537.7 

-0.7 36842 3572.3 3610.4 3191 .4 

3.48 

877 

21.00 

4028 

123927 

FT- 8 E lOd 28D an Jtw Ttuata - 

3S44J3 

-<XB 3571.8 3682.1 362BA 3211.1 

3.63 

622 

1870 

41.40 

123723 

FT-SE-A SCO 

1480.1 

-12 1506.7 15062 1S312 14272 

4.04 

874 

1720 

1927 

113421 

FT-SE OmaSCap 

1872.10 

-02 1877.54 188322 189321 1823.12 

228 

425 

2821 

1818 

143620 

FT-SE SmDCap «*w Tbrih 

1861J3Q 

-0.3 18S&39 186224 187a78 1835.71 

814 

4,70 

2823 

19.55 

142322 

FT-SE-A ALL-SHARE 

1484^8 

-1.1 150122 150028 1S2424 141325 

896 

656 

1821 

19.48 

1150^1 

■ FT-SE ActuarlM AU-Shara 









Day's Yes 

Div. 

Earn 

P/E 

Xd ecQ. 

Total 


Jtxrl * 

ehgeK May 31 Uay 27 May 28 ago 

ytetdK 

iJeHV 

jWwre 

raflo 

ytd 

Return 

18 WORM. EXTBACnOWG) 

260028 

-02 2808.16 260428 2843262301.80 

329 

421 

2722 

3728 

103830 

12 Bdiaatvo toduntrtaaH) 

37742a 

-OlS 370B29 3785.18 380183 312000 

851 

835 

2843 

4839 

102929 

15 0tHn»flra»8d(Sl 

254528 

-02 255025264823 259061 211520 

882 

425 

26.70 

4043 

103889 

18 QSEkpiotatian ft Pradni) 

1903.06 

-02 1921.10 192821 1947.83 1S4&40 

854 

120 

88007 

1522 

109023 

3) aQiSANUFACTUCRaW 

1956.38 

-12 1979.72 1976232007.12 577920 

883 

424 

2721 

2427 

998U 

21 BuGdbn? ft CoM&uctionfTt) 

IJQiilW 

-12 122124 1221.09 123926 1070.10 

810 

869 

3225 

16.18 

935.45 

22 Bulkftig Matte ft MerctwfW) 

1671.75 

-12 1901.13 190022 194020 1995.90 

8B3 

3.32 

32.82 

28.79 

571.78 

23 CanMiUcateqtl) 

2420.10 

-0.7 2437.43 243S.9S 2*52-22 2181.10 

883 

4JJ1 

3812 

2820 

105*20 

24 OhvrafllBd lndUatjM«oe} 

1982.73 

-12 1906.14 1984.64 2021.02 1853.40 

4.64 

428 

2821 

30.45 

96829 

25 Badronic ft Boct EqufcfW) 

1963.98 

-2.7 201 721 202623 207520 1980.40 

874 

860 

1851 

1220 

ckj cn 

» Ef^o*aring(71) 

1814J7 

-Q.9 183027 1825.16 1844.74 152220 

226 

427 

3026 20.11 

102525 

27 Engbitriring. VoNcteafrsj 

224122 

♦a* 223929 2217.78 2238.81 175120 

4.67 

827 

6126 32.42 

107128 

28 PltotinSi Fnrw ft PekopT) 

2720.86 

-05 273320 271025 2748.732337.40 

806 

831 

2833 

29.45 

105823 

29 TasdlM ft Aixwsff205 

171927 

-12 1738.87 172871 174520 1811.60 

4.08 

5.84 

2810 26.05 

96427 


Ck-wont 

ss 

GKN 

QtJfn-wt 

HS8C(79pMWf 


Kmart 





30 CONSUMER 00008(06) 

S74.14 

-12 2604^4 260821283120 289420 

425 

7.96 

14.03 4448 

87889 


31 Bwwrarteeti7i 

215520 

-4L3 216029 215829 217125 194420 

427 

723 

1528 1883 

84622 


32 SpUO. Vflne* ft CMeraflC) 

3WQ24 

-1.6 289521 290808 292027 273850 

3.68 

827 

1725 41.70 

94220 


33 Food Manufactuera(233 

218725 

-1.4221821 221928 224839 222620 

426 

821 

1422 4875 

90035 


34 HouriahotO GoodeflQ 

246524 

-84 2474.63 347128 2480.78 231890 

326 

723 

1828 40.74 

878.44 

. , 

38 ftefth Ceredfl 

166816 

♦03 166020 166829 1679.17 167920 

322 

620 

20.48 19-00 

95628 


37 PherwweeuttMteOl) • 1 

284870 

-1.1 2070.15 2668.13 2681.18 3080.10 

424 

021 

1328 47.15 

82822 


38 T<X>ac«>(D 

337841 

-1.7 3431.14 343923 352842 368720 

825 

10.10 

1120 10835 

75087 


5* 

M— — to 

•Mi t Soenoart 


None Wan warn? 

mtmBn 

NDRhwtadit 

Hon— b 

P—oont 

PSOt 


40 BBaOCEBpai 

41 OUMoutmpi) 

42 LatBWB & KB«s*23J 

43 M«tN3Q 

44 RMiMiS, FoodflT) 

46 MSn, Osn —Mq 

48 Sopport dmrinsm 

49 nwwjort(1Q 
6H 


100120 

-1.1 1933.08 1824.44 1853.12 1788.10 

3.18 

6.10 

18.72 

16.40 

92037 

279834 

-1 JO 282736263439 2B4&43 200720 

3.13 

622 

1951 

3435 

95S.7B 

2051.11 

-1.1 207328 207823 209638 1766.70 

336 

435 

2428 

19j42 

998.06 

291720 

-03 2930i8S 294820 296875 234320 

OOP 

316 

2226 

3425 

1006.12 

153803 

-a7 184825 1554.74 1SB826 1996.10 

A13 

9.77 

1229 

1322 

901.78 

.102131 

-2.0 1 65420 165020 169330 148720 

3.10 

6.46 

1923 

11.14 

88232 

1577,70 

-U7 158841 156526 160C02 150920 

235 

5.80 

1927 

928 

94724 

237898 

-13 228929 2264.48 2302-52 209620 

3.72 

424 

2323 

15.14 

87828 

119038 

-02 1194.71 119725 1182.19 122320 _ 

4.48 

220 

80201 

521 

1007.82 


K? 

i* 

1 1* 

eo.utoraspq 

62 BettlchyflT) - 
64 Dm Otitribubonff) 

88 TNeca7viajnfcaitor»(4) 

68 WteBriia 

2136.04 

205937 

173222 

168428 

168825 

-12 2173.19 218034 223822 2123.30 
-12 208934 211423 215237 1754.80 
-23 178735 180020 1800.46 190730 
-22 192821 1821.72 1979.53 199030 
♦0.4 7882X2 1679.17 1723.17 169820 

4.80 

4.15 

0X2 

436 

534 

8X8 

12X0 

* 

828 

15X0 

13X3 14.53 
10.17 1535 
X 5343 
14.75 009 
736 348 

602X7 

831.74 

791.77 

783X5 

812.47 

L si 

. 08 HQ9«-nNM4CtMjnS39) 

1607.75 

-12 182065 162820 166232 153521 

385 

6X7 

1304 19X5 

111BX4 

% 

■ »’ 

C" 

iTB'RWINCMRTan 

71 BNWflOJ 

73 {wMnce(i7) . 

. 74 Lite Anuranoette 

75 Marchant SantafS) 

77 Otor OmpciaKZO 

70 ProcanvO* 

208422 

264331 

110520 

216021 

2787.03 

17B&75 

1527.07 

-OLS 20B42B 207928 2115.60 1984.10 
-12 2677.182867.78 270982 245260 
-a9 1185X4 118121 121040 1266.60 
-0.1 2183.42 218083 225524 2556.00 
-0.1 279828 280439282734 257430 
-03 1800X4 1816.17 1823.05 1414.40 
-03 1540.19 1546.52 1568.03 139390 

4X7 

4.10 

&43 

5J0 

336 

377 

4.04 

839 

377 

12.17 

axs 

1148 

639 

4.09 

1355 4134 
1325 59X7 
318 2734 
14.70 86X8 
1310 23X8 
1733 to18 
3008 10X9 

807.48 

782X1 

soaes 

82732 

824^4 

94349 

857.74 


to SnrESneBNT TRUSTSft23J 

272421 

-US 2737.S1 273AM 278321 228000 

225 

1X8 

5330 2534 

909X3 


to FT-OC-A ALlrSHARQSSC? 

148423 

-1.1 1501 J2 1500.86 1524.64 T41335 

3X6 

358 

10X1 18.48 

1150X1 


■ Hourly movements 

' Opsw 9M' IMP 1L00 1200 1*00 14J0 t&OQ WW WfltVday lowrftfcy 

FT-SE WO 29842 29512 29SBS 29458 2952.7 2945.4 29352 2843.7 2832.4 29B&9 2331 ^ 

FT-SE MU SO 3SB7J 35646 3559.0 35542 3554 .5 3551.8 3S4&2 S54&2 3538.9 3568.0 3S37S 

FT-SE-A 350 1SUL3 1511.1 IStt.6 . 14965 1498S . 149S.7 1491.1 1494.4 14894 15 i3l0 1488S 

Urn* of FT-SE 100 Hpi BJSam L— r 4Jflpai 


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snamawat—rt 


Sw&VWWrtr 


J ardmi Charm, t 


■ IT-SK Aetuarifts 350 Indtatry baskets 



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8X0 

tftto 

1100 

12X0 

1300 

14X0 

1300 

1310 

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11538 

1150.1 

1145.7 

11434 

1143X 

11383 

1135.1 

1136.4 

11339 

11337 

11534 

-137 

nHinmiiui 

2656.4 

2857.8 

28413 

2820.7 

28230 

26229 

28KL2 

28235 

28137 

28136 

28430 

■28.4 

WbMr 

1887.1 

16830 

16738 

18806 

1681.7 

1683.1 

1B82X 

18B2X 

16838 


1B79X 

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2717.7 

2711.9 

26937 

28633 

26632 

2665.1 

26734 

2661.0 

28773 

26759 

27100 

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e 

— 

— 

8% 

— 

— 

IMbwt 

960 04% 8Gb 96b 

8% 18% 25% 

[-93S ) 

1000 

32 

55 

70 28% 3354 46% 

ZBaeca 

650 < 

04 

59 s% : 

ro» 

75 

31 

r675 | 

700 

15 

30 

41 35% 51% 67% 

Opto 


Keg 1 

to 1 

to . 

to 1 

to . 

to 

Etand Mat 

420 28% 32% 89% 10% 

a 

32 

r<22) 

460 

6 

16 

73 47% 

52 57% 

LarBrote 

160 

16 17b 19% 

8 13% 15% 

H63) 

180 

9% 

9 

TZ2ZJ4 

27 28% 

uaBteariB 

300 

29 

38 41% 

5% 

13 

16 

(-31B 1 

330 

12 22% 

a 20% 

a 

32 

Opto 


to 1 

tep DK 

JM) 1 

to Dee 

Raons 

130 50% 1X% 22% 

zb 

8% 

13 

H37J 

140 

4 

1210b 

Bb 

14 

18 

Opto 

l 

teg 1 

tea 1 

to Aug 1 

te» Fed 


P2SJJ 
Lasmfi 
H44J 
Lucas Ms 
nrai 
P s 0 
r623 ) 
POW&n 
nsi > 


rzra) 

BIZ 
r«33 ) 


240 1744 21H 
260 754 12 
134 1054 23 
154 8V4 12 
ISO 2114 3954 
180 8 1644 

GOO 48 58)4 
650 19 34 
180 1244 2054 
200 5 12 

280 25 30 
280 1244 19 


2454 554 
15141544 

- 7 

- 19b 
2*54 3*4 
18H12I4 
664416)4 
<354 4354 

23 1054 
14)4 24 
35 654 
25 1444 


P«0) 
ftof* Iran 
(-2*2) 
Taco 
("208 ) 


5*523) 


r352 » 
Option 


BOO 50 7714 6344 1554 
650 2954 6554 5754 38 
460 4544 5754 S3 8 
500 22)4 35 4254 2554 
240 16 31)4 30141114 
280 7)4 1854 2144 24 
200 1744 2314 29 7 

220 8 13 1554 1754 

500 41 5744 6544 16 
550 IS 33 42 44 
830 12 m 4*54 2054 
360 4 12 27444454 


10 1314 
2054 24 
914 - 

19)4 - 
6)4 1144 
19 22h 
34)4 4) 
6444 60)4 
15 18 
2754X54 
11)4 13 
22 23 
3344 42 
SO 8654 
19)4 2454 
3944 45 

19 21)4 
31 33 

1144 12)4 
22)4 24 
28 33)4 
53K 61 

20 14)4 
50b 29b 


teWlFimris 


60 

■2 

73 

241 

72 

170 

25 

152 

138 

83 

12 

12 

83 

371 

101 

301 

9 

189 

2S6 

33 











Iteta... 


Rnnnrtata 




Other* 

14 

Totals 

253 

1,017 

1407 


Danbmd on Am compart— — ad on ha London 8hm Sendee. 


TRADITIONAL OPTIONS 


FMteahgs 
Last tealngs 


May 23 
June 10 


Last Ded ar a U ons 
For settlement 


Sept. 1 
Sept 12 


CB8S: Mads, BP, Channel HkJgs^ Mcrafocus, R1Z, Tuftow Ol Put: Dank* Bum. 
Syatame RXs A Cafe: Channel Mdga^ Hanaon Wta, Marcara. 


LONDON RECENT ISSUES: EQUITIES 

tsaua Amt Mkt rsw 

pHeo paid cap 1894 price 

P >4) (EmJ HW* Low Stack p 


+/- 


Met Hv. 
div. cm. 


Jri Od Jn Jil Od Jan 


Ore P/E 
yM net 


M«— »» 52b 0344 81% 1454 30b 3754 

r<5«) 460 39 GOb 63 32)4 51 58 

BAT Ms 380 29 3554 45 5314 23 36 

r«B ) 420 14 22 3014 32 <1 43ft 

m 360 20)4 2914 36 12 19M 23 
(-366 ) 390 71042244 29 37 40 

Bril Tricorn 330 375* 3314 3854 7 12b 18 

("353 ) 360 11 17 21 3H 2654 3454 

CttuySca 420 45 5354 60 S 51)1 14 
f454 ) 460 18 2054 57 1954 29 31 

EsaraSR 550 49)4 58 70 17)4 27)4 SK 
rSBB) GOO 20 24)4 48 44 55 62b 

Gubnen 450 2744 36 46 11 20b 23 

r<71 ) 500 8)4 20b 26 33b 43 4644 

GBC 280 16 2144 2444 10)4 14H 17K 
fZS9 ) 300 554 12 15)4 23b 2654 29b 


BAA 900 31 53 6354 28 39 47b 

P9C7 ) B50 1144 91 41H 62 70 70 

Mu asHfr 460 2054 29 3154 18K 27 34 

C472 ) 500 5 14 17 50 S3H »«4 

Option Jac Syi Dac Jun Sep Dae 

Abbey Nad 380 12» 27)4 3654 6M 19b 204 

r395) 420 S 14 22 28 37M 41)4 

ABsnd 30 3 5 8 114 354 4b 

r31 ) 35134567 b 

Bn—s 500 12 29 42 614 27 34 

("500) 55D 144 1144 21b 52 61M EB 

Blue Qrete 280 11 23 31 5)6 25 

(*285 J 300 315)4 22 17 28 32 

BrfBrii GM 240 22b 2944 32 1 5 10 

f2SB ) 260 6 16% 18 8 13% 20 

180 11% TBb 23H 2% 13 15b 

200 2 0% 15% 15 25 27 

160 6 1516% 4 9% 11 

160 1 0% 944 20 22% 24 

130 8% 18b 20% 3 11 13b 

140 3b 11% 15% 8 16% 19 

390 25 34 41% 4b 16% 22 

420 4 19% 27 23 33% 3754 

330 15 27% 32% S 20 24% 

360 3 13 IB 23 37% 40 

110 %» 14541554 lb 5 6 

120 3 8 11 4*4 9 11 

220 8b a zs 4b 12b 16b 

240 2 11% 14 19 24% 2844 


H88) 

Whdcwi 
("181 ) 
Unto 
C135) 


("<11 ) 

Scot Power 

("330 ) 

Seen 

niB) 

Forte 

f223) 

Taraac 

P141 ) 

Thom EM 

POO) 

Tffi 

(-205) 

Torfens 

(■2W) 


100 

FJ>. 

43 X 

106 

100 Automotive Precs 

106 


LN4X 

OX 

- 

FP. 

2360 

76 

73 CAMAS 

78 


UN3.75 

Ql7 

- 

F.P. 

10.7 

112 

108 CLS 

108 


_ 


- 

FJ>. 

12X 

148 

125 CaplW 

140 

-3 

LN3X 

13 

b250 

FJ>. 

172.4 

249 

231 DCC 

231 


LQ34K 

33 

110 

F P. 

406 

120 

110 DBS Date ft Res 

114 

-1 

U42X 

1.1 

- 

FJ>. 

77.3 

S3 

80 Ramteg tertian 

92 




- 

FP. 

7X0 

50 

42 Do Warrants 

47 

-2 

_ 

_ 

180 

FP. 

583 

171 

190 GFTT Bus 

163 

-1 

RM33 

33 

120 

FP. 

404 

128 

121 Go-Ahead » 

121 

-1 

MN4X 

13 

- 

FP. 

- 

Sft 

36 Gored GC4 3 WT 

36 


_ 


IBS 

FP. 

423 

196 

180 Hamteys 

185 

-1 

W4.7 

22 

IM 

FP. 

53X 

106 

GA llrenlllii ni 

wo noonncoi 

96 


WN4.0 

12 

225 

FP. 

105X 

227 

221 MarmadMa 

227 


LN93 

2.1 

- 

FP. 

- 

96 

92 MBtoted* 

93 


- 


— 

FP. 

- 

50 

30 Da Warajns 

46 


_ 

_ 

5 

FP. 

4X0 

S*l 

ft Kays Food 

ft 

ft 

_ 

_ 

130 

FP. 

66.1 

138 

118 KeBer 

118 

-2 WNQ4.7 

23 

160 

FP. 

57.7 

tea 

159 Loitered tea. 

162 

-1 

WN7.7 

22 

- 

FP. 

33.0 

15 

1ft My Kkida Town 

1ft 


- 


IM 

F.P. 

462 

113 

106 rflghHreloW 

107 


R3X8 

2X 

120 

FJ*. 

344 

129 125*2 Norcor 

128 


W4.56 

25 

- 

FJ>. 

2713 

131 

118 Ratoar 

123 

-1 

WN2.7 

ZB 

- 

FJ>. 

292 

133 

128 SpedsOy Shops 

132 


L24 


- 

FJ>. 

563 

100 

90 TR Euo Garth C 

90 

-1 

- 

_ 

100 

FJ». 

584 

100 

92*2 TR Prop Pw C 

92*2 


_ 


100 

FJ>. 

433 

aft 

91 Templeton Let Am 

95 

ft 

- 

_ 

- 

FJ». 

337 

50 

41 DoWHs 

43 


- 

_ 

ISO 

FP. 

403 

ICO 

154 Vymura 

159 


L444 

22 


4.7 3&0 
6 2 sao 

as 23J 
2 a 12.0 
a.i 275 


2J 12S 
4.1 IM 

3 2 17.8 
52 13e 
5J5 8j0 


4J] 13.7 
6S 9.4 

3S 14.1 

as ias 

2.7 15J3 
23 


3L5 1&4 


RIGHTS OFFERS 


rssi) 

Optks 


135 0% 
155 2 

1000 38b 
1050 11% 
200 954 
220 Zb 
200 17 
220 3 
550 18 
GOO 2 


68% 90% 
45 65 
17% 23 
8% 14 
2Zb2Sb 
11% K 
44% 57 
22 37 
Oct j a* 


2 - - 
15% - 
B%S04k G5 
32b 79% 93% 
3% 11% 14% 
17 24 27 
IK 6 11% 
9% 19 22 
14 38 46 
53 G9 78 
Jd Od Jan 


8bd 500 50 82 89 11% 30 37% 

rS32 ) 550 21b 35 43 34% 50 68 

FOCfttia 700 40 73 8954 31% 52% 64 

fT12 ) 750 26b 40% 67 60 80% BI 

tears 452 2454 X - 16% 30 - 

(-465 ) 475 17% 29% - 25% 35 - 

Opto Abb to Ftt tag Fbd 

Ub-Royca 160 22% 27% 3054 4 8% 11 

P76) 180 9% 18 19% 12% 18 21 

* Wcriym g Mcvtv price, ft w i bmm shown m 
seine onar prica 


issue 

price 

P 

Amount 

paid 

Latest 

Renun. 

dare 

1094 

Hgh Low Shack 

CtoateB 

pnee 

P 

4or- 

105 

N8 

877 

20pm 

18pm Btogden teds 

20pm 


237 

M 

10* 

28pm 

9pm Clyde Blowers 


-a 

270 

NR 

877 

B4pm 

40pm Compass 

40pm 

-1 

120 

Ni 

on 

26pm 

17pm Dawson fete 


-2 

lift 

Ni 

28 m 

opm 

iWprn Ea^et 



IM 

M 

11/7 

apm 

20pm Heatiam 

20pm 


230 

M 

- 

34pm 

31pm Javb Porter 



80 

M 

4/7 

lipm 

8pm Pttcan 

Bpm 

-2 

24 

Ni 

- 

12pm 

10pm Ur« 

12pm 


125 

«• 

An 

23pm 

20pm VTR 

20pm 



FINANCIAL TIMES EQUITY MINCES 

June 1 May 31 May 27 May 26 May 25 Yr ago 


"High Ipw 


Jim 1. Tow eaaaadK 38492 CMK HL611 
Puw 2SkfiZ* 


FT GOLD MINES INDEX 


Ontonry 8here 23212 2354.4 2347.1 23824 239L8 

Old. Mv. yteid 4J2 4J7 429 452 4^0 

Eam-ykt %w 6.7B 5.B4 5^7 557 5.78 

P/E ratio net 1859 19.02 18^5 19.26 18,61 

P/E ratio nO 1922 19^0 1951 1954 10.1B 


22302 27135 23212 
4.13 4J32 3.43 

S56 6.78 352 

24.00 S&43 1859 

2258 3050 19.16 



3t 

% ehg 
m to 

May day frit 

30 27 age 

Grass Or 
ytate % 

52 ret 

tor 

ton KtaK tore fXft 

195M6 

+08 

153844 112838 183628 

2X2 

23B7X0 152238 

■ RigteBd kxfica 






Atrial (16) 

251932 

+61 

251838 257331 252133 

434 

344080190233 

tabahtoR 

2826.89 

+03 

251732 283613 222611 

138 

301339 1693.18 

Ncrtt Atoatra (11) 

166642 

*13 

184137 1842, TS 1584.07 

007 

203935 1383X0 


•for 19B4. Qnfrmy Stare Mm anca carepOntoir hgn 2713J1 2/02/94; tew 494 26/W40 
FT Onftiwy stare mom m» <Ar* W/3S. 


OnSwy Share hourly c ha n ge* 

Open 950 1000 1150 1250 1850 1450 1550 1050 


Wflli Low 


2385.7 2362.6 23415 2334.1 23308 23315 232&4 2327.4 2323.0 23875 2318. 
June) May 31 May 27 May 26 May 25 Yr as 


Coppi^L DM Fonchf Una Unbad 1894. 

ngiM in braOTB Mv Bnrtoor a ( compe res . Bate US Ddtere. Bale VUlmk 1000 JO 31/1992 
Pre o ac a sri n Gate Urea Indue Juna 1: 7i7« ; Orf* chwga: «*J potea. Vear age 1SL5 t PanM 
UBHI pncaa irere r immliihte ter » riun Sari AM em m etat ctered 31/W. 


SEAO ba r yd ns 22553 25521 

Equity turnover (Entft - 10555 

Equby begmt - 29584 

aiaras traded (mOT 4065 

T EnUng Inaa^narM Buanon and mmeas on 


26548 

10805 

28,088 

465.1 


28.657 

13108 

28560 

477.8 


28,185 295 

1491.7 118! 


5425 







FINANCIAL TIMES THURSDAY JUNE 2 1994 



LONDON SHARE SERVICE 


- 

% 


200 

-3 

1 M 


128 *; 

-% 

»% 


95 


48 

-3 

■«M 


181 

- 1 % 

41 


43 



177 



88 


45 

-J 

282 

<•1 

KB 

-1 

*384 


X 

"l 

•673 


21 S 

^2 

41*2 

355 


78 


*83 



236 

-0 

187 % 



146 % 



12 % 

-1 

64 

*5 

82 

+% 

*42 


IB 

“■6 

120 

98 


m 



RE 

51 

44 

iaS 

44 

139 

69 

99 

85 

93 

09 

* 

12 

7.1 

4.5 

* 

49 

? 

18 

143 

IOI 

_ 

102 

- 

39 

207 

04 

EDO 

11 


4.1 

49 

16 

_ 

95 

_ 

69 

— 

04 

49 

,2? 

61 

129 

5L2 

112 

0J 

* 

05 

17.4 

08 

285 

49 

117 

55 

17 

62 

17 

ibS 

05 

560 

04 

13 

io$ 

10.3 

- 

0.4 

30.1 

05 

* 

47 

14.1 

09 

582 

OG 

719 

£4 

08 

54$ 

VM 


0's 

PTE 

5.7 

134 

17 

15.0 

13 

162 

29 

239 

11 

665 

22 

179 

25 

20.7 

38 

150 

39 

111 

49 

203 

- 

464 

19 

164 

OB 

309 

25 

142 

25 

159 

25 

T68 

19 

118 

2.1 

217 

42 

155 

45 

179 

15 

249 

4.7 

149 

10 

160 

18 

* 

42 

4 

VM 


&“3 

PTE 

15 

Z7.1 

35 

409 

36 

910 

99 

- 

44 

- 

15 

269 

39 

160 

25 

214 

45 

- 

— 

— 

65 

65 

10 

22.7 

49 

139 

39 

220 

19 

227 

1.7 

109 

25 

108 

_ 

_ 

45 

108 

4.1 

224 

29 

: 

29 

529 

m 

_ 

35 

22-8 

19 

- . 

85 


11 

14.5 I 

107 

314 

59 

_ 1 

14 

— j 

10 

III 

2.7 

_ I 

1.7 

189 

03 


15 

116 i 

24 

220 , 

29 


27 

— , 

29 

219 , 

_ 

♦ i 

3.7 

219 . 

39 

207 

65 

— 

45 

259 

27 

214 

11 

34.1 

19 

- , 

— 

4.6 ' 

25 


45 

224 ' 

21 

24.1 i 

27 

* 1 

30 

179 1 

A 

1.0 

$ 

19 

252 

42 

Z79 

0.1 

— 

65 

145 1 

12 

221 1 

40 

209 1 

1.3 

34.9 l 

65 

+ < 

15 

- 1 

23 

- 1 

4.1 

119 1 

12 

349 1 

17 

15.2 


231 8744 
7 ns zra 
10M 7204 

"Bft 5 

244 59L> 
18 248 
153 02 

75 M5 
28 027 

470 um 

fttftS 

140 12.7 

174 3S12 
IDM 0*8 
153% MS 
728 V*l 
178 1782 
148*2 2324 
722 1(423 
48 2U 



TO 
175 
248 
*310 261 

*238 175 

in iso 

244 210 

218 158 

128 87 

ft ft 
g “ft 
■S 4 

“ft 75 


D W 

Pita 

IDU 

+ 0f 

a 

■i 

88 

— 

mi 

*ia% 

387* 

-6 

Wj 

-6% 

w 

-4 

111 

-5 

114 

-4 

82 

-3 

153% 

+3 

82 


6M 


48% 



31 


104 

- 

24B«1 


148% 

+% 

m 

-1 

SO 


8114% 

-% 

172*1 

-a 

3^ 

~-fl 

521 

-17% 

2BU 

-2 

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i-WU 

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7744« 

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S54 

+1 

222% 

-2 

a 


m 

-12 

158a 

-a 

54 


m 

-2 

212 

-1 

Med 


X 


3BB% 

-3% 

214 

-7 

I53%M 

-4 

n 

-2 

113 

-% 

348 


289 


381% 

<6% 

re 


10% 


SB2T 

-4 

tssr 

"1% 

na%H- 

-»J 



Pita! 


384% 

-1% 



586 

-13 

552 

-12 

884 

-6 

584 

-11 

<11 

-10 

flES 

+1 

222 

-IB 

B13 

-6 

480 


320 

-8 

339 

-10 

318 


802 

-9 

901 


GBE 

-14% 

EH 

-7 

1C A ELI 


+ 0T 

Pta 

— 

•’51% 

-H 



no 

-i 

31% 

♦% 

88 


X 


BM 


277 


308*1 

-20 

I2S 

-1 


-4 

16% 



438 


340*1 

-a 

17% 

-% 

18 

— 

a 


487 

-2 

MO 


in 


4K 


■B 


3JM 

-4 

524D 

-1 

379 


82 

- 


+1 

74 


1445 

-if 

388 

♦w 

740*1 

-4 


-1% 

-1 


33 170 

288 1BL1 
21 8.78 

78 208 
46 ai 
45 618 

400 m 

47lz 478 
13*i 319 
103 14.1 

77 J 

104 


VM 


GTS 

PIE 

07 

m 

05 

— 

45 

149 

29 

- 

59 

1X2 

19 

— 

15 

- 

59 

134 

19 

339 

Z2 

4 

14 

* 

49 

40.1 

OB 

102 

10 


11 

— 

2.1 

129 

19 

204 

2.1 

201 

19 

779 

79 

89 

05 

— 

09 

4 

17 

319 

59 

319 

5.1 

142 

19 

4 

55 


19 

279 

1J 

200 

4.1 

— 

29 

217 



119 

- 

19 

214 

29 

155 

5.7 

119 

12 

149 


24.1 

09 

* 

59 

114 

39 

209 

19 

— 

15 

4 

o.a 

J 

18 

111 

10 

49 




SEE 






119 

39 

- 

2804 

55 

200 

398 

XJ 

25 

as 

104 

4.16 

11 

52 

!U 

17 

IU 

719 

109 

59 

229 

— 

— 

821 

_ 

m 

9908 

23 

206 

725 

— 

— 

327 

— 

— 

354 

- 

- 

UU 

29 

115 

5790 

40 

1*8 

270 

129 

— 

2518 

— 

— 

1118 

17 

B4 

379 

— 

05 

BOB 

- 

82 

217 

— 

- 

140 

- 

-» 

1J5S 

42 

111 

201 

— 

— 

SU 

148 

4 

105 

- 


1039 


— 

CL2 

52 

4 

909 

— 


3394 

06 

4 

8*7 

- 


1990 

65 

Z1J 

798 



205 

— 

— 

Z75 

— 

105 

1913 

05 

4 

148 

59 


in 

— 

— 

3339 

22 

9An 

7.14 

— 


5117 

59 

102 

1980 

47 

158 

14Z3 

17 

249 

HI 

ill 

19 


29 

* 

37 


25 

118 

3* 

714 

25 

114 

5.1 

ni 


109 

43 

199 

39 

113 

12 

322 

11 

133 

12 

129 

12 

111 

37 

145 

65 

— 

18 

433 

32 

31 1 

11 

110 

11 

344 

11 

186 

19 

173 

13 

S3 

17 

IBS 

41 

4 

- 

436 


19 

259 

12 

200 

11 

198 

19 

105 

39 

153 

— 

201 

45 

- 

10 

18.4 

13 

110 

13 

117 

13 

211 

78 


05 

27$ 

1.1 

_ 

15 

4 

27 

312 

32 

199 

11 

118 

29 

179 

15 

229 

11 

209 

62 

418 


- 

- 

22 

213 

55 

198 

15 

114 

17 

78 

112 

14 

15 

87.1 

12 

* 

19 

421 

28 

1 1 %! 1 

- 

- 


4 


m 


901 247 

H 37 

•*% 83% 

in ® 
113 % HM 

213 an 
no 1 38 
m 68 
TO 138 
m 230 
n t: 
112 78 

188*» 158 

Oft £535 
130 109 

» 98*7 

80 33*j 

87% 94 

128 107 

118 105 

200 16* 
173% 187*; 
108 81 
37 23 

212 189 

121 101 

37*3 48 

m is 
m ioi 

78 38 

*98% 88 

m 87 

n 14 

429 350 

348 280 

478 423 

IB 104 
IS 19 
147 135*3 
II 46 
114 86% 

78 47 

118 90 

182 128 
38*; 34% 

138 121 

42 27 

Z9Z 265 
MB 92 
X 44 
158 128 

>8 48*3 

88% 36% 


VM Dlter 
Crs MV W-i 

- 1040 15 

BA 4118 1*.7 

14 387.7 53 

U 2525 22.0 

54 - - 

U 955 « 

72 78.1 -47 
48 1157 -08 

10.7 457 37 

02 2720 09 

U33S2 144 
19 3448 150 

LB 137.9 13 

03 1102 02 

U - ■ 

12 77.5 IOI 
OB mi -OB 
09 1407 IIS 

03 049 45 

- 907 -74 

08.394.8 73 

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32 


CURRENCIES AWP MONEY 


FINANCIAL TIMES THURSDAY JUNE 2 1994 

MONEY MARKET FUNDS 


MARKETS REPORT 


POUND SPOT FORWARD AGAINST THE POUND 


Focus on Futures 


Foreign exchanges yesterday 
again played second fiddle to 
interest rate markets where 
prices fell across the yield 
curve, writes Philip Gawith. 

Trade in euromark and short 
sterling futures was robust and 
prices very volatile. The 
December sterling contract 
closed at 93.49 from 93-59. while 
the equivalent euromark 
future fell by six basis points 
to 94.81. Movements in the 
back month contracts were 
even more dramatic. 

Bond market weakness 
spilled over into some of the 
Scandinavian currencies, with 
both the D anis h and Swedish 
crowns weakening, apparently 
on the back of bond sales by 
foreigners. 

Elsewhere, the dollar contin- 
ued its recent pattern of range- 
bound trading, paying little 
attention to economic data 
released. It closed in London at 
DM1.6428 against the dollar 
from DM1.6435- Against the 
yen it closed at Y104.650 Grom 
Y104.655. 

Strong first quarter GDP fig- 
ures boosted the Australian 
dollar, which rose to a 21 
month high against the US dol- 
lar, finishing at $0.7407 from 
$0.7383. 

Sterling finished the day 
firmer, closing at DM2.4922 
against the D-Mark from 
DM2.4846. Against the dollar it 
finis hed at $1.5171 from $1.5118. 

The Belgian central bank cut 
its key central rate to 52 per 
cent from 5.25 per cent 

■ The mood in the interest 
rate futures markets was again 
very gloomy. One analyst said 
the market seemed “deter- 
mined to creep towards some 
sort of finan cial Armageddon.” 

The pattern was again set at 
the long end of the market, 
with bunds feeding into gilts, 
which then spilled over into 
short sterling. Some of the 
back mouth (.longer) contracts 
have now lost a frill percentage 
point in the past week. 

The market actually started 
tinner, but then started to lose 
ground once the German repo 
announcement - the rate was 
cut by five basis points to 5.15 
per cent • came through. 
Expectations of a cut as large 
as ten basis points bad built up 
in advance of the announce- 
ment, so there was some disap- 


Sterflog 

Against the dollar ($ per £) 



■ Pound In Now York 


Jun 1 
E spot 
1 niffl 
3 mm 


1.5185 

12178 

1.5182 

12115 


-Pm. dose — 
1.5105 
1.5096 
1.5062 
V-SOW 


pointment in the market 

Analysts said there appeared 
to be tremendous value at cur- 
rent levels, but there was no 
buying interest It was difficult 
to persuade clients to buy 
when prices seemed, inexora- 
bly, cheaper the following day. 

Volumes were fairly large, 
with December short sterling 
trading 40,000 lots, and Decem- 
ber euromark nearly 51,000 
lots. 

■ The dollar was unaffected 
by the release of the May pur- 
chasing managers index which 
was steady at 57.7, although 
the price component rose to 
7L5 from 632 in ApriL 

Analysts said the dollar 
would stay in its recent narrow 
trading range of DM1.6390 - 
DM1.6480 until the release 
tomorrow of the non-farm pay- 
roll figures. Mr Ian Gunner, 
international economist at 
Chase Manhattan in London, 
said “expectations about the 
US economy are so solidly in 
place that it is difficult for a 
set of figures to make much 
impact" 

The dollar managed to resist 
some potentially negative com- 
ments from two Bundesbank 
council members. Although Mr 
Guntram Palm said there was 
still room for movement on the 
repo rate, he also added that 
“At the current time It would 
appear that a stopping point, if 
not a turning point, is in sight 
for interest rate policy." 

Mr Olaf Sievert, meanwhile, 


head of the regional central 
bank for Saxony and Thurin- 
gia, effectively discounted the 
prospect of imminent Bundes- 
bank Intervention to support 
the dollar. 

“The Bundesbank is not at 
the ready, waiting to intervene 
in the market at a dollar rate 
of DM1. 64... All rates in the 
region of DM1.70 or DM1.65 are 
not a problem for us...,” he 
said. 

■ In Europe the Danish krone 
closed at DEWJJ29 against the 
D-Mark, down from DM3.9160 
on May 30. The Swedish krona 
also fell, closing at SKr4.78 
from SKr4.68 on May 30. 

Mr Avinash Persaud. head of 
currency research at JP Mor- 
gan (Europe) said the weaken- 
ing of these currencies was 
driven by foreign Investors 
selling bonds. One possible 
explanation for the trend is 
that markets are suffering 
from greater competition for 
banks' funds, with more 
money diverted, for example, 
into corporate lending. 

The JP Morgan analyst said 
the reason the Scandinavian 
currencies had been particu- 
larly affected was that both 
were fairly exposed to interna- 
tional investors, and less liquid 
than some other markets. 

Mr Persaud said interna- 
tional investors were also con- 
cerned that governments faced 
with elections would not be 
able to administer the sort of 
fiscal medicine their economies 
required. He predicted that 
other countries like Spain and 
France, faced with a similar 
confluence of events, might 
also experience currency weak- 
ness in future. 

■ The Bank of England pro- 
vided late assistance of £35m to 
UK money markets after fore- 
casting a £350m shortage. 
Overnight money moved 
between 4 per cent and 6 per 
cent 

German call money fell back 
to 5.15/525 per cent from 5.75 / 
5.95 per cent on Tuesday. 

■ ormn cum n c ms 

Jin I £ S 

Humm 155775 - 155iM 102700 - 102000 
too 2838X0 - 2M5JM 174840 - USED 
KumB 0.4508 ■ 0-4519 02973 - 02978 

Poland 340521 - 34111.1 224500 - 224600 
Hunk 290048 - 2009.79 191200 - 191840 
UAE 54092 - 52805 34715 - 34735 


Jun 1 

Ctootag 

nod-point 

Change 
an day 

BMfafler 

spread 

Day's Mid 
high low 

Europe 







Austria 

(Sch) 

173339 

*0.0543 

266 - 411 

17.5487 17.4574 

Belgium 

(BFrJ 

51.3182 

-KL2323 

860 - 503 

51.4250 51.1720 

Denmark 

flDKrl 

9.7920 

+0.0434 

885 - 854 

08006 

0.7544 

Finland 

ff=M) 

82794 

+0.0555 

702 - 885 

8.2tt?0 

8-2120 

France 

(FFrJ 

56206 

+0.0235 

188 - 248 

65318 

8.4924 

Germany 

(DM) 

2.4922 

40.0076 

913 - 931 

25014 

£4645 

Gmeoa 

Pri 

370.552 

-+4.408 

796 - 308 

371.308 367.412 

Ireland 

0Q 

1.0251 

+0.0031 

242 - 260 

1.0260 

1.0219 

Italy 

(U 

2415J99 

4-iao4 

475 - 722 

241653 2401.61 

Luxembourg 

ILFr) 

51.3182 

+02323 

860 - 503 

51.4250 51.1720 

Netheriards 


2.7941 

+0.0074 

827 - 954 

2.7992 

2. 7857 

Norway 

(NKr) 

15B133 

+4X0321 

096 - 169 

105316 10.7709 

Portugal 

(Es) 

258883 

+1063 

614 - 172 

259.226 2SSL275 

Spain 

(Ptaj 

205613 

♦O.B57 

486 - 729 

205839 205065 

Sweden 

(SKr) 

11.9326 

+0.151 

246 • 406 

11.9462 11.7778 

Switzerland 

(SFr) 

2.1218 

+0.0015 

200 - 228 

2.1256 

2.1171 

UK 

W 

> 

. 

- 

- 

- 

Ecu 


1^946 

+0,0036 

940 - 950 

1J2964 

14898 

SORT 

- 

0.338505 

- 

- 

- 

- 

Americas 







Argentina 

IPreoj 

1J142 

+0.0052 

138 - 14S 

15187 

15066 

Brasil 

tCD 

2894.79 

+59.81 

420 - 538 

2900.00 2831.00 

Canada 

(CS) 

21035 

+0.0075 

027 - 043 

2.1071 

24884 

Mexico (New Paso) 

50368 

+0X132 

282 - 454 

5.0454 

5.0191 

USA 

IS) 

1^171 

+0.0053 

168 - 174 

15188 

15095 

PacfflcJMMda East/ Africa 





Austraka 

(AS) 

20463 

+0.0005 

472 - 494 

2.0536 

2.0425 

Hong Kong 

(HKS) 

11.7204 

+0JM06 

173 - 234 

11.7397 11.6639 

ImSa 

fftej 

47.8009 

+0.1773 

858 - 180 

47.6770 47.3S70 

Japan 

(V) 

158765 

+0552 

657 - 872 

159.270 158450 

Malaysia 

(MS) 

33122 

+0.0131 

106 - 137 

35170 

2.8930 

New Zealand 

(NZS) 

25534 

♦00107 

514 - 554 

25554 

25443 

ffiSpptaoa 

(PB5«a 

40.B101 

+0.1439 

986 - 215 

41.1215 404986 

SaucS Arabia 

(SR) 

5.6899 

+00205 

880 - 918 

55989 

5.6612 

Saigapara 

(SSI 

2J242 

+0.0064 

230 - 254 

24274 

2.3168 

S Africa (Com.] 

1 (R) 

5.5158 

+00273 

136 - 180 

55241 

5.4607 

S Africa |Fta.) 

(R) 

7-2669 

+0X186 

503 - 835 

7.2835 

7.1976 

South Korea 

(wwo 

1223.01 

+409 

269 - 333 

1225.03 121566 

Taiwan 

(T5) 

41.0736 

+0.1732 

613 - 859 

41.1400 400500 

Thailand 

(BJJ 

382689 

+01728 

537 - 840 

38.3220 38.0540 


One month Three months One year Bank or 
Rate HPA Hate %pa Rate %PA Eng, mow 


17.5301 

03 

175245 

04 

. 

- 

1144 

514332 

-04 

514432 

-04 

51.1839 

03 

115.4 

9.7998 

-1.0 

94125 

-08 

9 8136 

-04 

115.4 

. 


. 

, 

. 

_ 

804 

fl 57ft? 

-06 

8.5293 

-0.4 

8.4973 

04 

108.5 

2.4326 

-02 

2.4926 

-0.1 

£4734 

0.8 

124.1 

14256 

-06 

10288 

-0.7 

14286 

-03 

104.1 

242159 

-25 

2431.04 

-25 

246249 

-1.9 

774 

514332 

-0.4 

514432 

-04 

51.1832 

04 

115.4 

2.7938 

0.1 

£7947 

-01 

£7722 

08 

119.3 

10.8076 

04 

108202 

-04 

108113 

DO 

855 

259568 

-45 

261.813 

-415 

- 

- 

— 

206.118 

-25 

206598 

-2.7 

209503 

-1.9 

85.1 

1145S6 

-24 

115906 

-1.9 

124886 

-1.3 

75.1 

2.1204 

06 

£1167 

1.0 

24877 

1.6 

118.0 

. 

. 

- 

- 

. 


803 

14961 

-15 

14918 

04 

1491 

04 

- 

2.1052 

-14 

£109 

-14 

£1275 

-1.1 

865 

15162 

0.7 

15149 

06 

15106 

04 

655 

2.0476 

0.4 

£046 

0.4 

£0451 

0.2 

_ 

11.7123 

04 

11.7084 

04 

11.7354 

-0.1 

- 

158445 

34 

157.556 

34 

15349 

£4 

1834 

25527 

04 

£5562 

-0.4 

£5628 

-04 

- 

- 

- 

; 

- 

- 

- 

- 


TSOR rate for May 31. BkWWIer spreads ta the Pound Spot note shoo only Bn I 
but m snpiad by current tnom rata. Stwtog index ctaofind 6jr me Bm of 
OM Dob! Spot c**» Oofmd from THE WWH&mcRS CLOSING SPOT RATES. 


DOLLAR SPOT FORWARD AGAINST THE DOLLAR 


■ a» not «ncrly ramod new mortal 
1985 a lOOJU. CKTor and HUoM m oath the and 
muidro by bm F.T. 


Jun 1 

Chasing 

mid-point 

Change 
an day 

fl 

Day’s mid 

Mgh low 

Om month Three months 
Rate MPA Rats %PA 

One year JP Morgan 
Rate %PA Index 

Europe 














Austria 

(Sch) 

115575 

-0405 

550 - 800 

114950 

114455 

11465 

-04 

11.5685 

-0.4 

11.4933 

0.6 

103-4 

Belgium 

(BFr) 

33.8265 

+0.034 

120 - 410 

34.0000 

33.7950 

mntwz 

-1.1 

334015 

-04 

334685 

-0.1 

104.8 

Denmaik 

(DKr) 

6.4544 

+04058 

534 - 554 

8.4700 

6.4496 

6.4634 

-1.7 

6.4774 

-1.4 

6.4944 

-06 

1044 

Finland 

(FM) 

5.4574 

+04174 

524 - 623 

5.4631 

5.4330 

5.4614 

-04 

5.4899 

-04 

5.4859 

-0.6 

75.B 

France 

(FFr) 

56185 

-0003 

150 - 180 

5.8330 

54122 

5.6227 

-13 

5.6315 

-1.1 

5.6048 

02 

1044 

Germany 

<D) 

1.8428 

-04007 

425 - 430 

1.6489 

1.6408 

1.044 

-04 

1.6452 

-06 

14373 

04 

105.4 

Greece 

(DO 

244.250 

+£05 

800 - 700 

244.700 

243.600 

245.8 

-6.6 

246.45 

-34 

248.75 

-14 

704 

Ireland 

PO 

1.4799 

+04006 

789 - era 

1.4828 

1.4757 

1.4733 

14 

1.4754 

14 

1.4688 

aa 

- 

Italy 

W 

159250 

+1 

200 - 300 

159440 

1590.13 

153645 

-3.4 

1605 

-3.1 

1631 

-2.4 

703 

Luxontoourg 

(LFr) 

334265 

+0.034 

120 - 410 

344000 

33.7950 

33.8565 

-1.1 

334015 

-0.9 

33.8665 

-ai 

1044 

Netherlands 

P=9 

1.8417 

-04017 

412 - 422 

14492 

14405 

1.843 

-09 

1.8443 

-04 

1.B37 

03 

104.4 

Norway 

(NKr) 

7.1278 

-0404 

266 - 286 

7.1485 

7.1197 

7.1331 

-04 

7.1401 

-07 

7.1076 

03 

954 

Portugal 

(E^ 

170.650 

+0.1 

500 - 600 

171.050 

170400 

172.055 

-94 

17445 

-84 

179 

-4.9 

9£5 

Spain 

(Ptai 

135530 

-0445 

480 - 580 

135 800 

135490 

135445 

-3.7 

136.645 

-34 

138.855 

-24 

804' 

Swedan 

(SKr) 

74654 

+0.072 

BIS - 891 

74783 

7.7921 

74854 

-3.1 

7.9154 

-2.5 

00004 

-1.7 

81. 1 

a*ntxeriand 

(SFD 

1.3986 

-0.0033 

962-930 

1.4035 

13075 

14887 

-0.1 

1.3373 

04 

14815 

14 

104.0 

UK 

(0 

15171 

+04053 

168 - 174 

1.5188 

14095 

14162 

07 

14149 

06 

1.5108 

04 

68.6 

Ecu 

- 

1.1720 

+0.0009 

717 - 722 

1.1727 

1.1677 

1.1698 

£2 

1.1678 

1.4 

1.1771 

-04 

- 

SORT 

- 

Ml 733 

• 

- 

- 


- 

- 

. 

- 

- 

- 

- 

Americas 














Argentina 

peso) 

04981 

-04001 

sea - 96i 

04882 

09979 

• 

- 

. 

• 

- 

- 

- 

Brazil 

(CD 

1906.11 

+32.81 

810- 812 

1908.15 1908.10 

- 

- 

- 

a 

- 

- 

- 

Canada 

(CS) 

1.3868 

+0.0001 

863 - 668 

1.3881 

14827 

1.3888 

-1.7 

14923 

-14 

1.4098 

-1.7 

83.1 

Mexico (New Peso) 

34200 

_nnrw 

150 - 250 

3.3250 

3.3150 

3421 

-0.4 

33228 

-03 

34302 

-04 

- 

USA 

($1 

■ 

- 

- 

. 

- 

■ 

- 

- 

- 

- 

- 

1001 

PacUc/MMcSe Ered/AMcs 












Australia 

(AS) 

14502 

-0.0043 

497 - 508 

14569 

1.3492 

1.3555 

—4.7 

14544 

-14 

1-3527 

-04 

894 

Hong Kong 

(HKS) 

7.7255 

-04005 

250 - 280 

7.7260 

7.7250 

7.725 

0.1 

7.7275 

-0.1 

7.7417 

-04 

- 

India 

pa) 

314763 

+04033 

725 - 800 

314800 314725 

31.4563 

-3.1 

31.6013 

-£9 

- 

. 

- 

Japan 

m 

104.660 

-0405 

600- TOO 

104.830 104450 

104.455 

24 

104.005 

24 

101.425 

3.1 

145.0 

Malaysia 

(MS) 

25787 

-0.0005 

782 - 792 

£5828 

2.57B0 

24712 

34 

24677 

1.7 

24987 

-08 

- 

Now Zealand 

(NZS) 

15831 

+0.0012 

821 - 841 

1.8858 

1.6818 

1.6840 

-14 

14895 

-14 

1.7112 

-1.7 

- 

PhUpptaea 

(Peso) 

26.9000 

- 

000 - 000 

27.1000 26.7000 

- 

- 

. 

- 

- 

. 

- 

Saudi Arabia 

(SR) 

3.7505 

+04003 

500 - 510 

3.7510 

3.7500 

3.751 

-02 

3.7531 

-03 

3.7858 

-04 

- 

Singapore 

(SS) 

15320 

-04012 

315 - 325 

14340 

14315 

14313 

0.6 

1431 

03 

1433 

-01 

- 

S Africa (Com.] 

<H) 

3.S358 

+0.0053 

350-365 

3.6365 

3.6200 

3.8513 

-5.1 

34796 

-44 

3.7563 

-34 

- 

S Africa (FtaJ 

(H) 

4.7900 

+0.04 

800 - 000 

4400Q 

4.7600 

44237 

-84 

44825 

-7.7 

• 

- 

- 

South Korea 

(Won) 

806.150 

+045 

100 - 200 

806.500 806.100 

809.15 

-44 

812.65 

-34 

831.15 

-3.1 

- 

Taiwan 

(IS 

274738 

+0.0188 

710- 763 

27.0605 27.0570 

27.0938 

-09 

27.1338 

-04 

. 

. 

- 

Thokand 

(Bt) 

25-2250 

+0425 

200 - 300 

254300 254200 

242975 

-3.4 

25.425 

-34 

25405 

-£7 

- 


CROSS RATES AND DERIVATIVES 


EXCHANGE CROSS RATES 

Jun 1 Bfi- DKr BFr DM 


R 


NKr 


Ptn 


SKr 


SFr 


cs 


Ecu 


Belgium 


(BFr) 100 19.08 18.60 4.868 1.907 4708 5.444 21.00 5042 4008 23.25 4.135 1.949 4.100 2956 3022 2223 


Denmark 

(DKr) 

52.41 

10 

8.703 

£545 

1.047 

2487 

2453 

1144 

284.4- 

2104 

12.18 

£167 

1421 

£149 

1449 

182.1 

1423 

Bwland 

0808828 

0793223 

+0000496 

-141 

5.88 

France 

FFr) 

6043 

1M9 

10 

£425 

1403 

2835 

3479 

12.69 

3034 

2414 

1440 

£490 

1.174 

£489 

1.780 

1064 

1420 

Nethartand* 

£19872 

£16374 

+000128 

-140 

£43 

Germany 

(DM) 

2059 

£929 

3.419 

1 

0411 

9894 

1.121 

4438 

103.9 

8240 

4.787 

0452 

0401 

0844 

0609 

83.88 

Qggq 

Belgium 

404123 

39.7213 

+00144 

-142 

£13 

Ireland 

09 

5007 

9.553 

8413 

£431 

1 

2357 

£728 

1045 

252.6 

2006 

1144 

£070 

0978 

£053 

1.480 

1544 

1483 

Germany 

144964 

142942 

+000109 

-1.04 

443 

Italy 

(U 

£124 

0405 

0353 

0103 

0.042 

100 

0118 

0.447 

1072 

8410 

0494 

0088' 

0041 

0087 

0063 

0589 

0054 

Ranee 

6.53883 

846771 

+000223 

090 

£92 

Netherlands 

(FO 

18.37 

3405 

£050 

0892 

0387 

B84.7 

1 

3488 

92.66 

7349 

4470 

0759 

0458 

0.753 

0443 

5840 

0463 

Denmark 

743879 

748150 

+001745 

145 

1.86 

Norway 

(NKrJ 

47 47 

9.058 

7.883 

£305 

0448 

2235 

£585 

10 

2394 

1904 

11.04 

1.963 

0925 

1.948 

1-403 

1464 

1.198 

Sp*i 

154450 

159496 

-0002 

3.14 

068 

Portugal 

(Es) 

1942 

3.782 

3491 

0963 

0496 

9334 

1479 

4.175 

100 

79.41 

4408 

0420 

0488 

0413 

0468 

8140 

0400 

Portugal 

192454 

200468 

-0453 

£84 

OOO 

Spain 

(PH) 

24 96 

4.763 

4.144 

1.212 

0499 

1175 

1.389 

5458 

12SJ9 

too 

5403 

1432 

0488 

1.023 

0738 

77.19 

0430 







Sweden 

(SKr) 

43.02 

8408 

7.142 

£089 

0459 

2025 

2442 

9461 

217.0 

1724 

10 

1.779 

0438 

1.784 

1-272 

13£0 

1.085 

NON ERM MEMBERS 





Switzerland 

(SFr) 

24.18 

4415 

4416 

1.174 

0483 

1139 

1417 

5494 

122.0 

9089 

5.822 

1 

0471 

0492 

0.715 

74.79 

0810 

Greece 

284413 

285.744 

+0455 

8.03 

-3.87 

UK 

(t) 

51.32 

9.792 

8421 

£492 

1.025 

2418 

£794 

1081 

2584 

2054 

11.93 

£122 

1 

£104 

1417 

158.7 

1286 

rw» 

178£19 

186845 

+034 

442 

-047 

Canada 

ICS) 

24.38 

4.654 

4.050 

1.184 

0487 

1148 

1428 

5.138 

123-1 

97.72 

5.870 

1409 

0475 

1 

0781 

75^43 

0816 

UK 

0788749 

0775307 

-0.002882 

-1.45 

546 


US (S) 33.83 8.455 5.817 1.843 0.870 1593 1.842 7.128 170.7 1354 7.884 1499 0.859 1.387 1 

Japan (Y) 323.4 01.70 53.B9 15.70 0.459 15224 1741 68.12 1831 1298 75.17 1337 0.301 1326 9359 

Ecu 39 63 7.561 6.580 1.924 0.792 1866 2.158 8.347 1994 1584 9412 1.639 0.772 1.625 1.171 

Yon per 1.O0O: Damn Kroner. French Franc. Njwagtan Kroner. «nd Smrtah Manor p w lit Brtpan Franc, Escudo, LM aid Resent par 10a 


104.8 

1000. 

1223 


0454 

8.160 

1 


BMURK FUTURES 0MM) DM 125.000 per DM 


(I MM) Yon 124 per Yen 100 



Open 

Latest 

Change 

Wgh 

LOW 

EsL ud 

Open InL 


Open 

Latest 

Change 

Hgh 

Low 

EsL VOi 

Open bit 

Jun 

06071 

0.6062 

+0.0013 

0.6093 

0.6063 

33431 

119.021 

Jun 

04551 

04552 

+0.0003 

04575 

04549 

10.055 

81446 

Sep 

0.6095 

0.6076 

*04012 

0.6095 

0.0075 

1,101 

11452 

Sep 

04639 

0.9617 

- 

04640 

04816 

1.563 

8 AST 

Dec 

" 

0.6080 

- 

0.6080 

" 

87 

338 

Dec 

" 

0.9889 

-0.0050 

■ 

- 

9 

1.171 

■ SWISS FRANC FUTURES (1MM) SFr 125.000 per SFr 



■ amutfO FUTURES (IMM) £62.500 per C 




Jlffl 

07124 

0.714S 

+0.0022 

0.7155 

0.7124 

15437 

41.793 

Jun 

14112 

14168 

+0.0080 

14188 

14100 

7.714 

41442 

Sep 

0.7152 

0.7152 

+0.0018 

0.7162 

0.7152 

1.674 

5492 


1-5100 

14136 

+04060 

14050 

14100 

647 

£740 

Dec 


0.7178 


0.7180 


11 

347 

Dee 

1.5130 

14120 

+0.0052 

14130 

14110 

2 

80 


EMS EUROPEAN CURRENCY UNIT RATES 

Am T Ecu can. Rats Change % +/- from % spread Otv. 

rate* egofosl Ecu on day can, rata » weakest tad. 

13 

8 

-8 
-13 
-22 
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Ur a curency, and tiM iratanml pemdnnd parcareasa dta ta McW of fa cwrencyto mortal Mta torn tta 
Ecu cental rate. 

flT/WBZ] Staring md Hsian LM auspanflad (ram ERd. Agusanam o d raton d Oy Pm RnandsJ Timas. 
■ PHLADVLPHUL SE C/3 OPTIONS £31,250 (cents par pound) 


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fWOR^IlirreREST^RATES 


MONEY RATES 

June 1 Over One Three Six One Lands. Die. 

night month mtfts mths ye» Inter. rate 


1 MOWni BIWWdAHK HITWI (UFFET DMIm pointa of 100% 


Strata 

Prise 

Jl41 

- CALLS - 
Jid 

Aug 

Jun 

— PUTS - 
Jid 

Aug 

1.425 

8.94 

BAH 

808 

- 

- 

£04 

1-460 

£48 

£51 

£60 

- 

008 

£21 

1^478 

4-00 

4.24 

401 

- 

£25 

a so 

1^00 

1.86 

£38 

£77 

£05 

£83 

1.33 

1JS26 

099 

107 

104 

1.06 

IOS 

£53 

1JB0 

- 

007 

£75 

£24 

£74 

4.16 


Repo 

rate 


Belgium 

54 

54 

54 

54 

SA 

7.40 

4.50 

week ago 

54 

5ft 

5% 

5VS 

59k 

7.40 

400 

7=tnnce 

SI 

54 

s& 

54 

59k 

5.40 

_ 

week ago 

sa 

54 

5 h 

SVk 

sa 

5.40 

_ 

Germany 

5.85 

5.15 

5.08 

5.05 

£06 

BOO 

4.50 

week ago 

5 JO 

£15 

5.08 

£13 

£18 

600 

400 

Ireland 

54 


54 


64 

_ 


week ago 

54 

54 

54 


64 

- 


Italy 

rfc 

TIB 

7U 

T*> 

84 

_ 

7.00 

week ago 

r\ 

7*b 

7TB 

7ft. 

8 


700 


£16 

5.13 

5.13 

£13 

5.15 

_ 

505 

week ago 

5.15 

5.13 

5.20 

£23 

£26 


£25 

Switzerland 

4* 

44 

JU 

4U 

4M 

6.625 

£50 

week ago 

4'V 

44 

4V. 

4V. 

4+. 

6.825 

£50 

US 

444 

44 

■1* 

<8 

SA 

_ 

350 

week ago 

44 

4 4 

<5 

4 IB 

5A 

_ 

£50 

Japan 

34 

34 

24 

2% 

2* 

_ 

1.75 

worrt ago 


24 

Zh 

24 

21ft 

- 

1.75 


6.75 
6.75 
520 
5 JO 
626 
625 
7£S 
7SS 


intertumk Fixing 

4H 

44k 

5 

54 

_ 

_ 

_ 

week ago 


4»b 

5 

5* 

- 

_ 

- 

US Dollar CDs 

- 4.18 

4.48 

4.85 

5.43 

_ 


_ 

week ago 

- 4.18 

4.40 

4.80 

5.33 


_ 

_ 

SDR Unkad Da 

- Ti 

34 

Jft, 

4 

_ 

_ 

_ 

week ago 

3ft 

4 

44 

4A 

- 

- 

- 



Open 

Sett price 

Change 

«0h 

Low 

EsL VOi 

Open M. 

Jun 

94.94 

9409 

-003 

94.94 

B4.87 

28684 

153830 

Sep 

96.05 

9457 

-0.06 

95.00 

9405 

06308 

185310 

Dec 

94.09 

94J1 

-O.CB 

9492 

9478 

51207 

234890 

Mar 

9409 

9457 

-£10 

9471 

94.63 

45701 

207253 

■ THRSE MOKTH mMUtt MTJULTE TOTURBS (UFFQ LlOOOm points ol 1Q0K 


Open 

Sett price 

Change 

Hgh 

Low 

EsL ml 

Open Int 

Jun 

92JZ9 

9230 

-0.07 

82.30 

92. IS 

3464 

30654 

Sap 

9£Z7 

92.08 

-0.18 

S£32 

92.03 

13378 

51381 

Dec 

92.02 

91JB0 

■0.19 

92.03 

91.73 

7905 

49803 

Mar 

81.79 

9152 

-0£3 

91.79 

91 £2 

856 

13057 

■ THREE MONTH EURO SM8S FRAMC RfTUBBS OLIFFQ Sfirim potato Of 100% 


Open 

Sett price 

Change 

Mflh 

Low 

EeL vol 

Open inL 

Jun 

95.79 

96.67 

-aio 

90^0 

9500 

2610 

21421 

Sep 

85.81 

85.66 

-0.15 

95 S3 

95.85 

4852 

21954 

Dec 

95.70 

95.50 

-0.17 

95.70 

9£51 

779 

7738 

Mar 

9£50 

95.31 

-0.19 

95.50 

9530 

78 

5526 

■ THH 

H MONTH KU RfTURSS (UFFQ Eculm points of 10094 



Open 

Sett price 

Change 

High 

Low 

EsL m 

Open bit 

dial 

94.03 

9401 

£01 

9404 

9402 

631 

9705 

Sep 

94 £3 

9416 

-004 

9426 

9415 

1015 

12089 

Dec 

94.14 

9405 

-0.05 

0414 

9405 

151 

7829 

Mar 

9£87 

93.82 

-0.08 

93.87 

93.82 

160 

3179 


' LFFE tam feadad an APT 


Intabanfe taring 


— — “ — - a mine ' year art. I UEuH Or 

rami are odenrd ratal lor SlOm igiaMd w Bm mortal by Mur lataror ai a banka at nam 
day Tha Bank* n BoMarr Trust. Bank or Tokyo, Barctays and Ksoomri Wo Mn taMM r 
MW ims ara Kmn tar Bm rtamesBc Money Roes. US S CDs and SDR linkad DepaaR* W- 


t 0MM) Sim potato oi 10096 


EURO CURRENCY INTEREST RATES 

Jun 1 Short 7 days Ono Three 


term 


notion 


month 


months 


St* 


One 

year 


Dec 


Open 

98.25 

94.58 

9239 


9327 
94.58 
93 SCI 


Change 

*0.91 

-oxd 

-002 


High 

9928 

94.59 

83.99 


Low 

3525 

1UJS6 

93.94 


Eat ret Open InL 
46J1S 350252 

83^106 390.778 

132^09 407,934 


Bdpsi Franc SJj 

Danish Krona 6 

O-Mart 5 ig 

Dutch ijiridar 5, 1 , 

French Franc 5*9 

Portuguese Esc. 12‘a 
Spanish Peseta 7% 
Start ng 
Swos Franc 
Can. Do* sr 
US Doiar 
Italian Urr 
Yen 

As^n SSng 


She** lam raMa are at 


5'a 

Sir 

-Sis 

-S 1m 

-S 1 ! 

- iH: 
-r,i 

ji. 

■ jS* 

- si 
"4> 

-A 

- 31| 

tar BM 


S’a - 5>4 
a - 5>2 
5I4 -5% 
S.'< - Si. 
SH&i 
14 - 13 

m ■ v. 

S-4% 
4.*. - 4ft 
S’e - 5*5 
4A - 4,V 
7*3 -7H 
2&-S& 
-3\ 

US Dotar mi 


5^8 -5l< 

6 - 5L 
5LI -5«i 
5,'. - 5 
SSj - 5b 
13% - 14% 
7% -7% 
5A-4J1 
4A -4A 
SSS - 5U 

4% -4% 
7*9 - 7% 
2* -2A 

4ia - 4* 

1 von. annex. 


5%-5% 

sd-sa 

5.1 - 5,5, 

5,'a ■ 5 

55,-512 
13% - 12% 
7% - 71, 

5A-5A 

4A - 4A 

6,’, - ad 

4% - 41, 
7H-74 

2.1 - 2% 
4% - 4% 
i«a ampt 


54-5% 

W8-a% 

5A-6A 
Si'a - 5 
559 - 512 
12% - 11% 
7% -7% 
5A - 5,1 

4.1 - 4,1 
6 % - 6 % 
5-4% 

7B-7H 

2% - 2.1 

5.1 - 5i'a 


559 -Slj 
flia-6% 
S% - 6% 
5% -5i 
5% -5*, 
11 % - 10 % 
7% -7% 

6A - 6.1 

4A -4A 
7% -7% 
5% - 6«l 
8%-B 

2ll-2a 

oH-aa 


■ ua TRgA9umf —j. wmmfts omm) sim per 100 % 


Jlh 


Dec 


95.SB 
95.03 
94 JSZ 


95.66 

05.03 

9452 


-0.02 

-aoa 


0568 

0503 

94.52 


SB. 65 
95.01 
9451 


1520 13502 

8508 15.756 
351 7^404 


I opm 9 d a . MB lire we tor praMaum day 

1 (UFFE) DMIm points of 100% 


Stifira 

Price 

Jun 

Jid 

CALLS — 
Aug 

Sep 

Jun 

Jut 

pure — 
Aug 

Sep 

0475 

£16 

£25 

£27 

□JO 

OOi 

0.03 

£05 

£08 

9600 

OJJ1 

0.09 

£11 

£14 

0.12 

£12 

£14 

£17 

BBSS 

0 

003 

£04 

OJK 

£36 

£31 

032 

£34 


■ THREE MOMTH PBMB 7UTUHM (MATff] Parte IntarhanK offe red itae 

Open SdC pneo Change High Law 
Jun 94.43 94.43 - 94.48 3 A .42 

Sep 94.54 94.51 -O.Q2 94^7 94.49 

Doc 94.32 94.32 -0.07 94.43 94.30 

Mar 94.18 94.08 -0.10 9*33 9407 

■ THBM MOHYH feUHOOOliJUt (UFFB* Sim paints of 100H 


lend. Ctata 01 B1 Put* 2168. ttantaui dayM open mu Cad aassOB Putt iflOSSi 
I (UFFg SFr Tin pointa of 100% 


Eat ud 
12.104 

Open tat. 

51.312 

StrSn 

Price 

Jui 

— CALLS - 
Sep 

Dec 

Jin 

— PUTS - 
Sap 

Dec 

23,646 

0a032 

9660 

£13 

008 

£23 

£01 

£13 

028 

10,519 

36,110 

9S73 

003 

£14 

0.18 

0.11 

034 

£43 

6,324 

2£680 

9000 

£01 

£07 

aio 

£34 

£42 

£60 


Eat «eL tataL Coda 38 Pida 45 Provkwi day's open Int, Cdta GOB Puts 3704 



Open 

Sen price 

Change 

High 

Low 

EaL ud 

Open taL 

Jun 

- 

9528 

003 

• 

- 

0 

5804 

Sep 

94.57 

94.55 

-0.02 

04 57 

9457 

50 

1854 

Dec 

93.97 

93.92 

-005 

93.97 

93.97 

2 

1818 

Mar 

93.71 

93.67 

-0.05 

03.71 

93.71 

134 

1079 


nwitaua rtry-a vet. Cals 3.741 Pub. 7248. Pro*, dafs open ht, Cafla aDftrei Put* 48irea 


UK INTEREST RATES 


LONDON RIONEY RATES 

Jun 1 Over- 7 days One Time 

night notice month months 


Sx 


One 

year 


Inlwtoarti Stotng 

0-4 

5 - 4 * 

5A-5 

5% -5% 

S?4 - 5,', 

6A-6A 

Storing CD* 

- 

- 

5-4{J 

5A-5A 

5U-5& 

6-5JJ 

Treasury 80s 

- 

- 

4B-4U 

4%-4« 

- 

- 

Bank ns 

- 

- 

4JJ-45 

«-4» 

sa-sL. 

- 

Ldcsf authority daps. 

5-4* 

5-4* 



5A - 5,'. 

sA-flA 

Discos* Marital dtps 

sia-4 

4* -4U 

- 

- 

- 

- 

UK daaring bank brae landtag ids 5% per cent trim Fehruay 8. 1994 

Upte 1 1-3 3-6 8-9 

month monte months months 

9-12 

months 

Carts of Tax dap. ( 2100 , 000 ) 


4 

3% 

3% 

(rtt 


Can* of Tin dep. undta CIOCLOOO ta 1 %pc. Dnpoaaa y nd tahtan tor cata 4«pc. 

An nndw rtat Of (Sacaunt 4.mipc ECOO tatad rate 3Bg. Even Bnaioa. Mrika iy> rtay l*e >'■ 
1B84. agreed rota tor period Jtai 25 1»4 to Jut 23. IB64. Sdiamas 1 6 ■ &47pc. fWeronco rata tar 
petad Acr 30, IBM to May SI . IW*. Uont N 6 V &S22pc. Firanoa HeuM Bata Aria fi%pc Vo«i 
June 1, 1804 


■ THRU aaONTH STHUH FUTURES (L4FFE) £500.000 potna Of 1009* 



Open 

Sea price 

Change 


Law 

EsL ud 

Open ir*. 

Jun 

94X8 

94X9 

+£01 

64.70 

94X8 

7977 

83494 

Sap 

9427 

9422 

-0X3 

9429 

9421 

24464 

94412 

Dec 

93X1 

93.49 

-aio 

B3X4 

93.48 

40454 

138094 

Mar 92.98 92 M 

TVadod on APT. AS Open ktararri «gw 

■£18 93X2 

■■ taf |8illUU| dBf . 

92.78 

13085 

53703 


■ SHORT imUHO OPTWU (L1FPE) £500,000 points of 1009* 


Snfta 

Price 

Jun 

- CALLS - 

Sep 

Dec 

Jun 

— ■ pure - 
Sep 

Dec 

9460 

£18 

0.08 

£05 

0 

£38 

1X6 

9475 

£02 

£03 

0X3 

£08 

026 

129 

0500 

0 

£01 

0 

021 

0.79 

1X1 


EsL yeL toad. Cd. Z708S Put* 6425. Pravtau* Aft cpai ML, Ca«a 106730 Puts 1801 BO 


BASE LENDING RATES 


% 

Adam 6 Company 525 
AOedTRst Barit. ...SSS 


.525 

Bar* cd Cyprus 

Banket Iraiand .525 

Bankaf Intfla 525 

Bank at Scoland 525 


Brit BkofUd East S2S 

•Womi SNptoy ft t3n Ud SSS 
CL Bar* Ngttariand ... 525 

S25 


Oyttasdr*) Bar* 525 

Tha OMparaflve Banta 52S 

COMtaftCo 525 

Crept Lyonnaio -525 

Cyptirt Poputar Bank ™525 


•ft 

Dnn l rrrrrti — 52 S 

Borer Barit Lkirtud 6 25 

FtaancMftQsnBank— 0 
•Ftaberl Hsming ft Co _ 525 

Qtrobar* 529 

•QutnrmsNtahan 52S 

BMk AG Aideh . 525 

•Hambros Barit —425 

Haritafate A Oen knr 8k. 525 

■HBSsmuoL 525 

C Hose & Co — 525 

Hongkong ft ShsighaL 529 
Artan Hodge 6<a* — &2S 

•Leopold Joseph ftSore 525 

UtryteBsit 92 

Meghrai Bsic LM 525 

MkSmd Bar* 525 

«MourtBenKtng 8 

NSWoutli motor. 525 

•ReeBiMhero 525 


Corporation Urrdtad ta no 
taigar aulhortaad as 


Royal Bk of Sootand _ 525 
•SmBh ft Whai Secs . 

TOB S25 

•UnRed BK of KuHOt 525 

Urity Thre Bar* Ptc _ 525 

Wcatwn Trust _525 

Wdbanoy Laldtaw 525 

YafctMt e Barh 525 


• Members of British 
Merphun Banking & 
Secuiiflos Houses 
Aesodeflon 


RAND MINES LIMITED 




NOTICE TO BOU3EBS Q& SHBRE WABBARTS TO BBABBR 
' PAYMENT OTCOOPON NO . 113 

1. Coupon No: 113 

Z. Data ofpaymaoc On or after 7Juae 1994 
3. Amount 23 oactis (South AUom 0100 x 7 ) par osdnarjr Mara of 
25c8SMeach 

4.SoulhA&icml*m4teeideixShareSi61decs'Rax(SANHSI): 

1 5% or 3,45 cents per aharo 

a UK income tot (whoa qppticrtjte): m or 1 . IS oaotB per An 
a UX cucnency oquhndenti (cn 26 BAay 1 994); 

Gross: 4.14688pperrihare 

SANEST: 0A2200p pre share 

uktbc ;; ; • ~ 

Net 33172 
7. Payable at 


BardayaBenkPLC 
London Oouotar Services 
168 Feocburoh Street 
LoadcnEC33HP 


Baxdayg BadcRiC 
GmcheCntreo 
21 ntaLaSne 
75428 Paijj 
FRANCE 


Notes: 

0 Coupons paid by Bardaya Bank FW3 hi Paris wiB bo payable tn 
South African ciniuucy to an ettihoriaad dealer in exchange tn 
the Republic of Sooth Africa i wmtoa te d by file 


paying ngeoL Instructions regarding disposal cf the payment 
proceeds can only be given to such authorised dealer by Om 
paying agent concerned. 

Coupons paid by Bcmdaye Bank HJ3 In the Hated Kingdom wiH, 
udea, paymere la Soldi African currency is requested, be ta tbs 
sealing equhretea nhown hi 8 above in respect of c oupon s 
lodged vp to 3 June 1894 and fiieraafta- at the rate of exchange an 
the day the proceeds era remitted. 

in) Hoktera of share wazrents to bearer sra ramiaded tint the share 
warrants in their possession require to be eodocsed to reflect the 
new nominal value of file ordinary dares of 26 "»■«■ re*. 
instead at R1 each, as a result of the sub-division of or dinal y 
shares posed by Special Resolution on 23 November 1993. 
Share warrants to bearer should be surrendered to ana of the 
abovemataioned pay in g agents far this purpose. 

(frded Kingdom Secrecanes 


VIADDCT COSPOBAIB BEBVICBS UMTEBD 

■" m- . ... »■ r- • 



:cf3<uSiAftfca) 

■donRo-ouxisaanfo 


lam 

SAND MINES 


Sim ii mi i 

We are urgently seeking cocurieical 


LAURIE 

investment pn^erties upwards of 
££5tn dor in-house funds and overseas 

■arr^iMa 


clients. Please forward details to: 

Commercial 

free 071 «SZr> 

Richard van CStxen 

Property 



TT“ «niril tool for ih, • n iuu* limMur 

Market-Eye 

London stock exchanob 


News ,imi Como.inv 


071 329 8282 


REUTERS IOOO 

24 hours a day - only SI 00 a month! 
UVE FINANCIAL. DATA DPR EOT TO YOUR PC 
vrWCSM 


For more taftymatioe 


F« +45 4587 8773 















33 



financial times Thursday june 2 1994 


*• \ 



WORLD STOCK MARKETS 


EUROPE 

AtsiwUJmi/Sffl) 


+#- 


iffi 

Ugmd 


*/- ■» IwM W 


ixn 

BMurt 997 
OWP t- ' SR 
EA D«R ‘ 3400 

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SR 

446 

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-34 l.m 1.238 tfi 
■*5 1 JS7 1,030 0-* 
-91X71 BBS IS 
«- 1XS0 


McxAn 

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_ SB* 
-a 408 
•is 7m 


ms ?.i 
4« as 
171 2.4 
328 1 J 


12S -iSl 16770T71-2Q _ 

1-255 -« i«s i,ioo u 

«» -3500700 S.«0 0.7 
251 SO -6X0 206210* — 
'18 624 5*5.17 
11 150 -488 27*207.10 IS 
1«* +3S0 157 wn « 
1*817 -*3 13*8 889 19 

154 -.16 18190 MS 5.1 
216 +.19 KC 180 _ 
39120 -1.70 625 366 *S 
391*0 -4*50 555 382 5J 
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Z ESS? *™ -a 0M 7S3 IS 
jw. 3300 -751X06 BIB „ 

— ^” f<l 55 -88 1,180 680 43 

RfMU) 480 -5 004352.18 _ 


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AKZON 206 
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— B&20 ... 

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1.180 

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ActWGn 6X00 

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- Sn*Sr 720 

STtOPC 3 £76 

|S?8 ij® 

915*1 


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(JunT/Ftej 


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««« -10 K3M 3,705 1J 

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”6 BOO 448 IJ Z gwj* 1WS0 -SUOTMUMp 16 - !3*V 


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~ sue B*1 -19 W rou 

m *s© -ms 1 ®" 

-^47^ +3 ffl Sill 

— atneo 529 -1 700 610 ss 

-■ an* a 1W -4S14701SW — 
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§938* -IS 2X00 1JS0 13 

— Spiaffl $56 -1150 828 SB _ 

— SuajQ 20630 -7 JO 377 as 4L2 

= & 3 s ** i K *®8 

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- H*0oi 

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-.50 88-40 69X0 4.4 _ 
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+30 52 *2 10 — 

-.70 77 JO 8160 _ _ 

- 1*8 105* 1.1 — 

1810) -.40 208173.70 Z£ _ 

IK -17D 185.70 162.70 IS _ 

18.40 -JO 26 IS JO * J — 

88.50 -JDIOBJO 98 4J _ 

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131 +1^0 157 JO 1« ^ _ Whb 
224 -1 JO 2*00 71 9JD TJ _ ZuW 
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1BO 1.1 
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KcnatSJ 

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705 +Z 710 551 _ _ SUIt 

509 +3 530 425 13 _ SMki 

408 +1 477 318 ™ „ SmO* 

1,200 +10 1-210 1J10 _ _ aaBW 
504 +13 611 400 _ _ SrMS* 

2380 +10 2730 1220 — — SUShS 


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0C8 2*300 —325 26.1 DO 22300 24 — CDBCnr 1330 -20 1.830 1,1*0 03 

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600 _ 730 889 23 

217.76 +.75 JSI 215 23 
270 _ 333 2H7 1,1 

8J80 7300 EJOO 08 

B«1» 118300-1000 nuns HUM 04 

Mm. 059 -71.140 B20 13 

DanDak 318 -4 427 310 33 

EMU ‘ in -23025 162 5.1 

FLS a 500 -40 BIS 397 24 

smart sis _ W was 

I3SB 221 -1 278 218 

U* 332 . -8 426 332 33 

Wn8 1 J50 -20 1,060 1,140 OJ 

MOWS 273 -S 383 232 18 

- 637 : -678331 508 08 
S46 _ 737 530 0 3 

555*1 —9 615 538 0.7 

. „ 533*1 -3 675 473 0L7 

Supita - 488 -a 565 388 11 

TOBan . 324 +4J733B4B 300 _ 

82730 -12JO 1 J72 *2750 X2 
2X3 +2 2fi7 2D7.9B 4 J 


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1M -1 1__ 

1125 -.IS 1830 
ISA -4 189 ... 

9930 -1J0 11486J0 _ 

114*1 -1 14011280 3J 

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-1 11550 96 23 

-4 260 208 15 
_ 208 105 U 
-S 30& 226 1 J 

— 18450 140 ZB 

— 91 74 15 

-1 SI 72 IB 
-3 87 72 — 

— 122 #550 U 

-7 151 122 10 __ 

31 — — 


170 

245 

145 

79 

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ss 

nao 


57 u — 


1 10 — 


— ca>3A 


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1SSS 


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— HVCU 


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ratUMJ (Jon 1 / Mka) 



AaaarA 

CWr 

aqrM 

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183 - — 15410250 13 

1*0 -1 178 130 13 

80 — 105 80 _ 

89- -130 4630 3630 13 
-1 233 181 13 


— 14AM 41350 

— MAH Pt 324 


XUS 




HOP . .1130 -.1017401030 — 
Kasko 4ft50 +30 68 45 12 

RfinaB 628 +11 705 9Si 1.9 

118 -1 ’132 100 — 

178 +2 9*7 176 13 

17B *1 250 172 13 

232 -6 258 200 _ 

ZZ7 +4 260 190 03 

-406 +2 465- 287 KL7 

0»mpA .91 -1 102 89 — 

MBA as .... 104 80 13 

MW 72 -3 102 To \A 

Ropab 9030 +39 1 2D 88.10 D.7 

actanB 210 - -5 2S 180 19 

TmmB 2030 +40. 31 20 

Im 1430. -202030 14 


ntMajJanirRs) 


477 — 679 47* _ 

60S +1 769 SBS 33 

190 -12 898 748 23 

»1 +20 918 580 84 

1.257 • -33 13*0 1^57 17 
1,199 -35 MSS 1.102 IS 

813 -2» X002 BOS 17 

'280 +12BU& 240 — - 

520 -21 BB3 SIB 19 

3JE0 - -80 17110 1COD 8tfl 


» 


57650 +130 818 465 12 
. 272-160 a07 270 13 
700 — 708 5B0 2J 

212 +3 24S 199 XI 

1.230 -20 1380 1,180 OlB 

625 +12 881 901 1.6 

389 -14 440 382 23 

UHI — 12B21JW 13 
33BJ0 +2303B7J0 2M2D 11 
685 +101J9B 830 13 

- 235 -8 2S3 222 16 

203 +4 32* 285 34 

381 +2 433 383 11 

1*6.50 -30 1 BO 141J0 — 

91020 +020 949 915 11 
512 —650 S68 431 23 
14050 +1 181 JO 115.15 — 

162 +330 17B10BJD3J 
Hfi —5 800 655 U 
7® . — 860 886 13 
BOOM +2 960 830 15 
355 —2 410 3SZ IS 

195 +62203 165 — 

IBB +3 • 218 l5 13 
-2 470 378 2.1 
+450 397 302 16 
-748150 387 13 
• — 822 756 — 

+3 28817856 34 
— 1617 2.640 0.4 
+7 262 210 — 

+1 53050450 3.7 

-5 888 688 05 

-8 496 427 12 

—2052150 420 17 
-2 «4 336 35 

+B 1320 1^40 09 
+7 372 305 12 

+9 287 22S S3 

+2 3 13 232 24 

-50 U*50 970 13 

... +3 438 350 15 

Bam OBSJfl -150 7983) HUB 13 

+S 685 810 13 

♦1 669 480 1,1 — BU 

27650 — 80625650 12 — €*38 

• 323 +3 380 307 XI — EDW 

50850* +250 652 439 28 — MU 
WW 389 +39 397 

— tom 383 — 415 

~ Wao 494 +130 SI UD 

— VW 483 +150 334 

“ YWW 373 -450 443 

= BR I ?ZS 


SO 6580 i 
-110 8^00 5400 _ 

2S 5-J2S H — Daim 1.1BO 

—2D 3,400 mo 73 nuam ibid 

-15 45303376 42 - 8KS 473 



IMF 

Bam 

Man* 

MSMl 

Mats 


1580 —1,4301300 — _ 

680 +2 610 4GG - 

1370 -30 1500 991 06 

1,440 +60 MOO STB .„ 

1500 +601300 891 — 

1JS0 +10 1.750 1J7D — 
na +1B 744 50 14 
1580 +201410 940 — _ 

+14 634 402 13 — 

-10 BJOO 4.150 — — 

+60 53B0 4J7D 03 — 

— 1500 1J30 — — 

1.250 1,100 — — 

— sea at 1.1 _ 

+30 1500 1,040 — — 

+18 586 410 03 — 

-1 486 380 1.1 _ 

-10 570 550 — _ 

♦0 986 S3 — — 

+70 13601260 03 — 

+1S 730 416 — — 
+60X270 2410 — — 

_ 1+20 842 33 — 

-940 436 — — 

+40 1 .790 1 530 — — Mbltf 
+3035401690 -418 um 

— 13BQ1J200S - S 
+7 GOO 315 — _ m.4 
+3 42S 337 13 — U*QlS 
+6 907 Ml — — Mtfus) 

-20 1440 UMO 03 — ESS 
+6 720 671 13 — Mffj+nS 
+80 2370 2,620 — — Max 
+2D 1530 1.130 — — MM 
+70 2530 2510 — _ SB 

+20 1580 1310 — — HOD 
♦13 960 BO* 03 — MKTVB 

+18 886 7B6 — 

+1 610 410 __ _ 

+152* 387 — — 

-201370 1 420 - — 

+10 1570 1350 03 — 

-30 2360 1.720 — — 

-10 1.510 1.400 
+8 915 860 
+40 X1M aoo _ 

-4 910 SSI — — 

-4 MB 416 — - hqkSp 

1J0 W - - NHK Sp 


9390 +130 7,030 5380 _ — Sb&r 

470 +6 505 37S 1.1 — SrwBrt* 

610 — BBS 78B _ _ Son* 

B89 -9 1360 90S — - Earns 

1670 +40 2.0GO 2JM — SunBM • 720 

764 -1 7BZ 639 _ BUDBnk 1210 

1520 +301520 788 _ — StanCcm SSD 

1 .iso +1015*0 B86 03 - swrcnm H» 

787 -8 7BD 5T2 — _ SumCp 1X350 

1160 -10 1180 1J80 — — SunElfl 1300 

570 +10 578 43 — _ SUtBtnr 447 

850 +S «T1 783 18 ,_ SUrtiA 444 

412 -I 413 321 — StuMar 1310 

1,750 — 13901.420 15 _ SunMD 304 

1J20 *10 15501,700 ... _ SUrtim 882 

1370 +401,870 1,500 .. _ SuitRl 723 

+201520 890 15 SUBfiDP 1J7D 


HOW ROME gin 1/KJU3 



nTiB 


1460 +130 3590 2.720 ._ _ 

— -ID 060 711 — _ 

+9 906 307 — — SUZUfcj 
-13 8B2 BBS _ _ TDK 
+6 873 557 — — TUael 
”3 780 582 05 — TehoPti 
+10 1340 1300 0.7 — TS<8# 

—4 779 +90 _ HreSt 

+23 632 386 — — fmara 
— 1530 780 18 — Tkaoi 
-30 2310 2300 _ _ TanSai 
-20 1540 1520 ... — Ttflkl 
703 620 _ _ TUa 
— _ Tafckan 


+20 2530 1310 _. — Um 

-91340 aaa — _ WMna 

+10 15» 1.140 _ — WUHd 

-ID 1560 1,120 — — WMTTr 

+2 638 SOS 03 — (am 

: IS & : _ **" 

+6 700 SOD — 

-a 023 481 
— 15001,110 — 

—SO 2320 25*0 — 

-2 801 TOO 03 

65*0 +iai6,«0 5,400 _ 

B07 +2 BOB 818 _ 

' -10 730 *25 _ 

-40 25901390 — 

+17 S73 432 — — nTu,' 42.7s 

+1 510 404 - _ Stffi 73 

-1,070 837 _ _ gJS 

+1013801^0 _ - rei+nS 

52 - - Ottarb 17 

,-z — DFmg IOlBO 

— GEatfB 5.15 

— Sum 3555 

HSBC 8850 

- .+»- □» IKS ,u ® 

*401.7001380 _. — 

♦1 815 674 _ ***** ”• 

+40 1,460 1350 _ _ 

+70 4300 3,780 — — 

+12 789 BIO — — 

-1025101,970 13 — 

+1 722 570 _ — 

+7 882 670 0.7 — 


95B -.02 938 9.10 XI 
730 +.10 950 G_36 13 
B +.16 932 7.40 15 
238 -33 236 231 3J 
+37 +33 &5S 430 23 
438 - 4.75 X70 13 

3L01 -33 332 2J4 23 



1.700 

BOO 

1^0 

4,790 


+• 447 

+10 1330 
-2 309 
+26 BB2 
- 73* 
-1390 


951 0L7 
252 — 

864 _ 

611 13 — 

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1J90 


603 _ — Ttartna 


— — Twacp 

- - Tod 

842 fata 


5« - — 

407 _ — na 

-4 445 316 — — ToMco 
-13 B40 MS _ _ Total* 
+501.7801,140 _ _ 1km 
+1013101.460 ... - rm* 
-2 B4B 4» — — -IWPd 
+10 — 


HM 
MXChS 
HKShK 
WAS 
MCBa 

♦10 MSB 1370 — — 

— 1^40 1 non HXro 

+1 1340 m: i ww 

-5 587 400 M00"f 

+4 702 618 03 — 

+15 1.106 705 03 — I J2S. 

*B TOO SOB 07 — -22* 

-3 535 397 13 — 

+7 720 802 _ — -g'iS 

+34 831 670 KM ita 1X1IM 

-1 807 333 „ *W® II 

20300 +aooa5ooirS Z Z SJ-f? 

2.740 +70 3530 2360 — — 3a - 75 

1580 +20 1.410 1.110 _ _ 

470 -2 6S4 328 _ — 

528 +4 536 41 S — — 

1370 — 1300 1.190 03 — 

594 694 421 — — 

1.600 +101,7201.430 — — 

1310 +70 2320 1510 — — 


B40 

?a 

us 

704 

737 

502 

GOB 

791 

620 


9KFt 


SknaO 

SCMB> 

SKKCO 

6«UcA 


+4 570 — _ — 

-13 700 520 — — WrtPn 

-30 2.720 2500 _ — 

-10 1,950 1 320 0.7 
-4 692 4S0 


1530 


657 

+9 7» 565 
-10 1350 1.480 
+40 1.480 1.1 BO 


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—180 17J00 
-133 8A3 
-6 1,435 


VBM 93 

_ Mu 700 lao 

3560 -25 8390 2310 XT 

4500 +10 4370 X400 23 

11350 -290 12ASD 9L8CD 15 
2560* -30 2,715 2380 43 

1380 +6 1573 1580 13 

25B0 —60 3500 X*53 2_fl 

6.400 -150 8.100 6,140 22 
970 -281,100 8GS — 

747 +12 7® 416 123 

4,155 -125 5.140 3300X3 
893 -4 1510 021 _ 

8300 — 7,490 *300 21 

~ mm 55B0* -SO 7,630 6.400 23 

— Urow S^OO -150 B.OO 4310 13 

— MW 11J00 -30Q12S00 951Q 13 
“ MpU 4,133 -145 4300 3380 23 

ai*a 287 +6 2»4 102 — 

“ SarilO 020 -IS BS7 351 XI 

~ Sow B DBG -5 615 810 63 

— TabocA 4310 -140 43S0 33D0 XI 

— Total 1599 -» 2,185 ljas 33 


2Ss>« = SSSt ,3 


— TvKtr 
“ UnFen 

— tt#*rt 

— UcaUt 


Vfctai 


680 

1385 

1300 

2J80 

3336 


—26 1^35 950 1 3 
-3 738 576 7.0 
+10X460 1415 113 
— 1510 1,150 *7 
—29X120 2315 13 
-15 3410X250 03 


= Hi 


“ z«s 


dunl/Knra) 


— AOAA 
Z AfiAB 
Z AaaaA 

— Art* 9 


HSU B 


317 1 J 
380 23 
441 13 _ 

418 04 — tocniA 
338 03 — ItoS 
7W 1.4 _ mi 
220 13 _ MB 
■ mmoB 


Boaoni 


z RH.r(jiaii/un) 


Crtau 


Qagca 



rr v v • >• 


1.188 -Z3 1480 1,111 4J 

885 -21 1.150 9*3 43 

188 -4S2BJ01SMD 83 

iTSjo -1.1021aanas.10 .- 

1329 -4* 2.1US1303 33 

1*050 —5.10 206M5.W S3 
1386 -IB 1370 1321 XD 
..._ 423J0 +430 459 348 XI 
CCT 218-107030030 218 23 

Ofcnf 1J17 -55 X38S 1J17 S3 

Crtrtl SS9 .+3 8» 5110 X7 
QlOCF 403 +830 *9031820 _ 
cmat SIM +3860 ,757 511 117 
DBMt'* 5 730 -1109,180X220 tt7 
OochaF TOO -15 830 8BI7 _ 
OUkw 3aBJ« -If. 10 ,430 381 13 _ 
ESf _ .330 -10 OH 7B0X1 — 

»nGn 2306 -10SXBB4X3B3 2> — 
Eao 773 -13 . 3*0 BS6 1J — 

BWta 40X30 -7.10 43596558 49 
WAG 341 -9 382 328 _ 

EOS* 06* -29 1.1*7 8*2 X2 
OSSiy B71 -371JB8 850 _ 

BOO* 765 _+ 865 740 _ 


— ion 


SGA A 
grata 

•3094054410 3J _ SAFA 
-7DX9753LB1D +- _ SKFO 


— OH 


373 

no 

610 

107 

IK 

477 

477 


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iiSn) 


401 

50 


125 

125 

f1«9 

114a! 

129 

13* 

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115 

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+3 

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-8 

+11 

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700 

19* 

543 

542 

439 

397 

134 

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373 X7 
640 1-0 
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— MRu 

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— 4S 4J520 XI 18 X4 _ uSS 
+80 7X50 X079 33 _ 

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B «a9_ 

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072 +17 -839 BBS 19 

34873d . _X4«7X7S0 3J 


1901 


+9X5U1JB0 X7 
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Rta ICO +2 182 135 5J» 

Fontty 676 --B4 059 000 2J 

Frami 4 J80 -138 xnzo 4,790 13 
S1BCM 471 -10 BJO 421 27 

OU XMO -70 J.754 2.0W 0 .7 

Sauna! 907 -83 iffls tot os 

BDAya 604 • +4 9(S 558 ZO 

446 -9.1D4BM0 420 XT 

551 -1* 880 543 XI 

09 -9'71B*BUffi 

mnenq 60* ^xfln nau 

ta«l« *70 -1.40 118 77 SJ 

Wbu SB -3 570 400 §J. 

m C34 -30 709 500 M 

LV**H . 8(9 -19 06* 727 3.1 

LaBXp 3M30 -14.10 *U. 80 392 S4 


8.145 

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X2S0 +40 2450 1,779 1.1 . — 'SrtMA 

_MW -1 211 78 _ _ seorts 

7*400 -450 21450 25.000 1J _ SEMI 

1X880 K-1243D X110 — _ g+yta 

1305 -5 MOO 1.564 u _ suaKB 

XSJO +10 X2DD 1.650 — _ StamA 

XB40 +10 X595.1.302 — _ skraB 

1 JBO -20 2JD10 TJ3B9 — . _ g+rtj 

X340 +90X820X140 BJ — 

T1.11D —1101X800 miiBB — — S35? 

2J10 • +5XS94 19BB _ 7^ 

8,830 *30 7930 4,001 1 S 

4.109 
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— »3»* X205 +75 X440 4.671 XI _ “I'T 

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— : HH U 1X575 -375 14701 1X410 1.3 _ £M0 
1 JBO -3 19*8 .870 „ _ raBr 

2^ -55X1*0 1918 _ “g* 

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~ 10410 *110 12.U0 8498 „ _ 

700 -9OULM0 7.900 2J _ Z770 

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-60 X3S0 4465 14 — J*n» 9® 

_ +100 7,200 4.146 _ JMfflQ 167 

_ SH ’ 1X050 +50133009491 44 _ Mriffia l.isart 

_ StaBP 2400 — X730 1JK - ... Ooraflfl 1M 

_ Too** 30400 -5036JS02S4H _ _ MuBT 1480 

_ Totff =0950 -502+062 13*87 — _ PWnBf 5.030 

v. IMoan 1X4SD +38 U.7H 10460 — _ MB 217 


-X 312 
-3 216 
-4 215 
-2 360 
-2 155 

-3 155 

-3 164 
+3 IBS 
-a 143 

-a 

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403 1 9 
282 14 
200 1.1 
101 29 
100 Z3 
440 340 14 
430 SI 14 
00 4440 XZ 
311 258 X5 
258 24 
159 XO 
152 XS 
17 2-3 
109 19 
109 1J 

114 34 
113 54 
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129 SX 
10B _ 
142 840 _ 
73 4749 — 



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— MW 1420 


181 HI -2.75 
414 -14 


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233 171 14 
4» 3B* 14 
-1 480 350 14 
144 97.30 44 
-1 110 91 34 


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+101J40 1J60 — iax 

+9 473 346 _ MDK 

—10 1,380 070 _ _ KSK 
+13 834 667 04 _ ktn 
— 1470 051 _ _ MM+J 

-101,7101.490 TZ2 S5, 

+50 1J50 1JM09 _ SSa 
-60 4950 3JS0 04 — 

^ 70S 5« U - 

—4 910 480 — t a+ ji 

+101490 1Z&0 — _ 
-101JB0 1.72D _ _ fSSSn 
+101.1® 903 _ _ Wy+k! 

+23 888 521 04 — m»*» 
—40 2.450 1420 _ __ ESa 

-1 5S3 « Jtof 

_X68o 2.000 _ _ mm 

+10 713 505 14 _ MQSk 

+13 440 275 _ — ItoOnfai 

-19 565 360 _ _ ram 

♦SUMO 719 _ _ nea 
*10 1470 990 __ _ i+S* 

+T0 2J00 1J80 _ _ Kri 

+30 1,130 Ml __ _ ^ 

+13 7*3 514 _ — 

+4 933 787 _ _ 

+10 1490 1.150 _ _ 

-10 60S 42B 09 — 

+1D-U50 938 _ _ 

+5 039 440 _ _ 

-7 720 602 1,1 _ 

_ 640 585 _ _ 

+5 S3 438 _ _ 

+1 780 650 _ — 

+20 1,1=0 795 _ _ 

+9 550 397 14 — NgSta 

+4 BIS 678 _ _ - 

♦17 950 628 _ _ 

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672 TTOora 2400 -60X200 1.570 _ — - 

-2 30* 301 _ TUaM 3430 +100 3,640 3450 ._ _ I'*** ’ 

+50 1.420 1,100 X7 _ TkScn 3460 +20 3^S0 2.740 _ 

-b Gao 755 04 _ Tfcfisa 538 ‘ — " 

+7 409 879 _ _ TfcBope 670 

-t 4*2 337 „ „ n<sa 23*0 

+1 8C9 578 _ _ TffiW 1420 

-14 &+0 770 0.7 _ TkuDir 679 

-1 4*0 310 _ _ IVuCrp 789 

+10 1440 848 — — HoAta M3 

-8 1430 790 mm — looon 1J50 

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— 1.QEO 859 __ TShSffl 046 
— X348 1483CL4 _ TJMfcC 1.130 
-7 62* 485 04 _ 7*ttm SET 

. - +4OZS00XD00 — _ TMOJ 843 

— — Italian 4J10 +220 4J40 3420 _ _ Tota 412 

MB 1Z20 +30 1,220 859 _ _ T«0 1430 

NBKU 1460 -20 1.170 965 _ _ TOfOCn 56S 

1470 +3914801420 _ _ TDaAuL 1480 

^ — 593 395 — — Toynat 600 

283 -4 281 231 Toyota 061 

BOO +3 SQZ S65 _ _ TOJOSfc 2J90 

720 -13 754 528 1.1 — TyotaM 2.17U 

700 +1S 705 491 — ToyOTB 492 

463 -8 474 313 _ _ TovoTB 1J60 

830 +1 910 711 — _ TOttta . 489 

940 -12 973 781 OJ _ TafiSki 

665 _ 588 500 _ _ Trail 

1430 _X080 1.790 __ » Uffi 

14=0 +20 1450 1^30 _ _ UlUh 

764 _ 815 660 _ __ MUDr 

745 
489 
730 


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-1 50 2840 XD 262 

+.101X701040 34 — 
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-25 57 37 24 404 

-t 81 59 29 702 

+45 14 X1S _ _ 

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— 18.10 1X60 as 162 

-.40 1X20 1030 04 ™ 
-45 845 4.17 24 _ 
+26 452940 14 — 

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-.1021.90 1120 4.1 404 

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-20 1X30 1040 04 XB 
-45 0l80 545 4.1 _. 
+-2S8QJU35Z& XI — 
_ 24J5 14.40 XI 244 
+.10 1540 1090 14 XI 
-40 54 37.75 X3 214 

+3035402030 X7 _ 
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— 3045 1X40 XI 243 

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-.15 10-80 6J5 SJ — 
-40 4X50 2740 X0 - 
-.40 3338 1930 3-9 
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6140 -1408*40 46.75 04 _ 
3140 -36 3840 24J0 0.4 _ 
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1X50 920 04 — 

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-JO 1640 M -4 444 
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-J5 7.60 X73 7 A — 
+1 71 50 14 214 

+ 43 1130 8 2.4 17.1 

+ SO 33.75 23 24 — 

-25 41 26. BO ZO — 

-.10 23-50 1440 ._ _ 
-40 1640 1130 X0 _ 
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6. IB 
4145 
1X30 
1X50 
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2450 
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1540 

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6140 

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646 


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1470 

620 — — HMDOU 1530 
400 04 _ nunc 1570 
579 — — YuntaAt 913 
412 _ — YamBae 946 
1.410 +30 1.420 1 JEO 04 _ YrpncW 1570 

1460 _ 1.1 DC 8SS YmOtan 1570 

8550 +120 7500X1® — — YartKOB 1,100 
5410 +20 5490 +.680 _ YWTiwi 1500 

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+*0 1J60 1J30 — __ YaBkH 606 
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+ 10 BOO 702 04 _ YrtTlfl 968 
-15 820 490 — — YtiCTtrS 991 
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18035 Gottan 
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♦XB 1832 15X0 18 — — ~ 

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1.490 +101X301.080 _ _ Nucict 7.17 

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INDICES 


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In 

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30 


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213631 213660 214243 3430*4 3/2 


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IM CEOS e/USS 311*-*4 303077 295139 338837 4fl 


28747 287SLO 2897* 3228*0 1812 


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BTA (1877) 


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■ NEW YORK AST1V8 STOCKS 


■ TRADMa ACTIVITY 



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If this page gets your heart racing, you need a Pulse. 

Puisr- br/'Hrs V'. : 'L : re news from more of the world's markets than any . . : — — 

of ! V’>r snfoim.ition penek updated every minute by Dow Jones Telerate Li LS E ■■ Telecom^ 


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CALL NOW FOR YOUR FREE TRIAL ON 0800 28 28 26 EXTENSION 1154 


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* n T \| a i t {f \ lliiii 1 'iai.n WnriirjUM IjimWl 


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Change 


Stocks 

Closing 

Change 

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on day 


Traded 

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on day 

1130 

+30 

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8.8m 

573 

+16 

1100 

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+10 

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34 


FINANCIAL TIMES THURSDAY JUNE 2 1994 


4 pm doee June / 


NEW YORK STOCK EXCHANGE COMPOSITE PRICES 




044 16 


23 


17% 141b am 
16% 13% A L L4t« A 
66 57% AMP 
72% 52% AMR 
S 3%«H 
56% 38% ASA 
31% 25% MtttL 
13% 11% AttfM Pr 
13% 11% Aqdnceh 
31 24% ACE LB 

12% 10% ACM Mini 1X0 100 
loll 7% ACM (Mm* 0X0 9 l 2 
10% B % ACM 5*1 Sp i 0 9611.3 
12 9% ACM 6n So i 1X9 109 
11% 8% ACM Man « 1X8 11.7 
9% BACHkbngd* 0.72 £5 
15% 8% AemflCh 0.44 4.0 13 
9% 6% Asm Bad 6 146 

20% ZJAcorm 060 2.1 14 4 

9% 5% Aaava 036 *2 2 600 

15% 11% Acuson 113 

18% 16% Anars Erar 0.43 ZB 0 


Ngh Ua 
0.48 13483 40 14% 14% 

0.18 1.3 32 993 14% 14 

1.68 2.6 22 1458 54% 64% 

26 2687 56% 54% 

15 1281 4% 4% 

2.00 4.7 28 383 43% 42% 

0.76 15 17 *174 30% 29% 

0.50 4.0 8 29 12% 12% 12% 

13 12% 12% 12% 

863 27% 26% 26% 

508 
82 
148 
167 



84 46% Ad MOO i 
31% 16%AOMC 
0% SAdWS&D 
20 16% Amo Inc 
57% 49% Aogctl ADR 
65% 49% AetroL 
33% 25% Altec 
20% 16% AlWifBn 
4 1% ADaoi tec 

49% 38% 

39% 31% AktmaFrt 
26 19% AifffBlnc 
16% 14% AHteSS 
24% 21 % AirTcti 
106*2 1D1AbPw816 
1B% 13% PtxJa At 
21% 1 7 % ABteny Hi l 
16% 13% Alnwl 
25% 19% ABC® 
21% 17% AlCuhl A 
30% 25% Afttan 
25% 19% AknAl 
58% 49% Alcoa 
30% 23% AWflrawn 
22% 14 AMXAI 




3.00 5.1 1729 58% 57 

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030 1.3 1298 16% 15% 15% 

038 1.4 13 73 20% 19% 3) 

026 IX 13 426 IB 17% 18 

044 IX 22 1671 Z8% Z7% 27% 

£M 13 40 2007 23% 22% 22% 

1X0 1.71® 858 56% 57% 56 

060 2.3 4 670 26% 25% 28% 

1.00 63 26 690 16% 15% 15% 


24% 1 7 ABcgti Lud > 048 36 17 2319 18% 17% 16% 


26% 20% ABejf 
16% 13% MenCm « 
25% 20 Alogaix 

4% 1% ATlon 
27% 17% AUnceCa) 
10% 9 Alice 0 

77% 71% AM Hdl 
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21 


2% 1% 2 

20% 20% 20% 

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35 34% 34% 

26% 26% 26% 

5% 5% 5% 

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1X0 23 95 1630 70% 69% 70% 

46 2387 25% 24% 25% 

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. 6% Am Prate 035 3X 24 126 7 7 7 

8% 6% Amw&J QOS V0 6 990 J% 7% 7% 

20%AncsstMi 0.48 23 14 13 21% 21% 21% 

44Amaat 060 12 20 1474 49% 49% 49% 

9 9 

24 24 

32% 321 
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9% 8% Am Ad] R x 024 07 200 9 

31 70% Am Ban** « O10 04 32 5359 24% 
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20% 17% Am Cap Bd 1.54 06 31 
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21 21 

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53% 42% AraCyan * 1.65 3 4 30 2S97u53% 57% 53% +1% 

37% 27% AnflPw £40 02 15 2433 29% 28% 29% +% 

33% 26% AnCspr 1X0 16 1214624 28% 27% 27% +% 

26% 24% AmOrl 1.16 42 24129M 27% Z7 Z7% *-% 

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20% 16% Am Harttge 
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26% 23% AmPrtrn 0X8 11 
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27% 71 AmSter 046 £0 

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32% 27 An Wit 
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36% J4% BCE 
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17% l5*0n»iHBn 

* AUMalML 0 X % % * 

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28% 17*lMMOp aw 04 10 199 18 17% 1 

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AMEX COMPOSITE PRICES 


4 pm dose Jum 1 


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AdvMaon - m 6 12% 
AUnlot : 3 10 id 
AteBU0 -.-2 215,* 

Am ter Pa TWT2H00. «* 
AmMSA 064UC SO 20% 
AmttM OX 2 068 6% 
Amfa* -. 0 187 I* 
teMM 43 86 8 

ASRkm 072 1 43 ; 2 
Asm** 23 is 2% 
Atal 5 480 

ABasCMB 0 108 X 
Monk ...IT 260 12% 



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BAT ta 029 12 314 7% “ 

Bawd 6 3* 

Brtato 040131 noo 

BkHtaA 40 56 17% 17% 17% -* 

ttw A 00040 44 37* 36* 38* -* 
Boar Wap' ■ 110 Em1% II* 11* 
kkwmar - 2» 62 2|l 2fl -* 

BOWB 030 10 BZ 21% 21 21% +»j 

Bason A 1-04 14 27 .14. 13* 13*. -% 

CXnp 2 4 

Camtatt 020 13 zioo 22 

Cm Itac 1 026 22x100 12 
OtataA 001. fl 63 " 

OaXM E X 3 

Omnptti 47 IB 32* 3 

Wte 7 V256 137 5* 

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OMRU 001 17 S% 5% 



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QnnCA 0X 42 3 18 

CNMCB 040 15 
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16* 18* 16* 


abds 12 

amaik X 

Dacarnmn 10 

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Eauadox &4G 15 6 15*15*1! 

Engraap 1.72m 42 20* 20* ~ 

EOtoOay 0073662666 11% 11 11 

EeUEbAs DOB 10 2t 12* 12* 12* 

Btatoft) 6 « > 7% 7* -% 

San 15 815 33% 34* 35 -% 

EnoySen 502491 t£. s« *i +* 
Epnape 11 1343 17% is* 17% +% 

Ftakta OH 12 11 34* 34 34* 

FMAx 320 Hi 5 74* 74* 7‘ * 

FUQtetac 020 13 9 11* 11 r 

fttatfl 05274 GSU29* 29% 

tetatu 261388 44* M 

FHQuancp 2 * 3% J% 


I 000 7 88 

WA 072 W T78 21 
070 34 102 16 V 

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J £ S 4 

1 22 1535 3,5 0% 3,1 

X 1536 5% dS 6* 
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3 313 U3A 3* 3% 

015 45 5 10* TO»2 ID* +* 

13 283 10>4 ID 10% -* 


EH cap 
kttunCp 
U.CDM 


0.12 


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KtaakCp 

WtaExp 

KegrCq 

UtaW 
Laser tad 
Lagptann 
Umnitac 
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1 325 5* 5% 5* +% 
25 15 10* 10* 10* +* 
4 1470 4B 4A 4tt +A 
W ISO 10 17% 1ft J 4 
008 181707 19 18*18* -% 

3 183 5 U4% 4JJ +A 

20 11 13% 1ft 1ft +* 

22 5 *% «* 4* 

23 344 2D* 19* Iff* -* 

9 8 % 


77 151 



a i 

a II * 


25% 

9 35% 35% 35% 
Matte Ax 044 25 123 25* 24% 25* 
«m Co 020 6 5 4* 4* 4* 
teteUJ 3 8* 8* 6% 


utm 8 17 

WTOAX 056384 10CB 
NthCtaOl 029 IT 2 

Mnacf 122 3 

MR 72 10 

OdadcaA 



S a a 

34 135 n9% IS% 9% 
u«m o»155 681 33 32* 32% 

FB0MBG 040 89 651 18% 1ft TB* 


Pwte 

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PM U) 

PtrtwayA 

HyGera 

PUC 

PraaUnA 


Cp 

RtataCm 

SJWCnrp 

SDnOntan 

sane 

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Ola. e m Hgh imomRbi 
o»48 m 12 11* n% Jg 
104 13 19 25* a a 
023 191022 71* 71 71% +* 

050 20 4 37* 37% 37* 

are a ire 20 * iff* 20 % +* 

BSO 17 48 15 14* 14* -* 

010 1 IH T% 1% IS 
32 
3 
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2.10 9 14 36* 33% X 

16 noo 18* 18* ifl* 

OH 14 214 13% 12* 1ft 
21 


3 naij n 

115 U7% d&% 5% -1* 
25 1* di£ 1,5 -A 



67 

T86 PrxSs x 02D 52 8 

Tei&Dda 036 61 401 41 

Ttamadcs a 156 15 14* is 

Ttaatthi 20 16S 27% 27% 27% +* 

WNA 020 21 370 15 14% 15 +* 

TuMCWy 0 T17 2H 2% 2H -* 

Tito 11 15 1% 1% 1% 

TiAnallax 8 423 5* 5* 5* +% 

TtmrifeA 0D7 K 2B 19* 18% IB% -* 

Tumrss flfl7UE S58 19% 16* IS* 

LttffdodsA 5 40 2% 2% 2% 

UUFtafcB 020112 3 2% 2% 2% -A 

UtaRnm 17 34 6 5* 6 -* 

US Etta 96 135 28* 27* 27* +% 

VkcooA 10 242 30% 29% 29% -* 

VkeanB 1551 28* a% 2S% -* 

fftaanma zri4x 11* 10* n* +* 


Xyamta 


+% 

< 133 4% 3* *& +% 


- B - 

BEi a am oo 10 6 s 6 

Babbages 10 1258 1ft 11* 11% +* 
BataHWt SO * d* * 

Bata J 0D8 11 2236 1ft 17* 18 -1% 

BldwnLB 024 3 10 14* 14* 14* 
Bancfec 15 171 22% 21* 21* -* 
BnkSoum 044 12 576 1ft 18% 18* -* 
BartnsCD 040 9 205 18% 1ft 18% +% 
Banknorth 060 12 154 uTI* 20^2 21 +% 

BankWOrcs 020 28 24 u34 33* 33* 

Bants Geo 052 16 376 33* 32% 32% -% 

Basset F 080 15 IX 27% 26% 27 -% 

BayUbar 080 14 47u2S* 24% 25% +% 
Bajbanks 1.40 14 812 83% 63 63% +A 
BBSTFkx IDS 9 488 X* X* X* +£ 
BEAara 231052 ft 6% 9* +% 
BenbCnc 020 29 11 13% 13 13 -* 

BenUmy 16 530 16% IS* 16% +% 
BertfcyWR 044 14 15 38% 38% X% -* 
bhagip are 12 9 ft d8% ft 

take 95 107 5 4% 4% 

BigBx 01615 264 11% 10* IT* 
BtatlejrW 008 13 238 12* 11% 11% -% 
B410BI 36 2143 34% X* 34* ♦% 

Bkxnet 172086 9* 0% 9* +* 

Stocking 104 11 17 X* X X ft 
BMC Soft* 173011 55% 54% 54% -1% 
Boatmens XI .24 103959 33% 33* 33* 

BoD Evans 027 101870 21% 2ft 21* +,’* 
Boole SB 15 241 29% 29^4 29% +* 

Btatond 173818 10 ft ft -A 

BodonS«xa76 51253 31* 30 31 +1% 

Botanic 44 007 10 B% 9{J 

BradjWA 008 19 6 47* 46 47* 

Branco 020 26 K4 11% 11 «% ♦% 

BninnS 024 15 430 7% 7% 7ft 

BSBBncpx 076 9 Z73 B29 27% 27% ft 
BTaspng 048 0 26 3 3 3 

Whs M 1493 19% 10 19% +ft 

BbUbbT 22 K 12*412* 12% +% 

BtXTBmn X 587 9% ft 9% 

BttsnessR 02 46 X% 32% 32* +* 

ButaMta 5 X 22* 21% 21% 


FM Gtp 

Farr Co 

Famaial 

FHPW 

Ftomdcs 

FBhTIvd 

RityOfl 

BoatoA 


dec 
caw Med 
CadSdnapa 127 16 
Cadnuomdrea 20 


- C - 

182 11 25* 25% 2512 


9 357 8* 6 8 

82 28 27% 28 
9 17 16% 16% 


-A 

-% 

■ft 

ft 

ft 

ft 


GET YOUR FT DELIVERED TO 
YOUR HOME OR OFFICE IN BELGIUM. 

■A subscription hand delivery is available m any one of 98 postal codes throughout Belgium. 

^ ... .We will deliver your.daily copy of the FT to your home or to your office at no extra charge to you. 

IF you would like more information about subscribing please call Philippe de Norman 
on tel: 02/513.28. 16 or fax your requirement to 02/51 1.04.72. 


.... «f f , , 





C*re Cp 1 22 382 7% U7 7% ft 
Cafcene 225 8 5809 14% 13% 13% ft 
CalMcre 19 329 20* 20 X* ft 
CamtxBto i 497 1% ift ift 
CataML 2 85 3* 3% 3* +% 

Codas 0 X 2% 2* 2% +% 

Canon he 060118 I24n85% 64% 85% +1% 
Caw* 1 699 3% 2* 3% +* 

Catikta 012 25 144 4ft 48% 46% 
CaamnCm on 22 34 36% 26* 26% -* 
Cscade 0£0 IB 10 zi io* 18* ft 
Cssny S 008 151121 10%tnft 10% 
Cei0«a 4 123 og 6% 6 >] ft 
Ceflnta 8 334 10% 18* 1ft 

cacp IB 44 12* 12 12 

CereaTel 77 102 m 10% 10iJ 
Centocnr 5HP1B 12% 11% 12 

Cad Fid 1.12 121155 33% 33% 33% 
CnWSpf 22 14 11* dll n 
OtantSw 8 17 4* 4* 4* 
Chapter 1 QUO 8 B44 22% 22* 22* 
QraSh 009 1311074 9* 0* 9% 
Bwndsgn 42 47 u8* 8, 5 * ft 
Owntab T5 TOO 10% 10* 1ft -1* 
Ctanfut 1 290 % d* % 

Ctampower « ITT 3,', 3ft 3ft ft 
CtosiTe 9 972 4* 4* 4% ft 

Q4ra> Cp 63 6127 55* 63% K% +1% 
Gan Fin 10612 417 S2% 51% 51% ft 
CtatasCp 0.17 29 620 31%d2B% 30% -JJ 

QmttLflC 37 5681 35* 33* 35% +1ft 

CSTedi 131 1040 2* 2* 2% ft 

1321770 25 24% 24% 

CtzBancpxlDB 10 2 ZB* 28* 2b* 

CtoanHbr 26 IX 7% 7 7* 

CShOr 43 10 12% 12% 12% ft 

Ctomesan 92167 ft 4* 5* +% 
CocaCasSxlJM 16 380 26* XX* 
DDdaEngy 175 667 B 5% 5% ft 
CndeAtann 25 119 10* 9% ift +* 

Oogaeiqi 274974 1ft 15% 17% -1% 

Coonus 100 78 11% 11 11 -ft 

18 250 13* 13 13 ft 

B7 266 22 21 21% 

GoHGasx 105 13 34 21 20 21 ft 
Com Gtp 050 9 42 24 2315 24 

Ornate 024 12 806 19 18* 18% 
CR»Ax 009 185415 18 17* 17* 

CmcSASpiOH 374147 17* 1717.49 4.DG 

GtxmStataiaGB 11 IN 32 31% 31ft ft 
Conrad 070 92 51 18 17* 17* -* 

Compute 400 360 12% 12 12 -* 
Catuhare 57 372 13* 12% 12% ft 
OSBMfl 351220 3ji 3ft 3ft ft 

CDnfep L2B2B 509 40 X 39% +ft 

6 1344 7 65% 5% -* 

IHIBMEGull* 10% 11 
31 301 16% 15% 16% 

16 1116 ull* 10* II* ft 
050 18 656 19% 19% 18% -* 

86 483 10% 10% 10% ft 
22 1228 51 49% 51 +T* 

43 311 16* IS* 15* -% 
Qackera 002X3493 34% 24 24 ft 
Cay Comp 11111 1* 1% j,* ft 

381166 8* 5% 6* ft 
44460 6 5* 5% 


- F - 

112385 5% 4iJ 5 

024 13 IK 5* (&% 5% ft 

OH 51 4466 33 X* 32% ft 

141775 23 21* 22* +1 

3 174 3% 2* 3 

108 16 145 54ti 54% 54% +ft 

5 405 3* 2* 3ft 

OH 02344 10* 10* ID* 

X 690 27 26* Z7 ♦* 
FttAbama 120 IS IBS2 35% 35% 35% 
RratAm OH 62172 u34 33* 33% +ft 
FdficOMnx 100 11 226 24% 23* 24% 
ftCtXBk 000 21 396 24* 24 24 

W Seely 104 11 212 29% X% 29% 

Fat Tom 10B 9 491 42% 42 42 

FstWesm 036 7 132 0* 8* 8* 

FSJhMcx 052 6 4321 22* 22 22* 

FteBOerx IH, 11 172 47% 47% 47% 

Rrabnta 44 28 7% 7* 7* ft 

ftov 26 469 20* 20 20ft ft 

ftowM 17 444 6* 5% 6ft 

FOudLA 008 142987 5% (6* 5* ft 

FotaLB 009581 740 5* |B% M2 ft 

Foremost 108 10 684 31* 30% 3102 +.27 

FbrecfmB 13 358 14dis% 13% ft 

FtomeSanc OX X 6X 34 33% 33% ft 

Foster A X 457 3* 3* 3ft -ft 

Fithfin 104 11 354 28% TO 30 ft 

FstEadn 1.12537 USh^* 26% X* ft 
FaHnl 040 8 03 16 1ft 1ft 

FtKHwnlxl.lB 10 131 u28 27% Z7% ft 

FifcrHB 058 a 41 X 37 37 

FUtaifin 054 11 31u21% 20% 21% ft 

ftran OH 18 X 15% 15% 15% ft 

MmedADR 103 6 5% 5* 


- G - 

GBApp 7 5 3* 3* 3* 

GKSaw 007 21 395 14% 14* 14% ft 
0 IX 3% 3* 3% ft 

ID 5 3% 3% 3% 

016156 6 6% 6% 6% 

040 16 10 16* 16 16 +% 

18 458 u4% ft 4% ft 

4 BM 13* 12% 12ft -ft 

Gantex Cp <00 45 655 27 X* 27 +* 

Geras he 131 840 4* 3* 306 +08 
Genzyme 67 2428 29% 2ft 20* ft 
Staon Q x 040 11 207 18% 18 18 ft 

GkttngsL are 16 1851 22* 22 22% +% 
eSMA 080 18 X 18% 16% 18% +% 
GfchBtoffl 11 X 5% ft 5* 
6nodGuys 15 856 12% 11% 12 

GnuUsPmp 060 10 295 22* 21* 22 +ft 

Graoeosys 33 35 2 2 2ft 

Granite ax 70 IX 21 20% 21 .ft 

Green APx OH 10 2 17* 17* 17* 

GmwehPh 0 525 Ji % % -ft 

Grossmans 1 372 ft ft ft ft 

andWIr 637 111 12%d12% 12% ft 
Gil Crap 7 240 1ft Ift 1ft 

GbWSag 51725 0% ft ft .% 


Ikck Mr. E ttb M* L» Lot ctm 

-K- 

KSwtat D08 12 37 23 22% 23 +1 

AonraiCp 044 5 132 9* ft 9* 

KnyitanCp Qzffl 13 8« 22* 21* 22% +ft 

KMayOl 84481 7 6% 7 +% 

XedySvjt 0J2 22 7 27* 26% 26% ft 

Kentucky an 9 73 6% <b% 5% 

Umbel OW 14 20 24% 24% 24% +% 

Nradmer 14 42 7% 7 7 

KLAtoGb 54 6953 41 ffl% 41 +1 

KroNtodgs 5 627 10% ift 10,“ +40 

WA 1 <32 ii A JJ +* 

Karatg Inc 2041265 23 22% 22* -% 

KuOcfcaS 102195 15* ift 15* -% 


- L - 

Ladd Fun x 01" 48 32 9 ft 8% ■% 

Iran Rcdl 34 5418 3ft 28* 30* +1% 

Lancaster 0£4 X 326 47* 46% 47 +% 

Lance he 096 18 182 ift 18 18 

LandmkEph 411112 33* 32 32 -1% 
Lanoptbx 11 73 8 7* 8 

Lasaracpn 63 146 5% 5% 5% ft 

LamceS 15 3606 1B% 17% 18% +* 

Lawson Pr 048 16 326 23 22% 22% -/< 

1005 2S3 7860 16* 17* 17% -% 

LDICp OTB 2 32 5 5 5 -* 

Lechtas 15 286 12% 12 12% ft 
LdontCp 192635 32 3012 31% +1 
UbtyHBe 078 14 681 X* 27% X* +% 
Lite Test! 020 15 10 17% Ift 17% 

UMne 21 22 4* 4* 4* 

LUytndA OX X 238 22* 21* 21* -1 

LnBr 99 511 118%11B%U7% +,* tf 

Lincoln T 052 14 IX 14* 14 14* ft 

UndnyMf 14 14 32% 32% 32% 
UneaTec OH 38 441B 47* 44% 47* +2* 
LHMBtv 040 17 13 35% 030 35 

Loewhi Gp 008 27 3410 23* 22% 23A +A 
Lone Star X 177 7% 7* 7* -* 
LnbEO 4820550 BO* X* SO 

LTXCp 2 509 2% 2* 2* 

IWH 036 4 X »% ^4 3Q>2 ft 


H to 

Stuck lb. E IHta Mgb Low Last Cktg 

PutoB are 7 246 2ft 19% » -£ 
Pyramid HUM 77 a r% 7* ft 

QuadraLog 11 93 7* 7% 7* +% 

(taaketChm OEE 71 zlOO 17% 17% 17% 

Oal Fond 0X 16 332 Z3 21% 21% -% 

duanoin 
(tatotatar 
OVCNBMk 


7516299 16% 16% 16% +‘4 
18 190 13 12% 13 ft 

22 6048 X* 31% 33* +1* 


RaHys 


Raymond 

Recto 

REUfBA 

Rapigan 

Rep Waste 

Rtsnrtnd 


* 

-% 

* 

-* 


team he 
RbsrFS 
RaadwS 
RbNgnt 


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MO On 
MS Car's 

Mac ih 


-% 


Marine Dt 
Hartal Cp 


Maniotta 


Goods 
Garnet Rs 
GeMCD 
Geri BM 
Gadyte 
GendaPb 


005 2127107 X* 23% 23% 

17 567 X 1ft 1ft 

DM 42 40 13|2 13% 13% -07 

UtadsonGE (108 14 124 X* 32% 32% 
MaoraPw 13 598 3T X% 30% 
HaptaOp 076 11 538 18% 18% ift 
MafiBw 13 46 ft Oft 
Msnam Cp X 469 10% 10 ift 

13 53 4% 4% 4* 

B 49 40% 3ft 39% 

1 124 2* 2 2* 

18 161 6% 8* 0* 
tterahSn«A044 10 205 10% 9% ift 
Uanhalx 060 112006 21% 2121% 

10 3208 ft 8% ft 
M»hi M 412136 S3* 51* 53* 
UntorCp 01X3 5% 5% 5* 
McGrath n 044 13 11 17% 16% 17% 

McConnc 048 173852 21* 20% 21% +,% 
McCawC 48 4933 52* 51* 52% +% 

MraUmag 0 252 % % 3 ft 

Medea toe 016 15 18 12* 12 12 
MaHOneS 048 73 IX 22% 22% 22* 
Metarane OH 6 X ft 4% 4% 
MarterCp 016 45 20 14% 13% 13% 

MenbG OH X 3913 T0*d1ft 10,1 -& 
MratanLB 008 11 817 20* 19% X 

MracuyG 070 6 208 30 X* 29* ■* 

Meridbn IX 122X1 D32* 31% 32 +* 

Mmtael 172205 17% 16* 17* 

Metfmda A 006 15 93 ift 14% ift 
MKtealF 0X17 473u12% 11% 12* 
MdlNdB 2003421775 75% 75 75 3 4 

HatfWi 8 273 3% dft ft 

Mharags 19 1971 X 25 25 
Mtooeran 4 561 5* ft 5A 

MfcfpHbr 171023 7 6* 6* 

3 2706 6% 6* ft 
1542184 53* 52% 53 -% 

MMABM 436002 40* 48% 49 +* 

MkBandc 040 12 6094u3T% 30% 31 

MdnGnan 050 27 78 32* 32 32* 

H* 052 17 1099 25* 24* 24% ,% 
•Man 1818 24* 23* 24% +1* 

Mtantedi 14 35 11% 10% 10% -* 
MnbttoTel 441719 17* 17* T77 s 

Mratem Co OX 18 4 7% 7% 7% 

ModheMK052 18 IS X* 25% X -,i 
Meta OH 21X 3ft 35% X +% 
Motet hC 004 281740U38* X X 
Mosenni OH 151145 9* 8* B* -* 
MnshsaP 0X22 XX* X* 2ft 
Mr Caftoa 18 434 14% 14* 14% +% 
MIBSys 056 11 18 27* 27 27 
»med 13 635 X* 28% X +,*. 

W»oen 4 23 11 10% 11 ft 


-* 

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■r* 

+% 

ft 

ft 

♦ % 
+1 
+ % 
ft 


-* 

-* 


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■* 

J 4 

ft 


- R - 

13 IX 14% 14 14% 

5 778 S* 5* 5* 

3 624 ft »% 4% 

23 413 18% 17* 17* 

31 6BU33* 32 33% +% 

16 15 17% 17% 17% -* 

2 397 4* 3* 4% ft 
5 18 3* 3% 3* +,' c 

14 345 5* 6* 8* -% 
224 152839 42% 41* 42* ft 

1 92 ft 5% ft +% 
060 10 8 35* 35 35 

1.40 X1317 71* 71 71 -% 

01213 52 ft 6% 6% -% 
Roch5«8k 05B 4 1429 16* 15* 18* 
RooMWJt 015 33607 U18 17 17% 

Ross Sir OX 1014S 13* 13* 13* +% 
RMKfflM 25 334 X% XX* ft 
House 068 50 540 IS* 19 19* -* 
flFM&K. 052 X 230 18% 17* 17* ft 
RSRn 045 12 17u20% » X% 

Ryan Fraly 14 3055 7* 7* 7* ft 


- s - 

Sat MX) 106 B 954 5ft 55 * 55* 
Sanderson OX 13 17 17% 17% 17% 

5cnbnbgrA OX IB 1607 X* X 25 

Set Med L 82717 3D 29% 29* 

sasys&n 123140 15% 1ft 15% 

Scl« 6 651 6% dft 6* 


ft 


-.i 


SdtexCpx 052 76336 

16015* 15% 

-* 

Scan Bid 

7 0559 

8* d7 7* 

-1 

SeafieU 

120 45 19 37% 37* 37* 


Spate 

1112686 

24 23% 23?| 

ft 

SB Cp 

012 22 X 

18 17* 17* 


SeteeisB 

ax 1 BS 

1% 1% i!3 

■ft 

SatodkK 

1.12 15 21 25% 24* 2ft 

+% 

Sequere 

70 5038 

15 14 14% 

ft 

geguqia 

27 60 

ft 4 4ft 

ft 

Sav Tech 

13 5 

9 9 9 

-* 

SereFraa 

21 206 

4* 4* 4* 

-* 

Sevenstr 

18 68 ulB% 17* 17* 


Shrafed 

OH 161775 

23 22* X* 

-* 

90 Systm 

3 796 

bit 6* 6J2 

ft 

Sharoraraxl 

27 112 

’ 17 16* 17 

♦* 

ShmtbttP 

10 203 

11 1ft 10* 

ft 

Sena On 

18 1230 

22* 21% 22 

-% 

SterraTuc 

2 68 

3* 3% 3* 

+% 

SigmAJ k 

033 TB 1974 41% 40* 40ln 

-1 

SgmaDes 

1 302 

ft 7% 8% 


araftBc 

006 50 7 10* 10 10* 


SficrlUGp 

33 2168 11% 10* 11% 

ft 


Simpson x 056 24 X ift 19 19 -* 

SmAMW 33 XI 24% 231 2 24 +* 

snantefiv 65 4160 25 24* 25 +,'« 

SrataaiBP 1 285 ft 4* 5* 

Smocn 056 14 974 2D>4 X X ft 

Sranrast* 068 103792 21* 21 21* 

SpiB£teA 0X 44 1618 21* 21 21 ft 

SJ JndeMd 040 11 1416 27* 26% 27 +% 

SIPauBC OX 10 468 21* X* 21* ft 

SicyBl 21048 2* 2* 2* 

Staples 453435 29* 26% X* +% 

State Sir 056 174460 42 40* 42 +1 A 

SU Mem 11 1280 17* 15* 17 +% 

SWRegfc OE6 14 2032 21* 21 21 

Steal Tac 008 151533 17 16 16% +% 

SMdyUSA OX 37 551 10 9* 10 ft 

StobN 142 is 20% 20 x -* 

SbamteQ 1.10 12 71 20121110% 20 1 4 ft 

SHieUDy IS 4002 10 dft ft ft 

Stryker OX 22 656 27% 26% 27* +% 
SuteranD X 195 15% 14% 14% ft 
SumttomoB 080 25 7 22 22 22 

Sunni Be OH 14 644 u22* 22 X* 
SunmUTa 37 503 27* 26% 27% +% 
SBiSpwt 12 133 5,’* d4% 5 -% 

amMc 1113471 21* 20* 21% +* 
Satin Tra X 47 33 28* 28% ft 

Sybase Inc 64 0238uS5% 53% 55* +1* 
Symantec 382444 14* 13* 14% +}' 

Sjnafloy 038 18 27 18% 18 18% -% 

Summon 62 302 3% 3 3* ft 

Synergen 2 227 9* ft ft 

Synetic 63 73Sulft 15 ift -1 

Synoptes 185408 X* 1ft 19* -JJ 

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36 


WORLD STOCK MARKETS 


FINANCIAL TIMES 


Thursday June 2 1994 


AMERICA 


EUROPE 


Inflation fears trigger 
decline in US stocks 


Wall Street 


US stocks declined as fresh 
signs of inflation depressed 
bond prices, writes Frank 
McCarty in New York. 

By 1 pm. the Dow Jones 
Industrial Average was 14.46 
lower at 3.743.91. while the 
more broadly based Standard 
& Poor's 500 was down LOS at 
455.43. Volume on the NYSE 
was light, with 151m shares 
traded by early afternoon. 

In the secondary markets, 
the American SE composite 
shed 1.36 to 439.09 and the Nas- 
daq composite retreated 3.81 to 
731.38. 

From the opening bell, 
stocks moved in step with 
bonds. At mid-morning the US 
Treasury market was sent into 
a tails pin when the National 
Association of Purchasing 
Management released the 
results of its monthly survey. 

The closely watched report 
actually offered a mixed view 
of the economy. Its overall May 
index was unchanged from the 
previous month, but the prices 
index showed a sharp increase 
from April. The data suggested 
that a gradual escalation of 
demand for raw materials was 
beginning to feed through to 
prices paid by manufacturers. 
The trend, reasoned inflation- 
sensitive bond traders, would 
soon lead to higher prices paid 
by consumers. 

But government securities 
managed to stabilise and 
recover some of the ground 
lost immediately after the 
NAPM's announcement. Slid- 
ing prices for gold and other 
commodities helped to soothe 


nerves, as did talk of outright 
purchases by the Federal 
Reserve. 

The gradual improvement by 
bonds helped the Dow industri- 
als. The index retraced about 
half its losses after falling by 
as many as 35 points during 
the morning. But some cyclical 
stocks were stubbornly 
anchored in negative territory. 
Caterpillar, $1% tower at 
$105 l *. was responsible for 
most of the decline In the Dow. 
Cummins dropped $1% to $41% 
and Alcoa fell $1 to $69%. 

Takeover speculation in the 
pharmaceuticals field emerged 
once again. This time the 
potential target was US Surgi- 
cal, the medical equipment 
supplier. Its stock jumped $2% 
to S2I% on widespread expecta- 
tions that Ciba-Geigy. the 
Swiss drug group, would make 
a takeover approach. 

International Game Technol- 
ogy improved Sl% to $23% after 
its management issued a posi- 
tive assessment of the compa- 
ny’s prospects. In reaction to a 
recent slide in its share price, 
the company said that demand 
for its gambling equipment 
was at an all-time high. 

Compaq Computer, mean- 
while, shed $1% to $116% after 
announcing price cuts on some 
of its most popular products. 

On the Nasdaq, Apple Com- 
puter lost $l‘/« to $28. Investors 
were apparently unimpressed 
by the formal launch of its 
Power Macintosh line in C hina 
and the announcement of 
plans to begin hardware pro- 
duction there. Elsewhere, 
Lotus Development dropped 2% 
to $57% and Microsoft weak- 
ened SI 1 /; to $52'/>. 


Canada 


Brazil 


After opening lower following 
disappointment over the fail- 
ure by a congressional commit- 
tee to agree a revision of the 
constitution late on Tuesday, 
the Bovespa index picked up 
again. At midsession the index 
stood a net 166 higher at 
24,836. 

Brokers commented that 
liquidity had risen by late 
morning as foreign investors 
returned to the market. Turn- 
over was Cr220.2bn ($115.4m). 

Telebras preferred gained 0.8 
per cent at 072.60. 


Crisis of confidence as Tel Aviv drops further 2.6% 


The Israeli stock exchange registered its third 
successive day of heavy falls yesterday, with 
the Mishtanim index dropping nearly 3 per 
cent, writes David Horovitz in Jerusalem. 

The market has been drifting downwards for 
several weeks, and has lost in excess of 25 per 
cent of its value in the last month. 

Analysts said that the market was going 


through a crisis of confidence, and ascribed the 
latest falls to a variety or factors: a financial 
crisis in the country's largest health fond, 
Kupat Holim Clalit, unexpectedly poor results 
published recently by several large companies, 
deadlock in the peace process with Syria, and 
soaring house prices that have been fuelling 
inflation, prompting recent interest rate rises. 


EMERGING MARKETS: IFC WEEKLY INVESTABLE PRICE INDICES 

Market 

No. of 
stacks 

May 27 
1994 

Dollar terms 
% Change 
over week 

% Change 
on Dec '93 

Local currency terms 

May 27 % Change % Change 
1994 over week on Dec *83 

Latin America 

eiqj 

629.72 

+1.8 

-3.2 




Argentina 


963.00 

-1.0 

-3.1 

530,923.78 

-1.0 

-3.1 

Brazil 

(57) 

242.11 

+2.8 

+4.0 

607,432,4064) 

+13.7 

+497^ 

Chile 

125) 

653.43 

+3.0 

+18.4 

1.108.07 

+2.8 

+16^ 

Colombia' 

HD 

897.76 

-1.7 

+39J 

1.338.59 

-1.8 

+44.4 

Mexico 

(691 

91253 

+2 JS 

-9.3 

1304.66 

+2.9 

-3.3 

Penr 

(ID 

152.17 

-1.6 

+25.8 

203.32 

-1^ 

+27.9 

Venezuela 5 

(12) 

517.64 

-6.7 

-12.5 

1 .987.27 

+12.9 

+39.8 

Asia 

(558) 

245J3 

+0.3 

-15.7 




China* 

(18) 

99.21 

+6.9 

-33.5 

108.56 

+6.9 

-33.8 

South Korea 1 

(156) 

13JL21 

+0.0 

+11.9 

140.16 

+0.0 

+11.7 

Philippines 

(18) 

293.56 

+4.0 

-13.8 

379.36 

+4.0 

-14.6 

Taiwan. China* 

(901 

128.40 

-2.1 

-5.0 

129.48 

-1.9 

-32 

India* 

(76) 

123.79 

-0.6 

+6.3 

136.89 

4X6 

+62 

Indonesia* 

(37) 

108.76 

+4.8 

-12.8 

127.18 

+4.9 

-10.3 

Malaysia 

(105) 

266.49 

-1.0 

-21.4 

254.66 

-1.0 

-24.4 

Pakistan" 

(15) 

355.31 

+0 2. 

-8.4 

493.43 

+03 

-6.6 

Sn Lanta" 

15) 

178.91 

+1.5 

+0.9 

192.22 

+1.7 

+0.7 

Thailand 

155) 

394.82 

+4J 

-17.3 

394.74 

+3.9 

-1&3 

Euro/Mid East 

(125) 

99.71 

-1.2 

-41.1 




Greece 

(25) 

213.53 

-5^ 

-6^ 

356.54 

-6.1 

-7.3 

Hungary" 

<5) 

197.36 

+0.1 

+18.4 

243.54 

-0.2 

+2P6 

Jordan 

113) 

164.94 

+0.3 

-0.4 

237.50 

+0.0 

-02 

Poland 1 - 

P2) 

731.28 

+3.6 

-10.6 

1.042.85 

+3.8 

-5.5 

Portugal 

(251 

116.67 

-3.0 

+2.5 

137.08 

-2-5 

-0.8 

Turkey 0 

(40) 

76.56 

+2.3 

-64.0 

1,162.34 

-1.0 

-20.1 

Zimbabwe 1 * 

(5) 

291.30 

+0.1 

+44.1 

344.66 

+05 

+6U 

Composite 

(892) 

312.55 

+0.9 

-12.1 





* r,v "*** ™ "W'k cnartfiz aw oarcmuoa lo x nma m tnxn cto kMm rw ay. Sosa data: o*e <988*100 snap t (teas maw) 

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(*< V I9K. I tIVvc jr '393: H33w Jr I95T; /iMkjg J 1989 tl-iUuty 3 1991 


The bear phase among the world's emerging markets continues to deepen and the 
consensus is that the current downward cycle has further to ran, writes John Pitt. 
Foreign & Colonial observes that over the last 20 years emerging markets have seen 
four downward corrections. “Three of these falls,” it notes, “lasted less than eight 
months, and the other, in the early 1980s. a little over 2% years.” On the evidence that 
Jbe IFC composite index has dropped by some 9 per cent since the beginning of the year, 
r&c suggests that the current correction probably has “a couple more months to r un 
and another 3 per cent to fall”. 

Baring Securities, in its latest strategy document, argues that having been driven 

hurhpr nr thn tlrwwl nf TIC irwvi a i i_ .. 


higher by the flood of US money throughout 1993, emerging markets* are likely to 

?r the next three months given further tightening of US 

Rarinv diuc caa aarnfart nbaaj anuui.n. Aa L.lf 


remain under pressure over . 

monetary policy. However. Baring does see comfort ahead, especially in 'the second half 
of 1994. as trading prospects in general improve. More specifically. Bating finds favour 
with the north east Asian region. South Korea in particular, and, in Latin America, 
recommends Mexico, suggesting that Argentina could “be tripped up by rising US 
intpr^st r3t£s 


Paris off 2.4%, CAC-40 breaches 2,000 


Toronto was lower at midday, 
pulled down by a weak bond 
market and gold stocks. 

The TSE 300 composite index 
declined 313 to 4.295.40 in vol- 
ume of 31.04m shares valued at 
C$380m- 

Canadian bond markets felt 
the impact of heavy foreign 
selling of Quebec bonds due to 
nervousness over forthcoming 
elections in th e province. 

On the TSE, the only sector 
to move ahead was consumer 
products, up 17.68 at 6,751.©. 
Seagram gained C$% at C$41*/. 
in spite of announcing lower 
first-quarter profits. 

The gold and silver index 
dipped 152.79 to 10.093.54. with 
Placer Dome off C$% at C$31%. 

Among other active stocks, 
Newbridge Networks dropped 
C$4 V. to C$59Y. on rumours 
that the US Federal Communi- 
cations Commission might call 
a temporary halt to equipment 
orders. 


Tuesday’s intraday recovery 
was reversed as bourses faced 
weakness in bond and futures 
markets and. in the afternoon, 
early declines on Wall Street, 
writes Our Markets Staff. 

PARIS could not hold above 
the 2,000 level in the CAC-40 
and closed at its lowest point 
since the end of July 1993. 

The final kick downwards 
was triggered by Wall Street 
But, once again, the real pres- 
sure on equities was imposed 
by the futures and bond mar- 
kets as the CAC-40 index ended 
the session down 50.22, or 2.4 
per cent, at 1.979.68, slightly 
above the day's low of 1,972. 
June futures finished at 1,951, 
with turnover in the equity 
market estimated at nearly 
FFrSbn. 

Analysts commented that 
the equity market was “on the 
ropes", and that it was 
extremely difficult in the pres- 
ent climate to makp an assess- 
ment of when it would be a 
good moment to return on the 
buy side. The very seasonal 
nature of the French market - 
the first quarter was tradition- 
ally seen as the period when 
stocks rose against the Euro- 
pean average and s umm er a 
time of decline - was also 


ASIA PACIFIC 


advanced as a backdrop to the 
present situation. 

Among tbe fullers. CAP 
closed below its privatisation 
price, down 5.5 per cent at 
FFr143.80 while, against the 
□end. Eurotunnel put on 1 per 
cent at FFr32.95 as the group 
provided bullish estimates of 
traffic volume. 

FRANKFURT registered a 
new low in bund futures and 
fell away after an early, pre- 
bourse high of 2,146.62. The 
Dax index closed the session 
just 2D0 firmer at 2,139.79 and 
ended the post-bourse at 
2.113.61 

Turnover eased from 
DM6.7bn to DM6.4bn. Major 
blue chips seemed studiously 
inert, witb big price changes 
confined to Lufthansa, up DM8 
to DM1S5 in an extension of 
this year's speculative run, and 
to the engineering sector, 
where Deutsche Babcock 
moved ahead DM10 to DM247. 

At B Metzler, Ms Barbara 
Altmann said that investors 
were sitting on their hands; 
but. she added, there was 
beginning to be a case for 
selective buying with Bayer, 
for example, some 10 per cent 
off its high for the year at 
DM362.50 after hours, on a pro- 




Jun 1 
tarty chaoses 


THE EUROPEAN SERIES 
Opal 1030 11.00 1QQP HOP 14.00 1*00 tea 


FT-SE Eurcnadc 100 140007 139980 I3BS.78 1396.06 IBS-21 139139 139168 1388.97 

FT-SE bnmft 2D0 141 OS 1408J6 140023 140533 14639* 14Q1 OS I4Q4Q4 139953 


Hay 31 


MW 27 May 26 Uly 75 Hay S* 


7T-SE Emote** 100 139173 HW.19 141 1 48 141151 1435 77 

FT-SE fter+wfc 200 140070 141433 1-C507 143024 145390 

&s* i m ewe**. KtfMftr: roo - loons, an • man iv-w wo • ossw mb - rau* 


spective 1995 p/e of 10.7. 

AMSTERDAM was buffeted 
by a combination of negative 
influences from outside tbe 
equity market The Aex index, 
which at one point bad fallen 
to a session low of 396.08, 
Closed off 3.25 at 397.52. 

In spite of the overall gloom 
a few bright spots enlivened 
investors’ interest. KLM, for 
instance, which reports its 
1993/94 fourth quarter reults 
today, advanced 60 cents to 
FI 5L90. br ing in g its rise on the 
year to date to 24 per cent. 
Analysts were looking for tbe 
airline to come in with a profit 
in the FI 50m range. 

A broker’s buy recommenda- 
tion helped retailer Ahold to a 
rise of 30 cents to FI 47.80. 
while ING, the financial ser- 
vices group, which also reports 
figures today, slipped 60 cents 


to FI 75.30. 

The heavily weighted Royal 
Dutch also added some stabil- 
ity to the overall trend, the 
shares adding FI 1.50 to 
FI 196.30 and benefitting from a 
positive broker's note. 

ZURICH added buying of 
defensive stocks to the selling 
of cyclicals which marked 
Tuesday’s trading, and the 
upshot was a rise against the 
general trend. 

The SMI index rose 8.9 to 
2,731.5. Roche certificates rose 
SFr90 to SFrO.SOO. UBS by 
SFrlT to SFrl.212 in banks and, 
in insurers. Winterthur by 
SFr25 to SFr715. 

Among cyclicals, BBC Brown 
Boveri continued its downward 
career. SFr25 lower at SFrl.235. 
and Schindler accelerated with 
a fall of SFY350 to SFrS^OO. 

MADRID followed the pric- 


ing of the Endesa and San- 
tander issues with an above 
average drop in the general 
index. 5.62 or 1.7 per cent lower 
at 321.38. Turnover shot up 
from Pta25bn tu Pta42bn. 

An interaction of futures, 
basket trading ami tbe new 
issue rlosures was mooted as 
Endesa lost PtalfiO at FU6.400, 
and Santander at 

Pta4.SS5. Elsewhere. Repsol 
and TelefOnica fell Plnl4S to 
Pta4.l35 and Pta75 to Ptal.765 
respectively. 

WARSAW fell sharply as 
profit-taking in second-tier 
stocks coincided with falls In 
major blue chips which had 
already been undermined by 
weak investor sentiment. 

The ail share Wig index 
declined 870.7 or 7.2 fier cent to 
11.166.0. while turnover 
dropped 36 per ceut to l.OOObn 
zlotys and volume 46 per cent 
to l .fim slum's- 

ISTANBlfl.. in contrast, rose 
5.2 per cent, helped by sus- 
tained buying of state compa- 
nies. The composite index 
gained 774.36 to 15.523.46. 
recovering most of its losses 
since tho start of the week. 

Written and edited by William 
Cochrane and John Pitt 


Nikkei tops 21,000 for first time in 1994 


Tokyo 


Equities extended their run to 
a fourth consecutive high for 
the year, the Nikkei 225 aver- 
age closing above the techni- 
cally significant 21.000 mark 
for the first time since last 
September, unites Robert Pat- 
tan in Tokyo. 

The index gained 79.52 at 

21.053.11. within st riking dis- 
tance of last year’s peak of 

21.148.11. after a day's high of 
21.090.72 and low of 20,896.38. 
First section volume on the 
TSE was estimated at 700m 
shares and winners outnum- 
bered losers by 613 to 419. with 
158 issues unchanged. 

The capital-weighted Nikkei 
300 average ended at 309.89. up 
2.10, and the Topix index of all 
first section stocks rose 11.06 to 
1.693.58. In London the ISE/ 
Nikkei 50 index added 2.41 at 
1.405.42. 

The market moved higher at 
the opening as foreign buyers 
returned after Monday’s holi- 
days in New York and London. 
With some exceptions, domes- 
tic institutions and arbitra- 
geurs continued to sell 
throughout much of the morn- 
ing, bat they were no match 
for foreign investors. 

Trading was characterised 
by active demand for highly 
priced high-technology shares, 
encouraged by a government 
panel’s report yesterday which 
advised governmental invest- 
ment in fibre-optic infrastruc- 
ture to create a national multi- 
media network. 

Fujitsu, a world leader in 
fibre-optic switching systems, 
put on Y30 at Yl.130. Other 
multimedia-oriented companies 
also gained ground. 

NTT, positioned to be a 
leader in the expansion of the 
nation's telecommunications 
infrastructure, advanced 
Y27.000 to Y892.000. Heavy elec- 
tricals were also mostly higher, 
Hitachi rising Y20 to Y1100. 

Oil shares moved up on a 


SOUTH AFRICA 

Johannesburg was firmer as 
equities were given a boost by 
a rise in the gold bullion price. 
The overall index moved for- 
ward 24 to 5.420, industrials 
14 to 6,563 and golds 31 to 
1348. Anglos, which reported 
higher full-year earnings, 
advanced 75 cents to R219- 


cjiTTBikd tr; Ttw Financial Tlmt* Ltd. 

NATIONAL AND 


Goldman. Sachs & Co. and NelWm SeaxWes Lid. m confmction with the IrsUtuM of Actuaries and the Faculty of Actuaries 


REGIONAL MARKETS 














Rcun« it wrpr:(He?«i 

US 

Day's 

Pound Local 

Local 


US 









Donor 

Ctiange 

SlorSng 

Yen 

DM 

Currency 

% chg 

Dtv. 

□oltar 

Staring 

Yen 

DM Currency 52 wreck 52 weefc 






(rates 

Indus 

tote* 

an day 

YWd 

Index 

Index 

Index 

tofex 

totex 

Wgh 

Low 


Auaand i i69i , 

... K5^0 

-02 

171. B2 

115.90 

148.70 

157.64 

—0-7 

3.48 

17630 

172.41 

11834 

15034 

156.93 

189.15 

13619 

138.75 



-0.6 


115.21 

146.81 

148.70 

-0.7 

1.09 

17534 

172.15 

11537 

150.01 

140.75 

195.41 

142.90 

14a56 


•+ h 1 .36 



113.36 

146.41 

142J90 

-04 

336 

17136 

1E653 

113.43 

i4ase 

14334 

178.87 

141.92 

14731 




120.58 

86.73 

112.02 

131.63 

OA 

2.57 

130.72 

128/41 

86.43 

11130 

131.12 

14531 

121.46 

12932 



-0* 

24S.63 

165.69 

214.00 

219.67 

-02 

1.34 

251.10 

24a B7 

16 a 02 

214.95 

22034 

275.79 

20738 

21934 




142.35 

96 02 

124.02 

165.71 

-IS 

036 

147.65 

14534 

9732 

12639 

16836 

156.72 

86.54 

10033 





111 28 

143.72 

14837 

-1.1 

3.04 

169.66 

lease 

11231 

145/40 

149.93 

18537 

14930 

isaie 




134.90 

90.99 

11753 

117.53 

<J2 

1.76 

136.89 

134.57 

9038 

11737 

11737 

14T.07 

10738 

11330 


-391 33 


383.80 

258.86 

33438 

388 17 

0.5 

2.74 

38931 

382.45 

257.41 

33337 

388.15 

606.56 

271.42 

29929 




179.69 

121-20 

156.56 

174.51 

0.0 

3.48 

18331 

18038 

12131 

15633 

174.53 

20933 

15633 

18330 




86^0 

56.41 

75.48 

10435 

1.1 

130 

8735 

8531 

57.78 

74.78 

103.76 

97.78 

5738 

7005 




158.24 

106.74 

13738 

106.74 

02 

0.75 

161.14 

15830 

10655 

13736 

10835 

16531 

124.54 

15068 




456.06 

J07.B3 

3S734 

461.02 

-1.1 

1.45 

46933 

46135 

31032 

402.04 

467.01 

821.83 

31231 

344.02 




2093.69 

1412.27 

1824.07 

775637 

0-1 

1.00 

213731 

209930 

141330 

1829.81 

7751.98 

2647.08 

1431.17 

1493.02 




19J.75 

131.37 

169.67 

18737 

-03 

3.38 

19831 

185.31 

131.46 

170 20 

167.48 

207.43 

18422 

17032 





46.52 

60.09 

62.80 

-0.4 

331 

6934 

68.71 

4835 

5938 

6a05 

7739 

4837 

49.14 




191.90 

129.46 

16731 

189.44 

—1-4 

1.75 

198/47 

19437 

13133 

160.80 

192.15 

206.42 

isasi 

159.74 



-0.6 

342.16 

230.80 

298.11 

246.50 

-0.6 

1.54 

35035 

344.76 

232.04 

300.43 

24737 

37832 

242.48 

259/43 




25a2S 

174 JO 

22499 

273.38 

00 

237 

263.05 

2S6.41 

17332 

225.18 

27338 

28036 

175.93 

19931 




142JJ1 

96.79 

123.72 

148.72 

-13 

431 

146.89 

144.10 

9639 

12358 

150.84 

165.79 

11633 

12S35 




215 45 

145.43 

187.71 

253.45 

-1.6 

138 

224/4B 

22033- 

14643 

192.17 

25732 

23136 

163.85 

164.05 




156 19 

105.35 

136.06 

138.47 

-0.7 

1.75 

16032 

157.20 

10530 

13a 98 

139.38 

17 a 56 

124.48 

12036 




180.29 

121.62 

157.08 

18039 

0.1 

4.15 

163 32 

18038 

12131 

156.83 

180.08 

21438 

17032 

17937 




182.48 

123.09 

158.98 

188.06 

-03 

288 

18634 

18335 

12334 

159.69 

18634 

19604 

178.95 

163.94 

EURO+'E i721i 

...163 63 

-0.1 

161^47 

106.91 

140.67 

16140 

-0.2 

3.03 

18433 

16132 

10838 

141.10 

153.83 

17658 

141.68 

147.95 




204 JS 

137.77 

177.9S 

208.61 

-13 

143 

211.62 

20739 

139.92 

181.16 

21136 

22030 

156.82 

171.76 




166.51 

112.32 

145 07 

116.62 

0.1 

134 

189 62 

16633 

112.15 

14530 

116.49 

188.78 

134.79 

15431 




164^6 

1 10 JO 

143.10 

131.61 

0.0 

135 

107.47 

164.51 

110.73 

14a 36 

131.65 

17tt 76 

14138 

151.70 




179.13 

120.63 

156.06 

18239 

-02 

2.87 

18336 

17935 

121.05 

158.72 

182.71 

132.73 

175.67 

18034 



-0 3 

147.41 

99.44 

128.43 

136.31 

-0/4 

2.38 

15033 

14ai7 

99.73 

129.12 

13& 89 

1B7.47 

12237 

12838 


...^5? 83 


247.96 

18726 

216.03 

22838 

-03 

232 

253.04 

248.58 

16731 

216.62 

227.01 

29631 

182.38 

192.49 




185.40 

Hi ST 

144.10 

134.95 

03 

137 

168,52 

18534 

111/49 

14435 

13437 

17231 

14234 

IK! 23 


. 172.38 

-0.1 

169.08 

114.04 

14739 

147.83 

-0.1 

9m 

17238 

16934 

114.11 

147.74 

i4an 

17658 

15332 

190.08 


.. 172.88 

-0.1 

169.55 

11437 

147.72 

160.06 

-0.1 

233 

1 7333 

1E9L97 

114.40 

14ai2 

16031 

17836 

165.00 

181.70 


...182.01 

-0.2 

173.50 

120.41 

15631 

17B.12 

-03 

237 

182.32 

179.10 

120155 

156.07 

17632 

19530 

165.72 

108.70 

TV WortQ tnde> ... 

.. 173.42 

4X1 

170.08 

114.72 

148.17 

1SUX) 

-0.1 

223 

17336 

17030 

114.75 

14837 

151.15 

17BS7 

155i17 

16134 


broad front, supported by 
higber prices for crude oil and 
projections that China's need 
for oil would increase as its 
economy expands. Nippon Oil 
moved forward Y1S to Y77S 
and Japan Energy finished at 
Y458. up Y9. 

In Osaka the OSE average 
rose 148.83 to 23.311.19, with 
40.9m shares changing hands. 
OSE volume for May was 365 
per cent higher than in April, 
reaching 579.6m shares. 

Roundup 

Sentiment in the region was 
mixed to better, with selectiv- 
ity in evidence. 

MANILA climbed by 2.7 per 
cent on a higher than expected 
GNP growth rate, a late rally 
in an already bullish market 
driving the composite index up 
by 83.67 to 3,114.44 after a bout 
of profit-taking. 

GNP-related stocks were 


favoured, with San Miguel “A” 
shares up 43 per cent to 107 
pesos and Meralco “A” 3.3 per 
cent better at 31230 pesos. 

SYDNEY recovered on eco- 
nomic data, rising futures and 
stronger commodity and gold 
prices, the All Ordinaries index 
closing 15.4 firmer at 2397.2 in 
turnover of A$4562m. 

Brokers said that while the 
1.9 per cent rise in March GDP 
was not good for bonds, it 
fuelled buying of equities 
because of the prospect of 
higher company earnings. 

Among resource stocks, CRA 
jumped 26 cents to A$18.36, 
Western Mining climbed 10 
cents to AS7.80 and MIM added 
4 cents at A$3.17. 

TAIPEI saw waves of buying 
in electronics shares which 
pushed the weighted index up 
by 69.89, or 13 per cent, to 
5361.45 as turnover increased 
from T$5336bn to T$63.03bn. 

Rises in electronics were led 


by the leading computer manu- 
facturer Acer. TSL50 stronger 
at TS66 50 on newspaper 
reports of a higher 1994 profits 
taiget 

Petrochemical issues also 
attracted buying, on expecta- 
tions of higher product prices. 
China Petrochemical was up 
TS1.20 at TS28.10 and Union 
Petrochemical advanced TS2.S0 
to TS44.20. 

BANGKOK featured banks 
and building materials as the 
SET index moved ahead 11.48 
to 1.368-35 iu turnover of 
Bt6.7bn. The banking sector 
rose 2.55 per cent. 

HONG KONG was subdued 
on a lack of domestic news and 
the absence of foreign initia- 
tives. the Hang Seng index 
declining 41.48 to 9.512.07 as 
turnover recovered from 
HKS331bn to HK$3.97bn. 

SINGAPORE fell as general 
sentiment was weakened by 
retail margin selling in Malay- 


sian shares traded over the 
counter. The Straits Times 
Industrial index slipped 13.79 
to 2.267.35. 

Volume came to ltu.45m 
shares. Singapore Press foreign 
shed SSL to S$26 and Sem ba- 
wling Cnrp SO cents to S$12. 

KUALA LUMPUR dropped 
1.1 per cent on forced selling 
linked to margin calls by stock- 
brokers. the KLSE composite 
index closing 10.93 down at 
982.80. after hitting an intraday 
low of 97636. 

SEOUL fell for the fourth 
consecutive session, depressed 
by institutional inactivity and 
by worries about North 
Korea's nuclear progranune. 

The composite stock index 
dipped 6.72 to 93177. Reports 
that an international sanction 
against North Korea was immi- 
nent. and that Pyongyang had 
test-fired a missile over the Sea 
of Japan on Tuesday, brought 
an extra chill to sentiment. 


r iir . . ruIt10 ™ OoMTO/i. Sacfta and Co. and ffc aW at SowIMa LkMBd. 1897 

coma***™ cnonga 1/M4: Mam* efung* Ptiad-ftamnsn » Pran-ftnMnpaAa BMouM LaMot p*m warn imdSt lor Ma «nn. Sown Mtttn noM Ckaed31tt94 





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More turbulencemay 
lie ahead for the dollar 

Page 2 


FOREIGN EXCHANGE 


Hedge funds - cowboys 
of the financial markets 

Page 6 


Thursday June 2 1994 


199 


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T he time far easy pickings 
Js over. 

After several years of 
rapidly growing^ turnover and 
strong profit growth, the global 
* foreign exchange business is 
* suffering. 

The markets this year have 
had . to adapt to adverse condi- 
, tions and cope with frustrated 
expectations. The .dollar has 
been weak, instead of rising as 
widely predicted. This: year’s 
bloodbath in the world's bond 
markets has inflicted heavy 
losses on some of the more 
aggressive currency traders 
leading to a shr inka ge of 
liquidity and an infection of 
caution into their activities. - 
“The mood among the big 
foreign exchange and bond 
players is grim," says Jim 
O'Neill, head of global research 
at Swiss Bask dorp in London. 
According to one senior ana- 
lyst, trading, conditions “are 
the worst they lave been for 
six years aid. some people have 
madebag losses".; ' 

The current glboin contrasts 
with the boom years of the 
■ early 2990s when global turn- 
over soared to Ji.ooobn a-day 
and currency traders and 
investors were presented with 
a number of relatively safe 
bets. 

With the industrial countries 
in recession, it was easy to 
work on the assumption that 
interest rates were heading 
downwards and mate* money 
accordingly. The market could 
also exploit policy errors, such 
as the determination of the UK 
and Italian governments to 
defend sterling and the lira in 
the European exchange rate 
mechanism until their forced 
exits in September 1992. 

The decision last August of 
the European Union's finance 
ministers to;. widen the ERM 
fluctuatjoo'mdrgiBS to IS ^per- 
cent either side of the system's ~ 
bilateral central rates from 225 
per rant and 6 per cent previ- 
ously, removed one of the big- 
gest one-way bets from. the 
market ata stroke. The French 
franc and British pound have 
been effectively sidelined in ' 
currency triiding this year. ■ 
Most action has been in the 
“triad" currencies - : the dollar, ... 
the yen and the D-Mark. And;,??, 
is" in those, currencies that 
some of the smartest operators 



Chastened traders yearn for trend 


have came unstuck. 

At New Year, the forecasters’ 
consensus was that the dollar 
would fluctuate between Y112 
and Y114 and DM3..75 and 
DML78 between Easter and the 
end of the year. Early last 
month, it was heading towards 
record low levels against the 
yen and .threatened to breach 
the. psychologically important 
Y100 barrier. The dollar 
remains groggy despite subse- 
quent central bank interven- 
tion,- rising US interest rates 
and frilling rates in Germany. 


Peter Norman assesses the outlook as the markets 
try to cope with frustrated expectations 


The dollar’s weakness has 
been a reminder of how fickle 
markets can be. In January, 
the dollar locked sure to rise 
because the US economy was 
generally expected to grow tes- 
ter than its main trading 
rivals, forcing interest rate dif- 
ferentials to move in the dol- 
lar's tevour as the US tight- 
ened monetary conditions and 


Germany, and possibly Japan, 
eased. 

Instead a US-Japanese con- 
frontation on trade and the 
spillover effects of higher us 
interest rates on highly lever- 
aged bond markets achieved 
the reverse effect 

The Clinton administration's 
aggressive tactics and “shoot- 
from-the-lip” diplomacy to 


force Japan to cut its bilateral 
trade surplus with the US were 
construed - rightly or wrongly 
- as signs that the US wanted 
a higher yen to achieve its 
trade goals. 

Open disagreement between 
President Bin Clinton and the 
former Japanese prime minis- 
ter, Morihiro Hosokawa, at a 
meeting on February 11 caught 


‘ When we installed Dealing 2000-2, some 

of our dealers grumbled. 

If we took it away now, they'd go crazy.” 


speculative traders, including 
some lightly regulated offshore 
hedge funds and the propri- 
etary trading desks of some 
large investment banks, off 
guard. As the US currency 
slumped in response to the 
trade news, they were forced 
into a costly liquidation of 
positions built on borrowed 
funds in anticipation of a ris- 
ing dollar. 

The decision of the Federal 
Reserve Board earlier in Febru- 
ary to start raising US interest 
rates was intended as a pre- 


emptive, confidence-building 
strike against Inflation. 
Instead, it caught the global 
bond markets unprepared. 

The subsequent scramble out 
of bonds caused heavy losses 
among highly leveraged opera- 
tors including hedge funds, 
destroying part of their capital 
and curtailing their ability and 
willingness to indulge in fur- 
ther speculation in the foreign 
exchange and other financial 
markets. 

There had already been some 
victims from the ERM upheav- 
als of 1992 and 1993, including 
Bank Negara, the Malaysian 
central hank , which made the 
costly mistake of backing ster- 
ling in 1992 This year’s specu- 
lative turmoil has rfaimpd new 
scalps. George Soros, the finan- 
cier who reported making Slbn 
during the 1992 sterling crisis, 
admitted losing $600m when a 
bet against the yen went sour. 

One senior analyst estimates 
that this year’s trading losses 
have shrunk the hedge funds' 
capital from around S30bn to 
$15bn. On the assumption that 
such funds leverage their capi- 
tal tenfold, their losses have 
taken about $l50bn in liquidity 
from the market. Possibly 
reflecting the hedge funds’ 
problems, recent attacks on the 
Greek drachma and Portu- 
guese escudo have appeared 
half-hearted compared with the 
assaults on EU currencies in 
previous years. 

This year’s trading upsets 
have encouraged some other 
changes in behaviour. Symp- 
toms of a “back-to-basics" 
trend are a determination 
among some b anks to pay 
more attention to customer 
business and a revived interest 
in “fundamentals'' in the anal- 
ysis of currency movements. 

More attention is being given 
to the global flow of funds. 
Some fanriampntaiigf s ascribe 
the dollar's weakness to a con- 
tinuing diversification by US 
financ ial institutions, such as 
pension funds, of their invest- 
ments outside the US while 
Japanese investors are pulling 
back from involvement abroad. 

Others, such as Neil MacKin- 
non, Citibank’s chief currency 
strategist say the market paid 
insufficient attention to “vol- 
ume analysis" showing that 
market participants were very 


heavily invested in the dollar 
last summer. That has meant 
little natural demand for the 
US currency even when it has 
appeared a bargain. 

Another group, including Mr 
OTOeill, a long-time dollar bear, 
argues that the dollar is bound 
to be soft given the chronic US 
current account deficit that 
has totalled $l,025bn since 
1984. The International Mone- 
tary Fund has forecast a con- 
tinuing deterioration in the US 
current account to ?166bn in 
1995 from $109bn last year. 

If nothing else, constrained 
liquidity and increased uncer- 
tainty have enhanced the 
power of one group of players: 
the central h anks . Intervention 
by up to 17 central banks 
headed by the US Federal 
Reserve successfully halted a 
threatened fall by the dollar 
through the Y100 level last 
month. 

But although this was the 
first instance of large-scale 
concerted Intervention since 
October 1992. it does not pres- 
age a new drive by the leading 
industrial nations to enforce 
currency stability. The collapse 
of communism and the instal- 
lation of an “America-first" 
administration have weakened 
the ties among the Group of 
Seven nations. Concerted inter- 
vention, if and when it takes 
place, will reflect an opportun- 
ist consensus or temporary 
identity of interests among the 
big industrial powers and is 
therefore likely to be a rela- 
tively rare event. 

These various forces have 
left the market “yarning for a 
trend to emerge”, says Paul 
Chertkow, head of global cur- 
rency research at Union Bank 
of Switzerland. After investing 
heavily in their foreign 
exchange operations in recent 
years, few operators are happy 
with the present regime of rela- 
tively small plays and corre- 
spondingly small gains. 

A clear trend could appear if 
the current uncertainty over 
the dollar crystallised into 
either a break with, or confir- 
mation of, what remains of the 
bullish consensus for the US 
currency. That would mean 
renewed volatility in trading, 
offering a chance for this 
year's losers to rebuild their 
profits. 


NationsBank - already one of the three largest 
banks in the US - is making a growing impression 
internationally; as well. 

Its London dealing operation, for example, is 
expanding the number of trading desks to more 
than 1 00, to cope with increased turnover. 

Roger Mullings believes he knows why. 

“I think we’re getting recognised for always 
being able to deal fast - and at very close spreads. 

“Obviously the quality of our team is crucial. But 
we still need to take advantage of the best technology 
available. 

“We installed Reuters Dealing 2000-2 last year. 

“All dealing teams are naturally suspicious of new 
systems - but within a few months, we were using it 
for about 20% of our trades. And that proportion 
will almost certainly increase. * 

Dealing 2000-2 offers you a total market picture, 
automatic or conversational dealing all on one 
screen, full data capture, and the Reuters 24 hour 
service. What’s more, it can be added to a D2000-I 
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To find out why Dealing 2000-2 is already 
used bv over 400 banks in 22 countries, call David 
Berry on +44 71 324 7638. 

After all, it would be crazy not to have the facts. 


•••• •••• • 
• • • • 
•••• •••■ • 


• ••••• •••• •••# ••• 
• • • • • • 

• • •••• •••• ••• 
• • • • • • • 
••• »«t * #••• • * ••• 

DEALING 2000-2 



.« 


J 










FINANCIAL TIMES THURSDAY JUNE 2 1994 


II 

FOREIGN EXCHANGE 2 

While the fee§eagaaered dollar struggles against the rising yen, the P-Mark and sterling remain surprisingly resilient 


More turbulence may lie ahead for the US currency in the short term, warns Patrick Harverson 

Japanese trade row clouds the future 


A fter opening 1 the year on a bullish 
note, supported by the US econo- 
my’s strong performance and 
expectations of higher domestic 
interest rates, the dollar dropped sharply 
in April as short-term negative Influences 
- an ill-conceived government dollar pol- 
icy. deteriorating US-Japan trade rela- 
tions. and political uncertainties at home 
and abroad t notably in Korea and Mexico) 
- overwhelmed the positive fundamen- 
tals. The situation deteriorated so quickly 
that by early May massive intervention 
by up to 17 central banks was required to 
halt the US currency's free fall. 

While the central banks’ actions 
appeared to have set a short-term floor for 
the dollar around DM1.65 and YUM. the 
foreign exchange markets wonder what 
the next six to 12 months holds for the 
beleaguered greenback: further deprecia- 
tion. or recovery? 

Although currency analysts warn that 
more turbulence may lie ahead in the 
short term, most feel that the outlook is 
brighter for the dollar, if only because the 
Clinton administration - after attempting 
to "talk down” the dollar to narrow the 
trade gap with Japan - has Anally 
changed the course of its policy. 

Allen Sinai, chief global economist at 
Lehman Brothers, says: “We've seen the 


bottom in the dollar. The main reason is 
that the US administration has [realised] 
that allowing the perception to exist that 
the US has a dollar depreciation policy 
was a big mistake. It was clearly counter- 
productive. because [any benefit derived 
from] the opening of Japanese markets 
that might have come tram using the dol- 
lar as a political club against Japan was 
much less than the political cost of the 
higher interest rates tbat come off a lower 
dollar. " 

Realising that it cannot afford, for polit- 
ical reasons, to allow a weaker dollar to 
pull long-term interest rates higher, the 
US government is now committed, in 
word and deed, to support the US cur- 
rency against the yen and the D-Mark. 

John Lipsky, chief economist at Salo- 
mon Brothers, says: '"There were no 
magic wands waved by the intervention 
that will completely change the outlook 
for currencies. Yet, the GTs actions, and 
the change in US policy regarding the 


dollar . . . have truncated the downside 
risks for the dollar. The G7 is not trying 
to draw a line in the sand, or define a 
specific target band for currencies - but 
the message is clear. Additional dollar 
depreciation, especially in the context of 
weakening capital markets, will be 
resisted by the US authorities, with the 
co-operation of other central banks." 

Analysts are confident that the foreign 
exchange market has got this message, 
because institutional investors and cur- 
rency speculators realise that the central 
banks have the room within their domes- 
tic monetary frameworks to take what- 
ever action is needed to protect the dollar. 
As Mr Lipsky puts it “There is no policy 
dilemma facing central banks in support- 
ing the dollar,” because the needs of Euro- 
pean and Japanese economies are likely to 
require further stimulation from easier 
monetary policy in the near future. 

The Bundesbank's decision to cut 50 
basis points off German interest rates on 


May 11, for example, was taken with one 
eye fixed on the dollar. Although the 
Bundesbank explained the move in purely 
domestic economic terms, it was in its 
interests to provide the dollar with a 
much-needed lift, for a weak US currency 
was posing a danger to Germany’s export 
recovery. 

The May cut in German rates should 
shift the interest rate differentials further 
in the US currency's favour if. as is expec- 
ted, the Federal Reserve continues to 
tighten US monetary policy during the 
late spring and early summer. 

Much also depends on how US financial 
markets behave over the coming months. 
Declines in the price of US assets was one 
of the factors behind the dollar's recent 
slide. Anticipating trouble ahead for the 
inflation-obsessed US bond market, and 
for the vulnerable and US stock market, 
international investors steered clear of 
doilar-denominated assets during March 
and April. 


Ironically, further monetary tightening 
by the Fed - normally negative for bond 
and equity prices - might come to the US 
markets’, and thus the dollar's, rescue. If, 
by raising rates a few more notches the 
Fed convinces the bond market that it 
will be able to stave off a resurgence of 
inflation, long-term bond yields should 
start to come down. This would breathe 
new life into US equities, and In the pro- 
cess make international investors more 
likely to boy dollars to purchase US finan- 
cial assets. 

While the US administration's new dol- 
lar policy, improving interest rate differ- 
entials, and a possible strengthening in 
US fi nancial markets are all factors in the 
dollar's favour over the coming months, 
there U one cloud hovering above the US 
currency that will not go away: US-Japa- 
nese trade relations. 

The failure of the new Japanese prime 
minister Tsutomn Hata to build a major- 
ity in parliament makes another general 


election likely, probably after the passage 
of the next fiscal budget in June. With so 
much uncertainty surrounding the politi- 
cal situation In Japan, an early resolution 
of the trade dispute between the US and 
Japan cannot be expected. Consequently, 
the dollar is likely to remain vulnerable 
In the near-term to speculative selling 
against the yen. Some analysts predict 
that the US currency could fall through 
the headline-grabbing YI00 level, albeit 
only temporarily. 

Over the longer-term, however, analysts 
reel confident that a gradual improvement 
In the US's trade balance with Japan, 
prompted by a strengthening US export 
sector and some modest opening up of 
Japanese markets to overseas goods, will 
allow the dollar to climb back from its 
lows against the yen. 

Mr Sinai at Lehman envisages the dol- 
lar reaching Y105 by midsummer, then 
appreciating to YI10 or more by the end 
of the year, while Mr Lipsky at Salomon 
makes a similar prediction, forecasting 
YUO by the year end. 

As for the dollar/DM rate, analysts 
expect a widening differential between 
the two countries’ interest rates and eco- 
nomic performance to boost the dollar to 
at least DM1.70 by the summer and 
DM 1.75 by Christmas. 


The recent trade friction with 
the US has been highlighted by 
the Japanese media as the 
main reason for the yen's rise, 
but a closer look indicates that 
there may be more technical 
forces at work. 

The capital Hows into and 
out of Japan provide some 
explanation for the recent 
trend of a rising yen and a 
weakening dollar - Japanese 
investing less in overseas 
bonds, shares, and golf 
courses, and foreign investors 
buying yen to purchase Japa- 
nese shares. 

During the economic “bub- 
ble" of the late 1980s, Japanese 
institutional investors were the 
largest suppliers or capital in 
the international markets. 
According to the Bank of 
Japan annual net outflow of 
long-term capital averaged 
SllObn between 1985 and 1989. 
This fell sharply in the 1990s 
and in 1992 there was a total 
outflow of S28.5bn while last 
year the outflow was S78.3bn. 

The ratio of overseas securi- 
ties to total investment assets 
at Japanese life assurers, the 
country's leading institutional 
investors, for instance, fell to 
9.2 per cent at the end of last 
year, down from 15.7 per cent 
in 1989. 

The customary repatriation 
of funds during the January- 


March quarter, the final quar- 
ter of the business year, when 
institutions sell their foreign 
securities holdings to shore up 
dwindling profits, has also put 
downward pressure on the dol- 
lar and pushed up the yen. 

The liquidation of US real 
estate assets has had the same 
effect. Last year. Japanese cor- 
porations sold or partially dis- 
posed of S17.5&bn of US proper- 
ties, nearly a quarter of the 
total US property portfolio 
built up by the Japanese insti- 
tutions since the start of the 
investment boom in 1985. 
according to Kenneth Leven- 
thai. the US accountancy firm. 

Japanese investors have also 
reduced the purchase of US 

Yen 

Yen per USS 
100 


Emiko Terazono says the strong Japanese currency has upset business 

Yen for the yen hits dollar 


financial assets this year 
because of a tightening of US 
interest rates. During the final 
quarter of last year. Japanese 
institutions bought $37.5bn of 
US shares and bonds. That fig- 
ure declined sharply to S3.5bn 
for the first two months of this 
year. 

Meanwhile, the buying of 
Japanese shares by overseas 
investors has also helped boost 
the yen. The Bank of Japan 



5ctne« Datastnajm 


1994 


says overseas investment in 
Japanese stocks was a record 
S34.5bn during the first quar- 
ter, the demand coming •mainly 
from US pension funds. 

The strong yen has triggered 
an outcry from the business 
community, because it affects 
severely the competitiveness of 
Japanese companies. The Eco- 
nomic Planning Agency esti- 
mates that Japan's export 
industries are on average com- 
petitive at Y117 to the dollar. 
The Keidanren, the business 
leaders’ federation, reckons 
each 5 per cent rise in the yen- 
doliar rate knocks 0.3 of a per- 
centage point off annual gross 
domestic product growth. 

But while capital flows may 
influence the underlying 
strength of the yen, much of 
the latest volatility has been 
caused by speculators. The 
breakdown of the US-Japan 
bilateral trade talks - the US is 
pressurising Japan to cut its 
large current account surplus 
by stimulating demand and 
improving market access - 
prompted expectations that the 




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IN DEPTH-IN CONTEXT-INTERNATIONAL. 


US will use the currency mar- 
ket to curb Japanese exports, 
triggering aggressive buying of 
the yen against the dollar. 

But in late April, when the 
dollar looked like falling to a 
record low. below Y100, the US 
Federal Reserve and other cen- 
tral banks stepped in to sup- 
port the US currency, not least 
because of the destabilising 
effect or dollar weakness on 
the US bond market. 

Central bank intervention in 
itself is normally insufficient 


to support a currency, but 
some analysts believe that the 
recent rise in US interest rates, 
and the easing of short-term 
money market rates in Japan, 
will widen interest rate differ- 
entials enough to curb the fur- 
ther rise of tiie yen. Shrinkage 
of Japan's current account sur- 
plus, and lower capital inflows, 
would assist further. 

With the US administration 
seemingly adopting a more 
moderate stance towards 
Japan, Salomon Brothers in 


Tokyo, believes that the yen's 
appreciation has entered the 
final phase. “Over the next few 
months the yen is expected to 
weaken toward an exchange 
rate of YUO to the dollar," it 
says. Others, however, believe 
the market may yet test the 
Y100 level before weakening. 

With both US and Japanese 
trade officials making positive 
noises on bilateral trade, the 
volatility on the currency mar- 
ket which accompanied the 
breakdown of the talks in 
March will probably be 
reduced. Although comprehen- 
sive tax reforms may be 
delayed, due to the minority 
government, an announcement 
of a continued income tax cut 
into next fiscal year is expec- 
ted to be acceptable to the US. 


A key issue is when Japa- 
nese institutions wiLl start 
investing overseas? Keeping 
hinds in the domestic markets 
will not yield attractive 
returns. The central bank has 
eased short-term interest rates 
to historical lows of less than 
2.1 per cent, and the domestic 
bond market offers little better 
returns, with the compound 
yield at around 3.6 per cent 
However, fears of suffering 
currency losses on overseas 
investments as the yen appre- 
ciates has kept most investors 
cautious. The sharp decline in 
unrealised profits due to the 
stock market plunge has also 
wiped out the cushion for pos- 
sible investment losses, and 
eroded the Japanese institu- 
tions' ability to take risks. 


Sterling has benefited from being on the sidelines, writes Philip Coggan 

Stable pound confounds cynics 


After the excitement of 1992, 
when sterling left the exchange 
rate mechanism, the pound has 
been remarkably stable. 

Apart from a brief dip in 
February and March of 1993, 
the pound has tended to trade 
in a range around the DM2J30 
level and in an even narrower 
band around S1.50. 

In part, this is because the 
worst fears aroused at the time 
of the ERM departure have not 
been realised. For once, devalu- 
ation has not led to a resur- 
gence of inflation in the UK 
Indeed, underlying inflation 
(excluding mortgage pay- 
ments) has dropped to its low- 
est level since the 1960s. 

Furthermore, throughout 
1993. the UK's status, along 
with the US, as one of the few 
growing economies in the 
developed world made it a 
home for portfolio capital. 

Sterling has also benefited 
from being on the foreign 
exchange sidelines over the 
past 18 months. Traders' focus 
has been on the breakdown of 
the narrow band ERM and on 
the doliar/yen cross-rate. 

Over the medium term, there 
are probably two key factors 
for sterling. The first is 
whether Bri tain has conquered 
its old problems - high infla- 
tion and balance of payments 
crises - or whether the demons 
will return as soon as the 
recovery hits its stride. The 
second is whether the Conser- 
vative party is merely suffer- 
ing its normal mid-term blues 
or is finally going to lose office. 

The government has worked 
bard to try to create credibility 
for its economic policies after 
the ignominious departure 
from the ERM- A new mone- 
tary framework has been cre- 
ated. with the Bank of England 
at its forefront. Underlying 


Sterling 

DM per £ 
2.65 



2.60 


2.55 


2.50 


2.45 

Jon 

Souc*r m aaiiWM 


Inflation is now targeted at 14 
per cent, with the aim of get- 
ting the rate into the lower 
half of the range by the end of 
the parliament. 

The Bank writes quarterly 
inflation reports, is allowed to 
choose the timing of base rate 
changes and has its views 
aired in the minutes of the 
monthly monetary meetings. 
All this is designed to reassure 
financial markets that “steady 
Eddie” George, the Bank gover- 
nor, is looking after their inter- 
ests. rather than inflation- 
prone politicians. 

The new arrangements have 
not gone without a hitch. Feb- 
ruary's decision to cut base 
rates by a quarter of a percent- 
age point to 5.25 per cent was 
not received weD by the mar- 
kets, and may have limited the 
scope for further cuts. 

Gilt markets have consis- 
tently signalled Inflationary 
expectations of 4 per cent or 
so, indicating some scepticism 
about the government's ability 
to meet Its target. Signs of a 
pick-up in the annual growth 
rate of average earnings will 
have confirmed bearish fears. 
Nevertheless, producer price 


figures and survey details, con- 
tinue to show that inflationary 
pressures are subdued. 

On the balance of payments 
problem, Mark Geddes, trea- 
sury economist at Midland 
Global Markets, says that 
while "recovery in Europe 
should increasingly help UK 
exporters, the size of the cur- 
rent account deficit following 
several years of below trend 
growth and a 10 per cent deval- 
uation of the pound, remains a 
worry. The inaccurate nature 
of current trade statistics 
potentially disguises the true 
problem, and a prerequisite for 
sterling’s ability to maintain a 
value above DM2.50 over the 
longer term will be a stabilisa- 
tion in the trade deficit” 

Trade within the European 
Union is now recorded under 
the Intrastat system, based on 
the value added tax returns, 
and this has led some to 
believe that the statistics are 
under-recording imports. Fur- 
thermore, official figures show- 
ing that exporters have been 
raising prices, rather than 
chasing market share, are con- 
tradicted by Confederation of 
British Industry evidence. 


Other fundamental factors - 
economic growth and interest 
rates - may be moving in 
opposite directions. Keith 
Skeoch. director of research at 
James Capel. feels tbat the 
medium-term outlook for ster- 
ling is quite good. On interest 
rates he expects “German rates 
will get down to around 3 per 
cent on the back of sluggish 
growth and low inflation, while 
there is increasing evidence 
that we are close to the bottom 
of the base rate cycle in the 
UK The pound should start to 
benefit from a positive interest 
rate differential." 

He also believes that rate dif- 
ferentials will help the dollar 
strengthen against the D-Mark, 
and adds that “sterling nor- 
mally does reasonably well in 
an environment where the dol- 
lar is running". He believes the 
pound could climb to DM2.70. 

However, because European 
countries are expected to come 
out of recession this year, Mr 
Geddes thinks that Britain's 
“growth advantage" will start 
to disappear. 

The political outlook might 
not seem to matter, given that 
the government does not have 
to call an election until 1997. 
But according to Skeoch. “the 
main uncertainty In the 
medium term is that Major 
stays and is perceived by the 
markets as a lame duck PM." 

So pronounced is sterling's 
record of depreciation, that 
cynics will need overwhelming 
evidence to believe the bull 
case for the pound. That evi- 
dence, or the depressingly 
familiar bearish story, rem only 
come when the UK is farther 
advanced in its recovery, and 
cyclical factors have had their 
ma x i m um chance to inflict 
damage on the inflation and 
balance of payments numbers. 


The economic recovery has helped the German currency, writes David Waller 


Europe’s ‘anchor’ still intact 


Despite consensus among 
economists that the dollar 
should rise against the D-Mark 
during 1994, the German cur- 
rency has proved stubbornly 
strong. 

Economists put the D-Mark's 
resilience down to two factors 
- inherent weaknesses in the 
outlook for the US currency, 
coupled with increasing sup- 
port from economic fundamen- 
tals for the D-Mark. 

On the US front, economists 
cite a host of factors which led 
to dollar weakness, despite the 
likelihood of further Fed tight- 
ening of interest rates. These 
range from investors' demand 
for a higher yield on US securi- 
ties to compensate for the risks 
of holding such investments 
after a period of high volatility 
in the US government bond 
market, to foe perception that 
President Bill Clinton’s admin- 
istration considers it politically 
desirable to see a weaker dollar 
versus the yen to enhance the 


US's trading position relative 
to Japan. 

While trade relations 
between Japan and foe US do 
not directly touch the US cur- 
rency's relationship with the 
D-Mark, the D-Mark strength- 
ens by default as a result The 
German currency is helped by 
the growing conviction that 
Germany is pulling out of Its 
worst recession since the sec- 
ond world war. Expectations 
that the German economy is to 
endure a double-dip downturn 
- i.e. a lurch downwards this 
summer - have been contra- 
dicted by a mass of economic 
data suggesting that a more 
than modest recovery is under 

way. 

Figures on order intake, 
exports and employment, cou- 
pled with increasingl; b ullis h 
polls of business expectations 
and a spate of good news from 
the corporate sector, have 
changed foe climate of expecta- 
tions. One telling expression of 


this was the forecast in April 
from four out of five of Ger- 
many’s leading economic insti- 
tutes: they predict a pan-Ger- 
man growth rate of 1.5 per cent 
for the year, representing a 
slow but sure recovery. Finan- 
cial institutions are even more 
optimistic: Dresdner Bank, for 
example, expects the economy 
to grow by 2 per cent 

The rosier outlook for the 
economy has forced the finan- 
cial markets to revise their 
expectations on the scale and 
tuning of further cuts in 
short-term interest rates. The 
rationale for the change in out- 
look is that recovery makes it 
more likely that the Bundes- 
bank will start increasing 
interest rates again to check 
the inflationary impact of bet- 
ter than expected growth. 

Despite economists' expecta- 
tions of further cuts in the dis- 
count rate during the year 
euromark futures - which give’ 
rates for three-month borrow- 


ing - tell a more pesslm 
story. They suggest that 
interest rates will reach a 
point for the current inane 
policy cycle in September 
year at 4.7 per cent, comp 
to the present 5.1 per < 
three-month rate. Therea 
rates will rise to 5.60 per < 
by foe end of next year, 
futures market suggests 
reversal of earlier expectat 
that rates would carry on 
mg towards 4 per cent wi 
1994. 

"This represents a size; 
correction in short-term ; 
expectations," comments 
Joachim Fels at Goldi 
Sachs in Frankfurt. 

With German Interest n 
set to rise again as of the t 
of the year, and the Gen 
economy pulling out of foe 
drums, it is not surprising I 
foe D-Mark's status as a “i 
haven" currency is intact 7 


Continued on page 3 




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FINANCIAL, TIMES THURSDAY JUNE 2 1994 

: FOREIGN EXCHANGE 3 


Contrary to expectations, the EMS has been remarkably calm, says Peter Norman 

Emu hinges on political will 


Core.EIEII cain a e«tci<^>gain^;t^ D-Mark 




'.*_ r ' Vi ';. ' 

Former 


fluctuation 

u n> ■ 

margin 


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■ wi^f V. , !i. , .L... i . | jS!..' i ;-y*>;y. 7-. .-r.^ '■> .i 

*h> - julfl..- Sot»'jro«V.N6w • Dm s Jifik . «m --Mar -Apr Ntoy- 


long-term interest rates appear 


Central tankers, in the words 
of William McChesney Martin, 
a distinguished former chair- 
man of the Federal Reserve 
Board, are the people who 
“take away the punchbowl Just 
as the party is getting merry**. 

Last summer, central bank- 
ers and finance ministers from 
the 12 European Union coun- 
tries took away the biggest 
ever punchbowl from the 
global foreign exchange mar- 
kets. 

In the early hours of Mon- 
day, August 2, 1993, they wid- 
ened the - fluctuation margins 
In the exchange rate mecha- 
nism of the European Mone- 
tary System to 15 per cent 
either side of the EUS bilateral 
central rates from 3-g> per cent 
and 6 pa cent previously. That 
decision followed a year of cri- 
sis in the EMS tha t seen 
sterling and the Italian lira 
leave the system and numer- 
ous devaluations of other mem- 
ber currencies. 

As the officials left Brussels 
after their difficult emergency 
meeting that weekend, few 
observers were prepared to bet 
that the EMS had much of a 
future. The new margins were 
so wide that they almost con- 
stituted a free float. It was gen- 
erally expected that most of 
the currencies linked to the 
D-Mark through the ERM 
would depreciate sharply. With 
the EMS in apparent disarray, 
the European Union's ambi- 
tious plans for economic and 
monetary union by 1997 at the 
earliest, and failing that, by 
1999, also seemed doomed to 
Eafl. 

But contrary to expectations, 
the EMS has been remarkably 
calm for most of the past 10 
months. France and the other 
core members of the ERM 
resisted the temptation to fal- 
low the UK example of slash- 
ing Interest rates and allowing 
a depreciation of their curren- 
cies against the D-Mark. After 
an initial weakening, virtue 
was rewarded with the gradual 
return of the French franc and 
other core currencies to levels 
that were either within or 
close to the old intervention 
floors against the D-Mark. 

Although the ERM is no lon- 
ger perceived as a “glide path” 
to Emu, the return of calm to 
continental exchanges has 
revived 'interest in Emu. Few 


expect Europe wQl have a sin- 
gle currency and central hank 
by the earliest deadline 0 f the 
Maastricht Treaty, but the 
prospect of Emu by the end of 
the century is no longer 
laughed out of court 

Stage two of the Maastricht 
process has been under way 
since the beginning of this 
year. This Involves intensified 
cooperation on erwinmin poli- 
cy-mating among the 12 
through the council of econom- 
ics and finance ministers. In 
addition, the European Mone- 
tary Institute, which may be 
the embryo of the planned 
European central tank, began 
o perating at the beginning of 
this year and is engaged on 
technical preparations for the 
third and fhmt stage of Emu. 

However, the obstacles to 
Emu are still formidable. 

■ At a practical Level, the EU 
has done tittle to ensure that 
bank notes, coinage or pay- 
ments systems will be adapted 
in time far file proposed intro- 
duction of a single currency. 

■ Politically, both the UK ami 
Denmark have secured the 
right not to join Emu. 

■ Economically, only Luxem- 
bourg of the 12 EU members at 
present meets the tough con- 
vergence criteria that the 
Maastricht treaty sets as a con- 
dition far entry to stage 3. 

Of the criteria, the targets of 
low inflation and low 


relatively unproblematical for 
most member states. 

Because policy makers gen- 
erally agree that ft would be 
folly to return , to the old ERM 
narrow bands following the 
experiences of 1992 and 1993, it 
is also possible that EU states 
will apt for a generous inter- 
pretation of the requirement 
for exchange rate stability 
before joining Emu. The condi- 
tion that entrants to Emu 
should have stable exchange 
rates within the “normal 
bands" of the ERM for two 
years prior to joining could be 
construed to cover stability 
within the present 15 per cent 
bands. 

But even though the Treaty 
allows some flexibility, the 
requirement that the EU states 
control tfagir ftered fjpfirifr-C and 
overall debt looks daunting. 

Under the criteria, a country 
is supposed not to become an 
Rmn member if its fiscal dafigif 
exceeds 3 per cent of gross 
domestic product or its stock 
of government debt is more 
than 60 per cent of GDP. The 
latest Commission forecast, 
published last month 
suggested that only three coun- 
tries - Ireland, Luxembourg 
and Germany - would meet 
the deficit rule by the middle 
of the decade. At present, a 
majority of EU members 
exceed the debt guideline with 


four countries having stocks of 
debt that are more than 50 per 
cent in excess of the Maas- 
tricht limit Belgium and Italy, 
two members of the original 
EEC. have debt to GDP ratios 
of 138 per cent and 116 per cent 
respectively while Greece and 
Ireland have debt of 114 per 
cent and S3 per cent of GDP. 

Henning Christophersen, the 
commissioner for economic 
and monetary affairs, has pre- 
dicted that during 1997 a 
majority of present EU mem- 
bers should fulfil the criteria 
“with a return to normal 
growth". 

But given the ElTa relatively 
high real interest rates and 
typically moderate growth 
rates, it is hard to imagine Bel- 
gium, Italy, Greece and Ireland 
ever being able to meet the 60 
per cent debt to GDP ratio. 
Meanwhile, senior members of 
the Bundesbank central coun- 
cil and the German constitu- 
tional court have taken public 
positions against any weaken- 
ing of the debt and deficit crite- 
ria to ease entry to Emu for 
member states. 

So for, the political will of 
the “hard core” of EU members 
to move towards Emu has been 
remarkably strong. The proj- 
ect, too, is better anchored 
than previous plans for a sin- 
gle currency and central bank 
because the Maastricht process 
has the backing of a treaty. 

But there have been signs 
this year that tight EU integra- 
tion is losing support among 
electors in several countries 
including France and Ger- 
many. 

Much will depend on the les- 
sons, if any, that policy makers 
draw from this month's elec- 
tions for the European parlia- 
ment and the outcome of the 
elections for the German 
national parliament in October 
and French presidential elec- 
tions in early 1995. 

When the EU member states 
convene a planned inter-gov- 
ernmental conference In 1996 
to discuss the progress being 
made towards Emu, improved 
economic conditions in conti- 
nental Europe could give the 
project a fair wind. 

But the big decisions on 
whether Europe gets a single 
currency and central hank for 
its next millennium will 
depend on politics. 


The former communist countries 

Beacons in the 
monetary haze 


Roubte 



Understanding of the crucial 
importance of a sound cur- 
rency to the success of eco- 
nomic reforms has grown rap- 
idly among economic policy* 
makers in the former commu- 
nist world over the past 18 
months. 

The latest converts have 
been among the former practi- 
tioners of the planned economy 
who now govern Russia. "A 
strong rouble is the indispens- 
able condition for the revival 
of the Russian economy." Vic- 
tor Chernomyrdin, the Russian 
prime minister, recently told 
FT readers in a lengthy article 
which stressed his govern- 
ment's commitment to market 
reforms, albeit tailored to the 
specific and extraordinary cir- 
cumstances of a giant country 
whose inherited distortions are 
also on an epic scale. 

The attention of Russia, larg- 
est of the former communist 
states, has been attracted 
partly by the successful cre- 
ation of independent national 
currencies in several of the 
new states released from 
Soviet control over the past 
five years. Three currencies in 
particular stand out like bea- 
cons in the monetary haze left 
behind by the collapse of the 
Soviet Union and the disap- 
pearance of the transferable 
rouble. These paragons of sta- 
bility, all well launched on the 
path to full convertibility, are 
the Czech crown, the Estonian 
kroon and the Slovene tolar. 

In each case the countries 
concerned were the most west- 
erly and most developed parts 
of the former Soviet bloc, or of 
former Yugoslavia in the Slo- 
vene example, and enjoyed spe- 
cific advantages. But all three 
share a strong political com- 
mitment to sound money as 
the basis for a rational econ- 
omy and thriving trade. 

The Czech crown has been 
remarkably stable against the 
dollar awd other hard curren- 
cies since 1991. With capital 
Inflows of $1.4bn last year, bal- 
anced budgets and low foreign 
debt the crown is being 
groomed for full convertibility 
by 1996. The Estonian kroon, 
which is umbilically linked to 
the D-Mark, is managed on a 
currency board basis by the 


central bank which recently 
pledged to keep the currency 
fixed at eight kroons to the 
D-Mark until at least the turn 
of the century. The Slovene 
tolar Is similarly backed by 
steadily rising hard currency 
reserves now that Slovenia no 
longer has to subsidise the rest 
of Yugoslavia. 

The importance of a sound 
currency was first underlined 
by the architects of the Polish 
stabilisation programme in 
1990. Their reforms made the 
Polish zloty internally convert- 
ible and managed to halt 
hyperinflation. Heavily under- 
valued at the start of monetary 
reform, the zloty steadily 
appreciated for 18 months unto 
the first of a series of devalua- 
tions. The currency was last 
formally devalued in August 
last year by 8 per cent but reg- 
ularly loses value by 1.6 per 
cent a month a gafrigt a trade- 
weighted basket of currencies. 
This “crawling peg” devalua- 
tion is needed to compensate 
for inflation which, although 
foiling, hovers around 30 per 
cent annuall y 

Hungary, which inherited 


the largest per capital foreign 
debt in the region, has also 
made recourse to forint devalu- 
ation to maintain the competi- 
tiveness of exports but has 
managed to attract foreign 
investment which has allowed 
a strong growth of reserves 
despite a worrying rise in the 
current account deficit in 
recent months. 

With their shift in trade to 
western markets and commit- 
ment to continuing market 
reforms and privatisation, how- 
ever, the economies and cur- 
rencies of central Europe are 
on track to becoming “normal” 
by the end of the decade. They 
are being followed, with a time 
lag, by Albania, Romania and 
Bulgaria. In recent months the 
Romanian central bank has 
created the conditions for 
internal convertibility of the 
Romanian lei by raising 
domestic interest rates and 
taking other measures to dose 
file gap between official and 
black market exchange rates. 
The Bulgarian lev by contrast 
came under pressure towards 
the end of last year as a reflec- 
tion of higher than expected 


inflation and declining hard 
currency reserves. 

The picture is much more 
complex in the states of the 
former Soviet Union. The disin- 
tegration of the rouble zone, 
originally opposed by Moscow 
and the IMF. was the logical 
consequence of the emergence 
of new states. It has led to the 
emergence of a plethora of new 
currencies such as the Kyrgyz 
som and the Kazakh tenge 
alongside slightly longer estab- 
lished currencies such as the 
Ukrainian karbovanets. All the 
former Soviet currencies are 
traded on. the Moscow Inter- 
bank Currency Exchange while 
three, the karbovanets. the 
tenge and the Belorussian 
accounting rouble are also 
traded on the central Moscow 
stock exchange. 

The currencies of the former 
Soviet Baltic states, led by the 
Estonian Kroon, are in a class 
of their own with both the Lat- 
vian lats and the Lithuanian 
litas moving to modified forms 
of currency board manage- 
ment. But the fate of most 
other post-Soviet currencies 
accurately reflects the lack of 
consistent reform and the high 
inflation resulting from loose 
monetary policies. 

Some, like the Armenian 
dram, the Azerbaijani manat 
and the Georgian coupon, have 
been even further devalued by 
war and civil strife. Faced with 
hyperinflation and inconvert- 
ible currencies trade in such 
countries has been largely 
reduced to smuggling and bar- 
ter and those with access to 
hard currencies have become 
the new rich. 

If Mr Chernomyrdin’s new- 
found commitment to sound 
money does lead to tough 
restrictions on government 
subsidies to hard-pressed mili- 
tary plants and collectivised 
agriculture and adherence to 
lower inflation targets, the 
Russian rouble could 
strengthen after its long 
decline. After all, the rouble is 
backed by the enormous natu- 
ral resources of a Russia which 
is no longer obliged to subsid- 
ise the less developed parts of 
the former Soviet empire. 

Anthony Robinson 


Anchor still intact 


Continued from page 2 


is true in respect of the US 
dollar - and in Europe where 
the D-Mark has in the medium 
and long-term staged a dra- 
matic appreciation against 
other currencies. 

Despite doubts, the D-Mark 


has preserved its role as the 
“anchor currency” for Europe 
and the currencies belonging 
to the slimmed-down European 
exchange rate mechanism. 

The appreciation of the 


D-Mark against certain Euro- 
pean currencies since the end 
of 1991 (up 29 per cent against 
Spanish peseta, 27 per cent ver- 
sus the Italian Lire and 14 per 
cent a gains t the pound ) has 


worsened the competitive posi- 
tion of German industry - but 
the corrective in industry's 
favour will come not via a 
depreciation in the nominal 
value of the D-Mark^ Germany 
will strive to regain its compet- 
itiveness through an improve- 
ment in labour costs. 


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FOREIGN EXCHANGE 4 


Philip Gawith checks the amount of interest in exotic currencies in 1994 

Rude awakening for investors 

Turfdsfi Lira 

•OeQiTt-porUSS . - 

KJ — 



A fter the rather giddy 
romance between inves- 
tors and exotic curren- 
cies in 1993, the first quarter of 
1994 has proved to be a chas- 
tening experience. The attrac- 
tion lingers, but investors are 
now wary and more mature 
than they were only six 
months ago. 

Last year interest in exotics, 
particularly in south-east Asia, 
soared on the back of the 
emerging markets story. The 
motor for this growth was the 
internationalisation of US pen- 
sion and mutual funds, partly 
a secular trend, but also a 
function of the search for 
higher yields at a time when 
US interest rates were lower 
and domestic equities expen- 
sive. 

Two events in the first quar- 
ter combined to spoil the story. 
One was the carnage in inter- 
national bond markets. The 
liquidity pressures this gener- 
ated - for example, the need to 
raise cash against losses suf- 
fered in European bond mar- 
kets - spilled over into selling 
pressure elsewhere. Unhappily, 
as investors were to discover, 
exotic currencies are not 


socalled for nothing, and sell- 
ing out of a currency was not 
as easy as some assumed. 

Jon Bowen, head of the exot- 
ics desk at Midland Global 
Markets, comments: “People 
couldn't work out why they 
could enter the market over 
five days, but not exit in one." 

Perhaps fittingly, the second 
event involved Bank Negara, 
the Malaysian central bank. 
Ironically, given the bank's 
reputation until recently as 
one of the foremost speculators 
in world currency markets, it 
decided to step in to curb the 
influence of speculators on the 
Malaysian ringgit. The effect of 
Negara's intervention was to 
cause the ringgit to fall, 
between Christmas and New 
Year, by more than 5 per cent 
against a bakset of currencies, 
inflicting heavy losses on 
many investors. 

The discovery, says one bro- 
ker, “that the central bank 
could call a stop and change 
the rules, came as a big shock 
to a lot of people”. Negara, he 
says, was “the big stick that 
taught people these currencies 
are not what you are used to. 
You can’t just drive them 


around with flows of money”. 

For US fluid managers In 
particular, the newest kids on 
the block, and many naive in 
the ways of the developing 
world, these events were a 
rude awakening. Mr Bowen 
notes that the Negara episode 
has had a “noticeable impact 
on trading”, particularly in the 
Thai baht and the Indonesian 
rupiah. He says turnover in the 
five leafing Asian currencies - 
the Hong Kong dollar. Malay- 
sian ringgit. Thai baht, Indone- 
sian rupiah and Singaporean 
dollar - has. If anything, 
shrunk in the first half of 1994. 

Negara, of course, is not 
alone in the hands-on manage- 
ment of its currency. Singapore 
is also a country which does 
not want its currency interna- 
tionalised. in the sense of 
allowing the free market to 
determine the rate. 

Exotics, of course, mean 


SoteCKOoMaevam. 

more than south-east Asia 
alone, in^pod , it encompasses 
any currency beyond the dol- 
lar. yen and those of western 
Europe. The other main exotic 
blocs are Latin America, with 
eastern Europe also an merg- 
ing area. Investors in these and 


. 1994 . 

other areas also come armed 
with a healthy stock of cau- 
tionary tales. 

An obvious recent example 
concerns the Turkish lira, 
where concern about govern- 
ment economic policies caused 
the currency to fall by more 


thaTi so per cent against the 
dollar during the first quarter. 

Latin America r emains the 
almost exclusive preserve of 
US banks, which have some- 
thing of a “backyard" perspec- 
tive on the region. Trade is 
handled mostly from New 
York. Volumes, however, are 
still tiny compared to Asia. 

Albert Maasland. m a n a gin g 
director at Chase Manhattan in 
London, says eastern Europe is 
probably on a par with Latin 
America, but business is 
largely one way - money going 
into the currency for local 
investment “We can buy the 
local currency, but can’t sell it 
for foreign currency. Often this 
can only be done through a 
local bank" He adds: “We see 
lots of opportunities there, but 
they are years behind the 
Asian market ** 

The problem south-east 
Asian countries have faced is 


that the clamour to invest has 
caused their currencies to 
appreciate. This obviously 
effects export competitiveness, 
and countries such as Singa- 
pore and Malaysia, which have 
long-term economic develop- 
ment plans, do not like outsid- 
ers coming along and upsetting 
the environment- 

Notwithstanding recent trib- 
ulations. for those who know 
the market - Chase. Standard 
Char tered. Barclays, Midland. 

Natwest and Citibank are the 
main players in London - It 
remains an exciting prospect. 
Mr Maasland says they con- 
tinue to see “dramatic growth 
in trading, especially in Asian 
currencies”. He estimates that 
trading activity in the five 
Asian currencies rose 50-100 
per cent year on year. 

“In a number of them we 
will quite regularly see $50m- 
$l00m transactions, which was 
not the case two or three years 
ago," says Mr Maasland. 

It is not only a case of 
greater volumes. There is also 
more use of foreign exchange 
derivatives, though immature 
domestic capital markets still 
act as a constraint on trading. 


Investment into the region is 
likely in future to be more cau- 
tious. “The trend is still there, 
but the problem was that it 
was a fashion." says Mr 
Bowen. “ We’ve been through 
the boom times, now times are 
quieter. I do think we win see 
it grow again, but not at the 
rate of last year for a while" 

Until liquidity in some of the 
markets improves, investors 
are likely to limit the size of 
their deals. Liquidity, in torn, 
will improve as deregulation 
progresses. 

As David Clark, treasurer 
Europe at HSBC, notes: “Dere- 
gulation is the friend of the 
foreign exchange market - it 
encourages people to operate 
across borders." The other side 
of this coin, however, is poli- 
tics and as Mr Clark observes: 
“Politics still plays a bigger 
part in foreign exchange than 
economics does." 

As the story of the yen in 
1994 shows, you do not have to 
go to developing countries to 
discover this truth. But it is 
especially true with exotic cur- 
rencies in the developing 
world, where politics still has 
the upper hand over markets. 


Peter Norman looks at the pressures for greater stability in currencies 

Quest for order continues 


Dollar index 

Trade-weighted index 11985=100} 

100 






>09 8 


W 
80 § 

1876 7880828*8688909204 

Sooos: CMoMmni 

Long-term mtsa&gnments, such as the big apprec ia tion of the 
US doflar in the early 1980s, dtatort investment decisions and 
can foster protectionism 


T he world has now been 
living Cor 21 years with a 
monetary system domi- 
nated by floating exchange 
rates. But there continues to 
be a yearning among some pol- 
icy makers, active and retired, 
for more order, reminiscent of 
the currency stability that 
existed under the post-war 
Bretton Woods system of fixed 
exchange rates. 

Despite all tbe problems suf- 
fered by members of the Euro- 
pean exchange rate mechanism 
in 1992 and 1993. finance minis- 
ters from continental Europe 
have put greater exchange rate 
stability back on the interna- 
tional monetary agenda. 

.Announcing this step after 
the spring meeting of the poli- 
cy-making Interim Committee 
of the International Monetary 
Fund. Philippe Maystadt. the 
Belgian finance minister and 
committee chairman, said the 
Fund's executive board had 
been asked to study, and report 
back by October, “possible 
ways to introduce a greater 
degree of discipline in tbe pres- 
ent exchange rate system". 

.Around the same time. Hel- 
mut Schmidt, the distinguished 
former chancellor of Germany, 
called for Franco-German 
co-operation to restore orderly 


currency relationships for 
Europe against the dollar and 
yen “that were lost at the 
beginning of the 1970s". 

Other eminent former policy 
makers are beavering away in 
a grandly named Bretton 
Woods Commission which is 
due to report next month on 
the 50th anniversary of the 
Bretton Woods agreement. 
Their objective is to “formulate 
and agree on proposals for the 
reform of the international 
monetary system, the Interna- 
tional Monetary Fund and 
World Bank which will help 
set their course as the 21st cen- 
tury approaches”. 

At first sight there is much 
merit in the goal of greater 
exchange rate stability. More 
fixed exchange rates are of 
obvious benefit to interna- 
tional travellers and busi- 
nesses that import and export. 
In spite of sophisticated hedg- 
ing techniques, it is likely that 
exchange rate volatility hin- 
ders international trade and 
investment. Long-term mis- 
alignments, such as the big 
appreciation of the US dollar in 
the early 1980s. distort invest- 
ment decisions and can foster 
protectionism. 

Moreover, with hindsight, 
the period of fixed exchange 


rates in the industrialised 
world that fallowed the second 
world war looks like a golden 
age. Growth was faster than it 
has been since the collapse of 
Bretton Woods in 1973 and the 
industrial countries, which 
now support a 35m-strong 
army of unemployed, could 
boast of full employment in the 
1950s and 1960s. 

But it was also an age ol 
strict controls over capital 
movements in which compara- 
tively Tew rich countries rolled 
the shots. Changes in the 
world economy since the early 
1970s make it very difficult to 
imagine a successful return to 
Bretton Woods. 

When the Group of Seven 
leading industrial countries 
tried to stabilise their 
exchange rates through the 
Louvre Accord of February 
1987, some, notably Japan and 
Britain, found that their 
domestic economic stability 
was undermined. 

In Japan's case an exces- 


sively easy monetary policy, 
that was intended to prevent 
appreciation of the yen, tolled 
the now notorious "bubble 
economy”. In Britain. Chancel- 
lor Nigel Lawson’s struggle to 
prevent sterling appreciating 


against the D-Mark hindered a 
much needed tightening of 
monetary policy to curb a 
growing boom. The result was 
a rapid increase in UK infla- 
tion. followed eventually by 
soaring interest rates and a 


very damaging recession. 

More recently, massive free- 
flowing capital movements 
triggered crises in the Euro- 
pean Monetary System in 1992 
and 1993. 

After such experiences, it is 
not surprising that there are 
no official moves afoot to 
replace the present “non-sys- 
tem" of floating exchange rates 
with a more orderly system of 
fixed parities. 

For starters, the adoption of 
narrow fluctuation bands akin 
to the Bretton Woods system of 
near stable exchange rates 
would require countries to 
reach agreement on appropri- 
ate parities. This, says Morris 
Goldstein, deputy head of the 
IMF’s research department, 
“would be no easy task”. Still 
more problematic would be the 
subordination of monetary pol- 
icy to exchange rate goals, that 
would be required if such a 
system were to survive. 

But if fixed exchange rates 
are not the route to greater 


discipline in the international 
monetary system, what is? 

An indication came in the 
response of Michel Camdessus, 
the IMF managing director, to 
Mr Maystadt’s announcement 
in ApriL Mr Camdessus said 
his “instinctive reaction” was 
that there was more prospect 
of addressing exchange rate 
Instability at the world level 
through strengthened surveil- 
lance and coordination of eco- 
nomic policies than through 
co-ordinated intervention in 
the foreign exchange markets. 

In other words, the best way 
to exchange rate stability 
begins at home. This madm is 
likely to be endorsed by the 
Bretton Woods Commission, 
when it reports in July, and 
the IMF executive board when 
it submits Its finding * to the 
Interim Committee’s next 
meeting in Madrid in October. 
It would be surprising if both 
groups did not lay great stress 
on the need for convergence of 
inflation rates, greater savings 
and domestic investment and 
determined action to reduce 
fiscal deficits as the path to 
greater currency stability. 

It is unclear, however, 
whether the two bodies will go 
so Car as to suggest that such 
domestic-oriented approaches 


could one day lead to “target 
zones” in which the monetary 
authorities would keep the 
principal trading currencies - 
the dollar. D-Mark and yen - 
within relatively narrow 
ranges of each other. 

Last month Mr Camdessus 
expressed his doubts. As well 
as a high degree of conver- 
gence and increased attention 
to macroeconomic co-ordina- 
tion. achieving exchange rate 
stability through target zones 
would require an “exception- 
ally high degree of collective 
determination . . . given the 
high cost that may have to be 
paid for this in terms of growth 
and employment in the short 
term.” 

Such collective determina- 
tion does not exist It was “not 
accepted to the same degree in 
the three major currency areas 
of the world,” he said 

Mr Goldstein is doubtless 
right when he says that a fun- 
damental reform of the Inter- 
national monetary system is 
“not on the near-term hori- 
zon". 

But Mr Maystadt's Initiative 
in the April Interim Committee 
and the musings of men such 
as former chancellor Helmut 
S chmidt show it is a subject 
that will not go away. 





A fter the halcyon years of 
1992/3 when bull mar- 
kets in financial assets 
and one way bets In the ERM 
swelled foreign exchange trad- 
ing profits. 1994 has proved to 
tie more challenging. 

In contrast to tbe earlier 
period when the ERM crises 
saw currency markets domi- 
nate the headlines, the recent 
ructions in financial asset 
markets did not spill over 
directly into currencies. But 
the overall nervousness, as 
investors contemplate whether 
a bear market is under way, 
has not helped foreign 
exchange trading rooms which 
depend on cross-border deals 
for their volumes. 

Indeed, there is a sense in 
which 1994 has witnessed the 
revenge of tbe central banks. 
In 1992 '3. many of them were 
humbled by speculators who 
profited handsomely at the 
expense of taxpayers. This 
time round H has been the 
“speculators” who have lost 
heavily, with just about every- 
one appearing to have got the 
dollar wrong against the yen. 

Up-to-date national and 
global foreign exchange trad- 
ing figures are not available, 
but tbe overall picture is one 
nf volumes having returned to 
roughly the levels before the 
ERM shake-up (though some 
claim volumes are as high os 
even. 

A consultant to a leading 
European hank active in for- 
eign exchange argues that the 
total volume or foreign 
exchange business in London, 
easily the largest market, 
grew by io per cent last year. 

Although there have been 
periods of considerable intra- 
day volatility, the general 
complaint is that trading has 
been (roadless. with foreign 
exchanges taking their tunc 
from other asset markets. 

The one glaring exception, 
of course, has been the steady 
downward path of the dollar, 
with most investors on the 
wrong side of the trend. 


Profit trends are also not 
easy to determine. UK banks 
do not report on a quarterly 
basis, while US banks tend not 
to disaggregate their trading 
revenues. 

In general, thongh, those 
banks which rely more on an 
established client base than 
own-account trading are likely 
to have done better. And as 
the first quarter results of 
leading US banks like 
J.P. Morgan, Bankers Trust 
and Citicorp made clear, trad- 
ing revenues were sharply 
lower. 



Julian Simmonds: hopes to 
standanfise dealing rooms 

Within these figures, foreign 
exchange revenues probably 
fell proportionally less than 
bond and equity revenues. 
Banks appear to have lost 
most of their money during 
the first quarter in emerging 
market securities and Euro- 
pean bonds. 

The two bits of bard infor- 
mation about 1994 trading 
come from Chase and Citibank 
which show a separate foreign 
exchange revenue figure. 
Looking at the income line. 
Citibank's revenues fell to 
S&fim from Sl56m in the fourth 
quarter and S240m a year ago. 
At Chase, the comparable fig- 
ures were 885m, compared to 


This time around, speculators have lost heavily, writes Philip Gawith 

Revenge of the central banks 


575m in the fourth quarter and 
5103m in the first quarter of 
1993. 

Citibank’s figures form the 
basis for a widely-held market 
view that the industry leader 
performed worse than expec- 
ted. But Citibank says this fig- 
ure is distorted by accounting 
vagaries and notes that if its 
revenues are broken down by 
trading activity, foreign 
exchange is flat at 5200m com- 
pared to a year previously. 

With proprietary profits 
more difficult in a trendless 
market, the focus has switched 
sharply back towards the cus- 
tomer. This has helped a bank 
such as Midland, a distribu- 
tion-led outfit that functions 
more as a market-maker than 
as a position taker, relying on 
a core client base to generate 
business. 

Rob Loewy, head of foreign 
exchange at Midland Global 
Markets, says that be is still 
seeing growth in both the 
funds and tbe corporate side of 
the business. Foreign 
exchange earnings, he says, 
were also better in the first 
quarter of 1994 than the same 
period in 1993. 

Chris Deuters, head of for- 
eign exchange at Lehman 
Brothers, says although the 
first quarter of 1994 was a dif- 
ficult one. the aim remains tbe 
same: to use foreign exchange 
as a separate asset and invest- 
ment class, with a premium on 
the relationship with the cus- 
tomer. It is a case, he says, of 
“back to basics”, of getting 
close to the client to under- 
stand his needs. 

With “central banks no lon- 
ger in the middle, dishing out 
taxpayers money”, says Mr 
Deuters. there is a greater pre- 
mium on relationships and 


The acknowledged 
market specialists in 

Foreign 
and Treasury 

dealing appointments 


/rc«Mirv lit’ cm {fine itf 


Exchange 


good traders. Getting close to 
the customer Is hardly novel, 
but “it's not the originality of 
tbe idea that differentiates the 
bank. It’s the execution.*' 

Another key challenge he 
stresses Is the globalisation of 
tbe business. “Clients’ risk 
doesn't end at 5pm. so you 
have to be giobaL” Putting 
this operation together, with- 
out having multiple trading 
rooms in the same time zone. 
Is an important task. 

For Julian Simmonds, man- 


aging director foreign 
exchange and money markets, 
Europe at Citibank, a key dif- 
ference between 1994 and 1993 
is the shift in emphasis 
between costs and revenues. 
Whereas business was so hec- 
tic during 1992/3 that manag- 
ing the huge turnovers was a 
full-time activity, the quieter 
period offers opportunities to 
look at costs. 

It also allows greater time 
for strategic thinking, such as 
how to embrace the challenge 


of emerging mark ets. 

In terms of costs. Citibank Is 
looking at whether it can tidy 
up its operations on the pro- 
cess and technology side. It 
has now centralised the back- 
office function for clearing its 
European business in London. 
Mr Simmonds hopes also to 
standardise dealing rooms. 
Tve got to believe that there 
should be much more com- 
monality among our systems. 
The days are gone where every 
branch can have 100 pa* emit 


of what it wants.” 

He is quick to add, however, 
that “this is not a revolution. 
It's an evolutionary process. 
Ask the questions, and then 
try and change things slowly.” 

Hr Simmonds Is also con- 
cerned about the “efferves- 
cent” state of tbe labour mar- 
ket. “Packages are being 
offered as rich as at the height 
of the boom. I find that 
strange. Market participants 
have failed to recognise that 
things are changing. People 
need to become more realistic 
about what is attainable." 

Another important chal- 
lenge which all businesses face 
is the Increasing integration of 
foreign exchange, capital mar- 
ket and derivative functions. 
“Customers require solutions 


that cut across the products,” 
says Mr Stmmouds. “You have 
to think more broadly.” 

Quieter times need not sig- 
nal lower profits, as Chase’s 
first quarter performance 
shows. 

David Clark, treasurer 
Europe at HSBC, adds: “Yon 
don’t need a lot of big moves 
to make money. Foreign 
exchange dealers can live 
quite easily with the volatility 
we have.” 

What about the future? Mr 
Simmonds comments: “For- 
eign exchange is in transition. 
1 suspect bitter disappoint- 
ment for those who are gear- 
ing np to face the last two 
years again. I don’t think any 
of ns have had to manage 
against this backdrop before.” 


Telephone: 071-369 0369. 

36 Cornhill, London, EC3V 3PQ. 


io the untrained eye the 
change is indiscernible, 
but in dealing rooms 
across the world, electronic 
brokerage is slowly becoming 
part of the foreign exchange 
landscape. 

The fondly nurtured stereo- 
type of brokers, resplendent in 
loud braces, bawling down tele- 
phones as they barrel vast 
sums of money around the 
world is not under serious 
threat But the trading desks of 
large banks are increasingly 
acquiring automated dealing 
systems which simulate the 
services offered by traditional 
voice brokers. 

It is early days yet and the 
market share of electronic bro- 
kerage is still very small. It 
also remains to be seen 
whether there is space in the 
market for the existing three 
operators. But there is a clear 
sense of technology on the 
march, with no compelling rea- 
son why the broking commu- 
nity should prove Immune to 
change. 

The most significant recent 
development was the launch 
last September of the Elec- 
tronic Broking Service (BBS), a 
system backed by 13 leading 
banks in foreign exchange. 
This followed on the earlier 
launch of two other electronic 
broking systems: Dow Jones 
Telerate launched the Minex 
system in April 1993, and the 
launch in May 1992 by Reuters 
of the 2000-2 dealing system. 

EBS's origins were essen- 
tially defensive, with the banks 
anxious to prevent Reuters 
assuming such a dominant 
market position that it would 
be able to influence the way in 
which the market functions. 

It already had a strong hold 
on the foreign exchange mar- 
kets with about 50 per cent of 
global foreign exchange turn- 
over transacted through its 
main dealing systems, Reuters 
2000-1 and Reuters Monitor. 

Although EBS was essen- 
tially set up in opposition to 
Reuters, the real competition 
lies with the voice broking 


Philip Gawith discusses the progress made by electronic brokerage 

Technology on the march 



Screen test electronic brokerage is slowly becomteg part of the foreign exchange landscape 


community. Brokerage still 
plays an important part In cur- 
rency dealing. At the time EBS 

was conceived, and electronic 
brokerage is too immature for 
these figures to have changed 
substantially, roughly 60 per 
cent of deals in the currency 
market were done by traders in 
two banks - or counterparties 
* who call each other up 
directly. The remainder were 
done by brokers who bring 
together buyers and sellers. 

Figures released by EBS sug- 
gest it is making solid prog- 
ress. it is now starting to 
achieve consistently more than 
2,000 trades A day. For the 
week ended May 6, most trades 
(59 per cent) were in the $/DM 
cross, with other good perform- 
ers being DM/Swiss franc and 
DM/French franc. 

The number of users has also 
increased to 188 bank branches 
in 18 cities. Since January, 48 
new counterparties have been 
added, and only 10 of these are 
brandies of the 13 EBS part- 
nership banks. 


EBS is keen to resist the idea 
that it exists only because it 
can attract captive business 
from its shareholders. It notes 
that partner banks now repre- 
sent less than SO per cent of 
total users on the system. Reu- 
ters. meanwhile, announced 
recently that it had passed tbe 
5,000 matches/day mark on the 
2000-2 system. It is found in 
about 550 bank branches, and 
Portugal will soon become the 
22nd country where 2000-2 
systems are used. 

Minex has a strong position 
in Asia and claims to transact 
6 per cent of the daily broker 
turnover in dollar/yen in 
Tokyo. 

The voice broking commu- 
nity claims that the influence 
of electronic broking has so far 
been negligible. Indeed, one 
leading broker says that in the 
case of the D-Mark/franc pair, 
“we have found since they 
established themselves, our 
turnover has gone up as well". 
Re concedes that the effect 
would be different in a more 


established currency pair, such 
as dollar/D-Mark. 

Although electronic broker- 
age systems claim that they 
can cat brokerage costs, bro- 
kers argue that currency deal- 
os are more concerned with 
generating turnover than con- 
trolling overheads. Brokers 
also believe the human factor 
should not be underestimated. 
"A computer can't take you 
out for a drink after wort," 
qnips one. Some critics have 
wondered whether bank deal- 
ers would use EBS were it not 
for the fact that they have a 
stake in the system. Users, 
however, are adamant this is 
not the case. Tim Broome, 
assistant director at Barclays 
global foreign exchange, com- 
ments; EBS on our dealing 
floor currently stands on its 
own merits." 

Mr Bartko is confident that 
EBS is succeeding in terms ol 
the key criterion that deter- 
mines the success of a broker 
the liquidity it generates. This 
in turn, is a function of having 


prices to quote, to a critical 
mass of counterparties. He 
argues that EBS has generated 
liquidity which people are pre- 
pared to pay to have access to. 
This is particularly so in the 
dollar/D-Mark, D-Mark/ Swiss 
Franc and D-Mark/French 
franc crosses. EBS has been 
less successful in generating 
liquidity in the other five cur- 
rency pairs it offers. Mr Bartko 
says he is at a loss to explain 
why some cu r r e ncy pairs have 
succeeded better than others. 

Traders are generally quite 
complimentary about EBS, 
with two caveats. First, 
younger traders tend to be 
more receptive to the new tech- 
nology than older ones. Jnd m l. 
many in the market cite the 
cultural challenge of asking 
people to change deep-seated 
work habits as the most seri- 
ous challenge facing electronic 
broking. 

Second, EBS is used more in 
quiet markets, in heavy trad- 
ing, the inclination is still to 
revert to habit and trade on 
established systems, or with 
voice brokers. 

One early division between 
ebs and Reuters is that the 
former, understandably given 
its backers, has a dominant 
poation among the large banks 
in the interbank market while 
Reuters has a strong position 
among their counterparties, 
especially the retail market 
banks. “They have got the 
market-makers and we have 
got the hitters." says Bob Eth- 
enngton, international market- 
ing manager at Reuters. 

Naturally enough, both EBS 
and Reuters claim that they 
are making inroads on the oth- 
er's market. Certainly, there 
are examples of banks who use 
nmre than one of the electronic 
systems. 




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For the sixteenth successive year, Citibank 
has been voted No. 1 in Foreign Exchange 
in the Eurenwriey survey of Corporate 
CFOs, Treasurers and Fund Managers. 
Citibank FX: year after year, decade after 
decade, voted first by those who matter. 


CITIBANK 




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Philip Gawith discusses the role of hedge funds 

‘Cowboys’ of the 


At the beginning of 199>1. there 
were at least two certainties 
in the eyes of most global asset 
managers: the US dollar and 
European bond markets, bad 
to rise. 

U is a matter of history, of 
course, that events turned out 
otherwise, with most fund 
managers reaching the end 
of the first quarter nursing 
battered balance sheets arid 
wounded egos. 

In the search for scapegoats, 
the finger was quickly pointed 
at the hedge funds - large 
pools of speculative capital, 
whose predatory trading 
instincts and penchant for 
higlily leveraged trade has 
conferred ou them a reputation 
as the cowboys of modem 
financial markets. 

Figures about the size of the 
hedge fund industry are 
notoriously vague, mainly 
because many hedge funds 
are organised so as to avoid 
the application of most 
securities laws, and hence 
exist in something of a 
regulatory black hole. 

Republic New York 
Securities, a firm that tracks 
hedge fund activities, 
estimates that there are more 
than 400 hedge funds 
representing S35bn-S-IUbn 
capital. These estimates were 
largely corroborated by recent 
testimony from Barbara 
Pedersen Hohun. acting 
chairman of the Commodity 
Futures Trading Commission 
(CFTC>. at hearings on hedge 
fund activities held in the US 
by the House Banking 
Committee. The CFTC 
regulates US commodity 
futures and options markets 
and has information on most 
hedge funds of any size that 
use these markets. CFTC data 
indicates a total of S31.5bn 
under management of 
“self-declared" hedge funds, 
and S48bn under management 
by all listed investment 
partnerships combined. 

These figures need to be kept 
in context. The total net value 
of the regulated mutual fund 
industry in the US was 
SUOObn at the end of 199a. 
with at least 10 mutual funds 
having a net asset value 
greater than $9bn. Other US 
institutional investors had, 
at the end of 1993. $6.500ba in 
assets under management 


Estimates by John La Ware, 
a governor of the US Federal 
Reserve, are that perhaps a 
dozen hedge funds have a net 
asset value greater than $lbn 
with another 35 having capital 
between $100m and Jlbn. 
George Soros's group is 
believed to be the largest with 
about $9bn of capital 

How active are hedge funds 
on foreign exchanges? 
Testifying before the House 
banking committee, Mr Soros 
provided the following 
appraisal: using 1992 data from 
the Bank for International 
Settlements, showing global 
net turnover of the nine largest 
foreign exchange markets to 
be about S946bn per day, “all 
hedge funds in the aggregate 
control at most 1/lSOth (or 
0.005 per cent) of the daily 
global trading volume in the 
foreign exchange markets". 

This is based on the 
assumption that Soros Fund 
Management (SFM), on an 
average trading day in foreign 
exchange, might engage in 
transactions with a total value 
of around $500m: and that SFM 
constitutes about 15 per cent 
of the money invested in hedge 
funds. 

Against this rather benign 
view of hedge funds, two 
points must be made. First, 
their ability to leverage their 
funds, and willingness to take 
big bets, means that some of 
their trades con be very large 
indeed. Also, despite their 
self-styled contrarian instincts, 
hedge funds do often end up 
trading os a pack. In such 
cases their ability to move 
markets is beyond dispute. 

But Mr Soros does have 
support for his view that the 
influence of hedge funds can 
be exaggerated. The CTFC, 
for example, found that the 
more prominent hedge funds 
"have not contributed to 
volatility in CFTC regulated 
markets". The CFTC examined 
its records of hedge fund 
activity during February and 
March, when financial markets 
experienced considerable 
volatility, and found it "not 
significant". 

More specifically, on 
February 14, when the US 
dollar plunged to a six-month 
low against the yen, hedge 
funds “were not active 
participants in yen futures on 


markets 


this day, none appearing 
among the 30 largest net 
traders . . ." 

Arguably as important a 
development as hedge funds 
has been the mushrooming 
of proprietary trading 
activities by leading banks - 
that is. trading done on their 
own account where capital 
is at risk. 

Henry Gonzalez, chairman 
of the House banking 
committee, noted recently that 
bank trading activities were 
“growing at an uncontrolled, 
rapid pace. At the top 10 bank 
holding companies, trading 
account assets have increased 
about 400 per cent in the past 
four years and non top 
$140bn.” 

Insofar as regulators are 
concerned with the threat of 
financial instability, it may 
well be that they will in future 
concern themselves as much 
with banks' proprietary 
trading, and the activities of 
institutional investors, as with 
hedge funds. Mr Soros argues 
that “trend-following 
behaviour” is necessary to 
cause a market crash, and that 
this is most likely to come 
from institutional investors 
in general and mutual funds 
in particular, aggravated by 
hedging practices associated 
with derivative instruments. 

Large hedge funds like to 
argue that their contrarian 
instincts actually make them 
a smoothing influence in 
financial markets. This view 
also enjoys support from 
regulators. Indeed, the Fed's 
Mr LaWare told the House 
committee that “the activities 
of hedge funds add depth and 
liquidity to financial markets 
anri nan be stabilising 
Influences. It would be wrong 
to single out hedge funds as 
being responsible for moving 
global prices of financial assets 
or as being a major source of 
risk in financial markets.” 

It may be that markets have 
already done the regulators' 
work for them. Indeed, if 
reports about the extent of 
hedge fund and proprietary 
trading losses in the first 
quarter are to be believed, then 
a pruning process is already 
well under way. Hedge funds 
and proprietary traders have 
still to prove themselves in 
bear markets. 


Richard Desmond, group 
treasurer of BAT Industries, 
the tobacco and insurance 
group, sees a lot of bank pre- 
sentations in his London office. 

When, during a presentation 
earlier this year, one banker 
airily talked about “the client's 
views" on foreign exchange 
movements, Mr Desmond inter- 
rupted him. “We don't have 
views, we have exposures,” he 
said. “And if we don't have an 
exposure, we don’t have a 
view." 

That epitomises the 
dawn-to-earth conservative 
approach of Mr Desmond, who 
lectures on foreign exchange 
management and was a former 
president of the Association of 
Corporate Treasurers. 

Mr Desmond points out that, 
at BAT, which had sales of 
£I3bn last year, “the size of the 
organisation Is large in rela- 
tion to the size of the foreign 
exchange risks”. This, he 
believes, leads to a couple of 
advantages In risk manage- 
ment. “We don’t have to keep 
pressing far the last bribing in 
savings. And we can often take 
more conservative risk man- 
agement approaches." 

The treasury department 
may be centred in the UK but 
Mr Desmond has only a small 
team of five professionals at 
headquarters. Nevertheless, he 
claims that “the quality of our 
treasury staff is as good as any 
in London". His team both 
deals and devises the foreign 


Few activities conjure up a 
dull stereotype as readily as 
the chartist, whose dogged 
study of the past as a guide to 
the future can appear an intel- 
lectually arid, exercise. 

Few men, however, con- 
found this stereotype more 
thoroughly than Brian Mar- 
ber, doyen of the trade. Maver- 
ick and man of strong views, 
an hour or two in his company 
is enough to make anyone 
turn to charts. 

Unfortunately, Mr Marber is 
not quite the marketing gift he 
first appears. Indeed, he has a 
somewhat ambiguous relation- 
ship with his calling. “I told 
the secretary of the Society of 
Technical Analysts that it was 
not in the interests of the soci- 
ety to promote itself. We 
would do ourselves more good 
if we go around pretending to 
be weirdos. Hie efficiency of 
technical analysis is in inverse 
proportion to its acceptance,” 
he says. 

Mr Marber did not receive 
his first fee-paying client until 
June 1979, when he success- 


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New York Hoag Kong 

I-LM24HUIH73 B5iUS97i<» 

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Tokyo 

81-31151)39131 


Profile: RICHARD DESMOND 

Down-to-earth 

treasurer 


exchange strategies. 

The group reports to share- 
holders in sterling but Is a 
worldwide operation, with, 
costs and revenues in many 
different currencies. “We tend 
to be long dollars, yen and 
Deutschemarks” says Mr Des- 
mond. Exposures across the 
group are netted so that a sub- 
sidiary which has, for example, 
dollar costs can obtain dollars 
from the head office at a bud- 
get rate. 

As the BAT treasurer points 
out, there are four potential 
elements of a company’s for- 
eign exchange risk: the third 
party transactions of operating 
groups; non-remitted profits of 
subsidiaries; dividends and 
other financial flows to the 
core; and foreign currency 
assets. 

On third party transactions, 
Mr Desmond says that "every 
subsidiary should be manag in g 
its foreign exchange exposure" 
although he points out that 
most subsidiaries' exposures 
should not be large, since they 


have local cost factors. 

The subsidiaries are not 
without guidance on how they 
should handle their foreign 
exchange riaaHng s. BAT r uns a 
course in which all financial 
staff are trained in the style of 
the group. The head office aim 
has a range of policies which 
cover what the subsidiaries 
i^ n do, and substantial trans- 
actions have to be approved at 
the sub-operating group level 

Nan-remitted profits, which 
are being retained by subsid- 
iaries for future growth, are 
not hedged. They are recorded 
by the parent company after 
having been translated at the 
average exchange rates for the 
year. 

Dividends and other finan- 
cial flows are managed actively 
but conservatively, according 
to Mr Desmond. “When volatil- 
ity goes up, our strategy gets 
more conservative; when it 
goes down, we become slightly 
more active. If volatility goes 
down a bit, we use an option 
strategy. The cost is lower if 



Richard Desmond: “we don't have 
views, we have exposures* 


the volatility Is lower.” 

For much of the time. BAT 
makes straightforward transac- 
tions In the spot and forward 
markets, or using stop-loss 
strategies, with the target of 
achieving the average 
exchange rate for the year. 
However, Mr Desmond says 
the company is quite prepared 
to use sophisticated tech- 
niques, but on strict condi- 
tions. “We take a practical 
approach" he says. “We don’t 
aggregate risks, we like to 
retain our flexibility. When we 
use a product, we make sure 
we understand the potential 
out- turn. 

"Furthermore,” he adds. 


“before we buy a product, such 
as a zero cost collar, we will 
run a programme to see not 
only what our strategy will 
achieve but also the cost of 
unwinding it half-way 
through." 

When it comes to dealing 
with the exchange risk created 
by foreign currency assets. Mr 
Desmond says there are three 

possibilities. 

The first is make it abun- 
dantly clear to shareholders 
that the group has foreign cur- 
rency assets, which are not 
hedged, and let them assess 
the attractions of the shares on 
that basis. 

This approach would mean 
that all the company’s borrow- 
ings would be denominated in 
sterling, the currency in which 
the results are reported. 

The second strategy Is to 
match the debt exactly with 
the assets in currency terms so 
that when foreign exchange 
markets bob up and down, the 
value of the group’s reserves 
stay's the same. 

Mr Desmond says BAT uses 
a third approach. “We are a 
little bit more sophisticated. 
We look at the currency ratio 
of the future cash flows as wen 
as of the assets." 

He explains that this means 
that "when currencies move 
our debtyequity ratio and inter- 
est cover ratio will tend to be 
stable." 

Philip Coggan 


Profile: BRIAN MARBER 

Top of the chartists 


fully predicted that the dollar 
would drop against the 
D-Mark. Within two years Mr 
Marber had left his position at 
the stockbrokhig firm Simon 
and Coates - In his last six 
years on the stock exchange, 
he had been voted best techni- 
cal analyst in the City - and 
Brian Marber and Co soon fol- 
lowed, being set np in Septem- 
ber 1981. 

Mr Marber will not discuss 
the size of his client base, but 
says It "was originally all cor- 
porates - people who were fed 
np with forecasts from the 
buiks.” Initially he called 
himself a forecaster. “They 
would not have known what a 
chart was 15 years ago, and if 
they had they would have 
laughed!” 

Mr Marber may not enjoy 
marketing, but be knows a 
thing or two about advocacy. 
With the practised skill of one 
who has many times fought off 
the sceptics, he sets out his 
stall: 

■ A 1989 Bank of England 
study shows that 90 per cent 
of all FX derisions made in the 
market had some degree of 
technical analysis in them; 

■ 60 per cent thought techni- 
cal analysis “at least as useful 
as fundamental analysis”. 

To those who argue that 
maybe fundamental analysis is 
more useful further out, over 
six to 12 months, Mr Marber 
replies pungentiy. “I can tell 
you that is absolute rubbish.” 
He cites a biannual survey 
where analysts are asked for 
their forecasts one year out Of 
the 24 surveys he has moni- 
tored, in only 10 of those has 
the mean forecast been correct 


on (he trend. 

The figures show, he argues, 
that fundamental anal ysts get 
the trend right about 40 per 
cent of the time. “Random 
chance would have it that you 
would be right 50 per cent of 
the time, wouldn't it?” 

The same Bank study found 
that technical analysts were 
right no more than 50 per cent 
of the time. While Mr Marber 
concedes that charts will not 
help in a ranging market, he 
says “they will never leave 
you on the wrong side of a 
trend”. Research shows that 
foreign exchange is the only 
market to trend, and it does so 
58 per cent of the time. “That 


is sufficient to make money.” 
he says. 

Nothing gives Mr Marber 
more pleasure than laying into 
the “fundamentalists”. Pur- 
chasing power parity? “A load 
of bnflshit. The dollar was 
undervalued for 10 years in 
terms of PPP In the 70s. How 
the hell does that help you 
make a decision?” Interest 
rate differentials? "Lex wrote 
the most arrant nonsense 
recently: if interest rates go 
up, currencies go up.” 

He then polls out a chart of 
do liar /D-Mark going back a 
number of years which shows 
that the currencies followed 
interest rate trends only - 


wait for it - 40 per cent of the 
time. To Mr Marber. none of 
this is surprising. “The func- 
tion of markets is to try and 
discount the future. They con- 
centrate on anticipating future 
interest rate differentials, not 
current ones." 

In fact, sceptics have long 
ceased to be a problem. The 
enemy is now within - the 
problem to be faced is how to 
deal with success. Fifteen 
years ago banks did not 
employ chartists and people 
wanting to see the doilar/D- 
Mark relationship plotted had 
to come to people like Mr Mar- 
ber, Now it is tbe mere push of 
a button away. “Everybody 
thinks he’s a bit of a chartist," 
he says. 

The problem now is that 
interbank trading in foreign 
exchange dwarfs trade-related 
flows. But most Interbank 
trading. Mr Marber argues, is 
guided to a greater or lesser 
degree by technical analysis. 
The danger Is that it then 
becomes self-destractive as 
“there is no follow through, 
since no-one else is there”. 

He applies this logic to tbe 
range trading in foreign 
exchange markets since Sep- 
tember 1992. Why? “Because 
there are too many technical- 
ly-inspired derisions. Give me 
a market that isn’t subject to 
technicians. It’s much easier." 

Longer-term calls have 
become much more difficult, 
says Mr Marber. In the case of 
cable (£/$), the one-year aver- 
age used to change direction 
every three years. "Nowadays, 
by the time yon have called 
the change it has topped.” Mr 
Marber puts this down to 
improved communications. 
“Arbitrage works on bad com- 
munication. Where are the 
fun d a m entals wbeu people 
close positions at tbe end of 
the day?” he laments. 

Philip Gawith 



Profile: DAVID SHAW 


Erring on the side of caution 


Sterling’s undignified exit from 
the European exchange rate 
mechanism (ERM) in Septem- 
ber 19 92 was the catalyst for 
Legal and General revising its 
approach to currency manage- 
ment. says David Shaw, head 
of strategy. 

Sterling’s 14-15 per cent 
decline "brought home to us 
just how exposed our assets, 
and by extension our policy 
holders, had been.” He adds 
that “such events are becom- 
ing increasingly common and 
institutions like L&G need to 
assess the risks and take 
appropriate action”. 

Institutional investors are 
among the more cautious crea- 
tures found on foreign 
exchanges. So Mr Shaw Is 
quick to stress that the discre- 
tion he is allowed by his board 
and trustees is tightly con- 
strained. At the level of cur- 
rency selection only two sizes 
of position are allowed: the 
minimum position is 2.5 per 
cent, and this has to be justi- 
fied by an expected total 
return on the preferred cur- 
rency of at least 7.5 per cent. 

The maximum permitted 
position is 5 per cent of under- 
lying assets, irith an expected 
total return of 15 per cent "No 
conviction, no bets,” he says. 

Five per cent may not sound 
much, but can add up to large 
numbers when one considers 
that L&G has more than £30bn 
assets under management, of 
which about 20 per cent is in 
non-sterling assets. Across the 
breadth of UK institutional 
Investors, nearly £250 bn Is 
probably invested in non-ster- 
ling securities. 

Mr Shaw stresses that these 


large bets are rare. In 1993 
L&G did not take any 5 per 
cent positions, and only placed 
one 2J5 per cent position on the 
dollar, which paid off. 

This year has proved tricky. 
Mr Shaw is in good company 
when he admits that L&G had 
a bet on the dollar against the 
yen which went wrong. The 
group was saved from embar- 
rassment by placing a stop-loss 
order at Y 107.50. which minim- 
ised the loss to 2 per cent 
' While the 2.5 and 5 per cent 
limits are very rigid compared 
to many other currency trad- 
ing operations, they still repre- 
sent a considerable change to 
modus operand! from the situa- 
tion just two years ago. “The 
asset allocation view was Ini- 
tially (taken) without any seri- 
ous assessment of the relative 
attractiveness of the currencies 
involved,” says Shaw. 

Partly this reflected trustees’ 
concern that managers not be 
seen to be too pro-active in 
their management of curren- 
cies. It was also a function of 
the relatively low currency vol- 
atility since October 1990 when 
sterling had formally entered 
the ERM. 

Now the group does one-year 
currency forecasts, roughly 
consistent with its typical 
investment time horizon. The 
focus is on the four main cur- 
rencies - dollar, D-Mark, yen 
and sterling - and each month 
L&G uses fundamental eco- 
nomic analysis to rank the cur- 
rencies in terms of expected 
performance. With about 80 
per cent of group assets in the 
UK, the key is the sterling 
cross with the other three cur- 
rencies. 



— ' ■“ -ir . ■ / 

David Shaw: discretion allowed by 
Ms board is tightly constrained 


The degree of discretion In 
managing currency exposure is 
an ongoing subject of internal 
debate. An Important concern 
from a taxation perspective Is 
to be classified as an investor, 
not a trader - a fine distinction 
which turns on investment 
time horizons. 

Overall, says Mr Shaw, 
“there is an increasing willing- 
ness on the part of trustees to 
be more flexible In allowing 
currency management”. There 
is, however, a Job or persuasion 
to be done. Some trustees are 
fin a ncial ingenues, who need 
to be persuaded that currency 
management is not specula- 
tion, while others, for example 
will feel that selling sterling ^ 
in some way unpatriotic. 

With trustees more willing 
the currency derision is now' 
increasingly separated from 
thB underlying asset decision 
says Mr Shaw, “because the 
economic fundamentals that 
drive currencies are not the 


same set that drive the bond 
and equity markets". The deci- 
sions are taken “separately but 
simultaneously”. 

While progress has been 
made, Mr Shaw Is careful to 
stress that they have not 
reached the stage where, like 
hedge funds, proprietary trad- 
ers or currency funds, they 
purely take a view on a cur- 
rency. "What we do is cur- 
rency management, and it is 
the currency management of 
an underlying asset." he 
stresses. 

A concern that Mr Shaw 
expresses is that just as invest- 
ment managers are mastering 
currency management, the 
game seems to be changing. 
"We've padded up for tbe vil- 
lage cricket match to find 
we’re playing in the World 
Series,” he quips. 

The worry is that the advent 
of highly leveraged trading, 
conducted mostly by propri* 
etary traders and hedge funds, 
may have fundamentally 
changed that nature of mar- 
kets in a way which renders 
the more cautious strategies of 
institutional investors both 
anachronistic and inadequate. 
This concern was heightened 
by tbe volatility of financial 
markets during the first quar- 
ter which left many fund man- 
agers with red feces. 

It is early days yet. The first 
quarter may be a one-off, in 
which case it can be ignored. 
Otherwise, Mr Shaw may find 
himself having to manage his 
cur T enc y exposure as actively 
as he manages the underlying 
assets. 


Philip Gawith 






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The snows of an 
economic winter 
are meiting: Page 4 


FINANCIAL TIMES SURVEY 


BELGIUM 



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Thursday June 2 1994 


Faster recovery 
than expected 

Political and business leaders are trying to regain 
their confidence after riding out Belgium’s worst 
recession for 60 years. Lionel Barber reports 


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Belgium Is l ooking at a 
brighter future. After one of 
the most painful recessions 
since the 1330s, the Kingdom is 
advancing again much more 
rapidly than expected. 

Economic recovery will 
bring, relief for Belgium's 
beleagu e red political and busi- 
ness classes whose goal over 
the past 12 months can be 
summed up in one word: sur- 
vival 

Like all members, of the 
p, . European Union, Belgium has 

K >in P C(v v been buffeted by rising unm- 
ploymenl. intermittent labour 
unrest and popular disiUttaon- 
ment with pohthlans, few of 
whom can aspire to the stature 
of the immediate post- World 
War H generation led by Paul- 
Henri Spaak. 

The economic crisis peaked 
last summer when a wave of 
speculation threatened to force 
the fragile coalition govern- 
ment led by Prime Minister 


. .1 ■. 

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Ki£. 


Jean-Luc Dehaene to shgndoTf 
its policy of shadowing the 
D-Mark, a move which would 
have put Belgium's long-stand- 
ing anti-inflation strategy at 
lids. 

Although siren calls were 
heard in favour of a UK-style 
dash for growth through lower 
interest rates and a devalua- 
tion of the currency, the 
Dehaene gove rn ment and the 
Belgian National Bank stood 
firm. Together they refused to 
break ranks an interest rates 
with their partners in France. 
Germany, t he Netherlands and 
Luxembourg - the informal 
hard currency chib which con- 
tinues to enjoy the best pros- 
pects of fo rming a European 
monetary union later in the 
decade. 

Mr Dehaene plunged ahead 
instead with a “global pact” 
between government and 
employers, the most ambitious 
attempt to curb social spend- 


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ing since the second world 
war. True, be failed in the end 
to win the support of the 
trades unions; but flw lengthy 
political bargaining which 
accompanied the plan bought 
time for the government in the 
winter, as well as offering the 
prospect of significant budget- 
ary savings in the medium- 
term. 

Mr Dehaene, who looks like 
a s limm ed -down version of 
Chancellor Helmut Kohl of 
Germany, has seen his reputa- 
tion enhanced as a result of 
Hw global pact and his chair- 
manship of the widely 
acclaimed Belgian presidency 
of the Euro p e an Union which 
ended last December. 

Somewhat to the surprise of 
the Ralgfan public, he baa hpgn 
encouraged by France and Ger- 
many to put himself forward as 
a candidate to succeed Mr Jac- 
ques Defers as president of the 
European Commission at the 
end of the year. 

Sitting - in his prime ministe- 
rial suite in Brussels, Mr 
Dehaene declines politely to 
talk about his ambitions to 
move up the road to the Com- 
mission. Ss biggest indiscre- 
tion is a loud roar of fanghtgr 
in response to suggested Cabi- 
net permutations which would 
allow him to leave his post Yet 
he clearly relishes his reputa- 
tion as the “fixer” or the 
“plumber” in Belgium, and 
would not be averse to trying 
out his skills on a bigger stage. 

“Many people thnnght that 

because we were a government 
with socialists, it [the pact] 
was not possible. We proved 
that it was posable,” he says. 
“After a period of uncertainly 
between August and November 
[1993], we re-established inter- 



Brighter outlook: Pain do ia Notion, Biussaia, seat of the Sonata and Chamber of Deputies (Picture: Universal) 


naHnnaT cflpfldfiDce in the Bel- 
gian economy, in the Belgian 
currency, and in the Belgian 
flag.” 

The government's resilient 
response to the summer cur- 
rency crisis TOdprHnpg a con- 
sensus at the heart of Bel- 
gium's complex domestic 
politics, in which lin guisti c 


and cultural tensions between 
the French, Flemish and the 
tiny German minority are con- 
tained in a loose federal frame- 
work. This consensus rests on 
an assumption that Belgium's 
needs are best served by 
deeper co-operation and inte- 
gration in Europe. 

Though Mr Dehaene says 


pointedly that the ordinary 
Belgian’s enthusiasm for 
Europe is not what it was, he 
stffl portrays his country as a 
test-case for tarMing the prob- 
lems of the European Union 
itself: slow growth, high non- 
wage costs, high public debt 
and popular disenchantment 
with political elites (reinforced 


in Belgium by a corruption 
scandal in Waflonia which has 
already claimed the scalps of 
three leading members of the 
local socialist party). 

Belgium's global pact drew 
inspiration from Mr Defers’ 
White Paper on employment, 
growth and competitiveness 
which was endorsed by the 12 
heads of EU government at the 
Brussels s ummi t last Decem- 
ber. The government's mea- 
sures to encourage companies 
to recruit young people under 
25 without paying full employ- ' 
ment costs anticipated the 
White Book's own recommen- 
dations; so too. the global 
pact's goal of holding down the 
real wage growth to less than 
the rate of inflation for the 
next three years. 

The ul tima te prize for Bel- 
gium is European monetary 
union. The government and 
tiie central bank are at one in 
striving towards this goal, 
believing that in the long term 
a single European market 
without a single currency is 
not workable. Yet it is also 
clear that the government’s 
huge public debt - built up 
during the spend-thrift 1970s - 
makes it difficult for the coun- 
try to meet the Maastricht 
treaty’s criteria for EMU mem- 
bership. 

Mr Dehaene is convinced 
that Europe’s political leaders 
will exploit the treaty language 
in the most flexible way possi- 
ble to allow EMU to proceed. 
Yet doubts remain about 
where to draw the line. If Bel- 
gium were welcomed into the 
monetary union, protests from 
Spain and Italy seeking recip- 
rocal treatment would surely 
follow. 

Peer pressure inside the EU 
has helped to steady Belgium’s 
economic performance, but 
Union, membership has also 
served as an anchor for the 
Belgians themselves. Without 
the Union, Belgians would be 
much more vulnerable to ten- 
sions between Wallonia in the 
South and Flanders in the 
North, where the Flemish pop- 
ulation is becoming increas- 
ingly assertive in pressing for 
greater political and economic 
autonomy. 

Belgium’s drive toward 
greater devolution of power to 
the regions started almost 25 


IN THIS SURVEY 


Prospects for a looser 
state s tr u cture; interview 
with van den Brands of 
Flanders; heavy industry's 
travails — — PAGE 2 

The government bond 
market survives the 
shake-up; Belgium's 
growing reputation for 
haute COUhse PAGE 3 

One of Europe's strongest 
trade union movements 

adjusts to a shrinking 
power base; economy 
shows signs of a spring 
recovery; proftie of banker 
Altons Vorplaetse —PAGE 4 


years ago. and it has been 
gathering pace ever since. The 
most important shift took 
place as a mult of the Saint 
Micha el agreements last sum- 
mer which transferred powers 
over foreign trade, agriculture, 
and trade export promotion to 
the regions. 

The St Michael accords leave 
the national government with 
foreign and defence policy, 
internal security, the budget 
and social security. Critics 
argue that the national govern- 
ment has fwnma nothing more 
than a glorified co-ordinating 
committee; and there seems lit- 
tle doubt that Mr Luc van den 
Braude, the garrulous Flemish 
minister president, sees the 
agreements as the prelude to 
foil autonomy. 

Already, there are concerns 
in official circles about the 
ability of the national govern- 
ment to rein back regional 
spending. Mr van den Braude 
has also questioned why rich 
Flanders should contribute 
such a high proportion of the 
national social security budget 
to compensate for poorer Wal- 
lonia. Whether these tactics 
stir up or steal the thunder of 
the right-wing Flemish 
national movement remains 
unclear; clues may emerge 
from this month’s European 
parliamentary elections. 

Mr Dehaene regrets the con- 
troversy over social security, a 
matter which he considers 

ft Continued on next page 


FLANDERS 


autioi 


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F landers. Star Region in 

Europe. This is a bold claim, 
yet one which is made with 
_qui« confidence and bodied by an 
enviable track record. 

Flanders has for centuries been a 
hub of uutte and culture, and its • 

• patronage of the arts and learning 
' has always been a direct conse- 
quence of the wealth generated 
through commerce and trade with 
, Europe and the world 


A proud past is not enough io 
survive and continue to prosper in 
a world of fierce corameiriai 
competition, however. Not content 
to rest on past achievements, the 
Government of Flanders has 
introduced a number of financial 
incentives to encourage more 
international investment. 



STAR REGION 
IN EUROPE 


Twelve good reasons to 
invest in Flanders 

tr Flanders is located in the heart 
of the main Western European 
markets and the EC decision- 
malting center 
☆ Excellent infrastructure 

facilities: Brussels International 
Airport - Four major, modem 
seaports - Superbly illuminated, 
toll-free motorways 
Highest per capita exports in the 
world 


At the crossroads of Latin and 
Germanic cultures, and hence 
an ideal test market for Europe 

* Highly diversified industrial 
base with unlimited sub- 
contracting opportunities 

☆ Highly qualified, motivated 
and productive work force 

* Highest number of quadri- 
iingual speakers in the world 

* One of the lowest inflation 
rates m Europe and the 
industrialized world. 

☆ Readily available real-estate 
at competitive prices 

☆ Tailor-made incentives offered 
by the government 

* Ideal research and 
development environment 
flanks to exemplary 
cooperation between the 
universities and industry 

☆ Quality of Life 


r 





For more information on investment opportunities in Flanders, please return the form 
below duly filled in to the Flanders' Investment Office (FIOC Headquarters). 


fiOCHakortm 

. JoseeMERCKEN 

Managing Director 

MdrioesstifaaVl 
1000 Brussels, 

Tel 32-2-50738 
.. 32-2-507 3S70 

Fax 32-2-5073851 


FIOC-Asb 

BenDESMFT 

Arcadia Argos, 

Bloc A 01-05 

235 Arcadia Road, 
Singapore 1128 
Republic of Singapore 
T«ffi&467642T 
Fax 65467 7057 


FfOC-USA East 
Luc DE BROUCKERE 
70 Walnut Street 
WeBestar, 

MA 02181 -USA 
Tel 1-617-239 82 25 
Fax 1-617-239 52 96 


ROC-USA. West 

Rbp VANDENBUSSCHE 
2471 £. Bayshore Road, 
#510 

Palo Alto, 

CA 94303- USA 
Tel 1415-354 81 50 
Fax 1415424 9516 


FTOC-Scwa foavta 
MauritsBAESEN 
World Trade Center 
Box 70396 
10724 Stockholm, 
Sweden 

Tel 46-5-700 62 05 
Fax 46-8-700 62 07 


Generale Bank 

Belgium's leading bank. 

Supra-regional European Bank 


Generale Bank handles £ 60% of Belgium's international trade finance 
H 25% of payments traffic between Belgium 
and the rest of die world and 
S 9% of ECU payments worldwide 


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FLANDERS 



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Investment in Flanders, 
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rrtoHcadqoartws- feacc Mtttkcn, Managing Diitcur - Martaesstraat, 1 - 1000 Brads. Bdgium - Fax 32/2/507 38 SI 


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Generale Bank 

Montague du Parc 3 
B - 1000 Brussels 
Tel.; (32-2) 516 21 11 
Fax: (32-2) 516 77 43 

Generale Bank - London Brandi 

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London EC2A2DP 
Tel.: (071) 247 53 53 
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Just over a year ago a complex 
and protracted process reached 
its conclusion in Belgium. The 
small country, with a popula- 
tion of barely 10 m. completed 
its change from a highly cen- 
tralised. unitary state into a 
federation, of regions and lan- 
guage communities. 

The country's divisions have 
man}' permutations. There are 
two main cultural communi- 
ties - the Flemish and the 
French, plus a smaller German 
community. These occupy 
three distinct regions - Flan- 
ders. WaJlonia and Brussels. 

The risk with federalism is 



Pluralist Belgium has loosened its unitary ties in favour of federalism. Emma Tucker asks if it will work 

Flemings, Walloons, Germans 


one of duplication and hence 
inefficiency. As a Walloon gov- 
ernment official put it: “There 
is a danger that we have com- 
plicated the set-up so much, 
that it has become ineffective." 

But one year on. the verdict 
ou fully-fledged federalism is 
so far, so good. Rather than 


1 — 

I KEY FACTS i 



30.514 so km 

1 Population 10.1 million (mtd-1993 estimate) 

Head of state 



. King Albert II 



Average exchange rate 

1993 $1=BFr34.60; 20/5/94 



S1=BFr33.86 

ECONOMY 




1933 

Latest' 

Total GDP (Sbn) 

206.0 

n.a. 

Real GDP growth (<?i) 

-1.3 

0.8 

GDP per capita (S) 

20.396 

n.a 

Components of GDP (“ft) 



Private consumption 

63.9 


Total investment 

ia.i 


Government consumption 

15.4 

n.a 

Exports 

66.S 


Imports 

-63.0 


Retail prices (% change pa) 

2.8 

2.8 

Ind. production (% change pa).... 

-5.5 

1.0 

Unemployment (“o of lab force).. 

9.1 

9.8 

Reserves minus gold (Sbn) 

11.4 

13.0 

10 year bond yield pa,avg) 

7.22 

7.40 

FT- A index (% change on year)-- 

+32.7 

+1.7 

Current account balance** (Sbn). 

10.0 

10.3 

Exports** (Sbn) 

120.0 

n.a 

Imports** (Sbn) 

118.0 

n.a 

Trade balance** (Sbn) 

2.0 

n.a 

Trade partners** (% by value) 

Exports 

imports 

Germany 

22.8 

23.9 

France 

19.3 

16.5 

Netherlands 

13.7 

17.5 

UK 

7.8 

7.7 

Italy 

5.9 

4.5 

US 

3.9 

4.4 

Japan..... 

1.0 

2J2 

EC 

74.9 

73.5 

I * = 1994 figures (EIU forecasts for 1994 except reserves (March). 1 

bond yield i20'5'“94) and FT-A index ( 

Si o change from 31/12/93 to 1 

20/5/94) 



‘■=Trade figures (1992) refer to Belgium A Luxembourg Economic 1 

Union (BLEU) 



Source: IMF. Datastream, Economist Intelligence Unit | 


ABB 


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complicating the process of 
government, the new system 
has made it simpler. 

“Thirty to forty years of Bel- 
gium as a unitary state did not 
work," says Xavier Mabille. a 
Belgian political analyst. 
“There is less risk of doubling 
now than before." 

The process towards federal- 
ism began way back in 1970 

when the existence of two 
main cultural communities 
and three regions was recog- 
nised under the constitution. 
In 1960 the communities were 
given, in addition to cultural 
responsibilities such as lan- 
guage-use and the arts, respon- 
sibility for areas that could be 
dealt with at the “personal" 
level- This covered policies for 
the elderly and the handi- 
capped, for example. Mean- 
while. regional institutions 
were given responsibility for 
areas such as the environment, 
rural development and the 
economy. 

In 19SS, powers for both the 
communities and the regions 
were enlarged to include edu- 
cation. public works, transport, 
science policy and oversight of 
the communes and provinces 
within the regions. The com- 
munities and regions were also 
given responsibility for their 
own finances. 

Last year, the transition was 
completed. Under an agree- 
ment known, as the St Michael 
accords. Flanders, Wallonia 
and Brussels were granted 
their own. directly elected par- 
liaments. The parliamentary 
bodies of the communities 


N ext month, when foot- 
ball fever grips the 
world, Mr Luc van den 
Brande, minister-president of 
the Flemish government, will 
be supporting the Belgian 
team, the Red Devils, writes 
EMMA TUCKER. 

As yet. no Flanders team 
exists for him to support. Like 
the Belgian monarchy, the Red 
Devils remain one of a handful 
of institutions that inspire peo- 
ple like Mr van den Brande to 
call themselves Belgian, even if 
it is just for the duration of a 
football match. 

The rest of the time, Mr van 
den Brande is without question 
Flemish. Minister-president of 
the region since 1992, he has 
steered Flanders through its 
first year of full federalism. 

For the 49 year old politician 
this is only the beginning. 
Although wary of what he says 
- he has been rebuked by the 
King for thinly-veiled calls for 
Flemish independence - Mr 
van den Brande is keen to see 
yet more powers devolved to 



Jean-Luc Dehaene: prime minister 
of a polyglot country 

were also to be elected directly. 
Si gnifican tly, powers over for- 
eign trade, agriculture, scien- 
tific policy and some aspects of 
international relations were 
transferred to the regions and 
the language communities. 

Since last year many of the 
fears of those who distrusted 
federalism have been allayed. 

“I would have preferred not 
to live in a Federal State, but 
in a regional one," says Mr 
Charles Picqufe. president of 


the Brussels region. “But we 
have to live with it. and organ- 
ise our structures around it.” 

Of all the administrators fac- 
ing last year's dramatic 
changes, those in the Brussels 
region probably bad most to 
fear. As a bilingual region - 
part of it is Dutch speaking, 
while most in the capital speak 
French - the stresses were 
likely to show up more here 
than elsewhere. 

“With two communities, 
there is a temptation for sepa- 
ratism.” says Mr PicquA But 
for all his doubts, and even 
during a long recession, such 
forces have remained at bay. 
More troubling in the short 
term, are the economic impli- 
cations of federalism, if Bel- 
gium the federal state - a keen 
and dedicated member of the 
European Union - is to meet 
the convergence criteria for 
monetary union set out in the 
Maastricht treaty. 

One fear of Mr Peter Praet, 
senior economist at Kre diet- 
bank, Belgium’s leading bank, 
is that the new arrangements 
will mak e It very difficult for 
Belgium to meet Maastricht's 
stringent demands, particu- 
larly on control of the budget 

The real test will come in 
1996. by which time Belgium, 
in order to take part in a single 
currency, will have to have 
reduced its notoriously run- 
away government deficit to 
just 3 per cent of GDP. 

The new federalism also 
throws up potential problems 
for foreign policy. Since last 
year. Belgium’s three regions 



King Baudouin la dead; the rayed femfly remains a focus tor national unity 


have had the right to sign trea- 
ties with other nations. Indeed, 
Flanders - the most chauvinis- 
tic of the three regions - has 
already signed a treaty on 
water with the Netherlands. 
Inevitably, such a devolution 
diminishes tho standing of the 
Federal government 
Attitudes towards these new 
powers vary from region to 
region. Mr Luc van den 
Brande, president of the gov- 
ernment of Flanders, is an 


enthusiast The right to sign 
treaties will, he says, “do much 
to stimulate and facilitate rela- 
tions between Flanders and its 
European and international 
partners”. In tine with this. 
Flanders has set up a network 
of 70 economic representatives 
over five continents. It also has 
its own diplomats in Vienna, 
The Hague. Washington, 
Tokyo and Brussels. 

His approach contrasts 
sharply with that of Mr PioquG. 


B Interview; Luc van den Brande, Flanders 1 regional leader 

‘This is only the beginning’ 


the regions. “Is this the end?” 
he asks of last year's St Mich- 
ael agreements, which com- 
pleted Belgium's long transi- 
tion from a unitary state to a 
loose federation. “I don't think 
so. It is possible that new com- 
petences. such as social secu- 
rity, will be transferred to the 
regions, but linked to the new 
framework." 

“The debate in my view does 
not revolve around whether or 
not the Belgian level of govern- 
ment is disappearing, but 
around the way in which the 
Flemish and French-speaking 
communities may best live 
together in a modern federal 
state," he says. “I believe that 
the Flemish and French-speak- 
ing communities must in 
future work out, on a basis of 



Luc van den Brande: In search of 
a new regional balance 


equality, what it is they wish 
to undertake jointly and are 
able to do better jointly.” 

He maintains that the condi- 
tions for federalism, together 
with consensus where required 
at a national level, are now in 
place. Far a start, the St Mich- 
ael accords have lowered the 
tension of Belgian politics. 

For example, Mr van den 
Brande says that two years ago 
a Belgian from Flanders would 
not have wanted to turn up for 
the annual festivities in 
Namur, capital of French 
speaking Wallonia. “Since St 
Michael the pressure has 
become less,” he says. “It was 
necessary to have this reform. 
It was the best way of manag- 
ing the controversies between 
the two major parts of the 


country." 

Meanwhile, Flanders is mak- 
ing the most of its newly 
acquired responsibilities, 
enthusiastically pursuing its 
own foreign policy on the one 
hand, while remaining 
“intense and loyal” to the Bel- 
gian diplomatic service on the 
other. It has been particularly 
active on trade, using the 
Flemish Foreign Trade Board 
as a defender and promoter of 
Flemish exports. 

On the economics front, Mr 
van den Brande would like to 
see the levying of social secu- 
rity transferred to the regions, 
not least because in order to 
attract foreign investment to 
Flanders, he would like the 
authority to lower employers' 
costs. “It is not normal for us 


Like most other countries in 
the European Union, Belgium 
is only just emerging from a 
long and hard recession. With 
the fragile recovery has come 
a revival of hope in the coun- 
try's manufacturing sector. 
But the problems for heavy 
industry are far from over. 

The sector remains a robust 
and important part of the Bel- 
gian economy. Manufacturing 
accounts for roughly a quarter 
of gross domestic product, and 
employs about 28 per cent of 
the labour force. But excep- 
tionally high social security 
costs have made industrial 
employers fear that Belgian 
enterprise is pricing itself ont 
of the market 

“We are the only country in 
the world where we still have 
automatic and general indexa- 
tion of salaries, even during a 
recession,” says Georges 
Jacobs, president of UCB. the 
chemical and pharmaceutical 
group, and head of the Federa- 
tion of Belgian Enterprise. 
"We have the most generous 
social security system in the 
world-" 

The problem bas become 
something of a fixation with 
Belgian industrialists. Accord- 
ing to another prominent com- 
pany president, workers in 
Antwerp are 20 times more 
expensive than workers doiug 
the same thing just over the 


Emma Tucker on industry’s bid to contain costs 

The fight goes on 




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border in Rotterdam, Holland. 

Prompted by tbe pain of 
recession, tbe government last 
year took action to lower 
employers' costs. This 
included a BFr75bn cut in 
social security expenditure 
and a pay increase limit of % 
per cent for the next three 
years, effectively a freeze on 
wages once inflation was 
taken into account. But the 
Federation for Belgian Enter- 
prise argues that the measures 
were inadequate. 

“The government has done 
something, but it has not gone 
far enough ." sa ys Mr Jacobs, 
head of the FEB. "They are not 
doing enough to encourage 
Belgian enterprise." 

If ever there was a time for 
the government to assist the 
overburdened manufacturing 
sector, last year's company 
results show that today is the 
idea] time. A ccor ding to fig- 
ures from the FEB most indus- 
trial sectors experienced their 
first rise in production in 
December last year, for tbe 
first time since the end of 

1992. But for tbe whole of 

1993. figures were negative 
virtually across the board. A 
sectoral breakdown shows: 

• METAL. ELECTRICAL: 
deliveries dropped by 3.4 per 
cent in 1993, although exclu- 
ding cars, the drop was a more 
worrying 7 per cent. The 
financial health of the sector 


is meanwhile threatened by 
the high number of restructur- 
ings undertaken last year and 
a rise in bankruptcies. Orders 
from other countries, however, 
picked up towards the end of 
last year and should help the 
sec tor sta bilise in this. 

• STEEL: action by tbe Euro- 
pean Union to stabilise steel 
prices should help the Belgian 
steel sector recover from the 
recession, although high social 
security costs continue to 
diminish the competitiveness 
of this sector against other EU 
producers. 

• CHEMICALS: This year is 
likely to be better than the 
last, following a stabilisation 
of production in the fourth 
quarter of 1993. Prices have 
stopped falling and in certain 
sectors prices have begun a 
timid rise. 

• TEXTILES: production 
dropped by 7.6 per cent in the 
first half of the year and by 6 
per cent in tbe second. How- 
ever, exports of carpets - in 
which Belgium leads the world 
- rose a spectacular 58-9 per 
cent measured by volume In 
1993, principally thanks to 
exports of cheap carpets to 
Eastern Europe. 

According to the companies 
themselves, tbe worst Is over. 
Solvay, the chemicals com-- 
pany, and Belgium's second 
biggest enterprise, suffered 
particularly badly from the 


world recession. Cheap 
imports of soda ash from East- 
ern Europe and the US also 
prompted the need to restruc- 
ture. 

As a result, 11 consecutive 
years of profit came to an end 
in 1993 with a spectacular 
annual loss of BFr6.9bn. 
Almost Bfr3bn of the loss was 
caused by restructuring costs 
after the closure of several 
plants last year including two 
soda ash plants, one in Bel- 
gium and one in Germany, and 
a FVC plant in Austria. 

Now, however, the company 
is hoping for a better year. It 
expects a very slow recovery 
this year, and foster growth 
next year. Hie pick-up win be 
assisted by the start of produc- 
tion of hydrogen peroxide at a 
new plant in eastern Germany. 

Prospects are also rosier at 
Petrofina, Belgium’s largest 
industrial group, like Solvay, 
the company was hit by the 
global recession, although it 
managed to stay in profit last 
year. 

The group has refocused on 
core activities, abandoning 
those where the company was 
not competitive, such as coal, 
shipping, insurance, and prop- 
erty. It now expects a S per 
cent gain in productivity this 
.year through investment and 
t&rgrpdual shedding of 2,000 
jobs since 1991. A BFr26bn 
upgrading of its Antwerp refi- 


nery should be complete by 
September, and the company 
expects oil and gas output to 
go up 15 per cent this year. 

At UCB, Mr Jacobs is san- 
guine about prospects for bis 
enterprise. He describes the 
company, which concentrates 
on a fairly narrow range of 
pharmaceuticals, films and 
packaging, as "the small, 
clever guy". Following a 17 
per cent drop in profits last 
year, he now predicts that 
profits will be "at a good 
level" this year. 

So overall, Belgium's manu- 
facturing sector can probably 
expect a reprieve this year 
from the doldrums of 1993, 
even if growth remains unim- 
pressive. Mr Gert Lambrecht, 
a senior economist at Erediet- 
bank, one of Belgium's biggest 
banks, says activity will be 
weak, but it won’t fall farther. 

“It is also likely that wage 
costs will remain under con- 
trol," he says, adding that 
lower short term interest rates 
and a bounce back from two 
years of foiling capital invest- 
ment will boost growth in the 
manufacturing sector. Fur- 
thermore, the far reaching 
restructuring undertaken by 
many of Belgium's big indus- 
trial companies such as Solvay 
should start to pay ofT this 
year and next, restoring pros- 
perity to the sector. 


"It may be possible for us to 
sign treaties with other 
nations, but it is unlikely that 
the UK or France would bother 
to sign treaties with a region,” 
he says. As for as Brussels is 
concerned, it will continue to 
operate through the Federal 

government's embassies. 

Another problem is that of 
transfers of resources. With 
regions free to collect certain 
taxes, there is a danger of a 
two-tier system developing in 
and around Brussels. Those 
who are wealthy enough to 
commute are gradually moving 
out of the Brussels region, to 
set up home just over the bor- 
der in Flanders where taxes 
are lower. As a result, the tax 
ha y in Brussels is gradually 
shrinking , leaving the regional 
government short of funds and 
creating resentment that It has 
to pay for the city’s infrastruc- 
ture used daily by high num- 
bers of “free-riders". 

Many of these areas could in 
the future create resentments 
and tensions. Further, the 
ambitions of the regions differ 
widely. With Wallonia and 
Brussels more or less content 
with the current set-up, Mr van 
den Brande bas publicly stated 
his desire for a totally indepen- 
dent Flanders. 

Three things however, 
should act as a brake on the 
separatist forces. Firstly the 
monarchy, very much a sym- 
bol of Belgian’s unity. 
Secondly, the city of Brussels 
and the problem of how, if 
total independence should be 
granted to the regions, the dty 
would be split. Thirdly, there is 
the Belgian people's common 
history and a high level of 
intermarriage. These aspects, 
together with the lack of any 
religious tension, should 
ensure that at least for the 
time being, the loose federation 
will continue to thrive. 


to have our own regional 
industrial policy, but to not 
have any say over social secu- 
rity,” he says. 

Although he will not put a 
date on it - preferring instead 
to talk about Belgium's natural 
evolution - the Flemish minis- 
ter president's ultimate aim is 
to see an even more decentral- 
ised Belgium, in which the fed- 
eral government does tittle 
more than act as an “accepted 
go between” for the regions. 

Such a Vision, hfi maintains, 
is not out of line with the pro- 
cess of European integration, 
as it conforms to the notion of 
subsidiarity - devolving deci- 
sion-making down to the most 
appropriate level 

His ambitions for Flanders 
tie in nicely to such a struc- 
ture. And by the time Europe 
gets round to it Flanders may 
even be sending its own foot- 
ball team to the World Cup 
championship. 


Recovery gathers speed 


• Contd from previous page 
should be non-partisan. He 
plays down the threat of an 
eventual split in the country 
between north and south. 

In his view, the Belgian 
approach to regional and eth- 
nic tensions compares favoura- 
bly with the failure to hold for- 
mer Czechoslovakia together, 
let alone contain the separatist 
violence in Spain and Northern 
Ireland. “This has never been, 
in the view of the population, a 
revolution." Yet devolution 
and regions lisa tion still repre- 
sent something of a conjuring 


act. There is something of a 
“Now you see it, now you 
don't” quality about modern 
Belgium, particularly when the 
visitor travels outside Brussels 
into the Flemish heartland. It 
is only when something dra- 
matic happens - such as tbe 
death last year of King Baud- 
ouin, a monarch truly loved by 
his people - that the national 
spirit comes alive. 

To a lesser degree. Mr 
Dehaene, though for from pop- 
ular, has also emerged as a fig- 
ure around which the diffusa 
ethnic and political coalitions 


in Belgium can rally. He has 
done so for more than 15 years, 
first behind the scenes as a 
power broker and chef de cabi- 
net for prime minister WQfrled 
Martens and latterly as prime 
minis ter hims elf from 1991 
when no one else could win 
sufficient support for the job. 

If Mr Dehaene were to move 
to the European Commission, 
it could remove a critical hub 
in Belgian politics. Leaving 
aside the rival claim of Mr 
Lubbers, Dutch prime minis- 
ter, this is his biggest obstacle 
to succeeding Mr Delots. 





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Lionel Barber surveys the aftermath of the upheaval in the government bonds market 

Intact after the earthquake 


Most revolutions pass Belgium 
by. Vet even the most conser- 
vative practitioners in the 
Kingdom's financial markets 
have underetood the wisdom of 
Edmund Burke’s dictum that it 
is necessary to reform in order 
to preserve. 

The changes underway in 
Belgium cannot claim to match 
the Anglo-Saxon “Big Bang” 
which shook New York in the 
1970s or the City of London in 
the 1980s. Yet they are signifi- 
cant in Belgian terms. 

Over the past five years, the 
country has witnessed a 
restructuring of the govern- 
ment bond market; the intro- 
duction of an active market in 
short-term Treasury bills; and 
the creation of a Belgian 
Futures and Options Exchange 
(Bettor) - all of which have 
increased the liquidity of the 
domestic bond market dramat- 
ically. 

“It shows you can have an 
earthquake without the demo- 
lition," says Mr Peter Praet, 
chief economist of Generate de 
Banque. 

Little Bang began in 1989 
when Mr Philippe Maystadt, 
the Belgian finanhe minister, 
decided to restructure the gov- 
ernment bond market in a 
fashion similar to changes 
already underway in neigh- 
bouring France. 

The reforms meant scrap- 
ping the traditional means, of 
financing public debt through 
a favoured consortium of 


I . >- • - 



Belgian Franc 


-BFr par DM 
20. Q 


20.5 


r ;w* 


r •• ••V . - - v*rr. . 

. ■ Tv ' 1.10-V^^dveOTfTient bond yfald - - • 

Y-X • v* • .• ' .•*: - 


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banks, along with interest 
rates set by the National Bank 
of Belgium. 

. The old system was cosy, 
profitable and uncompetitive. 
A secondary market barely 
existed; and the intricate tax 
processing of “classic" govern- 
ment bonds kept foreign inves- 
tors away. And the banks 
themselves were lagging 
behind their European counter- 
parts in innovation. 

Mr Maystadt, who has since 
become one of- the most 
respected finance ministers in 
the European Union, calcu- 
lated that he could get a better 
price to government debt by 
opening up the market. He was 
right the new, highly liquid 
20-year, 10-year, and short-term 
linear bonds (OLOs) have 
saved the Belgian government 
billions of francs, according to 


4AAi 


2i.o: 


2L5 


22.0 


StMW 



1992 


1993 


1994 


Mr Praet With an outstanding 
net debt of BFr9,000bn, Bel- 
gium's public debt ratio to 
GDP is hovering around 125 
per cent - hig he r than Italy's. 
Last year alone, the debt 
increased by BFr784bn, double 
the actual budget deficit. 

This makes the government 
bond market one of the most 
important in Europe. But it 
also explains why Mr Mays- 
tadt, a fervent advocate of 
European monetary iTninm, is 
looking to save every sou so as 
to meet the demanding Maas- 
tricht criteria required to join 
EMU. 

In 1993, the state raised 
BFrl.530bn, while finding 
Investors for converting 
BFr601bn in long-term OLOs. 
Mr Jean-Paul ParmenHer. head 
of inc om e hmuiQ at Kre- 
dietbank in Brussels, argues 


that the more flexible manage- 
ment of debt tide the 

government over a sticky sum- 
mer when the franc came 
under speculative attack. 

Ms Jane Edwards, economist 
with Lehman Brothers in Lon- 
don, agrees. In her opinion, the 
National Bank's success in nar- 
rowing to within a hair's 
breadth the spread in 
short-term interest rates with 
Germany, while maintaining 
the currency link with the 
Deutsche Mark, has been 
“remarkable". 

Similarly, the spread in 10- 
year bonds has narrowed from 
around 100 basis points at the 
start of the year to between 80 
and 85 haste points, while other 
countries sudi as France have 
watched spreads widen. 

Some bond market observers 
believe that the Dehaene gov- 


Fashion houses win a growing reputation, writes Victoria Greenwood 

Flair, boldness and originality 


Belgium Is best known for 
beer, fifties, chocolate - and 
fashion. Next to the old Bel- 
gian brand-names of Stella 
Artois and Cfite d’Or, a host of 
new names is making its mark 
in the international fashion 
world. , 

Dries Van -'Natan, Anne 
Demeolemeester, Dirk Van 
Saene and Walter Van Beiren- 
donck may not be as big as 
Chanel and Yves . St Lament, 
or as fa mou s as. Armani ■««* 
Lagerfeld; but their labels are 
much sought a ftw among the 
cognoscenti and word is 
spreading fast 

The new Belgian designers 
can be spotted today in stores 
ranging from' Bergdarf Good- 
man in New York and Nieman 
Marcus in Los -Angeles to 
Whistles and Joseph in Lon- 
don, Joyce in Hong Kong, and 
to outlets in an increasingly 
fashion-conscious Tokyo. Back 
at home, Queen Fabiola has 
become an ambassador for the 
Belgian fashion industry, 
sporting Wateiet dresses, 
Strelli coats, Marie Storms 
jewellery and, always, the Del- 
vans handbag. 

The rise of contemporary 
Belgian fashion began in die 
early ittOc in Antwerp, at the 
Acadfarie Royale, the town's 
now famous art school. It was 
driven by a small group of tal- 
ented, avani garde and ambi- 
tious students who became 
known as toe Antwerp Six. 

The Belgian government 
helped to promote these 
designers not through direct 
financial' aid hot through a 
competition known as the 
Golden Spindle. Originally set 
up to give a shot-to-the-ann to 
the ailing textile industry; the 
award acted as a magnet to 
designer talent, helping young 
cash-strapped artists to forge 
an image. Still, these were 
hard times. Dirk Van Saene 
recalls how they all shared the 
same van to a fashion show 
In London. 

Today, the collective 


approach is out Each designer 
wants to be treated as an indi- 
vidual with a distinct label. 
Martin Margiela is typical, of 
the contemporary Belgian 
style, with his unfinished 
edges, asymetrical hemlines 
and recycled material. This 
decanstractteoist mode marks 
a dear break from the glitz 
and glamour of the 1980s and 
reflects a more restrained 
style to the politically chic, 
environmentally co rr ect 1990s. 

Dirk Van Saene, who has 
had his ups »nd downs , in the 
volatile fashion business, 
believes the market is develop- 


Walter Van Beirendonck 
found it Impossible to produce 
his line in Belgium, preferring 
instead the more sophisticated 
technical skills of northern 
Italy. Seated in the Acaddmie 
Royale overseeing a student 
show earlier this mnnth, Van 
Beirendonck cut an imposing 
figure with his shaven head, 
beard and fingers 
armour-plated in silver. His 
approach to the market is 
two-pronged. 

First, there is a commercial 
line called W. & L. T. - code 
to WUd and Lethal Trash. His 
publicity stales flatly: “WALT 


Modem Belgian fashion was launched in the early 
1980s in Antwerp’s Acaddmie Royale, driven by a 
group of talented and ambitious avarrt garde students 
who became known as the Antwerp Six 


ing in two directions. In one 
comer stand the large multi- 
label department stores who 
can be expected to dominate 
the market in terms of vol- 
ume; but tone will always be 
plenty of room and profits for 
the specialist stores with the 
small exclusive labels. 

The public is always looking 
for something exclusive and 
wlU always be willing to pay 
for it, he says. That does not 
mean that customers want to 
wrap themselves in the 
excesses of the catwalk; rather 
they are looking for something 
simple, serene and under- 
stated. 

Van Saene’s latest collection 
is simple and elegant, 
reminiscent of the early 1960s 
and Jackie Onassis. It is 
hand-finished In luxurious 
materials - and expensive. 
With only 16 clients, he 
estimates that he generated a 
turnover of around BF 6m. He 
xeHes on ateliers in the Ghent, 
Brussels and Antwerp region, 
all paid on a piece-work basis; 
bet his textiles come from 
Ireland, -Scotland, Italy and 
France. 


is colour. WALT is style." 
Translated, this means 
affordable, available and 
adaptable - the Walt fashion 
philosophy. In practice, it 
means flin clothes for the 
street: T-shirts for BFr 1,500 
(S45); sweaters for BFr 5,000. 
All are prodneed and 
distributed by Mustang Italia, 
part of the German Mustang 
Group. 

Second, Van Beirendonck 
has for the past three years 
run a separate collection of 
knitwear which draws its 
inspiration from Naive Art 
The style is bright and 
humorons. Dresses and 
sweaters range from BFr 
15.000 to BFr 35,000. Sold 
world-wide, he claims these 
high priced items are in 
enough demand to be 
recession-proof. 

Traditional Belgian industry 
has not been slow to spot the 
demand for avant garde 
Belgian products. In 1985, 
Monarca, an old Belgian 
family shoe company, adopted 
Dirk Bikkemberg who had just 
won the Golden Spindle 
competition- 


Today, Monarca produces 
around 15,000 pairs of 
Bikkemberg shoes annually 
from its factory in Lier, just 
outside Antwerp. The shoes 
are made of Belgian and 
Italian leather, for 
distribution in markets 
ranging from Switzerland to 
the US. Bikkemberg says its 
complete line of shoes, 
knitwear, clothing and 
accessories generated BFr 
25m-30m last year. 

Such talk of facts and 
figures are anathema to 
Gerald Wateiet, the self-styled 
“imposter” on the Belgium 
fashion scene. This youthful, 
audacious 30-year-old from 
southern Belgium knows little 
of art schools, or the 
decou&ii uctionist mode; but he 
has marip fais namp on shew 
talent - and an unusual 
partnership with a Flemish 
architect called Norbert 
Norman. 

Wateiet was brought up in 
Namur, WaUonia. In line with 
his parents' wishes, be steered 
clear of the fashion world and 
trained in toe hotel business. 
At 21, he became the youngest 
maStre tThdtel in Belgium. Bat 
before long he switched 
direction, to indulge bis 
lifelong passion for elegance. 

He and Norman opened a 
haute cofiture salon in 
Brussels. Today, located in the 
prestigious Avenue Louise, 
they sell 80 per cent of their 
products to Belgians. Their 
clientele are predominately 
working women aged 40 to 65 
seeking a simple, timeless 
mode. For Wateiet, codture is 
not just a fashion show; it is 
about cut, and what people 
can wear in practice. 

Wateiet and his team 
exemplify French fantasy and 
Flemish business acumen in 
action and stress timely 
deliveries, superior quality 
and high visibility. It looks 
like a winning combination - 
and it explains why Belgian 
fashion is here to stay. 


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eminent would like to exploit 
this new-found flexibility, per- 
haps by mining the short-end 
of the market, where interest 
rates are lower. The reason is 
that, with only two budgets 
remaining until the European 
Commission’s 1996 review of 
EU member states’ economic 
(and debt) performance, the 
government wants to produce 
the best debt figures possible 
ahead of a political judgment 
on EMU. 

Such a move could, however, 
strain the official policy of con- 
solidating the debt into 
long-term, stable debt It also 
assnmaa that the recent rise in 
long-term interest rates In 
Europe is temporary only. 
(Any further upward trend 
would, of course, cost the gov- 
ernment money). Mr Maystadt 
insists that judgments on refi- 
nancing debt are taken accord- 
ing to commercial logic, and 
there is no special effort to 
move into two- or three-year 
covenants. 

In the minister’s view, the 
second phase in Belgium’s 
reform programme should be 
to promote the diversification 
of products and stimulate 
greater competition among 
operators. There is plenty of 
scope. 

A recent Gdndrale de Banque 
study argued that Belgian 
investors interested in bonds 
still have a restricted choice in 
their home country, and could 
be wooed more effectively. 

The study estimated that 
Belgians bought an estimated 
BFr350bn to BFr400bn in for- 
eign bonds, around one third of 
which was in Luxembourg 
francs (an indication of how 



GAndrale de Bank in Brussels says investors could be wooed more effectively Picture: Tony Andrews 


much of Belgian savings is 
sloshing around in neighbour- 
ing Luxembourg, where there 
is no withholding tax). 

Small investors have been 
attracted by treasury certifi- 
cates, but Gfaterate de Banque 
Still estimates that finanrifll 
and credit institutions are the 
largest investor group with an 
83 per cent share. 

What else is to be done? Bel- 
fox could certainly borrow 
some of the liquidity which the 
OLOs enjoy. Its average daily 
volume is increasing; but a 
range of between 2,000 to 3,000 


contracts a day shows that it is 
much less liquid than in Ger- 
many. 

Second, the private bond 
market could be nourished. 
The market is 3n*all, and Bel- 
gian rampaniag s till seem WBiy 
of issuing securitised debt in 
Belgium, mainly on cost 
grounds. 

Third, there is more scope 
to Innovation in the market 
for longer term index con- 
tracts, for example for one to 
two years. 

But Mr Maystadt argues, cor- 
rectly, that Little Bang has 


farced the banks to come up 
with new derivative products. 
Recent changes in the law 
should open the door to the 
kind of “securitisation’' of 
bank loans and mortgages 
which is routine In the US. 

In short, those in Belgium 
Who fhnng ht that Little Bang 
would be a zero sum game - 
with other the government or 
the banks losing out to compe- 
tition - have been proved 
wrong. Belgium's quiet finan- 
cial revolution, as far as it 
goes, has paid off for both 
sides. 



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Belgium 




FINANCIAL TIMES THURSPAY_JUNE2_1994 


IV 


BELGIUM 4 


Trade union militancy loses some of its edge, writes Gillian Tett 

Retreat from the 


On paper the proposal looked 
startling. The workforce was to 
face a 20 per cent cut in pay. 
Hair of the employees would be 
Chinese, And as further provo- 
cation the would-be purchasers 
were demanding partial exemp- 
tion from employers' social 
security contributions. 

But when a group of Chinese 
bidders made precisely these 
demands earlier this year, as 
part of their bid for the bank- 
rupt New Tubermase steel mill 
ia Liege. Flanders, the local 
union’s response was even 
more surprising. In place of 
public protests, the local 
branch of the FGTB. Belgium's 
main socialist union, quietly 
started negotiations with the 
Chinese bidders. 

“VYe can’t accept a 20 per 
cent pay cut. But between 0 
per cent and 20 per cent there 
is a lot of room for negotia- 
tion. " explained Mr Jean Potier 
of the FGTB. who explained 
that the union was simply 
being ‘'pragmatic", given that 
the plant's 700 former workers 
had already been laid off five 
months ago. 

In the event, the Chinese 
offer fell through. But the epi- 
sode highlights a shift in Bel- 
gium's labour relations where, 
after decades of wielding formi- 
dable political power, the 
unions are increasingly on the 


defensive. On paper at least, 
their numbers remain impres- 
sive. with union membership 
rates of some 70 per cent. 
Although the proportion or 
active workers who are union- 
ised is rather lower - the 70 
per cent figure Includes mem- 
bers who are currently unem- 
ployed and on early retirement 
- this nevertheless leaves Bel- 


gium one of the most union- 
ised countries in Europe, sec- 
ond only to Scandinavia. 

But the ongoing erosion of 
Belgium's heavy industries is 
leading to an erosion of the 
unions' power base and bar- 
gaining power. Almost two 
thirds of Belgian employees 
now work in the service sector, 
with almost 13 per cent of the 
total workforce part-time. 
Unemployment stands slightly 
above 13 per cent, after almost 
touching 14 per cent last year. 

Meanwhile, the Belgian 
Christian Democrat govern- 
ment of Jean-Luc Dehaene has 
started to wage a new war of 
fiscal austerity. This is 
designed to curb not only the 
country’s huge public debt but 
also its high labour costs, cur- 


rently calculated to be almost 
three times M ghw than aver- 
age labour costs in France. 
Germany, UK, Italy and 
Netherlands. 

The unions, split three ways 
between Christian Democrat, 
liberal and socialist groups, are 
not taking the shift quietly. 
Last November, the anions 
called the country’s first gen- 


eral strike for 58 years in pro- 
test against the new austerity 
package, which proposed a 
BFr75bn cut in Belgium's 
social security expenditure - 
including a reduction in 
employers' social security con- 
tributions - and a pay increase 
limit of 2 per cent for the next 
three years. Allowing for infla- 
tion this 2 per cent limit 
amounted to a virtual wage 
freeze. 

The one day strike effec- 
tively paralysed the country, 
prompting an angry response 
from employers, who are now 
demanding tougher govern- 
ment controls to prevent a rep- 
etition of the rough picket tac- 
tics used last year. Mr Jan van 
Holm, director of labour rela- 
tions at Federation of Belgium 




Enterprises, the main employ- 
ers group, said: "At first we [in 
the FBE] were astonished and 
then very upset about these 
new tactics, which seemed to 
breach the usual range of 
human freedoms.” 

But after a few brief flashes 
of violence, the protest sub- 
sided and the government 
pushed through most of the 
co n trove r sial points of its aus- 
terity package - Including the 
2 per cent freeze on wages 
increases for the next three 
years. According to Ur Peter 
Praet, chief economist at Gen- 
erate de Banque, that the main 
outcome of the strikes may 
have been to illustrate the 
union's dwindling influence. 

“The strikes were more of a 
symbolic nature. The general 
feeling we have is that they 
proved that the unions were 
not very combative,’’ he says, 
adding that the most powerful 
pressure against the 2 per cent 
wage increase ceiling may 
finally come not from the 
unions but employers 
themselves. If the Belgium 
economy picks up later this 
year, as predicted, companies 
may start to demand that the 
ceiling is dropped to allow 
them to attract the best labour, 
he suggests. 

The unions themselves 
strongly disagree. Talk of the 


Belgium is one of Europe’s most unionised 
countries, but the erosion of heavy industry is 
weakening the unions’ base and bargaining power 



Puffing their punches: steel workers In Brussels protest at the industry* ruvdown In countries of the Eiropeon Union Picture: Reuter 


union’s decline is exaggerated. 
The strikes showed we could 
mobilise the workers - and 
could force the government to 
negotiate," insists Mr Roland 
DeWulf of the CSC, the 
Christian democrat union. 
Although he concedes that the 
results of the strike "were not 


exactly desirable", he insists 
that the unions have no 
i nten tion of chang in g their 

tactics or campaign. 

At ttin oama Hnw n rmp of 
unions expects a tins type of 
industrial conflict to recur this 
year, although they say 
protests could be stepped up 


when negotiations are 
re-opened on a proposed 
inter-professional agreement at 
the end of the year. 

Meanwhile, interim 
negotiations between the 
employers and employees have 
achieved a small, but 
symbolically significant 


breakthrough. After years of 
wrangling, unions have finally 
officially accepted that 
Belgium does face a labour 
costs competitiveness problem 
- although they remain at 
loggerheads with the 
employers about how to define 
it 


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T he Belgian economy is 
showing signs of a 
springtime recovery after 
last year's wintry mixture of 
recession, currency crisis and 
political uncertainty. 

After a 1.4 per cent contrac- 
tion of national outpnt in 
1993. this year's budget 
assumes a modest l.l per cent 
.recovery in gross domestic 
product However, officials are 
privately looking at a possible 
1.9 per cent GDP growth, pul- 
led along by brighter pros- 
pects in Germany and France. 

Such bald figures, however, 
tell little of the horror of last 
year or of the formidable chal- 
lenges which still lie ahead. 

For Belgium. 1993 was trau- 
matic. The recession and 
unemployment bit bard, and 
the franc suffered its worst 
battering since 1982 from spec- 
ulators. when in August the 
European exchange rate mech- 


anism (ERM) imploded and all 
currencies within the grid 
were set free to float within 
wide bands. 

The Centre-Left coalition led 
by Christian Democrat Mr 
Jean-Lnc Dehaene frequently 
seemed on the brink of col- 
lapse, bruised by scandals 
affecting its Socialist partners, 
challenged from within and 
from the unions over austerity 
measures, and in the final dif- 
ficult throes of turning Bel- 
gium into a federal state to 
enable French-speaking Wal- 
lonia, Dutch-speaking Flan- 
ders and polyglot Brussels to 
cohabit. 

To cap it all. King Baudouin. 
the embodiment of Belgium’s 
fragile unity, died suddenly in 
August. 

Yet the glne holding Bel- 
gium together, and the vitality 
of its economy, were stronger 
than most people had guessed. 


The economic auguries are promising, writes David Gardner 

Spring is in the air 


If there was a single turning 
point, it was probably the gov- 
ernment's mid-November 
adoption of the Global Plan, a 
package to rein in budget and 
social security deficits, boost 
industrial competitiveness, 
and freeze wages in real terms 
nntil the end of 1996. 

These measures were 
designed to release the 
strength of a high -productiv- 
ity, export-oriented economy, 
weighed down by huge public 
deficits and a growing wage 
gap with Belgium's main trad- 
ing partners. Pushed through 
stubbornly by Mr Dehaene 
against trade onion strikes 


and protests, they appear so 
far to be working. 

It Is still hard to pin down 
the precise reasons for the bet- 
ter than expected growth in 
output 

On the heels of a surpris- 
ingly severe wage freeze - the 
government quietly subtracted 
fuel and tobacco from the 
retail price index to which Bel- 
gian wages are linked - recov- 
ery is bring driven by exports 
rather than domestic con- 
sumption. 

The authorities predict a 
handsome current account sur- 
plus for the Belgtmu-Luxem- 
bourg Economic Union this 






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year of BFrtOObn, or 5 per cent 
of GDP. This is double the 
average surpluses of the sec- 
ond half of the 1980s, but, 
most importantly, the mix has 
changed. 

About half of the surplus is 
on the trade account, and 
three fifths of it is Belgian, 
whereas the hanking centre of 
Luxembourg traditionally 
accounted for around three 
quarters. 

The government is closely 
studying why Belgium’s 
exports and market share 
should be rising. Belgium 
exports around two thirds of 
its output, and two thirds of 
that goes to Germany, France 
and the Netherlands, its neigh- 
bours and peers in the 
“hard-core” group of EBM cur- 
rencies. 

But wages had risen more 
slowly in those depressed mar- 
kets, and Belgium was and is 
paying a competitive price for 
its franc fort policy of shadow- 
ing the D-Mark- "We are fry- 
ing to figure out the paradox,” 
smiles Mr Phillipe Maystadt, 
the finance minister. 

He and his officials suggest 
the margin between wages in 
Belgium and in its co m pet i tors 
was relatively small in the 
light of the persistent trend 
towards higher Belgian pro- 
ductivity gains. 

Tm afraid the adjustment 
Is being made not through the 
current account but the rise in 



finance mWetor Plflppe 
Mayrtadt ponderin g fire paradox 

unemployment,” Mr Maystadt 
says, forecasting a jobless rise 
to 10 J per cent by yearend 
before thinp improve. 

But the improvement could 
then be quite rapid. Mr Peter 
Praet, chief economist at Gen- 
erate de Banque, points ont 
that inventories have been cut 
drastically, leading to one of 
the lowest ever levels of 
stocks. Export4ed growth now 
should therefore feed into a 
revival of investment, then of 
domestic demand, and then of 
jobs. 

Unlike the recessions in 1975 
and 1980-82, most of Belgium's 
generally low debt and cash- 


rich companies remain 
respectably profitable. The 
overburdened social security 
system has taken a good deal 
of the shock of lay-offs and 
early retireme n ts, while the 
BFrtObn take from new energy 
tans is being recycled Into the 
tradeable goods sector to 
reduce employers' payroll 
costs. 

Mr Alfons Verplaetse, the 
governor of th e cent ral bank, 
reckons these transfers alone 
should create 50,000 new jobs 
over the next four years. Tor 
a politician four years is an 
eternity but not for Dehaene,” 
he remarks. 

Sticking with the Global 
Plan of which thin is part is 
ritaL Mr Dehaene is now in 
the running to succeed Mr Jac- 
ques Deters as president of the 
European Commissian, but bis 
tough managerial reputation 
is mare likely to be needed to 
ensure the success of the Plan 
- and to take the further, sen- 
sitive measures weeded to deal 
with Belgium’s debt. 

The Plan and spending cuts 
made last year look as though 
they will quickly bring the 
social security deficit into 
rough balance, and cut the 
budget deficit from 7.2 per 
cent in 1993 to 5-7 per cent - 
under the likely EU average - 
this year. 

Still to be. attacked is the 
debt stock, equivalent to 130 
per cent of GDP, which towers 
over the economy and the 
franc even though Belgium's 
huge stock of household 
savings, equivalent to 175 per 
cart of GDP, for outweighs 1L 

The debt is ova* twice the 60 
per cent detat-toGDP ratio set 
down In the Maastricht treaty 


as the marker for economic 
and monetary anion (Emn) by 
1997 or 1999 - to which 
Belgium is firmly committed. 

The debt stock is a useful 
alibi for pushing through 
structural reform of public 
finances and attacking the 
budget deficit. 

Lower Interest rates plus the 
repricing of virtually all 
Belgium's more expensive debt 
has, moreover, brought 
significant savings on an 
interest bill which had grown 
to 11 per cent of GDP. 

As Mr Verplaetse points out, 
“once nominal growth exceeds 
the deficit, we’re in a virtuous 
circle,” helping bring down 
the debt/GDP ratio, probably 
from 1995. Growing 
privatisation receipts could 
also be used to retire debt 

But a new assault on public 
finances will almost certainly 
be needed before 1996. when 
the Maastricht review of early 
candidates for Emn will take 
place. For instance, the 
Brussels region is in trouble 
because of Its shrinking tax 
base, while the education 
system an bath sides of the 
language divide (but especially 
in Wallonia) is heading for 
insolvency. 

This would need a very tight 
budget for 1996. But that is 
virtually impossible unless 
federal elections are brought 
forward from their November 
1995 deadline. Even then, 
going further than the 
government has already done 
will be socially and politically 
risky. 

In Mr PraeFs view of the 
medium-term, "yon need 
somebody like Dehaene to take 
these sorts of decisions.” 


■ Profile: CENTRAL BANK GOVERNOR ALFONS VERPLAETSE 

A force to be reckoned with 


Somewhere near the top of the 
list of movers and shakers in 
modern Belgium stands Mr 
Alfons Verplaetse, governor erf 
the central bank. 

His affable manner — accom- 
panied by guttural chuckles 
and the occasional "ooh-lah- 
lah" when describing the 
tumultuous events in the cur- 
rency markets in 1993 - offers 
few clues as to the importance 
of his job. But make no mis- 
take: Tire Fora” is a force to 
be reckoned with. 

As head of the National 
Bank of Belgium, Mr Ver- 
plaetse is the guardian of the 
national currency. He is the co- 
architect and standard bearer 
of the long-standing policy of 
shadowing the D-Mark, a pol- 
icy which has served as the 
counter-inflationary anchor for 
Belgium but which came under 
severe strain during last sum- 
mer’s currency crisis I nsi d e the 
European Monetary Suystem. 

Mr Verplaetse also played an 
influential, if at times mildly 
controversial, backroom role 
last year ahead of negotiations 
between government, employ- 
ers and trades unions on the 
global pact to bolster competi- 
tiveness. cut social spending 
and create more jobs. The gov- 
ernor supplied the intellectual 
framework (and the number- 
crunching) for the pact 

Mr Verplaetse has been gov- 
ernor of the National Bank 
since 1989. Bom in Zulte, in 
western Flanders, he took a 
degree in commercial science 
at the Catholic University of 
Leuven, and joined the bank in 
1953. His career took off when 
he became chef de cabinet of 
then prime minister Wilfried 
Martens, where his formative 
experience was preparing the 



Altone VerpbetBK champion of shadowing the D-Mark 


currency devaluation in 1982 
which set Belgium back on the 
path of fiscal orthodoxy. 

Mr Verplaetse is a numbers 
wan to his fleshy finger-tips. 
He rolls off figures with ease, 
pausing only to confirm their 
accuracy in tire ever present 
annual report of tire National 
Bank. Similar ly be pays dis- 
creet reference to his dafiy tele- 
phone conversations with his 
counterparts in Amsterdam, 
Luxembourg. Paris, and Frank- 
fort - one more sign of the 
dose cooperation these days 
between the “hard core” cur- 
rency club within the Euro- 


pean exchange rate mecha- 
nism. 

The spirit of co-operation 
was sorely tested last summer 
when market scepticism about 
the pace of interest rate reduc- 
tions in Germany triggered a 
wave of attacks on tire 
franc, the Danish krone and 
the French franc. Finance min- 
isters responded by widening 
the ERM fluctuation bands 
from 255 and 6 per emit to 15 
per cent an either side of the 
central rates. 

Mr Verplaetse supported the 
decision, but it led to severe 
pressure on the Belgian franc 


throughout the aut umn. Mar 
ket operators, having wit 
nessed the virtual collapse oi 
the ERM. were determined to 
test the resolve of the Belgian 
authorities. 

Looking back, Mr Verplaetse 
says the National Bank’s strat- 
egy was straightforward: “We 
had to buy time for the govern- 
ment.” This involved two sepa- 
rate manoeuvres. The first was 
a rise in short-term interest 
rates which risked choking off 
the early signs of economic 
recovery. The second was a 
more complicated effort to sup- 
port the government’s plan to 
secure an agreement on an 
austerity pact with unions and 
employers. 

Li retrospect, even Mr Ver- 
plaetse is guarded about the 
experience. On the one hand, 
the social pact included some 
80 per cent of Urn Verplaetse 
panel’s recommendations; but 
the experience of not being 
able to secure a consensus 
across the board dearly ca me 
as a surprise to the governor. 
“It was a new phenomenon," 
lie says, noting that in 1982 it 
was easier. 

A Belgian Cabinet minister 
is blunter “It was a mistake, 
and it will not happen again." 

However noble the political 
intention, the Impression was 
left that the National Bank 
was ready to compromise its 
independence, just at the time 
when central bank indepen- 
dence is a key tenet of the 
Maastricht treaty’s provisions 
For European monetary union. 

Yet without the contribution 
of Mr Verplaetse, it is doubtful 
IT the global pact would have 
got off the ground. 

Lionel Barber