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Business 


Ciskei ‘homeland’ 
leaders cede 
power amid unrest 

The government of Ciskei. a nominally independent 
black homeland in South Africa, relinquished 
power after widespread unrest South African 
troops moved in after Ciskei leader Brigadier 
Oupa Gqozo asked for help from Pretoria. In the 
Lebowa black homeland, the chief minister aisn 
requested assistance after a strike by civil servants 
yn arte it impossible to beep control. 

South Korea Increases alert: South Korea 
put its military forces on increased alert for a 
possible attack by North Korea as international 
pressure intensified on Pyongyang to allow nuclear 
inspections. Page 16 

Spielberg Him scoops the Oscar pool 

Holocaust drama Schin- 
dler's List swept the 
board at the Academy 
Awards in Los Angeles, 
winning seven Oscars 
for Steven Spielberg 
(left), including best 
director and best film. 

It was Spielberg’s first 
Oscar success after 
a string of box-office 
hits. Tom Hanks won 
the best actor award 
for his role in Philadelphia, the first mainstream 
film dealing with Aids, and Holly Hunter was 
named best actress for her portrayal of a mute 
woman in The Piano. 

Visa forms ‘electronic purse 1 consortium: 

Visa International has formed a global consortium 
to develop common specifications for an “electronic I 
purse" card which could be used instead of cash. 

Page IS 

Italian spending overshoots target: The 

Italian government said spending in 1994 was 
liable to overshoot the budget target by Ll4,800bn 
($3.8bn). Page 16 

US rocks shipbuilding talks: An unexpected 
shift of position by the US has thrown into disarray 
international negotiations aimed at reducing 
shipbuilding subsidies. Page 4 

Renault V6hfeules Industriefs, commercial 
vehicles subsidiary of the French state-owned 
automotive group, suffered a net loss of FFri.4bn 
($230m> last year compared with one of FFrl.62bn 
in 1992. Page 20 

Mideast talks move to Cabw Israeli and 
Palestinian negotiators are to meet again today 
in Cairo, having foiled during two days of talks 
in Tunis to agree conditions for resuming talks 
on Palestinian autonomy. Page 6 

French TV maker back in profit: Thomson 
Consumer Electronics. French television manufac- 
turer. returned to the black after three years 
of losses. Page 17 

Air France sells CSA stake: The Czech 
authorities said they had agreed to buy back 
Air France's minority stake in CSA. the Czech 
airline, for $27ra. Page 17 

Hoedtst, the German chemicals concern, reported 
an "insignificant" rise in operating profits in 
the first two months of this year. Page 17 

Credit Lyonnais to be restructured: French 
economy minis ter Edmond Alphandfery confirmed 
that the government plans to restructure Credit 
Lyonnais, the loss-making bank, by injecting 
capital and floating part of its property loans 
into a state-controlled shell company. Page 17; 

Lex. Page 16 

Jardine Fleming secured its position at the 
top of Hong Kong's merchant banking league 
with a 166 per cent rise in 1993 net earnings to 
USSanQm. Page 22 

Investment in India up eightfold: Foreign 
investment in India is estimated to have risen 
eightfold in the last 12 months to about $5bn, 
far above the government's targets. Page 6 

US cigarette tax may rise: A US health 
committee voted to raise the tax on cigarettes 
by SI 25 a packet to help pay for a reform of the 
country’s healthcare system. If agreed by Congress, 
the rise could produce S16m a year. Page 7 

US trade deficit sharply ups The US trade 
deficit in goods and services rose sharply to $6.3bn 
in January against £4.1 bn in December, the Com- 
merce Department said. Page 7 

Salisbury to open French drinks stores 

UK supermarket chain Sainsbury is to open a 
drinks outlet in Calais to offer its own-brand 
drinks at lower French prices. 


WEDNESDAY’ 


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No compromise as Anglo-Spanish proposals for rule changes are shunned Federal 

EU states 

fail to break s rauT/L 

~W ~m -m By Michael Prowse in 

deadlock OH : • Ifiii : •: :i'v» 


voting rights 


By Lionel Baber 

and David Gardner in Brussels 

and Kevki Brawn in London 

European Union foreign minis- 
ters yesterday foiled to resolve 
their dispute over voting rights 
in an expanded Union, as the UK 
and Spain ran into a wall of oppo- 
sition to their de man ds for 
changes to the rules. 

Three sets of Anglo-Spanish 
proposals aimed at protecting the 
ability of large member states to 
block decisions were rejected at a 
meeting of foreign ministers in 
Brussels, and neither side offered 
to compromise. 

The stalemate, which threatens 
to delay the entry of Finland, 
Sweden. Austria and Norway 
into the Union, prompted Mr 
Douglas Hurd, UK foreign secre- 
tary. to appeal to his EU partners 
and his own British cabinet col- 
leagues for Oexibility. 

Mr John Major. UK prime min- 
ister, raised the stakes in the dis- 
pute by warning that Britain 
would not be moved by “phoney 
threats to delay enlargement" 

Using language which con- 
trasted sharply with Mr Hurd’s 
calls for flexibility. Mr Major 
delivered a strong warning that 


■ Time running out for EU 

image Page 2 

■ MPs warn of fresh civil war 

over Europe Page 10 

the government was determined 
not to give way. 

“There is ample time to com- 
plete the enlargement process." 
Mr Major said in the House of 
Commons. “If there is delay it 
will be because certain other 
member states, two in particular, 
have taken an inflexible and doc- 
trinaire line." he said. 

The prime minister's office said 
Mr Major’s remarks were aimed 
at Belgium and the Netherlands, 
which he believed had blocked 
agreement in spite of the willing- 
ness of the other eight member 
states to settle on terms accept- 
able to Britain and Spain. 

Mr Hurd, who appeared uncom- 
fortable with Britain’s hard-line 
stand in the enlargement negotia- 
tions. said in Brussels that time 
was running out for a compro- 
mise. “Agreement requires move- 
ment by everybody.” 

Mr Pieter Kooijmans, Dutch 
foreign minister, reflecting wide- 
spread fru s tra ti on with British 



Spanish foreign minister Javier Solan a: not optimistic about a breakthrough 


■" '• \ • til 


Associated Press 


and S panish brinkmanship, said- 
“We are now in a crisis. That is 
because they cannot present any 
compromise as a victory for 
themselves.” 

Mr Alain Juppe, French foreign 
minister, said Anglo-Spanish 
demands would make decision- 
making in a Union of 16 member 
states more difficult “We want 
enlargement with a reinforce- 
ment of the European Union’s 
powers." 

Hopes of a face-saving compro- 
mise rest on a deal being reached 
at a meeting of EU foreign minis- 
ters is Greece this weekend. Mr 
Klaus Kinkei, German foreign 


minis ter, and Mr Javier Solana. 
Spanish foreign minister, said 
they were not optimistic about a 
breakthrough. 

The UK and Spain are seeking 
to maintain voting rules which 
allow two large member states 
and one small one to muster 23 
votes to block decisions. But all 
other states want to raise the 
minority blocking threshold to 27 
votes to take account of the entry 
of the Nordic and Alpine coun- 
tries. 

EU diplomats said the UK and 
Spain proposed three formulas to 
safeguard their position. These 
included raising the blocking 


minority to 25 votes, a UK pro- 
posal; making it impossible to 
outvote countries representing 
more than 100m people: and 
adding a legally binding Anglo- 
Spanish protocol to the Maas- 
tricht treaty which would allow 
countries mustering 23 votes to 
postpone decisions indefinitely. 

Ministers from the applicant 
countries warned in Brussels yes- 
terday that already tepid support 
for EU membership could cool 
further. “This gives the impres- 
sion that things are not handled 
rationally here." said Mr Pertti 
Salolainnen. Finnish foreign 
trade minister. 


Russia and IMF in deal on $1.5bn loan 


By John Lloyd and Reuter 
in Moscow 

Hie Russian government and the 
International Monetary Fund 
have come to an agreement mak- 
ing it likely that Russia will 
receive $1.5bn from the IMF soon, 
Mr Michel Camdessus. IMF man- 
aging director, said last night 

The announcement made after 
hours of talks with the Russian 
prime minister, Mr Viktor Cher- 
nomyrdin. and weeks of tortuous 
negotiations, fell short of the 
final deal and vote of confidence 
in its economic policy that Rus- 
sia had hoped for. 

The loan was delayed because 
of Moscow’s failure to cut spend- 

m g 

But Mr Camdessus was quick 
to cushion the blow of the delay, 
commending “the efforts of the 


Russian government aimed at 
achieving economic stability and 
fi ghtin g inflation”. 

Mr Alexander Khandruyev. 
deputy chairman of the Russian 
central bank, said earlier that the 
government team at the negotia- 
tions had promised the IMF to 
get monthly inflation down to 7 
per cent by end-1994. Monthly 
inflation fell to 9.9 per cent in 
February from January's 22 per 
cent 

At a news conference delayed 
for several hours. Mr Camdessus 
outlined a plan for putting lend- 
ing to Russia back on track. 

A policy programme to be sub- 
mitted shortly would serve as the 
hasis for an agreement between 
the IMF and Russia on the sec- 
ond drawing under the so-called 
systemic transformation facility, 
Mr Camdessus said. 


This document would then be 
submitted to the IMF board for 
approval, clearing the way for 
the new funds. 

“It's only a matter of a very 
few weeks." Mr Camdessus said. 
This should be followed by nego- 
tiations on a full stand-by loan 
for Russia. 

Mr Camdessus said a draft 1994 
budget submitted to parliament 
this month provided a sound 
foundation for Russia to continue 
its anti-inflationary policy. 

The talks with the IMF have 
been nervously watched by Rus- 
sia's western creditors, owed 
some $80bn. 

Russian officials say the gov- 
ernment, frozen into inaction 
Since the success Of hardliners 
and conservatives in December’s 
parliamentary polls and the res- 
ignations of key reformers, had 


foiled to convince the IMF that 
its budget was realistic. The draft 
budget envisages a deficit of 62.4 
trillion roubles ($36bn) or 9 per 
cent of gross domestic product. 

News of the loan agreement 
came as allegations of a coup plot 
against Mr Boris Yeltsin and of 
his own foiling health were being 
denied. 

Mr Chernomyrdin said' specula- 
tion on Mr Yeltsin's health was 
“insulting". According rto Mr 
Yeltsin's press service, the Rus- 


sian president has been officially 
sick for more than four weeks 
this year, and is still recupera- 
ting. 

Mr Chernomyrdin had missed a 
meeting with Mr Camdessus on 
Monday to fly to the Black Sea 
resort of Sochi for unscheduled 
talks with Mr Yeltsin in the 
midst of a furore of allegations 
that a group of highly placed offi- 
cials were prepared to strip Mr 
Yeltsin of power and name Mr 
Chernomyrdin as his successor. 


By Michael Prowse in 
Washington, Frank McGurty In 
New York and Our Markets Staff 

The Federal Reserve yesterday 
moved to slow the rate of US 
economic growth by signalling a 
modest increase in short-term 
interest rates to 3.5 per cent 

Bond and share prices rose fol- 
lowing the announcement, which 
came during a jittery day on 
Wall Street as traders waited 
anxiously for a decision on rates 
from the Fed’s policy-making 
open market committee which 
met yesterday in Washington. 

After the meeting, Mr Alan 
Greenspan, Fed chairman, issued 
a short statement saying the 
committee had decided “to 
increase slightly the degree of 
pressure on reserve positions. 
This action is expected to be 
associated with a small increase 
in short-term money market 
rates". 

Analysts immediately inter- 
preted this as a sign that the 
new target for the federal funds 
rate - the cost of overnight 
money for banks - wonld be 
raised to 3.5 per cent 

The Fed’s move was in line 
with market expectations and 
followed a quarter point increase 
in the fed foods rate to 3.25 per 
cent on February 4. Hie Febru- 
ary rate increase was the first in 
five years and led to a sharp 
increase in long bond yields to 
nearly 7 per cent because ana- 
lysts interpreted it as the first in 
a series of tightening moves. 

Speculation that the Fed wonld 
tighten policy again reached 
fever pitch last Friday after Pres- 
ident Bill Clinton called Mr 
Greenspan to the White House 
for a discussion of economic 
trends. The White House, which 
believes there is little risk of 
higher inflation, said it has not 
tried to influence the Fed’s deci- 
sion. 

By raising rates again, the Fed 
evidently hoped to calm nerves 
in bond markets by showing that 
it was serious about preventing 
the economy overheating and 
thus averting a rise in infaltion 
enxt year or in 1996. 

Most analysts expect the Fed 
to continue to raise rates until 
they reach a “neutral" level per- 
ceived to be at least 4 to 5 per 

Continued on Page 16 
Government bonds. Page 23 


I know its late, tut i d like some 
susti. How far do I have to go?” 


Japan records worst annual 
economic growth since 1974 



W** ' zT 

** -- -ii-:-:?, " : - 


By WSiam Dawkins in Tokyo 

Japan’s gross domestic product 
rose by only 0.1 per cent last 
year, the economy’s worst perfor- 
mance since 1974, just after the 
first oil price shock. 

The figures, announced by the 
government yesterday, follow a 
2.2 per cent decline in the final 
quarter of 1993 compared with 
the same period In 1992. This fall 
was not as severe as the market 
had expected. 

Private sector economists in 
Tokyo said the quarterly drop 
might be the bottom of an eco- 
nomic downturn which has 
lasted since mid-199L the longest 
since the second world war. GDP 
rose by a revised 1.1 per cent in 
1992, down from 4.3 per cent in 
the previous year. 

The Economic Planning 
Agency, the government’s official 
economic forecaster, was cau- 
tious yesterday. 

There were bright signs, such 
as an increase in personal con- 
sumption. but it was too early to 
say whether the recession had 


Real GDP (annual % changej 

7 - : 



Sara; Dsustraam 

come out of the trough, said Mr 
Tsutomu Tanaka, the agency’s 
vice-minister. The EPA’s caution 
is understandable, given the criti- 
cism it attracted early last year, 
when it declared an upturn 
which proved to be wrong. 

“This is at least the end of the 
decline, but there is still no sign 
of an upturn because of a contin- 
ued decline in investment in 
plant and equipment and the 


CONTENTS 


strength of the yen,” said Mr 
Hirohiko Okumura, chief econo- 
mist at Nomura Research Insti- 
tute. “I am prepared to bet this is 
the bottom of the cycle," said Mr 
Jim Vestal, chief economist at 
Barclays de Zoete Wedd in 
Tokyo. 

Mr Kozo Watanabe, acting sec- 
retary-general of the Japan 
Renewal party, which is the main 
influence on government eco- 
nomic policy, believed the econ- 
omy would recover in the second 
half of this year to stabilise at a 
growth rate of about 3 per cent 
for the rest of the decade. 

However, analysts warned that 
recovery prospects could be dam- 
aged by the political impasse 
over the 1994 budget, which may 
delay extra government spending 
and income tax cuts. Recent 
increases in Japan’s long-term 
interest rates could also hamper 
recovery, warned Ms Mlneko 
Sasaki-Smith. senior economist 
at Morgan Stanley in Tokyo. 

Personal consumption rose by 

Continued on Page 16 


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* ! >T HE FINANCIAL TIMES U M^ED 1994 No 32.324 Week No 12 lOHPOH • PARIS • FRANKFURT • NEW YORK • TOKYO 


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FINANCIAL TIMES WEDNESDAY MARCH 23 1994 


NEWS: EUROPE 


Waigel pours scorn 
on SPD’s tax plan 


Time running out for EU image 

The protracted enlargement voting dispute has a political price, writes David Gardner 


By Quentin Reel in Bonn 


Ur Theo Waigel. the German 

finance minis ter, yesterday 
denounced the tax reform 
plans of the opposition Social 
Democrats as wrongly calcu- 
lated and grossly extravagant, 
claiming they would lead to 
substantial tax increases for 
the great majority of taxpay- 
ers. 

Seizing on the opposition 
plans for a fairer redistribution 
of taxation to pay for the cost 
of German unification, Mr Wai- 
gel plunged into the first real 
controversy of Germany's mar- 
athon election campaign with 
a welter of statistics, designed 
to terrify the country’s proper- 
ty-owning middle classes, as 
well as average income-earn- 
ers. 

He said the new spending 
plans outlined in the election 
platform of the Social Demo- 
cratic party (.SPD) would add 
around DM60bn (£23.3 bn) to 
the government’s annual 
DM4S0bn budget, and prove 
impossible to finance from the 
present level of taxes and 
social insurance contributions. 

SPD plans for a 10 per cent 
income tax surcharge on the 
better paid, instead of the cur- 
rent 7.5 per cent surcharge on 


all taxpayers, would have to 
begin at income levels of 
DM44,000 a year to produce the 
same revenues, he declared. 
The SPD hopes of levying the 
surcharge on taxable incomes 
of DM50,000 for single earners, 
and DM100,000 for married cou- 
ples. would leave a DMtibn 
shortfall 

He also singled out the SPD 
plans for increased taxation on 
property and savings as likely 
to add another burden of at 
least DMlObn on property-own- 
ers. “It wants to punish fire top 
performers of our society 
through, a considerable tighten- 
ing of the tax system, although 
the top 10 per cent of taxpayers 
already pay more than 50 per 
cent of tax,” Mr Waigel said. 

Mr Waigel’s predictable 
intervention reflects the 
delight of the r uling liberal- 
conservative coalition in Bonn 
at the potential electoral dyna- 
mite in the SPD tax plans, in 
spite of the feet that they are 
intended to be neutral in their 
overall effect 

Mr Rudolf Scharping, the 
SPD leader, admitted yesterday 
that his presentation of the 
p lans last week might have 
been mistaken, by failing to 
make clear that the 10 per cent 
surcharge would affect taxable 


incomes of DM50,000 and 
above, not gross incomes. The 
result has been a barrage of 
press criticism, and concern in 
his own party ranks, that the 
plans would affect many aver- 
age income-earners. 

He insisted that more than 
50 per cent of all taxpayers 
would actually be relieved of 
the present planned 7.5 per 
cent “solidarity surcharge”, 
and fewer than 20 per cent he 
forced to pay the higher rate. 

As for increased wealth 
taxes, he said they would not 
be increased across-the-board, 
and would exempt private pen- 
sion and life insurance policies, 
as well as business property. 
He also promised a review of 
the present tax on interest 
incomes, which has caused a 
huge flight of capital from Ger- 
many to neighbouring Luxem- 
bourg. 

Mr Waigel said the SPD's 
proposals would drive inves- 
tors to deposit billions of 
marks in foreign tax havens, 
undermining economic growth 
in Germany. 

“What the SPD is presenting 
is an employment programme 
for Monaco, perhaps for Liech- 
tenstein and parts of Switzer- 
land, but certainly not for Ger- 
many” he said. 


T he European Union's 
festering Internal row 
over voting rights if it 
Opens its doors to Austria, 
Sweden, Finland and Norway 
risks destroying already 
muted Euro-enthusiasm 
among the electorates of the 
applicant countries, all of 
which have to submit EU 
membership to a referendum. 

The four putative newcom- 
ers have agreed hard-bar- 
gained entry terms. But their 
ministers now have to turn up 
In Brussels on an almost 
weekly basis, waiting in their 
embassies or hotels on the off- 
chance that the UK and Spain 
and their 10 partners can 
decide on how many countries 
should be entitled to block 
Euro-laws. 

EU foreign ministers again 
failed to resolve this dispute 
yesterday, at the fourth time 
of asking. 

Mr Douglas Hurd, the UK 
foreign secretary, Increasingly 
uncomfortable with the band 
he has been dealt, acknowl- 
edged yesterday that “there is 
time pressure". “We are well 
aware of the time-scale, but 
agreement requires movement 
by everybody," he said. 

Mr Dick Spring, the Irish 
foreign minister, summed up 
well the mood of the EU 
majority, when he warned that 




UK foreign secretary Douglas Hurd refuses to be pushed 


Europe’s reputation was being 
seriously damaged. “We are 
showing that we can’t do our 
business properly, and we are 
creating a bad impression 
among the electorates of the 
applicant countries,” he said. 

A senior official from Fin- 


land - the only applicant coun- 
try which as of now has near 
majority opinion in favour of 
Europe - said: “We have to cut 
this off now and get on with 
the [membership] process.” 

In the minds of all the nego- 
tiators. there is concern that 


the deadline for the four to 
enter in January next year is 
slipping away, fn (be minds of 
some, there is Tear that this 
deadline is not academic - that 
it could cause a fetal loss of 
political momentum which 
could turn Nordic and Alpine 
voters against Europe, and 
that the Union would take a 
long time to recover Prom such 
self-inflicted wounds. 

Deadlines on the Uruguay 
Round, on the European Eco- 
nomic Area free trade zone, 
and on previous enlargements, 
were missed without final mis- 
hap. The formal deadline at 
issue here is May 4. by when 
the European parliament must 
approve the accession treaty. 

It says firmly it will not if 
the UK aud Spain get their 
way in making it more diffi- 
cult for the EU to take deci- 
sions. British aud Spanish 
ministers profess to believe 
that if they can get a legal text 
on enlargement to parliament 
by about April 5, along with a 
compromise on majority vot- 
ing which leans their way, EU 
expansion can go ahead as 
planned. 

But there Is more to reckon 
with. Senior parliament offi- 
cials already say that even if 
the argument on voting rights 
goes their way. they doubt 
that the Strasbourg assembly 


- up for re-election hx June : 

- would be will tog or able to 17 
deliver approval to time. Many ‘ 
MEPs will be absent cubk- 
pai going; about half are set to 
lose their seats and may not 
turn up: up to a third never ' 
turn up anyway. 

The parliament received „ 
important new powers, taptafr?-: 
tag that of veto,' under the 
Maastricht treaty, and resent* 
the way the member state* ~ 
continue to treat it at -a 
talking shop. The Socialist sad 
Christian Democrat apjxufc 
tchlks who control the Emm- ' 
assembly definitely hold t 
whip hand on enlargement - '• 
and are In a mood to demon- 
strate they are nobody 'if. ■ 
rubber-stamp. But the logger 
the votes debate goes on, fits 
less likely it is that parlia- 
ments In the 10 member states . 
who oppose leaving the 
“blocking minority" on deci- 
sion-making unchanged will 
endorse ratification. 

Already Belgium and Hoi? ] 
land have said that they wtH \ . 
not get through a bill which 
enshrines quasi -veto powers 
for countries such as the UKl. . 

“The longer yon leave it, the 
more people are going to \ 
speak up oo the other side,’* a f 
Dutch diplomat warned yealarr 
day. “And then yon have * 
real political crisis.” 


France warns student rioters 


By David Buchan in Paris and 
John Ridding in Toulouse 


The Balladur government 
yesterday asked teachers to 
keep their students off the 
streets where they have been 
contesting a youth wage law 
and warned that if they did 
not, serious injuries might 
result 

But students in the south- 
eastern city of Lyons yesterday 
held their fourth demonstra- 
tion in less than a week 
against the law. In its final ver- 
sion published yesterday, it 
permits employers to pay 
unskilled young people 80 per 
cent of the national minimum 
wage for working 80 per cent of 
a normal 39-hour work week, 
with the other 20 per cent 
devoted to training. The gov- 


ernment's aim is to make 
France's jobless yonng, num- 
bering some 800,000 now, more 
employable. 

Dozens of protesters have 
been arrested demonstrating 
against the measures in the 
past week and at least 19 have 
been sentenced in court to up 
to six months in jaiL 

During three days of demon- 
strations in Lyons, capped by 
pitched battles on Monday, 35 
policemen were injured and 73 
people detained. 

In Nantes, 21 policemen were 
injured when about 300 young 
people broke away from an 
estimated 4.000 protesters and 
fought Cor more than four 
hours with police. 

Mr Mr Charles Pasq.ua, the 
interior minister, warned stu- 
dents not to let themselves be 


manipulated by left-wing politi- 
cians and unions, adding: “It is 
the young people who will pay 
the price." 

It was, in feet, an earlier ver- 
sion of the law. allowing 
employers to pay the same 
reduced wages to young people 
with university diplomas, that 
ignited the student revolt 
which has rumbled cm despite 
the law's revision. Ex-president 
Valdry Giscard d’Estaing, 
leader of the UDF party in the 
government coalition, yester- 
day criticised “the clumsy pre- 
sentation" of the law, saying 
that its original version was 
“discouraging” to students. 

Mr Michel Giraud, the labour 
minister, yesterday promised 
“early initiatives to help the 
country’s youth. He said that 
he and prime minister Edouard 


Balladur had been “incensed” 
by what he called “the political 
exploitation" of students' fears 
by trade unions and the Social- 
ist and Communist parties. 

But in Toulouse, a city with 
100,000 students and the high- 
est university population out- 
side Paris, this political con- 
nection was discounted. 

Professor Robert Marconis. a 
teacher at Toulouse-Le Mirail 
university, said that, in con- 
trast to 1968 when students 
seized control of part of Paris 
for nearly a month, “French 
students are more discouraged 
than politicised - more likely 
to be found reading L'Equipe 
[a sports paper] than Le 
Monde". But he added.- "This is 
dangerous for the government 
because It is hard to know how 
to deal with it" 


Croats and Serbs fail to 
agree Krajina ceasefire 


rut; FINANCIAL TIMES 


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Dmck-Vmncb und Maritime ObW,- : ‘- 


By Laura sober in Zagreb 


The Croatian government and 
Serbs from the breakaway Cro- 
atian republic of Krajina yes- 
terday failed to agree on a 
ceasefire which would start 
paving the way for an eventual 
peace treaty between Croatia 
and Serbia. 

Talks in the Russian 
embassy in Zagreb, the Cro- 
atian capital, mil continue 
today. They represent the high- 
est level meeting for many 
months between the two sides, 
as well as the first attempt by 
the Russians to broker a cease- 
fire aimed at ending the three- 
year-old conflict between Serbs 
and Croats. The talks, hosted 


by Mr Vitaly Churkin, Russia’s 
special envoy to the former 
Yugoslavia, coincided with 
threats by Mr Fraqjo Tudjman. 
the president of Croatia, to use 
military force to assert control 
over Krajina. 

The Krajina Serbs, backed by 
the Yugoslav army in June 
1991, waged a war of secession 
against Croatia’s moves 
towards independence. 

The Serbian side called for 
Croatian troops to withdraw 
from Krajina, a swathe of terri- 
tory which cuts across 
south-west Croatia. 

For its part, the Croatians 
insisted on asserting their 
authority over the region. Any 
substantial compromises, par- 


ticularly by the Serbs would 
gradually lead to the gradual 
suspension of sanctions an 
Serbia. 

Mr John Mills, the UN 
spokesman, yesterday called 
the closed-door meetings 
“detailed and purposeful". But 
he warned of a “growing impa- 
tience in the International 
community for solutions to be 
found in the regions". 

Previous UN attempts to 
forge a settlement on the sta- 
tus of the Serbs in Croatia 
have foiled. A ceasefire in Jan- 
uary 1992. which called for the 
return or hundreds of thou- 
sands of refugees, was violated 
one year later when Croat 
forces pushed across UN lines. 


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FINANCIAL TIMES WEDNESDAY MARCH 23 1994 


NEWS: EUROPE 


3 


EUROPEAN NEWS DIGEST 

British Steel to 
boycott talks 

British Steel is to boycott a key meeting tonight between the 
European Commission and big European steel producers 
because it believes the Commission is taking too soft a line on 
state subsidies. British Steel has become exasperated about 
state subsidies following the heavily criticised December 
agreement under which state-owned producers in Spain, Ger- 
many and Italy received government subsidies worth EcuB^bn 
(£5.14bn) in return for capacity cuts of more than 5m tonnes. 

Today's meeting is to discuss the progress of plans by 
non-aided producers In making voluntary cuts in capacity to 
help the industry reduce losses. The Commission has told 
private steelmakers that an Ecu240m fund to ease the cost of 
redundancies will be withdrawn unless the steel companies 
come up with the capacity cuts by April. 

Mr Martin Bangeinann, industry commissioner, wants a 
further 2m-3m tonnes cuts in hot-rolled product capacity on 
top of 13m tonnes cuts already delivered and 4m tonnes 
promised. Mr Heinz Kriwet chair man of Thyssen. the German 
steel producer, will also not attend today’s meeting because of 
"scheduling difficulties". Andrew Baxter 

Three accused of insider trading 

The first test of the Netherlands’ 1989 insider-trading law 
began yesterday with the trial in Amsterdam of three Dutch 
investors and a brokerage house. The defendants - Mr Joep 
van den N ieuw enhuyzen, Mr Eric Alba da Jelgersma and Mr 
Leon Melchior - sold more than 4m shares in HCS. a computer 
company in which they were the main private shareholders, 
on July 31, 1991, the morning after they had met the compa- 
ny’s bankers to discuss a FI 127.5m rescue plan. 

Prosecutors say the shares were sold to depress HCS's share 
price in the expectation that the lower price would be used 
several days later to fix the price of a private share placement 
in which the three would participate. The defendants deny 
that a firm decision had been taken on the private placement. 
HCS, which later launched a rights issue, was declared bank- 
rupt in 1992. Ronald van de KroU Amsterdam. 

Brandenburg coalition falls 

The tripartite centre-left coalition which has ruled Branden- 
burg since 1990 collapsed yesterday, amid allegations that Mr 
Manfred Stolpe, the state premier, had contacts with the east 
German Stasi- The Social Democratic party had threatened to 
oust the Affian ce 90 party from the coalition unless its leader 
withdrew charges that Mr Stolpe bad lied about his connec- 
tions with the former secret police. Alliance 90 leader Mr 
Gfinter Nooke said he would not retract his comments. The 



Stolpe: Stasi accusation splinters coalition 


Social Democrats and the Free Democrats will now run a 
minority government until state elections on September 11. 
However, the two Alliance 90 ministers yesterday said they 
would quit their party and stay with the two-party coalition, 
which has 41 or the 88 seats in the state parliament. Michael 
Lmdemaim. Barm. 

Talks ‘mishap’ sparks cod row 

Denmark and Sweden have clashed over Baltic cod quotas 
following Sweden’s accession negotiations with the European 
Union. Under the agreement, Sweden’s share oT the cod quota 
will rise from 35 to 40 per cent Fishermen on the Danish 
island of Bornholm are urging Denmark to vote against Swed- 
ish EU membership unless they renounce the extra 5 per cent 
But Mr Carl Bildt, the Swedish prime minister, said: “A deal is 
a deal.” The extra quota was awarded to Sweden In the final 
hectic phase of the negotiations, unknown to Danish negotia- 
tors. “It was a technical mishap." said Mr Niels Helveg Peter- 
sen, the Danish foreign minister. Hilary Barnes, Copenhagen. 

More F inns favour joining EU 

Support for joining the European Union has strengthened in 
Finland since accession terms were agreed in Brussels earlier 
this month. A poll in yesterday’s Helsingin Sanomat newspa- 
per showed the “yes" vote rising to 42 per cent from 39 per 
cent last month, while opposition slipped to 27 per cent from 
30 per cent A referendum on joining is expected in September, 
in Norway, where the opposition is still well ahead, a poll 
showed support for the anti-EU Centre party had surged by 5-4 
percentage points to 20.9 per cent since Norway reached its EU 
accession accord. Hugh Camegy , Stockholm 

Hungary sees record trade gap 

Hungary's current account saw a record deficit of $3.45bn or 9 
per cent of gross domestic product in 1993. but Mr Peter Bod, 
president of the National Bank or Hungary, said yesterday tire 
shortfall was an indicator of economic recovery and forecast 
growth of 3-4 per cent in 1994. Exports, hit by drought, Yugo- 
slav sanc tions and German recession, fell 17 per cent in 1993. 
Nicholas Denton. Budapest 

ECONOMIC WATCH 


Jobs outlook poor, says minister 


France: inflation 

Annual % change In consumer prices 



S3 94 


Forecast French economic 
growth of L4 per cent this 
year was “not enough" to 
make an appreciable dent in 

unemployment, Mr Edmond 
Alphandfiry. the economics 
minister, said yesterday, but 
he believed the recovery 
“could be more vigorous than 
foreseen”. Commenting on 
yesterday's price and trade 
figures, the minister said the 
03 per cent rise in consumer 
prices in February showed 
France had little to fear from 
renewed inflation. The foil in 
the trade surplus to FFr2.7bn 
(E300m) in January was only 


1990 91 92 

Souc* Dawatraam — . 

, correction from an abnormally high surplus of ™^hnm 
December. Exports rose at 4 per cent a year from OctoberlSW 
ESmrv 1994 compared to a 3.6 per cent growth in imports 
S? Turman ^ciaTsecurity budget reached a record 
m/n itfahn (£4l3bnl in 1993. equivalent to a third of the total 

tart year. WjJtaW wdl not need 

to import * J^eficiMf Sading^or Ll60.000bn 

(Esrnn) 3 km L16.000bn above target, due to a UO.OOObn 
shortfall in tax revenues and over-spending. 


No reformist spring on Ukraine farms 


Jill Barshay tests the political climate in the countryside before parliamentary elections on Sunday 


T he only outspoken reformist 
candidate in Ukraine's poor 
farm village of Yaroslavka, 
who promised to privatise the land 
and let the collective farm workers 
sell their sugar beets and milk to 
whomever they wanted, died in a car 
accident recently. He was travelling 
the poor roads that link the 80 iso- 
lated, backward villages in his elec- 
toral district, 90 miles north east of 
Kiev. 

Of the district’s seven remaining 
candidates in parliamentary elections 
next Sunday one is on the revived 
Communist party ticket and the other 
six are ex-party farm bosses or long- 
time local officials. 

Last September when Ukraine's 
first past-independence elections were 
called, western diplomats and 
Ukraine's opposition press thought 
they would be the mechanism that 
would at last remove the entrenched 
Soviet legacy that has steered 
Ukraine to hyperinflation, a severe 
energy crisis, plummeting output and 
monthly wages of less than $10. Now 
they are p^gsimicHr . 

Yaroslavka is a typical Ukrainian 
village of L300 people, 70 per cent of 
them pensioners, whose lives are cen- 
tered around the collective form, for- 
merly named ProCommunism. People 
there do not easily trust new 
approaches even though their lives 
have lurched back to a primitive bar- 
ter economy as the state is increas- 
ingly unable to provide. 

“The old mentality lives on here,” 
says Mr Mykhailo Yarmolenko, a 


Soviet master welder who built 
atomic power stations abroad and has 
retired to his family's birthplace. 
“People still expect the collective 
farm director to provide everything 
from roofing to their kids' lunches. 
They don't see another way.” 

Horse-drawn ploughs are used more 
and more as tractors break down. 
There are no replacement parts to be 
found. Public transport to the city 
was cut off a year ago. Candles are 
used more to cope with frequent 
blackouts which Last for days. The 
single general goods store has been 
closed for weeks because there are no 
goods. 

Personal backyard plots of beets 
and berries are the main source of 


security for their famili es' meals. 
Instead of using Ukraine’s worthless 
currency ($1 gets you 39,000 
karbovanetsj, home produce is 
bartered through informal networks 
of city friends and family who can 
bring matches or a warm sweater on 
a visit. 

Mr Yarmolenko uses his welding 
skills for his contribution to the col- 
lective form. The chairman wanted to 
pay him. “'What money?' I said,” 
recounts Mr Yarmolenko. “Give me a 
sack of Qour instead for my wife to 
make bhrd [pancakes]." 

Centuries of serfdom and starva- 
tion, whose apex was the artificial 
famine of tbe 1930s which wiped out 
Tin Ukrainian peasants, have made 


Ukrainian peasants a stoic lot. who 
expect little of their government and 
are good at devising private strategies 
for survival. They distrust radical 
change, preferring the devil they 
know, 

"I just don't believe that private 
farmers can feed the country,” says 
head of the village council. Hryhori 
Boretz, a life-time communist official, 
“Only the state can provide tbe kind 
of massive investment our farm 
needs. A lone former couldn't do it by 
himself with just a horse and a 
plough.” In this village, only two 
farmers have taken advantage of 
Ukraine's private land law to get their 
own farms. 

“There are not enough young peo- 


ple to take risks and responsibility" 
says Andrii Bezlyudny. who is in 
charge of the collective farm's anima l 
breeding and mechanisation. (The col- 
lective farm's head was oil on one of 
his regular trips to Kiev to beg for 
fuel needed for spring planting.) 

“Right now all the bureaucrats are 
in charge of the processing factories 
where we send our grain and milk. 
They don't have any money to pay us. 
but they won't let go either because 
they’d be out of a job. They five off 
these factories." 

On the front line of his farm’s prob- 
lems Mr Bezlyudny believes every- 
thing needs to be privatised, from the 
processing plants down. He is hoping 
for a new parliament. 


THE TRAGEDY AND THE IRONY OF VILLAGE CONSERVATISM 


To the amazement of outside 
observers Ukraine’s election cam- 
paign is not being fought primarily 
on economic issues, writes Chrystia 
Freeland. East Europe correspondent. 
But, if Ukraine is to have any hope of 
averting the sort of disaster foreign 
experts predict, then the day after 
they take up their seats, the new MPs 
will have to face up to the issues they 
have been avoiding on the campaign 

trail. 

On its own, Ukraine's economic 
plight is canse enough for serious 
international concern. Ukraine's 
macro-economic record - the worst in 
the former Soviet Union - is so dread- 


fill that the beleaguered officials of 
the International Monetary Fond and 
the World Bank in Kiev have taken 
to raising their spirits by counting 
the inventive new ways Ukrainian 
officials are constantly discovering to 
destroy their economy. 

But what makes fragile Ukraine 
particularly important now is its 
increasingly hostile relationship with 
Russia. Russians - ranging across the 
political spectrum from Lenin to Sol- 
zhenitzyn - have always seen 
Ukraine as an integral part of 
"Greater Russia". As Russian foreign 
policy hardens hi the aftermath of 
the elections there in December and 


in reaction to Russia's own economic 
travails, Moscow's pressure on Kiev 
to re-submit to Russian rule has 
become stronger. 

Ukraine’s economic collapse makes 
it more difficult for Kiev to resist; at 
tbe same time, the nation's political 
determination to remain independent 
is growing stronger. This makes 
Ukraine a particularly volatile part- 
ner in what is already a tense rela- 
tionship, hence the CIA's gloomy pre- 
diction earlier this year of a 
"probable" conflict between the two 
Slav giants. 

It is in the cities, with their greater 
voting power, that the outcome of 


Ukraine's election will be decided. 
There, the race is far more competi- 
tive and a new political class, repre- 
senting a fledgling middle class 
rather than the entrenched ex-com- 
munist nomenklatura, could emerge. 

Ukraine's tragedy is that the 
uncomplaining resilience of its vil- 
lages is likely to help keep its inept 
government In place. The irony is 
that it is the villages, with their tra- 
dition of hard-working self-suffi- 
ciency. which could be the driving 
force behind a Ukrainian economic 
revival - if Ukrainian voters are ever 
able to elect a government with the 
courage and skill to initiate reforms. 


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FINANCIAL TIMES WfiPNESPAY MARCH 23 IW 


NEWS: WORLD TRADE 


Japan ‘trapped’ by 

Michiyo Nakamoto on the implications 


chip imports deal 

of latest semiconductor market figures 


T he apparently favoura- 
ble figures for foreign 
share of the Japanese 

semiconductor market released 
last week have been greeted 
with both relief and resent- 
ment in Tokyo. 

On the one hand, the 20.7 per 
cent market share for the last 
quarter of 1993 is welcomed as 
proof of the tremendous effort 
that Japanese semiconductor 
users have made to increase 
market access for foreign man- 
ufacturers since the US-Japan 
semiconductor arrangement in 
1991. 

“The industry has worked 
very hard (to that end) in the 
last quarter," says an official 
at the Electronics Industry 
Association of Japan. 

At the same time, however, 
there is resentment at US pres- 
sure on Japan to ensure that 
"gradual and steady improve- 
ment in foreign market share 
continue throughout the dura- 
tion of the arrangement,” as 
Mr Mickey Kan tor. US trade 
representative said with the 
announcement of the fourth- 
quarter figures. 

Mr Tadahiro Seklmoto, chair- 


man of the EIA, said recently 

that from the industry’s point 

of view it would have been bet- 
ter not to have had the semi- 
conductor agreement at alL 
‘'We are troubled by the <20 
per cent) figure which was an 
expectation but which has 
been turned into a target If 
the agreement is to be contin- 
ued we want the figure taken 
out" 


iation. At the same time, how- 
ever. if that goal is achieved it 
risks supporting the perception 
that targets work in Japan. 

During the ill-fated frame- 
work negotiations, for exam- 
ple. under which the US had 
been asking for “abjective cri- 
teria" in measuring progress in 
opening markets, the semicon- 
ductor arrangement was cited 
by US officials as an example 


Japanese industry sees it as an 
expectation turned into a target 


Mr Sekimoto’s is a personal 
opinion, but it is shared by 
many of chose affected by the 
US-Japan semiconductor 
arrangement “We all want to 
call it quits," says one Japa- 
nese industry member. 

The resentment stems from 
what is seen as a no-win deal 
that has caught Japanese semi- 
conductor users in a bind. If 
the aim of the arrangement to 
improve market access for for- 
eign markers is not reached, 
Japan risks US threats of retal- 


of how numerical targets could 
be successfully used to obtain 
results in Japan. 

No matter how loudly Japa- 
nese officials state that there 
has never been any commit- 
ment on market share in the 
semiconductor arrange- 
ment - which notes only 
Japanese government recogni- 
tion that the US industry 
“expects that the foreign mar- 
ket share will grow to more 
than 20 per cent ... by the 
end of 1992", few in the US 


seem to heed their words. 

Behind US pressure on the 
semiconductor issue is a mis- 
guided perception of how 
t hin g s work in Japan, laments 
one industry official. The min- 
istry of international trade and 
industry has influence, but not 
enough to raise the foreign 
market share with a few tough 
words, he says. 

Nevertheless, for the trade 
ministry as well, the bilateral 
arrangement has left little 
choice but to apply pressure on 
Japanese industry and achieve 
a target it does not officially 
recognise. 

At the end of 1992, the key 
year in which foreign market 
share was expected by the US 
to reach 20 per cent, ministry 
officials pleaded with compa- 
nies to buy foreign semicon- 
ductors even if it meant they 
would have to throw them 
away later, according to one 
industry member. 

While the share of foreign 
semiconductors in Japan did 
reach 20 per cent at the time, 
US pressure has far from 
diminished. Earlier this year, 
when the figure fell below 20 


Japan 

Semiconductor maricat 
Foreign shaxe. % 

35 


30 — - - • ' - ' 

1991 A g roairant 
trend line IU3 ggaggjgj 
25 



1988 88 90 92 94 96 

Sauro* OS Trade Rsprasmottue, 

US Seratconduetor Industry AwocaatJon 


per cent for three consecutive 
quarters, the US requested an 
emergency consultation and 
asked Japan to adopt an action 
programme to stem the 
decline. 

“It is strange for the US to 
ask us to adopt an action plan 
to boost imports when in fact 


US suppliers have not always 
been able to meet Japanese 
demand due to a shortage of 
supplies,” complains Mr Koji 
MatsuL deputy director of the 
industrial electronics division 
at the trade ministry. 

Meanwhile, the US Semicon- 
ductor Industry Association 
has said it believes the foreign 
semiconductor share will reach 
between 25 and 30 per cent by 
1996. The Japanese industry is 
worried the US might again 
take this figure as a target and 
press Japan to achieve it. 

The concern in Japan is that, 
with a mid-term review of the 
semiconductor arrangement 
due by the end of July this 
year, and against the back- 
ground of frustration over the 
stalled framework negotia- 
tions, the US may seek to win 
greater commitments in semi- 
conductor trade, including a 
government guarantee of mar- 
ket share. 

Some in the trade ministry 
believe that unless it can be 
made clear that the semicon- 
ductor arrangement has no 
market share commitment, the 
deal itself should be scrapped. 


INFORMATION FROM THE BANK OF ENGLAND 


- i ■ 



" i 



BID PRICE AUCTION FOR £2,500,000,000 

FLOATING RATE TREASURY 

STOCK 1999 

INTEREST PAYABLE QUARTERLY AT LIBID LESS 
AT A MINIMUM PRICE OF £99.50 PER £100 NOMINAL OF STOCK 


f •- - ■*'. 


: J 4 


v; -fcd 

VW* 

v.V: r i’. 

V'-c-i 


PAYABLE IN FULL WITH APPLICATION 


I This Stack w itt. on I s u i c. be an investment biting tvlihin Pan II ef the First 

| Schedule totheThutee Investments Act 1961. Application has been made to the 
I London Stock Escbange for the Stack to be admitted to the Official Ust an J I 
| March 1994. 

1. THE GOVERNOR AND COMPANY OF THE BANK OF ENGLAND 
: inviie bids foe the above Stock. 

\Z Tbc principal of and Intncst an the Stock will be a charge on the National 
; Loans Fuad, w&h recount to die Consolidated Fund of the United Kkigntaoi. 

]3. The Slock will be repaid at gar on tbc Interest payment dac (as defined In 

j paragraph lObdow) biting in torch 1999. 

4. AppIfcatiourMa to form lea than £30ptonomliid of Stock. 

5. The Stock will be registered ai die Bank of Englaid or « the Bank of Ireland, 
... BeHSat. and will be transferable by holmmcat in writing in ac c o n fa n cg with the 

& Stock Transfer Aa 1963. Stock rcglsemlet the Bank of England held for the 

a account of memben of the Central Gita Office (CGO) Sendee will sbo be 

transferable by exanpr transfer in accordance with the Snick Transfer Act 1982 
SjUAj* and the relevant subordinate legMarion. Transfcn arfll be fine of stamp <fcoy. 
Interest 

6. Interest will be payable quarterly in acoonbnce with p a ragra ph 10 below, 
(merest warrant* wlfl be trensnhted by post. 

Chir-ii 1. Pursuant to a dheaimi of Her Mricstr't Treswry under Section 50 of the 
Income and Corporation Taxes Act (988, interest on the Stock will be paid 
without dednedon for or on account of United Kingdom income tax. However. 

•■'v 1 the interest has a United Kingdom source end therefore may be chatgeablc to 

"ii United Kingdom tax by direct aasesameuL 

'I 8. The Stock will be issued by Her Majesty's Treasury wbb the conditions that 

(a) so long as Stock b in the beoefidal ownership of persons who are not 


fife 


SK;,. 

k'S&Nl <b> 


lyraridot In the United Kingdom. the interest thereo n dill be 
uwu i 


PnbllcatloaorRateoflnteiat pcrnsnamandCenpon Amounts 

13. The Bank of Fngtand will. as soon aa practicable after I LOO am on each 

fflgfffi fl ff pp fl n f l yn mnn fyl wilw* 

the amount of interest payable per £100 nominal oTSiock (the 'Interest amounT) 

for the relevant intrwg period, and will pub Bah both figure. The'uaereai amount 

shall be calculated by applying (he me of mtetett per anaum per £ 100 noadnal 

of Stock, mnftWriag such premia by the actori amnber of days in the interest 

period concerned divided tor 363 and roundtaig the lesnlting figure to the nearest 

fourth decimal place. The bnkof England's detennharionaftbe ate of interest 
and the interest amount shall be finsl and binding upon ail parties. ' t 

14. The tateofioteest for the first Interest period will be stf on Wednesday. 23 
March 1994 a described injjaiagiaph ll above. Thereafter the interest 

HnwHriiw fWl H*|. wfll h»a» <iia|]i i i ujw i il«y^^li IM WM pwlivl 

Method ef Application 

13. B ids must be su bmitted oa the application form published wkh the 

msBriv? wSct Sf^'AftfoN 

WEDNESDAY, 38 MARCH 1994; or lodged by hud at the Central Gitas 

Office. Bank o f Engl and. Bank Boi M i ng y 19 Old Jewry, f n a rinn not later than ' 

1<LM AM ON WtfHVKSD AY, 30MARCH 1994; or todged by hand at am of 

thoBrancba or Agenda of the Bank of England not faner tbn 338 PM ON 

TUESDAY, 29 MARCH 1994. Gilt-edged market makers may Ud by 
telephone to the Bank of En g l a n d not tatter than 1000 am on Wednesday. 30 

March 1994. Bids wfll not be revocable between IOjOO am on Wednesday, 30 

March 1994 and IOJOO am on Tuesday, 3 April 1994. 

16. Each bid most be for oneamorart and Cor a m i n i m u m of fSOflOO nominal 
of Stock and for a mnhipk of Stock a faiiows:- 

Antoma of Stock applied for Multiple 


£.'•--■•1 


Slock comprised therein to be credited to the member's accoora. The member \. . 

who is shown by the accounts of the CGO as being entitled to any Stock shall. .- ■ i 

to the exclusion of all pereoas previously entitled to such Stock and any person;.^ 
claiming nay eairiemeat thereto, both be treated at entitled to soch Stoat as if « : 

tkM member were the holder of a tetter of allotment and be liable for the payment ?-t ^ 

of any amoumdnetn respect of inch Stock. K 

26. Application forms and copies of the prospectus maty be obtained by post fl : -wj 
i the Bank of England. New Issues, Southgate House, Srxahgate Street, -.y - 


Grom 


Moyne BuQiSags, la 

office of the London 



TEnglatt ... 

Gloucester. GL1 lUW; si the Central Gita Office, Bank of England. I Bank 

Buildings. Princes Street. London. EC2R 8EU or at my of the Blanche* or 1 ‘ 

Agencies of the Bank of England; at the Bank of Ireland. Mi 

Hoar. 20 Callender Street, Betfsst, BTt 5BN; or at any i 

Stock Excfamge in the United Kingdom. 

GtivtmBKnt SkaartM % « 

Attention is drawn to rbc statement issued by ^Her Msdjaty’sTreasury on 29 May jrr. r“ 
1933 vrnaui CA|iuiUBii UML.miiiciinac3i.ui ucwuaijuMiuvt iuua|iun.r. *V »?i»e 
neither Her Majesty's Govenmxni nor tbe Bank of England or their respective -jit 
servants or agents undertake to disdose tax changes decided oa but not yet 
a n no unced, even where they may specifically affect the terns on which, or the 

co n di tion s under which, this Stock is issued or sold by or on behalf of tbc A 

Government or the Beak: that no respoastbilitycia therefore beaocepced fa any ?.*?*?*$ 

omissioa to make such disclosure; and that such omitsinn shall neither render 

any oansaefkin liable to be set aside nor give rise to any claim for compensation.; 

BANK OF ENGLAND 
LONDON 

22 March 1994 


uv 


exempt bom income tax; and 
so tot* aa Stock is in the beneficial owneoMnof persons who are neither 
dooridled nor ordinarily resident in the Unhedniigdom, neither tbe oinul 

t hereo f pot the interest thereon shaH be liable to sxty taxation present or 

future. 


£LM0^M or greater 




| For there purposes, pemons are not onfiowfly resident in the IWtedKl 

they are regarded as not ocdlnarOy resUku for the purposes of United 1 

i income tax. 


the Interest from any 
trade or business carried 


17. The nmiimun price, bdowwtridi bids will not be accepted, is £99 JO 
£100 nominal of Stock. Bids most be made at theounhuum price or K" 
prices winch arc multiples of one penny. Bids lodged withouta price being *nren 
will be deemed to have been made at the minimum price. 

18. Unless die applicant is a member of theCGO Service, a separate cheque 
; PAYMENT IN FULL AT THE PRICE BID rat aocom 

t must be dawn on a branch or office, shamed within the! 



i on m roc umuxt lungoom. Moreover; ue avauaratny of these t 

■ i sobject to tbe provisions of any Law. present or ftamre, of the United 1 

. ' | directed u> preventing avoidance of taxation by persons domiciled, re 
. ' -I ordinarily resident in the United Kingdom, and, m particular, tbe imereavrill not 
„■ . .. be exempt fiom income tax where, under any such pronsioii,k Eds to be treated 
. -i for the txupose of the Income Tax Acts as income of any person resident or 
- - : ordinarily rr-ri d en t in die United Kingdom. 

*• 9. In nd d ittao , the Inland Revenue has confirmed that, on the buh of a 

■ long-standing publtabcd concess ion, tancrea on the Stock will not be charged to 

j United Klngoomtxx in the hmdsofastodtbokterwbo is oocat any time In tbe 
'.‘.i relevant tax year resident In the United Kingdom, except where such stockholder. 

: l (s) is char«able under Secooa 78 of the Taxes Martagemem Aa 1970 in tbe 
. .j nmne or a trustee or other representative mentioned m Section 72 of that Aa 

. .! or ia the name of on agent or branch in the United Kingdom having the 

manqgnn rot or control of die iacnai; or 

seeks to dalra relief In respect of taxed income from United Kingdom 
sources or 

is chargeable toompomdon tax on tbe Income of « United Kingdom branch 
or agency to which the interest is attributable; or 
Is chargeable to income tax on the profits of a trade canted on In the (Jolted 
1 Kingdom to which tbe interest is attributable. 

?->>:- •- Vj (Merest Payment Dates 

it KX.. Interest will accrae (tom 31 Marefa 1994 (the issue daw) and such interest 



b4d orpan of any bid. 

wfli be sold to 


Stock 

at which the Bank of 

lowest accepted price 1, 


,.,;j 

,-i 


fb) 

(c) 

ltd) 


O-.’Vi 


win be payable oa 9 June 1994 and oa each dale (bereaftawfakh (except 

below) faili three months after the prece&ng interest payment date fa 


dale being s 'interest t ^ym oa date"). 


as stated 

tattenat payment dale {each such 

. sty merest p ay me ut thttc would 

otberwtaTfiill on a to which is not a business day (pa defined below) It shall be 
poMpoacd to the real nminrsi diyiinlg—tl would thmliy full laiheaaxtc tondre 
numb, in which event that toerea paymen t date stall be the inuneAatdy 
..-if.’ preceding business day and each subsequent interest payment dale shall be (be 

laabustaesad^y of ihethinl month after ttre month In wtddi the ptecettangtanereSL 
yr" /■; payment date Ml. In drisprospermslhe period friwi (and 1nr1«Hnft)fm»;iU»nM» 
ti«' , -i payment date (or tbe Issue dare) to (but excluding) tbe next (or first) interest 
4->V.’irv pay ment date U called an ’Interest period* sad "business ‘ ' 
than Saamlay or Sunday Jon whkn tanka are open Eorl 
iJ~ Rate of Interest 
■ 1 1- The rare of hncrestjper annu m payable in taped of the Stock for each 

**>.- ^ Interest period shall be Ui% below the rate per annum determined by tbe Bank 
df England to be the arithmetic mean (rounded If Mcewny to the nearest fifth 

ft.-?;-., decimal place) of the rates at which three month depoaks tn sterling are bM mat 

«Vv-~- 1 lj0 ° 818 00 Interest detenofantion date (aa described in para gf a p h 14 
v :■•*...{ betow)by the twenty reference banks referred to In par a gra ph 12 befew, provided 

\ J that 0) ir sixteen or mac inch quotation arcnareihmic, the five Mgbn (or. If 
£(“•*• there are more than five such highest rates, only fire of inch rates) and the five 
);ic- y? n lowest te. If there are more than Rvesuch lowest rat es, onl y five of suc h tales) 

& Vw srithme^BM^iifif fewer than riraeo’bul more^adghfarebquDmtioas 
*V-v-3 sre available, tbe two highest (or, If there are more than two such higbea men, 
only two of such rates) and the two lowest (or, if thse are more than two such 

lowest rates, only two of such rsreslshafl be tBsregatded by the Bank of England 

>1 for the purposes of ttaenninhif wharilhmetie mea n ; (IH)ff fcww than nin^wrh 
;:i q»»mwkmamaiinlt^e_»taBMhafPi>gtandsl»3n J—tjflWiflf tbrrHO 


'means a day (other 

tea la London. 


("A., 


at which three nwolh depoaks in sterling am bid ai I IjOO am on the i 
-i detemdnarion date by such other banka as the Bank of England »*mll select, if 
' pacticabie comaliliig Her Ma}esty'sTreasuiy. so tin* fd) above may be 

X/t ... rate of intercst amnot be desomlced in armirfiwm with the fbregoiog 


' the rate of interest cannot he desennined'in armntanm with „ „ 

provisions the tree of interest shall bo ttat catabUahed on iho bat preceding 
j uteres determination doe. 

12 . Por the purposes of p ara g raph 11 above the reference banks shall be the 
twenty ii iiho ri s e d ha t ihi Uon s , within the meaning of the Banking Act 1987, 
gr-Tr'al which, disn*rdlnganyexchxiedjastitutioosrefcctd to below, hadoutsta«fit« 
ssat«he3l tVc-fmbrT finmnii»,riy itw inlcseadetenamrainn 
<feir the lagertstetfittgetagfolelireratiesraaefenadiiedliy the Bank of&Kbnd. 

Hht 1 *** whoU ^™^ 


19. The Bank of Er_ 

Bids will be rankedm iVurnfug order of . 

agtficretts whose bids are at or drove the lowest 

Hi dwid decides any bids be 
winch will be not less than the mtalniiini price. APPL 

ARE A CCEPT ED WILL PURCHASE STOCK AT THE PRICES AT 

WHICH THEY BID; tads which are accepted and wMch are made at prices 

above the lowest acccptedprke win be satisfied in full; bids which are accqxed 

and which arc made at the lowest accepted price may be satisfied in fall or in pm 
only. 

20. TheBankof Eogfamdauty sell to applicants less than (he fail anramt of the 

Stock. 

21. The Stock win be initially issued ata price and on terms soch ttat it will not 

be a deep disconm security for the purposes of Schedule 4 to the Income and 
Gotpoodon Taxes Act 19W ora deep gain security for the purposes of Schedule 
11 to tbe Finance Ad 1989. Further taeumoft br . Slo ck nay best a dee p dis co unt 

(broadly, a discount exceeding per aooum) and in certain Hicrunstances this 

could resoh in all of tbe Stock being treated thereafter as such a security. 

However, it is the int e ntion of Her Majesty's Treasury that Anther issues of Stork 
wDt be oo n duacd so as to prevent any of tbe Stoat being beared as a deep 

disore na security or a deep gain security for United Kingdom tax purposes. 

Provided the Stock is neither a deep discount security nor a deep gain security 
and is not (reared as such, any discount to (he opgiima value at Which [he Suxx 
b issued will not rep r esect taxable income for tbe p ur po se s of tbe relevant 
provisions. 

22. Lours of anounect in respect of tbe Stock sold, being the only form in 
which the Stock (other ttan amounts held in the CGO Service for the account of 

memb e n ) may be transferred prior to irgisrrarioa, will be dcapacbcd by post at 

the rf* of the applicant, but the despatch ofmqr letter of atibanem. and the rriund 

of any excess amount paid, may at tire dtecrakn of the Beak of England be 

withheld until tbe eppl te am 's cheque ires been paid. In the event of such 
wi thh olding, the applicant win be notified by leao- by the Bank of England of 

^amount of Stock alkxaedto him. 

re, but such notification will confer 

n allocated. 

23. No saU wiU he made of « less amomx than £50D00nomiad of Slock. If 
an app l ic a tion is satisfied in pan only, tire excess amount paid will, when 
refunded, be remined by cheque despatched by post si tire risk of tbe applicant: 
if an application b rejected the amount paid ou application will be returned 
likewise. Non-payment oq presciiutioa Of scheme la respect of uyStodc add 
will reader audi Stock liable to forfeiture. Interest at a rate equal to the London 

Inter-Bank Offered Rate for seven day deposits in sterling ('LiBORT) phis 1% 

per annum may, however, be charged oa the amount payable in respect of am 
Stock for which mymeat is accqptcd after the due due. Such rate will be 
detetmtaud by fire Bank of EtHtanaby reference to market qumlona, on the due 
date for such payment, for UBOR attained from such some or sources as the 
Bank of England shall consider appropriate. 

24. Lctim of alkxmeat may be ^iit into denominrtiocs of multiples of £30 D00 

on written request to the Bank of England. New Issues. House. 

Southgate Street, Gloucester, GLi 1 UW received oof later than d April 1994. 

Such requests must be signed and mast be accompani ed by tbc Icuas of 

allotment Letters ofaUonaera, accompanied by a com p l eted re gatralio n fonn. 
nay be lodged for regtsuatiou forthwith and m any case must be lodged for 
iwattation not Inter than 8 April 1994; in the case raSrodt hdd for tire aomat 

of me m bers of the CGO Sendee registration of Stock will be effected trader 

separate arrangements. 

23. St*)ea id the provisions governing membership of the CGO Service, a 
member of that Service may, by completing Section B of tiro appUarion form, 
request that any Stock sold to mm be credited direct to his account la tbe CGO 

onThursday. 31 March 1994 

an aecom la the name 

Number 2 Account, mi ore to accept such dell very 
member- to-member detaveries under the rales or tbe CGO Service on 31 Match 

1994 shall for the purposes of ibis prospectus ooMtitute defeuta in due payment 

of the amount payable ia respect or the relevant Smde. A member of the CGO 

Sendee my aba srtject to the provisions governing m embership of that 

Service, suffeader a letttf of ataotmeot to the CGO for cnaeeUation tad for the 


TO THE GOVERNOR AND COMPANY OF THE BANK OF ENGLAND ( 

whh tbe terms of the prospectus dated 22 March 1994* 


I/We apply in 

as follows:- 


J 


of Pleating I 

Treasury Stock 1999 app Bed fire: 

Amount qf Stock applied for Mu 

£30D00-£UD00fl® £5C 

EljOOOjDOOor greater £ l D00D00 


Price Md per £1M oomimd of Stock, 
beiaga muKfarie of one pramy. raid NOT 
THANTHE MINIMUM PRICE 
OF £99.58 PER£1N NOMINAL OF STOCK; 


Sume n e i o rad (a), bri ng the a mount repa ir ed far 
payment IN FULLATtHE PRICE BID (b) for 

Sery £1M NOMINAL of Stock applied for: 




TOR CGO MEMBERS ONLY 


CGO PARTICIPANT NUMBER — 
Name of contact 


-Tel No_. 


I 


1/We request that any taler of aUotmeni in respect of Stock sold to 

metas be sent by post at my/our risk to me/us at tbe address shown 
below. 

IN THE CASE OF AN APPLICATION BY A MEMBER OF THE CGO 

SERVICE WHO HAS COMPLETED SECTION B. we request tint any Stock 

allocated to us be credited tflreet to our account at the Central Gtta Office. 

Wo hereby irrevocably undertake to accept such Stock by mcmber4o-member 

dehveiy through the Central Gita Office Sovice (torn the Governor and 
Comiwy of the Bonk Of EiretauL Number 2 Account (Paitidpant number 
3 183) by the deadline for such deliveries on 3! March 1 994, and we agree that 
the conskfcraica to be Input in reroect of soch delivery shad be the amount 
payable by us an the sale of Sttdi Stock in accordance with tbe terms of tbe 

vmveam - SIGNATURES) 

Dane—-— of, or oa behalf of, applicant 


PLEASE USE BLOCK CAPITALS 


/j » i ; 

FORENAME(S)INFULL 

SSHBR 






JTOWN 

1 



POSTCODE 


(a) A separate cheque oust accompany each application. Cheques should I 

be made payable to 'Bank of Engtrart* and crossed “New issues' anl | 

Ml* be drawn on a brrach or office, rinsed witirio lire Town Gearing > _ 

area, of a settlement member of CHAPS and Town Clearing Company , 9-m 

i tatad i 

(b) The pro en hi re for sny refund, b so out in the prospectus. | 

APPUCATION FORMS MUST BE SENT TO THE BANK OE ENGLAND. J 

NEW ISSUES. PO BOX 444, OXXJCESTER, GLI 1NP TO ARRIVE NOT I 

LATER THAN 1000 AM ON WEDNESDAY. 30 MARCH 1994: OR | 

LODGED BY HAND AT THE CENTRAL GILTS OFFICE, BANK OF , 

ENGLAND, BANK BUILDINGS, 19 OLD JEWRY. LONDON NOT J 

LATER THAN IOjOO AM ON WEDNESDAY. 30 MARCH 1994; OR ■ 

LODGED BY HAND AT ANY OF THE BRANCHES OR AGENCIES OF I 

THE BANK OF ENCB-AND NOT LATER THAN 3 JO PM ON TUESDAY, i 

29 MARCH 1994. , 



US rocks 

shipbuilding 
subsidy talks 


By Guy do Jonquttres, 
Business Editor 

An unexpected shift of position 
by the US has thrown into dis- 
array international negotia- 
tions aimed at reducing ship- 
building subsidies, just as 
other countries had offered 
concessions removing some of 
the biggest obstacles to agree- 
ment. 

The US surprised other dele- 
gations at talks at the Organi- 
sation for Economic Co-opera- 
tion and Development in Paris 
last week by insisting on the 
freedom to require that ships 
financed by its export credit 
schemes be built in US yards. 

Though such "home-build" 
provisions are a normal feature 
of most export credit schemes, 
the demand that they be for- 
malised in a legal requirement 
is seen by other delegations as 
an attempt to establish a prin- 
ciple which is both unaccept- 
able and contrary to the pur- 
pose of the negotiations. 

The US demand followed 
important concessions at last 
week’s meeting by Japan and 
South Korea, which had been 
widely regarded ns taking the 
most inflexible positions in the 
five-year-long talks. 

The two countries finally 
agreed to the establishment of 
an international anti-dumping 
code for ships, to prevent 
"injurious pricing". Substan- 
tial progress has also been 
made on the detailed provi- 
sions of such a code. 

In addition, Japan has 
agreed to modify the terms of 
shipbuilding credits provided 
by the Japan Development 
Bank, to bring them into line 
with tighter restrictions on fin- 
ancing demanded by the US. 

However, because a success- 


ful outcome of the negonattMH' 
depends on a complex package 
deal, tltese concessions could 
be put In jeopardy if the Ust- 
minute VS shift makes overall 
agreement impossible. 

Tbe latest turn of events cre- 
ates a particularly awkward 
problem for the European 
Union. The Commission Is 
expected to take a firm Unt 
with the US, because it sees an 
agreement In the OECD as cru- 
cial to Its efforts to phase out 
national shipbuilding subsidies 
in Europe. 

There is a danger that the 
US demands could undermine 
EU cohesion on the issue if 
some shipbuilding industries 
and member governments, par- 
ticularly in southern Europe, 
seize on them as a pretext to 
press for a relaxation of. 
national subsidy rules. 

A further obstacle to agree- 
ment is the US refusal to nego- 
tiate a repeal of the Jones Act; 
which requires that a fixed 
proportion of cargo passing 
through US ports be carried in 
US-registered ships. However; 
it is thought that a way could 
be found around this problem 
by gradually relaxing the appli- 
cation of the act 

Prospects for breaking the 
deadlock will depend on a 
report being drawn by Mr Staf- 
fer! Sohlman. Sweden's ambas- 
sador to the OECD, who is 
chairing the talks. If he 
believes scope for compromise 
remains, he will reconvene the 
negotiations, probably fete' 
next month. 

The negotiations, which 
were originally instituted 
under pressure from the US. 
Involve the world's largest 
shipbuilding countries. They 
also include Finland, Norway 
and Sweden. 


Gatt draft 
ready on 
eco-issues 


Financial 

services 

demand 


By Frances WOiams in Geneva By G j Bian Tett in Brussels 


Trade negotiators yesterday 
agreed the broad outlines of a 
work programme on trade and 
the environment to be carried 
out by the General Agreement 
on Tariffs and Trade and its 
successor, the worid Trade 
Organisation. 

The draft document, to be 
approved by ministers when 
they meet next month In 
Marrakesh to sign the Uru- 
guay Round trade accords, 
establishes a committee on 
trade and environment with 
an initial two-year life-span. 
Further extension of the com- 
mittee’s mandate will be dis- 
cussed at the first WTO minis- 
terial conference in 1996. 

The draft strikes a compro- 
mise between industrialised 
countries, notably the US, 
which wanted a permanent 
committee, and some develop- 
ing nations which wanted to 
give it a fixed term. 

The committee to be set tip 
shortly after the Marrakesh 
meeting, will have broad 
terms of reference which 
stress the need to make trade 
and environment policies 
mutually supportive. 

The document outlines seven 
categories of issues the com- 
mittee may explore. These 
include the impact on market 
access of environmental mea- 
sures and whether fair trade 
rules need to be modified to 
accommodate multilateral 
environmental agreements 
with trade provisions. 

Trade officials said yester- 
day the document was drafted 
broadly enough to encompass 
any trade-related environmen- 
tal issue, including such con- 
troversial areas as “processing 
and production methods” (dis- 
criminating between products 
according to how they are pro- 
duced) and “eco-dnmplng" 
(allegedly unfair competition 
from countries with low envi- 
ronmental standards). How- 
ever, they expect the commit- 
tee to start with less emotive 
issues such os eco-labelling. 


The diplomatic manoeuvring 
for the post-Marrakesh Gatt 
negotiations gathered pace yes- 
terday after France tailed for 
the European Union to take a 
tougher line with the US and 
other Gatt members in the 
long-running negotiations over 
liberalising financial services. 

In a strongly worded memo- 
randum issued to a meeting of 
finance ministers cm Monday, 
France demanded that the EU 
retain Its threat to maintain 
"reciprocal" restrictions in 
Europe’s financial services if 
the US and others did not offer 
to liberalise theirs. 

"in the context of [continu- 
ing discrimination against 
European banks]. ... the Euro- 
pean Union should not aban- 
don its recourse to reciproc- 
ity,” the memorandum said. 
This step would be needed to 
protect European banks from 
the risk of discrimination in 
other markets. 

The EU is due to reopen for- 
mal discussions with the US 
and other Gatt members over 
the liberalisation of the finan- 
cial services after next month’s 
Marrakesh meeting. They 
foiled to reach agreement over 
the Issue at the final Gatt 
meeting last December. 

So for, the Commission has 
refused to indicate whether 
Union would maintain recipro- 
cal controls if these new nego- 
tiations foil to reach an accord 
within the six-month deadline 
set for them. 

The barriers, which were 
introduced under a recent 
European banking directive, 
allow the EU to take action 
against the batiks of countries 
which are imposing similar 
restrictions. 

But Brussels officials yester- 
day insisted that the Cmnmis- 
sion was unlikely to bow to 
French demands. “The com- 
mon position among tbe mem- 
ber states is let’s wait and see 
what happens in the negotia- 
tions," said one. 


Gas contracts agreed 


By Robert Corcine 

Five contracts have been 
awarded for conceptual engi- 
neering on the proposed UK- 
Continent Gas Interconnector, 
a £300m natural gas pipeline 
which will provide a direct fink 
between the UK and European 
gas grids. 

Conceptual work on the Bel- 
gian terminal at Zeebrugge 
will be done by TraciabeL with 
British Gas designing the UK 
terminal at Bacton. 


A consortium headed by 
EMC will work on the 215km- 
long, offshore pipeline with 
Geoteam conducting the off- 
shore survey, Haecon was 
awarded a contract for concep- 
tual engineering on the 
onshore section In Belgium, 
The Interconnector group, 
which includes British Gas, 
British petroleum, Conoco, Bis- 
trigaz. Elf. Norsk Hydro and 
Statoil, announced that they 
were contemplating enlarging 
the diameter of the pipeline. 













' T^o of Europe’s most important telecommunications companies, France Telecom 
ind and Deutsche Telekom, are now extending their current joint activities to the 
global stage. This strategic alliance is a European response to the challenges posed 
by a completely altered and increasing competitive world market. Challenges that 
every industrial nation in Europe must, in particular, face up to. 

This alliance positions both companies as global, high-tech service providers in a 
key technology area. Along with its closely related information technology, tele- 
communications is an indispensable cornerstone technology and driving force in 
virtually every high-tech industry, in chip manufacture, opto-electronics, software 
development and many more. Today, no other technology plays such a vital role in 
- a nation’s ability to compete and, therefore, to create employment and generate 
prosperity. 

Above all, the alliance will be able to offer international companies and business 
customers with a strong European presence the advantage of fast, economical one- 
source delivery of the very latest telecommunications technologies. In particular, 
the competitiveness of European companies in the international marketplace will 
be significantly enhanced. 

By so doing, this new Franco-German alliance will also be making a powerful 
contribution to greater European-wide cultural and market harmonisation, to new 
jobs creation in many areas of industry, and - not least - to safeguarding Europe’s 
position in the global market. 




6 


FINANCIAL TIMES WEDN ESDAY MA RCH 23 1994 


NEWS: INTERNATIONAL . ; 

Nazarbayev wants pipeline to IN Korea miscalculates in row with South 

go ahead through Turkey 

Kazakhs deny 
Russia gas 
and oil stakes 


By Chrystia Freeland 
and Robert Corztne 

President Nursultan 
Nazarbayev of K.-wairhstan yes- 
terday said his country would 
not give Russia equity stakes 
in either the Tengiz oil project 
or the Karachaganak gas field 
being developed in Kazakhstan 
by western companies. 

Russia, which controls the 
export routes for the two devel- 
opments, has been insisting on 
equity in the fields rather than 
being paid a tariff. 

“Russia will not get an 
equity share in Tengiz or Kara- 
chaganak,'' Mr Nazarbayev 
said yesterday. He added that 
on March 28 he was due to 
meet Russian leaders in 
Moscow to discuss these and 
other economic disputes 
between the two republics. 

Mr Nazarbayev's statements 
contradict the views of western 
businessmen in Alma Ata who 
believe Kazakhstan is on the 
verge of conceding equity in 
the two fields to Russia. Ten- 
giz. which is being developed 
by Chevron of the US. is produ- 
cing oil for export But Chev- 
ron has been plagued by dis- 
putes with Russia over the 
effect on pipelines of contami- 
nants in the oil and the route 
of new pipelines. 

Karachaganak. which is 
some way from the export 
stage, is being developed by 
British Gas and Agip of Italy. 
They have been watching 
Chevron's troubles closely. 

Mr Nazarbayev said yester- 
day that Kazakhstan was seri- 
ous about plans to construct 
an export pipeline south 
through Turkey. But this 
would only be built after a 
joint Russian-Kazakh project to 
build a pipeline from the Cas- 
pian to a Russian port on the 
Black Sea. 

Together, Mr Nazarbayev’s 
statements indicate an increas- 
ing determination on the part 
of the Kazakh leadership to 
lessen the ties which have per- 
mitted Russia to exert its eco- 
nomic domination. 

Kazakhstan has complained 


that many Russian refineries, 
upon which It is dependent, 
refused during the recent 
severe winter to ship back 
refined products to Kazakh 
suppliers of crude oil. Russian 
buyers of Kazakh coal were 
also late in making payments. 

Mr Nazarbayev, who, after 
the collapse of the Soviet 
Union, was one of the most 
ardent backers of closer inte- 
gration among former Soviet 
republics, is taking a more 
independent line now that 
“co-operation" is taking the 
form of Russian domination. 

He was furious when the 
country was ejected dram the 
rouble zone last autumn. Yes- 
terday he rejected the notion of 
recreating the zone, describing 
it as “a deluded dream". Mr 
Nazarbayev also opposed 
deployment of Russian-only 
peacekeeping forces in trou- 
bled former Soviet republics. 

He warned of hardline ten- 
dencies in Moscow and said the 
time had come for Russians to 
reconcile themselves to the 
existence of tnxefy independent 
neighbours - a process he 
believes is only beginning. 

“There are certainly some 
political overtones [in Russia's 
economic treatment of Kazakh- 
stan]," Mr Nazarbayev said. 
“These are growing pains. We 
are just now beginning to learn 
how to treat each other as hilly 
sovereign, independent states." 
• Russia has reached agree- 
ment with Azerbaijan to grant 
a 10 per cent stake in a multi- 
billion dollar oil deal in the 
Caspian Sea to Lukoil, Russia's 
largest semi-independent oil 
company, a Lukoil spokesman 
in Moscow said yesterday. 

The Lukoil share will come 
from the 25 per cent stake in 
the development of the project 
held by the the state oil com- 
pany of Azerbaijan. A group of 
western oil companies led by 
British Petroleum are responsi- 
ble for 75 per cent of the even- 
tual development costs. Profits 
are expected to be shared out 
on a basis of 80 per cent for 
Socar and 20 per cent for the 
western group. 


Accord Nigeria 
postponed cancels 
in Somalia land deals 

By Leslie Cr awfo rd In Nairobi By Paul Adams In Lagos 


Somalia's rival warlords 
yesterday postponed a cere- 
mony of national reconcilia- 
tion for the second time this 
week. 

The postponement is an 
embarrassment to the UN, 
which has been sponsoring the 
negotiations in Nairobi in the 
hope of reaching a political 
settlement before US troops 
complete their withdrawal on 
Friday. The departure of US 
and European peacekeepers 
has been triggered in part by 
the unwillingness of rival 
Somali dans to make peace. 

At Issue is how 15 different 
e lans and numerous sob-clans 
are to share power in a future 
Somali government The strug- 
gle for hegemony has 
destroyed Somalia’s civil insti- 
tutions and placed the country 
in the bands of gunmen. 

Tbe year-old UN Operation 
in Somalia (Unosom) has been 
unable to enforce peace. West- 
ern diplomats say the country 
has exhausted patience and 
willingness to help. 

Mr George Bennett, Unosom 
spokesman, said the reconcili- 
ation ceremony had been can- 
celled because tbe 15 partici- 
pating Somali factions coaid 
not agree on who should be a 
signatory to the agreement 
which includes a power-shar- 
ing arrangement for a national 
government 

The reconciliation ceremony 
has been rescheduled for 
today. “The Somali factions 
realise international opinion is 
highly critical of them and 
that the West is disengaging,” 
Mr Bennett said. “We hope 
this time they will abide by 
their declarations." 


Nigeria’s military regime has 
cancelled last year's alloca- 
tions of land to top members of 
the government, in an effort to 
prove it is dealing with corrup- 
tion at all levels of officialdom. 

Gen Sani Abacha, head of 
state, and his number two, Lt- 
Cen Oladipo Diya, were among 
130 prominent Nigerians 
including cabinet ministers 
and top military officers allo- 
cated plots of prime land for 
less than one-tenth of their 
market value by former presi- 
dent Gen Ibrahim Babangida 
after he annulled last June’s 
presidential elections. 

When the private property 
developers who claim to own 
the land took legal action, the 
government tried to justify the 
move last September by produ- 
cing a backdated decree which, 
in turn, threatened all land 
tenure on Nigeria's coastal 
land. The trial was due to come 
before the high court on April 
2R 

"It is not clear who will 
repay the money for the plots 
or whether they are withdraw- 
ing from next month's court 
case,” a spokesman for the 
developer said yesterday. 

The land scandal has dam- 
aged the claim by Gen Abacha. 
who seized power in Novem- 
ber, to root out the corruption 
of the Babangida regime. Infor- 
mation minister Jerry Gana 
Intends next month to launch 
a “war against indiscipline and 
corruption" 

The government plans to 
investigate the oil and other 
state Industries, the central 
bank, the judiciary and the 

police, but not the armed 
forces. 







North and South Korean officials (left) in December 1991 reaching a peace deal which led in 1992 to cancellation of annual US-South Korean Team Spirit exercises (right), revived the next year ******** 

The US and Seoul are now more determined to stand together, writes John Burton 


T wo years ago, there was 
optimism that North 
and South Korea were 
on the path to reconciliation 
ami eventual peaceful unifica- 
tion. Events have gone horri- 
bly wrong since then. 

Relations have deteriorated 
to the point where the threat of 
a military confrontation on the 
Korean peninsula has become 
a frightening possibility. That 
did not appear so at the end of 
1991, when the US. North 
Korea and South Korea began 
to implement a three-way deal 
to defuse nuclear tensions. 

The US agreed to pull out its 
tactical nuclear weapons from 
South Korea. This persuaded 
North Korea to sign a non- 
nuclear pact and a non-aggres- 
sion treaty with South Korea. 

The US responded by holding 
a high-level meeting with 
North Korea and cancelling its 
Team Spirit military exercise 
in South Korea for 1992. In 
return. North Korea agreed to 
start allowing the Interna- 
tional Atomic Energy Agency 
to inspect its nuclear facilities 
at Yongbyon. 

Things became unstuck in 
the summer of 1992 as the two 
Koreas negotiated implement- 
ing their non-nuclear pact. 
Seoul demanded North Korea 
accept challenge- or spot- 
inspections of suspected 
nuclear facilities in compliance 
with the treaty. Pyongyang 


refused, blocking progress in 
the inter-Korean talks. 

One problem was that the 
treaty language governing 
spot-inspections was ambigu- 
ous. “The wording in the 
treaty was poorly drafted." 
admits one senior South Kor- 
ean foreign ministry offlciaL 

Seoul first offered aid to help 
rescue North Korea’s strug- 
gling economy if Pyongyang 
accepted spot-inspections. 
When that offer proved fruit- 
less, it put on pressure in the 
late autumn of 1992 by asking 
tbe US to resume the Team 
Spirit exercise in 1993. 

Pyongyang had routinely 
condemned previous Team 
Spirit exercises as a rehearsal 
for a possible attack against 
North Korea. It also viewed the 
resumption of Team Spirit in 
1993 as the US reneging on its 
promise to halt the exercise if 
North Korea accepted IAEA 
inspections. Pyongyang proved 
increasingly intransigent, and 
it is likely the incident 
reinforced its distrust of the 
intentions of the US and South 
Korea. 

“The holding of Team Spirit 
'93 was a terrible mistake," 
said Mr William Taylor, a 
prominent North Korea ana- 
lyst and vice-chairman of the 
Center for Strategic and Inter- 
national Studies in Washing- 
ton. “It has taken us another 
year to repair the damage and 


try to get things back on 
course." 

Another factor adding to 
Pyongyang’s anxiety was that 
the staging of Team Spirit in 
March 1993 occurred shortly 
before the expiry of a deadline 
set by the IAEA for it to be 
allowed to inspect two unre- 
ported facilities believed to 
contain nuclear waste. 

E xamination of the waste 
material might confirm 
IAEA suspicions that 
North Korea had produced 
more bomb-grade plutonium 
than it had declared after shut- 
ting down its s mall 5MW reac- 
tor in 1989. The US Central 
Intelligence Agency estimated 
the North could have extracted 
enough plutonium to make one 
or two crude nuclear devices. 

On March 12. 1993, Pyong- 
yang announced it was with- 
drawing from the Nuc lear Non- 
Proliferation Treaty (NPT), the 
first country to do so. It 
explained it was taking the 
action in response to Team 
Spirit and the IAEA special 
inspection demand, which it 
described as a “seditious politi- 
cal machination aimed at forc- 
ing us to open military objects 
and bases, therely leaving us 
disarmed militarily." 

If it agreed to the IAEA 
demand, North Korea said this 
would create a precedent for 
accepting similar spot inspec- 


tions by South Korea. 

Many observers concluded 
North Korea wanted to drop 
out of the NPT because it 
feared the IAEA was dose to 
discovering Pyongyang was 
indeed developing nuclear 
weapons despite its denials. 

North Korea is committed to 
producing a nuclear weapon 
because Pyongyang views it as 
the ultimate guarantee against 
the country’s absorption by the 
South, according to these ana- 
lysts. But the prevalent theory 
in Seoul has been that North 
Korea was using its threat of 
NPT withdrawal and the block- 
ing of international inspections 
in a desperate attempt to win 
concessions. 

These would include gaining 
diplomatic recognition and eco- 
nomic aid From the US and 
Japan, reversing the diplo- 
matic defeat North Korea suf- 
fered when China and Russia, 
its two oldest allies, estab- 
lished relations with South 
Korea in the early 1990s. The 
North has also been seeking 
the right to inspect US military 
bases in South Korea, a prom- 
ise by the US not to attack 
North Korea, and the perma- 
nent suspension of Team 
Spirit. 

Tbe view that the North was 
playing the nuclear card for 
diplomatic purposes gained 
support last summer when it 
agreed to suspend its NPT 


withdrawal in return for the 
promise of improved ties with 
the US In the future. 

Since then, negotiations on 
the nuclear dispute have 
focused on a package deal in 
which the US would again sus- 
pend Team Spirit and hold a 
new round of talks with North 
Korea on possible diplomatic 
recognition. If Pyongyang 
agreed to allow unrestricted 
regular inspections by the 
IAEA and pursue its talks with 
South Korea on mutual 
nuclear inspections. 

T his would have paved 
the way for a second 
stage of negotiations in 
which the US might have 
finally offered to normalise 
relations with Pyongyang if it 
accepted spot inspections by 
the IAEA. But the North has 
remained stubborn on two 
points in concluding the initial 
package deaL 

Apparently fearing that the 
US would not fulfil its end of 
the bargain, it has insisted 
Washington make simulta- 
neous concessions in any 
trade-off with Pyongyang. The 
US and South Korea, equally 
distrustful of North Korea, 
have demanded Pyongyang 
make the first steps in the ful- 
filment of any agreement 
The North apparently made 
a concession in this regard 
recently when it agreed to 


Japan looks at options for Pyongyang sanctions 


By WDQam Dawkins 

Japanese government departments 
and agencies are considering the 
prospect of measures against North 
Korea if the United Nations Security 
Council adopts sanctions, Tokyo said 
yesterday. 

The move, revealed by Mr Masa- 
yoshi Takemura, chief cabinet secre- 
tary, marks Tokyo’s growing alarm, 
over North Korea’s defiance of inter- 


national pressure to open its nuclear 
sites to foil inspections. Pyongyang's 
suspected development of missiles 
capable of reaching Japan, with or 
without nuclear warheads, has 
heightened public anxiety. 

Until recently, Japan shared Chi- 
na's reluctance to consider economic 
penalties, for fear of further isolating 
Pyongyang’s unpredictable leaders. 
But Prime Minister Morihlro Hoso- 
kawa told US President Bill Clinton 


at their summit last month that 
Tokyo would take part in sanctions if 
the Security Council called for them. 

Official Japanese exports to North 
Korea totalled $250m (2148m) in 
1991, making it the country's second 
largest trade partner after China, 
according to the Japan External 
Trade Organisation. But North 
Koreans living in Japan are esti- 
mated to remit another S800m a year 
in cash. 


The possibility of sanctions pnts 
more pressure on the Japanese gov- 
ernment to curb unofficial remit- 
tances to North Korea, a sensitive 
political problem. 

Support for the North Korean 
regime from the Social Democratic 
Party, the largest member of Mr 
Hosokawa’s seven-party coalition, 
has declined once last year's visit to 
South Korea by Mr Sadao Yamahana, 
tbe former Socialist leader. But some 


analysts believe North Koreans In 
Japan are generous contributors to 
Socialist election funds. 

North Korea’s suspected nuclear 
weapons programme will be on the 
agenda when South Korea’s President 
Kim Young-sam meets Mr Hosokawa 
tomorrow, at the start of a three-day 
visit to Japan. They are also expected 
to discuss US deployment of Patriot 
missiles in South Korea and timing of 
US-South Korean military exercises. 


Israeli and PLO negotiators 
to continue talks in Cairo 


By David Horovitz in Jerusalem 
and Mark Nicholson in Cabo 

Israeli and PLO peace negotiators are to 
meet again today in Cairo, having failed 
during two days of talks in Tunis to agree 
conditions for resuming peace talks on 
Palestinian autonomy suspended following 
last month's Hebron mosque massacre. 

The stumbling blocks appear to be 
Israel’s refusal to allow an armed interna- 
tional force to be deployed in the occupied 
territories to protect Palestinians, and its 
rejection, of PLO demands for the evacua- 
tion of the 400 Jewish settlers who live in 
the heart of Arab Hebron. 

Israel's foreign minister, Mr Shimon 
Peres, usually optimistic where Middle 
East peace prospects are concerned, 
seemed downhearted yesterday, speaking 
of the “many obstacles” to be overcome 
before talks could resume. He firmly ruled 
out any prospect of a summit meeting 
soon between Mr Yitzhak Rabin, prime 
minister, and Hr Yassir Arafat, the PLO 
chairman - that would signal the negotia- 
tions were back on track. 

The US peace talks co-ordinator. Mr 
Dennis Ross, and Mr Terje Roed Larsen, 

Norway’s foreign ministry envoy, both of 
whom tried to help mediate a break- 
through in Tunis, flew to Cairo yesterday 
in anticipation of today's talks. According 



m . 5 


M 


Peres: seemed downhearted 

to Israeli and Palestinian sources, the two 
sides did agree on certain aspects of a 
Norwegian proposal, for the temporary 
deployment of international observers in 
Gaza. Jericho and Hebron, but the PLO 
insisted that these observers be armed, a 
proposal Israel rejected. 

Norway yesterday called for an emer- 
gency meeting of more than 20 donor 


countries, also to be held in Cairo tomor- 
row, to discuss arrangements for a Pales- 
tinian police force, originally intended to 
take over from Israeli forces after their 
eventual withdrawal The donor countries 
will be represented by embassy officials. 

Officials and diplomats close to the fanes 
said the meeting was likely to discuss the 
passible early deployment of a contingent 
of Palestinian police in Hebron should this 
form part of tbe negotiated solution. 

Today's Cairo talks are expected to be 
headed by Major General Amnon Shahak 
on the Israeli side and Mr Nabfl Shaath for 
tbe Palestinians - the two men who had 
headed the now-stalled talks on Israeli 
withdrawal from Gaza and Jericho. 

The Israeli team, which was last night 
briefing Mr Rabin on the Tunis talks, also 
ruled out PLO calls for the removal of 
Jewish settlers from Hebron. The settlers 
themselves threatened yesterday to use all 
means short of shooting soldiers to resist 
attempts to evacuate them, and said they 
were considering ways to increase the 
Hebron settler population. 

Three Palestinian survivors of the 
Hebron massacre told the Israeli commis- 
sion of inquiry yesterday that at least two 
gunmen were firing in the mosque. 

Two Moslem clergymen and three Moslem 
mosque guards declined to testify last 
week. 


Foreign investment in India up eightfold in year 


By Stefan Wagstyi in New Delhi 

Foreign investment in India is 
estimated to have risen eightfold in 
tbe year ending this month to about 
$5bn (£29bn). Ear above the govern- 
ment’s targets and the most optimis- 
tic private forecasts. 

Announcing the figure at a business 
conference yesterday, Mr Manmohan 
Singh, finance minister, urged busi- 


nessmen to make further investment 
commitments, saying the economic 
reforms carried out since 1991 
required “a vigorous response from 
both foreign and Indian investors". 

The estimated total includes about 
?L5bn in direct investment and about 
$3.5bn in Foreign fund managers' 
investment in Indian stock markets 
and overseas issues made by Indian 
companies. 


The figures measure actual inflows, 
not investment approvals, and com- 
pare with a total of $585m for 1992-93. 

The big inflow of portfolio invest- 
ment reflects the fact that India’s 
financial markets were largely closed 
to foreign investors until late 1992 and 
the general popularity of investment 
in emerging markets, as well as grow- 
ing appreciation of India’s prospects. 

The SSbn estimated total for 1993-94 


compares with a forecast of S3bn pub- 
lished in the government’s annual 
Economic Survey only a month ago. 
At the start of the financial year, 
finance ministry officials expected 
inflows of up to $2bn at most 
They believed it would take years 
for inward Investment to pick up 
speed. They are pleased actual Inflows 
exceed their forecasts but there is 
concern that a large element of the 


inflow is portfolio investment, which 
could be reversed if fund managers 
sell their holdings. 

The government’s policy is to 
encourage direct investment, espe- 
cially in infrastructure. 

Mr Singh said India remained com- 
mitted to fortber reforms, including 
liberalisation of foreign exchange 
rules, financial markets and trade pol- 
icy. 


NEWS IN BRIEF 


Guerrilla rockets 
land in Israel 

Guerrillas in south Lebanon fired Katyusha rockets into northern 
Israel yesterday, one day after Israeli shelling killed two school- 
children and a man, Reuter reports from Tyre. 

Security officials said “three or four" Katyusha rockets were 
fired from near Qlayleh village in the south. At least two rockets 
hit western Galilee, the others fell in the border area. The rockets 
caused no casualties. No group claimed responsibility, but secu- 
rity officials said the attack seemed to be in reprisal for tbe 
Israeli shelling 

China’s inflation rate rises 

Figures ind i cat i ng a rise in China’s inflation rate were published 
in the Chinese press yesterday, our Foreign Staff writes. The 
reports said retail prices in the first two months rose 20 pm* cent 
nationwide over the same period last year, against 13 per cent for 
all of 1993. The State Statistical Bureau report showed Industrial 
output grew by 1&2 per cent in the first two months: capital 
construction surged 41.8 per cent in the same period. 

Morocco free trade zone 

Morocco will build a new harbour and a free trade so ng of some 
5,000 acres in the Atlantic coast port of Dakhla In disputed 
Western Sahara, Reuter reports from Rabat The official news 
agency MAP quoted Mr Mohamed Hassad, public works minister, 
and Mr Driss Jetton, commerce and industry minister, as saying 
the harbour would take three years to build and become a centre 
for deep-sea fishing. Morocco claims Western Sahara, but PoB- 
sario guerrillas have been fighting for Independence *rin re 1976. 

Israeli banks’ higher profits 

Two of Israel's top five banks have this week released figures for 
1999 that show increased profits over the previous year, writes 
David Horovitz in Jerusalem. United Mizrahi Bank yesterday 
ann ou n ced 1993 profits totalling Shkl35m (545.3m), a 9 per coat 
increase over 1992. 

Mr Chaim Kubersky, chairman, said the bank was in "good 
shape" ahead of the scheduled sell-off of up to 51 per cent of its 
shares later this year. First International Bank of Israel reported 
a 37 per cent rise in profits for 1993 compared to 1992, at ShkM4m. 

Cambodians can stay 

About 30,000 Cambodians have sought relUge in Thailand since 
the capture by government forces of the Khmer Rouge's Paffin 
stronghold, Reuter reports from Bangkok. They will be allowed 
to stay until the situation returns to no rm?! 




allow an IAEA Inspection team 
Into Yongbyon on condition 
that the US would suspend 
Team Spirit if the results 
proved satisfactory. 

But the North's subsequent 
refusal to allow the IAEA to " 
carry out crucial tests after 
completing at least 80 per cent 
of its inspections might have 
been an attempt to retain ‘ 
“leverage" in Us dealings with 
the US on Team Spirit, South 
Korean officials say. 

The North has also proved 
reluctant in dealing with the 
South iu the negotiations over 
mutual nuclear inspections. 
“North Korea obviously wants; 
to pursue its policy of improv- 
ing relations with the US white 
delaying inter-Korean dialogue, 
with the eventual aim of elimi- 
nating Seoul's links with the 
US." Mr Chung J&ng-uk, 
national security adviser to 
South Korea's President Kim 
Young-sam, said. The North 
might have been hoping to 
play off Seoul against Washing- 
ton in an attempt to Unpove 
its bargaining position and Win 
new concessions. -- ' i " 

But if tbe North believed it 
could exploit such differences, 
it has badly miscalculated after 
it broke off talks with the 
South last weekend. It has 
angered the South and the US 
and strengthened their 
cooperation and determination 
in confronting the North. 





FINANCIAL TIMES WEDNESDAY MARCH 23 1994 





1 1 \ 


nn II. 



NEWS: THE AMERICAS 


Sharp rise in US trade deficit 

Figures include services for the first time, reports Michael Prowse from Washington 


The US trade deficit in goods 
and services rose sharply to 
$6.3bn in January against 
$4,1 bn in December, the Com- 
merce Department said yester- 
day. 

The monthly figures were 
the first to include data on 
trade in services. Until yester- 
day, the US published monthly 
data only on merchandise 
trade - or trade in goods. By 
excluding a large surplus on 
services these gave a mislead- 
ing impression of the US's 
overall trade performance. 

The increase in the overall 
trade deficit mainly reflected a 
sharp fall in exports from 
$57-3bn to $54J5bn, partly offset 
by a smaller drop in imports 
from $6 1.4 bn to $80.8bn. 

The larger- than -expec ted fall 
in exports - reflecting weak- 
ness of demand in overseas 
markets - indicates that trade 
may act as a drag on US eco- 
nomic growth in the first quar- 
ter, partly offsetting the 
strength of domestic US 
demand. 

Yesterday's figures high- 
lighted the sharp divergence in 
US trade performance in the 
goods and services sectors. 

The deficit in trade in goods 
rose to Sllbn from $8.7bn in 
December. The surplus on ser- 
vices rose to $4.7bn against 
$4.6bn in December. 

The merchandise trade defi- 


US trade: services lessen the blow 



Km 

Goods 

Sendees 

Net balance 

Marctamciss 
On ‘old’ be 

■July 1908 ' 

•‘-its. 

'• 

-6J9 

-10.4 

Aug 1893 - 

-11.6 

4.e' 

-7.0 

-100 

Sap 1893.;'- 

• -12 S 

• '4,4 • 


-106 

Oct 1993 

-12J5 

4.2 

-as 

-me 

Nov 1993' 

■ -n*"- 

' as •’ 

-7.5 

-9.7 

Dec 1993 

-a.7 

4.6 

-41 

-7.4 

Jen 1994 ■ ' I 

>11.0.. . * 

- 4.7 

-03 

-08 


Source; Dapsiment c* Connane 


cit on the old basis rose to 
$9.8bn in January against 
$7.4bn in December. This dif- 
fers from the reported $nbn 
deficit in trade in goods 
because the latter is calculated 
on a “balance of payments” 
rather than “ census " basis. 

The census figures are based 
on physical movements of 
goods whereas the balance of 
payments figures also reflect 


changes in the ownership of 
goods. The two reporting meth- 
ods also differ in the way they 
treat gold and military con- 
tracts. Generally figures on the 
balance of payments corre- 
spond more closely to interna- 
tional definitions. 

The revised and expanded 
monthly trade figures were 
“important for raising our 
awareness of how our economy 


works and how our nation 
competes in global markets,” 
said Mr Dave Barram, deputy 
commerce secretary. 

“We live and work in an 
economy in which the software 
is as Important as the hard- 
ware.. .our service and manu- 
facturing sectors grow increas- 
ingly interwoven.” he said. 

Since the late 1980s the US 
surplus on services has 


increased steadily - from 
SliLlbn in 1988 to $55.7bn last 
year. The deficit on goods fell 
from $i27bn in 1988 to a trough 
of $73.8bn in 1991 during the 
recession but then begin rising 
as the US economy recovered, 
reaching SI 32. 5b n last year. 

The rise in the surplus on 
services has thus offset to a 
considerable degree the deteri- 
oration on goods. The services 
surplus last year was nearly 60 
per cent as large as the deficit 
on goods. The deficit on goods 
and services combined, at 
$76.Sbn last year, is thus 
sharply lower than the 
$U4£bn registered in 1988. 

The main components of the 
services account are: business 
services (surplus of $22.8bn last 
year): tourism and travel (sur- 
plus of $20-8bn); royalties and 
licence fees (surplus of 
S15.7bn); and government 
transactions including military 
(deficit of $2.£bn>. 

The sharpest improvement 
in the US services account 
since the mid-1980s has been in 
travel and tourism. Exports of 
business services have grown 
roughly In line with exports 
and goods and less rapidly 
than imports of business ser- 
vices. Many analysts thus 
expect the services surplus to 
stabilise rather than continue 
growing rapidly. 


Camacho puts peace 
before presidency 


By Damian Fraser 
in Mexico City 


Mr Manuel Camacho, the peace 
envoy in the Mexican state of 
Chiapas, has sought to end 
speculation about his political 
ambitions by apparently r ulin g 
himself out as a presidential 
contender this August. 

“If it continues to look as if 
my priority Is to become a can- 
didate Cor the presidency of the 
republic, this could end up 
damaging the peace process “ 
Mr Camacho said. 

“Between seeking a candi- 
dacy for the presidency and 
the contribution I can make to 
the peace process in Chiapas. I 
choose peace.” he said. 

However, in giving his work 
in Chiapas as the reason for 
not seeking the presidency. Mr 
Camacho left open the admit- 
tedly small possibility his pres- 
idential ambitions might 
return if the conflict in Chia- 
pas were resolved, or if he 
were no longer needed in the 
state. Mr Camacho made clear 
he still wanted to be president, 
but not at the cost of peace in 
Chiapas. 

Despite the potential ambi- 
guity. news of Mr Camacho's 
announcement led to a sharp 
recovery in the Mexican stock- 
market yesterday. By noon it 



Mr Manuel Camacho: his 
announcement caused stock 
market recovery 


was up 3.7 per cent. The New 
York-quoted stock of Telefonos 
de Mexico was up by 7.2 per 
cent at 1pm. The peso also 
strengthened slightly. 

Mr Camacho, a former 
Mexico City mayor and foreign 
minister, is one of the best 
known and most powerful 
members of the ruling Institu- 
tional Revolutionary party. His 
candidacy could have split the 
party, and thrown this 


August's presidential election 
wide open. 

The political uncertainty 
caused by his rumoured candi- 
dacy contributed to sharp 
declines in the Mexican stock- 
market and peso, and conster- 
nation in the government 
Over the past six weeks the 
stock market has lost about 17 
per cent of its value, and the 
peso has depreciated by more 
than 6 per cent against the dol- 
lar. 

The situation In the impover- 
ished southern state of Chiapas 
has also become more tense in 
recent weeks. Big landlords are 
engaged in a struggle over land 
with sympathisers of the Zapn 
tista rebels, who launched a 
rebellion iu the state at the 
New Year. 

Mr Camacho believes that 
speculation about his presiden- 
tial candidacy was complica- 
ting efforts to bring the sides 
together. 

He also said that in the cur- 
rent electoral climate he would 
not seek to be a senator, nor 
would any member of his nego- 
tiating team in Chiapas seek 
political office. But he said he 
would continue in politics, 
seeking democratic reforms, 
and responding to the needs of 
the population. 


Clinton to face 
fresh scrutiny 
on Whitewater 


f 



By Jurek Martin in Washington 

In a fresh blow to President 
Bill Clinton it now appears cer- 
tain that the US House and 
Senate will conduct fully 
fledged hearings into the 
Whitewater affair, possibly as 
early as next month. 

Mr Tom Foley, the speaker, 
and Mr Bob Michel the Repub- 
lican leader, announced yester- 
day that the House would vote 
later in the day on a motion 
identical to that approved by 
the Senate last week. Mr Foley 
predicted it would pass, adding 
that, as with the Senate, no 
grants of immunity from prose- 
cution would be given to those 
summoned to testify. 

The bipartisan agreement 
marks the end of Democratic 
resistance to the idea of wide- 
ranging hearings into the tan- 
gled tale of the Clintons' finan- 
cial and land dealings in 
Arkansas in the 1970s and 
1980s. It also ensures that the 
national spotlight will remain 
focused on Whitewater, much 
to the regret of a president try- 
ing to get his domestic legisla- 
tive agenda back on track. 

Yesterday's announcement 
followed the postponement of a 
House banking committee ses- 
sion scheduled for tomorrow, 
which could have provided the 


first congressional forum for 
Whitewater. 

The committee, under the 
chairmanship of Mr Henry 
Gonzalez, the Texas Democrat, 
was due to review the semi-an- 
nual report of the Resolution 
Trust Corporation, the agency 
created to clear up the savings 
and loan d£bdcle of the 1980s. 

A bankrupt Arkansas S&L, 
Madison Guaranty, has been 
implicated in the Whitewater 
affair. Both Mr Lloyd Bentsen, 
the treasury secretary and Mr 
Roger Altman, bis deputy and 
acting head of the RTC, were 
scheduled to testify. 

In postponing the committee 
hearings. Mr Gonzalez first 
accused Congressman Jim 
Leach, the ranking Republican, 
of seeking to transform them 
into a “judicial adventure" 
against the president. But 
later, in a letter to Mr Foley, 
he said he favoured House 
hearings “in a forum of broad 
reach - possibly a select com- 
mittee - that can explore all 
the charges that have been 
brought". 

In Little Rock yesterday, Mr 
David Hale, a former Arkansas 
judge, pleaded guilty to con- 
spiracy and fraud in an unre- 
lated case as part of a bargain 
with Mr Robert Fiske, the inde- 
pendent Whitewater counsel 



Cigarette 
tax may 
rise $1.25 

By George Graham 
in Washington 


Anti-smoking advocates won a 
significant battle yesterday 
when an influential congressio- 
nal health committee voted to 
raise the tax on cigarettes by 
$1.25 (84 pence) a packet to 
help pay for a reform of the 
healthcare system, far more 
than the 75 cent increase pro- 
posed in President Bill Clin- 
ton's health plan. 

The stiff tobacco tax 
increase, which could raise an 
estimated $16bn a year, passed 
the health panel of the House 
of Representatives Ways and 
Means committee by a 6-5 vote, 
but could fall by the wayside 
as healthcare legislation goes 
through Congress. 

Mr Clinton had originally 
considered a steep increase in 
the tobacco tax. partly to raise 
revenue to pay for aspects of 
his reform plan and partly to 
act as a severe disincentive to 
smoking, but backed down to 
75 cents to placate congress- 
men from tobacco-producing 
states in the south-east 

Mr Clinton’s efforts to push 
healthcare reform have 
appeared to lose momentum in 
recent weeks, but a legislative 
package is still being painstak- 
ingly crafted in Congress. 

One draft now being circu- 
lated by the House energy ana 
commerce committee, under 
the chairmanship oF Mr John 
Dingell of Michigan, would 
eliminate the requirement tnai 
all but the largest companies 
be required to buy health 
Insurance for their employees 

through government-run 

“health alliances". 


Christopher 
defends 
China line 

By Jurek Martin 

The US will not back down 
from its demands that China 
improve its human rights 
record as a condition for 
extending trade benefits, Mr 
Warren Christopher, US secre- 
tary of state, said yesterday. 

In a signed column in the 
Washington Post, Mr Christo- 
pher wrote that “our specific 
conditions for renewing MFN 
[most favoured nation trading 
status] are reasonable and 
attainable We are not ask- 

ing C hina to apply American 
prescriptions, only to adhere 
to the universal standards of 
human rights that bind most 
nations in the world today.” 

His unrepentant article may 
be seen as a dear rebuttal of 
critics who claim his recent 
mission to China was a diplo- 
matic disaster. Bot it also 
underlines differences in the 
administration over whether 
withholding trade privileges, 
which may prompt retaliation 
against US businesses, is the 
best way to improve human 
rights in China. 

Senior officials of both the 
treasury and commerce 
department have argued pub- 
licly that US commercial open- 
ings should not be sacrificed 
to the tinman rights concerns 
of the state department 

At the weekend, Mr Uoyd 
Bentsen, Treasury secretary, 
hoped “alternatives" could be 
worked out Last week another 
senior White House official 
reflected the dilemma by say- 
ing that it was “untenable” 
both that MFN not be renewed 
and that China’s human rights 
record be ignored. 


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i 






Delays hit British Rail privatisation 


operating as "shadow fran- 


By Charles Batchelor, 
Transport Correspondent 

The sale of British Rail 
franchises to the private sector 
is expected to take up to a year 
longer than first planned. Mr 
John MacGregor, UK transport 
secretary, disclosed yesterday. 

The government does not 
expect to sell off the first six 
franchises until sometime 
before the end of 1995. It had 
hoped to sell the franchise for 
the Gatwick Express, running 


Pergau 
‘threat’ to 
aid budget 
for 3 years 

By James Blitz 

Lord Younger, the former 
defence secretary, could have 
committed to Malaysia the 
UK's entire budget for Aid and 
Trade Provision for three years 
when he secured a contract to 
sell defence equipment in 1988, 
according to evidence given 
yesterday to MPs. 

Lord Howe, the former for- 
eign secretary, told the Com- 
mons Select Committee on For- 
eign Affair s that the decision 
to link an offer of aid for Mal- 
aysia’s Pergau dam project 
with a £lbn defence contract 
was taken entirely by Lord 
Younger, his cabinet colleague 
in the late 19S0s. 

He said that a protocol 
signed by Lord Younger and 
the Malaysian government in 
March 1988 had made “a sub- 
stantial moral co mmit ment" to 
Offer aid to Mala ysia and that 
its contents had caused “ani- 
mation", “astonishment" and 
"dismay" in Whitehall when 
they became known. 

But Lord Howe emphasised 
yesterday that one of his prin- 
cipal concerns at the time was 
that the wording of the proto- 
col could have allowed the 
Malaysians to make a consider- 
able call on funds from 
Britain's aid budget 

He pointed out that - with a 
defence deal potentially worth 
£1.5bn in the making - this 
would have committed the UK 
to immediately grant Malaysia 
£300m in cash, three times the 
annual budget of the ATP 
scheme which gives aid to 
developing countries so they 
can secure British contracts. 

“We had to Umit the finan- 
cial commitment involved," 
Lord Howe told the MPS. “The 
original wording meant that if 
we wanted to sell another spit- 
fire. Malaysia could have 
pressed for another dam." 

Lord Howe said that he fully 
understood Lord Younger's 
determination to secure the 
defence contract. “In retrospect 
we can say it was an error of 
judgment, but at the time the 
main thing was that he got the 
deaL" 


between London Victoria and 
Gatwick Airport, this autumn 
and a further six franchises 
early next year. 

“We did indicate an earlier 
timetable when the Railways 
Bill was going through the 
House but that was before we 
had done detailed work." Mr 
MacGregor said. News of the 
delay came less than two 
weeks before the creation of 
separate companies to own 
BR’s track and signalling and 
to lease rolling stock. 


sary cake might not appear to 
be the stuff of serious radio 
broadcasting. But in Northern 
Ireland the BBC knows only 
too well that trivia can be 
deadly serious. 

With a few minutes left of 
his popular “Talk Back" pro- 
gramme, presenter Mr David 
Uunseith is up to his head- 
phones in controversy. A tele- 
vised report of a party thrown 
for Mr John Hume, leader of 
the nationalist Social Demo- 
cratic and Labour party (which 
aspires to a united Ireland by 
consent), has shown the cake 
in question apparently iced In 
the colours of the Irish repub- 
lic. 

A member of the province's 
grievously divided c ommuni ty 
is not amused and sounds off 
on air. Before long, Mr Mark 
Durkan. chairman of the 
SDLP. is on the line to point 
out that any likenpss is unin- 
tentional; the SDLP Has never 
used or abused any nation’s 
national flag. 

In this part of the United 
Kingdom sensitivities are as 
acute as political opinions are 
diverse. Extremes, however 
much in the minority, tend to 
dominate and it often appears 
that only those who shout 
loudest get heard. 

In the middle stands BBC 
Northern Ireland, recent win- 
ner of a Royal Television Soci- 
ety award for 25 years of out- 
standing service to the 
province, and charged under 
charter with providing a daily 
menu of public service broad- 
casting; one of its prime tasks 
being to maintain fairness and 
balance in a society where bad 
judgement can have poten- 
tially grave consequences. 

“There is an obvious diffi- 
culty in being called the Brit- 
ish Broadcasting Corporation 
in a place like this", says Mr 
Robin Walsh, the affable but 
tough Londonderry man who. 
after a lifetime in newspaper 
and television journalism is 
now, at 54, controller BBC 
Northern Ireland. 

“One side of the community 
thinks you should be waving a 
particular flag. The other sus- 
pects you are part of the Estab- 
lishment and on no account to 
be trusted", he says. 

Mr Walsh’s assessment is 


“The Tories' plans for rail 
privatisation are falling apart 
before they've even started," 
said Mr Frank Dobson, Labour 
transport spokesman. 

Despite the delay the govern- 
ment still hopes to have priva- 
tised more than half of BR’s 
passenger rail services by 
April 1996. “This is a challeng- 
ing but achievable pro- 
gramme." Mr MacGregor said. 

The first six franchises to be 
sold off are expected to be Gat- 
wick Express, the east coast 


easily confirmed. At the recent 
annual conference of Sinn 
F&n. the BBC was vilified for 
peddling “Loyalist (pro-British) 
propaganda". 

On the other hand. Mr Jim Wil- 
son. general secretary of the 
Ulster Unionists, Haims many 
ordinary, working-class pro tes- 
tae ts believe even tbe sur- 
names of some of tbe BBC’s 
leading, local broadcasters lend 
weight to suspicions of pro- 
catholic bias. 

Mr Walsh stresses the corpo- 
ration’s commitment to cover 
all aspects of life in the prov- 
ince but believes the thirst for 
news in Ulster is unquencha- 
ble. He accepts, however, there 
is a tendency to inflate or over- 
state the impact of news and 
that hyperbole can get the bet- 
ter of the most experienced 
journalist. 

He recalls the BBC mistak- 
enly announcing the break- 
down of an IRA ceasefire and 
still shudders at the though t 
some Loyalist paramilitaries 
might have seen it as the green 
light for fresh atrocities. 

But he rejects the old notion 


main Hup between Tendon and 

Scotland; the Great Western 
main line; the London, Tflbury 
and Southend line; south west- 
ern division; and ScotRafl. 

The Isle of Wight fine wfil be 
sold off later because, unlike 
the rest of the rail network, tt 
will operate as a single unit 

in cl udin g both train operations 

and track. 

Apart from Gatwick Express, 
which is already operating as 
an independent company, the 
first six franchises wfll start 


“that if everybody moans you 
must be getting it about right 
I think that is trite. If you 
scratch the surface of the rhet- 
oric 1 think you find most peo- 
ple believe we are trying to be 
fair in a tough situation”. 

Mr Durkan of the SDLP 
accepts tire point recognising 
that In the cut and thrust of 
daily deadlines thing w are not 
always going to be calibrated 
too precisely”. Even so, he 
complains his party cannot 
win representation on Ques- 
tion Time (TV debates) pro- 
grammes from the province. 

“The thing I am most proud 
of," says Mr Walsh, “is the 
manner in which people work 
at the sharp end of highly emo- 
tive stories but manage to 
leave their opinions and tribal 
and political affiliations at 
home." 

There is plenty of extra guid- 
ance on how to avoid the ter- 
minological traps which await 
newcomers to Ulster politics. 
Never, say BBC guidelines, 
give pet names like "provoG" to 
terrorists, don’t refer to IRA 
"volunteers” - who knows 


chises” from April 1 with the 
remaining 19 due to start in 
October. These will be ran by 
their existing management as 
independent operations to 
establish how attractive they 
might be for private bidders. 

A fear of some potential bid- 
ders is that the government 
might reduce or remove subsi- 
dies for lossmaking lines dur- 
ing the life of a franchise. Mr 
Roger Freeman, transport min- 
ister. indicated that the Trea- 


why they joined? - and avoid 
offending everyone by refer- 
ring to the “mainland". 

Mr Walsh’s journalists some- 
times take much more serious 
risks - to life and limb. One 
reporter arranged a frightening 
rendezvous in the back of a 
van with hooded men to hear 
stories which Mr Walsh 
believes nramateTy led to the 
an inquiry into alleged collu- 
sion between police and Loyal- 
ist paramilitaries. 

His staff have been caught 
up in bombs, borne the brunt 
of angry public reaction to 
atrocities and occasionally con- 
fronted direct intimidation 
from tbe paramilitaries. 

There is no shortage of 
recruits, however, to work in 
the BBC’s only 24-hour news 
room outside London which is 
called on to output to all parts 
of the organisation. Morning 
and evening radio news pro- 
grammes have built large, 
loyal audiences and now, 
a gains t the trend, the BBC 
invested to beef up its special- 
ist political and security teams. 

The organisation, however. 


sury would be expected to 
promise to maintain subsidies. 
“Long-term commitments of 
subsidy will have to be made." 
be said. 

The announcement of details 
of the privatisation timetable 
coincided with the launch of a 
rfli myrig n against the rail pro- 
gramme by Save our Railways, 
a protest group, the Labour 
party and transport unions. 

Save our Railways will moni- 
tor privatisation and report 
any deterioration of service. 


faces some tough competition 
in the local marhetplaw. Live 
at Six on UTV. for example, 
m ounts a highly effective effort 
to win early evening news 
viewers and strives hard to 
foject a more intimata, Ulster 
flavour into its coverage. 

AH broadcasters in the prov- 
ince face a common obstacle 
flnri an almost daily iiaarfaffha - 
the continuing ban on broad- 
casting the words of represen- 
tatives of Sinn F6in and 
extremist paramilitary organi- 
sations. Mr Keith Baker, bead 
of news and current affairs, 
calls it a “preposterous strai- 
ght} acket" which creates par- 
ticular problems on live pro- 
grammes. 

Mr Baker says its judgment 
on when or when not to 
include the views of people 
subject to the government 
order is more editorial than 
legaL “We haven’t got it wrong 
yet and I am not sure what 
would happen if we did; I sup- 
pose an angry phone can from 
the Heritage Department [of 
the government]"- Tbe switch- 
board is standing by. 


Britain in brief 


Spectrum 
review plan 
for radio 

The UK government is 
considering radical proposals 
for flip management of the 
radio spectrum including the 
possibility of holding 
spectrum auctions and even 
tiie creation of a secondary 
market in spectrum 
assig nments. 

The possibility of radical 
change in tiie management 
of tbe radio spectrum came 
yesterday in a consultative 
document from the 
Department of Trade and 
Industry. 

The radio spectrom is the 
complete range of useful radio 
frequencies covering 
everything from radio and 
television to mobile 
common! cations, microwave 
telecommunications links and 
satellite services. 


Ferranti 
MBOs planned 

Mawagampnt teams r unning 
different parts of Ferranti 
International, the ailing 
defen c e electronics group, will 
this week attempt two 
buy-outs from tbe receiver. 

One team wants to buy a 
Ferranti components division 
in Oldham. Greater 
Manchester, north-west 
England. 

'Die other, based in 
Bracknell, Berkshire, ne »r 
London, wants to buy the 
software division and enter 
a supply agreement for 
hardware from Oldham. 

Arthur Andersen, the 
receiver, said there was outside 
interest in buying the business 
whole, which might prove 
more convenient and 
attractive. 


Palace loses 
Dutch master 

Security at Buckingham 
Palace was under review after 
a former employee was ’• 
arrested over the theft of a 
17th century ofl painting. 

- Roval o fficials only learned 
that the £100,000 painting by 
Dutch artist Adriaen Van 
Ostade had been stolen from 
a guestroom in the state 
apartments when it was 
offered up for auction at 
Phillips Auctioneers in 
London. 


Post Office 
faces strike 

The Post Office faces the threat 
of disruption from three 
industrial disputes. 
Engineering staff working 


for the Royal Mail in London 
voted to strike over the 
proposed closure of half the 
capital’s mechanised letter 
offices, starting next month. 

The Royal Mail's 5,000 

engineering workers around 

the country are taking part 
in a strike ballot in opposition 
to the transfer of its building 
engineering services to a 
separate subsidiary company 
RoMEC 

On top of this, workers at . . 
London's main post offices wifi 
strike on March 30 over the 
issue of post office closures : 
after a three to one majority • 
vote in support of industrial 
action. 


Crossrail plan 
wins backing 

The chairman of a House of ’. 
Commons committee 
considering the £2ho Crosstab 
plan for an east-west 
underground railway link 
nrocft Xio mfoo dismissed 
that the project ts doomed. .. 

Mr Tony Marlow, chair man . 
of a committee of MPs 
considering a bill providing 
for the link, said the 
committee was “nowhere near . 
reaching any decision on 
any thing ." 

Mr Marlow spoke out after. ;i 
reports that the committee 
bad accepted evidence that 
tbe link would be uneconomic. - 


UK land prices 
rise quickly 

i-anri prices have risen .. V 
exceptionally quickly over the - _ 
past 12 months, stoking 
inflationary pressures in the r. 
housing market and the ••••„• 

general economy, e. 

housebuilders warned. 

Prices for quality sites haye^' 
risen by an average of 20 per . : 
cent nationally during the past 
12 months and by up to B0 per - 
cent In southeast England, -£■ 
according to Mr David WHsanj :' 
chairman of Wilson Bowden, 
one of Britain’s most profitably 
housebuilders. 

He blamed restrictive '};■ 

p lanning policies by local and 
central government for - L--'. 
creating a shortage of good 'h 
sites and forcing up the priced-;-. , 
of land as the housing market^ 
started to recover. 3L 


Auditor took 
BCCI loans 

Price Waterhouse, the 
accountancy firm, received 
loans or credit fadlltiea in two 
African countries from the 
Bank of Credit and Commerce 
International, its audit client. 
In possible contravention of ; . 
professional ethical rales. 

The firm said yesterday that . 
it had also received loans from 
BCCI in Panama and 
Bar b ados, and that two of its . 
partners in the Cayman 
Islands had deposits with the 
bank. 

It said that these 
transactions had been on 
normal commercial terms and. 
that they had in no way 
affected its andit judgments 
onBCCL 


All about Ulster’s broadcast news 

Michael Cassell on the BBC’s policy towards covering local news in Northern Ireland 


A phone-in argument over 
coloured icing on an anniver- 



Jlm Dongai, political editor for BBC Northern Ireland, pictured outside the parliament buildings at Stormont, Belfast 



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OIVUAET 



UK 


MPs warn of fresh ‘civil war’ over Europe 


Jailed 


By PhtBp Stephens, 
Pofltical Editor 


Leading pro-European MPs 
amongst the Conservative par- 
ty's rank-and-file last night 
warned of the threat of 
renewed civil war in the party 
over Europe alter the fierce 
anti-Brussels outburst in the 
House or Commons from Mr 
John Major. 

Conservative MPs on the 


centre and left of the party 
have been told not to engage in 
public debate with rightwing 
Euro-sceptic colleagues to sup- 
press internal divisions before 
June’s European elections. 

The instruction, delivered by 
the Conservative whips, in 
charge of internal party disci- 
pline, but said to have come 
directly from the prime minis- 
ter - has up to now met with 
grudging acquiescence from 


the members of the party’s 
Positive Europe Group. 

But the anti-European time 
of the prime minister's com- 
ments enraged many of the 
enthusiasts- They warned that 
if the row with Britain's part- 
ners over voting rights in an 
enlarged Union was used as an 
excuse to appease Tory scep- 
tics. the present truce on the 
backbenches would disinte- 
grate. 


Ministers said that Mr 
Major's comments represented 
no more than an attempt to 
convince Britain’s European 
partners of the seriousness of 
its resolve. 

Many on the backbenches, 
however, interpreted his 
aggressive characterisation of 
the opposition Labour party as 
a “poodle" of Brussels as a 
dear precursor to an overtly 
nationalistic stance in the 


run-up to the June elections. 
There is a strong suspicion 
that Mr Major has decided that 
appeasing the Euro-sceptic 
right offers the best chance of 
heading off a challenge to his 
leadership later in the year. 

Members of the Positive 
Europe group have responded 
by telling party managers 
that they will not accept a 
** bashiag -Brussels" platform in 
the campaign for the European 


parliament They believe that 
by bowing to the right of the 
party the prime minister is 
underestimating a potentially 
far more dangerous threat to 
his leadership from the centre- 
left The pro-Europeans fear 
that Mr Major's approach could 
degenerate into a repeat of the 
disastrous European campaign 
in 1989. 

Mr Douglas Hurd, the foreign 
secretary, has sought to re as- 


sure the enthusiasts that 
Conservatives will not attack 
the Union's institutions but 
focus instead on the dangers of 
the socialists securing control 
of those institutions. 

But the enthusiasts fear his 
instincts are bang over-ruled 
by Downing Street, undermin- 
ing confidence that he will be 
able to hold the line a ga in st 
the sceptics once the campaign 
is under way. 


Nissan 
UK chief 
appeals 


By John Mason, 

Law Courts Correspondent 


Matrix case 
‘blow to public 
confidence’ 


Favourite wins the race to own Epsom 


By David Blackwell 


By John Mason, 

Law Courts Correspondent 


Public confidence in the 
criminal justice system has 
been damaged by the govern- 
ment's attempt to use public 
interest immunity to prevent 
documents being disclosed dur- 
ing the Matrix Churchill trial, 
the chief prosecutor in the case 
told the Scott inquiry. 

Mr Alan Moses QC also said 
government ministers must 
use their discretion when con- 
sidering making pn applica- 
tions - a stance that contra- 
dicts the advice Sir Nicholas 
LyeD QC, the attorney general, 
gave government ministers 
who signed Pn certificates to 
stop evidence being heard by 
the Matrix Churchill jury. 

Mr Moses said ministers 
should not apply “mechani- 
cally" for PC certificates. 

They had to use their judg- 
ment about whether release of 
documents would really dam- 
age the national interest. If 
they thought disclosure would 
have this effect, they were 
under a duty to apply for PIL 

Sir Nicholas, who gives evi- 
dence to the inquiry tomorrow, 
has argued since the trial that 
ministers are always under a 
duty to seek Pn and should not 
use their discretion. 

Mr Moses told Lord Justice 


Scott: "A minister would he 
ftl-advised to sign a certificate 
unless he was satisfied about 
the reasoning of the prosecu- 
tion for fear that he would be 
accused of withholding docu- 
ments or signing gagging 
writs. Then he is subjecting 
himself to the sort of furore 
that happened in this case - 
which is something I can well 
understand." 

The Matrix Churchill trial 
had produced a reaction that 
“we the public no longer find it 
acceptable and cannot have 
faith and trust in a fair trial if 
this kind of thing is going on", 
he said. Mr Moses said he had 
never been told of the reserva- 
tions held by Mr Michael 
Heseltine, the trade and indus- 
try secretary, about signing 
the PII certificates. 

Had he known of Mr 
Heseltine's objections, Mr 
Moses told the inquiry on Mon- 
day. he would have used a dif- 
ferent argument in asking for 
Pn to apply. 

• Earlier the chief prosecutor 
Launched a scathing attack on 
the conduct of Whitehall in the 
case. He told the Scott inquiry 
that if he had been told by 
officials about the extent of 
their knowledge of British 
arms-related exports to Iraq he j 
would not have gone ahead 
with the case. 


The favourite won the race 
for the Derby yesterday. Race- 
course Holdings Trust, owned 
by the Jockey Club, wfS be the 
new owner of Epsom, where 
the next Derby will be run on 
June i. 

It will also own Sandown 
Park and Kempton Park. 

The trust, always seen as the 
i safest bet, made a winning bid 
of £30.25m. This outstripped 
bids from the two outsiders - 
Sunset + Vine, the sports tele- 
vision company, and a consor- 
tium headed by Mr Stan 
Clarke, owner of Uttoxeter 
racecourse. 

The three courses were 
offered for sale in October 
by the Horse-race Betting Levy 
Board, which has owned the 
courses for more than 20 
years. 

Mr Rodney Brack, chief exec- 
utive of the board, said the 
race had been close. All three 
candidates had satisfied the 
board's prime demand to safe- 
guard the future of quality rac- 
ing at all three courses, the 
highest bidder won. 

The Levy Board will face 
criticism that It has taken the 
safe option. 

The trust, whose main share- 
holder is the Jockey Club, rac- 
ing’s governing body, already 
owns nine of the UK’s 59 
courses, including Cheltenham 
and Newmarket 

Mr David Hillyard, RHT’s 
managing director, said be was 
absolutely delighted. Anyone 
who accused the trust of being 
establishment and unimagin- 






For over 200 years the Derby at Epsom 
racecourse, south of London, has been a 
part of British sporting history - but in 
1918 it made more tragic headlines when 
suffragette Emily Davison (above) threw 
herself in front of Anmer, the King’s 
horse, at Tattenham Corner. Her death 
marked a turning point in the emancipa- 
tion of women in Britain, writes Christine 
Buckley. 

The Derby Is arguably the world's 


greatest horse race. It began in 1780 and 
was named after the Earl of Derby, the 
race's first host Early in file following 
century its reputation started to soar with 
th e addi tion of the One Thousand Guineas 
and Two Thousand Guineas to the card. 

Soon the annual race on the Surrey 
Downs became a famous day out - “Derby 
Day" had arrived on the sporting calendar 
- a mecca for serious racegoers and those 
in search of a stirring spectacle. 


In 1847 Lord George Bentinck, a racing 
reformer, moved that parliament itself be 
adjourned for the race - a custom that 
lasted for several decades. 

Derby Day. now the first Wednesday in 
June, remains an excuse for a large exo- 
dus from London as The City heads for 
the co untry . It has become one of the 
main events of corporate entertainment - 
with dozens of open-top buses emblazoned 
with company logos lining the course. 


atlve “clearly was nowhere 
near Cheltenham last week” 
for the three-day National 
Hunt Festival. 

The trust will be borrowing 
around 70 per cent of the pur- 
chase price, which includes 
Elm related to Derby sponsor- 
ship. It is funding the balance 
from its own resources. The 


contract is expected to be con- 
cluded by the end of next 
month. 

A spokesman for Sunset + 
Vine said: “Our bid was 
designed to improve and 
broaden the appeal of racing to 
the public, bring innovation 
and marketing expertise to the 
world of racing." 


Sunset, winch has a market 
value of less than ElOm, had 
lined up an impressive board, 
including Robert Sangster, the 
millionaire racehorse owner. 
David Lloyd, former British 
Davis Cup tennis player, and 
racehorse trainer Luca 
CumanL 

Mr Stan Clarke, who turned 


Uttoxeter racecourse from 
losses five years ago. put in a 
private bid with Mr Anthony 
Solomons, chairman of Singer 
& Friedlander, the merchant 
banking and property group, 
and Mr Andrew Cohen, the 
managing director of Better- 
ware, the home shopping com- 
pany. 


The jury in the Nissan UK 
corporation tax fraud trial was 
misled over the guilty plea 
entered by Mr Frank Shannon, 
the company's former finance 
director, the Court of Appeal 
was told yesterday. 

The claim was made by Mr 
Alun Jones QC, appearing for 
Mr Michael Hunt, the manag- 
ing director of the Conner car 
importers who was jailed for 
eight years last July after 
being convicted of a £5Sm tax 
fraud against the Reve- 
nue, which administers the 
UK's tax collection. 

Mr Hunt is appealing against 
both his conviction and file 
length of his sentence. 

The offence Mr Shannon 
admitted to - one of cheating 
the Revenue - should be 
declared null and void since 
the particulars of what he 
admitted did not amount to 
cheating the Revenue. Mr 
Shannon had no knowledge of 
the particular fraud involved 
in the charge, Mr Jones said. 

Mr Shannon only made the 
confession after a bargain 
between himself and the Reve- 
nue in which he agreed to set- 
tle his outstanding tax liabili- 
ties and plead guilty to the one 
offence, he said. 

This meant he would have to 
pay no more money to the rev- 
enue and avoid further prose- 
cutions. The Revenue could 
also claim success from his 
conviction, Mr Jones added. 

However, the jury hearing 
the case against Mr Hunt woe 
told Mr Shannon had pleaded 
guilty to a similar charge to 
one of those brought against 
Mr Hunt 

“The jury have simply been 
misled about what the plea of 
guilty is.” Mr Jones said. Mr 
Hunt's conviction should 
therefore be overturned, he 
argued. 

The appeal is expected to 
last five days. 



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FINANCIAL TIMES WEDNESDAY MARCH 23 1994 


BUSINESS AND THE ENVIRONMENT 


u 


WORLDWIDE WASTE 


US finds traditional 
disposal hard to beat 

Strict government rules have failed to achieve their goa 
of cutting the use of landfills, writes George Gr aham 



or gouging ont stone leaves unsightly scars: McAIpine's Penryn slate quarry. Bethesda, north Wales 

Quarries head 
for the coast 

Andrew Taylor looks at proposals to limit the damage 
caused by extracting materials for the building industry 


Solid and 
hazardous wastes 
fan th e US have 
come under 
increasingly 
complex laws and 
regulations. 
Starting with the 
Resource 
Conservation and Recovery Act 
of 1976, which set up a complete 
m a nag ement system for hazardous 
wastes and established disposal 
criteria for other categories of 
solid waste, the federal 
government's restrictions have 
had far-reaching effects on waste 
management 

Not all of the rulemaking has 
been successful. The Super-fund 
legislation of 1980 and 
am endm ents of 1986 have had 
unintended consequences an/ i 
have failed to achieve their wmm 
purpose, which was to provide 
for the dean-op of toxic dumps. 

As a result the Environmental 
Protection Agency is trying to 
push yet another S upeifun d 
reform through Congress. 

Government efforts to direct 
waste manageme n t practices have 
also stumbled over simple 
economics: traditional methods 
of disposal such as lawdinnc have 
remained stubbornly cheap, while 
favoured approaches such as 
recycling have generated a glut 
of unsaleable mate rials. 

The US produces around 196m 
tons of municipal waste a year 

- about 4.3Ibs per person and 
almost double the norm in other 
industrialised countries. 

Hie EPA es tima tes that the US 
spends about S35bn (£23-9bn) a 
year on collecting and disposing 
of municipal solid waste, 
managing hazardous waste and 
cleaning np underground petrol 
and chemical storage tanks. 

Spending in these areas is rising 
faster than on any other category 
of environmental regulation. The 
Congressional Budget Office 
calculates that cleaning np 

Snperfund toxic waste sites alone 

- excluding dumps on federal 
government property - will cost 
a total of $75bn. A separate 


estimate by the University of 
Tennessee pats the price at 
SlSlbn. 

To deal with solid waste, the 
EPA has set np a hierarchy of 
management techniques: 

1- Reduce waste by preventing 
its creation; 

2. Recycle and compost as much 
as possible; 

3. Incinerate or treat waste In 
other ways to reduce its volume; 

4. In the last resort, landfill. 

Of these approaches, reducing 

the source of the waste may be 
the most promising because the 
cost to businesses of installing 
new equipment can often be offset 
by savings on reduced raw 
material consumption. 

Environmental groups also 
argue for consumers to play a 
role in source reduction through 
“precycling”: choosing products 
which use less packaging or 
avoiding throwaway products. 

Recycling has proved a more 
mixed blessing. Many states and 
cities have set ambitious goals: 
between 1989 and 1992 the 
proportion of municipal rubbish 
recycled rose from 9 per cent to 
14 per cent, while the proportion 
sent to landfills dropped from 
84 per cent to 76 per cent, 
according to the World Resources 
Institute’s Environmental 

Almanac. 

Seattle is often cited as the 
example for recycling. In 1989, 
the dty raised its charge for 
picking up a second rubbish bin 
from $5 to 99 per month, and 
lowered charges for customers 
who recycled. By 1991, that fee 
increase had cut tiie proportion 
of households who put out a 
second bin from 39 per cent to 
11 per cent With other initiatives 
cm recycling and source reduction, 
Seattle cot the solid waste it was 
disposing of by a quarter. 

But with a sluggish market for 
recydables, it can now cost Seattle 
910 a tan to get rid of recycled 
newspa p ers where it was once 
paid 910 a ton, and the city has 
h ad to stockpile or even landfill 
some recydables such as glass. 
Critics of the EPA’s insistence 


that recycling must come before 
other waste management 
techniques say there is a natural 
limit at around 30 per cent 
recycling, where simple economics 
override government policy. 

President Bill Clinton’s recent 
order that the federal government 
must double the recycled content 
of its paper to 20 per cent is 
expected to boost the recycled 
paper market 

Inciner ation h a s aicn gainnH 
ground in some states, especially 
in tiie north-east Mahn> and 
Massachusetts incinerate more 
than 40 per emit of their solid 
waste, while Connecticut 
incinerates nearly two-thirds. 

Incinerator construction is 
spurred largely by the difficulty 
some cities have to persuading 
other localities to take their 

rubbish for landfilling , but 
incinerators are still greeted with 
universal suspicion, and no me 
wants them to their back yard. 

TjndfiTl r anks at th f bottom 
of the hierarchy, and it had been 
widely expected in the 1980s that 
tougher operating standards 
imposed by EPA and by the states 
would also make it less attractive 

In finanrrat tonne . 

Although the number of 
landfills open to receive waste 
foil from 20,000 in 1978 to 6,000 
to 1986, the a nticip a ted shortage 
of landfill space has not 
materialised. With dumped 
volumes dropping off in the 
recession at the start of the 1990s, 
solid waste companies have seen 
tbelr eanrings folL 

The one place where landfills 
have been filling up rapidly is 
to the Mississippi basin, where 
last year’s floods produced a 
morass of debris and sodden 
sandbags. In most cases, however, 
dump operators hid to waive 
fees. 

In the end, the sheer 
accumulation of waste at the rale 
of nearly 200m tons a year will 
lead to shortages of landfill space. 
But for the foreseeable future, 
landfills remain the dominant 
form of waste disposal because 
they are the cheapest. 


R ock, sand and gravel, 
gouged or blasted out of 
great quarries, are irre- 
placeable as basic building 
materials. But does Britain want 
large unsightly boles scarring its 
countryside? And what of the envi- 
ronmental damage caused by huge 
trucks carrying stone to build yet 
more roads? 

UK ministers are pondering these 
questions as they prepare guide- 
lines for local authorities, which are 
establishing planning targets for 
aggregates’ extraction into the next 
century. 

The government’s finding s could 
determine the future of hundreds of 
milli ons of pounds of investment 
proposed by British building mate- 
rial companies for a new generation 
of coastal super-quarries in Scot- 
land and Scandina via 
These quarries would reduce pres- 
sure on Britain’s sh rinking country- 
side in southern En gland and the 
Midlands but would be viable only 
if the price of aggregates were to 
rise, providing investors with an 
acceptable rate of return. 

A consultation paper published 
by the Department of the Environ- 
ment 14 months ago suggested the 
restriction of aggregates extraction 
in some of the more politically sen- 
sitive regions. It also proposed 
inhibiting the rise to sea-dredged 
sand and gravel, partly to protect 
c o a stal fishing. 

The policy would conserve valu- 
able and irreplaceable land-based 
reserves, requiring the industry to 
switch to other sources, the depart- 
ment said. These would include 
Scottish quarries, imports and recy- 
cled or secondary materials such as 
slate, colliery spoil and china clay 
waste for landfill. 

Similar deliberations are taking 
place in other large European coun- 
tries where concern for the environ- 
ment is equally high cm the political 
agenda. Tarmac, the construction 
group, which is currently consider- 
ing spending up to £75m on a Nor- 
wegian coastal quarry, says the 
investment would work only if 
Britain and Germany took a large 
proportion of the output. 

Publication of the British guide- 
lines, however, is already 10 months 
late, emphasising the difficulties 
faced by domestic politicians who 
wish to display their green creden- 
tials without damaging the con- 
struction industry - considered to 
be an important engine for growth 
for the economy. 

Neither are the arguments as sim- 
ple as they might first appear. Oth- 
erwise, companies such as Tarmac 
would have leaped at an opportu- 
nity to raise prices and improve 
margins, which have been eroded 
heavily during the UK recession. 

The DoE consultation paper con- 
tained two options, based cm fore- 
casts Of construction demand up to 
2011. 


The option preferred by the 
department would reduce the per- 
centage of locally produced rock, 
sand and gravel in England and 
Wales from more than 80 per cent to 
64 per cent, and cut marine-dredged 
aggregate from 7 per cent to 6 per 
cent. Imports from Scottish quarries 
and elsewhere would be expected to 
rise from 1 per cent to 9 per cent, 
while the use of secondary and 
recycled materials would rise from 
10 per cent to 16 per cent 

A second option, preferred by 
b uilding material suppliers, would 
require a more gradual reduction to 
land-won supplies, with the propor- 
tion of crushed rock remaining con- 
stant at about 50 per cent but with 
sand and gravel, mostly from south- 
east England, falling from 32 per 
cent to 24 per cent by 2011. 

Marine-dredged sand and gravel 
would rise to 8 per cent, requiring a 
lower increase In imports to 6 per 
cent by 2011, compared with IS per 
cent in the department's preferred 
option. 

The BACMI, the British Aggre- 
gate Construction Materials Indus- 
tries trade association, says its 
members recognise the need to con- 
sider the environment but that the 
department’s option could create 


worse environmental problems. 

Deliveries of aggregates by sea 
from Scotland or Scandinavia would 
require large port facilities for 
unloading, storage and transfer to 
land-based transport Construction 
is a fragmented activity and most 
deliveries would still need to be 
made by road. 

Land-based quarries are tradition- 
ally within 30 miles of most of their 
customers. Deliveries from coastal 
areas or rail depots would require 
much greater lorry distances to be 
travelled. 

Alternative materials such as 
slate create their own environmen- 
tal problems and often cannot 
replace traditional aggregates for 
technical or cost reasons, the 
BACMI says. An attempt to use 
china clay sand from St Austell in 
Cornwall as a substitute for 
embankments and fill on the new 
Severn Crossing failed after it was 
realised that “this would involve 
500 vehicles a day for more than a 
year - some 68m heavy goods/ve- 
hicle miles”. 

The BACMI advocates an increase 
to sea-dredged aggregates which, it 
says, affects only 0.03 per cent of 
the sea bed in the North Sea com- 
pared with 54 per cent affected by 


fishing, it says the Ministry of Agri- 
cultures receives virtually no com- 
plaints from fishermen about 
marine dredging. 

Companies say a more restrictive 
planning regime will not necessar- 
ily lead to higher aggregate prices 
needed to make investment in Scot- 
land and Scandinavia attractive. 

Tarmac says that at present 
extraction rates shortages may not 
start to emerge for at least four 
years. Moreover there is sufficient 
flexibility in existing p lanning per- 
missions for operators to increase 
production in the short term. Fall- 
ing demand for construction during 
the recession bas meant that 
annual production of aggregates in 
England and Wales has fallen by 23 
per cent since 1989 from 300m 
tonnes to 230m tonnes. 

Given the uncertainty over 
danrumd and supply, it may still be 
difficult for companies to commit 
the £50m-£60m needed to open a 
coastal quarry even if a more 
restrictive policy is introduced. 

The BACMI. which says that 
quarry operators have become more 
sensitive to environmental consider- 
ations, favours a more gradualist 
approach and would prefer a com- 
promise between the two options. 



MANAGEMENT 


M ost commentators 
accept that commer- 
cial life is increasingly 
hedged around with 
choices about profits and ethics. 
But while the debate on how an 
individual’s standards are formed 
has been under way for centuries, 
how can organisations sensibly 
develop an ethical position? The 
diagram alongside shows how US 
academics Eric Reidenbach and 
Donald Robin, professors of market- 
ing at the University of Southern 
Mississippi, have established a sort 
of moral pyramid to demonstrate 
the range of corporate attitudes. 
European companies, too, can use 
this theoretical model as a basis for 
dealing with ethical issues. 

It is important to note that a 
multi-divisional company may 
occupy several stages at the same 
time, and companies may also 
regress from higher to lower levels. 
At the base are the amoral or “ethi- 
cally challenged” companies, none 
erf whom, one suspects, will be read- 
ing this. They are around strictly 
for the short term, and are charac- 
terised by “winning at all costs”. 
Obedience is valued and rewarded 
and there is little concern for 
employees other than th e ir value as 
an economic unit of production. 

The ethical climate of a stage one 
organisation can be summed up by 
phrases like “they'll never know” , 
“everybody does it”, and “we won't 
get caught". At the heart of this 
organisation is the philosophical 
conviction that business is not sub- 
ject to the same rules as individuals 
and that there is no set of values 
other than greed. 

At stage two are the legalistic 
organisations. They obey the law, 
though ethical concerns are judged 
on the basis of adherence to the 
letter if not the spirit of it No 
breach of law often means no 
breach of ethics. “If it’s legal, it s 
OK and if we are not sure, have the 
lawyers check it out," typifies the 
legalistic approach. Economic per- 
formance dominates evaluations 
and rewards. A legalistic company^ 
code of ethics - if it exists - would 
be dominated by “don’t do anything 
to harm the organisation" state- 
ments. . . _ 

Some legalistic companies have 
no ethics code, and do not accept 
the necessity. Often they see little 
purpose in expressing explicit 
ethical standards, and Indeed 
some feet any such statements 
could lead to difficulties and compli- 
cations. .. 

Most stage two companies would 
leave ethical concerns aside until 
they become a problem; only then 
would they consider remedial 

action. . 

This ignores two crucial pouds- 
First, all organisations have ethical 
standards even if they ***** 
explicit. Some things are*** to be 
acceptable, others are not However, 


John Drummond considers how to 
achieve an ethical balance in 
business operations 

Saints and 
sinners 


■fctflANCED CONCERN 



FOR PROFITS 
ANDETHICSv 


i* 1 " 

■ * ;^c" 

06F-*535g 


ijNaiuj\NG® 


Source: Reidenbach and Robin 


when there is no consistent under- 
standing and application of those 
standards the inevitable result will 
be Internal and ultimately external 
confusion. 

Second, waiting for a problem to 
occur is not sound management 
practice. And the consequences can 
be very serious, particularly in 
terms of risk to reputation. As 
never before, the media and others 
are now sensitive to ethical 
breaches. It is increasingly unlikely 
that ethical transgressions will go 
unnoticed. Remember tiie nostrum: 
“News is what someone somewhere 
doesn't want to see in print. 


anything else is advertising”. 

Stage three contains the respon- 
sive companies. Managers in this 
category understand the value of 
not acting solely on a legal basis, 
even though they believe they could 
win. Although a reactive mentality 
may remain, it is coupled with a 
growing sense of balance between 
p r ofi t s and ethics. Nonetheless, the 
basic premise still may be a some- 
what cynical “ethics pays". 

Management begins to test and 
learn. from more responsive actions. 
A responsive company's ethics code 
would reflect a concern for other 
stakeholders, but additional ethics 


support vehicles, such as hotlines, 
are less likely to be found. 

Reidenbach and Robin describe 
stage four companies, somewhat 
controversially, as “emerging ethi- 
cal". A better term might be “ethi- 
cally engaged”. Managers have an 
active concern for ethical outcomes: 
"We want to do the “right thing'." 
Values are shared across the organi- 
sation. Ethical perception has focus 
but may still lack organisation and 
long term planning. 

Ethical values in such companies 
are part of the culture. Codes of 
ethics are action documents, and 
contain statements reflecting care 
values. A range of ethical support 
measures are normally in place, 
such as ethical review committees; 
hotlines; ethical audits; and ethics 
counsellors or ombudsmen. 

Problem solving is approached 
with an awareness of the ethical 
consequence of an action as well as 
Its potential profitability, and pains 
are taken to uphold corporate val- 
ues. For example, the European 
region of a leading international 
chemical company surveys staff 
understanding of corporate ethical 
standards and acts on any disso- 
nances. 

Most progressive European com- 
panies would, one suspects, see 
themselves as stage three or four. 
At a minimum they do have ethics 
codes aimed at all stakeholders. 
They recognise that ethics comes 
from the inside out and that a mis- 
sion statement, for instance, is not 
the same as an ethics code. They 
are not blind to the promotional 
advantages of high ethics in the 
“caring ’90s” but they understand 
that without employee commit- 
ment any form of ethically orien- 
tated marketing may be at least 
meaning less or at worst counter- 
productive. 

Stage three and four companies 
also accept that their code of ethics 
is a starting point - any code not 
monitored and enforced rapidly 
becomes a dead letter. One leading 
UK hank has put in place a range of 
instr uments for enlisting staff com- 
mitment to its code, tnrfudiiig eth- 
ics hotlines and regular assessment 
of code effe ct i veness. 

Lastly, stage five represents what 
the researchers call the ethics 
org anisation. Here there is a total 
ethical profile, with carefully 
selected core values (and an 
approach to hiring, training, firing 
and rewarding) which reflect it. 

The answer is not to attempt to 
turn staff and companies into 
saints, but rather to strike a suit- 
able ethical balance in business 
operations, to minimise reputa- 
tional risk. 

The author is managing director of 
London-based Integrity Works. He is 
also coauthor of Managing Business 
Macs, published this week by But- 
terworth Hememarm. Price £17,95- 


BOOK REVIEW 

The continuing 
search for excellence 


By Christopher Lorenz 

‘Watennan’s argument 
is ample if controversial: 
that today’s top * 
companies ... do not put 
the shareholders first. 

Instead they pay 
primary attention to 
employees and 
customers’ 



W hen Tom Peters and 

Robert Waterman were 
consultant colleagues 
in McKinsey & Co’s organisation 
practice to the 1970s, Waterman 
played godfather to Peters, the 
brilliant but reckless junior. But 
since they went their separate 
ways after the staggering success 
a decade ago of their best-seller, 

In Search of Excellence, ft is Peters 
who has had the higher profile. 

His string of charismatic 
shockers, notably Thriving cn 
Chaos and Liberation Management. 
eclipsed the quieter Waterman's 
equally perceptive works, The 
Renewal Factor and Adhocracy: 
The Power to Change. 

With this latest volume*. The 
Frontiers of Excellence, Waterman 
deserves to hit the same heights 
as Peters. In the US, where the 
book’s local title is What America 
Does Right, its timing Is especially 
good: after several years of 
self-doubt, American business 
is ripe for the same sort of 
confidence-booster that In Search 
of Excellence proved to 1982-83. 

The core of Waterman's message 
is captured in his subtitle: 
Learning From Companies That 
Pul People First His argument 
is simple if controversial: that 
today's top companies, like those 
which have remained successful 
over the long term, do not put 
the shareholders first Instead, 
they pay primary attention to 
employees and customers. As a 
result they perform for more 
effectively than their rivals and 
thereby deliver superior results 

to their shareholders. 

They do this, says Waterman, 
by being better organised to meet 
the needs of thefr employees, 
thereby motivating them 
unusually well; and to meet the 
needs of customers by being either 
more innovative, more reliable 
or cheaper - or all three. 

This is simple to state but 
difficult to achieve. Waterman 
devotes almost the entire book 
to examining how 10 US 
organisations “put people first"; 
how the courier company Federal 
Exp ress strikes an ideal balance 
between what he calls “potentially 
oppressive systems and the 


cheerful attitudes of a deeply 
enthusiastic workforce”: how Levi 
Strauss, the clothing 
manufacturer, creates employee 
commitment and a set of 
empowering “shared values" In 
a sweatshop industry; how 
household goods company 
Rubbermaid and consumer 
products group Procter & Gamble 
have remained so innovative for 
so long; how Motorola’s 
50-year-old maxim of “anticipate 
and commit" has inspired tiie 
telecoms company to change its 
business several times and 
improve product quality; and so 
on. 

Along the way, Waterman 
provide several valuable insights: 
into the nature of leadership in 
a decentralised, shallow 
organisation (“today's leaders 
understand that you have to give 
up control to get results - they 
act as coaches not as ‘the boss”*); 
into the importance to strategic 
success of building relationships 
with customers and suppliers that 
are hard for rivals to duplicate; 
and in the consequent need to 
organise outwards and downwards 
to please customers and 
employees, rather than upwards 
to please the boss. 

These principles emerge from 
the wealth of practical detail so 
that the reader has a sense of 
learning alongside Waterman 


rather than being lectured. 

That said, the book has minor 
flaws. Prime among them is 
Waterman’s very enthusiasm, 
boyishly infections though it is 
for the most part. His celebration 
of P&G's innovation, and its 
history of encouraging 
self-managed teams to several 
factories, hardly pauses to 
consider claims that its head office 
bas a Stalinist, oppressive culture. 

Waterman also concentrates 
too much on the well-known 
potential for companies to liberate 
the initiative of their frontline 
employees. Far too little of the 
book deals with the trickier and 
more complex question of whether 
middle and senior managers - 
those who keep their jobs - can 
be liberated in similar fashion. 

Waterman also ducks the thorny 
question of why some great 
companies stumble badly, while 
others remain vibrant 

To conclude that we should 
“learn from the best while they're 
good and move on when they lose 
their edge" is a cop-out unworthy 
of the manifest intelligence which 
Waterman shows in the rest of 
this very readable book. 

* The Frontiers of Excellence, 
published in April by Nicholas 
Brealey Publishing, price £16.99 
(in the US: What America Does 
Right, published by Norton, $25). 




WEDNESDAY MARCH 23 1994 



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FINANCIAL TIMES 


PEOPLE 


Nell Richardson joins 
Ian Martin’s Glenisla 


Neil Richardson, 37. (right) has 
been appointed as the first 
investment director of Glenisla 
Group, the privately held Lon- 
don-based investment firm set 
up last month by Ian Mar tin 
with financial backing from 
Kohlbexg Kravis Roberts, the 
Wall Street leveraged buy-out 
specialist 

His appointment marks the 
first step by Martin, chairman 
and joint founder of Glenisla 
and formerly deputy chairman 
of Grand Metropolitan, towards 
putting together bis team of 
financial experts. 

Glenisla has been set up to 
seek out undervalued invest- 
ment opportunities in die UK 
and western Europe in a wide 
range of consumer and non- 
consumer industries. Accord- 
ing to Martin, Richardson will 
be responsible for “identifying 


and developing acquisition 
opportunities, assessing poten- 
tial targets and overseeing 
transactions through to com- 
pletion". 

Richardson moves from CS 
First Boston where he has 
been director of UK mergers 
and acquisitions and instru- 
mental in building up CS First 
Boston's European merger and 
acquisition business which 
now employs 45 professionals 
in London. At CS First Boston 
Richardson was responsible for 
creating and overseeing trans- 
actions such as STC’s sale of 
an 80 per cent stake in ICL to 
Fujitsu, Burton Group’s sale of 
its financial services 
operations to GE Capital and 
House of Fraser's sale of its 
credit operations and recent 
overall restructuring. 

Over the past decade, Rich- 



ardson has been Involved in 
transactions with an aggregate 
value of over $l0bn- Before 
joining CS First Boston in New 
Y ork in 1986, he spent six years 

with Bain & Company, the 

strategy consultants. 

Richardson was educated at 
Ashington Grammar School in 
Northumberland where he was 
one of the first pupils to gain 
admission to Oxbridge. He read 
chemistry at New College. 
Oxford, and spent bis final 
year researching the photo- 
chemistry of the ozone Layer. 


■ Dennis Millard, a US citizen 
who has spent the past seven 
years based in the UK as 
director of finance and strategy 
at Plate Glass Group, which 

is listed in South Africa, has 
been appointed finance 
director at MEDEVA. 

■ Ralph Ellis, chairman of 
British Gas South Eastern, 
has been appointed director 
of property at BRITISH GAS. 

■ Alastair Wilson, formerly 
md of W illiam Younger 
(Yorkshire), has been 
appointed md of Newc astle 
Br eweri es, part of SCOTTISH 
& NEWCASTLE BREWERIES; 
he succeeds Haydn Biddle. 

■ David Walker (above left), 
formerly divisional director 



with Lex Retail Group, has 
been appointed md of 
HYUNDAI CAR (UK). 

■ Simon Norris (above right), 
formerly head of employment 
strategy at part of British 
Aerospace, has been appointed 
personnel director of 
REMPLOY on the retirement 
of Mark Daymond. 

■ John Bamsey, formerly md 
of Salisburys, part of Signet 
Group, has been appointed md 


of HILTON National. 

■ Lawrence Condon, sales and 
marketing director of Anglian 
Windows, has been appointed 
to the board of ANGLIAN 
GROUP. 

■ Stewart Gfflfland has been 
appointed director of take 
to me an d to the board of 
WHITBREAD Beer Company. 

■ George Sutherland, formerly 
financial controller in Hong 
Kong for Shell International 
Petroleum, has been appointed 
director of fin ance of the 
UNIVERSITY OF 
EDINBURGH. 

■ Ooi Boon Ann has been 
appointed a director of 
LONDON FORFAITING 
COMPANY. 


Graham Watson changes teams 


Graham Watson, one of 
Scotland's leading corporate 
finance specialists, has become 
a partner of the accountancy 
firm Touche Ross. He wants to 
help make its Scottish branch 
into a leading adviser on corpo- 
rate finance north of the bor- 
der. eventually, he hopes, put- 
ting it on a par with Scottish 
merchant banks such as Noble 
Grossart 

Watson, 36. worked at Noble 
Grossart for eight years after 
training as a CA. In 1991 he 
resigned as a director to set up 
Carnegie, giving financial 
advice to sportsmen and foot- 
ball and rugby clubs. 

He had already come up with 


the debenture issue which 
enabled Rangers to finance a 
new stand and had launched a 
similar issue for Arsenal, 
before advising the Scottish 
Rugby Union on its £37m Mur- 
rayfield stadium project Car- 
negie looks after the affairs of 
golfer Sam Torrance and foot- 
baller Ally McCoist 
Last October Watson unex- 
pectedly resigned as MD of 
Carnegie because of disagree- 
ment over strategy with its 
main shareholder, David Mur- 
ray. chairman of Murray Inter- 
national and of Rangers. Car- 
negie subsequently moved its 
HQ from Edinburgh to London 
and opened up in New Zealand 


and New York. 

Touche Ross already has two 
partners in Scotland dealing 
with corporate finance. David 
Shearer and Peter Holmes, who 
last week took credit for devis- 
ing the £72m management 
buy-in of 25 engineering sub- 
sidiaries of Cookson, the spe- 
cialist industrial materials 
group. 

Watson says that since firms 
like Touche Ross already pro- 
vide companies with tax advice 
and management consultancy, 
"there is no reason why we 
should also hand over to mer- 
chant banks the role of being 
corporate finance advisers as 
well". 


Non-executive 

directors 

From this Friday. Jo hn 
Devaney. chief executive Mid 
managing director ofEastern 
Electricity, will join the board 
of Midland bank as a non-exec- 
utive director. On the same 
day Sir Colin Marshall, chair- 
man of British Airway* . wij 
step down from the Midland 
board while remaining a non- 
executive member of the board 
of HSBC, which owns Midland. 

Three months later. Tony 
Hales, chief executive of Allied 
Lyons, will become a Midland 
non-executive, bringing the 
non-executive element pf the 
13 -strong Midland board back 
to full strength. It has been one 


■ Martin Llowarch, already on 
the board, as deputy chairman 
at ABBEY NATIONAL. 

■ Clive Clagne, recently 
retired director at Electra 
Investment Trust, at ON 
DEMAND INFORMATION. 

■ David Hodgson, senior 
partner of Paterson Bateman 
and Hodgson, as chairman at 
the BEVE RLEY BUILDING 
SOCIETY. 

■ Lord McAlpine of West 
Green at DEVELOPMENT 
SECURITIES; and William 
Grant at DEVELOPMENT 
SECURITIES PROPERTY 
INVESTMENTS. 

■ David Swallow has resigned 
from BRENT 
INTERNATIONAL. 

■ David Benson, a director of 
Sea Containers, at the ISLE OF 
MAN STEAM PACKET 
COMPANY; Michael Aiken has 
resigned. 

■ Keith James, former senior 
and founding partner at 
Needham and Janies, at HUNT 
&CO. 

■ Jonathan Davies has 
resigned from HTV GROUP. 

■ Peter Newton, former 
director of County Natwest 
Securities Australia, at 
GEMCOR. 

■ BiO Richardson, retired 
director of commercial services 
at British Steel, at STEMCOR 
HOLDINGS. 

■ John Dowling, former chief 
executive of Charrington 
Industrial Holdings, as 
chairman at WORLD FLUIDS 
HOLDINGS. 

■ Mark RadclifFe, a director of 
the SFA and chair man of the 
Stock Exchange Working Party 
on smaller companies, and 
formerly a director of 77 
Group, at WILLIAM JACKS. 



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financial times Wednesday march 23 ,994 


The Morris 
Minor of 
jazz 

D ated bat lovable and 
reliable, it simply will 
not go away* Though it 
first appeared over 40 
years ago, the Hammond B 3 
organs teeth grating treble sound 
is as popular with today’s hip set 
as it was during the heyday of 
greasy soul jazz. Given the other 
uses to which the instrument has 
been applied - in gloomy cocktail 
lounges and brightly lit social 
dubs - it is a wonder that every 
one has not been smashed up and 
buried in a secret place. 

U is the Morris Minor of the jazz 
world and the reason there are still 
so many on the road, held together 
by gaffer tape and nicotine, Is that 
in the right hands the Hammond 
can be made to swing lifc» crazy. 
Few oth er instruments, running on 
a mixture of gospel and blues, can 
transport a small group to the 
heights a B3 can. Usually found in 
the company of an electric guitar 
and drums (or tenor sax and 
drums) the Hammond driver w»i 
prod out solos, or provide mount- 
ing excitement for other soloists to 
adorn, and all the while moving 
things along with thick bass 1 W; 
from the pedals. The purists might 
even use an original Leslie speaker, 
a device whose spinning reflector 


ARTS 


D 


Garry Booth 
reviews Jimmy 
Smith and his B3 
Hammond organ 


emphasises the already shrill 
vibrato. More often the ori ginal jg 
souped up by new technology - the 
young German player, Barbara 
Dennerlem, heard at Dingwalls last 
week, makes the most of her deft 
left foot by using a sampled doable 
bass sound for the pedals, in the 
place of the gritty ori ginal. 

It is unlikely that the Hammond 
would have got this Ear without the 
attention of one man. Jimmy Smi th 
single-handedly reinvented the 
Hammond organ sound in the late 
1950s with a series of jam session 
recordings for the Bine Note label. 
Sizzling bines which wrong the 
lowdown best from horn players 
like Lou Donaldson and Jackie 
Maclean were an instant success. 
Apart from taking a wrong turning 
Into pop-crossover hi the latter part 
of the 1960s, Smith has been follow- 
ing that same, fluky road ®toce. 

Seeing the youthful Sm* > seated 
behind the varnished fa* ie of his 
B3 at Dingwalls five r> 4 hts this 
week with a quartet ' . Mxnphunes 
(Herman Riley), e' *::ric guitar 
(Terry Evans) and drums (Jimmie 
Smith Jur), the years roll back. The 
tunes are almost irrelevant it is 
the groove that is important to 
Smith, an inveterate crowd pleaser. 
The preacher sends (lurries of titil- 
lating notes ont from the right 
hand, a padding of droning chords 
from the left. His guitarist, while 
not up to the kind of licks Kenny 
Burrell would spin from the organ- 
ist's chords, is suitably twangy and 
sings a passable “Georgia”; Riley’s 
upper register sax sound providing 
gritty solo parts, and jocular con- 
versation with the leader. And yes, 
“Bach To The Chickenshack" did 
creep out, deliciously. 

But on Monday Smith sometimes 
seemed too relaxed and verged dan- 
gerously towards the cocktail 
lounge end of bland, t inklin g 
improvisation. An instinctive and 
competitive player. Smith always 
excels in tongh company and is 
capable of leading the best of jazz 
bluesmen. Hearing him in unde- 
manding company like this is still 
a joy - but what a pity Burrell 
cannot be prised away from B.B. 
King for a reunion match. 


id you see that excel- 
lent programme Mod- 
em Art about the 
Musge d’Qrsay? Tim 
. ,. . Benton expressed the 
thought that the curators 
“““brted the Impressionists but did 
not dare put out their big collection 
of “pompier art" - all that I9th cen- 
jury wedding cake stuff - although 
they recognised its historic impor- 
tance, because they feared that peo- 
ple might think they actually liked 
it. 

And what about that documen- 
tary on the development of the bicy- 
cle, Design Principles, which 
showed that some of the best 
designs have never been mass pro- 
duced because of bureaucratic rules 
about the definition of “bicycle"? 
Uid you catch Ron Moody playing 
Aristotle, Galileo and Newton in 
that short drama about the begin- 
nings of physics, Newton’s Reootu - 
tUrnt Or see the eye-opening pro- 
gramme Managing Schools which 
showed how the theory of “coDegi- 
ality" (oh dear) Tia<? led to commit- 
tee mania with some teachers now 
seeming to spend as much time 
referring up or down and malting 
references back as they spend in the 
classroom? 

If the answer in each c ase is no, it 
is hardly surprising, because non e 
of those programmes was trendy or 
“sexy” within television's special 
definition (striking and appealingly 
fashionable). They were not made 
to win big ratings and, since none 
of them appealed to the lowest com- 
mon denominator, they were not 
promoted by the BBC which 
screened them all Indeed, the BBC 
barely acknowledges their exis- 
tence. They are all Open University 
programmes, and consequently 
shown on BBC2, early in the morn- 
ing or late at night, coned off 
behind the OU logo. 

Yet they are available to us all, 
and if yon seek them out - loading 
the video recorder each night with a 
three-hour tape timed to start at 
6J5 in the morning is the best way 
- you find yourself watching the 
sort of television which you may 
have forgotten was possible. Televi- 
sion does not have to come at you 
all the time like a fa irgro un d 
staffed by teenage speed freaks. 
There is a calmness and an intelli- 
gence here which is wonderfully 
refreshing. 

Of course not all OU programmes 
are made to the same standard, or 
in the «me style, and , unless you 

are a true polymath, some will 
leave you baffled. I stuck with 
Genetics - Beyond The Double Helix 
while they explained how miles of 
DNA is coiled up neatly to get it 
inside a cell, but when they began 
to assume that I knew the meaning 
of things such as “X-ray diffraction” 

I gave up. Pure Maths: Orthogonal 
Bases I deserted even faster since I 
did not understand the symbols. 



You may have to seek it out, but you can still find the sort of television you may have forgotten was possible: Ron Moody in ‘Newton’s Revolution’ 

Television/ Christopher Diinkley 

Enlightenment for all 


However, at the other end of the 
spectrum are programmes which 
are almost mtfifiHngmahaMn from 
the more serious offerings in main , 
stream television. Some, such as an 
episode in the Technology series 
billed as "EurekaarghT, turn out to 
be literally indistinguishable: thin 
was an old Horizon programme 
about the exploitation of patents. 
Performing Art, which was simply 
billed as the midnight programme 
on BBC2 on Tuesday last week 
without any reference to the OU 
(probably sensible if the BBC wants 
to maximise its audience) was an 
engrossing report on the huge suc- 
cess of the new Tate Gallery in St 
Ives. True, it was more concerned 
with the creation and organisation 
of the gallery than with the pictures 


on the walls, but it could have stood 
up in any of television's arts slots. 
It was far more interesting than 
much of the overwhelmingly metro- 
politan material on The Late Show. 

Filling the remarkably large cen- 
tral area between the bewilderingly 
specialised and the universally 
appealling are many programmes 
which, while slightly more peda- 
gogic than we would expect these 
days from mainstream television, 
are perfectly comprehensible to 
anyone with a reasonable educa- 
tion. Many are on subjects which 
mainstream television either 
ignores or treats only in a destruc- 
tively reductionist manner. 

Outstanding in my two-week sam- 
pling was the first in a series called 
Lifestyles, Work And The Family 


which compared changing expecta- 
tions and soda! attitudes between 
two generations of doctors in one 
family and two generations of steel 
workers in another. No doubt this 
would be considered not punchy 
enough for television’s normal cur- 
rent affairs series, yet in terms of 
history, politics in the broadest 
sense, and sociology, it is powerful 
stuff. 

The episode “It's A Lovely Day 
Tomorrow'' in the series Science. 
Technology. And Everyday Life was 
a startling reminder of the Pol- 
lyanna attitudes towards scientific 
“progress” in the first half of the 
20th century. Best of all. perhaps, 
was another episode in the Modem 
Art series which ranged widely 
from a discussion of attitudes 


towards women in pictures by 
Degas and his contemporaries to an 
exploration of the redevelopment of 
Paris by Haus smarm; an utterly 
absorbing programme. 

The style may sometimes jar a 
little. It is usually fairly obvious 
that the presenters are academics 
first and broadcasters second, 
though none that I saw was com- 
pletely inept, and presentation has 
improved since the early days. 
Although the Oared trousers and 
Zapata moustaches which, thanks 
to repeats, appeared to survive for 
so long as a uniform among OU 
presenters, have now (almost) all 
gone, you can still find yourself 
brought up short by some Marxist 
comment which sounds endearing ly 
dated, five years after the foil of the 


Berlin Wall Similarly you can still 
come across old fashioned finger- 
wagging feminism, yet both are 
now exceptional 

There is another difference 
between OU material and other tele- 
vision programmes. Difficult to pin 
down precisely, the most important 
aspect is probably that OU person- 
nel do not feel compelled to strain 
perpetually for “balance", either 
politically or between any other 
schools of ideas. As often as not the 
OU tone indicates the sort of 
detachment and scepticism regard- 
ing all traditional and received wis- 
dom which is such a healthy aspect 
of the better sort of academic life. A 
little more of it in mainstream tele- 
vision journalism could go a long 
way. 


Theatxe/Malcolm Rutherford 

The Case of Rebellious Susan 


W hat a marvellous place 
the theatre most have 
been at the beginning 
of the present century. 
Ibsen, Strindberg, Chekhov, Wilde, 
Shaw, GranviUe-Barker bursting 
out all over. And so modern. Here 
were grown-up plays for grown-up 
people: articulate and educated 
writers providing for an equally 
educated audience. No doubt it was 
very middle class and possibly 
slightly earnest, but it was theatre. 

In Richmond the tradition contin- 
ues. Even the revival of an almost 
forgotten play - The Case of Rebel- 
lious Susan by Hoary Arthur Jones 
- has the house captivated almost 
throughout. 

The piece has its faults. First per- 
formed at the Criterion in 1894, the 
text was tampered with by the act- 
or-director Charles Wyndham on 
the grounds that the original might 
have been too shocking. In the ver- 
sion that has come down to us, it is 
not quite clear whether Susan has 
committed adultery in Cairo in 


order to show that what a husband 
can do a wife can do too. Her disaf- 
fection may be all an elaborate pre- 
tence. 

Thera are other ambiguities. Not 
all the motivations are Intelligible. 
Who was the only love of the 
divorce lawyer, Sir Richard Kato 
QC? Moreover, the play ends on a 
note of sentimentality not wholly in 
line with what has gone before. Per- 
haps Susan should have stuck to 
her rebellion. 

Nevertheless, she puts up a good 
fight. So do some of the other 
women. Kato has a young ward 
called Elaine Shrimpton. Her ora- 
tory leads to the storming of the 
Clapbam Post Office, fully reported 
in The Times. Admiral Darby, one 
of the more unfaithful of the spe- 
cies, has a very forgiving wife, sig- 
nificantly called Victoria. The 
house where the revolutionary 
Elaine lives in south London is in 
Gladstone Road. 

Clapham indeed comes in for a 
good deal of stick as being a boring. 


conventional London suburb. This 
goes down extraordinarily weD in 
front of a Richmond audience. 

One cavil If you are going to 
revive a play like this, you must 
pay every attention to detail The 
set in the lovely, tiny Orange Tree 
theatre brings it off Yet some of the 
costumes do not quite fit I cannot 
imagine that Sir Richard Kato 
would wear a morning coat that 
looks as if it has been picked up 
from Oxfam. Kirky, the footman, 
also looks a bit scruffy. 

For the rest however, this is a 
scintillating production directed by 
Auriol Smith. Is it a comedy or a 
tragedy? In the course of the play 
Jones seeks to answer the question 
himself: “My comedy isn’t a comedy 
at all. It's a tragedy dressed up as a 
comedy.” That is about right. 
Sarah-Jane Fenton as Susan 
becomes steadily more attractive as 
the piece goes on. 

Orange Tree, Richmond. (081) 940 
8633 


Ageing into Variety 


I t is just like the good 
old days at the Palladium 
for the next week or so. 
There is a comedian topping 
the bill telling jokes, performing 
sketches, getting involved in 
slapstick. 

The fact that the jokes (Man: “Got 
a copy of Psychic News? 
Shopkeeper “You tell me".) have 
the patina of history: the sketches 
(the blindfolded Great Mystero just 
cannot conjure up a right answer 
for his feed) are of Victorian 
vintage; and the slapstick (two men 
compete for the favours of a third 
wearing a skimpy bikini) had them 
roaring at the Coliseum - in Rome 
- add to the warm glow of 
communal memory. 

The only thing slightly disturbing 
is that this is Paul Merton's show, 
Merton the cynical, deadpan, 
alternative comedian. 

Although Paul Merton rose to TV 
fame through stand-up routines in 
comedy clubs, he has always been 
too laddish to be your typically 
PC-alternative ranter. His audience 


is the lower middle class and it 
was out in force on Monday, willing 
their boy on. He got there in 
the end, but it was a tough 
battle. 

Only in a protracted skit on 
Aladdin, with Merton somehow 
playing Buttons, did the Palladium 

Antony Thorncroft 
finds alternative 
comedian Paul Merton 
distancing himself from 
his television past 


come to life. (Buttons “I haven’t got 
any friends”. Audience; “aaah". 
Buttons - aggressively - “Don’t 
you patronise me"). 

Merton shares the stage with Lee 
Simpson and Richard Vranch. 
Perhaps it is inevitable that the 
young Turks of comedy eventually 
age into variety stars, but there is 
something dispiriting about 


watching Merton do monologues 
about his school days, and Simpson 
and Vranch perform sketches honed 
in the music halls. 

What saves it, and makes for a 
mildly amusing evening, is 
Merton’s aggrieved innocence, put 
over with a professional picCuiiOu 
and clarity. Many of the one liners 
have his special mark on them - “I 
disturbed a burglar last night. 
I told him there was no God” - 
and when he does occasionally let 
rip on the ad libs his famed 
stream -of-consciousness ravings 
show signs of genius. 

Paul Merton seems to be 
distancing himself from his 
television past - his sparring 
partner on Have l Got News for You, 
Angus Deayton, bears the brunt of 
a running joke (he is portrayed as a 
suspended suit), and Merton even 
has a go at improvisation: “if you 
can't be bothered to learn the words 
why do it at all." 

But this very English, very 
traditional, evening hardly 
stretches his talent 


|| International^ 

Ari 

rs 

Gun 

DE 


■ BORDEAUX 

Palais des Sports Tonight, 
tomorrow: Muhai Tang conducts 
Orchestra National Bordeaux 
Aquitaine in works by Mendelssohn 
and Shostakovich, with violin soloist 
Midori. Sun (at Grand-Th&Mre ): 
Alain Lombard conducts an 
all-Haydn programme, with trumpet 
soloist Sergei Nakariakov (5648 
5854) 


■ COLOGNE 

PhMiarmonfe Tonight Alfred 
Brands! plays Beethoven piano 
sonatas. Tomorrow: Dmitri 
Hvorostovsky, James Galway, the 
Labeque Sisters and others take 
part In opening of 1994 
KlassikKomm. Fri: Vladimir 
Ashkenazy conducts Berlin Radio 
Symphony Orchestra In works by 
Ibert, Roussel and Dvorak. Sat 
HeJmuth Rilling conducts Bach’s 
Matthew Passion. Sun morning*, 
Frank Martin's oratorio Golgotha. 
Sun afternoon: Martin HaselbSck 
directs Wiener Akademie in a Haydn 
programme. Sun evening: Gidon 


Kramer and friends (0221-2801) 
Opemhaus Tonight Helen Donath 
song recital. Fri: Harry Kupfer’s 
production of Shostakovich's The 
Nose. Sat Jochen Ulrich's 
choreography of Peer Gynt Sun: 
Jones Con ion conducts first night 
of Anthony PHavachTs new 
production of Peter Grimes, with 
cast headed by Ben Heppner, 
Carolyn James and Victor Braun 
(repealed April 1, 4, 7, 10, 13, 16, 
19). Tubs: RigoJetto (0221-221 8400) 


■ COPENHAGEN 
Royal Theatre Tonight Cosl fan 

tutte. Tomorrow, Mon: new ballets 
by Anna Laerkesen and Laura Dean. 
Fri, Sun afternoon: Carmen. Sat 

Helgl Tomasson’s new production 
of Sleeping Beauty. Tues: Paavo 
Berglund conducts Dieter Kaegf s 
new production of Fideflo. Next 
Wed: Boje Skovhus song recttal 
(tel 3314 1002 fax 3312 3692) 


■ DRESDEN 

Semperoper Tonlgit, Sat The 
Bartered Bride. Tomorrow: La 
travfatn. Fri: Prokofiev's ballet 
Romeo and Juliet Sun, Mon: 
Giuseppe S'mopoli conducts 
Dresden StaatskapeBe in 
Schumann’s oratorio Das Paradis 
und die Peri (0351-484 2323) 
Kutturpafest Sat. Sun: JOrg-Peter 
Weigie conducts Dresden 
Philharmonic Orchestra and Chores 
in Bach's St John Passion 

(0351-486 6666) 


■ FRANKFURT 

Alto Oper Tonight Lorin Maazel 

conducts Bavarian Radio Symphony 


Orchestra in an all-Richard Strauss 
programme. Tomorrow, Frfc Pinchas 
Zukerman conducts Frankfurt Ratio 
Symphony Orchestra in Bach and 
Bruckner. Sat US Army Band and 
German- American Chorus in an 
evening of American poptriar music. 
Sun: Alfred Brands! plays Beethoven 
piano sonatas. March 30- April 4: 
Budapest State Opera in Der 
Zigeunerbaron (069-134 0400) 
JahrhunderthaEle Hoechst Fri, Sat 
Ballet of Geneva's Grand Theatre 
'm choreographies by Ohad Naharin 
(069-360 1240) 

Oper Fri, Sun: Syfvain Cambreilng 
conducts Herbert Wernicke's new 
production of Duke Bluebeard’s 
Castle, with Henk Smit and 
Katherine Ciesinski (069-236061) 
English Theater Kai se rstrasse 
A new production of Arthur Miller’s 
1991 play The Ride Down Mount 
Morgan opens on Fri, with previews 
tonight and tomorrow (069-2423 
1620) 


■ GOTHENBURG 

Konaerthuset Yevgeny Svetianov 
conducts the next two weeks of 
concerts by the Gothenburg 
Symphony Orchestra. Tomorrow 
and Fit Mahler’s Sixth Symphony. 
Next Wed: Mozart and 
Rimsky-Korsakov. Barbara 
Hendricks gives a song recital on 
Tues (031-167000) 


■ HAMBURG 
MusikhaOe Tonight Daniel Nazareth 
conducts MDR Symphony Orchestra 
and Chorus in Verdi's Requiem. 
Tomorrow: Andras Schiff piano 
recitaL Sat evening. Sun morning: 
North German Radio Symphony 


Orchestra plays Wagner. Mon: Lynn 
Harrell cello recital (040-354414) 
Staatsoper Repertory over the next 
two weeks includes a Ring cycle 
conducted by Gerd Albrecht La 
traviata with TIziana Fabbricini as 
Violetta, Der WiTdschOtz and FidelJo 
(040-351721) 


■ HELSINKI 
Finnish National Opera Tonight 
tomorrow: new Stravinsky ballet 
programme, including world 
premiere of Jorma Uotinen's 
Petrushka. Fri: Otetio. Sat Nicolai's 
Die lustigen Weiber von Windsor. 
April 10, 12, 13: guest performances 
by Deutsche Oper Berlin (0-4030 
2211) 


■ LYON 

Op£ra Tonight Fri, Sat (also April 
7-10): American Ballet Evening, 
choreographies by Bill T. Jones, 
Stephen Petronio and Susan 
Marshall. Tomorrow: Kent Nagano 
conducts symphonic and vocal 
works by Cantetoube, Debussy and 
Ravel, with soprano soloist Dawn 
Upshaw. March 30 -April 3: Pina 
Bausch Tanztheater Wuppertal (tel 
7200 4545 fex 7200 4546) 
Auditorium Tomorrow, Fri: Gennadi 
Rozhdestvensky conducts Orchestra 
National de Lyon in works by 
Saint-Saens and Mendelssohn, with 
piano soloist Viktoria Postnikova. 
April 5: Martha Argerich (7860 3713) 


■ MONTE CARLO 

SaOe Gamier Tonight, Fri, Sun - 
afternoon: Evekno Pido conducts 
Jonathan Miner's new production 
of Anna Boiena, with Ghjsy Devinu, 


Denyce Graves and Roberto 
Scandkizzi (9216 2299) 


■ MUNICH 

Staatsoper Tonight, Sun, next Wed 
and Sat Lady Macbeth of Mtsensk 
with Marilyn Schmiege and Jan 
Blinkhof. Tomorrow: Ivor Bolton 
conducts Richard Jones' new 
production of Giulio Gesare, with 
Ann Murray, Kathleen Kuhlmarm, 
Trudeliese Schmidt, Pamela Cobum 
and Christopher Robson. Fri, Mon: 
Meistersinger with Bemd Weikl, 
Francisco Araiza and Karita Mattfla. 
SaL next Tues: choreographies by 
Uwe Scholz, Hans van Manen and 
Jiri Kytian (089-221316) 

Gasteig Tomorrow. Fri. Sun 
morning, Mon: Christoph von 
Dohnanyi conducts Munich 
Philharmonic Orchestra in works 
by KA Hartmann, Berg and Dvorak, 
with violin soloist Frank Peter 
ZRnmermann (089-4809 8614) 


■ OSLO 

Konserthus Tomorrow, Fri: Klaus 
Weise conducts Oslo Philharmonic 
Orchestra and Chorus in Berlioz's 
Requiem (2283 3200) 

FoJketeatret Fri: first night of new 
production of Die Walkure, second 
instalment of Norwegian National 
Opera's Ring cycle conducted by 
Heinz Fricke. The cast includes 
Carol Yahr, Marianne Hfiggander 
and Oddbjom Tennflord. Repeated 
April 6, 9, 13, May 14 and 19, with 
Das Rheingold on May 5 and 7 (tel 
2242 7724 fax 2242 7877) 


■ STOCKHOLM 

Royal Opera Tonight: Suppe’s 


operetta Boccaccio. Tomorrow, Fri, 
Sat afternoon, next Tues and Thurs: 
Natalia Makarova's production of 
La Bayadere. Next Mon and Wed: 

La boheme (tickets 08-248240 
information 08-203515) 
Konserthuset Tonight, tomorrow: 
Iona Brown directs Academy of 
St Martin in the Fields (tickets 
08-102110 information 08-212520) 
Berwakfhafien Sat afternoon: 
Emmanuel Krivlne conducts Swedish 
Radio Symphony Orchestra in works 
by Debussy, Bernstein and Dvorak 
(08-784 1800) 


■ STRASBOURG 

Palais de la Musique Tonight, Sun 
afternoon: Friedrich Haider conducts 
concert performances of Roberto 
Deveneux, with cast headed by Edita 
Gmberova. Fri: Wolfgang Sawallisch 
conducts Vienna Symphony 
Orchestra in symphonies by Haydn, 
Beethoven and Schumann (8875 
4823) 


■ STUTTGART 

Staatstheatsr Tonight: Achim 
Prayer’s production of Der 
FreischQtz. Tomorrow, next Tues: 
Der Rosen kavalier with Ellen Shade 
and Helmut Berger-Tuna. Fit Marcia 
Haydde’s version of Glazunov's 
ballet Raymonda Sat Johannes 
SchaaFs production of Rigoletto, 
with Wolfgang Schdne in title role. 
Slxi morning, Mon evening in 
Liederhafle: Michael Gielen conducts 
Bruckner’s Eighth Symphony 
(0711-221795) 


ABTS GLIDE 

Monday: Berlin, New York and 
Paris. 

Tuesday: Austria. Belgium, 
Netherlands, Switzerland. Chi- 
cago, Washington. 
Wednesday: France, Ger- 
many. Scandinavia. 

Thursday. Italy. Spain. Athens. 
London. Prague. 

Friday: Exhibitions Guide. 

European Cable and 
Satellite Business TV 

(Central European Time) 
MONDAY TO FRIDAY 
NBC/Super 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. 3345 

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 2230 

Sky News: FT Reports 0430, 
1730: 





FINANCIAL TIM-re WEPNESr AV MA * CH 23 1994 


Edward Mortimer 




Wave after 
wave of appli- 
cant countries 
Comes crashing 
on to the 
shores of the 
European 
Union. The 
European Free 
Trade Association (Efta) wave 
has just broken, but behind it 
the central European wave 
already looms high and menac- 
ing. 

Ur Peter Boross, the Hungar- 
ian prime minister, faces a gen- 
eral election on May 8. No one 
in Budapest doubts that his 
desire to file an EU member- 
ship application in April is 
closely related to this fact 

Mr Boross's conservative 
nationalist party, the Hungar- 
ian Democratic Forum (MDF), 
which has governed Hungary 
for the last four years, is strug- 
gling to climb back from fourth 
place in recent opinion polls, 
which give the socialist (for- 
merly communist) party a com- 
manding lead. 

Economically, Hungary's 
recovery from post-communist 
depression has begun: indus- 
trial production grew by four 
per cent in 1993, after falling 
steeply in each of the three 
previous years. But GDP still 
registered a slight drop, thanks 
to a collapse in agricultural 
output; and there is a long way 
to go to get back to 1989 levels. 

Most Hungarians compare 
their present circumstances 
unfavourably with those they 
enjoyed under "goulash com- 
munism’' in the 1980s. even 
though few imagine that it is 
possible to go back to that 
phase, during which a totali- 
tarian system was being gradu- 
ally and hesitantly relaxed. 
The socialists themselves 
accept that the transition to 
market-driven capitalism is 
now irreversible. But they offer 
to manage the transition better 
and to protect the weak 
against its worst effects. Such 
promises may be worthless, 
but many voters want to 
believe them, or at least to see 
what a change of government 
will bring. Mr Boross's only 
hope of winning back his par- 
ty’s supporters lies in convinc- 
ing them that the long-term 
strategy of his predecessor Joz- 
sef An tall (who died in Decem- 
ber) Is still on track. That 
strategy aimed to make Hun- 
gary a fully western country, a 
member of the EU and Nato, 
by the end of the century. 

On Nato, the government is 
making the best of the half-suc- 
cess achieved at the summit in 


Thirsty 
for a 


A French vehicle fleet 
management com- 
pany. an Austrian 
consumer finance 
business, a Swedish computer 
leasing concern: piece by piece, 
GE Capital is stitching 
together one of Europe's broad- 
est financial groups. 

All three acquisitions have 
been announced by the finan- 
cial services snbsidlaiy of Gen- 
eral Electric, the US industrial 
sinr«» last summer. GE 
Ca pital has also helped ball out 
GPA, the Irish aircraft leasing 
group, taken a stake in a 
Monaco-based ship manage- 
ment business, and acquired 
interests in other European 
firwnHgt sector concerns. 

Its involvement in busi- 
nesses such as car sales financ- 
ing, leasing lorry trailers and 
servicing other companies' 
mortgage portfolios has not 
made headline news. It tends 
to buy small, picking up 3200m 
of assets here, $30Gm there. But 
if its record in the US Is any- 
thing to go by, GE Capital’s 
competitors in the European 
financial services industry 
have plenty to worry about 
Last week's £L2bn bid in the 
US for Semper, a financial ser- 
. vices group based in Chicago, 

| threw a rare spotlight an the 
company's «Tiih?h~nnft ff it suc- 
ceeds in forcing Kemper to 
accept its unwanted advances, 
GE Capital win emerge as one 
of (he biggest fund manage- 
ment groups in the US. 

GE Capital’s track record in- 
recent years is envied by 
rivals. While other industrial 
companies that ventured into 
flnandai services in the 1980s 
got their fingers burnt, GE has 
thrived. The assets in its main 
ftnanning operations have dou- 
bled in the past four years, 
reaching $U8bn at the end of 
last year. That does not 
include the assets of a special- 
ist insurance operation and 
Kidder Peabody, the invest- 
ment bank if owns. 

GE Capital is one of the most 
consistently profitable compa- 
nies in the US financial sector. 
While the country’s commer- 
cial banks were going through 
problems with real estate and 
leveraged buy-outs in 1990 and 
1991. GE Capital barely 
flinched. The company was not 
totally hnwnmp from su c h diffi- 
culties but a policy of not lend- 
ing for new construction - 
which proved the riskiest form 
of real estate lending - kept it 
away from the worst effects of 
the late-lS80s building boom. 

Its robust balance sheet also 
enabled it to shrug off the 
problems hum leveraged lend- 
ing. From 18 per cent in 1988, 
its post-tax return on capital 
edged down to 17 per cent in 


potion 


The Hungarian 
parliament 
yesterday 
voted to apply 
for EU entry 


January, when Nato promised 
to admit new members in the 
future hut avoided saying who 
or when. On the EU the posi- 
tion is slightly clearer, since 
last June's Copenhagen sum- 
mit explicitly offered the pros- 
pect of full membership to 
those central and east Euro- 
pean countries that have asso- 
ciation agreements. 

Since February, Hungary has 
such an agreement fully in 
force. Filing a membership 
application now will probably 
not affect the final outcome, or 
the timetable of negotiations, 
which will be determined by 
arguments among the EU's 
existing members; but symboli- 


Federal or 
confederal, deep 
or shallow . . . 
Hungary must 
be in the EU 


cally it will be an important 
milestone on the road. 

Opposition parties are irri- 
tated by the government’s will- 
ingness to exploit this symbol- 
ism for electoral purposes, but 
none of them would dream of 
opposing the strategy. There is 
an all-party consensus on EU 
membership, but few Hungar- 
ians of any party seem to have 
thought out the full implica- 
tions, or to have followed the 
arguments within the EU 
about the direction it should 
take. Federal or confederal, 
deep or shallow: it makes no 
difference. Hungary must be 
ia. 

An economic rationale for 
this attih irip can he given: as a 
small country on the edge of a 
large economic bloc, Hungary 
needs to he inside rather than 
outside. But it is clear that 
that is not the main reason. 


What Hungarians want above 
all security. 

Security from what? Russia? 
From their more immediate 
neighbours? From themselves? 
Put any of these threats to 
them in specific terms and 
they will tend to play it down. 
The Russian threat is in the 
background, but for Hungary, 
much more than for Poland, it 
is now reasonably remote. The 
suggestion that Hungary could 
be drawn into Balkan conflicts, 
by concern for the Hungarian 
minorities in Serbia and 
Romania, is indignantly 
rejected; as Is any questioning 
of the stability or permanence 
of Hungary's internal democ- 
racy. 

All these are spectres which 
haunt the Hungarian soul in 
the dark hours of night, even 
though in daylig ht they may 
seem far-fetched (and anyway 
they should be kept out of 
sight for fear of scaring off 
investors). Or rather they are 
different shapes assumed by a 
single, more permanent spectre 
that lurks just below the sur- 
face of Hungary’s collective 
psyche - a spectre called “the 
tragic past”; a history of war, 
defeat and conquest punctu- 
ated by brief moments of glory. 

That of course Is something 
Hungary has in common with 
the rest of central Europe, 
indeed with Europe as a whole. 
But it Is something western 
Europe is seen as having 
escaped from since 1945 - give 
or take a few nasty local excep- 
tions like Northern Ireland. 

If Western Europe has 
escaped, central Europeans 
tend to assume that it must 
have done SO by taking magic 
potions. A range of bottles is 
on show in the west European 
pharmacist's window, and cen- 
tral Europe is determined to 
try them all Some, labelled 
Conference on Security and 
Co-operation in Europe 
(CSCE). Council of Europe, 
North Atlantic Co-operation 
Council (NACC), it has already 
swallowed. They taste disap- 
pointingly bland, and the latest 
to be pushed across the 
counter at Nato's January 
summit, lahaUad "Partnership 
for Peace”, smells similar. 

But there are two bottles in 
the back of the shop, with very 
high price tags, which the 
chemis t goons curiously reluc- 
tant to dispense. One is Nato. 
and the other has just been 
re-labelled “EU". They, surely, 
contain the real stuff. At any 
rate, central Europeans will 
not be content tmtg they have 
tried them out 



General Electric’s fast-growing financial services 
offshoot is looking to Europe, says Richard Waters 


Global expansion 
to cap it all 


1990, but has since climbed 
back steadily. Last year, it was 
18.5 per cent 

The result: while other finan- 
cial businesses in the US shed 
assets, GE Capital has been 
buying. It has spent J2bn or 
more a year cm acquisitions in 
each of the past three years, 
preferring to pick up | busi- 
nesses being discarded by oth- 
ers. Last year's haul included 
the assets of the credit card 
business of ofl company Exxon, 
and the railcar leasing busi- 
ness of Chrysler. 

Real estate has become a 
particular focus of its acquisi- 
tion policy. Apparently believ- 
ing that it is buying at the 
bottom of the market, GE Capi- 
tal added to its mountain 
of property assets in recent 
months, taking advantage of 
the fact that bank-« ?>p d insur- 
ance companies are still cut- 
ting their involvement in the 
sector. 

In the past year GE Capital 
has bought 51 bn of property 
from First Chicago bank and 
31-lbn from the Resolution 
Trust Corporation, the govern- 
ment agency responsible for 
selling the assets of failed 
savings and loans institutions. 
It also took on JLlbn of prop- 
erty when it bought two annu- 
ity companies last year, GNA 
and United Pacific 

It is still busing property: GE 
Capital's latest target, Kemper, 
has $1.7bn of property on its 
books. Acquiring Kemper 
would also mark a renewed 
interest by GE Capital in the 
investment business. GE Capi- 
tal’s earlier involvement in the 
sector proved disappointing. 
Kidder Peabody was a loss- 
maker in the early- 1990s. and 
was long rumoured to be one 
company that GE would have 
been happy to seQ. But, helped 
by the buoyancy of financial 
markets, it made operating 
profits of 5439m last year. 

Last year, GE Capital made 
its first forays into the retire- 
ment savings market, with the 
acquisition of an annuity busi- 
ness. It has also bought a small 
mutual funds business, with 
$7 bn of assets. The acquisition 
of Kemper would build on this. 
Its 544bn of fund assets would 


GE Capital: electric performance 


Net oamiags ($bn> 


mm 



erst The interest rate it paid 
on its outstanding short-term 
tebtattheendotbstytMTO 
o on np r cent, down from 3*7 
“ X . sear bdte. With 
short-term borrowings of 
$46bn. every hundredth of a 
percentage point counts. 

Ironically- the more success- 
ful CE Capital becomes, the 
more its tripte-A rating could 
be at risk. The financial com- 
pany relies on the backing of 
itsparent for its top rating. As 
GE Capital's profits become 
more important to GE - last 
vear they amounted to 40 per 
cent of the total - so the par- 
ent’s own rating becomes less 
robust- 

“At what point does the tail 
start wagging the dogT 7 asks 
Mr Ray Miller of Standard & 
Poor's, the rating agency. 
"That’s something we're wres- 
tling with now." 


\A 




. tB80 90 31 BZ 




W hen It comes to 
buying financial 
assets, GE Capi- 
tal’s robust bal- 
ance sheet makes it one of the 
first on most sellers’ lists. It 
could turn out to be the only 
serious bidder for Kemper, 
while commercial banks have 
their sights set on the mutual 
fund industry, few are likely to 
have the stomach for Kemper’s 
$L5bn of under-performing real 
estate assets. 

A second advantage, often 
commented upon, is the fact 
that GE Capital is not a bank, 
and so does not suffer from the 
dead hand of banking regular 
turn in the US. In reality, this 
is much exaggerated. Banks 
also carry out their credit card, 
leasing and consumer financ- 
ing activities through non- 
bank subsidiaries. 

More significant is a third 
advantage: a management 
twnm with an unparalleled rep- 
utation and record in its indus- 
try. Under Mr Gary Wendt, its 
head for the past eight years, 
GE Capital has won a name for 
driving hard bargains as a pur- 
chaser and for a fanatical 
attention to costs. Mr Wendt is 
regarded in the industry as a 
dose ally of Mr Jack Welch, 
chair man of General Electric. 

The financial services com- 
pany shares the low-cost cul- 
ture of the industrial group of 
which it is a part Its use of 
technology to reduce process- 
ing costs and generate manage- 
ment Information is also far in 
advance of the banking indus- 
try. bemoans an executive in 
nne of the biggest US banks. 

“They think differently from 
us. They approach things dif- 
ferently,’’ the exec utive says. It 
is a difference that European 
hflnt-g may be about to dis- 
cover. 


mm 





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* ‘-V • 

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* • ‘‘ v?; /Jim- ■'#> . 'iawj§ : 'to«- • 


Ffcianchg ‘ 1 TS 2 -.' 1207- '/jiSZT' 1306 


3SI 457 501-641. 


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AB other ’’/i’-f-. 


(54) 119 ' 8TO 


! ‘ - ; ■ (32$. (290) •,...(272) 

-Ji -tiSe*- riass . zoos 

If-M A"'"*'. . 


put GE among the 10 biggest 
mutual fund businesses in the 
US. If Kemper’s life insurance 
business, and GE's other fund 
management activities were 
added in, GE would control 
|150bn of investments. 

In Europe, GE Capital is at a 
much earlier stage of develop- 
ment It made some sizeable 
acquisitions in the 1990s, 
including the credit card busi- 
nesses of UK retailers Burton 
and House of Fraser and the 
vehide fleet services business 
of Avis Europe. But the spate 
of smaller purchases in recent 
months indicates its intention 
to build on these interests. 

With the European financial 
sector under recessionary pres- 
sures, the US giant has been 
prowling for acquisitions: it is 
no mrnrtfitmtv* that three of its 
recent buys, announced last 


month, were the vehicle 
finance, computer leasing and 
office equipment leasing com- 
panies of Skandinaviska 
gnsiriiriH Banken, the troubled 
Scandinavian bank. 

• Europe is not the only focus 
of its interest, however, invest- 
ments since last summer 
include an automobile financ- 
ing company in Thailand and a 
vehicle fleet company in Can- 
ada. 

In its adventures outside the 
US. GE Capital has three fee- 
tors in its favour 

First, it has access to a (heap 
supply of fee basic raw mate- 
rial that drives its b usiness - 
cash. With a triple-A credit rat- 
ing. GE Capital ranks among 
the best-regarded borrowers in 
the capital markets (unlike 
banks, it does not collect 
deposits to lend on to borrow- 


LETTERS TO THE EDITOR 


Number One Southwark Bridge, London SE1 9HL 

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


Treasury: masterminding the UK's decline 


From Mr Ian PhUUps- 
Sir, So we are told that an 
influential committee of MPs is 
recommending that the Post 
Office should be free to raise 
money outside the public sec- 
tor borrowing requirement to 
help it compete (“MPs urge 
more access to funds for Post 
Office”, March 18). At the same 
time the Cabinet is reportedly 
deadlocked on a leasing deal 
that would provide London 
Transport's Northern Line 
with badly needed new rolling 
stock, with the chief secretary 
insisting that it would be a fla- 


grant breach of public borrow- 
ing rules. We hear also the 
armed services are considering 
leasing vehicles in order to 
save money, although doubt- 
less the rules will be broken. 

I thought the Ryrie rules 
were dead, and that the prime 
minister, when in a previous 
post, claimed to have done 
away with many of the restric- 
tions that blur public/private 
sector investment decision- 
making to the country's disad- 
vantage. 

Or do we have to wait for Sir 
Alastair Morton's committee to 


come up with miracles? 

No, the truth of the matter is 
that even if they do produce 
some good ideas Treasury 
orthodoxy will see them off. 
Even were there are good 
infrastructure projects that 
earn a decent rate of return 
they fail to go forward because 
of the dear old public sector 
borrowing requirement, and 
our inexorable decline goes on. 
magtermforiBri by the Treasury. 
And these are the guys who 
got us into and out of the 
exchang e rate merinmiam, ach- 
ieving the proud feat of bad 


timing an both occasions, and 
who have consistently mis- 
managed interest rates and 
exchange rates in both good 
times and bad. 

I would like to support Sir 
John Banham's reported view 
that the Treasury should he 
abolished as part of a drive to 
refocus policy making (“Ban- 
ham calls for Treasury aboli- 
tion”, March 31). 

Ian Phillips, 

Glebe Cottage, 

Dunttsboume Cottage, 
Cirencester, 

Gtos GL7 7JN 


Language of 
television 


Sacrificed on the alter of Europhobia 


From John Parry 

Sir, Christopher Dunkley 
(Television: March 2) bemoans 
the fact that his satellitejcable 
l equipped viewers do not have 
anything to watch. Perhaps 
| this is because the selection 
offered to them is so feeble. 

Here in Geneva we are 
cabled and I have 34 channels 
in seven languages. Agreed, 
much of It is of mind-boggling 
tedium; I can only take so 
much of HTV for example. 

But if one continues to zap 
around, one can find some fas- 
cinating programmes even if 
one’s command of the lan- 
guage is shaky. 

The German channels, deni- 
grated by Mr Dunkley. have 
excellent documentaries in the 
evenings. Tiring of the intermi- 
nable ice hockey on all three 
Swiss channels the other night, 

I flipped to a German channel 
and found a fascinating 45-min- 
ute documentary on the fell of 
East Germany which taught 
me a lot that I did not know. 
The same channel a year or bo 
ago had a touching report on 
the Volga Germans who yearn 
to go “home" but can’t. 

Of course, one has to speak 
more than one language to 
appreciate ail this, and I 
assum e Mr Dunkley is telling 
us that bis monolingual view- 
ers can't handle anything 
other than English. In that 
case, they are missing a lot of 
good TV. But then that’s all to 1 
do with the British education , 
system, isn’t it? And that's 
another subject 

John Parry j 

1 Chemtn de la Bade, : 

1213 Geneva, 

Switzerland I 


From Mr DAA FagandinL 
Sir, What I have not heard or 
read about regarding EU 
eniar gftmpnt is the unspoken 

perception in Europe that if 
Britain were to succeed in 
holding the blocking vote at 23, 
it would later insist that an 
unalterable precedent had been 
created when others came to 
join. Four such applications 
are in prospect, so Britain 


would thereby have trans- 
formed the EU into a virtual 
free trade area, an outcome our 
partners know is the present 
government’s real aim whoa It 
speaks cf being at the heart of 
Europe. In that sense, we are a 
spear that mil have to be 
deflected. 

We may just be able to delay 
matters until 1996, but at vast 
cost in credibility. Whatever 


happens, we will eventually be 
forced to have a referendum to 
determine our future one way 
or the other. Until we do so, we 
will have sacrificed what Influ- 
ence we have at present on the 
altar of Europhobia and be 
unable to defend any of oar 
real Interests. 

DAA Fagandini, 

6 Alleyn Park, 

Duho&h . London SE218AE 


Unclear trend on shorter working hours 


From Mr Dan Cony. 

Sir, In the short term it does 
seem as thnqgh the increase in 
part-time work occurring in 
the British economy is such 
that average hours worked per 
week are falling (“In, out, 
share the work about”, March 
15). This fairer distribution of 
av ailab le work is surely to be 
welcomed whatever other 
qualms «we might have about 
the economy's inability to pro- 
duce enough person-hours of 
work In total. 

The question is. however, 
whether the mere existence of 
a more flexible labour market 
will mean (hat this trend con- 
tinues as David Goodhart sug- 


gests it wiH The labour mar- 
ket has become mare deregu- 
lated since 1979, yet analysis in 
New Economy has shown that 
over this period average work- 
ing hours have actually 
increased - in stark contrast to 
the trend of the last 100 years 
or so. Certainly there have 
been more part-timers over 
this period but there have also 
been more self-employed (who 
tend to work longer) and also 
the manager and professional 
class have been working lon- 
ger, generally unpaid, extra 
hours. 

We do not really understand 
this latter phenomenon, ft may 
be employers demanding more 


effort or it may he an increased 
incentive to get promotion due 
to the increased monetary 
rewards and the hedge this 
gives against the growing inse- 
curity of any job. 

Until we understand this , it 
will be difficult to say whether 
the new deregulated labour 
market will of its own accord 
share out the work better or 
whether more positive action 
will be needed. 

Dan Corry, 
editor. 

New Economy. 

Institute for Public Policy 
Research, 

30-32 Southampton Street, 
London WC2E 7RA 


On time - but only if you move the goal posts 


From Mr Andrew WN Banks. 

’ Sir, As William Waldegrave 
(Personal View, March 17) 
should know, there are lies, 
damned ties, statistics and 
white lies. 

The passenger’s charter of 
which he is so proud fells into 
the latter category. Intercity, 
with which I estimate 1 have 
travelled 300.000 miles in the 


last six years, has achieved its 
targets only by moving the 
goal posts. Whereas six years 
ago the journey time between 
Newark and London averaged 
less than 85 minutes, it is now 
almost 95 minutes on the new 
“faster” trains. These increases 
coincided with the imposi t i o n 
of the charter. 

Regular commuters now 


smile when BR tells us we are 
arriving two minutes early. Six 
years ago this would have been 
eight minutes late. 

Mr WahHegrave’s glass may 
be half full, but sadly he now 
drinks from a pitcher inetpad 
of a pint glass. 

Andrew w N Backs, 

4 Pine Close. 

Newark NG24 2AU 




Ukrain 




J 



FIN ANCTAI. TIMES WEDNR^... MApr .„ „ 


financial times 

!KI£ 5 K 2 S£ 1 s“£ 

Wednesday March 23 1994 


More or less 
safe pensions 


The debate over minimum 
solvency requirements for British 
pension schemes may appear 
arcane, but it goes to the heart of 
the issue addressed by the Goode 
Committee on pension law reform. 
How do you protect the promise 
contained in the typical pension 
scheme trust deed to pay a given 
level of pension benefit? 

Setting aside money in advance 
from which to meet pension liabil- 
ities - in a word, funding - pro- 
vides security for present and 
future pensioners in the event of 
the employer running min finan- 
cial difficulty. The problem is to 
define how much to set agidp and 
more specifically, to establish a 
minimum solvency standard to 
ensure adequate protection. It Is 
now clear that the government is 
likely to reject the Goode Commit- 
tee's approach to calculating mini- 
mum solvency in favour of a 
watered down version developed 
by the actuarial profession. 

The case for compromise rests 
on the difficulties that could be 
faced by companies and funds that 
are obliged to establish a new base 
level of funding under the legisla- 
tion that will follow Goode's 
recommendations. In present UK 
law. there are no solvency require- 
ments; the assets and liabilities of 
most earnings related pension 
schemes are valued on an ongoing 
basis. This requires assumptions 
to be made about future benefits 
and about the current value of 
ftiture income streams. In effect 
the actuaries ignore stock market 
values and take a longer term 
view. This has permitted the aver- 
age fund to invest up to 80 per 
cent in equities, despite a pre- 
sumed higher risk relative to the 
government's gilt-edged stock. 
Higher returns have thus been 
earned than on portfolios more 
heavily biased towards gilts. 

If. on the other hand, a fund is 
valued an the assump tion that ft 
is to be wound np immediately - 
the so-called discontinuance basis 


-there is no escape from applying 
stock market values in working 
out whether the scheme wn 
past service liabilities. These are 
valued on the bads of rainnigting 
what it would cost to buy a 
deferred annuity from an insur- 
ance company. 

Until recently a valuation on an 
ongoing basis would us ually pro- 
duce a bigger surplus than on a 
discontinuance basis. But benefit 
improvements have eroded the 
margin. Meantime the gap 
between the returns expected on 
an equity portfolio compared with 
toe gilt returns which dictate 
insurers' annuity rates hac wid- 
ened. So many schemes that are 
well funded on an nngrring Hade 
may be under-funded on the dis- 
continuance basis. 

The actuaries’ proposed compro- 
mise involves valuing liabili ties 
on a mixture of the two tares . 
Equity-type returns will be 
assumed in valuing the rights of 
younger members of a pension 
fund, while a shift will be made to 
a gOts-based valuation for older 
members and current pensioners. 
But this could lead to members 
receiving less than the accrued 
benefits promised to them on 
winding up. This is better than no 
solvency standard. But it locks a 
less than satisfactory outcome. 
Yet, as in the discussion over the 
ownership of pension fond sur- 
pluses. the bargaining chips are 
all in the of the employers. 
If the minimum solvency standard 
looks onerous, they will abandon 
defined benefit schemes and opt 
for defined contributions. 

That implies greater uncertainty 
about the value of pension bene- 
fits. And since funds would be 
obliged to adopt lows- risk invest- 
ment strategies, investment 
returns would be less in the aggre- 
gate. But there would be no con- 
tribution holidays and for more 
transparency. As always in pen- 
sions, it boils down to a search for 
the least bad alternative. 


Ukraine votes 


“Ukrainebas not yet died," is the_ 
apt title of t£e Uk rainian national 
anthem. As Ukr ainian voters pre- 
pare foi parliamentary elections 
on Sunday, their nation’s exis- 
tence is as imperilled as ever. The 
elections give Ukrainians a 
chance, perhaps the last, to set 
their political house in order. 

Optimists dream that Sunday’s 
elections could oust Kiev’s ex-com- 
munist leadership and bring in a 
new guard better equipped to 
introduce market reforms. The 
new people who might be able to 
lead Ukraine to the market at last 
could be businessmen and factory 
directors from Russian-oriented 
eastern Ukraine, or they might be 
reformist nationalist politicians 
from the western and central 
regions of the country. 

Unfortunately, these dreams are 
likely to r emain just that. Since 
reform candidates have been 
unable to form a single bloc, the 
reform vote is likely to split, giv- 
ing the victory to ex-co mm u ni sts. 
An even greater danger is that the 
Sunday elections will further con- 
fuse Ukraine's already muddled 
political scene. 

On average, eight candidates are 
r unning in each constituency, 
while Uk rainian law requires 50 
p er cent voter turn-out to elect a 
member of parliament. An 
extreme possibility is that these 
stringent requirements will make 
it impossible for voters to elect a 


viable parliament. Mr Kravchuk 
has hinted that he would then 
introduce direct presidential rule, 
a dream for him. but a nightmare 
for Ukrainians who live with, the 
hyperinflation he has created. 
More likely, the elections will pro- 
duce an amorphous new parlia- 
ment, although many constituen- 
cies will first require run-off 
elections between the two leading 
candidates. The legislature might 
be more paralysed than its prede- 
cessor, which at least has a work- 
ing national-communist majority. 

In any case, the new legislature 
will face the same political obsta- 
cle to radical reform as the pres- 
ent one. Politicians fear that such 
reforms would initially cause the 
worst pain in the Russified Don- 
bass region. Thus the right eco- 
nomic medicine would endanger 
Ukraine’s fragile statehood. 

All of this is bad news for the 
west, which is coming to view 
Ukraine as a bulwark against 
Moscow's expansionism, particu- 
larly now that Russia is ta king a 
harder line toward the “near 
abroad”. Ukraine needs political 
and economic support if Russia is 
to be discouraged from provoking 
a potentially devastating conflict 
with its important neighbour. 
Unfortunately, the Ukrainian gov- 
ernment is unable to use economic 
help constructively. Worse, the 
elections are unlikely to change 
this unhappy situation. 


Euro-fraud 


Po the untutored eye, the effort to 
combat fraud against the Euro- 
pean Union budget can seem an 
elaborate and unproductive ritual. 
Every year, the EU Court of Audi- 
tors chronicles waste and chica- 
nery in the spending of official 
[hods and urges the European 
Commission to sharpen its con- 
trols. Every year, the Co mmiss ion 
promises to crack down and 
recoup missing money. Mean- 
while, large-scale abuse of the 
budget - especially of farm subsi- 
dies - continues unabated. 

T his view may be a caricature, 
but it is s ufficien tly well estab- 
lished in the minds of European 
ci tizens to have become a blot on 
the ElTs credibility. As pressure 
on the budget grows and the dis- 
mantling of borders within the 
Union provides increased opportu- 
nities for fraud, the problem can 
only intensify. More clearly needs 
to be done to tighten monitoring 
of the effectiveness with which 
taxpayers’ money is spent. 

Fortunately, there are signs that 
the C ommissi on and at least some 
member states are showing 
greater attentiveness to the issue. 
This week. Mr Peter Schmidhuber, 
EU budget commissioner, will 
unveil p lans to step up the fight 
against fraud, with additional 
Commission staff devoted to the 
task, improved procedures for 

cooperation with national judicial 
and police authorities, and more 


extensive sanctions against 
wrongdoers. Separate!;, the Brit- 
ish government will today pot for- 
ward its own ideas, including a 
proposal that fraud against the EU 
budget be made a criminal offence 
across the Union, as is fraud 
against national budgets. 

These are steps in the right 
direction, but they do not demon- 
strate that the Union is treating 
the issue with quite the serious- 
ness it deserves. It is for from sure 
that the Council of Ministers will 

iTnawimmntly back the British ini- 
tiative. Nor can member govern- 
ments be counted on to give the 
Commission the assistance it 
needs, especially when it comes to 
e x te nding scrutiny tram the agri- 
cultural budget to structural 
funds, often, perhaps unfairly, 

criticised for fostering corruption 
in the Union's poorer regions. 

Moreover, the suspicion persists 
that the Commission is running 
behind the issue rather than giv- 
ing a lead. This week it has come 
in for withering criticism from the 
EU auditors for restricting their 
inquiries and behaving as if par- 
ticular problems were isolated 
“accidents”. It should be dear by 
now that various EU pro gramm es 
offer opportunities for systematic 
fraud- The Commission can set an 
example in combating it by show- 
ing more sy st ema ti c transparency 
to those with the job of monitor- 
ing its activities. 


T he saga of the Gioia 
Tauro steelworks in 
southern Italy is a sorry 
tale about broken prom- 
ises, iD-conceived ideas, 
wasted money and cynical politi- 
cians. 

It epitomises the failure of state- 
sponsored development to bridge 
the divide between a rich, industri- 
ous north and central Italy and the 
world that exists south of Rome. 

Gioia Tauro is also a timely 
reminder, as Italy goes to the polls 
on Sunday, that the political and 
economic problems of the smith are 
likely to become more complex after 
the elections. Here the old political 
order has not been swept away, 
unemployment is three times 
greater than in the north and large 
areas are in the grip of organised 
crime - not least at Gioia Tauro, 
where the Calabrian mafia, the 
‘ndrartgfma, moved in on the back 
of public works contracts for a steel 
complex. 

Twenty-five years ago Gioia 
Tauro was the most fertile coastal 
plain in the region, rich with citrus 
and graced by ancient olive trees. 
Against technical advice it was 
selected aver 11 other potential sites 
as the location for Italy's fifth inte- 
grated steel works. 

Gioia Tauro lacked a port good 
roads, easy access to rail Hnks had 
no tradition of industry and was in 
a zone with a high risk of earth- 
quakes. These drawbacks were, 
however, outweighed by the needs 
of the ruling Christian Democrat 
and Socialist party bosses. The steel 
project was presented as the key to 
industrialising Calabria, the most 
backward southern region. 

The steelworks was never built. 
The 1973 oil shock cut world 
demand for steel and the project 
became redundant But it was only 
aborted after the infrastructure had 
been laid. The plant was conceived 
on the grandest scale imaginable to 
inflate the contracting business. 
The centrepiece was the largest 
artificial port in the Mediterranean 
with 5km of wharves. 

The port is still unused 15 years 
after completion. With luck it might 
become a rnntainpr te rminal Else- 
where on the site, fly-overs vanish 
into weeds. 

The nearby industrial zone is 
vacant save for one state-owned fac- 
tory. Three hundred jobs were 
promised in a venture by the anus 
manufacturer. Oto-Breda. to pro- 
duce a new Nate missile. By the 
time the plant was finished in the 
early 1980s. the missile had been 
superceded. Oto-Breda ’s owner, the 
state industrial holding , Rfim , was 
placed in liquidation in 1992 and the 
plant is up for sale. 

For the past 12 years, successive 
governments have backed plans to 
make good some of this waste by 
allowing Enel, the state electricity 
authority, to build a power station. 


Elections may not 
bridge that gap 

Robert Graham examines the divide between Italy’s 
industrialised north and a south dependent on state aid 

North-south divide: the economics of dependency 


15 


Unemployment 


CapKal'. . Revenues 

expendBuref*) (%} 

Gap&sf transfers Direct tax 



Italian public accounts 

Northern and central ftaJy 
Southern fifty 


indirect tax 


Social security 
cootrj&tatocs 


1220 


680 


IBfft . .. 

• r— — i eeiow 5* 

' " 10-15* 


SaiwCmt 


This was blocked by environmental 
objections. When this hurdle was 
overcome, the state had to contend 
with the C alabrian mana 
In 1990 magistrates froze all con- 
struction contracts on suspicion 
that the construction companies 
were 'nadnmgheta fronts in an area 
where some 60 'ndrangheta famili es 
operate. The magistrates’ investiga- 
tions led in January to 39 arrest 
warrants on corruption charges 
related to the contract, including 
the Enel r.hairmnn 
Violent protests, meanwhile, by 
the jobless in Gioia Tauro forced 
the damp! government last 
autumn to sanction a new start on 
the power station. This was seen 
locally as a move to buy stability in 
the run-up to the elections. Today, 
few believe the project will be com- 
pleted because of environmental 
protests, plans for Enel’s privatisa- 
tion, and the difficulty of ensuring 
against mafia involvement 


Roggkxfl Ctfabrta 


What has happened at Gioia 
Tauro is a microcosm of what has 
been repeated in different degrees 
across the south. With a third of 
Italy's population, it was treated as 
a vital reservoir of votes by the 
Christian Democrats during the 
postwar era to hold the Communist 
party at bay. It suited politicians to 
create a culture of dependence - or 
assistenzialismo. 

Transfers to the south from the 
central government have on aver- 
age accounted for about 60 per cent 
of gross domestic product since the 
1950s. Income support, direct and 
indirect from the state, makes up 49 
per cent of the south's GDP. Accord- 
ing to Bank of Italy data, four-fifths 
of Italy’s total public deficit is 
attributable to the south - the cen- 
tre and north shows a surplus. The 
south absorbs 53 per cent of all pub- 
lic spending. 

Initially, the south accepted this 
as needed assistance, but it became 


113,8 


OOP 

Per capita 
(EC 12 average •* 100) 

10&a 

fIZIZJ. too 


Souts: Euopoon Coanhakm 

an institutional habit of depen- 
dence. If the state (controlled by the 
local political parties) did not pro- 
vide jobs in the south, then it 
offered unemployment subsidies or 
fake disability pensions or easy 
early retirement deals. The state 
also agreed with the unions to 
maintain a national minimum 
wage, even though productivity was 
often 20 per cent lower in the south. 

Where this safety net failed, the 
illicit economy controlled by organ- 
ised crime helped out with income 
from contraband cigarettes, drugs, 
extortion, racketeering, usury. Until 
Rome politics was shaken two years 
ago by corruption scandals it suited 
tiie ruling parties to be tolerant of 
organised crime: in Sicily, Calabria 
and the Naples area the mafia deliv- 
ered votes. 

The business success stories in 
southern Italy have been in areas 
close to Rome or where the grip of 
organised crime is slight, as in Pug- 


lia. It is no accident that Fiat opted 
to site Its flagship car plant near 
rural Melfi in Basilicata, central 
southern Italy: the area is free of 
mafia links. Fiat has also been able 
to break away from the traditional 
labour market rigidities and intro- 
duce new working practices. No 
state industry would dare contem- 
plate this, and smaller private 
investors lack the muscle to force 
such deals through. 

But the Melfi project, producing 
the Punto model launched last year, 
would also have been impossible 
without the commitment of 
Ll.400bn in state aid. This is proba- 
bly the last such act of state gener- 
osity to a private group. Not only is 
Brussels on the war-path against 
subsidies, unions in the north do 
not see why new jobs should be 
funded in the south when they need 
to protect existing ones in Turin. 

The more general debate on bank- 
rolling the south has become cen- 
tral to the political platform of the 
populist Northern League. The 
league's appeal has evolved in good 
measure from the way’ its leader, Mr 
Umberto Bossi. has articulated the 
frustrations of hard-working north- 
erners, who pay taxes to a govern- 
ment in Rome that squanders the 
money on ill-monitored transfers to 
the south. 

D espite these genuine 
objections, it is hard 
to see agreement on 
introducing a fresli 
approach to the prob- 
lems of tbe south. The league wants 
to cut assistenzialismo but has no 
base in the south. Its allies in this 
election campaign are media mag- 
nate Silvio Berlusconi’s Forza Italia 
movement and tbe neo-fascist MSI; 
and Mr Berlusconi is relying on the 
MSI structure to deliver tbe votes. 
Both are promising more jobs and 
more public works projects in the 
south. 

The left’s Progressive Alliance is 
also committed to the principle of 
national solidarity, with the better- 
off regions helping the poorer, and 
would not stop the flow of money to 
the south. As for the discredited 
ruling parties in the centre, which 
have either recycled their candi- 
dates or picked from s imilar figures 
whose careers have been based on 
patronage, they have no interest in 
turning off the tap. 

None of the parties looks as if it 
has the will and ability to combine 
spending cuts with creating the 
conditions necessary to introduce 
the market economy that operates 
in the rest of Italy. Budget con- 
straints will play a considerable 
part in weaning the south off state 
hand-outs. But this will merely 
increase the income gap between 
the north and the south and push 
the ‘Mezzogiomo’ back to the 
peripheral role it played when the 
first republic began after tbe war. 


Rail privatisation’s difficult journey 



On April 1. British 
Rail is to be split 
asunder. A radical 
re-structuring of 
passenger and 
freight services, 
track and rolling 
° E tSfFnr iL stock provision and 

^ — a variety of other 

services and maintenance activities 
will form the prelude to the govern- 
ment's ultimate goal of privatisa- 
tion. Will it work, or will it turn out 
to be an April Fool? 

At first sight the changes next 
month are a cleverly contrived con- 
tinuation of the fundamental organ- 
isational changes Introduced in 
April 1982 and April 1992. The 27 
profit centres set up two years ago 
will become tbe basis of 30 (25 pas- 
senger train operating units and 
five freight) separate businesses for 
franchising. There will be more pri- 
vate sector involvement in manage- 
meat and private risk capital will 
be introduced. Additionally, the 
“internal market”, whereby the 
profit centres sell services to each 
other, will be extended. 

The 1992 changes gave the manag- 
ing director of each passenger rail- 


way business - Intercity. Network 
Sout h East and Regional Railways - 
direct control of their own infra- 
structure ami supply of train ser- 
vices. A separate Central Services 
organisation was also established, 
selling services to the individual 
railway businesses in an internal 
market. Benefits have begun to 
show: for example, staff numbers on 
the Gatwick Express have fallen by 
25 per cent since April 1992. assets 
are being used more intensively and 
marketing initiatives introduced. 

But there are problems with the 
new proposals. The first is psycho- 
logical. The business managing 
directors, before they took direct 
control in 1992, could not influence 
the production of railway services 
sufficiently to achieve what their 
marketing studies showed passen- 
gers wanted. Hie present changes 
are being imposed against strong 
opposition from experienced rail- 
way managers. Moreover, the reor- 
ganisation is too soon after that of 
April 1992, which involved a huge 
effort 

Another problem is operational. 
Great concern has been expressed 
about the split in ownership and 


control between Rail track (which 
assumes responsibility for stations, 
track, signalling, timetabling, oper- 
ating control and safety) as an 
intermediate supplier and the train 
operating units as train service pro- 
ducers. A railway is above all a 
systems business, in which all the 
principal activities are interlocked. 

Moreover, passengers are part of 
the production process. Unlike 

The greatest 
problem is 
economic . . . the 
InterCily profit will 
be turned into a loss 

Marks and Spencer, or even a “just 
in time” supply of components for 
manufacture, any accident, mis- 
match or misunderstanding 
between the suppliers and produc- 
ers will immediately affect them. 

The greatest problem is economic. 
The £l00m or so Intercity annual 
profit will be turned into a loss 
because of Infrastructure and 
rolling stock leasing charges, and 


subsidy will be required. Even the 
£10m profit for the coveted 
Gatwick Express will be extin- 
guished. 

These seemingly high costs arise 
because the infrastructure capital 
value was put at £6.5bn and the 
Treasury imposed a 5.6 per cent 
required rate of return, increasing 
to 8 per cent. Additionally, bureau- 
cracy and transaction costs of the 
new system will be high, and safety 
controls will be more expensive and 
complex than the present “safety 
validation” procedures. 

Moreover, railway revenues tend 
to track fluctuations in gross 
domestic product In a downturn, 
unless train services can be cut 
(and remember Railtrack decides 
the timetable) and rolling stock 
handed back, franchisee profits may 
disappear. Private sector franchi- 
sees will only be interested if they 
can see where the profits will come 
from. Costs in the train operating 
units are already being cut More 
cost savings and revenue improve- 
ments axe in the pipeline. So what 
leverage will be left for the private 
sector with franchisees controlling 
only some 20 to 25 per cent of total 


cost due to infrastructure and leas- 
ing charges? Subsidies may be 
granted, but they are politically vul- 
nerable (and the government's 
contribution is planned to be 
cut by two- thirds by 1996-97 
anyway). 

The benefits are that the train 
operating units will be much 
smaiipr businesses than the present 
ones, with greater freedom for inno- 
vation. Staff can be more closely 
involved and costs will be more 
exposed. Even so, the scope for 
substantial profit improvement 
by private franchisees is 
narrowing. 

Perhaps the most likely outcome 
is that BR will continue to be the 
predominant owners, with their 
staff as management franchisees at 
the heart of the railway system and 
the private sector round the periph- 
ery. In these circumstances the 
■Railtrack monopoly will be forced 
to bow to their demands. 

John Heath 

The author was pro/fessor of econom- 
ics, London Business School 1970-86 
and a consultant to British Rail 
1978-93. 


Observer 


Compounding 
the gloom 

■ He couldn’t even muster an auf 
Wiedersehen. Wolfgang Hager, dour 
r hairman of the Hoechst ritarainfl’k 
group, yesterday growled his way 
through his last annual press 
conference in traditionally 
lugubrious style, only to break with 
custom at the dose. 

While retiring German bosses 
are supposed to tighten up, bury 
the hatchet with the hacks, and 
even crack the odd joke about 
having had tough but fair treat- 
ment, HHger was not in the mood. 

Since early last year, when his 
lofty, technocratic response to his 
company ’s plants’ alarming 
tendency to leak, horn and even 
explode earned Hilger a roasting, 
the chemistry between him and 
the media has been severely awry. 

A formal farewell from the floor, 
typically offered up on these 
occasions by a venerable journalist 
whose career has nm in - distant 
- parallel with the retiring boss, 
also failed to materialise. 

If HOger noticed that the pack 
restricted itself to a single question 
about yet another explosion, last 
Friday, which wrecked a r efri ge ra n t 
plant, and mice again obliged the 
police to tour the sheets warning 
local readmits to dose their 
windows and stay indoors, he did 
not show it 

Anyone interested could pick 
up a press release on the way out, 


but otherwise he bad nothing to 
arid he Mid 


Change first 

■ Did NatWest know what it was 
letting itself in for when it decided 
to snap up New Jersey retail bank 
Citizens First? It's a pity nobody 
thought of askin g Andy Nemes, 
in the UK dearer’s international 
trade and hanking services division, 
for a worm’s eye view of the 
proposed acquisition. 

When NatWest recalled Nemes 
to London after 2’A years in the 
US, his wife Janet closed her 
Citizens First account Could she 
have the money in sterling, she 
inquired? Sure thing; she was 
promptly directed to the bullion 
counter. 


Crying wolf 

■ Consternation and concern in 
the department of transport when 
Bob Cryer. Labour MP for Bradford 
south, called for a special debate 
in the Commons on Menwyth hill 
station. 

Obsessed as they are with rail 
pr ivati sation, the civil servants 
went into overdrive. The minister 
concerned, Roger Freeman, was 
askpd by officials to dear his diary 
to ensure that he was free to 
answer the debate, due to be heard 
this coming Friday. 

Whereupon it was discovered 
that the “station”, near Harrogate. 



consumer confidence’ 

is a security listening post operated 
by the ministry of defence, in 
cooperation with American spooks. 
Freeman has thanke d Cryer for 
providing him with an unscheduled 
day off. 


Merry old soul 

■ King Coal has been a long time 
dying; but now he really has passed 
away it seems. A provisional death 
certificate appears on Thursday, 
in the form of a book of 
photographs published by the Royal 
Commission on the Historical 
Monuments of England. 

The project began before British 


Coal's announcement in October 
1992 that 31 of its remaining 50 
active mines were to be dosed; now 
just 17 remain. The Commission’s 
photographers, backed by 
archaeologists and industrial 
surveyors, toured every English 
coalfield, recording all aspects of 
the industry. 

Images of Industry: Coal, will 
be launched at tbe Yorkshire 
Mining Museum in Wakefield. “The 
complete set of images, backed by 
research notes, will become part 
of the National Monuments Record, 
where they can be consulted by 
the public.” RIP. 


Tiger's tail? 


■ Has the City, in succumbing 
to the lure of Oriental expertise 
in the boardroom, been stealing 
a march on British industry? Or 
is it unduly beguiled by eastern 
promise? 

London’s oldest merchant bank. 
Barings, has been endeavouring 
to brush up its global street cred 
and , in addition to Credit Lyonnais 
boss Jean Peyrelevade, has now 
opened its hallowed portals to 
Yoshihiko Miyauchi. president of 
Japan's largest leasing company 
Orix, in a nonexecutive capacity. 

Last year Foreign & Colonial 
put a former ambassador to Britain 
on the board of one of its Pacific 
trusts and Barclays has a Japanese 
banker. Outside the Square Mile 
there has been little such activity. 

Deputy chairman Andrew Tuckey 


says be ran into Miyauchi on his 
first visit to Japan 25 years ago 
when he was personal assistant 
to the chairman of what was then 
Orient Leasing. As part of the 
Sanwa Bank group, with which 
Barings set up a joint venture, the 
company was a natural port of call 
for tiie Brits. 

Tuckey, who describes a visit 
to the Orix Blue Wave baseball 
team as “a pleasure probably still 
to come”, sees in Miyauchi a man 
with “long exposure to western 
business". 

There is no telling yet whether 
these sorts of relationship can 
really be put to work. As well as 
being impressed by his connections 
in Tokyo, Barings, with its 
emerging markets ambitions, thinks 
the new addition can provide “the 
Oriental perspective on China and 
throughout south-east Asia”, as 
Tuckey phrases it. Big area, tall 
order. 


Abracadabra 

■ Hurry along now please with 
your submissions, to the UK’s 
department of social security, to 
tender for providing “market 
research services using mystery 
techniques to measure levels of 
customer service". Bidders must 
supply details of “technical, 
professional or trade bodies” to 
which they belong, the Supplement 
to the ElTs Official Journal 
specifies. 

Magic Circle members preferred? 


, - 





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LJhjI LRPIastics Limited 
Tel: 0773 852311 


FINANCIAL TIMES 

Wednesday March 23 1994 


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A Division of Senior Engineering Group pic 


Seoul forces on 
for attack from 


alert 

north 


John Burton in Seoul and 
George Graham In Washington 


South Korean president Kim 
Young-sam yesterday ordered the 
country's military forces to 
increase their readiness for a pos- 
sible attack by North Korea as 
international pressure intensified 
on Pyongyang to allow nuclear 
inspections. 

Mr Warren Christopher, the US 
secretary of state, said diplomacy 
had “reached a critical point", 
but Chinese officials warned that 
sanctions or other moves against 
North Korea would only serve to 
increase tension on the Korean 
peninsula. 

The South Korean armed forces 
were put on alert as Mr Kim was 
preparing to leave tomorrow for 
Japan and China, where he will 
ask Beijing to persuade Pyong- 
yang to accept unhindered 
inspections by the International 
Atomic Energy Agency. 

South Korean forces are gener- 
ally on alert when the president 
leaves the country, but Seoul has 


been particularly tense since 
North Korean officials declared 
that the South Korean capital 
could become a “sea of fire". 

Meanwhile, a North Korean 
radio broadcast accused the US of 
making a “grave threat" by 
agreeing to deploy Patriot mis- 
siles in South Korea. The US says 
the deployment, agreed this 
week, is "purely defensive". 

Mr Han Sung-joo, the South 
Korean foreign minister, said the 
"door is still open” to direct nego- 
tiations with North Korea, and 
he added that If the United 
Nations Security Council decides 
to impose economic sanctions, 
they will be Introduced gradually 
to give Pyongyang time to 
reverse its decision, 

Mr Christopher said that he 
expected the UN Security Council 
to consider a resolution calling 
on North Korea to allow the com- 
pletion of inspections. 

"Our diplomacy has now 
reached a critical point. We've 
made it clear to North Korea that 
it must become a responsible 


member of the international com- 
munity or that community will 
have no option but to pursue 
other options,” Mr Christopher 
said. 

The first UN resolution, how- 
ever, is likely to contain only an 
indirect threat of sanctions, as it 
is unlikely that China would 
approve sanctions against Its 
ally. Mr Li Peng, the Chinese pre- 
mier, warned in Beijing yester- 
day that North Korea should not 
be put under extreme pressure. 

Differences in South Korea's 
tougher approach to North Korea 
emerged as the opposition Demo- 
cratic party cautioned against 
the military measures and urged 
the government to seek contin- 
ued dialogue with Pyongyang. 

Mr James Woolsey. director of 
the Central Intelligence Agency, 
repeated his agency's estimate 
that North Korea had diverted at 
least enough nuclear material to 
makp one bomb. 


Italian 

spending 

overshoots 

target 


By Robert Graham in Rome 


N. Korea miscalculates. Page 6 


Drugs groups cut spending 
on research and development 


By Paul Abrahams in Tokyo 


The growth of investment in 
research and development of 
pharmaceuticals by the world's 
top drugs groups decelerated 
steeply last year because of 
health care reforms and efforts to 
cut medicines spending. 

The world's top 38 companies, 
which have reported their 
results, increased their R&D 
expenditure by only 9.6 per cent 
last year. That compares with 
industry growth rate during the 
1980s of between 16 and 20 per 
cent. 

The investment slowdown fol- 
lows industry warnings that R&D 
spending was unsustainable 
because of government interven- 
tion to control drugs prices and 
consumption. 

Pharmaceutical groups have 
been struggling with poor growth 
rates in the world’s most impor- 
tant medicines markets. The 
increase in drug sales in the top 
seven European markets declined 
bom S per cent in 1993 to only l 
per cent last year. 

Most drugs groups have 
responded by cutting marketing 
and administrative overheads for 
the last two years. None had pre- 
viously dared cut R&D. viewed as 


the life-blood of the industry. 

But last year, among the top 38 
pharmaceuticals groups, five 
companies (three in the US. one 
in Europe and one in Japan) were 
forced to reduce expenditure. 
They included Monsanto, Marion 
Merrell Dow and Parke Davis of 
the US, Ares Serono of Switzer- 
land, and Shlonogi in Japan. 

Dr Leon Rosenberg, president, 
Bristol-Myers Squibb Pharmaceu- 
tical Research Institute, warned: 
"The heady days of R&D are 
over." Between 1981 and 1993, 
pharmaceuticals R&D spending 
rose from $5.4bn to *26.5bn 
according to the UK-based Centre 
for Medicines Research. 

"Although the immediate 
effects will be limited because of 
the time it takes to develop new 
medicines, in the longer term the 
flow of innovative medicines is 
being threatened," Mr Bryan 
Wright, representative in Japan 
of the US Pharmaceutical Manu- 
facturers' Association, said. 

European companies appear to 
have been less affected than their 
US counterparts. The top 10 
European groups, which have so 
far reported figures, increased 
their R&D spending by an aver- 
age of 15.4 per cent from $6-09bn 
in 1992 to $T7.1bn last year. They 


spent, on average, 16J3 per cent of 
sales on R&D. Those groups 
whose spending rose the most 
included Wellcome (30.6 per 
cent). Glaxo (24.2 per cent}, and 
SmithEline Beecham (20.2 per 
cent). 

The top 10 US groups increased 
their R&D spending 8.8 per cent 
from $7.85bn last year to $8.5bn. 
On average, they invested 11.2 
per cent of their turnover In 
R&D. The top five Japanese com- 
panies raised their spending only 
6.6 per cent from $1.78bn to 
$1.9bn, investing 11.4 per cent of 
their sales. 

Those groups spending least 
have been most hit by the 
reforms. Among the lower-level 
spenders of the top 38 companies, 
R&D spending increased only 5.1 
per cent 

The US figures follow a warn- 
ing by the American Pharmaceu- 
tical Manufacturers' Association 
that its members expect to 
increase R&D spending only 9.4 
per cent this year, the first 
single-digit increase since 1977. 

That compares with average 
annual growth of 16 per cent , 
between 1980 and 1992. I 


Pharmaceutical survey, separate 
section 


The Italian government 
yesterday revealed that spending 
in 1994 was liable to overshoot 
the budget target by Ll4^00bn 
($aabn). 

The estimate is based on first 
quarter treasury receipts which 
were lower than expected as a 
result of the recession biting 
deeper. At the same time social 
' security spending has grown fos- 
ter and the savings envisaged in 
the reform of the civil service 
have been slow to materialise. 

The budget shortfall comes 
during the closing stages of the 
election campaign and underlines 
the limited options open to the 
next government. It would make 
it extremely difficult for media 
magnate Silvio Berlusconi to 
carry out his promise to relaunch, 
the economy, reduce taxes and 
provide more jobs. 

Instead the next government 
will probably be forced to intro- 
duce a corrective budget shortly 
after it takes office. 

The 1994 budget envisages 
holding the budget deficit at 
L151,000bn. equivalent to 8.7 per 
cent of GDP. On yesterday's pro- 
jections the deficit would expand 
to almost LlfiO.OOObn. 

One area where spending has 
grown rapidly is pensions, and 
officials have warned this week 
that Italy will have to accelerate 
its plans to raise the pension age 
to 65 years. If tough measures are 
not taken on pension and health 
spending, the total social security 
budget may exceed 14 per cent of 
GDP. 

Italy's state-dominated pension 
system is among the most gener- 
ous in the EC and reforms intro- 
duced last year envisage only a 
gradual tightening of benefits 
and an extremely slow move 
from the current retirement ages. 
At present women retire at 55 
and men at GO. 

The pensions budget has been 
complicated by the recession 
with large-scale resort to early 
retirement agreements in order 
to facilitate industrial restructur- 
ing. This year the government 
approved a deal covering some 
6,000 employees at Fiat and ear- 
lier this month agreed to fund an 
early retirement deal for the bulk 
of 12,000 redundant workers in 
Ilva, the state-controlled steel 
group. 

The political parties in the elec- 
tion campaign have all empha- 
sised the need to encourage pri- 
vate pension funds and to reduce 
the burden on the state. 


Japan’s economy stagnates I Fed signals rate rise 


Continued from Page 1 


1.1 per cent last year, or by 0.7 
per cent between the third and 
fourth quarters, indicating that 
consumer spending has been rel- 
atively resilient in a weak labour 
market. Another positive sign 
was private housing investment 
which grow by 3.7 per cent dur- 
ing the year, or l.S per cent in 


the last quarter, helped by cheap 
government-backed mortgages. 

Corporate investment fell by 
8.4 per cent last year, of which 3.5 
per cent was in the final quarter. 
The continued strength of the 
yen, which hit a high or nearly 
Y100 against the US dollar in 
August, weakened exports which 
were dawn 2.2 per cent from the 
third ta the fourth quarters. 


Continued from Page 1 


cent. The speed of tightening, 
however, is likely to depend on 
the rate of economic growth 
later this year and the extent of 
upward pressure on inflation. 

After weeks of anticipation, 
bond traders appeared relieved 
that the long-awaited boost in 
the Fed Funds target rate had 


finally taken place. The bench- 
mark 39-year government bond, 
which is especially sensitive to 
inflationary expectations, 
showed the biggest gains, jump- 
ing about % of a point to 92& 
within minutes of the announce- 
ment 

Additional reporting by Tracy 
Corrigan , Conner Middetman and 
Philip Gaurith in London 


FT WEATHER GUIDE 


Europe today 


1 tOA 3. 


An active low pressure system will result In gale 
levee winds along British coastal regions and 
over the North Sea. A zone of moderate rain 
over Ireland and Scotland wBI gradually push 
southward. It will be doudy with patches of 
light nun over England, the Benelux, northern 
Germany and Poland. Southern Scandinavia will 
have outbreaks of heavier rain, whfle in the 
north it will remain mostly dry with patches of 
sunshine. Central Europe will experience a 
mixture of clouds and sunshine. Sustained 
sunny periods are likely in the Mediterranean 
region. Temperatures wW be above the 
seasonal normal over a large area, with 
readings ranging between 15G-23C. 




^ £ .is ) 

— r? 


7 / ,030 \* ./? 


« 20 •«*£)’. 




Five-day forecast 

Unsettled conditions will gradually spread into 
central and eastern Europe. Tomorrow, gale- 
lorce winds will buffet the coast of Denmark. It 
will be showery in Scotland and mainly dry Vi 

England, but England should experience rain on 
Fnday. By the weekend, the UK wiB be 
unsettled and somewhat cooler. Scandinavia 
will experience wintry conditions with periods of 
snow and sleet or rain in the south. 

It wiB be sunny over much of southern Europe 
with afternoon readings ranging between 19G- 
27C. 


iV-Cf 

ft 9 Jv ^ V- • 


13 


^ f) X 

HIGH tr* h C p 

" .# ? 


VunGy- 




■&. A ' 


Warn Irani -M-dte CM front A A win* «poed In KPH 


TODAY’S TEMPERATURES 


SftHWrtJMSGMT. Temperatures marmum for day. Fotvat&s tty Merao Ctwsult of the Atetftartands 



Mourn um 

Ballast 

rain 

12 

Cardiff 

windy 

14 

Frankfurt 


Celsius 

Belgrade 

(lair 

(9 

Chicago 

cloudy 

IS 

Genova 

AbvWvjbi 

sun 

30 

Berlin 

shower 

Id 

Cologne 

fair 

20 

Gibraltar 

Accra 

shower 

33 

Bermuda 

sun 

22 

O’ Salaam 

fan- 

30 

Glasgow 

AIiJIWT, 

cloudy 

20 

Bogota 

ram 

19 

Daku 

sun 

25 

Hamburg 

Amvttfn&vn 

doudy 

IS 

Bombay 

sun 

34 

Dates 

tab 

26 

Helsinki 

►Ufiere 

am 

17 

Brussels 

bur 

17 

Delhi 

sim 

32 

Hong Korn 

B. Aitot 

tar 

24 

Budapest 

fair 

13 

Dubai 

sun 

26 

Honolulu 

B hjm 

ran 

14 

CJngen 

rain 

10 

DUblin 

ran 

14 

Istanbul 

Bangkok 

ttnmd 

32 

Cairo 

Ml 

24 

Dubrovnik 

tan- 

19 

Jersey 

Barcelona 

Sun 

19 

Capa Town 

fair 

23 

Edinburgh 

rain 

11 

Karachi 

Bapncj 

tar 

9 

Caracas 

far 

28 

Faro 

sun 

21 

Kuwait 



Your bonus program. 
Lufthansa Miles & More. 

Lufthansa 

German Airlines 


L. Angeles 

Las Palmas 

Lana 

Lisbon 

London 

Luxboug 

Lyon 

Madera 

Madrid 

Majorca 


fair 

19 

Malta 

sun 

22 

Rio 

fair 

28 

Sul 

18 

Manchester 

ram 

13 

Riyadh 

sun 

28 

sun 

18 

Mo-da 

fas' 

32 

Roma 

am 

19 

rain 

11 

Melbourne 

sun 

25 

S, Frsco 

shower 

14 

rain 

14 

Mexico City 

sun 

25 

Seod 

shower 

7 

rain 

4 

Ml am 

SUI 

28 

Singapore 

shower 

30 

doudy 

17 

Mian 

Gun 

22 

Stockholm 

doudy 

8 

shower 

26 

Montreal 

cloudy 

7 

Strasbourg 

fan- 

22 

tan- 

12 

Moscow 

ter 

4 

Sydney 

bar 

21 

fair 

18 

Munich 

fair 

19 

Tangier 

doudy 

19 

BUI 

34 

Nabobi 

fair 

26 

Tel Aviv 

tea- 

20 

fair 

23 

Naples 

sun 

20 

Tokyo 

rain 

18 

sun 

17 

Nassau 

fair 

30 

Toronto 

doudy 

9 

sun 

22 

New York 

fair 

17 

Tunis 

Nr 

21 

sun 

27 

Nice 

sun 

17 

Vancouver 

shower 

10 

sui 

22 

Nicosia 

shower 

19 

Venice 

sui 

19 

doudy 

17 

Oak) 

rain 

8 

Vienna 

fair 

17 

far 

17 

Pads 

fair 

18 

Warsaw 

shower 

9 

sun 

21 

Poth 

fair 

33 

Washington 

sun 

22 

sun 

19 

Prague 

shower 

15 

"Wngion 

ft* 

18 

sun 

21 

Rangoon 

fair 

35 

WSnnifMg 

doudy 

-2 

sun 

20 

Reykjavk 

windy 

4 

Saleh 

far 

20 


THE LEX COLUMN 


Tough life at the top 


i If a life insurance company should be 
judged by its ability to sell life insur- 
ance, Prudential still has something to 
prove. Yesterday's 45 per cent rise in 
full-year profits owed more to recovery 
in general reinsurance - which the 
Pru admits is peripheral to its ambi- 
tions - than underlying momentum in 
long-term savings. Life Insurance prof- 
its rose by 10 per cent. But that 
includes taking £50m of US invest- 
ment gains into profits rather than 
diverting such windfalls into reserves, 
as was the case last year. On the 
accruals accounting method favoured 
by the Pru, the profit contribution 
from new life insurance business actu- 
ally fell. 

Prudential might reasonably plead 
special circumstances. Restructuring 
its direct sales force in the UK has 
yielded annual cost savings of more 
thanflDOm, but with inevitable disrup- 
tion. As reorganisation comes to an 
end. the sales force must start to per- 
form. More worryingly. Jackson 
National proved extremely vulnerable 
to low US interest rates, which made 
its annuities less attractive than equi- 
ty-based savings products. Perhaps an 
infusion of new management and 
revamped product range will be 
enough to reverse last year's 38 per 
cent drop in sales. 

It is certainly too early to pass judg- 
ment on either count. In theory, Pru- 
dential should be well placed to deal 
with tougher regulation at home. By 
deciding not to provide against mis- 
selling of personal pensions, it has 
shown touching faith in its record of 
compliance to date. While a yield 30 
per cent higher than the market aver- 
age might look generous in the light of 
yesterday's headline figures, the 
uncertainties ripmanri no less. 


Prudential 


Sham price relative to the 
FT-SE-A AR-Share Index 

160 — — - 


140 — 


130 


120 — J 


90 1 1 

1989 SO 
Satires: FTGrapMta 


mg to spend much time and capital 
injecting vim and vigour. 

The most serious worry, though, is 
what differential rates of inflation will 
do to margins. Bo water’s suppliers - 
most conspicuously the pulp and 
paper manufacturers - are currently 
pushing through big price rises. But it 
may prove difficult for Bowater to 
pass the parcel on to its customers, 
producing a nasty margin squeeze. 
Besides, Bo water's customers are 
growing ever more demanding, speci- 
fying shorter runs and higher stan- 
dards. That puts another pressure on 
margins, which will not quickly be 
reversed. With no currency gains 
likely this year. Bo water's attractions 
as a recovery stock have soured But 
with volumes growing at a respectable 
3 per cent, Bowater still retains its 
longer-term appeal. After a frantic 
spell of corporate activity, Bowater 
must now consolidate. The shares 
seem likely to do the same. 


If it follows the established pattern, . 
Credit Lyonnais would lend the shell 
company enough to buy both the had 
debt at Its value after provisions and 
sufficient zero coupon bonds to 
finance eventual repayment of the bor- 
rowing, But credit Lyonnais would 
not receive interest on its loan to the 
shell company. Since debt transfers to : 
the shall company could exceed 2 per ! 
cent of its loan book, that implies a 
drag on net interest income for years. 

Credit Lyonnais would thus find It 
harder to the recovery to reach the; 
absolute levels of profitability estab- 
lished by other French banks. But lbs 
own recovery will be more pronounced 
simply because Its provisions have, 
been higher, And since the hank is 
trading at a 25 per cent discount to 
stated 1992 net assets, the market has 
priced in the risks. 


Bowater 


Bowater*s premium rating, which 
has been carefully cultivated over the 
years, was blown away In one puff 
yesterday as its shares fell 8 per cent 
That may partly reflect a cyclical 
reversal of fortune with Bo water’s pre- 
vious virtues being transformed into 
present vices: defensiveness in reces- 
sion now appears dullness in recovery. 
Good treasury management, which 
produced interest income despite year- 
end debt of £262m, now smacks more 
of financial alchemy. Bowa tar’s pen- 
chant for buying exhausted leveraged 
buy-out companies once seemed a 
clever way of buying assets on the 
cheap. But the drawbacks are now 
becoming apparent, with Bowater hav- 


Credit Lyonnais 

The French government feces a deli- 
cate task to the rescue of Credit Lyon- 
nais. ft must not alienate outside 
investors to the point where privatisa- 
tion becomes impossible. Equally it 
must not show so much favouritism 
that it upsets the rest of the French 
banking community. So for few details 
have emerged, though It is dear that 
tomorrow’s deal will involve the trans- 
fer of non-performing property loans 
to a shell company. Precedent sug- 
gests this is one way of Smiting the 
immediate bad debt provision - and 
therefore the capital injection from 
the government - but there is a cost 
in the form of future income forgone. 


GKNAVestland 

Whatever the niceties about strate- 
gic vision and industrial logic, GEN’S 
bid for Westland is settling down to an 
old-fashioned haggle over price. Unfor- 
tunately, from GEN'S point of view,, 
there may well be a gap between the 
price it is prepared to pay and the 
price which shareholders are prepared 
to accept Sir David Lees. GEN’S chair- 
man, has said repeatedly that he win ! 
not “overpay" for Westland. That 
implies that any increase in the offer 
will be modest There might conceiv- 
ably be some flexing of terms over the 
Arab Organisation For Industrialisa- 
tion settlement GKN might for exam- 
ple, keep all of any payment In return 
for a higher offer. But the total pack- 
age seems unlikely to take the bid 
much over the current market price of 
326p. 

That may not be enough to dislodge 
Westland's heavily concentrated 
shareholders, particularly since one of 
the largest is M&G, which has a tradi- 
tion of supporting existing manage- 
ment In the absence of a substantially 
higher bid, institutions may also feel 
that they can play a waiting game. If 
the projected orders tom out to be pie, 
rather than helicopters, in the sky, 
they may think that they can sell to 
GKN later. Its 45 per cent holding sug- 
gests a continuing interest and to any 
event, Westland's tax advantages do 
not become substantial until 1996. If 
the orders do materialise, however, 
Westland would be worth a good deal 
more than 326p. The unenviable prob- 
lem facing Sir David is that if he 
refuses to overpay now, he may risk 
having to do so later. 


This announcement appears as a matter of record only 


CAM 90nEDADE DO AEBQWKrO WTEkNACIOHAL DE MACAU SaJLL 

w wnwiwfl a 


CAM - SOCIEDADE DO 
AEROPORTO INTERNACIONAL 
DE MACAU S.A.R.L. 

US Dollar I02L5m Credit Facilities 

Guaranteed by the Territory of Macau 

to finance the offshore costs of a contract awarded to die Consortium Soares da 
Costa/ Siemens in connection with the Macau International Airport Project 

Structured and Arranged by ANZ International Merchant Banking 


US Dollar 15.4m Commercial Loan 


Provided by: 

Banco Comerrial Portugu&s S.A. 
Bayerische Landesbank GirozentraJe 
Banco Comerdai de Macau S-A. 

Banco de Fomenta e Exterior SA 
Australia and New Zealand Banking Group Limited 


Agent Bank: 

Australia and New Zealand Banking Group Limited 


US Dollar 4L3m Buyer Credit Loan 

Guaranteed by the Export Credits Guarantee 
Department of the United Kingdom 


Joint Lend Managers: 

Australia and New Zealand Banking 
Group Limited 

Bayerische Landesbank Cirozenbrale, 
London Branch 

Standard Chartered Bank 


US Dollar 2 ZSm Boyer Credit Loan 

Guaranteed by Hermes 
Kreditversicherungs A.G. of the Federal 
Republic of Germany 


Arranged by Bayerische Landesbank 

Gironzentrale 


Managers: 

Bank Austria AG 
Banque Paribas 
Union Bank of Switzerland 
Bank of America NT & SA 
ABN AMRO Bank N.V. 

Giro Credit Bank, London Branch 


Provided by: 

Australia and New Zealand Banking 
Group Limited, Frankfort Branch 

Bayerische Landesbank Girozentrale 


Agent Bank: 

Bayerische Landesbank Girazentrale 


Agent Bonk: 

Australia and New Zealand Banking 
Group Limited 

US Dollar &8m Boyer Credit Loan 
Guaranteed by die Export-Import Bank of the 
United Slates 


US Dollar 115m Boyer Credit Loan 
Guaranteed by COSEC - Companhia de 
Segura de Cr&iitos SA. of the Republic 
of Portugal 


Arranged by Banco Comerdai de Macau 
SA. 


Provided by: 

Australia and New Zealand Banking Group 
Limited, New York Branch 


Provided by: 

Banco Comerdai de Macau SA. 
Banco de Fomento e Exterior SA 


Agent Bsmkz 

Banco Comerdai de Macau S.A. 


Legal Advisers to due Arranger: 

Norton Rose 


SOARES DA COSTA 


nangen Legal Ahbm to the B oaowe n . 

Linklatens & Paines. Hong Kong 

E-bund*] Advisers to tbe Borrower: 

EF1SA - Engenhara financeira SA, 

SIEMENS 




tj 

ii 




















16 


SHEERFRAME 

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Tel: 0773 852311 


FINANCIAL TIMES 

Wednesday March 23 1994 




JSEMOR 
WEXOMCS 

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m a ; ftmun nlr 



Seoul forces on 
for attack from 


John Burton In Seoul and 
George Graham in Washington 

South Korean president Kim 
Young-sam yesterday ordered the 
country’s military forces to 
increase their readiness for a pos- 
sible attack by North Korea as 
international pressure intensified 
on Pyongyang to allow nuclear 
inspections. 

Mr Warren Christopher, the US 
secretary of state, said diplomacy 
had “reached a critical point", 
but Chinese officials warned that 
sanctions or other moves against 
North Korea would only serve to 
increase tension on the Korean 
peninsula. 

The South Korean armed forces 
ivere put on alert as Mr Kim was 
preparing to leave tomorrow for 
Japan and China, where he will 
ask Beijing to persuade Pyong- 
yang to accept unhindered 
inspections by the International 
Atomic Energy Agency. 

South Korean forces are gener- 
ally on alert when the president 
leaves the country’, but Seoul has 


By Paul Abrahams in Tokyo 

The growth of investment in 
research and development of 
pharmaceuticals by the world's 
top drugs groups decelerated 
steeply last year because of 
health care reforms and efforts to 
cut medicines spending. 

The world's top 38 companies, 
which have reported their 
results, increased their R&D 
expenditure by only 9.6 per cent 
last year. That compares with 
industry growth rate during the 
1980s of between 16 and 20 per 
cent. 

The investment slowdown fol- 
lows industry warnings that R&D 
spending was unsustainable 
because of government interven- 
tion to control drugs prices and 
consumption. 

Pharmaceutical groups have 
been struggling with poor growth 
rates in the world’s most impor- 
tant medicines markets. The 
increase in drug sales in the top 
seven European markets declined 
from 8 per cent in 1992 to only I 
per cent last year. 

Most drugs groups have 
responded by cutting marketing 
and administrative overheads for 
the last two years. None had pre- 
viously dared cut R&D, viewed as 


been particularly tense since 
North Korean officials declared 
that the South Korean capital 
could become a “sea of fire". 

Meanwhile, a North Korean 
radio broadcast accused the US of 
making a “grave threat” by 
agreeing to deploy Patriot mis- 
siles in South Korea. The US says 
the deployment, agreed this 
week, is “purely defensive". 

Mr Han Sung-joo, the South 
Korean foreign minis ter, said the 
“door is still open" to direct nego 
Hattons with North Korea, and 
he added that if the United 
Nations Security Council decides 
to impose economic sanctions, 
they will be introduced gradually 
to give Pyongyang time to 
reverse its division. 

Mr Christopher said that he 
expected the UN Security Council 
to consider a resolution calling 
on North Korea to allow the com- 
pletion of inspections. 

"Our diplomacy has now 
reached a critical point. We’ve 
made it clear to North Korea that 
it must become a responsible 


the life-blood of the industry. 

But last year, among the top 38 
pharmaceuticals groups, five 
companies ithree in the US. one 
in Europe and one in Japan) were 
forced to reduce expenditure. 
They included Monsanto, Marion 
Merreil Dow and Parke Davis of 
the US, Ares Serono of Switzer- 
land. and Shionogi in Japan. 

Dr Leon Rosenberg, president, 
Bristol-Myers Squibb Pharmaceu- 
tical Research Institute, warned: 
"The heady days of R&D are 
over." Between 1981 and 1993. 
pharmaceuticals R&D spending 
rose from $5.4bn to $26.5bn 
according to the UK-based Centre 
for Medicines Research. 

“Although the immediate 
effects will be limited because of 
the time it takes to develop new 
medicines, in the longer term the 
flow of innovative medicines is 
being threatened," Mr Bryan 
Wright, representative in Japan 
of the US Pharmaceutical Manu- 
facturers' Association, said. 

European companies appear to 
have been less affected than their 
US counterparts. The top 10 
European groups, which have so 
far reported figures, increased 
their R&D spending by an aver- 
age of 15.4 per cent from $6.09bn 
in 1992 to $7.1bn last year. They 


alert 

north 

member of the international com- 
munity or that community will 
have no option but to pursue 
other options." Mr Christopher 
said. 

The first UN resolution, how- 
ever. is likely to contain only an 
indirect threat of sanctions, as it 
is unlikely that China would 
approve sanctions against its 
ally. Mr Li Peng, the Chinese pre- 
mier. warned in Beijing yester- 
day that North Korea should not 
be put under extreme pressure. 

Differences in South Korea's 
tougher approach to North Korea 
emerged as the opposition Demo- 
cratic party cautioned against 
the military measures and urged 
the government to seek contin- 
ued dialogue with Pyongyang. 

Mr James Woolsey. director of 
the Central Intelligence Agency, 
repeated his agency’s estimate 
that North Korea had diverted at 
least enough nuclear material to 
make one bomb. 


spent, on average, 16.9 per cent of 
sales on R&D. Those groups 
whose spending rose the most 
included Wellcome (30.6 per 
cent). Glaxo (243 per cent), and 
SmithKIine Beecham (203 per 
cent). 

The top 10 US groups increased 
their R&D spending 8.8 per cent 
from $7R5bn last year to $8-5bn. 
On average, they invested 11.2 
per cent of their turnover in 
R&D. The top five Japanese com- 
panies raised their spending only 
6.6 per cent from J1.78bn to 
$1.9tm. investing 1L4 per cent of 
their sales. 

Those groups spending least 
have been most hit by the 
reforms. Among the lower-level 
spenders of the top 38 companies, 
R&D spending increased only 5.1 
per cent 

The US figures follow a warn- 
ing by the American Pharmaceu- 
tical Manufacturers’ Association 
that its members expect to 
increase R&D spending only 9.4 
per cent this year, the first 
single-digit increase since 1977. 

That compares with average 
annual growth of 16 per cent 
between 1980 and 1992. 


Pharmaceutical survey, separate 
section 


Italian 

spending 

overshoots 

target 

By Robert Graham n Rome 

The Italian government 
yesterday revealed that spending 
in 1994 was liable to overshoot 
the budget target by Ll4£00bn 
($8J3bn). 

The estimate is based on first 
quarter treasury receipts which 
were lower than expected as a 
result of the recession biting 
deeper. At the same time social 
security spending has grown fos- 
ter and the savings envisaged in 
the reform of the civil service 
have been slow to materialise. 

The budget shortfall comes 
during the closing stages of the 
election campaig n and unde rlines 
the limited options open to the 
next government. It would make 
it extremely difficult for media 
magnate Silvio Berlusconi to 
carry out his promise to relaunch 
the economy, reduce taxes and 
provide more jobs. 

Instead the next government 
will probably be forced to Intro- 
duce a corrective budget shortly 
after it takes office. 

The 1994 budget envisages 
holding the budget deficit at 
L151,000bn. equivalent to 8.7 per 
cent of GDP. On yesterday's pro- 
jections the deficit would expand 
to almost L160.000bn. 

One area where spending has 
grown rapidly is pensions, and 
officials have warned this week 
that Italy will have to accelerate 
its plans to raise the pension age 
to 65 years. If tough measures are 
not taken on pension and health 
spending, the total soda! security 
budget may exceed 14 per cent of 
GDP. 

Italy's state-dominated pension 
system is among the most gener- 
ous in the EC and reforms intro- 
duced last year envisage only a 
gradual tightening of benefits 
and an extremely slow move 
from the current retirement ages. 
At present women retire at 55 
and men at 60. 

The pensions budget has been 
complicated by the recession 
with large-scale resort to early 
retirement agreements in order 
to facilitate industrial restructur- 
ing. This year the government 
approved a deal covering some 
6,000 employees at flat and ear- 
lier this month agreed to fund an 
early retirement deal for the balk 
of 12,000 redundant workers in 
Ilva. the state-controlled steel 
group. 

The political parties in the elec- 
tion campaign have all empha- 
sised the need to encourage pri- 
vate pension funds and to reduce 
the burden on the state. 


N. Korea miscalculates. Page 6 

Drugs groups cut spending 
on research and development 


Japan’s economy stagnates 


Fed signals rate rise 


Continued from Page 1 


1.1 per cent last year, or by 0.7 
per cent between the third and 
fourth quarters, indicating that 
consumer spending has been rel- 
atively resilient in a weak labour 
market. Another positive sign 
was private housing investment 
which grew by 3.7 per cent dur- 
ing the year, or 1.8 per cent in 


the last quarter, helped by cheap 
government-backed mortgages. 

Corporate investment fell by 
8.4 per cent last year, of which 3.5 
per cent was in the final quarter. 
The continued strength of the 
yen, which hit a high of nearly 
Y100 against the US dollar in 
August, weakened exports which 
were down 22 per cent [rom the 
third to the fourth quarters. 


Continued from Page 1 


cent. The speed of tightening, 
however, is likely to depend on 
the rate of economic growth 
later this year and the extent of 
upward pressure on inflation. 

After weeks of anticipation, 
bond traders appeared relieved 
that the long-awaited boost in 
the Fed Funds target rate had 


finally taken place. The bench- 
mark 30-year government bond, 
which is especially sensitive to 
inflationary expectations, 
showed the biggest gains, jump- 
ing about % of a point to 92& 
within urinates of the announce- 
ment 

Additional reporting by Tracy 
Corrigan, Conner Middelman and 
Philip Cawith in London 



EM 


TT 



Europe today 

An active tow pressure system will result in gale 
lorce winds along British coastal regions and 
over the North Sea. A zone of moderate rain 
over Ireland and Scotland will gradually push 
southward, ft will be cloudy with patches of 
light rain over England, the Benelux, northern 
Germany and Poland. Southern Scandinavia will 
hove outbreaks of heavier ram, while in the 
north it will remain mostly dry with patches of 
sunshine. Central Europe will experience a 
mixture ol clouds and sunshine. Sustained 
sunny periods are likely in the Mediterranean 
region. Temperatures will be above the 
seasonal normal over a large area, with 
readings ranging between 15C-23C. 

Five-day forecast 

Unsetned conditions will gradually spread into 
central and eastern Europe. Tomorrow, gale- 
torce winds win butter the coast of Denmaric It 
will be showery in Scotland and mainly dry in 
England, but England should experience rain on 
Friday. By the weekend, the UK will be 
unsettled and somewhat cooler. Scandinavia 
will experience wintry conditions with periods of 
snow and sleet or rain in the south. 

It will be sunny over much of southern Europe 
with afternoon readings ranging between 19C- 
27C. 



TODAY’S TEMPERATURES 


Situation a! 13 GMT. TemperaUjrvs rraxmvm lor day. F u e cs st s by Meteo Consult of the Netherlands 


Abu Dhobi 

Maximum 
Celsius 
sun 30 

Accra 

shower 

33 

AlgkHS 

cloudy 

20 

Hitislwdain 

cloudy 

15 

Afhtms 

sun 

17 

0. Ares 

faff 

24 

0 ham 

ran 

14 

Bangkok 

Ihund 

3 2 

Boreoiona 

sun 

19 

Being 

hr 

9 


Belfast 

ram 

12 

Belgrade 

fair 

19 

Bertn 

shower 

14 

Bermuda 

sun 

22 

Bogota 

rain 

IS 

Bombay 

sun 

3* 

Brussels 

loir 

17 

Budapest 

bar 

13 

CJwgen 

rain 

10 

Cairo 

Sun 

24 

Cape Town 

fair 

S3 

Caracas 

fair 

26 


Cardiff 

windy 

14 

Chicago 

doudy 

15 

Cologne 

fair 

20 

D' Salaam 

far 

30 

Dofcr 

sun 

25 

Dallas 

fair 

26 

Delhi 

sun 

32 

Oubai 

sun 

29 

□ufalbi 

rain 

14 

Dubrovnik 

fair 

19 

Edinburgh 

rain 

11 

Faro 

sun 

21 


Frankfurt 

fair 

19 

Geneva 

SW 

18 

Gibraltar 

aw 

18 

Glasgow 

ram 

11 

Hamburg 

rain 

14 

Helsinki 

rain 

4 

Hong Kang 

cfouay 

17 

Honolulu 

shower 

26 

kranWiH 

Or 

12 

Jersey 

Mr 

16 

Karachi 

sun 

34 

Kuwait 

fair 

23 

L Angeles 

Ml 

17 

Las Palmas 

Ml 

22 

Lima 

sun 

27 

Lisbon 

sun 

22 

London 

doudy 

17 

lUxJtotaq 

fair 

17 

Lyon 

aw 

21 

Madeira 

aw 

19 

Mart 

sun 

21 

Majorca 

an 

20 


Marta 

sun 

22 

Manchester 

rain 

13 

Mania 

fair 

32 

Melbourne 

sw 

25 

Mfaaco Oty 

3W 

25 

Mfam 

sun 

28 

Man 

sw 

22 

Montreal 

cloudy 

7 

Moscow 

fat 

4 

Munfcii 

fair 

19 

Nairobi 

fair 

26 

Naples 

Sun 

20 

Nassau 

far 

30 

Now York 

lair 

17 

Nice 

sun 

17 

Ncogts 

shower 

19 

Oslo 

rain 

8 

Pmia 

fair 

18 

Penh 

fak 

33 

Prague 

shower 

15 

Rangoon 

far 

35 

Reykjavik 

windy 

4 


Rio 

fair 

28 

Riyadh 

sun 

26 

Rome 

sun 

19 

S. Frsco 

shower 

14 

Seou 

shower 

7 

Singapore 

shower 

30 

Stockholm 

cloudy 

8 

Strasbcug 

ter 

22 

Sytfwy 

ter 

21 

Tangier 

doudy 

19 

Tel Aviv 

ter 

20 

Tokyo 

rain 

16 

Toronto 

doudy 

9 

Tunis 

far 

21 

Vancouver 

shower 

10 

Venice 

sun 

19 

Vienna 

fair 

17 

Warsaw 

shower 

8 

Washington 

GW 

22 

Wefltngtan 

fsk 

18 

Winnipeg 

doudy 

-2 

Zurich 

ter 

20 



Your bonus program. 
Lufthansa Miles & More. 

Lufthansa 

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THE LEX COLUMN 

Tough life at the top 


If a life insurance company should be 
judged by its ability to sell life insur- 
ance, Prudential still has something to 
prove. Yesterday's 45 per cent rise in 
full-year profits owed more to recovery 
in general reinsurance - which the 
Pru admits is peripheral to its ambi- 
tions - than underlying momentum in 
long-term savings. Life insurance prof- 
its rose by 10 per cent. But that 
includes taking £50m of US invest- 
ment gains into profits rather than 
diverting such w indfalls into reserves, 
as was the case last year. On the 
accruals accounting method favoured 
by the Pro, the profit contribution 
from new life insurance business actu- 
ally feEL 

Prudential might reasonably plead 
special circumstances. Restructuring 
its direct sales force in the UK has 
yielded annual cost savings of more 
thanSlOQm, but with inevitable disrup- 
tion. As reorganisation comes to an 
end, the sales force must start to per- 
form. More worryingly, Jackson 
National proved extremely vulnerable 
to low US interest rates, which made 
its anmiitiaw less attractive than equi- 
ty-based savings products. Perhaps an 
infusion of new man agement and 
revamped product range will be 
enough to reverse last year’s 38 per 
pgnt drop in sales. 

It is certainly too early to pass judg- 
ment on either count. In theory, Pru- 
dential should be well placed to deal 
with tougher regulation at home. By 
deciding not to provide against mis- 
selling of personal pensions, it has 
shown to uching faith in its record of 
compliance to date. While a yield 30 
per cent higher than the mark et aver- 
age might look generous in the light of 
yesterday's headline figures, the 
mirgrtainHps demand no less. 

Bowater 

Bowater’s premium rating, which 
has been carefully cultivated over the 
years, was blown away in one puff 
yesterday as its shares fell 8 per cent 
That may partly reflect a cyclical 
reversal of fortune with Bo water's pre- 
vious virtues being transformed into 
present vices: defensiveness in reces- 
sion now appears dullness in recovery. 
Good treasury management, which 
produced interest income despite year- 
end debt of wfftrn, now smacks more 
of financial alchemy. Bowater’s pen- 
chant for buying exhausted leveraged 
buy-out companies once seemed a 
clever way of buying assets on the 
cheap. But the drawbacks are now 
becoming apparent, with Bowater hav- 


FT-SE Index; 3201.5 (+3.5) 


Prudential 

Share price retefiva to the 
FT-SE-A Afl-Share Index 



ing to spend much time and capital 
injecting vim and vigour. 

The most serious worry, though, is 
what differential rates of inflation will 
do to margins. Bowater’s suppliers - 
most conspicuously the pulp and 
paper manufacturers - are currently 
p ushing through big price rises. But it 
may prove difficult for Bowater to 
pass the parcel on to its customers, 
producing a nasty margin squeeze. 
Besides. Bowater’s customers are 
growing ever more d emanding , speci- 
fying shorter runs and higher stan- 
dards. That puts another pressure on 
margins, which will not quickly be 
reversed. With no currency gains 
likely this year, Bowater’s attractions 
as a recovery stock have soured. But 
with volumes growing at a respectable 
3 per cent, Bowater still retains its 
longer-term appeaL After a frantic 
spell of corporate activity. Bowater 
must now consolidate. The shares 
seem likely to do the same. 

Credit Lyonnais 

Hie French government feces a deli- 
cate task in the rescue of Credit Lyon- 
nais. It must not alienate outside 
investors to the point where privatisa- 
tion becomes impossible. Equally it 
must not show so much favouritism 
that it upsets the rest of the French 
banking community. So far few details 
have emerged, though it is clear that 
tomorrow’s deal will involve the trans- 
fer of non-performing property loans 
to a shell company. Precedent sug- 
gests this is one way of limiting the 
immediate bad debt provirion - and 
therefore the capital injection from 
the government - but there is a cost 
in the form of future income forgone. 


If it follows the established pattern, 
Credit Lyonnais would lend the shell 
company enough to buy both the bod 
debt at its value after provisions and 
sufficient zero coupon bonds to 
finance eventual repayment of the bor- 
rowing. But Credit Lyonnais would 
not receive interest on its loan to the 
shell company. Since debt transfers to 
the shall company could exceed 2 per 
cent or its loan book, that implies a 
drag on net interest income for years. 

Credit Lyonnais would thus find it 
harder in the recovery to reach the 
absolute levels of profitability estab- 
lished by other French banks. But its 
own recovery will be more pronounced 
simply because its provisions have 
been higher. And since the bank is 
trading at a 25 per cent discount to 
stated 1992 net assets, the market has 
priced in the risks. 

GKN/Westland 

Whatever the niceties about strate- 
gic vision and industrial logic. GKN*s 
bid for Westland is settling down to an 
old-fashioned haggle over price. Unfor- 
tunately, from GKN*s point of view, 
there may well he a gap between the 
price it is prepared to pay and the 
price which shareholders are prepared 
to accept Sir David Lees, GEN’S chair- 
man, has said repeatedly that he will 
not "overpay” for Westland. That 
implies that any increase in the offer 
will be modest There might conceiv- 
ably be some flexing of terms over the 
Arab Organisation for Industrialisa- 
tion settlement GKN might for exam- 
ple. keep all of any payment in return 
for a higher offer. But the total pack- 
age seems unlikely to take the bid 
much over the current market price of 
326p. 

That may not be enough to dislodge 
Westland's heavily concentrated 
shareholders, particularly since one of 
the largest is M&G, which has a tradi- 
tion of supporting existing manage- 
ment. In the absence of a substantially 
higher bid, institutions may also feel 
that they can play a waiting game. If 
the projected orders turn out to be pie, 
rather than helicopters, in the sky, 
they may think that they can sell to 
GKN later. Its 45 per cent holding sug- 
gests a continuing interest, and in any 
event Westland's tax advantages do 
not become substantial until 1996. If 
the orders do materialise, however, 
Westland would be worth a good deal 
more than 326p. The unenviable prob- 
lem facing Sir David is that if he 
refuses to overpay now. he may risk 
having to do so later. 


Thta announcement appears as a matter of record only 

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FINANCIAL TIMES SURVEY 


PHARMACEUTICALS: Research and Development 









.3** 



mm 


s? 








aV->- 


'I’ : i 


fci* : 









Wednesday March 23 1994 

Research used to be an expanse which was never questioned, but not any more. The high 
costs of developing new medicines, tighter regulatory demands - and pressures on 
national health budgets - mean that only those groups capable of bringing innovative 
preparations quickly to the market wit! survive. Paul Abrahams reports. 

Survival of the fastest 


Stainless steel steriXntion vessels for drug research, The industry to 
tkxflng itself In an incra asty and pressured env ir o n me nt 


T he flow of funding for 
pharmaceuticals research 
and development - the 
lifeblood of the drugs industry 
- is under threat. Drugs com- 
panies' ability to raise R&D 
spending is being undermined 
by healthcare reforms intro- 
duced by cash-strapped govern- 
ments around the globe. 

Tve never seen the like of 
last year before. It was grim. 
Nearly every country took one 
route or another to cut drugs 
expenditure," laments Mr Ren& 
Dehecq, president of Elf Sanofi, 
the French group. 

Last year prescription drugs 
sales in the top 10 markets 
grew only 4 per cent, according 
to IMS International, the mar- 
ket research group. The sector 
is unlikely to expand faster 
this year. 

The mood of the industry, 
which has been used to growth 
of between 17 per cent and 20 
per cent a year, has descended 
into deep depression. 

“The climate has changed 
dramatically from one of 
expansion to feelings of great 
introspection, examina tion and 
constraint," gg phins Dr Leon 
Rosenberg, president, Bristol- 
Myers Squibb Pharmaceutical 
Research Institute. 

Admittedly, market growth 
had already been decelerating 
before last year but drugs com- 
panies had previously 
responded by cutting manufac- 
turing, marketing and general 
administrative costs. R&D had 
remained inviolate. 

Now, the precipitous rise in 
pharmaceuticals R&D - hum 
$5.4bn in 1981 to $26.5bn last 
year according to the UK-based 
Centre for Medicines Research 
- appears to be ending. Tbe 
top 10 R&D spenders last year 
increased their investment by 
only 11.4 per cent 


The deceleration in R&D 
growth may be inevitable, 
according to Prof Jflrgen 
Drews, president of interna- 
tional R&D at Roche, the Swiss 
healthcare group. 

“The industry has clearly 
been over-spending. Global pre- 
scription sales would need to 
reach about S280bn a year 
within 10 years to justify the 
present levels of investment. 
The chances of reaching that 
figure are more than low - they 
are non-existent,” warns Prof 
Drews. 

The 10 largest prescription 
drugs markets - representing 
more than 90 per cent of the 
world market - were worth 
SIMflta last year. 


Astra, and three British com- 
panies - Glaxo. Wellcome and 
SmithKline Beecham 
increased their spending by 
more than 20 per cent last 
year. 

Most companies registered 
only single-digit R&D growth, 
and a few - for the first time in 
recent memory - actually cut 
R&D spending last year. 
Among the top 40-odd pharma- 
ceuticals groups, five compa- 
nies - three in the US. one in 
Europe and one in Japan - 
were forced to reduce expendi- 
ture in not only real, but also 
nominal terms. 

Mr Lodewjjk de Vink, presi- 
dent and chief operating officer 
at Warner-Lambert, whose 


□ What companies are spending on research 
and development - see table, page two. ' 

□ New products; leading compounds now in 
development - see Ttst,pagefour. . 

O World drug purchases - see page four. ■ 


Dr Rosenberg concludes: 
“The worst case scenario 
would be tlwt the pharmaceuti- 
cals industry as we know it 
disappears because companies 
no longer believe that there is 
a likelihood of generating a 
reasonable return on money 
put into research. The heady 
days of R&D are over.” 

The impact of healthcare 
reform and the consequent 
slowing of sales growth on 
R&D spending can be seen in 
the table (see page two), com- 
piled by the Financial Times. 

A few groups, mostly Euro- 
pean companies with strong 
volume growth, have managed 
to avoid slowing their invest- 
ment For example, Sweden’s 


drugs subsidiary Parke Davis 
cut Us budget explains: “R&D 
used to be a cost-centre that 
was never questioned. But the 
days of macho spending are 
over. Current levels of spend- 
ing are clearly unsustainable 
and there will be more compa- 
nies out there cutting R&D. 
More is not necessarily better.” 

T he dangers of cutting 
research and development 
are considerable, however. 
For some groups it could prove 

te rminal 

“Once a company starts cut- 
ting R&D, then it's over. It's 
the lifeblood of a pharmaceuti- 
cals company," warns Dr 
Edward Scolnick, president of 


'' ’ ' : 


Merck Research Laboratories, 
the US's biggest drugs group. 

Mr BUI Steere, chairman and 
chief executive of Pfizer of the 
US and chairman of the US 
Pharmaceutical Manufactur- 
ers' Association, explains: 
“Those companies without 
anything in their pipeline and 
with slowing sales are going to 
find it increasingly difficult to 
justify funding R&D aggres- 
sively. 

“They’re going to get more 
and more frightened as their 
income recedes and that win 
set up some kind of synergistic 
death spiral as they cut R&D 
because their income is drop- 
ping. They’ll be killing them- 
selves.* 

The irony is that at the same 
time as R&D spending growth 
is decelerating, the scientific 
opportunities for creating inno- 
vative new medicines are 
expanding rapidly. 

Biotechnology and a greater 
understanding of tbe life and 
death of the cell are opening 
up vast new scientific and 
medical horizons, according to 
Sir Richard Sykes, chief execu- 
tive of Glaxo, Europe's largest 
drugs group. 

‘The basic biology of cellular 
mechanisms is becoming more 
and more understood. Drug 
design is becoming more of a 
science than an art,” he says. 

Dr William Scott, senior 
vice-president of exploratory 
drug discovery research at 
Bristol-Myers Squibb, explains: 
“The opportunities for making 
better drugs are greater than 
ever before. In a short period of 
time, most genes in the human 
body wdl be sequenced. Once 
we can identify tbe molecular 
basis of diseases, then we can 
begin to treat them.” 

Continued on next page 










j e » 

Li?' 






*11“ 







Among pharmaceutical companies, only those capable of discovering 
and developing innovative drugs on a global basis wffl survive 


( initial questions in 
healthcare 
today... 


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PHARMACEUTICALS 2 


Pharmaceutical research and development, 1992-93 


R&D, 1992 
in $m 

R&D, 1993 
in 3m 

increase 
%. 1993 

Sales, 

1993 

% R&D/ 
sales 

1. Roche 

1,090 

>1,240 

>13.8 

5,261 

23.56 

2. Johnson & Johnson* 

1,111 

1,200 

8.0 

14.130 

8.5 

3. Merck" 

1,117 

1,170 

4.7 

10.490 

11.15 

4. Glaxo" 

880 

1,093 

24.2 

6.060 

18.00 

5. BMS 

932 

972 

4.3 

6.524 

14.90 

6. S Lmy* 

925 

954 

3.1 

6.500 

14.67 

7. Pfizer}- 

763 

888 

16.4 

6210 

14.30 

8. Abbottf 

772 

881 

14.1 

8400 

10.48 

9. Bayerf 

714 

810 

13.4 

5.522 

14.60 

10. Sandaz 

751 

>801 

>6.7 

4.948 

>162 

11. Hoechst 

792 

n/a 

n/a 

n/a 

n/a 

12. Smith Kline Beediam 

609 

732 

20.2 

5,153 

14.20 

13. American Home Products* 

5S2 

663 

20.1 

8.304 

7.98 

14. Cba 

657 

n/a 

n/a 

n/a 

n/a 

15. Monsanto* 

651 

620 

-4.8 

7,902 

7.80 

16. American Cyanamid 

531 

596 

12 2 

4.277 

13.9 

17. Schering-Ptough* 

521 

578 

10.9 

4.341 

13.30 

IS. Rhone- PoUenc Rorer 

521 

561 

7.7 

4.000 

14.05 

19. Upjohn 

510 

566 

11.0 

3.007 

18.80 

20. Takeda § 

535 

557 

4.1 

6.720 

8.28 

21. Boehringer Ingel heim 

489 

n/a 

n/a 

n/a 

n/a 

22. Wellcome ☆ 

369 

482 

30.6 

3.019 

15.90 

23. Corange 

459 

n/a 

n/a 

n/a 

n/a 

24. Marion Metre!! Dow 

465 

451 

-3.0 

2.818 

16.0 

25. Sobering 

422 

450 

6.6 

2,379 

18.90 

26. Zeneca 

378 

429 

13.5 

2.768 

15.49 

27. 0f Sanofi 

352 

414 

17.6 

2,120 

19.60 

28. Syntax" 

374 

404 

8.0 

2.123 

19.00 

29. Astra 

298 

389 

30.5 

2.712 

14.30 

30. Pharmacia 

384 

n/a 

n/a 

3.290 

n/a 

31. Parke Davis 

383 

380 

-0.8 

2,114 

18.00 

32. Yamanouchi 

320 

360 

12.5 

n/a 

n/a 

33. Fujisawa 

335 

357 

6.6 

2.390 

14.80 

34. Sankyo § 

318 

345 

8.5 

3,570 

9.60 

35. Genetech 

279 

299 

7.2 

457 

65.00 

36. Bsai § 

273 

277 

1.5 

2,100 

13.20 

37. Novo Nordisk* 

225 

257 

14.2 

1.790 

14.30 

38. Shkmogi § 

260 

254 

-2J3 

2.140 

11.80 

39. Daiichi § 

217 

234 

7.8 

1,880 

12.30 

40. EMerck 

217 

221 

1.8 

1.572 

14.06 

41. Knoll (BASF) 

172 

185 

7.6 

1.050 

17.60 

42. Synthelabo 

156 

174 

11.5 

1,114 

15.60 

43. Solway 

180 

n/a 

n/a 

n/a 

n/a 

44. Ares Semno 

133 

118 

-11.3 

755 

15.60 

Currencies as at December 31, 1093; “Indicates group; "year -end June 30, 1993: t indicates hsaffltcaie; § estfmates for 1993; 

A Mficates year-end, August 30, 1993. source: Fkandal Times 

- dsta conq&ed by Arme-Brit DuBforue and Pad Amtiams. 



neon by Tony Andnma 


Playing for high stakes In molecular roulette 


Continued from previous page 

The problem of how to access 
such new technologies is exer- 
cising Uie minds of all research 
directors. Many are clearly 
irked by the view propagated 
by small biotechnology phar- 
maceuticals groups are being 
left behind. 

Although a few groups such 
as Roche and Rhhne-Poulenc 
Rorer have acquired biotech- 
nology companies, others have 
limited themselves to small 
joint-ventures, adopting a port- 
folio approach. 

The difficulty for the phar- 
maceuticals companies is 
creating the in-house expertise 
capable of judging which pro- 
jects to pick. 

Dr Hiroyki Nagasako, board 
director for corporate planning 


at Daiichi, the Japanese group, 
pg piains why his company has 
no plans to link up with bio- 
technology companies: “There 
are exciting things happening 
in the US biotechnology indus- 
try but frankly you need to 
develop proper levels of exper- 
tise to manage these technolo- 
gies and unfortunately we do 
not have these skills. It's an 
expensive business and you 
can waste a lot of money." 

Given the increasingly diffi- 
cult environment for pharma- 
ceuticals companies, only 
those capable of discovering 
and rapidly developing innova- 
tive drugs on a global basis 
will survive. 

Dr John McCall, executive 
director of discovery research 
at Upjohn in the US, says: “The 
right response to the new envi- 


Not what the 

doctor ordered! 

6 Pharmacists may be allowed to substitute cheaper, non- 
branded drugs for brand name products prescribed for 
patients by their doctors, Dr Brian Mawhinney, Health 
Minister, announced yesterday. 

He told the Parliamentary Health Committee he was planning 
discussions with representatives of family doctors and 
pharmacists on the introduction of the scheme . ?1 

1 Reported m The Daily Telegraph \ 18 February 1994 

Generic substitution would have 
a major impact on a successful 
British industry. 

Provisional figures show that the British 
pharmaceutical industry contributed a trade 
surplus of more than £1,500 million to the 
national economy last year. 



This surplus has been achieved largely 
as a result of massive investment in 
research by the manufacturers of 
branded medicines - enabling 
the UK pharmaceutical industry 
to stay ahead of its international 
competitors. 


There really is no substitute for innovation 


THE BRITISH PHARMACEUTICAL INDUSTRY. 
HELPING TO KEEP BRITAIN HEALTHY' 



ronment is clearly to develop 
novel compounds. They’re 
more fan to work with, easier 
to register with the regulatory 
authorities and more profit- 
able. There will be no place for 
me-too, copy-cat, drugs in the 
future." 

Targeting innovative drugs 
is a high-risk, high reward 
strategy. 

“Development is going to be 
riskier” says Dr Robert Spie- 
gel, senior vice-president of 
clinical research at Schering- 
Plough research institute in 
the US. 

“There will be companies 
capable of discovering innova- 
tive profitable compounds that 
allow them to fund further 
research, and then there are 
others who are just going to go 
down the tubes.” 

eanwhile, given the 
deteriorating operating 
environment, company 
boards are now insisting that 
money spent on R&D is 
invested increasingly produc- 
tively. 

Dr Trevor Jones, WeDcome's 
director of research, develop- 
ment and medical OK, admits: 
“Until recently the pressure to 
look very hard at what we 
ought to do has simply not 
been there." 

Almost all R&D directors are 
focusing their efforts, cutting 
the number of therapeutic 
areas they explore. They are 
also concentrating their 
resources, taking fewer but 
more innovative compounds 
from the laboratory into clini- 
cal trials. 

They aim to develop drugs as 
quickly as possible in the three 
main markets, the US, Japan 
and Europe so that the huge 
costs of developing the medi- 
cines can be recouped. 

The regulatory environment 
is not conducive to rapid devel- 
opment, however. Regulatory 
authorities now require more 
than simple data proving a 
drug Is safe and effective They 
are already demanding farther 
data to demonstrate a new 
compound is better than exist- 


R&D as a percentage of sates 



Bourai: KPUCfc fturmacartieai tnduatiy EfrMkig 

Bringing products to market 


Number of products 
100 


' tbMton (at UMQprlcesj 
- - T" 1*25 

« Now products launched . 



.1960 1S65 1970 1975 

Sw* KPMCfcfJndmioauddJ Muatrytatflnp 


I960 


196S 


1990 


ing therapies. 

In addition, pharmaceuticals 
companies are also being 
drawn into the statistical and 
methodological quagmire of 
health economics as the 
authorities demand data prov- 
ing a medicine is cost-effective. 
Both trends add time to the 
cost and duration of a drug’s 
development 

G iven the increasing cost 
of drug development and 
the need to focus 
resources, a number of phar- 
maceuticals companies have 
reacted by forging aniamry^ in 
particular therapeutic catego- 
ries. 

“We need to collaborate 
more, not compete in basic 
research," explains Mr Robert 
Cawthom, chief executive of 


Rhdne-Poulenc Rorer. 

However, greater scientific 
collaboration, cost-cutting, and 
better use of existing resources 
can only go so far. 

“It's going to he a lot smaller 
industry. There’s going to be a 
lot of consolidation,” says Mr 
Steere at Pfizer. 

Second tier companies will 
need to allocate their resources 
carefully, employ considerable 
skill and enjoy a great deal of 
luck if they are to develop the 
next generation of products 
capable of ensuring their sur- 
vival in this ever-harshenlng 
healthcare envir onment . 

The stakes involved in 
playing molecular roulette are 
higher than ever before. Few of 
those that fail to develop inno- 
vative drugs will be Indepen- 
dent by the end of the decade. 


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£*^[ANCfAL. TIMES WEDNESDAY MARCH 23 1994 


m 

PHARMACEUTICALS 3 


■ RESEARCH TRENDS 

Combination of brains and brawn 


Drug discovery, the first 
phase of pharmaceutical 
research, is being reshaped 
by several strong 
technological forces, 
writes Clive Cookson, 
Science Editor 

T wo of the most powerful factors in 
pharmaceutical research may seem 
to be leading in different directions. 
One is the ability to screen vast numbers 
of molecules - which may be natural prod- 
ucts or synthetic chemicals - ever more 
rapidly for useful pharmacological activ- 
ity. The other is the use of computers to 
design an individual molecule to fit per- 
fectly into a particular biochemical slot, 
such as a receptor site on an enzyme. 

There are indeed companies focusing 
hard on one or other of these approaches. 
For example, Affymax of Palo Alto, Cal- 
ifornia, has pioneered a technique to make 
and test millions of new compounds, by 
putting 1 together peptides from random 
combinations of aminn acids. The pharma- 
ceutical industry Is suddenly showing 
great interest in creating huge "chemical 
libraries” of this sort for mass screening. 
At the other extreme is Ago uron, based 


further south in La Jolla, California. It is a 
leading exponent of "rational drug design” 
by computer. The company says its anti- 
cancer drag AG-337, now in clinical trials, 
is the first in the world developed from 
scratch by computational chemistry, with- 
out reference to existing compounds. 
Agouron designed AG-337 to inhibit thymi- 
dylate synthase, an enzyme required by 
rapidlydividing cancer cells. 

But most drug companies are combining 
brains and brawn in their approach to 
drug discovery, says Dr Trevor Nicholls. 
European managing director of Amersham 
Life Science, a UK- based supplier of 
research tools to the pharmaceutical 
industry - “some of our customers are 
using both approaches in tandem. They 
look for a good shape to at a particular 
receptor, through the principles of rational 
drug design, and synthesise many mole- 
cules with the same general shape. Then 
they use Tiigh throughput screening 1 to 
find the best of this rationally chosen 
bunch." 

Sir Richard Sykes, chief executive of 


Glaxo, agrees that the use of chemical 
libraries in this way has enormous poten- 
tial - “if you have a target - if you have 
identified a receptor or enzyme, you can 
done its gene and crystallise the resulting 
protein. Then you can look, at the active 
site and say: this is the sort of molecule 
you can fit into it With chemical libraries, 
you can make thou- 
sands of variants and 
see whether by Itera- 
tion you can get a 
better and better fit 

"You’re limited at 
the moment with chamire ii libraries - they 
consist mainly of peptides - but as the 
technology develops you will be able to 
make t housan ds of variations of these mol- 
ecules instead of needing medicinal chem- 
ists to make them. Then the fine tuning 
would be done by medicinal chemists,” Sir 
Richard says. 

Glaxo launched a chemical libraries ini- 
tiative last year. In the US the company 
has an ambitious programme to synthesise 
a million small molecules. In the UK, 


Glaxo is concentrating on building up 
chemically diverse collections of organic 
molecules that might be developed into 
drugs. 

Sir Richard says chemical libraries and 
their associated technologies will enable 
research chemists to spend less time on 
the routine aspects of organic synthesis 
and more on the cre- 
ative medicinal 
aspects of chemistry. 

Meanwhile labora- 
tory automation, 
together with new 
techniques such as Amersham’s Scintilla- 
tion. Proximity Assay, is rapidly speeding 
up the rate of screening. "People are regu- 
larly running assays with up to 10,000 
samples on a single screening run, which 
can be completed within a day,” Dr 
NichoQs says. "Some companies are now 
looking to increase that by a factor of 10, 
for example by miring several compounds 
in a single welL If you get a ‘hit’ to a 
particular well, you then separate the com- 
pounds out and test them individually. " 


Dr John McCall, executive director of 
discovery research at Upjohn, says his 
company is “now using recombinant tech- 
nology to screen as many as 12,000 com- 
pounds in a day - which used to take 12 to 
IS months. That represents one of the big- 
gest revolutions in molecular biology.” 

Both mass screening and rational drug 
design share a common underlying tech- 
nology. genetic engineering. They ore fea- 
sible because “recombinant DNA" tech- 
niques enable researchers to clone the 
gene for any protein receptor and transfer 
it to cells in culture, which then produce 
large quantities of the pure protein. 

For screening, the protein is incorpo- 
rated in an assay which tests whether 
candidate drugs bind to it. For drug 
design. X-ray crystallography is used to 
obtain the protein's precise 
three-dimensional structure which can 
then be fed into a computer programmed 
to cany out molecular modelling. 

Agouron employs 17 X-ray crystaUogra- 
phers who play a central role in the drug 
design process. They crystallise not only 


the pure target protein but also the com- 
plex formed when the drug binds tn it. 
Their structures are fed back to the com- 
puter scientists, who use the detailed 
information about the binding site to 
improve the drug further. So the design 
process involves an iterative cycle 
between computer modelling and crystal- 
lography. 

How will drug discovery develop in the 
future? “Over the next few years, were 
going to sec more emphasis on experi- 
ments taking place within living cells," 
predicts Dr John Maynard, research direc- 
tor of Amersham International. “You can 
only examine cellular expression systems 
by looking at living ceils." 

Sir Richard Sykes believes that it will 
become technically possible to improve 
the structure of candidate drugs in situ, 
while the molecule is actually attached to 
the target site, through a pmeuss of chemi- 
cal evolution - “the long-term potential is 
to put some sort of evolutionary pressure 
on the discovery process," he says. 

“For example, if you have an enzyme, by 
an evolutionary technology you would 
develop the molecule within the active 
site. I would think this is the way people 
are thinking: move away from peptides to 
small organic molecules and alter them 
within the active site. In effect you’re try- 
ing to speed up the process of natural 
evolution." 


In the next few years, there will 
be more emphasis on experiments 
taking place within living cells 


One of the fastest 
growing aspects of 
pharmaceutical R&D 
is contract research 


C ontract research has 
expanded from a small 
cottage industry In the 
mid-1970s to a business whose 
worldwide turnover is now 
estimated at $3bn a year. 

Contract research organisa- 
tions - known generally as 
CROs - span the whole spec- 
trum of pharmaceutical R&D. 
In the discovery phase, they 
synthesise tiny quantities of 
research chemicals and help to 
elucidate the pharmacological 
action of new molecules. 

But their biggest contribu- 
tion comes in clinical develop- 
ment; indeed, some of the 
larger CROs have built up clin- 
ical departments as large as 
those in medium-sized pharma- 
ceutical companies. Toxicology 
and laboratory analysis are the 
most mature sectors of the 
CRO market, in which compa- 
nies routinely contract out 
work. 

A book just published* by 
Technomark, a London consul- 
tancy. contains what is 
claimed to be the first compre- 
hensive analysis of the interna- 
tional contract research indus- 
try. It shows that there about 


1,000 CROs worldwide, of 
which at least 20 have reve- 
nues exceeding $20m a year. 

Richard Wyse and Graham 
Hughes, the Technomark 
authors, estimate that the 
European CRO Industry has a 
turnover of about $900m, of 
which the UK accounts for 
$40Qm. Britain is the preferred 
location for drug development 
programmes, they say, because 
of the strength of its scientific 
expertise, its health and aca- 
demic infrastructure and, 
above ail its favourable legis- 
lative and economic condi- 
tions. 

F actors fiieling the rapid 
growth in contracting out 
include: 

• Regulatory and legislative 
changes which require phar- 
maceutical companies to carry 
out larger and more wide-rang- 
ing studies. 

• Globalisation of the phar- 
maceutical industry; CROs 
have local knowledge and 
skills which can be very attrac- 
tive to, say, a Japanese drug 
company trying to expand into 
Europe. 

• Growth of biotechnology 
companies which have little 
in-house experience of the com- 
plex process of clinical develop- 
ment and cannot afford to staff 
their own overseas offices. 

• Strategic decisions by many 
pharmaceutical companies to 


CONTRACT RESEARCH 


Big change in attitudes 


use CROs for certain areas of 
R&D, so as to accelerate devel- 
opment and cut costs. 

• Increasing recognition by 
the industry that CROs repre- 
sent a valuable source of exper- 
tise. 

Sir Richard Sykes, chief 
executive of Glaxo, explains 
why CROs are so useful -- “in 
R&D, there’s a baseline level of 
activity and then there are 
peaks and troughs. It's impor- 
tant not to staff up for the 
peaks.” he says. “The idea Is 
generally to contract out for 
the peaks; that way we can 
keep a lean machine." 

That Is the classic justifica- 
tion for contracting-out. Dr 
Pierre Simon. R&D director of 
Elf Sanofi, puts it similarly: 
“Development comes in waves. 
We want to use our develop- 
ment capacity at 100 per cent," 
he says. “Anything over 100 
per cent and we turn to CROs. 
That's better than hiring new 
people. This is an unstable 
world. Td prefer not to hire 
people and then fire them a 
couple of years later.” 

Japanese drug companies 


Growth of Contract Research Organisations 


(timber , 

of “ 7//!. 

?R0 % M 



Souk* VTyw aid Hogho* GMadtl ffcwwx* 1 M *« 1«IQi 


with global ambitions have 
particular reason to contract 
out clinical development over- 
seas. “We already use CROs In 
the US,” says Mr Maaaji Ohno, 
manag in g director for R&D at 
Eisal. “We aren't sure in 
Europe yet. There’s no tradi- 
tion of CROs in Japan, but 
they make it very easy to enter 


clinical trials. It allows us to 
avoid building up an expensive 
infrastructure overseas.” 

Mr Mitsuhiko Sentoku, direc- 
tor of planning and develop- 
ment for Daiichl, agrees. “We 
can acquire very good Clinical 
data in London - we're putting 
one of our leading products 
Cravit through CROs in 


Europe. That avoids having to 
build up important infrastruc- 
ture." 

Sir Richard Sykes draws a 
dear distinction between con- 
tracting-out and collaborative 
research. “Contracting-out is 
for a specific task; we lay down 
the parameters and we pay for 
it," he says. “That's quite dif- 
ferent from collaboration, 
where there’s a close flow of 
information between us and 
our partners." 

In 1992/93, Glaxo spent £183m 
on research, of which £39m 
went to external organisations 
- mainly collaborative part- 
ners. In the same year, the 
company spent £556m on devel- 
opment, of which £L28m was 
external - mainly contracted 
out 

“Our major competitors are 
still the pharmaceutical com- 
panies themselves, rather than 
other CROs,” says Dr John 
Mills, senior vice-president for 
Europe at Besselaar - one of 
the largest CROs with 1.100 
employees worldwide. 

“In some companies the med- 
ical directors are resistant to 


contracting-out because they 
think they will lose control by 
handing work over to us. Peo- 
ple are not yet as open with us 
as they could be.” 

Even so, Dr Mills says, there 
has been a huge change in atti- 
tudes over the past 20 years. 

“When 1 started out in the 
industry, you contracted-out 
the bits which you really didn’t 
want to do or which you were 
afraid might foil. 

“Contracting was regarded 
as a rather mucky end of the 
business - and not very excit- 
ing. We're much more respect- 
able now.” 

M r Simon Garnham, 
who founded Chiltern 
International in 1982 
and has seen it grow into a 
substantial European CRO, 
describes another change. 

“The market has developed 
from a very immature, not to 
say casual, situation 10 to is 
years ago when significant 
clinical research expenditures 
were often made on the basis 
of discussions and a simple 
exchange of letters, to a point 
today where sophisticated 30- 
page legal agreements accom- 
panied by full product specifi- 
cations mid costings are more 
the norm." 

Most people in the contract 
research industry expect it to 
continue growing in the years 
ahead, though not as quickly 


as over the past two decades. 

“The minimum critical mass 
necessary to undertake larger 
projects today is somewhere of 
the order or 100 staff, spread 
amongst a balance of depart- 
ments giving really quite sig- 
nificant drug development 
capabilities says Mr Garn- 
ham. 

“But by trying to keep the 
size of functional groups mod- 
est, say between 20 and 30, it Ls 
possible for contractors to 
respond to clients better and 
for clients to identify better 
with those groups who are pro- 
viding services. 

“Overall, the market today is 
still very fractured." he says. 
“In 20 years’ time, people in 
business schools will probably 
look back and refer to tills ns a 
classic situation of an imma- 
ture market developing and 
polarising Into a relatively 
small number of relatively 
large players who dominate 
the game, together with a rela- 
tively large number of small 
players to provide highly speci- 
alised services - in particular, 
therapeutic or geographical 
areas." 

□ □ □ 

* Pharmaceutical Contract 
Research in the 1990s, £250; 
from Technomark, King House, 
5-U Westbourne Grove, Lon- 
don W2 4UA. 

Clive Cookson 



they cost the health service a packet? 




Or save it a fortune? 



^-Modern medicines aren't cheap. 




And as science becomes more 
sophisticated and research. 

^7 arid development costs 
inexorably, ■ they’re unlikely to 
become cheaper. .^|j| 

^Vhich poses an obvious dilemma for every 
health service which is trying to meet rising 
public expectations for healthcare, with- 
out imposing a crippling burden on 







taxpayers. 

Birr do today’s medicines often repieS^hihe-; 
cost-effective . solution, rather than- addihgvib 

the problem? . y > : . . 

What if they can help dp .away with /the 
need for expensive surgery? (As has already 


happened in the field of gastric ulcers.) 
Suppose - as one recent study on heart disease 
’^suggests - they can reduce, or in some cases 
eliminate, the need for hospitalisation? 
..What's the true economic 
cost Cor benefit) to society 
of a medicine that allows 
a migraine sufferer 

perform efficiently and produc 
,ther than having time off work? 

I^GuiXO has taken a lead in its industry, by 
investing time, effort and money to investigate 
questions like these. 

ToDAYj we employ over 50 specialist health 
/economists around the world to conduct and 
coordinate research - often in partnership 



with independent bodies - into the 
complex balance between the cost of 
treatment and the resulting improvements ‘ v ) 
in the health, and quality of life, of patients. • 
As we develop new medicines, our goal is not 
~ . only to meet the highest 

standards of safety, 
efficacy and quality. 

->■ We also 

■ .... 

w ' Ss * r 

recognise the need to provide 



. N 





demonstrable value for 
patients and health services alike. 
And it’s a need we’re ready to meet.’ 



Glaxo 



WORKING FOR A HEALTHIER WORLD 





pnWAlvCIAL TIMET '" nAY MAR ° H ” ^ 




World pharmacy drug purchases in US$ (millions) 

Figures for the period: January to December, 1993 




n America 


Cartfiovasoiar 7,983 

ASmentary/meteboflgm 7,776 

Central nervous system 8,003 

Respiratory 5,205 

Anti-infecttves 4,585 

ttjscuto-sketetal 2,445 

Stood agents 2,062 

GentttHrttery 3,184 

Dermatologicai 2J63 

Miscellaneous 2,105 

Hormones 472 

Cytostatics 685 

Sensoiy organs 1,392 

Parasitology 80 

Hospital sohiUons 2 


Japan* 

3,115 

3,880 

1,023 

1,660 

2722 

1,962 

1,551 

378 

655 

1778 

342 

614 

563 

6 

468 


JzanasL 

3,100 

2709 

1741 

1758 

790 

715 

494 

762 

702 

486 

248 

263 

170 

23 

21 


Jam. 

2.960 

2759 

1755 

998 

1,494 

542 

718 

578 

502 

358 

147 

168 

222 

38 

9 


J2!*_ 

1721 

1790 

807 

547 

876 

499 

580 

291 

261 

611 

339 

371 

118 

5 

38 



774 

376 

366 

82 

281 

294 

166 

61 

81 

92 

22 

4 


433 

424 

551 

219 

221 

103 

192 

407 

229 

124 

61 

4 

2 


295 

383 

196 

230 

108 

74 

63 

97 

79 

24 

IS 

33 

30 

6 

0 


60 

72 

58 

19 

39 

45 

23 

3 

0 


Tom 

% increase 


48,732 

5 


20.215 

6 


12^80 

9 


12.148 

6 


5.143 


11 


_4j419 

12 


1717 

11 


1733 

6 


The race to market: high development costs are only recouped in three main markets: the US, Japan and Europe 


* Mates iwr-flupari natal on* (Wa awea ftr fee *x*m bftfc PhmatauBcat 


PM Mam. anrint wAIM<<W Pa aMa Ode* l» Hw» 


Potentially important pharmaceuticals now under development 


Launch date, 


Company 

Therapeutic 

Class 

indication 

Company 
brand name 

Generic name 

Launch date, 

M#x imitate 

Company 

Tnerapeutic 

Class 

fexBcaflon 

company 
brand name 

Generic name 

Major markets 

Chiron 

Antibiotic 

septic shock 


antl-TNF MAb 

94 Wrid 

J & J 

Anti-psychotic 

02+5-HT2 antag. 

Risperdal 

risperidone 

93-6 Wrid 

OR Fir 

Bayer 

Antibiotic 

septic shock 

BAY 1351 

antt-TW MAb 

97 Wrid 

Pttanrada 

Anti- psychotic 

D2+5-HT2 antag. 


amperoztte 

yo oji 

07 ufrtrf 

Ceutecti 

Antibiotic 

septic shock 

C0P571 

anti-TNF MAb 

97/8 Wild 

Akzo Pharma 

Anti-psychotic 

D2+5-HT2 antag. 


Org 5222 

at niw 

QC. UJAri 

Bayer 

Antibiotic 

septic shock 

10-3358 

anti-TNF MAb 

? Wrid 

Pfizer 

Anti-psychotic 

02+5-HT2 antag. 


CP-88059 

iHH nno 

no, ){C 

Synergen 

Antibiotic 

septic shock 

Antrll 

IL-l rec. ant 

95-96Wrid 

Hoechst 

Anti-psychotic 

D2+5-HT2 antag. 


HP873 

i>0+ uo 

on RormjiPiif 

British Bio-tec 

Antibiotic 

septic shock 

BB-882 Lv. 

lexipatant 

97+ Eur+US 

Fujisawa 

Anti-fBycbotic 


Mpdet 

zotephie 

yu UClMIrCUl 

A7/Q UMH 

Bristol Myers Sqb 

AnB-viral 

Aids 

Zerit 

stavudinef d4T) 

94 Wrid 

Zeneca 

Anti-psychotic 


Seroqud 

Id 204 836 

97/0 Ww 
ocn M/rM 

Upjohn 

Antl-viral 

Aids 


U-87201 

? US 

miy. a 

Arti-psychotic 



olanzapine 

8677 Wnu 

try to UMri 

Roche 

Antf-viral 

Aids 


Ro-318959 

9677 Wild 

UDy. Efi 

Arti-psychotic 



zatosetron 

37/0 WfW 

SrmthXIine Bchm 

Antl-viral 

AIDS 


SK&F 7 

97 Wrid 

Ciba 

Anti-epieptic 


TrDeptaJ 

axcarbazepfm 

96 US 

Roche 

Anti-viral 

Aids 


Bo-247429 

9677 

Warner Lambert 

Antt-eptieptic 


Heuronttn 

gabapentin 

94-3 Wrid 

Hoechst 

Anti-vlral 

Aids 

Trental 

pentoxyfyflJne 

USA 

Wellcome 

Antl-epJeptic 

glutamate release inh 

Lamfctal 

lamotitgtoe 

90-3 Wild 

Rhone P Rater 

Anti-viral 

Aids 

RG 83894 

killed virus 

98 Wrid-Asia 

Marion M Dow 

Aiti-epSeptic 


Sabrfi 

vigabahin 

95 US 

MicroGerteSys 

Antl-vfral 

Aids 


gpl60 


Fteons 

Anti-epileptic 

NMOA antagortist 


ramacemide 

98 Eur 

Genentech 

Anti- viral 

Aids 


gpl20 

97 US 

Roche 

Dementia 

cholnerglc 


arfiracetam 

93-7 Br 

British Bio- tec 

Antl-viral 

Aids 


p24-VLP 

97 Wrid 

Forest Labs 

Dementia 

choGner^c 

Synaptan 

physostigmira 

96 US 

Smith KUne Bchm 

Anti-viral 

herpes 

lam/penddovir (tfd) 

94 Fur 


Hoechst 

Dementia 

chatiner^c 

Mentane 

velnacrine 

94 Wild 

Smith Wine Bchm 

Antl-viral 

herpes 

tam/pflflddovtr (tid) 

94 US 


Warner Lambert 

Dementia 

chotinergic 

Cognex 

tacrine 

93 US+Eur 

SmrthWrne Bchm 

Anti-viral 

herpes 

fam/percidovir (tid) 

96 Jap 


Sumitomo 

Dementia 

choftnergfc 


SM-108S8 

95 Jap 

Wellcome 

Antl-virai 

herpes simplex 

Valtrex 

valaddovir (bid) 

95/6 US+Eur 

Takeda 

Dementia 

cholinesterase trth 


TAK-147 

98+ Jap 

Wettcome 

Anti-viral 

herpes simplex 

Vatbex 

vatacjcJovtr (bid) 

97 Jap 

Beal 

Dementia 

chotinerglc 


E 2020 

96+ Jap 

Wellcome 

Antl-viral 

herpes zoster 

zonavtr 

BW 882C 

96-97 Jap 

Sigma Tau 

Dementia 

cerebral metab. 

Alcar 

acdyl-caniUne 

96+ US 

Wellcome 

Antl-viral 

herpes zoster 

zonavir 

BW 8S2C 

97 US+Eur 

SmithKHne Bchm 

Dementia 

cerebral metab. 

Alcar 

ace^-cam&ine 

95 US 

Merck 

Anti-viral 

herpes zoster 


- 

93 US 

Dabtippon 

Dementia 

cerebral metab. 

RGH-2202 

poatakeln 

98 Jap 

Lilly, SI 

Antf-vlral 

influenza 

LY 217836 

amltivir 

95796Wr1d 

DaSctti 

Dementia 

cerebral metab. 

DM-9384 

nefiracetam 

96 Jap 

Voshitomi 

Arthritis 

NSAI0 


Y-23023 

96+ Jap 

Chugai 

Dementia 

carebral vasodilator 

Antovas 

ntoaravan 

92 Jap 

Fujisawa 

Arthritis 

NSAJD 


FK 3311 

Jap 

Chugai 

Dementia 



nkxrantfl 

95 Jap 

Sankyo 

Arthritis 

NSA1D 


CS 870 

96+ Jap 

Yamanoucte 

Dementia 



ktdekBcazkn 

96+ Germ 

Dainippon 

Arthritis 

NSAID 

Dibenon 

bermoprofen 

95 Jap 

Du Pont Merck (jv) 

Dementia 


DUM9B 

finopridne 

98 US 

Sandoz 

Arthritis 

immunosupp. 


cyck»porm(Bq/soft gel) 

93-95Wrid 

Roche 

Dementia 

MAO-8 tnh. 

lazabemida 

Ro-1 9-6327 

98 Wrid 

Nippon Shinyaku 

Arthritis 

hnfminosupp. 

Ord 

actarit 

94 jap 

Hoechst 

Dementia 

xanthme 


propentoxyfySne 

96 Eur 

Synergen 

Arthritis 

immunosupp. 

AiM 

IL-1 rec. ant 

95-96WrW 

Hoechst 

Dementia (MD1 

xanthine 

(Trental) 

psntokffyfllne 

83 Eur 

Pfizer 

Arthritis 

5 -lipoxygenase inhtb 

Enabfe/EraMex 

teuldap 

94 Wrid 

Bayer 

Dementia 

Ca antag. 

Mmotop 

nfcnodtaine 

90-4 US+etr 

Zeneca 

Arthritis 

5-Hpaxygenase inNb 


D-2138 (oral od) 

? Wrid 

Searie/Monsanta 

Dementia 

NMOA antag 

Oycan 

nflacarnkta 

96-97US+Jap 

Greenwich 

Arthritis 

mod carbohydrate 

Theralectin 

amiprdose 

95 US 

Hoechst 

Dementia 

ACTH analogue 

HOE-427 

ebiratide 

98 Wild 

Syntax 

Arthritis 

mod carbohydrate 

Therafectfn 

am ip rl lose 

7 US+Can 

Schering AG 

Dementia 

beta cartxdne 


gedocamfl 

99/00 Eur+US 

Hoechst 

Arthritis 

immunological 


ieflunomlde 

98 Wrid 

Bristol Myera Sqb 

Dementia 

ACE inhibitor 


ceranapril 

97 Wrid 

Syntax 

Arthritis 

immunological 


leflunomfde 

98 Wrid 

Ono 

Dementia 

PPCE 


ONO 1603 

95 Jap 

Syntax 

Arthritis 

purine syn bit) 


mycophenofate mofetil 

95+ Wrid 

Tanabe 

Dementia 

thyrotropin re) horm ana 


TA-0910 

94 Jap 

CeDtech 

Arthritis 

monodonal anflb. 

COP571 

anti-TNF MAb 

00 Wrid 

Takeda 

Dementia 



TRH-Sfl 

9B+ Jap 

Wellcome 

Arthritis 

monoclonal ant*. 


Cam path- 1H 

98+ US+Eur 

B Ingetiretm 

Alzheimsrs 

Ml antagonist 


WAL2014 

98+ Wrid 

Centocof 

Arthritis 

monoclonal artUb. 

Gen tare 

aiffl-C04 MAb 

95 Wrid 

Yamawuchl 

Dementia 

Mi rec stimulator 


YM 796 

96+ Jap 

xoma 

Arthritis 

monodonta ant*. 

C05+ 

ant»-C05 immunotox. 

96 Wrid 

B ingeflieim 

Dementia 

A1 antagdtiat 


KFM 19 

98+ Wrid 

Schertng Plough 

Cancer 

androgen/anti 

Eutadn 

flutamide 

89 Wrid-Jap 

Bayer 

Dementia 

Chotinesterase tnti) 


metrofinate 

98 WrW 

Nippon Kayaku 

Cancer 

androgen/anti 


flutantide 

S3 Jap 

Sarxloz 

Dementia 

- 


BIA 713 

98+ Wild 

Zeneca 

Cancer 

andragen/anti 

Casodex 

W-176334 (Od) 

95 Wrid 

Glaxo 

Memory 

5-HT3 antag. 


ondansetron 

97 Wrid 

Starting 

Cancer 

androgen/anti 


zanotefone 

96+ US 

Ully, a 

Memory 

5-HT3 aitag 


zatosetron 

97 WrW 

Nippon Kayaku 

Cancer 

oestrogen/anti 


toremlfene 

93 Jap 

Gbno 

Acid disordera 

K/H2 antagonist 


ranftkflne Msmutii 

9996WIW 

Zeneca 

Cancer 

oestropen/anti. 


id-182780 

? Wild 

Abbott 

Add disordera 

proton pump tnh 


fansoprazote 

92-94 Wrid 

Takeda 

Cancer 

LH-flH analogue 

Lupron 

teuproretin 

91 Jap 

Takeda 

Add disorders 

proton pimp inh 

TakapnxVOgast 

tansoprazoie 

92-94Jap 

Ciba 

Cancer 

aromatase Inh. 

Lentaron 

formustine(lm) 

2H92 Eur 

Bsai 

Add tflsordere 

proton pistvp Inh 


E 3810 

94-95Jap 

Ciba 

Cancer 

aromatase inh. 

Fadrozole 

fabjoatf 

95-6 Wrid 

Lffly, Q 

Add disordera 

proton pwnp inh 


E 3810 

97+ US 

Zeneca 

Cancer 

aromatase If*. 

Arkntdex 

(CI-D1Q33 (od) 

96+ Wrid 

Glaxo 

Emesis 

5-HT3 antag. 

Zoftan 

ondansetron 

90-91 &JT+US 

Zeneca 

Cancer 

thymidylats syn inh. 

Tomudex 

D-1694 

? Wrid 

Smith Kfine Bchm 

Emesis 

5-HT3 antag. 

Writ 

granfsetron 

91-84Wrid 

Liposome Camp. 

Cancer 

artbbkjt/lntenralat 

Dox-99 

doxorub. -liposome 

96 US 

Sandoz 

Emeds 

5-HT3 antag. 

Navoban 

feopbstron 

93-7 Wrid 

Pfizer 

Cancer 

anfibiot/lntercabt 

TIC D-99 

daxorub. -liposome 

96 US 

Yamanouchi 

Emesis 

5-HT3 antag. 


YM 060 

96 Jap 

Pharmacia FtCE 

Cancer 

antibiaL/intercalat 

PharmorutXdn 

epirobtem 

93 US 

Glaxo 

emeets 

5-HT3 antag. 


GR 87442N 

97 Wrid 

Knoll/BASF 

Cancer 

antibkjt/intercalat 


amonaflde 

95 Eur+US 

Synthetabo 

BPH 

alpha blocker 


anuzosta 

95/6 Jap 

Pharmacia RCE 

Cancer 

antibioUIntefcalat 

FCE 23762 

methoxymorphollno dox 

? Eur 

Yamanouchi 

BPH 

alpha blocker 


amstibain 

US+Eur 

Upjohn 

Cancer 

antibiol/lntercalaL 

Tomosar 

menogartl 

95 Jap only 

B togdhehn 

BPH 

dpha btocker 


ternsutoskta 

Eur 

Ou Pont Merckflv) 

Cancer 

antibloL/rntercatet 

Ct-941 

Wan ti azote 

95+ Eir 

Merck 

BPH 

androgen inh. 

fYoscar 

finasteride 

92-7 Wrid 

Du Pont Merck Qv) 

Cancer 

antibloL/lntercalaL 

DUP 937 

anthrapyrazoie 

95+ Eur 

Yamanouchi 

BPH 

androgen inh. 

Proscar 

finasteride 

98/7 Jap 

Schenng AG 

Cancer 

anti -metabolite 

Fludara 

fludarablne (lv) 

93 Eur 

SmrtWQine Bchm 

BPH 

androgen Inh. 

SK&F1 05657 

epridalde 

96-97Wrid 

Lederie/Cyan'd 

Cancer 

anti-metabolite 

taovarin 

leucovortn Ca (1) 

91 US 

Sender 

Obesity 

5-HT uptake inh. 


dexfenRuremine 

93 US 

Lederie/Cyan'd 

Cancer 

anti -metabolite 

Mpent 

pentostatin 

92 UK 

Lilly, a 

Obesity 

5-HT uptake Ml 

Lovan 

tenretew 

93/4 Wrid 

Bristol Myers Sqb 

Cancer 

anti -metabolite 

Taxol 

padrtaxel 

93-96Wrid 

Pfizer 

Obesity 

5-HT uptake Wt. 


sertrafine 

95 US 

Rhone P Rorer 

Cancer 

anti-metabolite 

Taxotere 

doce taxol 

95 US/Eur+Jap 

B ingelheJm 

Obesity 

beta 3 agonist 


ULTG307 

98+ Wrid 

Ciba 

Cancer 

anti-metabolite 

\Q-edam 

edatrexata 

95 US+Eur 

Roche 

Obesity 

fipase inh. 

Ocfistat 

orfiptastet 

97+ Wrid 

Ptvirmacia RCE 

Cancer 

anti-metabolite 

FCE 24517 

taUlmustine 

99 Wrid 

American Home 

Osteoporosis 

HRT 

Premartn MPA 

oest-pregeatin comb 

93 US 

British Bio-tecn. 

Cancer 

melalloprot mh. 

BB-94 oral 

batimastat 

97 Eur +US 

Cite 

Osteoporosis 

HRT 

Estracomb 

oest comb. 

93 WrW 

Dauchi 

Cancer 

topol some rase inh. 

Topotadn 

imotecai 

5/94 Jap 

Warner Lambert 

Osteoporosis 

HRT 


CI-376 

94/5 US 

Chupj 

Cancer 

metal complex 


DWA-2114A 

93 Jap 

Schering AG 

Osteoporosis 


Cftnrara 

estradtol patch 

95 Eur+US 

Knoll BASF 

Cancer 

immunotogiiaj 


TNF 

95 US 

Akzo Pharma 

Osteoporosis 

synthetic steroid 

Uvtel 

fiboione 

95-6 Wild 

Wellcome 

Cancer 

cytokines 

Weflferon 

interferon -a 

92 US 

RMne P Rorer 

Osteoporosis 

catdtonin 



94 US 

Arcs-Scraro 

Cancer 

cytokines 

Rebrt 

interferon-b-r 

94 Eur 

Sandoz 

Osteoporosis 

cddtonln 

Mtacatoin 

caidtonin (I nasal) 

94/5 US 

5<ogon 

Cancer 

cytokines 


Interferon-b-r 

95/6 US 

Merck 

Osteoporosis 

btaphosphonate 

Fosonax 

alendronate 

95-8 US+Eur 

Schertng AG 

Cancer 

cytokines 

Betasorao 

Interferon-b-r 

95/8 US 

Lflty, 01 

Osteoporosis 

bfepfnsptonate 


ratodtene 

97+ US 

SchiTfng AG 

Cancer 

cytokines 

Betas eron 

interferon- 5-r 

95 Eur 

Sterling 

Osteoporosis 

btephosjrfionate 


VkKtnnats 

96-98US 

Immune* 

Cancer 

cylokmes 


interleukJn-2 

(92) lie out 

Yamanouchi 

Osteoporosis 

btaphosphonate 


YM l75Qntfont) 

97+ Jap 

Chiron 

Cancer 

cytokines 

PrOleukin 

inteileukin-2 

90 Eur 

Takeda 

Osteoporosis 

btaphosphonate 

NE-58095 

risedronata 

98+ Jap 

Roctw 

Cancer 

cytokines 

Prafeuton 

lnterieukJn-2 

92/1 Eur 

Astra 

Asthma 

hrondioflirtfc-2 

Brie. Tutwrisfler 

tertwteHne 

88-95Wrid-US-Jap 

J & J 

Cancer 

cytokines 


mterieukin-2 

- 

C*a 

Asthma 

broncho/beta>2 

Foradfl 

termoterol 

90-96WrW 

Schonrrg Plough 

Career 

cytokines 


interteuWn-4 

95 Wrid 

Astra 

Asthma 

bronchQ'beb-2 


bamhuterof(oraO 

9S+ US 

Aros-Serono 

Cancer 

cytokines 


interfeuJdn-6 

96 US+Eur 

Glaxo 

Asthma 

broncho/beta-2 

Serevent 

saimeteroJ 

90-4 Wrid 

immune* 

Cancer 

cytokines 

PlXY-321(PayWne) 

(3H-CSF/IL-3 

US 

&3XQ 

Asthma 

broncho/beta-2 


SI 114297 

98+ Wrid 

Upjnhn 

Cancer 

interferon inducer 


biopirimine 

95 US+Jap 

Yamanouchi 

Asthma 

txondn/K dot 


YM-934 

98+ Jap 

Kycwa Hakku 

Cancer 

DT diaphorase inh 


E09 

98+ Eur 

Astra 

Asthma 

steroid 

PutmL-TiBtxjftaler 

budesonkte 

95-6 Wild 

Roche 

Cancer 

vit A derivative 

VesanaW 

tretinoin 

94+ Wrid 

Gtexo 

Asthma 

steroid 

FfiXOikte 

fluticasone 

93-7 Eur 

Gencntedi 

Cancer 

monoclonal am*. 


MAb Hffl-2 

97+ Wrid 

Astra 

Asthma 

steroid 


05522 

98+ wild 

Wellcome 

Cancer 

monoclonal antib. 


Campath-IH 

7 US+Eur 

Fisons 

Asthma 

other Antl-Mtam. 

TVada 

nedocromll 

88-9lvnW 

Glaxo 

Cancer 

drug resistance 


Iff 120918 

98+ 

Fifsawa 

Asthma 

other Arm-Mam. 

Astock 

quhdast 

95 Jap 

Warner Lambert 

Cardiovasc 

lipid lowering 


gemftixozti 

93 Jap 

Abbott 

Asthma 

5 lipoxygenase inh. 


zfieuten (AA-661) 

95 WtU 

Sandoz 

Cardlov 

flpid lowering 

Lescd 

ftuvastatm 

94-7 Wild 

Zeneca 

Asthma 

6 Spoxygenase Wti 


D-2138 (oral od) 

? Wrid 

Warner Lambert 

Cardiovasc 

tap'd lowering 


0-981 

95+ Wrid 

Merck 

Asthma 

teukdrtene antag. 


MK-571 

1 lflfu 

96+ US 

Takeda 

Canfiovasc 

lipid lowering 


BAY n«228 

98+ Jap 

RMne P Rorer 

Asthma 

leukotriena antag. 


RP 12525, RP? 

97 Wrid 

Sclvsy Pharma 

Anti- depressant 

5-HT uptake Inh. 

Luvox 

Ruvoxantine 

94 US 

Yamanouchi 

Asthma 

RAF antagonist 


YM-264 

98+ Jap 

Upjohn 

Anti-rtapressant/OCD 

5-HT uptake Inh. 


fluvoxamine 

94 US 

Yoshttom) 

Asthma 

PAF aitagontat 


Y-24180 

97+ tap 

Pfizer 

Anti-depressant 

5-HT uptake Inh. 

Zotatt/Uctra) 

sertraline 

90-2 US+Eur 

Takeda 

Asthma 

TXA2 syn. antag. 


AA 2214 

95 Jap 

Smithwme Bchman 

Anti-depressant 

5-HT uptake Inh. 

Sercaat 

paroxetine 

91-3 Wrtd-scan 

Shkmogi 

Asthma 

TXA2 syn. toh. 


S-1452 

Q5/6 ton 

Sohray Ptuuma 

Anti-depressant 

5-HT uptake mh. 


ctovoxamtae 

95+ Eur 

SOnkyo 

Asthma 

TXA2 syn. Ml 


CS 518 

96+ Jap 

Pharmacia FlCE 

Anti-depressant 

5-HT uptake inh. 


rehtatatine 

95 Wrid 

Doflchl 

Asthma 

TXA2 syn. fnh. 

DU-1904 

riafagrel 

9B+ Jao 

Synthetabo 

Anti-depressant 

5-HT uptake Inh. 


titOXBtifW 

? Eur 

Kissel 

Asthma 

TXA2 antag/ayn. inh. 


KD1-7g2 

WOp 

97+ .tap 

American Home 

Anti-depressant 

NE.'5-HT uptake inh 

Effexor 

veniafaxtne 

94 US+Eur 

Nova Pharm 

Asthma 

bradyfclitin antag 

n/9 

n/a 

96 MMri 

KiMllBASF 

Anti -depressant 

NE/5-HT uptake inh. 


itafenodone 

97 Eur 

Hoechst 

Asthma 

bracVcWn antag. 

Koe 140 

rcatlbant 

nnu 

98+ WiM 

Akro Pharma 

Anti-depressant 

NE uptake inh. 


setnrtHnefOrg 4428) 

97+ Eur+US 

Fu^sawa 

Asthma 

neurokinin antag 

n/a 

FK 688 

97+ fain 

Actra 

Anti -depressant 

5-HT/NA uptake Iflhib 


mitaadpean 

96 

SrrethKIine Bchm 

Vaccines 

hepatitis B 

Engertx-8 

n/a 

93 .fan 

Roche 

Aral -depressant 

MAO -A Inhibitor 

Aurorix 

mochtoermde 

90-7 Wrid 

Medeva 

vaednes 

hepatitis B 

Hepagene 3 

n/a 

BO sRJy 

Synmelabo 

Anti-depressant 

MAO-A inhibitor 

MD-370503 

befloxatine 

7 Eur 

SrrttW<Hn8 Bdun 

Vaccines 

hepatitis A 

Havrix 

n/a 

Mil 

£2-4 Pur 

Bristol Myers Sqb 

Anti-depressant 

5-HT2 antag. 

Serzone 

nelazodoita 

94 US+Eur 

SmithKSnB Bchm 

Vaednes 

hepatitis a&b 

rite 

n/a 

97+ Wrid 

Bayer 

Anti-depressant 

5-HTiA part ag. 


ipsapirane 

94 Wrid 

Inst. Merieux 

Vacctaes 

hepatitis non A/B 

n/a 

n/a 

95 Wrid 

Sumitomo 

Anti-depressant 

5-HT1A part ag. 

Sediel 

tandosprona 

95 Jap 

SmfihNlne Bchm 

Vaednes 

influenza 

nft 

n/a 

97 WM 

Akra Pharma 

Anti-depressant 

alpha- 2 antag. 


mianserin 

95 US 

Ctjlrof] 

Vaccines 

hopes 

rVa 

n/a 

m nnu 

05 VMd 

Akio Pharma 

Anti-depressant 

alpha-2 antag. 

flanergon 

mirtazapine(Qrg 3770) 

93-5 Wrid 

American Home 

Vaednes 

Aids 

Ya?Syn 

n/a 

nnu 

J & J 

Anti-psychotic 

dopamine antag. 

fmpromen 

bramoperidol 

92 US 

Chircn 

Vaednes 

Aids 

n/9 

n/a 

trerMTIIIU 

95 Wriri 

Akra Pharma 

Anti- psychotic 

dopamine antag. 


Org 10490 

98 Eur+US 

Cflia 

Vacdnsa 

Abb 

n/a 

n/a 

w miu 

36/7 Wrid 


The details above were supplied by Lehman Brothers’ pharmaceutical research team which is among the leaders in the analysis of trends In the world healthcare Industry. The team, composed of 13 healthcare specfaBsta 
Mew York and Tokyo, regularly provides updates on products under development More details available from Lehman Brothers in London on 071 260 2266. 


baa«d in London, 





PHARMACEUTICALS 5 



A S growth or the world's 
pharmaceuticals market 
continues to decelerate 
so research and development 
managers are being forced to 
£ “ m °re focused in the way 

R&D llleir “ mpani “ 

I think R&D spending will 
slow down." says Dr Roy Vage- 
los. chairman and chief execu- 
tive of Merck. "Over the last 15 
years, R&D has grown at about 
14 per cent a year. Td love that 
to continue, but it's no longer 
an option." * 

Most groups are responding 
to the new environment by 
reducing the number of thera- 
peutic categories they explore. 
Admittedly, a few. giant 
groups, can continue to cover 
most areas. Dr Edward Scol- 
nick. president of Merck 
Research Laboratories, says: 
\ou can do research in most 
things in most therapeutic 
areas. It doesn't cost that 
much." 

Other companies, without 
the benefit of an R&D budget 
of more than Slbn a year, and 
1,800 people working in discov- 
ery, are being forced to concen- 
trate their efforts. 

“You have to be at the lead- 
ing edge of the areas you're 
researching and you have to be 
focused," says Mr Lodewijk de 
Vink, president and chief oper- 
ating officer of Warner-Lam- 
bert. 

"It'll be like the biotechnbl- 
ogy industry. You'll soon be 
talking about burn-out rate for 
those pharmaceuticals compa- 
nies still looking at all areas.” 

Choosing which therapeutic 
areas to investigate is far from 
easy - "the hardest decision 
you have to make is which 
areas to explore,” says Dr Wil- 
liam Scott, senior vice-presi- 
dent exploratory drug discov- 
er}’ research at Bristol-Myers 


THERAPEUTIC CATEGORIES 


Research moves to sharper focus 


Squibb, "it's like a kid going 
into a candy store with a credit 
card. You can kill yourself. 
You have to be very focused." 

Many R&D directors con- 
tinue to duck the difficult deci- 
sions. Although they claim 
they are more focused than 
before, the areas they continue 
to explore cover most human 
diseases. An R&D director 
whose researchers are looking 
at inflammatory diseases ran 
cover diseases as diverse as 
asthma, rheumatoid arthritis, 
and inflammatory bowel syn- 
drome. 

When choosing which areas 
to cover, there are a large num- 
ber of criteria adopted by com- 
panies. The most important are 
probably medical need anrf bio- 
logical science, according to Dr 
Scolnick - “biologically you 
have to understand the basic 
physiology - what the disease 
mechanisms are. We find pro- 
jects with the right combina- 
tion of scientific understanding 

Research directors face 
hard choices over which 
areas to investigate 

and medical need and then we 
set to work." 

Dr Takao Tanakaya, execu- 
tive director drug discovery 
division at Fujisawa, agrees: 
"You have to understand the 
basic pathology of the disease. 
Although Alzheimer's looks 
interesting because there's a 
huge potential market, we've 


steered dear of 
dementia 
because we 
don't under- 
stand what's 
going on. That 
means it's diffi- 
cult to develop 
anything really 
innovative." 

Some compa- 
nies also try to 
match unmet 
needs with the 
their expertise. 

At Schering- 
Plough, man- 
agement will 
only work in 
areas that 
match the com- 
p a n y ' s 
strengths, where the group has 
sufficient critical mass to make 
a difference, according to Dr 
Robert Spiegel, senior 
vice-president clinical 
research. 

The demand for new treat- 
ments for diseases in the 
elderly, such as osteoporosis, 
and Alzheimer's has attracted 
man y companies. 

Dr Teruhisa Noguchi execu- 
tive vice-president for R&D at 
Yamanouchi, explains: "We've 
decided to concentrate on car- 
diovascular, gas tro- intestinal 
and central nervous system 
diseases, as well as endocrinol- 
ogy. diabetes and bone disor- 
ders. They're all linked to the 
ageing population which is a 
real problem in Japan.” 

But there are dangers in 
focusing only on untreated and 



A quarter of the world’s top 50 medkrines were originated in the UK 


unexplored areas. Some groups 
see the need to balance the 
risks between different thera- 
peutic categories. 

Dr Spiegel at Schering- 
Plough explains: "There are 
some discovery areas where we 
are quite comfortable that if 
we invest the money and have 
the patience, products will 
come out. 

"But there are others that 
are high risk areas that are 
scientifically exciting and 
could be of great potential 
yield, if you hit it right" 

"The problem is that the new 
areas are really difficult" says 
Dr Spiegel. ‘7n brand new 
fields, the regulatory and clini- 
cal environments are 
unknown. 

"Take Alzheimer's: until 
Parke Davis had Cognex 


■ BRINGING DRUGS TO MARKET 

Speed is imperative 


Cutting the time rt takes 
to bring a new molecule 
to market remains one 
of the industry's most 
important priorities, 
writes Paul Abrahams 


I t is imperative to speed 
products to market, says Dr 
Stephen Carter, senior vice 
president of worldwide clinical 
research and development - 
“you're dealing with a finite 
patent life during which you 
can market the drug exclu- 
sively. That’s the period during 
which you can gain a return 
on your investment. 

"Even if it cost s more top 
front.' saving time can be 
worth hundreds of millions of 
dollars." 

The need to accelerate drug 
development has become even 
more acute over the last 12 
months, according to Dr 
Edward Scolnick, president of 
Merck Research Laboratories. 

“Cost containment and ther- 
apeutic substitution lias short- 
ened effective patent life," he 
explains. 

“Look at Pravachol and Mev- 
acor [two cholesterol drugs! - 
they’re competing on price. 
Although its patents are still 
valid, they've lost their effec- 
tive patent life. When Bristol- 
Myers Squibb 1 s Capoten comes 
off patent, we expect the 
healthcare companies won't be 
willing to pay the difference 
for our competitor product 
Vasotec, even though they 
won't be prescribing the best 
medicine. We'll lose our effec- 
tive patent" 

The difficulty is that 
although the drugs groups 
want to bring products to mar- 
ket as quickly as possible, the 
regulatory hurdles facing them 
are increasing all the time. The 
regulatory process is becoming 
increasingly complex and 
demanding, says Dr Carter. 

"Just take the fact that you 
now have to do trials using 
active control compounds so 
you can compare the new mol- 
ecule against tlie old ones. 

“Now you not only have to 
show that the drugs work, you 
have to show they work better 
than the existing therapies. 
That often means large trials 
involving large numbers of 
patients. And the fact that reg- 
ulatory authorities are asking 
for clinical end-points, rather 
than just surrogate markers. 
Add on to that the require- 
ments for health economics 
data. It's becoming really 
expensive and time-consum- 
ing." he laments. 

Dr Carter admits that one 
counter-trend is the US Food 
and Drug Administration s 
willingness to accelerate 
approval for life-threatening 
diseases such as Aids when 
there's no available therapy. 
But this is an exception, he 

argues. ,. 

Another problem is co-ordin- 
ating development on a world- 
wide basis. The costs of devel- 
opment are so high that it is 
no longer possible to ajuew® 
reasonable return from just the 
European, or Japanese, or u 
market. „ 

Rhone-Poulenc R ™ er „ h ^ 

taken this on board, u i- 
th rowing ail its resources at 


the international development 
of Taxotere, its new cancer 
compound. 

“We will be filing the new 
drug applications in north 
America, Europe and Japan 
within three months of each 
other. We’ve never done that 
before.” says Mr Robert Caw- 
thorn, chief executive. 

Dr Trevor Jones. Wellcome’s 
director of research, develop- 
ment and medical, explains: 
“Five years ago, Japan wasn't 
even on the agenda for our 
company. Now it's a central 
part of our thinking and we’ve 
65 clinical scientists working 
on phase in trials.” 

Similarly, some Japanese 
groups, such as Fujisawa, are 
busy trying to establish inter- 
national development capabili- 
ties. 

Bristol-Myers Squibb has 
now reached the stage where it 


erwise you're dead," says Dr 
Carter. “Dollars spent on use- 
less compound X, means fewer 
dollars spent on potential 
blockbuster Y." 

Most drugs groups have been 
developing far fewer com- 
pounds than in the past. Bris- 
tol-Myers Squibb reckons it 
has cut the number of com- 
pounds in the pipeline by a 
third in recent years. At 
Upjohn, the number of com- 
pounds being developed has 
been cut from 74 three years 
ago to 34, according to Dr John 
McCall, executive director of 
discovery research. 

Cutting drugs in develop- 
ment is not easy, however. 
“It's really easy to start a pro- 
gramme” says Dr William 
Scott, senior vice-president 
exploratory drug discovery 
research at Bristol-Myers 
Squibb - "the difficult part is 



Research scientist at the Weficome group 


prepares one core dossier for 
Europe and the US. 

"A long time ago we used to 
file a new drug application in 
the US. and then look at 
Europe. 

“We know what's required 
for the individual markets, but 
it's far more efficient with a 
core dossier," says Dr Carter. 

When Bristol-Myers Squibb 
prepares assays for the Euro- 
pean and US regulatory 
authorities, it conducts them 
at Japanese standards, even 
though the drug may never be 
developed for that market - "if 
we do decide to take the prod- 
uct to Japan, It can save us IS 
months." he says. 


O 


ne of the most impor- 
i tant elements in achiev- 
ing speed to market is 
ensuring the compounds 
picked for development are 
good <mes. , , 

“When the benefits of a drug 
are incremental rather than 
dramatic, then approval 
becomes a lot tougher. The 
major breakthroughs are much 
quicker." says Dr Carter. 

Once the compounds have 
been chosen, the R&D director 
is then faced with the problem 
of allocating scarce resources 
to competing projects. 

“You have to prioritise. Oth- 


knowing when to kill IL You 
have to set stringent go-no-go 
decisions. And you have to 
make those decisions as early 
as possible. You can save a lot 
of time and money that way. 
You have to be tough. You 
want to add to the portfolio as 
much as possible, making it as 
rich as possible. So you have to 
have strict criteria to make 
sure all the compounds are 
competitive,'’ he says. 

Dr Carter explains: "One of 
the hardest problems is know- 
ing when to say 'no'. Your 
teams Invest years of their 
lives. They will come up with 
all sorts of alternative 
approaches to save the project 

“They will always ask for 
one more trial. But you have to 
be snrgicaL You have to put 
the bullet into the brain. Then 
you turn them on to something 
else. You have to have a cul- 
ture that says you personally 
have not foiled, it was the proj- 
ect that foiled. Human nature 
bemg what it is. the; tend not 
to believe you. And I can't 
deny that success helps career 
development." 

Once the compounds have 
been chosen, all resources 
must be allocated to them. Sir 
Richard Sykes, Glaxo chief 
executive, explains: “If you 
have priority molecules you 


have to get them to market as 
quickly as possible. Take our 
neur aminidas e inhibitor [for 
treating ’flu]. It’s important so 
it gets 100 per cent attention. 
We will spare no expense 
bringing that drug through the 
system." 

"Allocating resources and 
making these judgments is the 
most important part of my 
job." says Dr Scolnick. “On the 
top-priority drugs, nothing 
should rate-limit the process. 
When we were developing Mev- 
acor [a cholesterol-lowering 
drug and fourth-biggest selling 
medicine in 1992] there were 
concerns about its safety. The 
drug was In limbo. So we 
threw resources at it Half of 
the dogs we had were allocated 
to testing Mevacor’s safety - 
you can’t do that with more 
than two drugs." 

One rate-limiting problem 
can be manufa cture - "tradi- 
tionally. you’d make, say, 5kg 
of a drug for a trial,” says Dr 
Carter at Bristol-Myers Squibb. 
"And if the trial looked good 
you’d make another 5kg. For a 
potential blockbuster, we’d 
make it all at the start. In the 
past, if you didn’t do that, 
you’d save money, but by 
hedging your bets, it might 
take two years longer to 
develop the compound. You 
have to plan for success rather 
than failure." 

Drawing up a design for the 
rfhiirai trials and then sticking 
to it is also important, accord- 
ing to Dr Robert Spiegel, senior 
vice-president. clinical 
research at Schering-Plough. 

"The major improvement 
comes from having an agreed 
aim when you start the pro- 
cess. and then - it's going to 
sound like a dichi - doing it 
right first time. You have to 
make sure everyone agrees 
what you’re trying to do and 
then not make too many 
changes so you can avoid 
being forced to go back to 
scratch and start again,” he 
says. 

One technique used by Euro- 
pean and US groups - though 
not Japanese ones - is parallel 
development. Dr Spiegel 
explains: “It depends on the 
product. Either you can wait 
until you’ve completed the 
dose -ranging study and then 
start the pivotal phase three 
study, or you can start the piv- 
otal study early, using three or 
four doses. That takes more 
resources, but it can be really 
effective in compressing and 
telescoping the process. 

“Although we might have 
accrued between 50 and 100 per 
cent more patients than we 
might have done normally, and 
even taken a little longer over 
the pivotal trial, we could 
shave two or even three years 
off waiting for the results of 
the first dose-ranging triaL" 

However, not all are con- 
vinced o£ the need to be first. 
Dr Roy Vagelos, chairman and 
chief executive of Merck, says: 
"It’s nice to be first, but it's 
best to be best Our ace-inhibi- 
tor Vasotec overtook Capoten 
[Bristol-Myers Squibb’s drug] 
because It's a better drug. 
There’s nothing better out 
there." 

Clinical trials: thorough prepa- 
ration can cut costs: see page 7 


approved, nobody knew what 
sort of efficacy the FDA 
wanted. There bad never been 
a drug approved in that area 
before. You have to have a bal- 
ance of risk." 

A number of companies have 
cut the number of therapeutic 
areas in a meaningful way. 
SmithKline Beecham's exit 
from gastro -intestinal disease 
more than 12 months ago - it 
was an area that virtually cre- 
ated its predecessor Smith- 
mine French - was probably 
the most dramatic. 

However, Wellcome has also 
moved out of tropical diseases, 
and Dr Trevor Jones, director 
of research, development and 
medical, says the group will 
stop developing new anaesthet- 
ics once it has completed its 
present generation of products. 

Dr Pierre Simon. R&D direc- 
tor at Elf Sanofi, explains his 
company's decision to concen- 
trate on only three areas. 
“Seven years ago, Sanofi was 
present in all areas of research. 
I told the chairman it was stu- 
pid - you can't do all that 
effectively because develop- 
ment is becoming more and 
more sophisticated and expen- 
sive. Instead, we decided to 
concentrate on just three 
areas.” 

Dr Leon Rosenberg, presi- 
dent, Bristol-Myers Squibb 
Pharmaceutical Research Insti- 
tute. says: “Well have to cut 
some areas over the next few 
years. We won't scale back on 
cardiovascular or oncology, 
and we have a very major posi- 
tion in dermatology. 


“We'll also 
stake our 

future on 

immunological 
areas, but in 
central nervous 
system dis- 
eases and diag- 
nostics we can- 
not lead. Now 
that there's a 
bright light 
shining down 
on everything 
we do, we have 
to concentrate 
on those areas 
where we are 
leaders and 
have greatest 
strengths." 

Once the 
therapeutic areas have been 
chosen, the R&D directors next 
difficulty is to decide which of 
the man}' compounds compet- 
ing for limited developed 
resources should be selected. 

“For the last while, we have 
only pursued those new thera- 
pies that will produce a clear 
medical benefit We will only 
develop those with a distinct 
advantage,” says Dr Paul 
Herrling, head of research at 
Sandoz. 

“There’s much more scrutiny 
than there used to be about the 
quality of the drugs in develop- 
ment.” agrees Dr Robert Spie- 
gel, senior vice president clini- 
cal research at 
Schering-Plough. “You have to 
look at what the market will 
bear for a product which is 
only a minor improvement” 

“The medicines have to add 
value, otherwise we're not pre- 
pared to spend time and money 
on them.” says Sir Richard 
Sykes, chief executive of 
Glaxo. 

Dr Scolnick agrees: “You 
have to have uniqueness in dis- 
covery. otherwise you end up 
selling generic drugs.” 

Dr Simon adds that he 
recently cut some beta-block- 
ers and H2-antagonists from 
his pipeline even though they 
were safe and effective - “they 
made no sense because they 
were little better than existing 
therapies.” he says. 

Similarly, RhOne-Poulenc 
Rorer last year cut a safe and 
effective 5HT-3 antagonist simi- 
lar to Glaxo’s highly successful 
Zofran, because it was no bet- 


ter than existing compounds, 
according to Mr Robert Caw- 
thorn. chief executive. 

Some groups abandon even 
promising and innovative pro- 
jects, however. Dr Simon at Elf 
Sanofi explains: “When you are 
using biochemical screening 
you come up with interesting 
compounds that do not fit 
exactly in the areas where you 
want to work. 

"We came up with a good 
asthma drug, but we had no 
intention of getting into 
asthma. We want to license it 
out. The problem is one of tim- 
ing. If you talk to early, you 
haven't much to say. If you're 
too late you lose time. You 
have to have good clinical tri- 
als to show it's good and then 
sell out quickly.” 

Most R&D directors agree it 
is for easier to develop good 
quality drugs than poor ones. 
Dr Masaji Ohno. managing 
director of R&D at Eisai. 
agrees: "Our chairman, Mr 

There is higher scrutiny 

today over the quality 
of drugs in development 

Yuji Naito, asks us to find com- 
pounds that are so good they 
develop themselves.” 

At Sanofi. Dr Simon adds: 
“You have to set high stan- 
dards to get compounds Into 
development. We look at 
strength, oral activity, dura- 
tion of action, the toxicology 
and genotoxicity. 

"We also make sure the mol- 
ecule can be metabolised in 
man. The drug has to dear the 
bar, even if it's set high." 

Production costs are also an 
important issue, according to 
Dr Herrling. “You have to look 
at how complicated the mole- 
cule is and how many steps it 
takes to synthesise. The cost 
and complexity of manufacture 
is becoming much more impor- 
tant,” he says. 

Dr Stephen Carter, senior 
vice-president worldwide clini- 
cal research and development 
at Bristol-Myers Squibb agrees: 
“If it's going to takes 15 chemi- 
cal steps to produce a com- 
pound. I might need 20 chem- 
ists full-time working for a 
year to generate enough for a 
clinical triaL If that's the case, 


1 might not put it into develop- 
ment" 

The potential market of a 
drug is also clearly important. 
Dr Noguchi at Yamanouchi 
says his company has set a tar- 
get Of minimum annual saley 

of Y2bn - about 8200m - for 
drugs to move into develop- 
ment 

One consequence of the new 
cost-conscious environment is 
that decisions about the future 
of molecules are made much 
earlier than before. 

“Just recently we discontin- 
ued a couple of compounds 
which in earlier times we 
would have continued to see 
what happened to them. 
Today, we just don't have the 
luxury of doing that," says Dr 

Spiegel at Schering-Plough. 

However, although most 
companies pay lip-service to 
the over-riding drive towards 
innovation, most R&D direc- 
tors admit they need to bal- 
ance their portfolios for risk. In 
Japan, these low-risk, low-re- 
ward. compounds are called 
survival drugs, according to Dr 
Masaji Ohno, managing direc- 
tor of R&D at Eisai. 

"Let's be honest about this ," 
agrees Dr Carter at Bristol- 
Myers Squibb. "If you just go 
for high-risk, high-reward 
blockbusters, you're just going 
for home runs. That's not nec- 
essarily good for business. 

“You have to have singles 
and doubles to support the 
franchises. You need to bal- 
ance across the franchises and 
across the risk. A Si 00m prod- 
uct in an old franchise is more 
valuable than a SI 50m product 
in a new area." 

Few companies admit setting 
out to create me-too drugs. 
However, Dr Spiegel admits 
that whjen you set out to find 
something exciting you some- 
times only come up with a 
drug offering marginal 
improvements. 

An important area little 
stressed by R&D directors pub- 
licly is that of line extensions. 

“We call the process ever- 
greening,” says Dr John 
Niblack, president Pfizer cen- 
tral research. Dr Carter at Bris- 
tol-Myers Squibb agrees: "Line 
extensions help quality of life 
and generate increased exclu- 
sivity for the company. 

"Besides, developing line 
extensions is easier than devel- 
oping new compounds because 
the safety is already proven - 
you just have to show efficacy. 
We don't have to spend a lot of 
money on this, but it's worth- 
while." 

Paul Abrahams 


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S hould the European 
Union be helping the 
European drug industry 
- and if so, how? 

This question will echo 
around European capitals over 
the coming months, provoked 
by a policy document finalised 
in early March by the Euro- 
pean Commission. But on the 
basis of the initial responses to 
the Commission's paper, the 
echoes may be a little muted. 

For a start, 1994 seems rather 
late in the day to be addressing 
such a fundamental question. 
Over more than three decades, 
the attention of legislators in 
Brussels and Strasbourg has 
focused repeatedly on different 
aspects of medicines - such as 
marketing authorisations, 
patent extension, drug promo- 
tion, or cancer research. 

Now, all of a sudden, a broad 
industrial policy is needed, 
says the Commission, since the 
framework within which phar- 
maceutical companies operate 
"has been profoundly shaken," 
by rising research and develop- 
ment costs, the emergence of 
new technologies, and the 
international trend towards 
mergers and restructuring. 

Secondly, the recommenda- 
tions the Commission is mak- 
ing are very finely nuanced. 
From the cautious title - a 
“communication on the out- 
lines of an industrial policy” - 
through to the hesitant conclu- 
sions, the Commission makes 
so many careful genuflections 
in so many different directions 
that the document provides lit- 
tle clear lead for any kind of 
action. 

The discussion of policy 
skates over a wide range of 
issues: industry performance, 
public health policy and social 
security spending, research 
funding, national sovereignty 
and subsidiarity, competitive- 
ness and competition. 

But the Commission fails to 
offer any effective resolution of 
the tensions it alludes to, nota- 
bly between cost-containment 
and research funding: it goes 
no further than the observa- 
tion that “the legitimate con- 
cern to limit public expendi- 
ture must not be allowed to 


PHARMACEUTICALS 6 

The European drug industry - a suitable case for treatment? 

Disappointment over policy document 


jeopardise the future of phar- 
maceutical research in 
Europe." 

And most of what it pre- 
scribes is little more than ano- 
dyne "intensification of dia- 
logue with the member-states” 
on a range of uninspiring 
administrative matters such as 
consolidation of existing legis- 
lation, establishment or the 
new European Medicines 
Agency, and promotion of 
research coordination. 

Not surprisingly, European 
drug companies have not been 
dancing in the streets to cele- 
brate a new dawn for high- 
technology medicines. Industry 
trade associations and senior 
company executives who have 
been closely involved in the 
evolution of this policy outline 
are muttering diplomatically 
about the need to study the 
document closely before judg- 
ing it. or they point politely to 
some of the positive state- 
ments that the Commission 
has incorporated about the 
value of the industry to 
Europe's economy and its citi- 
zens’ health. 

“It may prove to be a useful 
vehicle for a dialogue to 
develop an Industrial policy,” 
conceded Chris Dalton of 
Zeneca. There is no disguising 
the intense disappointment felt 
throughout the research-baaed 
Industry, however. 

P rivately, drug company 
managers admit that the 
policy document con- 
tains much than they barf 
hoped for - "this is a wasted 
opportunity,” one remarked 
sadly after leafing through the 
document 

Others voice the fear that 
“this is unlikely to have any 
Influence or produce any 
change.” And some talk defi- 
antly of the policy outline 
"needing a lot more work on 
it.” The US companies in 


Europe are already writing to 
the Commission to express 
their dissatisfaction. 

The disappointment is all the 
more acute because the Euro- 
pean drug industry felt until 
early 1994 that it was going to 
come out of the exercise with a 
much stronger, pro-industry 

document; 

Following a 1991 undertaking 
from Commissioner Martin 
Bengemann to back the indus- 
try in its battle for better pub- 
lic understanding, a select task 
force of drug industry experts 
from Hoechst. Glaxo, Rhftne- 
Poulenc, Merck, Sharp & 
Dohme and the Swiss firms 
worked with officials from the 
Co mmiss ion’s industry affairs 
services all through 1993, 
under Bangemann’s auspices, 
to produce a suitable draft. 

By early 1994. the document 
was ready. Its chief importance 
- certainly for the industry - 
was that it addressed the most 
serious concern of research- 
based drug companies: 
national controls on pricing 
and reimbursement, it did not 
go quite as far as the drug 
firms wanted, but it clearly 
recommended economic dere- 
gulation, with free pricing for 
new products, a phasing in of 
more general price liberalisa- 
tion, and increased patient co- 
payment to move drug reim- 
bursement further away from 
political control- 

Drug companies felt that at 
last they were to be given a 
weapon to battle against dis- 
criminatory and anti-competi- 
tive national health policies. 
The quid pro quo for this liber- 
alisation was to be additional 
stimulation of competition 
from generics and parallel 
imported medicines, spurred 
by more comparative informa- 
tion for doctors and the public 
on drugs and drug prices. 

But shortly before the full 
Commission was asked to 


Peter O’Donnell examines whether 
the European Union is helping 
European drug companies 



The European drug industry felt - until early 1994 - that it was going to 
come out of the exercise with a much stronger, pro-industry document 
Pictured above is a researcher at RhOne-Poiiene Rorer. 


endorse the Rangnmann draft, 
the document was ambushed 
by a loose coalition of member 
states, generic drug companies, 
consumer organisations, and 
other Commission services 
who felt that they were being 
rail-roaded when this text was 
revealed to them at such an 
advanced stage of drafting. 

“National health services are 


being asked to adapt to the 
needs or the drug industry,” 
one outraged official com- 
mented. Spearheaded by Social 
Affair s Commissioner Padraig 
Flynn (who is also responsible 
for the EXTs embryonic health 
policy), an intensive intra-Com- 
mission horse-trading exercise 
built new provisions on health, 
employment and social econ- 


A new lease of life ? 


For 221,000 people worldwide, 
a transplanted kidney, heart or liver 
offers a new lease of life; 

10 years ago, this was only just 
becoming a reality. 

In those 10 years, Sandoz 
research has been directed towards 
providing better long term health 
and a more predictable 
future for those given 
this gift of life. 


SANDOZ - WORLD LEADERS IN TRANSPLANTATION 



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What the European Union 
aims to achieve 


A ccording to the Commis- 
sion’s policy outline, the 
principal areas where the 
European Union is creating a 
more favourable environment 
for the drug Industry are: 

□ The European Medicines 
Evaluation Agency - due to 
come into operation from 1995 
in its London base, and provid- 
ing rapid access to the single 
market through new product 
authorisation procednres: 

□ A centralised procedure, 
leading to a single authorisa- 
tion for the whole of the EU 
reserved for certain new 
medicinal products and man- 
datory for those derived from 
biotechnology. 

□ A decentralised proce- 
dure, designed for most medic- 
inal products, based on mutual 
recognition of national mar- 
keting authorisations (with 
disputes to be settled by bind- 
ing EU arbitration). 

The proceed ure should pro- 
vide faster authorisations (300 
days instead of several years), 
and keep down cost increases 
in authorisation processing. 

It should also enhance con- 
sumer confidence and improve 
public health protection. 

It will help In due course to 
reduce the diversity from mar- 
ket to market in Information 
about therapeutic indications, 
side effects, presentation and 
package size. 

Recent legislation indudes: 

□ A directive cm wholesale 
distribution of medicines will 
facilitate and stimulate intra- 
Community trade whilst 
ensuring the integrity of 
transactions, regulating recall 
of defective products, and 
deterring counterfeit products. 

□ Directives on medicines 
advertising, labelling and leaf- 
lets will improve information 


for patients, limit waste, and 
impose requirements on pro- 
motion to health professionals. 

Patent protection: 

□ A new regulation ensures 
intellectual property protec- 
tion of up to 15 years from the 
date of first marketing of a 
medicine in the EU. 

□ A common position was 
adopted in February on the 
revised draft directive on legal 
protection of biotechnological 
inventions, opening the way 
for definite adoption daring 
1994. 

A stable and safe environ- 
ment for new biotechnology pro- 
jects: 

□ Co-operation between the 
EU and member-states should 
improve in order to avoid 
duplication of research and 
development projects. 

□ It will be necessary to 
bring greater attention to ethi- 
cal questions associated with 
certain applications of biotech- 
nology and to enhance public 
understanding. 

□ A review of the regula- 
tory framework in the fight of 
advances in scientific know- 
ledge. 

Programmes better suited to 
pharmaceutical research and 
development: 

□ Encourage multi-disci- 
plinary research and industry/ 
university inter-action. 

□ Promote integration and 
co-operation between pre-uor- 
maiive research and R&D - as 
in the project Fourth Frame- 
work Programme 1994-1998, 
now in the final stages of dis- 
cussion. 

□ Evolve research priorities 
in pharmaceutical research, 
via pilot projects. 

Peter O’Donnell 


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omy considerations into the 
policy outline. And it reduced 
to mere platitudes nearly 
every thing that the industry 
had tried carefully to build 
into it 

The resulting dilution satis- 
fies no-one - except the mem- 
ber states, who will now retain 
almost unconditionally the 
autonomy they prize in manag- 
ing their own health care bud- 
gets, Including drug pricing 
and reimbursement regimes. 

“We weren’t looking for 
hando uts - just for deregula- 
tion,” says Anne Polya of 
Pfizer, plaintively. 

But generic drug companies 
are not happy either. Greg 
Perry of the European Gener- 


ics Association criticises the 
lack of provision for generic 
companies to prepare copy 
products during the last year 
of a product’s patent term, so 
that copies can be launched 
i mme diately on patent expiry 
- “without this, there is going 
to be no real increase in 
generic use,” he says. 

Even the consumers find the 
document ultimately unhelp* 
fill. Luc Joossens. a Brussels- 
based consumer spokesman on 
health affaire, says: “This is 
now so vague it goes 
nowhere." He had be en hoping 
for clear commitments to 
increase incentives for generic 
prescribing and dispensing. 
and to provide clear and com- 


prehensive data on drug con- 
sumption. 

Optimists within the Com- 
mission believe the document 
can still serve a useful purpose 
by stimulating an informed 
discussion In tho European 
Parliament and in the Council 
of Industry Ministers of the 
Twelve. 

“Nothing of real substance 
has been removed from the pol- 
icy outline," according to Fer- 
nand Sauer of the Commis- 
sion’s pharmaceutical industry 
unit. He believes that the 
agenda it sets may lead 
national governments to take a 
fresh look at how to make the 
most of the asset that the drug 
industry represents for Europe. 

While Brussels has no com- 
petence to oblige member 
states to act in this field, a 
discussion of this type ’Tnay 
also induce them to voluntarily 
eliminate any distortions of the 
functioning of the internal 
market” 


Influencing the economics of drug provision 

Extracts from the Commission's policy outline 


he policy outline says 
that [the European drag 
industry’s] “ability to 
finance the research and devel- 
opment of therapeutically 
innovative mAffi'rines, which is 
a condition for its tong term 
competitiveness, in particular 
seems to be relatively weak.” 

□ P harmaf-AiTfic-fl! spending 

represents an important share 
of social security budgets, 
whose financing is a subject of 
concern in most member states 
at tile very moment that they 
are required to contain public 
deficits in order to prepare fin- 
economic and monetary union. 

□ The Commission will see 
to it that any price control sys- 
tem is operated in such a way 
that the price setting mecha- 
nism is fully transparent anrf 
that all forms Of discrimination 


are prevented. 

a It would not be acceptable 
that, national decisions relating 
to price fixing or admission for 
reimbursement are influenced 
by the origin of products and 
discriminate against products 
imported from other member 
states. 

□ In the case of medicinal 
products which are available 
without prescription - and 
which are not eligible for reim- 
bursement by social security - 
it seems that, in some member 
states, the market is often com- 
petitive enough to ensure an 
affordable price level 

□ In the case of reimbursed 
medicinal products, it could be 
interesting to consider other 
cost containment measures. 
Such methods would be based 
on competition between under- 


takings for those therapeutic 
categories where several treat- 
ments are available. 

□ Member-states should not 
be forced to accept excessive 
pricing of medicinal products 
which are not subject to com- 
petition, whilst ensuring that 
the pharmaceutical industry 
maintains its financial capac- 
ity necessary to support its 
R&D activities. 

□ The Court of Justice has 
on many occasions ruled that 
parallel imports are legal irre- 
spective of the factors that 
determine price differences. 

□ Prescribing doctors, if bet- 
ter informed about the cost/ ef- 
ficacy ratio of medicinal prod- 
ucts. will tend to prescribe 
genetically. 

Peter O’Donnell 


Case study: Schering-Plough Research Institute 

A more selective approach 


F or US pharmaceutical com- 
panies. the impending 
healthcare reforms prom- 
ise an era of increased cost- 
containment and pricing con- 
trols. Under the weight of such 
restrictive measures, how will 
the innovative drugs industry 
adapt to survive? 

According to Dr Robert Spie- 
gel senior vice-president clini- 
cal research at Schering- 
Plough Research Institute, the 
market for new drugs will 
never subside - “we believe 
that there will always be a 
market and a very profitable 
market for drug companies 
that can develop novel prod- 
ucts that satisfy an unmet 
need in an important therapeu- 
tic area,” he says. 

In 1993, Schering-Plough 
spent US$578m on research 
and development, an invest- 
ment which it expects to 
increase to over $800m this 
year. 

Despite its continued com- 
mitment to R&D funding, Sche- 
ring-Plough admits that the 
more cost-driven market has 
triggered a change of 
approach. 


“There is a new world now 
that is forcing us even more to 
adapt our research and devel- 
opment process.” says Dr Spie- 
gel 

At Schering-Plough, most of 
this adaptation bas been evolu- 
tionary. About three years ago 
the company set up a Pharma- 
ceutical Economic Unit 
designed to assess the eco- 
nomic cost and quality of life 
benefit of potential new drugs 
at the earliest possible stage. 

E valuation of exactly what 
Schering-Plough expects to 
bring to the market when 
a product is fully developed is 
now “a prominent part” of its 
core R&D process, says Dr 
SpiegeL 

Combined with this more 
selective approach to R&D, Is 
the knowledge that on the way 
to discovering breakthrough 
products, drug companies are 
inevitably exposed to greater 
risks. This means manufactur- 
ers have to be increasingly dar- 
ing when deciding which com- 
pounds to back. 

Dr Spiegel says: “If you’re 
only going after Alzheimer's 


drugs, the winner of that in the 
pharmaceutical industry will 
have a nice pot of gold at the 
end of the process, but there 
will be a lot more losers along 
the way.” 

Willingness to conduct 
research in more high-risk 
areas then, is no guarantee of 
commercial success. As Raul 
Cesan, president Sobering Lab- 
oratories suggests: “We all 
want to develop something 
that is unique, yet we may end 
up with something that is a 
marginal improvement” 

Development of compounds 
that may offer only a slightly 
better safety profile over prod- 
ucts already on the market Is a 
luxury which research-based 
drug companies can no longer 
afford. 

in certain cases, “that mar- 
ginal improvement gives to the 
system exactly what politicians 
and government officials want 
They lower tile price because 
once you have two or three or 
four of those {products], prices 
collapse Immediately,'' argues 
Raul Cesan. 

Research at Schering-Plough 
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PHARMACEUTICALS 7 


If the manufacturer of 
a product can save a 
year In its development, 
that could be equivalent 
to the final year's sales. 
For a leading 
compound, that could 
be $4 00m, reports 
Alan Archer 

F ew industries operate 
under such stringent reg- 
ulatory controls as the 
pharmaceutical industry. The 
complexity and volume of the 
regulations indicate a high cost 
area, one of which is clinical 
trials which are expensive and 
time consuming. 

The three phases of rlinirai 
research are the longest and 
most costly stages in the devel- 
opment of a new drug. They 
take an average of four to six 
years, although depending on 
the type of drug, they may in. 
an extreme case require 10 
years. 

A single advance in effi- 
ciency can be both commer- 
cially and scientifically benefi- 
cial. Considerable data is 
assembled from the trials 
which is subjected to detailed 
statistical evaluation and medi- 
cal interpretation. 

Effective information tech- 
nology (IT) management can 
be a competitive aid in cutting 


■ CLINICAL TRIALS 

Thorough preparation can cut costs 


high costs and helping to 
streamline the product devel- 
opment and approval process. 
Companies cannot take short 
cuts with clinical trials, but 
with well-planned IT. the risk 
of errors in documentation and 
testing can be greatly reduced. 

Today, an increasing number 
of the world's teari ng pharma- 
ceutical companies are looking 
to contract research organisa- 
tions (CROs) to run part or in 
some cases the whole package 
of clinical trials. Dr John Mills 
international vice-president of 
Besselaar, one of the largest 
CROs worldwide, said there is 
a "dramatic increase" in the 
amount of contracting-out of 
clinical trials. 

"In the past couple of years 
we have had twice the number 
of proposals.'’ says Dr Mills. 
Some companies request part 
service while others are 
requesting the full works, be 
adds. 

A measure of how much clin- 
ical trials COSt is hi g hli ghted 
by Pro t Richard Peto of the 
clinical trial service unit Rad- 
cliffe Infirmary. Oxford, who is 


carrying out a significant trial 
on 20,009 people for the effec- 
tiveness of a cholesterol-lower- 
ing drug. The trial costing 
some £20m is being equally 
sponsored by Roche, Merck 
and the MRC. 

But such large sums have to 
he viewed in proportion - 
"what is £20m when the sales 
of the drug are $lbn per year?” 


The regulatory process 
for pharmaceuticals is 
becoming increasingly 
complex and demanding 


asks Prof. Peto. 

According to a spokesman at 
the US Pharmaceutical Manu- 
facturers' Association, some 
clinical trials in the US are 
now costing $35,000 per patient 
over a six-month period. 

There have been alternatives 
to clinical trials. In 1989, the 
US Congress created the 
Agency for Health Care Policy 
and Research (AHCPR) to 
comb through vast databases 
of records accumulated by hos- 


pitals, insurers, and govern- 
ment health programmes since 
the late 1980s. These studies 
are known collectively as "out- 
comes research." 

After sp ending nearly $200m 
on this type of research, 
AHCPR "cannot point to a sin- 
gle case in which its database 
studies have changed clinical 
practice,” comments Prof Peto. 

Many companies in the 
industry are hoping the Inter- 
national Conference on Har- 
monisation (ICS) process will 
save a lot of time and money 
on clinical trials. 

There is a desire by the Japa- 
nese regulatory agency to har- 
monise its requirements with 
those of Europe and America. 

Dr Trevor Jones research 
and development director at 
Wellcome says: "Until now, we 
have had to repeat all of the 
stability data - storage, shelf 
life, and so on. From now on. 
we will only do it one way. 
Some of it we will do in Japan, 
though.The difficulty is the 
clinical side and it is still the 
case that we have to repeat a 
lot of clinical work in Japan. 


We now have 65, mostly dint - 
caJ-related scientists in Japan 
to carry out the necessary 
Phase m trials," he adds. 

Dr Jones says Wellcome has 
reorganised R&D to meet 
global changes. A new group 
set up in Wellcome called 
Euroclin, as a prelude to 
Worldclin. It has 200 staff 
spread geographically across 
Europe. 

There is a large group in 
France with other groups in 
Italy, and Germany with basic 
acquisition of data - "this has 
been done without incentives, 
such as tax relief but there are 
three very important advan- 
tages: to be in touch with local 
clinicians; regulators; and local 
companies," says Dr Jones. 

Dr Pierre Simon, research 
and development director of 
Sanofi, observes that "you 
have to set high standards to 
get compounds into full devel- 
opment. We look at strength, 
oral activity, duration of 
action, the toxicology and gen- 
otoxirity. 

“We also make sure that the 
molecule is metabolised in 


man. The drug 1ms to clear the 
bar, even if its set high,” says 
Dr Simon, 

“When you have to organise 
a trial like we have for the 
anti-thrombotic, Clopidogrel 
this is a real challenge." he 
adds. “We need a two-year 
study, with 500 centres and 
15,000 patients. This is difficult 
for a young company. So far. 


Clinical trials in the US 
can now cost $35,000 
per patient over a 
six-month period 


we have enrolled 9.000 patients 
- far faster than we thought 
and we've saved about six 
months: that’s a huge boost to 
revenues for a large com- 
pound." 

jAnother company that 
keeps a tight rein on its clini- 
cal trials preparation is Fujis- 
awa where Dr Hitoshi Oyasu, 
managing director research 
and development division, 
comments: “We don't like cut- 
ting out compounds from our 


product pipeline, but clinical 
trials are costly. 

“However, we now have 18 
NCEs in the cycle - and that is 
too many. 

“We look at the p re-clinical 
data and if there is no 
advantages, it gets killed.' We 
‘cut’ a promising oral anti-his- 
tamine only last year." he 
adds. 

The company believes that 
the ICH will make a difference 
to future eiinirai trials - one 
day - but progress seems to be 
difficult at the moment. 

Dr Oyasu says: “We are try- 
ing to reduce the numbers of 
clinicians and centres we use 
for our trials. We want to focus 
on those investigators who are 
more reliable and deliver the 
data on time. 

“In the past, some Japanese 
groups have used the clinical 
trials as part of their market- 
ing strategy - in some cases 
there was only one patient per 
hospital. We want at least 
eight per hospital.” 

Dr William Scott, senior 
vice-president exploratory and 
drug discovery, Bristol-Myers 


Squibb, says: “If you can save 
one year in development, that’s 
equivalent to the final year's 
sales. 

"For 3 big compound, that 
could be $400m,” comments to 
Dr Scott So even if its costs 
more up front, saving time can 
be worth hundreds of millions 
oT dollars. 

The problem is that the hur- 
dles are getting higher all the 
time, be adds. The regulatory 
process is becoming increas- 
ingly complex and demanding 
- “just take the fact that you 
now have to do trials using 
active control compounds so 
you can compare the new mol- 
ecule against the old ones. And 
the fact that regulatory author- 
ities are asking for clinical end- 
points, rather than just surro- 
gate markers. 

“Admittedly, one counter 
trend is in the area of life- 
threatening diseases when 
there's no available therapy. 
There you can get accelerated 
approval using surrogate 
markers. But the approval Is 
only conditional. You can give 
the drug to all that require it.” 

Dr Scott adds; “BMS did this 
with DDI - which we gave to 
27,000 patients - and with D4T 
which we gave to 9.600 
patients, Taxol was also given 
accelerated approval." 

□ The writer. Alan Archer, is 
editor of the FT neiosletter. 
Pharmaceutical Business News, 


Biotechnology companies are carefully choosing research areas which have the 
highest appeal to potential funders, writes Daniel Green 

Our ideas for your investment 


It is difficult to trust anyone 
when trying to assess the 
promise of biotechnology 
research and development. 
The reason lies in the nature 
of the biotechnology industry, 
not as a scientific enterprise 
but as a capital-raising 
machine. 

Biotechnology is usually 
defined as drug development 
and manufacture using living 
organisms rather than inani- 
mate chemicals. 

But as almost any biotechn- 
ogy company executive will 
eventually concede, biotech 
R&D in the private sector is as 
much a means for raising 
funds as poshing the frontiers 
of knowledge. 

How it is presented there- 
fore, is coloured not only by 
the objective standards of a 


peer-review scientific journal, 
but also by the more old-fash- 
ioned need to persuade those 
with money to hand It over. 

It takes at least seven years 
for a potential drug to go from 
the laboratory bench to the 
market. During that period, 
the company must secure 
enough capital to pay for sala- 
ries, clinical trials, regulatory 
fees and marketing. 

According to Mr Steven Bur- 
rill. of San Francisco merchant 
bank Burrill and Craves, the 
1,400 or so companies that 
make up the US biotechnology 
industry alone need $5bn a 
year to survive. 

That cash comes from from 
venture capitalists, money and 
securities markets and large 
pharmaceuticals companies 
seeking smaller partners. 


Enr.li has many demands on 
its cash and management 
resources, especially now, 
when healthcare reforms 
around the world add a new 
level of uncertainty to the 
business of researching and 
developing new drags. 

But time is much that a bio- 
tech company can do in R&D 
management to raise its bar- 
gaining power with the suppli- 
ers of capital. Foremost, it can 
choose carefully the areas of 
research which appeal to 
investors. 

In principle, it wants to 
research into diseases which: 

• have a high profile, so that 
a typical investor is familiar 
with at least its name; 

• which can be treated by a 
relatively small number of 
specialists - biotechnology 


companies cannot afford to 
have large sales teams knock- 
ing on the doors of the west- 
ern world's general practitio- 
ners. 

Mr David Robinson, chief 
executive officer of San Diego, 
California, company Ligand 
Pharmaceuticals, says that his 
company chose to work in can- 
cer therapy partly there are a 
relatively small number of 
treatment centres in the US, so 
“yon only need a sales force of 
50"; 

• which has dear end points 
to a coarse of treatment, such 
as complete recovery, rather 
than marginal improvement. 
This makes the results of clini- 
cal trials less equivocal, which 
in turn is likely to shorten 
both the time taken to com- 
plete tire trials and the detiber- 



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Pay scales In the biotechnology industry 

Average compensations for chief executive officers* 

Company 

size 

Base 

salary 

Annuel 

bonus 

Potential 
share options 
value 

Small 

$161,000 

$51,700 

$1,530,400 

Mld-ste 

$216,600 

$58,000 

$1,132,800 

Large 

$235,800 

$67,900 

$842,700 

Top-tier 

$293,300 

$117,700 

$3£10.100 


Where biotechnology companies get their money from 


In the US, 54 per cent of chief executive officers in the biotechnology 
sector received a cash incentive in 1992, which averaged $73,000; also, 
61 per cent received option grants, reported at face value - the number 
of options times the the exercise price; 21 per cent of CEOs exercised 
shares in 1992. realising option gains (appreciation) of $1,359,400. The 
mix of base salary, bonus and potential option value is relatively stable, 
reganfiess of the company size. Source. - Ernst A Young 


ations of regulatory authori- 
ties, such as the US Food and 
Drug Administration. 

At Cor Therapeutics of south 
San Francisco, work is being 
carried out on a drag called 
TntegrUm,' which is used to 
try to prevent the dangerous 
complications that arise from 
a heart treatment called angio- 
plasty. 

“The trials are done on a 

30-day time 

frame," says 
Mr Vanghan 
Haitian, presi- 
dent and chief 
executive offi- 
cer. “[Assess- 
ing] Integrilin 
is relatively ™“*^^** 
easy because of its clear end- 
points.” If the patient is more 
likely to emerge from the SO 
day period without life threat- 
ening complications, the use of 
the drag can be deemed a suc- 
cess; 

• which affects not just the 
elderly - there are powerful 
economic and ethical reasons 
for regulatory authorities to 
speed the approval of treat- 
ments that affect children and 


Biotech companies have 
many ways to raise their 
bargaining power with 
the suppliers of capital 


people of working age. 

It is widely recognised that 
cancer drugs progress rela- 
tively rapidly through the 
approvals process, even In the 
face of. for example, evidence 
of severe side efforts. 

Only a handful of illnesses 
meet these criteria, so it 
should not be surprising that 
biotech companies usually 
work on projects aimed at 

treating at 

least one of 
three condi- 
tions: Aids, 
heart disease 
and cancer. 

The formula 
is not foolproof 
against the rig- 
ours of scientific research. In 
the 1980s, several biotech com- 
panies began research pro- 
grammes into septic shock, a 
condition which meets aH four 
of the above criteria for secnr- 
ing funding. 

In financial terms the 
research programmes were 
successful. Money poured into 
the companies involved, and 
three US biotech operations, 
Centocor. of Philadelphia. 



5% io%- 


Seuea; Emat tnd Yowig 


Pennsylvania. Roma, of Berke- 
ley, California, and Synergen 
of Boulder, Colorado saw their 
market capitalisations rise to 
a combined total of $4J»bn two 
years ago. 

Since then, their potential 
septic shock drugs have met 
with serious problems in clini- 
cal trials and today the three 
companies' combined market 
capitalisation is less than 
$lbn. 


: . : » s i 

15% 20% 25% 30% 35% 


Such setbacks are more than 
just a jolt for the biotech com- 
pany concerned and for poten- 
tial patient beneficiaries of a 
successful drag. 

They are used by the suppli- 
ers of biotech capital as evi- 
dence that the risks are very 
high and therefore as a lever 
to wring concessions out of the 
companies in return for that 
capital. The large phannacen- 
□ Continued cm next page. 


New incentives to form research alliances 


Continued from facing page: 

covers six main therapeutic 
areas. These are: anti-inf ec 
tives; oncology; allergy; derma- 
tology; cardiovascular and the 
central nervous system. 
According to Dr Spiegel, the 
secret of the company's R&D 
success lies in its balance of 
discovery areas. It supports 
both research into “quite com- 
fortable” scientific fields and 
high risk areas “of great poten- 
tial yield.” 

He explains: “There are 
times when you're in brand 
new areas where the regula- 
tory environment and clinical 
development environment is 
also unknown. But if you're in 
those areas that have high 
potential success, it’s worth 
taking that risk, too.” 

However, incentives to take 
such risks could soon disap- 
pear if the pricing controls pro- 
posed under healthcare reform 


are approved - “the proposal 
to severely review the ultimate 
pricing of a drug, even if it's a 
breakthrough product, gives a 
disincentive to how much risk 
money you would put up for 
those types of activities.'’ 
warns Dr SpiegeL 
hi any case he believes that 
current market forces are tak- 
ing care of price controls 
within the drug industry. 

I n Its 1993 annual report pub- 
lished last week, Schering- 
Plough announced that 
between 1992 and 2993, it held 
average US net prescription 
drug price increases to below 
the rate of increase in the con- 
sumer price index (CPI), and in 
.1994 expects price rises again 
to be at or below the increase 
inCPL 

"Prices have been moderat- 
ing dramatically," comments 
Raul Cesan. 

While individual companies 


may be suffering a loss of appe- 
tite for R&D risk-taking, the 
US drag industry as a whole is 
maintaining its commitment to 
R&D through teamwork. 

Joint ventures and alliances 
between university research 
departments, smaller biotech- 
nology companies or estab- 
lished pharmaceutical compa- 
nies show that by pooling their 
resources, drug companies can 
continue the search for innova- 
tive products. 

In future, Dr Spiegel pre- 
dicts. “there will be more 
incentive to form alliances in 
the research area to spread 
your bets, and that's certainly 
a concept that we embrace.” 

In its annual report, Sche- 
ring-Plough says that about 25 
per cent of its research dollars 
were targeted for biotechnol- 
ogy. 

Another form of alliance has 
seen US drug companies tap 
into the market of managed 


care. Last year, Merck & Co 
acquired health maintenance 
organisation Medco Contain- 
ment Services for SSbn, in a 
move widely regarded as an 
attempt to protect market 
share. 

Effectively, the acquisition 
changed Merck's mission from 
being a research-based phar- 
maceutical company to a major 
player in the healthcare mar- 
ket. 

Such redefinition of com- 
pany business strategy is not 
anticipated by Schering- 
Plough. To ensure long-term 
survival beyond healthcare 
reform, the company believes 
continued investment in its 
R&D pipeline is essential 

Raul Cesan concludes; “You 
have to find the very success- 
ful drugs eventually - other- 
wise you cannot survive." 

Claire Wilkinson 


<(Roche> 


Roche Pharmaceuticals 

Roche Consumer Health 

Roche Vitamins and Fine Chemicals 

Roche Diagnostics Systems 

Investing in Research and Development in the UK 

Roche Products Ltd . Broadwater Road . Welwyn Garden City . Hertfordshire . AL7 3AY 





17 



Useful GEM N0. z 

Lifts maintained by 
Stannah only suffer, on 
average, an emergency cal] out 
every 15 months and 24 days. 

For information 

'phono 021 ■359-5868' and quota FT2 


FINANCIAL TIMES 


COMPANIES & MARKETS 


©THE FINANCIAL TIMES LIMITED 1994 


Wednesday March 23 1994 


Overseas Moving 
by Michael Gerson 


\ 081-446 1300 




IN BRIEF 


UAP long-term 
stake earmarked 


Mr Edmond Alphaud6ry, Prance's economy 
minister, has said that 10 per cent of Union des 
Assurances de Paris (UAP), France’s biggest 
insurer, was to be allocated to long-term investors. 


German carmakers and suppliers unite 

Germany's biggest vehicle makers and a leading 
parts supplier are planning to unite in a venture 
for cost-cutting. Page 18 

Renault bucks cut their loss 

Renault Vfthicules Industriels, the commercial 
vehicles subsidiary of the French state-owned 
automotive group, suffered a net loss of FFrL4bn 
(S230m), compared with FFri.ffibn. Page 20 

NovaH transformation 

Acquis itions by Novell, the leading supplier of 
software for personal computer networks, have 
transformed it into a software powerhouse with 
annual revenues of nearly SBbn. Page 21 • 

Star changes direction 

Star TV, News Corporation’s satATiiio television 
arm in Asia, is to change its business strategy 
in an attempt to broaden its appeal. Page 22 

( Bold > acipdsltlona assist Bomrter 

Bowater, the UK packaging, printing and coated 
products group, attributed its 44 per wnt increase 
in full-year pre-tax profits to £211 An ($315m) 
to its “bold" acquisitions strategy. Page 24 

BSG suffers after falling demand 

BSG International, the UK vehicle distribution, 
childcare products, motor and aviation equipment 
group, blamed a 27 per cent decline in operating 
profits on falling demand for automotive and 
aircraft components. Page 25 

Avonmore advances abroad 

Avonmore Foods, the Irish dairy and meat proces- 
sor, lifted turnover last year by 35 per cent to 
more than IBtra ($I.4im). Page 27 

Sour relations In Italy 



Italy's milk producers are strongly resisting 
a proposal by the European Co mmis sion to reduce 
an increase in their quota just as they are cutting 
back after years of overproduction. Page 28 


Companies In this Issue 


Ak France IB 

Allied London Props 25 

American Trust 27 

Antofagasta 27 

Appteyard 25 

Australia Air 22 

Avonmore Foods 27 

BCH 2D 

BSG Inti 25 

BaiUie Gfffrd Japan 27 

Beny Starquest 27 

Borland lnt*l 21 

Bourne End 27 

Bowater 24 

Bupo 25 

Butte Mining 24 

CSA 16 

Cariplo 22 

Oba-Getgy 17 

Clyde Petroleum 24 

Compaq Computer 21 

Computer Management 25 
Crdcllt Lyonnais 17 

Daimler-Benz IB 

Derwent Vafley 26 

Dotting Kinders! ey 24 

GEA 18 

QEC 27 

GKN 24 

GPT 27 

Georg Focher IB 

Glaxo 17 

Gota Bank 20 

Hoechst 17 

Haiders Technology 26 

Hyundai 21 

Iceland 27 

Incentive 20 

Jenfine Flemfag 22 

Law Debenture 27 

UIDput 27 


Lineal 

28 

Unde 

21 

London & St Laurence 

27 

MTM 

26 

Mandarin Oriental 

22 

Manii 

22 

Maybom 

25 

Mercedes-Benz 

18 

Midland Bank 

12 

Motor Wodd 

27 

News Corporation 

22 

Novell 

21 

Olivetti 

20 

Pernod Hicard 

18 

Prudential Cotp 

18 

Quicks 

28 

BPS 

26 

RV! 

20 

Reflex Group 

27 

River & Merc Ameren 

27 

Secure Trust 

27 

Serna 

2B 

Stamens 

27 

Sogefl 

20 

Star TV 

22 

TCE 

17 

TeOa 

20 

Tenneco 

21 

Trace Computers 

27 

Trafficmaster 

26 

Trintey Inti 

26 

Tiy 

25 

lido Holdings 

24 

UniChem 

25 

VAE 

18 

Vise 

18 

Volkswagen 

18 

Vontobei 

20 

Westland 

24 

Wiseman (Robert) 

27 

World of Leather 

26 

ZF 

18 


Market Statistics 


BAmnl reports servtefl 30-31 
Bandura* God bonds 23 

Bond tu&ires and options 23 
Bond prices ano yieids 23 
CDonodUas prices 28 

ttvMmds announced, UK 24 
BIS currency rates 3B 

amtand prices 22 

Hwd Interest huficea 23 

FT-A World Bates Back Fags 
FT Sold Mtaas Index BackPags 
FT/tSMA M bond svc 23 

FT-SE Actuaries hcflces 28 


Foreign exchange 38 

GBs pnras 23 

ufto equity options Back Page 

London share senrica 30-31 

London trad options Back Page 

Uaogsd funds sente 32-36 
Money markets 36 

lew ted bond Issues 29 

Recent issues, UK 29 

Short-term Nitrates 36 

US rawest rates 23 

World stock Mokate 37 


Chief price changes yesterday 


RUMKRIKr«M» 


ttsm 

SIS 

+ 

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22W 

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fOMnewS 

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Ms 

860 

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Agfa 

1060 

- 

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MGW YORK CM 



IBM* 

SO* 

7Vh 

+ 

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Tefekne 

Ms 

63* 


4» 

taw* 

SOM 

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1* 

nap Hub 

K* 

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57% 

“ 

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Ham York prices at 1230pm. 


LOMBOK (Pence) 
RImb 


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£2 

+ 

4 

Ewwt Run 

80 

* 

13 

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fSM 

443 

+ 

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ftnulHPiti 

1513 


52 

wrap 

208 

- 

17 

tatnl 

850 

- 

SO 

Basra 

4S3 

- 

30 


PARS {Frit 


SSSCK33 


Eceo 

672 

GaumMOKM 

964 

Stem 

605 

nra 


Ertw tat 

731 

Birtanca 

2070 


800 

TOKYO IVMI 


®»®a 


EBMGfco 

1130 

HBOmud 

940 

nos 


Hnfl Motors 

880 

lira 

601 

rapoasrop* 

9SS 

flonown 

468 


+ 22 
+ 24 

+ 25 

- 25 

- 92 

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* 60 
+ 42 




ITS 

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no 

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30 

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1W 

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267 

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T1 

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682 

- 

21 

UC9BMS 

in 

- 

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Motor Watt 

314 

- 

14 

NKKB 

170 

- 

14 

MUX 

53 

- 

5 

Stash Estttol 

2S2 

- 

10 

Try Croup 

30 

“ 

3 


Alphandery confirms that non-performing property loans will be floated off 

State injection for Credit Lyonnais 


By David Buchan and ARCS 
Rawsthom in Paris 

Mr Edmond Alphandery, the 
French economy minister, yester- 
day confirmed that the govern' 
meat plans to restructure Cr&St 
Lyonnais, the loss-making bank, 
by injecting capital and floating 
part of its property loans into a 
state-controlled shall company. 

Details of the rescue package 
will be announced on Thursday 
afternoon when Credit Lyonnais, 
which has been badly affected by 


By Christopher Parkas 
hi Frankfurt 

Hoechst, the German chemicals 
concern, yesterday reported an 
“insignificant" rise in operating 
profits in the first two months of 
this year, and no change in 
domestic earnings or sales. 

Growth of 5 per cent In turn- 
over at the parent, Hoechst AG, 
was entirely due to a 9 per cent 
increase in exports, according to 
Mr Wolf g an g Hflger, the retiring 
rfiflirman. 

Hoechst, the last of Germany's 
big three chemicals makers to 
report on progress, was markedly 
less optimistic than Bayer, which 
last week confidently predicted 
an earning s increase this year of 
up to 20 per cent BASF said it 
expected to raise in spite of a 
sharply higher tax hin 

Mr Hilger restricted his fore- 
casts to the view that the low 
point of the recession had been 
passed and the long-awaited light 


By ABce Rawsthom In Paris 

Thomson Consumer Elect- 
ronics (TCE), the French com- 
pany that is one of the world's 
largest television manufacturers, 
last year returned to the black at 
the operating level after three 
years of losses. 

It made an operating profit of 
FFrl55m (*26.3m) against a 
FFr335m deficit in 1962. 

However, the company, a sub- 
sidiary of Thomson, the state- 
controlled electronics group. 


the economic recession after its 
aggressive expansion in the late 
1980s. will disclose a heavy net 
loss for 1993, estimated by ana- 
lysts at between FFriL5bn ($410m) 
and FFrSbn. 

The rescue has been the sub- 
ject of intense negotiation 
between the government and Mr 
Jean Peyrel evade, the French 
financier appointed ehairman of 
Credit Lyonnais with a brief to 
prepare it for privatisation. 

The package is expected to 
include a PFr4bn capital Injection 


on the horizon was visible. Group 
orders had increased for the first 
time in two years, although 
domestic demand was 

miftTumg pri 

Mr Jtlrgen Dormann, finance 
director, who takes over from Mr 
Hilger next month, was gloomy 
on prospects in Germany. He 
doubted if domestic profits would 
be enough to pay a dividend. Part 
of this year's pay-out would have 
to come from foreign earnings 
and an expected DM20Qm ($ll8m) 
residual tax rebate. 

The group, which announced a 
DM7 dividend for 1993, down 
DM2, following a 42 per cent drop 
in pre-tax earning s on unchang ed 
sales of DM46bn, blamed most of 
last year’s downturn an poor con- 
ditions in Europe. 

Operating profits in the Euro- 
pean Union tumbled to DM289m 
from DMXhn hi 1992. The region, 
accounting for 60 per cent of out- 
put, generated only 20 per cent of 
operating income. Other regions. 


remained in the red after 
restructuring charges and the 
cost of servicing its heavy debt ft 
made a net loss of FFr973m, 
against FFrL77bn. 

Mr Alain Prestat, chairman, 
said the negative trend had 
become a positive one, although 
it would take another 18 months 
for the group to become profit- 
able at the net level "This time 
last year people said we were in a 


and the removal from the banks' 
balance sheet of FFr25bn-FFr40bn 
of non-performing property loans 
which win be guaranteed by the 
government 

Asked whether this operation, 
coinciding with French requests 
for approval for large amounts of 
state aid to Bull and Air France, 
might not be too much for the 
European Commission to swal- 
low, Mr A]phandfcry said that in 
the case of Credit Lyonnais, “the 
government will be carrying out 
its normal role as shareholder”. 


apart from Latin America, 
showed modest increases, while 
operating profits fell in all busi- 
ness sectors apart from technical 
and agricultural products. 

Chemicals, fibres and plastics 
suffered from falling volumes 
and prices, while business was 
hit by the miserable condition of 
the European textile and automo- 


make or break situation,” he 
added. "These results show that 
we’ve made it” 

TCE, which owns a string of 
consumer electronics brands in 
Europe and North America 
including RCA, Telefunken and 
Ferguson, has been restructured 
in the past two years since the 
arrival as chairman of Mr Pres- 
tat a former civil servant. 

Mr Prestat 41, has cut costs 


He said taking property loans 
off Credit Lyonnais’ balance 
sheet Is a classic operation” of 
the kind carried out for “other 
French and foreign banks", 
though he added that it would be 
notified to Brussels. 

Mr Alphandery said he would 
not take a final decision on the 
recapitalisation until he had seen 
the bank’s 1993 accounts. The fig- 
ures will be presented to the 
hoard an Thursday. 

Still at issue is how long the 
state will guarantee the property- 


tive industries, Mr Hilger said. 
Better results were achieved 
from raw materials for deter- 
gents. Carbon products had 
shown a real turnround, and the 
plant protection business outside 
Europe had improved. 

Mr HUger, who said the com- 
pany spent or set aside DMlbn 
last year for restructuring - two 


and reorganised TCE’s 
operations. 

The number of employees was 
reduced by 10 per cent to about 
49,000 last year. He has also 
embarked on a redesign of the 
group’s products - hiring Mr 
Philippe Starck, the French 
designer,, as artistic director. 

The group increased sales by 10 
per cent to FFr33.4Sbn in 1993 
from FFz30J55bn. It made inroads 


related loans before reintegrating 
them into the bank's balance 
sheet, and the knock-on financial 
effect of the operation on Credit 
Lyonnais's other shareholders, 
notably Thomson, the state- 
controlled electronics group. 

Ms Sheila Garrard, banking 
analyst at Lehman Brothers, 

said: “Credit Lyonnais has disap- 
pointed us so often in the past, 
but it now has a chance to clean 
up its balance sheet and start 
afresh." 

Lex, Page 16 


thirds within Germany - indi- 
cated the process would con- 
tinue. He gave few details, apart 
from warning of more job losses. 
A reduction of 12,000 in the past 
three years was to be followed by 
a further 8,000 this year and next 
Total annual personnel costs 
would be cut by about DMLSbn. 
Observer, Page IS 


into Asia and increased its share 
of the European market 

Mr Prestat hoped to increase 
sales by another 10 per cent this 
year. Demand in Europe was still 
depressed, but conditions in the 
US and Asia were improving. 

TCE is still struggling with 
heavy borrowings - FFriOJbn at 
the end of 1993 compared with 
FFrl0.7bn a year previously. “Of 
course Td like to see a lower level 
of debt, but that's a matter for 
our shareholder [the French gov- 
ernment],” said Mr Prestat 


Zantac 
faces new 
challenge 
in US 

By Richard Waters In Now York 

Zantac, Glaxo’s ulcer medication 
which is the biggest selling drug 
in the US, is racing a new chal- 
lenge following an application 
by a generic drug company to 
produce a low-cost version of the 
product there. 

The latest assault on the domi- 
nant position of Zantac, which 
bad sales in the US of £2t>n last 
year and worldwide sales of 
S3L5bn, comes as Glaxo is battl- 
ing in the courts to uphold a US 
patent which has eight years left 
to ran. 

Ciba-Geigy, the Swiss pharma- 
ceuticals group, confirmed yes- 
terday that its Geneva Pharma- 
ceuticals subsidiary had filed an 
application with the US Food 
and Drag Administration last 
month to produce a version of 
Zantac, known as Form l. This 
version of the nicer drug, raniti- 
dine hydrochloride, is thought 
never have to been produced 
commercially. Glaxo markets a 
later version of the drag, known 
as Form 2. 

Geneva hopes to make its anti- 
ulcer drag available by the end 
of 1995, when Glaxo's US patent 
on Form l expires. Ciba would 
not say what it expected to 
charge for the product, bat 
added: ”11*11 certainly be cheaper 
than Zantac.” 

The two versions of the drug 
are identical in their effects on 
patients, according to both Glaxo 
and Ciba. Form 2, though, is 
easier to produce, and was 
adopted by Glaxo as the pre- 
ferred version in the early 1980s. 

The UK company questioned 
yesterday whether a Form 1 
product could be produced com- 
mercially, and whether it could 
be manufactured without some 
elements of Form 2 Zantac being 
produced, potentially infringing 
its patent Ciba said it could 
Twairp the drug. 

Glaxo also challenged an 
attempt by Geneva to have its 
version of the drag approved 
using a speeded-op approval pro- 
cess applied by the FDA for 
drags which were converting 
from prescription to over-the- 
counter status. The procedure 
docs not involve time-consuming 
and expensive trials. Ciba said it 
expected a quick approval. 
Geneva had been involved in two 
precedents in the US of so-called 
polymorphs - different versions 
of the same drag - qualifying for 
rapid approval, it said. 

Last summer, Glaxo won a 
court victory to protect its US 
patent on Form 2, which expires 
I in 2002. 


Hoechst tempers 
optimism for 
chemical makers 


we y; - 





Wolfgang Hfiger (left), retiring chairman, with J&rgen Dormann who will take on the job next month 


French TV maker returns to profitability 

Thomson Consumer Electronics continues revamp 


Barry Riley 

Somewhere there’s a bull 
run seeking a china shop 


These are tough 
times for the 
global investment 
strategists as the 
markets seek to 
re-establish order 
and coherence 
after last year’s 
bull run. Take 
your pick: Morgan Stanley, for 
instance, which rampaged 
through Hong Kong so noisily as 
a raging bull last autumn is now 
in a seriously bearish mode glob- 
ally. while on the other hand 
Goldman Sachs is complaining 
bitterly that the markets have 
over-reacted to the Federal 
Reserve's modest tightening. 

In important sections of the 
global securities market price 
leadership is shifting from one 
group of investors to another - 
from international hedge funds to 
domestic pension funds, for 
instance. US mutual funds have 
introduced a new element of 
potential volatility. In the process 
investment yields are taking 
quantum leaps to levels at which 
the new investors can hope to 
attain their objectives. 

Hie damage to securities prices 
has in some cases been substan- 


by 45 per cent from its mid- 
January p*«k. Yet there is also 
the intriguing likelihood that 
new anomalies are being created. 
UK gilts, for instance, are now 
providing yields (of up to some 
7.6 per cent at the long end) 
which the Bank of England is 
apparently no longer willing to 
offer on new issues, hence the 
floater launched yesterday. 

The great divide is between the 
static interpretations of global 
valuations and the more dynamic 
theories of Hows of funds. On the 


former basis a sharp jump in the 
yield on, say, long Treasury 
bonds is most easily explained in 
terms of a significantly worsen- 
ing view by investors of the pros- 
pects for inflation. However, this 
makes little sense when the Fed 
tightening that triggered the 
move was designed to head off 
fixture inflationary pressures. 

Cause and effect are more eas- 
ily related on a flow of funds 
analysis: the Fed Is in the process 
of shutting off the liquidity pump 
which inflated securities markets 
worldwide. The effect of loose 
monetary policy is normally evi- 

There is also the 
intriguing 
likelihood teat 
new anomalies 
are being created 

dent much sooner in financial 
asset price inflation than in the 
prices of goods and services gen- 
erally. A liquidity-driven equity 


per cent tumble in the Hoqg 
Kong equity market since the 
peak at the beginning of the year, 
while New York's Standard & 
Poor’s 500 Index has only 
retreated some 3 per cent. The 
contrast is symptomatic of how 
Last year’s flows have began to 
reverse: US-based money is being 
withdrawn, or at least is bong 
parked on the sidelines. 

Flows of money do not easily 


explain the whole confusing pic- 
ture, however. In Europe the 
equity and bond markets have 
moved down more or less 
together, but in the US almost all 
the damag e has been suffered in 
bonds. As for Japan, the Nikkei 
Index is up same 16 per cent so 
far to 1904 whereas yen bonds 
have slumped (the 19-year JGB 
yield is up by 106 basis points to 
4.1 per cent over the same 12 
weeks). Stick all that into your 
tactical asset allocation model 
and watch it crash. 

Well, perhaps, your model is 
extremely sophisticated. It might 
allow for the fart that the UK 
stock market is yield-oriented 
and is thus sensitive to long-term 
interest rates whereas nobody 
buys Japanese equities for the 
income (which is still quite a 
long way short of l per cant). 
Some valuation models look at 
the influence of short-term as 
well as long-term interest rates, 
however the puzzle here is that 
everywhere outside the US short 
and long rates are moving in dif- 
ferent directions. Again, your 
model will freeze unless you have 
programmed in some sophisti- 
cated time lags. 

Japan is the real challenge. 
Recovery prospects are a matter 
of faith, but Tokyo is the benefi- 
ciary of setbacks elsewhere. 
Global investors are seriously 
underweight in Japanese equities 
and naturally consider filling 
that gap when they take profits 
elsewhere, and find there are no 
better stories around. But as Mr 
Robin Griffiths, James Capel's 
technical analyst, says, the views 
get more bullish the further you 
go away from Japan. In the cha- 
otic world of global investment 
there simply has to be a bull mar- 
ket happening somewhere . 



bull market can be punctured 
tiafc to take an extreme, the stock more completely than one pri- 
market in Turkey has slumped marfly supported by growth in 

dividends and earnings. 

Distance the heart grow 
harder, there has been a near-30 


Who s 

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vni 

" PHARMACEUTICALS & 


FINANCIAL TIMES WEDNESDAY MARCH 23 1994, 


■ DRUG DEVELOPMENT COSTS 

Demand for economic specialists 


New drugs must not 
only be safe to use: 
producers must prove 
to buyers that their 
products are dearly 
cost-effective, too, 
reports Daniel Green 

W anted: health econom- 
ics specialists. Excel- 
lent pay and prospects 
with some of the world’s big- 
gest corporations. Perks 
in c l ud e travel, r ubbing shoul- 
ders to top management and a 
key role in the successful 
launching of products with 
potential sales of more frhan 
£lbn a year. 

This is the message that the 
world’s big pharmaceutical 
companies are putting out. One 
of Europe’s top companies 
recently approached Professor 
Alan Maynard of the Centre for 
Health Economics at York Uni- 
versity in the UK and asked 
him for the tiamaa of five PhDs 
it could recruit. It did not 
receive the answer it wanted. 

“They are just not out 
there," says Professor May- 
nard. 

The demand has arisen 


because the structure of the 
drugs industry is changing. 
Where once companies sold to 
doctors and hospitals, they 
now sell to governments, 
insurers and, in the US. corpo- 
rations from a range of indus- 
trial sectors. These are the 
organisations that actually pay 
for medicines, and they are 
beginning to flex their buying 
power muscles. 

For drugs companies, this 
mtwittg that It is no longer 
enough to show that a drug is 
safe and works, although, this 
is still required by regulatory 
bodies such as the Washington- 
based Food and Drug Adminis- 
tration. Now the task indudes 
demonstrating to the payers 
that a drug is cost-effective too. 
The disffipHna even has a namp 

of its own: ‘pharmacoeconom- 
ics.’ 

Nowhere is the importance 
of this new area dearer than in 
Australia. Since January 1933. 
any drug submitted for 
approval there must be accom- 
panies by not only the results 
of clinical trials but an eco- 
nomic impact analysis. 

That analysis must be based 
on comparisons with existing 
treatments. It must cover not 


only the price of the drug, but 
the impact on spending on 
other medical services and the 
time a patient spends occupy- 
ing a hospital bed. Sometimes, 
in the case of for example, 
elderly patients, social services 
costs can be included. 

The Australian scheme is 
still in its early days. Much has 
yet to be finalised especially 
the question of how to have an 
objective measure of patient 
quality of life. 

But the effect on drugs com- 
panies has already been 


Faced with soaring 
costs, the role of 
‘phannacoeconomics’ in 
the drugs industry seems 
set to increase 


far-rea ching . The economics 
can be simple if a new product 
is only a marginal improve- 
ment on an existing one. A 
comparison is made of the cost 
of the drug and any dff fe r ap nps 
in bow long the average 
patient has to spend in hospi- 
tal. 

If however, a “breakthrough” 


treatment is being submitted 
for approval - often with a 
high price the drugs company 
has to work hard to demon- 
strate conclusively that It 
makes economic sense. 

Therefore, the bulk of the 
economics workload is failin g 
on companies which invent 
breakthrough drugs. These are 
the biggest research-based 
companies, mostly US. UK and 
Swiss. 

Glaxo of the UK, for exam- 
ple, already has 50 employees 
hi the area. Anglo US company 
SmithKllne Beecham has less 
than io but is recruiting rap- 
idly. 

Not surprisingly, such com- 
panies have sought to make 
the best use of the investment 
outside Australia as well as 
inside. The economists work is 
used in marketing where their 
efforts may help persuade gov- 
ernments and regulatory bod- 
ies to allow a high price to be 
charged - provided an eco- 
nomic benefit is felt elsewhere. 

At Swiss company Sandoz. 
for example, health econo m ics 
is part c£ the marketing opera- 
tion. It began with studies that 
showed that transplanting kid- 
neys was cheaper in the long 



term dialysis. Sandoz 

malras SanHinvmrm an iirnw n- 

no suppressant used in trans- 
plant operations to cot the 
chances of a new kidney being 
rejected. 

Sales are growing rapidly, 
the drag is in already in the 
world's top 20 sellers, and the 
company regards its pharma- 


coeconomics programme as a 
success. Sandoz is extending 
its phannacoeconomics pro- 
gramme to studies on «kfn dis- 
ease. This could help sales of 
its fungal treatment Lamisil 
which had sales of about 
SFr5Gm in 1992, but stockbro- 
ker James Capel forecasts that 
by 1996 it wtQ be the compa- 


ny’s second biggest product 
with sales of SFrfOOm a year. 

Economists can also become 
involved at a much earlier 
stage of the drugs industry 
development **hnin At Glaxo, 
for example, they advise 
research and development 
departments on the likely eco- 
nomic effects of proposed new 


products. A decision c»n ^ 
made earlier over whether k is 

worthwhile to continue 
research on a product that may 

not find favour to an inoeas- 
ingiy cost-conscious healthcare 
environment. 

Not an the research comes 
from or favours the drugs 
industry. UK government 
funded research by indepen- 
dent academics on the costsot 
treating depression and bwo« 
cholesterol have not uncondi- 
tionally pleased SmithKll ne 
whose new antiw 
pressive Seroxat promises to be 
one of its biggest successes of 
the 1990s, and Merck, whose 
Mevacor and Zocor cholesterol 
lowering drugs have combined 
sales of about ¥2bn a year. 

The role of pharmacoecon- 
omics in the drugs industry 
seems set to Increase. This 
kind of work and the Austro 
Haw experiment have attracted 
the attention of governments 
and other healthcare buyers 
around the world. Canada has 
already issued draft g u id eline s 
on how to do pha rm a c oecon- 
omic studies of treatment 
regimes, and US healthcare 
organisations now demand to 
know the comparative costs of 
competing treatments. 

Budget-conscious politicians 
and private sector healthcare 
buyers will find It hard to 
resist using such analyses 
when negotiating drug selling- 


i 


Power balance shifts slowly in biotechnology battleground 


Continued from previous page: 

tical companies in particular 
are keen to extract conces- 
sions in the form of increased 
rights to market any drag 
developed. 

Mr Robert Spiegel, senior 
vice-president of clinical 
research of the US company, 
Schering-Plough, argues that 
the biotechnology companies 
want to keep too much in the 
way of marketing rights for 
drags that are still in the early 
stages of research and develop- 
ment 

“We need to go for the inno- 
vative [in biotech companies]: 
those products that are going 
to take care of needs that 
haven't been covered yet” he 
says. 

“That’s going to be a more 
risky investment And we're 
being told: ‘Don't expect that 
you can get the rewards. We 
expect you to make the Invest- 


ment but we’ll decide how 
much you can get in return.”’ 

He warns that as a conse- 
quence, “pharmaceutical com- 
panies like ours or any other 
big pharmaceutical company 
are going to be a lot mure cau- 
tious in what type of invest- 
ments (they make].” 

Some large drug companies 
have already scaled back their 
involvement in biotechnology 
on the basis that the risks are 
simply too great 

“Why produce drugs 
through biotech, when you can 
mait> the compounds through 
classical chemistry?” asks Mr 
Pierre Simon, R&D director of 
Elf-Sanofl. the French drugs 
company. 

“For the next few years, we 
will try to mimic the products 
of biotechnology through clas- 
sical chemistry." 

In private, few heads of 
large drag companies agree 
with Mr Simon. They say that 


in practice, investing in bio- 
technology companies is more 
than just buying into a possi- 
ble new drug. 

“Biotech company employ- 
ees have a dedication and 
enthusiasm as well as talent 
and the desire to work long 
hours that is hard to find in a 
large organisation,” concedes 


one. And the argmnents in 
favour of the promise of bio- 
technology RAD seem slowly 
to be gaining the upper h«i*d- 
Ten years ago, deals 
between biotech companies 
and their big drugs company 
partners usually saw the 
exchange of all marketing 
rights to biotech research pro- 


grammes for capital and a 
promise of royalty payments 
s ho ni fl a drug be successful. 

The formula was not popu- 
lar aiming biotech companie s 
for two reasons: 

• Much of the “financial 
upside” of developing a popu- 
lar medication is being able to 
benefit from profit margins in 


manufacturing and sales. 

• As a drug progresses 
through the sequence of clini- 
cal trials towards approval, its 
value increases sharply. Sell- 
ing rights later, rather than 
sooner, can earn a lot more 
money for a small company 
Ms Jane Shaw, the chief 
operating officer of one of the 


few biotechnology companies 
to have made it to consistent 
profitability, Alza of Palo Aito, 
California, says that times 
have changed. 

ft used to be hard to secure a 
deal for anything other Hum a 
royalty arrangement, she says, 
but today she pan view “royal- 
ties [as] somewhat limiting . 
We can now take higher risks 
for higher rewards.” 

The co m promise is for a bio- 
tech company to sell only lim- 
ited marketing rights in 
return for the capital injec- 
tion. Glaxo of the UK, for 
example, has a five per emit 
stake in Gilead Sciences of 
California. Gilead has a num- 
ber of compounds In the late 
stages of development, bnt 
Glaxo has no rights to them. 

“Glaxo is sharing co-promo- 
tion rights but only in code- 
blockers [which are still in tire 
earliest stages of research],” 
says Mr Michael Biordas, chief 


executive officer. 

Biotech research and devel- 
opment is a b attl egr oun d. One 
the one hand are the small bio- 
technology companies which 
have ideas, expertise and 
energy but not cash or market- 
ing power. 

On fop hand are fop 
large cash-rich pharmaceuti- 
cals companies with huge 
sales forces, yet struggling to 
nwinfariw morale in the free of 
healthcare reforms and job 
cuts. 

The biotech co mpan ies want 
to give away as few of their 
ideas as possible in return for 
the greatest investment they 
can secure. The pharmaceuti- 
cal companies want to secure 
as many rights - preferably 
global rights - in re turn for a 
large stake and HmHrf cash 
4 x w m an 

The balance of power is 
shifting oily slowly, and the 
ski rmishing goes OH. 


The small biotechnology companies have new ideas, 
expertise and energy - but not enough cash or 
marketing power. In contrast, the large cash-rich 
pharmaceuticals companies have powerful sales forces 



New Mctedi products: tbe result of taigb dedteaSon and mrarch talent 


1 



Takeda Chemical Industries, Ltd, 

Heed Office: 1-1, Doshomochi 4-chome, Chuo-ku, Osaka 541, Japan Tel: (06) 204-2111 Fax: (06) 204-2880 
Tokyo Head Office: 12-10, Nibonbashl 2-chome, Chuo-ku, Tokyo 103, Japan Tel: (03) 3278-2111 fax: (03) 3278-2000 


In Perfect Balance 

According to the ancient Chinese philosophy of yin 
and yang, the universe is composed of opposing but 
interdependent forces. ■ interestingly, this philosophy 
resembles the concept of homeostasis, the natural 
balance that occurs within living organisms, including 
the harmony between antagonists and agonists that 
regulate vital functions. Thus, an important factor in 
the search for new medicines is the development of 
compounds that work together with the body's own 
restorative and regenerative abilities. ■ To lead healthy 
lives, we must seek balance with nature, with society, 
and within ourselves. Through pharmaceutical research, 
we are striving to help people attain this balance. 


t 


t 



* 




FINANCIAL TIMES WEDNESDAY MARCH^3_l9g4 


France allocates 10% of 
UAP to core shareholders 


By Alice Rawstftorn in Paris 

Tile French government plans 
within the next few days to 
launch a tender offer for noy- 
qiu: dnrs. or hard core share- 
holders, to invest in Union des 
Assurances do Paris UJAP), the 
insumuce group tliat is due to 
be privatised later this year. 

Mr Edmond AlphaDdcry. 
economy minister, yesterday 
said that 10 per cent of UAP, 
which is France's biggest 
insurer, was to be allocated to 
long-term investors. 

The announcement of the 
tender offer will mark tho first 
step towards the sale of the 
government’s 5ft per cent stake 
in UAP. 

The holding is valued at 
between FFr25bn and FFrUSbn 
($li!hnS4.7bii>. 

Tlic appointment of noyatix 


dur s, or long-term investors 
that are intended to forge stra- 
tegic links with a company and 
to protect it against hostile 
takeover bids. Is a standard 
part of the French privatisa- 
tion process. 

UAP is the largest noyau dur 
in Franco, as the country’s 
leading institutional Investor 
with a warren of shareholdings 
across the corporate sector. 
Some of these companies are 
now expected to volunteer to 
become noyaus dtirs in UAP. 

However, Banque Nationale 
de Paris (BNP), the recently 
privatised French bank that 
has been UAP’s main financial 
partner, will reduce its stake to 
15 per cent from 19 per cent 
following the privatisation. 

Suez, the French holding 
company, and Winterthur, the 
Swiss insurer with which UAP 


has a cross-shareholding, will 
retain their existing invest- 
ments. 

Mr Alphandery yesterday 
confirmed that UAP would be 
allowed to raise capital as part 
of the privatisation. Mr Jac- 
ques Friedmann, UAP’s chair- 
man, has made no secret of his 
hopes of staging a capital 
increase to finance the group’s 
international expansion. How- 
ever, the size of the increase 
has not been decided. 

The economy minister 
described UAP as “a business 
in sound financial shape”. UAP 
on Monday announced an 
increase in net profits of 31.8 
per cent to FFrl.42bn in 1993 
from FFri.OSbn in 1992. The 
group, which reported peak 
profits of FFr4.2bn In 1990, 
hopes to continue its recovery. 
See Observer 


Czechs repurchase CSA stake 


By Alice Rawsthom 

The Czech authorities 
yesterday ended months of 
negotiations by announcing 
that they had agreed terms for 
n deal to buy back Air France s 
minority stake In CSA. the 
Czech airline, for S27m. 

Air France, which two years 
ago paid S30m for its 19.1 per 
cent holding, had initially 
resisted the Czech govern- 
ment's attempts to farce it to 
sell the shares. 

However, the Czechs per- 
sisted. anxious to exert greater 
control over the management 
of the airline, which fell into 
the red last year and is on 
course for further losses this 
year. 


Air France will sell its entire 
CSA stake to Konsolidacni 
Banka, the state-controlled 
Czech banking group. 

The negotiations were com- 
plicated by the role of the 
European Bank of Reconstruc- 
tion and Development (EBRD), 
which acquired an identical 
19.1 per cent holding in CSA at 
the same time os Air France. 

EBRD has already written 
off 30 per cent of this invest- 
ment. but the remainder was 
guaranteed by the French 
group. 

The bank has maintained 
throughout the negotiations 
that, although it hoped to 
retain its CSA stake, it would 
only do so if the Czech authori- 
ties took over the guarantee. 


The Czechs have reached a 
compromise whereby Konsoli- 
dacni Banka will have a put 
option over the EBRD stake 
which is not exercisable until 
August 1997. 

The EBRD board will meet 
tomorrow to endorse the agree- 
ment and the bank is then 
expected to sign a format 
accord in Prague. 

Air France said it could not 
comment on the sale until it 
was finalised. However, the 
Czech transport ministry yes- 
terday said that the five Air 
France representatives on the 
CSA board had resigned on 
Monday. The Czechs now 
intend to wait for a year before 
bringing a new international 
investor into CSA. 


Air France sells duty-free chain 


By Alice Rawsthom 

Air France, the state-controlled 
airline, has sold Sareseo, its 
chain of duty-free shops, to 
Vaturi-Peraod Ricard-Elig. a 
retail consortium that includes 
Pernod Ricard, the leading 
French drinks group. 

Sareseo, which owns a num- 
ber of restaurants as well as 
duty-free shops at Charles de 
Gaulle airport in Paris and at 


Nice airport, is controlled by 
Servair, the catering subsid- 
iary of Air France. 

Servair owns 60 per cent of 
the shares and Aero ports de 
Paris, the airport operator, 
has the remaining 40 per cent. 

The terms of Saresco’s sale 
have been agreed in principle 
and the deal is expected 
shortly to be concluded. How- 
ever. the value of the transac- 
tion has not been disclosed. 


Sareseo last year made sales 
of FFrl.33bn ($459m), an 
increase over its FFrl.OIbn 
turnover In the previous year. 
However, its net profits were 
depressed by increased invest- 
ment costs - due to the refur- 
bishment of a number of units 
- and slipped to FFr27.5m- in 
1993 from FFr34.4m in 1992. 

The acquisition of Sareseo 
forms part of the expansion of 
Vaturi-Pemod Ricard-EHg. 


reinsurance 

subsidiary 

By Alison Smith In London 

Prudential Corporation, the 
UK financial services and life 
insurance company, reported 
pre-tax profits of £589m 
($886tn) Tor 1993, a 45 per cent 
advance, helped by a sharply 
Improved performance at Mer- 
cantile & General, its reinsur- 
ance subsidiary. 

The final dividend rose to 
8.7p, taking the total dividend 
to l££p per share, a rise of 
almost II per cent. Earnings 
per share increased 40 per cent 
to ZLOp compared with IS. Op. 
Shares closed the day 2p down 
at 332p. 

Mr Mick Newmarch, chief 
executive, said Prudential did 
not need to make specific pro- 
vision against potential com- 
pensation claims In respect of 
personal pensions sold to peo- 
ple opting or transferring out 
of occupational schemes. Last 
year it carried out some £355m 
of pension transfer business. 

Profits from the life business 
rose to £481m. from E444m, 
with much of the increase 
coming from operations out- 
side the UK. Profits from the 
UK rose £6m to £282m- 

Jackson National Life. Pru- 
dential's US subsidiary, con- 
tributed profits of £122m, 
though this was not directly 
comparable with the 1992 fig- 
ure of £86m, which included 
some £52m as a result of real- 
ised investment gains. 

Lex, Page 16 


Income ahead 
at Austrian 
railway group 

By Ian Rodger in Vienna 

VAE Eisenbahnsysteme, the 
Austrian maker of high-speed 
and heavy-duty railway 
switches, said net income 
jumped 18 per cent last year to 
Sc hg 1.3m (16.8m), on sales up 
21 per cent to Schi.7bn. 

The group said it expected 
turnover and profits to grow 
by at least 5 per cent this year. 

VAE last year raised 
Sch300m in a rights issue 
which reduced the Austrian 
state’s holding to 26 per cent 


ZF joins forces with carmakers 

V .... . A . IUMlA« tn rtUWln 


By Christopher Parkas 
in FrankfUrt 

Germany’s biggest .vehicle 
makers and a leading parts 
supplier are planning to join 
forces in an ambitious co-oper- 
ative venture which could 
mark a breakthrough in the 
automotive industry's drive to 
cut costs. 

The scheme provides for ZF, 
a transmissions and steering 
specialist, to pool Its resources 
with Volkswagen and Merced- 
es-Benz In an operation which 
will supply both vehicle mak- 
ers with jointly-developed 
steering gear. 

According to ZF, which 
unveiled the plan yesterday, 
the project would reduce 
steering equipment costs. It 
would also be open to other 
automotive groups, the com- 
pany said. 

ZF has been nominated as 
the project's industrial leader. 


and its division based at a new- 
ly-opened factory in Schwfl- 
bisch GmOnd has been desig- 
nated as the manufacturing 
base. 

If the venture is approved by 
the companies' boards and the 
cartel authorities, it could lead 
to Mercedes and Volkswagen 
buying is most or all of their 
steering gear, rather than mak- 
ing it themselves as at present 

All German vehicle makers 
are keenly examining possibili- 
ties for reducing costs by 
increased out-sourcing and 
greater use of common compo- 
nents, especially those parts 
under a vehicle's bodywork 
which do not directly affect a 
prospective buyer’s judgment 

At the same time, the domes- 
tic components industry is 
under pressure from customers 
to cut costs, which has led to a 
wave of losses and intensive 
merger and co-operation talks. 

ZF, which last year made an 


undefined operating loss after 
tumbling German sales cut its 
global sales by DM400m to 
DM5.4bn i$3J2bn), was recently 
refused permission by the car- 
tel authorities to take over 
General Motors’ subsidiary. 
Allison Transmissions. 

Shortly after the refusal it 
announced plans to open a new 
factory in Alabama to supply 
front and rear axles for a new 
Mercedes factory in the state 
which is due to start produc- 
tion of cross-country vehicles 

in mid-1997. 

• Daimler-Benz is to pay 
DM424m to buy out the Bavar- 
ian government's 8.58 per cent 
holding in its aircraft and 
defence systems subsidiary, 
Deutsche Aerospace. 

The price, announced yester- 
day, was “extraordinarily satis- 
fying", said Mr Edmund 
Stolber, the Bavarian prime 
minister, who recently 
suggested he was looking 


for DM300m to DM350ra. 

The deal marks a further 
stage in the state's privatisa- 
tion programme, announced 
last year, and started earlier 
this month with the takeover 
of the Bayemwerk energy util- 
ity by Viag for a cash consider- 
ation of DM23bn plus a block- 
ing minority stake in the 
enlarged Viag group. 

The next move will be the 
disposal of a holding in the 
Rhine-Main-Damibe canal man- 
agement company, which will 
complete Bavaria’s assets sale. 

Mr Stolber stressed that pri- 
vatisation of state and local 
government-owned savings 
banks was out of the question. 
Publicly-owned banks were 
important to help the financing 
of local small and medium- 
sized industries, which often 
entailed higher risks than 
those acceptable to private sec- 
tor financial institutions, he 
said. 


Visa forms ‘electronic purse’ consortium 


By Reuter In New York and 
Alison Smith In London 

Visa International said 
yesterday it had formed a 
global consortium to develop 
common specifications for an 
“electronic purse” card. 

The card wiQ have a micro- 
chip that can be used instead 
of cash and coins for 
everything from vending 


machines to public transport. 

The Visa move comes three 
months after National West- 
minster Bank established a 
joint venture with Midland 
Bank and British Telecom to 
launch an electronic smart 
card, called Mondex, In 
the UK. 

Joining forces with Visa are 
NationsBank, Wachovia and 
Electronic Payment Services, 


all of the US; the Financial 
Information Systems -Centre, 
which Is based in Taiwan; 
Groupement des Cartes Ban- 
caires of Paris; Banksys in Bel- 
gium; Sociedad Espanola de 
Medios de Pago in Spain; and 
Portugal’s Sodedade interban- 
carfa de Services. 

A limited number of other 
companies which had invested 
in developing similar systems 


would be invited to join. Visa 
said. 

NatWest is trying to recruit 
partners in up to 30 countries 
to establish Mondex interna- 
tionally. NatWest scud: “Devel- 
opment of common standards 
will benefit the whole industry 
and the consumer. We believe 
that both Mondex and Visa can 
moke significant contributions 
in this area." 


Georg Fischer stays 
in the red as sales fall 


By Ian Rodger 

Georg Fischer, the Swiss 
foundries and diversified engi- 
neering group, has reported a 
1993 loss of SFr34m ($24.3m), in 
line with a forecast made last 
September, compared with a 
depressed profit of SFrUm in 
1992. 

The directors are recom- 
mending that the dividend be 
passed for the second consecu- 
tive year, but they indicated 
that the group should make a 
modest profit this year. 

Fischer, which is heavily 
dependent on the motor indus- 
try, said its sales fell IS per 
cent to SFr2.02bn, mostly 
because of divestments. 


Trading profits fell 38 per 
cent to SFr46m because of the 
lower sales and squeezed 
margins. 

The automotive products 
group, making castings and 
components for the motor 
Industry, was the only one to 
make a profit in 1993. 

The machine tool division 
was slimmed down following 
the closure of the Burkhard 
und Weber unit 

Mr Martin Huber, the chief 
executive, said that new orders 
were up 12 per cent so Ear this 
year. The piping systems divi- 
sion should return to the black 
this year and the plant engi- 
neering division should break 
even. 


GEA capital increase 
aims to raise DM370m 


By Quentin Peel In Bonn 

GEA, the Ruhr-based German 
energy, environmental and 
process technology group, yes- 
terday revealed details of its 
planned capital increase, 
intended to raise some 
DM370m ($ 2 18 m) in extra 
finance for the rapidly expand- 
ing enterprise. 

The share issue will increase 
the company's basic capital 
stock of DMISOm by a nominal 
DM40m, or more than 26 per 
cent, with the issue of 400,000 
new voting shares, and the 
same number of preference 
shores. 

The shares will be. offered to 
shareholders at a ratio of 4:1, 


and be managed by Commerz- 
bank and CS First Boston. 

The company, based in 
Bochum, was family-owned 
until it went public with a 
DM775m share issue in 1989. It 
made its name in thermal and 
energy technology, expanding 
into air treatment and refriger- 
ation, with the acquisition in 
1992 of the Dutch group 
Grass o, and food and process 
engineering, with the purchase 
last year of Niro, in Denmark. 

Mr Volker Hannemann, the 
chief executive, said that at 
least one purchase was 
planned in 1994. 

“We are working on a num- 
ber of projects both inside and 
outside Germany," he said. 



MANDARIN ORIENTAL 
Till- HOTEL GROUP . 


Highlights 1993 


Mandarin Oriental 


Profit Maintained 


Profit after taxation 
Earnings per share 
Dividends 


US$40.9 m 

USe6.00 

US$5.00 


Four additional hotels to be managed 
Shareholders’ funds up 29% to US$835.7 million 

“ The Company’s two hotels in Hong Kong should benefit from stronger 
demand in 1994. While the immediate outlook is mixed in the Group’s other 
markets , the groundwork has been laid for future growth and the prospects 
for the Group remain encouraging." 

Simon Keswick, Chairman 
2 2nd March 1994 


19-9 3 RESULTS ! 


Year ended 31 at December 


1993 

1992 


USSm 

USSm 

Turnover 

158.8 

148.4 

Operating profit 

41.2 

37.B 

Share of profits of associates 

9S 

1Z4 

Profit before interest and taxation 

50.7 

50.2 

Net interest expense 

(2.7) 

(3-1) 

Profit before taxation 

48 JO 

48.1 

Taxation 



— Company and subsidiaries 

(4-8) 

(5ff) 

— associates 

(2-3) 

(2.7) 

Profit after taxation 

40.9 

40.4 

Minority interests 

(0.1) 

(0-1) 

Profit attributable to Shareholders 

408 

40.3 

Dividends 

(34.0) 

(34.0) 

Retained profit for the year 

6.8 

6.3 

Shareholders' funds 

835.7 

649.3 


use 

use 

Earnings per share 

6.00 

5.94 

Dividends per share 

54)0 

5.00 


Mandarin Oriental International Limited 

incorporated in Bermuda with limited lability 


ft member of the Jonfine MatheaM Group 


* : % ‘I 


nitf knot dividend ot UScJ S3 per ordhvuv stare mBbo payable on June tS9<, sutler to approval at the Annual General Meeting to be held on 
till June JtJpJ. to Shareholders on the register ol members at ihe dose of business on 8th Aprs t9S4, amt wtt be available in cash yvtiti a sow 
.Vferruftvtt. Pie share remrars wtf fie dosed fovn Wfifa iShApnl 199* toduslvo. The dMoond wffl tw avertable to united Slates Dotos, Hmo 
KongDoAvs and Starling, bturehtMors on tha Jersey branch register wtirecene Untied States DoBars SrareMders on the Hong Kong bmndi 

nxvstor wifl redan* Hong Kong OoHars. untoss they etoor tor onoofthe alternative curmxm by nodM w m Company's n&tstrars or transfer scents 
bv A ? th May ( ®4. ShjieWdcrs whose stores are hm through tha Centra! Depository System bt Singapore rCDPl wtB receive Horn Korn Omars, 
ontoss rtvy ehxt through OOP to receive United states Defers. v v 


HiCI « vinvlnni ■ I k ■»!( K> *m; -.VfcirtiiJnn UniTSat hkiiti • MjinUni r.V*r,iol, Mavu « 

M.i mLuiii i J i m aj I. MjiVU • UimLiln t JiuwjL Sill l rjntt».u • lJa; unanL • 

Hmu 1 jIhim N>iiin. ihjiLm l ■ fliukvi Y*hi KWj. . ik*H t«b VKu, Mkiu • (Ik- K.vx'ture, lhm? Knra: 


LVMH 


MO£THSNNBSr. LOUIS VUfT70N 

A FRENCH "SOCICTE ANONYME" 

SHARE CAPITAL OF F. 78M34SH FRENCH FRANCS 
REGISTERED OFFICE : 3» AVENGE BOCHK - 7SQW PARIS (VRANCU 
REGISTERED WITR THE REGSTRC OC COMMERCE 
ET DB5 SOCIETIES 

UNDER REFERENCE PARIS B 775 <70 417 


FRF LS05JKWJNW, 9,707% 

1992 Titres Subordounfe & DurEe Indetermin^e - 
Notice to Bondholders - 


The Board of Directors of LVMH MOET HENNESSY LOUIS VUITTON hereby 
notify huMcn of 9,707% Titres SubonJoanfe 1 Dur bt Ind&enninfe of tbe company 
chat a General Mewing of (notfhaMcra will be held oa April It. IW V 930 run. m 
the company’s registered office to consider tbe following agenda: 

- approval of dre cmunnplacecf merger wait Jacques Ruber SA; 

-granting of powers to third panics to carry out the necessary legal formalities; 

• lielerminaiiiu of rbr place where tbe powers of a Homey of the represented 
bondholders and tbe nimuai of Ibe meeting, as wen w the attendance list, wfli be 
deposited. 

No ad km may validly be token by llte General Meeting unless holdcts bolding at 
least one quarter of the bonds l ben outstanding ere present or represented n the 
meeting. 

The resolutions and report to be submitted at liw meeting are available for 
csnmiiErfHM of die fcgBfcraf office of Ore company. 

Board of Directors 


SOCIETE GENERALE 
USD 300.000.000 

FLOATING RATE 

NOTES 
DUE 1996 

For the period 
March 22/1994 to 
September 22,199 4 the 
new rate has been fixed 
at 4,03126% PA 
Next payment date: 
September 22,1994 
Coupon nr :16 
Amount : 

USD 206,04 
for the denomination 
of USD 10 000 
USD 2060,4 2 
for the denomination of 
USD 100 000 

THE PRINCIPAL PAYING 
AGE NT SOGENAL 
SCX2ETE GENERALE GROUP 
15, Avenue Emile Reuter 
LUXEMBOURG 


SAMANTHA 
INVESTMENTS PLC 

£20 million Subordinated 
Boating Rate Notes 
Due 2000 

in accordance with the 
provisions of the Notes, 
notice is hereby given that 
tar the interest period from 
21st March, 1994 to 21st 
September, 1994 the Notes 
wffl cany interest at the rate 
of 7 per cent per annum. 

Interest payable on 2ist 
September, 1994 will 
amount to £3,528.77 on 
each £100,000 Note. 

West Merchant Banic Urntted 
Agent Sank 


CREDIT LYONNAIS. 
USD 500,000,000.- 
(Jndated FRN 

Bondholders are hereby 
informed that the rale tor 
the coupon N°li has been 
fixed at 4,875 %, 
for the period 
from 22nd March 1994 to 
20th June 1994. 

This period has 90 days and 
the Coupon has a price of 
USDI21.88 and shall 
be payable as from 
20th June 1994. 




unj rrg&rend m IreWkl 
undrrilif BiuUmji Soartto Ac*. 199V 

u,th regiticred nmkr IBj 

First National 
Building Society 

£25,000,000 

Floating Rate Permanent 
Interest Bearing Shares 

(PIBS) 

For the Inteml Period (8rh 
March, 1994 p> l^th Septem- 
ber. 1994 the PIDS will carry an 
Interest Rate of 7.75113% per 
annum- The (ntcreic Amount 
per £l,toO will be £19.10 puy- 
able on the Wrh September, 
1994- 

W 1 * Tbe InmndruuntSiuii 
(Ui!httnr<4')!*Uiil|RlKineJMii4ni) 
die RipufcOcnf firiuxILnl 


B BwbnTnut 

Company, London AecniBub 
IlrdVhnvh, IW 


LVMH 


MOET HENNESSY. tOUIS VUHTON 

A FRENCH "SOCIETE ANONYME" 

SHARE CAPITAL OK F. 7WJ0J4JW FRENCH FRANCS 
RFCISTTOWO OFFICE : JO AVENUE UOCHE - 7SIM PAJUS IFRANCW 
REGISTERED WOW THE RKGISTRE DU COMMERCE 
KT l)ES SOCIETES 

CNDER REFERENCE PAMS B 775 £79 417 


FRF 5.000.000.000, 

1990 Titres Subordomtes A Durt-c IndKeiminie - 
Notice to Bondholders - 


Tbe Board of Directors of LVMH MOLT HENNESSV LOUIS VUl ITON Hereby 
notify bofclecof 1990 Tires Subontoimes & Durto ImKiermlnfe ul tbe company dwt 
j General Meeting of bondholders win be bcM on April 1 1, 19M at iUslXiajm. a> tbe 
company's rcgntcral office to consider tbe following agenda: 

> approval uf Ibe contcmpbred merger wcilb Jacques Robrr S.A. ; 

* granting of powers to third parties to cany out the Decenary legal formalities 

• determination of the place where the powers of attorney of Ibe represented 
bondhotders and tbe mhmies of the meeting, as well as tbe attendance list, will he 
deposited. 

No action may valiiffy be taken by the General Meeting unless holders holding at 
least one quarter of the bonds then outstanding are present or represented ai Ibe 
meeting. 

The resolution* and report to be submitted at tbe meeting are available for 
ewainaiow at die registered office of tbe u x npcoy . 

Board of Directors 


MINORCO 

NOTICE TO HOLDERS OF BEARER 
SHARE CERTIFICATES 
PAYMENT OF COUPON No. 13 

With rvfctvncc to the notice of interim dividend advertised in 
rite pnso u»i March IS. 1994 the Following information ^published 
for the guidance of holders of bearer share certificates. 

The dividend of 19 cents was declared in United States 
currency. The dividend will be paid on or after May 4. 1994. 
agiirnr surrender or Coupon No. 13 detached from hearer share 
certificates as follows: 

(a) nt the offices of the Corporation’s Continental pnying agents: 

ffctnqur.’ Generate du Luxembourg Credit du Non! 

14, me Altlringen 34, rue des Mathurim 

(jutembourg 75008 Paris 

Grand Duchy uf Luxembourg l-Yancc 

(b) at the Ixmikm Securities Department of Barclays Bank pic. 
Slock l-Jtdinngc Services Dept., I6S t-unchurch Street, 
ixvtdon I-C3P 3HP. Unless persons depositing coupons at 
such office reqiiusl payment in United Stales dollars (in which 
case they must comply with any applicable I btchungL’ Coni ml 
regulations), payment will be made in United Kingdom 
currency either: 

(i) in respoctoFcoupons lodged on or prior to April 27. 1994, 
at the United Kingdom currency equivalent of 
the United Stales currency value of the dividend on 
April 12, 1994; ur 

(it > in respect of coupons lodged on or after April 28, 1994, 
al lire prevailing raw of exchange on the day the proem I s 
are remitted to the London Securities Department of 
ilnrctays Bank pte. 

Coupons must be left for at least four dear days for examin- 
ation (eight days if payment in United Slates currency has been 
requtnted) and may be presented any weekday fSatUrtlay 
excepted) between the hours of 10 a.m. and 3 p.m. 

United Kingdom income tax will be deducted from payments 
to any person in the United Kingdom in respect of coupons 
deposited at the London Securities Department of Barclays Bank 
pte. unless such coupons are accompanied by Inland Ftewnue 
nun -residence declaration forms. Where such deduction is made 
the net amount of the dividend, after deducting United Kingdom 
Income tax at 20% will be 15.20 cents (United States) per share. 

(n the case of payments made in United Kingdom currency 
the sterling equivalent of the net dividend will be calculated in 
atxordamx with sub-paragraph (b) above. 

Copies of the Interim Report of Minoreo for the half-year to 
IXvembw 31, 1993 will be available from the Registered Office 
of the Corporation and the offices of ihe paying agents referred 
to above. 

By Order of the Hoard 
N Jordan, Secretary 
March 23, 1994 
Minoreo Soetcfe Anonyme 


RC l.mctnbowf N»- tlt^U 1 .* 


I 

1 


* 







FINANCIAL TIMES WEDNESDAY MARCH 23 1994 


19 


MAVtSEW FINANCIAL 
$335,002^47.77 

ttoiawAnaroti l9BOAO*rerTtat 

$1 27,300,000.00 


$195,976,000.00 

WW Ctaa# A-e Asset Backed Notes 

$11,726,547.77 



LJNIfiNVJCO 


■iHtaABnaftMrtnu 


US$350,000,000 

GUxd kUdum-Ham Note Piupamme 




@B0aiberi 
Spanekasson Bfkubon A/S 
USS 150,000,000 

Suboninated Floating Rale Notes 
DUO 2000 


CtMoiad kiDMtMM Bnt um 


Global Underwriting Expertise 

(And The Lead Manager Roles To Prove It) 





GOTA BANK 


US$100,000,000 
SubonflnaiBd Hooting Rate None 
Due 2001 


GOTA BANK 


USS 100,000,000 

Hooting Rata Notes Due 1996 


ffiCHBOCAL 


ftKANSAUIS-OSdKE-MNUa 

US$ 100,000,000 
Homing Rate Notes Duo 1996 


Cfmfcal kMntnMBt cm* IHM 

ffiCHBNBCML 


% 


Enta PubBco RmHoMiivUoji 
R ipafloto, Sputa 

¥ 10 , 000 , 000,000 

lO-YearSyndtatodLoan 
Private Pacement 


OienW Iknt 


ffiCitamau. 




UKDHDCUfTIL ISSiorWLOU. 


US$50,000,000 

9% Notes Due 1995 


UllUlh-miMWMl 

ffiCHBmCAL 



Mn 


^ftterrard 

Waterford Foods 
Investment Limited 

STG 30,000,000 
Naas Due 2004 





ftKANSAUB-OSAKE-RVtKKI 


US$30,000,000 

Privately Placed Floating Rate 
Nous Due 1996 


%gCHB*BCAL 





BANCO BRAG 
US$ 20JOOO.OOQ 

1025% Notes Due 1996 




Chemical Banking Corporation’s 
underwriting expertise is truly global, as 
the above transactions, which we lead- 
managed, indicate. We are established 
leaders, through our subsidiaries 
Chemical Investment Bank Limited, 
and Chemical Securities Asia Limited, 


in the international debt markets. 

Added to this, through our subsidiary 
Chemical Securities Inc., we can now 
underwrite and deal in all types of debt 
securities in the United States, including 
corporate bonds. 

Our global network can find and 


access the most cost-efficient capital 
sources, wherever they might be. 
Whatever your financial needs, ask 
Chemical to help. We’re a financial 
partner with many strengths, including 
global debt underwriting expertise. 


8% Chemical 


Expect more from us.™ 


© 1994 Chemical Banting Corporation. CtiamfcaJ Socurttfos Ina-Member NASD/SIpC. Chemical lnveswanl Bank Limited-Member SFA. 
Chemical Bank. Chemical Investment Bank Urrttad, Chemical Securities Asia Limited, Chemical Securities Inc. and Chemical Bank Sucusal on Espafta, are separate aJbSdtaries of Chemical Banking Corporation. 




















SCA Extraordinary 
General Meeting 


The shareholders of Svenska Ccllulosti Aktiebulagct SCA 
are hereby incited to attend an Extraordinary General 
Meeting, to be held on Monday, April I /, 1994 at 
4:30 pan. in Potbemsulen. fvgewarshusel, 
Mulmskilhudsgatan 46, Stockholm, Sweden. 

Notice of pamdpdrion 

Shareholders wishing to participate in the Meeting must: 

- be recorded in the sb.ire regisrer maintained by chc 
Swedish Securities Register Center (Viirdepappens- 
ccnrmlen VPC AB), on March 31, 1994, 

- notify SCA of their intention to participate not later than 
4:00 p.m, Wednesday, April 6, 1994 to SCA, Corporate 
Secretariat and Legal Affairs, S-SS I 88 Sundsvall, Sweden, 
telephone +46 60-19 31 14, or telefax +46 60-19 31 34, 

Name, address, personal idcntification/organizarion number 
(where applicable), telephone number and number of shares 
should be provided with the notice of participation. 

Shareholders who have their shares registered in the name 
of a nominee must temporarily have their shares registered 
in their own name with the Swedish Security Register Center 
(VPC) on March 3 1, 1994. A request for such temporary 
registration should be received by the nominee well in ad- 
vance of the deadline. 

Agenda 

The following matters shall be addressed at chc Meeting: 

(. flection of Chairman of chc Meeting. 

2. Preparation and approval ot the list of shareholders 
entitled to vote at the Meeting. 

3. Election of two minutes checkers. 

4. Determination whether the Meeting has been duly 
convened. 

5. The Board of Directors' proposal to authorize the Board 
to decide, prior to chc 1994 Annual General Meeting, on 
art issue of a maximum of 6*500,000 "B" shares against 
payment in cash, such issue to deviate from the share- 
holders' preferential rights and to be subscribed by 
Svcnslui Handclsbanken for placing primarily wirh 
foreign investors. 

6. The Board of Directors' proposal to authorize the Board 
to decide, prior to (he 1994 Annual General Meeting, on 
an issue of a maximum of 3,000,000 "B" shares against 
payment in cash, such issue to deviate from the share- 
holders' preferential rights and to be subscribed by 
sellers of the french packaging company Ocor S.A. 

The Board of Directors’ complete proposals, as well as docu- 
ments pursuant to Chapter 4 $ 4 of the Swedish Companies 
Act, will be available at the Company's office at Stureplan 3, 
Box 7827, 5-103 97, Stockholm, Sweden, from March 30, 
1994. 

Stockholm in March 1994 
The Board of Directors 



SCA 



Malaysia 

U.S. $600,000,000 

Floating Rate Notes due 2015 

Fot die six munch period ZIm October. 1993 to 2 1 at April. 1994 
the .inbuilt jmsmWc (vr US. 310.000 Note will hi U.S. 3205.42. 
The relevant interest payment J.nc wilt be 2 hi Apnl, 1994. 


Bankers Trust 
Company , London 


Agent Bank 


At fiance International Health Care Fund 

Socirti d'lnvesthsrmrni 4 Capital Variable 
47, Boulevard Royal 
L-2449 Luxembourg 
R.C. Luxembourg B25 105 

NOTICE OF MEETING 

LYji MurSmIJit. 

'Vc haic pk-JMiiv in inviting tou 19 attend the Annuat Genera I Meeting o ( 
*h in.-hukii.-iv which Will he held no Wednesday, March JO, 1V>M ->l J.JP pm il the 
i’l(Wc& u( Siaie Sued Bank. Luxembourg S.A. 47 Utnilevjrd Royal, L-OJJP 
Luxembourg. » ilb the following afirnd-i: 

AGENDA 

1. T*i jppowc i he annual report incorpor-iling the Million' report and audited 
luunvul •4aicmetus ul die Fund lor the fool year ended November 30. l«3. 

2. To Ji'thjrgc ihe DireOon and the Authtort witfi nr*pcct to rile perfornura.- of 
ihen dunes ituimg I he fiscal year coding Novcmher 30, IW1 

3. To eta.* the (,dks*iag seven persons as Urnxtum, each to hold office unfit ibe 
IKM Annual General Meeting of Share ho Ulers ami until his or its successor is 
duly cfcnrd and ipniificd: 

RD Smart. CUh 
i Kent Blair. Jr 
S M Davies 
David H Dwvln 
WllllcmleruM 
Jean- Claude Koch 
Fdwanl J LoMer 

4. T.i jpptnni Kiast & Young. Lu wmtaurg as indepemfem audihXS of the Food fot 
ihe Inal year ending November 30, IW. 

5. To transact such other business as may properly come before the meeting. 

Only durchnMcra of rw*fd on Febnniy 3. IW arc cnlidcd to notore of. and to vote 
jl the Annual General Meeting n( SharchuMcts and at any adjournments thereof. 
Should you wi be able in an end the meeting in person, please date and sign the 
enricual pftm and return it before March IS, 29*U by fax a ad by airmail in the 
envelope piuvuVnl to Sutc Sheet Bank. Luxembourg's. A-. 4? Boulevard Royal. 
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Olivetti in 
European 
multi-media 
venture 

By John Simians In Milan 

Olivetti, the Italian computers 
group, said yesterday It had 
set up a joint venture with 
Redgate Communications of 
the US to exploit Europe's 
growing market in multi- 
media services, which is expec- 
ted to be worth $10bn in 1996. 

Outside Italy, the venture 
marks Olivetti's entry into the 
European market for elec- 
tronic catalogues. 

Olivetti is to hold a 51 per 
cent stake and Redgate, a spe- 
cialist mnlti-media editor 
based in Vero Beach, Florida, 
will have 49 per cent Redgate 
is a venture capital based com- 
pany whose investors include 
AT&T Ventures and Olivetti. 

The first project planned for 
the joint venture is InStoreNet 
In France. The service will 
give customers access on spe- 
cialist retailing networks to 
catalogues offering graphical, 
audio and video information 
on hardware and software 
products. 

Olivetti’s participation, 
which will be managed by its 
recently formed telecommuni- 
cations and mnlti-media divi- 
sion, reinforces the company’s 
shift away from hardware to 
more profitable service-based 
activities. 


Italian car parts 
group drops to 
L18bn for year 

Sogefi, Italy’s listed car 
components company con- 
trolled by Mr Carlo De Bene- 
detti’s CIR holding company, 
yesterday reported net group 
profits of L18.ibn (810.7m) for 
L993, down from L33.3bn the 
previous year, writes John 
Simians. 

The 1992 earnings, however, 
were boosted by a Ll9bn 
extraordinary gain through 
the sale of Sogefi’s stake in the 
German Boge group to Man- 
nesmann. 

In 1993 the group made an 
extraordinary gain of Ll&dbn 
through the sale of the 
SVAMA distribution subsid- 
iary. Group net borrowings 
fell from Lll6.4bn to L38.5bn. 

The company said a strong 
presence in the second-hand 
car market and the fact that 
its activities were centred both 
on Europe and the US enabled 
sales to reach L660.4bn in 
1993, against L664.5bn, despite 
recession in the car industry. 


Vontobel soars 
64% to SFr40m 

By Ian Rodger in Zurich 

Vontobel, the Znrich-based 
private banking group, said Its 
consolidated net income 
soared 64 per cent last year to 
SFNO.lm (927.6m). 

The directors are recom- 
mending a 48 per cent rise in 
dividends to SFr20 per bearer 
share and SFr4 per reg is tered 
share. 

The group has revealed for 
the first time the size of Its 
assets under management, 
SFr21.5(m, of which half are 
managed on a discretionary 
basis and half are from private 
clients. 

The Vontobel family, which 
has do heirs, has given some 
SFr6.8m worth of the compa- 
ny’s bearer shares to its 500 
employees. 

The main contributor to 
profits growth was the dou- 
bling of trading income to 
SFr61~6in. 


INTERNATIONAL COMPANIES AND FIN ANCE — 

RVI confident after cutting loss to FFrl.4bn 


By David Buchan in Paris 

Renault Vfihicules Industrtels, 
the commercial vehicles sub- 
sidiary of the French state- 
owned automotive group suf- 
fered a net loss of FFrl.4bn 
($23 0m) last year compared 
with FFrLBSbn in 1992. 

The group said it hoped to 
halve the loss tn 1994. however, 
and claimed that it could sur- 
vive without an injection of 
new equity capital 

When Renault’s planned 
merger with Volvo of Sweden 
collapsed late last year, it was 
claimed that RVI would 
require additional capital with- 
out the support of Volvo’s 
stronger truck operations. 

Mr Shemaya Levy, new RVI 
president, said that following 
the failure of the merger the 
group's international strategy 
was now focused on achieving 
synergies with Mack Trucks, 
its US subsidiary, which was 
expected to return to profit in 
1994 after several years of 


Renault was not discussing 
an alliance with Flat of Italy, 


“certainly not at the level of 
track-making.” he said. 

RVTs consolidated turnover 
was virtually unchanged last 
year at FFr25. ibn. 

The group’s financial for- 
tunes differed sharply in 
Europe and in North America. 

Demand for new trucks fell 
sharply in west Europe last 
year, and RVTs turnover in 
Europe declined by 13 per cent, 
while its operating loss in the 
area rose to FFr699m from 
FFr429m a year earlier. 

“We hit the bottom ot the 
cycle In the summer of 1993, 
and we are now in a phase of 
slow, progressive recovery,” 
said Mr Levy. The European 
operation was now steadily 
reducing its losses. 

In contrast to Europe, 
demand for heavy trucks in the 
US had risen strongly. Mack 
turnover increased by 24 per 
cent to $1.7bn, and halved Us 
operating loss to $72m from a 
loss of $152m in 1992. 

Mack had broken even last 
month, said Mr Levy, and it 
would achieve a profit in the 
whole of 1994. 



An RVI truck in Rothmans Williams Renault GP team colours 


Mr Levy dismissed the sug- 
gestion that Renault trucks 
was the weaker part of the 
French group and had had 
most to gain from the merger 
with Volvo and most to lose 
from the failure of the deal. 

“We have done no worse 
than our European competi- 
tors.” he said. “It is true we 
have not benefited like Flat or 


Volvo from currency changes. 
But chiefly by reducing stocks 
we have been able to bring 
down our debt from FFr3.7bn 
at the end of 1992 to FFr3.1bn 
by the end ofl993, and with a 
lower break-even point, we are 
well placed for the recovery.” 

There was no need for the 
capital increase that Mr Jean- 
P terra Capron. his predecessor. 


had talked of in the context of 
me merger with Volvo -We 
have no handicap linked to onr 
size.” he said. 

He accepted, however, that 
RVI needed to work hard at 
increasing the average 3 per 
cent market share it has in 
Europe, outside France and 
Spain. 

ft had maintained Its invest- 
ment in research and develop- 
ment and had retained the 
intellectual property rights to 
its share of the work done with 
Volvo in developing a new 

medium-weight truck cab. 

RVI would now focus an 
developing new engines, and 
possibly suspension and brake 
systems, with Mack, however. 

It would also seek to develop 
a common purchasing strategy 
with Mack to exploit the fact 
that some components suppli- 
ers, such as Bosch and Miche- 
lin, had operations on both 
sides of the Atlantic. 

“This does not exclude con- 
tinued co-operation with 
Volvo, or others, in such areas 
as gearboxes, axles and trans- 
missions.'’ said Mr Levy. 


BCH to cancel capital after Pta26bn buy-back 


By Tom Bums hi Madrid 

Banco Central Hispano (BCH) 
plans to cancel some 5 per cent 
of its share capital after being 
forced to buy back its own 
stock from the markets to sup- 
port the price. BCH shares 
came under pressure after the 
collapse of rival bank Banesto 
at the end of last year. 

Officials at BCH, which owns 
the biggest branch network in 
Spain, acknowledged yesterday 
the bank had spent some 
Pta26bn ($187m) supporting its 
share price. 

BCH equity owned by the 
bank has risen since December 
from 0.2 per cent of the total 
number of shares on the mar- 
ket to close to the 5 per cent 


Developer pays 
DM40m for 
Berlin stake 

By Andrew Taylor, 

Construction Correspondent 

Christiani & Nielsen, the 
international contractor and 
property developer, has paid 
DM40m ($22.7m) to acquire a 
71.73 per cent stake in a DMlbn 
property development close to 
Berlin. 

Nobleclear, the development 
company, was previously 
owned by UK property develop- 
ers Mr Ronald Lyon and Mr 
Godfrey Bradman and East 
German Investment Trust 

After the purchase East Ger- 
man Investment Trust will 
retain 18 per cent and Mr Lyon 
10.27 per cent of Nobleclear. Mr 
Bradman has sold his stake. 

Nobleclear plans to develop 
the 309 acre site at a cost of 
DMSOOm over the next four to 
live years. 

It will provide a mix of resi- 
dential, Light industrial and 
commercial buildings in one of 
the largest out-of-town develop- 
ments In the region. 

Christiana, the former Dan- 
ish construction group, was 
acquired by its Thai subsidiary 
for $80m at the end of 1992. 

It U the second time this 
year that Mr Bradman, former 
chairman of collapsed UK 
developer Rosehaugh, has 
decided to give up a property 
development opportunity. 

His plan to lead a consor- 
tium to develop a £30 Dm 
($438m) retail and residential 
development at White City in 
west London collapsed after 
British Rail and the BICC engi- 
neering group accepted an 
alternative offer for the land. 


limit set by the authorities. 

The board will seek authoris- 
ation from the annual meeting 
next month to write off the 
equity it now owns. The amor- 
tisation would reduce the num- 
ber of BCH shares to 551,619 
from 578,959 and the bank esti- 
mates the cancellation will 
raise income per share from to 
Pta296 from Pta281. 

BCH shares, which traded at 
Pta3,380 at the beginning of 
this year, fell earlier this 
month to Pta2,755 and have 
steadied to Pta2,850, represent- 
ing a 15 per cent discount on 
the estimated book value. 

Investor confidence in BCH 
waned in the second half of 
last year and fell further fol- 
lowing the troubles at Banesto. 


BCH's net interest income 
shrunk by 4.8 per cent last 
year although Its operating 
profit was up by 1L8 per cent 
due, in part, to non-recurring 
foreign exchange and public 
debt trading. 

The bank's profile was fur- 
ther dented recently by credit 
rating agencies. Moody’s has 
placed BCH under review for a 
possible downgrade and IBCA, 
the Loudon-based agency, last 
week adjusted the bank’s 
short-term commercial paper 
from Ai+ to Ai and its 
long-term debt from AA- to A+. 
Both agencies cited flat core 
earnings at the bank, concern 
over asset quality and the slow 
progress of cost reductions as 
reasons for the revision. 


The bank’s move was wel- 
comed yesterday by market 
analysts. "In the circumstances 
it is a well thought-out move, 
mid there could be further can- 
cellations of stock over the 
year,” said Mr Robert Maxwell 
of Madrid brokers Maxwell and 
Espinosa. 

BCH officials insist any link 
between Banesto's troubles 
and possible difficulties at BCH 
is wholly out of place. Never- 
theless, the buy-back and 
write-off moves are part of sev- 
eral initiatives to restore inves- 
tor confidence. 

• BCH is streamlining its 
decision-taking process. Mr 
Jose Mara Amusategui, chair- 
man, is pruning his board to 28 
members from 39 and his exec- 


Loan losses hit Gota Bank 


By Hugh Camegy 
in Stockholm 

Gota Bank, merged by the 
government at the turn of the 
year with fellow state-owned 
Nordbanken, yesterday 
reported an operating loss in 
1993 of SKrl3.57bn (S1.71bn) 
reflecting the damage wreaked 
by loan losses on Sweden's 
banks. This was more than five 
times its 1992 Loss of SKr2.4bn. 

The loss came despite the 
transfer during the year of 
SKi38^bn out of Gota's total 
loan portfolio of SKr78.4bn into 
a separately-run, so-called bad 
bank called Retriva. The 
transferred loans included 
SKr23.4bn out of Gota's 
SKr27.2bn problem loan book. 


Despite this, credit losses - 
mostly from the property 
sector - stood at SRrll^Bbn in 
1993, including the write-down 
of assets transferred to 
Retriva. The figure was only 
slightly below the 1 992 loan 
loss figure of SKrl2£bn. 

Net interest income also 
slumped by S3 per cent to 
SKrl.7bn, partly because credit 
losses before the Retriva 
clean-up had to be 
loan- financed, pushing up 
interest costs. 

However, the Retriva 
operation meant problem loans 
after provisions for losses at 
the year-end stood at SKrl.lbn, 
compared with SKrl2.4bn in 
1992, out of a total outstanding 
loan portfolio of SKr40bn. 


Apart from setting up 
Retriva. the state kept Gota 
afloat by pumping in SKr20bn 
in capital. It then decided to 
hand over Gota to 
Nordbanken. which itself was 
only kept afloat by 
huge injections of state 
assistance and a similar 
“bad bank” operation to 
deal with non-performing 
loans. 

Nordbanken, which will 
report its results for 1993 later 
this week, has since bounced 
bank into profit 

But it has already had to 
spend SEr3bn on a further 
capital infusion to keep Gota's 
capital adequacy ratio above 
the internationally-required 
level of 8 per cent 


Profits advance 67% at Incentive 


By Hurfi Camegy 

Restructuring, cost-cutting and 
a boost from the fall in value of 
the Swedish krona pushed up 
results at Incentive, the Swed- 
ish industrial group controlled 
by the Wallenberg family. Prof- 
its jumped by 67 per cent to 
SKr620m (878.57m) in 1993 from 
SKr371m in 1992, excluding 
associated companies. 

Group sales, however, were 
up Just 4 per cent at 
SKri2.27bn from SKrll.77bn 
due to the weakness of the 
company's European markets 
and divestments related to 
Incentive’s move to narrow its 
focus on engineering. 

But a smaller rise In costs 
and a positive effect from the 
devaluation of the krona worth 


SKrlOOm helped produce the 
sharp improvement in profits. 

Profits after counting in con- 
tributions from associated 
companies rose to SKrl.85bn 
from SKrl-27bn. The dividend 
is raised to SKr7 per share 
from SKifi last year. The result 
underlined an improving trend 
in the Wallenberg empire after 
several tough years. 

Incentive said the prospects 
for 1994 were "relatively 
favourable,” with higher vol- 
umes, improved margins and 
lower costs set to improve 
earnings. 

Earlier this month. Investor, 
the senior of the Wallenberg 
companies, said it expected ris- 
ing profits in 1994, following a 
sharp tumround in the last 
quarter of 1983. 


Incentive said a recently- 
announced decision to sell the 
glass-making company Orre- 
fors to Incentive's shareholders 
would complete a programme 
of restructuring carried out 
since Incentive was listed in 
1991 after emerging from under 
the wing of Asea, the Swedish 
half-owner of Asea Brown 
Boveri, the Swiss-Swedish 
engineering group. 

Charges of around SKrlOOm 
were made against 1993 earn- 
ings against costs of breaking 
up the HSgglunds subsidiary, 
parts of which were sold off. 

Last year, Incentive also 
spent around SKr500m last 
year acquiring MacGregor- 
Navire, the shipboard cargo 
handler, from the Finnish 
group Kane. 


utlve committee to 14 from 19. 

• The bank plans to raise 
income by disposing of port of 
its industrial assets, although 
It intends to keep control of 
the prime companies in its 
portfolio. This week it will 
realise about 8104m through 
the placement of 13.5 per cent 
of Aumar, a toil-motorway 
operator, in which it holds a 67 
per cent stake. 

• In the second half of this 
year the bank will tap the mar- 
kets for some PtaTObn in three 
issues of subordinated debt 
“We are very capitalised in tier 
one, core capital so we can 
afford to cancel and what we 
want is a better mix, with 
more subordinated debt,” said 
a senior BCH executive. 


Telia pushes 
earnings up 
to SKr3.95bn 

By Hugh Camegy 

Telia. Sweden’s state-owned 
telecommunications company, 
yesterday reported profits 
after financial items more 
than doubled in 1993 to 
SKr3.95bn (5500m) from 
SKrUSm in 1992. 

Sales were up marginally to 

SKr35.34bn from SKr35-29bn. 

The increase in profits 
was put down chiefly to a fall 
in investments, which were 
down by 7 per cent to 
SKr7.L7bn, lower debt costs 
and a drop in restructuring 
costs. 

The company said the 
number of subscribers fell 
slightly for the first time, due 
to tiie recession in Sweden. 

However, telephone traffic 
rose by almost 5 per cent, due 
chiefly to fast-growing mobile 
telephone usage. 

Telia became a 
commercially-structured, 
independently-run company lu 
the middle of last year, having 
previously been a directly 
state-run concern called . 
Televerket 

ft faces competition in 
international telephone traffic, 
mobile telephone networks 
and the supply of telecons 
equipment 

The preseat centre-right 
coalition government intends 
to begin privatisation as early 
as next year or 1996 If it wins 
September’s general election- 

However, the opposition 
Social Democrats, currently 
leading in the opinion 
polls, are against any 
sell-off. 


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^N^N^ALTIMESjVEpMEgD^^Y MARCH 23 1994 


international companies and finance 

Programmed for the Microsoft challenge 

Novell’s expansion has pitted it directly against the market leader, writes Louise Kehoe 


T he balance of power in 
Uie computer software 
industry has shifted 
unexpectedly towards the state 
of Utah, home of Novell, the 
leading supplier of software for 
personal computer networks. 

Novell announced late on 
Monday that it planned to 
acquire WordPerfect, a Utah 
neighbour, for $L4bn in stock. 
At the same time, Novell has 
purchased the rights to a popu- 
lar spreadsheet program called 
Quattro Pro from Borland 
International for $i45m in 
cash. 

Novell shares were down in 
heavy trading yesterday morn- 
ing. at *20% from 523% at Mon- 
day’s close. 

The moves give Novell an 
instant stake in the market for 
application programs, with 
WordPerfect’s word processors 
and Borland's spreadsheet 
They also transform Novell 
into a software powerhouse 
with annual revenues of close 
to 52bn. second only to Micro- 
soft, the world’s largest soft- 
ware company with revenues 
last year of $3.75bn. 

For the first time, Microsoft 
will face competition from a 
company with the size and 
breadth of products to chal- 
lenge its own market domi- 
nance. 

Novell seems to relish the 
opportunity for a market bat- 
tle. There is no love lost 
between Novell and “the boys 
from Seattle”, as Mr Raymond 
Noorda, Novell chief executive, 
calls Microsoft's youthful exec- 
utives. 

Mr Bill Gates, Microsoft 
chairman, has charged that 
Novell “has a vendetta against 


us", and Mr Noorda has 
accused Microsoft of anti- 
competitive business practices. 

Microsoft is being investi- 
gated by the US Justice Depart- 
ment, and Novell ^ played 
an active role in providing 
information to the anti-trust 
investigators- Novell has also 
filed an anti-trust co mplaint 
against Microsoft in Europe. 

However, Mr Noorda care- 
fully avoided any comment on 
Microsoft yesterday, and ana- 
lysts said his plans to expand 
Novell may shift attention 
away from Microsoft’s market 
dominance. 

Until now, Novell has com- 
peted with Microsoft only in 
the area of operating systems, 
the software that controls the 
basic hmctions of a computer 
or network of computers. 

N ovell's Netware is the 
leading network oper- 
ating system. Last 
year, Novell also acquired 
Unix, a computer operating 
system widely used In "open 
systems” computing. Novell 
faces increasing competition, 
however, from Microsoft’s 
recently-introduced Windows 
NT. an operating system for 
networked computer systems. 

With its acquisition of Word- 
Perfect and purchase of Bor- 
land's spreadsheet, Novell wfll 
now go head to head with 
Microsoft in the booming mar- 
ket for office software “suites”, 
or bundles of business software 
applications, including word- 
processing. spreadsheets and 

database wanapiwpnt 

Novell also plans to leverage 
its leadership in networking 
software to create a class of 



Nowell 

Share price (5) 



Raymond Noorda: relishes 
battle with ‘boys from Seattle' 

applications products called 
"groupware”, aimed at teams 
of workers. 

Such software would include 
messaging, task management, 
document management and 
workflow tools, Novell said. In 
this market segment, Novell 
will compete with Microsoft 
and Lotus Development, the 
third-largest personal com- 
puter software company. 

"The era of stand-alone per- 
sonal computing is evolving 
into group collaboration that 
connects individuals, groups 
and companies.” said Mr 
Noorda. “Novell's objective is 
to accelerate this market tran- 
sition.” 

Yet Novell’s expansionary 
moves also reflect tough times 
in the software industry, as 
smaller companies find it 
increasingly difficult to com- 
pete with “mighty Microsoft”, 
with its broad distribution and 
marketing clout, and to keep 
pace with a price war. 


1993 
Souca: Datastraam 


94 


WordPerfect and Borland 
have both lost market share 
over the past year, according 
to market analysts. WordPer- 
fect has recently laid off more 
than 1,000 employees, or 17 per 
cent of its workforce. Borland 
has faced cashfl ow problems as 
it slashed prices in an attempt 
to gain market share. Borland 
said on Monday it would 
restructure its operations, fol- 
lowing the sale to Novell of its 
leading product. Large staff 
cuts are expected. 

Novell's extensive distribu- 
tion network, with 25,000 
resellers worldwide, could 
breath new life into WordPer- 
fect and Borland's spreadsheet 
business, industry analysts 
say. 

Novell faces the chall enge, 
however, of integrating the 
new businesses into its estab- 
lished operations. “Mergers are 
difficult in any industry, but 
more so in software because 
you have to combine different 


code bases, as well as different 
cultures,” said Mr Pete Hig 
gins, Microsoft vice-president 

However. Novell is not new 
to these challenges. Over the 
past 10 years the company has 
acquired no fewer th qn 15 soft- 
ware companies, although 
none the size of WordPerfect 

And Mr Noorda says 
long-standing friendships 
between executives of the two 
companies, whose offices are 
just a few miles apart will 
help to make the combination 
“a natural merger". 

A more pressing problem for 
Novell is who will replace Mr 
Noorda, who at 69 is about to 
retire. “We are on track to find 
my successor by mid-June,” 
said Mr Noorda, who has been 
talking to several industry 
executives outside the com- 
pany. 

Thus, although Mr Noorda 
may have realised his dfeam of 
creating a new “software 
powerhouse”, the newly-expan- 
ded Novell faces significant 
uncertainties. It also remains 
to be seen how Lotus Develop- 
ment will react to Novell’s 
expansion plans. 

Four years ago, Lotus and 
Novell aborted a planned 
merger, after the two compa- 
nies failed to agree on who 
should head the merged busi- 
nesses. Mr Noorda says he 
recently rejected an attempt by 
Lotus to resurrect talks. 

Novell’s acquisitions do, 
however, confirm a broad 
trend in the software industry 
toward consolidation. Last 
week, Aldus and Adobe 
Systems, two leaders in desk- 
top publishing software, also 
announced plans to merge. 


Borland shaken by revamp and resignation 


By Patrick Harverson 
in New York 

Borland International, the US 
personal computer software 
company which is selling its 
spreadsheet product Quattro 
Pro to Novell for !145m, 
warned it would report signifi- 
cantly lower revenues and a 
"substantial" operating loss in 
the quarter ending March 31. It 


also announced fho resignation 
of its finance chief. 

Borland said it would incur a 
charge in the next quarter, to 
cover the corporate restructur- 
ing that followed the Quattro 
Pro sale and its poor recent 
earnings performance. 

It said it had not yet 
determined the extent of the 
charge. 

The latest developments fol- 


low last week’s appointment of 
Mr Keith Malb as Borland’s 
first chief operating officer. Mr 
Maib, a former partner at the 
accountancy firm Price Water- 
house spent the weeks before 
his appointment examining in 
detail Borland’s business. He is 
now running the day-to-day 
management of the company. 

The arrival of Mr Maib fol- 
lowed a period of turmoil 


among the company's senior 
management. 

The resignation of Mr Alan 
Henricks, who stepped down as 
chief financial officer “to pur- 
sue other interests”, was only 
the latest in a line of recent 
departures by senior execu- 
tives. Last Wednesday, the 
head of the company’s product 
division resigned. 

The sale of Quattro Pro, the 


arrival of Mr Maib, and the 
planned restructuring are all 
part of an attempt by Mr Philip 
Kahn, Borland's chief execu- 
tive. to ensure the company 
survives a price war in the 
increasingly competitive soft- 
ware market 

Borland incurred a loss of 
549m for its 1993 fiscal year, 
and in the latest quarter 
reported only modest profits. 


Tenneco 
names new 
Case head 

By Laurie Morse In Chicago 

Tenneco, the diversified US 
industrial company, has named 
a veteran of Honeywell’s Euro- 
pean restructuring programme 
to bead J. I. Case, Tenneco ’s 
largest division. 

Mr Jean-Plerre Rosso, 53, 
from Vichy, France, will suc- 
ceed Mr Edward Campbell as 
Case's president. Mr Campbell 
will retire on March 3L 

Mr Rosso’s appointment is 
seen as a sign that Case is 
about to proceed with an 
extensive rationalisation of its 
European operations, where its 
construction and agricultural 
equipment lines have been bat- 
tered by competition and 
shrinking markets. 

Case has just completed the 
first year of a three-year, 
5920m restructuring pro- 
gramme designed to rescue it 
from losses of $lbn in 1992. To 
date, the bulk of Case's ration- 
alisations and plant closings 
have been in North America. 

Announcing the appoint- 
ment. Mr Dana Mead. Ten- 
neco’s president, said "a sub- 
stantial amount of 
restructuring steps remain 
across all of Case’s worldwide 
operations”. 


Compaq Computer to open plant in Brazil 


Compaq Computer of the US is 
to build a $15m assembly plant 
in Brazil. It should become 
operational by September. Reu- 
ter reports from Sfio Paulo. 

"Brazil will play a key role 
for our growth in Latin Amer- 
ica,” said Mr Eckhard Pfeiffer, 
Compaq president and chief 
executive officer. 

He said the plant, which will 
be located on the outskirts of 
S3o Paulo, will serve the Latin 
America and Caribbean region 
outside Mexico. 

It will begin by producing 


desktop models and eventually 
assemble the full line of Com- 
paq products. 

Mr Pfeiffer described the 
planned Brazilian plant as one 
of “high volume manufactur- 
ing capacity” that would even- 
tually employ around 400 
people. 

He would not comment on 
production numbers, except to 
say that it would be in the 
“hundreds of thousands of 
units”. 

A regional plant should rep- 
resent substantial production 


and operational cost-savings, 
which would be passed on to 
the consumer, he said. 

He said the plant was the 
result of a policy of installing 
manufacturing operations "at 
the heart of our markets”. 

Compaq has three manufac- 
turing plants - In Texas. Sing- 
apore and Scotland - and 
recently announced plans to 
open a fourth, in China. 

Mr Pfeiffer said although the 
Brazilian plant was due to 
begin manufacturing by Sep- 
tember. the location had not 


been finalised. The company 
was looking for an existing 
building. 

He said computer peripherals 
would be provided by tradi- 
tional suppliers, but added that 
the company would look into 
the possibility of buying equip- 
ment from Brazilian manufac- 
turers. 

Mr Manuel Parra, vice-presi- 
dent for Latin America and the 
Caribbean, said Compaq held 
around 12 per cent of the 
400,000-unit Brazilian personal 
computer market 


Battle for Hyundai site 


By Robert Gibbens sn Montreal 

Canada’s federal government 
and the state of Quebec are 
trying to find ways to re-open 
the Hyundai car assembly 
plant near MontreaL 

The South Korean group's 
C$400m (USSmim) plant was 
closed temporarily last sum- 
mer because of poor sales of 
the Sonata car. It was to be 
re-tooled for assembly, from 
mid-1995. of the 1996 Elantra 
for the North American and 
European markets. 

Hyundai, however, ipain- 
tains it can only build the 
Elantra economically in Korea. 

A weak Canadian dollar has 


driven up the cost of parts pur- 
chased in US dollars, and the 
North American Free Trade 
Agreement has raised duties 
on all imported parts. 

Hyundai said the Bromont 
plant would stay shut indefi- 
nitely. An Ontario wheel plant, 
meanwhile, will be shut down 
completely and sold. 

In Ottawa Mr Paul Martin, 
federal finance minister, said 
he had raised the Bromont clo- 
sure with the Korean govern- 
ment. “We’re actively seeking 
alternative uses.” he said. 

The Quebec government 
hinted it might be willing to 
help if Hyundai agreed to 
re-open the plant 


Linde acquires gasworks 


By Nicholas Denton 
in Budapest 

Linde, the German engineering 
concern, yesterday announced 
the acquisition of a Hungarian 
facility producing industrial 


The German group is to take 
over the air separation and 
oxygen production works in 
Dunaujvaros in central Hun- 
gary, previously operated by 
Dunaferr, the state-owned steel 
producer. 

Although the purchase price 
was not disclosed, Linde said 
the acquisition and other 
developments planned for 1994 
would take their total invest- 


ment to DMl25m (f73.5m) for 
Hungary and DM400m for the 
central-east European region 
as a whole. 

Linde outbid Messer Griesh- 
eim, the subsidiary of German 
chemical group Hoechst. to 
win the Dunaferr assets. The 
deal leaves the Hungarian 
industrial gases market 
divided primarily between the 
two German groups. 

Mr Gunnar Eggendorfer, 
Linde board member, said 
demand for industrial gases 
was expected to grow faster 
than the economy as a whole. 
He said Linde hoped to extend 
the use of the products made 
at the facility. 





Peugeot Finance International NV 
FF 500,000,000 
Zero Coupon Bonds due 1996 

MOTICfc IS l IKRERY lUVfcN rli.it in .tccnriLirux with Condition 5(c) 
r,i the Terms ami C.nJitiom ul rhe Bomb. ,l,c ,>30 
April 199*1 deliver to e.ich Bvmdlu'klcr one w.urint per rr 10 , 000 

W\ir"uw Arelemt Notice num b* surrendered un^cturr with 
.he T.ikm jpi-crUrtinfi t.‘ Hie Bonds entitling the holder thereof tu .me 
Wi.rr.mt per FF 10,000 priiicM ^ Bonds held w a|JT Paving 

Am listed Mow with .< copy in Hie Fiscal Agent not later than lO-W 
j.ii [London time) on the tilth busiru.-* day in Lmdnn, Pjm and 
LuxeniNii.ri; Prior t„ .he Warrant ^livct> Cbte. Failure W jrupwfr 
comply with rhe above will remit "> d»« BunJ/W.irmnc Account Norrec 

A-!”' I’Stu tv the W the BonJMJi fis!' K 

x * j i . French bank uf luoker auniunicu co nwlnuln 

■TfattS 

Sl.miillV.ndh-'l.icrs must elect to receive .iny Warrants loNrdJ iwJ 
' * | ' , [-..ndiriun 5(c) rhrouch nil account to be held in rhe 

Sa‘ta..nr Accor... r Norke bubni.n..Me Horn anyof the Puy.DK 

Agent* luted below: - | 

Fiscal Agent 

U inkcra Trust Company 
I App'.Ll Street 
DouJ^Ke 
Lvidm £C2 A 21 IE 

Paying Agents 

BjjiLeisTiOh. Ijnemknig S.A. Credit Subic 

1 4 Boulevard F.D. Btwvult ParaiepLicS 

L-24W LiwmhiutK 8001 Zurich 


ifcuhjiir Nj.lon.ik- Je I’.iru 
lolWcv.uJ ita hnliem 
7«v»r«i. 


0 


BankcrsTnist 
Corapwvy. London 


23rd March, 1994 


CENCOR LIMITED 

l Incorporated la Ibc RCpebfc trf Swob AXncal 
•.‘wafay Rrgi«rauo»rfc 01/013208 
(tpnorrty Cc o aa l Minis; Lotus CVspmOoa LisuJnl) 

PAYMENT OV COUPON NO 145 
(Otvklmd No 136) 

HOLDERS OP SHARE WARRANTS TO BEARER will receive payment on 
alter 30 March 104* at the rale of 0.97 161 p the jmuunl UecfcncU per shire, 
0.l4574p being South African non-resident durebofckrs' lu of 15% aprioxi 
surrender uTConpun No M5. 

Coupon* must be deposited FOUR CLEAR DAYS for iaepecrion before 
payment win he made: 

In London At the office of the London Secretaries of ibe Compjay 
30 Ely Place: London ECIN 6UA 

Id Park At Credit du Non! 

laSwftrerbnd A. Credit Suisse. Zurich: Union Bank of Switzerland. Zurith; 

5w«s Bank Corporator, Rule; or a any of their brandies. 
Carports belonging to brides resident in Great Briuin and Northern Ireland wiD be 

paid aa follow*: 


Amount of tlivUrml after deduction of Sooth African noo-reskicoJ 
durchoMen' ux of IS* 

Lew United Kingdom Income Tu of 5% on the Gross 
Ararat nl of the dividend of 0.97 161 p 


ftfnce 


0*2587 


004X58 

077729 


Listing Conns Can be chained frara the office of Ibe London Secretaries 
per pro GLN COR IU.K.j LIMITED 
Loudon Secretaries 
LI Baines 

MEly Place 23 Marsh IW1 

London EC IN HJA 

NOTE: 

Under ibe JuuHe tar r p ern cn l between *e Untied Kingdm and Ac HfftoAc of Scab Africa 
tbcSoadi Aligns scrwetnknt airs lAutJm * tax j p yfiuA l i m ihcifinidtad is ritcwibfc sse aols 
Igantf tfao timed Kifgdcrt Joyride in tespea of Ok driVleoi The deduction of ax at the 
iciSiml rate nf nleoloi 20ta ttprocau as ailnwantc ef mOl at ihcratrsf !$%« raped 
J Sixth ATncM wntnlot dunMifcn' tax. 

n» SfDB, must Id the divUcnd recchal tu be mined By Ibe mdtekhul ihmebuUci on my 
nm Ice hune Tai (upon h 0 97IMp H^pUsJ by die aamber of ifares bdd. 


Marine Midland 
Bank N.A- 
U.S. $125,000,000 
Ftoatioff Rale Subordinated 
Capital Notes due 1996 

For the tltnre months 23nl 
March. 1994 m 2)nl June. 1994 
the Nmi» will curry .in interest 
rate of 5.25% per annum wirh a 
ciaupun nmiHiiu uf LLS $174.17 
per U.S. $10,000 Nure and U.S. 
$670.83 per U.S. $50,000 Now. 
The relevant interest payment 
dire will be 23rJ June. I**M. 

Lta nlonilf fiaekei Stick Esdutw 


QBonkcn Trust 


CnoynTilaidan Agon Bank 


HMC MORTGAGE NOTES GPLC 
£140,000,000 
Class A 
and 

£7,000,000 
Class B 

Mort g age BacfcBdFloU nflRs tt 
Notes due September 2030 
Notice Is hereby given mst <or the 
i merest Period from March 21, 
1994 to ' Juno 20. 1994 tha 
CUsa A Notes and Class B Nows 
wl carry Interest rales Of 55.4. 
and B'4%, res pec ti v e ly. Die 
interea payable on the ratovani 
interest payment dale, June ZO. 
1994 tar the Ctass A Notes Ml 
be 1 1.339 .01 per £37,650 nominal 
amount, and tar the Ctass B Notes 
w» ba El. 558 22 per £100,000 
nominal amount. 

By The QBn KsAatUn Bak,RJL 
Undn.AgMBant 

March 23.1994 


21 


INVITATION FOR THE HIGHEST BID 
FOR THE PURCHASE OF THE GROUPS OF ASSETS OF 
MINAIDIS-FOTIADIS WOOL INDUSTRY SjL, OF ATHENS, GREECE 

ETHNIKI KEPHALEOU SA, Administration of Assets and Liabilities of i Skouleniou Str., Athens, Greece, in iM 
capacity os Liquidator of M1NIA1D1S FOTIADIS WOOL INDUSTRY S.A., 6 company whh hs tegbtered office in 
Athens Greece, fthe Company), presently under special It^uWalion aoconlmg to the onwisioiK of Section 46a of Law 
UJV2/1990, (as 5oppkmcBlcd by artidc 14 of Law 200Q/I99I), 

anaonnees a call for tenders 

for the purchase of any or all of the groups of assets mentioned below. 

BRIEF INFORMATION 

The Company was es tablish ed in 1943 and was in operation until 1988. when it wna declared bankrupt. On 21-5-19S9, h 
was placed under special liqiiicbuofl according to ankle 7 of Law I3X6/S3 and an IS-2-1994 under special liquidnliun 
according to the provisions of section 46a of Law 1892/90, as supplemented by article 14 of Law 3000/91. Its activities 
included the ma n ufa ctu ring, selling and export of woo) and blended fabrics. 

GROUPS OF ASSETS OFFERED FOR SALE 

1. A spuming and weaving mill m (he Athens area (surrounded by bkovaron St. N. Ionia Avenue S. V team Ion St. D. 
Ralli), consisting of several buildings, covering an area of 10.438 sq. m- trending on a pkri of approximately 6.100 
sq. ql and containing machinery, mechanical equipment and a limited amount of nock in rate. The company'? 
registered name is also being offered for sole, although » well as other assets, excluding web claims as have been 
assigned to third parties. 

2. A plot of land of approximately 617 sq. m. located beyond Ibc city pluming area, in the region of Konuuuko on the 
island of Salamma. 

3. A plot of land of approximately 70S sq. m, located in the same area as the previous one. 

4. A plot of land of approximately 4S7 sq. m., located beyond the city area, in the regain of Alilu on the island of 
Salamim. 

OFFERING MEMORANDUM - FURTHER INFORMATION: 

Interested parties may obtain the Offering Memoranda in respect uf the Company and its assets thereof upon signing a 
confidentiality agreement. 

TERMS AND CONDITIQN&.OF THE AUCTIONS 

1. The Auctions shall take place in accordance with the provisions of ankle 46a of Law 1892/1990, the terms and 
conditions set forth herein and the Terms and Conditions of Sale* contained in the Offering Memoranda. Such 
provisions and other terms and conditions shall apply irrespective of whether they are mentioned herein or not. 
Submission of binding offers shall mean acceptance of such provisions and other terms and conditions. Submission 
of offers in favour of third patties to be appointed at a later stage shall be accepted under the condition that express 
mention is made in this respect upon submission and that the offeror shall give a personal guarantee in favour of such 
third party. 

2. Bmrfbra Offers? Interested patties are hereby invited to submit binding offers, not taicr than 14th April 1994, at 1 1.0U 
am bouts, to the Athens Notary Public Mrs Ioanna Gavricllt-Anagnostalaki, at the following address: 18, Kdiou Sir. 
Athens, Tel: +30-1-361.97.28. Fax: +30-1-36151.91. Offers should expressly state the offered price and the detailed 
terms of payment (in cash or instalments, mentioning the number of instalments, the dales thereof and the proposed 
annual interest rate if any). In ibc event of not specifying a) the way of pay mem. b) whether the instalments bear 
Interest and e) the interest rue. then it shall be deemed that a) the offered {nice is payable Immediately In b) the 
instalments shall bear no interest and c) the interest rate shall be the legal rale In force (presently 32*» yearly). 
Binding offers submitted later than the above dale shall neither be accepted aor considered. The offers shall be 
binding until the adjudication. 

3. Letters of Grmronn-e: Binding offers must be accompanied by a Letter Of Guarantee, Issued, in accordance with the 
draft Letter of Guarantee contained in ibc Offering Memoranda, by a bonk legally operating in Greece, to remain 
valid until the adjudication- The amounts of the Letters of Guarantee must be as follows: (a) for Ibe cotton spinning 
and weaving mill in Athens area (1st Auction): Drs. 80,000.000. - (EIGHTY MILLION), (b) for the plot or (and in 
Koutsonko (2nd Auction): Drs. 300.000. - (FIVE HUNDRED THOUSAND), (c) for the plot in the same Region (3td 
Auction); Drs. 500000. - (FIVE HUNDRED THOUSAND). 

Letters of Guarantee shall be retained after the adjudication. In the event of oao-compliance whh the provisions and 
other terms and conditions referred to in paragraph 1 hereof, Ihe Leticia of Guarantee shall be forfeited as a penalty. 

4. Suhmnxlni in Binding offers together with the Letter of Guarantee shall be submitted in sealed envelopes. 
Submissions shall be mode in person or through a duly authorised ngpm 

5. Envelopes containing the binding offers shall be unsealed (successively as mentioned above, ic 1st Auction. 2nd 
Auction etc.) by the above mentioned Notary Public in her office, on 14th April 1994, at 14D0 hours p.m. Any party 
having duly submitted a binding offer shall be entitled to attend and sign the deed attesting the unsealing of the 
binding offers. 

& As highest bidder shall be considered the participant, whose offer will be judged, by over 31% of the -Company's 
creditors (the ‘ Creditors'), in their absolute dhciclion. upon suggestion of the liquidator, to be m the best interests of 
all of the creditors of the Company. Mention is made that for the purposes of evaluating an offer proposed to be paid 
in instalments, the present value thereof shall be taken into account, which shall be calculated on the basis of a 
discount interest at an annual rate of 22% compounded yearly. 

7. The liquidator shall give written notice to the highest bidder to appear on the date and place mentioned therein and 
execute the contract of sale in accordance with the terms contained In his binding offer and/or any other improved 
terms, which may be suggested by (he Creditors and agreed upon. Adjudication shall be deemed to take effect upon 
execution of the contract of sale. 

8. All costs and expenses of any nature in respect of the participation and the transfer of the assets offered hereby for 
sale shall be exclusively home by the participants and the purchaser respectively. 

9. The liquidator and (be Creditor* shall have no liability nor obligation whatsoever towards the participants in tela lion 
to the evaluation of ibc offers or the appointment of the highest bidder or any decision to repeal or cancel the Auction 
or any decision whatsoever in connection with the proceedings of the Auction. The liquidator and the notary shall 
have no liability for any legal or actual defects of (lie assets. Submission of binding offers dull not create any right 
for the adjudication nor the participants shall acquire any right, power or claim born this invitation and/or their 
participation in the Auction against the liquidator and/or the Creditors for any reason whatsoever. 

10. This invitaiioa has been drafted in Greek and translated into English. In any event Ihe Greek version shall prevail. 

To obtain the Offering Memoranda and any further information, please apply to the Liquidator^ attorney in Athens, Mr 
Nikoiaos Psaroudakis at 3. Voukonrestiou Str.. 10654 Athens. Tel: +30-1-322.18^9 and +30-1-325.4L40, Fax: +30-1- 
325.4 L 40. 


H 


This announcement appears as a matter of record only. 


HAM BROS BANK 

advised 

KF-Nordico AB 

on the merger of 


HI 



HI 


AB Gustavsberg 

One of Sweden’s leading manufacturers of Sanitary Ware 
and Bathroom Products with 

Sphinx 

NV Koninklijke Sphinx 

of The Netherlands 


HAMBROS BANK LIMITED 
41 Tower Hill London EC3N 4HA 

Member of IMRO and SFA 
Murch 199-f 


H 




Float Fjmnc&i Group 
usatoaooaaoo Ftadang h«m 
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Fa me tflra months S3 Kadi 199« to S3 

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oi+tampermuistf uwttan 

Bl USSKUB DM USSIOBD now 
Listed an me tuaeMt Seacx ExSianoe 

Agor* Mmgen ta*era«*|r rwl Concur, 


CITY j 
INDEX. 

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CTHE C I T Y*S BOOK M.A j ^ 

Itv M.vLvX tratm « xpicul hitAt - LUmuI md Spwtv Vvx J 
liwluc enl wi annua wloiM ChwuiB nil Ml JWi’ 
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Jardine Fleming 
cements position 
with $202m net 





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Duff Forecasts and Market Myths for 1994 

Tr-.o US doiiof will loot, dcriaben will continue; go'ct S most commcashcs 
won ! rise: iepan's economy a stock mc;kc-t wit; to v. cck. You aid 
NOT read that In Fu-', ‘or, Money - >ho Iconoc!o5"c Irvcstmcnl letter. 

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0962 879764 

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RIGGS NATIONAL CORPORATION 
US $100,000,000 

FLOATING BATE SUBORDINATED NOTES DDE 1996 
In accordance aririntoc pi u + toimis ot Uie Notes, notice La hereby given that for 
the pedod 22 March IBM lo 22 June 1994 the Notes wU cany a me of Imemt 
af5Kft per annum with * coupon amount aTUSS 134.27 


By Simon Hofberton 
in Hong Kong 

i Jardine Fleming yesterday 
cemented its position at the 
i top of Hong Kong's merchant 
banking league, posting a 166 
, per cent rise in 1993 net earn- 
ings to US$2Q2m from $76m in 
1992. 

The company - a joint ven- 
ture brokerage between Jar- 
dine Matheson and UK mer- 
chant bank Robert Fleming - 
is strongest In investment 
management, broking and cor- 
porate finance. 

Commenting on bis compa- 
ny’s results, Mr Alan Smith, 
executive chairman, said: 
“What I think these results 
show is this is Asia and this is 
where you should be.” 

Mr Smith sa id tha t for the 
past decade Jardine Fleming 
had made an average 60 per 


NEWS IN BRIEF 

Australia Air 
offered grant 
to move base 

The Victoria state government 
has offered a A$5m (US$3.5m) 
g rant, to Austr alia Air Interna- 
tional if the fledgling carrier, 
which hnids air service ri ghts 
to China, moves its headquar- 
ters from Sydney to Mel- 
bourne. writes Nikki Tail from 
Sydney. 

Australia Air was given the 
rights to weekly flights 
between Australia and Beijing 
last year, but has been unable 
to satisfy the International Air 
Service Commission that it has 
the necessary funds to start 
operating. 

The Victoria government's 
offer is co nd i ti ona l on a Afssm 
flotation of the airline during 
the next two months. 

Comalco NZ posts 
NZ$18m loss 

Comalco New Zealand, part of 
the Australian Comalco group, 
has made an after-tax Ires of 


This announcement appears as a matter at record only. 

$25,000,000 
Oilfield Equipment Credit 


(2D 


Joint Stock Company 

“YUGANSKNEFTEGAZ’ 

Nefteyugansk 


Provided by 


Bank for Foreign Trade of the 
Russian Federation 


Moscow 

As Agertl and Lender 


Russische Kommerzial Bank AG 


ZUrich 

As Lender 

STATE OIL COMPANY 


MS 


Moscow 

Served as Oil Marketing Agent 


SOVLINK-AMERICAN CORPORATION 

New York and Moscow 

Served as Financial 
Advisor to tfte Borrower 

March, 1994 


AIRCRAFT LEASE PORTFOLIO 
SECURITISATION 92-1 LIMITED 

jtaKXvnfttfMft ATNtrf sttboty m Jorieyt 

ILS^K M O&OO O Secured Circa A3 floating Rate Notea due Juno 1997 
Notice Is hereby given tfwt i he Rate of Interest ho* been Axed at 
4.6375*% and that the Interest payable on the relevant Interest 
Payment Dale June 23. 1994 in respect of U.S-S61.000 nominal 
Of the Notes wflf tie U-S-S7ZZ.93 and h respect of U.S530 500 
nominal of me Notes win be u.s.$36i .47. 


MantlZX 1994, London _ _ 

By Cttffiank. NA (Issuor Sendees), Agent Bank 071 BA WO 


WHY PA V' MORE FOR LE$S? 

Cuff PC QtniU :L TW.'/tJ 


QUOTE 

PC QUOTE 

GaKB HYPEfiPEED 



cent annual return on share- 
holders’ funds. In 1993, the 
return was 91 per cent on 
funds of $303m. 

year funds under man- 
agement more than doubled to 
$21.3hn on the back of strongly 
rising share prices in most 
Asian markets. 

Inflows were particularly 
strong in Hong Kong, where 
sales of unit trust products 
reached $3.7bn. A flood of 
applications at the beginning 
of this year forced the com- 
pany to place a te mp orary halt 
on new subscriptions. 

The company said that it 
achieved a higher share of 
agency broking business last 
year and was active in Introdu- 
cing new products, particularly 
derivatives and Euro- instru- 
ments. It claimed it held first 
position in the trading of “B" 
shares in Shanghai. 


NZJ18m (DSJlOm) for 1993, its 
deficit third in a row. writes 
Terry Hall from Wellington. 

Mr Kerry McDonald, chief 
executive, said prospects 
seemed to be improving as 
world demand for al uminium 
was growing and prices were 
recovering. He added that low 
prices were responsible for last 
year's loss, which followed a 
“massive" increase in supplies 
from the fomer Soviet Union. 

CSR buys stake 
in earthmoYer 

CSR. the building materials 
and sugar group, is to pur- 
chase a 51 per cent stake in 
AWP Contractors, a Western 
Australia earthmoving busi- 
ness, for A$30m (US$Zlm), Reu- 
ter reports from Sydney. AWP 
is 333 per cent held by Broken 
Hill Holdings. 

Israeli construction 
group float delayed 

The Israeli finance ministry is 
to postpone a share offering of 
Shiknn U'Pihiah, the state- 
owned construction company. 
Renter reports from Jerusa- 
lem. The flotation had been 
expected to bring in $337m. 


Worldwide 
accounting 
standard 
moves closer 


By Andrew Jack 

International accounting 
standards-setters are to work 
with their US counterparts to 
develop the reporting of earn- 
ings per share. 

The US plans to move away 
from its current disclosure of 
primary earnings per share 
towards the international 
emphasis on the disclosure of 
basic earnings. 

The International Account- 
ing Standards Committee 
(IASC) said it expects to issue 
an exposure draft standard 
later this year, which would 
lead to a final standard in 
1995. The US Financial 
Accounting Standards Board 
plans a similar timetable. 

The move represents a shift 
towards greater co-operation 
as standards-setters attempt to 
harmonise ffa»nefei repo rt ing 
around the world. 

It comes when the IASC is 
pressing for whole scale ratifi- 
cation of its standards by 
Iosco, the International Organ- 
isation of Securities Commis- 
sions, which could lead to 
companies using IASC stan- 
dards gaining quotations in 
stock exchanges. 

A number of the national 
accounting standards-settlng 
bodies, including those in the 
UK, Canada, US and Australia, 
are beginning to develop pre- 
lects jointly. 


Italian bank 
plans capital 
increase 

Cassa di Risparmlo delle 
Province Lombards (Cartplo), 
Italy's largest savings bank, 
plans a capital increase and 
part floatation. Router reports 
from Rome. 

Mr Sandro Mblinari, director 
general, said tire flotation 
would be aimed at institu- 
tional investors, clients and 
bank employees. 

“By the end of 1994, Cariplo 
wfll be on the bourse with a 
capital increase that will be 
dose to 20 per cent and worth 
not much less than L2,DOObn 
($1.19 bn) ,* Mr MoBnari said. 


THE KOREA-EUROPE FUND 
International Depository Receipts 
Issued by 

Morgan Guaranty Trust Company of New York 
INTERIM RESULTS 

The Directors of The Korea- Europe Fund Limited announce the 
unaudited results (or the six months ended 31 December 1993. 


Assets applicable to onlnaiy captal 
Net asset value per share 


Investment Income: 
Dividends 
Bond Merest 

Deposit Merest 
Total Revenue 
Expenses and Interest 
Deflbt before taxation 
Taxation on the revenue 


Deficit per share 


Al 31 December At 31 December 
1933 2982 

USS000 USS000 

2QL2Z2 14&3&2 

S7.02 SS.1Z 

Six Months Ended Sbt Mortis Ended 
31 QBCwnbarifflS 8LB— aatMB 
ussooo ass ooo 


107 
15 
122 
UB4 
912 
1Z 
823 
3^4 cents 


Over the six months to 31 December 1993 the net asset value of the 
Company increased by 27.4 per cent, compared with a rise of 15 per 
cent In ihe KSE Composite Stock Price Index In US Dollar terms. 
This outperformance was largely due to the Company's 
overweighting in smaller companies which outperformed the rest of 
the market 

The Majority of dividend payments by Korean companies are made 
in the first six months of the calendar year. As a result, the greater 
part of the Company's revenue will be received In the final six 
months of the current accounting period and there is a deficit of 
revenue after taxation for the period covered by thts statement 
The Interim Report wE be mailed to registered shareholders at their 
registered addresses on 4 AprS 1994. For the benefit of holders of 
depository receipts the Interim Results will be published In the 
Financial Times on 23 March 1994, and copies of the Interim Report 
wflf be made available from 4 April 1894 at the offices of Schroder 
Investment Management Limited, 85 Queen Victoria Street, London, 
EC4V4EJ. 

Depositary. Morgan Guaranty Trust Company of New York, Brussels 
Office, 35 av. des Arts. 1040 Brussels. 


LEGAL NOTICES 


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March 1904, m«ea dehdli of the debts they 
to he dee io then boa We cam. and 
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15 March 1994 


COMPANY NOTICES 



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Star TV changes tack to 
attract Asia’s middle class 


BySbwi Hotberton 

Star TV, News Corporation's 
Asian satellite television arm, 
is to change its business strat- 
egy rcuficaHy in an attempt to 
broaden its appeal to Asian 
viewers. ■ 

Mr Gary Davey, chief execu- 
tive, said Star would change 
from being a broadcaster 
which attempted to lure tile 
top S per cent of raw® in 

Asia to one which attracted the 

region's growing middle class. 
Star currently has an esti- 
mated 200m viewers in Aria. 

To achieve this, Mr Davey 
said Star would change from 
a predominately English- 
language broadcaster to one 
that offered viewers pro- 
grammes in their own -lan- 
guage. He said the change 
reflected Star's new manage- 


ment taking "a fresh but realis- 
tic look at the market”. 

Mr Davey, speaking at a 
media conference in Hong 
Kong, also foreshadowed the 
introduction, of pay-TV on Star. 
He said Star was about to 
launch pay-TV channels, 
although he did not specify 
their number or type. 

Until recently it had been 
thought that the formidable 
problems of fee collection 
across the vast and varied ter- 
rain which Star covers would 
prevent the early introduction 
of pay-TV. 

Mr Davey underlined Star 
TVs appreciation of the spe- 
cial cultural and political cir- 
cumstances in which it was 
broadcasting. 

Star would “pay greater 
attention to local needs, tastes 
and sensitivities.” he said. . 


“In this region we fully 
recognise our responsibilities 
to cater to local needs. In 
a region with fer greater pollti. 
ial and cultural diversity than 
Europe, any broadcaster must 
be conscious of these sen- 
sitivities and operate accord- 
ingly.'’ 

Earlier this week it was 
announced that the BBC would 
cease transmitting its World 
Service Television news on 
Star TVs “northern beam”. 
This covers China. Mongolia, 
Hong Kong. Taiwan, Korea and 
Japan. „ 

Since his move to Hong 
Kong. Mr Rupert Murdoch, 
News Carp's chairman, has 
sought to impress China's 
Communist rulers and other 
Aslan political leaders. He 
hemes that by sacking the BBC 
his cause may be served. 


HK hotel group static at $40m 


By Louise Lucas tii Hong Kong 

Mandarin. Oriental Inter, the 
hotel group controlled by Jar- 
dine Matheson, yesterday 
announced unchanged net 
earnings of US&OJ&n for 1993, 
compared with $4Q.3m the pre- 
vious year. 

Improved contributions from 
the Hong wnng hotels were off- 
set by weak performances in 
most other mar k*** , the com- 
pany said. 

The results fell short of 
expectations, and the group 
has been hit by a fall in 
hotel visitors. For 1989, 


profits totalled HX$392.3m 
(US$50 -8m)- 

Some 61 per cent of profits 
before interest and tax came 
from Hong Kong and Macao 
last year, and Mr Robert Riley, 
manag in g director, earmarked 
the colony as one of next 
year's better performers, due 
to shrinking supply as hotels 
are pulled down and converted 
into office blocks. 

Mr Riley said the average 
room rate at the Mandarin Ori- 
ental in Hong Kong was lower 
than it was in 1989, during 
which time inflation in the col- 
ony had risen more than 50 per 


cent This year he sees rates 
outpacing inflation as the sec- 
tor attempts to catch up. 

Mr Simon Keswick, chair- 
man, said: “The company’s two 
hotels In Hong Kong should 
benefit from stronger demand 
in 1994. 

“While the immediate out 
look is mixed in the group's 
other markets, the groundwork 
has been laid for future growth 
and the prospects for Mandarin 
Oriental remain encouraging.'’ 

Earning per share were 6 US 
cents, against 534 cents. Ihe 
group Is maintaining a 5 cents 
a share dividend. 


Discounters hurt Marui profit 


By Emlko Terazono 
In Tokyo 

Marui, the big Japanese 
department store group, suf- 
fered shar p fens in non -consoli- 
dated profit and sales for the 
year ended January as con- 
sumer confidence continued to 
wane. 

The retailer said parent pre- 
tax profits fell 14.9 per cent to 
Y29.8bn ($280m), while sales 
declined 6 per . cent to 
Y506Rbn. 

Japan’s department stores 


have been bit by competition 
from discount retailers, with 
consumers opting for value at 
the expense of higher margin 
items. Mr Tadao Aoi, Marui's 
president, said the retailer will 
fry to prevent further declines 
in sales. 

A fall in interest income due 
to the foil in Interest rates also 
hurt profits, with after-tax 
profits down 12 per cent to 
Y165bn. 

For the current year, Marui 
expects profits to decline fur- 
ther. It predicts a 128 per cent 


fall in pre-tax profits to Y26bn 
on a 0.6 per cent rise in salesto 
YBlObn. 

■ Aoyama Trading, the Japa- 
nese retailer of discount men's 
suits, said it win tie up with 
J.C. Penney, the leading US 
department store, to set ap a 
men's casual wear chain In 
Japan. 

Aoyama plans to open 
the first store in the autumn 
and expects to expand the 
chain to 50 to 70 stores 
during the year ending March, 
1996. ' 




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COMPAGNIE BANCAIRE 
£300.000,000 
Floating rate notes due 
1995 Initial Tranche 
£200,000,000 

For the Interest period 21 
March 1994 to 21 June 1994 
the notes will bear interest td 
5.25% per annum. Interest 
payable ofi 2/ Jane 1994 per 

5100,000 note wOi amount to 
5J.32129 

Agent: Morgan Guaranty 
Trust Company 

JPMorgan 


U.S. $125,000,000 


American Express Travel Related 
Services Company, Inc. 

(incorporated in Nsw YWg 

Hosting Rate Notes Due 1998 




1994 Wfll be US. SH021 „ 

ritow'S“s'MS r 

By:^C»«»QH«lhaltma«ik 1 NJL - 

London, Principal Paying AgontondAgant Bank CHAS8 

March 23, 1994 - %# 


















INTERNATIONAL CAPITAL MARKETS 


US Treasury prices see-saw ahead of Fed 


By Frank McGuity in New York 
and Antonia Sharpe In London 

US Treasury bond prices 
see-sawed early yesterday as a 
Federal Reserve committee 
opened a policy -making session 
that was expected to coincide 
with a move to tighter money. 

Later, Federal Reserve Board 
chairman Mr Alan Greenspan 
said central bank policymakers 
had decided to increase' pres- 
sure on bank reserves in order 
to raise interest rates. 

“This action is expected to 
be associated with a small 
increase In short-term money 
market Interest rates," Green- 
span said. 

By midday, the be nchmar k 
30-year government bond was 
& higher at 91&, with the yield 
slipping to &938 per cent. At 
the short end, the two-year 


note was £ better at 99ft. to 
yield 5.052 per cent 

Early on, bond traders were 
content to remain on the side- 
lines amid the uncertainty sur- 
rounding the outcome of the 
meeting of the Federal Open 
Market Committee. 

With no indication of a pol- 
icy change during the morning 
session, however, bonds amw! 
the yield curve moved moder- 
ately higher in lig ht trading. 

The ga in s seemed to suggest 
that the market h g d already 
priced an increase in the Fed 
Funds rate, currently standing 
at SJ25 per cent, into Treasury 
prices. 

But the overriding nervous- 
ness of the market was 
revealed just before mid-day. 
when a Fed spokesman said 
the FOMC had not yet dis- 
cussed monetary policy. 


The news forced the long bond 
to give back all its session 
gains In a matter of Tnimrins 

Soon thereafter, it regained its 
stride and began moving up 

ag ain. 

Meanwhile, the FOMC ses- 
sion was complicating an after- 
noon auction by the Treasury 


GOVERNMENT 

BONDS 


of $17bn in two-year notes, to 
be followed by the sale of 
Slibn In five-year securities 
the next day. 

■ European government bond 
markets pared their gains yes- 
terday afternoon following 
early indications that the US 
Fed might leave monetary pol- 
icy unchanged. 


Analysts said that the Fed's 
decision to keep the markets 
guessing about the direction of 
its monetary policy came as a 
surprise, since most traders 
had expected the Fed to sanc- 
tion a rise of a quarter-point in 
the Fed funds rate to IL5 per- 
cent. 

The lack of early action by 
the .Fed extended the markets' 
long vigil for evidence that 
European bonds were in the 
process of d&coupVing from the 
US market 

Analysts said that had the 
Fed decided to leave monetary 
policy unchanged, it would 
have been easier for the Bund- 
esbank to cut its repo rate 
today. 

The market bad expected the 
Bundesbank to lower the rate 
by up to eight basis points 

from 5^8 per cent. 


■ UK gilts generally outper- 
formed other European govern- 
ment bond markets, supported 
by hopes of favourable infla- 
tion data for February today. 
The market expects a monthly 
rise of 0.4 per cent in the retail 
prices index, bringing the 
a nnua l rate, excluding mort- 
gages. down to 2.6 per cent 
from 2.8 per cent in January. 

Media reports of a Gallup 
poll showing consumer confi- 
dence at a four-year low also 
supported gilt prices since the 
findings kept hopes of a fur- 
ther cut in interest rates alive. 

The June long gilt future on 
Liffe traded at 109JJ in the late 
afternoon, up g on the day, oil 
the day's high of I09JJ but well 
up on the worst level of 109ft. 

Analysts expressed disap- 
pointment at the size of the 
Bank of England's first float- 


meeting 

mg-rate gilt for 15 years. 

They had been confident that 
the novelty value of the issue 
would encourage the Bank to 
set the amount at between 
£3bn to £3.5bn. However, the 
Bank chose to raise only 
£L5bn, indicating to the war , 
bet that it was comfortable 
with its funding programme. 

The other terms of the issue 
were in line with market 
expectations - a minimum 
price of S9.50. a coupon of 
three-month Libid less '/■ point 
and a five-year maturity. 

■ German government bond 
prices see-sawed after news or 
the Fed's inaction. The June 
bund future on Liffe stood just 
under a half-point higher at 
96.45 in the late afternoon, 
below the day's high of 96.60 
but off the low of 95.84. 


Turkey’s foreign debt 
rating lowered by S&P 


Poland considers borrowing over $lbn 


By John Murray Brown tn 
Ankara and Tracy Corrigan 
hi London 

Standard & Poor’s has lowered 
Turkey's foreign currency debt 
rating from trlple-B minus to 
double-B, taking the country's 
credit below investment grade. 

Turkey was also placed on 
Credit Watch suggesting that 
its rating may be lowered fur- 
ther. S&P cited delays in imple- 
menting an austerity plan to 
tackle Turkey's economic cri- 
sis. 

Earlier this week, the Trea- 
sury came close to defaulting 
on some $415m-worth of lira- 
denominated government 
bonds issued by the state- 
owned Public Participation 
Administration. 

Banks involved say the PPA 
settled the amount in full, but 
only after a seven-hour delay. 
This was too late for many 
banks to transfer the funds 
electronically, so they incurred 


the cost of overnight borrow- 
ing to cover their positions. 

Government finaiywi are fac- 
ing a growing liquidity short- 
age. However this is the first 
time Turkey has appeared 
close to a default. 

The crisis came after the 
Treasury refused to provide 
finance, forcing the PPA into 
the interbank markets for an 
estimated $200m. This resulted 
in a scramble for funds push- 
ing up interbank rates, which 
yesterday touched 450 per cent 

The PPA has an estimated 
$lbn of outstanding revenue 
sharing bonds. The two-year 
bonds are lira-based, dollar- 
indexed and redeemable at the 
central bank firing rate. 

Bankers say it is moot point 
whether they are considered 
foreign or domestic liabilities 
but the incident renewed bank- 
ers’ concerns about Turkey's 
ability to service its foreign 
debt, which was about $64hn at 
end-1993. 


By Conner Mfddetmann 
in London and Anthony 
Robinson In Warsaw 

Poland plans to borrow over 
$lbn on the international capi- 
tal-markets following the suc- 
cessful conclusion of its Lon- 
don Club negotiations for a 
reduction of up to 45 per cent 
in its $13bn commercial bank 
debt earlier this mo nth. 

Mr Henryk Chmeliak, the 
acting finanm minister, told an 
FT conference in Warsaw that 
the Polish government was 
exploring the possibility of 


foreign bonds now that the 
London Club agreement has re- 
opened Poland’s access to 
international markets on nor- 
mal commercial terms. 

According to Mr Ian Hume, 
director of the World Bank’s 
Warsaw office, Poland needs 
higher foreign investment to 
fund the infrastructure invest- 
ments needed to underpin sus- 
tained rapid growth. But the 
bulk of Poland's current $L4bn 


to $l6bn annual investment 
will continue to be financed 
domestically, he said, with an 
increasing proportion coming 
from domestic bank lending, 
re-invested profits and other 
□on-bank fim»nrt» 

At the same time, the rela- 
tive importance of funding by 
international financial instftu- 


INTERNATIONAL 

BONDS 


tions will decline, while foreign 


Meanwhile, the Eurobond 
market’s tense vigil for the US 
Federal Reserve’s Open Market 
Committee meeting kept issu- 
ers and investors sidelined. 
Although the Fed’s afternoon 
open-market operation indi- 
cated an unchanged policy 
stance, traders still expect an 
imminent ti ghtening and pre- 
dicted that, until it arrives, the 
primary market will remain 
deadly quiet 


What little demand there is 
remains focused on floating- 
rate notes, which are less sen- 
sitive to interest rate uncer- 
tainty than fixed-rate bonds. 

This encouraged the 
Southern Australian Govern- 
ment Finance Authority to 
issue $500m of two-year FRNs 
paying three-month Libor flat 
. with a par issue price. 

While some traders said the 
pricing was on the tight side, 
an official with lead manager 
Swiss Bank Corporation said 
the deal met solid demand, 
benefiting from the recent 
“demise of the fixed-rate mar- 
ket” and the recent build-up in 
cash by money market funds 
and bond investors looking for 
short-dated investments. 

By late aftemoon,it was trad- 
ing around 99.95, be said. 

• Germany's Landwirtschaf- 
tliche Rentenbank yesterday 
signed a Euro medium-term 
note programme worth $ 2 bn, 
arranged fay Merrill Lynch, and 
plans to issue an inaugural 
benchmark Eurobond within 


the next few weeks, it said. 

The bank is a central refi- 
nancing institution for the Ger- 
man agriculture and food 
Industries, channelling loans 
through commercial banks. 
S&P recently assigned a 
tripIe-A rating to its long-term 
debt It is a frequent borrower 
in the German domestic mar- 
ket, where it has DM2l.5bn of 
bonds outstanding. 

• Moody's has upgraded to 
A3 from Baal the long-term 
debt ratings of the Birming- 
ham Midshires Building Soci- 
ety, citing the company’s 
improving profitability and 
financial fundamentals. Some 
£200m of debt is affected. 

Moody’s has also placed the 
credit ratings of the three UK 
mortgage-backed securities 
under review for possible 
upgrade. They are: Collateral- 
ised Mortgage Securities (No 
4), rated Aa3; Platform Home 
Mortgage Securities No 1 pic, 
rated Aal; and Stars 1 pic, 
rated Aal. Around £780m is 
long-term debt Is affected. 


direct investment win continue 
raising $ltm to $L5bn through to rise sharply, he added. 


Credit Agricole in 
venture with Lazard 


By Tracy Corrigan 

Credit Agricole and the Lazard 
group have set up a joint com- 
pany specialising in structured 
finance. 

Credit Agricole-Lazard 
Financial Products, based in 
London, will offer a wide range 
of financial techniques to large 
international companies. 

Unlike the financial products 
subsidiaries set up by CS First 
Boston and Merrill Lynch, the 
unit is not designed as a 
vehicle for trading derivative 
instruments. 

An increasing proportion of 
corporate finance, including 
mergers and acquisitions busi- 
ness, now involves structured 
transactions, often using deriv- 
ative instruments. 

Mr Edouard Stem, a partner 
of Lazard Frtres, cited Via- 
com's $9.5bn agreed takeover 
of Paramount, which was 
helped by the offer of contin- 
gent value rights, structured 


using derivatives, to Para- 
mount shareholders. Lazard 
was Paramount's adviser. 

In the past, Lazard has used 
other houses for derivative 
transactions. 

Credit Agricole. France’s 
largest bank, is already a sig- 
nificant participant in the debt 
and derivative markets, but 
has not been active in corpo- 
rate finance. 

Under the partnership. 
Credit Agricole will provide 
the necessary capital and trad- 
ing muscle, while Lazard will 
provide the client list and cor 
porate finance expertise. 

The amount of capital pro- 
vided for the joint company 
was not disclosed, but 75 per 
cent is provided by the Caisse 
Nationaie de credit Agrlcolc 
and 25 per cent by the Lazard 
houses of London. Paris and 
New York. 

The board of directors is 
made up equally of representa- 
tives of the two shareholders. 


Seoul to ease domestic 


company finance rules 


South Korea plans to ease 
rules on domestic company fin- 
ancing through securities mar- 
kets and allow securities 
houses to expand their 
operations. Renter reports 
from Seoul. 

From April 1, manufacturing 
companies and small and medi- 
um-sized companies will be 
able to issue unlimited 
amounts of corporate bonds. 

the finanrp ministry anirf. 

Manufacturing companies 
will also he free to raise capital 
via rights issues, while securi- 
ties firms will no longer need 
prior approval to relocate 
branches, change names or 
Invest in other brokers, the 
ministry lya jd- 

ft* IU* 

ni piurvuh kUV illsmi**? uiua- 

istry sets limits on total corpo- 


rate Issues for a month. There 
are similar restrictions on 
rights Issues. 

In addition, the government 
will no longer require institu- 
tional investors to buy more 
shares than they sell or make 
capital contributions to the 
stock market stabilisation 
fund. 

To encourage overseas port- 
folio investment, the ministry 
will adopt a “negative system”, 
in which securities companies 
will now be able to engage in 
all foreign exchange rtoniing g 
except for those prohibited by 
law. 

Currently, the ministry has a 
“positive system” which bans 
all offshore portfolio invest* 


ted by the law. 


I WORLD BOND PRICES j 

BENCHMARK GOVERNMENT BONDS 

Rad Days Week Month 

Coupon Date Pries change Yield ago ago 

Italy 

■ NOTIONAL ITALIAN OOVT. BOND (HIP) FUTURES 
(UFFEJ* Lira 200m lOOlhs of 100K 

FT-ACTUARfES FIXED INTEREST IIHXCES 

Price Indteaa Tue Day's Mon Accrued 

UK Gat3 Mar 22 change K Mar 21 Merest 

xd aC5 
yld 

— Lore coupon yMd— — Mmfiun c<**Jan yMd — 
Mar 22 Mar 21 Yr. ago Mar 22 Mar 21 Yr. ago 

— Wgh coupon yMd — 
Mar 22 Mar 21 Yr. ago 


Australa 


9.500 

08AM 

114.6900 

+0380 

7.14 

724 

089 

Betgun 


7250 

0404 

B9J5600 

♦0270 

720 

099 

088 

Carada* 


Hsrvi 

06AM 

92^000 

-0.100 

7.60 

7X4 


□anmartt 


7JM0 

12AM 

101.1000 

♦0150 

BBS 

058 

049 

France 

STAN 

6.000 

05/96 

107^750 

♦0130 

5.78 

6.70 

5.42 


OAT 

5.500 

04AM 

93.1200 

♦022 0 

6.45 

015 

005 

Germany 


6.000 

DBAS 

97*900 

♦asso 

624 

018 

oao 

Italy 


1500 

01AM 

94.4900 

♦0340 

927T 

032 

073 

Japan 

No 119 

4.800 

06/99 

1056710 

-0050 

152 

148 

3.16 


NO 167 

4500 

06/03 

101J6Q0 

-1200 

429 

4.07 

3X9 

Netherlands 


5.750 

OIAM 

853600 

♦0480 

&40 

Oil 

628 

Spain 


1OJ0O 

10/03 

11CL6500 

♦0650 

8.81 

087 

036 

UK Gilts 


6.000 

0BIBB 

97-04 

+11/32 

065 

5X8 

018 



0.750 

11AM 

96-00 

+17/32 

726 

7X9 

078 



9.000 

1QAIB 

113-02 

+23/32 

751 

724 

7.03 

US Treasury 

>■ 

3A7S 

02AM 

95-04 

+4/32 

056 

046 

626 



&250 

08/23 

91-09 

+6/32 

096 

820 

081 

ECU (French QtreQ 

ft 000 

04AM 

817200 

- 

088 

057 

066 


Open Sett price Change Hgh Low EsL voJ Open lot 
Jun 109.30 11029 ^006 11070 10030 46819 98528 

Sep - 10884 4066 0 6 

■ ITMJMN GOVT. BOND (Em 1 } FUTURES OPTIONS (UPFEJ LkaZOOm lOOths of 100% 


Softs 

Price 

11000 

11060 

11100 


Jun 

. 2*1 

£38 

2.11 


CALLS 


Sep 

£32 

300 

288 


Jun 

282 

287 

282 


PUTS 


Sep 

3.48 

3.74. 

482 


i dosing, -Naur Ytt* affl -day 
t Grow mud -ftU GndudnQ vANnUbg « 
ntecs: 118, UK In SBvfc, An ki dec im al 

US INTEREST RATES 


Yttotat Locrt mMt tfraidvd. 

; « its par cm by ian*M4 

Source; MMS MmtfMtf 


EM. WL UUL QMs 24 SB BP 3377. Ptwtoul city's apm fell, Cato 48881 Pub 50087 


Spain 

■ NOTIONAL SPANISH BOND FUTURES (MEFF) 


Lunchtene 
irate . 


Bnffer loan rata . 
fttlwto. 


MJkwtaaltatanentat- 


OPB KttA — 
• I’m mud _ 
5 Tlra srafe- 
lh Sc north _ 
- Oaayaar 


Trenuy BUs and Bond Yields 
181 Two year. 


33B nmm*- 
170 Rwjnr- 
«JH UKycsx 
4.40 30-ywr 


387 

548 

883 

8JM 

883 


Jim 

Sep 


UK 


Open SeBprice Change High Low EsL «oL Open InL 
8080 100.48 4081 100.75 99-75 40848 103803 

9988 - - 125 


■ NOTIONAL UK QH-T FUTURES QJFFE)' E50800 32nds of 100% 


BOND FUTURES AND OPTIONS 

Franc© 

■ NOTIONAL FRENCH BOND FUTURES (MATTF) 



Open 

Sett price 

Change 

High 

tew 

Eat ml 

Open hit 

Msr 

110-13 

110-27 

+0-03 

110-28 

110-12 

293 

11187 

Jun 

109-10 

109-28 

+023 

110-00 

109-05 

65897 

151200 

Sep 

108-16 

109-00 

+0-23 

108-16 

108-18 

10 

107 


■ LONG CULT FUTURES OPTIONS (UFFE) 530,000 64ths Oi 100% 


Mar 

Jun 

Sep 


Open 

Soil pries 

Change 

High 

Low 

Eat voL 

Open htt. 

StnKfl 

Jun 

124.00 

12428 

+004 

124.76 

123.96 

83.935 

64273 


123.48 

123.78 

+0.04 

12422 

123X6 

203.442 

143224 



122.78 

123.06 

+0.06 

123.42 

122.76 

1,547 

12256 

in 

1-23 


CALLS 


PUTS 


Sep. .• 
2-30 
2-10 
1-48 


Jun 

1- 30 
1-60 

2- 31 


S«P 

2- 39 

3- 10 
3-48 


Apr 

-— CALLS 
Jun 

Sep 

Apr 

— PUTS — 
Jun 

Sap 

1.19 

1-95 

200 

036 

121 

1.9* 

058 

1.48 

- 

078 

1JB3 

242 

025 

0.99 

- 

137 

2.10 

- 

0.08 

004 

- 

- 

279 

- 

002 

036 

- 

• - 

3.54 

- 

1 27290 

PWs 23288 . 

Previous day's epan Jnu Cato 3605*0 Puts 28097*. 


Em. vcL total. Cato S538 ftto 3100. Previous day's opan W. Cato 74023 Puls 80831 


Strfte 

Pries 

123 

124 
128 
128 
127 


Germ a ny 

■ NOTIONAL QERMAN BUM> FUTURES DM2S0800 Utah* of 10W 

Open Soli price Change High LP* 

95.92 9880 *083 9880 95.84 

95.72 »24 4083 96-2Q 95.72 


Ecu 

■ ECU BOND FUTURES {MAUF) 


Jun 


EsL vd Open M. 
180687 183626 

202 5096 



Open 

Sen price 

Ctenge 

Htfi 

Low 

Mar 

11042 

11074 

+006 

117.00 

118.42 

Jun 

89J» 

9012 

+014 

9030 


US 







EsL voL Open InL 
2.183 5.787 

1.118 5830 


■ US TREASURY BOND FUTURES (GOT) $100,000 32nds of TOOK 


■ MW> FUTURES OPTIONS (LIFFE) DM250800 potoM n4 1QOW 


Strike 

Price 


9700 

8750 


Jun 

CALLS 

Sep 

Jun 

Sap 

1.15 

1J37 

1.15 

1.63 

091 

1.17 

1.41 

1.93 

071 

028 

1.71 

224 



Open 

Latest 

Changa 

Wgh 

tew 

ESL mL 

Opan hit 

Mar 

109-06 

109-13 

+0-05 

109-19 

109-02 

0907 

19205 

Jui 

108-09 

108-18 

+0-04 

108-24 

108-03 

262356 

370383 

Sep 

107-16 

107-22 

♦0-07 

107-27 

107-16 

3.677 

39250 


E*L tout. Cato 15128 PUB 24774. Previous day's open W, Cols 20231 Pu» 217820 

■ NOTIONAL MEDIUM TSW GERMAN MOT. BOND 
pirea ifFEl* DM250.000 lOOttW IPO* 


Open Sett price Ctmge Htfi Lew EsL ml Open W. 
10081 10082 +022 10085 10081 85 2816 


Japan 

■ NOTIONAL LONQ TERM JAPANESE GOVT. BOND FUTURES 

(UFFQ VI 00m lOOtfw of 10086 

Open Close Chongs High Low EW. ml Open trrt. 
Jun 10983 - 10980 10980 1679 0 

- LIFFE eeobacti tnxtad on APT. M Open irisrest Dpt. are tor tamtam cby. 


UK GILTS PRICES 


itatos in wafl went *»- 


1983/94 — 
HpB las 


Hotoa 


„ YWd _ _1993/94_ 

U fled W<*S+er- Hgfr Uw 


(Mb 


„rW_ _ 19B3A4 _ 

(i) BPrtaE +nr- Ntfi Uw 


aow (Uni w a me vwd 

&rtl3*Wel904____ 1X33 
Treat Iflpcliv 1994#_ 989 

te*H2%flCl»* - 12,12 

Trees 

1 ape 1995 1184 

EH»3ietton-% 388 

10*41*19® 883 

Tick 12%(* 1995#— 1183 
14pc 1986 1223 

isikibbs# 1288 

BrtiSUeiwS— iiJfl 

CoomUnlDpc 1898 — &U 
Item 13%pe 1097# — llri 

BsftltJltfelMT 3.44 

TIES SlrfC 1987# 8.16 

EjWi ISpC 1897 . 1183 

UPC 13»-~- 5® 

Tmsi 7%]* , *®#_— - 788 

TiSBWd*M9M»8- MB 

idpeSIH 11.16 

Tn»io>2K'flfttt «■*! 

Ere* 12»199B — WOO 

anfepc 199*4 Ml 


RMtontoMTton 

EaS 12I4PC 1999 1005 

Treat 10*6**999 J»1 

TwaEpc 1999 ft 018 

CMM IOVipc Iflflfl- «•£ 

9pc20D*4 0® 

Trees tape BW 1JII 

rtpsSOOl— tJS 

7pe '01 

TpeW A- 7-OjJ 

Stipe 2002. »■£ 

tornom 7» 

tape 2003 M4 


585 100* 
504 101* 
439 103*8 
43B 10ZH 
194 105(2 
587 9751 

522 10BJS 
538 111*2 
550 I14B 
SJ4 1184 
5.76 114% 
804 U9B 
8.16 118 
831 Ilia 
835 1074 
&50128HN 
638 11® 
6.5310312* 
541 101U 
884 12513 
6.73 rays 
SJJ8 120 
880 110|] 


687121** 
8.91 1154 
884 3/ A* 
699 1141) 
6.9S 10Uf 
734 1284 
731 I14U 
7.U 99A 
t.ib m 

7.40 114U 
731 UH4 
7.44 117£ 


*4 

+4 

+4 

+4 


& 

£ 

+4 

+A 

+4 

*& 

+41 


1094 1004 
10511 10 1 A 
1104 1034 
iwi 1024 
TUB 105(1 
98 94 

1094 i«B 
1184 I” 1 * 
1»»* 1MB 
1254 IMA 
1204 H*H 
1184 1084 
1W4 »174 
11411 1104 
1104 1054 
inu iwA 
114U lOfti 
1084 991i 
1024 97B 
1314 1254 
14*1 VBA 
1204 H84 
1184 1081 


1284 1204 
1214 11*1 
lOlii 964 
1214 1124 
1184 108 

136M 1254 
1224 109B 
mad ms, 
514 «« 

1284 H»4 
11311 97A 
127A 1084 


Trr* 11*0* 20m -< — 
Peetoig 3*zpo W 4 

cmntoonv 1 a*am_ 

TnasOlmcZOIKtt 

B4PC20MA 

Caw 9 *2 PC2DQ5 

Ten I24pe 2003-5 w— 

74pc2raatt 

8X208-8# 

TTBJS 114x2003-7 — 

Tress 8*21* 2007# 

134JC W-8 

Tim Bpe 2008# — - 


948 7AT IZIJi 
LSI Ml 774 

828 7J6114{i* 

im 728 88 

703 73B 98 

825 7.477754* 

X45 771 1324 
738 7.43 USA 

779 7JZ19ZBJ8 
838 770 I25R 
734 TM toft] 
888 7721395* 

798 7301194^ 


*& USB 
+4 8» 
+ii 125U 
+& 1054 
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+H 1 
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+4 1114 
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+4 ISIfl 
124H 


1M4 

8TJ 

1054 

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Wit 

1054 

12*4 

9*B 

9*ti 

11*! 

074 

1314 

HJ14 


Ntoe-UNwl « 

TiBL2pe-94 (1024 

2PC96 prat 


44PCV8#— (' 

2*jjcin 
24pc'03 
44KTM# — 0 

2set8 gB St 231 818 174U 

24x18 (78ft 118 335 157 A 

24*11 (743) 820 337 163(2 — T 


2) 124 139 1354 T 

129 144 1444 


1164 +S 1294 16 _ 
1154 4 13612 1034 



retool t 
1945.1 


Tress 8pc 2008 

Trees 6 l/4pe 2010 

CBS* 9peLs 2011# 

1*81 ft* 201 2# 

Treat 54pe 2006-12#- 

neu 9pe 2013# 

74*2013-15# 

Tree* 64 pe 2017# 

&em3pe't3-T7 


748 

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742 

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+H 

8U 

790 

75* 

114 


T2EB 

TM 

754 

11*14 

+il 

127H 

178 

732 

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1171, 

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743 

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841 

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92.1 

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1004 

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Matos 


-to*- 

M Had Price? »tr- Ngb tew 


AManDBl142010— . 

Man Dev 1 Wipe 2009— 

Sima Il4pc 2012 

fetond C*i 84x18—. 


Const* 4pc. 


wartraoaiaic# 

C0m5i2flC-8IAR.___ 
HaUptNAL - 

Coreto 24x — 

Treat. 2*a* — - 


7 St 

- - SOft 

♦ft 

to 

750 

- *8 ft 

+*1 

s*B 

538 

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+A 

71 

733 

- 37MU 


««*. 

7.71 

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♦ft 

58*2 

732 

- 31 ft* 

♦ft 

37*8 


974 

■25B 


lapow-s. 

Unto (toebacISK 201 K 

Lstdsl34pc2D08 

Livarpael34pcfted. 

^ UCtoetONt 

4 
3S4 

2*1 

2711 UaMBEttoSlfepcMIB 


833 738 1285 
8*8 735 - 12*4 
835 832 130 

738 - 1084 

835 - 1014 


114x2007- 

M»lW.3psV 

iruUi /unto 34x2021. 
44pcL202* - 


1151 

_ 

1« 


130 

0l7S 

052 

834 

1S3U 

1*01* 

♦B 

170ft 

149% 

164 

- 

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.. 

44% 

833 

— 

38 

. , 

40*9 

aw 

130 

t» 



126% 

41* 

7.10 

72*a 



78 

- 

330 

1*1 


150% 


30B 

128 

, , 

1*5% 

11.15 

- 

148 

— 

159% 


1 Up Id 5 years #3] 

2 5-15 yeara (34) 

3 Over 15 ynent (99 

4 knadeemablw (H 

5 AS stocks (83) 

fridsx-Dnked 


G UptoSyaroO 
7 Over 5 years (11) 

B Al stocks (13) 

Debentures end Loans 


12057 

♦0.14 

12040 

159 

238 

5ym 

066 

073 

658 081 

OSS 005 7.02 757 

7.12 

15153 

♦037 

15048 

1.61 

275 

IS yn» 

7X2 

7.48 

750 752 

758 020 7.79 753 

040 

17021 

♦058 

18958 

1.18 

353 

20 yre 

756 

750 

OOI 754 

750 839 750 7.85 

049 

19702 

+0l32 

19039 

3.03 

1.47 

hrod.T 

759 

7.72 

042 



14727 

♦033 

148.78 

1.70 

324 













- 

Inflation Mi 

inflation 10% 








Mar 22 Mar 21 Yr. ago 

Mar 22 Mar 21 Yr. ago 


18850 

*0.02 

188X8 

-0.16 

253 

Up Id 5 yre 


275 

275 233 

153 152 1.41 



100-41 

180.15 


♦ 0.02 

♦ 0.02 


16037 

lean 


062 

n 


1.41 


337 337 3.42 


331 


331 


333 


' •— 5 user ytebf — 15 year yield — — 25 year yield— — 

Mar 22 Mar 21 Yr. ago Mar 22 Mar 21 Yr. ago Mar 22 Mar 21 Yr. ago 


S Debs & Loans (73) 13811 

Average press redemption yields m 


♦015 137.89 231 

ebovs. Coupon Bands Ltrec OK-7NK: 


2.66 835 841 857 863 865 

Metfum: BK-10WK Hgh: 1114 and aw. t ft* yield. yU Veer 10 dare. 


932 871 


872 


931 


GILT EDGED ACTIVITY INDICES 

Mar 21 Mar 16 Mar 17 


Mar IB Mar 15 


FT FIXED INTEREST INDICES 

22 Mar 21 Mar 18 Mar 17 Mar IB Vr ago High' Low' 

Qo*L Sacs. (UK) 9935 9882 9872 9935 9934 9899 10730 9635 0» Edged bargatas 91.5 987 683 987 1006 

Rttad Merest 11879 11845 120.14 12036 12137 11234 16337 11234 5-day average 986 98B 97.0 963 943 

- for 19B3/B4. Core Hire s SscuOm Utah since compuaore 127.M Brvsq. taw 4818 (371/75). Reed IntanM high sines ctsnpHBon: 13197 pi /U9f) , tow 5033 BfUTB) . Basks IQ3; Commnont Sctutaes IV 
10*8 end Fired lares 1038. SE aottvSy Men nobsaed tore 


FT/ISMA INTERNATIONAL BOND SERVICE 


Ustod ora the He* kwmottnf trends tar srtdi here is an aJeqiA secondoy martat iresst prices at 7iOO pm on Martb 22 
tooued Hd Oter Otp. YfcW issued BU OHer Ghg. YUi 


Iseued Btd Offer Ghg. Yield 


113. DOLLAR SITWGH1S 

Ptba/ Nall Tesasuy 94 03 KUO 964 

Atw*Fram»9495 600 105% 

AusMBhOO *00 1084 


Bank oTRItyo 8% 66 - 
B9tffin94» 

BFCE74W 

atohCas02l 

Canada 9 00 


W84 
1094 
100 104% 1054 

260 1124 H24 

ISO 10*4 1054 

1500 114 124 


Chaung Itag Hi 54 98 

Oil* 84 04 

Cotnd Bmps fl 96 — 
CtoB Rmaer 94 99 — 

DemtakS49B 

ECSCel+flB 

EC 84 96— 

BB749B 

19497. 


WOO 1064 
- 500 924 
ia» 9)4 


Bac de Francs B 98 — 
Baa5re94 88 _ — . 
Bi-toi Bank Japai 8 02 . 
Export Dev Cop 9*2 08 . 
Onto* 7% 97. 


ftrish Ejput 34 95 — 
Fad Motor Credt 8409 . 
Gas Bsc Captol 9498- 
GMAC94BB. 


1000 1094 
-200 W94 

- 100 KB4 
-GOO 10B4 

- 180 1114 
_ 200 HM4 

-200 1054 
1500 994 
. 300 1074 


M 5h Jopoi Fin 74 97 . 
Irtrt Proa On 7H«_ 
23. 


Japan On Ek 84 01 — 

Kami Bsc Pvr 1096 _ 
Koto Bre Power 64 OQ. 
LTCB Hi 8 97 . 


74DB_ 
MppanOadBk1tf4B5. 

Noway ^4 97 

Cnwto 74 03 


- 1374 +4 1374 1314 

IJT 239 200 2044 104(1 

132 256 IW* +* 113A 1054 

2£0 236I70H* 1764 

262 110 1684 1734 I5S 

235 11T1134* 4j, 1194 10 


QdarKbnu*n*84 0 i 

PaBoCffBda74 08 

ftitugff 54 03 

Qudxc Hjrto s4 38 — 

Ort»cPwg» 

8tonduy94« 

spsioa 

S8AB9495 


240*16 . ... 

24PC20 pin S3* 148 139* 

24pc*2ttt p7.7) 132 SM 

44SC-30# — (135.1) 147 

PnapsoOm re* radsmpBon tats on praleciacf btflaian ol(i) ION 
and P) 5%. (b) Figure in purentftnai show Wt baca for 
>9 Oa 8 monfta prior n nsua) end ham bean aftratsd 10 
ntartng td BH to 100 In January 1087. CcmMnton fader 
RP1 far Jura 199ft Ml 3 end far January 109« 1413. 


♦C 142ft 1154 
+b 1384 loea 

1*2 114 

♦4 120 S5 


1304 

128 

34 




State * CBW B *2 96 

-200 

.2000 


-TOO 

Tt*yoQacPOMrB%« 

Toh>oU*opche% 06 

To«vtaMi]tor5%SS 

- 300 
-200 
tstn 




. 1900 


. 1500 

DB/TBOC MWK SnWOKIS 


twin 


.2000 




.2000 




.2900 

HRALon . 




to 

. 6000 


.1500 


. 1500 


own 

SHdanBW 

.2509 


1064 
934 
VI4 

WO W54 W54 
300 1124 >124 
10QQ 984 984 

193 1054 1984 

. 100 1054 W54 
250 10*4 W*4 

110 
110 
W74 
1084 
ui4 
1054 
1084 
994 

1074 
200 1054 108 

200 10*4 105 

. 200 1M4 1044 
3500 884 68 

.600 1084 WB4 
.350 108 1084 

1350 904 <<14 

. 200 HH% W54 
1000 1004 1014 
.150 1054 W64 
1000 H334 1034 

3000 1014 1014 
.200 1084 <994 

.200 103 1034 

WOO 904 014 

1124 
MB 
1074 

1114 
. 1064 
150 1114 112 

894 

1054 WB 
W04 1004 
W54 1054 
1084 197 

1054 M64 
974 964 

Wl4 1024 
100 
W84 


,150 1114 
■ 200 1054 

. 1» 107 

. 300 1 W 4 
.500 MM4 


■*4 

-4 

♦4 

+4 

-4 

-4 

-4 


-4 

-4 

-4 

-4 

-4 


-4 

♦4 


*4 

-H 

♦4 

-4 

-4 


-4 

-4 


t4 

-4 

*4 


*4 

-4 


730 
539 
651 
562 

830 

530 
838 
M2 
7A3 
733 

531 
651 
6.18 

538 
581 
578 
5W 
828 
554 
638 
638 
630 

539 
553 
535 
032 
028 
571 

831 
681 
570 
738 
&15 
733 

570 
596 
727 
635 

571 
721 
570 
557 
503 

731 
514 
138 
657 
538 
524 


Unfed Khgdom 7% 97 

VMaragm M Fin 7 03 

-5500 
— 1000 
_ 2000 





SWISS HWKS1BNGKT3 




Oouncl Bmps 4% 98 

QB6%M 

250 






















YBN ST1MIGH15 

Bt^km 5 99 

75000 

SB 8% 00 

woooo 

20000 






Japan Dm Bh599 

100000 

rtppon Td Id 5% 98 

.50000 


HOOP 




50000 



01HEH ST7UBGHTS 


Godnomt lut 9% 99 LFr „ 

WM3 toff 8 06 1A 

WtolfcdW^DiH 

- woo 
-1000 
-1000 

— SCO 
500 

Bal Canada W% 99 CS 2 — 

— 150 


104 UM4 

00% 1014 
284 264 


565 A88EY NATL TREASLFY 8 03 C . 


954 


Britiah Cdurbis 10 90 CS - 
BBilOaWCS. 


94WC5- 
Gan Sac Captol tO»CS. 

556 WWWFinlOOICS 

571 MpponT*Tdt04B9CS. 

575 amioao 3 cs 


.500 1064 

_ IX lid; 
_ 275 1084 
-300 1064 

- 400 1W4 

- 200 111 
,1500 994 


98 

114 


MI 

101 % 

1024 

112*2 

114 

111*1 

103 

110 

itd 

109 

1074 


i®4 

113 


103*2 

1114 

W54 

1074 

IIS* 

924 

1M4 

1114 

1064 

1Q?4 

112 

to*4 

1124 


004 1014 

109 TW 

024 1034 
064 1094 

114 112*4 

107 107*} 
1114 



605 


1000 

100 

100% 

+% 

800 

-h 

837 

Afcnca Ida 11% 87 E WO 

112% 

112% 

♦% 

6.70 

+J* 

648 

Brttb Land 8% 23 E 

- 160 

94% 

95% 

♦% 

982 

-% 

aoo 

SW97E 

-837 

W6% 

109 

-% 

658 



Hdfat 10% B7C 

_ WO 

109% 

«»% 


675 



HansaH0%9IE 

- 500 

100% 

118 


720 


5JB 

HS8C todsgs 1130 02C 

- 153 

118% 

118% 

•% 

B3l 


aw 

lair 10*2 ME 

-400 

118 

110% 

♦% 

6£9 


4.1a 

Japan Dm Be 7 00 C 

-200 

99 

90% 

+% 

7.18 


539 

Laid Sacs 9% 07 E 

-an 

106% 

107% 

♦% 

ALGO 


565 

Ontario 11% 01 E 

_ 100 

116% 

118% 

+% 

704 

-% 

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24 


FINANCIAL TIMES WEDNESDAY MARCH £3_W4 


COMPANY NEWS: UK 


Bowater disappoints in 
spite of rise to £212m 


By Neil Buckley 

Bowater, the packaging, 
printing and coated products 
group, yesterday claimed 
success for its ‘'bold" acquisi- 
tions strategy as it revealed a 
44 per cent increase in full-year 
pre tax profits from £147m to 
£2L2m. 

However, the group's shares, 
after an initial lOp surge, 
reacted badly, closing down 
39p at 453p. 

Analysts said the good 
results had been expected and 
already discounted in the share 
price, and the market was dis- 
appointed by a cautious state- 
ment from Bowater. 

The group said market condi- 
tions, especially in continental 
Europe, continued to be diffi- 
cult, and a move to shorter 
order books and smaller orders 
bad accelerated. Raw materials 
prices were also said to be ris- 
ing, prompting concerns about 
margin pressure. 

But Mr David Lyon, chief 
executive, said demand showed 
some signs of improvement 

"Demand was down In the 
third quarter of last year, 
but came back in the fourth. 
Overall it’s a little better." 

The profit, at the top end of 
expectations, included an 
exceptional gain of £10.3m on 
business disposals, plus a £7m 
gain on foreign exchange 
translations 

Mr Lyon said last year's 
acquisitions, totalling £403m, 
of Specialty Coatings Interna- 
tional, the US coatings com- 
pany. medical packaging com- 
pany Tower, and MiTek. the 
connector plate manufacturer, 
had been integrated quickly 


*ic?i f 



Timor Hunphrtas 

David Lyon; demand is now showing some signs of improvement 


and outperformed expecta- 
tions. 

An important task now was 
to exploit the links between 
different parts of the business 
bo develop "value-added" prod- 
ucts and ensure the group 
could offer integrated solutions 
to customers' needs. 

Group turnover for the year 
to December 31 increased from 
£1.57 bn to £2.l4bn, including 
£31 8m from acquisitions. 

Operating profits rose 
ITOrn £14lm to £194m, with a 
£3Sm contribution from the 
acquisitions. 

Operating profits in the UK 
and Ireland Increased from 


£69 .5m to £74,5m, in the Ameri- 
cas from £39 -2m to £80. 7m, and 
in Australasia from £135m to 
£22£m. Profits in continental 
Europe fell from £16,4m to 
£14m. Operating margins 
increased from 9 to 9.1 per 
cent 

A £61m cash inflow from 
operations, before acquisitions 
and rights issues, helped 
reduce debt from £27 6m to 
£282m. Gearing fell from 56 per 
cent to 40 per cent 

Bowater is proposing a final 
dividend of 7.25p. lifting the 
total from ll.lp to I2.55p. Earn- 
ings increased from 24.4p to 
28.2p a share. 


Butte loss static at £355,000 


By Kenneth Gootfing, 

Mining Correspondent 

Butte Mining, the UK company 
whose main activity Is prose- 
cuting US lawsuits - it is seek- 
ing damages of up to $lbn 
(£670m) from former managers 
and promoters - has reported a 
pre-tax loss of £355.000 for the 
six months to end-December 
and the result for the full year 
is not expected to be any worse 
than this. 


The interim result is little 
changed from the £336.000 defi- 
cit in the same period last 
year. 

Mr David Lloyd-Jacob, chair- 
man, said the past six months 
“have been frustrating, with 
no action by the Federal Dis- 
trict Court judge in Montana 
on any of the substantive 
motions in front of him." 

"Until the judge rules on 
these motions, a court date 
cannot be set. We have devel- 


oped an extremely strong case 
and look forward to the oppor- 
tunity of presenting it in 
court." he added. 

In the second half of this 
year, Butte expects to finish 
restructuring and floating 
VAM, an Australian gold com- 
pany. and to receive about 
A$800,000 (£394,000) from this 
transaction. 

This will provide funding to 
develop some of the company’s 
property in Montana. 


Computer 
problems 
take toll 
on Dorling 

By Andrew Botger 

Dorling Klndersley Holdings, 
the publisher of highly illus- 
trated reference books, 
reported a 17 per cent decline 
In pre-tax profits to £3.51m 
and said computer problems at 
a distributor had affected sales 
growth and increased costs. 

Sales increased by 17 per 
cent to £45.l3m in the six 
months to December 3L 

The publisher’s shares, 
which more than doubled after 
being floated at I65p at the 
end of 1993, fell sharply in 
December after the group 
issued a profits warning. The 
shares yesterday closed 2p 
higher at 266p. 

Mr Peter Klndersley, chair- 
man and chief executive, con- 
firmed December's forecast 
that pre-tax profits for the 
year to June 30 were expected 
to be somewhat less than the 
£9. 65m achieved previously. 

DK said it had experienced 
problems over distribution by 
Tip tree Book Services to book- 
shops and, in particular, to DK 
Family Library, which sells 
directly to homes and schools. 
Tiptree had been replaced as 
distributor for Family library 
anil its services to bookshops 
had improved, although DK 
continued to monitor this situ- 
ation. 

Mr Klndersley said DK was 
pursuing a legal claim against 
Tiptree for loss of revenue and 
additional costs, but had been 
advised not to disclose its esti- 
mate of the financial impact to 
date. 

Tiptree, which is owned by 
Random House, the US pub- 
lisher, said it refused to be 
made a scapegoat for the fail- 
ure of DK to meet the expecta- 
tions which its management 
had raised among sharehold- 
ers. It would be misleading to 
suggest that any compensation 
which DK might obtain from 
Tiptree would have any signif- 
icant impact on the bottom 
line of the company's perfor- 
mance. 

Another area of disappoint- 
ment was DK Education, 
which supplies teaching pack- 
ages to schools. 

Earnings per share fell to 
JL3p (4-7p), but the interim 
dividend was held at 1-Ip. 


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Dilemma of divided loyalties 

Tim Burt on the key to the outcome of GKN’s bid for Westland 

, ^ „ . GKN will argue that 

T wo institutional inves- not only immediately quadra- Wmmmm uns fere even be 

tors holding the key to pie the turnover of its defence SOvwnr j r _ foenC0 i nart or a larger group, ar 

the outcome of GKN’s business to more than £50Gm a Share prices (panc^ par WO uid i 


T wo institutional inves- 
tors holding the key to 
the outcome of GKN’s 
£497m hostile bid for Westland 
are about to be barraged by 
lobbying from the two sides. 

M&G and Schraders are not 
relishing the prospect As the 
largest institutional sharehold- 
ers in both companies, they axe 
in the uncomfortable situation 
of being asked to play King 
Solomon with Westland's 
future. 

Their tHin-mma will be under- 
lined by forceful lobbying by 
Mr Alan Jones, Westland chair- 
man, who claims his compa- 
ny's best interests lie In inde- 
pendence; and by Sir David 
Lees, his GKN counterpart, 
who is seeking an enlarged 
defence business. 

With 12 per cent of Westland 
and 5J> per cant of GKN, M&G 
admits it could make a case for 
supporting either side. The 
sentiment is similar at Schra- 
ders, which has 13.5 per cent of 
the helicopter company and 4.4 
per cent of the engineering 
group. But to the chagrin of Sir 
David, they have so Ear leant 
towards the Yeovil-based heli- 
copter maker. 

Their task has been made 
easier by GKN’s 290p a share 
offer, launched seven weeks 
ago at a 5 per cent discount to 
the market price. The move 
prompted a sharp rise hi West- 
land's shares to 333p, but they 
fell back after GKN vigorously 
attacked Westland's prospects. 
They closed yesterday at 32fip. 

Before even entering into 
any arguments about prospec- 
tive helicopter orders or syner- 
gies with GKN's armoured 
vehicles business, the institu- 
tions simply point to the price 
and say it is inadequate. 

Mr Richard Hughes, director 
of investment management at 
M&G. says: “The shares are 
trading well above 290p. We 
will make our decision on the 
offer as Westland shareholders, 
irrespective of our commit- 
ment to GKN.” 

Such comments - echoed at 
Schrodeis - raise the hackles 
of GKN executives, who com- 
plain that the institutions 
must start looking at the take- 
over as their shareholders too. 
For them, Westland would 


not only immediately quadru- 
ple the turnover of its defence 
business to more than £50Gm a 
year, but would transform the 
fax profile of the whole group. 

The helicopter group's UK 
profits would enable GKN to 
recoup a large chunk of 
Advance Corporation Tax, 
which it has been forced to 
write off in the past because of 
its high proportion of overseas 


Share prices (pence) 
600 



By increasing UK sales to 40 
per cent of turnover, Westland 
would bring GKN’s total tax 
rate closer to the 33 per cent 
average from 38.7 per cent last 
year, when it wrote off £7.9m 
of unrecoverable ACT. 

While admitting Westland 
would “impact favourably" on 
GKN’s overall tax rate, the 
Midlands-based group argues 
that such a marriage would 
also be blessed by logistical 
and marketing advantages, 
especially in lucrative export 
markets. 

It has also held out the pros- 
pect of financial support to bol- 
ster Westland's balance sheet, 
which it suggests may not be 
strong enough to sustain 
strong de mand for civil vari- 
ants of the EH101 helicopter - 
should that materialise. 

Defence industry analysts 
are not convinced. They see 
GKN's motives as purely fiscal. 

“If Westland is so attractive, 
then GKN will have to dig 
deeper into its pockets and find 
a little more,” said one analyst 

S everal analysts also sug- 
gest that the offer price 
reflects GKN’s expertise 
in extracting a good deal from 
United Technologies, which 
agreed to sell its 18.7 per cent 
Westland holding for £75m at 
2S0pashare. 

However, with 45 per cent of 
Westland under its belt, GKN 
appears wedded to 290p. Sir 
David claims the price already 
includes a premium to West- 
land's underlying value and Is 
a fair price in the face of uncer- 
tain future prospects. 

Helicopter orders may be 
(nicking up, he says, but they 
are not as rosy as Westland 
claims. Describing Westland’s 
sales estimates as over-optimis- 
tic, Sir David warns: “Westland 


400 


Westland 


300 ~ Bid pries 
29Qpati 
Fab 8 

350 


Mar 1893 

Sourcw FT CkaphHs 


does not and cannot project 
when profits will support the 
current share price." 

He points out that West- 
land’s prospects would have to 
grow remarkably from the one 
delivery scheduled this year to 
meet in 2000 its estimated 39 
deliveries of which 12 are 
already on order and 27 as yet 
prospects. 

Mr Jones claims the mar ket 
has already given GKN the 
thumbs down. He denies sug- 
gestions that Westland's 
shares have been boosted by 
bid speculation and its success 
last year in extracting a £385m 
damages award, still under 
appeal, from the Arab Organi- 
sation for Industrialisation. 

“The offers were made below 
the market price and include 
no premium for our potential, 
for control or for the tax 
advantages to GKN,” he says. 

Having sparred for several 
weeks, the two chairmen are 
now putting the final touches 
to their institutional presenta- 
tions. 

Westland is likely to promise 
M&G and Schroders sizeable 
earnings growth if they stick 
with the company as its pro- 
duction expands. 


GKN will argue that West- 
land would fere even better as 
part of a larger group, and that 
Sc institutions would benefit 
from its upside potential any- 
way as shareholders in GKN. 

Keen to win City support for 
its argument, the engineering 
group has also pointed to a 
report published last we* by 
UBS the securities house. Tak- 
ing a forecast of orders 28 per 
cent higher than Westland’s 
own, it produced a best case 
scenario for the year 2002 that 
gave Westland’s shares a pres- 
ent value of 306p on a cashflow 
basis and 27 5p on an earnings 
basis. 

The same report, however, 
argues: “Westland's strong 
product range, cost base, and 
order book is producing rap- 
idly accelerating earnings and 
dividend growth. The tax bene- 
fits available to GKN make 
Westland worth up to 400p per 
share, rather than the 290p it 
has offered." 

Faced with increasingly hos- 
tile arguments, the institutions 
are sitting tight and waiting 
for the combatants to fire the 
next salvo. 

T hat is expected next 
Monday, the deadline 
for Westland to release 
new information relevant to 
the bid. It is expected to make 
a buoyant trading forecast, 
pointing to profits of at least 
£36m (£30. 5m) this year despite 
continuing uncertainties in the 
defence and aerospace market 
Despite Sir David’s protesta- 
tions that GKN has made a fair 
offer, the institutions sense 
that the tax incentive will be 
enough to persuade him to up 
his bid - albeit marginally. 

“Buying a growing company 
at a depressed point in the 
market, which also comes with 
tax advantages, is a very 
attractive option.” says one 
Institutional investor. 

Warning GKN that there is 
little prospect of it accepting 
the bid at the current price, 
another institution warns: 
“GKN and Westland are going 
to have to live together 
whether the bid stands or falls. 
Sir David knows the game, and 
he knows we won’t accept this 
offer.” 


Clyde Petroleum cuts loss to £23.4m 


By Peggy HaHinger 

Clyde Petroleum, the lossmaking oil and 
gas exploration company, yesterday 
warned that a return to profitability was 
uncertain as long as the oil price remained 
at historically low levels. 

Mr Malcolm Gourlay. chief executive, 
said that in a climate of weak oil prices, a 
return to profit and to the dividend 
list depended on two main factors: the 
speed at which Clyde could build up 
production and the level of exploration 
writeoffs. 

This latter factor, which writes off 
onsucoessftil exploration as incurred, was 
“unpredictable," said Mr Gourlay. 

The group was seeking to reduce the 
exposure to such factors by reining in 
exploration. Expenditure on new pros- 
pects was £i8m last year, against 
£30m previously. Clyde was further reduc- 


ing exploration Investment to £l0m this 
year. 

The group spent £93 .6m. on development, 
against £17. 46m last time. Some £36m was 
budgeted for development this year. 

Clyde reported lower net losses of 
£23.4m for the year to December 31, 
against a £39i8m deficit last time. Sales 
were 2 per cent lower at £81.6m. 

The company enjoyed a series of one-off 
gains which helped to reduce losses. These 
included an £&3m fall in exploration costs 
to £34m, a tax clawback of £5m, and lower 
provisions of £7 JSm (£Um> on the carrying 
value of assets. 

The company also ‘benefited from the 
hedging of 80 per cent of its production at 
an 318 oil price. Some 24 per cent of this 
year's output was hedged at $17, Mr 
Gourlay said. 

Clyde expected to increase production 
by GO per cent this year, largely because of 


the inclusion for a full year of output from 
the North Sea Gryphon field. Last year 
Clyde staged a £34m rights issue to 
develop this field. 

“At the moment we are disappointed 
that benefit comes in juxtaposition with a 
historically low oil price,” Mr Gourlay 
said. 

Analysts greeted the results with a cer- 
tain degree of resignation. Borrowings of 
El.88.7m, representing 110 per cent .of 
shareholders' funds, remained higher than 
expected. 

The group was also not showing a great 
deal of success in the exploration carried 
out to date, even though it has been 
attempting to reduce the risk through 
forming out interests. 

As in previous years, there was no divi- 
dend. Losses per share were halved to 62P- 

Proven and probable reserves fell by 8 
per cent to 164.4m barrels of oil equivalent 


CE Heath decides to axe 
six reinsurance jobs 


Cost-cutting helps UDO 
advance 32% to £1.85m 


By Andrew Jack 

CE Heath, the insurance 
broker, yesterday made six of 
the staff in its reinsurance 
division redundant, inclrafing 
the Joint managing director of 
its LMX operations. 

Tbe surprise notification of 
compulsory redundancies yes- 
terday at the company follows 
restructuring over several 
years of similar excess insur- 
ance divisions at many other 
brokers. 

Mr Tim Broadhurst, manag- 
ing director of Heath Fielding, 
confirmed that Mr Paul 
McCarthy, joint managing 
director, one junior director 
and four staff had been 


made redundant 
He said that there were no 
plans to replace these staff and 
that Mr Dennis King, the other 
joint managing director, 
would take charge. 

He stressed that the func- 
tions provided would continue 
for the foreseeable future and 
that he anticipated no reduc- 
tion in the volume of business. 
He said that division remained, 
“extremely profitable.” 

"There are no problems, no 
further redundancies !m d the 
numbers wfD reveal all in due 
course,” he said. 

"LMX is a word disappear- 
ing from our vocabulary but 
we will still have a retro divi- 
sion.” 


By Tim Burt 

UDO Holdings, the supplier of 
drawing office equipment and 
reprographic services, yester- 
day hailed a cost-cutting pro- 
gramme and ampha-rifi on hi gh 
margin products as the main 
factor behind a 32 per cent 
increase in interim profits. 

In the six months to January 
31, pre-tax profits rose to 
£l.S5m <£1.4m). This was 
despite reduced turnover of 
£23. Im (£23. 9m) as the group's 
traditional businesses contin- 
ued to suffer the effects of 
recession. 

Mr Mike Wright, Airman, 
said the improvement reflected 
savings achieved by a redun- 


dancy programme and renewed 
emphasis on higher margin 
products. . : 

The workforce has been cat 
by 10 per cent to 900. and Mr 
Wright said he had been 
encouraged by growing 
demand for the group’s colour 
im aging equipment 
“The colour imaging centres, 
established last year and repre- 
senting a very substantial 
investment are now coutrlbot- 
ing to group profits be added- 
Earning s per share rose to 
4J25p i3.22p), and the interim 
dividend is up to 2J2p Wtipb: 

The group ended the year 
with net cash of £I4Amr sbp . 
said it was considering acquip 
tions. . 


Metalrax to expand as 
profits pass £8m mark 


By Tim Burt 

Metalrax Group, the precision 
components, houseware and 
storage equipment group, yes- 
terday said it was planning to 
expand its UK and North 
American operations following 
a 7 per cent increase in 
profits. 

The Midlands-based group 
made pre-tax profits of £8.Q2m 
in the year to December 31, 
compared with a restated 
£7.47m last time. 

The company said it was 
well placed to make acquisi- 
tions on both sides of the 
Atlantic and was already dis- 
cussing two bids. 

Such acquisitions are likely to 
be funded from year-end net 
cash balance of £8 .3m (£&3m) 
or by offering equity to poten- 
tial subsidiaries. 

Expansion of tbe group last 
year helped turnover rise 10 


per cent to £71 .3m. 

Mr Eric Moore, managing 
director, raid tbe performance 
of the precision components 
division showed the sharpest 
improvement and now 
accounted for 50 per cent of 
sales and profits. 

The business was augmented 
at the year-end by the film 
acquisition of Western Body 
Hardware, the specialist lodes 
business. 

Mr Moore also hinted at fur- 
ther expansion of the house- 
ware division, representing 30 
per cent of turnover, following 
its takeover of Fabricate, tbe 
supplier of non-stick materials. 

The new subsidiaries 
increased the workforce to 
more than 2,500. 

Earnings per share were 
6J6p (&27p) and the final is 
raised to 3p (5L.73p), taking the 
total to 4p (3.64p). A I-for-10 
scrip issue is proposed. 


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BSG hit by slowing 
orders and recession 


By Urn Burt 

BSG International, the vehicle 
distribution, childcare prod- 
ucts, motor and aviation equip- 
ment group, yesterday blamed 
a 27 per cent decline in 1993 
operating profits on falling 
demand for automotive and 
aircraft components. 

The Midlands- based group 
saw operating profits fall £5m 
to £l3JZm as its businesses suf- 
fered under the twin impact of 
recession in continental 
Europe and slowing orders for 
new aircraft. 

Although pre-tax profits rose 
to £10. 6m from a restated 
£7.5m. the group said this 
increase was due mainl y to a 
£1.6m profit on the sale of one 
its Midland plants and reduced 
interest payments. 

Mr Richard Marton. chief 
executive, said pre-tax profits 
would have been higher had it 
not been for £l.lm of redun- 
dancy and restructuring costs, 
mostly at its Rumbold aircraft 
interiors subsidiary where the 
workforce was cut by 10 per 
cent to 750. 


The company, part of the 
group's consumer and special 
products division, suffered 
from a SO per cent reduction in 
new aircraft under construe* 
tion. The division, which also 
saw recession hit demand for 
its childcare products in 
Europe, reported a 43.6 per 
cent decline in operating prof- 
its to £4m. Automotive compo- 
nents, previously the group’s 
largest division, endured an 
even sharper fall as operating 
profits slumped KL2 per cent to 
£2.7m. 

Mr Marton said: “We're 
being dragged down by prob- 
lems in Europe. The car mar- 
ket is in a mess and will 
remain so for the rest of this 
year." 

The problems were partially 
offset by an upturn in UK 
vehicle registrations and used 
car sales, which helped the 
vehicle distribution and leas- 
ing business increase profits 
by 62 per cent to £6. 5m 

Together the three divisions 
lifted group turnover to 
£573. 9m (£555. lm). 

Mr Marion, meanwhile, said 


the group was committed to 
disposals of peripheral busi- 
nesses. “We want to eliminate 
the problem areas of the group 
as far as possible," he said. 

Bantings per share came out 
at 2_43p (LS7p) and the final 
dividend in unchanged at 2J5p, 
maintaining a &2p total 

• COMMENT 

Despite BSG's disappointing 
operating performance, its 
shares fell just l%p yesterday 
to 77%p. The market's flat reac- 
tion reflects a willingness to 
believe that BSG will make the 
right restructuring decisions. 
Although the company 
remains tight-lipped about its 
intentions, it is thought to be 
reviewing some of its 
operations in continental 
Europe and how to extract 
greater earnings from its core 
businesses. Forecast pre-tax 
profits this year of £i6m indi- 
cate that BSG is at the bottom 
of its business cycle and 
should benefit from new 
orders, but on a multiple of 
18.9p, the shares remain an 
expensive option. 




Mayborn 
increases 19% 
to £4.24m 

Mayborn Group, involved m 
the packaging and distribution 
of consumer goods to the retail 
trade, achieved a 19 per cent 
rise in pre-tax profits from 
£3.55m to £4.24m in the year 
to December 31. 

The largest rise came from 
the fabric dyes division with 
operating profits ahead to 
£1.94m (£1.5 2m). Baby prod- 
ucts contributed £3m (£2.9 lm) 
while losses at florists’ sun- 
dries deepened to £28,000 
(£19,000). Mr lan Peacock, 
chairman, said it could be 
some time before that division 
returned to profitability. 

Turnover of this USM-qooted 
concern grew 11 per cent to 
£39.9m (£36. lm) and the pre- 
tax result was after net inter- 
est payable of £120,000 
(£311,000). 

Earnings per share were 
1-L3p against i2-4p and a final 
dividend of 3-9p (3.4p) lifts the 
totalto 5.7p (5p). 


CMG ahead and plans 
flotation next spring 


By Alan Cane 

Computer Management Group, 
a privately held computing ser- 
vices company operating 
chiefly in the UK and ennrtnMi- 
tal Europe, achieved increased 
turnover and profits before tax 
in 1993. 

The company has. subject to 
market conditions, decided to 
float on the London Stock 
Exchange in the spring oF 1995 
through a placing that will 
value it at about £130m. 

Turnover for 1993 reached 
£12&8m, an increase of 19 per 
cent on the previous year's 
£107.8m, and pre-tax profits 
rose by 28 per cent to Ell.lm. 

Earnings per share, however, 
at 35.4p folly diluted were only 
slightly ahead of the 35.3p 
recorded last time. 

Mr Chris Banks, group 
finance director, said that 
although the company had 
grown some 5 per cent' In Ger- 
many 'it had lost money there, 


leading to tax charges which 
could not be offset against 
losses; As a result, the tax 
charge grew from £3 An to 
£5Km. 

Growth had been strong in 
the Netherlands, helped by two 
small acquisitions, tut weak in 
the UK. There were signs that 
the latter was improving and 
the company would continue 
to grow in 1994. 

CMG is an employee-owned 
company with some 1,800 
shareholders comprising 
employees, former employees 
and close relatives. A dividend 
for the year of I31p will be 
paid. Dividend cover is 2.6 
times. 

Mr Banks said the company 
had decided to come to the 
market to improve its scope for 
growth, to provide liquidity for 
printing shareholders and to 
underline the company's pub- 
lic image. :■ . 

Kleinwort - Benson will be', 
adviser to the flotation. 


Bupa 
advances 
13% to 
£41. 2m 

By Bethan Hutton 

Bupa, Britain's largest private 
medical insurer, achieved, a 13 
per emit improvement In pre- 
tax profits to £41 An for the 
year to mid-December 1993. 

Hie figure, which compared 
with £36.5m for 1992, was 
struck after taking account of 
a £4-9m rise in exceptional 
costs to £18. 9m. 

The underwriting surplus 
grew to £lSL8m (£7.6m) before 
exceptional , because of an 
improvement in the loss ratio, 
which expresses benefits paid 
as a percentage of subscription 
income. The ratio figure for 
1993 was 81.1 per cent com- 
pared with 82.2 per cent in 
1992. 

The results show a contin- 
ued strengthening from 1990, 
when the association incurred 
a loss of £38. 2m, and 1991 
when there was a pre-tax 
profit of ElAn. 

Exceptional costs reflected 
the restructuring of Sanitas, 
the group’s Spanish subsid- 
iary, and property write- 
downs in the UK. 

Reserves grew by £79 An to 
£4 29m last year and the 
group's solvency ratio 
increased from 43 per cent to 
53 per cent 

Operating profits from the 
health services division, which 
runs hospitals, screening cen- 
tres and nursing homes, 
improved from £22. lm to 
£25.7m. The advance was attri- 
buted mainly to greater effi- 
ciency. 

Bupa's market share has 
fallen in recent years as new 
providers have entered the 
market. According to the 
Monopolies and Mergers Com- 
mission its share has declined 
from 59 per cent in 1985 to 44 
per cent in 1992. 

However, the group says its 
customer base has now stabi- 
lised and if, as appears likely, 
the market has contracted 
overall this year, that may 
mean its market share has 
improved slightly. 

There was considerable spec- 
ulation last year that Bupa 
was planning to swap its prov- 
ident association s t a tus for a 
market fisting, but the group 
now says it has no plans to go 
public in the near future. 


Expanding Appleyard up at £5m 


By Pad Taylor 

Appleyard Group, the North 
Yorkshire- based motor dealer, 
yesterday announced the 
acquisition of five passenger 
car dealerships from Whi- 
tworths Holdings, the private 
flour milling group, and at the 
same time unveiled a sharp 
increase in 1993 pretax profits 
from £223,000 to £5. 12m. 

The acquisition is for £l0J2m 
cash and will be funded from 
the £is.4m proceeds of last Sep- 
tember's 3-for-10 rights issue. 
The mixed franchise dealer- 
ships being acquired showed a 
combined operating loss of 
£100,000 last year on turn- 
over of £44.6m and had esti- 
mated net assets of £8.9m 


including £5.9m of property 
assets. 

Mr Mike Williamson, chair- 
man and chief executive, was 
confident the financial perfor- 
mance of the dealerships could 
be improved. He said the deal 
was a further step in the 
group's national growth strat- 
egy. 

The group’s profit was 
achieved on turnover up 20 per 
cent to £366. 9m (£305.5m). 
Operating profits were £5 .9m 
(£l.S4ixD. 

Mr Williamson sa( d the pas- 
senger car business benefited 
from the stronger new car mar- 
ket while used car volumes 
and margins firmed as the year 
progressed. 

The group has continued its 


multi-franchising strategy and 
now has 15 sites with two or 
more franchises - two of the 
Whitworths' dealerships are 
also multi-franchise. 

As part of the plan to widen 
its commercial vehicles inter- 
ests the group acquired WSM 
Motors, a Mercedes-Benz opera- 
tion in Bristol and Yeovil in 
November. 

Trading profits from the 
group's associated contract 
hire and leasing business 
increased by 72 per cent to 
£lAm. 

Net interest costs fell to 
S22m (£3.61m). 

Earnings per share increased 
from 0.8p to 6-8p and the final 
dividend is raised to 2 Ap (2.6p) 
making a total of 5.5p (52p). 


# COMMENT 

Appleyard continues to benefit 
from the effects of operational 
gearing following its cost 
reduction programme with 
incremental volume improve- 
ment producing disproportion- 
ate profit gains. In terms of the 
outlook profits from new and 
used car sales are continuing 
to improve and the after sales 
market is strong. The group's 
multi-franchising strategy 
makes sense and the acquisi- 
tion - which looks sensibly 
priced - will broaden its geo- 
graphic reach. Further acquisi- 
tions are likely. Pre-tax profits 
should reach £8 An this year 
producing earnings per share 
of 9.6p and a orospective p/e of 
16.1. 


Try in the red and calls for £5.6m 


By Andrew Taylor, 

Construction Correspondent 

Try Group yesterday became the latest 
company to announce a rights issue to 
finance land purchases and take advan- 
tage of the housing market recovery. 

The company is seeking to raise £5.6m 
via a 3-for-5 share issue at 23p apiece. 

Try, at the same time, announced a 
£2. 17m pre-tax loss for the year to end-De- 
cember after property and rationalisation 
provisions of £1.74m. This compares with a 
restated loss of £810,000 for 1992. 

The scale of the losses and provisions 
had been signalled by the company earlier 
this year, and the shares fell 3p to 80p. 

Because it has taken £6. 7m of accumu- 
lated losses from the housing division onto 
the group balance sheet, the company has 
insufficient distributable reserves to pay a 


final dividend leaving the total pay-out for 
the year at 0.5p up). 

In order to resume dividend payments 
Try is seeking shareholder and court 
approval to reduce its share premium 
account by the appropriate amount. 

Mr Peter Howell, chief executive, said it 
was the company's intention to pay a total 
net dividend of lp for 1994. Losses per 
share were 5.12p (423p). 

Group turnover rose to £12lm (£U8m). 

The contracting division made an oper- 
ating profit of £ 1.24m on sales of £116m. 
Two thirds of a record £126m order book 
was negotiated work which tended to com- 
mand higher margins than work won on 
competitive tender, said Mr HowelL 

Housebuilding incurred an £890,000 loss, 
mainly because of the timing of develop- 
ments on more expensive land bought by 
the group during the late 1980s. The num- 


ber of homes sold also fell. From 201 to 152. 

The rights issue has been underwritten 
by Lazards. 

• COMMENT 

Try's decision to expand housebuilding, 
closing operations in East Anglia and Scot- 
land and concentrating in south-east 
England, looks a little belated compared 
with others in the sector. It is a good 
contractor achieving better than average 
profit margins throughout the recession. 
Its record in residential and commercial 
property’ is less impressive. The rights 
price, however, is at a sufficient discount 
to make this a worthwhile investment if 
the new housebuilding team performs, but 
it is a risk. At an ex-rights price of 29p the 
company is on a prospective p/e of almost 
20 on pre-tax profits or £lm in 1994 and a 
p/e of 11 on £2m in 1995. 


Allied London leaps to £5.75] 


By Simon Davies 

Allied London Properties, the 
property investment company, 
yesterday reported doubled 
pre-tax profits of £5. 75m in the 
six months to December, 
against E2.89m last time. 

Sir Geoffrey Leigh, the chair- 
man, said the upswing in the 
property market “accelerated 
in the last quarter of 1993, with 
an improvement in yields, and 
there are also some indications 
of renewed tenant interest in 
expanding their requirements”. 

This bullish view has been 
reflected in the £41m invested 
by Allied London since the 
start of the current fiscal year. 


Net rental income at the 
interim stage was £10.3m 
(£9m), and the company 
reported a £957,000 profit from 
the sale of an investment prop- 
erty, and a further £695,000 
from short-term investments. 
Interest payments were stable 
at £5.4m. 

Allied London has utilised 
cash balances, which stood at 
£16m in June, to acquire Pel- 
ham Homes from the Rose- 
haugh receiver. The transac- 
tion was completed in 
December for £3m, and Pelham 
carried a further £14m of 
debt 

Pelham owns a substantial 
land bank in south east 


England, and Allied London 
plans to add value through 
improved planning consents, 
and then trade the sites, 
against the background of 
rapidly increasing land 
prices for the housing mar- 
ket 

Allied London's gearing is 
currently around 100 per cent 
but this is based against June 
30 property valuations. The 
cnwipawy said it was actively 
seeking further investment 
opportunities. 

Allied London will pay an 
interim dividend of 1.18p 
(l.075p). Fully diluted earnings 
per share amounted to 4.1p 
C2-SP). 


UniChem in 
£2.44m buy 

UniChem, the pharmaceuticals 
wholesaler, has has bought EA 
Brocklehurst, which operates 
10 pharmacies throughout 
Humberside, for £2.44m, 
writes Rebbeca Rea. 

The consideration for Brock- 
lehurst will be met by the 
issue of 220,604 ordinary 
shares of lOp each and the 
issue of loan notes totalling 
£420,000; the rest will be paid 
in cash. 

Seven of the pharmacies will 
become Moss Chemists, the 
brand name of UniChem’s E 
Moss subsidiary, while the 
other three have been sold 
back to two former Brockle- 
hurst directors for £457,000. 


-his t 

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26 


FIDELITY SPECIAL GROWTH FUND 

Socitftd d’lnvestisserwdt & Capital Variable 
Kansallis House 
Place de L’Etoile 
L-1021 Luxembourg 
R.C. Luxembourg B 20095 

NOTICE OF ANNUAL GENERAL MEETING 

Notice is hereby given that doe Annual General Meeting of the Shareholders of FIDELITY SPECIAL 
GROWTH FUND, a socic'ie d'invesussemem a capita! variable organized under the laws of the Grand 
Duchy of Luxembourg (the * Fund ' ), wilt be beld atthe principal office of die Fund, Kansallis House, 
Place de L'Etoile. Luxembourg, at 11:00 a.m. on March 31, 1994, specifically, but without limitation, 
for the following purposes : 

L Presentation of the Report of the Board of Directors. 

2. Presentation of the Report of the Auditor. 

3. Approval Of (lie fcialance sheet and income 5tatemeot for the fiscal year ended November 30. 1993. 

4. Discharge of the Board of Directors and the Auditor. 

5. Election of six (6 J Directors, specifically tfie re-election of Messrs. Edward C Johnson 3d. Barry 
R. J. Bateman. Charles T. M. Coll is, Sir Charles A. Fraser. Jean Hamilhis and H. F. van den Haven, 
being all of (be present Directors. 

6. Election of the Auditor, specifically the election of Coopers & Ly brand, Luxembourg. 

7. Declaration of a cash dividend in respect of the fiscal year ended November 30, 1993. 

& Consideration of such other business as may properly come before the meeting. 

Approval of items 1 trough 7 of the agenda will require the affirmative vote of a majority of the shares 
present or represented at the Meeting with no minimum number erf shares present or represented in order 
for a quorum to be present. 

Subject to the limitations imposed by the Articles of Incorporation of the Fund with regard to owner- 
ship of shares which constitute in the aggregate more than three percent ( 3 % ) of the outstanding shares 
of the Fluid, each share is entitled to one vote. A shareholder may act at any meeting by proxy. 

Dated: February 17. 1994 

BY ORDER OF THE BOARD OF DIRECTORS 


Fidelity 



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INTERNATIONAL COVERAGE 

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FtNANClALTTMEsl Take 3 c,ear view °* the fest * movin 9 world of international 
T‘i — i— I telecommunications with: 

NEWSLETTERS 


Tfilfinom Markets 


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sr < : i ;• acJ rT.i:-.v:;'-.t c-. r :ure ;nc. t *. c 

Telecom Markets .i .* 

~Z U- ■< 355'. l&- £ .V.j ?=- =*•< --4 C. £• -6' 3 
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: 3 ' - C T 3 i5c-3 »53 *..-.£ Ttr-vii 7- •» Vj- ; -.e:s 


Standard ll Chartered 

Standard Chartered PLC 

(Incorporated with lirmtad tibUfty In Engtamfl 

£300,000,000 

Undated Primary Capital Roaring Rate Notes 
of which £150,000,000 
comprises the Initial Tranche 

m accordance wtth the Terms and Gondtoarw of the Noie3. notice ts hereby given 
the* toe Cm throe months period <92 daysl from 22nd March 1994 to 22nd June 
1994 the Notes wt* cany an Interest Rale of 5 ’/■ per cent per annum. 

The tocenoat payment dole wS tie 22nd June 1994. Coupon No. 38 wtf therefore 
be payable an 22nd June 1994 at C 685. 27 per coupon from Notes of £50,000 
nonrnol arxf £69.52 par coupon from Notes of £5.000 nominal. 


J.Henry Schroder Wagg & Co. Limited 

Agent Bank 



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^.Nru. TlMES WEDNESDAY MARCH 23 1994 


COMPANY NEWS; UK 


UK newspapers contributed lion’s share of turnover and profits 

Trinity rises 32% to £19.9m 


Sema sells 

I-Linie 

software 


By Ian Hamilton Fazey, 
Northern Correspondent 

Trinity International, the 
Chester-based regional newspa- 
per publisher, made pre-tax 
profits of £19£5m last year, an 
Increase of 32 per cent on 
1992’s £i5.o9m. which was 
restated in accordance with 
FRS3. 

Operating profits jumped 
from £iaim to £20.85m, includ- 
ing £418/100 from acquisitions. 

Mr Philip Grat chief execu- 
tive, said: This Is our best 
operational performance to 
date." 

Trinity, which owns daily 
newspapers in Liverpool and 
weeklies in Merseyside, North 
Wales, HannHa and the US, has 
changed tack since 1868 by 
divesting from paper making 
and concentrating on newspa- 
per publishing. 

Last year it fully integrated 
Scottish and Universal News- 
papers. bought in 1992. and 
spent £i2.4m buying Hudders- 
field Newspapers and £23 -2m 
Apipiiring the newspaper inter- 
ests of Argus Press, based in 
southern and south-east 

Rwgiawri- 

Tumover advanced by 16.5 
per cent from £1 15.4m to 


Trinity I nte rnatio nal ■ 

gtiare price (pence) 

500 T 



£ 134.4m wtth UK newspapers 
responsible for £79.4m - 59 per 
cent of sales compared with 54 
percent 

UK newspapers also made 
the lion’s share of profits with 
£15. 7m, or 75 per cent of the 
whole. 

PwnflHian and US operations 
benefited from senior manage- 
ment changes, new titles and 
ma rketing initiatives. Improv- 
ing profit contributions to 



Philip Graf: best operational 
performance to date 

£2.99 m (£2. 77m.) in Canada 
and £2.l7m (£1.8lm) in the 
US. 

Mr Graf said Trinity would 
be trying to expand further by 
Innovation, product develop- 
ment and acquisition, but was 
not at present involved in seri- 
ous discussions over buying 
more newspapers. 

Gearing rose from 145 per 
cent to 50 per cent, reflecting 
the latest acquisitions. 


Gamings per share show a 40 
per cent rise to 20ip (14.4p 
restated). 

A proposed final dividend of 
6.7p (6p) lifts the total by Ip to 
9.7p. 

• COMMENT 

Profitability in the regional 
press is notoriously dependant 
on local classified advertise- 
ments for jobs, homes and sec- 
ond-hand cars, as well as dis- 
play advertisements by 
retailers. If Trinity is to keep it 
up, the strength of the UK 
recovery will become more 
important as acquisitions 
become harder to find. 
Short-term, however. Trinity 
has one last cost squeeze to 
exploit: the Argus titles 
acquired in November are 
among the last in western 
Europe where journalists still 
use typewriters. Moving to 
computerised direct input and 
cutting out a stage in the pro- 
duction process should yield 
substantial gains in productiv- 
ity and profitability over the 
next two or three years, 
though manag in g such change 
in the newspaper industry 
always carries some risk of 
conflict and Interruption to 
revenues. 


Lincat up 
25% but 
warns on 
full year 

Lincat Group, USM-qnoted 
designer and manufacturer of 
commercial catering equip- 
ment, lifted pre-tax profits by 
25 per cent to £688,000 in the 
first half of 1993. But Mr Mar- 
tin Craddock, chairman and 
chief executive, said he was 
cautious about the outcome 
for the foil year. 

The shares fell 9p to 220p 
yesterday. 

The profit was achieved on a 
10 per cent rise in turnover 
from £6.5lm to £7.17m, bat 
behind the result there was a 
mixed response from the sub- 
sidiaries. 

Mr Craddock said that the 
main subsidiary, Lincat; had a 



good first half with turnover 
up 18 per cent and profit 11 
per cent 

At Colnbrook turnover was 
held and there was a small 
profit compared with a loss. 
Because of the way contracts 
fell, turnover at Corsair fell by 

9 per cent with marginally 
reduced profits bat there was 
progress in most areas. 

Douglas lifted turnover by 

10 per emit and profit by 29 
per cent. Sales of Lincat in the 
US grew by 36 per cent 

Mr Craddock said current 
order levels were slightly 
lower than could normally be 
expected at this time. How- 
ever, the interim dividend is 
increased from 2p to 2.2p - 
last time a total of 6p was paid 
from profits of £1.4m. 

Trafficmaster 
for market 
at £28. 7m 

Trafficmaster, a Luton-based 
company which claims to offer 
the world’s first commercially 
available on-board traffic mon- 
itoring system, is coining to 
the market with a capitalisa- 
tion of £28.74m, writes Andrew 
BoJger. 

Allied Provincial has placed 
7.5m Trafficmaster shares 
with institutions at I30p each. 
Dealings begin on March 31. 

Mr David Martel], the chief 
executive, said the marketing 
had been very well received 
and the flotation would raise 
£7.1 7m In new money - more 
than originally planned. 

Trafficmaster has installed 
Infra-red sensors which moni- 
tor traffic speed, transmit it by 
radio to a central computer 
and then teed the information 
to visual display units in sub- 
scribers' vehicles, advising 
motorists of the average speed 
and direction of any hold-up. 

The system already covers 
more than 1,000 miles of 
motorways and trunk roads in 
the south of England and the 
Midlands and part of the flota- 
tion proceeds will be used to 
extend the network to cover 
the main motorways in 
England. Wales and Scotland 
by the end of this year, and 
main trunk roads during 1995 
and 1996. 

The directors said that once 
the network was complete rev- 
enue from each subscriber 
should push profitability up 
quickly. 


MTM share placing to 
help fund £12m acquisition 


By David Wighton 

MTM, the chemicals company 
which sold mo6t of its busi- 
nesses last year to repay its 
bankers, is proposing its first 
acquisition since its financial 
reconstruction. 

It is to pay up to £lL8xn for 
Colin Stewart Minchem, a min- 
erals and chemicals processor 
which was a £5 .5m manage- 
ment buy-out from Benjamin 
Priest in 1989. 

The purchase will be funded 
partly by a placing of 9.7m 
shares at 60p. for which exist- 
ing investors can apply on a 
S-for-8 basis. 

Hill Samuel, the merchant 
hank, has also placed most of 
the shares which MTM's bank- 
ers agreed to swap for £283m 
of their loans last April. 

In August, MTM outlined a 
new strategy of acquiring tech- 
nology-related businesses 
which are either profitable, 
cash-generative and with a 
strong management team, or 
are emerging businesses which 
are expected to be 


profitable within 12 months. 

Qnliw Stewart uimhwri falls 
into the first category. Based 
in Winsford, Cheshire, it pro- 
cesses minerals and chemicals 
mainly for the detergent indus- 
try which accounts for 80 per 
cent of its sales. 

One of the three leading 
detergent companies provides 
a “substantial" proportion of 
its gross profits. 

Ignoring one large contract 
in 1991 sales and operating 
profits of CSM have risen 
steadily, reaching £l0.7m and 
£2D&n respectively In the 12 
months to March 1993. 

Mr David Swallow. MTM 
c hairman , said the initial con- 
sideration of £10.5m repre- 
sented 9.5 times fully taxed 
earnings for last year with the 
multiple dropping to 6 if the 
vendors earn the additional 
consideration of £1.3m. This 
requires operating profits of 
£2An next year. 

After the acquisition MTM 
will have net cash of £5m and 
net assets of £L5-8m- 
MTM also announced a pre-tax 


loss of £12m for 1993. down 
from £59 Jim in 1992. The 
remaining agrochemicals busi- 
ness made an operating profit 
of £300.000 on turnover of 
£21JLm. 

After head office costs the 
continuing activities made an 
operating loss of £818,000. 

Broker Hoare Govett is pro- 
visionally forecasting profits of 
£2m fids year for earnings per 
share of 5p after 15 per cent 

tax 

• COMMENT 

Given the valuations of most 
chemicals companies these 
days this deal looks almost 
suspiciously cheap, though 
there is always a risk of Cohn 
Stewart's ™in customer walk- 
ing away. M1M will now be 
hard pushed to repeat the trick 
by finding a decent earnings 
enhancing acquisition which 
can be ftmded by shares on a 
multiple of only 12. But a com- 
pany fresh from a near-death 
experience and stQl looking for 
a chief executive can scarcely 
expect much better. 


RPS shows 
13% growth 
to £825,000 

RPS Group, the USM-traded 
environmental consultancy, 
maintained growth in the sec- 
ond half of 1993 to end the year 
with pre-tax profits up more 
than 13 per cent from £727,000 
to £825,000. Turnover was 
£7 .52m, against £7 .62m. 

Mr Roger Looker, chairman, 
said that “as one of the leading 
companies in the sector with a 
strong balance sheet and posi- 
tive cash balances, we will ben- 
efit from the inevitable 
increase In the importance of 
environmental issues.'’ 

Trading and cash flow in the 
first quarter of 1994 gave cause 
for optimism, he added. 

Cash flow was positive for 
the third successive year and 
overall cash balances were up 
by £631,000 and stood at 
£646,000 at the year end. The 
company paid off all remaining 
debt in the first half and had 
no debt at December 31. 

Earnings per share edged 
ahead from 4.82p to 4.87p, 
while a final dividend of L3p 
raises the total for the year to 
2-4p (2Jtp). 


Derwent 
jumps to 

By Simon Davies 

Derwent Valley Holdings, the 
London-focused property 
investment company, reported 
a sharp jump in pre-tax profits 
from £896,000 to £2^fen in 1993, 
helped by lower interest pay- 
ments and rising rental 
income. 

The company, which 
announced a £l£L9m placement 
last July, has seen net asset 
value per share rise 8.5 per 
cent to 544p (50lp) since the 
issue, and anticipates further 
increases in 1994. 

Mr John Ivey, chairman, 
said: "Prospects for 1994 are 
encouraging. Management will 
continue to maximise the 
potential of the portfolio and 
acquire further properties.” 
The company has purchased 
£23.8m of properties since 
July. 

Net revenue from properties 
amounted to £7m in 1993. com- 
pared with £6.4m in the previ- 
ous year. Debt servicing costs 
fell from £3.1m to £2.5m in 


Valley 

£2.54m 

1993, due to falling interest 
rates, and the feet that pur- 
chases were timed towards the 
end of 1903. 

Net borrowings, however, 
climbed £6m to £34.7m as a 
result of acquisitions, repre- 
senting gearing of 55 per 
cent 

The company’s portfolio has 
remained well let, with void 
space of 32,000 sq ft at the year 
end. of which 26,600 sq ft were 
accounted for by newly refur- 
bished offices. 

About 85 per cent of Der- 
went’s portfolio is located in 
the West End of London, and 
the company said there were 
already signs of an improve- 
ment in the rental market It 
has a number of planning con- 
sents for developing its portfo- 
lio, to enhance its performance 
in a rising market 

Earnings per share more 
than doubled to 20.8p (10-2p). 
The directors recommended a 
final dividend of 6.05p, making 
a total of 9.1p <8.6p) for the 
year. 


Boost from Laidlaw helps 
Quicks advance to f 3m 


By Paul Taylor 

Quicks Group, the Manchester-based motor 
distributor, reported a 48 per cent increase in 
1993 pre-tax profits to £3.04m yesterday, up from 
£2.0Gm the previous year. 

Turnover grew by 27 per cent to £253m 
(2195m) almost entirely reflecting a £5gm contri- 
bution from the Laidlaw group of five Ford 
main dealerships, which were acquired in July 
last year. 

Earnings per share from the enlarged group, 
which now consists of 18 car dealerships, 10 of 
which are Ford, increased by 22 per cent to 9^p 
(7J5p) and the final dividend is bring raised to 
3p (2.75p) making a 5p (4-5p) total for the 
year. 

Operating profits grew by 23 per cent to 
£4^1 xq (£3.6fim) including a £336,000 contribu- 
tion from Laidlaw, while net interest costs ted 
to £L47m (£l-6m). 

The group noted that the recovery apparent in 
the first half continued into the second hair 
with pre-tax profits, on an equivalent basis, at 
£l.6lm compared with £950,000 for the 1992 
period. 


this near doubling of second-half pr 
reflected the continuance of strict many 
controls following the mstaiintjpn of the 
management team in late 1991, and in partii 
the profit impact of the run-down of the gn 
leasing activities. 

Quicks’ overall new car registrations 
exceeded manufacturers’ targets and the sal 
used vehicles had been higher than the ore* 
year’s total 

Despite difficult market conditions 
group's sendee, bodywork and parts distribi 
business also continued to be profitable. 

Mr Murray stated that “margins in every 
of our business have remained under pres 
for the whole year", but added that “mar 
ment action to further reduce the cost base 
helped ofiset margin erosion.” 

So far this year trading conditions 
unproved with registrations of both cars 
commercial vehicles ahead of last year. 

“The market remains highly competi 
but it is encouraging that Ford has bt 
to strengthen its position". Mr Mu 
said. 


for £1.5m 

By Alan Cano 

Sema Group, the Anglo-French 
computing services company, 
has abandoned attempts to 
succeed in the marketplace 
with I-Linie, the manufactur- 
ing management software it 
hoped would be the corner- 
stone of its packaged software 
business. 

The directors said yesterday 
tbat the company had sold the 
I-Linie business to CGI, a 
French subsidiary of Interna- 
tional Business Machines, for 
about £l.5m cash. The deal is 
subject to the approval of the 
German competition board. 

S eina , which had turnover 
last year in excess of £500m 
and pre-tax profits of £24J9m, 
acquired I-Linie through, the 
purchase of ADV Orga, a Ger- 
man software packages com- 
pany in 1989. It has since 
spent several million pounds 
of research and development 
funds, in conjunction with 
IBM, to develop the product 

I-Lfnie, a financial, account- 
ing and human resources 
package was seen by Sema as 
competition for R3, a success- 
ful package from . SAP, the 
German software house. 

Serna’s corporate plan calls 
for the company to achieve 60 
per cent of turnover from 
systems integration, 25 per 
cent from facilities manage- 
ment and 15 per cent from 

software packages. The compa- 
ny's packages business, exclu- 
ding I-Linie, currently 
accounts for 5 per cent of turn- 
over. 

The directors stated that the 
company would retain a pres- 
ence in the software packages 
which it continued to see as 
strategic to its development 


World of 
Leather 
in the red 

World of Leather, the USM- 
qnoted furniture retailer, 
ended 1993 with a pre-tax defi- 
cit of £121,000, after taking 
account of a £406,000 excep- 
tional charge representing the 
costs of a contractual dispute 
with its former warehousing 
and distribution company. 

Hie dispute was resolved in 
an out-of-court settlement just 
before the year end, and 
involved a £150,000 payramt 
by World of Leather. 

The pre-tax outcome com- 
pared with £44,000 profits hit. 
time and came from turnover 
op from £25.6m to £27.2xa. 
Operating profits, before 
exceptional items, increased 
from £5126,000 to £588,000. 

The improvement here, the 
company said, was achieved 
through improved margins - 
up from 44 & per emit to 47.1 
per cart - which more than 
offset higher distribution 
charges and administrative 
costs. 

On December 26 the com- 
pany opened its first new store 
for nearly four years, increas- 
ing the number of outlets to 
29. 

Losses per share came out at 
2.4p (O.ip earnings). The direc- 
tors said that provided there 
was no deterioration in the 
current level of trading it was 
hoped the company would 
return to the dividend list this 
year. The last payment wa&fn - 
1989. 

Holders’ ” 

rise held j? 

to 13% ■£ 

Holders Technology, . 'tflt- 
USM-qnoted supplier of too&- 
materials and equipment to 
the European printed circuit 
board industry, lifted pre-tacs, 
profits by 13 per cent, £ro»\ 
£394,000 to £446,000, > 
the year ended November w.. 
1993. 

Mr Rudolf Weinrefch, 
man and chief executive* m*!- 
the result was affected by Fer- 
ranti, ora of its larger UK a# ; 
tomers, going into receive^ :, 
ship. That left it with » 
debt of £56,000, thus redactor 
the profit growth to about 
of what it would other*!® 8 
have been. 

Turnover rose from £3-48® 
to £4m. Mr Weinrelcb 
that in the current year tn« . 
group expected to see Inert*®' 
tag sates of the Ispanex 
rives flexible circuit mate*®® 
which it distributes aero* 
Europe. •> 

He added that the oaW^T; : 
for the year would dep end. 0 ^ : 
the group’s success in sWftnje 
the product mix in favour w 
higher margin Items. * <■ 

Earnings per share ro se *” 
9.23p (9.07p). An .unebanS** 
final dividend of 4P J*. ' 

posed to maintain the total 81 






w, 


'•'ki 


, 1 t'l '*■ 

• ‘ ■ u 



COMPANY NEWS: UK AND IRELAND 


Buoyant result masks a growing focus on price in the marketplace 

Iceland ahead 18% to £65.2m 


By Peggy Hoffinger 

Iceland, the frozen and chilled 
foods retailer, yesterday 
warned it was beginning to feel 
the pressures of an increas- 
ingly price sensitive environ- 
ment, in spite of an 18 per cent 
increase in annn*| pre-tax prof- 
its to £65 .2m. 

Mr Malcolm Walker, t he 
chairman and chief executive, 
said there was a growing focus 
on price in the marketplace. 
While Iceland was insula te d 
from the worst effects of price 
cutting, by carrying a smaller 
proportion of the most vulnera- 
ble items such as bread and 
milk, “we are not immune 
from the problem," he gain 

Like-for-like sales in existing 
stores in the first few weeks of 
the year were running about 2 
per cent lower, partly because 


of the effects of lower prices. 
This followed a sharp slow- 
down in comparable sales 
growth last year, from 7 per 
cent in the first half to 3 per 
cent In the second. 

However, Mr Walker said he 
was confident the group would 
advance this year. Gross mar- 
gins had stabilised, and the Ice- 
land outlets at Littlewoods 
were expected to contribute 
profits in 1995. 

Sales for the group as a 
whole were 14 per rant hi gtw 
at £l.lSbn for the 52 weeks 
to January 1. The period 
compared with 53 weeks in 
1993. 

New Iceland stores contrib- 
uted 8 points of the increase, 
with the Littlewoods outlets a 
further 4 points. Like-for-like 
sales were 5 per cent wViraH, 
with nil inflation. 


The group opened a record 
103 new stores, including 43 
Littlewoods food halls. Mr 
Walker said Iceland planned to 
open a minimum of 50 stores 
this year. 

Higher capital expenditure of 
gllflm, a gnrnet £S4m fact time, 
helped to push up debt from 
£65m to £7Qm. Debt as a pro- 
portion of shareholders 1 funds 
fell from 40 per cent to 32 per 
cent 

Iceland's foray into France, 
which has cost £4m so far, was 
disappointing. Mr Walker said 

Iceland would not invest any 
further and would decide by 
the end of the year whether to 
remain in France. 

An improved final dividend 
of 2.6p is proposed for a total 14 
per rant higher at 3J$P- Earn- 
ings were 14 per cent ahead to 
15.68p. 


• COMMENT 

Many analysts have been left 
scratching their heads after 
this set of figures. Second half 
sales were much lower than 
expected and losses at Uttle- 
woods and in France were also 
higher than forecasts. Yet prof- 
its were in tine with expecta- 
tions. Cost-cutting and 
improved buying power may 
explain some of the profits 
achievement, bat many ques- 
tion whether this is sustain- 
able. Iceland aim appears to be 
struggling for comparable 
sales, which have fallen from 
growth of 10 per cent to a nega- 
tive 2 per cent in less thaw 12 
months. The bears have cut 
forecasts from £71m to a flat 
£65jxl While the multiple of 11 
appears attrac tiv ely low, this is 
likely to reflect a degree of pes- 
simism over the longer term. 


Robert Wiseman 
Dairies valued at 
£64m in float 


By Maggie Urry 

Robert Wiseman Dairies, the 
Scottish liquid milir processor 
and distributor, priced its flota- 
tion yesterday at loop a share, 
valuing the group as a whole 
at £63-7m. 

A total of £16. lm has been 
raised through an institutional 
placing, completed yesterday. 

The placing gives £l4.5m net 
new money to the group, with 
the sale of 15m shares, and a 
Anther 1.08m shares have been 
placed on behalf of family 
members. The family is also 
taking £3 .5m in a special divi- 
dend before the current year 
end on April 2. The float will 
leave the Wiseman family with 
nearly 74.8 per cent of the 
group, and, barring large 
acquisitions for shares, the 
family expects to retain control 
for some years to crane. 

The group is forecasting pre- 
tax profits for the current year 
of not less than £5.Q9m 
(£3. 19m), including a £327,000 
exceptional profit on the sale 
of an investment. Excluding 
that profit, eamlngB per share 
are forecast at 6.6lp (6.J4p), 


giving a p/e at the issue price 
of 15.L The notional net divi- 
dend for the year to April 2 is 
2J5p giving a yield of 3.12 per 
cent, covered 2.6 times. 

The group, which has just 
acquired Mackies dairy in 
Aberdeen, has 21 per cent of 
the Scottish milk market, but 
only 2 per cent of the UK mar- 
ket It specialises in supplying 
multiple retailers, which now 
take 65 per cent by volume of 
the group’s milk. 

Mr Alan Wiseman, ex ec u t iv e 
chairman, said that by being a 
low cost producer, the group 
could make good margins from 

selling to supermarkets in 
spite of low prices. 

Wiseman has expanded into 
England with the purchase of a 
dairy in Manchester in 1991 
and now plans a sizeable 
investment programme there. 
With the Manchester project 
and other investments the 
group plans to spend £14m 
over the next two years before 
any acquisitions, using the 
rash raised in the float 
Dealings in the shares start 
on March 28. The placing was 
arranged by Fanmure Gordon. 



IjAHndVMMr 

Alan Wiseman (left) with managing director Robert Wiseman 
and Hayieys Promise Gloriette, a black and white fresian 


Fags held 
back by 
lower 
copper 
prices 

By Kenneth Gootfing, 

Mining Correspondent 

Sharply lower international 
copper prices held down the 
1993 profits of Antofagasta 
Holdings, which has mining , 
banking, rail and water distri- 
bution interests in Chile. The 
group's pre-tax profits slipped 
from £23 ,5m to ms-Itt, 
Earnings per share 
increased by 22^ per cent to 
73J)p, however, after a strong 
performance by associate com- 
panies, reflecting growth in 
the Chilean economy. 

Antofagasta is lifting the 
total dividend by lp to 2lp 
with a final payment of I5p 
(14p>. 

Pre-tax profits of the group's 
mining operations fell from 
£6. 65m to £1.51in. The direc- 
tors pointed out that during 
last year the average global 
copper price fell by 16 per emit 
from $1.03 per lb to 87 cents. 

In December the group’s 
MichUla mining operations 
were merged with those of 
Iilnce, and ore from both 
mines is now processed 
through a solvent-extracthm-e- 
lectro- winning plant at T.hu«w. 
This process was not previ- 
ously available to Miehiiia. 

A £7-28m provision has been 
made for the write-down of 
mining assets associated with 
the previous process. 

Pre-tax profits from the rail- 
way operations increased from 
£JL37m to £4.1m and income 
from associated » M wi» irtnp 
was up from £12Jftn to ttsm. 

There was an £&25m profit 
on disposal of part of Banco 
O’Higgins, merged last year 
with the Chilean subsidiary of 
Banco Central BSspanoameri- 
«nni of Spain (CentroHIspaiio 
Bank) 

Group turnover was up from 
£72.1m to £86.7m. Administra- 
tion expenses jumped from 
£11. 8m to £18.6m, mainly 
because of the inclusion of an 
extra £4m costs at the Liana 
mine which became opera- 
tional from only the second 
half of 1992. 

Another tim in extra costs 
was incurred from the closure 

Of Mirhilla. 


Acquisitions help lift 
Avonmore to I£29.2m 


By David BlaekweS 

Avonmore Foods, the expand- 
ing Irish dairy and nwat pro- 
cessor, lifted turnover last year 
by 35 per cent to more than 
£lbn, while pre-tax profits rose 
by 17 per cent from KSfim to 

Turnover totalled I£l.l3bn 
(£L09bn) against I£831m. 

Mr Brendan Graham, group 
secretary, described passing 
toe £lbn turnover mark “as an 
important and significant mile- 
stone in the growth of Avon- 
more as an international food 
group.” 

More than 73 per cent of 
turnover was generated over- 
seas, against 66 per cent in 
1992. 

The company attributed the 
rise to organic growth and 
acquisitions, of which the most 
important was the purchase 
last July for £21.6m of the Bir- 
mingham area operations of 
Dairy Crest. This gave the 


group almost 8 per cent of the 
UK’s liquid milk market. 

Total sales for the dairy 
group were up 35 per cent to 
l£572m (l£422m), helped by 
strong UK milk and US cheese 
sales. Operating profits on the 
dairy side increased from 
IElB.5m to I£24.2m, giving mar- 
gins of &2 per cent 

Operating margins in the 
meat division improved in the 
second half from 1.8 per cent to 
&S per cent - still below the 
1992 levels. 

Turnover for meat was 50 
per cent ahead at I£454m. 
reflecting the integration of the 
acquisitions. 

Earnings per share were 1&5 
per cent ahead at I4.35p 
{12. lip). A final dividend of 2p 
is proposed (1.85p), bringing 
the total for the year to 3.55p 
(3.3p). Mr Graham said the 
group expected to make fur- 
ther advances this year as It 
continued to consolidate its 
acquisitions. 


• COMMENT 

The tough conditions in its 
markets -make this a satisfac- 
tory performance for Avon- 
more, which has grown rapidly 
through acquisition. It couid 
be argued that although mar 
gins are tight, the company is 
still making returns and hnc 
plenty of room for improve- 
ment. The management runs a 
tight ship, but the company 
could be said to be driving 
towards the big league too 
hard and too fast While the 
core dairy business looks good, 
the company has to negotiate 
the changes looming in the UK 
milk market It is not so famil- 
iar with the meat sector, which 
appears to be giving some 
problems. Analysts are expect- 
ing earnings to increase by 
about 9 per cent this year 
as the tax charge rises, putting 
the company on a prospective 
multiple of around 10.5 - 
fair value in the sec- 
tor. 


Lilliput grows 53% to £3m 


By David Blackwell 

Lilliput Group, the maker of 
hand-painted miniature china 
cottages that was floated in 
November, boosted profits by 
53 per cent and sales by 21 per 
cent for 1993. 

The pre-tax figure rose from 
ntm to ti iB m on turnover 
up from £13£m to O&Sm. 

A dividend of 0.6p is pro- 
posed, in line with the prospec- 
tus forecast and equivalent to 
4JJ5p if the shares had been 
trading for a full year. Earn- 
ings per share were 9-5p (6.7p). 

Sales in the UK, which 


accounts for more than 60 per 
cent of turnover, were up by 25 
per cent. TTie US. the second 
biggest market with 27 per 
cent of sales, improved by 10 
per emit. In order to cope with 
demand, the group created 100 
new jobs in the year. 

Membership of the collec- 
tors’ dub - a vehicle to stimu- 
late demand for the models - 
rose from 58,000 to 68,500. 

Mr John R usse ll, chairman 
and chief executive, said mem- 
bership had risen to 7L500 in 
the first two months of this 
year “and the momentum is 
still growing.” 


Net interest receivable was 
£24.000, compared with payable 
interest of £121.000 last time. 

The Cumbria-based group 
ended 1993 with £4m cash. Mr 
Russell said it was looking for 
an acquisition where it could 
use its skills in marketing col- 
lectable products. 

Mr Roger Fitness, chief exec- 
utive, who led the group's 
move into the US market, has 
resigned for personal reasons. 
He will remain as a consultant 
for a minimum of three 
months. Mr Russell is assum- 
ing the role until a new chief 
executive is appointed. 


GPT wins £40m Chinese order 


By Andrew Adonis 

GPT, the UK-based telecommunications joint 
venture between GEC and Siemens of Germany, 
has won a Chinese contract which it claim* is 
the largest ever awarded for the next generation 
of telecoms transmissions systems. 

The £40m order includes equipment for a 
1,400km system using “synchronous di gital hier- 
archy” technology, the state-of-the-art transmis- 
sion backbone for carriage of high-speed data 
and voice t raffic 

GPT beat Alcatel of France and AT&T of the • 


US for the contract Mr Peter Brown, managing 
director of GPT’s network systems division, said 
its success was the result of collaboration 
between Siemens and GPT’s UK-based develop- 
ment team in a £2 bn joint development pro- 
gramme for network infrastructure. 

GPT has a manufacturing joint venture in 
Shan g hai, called SLdtec, hut most of the SDH 
equipment for the contract will be manufac- 
tured at the company's Coventry plant 

China has lass than nnp phone line per 100 
people, but wants to quadruple its number of 
lines by the year 2000. 


Bourne End reduces deficit to £55,000 


By Simon Davies 

Bourne End Properties, the property 
investment company, achieved a small 
profit in the second half of 1993, resulting 
in a reduced pre-tax loss of £55D00 for the 
year, against a deficit of £1.17in in 1992. 

The company successfully pushed 
through a 3-for l rights issue late last year, 
which has transformed the company and 
given rise to a more aggressive investment 
policy. 

At the December 31 year end, borrow- 
ings had increased almost threefold to 
£i05m, but net asset value per share rose 


12p to 85p and gearing was more than 
halved from 580 per cent to 230 per cent 

During 1993, net rental income increased 
from £3.47m to £3Blm, while net interest 
payable fell from £4 22m to £&34m. 

Mr Leo Noe, chief executive, said that 
rental income was currently L3 times 
interest payable, despite a farther £2lm of 
acquisitions announced in February. The 
company is comfortable with current debt 
levels. 

“If the market continues to improve, we 
would be doing our shareholders a disser- 
vice if we reduced our gearing by m uc h ." 
he added. 


Bourne End has renegotiated its debt 
and more than half is now fixed for 
between 15 and 20 years, at interest rates 
of below 10 per cent 
The company's property portfolio 
was valued at E147m in December, 
representing upward valuations totalling 
£lL9m, of which £5.5m was on proper- 
ties owned before 1993. Bourne End's 
net worth increased from £39m to 
£45m. 

Losses per share were reduced to 0.4p 
(8£p) and a final dividend of 0.25p is pro- 
posed, maintaining the total for the year 
at Ip. 


Secure Trust edges ahead to £7.6] 


By Alison Smith 

Secure Trust, the financial 
services group, yesterday 
reported a 4 per cent increase 
in pre-tax profits from £7. 32m 
to £7.61m for 1993. 

Net interest income rose to 
£4.01m (£3.42m). helped by the 
group’s acquisition of Peoples 
Bank during the year, which is 
estimated to have contributed 
some £500,000 in interest 
income. Fees and commission 
income rose to £145m (£13 An). 


Warning 
hits Motor 
World shares 

Shares of Motor World Group, 
the car parts and accessories 
retailer which floated in Febru- 
ary last year, fell Up to 314p 
yesterday following an adverse 
trading statement at the 
annual meeting. 

Shareholders were told that 
the exceptionally wet winter 
weather had resulted in a cus- 
tomer fall-off which bad 
affected retail sales during the 
opening half year. 

However, this was partially 
offset by increased spending 
per head and, in the light of an 
increase in the nun £j' r .®* 
branches from 180 to 209, the 
board said it was -quietly con- 
fident" in the outcome for tne 
current year. 

R & Merc American 

River & Mercantile American 
Capital & Income Trust raised 
net asset value from 49.34p to 
49J5Sp per capital share m the 
year to February 28 1994, whde 
net assets per mcome snare 
were also higher, at 75.5 P 
against 70.59p previously. 

Net earnings m the year 


The group's main activities 
comprise its household cash 
management service, its bank- 
ing service, and motor and gen- 
eral insurance business. 

Provisions for bad and doubt- 
ful debt fell sharply from 
£382,000 to £296,000. 

The board proposes a final 
dividend of 10.5p per share, 
which gives a total of 15p 
(I3.5p) for the year, an increase 
of 11 per cent. Earnings per 
share rose to 35.8p (3A3p). 

Mr Henry Angest, chairman 


and chief executive, described 
the profit growth as steady 
rather than spectacular. He 
envisaged future growth com- 
ing from the group's banking 
activities, through developing 
facilities such as the cheque 
book and cash card currently 
available to Peoples Bank cus- 
tomers. 

The group is also looking to 
expand its geographical spread 
beyond the Midlands and 
Bradford where it is based at 
present 


NEWS DIGEST 


dropped from £610,000 to 
£562,000, equivalent to 7.49p 
(8.i3p) per income share. The 
final dividend is held at 2-^J 
for a same- again total of 7J8p. 

American Trust 

American ITust which invests 
mainl y in US equities, 
increased net asset value by 16 
per cent from 285 -2p to 30&9p 
at the end of January 1991 

Net earnings in the year 
grew from £4.Q2m to £4.58m 
and frilly diluted earnings per 
share were ahead 14 per cent at 
5.46P 14.73P). The recommended 
final dividend is 3.6p (3.#) for 
a total up from <L9p to 5Ap. 

Reflex Group 

Reflex Group, the computer 
services and software com p any 
based in the Irish Republic, 
returned to profit in the year 
ended December 31. 

The pre-tax figure came out 
at IE619.000 (£596,000) against a 
loss of l£4.5Sm for the eight 
months to December 31 1992, 
when the figure was hit by 
iftm written off to reserves. 

The 1993 pre-tax profit was 
also boosted by a writeback of 
1X294,000 of provisions for 
losses on discontinued 
operations against a write- 
down of I£486,000. 


Turnover was ahead at 
I£8.1m (I£5.58m). Earnings per 
share were 4J25p (26A5p losses). 

Trace Computers 

Falling interest rates, reduced 
borrowings and an improving 
market helped Trace Comput- 
ers, the software specialist, 
increase interim pre-tax profits 
from £105,000 to £216400. 

Turnover for the six months 
to November 30 Was also 
ahead, at £9.24m (£8£4m). 

Earnings per share were 
higher at L22p (0.59p) and the 
interim dividend is again 0fr5p- 

Law Debenture 

Net assets per share of the Law 
Debenture Corporation rose by 
30 per cent to 667.3P at the raid 
of December 1993, a g ainst 514p 
a year earlier. 

Net earnings for the year 
improved from £ 4.57m to 
£4.98m, equivalent to 21.9lp 
(20.07p) per share- The divi- 
dend total is raised by lp to 
19_25p with a 12_75p finaL 

Berry Starquest 

Berry Starquest, an investment 
trust, bad a net asset value per 
share of 239.6p at the year 
ended January 31, against 
200. lp six months earlier and 


Mr Angest acknowledged 
that administrative expenses, 
at £10.16m a gains t an 

operating income of £18.54m 
(£17 Jim), were high, but attri- 
buted this partly to the cost of 
meeting regulatory require- 
ments. 

In December the group 
launched a telephone-based 
motor and household insur- 
ance service - SecureDirect - 
in response to inroads in its 
business from other telephone 
insurance services. 


170.7p at the previous year end. 

Net revenue for the year fell 
from £160,000 to £126,000 for 
earnings per share of 2.4p 
(3Jp). An unchanged dividend 
of 5L2p is proposed. 

B Gifford Japan 

Net asset value per ordinary 
share of the Baillie Gifford 
Japan Trust stood at 789.2p at 
February 28, a decline of 3.6p 
an the figure standing at the 
August 31 year-end. 

Available losses for the half 
year to end-Febniary totalled 
£209.562 (£68£27) and losses per 
share were L9p (0.63p). 

Lon & St Lawrence 

Net asset value per share of 
London & St Lawrence Invest- 
ment Trust stood at 182.45p at 
February 28, against 17&32p six 
months earlier and 157.06p at 
the previous year end. 

Net revenue for the year 
more than trebled from 
£513,323 to n.ffim and earnings 
per share were 5.l4p (2.7p). 

hi November last year the 
trust merged with its associate 
company, Practical Investment 
Company, and in fine with its 
stated intention to pay an 
interim dividend in May each 
year, the trust has announced 
a pay-out of 3.12p this time. 


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Oil price reaches 
$14 ahead of 
Opec meeting 


By Robert Corzine 

Oil prices edged upwards 
yesterday is advance of the 
meeting in Geneva on Friday 
of the Organisation of Petro- 
leum Exporting Countries. 

The price of the benchmark 
Brent Blend for May was hov- 
ering just above the S14 a bar- 
rel level in late London trading 
yesterday. That compares with 
a closing price of $13.77 on 
Monday. 

Part of the price increase 
was attributed to storms in the 
North Sea. which prevented 
tankers from loading at Nor- 
way's Statfjord and Gullfaks 
fields. Loading operations at 
Norway’s two onshore termi- 
nals, Mongstad and Sture, were 
also affected by bad weather. 

Mr Peter Gignoux, a trader 
at the London office of Smith 
Barney, said evidence of "a bit 
more demand from refiners" 
was also helping to underpin 
the market 

The firmer price coincided 
with a growing belief in the 
markets that Opec oil minis- 
ters may choose to roll over 
the present production quota 


of 24.52m barrels a day. rather 
than try to engineer a cut in 
output to boost prices. 

"They are waiting for 
demand to bring the price up." 
according to Mr Joseph Stanis- 
law at Cambridge Energy 
Research Associates in Paris. 
He said that an extension of 
the quota for at least the next 
two quarters could be por- 
trayed in a “constructive and 
positive" light. "The longer 
they say this Is the right quota 
the better it would be for the 
markets,” he added 

Unlike previous Opec meet- 
ings there has been little pub- 
lic evidence of pre-meeting con- 
sultations between member 
states. Nevertheless analysts 
say the roll-over may emerge 
as the preferred option because 
a small cut in quotas of, say, 

500.000 b/d would be unlikely 
to have a lasting impact on 
prices and would simply give 
away market share to indepen- 
dent producers. 

A larger cut of Lm-I-5m b/d 
could provoke a sharp rise in 
prices, but it would also raise 
doubts whether some Opec pro- 
ducers would abide by It. 


BP set to 
explore in 
China’s 
Tarim basin 

By Robert Corzine 

British Petroleum has become 
the latest international oil 
company to secure an agree- 
ment to explore for oil in the 
remote Tarim basin In western 
China. 

Under the terms of the 
agreement with the China 
National Petroleum Corpora- 
tion BP Exploration and four 
Japanese partners will spend 
three years on a seismic pro- 
gramme. after which they will 
have an option to begin explo- 
ration drilling. 

The consortium's commit- 
ment is on a relatively small 
scale, thought to be around 
83m for the seismic operation. 
Other foreign companies 
which have recently reached 
exploration agreements in the 
area include Exxon and Tex- 
aco of the US, Agip of Italy 
and a number of Japanese 
companies. 

The Tarim Basin has long 
been viewed with interest by 
foreign companies, bat its 
remote location and lack of 
infrastructure means develop- 
ment of any oil finds are likely 
to be long-term prospects. 


MARKET REPORT 


Silver leads gold to two-month high 


The London GOLD price was 
fixed at the highest level since 
January 20 after a buying 
spree, which started in the sil- 
ver pit pit of the New York 
Commodity Exchange, set-off 
buying stop-loss orders. 

The yellow metal ended at 
S3S9.25 a troy ounce, while SIL- 
VER was up 16 cents at $5.57‘/j 
an ounce. 

The market had been very 
steady before the futures 
opened, buoyed by continuing 
tensions in South Africa and 
concerns over the deployment 
of US missiles in South Korea. 

At the London Metal 
Exchange COPPER edged up 


UM wnwim STOCKS 

(As Jt Mamsyf oa*8 
tonnes 

Aluminum 

+ 1.625 

ft> 2.598.150 

MumMum aJoy 

-80 

«n 45.820 

Copper 

-1.650 

to 514075 

Lead 

-560 

to 331.550 

MCMt 

-354 

10 134200 

Zhc 

-4000 

to 1,091.450 

Un 

+200 

10 24580 


on the back of commission 
house and merchant buying, 
although the move failed above 
$1,950 a tonne, for three 
months delivery, which damp- 
ened sen timent in other met- 
als. 

Three months ALUMINIUM 
ended the day at $1,334 a 


tonne, down from its high of 
$1,340 but up on Monday's 
$1,328 close. Speculative and 
merchant sales were blamed 
for the late fall. 

London Commodity 
Exchange COFFEE futures set 
fresh highs, the May position 
climbing to $1,355 a tonne 
before ending the day at $1,354, 
up $23. 

Same dealers said they were 
slightly surprised by the rise, 
which they thought might 
reflect a trade house buying in 
London and selling in New 
York. 

Compiled from Reuter 


Brussels’ cheese-paring irritates Italians 

John Simkins reports on resistance to a proposal to reduce the country’s milk quota 


I taly's milk producers are 
strongly resisting a pro- 
posal by the European 
Commission to reduce an 
increase in their quota just as 
they believe they getting are 
back on track after years of 
over-production. 

Their anger is directed at Mr 
Rene Steichen. the agriculture 
commissioner, who has 
decided that an agreed 
increase of 900,000 tonnes in 
Italy's a nn u al milk quota, tak- 
ing It to a total of 9 -9m tonnes, 
should be reduced by 350,000 
tonnes in 1994-95. 

A hot reception awaited Mr 
Steichen earlier this month 
when, he was to attend the 
opening of Italy's agricultural 
trade fair in Verona, but the 
commissioner had second 
thoughts and stayed away. In 
response. Italy's three big 
farming associations also boy- 
cotted the event However, the 
producers are likely to con- 
front him at Brussels on March 
28 and 29 when the European 


Union’s agriculture ministers 
will discuss the Italian quota. 

Italy, which is a net importer 
of gink, admits to having vio- 
lated milk quotas for much of 
the 1980s and Denmark, Britain 
and the Netherlands were 
reluctant to see its quota 
increased. But the 9.9m tonne 
quota was granted in the light 
of I talian commitments to 
bring production down from mi 
estimated 11.5m to 9.9m by the 
end of March 1995. As a first 
stage. Italy was expected to 
reduce production to 10.6m by 
the end of this month. 

The commission believes 
Italy is not meeting the 
demands made of it. Whereas 
Spain and Greece have had 
quota increases confirmed - 
the latter only provisionally - 
it has therefore shaved Italy’s. 

The decision will make it 
for the co mmissio n to 
win the approval of the 12 EU 
countries for a suggested 1 per 
cent cut in quotas in 1994-95. 
'The market is fragile and bal- 


ance is maintained by quotas 
on the one band and subsidis- 
ing outlets on the other," 
according to a spokesman for 
the agriculture commissioner. 
“There is no guarantee the bal- 
ance will continue and there is 
a serious danger of interven- 
tion stocks building up without 
the cut in quota." 

M r Alfredo Diana. 
Italy’s agriculture 
minister, retorts that 
Mr Steichen has acted too hast- 
ily grid t h?r Italy bad until the 
end of this month to present 
evidence of the results of a 
costly overhaul by the minis- 
try, which' has subjected 

290,000 mflk producers to quota 
controls. The Italians hope that 
this data will enable Mr Stei- 
chen to amend his proposal 
and be is in close touch with 
Mr Diana. However, if the cut 
is confirmed, Italy may face 
more financial penalties on top 
of the L2£00bn (£l.l2bn) that 
Confagricoltura, the farming 


a yenrfatinn. estimates it must 
pay for violating past quotas. 

The herd-by-herd examina- 
tion revealed widespread 
abuses, such as quotas being 
claime d by defunct businesses, 
which disqualified 35,000 
farms. The commission claims 
that at one time quotas were 
issued for over 12m tonnes, 
compared with production esti- 
mated by the Italians at iz.Sm. 
and Confagricoltura admits 
t-hat the abuses date back to a 
period when Italy “paid too lit- 
tle attention to quotas". 

Mr Steichen has compli- 
mented Mr Diana on the prog- 
ress made but it is only in the 
past 18 months that Italy has 
signalled a serious attempt to 
get output in line with quotas. 
Italy has always objected to 
the system, mainly because It 
imports 60 per cent of its 

ynwiial Tfttri trmpg con sum ption 

and has not wished to curb 
development of its domestic 
producers. Production is con- 
centrated in the north and 


transport costs make fresh 
milk expensive in much of the 
south 

"It seems nonsense to cut 

350,000 tonnes of quotas from a 
country that imports," says Mr 
Walter Luchetti, a director gen- 
eral at the agriculture minis- 
try. Mr Luchetti rejects sugges- 
tions that Mr Diana's efforts to 
reduce production have met 
with resistance within Italy's 
fragmented milk industry. 
"Our producers have accepted 
the regulations and are making 
great efforts to comply," he 
says. 

Confagricoltura says that 
much of Italy's milk is used to 
make cheese, which is not In 
surplus in the EU, and is scep- 
tical about the effectiveness of 
quotas as a method of balanc- 
ing the market 

"But we are serious about 
resolving the milk issue 
because this is essential to g£ve 
us negotiating influence in 
other agriculture reforms," 
says the association. 


Underbidders hope for Chilean deal 


Commodity price gams 
forecast for 1994-95 


By Kenneth Gooding, 

Mining Coneapondent 

Magma Copper of the US and 
Broken (fill Proprietary. Aus- 
tralia's biggest company, still 
hoped to win control of the 
El Abra project in Chile, one 
of the world's biggest 
undeveloped copper deposits, 
Mr Burgess Winter, the 
president of Magma, said 
yesterday. 

Codelco, the state-owned 
Chilean copper group, put 51 
per cent of El Abra out to ten- 
der last year and in October 
Cyprus Amax of the US with 
its partner Lac Minerals of 
Canada, was first past the post 
offering US$404m and an 
undertaking to spend $307m on 
the project 

However, in February, 
Cyprus and Lac said tests they 
had made to confirm previous 
estimates showed reserves at 
El Abra might be significantly 
lower than previous data 
suggested and they might have 


to renegotiate the deal. Codelco 
has given them until May 15 to 
complete. 

Mr Winter said that. If nego- 
tiations between Codelco and 
Cyprus-Lac broke down, Mag- 
ma-BHP would press for El 
Alma to pass to them as the 
second-highest bidders rather 
than be put out to tender 
again. 

He said Magma-BHP had bid 
high for El Abra. offering 
US$240m, some $10m ahead of 
RTZ of tiie UK, third past the 
post The gap between the 
Magma-BHP and Cyprus-Lac 
bids was explained ter the feet 
that Magma-BHP’s test work 
s ug gested that El Abra could 
support annual output of 

160.000 tonnes of copper 
whereas the highest bidders 
were looking originally for 

225.000 tonnes. "We thought 
that was impossible,” said Mr 
Winter. 

Under the rules Codelco set 
for the tender, failure to con- 
clude a deal with the highest 


bidder was to have resulted 
automatically in the start of 
negotiations with the under- 
bidder. 

However, Mr Winter pointed 
out that Chile's recently- 
elected new government had 
changed virtually all of Codel- 
co’s senior executives "so at 
the moment it is difficult to 
find someone to talk to”. 

Some analysts have 
suggested that the disagree- 
ment over EJ Abra is extremely 
embarrassing for Codelco as 
the deal, the first sale of a big 
ore body fay the group, was 
supposed to set a pattern for 
other privatisations. It also 
coincided with revelations that 
a relatively junior executive 
had lost US$207m in capper 
futures trading. 

• Mr Winter, in London to 
speak to investors, said Magma 
expected the copper price to 
reach $l a lb by the end of this 
year against last night's Lon- 
don Metal Exchange three- 
month price of 8S.6 npnfcg. 


By NRdd Tart in Sydney 

World commodity prices are 
forecast to rise by 6 per cent in 
199495, regaining with interest 
the estimated overall fell of 2 
per cent seen in 199394. 

According to a report from 
the Australian Bureau of Agri- 
cultural and Resource Econom- 
ics, commodity prices overall 
rea ched a nadir in the first half 
of 1993-94, but recovered with a 
6 per cent rise In the first quar- 
ter of this year and are expec- 
ted to show a farther 1 per cent 
increase in the second quarter. 
In the next fiscal year Abare 
suggests demand will 
strengthen as more countries 
move out of recession, and 
tighter supply renditions per- 
sist, particularly for rural prod- 
ucts like sugar, cotton and 
rice. 

As for as specific commodi- 
ties are concerned, Abare pre- 


dicts that the world gold price 
should rise by about 7 per cent 
in 1994, to average US$385 an 
ounce over the year (close to 
the present level). The forecast- 
ers suggest that the price rise 
will result from increased jew- 
ellery fabrication and invest- 
ment demand, spurred by the 
general improvement in eco- 
nomic conditions. 

Abare also sees a firming of 
the wool prices in 1994-95, as 
strengthening demand from 
western Europe and, to a lesser 
extent, Japan outweighs some 
upward revisions to expected 
level of the Australian wool 
production. It suggests that the 
market indicator price could 
increase by about 9 per cent, to 
average A$5.30 a kilogram 
clean. However, the average 
market indicator for 1993-94 is 
put at around $4A5, still mar- 
ginally below the previous 
year’s figure. 


COMMODITIES PRICES 


BASE METALS 

LONDON METAL EXCHANGE 

(Prices from Amalgamated Metal Trading) 

■ ALUMINIUM, 93.7 PURITY $ per tonne) 


Precious Metals continued 



Cash 

3 ihtlfiS 

Close 

13145-4.5 

13345-6.0 

Pravkxa 

130&-9 

1332-3 

HfltVtow 


134271333 

AM Official 

1314-4.5 

1338-45 

Kerb ctoeo 


1333-4 

Open lot 

271,041 


Total daily turnover 

38251 


■ ALUMfftfUM ALLOY ($ per tonne) 


Close 

1270-5 

1265-90 

Previous 

1285-300 

1310-5 

WgtVlow 


1310/1285 

AM Official 

1200-S 

1295-300 

Kerb dose 


1285-80 

Open M. 

4.561 


Total daily tincw 

1.034 


■ LEAD ($ per tonne) 



Close 

482.5-3.5 

477-8 

Previous 

462.5-3.0 

477-8 

HiqhrTow 


4745/474 

AM Official 

462-45 

477-75 

Kero dose 


473-4 

Open <iL 

33.932 


Total Paly turnover 

3553 


■ NICKEL (S per (orawl 


Ooso 

5620-30 

5685-90 

Previous 

5650-60 

6715-20 

WtjMow 


5700/S640 

AM Official 

5630-5 

5660-5 

Kerb dose 


5665-70 

Open kit 

50.848 


Total daav turnover 

9.177 


■ TiN tS per torewl 



Close 

5475-60 

5525-30 

Previous 

5535-40 

5585-90 

Higntow 


5570/5490 

AM Official 

5510-2 

5564-8 

Kerb dose 


5500-10 

Odct tra. 

19.462 


Total tfcsty turnover 

5.176 


■ ZINC, special nigh grado (4 per tonne) 

CJooe 

951 5-2.5 

972-3 

Previous 

95fl.5-r.S 

977-8 

High-low 


977/971 

AM Official 

953.5-4.0 

974-4.5 

Kerb dose 


971-3 

Open In l 

109.53 1 


Total daily tunover 

18,717 


■ COPPER, grade A (S per tonne) 


Close 

1940-1 

1952-3 

Previous 

1933-4 

1946-6 

Kph/tow 

1943/1942.5 

1956/1940 

AM Official 

1942.5-45 

1955-8 


KflJB dose WX-SO 

Open im. 224.798 

Total dolly turnover 60223 

■ LME AM Official C/S rate: 1.4870 

IAIE Ctartng C/S rate: 1.4822 

Spoil 4670 3 mm*!.483> 6 mOer 1.4003 9 mml.4787 

■ HIGH QflAOE COPPER (COMEX) 




ours 



Open 



a am 

ctang* 

Men 

lew 

tat 

*W 

Mr 

9125 

*025 

3105 

91 10 

2.355 

553 

Hf 

91.10 

*025 

91.40 

91.10 

1.090 

38 

Mr 

90.90 

*025 

91-70 

9090 

42,638 

10,018 

Jm 

90/0 

+0.25 

91.10 

91.10 

923 

1 

H 

90 55 

+035 

9105 

9050 

11.837 

1.573 

tag 

9050 

*0.40 

- 


472 

18 

Tote 





70.189 

11903 


PRECIOUS METALS 

■ LONDON WAiJON MARKET 
(Prices suppBeq By N M RotfachMl 

Gold (Tray oil 


C eouv. 


rung fix 

moon fl* 

"3 High 
's Low 
rious dose 


200.607 

261.754 


S price 
383.00-389.50 
306. 80- 367 JO 
380.95 
389.15 

389 50-390.00 
306.30-366.70 
3flfi.00-J6S.40 
s Ldn Moan OoM Lendbig Run (Vs US5] 

wtfi — - 3 J 5 0 months .... — 156 

snths . 
snths . 

IT Rx 


snths 
amns 
or 

I Colne 

errand 
leleaf 
Sovereign 


s«a Day's Open 

price dongs Hgt ta M W. 

Mr 389.2 +3.4 

Apr 389.7 +3.4 3845 396.4 54779 13.749 

May 3949 +45 

JM 392.1 +3J 393-3 3847 42.370 4440 

flag 394.6 +45 395.0 3914 7.706 98 

Oat 397.2 +45 387.3 3956 4354 20 

Total 144211 14900 

■ PLATINUM NYMEX {50 Troy oz.: 5/tray az.) 

Apr 

4054 

+23 

406.0 

4044 

9.115 

1461 

Jd 

406.7 

*80 

409X 

4044 10X85 

1.007 

Oct 

407J 

+3J> 

4085 

407.0 

14»7 

62 

Jan 

407,7 

+3.1 

4085 

4004 

574 

- 

Apr 

403.1 

♦3.4 

409X 

409.0 

707 

47 

ToH 





21XM 

1*77 

■ PALLADIUM NYMEX <100 Tray at: **oy az.) 

Mar 

13SJN 

+135 


. 

14 

. 

Jbb 

13485 

+1.55 

136.00 134,75 

1910 

48 

Sep 

13545 

+I5S 

13825 

13825 

390 

- 

Dec 

13445 

♦ 155 

- 

- 

183 

4 

Total 





4X08 

82 

■ SILVER COM EX (too Tray az.; Cmts/tray at) 

Mar 

5583 

+17.3 


5454 

863 

232 

Apr 

5588 

+174 



5 

- 

May 

581.5 

+173 

563.0 

5480 68406 

5.95S 

Jnl 

585J 

+17.4 

5680 

5494 

17X57 

505 

S»P 

5688 

+17.5 

5725 

SS9X 

5X25 

218 

See 

5742 

+174 

577X 

560.0 

8.747 

135 

Total 




311240 

7458 

ENERGY 






■ CRUDE (ML NYMEX (42.000 US gate. S/bamfl 


Lata* 




*>P* 



price 

dwige 

w* 

Low 

tat 

Vet 


15.40 

*0.03 

1850 

1828 *4.199 36.878 

My 

1528 

+0.05 

1838 

1814111454 43,449 

Jut 

1831 

+0.08 

1S38 

1815 69437 

14.418 

Jul 

1537 

+0.06 

15.44 

1828 

33.141 

6.453 

Aug 

15.50 

*006 

15 55 

1548 

17.371 

1218 

Sep 

1856 

+007 

15X0 

154fl 19,532 

733 

ToW 




414,797114488 

■ enuoe OIL IPE fSTbarreo 





Uteri 

Deyta 



Open 



price 

change 

Mob 

Urn 

tat 

VU 

MJ 

1498 

. 

14.10 

13.90 

61.083 

18,532 

Jrni 

1188 


1347 

13.79 

25.783 

8X09 

Jd 

1499 

- 

1407 

1348 

18,177 

18*3 

Auo 

14.07 

*005 

14.12 

1395 

9,678 

1.083 

Sep 

14.15 

-0.12 

1440 

14.03 

4,138 

40 

Oct 

14.22 

•Oil 

14.22 

14.18 

2X93 

280 

Tote 




124,187 81288 

■ HEATING OIL NV1EX (42400 US e.USgflS.1 


Latest 

Day's 



am 



price 

dungs 

Wffl 

LOW 

w 

Val 

Apr 

4545 

*0.40 

4875 

4800 

31X05 

11X80 

My 

44.15 

+W2 

44.45 

43.75 50.915 

4.790 

Jnn 

44.20 

*002 

44 40 

4340 35470 

1,773 

Jd 

44.60 

+0 27 

44X0 

44.15 

22.392 

M6 

tag 

45.15 

+00! 

4580 

4815 

9X62 

90 

S«P 

46.30 

*0.12 

4650 

4040 

8448 

10 

Total 




189X11 

11118 

■ GAS OIL tre iSTonnil 





SM 

o«r* 



opn 



pries ebasge 

Hffi 

low 

AH 

W 

Apr 

14100 

+LZ 14355 I39S 23.366 

7X37 

May 

14CJ5 

♦4 00 

14225 

139X0 

18339 

6440 

JM 

141.75 

*3.25 

141.75 

139.50 

19.460 

1X89 

JOl 

14150 

+475 

14225 

14045 

11*68 

1X9* 

Aug 

144.50 

+2.50 1-H 00 142X0 

5X80 

138 

S«p 

14575 

+200 

14875 144.00 

3472 

383 

Trial 




109483 17X83 

■ NATURAL GAS WMR (IC.OOO mmBBi, SimrnKui 


(am 

ftey* 



Open 



pries 

dasgr 

Ityl 

Law 

tat 

tot 

Apr 

1078 +8020 

2105 

2035 14X24 

9.560 

Hay 

2.100 

■0012 

1120 

2080 11924 

1337 

JM 

2.100 

-aot2 

2120 

2095 

9X77 

664 

Jul 

2.105 

-0.012 

2120 

2100 

9467 

1.004 

tat 

2.129 

-0007 

1135 

2115 

9.816 

527 

Sap 

Z.I50 

■0.005 

2160 

2150 10.300 

2*8 

ToM 




121X28 164*3 

■ UNLEADED OASOUME 




NYMEX (43400 US gate: bUS gate) 




3.35 12 months 185 

_X.d4 


Uteri 

pries 

Day's 

ctepgr 

ffigh 

Open 
Low Int 

tot 

D-lray oz. 

US cts aqufir. 

Apr 

*6.75 

+0.13 

47.K 

46.40 27,424 

3X18 

366.20 

544X0 


*7.40 

*0(0 

47.,-V 

47.00 46,780 

5X68 

370.55 

549X0 

Am 

47.70 

+0X4 

47X5 

47 JO 23.017 

2X37 

375.10 

555.50 

Jot 

47.75 

*001 

47X5 

47X0 9.274 

1202 

304.45 

568.66 

Aag 

<7.*S 

-aw 

47.50 

47JS 7,341 

194 

5 puce 
366-931 

C 

261-263 

Sep 

Total 

47 05 

-0.02 

47X0 

47X0 *.333 
121B77 

301 

16X76 


GRAINS AND OIL SEEDS 

■ WHEAT LCEg par tonne) 


SOFTS 

COCOA LCE (E/tonne) 



Seri 

pries 

£2r 

item 

Low 

op" 

tat 

M 


frit 
prtn i 

fcyta 

BtM«B 

item 

OP" 
LOW tat 

M 


Mar 

1QSX9 

■030 10175 

105X0 

23 

20 

Mr 

924 

+4 

940 

940 175 

10 

Apr 

■w 

106-35 

-4X2D 

106X0 

10835 

1X24 

117 

My 

958 

+4 

960 

948 23X35 

IX© 

Jm 

JM 

107X0 

- 

107X0 

10730 

528 

11 

Jri 

970 

+5 

973 

958 1 5X87 

575 

APB 

Sep 

8115 

X.10 

- 

- 

296 

- 

S* 

982 

+7 

953 

968 1 0,648 

<18 

oa 

ten 

94X0 

-aio 

94J3D 

94X0 

1,194 

138 

Dm 

996 

+7 

998 

954 17,178 

278 

Ok 

JM 

Trial 

96X5 

+0X5 

96-50 

9150 

659 

43«1 

328 

MB’ 

Tote 

1016 

+8 

1017 

1004 23X56 348 
1100)8 1602 

Ftt 

Tote 


■ WHEAT CBT ffXOCtHj rnfcr; carte/BCte txaftel) 


Iter 

325/4 

-6* 

331/4 

325/4 800 1X10 

Stay 

323/6 

-7* 

33672 

329/2 82X90 11X85 

Jd 

320/2 

-5/4 

325/4 

320* 99X30 11X65 

Sep 

322* 

■so 

327/4 

322/4 17,790 1X05 

Dee 

332/2 

-572 

335/4 

331/2 23.130 420 

Mr 

335/4 

-5* 

336* 

335/4 20 

Tetri 




223X15 21865 

■ MACE CBT (5X00 bu fflki; centa/Sfllb bushel) 

kter 

278* 

-0* 

280* 

278* 3X55 5370 

My 

282* 

-3* 

285* 

282/4580X95 77X95 

Jri 

286/2 

■2* 

288* 

296* 579X10 36,436 

Sep 

274* 

-2/2 

279/2 

274*134,330 5,150 

Dec 

261/4 

-1* 

263/2 

261/2302.135 21X70 

Mar 

267/2 

-2/2 

269* 

267/2 20X55 445 

Tetri 




J4BW1412« 

■ BARLEY LCE (E p« toms) 


Mar 

105X0 

♦035 

- 

7 

May 

106X0 

♦035 

106.00 

106X0 191 2 

Sep 

94.00 

+0.10 

- 

- 139 

NO* 

95.70 

- 

96.70 

95J0 89 3 

Jan 

97-75 

- 

w 

18 

nor 

96.40 

+0.15 

- 

• 

Tetri 




444 5 

■ SOYABEANS CBT (3X0Dbu mkc canMQBi 

Hv 

888/2 

+0/2 

w* 

B8S/4 1000 2X75 

My 

686* 

-2/8 

690/6 

685*201X60114,635 

Jot 

B88/8 

-2* 

891/4 

688/4228X55 40.605 

AOS 

680/2 

-2* 

684/2 

680* 3a 400 1.965 

Sep 

663/4 

•1/2 

66 672 

662* 20X65 1.220 

Mr 

68072 

■2/2 

054* 

650*15ai80 14X35 

Tetri 




770X63175,680 

■ SOYABEAN OL CST (0O,OQOB»: cents*} 


■ COCOA CSCE (1C tonnes; S/tormea) 


1243 

+20 

1247 

1212 39X93 2X88 

Apr 

46550 +0075 47X50 46,750 

9X12 

1X70 

1270 

*22 

1272 

1239 

18X28 

928 

Jm 

53X50 

-0X25 S3X75 53X50 

11.763 

1111 

1288 

+16 

1281 

1280 

9X95 

127 

Jri 

53X50 

-0X29 53X00 51050 

1512 

389 

1320 

+18 

1322 

1283 

6X22 

64 


51X75 

-0060 51.700 51.450 

1716 

ia> 

1357 

+20 

1359 

1330 

8X25 

285 

Oct 

47X60 

-a 100 47X00 47X25 

1,899 

59 

1377 

+20 

1350 

1350 

5.354 

U 

Dm 

48.450 

-0.100 48.450 41100 

1138 

48 





*117 AW 

Tate 



81X93 

4085 


«qr 

TeM 

■ COCOA PCCO) (SOR'a/tanne) 


■ PORK BELLIES CME (40^XXXbs; oenta/tos) 


*1 


My 

Mr 22 

10 day mow . 


Price 

952.72 


948.48 


Ptar. day 
957 JO 

94557 


■ CO P FtE LCE (SAome) 


■tar 

1352 

+26 

1352 

1335 

257 

35 

My 

1352 

+21 

1355 

1332 

15X08 2X32 

Jri 

1363 

+22 

1354 

1334 

13JQ0 2X50 

tep 

1851 

*21 

1350 

1333 

6X44 

675 

NOV 

1347 

+20 

1346 

1333 

3.486 

698 

Jen 

1344 

+22 

1335 

1335 

5X84 

2 

Tate 





48X53 6,782 

■ COFFEE •c CSCE (37-SOOBW centt/fcs) 


My 

8180 

+1.15 

8110 

82X0 

43 

40 

Jri 

84X5 

*1.18 

84X0 

8245 

34X08 4.122 

te> 

85X5 

-1.05 

85,05 

84X0 

11X24 

1X13 

Oec 

8155 

+1.13 

88X0 

85X5 

5X20 

188 

■Mr 

87.45 

+1X5 

87X0 

87X0 

3.795 

B7 

My 

BOM 

+1XS 

88X0 

88X0 

1.128 

2 


Total 


5BAJD W32 


QOO) (US centa/pomd) 


Her 21 
Conn, daily 
15 day araraga 


Pika 

.77.14 

.7X16 


ftw. <tey 

TIM 

74J3 


Mar 

29.19 

+402 

29X5 

29.00 

646 

852 

■ No7 PREMIUM RAW SUGAR IXE (cental 

May 

28-87 

■0.19 

29X8 

28X6 33JBZ1 

1184 

— 



Jri 

7HH3 

-418 

29.18 

28X1 

27,434 

3.400 

Mr 

1133 +0JIB 1136 

12X5 1X39 

«te 

2842 

■415 

28.72 

2138 

8,100 

316 

Jri 

1168 +4X4 

- 1728 

tep 

27X0 

■417 

2823 

27X0 

8X18 

107 

Oct 

1117 +40? 

- 145 

Oct 

27.17 

■414 

27.40 

27.12 

BJ45 

225 

Jm 

1106 *4X1 

• - 

Total 





S8X«0 13X23 

TUI) 


4,110 


a 


■ SOYABEAN MEAL CST (100 tons: SrtorO 


*ar 
u 
tag 

Sep 
Oct 
TaU 

■ POTATOES ICS (Eton/wl 


WHITE SUGAR LCE (S/tonr* 


193.0 

43 

193.0 

1B1X 407 

646 

May 

33740 

+1X0 337.70 33800 

8817 

476 

194,1 

44 

1948 

193L7 24575 

7.041 

AU0 

33150 

+460 333X0 331.70 

8004 

411 

194X 

44 

1953 

1943 25,109 

4X66 

Oct 

310X0 

- 31100 31 400 

4333 

<32 

194.1 

-43 

194.4 

ma 7X48 

360 

Dee 

308X0 

• 30730 30730 

107 

2 

192X 

42 

wax 

1812 5,773 

197 

liar 

30840 

- 30530 306X0 

479 

10 

irn; 

+42 

190.7 

1905 3X25 

50 

My 

307.40 

-020 

202 

- 




80X85 18X95 

Tote 



18,147 1X30 


a SUGAR ir CSCE (IllOOOtoef certmflb* 


Ate 

1973 

+3X 

2015 

192X 

701 

79 

My 

1116 

*405 

12X2 

1210 81,794 5X41 

My 

2180 

*7.0 

21 SX 

21 OX 

811 

209 

Jri 

1133 

+0X8 

1137 

1127 35,734 1.714 

Jm 

1340 


_ 


2 


Oct 

11X2 

+OX5 

11X5 

11.77 30,118 1387 

tew 

BOO 






Ms 

11X7 

+OM 

11X0 

11X5 11647 387 

Apr 

1273 

+1.0 

1286 

1286 


5 

Mr 

1136 

*406 

1134 

1134 1.715 

Hay 

14&0 

. 

- 


. 


Jul 

11X2 

+407 

11X2 

11X0 1X08 2 

Total 





1X63 

2S3 

Tote 




143X25 9X21 

« FREJGHT (BiFEEX) LCE (SlCUndex poinfl 


■ COTTON NYCgpMOOtweants/BJs? 

Us 

1193 

*15 

. 


233 


“W 

7SX9 

*458 

7809 

7U0 22X73 5.456 

Apr 

1292 

+12 

1306 

1385 

986 

84 

Jri 

7836 

+0X4 

7855 

75X0 14.173 1X89 

My 

1230 

+24 

1289 

1275 

328 

132 

Oct 

7140 

+020 

7160 

73.16 1573 552 

Jri 

11 SB 

+5 

1165 

1160 

565 

21 

Use 

7492 

- 

71X0 

7076 14X41 1168 

ce 

1280 

+10 

1280 

1090 

227 


Iter 

71.70 

• 

71X0 

71X8 662 46 

Jan 

1350 

+20 

1350 

1340 

81 

35 

»I 

7135 

■406 

72X5 

72X0 222 29 

Total 





1770 

297 

TOM 




64X7718130 


don 

ftsr 





■ ORANGE JUICE OTCG flfi/XMffig; oantaAbri 

BR 

1168 

1162 





■ 












Mr 

110X0 

+420 111X0 11425 8148 1X17 


40025-402.75 


83-08 


Minor IHetats 

B/ropean free mart*, from Metal Brifcfln. S 
per lb m worrinuse. wars otherwise stated 
(teat twee's fri brackets, where changed). Antf- 
mony: 99.8%, S per Same, 1,800-1,880 (1.760- 
1 J10). BtemiflfK mh 99.99%, tonne Iota 225- 
zao. Cadmium: it*?. 99,596, 80-70 (80-86) 
coma a pound. Co bole MB free market, 
89.8%. 24.00-Z5.00 {22.50-23.50}; 99 3%, 
1B.W-I8.to (17.80-18.70). Mertwyt nrin. 
90.99%. S per 76 lb flask. 90-100. Molybde- 
nums drummed moiybdic oxide. 2.80-2.90 
(2. BO-285). Sefenhim; irin Sft5tt, 280*55 
(3.60-455). Tungsten ore: standard min. 65%. 
S per tonne unit UOko) WO„ df. 30-48. Vana- 
dium: min. 98%. df. 1.35-1.45. Uranium: 
Nwnco exchange value. 7.00. 


Jm 

Mar 

TUN 


.11125 -035 116.50 11525 2,130 

11425 -426 1M90 11150 1,200 

114.75 +025 11475 71410 1.706 

11125 +025 1 1605 HITS 


80 
78 
18 

195 9 

1900* 1599 


VOLUME DATA 

Open Merest and VofciTW data Shown tor 
centmae traded on COM EX, NYMEX, CST, 
7IYCE, CME. CSCE and 6>E Crude OH ao one 
day in 


INDICES 

■ Harms (Bae* 18/8/31=100) 

Ms-22 Mar 21 month age yes ago 
1021.2 1837-0 17944 17840 

■ CRB ftitwaa (Baaa: Va/66=10q __ 


Ms 21 

228.52 


Ms « morth aiio year ago 

22857 ft 213.03 


May 

Jd 

Ate 

Fab 

Ks 

Total 


35X00 +4400 53.800 $U»0 
55X50 +0090 55375 64300 
54100 +4200 56200 54500 
54730 +4125 54000 53300 
< u> «n -4350 i ff 

54350 - 0 54150 



LONDON TRADED OPTIONS 

strata Price 8 tonne — • CaBs Put* — 

■ ALUMMRJM 


(99.796) LME 

May 

Aug 

May 

Aug 

1300 

51 

82 

24 

39 

1326 

37 

88 

as 

50 

1300 

26 

58 

48 

62 

■ COPPER 





(Grade A) LME 

May 

AUO 

May 

Aug 

1900 

70 

100 

23 

47 

1950. 

42 

74 

45 

70 

2000 

22 

52 

75 

98 

■ OCIfVfcfcUCE 

May 

JU 

May 

Jul 

1250 — 

108 

1Z7 

6 

24 

1300 — _ 

68 

63 

IB 

40 

1350 

38 

66 

36 

63 

a COCOA LCE 

May 

Jul 

May 

Jri 

825 __ 

44 

73 

11 

28 

950 

29 

68 

21 

38 

978 

18 

45 

35 

50 

■ BRENT CRUDE IPE 

May 

Jin 

May 

•An 

1300 

- 

- 

15 

29 

1350 . 

79 

- 

25 

SO 

MOO 

56 

58 

47 

- 


LONDON SPOT MARKETS 

■ CRUDE OIL FOB fetor barral/May) +or 


cum 

S12.0O-2.72w 

+0,126 

Brers Bend (dated) 

$14.77-4.51 

+028 

Bran Rend (May) 

S13XX-4X1 

♦0225 

W.TJ. (1pm eat) 

S1B-24-5X5w 

+0X4 

■ OH. PRODUCTS NINE prompt deteery OF ftenrw) 

Premium OaeoBno 

«1 66-157 

*2 

Gas 01 

$144-146 

+4 

Heavy Fuel OS 

$71-73 

-1 

NapMhS 

S135-136 

+85 

Jri Fuel 

£162-163 

+45 

Peoabum Arjpo Xatawau 



■ OTHER 



GoH (bar troy <x& 

$38826 

+3J7S 

SI wr (per tray czj* 

567.50c 

+16 

Ratlnum (per troy oz.) 

$402-15 

+2X5 

Peftadhm (per My <a) 

Si 34X5 

+1.10 

Copper (US prod.) 

96.00c 

-1.0 

Lead As prod.) 

3800c 


Tin (Kuala Lumpri) 

14X44 

-0X7 

Tin (New York) 

253.50c 

-3X 

Snc (US Prime IV J 

Una- 


Cattle #ve wa^rtJT 

12807P 

+1.18" 

Sheep (*ve w»gW4 

140.C7p 

+6X3- 

Pigs (9re weight) 

77X7p 

-3.06- 

Lon day augv (raw) 

S2S1X0 


Lm day sugar (wte) 

S342X0 

+1X 

Tats & Lyle export 

£30800 


Barley (Eng- leatfi 

Unq 


Maize (US Mti YeteM) 

Unq 


Wheat (US Dark Norm) 

SM 65-Ox 


Rubber (ApoV 

7O50P 

+0X0 

Rri*er(May)¥ 

TLOOp 

+0X0 

RriJbeitKLRSSNol ApO 

251.00m 

+0X0 

Cooonuf OKPhB)§ 

S54&04 

♦10 

Prim Ol (Matay.)§ 

soon* 

+5 

Copra (PhH)§ 

3343.0 


Soyabean* (U9 

2201 .Ow 


Cotton Outlook A Index 

BOXSo 

■0.15 

Woofiops (64s Scpar) 

fiOp 



C per tanm ixte s ot h erata e a—d. p CMca/kg. e nwte/lL 
r mggitftg. ra » tata| >M n centa/kg. u *or » My- 1 MnrfJw. 
x AodUay. f Union PtwecaL J CT RMadam. * Btrim 
maur dean. 4 Oha a p (Uve ea tf tt priced- ’ Qsp> 
walk, mu n W ana l pncaa. 


CROSSWORD 


MEAT AND LIVESTOCK 

■ U VE CATTLE CME HOXOOfca; canta/ttta) 

Sad Day*a Open 

price ctnaga IBgfr Is U Vd 

74775 +4800 74900 75X75 34297 4X50 
74275 +4300 74.450 71950 24,327 2,835 
74950 +4325 72.925 72400 12296 1.005 
74700 +4250 74900 74375 9,732 792 

74J« +0250 74450 74700 2.430 54 

74750 +0225 73X25 74550 1,170 32 

44202 1,561 

■ LIVE HOGS CME (4000tttia: cente/taa) 


No.8,411 Set by PROTEUS 



ACROSS 

1 Summer’s language for a 
genus of ferns (6.6) 

10 Collisions arising from child- 
ish behaviour? (7) 

11 Where some discover it 
readily (7) 

12 Volpone’s fly confederate hav- 
ing doctor’s account returned 
15) 

13 Cover-drive accomplished 
without being separated (8) 

16 Completely node ? (9) 

16 Lowly worker wants coarser 
fish portion (4) 

18 Rush to keep American law- 
yer quiet (4) 

20 Artist showing string of cam- 
els (tailless) and soldier in 
turn (10) 

22 Handguns difficult to wear 
out (8) 

24 He is about to play back Bar- 
tok (6) 

20 Relatio n s with friendly Rus- 
sian? (7) 

27 Prattle of strange riteh (7) 

28 Put one's foot down an empty 

talk (443,3} 

DOWN 

2 is taken up in regimental 
headquarters and put down 
(7) 

3 Swap old coins (8) 

4 Waist-band caught in window- 
frame (4) 

s Aria that may get sung even- 
tually CLL3) 


6 Upper-class girl turns In 
attempt to get Italian man (5 ) 

7 Painful affliction making a 
teacher lose temper initially 
C7) 

8 Hearty greeting given by com- 
pany employees to fish (4,9) 

9 Orchestra with the urge to 
“take it away"? (44,7) 

14 Some art-aid arrangement 
said to give audience the best 
pictures (6^) 

17 Chief in lawsuit often seen by 
cinema audiences 

19 Conditions for orchestral 
players (7) 

21 Festive meal for sea-nymph 
CD 

28 Sower scattering less well 
than before (5) 

2> Place to notice (4) 

Solution 8,410 



Of broking and jobbing the Peljkan’s fond, 

See how sweetly he puts your word onto bond. 

SbiUtan& 


JOTTER PAD 








Mis 


FlNANdAL TIMES WEDNES DAY MARCH 23 1994 


f>nu‘ <>ai t 


SWORD 


m i 
1 1 

T 

a • 



r-jji' 

* * to': 


LONDON STOCK EXCHANGE 


MARKET REPORT 


Footsie 3,200 mark challenged in nervous trade 


FT-SE-A All-Share Index 


1.800 


Equity Shares Traded 

Tumw+w by voLuma (mWcnJ. ExcJueavj-. 
rranHiuviut Business ana overseas tumt*er 
1.200 


By Tony Byland, 

UK Stock Market Editor 

A highly-charged session saw the 
UK stock market struggle to hold 
on to the 3,200 mark on the FT-SE 
todec as it dosed just ahead of the 
the US Federal Reserve’s indication 
that it was not changing its mone- 
tary stance in yesterday's trading 
session- In mid-afternoon, the Lon- 
don stock market plunged sharply 
to a new trading low for the year 5 
3.156.9 in the lace of a sell-off in 
stock index futures. 

The market was dominated 
throughout the day by the pros- 
pects Tor the meeting of the Federal 
Reserve's Open Market Committee 
(POM©. London closed a few min- 
utes ahead of the Federal Reserve's 
actions in the US money markets, 
and UK analysts were left to ponder 


the implications overnight. 

The session opened strongly, with 
UK government bonds leading equi- 
ties ahead and interest rate confi- 
dence heartened in Europe by the 
Bundesbank announcement of 
another variable rate money market 
repos tender today. UK company 
news also continued to help senti- 
ment, as Prudential, the UK life and 
general insurance group, joined the 
list of leading British companies to 
increase its dividend payment; but 
the Prudential share price became a 
casualty of the market setback later 
in the day. 

Although trading volume was 
unimpressive at this stage, the 
Footsie climbed by more than 22 
points and the market appeared 
confident in spite of the uncertainty 
ahead of the FOMC meeting. 

But the stock market was halted 


Account Part tog Pat— 

TW Duongs; 

Mbi 4 Mar 28 Apr II 

OpHsci Oatfattefone: 

**rB* Apr7 Apr 21 

Last Docfingx ” ” ” “ 

MW 23 Apr a apt a 

Account Dor 

Apr 6 Apr IS May 3 

*Naw Hmo deaSnga may taka plaoa ham two 
burinaca day* oarfler. 


in its tracks and then driven 
sharply downwards when the June 
futures contract on the Footsie ran 
into trouble. Although selling of the 
contract, still In its early days, was 
not heavy, the price quickly fell 
through the 3,200 mark and took the 
underlying stock market with it. 

Traders suspected that futures 
selling came from securities houses 
suddenly nervous ahead of the 
FOMC meeting. The stock market 


fell into important support territory 
before rallying, once again taking 
its lead from the stock index fixtures 
sector. 

Concern was expressed at the evi- 
dent power of derivatives markets 
to influence the underlying stock 
market In part this reflected the 
lack of volume and nervousness in 
equities while bond markets remain 
so fickle. 

The FT-SE Index struggled back 
Into positive territory to close at 
&201.5, a net gala of 35 on the day. 
London traders were then left ou 
the sidelines to watch the response 
of the US credit markets to the Fed- 
eral Reserve's actions, which 
appeared to leave open the c hanc es 
of an early tightening in credit poli- 
cies in the US. 

The FT-SE Mid 250 Index followed 
the market trend, ending the day 


with a loss of 1.4 at 3553.1. Seaq 
volume picked up in the second half 
of the session to record a total of 
678m shares, a third higher than on 
Monday, when retail business in 
equities was worth £l.i9bn. 

The retail number, the most sig- 
nificant guide to genuine invest- 
ment activity in the stock market, 
was at the lower end of daily aver- 
ages for the past twelve months. 

While some Far Eastern stocks 
rebounded strongly behind the 4 per 
cent upturn in the Hong Kong mar- 
ket, the rest of the UK market was 
unable to escape from the shadow 
cast ahead of the FOMC meeting. 
The erratic performance from bond 
markets over the past week has 
underlined the dependence of equi- 
ties ou the interest rate drama cur- 
rently being acted out in Europe 
and the US- 


1,750 -- 


1,700 - 




Jap Feb Mar 

Scuta FTiSupnex 1994 

■ Key Indicators 
In (flees and ratios 

FT-SE 100 3201.5 +3.5 

FT-SE Mid 250 3853.1 -1.4 

FT-SE-A 350 1625.0 +1.2 

FT-SE-A All-Share 1517.05 +0.79 

FT-SE-A AB-Share yield 3.50 <3.58) 

Best performing sectors 

1 Electricity +1.3 

2 CfiemlcaJs +1.2 

3 Water ....... . +1.2 

4 Oil. Integrated +1.1 

5 Relates, General ........ ... +0.9 


FT Ordinary Index 2527.7 

FT-SE-A Non Fins p/e 21 .55 

FT-SE 10G Fut Jun 3211.0 

10 yr Gfft yield 7.31 

Long gllt/eoufty ykl ratio: 2.1 6 

Worst performing sectors 

1 Printing. Paper & Pc Kg „ 

2 Pharmaceuticals 

3 Engineering, Vehicles 

4 Merchant Banks 

5 Property 


Glaxo hit 
by Zantac 
challenge 


Pharmaceuticals group Glaxo, 
which ’has one of the highest 
market capitalisations of UK 
quoted companies, fell sharply 
yesterday as a fresh challenge 
was launched at its top selling 
product 

Geneva Pharmaceutical, an 
arm of Ciba-Geigy, one of the 
leading global drugs groups, 
has filed an application with 


the US Food and Drug Admin- 
istration to produce a new 
rival for Zantac, the anti-ulcer 
drug which makes up aro und 
43 per cent or Glaxo’s sales. It 
claims the product would not 
infringe Glaxo's patent which 
expires In 2002. 

Bearish analysts, particu- 
larly those from US houses, 
said the news was a severe 
blow partly because It consti- 
tuted a completely new chal- 
lenge to Zantac and partly 
because of the status of the 
cballenger. Ms Jo Walton of 
Lehman Brothers said “The 
result is further uncertainty 
making it very difficult for 
investors to be clear how long 
the Zantac franchise will 


remain." A Glaxo spokesman 
said the company was consid- 
ering legal action against the 
Geneva application. 

Very heavy selling after the 
news broke sent the shares 
down 2i to 662p on turnover of 
11m, and busy trade in options. 
Ciba shares were up SFr40 at 
SFr855. 

Bowater tumbles 

Paper and packaging com- 
pany Bowater was the big 
casualty in the Footsie as con- 
sideration of annual figures 
prompted concern over profit- 
ability. The shares fell 39 to 
453p, a slide of around 8 per 
cent, with 7.8m traded. 


EQUITY FUTURES AND OPTIONS TRADING 


A squeeze in stock index fuelled strong buying of the 
futures at the dose of trading underfing FT-SE 100 Index 
enlivened what had bean an ahead of the dose of the 
erratic session In derivatives. stock market, writes Joel 
The late rally In futures Klbazo. 


stock market, writes Joel 
Klbazo. 


m FT-SE 100 INDSt FUTURES (LlFFEi £25 per tuil Index point 



Open 

Sett price 

Change 

High 

Lew 

Eat vof 

Open Ira 

Jun 

32000 

321 X9 

+13.0 

3229.0 

3183.0 

13708 

55500 

Sop 

32300 

3220.0 

+12.0 

32300 

32200 

2 

700 

Dae 

- 

3237.0 

+13i) 

- 

- 

0 

0 


■ FT-SE WO 2S0 INDEX FUTURES (UFFE) CIO per fufl Index point 
Jun 3880.0 3850.0 -5.0 38724 3850.0 

8 FT-SE MIP 250 ttmeX FUTURES (OMUQ CIO par ftjB Index point 

Xn 3872.0 3850.0 -22.0 38724 3872.0 

Sep 3865.0 

AS upon IntenMt flgurea wo lor pnwws day. T Exact volume shown. 


■ FT-SE 100 NDEX OPTION I 


I f319« CIO per Ml Index point 


3000 3050 3100 3160 3200 3250 3300 3350 

CPCPCPCPCPCPCPCP 
Apr 217*2 10 17212 14 13012 M 83*2 35*2 60 55*j 36*2 84** 20 1191 2 10E leo^ 

MW 234 27 182*2 35 158 147^121^2 6Z*z » 04*2 HU* 110 48*» 140 34 176 

Jtfl 244*2 38 208 48 172 82% 140*2 01 111*21011* 87% 127% 68 155*248*218812 

Jut 257 46*2 221*2 80 188*2 74 156 S6 129 116 1M*a141*j 84*z 170*2 201 

OKt 321 98 257 12812 MS 165 147*2215*2 

Ub 13.163 tot* 4529 

■ EUBO STYLE FT-SE 100 INDEX OPTION [UFFE) CIO per M Index point 

-nws 3075 3U5 3175 3PPd 3275 3326 3375 

Apr 187*2 12*2 145*2 10*2 108*2 27*2 73*a 44*2 47» 2 B7*j 27*2 100*2 IB 13712 7*a 178*2 
May 212*2 30 174 41 138 55 107*a 73 78>a 94*2 S7 122 40 154*2 27 161 

Jin 222*2 38 153*2 68 68*2111*2 98*2 170*2 

Sap 208 68*2 30*2101*2 145*2142*2 101*2158*2 

06Cf 303 98*2 239 130*2 TO 170*2 134*2 219 

Ub tmo Puts 684 - uidatpng Mm vsioa Ptmtam mean an imal on mmm prices, 
t Long Med mphy monte 

■ EURO STYLE FT-SE MUD 3CO MOEX OFTOM (OMUQ CIO pw Ml Index point 


3890 3800 3860 4000 4060 4100 4160 

Apr 83 63 ' 91 124 14 163 7 206 252 1 252 

MW 

0 PIM a SeUtonent prices sod tdanieJ are Hen at 430pm. 


FT - SE Actuaries Share.- Indices 


The June contract on the 
FT-SE 100 dosed at 3,211, 
which was about 2 points 
ahead of its fair value 
premium to cash of 10 
points, with the strong finish 
attributed to a late advance 
in UK gilts. Volume at the 
official dose was 10,275 lots. 

Bonds had also been firmer 
earlier in the day when June 
opened at 3,208, and good 
buying drove the contract 
to the day's peak of 3,229. 

However, a bout of nervous 
trading ahead of the US 
Federal Open Market 
Committee meeting saw June 
surrender eariy gains and it 
fsH to ft low of 3,183 in the 
eariy afternoon. 

In Uffe FT-SE Mid-250, 

June traded 97 contracts and 
ft dosed at 3,850. The screen 
showed no turnover in the 
same contract on the OMLX 

In Uffe traded options, 
turnover improved to 43,697 
contracts ahead of today's 
expiry of the March stock 
options. Volume in the FT-SE 
100 option was 17,973 lots 
and 2,594 in the Euro FT-SE 
option. Bid speculation made 
Argyll Group the busiest 
stock option with a total of 
4,530 lots. 


The UK Series 


Da/a Year Dtv. Earn. PIE Xd at*. Total 

Mar 22 crigeM Mar 81 Mar 18 Mar 17 ago yield* yWd% ratio ytd Return 


FT-ae ioo 3W* 

FT-SE MM 250 3853 

FT-SE Rfid 250 ax Inv Trusts 3872 

FT-SE-A 350 1625 

FT-SE SmafCsp 1988.1 

FT-SE SmaBCap ax Inv Trusts 19B8.I 

FT-SE-A ALL-SHARE ISIT.t 

■ FT-SE Actuaries All-Share 


+0.1 3198.0 3218.1 3250.7 2881.1 3.78 5.93 

3854.fi 3885a 3086.0 314&2 3.16 SJtX 

-0.1 3875^4 3886a 3«&2 31B7JB 3J27 9.81 

+0.1 1023a 1632.7 1049.4 1422.5 3.64 5.78 

-03 1994.96 2001-51 2006.90 1683.60 2JB3 379 

-0.4 197738 198359 1988.78 1574.00 297 4.17 

181828 1824JM 1840.78 1408.08 3.58 8 JS2 


10 MINERAL EXTHACmON<ia) 

12 Extractive industries**) 

15 OH, totegraiedOl 

16 OH Exploration 8 PTOdfHJ _ 

20 Oat MANUFACTUHERSI2B4} 

21 Bidding 4 Coratructkxipl) 

22 Bidding Matte & Marcto&Q) 

23 ChomlcateBO) 

24 Dhrersaied MdustriateftS) 

25 Electronic & Boot EquIpCW) 

26 Engineerings 

27 Engineering. VeWd«(12) 

28 Printing. Paper 8 Pekgcn 

28 Textiles & AppareKS) 

30 CONSUMER QOODS(94) 

31 Brewerias(l7} 

32 SpHrtts. WtaM & CtdaraOO) 

33 Food ManulacturersOT 

34 Housenoid OaodWi2) 

38 Health Care) 20) 

37 Phetmaceutteatefl 1) 

38 Tobaccotli - 

40 SEHVICES{221) 

41 QstraxHOre(31) 

42 Lettue & HetoteCSfl 

43 ModbOSI 

44 Ratalera, FootfliT) 

45 RBttetofs. GaneraS44) 

48 Support Services(40) 

49 TraraporttIO) 

51 Other Sendees & Bu dnaesflg). 

60 murriESpa} 

62 BecMcfty<i7) 

64 (tea Dtetriburioop) 

68 Telacomriturilcaitona(4) 

68 Wrtertl3) 

69 NON- FINANCIALS (633 ) 

70 FViANOALS{104) 

71 BanksflQ 

73 hieurance(1B) 

74 Lite AasraanceW 

75 Merchant Books® 

77 Other Rnanda«25) 

79 Prooaiygai — 

BO INVESTMENT TKUSIgg gil — 

89 FT-SfrA ALL-SHARE»M 


Day's Year Dfv. Earn 

Mar 22 chge* Mar 21 Mar 18 Mer 17 ago ytefcBe yiafcHt 

2581.47 +0.9 2539.64 2535.01 255333 21 49d0 355 430 

400325 +03 3862.34 388938 3900-04 3171.70 3^4 4.44 

2467.75 +1.1 244230 2436.12 24604S8 202230 368 5.05 

1844.80 -03 184393 184048 1851.71 213*50 324 388 

2138-94 -0.3 2144^5 2152.84 218730172290 390 4.03 

1416.93 -OJJ 1429.83 1431A4 1440.00 93830 232 346 

224838 -0,7 2264^3 227321 22844Z6 181330 316 278 

2492.34 +12 246181 2477.96 2488.69 2131 AO 371 434 

2144.83 -31 214331 2150^0 2170.74 1856JS0 4JJB 4JB 

205a 17 +Q3 2044.71 2055.89 2088.71 187730 337 321 

1958.15 -0.1 196338 195933 187314 145030 279 3.02 

2305 04 -1.5 234131 2368.01 2304.14 18KL20 432 3.22 

20 4837 -2.0 302630 3046.01 304336 2303450 230 4j»3 

tanas -03 187331 1387.04 1917.07 189730 3.61 &18 

2837.63 -0.2 284380 285317 2972.33 286830 438 7.14 

2209.04 +0.3 2202.96 222323 2239^9 2134.70 4.12 7.77 

3045 44 +0.B 3028.39 3024.00 303936 2850.10 334 8.02 

2346.07 +0.8 233331 233830 2358.83 2460IXT 4.04 739 

2638.72 -0.1 263834 264337 2688.16 2338420 336 7.01 

1784>W +07 1771.45177130178234 179330 3.09 533 

3047 42 -1.6 309639 3106.17 312730 312030 4.11 735 

ao gaga -0 5 3913.51 3966.46 3968-04 412730 036 838 

2064 40 206334 2073.33 209137 180130 236 5.39 

3083.84 -0.3 3083.55 3102.00 3103.78 26®.4C 2.77 438 

2290.77 -03 2298.18 2307.38 232736 1766.10 3.13 4.44 

314230 -03 3157.38 3188.62 3214.72 2200.90 2.02 4.16 

103832 -05 164438 1040171 64067 2052.70 3.78 076 

1731.71 +0.9 171047 172058 1753.11 161040 2.76 537 

169432 +0.4 168835 189539 171084 153830 238 073 

2577 39 -4X2 2582.11 257033 2592-99 2099.60 338 331 

t205‘fl2 12007 6 1213.61 1222.48 131430 3.94 338 

240031 +03 236936 240235 243532 208730 4.18 738 

934142 +13 231031 232132 234431 171230 333 1038 

204735 +03 2037.75 2027.54 207638195080 534 * 

207108 -0.4 207079 210139 2134.80190060 331 5,84 

imw'ia +13 186438 1883-16 1874.74 1014.70 430 1348 

174 SJB +0.1 1745.50 17S 1.86 176055 1542.44 338 5.68 

2205*18 229639 233037 2386-10 107830 3.68 US 

+03 288632 2870.85 303000 2238.40 8.70 631 

135433 13W.59 135931 1361.48134430 4.71. 004 

261900 + 0.1 261087 259071 2814.13282130 4.70 434 

tw.43 .1.1297736 3M133 3087.83 2«O40 334 003 

2013 45 -0.3 201079 208130 203234 137010 333 5.54 

ZLl'n -13 1874.18 18 9039170336123230 3.7D 337 

+a7ga7a4B2BB&45 2928-12 222B30_ 2-12 __1.71 

1g17 M 161836 182438 184078 140006 338 53B 


2042 23.12 118233 
2333 1430 140332 

22.11 14.40 1405.43 

2139 1045 122040 
3331 011 151042 

3055 735 1502.42 

21.66 1013 1243.T7 

P/E Xd afl. Total 
ratio ytd Return 

2535 27.53 101237 
2738 2093 108076 
24.87 31.69 997.33 
3001 QW 104014 
31.94 11.18 1065.01 
3838 331 108537 
4073 132 103055 

27.67 2030 108137 
3060 2430 107439 

19.77 230 977.81 

44.75 6.73 1097.71 
4138 2081 1095.41 
2064 1.60 1132.05 
2008 136 102735 

1061 1938 981.15 

15.77 11.01 96638 

19.41 18.03 03792 

1636 11.13 969.75 

1632 137 021.28 

2135 238 101233 

16.11 36.65 94070 

13.99 0,00 84734 

2237 006 993.09 

24.79 637 1044.08 
27.16 1325 111089 
2630 1430 1074.72 
12.72 1.99 96007 
23.38 4.34 90004 

1637 1.96 1011.09 

3330 532 969.78 

39.43 037 1014.82 

17.00 5.60 89734 
1132 1086 94538 
t 0.00 90438 
2090 009 88138 
072 338 80733 

2135 087 1205.56 

19.49 2830 89131 
1020 5538 65933 
1434 1332 903.42 
27.10 231 96330 

1520 11.44 86029 
2234 1237 105236 
3038 230 92539 
58.60 14,80 95018 
2186 1013 1243.77 


■ Hourly movemertts^^ lfJD# 12 3 0 1330 1430 15 J 0 1010 Hlqh/dsy LawMay 

„.< • 3219 0 32178 32157 32078 32008 31998 31993 32201 31808 ‘ 

FT-SE 100 32«-B ggj 38603 3860.0 3867.7 3866.7 S8552 3851.8 3881.7 38502 

FT.$£MM250 38553 3«73 1632 ^ iB 31 3 1«O0 10273 16243 1824.0 1633.0 1819.1 

FT-BF.A aso 1827.4 1630.4 iiw- 


Tkrw C* FT-SE 100 Htfl HtS»i Low 


Iff na O' r I *ec W r*»i 14*-%— — — 

3S0 Industry basks** 

■ FT-SE Actuaries iao o lOOO 1 4 JO l&flO 19.10 Ckx» Praateue Change 

13009 13563 13583 13509 1351.5 13513 13623 -113 

BMa 5 Cnstrcn 1361.8 *3604 1M2J 3075.6 30743 30753 3022.1 30100 30101 30653 -49.1 

RvmnaoeuUcte 3067.8 3071.2 3079.. 3M -7 18824 1878.0 19800 18813 18593 +313 

1860.8 1«7.6 ggj ^6 2938.7 2941.2 29373 29343 20423 29343 +73 

Banfc, 2961.4 29601 29623 -=»'■ 

- i_ _+ Ju .^ fciiaudwiraiM».i3MNconrawanaaearattetetexn11wFinwBM , nwM 

wxiteaen on «- lT4*A^^Cf& ■« "*» 

FWSTAT^ d “* iSn^E 1 00, tto FT^E fM OBD. FT-SE AcXariM 9» and^ th. FT-«e Achratoo NidiMry 

J? Nixi- r — wa* ami ItenuMc <X tetanri eng tea FT-SE actw AAStera tew * 

n+o FT IOC* twMboqn aodi E+c wy P* ^ me feoicr of Acmrtei undar a aamriori rat n< gound niae 


aM , 000 1130 lo w == ™ ■ 

2 13633” 13609 13509 13509 13509 1351.5 13513 13623 

BMaSCrotren 13613 *3604 1M2.3 3075.6 30743 30753 3022.1 30100 30101 30652 

PtatnaoeuUcb 3067 ' a 3071 ^ 1884,1 1083.4 18823 1878.0 18800 18813 18593 

ui— ... 1WU18 1867.6 18+13 1*85 mm; 2041.2 20373 29343 20423 29343 


Despite increased profits, 
reduced gearing and an 
increased dividend, underlying 
profits were flat once gains 
from currency shifts and acqui- 
sitions had been stripped out. 
There were also worries that 
Bowater would not be able to 
pass on the rise in paper prices 
to its customers, and concern 
over the short-term future for 
the company was highlighted 
by a change of stance from 
S.G. Warburg which has been 
recommending the shares for 
the past five years. The house 
Is believed to be worried that 
consolidation among Bowater's 
customers means that con- 
tracts are bigger but rarer and 
much more competitive. 


■ Major Stocks yesterday 

V*. Ctteg Oft 
000a price damn 

ASDA Great 1.1 00 57 -h 

Ahfcay Nabonatt 2900 *82 +2 

Alban Rater 2900 B3 -1 

AfitotM-yoract 562 BIB +S 

ringisn (Mur 9S2 510 «B 

Ann 869 357 -2 

a Qrooot 1200 258 -3 

ArpMMwt 1200 2BB -3 

Aaaoc. Ira. Foodat 1.100 962 +a 

Anoc. Bra. Pora 742 561 +8 

BAAt 1300 1005 -8 


BATIntet 

BET 

acc 


ereiMa. 

BTt 

BTff/PoW) 

BTHt 

Bar* of ScoOsncrt 

8«dwat 

Baaat 

BkwClidat 

Baehw 

Boont 

Bowararf 

» It taunpacot 
BriMi Mramyat 
Brtteri G+ef 
Brtuh Land 
BritWiSmlt 

Bund 

Bunnoh Camxf 
Burtcn 

CabiaAWkvt 


2.ra0 468 +2 

5.100 130*2 ^2 

BOB 430 -3 

529 720 +4 

<L300 377*2 +6*2 

1.400 332 -6 

•VfflO 400 -1*2 

6.600 200 -2 

8.400 363 

900 102 +1 

*900 642 +2 

1AM sza +e 

-'■.000 342 -6 

241 413 

979 540 +4 

7300 463 -39 

1300 513*2 i0 

3300 436 «b 

4JSOO 307*2 +1*2 

704 410 

4.700 143 +*» 

«L0OO 173 -10 

174 441 +6 

2.800 57*+ +1*1 

1CL000 430 +4 


CaODuy SctHMppeat 1.100 <83 

Color Dmup S9 324 

Carndoot 3300 307 

Caton Camna.t 1300 *»" 


CoaMUfakt 
Conan. UNonf 
Cookoon 
CounateJat 

toW* . 

Du La Runt 
Dwona 
Eaatam Boot 
East MUand Bad. 
EnaCMnaCtayn 
Bi te pM a 09t 
EoreunnalUna 
FM 


Soil Acckteat 

a, 

Grand Met f 


GKN 

QuVamt 
HSBC PSpMWt 


Hemaona Craafleld 

Hava 

HUdOHn 

M 

iSrcnpot 


1300 330 -10 

1,700 248 -3*2 

2A00 576 -3 

1.100 273 -a 

3.600 641 -4 

412 453 

227 «& -15 

417 211 -1 


1300 

2.100 423 M 

3.600 306*2 *5 

11JJOO 442 -21 

214 341*2 +4*2 

1300 555 -4 

1r400 472 +6*2 

2JB0Q 574 +17 


2300 400*2 -** 

4,400 703 +es 

400 380 -1 

+300 281*2 -*2 

308 200 

72 296 +1 

2j000 175 +6 

93 346 -2 

3300 BOB <23 

1.100 


Kklflflftert 1.700 670 -10 

KM4 Sara 112 flte +2 

Ladbrofcat 2.700 207 

Land SaoaUaat 1300 

Lanorta 1300 

Lags 4 Ganartft 1000 

Lloyds Abbay 841 

EAwdaBankf 3300 

LriSMO 4300 

London BaO. 42 

Lonhri 1300 

Lucas 4300 ISO -10 

MEPCt 217 <78 -0 

MR 2,100 147 -1 

UaMD 113 725 +7 

MatoBSwncwt <300 420*2 +7*2 

MkJtandi Baa. 56 63+ +10 

Uonfeon (Wmj 40i 117 -i 

NFCt 1300 238 -4 

NutWaatBatirf 11,000 444 9 

Marion* Powait VOQ 474 <4 

Nan 320 221*2 *1 

Nonh West WUart 420 6«3 +4 

Northern Baa 886 577 +10 

Northern Fbodat 1.500 211*2 -*2 

NonwB K» 65fl +12 

Paaoorrt 1.700 429 -IB 

P&Ot 1300 677 +3 

rawrnran 1300 iBG 

PowarGanrt M7 540 +5 

ftudaoUaif 12300 331*2 -2*2 

RMCt 151 B73 ■* 


Mdn?^oiniant 

HaSandt 

HaadMILt 



3EOOW1 4 Naw-t 
Scot. Hydn UJ ea 

Scotddi Pnrari 

Saerat 

Sadywdr 

Ewan Tiaret 

9*tal Tmnfpottf 


90S 2041 +21 

1B30D 189*9 -2*2 

2300 419 -13 

770 271 

3,700 381*2 -4*2 

n 1190 -a 



3 HMtotft 871 143*2 +*7 

BMdrant . 7.100 401 


OnKI BCecftatn UtS-t 364 

BfflUB IndS. 3T3 


404 364 -1 

406 +4 

634 +5 

493 *S 

574 +4 

ft B +4 

STB HI 

814 1106 -19 

1AOO 218 

1200 323 ■* 

840 
1300 

5600 222*2 -6*2 

1.100 104 4 

426 

275 156 -1 

3300 223 +S*2 


South Woot SqcL 
Satehon Water 
Standard Chauf 
Saonhouaa . 

SBhAfcnsat 
T4N 

It Great 

TSat 5600 272 

Tanraet 

Tam 5 Ly+s 

Taytor WMdrow 
Tascof 3300 223 ti*2 

Thatnos WaMrt 
Thom EWt 

TOmiandf 

TteUgal Ha» 2JK» 106 

UMgate 1GG 3S7 -1 

UnSaarf S.+OO 1066 +10 

IMuad Btacuaat 2,100 399 +0 

URL Naanpapara 209 «*” -” 

Vodaforwt 2.000 

WvteiiDlSEQt 414 

vwkamat isoo 

VMahWaaar 207 560 +0 

Wassay LUuar 336 666 +4 

Wtefinadt 400 527 -1 

Wfltenv riMgs.t 2.100 380 +2 

VWaConoon ijm 232 

Wlmpey 1.700 314 +2 

WfiMerf 447 944 +2 

IMMaSm. 449 424 +2 

Yoriahaa Water 529 531 +7 

Zanacat 0300 753 -3 

Band an traaig yctma tor a aslaedCM. e4 mafor 
aeartasdatA Bnaron tea SEAQnaaani 
yartaiday wtf 490pm. TVattaa N ena aMon er 
man am nretdad dawA. f Wfcaki an FT-SE 

100 (naax congdniani 


There also concerns that 
Bowater is about to return to 
the acquisition trail. However, 
Ms Chris Monro at house bro- 
ker Hoare Govett said: 
“Bowater has positioned itself 
very well for long term 
growth." 

Prudential concerns 

Prudential, the UK's biggest 
general insurer was the mar- 
ket's second heaviest-traded 
stock with more than 12m 
shares changing hands after 
better than expected prelimi- 
nary results. Prudential shares 
touched 343p immediately the 
figures were published but sub- 
sequently closed 2% off at 
331‘Ap. 

Mr Trevor May, insurance 
analyst at BZW, increased his 
current year forecast for Pru- 
dential from £5 65m to £650 
after the results, but said senti- 
ment in the market remained 
affected by worries about pen- 
sion transfers. 

Marketmakers said Pruden- 
tial shares were still affected 
by the sale early last month or 
a near 2.5 per cent stake in the 
company, some 46m shares, at 
350p a share. 

Food retailer Argyll saw 
huge options turnover - 1530 
contracts, equivalent to 4.5m 
shares - encouraging specula- 
tion that a bid may be in the 
offing. KKR, the US leveraged 
buy-out specialist, was one 
name being rumoured as tak- 
ing a keen interest in the UK 
group, whose shares have been 
strong performers recently. 

Argyll shares retreated 3 to 
256p in a generally weak food 


NEW HIGHS AND 
LOWS FOR 1993/94 

NEW HMH8 (40L 

GILTS HI BUM MAILS 5 MCHT3 (1) CRafton. 
CHEMICALS M BASF. B^n. HMM. Panri. 
nsmouTORs ra abi l^w. isa rb-l. 
Norixan, Sonctoraon drama, ELECTRNC A 
ELECT BQUP |3| fitemnJ TML Ml, NEC. 
TaaMn. EXOJNEERMa <31 Brorta. 

Mm+C, RcEs Boyce. EMQ, VBBCLES |1) 

vOtoiMean, EXTRACTIVE M08 IN Anglo 
Pacific Rml Cotednrto Mnkifi. ML Muan, 
Mhxsrcn MjbM MWng. HEALTH CARE (1) 
Am arahm WL . INSUfMNCE n) GadgMcK. 
INWLS1 MBIT TRUSTS (3) EFM Incoms. London 
Anwr. Oman. Htd Hacomiy Cad.. LEBRIRE 
A HOTELS dl CracUftrtL MEDIA R] HMfetef 
Netttete. Pnomlnk. OIL EXPLORATION 1 
PROO tH ONo RngudB, PRTNCL PAPER A 
PACKS n Pontes. RogonL PROPERTY CO 
Bouihj find Prapjn ffltop*, SUPPORT 8ERV8 
m KteamsBOO. TEXHLES A APPAREL (1| 
Cknmont Oannante. AiffiRMANB R) QiBMte 
Laura's. SOUTH AFRICANS TonjSaL-t+ActL. 
NEW LOWS flSL 

OO.T3 1*) DISmsvrOR8 IQ -Mate. Wfilpac. 
■SLECTRMC A ELECT EOUP (1) Rngpu. 
HEALTH CARE (1) CaWa ton. 9Md 
DtagrootiOL INSURANCE (1| Hknxn Stead. 
INVESTMENT TRUSTS (1) KMiuort Eur> Plvi. 
LEISURE ft HOTELS (1) Mtambfcy, OB. 
EXPLORATION 6 PROO (g Cop+™ Ramucaa. 
PHTNO, PAPER A PACKO {1) CMS* PaOurang. 
PROPenY (11 ChteteML SUPPORT SOWS n 
Boriand ten. tee- conical Canpudng. 
AMEHCAIB (II Houteen bKte. 


retail sector as investors were 
reminded of the industry's 
problems following results 
from Iceland. Continuing mar- 
gin pressure and sales growth 
decline were worse than the 
market had been expecting and 
the shares retreated 4 to l53p. 

Turnover In aero-engines 
group Rolls-Royce rose to 
i fi gm , with buyers encouraged 
by an upbeat presentation to 
institutions on Monday. 

Hoare Govett, the group's 
broker, was said to have had a 
big buyer, and US investment 
bank Lehman Brothers was 
also reported to have been a 
keen purchaser early In the 


session. The shares, up initially 
closed 2*.-* off at 189'Ap. 

Stocks with a substantial 
exposure to Hong Kong 
responded to the big rally on 
that market overnight, with 
HSBC jumping 23 to 783p. 

There was an element of 
unease surrounding NatWest’s 
acquisition of Citizens First, 
the US bank, for $500ra. Nat- 
West shares slipped S to 464p 
on heavy turnover of 10m 
shares. 

Sun Alliance slipped 4 to 
325p ahead of tomorrow's pre- 
liminary results which are 
expected to reveal profits 
recovering strongly to around 
the £l75m-£190m mark, against 
last year’s £129m loss. 

Water stocks were the best 
performers in a generally 
strong utilities sector following 
a buy recommendation from 
BZW. The broker's utilities 
team was said to have pin- 
pointed dividend potential in 
the sector, and hi g hli g hted the 
attractions of Anglian, 510p, 
North West, 543p and Severn 
Trent, 572p, all of which rose 8 
on the day. 

file power generators also 
moved ahead strongly, with 
PowerGen driven by a Klein- 
wort Benson buy note. The 
shares put on 5 to 665p. 

Oil shares responded to the 
latest rise in crude oil prices, 
to above the $14 a barrel level 
ahead of Friday's Opec meeting 
in Geneva. Marketmakers were 
said to have moved quickly to 
fill in their short trading posi- 
tion in the various stocks, driv- 
ing BP up 6% to 37754. 

Clyde Petroleum slipped 254 
to 34p following results 


described os disappointing by 
some analysts. However, Hoare 
Govett, Clyde's broker, said the 
shares were “obviously over- 
sold compared with their 
peers." Lasmo dipped late to 
close 3 off at 12Sp with the 
market braced for a possible 
cut in the dividend and big 
underlying losses. 

News that metals group 
Johnson Matthey had signed n 
collaboration deal with Cana- 
da's Ballard Power Systems 
boosted the stock and the 
shares put on s to 590p. 

Weak bond markets contin- 
ued to undermine property 
stocks, with Panmure Gordon 
taking a more cautious view on 
the sector. Land Securities fell 
6 to 680p. MEPC 6 to 478p and 
Slough Estates 10 to 252p. 

Packaging group RPC was 
heavily traded after agency 
broker Charterhouse TUney 
crossed just over 4m shares, 
equivalent to 6 per cent of the 
company. Dealers said the 
trade was priced at 162p and 
the shares closed 3 lower at 
that level. 

Trinity International the 
newspaper and packaging 
group, improved 3 to 458p on 
increased profits. S.G. Warburg 
raised its 1994 forecast by 
£0.5m to £23m. 

Unilever was said to have 
benefited from switch advice 
out of the NV shares from Nat- 
West Securities. 

MARKET REPORTERS: 

Christopher Price, 

Joel Klbazo, Peter John, 

SCava Thompson . 

■ Other statistics. Page 23 


LONDON EQUITIES 


UFFE EQUITY OPTIONS 


— can Pute — 

Option Aff Jnl Oct Apr Jul Od 

NtaHjora 6D0 29 4DM 51 8M271* 35 
r*17> 650 6 17 2SH37U58UMH 

AnH* 240 n 29» 32H 3H 14 IBM 

(758 ) 280 8 II 22 12 25 29 

ASDA 50 8M 111* 12M 1 3 «M 

C57 ) 40 ZH 5M 7 6V4 7M 10M 

Brit Abwap 420 2SM37M45W BM 22 28 
T435) 440 6 IBM 27M SOM 44M 50 

tBNNni. aaomset* « a* 22 m 

r40T ) 420 8 23 33 28 38M 47 

Boots 500 45M 56 83t* 2M 13M IBM 

F540 ) 950 11 2SM 38 ISM 36M 42 

BP 380 231* 33M 40H 6 1ZM 17M 

[-377 } 390 7H 19 26 IBM 27M 33 

Bteuasd 140 a 14H IBM 5M 11M 14M 

(143) 100 2 8M WM 20M 24M 26M 

B*a 500 37 60H BZH 4H IBM 23H 

rS2B) 560 8 21 37 28 44M 48 

CXteBW) 425 17MMH - 12 27 - 

("429 ) 4508U2S -27M42 - 

Comodto SOO 48 361*86% 3 18M2SM 

(*540 ) 550 13M 29 38M 22 44 50W 

CnanlMoa 550 31 48M SBM B» IB 25. 
(-572 ) BOO 8 22H29M 33 43 S2M 

O BOO 28 52 SIM ISM 36M 52 

("804 ) 890 6 29 41Yi 52M 8SM 81M 

Khflfistier SSO 33H 47 67M B 27W 35 

rs72 ) 600 8M 23V* 34M 34M 55M 63 

Land Sear 650 38 47 S3 5 19 24 

C6M) 700 7 1B27M26M « 51M 

Unto 6S420 12M 22 30 9M 22 24 

PCO ) 460 2 6 141* 41 40M EOM 

Mttst 480 18 34% 40Yi 13M 24M 33 

T462 ) 500 4 18 29 42 48M 57H 

Steratuy 340 28 34 431* 5 IBM 22M 

rS61 ) 390 8 19H 27M 17M 34M 37M 

StaBl Tiara. 650 30K 49 57 5M 16 25H 

rare 1 too o 23% an* 31 41 51 

S&xcIioum 200 21M 27M 91M 2 7M 9M 

rzia ) 220 7 U *0« 6 18 IBM 


97 12 17 - 3 7M - 

108 9M ISM - 0 11» - 

1050 22M 46 6m 26 39 B1M 
1100 aw 29 45 66 n 82 
750 341* SOW 64 17M34M49H 
300 B28H 42 52 84 78 
fttey Ang Bwr Hay Aiq Hom 

460 28 39 48M I2M 23 2BM 
SOO 8 21 30 3BM 46 51 
200 MM 23 *91* 7% 13 19M 

220 S13H20M1M24M 31 

330 20 37 46M 6 111* IB 

360 12 22 31 21M2BM33M 
»sr Ora Sep Mu JW Sep 


Opdoa 

Hanson 
(*281 ) 
Latent* 

naj 

lira Ml 

n») 
p b 0 
r67B) 
POtagon 
n«4j 
nadamd 
r33i 1 
mz 

PBB) 

Botfand 

rss?) 

Of* Iras 
rZTQ) 
Toko 
f223 ) 


OH Pula 

HE? Abb MW May Aufl Hra 

2B0SM29M 34 3* B 9» 
290 11M 17M 22 BM 14 18 
120 T4M 20M 2SM BM 12 IB 
130 9 10 20M12H 17 22 

180 22 28M32M 3M 8 12M 
200 8M 17 21M 11 14 72a 
650 41 M 61 78 IBM SOM 4BH 
700 17 37 4BH 45 6BM 7B 
180 20M2SM 30 4 9 11H 

200 7M 14M 18 12M IBM 21 
330 0H IBM 2B 17M 22M 28M 
380 2 OK 18 41M 44 48 


RISES AND FALLS YESTERDAY 

F 

British Funds - ... 

Other Fixed Interest 

Mineral Extraction 

General Manutactuos 

Consumer Goods 

SenricM 

Udfltiao 

Flnaoctata 

Investment Tnrats ... — 

Other* 

Toms { 

Dma MH en Dor cnroartM taw* on 1h* Lonoon SMre EarwOe. 


FUma 

FaBa 

Sterne 

58 

1 

17 

0 

0 

9 

54 

73 

78 

117 

194 

369 

38 

59 

95 

70 

157 

291 

30 

9 

7 

82 

ISO 

170 

106 

30 

44 

70 

310 

22 

568 

760 

1368 


850 42M69M S3 
900 IBM 48 60 
550 22 »47M 
GOO EM 17M28M 
260 1BM29H 36 
280 10M 19 2BM 


24 39M52H 
51M65H 78 
28 38 50 
B7M71M 82 
9 18 22 
21 25M 32 


TRADITIONAL OPTIONS 

Rrei Dealings March 21 

Last Dealings Aprfl 1 


late De clara tio ns 
For seMement 


Tosco 220 11M IBM 34M 12 IBM 21M 

f223 ) 240 4 10M 16 26M2BM33M 

Wodaftne 500 SIMOOM BO BM 23 30V. 

fG37 ) 550 21 38M E4M 30 «» Sfi 

maBM 390 14M 23 30 IBM 25 31M 

f3B0 ) 420 <M 12 16 41H45MS0W 

Opfioo Agr Jte 0c< Apr Jul Od 

0AA torn 3I54M73M 21 46 53 

nooq 1050 II 32 51 52M 74 80H 

IftamHr 500 34M 43 49 4M T9 23M 

r527 ) BSD 6 16 23M 28 49 52h 

Opdon Her j« Sep liar Jun Sep 


Abbot NM 480 

r«si j soo 

Amend 35 

r®r j 40 

Bvciavs 500 

rS3B) 550 

Bka Ckde 330 
(•341 ) 380 

British Cra 300 
C307 ) 330 

DLera 200 

f211 1 290 


94 38 80 
1 16M29M 
3 SM 7M 

1 3M BM 
42 85 B8M 

2 25 39M 

11 M 32 
1 10 22 
9 IBM 22 
1 «M 10 
13 22M27H 
1 12 16 


1 12M20M 

22 32M40M 

1 3 4K 

4 6 7M 

1 1DM21M 

14 31 44 

1 IBM 27 

21 34H44M 
1 14 19 

23 3414 37 

1 8 IB 

II IBM 27 


CoHs: Amstrad, Caverdtea, Cray Boo, Fbons, Huntarprtnt, 
Rsgant Crap A, Wkfewy. Putt & Cofis: Hanson Wts- 

LONDON RECENT iSSUESs EQUITIES 

Essue Amt MkL Ckne 

pnoe paid cap 1893704 price 

p up (Em.) Ugh Low Stock p ♦/- 

- F.P. 319 248 241 Aboust N Dawn C 245 +2 

135 F.P. 41.2 M2 134 AppBsd D«t W 130 

105 F.P. 305 118 101 CedBdtea 106 +0 

- FP. 1269 65 62 Central Eure QwOi 03 

- FP. 6.40 23 21 Do Warrants 21 

- F.P. 008 £87*2 £87*2 Chester Water £87*2 

- FP. 3QJB 125 125 County Sn» C 125 

50 FP. 1302 60 45 Etin Now Tiger 46*2 +*2 

- PP. 12L2 50 49 F & C Private Eq 48 

100 FP. 144.0 90 93 FkMty Jpn Vteun 96 +1 

IX FP. 32.7 156 130 FMW 


21 

£87*2 

125 

46*z +*2 
48 

96 +1 
150 


Wfs, ML Label, 


Net Dlv. Grs P/E 
db. cm. ytd net 


WN39 2.4 3.3 16.1 
RN191 2.9 2J 17 A 


t235J) 43 3.4 9.0 


R3J 03 29 105 


fTSP) 

open 

Grand Ute 
C471 1 
LzrSrate 

r206 I 

UMBtadb 
C3S9 1 

Option 

neons 

ns3) 


IX 9M 14M 22 1M 8M 15 
140 I BM 18» BM 19 21 


Opten my fcng Me* May Lu; M» 

Bit Aara SOO 43 63 82 2BH 44 58M 

rsw) 560 22 41 5B 56 71M84M 

BAT kids 400 22 32M47M 18 27M 37 

r«70) 500 B 17 23 48MS4VI 83 

BTR 300 32 42 47H BM 12 17M 

(T83 ) 390 13 94XM17MHM31M 

MTdsam 390 2BMXM49M 4M IS IBM 

1*406 } 420 9M 18 20M IS 31 33M 

CatnrSdi 460 2M 52M X 54 10M IB 

r4B2) 500 1 2H38M 94 27 33 

Baton B« 600 43 B8 86 8 23M 31 

(*032) 850 IBM 31M 39M 31 50 57 

Gtoness <60 38M 48M 58M 8M 1B26M 

reel J GD0 13H 27 37H X X47M 

BSC m 19 21H 26 7M 16 14M 

(*X0 ) 3X4M7HK27H 38 30M 


ftetewn ICO IBM 211* X 1 SM 8 

(*177 ) 1W 2 SM 13 4M 16M 18 

Laratu 140 16M 23M 29M 1 7 13 

(*1U ) 160 1 13 » 8 ISM 23M 

WO Pam 480 T7M S3 43 1 20M 20M 

T475 ) 500 1 14M 24H 27b 43 48 

Scat Power 390 SM 23M 32 3 IBM X 

(■383 ) 420 1 10M 19 X 34 44M 

SSteS 110 SM 11 15 I 4 6 

C117) IX 1 5M 8M 4M 9M 12 

Fate 280 4 14 22M 2M 17 22M 

(*261 ) 280 1 7 14 Xh 31 35 

Tarmac 400 24 X X 1 1ZM 20V, 

(*401 ) 500 1 1BMZ9M 22 32K40H 

Than SI 1100 14 5BM B1M 6 37 6SM 

(1103) (ISO 1 3BH 57 48M 65 8SM 

TSB 220 4M ISM 23 2 10 17 

rare j m i iwtw« a a 

Tomans 240 11 21 27 1 BM 15 

1*250 ) 260 I 11 17 12 19W 2BM 

Wellcome 600 28M E3M IBM 1M X 42M 

(■622 ) 660 1M M 52 32 59 6BM 

Option Apr JM Oct Apr Jd Oct 

Gtoo B50 31MB0M75H 17 37M56M 

reel j 700 11 zr s3 48m»m87m 

HSCTSptis 750 GBM 93M 113 21 <9 66M 
(*701 ) BOO 29 89M 88M « 75M 92 

Hantara 2000 92 IB 197 34M 50M 115 

(-20411 2050 SZM 131 171 KM 111 IX 

Option May Aag Hot Mar Auq Nw 

RtWflpm ISO 13M 21 2SM 7 12M 17 

P0B1 ano 5 12 IB IBM 24 Xh 

* Underlying mxiray price. Premteoo Shorai era 
bteftd on teoring ofhr prices- 
Man* 22. Teto c ont ra cra: •’3.130 Ctoti 29908 
Putr 10224 


_ 

FP. 

054 

105 

96 Fleming Japan C 

101*2 


. 

- 

- 

- 

- 

F.P. 2£9U) £31*2 £21*a FrixiMn Ron 

£31*2 


028c 

- 

06 

- 

- 

FP. 

510 

103 

100 Qartmare Brit Inc 

102 


- 

- 

- 

- 

ra 

FP. 

602 

113 

112 Do Zero Pf 

112*2 

■h 

- 

- 

- 

- 

- 

F.P. 

106.5 

213 

200 Do Unto 

213 


- 

- 

- 

- 

170 

FP. 

70.1 

in 

159 OoUaboreuctii >*h 

180 

■9 

WN3J 

23 

23 

173 

183 

FP. 

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Oulda to tee London Share Senrice. 


RIGHTS OFFERS 


Issue 

price 

p 

Amount 

paid 

*to 

Latest 

Renun. 

date 

1993/94 
Htah Low 

Slock 

Closing 

price 

p 

+or- 

b 

92 

l*H 

11 74 

15pm 

7pm 

BurfM 

9*]pm 


d 

173 

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27pm 

14{im 

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14pm 


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Roden UacLetan 

4pm 

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200 

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4/5 

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38pm 

Hariya 

38pm 



150 

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5/5 

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13pm 

Union 

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1 

30 

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Upton & Sthn 

0 pm 


"* 

315 

1*0 

30/3 

64pm 

48pm 

Wsthanpeon JD 

4Bpm 

-1 

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FT GOLD MINES INDEX 



rnr Xcdg 
21 00 day 

Mar Mtf Vtr 

10 17 ago 

Brats MV 
yMd % 

02 Mtik 

Ugh Law 

UdWnnUntVO 

2SS&A8 -02 

2069.10 2SB09B 135&.15 

132 

236739 124032 

■ Hs0kraIMba 

AWca(*S) 

283334 +13 

280630 279133 151837 

4.67 

344000 148037 

AastrohslajB) 

236338 +O0 

254439 254034 124&5B 

133 

301339 124058 

Morth America fit) 

1727.64 -1.1 

174835 170027 118733 

655 

2030.65 118237 


Copyright 1)w Fbunate Tin LMW 196*. 

ROwbb In nracMS «ho» iuidm ot ewi ii atoB. Bede US Dam. Bne Vteuw 100000 91712/92. 
Prekeosaar Gold Mtoee tedeic Mar 22: 228.1 ; flairs change +ta poteoc Y« ogix 105.7 r P«*m 
Ltesii pneat w wwraltabte tor tHi adban. 


on* PriM ■ a pramiun. 

FINANCIAL TIMES EQUITY INDICES 

Mar 22 titer 21 Mar 18 Mar 17 Mar 16 Yr ago TBgn 1m 

Ordinary Share 2527.7 25202 2542.7 26600 2552.0 22302 27106 2124.3 
OnL dtu. yield 066 3.67 3.65 3.02 3.64 4.39 4JS2 

Earn. ytd. 98 UI 4.88 4.89 4.97 492 4.95 6.17 038 3.K 

P/E ratio net 21^2 21.78 21.87 22.00 21.95 20.19 3043 19.4( 

FYE lEtto riH 22.78 22.75 22.86 23-06 22.93 1070 3000 101* 

■Far 1993/94. Ordteay Share Max am compOahon: nigh 27106 SA09C low 49u** 2IWM0 
FT Onftray Share rob base am 1/7(35. 

Ortflnsry Sham hourly ettangas 

Optin 9 lB 0 HUM 11 JO 1LOO 1090 14J0 1000 1000 Hlflh lam 
25306 2533.0 2S37.0 25300 2535.8 2531.0 26302 2525.8 2621.2 2537.7 2517.1 


^AO bargains 37.802 34987 3 

Equrty turnover (EnOf - 1 1B1J5 1 

Equity bargalnar - 40,590 3 

Shares Hatted (rnQt - 460 2 

t ErcliKtog nra-narkM txatesaa and ownaaa umnwr. 


Mar 21 Mar 10 Mar IT Mur 10 Yr ago 

34«7 

33,758 

34334 

30576 

39.577 

11015 

14305 

14208 

1458.1 

13407 

40,690 

36*43 

30360 

34^94 

45,780 

4603 

4900 

573.7 

590 

811.4 


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FINANCIAL TIMES WEDNESDAY MARCH 23 1994 


LONDON SHARE SERVICE 


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FINANCIAL TIMES WEDNESDAY MARCH 23 1994 



















































































































































FINANCIAL TIMES WEDNESDAY MARCH 23 1994 





















































































































35 










































































36 


CURRENCIES AND MONEY 


FINANC IAL TIMES WEDNESDAY M ARCH 23 1994 

MONEY MARKET FUNDS 


MARKETS REPORT 


POUND SPOT FORWARD AGAIN* ST 7Htz ROUND 


Market waits on Fed 


Foreign exchanges face 
another day of tense anticipa- 
tion today after the Federal 
Reserve failed yesterday to 
tighten US credit policy, writes 
Philip Gcuoith. 

The dollar dropped half a 
pfennig after the US central 
bank added reserves with 
two- day system repos which 
suggested no change in mone- 
tary policy. The Fed moved 
quickly, however, to quash 
rumours by saying the FOMC 
meeting, which runs over two 
days, had yet to discuss mone- 
tary policy. 

Analysts said yesterday's 
action by the Fed was simply a 
holding operation. There is a 
strong consensus that the Fed- 
eral Open Market Committee 
(FOMC). the policy-making 
arm of the Fed, will take a 
decision to tighten policy. 

This decision will either be 
implemented today at “Fed 
time” - 4.30pm GMT, when the 
Fed conducts its daily open 
market operations - or later, at 
a moment of the Fed's 
choosing. 

Any action from the Fed 
today is likely to coincide with 
a further reduction by the 
Bundesbank of the German 
repo rate. The combination of a 
rise in US rates and a lowering 
of German rates could well 
give the dollar a significant 
upward lift. 

In the UK. meanwhile, the 
release of the February retail 
price Index is keenly awaited. 
Some observers believe a good 
number could trigger a cut in 
interest rates, but this is a 
minority view. 

■ After spiking below DM1.68 
after the Fed's daily 
operations, the dollar bounced 
back and was trading at 
DM1.687Q yesterday evening. A 
similar pattern was evident 
against the yen. spiking below 
Y105.73 before trading later at 
Y 106 ; and against sterling, 
where the dollar spiked up to 
$1.4915, before trading later at 
$1.4870. 

The dollar continues to be 
wrapped in bearish sentiment 
Analysts say that the problem 
for the US currency is that an 
interest rate increase of 25 
basis points is already priced 
in. The dollar's weakness was 
illustrated by it finishing lower 
in London at DM1.6885 against 


D-Mark 

Against the FTT (FFr per DM) 

3.42 ■— 


3.41 


3.40 •->- 



3.39 ' 


14 Mar 1904 22 

Oairac DataaMant 

■ Pound hi Haw Vmfc 

Km 22 —taut — - Aw. <*>sa - 

Caput f-4870 1.4885 

1mm 1.4850 1.4884 

3ra8i 1.4828 1.4838 

1 yr 1.4780 1.4789 

the D-Mark from DMI.6979. 
despite the prospect today of 
US rates rising and German 
rates falling. 

In the money markets, Fed 
hinds came off from the 3% per 
cent, where they had been 
trading before the Fed acted, to 
per cent This move was 
echoed in the futures market 
with eurodollar contracts 
slightly firmer than on Mon- 
day, suggesting a scaling back 
in expectations of the likely 
extent of credit tightening. 

The June contract was trad- 
ing at 95.60, from 95.58, while 
the December contract was 
also two points firmer at 94.75. 

With Fed funds now at &25 
per cent, and three month 
money at 3.33/4.00 per cent, the 
spread between the two rates 
is currently 75 points. Assum- 
ing the same size spread, the 
June contract is discounting 
three month money of 3.65 per 
cent, 40 points higher than the 
current level. For September 
the figure is 80 points, while 
for December it is 125 points. 

■ The D-Mark was firmer 
across the board in Europe. It 
closed at FFr3.418 from 
FFr3.407 on Monday against 
the French franc. Analysts 
warned that if the Bundesbank 
did not quicken the pace of 
monetary easing, the steady 
weakening over the past week 
of the franc could continue. 

The Bundesbank announced 
it was holding another variable 
rate repo. The lowest bid 


accepted last week was 538 per 
cent, a reduction of six basis 
points in the repo rate. Ana- 
lysts are predicting a fall of up 
to ten basis points. 

Overnight rates firmed 
slightly, from 5.70/5.80 per cent 
on Monday, with some quotes 
of .5^0/550 per cent reported. 
Ms Phyllis Reed, European 
bond strategist at BZW, said 
the move had not been very 
convincing and doubted 
whether it would be enough to 
stop a good repo. 

“All the signs are that liquid- 
ity is quite good so it could be 
that the banks are getting 
jumpy on the Fed tightening," 
she said. Supporting the case 
for a fall of up to ten points in. 
the repo rate, Ms Reed noted 
that the mid-point of the over- 
night rate was still below the 
repo rate and this was nor- 
mally a good sign. “Banks tend 
to be quite amb itious on the 
bidding." she said. Last week 
the overnight rate feu to the 
repo rate level only at the time 
of the auction. 

The repo announcement trig- 
gered a rally in the futures 
market The June three month 
euromark contract finned one 
point to settle at 9151 while 
the December contract rose six 
points to 94.95. Both moves 
indicate a more positive out- 
look about German interest 
rates falling. 

■ Sterling finished more than 
a pfennig weaker against the 
D-Mark, dosing in London at 
DM+L5094 from DM2.5205. Trad- 
ers said the UK currency was 
being affected by speculation 
about an interest rate cut 

Mr Robin Marshall, chief 
economist at Chase Manhat- 
tan, warned there was a dan- 
ger of a rate cat backfiring. If 
it upsets the gilts market, this 
will put upward pressure on 
mortgage rates. 

In the discount market the 
Bank of England dispatched a 
shortage of £750m without dif- 
ficulty. Sterling futures firmed 
slightly with the June contract 
a basis point up at 94B5. 

■ OTMBCBBBMCM 

Mar 22 £ S 

Hungay 153.473 - 151725 110300-101401 
ten 2S97A1 - 2B03JN 1748.00 ■ 175000 
mm 04423 - 04438 02977 ■ 0296S 

Pound 32B5U - 32B7S4 221130 - 221130 
RUM 257055 - 258559 173500 - 174000 
UAt 5.4*6 - 54596 18713 - 35735 


Mar 22 

Swope 

Austria 

(Sch) 

Brtghan 

(BR) 

Dermork 

(DKr) 

HrtBrid 

(FM) 

Renee 

(FR1 

Germany 

(PM 

Greece 

(Or) 

Ireland 

09 

Itaftr 

<U 

Luxembourg 

(LFr) 

Ketherfonds 

PI 

Norway 

(NtO) 

Portugal 

m 

8p*n 

pta) 

Saradwi 

CSKr) 

Sirtewtand 

(SRi 

UK 

(9 


1 


Cloaing Chang* Bldtafler 
mtd-polK on day epread 


Day 1 * MU 

high low 


One month Three months Oua year Bank c4 
Raw %PA Rue %PA Rata %PA Eng. Indm 


IT. WOO 17.6315 17.86Q5 
-0.1114 321 - 284 52.1570 51.6390 51.643 
9.8865 9.3385 9.6877 

£3070 62320 
0,6038 05534 £5882 

£6285 £5051 £5111 


94588 -Q.01 78 529 - 647 
82487 -0-0356 384-589 
05709 -00128 725 - 312 
£5094 -OOT11 000 - 107 


02 17.65«9 02 

-12 31.8893 -08 62-0993 -0-6 

-1.1 843824 -ID 02172 -06 

-12 8.8017 -12 82268 -02 

-08 £5137 -07 £5145 -02 


1132 

1142 

114.7 

812 

1082 

1283 


1.0382 


-1.130 225 - 068 388230 388.068 


-0.0015 371 - 382 
248426 -529 288 • 613 

51.7793 -01114 321 -264 
2.8226 -00112 209-243 


12429 12349 1.0391 

246920 3479.16 2491.86 
52.1570 51.6590 812243 
22450 22170 £8233 


258299 -0272 438-780 260100 258200 559.574 

205.757 -021 B 661 - 883 206250 205205 206237 
11.7048 -0.0083 959 - 137 11.7140 11.6296 11.7248 
2.1260 -I IOW 235 - 284 £1346 £1274 £1235 


-12 1.0406 

-32 2504.68 
-12 512893 
-02 £8241 

02 102142 
-42 291219 
-34 207242 
-2.1 11.7603 

OJ3 £1199 


-02 1-0468 -0.0 

~£2 2555.41 -2-9 
-02 52.0993 -02 
-02 £8205 0.1 

-03 102054 02 

-42 

-3.1 211.157 -22 
-12 112683 -1.4 
1.0 £0996 12 


10£6 

78.7 
1142 
1182 

842 

85l3 

76.7 
1182 

802 


Ecu 

SDftt 

American 

Argentina 

Brazil 


- 12024 

- 0.941880 


-0.0034 014* 034 12085 12000 12039 -1A 12063 -12 12107 -02 


141847 
(Or) 121825 


Mexico (New Peso) 

USA ($) 

PadflcMMcBe Bast/AMca 
AusMa 
Hong Kong 
India 
Japan 


+0.0002 827 ■ 887 
+2227 783 - 866 
£0294 +0.0043 283 - 304 
42342 *0.0056 251 - 433 

14882 +0.0017 B57 - 887 


1.4815 1.4825 

1220.00 119520 
£0420 £0224 
42445 42230 
1.4915 1.4837 


(AS) £0337 -0.0003 322 - 951 £1072 2X821 

HKS) 11.4816 +0.0088 770 - 882 11.5263 11.4648 

HRS) 48.6203 +0.0496 980 - 415 46.7860 483470 


New Zealand 
PhNpptoee 
Saudi Arabia 
Singapore 
S Africa (Com.) 


M 
(MS) 

04ZS) 

(Peso) 40.9821 
(SHI 
(SS) 

(H) 5.1211 


157.545 -0243 455 - 635 

4.0495 +0.0084 473 - 515 
£8058 -0.0011 033 - 082 


4.0569 4.0438 
2.8259 £6025 


+0.0489 082 - 559 415695 40.6600 


5.5732 +00367 7T1 - 753 515825 55637 

23671 +0.0036 559-582 23840 £3536 

-0.0001 182 - 239 5.1445 5.1085 

+0.0488 454 - 648 88650 6.8255 

+£7l 015 - 244 1204.10 1200.00 

+0.082 522 - 788 39.3600 39.2000 

THaland (Bt) 37X1009 +0.0133 734 - 284 37.7500 37.5320 

TJSDR mm tor Mrn. BHEfeflbr apreacto h On ftaund Spot tot*. atom <rty to tout 0W* Oaetomt 


S Africa (Fin.) (F? 6.8651 

Sou#! Korea (Won) 1201.30 
Taiwan (IS) 39.2654 


£0274 

12 

20255 

as 

20277 

ai 

pft.3 

1/4843 

1.5 

1.4818 

12 

1.4775 

06 

803 

£0922 

08 

£0898 

a7 

£0679 

as 

_ 

11.4688 

1 A 

11.4832 

02 

11.4141 

as 

- 

157.185 

2.7 

156.455 

£8 

16328 

£7 

183.9 

£6087 

-12 

£613 

-1.1 

£6216 

~ae 

_ 

- 

- 

- 

- 

- 

- 

- 


W an HnUJad by curcnt inttrett raws. Storting Index eafcufcsnd by the Bnok of England. Bate 
the Data Spa M*« tatad bom THE WMiHBJTBtS CLOSING I 


1» - lOO Um, Odor and Md+aM ki bob ttm and 
SPOT RATES. Soma wduas ora rrandM by tw F.T. 


DOLLAR SPOT FORWARD AGAINST THE DOLLAR 


Mar 22 


Ctoamg 

Change 

Bid/oncr 

Day's mid 

One month 

Three month* 

One year J.P Mayan 


mkl-pobit 

on day 

spread 

high low 

Rate 

MPA 

Rate 

MPA 

Rate 

MPA 

Index 

Europe 

Austria 

(Sch) 

112855 

-0.082 

830 - 880 

113050 11.8600 

11.9065 

-2-1 

11.933 

-1.6 

11.9365 

-04 

1031 

Belgium 

(HR) 

34.8400 

-aiis 

200-B00 

350000 3*7460 

3*02 

-2.8 

35.035 

-22 

353 

-1.3 

10*2 

Deraneric 

(DKr) 

6.6336 

-4X0198 

318-353 

6.8408 56179 

6.6509 

-3.1 

66729 

-2-4 

6.7176 

-1.3 

103.4 

Finland 

(FM) 

5-5502 

-0.0303 

451 - 552 

6 .5723 53368 

5556 

-12 

5.5805 

-0.7 

53682 

-03 

76.0 

Ranee 

(FFr) 

5.7710 

-0.0152 

700 - 720 

57792 57535 

5.7846 

-£8 

5.8048 

-2.3 


-13 

10*6 

Germany 

(D» 

1.6885 

-a 0094 

881 - BS8 

1.6960 1.6853 

1.8918 

-23 

1JG964 

-1.9 

1.7010 

-03 

104.7 

Greece 

(Dr) 

248.700 

-135 

500 - 900 

247.700 245400 

250.8 

-19.0 

257 £5 

-17.3 

286.45 

-16.1 

70.9 

Ireland 

09 

1.4316 

+4X0037 

306 - 326 

1.4359 1.4288 

1.4284 

£7 

1.424 

£1 

14101 

13 

- 

HaV 

OJ 

1B/1./5 

-0./5 

1» - 226 

10752b 1005/0 

Ib/lUb 

-5* 

1UMI./3 

-*b 

1/313 

-a.t) 

IbJJ 

Luxemborag 

(LFr) 

34.8400 

-0.115 

200 - 600 

353000 3*7450 

34.92 

-2-8 

■rrHYK 

-22 

353 

-1.3 

10*2 

Netherlands 

(R) 

1.8992 

-4)3097 

967 - 997 

1.9075 13940 

1-9024 

-£1 

1.9062 

-1J5 

1.9112 

-06 

1017 

Norway 

(NKU 

72391 

-0326 

373 - 406 

7.3740 73185 

7.3*91 

-1.6 

73629 

-13 

73781 

-05 

9*9 

Portugal 

(Eel 

174.000 

-0.45 

950-050 

17*950 173.750 

175CM 

-72 

1765 

-5.7 

181. 725 

-4.4 

fl£T 

Sprtn 

(Pta) 

138.445 

-0.575 

420 - 470 

138.700 138.250 

139.045 

-52 

139-965 

-*4 

143075 

-33 

BO. 5 

awoden 

(SKr) 

7.8757 

-3.0148 

723- 790 

7.8820 7.8325 

7.9027 

-4.1 

7.9405 

-£3 

8.0457 

-22 

mn 

Sudbariand 

(SFr} 

1.4399 

-0.0077 

293 - 303 

1.4335 1.4275 

1.-1308 

-0 7 

1.4308 

-03 

1.4219 

0l6 

10*5 

UK 

(9 

1.4862 

+4X0017 

857 - 887 

1.4915 1.4837 

1.4843 

15 

1.4818 

1£ 

1.4775 

06 

893 

Ecu 


1.1411 

+4X0042 

406 - 416 

1.1432 1.1396 

1.1382 

3.1 

1.1341 

£5 

1.1262 

13 

- 

SORT 

Americme 

- 

139659 

- 

- 

“ 

- 


“ 


“ 

“ 

“ 

Argentina 

(Peso) 

0.9990 

-0301 

980 - OOO 

1.0001 0.9680 

- 

- 

- 

- 

- 

- 

- 

Brarii 

(CO 

B1S.705 

+14262 

700 - 710 

819.720 819.700 

to 


- 

- 

- 

- 

- 

Canada 

test 

73655 

+0.00)3 

652 - E57 

13695 73620 

1.3863 

-0.7 

1.3679 

-07 

13706 

-08 

84.9 

Mexico (New Peso) 

33200 

. 

150 - 250 

3.3250 33150 

£321 

-Q4 

33228 

-03 

£3302 

-03 

— 

USA 


- 

- 

. 

- 

- 

- 

- 

- 

- 

- 

101.4 

Pecfflc/Mkkta East/ Africa 











Australia 

(AS) 

1.4088 

-0.0017 

083 - 093 

1.4148 1.4075 

1.41 

-1.1 

1.4147 

-1.7 

1.42S3 

-13 

87.4 

Hong Kong 

(HKS) 

7.7255 

-0.003 

250 - 260 

7.7286 7.7250 

7.7285 

-05 

7.7345 

-05 

7.7592 

-04 

- 

Inda 

(R8) 

31.3688 

-0.0025 

650 - 725 

313750 31.3625 

31.4338 

-25 

31.5683 

-£6 

- 

- 

- 

Japan 

(Y) 

106.005 

-4X285 

880 - 030 

105180 105.830 

705.9 

12 

105-59 

13 

T 03.755 

21 

145.0 

Malaysia 

(MS) 

£7247 

+3.0032 

243 - 252 

£7260 £7195 

£7177 

£1 

£7022 

£3 

£7647 

-13 

- 

New Zealand 

(NZS) 

1.7533 

-0.0028 

522 - 544 

1.7622 1.7520 

1.75*5 

-O.S 

1.759 

-13 

1.7809 

-1.6 

- 

PtnSpplnoa 

(Peso) 

27S750 

- 

000 - 500 

27.7500 27.4000 

- 

- 

- 

- 

- 

- 

- 

Saudi Arabia 

(SB) 

3.7500 

+0.0002 

496 - 501 

£7505 £7490 

3.7507 

-02 

£753 

-03 

£7845 

-04 

- 

Singapore 

(SS) 

1-5860 

- 

857 - 862 

1.5870 1.5850 

1.5853 

0.5 

15848 

03 

1.5834 

03 

- 

S Africa iGom.) rm 

£4458 

-0304 

450 - 466 

3.4500 £4410 

3.4623 

-5.7 

£4883 

-4-9 

£5813 

-39 

- 

S Africa (Fin.) 

P) 

4J125 

+0.0275 

075 - 175 

4.6200 *5975 

*6465 

-&fl 

4.7065 

-82 

- 

- 

- 

South Korea 

(Won) 

608300 

+0.9 

800 - 800 

809.000 807.100 

811.3 

-4.5 

814.8 

-02 

8333 

-31 

- 

Tahran 

(IS) 

284200 

+0.025 

200 - 200 

26.4300 26.4000 

26.4855 

-3.0 

26-586 

-2.5 

- 

- 

- 

Thatond 

(BO 

253000 

-0.02 

900 - 100 

25.3200 252800 

2538 

-£B 

2S20S 

-ar 

26.025 

-23 

- 


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Trust Funds 


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299 

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1823 




Dank of Seated 

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2*2 



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£390.000* 




ratal 
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01*2 

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900 

179 

909 

s*o 

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1S0 

IB 


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PO But ISO. WnaWw 


CROSS RATES AND DERIVATIVES 


EXCHANGE CROSS RATES 

Mar 22 BFr DKr Fh 

DM 

K 

L 

H 

NXr 

E* 

Pta 

SKr 

SA- 

£ 

CS 

S 

r 

Ecu 

Belgium 

(BFt) 

100 

1934 

1856 

*848 

£005 

4799 

5-452 

21.07 

499.4 

397.1 

2250 

*104 

1531 

£519 

£870 

30*2 

2.614 

Denmark 

(DKO 

5232 

10 

£700 

£545 

1353 

2521 

2363 

11.07 

2B23 

208.5 

1157 

2.155 

1514 

£058 

1.507 

1595 

1.321 

France 

(FFr) 

8037 

11.43 

10 

£925 

1310 

2897 

£291 

1£72 

3015 

239.7 

1384 

£478 

1.186 

£366 

1.733 

1835 

1518 

Germany 

(DM) 

2364 

3.929 

£418 

1 

0.414 

990.4 

1.125 

4348 

1031 

81.94 

4563 

0547 

0389 

0809 

0592 

02-77 

0519 

Ireland 

(«3 

49.88 

9.498 

8363 

£417 

1 

2394 

£720 

1051 

249.1 

1981 

1137 

£047 

0563 

1555 

1532 

151.7 

1354 

fbtfy 

(U 

£084 

0397 

0345 

aiai 

0042 

100 

0114 

0439 

1041 

£274 

0471 

0088 

0540 

0082 

aoao 

6338 

aasz 

Nethwtanda 

(FO 

1834 

3.492 

£038 

aess 

0368 

8803 

1 

3365 

9150 

7253 

*145 

0753 

0354 

0718 

0526 

55.79 

0.461 

Norway 

(NKri 

47,46 

9-037 

7-862 

£300 

0.951 

2278 

£688 

10 

237.0 

188.5 

1072 

1548 

0517 

1580 

1.362 

144.4 

1.193 

Portugal 

Ife) 

2atc 

£812 

£317 

£070 

0401 

9609 

1-092 

4319 

KXX 

7951 

4524 

0522 

0387 

0.78S 

0575 

8050 

0503 

Spato 

(Pta) 

25.18 

4.795 

*172 

1320 

0505 

1209 

1373 

5306 

125.8 

100. 

£691 

1.034 

0488 

0587 

0723 

m.61 

0.633 

Sweden 

(SKr) 

4438 

8.426 

7.331 

£144 

0 887 

2124 

£413 

9.325 

2213 

175.7 

10 

1.816 

0555 

1.734 

1570 

1343 

1.113 

Swttzoriand 

(SFri 

2437 

4340 

*036 

1.181 

0488 

1169 

1.328 

5.134 

121.7 

96.75 

5506 

1 

0.471 

0555 

0.889 

7*12 

0.613 

UK 

(El 

51.78 

9-659 

8577 

2509 

1.038 

2485 

2523 

10.91 

2586 

205.6 

11.70 

£125 

1 

£029 

1.486 

1575 

1.302 

Canada 

(PSt 

25.52 

4859 

4327 

1337 

0512 

1225 

1391 

5.377 

1275 

1013 

5.768 

1.047 

0.433 

1 

0732 

7752 

0642 

US 

IS) 

34.B5 

6.635 

5.772 

1.688 

0.639 

1672 

1.900 

7342 

17*0 

1384 

7573 

1.430 

0873 

1385 

1 

108.0 

OB76 

Japan 

M 

32B.B 

62-60 

54.46 

15.93 

6580 

15778 

1732 

6937 

1642 

1305 

7439 

1349 

6349 

1258 

9.435 

1000 

£267 

Ecu 


39.77 

7.572 

6.588 

1.927 

0.797 

1909 

£168 

8379 

1985 

157.9 

£988 

1532 

0.768 

1558 

1.141 

121.0 

1 


EMS EUROPEAN CURRENCY UNIT RATES 

Mar 22 Ecu cea Bale Orange % +/-from % spread 

rates against Ecu on day can, ram w we*aat 


ON. 

tod. 


'ion per i .«» Danish Kura. French Franc, Naregw Knmer and Smaoh Krona, pv 10; Bdgan Am, Escudo. Ln and Peseta per IDO, 


■ D-MARK FUTURES 0MM) DM 125.000 per DM 


■ JAPANESE VEX FUTURES ffMMJYan 125 per Yen 100 



Open 

Latest 

Change 

Wflh 

Low 

Est. vot 

Open ft 


Open 

Latest 

Change 

w* 

Low 

EsL vot 

Open Int 

Jun 

0.5688 

05901 

+0.0013 

05908 

0.5880 

44377 

90579 

Jun 

0.9468 

03455 

-00004 

0948? 

09453 

16992 

47920 

Sep 

0.5686 

0.5886 

+00010 

05886 

05881 

60 

2549 

Sep 

0.9523 

09513 

+00004 

09523 

09510 

68 

1935 

Dec 

" 

05872 

" 

05872 

“ 

3 

118 

Dec 

- 

0.9565 

- 

09587 

00565 

10 

394 

■ SWISS FRANC FUTUNBS 0MM) SFr 125,000 per SFr 



■ 3TBRUNQ rUTUMS (WM) £82.500 per £ 




Jun 

0 697fl 

0.6990 

*0.0014 

07002 

06972 

13326 

32.057 

Jun 

1.4844 

1.4826 

•05018 

1.4880 

1.4800 

19.338 

24.410 

Sep 

0 7004 

07008 

+0.0024 

0.7010 

07000 

22 

262 

Sep 

- 

1.4820 

. 

1.4820 

1.4800 

10 

830 

Dec 

07015 

0.7QI5 

*0.0015 

0.7015 

0.7015 

2 

37 

Doc 

“ 

1.4800 

" 

1.4800 

1.4780 

15 

33 


Ireland 

NettMriande 

Beigkan 

Germany 

France 

Denmark 

Spain 

Portugal 


Greece 
He* 

UK 

Ecu central tales hi by toe European Gomnmian. cumin are In deecmdtefl retaera strength. 
Pereennge chafes ere ta Ecu; ■ poatae change dram ■ waeh cwraocy. nvogmee ahoM Uw 
me beraran rao epreeda: ere pcceraagB iM areno a bwean toe eceai roertceiend Ecu canual ratea 
tar a curacy, and toe maurnom pairoeiad par c an ta ae ds wa don (4 ere eenencyta roadrai rata Iren u 
Ecu central rata. 

fl TIMS Suriria and RMrei Uta mraianded from BWL AdMSbrart cdoMed by me Rnaidal T«nra. 

i£/SOPT10i»ai^S0 (cents per pound) 


0908628 

0.797897 

+0901228 

-1.33 

496 

9 

£19872 

£16806 

-00021 

-190 

*33 

- 

409123 

39.7390 

-00339 

-1.18 

4-20 

9 

194964 

192829 

MXDQZ54 

-1.10 

4.11 

- 

£53883 

698612 

+0.00779 

0.72 

£23 

-6 

7.43679 

797410 

+000365 

1-85 

1.11 

-13 

154950 

158.145 

+0122 

£53 

0.4* 

-18 

192954 

190589 

+0188 

£97 

0.00 

-20 

MBERS 

28*513 

281.719 

+005 

6-50 

-392 

- 

179319 

1906.87 

-1.45 

694 

-317 

- 

0786749 

0768805 

+0.002332 

-2.28 

5.38 

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£13400* *78 344 | 444 1 Oe 

(AOn-ei*aM 1*40 334 *49 1 Ob 

I1,D0IH)44»~~— 1*25 319 I 4221 » 


241 170 
2*4 320 
148 228 


0-MB R®’ 


cowwur m re kand mao* not 
Mho mnaet or la aeouclba ■! bmc nm hone n. 
imenaa o( famren ygymm abtr marae ** tancta «• 


CIMDO-C . 
£S00-d99»- 

30-0 9%4 


*90 

30B 230 I ini 

279 208 277 C-4HI 

223 vae I 22B10-WI 

•mmumnam 


m gyre, 'c uiy i n a m mar AH'. M Or 
* BMih bMram b r 


MONEY RATES 


■ TWHBEMOinH EUHOMAHK FUTUBBS (UFFE)' DMlm pants of 100% 


Strike 

Price 

Apr 

- CALLS - 
May 

Jiai 

Apr 

— PUTS - 
May 

Jun 

1.400 

8.40 

895 

a *2 

. 

096 

027 

1.425 

599 

£12 

894 

- 

097 

062 

1-460 

3.68 

*08 

*47 

017 

072 

193 

1.475 

193 

£47 

£92 

075 

194 

£18 

1900 

064 

191 

193 

£07 

£82 

£44 

1905 

0.15 

061 

194 

*02 

4.81 

£14 


Match 22 

Over 

Ono 

TtVM 

Sh 

One 

Lomb. 

Do. 

Repo 


(Sqm 

month 

liiUcb 

mthj 

year 

Inter. 

(TOO 

rate 

Belgium 

_ 

6'i 

ej 

6'» 

64 

7.40 

5.00 

_ 

axn* ago 

- 

8*. 

8i 

6'.b 

Uta 

7.40 

500 

- 

France 

6!. 

6i 

6’.« 

6'i 

55 

£10 

_ 

7.75 

■n+fk ngo 

8« 

81 

e>+ 

6i 

53 

£10 

_ 

7.75 

Germany 

5 7b 

6.85 

£75 

5.58 

538 

£75 

525 

5.88 

mvW ago 

5.90 

5S5 

5.80 

565 

5.43 

6.75 

525 

594 

Ireland 

«U 

6i 

S'.i 

6'i 

6ta 

- 

- 

£75 

week ego 

6i 

e; 

S'* 

6'a 

B'a 

- 

- 

£75 

tte*y 

B'r 

8’i 

B»b 

BH 

8te 

— 

8.00 

8.92 

•«.* ago 

a: 

8io 

a 1 * 

01 

84 

- 

8.00 

£92 

Netherlands 

su 

5 49 

s.35 

526 

525 

- 

525 

_ 

itrtri ago 

553 

£49 

529 

590 

£16 

_ 

£25 

_ 

Swftrerlond 

4** 

4*. 

*M 

41 

4 

8.625 

4.00 

_ 

»«*i og>> 

J 

4'. 

4i 

4 

33 

8 625 

4.00 

_ 

US 

3’r 

3^ 

3Q 

4J 

43 

_ 

390 


woeK ago 

3i 

O'b 

3Q 

4i 

44 

- 

3.00 

- 

Japan 

y* 

I'. 

2H 

2*4 

21 

- 

1.75 

_ 

wed* ago 

?’* 

2'r 

2te 

2 V, 

24 

- 

1.75 

- 

■ S LIBOR FT London 








Inierbank Ruing 

- 

3Xi 

4 

4'i 


- 

- 

_ 

wet* ago 

- 

3 4 i 

3\ 

4'.o 

ft 

- 

- 

_ 

US DoBor CDs 

- 

3.52 

375 

4.06 

4.48 

_ 

- 

_ 

wri .igo 

- 

3.52 

£68 

398 

4.33 

- 

- 

- 

SOH united D* 

- 

3« 

3« 

3'4 

4 

- 

_ 

- 

WKf** J>JO 

- 

3'* 

3”. 

3 r « 

4 

- 

- 

- 



Open 

Seripnce 

Change 

High 

Low 

EsL voi 

Open int. 

Jim 

9*49 

94.51 

+0.01 

94J53 

94.48 

2582a 

265658 

Sep 

94.74 

94.77 

+002 

94.79 

94.73 

16162 

168323 

Dec 

94.87 

94 95 

+0.06 

94.95 

94.87 

20573 

150425 

Mar 

94.92 

9*99 

♦0.07 

95 00 

94.90 

11688 

129970 

■ THREE MONTH EUMJURA MTJRATE FUTURES (UFFE) LI 000m points o! 100% 


Open 

Sett price 

Change 

Ugh 

Low 

EsL wjl 

Open oil. 

Jim 

91.70 

91.73 

♦0.03 

91.77 

91.88 

5437 

. 58377 

Sep 

91.88 

9134 

♦0.04 

91.97 

91,88 

3038 

28862 

Dec 

92 07 

92.09 

+0.04 

92.11 

32.07 

1801 

38538 


92-08 

92.09 

+0.04 

92.10 

92.08 

925 

3861 

■ THREE 

MONTH 

EURO SWISS FRANC FUTURES (UFFQ SFrlm points of 100% 


Open 

Sett price 

Change 

Nigh 

Lm 

Est wjl 

Open bit 

Jun 

96.06 

96.08 

*0.02 

96.09 

9£05 

4449 

35191 

Sep 

96.16 

9616 

+0.02 

9917 

96.14 

466 

7003 

Dec 

96.07 

96.08 

+0.03 

96.09 

96.07 

255 


Mar 

96.00 

96.00 

+0.05 

96.00 

96.00 

TO 

128 

■ THHEE MONTH ecu FUTURES (UFFH) Eculm points Ot 100% 



Open 

Sett pnee 

Change 

High 

Low 

Eat voi 

Open mt 

Jon 

gj.CE 

94.05 

+003 

B4.05 

94.02 

378 

11001 

Sep 

9423 

9428 

♦0.03 

9426 

9423 

957 

10488 

Doc 

94 38 

94.39 

♦0.04 

94.38 

9427 

176 

6666 

Mar 

- 

9*40 

+0,04 

- 

- 

0 

714 


ECU LkiKed 8+ mkl raw: 1 nm 1 n«tK 0V 6 minx »'« 1 year. 6 . S UBOfl mtmtwih hng 
Ijin 4re oM*rd pan Itx (f(hn queisd [o Ore pnanrel by tei le+nance bre+a at 1 lam sfch mUng 
03/ Tire cunki so Qjnwjrs Tiua3 Bork ct Tohyo. OnrcUyii and Nataad W«M<m 
MO reft-, at) -?own ire Ore donreaac Money HaUre. US t Ctb and SCR bnked Depovtl (ON. 

EURO CURRENCY INTEREST RATES 

Mar 22 Short 7 days One Threo 


' UFFE Mtm traded on APT 


■ THREE MO«mi EUROPOliJUl (UBri] Sim poalta Q( 1D016 


lenri 


manure 





Open 

Latest 

Change 

High 

Lw» 

Eat voi 

Open htt. 



Jun 

95.60 

95.59 

-0.01 

95.61 

95.58 

97.583 

500970 

Sr* 

One 

Sep 

95.1B 

95.17 

-0.01 

95.19 

05.18 

77093 

357^29 

months 

year 

Dec 

9*72 

94.73 

- 

94.75 

94.71 

48.490 

281,708 


Bc*g«n Franc 

5>4 - 

eig 

6*4 ■ 

1 6*0 

GL ■ 

■S4 

64 

-8 

B4 

-8 

61 'i 

-SB 

D+rit-.h Krone 

flli ■ 

S'« 

b u 

6 L 

6 % 

-6 

64 

■ B 

64 

<6 

6 - 

54 

OMjrit 

5t 

5L 

513 

5K 

513- 

■5^ 

SH- 

54 

si! 


5.1 

- 5 I 2 

Dulcn Gukler 

Sir ■ 

5,i 

5ft 

s,< 

54 - 

■54 

54- 

54 

5.1 

5.1 

5.1 

-5,1 

French Franc 

•A- 

6.1 

8,\ • 

■6,; 

6.1- 

8.1 

0.1 - 

6,1 

6,1 

0A 

6- 

54 

F'nriugwse Esc. 

10 'r 

- 10 

10^4 

- 10 

10 - 

94 

9»+ 

94 

94 

94 

9k 

-94 

Spjmch PoulU 

8‘+ ■ 

BA. 

SL - 

«l*r 

8.1 

a 

6.1 

-a 

«4 

Til 

*4 

- 7S 

Stdtuig 

Sir 

-5 

51 + - 

54 

5.1- 

54 

54- 

54 

54 

5.1 

5.1 

-5,1 

Sens Fianc 

J>4 

- 4 

JL 

- 4 

44 

- 4 

4.1- 

31! 

3! 1 

3ii 

3K 

-3Ji 

Cm DvOjt 

4ii- 

352 

■f'« 

- 4 

44- 

44 

44 

its 

5,1 

4'J 

5.1 

-5,i 

US Dollar 

3A 

ar. 

ail - 

3.1 

3|i - 

3.1 

4 . 

3l 

44 

4k 

44 

-4H 

itaiun Lra 

8*2 

-a 

8*2 

- a 

84 

-a 

8«2 

- B 

ok 

-8 

81, 

-84 

Yen 

2*4 ■ 

2.’r 

2 l 4 • 

2.1 

2.1 

2h 

24- 

2.1 

24 

2.1 

2.1 

-24 

Awn SSng 

3‘: - 

2*2 

3 ': - 

2‘2 

3*2- 

2*2 

* - 

3 

4 

3 

44 

-34 


■ US TREASURY BILL FUTURES (IMM) Sim per 100% 


Jun 

sax 

96.00 

-0.01 

9601 

95.99 

8.067 

37.996 

Sep 

95.66 

95 .ee 

- 

SG.66 

93.66 

65* 

£647 

Dec 

95 J2 

95.3a 

- 

95 £2 

95,32 

41 

2-839 


M Open b«WHl 1*7- at tor pnna doy 
■ PIRO MARK OPnOMS (UFFE) DM 1m points of 100H 


inert iwm nnei no caf t» B» US Delor and Von. oBwre m dayy nottM. 

■ THREE MOflTTf P®OR FUTURCS (MATFF) Paris SHertttnk otfbred cite 


Shite 

Price 

Jun 

— CALLS - 
Sep 

Dee 

Jun 

— PUTS - 
Sep 

Dec 

Adam & Company , 

% 

— £35 


0.12 

027 

055 

an 

0.10 

a to 

Alfed Thai Bar* _ 

£25 

9475 

0.04 

021 

0.37 

028 

0.19 

017 

AIB Bar* - 

... £25 

9500 

0.02 

ati 

024 

asi 

034 

0.29 

•Harey Ansbodicr .. 

GJ25 


■ EURO SWISS FRANC OPTIONS (LEFFE) SFr 1m poiflP of 100» 



Open 

Sett price 

Change 

High 

Low 

Est. woi 

Open mt 

Strike 


CALLS - 



— PUTS - 


Jun 

94.11 

94.10 

-O01 

94.13 

94.® 

15,873 

88.435 

Price 

Jun 

Sep 

Dec 

Jun 

Sep 

Dec 

Sep 

94.38 

94.40 

+0.01 

94.43 

9*36 

8.718 

*5.424 

9600 

040 

026 

032 

Q.12 

0.12 


Dec 

94 £5 

94 S7 

+001 

9*60 

94.53 

6.005 

33^08 

9625 

0.06 

0.14 

0.19 

023 

023 

£36 

Mar 

94.60 

9J65 

+003 

9407 

94.59 

6.148 

38.045 

9650 

0.02 

0.08 

010 

0.44 

042 

052 

■ THREE MONTH 

EURODOLLAR (LIFFQ- Stm potnBOf 100% 



Esi. vp. W*. CSH D Pua 50+ 

Prevkiua day's ofrai n. Crib tea Put MSO 



Open 

Sett price 

Change 

High 

Low 

6«. vpl 

Open rn. 








Jim 

95.50 

95.60 

+0.02 

9£58 

95.58 

90 

48*2 








Soo 

95 16 

9551 

+004 

95.19 

99.1S 

238 

22*7 








Dec 

94.70 

94.75 

+002 

84.70 

94.70 

51 

15)3 








Mv 

94.J9 

94.50 

*o.(n 

94.49 

94.49 

16 

721 









Previous djjri v<X. c*m 0406 Puci 39200 . Aw. 00/0 open W. Cafe 50239 Pula 429423 


Uef- WTEREST RATES 


LONDON MONEY RATES 

Mar SSL Over- 7 dsya On* Three Six One 

ntgM notice month months morahs year 


totsitank Storing 

S.l - 3 

SU-5i 

5A -5 it 

Sft - £!( 

5A 

SA 

V« - 5A 

Sterling CDs 

- 

- 

Sk-sh 

&t-5& 

5^0 

SA 

SA - 5,1 

Treasuy Bte 

- 

- 


44, -4H 




Bank BAs 

- 

- 

4JJ-4IJ 

*JJ-4 U 

43 

*a 

- 

Local authority daps. 

5.1 - 5,1 

5,1 - 5,1 

5,1 - 5i 

SA ■ 5A 

5A 

SA 

5A-5A 

Decount marhat deps. 

S-3*z 

SA-5A 

- 

- 



- 

UK ctearing twrik base 

fentSng rate 5L per cent ton February £ 1994 





Up tD > 

7-0 

3-6 

£9 

9-12 



month 

month 

merths 

months 

worths 

Cen» oi Ta* dap. (Cl 00,000) 

iH 

4 

34+ 

34. 

3'i 


Owl* c+ Tm dtp. i mfler £100400 m 1 htx. Dapra ta i v a M a ar i tor cash hpc. 

An Hn+wnuddreart *4056pc. EUUU fbtad nSfl SHo. Enxat fi nance. M**ip(bi Fcdaury 28. 
190* Aprnd rata tor period Mer 20, 1894 ta An 23. 1994. Schemes I A II (LSOpc. FMemree rate lor 
period Feb i, 1094 to Feb 28. 1994. Schemes IV & V 6295pc. Fhra How Boss Rato 5>jpc tarn 
Mori. 1994 

■ 71UME MONTH STEHIDIO FUTURES (LIFFQ £500,000 potots d 10096 



Open 

Sett price 

Change 

High 

Low 

EsL vot 

Open tot 

Jim 

9*84 

94^5 

*4X01 

fw.se 

9*83 

9314 

117788 

Sep 

9*67 

9*70 

+003 

94.72 

94.87 

11077 

77078 

Dec 

94.41 

64.48 

+0.04 

9*48 

9441 

6611 

105486 

Mar 

94.12 

6*18 

+0.04 

94.18 

94.13 

1964 

34716 

Traded «*i APT. AI open Maraat Boo- 

are tar pnataia day. 





■ SHORT STENUK OV TIO MS (UFFE1 C500.000 poWa of 100% 


StfKe 

Price 

Jun 

- CALLS - 
Sep 

Dee 

Jim 

— PUIS 
Sep 

9475 

017 

020 

0.19 

0.07 

025 

asm 

005 

aio 

0.T0 

031 

0.40 

9525 

001 

004 

0.05 

0 41 

059 


Dec 

0.o« 

0.64 

0.64 


Esl m. nu* Cab) 2310 Puts irsa PnwkMS ita/9 open M, Cam i287K Puts I258S7 


BASE LENDING RATES 


« % 

OmsinUamria 525 aitadMsihoQuararttee 

EwtarBar*iUWl9d-_ 63G Ctrpwadrrt Lmaadlsno 

Financial & Gen Bonh _ 6 longaruDvD+fes 

•Robert Ffeming&CQ ...525 a taduno brtiMiwx. 8 

8ar*d8arodJ 525 t3toto* ........ 525 FtoyarRt*Sctftond_ 5a 

Banco BareoVbcqja- 525 •GumessMahon 525 *Smfi4WBm»i3eC3. 525 

BartiDfCypus— 626 hfeOD Barth AO ZUridi .525 stendanl Chartered 525 

Barts of traiand 525 •HartirasBwk 525 tsb 525 

Barts of irxSa — -52S HwtbtoSGcn iwtft. sa •UndodahntKUgralt- 523 

BaftofSoofend -525 MSonud.. 525 UrtyUuaBa*Pic._ 52s 

BanJayeBa* .525 aHoaeiCo— 525 WaaKmThjS 526 

BMBkcfUd&sl — 525 Hmgtaa«lSto^ 525 WhaeawayLaktere __ 525 

•enxnSrtptey — 525 JuAan Hodgo Bar*.— 525 YotertreBar* — 525 

CLBarANadedand— 525 «Uopt«l Joseph » Sons S25 

C«*>0rtsNA- 525 Lloyds Bank -~52S # Membora a! Brttlsh 

CMtoriatoBar* -5S5 Moghrai Bank Ltd 525 Merchant Banking 8 

UieCkKipera>MBar*.525 kUtand Barts.... SS5' Seeurtriee Houses 

CauBBiCo 525 'hVxntBarMng™. 6 Aracduon 

OmdtLyawiata S26 NraV/uwrtnsfer 5J2S « toadtttoiib a Bon 

Cjptus Popular Bar* -525 •Reaftodna 525 



The nxniul soul for the vcrluu, InteMo* 

Market-Eye 

London stock exchange 


Equity nnd 
Options Prices 

l 1 -!,. ■I'.vkru 

071 329 8282 


Signal 


Q 130+ softw ar e applegflona O 
O RT DATA FROM S10 A DAY O 
O Signal SOFTWARE QLWJE O 
Co* London rf 44 + pj 71 231 3558 
tor yata flsido and Signal price tel 


Argus Fundamentals 

'Understand what is driving ci! prices' 

Petroleum Argus 

CALL to: a FREE TRIAL to t’.rs Ntontoly publiosticr ,;4-i ?l ) 3598732 


☆ PROPERTY FINANCE ☆ 

N«" KM+rces for c om mercial properUem up to 90% loan 10 valuation; most 
oompatfoira and UexJUa terms: Mtoonun £500,000. Contact Richard von Gdtzsn. 
lUchaei Laurip Partnership Ltd (Member of th« SFA) 

Tel: 071 493 7050 Fax: 071 499 6279 


FUTURES TRADERS: 



1 

1 
1 


recooii»idalMiis.Becaiiseif}au 


No ifs, ands, 
or blits 


usii^BAilriiaaimisiRoabnto costs _ 
youEtrcrore than yoc need to ^eaL | 
MLaKJ-WakkxityoadoDOtp^for 
advkefwdonotmid! 

• Second, we are tpecnfizrd. 


_ way-awJpnwfeMflWLtoi 



nide, wean take advantage 


_ lumuuiwuuik iuuuwun|«Hi«uwajB: Waldodbtte lumbers broker fe 1 ■ 
a ‘^wlmMCOwnisaowds!^ ndependcst traders rndd- I 
staff No broto-wa^ywi with tratfcg wid<v Tefephone ct wife today. Jjj 


I 

I jKrs-WearewtaHpnsHitmase 
aany of the investors who call us are 
paying SGO (or n«e) per mdeiriUi 
nwsamfiitureabwker. 
befirietteycangctdar 

I 19 1 of qualify feobmge 

smin« for only S22/J36 a nmnd luni. 

HnwrL Storing In ihiiiL ...i rmuwnnnrjwjisarwufiaia- 

Howdowdol’InttwmqaBtotwpc fy^bttennni^bnikerfer 


0800-262472^, 

CbdaideiheULIL,caflte84e8fydblB8 
B^a*97H 18444 
Germany; 6UMIB1I10 
FrtnosOfrOOBKl 

SatefimidiO^flSgW 
Dcnraoifc 9M) 1 -75-rj 
NrttataafcOMS.'HH) 

OUiea on 071-30.1701, rreasediBga 
For 0732470+71 




Pntnde 


Tr»- na (ppiimiafi 

flOniratia^lnwtmiiibl^toctodhaaKrtAcf 
teac3»BatotiBnteori(^iaimeamCTewcw- 

LiJ W 

II 3a Stmt 




ANC1AJL 



T7 




3d 


298 132 _ 
61839010 It 

iSoo-so 2> 

2W 1J130 OJ 
, 1W !U65 4.1 
1®8 732 »£ 

iB sa ,a a « 

260 fie _ 

» nu 

5*20745 4i 
g£3> 181 2_£ 
«a« 3*8 5.C 

,2S 3»i.i 
1&& 661 _ 
1305 635 3B 
973 21050 .. 
1.125 630113 

IS 12® M 

7S2 419 1J 
„g*5 5S1 03 

3^0 i.iea 17 

,£3 480 Sj 
IjTE* 1.050 Zt 

"WO 210 _ 
wo 310 =o 
510 405 05 
TOO 430 6.1 
2-470 787 _ 

_ 2*2 570 3J 
2524 1.160 1.0 
MB 273 _ 
,377 244 17 
3.1 OD 1.880 J.l 
137 4.6 
35421610 IS 
® 1D6J 
« inu 
650 317 -1C 
BOO 451 4.9 
1636 B32 17 
300157.10 ia 

355 220 3J 




845 24 
835 522 — 
6,51.000 „ 


m 


pi 


m 


32 


38B 2 A 

•197 2_5 

238 1.0 
1900 OJ 
79900 03 
610 IB 
235 13 
60 4.8 
375 26 
Z5850 13 
IfiZ __ 
217 2JS 
1.050 03 
195 38 
524 OB 
E4.20 OB 
400 OB 
385 OB 
320 IB 


m 


m 


m 






mr. 


ul 


m 


m 




• 455 — 


) an iB 

... 

11.725 3-0 


1 1-380 35 



14R20 ZB 



) 23.70 16 


! 11260 5.7 

„„ 

1 550 16 



I3B25 06 



1307.10 25 



1 1.470 0.8 


1 30S 06 


) 493 2.1 


) 402 26 

__ 

) 334.10 26 


1 «JO _ 


1 617 6-3 



i 105 26 

__ 

l 41D 0^ 



1 368 5J 



1 624 3-0 



> 874 26 

,- r 

i fiBO OB 



13.940 0.7 

— 


10 26801.520 DB 
-8 535 210 — 
—4 004 545 0.7 




m 




m 


33C 


a«rSB= 


m 


INDICES 


US INDICES 


Mr Mar 

22 21 


Goisal 69/12/77) 
Austnfia 

» Ontaatafl/l/BH 

uunron/inq 

*Hfeb 

own *Mto43anzfl4) 
Traded hdetf2/i/9i) 
Brifltora 

Bare ha«i) 

Boat 

Bmespa (Sftn 2/831 

M*B6*Mnb9(1975) 
G0fflpiS«4 (1975) 
PtottBogy H/l«# 

Oh 

rot Sen 01/12001 

B w > 

CooertMjenSEp/t®) 

Maod 

)£X GerertjmnMO) 
Raaec 

S8F HO 01/12®) 

CflC 4001/1387) 


1S7WL46 19131.43 30074.78 2547040 18(304 12167B8 B/3® 

21408 21403 21615 291060 3094 MB60 13/1« 

10102 10206 10ZB5 V09W 3/2® 58170 IVl/K 

44464 44108 44663 48066 2/2® 30036 14/1/K 

115665 115137 II BIBS 122225 UBW TOM 15 WO. 

150222 135435 1511.74 154265 92/94 ItBAS 4/1® 

U 127082 133186 1406460 16/3® 7M7 4/1® 

U 384106 387150 387269 IB/3® 2M331 21/1« 

(u) 452360 45MLB0 468130 1/2® 8Z75ID 21/W 

M 211182 213747 218260 1/2® 172967 STI/WK 

U 41811 43117 488760 4/2/94 261269 1QB/B 

J9ia7 39151 30*31 41179 2/2/94 2B160 4/1® 

18403 1BS16 18610 19721)0 4/2/94 843.16 22/IS 

147150 147ES9 149138 158520 2/2® 1VM.fl Wl« 

23)068 2202.69 222134 235553 2/Z® 157111 7aMt 


1216768 8/3® 

fCfftor I97g 

8* 

« 

238301 

ZDM7 80® 

,49560 ian® 

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Mar 11 Mar 4 Year ago 
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Mar 9 Mar 2 Year ago 
257 259 ZM 

2453 24.34 2S.62 

: WJTIH1ES SSOO limes index 
High Low Ea,voL Open ini 

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71.90 47155 280 4.632 

74,10 474.00 54 4.050 


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1 ■ 



NEW YORK STOCK 


FINANCIAL TIMES W EDNESDAY MARC H 2? 1994 

COMPOSITE PRICES 




IBIM 

N* UtodtocL 

17? 11% AAR 
29? 125* a LUKA 
£7*4 54? AMP 
72% ssiium 
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4pmdoseUardi22 


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Sir Ear 
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Dhr. E 100a Kfgh lorCta Chag 
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40 


WORLD STOCK MARKETS 


AMERICA 


FINANCIAL TIMES 


Wednesday March 23 1994 


FOMC meeting fails 
to give Dow direction 


Wall Street 


(IS stocks failed to find a clear 
direction yesterday morning as 
the Federal Reserve's policy- 
making body began delibera- 
tions which were expected to 
result in higher interest rates, 
writes Frank McGurty in New 
York. 

By 1pm, the Dow Jones 
Industrial Average was 
unchanged at 3,864.85, while 
the more broadly based Stan- 
dard & Poor's 500 was 0.13 
easier at 468.41. 

In the secondary markets, 
the American SE composite 
inched 0.15 ahead to 470.92. but 
the Nasdaq composite slipped 
0.15 to 796.35. 

Volume on the NYSE was 
light, with 158m shares traded 
by 1 pm. Advancing issues led 
declines, 1,015 to 929. 

Most analysts were expecting 
the members of the FOMC to 
vote for a further tightening of 
monetary policy. 

A move to lift the Fed's tar- 
get for the benchmark Fed 
Funds rate by 25 or 50 basis 
points, Grom the current level 
of 3.25 per cent was expected 
sometime during the session or 
soon thereafter. 

But the morning brought no 

ASIA PACIFIC 


indication of a shift to tighter 
money, and blue-chip stocks. In 
parallel with bonds, moved 
moderately higher in early 
trading. Just before midday, 
however, a Fed spokesman 
said the FOMC still had not 
discussed monetary policy, 
suggesting a Fed move was 
still in a possibility before the 
session ended. The announce- 
ment wiped 10 points off the 
Dow industrial index in a mat- 
ter of minutes. 

The downturn was 
short-lived and the market 
soon regained its balance, 
while falling to make further 
headway as the afternoon ses- 
sion commenced. 

Among individual issues, 
Alcoa added $2 to $80% and 
Chevron $7. to *91%. 

But Merck dropped $1% to 
*30% on reports that Us choles- 
terol-reducing drug would soon 
face competition from a 
cheaper product from Sandoz. 
Bristol-Myers Squibb, down 
*1% to $53%, was also hit hard 
by the news. 

One of the stars of the ses- 
sion was Micron Technology, 
$2% ahead at $95%. 

On the Nasdaq, investors 
showed a lack of confidence in 
Novell's decision to mount a 
challenge to Microsoft’s do mi- 


Lower bonds hit Tokyo as 
Hong Kong rebounds 4% 


Tokyo 


A sharp sell off in the bond 
market prompted by concerns 
over rising tensions In the Kor- 
ean peninsula and higher US 
interest rates affected investor 
confidence, and the Nikkei 
index closed lower amid low 
volumes, writes Emiko Tern - 
zono in Tokyo. 

The Nikkei 225 average 
declined 215.92, or 1.1 per cent, 
to 20,253.53 after a high of 
20,45855 and a low Of 20,202.42. 
Falls in the futures market 
prompted arbitrage selling, 
while small lot profit-taking 
also depressed share prices. 

Volume was 360m shares as 
investors refrained from activ- 
ity ahead of last trading day 
for March settlements on Fri- 
day. Buying by foreign inves- 
tors also declined from previ- 
ous weeks. 

The Toplx index of all first 
section stocks fell 19,23 to 
1,628.01 while the Nikkei 300 
declined 3.42 to 299.27. Losers 
led gainers by 826 to 247, with 
111 issues remaining 
unchang ed. 

In London, the ISE /Nikkei 50 
index rose 0.67 to 1,344.28- 

North Korea's rejection of 
full international inspection of 
Its nuclear facilities and the 
subsequent decisions by the US 
to deploy missiles in Seoul 
fueled fears of growing ten- 
sions in the Korean peninsula. 
Such uncertainty coupled with 
speculation of a further rise In 
CJS interest rates hurt the bond 
market, which in turn damp- 
ened the share prices. 

Mr Jason James, a strategist 
at James Capel, said that Japa- 
nese institutions may choose 
to invest in the bond market if 
long term interest rates rise 
further. He expects volatility 
on the bond market to affect 
share prices on the short term 
and sees the Nikkei index clos- 
ing this business year between 
19,500 and 20,000. 

Interest rate sensitive shares 
lost ground in anticipation of 
higher long term interest rates. 
Nippon Steel fell Y4 to Y350 


and Tokyo Electric Power by 
Y80 to Y3290. 

Banks were lower on profit- 
taking with Industrial Bank of 
Japan down Y100 to Y3.210 and 
Sumitomo Bank off Y30 to 
Y2.170. 

Bakery and flour mill stocks 
were once again sought by 
speculators due to the contin- 
ued rice shortage. Retailers are 
reporting a rise in sales of 
bread and noodles and Yama- 
zaki Baking rose Y30 to Y2.100 
and Nltto Flour Milting gained 
Y2Q to Y550. 

In Osaka, the OSE average 
fell 196.17 to 22,349.87 in vol- 
ume of 92.2m shares. Aoki 
International, a retailer of 
office workers' uniform blue 
suits, plunged Y240 to Y3.300. 

Roundup 

Regional markets adopted 
sharply divergent routes. 

HONG KONG rebounded, the 
Hang Seng index gaining 4 par 
cent to finish above 9,000 as 
bargain hunters sent prices up 
after the recent losses, and 
with a rise in US rates already 
discounted. 

The index jumped 345.14 to 
end a volatile day at 9,012.17, 
having swung from a low of 
8,533 to a high of 9,150 as Japa- 
nese funds were seen returning 
as buyers. 

Preliminary turnover was a 
healthy HK$6.34bn against 
Monday’s HK$652bn. 

The turnaround came as Mr 
Stuart Cook of Morgan Gren- 
fell Asia Securities said that 
the Kang Seng was unlikely to 
hit its January 4 high of 12,599 
again this year, but it could 
rebound to 10,000-12,000 by the 
end of the year. 

He said that the market was 
still attractive with strong cor- 
porate earnings anticipated. 
Interest rates would remain 
low, and it was unlikely that 
property prices would crash in 
the next 12 months. 

However, Morgan Stanley 
has reiterated its view that the 
index could touch or pass the 
7.000 level as a result of 
bloated property prices, the 


Deng succession and MFN sta- 
tus for China. “At the 7,000 
level we would recommend 
buying stocks heavily. The 
inng term story on China -is 
still intact and as attractive as 
ever." 

KUALA LUMPUR picked up 
1.4 per cent after recent sell- 
offs as bargain hunting lifted 
the composite index 13.30 to 
967.48. The index hit a low of 
93550 in early trade after fall- 
ing 9220 points over the previ- 
ous three trading days. 

SINGAPORE was firmer in a 
technical rebound after Mon- 
day's sharp falls and the 
Straits Times Industrials index 
rose 8.74 to 2,045.04 after hit- 
ting an intra-day low of 
1,990.37. 

AUSTRALIA saw late bar- 
gain hunting pick shares up 
from their lows, leaving the All 
Ordinaries index to finish 02 
firmer at 2.140.8. having been 
14.7 points down at one stage. 

SEOUL closed easier in weak 
trading as mild selective buy- 
ing centred on some blue chips 
was wiped out by selling pres- 
sure caused by growing ten- 
sion over North Korea's 
nuclear row. The composite 
index eased 7.70 to 87725. 

NEW ZEALAND was 
unnerved by weakness else- 
where and the NZSE-40 capital 
index fell 48.41 or 22 per cent 
to 2206.93 in moderate turn- 
over of N2S44m. 

MANILA recouped some of 
its sharp early losses after 
Hong Kong’s rebound and the 
composite index finished 3427 
or 1.3 lower at 2263.60, after a 
low of 2203. 

BOMBAY was lower In ner- 
vous trade triggered by the 
Bombay Stock Exchange 
declaring a local stock broker 
defaulter. 

The BSE 30-share index 
closed 28.95 lower at 3.79L78. 

COLOMBO was lower again 
prompting speculation that the 
correction which began on 
March 1 would continue at 
least until after tomorrow’s 
southern provincial council 
election. The all-share index 
fell 10.01 to 1256.48. 


EUROPE 


Bourses steady, awaiting US rate news 


nance of the market for per- 
sonal computer software. The 
stock slumped $3% to $20% a 
day after the company 
announced plans to buy Word- 
Perfect and Borland's spread- 
sheet business. Microsoft, 
meanwhile, appreciated $1% to 
$84%. 

Mexico 

Equities soared after govern- 
ment peace envoy Mr Manuel 
Camacho Solis said that he 
would not stand for the Mexi- 
can presidency. 

The IPC Index of 36 leading 
shares rose 2328 or 1 per cent, 
to 2.40629 in reaction to the 
statement 

Telmex recovered from an 
early loss of more than 1 per 
cent to gain almost 2 per cent 

Canada 

Toronto was mixed at midday 
after the US Federal Reserve 
failed to indicate any change in 
its short-term interest rate pol- 
icy and the domestic market 
market remained hesitant 
ahead of an expected sharp rise 
in the Ba nk o f Canada's key 
rate. The TSE 300 composite 
index edged up 22 to 422520 at 
midday. 


European equity markets 
marked time yesterday, await- 
ing interest rate clues from the 
FOMC in Washington. In the 
event, the news from the poli- 
cy-setting committee was that 
the meeting was stm reviewing 
current economic conditions 
and had not yet discussed the 
direction it wants to set for 
interest rates over the next 
eight-week period. 

Mr Albert Edwards at Klein- 
wort Benson commented that 
the bond market would taka 
inaction badly; be thought it 
that there would probably be a 
half percentage point rise in 
the discou nt ra te by Monday. 

FRANKFURT consolidated 
its position with a day's gain in 
the Dax index of 10.06 to 
2,14124. but off from the ses- 
sion high of 2,15521. 

Traders said that a weaken- 
ing in the futures market con- 
tributed to the easing. 

Turnover was modest at 
DM7.6bn. 

The banking sector attracted 
attention with Anther results 
due out in the next couple of 
weeks. James Capel, in a 
research note issued an Mon- 
day, noted that its forecasts for 


FT-SE Actuaries Share 


Mares THE EUROPEAN SERES 

Httrt dggM open 1030 llJO 1100 1100 HOP 1SJ0 Paw 

FT-SE Em*** 100 144000 144177 1441*1 144150 1441.58 1441.48 1441.13 143&4B 

FT-gBwntfcZP 14M35 14C4J8 1484J5 148183 148139 140017 1481.13 H77J1 

Mar IS 


Mar 21 


Mar 18 


Hto 17 Mr 18 


FT-SE BraM* 1D0 143B71 144551 1481X8 146X38 148938 

FT-SE Bnfctf 200 147154 14BM8 150336 150*32 151324 

ta. a* idoo (avtonq; noway: IDA - 144417: JOB - 145.78 laettir UD - KK9 SO - K77JI. 


199425 had been shaded down 
for two main reasons. It said: 
“We have probably been too 
optimistic for the pace of 
recovery in terms of lending 
growth and felling bad debts." 
The note added: “This years 
trading profits have been 
adversely affected by the mar- 
kets' reaction to the trend 
reversal in US interest rates'*. 

Bayerishe Hypo, which 
pleased the market with 
results yesterday, added 
DM120 to DM469, while Bayer- 
ishe Vereinsbank, results due 
later this week, gained DM2 to 
DM49L Volkswagen, up DM320 
at DM49020, strengthened on 
hopes of good 1993 figures due 
tomorrow. 

ZURICH finished higher as 
domestic institutional buyers 


returned at current lower 
prices bed the day’s best levels 
were not maintained. The SMI 
index rose 20.4 to 22247, after 
a high of 22432. 

Ciba registered rose SFrtQ to 
SFr865: the company has filed 
an application with the US 
Food and Drug Administration 
to produce a rival to Glaxo's 
Zantac anti-ulcer drug. Nestid, 
with results dim this week put 
on SFriZl to SFrl24L 

Sandoz, with results sched- 
uled for tomorrow, rose SFr50 
to SFr3,920 amid suggestions 
that the introduction of its Les- 
col cholesterol drug could 
spark a price war in the US. 

Georg Fischer rose SFifiO to 
SFr 1,310: the mechanical engi- 
neering group said it expected 
to break even In this year after 


a 1993 loss of SFr34m. 

Holderbank rose SFrS to 
SFr963 in response to its 122 
per cent rise in 1993 not profit 

PARIS fell bads from its ses- 
sion high in d volatile session, 
the CAC-40 index finally dos- 
ing down 2.01 at 2200 . 68 . The 
index moved between a high of 
and a low of 2,196.12. 

BNP. which the government 
said would have its stake in 
UAP cut from 19 per cent to 15 
per cent as part of the insurers 
privatisation, lost FFr2.70 to 
FFr25120. UAP was unchanged 
at FFr18920. 

AMSTERDAM drifted down, 
with the AEX index losing 121 
to 41423. Pakhoed, the storage 
and transport group, which 
repeated its forecast that 1994 
earning s per share were set to 
rise, lost FI 120 to FI 5320. 

In a separate development 
PTT, the Dutch post and tele- 
phone utility, announced that 
its first tranche of shares could 
be floated on June 7. 

MILAN was steady, helped 
by the positive early tone in 
other European markets and 
having found technical support 
at Monday's lower levels. The 
Comit index edged 024 lower 


to 664.68 as election uncertain- 
ties remained at the centre of 
attention. 

Industrials led the way. Flat 
rose 121 to U999, Pirelli L58 
to L2.43Z and Montedison L43 
to LI 238. Olivetti put on 125 to 
12293 as hopes remained high 
for a swift decision on Italy's 
second mobile telephone 
licence. 

ISTANBUL fell 42 per cent, 
wiping out Monday’s gains, in 
uncertain trade ahead of Mon- 
day’s local elections. The com- 
posite index lost 747.76 to 
14,838- The elections are 
viewed as a key test of whether 
Prime Minister Tansu Ciller’s 
coalition government can be 
trusted to tackle the looming 
economic crisis. 

Analysts agree that the elec- 
tion will be followed by sharp 
price rises as the government 
relaxes restraints on loss mak- 
ing state run companies, but 
observers are divided on what 
effect the polls will have on 
financial markets, bit by a 
plunging lira and soaring inter- 
est rates. 

Written and edtec! by John PUt 
and Mchaal Morgan 




1 lit 

■M# 


nd 

dep 



Swedish bull run may be coming to an end 

Emphasis will be on corporate earnings in 1994, writes Christopher Brown-Humes 


A bull run dating from 
late 1992 may finally be 
coming to an end for 
Swedish equities. 

Long-term interest rates are 
heading upwards, thanks to 
turbulence in international 
markets and worries about 
higher US interest rates, At the 
same time a stream of rights 
issues is soaking up liquidity. 
The two trends have combined 
to bring the most unsettled 
market conditions for nearly 18 
months. 

Shares have generally fallen 
in recent days, but even so the 
Affirsvariden index remains 
up some 4 per cent since the 
beginning of the year. 

The turbulence may just he 
temporary: Goldman Sachs in 
London, for example, antici- 
pates a 20 per cent rise in the 
market over the next 12 
months. 

To some extent, the bourse 
has been a victim of its own 
success. 

What began as a trickle of 
companies seeking new equity 
from their shareholders has 
turned Into a flood. The gov- 
ernment is also making heavy 
demands on the market with 
its privatisation programme, 
the most recent being its 
SKiftbn ($lbn) sell-off of a 48 
per cant stake in forestry 
group AssiDomAn. Some 
observers are suggesting that 
the state’s planned late spring 
disposal of its stake in Pharma- 
cia - for an estimated SKrl4bn- 
16bn - should be delayed. 

Skandia, the insurance 
group, and Avesta Sheffield, 
the stainless steel producer, 
are the latest big companies to 
announce rights issues. 
According to one estimate, 
rights issues and privatisations 
may soak up as much as 
SKrSObn this year, equal to 
some 3.4 per cent of GDP, and 
dwarfing the SKr27bn raised in 
1993. 

The demand is huge, but 
supply from both foreign and 
domestic sources remains 
healthy. Last year foreigners 
bought a net SKr30.8bn of 


SOUTH AFRICA 

Gold posted gains as the sector 
remained buoyed by a strong 
bullion performance. Bat 
industrials were lower amid a 
lack of foreign interest. The 
gold index lost 41 at 2,121, 
industrials shed 43 to 6,067 
and the overall rose 1 to 5231. 


FT -ACTUARIES WORLD INDICES 


Jomtfy comofcd by The financial Timas Ltd.. Goldman. Sachs & Ca and NaiWeat Seortiea ua. in conjunction wan the Instttuta of Actuaries and the Faculty of Actuaries 
NATIONAL AND 

MONDAY MARCH 21 1904 


REGIONAL MARKETS 


FRIDAY MARCH 18 1884 


■ DOLLAR MDEX- 


figures *i porentfwses 

US 

Oar's 

Ptxnd 



Local 

Local 

Grass 

US 

Round 



Load 



tar 

show minty* at lines 

Dollar 

Change 

Storing 

Yen 

DM 

Currency 

% chg 

&y. 

Dollar 

Sterling 

Yon 

DM Currency 1993/34 

1993/94 

ago 

of stock 

mdax 

% 

Index 

hXtex 

Indeet 

index 

on day 

Yield 

teda* 

IncJax 

man 

Max 

Mok 

MS* 

Low 

iWWW) 

Austrsfid (69) 

171.68 

-1.6 

171.46 

115.35 

151.55 

181.07 

-1.1 

3J6 

174.45 

17173 

11093 

15183 

162.88 

18015 

130.19 

141.01 

Austria (171 

taa.li 

-09 

187.87 

12633 

166. CW 

16623 

-0 7 

0 93 

189.79 

189.00 

127.21 

1675S 

107.40 

195.41 

139X53 

14657 

Bdghan (42) 

......168.38 

-0.5 

168.17 

113.13 

14663 

145,15 

-0.5 

380 

16938 

16058 

11146 

14026 

14559 

171^9 

141^2 

14076 

Canada (107) 

!3At» 

—0.5 

(37.00 

92.77 

(31.98 

13639 

-o.s 

£.46 

738.78 

13a£l 

93.02 

12258 

13755 

14511 

121.46 

12453 

Dentnort fKJ — — 

...._263.71 

-OS 

26337 

177.18 

232.77 

230.62 

-0.4 

QOS 

26S4J8 

263.96 

177.87 

233.73 

239.89 

275.79 

185.66 

20054 

Finland (22) 

..,..145 77 

-1.4 

145.58 

97.94 

12887 

170.72 

-a? 

0.B5 

147.S8 

147-37 

99.12 

130.40 

17158 

156.72 

73.12 

74.73 

Frax»(99) ....... 

.....178.18 

-1.0 

17555 

11837 

155S1 

159.91 

-0.9 

288 

178.01 

177^7 

119J31 

158.96 

161-33 

185J7 

14060 

157.03 

G*fmjiny (59) 

.....13522 

-1.0 

134,85 

90.73 

119.18 

119.18 

-0^ 

1,74 

138.41 

135.85 

61.43 

12028 

12028 

14038 

107/S9 

114.44 

Honfl Kong (56) 

-.355.47 

-4.9 

355.02 

23064 

313.7B 

352.71 

-4.9 

300 

373.60 

37125 

250J55 

329.61 

370.93 

50056 

24457 

24181 

intend (n) 

190.73 

0.1 

190.48 

128.15 

188.36 

188J1 

OJ 

3.17 

190.60 

108A1 

127.7S 

168X17 

187.81 

20913 

14015 

15177 

a*/*** 

74.79 

-T.4 

74.70 

5025 

6602 

siro 

-1.4 

1.SO 

7SJBS 

75.53 

50.84 

8088 

9S.QE 

7093 

6021 

5031 

Japan (aeej 

.—15514 

-03 

154.94 

10433 

138 94 

10123 

0.0 

0.78 

15551 

154.87 

104.23 

137.13 

104J3 

16091 

119.90 

122.00 

Malaysia $9) 

- — .44&2S 

-5.6 

444.69 

239. 18 

39204 

4S5.fi? 

-5.5 

1.63 

471.48 

45054 

3(8.03 

41075 

494.00 

S21.SS 

27049 

278.41 

Mexico (18| 

—2057.81 

-0.9 

2055.26 

1382.es 

181649 

7470. OS 

-0.6 

0.67 

2075.85 

206724 

1391 

163038 

751145 

2847 M 

1431.17 

164073 

Nethfriand JM) 

1B&42 

-05 

198.17 

13332 

175.15 

172.67 

-0.4 

3l18 

109.38 

19056 

133.84 

17551 

17184 

207.43 

16130 

107.38 

New Zealand [14) 

69.97 

-2.4 

69.88 

47.01 

61.77 

6625 

-1.9 

057 

71.69 

71.40 

4005 

6022 

6048 

7759 

45.46 

47.03 

Norv, ay B3) 

— 197.46 

-22 

19730 

132.67 

17439 

197.39 

-2.1 

1.66 

201 83 

20029 

13028 

17756 

201.64 

200.42 

160-61 

156.06 

Singapore (45) 

-_.JJ94.G6 

-4.3 

29438 

197.98 

260.10 

215.36 

-4J 

1.62 

30402 

30075 

200415 

271.81 

22454 

37092 

217.00 

220.66 

South Africa (60) 

.....JJ6&50 

-05 

268.16 

17906 

235^4 

267.07 

-0.1 

280 

267.7B 

208.67 

179.48 

236.12 

267 48 

280.26 

181.99 

171.12 


















Swedon (36) 

— .21540 

-13 

215.12 

144.73 

100.13 

251.80 

-OB 

1S1 

217J52 

216.72 

14088 

191.89 

25177 

23002 

154.78 

18157 

Smteertanti Hfl) 

—.(59.09 

-1J3 

156.66 

106.63 

14042 

(41.78 

-1.3 

TJ59 

16174 

1S0.0S 

107.74 

141.74 

14350 

17056 

112.84 

116.14 

United Kingdom (215) ... 


-OB 

194.94 

131.1S 

17030 

194.04 

-08 

3.78 

198.87 

19006 

131.96 

173.80 

19656 

214.98 

17001 

174.67 

USA (519) 

190.77 

-OS 

18052 

128.17 

16038 

19077 

-OS 

2.77 

191.76 

190.96 

12053 

100.08 

101.76 

>9004 

178.91 

18164 

EUROPE (745) 

167.42 

-0.9 

18730 

11048 

147.78 

16025 

-OS 

286 

188.97 

16027 

113.25 

14099 

161.52 

178.56 

13056 

14250 

Rtortte [113J 

208JJ4 

-T.0 

20837 

14010 

18416 

21X18 

-Ofi 

1J0 

21034 

20097 

141^2 

18551 

21406 

220.60 

145.85 

15068 

Pacific Boskt (722) 

162.57 

-08 

182.37 

109X3 

14051 

11661 

-05 

107 

18164 

16116 

10081 

14447 

11402 

16090 

12450 

12652 

Euro-Pa«flc(M07j 

184.44 

-0.8 

18432 

11048 

145,15 

181.96 

-o.s 

183 

185.82 

165.13 

>11.14 

14021 

13201 

170.70 

13091 

13294 

North America (8263 

.....187.49 

-OS 

187 35 

12637 

16550 

166.99 

-OS 

2.76 

188.46 

187.68 

12032 

166.16 

10709 

182.73 

173.70 

160,00 

E*. UK (530) - -- 

— 148.96 

-10 

14077 

10008 

131.48 

13938 

-QJ) 

231 

15O40 

149.78 

10081 

132.62 

140 85 

156-73 

120,47 

12272 

PWfc Ex. Jopon (253) _ 

—338.28 

-3.8 

235.99 

158.76 

20656 

217.34 

-3.7 

281 

246.72 

244.71 

164.70 

21087 

22059 

298^1 

189.48 

17096 

Wood Ex. US (1652) 

18534 

-08 

185.72 

111.49 

14647 

105.29 

-OB 

1.B4 

167.31 

16061 

11014 

14752 

13016 

172^1 

13252 

13353 

Werid Ex. UK (1956) 

171.05 

-0.7 

17083 

11432 

150.98 

148.46 

-08 

2.01 

17324 

171.53 

11045 

151.68 

14806 

17558 

14088 


Wood Ex. So AI. (2111) 

172.62 

-07 

172.40 

115.98 

152J7 

151.72 

-0.6 

zw 

17168 

17014 

11053 

15350 

15063 

17058 

14009 

149.65 

WwisEx. JaparpnKj _ 

184.74 

-09 

164.50 

134.(2 

183.06 

isara 

-06 

Z77 

166.42 

>6065 

124.05 

18458 

18023 

18520 

164.42 

16554 

Uw Wane mdex Ei7y) _ 

173.18 

-07 

17236 

11636 

152-87 

152.81 

-OS 

2.16 

174.42 

17070 

11081 

183.79 

153.83 

17897 

14014 

14958 


LKW pKCM I 


I ««■•*». Jap a n w o rata doaod Utah St. 



Swedish shares, taking their 
ownership of the stock market 
to nearly 25 per cent There 
has been no sign of a let up in 
1994, with a further SKi325bn 
of net purchases by foreigners 
in January. 

Mr Bjorn Karlin, chief execu- 
tive of the Swedish Association 
for Share Promotion, expects 
overseas institutions to make 
SKi30bn of net purchases in 
1994 simply because many are 
still adjusting their portfolio 
weightings after Sweden 
relaxed restrictions on foreign 
share ownership in January 
1993. 

He also expects a big inflow 
of funds from domestic institu- 
tions and households because 
of higher personal savings, 
new individual pension 
schemes, and changed tax 
treatment for dividends and 
capital gains. 

Most analysts are agreed 
that the fundamentals will 


Sweden 

Aiftasvflrtden index 



remain strong in 1994. How- 
ever, the driving factor this 
year will be corporate earn- 
ings, rather than lower interest 
rates, even though the trend 
for the latter is expected to be 
downward. 

Corporate results for 1998 
generally met or exceeded 


expectations, and further gains 
are anticipated this year as 
companies benefit from the 
three hard years of cost-cutting 
and a generally weak currency. 

The general economic pic- 
ture is also much more encour- 
aging, with positive GDP 
growth expected in 1994 for the 
first year since 1990. 

The recovery was triggered 
by strong growth in exports, 
following a 20 per emit depred- 
ation in the krona last year, 
but is now spreading to the 
domestic economy. 

The improved economic oat- 
look has brought a strengthen- 
ing of the krona since the 
beginning of the year. This will 
he positive for foreign. Interest 
in the market, according to Mr 
Christian Diebltsch, Swedish 
analyst with Kteinwort Benson 
in London. 

“I don’t think we will see the 
market rise another 54 per cent 
rise in local currencies, like 


last year, but a strong krona is 
certainly positive from a for- 
eign perspective," he states. 

O n the negative side. 
Sweden's huge budget 
deficit - one of the 
highest in the OECD - and an 
unemployment rate of around 
14 per cent will continue to 
cause concern about the state 
of the country’s finances. 

Uncertainty will also 
increase as the year prog- 
resses, with both a general 
election and a referendum an 
entry into the European Union 
due before the end of the year. 
A "no* 1 vote in the EU referen- 
dum, in particular, would dam- 
age confidence. 

These fedora aside, there is 
the market’s vulnerability to 
developments in the interna- 
tional arena: a vulnerability 
which has been enhanced iiy 
the increased levels of foreign 
ownership. 


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