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FINANCIAL TIMES 


Capital markets 
Brazil 

BtiwiteHcftwk 


Mvi ahead 


'Europe’s Business Newspa&er 


Call by Moscow 
for new European 
security order 

Russian defence minister Pavel Grachev urged 
the establishment of a new European security 
order involving all European natinne in a Brussels 
speech he urged that the 52-raember Conference 
on Security and Co-operation in' Europe be given 
powers of “permanent leadership and coordina- 
tion” over Nato, the European Union and the 
Commonwealth of Independent States on security 


THURSDAY MAY 26 1994 


rivalries, Page 2i Editorial Comment, Page 15 

Fomf targets Burma: A Hong-Kong based 
securities company controlled by Malaysian-Ghi- 
nese entrepreneur Robert Enok is marke ting- 
the first listed investment fund targeted at Burma. 
Page 16 

Credit to Austrian bank cut: Bankers Trust 
Of New York and five other fritematlnnal hanks 
have withdrawn credit ttnas from Bank for Arbeit 
und Wirtschaft (Bawag), a leading Austrian hank 
under investigation for irregular offshore iovest- 
mem practk^. Page 17; Bawag spotlight shifts 

offshore. Page 18 


UK lottevy wtanen Camdot, a UK business 
*>{ consortium, won the licence to run the first UK 

‘ ri; *c*w National Lottery for more than 150 years. Page 

16; Camelot draws winning ticket. Page 15 


Japanese drugs companies had sluggish profits 
for the year to March after antibiotics sales fell 
in response to a sharply lower number of flu 
cases in the second half. Page 22; NSK declines 
20% and Japan Tobacco bocks trend. Page 22 


■Mad cow* case suspected In Qennsny: 

German authorities have uncovered what they 
believe could be a third case of BSE or “mad cow 
disease" in a cow from a farm near Hanover 
imparted from Britain in 1988. Germany recently 
threatened a unilateral ban on imports of British 
beef. 

Kenya made its currency fully convertible for 
nearly all transactions, reflecting go ve rnment 
fOTnfntanpfl that mwvw i w and political stability ' 
will ensure there is no capital flight Page 6 


—efaUga— Bsctiaft «h—a dropped 15 per 
cent after the disclosure that the Frankfurt-based 
group will have to make fresh provisions for newly 
identified risks arising from its North American 
oil operations. Page 17 

Nokia, telecommunications group, announced 
plans to raise more than FM2bn ($378m) of new 
equity in the biggest international share issue 
by a Finnish company. Page 17 . . 

House c hairman ‘may quiff; Lawyers for 
Democratic Congressman Dan Rostenkowski 
were reported to have offered his resignation 
as House ways and means committee chairman, 
in exchange for dropping a federal indictment 
on expense account offences. Page 7 

Brussels points finger at lax Ell nations: 

The European Commission blamed France and 
Denmark, in addition to several southern European 
nations, for not doing enough to curb budget 
deficits and restrain inflation. Page 2 

Kentucky win HRs nepubHcam: The 

Republicans captured a House of Representatives 
seat in Kentucky which had voted Democrat 
for 129 years, raising the party’s hopes of gains 
in the November congressional elections. Page 7 

Kumagal Gum!, internationally ambitious 
Japanese property developer and construction 
company, reported a 2056 per cent fall in taxable 
profits to Y2356bn ($224.4m) following a decline 
in capital investment by Japanese industrial 
customers. Page 21 

Guatemala crisis: The Guatemalan government 
is facing a fiscal crisis and will probably fail to 
meet conditions imposed by official creditors. 
Page7 

Booing, world’s largest commercial aircraft 
manufacturer, is stepping up efforts to enter the 
market for 70-100 seat jets in co-operation with 
the Japanese and Chinese aircraft industries. 

PageS; Iberia and Lufthansa in talks on closer 
cooperation. Page 20 

braal economy M to grow by 6%*: Israel's 
central bank predicted the economy would grow 
at 5 per cent this year despite concern about high 
inflation and a slowdown In Jewish immigration. 
Pages 

—alia wpwct dtecovowH Police arrested 
Vincenzo Lauretta, alleged head of the Stidda 
criminal group, Sicily's second-largest Mafia organi- 
sation at his ho m e- Italian Justice caught between 
two revolutions. Page 3 


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Greenspan opposes controls on derivatives 


By George Graham 
in Washington and John Gapper 
bi London 

Mr Alan Greenspan, chairman of 
the Federal Reserve Board, yes- 
terday brushed off calls for new 
legislation to control derivative 
financial instruments and 
warned that intervention could 
increas e risks to the US financial 
system. 

“Remedial legislation relating 
to derivatives is neither neces- 
sary nor desirable at this time," 
Mr Greenspan told a congressio- 


nal subcommittee in Washington. 

Mr Greenspan said there was a 
pressing need to overhaul the 
entire US regulatory structure, 
but he warned that reforms 
aimed solely at derivatives could 
be counterproductive. 

Last week, the US General 
Accounting Office called for mea- 
sures to strengthen controls on 
this ftmt- Avjia mting area of the 
financial markets. Derivatives, 
such as swaps and options, are 
instruments derived from other 

frrmnriflT aiyyfts OT 

The GAO warned that the 


entire financial system could be 
imitermi ne d because of the lai-k 
of regulation, but Mr Greenspan 
highlighted the risk of interven- 
tion: “Legislation directed at 
derivatives is no substitute for 
broader reform.” 

In the absence of broader 
reform such legislation could 
increase risks in the US financial 
system “by creating a regulatory 
regime that is itself ineffective 
and that flhntniahwg the effective- 
ness of market discipline.” 

Mr Greenspan's remarks were 
echoed yesterday by representa- 


tives of four US regulatory agen- 
cies overseeing banks, securities 
dealas and fixtures markets in 
their testimony in Washington to 
the House of Representatives 
subcommittee on telecommunica- 
tions gnd ftnanro 

Tm not prepared to say at this 
point the iky is felling down, we 
need to legislate.” said Mr Arthur 
Levitt, chairman of the Securities 
and Commission. 

Mr Eugene Ludwig, comptrol- 
ler of the currency, and Mr 
Andrew Hove, chairman of the 
Federal Deposit Insurance Corpo- 


ration. the two other principal 
federal bank supervisors, as well 
as Ms Barbara Holnm, acting 
chair of the Commodities and 
Futures Trading Commission, 
expressed similar sentiments. 

But all five agencies, under 
pressure from some politicians to 
act quickly, yesterday outlined 
the steps already taken to over- 
see trading in derivatives. 

Continued on Page IB 
US management urged to 
improve use of derivatives. 



Alan Greenspan: 'Legislation is 
no substitute for broader reform’ 


Bond and equity prices re ?, ists , 

^ j * IMF call to let 

tumble across Our ope rupee appreciate 

Markets decide long run of •••••• SJTJSrJrSWtSS 

interest rate cuts is finished f,w ' \ , ^ *'• resisting advice from the Interna- an increase 1 * of 


ffcwYMfc;. 

ivy 


By Our Mariurts Staff 

Bond and equity prices across 
Europe Ml heavily yesterday as 
markets reached the unwelcome 
conclusion that a 20-month run of 
Baiting interest rates ti«d come to 
an end. 

Prices fell sharply after the 
Bundesbank called off a planned 
auction of . four-year notes 
because of insufficient demand 
from bond marfrpt traders, which 
followed warnings from the bank 
that farther cuts hi interest rates 
were not planned. 

At the same time, apprehen- 
sion returned that the US Federal 
Reserve might continue to 
tighten credit policy, despite hav- 
ing lifted its key interest rates 
only last week. 

In the UK, the FT-SE 100 Share 
Index plummeted In the after- 
noon as investors flinched at the 
prospect of upward pressures an 
interest rates. It dosed 08.4 
points, or JL 21 per cent, lower at a 
new 1994 low of SJJ20.7. 

The CAC-40 Index in Paris Ml 
4831, or 23 per cent, to 2,084.41, 
while Frankfurt continued to pay 
for the recent relative strength of 
the market The Dax index Ml 
3935, 0 T L8 per colt, 2,158.77. 

Mr Hans Tietmeyer; president 
of the Bundesbank, had 
suggested on Monday that Ger- 
man interest rates niight be left 
Unchanged- 

Market concerns over this 
statement were exacerbated yes- 
terday by a relatively small 
reduction in money rates at the 
bank's weekly securities repur- 


chase auction, used to inject 
short-term liquidity fritn money 
markets. 

The mood soured even more 
when the Bundesbank cfl~n«T off 
a planned auction of four-year 
notes because of insufficient 
demand from bond marlrat trad- 
ers who bad been disappointed 
by the outcome of the auction. 

“What happened today is an 
absolute embarrassment for the 
Bundesbank and it has behaved 
in an amateurish way,” said one 
analyst in. Frankfurt In Ms view, 
there had been enough demand 
in the market but the Bundes- 
bank was not willing to raise 
tends at the current high yields. 
'Prices for the June contract of - 
the German government bond 
future on ijffe, the London 
futures and options exchange, 
Ml during trading to the year’s 
low of 93.30 but recovered 
slightly later to 9334, down 0.7 
point on the day. 

The policy-making council of 
the Bundesbank is due to meet 
today for its fortnightly discus- 
sion of m o n e tary policy but the 
market does not expect the cen- 
tral bank to announce a change 
in official interest rates. 

UK government bonds also 
traded near to the year's lows, 
reaching 103% in late trading, 
down S- Gilts were also 
depressed by a Wgher-than- 
expected price realised at the 
Bank of England's auction of the 
government’s first convertible 
gilt since 1987. 

In London, pressure on equity 
prices came from the stock index 


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fixtures market where tire June 
contract on the FT-SE 100 fell 
below 3,000 to a substantial dis- 
count against the stock market 
A large computer-driven seD-off 
in stock index futures originated 
tram a US securities house. 

UK market strategists 

expressed highly bearish, views at 

the dose, pointing out that the 
equity market chart forecasters 
see tttfie support for shares above 
the Footsie 2£50 level 

There was little response in 
London to a firm opening on Wall 
Street after US durable goods 
orders for April showed a gain of 
only 0J. per cent suggesting less 
pressure fin another hike In US 
interest rates. 

The dollar also came under 


pressure, prompted by the 
weaker than expected durable 
goods orders. The US currency 
dosed in London at DML6447, a 
pfennig down an the intra-day 
high of DMLB545. 

Concern over German rates 
increased after a Bundesbank 
member warned of the *%a£Lation. 
potential" in the growth of Ger- 
man M3 money supply. 

Lex, Page 16 
Inti bands. Page 23 
London shares. Page 29 
World. Stocks, Bark P, Section H 


By Martin WoH In London 

The Indian government is 
resisting advice from the Interna- 
tional Monetary Fund to let the 
rupee float upwards in response 
to record private capital inflows 
i nto India. 

During its annual Article IV 
consultations, the IMF advised 
India to let the rupee appreciate, 
if it could not implement a much 
shar per than planned cut in the 
fiscal deficit. But the govern- 
ment, supported by the World 
Bank, is concerned about the 

harm p Mg app- fyiatinn mig ht rin 

to exports, which grew fay 21 per 
cent, in US dollars, in the last 
financial year. 

Though not committed to an 
exchange rate target, the govern- 
ment wDl resist any substantial 
appreciation from a rate of dose 
to 31 to the US dollar, at which ft 
has stayed since March 1993. 

Senior Indian officials said an 
apprecsation.wauld risk inflicting 
the “Dutch disease” an the econ- 
omy - a reference to the way 
discoveries of natural gas 
reduced the competitiveness of 
exports from the Netherlands in 
the 1970s. 

In the financial year ending 
March 1994, according to tiro min- 
istry of finance, India received 
foreign direct investment of 
about 9600m and a portfolio flow 
of S4bn, ¥L5bn of which was from 
foreign institutional investors, 
while J5L5bn arrived in response 
to foreign issues of equity and 
convertible bonds by Indian 
firms. 

Tins capital inflow, in addition 


to what the finance ministry 
believes will be a s mall current 
account surplus, helped produce 
an increase of $8.7bn In India’s 
foreign exchange reserves during 
the fimwiriai year. Even without 
holdings of gold, reserves stood 
at $i53bn at the end of March, 
equivalent to some seven months 
of Imports. 

Along with a fiscal deficit of 73 
per cent of gross domestic prod- 
uct, the rise in reserves has aug- 
mented domestic liquidity. Mone- 
tary growth has jumped from 5 
per cent in the year to May 1993, 
to IS per cent in the year to Janu- 
ary 1994. Annual inflation is also 
running at n pm- cent - high by 

TmWan standards. 

In the short run, the govern- 
ment is prepared to accept the 
reserve accumulation. But it has 
decided to curb the monetary 
effects through the imposition of 
higher cash reserve requirements 
on the banking system. It has the 
additional option of. trying to 
sterilise the inflow, via open mar- 
ket operations of the Reserve 
Bank of India, the central bank. 

U the build-up of foreign 
exchange reserves were to con- 
tinue, the government might 
make the terms of non-resident 
banking deposits less attractive. 
It might also try to restrict the 
access of Indian business to for- 
eign ca pital. 

The government began liberal- 
isation of consumer goods in this 
year's import policy .The build-up 
of reserves will make it easier to 
speed up the process, a move rec- 
ommended by the IMF and World 
Bank. 


Eurotunnel to launch rights 
issue today at big discount 


This announcement appears as a matter of record only 

£13,000,000 

Management Buyin/Buyout of 


By Robert Poston in London 

Eurotunnel is planning to launch 
its £850m <$1.3bn> rights issue 
this morning at a price very dose 
to the minimum which would 
allow its vital £1.6bn refinancing 
to take place. 

The rights issue {rice is expec- 
ted to be about 26Qp for each 
Eurotunnel unit This would be 
27 per cent below yesterday's 
355p dosing market price in Lon- 
don, a significant discount which 
reflects the uncertainties about 
the future revenues of the Chan- 
nel tunnel operator. 

The expected rights price is 
only about lop above the 250p 
floor which would permit Euro- 
tunnel to raise sufficient equity 
finance to cover its pressing 
financial requirements. The com- 
pany has authority to issue only 
350m new shares. 

The rights issue will be Euro- 
tunnel's biggest equity fund rais- 
ing and one of tiro biggest cash 
reiTig by a UK company. 

Investment institutions have 
been reluctant to underwrite the 
share offer. Their concern is that 
all earnings from the tunnel will 
be swallowed by “interest pay- 
ments on about £8bn of debt 
until at least 1998 and there 


BmpeanNBW—— *-4 LMdarfags. 

tatamfioml News 64 UBaa 

fnwbnNBHB 7 MWS B ta. 

WoridUada Mm 8 Obaaiwr — 

UK Nous 9.10 Technology- 

naopto 11 Am 

Wwdhtf 78 

Lax 18 OnsKXd — 




will be no dividend until 2003. 

Eurotunnel's financial advis- 
ees, S. G. Warburg end Basque 
Indosuez, were able yesterday to 
start the task of getting commit- 
ments from institutions to under- 
write the shares, because the 
company’s 220 banks gave formal 
approval to their £70Qm portion 
of the refinancing, more than a 
week after the deadline. The 
banks are providing senior debt, 
or a loan, winch ranks ahead of 
all w ixtinp fiirfMaw . 

One fitnd manager said: 
“Frankly we were not keen to 
take the tmderwitting. However, 
Warburg can be very persua- 
sive." 

. Brokers sato the mmerwriting. 


CONTENTS 


challenge was made more diffi- 
cult by the sharp fall in the stock 
market, as the FT-SE 100 index 
Ml 68.4 points to dose at 3020.7. 
However, the price of Eurotunnel 
units, an unusual security twin- 
ning UK and French shares, fell 
only 5p to 35Sp. 

A significant rote in supporting 
the share issue was played by 
Swiss Banking Corporation, 
which had provided a commit- 
ment to provide primary 
underwriting for a third of the 
whole share offer. It yester- 
day attempted with Warburg 
and Indosuez to find snb- 
anderwritera, to reduce its expo- 
sure. 

Without the refinancing, Euro- 
tunnel faced a liquidity crisis, 
only four years after it last ramp 
close to calling in the receivers. 
By next month, it will have 
exhausted all Its cash res- 
erves. 

The costs of completing the 
tunnel were well above original 
forecasts, but its difficulties have 
been compounded by the late 
start of freight and passenger ser- 
vices, which means revenues in 
early years of operation w31 be 
lowiir than it hoped. 

London stocks. Page 29 i 




ftwign Bcdwgae — . J 6 

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.14 UK -M47 Equity Opfcn» I 40 

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.12 HUta Hamru m n 38 

.13 C omra de * 28 ReoantlWUM .. 40 

.13 FTActuvto SB Shmhfamafco; — 3031 

_28 FTWaWjtoftW— — . 40 IMMOdon 40 


ector 


VECTOR INDUSTRIES LTD 

Led and arranged by 

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Equity and mezzanine funds provided by 

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Senior Debt provided by 

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Having the capital to back a big idea is only half the secret. 
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O^TTW. inmAiWTAT. TTlvniS 1J0V1XTED 1994 No 32,376 Week No 21 LONDON - PARIS - FRANKFURT - MEW YOHK ■ TOKYO 


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NEWS: EUROPE 


FINANCIAL TIMES THURSDAY MAY 26 ISM 


Poor April shopping figures hit recovery prospects 

German retail sales tumble 


Western Cknmy 

GOP annutf W ctanga • 


8 


By Christopher Parkes 
in Frankfurt 

It was good while it lasted, bat 
the unexpected surge In west 
German consumer spending 
which gave the economy a 
forceful boost in the first quar- 
ter came to a sudden stop last 

month 

The HDE retailers' associa- 
tion yesterday tempered a 
report of a zeal 2 per cent rise 

in sflV*? daring Mar ch with a 
warning that “deep red” 
results for April -not yet 
ready for release - would 
squash any hopes that spring- 
time had arrived in the shops 
sector. Department stores have 
calculated that real sales tum- 
bled 12 per cent i»«t month 

The respected Ifo economics 
inst itut e reported on Tuesday 
that its survey of expectations 


showed a sharp change of 
mood among retailers in April 
after several months of rising 
optimism. Order plans wore 
being revised downwards as 
prospects for the next six 
months dimmed and unsold 

stocks mounted. 

On the same day. the federal 
authorities announced that 
new road vehicle registrations 
in April crashed 24 per cent 
below March levels mid were 
16 per cent lower than in the 
same month last year after 
three months of growth. 

The effects of the winter buy- 
ing spree are expected signifi- 
cantly to holster official first- 
quarter growth figures for west 
Germany, dne in the next two 
weeks. 

In the interim, the Berlin- 
based DIW institute this week 
issued an estimate that gross 


domestic product rose 1.9 per 
cent in the year to the end of 
March. The forecast is only 
marginally higher than that of 
most private economists. But 
DIRTS analysis that domestic 
factors alone - including heavy 
private spending - were 
responsible for the growth is at 
odds with the more general 
view that increasing exports 
are pulling the economy out of 
recession. 

Although DIW has developed 
a reputation for its individual- 
istic views - improving foreign 
trade remains th» main hope of 
recovery in most analysts’ 
eyes - it was not alone in bring 
remght off guard by the early 
surge in private demand. The 
effects on economic perfor- 
mance will provide unexpected 

and welcome iwiiw j lnnlng for 

the government’s forecast of 


L5 per cent growth for the full 
year which has lately won 
increasing support from ini- 
tially sceptical independent 
economists. 

However, events have not 
gone down so well in the 
Bundesbank. The monetary 
fHgrf p Hwarians in Frankfurt 
have been displeased by the 
sight of people spending so 
freely while the economy -by 
their reckoning - has a long 
way to go to overcome its 
structural problems. 

Mr Reimut Jochimsen, a 
member of the Bundesbank 
council, warned yesterday that 
the vaunted “special factors" 
were not the only grpfanatinn 
for continuing rapid growth in 
money supply. Potential infla- 
tion was inriring behind the 
distortions, he said, in an 
apparent reference to contin- 



vnTw * 1 


M 87 


r m l « l 


teW 


ued heavy bank lending. 

“It is reasonable to assume 
that a significant amount of 
spending has been fuelled by 
borrowing," says Mr Richard 
Reid, chief economist at the 
Union Bank of Switzerland in 
Frankfurt Saving has also 
dwindled. According to DIW, 


spending on private consump- 
tion in the first quarter rose 
twice as fast as disposable 
incomes. Mr Reid estimates file 
average proportion of dispos- 
able income saved fell from 
1&2 per cent in the last quarter 
of 1933 to 1L5 per cent in the 
first three months of this year. 


Brussels points finger at fiscal policy laggards 


By Lionel Barber in Brussels 

Hie European Commission yesterday 
printed the finger at EU member 
states which it considers are not 
doing enough to curb budget deficits 
ami restrain fnfiatimi. 

Dropping its usual diplomatic lan- 
guage, the Commission singled out 
France anH Denmark for i” fi»ai 
policy, along with more familiar lag- 
gards led by Spain, Greece, Italy, and 
Portugal. 

The UK, which has introduced 
record tax increases to curb a £50bn 


budget deficit, escapes criticism on 
the focal side. But Mr John Major’s 
government rece i ves an unwelcome 
warning from Brussels about the 
risks of inflation. 

The criticism appears in an update 
of the Commission’s macroeconomic 
guidelines which are intended to 
serve as a blueprint for the EU to file 
end of the ce ntur y and a framework 
for achieving a single currency. 

Union heads of government 
approved the first version of the 
guidelines at the Brussels summit 
last December. The latest paper has 


been ad justed to account of the 
economic recovery now under way in 
Europe. 

Mr Henning Christophersen, the 
economics commissioner, stressed the 
iwipm - farom of reducing budget defi- 
cits. He expressed concern about the 
recent rise in long-term interest rates 
in Europe said measures should 
be taken to reduce them so as not to 
harm the recovery. The Commission 
paper calls for a “dear confirmation” 
in member states' 1995 budgets that 
fiscal consolidation is under way. It 
urged Belgium to matrh its budget 


targets, and called on Spain, Portugal 
and Greece to embark on serious 
long-term budget p riming. 

The Commission also noted: “In 
Denmark and France the deliberate 
policy of supporting economic activ- 
ity doling the recession by an expan- 
sionary fiscal policy has led to an 
increase in the deficit; it is important 
to w n m r »> that tiie fiscal expansion is 
reversed as the economy gains 
momentum.” 

On inflation rates, the Commission 
says Spain, Portugal, Italy and 
Britain have yet to decline into the 


range set by the macroeconomic 
guidelines. Its prediction tint Italy 
and the UK “are expected to 
approach it si gnificant ly next year” 
may Irritate Mr Kenneth Clarke, UK 
chancellor of th» exchequer, who hac 
already clashed with London over its 
lower growth forecast for the UK. 

Under pressure from Mr Jacques 
Delors, president of the European 
Commission, the new Brussels paper 
| pi>lndp« more wn]ih««fa on training, 
education, and other structural mea- 
sures to tackle unemployment and 
encourage the creation of new jobs. 


Drachma rises 
but selling 
engulfs shares 


By KerfriHape In Athens 

The Greek drachma, bolstered 
by high interest rates, rose yes- 
terday against both the D-Mark 
an d the dollar, but said 
the currency crisis was causing 
a severe liquidity squeeze. It 
closed at Drl47.5 to the 
D-Mark, up from Drl49 on 
Tuesday, and at DT244.4 to the 
dollar, up from Dr245.1. 

However, investor nervous- 
ness prompted a wave of sell- 
ing yesterday on the Athens 
stock exchange, fuelled by 
rumours that the government 
plans to issue a one-month 
treasury MU with an interest 
rate cf mare than 90 per cent 

The index dropped by 5JS per 
cent to a t wo y e a r low, bring- 
ing losses for the week to 
around 10 per cent. Brokers 
said many investors were dis- 
posing of mutual fund holdings 
in order to invest in short-term 
government paper. 

Analysts said government 
efforts to defend foe currency 
by raising short-term interest 
rotes to triple-digit figures had 
proved successful, but only at 
the expense of stifling the 
faming system. The drachma 
has been under constant pres- 
sure far the past 10 days, since 
the government derided to lift 
capital controls. 

Faced with a deepening 
liquidity crisis, banks have 
been raising interest charges 


Paris talks aim to defuse old central European rivalries 


By David Buchan in Paris and 
Anthony Robinson in London 

Central Europe's underlying 
ethnic and cultural rivalries 
win be under the spotlight in 
Paris today at a European 
Union-sponsored security 
conference. 

Mr Edouard BaHadur, the 
French prime minister whose 
"Balladur plan” inspired the 
40-nation “conference on Euro- 
pean stability”, win open pro- 
ceedings aimed at helping 
would-be EU members settle 


their unresolved minority and 
other disputes before they 
become full members of the 
EU. 

The conference, to be chaired 
by Greece as current president 
of the EU, is expected to con- 
clude with a general statement 
of principles an foe need for 
negotiated settlements of fron- 
tier and ethnic disputes. But 
the main business wfl] be con- 
ducted at two “round tables”. 

These will concentrate on 
the specific issues of the dis- 
puted Russian military j)res- 


ence in Latvia and Estonia, 
rights of Russian-speaking 
minorities in the Baltics, anH 
the way in which minority 
issues affect broader relations 
between states in central 
Europe. 

There will be specific refer- 
ence, for example, to the ethnic 
Hungarian minorities in 
Romania and Slovakia. 

Most central European states 
have shown lukewarm support 
for the conference, preferring 
behind-the-scenes diplomacy 
and patient, unspectacular 


bridge-building. The defeat of 
right-wing nati o nalis ts in the 

first round of the Hungarian 
elections and the removal from 
power of Slovakia’s nationalist 
leader, Mr Vla dimir Meciar, 
have already helped to calm 
relations between Hungary and 
Slovakia. 

Romania's search for eco- 
nomic stability and respectabil- 
ity has also helped to cool pas- 
sions in e thni c ally - mixe d 
Transylvania. 

P oland, with only tiny e thnic 
minori ties left after the preda- 


tions of Hitler and geographi- 
cal boundary shifts imposed by 
Stalin, has already concluded 
bilateral treaties with all seven 
neighbouring states. The 
Czechs, while slightly appre- 
hensive about the growing 
demands for compensation 
from ethnic Germans ex pelle d 
from Sudetenland in 1945, sus- 
pect that raking over ethnic 
issues in public is a diversion 
from removing the economic 
obstacles to EU enlargement to 
the east. 

The round tables are sup- 


posed to produce bilateral 
accords of “good neighbourli- 
ness" which would be endorsed 
in a concluding session of foe 
conference and then be regis- 
tered with the permanent 52- 
natian Conference on Security 
and Co-operation in Europe 
(CSCE). 

The EU hag deliberately lim- 
ited the conference's remit to 
-potential EU members - the six 
countries of central Europe, 
foe three Baltic republics, and 
Slovenia, the one peaceful frag- 
ment of ex-Yugoslavia - be- 


cause it expects the prospect of 
entry will spur these countries 
into good-neighbour 
agreements. 

But the conference's EU and 
French organisers have 
decided to steer clear of the 
area of greatest ethnic tension 
-the Balkans - because the 
Yugoslav imbroglio is being 
separately tackled by the 
United Nations and other inter- 
national mediato rs. 

It will also steer dear of any 
minority disputes within or 
involving the EU Twelve. 


on working capital for corpo- 
rate bomrtrots from around 23 
per cent to as much 40 per 
cent One banker said: “IPs a 
grim situa ti o n . Theinterbaak 
market Is practically deed after 
10 days of pressure and 
would-be borrowe r s are bring 
turned sway.” 

The National Bank of 
Greece, foe Ingest state-owned 
bank, which control* over a 
third of total deposits, has 
started restricti n g withdrawals 
to 50 per cent of new deposits. 

There is increasing specula- 
tion the government will be 
forced to raise interest rates 
sharply on treasury Mgs, the 
mwfn instr ument for Btmnriwff 

foe public sector deficit A new 
issue is due next week, when 
the government must raise an 
estimated DTODttm UU.QGbn) to 
meat its debt hhtigrtkra. 

Meanwhile, the firunyy » min- 
istry Issued instructions to 
state corporations and pension 
funds to transfer part of tbrir 
deposits to the central bank. 
The move appeared aimed at 
ensuring that the gove m mait 
will be able to cover day-today 
spending 


THE FINANCIAL TMHS 
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Financial Time* Limited. 
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FINANCIAL TIMES THURSDAY MAY 26 1994 


NEWS: EUROPE 


3 


EUROPEAN DIGEST 

French airline 
cash inquiry 

The European Commission yesterday opened an official 
inquiry into the French government’s plan for a FFr20bn 
(£2.3 bn) capital Injection into Air France, the loss-making 
national carrier. Officials hope to reach a decision on the 
restructuring plan by the end of July, mainly because of the 
political sensitivity of the case. Yesterday's announcement 
means Brussels has decided the capital injection amounts to 
state aid, but it has not yet judged whether the restructuring 
plan violates competition rules. The next step is for the Brus- 
sels authorities to examine whether the amount of aid Is 
justified ou commercial grounds, and whether it could disrupt 
the market. Officials will also attempt to clarify whether the 
rescue plan is the last of its kind, rather than a means of 
funnelling money into the purchase of stakes in other EU 
carriers. Observers predict approval for the state aid plan, 
albeit with conditions. Lionel Barber, Brussels 
■ The French government is to change Air France's legal 
status to make it easier for the airline to offer shares to staff 
in return for voluntary pay cuts, Mr Edmond Alphanddry. the 
economy minister said yesterday. Mr Christian Blanc, the 
airline's chairman, said that staff shareholdings in the com- 
pany could rise to between 15 and 20 per cent of the company's 
capital, compared with just a few per cent at present John 
Ridding, Paris 

Work starts on Leuna plant 

Chancellor Helmut Kohl yesterday inaugurated construction 
in eastern Germany of one of the legion’s most modem oil 
refineries which is backed by EU-Aquitaine, one of France's 
largest oil companies. The Leuna plant in Saxony-Anhalt is 
being buOt by a consortium headed by Elf Aquitaine, Rosneft, 
the state-owned Russian oil company, and Tbyssen Handelsu- 
nion, a subsidiary of Tbyssen, tbe German steel group. The 
consortium is investing more than DM4. 3bn (£1.7bn) in the 
plant which will take three years to complete. The project 
nearly collapsed earlier this year after Elf decided to sharply 
reduce its stake to a minority holding, causing considerable 
embarrassment to Mr Kohl who had been persuaded by Presi- 
dent Francois Mitterrand to give Elf access to petrol distribu- 
tion and refining in eastern Germany. The project was sal- 
vaged after the Russians secured a stake at the refinery. 

Mr Kohl said the refinery represented “a milestone for 
German-French co-operation" and “symbolises the thorough 
change in our relations with Russia." Judy Dempsey, Berlin 

Danes expect strong growth 

Strong growth in domestic demand will cut the surplus on 
Denmark's current account from DKr35bn (£3.6bn) - close to 4 
per cent of gross domestic product - in 1993 to around 
DKrl2bn by 1996, according to a report by the chairmen of tbe 
economic advisory council They predict an increase in real 
private consumption by 5 per cent annually this year and in 
each of the two following years, while GDP is expected to 
increase by about 3 per cent a year over the same period. The 
rise will cut the central government budget deficit from 
DKrSObn this year to about DKr22bn by 1S96 as tax revenues 
recover, they forecast 

The report calls for reductions in the country’s minimum 
wage levels and “entry wages” for first-time employees as the 
best way to bring about a lasting reduction in unemployment 
currently running at tits per cent Mr Mogens Lykketoft, 
finance minis ter, was quoted yesterday as saying that he did 
not accept the argument. The report also attacked an ambi- 
tious government job-sharing scheme, by which wage-earners 
can take six months off on unemployment pay to care for 
children or undertake job-related education. The scheme, so 
far temporary, will cost the equivalent on an extra L5 percent- 
age points on tbe 25 per cent VAT if it is made permanent, the 
report said. Hilary Barnes. Copenhagen 

Poland expands debt plans 

Poland expects to buy back around a fifth of its $13bn commer- 
cial debt, according to Mr Krzysztof Krowadd, the country’s 
chief debt negotiator. This is more than the 5 per cent of the 
debt mooted in talks with banks for the buy-back operation 
earlier this year as the country looks to reduce the stock of 
debt by as much as it can afford in order to clear the way for 
bond issues abroad next year. A buy-back of 5 per cent of the 
debt was considered when its price stood at around 50 cents to 
the dollar. The current price is 38J5 cents. Mr Krowadd said 
yesterday he would know exactly how much of the debt would 
be bought back once holders of the debt had responded to 
Poland’s proposal made last weekend to purchase the debt at 
between 41 cents and 38 cents to the dollar. The operation is 
part of a debt reduction framework agreement negotiated with 
the London Chib of commercial banks last March. Christopher 
Bobmski, Warsaw 

Concern for Bosnian Serbs 

Only 41 per cent of Bosnian Serbs live in territory controlled 
by their self-proclaimed leader, Mr Radovan Karadzic, accord- 
ing to a representative of the Serb community in Sarajevo. Out 
of 1.3m Serbs in pre-war Bosnia-Hercegovina, 600,000 had left 
the country since the war began, Mr Goran Simic, president of 
the Sarajevo-based “Serb citizens' council" told a meeting 
yesterday at London's Institute for War and Peace. A further 
100,000 had died, and 200,000 were still living “under the 
legitimate Bosnian government," 70,000 of them in Sarajevo. 
The Serb citizens' council was formed in Sarajevo last March 
at an assembly of 500 delegates from the government-held 
area. Mr Simic said one of the main objectives of his council 
was to lobby for amendment of the proposed Moslem-Croat 
federation “to include the Serbs as a constituent people." This 
proposition had been well received by the Bosnian parliament, 
but tbe government had yet to respond to it officially. Edward 
Mortimer 

ECONOMIC WATCH 


Dutch trade surplus up sharply 

The Netherlands' trade 
surplus surged to a provi- 
sional FI23.2bn (£S.3bn) last 
year from F19.9bn in 1992, 
reflecting a rise of nearly 5 
per cent in the value of 
exports and a slight 0.7 per 
cent drop in imports. The cen- 
tral statistical office cau- 
tioned, however, that the fig- 
ures for the two years are not 
entirely comparable. With the 
advent of the European single 
market in January 1993. cal- 
culations of European 
imports and exports are now 
based largely on figures sup- 
plied by the companies them- 
selves, supplemented by the 
office’s own estimates. Officials said yesterday that even if the 
1993 figure were revised later, it was likely to remain above 
F120bn. As in previous years, the country's biggest trading 
partners were Germany and Belgium. Ronald van de KroL 
Amsterdam. 

■ inflat ion in the western German state of Hesse slowed to 0.1 
per cent in the month to mid-May from a 0 2 per cent month- 
on-month increase in April, the state statistics office in Wies- 
baden said yesterday. 

■ Italy's overall balance of payments recorded a L202bn 
(£85m) deficit in April alter IA290bn the previous month, the 
foreign exchange office said. The Bank of Italy's official 
reserves fell to L91,488bo in April from L9L957bn in March. 

■ French household spending on durable manufactured goods 
rose by 1.2 per cent in April following a rise of 0.6 per cent in 
March, the national statistics office said. 


Netherlands 

Trade surplus (R bn) 

25 - 



1986 87 88 89 90 91 82 93 


Source D a t a atraam 


Italian justice caught between two revolutions 



Di Pietro: one of an elite team of investigating magistrates with the status of a film star ap 

of tbe “dean hands" investiga- 


M r Umberto Bossi, 
rough-tongued leader 
of Italy’s federalist 
Northern League, never 
minces bis words. Asked on 
Tuesday whether crusading 
magistrates and their "clean 
hands” corruption investiga- 
tions were responsible for 
changing Italy, he replied: 
“Balls." 

Mr Bossi had just learned 
that his was the only 
well-known name from the 
new political regime on a list 
of 32 people who will go on 
trial on July 5, charged with 
breaking the law cm the financ- 
ing of political parties. 

In another era -perhaps as 
recently as three or four years 
ago - any ambitious Italian 
politician might have been 
pleased to find himself in the 
company of those now up for 
trial They include two former 
Italian prime ministers (the 
Socialist Mr Bettlno Craxi and 
Christian Democrat Mr 
Arnaldo Forlani) three other 
ex-ministers and several 
well-known industrialists. 

Mr Bossi - like his fellow 
accused -is fighting back. In 
an interview published yester- 
day in La Stamps, the Turin 
daily, he accused the magis- 
trates of trying to hold up the 
“revolution” started by his 
party, now part of the new 
right-wing government 
The magistrates, however, 
claim that the formal decision 
on Tuesday to move to a trial 


Andrew Hill on 
tensions related 
to corruption 
probes of the 
old regime that 
touch on the 
new one 


is further proof that they are 
determined to continue a dif- 
ferent “revolution” they began 
two to three years ago, by 
uncovering a powerful network 
of bribery, corruption and 
organised crime. 

Last Saturday, for example, 
Palermo magistrates requested 
a trial for Mr Giulio Andreotti, 
the Christian Democrat who 
has seven times been prime 
minister of Italy. He is accused 
Of Hnkii with the mafia , which 
he vehemently denies. 

At least three investigations 
are also under way into busi- 
nesses linked to Mr Silvio Ber- 
lusconi, the prime minister. 
Meanwhile, Ravenna magis- 
trates are examining docu- 
ments taken last Friday from 
the Milan headquarters of 
Mediobanca, the powerful mer- 
chant bank, after allegations 
that the bank did not reveal all 


it knew about a “hole” in the 
accounts of Ferruzzi-Montedi- 
son before the industrial com- 
pany collapsed last year. 

However, although the work 
will continue, the high-profile 
style of Italy's investigators 
may now be toned down. Mr 
Alfredo Biondi. Italy's new jus- 
tice minister, has already said 
that magistrates and judges 
should stick to their job - ap- 
plying the law - and steer clear 
of policy pronouncements. 

Mr Francesco Saverio Bar- 
re lii, Milan's chief prosecutor, 
appears to agree, although he 
would attack any proposal that 
smacked of increasing the 
political control of judges and 
magistrates. 

In an interview last week, he 
said he used to believe that 
magistrates should always 
r emain anonymous. “But when 
this operation began, there 


were such strong reactions 
[from the public! I wondered 
whether perhaps at this point 
people wanted to know who we 
were," he says. “Ware we arch- 
angels, demons, or people like 
anyone else?" 

Italians certainly know who 
the magistrates are now, and 
most of them think they are on 
the side of the angels. The 
best-known example and most 
popular is Mr Antonio Di Pie- 
tro, one oT Mr BorreDl’s £11 te 
team of investigators. Cur- 
rently in Los Angeles to 
deliver a series of lectures, he 
has been greeted like a film 
star by Italian expatriates. 

Mr Borrelli believes that the 
decision to open up to the pub- 
lic - partly through carefully 
timed leaks to journalists 
about the most important 
breakthroughs in investiga- 
tions — built Up the momen t um 


non. 

The momentum was main- 
tained over the last few 
mnntTifi by revelations during 
the long-running trial of Mr 
Sergio Cusani, a financial 
adviser to Femizzl-Montedi- 
soo- Much of the trial was tele- 
vised, anhanning the image of 
Mr Di Pietro, who acted as 
prosecutor. Mr Cusani was sen- 
tenced to eight years in prison 
at the end of last month for 
corruption and falsifying 
accounts in relation to the 
alleged payment of LisObn of 
bribes by Femizti-Montedison. 
Payment to political parties 
allegedly helped the group 
extract itself from Enimont, its 
ill-fated joint venture with Eni, 
the state energy and chemicals 
company, in 1990. 

The trial which will begin on 
July 5 has sprung from testi- 


mony during the Cusani trial 
As an event, It Is likely to 
attract even more public atten- 
tion. “When great beads start 
to roll, ilpopoiino (the common 
people) are always enthusias- 
tic.” Mr Borrelli paints out 

The danger in such an 
approach is that it sets up a 
potential “short-circuit", as Mr 
Borrelli puts it, between the 
piazza and the magistrature, 
which is both undemocratic 
and unhealthy. Mr Borelli says 
such a short-circuit has not yet 
occurred but he thinks now 
may be the right time to recast 
the public image of the magis- 
trates. 

Partly that may be a tactical 
decision to avoid political 
interference. Members of the 
new government have already 
launched into polemical debate 
with tbe judiciary and magis- 
trates. During the election 
campaign in March, Mr Berlus- 
coni was critical of the timing 
of certain investigative “break- 
throughs” by magistrates. Mr 
Bossi himself rails against per- 
secution of his party by the 
“gang of four" Milan prosecu- 
tors. 

Mr Borrelli says the investi- 
gators are co untin g an popular 
support to maintain the impe- 
tus through many years of tri- 
als and appeals. The hope is 
that people will also start to 
clean up the smallest of 
corruption themselves. “That 
process hasn't yet taken off,” 
says Mr Borrelli. 


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FINANCIAL TIMES THURSDAY MAY 26 1994 


NEWS: EUROPE 


Europe’s Greens expect a patchy performance 


12 


Bronwen Maddox assesses the environmentalists’ election prospects 


Green feeling across Europe 



In their own eyes, 
the Greens are the 
\ \ only political move- 

\ ment to have pene- 
Njr A trated every Euro- 
pean country. But 
the elections for the 
European parliament 
are likely to show 
that while they have 
established some 
strongholds, in other 
countries they are 
facing near-extinc- 
tion. The UK’s Green 
Party, in particular, 
knows that it will face a tough fight 
In the 1989 elections it scored is per 
cent of the poll, the highest Green 
vote in Europe, and pushed the Lib- 
eral-Social Democrat Alliance into 
third place. 

But that success was due partly to 
special factors. The unpopularity of 
the government at that point, the 
collapse of the Alliance, and the low 
electoral turn-out helped. Green 
issues were also high in people's 
minds after the 1986 Chernobyl 


EUROPEAN 
ELECTIONS 
June Sand 12 


explosion, the death of North Sea 
seals, and rising concern about 
global warming following several 
hot summers. 

Recession and a perception that 
some environmentalists have been 
too prone to doom-mongering have 
since mnda the Greens* task harder. 
It is fielding 85 candidates for the 
forthcoming elections, contesting 
every seat But the Green Party won 
only 1.3 per cent in the 1992 general 
election, although that had picked 
up to some 5 per cent in the local 
elections last month. 

According to Mr Shane Collins, 
candidate for the very un-green Lon- 
don South Inner constituency, urban 
areas have an additional problem. 
"Most of our natural voters are dis- 
enfranchised”, he says -they have 
dropped off the electoral register 
because they are homeless, or 
objected to the now-abandoned poll 
tax. 

But both he and Mr David Taylor, 
candidate for Somerset and North 
Devon, where Greens came second 
last time, stress that one issue has 


been reviving Green concerns: the 
government’s roadbuilding pro- 
gramme. Protests against the widen- 
ing of the M25 rood orbiting London, 
the extension of the M3 motorway 
through Twyfoid Down, ami most 
recently, the Batheaston bypass at 
Solsbury Rill near Bath have 
attracted supporters of all ages and 
social backgrounds. 

Despite this new stimulus, British 
Greens are labouring under a handi- 
cap not suffered by their continental 
European colleagues: the UK’s first- 
past-the-post electoral system. Ms 
Penny Kemp, of the Green Party's 
national executive, believes this is 
one reason why environmental 
enthusiasm on the continent is a vig- 
orous political force. 

Although Greens won a smaller 
share of the vote on the continent in 
1989 than they did in the OK, propor- 
tional representation allowed Greens 
from seven of the 12 countries to 
secure 28 seats in the European Par- 
liament 

The German Greens’ support arose 
originally out of national fury over 


the corrosion of German forests by 
acid rain. They were largely dis- 
missed as a fringe group of radicals 
alter failing to retain seats in the 
Bundestag four years ago. But their 
success in the early rounds of the 
German electoral marathon shows 
that they pose a threat of replacing 
the Free Democrats as the third 
force in German politics. 

On March 20, in the Schleswig-Hol- 
stein local elections, their share of 
the vote rase from 6 per cent to 10.3 
per cent. The previous week in 
Lower Saxony state elections, and in 
Hamburg city state elections last 
autumn, they seized some 13 per 
cent of the vote. 

The Italian Green movement, 
which gainori p mmimmrp during the 
reign of Mr Carlo Ripa di Meana as 
European environment commis- 
sioner, is also in buoyant mood. It 
has seen a Green candidate elected 
as mayor of Rome, and has 
high hopes for the European 
Parliament elections, for which 
Mr Ripa di Meana has pledged his 
support. 


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Empaan pwSwnant Mould givo 
priority to onvireau 




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rules on 
lobbying 
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Ms Kemp and others in the UK this year. However they acknowl- 
Green Party hope that these signs edge that despite their best efforts, 
mean that European Greens will win the UK contribution may continue to 
more than 40 seats in the parliament be low. 


MEPs ‘should disclose interests’ Jobs crisis dominates 

campaign in France 


By David Marsh 


The European parliament's 
rules on disclosure of outride 
business interests by MEPs is 
“totally inadequate”, Ms 
Pauline Green, leader of 
Britain's Labour contingent at 
the Strasbourg assembly, said 
yesterday. 

Ms Green, who is 
campaigning for re-election in 
the London North seat in next 
month’s poll, said the present 
system for registering MBPS' 


links in areas like 
consultancy needed to be 
tightened. 

Terming as “extremely 
sparse” the information MEPs 
were obliged to give, she said, 
“It is an inefficient system. I 
feel we should provide much 
more in-depth knowledge of 
members* interests.” 

She coupled her 
recommendation with a call 
for EU member states to 
intensify efforts to co-operate 
with the parliament 


Speaking at a conference in 
London organised by the 
European Business 
Foundation, Ms Green said 
member governments were 
now recognising the 
Increased importance 

of the parliament in the EU 
legislative process. 

“There's a huge amount to 
be done in bringing that 
together.” 

Britain, in particular, had 
realised that working together 
with the parliament was 


essential to maximise 
influence over European 
legislation, Ms Green claimed, 
saying the UK government bad 
“suddenly become pro-active” 
in its relations with the 
assembly. 

Ms Green was speaking 
along with Sir Christopher 
Pront, the leader of the UK 
Conservatives in Strasbourg, 
and Sir Russell Johnston, the 
Liberal parliamentary 
spokesman on European 
affairs. 


By David Buchan in Paris 



Cabin In Its Gl-assIReascjn Ei^ouchTo Read On. 


If you’re under the impression 
that flying in a corporate jet means 
you have to compromise comfort 
for speed, you’ve never flown in a 
Beed\jet400A. 

For starters, Beechcraft engi- 
neers chose a “vertical oval" cross 
section that provides more head 
and shoulder room and more 
interior volume than competitors’ 
cabins can offer. 

There’s also a cocoon of thermal 
and acoustical insulation that helps 
control temperature and sound 
levels. All of which adds up 
to a spacious, comfortable and 
productive environment for up 
to nine passengers. 

And the Beeehjet40t)A is ajetyou 
can expect to By at real jet speeds. 
With a top cruise speed of 538 mph 
(866 km/h) and the ability to climb 
to 41,000 feet in a brief 33 minutes, 
its performance rivals many of 


today’s most popular airliners. 

The computer-designed “super 
critical" wing, with a 20-degree 
sweep, reduces drag for efficient 
high-speed performance and also 
assures docile low-speed handling 
characteristics. 

Coupled with state-of-the-art 
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France most be the only EU 
state where people have been 
passing aroond the hat at some 
European election rallies to 
buy arms for a "European” 
cause. 

“So for we have got commit- 
ments Of FFr20.000 t£2J3l) to 
buy weapons for the Moslems 
in Bosnia.” said a representa- 
tive yesterday of “Action for 
Bosnia”. It has been raising 
funds at rallies of the “Europe 
Begins at Sarajevo" group 
which is expected to file its 
«fflriirlat» list by tomorrow, the 
closing 

The campaign to lift the 
arms embargo on Bosnia has 
injected a note of uncertainty 
into the election in France and, 
given France’s l eading diplo- 
matic and military rale there, 
in the future comae of western 
policy in Bosnia. 

The campaign has been 
mounted in the media with 
great skill by Mr Beraard- 
Henri Levy, a left bank Paris 
intellectual who produced a 
film on Bosnia for this month’s 
Cannes festival and has since 
gathered 86 other “potential” 
names to run on the “Europe 
Begins at Sarajevo” ticket 
"Potential", because for the 
past two weeks, Mr Levy and 
his colleagues have been say- 
ing that if the mainstream 
parties adopt their arms-for- 
Bosnia stance, they will with- 
draw their candidates. 

These pressure tactics have 
had only limited impact on the 
joint government list of the 
RPR gaullists and the UDF 
centre-right led by Mr Domini- 
que Baudls, mayor of Toul- 
ouse, but far more on the 
Socialist list led by Mr Michel 
Rocard. 

Fearing that Mr Levy could 
proride further competition for 


the left-wing vote - in addition 
to that already provided by the 
radical list led by Mr Bernard 
Tap re, the controvereial Mar- 
seilles businessman and politi- 
cian - the socialist leader has 
tried to head him off. lifting 
the arms embargo would be 
“recognising our failure [in 
Bosnia], but the only way of 
saving a bit of honour,” said 
Mr Rocard. But this statement 
may have come too late to save 
Mr Rocard votes. 

Less surprising is the other 
issue dominating the election - 
employment, which is already 
the national preoccupation in a 
country with a record 122 per 


Two thirds 
believe the EU 
jobs policy 
is wrong 


cent jobless rate. 

A poll in yesterday’s Libera- 
tion newspaper showed that 
two-thirds of French believe 
the EU*s employment policy is 
not headed in the right direc- 
tion. But there has been little 
precise debate about the right 
direction for Europe, partly 
perhaps because few French 
politicians dare espouse the 
labour market reforms pre- 
scribed by the Delors white 
paper an European competttiv- 
ity. They have all seen the 
trouble Prime Minister Baha- 
dur ran into attempting too 

Overt a CUt in the minimum 

wage for French youth. 

The Euroelection debate has 
also been blunted by the fact 
that the joint list of the RPR- 
UDF governing parties is a 
composite, ranging from enthu- 
siastic Europeans to all but the 


most die-hard opponents of the 
Maastricht treaty, who them- 
selves have formed the dissi- 
dent "Alternative Europe" list 
unde- Mr Philippe de VUllers 
ami Mr Jimmy Goldsmith, the 
Anglo-French financier. To 
deny ammunition to the latter, 
Mr Saudis carefully hides his 
federal faith and eschews any 
mention or Maastricht, or 
indeed of Gatt, Mr Goldsmith’s 
particular bite noire. 

In the same vein, Mr Alain 
Lamassoure, the EU affairs 
minis ter who is one of the few 
ministers to be doing much 
campaigning, is stressing the 
.need for subsidiarity within 
the EU, a rare area where the 
French and British govern- 
ments have something in com- 
mon. Taking another leaf out 
of Britain’s book, he has also 
been using the campaign to try 
to set a series of "Euroscares" 
to rest by. for instance, empha- 
sising that Brussels rules an 
unpasteurised cheeses were 
drawn up at France’s request 
so that its "frontages a last au m 
could continue to be sold 
throughout Europe. - - 
According to yesterday's 
poll. 47 per emit of French 
claim their vote on June 12 
will be determined by Euro- 
pean issues while 41 per cent 
admit national issues will dic- 
tate the way they cast their 
ballot But the election will 
still be very largely read as a 
preview of next May’s presi- 
dential contest 
It is igjgt crucial for Mr Baila- 
dur, or his feltew ganUlst rival, 
Mr Jacques nhiraq n rfthy are 
on the gnwp rnmpnt list. But the 
stakes are high for Mr Rocard, 
who is leading his party's list; 
if his list gainft much less than 
20 per cent, it may encourage 
some in bis party to look for 
another to keep the Socialist 
standard Dying in the EtysGe. 


ins m EU affairs. A farm# 
employe* of the European Com- 
mission and British Gas, he 
stood unsuctes&Oly for the Ltb- 
traJ Social Democratic AUkmci 
in the i$83 and 1387 UK elec- 
tions and for the European par- 
liament fn 1964. 

The amount of Influence 
over MBPs by industry lobby- 
ists tea attracted concern. 
What changes are needed cov- 
ering contacts between lobby- 
ists ami MSPs or MBPS’ staff? 
The rules cm conduct of EU 
officials, MEPs and their staff 
in relation to transfer of Com- 
mission documents and infor- 
mation used to be tightened. 
Until the parliament agrees a 
method for the foil declaration 
of MEPs* outside badness and 
consultancy Interests. It will be 
difficult to establish effective 
codes of practice for external 
lobbyists. 

Can British MEPs set a lead 
in trying to bring about 
greater transparency? The 
Westminster model ol disclo- 
sure sets an appropriate stan- 
dard for MEPs to follow. Brit- 
ish MEPs could take the 
Initiative by introducing fun 
disclosure of their outside 
interests. This would reassure 
the British electorate that they 
operate in a comparable way to 
their Westminster counter- 
parts. It aright spur MEPs from 
other countries to follow suit 

How many lobbyists do you 
consider are active In Brussels 
and Strasbourg in building 
relations with members of the 
European parliament? The 
best estimate is 140 public 
affairs consultancies, 160 law 
firms, 572 trade associations 
and professional associations 
and 58 regional and local 
authorities. The Commission 
estimates that there are 3,000 
interest groups with links to 
EU institutions, employing 
1OJ1Q0 people. 

What are the prospects for a 
code of practice? Twenty lead- 
ing public affairs companies, 
including Baaumark, are dis- 
cussing a draft coda of practice 
with the Commission. - 

Hew rewarding is this bad- 
ness for European lobbyists? 
Typical annual turnover of 
companies active in the EU 
public affairs field is £9Xfc0Q0 
to £700,000. The loading com- 
pany claims turnover of mare 
than £Im. Beaumark's this 
year will be £300,000 to 
£400,000. 

Are you concerned that 
some lobbyists may gain 
access to information under 
false pretences, for instance, 
by posing as journalists? Yes. 
There should be dear separa- 
tion between journalists cow 
tag the parliament and lobby 
ists. Where there are doubts, 
the status of the “journalist- 
concerned should be reviewed. 


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INTERNATIONAL 


Kenya nears 
total currency 
convertibility 


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By Lesflo Crawford and 
Mfctnel Holman in Nairobi 

Kenya yesterday made its 
currency faBy convertible for 
nearly all transactions, one of 
the most important steps in 
the country's liberalisation 
programme. 

The measures were 
announced a day after Kenya's 
ruling Kama party backed a 
controversial reform pro- 
gramme, urged by western 
donors, which embraces all 
aspects of the economy. 

The decision reflects govern- 
ment confidence that Kenya’s 
economic and political stability 
will ensure that there is no 

capital fHgtit. 

Mr Musalia tfudavadi, the 
finance minister, said Kenya's 
relaxation, of the exchange con- 
trol act made the ah whig fully 
convertible for all current 
account transactions. Kenyans, 
are now free to invest outside 
the country up to a rnanrlirm m 
of $500,000 without central 
bank authorisation. The bank 
says it will approve all bona 
fide transactions beyond that 
amount without undue delay. 

Exporters are also free to 
retain all export proceeds in 
foreign currency- Previously, 
they bad been required to sur- 
render part of their foreign 
exchange earnings after 90 
days. 

This is about as free as you 
can get it is quite an achieve- 
ment,” said one private 
b anker , 

Mr Mudavadl said new proce- 
dures would also be introduced 
to simplify transactions, previ- 
ously mired in bureaucracy 
which encouraged corruption. 

The only area which will 
remain subject to exchange 
controls is inward investment 
- in shares and government 
securities by foreigners. Mr 
Mudavadi said legislation to 
allow foreign investment funds 
Into Kenya was not yet ready. 
He did not say when the last 
controls would he removed. 

The currency liberalisation 
measures appear to have been 
decided in the wake of the . 
appreciation of the shflifaig and 


the build up of $7Q0m in for- 
eign exchange reserves - 
enough to cover 454 mouths 
imports - winch reflect a new 
confidence in Kenya’s eco- 
nomic policies. 

Furthermore, they signalled 
President Daniel arap Mot's 
support for the 33-year-old 
finance minister, who has 
fought, since he took over last 
year, to implement the eco- 
nomic reform programme in 
the face of fierce opposition 
from some politicians and civil 
servants who resent the loss of 
patronage implicit in his 
reforms. 

The decision coincided with 
a visit by an International 
Monetary Fund mission, which 
completed a review of Kenya's 
enhanced structural adjust- 
ment policy this week, con- 
cluding th at the East African 
country had made considerable 
progress since multi-party elec- 
tions In December 1992. 

The polls, which returned 
President Moi to power, caused 
a large increase in money sup- 
ply and saw inflation spiral out 
of control. Opponents say 
money was printed to buy 
votes. 

Mr Htroyuki Efino, IMF assis- 
tant director for Africa and 
leader of the mission, praised 
“substantial progress” but said 
the fond was concerned about 
the budget deficit and the 
financial performance of state 
companies, long criticised as 
nests of corruption for Mr 
Mod’s stalwarts. 

“What is important to us is 
to send a dear message to the 
Kenyan people that these sorts 
of irregularities will not be tol- 
erated again,” Mr hi no said, in 
reference to some of the worst 
reported abuses of the so-called 
•political banks”. 

But he said the IMF was not 
attaching strings to future 
aid. 

■ Monetary conditions were 
“not as tight as had been 
expected” and the budget defi- 
cit for the financial year end- 
ing next month' was likely to 
reach 7 per cent of GDP, 1 pea* 
cent higher than the target. 


Beijing success may impress Chernomyrdin 

Tony Walker previews the Russian prime minister’s four-day visit to China 


W hen Mr Victor Cher- 
nomyrdin arrives in 
Beijing today his 
view of life in the Chinese capi- 
tal through the tinted windows 

Of hlS ftffinal KmnmmiB may be 

of greater interest than the 
issues to be discussed in four 
days of tailra with officials. 

Russia's prime minister 
could not help but be struck by 
evidence that China’s 
of foe market has carried it 
farther and faster than bis 
country’s fumbling efforts to 
reform its socialist era econ- 
omy. 

Chinese leaders are known 
to draw unfavourable compari- 
sons with economic progress in 
Russia to urge swifts* reform, 
lest China's ruling 
party meets the same fate as 
its counterpart in the former 
Soviet Union. 

While it Is most unlikely that 
any chfaxw nffiriai would be 
so undiplomatic as to make 
crude reference to the yawning 
gap between the performances 
of the respective econo- 
mies -China recorded growth 
rates in each of the past two 
years of about 13 per cent com- 
pared with decline in Russia 
-it would he hard for Mr Cher- 
nomyrdin to ignore China’s 
success. 

He might seek to draw les- 
sons from his exposure to Chi- 
na’s economic progress: at the 
very least he will be trying to 
engage his country's economy 
more closely with that of tts 
booming southern neighbour. 

Mr Ch ernomyr d in 's visit will 
be concerned primarily with 
trade, including vexed qnes- 



Vlctor Chernomyrdin: trade Is first concern 


Hons of payment -both coun- 
ties are seeking a bigger pro- 
portion of payments in cash 
rather' than barter goods. 
These and other trade-related 
issues, such as strengthening 
management of border trade, 
are being discussed In Beijing 
this week at the second session 
of the Shm - Huftcfan Joint Com- 


mission on Economic, Trade 
and Technical Cooperation. 

Mr Alexander Shokhin, Rus- 
sia's deputy prime minister has 
been in Beijing since early this 
week for the joint trade com- 
misston. He will also have been 
preparing for the Chernomyr- 
din visit which will encompass 
a broad range of topics, includ- 


ing co-operation in aerospace 
-such as a joint fighter proj- 
ect-chemicals, pharmaceuti- 
cals. and machinery. They are 
also working on improving sea, 
road and rail transport routes. 

Two-way trade reached 
$7.68hn last year, an increase 
of 30 per cent over the year 
before, making Russia China’s 
seventh-largest trade partner. 
Chinese imports reached 
$499hn and exports $2.69hn. 

In the first three months of 
this year two-way trade fell 
sharply, however, to 5991m. 
This was largely due to a dra- 
matic slide in border trade 
which, according to some esti- 
mates. was down by more than 
50 per cent to the and of March 
compered with the correspond- 
ing period last year. 

Stricter customs and immi- 
gration regulations on the Rus- 
sian side have slashed the 
number of Chinese pedlars 
crossing the frontier. Payments 
problems are also bedevilling 
croedborder trade. 

In Beijing, Mr Geng Xuncai, 
a senior ministry of bade offi- 
cial, called for a greater per- 
centage of business to be con- 
ducted in cash. This call partly 
reflects growing Chinese Impa- 
tience with the practical diffi- 
culties of barter bade, which 
accounts for 70 per cent of 
business, now that the state- 
controlled trading system is 
breaking down. 

The Russians are also press- 
ing for cadi payments for sup- 
plies of military equipment, 
according to the representative 
of a western arms supplier in 
Beijing. 



.tm .98.. . n*. 

e cwew^Co-op^niOon 


China purchased 26 Su27 
fighters from Russia in 1992 
and is anxious to add another 
squadron but payments prob- 
lems appear to be hnMiiq? up 
the dead. On-going negotiations 
on military purchases and 
exchanges in the technical 
WwM ate being underpinned by 
a new military co-operation 
agreement 

The agreement, signed last 
November by Mr Pavel 
Grachev, the Russian defence 
minister, provides for an 
review of military 
co-operation and includes ref- 
erence to the possibility of 
Joint training exercises and 
acoess to each other’s airfields. 

Russian and Chinese officials 
have been stressing the com- 
plementary nature of the two 
economies. In Beijing, Mr Igor 
Rogachev, the Russian ambas- 
sador, described as “great” the 
potential for economic 
co-operation. He proposed the 
establishment of more joint 


ventures to marry Russia's 
“natural resources with Chi- 
na's rich agricultural and 
labour resources”. 

Russia itself is anxious to 
exploit China’s enormous 
demand Tot infrastructure 
assistance. It has proposed that 
it become involved in big capi- 
tal works projects such as the 
$10bn Three Gorges dam on 
the Yangtze river. 

Among the more delicate 
issues of Mr Chernomyrdin’s 
visit are those concerned with 
foreign relations. Moscow will 
have viewed with misgivings a 
recent 12-day tour of central 
Asia by China’s premier Li 
Peng which was aimed at 
increasing Beijing's influence 
in those former Soviet repub- 
lics, including resource-rich 

Kazakhstan 

Russia fears a greater Chi- 
nese presence in these areas 
and with it increased competi- 
tion for the region’s oil and 
minerals resources. China tra- 
ditionally has regarded the 
countries on its western fron- 
tier as part of its sphere of 
influence. 

Meanwhile Moscow has Indi- 
cated that it is anxious to 
the tension on the Korean pen- 
insula and that it would like to 
work more closely with China 
an this. But Russian influence 
Is much diminished in Pyong- 
yang these days. Beijing may 
not wish to complicate Its deal- 
ings with the North Koreans 
by involving Moscow too 
closely In attempts to persuade 
them to agree to international 
demands to open their nuclear 
sites to inspection. 


Indian Airlines settles pay 
dispute with engineers 


State-owned Indian Airlines said 
yesterday it had settled a pay dispute 
with, engineers, aiding their lfiday 
strike that had disrupted flights Ren- 
ta* reports from New Delhi 
The Press Trust of Loffia said the 

alriliw, w hich flip* mainly domwaHc 

routes, agreed to a 45 per cent 
increase in the allowances of same 860 
striking engineers. 

Indian Airlines officials aajd eaiiler 
they had invited the engineers for 
talks oh a productivity-linked 
incentive scheme after they had 


rejected a 80 per cent wage increase. 

The engineers began a go-slow an 
May 16 to back demands for wage 
parity with their higher-paid counter- 
parts in Air India the country's inter- 
national air carrier. 

Indian Air line* in the red pri- 
vate airlines were allowed to compete 
against it three years ago, said aaHfrw 
it could not afford to pay what would 
have amounted to a 90 per cent wage 
rise. It lost more than RslOOm 
(£2.1m) in revenues during the go- 
slow. 


Taiwan ends China travel ban 


Taiwanese travel agents lifted a 
25-day boycott against China yester- 
day, despite lingering anger over the 
death of 24 Taiwanese tourists in 
eastern China two months ago, AP 
reports from TaipeL 

The boycott was part of Taiwan’s 
reaction to allegations that the tour- 
ists woe robbed and murdere d and 
that China covered up the feds. 

But the a tte mpt to punish China 
appeared to have ended with travel 
ag«*ntv and the g o vernment each say- 
ing the boycott was the other’s initia- 
tive. 

Travel agents say about 20JM0 can- 


celled to ms have cost them revenues 
of between T$40m to 15100m (Elm to 
£2Jftn). Last year about 1.5m Taiwan- 
ese travelled to China, pumping $3bn 
into tiie Chinese tourism industry. 

The Taipei Association of Travel 
Agents said the lifting of the boycott 
was approved by the Mainland 
Affairs Connell, which makes 
Taiwan’s mainland policy in the 
absenc e of official Chtna-Taiwan ties. 

Mr Micky Chen, the council’s direc- 
tor of economic affaire, said the gov- 
ernment had never encouraged 
organised tours to China, believing it 
to be a dangerous place, bat was in 


no position to Impose travel hang, “it 
was travel agents who started the 
boycott," he said in an interview. 

China and Taiwan do not recognise 
each other, and their trade and tour- 
ism links, while tacitly approved by 
both g o vernments, are unofficial. 

The bodies of the tourists and eight 
Chinese crewmen wen found in the 
burned-out hulk of a pleasure boat on 
Thousand Islands Lake In Zhejiang 
province. 

Hie victims’ relatives complained 
that they were denied information 
and harassed when they visited the 
lake. 



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Peter McSorley, Anglo Brokers 
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Keith OrreJ- Jones, Blue Circle Industries 
Anita Roddick, Body Shop 
Sir James Blyth, Boots 
Sir Colin Marshall, British A i no ays 
Cedric Brown, British Gas 
David Simon, British Petroleum 
Johnathan Fry, Btinnah Custrol 
Michael Green, Carlton Communications 
Mike Forster, Club 24 
Neville Bain, Coats ViyelLi 
Bruce Cohen, Courts 
Richard Clothier, Dalgety 
Andrew Teare, English China Clays 
John Poulter, Fdircy Croup 
John Conlan, First Leisure Corporation 
Patrick Egan, Fiso/lS 
Rocco Forte, Forte 

Mike Billington, General Domestic Appliances 
Donald Pardoe, C EC Marconi Secure Systems 
Dr Richard Sykes, Glaxo Holdings 
Gerry Robinson, Granada Croup 
Derek Bonham, Hanson 
Ronnie Hampel, Imperial Chemical Industries 
Peter Salt, JEM 

Michael Ockenden, InterMortgage 
Alan Smith, Kingfisher 

Arthur Stone, Leeds cr Holbeck Building Society 
Martin Laing, l.aing 
Brian Pitman, Lloyds Bank 
Sir Anthony Gill, Lucas Industries 
John Sacher, Marks Ct Spencer 
John Simpson, Mayflower Corporation 
John Menzies, Blendes 
John William Baker, National Power 
Alan Jones, Newey W Eyre 
Francis Baron, Owners Abroad 
John White, Persimmon Group 
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NEWS: INTERNATIONAL 


Central bank says peace process will help boost economy 

Israel forecasts 5% growth 


h r — I 


General Index 
300 


Annual K Cheng* IftGPt 


By Julian Ozanne in Jerusalem 


Israel's central bank yesterday 
predicted the economy would 
grow at 5 per cent this year 
despite concern, about high 
inflation and interest rates, a 
slowdown in Jewish, immigra- 
tion, and a continuing stock 
market downward trend. 

The Bank of Israel, which 

published its annual state of 

the econo my report yesterday, 
said a stable economic policy 
and exploitation of sound infra- 
structure and potential human 
resources would fuel fast 
growth in the coming years. 

Growth of 3J> per cent for 


1933 was low, against 6.7 per 
cart growth in 1993. but that 
was temporary. The low 
growth masked significant 
rises in exports, investment 
and employment. The central 
hank also said the imfnlrfing 
Arab-israeli peace process 
would have positive effects on 
the Israeli economy in opening 
new markets, increasing 
exports, investments and con- 
sumption. 

“We have the potential, the 
technology, the manpower and 
the new markets ... the gen- 
eral direction is positive," Ur 
Jacob Frenkel, central bank 
governor, said. "Despite the 


stock exchange crisis, growth 
will remain as expected." Ana- 
lysts said the bank was seek- 
ing to deflect criticism from 
industrialists and finance min- 
istry officials that recent rises 
in interest rates would curb 
economic growth. 

But Mr Frenkel warned that 
the government would have to 
tackle urgently a runaway 
inflati on rate, which is about 
13£ per cent, well ahead of the 
government's 1994 target of 8 
per cent The central bank said 
inflation was the product of 
rocketing housing prices, now 
climbing at an annual rate of 
33 per cent Mr Frenkel urged 


the government to release 
more state-owned Land, press 
contractors to build in a fixed 
time, and increase permits for 
foreign construction workers 
to fill jobs of Palestinians 
unable to come to work after 
Israel sealed off the occupied 
territories. 

The cabinet is due to finalise 
plans on Sunday to combat the 
housing crisis. 

Mr Frenkel said the govern- 
ment should press ahead with 
privatisation despite the crisis 
on the Tel Aviv Stock 
Exchange where shares have 
fallen 18 per cent in the past 
three weeks. The Mishtanim 


220 -- 



20 


180 * 

Jan vm 

5QwoKFr0npMa 


taee to *» at « — 


index of the top 100 blue chip 
shares foil by 1.5 per cent again 
yesterday, closing below the 
level of August 1993. 

Further reforms in economic 
policy, including lower taxa- 
tion, faster liberalisation, and 
increased investment In infra- 
structure. were necessary to 


Rights groups warn on Hong Kong refugees 

Louise Lucas on worsening tension as the time approaches for Vietnamese repatriation talks 

C hildren of Vietnamese 
asylum seekers held in 
detention centres in 


C hildren of Vietnamese 
asylum seekers held in 
detention centres in 
Hong Kong may know little of 
life beyond the heavy iron 
gates, but in recent weeks they 
have seen some horrific things 
around them: adults tearing 
open their own flesh with 
sharpened spears of bamboo 
and knives, self-immolation 
and the emaciated figures of 
hunger strikers. 

In the past week 65 cases of 
self-wounding have been 
reported at the detention cen- 
tres, and emotions are set to 
escalate before a key meeting 
next week in Bangkok to dis- 
cuss strategies for resettlement 
and repatriation of the Viet- 
namese asylum seekers 
remaining in Asia. Pressure 
groups are urging the Hong 
Kong government to move fast 
to defuse a potentially explo- 
sive situation. 

The government’s recent 
track record is not encourag- 
ing. Last month, the Correc- 
tional Services Department 
despatched L200 officers in riot 
gear to move L500 Vietnamese 
from Whitehead Detention 
Centre, in Hong Kong's New 
Territories, to High Island 
Camp, half an hour's bus ride 
away. 

Hie storming of Whitehead 
was crude, violent and exces- 
sive, according to lawyers and 
rights groups. Buddhist 
shrines were torn down, 
women and children lacked 
and punched, mace sprayed in 
detainees’ feces and teargas 
fired liberally, they say. These 
claims, and others, are being 
investigated by an independent 
inquiry set up by Mr Chris Pat- 
ten, Hong Kong’s governor. 

Human rights groups say at 
least 270 people were treated 
by doctors after the storming 
during which, they say, 557 
teazgas shells were fired, along 
with a pepper-fog teargas 


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Sieds like this at the Sham Shtd Po camp fax Hong Kong house 1,800 Vietnamese refugees each 


HtrmaiJOmti* 


machine. The government at 
first admitted to 250 rounds of 
teargas and 30 casualties. 

Just over half the 52JJ00 Viet- 
namese refugees in camps 
throughout Asia are held In 
Hong Kong detention centres. 
Hong Kong itself already has 
one of the world’s highest pop- 
ulation densities at 5,390 peo- 
ple a sq km, and the 1992 
agreement struck with Hanoi 
to repatriate non-refugees 
seemed a fair solution. 

However, repatriation is 


proving a double-edged sword: 
government figures show it 
has brought the annual flood 
of asylum seekers down to a 
trickle, but the plight of men 
and women being forcibly 
returned to a country where 
they say they would be at risk 
has provoked indignation in 
the US and elsewhere. 

There is little local sympa- 
thy. In an economy where the 
onus for welfare has tradition- 
ally been put upon the family, 
it goes against the grain to see 


the governments of Hong Kong 
and Britain together with the 
United Nations High Commis- 
sion for Refugees shell out 
funds on the Vietnamese’ 
upkeep (the total bill for the 
current financial year is expec- 
ted to be HK$9S8m (US$129m). 

When one youngster, en 
route to the US after a last- 
minute reprieve, said he never 
wanted to see Hong Kong 
again, an outraged reader 
wrote to the local daily, the 
South China Morning Post: 


"His remark instils a feeling of 
guilt among the people of Hong 
Kong who have been doing 
more than any other people in 
the world for the Vietnamese 
refugees. As for this young 
man, we provided food, shelter 
and, not least, the opportunity 
to seek a new home else- 
where." 

Most of those awaiting 
screening will be rejected as 
lacking a well-founded fear of 
persecution in Vietnam: of the 
58,491 people already screened, 


Fall in investment hits Australian budget hopes 


By NBdd Tart in Sydney 


Investment by Australian companies 
fell more than 5 per cent between the 
last quarter of 1993 and the first quar- 
ter of 1994 - a decline which casts 
further doubts over the optimistic 
assumptions on which the federal 
government has based its 1994-95 bud- 
get calculations. 

According to the latest Australian 
Bureau of Statistics figures, real pri- 
vate capital expenditure on equip- 
ment, plant and machinery dipped 
from A$4.195bn to A$3.9bn (£2bn to 
£L88bn), while spending on buildings 
fell from A$2.027bn to A$L984bn. 


The corresponding figures for the 
March quarter of 1993 were A$4.l44bn 
and A$L876bn respectively. 

The figures are significant because 
the federal government is banking on 
a substantial upturn in business 
investment to help boost economic 
growth to about 4 j 5 per cent in 1994-95 
fiscal year. It needs growth of this 
order to generate extra tax revenues, 
to fond a number of welfare-related 
schemes, most notably, an ambitious 
jobs programme designed to address 
Australia's double-digit unemploy- 
ment rate. 

In his budget speech earlier this 
month, Mr Ralph Willis, treasurer. 


forecast a K5 per cent increase in 
business investment during 1994-95, 
after a predicted rise of 1 per cent in 
the current year. 

This figure was in line with some 
private-sector expectations, but was 
at the upper end of the forecasting 
range. 

The government's projections 
immediately encountered scepticism 
from some employer groups, which 
felt Australian companies were still 
seeking efficiency gains rather than 
new capacity,' and suggested that 
profit improvements among small and 
medium-sized businesses are lagging 
those in large, quoted corporations. 


Yesterday, Mr Wilis defended the 
government’s projections, saying 
overall expectations for the year were 
unchanged, and that he expected the 
"realisation ratio” (the ratio of actual 
investment to expected investment) to 
increase. But analysts, who had been 
expecting a modest investment 
pick-up in the March quarter, or a 
stable position at the least, wore sur- 
prised by the data. 

"The fell in plant and equipment 
expenditure in the March quarter is 
unexpected, puzzling and disappoint- 
ing,” Mr Chris Caton, chief economist 
for Bankers Trust Australia, com- 
mented. 


• The Australian Chamber of Com- 
merce and Industry, the nation's larg- 
est employer group, is to lodge a for- 
mal complaint with the International 
Labour Organisation over new federal 
legislation on industrial relations 
next week. 


The ACCI claims the law, passed at 
the end of last year and highly 
unpopular among employers, 
breaches fundamental principles of 
collective bargaining and does not 
allow companies to bargain freely 
with employees without being 
impeded by compulsory arbitration 
and centralised awards. 


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ensure greater stability, - the 
bank noted, 

"Israel today has the poten- 
tial to continue fast growth, 
white Integrating into the 
world’s business community 
and exploiting the new possi- 
bilities opened by the peace 
process," the report said. 


89 per cent were screened out 

Government officials refer to 
them as “economic refugees,' 
despite the feet that Hong 
Kong is full of maids from the 
Philippines, sandwich boys 
from the UK. MBAs from the 
US and barmaids from Austra- 
lia. 

Most of the asylum seekers 
are packed within the confines 
of rude bunkers in Whitehead 
Detention Centre, who ee walls 
are topped with massive loops 
of barbed wire. In summer the 
huts are sweltering, in winter 
freezing. Whitehead feces the 
sea, but affords no more of a 
view than Alcatraz. 

"They are isolated and insu- 
lated. 1 ' says Ms Pam Baker, a 
lawyer who chairs Refugee 
Concern. "No independent 
body goes in there. The 
UNHCR and the Hong Kong 
government are in cahoots and 
have the whole thing tied up. 
It is pretty claustrophobic, and 
they don’t really know what’s 
going mi in there so they make 
up rumours which go around 
and spread like wildfire.” 

Mr Jahanshah Assad! , the 
Hang Kong chief of mission at 
the UNHCR, says the recent 
spate of self-mutilation in the 
camps is "quite regrettable.” 
But what more can he do, he 
asks. 

What the UNHCR does is 
provide counselling. This, it 
believes, is sufficient and has 
quashed certain requests by 
Refugee Concern for lawyers’ 
visits an these grounds alone. 

Refugee Concern wants it to 
giant access to concerned indi- 
viduals, non-governmental 
organisations and lawyers. It 
could also sanction the instal- 
lation of payphones, and it 
could allow a free Cow of infor- 
mation, it says. 

In short, it says, it could pro- 
vide some of the amenities 
already offered to inmates at 
Hong Kong’s Victoria Prison. 


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FINANCIAL TIMES THURSDAY ma V ,« 1994 


NEWS: THE AMERICAS 


Advance for 
Republicans 
in US poll 


By Jurak Martin, US 
Editor, n Washington 

Republican hopes for gains in 
the mid-term congressional 
elections in November were 
sharply lifted late on Tuesday 
when the party captured in 
Kentucky a House of Represen- 
tatives seat that had voted 
Democratic for the last 129 
years. 

In. a special election caused 
by the death in March of Con- 
gressman William Natcher, Mr 
Ron Lewis, a f undamentalis t 
Christian minister, defeated Mr 
Joe Prather, the Democratic 
candidate, by 55:45 per cent 

The House now holds 256 
Democrats, 178 Republicans 
and one independent (Mr Ber- 
nie Sanders of Vermont). 

Last month, the Republicans 
picked up anntiwr traditional 
Democratic seat in Oklahoma, 
also a state bordering the 
south. With xi incumbent 
Democrats in the region hav- 
ing announced retirement and 
with more than 40 House seats 
to be vacated by incumbents of 
both parties nationwide, the 
prospects for further Republi- 
can gains in November seem 
clear, perhaps beyond the 25- 
seat advance hitherto consid- 
ered realistic. 

Particular factors applied 
this week in Kentucky’s sec- 
ond district, not least the 
absence of Mr Natcher, a fix- 
ture for the last 40 years who 
was often returned unopposed. 

Mr Natcher, a conservative 
Democrat by any standards, 
bucked the party trend evident 
in bis own district in presiden- 
tial ejections. In 1992, President 
George Bush beat Mr Bin Clin- 
ton from neighbouring Arkan- 
sas in the district by 45:41 per 


cent (Mr Ross Perot, the inde- 
pendent, took the rest Y, in 1988, 
Mr Bush beat Mr Mirhaai 
Dukakis there by 60:40. 

Mr Lewis benefited, in a low 
voter turn-out, from strong 
org ani sation by the religious 
right and $200,000 (£1324100) in 
f un d ing , mostly for media 
advertising, from the Republi- 
can national committee. Mr 
Prather ran a low-key 
ram PRigIL 

The victor also scored 
heavily by explicitly identif y, 
lug his opponent with the poli- 
cies and personality of Presi- 
dent Clinton. One slogan ran: 
“If you like Bill CUnton, you’ll 
love Joe Prather. Kentucky 
doesn’t need another profes- 
sional politician." 

Special factors or not, Mr 
Clinton has presided over a 
series of worrying Democratic 
defeats in elections since he 
won the presidency in Novem- 
ber 1992. These include senate 
races in Georgia and Texas, 
gubernatorial contests in New 
Jersey and Virginia, mayoral 
contests in Los Angeles and 
New York, and two House 
seats in the last mranth 

Some of the president’s poli- 
cies have not gone down well 
in the south, including Ms pro- 
- posals to increase- taxes on 
tobacco, a regional product 

Also, same of these electoral 
reverses have been partly 
brought about, by intense 
efforts by the religious right 
These have been most effective 
in its heartland of the Booth 
and the region’s borders, and 
wherever voter turn-out has 
been low and national atten- 
tion elsewhere, and so do not 
necessarily imply growing sup- 
port for the C hristian conser- 
vative agenda nationwide. 


Rise in durable 
goods orders 
points to growth 


BylflchMl Prowao 
In Washington 

US orders for durable goods 
rose 0.1 per cent between 
March and April, less than 
analysts expected, but the 
longer-term trend appeared 
consistent with continued 
robust economic growth. 

The increase in orders was 
the 11th consecutive monthly 
gain and followed a revised 0.7 
per cent increase in March. 
Orders were 10.4 per cent 
higher than in April last year, 
before allowing for inflation of 
Just under 3 per cent 

Separate figures yesterday 
showed a small rise in sales of 
existing US homes last month, 
to an annual rate of 4.12m 
against 4.07m in March. 

Hie volatile transport sector 
accounted for much of the 
weakness in goods orders last 
month. A decline in orders for 
motor vehicles and railway 
equipment more than offset 
increased demand for aircraft 
Excluding transport, orders 
rose 0.6 per cent from March. 

Analysts were divided over 
the figures, partly because 
they disagree on the extent to 
which increases in short-' and 
long-term interest rates are 
curbing economic growth. 

“Today’s report adds to ear- 


lier evidence that the economy 
was already slowing down," 
said Mr Robert Barr, a senior 
economist at the US Chamber 
of Commerce. The Federal 
Reserve’s decision to raise 
Interest rates last week “may 
not have been warranted," he 
added. 

Mr Richard Berner, chief 
economist at Mellon Bank in 
Pittsburgh, said the underlying 
trend was strong and predicted 
US capital spending would 
remain robust, partly because 
demand for OS durable goods 
was now growing in overseas 
markets. 

The Fed would soon have to 
consider raising interest rates 
again, to prevent growth put- 
ting upward pressure on infla- 
tion, he warned. 

Mkny analysts expect figures 
for gross domestic product, due 
on Friday, to show a modest 
downward revision In eco- 
nomic growth in the first quar- 
ter to an annualised rate of 
just over 2 per cent, against a 
preliminary estimate of 2.6 per. 
cent 

But this is widely seen as 
underestimating the economy’s 
underlying rate of growth. 
Wall Street growth projections 
for the second quarter range 
from an annual rate of 3.5 per 
cent to as much as 6 par cent 


Guatemala risks 
loss of loans 


By Edward Oriabar 
in Guatemala City 

The Guatemalan government 
Is fin-frig a fiscal crisis and will 
probably foil to meet condi- 
tions imposed by official credi- 
tors. This follows Congress 
having resisted crucial draft 

tegiala Ham this month. 

Congress failed to pass 
before the summer recess tax 
reforms which the finance min- 
istry hoped would offset sharp 
revenue losses this year and 

hoM the g o ve r nment’s tax take 
at 85 per cent of GDP. 

The reforms were to include 
stiffar sanctions for tax evad- 
ers, the abolition of many 
value-added tax exemptions, 
and the introduction of a 2 per 
cent flapfrat tax. 

The government may now 
' fidl to meet June 30 fiscal tar- 
gets set by the International 

Monetary Fund. That would 
lead, to- a freeze of a S35m 
(£28m) financial sector loan 
American DeveL- 
and of ft $42m 
adjustment loan 


The tax reform package was 



als o opposed by Guatemala’s 
powerful private sector, where 
it was claimed t hat th e finance 
ministry was corrupt and inef- 
ficient, and that improved tax 
collection was needed rather 
than reform. 

Congress also blocked 
approval of relatively soft 
farms agreed between the gov- 
ernment and Paris Club credi- 
tors last year, which must be 
ratified by next Tuesday. 

Congress is now in recess 
and is sot due to return until 
after Congressional elections, 
due to be held in August 

Ministers say they still hope 
for Congressional approval of 
the Paris Club deal in an extra 
gP Efinn , but this would require 
political bargaining. 

The private sector has long 
regarded tax increases as 
anathema to its interests, 
gfl f h mig h Guatemala has one of 
the lowest taxation rates in the 
western hemisphere. 

Economists say that, if no 
changes are made, the tax take 
will drqp below 7 per cant of 
GDP, widening the fiscal defi- 
cit P n d jeopardising much*, 
needed social investment 


Chairman 
may be on 
way out 

Lawyers for Democratic 
Congressman Dan Rosten- 
kow&ki were reported yester- 
day to have offered his resig- 
nation as House ways and 
means committee chairman 
and, perhaps, even Ids accep- 
tance of a short prison term in 
exchange for the dropping of a 
multi-count federal indtetmemt 
on expense account offences, 
Jutek Martin reports. 

It was far from clear 
whether a plea bargain accept- 
able to both sides could be 
reached but Mr Rostenkaws- 
H’s days as commi tt e e chair- 
man aw Hid to he numbered. 

Mrs Hillary BfflP” 1 " flKnfan 
conceded yesterday that his 
departure would be a blow to 
the passage of healthcare 
reform by Congress this ses- 
sion, which the powerful 
chairman is committed to 
achieve. But she remained con- 
fident that an acceptable bill 
to guarantee universal medical 
insurance in the US would 
emerge. 

The charges against Mr Ros- 
teukowsid stem from, and 
seem to go beyond, the House 
post office scandal unearthed 
three years ago. In spite of the 
negotiations being conducted 
by his lawyers, he has repeat- 
edly protested his innocence. 


Chretien warns Quebec 



Jean Chrtttexu Drawn into the separatist debate 


PHicMIvMwri 


By Bernard Simon hi Toronto 

Canada’s prime minister Mr 
Jean Chtetien has added his 
voice to a rising chorus of 
warnings about the risks Que- 
bec faces if the francophone 
province steps up its campaign 
for independence 

Mr Chretien fra« so far tried 
to steer dear of the separatist 
debate, but be has been drawn 
into it by the separatists’ 
strong performance in opinion 
polls before a Quebec provin- 
cial election, due by year-end. 

The Parti Qifebecds, which 
has promised immediately to 
launch a loosening of Quebec’s 


ties with Ottawa if it wins the 
election, is weD ahead of the 
ruling Liberals in the polls. 

The PQ’s federal counter- 
part, the Bloc QuSbecois, has 
lost no opportunity to press 
the separatist cause outside 
Quebec. The BQ forms the offi- 
cial opposition in the House of 
Commons in Ottawa. 

Mr Chr&tiHi accused tbs sep- 
aratists this week of hurting 
the economy by sowing doubts 
in financial markets about 
Canada’s political stability. 
The prime minister said he 
was confident that Quebec peo- 
ple would vote to stay in Can- 
ada if a referendum were held. 


The PQ plans to call one 
within a year if It wins the 

forthcoming el<»<*Hnn. 

Concem has grown in the 
federalist camp, however, that 
the risks of separation are not 
being driven home forcefully 
enough to Quebec voters. 

Mr Peter White, a business 
partner of publisher Mr Conrad 

Rlnrir arul head Of the fin nuefl 

for Canadian Unity, warned in 
a newspaper commentary this 
week that nationalist parties 
“have already made tremen- 
dous strides in inde- 

pendence seem natural. Inevi- 
table and practically a fait 
accompli.” 


Venezuelan currency value down sharply 


By Joseph Mm In Caracas 

The value of the Venezuelan currency, 
the bolivar, foil sharply after the intro- 
duction of a new procedure for sales of 
foreign exchange by the central bank. 
The new system nanowed the gap that 
had developed between the official 
value of the currency and that on the 
jwihHai market. 

Many bankets and economists said 
they , believed the central bank had 
taken a step in the right direction by 
abandoning the system of rationing 
sales of dollars to banks and exchange 
houses. It could help to stabilise Vene- 
zuela’s jittery foreign exchange market 

A growing gap bad emerged this 


month between the official rate set by 
the previous auction system and the 
rate on the parallel market 

.The central hanlr ahanrirmeH the lim- 
ited auction system on Monday and 
dealers started operating a “Dutch auc- 
tion” system, under which the central 
hank foreign errhange to h flnirc 
and exchange fringe s offering tfre high, 
est bids of the day. The new procedure 
sets no limits cm resale mar gins apd is 
more responsive to market demands. 

Yesterday, the central hank sold dol- 
lars to the banking system at rates 
ranging from 169 to 182, for an average 
of 17251 per dollar. 

On Tuesday, Venezuelan commercial 
banks sold US dollars to corporate ch- 


eats and the public at rates varying 
from 165 to 185 bolivars to the dollar, 
af ter purchasing dollars from the cen- 
tral bank at a maximum rate of 165 to 
the dollar. 

The average price at 29 commercial 
banks for buying dollars cm Tuesday 
was 175J&1, a 21 per cent devaluation 
In comparison to the previous day’s offi- 
cial dollar price, but a 4.4 per cent 
devaluation against Monday’s price an 
the parallel marke t. 

In all of 1998. the bolivar lost 25 per 
cent of its value against the dollar. 

The central bank did not release any 
figures on the amounts of dollars sold 
on Tuesday, but these were clearly 
higher than under the previous system, 


which probably averaged about 53540m 
per day, bankers estimated. 

Mr Edgar Romero Nava, president of 
Fedecftmaras, Venezuela's largest com- 
mercial and industrial association, 
praised the central bank's new proce- 
dure as “more transparent" than Its 
predecessor, but warned tint it will not 
work in isolation. 

He said the government of President 
Rafael Caldera should also i mp l eme nt 
“macroeconomic stabilisation mea- 
sures" such as a sound fiscal policy, 
privatisation of state-owned co mp an tos 
and a reform in the present system of 
employee severance benefits, as well as 
improving purchasing power for the 
public. 


Ill trade, you should meet 
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with a familiar one. 


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8 


NEWS: WORLD TRADE 


FINANCIAL TIMES THURSDAY MAY 26 19W 


Deutsche Telekom 
loses cartel case 



Feta- Sutherland (right), head of Gaft, speaking to businessmen in Kuala Lumpur yesterday rdm 

Gatt chief answers critics 


Boeing looks 
east in project 
for smaller jet 


By Andrew Adonis in London 
and Judy Dempsey In Berlin 

Deutsche Telekom, the 
state-owned German telecom* 
muni cations operator, has been 
seriously hindering competi- 
tion in Germany's liberahsmg 
telecoms market through sub- 
stantial cross subsidies from 
its monopoly businesses. 

A six-month investigation by 
the Federal Cartel Administra- 
tion in Berlin concluded that 
since 1989 Deutsche Telekom 
has channeled subs idies total- 
ling DML9bn <£760m) into its 
data networks division. 

The decision has Car-reach- 
ing implications for Deutsche 
Telekom as it faces privatisa- 
tion amid growing interna- 
tional competition. Deutsche 
Telekom still has SO per cent of 
Germany's data networks mar- 
ket; in the other liberalised 
telecoms sectors of satellite 
and mobile communications 
rival operators have taken 
nearly half of the German 
market 

Data networks were liberal- 
ised in Germany in 1989, in 
accordance with European 
Union rules on telecoms liber- 
alisation. But competitors have 
Jong complained that Deutsche 
Telekom was keeping them out 


of the DM800m-a-year market 
by sub s i d i si ng data networks 
from its monopoly voice and 
leased lines bumnesses. 

The Federal Cartel Adminis- 
tration has broadly upheld the 
complaints. “We proved how 
Deutsche Telekom had been 
hindering competition through 
providing hidden subsidies,” 
the Cartel Office said yester- 
day. Its report Is with the Min- 
istry of Economy and the Min- 
istry of Posts and 

Tplp ornnimmir-aHnnc 

An association of rival tele- 
coms operators, which took the 
case to the cartel authority, 
includes British Telecommuni- 
cations, AT&T of the US, and 
Unisource, a joint venture 
between the Swiss. Swedish 
and Dutch state telecoms 
companies. 

“This is a landmark case in 
German telecommunications 
and business,” said Mr Gerd 
Eickers, president of the asso- 
ciation, saying it would send a 
“strong signal and incentive to 
all aspirants in the liberalised 
European telecommunications 
market". 

Deutsche Telekom said it 
had yet to see the report, but 
claimed to be “confident” that 
significant changes to its 
accounting system made over 


the past two years, and othss 
in train, would meet the 
complaints. 

The Economics Ministry said 
the finding s would not delay 
the privatisation of Deutsche 
Telekom. The governing Chris- 
tian Democratic coalition has 
secured backing for the partial 
privatisation of the telecoms 
and postal services, although a 
flotation is unlikely before 
1996. 

However, the cartel report 
calls into question the capacity 
of Deutsche Telekom to meet 
early competition. Under exist- 
ing EU rules its monopoly on 
basic voice traffic is protected 
until 1998. The cross-subsidy 
report also has r amifi cations 
for the Eculbn (£770m) joint 
venture between Deutsche 
Telekom and France Telecom, 
the French state operator, 
formed last December to pro- 
vide data and other advanced 
services to multinationals. 

The companies argued that 
the exposure of the data sector 
to competition justified their 
move to integrate their inter- 
national data services. They 
are anxious to extend the alli- 
ance, but EU competition 
authorities may resist any fur- 
ther integration until competi- 
tion is will established. 


Mr Peter Sutherland, the 
director general of flat*, has 
said that the idea that the 
recently concluded Gatt agree- 
ment would erode national sov- 
ereignty was “absolute non- 
sense" and that such 
sentiments must not be 
allowed to undermine the 
accord, writes Kieran Cooke in 
Kuala Lumpur. 

Some members of the US 


Congress have said that a new 
Wor ld Trade Organisation 
(WTO), to be set up next year, 
will he like an “economic 
United Nations” in winch the 
US could be outvoted by 
smaller countries. 

Mr Sutherland, in Kuala 
Lumpur to attend a meeting of 
business leaders from around 
the Pacific, said it would be an 
act of the greatest folly if the 


recently concluded agreement 
was to be questioned in this 
way. “By any stretch of the 
imagination, sovereignty is not 
at issue. The WTO will not be 
an instrument of world govern- 
ment It will in no way inhibit 
sovereignty." 

Mr Sutherland said there 
was an urgent need for coun- 
tries including the US to ratify 
the Gatt agreement. 


By Paid Betts, 

Aerospace Correspondent 

Boeing, the world's largest 
commercial aircraft manufac- 
turer, is stepping up efforts to 
enter for the first time the mar- 
ket for smaller 70-100 seat jets. 

The US group, which has tra- 
ditionally dominated the Large 
airliner market, is working 
with the Japanese and Chinese 
aircraft industries to study the 
development of a new commer- 
cial jetliner smaller than its 
current Boeing 737 family of 
100-170 seat narrow-body 
aircraft. 

Boeing yesterday said it had 
appointed Mr Richard James, 
its former vice-president of 
marketing for commercial air- 
craft programmes, to a new 
position of vice-president to 
study the development of a 
new small aircraft. 

“His assignment win be to 
explore the market feasibility 
and structure of a new small 
aircraft programme," said Mr 
Ron Woodward, president of 
Boeing's commercial aircraft 
operations. Boeing said repre- 
sentatives from Japan Aircraft 


Industry and the China 
National Aero-Technology 
Import and Export Corporation 
had begun work with Boeing 
in Seattle to wnrmhw the mar- 
ket requirement and potential 
configuration for a new com- 
mercial Jet aircraft sUghtly 
gmaHor thin the 787. 

The move Is expected to 
intensify further competition 
in the small Jet airitaer market 
which is scrambling to restruc- 
ture Itself in thefneof large- 
scale over-capacity In. that sec- 
tor. It would pitch the world’s 
leading aircraft manufacturer 
against companies- such as 
FOkfcer, British Aerospace and 

Ranh In that iffiarfrf* . 

Boeing sees strong demand 
for smaller jet airliners emerg- 
ing during the next 20 years In 
the Asia-Pacific region. 

The small aircraft project will 
extend Boeing's dose linfe* 
with both the Japanese and 
Chinese aircraft industries, 
Japanese companies already 
participate on an Boeing air- 
liner programmes, including 
the latest 777 wide-body air- 
craft, while China produces 
parts for the 737 and the 757. 



MADRID 


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NEWS IN BRIEF 


TCI-Sumitomo in 
Japanese ventures 

TCL the US cable TV operator, and Sumitomo, the Japanese 
trading house, have agreed to set up two new Joint venture* in 
Japan to operate cable TV companies and supply programme 
software, writes Mlchlyo Nakamoto in Tokyo. 

The two companies will set up a cable TV operator to oversee 
the operations of Sumitomo's portfolio of cable TV companies in 
Japan as well as any others the company might acquire in the 
future. Sumitomo has an equity stake in 26 cable TV companies 
with a total of 132,000 household subscribers. 

The other joint venture company wffl provide programmes to 
cable TV companies, take charge of tin TV shopping business 
which Sumitomo and TCI are considering, and set up new TV 

ffhamwk 

The capital of the two new companies will total $500m 
(£333-3m), with Sumitomo investing dm bulk of funds and TCI 
investing op to the maximum allowed to a foreign company 
under Japanese law. Recent deregulation moves by Japan's Min- 
istry of Posts and Telecommunications increased the permissible 
foreign equity level to one third. TGI intends eventually to raise 
its stake to 40 per cent, Japanese regulations permitting. 

Nokia first for debut in Japan 

Nokia, the Finnish telecommunications group, yesterday became 
the first European manufacturer to start selling cellular phones 
in Japan, write Michiyo Nakamoto in Tokyo and Christopher 
Brown-Humes in Stockholm. 

It marks the entry of Europe’s largest mobile phone manufac- 
turer into the win-id’s second-largest mobile phone market It 
follows last month’s deregulation when it became possible to sell 
mobile phones in Japan for the first time. Previously it was only 
possible to lease them. 

Hie Finnish group has delivery agreements with two operators 
in Tokyo and Kyoto, with a third accord, in the Nagoya region, 
due to come into force in July. Last year Nolda and Mitsui, the 
Japanese trading house, established a joint venture to import 
Nokia's phones. Last week it signed up Casio, the maker of 
watches and calculators, to supply its easterner support services. 

Nokia expects mobile phone shies in Japan to reach between 
L3m and L4m tins year, including 300,000 digital phone sales, ft 
aims to capture around 25 per cent of the digital market. 

Nokia share issue, Section II 

US cinema offensive in China 

American-style multi-screen cinemas, complete with popcorn, 
candy and arcade games, wifi be appearing soon in Chinese 
cities under a joint venture between two US companies and . 
Chinese investors, Reuter reports from Los Angeles. 

The joint venture win Invest about XI 00m (£6€m) to build ‘ 
multiplex cinemas and entertainment centres throughout China, 
according to Mr Paul Broadhead, president of Paul Broadheed 
Interest USA, a co-founder of Cinemark, the fourth-largest US i 
chain of cinemas, and Four Points Entertainment, a tdevMosT 
production company. The Intention is to have 150 to 200 sc r ee n s 
over the next five years, said Mr Shnkri Gfaalay ini, chairman, of 
Four Points. ■> 

The venture first plans to renovate an printing dnema amL 
entertainment complex, Asia Film Town, In Changzhou, ant , 
industrial city of 3L5m people. Asia Kim Town, a three^year-old ' 
complex, has eight screens, with restaurants and shops' bufitj 
around a sw imming 1 pool. 

Unctad’s exporter database 

The United Nations Conference on Trade and Devetopmeni has 
launched an electronic pocket-book fin* exporters on CO-Som, 
enabling users to will up comprehensive infor mation on tn * 
flows, tariffs and trade rules for more than 5,000 produc ts in i 
world’s main markets, writes Frances Williams in Geneva. - v V. 

The CD-Rom version of Unctad’s Trade Analysis and Infottofr 
tion System (Trains) unites six separate databases and indtffos 
information on 50 markets accounting for more .titan 35 per emit 
of world imports. The Trains CD-Rom “has everything an 
exporter or negotiator needs to know about the market access 
conditions for a product,* according to Unct&d. GD-Roms 
up to 650 megabytes of information, equivalent to 450 gnnqd 
computer diskettes, and the faffing cost of CD-Rom drives ft»9W 
less than $400) has made the technology widely abRadRfo&i 
Unctad developed Trains initially for use by developing country 
governments. It covers tariff and non-tariff trade measures* 
including details of preferential schemes, detailed impart data, 
names and addresses of importers for selected product categories 
and markets, and other general trade rinrmn«ifa tjpn . ' 

• Further information from UndadlDMSlTRAINS, Patois ties 
Nations, CH-13U Geneva 10, fax 41 23 907 OOSL 

Cuba sets $lbn tourism target 

The Cuban government has set new targets which indicate: 
expectations of a significant expansion in tourism over the next 
two years, writes Canute James in Kingston . 

It is expecting gross income from the sector to reacir^dOOm 
(£600) this year and Slim nest year, Mr Osmaay CSeafnegw, ti* 
tourism minister, told a recent conference on Cuban tourism. 
Gross income from the sector last year was $72Qm, at which- 
about one third represented net earnings. The government fe 
nopmg the volume of visitors will reach lm by 1996. donMiiast 
year’s volume, the minister said. The island's stock of hotel 
rooms is being increased to meet fib* growth In vtsitor arrivab, 
with foreign investors involved in the construction and rehab®- 
tattoo of 7,000 rooms. The expansion in capacity should lift the 
number of rooms to 50,000 by the year 2000, he said. 












FINANCIAL TIMES THURSDAY MAY ?6 1994 

NEWS: UK 


UK lags Germany on performance 


By Davfd Qoodnrt, 

Labour Editor 

British manufacturers 
continue to trail their German 
opposite numbers in the tntin- 
m? of technicians and the use 
of postgraduate engineers and 
scientists, according to an 

SB^lySlS Of rfwmifa) qpri tmgf- 

neering companies in the two 
countries by the National Insti- 
tute of Economic and Social 
Research. 


I njisu rvey. NIESR research- 
ers found a bigger skills and 
POtfo n n an c e gap in four pairs 
of engineering companies com- 
pared with three pairs of chem- 
ical companies. 

The British engineering 
plants had improved productiv- 
ity substantially over 15 years, 
but still trailed the German 
factories. They were also ‘'fol- 
lowers" in technical innova- 
tion. “British price competi- 
tiveness Still dfl penrfe heavily 


on favourable movements in 
exchange rates," says the 
report. 

By contrast, the analysis in 
chemicals pointed to a similar 
performance between the two 
countries. “Most British plants 
were at least equal to and 
sometimes ahead of their Ger- 
man counterparts in the use of 
new, sophisticated capital 
equipment 1 '. 

The German plants were 
well ahead on shopQoor qualifi- 


cations. In chemicals, 4 5 per 
cent of Germans had a craft 
apprenticeship compared, with 
23 per cent in Britten. In engi- 
neering the gap was wider, 57 
per cent to 20 par cent 
These differences woe even 
sharper at the intermediate- 
technician level with virtually 
all German supervisors trained 
to Meister level and only 5 per 
cent of British supervisors 
with any specific training for 
their role. 


The proportion of technical 
and hi gh er degree graduates 
Was similar m the chemical 

industry, but Ge rman p lants 
had more than double the Brit- 
ish level in engineering. Ger- 
many is taking more postgrad- 
uate students who are 
regarded by British employers 
as “overqualified” and lacking 
in commercial aptitude. 


UK com pe tit i v e ness. Page 10 
Editorial Comment, page 15 


Rates must rise 
to keep inflation 
below 4% target’ 


By GOllan Tett. 

Economies Staff 

Interest rates will have to be 
raised by a full percentage 
point within the coming 
months if inflation is to be 
kept below the government's 
target of 4 per cent, a leading 
economic research body 
warned yesterday. 

Though raising rates bright 
be politically unwelcome for 
the government, the new di- 
mate of openness w»wn« tha* 
the Bank of England increas- 
ingly has the upper hand in 
setting inflation pnhey, argues 
a report from the National 
Institute of Economic and 
Social Research. “The publica- 
tion of the minutes of meetings 
between the chancellor and the 
governor ... has left the gov- 
ernment with surprisxngy lit- 
tle room for manoeuvre,” the 
report says. 

“(The government! has 
allowed a situation to develop 
in which it is difficult for the 
bank's advice an interest rate 
moves to be rejected," the 
report says, pointing out that 
the bank feaflf is increasingly 
inclined to approve increases 
In interest rates. 

Factors that will persuade 
the bank to raise rates before 
the end of the year are the 
growth in earning s and money 
supply, the report suggests. 
Average earnings have gr ow n 
at a slower than expected rate, 
but are expected to grow by &5 
per ewit tbla year and 5 per 


cent next year. Meanwhile MO, 
which has been growing by 6 
per cent, is expected to con- 
tinue rising well above the gov- 
ernment's 4 per cart monitor- 
ing range. 

These factors have not trig- 
gered inflation yet, says the 
institute, which admits that its 
own inflation predictions - 
among the gloomiest in. the 
City - have become more opti- 
mistic since February. 

It says inflation will only rise 
a “little over the next year or 
two”, from its current underly- 
ing 23 per cent, if base rates 
are brought in line with the 
level of interest rates now 
expected in the markets. 

But with the markets now 
assuming that interest rates 
wifi rise to 6 per cent by the 
end of the year, and 7 per cent 
by 1996, this implies a signifi- 
cant rise from their current 
level of 535 per cent, it points 
out This rise will have to 

nrmr w ithin lft nuwflw 

These interest rate rises 
should not seriously affect 
recovery, the institute says. 

• The UK’s gross domestic 
product grow by 0.7 per cent In 
real terms In the first quarter 
of 1994, confirming earlier esti- 
mates, the Central Statistical 
Office reported yesterday. A 
CSO review of trade statistics, 
which reduced the volume 
(although not the value) of 
imports last year, has resulted 
in estimates of 1993’s GDP 
growth being revised upwards 
from L9 to 2 per cent. 



An anti-nuclear p ro te s t er is hauled aboard a naval dinghy beside HMS Victorious as it arrived on 
the Clyde in Scotland y est er d ay. The second of four Vanguard dan submarines to be built by 
Vickers, it can cany up to 16 Trident missiles. There wffl be a prog ra mm e of trials before it is 
formally accepted by the Royal Navy from its makers pimn^iwv 

BAe wins missile order 

British Aerospace Defence has 
won a new government order 
for its advanced short-range 
air-to-air nriarile worth £665m, 
writes Bernard Gray. 

The original £570m develop- 
ment and production order for 
the Asmara was planad with 
BAe two years ago and 
included a fixed-price option 
for a further batch of missiles 
which the ministry picked up. 

Asraam is the only replace- 


ment under development for 
the Aim-9 Sidewinder missile. 
BAe is In partnership with 
Hughes of the US to try to 
meet the Pentagon’s require- 
ment for a replacement 
The deal is not expected to 
affect the negotiations between 
ra« and Matra of France over 
the merger of their miasfle 
businesses. 

• The Ministry of Defence yes- 
terday placed an order worth 


more than £20m for submarine 
comman d systems - to be 
installed in Trident ballistic 
uriggnp submarines and retro- 
fitted to the Trafalgar and 
Swiftsure classes - with elec- 
tronics specialists BAe Serna of 
New Malden, Surrey. This fid- 
lows BAe Sana’s success last 
week in winning contracts far 
rt» surface ship control system 
for the new frigate for the Kor- 
ean navy worth £36m. 


Britain in brief 



New Labour 
leader sought 
by July 21 

Labour’s national executive 

co mm ittee threw foe party's 
leadership election wide open 
yesterday by inviting a 
challenge to Mrs Margaret 
Beckett, deputy leader. 

The surprise decision, taken 

at Mrs Beckett’s request, 
opens the way for her to join 
up to five other candidates 
fin the race to succeed Hr John 

Smith as leader. It also raises 
the prospect of a contest for 
both jobs between teams 
Knifing wmiMatwe fro m the 

party's “modeniising” and 
traditional wings. 

The new leadership team 
will be declared on July 21 

after a six-week campaign and 
a postal ballot involving up 
to 43m party members and 
trade nuten supporters. 

But the NEC will not accept 
lmmlmtiiwtimHl nflnrflm 

European election on June 
9, suggesting that Labour is 
in for at least a fortnight of 
backstage manoeuvring by 
potential candidates. 


Banks warned 
of risks 

The Bank of England has 
warned merchant banks of the 
growing risks of being sued 
or suffering damage to their 
reputation as a result of 
advising companies on mergers 

arid nfqnigit l niw and 

restructurings. 

The bank disclosed its 
supervisors had discussed risks 
With mgcchant hanky after 
cases such as Samuel Montagu 
being ordered to pay £TT2m 
to the creditors of the 

willapfw l fmarw-fol group 

British & Commonwealth 
Holding s 

It disclosed file actum in its 
199334 Banking Act report, 
which said banks’ 

role in takeovers, new issues 
and corporate restructurings 
“makes them especially 
vulnerable to litigation and 
loss of reputation”. 


US man holds 
Sinn Fein talks 

A senior frisb-American 
businessman is holding 
informal talks with Sinn Min, 
the political wing of the 1BA, 

in an effort to bring aboat 
peace in Northern Ireland. 

Mr WtQtem. Ftyn, president 
of Mutual America, one of the 
biggest US insurance 
companies, has renewed 
contact with Sun F&n while 
on a visit this week to Dublin 

and Belfast Mr Flyn is part 
of a delegation of 
Irtste American businessmen 
Hinnwliy tnw eWnt wi Wh 

rides of foe Irish border with 
officials and local enterprises. 
He is understood to have used 
the visit to tzy to persuade 
SfonFftn of the growing 
support within the 
Irish-American community 
for the UK-Zrish peace 
initiative. 


Consumer debt 
arrears fall 

Consumer debt arrears are 
felling, according to a survey 
published by Infoiltrik. the 
credit information group. 

The s ur vey found 7 j 6 per 

ront rfi inafaiTmwnt credit 

accounts in arrears in the first 
quarter of 1994, oompared with 
10.1 per cent in the first 
quarto- or 1993. The proportion 
of accounts significantly in 
arrears - three months or over 
- fell from 4 pear cent to 3.6 
per cent over the same period. 


Few checks on 
benefits claims 

The Benefits Agency pays 
social security benefits worth 
more than £800m a year to 
people living abroad without 
regularly checking that they 
are still aUve, the National 
Audit Office says. 

According to the public 
expenditure watchdog; a spot 
check last year into the 
eligibility of 7,700 pensioners 
and widows led to the 
suspension of payments to a 
fifth of those contacted. The 
agency pays benefits and 
pensions to 6MMM0 people 
overseas, almost half in 
Autralio, Canada and the HS. 

Most other countries 
regularly check the eligibility 

rtf pJutniMifi nhr nild fwl 

out “life certificates” 


requiring them to attest to 
the feet they are stiH dive. 


Nuclear 

cost-cutting 

British Nuclear Fuels plans 
to cut a third of its workforce 
at its SeUafleld reprocessing 
plant in Gumbria over the next 
five years. The company said 
it had to cut costs by 20 per 
cent or £10Qm a year for the 
next five years to remain 
c om peti ti ve. 


Fall in fraud 
convictions 

The conviction rate of the 
Serious Fraud Office fell to 
59 per cent in the year to April 
from 71 per cent tn 1992-93. 
After another co ntro versial 

year in which the office was 
criticised for its handling of 
the prosecutions of Mr Asll 
Nadir, former Polly Peck 
chairman, and disgraced 

financier Mr Roger Levitt, the 

office said it should be judged 
on its overall performance. 

During the year 23 trials 

were completed involving 54 
defendants and in 20 of them 
one or more of the principal 
defendants had been 
convicted. Of the 32 convicted, 
12 pleaded guilty and 25 
received custodial sentences. 


Tourism move 

The Confederation of British 
Industry employers’ 
organisation has admitted that 
it Hag paid inroflMani 
attention to the industry in 
the pest and Is setting up a 
Tourism Action Group to raise 
tiie industry’s profile. 

The GBI said tourism 
employment grow by 81 per 
cent between 1983 and last 

year, well above the rate for 
the economy as a whole. 
Tourism was one of the 
country's leading industries, 
with annual revenues of 
£293bn, accounting for SB per 
cent of gross domestic product, 
and earning £10bn in foreign 
exchange a year. It employed 
more than L4m people - 6 per 

r<f TUT Mnplftymmt 

The industry worldwide was 
exported to double in size by 
2005, but although the UK was 
the world’s sixthrUggest 
earner of tourist receipts, its 
US dollar market shar e had 
fallen from 63 per cent in 1980 
to 43 per cent today. 



■. .. 

■. • • «. 
.t: IT 


. r X. 

V '<£■> . < 

. [ .. IS 

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10 


FINANCIAL TIMES THURSDAY MAY 2t> l*»4 


NEWS: UK 


‘UK needs culture of improvement’ 


S cattered through the 163 
Pages of the govern- 
ment's competitiveness 
white paper is a frank assess- 
®ent of ttie OK economy's rela- 
tive standing. 

The authors say; “The white 
Paper sets out the govern- 
ment's view of the UK's com- 
petitive position. It provides, in 
a timespan outside the normal 
cut and thrust of party politics, 
an assessment of the UK’s rela- 
tive strengths qn d weaknesses 
- those factors which funda- 
mentally determine a nation's 
international standing." 

Therein lies its originality. 
As the paper itself acknowl- 
edges, most of the policy dis- 
cussion describes initiatives 
which the government has 
already announced. But gov- 
ernments, especially those 
which have been in power for 
15 years, are not in the habit of 
subjecting themselves to a crit- 
ical audit 

The paper also stresses that 
the white paper will be 
updated and that the ministe- 
rial group on competitiveness, 
which has helped to draw it 
up, will remain in existence. 

“At the head of this 
approach is a recognition that 
the UK needs a culture of con- 
tinuing improvement Competi- 
tiveness is dynamic. We cannot 
ever afford to stand still," the 
paper says. 

The authors have had to 
negotiate a fine line between 
being honest about the UK's 
problems while remaining posi- 
tive about how they have been 
tackled over the past 15 years. 
Similarly, they have attempted 
to justify limited intervention 
by the government without 
undermining the government's 
belief in free markets. 

The economic landscape, 
says the white paper, is chang- 
ing before our eyes. The econo- 
mies of the countries in the 
Organisation for Economic 
Co-operation and Development 
now produce only around half 
of world output as the non- 
OECD countries, such as the 
Asian "tigers", catch up. 
“Hong Kong and Singapore 
now have average incomes 
which match those of the UK." 

International trade lias been 
one of the main forces behind 
growth since the second world 
war. Trade barriers are con- 
tinuing to fall. These changes 
will increase living standards 
throughout the world but also 
increase ^competition. “The 


The government’s long-awaited policy document 
on boosting competitiveness promises to raise 
education and training standards and provide a 
better climate for business. David Goodhart reports 


rapid spread of capitalism, the 
opening of closed economies 
and the removal of rigid 
systems of central planning 
could bring a low-cost labour 
force of 1.2bn people on to 
world markets as producers as 
well as consumers.” 

Advances in technology and 
communications, and rapid 
changes in demographic struc- 
ture, will also shape economic 
growth in the coming decades. 

Amid these changes, what 
does ft mean for a nation to be 
competitive? The paper quotes 
approvingly the OECD defini- 
tion; “. . . the degree to which 
a nation can, under free and 
fair market conditions, pro- 
duce goods and services which 
meet the test of international 
markets, while sim ultaneousl y 

maintaining and l yypanriing fha 

real incomes of its people over 
the long term”. 

The analysis then traces the 
weaknesses in UK performance 
back to the end of the 19th 
century. After 1945 Britain's 
standard of living rose faster 
than ever before “but other 
countries did still better”. 

The 1980s saw a marked 
improvement. “Manufacturing 
productivity grew faster than 
the US, Fiance and Germany. 
Our share of the volume of 
world trade stabilised after 


decades of decline. Our overall 
growth rate was similar to 
France, Germany and Italy. 
The climate of industrial rela- 
tions was transform- 
ed... There was also a dra- 
matic rise in the number of 
small firms. At the end of 1991 
there were 900,000.” 

But there are no grounds for 
complacency. "The improve- 
ments of the 1980s mean that 
we are now back in touch with 
the leaders, but there remains 
a lot of ground to make 
up . . . Although we have 
many world beating compa- 
nies, average productivity lev- 
els in manufacturing have not 
yet risen to those of our major 
competitors . . . And our over- 
all share of world trade in ser- 
vices has continued to fall.” 
GDP per head placed the UK in 
16th position in 1993 among 
OECD countries, up from 18th 
position in 1991. 

Is manufacturing special? 
The paper says that all sectors 
of the economy are important 
but continues; “A competitive 
manufacturing sector is essen- 
tial for our long-term prosperi- 
ty .. . Manufacturing is a 
major employer and a l per 
cent change in exports of man- 
ufactures would be balanced 
by a 3 per cent change in the 
exports of services.” 


What is tbe government's 
role? “Business - not govern- 
ments - create wealth . . . 
Tbe government's role is to 
create the conditions in which 
firms throughout the economy 
can improve competitiveness 
by providing the stable macro- 
economic environment which 
enables bus iness to plan ahead 
with confidence, HMinng mar- 
kets work more efficiently and 
broadening the influence of 
market disciplines on resource 
allocation, pursuing tax poli- 
cies which encourage enter- 
prise and do not hinder eco- 
nomic efficiency. and 
improving value for money in 
those services which are best 
provided by the public sector.” 

T hat is not alL A inter- 
ventionist passage talks 
about regulating to 
reduce uncertainty and adds: 
“Where markets do not work 
well in delivering the goods 
and services that people want, 
the government has a positive 
and proactive role to play. It 
has a central role in areas criti- 
cal to the process of wealth 
creation." 

The paper goes on to justify 
government intervention in 
education, funding research 
and development, the supply of 
capital to small companies. 


removing barriers to employ- 
ment and encouraging employ- 
ers to train their workforces. 

The section on education and 
training and the section on 
management contain the white 
paper's sharpest criticism of 
past UK performance. “We 
have to develop the self-confi- 
dence and seif esteem which 
make good citizens and good 
workers. 

"We have to demand respect 
and rewards for vocational 
education and training as well 
as academic study. Above all, 
we have to give all our people 
- not just some of them - 
every opportunity to give of 
their best . . . For too long the 
UK's levels of participation and 
achievement have dragged us 
down the international educa- 
tion and training league.” 

Employment, by contrast, is 
forgely a success story accord- 
ing to the white paper. Indus- 
trial relations has dramatically 
unproved and tbe labour mar- 
ket is more flexible. There are 
worries that unemployment 
remains “uncomfortably high” 
and that earnings grew faster 
than justified by improved per- 
formance in the 1980s. 

But the paper says the posi- 
tion is improving on both 
fronts and adds that low non- 
wage labour costs remain an 
important competitive advan- 
tage. 

On management and innova- 
tion the paper says that, by 
any standards, the manage- 
ment of some UK companies 
equals or exceeds that of its 
international competitors. “But 


UK !§» Germany I France I Italy H 

Real GDP growth 
Average annual percentage growth 
12 


Thase parted* are uad by ihe OECD 
to compare oompMa economic cycles 



Source: OECD 


□japan 

Share of world service receipts 
(%> 

20 



Source: IMF 


Business Investment as a proportion 
of business value added 
Average over period {%} 

25 


20 - 



196048 1968-73 1974-78 1980-90 

Source: OECO 


COMPETITIVENESS CHECKLIST 


EDUCATION AND TRAINING 

■ £300m-worth of new measures to strengthen 
vocational training and education 

■ A new general diploma at 16 and 

new vocational options will be developed 

■ ElOOm for better careers guidance and 
work experience 

■ Cl 00m for new accelerated apprenticeships 
for people aged 18 to 19 

■ £60m to train up to 24,000 workers 
in small companies 

■ Consultation on credits for 

1 6-to- 1 9-year-olds to purchase their own 
education 

BUSINESS LINKS 

■ Business links scheme to be extended 
to provide back-up in the area of export, 
innovation, technology and design 

■ Export consultants and innovation and 
technology counsellors to be placed in 
70 business link centres 

INNOVATION 

■ Innovation credits for small companies 
to encourage use of outside experts 

■ New Initiatives to strengthen links between 
universities and business 

■ Six sectoral groups will be set up to work 
with the City to improve the flow of finance 
for innovation 


LATE PAYMENT 

■ Government departments to foBow the 
CBl employer organisation's Mb payment 
code 

■ Annual reports to include companies' 
payment record 

■ Review to strengthen the informal 
smaB claims procedure 

BUSINESS FINANCE 

■ Business angels scheme to be boosted 

REGIONAL AID 

■ To allocate more of the regional aid budget 
via competitive tendering 

TRANSPORT 

■ Proposal to privatise the National Air Traffic 
Services 

■ A competition for privately financed trams 
for London Underground's Northern line 

DEREGULATION 

■ Acceptance of Health and Safety 
Commission's recommendations to remove 
40 per cent of regulations affecting 
business 

■ A consultation on si m pK fied arbitration 
law and on increasing size of companies 
qualifying for accounting efisetosura 
concessions 


overall national performance Is 
determined not by the stan- 
dard of the best but by the 
average. It is here that tbe UK 
lags behind the competition." 

On innovation, too, while 
some companies and sectors 
are world class, too many are 
not The need for improvement 
shows in a number of ways: 
“Total UK expenditure on 
research and development has 
declined relative to our main 
competitors . . . The UK has a 
declining share of US patents 
. . . Technical qualifications 
tend to be less common 
and less well rewarded 


than in other countries." 

On for business the 

paper says the UK financial 
system is among the most 
sophisticated in the world but 
adds “there have been expres- 
sions of concern over the sup- 
ply of finance to industry”. The 
tone here is neutral - the gov- 
ernment reporting complaints 
rather than endorsing them - 
and includes: inflexibility in 
dividend payments; excessive 
reliance on overdrafts; small 
businesses complaining that 
banks place too much empha- 
sis on security; and late pay- 
ment 


On tbe European dimension, 
tbe paper praises the European 
Union's single market Initia- 
tive but warns that the EU is 
becoming over* prescriptive in 
some areas. 

In conclusion the paper 
states: “This white paper is. in 
effect, a snapshot of the work 
in hand across government It 
shows a formidable agenda of 
action and initiatives. It 
reveals tbe comprehensive 
nature of the government’s 
work and how it can support 
wealth creation." 


Samuel Britten, Page 14 


VahM added par hour woricad 
Whole economy (UK^IOO) 


Contribution of financial aendoe a to UK balance 
of payments . . 


^1 Whole economy Manufacturing [ i 



Source: Van Ariv 


18TO Total mi mafptB Horn ftwncM MivtoM«£0.4hn 
Banks' 


Other 18% 


ka11%] 1 SectvHa* daring 

I Commodity fenders 25% 

1999 Total mt receipts from financial MPdcM«£A3bn 


Securities 


Insurance 10% 

Commodity tradora 



these charts do not inckideinvestmMt taodme 
Source: CSO 



This is the team: Industry, 
Power, Transportation. To 
be more precise, they're the 
three areas we operate in. 
Diverse, exacting, unique, 
yet , when united under a 
common strategic vision, 
their movements choreo- 
graphed and coordinated, 
they become together tke 
force which permits us to be 
amongst the leaders in Elec- 
F I N M E C 


OUR STRENGTH 
IS TEAMWORK, 

WITH INSPIRED SHOOTING. 




lIBIlflT PS VII TZIIIPIITITIOI 

A N I C A I R 


tromeehanics at the inter- 
national level, creating 

products and systems for the 
industrial growth of coun- 
tries around the world. The 
true players in this game of 

intelligence* preparation, 
and determination, are , of 
course, our people . If you 
decide to join up with us, 
here’s hoping that this sea- 
son, the best team wins. 
GROUP 


/. . v 



> VL... ' I*. .' ‘ : ^ <v. '4 



This Monday, and every Monday set yourself up for the week ahead with the 
Financial Times. 

Its agenda win not only alert you to the business opportunities and hlghRghts of the 
week, it will help you make the most of life outside work too, offering a comprehensive 
guide to everything from the Arts and fashion to health and travel, in an easy to use format 
So, if you want to rise above it all, get the FT this Monday. 

Financial Times. Europe’s Business Newspaper. 






* > ' A 


v v i 


FINANCIAL times THURSDAY MAY 26 1994 


MANAGEMENT: MARKETING AND ADVERTISING 


i«ct hope 


Alison Smith on why disclosure 
can be a virtue for insurers 

Facing up to 
life’s problems 


Y ou don't need an army to 
run our system. 

The slogan, featured in 
the latest poster advertising 
of its AS/400 c om p ut ers, belongs to 
International Business Machines. 
But as of nmrt month it could just 
as easily be applied to the running 
of the comp u ter giants own world- 
wide advertising. 

In a move which took the ad 
Industry by surprise on Tuesday, 
IBM announced that it would be 
sacking its 40-plus advertising agen- 
cies around the globe and giving aQ 
the work to a single agency, OgStvy 
and Mather. Estimates of IBM's 
annual advertising spending - 
unconfirmed by the company itself 
- range from $300m (£200m) to 
9500m. 

The rationalisation follows plans 
announced earlier tills month to 
shake up IBM’s 40,000-strong mar- 
keting and sales force. Lou Ger- 
staer. chief executive, intends to cut 
across the existing geographic 
organisation and form 14 teams, 
each covering a specific industry 
se gm ent. All the upheavals are part 
of the company’s desperate attempt 
to regain ground lost to rivals and 
restore profits, following three 
years of losses. 

Companies everywhere have been 
Cutting fhe nnwih flr of fhar suppli- 
ers - be they advertising agencies 
or providers of goods and other ser- 
vices - in recent years. What is 
remarkable in this case is the 
extreme to which IBM has guns in 
placing all its advertising with a 
single agency. Says Abby Kohn- 
stamm, IBM vice-president tor cor- 
porate marketing: “There is a trend 
amrrog many mwipnwtea we have 
looked at to have as few agencies as 
possible as their partners. But Pm. 
not sore any have taken it to the 
degree we have." 

According to Dominic Mills, edi- 
tor of the advertising trade journal 
Campaign, IBM's move is a “reaffir- 
mation of somethi ng M artin Sorrell 
[chief executive of WPP, OEM's par- 
ent company] has always preached, 
which is one-stop shopping — yon 
can get everything you want from 
rmfl agency network”. 

But while it is possible to point to 
Other nmyipanfog going in the mma 
direction as IBM - mtHr cites Ree- 
bok, the sports shoe manufacturer, 
for example - he also says there are 
companies taking the opposite path 
and decentralising: “Coke, tor exam- 
ple, traditionally only used 
McCann-Erickson, now it uses a 
number,” he says. 

Now that IBM has a single world- 
wide network at its disposal, it can 
be expected that global advertising 
for the IBM brand will emerge. 
Kbhnstamm says that the intention 
is for there to be an overall interna- 
tional campaign, modified as neces- 
sary for each country. Beneath that, 
there will be more localised adver- 


L ife insurance companies 
face a huge challenge next 
year when the UK’s new 
regulatory regime for the industry 
comes into effect. But awnHing 
to the organisers of a s eminar 
in London today* the mandatory 
disclosure of commissions and 
other policy details should be seen 
as a marketing opportunity, not 
a threat 

The Securities and Investments 
Board, the City’s chief regulator, 
has made compulsory from 
January l both the design and 
the use of a “key features” 
document giving details of costs, 
charges and the risks in tnWng 
out a policy. 

Companies’ responses to this 
new demand - how they redesign 
their products, tor exampl e to 
spread charges and commissions, 
an d ho w they incorporate the new 
document Into their agents' sales 
pitch - will be a sign of how 
flexible they really are. 

Many life companies have 
previously regarded new 
regulatory requi rements as part 
of their problem rather than part 
of any solution. So it Is per haps 
quixotic of marketing consultants 
Bamber Forsyth, which together 
with Courtyard City Services is 
staging the free lunchtime 
seminar, to seek to persuade them 
that they can use the chang a to 
improve their contact with 
customers. 

The presentation will include 
some marketing jargon. There 
will be talk, for example, of 
customers going on “information 
journeys": either a “horizontal” 
one - often the company’s vision 
of what happens, in which they 
see a range of branded leaflets 
- or a “vertical" one - in which 
information comes from more 
varied sources. 

There will also be same 
statements of the seemingly 
obvious, but on the whole the 
seminar should raise some valid 
issues at a time when much of 
the life industry would be unwise 
to reject any offers of help. 

Peter Kelly, a financial 
crmvm nmt-ati ftng twMaiWnn* 

taking part, says companies need 
to be positive and that the sales 
force should not see compliance - 


as just a mass of detailed 

requirements to he met “The life 
insurance industry is nowhere 
near as good at communication, 
especially internally, as it thinks 

It is.” he says. 

Compliance can be presented 
to the customer as a sign of a 
powerful and cheut-friendly 
organisation. 

Anne McGrossan of Bamber 
Forsyth argues that one of the 
effects of disclosure wffl he that 
products will become less easy 
to differentiate: companies 
therefore take the opportunity 
to develop more strongly their 
corporate values in 
communicating cli en t. 

“It’s a question of bow good 
customers feel about the company 
as well as the product.” 

The need to develop corporate 
branding applies not just before 
the sale but also afterwards. Keith 
Bamber cites a company whose 
after-sale material was so 
forbidding that sending out the 
annual statement acted as a 
trigger for policies to be cashed 
in. He argues that branding 
should be more powerfully 
reflected in the papers soot to 
an investor after buying a 
product 

“Retention of customers has 
to be paramount.” he says. 
Companies will need new sales 
strategies to address this, 
including greater integration of 
the promotion and administrative 
functions. The clear language 
of the compulsory SIB document 
will put the onus on companies 
to spell out equally dearly the 
benefits of taVmg out a policy. 

“The company has to do 
something just as strong, simple 
and understandable about what 
it Is offering; and tire kind of 
company It is,” says Kelly. 

While the overall message is 
that the new regime can work 
positively for life companies, other 
c omdusta ns arv< Twnr<> chilling : 
Bamber Forsyth says there is high 
cost to getting It wrong and warns 
that “disclosure can dnrninata 
even if you bury it". 

*The seminar takes place at the 
Institute of Directors, PaU Mall, 
London from 12.30pm 



Yabba 

dabba 

deals 


T he formidable marketing 
machine behind The 
FUntstones, which premi- 
eres in the US tomorrow, is get- 
ting into gear. Sven if yon never 
see the film - which opens later 
this summer in Europe and Asia 
- it will be hard to escape the 
promotional blitz. 

Amblin Entertainment, Steven 
Spielberg’s production company, 
estimates that more than SI 00m 
(£67m) win be lavished on mar- 
keting, more than twice what 
was spent on Jurassic Park. The 
FUntstones film is based on the 
1960s cartoon series of life In 
prehistoric Bedrock. The series 
holds cachet with US babytoran- 
ers, and viewers in countries 
such as Britain, Mexico and 
Japan, where re-runs have been 
playing for years. 

The toy maker Mattel has 
signed a deal with Amblin for a 
new line of FUntstones dolls, 

I Including the Talking Fred. 
Actor John Goodman, who plays 
Fred hi the movie, has been tak- 
ing the doll with Mm on televi- 
sion appearances. 

FUntstones songs have already 
become hits. The rock group the 
B-52s, which appears in the film 
as the BC-52S, has two new sin- 
gles out: its version of the | 
FUntstones theme song and 
“Bedrock Twitch". 

McDonald’s has traded in its 
golden arches in the film for 
dinosaur tusks, and has been re- 
christened Rocdonald's. In 
exchange for the cameo, the 
food chain has launched what it 
calls its biggest promotion. 
McDonald’s will be selling 
FUntstones mugs and t-shirts in 
38 countries. 

Left-over products from the 
cartoon era will receive a free 
ride from the promotion. Turner 
Entertainment, which owns the 
animated series, Is receiving 
heavy play on television. 

The ultimate success of the 
FUntstones products depends on 
bow much enthusiasm the film 
generates at the box-office. In a 
few months, executives involved 
in the promotion may either be 
crying in their dinosaur milk or 
yabbadattba-dolng ail the way 
to tile h ank. 

Victoria Griffith 


TrtvOT KmphriM 

. . but you do Deed a general. IBM's advert i s i ng strategy wH focus on a global campaign, modified for Individual countries 

Forty into one 
does go 

Diane Summers looks at why IBM is putting all of its 
advertising eggs into Ogilvy and Mather's basket 


tiring for specific products. 

There are dangers inherent in 
this global approach, as Maurice 
Saatchi, chairman of Saatchi & 
Saatchi. pointed out in a speech in 
London recently. “How do yon com- 
municate to lots of different people 
in all these different countries 
across the world without being so 
bland and Jelly-like that you have 
nothing real to say?” he asked. 

Charlotte Beers, O&M chief exec- 
utive, acknowledges that global 
ftanrpaig rm are “the most challeng- 
ing of all tasks because you must 
reach for a common denominator 
and yet never violate significant 
cultural differences”. But she never- 
theless believes that it can be done, 
pointing to her agency's work for 
Unilever on its Ponds skin care 
range. “The idea was developed in 
Parte, refined in London and has 
now been taken to 43 countries with 
major market share success. The 
same thing has been done with the 
Ford Mbndeo," she says. 

Maurice Saatchi also paints to the 
organisational challenge for an 
agency at running offices all over 
the world. Networks “mean coordi- 
nation, which often means commit- 
tees - not the best environment for 


inspired creativity", he said. The 
organisational challenge, both for 
O&M and IBM. is not underesti- 
mated by either party. Shelly Laza- 
rus, head of OtHtlTs North American 
operation, says she is putting 
together a worldwide team to bear 
responsibility for the CBM brand. 
There will also be a regional O&M 
team in Paris relating to IBM’s head 
of communications in Europe, and 
similar teams for TjHti America 
and Asia Pacific - the latter will 
operate from Tokyo. These will be 
in addition to all of the national 
offices which both IBM and O&M 
already operate. 

O&M is ideally placed for the job, 
in Mills ' assessment “There's a cul- 
tural fit - both are powerful brands, 
with long traditions and big global 
operations.” 

Overall, he sees the move to a 
single agency as positive for IBM. 
“It has the reputation of being a 
really bad client, with the left hand 
never knowing what the right hand 
was doing - hence 40 agencies prod- 
ucing what were potentially very 
discordant messages about IBM,” he 


The financial rewards for the 
agency, and parent WPP, are as yet 


unclear. Nell Blackley, media ana- 
lyst with Goldman Sachs, says it 
will cost the company money in the 
first half of the year. “It’s pain and 
then, hopefully, pleasure down the 
road.” he says. There will also be 
some account losses within the 
agency - Microsoft and Compaq 
business, for example, will have to 
be jettisoned because of conflicts of 
interest And what has been O&M’s 
gain has been same loss to sister 
WFP agency J Walter Thompson, 
one of the 40 agencies to be crossed 
off IBM’s hsL 

But these minor points will not be 
uppermost in Sorrell’s mind. For 
him the IBM victory is particularly 
sweet. When WPP took over J Wal- 
ter Thompson in 1987, it also inher- 
ited a smaller subsidiary called 
Lord, Geller. Federico, nsnrfain. The 
agency was well-respected and held 
a number of prestigious accounts. 
Including IBM. After defections of a 
number of key personnel, fimnHaT 
claims by Sorrell and counter- 
claims by the defectors who framed 
a rival agency, a cou rt sett lement of 
$7m was accepted by WPP. The IBM 
account was lost to both agencies 
and Sorrell has had to wait until 
now to see it return to the fold. 


PEOPLE 

Knapton quits Lazards for L&G 




Peter Knapton, who had stayed 
a brief year as chief invest- 
ment officer of Lazard 
Brothers, has quit to become 
managing director of the secu- 
rities side of Legal & General 
David Rough, group director 
of investments, had previously 
been doing the job himself. 
However, he Is effectively num- 
ber two to chief executive 
David Prosser, according to 
Knapton, and the company 
reckoned it needed someone 
specifically to manage the 
group’s quoted investments 
and to chair the investment 
strategy committee. The heads 
of the property and venture 
capital divisions also report, 

Bodies politic 

■ Patrick Galvin, chairman 
and chief executive of 
Waterford Wedgwood, has been 
appointed to the court of 
directors of BANK OF 
IRELAND. 

■ Bill Latto, md of Balfour 
Beatty Building, has been 
elected chairman of the 
BUILDING EMPLOYERS 
CONFEDERATION National 
Contractors Group. 

■ John Pitts, a director of 
Taylor Woodrow Construction 
Southern, has been elected 
president of the London region 
of the BUILDING EMPLOYERS 
CONFEDERATION. 

■ Michael Cooling, corporate 
relations manager of Reuters 
Holdings, has been elected 
chairman of the INVES TOR 
RELATIONS SOCIETY. 

■ Tony Cash, md of 
Wetdmuller CKlippon 
Products), Noel Davies, chief 
executive of VSEL, Anthony 
Fuller, ffoairman of Fuller 
Smith & Turner, Roy Hitchens, 
chief executive of Staveley 


alongside Knapton, to Rough. 

Knapton says the head- 
hunters were “reasonably per- 
suasive” and claims he was 
enjoying himself at Lazards. 
“Jobs like this don’t come up 
very regularly, and when they 
do, the timing is never going to 
be ideal" says the father of 
seven daughters. 

However, the rest of the 
industry suspects that he had 
yet to fit into the cliquey 
senior management at Lazards 
- which has, moreover, strug- 
gled to become anything other 
than a niche player in the 
investment business: it has 
£5bn under management. 

Legal & General is one of the 


Industries. Paul Lester, chief 
executive of Graseby, Brute 

Thompson, chief executive of 

the Society of Motor 
Manufacturers and Traders, 
and Hugh Williams, chairman 
of Canford Audio, have been 
appointed members of the 
CBTs yratirronl council. 

■ Julian Mines, formerly a 
regional adviser for Business 
& Technology Education 


director of INDUSTRY IN 
EDUCATION. 

■ Liam Donaldson, formerly 
director of public health ol the 
Northern Regional Health 
Authority, has been appointed 
regional general manag er of' 
the m erged NORTHERN AND 
YORKSHIRE REGIONAL 
HEALTH AUTHORITY and 

also regional director of the 
Northern and Yorkshire office 
of the NHS Executive. 

■ Robert Barns, chairman 

cfRHB Holdings, has been 
elected chairman of the 
executive committee of the 

WORM) TRAVEL AND 
TOURISM COUNCIL. 


biggest passive fand managers 
in London - with group invest- 
ments under management of 
£30bn phis. Knapton rays his 
task is not to lead it, say, 
aggressively into active tech- 
niques. His preferred style is 
not to “come in and shake 
things up” but rather to “try to 
build a team of people who 
work well together. Legal & 
General has a perfectly reason- 
able track record and perfectly 
reasonable people." 

While his first job in the CSty 
was with National Provident, 
he had stayed away from 
insurance companies until 
now. He came to Idzards from 
hrvesoo. 


■ Robert Mapstone, currently 
head of equity de ri v ati ves at 
NatWest Markets, is to join 
Nomura International In 
London to lead its equity 
trading ami risk operations. 

He will be responsible for 
Nomura’s equity trading in 
Europe, iuctndiiig both 
derivative and cash products, 
and Nomura's international 
stock-fending activities. He 
win report to Basil Postan and 
ToshiWko Mrigniwg a , 
co-beads of Nomura’s 
European equity division. 

“Trading is critical to the 
future development and 
profitability of our equity 
business, "says Postan. 
Nomura is delighted, be said, 
to have attracted “someone 
of Mapstooe’s talent and 
experience to pull all these 


Non-executive 

directors 



Mapstone, 33, has worked 
in the equity de ri v ati ve 
markets since 1982. He was 
head of European equity 
der iv atives at SLG. Warburg 
before Joining NatWest 
Markets in 1988. 


Noble: realistic with the actuality 




.■:!V 

I" • 



Skye Bridge Ltd, developer of 
the highly unpopular toll- 
bridge which next year will 
aHminnh* the ferry trip across 

the Kyte (dLochalsh to Skye in 
Scotland, has persuaded Sir 
fate Noble, one of the project’s 
most authoritative critics, to 
become its chairman. 

Noble, who is an Edinburgh 
merchant banker (he co- 
founded Noble Grossart and 
djafas Noble & Co), owns an 
Skye and is a Gaelic 
swfta, stSl the bridge 


money -oh a non-essential proj- 


ect Although Skye Bridge, a 
consortium of [the construc- 
tion companies]. Miller Group 
and Dywidag [of Germany] and 
Ha nit of America, is financing 
the bridge and will recoup the 
£i7m construction cost from 
toils, the Scottish Office is 
spending £6m on the connect- 
ing roads- 

“The ferries are the most 
efficient and cheapest way of 
crossing to Skye," says Sir 
Iain. “The government will 
lose the profit which Caledo- 
nian Macbrayne makes .o n 
t from , and about 30 ferrymen 


will lose their jobs. With tolls 
on the bridge the highest in 
Europe (£5 tar a car), it’s not 
surprising it’s unpopular.” 

So why take on the job? 
“You can't spend your life 
ghrnlng (moaning) about 
what’s dime.” says Noble. “The 
bridge is now an actuality. 
What we must do Is make it an 
important Skye-based business. 
Yes, 1 can imagine all the 
brickbats that will be thrown' 
at m& But the tolls are set by 
parliament. People should 
work on their MPs to get them 
reduced or abolished,” 


Peter Davis, 51, chairman of 
Reed Elsevier, is to be 
appointed a non-executive 
director of Prudential Corpora- 
tion, the UK’s largest institu- 
tional investor. He fills one of 
the vacancies on the board left 
by tiie retirement of Sir Alex 
Jarratt, a former chairman of 
Reed International, Mary 
Baker, president of Women in 
Management and wife of Tory 
UP ifeniwrii Baker, im d Brian 
Medhurst, head of the Pruden- 
tial's international division. 

Davis (above), who j (fined 
Reed the year after Sir Alex 
retired as chahman, is the lat- 
est addition to a younger and 
smaller Prudential board 
which includes Andrew Teare, 
nbipf executive of En glish 
China Clays, and Nfcafl Fitzger- 
ald, a vice-chairman of Uni- 
lever. 

■ August van Oostveen, . 
former md of Robeco, at 
MARTIN CURRIE EUROPEAN 
INVESTMENT TRUST. 

■ Lawrence Urquh art ha s 
resigned from PREMIER 
CONSOLIDATED OILFIELDS, 
a David Hartley, who has a 
substantial ftharahrilfting , at 
TO YE AND COMPANY; Sir 
David Rowe-Ham has resigned. 

■ Robert Wilkinson, former 
director of surveillance at the 
T-rmAm Stn rir Tha-hang e, and 
Odo Haitink, former deputy 
chairman of the executive 
board of Nat tonaH fedaianden, 
at INVESCO EUROPE. 

■ Derek Bourdon is retiring 
from LON DON AND 
MANCHESTER GROUP. 

■ VMhnaUn fffbrn H baa 
resigned from OCEAN 
WILSONS HOLDINGS. 

■ Peter Pollock, former group 
chief executive of ML 
Holdings, at PLATTGNUM. 

■ Richard Good, retired 
director of Keyser UEman, at 
LONDON FINANCE & 
INVESTMENT. 

■ Antoine Lafont, a 
consultant with Lazard Freres, 
at The BROCKBANK GROUP. 



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12 


TECHNOLOGY 


FINANCIAL TIMES THURSDAY MAY 26 1994 



try to 


m My generation 
saw this coun- 
try grow from 
Sand dunes into 
a garden and 
then into an 
industrial state. 
As modem 
Zionists, we 
want our coun- 
in high-tedi and sci- 
toente nt.” 

- Dan Propper, president 
Israeli Manufacturers' 
Association. 


P ropper need not worry. 
Israel already appears 
to be one big science 
park and is learning 
fast how to exploit and corn* 
merdalise its scientific exper- 
tise. 

More than 60 per cent of 
Israeli university students 
graduate with degrees in sci- 
ence-based disciplines. Israel 
has the highest ratio of scien- 
tists and engineers to popula- 
tion in the world. Its expendi- 
ture on research and 
development, at about 3 per 
cent of gross domestic product, 
is proportionally higher than 
the US, Japan and the other 
Group of Seven leading indus- 
trialised countries. 

The country's Ministry of 
Trade and Industry has a bat- 
toy cf statistical superlatives 
at hand. Mo fewer than 135 sci- 
entists and engineers per 10.000 
inhabitants are engaged on 
a gainst 70 in the US, 65 in 
Japan, 43 m Germany and 28 in 
the UK. Israel's natural scien- 
tists en gi n e e r s produced 61 

papers of published research. 


Israel is learning fast how to exploit its technical skills, 
writes Peter Norman in a continuing series on research 

From sand dune 
to science park 


per 10.000 of the labour force in 
1987, about twice the rate of 
the US, Britain and Canada 
and more than four times that 
of Japan. 

This performance predated 
recent Immigration from the 
former Soviet Union which has 
increased Israel’s population 
by a tenth and further 
enhanced its scientific poten- 
tial. About 36 per cent of the 
550.000 mainly Russian immi- 
grants since 1389 have scien- 
tific occupations and 53 per 
cent have more than 13 years 
of schooling. 

But it is only since the mid- 
1960s that Israel has focused on 
turning its formidable R&D 
p otential to commercial ends. 
An increasingly open economy 
and the gradual lifting of the 
threat of war have encouraged 
researchers and companies to 
explore peaceful uses for many 
of the technologies developed 
when the nation’s existence 
was under threat This poten- 
tial has been boosted by 


improvements in the Israeli 
approach to marketing - a tra- 
ditional area of weakness - 
and the greater availability of 
start-up finance and venture 
capital after the "discovery” of 
Israel by foreign investors. 

The government has also 
increased its support for indus- 
trial R&D through the Office of 
the Chief Scientist, an agency 
of the trade ministry. This 
invested about S330m (£220m) 
in R&D last year and h a s spon- 
sored an innovative pro- 
gramme of Iw’hnnlngingl “incu- 
bat ore" attached to research 
institutes and established high- 
tech rampanfpg to create condi- 
tions in which recent immi- 
grants, in particular, can 
develop their ideas. 

Basic research is centred an 
seven universities, of which 
four, the Hebrew University in 
Jerusalem, the Weizmann 
Institute of Science in Rehovot 
near Tel Aviv, Technion - the 
Israel Institute of Technology 
in Haifa - and Tel Aviv Uni- 


versity. are of worldwide 
renown. AH have set up com- 
panies to commercialise their 
discoveries and develop tech- 
nological tra n sfer to Industry 
while protecting their patent 
rights. Some, such as Technion 
and the Weizmann Institute, 
have also created science 
parks. 

Technion. Israel's equivalent 
to the Massachusetts Institute 
of Technology, has the Tech- 
nion Research and Develop- 
ment Foundation to 
the university's applied techno- 
logical research activities and 
create closer ties with indus- 
try. R&D efforts are focused in 
22 different centres covering 
research in areas such as aero- 
nautics, space technology, elec- 
tro-optics, microelectronics, 
advanced silicon chips, solid 
state electronics and robotics. 

There is no barrier to collab- 
orative research efforts 
between academia and indus- 
try in IsraeL It is a small coun- 
try - about the size of Bel- 


gium. The constant threat of 
war since Us creation in 1948 
led to the build-up of a large 
and innovative defence indus- 
try and intimate links between 
the military-industrial com- 
plex, academia and the govern- 
ment People know each other 
and move easily in and out at 
the various sectors. 

The interaction between 
industry and research institu- 
tions inside Israel has been 
augmented fay dose ties with 
the US scientific establish- 
ment Israeli academics are 
generally not well paid. But 
they cCbm make up for lack of 

earning s at home by sp ending 

several months a year on sab- 
batical at US universities or 
r es ea r ch centres. Exposure to 
American ways has not only 
boosted academic Incomes. It 
has led to an interchange of 
ideas and helped spread the 
spirit of entrepreneurship in 
Israel 

Bob Buckwald, president of 
Cl Systems, was bom in the US 



Htffi it home tn iti» imri imtftiitin of Tfhnoiofl r, wtwre i v—nti end d— step— at li rrrtwl out In 77 real m 


and has lived in Israel for 23 
years. He taught physics at 
Technion until 1982 when he 
derided to set up Ids company, 
d began as an R&D subcon- 
tractor. helping to make test- 
ing equipment for advanced 
weapons systems. Based in 
Migdal HaEmek, one of several 
industrial towns about half an 
hour from Haifa, G has grown 
from a $100,000 company in 
1984 to a developer and manu- 
facturer of electro-optical test 
and measuring systems, worth 
an estimated $40m today. 




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Buckwald says Technion 
played an important part in 
getting his company launched 
when it bad few re so urces. He 
used Technion facilities to 
develop CTs first electro-opti- 
cal device, paying royalties in 
return. He has continued to 
maintain dose ties: Technion 
scientists visit Cl about every 
two weeks. The company is 
developing a spectral imaging 
system, the SpectraCube. Sci- 
entists at the Technion the 
Weizmann Institute have 
helped in its development 

Orgenks, a diagnostic bio- 
technology company, is located 
in a nondescript business park 
In Yavne. south. Israel Just 10 
minutes’ drive from the Wei*- 
mann Institute. It was founded 
in 1983 by Professor Max Herz- 
berg, who emigrated with his 
family to Israel from France 
after the 1967 six-day war, and 
who then shuttled between 

ferael end the US tanrhing npfl 

researching before finally tak- 
ing a position at Tel Aviv uni- 
versity in 1982 to teach molecu- 
lar and cell biology. 

Orpnfca is a small research- 
oriented company with «nmmi 
sales of $&5m. It has invested 
about $l4m on R&D since start 
up. is now profitable and 
exports 98 per cent of its out- 
put of diagnostic products. 

The company exemplifies 
how Israel's new high-tech 
companies interact with the 
country's research establish- 
ment It is currently carrying 
out a joint research pro- 
gramme with Tel Aviv Univer- 
sity on monoclonal antibodies, 
used to control food quality. 
Heizberg is no longer an aca- 
demic. But since 1991, he has 
chaired the Israeli National 
Steering Committee on Bio- 
technology which centralises 
the government’s fhnding 
activities in tire sector. He is 
also a member of toe chief sci- 
entist’s research 

Technion’s academic excel- 


lence was one. factor b ehind : 
the decision of Intel, the Mg l® . 
samiranrinctor puap, to start a • 
envelopment centre in HaOa in . 
1974 which now employs 550 
people, total's Israeli srienfists 1 
dovetoped the numerical maths 
processors for the 386 chip and - 
helped develop the Pentium 
processor. 

Dov Frohman. general man- 
ager of total farad, says it was - 
attracted to Haifa in part 
because of the large pod of . 
talented science graduates. A 1 
concentration of technologists 
in Jerusalem was one factor--' 
behind the company's derision 
to set up its production hdfi- 
ties there. 

But he does not think 
Israel's academic institutions 
axe particularly productive. 7. 
According to Frohman, much ' 
of the collaboration between 
science and indu&ry is based " 
on national contacts, total has 
invited scientists from Tech- 
nion to visit Us Haifa facilities. 

It cmraatiy has a small joint 
programme with the. Hebrew r ‘ 
University to develop neural 
networks in data processing. 

With government backing, 
Intel staff have also set up an • * 
incubator one of two dozen in 
the country which provide : - 
infrastructure for smaHhlgh- : 
tech projec ts to help than ; 
towards commercial viability. 

Israel’s incubators and •• 
recently established high-tech - 
companies are producing ' 
"some , really world dass pro- - 
jects", says liana Gerard, prosit 
dent of Gerard Group Interna- ~ 
tional, a US-Isradi consultancy : - 
that puts Israefi high-teehcom- 
parties in contact wfth-US “For- 
tune 500” companies. 

She duxes none of Froh ■ 
man’s reservations. The pre- : 
diction may sewn far fetched," - 
she says. "But by the year 
2006, Israel will be the world ? 
centre of high-tech R&D." 3 


Next week: Sweden 


Mix and match 
for PC users 

Rachel Frampton looks at the 
growth of component software 


l 


N early 50 years after 
the tin can was 
Invented someone 
came up with the idea of a can 
opener. By that timescale, it 
has taken the personal 
computer industry a 
comparatively short 10 years 
to work out how to unlock 
software applications so that 
they become easier to use and 
integrate. 

Several leading US software 
companies are devetaping 
technology that will allow 
software applications such 
as word processors or graphics 
packages to be broken np into 
smaller software 
“components" that users can 
recombine in different ways, 
according to their 
needs. 

Proponents of component 

software say tills win make 
working an a PC easier and 
more efficient because users 
will no longer be saddled with 
large, complex applications 
with superfluous features. 

Instead of having to switch 
between a wind processor, a 
spreadsheet and a graphics 
program to create a report 
with text, charts and 
illustrations, the PC user will 
be able to combine features 
of all three programs to create 
set of software tools 
Specifically designed for the 
job. 

However, the development 


dominant role In the software 
industry has given OLE broad 
support from other software 
developers. 

An alternative approach, 
called OpcmDoc, is favoured 
by a consortium ted by Apple 
Computer, IBM and 
WordPerfect Other members 
include Novell, Sun 
Microsystems, Xerox and 
Tafigent, the systems software 
joint venture funded by IBM, 
Apple andHewIet&Packnd. - 

The consortium claims Ms 
technology will be eraierto -- 
use and require less 
computing hor se pow e r. 
OpenDoc is also promtetnf 
software that will work on t 

a variety of c o mp a rt e r systems. 

whereas M icrosoft** OLE te \ 
currently geared to the •" f . 
c om pany 's Windows PC t 
Operating system. . 

While OLE is already . . ' 

available, however, the 
OpenDoc group wfiLnot 
complete the first versions 
or its software until the ami 
of tiie year. A San 
Frandsto-based organisation 
set up by the founding '■ 
members of OpenDoc, trim 



depends on establishing 
standards that define how 
software components work 
together. This could lead to 
yet another battle over 
software standards in the 
computer industry. 

Already , there are two 
competing approaches to 
component software. The first, 

led by Microsoft, is called 
Object linking and 
Embedding. OLE is a set of 

BWg ramnriny that 

enable features of one 
program to be incorporated 
in other programs. Microsoft’s 


laboratories, will publish 
spedficationssothatotiRr 

software developers and 
corporate users wtilba site 
to design their own . 
components. ' r 
The OpenDoc consortium 
claims wide support 
but few applications 


endorsed OpenDoc. 
WordPerfect, which Hrtrf-- 
is acquiring, teihe only 
member of the OpeaDoo^. 
consortium thatisprimaw 
au applications vendor 
Moreover, the critical test . 

of component software ’rih 

be whether PC users embrace 
the concept 

Whether It will be dwapo’* 

or more expensive, to bay 

sofware in the fonAuf 
mlx-and-match 
has yet to be seen. 


s* -V - 



13 


_'.-=^an^saaS. : . 





FINANCIAL TIMES THURSDAY MAY 26 1994 




ami mas 
PC usee 


ARTS 


W hat are the 
constituents 
of North 
American, pop- 
ular culture? 
Let me start with, my postbag. I 
returned irom Cannes to find 
two outraged letters from 
transoceanic readers, one cas- 
ing me anti-Canadian, the 
other anti-American. 

In the first case I had quoted 
Leslie Nielsen as saying he was 
brought, up near the Arctic, 
although his birthplace is, says 
the correspondent “further 
from the Arctic Girdle than is 
London.” I and fellow journal- 
ists are accused of conspiring 
to paint Canada as "one bor- 
ing, amorphous lump some- 
where in the frozen north." 

In the second case, a Wash- 
ington DC reader resents my 
claim that many US citizens 
“have not heard of Arthur 
Miller, Einstein or the PopeJT 
I am, as you Know, a regis- 
tered acolyte of western Atlan- 
tic culture Mgh. and low. But 
part of that culture’s appeal is 
the thin line between inert 
honesty and productive hyper- 
bole. Nielsen was the one who 
played test and loose with the 
Antic's location. And while I 
have not personally polled 
America about Arthur Miiw 
and Co, recently large numbers 
of America’s youth did Ml to 
answer the question “Who was 
Adolf HitlerT 

Let us come to Grumpy Old 
Mm and The Adventures Of 
Buck Finn . The first is a Wal- 
ter Matthau/Jack Lemmon 
comedy shot in what looks like 
the Arctic Circle - huts on fro- 
zen rivers, fishing through ice 
- but is actually no further 
north than Minnesota. And 
Buck Firm is about ah Ameri- 
can boy’s dream of living a life 
of eternal truancy. Truancy 
from home, parents, education; 
in short, from what w e shall 
hereinafter ran ttrrp (Every- 
one Else’s Boring Facts). 

If Finn lived today, he would 
be a movie . addict, where 
respectable truth is ritually . 
sacrificed to radiant embroi- 
dery. The same spirit fills 
Grumpy Old Mm as fills Wb 
assertion that he grew up 
cheek-by-jowl with the Eski- 
moes. We are asked to believe 
that Matthau and Lemmon 
both fall for new neighbour 
Ann-Margret and that she; an 
auburn-haired knockout even 
at SO, would be ardently tom 
between the two codgers. 

Grumpy Old Mm does not so 
muffh “stretch” plausibility as 
strain, split and finally lacerate 
it But I found the film fim in 
direct ratio to its increases in 
absurdity. Matthau as a Don 
Juan? He looks more like a 
basset-hound-, trapped in a 
fridge. Lemmon as a sweet 
monastic widower? He looks 
more like Mr Executive Stress 
sent for a rest-cure to the icy 
north. 

But this is what movies are 
about Hire that star; push him 
up that mountain towards 


T wo niche brands from 
New York, both with 
rather dodgy sell-by 
dates, have been mar- 
keting themselves hard in Lon- 
don this week. Laurie Ander- 
son, Mg in 1961 but as minimal 
as her music since, has a new 
book. David Byrne, driving 
force behind Talking Heads, 
the po-faced students' band of 
the 1960s, was plugging David 
Byrne, the album. 

Anderson got caught in the 
performance art web and has 
never escaped. She stiU sits sol- 
emnly at her electronic key- 
board; she still has mastery 
over the sawn*- note; she still 
chants, in her hypnotic drawl, 
well-rounded nonsense. Her 90 
minute monologue at Sadler's 
Wells was “what 1 did on my 
holidays". “In 1987 I went to 







Troth sacrificed to radiant emboidery. Jack Lemmon and Walter Matthau in ‘Grumpy Old Men’ 

Cinema/Nigel Andrews 

Culture of the absurd 


Peak Preposterous; then have 
him tell his interviewers he 
was bom in Katmandu. Spits- 
bergen or El Dorado. 

.Grumpy Old Mm is no mas- 
terpiece but ' it coaxed a cool 
S70m from Americans who 
know a* class comic double act 
when they see ana The Adorn- 
tures Of Huckleberry Firm is a 
masterpiece, on page, hut has 
an odd habit of defeating peo- 
ple on screen. Twain's Missis- 
sippi was of the mind, just like 
Nielsen's remembered Regina, 
and his hymn to childhood fan- 
tasy, otherwise definable as 
the flight from EEBF, resists 
photographic re-enactment 

Elfiah Wood is a tousled, 
puckish Huck with eyes like 
UFOs. And Jason Robards as 
the King of Bilge water, 
Twain’s master fraudster, won 
gusts of laughter from the 
press show anrifenm with trig 
DIY cockney accent and A-Z 
knowledge of English land- 
marks. “Where’s Buckingham 
Palace?” Robards: “Bucking- 
ham.* But the book’s real 
magic is the . river, and that is 
■primped; even. though camera- 
man Jgnng Kaminski. Schin- 
dler’s List Oscar-winner, might 
have worked wonders if 
allowed out for long enough. 

•k 

Hostile Hostages is unhappier 
proof of our assertion that 
many Americans cannot have 


GRUMPY OLD MEN 
( 12 ) 

Donald Petrie 

THE ADVENTURES OF 
HUCK FINN (PG) 

Stephen Sommers 

HOSTILE HOSTAGES 
(15) 

. Ted Demme 

A BUSINESS AFFAIR 
(15) 

Charlotte Brandsfrom 

heard of the playwright, physi- 
cist and papal eminence cited 
above. If they had, this “com- 
edy” might have a less casual 
attitude towards dramatic 
str u ct ur e, space-time improba- 
hTHtiBR an-wi marital break-up. 

Judy Davis and Kevin Spa- 
cey play the bickering couple 
whose car and later, hmne are 
hi-jacked by a fleeing burglar. 
As the footpad whp referees 
their rows - the film's US title 
was The Ref - stand-up comic 
D ennis Leary looks as if he 
wished he had never sat down 
in his Disney actor’s chair. 
Feeble dialogue destabilises an 
already strained plot conceit, 
and only dear Glynis Johns as 
Mum-inlaw - how they wheel 


out the English actors for vil- 
lain roles! - floats above the 
M-concept banality. 

A Business Affair is set in 
hut might be set in 
the Arctic for all resemblances 
to life in this city. The film is 
funny, bat how much is it 
meant to be? Jonathan Pryce is 

the P gnimmiaiHil Wn gtinh writer 

married to model and would-be 
novelist Carole Bouquet 
(French). And Christopher 
Walken is the snaky, Italian- 
extracted American publisher 
who steals La Bouquet plus 
her works-in-progress. 

Director Charlotte Brand- 
strom approaches W OKam sta- 
tHfiffl’s script, drawn from two 
novels by Barbara Skelton, Hke 
a hrai i ffl fa tr y w f approaching a 
dtfficnft. but talented pupQ. Her 
no-nonsense style irons the 
irony ont of lines that we 
assume to he satirical but can- 
not he sure: “I can’t negotiate 
with Amis in a condition of 
frustration. Fm Sicilian" (Wal- 
ken to sex-bared Bouquet). 

I helped Martin Anri« would 
walk in, pick up his dropped 
name and hurl it among the 
cameras, causing the film to 
jump about and get some style. 
With Walken and Pryce both 
in mint form - the first a flaky- 
voiced dandy with dancing 
eyes and teeth, the second tall, 
glim and deadly film an explo- 
sive pencil - the histrionic 


Pop/Antonv Thomcroft 


Laurie Anderson and David Byrne 


Mexico to see my brother” and 
then on to an anecdote about 
primitive Mayans mistaking 
her contact lenses for jewels 
that she hid in her body. Most 
of her tales are less e x ci ting: 
many axe downright banal; 
same test credibility, especially 
the Arctic family who eat pos- 
sum smeared with maple syrup 
while their children disappear 
down mining shafts. 

Anderson brazenly reads 
from her book, entitled Stories 
from the Nerve Bible, her fanci- 
ful name for the body, occa- 
sionally switching from her 
natmxd voice to an electronic 


mike which catapults her from 
bass ' profondo to squeaky 
soprano. Sometimes dm stngg- 
In the hushed, reverential, 
atmosphere it is all but impos- 
sible not to nod off - hut, oh 
so, beautifully. 

You expect Laurie Anderson 
to be out-to-lnnch and you 
enjoy the test erf wills between 
her kookiness and the credu- 
lity of the audience. David 
Byrne had a harder task at the 
Palladium, introducing intro- 
spective new songs to unregen- 
erate Talking Heads tens. I felt 
sorry for the chap who stood 
up ready to boogie: he had to 


wait for the fourth encore 
before Byrne had mustered 
enough enthusiasm from the 
audience. 

Byrne, now with long hair, 
sings bleak songs with even 
bleaker settings, performed by 
a trio of guitars and percus- 
sion. Actually they grow on 
you, but at first sounding are 
rather relentless. Of course the 
lyrics are startling: “I met my 
love at a funeral” begins 
"Crash"; “Running naked 
down the state highway” opens 
the more hopeful, indeed evan- 
gelistic, “Buck naked”. 

But the more you get down 


to the words the more yon fed 
Byrne is going for easy fixes. 
The lyrics sound important but 
fall apart The salvation is in 
the rhythms, the Latin tinge to 
“Sad Song", for example, 
which, with “Lilies of the Val- 
ley", is the 9ong most likely to 
ingratiate itself quickly with 
Byrne’s now rather mature 
cult following. 

Perhaps in a smoky dub it 
might have (ticked, hut at this 
palace of v ariety Byrne came 
across as a rather serious fam- 
ily man in his early forties half 
heartedly taking on world 
issues to fulfil a contract. 
Thera is actually little Byrne 

offers in performance that addB 

to his CD, except perhaps a 
tendency to sing flat The great 
thing about Tatting Heads was 
that the name said it alL 


An audacious 
‘Coriolanus’ 


B oy. The real Cains Martins Coridanns 
was probably thirty-something when 
he died, and Shakespeare's hero has 
been played by many actors older than 

ttmt Before trifling Wm, however, Ms enemy 
Aufidius nattc him “boy", anil jt IS this h rilHant 
taunt that drives Coriolanus into his final, fatal 
fury. And this word is the due to the RSCs 
splendid audacity in casting Toby Stephens - 24 
years old, forsooth - as its new Coriolanus. 

He charges through the role in a youthful 
blaze. His voice, a tenor, has steel and clarion 
attack. Not only proud (the ward forever applied 
to Mm by other characters), but thrillingly bob 
tempered and impetuous too, this Coriolanus 
has never quite grown up. Assured of Ms own 
natural superiority, he liras in action; he has no 
reflectiveness until it is way, way too late. Even 
idiot Ms ranthor anil friends persuade Mm to 
return in mfldneas to the people, his temper 
bursts out a gain, and he shouts “Wen, MILDLY 
BE IT THEN.” This is, to us. marvellously funny 
- but he htmgrif larlns any irony. 

Something in ffies cm bring wHwi from 
Rome. When he comes to Antium and is 
embraced by Aufidius as a friend, he is stiff 
lifeless, as if already in rigor. His mother cracks 
tills dead facade, and he cries out in massive 
misery at how she hag rmrimig hfm He knows 
she has sealed bis death-warrant, and in Ms 
final srana he «am« to invite Ms death. He iim i s 
a pa-m fhft crnin iiwnlwit hanghfinaat that had 
brou ght the RArmnig rlnm to MlKng Mm; this 
time, with Ms new Volsdan colleagues, nothing 
will save Mm. 

The director, David Thacker, has had the idea 
of setting the play in post-1789 revolutionary 
France, to lend new force to the republican talk 
that surrounds Cariolanns and his fellow-aristo- 
crats. Banners around the theatre bear the 
words "Liberty, Equality* Fraternity”. A key 
image is the stream of com that pours from 
above into a locker beneath the stage, and 
which the hero bars the plebs from taking. 

But Fran Thomson's designs, handsome and 
vivid though they be, are so historically specific 
that they raise problems. Stephens's hair is 
brushed forward like Napoleon’s - Le. not an 
arista but a self-made man who turns republi- 
canism back into conservatism - and the noble- 
women are dressed with Napoleonic neodassi- 
cignu He is uniformed in black and gniH Hire a 
GMcauh officer: Le. post-Napoteomic. And the 
backdrop is Delacroix’s “liberty Trading the 
People”: which, sorely, is all about the barri- 
cades of 1830. The more you know about post- 
1789 France, the more distracting you will find 
this production’s notimrfs) of period. 

This nftt wiMigfranding the production han 
great vigour and narrative energy. Thacker 
TflafcftR the most of the love-hate nexus between 


components are here. But the 
movie's own rhythms are 
relentlessly four/four, and Bou- 
quet has yet to acquire «nmig h 
convincing En gHwti ph r ftfffa g In 
wrap around even simple lines. 

“Why not call eet a naaht?“ 
the actress asks at one point, 
causing us critics to nod in 
agreement. But no rest for cul- 
ture monitors: it is half-term 
and the world is full of chil- 
dren's films. Besides Twain we 
have Rookie Of The Year and 
Josh And SAM Rookie (PG) is 
about a small boy (Thomas ten 
Nicholas) who develops a 
mira c ulo us pitching aim after 
an araj i frmt nr)d plays fe»gphaT 1 
for the Chicago cubs. This 
made much money in America 
and we see why. Played for 
frantic «*h ftTw v it has a frantic 
charm. Actor Daniel Stern 
debuts as director. 

Josh And SLAM (12, director 
Bmy Weber) is the lesser tale 
of a boy who persuades his 
Mother Sam that he (Sam) is a 
Strategically Altered Mutant; 
hpnro name. As a result they 
travel all over America escap- 
ing from parent s , wchnnlq and 
EEBF. In short, they are just 
like Huck Finn, Les Nielsen 
and the rest erf us who love 
that wonderful world called 
Imagination and who wffl not 
be put off by Cantankerous of , 
Canada or Apoplectic of Amer- I 
tea. I 


Coriolanus and Aufidius (Barry Lynch, darkly 
smouldering, as slight and lean as Stephens). At 
the end, the Volsdans leave Aufidius alone to 
embrace again Ms now dead enemy. As the 
hero’s mother Volunmia, Caroline Blakiston 
begins as a hearty and youngish society lady, 
with horridly Oedipal outbursts against her 
son’s wife Viigffla. Her finest hour is In the 
hpipiaao fory -«Qip unleashes on the tribunes who 
have exiled her boy. She is, however, too sub- 
dued in the great scene when she persuades him 
to save Rome. And her diction has become 
mnazy. 

Monica Dolan makes the ungrateful role of 
VhglHa into a very interesting study of passiv- 
ity. And Philip Voss makes old Menenius into 
the most rounded character in the play: hero- 
worshipping young Cams Martius, contemptu- 
ous of the tribunes, folly possessed of the mod- 
eration and diplomacy Ms boyish hero so emi- 
nently lacks. This difficult play can have a 
vaster scale, the hero a mightier intellect, than 
in this production. But it is completely alive, 
and gathers powerfully In excitement. 

In repertory at the Swan Theatre, Strat- 
ford-upon-Avon 



Toby Stephens In the title role 


Keeping up with Arcadia 

A Nobel prize-winner scholars of Love's Labour’s actors. Lucy Whybrow has 
said on foe radio on Lost It says “Lord! what fools Thomasina’s febrile intensity 
Monday that he could these scholars be”, and then, and charming precocity; and 
keep up with all foe so tenderly, darts on to know- Edward Atterton has the 


A Nobel prize-winner 
said on foe radio on 
Monday that he could 
keep up with all foe 
tflTlr about uripnffp and Roman- 
ticism in Tom Stoppard's Arca- 
dia. I rather pity him. Trying 
to keep up with Arcadia is, for 
us lesser mortals, im pnggifila, 
exuberant, and, finally, 
strangely touching. The play 
was exciting when new last 
year at the National Theatre: 
but returning to it, now that it 
cranes to the West End, is even 
better - just that bit less bewil- 
dering but no iggg tantalising. 
For our failure to understand 
everything is part of the 
beauty of (he play. 

Arcadia is all about know- 
ledge - about foe effort to 
know things, about the muta- 
tions of known things and our 
ways of knowing them, and 
about the ultimate unknowa- 
bility of things. It suspends, 
gbimm Bring in fhft air, both 
knowledge as a human episte- 
mological endeavour and 
knowledge as an ultimate onto- 
logical fact Its wit puts one in 
mind of Congreve and Wilde, 
but finally it comes closer to 
foe forsworn, death-clouded 


scholars of Love's Labour’s 
Lost It says “Lord! what fools 
these scholars be”, and then, 
so tenderly, darts on to know- 
ledge of life, death, and sex. 

Arcadia commutes between 
two eras: 1809-1812 and the 
present day. Lord Byron is for- 
ever offstage, much spoken of 
by characters in both periods. 
Romantic sincerity and 
Romantic artifice are allhnpor- 
tant; and so is nature - nature 
as spoilt and reinvented and 
investigated by successive 
humans; and so is time. 


T he play cast its spell 
with its marvellous 
original cast last year. 
This time I admire 
Trevor Nunn’s direction even 
more because he has kept the 
play virtually as mchanting 
with a new and generally infe- 
rior cast I miss some of the 
first cast dreadfully - we are 
lucky that Radio 3 has twice 
broadcast their performance - 
but I remain captivated. The- 
best news is that the two most 
touching and complex roles, 
Thomasina and her young 
tutor Septimus - are still very 
well played by talented young 


actors. Lucy Whybrow has 
Thomasina’s febrile intensity 
and charming precocity; and 
Edward Atterton has the 
smouldering intensity of foe 
young Romantic’s mind and 
emotion. 

The worst news Is font Tho- 
masina’s n v*h ftr and the revi- 
sionist scholar Hannah are 
acted terribly - busily, over- 
emphatically, weakly - by 
Julie Legrand and Joanne 
Pearce. Roger Allam is a more 
languid, classy lecturer than 
was Bill Nlghy; Charles Simp- 
son a more affected young 
arista than Sam West 

Yet any flaws are minor, for 
Nunn has elicited pacing so 
lucid, and pointing so natnrp l, 
that this astonishingly com- 
plex play remains rich in sus- 
pense, laughter, and the excite- 
ment of thought. Jeremy 
Sams’s music, brilliantly cross- 
ing historical periods, is per- 
fect and moving; and so is the 
beautiful Georgian round roam 
of Mark Thompson’s set In 
this post-modern work, every 
rococo Bw Vh a llishnipnt makes 
its telling contribution. 

Theatre Royal, Haymarket 


International 


. * .. 
... \ -■ ^<5 

* ;v. 

V 




■ ATHENS 

Megaron Sat, Sim, Mon, Tubs: 
Jacques Laasafle’a Avignon Festival 
production of Euripides’ 

Andromac h e. June 8-12: Orchestra 
National du Capitate de Toulouse 
(01-728 2333/01- 722 5511) 

■ BOLOGNA 

Ttrtre Coremunrio Final 
performances of Offenbach's 
Barba-bteue are tonight and 
tomorrow, with a cast headed by 
Brio Di Cesare and Adelina 
Scarabs#. The season ends on June 
3 and 4 with symphonic concerts 
conducted by EHahu Inbal . 
(051-5299 99) . 

■ BERGAMO 

The annual festival at Bergamo and 
Brescia runs til June 11 with an 
ampharis on the pteno music of 
Bach, Mendelssohn, Schumann 
and Reger. Artists featured over 
the coming week indude ABcta de 
Larocha, Mauririo Zanirvl and the 
PteQue Chamber Orchestra and 


Chorus (Bergamo: 035-249831. 
Brescia: 030-375 7974) 

■ FLORENCE 

MAGGtOMUSfGAUe 
Zubin Mehta conducts Verdi’s 
Requiem tonight and on Sun at the 
Teatra CommUnete, with Luciano 
Pavarotti, Roberto Scancftzzzf. 
Michele Crider and Dolora Zap*. 
Tomorrow's concert is given by 
the Oslo Philharmonic Orchestra 
conducted by Mariss Jansons. Sat 
(Teatro della Pergola): Radu Lupu 
Is piano soloist with Academy of 
St Martin in the Fields. Sat, next 
Tues and Fri (Teatro Communato): 
Mehta conducts Luc Bond/s 
Salzburg production of Salome, 
with Catherine Maifitano and Monte 
Pederson. Next Wed and Thurs: 
Semyon Bychkov conducts the 
Maggio Orchestra In works by 
Beethoven and Stravinsky, with 
piano soloist Maria TIpo. The festival 
runs tffl July 1 (055-277 9236) 

■ GENOA 

Teatro Carlo FeSce Tonight, Sun 
afternoon, next Fit Bruno Bartotetti 
conducts Ptertuigj Samarttani’s new 
production of Lucia <fi Lammermoor, 
with cast headed by MarieOa Devfa 
(010-589329) 


■ LONDON 

THEATRE 

• King Lear Robert Stephens 
plms Lear in Adrian Noble’s RSG 
production, which was 
enthusiastically received when It 
opened In Stratford last year. The 
cast also Includes Simon Rusself 


Beale as Edgar, David Bradley as 
Gloucester and Janet Date as ■ 
GoneriL Previews start tonight. Press 
night on Tues (Barbican 071-638 
8891) 

• A Mkteurrvner Night’s Dream: 
the summer season in . Regent’s 
Park opens with a new production 

of Shakespeare’s w^xiroaturaJ tale, 
directed by Deborah Paige. Previews 
from tomorrow, opens on Tues 
(Open Air 071-486 2431) 

• Pericles: the National Theatre's 
new production of Shakespeare’s 
magfoal epic Is cSrected by Phyllida 
Lloyd, with Douglas Hodge in the 
title rote. In repertory at the Ofivier 
with Alan Bennett’s stage adaptation 
of Kenneth Grahame’s novel The 
Wind In the Wfflows (National 
07.1-928 2252) 

• Rutherford & Son: the National 
revives Gltha Sowerb/s 1912 
powerful portrait of suffocating 
Victorian values. . Bob Peck plays 
John Rutherford, a man obsessed . 
with the running of his factory at 
the expense of ail compas si on. Katie 
MftcheR directs In the Cotteeipe 
(National 071-428 225?) 

• Dead Funny: Terry Johnson's 
new comedy of sexual bnpotenoe 
has tension as wen as bite. With - 
Zoe Wanamaker and David Hafg 
(Vaudeville 071-836 9987) 

• A Month In the Country: Helen 
Mirren is in daz zl ing form as foe 
bored Russian housewife of 
Turgenev’s languid masterpiece 
(Afoery 071-867 1115) 

• Travesties: Antony Sher gives 
a powerful p erf ormance in Tom 
Stoppard's teasing comedy (Savoy 
071-836 8888) 

• An inspector Cate: Stephen 
DakJrys exhilarating revamp of J.B. 
Priestley’s psychological thriSer 


(Aidwych 071-836 6404) 

• Crazy for You: after more than 
a yew in the West End, Gershwin's 
musical comedy still burets with 
energy, humour and style (Prinoe 
Edward 071-867 1045) 

• For ticket information about 
West End shows, phone Theatreline 
from anywhere in UK: Plays 0836 
430959 Musicals 0836 430960 
Comedies 0836 430961 Thrfllere 
0636 430962. Most London theatres 
are dosed on Sunday. 

MUSKI/DANCE 

Covent Garden After a long gap, 
the Royal Baftet returns on Mon 
with the first of seven perfor ma nces 
of Mnkus’ Don Quixote starring 
SyMe GuStem. The Royal Opera 
has a find performance of 
Giordano’s Fedora tomorrow with 
Freni and Carreras, plus Raeeirrfs 
Mosd with Ruggero Raimondi (tffl 
June 11). The next new production 
Is Alda, opening Jure 16 (071-240 
1066) 

CoBseum ENO repertory for foe 
next week consists of Um Albery’s 
production of Peter Grimes with 
Phffip Lanjgidge in the title rote, 
conducted by David Atherton, and 
Cosi fen tutte with a cast heeded 
tV Vivian Tiamey. The. next new 
production b Jenufa, opening June 
8 (071-838 3161) 

Queen Ba betti HaH-Anne Teresa 
Do Keeremaeker. the Belgian 
experimental choreographer, brings 
her Rosas Dance Company to the 

South Bank tomorrow and Sat with 
a programme set to music by Bach 
(071-928 8800) 

Barbican Mstislav Roetropovtch 
conducts LSO In tonight's 
all-Shostakovich progr a mm e, with 
violin soloist Maxim Vengerov. 


Richard Stamp conducts Academy 
of London neod Wed in Viennese 
operetta extracts, with soloists from 
the Vienna Volksoper (071-638 8891) 


■ MADRID 

Teatro Lirico La Znnmtlw Tonight, 
Sat, Sun, next Tues, Thurs and Sun: 
OdOn Alonso conducts Emfllo Sagi’s 
new production of GnHIo Arrieta’a 
1871 opera Marina, with cast 
headed by Alfredo Kraus and Ana 
Maria Gonzalez (01-429 8225) 
Aucttorio Nacionaf de Mosfca 
Tonight flute and guitar recital by 
Montserrat Gascon and Xavier Cod. 
Tomorrow, Sat, Sun: Aide Ceccato 
conducts Spanish National 
Orchestra In works by Tchadajvsky 
and Stravinsky (01-337 6100) 


■ MILAN 

Teatro aHa Scsla A new production 
ofElektra, conducted by Ouseppe 
Sinopofl and staged by Luca 
Ronconl, opens on Sat with a cast 
headed by Janis Martin (repeated 
May 31, June 2, 4. 7. 8. 10). Brigitte 
Fasa b a ender ghree a song recital 
on Sun, and there are nine 
performances of Ftigoletto between 
June 3 and 30 (02-7200 3744) 
Teatro Nuovo Roland Petit’s ballet 
Tout Satie opens on Sat and runs 
daBy except Sun tffl next Fri 
(02-7200 3744) 


■ NAPLES 

Teatro San Carlo Manon Lescaut 
opens on Sat for five perfor ma nces 
with a cast headed by Miriam Gaud. 


Nicola Martinucd and Antony 
Mkfoaets-Moore (081-797 2412) 

■ PRAGUE 

PRAGUE SPRING FESTIVAL 
The find week of the festival 
indudes conce r ts by the BBC 
PhBurmodc, Prague Symphony, 
Czech Philharmonic and Suk 
Chamber Orchestras, plus Steve 
Reich and Musicians, Mustea 
Boherdca, John Wiliams and 
London Sinfontetta Voices. Estates 
Theatre has performances of Don 
Giovanni tomorrow and Sat and 
the National Theatre has Gounod's 
Romdo et Juliette on Tues. Charles 
Dutoit conducts Orchestra National 
de France in the doskig concerts 
next Wed and Thurs (02-311 8780) 

■ ROME 

Teatro Valle Tomorrow: Iona Brown 
(Erects Academy of St Martin in 
the Fields in works by Wagner, 
Britten and Mozart Sat Mariss 
Jansons conducts Oslo 
Phitiarmonic Orchestra In works 
by Sibelius and Tchaikovsky. Sun, 
Mon, Tues: Daniels Gatti conducts 
Orchestra dalPAccademia dl Santa 
Cecflia in works by Sdarrino, Berg 
and Beethoven, with vio&n soloist 
Mark Kaplan. June 3: Edita 
Gruberova (05-678 0742/06-6880 
3794) 

■ TURIN 

Teatro Regto Tomorrow and Sun 
(both at 3 pm): L'eltelr cfamore with 
cast headed by Maria Grazia 
Nocentinf, Roberto Aronica and Lao 
NuccL June 6: Edita Gruberova song 
recital (011-881 5214) 


ARTS GUIDE 

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 Euopean Time) 
MONDAY TO FRIDAY 
NBCASuper Channefc FT Busi- 
new Today 1330; FT Business 
Tonight 1730, 2230 

MONDAY 

NBC/Super Channel: FT 
Reports 123a 

TUESDAY 

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

WEDNESDAY 

NBC/Super Channel: FT 
Reports 1230 

FRIDAY 

NBC/Super Channel: FT 
Reports 1230 

Sky News: FT Reports 0230, 
2030 

SUNDAY 

NBC/Super Channel: FT 
Reports 2230 

Sky News: FT Reports 0430, 
1730; 







14 


Modern lessons 
from an old master 


I 

A former Democrat 
aspirant to the White 
House (Gary Hart) 
was plagued by cries 
of “Where’s the beeTT What 
the complaint meant, when 
translated out of journalese, 
was the relative absence of 
plans to raise federal sp endi ng 
or intervene in the conduct of 
business and industry. 

The British government's 
white paper on competitive- 
ness, now appearing after a 
long gestation period, has been 
predictably greeted with simi- 
lar cries. The kinds of “beeT 
that exponents of competitive- 
ness usually want are nearly 
all penurious: tax favours far 
selected sectors, disguised 
export subsidies, or threats to 
overseas countries such as 
President Bill Clinton’s “tar- 
gets” for import penetration 
into Japan. 

The ahfign rg of is 

a good feature of the white 
paper. Except in the education 
and training Grid few new poli- 
cies are announced. 

For the rest the white paper 
restates existing paSdes. Scene 
i new ideas are to be “studied” 
or =mH in their 

| search for hard announce- 
ments officials have been 
forced to drop in sentences 
! such as: “Lord Walker is to be 
personal adviser to the presi- 
dent of the Board of Trade an 
overseas investment” The doc- 
ument is reminiscent of many 
of the products of pre-Thatcher 
Tory gpfe nungm in its mix- 
ture of exhortation, statistics 
and summaries of mostly 
minor gnvw nmpnt moves. 

The postwar style comes out 
clearly on the cover, which 
illustrates a mflange of indus- 
trial processes - as if to reas- 
sure ministers who might have 
been alarmed by the patient 
explanations of the official 
writers (paragraphs 1.27 to 
1.29) that all sectors of the 
economy are (equally) impor- 
tant and that “many of today’s 
high-tech industries include 
ones in the service sector”. - 
The white paper is tom 
between the desire to show 
that Britain’s performance has 
been relatively good over the 
past 15 years of Con ser v a t iv e 
government and the need to 
show that it has not been good 
enough, in order to sustain 
exhortation about competitive- 
ness. On the whole the first 
requirement tends to prevail. 

The document has many 
good things, in spite of its title. 
It can be regarded as a sort of 
economic report an embryonic 
version of a document such as 
the US Council of Economic 
Advisers’ Report, which 
reflects the outlook of the 
incumbent fl dmTnig t ratinn, but 


It is instructive 
\ I l to look again at 

I I \ the edition of 

I — | • \ Life magazine. 

dated Novem- 
W?Z-Z—S her 25 1968. On 

Book ^ cover . next 

.M m *. JiMX 

begins", is a smiling president- 
elect, hut the text and pictures 
inside now come over with a 
sense of retrospective fore- 
boding. 

There is a three-quarter-page 
shot of election night in New 
York conspicuous for its lack 
of warmth and enthusiasm. 
Richard Milhous Nixon and his 
family are celebrating, but the 
crowd is curiously static, no 
punched fists in the air. no one 
obviously shouting approvaL 
Reflecting on an awfiil year, 
with two assassinations, race 
riots and violent anti-war dem- 
onstrations at the Democratic 
convention in Chicago. Life did 
not hold out much hope that 
the new president could 
change things for the better. 
Bis campaign had been “ser- 
viceable if not inspiring”, his 
solutions “managerial and 
unspecific”. 

When he died last month, 
American reactions to their 
37th president went through 
two phases in quick order. The 
first, dictated by the decent 
instinct not to speak ill of the 
dead and spurred on by the 
generous eulogies of President 
Bill Clinton and others, alm ost 
amounted to a kind of revision- 
ism. Obituaries and columns 
delved deeply enough into the 
reasons for his downfall - 
Watergate - hut they were off- 
set by compliments for an 
endurance in disgrace that to 
many was tantamount to reha- 
bilitation, and for the good 
thing s he had done as presi- 
dent A fixture in American 
politics since 1946, there 
seemed almost a sense of 
national loss that hfi was no 
longer around as the focus of a 
new admiration or the old 
loathing. 

The second phase revised 
this revisionism. Garry Tru- 
deau’s “Doonesbury” cartoon 
strip savagely lampooned those 
who had tried to rewrite 
Watergate. Others wrote with 
passion about the betrayal of a 
nation’s trust by a man who 
became the first president to 
resign in order to avoid 
im peachment! 


WATERGATE - 
The Corruption and Fall 
of Richard Nixon 
By Fred Emery 
Jonathan Cape, £20, 

542 pages 


Interestingly, for one who 
had covered Nixon's first term, 
which ended with his landslide 
victory in 1972 but before 
Judge John Sirica opened 
cracks in the Watergate 
defences, and who had spent 
long nights in London editing 
Watergate copy from out 
W ashington bureau, 1 found 
much of both phases unreada- 
ble. r had my opinions of 
Nixon, I said to myself. Why 
read those of others with axes 
to grind? 

Fred Emery has provided a 
necessary “reality check" and 
it could not have come from a 
better non-American source. 
He was The Times's Washing- 
ton bureau chief from 1970-77. 
Unlike the late, great Peter 
Jenkins who, when resident 
Guardian correspondent, knew 
in his hones that Nixon 
was rotten, Emery was a 
reporter's reporter, in the best 
American sense of the term, 
writing what he knew and 
could find out without embroi- 
dery. 

He survived - and thrived - 
even though his thm editor, 
William Rees-Mogg. once flew 
to Washington to tell US jour- 
nalists assembled at the 
National Press Club to stop 
crucifying their president 
because Watergate simply was 
not important enough. It may 
be doubted that today’s press 
barons would be so charitable 
to those not toeing the propri- 
etor’s line. 

Emery’s book, published in 

conjunction with the BBC doc- 
umentary series already begun 
in the UK and due to air in the 
US to coincide with the 20th 
anniversary of Nixon’s resigna- 
tion in August, is a smoothly 
written, meticulously 
researched narrative account 
of what began as “a third-rate 
burglary” and ended as a 
cover-up of monumental pro- 
portions at the highest levels 
of government 

Of course, as he makes “per- 
fectly clear”, to use Nixon’s 
favourite phrase, it did not all 
begin with the break-in of 
Democratic party offices on the 
Memorial Day weekend of 1972. 


The seeds had been sown a 
good two years earlier, as an 
enraged Nixon - and an 
equally furious Henry Kis- 
singer - tried to find out who 
had been leaking what over 
the bombing incursions in 
Cambodia and the publication 
of the Pentagon Papers, detail- 
ing US involvement in Viet- 
nam. 

The cast of characters that 
was to become notorious - Hal- 
demann, Ehriichman, Mitchell, 
Liddy, Hunt, Dean, Huston, 
Young, Ma grader and many 
more - was commissioned (the 
“plumbers”) and in place for 
“dirty tricks”. What they did 
still has the power to shock, 
but nnthinp IfltP as much as 

the cover-up itself. The 
endemic characteristic of good 
US scandals is that the act 
itself Is never as bad as 
subsequent attempts to frus- 
trate and conceal a lesson 
still not learnt 20 years 

OIL 

Indeed, if there is one over- 
riding lesson from this book 
relevant to contemporary revi- 
sionism, it is that Nixon was 
not betrayed by overzealous 
minions taking the vague 
wishes of his darker side to 
ex t rwneft The president might 
have overruled, in July 1971, a 
madcap scheme to firebomb 
the Brookings Institution, a 
Democratic redoubt, but for 
such a plan to have been 
drawn up and presented to the 
Oval Office on the reasonable 
expectation of approval speaks 
volumes for the degree of con- 
trol exercised from the very 
top. If that were true pre- 
Watergate, it just got worse as 
events spun out of the 
control of even the master- 
mind. 

None of this was evident to, 
or even suspected by, Life in 
1968 beyond its graphic pic- 
tures and words. But Hugh 
Sidey wrote in that edition that 
the new president-elect could 
do far worse than visit Wil- 
liamsburg. Virginia, where 
independence from Britain was 
planned to soak up an atmo- 
sphere he said was still redo- 
lent of Washington, Jefferson, 
Monroe and Madison. We may 
only speculate whether history 
would have been different had 
Richard Nixon taken the 
advice. 


Jurek Martin 


Leaving you at peace with 


yourself. It's all part of Regent's 


truly attentive service. 



FINANCIAL TIMES THURSDAY MAY 26 1994 


ECONOMIC VIEWPOINT 


Three big cheers 
for no 'beef 


AUCKLAND. UANCKOK UEVERLY HILLS. CHIANC. MAI. FIJI. HONG KONG. JAKARTA. 
KUALA I.UMPUK. LONDON MELBOURNE. SINGAPORE. SYDNEY. TAfl'El. 
i UNTAC 1 VO UK. TRAVEL COUNSELLOR OR ANY REGENT IN I EKNATIONAL WORLHWllJE KbSEKVA flONS CENTRE 


FOUR SEASONS • REGENT. DEFINING THE ART OF SERI ICE AT lit HOTELS IN 19 COUNTRIES. 


By Samuel Brittan 


is reasoned and analytical, 
with a statistical framework 
that changes little from one 
president to the next 

The white paper should he 
improved, given a new title 
and made into an annual event 
tmtfl it achieves such status. 
Bat it has a long way to go. It 
is a difficult document in 
which to find one’s way. There 
is no index, fist of figures or 
even detailed table of contents. 
Maddeningly, the statistics 
from which the charts are 
drawn are omitted so one 
either has to guess or lax the 
Department of Trade and 
Industry if one wants more 
rttan an impressionistic glance. 

The white papa: authors try 
hard to out with a con- 
cept of competitiveness by 
which they can square their 
economic conscience. In the 
end they settle for the OECD 
definition: The degree to 
which [a country) can. under 
free and fair market condi- 
tions, produce goods and ser- 
vices which meet the test of 
international markets, while 
simultaneously maintaining 
and expanding the real 
incomes of its people over the 
long term.” 

The OECD ripfinitirm mi ght 
please politicians by giving 
some credence to the notion of 
all countries being more com- 
petitive, but it is opaque 
enough to put off others from 
fuller analysis. Deconstructed, 
the definition means some 
rmwhmfltirm of reasonable pro- 
ductivity growth and an appro- 
priately valued real exchange 
rate. If people want to use 
words in this funny way, why 
should we seek to spoil their 
game? But alas the issue does 
matter. The white paper’s offi- 
cial authors desperately try to 
mute damag e by inserting in 
the body of the document that 
“there are prizes in world mar- 
kets for an". 

But what competitiveness 
means to most people is illus- 
trated by the white paper’s 
sob-beading: Helping Business 
to Wm. Overall performance 
can only be translated into 
competitiveness if countries 


UK 1 * taw cost advantage 


fN 



Unit labour costa a* paean* V- 


UK* fOO 

rare 

to ae 


Belgium 

87* 

: ■: V 

. * . V* ■> IV . 

v -Vm. 

Canada 

9&8 

94.1 

’ 98.7 

Franca 

- 10L8- * 

iq&s . . . 

f 

Germany 

107.9 

115,7 

ISM 

Ore ace 

il&Q 

‘ . NA 

NA 

Ireland 

NA 

NA 

NA 

Raly 

®L5 

83.1 


Japan 

81.8 

99.3 

113.0 

Natbartand* 

83.1 

98.7 

112L6 

Portugal 

236.6 

NA 

NA 

Strain 

' 1243 

NA 

. -mi 

UK 

70Q.0 

100.0 

1006 

US 

7903 

75.4 

; 83* 


the mirror Image of budget def- 
icits, but that Is not completely 
convincing either. An alterna- 
tive explanation is that these 
deficits reflect international 
differences .to private savings 
relative to toveafa na a t opportu- 
nities. or inflows of capital 
funds across the exchange. In 
the latter case, as scow people 
win ha sany to hoar, there 
may be no problem at aU, 
Thera la such a thing as 
being too com p e titiv e. Let os 
suppose that by some magic 
British labour costs could be 
haired overnight relative to 
those of other countries. 
Unless there were some change 
to underlying international 
capital flows the improvement 
could not last British produc- 
ers would for a time - be 
swamped, with metre 
which would be fine for: a 
while. Eventually, however, a 
combination of higher domes- 
tfc caste and an appreciation of 
sterling would choke off the 
extra demand. The remit 
would be a return to the origi- 
nal level of competitiveness 
and balance of payments, with 
a great deal of disturbance on 
route. 


F ifty years ago yester- 
day, a much more 
Important white paper 
was issued, tin war- 
time coatftten government 19M 
paper op employment policy. 
Tin promise of that earlier doc- 
ument was to provide condi- 
tions tor high employment. 
Alas, that hope has been 
dashed from our tips. 

If unemployment were a 
question of just a few countries 
with overvalued real ex chang e 
rates, then it might make 
sense to see the problem is 
terms of competitiveness. But 
when high unemployment is a 
common problem among 
nearly all developed countries, 
if makes no sense at all to see 
it in these relative terms. Nor 
does it make sense to call for 
greater competitiveness 
against developing or former 
communist countries which 
are hard put to pay their way 
even with their comparatively 
low wages. 

Some ministers in the 
Thatcher government of the 
1980s were brave enough to 
talk of workers being priced 
out of jobs. Present-day minis- 
ters prefer to translate this 
unpalatable concept into the 
superficially softer one of lack 
of international competitive- 
ness. The effect is, however, to 
project the problem an to the 
outside world - as if somehow 
inferior performance by China 
or the Czech Republic would 
make western European unem- 
ptoyment go away. 


Source Ntftonal Mftutttar Economic and Social Rtttttcft 


are ranked to an imaginary 
league table rather than being 
content to improve on their 
awn. The big defect to talking 
about countries being more or 
less competitive is that it 
makes world trade a form of 
warfare in which one country 


The big defect in 
talk about nations 
being competitive 
is that it makes 
world trade a form 
of warfare 


can only gain at the expense of 
another. 

Thus unfortunately the lack 
of “beeT to this white paper is 
all too likely to mean pressure 
on this or another government 
to produce a much more inter- 
ventionist document which 


will really attempt to boost 
Britain's trade at the expense 
of other countries. FOr being 
more competitive means, to 
ordinary language, being more 
competitive against others. 

The positive conclusion from 
international comparisons is 
that, judged by labour costs, 
the UK is the most competitive 
of the European Union coun- 
tries except Italy, and is also 
more competitive than Japan. 
Only the US is more competi- 
tive. Even in 1990 when the UK 
entered the exchange rate 
mechanism, unit labour costs 
in manufacturing were tower 
than in G ermany and France. 

How come if America and 
Britain are so competitive that 
they have such notorious cur- 
rent payments deficits? One 
could say that it is non-price 
competitiveness, such as deliv- 
ery. design and so on. But that 
would be scraping the barrel. 
The payments deficits could be 


LETTERS TO THE EDITOR 


Number One Southwark Bri 

Fax 071 873 5938. Letters transmitted should be dearly typed a 


e, London SE1 9HL 

not hand written. Please set fax for finest resolution 


Investment authority role still unclear 


From Mr Michael Bryant 

Sir. The interim report of the 
Treasury and Civil Service 
Committee identifies, but does 
not provide an answer to, a 
fundamental problem to retail 
investment regulation. 

The committee obviously 
believes that, in its present 
form and structure, the Per- 
sonal Investment Authority 
will not be effective; major and 
fundamental changes are 
needed. But, before then, and 
as a matter of urgency, govern- 


ment should indicate if it is 
prepared to legislate to with- 
draw the ability for any retail 
investment business to seek 
authorisation from the Securi- 
ties and Investments Board 
directly. If such legislation is 
promised, the PIA can be 
developed, as the committee 
obviously believes is neces- 
sary, as a single retail regula- 
tor under the self-regulatory 
organisation regime. 

If government is not pre- 
pared to legislate, regulatory 


arbitrage will frustrate the 
accepted need for a stogie 
retail regulator; there will 
always be the choice between 
SIB or PIA. 

Consequently, if no legisla- 
tion is likely to be forthcom- 
ing, the only answer is for the 
PIA to become a designated 
agency, equal to and alongside 
the SIB. In these circum- 
stances, there would be no 
opportunity for regulatory 
arbitrage. Arguments about 
composition of governance 


would cease, and consumers 
would know exactly bow their 
adviser was regulated. 

Without a clear indication 
from government of legislation 
to remove SIB'S authorisation 
powers, the PIA as a self-regu- 
latory organisation has no real 
fixture as the single, effective 
retail regulator. 

Michael Bryant, 

Rathbone Brothers, 

University Bouse, 

Lower Grosoenor Place, 

London SWIW QEX 


Good team 
overlooked 


Frustration of auditors over liability 


From Mr Mike Dodds. 

Sir, How did Laura Thomp- 
son manage to overlook New- 
castle United to her review of 
the English season (Sport: 
“Blessed break for the game”. 
May 23)? They are surely the 
very thing she was looking for 
- a team that plays with the 
skill, attitude and flair of Man- 
chester United but which, 
more often than not, is com- 
posed solely of English outfield 
players. 

Newcastle United may not 
quite match up to Manchester 
United yet to consistency of 
performance throughout the 
season, but there is every indi- 
cation they they will do so 
very soon. 

Mike Dodds, 

<55. little Barnes, 

Dutoricb, London SE21 SSD 


From Mr G Acher. 

Sir, I am delighted your edi- 
torial, ’The liabilities of audi- 
tors” (May 23), recognises there 
is a serious issue to address: 
“. . .In principle, the argument 
for reform seems sound. It 
must be unreasonable for audi- 
tors to be held wholly responsi- 
ble for corporate disasters 
when they have not been the 
direct cause of the problems.” 

You recognise that reform 
would require radical changes 
to the law “overturning the 
principle of joint and several 
liability”, and that there is no 
likelihood of this reform being 
introduced soon. That is the 
dilemma which has resulted to 
what you term "a flawed alter- 
native" 

Auditors are well aware that 
the change proposed to Section 
310 of the Companies Act 1985 
is the second-best solution. 


However, it is surely better to 
do something to improve an 
unfair position, even the sec- 
ond-best option, than to do 
nothing at all? Readers may 
remember that five years ago 
the Liklerman report 
suggested, among other steps, 
the change to Section 310 
which the big firms now pro- 
pose, yet nothing has been 
done since than 
You also commented an the 
reluctance of firms when sued 
for audit negligence to go to 
court, particularly when the 
courts have “in practice dem- 
onstrated consumable sympa- 
thy for the profession, tightly 
restricting its duty of care . . . n 
Derisions not to go to court are 
based on a case by case com- 
mercial assessment of the 
likely cost, etc - legal costs 
have represented more than 
half the total costs of settling 


claims a gains t major firms. 
Cases like Caparo and Galoo 
have been heavily criticised in 
many- quarters and those 
defending suits would be 
unwire to rely on the courts 
taking a similar line in other 
circumstances. 

The blunt feet for the audit- 
ing profession, is that we are 
exposed at present to the vay 
real risk of massive otahne and 

of bearing a disproportionate 
share of responsibility. You 
have pointed out this situation, 
.is unreasonable. 

I hope you and your reader 
win also be sympathetic to oar 
frustration in having to put 
forward a second-best solution 
to a problem. 

G Acher, 

head of audit and accounting, 
KPMG Peat 1 Marwick, 

8 Salisbury Square, 

London SC4Y8BB 


Positive achievements of Dr Banda should also be recognised 


From Sir Henry Phillips. 

Sir, It is all too easy for 
Michael Holman and Nick 
Yotmg to brand Dr Banda of 
Malawi as an oppressive dicta- 
tor accountable only to himself 
(“Malawi slips at last from iron 
grip of Banda," May 21). Not 
much Is said about his positive 
achievements. 

I was his minister of finance 
during Nyasaland’s transition 
to independence In 1964 and 
when at that point 1 left the 
country it is not unfair to say 
that, due to a paucity of 
resources, it was an impover- 
ished colonial backwater. Dr 
Banda’s first task was to mobi- 
lise funds from elsewhere in 
the western world. 

This enabled him to finance 
a formidable programme of 
social and economic develop- 


ment. The importance he 
attaches to education mani- 
fested itself in the establish- 
ment of primary schools for 
all, secondary schools in every 
district and a university of 
which he is chancellor. The 
need to open up the country 
resulted to major road con- 
struction. a railway extension, 
more frequent air services and 
vastly improved telecommuni- 
cations. And he sought to 
encourage industrial invest- 
ment by a liberal regime for 
private enterprise. 

Even more important, his 
personal intervention in agri- 
cultural production and mar- 
keting ensured self-sufficiency 
to their basic foodstuff. Very 
occasionally, the failure of the 
rains might have made It nec- 
essary to Import maize, but 


this danger did not divert him 
from admitting a minimi hun- 
gry refugees froze the dvil war 
in neighbouring Mozambique, 
a signal act of humanity. 

Since I left Malawi and, until 
recently, I have been a regular 
visitor as a director of the 
National Bank of Malawi, nnri I 
have travelled the length and 
breadth of the country. Com- 
pared with my colonial memo- 
ries I can say without hesita- 
tion that the quality of Hfe of 
its peoples has vastly improved 
os a result of Dr Banda's poli- 
cies. Adults and children alike 
are by African standards well 
dad, well nourished, industri- 
ous and happy. 

We may detest autocratic 
rule, but strict discipline is 
often necessary to overcome 
backwardness, to Malawi, 


many individuals have suf. 
fared in the process; and the 
emotional reporting of sifoh 
incidents has unsurprisingly 
engendered a worldwide aw* 
of outrage which tends t&.oW 1 
shadow any resultant cflffiDHd 

good. 

Dr Banda, even at fib IP*" 
age and to supreme command 
has bowed to world opinion 
(while reminding us that'®*.' 
so long ago we imprisoned Mj.. 
without trialfl He set 
reforms necessary to aafaff* aItf 
human rights and to totrodflt* , 
political pluralism end be hjj 
graciously - acknowledge 
defeat by a sucxessor to wb 0 ®- 
he has pledged full support. 
Hemy Phillips, ■ *. .. 

34 Boss Court, :'V 

Putney Bill, 

London SWtS 3NZ 


iiro 






u\V 
. \-.+ 


■-is «. 

V"> f - 


FINANCIAL. TIMES THURSDAY MAY 2fi TQ<M 


35 


\ 


.. '<• 
*-\ 


FINANCIAL TIMES 

Number One Southwark Bridge, London SE1 9HL 
Tek 071-873 3000 Tdet 922186 Fax: 071-407 5700 

Thursday May 26 1994 


More knocks 
for the PIA 


Few disinterested observers would 
argue with the Treasury select 
committee’s assertion that the 
British retail financial services 
Industry has for too long been 
characterised by incompetence 
and nrismsfllng. The irony is «m t 
the' Personal Investment Author- 
ity (PIA), a watchdog that has not 
yet even been recognised by the 
Securities and Investments Board, 
has attracted loader «nd more 
damag ing rrWrism tVwn^ thA inriafr- 
ing regulatory bodies that so sig- 
nally failed to rfierfc the abuses 
that have come to light. The risk, 

amid st aH Hu* KnHahalw> Wwt tmw 

surrounds the future cf the PIA, is 
that the need for mare rigorous 
and speedy investor protection 

wffl.be overlooked. 

The credibility of the PIA’s 
chairman, Mr Joe. Palmer, has 
und eni abl y been damaged % an 
unfortunate gaffe before the select 
commit tee and bynrisdemeanoiirs 
committed by Legal & General, 
which be used to run. Yet ft is not 
clear that the committee is right 
in thinking that a hew cfarirnem 
would help at this paint Any new 
candidate would be unlikely to 
command universal confidence. 
The job calls for an wndmyHtaTiiHwg 
of the industry, the respect df con- 
sumer groups and the public, and 
a deft fr«nd in dflaitng with pottiA- 
tians. Even if such a paragon 
could be found, the loss of yet 
annthw ch ai r m an, after the depar- 
ture last year of Sir Gordon Dow- 
ney, would in itself be damaging 

The priority at this point should 
be to implement those of the 
select committee's xecommenda- 
ticns that are designed to put this 


rickety show on the road as 
Quickly as possible. Calls for 
changes in the balance of the PIA 
board to strengthen pub Ac inter- 
est representation, monitor- 
ing of commission-ooly nigum 
and individual registration of 
s a les m en and advisers are emi- 
nently sensible. Should Mr Palmer 
foil to deliver on such mtnimn 


requirements of- the committee 
within a reasonable time of the 
HA being recognised. Bum the 
case for replacing him wiH be 

Tmmw inw Mhlp 

. The wider question concerns the 
logic of the SB'S c onUtmhig rote 
in retail regulation. This is, in 
effe ct , a fifth wheel -an the regula- 
tory coach, which opens up unde- 
sirable scope for regulator? arbi- 
trage. The PIA is not 
self-regulatory body along the 
Hmm originally envisaged by the 
Financial Services Act. Tbs objec- 
tions to it bath setting standards 
and ragnlating practitioners is no 
longer relevant; and toe case for 
an intermediate body, the SIB, 
between the HA and the Treasury 
has lost its rationale 
But if the HA were to become a 
'd e sign a ted agency*, such as the 
SIB, it would not have legal power 
to go down the desirable path of 
individual registration or to 
impose fines. That, along with 
tBrhriTMil legal problems, moana 
that legislation would be neces- 
sary to knock the s tr u c ture into 
coherent shape. But toe Treasury 
p r pfai n to. hitto hfthiiui the protec- 
tive shelter of the SIR hi view of 
the magnitude of past fintures in 
the area, that is abridge the gov- 
ernment most eventually cross. 


European peace 


Today's EU conference . on 
“staMHiy in Europe” is the brain- 
child of the man who will open it, 
Mr Edouard Balladur. Nearly a 
year aeo he luimrfiad hu plan for 
a “stability pact” which the 
EU would coax central and east 
European states into aatt i ing their 
bilateral disputes over frontiers 

and national minorities. 


EU, having ignominiously 
in Yugoslavia, should taka timely 
action to prevent the same sort of 
thing happening elsewhere. It 
tiiimiM use its undoubted leverage 
over ex-communist states to per- 
suade them to work together, 
rather as the US did in western 
Europe with the Marshall Flan. If 
these countries were to join the 
EU, they must not bring unre- 
solved conflicts in with them. 

For aQ that, there were many 
reservations both among France’s 
partners and among the countries 
concerned. The mention of border 


disputes was felt to he unhelpful: 
so state in Europe officially lays 
claim to its neighbours’ territory, 
but all too many would feel justi- 
fied in doing so once toe subject 
was opened. To Uni the question 
to national minorities was doubly 
i w i r n rtim afa* ginnn one of the main 
arguments used against giving 
rights to such minorities is pre- 
cisely the fear that this would 
prove the first step towards loss of 
national territory. 

The proposal has since been 
refined so as to avoid, or at least 
attenuate, those objections. But it 
is dear that the. central E ur ope an 
countries attending still do so 


with strong r eservations, except 
pprhapg fo toe mm of BiiiB By 

whose outgoing nationalist gov- 
ernment (now disavowed, by the 
voters) made agftatfan an b ehalf 
of its “Mth «iwi kin” in neighbour 
tog. countries one of the main 
planks of its foreign policy. The 
other country whiidh seems 
increasingly anxious to do Hm> 
same is Russia, whose foreign 
mihj&ter Hr Andrei Kozyrev will 
no doubt stress toe fame in Us 
speech. That very feet wffl. make 
Russia’s neighbours even less 
keen on the whole project. 

Both central and east European 
states can legitimately object that, 
like the victorio u s sTHar in 1919, 
the EU is trying to impose on 
them a standard tf minority rights 
that it does not apply to itself 
And, while "kin states” can some- 
times {day a constructive role in 
managing minority issues - as 
Austria has in the Raibm South 
Tyrol and Ireland is trying to do 
in Ulster - it is dangerous to give 
such states a general licence to 
interfere in their neighbours’ 
affairs, especially when they have 
toe size and record of Russia. 

to so for as such issues can be 
handled internationally, it is best 
done discreetly and an the basis of 
a stogie, generally accepted set of 
principles. That is the approach 
already adopted by the CSCE, 40 
of whose 52 member states will be 
represented in Paris today, 
through its ffl gft Commissicaier on 
National Minorities, Mr Max van 
dor StoeL The EU’s most valuable 
contribu tion could be to give his 
efforts quiet support. 


Raising skills 


When the government published 
its white paper on competitiveness 
on Tuesday, it was quickly 
attacked for the absence of dra- 
matic initiati ves. Eschewing such 
grand gestures was sensible, given 
the history of UK industrial pofiey 
and its poor record of picking win- 
ners. A new study from the 
National Institute of Economic 
and Social Research, suggests that 
less glamorous micro-economic 
yihrtttg ran do mfiro to enhance 
business performance than 
heavy-handed government action. 

The study analyses the ski l l s 
and performance of engineering 
and ehatntoai companies in Ger- 
many and the UK. In both sectors, 
the German companies have work- 
farces that are better qualified 
than those in the UK. On the shop- 
floor, this is a consequence of the 
high level of era ft qualification 
achieved by the German appren- 
ticeship training s y s t e m . Among 
supervisors, toe German compa- 
nies can draw on the technically- 
trained ma tt er while only a band- 

ful of British sqpoTlsars have spe- 
cific t raining . Tackling these 

shortcomings in the UK’s skills 
base is righfly at the centre of toe 
competitiveness package. 


But the researchers also found 
sI plMeant itiftwmqn fn the skills 
available at graduate and post- 
graduate levels. In engineering, 
the German enrnpaniea have more 
than doable the proportion of 
tnrfmtoflt and bfg har degree gradu- 
ates of their UK counterparts. As 
result, British companies are 
less innovative in their products. 
They also flirt it harder to make 


incremental production changes 
to remain c o mpeti tive. It is hardly 
surprising that their productivity 
trails the German plants, or that 
they are “followers” in technical 

In the chemical industry, com- 
panies in the two countries 
employ numbers of gradu- 

ates. But German companies have 
a much higher proportion of post- 
graduates which the study 
beHewes will help them, cope better 
with the accelerating pace of inno- 
vatfam. Postgraduates can draw on 
spedalist knowledge and contacts, 
«mtl improve knowledge transfer 
from research institutes to busi- 
ness. Yet UK employers tend to 
p r p fa r first degree graduates and 
regard postgraduates as over-spe- 
Slacking to commerc ia l 
and practical skills. 

Wafafog the BfcfflB base of key 
industries thus involves much 
more training- Encouraging 
business to make better use of the 
UK’s a*»*aTi«mt yiwiai base and to 
harness the skffls of postgraduates 
is also vital. Last year’s science 
white paper launched a series of 

initiatives to encourage this, 
in ^niMTig a new research master’s 
degree. This will combine a 
grounding to research tec hniq ues 
with sVflls such as management, 
team working and communica- 
tion. 


unlikely to grab the headlines or 
win many votes in toe po litica l 
marketplace. But if successful, 
they could make a signi fica nt con- 
tribution to improving toe perfor- 
mance of British business. 


T he lSth-cantnry author 
Henry Fielding had a 
dear Idea of how power- 
ful a device a lottery 
could be for raising 

money. 

“A lottery is a Taxation 
Upon all the Foots m Creation; 
And Beaven be prais'd 
R is tasCy nosed. 

Credulity is ahoays in Fashion." 
The sang was sung to Fielding's 
play The Lottery performed at the 
Drury Lane Theatre to 1732. 

Adu es London, to toe more sober 

Mk»i k- miiMllng x of flie Tngtifntinn (f 

Civil Engineers, nwr toe Hon*” of 
Comm cats, there was little c re d ulity 
yesterday when Camelot was 
unveiled as the winner of the 
fiercely contested battle for the 
National Lottery licence. 

There was, however, a lot of opti- 
mism that enormous sums can be 
raised for five “good causes” speci- 
fied by the government through the 

first nationwide lottery in toe UK 
for more than 150 years. 

fiarn«4n fr fe f nTArtH^tog that d uring 

the seven-year term, of its licence 
toe total turnover for the National 
Lottery will amount to £S2bn, and 
that £9bn will be distributed to the 
good causes - the Arts Councils of 
the UK, the Sports Councils, the 
National Heritage Memorial Fund, 
th e Minpmiimq Commission mb 
the National Lottery Charity board. 

la its “peak year" of operation, 
Camelot, which has kmg been seen 
as toe potential victor to the lottery 
contest — aWtwng h no ntHrtai word 
of the actual winner leaked - envis- 
ages a turnover of SSAba. and a pay- 
ment to the good causes of £L6bn. 
Camelot, which plana ot fatm* the 
lottery in early November, believes 
it will be able to hand over £750m to 
its first foil year of operation. 

Camrtot brings together five large 
organisations: Cadbury Schweppes, 
the confectionery group, DeLaRae, 
the banknote and security printer, 
GTECH, the US lottery equipment 
manufacturer, ICL, the computer 
grow, and Ratal the electronics 
flnfl cun ufiTTtiffitiraw gpw p. 

Mr Tim Holley, the quietly spo- 
ken Racal executive who became 

fJrirf nf fhmdrf , yw. 

today. "This is a very, very excit- 
ing project” Be said not only would 
toe lottery be the largest to the 
world but it would also involve the 
largest launch of a consumer brand 
to toe UK. 

The game itself could hardly be 
more simple. A player will pay £1 
and choose six numbers out of a 
possible 49 on a "play card.”. The 
numbers do not have to be placed in 
any p*Htoni*r order. Three co r rect 
numbers will probably be worth a 
£10 prise, four, £50400, five, several 
thousand pounds. Pick the correct 
six numbers and you hit the jack- 
pot, which could be betweai £3m 
and £Sm each week. 

“It's easy, it’s simple, and it will 


Camelot draws 
the winning ticket 

Raymond Snoddy on the winners and losers in the 
hotly contested battle for the UK lottery licence 



IbqiMma 

Prise draw: Sir Ron Dealing, chairman of Camelot, winner of the licence to operate the UK’s National Lottery 


be a lot of fun,” said Mr David Rigg 
Camelotis mmmnniBitiwig director. 

The draw of the winning numbers 
win take place live an prime time 
television an Saturday nights. Cam- 
elot believes the p rog ra mme could 
shoot straight to the top of the rat- 
ings with possible audiences of 23m. 
Though no television contracts 
have been signed, Camelot says toe 
broadcast wfll “probably” go to the 
BBC, partly because the corporation 
can offer extensive live radio as 
well as television coverage. 

The company has not yet decid e d 
whether the draw win he the cfonax 
of a 40-minute tight ente rtainment 
show or a five-minute programme 
devoted entirely to the draw, or 
whether the BBC win main* toe pro- 
gramme in-house or use an indepen- 
dent producer. A celebrity guest 
win inevitably be Involved. 

The total prize pay-out ratio over 
the period of toe licence, which 
runs to the end of September 2001, 
wfll be mor e than s&5 per cent of 
net sales after the deduction of a 12 
percent lottery tax on gross sales. 
The good causes’ money win range 


from 25 per cent to 80 per cent of 
total revenues. 

One of yesterdays losers, who 
had promised to offer an profits to a 
combination of good causes and 
charities, was Richard Branson, 
chairman of Virgin group. He was 
not alone in his disappointm ent. 
Seven applicants foiled, a number of 
whom had been working on the 
project for several years. 

The unsuccessful bidders, ranging 
from The Great British Lottery 
Company, which hwhitiAq Granada 
and Carlton fl n mmnniefltinns . to Mr 
Branson’s UK Lottery Foundation, 
and tha H.M 

- bid, spent millions in putting to 
their ennftnrtimrm together. 

Mr Pete Davis, the director-gen- 
eral of the National Lottery who 
finally took the crucial dwrfsinn laid- 
week, made it dear that hfi had tin 
doubt that Camelot was the stron- 
gest applicant The company nmw 
near the top or at the top of every 
category in which the applicants 
were assessed, he said. 

They were "amongst the highest” 
to the forecasts for money to be 


raised, and plan to retain only 11 
per cent of revenues as combined 
profits and operating costs - by far 
the lowest on offer. Out of this will 
came 5 per cent sales commission to 
retailers. This will leave profits of 
less than 1 per cent of fog “Came- 
lot was also by a kng way the best 
prepared,” said Mr Davis. 

The only thing that might have 
stopped Camelot winning the 
licence was controversy surround- 
ing GTEC, which has been accused 
by rivals in the US of Irregularities. 
The company has never been found 
gtritty of any wrongdoing. 

T am satisfied that we have a full 
and comprehensive picture of all 
the people involved, and I am confi- 
dent to my decision that all those 
involved with Camelot and Camelot 
itself are fit and proper for that 
role,” Mr Davis said. 

The lottery will not just make 
winners of the players. Camelot 
itself is the most obvious winner so 
far. Mr Brace Jones, leisure analyst 
at the stockbroker Smith NewCourt, 
marirad Racal, which will benefit 
from communications contracts. 


and Cadbury Schweppes, as "buys”, 
and de La Rue a "bold” to a recent 
forecast if Camelot won. 

But there are likely to be a large 
number of other business winners 
from a lottery that plans to sell its 
first tickets in 26 weeks - to early 
November. 

The GTECH lottery machines will 
be mwfe at ICL's plant at Ashton- 
under-Lyne and contracts will soon 
be awarded for the provision of tick- 
ets and later the scratch card games 
which will be launched next year. 

C amelot will directly 
employ about 500 at 
Rickmansworth In 
Hertfordshire, and at 
Aintree on Merseyside, 
but more jobs will flow from the 
retail operation - selling lottery 
tickets in both shops, from indepen- 
dent comer stores to garages, super- 
markets »nJ new sagents 
Camelot plans to have 10,000 out- 
lets selling tickets by the November 
launch, and within two years 27,000 
outlets connected to the largest 
computer network to the UK, plus a 
further 12,000 outlets selling only 
scratch cards. 

Some observers have suggested 
that the total number of jobs gener- 
ated directly or indirectly could 
reach as Ugh as 8SJW0, though the 
figure is probably optimistic. 

The construction industry could 

be among those benefiting greatly 
from the proceeds of the National 
Lottery. Mr Tutor Brooke, National 
Heritage secretary, has made it 
dear that he expects the money to 
be “spent mainly on capital pro- 
jects” to provide new and lasting 
improved facilities, such as sports 
stadiums and concert halls. 

Even Mr Branson, who had 
pledged to raise more than £llbn 
for charities and good causes, and 
angrily attacked the choice of Cam- 
elot yesterday, contributed to the 
lottery o u t com e by improving the 
income of the good causes, causes. 

First Mr Branson and his partner 
Lord Young, the former Department 
of Trade and Industry secretary, 
generated publicity for the lottery 
and dominated front pages when 
the hide were submitted to Febru- 
ary by bringing along Desert 
Orchid, the famous racehorse. More 
significantly, by promising to give 
all his profits to the good causes 
and amp charities of his own, Mr 
Branson forced all the other bidders 
to reduce their own profit margins- 
As Mr Davis observed yesterday, 
the bidding process had worked 
wen, to forcing up the money for 
good causes and forcing down the 
amount absorbed by profits and 
operating costs. 

It remains to be seen, however, 
whether Fielding was right in say- 
ing that a lottery is "easily raised”, 
even when the sums involved total 
BBhn and the odds a gainst winning 
a jackpot are roughly 14m to one. 


Too many dollars, not enough sense 



PERSONAL 
VIEW 


It still amazes me 
that the US dollar’s 
weakness has 
caused so much sur- 
prise. The consen- 
sus may he crack- 
ing, bat most people 
still ream to believe 
the outlook is prom- 
ising or, more bluntly, that long 
positions wifi be rewarded eventu- 
ally. Fart of t he reas on far th e sur- 
prise and c ontinui ng optimism is 
the failure to grasp the real issues 
underlying the dollar’s weakness. 

Most commentaries on the dol- 
lar's probkms have ignored or over- 
looted the simple words “balance cf 
payments deficit*. It is here the root 
cause of the dollar’s problems lies. 
The financing needed, to terms of 
required capital inflow, has started 
to fetter to the face of real interest 
rate levels that are still too weak, 
relative to Germany and Japan, for 
exampift Unless the US authorities 
are prepared to agree soon to a sub- 
stantial increase to US interest 
rates - for example, an increase to 
the Federal Funds rate to about 6 
per cwwt, implying lon g yields of 
about 8 to &5 per cent - the value 


of the dr>n«r will erode by a farther 
7 to 10 per cent 

The last significant US balance of 
payments problem was to 1987, 
some time after the 1985 Plaza 
agreement to secure further depre- 
ciation. Then, the US current 
account deficit reached a record 
yifiTbn. equivalent to 3.7 per cent of 
gross domestic product But at that 
time the US still enjoyed substan- 
tial inflows of private, long-term 
investment capital of about $60tm. 

In 1993, the US current account 
deficit was a mere $109bn, or L7 per 
cent of GRIP, but net long-term capi- 
tal (securities transactions and 
direct investment) recorded an out- 
flow of same $40 bn. Thus, compar- 
ing 1967 and 1993, the sum of the 
current account deficit and net 
long-term ca pit al flows was about 
the same, at 12 per cent of GDP. 

This year and in 1995, America's 
balance of payments is set to reach 
real records. We forecast the cur- 
rent account deficit will rise this 
year to about $145hr*$150bn and In 
1965 to about $170bn, or same 2J» 
per cent of GDP. But we have to add 
long-term capital outflows, which 
are assumed at some $50bn to $60bn 


US Balance of Payments 


Staprmu* 1HS-BS 1*M2 1M tSM* 

Curort account -1344 

-55l5 -1092 -145 

Long-tam capbl +75 JS 

-&0 -402 -50 

Bask balance -5&5 

-S1.5 -14S.4 -IBS 

Financed nMy by 
netoftkUcapfai 257 

320 71.1 

Hot baiting Run 25 A 

22S 48J 

* breast 


a year - 0.75 per cent of 
GDP. 

As tiie table shows, the US feces 
the problem of obtaining stable and 
secure financing of the growing 
amount of dollars it is creating via 
its balance of payments deficit, at a 
time when the main vehicles far 
such financing are suspect Central 
banks have acquired huge increases 
in dollar reserves already and net 
banking flows cannot be relied an. 

The US is already the world’s 
largest net debtor. Its net interna- 
tional investment position has 
swung from +$230bn in 1977 to 
-$34bn to 1967 and to an estimated 
-$588bn at the end of 1963. 

By comparison, to Japan, tire cur- 
rant account surplus ($l30bn to fis- 


cal 199384) may fen on a temporary 
cyclical baas, but medium-term 
prospects favour a renewed widen- 
ing towards the middle of the 
decade as Japan toe learns to live 
with a stronger yen. Upward pres- 
sure on the yen has less to do with 
US trade rhetoric than with the fact 
Japan is not recycling its current 
account surpluses as in years gone 
by. Foreign inve s t ment is not that 
appealing to companies trying to 
rebuild after the domestic asset 
price collapse and coping with a 
strong yen. And in Germany, unifi- 
cation led to a collapse of the coun- 
try’s current account surplus, text 
its trade balance is on the rise again 
from 1994 and it continues to enjoy 
a sizeable ea pjfo i inflow. 

The task of absorbing about 
$200bn a year is problematic 
because US real interest rates are 
inadequate to make US investors 
change the structural diversifica- 
tion on which they have embarked 
or make foreign investors, already 
long of dollars, buy more. It wfll not 
count for much if the Bundesbank 
reduces nominal Interest rates once 
more over the next six to nine 
months, say to about 4 to 45 per 


cent, if this keeps real D-Mark rates 
at about 2 to 2J& per cert. In the 
bond market, real yields are run- 
ning at about 4 per cent The US 
Fed would have to offer considera- 
bly in excess of that to reactivate 
capital flows that helped to push 
the dollar back up on a medium- 
term view. Moreover, it would have 
to “shock" the markets. The trouble 
Is, it knows it would shock the US 
government and domestic financial 
markets, too. 

The question is whether the US 
authorities would permit such mon- 
etary tightening and, if not, 
whether they may be forced Into it 
by the extent of US dollar depreda- 
tion. Either way, the issue for the 
US - as it is for markets - is when 
araj under what circumstances US 
aut h oriti e s will pay attention to the 
imbalance between savings and 
investment, which is resulting in 
the supply of far too many dollars. 

George A Magnus 


The author is chief international 
economist, &G. Warburg Securities 


Observer 


A vision of 
Scholey 

■ So what next for Sfr David 
Scholey, the man responsible for 
asganhttng Britain's only half - 
decent competitor to Wall Street’s 
powerful investment banks? 

After 30 years on the job, he has 
handedfahfanoticeasadirector 
and plans to retire upstairs to jdn 
the 88-year-cld Lord Roll in the 
president’s offiep- 

Warburg stresses that Sir David 
wfll continue to devote his time 
“largely to the business of the 
group”. But he Is not yet 60, and 
the young turks at Warburg might 
prefer it if he wait off and did his 
own. thing for a white and left than 
to ran the show. 

There is no shortage of jobs. If 
British Telecom ever dedded to 
sptt the rate of chairman and chief 
executive, Sir David, as one of ST'S 
senior directors, would be a natural 
chairman. 

Then there fa the question of 
the succession at GEC, where both 
Leads Prta-'and Wetostock are 
getting a bit long fa the tooth. Sir 
David would be a diplomatic, choice 
as chairman white the City derided 
whether young Simon Wetostock 
was up to taking over from hfa dad. 

K Sir David really has tired of 
file commercial grind, there is 
always the BBC, whose board he 
1 ms just j oined 'Hie rhainiMm' g 
job does not fell vacant until 
November 1996, but Marmaduka 


Hussey is over 70 and might be 
persuaded to take early retirement 
ffiven that Sir David didn’t get 
the Ttenk of England governor's 
job, how about giving him the BBC 
as a consolation prize? 

ffa hard to Him 

disappearing from public view for 
long: 


Own goal 

■ Sprint had better get a move 
on. The US long-distance phone 
company thought it had its eye 
an the ball when it sent a 24-page 
booklet extolling its services to 
journalists coming wh at it calls 
“tire world’s greatest spurting 
event” - football's World Cup to 
Ho bald In tha T7B ftit mrnniar 
“As you make your preparations," 
it said, “youmaynot be thinking 
about things as simple as phone 
calls. We are." 

Not enough, unfortunately. 

Nbwbere in all the bumf was there 

a contact phone or fax number. 


Back to the core 

■ Why has Max Chapman. 

Nomura’s hard-hitting New York 
chief; cancelled his plans to come 
to London? 

Tokyo had been comSSgo? the 
Chapman magic, which transformed 
the firm’s sleepy New York 
operation into a significant Wall 
Street presence, to work similar 



wonders with its Less-than-dazriing 
London outfit. 

The official version of events 
thereafter is that Chapman decided 
that running New York and London 

together would be a bit much. - 
and might indeed jeopardise what 
he had achieved so far in America. 
Wall Street, however, believes 

that Chapman did nt* tate 

London job either because he asked 
for too much in the way of pay and 
perks, or because management in 
Tokyo suddenly got cold feet about 
bringing Chapman’s loose and 

a g g ressi v e managPiwgnt gtyte fn 

Lo ndon. 

Nomura insiders counter that 
a compensation package had 


already been agreed upon by both 
sides, and contend that his family’s 
opposition to the move was a very 
significant factor to the volte face. 

Chapman must believe there is 
still plenty to occupy him in the 
Big Apple, for he has just renewed 
Ms contract He could make a start 
by trying to recoup the losses 
sustained fa the volatile markets 
of recent months. 


Much ado 


■ Sudi are tiie troubles of Tansu 
Ciller, Tu r k ey ’ s prime minister, 

that mm a Seeming l y hmnrairHm 

family event, such as this week’s 
visit to the US to attend her son’s 
graduation day, is recast as amqjor 
crisis. 

Entirely omitting the real reason 
for her visit, the country’s leading 
newspaper has made out that it 
was her husband Oaer. under the 
heat of scandal allegations, who 
was fleeing the country to live to 
America. 

There have indeed been periodic 
allusions to business wrongdoing 
when Ozer was general manager 
<rf the collapsed Istanbul Bank, 
but we ar e hardly talking 
Whitewater hoe. 

Again, Ozer may use his wife's 
position to push a few of his 
business cronies, but he does not 
appear to have much interest in 
broader policy questions. She so 
demonstrably wears the trousers 
-indeed, she started off by forcing 
him to take her maidm name, a 


feisty move, even by western 
st a nda r d s . 

Mnnh mor e likely is that Ozer 
means to brush qp his American 
contacts. He was alter all 
franchise-holder in Turkey for the 
7-Eleven convenience store chain 
before he very publicly resigned 
when his.wffe took on the Turkish 
leadership last June. 


Over and out? 

■ Is there life after the Beeb for 
John Tusa? The former head of 
the World Service, who quit after 
being denied the chance to apply 
for the director-generalship, then 
had a discordant eight-month 
sojourn as president at Wolfson 
College, Cambridge, before walking 

out saying that he had better things 

to do with his time. 

His name was bandied about for 
foe Arts Council job. He didn’t get 

Now London News Radio, of 
which he fa non-executive 
chairman, may be gobbled up by 
Reuters even before it goes on air. 

If this happens, Tusa could be 
looking for another part-time job. 

Of course, he cobid always do a 

few more shifts presenting the One 
o’clock news for toe BBC. 


Flesh-eating flash 


bacterium cm the rise in Norway 
By Stella Bugge”, 


r 




16 



vfA m 

\ FLEXON/CS 


A world leader in 
•” flexible connectors 

Tel: 0923 77B547 
A Division of Senior Engineering Group pic 


FINANCIAL TIMES 

Thursday May 26 1994 


FRUEHAUF 

TRAILER s 


Carrying the 
nation's goods fjjT*"* 


Asian entrepreneur markets first 
listed fund to invest in Burma 


By Alexander Nicou, Asia EcBtor, 
In London 

A Hong-Kong based securities 
company, controlled by Mr Rob- 
ert Kuok. the Malaysia]i*Chiziese 
entrepreneur, is marketing the 
first listed investment fund tar- 
geted at Burma. 

The fund, intended to attract 
SI 00m from institutional inves- 
tors, is the latest indication of 
the ending of the Isolation of Bur- 
ma’s repressive military regime. 

South-east Asian countries 
have recently adopted a policy of 
“constructive engagement” with 
Burma. Prime minister Goh Chok 
Tong of Singapore, one or the 
main foreign investors, visited in 
March w ith a group of business- 
men. Thailand has invited Burma 
to attend July’s ministerial meet- 
ing of the Association of South 


East Asian Nations. The Myan- 
mar Fund, using the name given 
to Burma by its government, will 
be listed in Dublin. 

It is being established by Kerry 
Securities and managed by Kerry 
Investment Management, both 
Hong Kong-based arms of the 
Kuok group. Mr Jeremy Bak in, a 
London-based assistant director 
of Kerry Securities, said: “It's 
really a venture capital fund. 
Burma is a blank sheet: there's 
nothing there in the way of 
industry". 

Since Burma has no stock 
exchange, the fund will invest in 
joint ventures and unquoted com- 
panies. It may also buy old Bur- 
mese debt issues and shams in 
non-Burmese companies with 
direct exposure to Burma. 

Mr Kuok has a wide range of 
Asian interests. He made his for- 


tune in sugar and other commod- 
ities, then expanded into hotels 
(including the Shangri-La group), 
property and other sectors, espe- 
cially in China, where his ven- 
tures include Beijing’s World 
Trade Centre, and in Hong Kong 
where he controls the South 
China Morning Post 

The investments to be made by 
the fund are expected to reflect 
the interests of the Kuok group. 
The fund is likely to put $20m 
into a business park in a venture 
with the Bunaese-Chinese Ho 
family, based in Thailand. Mr 
Hal pin Ho is a director of the 
fund and of a company advising 
its managers. 

It will also invest in hotels and 
plantations. Tourism, telecommu- 
nications, a deep-sea port and 
hanicg are other possible invest- 
ment opportunities. 


Mr John Jackson, campaigns 
director for the Burma Action 
Group, said it was hard to invest 
in Burma without bolstering the 
military regime: "The vast major- 
ity of the economy is controlled 
by the military or their families. 
We think it is very difficult to 
invest ethically." 

The junta, called the State Law 
and Order Restoration Council 
(Store). has been seeking to open 
the country to foreign invest- 
ment ? nd hq s introduced 
reforms. But Mr Jackson said it 
had not loosened control suffi- 
ciently to attract significant 
investment 

Store ignored the results of a 
1390 genera 1 election won by the 
National League for Democracy. 
It has held Ms Aung San Sun 
Kyi, XLD leader, under house 
arrest since July 1989. 


Greenspan 
warns on 
derivatives 

Continued from Page 1 

Mr Edward Mar key, chairman 
of the House subcommittee, has 
been pressing for early legisla- 
tion, particularly to extend regu- 
lation to affiliates of securities 
and insurance companies whose 
derivatives activities can escape 
control of federal regulators. 

In contrast to Mr Greenspan, 
Mr Brian Quinn, the Bank of 
England's director for banking 
supervision, yesterday repeated a 
call for the derivatives trading 
subsidiaries of US securities 
firms to be brought under regula- 
tion. Mr Quinn said he was 
“more agnostic” about increased 
regulation of other participants 
in derivatives markets. He said 
the case for regulating hedge 
funds “seems to me not to have 
been made". He said principal 
market maker s should be super- 
vised on a consolidated basis, but 
that “the markets seem to be 
developing their own safeguards 
and sanctions”. 


Grachev calls for wider 
co-operation on security 


By Bruce dark hi Brussels 

General Pavel Grachev, the 
Rnss inTi ripfenne minister, yester- 
day urged the creation of a new 
European security order involv- 
ing all European nations. 

hi a speech to his counterparts 
in Nato and eastern Europe, he 
chided western nations for under- 
estimating the scope of the Con- 
ference on Security and Co-opera- 
tion in Europe, a 52-member 
group which includes the US, 
Canada, all European states and 
former Soviet republics. 

He called for the CSCE to be 
granted powers of “permanent 
leadership and co-ordination" 
over Nato, the European Union 
and the Commonwealth of inde- 
pendent States on security mat- 
ters. 

Gen Grachev called for regular 
consultations between Russia 
and Nato on “the whole spectrum 
of European and world security 
problems". He added: “This 
mechanism would be a practical 
step towards forming a viable 


system of collective security and 
stability in Europe under the 
aegis of the CSCE.” 

Diplomats said the appeal was 
a deft move to recapture the 
political initiative «nd capitalise 
on euphoria created by Russia’s 
promise to join Nato's Partner- 
ship for Peace plan. 

Nato is keen to encourage Rus- 
sia to forge closer ties with the 
west after recent disagreements 
over allied action in Bosnia and 
arms control, but it wants to 
avoid suggestion of a privileged 
relationship which might harm 
the interests of eastern European 
states. 

Without withdrawing his 
pledge to join the programme, 
which calls for joint exercises 
and exchange of knowhow, Gen 
Grachev said a much broader 
spectrum of co-operation between 
Russia and Nato would be 
mapped out before Russia signed 
up to PFP. This contradicted 
Nato's stress on the need for 
countries to sign the PFP entry 
form first and elaborate details 


later. Some IS countries have 
already adhered to the scheme. 

In a further challenge to the 
western new that PFP treats all 
members equally. Gen Grachev 
presented an 8-page list of 
“parameters" to underpin Rus- 
sian participation in the project 
These parameters go beyond the 
relatively te chnical remit of the 
PFP and reiterate Russia's 
demand for the role of the CSCE 
to be upgraded. 

Among the most controversial 
demands was for the broader 
Russian-Nato relationship to 
include mechanisms for consulta- 
tion between Moscow and the 
alliance, both on a regular basis 
and in emergencies. Diplomats 
said Russia's maTimnm goal was 
clearly a promise that Russia 
would be consulted before any 
use of force by the alliance. 

However. Mr Manfred Warner. 
Nato secretary-general, has 
insisted privately that any con- 
sultation with Russia should be 
on a case-by-case basis and at the 
discretion of Nato. 


November launch plan for UK lottery 


By Raymond Snotidy In London 

Camelot, winner of the licence to 
run the UK national lottery - the 
first for more than 150 years - 
will today push ahead with plans 
to la unch the mnlti-billion proj- 
ect In early November. 

The consortium, whose mem- 
bers include Cadbury Schweppes, 
the food and drink group, and De 
La Rue. the bank note printer, 
are forecasting total sales of 
£32bn ($48bn) during the seven 
years of the licence and pay- 
ments of £9bn to good causes 
such as the arts and charity. 

Camelot beat seven other con- 
sortia to win the licence, includ- 
ing the bookmakers' favourite, 
the UK Lottery Foundation, put 
together by Mr Richard Branson 


and Lord Young, a former UK 
cabinet minister. Unlike the 
other bidders Mr Branson, the 
Virgin chairman, was planning 
to give aR the profits to charity 
and good causes. 

Mr Peter Davis, director- 
general of the national lottery 
who took tiie decision on award- 
ing tiie licence, said yesterday: 
"Camelot was clearly the all- 
round best applicant I have no 
doubt about that They were 
strong in every department” 

The decision clearly angered 
Mr Branson who said last night 
he would ask Mr Davis for an 
explanation of his decision. 

"We feel that he has not taken 
into account at all the market 
research that shows that more 
people will buy more tickets if 


they know all the profits wQl go 
to good ca u ses, " he said. 

The Branson bid predicted 
total sales of £37bn over the 
licence period, with £10.5bn 
going to the governm ent's good 
causes, which apart from the 
arts and charities include the 
national heritage, a new mfilen- 
ntum fund and sports. Mr Bran- 
son believed a further £6 00m 
would have bear raised for other 
charities of his choosing. 

Although the national lottery 
office did not draw up a formal 
shortlist, Camelot was hardest 
pressed by Lotco, a consortium 
put together by Rank Organisa- 
tion, the UK leisure group. Mr 
Branson came next as a serious 
ca n dida te , and tiie other main 
contender was a consortium put 


together by Tattersalls, the Aus- 
tralian lottery operator, and 

N. M. Rothschild. 

The Branson bid and the prom- 
ise to give aR the profits away 
meant that many of the other 
bidders had to reduce their profit 
levels. It is believed that the 
Camelot profit levels are much 
lower than has widely been 
believed and are well under 1 per 
cent of sales and probably about 

O. 6 per cent 

Apart from Cadbury and De La 
Rue, the Camelot consortium 
includes Racal Electronics, the 
computer group ICL, and Gtech, 
a US group which is involved in 
62 lotteries around the world. 


Camelot draws the winning 
ticket, Page 15 


FT WEATHER GUIDE 


Europe today 

A low pressure system near Land's End will 
slowly move eastwards. Renn wfn spread over 
England and northern France. The rain will be 
heavy and there wfil be some thunderstorms. 
The Benelux countries and Germany wiU have 
sunshine in the morning, but later in the 
afternoon it wfH rain quite heavy. It wlU also be 
unsettled in northern Scandinavia, Poland, the 
Baltic states and the northern Balkans where 
there will be showers and a Bttte sunshine. A 
high pressure area, centered west of Norway, 
will bring dry conditions with broken clouds In 
Scotland and southern Scandinavia. Tropical 
temperatures combined with plentiful sunshine 
win persist in Italy and Greece. 

Five-day forecast 

On Friday, the heavy rain will move into the 
northern Balkans, Poland and eastern Germany, 
while in western Europe, it will become mainly 
dry with broken ctouds. Southern Europe wifl 
stay sunny and warm. During the weekend, the 
weather wai improve. On Sunday, a few 
thunderstorms will develop over Spain and 
southern France. Next weak, the warm, but 
thundery conditions will spread northwards, 
affecting northern France, Eng laid and the 
southern Benelux countries. 


TOOAY’S temperatures 


Abu Dhabi 

Accra 

Alpha ra 

Amsterdam 

Athens 

Atlanta 

B_ Aires 
B-ham 
Bangkok 
Sanatoria 



Stratton at 12 OUT. Temparstures maxhrunfor day. Forecasts by ueteo Consult of tf» AfefherfarKfs 


Msdmurn 

Baftng 

doudy 

20 

Cwacas 

fair 

30 

fjHrnt 

Belfast 

rain 

14 

Canflft 

raki 

15 

atm 

40 

Belgrade 

Mr 

31 

Casablanca 

Mr 

24 

Ur 

33 

Benin 

ft* 

23 

Chicago 

fair 

15 

fair 

31 

Bermuda 

f* 

26 

Cologne 

shower 

20 

shower 

TO 

Bogota 

cloudy 

22 

Dakar 

ft* 

29 

sun 

33 

Bombay 

thwd 

33 

DaSas 

fa fc 

31 

aw 

31 

Brussels 

rain 

17 

Delhi 

fair 

43 

Mr 

17 

Budapest 

Mr 

28 

Djakarta 

Mr 

31 

rain 

14 

CJiagen 

far 

17 

Dubai 

aw 

38 

Mr 

37 

Gabo 

an 

38 

Dublin 

rain 

14 

sun 

28 

Cape Town 

Mr 

17 

Dubrovnik 

aw 

30 



Latest technology in flying: the A340 

Lufthansa 

German Airlines 


Edinburgh 

fair 

13 

Madrid 

sun 

29 

Rangoon 

fair 

35 

Faro 

Frankfurt 

aun 

thwd 

24 

25 

Majorca 

Mdta 

BUI 

sun 

29 

33 

Reykjavik 

RfO 

Mr 

cloudy 

10 

27 

Geneva 

shower 

19 

MmuJhmIbi 

raki 

14 

Rome 

SU1 

26 

Gibraltar 

sun 

28 

Maria 

dowdy 

32 

S. Frew 

windy 

19 

Glasgow 

fair 

15 

Melbourne 

lair 

14 

Seoul 

shower 

23 

Hambug 

fat 

ia 

Mexico City 

sun 

25 

Singapore 

cloudy 

31 

HflMnW 

Shower 

is 

Mtem 

fair 

31 

Stockholm 

fair 

14 

Hong Kong 

Mr 

30 

Mian 

fair 

26 

Strasbourg 

shower 

23 

HonoMu 

fair 

28 

Montreal 

shower 

14 

Sydney 

fair 

22 

tatanbJ 

aw 

29 

Moscow 

thund 

20 

Tangier 

Mr 

22 

Jersey 

tain 

14 

Miridi 

shower 

25 

Tel Aviv 

sun 

34 

Karachi 

Mr 

38 

■- » 

Mr 

25 

Tokyo 

rain 

24 

Kuwait 

8W 

44 

Naples 

SU1 

29 

Toronto 

cloudy 

12 

1- Angeles 

ft* 

23 

Nassai 

Mr 

30 

Vancouver 

cloudy 

17 

Las Palmas 

ire- 

24 

New York 

shower 

23 

Venice 

far 

26 

Uma 

cloudy 

25 

Wes 

Mr 

24 

Vienna 

fair 

26 

Lisbon 

sun 

23 

Nicosia 

sun 

32 

Warsaw 

cloudy 

2d 

London 

shower 

16 

Oslo 

Mr 

18 

Washington 

shower 

23 

Indiana 

shower 

18 

Paris 

fain 

18 

Wellington 

fair 

15 

Lyon 

thwd 

20 

Perth 

cloudy 

22 

Winnipeg 

sun 

27 

Madeira 

Mr 

21 

Prague 

shower 

25 

Zurich 

shower 

22 


THE LEX COLUMN 


In a bind with bonds 


It is difficult to believe that barely a 
week has passed since the promise of 
a hiatus in US monetary tightening 
was supposed to bring calm to finan- 
cial markets. Yesterday's 68 point fall 
in ].nnrton equities cam** in the slip- 
stream of some bad news from the 
bond markets, notably Germany’s 
decision to withdraw a debt auction 
for lads of demand. But there were 
local factors at work as well 

Though the UK's own gQts auction 
was well covered at 133 times, there 
were doubts as to how much of the 
paper found its way into firm hands. 
There is growing indigestion in tiie 
new issue market for equities, coupled 
with the prospect of a not particularly 
appetising rights issue from Euro- 
tunnel this morning. With the FT-SE 
100 index hovering not far above 3.000, 
equities arguably offer value. The eco- 
nomic recovery has apparently sur- 
vived last month’s tax rises, while 
both earnings and dividends have 
proved surprisingly buoyant in 1994. 

Yet the argument is not compelling. 
The market is still on a historic p/e 
not far short of 20. Hie earnings 
momentum may falter next year when 
both interest rates and taxes will be 
rising a gain As for dividends, White- 
hall chatter about possible actum to 
stop companies over-paying is a desta- 
bilising force. The most worrisome 
aspect is that the more the authorities 
come under funding pressure in a 
weak gOt market, the more they may 
be tempted to alter the fiscal regime in 
a way that favours bonds over equi- 
ties. 

Courtaulds 

After near-disaster in the late 1970s, 
Courtaulds spent a decade trying to 
iron out volatility from its fibres busi- 
ness. The outperform ance of the 
shares since then is a measure of its 
success. Yesterday’s figures are a 
reminder of the limits to text-book 
winnagpmi»n t. While Courtaulds is a 
low-cost producer, demand remains 
unpredictable. Given the bleak out- 
look at the interim stage, a 14 per cent 
drop in foil year operating profits 
from fibres and chemicals is some- 
thing of a relief. 

If fibres markets are kinder this 
year, tackling the coatings and seal- 
ants business is now the most press- 
ing task. Yesterday's £50m restructur- 
ing charge is a step in that direction. 
An operating margin of 7 per cent on 
turnover of £S5Qm is well below what 
could be achieved. With the economic 
cycle now turning in Courtaulds' 


FT-SE Index: 3020.7 (-68.2) 


Cw atmkh 

Share pric* mutate the 
FT-SE-AAH-Sharetodwt 
720 — 



favour, improvement in this area 
should underpin growth. 

But even if Courtaulds repeats its 
management success In fibres, the 
prospects are hardly dazzling. Few the 
shares to sustain a rating above the 
market average, Courtaulds* new fibre 
Tencd needs to deliver. With plans for 
150.000 tonnes capacity by the end of 
the decade the company is backing its 
faith with cash. The potential return 
on this investment is still difficult to 
predict. If Courtaulds can make the 
best of its lead in this area, though, 
the shares should again outperform. 

Carlton 

It is hard to know whether Carlton’s 
acquisition of Central Television is 
paying off. Though group interim 
results included two months of profits 
from Central, they were not split out. 
Carlton did say that changes already 
implemented would save £lQm on an 
annual basis. The takeover benefits 
have therefore come through some- 
what faster than expected. Still 
unclear is whether the eventual 
savings will be greater than the 
£10m-£15m forecast when tiie deal was 
agreed last year. 

In the short run, the recovery in TV 
advertising and strong growth of video 
sales will continue to boost Carlton's 
profitability. Longer term doubts hang 
over both of the group's major bad- 
nesses: the expected eclipse of videos 
by compact disc formats; and 
increased competition to its ITV fran- 
chises from cable and satellite. 

The government’s review of cross- 
media ownership may throw up oppor- 
tunities for Carlton in cable and satel- 
lite. The chairman. Mr Michael Green, 


has been vocal in calling for the barri- 
ers that keep media groups out of each 
others' patches to be pulled (town. But 
shareholders wfil probably want to see 
Central fully integrated and enhanc- 
ing earnings per share before Garth® 
embarks on another big acquisition. 
Fortunately, that seems to be manage- 
ment’s i nte ntion. 

Land Securities 

Unlike most of its peers. Land Secu- 
rities has not put a foot wrong in 
recent years. But the defensive quali- 
ties that stood it in good stead fo the 
recession may be a handicap in a ris- 
ing market Land’s conservatism has 
stopped it making mistakes, but baa 
also prevented it from seizing opportu- 
nities. Its modest spending on acquisi- 
tions has left it with a sizeable chunk 
of unspent funds at a time when com- 
petition from institutions is particu- 
larly intense. Restarting its develop- 
ment programme will take up some of 
the slack, but on too smalt a scale to 
make much difference. With its low 
gearing and satety-firat approach, 
Land Securities will find it hard to 
keep up with its more nimble rivals. 

The company remains a weB-tunad 
rent collecting machine, with a secure 
income and good quality, well-let prop- 
erties. But since most of its tenants 
pay above-market rents, it will be sev- 
eral years before it reaps the benefit of 
rising rents in its rent reviews. Flat or 
declining earnings mean Land Securi- 
ties may thus only maintain steadily- 
rising dividends at the expense of run- 
ning down its dividend cover. 

S.G. Waiburg 

There were two gratifying aspects to 
S.G. Warburg's results. The underly- 
ing level of dealing profits appears 
quite strong in spite of February’s par- , 
ticulariy sticky patch in the gilts mar- 
ket, while fee income has forged 
ahead. Warburg's business will always 
have a cyclical element, but the case 
that it is also enjoying long-term 
structural growth starts to look more 
plausible as Its international reach 
grows. In the short run much depends, 
on whether market conditions sustain 
the large volume of corporate business 
that is evidently In the pipeline. Em 
so the shares do not look expensive. 
Stripping out Warburg's Mercury 
Asset Management stake leaves 
investment banking with a market 
value of £730m. That Is not much for a 
business which generated toe-tax prof- 
its of £l87m last year. 



Doing what we do best. 



Hill Samuel 


Bank 


Hill Samuel Bank Limited • 100 Wood Street • London EC2P 2AJ 

A member of the Securities Be Futures Authority ■ A member of die TSB Group 












The stock market: 
investors have had 
a rough ride: Page IV 




BRAZIL 




Thursday May 26 1994 


K 

f ) 


While government and the economy lurch from one 
mini-crisis to the next, underlying changes within 
Brazil will ensure the country’s slow 
advance towards modernity, writes Angus Foster 

Critical year ahead 
on path to reform 


*»Eni 


Reforming Brazil often seems 
like mountaineering. Each, 
peak that is conquered simply 
reveals another, bigger prob- 
lem ahead. Although the coun- 
try has made considerable 
progress in opening its econ- 
omy and political system in the 
. past five years, the scale of 
) what remains to be done is stQL 
daunting : 

This year will be critical. 
Presidential general elec- 
tions in October offer the 
chance to renew the impetus 
for change. The government of 
R esident Ttawiar Franco, who 
took office following the resig- 
nation amid corruption, 
charges of Mr Fernando Collar 
in 1992, lacks congressional 
support and is increasingly 
having to act as a caretaker 
regime. 

A package of- reforms to 
tackle inflation, now dose to 50 
per cent a month, is due to 
lead to a new currency from 
July L Inflation is likely to fall 
sharply, at least to begin with. 
But spending pressures on the 
gove rn ment in an election year 
are intense, and there are 
mounting fears that inflation 
will creep into the new cur- 
rency, Brazil's fifth since 1986. 

Mr CoDor, the first democrat- 
ically elected president since 
the military takeover in 1964, 
left a mined legacy. Hie is now 
extremely unpopular, but most 
Brazilians agree that bis 
removal strengthened the polit- 
ical system because it showed 
that institutional checks and 
balances could work, and that 
public opinion is increasingly 
important Likewise, although 
-his economic policies contrfb- 
*uted to a deep recession, his 
moves to open the economy 
forced the private sector-fo 
compete, and are now showing 
substantial benefits. 

After zero or negative 
growth since 1988, the econ- 
omy last year grew at about 5 
per cent to take gross domestic 
product to $432bn - slightly 
behind China but ahead of 
Russia in US dollar terms. 
Most of the increase came from 
the industrial sector, especially 
carmakers, where there have 
been marked improvements in 
productivity. In the first half of 
last year, private sector manu- 
facturing productivity indices 
increased 18 per cent, 
reflecting the strength of cam- 
panics which survived the 
recession, and the redactions 
in their payrolls. 

Growth this year is forecast 
to reach 84 per cent, bat is 
extremely uncertain o win g to 
the introduction of the new 
currency. Growth rates pale 
into insignificance, however, 
alongside inflation, . which 
reached 2,500 per cent last 
year, and which is mainly 
responsible both for Brazil's 
very low Investment rate of 16 
per cent of GDP and for one of 
the world's worst Income dis- 
tributions. 

Mr Rubens Ricupero, finance 
minister, says that without 
pcnnmwtft stabilisation "there’s 
no salvation”. "Stabilisation is 
not an end in itself, but a pre- 
condition for Brazil to recog- 
nise its problems and deal with 
them," he says. 

The latest anti-inflation plan 
has won wide support from 
economists because it concen- 
trates an the economy’s main 
problem, a lack of c onf i d en c e 
in the government's ability to 
balance its budget Mr Fern- 
ando Henrique Cardoso, the 
former finance minister who 
resigned in March to run for 
the presidency, negotiated a 
budget through Congress 
which was balanced, thanks to 
swingeing spending cats, espe- 
cially in investment, arid opti- 
mistic estimates of tax and 
social security revenues. 

The next step wfil be the 
introduction of the new cur- 
rency, the ReaL Future mone- 
tary and exchange rate policy 
will not be announced until 
next month, but it seems likely 
the Real will be linked at par- 
ity to the US dollar, at least to 
begta with, and backed by Br* 
zfl’s mwe than $30tm foreign 


exchange reserves. However, 
the country’s powerful indus- 
trial lobby wifi squeal if the 
new currency becomes overval- 
ued against the dollar, as hap- 
pened in Argentina’s stabilisa- 
tion. If inflation continues in 
the Real, gradual devaluation 

is likely. 

Monetary policy win have to 
be kept extremely tight, espe- 
cially in the first few mrni»w 
bat there are already growing 
electoral pressures to increase 
spending. Several federal en d 
state banks, which benefit 
from inflation and use the prof- 
its to cover losses from non- 
performing and often political- 
ly-inspired loans, would face 
severe problems if infla tion 
ML The government may not 
risk closing down these banks 
so close to elections and the 
far -from-independent central 
bank may instead be pressured 
to support them, thns threaten- 
ing monetary pdhcy. 

There is another, longer-term 
throat to the stabilisation plan. 
When the programme was 
launched in December, the 
government still hoped Con- 
gress would approve a number 
of constitutional changes to 
allow fixture administrations 
greater freedom to control 
spending. The widely criticised 
1988 constitution imposed too 
many spending demands on 
the government and intro- 
duced social welfare provisions 
which were too generous. For 
pramplp, female teachers «m 
retire after just 25 years' wort 
At tins rate, more people wiB 
soon be receiving pensions 
than contributing. 

The problem Is that Con- 
gress, .again fearing election 
xepenmssfans; has failed to 
approve many 1 gf the -constitu- 
tional chang as the government 
needed. 

As a result, the inmming 


regime will face the same prob- 
lems with balancing future 
budgets as in the past, and this 
year's spending cuts are not 
repeatable. 

"The DIF didn't sign for 
good reasons,” says Mr 
Antonio Delftm Netto, former 
planning minister, in refere nc e 
to the IMF's refusal to agree to 
a standby loan programme 
ahead of Brazil’s private bank 
debt restructuring last month. 

Mr Cardoso is traffing in the 
opinion polls, and almost cer- 
tainly needs inflation to fall 
sharply under the plan. If it 
does, he will be a strong chal- 
lenger to the front runner, Mr 
Luis Infkdo Lola da Silva of the 
left-wing Workers Party (PT), 
usually known as Lula. 

Mr Cardoso's problem is that 
he has found it difficult to 
develop a rapport with poor 
voters. Also, he cannot com- 
plain about file government's 
poor performance because he 
was, until recently, part of it 

Mr Tasso Jereissati, chair- 
man of Mr Cardoso’s PSDB 
political party, says: “There is 
immense disillusionment in 
thfa country tow a rds politics, 
and that is making Lula more 
appealing." 

A victory for Mr da Silva 
would mark a big shift in Bra- 
zil. which has never elected a 
socialist president But he has 
himself moderated many off the 
FTs more radical polities. 

He is surrounded by good, 
sometimes idealistic, advisers 
and the party is determined to 
concentrate on problems such 
as education, unemployment 
and land reform. 

These are central to Brazil’s 
longer-term development yet 
have been neglected because of 
the economic m i smana g e ment 
of the past 10 years - Brazil’s 
so-called "tost decade”. 

A PT victory would lead to 
considerable short-term uncer- 
taint y, especially among for- 
eign invertors. The party has 
said it will review an already 
flagging privatisation pro- 
gramme awl demand renegoti- 
ation of Brazil’s foreign debts. 

These threats are serious, 
bat it seems likely that an 
incoming PT government will 
face many other mare pressing 
Continued on Page 3 


IMSIDE THIS SURVEY 

Potties: Whoever wins the October elections wW Inherit one of 
the most composted political systems hi Latin America -Page ■ 
The economy: For yeare steered towards Import st*»tftuUon and 
tariff protection, the economy needs to change abaction .page m 
C ar industry: Sates are booming but domestic producers and 
Importers are bickering over trow to share the spote Page W 
Guides for visitors: Basic information and tips for buanesanen 
hi Brasflta. S*> Paulo and Rio do Janeiro.: PB » ev 

Agriculture: A new forming efite Is emerging now Itatthe 
government *«** fatpriv withdrawn from tlws sector rage » 

EdtafM production: 



Rubens (OcupenK *No safvatkxi 
without economic etabSMtfcm' 



Congress btASng, BrasOa: 


How to maximize your investment goals. 


Brazil, 

the best field. 



255 of top 50&^8^gmies3 
45% of total 
Trade surplus among 
in the world (US$ 13 billion) 

Highest foreign exchange reserves in 
Latin America (US$ 35 billion) 

Best performing stock market in Latin 
in 1993 (approximately 107% in US$ t 


America. 


The new ru 


Privatization: 24 companies sold forUSS 6.6 billion, 

37 to be sold in 1994. 

Trade liberalization: reduction in average tariff to 14.2%, 
elimination of non-tariff barriers. 

Deregulation: liberalized foreign investment 


Pactual, 
the best team 





Investment Backing: Renato Bromfinan 
Merchant Banking: Luiz Cezar Fernandes 
Economic Analysis: Paulo Guedes 
Portfolio Management Andre Jakurski 
International Coverage: Thomas W. Keesee 
Fixed Income: Marcos Pidbeico ? 

Capital Markets: Marcelo Serfaty 



in Brazil, 


Mm 


Av. Rep. do Chile, 230/29* CEP 20031-170 Rio de Janeiro RJ (021) 292-302S Fax <021)533-1661 
Av. PanBita, 1294/19* emtf. l5B CEP 0131 0-IOO Sto Panto SP 011) 2855122 Fax ©11) 2853963 







II 


FINANCIAL TIMES THURSDAY MAY 26 1994 * 


BRAZIL II 



NhtaAiKMas 

Uifs Inieio Lula da Silva, 
csxfldatB for the Workers Parly 
FT): 

Mr da SRva, 46. is campaigning to 
become Brazes first socialist preai- 
denL 

Bom hi the poor north-eastern 
state of Pe rnambu co, he rose to 
prominence in the late 1970s as the 
union leader of metalworkers 
opposed to the military government 
He co-founded the PT and gained 
31m votes in the second round of 
the 1989 elections, but lost by 44 
per cent to SO per cent to Fernando 
Coflor. Has spent much of the time 
since on ‘caravans" around the 
country, bidding support In rural 
areas. 

T hanks tO SL SUCCeSSlOD Of 

mishaps and 21 years of 
military government, 
Brazil has been ruled by an 
elected president for only 30 
months in the past 30 years. 

Former President Fernando 
Collar, who resigned amid cor- 

nyp tinw allegations in Septem* 

ber 1992, was the latest elected 
president to fail to serve his 
full term. Mr Itamar Franco, 
Mr Conor’s successor, has 
lacked a popular mandate or 
support in Congress and his 
government has often been 
only capable of crisis manage- 
ment rather than implement- 
ing policy. 

Brazil’s fragile democracy 
should therefore emerge con- 
siderably strengthened from 
this year's presidential, con- 
gressional and gubernatorial 
elections, due in October. 

Whichever of the two front 
runners wins the presidential 
race, they will have at least a 
chance to build a popular alli- 
ance in congress and tackle 
some of the country's prob- 
lems. However, structural 
weaknesses in Brazil's political 
system, and a recent cut in the 
presidential mandate from five 
tO four years, means chang e 
win be slow and often erratic. 

Mr Luis Initio Lula da Silva, 
the left-of-centre Workers 


HmMoOM) 
Fernando Henrique Cardoso, 
candidate for the Bnaflian Social 
Democrats (PSDB) and Liberal 
Front OPFL) affiance: 

A re sp ected sociologist and oppo- 
nent of the rrsBtary regime, Mr Car- 
doso (63) entered politics In 1984, 
was defeated In elections for mayor 
of Sao Paulo, but won a seat in the 
Senate two years later. 

He co-founded the PSDB after 
growing drsflhisioneci with the main 
opposition party, the FMDB. 

In the present government Mr 
Cardoso served as foreign minister 
before becoming finance minister 
last year and launching a widely 


Party fPT) candidate, is front 
runner in the polls with a 
steady 30-35 per cent of the 
vote. Mr da Silva, a former 
metalworker and union leader, 
combines populist appeal with 
good oratory. As loser in the 
1989 elections, he also draws 
support from Brazilians who 
feel betrayed by Mr CoDor. 

The PTs roots lie in radical 
protest politics, but It has 
become increasingly moderate 
in the past few years. The far 
left of the party, known as the 
Shia wing, remains visible and 
vocal but the advisers close to 
Mr da Silva are moderates who 
have spent the years since the 
last election preparing for gov- 
ernment According to Mr Alo- 
fzio Mercadente, one of the key 
advisers, a PT government 
would concentrate on the fight 
against hunger and unemploy- 
ment and on education and 
rural reform. “Four years Is 
not a lot of time, but it’s 


PufeOandafa 

Roberto Marinho, bon of TV 
Globo and O GJobo newspaper; 
Most BrazSans rely on television for 
their news coverage and TV Sobo 
has a virtual monopoly, attracting 
more than 60 per cart of viewers for 
Us nightly news pro g r am me. Globo 
was widely seen as critica l to the 
o l cd ion ca mp aign of Mr Coder, who 
was Mr Marfeho's favoured cancfi- 
date. 

This time, Mr Marinho, 89, is 
expected to back Mr Cardoso, but 
bias against Mr da Siva wffl proba- 
bly be less visfcle. Nevertheless, with 
the PT intent on attacking Gfobo’s 
power-base if it wins the elections, 
Mr Marinho’s views will be very 
important 


enough to start mairirng irre- 
versible changes," he says. 

The PTs biggest drawback, 
apart from a largely hostile 
media, is its lack of experience 
in national government. The 
party has been making prog- 
ress in local government, but 
remains poorly represented in 
Congress. According to polls, 
many Brazilians are personally 
drawn to Mr da Silva, but 
worry about his lack of a track 
record. “There is stfil a percep- 
tion that the PT is great for 
opposition, but not good to 
govern,” according to Mr Mario 
Mamede, a FT state deputy. 

This perception will be explo- 
ited by Mr da Silva's likely 
main competitor, Mr Fernando 
Henrique Cardoso, who 
resigned as finance minister in 
March to run for the presi- 
dency. A former academic with 
left-of-centre views which often 
found him on the same stage 
as Mr da Silva under the mxli- 


Antonio Carton Mag te h iin. fonmr 
governor of BaUm state: 

One of the most pow e rful man In 
Brazil because of poRfcal and teraiy 
ties, Mr MagaOi&es was largely 
maponabw for persuacSng Ns party, 
the PFL, to bock Mr F er na ndo Hen- 
riqu* Cadosa 

Fearing that tha poly dd not have 
a viable canddate of Rs own, and 
determined to block hk da StaL Mr 
MagahBa wl now be one of toe 
most I mportant figures in the cam- 
paign, aspsdaly n the north of Bw 
country. 

However. Ns right-wing views end 
liking of tradftnmd-styto poffifcs 
makes him unappoing to many in 
Mr Cardoso’s party. 


fairy. Mr CsnlOSO ha* alcn wwl . 

lowed. His views are today cen- 
trist, with emphasis on social 
issues. He is also more econom- 
ically liberal than Mr da Siva, 
and is likely to favour an accel- 
erated privatisation pro- 
gramme and marfenti reforms. 

Mr Cardoso’s problem is 
that, during his period as 
finance minister, monthly 
inflation rose from under 30 
per cent to more than 40 per 
cent The government's anti-in- 
flation plan, which Mr Cardoso 
negotiated through Congress, 
is therefore extremely impor- 
tant to his campaign, if infla- 
tion fells following introduc- 
tion of the new currency in 
July, Mr Cardoso hopes his 
poll ratings will increase from 
the present 15-20 per cent 

He will also be helped by an 
election alliance between his 
party, the Brazilian Social 
Democrats (PSDB), and the 
right-of-centre Liberal Ftont 


IMOMW 

Praaktent Itamar Franco: a 
pnwftte Xtog mafcar. 

ABheugh be is dsnfisaad as an Inef- 
fectual loader by many pofitidara. 
Pr esi d en t Franco can significantly 
affect the outeoma of the ele ct ion s . 
The office of tha presidancy wMds 
extensive executive p ow er and can 
Mso canter status an Rs pre fe rred 
cm dkte ht 

Pre si dent Franco is backing his 
fanner fumes minister, Mr Cardoso. 
However, Hie president's unpredict- 
able and p opufat character could 
teed to surprises, espedafy If tha 
araHnfistion plan does not succeed. 

As its chosen canddate. Mr Ca r- 
doM wH afeo to unable to attack an 
otherw i se unpopular government. 

(PFL\ which is strong and well 
organised in the north-east of 
Brazil, exactly where Mr Car- 
doso is weakest. 

With four months left to the 
elections, it is still very diffi- 
cult to assess the likely out- 
come. Under Brazilian law, the 
two candidates with most 
votes go through to a second 
round in November. If inflation 
fells, Mr Cardoso and Mr da 
Silva could be neck and neck 
in the second round. If it does 
not, or only fells briefly, Mr 
Cardoso could be beaten in the 
first round by an outsider, 
such as former SSo Paulo state 
governor Orestes Quercia. 

Whoever wins will inherit 
one of the most complicated, 
and some say most difficult to 
reform, political systems in 
Latin America. With 20 politi- 
cal parties in Congress, often 
bound by individual loyalties 
rather than ideology, govern- 1 
ments are farced to build alii- i 
ances of strange bed-fellows. 
Congressmen often pursue 
re gional rather than n ational 
interests, and corruption 
remains a serious problem. 

But, since Congress is the 
guardian of the constitution 
and reform would deprive 
Congressmen of power and 
privilege, adequate political 
change will take a long time. 


praised but stffl improved anti -infla- 
tion plan. 

Change will be slow 

Whoever wins the elections in October will inherit one of 
the most complicated political systems in Latin America, 
writes Angus Foster 


David Pilling examines export and import links J 

Shrinking trade share 
is likely to reverse 


Brazil is still one of the 
world’s most hermetic econo- 
mies. In spite of the reforms of 
disgraced president Fernando 
Col lor, which aimed to prise 
open the country alter yews of 
Import substitution, Brazil's 
trade with the outside world is 
less, proportionally, than a 
decade ago. 

In 1983, total trade consti- 
tuted 16.6 per cent of gross 
domestic product, an already 
small pr o p or tion that slipped 
to 15JJ per cent last year when 
combined imports and exports 
reached $64hn. Chile trades 
about 60 per cent of Ha GDP. 

“Brazil’s presence in the 
world market is smaller than 
it was 10 years ago. We are 
shrinking," says Mr Eduardo 
Gianetti da Fonseca, an econo- 
mist at the University of SAo 
Paulo. TUs trend is, however, 
Ukely to reverse as Color’s 
reforms dig in, domestic 
demand picks up and industry 
- deprived of its once captive, 
highly protected mar- 
ket-looks abroad for opportu- 
nity. “There is a consensus In 
Brazil that the country must 
participate more in interna- 
tional trade," says Mr Tullo 
Vlgevani, professor of political 
science at S&o Paulo univer- 
sity. 

Last year, exports rose by 
7.7 per cent against 1992, a 
creditable performance given 
weak international demand. 
Imports surged by nearly a 
quarter in response to domes- 
tic growth of 49 per cent In 
1993, Brazil ran a trade sur- 
plus of $139bn, down on the 
$15.5bn of the previous year, 
but still one of the largest in 
the world. 

Average tariffs, at 14 per 
cent, are now near Latin 
American norms, allowing a 
rapid rise in imports of inter- 
mediary and capital goods. 
Many economists say manufac- 
turers are importing machin- 
ery in order to raise productiv- 
ity, which should feed into 
future exports. 

Imports of consumer goods, 
on which tariffs are stfil rela- 
tively high, grew less rapidly, 
although there were sharp 
increases in imported cars and 


electronic equipment In the 
medium term, consumer 
imports are likely to rise sig- 
nificantly, hut Brazil’s divent- 
fled production base Is fairly 
well-equipped to compete and 
has made important productiv- 
ity gains in recent years. 

“Tariffs have gone down 
substantially and yet indus- 
trial out p u t is growtog,” says 
Mr ChtUhense Letts da Silva 
Dias, director of the Institute 
of Economic Research. Domes- 
tic manufacturers, he says, an 
bolding their own against for- 
eign producers in contrast 
with some less-sophisticated 
Latin American economies 
whose Industries have strug- 
gled to compete. 

Even so, Brazil’s huge sur- 
pluses - necessary for financ- 
ing foreign obligations follow- 
ing the debt crisis of 1983 


The North American Free 
Trade Agreement and the 
economic in te gra ti o n of 
Europe may limit 
access to Brazil's 
traditionally strongest 
export markets 


- are likely to shrink farther. 
In 1994, the first-quarter sur- 
plus was down by nearly a 
third on 1993, and is likely to 
be around llffim by yraraid; 
about half its 1988 peak. 

Mr Stanto Davi Silber, a Sfio 
Panic trade specialist, says it 
is both desirable and feasible 
for Brazil to double the 
amount of its international 
trade relative to GDP. Mr 
Gianetti agrees that succes sfu l 
domestic restructuring 
requires for greater commer- 
cial interchange than today's 
“ridiculously low- levels. 

The North American Free 
Trade Agreement and the eco- 
nomic integration of Europe 
may limit access to Brazil's 
traditionally strongest export 
markets. Mr Silber says there 
is further room for expanding 
trade with Latin America 
which now accounts far 20 p«r 
cent of Brazilian commerce 
against 14 per cent in 1985. 
Brazil has proposed a South 


American frae trad* bloc. 

Argttttaa. Mow member a - 

the Metcosul free trade mn 

with Brazil, Uruguay and Par- 
aguay* ac count s for much of - 
that increase la coutinentai 
trade; Brazilian shipments . 

there soared from SJI) per cent 
of total exports to 1988 to U 
per tout last year. However, 

Mr Sifter says that, given Af- 
ferent exchange rate potida 
and concern to Buenos Aires 
over onmfeteaitiy Ugh trade j 
deficits with Brazil, there may 
be reatndnti to fartherbig 
in cr e as e s . \ - 

Another way to accelerate 
commercial integration, he 
says,fiwwhhrqi^e9qwnd- 
tag Asian markets where Bra- . 
ill. to under-represented. 
Greater Latin American 1 
co-operation should facilitate 
totter access to Padflc ports. 

Before Brazil can branch 
itself upon the world In ear- 
nest, Mr Silber says, it mast ... 
tackle tin plethora of indirect 
taxes wUch bioat the price at . 
exports by np to 15 per cent 
“At dm moment we are export- 
ing taxes" be savs. 

As nations begin to huddle 
into trading blocs, some Bra- 
sOias industrialists fear they 
win .be isolated. It seems n 
ltfcetr, for example, that Nafla II 
will dimi a Mi access to the DS ' 
of Brazilian orange juice con- ( 
ccnt ra te and pulp, both, of " 
which can be produced in 
Mexico. 

Mr SUber says that Brazilian 
exports - metallurgical prod- . . 
ads, vehicles and chemicals, 
as well as commodities such as 
soya, coffee and mineral ores 
- an sufficiently diveralfisd to 
withstand isolate-; difficulties 
in particular markets. 

Of more concern to many 
anatysts ls the possibility of - 
fresh efforts within the Gen- 
eral Agreement on Tariffs and 
Trade to exclude exports from 
countries such as Brazil under 
environmental or social dump- 
ing provisions. 

T think this is really a - 
potential menace," says Mr 
Silber. “If s a strong instru- * 
meat that yon could use 
against everything. We will - 
have to see what happens.” 


Transactions including an auction for control, an offer to employees, 
a public placement and two public auctions resulted in the privatization of tire total 
stake of 91% owned by Brazil's Federal Government in 




CSN 

COMPANHIA SIDERURGICA NACIONAL 


for an amount equivalent to 


US$ 1,493,800,000.00 


The Seller 

BNDES - BANCO NACIONAL DE DESENVOLVIMENTO 

ECONOMIC© E SOCIAL 


was advised by a Consortium led by 


I wrwmm hibrasilpar 
Hservicos 

■Jll UllNANCEmOS 

BSF - Brasilpar Servigos Financeiros 
Alameda Santos, 1357 - 2 s andar 
01470-900 - Sao Paulo - SP - Brazil 
Phone: (55-11) 285.1222 - Fax: (55-11) 285.6582 


This announcement appears as a matter of record only 

April 1994 



Cesp 

The Power Behind 

SAo Paulo Progress 

cesr, the sao PauloElecaic Company, has a key role in BrazSlan deuelopmenL it is the 
targesr pomer gerterothrig company in Brazil resp^is&^for 96% of the en&^iecfijhed by 
the State of Sao Paulo ( largest Industrial and financial center In Latin America > and 24% 
of an the electricity generated in the country. . . 

CESP boasts modem and competent management and the highest technical standards 
among power generating plants in Brazil and abroad. It comprises 31 power plants 
producing ouer 9 thousand megawatts destined for a growing consumermarket. 
And that's not all. Euer alert to the demands of the coming years and in continuation of 
its significant role in the general progress of the State ofSdo Paulo, the company & bulking 
new plants that will Increase power capacity by so % at the turn of the century. 


that >! s ciisp - in suing i»uo(;ki:ss with eni;kgy 




GOVERNO DE SAO PAULO 

BUILDING A BETTER FUTURE 



Companhia 
da 

SAoi 






FINANCIAL TIMES THURSDAY MAY 26 1994 


III 



** *V» 


1 





V*. 


Ill 




razil’s economy, the. 
tenthrlargest in the 
world, Is the super- 
tanker of Latin America's fleet 
As such it is the hardest to. 
tnm arouraLFor years steered 
towards import substitution, 
tariff protection and state 
intervention. It is still largely 
drifting on its old course, even 
thnnp h fts helmsman long ago 
sought tbdiange direction. 

Part of the problem is that 
the helmsman, disgraced for- 
mer president Fernando Collar, 
has been removed and replaced 
by President Itamar Franco, 
who lias seanad incapable of 
steering Brazil through choppy 


Mare fundamentally, there Is 
resistance to overhauling an 
economic model which, how- 
ever flawed, has produced a 
$432bn economy and average 
annual growth of 7 per cent in 
the 40 years to 1980. There are 
also some very powerful inter- 
est groups. 

The aftermath of the debt 
crisis in the aarty 1980a. when 
growth stopped, spelt out the 
need tor rfiarig c- .“We had an 
import-substitution model of 
state-led growth. But this is 
seen as gone for good,” says Mr 
Eduardo Gianetti da Fonseca, a 
leading economist 
Nonetheless, he says, Brazil 
is ‘Tagging behind" as Ti^t fn 
America shifts towards fiscal 
responsibility and market l ib- 
e ralisat ion. "A cl ea r indication 
of this is inflation, a symptom 


The economy is drifting along on an old course, writes David Pilling 

A change of direction is needed 


of the inability to solve 
problems." 

Brazil has managed to cope 
with, inflation, which last year 
reached 2£QG per cent, with a 
highly complex system of 
indexation, termed “perverse 
adaptation" by Mr Gia ne tti 
Indexation creates an infla- 
tionary inertia which, unless 

If the budget is truly 
balanced this would 
reduce the government’s 
need to engage in 
Wgb- interest borrowing 

interrupted, assures the contin- 
ued escalation of prices. 

It is precisely to interrupt 
that cycle that Mr Fernando 
Henrique Cardoso, who 
resigned in March as 'finance 
minister, last December 
launched the most realistic 
attempt yet to crack inflation 
The plan, partly designed to 
tackle the budgetary indisci- 
pline which, fuels price rises, 
and to remove the safety net of 
indexation, is judged by most 
economists to be tec hnically 
adept. Mr Cardoso's threeetage 


scheme, which p Isq lannnheri 
his campaign for election as 
president, seeks to use public 
spending cuts and emergency 
taxes to remove the 1994 bud- 
get deficit, originally estimated 
at $22.2bn. if the budget is 
truly balanced - and uncer- 
tainty remains over whether It 
will be, particularly in an elec- 
tion year -then this would 
reduce the government's need 
to engage in high-interest, 
short-term borrowing which 
expands the money supply. 

Stage two, begun in March, 
introduced a transitional index 
and accounting unit, the Uni- 
dade Beal de Valor (URV), a 
daily general price index based 
an a measure of current infla- 
tion which is anchored to the 
dollar through Brazfl’s foreign 
exchange reserves of more 
; than $30bn. Salaries, new con- 
tracts and large purchases are 
now quoted in ORVs, paving 
the way for the conversion of 
the index to a new currency, 
the Real 

The Real, the fifth currency 
in a decade, is due to be 
launched on July 1 when ana- 
lysts predict that Inflation will 
(bop from 45 per emt a month 



to less than 10 per cent The 
question is, how long it will 
stay there? 

At best, Mr Gianetti says, the 
scheme win build a low-infla- 
tionary "bridge" between now 
and presidential elections to be 
held in October. “But, if things 
go badly wrong indexation 
is disrupted, I don’t discount 
hy per in flation. It’s foil indexa- 
tion and then no . . 

it's a big gamble." 

Mr Tullo Vlgevani, professor 
of political science at S&o 
Paulo University, says the plan 


“lacks the political base to take 
hold", ft cannot work in the 
long run, he says, without tax*- 
damental constitutional 
changes that would permit the 
routine , balancing of the fed- 
eral budget 

The 1988 constitution obliges 
the federal government to 
hand over most of its tax reve- 
nue to state and municipal 
administrations without releas- 
ing it from spending obliga- 
tions. 

The constitution thus virtu- 
ally guarantees inflation-fuel- 


ling budget deficits by ear- 
marking more than 90 per cent 
of revenue before a single 
spending decision is made. 

Brazil has adjusted to the 
illogical world or near-hypertn- 
flation - last year, gross 
domestic product grew by 4B 
per cent - but its economy has 
been warped. 

Very high interest rates 
(more than 20 par cent a year 
in real terms) divert Invest- 
ment into government paper 
rather than productive capac- 
ity and add to the burden of 
pnblioeector debt. 

Investment l ast year was 16 
per cent of GDP, compared 
with 27 per cent in Chile. Mil- 
hous of poor Brazilians, with- 
out access to indexed bank 
accounts, are unprotected from 
rocketing prices. 

Even if Mr Cardoso's plan Is 
initially successful, monetary 
policy will have to be kept 
tight to rein in consumer 
demand as prices stabilise. 
This could tip the economy 
into recession, threatening 
hoped-for growth in 1994 of 8-4 
per cent 

Notwithstanding the risks, 
Mr Jofto Geraldo Ribeiro F ilh n 


of Banco de Boston, says: “We 
have never had an opportunity 
like this and we don’t know 
when we will have another 
one." He points to high inter 
national reserves and April’s 
conclusion of a Brady-style 

debt rescheduling agree- 
ment - named after a 1989 Ini- 
tiative by the them US Trea- 

Most analysts agree that, 
largely as a result of 
reforms started under 
Gofior, the economy has 
taken significant steps 

sury Secretary Nicholas Brady 
-for the country’s foreign 
debt -admittedly without IMF 
blessing. 

Most analysts agree that, 
largely as a result of reforms 
started under Collar, the econ- 
omy has taken significant 
steps. Privatisations and 
reduced tariffs have stimulated 
exports, which grew by 8 per 
cent last year, and improved 
productivity. Foreign invest- 
ment in the capital markets 
reached $5.5bn last year 
against $l.3bn in 1992, and 


multinational interest has been 
reawakened in Brazil as Latin 
America’s potentially most 
dynamic economy. 

It is not dear whether a new- 
ly-elected government will con- 
tinue in the same direction. Mr 
Gianetti fears that strong inter- 
est groups, such as state 
monopolies, will prevent fur- 
ther restructuring. To reform 
in the context of splintered 
political parties and a burden- 
some constitution will not be 
easy, he says. “We have had 
the feast of democracy before 
the blood, sweat and tears of 
market reform.'’ 

There is uncertainty, espe- 
cially among foreign investors, 
about what would happen IT 
election front-runner Mr Luis 
In&cio Lula da Silva or the 
left-wing Workers’ Party 
should become president. 
Many analysts feel however, 
that his reservations about eco- 
nomic reforms would be cooled 
by the reality of government 
and the need to build coali- 
tions. 

“In the long term - indepen- 
dently of who becomes presi- 
dent - Brazil has no other way 
out," says Mr Julius Haupt 
Buchenrode, director of invest- 
ments at Banco Chase Manhat- 
tan. “It needs to reduce infla- 
tion; to balance its budget; to 
adjust its constitution-, and 
probably to continue privatisa- 
tions. There’s no magic solu- 
tion." 


Critical year ahead 
on path to reform 


Continued from Page 1 
problems. It win also almost 
certainly lank a cong res sion al 
majority and would have to 
compromise in order to build a 
governing alliance 

While government and the 
economy lurch from one mini- 
crisis to the next, underlying 
changes within Brazil will 
ensure the country’s slow 
advance towards modernity. 
The downfall o£ Mr CotHor was 
followed early this year by a 
recommendation from Con- 
gress that 18 of its own mem- 
bos should be expelled an cor- 
ruption charges . although, 
unfortunately, some have been 
pardoned. 

The growing demand for 
transparency at all levels of 
government is leading the 
media and pressure groups to 
fbcus .on . what politicians .do, 


individually and collectively, 
for Brazil -.and . often to 
demand improvements. Sec- 
ond, there is a growing realisa- 
tion in ftp n^wfia ana parts of 
the political classes of Brazil’s 
position in the world, and its 
dubious distinction as the only 
mam latin American country 
yet to stabilise its economy. 

Reform w£H take time and 
will be erratic. Mr da Silva and 
Mr Cardoso will offer similar 
pledges of change, but both 
may find Brazil's traditional 
preference for consensus frus- 
trates their programmes. Mr 
Roberto Macedo, a S5o Paulo 
economist,, contrasts Brazil 
with tiie Asian “tiger" econo- 
mies such as South Korea. 
“Brazil is a whale economy, it 
moves very slowly and Is very 
difficult tq turn round,”, he 
says... . 


B razil’s foreign ministry bnidw a 
privileged place in the coun- 
try’s capital. Brasilia - over- 
looking the Congress building and 
opposite the Palace of Justice. The 
location is deserved because the min- 
istry, known as Itanjaraty, is nne of 
the country's most able and impor- 
tant. 

But it is a cruel punishment for fh«> 
diplomats, who are farced each day to 
look at the cause of their frustration 
— politicians. Despite Brazil's si ze and 
potential, it is unable to play the 
international role many in Itamaraty 
seek. Instead, its importance and 
negotiating strength are compromised 
by the political failure to stabilise the 
economy and bring down inflation 
Brazil’s economic instability is also 
acting as a brake on the development 
of Mercosul -the free-trade zone 
formed between Brazil, Argentina, 
Uruguay and Paraguay which is due 
to come into force an January l - and 
plans for a wider free trade area to 
incorporate most of South America. 
Mercosul has progressed much faster 
than cynics first suggested. But lon- 
ger-term questions remain unan- 
swered, and it would not be surpris- 
ing if key partners such-as Argentina 


Angus Foster looks at foreign relations 

International role denied 


chose to link with the US-led North 
American Free Trade Agreement 
(Nafta) grouping, rather than remain 
tied to Brazil’s bumpy ride. 

Brazil's cultural and trading ties 
have traditionally been with Europe, 
original home to much of the coun- 
try’s population, and the US, which 
emerged as Brazil’s biggest foreign 
investor early this century. 

Bui the relationship with the US is 
complicated, end often, troubled. Ita- 
maraty is itself sometimes accused of 
being anti-American, although this 
partly reflects the broad range of sub- 
jects where the two countries’ inter- 
ests do not coincide. Brazil's concerns . 
about a proposed linkage by the US 
between social and environmental 
issues and trade is the latest eyawipie 
of underlying tension. 

Relations have improved this year, 
however, with the Brazilian Senate's 
approval of a treaty to allow inspec- 


tions of some of its nuclear installa- 
tions and Brazil's acceptance of US 
itomflnrtu on patents and copyrights. 
Last month’s completion of Brazil’s 
foreign hank debt restructuring, 
achieved without IMF blessing, also 
removed another stumbling block. 

But it is Mercosul, and Brazil’s 
future within South America, where 
most change is occuring. The Merco- 
sul treaty, signed in March 1991, calls 
for a customs union to be ready by 
next year through the im plementatio n 
of a common external tariff 

Tariffs have already been reduced 
on many goods, and trade within the 
group has grown extremely rapidly 
-more than doubling since 1990 to 
about J8bn last year. 

Tins partly reflects the complemen- 
tary nature of the two biggest econo- 
mies, Brazil’s industrial strength 
being offset by Argentina’s competi- 
tiveness as a producer of -primary 


products such as foodstuffs and off 
Difficulties remain -for example, 
Brazil’s desire to retain high faHffa to 
protect its computer and telecommu- 
nications Industries. As a result, the 
common external tariff Is likely to 
apply to only about 85 per cent of 
products. Remaining goods will only 
be harmonised from 2Q0L 
Brazil is now proposing to use Mer- 
cosul as the base for a wider trade 
agreement among all South American 
countries. This would be a simple free 
trade agreement rather than a cus- 
toms union, and would be jointly 
negotiated by the Mercosul nations. 

“We hope to use Mercosul as a plat- 
form for further trade liberalisation 
throughout South America," says 
Ambassador Jos6 Arthur Denot Med- 
eiros, in charge of Mercosul issues at 
Ramaraty. 

Brazil’s economic dominance of the 
continent means that most countries 


will be interested in joining, although 
Chile’s priority clearly lies in gaining 
entry to Nafta. Even if countries do 
not formally join, there is an increas- 
ing move towards lower tariff barriers 
arid more open trade. 

Argentina's position is more compli- 
cated, and at times the country com- 
mitment to Mercosul has appeared in 
doubt as it contemplated its chances 
of entry to Nafta. Complaints by 
senior Argentine leaders about Bra- 
zil’s economic instability have also 
angered the Brazilian side. Argentine 
claims of dumping against Brazilian 
companies are rebuffed by Brazil’s 
suggestion that the Argentine cur- 
rency is overvalued. 

Teething problems and tensions are 
hardly surprising, but they hide a lon- 
ger-term problem. Brazil’s big indus- 
trial economy is for from ready to 
compete within a US-led trade area 
such as Nafta, suggesting that an 
Americas- wide agreement Is still 
many years away. But if more coun- 
tries such as Chile opt for the North 
America model, there is a chance Bra- 
zil will be isolated. 

Back at Itamaraty, the diplomats 
must hope the politicians sort out 
Brazil’s many other problems in time. 


ADVERTISEMENT 


Petrobras: Leader in Deep Water Technology Plans 22 BN Investments. 


Petrobrds, Brazil's - and Latin 
America's - largest corporation 
and one of the world's leading 
oil companies, plans to invest 
nearly $22 billion through 1997 f 
principally in exploration and 
production (E&.P) of newly- 
discovered giant offshore deep 
water fields at Campos Basin , . 
the country's -largest oil 
province located 100 miles east 
of Rio de Janeiro. 

Petrobrds celebrated its 40th anniversary 
in 1993 having built a solid reputation 
on the international financial markets 
and with domestic and foreign supplies 
as the corporation that, out of the 
world's top 50 oil companies, has grown 
the fastest over the past years, according 
to Petroleum Intelligence Weekly 
magazine. 

The decision to invest heavily in order 
to guarantee and increase oil and 
petroleum derivatives supply within - 
Brazil is in direct compliance with the 
mission given to Petrobrfis by the - 
Brazilian Constitution, according to the 
company's chief financial officer, 
Orlando Galvao. 

That mission includes supply of the 
continental-sized Brazilian market, with 
exclusive rights' for research, 
prospection, production, refining, 
import and transportation of crude oil 
and oil products within Brazil. Over the 
past four decades, the company has 
discovered 11.5 billion barrels of oil, of 
which 33 billion effectively have been 
produced. 

It should be noted that Petrobrds has 
invested between $2 billion to $3 billion 
per year over the past ten years. 

"One of the most important aspects of 
thiig accumulated experience is the fact 
that Petrobrfis has become the world 
leader in deep water technology for 
crude oil exploration and production," 
notes Mr Galvao. 

Petrobrfis now operates routinely at 
underwater depth levels of 2,600 feet. 
And, just last month (April), the 
company put into commercial 


production a well located at a depth of 
3,400 feet, a world record. 

- Brazil's total petroleum reserves 
" correspond today to 6.9 billion barrels 
of oil equivalent (BOB), of which 4.5 
billion are in proven reserves. Daily oD 
production is about 700,000 b/d, 70% of 
it from offshore fields. 

The reserves/production ratio is 17 
years, one of the best among the 
international oil companies, with an 
increase of 23 barrels for each barrel 
produced from 6,243 active wells, 10% 
of them offshore. 

The important of offshore production is 
further demonstrated by the 75 maritime 
production platforms operating along 
the Brazilian coastline as well as by the 
feet that 15 of the company's currently 
active 28 drilling rigs are located in the 
sea. 

The company's refining activities take 
place in 11 refineries which, except for 
another two small private plants, are all 
operated by Petrobrfis. Some 1J2 million 
barrels of petroleum are processed dally 
out of a capacity of 1.4 million b.p.d. 

In the transportation area, the firm owns 
a fleet of 72 ships totalling 55.4 million 
deadweight tons. Moreover, Petrobrfis 
operates a 3, 800-mile network of .oil 
pipelines and nine terminals with a 
■storage capacity of 56 million barrels of 
ofl and oil products. 

Demand for oil products in Brazil is 
increasing. Last year average daily 
consumption was 1.27 million b/d. 
Petrobrfis 1 production for the year 
averaged 668 million b/d, while crude 
oil imports were at 586 million b/d. 
Meanwhile, the company is also an 
important exporter of oil products, with 
overseas sales totalling S863 million in 
1993. One of Its most important export 
items was the shipment of 40,000 b/d of 
gasoline to US markets. 

The group's principal subsidiary, BR 
Distribuidora, is Brazil’s largest 

derivatives distributor. 

BR Distribuidora at the end of the 1993 
went public with excellent results: in 
January after hitting a high of $52 per 
thousand, its shares settled at $41 per 
thousand, well above the launch price of 
$33 per thousand. 


Economic Performance and New Investments 


Mr Galvao points out that "in 1993, 
Petrobrfis' performance was especially 
positive due to some price recovery, 
lower petroleum import costs, general 
reduction in operating costs, and lower 
interest rates on its international debt 


transactions. Another important factor 
was BR Distribuidora's performance 
with a net profit of $110 million." All 
these resulted in a 1993 net profit of 
USS 673 million, on a gross operational 
revenue of USS 18 billion. 


lOOOm Barrier Surpassed 
New World Record 
for Offshore Production 
at Marlim - 4 


Marlim South, a reservoir 
discovered in 1987 by the wel 
4-RJS-382, was the selected 
area. This reservoir is located 
at depths ranging hum 1000 
to 2000 meters, with an 
estimated area ol 250 km2 
aid oa reserves of 5.9 bflton 
barrels. This choice look into 
consideration the proximity of 
this accumulation to the 
Martm Retd and the 
production facflMes already 
Installed and in operation for 
the Martm PBot System, the 
first deepwater Floating 
Production System instated 
In the Campos Basin. 


Since tire Marlim South 
discovery wefl is located In 
. 1 1 50 meters erf water and ties 
more than 25 km from the 
nearest floating Production 
System (Marlim Pitot), 


Petrobras decided to start oil 
slowly with one wett. The 
Matfim-4 weS. at a depth ot 
1027 meters and IB ton tar 
from the stationary unft from 
Martm Plot System, was 
elected as the first step In this 
venture. 



Output to forecast al 6300 
bpd, with an estimated total 
production cost of USS 3-501 
barret. Investment In Marfim-4 
well project is around USS 25 
mSon. with part of the 
malcrial/equipment required 
redeployed from the Martm- 
20 wel, which has been 
abandoned 


Careful planning is being 
implemented to make this 
project a reality. The expected 
results wfll provide the 
company with possbiEties ot 


Increasing reserves since 
those located at waters 
deeper than lOOOm are 
classified as ‘not defined* 
so far; 

Anticipating reservoir, 
geological and oil data for 
future field development; 

Expanding technological 
frontiers through field 
proven methods. 


By achieving this goal, 
Petrobras improved the 
state-of-tha-art In deepwater 
production whie sotting a new 
world record, thanks to 
creativity and commkmenL 


recorcjsinsubs^a completion 



With such good results, Petrobrfis shares 
performed very well in the main 
Brazilian stock exchanges during 1993. 
As an example, while the'Sao Paulo 
Stock Exchange Index (Bovespa) 
increased by 148% during the year, 
Petrobrfis share price surged by 357%. 
At the end of the year Petrobrfis shares 
represented some 7.8% of the overall 
traded volume on that exchange* 

"It is essential that we reduce debt 
service as well as import costs,” says Mr 
Galvao. "That is why we consider new 
oil field discoveries, exploration and 
production increases to be so important 
It is what has brought about the lower 
comparative costs between domestic 
production and imports." 

According to the Petrobrfis executive, the 
price of domestic production in 1993 
was $ 14.48/BO E compared to $16.04 for 
imported oiL 

With Brazil returning to the mtemational 
capital markets in 1991, Petrobrfis 
became one of the most aggressive 
players in the Eurobond field. In 1993, 
the firm issued a total of $810 million in 
Eurobonds in operations led by 
institutions such as Chase, J P Morgan, 
Indosuez, CS First Boston, Salomon 
Brothers, Bear Steams and Nomura. 

This year, the company intends to issue 
some $600 million in Eurobonds, most 
of which to fund its investment program. 
The Petrobrfis investment plan seeks to 
modernize and expand the company's 
assets in order to better satisfy market 
expansion requirements, improve the 
quality standards of its products and 
safety of its operations. Of the $22 
billion investment total projected for the 
five-year period 1993-1997, about S14 
billion will go towards oil exploration 
and production, S3 billion to expand and 
modernize the refineries, S3 billion for 
increase and modernization of pipelines 
and terminals, and $600 million in new 
oil tankers. 

These are the principal projects considered 
in die investment program: 

i. Phase I development of the Marian 
offshore field in the Campos Basin. 

To exploit commercially proven reserves 
of 1 billion BOB, an investment of $1.7 
billion is planned. This is designed to 
increase production to 205,000 BOE/day 


at a unit cost of only S7.47/BOE, with a 
return-rate of 67% a year. Operation 
startup is scheduled for June, 1994. 
Recently, Petrobrfis put into place in the 
Marlim field the world's largest capacity 
offshore oQ production platform. 

2. Phase 2 development of the 
Albaeora offshore field, also in the 
Campos Basin. 

Albaeora has proven reserves of 508 
million barrels. An investment plant of 
$1-5 billion should bring production to 
186,000 BOE/day with a unit cost of 
$ 10.75/BO E, corresponding to a return 
rate of 41% a year. Startup is scheduled 
for 1996. 

3. The Bolivia- Brazil gas pipeline. 
This 28- inch, 1,100-mile-long pipeline 
will gp from Santa Cruz de la Sierra in 
Bolivia to Sao Paulo, Brazil's largest city, 
with extensions to seven other Brazilian 
states. It will transport initially 8 million 
cubic meters a day of natural gas, with 
volume to be doubled in a final stage. A 
total investment of £L5 billion is planned. 
USS 17 billion by Petrobrfis. Feasibility 
studies are currently being carried out 
with the support of CS First Boston, 
financial consultant to the project 
Petrobrfis estimates that these new 
projects, among many others, will create 
a significant demand for equipment, 
materials and service supply. Because of 
the characteristics of the projects and the 
complex technological solutions 
required, the level of import of 
equipment and specialized services will 
tend to be significant. 

"While the greater part of the fina nc ial 
resources necessary to cover these 
investments will be generated by the 
company's operational cash flow, there 
will be a substantial requirement for 
long-term financing mechanisms,” 
according to Galvao. 

They will be required to complement 
our internal generation of funds," he 
says. “To this end the company has 
initiated negotiations for a number of 
new financing schemes including export 
credit facilities, securitization of 
receivables, leasing transactions, as well 
as the issuance of new long-term bonds 
and notes on the international capital 
markets.” □ 


i 


I 





rv 


FINANCIAL TIMES THURSDAY MAY 2S 19<M 

BRAZIL. IV . ..Zl" ' 


SOCIAL AFFAIRS 


Cruel contrasts 


Brazil is a country of cruel 
social contrasts: from the Man- 
hattan-style skyscrapers of S3o 

Paulo's Hnanria^ distri ct to Hw 

poverty of parts of the 
north-east, which can rival 
sub-Saharan Africa. 

While the country is one of 
the weald's hugest agricultural 
exporters, many millio ns of 
people are thought to go hun- 
gry. While developing a first 
world banking system to cope 
with the country's chronic 
inflation, more than hq ] f the 
population earns too little to 
open an account “Capitalism 
in Brazil only works fra* 20 per 
cent of the population, the rest 
live on the margins,” says Mr 
Herbert de Souza, a sociologist 
and the driving force behind a 
successful anti-hunger cam- 
paign. 

The “Citizen’s Action” cam- 
paign led by Mr de Souza won 
the support of minions of Bra- 
zilians. from managing direc- 
tors to shop assistants, in pro- 
viding basic foodstuffs to the 
extremely poor. Now, he wants 
to broaden the campaign, 
which is administered by local 
volunteer committees, to fight 
for jobs, health, education and 
land re fo r m . 

It w a tnn gh challeng e Brazil 
hag rmp of tjhi» most unequal 
wealth distributions in the 
world -the poorest fifth of the 
population receive about 2 per 
cent of the income. Brazil has 
not even experienced the lim- 
ited land reforms of countries 
such as Mexico. 

The plight of the rural poor 
has led to massive urbanisa- 
tion since the 1950s and the 
springing up of u faoda' H shanty 
towns around cities. 

Taquaril is a faaela on the 
eastern outskirts of Belo Hori- 
zonte. a city of 2m in the 
south-eastern state of Minas 
Gerais. Taquaril was originally 
built fay the local co uncil to 
house 1,800 famiTies in 1987. 
That number has now more 
than doubled following unoffi- 
cial occupation of nearby land 
by desperate newcomers. Same 
of the homes are built of card- 
board gnd tarpaulin, and perch 
precariously on geologically 
unsafe hillsides. Many lack 
electricity and most are with- 
out proper sanitation. 

Before a regular bus service 
was introduced, residents who 
worked in the city centre often 


faced a four-hour walk home. 
Youngsters ended up sleeping 
in the centre and d rifting fatn 
crime, says Mr Walter Gomes 
de Sanson, leader of a recently- 
created community associa- 
tion. 

Another resident, Mr Paulo 
Roberto Martins, arrived In 
Taquaril with his family six 
years ago because, he says, he 
could not survive an the agri- 
cultural wages paid in the Gov 
Valadares area, 450km 
north-east of Belo Horizonte. 
He now works as a concierge, 
earning about $100 a month. 
Tm lucky I have a job,” he 
says. 

Shanty town residents are 

amrniff t he most wlrwiw signs 

of Brazil’s marginalised popu- 

The constitution places 
heavy responsibilities on 

the federal government 

latrnn; a huge underclass with 
little access to proper health 
care, education or other public 
services. 

They are victims of a state 
that tries to do too much and 
ends up doing too little, accord- 
ing to Dr Antonio Carlos 
Gomes da Silva, superinten- 
dent of SSo Paulo’s Hospital 
das G micas, the largest hospi- 
tal in Latin America with 
nearly 2,000 beds. 

Mr da Silva criticises the 
1988 constitution, drawn up 
after more than two decades of 
military governments. The con- 
stitution places heavy respon- 
sibilities on the federal govern- 
ment for provision of services 
but does not say where the 
resources will crane from. 

Mr da Silva, along with 
many business leaders, 
believes Brazil’s low tax base 
should be widened and the tax 
system simplified. He also 
wants measures taken to 
reduce fraud in the health ser- 
vice as weU as productivity 
contracts with employees. 

Funding problems for public 
health are made worse by a 
complicated system, involving 
transfers of revenues from the 
federal government to the 
states and municipalities and 
by a shortage of hospital beds 
in some regions. This means 
the go vernm ent must pay pri- 
vate hospitals to treat public 


sector patients, creating rich 
te rritory for overcharging and 
corruption. 

Analysts say the underfund- 
ing of the public health service 
is a critical problem and gov- 
ernment spending per capita 
fell from $80 in 3900 to $44 in 
1992, a cc o rd fa g to the Ministry 
of Health. 

In public educati o n, ftmding 
is also a problem and the sec- 
tor is, like health, dominated 
by low salaries and frequent 
strikes. 

However, Brazil has made 
large progress in providing 
basic education in recent 
decades. 

In 1950, about a third of 
seven- to 14-year-olds had 
access to public educathm. By 
1990, that had risen to 88 per 
cent. However, the problem 
fam faegp that many pupils do 
not complete primary educa- 
tion and , as with all Brazilian 
social indicators, regional dif- 
ferences are extremely marked. 
For example, in Alagoas state 
in the north-east, the illiteracy 
rate is 45 per cent, co m p a red 
with 9 per cent for the wealthy 
south eastern state of Rio 
Grande do SuL 

Mr Jos£ Goldemberg, an aca- 
demic and former educathm 
minister, notes that the state 
spends an average $300 a pupil 
in basic education, compared 
to several thonsand -d ollars p er 
Student in public m ri v areiliiMi 
“In every country the elite 
takes care of its own,” he says. 

Brazil’s fragmented political 
system means that no single 
party can control Congress and 
that strong economic interests, 
ranging from landowners to 
government-owned companies, 
have entrenched positions in 
Congress and can block 
reforms. 

But Mr de Souza, while 
admitting he is often dismayed 
by the antics of politicians, 
believes that mere has been a 
new awareness of the country's 
problems, as shown by the 
reaction to the anti-hunger 

campaign 

"The elite has not yet 
noticed this change but it 
exists, and is being expressed 
through non-governmental 
organisations, grass roots 
groups and progressive local 
councils,” he says. 

Patrick McCuny 


B razilian car sales are booming, 
but domestic producers and 
importers of foreign models are 
bickering over how to share the spoils. 

The industry, domi na ted by Brazilian 
subsidiaries of the world’s feeding car- 
makers, was the motor to gmerai eco- 
nomic recovery last year, ft was kkk- 
started by a price-cutting pact between 
government, manufacturers and 

.flvwl ljy {jpgnnjjj 1 np Iod^hd* 

t eccen sector so lOreign campetzuon. 

Domestic output, which was flounder- 
ing at 914,000 units in 1990, has recov- 
ered strongly, growin g 30 per cent last 
year to reach a record L39m units. First 
quarter output this year rose a further 
34 per cent to 368JD00 units. Brazil, sow 
the world's tentirfaggest vehicle manu- 
facturer. has re c aptur ed from Mexico 
the iwaitka of top Tatfn American pro- 
ducer. 

The of impests, ramMnpd with 
b etter market comfiticns. has led to big 
i m pi r wuTramfe in productivity. At AlltO- 
latino, a joint ve ntu re between Volks- 
wagen and Fort, pr o duc tiv it y in terms 
of man-hours pa- car has jumped 50 pa 

rrrnt mw 1990 , rimibr gafrwt 

at the other two domestic manufactur- 
ers, Fiat and General Motors. However, 
analysts say the industry is still a long 
way behind productivity in more 
advanced far fa g i rfa t 
Meanwhile, car imports, for years 
blocked by prohibitive tariffs, have 
risen from virtually zero in 1990 to 


David Pilling reviews the car industry 

Motor to recovery 


67,000 units last year, nearly 6 per cent 
of market share. Over that period, 
import tariffs have fallen from 85 to » 
pa cent and are due to drop to 20 per 
cent lata this yea. Domestic car- 
makers, fearful of a potential onslaught 
of imports, have called for quotas aimed 
at restricting vehicle imports for seven 
years to perc ent ages ranging from to 
7. "Quotas would be a temporary mea- 
sure to give us time to face interna- 
tional competition," says Mr Ivan Fon- 
seca e Silva, vice-president for business 
and legal affairs at Antobrttna. 

Mr Josd Carlos da Pinhefrn Neto, cor- 
porate affairs director at General 
Motors do Brasil, says it is not feasible 
to leap directly from frill protection to 
fairi n g on imports from more competi- 
tive countries, some of which he 
accuses of dumping cheap cars an the 
Brazilian market "ft’s like a kid. You 
keep it locked in a roam and then you 
open the door with no kind of restric- 
tions,” he says. 

Brazilian carmakers also argue that 
foreign competitio n has not been the 
qocfel wiwnw^ Jn rewing up thn indus- 
try. They point to price-ortting agree- 


ments in which the government slashed 
vehicle sales tax, unions curbed wage 
demands and industry cut profit mar- 
as the main factors behind steeply 
rising safes. 

T he tri p artite pact baa cut average 
car prices by 30 per amt in reel 
terms and those of the socalfed 

"popular” car (with engines of less than 
lOOOcc) by 46 pa cent The price of 
Autotatina’s basic Gol for example, has 
crane down to $7,200 from $13,000 two 
years ago. 

Inirmagad Safes have p wp np tfd Mg 

in v estm en t projects. General Moure 
will have spent $ibn on adding new 
production Ones in the five yeans to 
1996 and Is considering starting a third 
plant Autolatina intends to spend 
$ 2 L 2 bn in the next three years, moderni- 
sing its production Hites. Both compa- 
nies are taking advantage of the pro- 
posed Mercosul common market to 
rationalise production between their 
Brazilian and Argentine plants. 

Some foreign manufacturers, 
attracted by Brazil's huge growth 
potential, are also contemplating direct 


inv es tmen ts. Nfegan da BatiUs 
log up the possibility of bonding a i 
fQUygutunmted plant to produce pap* 
tar can and po mb HWcm accord- 
ing to Mr Lute Carte SoHttto de OHv. 
etc*. general manager. A final 
will await the outcome of October’s 
presidential elections and signs of 
greater government potay consistency, 
he says. ... 

Nissan has Identified Brazil as poten- 
tially one of toe world's meet lucrative 
markets. There are 1L4 Brazilians pa 
vehicle, compared with 5.7 Argentine*. 
&S Japanese aadLS North American*. 
Sustained growth, or access to ctwflt 
- almost lm poesftte wttfa near 
ffetion - could send safes 
Nissan expects total safes to 
165,000, with a potential foreign stare tf 
IS pa cant, next yea. 

Imp o rt ers reject industry m g umma 
that they threaten Brazilian jobs. The 
vehicle industry employs UfoOQO work- 
ers, with knock-on benefits for thou- 
sands of others. Foreign manufacturers 
say imports have created mare jobs 
than they have d es troy ed as weS as 
contributing fTOQfo in taxes test year. 

Rivalry is booed to continue, some- 
thing to which domestic manufacturers 
are reconciled. "We will have more 
compe titi on." says Mr Robert Reward, 
chief operating officer at Autolatina. 
Thi not particuariy concerned as long 
as they play by toe same rales; as long 
as there's a fevei playing field," be soya. 


W hen Sto Panto brokers attri- 
bute a 10 pa cent fell an. the 
stock exchange to mdnoBs 
over the death erf Ayrton Soma. Brazil’s 
much-loved racing-car driver, one 
knows one is tfeaWng with a volatile 
maricet 

Indeed, investors - who saw real 
gams of more than 100 pa cent last 
yea-have had a rough ride in 1994. 
SSo Paulo's Bovespa index, after dxm- 
hmg by a real 50 pa cent in January, 
has since nosedived. By the second 
week of May, gains had been wiped out 
and the index was down 9 pa rant on 
the 1993 dose. 

Even the chairman of Bovespa, Mr 
Alvaro Angosto Vufigal, cannot dis- 
guise the market's roller-coaster nature. 
“We will have a way volatile yea. I 
probably shouldn’t say that, but I have 
to be honest,” he says. 

An inflation rate edging above 45 pa 
cent a mrarfh is the prime c ul pri t, exag- 
gerating sentiment and distorting 
indexes. “When you have inflation like 


THE STOCK MARKET 


Roller-coaster 


tins, you lose the focus of the exact 
value of things,” says Mr VkfigaL 

In addition, 1994 is an election yea, 
never a particularly stable time in Bra- 
zil, and investas -particularly foreign- 
ers - are nervous about the prospect of 
presidential victory for Mr Luis Tnfcio 
Lula da Siva, the left-wing front-run- 
ner. 

Conclusion of a Brady-styte debt 
restructuring deal in April was not 
enough to cahn markets, particularly as 
it came when US interest rates woe 


nosing upwards. Optimism ova a plan 
to crack inflatio n has been dulled by 
political wrangling in Congress. 

None of this had stemmed foreign 
inflows, which last yea reached a 
record net $5£bn, and were at $L54bn 
by the end of March, the latest figures 
available. Foreign investors in Brazilian 
equities, wdyfag under recently liber - 
aHsed legislation, face no withholding 
tax on gapfai gains and no minimum 
repatriation period. There is a 15 pa 
cent tax an dividends. According to Mr 
Vidigal capital stays in Brazil for an 
average five months 

Relative to the size of the economy, 
the stock exchange is still mB with a 
market capi talisation of around $80bn 
- it had poked at $130bn - about 18 per 
cent of gross domestic product Brazil- 
ian markets have a daily turnover of 
more than$20Qm, of which 18 pa cent 
represents foreign participation against 
less than 8 pa cent in 1992. S&o Paulo’s 
exchange accounts for 85-90 pa cent of 
trading, with Rio being the second-big- 
gest market 

Three-quarters of trading in 541 listed 
stocks is concentrated in just 10, mainly 
state-controlled, stocks. Telebrfis, the 
state telephone company, accounts for 
nearly 40 pa cent 


Mr Julius Haupt Buchenrode, director 
of investments at Banco Chase Manhat- 
tan, expects foreign flows to continue, 
regardless of the outcome of elections. 
The mam reason fa inflows is the 
perception that the country will do 
what all the other Latin American 
countries have done already -restruc- 
ture the economy, reduce inflation and 
set the preconditions for sustained 
growth,” he says. 

M r Isaac Michaan. managing 
partner of Brazilian broker 
Vfertice, is also optimistic. He 
points to price earnings ratios of about 
12 times, much Iowa than most other 
Latin American exchanges, and to 
prices at an average bock value of 70 
pa rant, Some well-managed compa- 
nies are traded at only a quarter of 
bode value, he says. 

Very cheap shoes may provide bar- 
gains for i n vestors, but do ttttfe to per- 
suade new companies to come to mar- 
ket. "With very high inflation and 
cheap prices, there have been very few 
new issues,” says Mr VldigaL 
In any case, few companies are in 
need of fresh capital A decade of eco- 
nomic stagnation has left idle industrial 
capacity of about 30 pa cent, according 


to Mr Buchenrode, Those companies 
that do want cadi have found ft more' 
convenient to look abroad; last year 
than were $7.Gtai in Eurobond tomes, 
against $4£bn the year before. 

The tong-tom success of Brazil’s 
equity markets depends an the -malt- 
ing of inflation, accontfeg to )£r Yfcfr- 
gal As weU as redwing volatility, th* 
resulting sharp drop fn real 
rates would mean buttons of dollars 
currently Invested in fixed-lnomne 
foods would beawttched to.tmSttosr‘ v 
Further privatisations wfll also be 
important Mr Vtotaad ops $7bn bas so 
far been raised and he estimates there 
is another $40bn in potential state wfl- 
offe, but he does hoc expect any "very 
exciting progress” until after' the elec- 
tions. , 

Presidential candidate Mr Fernando 
Henrique Cardoso to co mmi tt e d to far- 
ther privatisations, hut Mr da Sihra is 
far more equivocal Even If Mr Cardoso 
to elected, Mr VkUgal does not foresee 
rapid movement on politically sensitive 
companies such as Tetefarts. 

Mr Buchenrode of Chase prefers to 
look further ahead. “Short-term predic- 
tions are very dangerous,” he says. But, 
in the long-term, ha is b ullish, ■ ■ ■ 

“We are betting on restructuring. We 
don't know how tong it will take, a 
when the g»fas will come." When it 
does happen, though, he is confident 
that those who have weathered the 
steam win not rqjret their tenacity. 

David Piffing 



Icatu 


DAILY REPORT 


02 -May-** 



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FINANCIAL TIMES THURSDAY MAY 26 1994 


Guide for business visitors 


BRASILIA 

Faded at the edges 


Brazil’s futuristic coital, laid 
out in the shape of a giant 
aeroplane and symbolically 
placed at the country's centre. 
Is beginning to look a little 
faded at the edges, writes 
Angus Foster. The seat of gov- 
ernment once i960, Brasilia is 
merging in 'with ^ surround- 
ing plateau, bat it is atm a city 
without a past and with very 
shallow roots. 

Host visitors only go to Bra- 
silia far woric- nearly all gov- 
ernment departments <wH for- 
eign embassies are here -and 
as a working environment it is 
pleasant. There are few traffic 
Jams anil it is usually easy to' 
arrange meetings with govern- 
ment departments quickly. 

There are regular flights 
from S&o Paulo and Bio 
although they can get booked 
up on Fridays — whan many 
people leave Brasilia - and an 
Mondays, when they re tu rn. 

The Congress bufhlmg at the 
end of the “esplanade" of gov- 
ernment ministries flnmjniriy; 


Sfio Paula P tonssr s nmnumat: cosmopofits n and chic awa|*i 

SAO PAULO 

Drive and energy 


Sflo Paulo may not be the 
capital of Brazil, but it hnc all 
the swagger of the country’s 
most important Inftimtrial and 
financial centre, writes David 
PEffing- Cosmopolitan, chic, 
frenzied and sometimes vio- 
lent, Sao Paulo hnc the ! « «« of 
New York and the skyscrapers 
to match 

Outside Brazil, flits , city of 
17m people does not enjoy the 
grand reputation of Bio de 
Janeiro, and it certainly lacks 
Hw sea air «™t the fabulous 
setting. But for many visitors, 
Sfto Paulo has a drive and 
energy they find appealing! 

For all its imma turity, S&O 
Paulo is not an unfriendly 
place. Non-Portuguese speak- 
ers armed with a phrase book, 
a little Spanish, or a knack for 
gesticulation will find most 
PauEstas ready to help. 

Because cf the city's size and 
traffic snarl-ups, it can take 
considerable . time .to get 
between appointments. Mid- 
night traffic jams are not 

RIO DE JANEIRO 


unknown. Try to schedule 
meetings dose, to one another,, 
bearing in mind that (he city 
has several centres. 

Sflo Paulo has a great night- 
life with bars, restaurants, 
music venues, theatres and 

rfnemaa allowing Wn gHah-lan- 

guage films. 

Without being paranoid, be 
on your guard and do not walk 
around aimlessly after An-ir. 
Useful telephone nmnhera : 

City codsJsCir*^' " 
"International a irport: 945 2111 
-Damestie-aizportc 536 8555 
Ponte Agree (shuttle flights to 
Bio): 534 0216 

Hotels: Maksoud Plaza 25S 
44U, Grand Hotel Ca’d’Oro 256 
8011, Caesar ,park 2S3 6622 
State government infor mation 
office: 845 3475 

Federation of Sflo Panlo Indus- 
tries (FESP): 2513522 
Stock exchange: 233 2000 ' 
American Chamber of Com- 
merce: 246 9199 

British Chamber of Commerce: 
2550519 ' 


Relaxed attitudes 


Far Cariocas, as Bio de Janeiro 
residents are called, the beach 
is the soul of the city, writes 
Patrick McCurry. Each beach 
has its own personality and 
‘•crowd". A swim before Auk, 
surrounded by Bio’s spectacu- 
lar scenery, is an unforgettable 
experience. 

But visitors should remem- 
ber that those romantic spar- 
kling lights <*wning from the 
hfli« pinpoint the city's notori- 
ous faoda shanty towns -and 
that robbing tourists, particu- 
larly in the Copacabana dis- 
trict, is a popular beach activ- 
ity. 

Valuables such as cameras 
should not be displayed in the 
street, on the beach or on 
buses. Taxis are generally safe 
but they often tabs the longest 
route possible and at speeds 
usually not permitted outside 
Formula 1 racing circuits. The 
tube system is reliable and 
secure. 

Business visitors should not 
be surprised when meetings 


start late or executives are 
informally dressed. This some- 
times relaxed attitude is coun- 
terbalanced by the Cariocas’ 
strengths: quick and ciealiwu 
thinking. 

Away front the beach, visi- 
tors can take an electric train 
to the Corcovado peak, site of 
the famous statue of Christ, or 
a cable car to Sugar Loaf 
Mountain for an aerial view of 
the city's beauty. 

Useful t ele phon e numbers: 

City code 021 

International airport 396 4132 
Domestic airport: 210 2457 
Ponte A£rea (shuttle flights to 
S&) Paulo): 272 5239 
Hotels: Caesar Park (Ipanema) 
287 3122, Copacabana Palace 
(Copacabana) 255 7070, Le Meri- 
dian (Leme) 275 9922 
State Government: 553 5942 
BND&3 (Development Bank i/c 
privatisations): 277 7003 
Federation of Bio Industries 
(FDUAN): 292 3908 
Securities Commission (CVM): 
2120200 


ORDER YOUR 
SUBSCRIPTION TO THE 

FINANCIAL TIMES 

handdjeovered in 
RIO DE JANEIRO 
SAO PAULO and BRASILIA 


Contact your local FT agent today: 
SYNCHRO SERVICOS DE DlBTRIBtHCAO LTDA 

Rio de Janeiro SSo Panto 

Tfcl: (021) 290-6747 ^ ( 011 ) 579-6482 

Fax: (021) 290-6111 ^ ( 011 > 578^754 


FINANCIA1TOS? 





the city and when Congress is 
sitting it is invariably being 
lobbied by an interest group of 
same sort 

At night,- Brasilia often 
appears very quiet la fact i t 
contai n s some reasonable res- 
taurants and bars, but they are 
often a long way from the hotel 
district in residential areas. 

For those <*mgh» in the city 
over a weekend, BrasfHa fan 
be a soulless place. One option 
is to hire a car and drive two 
hours, west to the sleepy histor- 
ical town Piresidpafis. 

Alternatively, over a long 
weekend, visit (he River Ara- 
guaia region further west 
Usefhl telephone numbers: 

City code is 061 
Airport: 365 1224 . 
artels: Naoum Plaza 226 6494, 
Ku Mt schok Plaza 316 3333 
Ministries: Finance 314 2000, 
Mines and Energy 218 50 00, 
Planning 215 4343 
Embassies: PS 321 7272, UK 225 
2710, European Union 248 3122, 
Japan 242 6886 



- ' f -h L-t ’v. - 


Soya accounts for some 40 psr oant of I 


AkamaM^dkJuaaut Soger < 


1 workers have bean laft baMnd by technologicat advances 


The agriculture sector has been transformed, reports Patrick McCurry 

A new farming elite is emerging 


Brazilian agriculture is 
learning to support itself. 
Despite cute in government 
aid, lower import tariffs and 
general economic instability, 
the 1993-94 cereals harvest is 
expected by the' Ministry of 
Agriculture to be a record 74m 
tonnes. 

Part cf the reason for the 
success has been a number of 
impressive productivity gains 
in t he past derada, mainly on 
the back of gove rn ment invest- 
mart in the 1970s. 

Now that the government 
has largely withdrawn from 
the sector a new farming elite 
is emerging, often r cpree ant cd 
by large agroindustrial compa- 
nies or export-oriented produc- 
ers that can compete in world 
markets. 

However, some economists 
worry that- the free market 
shake-up is leading to smaller 
and less efficient producers 
being to - subsis- 

tence farming and that more 

workers are being farced to 

abandon Hw lanH and and up 

swelling Brazil’s shanty towns. 

“Only the highly efficient 
producers will survive,” 
declares Mr Jos6 Carlos Duarte 
da Ooncefoflo, president of the 
Coplan co-operative in Campi- 
nas, 60 nrifag from Sflo Paulo. 

The cooperative, winch rep- 
resents 538 coffee wild cotton 
producers and has annual 
gross sales cf $18m, enc ou rages 
the use of fertilisers, high- 
yielding seeds and automation 
to increase Its members’ pro- 
ductivity. Coffee yields are 20 
hags (60kg each) a hectare, 
compared with a national aver- 
age of eight tegs, says Mr Con- 
cefoflo. 


The transformation during 
the past dAw>d» jg striking he 
says, recalling his arrival at 
the cooperative 10 years ago 
when government subsidies 
were stiQ flowing: “It was ridic- 
ulously corrupt People were 
tairfng- the money spend- 
ing it cm anything except farm- 
ing. Today, the industry has 
become much more profes- 
sional.” 

This growing professional- 
ism IiQftr Imam In flu 1980s 
with the phasing out of govern- 
ment subsidies. 

It was followed by a general 
reduction of otter government 
su p p o rt to farmers - sparked 


Brad is still 
the yroricfs biggest 
coffee exporter 

by Brazil's financial cri- 
sis -which included cuts in 
agricultural loans and pur- 
chases of excess stocks. 

One of the most outs tanding 
grampigB of improved produc- 
tivity cancans soya. While the 
planted area of soya in the past 
decade has increased only, 
slightly, to about 10m. hectares, 
production has soared from 
15m to 23m tonnes, reports 
Conab, a gove rnm ent agricul- 
tural agency. . , 

The productivity gains, 
according to Professor Gull- 
herme Leite, an agricultural 
economist, were made poss ible 
by government in ves tm ent in 
the 1970s in new seeds and 
agricultural technology tai- 
lored to a semi-tropical cli- 
mate, flTiri by the opening up of 
the vast terrains of the central 


and western states such as 
Mato Grosso. 

Today, Brazil is the world’s 
second-largest soya exporter 
after the US and the leading 
exporter of orange juice, 
another crop that was hardly 
cultivated 25 years ago. This 
crop evolution continues a his- 
toric pattern. The Portuguese 
colonises planted sugar cane 
in the north-east, which was 
la ter supplanted by wffa* in 
the state cf Sflo Paula Soya 
has now became by far the 
most important crop in Brazil. 

Soya earns Brazil more than 
$3bn a year and accounts for 
some 40 per cent of agricul- 
tural exports, with enffe*- and 
orange juice earning about 
glhn each. While Brazil is MSI 
the world’s biggest coffee 
exporter, its importance, how- 
ever, has rtarffawri . irignWiwtrrily 
since the early 1950s when it 
represented floe vast 
of agricultural exports. Last 
year, coffee accoun t ed for just 
16 per cent . 

Similarly, because of Brazil's 
industrialisation, agriculture 

has iteclinpri rtr annttti rally fa i te 

importance to the economy, 
shrinking from about half of 
gross domestic product 40 
years ago to 13. per cent today, 
according to Mr Latte. 

But today’s agricultural sec- 
tor_is.aften_lrfgfaly competitive 
thanks to low prodntfian costs, 
says Mr Andrfc PessOa of con- 
sultants MB Assodados. He 
highlights the growth in 
experts of processed chickens, 
which benefit from low costs 
for land, labour and feed. 

“Californian chickens 
receive large subsidies and we 
get none mid yet we are still 



competitive in world markets," 
says Ifr Peseta. 

But same other products are 
less competitive. With the low- 
ering of tariff^, Brazil ha» 
became an importer of crops 
such as wheat Economists say 
this is because wheat is highly 
subsidised by the US and Euro- 
pean Unicoi and also because 
countries such as Argentina 
have better soils for wheat pro- 
duction. 

Mr Pedro de Camargo, presi- 
dent of the Brazilian Bural 
Society, a producers' associa- 
tion, mmpfaiiw that white Bta- 

zfl has lowered or eliminated 
import tariffs and subsidies, 
the rest of the world has not. 
“We are being taken for a ride 
and we don’t have the political 
clout to insist an change* by 
the US and Europe,” he says, 
r.ifliming that the Uruguay 
round of the General Agree- 
ment on Tariffs and Trade 
talks will not httefit RwwJHan 
agriculture. 

The losers under Brazil's 
move to a more p mft»mtiitnal 
system are those producers left 
behind by the technological 
advances, which includes large 
parts of the pom* math-east of 
Brazil as well as sugar cane 
workers in the state of S3o 
Paulo. This process has 
sparked a strong migration of 
rural workers to the shanty 
towns in the past decade. 

Mr Lute foddo, presidential 
ffandidatp of the left-wing 
Workers Party, intends to insti- 
tute a thorough agricultural 
reform an ^ fiTvd land for up to 
three millio n landless famine* 
But any changes will first have 
to overcame the powerful land- 
owners’ lobby in Congress. 


|| KEY FACTS | 


8.511 966 an km 1 



. 156_3 mflUon 1 

I Head of State — -Itamar Auousto Cautiaro Franco { 

1 Currency — Cruzeiro, 

Real and URV accounting unit 1 



1992 S1b4_513 I 

- 1003 $1-8&449 


ECONOMY 




1882 

1888 

Total GDP (fbn)’ 

411.5 

432.0 

GDP per capita ptwtb (%)'*. 

-2.7 

3.0 

Components of GDP (%)_ 



Private consumption 

62.4 

n.CL 

Total Investment ..... 

19.1 

ruL 

Government consumption 

15.2 

ruL 

Exports 

9.6 

iuk 

Imports. — — 

-6.3 

ruL 

Annual average % growth bi 



Consumer prices (%) .... . 

1,129 

2,491 

Unemployment rate (%) — — 

15.8 

14.9 

Stock market 



Stock market cap. ($bn)*. 

45.3 

99.4 

No. of fisted companies*. 

565 

550 

Share price index growth (%)*__ 

0.4 

108.3 

Bond market— 



IDU Brady bond yield (%) - ~ 

20.8 

10.6 

Total rattan on bonds (%) 

0.9 

58.8 

Eurobond debt issuance (Sbn)~~ 

4.6 

6 Jl 

Reserves minus gold ((bn) 

22.2 

30.6 

Total external debt ($bn) 

121.1 

n. 0 . 

Debt sendee ratio {%) 

24.4 

IL& 

Trade. — : 



Exports (Stan) 

35.9 

38.8 

Imports ($bn). 

20.6 

25.7 

Trade balance ($fan) 

15.3 

13.1 

Main trading partners (%)* 

Exports 

Imports 

USA_. „ 

19.7 

25.1 

Japan _ . _ 

6.4 

5.6 

Germany „ . 

5.7 

9.0 

EC.___ _ 

29.6 

22.4 

Latin America & Caribbean 

22.6 

17.3 


(1) 1993 figures are estimates. (2) S&o Paulo Boisa De Vat ores. 

(2) IFC Index, dollar terms, 96 Increase over previous year end. 

(3) Percentage shares of trade hi 1992. 

Sources: IMF, IFC, HU. Salomon Brothers. 


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BRAZIL VI 


THREE STATES TACKLE ECONOMIC AND SOCIAL PROBLEMS WITH A VARIETY OF APPROACHES 




FINANCIAL TIMES THURSDAY MAY 26 1994 



). m 


Biggest consumer market 

Sao Paulo state accounts for more than 40 per cent of Brazil’s 
industrial production, writes Patrick McCurry 




The state of Sao Paulo Is 
Brazil’s economic giant and the 
biggest consumer market in 
South America. With less than 
a quarter of Brazil's population 
it accounts for more than 40 
per cent of industrial produc- 
tion and 37 per cent of gross 
domestic product. 

Paulistas, as Us inhabitants 
are called, put that success 
down to one main factor: hard 
work. The more arrogant look 
down on what they regard as 
the decadent and workshy Bio 
de Janeiro as well as the 
under-developed and pover- 
ty-stricken north-east of Brazil. 

Sdo Paulo's wealth was built 
on the 19th century coffee 
boom and the influx of immi- 
grants from Europe, Japan and 
the Middle East That was fol- 


lowed by a wave of immigra- 
tion by job-hungry Brazilians 
from the north-east who have 
helped swell the state's popula- 
tion to 35m. The city, at 17m, is 
the biggest in South America. 

In the 1950s, the economy's 
axis moved from agriculture to 
industry, with the arrival of 
car production, and 

other manufacturing to take 
advantage of the state's large 
population and enterprising 
workforce. The economy Is 
today highly diversified, rang- 
ing hum the manufacture of 
satellites to food processing. 

Sao Paulo's growing eco- 
nomic supremacy mirrored the 
decline in Importance of Rio de 
Janeiro, which was partly 
caused by Rio’s loss of the cap- 
ital to Brasilia in I960. “S5o 


Paulo is the centre of gravity 
for Brazilian capitalism,” says 
Mr Pedro Paulo Branco, head 
of Seade, the state's research 
institute. 

But Mr Luiz Antonio Fleury 
Fflho, the state governor, com- 
plains that part of Sao Paulo's 
wealth subsidises the federal 
government 

“We contribute 52 per cent of 
federal taxes while only get- 
ting 2 per cent back,” he says. 
Analysts put Sao Paulo's con- 
tinued industrial success down 
to a good road and energy 
infrastructure, impressive uni- 
versities and research groups 
and a strong business culture, 
founded on the dynamism of 
Its immigrants. 

But there are problems. Sdo 
Paulo's share of Brazil’s GDP 


has fallen from 41 per emit in 
1980 to 37 per cent in 1992, 
according to Seade, and there 
have been doubts about 
whether the state can continue 
its role as the engine driving 
the national economy. 

Part of the reduction in Sao 
Paulo's importance has been 
caused by neighbouring states 
such as Minas Gerais offering 
tax and land incentives to 
attract companies tired of Sda 
Paulo's over-saturated infra- 
structure and higher costs. 

However. Mr Branco says 
these companies are often in 
the agro-industrial or interme- 
diate goods sectors and that 
capital-intensive and high-tech 
companies are still choosing 
Sdo Paolo. 

Some business people say 



Paiacfo das BandetautteK S50 Pauto state go w mmant headquarters 


militant unions, particularly In 
tiie car Industry, have contrib- 
uted to companies moving out 
Mr Jos& Lopez Feijdo, presi- 
dent of the CUT union confed- 
eration in S3o Paulo, says the 


fits of being dose to S3o Pau- 
lo's huge consumer market are 
overwhelming. 

This point is echoed by Mr 
Robert Rennard, chief operat- 
ing officer of Autalatraa, the 


number of companies leaving holding company for the com- 


the state because of strong 
m rio ns is “very small” and that 
for most companies the bene- 


bined operations of Ford and 
Volkswagen in Brazil. Mr Ren- 
nard adds that he expects 


higher labour costs in SSo 
Paulo to be offset by a redac- 
tion in regional wage differ* 
ences in the car industry and 
that relations with the unions 
“are maturing." 

Large sectors of SSo Panic's 
economy are not. unionised, 
however, and unemployment 
stands at 15 per cent; about 
1 . 2 m workers. Some analysts 
believe that the state's social 
problems, particularly unem- 
ployment, will not be relieved 
significantly by economic 
growth because of a move 
towards more specialisation in 
Industry. 

Outside the industrial sector, 
the city of S5o Paulo has con- 
solidated its hegemony over 
Rio de Janeiro in financial ser- 
vices. The Sdo Paulo stock 
exchange accounts for about 85 
per cent of Brazilian share 
trading. The city's futures and 
commodities exchange had 
trading volume of more than 
SSOObn in 1993. 

Since the 1970s, when SSo 
Paulo's stock market expanded 
after carefully targeting the 


growing new capital issues, 
there ha a been a trek of finan- 
cial executives from Rio de 
Janeiro to SSo Paulo. Mr Ron- 
aldo Nogueira, a director of the 
Brazil Fund investment trust 
who lives , in Rio de Janeiro, 
says: “Not being in SSo Paulo 
requires a effort and l 
find myself travelling there at 
least race a week on average.” 
The future for Sdo Paulo 
clearly depends on the national 
perspective. If the Brazilian 
economy can be stabilised then 
SSo Paulo could become an 
even more important hub, ana- 
lysts believe. They see the 
stats as the anchor of a large 
industrial and trading region, 
helped by by the Mercosul 
trading bloc. 

The avis linking SSo Paulo 
with Buenos Aires, South 
America’s two biggest markets, 
is regarded as a key part of 
this development. “Other Bra- 
zilian states and countries like 
Paraguay and Bolivia will act 
as satellites, linking their 
growth to that of Sdo Paulo,” 
Mr Branco says. 


Quiet revolution under way Austerity and common sense 


In its own quiet way, the state of Minas 
Gerais is undergoing a revolution. 

As well as being set to challenge Rio de 
Janeiro as Brazil's second biggest econ- 
omy, it has become the most active state 
in global financial markets following a pio- 
neering Eurobond issue earlier this year. 

Development officials portray the state, 
which is larger than France in area, as a 
haven for businesses from the overcrowd- 
ing, high costs and strong, union organisa- 
tion of neighbouring Sdo Paulo. 

In the 16th century it was gold that 
attracted settlers to the state. Gold mining 
was largely replaced by iron ore but the 
colonial towns built by the settlers, such 
as Ouro Preto and Tlradentes. remain, and 
have become an important tourist attrac- 
tion. 

State officials boast that Minas' share of 
national gross domestic product increased 
by three percentage points to 11.4 per cent 
between 1970 and 1990, while Brazil's other 
three largest economies - those of SSo 
Paulo, Rio de Janeiro and Rio Grande do 
Sul - saw their shares shrink. During the 
1980s. Minas exports increased by an aver- 
age 10 per cent a year. 

This growth was sparked in the 1970s by 
the arrival of big industrial companies 
such as Fiat and by a strategy to attract 
manufacturing and high technology com- 
panies, many from overcrowded SSo 
Paulo, by offering fiscal incentives and 
lower costs. 

The policy has been promoted by the 


Minas Gerais has 
become the most 
active state in global 
financial markets, 
says Patrick McCurry 

state's development h ank, BDMG, and its 
Industrial Development institute. In the 
1990s, the state has targeted companies in 
sectors such as vehicle parts, electronics 
and agribusiness. Nevertheless, iron ore 
still makes up about a quarter of Minas's 
$5bn in exports. 

With a GDP of about $42bn, the state Is 
home to a large chunk of Brazil's newly- 
privatised, and profitable, steel Industry as 
well as mining, al uminium and car pro- 
duction. Industrial giants with operations 
in Minas include the steel «wnpw ny Usimi- 
nas, the government-controlled mining 
company Comptanhia Vale do Rio Doce 
and Alcoa, the world's largest al uminium 
producer. 

The economy has been helped by 
finance from the World Bank and Inter- 
American Development Bank for infra- 
structure projects. 

The state government has also been 
active in international financial markets. 
In February it raised $200m through a 
Eurobond issue that offered options to buy 


stock in its electricity company Cemig. 

Despite the complexity of the operation 
and the fact that no other state had 
attempted a bond with equity warrant 
issue, the offer was successful and has 
opened the door to similar operations in 
the future, say state officials. 

They add that the state's conservative 
financial manag ement has led to a bal- 
anced budget for the past three years. 

However, Minas Gerais also suffers from 
serious social problems, including shanty 
towns and an estimated 2m people or more 
living in poverty. Problems are particu- 
larly acute in the north of the state In 
areas such as Jequitmhonha. 

Mr Marcus Flora, general secretary in 
Minas for the left- wing Workers Party 
(PT). criticises the state government’s poli- 
cies. He says that investment has been 
over-concentrated in large civil construc- 
tion schemes to benefit contractors and 
other political allies of the state govern- 
ment 

“Education, health and public sanitation 
have suffered and while the state produces 
20m tonnes of cereals a year, 2m people 
are going hungry," says Mr Flora. 

The state government and its agencies 
deny that social problems have been 
ignored. Officials point to schemes such as 
the Jaiba irrigation project for fruit farm- 
ers in the poor north of the state, and 
education projects such as the Carumim 
programme for children from low income 
backgrounds. 


Brazil's backward and usually corrupt 
north-east is an unlikely place to encoun- 
ter balanced budgets and good govern- 
ment But thanks to both these factors 
and a bit of tuck, the state or Ceard Is 
becoming the envy of reformists in the 
region and winning plaudits from interna- 
tional agencies. 

Ceard's fortunes started to turn with 
the 1987 election as governor of a young 
businessman, Mr Tasso Jereissati, who 
decided to confront the cosy s y ste m of 
patron-and-client politics responsible for 

tnucb of the north-east's poverty and 
problems. 

His main achievement was to balance 
the state's previously anarchic budget 
with a mixture of austerity and common 
sense. About 40,000 public employees, 
political appointments under previous 
regimes, were sacked. Tax collection was 
tightened and corruption attacked. These 
ideas, fundamental to most governments, 
are still controversial In much of Brazil 
and Mr Jereissati was ostracised by much 
of the state's elite. 

With the budget balanced, and corrup- 
tion under wraps, businessmen started to 
invest and the ec o nomy began to prosper. 
Growth in gross domestic product has 
o ut s t r i pped Brazil's by a factor of five. 
Pm 1 capita income rose 30 per cent to a 
still very low $L300 while in the rest of 
the country it remained stagnant 

Mr Jereissati, who had joined the cen- 
trist Brazilian Social Democrats (PSDB) of 


Ceara is becoming the 
envy of reformists and 
winning plaudits from 
international agencies, 
reports Angus Foster 

Mr Fernando Henrique Cardoso, the for- 
mer finance minister, was followed as 
governor by his chosen successor Mr Giro 
Gomes, who took over In 1991. 

Both men sought to attract Brazilian 
and foreign investment Textiles company 
Grupo Vicunha Is building two new facto- 
ries iu the state at a cost of $450m. These 
could create 5,000 new jobs by 1997. 

Other companies, such as shoemaker 
Grendene and plastics company Petropar 
are also investing smaller amounts. A 
consortium of Taiwanese businessmen is 
investing as much as $32m in various 
light Industry ventures in the interior of 
the state, attracted by low labour costs 
and government incentives. 

Ceard is a long way from being a para- 
dise and still faces huge problems, includ- 
ing areas of extreme poverty, rapid urban- 
isation and an overlooked rural sector. 
Illiteracy remains stubbornly close to 40 
per cent of the population above 14 years 
old. Infant mortality has been cut dramat- 
ically by an internationally praised health 


scheme, but in rural areas it remains 
unacceptably high. 

Even critics welcome the cleaning out iff 
public accounts and say the government’s 
new credibility has brought investment 
from business and multilateral agencies 
such as the World wank, pleased to see 
money reaching desired targets rather 
then syphoned off to corrupt politicians. 

But there Is concern about who has 
gained from eight years of PSDB role. Ms 
Maria Cldde Bernal, a local union leader, 
says there has been a lack of investment 
and good policies in areas such as agricul- 
ture and the urban shanty towns, the fav- 
elas. "The benefits haven’t gone to the 
majority of the people, but to the elites,” 
she says. Other critics say both governors 
have made expert use of public relations 
to take credit for schemes .which commu- 
nities have started themselves. 

Dr Adalberto Barreto, a psychiatrist 
who works in the giant shanty town of 
Pxrambu, says most h ealth and welfare 
services are still provided by residents. 
"The government Is capitalising on this. 
It is the communities who are making the 
changes," he says. 

Mr Jereissati, who Is likely to stand for 
governor again iu this year's elections, 
admits that much remains to be done, and 
that achievements so far are building the 
base fra future reforms. “We need to jump 
forward, especially with social develop- 
ment We need to start Integrating the 
poor into society,” be says. 


* I 


1 \w. 

J ## 


No. 1 Lead Manager of Brazilian 
Eurobond Issues in 1993. 

No.l in terms of number of deals, excluding own issues (source: IFR/SDC OmniBase) 

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3-3 million square miles. Guess which country? 

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INTERNATIONAL CAPITAL MARKETS 


Thursday May 26 1994 


W han bankas and trad- 
ers gather for the 
annual meeting of the 
hrternatkaial Securities Market 
Association (ISMA) in Hew 
Orleans on June X, their mood 
is likely to be somewhat less 
festive than it was a year ago. 

The contrast between 1393 
and 1994 in the international 
capital markets could hardly 
be starker. Last year, declining 
interest rates led to an unprec- 
edented bull ran in the world’s 
government bond markets, 
which encouraged record issu- 
ance of WOffim in the eurobond 
market The strong upward 
trend encouraged a surge of 
investment by mainstream 
ftmd managers, financial insti- 
tutions and hedge funds. 

In February, the bull ran 
rapidly turned into a bear mar- 
ket, when tixe US Federal 
Reserve raised interest rates 
for the first time in five years. 
The market's reversal was par- 
ticularly painful, because most 
traders and inves to rs hnid long 
positions in bonds, expecting 
the rally to continue. The 
reversal of fortune of the US 
bond market and the spillover 
into European markets were 
exacerbated because many 
traders and investors held posi- 
tions through the fixtures mar- 
kets, and were forced to liqui- 
date positions as prices fell, to 
cover margin calls on their 
positions. 

“What we saw in 1992 and 
1993 was a trending market," 
said Manfred Schepers, an 
executive director of Swiss 
Bank Corporation in-London. 
“Globally, many investors 
were taking large positions In 
terms of credit and interest 
rate risk, which led to a dra- 
matic wymelftn of ft ii wg i ii g 
markets and of band markets 
generally.” 

At the peak of the market, . 
two emerging markut borrow- 
ers, China and Arge n tina, were 
able to issue large global band 
offerings. “People lost touch 
with the fact that emerging 
markets are a credit game and 
that thB maikwt li quidity is not 
always reliable,” said Mr Sche- 
pers. 

As a result, when the Fed’s 
rise «nn», the em erging mar- 
kets were hit particnlariy hard. 
New issues of both bonds and 
equities from these regions 
have suffered as a result. 

The greater appetite far risk 
was also shown by investors’ 
willingness to buy very long- 
dated bonds. For waaipte, Ger- 
many issued 30-year govern- 
ment bonds far the first time 
last year. Although the amount 
of funding through fixed 
income hands has dropped off 


Mood is sombre as 
bears spoil the fun 

In February, the bull run ended when the US Federal 
Reserve raised interest rates. Tracy Corrigan discusses 
the painful change of fortunes for traders and investors 


this year, this has been par- 
tially balanced by the increase 
jtn issuance of floating-rate 
notes. Dealers also report 
record volume in the Euro 
commercial paper market, and 
there are early signs of a 
revival in bank lending. 

Since there is little sign that 
debt requirements are faffing 

it lS likely that fending wffl 
simply shift away from the 
mainstream ftrofl tnnnme euro- 
bond market, where the flow erf 
new issues has suffered as a 
result of weakness and volatil- 
ity in government bond prices. 


However, the huge volume of 
funding in the bond market 
last year cannot be switched to 
thfl anaiiH- equi- 

ties market 

The net result of the turn- 
around in market is bound 
to be lower profits for the 
financial institutions which 
dominate the international 
capital markets. First of all, 
their trading income, a 
one-way bet far almost all of 
last year, is bound to suffer. 
On the while 

some of the fixed income euro- 
bond business has been 


In this survey 


US, Japan and emerging markets, Page 2? Secondary debt 
market and dragon bonds. Page 3; International equities, 
derivatives and commercial paper/ Page 4; Syndicated loans 
and securitisation. Page 6; Profiles: Merrill Lynch, Lombard 
Odierand Abbey National, Page 6 . 


“The US bond market has 
had a predominant effect an 
attitude well beyond the funda- 
mentals,” said Ludovico del 
Balzo, a wmMginy of 

Lehman Brothers. "There is no 
reason why the long end of the 
European bond market gfawiid 
be as weak as it has been 
except far sentiment” 

Nevertheless, the fact is that 
far most of the year so far, the 
markets have denari analysts’ 
insistence on market funda- 
mentals. Many h m?d investors 
who held ooi to inventory dim- 
ing the first wave of selling 
were forced to liquidate an the 
ffewwl OT third wave Inafaiad. 

The impact on stock market 
investment has been somewhat 
less pronounced. Mr del Balzo 
notes that while US mutuals 
investing in bonds have seen a 
high level of redemptions ting 
year, there has been little 
shrinkage of equity funds. 

The volume of new issues in 
the international equities mar- 
ket remains firm, although 
there Is now a greater sensitiv- 
ity to p ricing , particularly of 

H HT CTgtn g r nrarlra t t raiKiv - tinns 

But volume in this market is 
being buoyed by the heavy 
slate of privatisation issues, 
especially in Europe. 


replaced by floating-rate notes 
and commercial paper issu- 
ance, the conmdssians earned 
axe substantially lower, owing 
to the lower level of underwrit- 
ing risk. 

To smnp grtent, the market 
is better positioned to cope 
with the cyclical turnaround 
than it has bean in the past 
The last shake-out of the euro- 
bond market, in the late 1980s, 
came when competition had 
become so cut-throat that prof- 
itability even tor market lead- 
ers was being eradicated. A 
number of casualties pulled 
out or cut back, but the market 
did manage to impose some 
discipline. The introduction of 
the fixed price re-offer system 
for pricing riaaig, while not an 
unqualified success, has at 
least managed to rid the mar- 
ket of some of the worst 
excesses. 

Market participants can also 
comfort themselves with the 
knowledge that most of their 
institutions enjoyed record 
trading profits last year, have 
reasonably strong capital 
bases, and so ghmiTri be able to 
weather a few storms. 

But the relentless institu- 
tionalisatian of the market has 
also made it mare difficult to 


Eurobonds: down to earth with a bump 

Search for yield over 


Nothing could have prepared 
eurobond syndicate managers 
fix- the rapid deterioration in 
market conditions in 1994. Rid- 
ing high after a record year of 
new issue volume and lumpily 
thinking about how to spend 
their hefty profit-related 
bonuses, the sudden collapse 
in bond markets around the 
world in February had the 
same effect on them as a 
bucket of ice-cold water on 
sun- warmed skin. 

“It is no longer a bull market 
for new issues," says Simon 
Meadows, joint head of syndi- 
cate at CS First Boston. He 
notes that the opportunities 
which were available last year 
in so many currencies and 
structures are no longer there, 
mainly because evidence that 
US interest rates are rising 
again has wiped out the need 
among investors to take risks 
to enhance their returns. "The 
search for yield is over, that 
extra pick-up is not needed any 
more,” says Mr Meadows. 

After soaring 45 per cent to 
WOObn last year, new issue vol- 
ume from the start of 1994 to 
May 15 stood at $164hn, down 
from 31711m in. the same period 
last year, according to IFR 
Securities Data. At the same 
time, the proportion of fixed- 
rate issuance has declined in 
favour of floating-rate note 
(FRN) issuance, reflecting the 
shift in investor demand to 
make the most of any rise in 
rates. 

From January 1 to May 15 
this year, bo r rowe rs launched 
the equivalent of f43bn in 
FRNs, corresp o nding to 26 per 
cent of total new issues (and 

mainly itawwitriaM jg, US dbl- 

fan), compared with a total of 
$24bn in foe year-ago period 
(or 14 per cent of total new 


a 


Emerging market borrowers 
which tapped the eurobond 
market with such success fast 
year have also s uf fere d as a 
result of the more defensive 
stance being adopted by inves- 
tors. Yield spreads on their 
taper have widened substan- 
tially in the secandaxy market, 
eroding the progress which 
they made last year with 
respect to prinfng Syndicate 


managers say while the market 
Is stffl open to them, they w2) 
have to pay what investors 
want to raise funds. 

John McNiven. managing 
director at Merrill Lynch in 
London, says that the new 
issues market is stiff available 
to a whole range of issuers but 
ttot the process has become 
more focused. "You have to 
manage the new issue process 
more pro-actively," he says, 
“Underwriters have to differen- 
tiate between the credits to get 
secondary market support" 
Whereas last year the bull 
market cond itions made it pos- 
sible for syndicate m anager s to 
stick their necks out on pricing 

The sudden collapse in 
bond markets had the 
effect on syndicate 
managers of a bucket 
of Ice-cold water on 
sun-warmed skin 

to win a mandate, this year 
they are under pressure to get 
thefr pricing right or risk being 
left with the entire deal on 
their books. 

The market volatility and a 
reluctance among hanks to tie 
up their capital to support 
other people’s deals has 
wnmflskfld one of the less gen- 
tlemanly practices in the euro^ 
band market when members of 
a syndicate sell their allocation, 
of the new Issue back to the 
lead manager rather then keep 
it an their books in the hope of 
selling it an to investors. 

Recent instances of "bond- 
dumping” have prompted a 
debate in the eurobond market 
about the viahflfty of the fixed- 
price .re-offer mec hanism 
which was devised in 1989 by 
Morgan Stanley to to tal so me 
tripling among imderwriters 
daring the offering process. 

CS First Boston recently 
called for a revision of euro 
bond new issue practice to 
stamp out bond-dumping. It 
proposed a modified, fixed price 
re-offer mechanism whereby 
the lead manager would be 
able to retain control of its 
Issue by inviting the under- 
writing group to request papa- 


according to end-investor 
demand, but not guaranteeing 
to allot these firms any bonds. 
By only allocating bonds to 
underwriters whose demands 
are credible, the lead manager 
could limit the flowback of 
bonds and downward pressure 
on. prices. 

However, other leading euro- 
bond houses have stood by the 
existing re-offer system. In a 
letter to tee International Fin- 
ancing Review, which has been 
tee forum for the debate. Rob- 
ot Gray, chairman of tee mar- 
ket practices committee of the 
hitermitinniiT P rimar y Market 

Association, notes teat since 
its introduction the re-offer 
system has been used to raise 
the equivalent of more than 
|800ta in 15 differ ent enrren- 
ctes in more than 3£00 issues, 
approximately two-thirds of 
total eurobond issuance daring 
this period. 

. On the topic of banddump- 
ing, he adds: “Responsible lead 
managers should factor that 
possibility into their pricing 
and syndication strategy for 
any transaction.” 

Syndicate managers expect a 
Blight improvement in trading 
conditions this year but they 
say teat the main task win be 
to encourage investors back 
into tee market. One positive 
development is that in ves to rs 
are now more comfortable with 
medium-term note (MTN) pro- 
grammes which stable issuers 
to achieve cost-effective financ- 
ing through relatively, .small 
transactions. 

Paul Abberley, head of fixed- 
income investment at the Lon- 
don ann of Lombard Odier, the 
privately-owned Swiss invest- 
ment management company, 
says that the growing liquidity 
in tee MTN market is helping 
to hhir (fttHnctimm wtte 
the eurobond market. 

"In some ways MTNs are 
more attractive than euro- 
bonds because MTNs are struc- 
tured to suit you while a euro- 
bond has a fixed maturity,” 
says Mr Abberley. He adds teat 
when it comes to the second- 
ary market, MTNs are some- 
times easier to sell than euro- 

Coaxtinned on page 2 


squeeze extra profits out of cli- 
ents. Institutional Investors 
themselves have much 

more sophisticated, and are 
demanding - and gettin g - a 
more competitive service from 
trading houses. 

One s y mp to m of this is the 
tqp item on the agenda at fofe 
ISMA meeting in New Orleans 
- a shift in market practice 
from seven-day to three-day 
settlement of bonds. A pro- 
posal will go to the ISMA 
board in New Orleans, asking 
for a change in rules effective 
June 1, 1994. The reduction to 
three business days will apply 
to all ISMA members. While it 
is not likely to suit retail inves- 
tors, some of whom like to hold 
eurobonds because of their 
hearer form, their interests are 
being sacrificed because they 
now make up only a g»M>n por- 
tion cf thft market 

“The main benefit win be the 
reduction in systemic risk, 
because the period of counter- 
party risk will go down from 
seven to three days,” said John 
Langton, ISMA’s chief emeu* 
five. 

Mr Langton the rhnug t* 
is needed as a result of tee 
huge growth in secondary mar- 
ket volume: four years ago, the 
total annual turnover in Cedel 
and Eurodear, Europe’s two 


international clearing houses, 
was $6,5Mbn; It is now 
$ 30 , 000 biL “What was accept- 
able five or six years ago Is no 
longer. You are now looking at 
a different magnitude of busi- 
ness,” as well as substantial 
changes in market practice, 
suite as the growth of the repo 
market, he added. 

While trading conditions 
have been disappointing so far 
this year, one area of the mar- 
ket has continued to furnish 
lucrative business. Activity in 
the derivatives market has if 
anything accelerated, particn- 
lariy in the first quarter of the 
year, when many traders and 
investors were active in the 
fixtures markets as they tried 
to hedge risk and offload posi- 
tions. 

Although, margins In the 
futures broking business are 
extremely thin , heavy volume 
has mad» the business attrac- 
tive for larger market partici- 
pants. Meanwhile, the over-the- 
counter market, where more 
exotic options and swaps are 
fte<Hgnpd to suit Individual cli- 
ents’ needs, has became more 
competitive, due to the advent 
of new participants. However, 
the highly specialised nature of 
the business means that h^r>| r« 
still find the OTC market a 
lucrative area. 

The continued growth of the 
derivative markets, despite 
some bad publicity from heavy 
corporate losses, is widely 
expected to continue through- 
out 1991 However, even a par- 
tial recovery in bond prices at 
thin paint in the year is highly 
unlikely to allow new issue 
volume to recover to last year's 
Level A shift of emphasis 
towards international equities, 
floating-rate notes and possibly 

hank landing is Hkaly to help 

fiff demand from borrower s . 



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FINANCIAL TIMES THURSDAY MAY 26 1994 


INTERNATIONAL. CAPITAL MARKETS 2 


T hree years after steep 
declines in interest rates 
sparked a prolonged 
boom in debt issuance by US 
companies, the recent turn- 
around in interest rates has 
begun to take its toll on the 
corporate bond market 
The latest figures from Secu- 
rities Data, the New Jersey- 
based financial information 
firm, show that in April, US 
companies issued SlO^bn of 
debt (both investment grade 

and junk). That was almost 
half the S2CL8bn they issued in 
April 1993, and well below the 
average $24bn issued over the 
first quarter of the year. It was 
also the lowest monthl y total 
since January 1991. Yet. no (me 
on Wall Street was particularly 
surprised by the sharp drop in 
issuance during ApriL 
Between early February and 
mid-April, the Federal Reserve 
tightened monetary policy 
three times, in the process 
pushing up short-term interest 
rates three quarters of a per- 
centage paint to 3.75 pee* cent 
The rate increases - which the 
Fed hoped would prevent the 
rapidly-growing economy feed- 
ing a revival of inflation - 
sparked heavy selling of gov- 
ernment bonds. Investors were 


selling bonds because they 
feared that, in spite of the 
Fed’s actions, inflation would 
rear its ugly bead again and 
undermine the value of their 
fntqd-inro fflfl aSSCtS. 

The end result was a sharp 
rise in band market yields, and 
- after a brief lag - a slow- 
down in corporate bond issu- 
ance. Having feasted for three 
years on cheap credit compa- 
nies quickly became wary of 
wffing their bonds in a less 
favourable interest rate envi- 
ronment Similarly, investors 
were wary about buying corpo- 
rate paper if interest rates 
were going to keep an rising. 

Although the April data con- 
firmed that the new issues 
market was weakening, the 
first signs of a reversal were 
evident in the opening quarter 
of the year, when companies 
sold 572. lhn of new debt down 
from $97.9bn in the same 
period of 1993. While the totals 
were still impressive by histor- 
ical standards, investment 
bankers noted a deterioration 
in market sentiment in the lat- 
ter half of the three-month 
period, and on into ApriL 

Mr James Forese, the head of 
the fixed-income syndicate 
desk at Salomon Brothers in 


Patrick Harverson looks at the US corporate and junk bond markets 


Rates rise takes its toil 


In April, there was a sharp drop in issuance by US companies 


Yield spread his tory 


Ossa points 



going to the sidelines," said Mr 


New York described market 
conditions during April and 
early May as extremely vola- 
tile: “Sentiment has been very 
fickle. One day markets are 
rallying, and people feel good 
about long rates. The next day, 
markets are selling off, and 
people are pessimistic on 
rates.” 

The deterioration in market 
c onditions manifested itself in 
a widening of spreads, and a 
drop in HamanH from investors, 
which quickly scared many 
issuers away. Investment 
bankers say that whereas they 
could offer issuers tight 
spreads over 6 per cent Trea- 
sury rates last year, by the end 
of the first quarter they were 
talking about significantly 
wider spreads over 7 per cent 
Treasuries. It was the kind of 
talk that issuers did not want 
to bear. 


Sera J* Motgaa 

Once the market began to 
decline, demand quickly 
shrank, although interest in 
high quality paper held up rea- 
sonably weh. “Investors have 
been gning to hi gher quality, 
but for the most part they are 


Forese. "They are not buying 
much of any thing , and are 
keeping their money in 
short-term and other defensive 
instruments." The »na product 
that was in demand was float- 


ing-rate debt, which always 
appeals to investors looking to 
protect the value of their capi- 
tal in a market where interest 
rates are rising. 

As for junk bonds, they have 
generally fared better than 
their investment grade coun- 
terparts during the recent tur- 
moil afflicting fixed-income 
markets. This is partly because 
the accelerating pace of eco- 
nomic activity is good for junk 
bands because it reduces the 
risk that low-rated issuers will 
default hi times of economic 
growth, junk bonds tradition- 
ally do welL 

Also, the phenomenon that 
has sustained the junk bond 
market for the past few years - 
low interest rates chasing 
yield-hungry investors into 
higher interest-bearing assets 
such as junk bonds - did not 
begin to be seriously under- 


mined by the rise In interest 
rates until relatively recently, 
primarily because rates 
remained low by historical 
standards. Thus, until April, 
the motivation to Invest in 
junk was stitl quite strong. 
With sufficient demand from 
investors to mop up the new 
supply, junk bond issuance in 
the first quarter was 4 per cent 
higher than the year before at 
SHTbn, 

After March, however, there 
was a noticeable fall off in 
demand, so much so that in 
April, only 5S.2bn of junk 
bonds were issued in the US. 
down from $3.6bn in the same 
month a year ago and well 
below the average monthly vol- 
ume of £L9hn recorded during 
the first quarter. 

Issuance dropped sharply 
after March because investors 
became more choosy about 
which paper to buy. and began 
searching for ever-higher 
yields as interest rates on gov- 
ernment and investment grade 
bonds climbed. As one junk 
bond analyst at a large US 
bank explained: "It’s become a 
buyer’s market. With new 
issues, prices had to be 
increased by 100 basis points, 
150 basis points, sometimes 


even more, to induce the buy- 
ers to corns fn.* ft m not tag 
before companies started rafat- 
ing to pay the yields investors 
were asking. 

Companies were abo reluc- 
tant to come to the market 
because junk- hood mutual 
flmds - traditionally a large 
source of demand for low-rated 
Issuers - ware confronted with 
suddenly high rates of redemp- 
tions as investors chose to 
move their money elsewhere 
white the storm in the bond 
markets ww raging. 

For both the investment 
grado and junk bond markets, 
the outlook for the rest of the 
year dependejreatiy on what 
happens to US Interest rates. 
As of early. May, the Fad had 
raised rates twee times, and 
most audits were predicting 
that there was more to came, 
especially with the weakening 
dollar requiring support 

Yet what the corporate brad 
market needs above all now is 
some certainty about the out- 
look for Interest rates. Inves- 
tors need to be confident about 
where rates win be in the next 
three, six and 12 months, 
before they can start wwMng 
reasoned judgments about 
where to put their mousy. 


Search for 
yield over 

Continued from page 4 

bonds because Issuers are 
often willing to buy back their 
paper. By contrast it is rare to 
find an issuer of eurobonds 
who will buy them back. 

Bim Hun dal. head of the 
MTN desk at Goldman Sachs, 
says that while issuers often 
use the programme’s master 
documentation to streamline 
eurobond execution, the main 
use is for structured (deriva- 
tive-linked) products sold 
directly to investors. 

Several leading names in the 
eurobond market have set up 
MTN programmes in the past 
year, most notably the World 
Bank whose programme is 
designed to increase secondary 
market liquidity and enhance 
price transparency. A more 
recent recruit is British Colum- 
bia in Canada which signed a 
$2bn Euro medium-term note 
programme (EMTN) in early 
May as part of an ongoing pro- 
cess of diversifying Its borrow- 
ing sources and broadsring its 
investor base. 

Antonia Sharpe 


Emiko Terazono on how Japan’s corporate bond market is being undermined 

Patience is running out 


The Japanese way of doing 
i-hftigg gradually, in an orderly 
manner with a long-term per- 
spective, has long been consid- 
ered by outsiders to be the rea- 
son for its success in becoming 
an industrialised power. 

However, in the world of 
finance, this rule does not 
apply. The piecemeal reforms 
under way in Japan’s financial 
markets today, are undermin- 
ing Tokyo’s chance of becom- 
ing a truly international finan- 
cial market 

The country’s firmnrial mar- 
kets have been tightly regu- 
lated by tiie powerful ministry 
of finanra, and closed to out- 
side influences until the 1980s. 
However, the stock market 
boom of tiie late 1980s and the 
rise in the flnanrial power of 
Japanese financial institutions 
led to calls for deregulation 
both from home and abroad. 

However, financial authori- 
ties, who feared losing their 
power over the industry, 
financial markets and capital 
flows, have been reluctant to 
Implement fully-fledged 


r ufu rm, claiming that it would 
bring ‘•confusion" to the mar- 
kets and investors. 

Such dragging of feet, say 
market participants, will lead 
to a decline in Japan’s position 
as an international capital 
market, even though it may be 
among the world’s largest. 
“Japan’s capital and foreign 
exchange market is faring a 
severe case of hollowing out,” 
says Mr Milrf n Ftqii at Nomura 
Securities* bond division. He 
says issuers and investors are 
shifting their activities to less 
regulated offshore markets 
such as Hong H(mg - 

Restrictions on the types of 
investment products which 
can be issued, difficulty in 
bringing market prices into 
fund-raising activity, the l ac k 
of a proper secondary bond 
market, the lack of hedging 
tools for straight bond trading 
are frustrating foreign invest- 
ment houses which hoped for a 
lucrative market following 
deregulation. 

Officials at foreign securities 
houses now also warn that 


their patience will not last for- 
ever. 

“If thing s haven’t changed 
by April next year, we will 
have to reconsider our Tokyo 
operations," says a leading US 
i nvestment bouse. 

Since the mid-1980s, the 
ministry of finance has been 
promising deregulated finan- 
cial markets. So far, on tire 
corporate bond market, they 
have managed to lift various 
regulations and bring in the 
mechanism for the primary 
market 

Ova* the past year, the limit 
on the maximum amount of 
new issues has been lifted, and 
the market has been opened to 
a wider range of issuers, with 
the minimum credit rating for 
issuing foreign and domestic 
yen bonds by Japanese compa- 
nies lowered from single A to 
triple B. 

Restrictions on floating rate 
notes has been lifted, while 
companies Issued domestic 
dual currency bonds for the 

first tiiwp tn March. 

The entrance of hanks’ sub- 


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sidiaries into the securities 
business, the initial step for 
the ministry’s partial easing of 
the barrier between the securi- 
ties and banking industries, 
has also helped taring in com- 
petitive pricing and increase 
the number of companies issu- 
ing corporate bonds. 

Ten trust banks and 
long-term credit lmnks were 
allowed last April to establish 
securities subsidiaries, and 
city banks, or the large com- 
mercial banks, will follow suit 
this summer. 

However, products such as 
junk bonds and index-linked 
bonds are still barred, and the 
ministry of finance is hesitant 
about innovative instruments 
tailored for the Issuers' needs 
- an area in which foreign 
investment houses excel. 

Asset securitisation, which 
many foreign securities com- 
panies are eager to promote, 
has also failed to take off 
domestically due to the ambig- 
uous status of asset-backed 
securities as an investment 
instrument, and various proce- 
dural barriers. 

And although the corporate 
bond primary market has 
grown to Y2300bn. a second- 
ary market remains virtually 
non-existent due to an archaic 
bond registration law, and the 



There to a risk of Tokyo becoming a ma r gina l domestic market 


lack of an efficient clearing 
system. 

Because the Japanese legis- 
lative system treats bonds in 
the way in which they were 
treated before the second 
world war when sueh instru- 
ments were considered unmov- 
able assets, investors are 
required to register their 
bonds with designated banks. 

Such procedures can some- 
times take op to a month, 
hampering smooth trading. A 
centralised clearing system 
similar to Euro clear would 
solve such problems, boosting 
secondary trading. This would 
require a change in legislation 
but strong opposition from 
banks, which receive a regis- 
tration fee, and the cost of set- 


ting up such a system are 
obvious barriers. 

However, foreign investment 
house officials say such funda- 
mental problems need to be 
solved if Japan is to become an 
international financial centre. 

Along with such structural 
problems. large Japanese insti- 
tutional investors still remain 
reluctant to diversify invest- 
ments and balance risks with 
returns. Here again, much of 
this is due to rigid investment 
guidelines set fay the ministry 
of finance. 

But brokers say the mental- 
ity of tiie Japanese fond man- 
ager, who is not evaluated an 
the basis of his investment 
returns, has been partly 
responsible for the slow pace 


ftcMvO^iOnP 

of the country’s financial revo- 
lution. 

Store performance does not 
affect tiie salaries or the 
amount returned to the benefi- 
ciary. investors tend to be sat- 
isfied with low risk, low 
retain products and do not 
fed the need to trade bonds or 
to buy asset-backed securities. 

Mr Fuji! at Nomura likens 

the Japanese capital market to 

someone with the "morato- 
rium syndrome" - common 
among Japanese university 
students, who refuse to go out 
into the real world after grad- 
uation. "It’s like a spoiled 
child, who suddenly realises 
he’s become an adult physi- 
cally, text doesn’t really want 
to grow hr" he says. 


The uncertain political outlook will affect emerging markets, says Conner Middelmann 

Issuance slows to a trickle 


After surging to record levels 
last year, toe issuance of inter- 
national bonds by emerging 
market borrowers has become 
a t rickle in recent months. 

This follows the sell-off in 
global bond markets, triggered 
by the US Federal Reserve’s 
decision in early February to 
tighten US interest rates. Since 
then, most bond markets have 
shed a large portion of last 
year’s gains, with the emerging 
markets falling most steeply. 

As long as US interest rate 
uncertainty persists, emerging 
bond markets will be caught in 
the thrall of the US Treasury 
market, where yields have 
risen sharply in recent months 
in volatile trading. Moreover, 
the uncertain political outlook 
ahead of Mexico’s and Brazil’s 
elections later this year will 
also make investors reluctant 
to increase their emerging-mar- 
ket holdings. 

However, once US rates are 
perceived to have peaked and 
the political picture clears, 
investors are expected to ven- 
ture back along the yield curve 
Into longer-dated, fixed-rate 
assets. Until then, they are 
likely to stick to less volatile 
short-term or floating-rate 
instruments which offer a size- 
able yield pick-tip over most 
OECD markets at relatively 
low risk 

Moreover, some sectors of 
the secondary eurobond mar- 
ket are now so cheap that they 
have begun to attract cautious 
buying, traders say. “No one 
regards this market as funda- 
mentally overvalued," says Mr 
Paul Luke, economist at Mor- 
gan Grenfell, adding that the 
market offers significant capi- 
tal-gains poten tial 

Latin American borrowers - 
sovereign and corporate - had 
a spectacular run in the inter- 
national bond markets in the 
past two years. After Issuing 99 
deals totalling some $9.7bn to 

1992, they raised a total of 
$24bn in 206 new issues last 
year, data compiled by 1FR 
Securities Date show. Total 
emerging market issuance, 
including Asia and eastern 
Europe, nearly tripled from 

$I7.4bn in 1992 to SO.lbn in 

1993. 

In the first four months of 
this year, issuance fen to 44 
deals worth $6.6bn in Latin 


America and to H6.6bn overall, 
according to IFR. 

Dnring the boom, the yield 
premiums issuers paid over 
underlying government bonds 
were rapidly eroded by strong 
investor demand. This allowed 
borrowers to raise money at 
increasingly advantageous lev- 
els - and well below the inter- 
est rates they would have bad 
to pay in their domestic mar- 
kets, where inflation pressures 
were keeping rates high. 

However, tiie market correc- 
tion has sent emerging market 
eurobonds’ yield spreads bal- 
looning back out. For example, 
Mexico’s Banco Nacional de 
Comercio Exterior (Banco- 


I n te ma tiona* bona teauanoe 

Amounts (SbflBoa) ‘ . 

.50 



1991 .1992 1893T 
SouuK'm SaarttmOcs' ” ' Way 1/ 


mext) in January issued $lbn 
of TV. per cent 10-year global 
bonds yielding 163 basis points 
above the US Treasury note; 
the spread widened to about 
385 basis points, but narrowed 
to around 280 by mid-May. 

During the bull run, many 
private sector borrowers joined 
sovereign and public-sector 
names; some issuers, Including 
the Republic of Argentina and 
Mexico's Cemex, launched 
large global bond deals provid- 
ing investors with more liquid 
paper; and borrowers length- 
ened the maturities and broad- 
ened the currency range of 
their bonds to appeal to a 
wider investor base. 

Many of these trends have 
been reversed in recent 
months: the bulk of isauanna 
has been in US dollars; private 
sector borrowers have largely 
ceded the stage to the handful 
of public-sector entitles still 
brave enough to tap the mar- 
ket; some of the liquid, global 


issues have taken a particu- 
larly heavy pounding; and 
maturities have shortened sig- 
nificantly, with most business 
now taking place at tiie very 
short end of the yield curve. 

“A lot of the action has been 
in the money market," says 
Miles Frotter, in charge of 
emerging markets origination 
at Swiss Bank Corpor a tion in 
London. Institutional investors 
seeking a lucrative home for 
their cash have been piling 
into corporate commercial 
paper and certificates of 
deposit which Mexican. Brazil- 
ian and Ar gentina banks have 
been issuing heavily in recent 
months, he says. They offer 
returns well above investors’ 
own domestic money markets 
while minimising the volatility 
of longer-dated paper. 

Some of the Mexican govern- 
ment agencies, such as Banco- 
mext and Naflnsa, have been 
particularly active issuers of 
Euro commercial paper and 
medium-term notes ranging 
between six months and three 

years, traders say. One dealer 
estimates they have issued 
well over Slbn of such paper 
since the beginning of the 
year, including public floating- 
rate note issues and privately 
placed deals. 

It is no surprise that in an 
environment of rising Interest 
rates, a growing proportion of 
new issues consists of floating 
rate notes. Of this year's Latin 
eurobond issues, 23.4 per cent 
have been FRNs, far greater 
than the 6.6 per cent of issues 
represented by floaters in 1993 
and 15 per cent in 1992, notes 
Peter West, economic adviser 
at West Merchant Bank. 

“The trend towards FRNs is 
likely to intensify, to the Ugh* 
of their attractiveness to inves- 
tors to a rising interest-rate 
environment," he predicts, 
while adding that Issuers reluc- 
tant to face the risk of a float- 
ing rate structure may 
prefer to pay the premium to 
swap then into a fixed rate. 

Meanwhile, some say Inves- 
tors' cautious return to tiie sec- 
ondary market may herald a 
pick-up in new issuance. 
“Some bottom fishers are com- 
ing back to the market and are 
buying away the cheap, good- 
quality assets. This is a posi- 
tive sign, as it creates an envi- 


ronment where new issues 
could he welcomed," rays Vin- 
cent Keith , hi% »d of tqnergj pg 
market syndicate at Bankers 
Trust in London. 

H3s is one of several under 
writing houses poised to lead 
an Issue from an emerging 
ma rk et borrower; traders say 
Bankers Trust has the man- 
date to issue $250m of 10-year 
fixed bonds yielding around 
350 bps over for the Philippine 
Long-Distance Telephone Com- 
pany. 

Also to the pipeline are two 
shorter deals for two Indian 
borrowers: .the Industrial 
Development Bank of India, 
with Citibank tipped as lead 
manager, and the Indian 031 
Corporation, said to come via. 
Chase Invest me nt Bank, - ■ 

Elsewhere, the Province of 
Buenos Aires is planning a 
bond issue of its $450m Euro 
medium-term note programme 
via Salomon. Brothers. The deal 
was originally supposed to 
come in the wake of Argen- 
tina's global bond offering last 
December but was then post- 
poned due to a deterioration of 
market conditions. 

Eastern European borrowers 
are also Umbering up for new 
issuance, Poland plans to raise 
more than $ibn on the interna- 
tional capital markets once Ha 
London Club negotiations fora 
reduction of up to 45 per cent 
in its $i3bn commercial bank 
debt have been concluded. 
More supply is also expected 
from borrowers in the the 
Czech Republic and Slovakia. 

As long os US Interest rate 
uncertainty continues, most 
issuers will have to pay larger 
yield premiums than they did 
last year, to compensate inves- 
tors for increased volatility. 
"Most Issuers understand they 
have to pay up - they realise 
the market environment has 
changed," says Mr Keith at 
Bankers Trust 

“Initially, we will have to 
have generous spreads,” agrees 
Graham Marshall of c or- 

borate finance at ING Bank in 
London. “But once US rates 
aren't seen rising any further, 
spreads could contract,* 
predicts. Once interest rate 
and election jitters are out of 
the way, he expects issuance to 
pick up. “i think we could have 
a good fourth quarter." 



U bufl nm, you could buy 
almost any emerging 
market debt instrument and 
make a substantial profit How- 
ever, amid the uncertain OS 
interest rate outlook and with 
general elections in several 
developing nations looming , 
that performance. wtQ be bard 
to match fids year, and inves- 
tors win need to be a great deal 
more discerning if they are to 
ride the secondary debt market 
successfully. 

Prices for emerging market 
debt were driven to dizzy 
heights in 1998 an a wave of 
foreign capital attracted by 
double-digit returns and 
improving domestic Hnw^j ti wy 
in nary developing countries, 
where political and economic 
reforms were beginning to pay 
off. The rally soon attracted 
Increasingly indiscriminate 
buyers — including highly 
leveraged speculators - who 
helped push price levels that 
proved unsustainable. 


INTERNATIONAL CAPITAL MARKETS 3 


Investors in the secondary debt market need to be more discerning, says Conner Middelmann 

Caution the watchword after wake-up call 

‘Some levels of asset prices during 1993 were based on a hope and a prayer 1 


"Some of the. gains were 
purely liquidity-driven,” says 
Marc Wenhammar. head of 
fixed income at Foreign & 
Colonial Emerging Markets. 
Especially in some of the non- 
performing debt markets, “the 
price appreciation didn’t really 
correspond with fundamentals 
- it was pure speculation,” he 
says. 

"To be honest, some levels erf 
asset prices last year were 
based od a hope and a prayer,” 
echoes Peter West, economic 
adviser at West Merchant 
Bank in London. 

JP Morg an’s Brady bond 
index surged 44,17 per cent last 



“.--r V:s.' 


o a trickli 


Are dragon bonds doomed to 
obscurity? asks Louise Lucas 

The fire has 
been doused 


Dragon bonds set south-east 
Asia’s debt markets alight last 
year: issuers as diverse as 
Abbey National and China 
launched acme USJSbn wrath 
of bands and some bankers 
found the paper easy to place. 

Nhv£ 0* fire appears to have 
been ‘doused. Mandates lan- 
guish in bankers’ desks 
inv estors holding the once cov- 
eted Bering Issue have seen 
spreads widen to 125 basis 
points over US treasuries from 
88 basis points at launch. 

Same argue that bad timing 
and lack. of liquidity will con- 
sign dragon bonds to the myth- 
ical status of the creatures 
after which they are named. 
Others say it is a lull, predict- 
ing that China will be able to 
tap investors again for capital. 

“We believe the dragon bond 
market is about to balloon. It 
has been held up because of 
-the US treasury markets,* says 
'"Mr Chris Nicholas, senior 
vice-president with Lehman 

Some argue that dragon 
bonds wifl soon be 
consigned to the 
mythical status of the 
creatures after winch; 
they are named ^ . 

Brothers in Hong Kong. 

The US investmenthfmfctfw*., 
been by for the mosfracxKw' 
bookrunner in a laagiwftjbie . 
dominated by American banks. 

Knee the AstanS&^tip^it ” 
Bank’s first iss a^ri P^hmCT 
1991 some OSl Mpjfe re Eeatfc ' 
raised through drajmfi^bonds, 
which are prittB,ife^chedand 
syndicated^ Pacific 

at least t^o.^rTtije three cen- 
tres - 'Hong '^png, Singapore . 
and Taiwan. 

Samelandmarks stand out - 
die DS$30Qm five-year dragon 
bond launched by General 
Electric Capital Corporation, 
the first corporate to test the 
waters, and the 10-year money 
raised by China. 

By issuing dragon bonds 
issuers can tap a hea lth y vein 
of daihawd was previously 
frustrated at being left with 
the crumbs of eurobond issues: 
successful deals were fully 
taken up in London by the 
time Asian, investors awoke, 
leaving them Just the less pap- 
ular issues. 

Not all bankers share Lehr 
man’s enthusiasm for dragon 
bonds. One syndicate rantiagwr 
notes: "Coming to Asia to 
extract five basis points over 
and above what a fofr market 
price would be in Europe is 
irresponsible tourism.” 

He offers a more regional 
role for the market a forum fin- 
local investors to meet local 
borrowers, where a single A 
rating (or no rating at all) is 
not the leper’s bell it might be 


in Frankfort or London. 

Economic conditions in Asia 
- fast growth and big demwnd 
for financing (total costs of 
upgrading baric infra s tr u ct ur e 
have been estimated at 
US$l, 000 bn) - support toe call 
for a specific Asian bond mar- 
ket 

“When the tinift mmM that 
Asian currencies or targeted 
transactions offer the best 
funding, that’s the time when 
the dragon nun*** will really 
shine,” says one banker. 

For Its proponents; the exis- 
tence of an Aston, ranket/te 
part of the gdobalis^ui^o^cBiv 
ital markets, ratheHtfian an 
alternative to ^obal^iae^ H 
is the natural maaket^fer ixa^ 
rowers who may notppqa.’a 
presence in Europe, fra|£iam- 
ple, but who wiahto ta£Amm:- 
inan and Asian investos&^p-": 

Ur Nicholas says: "A fct jof 
people are advocates of 'global 
markets, which harogginitafe 
started and 


year. West Merchant Bank's 
secondary debt index, which, 
besides Brady bonds, faeimiwa 
the commercial debt of coun- 
tries which have not yet com- 
pleted the Brady restr uctur ing 
process, rose by 63.6 per cent 

When the inevitable wake-up 
call came -> in the form of US 
interest rate tightening in Feb- 
ruary — it sent emerging bond 
markets plunging in a sell-off 
exacerbated by paniceelling 
from hedge funds and other 
leveraged players. 

Domestic woes, including toe 
assassination in late March of 
Mintem presidential candidate 
Donaldo Colorio, put further 
d o w n wa r d p ressure on prices. 
In the first four months of 1994, 
WMB’s Index shed about 2&5 
per cent 

While the slump was 
across-the-board in nature, it 
varied in rng g nti- wda, with toe 
non-performing assets particu- 
larly badly hit This is a mirror 
image erf last year's develop- 
ments, when the prices of such 
instruments were driven up 
sharply in arfidptfinn of debt 
restructuring (teals, says Mr 
West With little or no current 
yield, these assets had no sup- 
port daring toe market seltoff 
as exemplified by Peru, Russia 


and Panama. In the first four 
months of the year, the price of 
Frau’s Citibank loans plun g e d 
by 4L7 per cent, Russian Vne- 
shflktmcanbank debt sagged by 

45J> per rant and Panama’ s XJS 

dollar loans fell by 82.7 per 

rpnt 

“Both the surge in inflows in 
1992 ami 1993 and the sudden 
contraction in early 1994 
reflected a herd mentality,” 
Charles Dallara, managing 
director of the Washington- 
based I nstit ute of International 
Finance, said in a recent 
speech. 

Most specialists feel the 
seU-off has been overdone and 
say many markets have begun 
to offer good value. “The cor- 
rection bas now put markets 
into cheap territory versus 
their fi m J a ma nh ii credit qual- 
ity,” says Aidan Freyne, bead 
erf ftiwurg in g market sales for 
Salomon Brothers Europe. 

Many tbe shake-out 

may prove beneficial for the 
markets longer-term. "The cor- 
rection will ultimately be good 
for the secondary market - it 
got rid of the speculative 
money, and Is maWfaig people 
look at fundamentals, analys- 
ing which markets really pro- 
vide value,” says Elizabeth 


ate-aOi. ^ .V-V*\ !- 

M r r r-.r ■ , > U * !M+y * * f*? »**i 


when they provided about 60 
per cent of the total flows. 

Heavy private external finan- 
cing to developing nations 
bears the rink of “inducing a 


CS' ■ ■ • -7" ' vi?.* -. -7 *. mood of complacency” among 
•yrv ? ? V. . - r : 1 i. J ^ A ■“ y ?* * " viK4 ‘ »#vi| : : irz ‘ . policy makers, Mr Dallara 
J ¥itr "r : ~ v ' 7 m ^ ftf- ■ ~ : y\ : - ^ ’• warns, urging that devetoping 

nations' govranments keep up 

ffiS; ..?". * .. ' . I . / v. their reform policies if they 

S - ■ . "■ W- •> ■ ' - want to maintain a stable Dow 

, ■ *- -■ *T.. : /' *V of funds to their economies. 


. ->■ , 




rA ,-.c. : • r t-teat ' . '■ V 1**; . . 


Morrissey, managing partner 
of Klciman Intranational Con- 
sultants in Washington. 

According to Salompn 
Brothers, outstanding emerg- 
ing mark et debt at tbe end of 
toe first quarter of 

same $127bn in Brady bonds; 
2221 bn in medium- and 
shortterm bank debt (includ- 
ing pre-Brady bank debt); and 
some 8112bn in eurobonds, 
globals and Yankees. In addi- 
tion, there is about $255bn in 
local-currency, domestic mar- 
ket instruments, only some of 
which foreigners can bay. 
Altho ugh the market farhuUm 


eastern European, African and 
Asian debt, the lion's share of 
turnover is in tjHw American 
paper. 

New external investment 
and lending to principal devel- 
oping countries, which fell 
from $102. 7bn in 1981 to $27.5bn 
in 1987, surged to $180-8bn last 
year, according to numbers 
published by the ITF. Equity 
and bond purchases dominated 
last year’s flows, each account- 
ing for more than JSObn, with 
commercial banks providing 
another gaflm. This contrasts 
with the heavy reliance on 
commercial banks in 1981, 


warm, urging that developing 

governments keep Up 
their reform policies if they 
want to maintain a stable flow 
of funds to their economies. 

He also said investors need 
more information on emerging 
markets: both on their eco- 
nomic performance and pros- 
pects, as well as the risks 
involved - sovereign, liquidity, 
counterparty and market risks- 
This could contribute to 
greater discrimination by 
investors, and thus reduce vol- 
atility “by acting as a counter- 
weight to both bullish and 
bearish swings in sentiment,” 
he says. 

Discerning investors will 
have to watch out for several 
potentially market-moving 
developments year. 

On the political front, sev- 
eral Latin American countries 
will hold general elections In 
the coming months, with 
Mexico's polls in August and 
Brazil's October elections par- 
ticularly closely watched. 


Moreover, investors should 
keep an eye on the ongoing 
debt restructuring process. 
Bulgaria, Ecuador and Poland 
are next in line for Brady 
deals, having reached agree- 
ments in principle with their 
creditors. Panama, where 
restructuring proposals have 
already been exchanged, and 
Peru are expected to reach 
agreements late this year or 
early 1995. 

Russia Is expected to restruc- 
ture its commercial bank debt 
this year but there will be no 
writeoff of either principal or 
interest. Lastly, COte d’Ivoire 
has a growing chance of nego- 
tiating a deal In 1995 and Is the 
most attractive exotic asset, 
notes Alexander Mitcheson- 
Smith emerg i n g markets ana- 
lyst at DBS. 

As long as US interest rate 
uncertainty continues to cloud 
the horizon, emerging bond 
markets could be prone to 
unpredictable mood swings. 
Many observers do not expect 
to see a sustained market 
recovery until late this year, 
when the peak in US rates has 
passed, the elections are out of 
the way and growth in the 
region picks up. 

However, some traders are 
reporting a cautious return by 
investors seeking exposure to 
some of the more heavily sold 
sectors. "We are starting to see 
investors looking for cheap 
paper,” says one trader. "The 
market has deteriorated along 
with Treasuries but its funda- 
mentals haven’t - for a lot of 
people, these levels offer great 
value for the longer term.” 


dramatically i 
months or. so, M fleSS pyay 
institution neetM w ffit nn e to 
the market Jjj mas«ffi rrow 
USSlbn. WeJi§ji|§|SoSr pro- 
jects right where 

they need financtogaf US200m 
to US*80tar perfect fit 
for the drag^pSand market” 

Howeyetvitira market has 
been «bnwn*d by local corpo- 
rates. Companies in Hong 
* Kong '(traditionally cash-rich 
;^kd‘ without credit ratings) 
have steered dear, preferring 
to. issue eurobonds and con- 
vratible bonds. 

-.* That Hong Kong corporates 
will continue to tap interna- 
tional investors is signalled by 
ambitious expansion plans 
(chiefly in China) and by tbe 
fact that companies such as 
Wharf Holdings and Swire 
Pacific have secured credit 
agency rating. 

Wharf, the conglomerate 
with interests spanning prop- 
erty, ports, cable TV and tele- 
communications, became the 
first to secure a rating earlier 
this year. The company was 
also among the first to raise 
money overseas to a bond 
issue in June last year. 

Tbe triple-A-raied GECC has 
returned to the dragon bond 
market twice since its 1992 
debut, raising a farther 
US$350m in three-year paper; 
and Intelsat has followed 
China to become the second 
issuer of a 19-year issue. By for 
the bulk of offerings has been 
rat a fixed-rate bads, al t hough 
in the first quarter this year 
the sums raised to floatingnrate 
braids exceeded that in fixed 
rate issues. 

If mare companies and sover- 
eign borrowers take up the 
baton as braid markets revive, 
bankers say new fire win be 
breathed into the dragon bond 
market. But as an embryonic 
market it still has for to go. 






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Would you like 
to invest your money and 
orientate yourself on the Czech capital market? 


Komero, Ltd. 

a Czech brokerage company is the best choice. 


We seem to be getting deeper 
and deeper into debt 

(and derivatives, and futures, and securitisation . . .) 


T& vumuiii west ■ 
««•*■** 

i sverige aktkboiog 

UBLShMoD 
EMTN Programme 




DSnulbon 
FRN Easttc 


LA_B. INVESTMENTS Pl£ 
XSSnnXlioQ 

Bond Isuc 


I iikmwcway fioffjmts ru: I 


£20 million 
Bondlnuc 


Kingdom oTSpain 

BCUSbflBon 
Revolving Credit fed% 


£2S0 mjlKoo 
Sterling CP Program me 


SLOUGH 
ESTATES - 

050 million 

Revolving Credit Facfl itj 


BPS 

Residential Property 
Securities No- 3 PLC 


jOSOmilBoa 

FRNbnm 


9 

English China Chys pic 

USS31S«Bkm 
RevotvingCrcdh Facffitj 
and Term Lou 


A 


£200 million 
Bond Issue 

tdBlad MH , 


USdbilfloa 
Mold-Currency Shelf 
Esraame Programme 


XUSmllfioa 

Boodlmac 


BRADFORD 
&BIN GLEY 

nOOmHlion 
FRN Issue 


I Edcmuir Properties PLC I 


XSOnutfioo 
Bond brae 


Halos 

Halos Limited 


Rover Finance 
Wholesale 

X390nuHoa 
Re v olving Credit ladBty 


GH<StAL MOTORS 

ACCEPTANCE 
CORPORATION (UK) pic 

£400 million 

Revolving Credit FacBUy 


Stxndhj Credit FacOHIcs 


Beta Finance 

£75mDam< 
Bond lame 




nOOmflCon 
Bond fame 


Rayo^ Refimary 
Company Limited 

US$2JbOUoa 
s«ix of Corporate Credit 
and Project Kmnce 
Jatattanagn 


S&N 

Scottish & 
Newcastle pic 

NLG SO millioa 
Private Ptaccment 


City of Copenhagen 

DKK2S0 mason 
Bond brae 


TTie Rank Organisation 
mQijQp 

Revolving Cmfit Facility 


Peugeot Talbot Motor 
Company Ud 

USO ndHion 
Bond brae 


GUINNESS PLC 


JU billion 

BCP Programme 


A/S 

Orttundjforbinddscn 


Kerry Foods Inc. 

US$155 millioa 
Wnte PhctacntoT 
Senior Notes 


Co snwdwk 
Overseas Finance PL V. 


Edinburgh 


USS2 bafion 
ECP Programme 


LOTHBURY 

Lothbuiy 
FmMfing No. 1 PLC 


XS25bSm 
D ebt and Equity 
Private financing 


British Aerospace 
£L5bUBoa 

Rcvalvteg Credit IbciCty 


ASTBUEBOS 

ESPMMXjES 

XTSmflQoa 
Item Loan 


HAMMERSON 
■wra mrama m 

niP^fcp M&ir— I— r 

DOOnuffion 
Bond Issue 


1289.5 minion 
Term Loan 


JOSOndBon 
8CF Programme 


mss> 

Lasmoplc 

£J50mIffion 

Revolving Credit Facility 



N LC 15 million 

Private Placement 


Smith Kline 
Bcecham Capital pic 

OOOmUBoo 
Guaranteed Note lane 


A/S Efcsportfinans 

DOOmBBoo 
Bond lame 


Coca-Cob AmatO Limited 

USSIOO millioa 
BCP Progra m me 


NWV\ 


NatWest Markets 


jwrdusc aod sale of securities 
ti tte Stock Exchange of Securities, 


’ jpKty bsoo irf stocks and tAIigatioos 


Fugoaovo nam. 3 
120 00 Praha 2 
Czech Republic 
Phone: +42224498235 
Fax: +422 244 98 256 


/nuid bj National Hbualnaer Bank Pic, a Member of IMftO 










IV 


FINANCIAL TIMES THURSDAY MAY 26 1994 


INTERNATIONAL CAPITAL MARKETS 4 


International equities: Tracy Corrigan says business is holding up welt 

Privatisation the driving force 

Some record offerings are likely to come to the market in a year or so 


B usiness in the interna- 
tional equities market 
has held up well this 
year, in the face of weaker 
domestic stock markets and 
volatile interest rate condi- 
tions. 

In the first quarter, the vol- 
ume of new international 
equity issues reached Sll.Sbn, 
according to Euromoney, well 
above last year’s first quarter 
total of just over $5bn. 

However, last year's bumper 
volume of S36.5bn was 
weighted towards the second 
half of the year, as the strong 
performance of stock markets 
encouraged a number of gov- 
ernments to push ahead with 
privatisation programmes. 

This year, aiihrmg h the types 
of new issues remain diverse - 
rangi n g from secondary offer- 
ings of common stock, to 
global depositary receipts and 
initial public offerings - priva- 
tisation is the driving force, 
particularly in Europe. 

The poor performance of 
emerging markets in Asia and 
i-atin America this year has bit 
business in those areas hard- 
est, though some analysts 
believe issues from these 


regions now offer better value. 

The increase in volume also 
reflects a growing trend 
towards structuring equity 
offerings as international 
rather than domestic deals, as 
Institutional investors con- 
tinue to inrraaa» their alloca- 
tion of assets overseas. 

“We stai have a bigger pipe- 
line of business than we did 
this time last year." said Mr 
John St John, a director of 
Kleinwort Benson. 

However, the worsening of 
conditions in the stock market 
has made investors much more 
sensitive to pricing: increas- 
ingly, issuers are being told to 
price their deals attractively or 
stay out of the market 

Despite the need to price 
new issues more cheaply the 
flow of deals has not abated. 
This is because many govern- 
ments which have embarked 
upon privatisation pro- 
grammes are not in a position 
to wait for conditions to 
improve. 

“Basically, governments 
around the the world are bur- 
dened with a big debt problem, 
an ageing population and a 
social services superstructure 


which they can no longer pay 
for out of taxes." says Mr St 
John. “It’s not just that they 
want to make their companies 
more efficient: they have to 
sell off assets to pay for it all” 

As a result, some record 
offerings are likely to come to 
the market in the next year or 
so. for example from Germany, 
where Deutsche Telekom and 
Lufthansa are expected to be 
put on the block. 

The Deutsche Telekom deal, 
which is likely to take more 
than a year to come to market, 
is expected to be the largest 
equity offering to date, with 
estimates in the range of 
DM25bn. 

The Swedish government 
recently announced its largest 
privatisation offering: it is sell- 
ing SKr lObn of shares in Phar- 


macia. the pharmaceuticals 
group - or 315 per cent of the 
company. 

Other European countries 
which still have slates full of 
privatisation issues include 
Italy, Austria and Spain. 

“There is. waiting in the 
wings, an enormous amount of 
privatisation business." which 
will not be halted by the more 


Issuers are being told 
to price their deals 
attractively or stay away 


demanding market conditions, 
according to Mr David Freud, 
vice-chairman of Warhurg 
Internationa]. “There is too 
much political goodwill 
invested in the ** 

At the same time as govern- 


ments are privatising state 
companies, they are acting to 
relax capital raising controls 
on non-state companies. 

In Austria, where the privati- 
sation programme is being 
accelerated, the taxation rules 
have been changed to make it 
more attractive for companies 
to issue paper. For example. 
Mayer Meinhof. a private com- 
pany. recently brought a $300m 
offering. 

Liberalisation of controls has 
been particularly evident in 
some Asian countries, such as 
India, where business has been 
particularly active. The 
strength of Asian stock mar- 
kets helped issues from the 
area to soar lost year, but the 
market has since become far 
more selective. 

Deals now have to be priced 


attractively to attract institu- 
tional investors. The postpone- 
ment of a planned Slhn Issue 
for Vldesh Sanch&r Nlgam 
iVSXL), the state-controlled 
international telecommunica- 
tions monopoly by the Indian 
government, which would not 
lower a price considered too 
high by fund managers, 
reflects the new mood. But 
many governments are likely 
to decide that they would 
rather accept a slightly lower 
price for their assets than wait 
for the market to turn. 

Deals which are attractively 
priced con still be oversub- 
scribed: Tele Danmark, the 
Danish state monopoly tele- 
communications operator, met 
strong demand for Its sale of 
4&3 per cent of its shares yes- 
terday. worth around SSbn. 


International aquRSaa 
vofema (1M3-M) 


Lauooh 

etwee 

<hn> 

tone* 

Jenuwy 

S66J9 

12 

February 

904.19 

20 

March 

3.0843 

a 

Ai*i 

1,344.33 

20 

May 

1,990.54 

30 

June 

5J3 2M 

48 

•Wy 

3,535,38 

41 

August 

1053.43 

25 

September 

V7W0 

41 

Qctobar 

4,42007 

-38 

November 

&5U.4S 

78 

December • 

00057 

S3 

1903 total 

90,401.49 

484 

January 

3,038.12 

27 

Fabmary 

5.111.02 

35 

March 

3,523.78 

42 

Apt* 

4.9008* 

29 

190« total 

i itjmum 

133 

TOTAL 

53, 15421 

887 



But US Investors are proving 
particularly selective: several 
underwriters reported poor US 
demand for the French privati- 
sation issue for UAP, the insur- 
ance company, blaming the 
pricing and the surplus of 


financial aervfcas titnh. 

Meanwhile, tbs pace of issu- 
ance by US companies - both 
initial pubfle offering and ms 
ondary offerings - baa ti**- 
mod somewhat, ' 

“I would characterise it u a 
buyer's market rather thin a 
seller’s market." said & 
Ludovico del Baba, a manta, 
iug director of Lehman 
Brothers. ■ 

MttnwMfe as ttetaftom 
trend tomb greater dfvwrifi- 
cation of assets to set to wn- 
tlnue, the use of totenatkxu] 
equity offerings Is likely - to 
become increasingly lmpor. 
tent. In countries such u 

mi Bnodl, the 
rash of dealr launched last 
year has barely scratched the 
surface at these huge 
But Is the Shot term, bank- 
ers axe banting to tone d own 
their promises to potential 
Issuers, .... 

Iti terms of supply, it wUt be 
pretty sustained- the key 1 * to 
make sore that deals come to 
mulet at reasonable Jevsb," 
Mr del Bato warns. *1 don't 
think these is a tansy of irra- 
tionality- is general people are 
becoming sacra reafotte.” 


W hile conditions have 
worsened signifi- 
cantly in most mar- 
kets this year, there is at least 
one bright patch: the deriva- 
tives market The growth of 
Che exchange-traded market in 
futures and options and the 
over-the-counter market in 
swaps and options shows no 
sign of abating. In fact , the 
world’s futures exchanges 
experienced record volume in 
the first quarter, as dealers, 
treasurers and investors used 
futures to tiy to hedge or repo- 
sition themselves, after the US 
Federal Reserve raised interest 
rates. 

The reason for the continued 
activity in the derivatives 
market, while ac ti v i ty in some 
other areas has dropped off, is 
partly that d e r i v ativ e instru- 
ments can be used to take 
bearish as well as bullish posi- 
tions, so there is no logical 
reason why activity should 
slide in a bear market. Also, 
derivatives can be used to 
trade volatility, so volume 
tends to rise when market con- 
ditions are volatile. 

However, the high level of 
activity in derivatives this 
year has had some negative 
impact, most notably by re- 
arousing fears that the world’s 
financial markets are now 
driven by derivative rather 
than cash market trading - or. 


as is often said, the tail is wag- 
ging the dog: These fears were 
repeatedly voiced in the wake 
of the 1987 stock market 
crash, when stock index 
futures were blamed by some 
observers for precipitating or 
exacerbating declines. 

However, the fact that bond 
losses in the first quarter of 
1994 were first seen in the 
futures markets can also be 
explained by the greater 
liquidity of futures, relative to 
cash markets. Some investors 
and traders, though, undoubt- 
edly bad their fingers burnt, 
having taken aggressive posi- 
tions in the futures markets. 

“Overall, the amount of 
business in derivatives mar- 
kets continues to grow at a 
healthy rate,” said Steve 
Smith, an executive director of 
Swiss Bank Corporation. 
“Unfortunately, towards the 
end of last year a numb er of 
proprietary institutions - 
banks and hedge funds and 
some traditional investors - 
had built up large speculative 
positions, mainly in bonds, to 
a level which the market place 
had never seen before. The 
unwinding of these positions 
led to a short-term diminution 
In some areas of activity. How- 
ever, the ongoing use of deriv- 
atives for traditional fund 
management and for risk man- 
agement on the treasury side 


Derivatives: Tracy Corrigan discusses one bright patch in the markets 

The tail still wags the dog 


is growing in leaps and 
bounds.” 

According to tbe Interna- 
tional Swaps Dealers Associa- 
tion, the notional amount of 
over-the-counter swaps out- 
standing is about S4,500bu. 
The OTC market has generally 
been tbe forum for greatest 
innovation, developing exotic 
options such as knock-out 
options, which reduce the cost 
to the end user. Some futures 
exchanges are trying to adapt 
products from the over-the- 
counter market, so that they 
can offer standardised con- 
tracts which have some of the 
flexibility of the OTC market 
For example, the Chicago 
Board Options Exchange has 
introduced Flex options, which 
allow standard contracts to be 
adjusted to individual needs. 

Tbe swap market used to be 
closely linked to the new-is- 
sues market, but is now 
increasingly used by compa- 
nies on an ongoing basis, for 
treasury management 

However, some heavy losses 
by corporate treasury depart- 
ments using derivatives has 


tnrned off some companies, 
and could create a more diffi- 
cult environment for banks 
marketing these instruments. 
Germany’s Metallgesellschaft 
had to be rescued by its hank* 
when a trading subsidiary 
incurred estimated losses of 
Slbn on oil derivatives, tbe 
largest In a series of losses by 
companies such as Allied 
Lyons and Showa SbelL 

Perhaps even more worrying 
for banks, Procter & Gamble 
recently threatened legal 
action against Bankers Trust 
after it took an after-tax loss 
of SlOOm on swaps sold by 
Bankers Trust While the legal 
grounds for snch a claim 
remains shaky, the floating of 
the notion that h anks are irre- 
sponsibly marketing risky 
instruments is damaging, even 
if it cannot be made to stick. 

Such developments are 
likely to attract further scru- 
tiny from regulators, many of 
whom have already expressed 
concern about the potential 
knock-on effects of problems 
in the derivatives market. 
Although a number of reports 



■ >■ ■ W Jflw- “W-: 'S ™ ' ’ '™;. I-.:;.;; 




This Autumn IMF and World Bank decision makers will gather in Madrid for their annual 
meeting. On Friday, September 30 to coincide with this important event, the Financial Times 
will publish Its IMF/ World Economy and Finance survey. 

It will provide authoritative, comprehensive and up to the minute background to the 
proceedings In Madrid. As a consequence It will be essential reading for all those who bring 
Influence to bear on the world economy. 

The Financial Times will be widely cflstributed at the conference and the survey will 
appear every day in those issues circulated at the meeting. What this provides is the perfect 
medium for you to speak directly to this select body of people. 

If you would like to advertise hi the FT IMF/Worid Economy and Finance Survey contact 
Hannah Pursall in London on +44 71 873 4167 or your usual Financial Times representative. 

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by regulatory authorities snch 
as the Bank of England have 
adopted a fairly conciliatory 
tone, there are still calls for 
regulators to tighten up on 
derivatives use, or at least to 
force greater disclosure. 

The latest warnings have 
came from the US General 
Accounting Office, which said 
in a report that inadequate 
regulation of the derivatives 
markets poses a threat to the 
CS and international financial 


system. The report is expected 
to increase pressure for legis- 
lation to control the markets. 

The industry has made some 
efforts to put Its house In 
order, by tightening control 
standards. Tbe Group of 
Thirty report on derivatives in 
1993 set strict guidelines. Fur- 
ther. US banks such as Citi- 
bank have led the way in giv- 
ing fuller details of their 
derivatives exposure. 

Closer scrutiny by regula- 


tors and a spate of tarns dm 
to poor controls have undoubt- 
edly succeeded In concentrat- 
ing tbe minds of bankers at 
board level tone of whom bad 
risen through the ranks in a 
pre-dertvativas era. 

The rapid expansion of tbe 
derivatives market has forged 
stronger links between mar- 
kets. The notional amount of 
futures contracts traded annu- 
ally on world exchanges is 
around |l40,000bn. In many 
cases, futures markets, with 
standardised contracts and 
centralised charing; are more 
liquid than the underlying 
cash markets, and tend to 
drive cash prices np and down. 
For example, volume in FT-SE 
100 Index futures on the Lon- 


don International Financial 
Futures A Options Exchange 
(UOb) to two and a half times 
tbe stock market's turnover. 

The most active futures con- 
tracts are traded to the deal- 
ing pits of exchanges, but 
some contracts, particularly 
options contracts, have «rc- 
cessfolty shifted to electronic 
trotting. The battle between 
traditional open-outcry trad- 
ing and electronic screen- 
based trading to tihely to tak* 
some time to resolve. . 

However, Gfobex. the 14- 
hoar futures trading system 
J oi ntly developed by Bentos, 
the Chicago Mercantile 
Exchange and the Chicago 
Board of Trade, has achieved 
disappointing volume. . 


EC P compared to USCP 

Basis points 
30 





Swear BZW 




.. • 

These graphs outline thecontiraiing convergence of rates levels achieved wW vary 

in the USCP 1 and the ECP 1 markets. As evidenced by these Assuming standard levels, ECP would be laauad at Ubfd plua 6 

graphs, at present the ECP market is more competitive than basis points (La. the mid price between LI*! and LKxx) and 
tho USCP market. The graphs assume that the issuer of ECP USCP at Fed dortle-A Sat (Iha benchmark iavai 
and USCP is rated A1/P1, although oven at this rating. for this rartoQ- 


lUacow w e dl pqpar and Bm eonm atM paper 


Commercial paper: the ECP market is thriving, says Antonia Sharpe 

Cash haven lures investors 


The volatility which has 
plagued the government bond 
markets across the world since 
the US Federal Reserve started 
raising interest rates in Febru- 
ary has increased the attrac- 
tion of the Euro commercial 
paper (ECP) market 
The prospect of higher inter- 
est rates In tbe US. and uncer- 
tainty over the long-term direc- 
tion of UK rates, has prompted 
fixed-income investors to shift 
the balance of their portfolios 
away from long-dated instru- 
ments to the very short end of 
tbe yield curve, analysts say. 

The short maturities avail- 
able in the ECP mar ket, from 
one day to 364 days, appeal in 
particular to investors who are 
looking for a safe haven to 
deposit their cash until the 
conditions in the bond and 
equity markets improve. This 
defensive Investment strategy 
is expected to keep outstand- 
ings in the ECP market at their 
present high levels for most of 
this year. 

"The ECP market is looking 
healthy and there is strong 
demand from investors for 
good-quality paper." says Ms 
Julie Joe, CP product Tnanap -r 
at Lehman Brothers. 

According to Lehman 


Brothers, the total combined 
ECP and Euronote market out- 
standings increased S2bn dur- 
ing the first quarter of 1994 
from $llObn in the last quarter 
of 1993 to $U2bn, of which the 
total ECP outstandings 
account for S81bn. In the same 
period, the USCP outstandings 
increased by the same propor- 
tion from $560tm to $57Qbn. 

Although the ECP market is 
much smaller than the USCP 
market, its competitive rates 
are attracting a growing num- 
ber of US issuers. Mr David 
Knight, managing director of 
CP operations at BZW, says 
that rates in the two markets 
have been coming closer 
together and that in recent 
months ECP rates have consis- 
tently been five basis points 
cheaper than in the USCP mar- 
ket. He adds that the ECP mar- 
ket also offers US issuers a tax- 
efficient way of funding their 
European operations. 

Another factor which is 
Increasing the attraction of the 
ECP market is renewed confi- 
dence in its ability to provide 
quick access to short-term 
liquidity. Question marks over 
its liquidity and efficiency 
were eliminated last June 
when Denmark raised as much 


as $L5bn in a matter of days to 
support the Danish krone 
when it came under attack 
from foreign exchange specula- 
tors. 

Since then, the size of ECP 
programmes has increased 
steadily. Ford Credit Europe, 
Hanson and Guinness have 
been able to raise funds of 
more than Slbn, amounts 
which have previously been 
the sole domain of sovereign 
borrowers. Other high-profile 
ECP programmes include ,$lhn 
for Bankers Trust New Zealand 
and $500m for PowerGen, the 
UK’s second largest electricity 
generation company. 

“Now corporates are able to 
access the market In excess of 
Jlbn." says Mr Knight. He adds 
that this development will 
facilitate any needs In the cor- 
porate sector to fund 
short-term working capital 
requirements, especially now 
that inhospitable conditions in 
the primary markets discour- 
age the launch of bond issues. 

Six or seven large pro- 
grammes are expected to 
emerge over the next few 
months from a variety of Euro- 
pean and US borrowers, includ- 
ing corporates, banks and qua- 
si-sovereign entities, analysts 


say. The inroads which the 
ECP market has made into the 
German and Swiss domestic 
markets as a result of deregu- 
lation in the two countries 
have also contributed to the 
increased volume. Issuers can 
now issue in D-Marks and 
Swiss franca directly under 
their ECP programmes. 

There are also signs that 
European issuers are looking 
to raise funds in the US. to 
April the Electricity Supply 
Pension Scheme, the second 
largest pension scheme to the 
UK, became the first one out- 
side the US .to obtain credit 
ratings from Standard & Poor’s 
and Moody's, the two leading 
international ratings agencies, 
in order to access tbe USCP 
market 

Mr Brian Matthews; finance 
director of ESN Pension Man- 
agement Group, said that one 
of the main benefits of the rat- 
ing was that tbe scheme’s US 
investment property company. 
Eastern Realty Investment 
Corporation, was able to raise 
giosm in the USCP nuofcrt * 
an average interest rate of tass 
than 3.5 per cant ; 

This financing route . pf 0 " 



V 


V 



FINANCIAL TIMES THURSDAY MAY 26 1994 


INTERNATIONAL CAPITAL MARKETS S 


s 

•■V 


IS. 


• s . ."■'5 n 



The rapid- evolution of the 
international bead TnaxVpfc in 
recent years has encouraged 
more and more borrowers to 
tap the capital markets 
directly for their core financ-- 
ing, forsaking the syndicated 

loans marks* 

However, after a dsr ttuf 1 fa 
the volume of conventional 
syndicated credits over a 
period of years, there are signs 
this decline is being reversed. 

In 1993, internatio n al syndi- 
cated loans volume reached 
some HSfflm, according to. the 
Organisation for Econo mic 
Co-operation and Develop- 
ment’s Financial Market 
Trends, about $12bn higher 
than the previous year. How- 
ever, more th?m S60bn of that 
total consisted of refinancing 
of existing debt, particularly 
by US companies, so the total 
volume of new loans was 

STObn, thelowest since 1986. 

But the .International bond 
markets place certain rimyHind s 
on borrowers: they must gener- 
ally have a relatively high 
credit rating, they cannot 
repay the debt as and when 
they want to, and; they must 
rely cm the - receptiveness of a 
given market at . a given *iww 
For these and other reasons, 
direct bank lending, syndicated 


or otherwise, still performs a 
number of vital functions. 

hi addition, after suffering a 
squeeze-on their capital, com- 
mercial banks have shored Up 
their balance sheets in the last 
few years, and axe again will- 
ing to commit capital to lan d - 
ing. Their capital/assets ratios 
have improved, as levels of bad 
debt has declined and as. old 
debt has matur ed . 

- Band market weakness this 
year could help boost activity 
m the syndicated loans mar- 
ket. In a bull market, .it tend s 
to be easier Ear lower-rated bor- 
rowers to tap the market, In a 
bear market, they may be 
forced to return to their banks 
for tending. 

Other types of bank financ- 
ing have been buoyant, in par- 
ticular * project financing, 
which is Often for large and 
risky infrastructure projects. 
This allows companies, per- 
haps able to raise money in 
their own. tight, to isolate 


Syndicated loans: Tracy Corrigan sees signs of greater interest 

Banks chase new business 


Top 10 anangati of biternational vyndfeatad 
loans In IMS* 

Rank 

Book 

Amount (8m) 

No 

Kebant 

1. 

National WMtensr 

1S£S1J370 

124 


7j6 

2 - 

Citicorp 

13J91A70 

119 


8.6 

3 

Barclays 

10807.640 

103 


5L2 

4 

Deutsche Sank 

9,763*422 

SB 


4.7 

S 

HongkongAfldand Quup 

7.272228 

86 


&5 

6 

Chase Manhattan 

8,796.101 

100 


&3 

7 

Chemical 

6.781.850 

96 


&3 

a 

ABN-AMRO 

6,527.161 

83 


&2 

9 

Union Baric of Swttzwteid 

5,540.704 

67 


2.7 

10 

JP Morgan 

5£0S£99 

40 


2.7 


banks and a loan syndicated 
among the sa m e basks, they 
say, is technical rather than 
material. Increasingly, a know- 
ledge of the bond and loan 
markets is needed. "Yon need 
to know at what level the com- 
panies’ bonds can be asset- 


*UBgn«l taw o%, mW by — r—* tapportewnmt 


on the cash flows created by 
.tiie particular project 

For erampte-, in the case of 
the Rayong refinery in Thai- 
land, the key -sponsor was the 
Royal Dufch/ShaH group with 
a 64 per cent stake, while the 


Petroleum Authority of That 
land had a 36 per cent stake. 
Shell could easily have tapped 
the international markets, but 
was able to obtain non-re- 
course financing so it would 
not have to risk its balance 
sheet The debt firanemg of 
the 12.4m project was made up 
of a suhn fatuity. The struc- 
ture allowed the joint venture 
to take advantage of export 
credit guarantees. 


The dividing Use between 
bank credit and bonds, - as 
between so many other mar- 
kets, has become increasingly 
thin. Fax example, some bank- 
ers argue that since many 
floating-rate note issues 
launched in Asia are placed 
directly with banks, they axe 
imm« rather than bonds. I H» 
difference between, a floating 
rate note issue bought and 
bandy traded by a number of 


loans." said Mr Alby Cator, 
head of syndicated loans at 
NatWest Markets. 

Although there is Ifttte . ^gn, 
of a net increase in volume, the 
greater enthusiasm of banks 
for lending is revealed by a 
tightening of the spreads over 
the London fatariwnt- o ffe red 
rate at which loans are being 
agreed. Mr Cator says the 
spread fox- a top-rate corporate 
bamwrer has tightened from % 
paint aver Libor a year ago to 
V* point over Libor. "We 
haven’t yet seen how low 
spread will go,” he warns. 

Ei ghteen nwntK< ago, com- 
panies were borrowing at 45-50 
bams points over Lflwr. How- 
ever, in April 1993, Reuters 


signed a £160m five-year 
revolving credit with a margin 
of % point over libor. Despite 
the aggressive pricing, the deal 
was heavily oversubscribed, 
and increased from Its original 

ar ra of Clftflm 

That deal was followed by a 
£150m revolving credit in May 
for Northern Foods, with the 
same margin, which also was 
increased. Last month, WH 
Smtth raised fl4Qm through a 
£L40m revolving credit an the 
same terms — again oversub- 
scribed. Bankers say that bilat- 
eral loans have been agreed at 

figjtfcw 

In March, Allied-Lyons 
raised $2S0m over six years at 
a mar gin of so points — 
but that was for a guarantee 
facility rather than a re v olv in g 
credit In February, BTR Dun- 
lop Finance agreed a three- 
year revolving credit facility 
with a margin of 25 basis 
points. There is anecdotal evi- 
dence a number of corporate 
treasurers are waiting to see if 


margins have further to fall 
before wwntng r to tbs marks*. 

"There have been fewer Mg 
corporate deals than we would 
have expected," according to 
Mr Stan Hem, a director of 
Samuel Montagu. "Some have 
held off, expecting pricing to 
go down." Generally, compa- 
nies appear to be borrowing 
l es s than in the last cycle, he 
added. 

Meanwhile, there has been a 
resurgence of sovereign busi- 
ness. Most notably. Spain 
signed a three-year revolving 
credit facility in September for 
EcuSbn, at a margin of just 7JS 
basis points. The facility, 
designed to replace lines from 
the central bank to the trea- 
sury, was heavily oversub- 
scribed. 

Because of the zero risk 
weighting of sovereign credits, 
which means that whatever 
their credit rating banks do not 
have to put aside capital to 
meet guidelines, the banks can 
gflfart fiBnwnw margfoft. 

While the syndicated loans 
market has yet to show a 
marked increase in volume, 
the good news for bo r rowers is 
that hanks aTC riwring what 

business there is more aggres- 
sively. "There are a lot of for- 
eign banks with operations in 


Interactional cyndfeated 
loans volume (19*3-941 


Month 


Amount 


January 

1&038JB2 

128 

February 

10859.106 

142 

March 

17.117.881 

172 

April 

10255242 

131 

May 

21.750295 

150 

Jura 

16*397,362 

182 

July 

22,110*420 

206 

August 

14,544.010 

141 

September 

26.B63.741 

168 

October 

11*407.785 

133 

November 

16,156.735 

160 

December 

25£29.089 

212 

Month 



unknown 

1 .967.824 

37 

1983 tot* 

210*205.162 

1,865 

January 

KW1RW1 

127 

February 

9.712.423 

129 

March 

16,209.709 

179 

Apr! 

16,815555 

8S 

Month 



unknown 

71.000 

3 

1094 toted 

59,595468 

523 

TOTAL 

203,730880 

2,488 


awwAnmw 


London that have to be paid 
for," said one banker. The 
maturity of asset portfolios 
means loss of income, so some 
banks are desperate for assets, 
and that is pushing down 
prices." 




:r\~ 


■"Sfc 


• i r ‘ 


*-i ■ .- 

■ 1 . 

“ •• .- 


The rise in IRS interest rates in. 
recent months ha«f rirmAoH the 
outlook for the asset securitisa- 
tion business In the US. 

While, the volume of asset- 
backed securities grew by 9 per 
cent to $5&8bn .in 1993, .the 
market has stopped In its 
tracks this year. By April. 
$2&4bn in -asset-backed securi- 
ties had been, issued, down 
from J15.7bn in, the- first four 
months of 1993.-. * .. • > 

The larger mortgage-backed 
securities (MBS) market has 
also experienced a reversal but 
when it came it was later in 
the year, and more severe. 
WhSe first quarter MBS new 
issue volume grew by about 6 
per cent to a record gHKUJbn, it 
plunged 75 per cent in April 
when only $7bn of securities 
were issued. 

The downturn in file asset- 
backed and MBS marksta alun 
reflected the increase In bond 
market volatility. As Ms Pat- 
ricia Honan, head of asset- 
backed finance at Chase Secu- 
rities in New Took, explains: 
Tt is not the absolute level of 
interest rates, but interest rate 


healthy condition, amt innova- 
tion is still a feature. Last year, 
car loans and receipts were the 
most heavily securitised form 
of asset (volume totalled 
J2A9bn), followed by . credit and 
card . charge : receivables 
(Cfllbn). However, many other 
types of assets are being secur- 
itised in greater numbers as 
issuers seek a cheaper way to 
finance their asset growth. 

Recent innovations include 
fiBcnritised automobile dealers’ 
barm (the money vehicle man- 
ufacturers lend to their dealers 
to purchase , new cars and 
trucks), agricultural equip- 
ment loans, automobile leases, 
and loans granted to compa- 
nies by Eximbank, the govern- 
ment body which provides 
export credit guarantees. 

Innovation in the MBS mar- 
ket has been hit by the turmoil 
and volatility of recent months 
which left participant reding 
- particularly those active in 
the MBS d erivativ es market, 
where volatility destroyed 
their assumptions about pre- 
payment levels and made the 
pricing of securities such as 
collateralised mortgage obliga- 
tions (XCMQs) extremely tfiffl- 


Patrick Haiverson and Antonia Sharpe look at securitisation 

Market stopped in its tracks 


positions in CM Os came 
unstuck. AaVtn Capital Man- 
agement was forced into bank- 
ruptcy in April because of its 
hugs CMO-retated losses. 

Those seeking security in the 
MBS market were attracted by 
the launch of collateralised 
mortgage obligations by Gfrmie 
Mae (the Government National 
Mortgage Association). 
Although existing CMOs 
Issued by other government 
mortgage agencies such as 
Fannie Mae (Federal National 


Mortgage Association) are pop- 
ular because underlying 
mortgages are supported by an 
inferred federal guarantee, 
flftnmte Mae’s mortgages enjoy 
an explicit federal backing. 
Thus, its CMOs win cany a 
zero risk weighting - a big 
attraction for conservative 
investors. 

Although securitisation is a 
huge market in the US, its 
development in tire UK is at an 
early stage. Banks and build- 
ing societies seeking to diver- 


sify thefr funding sources have 
started to experiment with this 
financing technique. In the 
past year, Barclays Bank and 
National Westminster Bank 
have launched mortgage and 
personal loan securitisations. 

Regulatory oonstxebxta have 
hampered the use of securitisa- 
tion by building societies 
which last year had just undo: 
60 per cent of the DK mortgage 
market The tradition of lend- 
ing through floating-rate mort- 
gages as opposed to fixed-rate 


mortgages also puts the HE at 
a disadvantage because vari- 
ahle-rate assets are more diffi- 
cult to match. 

The Building Society Com- 
mission. the sector's statutory 
regulator, is due to publish 
guidelines in the next two 
winnfhn rm frow budding societ- 
ies can securitise ihedr assets. 

Leeds Permanent Building 
Society, the UK's fifth-largest, 
is dose to becoming the first 
society to fund its mortgage 
lending business through 


volatility that has kept inves- 
tors on tiMaafifi^T* _ 

Nevertheless! the business Of ity dried up, koine leveraged 
securitising assets remains in a funds which bad taken big 


Continued from page 4 

vided two advantages to the 
scheme, be said. First, it was 
tax-efficient because the 
scheme did not have tax-ex- 
empt status in the US. Second, 
if the scheme had lent the 
flmds to the US subsidiary, it 
would have had to give up a 
r e turn - which wss-much-higher 
than the interest rate which 
the US company was paying. 


Cash haven attracts 


Despite the higher profile the 
ECP market enjoys, several 
factors could htnfl«r progress. 
The need to have a high-qual- 
ity rating is the main obstacle 
facing potential issuers. At 
present investors tend to be 
conservative and restrict than- 
selves to the best-rated paper. 


As a result of this 
black-and-white attitude to 
credit ratings, many issuers 
with mediocre ratings have efif- 

fUmlty mining ri gnffjrant ( cttthi 

in the ECP market. By con- 
trast, they have good access to 
the US domestic market 
Mr Knight paints to another 


negative development - the 
largest ECP investor segment, 
the French fflcav money mar- 
ket tends, have been reducing 
their holdings of ECP to com- 
ply with regulations laid down 
by the Commission des 
Operations de Bourse, the 
French stock market authori- 
ties, that Sicavs can hold only 

a nu ntimn m of 10 per «»nt of 

assets in unregulated instru- 
ments such, as ECP. 


securitisation. Nationwide and 
Skipton have also carried out 

crniOgr rfmBw 

Leeds has spent the past two 
years setting up a sy s tem to 
securitise its mortgages so that 
it can handle higher mortgage 
volumes. Leeds plans shortly 
to test the system by using a 
pool of its mortgages as coBat- 
eral to raise up to £10(fen from 
a small group of banks rather 
than through selling securities 
in the public market 

The form of securitisation 
which the Leeds plans to 
undertake offers societies 
another way of gaining access 
to wholesale markets. If more 
societies approach the regula- 
tory Hmffai on their, wholesale 
tending, this mi ght prove an 
a ttract iv e alternative form of 

fiimting . 

By comparison, Germany 
and Denmark have long-estab- 
lished mortgage bond markets 
through which mortgage banks 
can raise funds by issuing 
bonds which are backed by 
their assets. In Germany, the 
Pfandbrief dotes back to a spe- 
cial decree by Frederick the 
Great in 1766, while in Den- 
mark, the first mortgage credit 
institutions were set up at the 
end of the 18th century to meet 
the large financing needs after 


tire great fire in Copenhagen in 
1789. 

Dr Helmut Scholz, manage- 
ment board member of Bayer- 
lsche Vereinsbank, a leading 
Bavarian mortgage bank, says 
Pfandbriefe are much safer 
than mortgage-backed securi- 
ties because they are issued on 
the basis of the German mort- 
gage bank act which ensures 
investor protection through a 
system of stringent regula- 
tions. 

Danish mortgage hawks are 
also subject to strict regula- 
tions, says Lars Rohde, man- 
agement board member of 
Realkredit Danmark. For 
example, banks are required to 
hfliawrp their landing and bor- 
rowing and they are not 
allowed to take foreign 
exchange or interest rate risks. 

Despite the high degree of 
investor protection and Squid 
secondary markets, both Ger- 
man and Danish mortgage 
bonds trade at a fairly wide 
yield spread to government 
bonds. The differential is 
thought to reflect the low 
take-up by foreign investors 
and mortgage banks in both 
countries have recently been 
puhlidsing their bonds abroad 
in a bid to attract more foreign 
investment. 


• ••<"• WciT 


a trickle 


|f Napoleon had better information, 

he might not have met 
his Waterloo. 



A good start to 1994 


U X 


UK. 



Hong Kong 


Thailand 





FLEMINGS 

INTERNATIONAL INVESTMENT BANKING 


LONDON. NEW YORK. HCHWG KONG. TOKYO. PARIS. FRANKFURT. MAD RID. ZXJR1CB. GENEVA 
MILAN . SYDNEY . BANGKOK . TAIPEI . MANILA . JAKARTA . SEOUL . SHANGHAI . BOMBAY 
KUALA LUMPUR. SINGAPORE. LAHORE. COLOMBO. JOHANNESBURG. BAHRAIN 


25 CoptbaH Avenue, London, ECZR7DR. 
Tel : 071-638 5858 Fan 071-382 84M 








VI 


FINANCIAL TIMES THURSDAY MAY 261994 


S 


INTERNATIONAL. CAPITAL MARKETS 6 


On this page, FT writers profile an intermediary, Merrill Lynch, an investor, Lombard Odier, and a borrower. Abbey National 


S 

S 


Some months ago, news that a 
veteran Merrill Lynch invest- 
ment banker bad flown in 
from New York to can on Lon- 
don clients sent shivers down 
the spines of the locals. Was 
he about to snatch a big deal 
from under their noses? asked 
worried enrobond syndicate 

managers at the London-based 

houses. 

His arrival was given far- 
ther importance because it 
coincided with market 
rumours that Hanson, the 
Anglo-American conglomer- 
ate, was about to launch a 
large global bond offering; The 
Hanson deal has yet to sur- 
face, but nevertheless the epi- 
sode serves to illustrate the 
strong presence which Merrill 
has buflt in the international 
capital markets. 

As the biggest US securities 
house with a market capitalis- 
ation of SSbn and an enviable 
distribution system to institu- 
tional and retail investors, one 
expects Merrill to have a domi- 
nant position in the US and In 
the international arena. 
According to Securities Data, 
Merrill was the leading under- 
writer of worldwide public 
new issues of debt and equity 
in 1993 with business worth 
$l93bn. It also maintained its 


The company treasurer, once a 
rather marginal figure within 
an organisation, has grown in 
status in recent years. The 
growing complexity of the 
financial markets and the 
increasing range of sophisti- 
cated instruments available 
have made his task more diffi- 
cult and more highly valued, 
while a series of well-publi- 
cised losses on derivatives by 
treasury departments have 
also resulted in closer scrutiny 
of the treasury operation. 

This is particularly true of 
hank treasurers, whose activi- 
ties are even more central to 
the wellbeing of their institu- 
tions than those of corporate 
treasurers. 

Gareth Jones, Abbey Nation- 
al's treasurer since the build- 
ing society acquired bank sta- 
tus in 1989, has seen his 
department through a crucial 
transition period. Since becom- 
ing a bank. Abbey has been 
more active in using interna- 
tional capital markets. Its trea- 
sury is considered one of the 
more aggressive and profes- 
sional operations in the finan- 
cial markets, in its activities as 


Impressive placing power 


market share of just ova- 13 
per cent 

Merrill's placing power, its 
wide range of services and its 
ability to execute currency 
swaps are some of the 
strengths which attract bor- 
rowers. Officials at a European 
sovereign borrower which has 
been active in the eurobond 
market In recent years say 
that although Merrill to 
be more anonymous than its 
competitors, it has strong 
ideas on derivatives, swaps 
and other structured products. 

The perception that the com- 
pany “transcends individuals" 
also appeals to the treasurer of 
a UK hank who regards Mer- 
rill as one of the best dealers 
in medium-term notes, a facil- 
ity which Is increasingly popu- 
lar with borrower s . However, 
another UK corporate trea- 
surer feels rather neglected by 
Merrill with respect to pri- 
mary issues now that the yield 
spreads on his bonds have 
tightened substantially. “They 
get more bang for their bucks 
by working with medium- 
range credits,*’ he says. 

Indeed, Merrill has been 


closely involved with issues, 
sovereign borrowers in partic- 
ular, which are seen to be 
improving credits. It has 
arranged Issues for Portugal, 
Argentina and is widely expec- 
ted to lead-manage the first 
eurobond offering for Lebanon 
later this year. 

Although Merrill Is seen as a 
powerful fixed-income house, 
it has also made rapid strides 
in the international equity 
market In recent years. 
According to IFB Securities 
Data, Merrill raised S4£4bn In 
international equity issuance 
in 1993, putting it second in 
the hook runners' table behind 
Goldman Saehs. Although it 
only moved up just one place 
from the previous year, it 
almost doubled the amount 
raised in equity issuance com- 
pared with 1992. 

By contrast, Merrill only 
achieved fifth position in the 
widely-watched enrobond 
league table last year when it 
raised 3l7.9bn out of total 
eurobond issuance of $400bn, 
putting it behind Goldman 
Sachs, Deutsche Bank, Morgan 
Stanley and CS First Boston. 


Syndicate managers at other 
London-based enrobond 
houses offer several reasons 
why Merriirs profile in the 
eurobond market is not as 
high as it could be. Same say 
it Is because the Loudon opera- 
tion tends to report bade more 
to New York whereas other US 
houses in Loudon have more 
autonomy. Others put it down 
to Merrill's dependence on 
eurodollar issuance. “It has 
virtually no penetration in 
sterfing or D-Marks," says one 
syndicate manager. 

However, Merrill has bees 
taking steps to broaden its 
range of currencies which 
should enable it to underwrite 
more business In the eurobond 
market It has built up a pres- 
ence in yen and French francs 
and Its return to dealing in UK 
government bonds earlier this 
year should help it to win 
more primary euroster l ing 
mandates. Heavy losses had 
promp te d Merrill to pull out of 
gflfc in 1989. 

Expertise in money markets 
and floating-rate notes have 
a bp enabled Merrill to ««airp 
the most of the change for the 


Crucial transition period 


an issuer and as an investor. 

Last year, it raised $5.5bn in 
the international bond mar- 
kets. So far this year the total 
is $5bn, of which $4 bn was 
completed in January, before 
the markets turned sour. In 
addition. Abbey also has a 
$4bn US commercial paper pro- 
gramme, of which $2.5tm is 
drawn, and a $ 10 bn medium- 
term note programme, of 
which $&5bn Is drawn. 

Part of the challenge has 
been to raise the international 
profile of the company. “We 
have had a p re tty good recep- 
tion in the long-tom debt mar- 
ket - we have achieved quite 
good rates in lira,” said Mr 
Janes. Nevertheless, in a mar- 
ket where perception often lags 
change, it has been a battle to 
convey the message abroad 
that Abbey Is now a bank, 
rated AA by Standard & Poor’s 
and AA2 by Moody's, rather 
than a building society, consid- 
ered a more esoteric breed by 
overseas investors. Abbey 



Gareth Jonas: tun Um treasury 
cervices as a profit centre 


National has therefore held a 
series of roadshows in Europe, 
aimed at the banks which man- 
age local retail distribution. 

As well as tapping retail 
demand. Abbey has also built a 
stronger institutional base, by 
issuing large liquid transac- 
tions. So far this year. Abbey 
has launched $lbn offerings of 


fixed and floating-rate bonds. 
Last year. Abbey issued a 10- 
year eurobond in the sterling 
market which, after the second 
tranche was launched, totalled 
£lbn. eq ualling in size the larg- 
est deal in the sector. 

As well as being a sizeable 
issuer. Abbey National’s trea- 
sury is also active as an inves- 
tor - it is the largest investor 
in the sterling mortgage- 
backed bond market, but it 
runs investment books in a 
number of currencies, the larg- 
est of which are storing; and 
dollars. Abbey has also bought 
bonds in the US mortgage- 
backed market, and is keeping 
track of developments in the 
European asset-backed market 

In a radical departure. Abbey 
has also set up a joint venture 
in derivatives with Baring 
Brothers. Abbey National Bar- 
ing Derivatives was set up last 
year as a branch of Abbey 
National Treasury Services - a 
move which caused concern 
about the potential risks of 


worse in market sentiment 
which has p rom pte d investors 
to apt fa short-dated maturi- 
ties and for floating-rate as 
opposed to fixed-rate bonds. 

These developments already 
appear to be producing 
results. According to IFR Secu- 
rities Data, by early Kay Mer- 
rill had clawed its way to sec- 
ond position In the 1994 
eurobond league table with 
Just under flObn worth of new 
issue business or &5 per emit 
of the total. 

However, Merrill has 
exposed itself and its new 
issues to potentially harsh 
scrutin y by the market follow- 
ing its rather arrogant contri- 
bution to a recent debate on 
whether the eurobond mar- 
ket’s fixed-price re-offer mech- 
anism needed to be amended. 

In a letter to IFB magazine, 
which acted as a forum for the 
debate; Merrill said: “Difficul- 
ties clearly arise with the 
fixed price re-offer mechanism 
with respect to transactions 
which are clearly mispriced 
and/or poorly rate-timed. It is 
our policy to avoid such trans- 
actions and hence are not in a 
position to make an informed 

comment” 

Antonia Sharpe 


derivatives business, although 
Abbey insists its strategy is 
conservative. Unlike most cor- 
porate treasuries. Abbey 
National Tre asu r y Services is 
run as a profit centre: pre-tax 
profits in 1993 readied almost 
£20(ta, having shown consist- 
ent growth since 1989. 

The a r g um ent* against run. 
ning a treasury department as 
a profit centre are strong for 
industrial companies, where 
the treasury is mainly 
d*wignori to service other busi- 
ness areas. But a bank trea- 
sury is an integral part of the 
main business. 

Nevertheless, despite the 
strong performance of Abbey 
National Treasury Services. Mr 
Jones believes that a purely 
profit-oriented approach is 
potentially dangerous for a 
treasury operation. "We are a 
profit centre but the chief exec- 
utive is not pushing for addi- 
tional profits from treasury,” 
he said. *Tf things go wrong in 
treasury it will have a dispro- 
portionate effect on the public 
perception of the business” 

Tracy Corrigan 


Dynamic Swiss approach 




Swiss private bankers are 
reputed to be low-risk, conser- 
vative investors. AU the more 
remarkable then, that one of 
the country's oldest hanks, 
Lombard Odier. should have a 
fixed-income investment arm 
that Is consistently outper- 
forming market indices with 
the help of innovative invest- 
ment strategies and a dynamic 
trading approach. 

"Markets are inefficient, and 
we are very active managers - 
our investment philosophy is 
to try to discover the ineffi- 
ciencies and ensure the portfo- 
lio will benefit," says Paul 
Abberley, director and head of 
fixed Income at lombard Odier 
in London. He adds that “inef- 
ficiencies are dynamic, they 
constantly change. It's not 
realistic to build a model - you 
need human judgment to eval- 
uate them.” 

Lombard Odier London was 
set up In 1878 to provide spe- 
cialist ftmd management ser- 
vices to institutional investors 
in separate bond and equity 
funds. The total amount of 

funds Under iwanflgpmpnt has 

grown to $7.2bn (of which 
S4-5bn are invested in fixed 
income) from around S2£bn in 
December 1990. 

The ftmd invests in about 20 
OECD bond markets: including 
their currencies - which are 
managed as a separate asset 
class to enhance total return - 
that's 40 variables. 

To cover all this ground, 
Lombard Odier set up a team 
of 10 Investment professionals 
specialising in three areas. 
Paul Abberley sets kmg-tenn 
strategy on a six- to nine- 
month fundamental view. A 
tactical group of four fine- 
tunes the long-term strategy 
and carries out microwork: 
picking sectors, carrying out 
yield-curve analyses, issue 
selection, and executing trades. 
The remaining five are mem- 
bers of the portfolio manage- 
ment group, who, taking into 
account long-term strategy, 
input from the tactical group 
and client parameters, build 
efficient portfolios to ensure 
investment performance. 

The bond team uses a multis- 
trategy approach, consisting of 
“top-down” analysis of macro- 
economic and political trends, 
supplemented through “bot- 
tom-up” sector- and security- 



Panl Ahbwtor the 1to a tu nin g 
adda to to* tunwiw* 


selection. They place a heavy 
winhwh on flne-tuntmz which 
helps (temp volatility and boost 
returns. Thus, while its overaB 
long-term strategy remains 
constant, Lombard Odtert- 
bond managers do a substan- 
tial amount of dust-term trad- 
ing within the overall loop 
term strategy, to optimise toe 
portfolio’s performance. In 
1992, for example, their turn- 
over for a UK pension fund 
was 32S per cent. Including 
currency trading. 

“This may appear high, but 
the level of turnover was not 
generated by inconsistent 
long-term strategy or by con- 
stant issue trading," says Mr 
Abberley. “Our commitment of 
resources in the tactical invest- 
ment group simply allows port- 
folios to move quickly In times 
of short-term market instabil- 
ity.- 

Short-term trades might 
Include a switch born gilts to 
eurosterling bonds of a similar 
maturity, or going short on one 
part of the yield carve and 
long on other sectors. This con- 
trasts with more conventional . 
bond fond managers, who 
might buy paper and sit on it 
for several months; while both 
houses might have the same 
long-term strategy, Lombard 
Odier may generate three 
times the turnover. “The fine- 
tuning adds to the turnover, 
but it also adds value;" Mr 
Abberley says. 

Amid the recent turmoil in 
world bond m a r k et s, be admits 
that "the first quarter of 1994 
has been a very challenging 
period; we’ve had to deal with 
high volatility and a sharp cor- 
rection in most markets - it’s 


been a period where ow b best 
off bein g defensive, rather Bam 
adding vain*.” 

To cope with these condi- 
tions. his team has moved 
away from directional bote, 
and has sought to shorten 
duration to jfthme risk. - 
But protecting one’s down- 
side does not promote index 
out performance. That’s why 
they are tacreestagiy looking 
to exploit relative, not abso- 
lute. value. Thte might involve 
spread {dm between efferent 
mwkahC Tt donut matter if 
S» or down, aa 
_ move your 

tt3»ttrJffiberiey. 
vattree fores ah intrinsic 
r tabard Osar’s porffh 
W TO. wnere Quant 

1 permit They can be 

«*£ to replicate cash market 
strategies mesa cheaply than 
xxsm conventional securities, 
awf to hedge cash positions. 
M oreover, ftmd managers 
tatelft we options to achieve 
riot-return configurations 
which are impossible to 
aefedeve bi the own market 
Uttfanately, "fond managers 
ore constantly driven by the 
twin forces ca hope and fean 
hope that their losses win 
abate, ami tear tost toe&r gates 
wtipwfft be eroded,” says Mr 
Ah&erfefc Ifite too often leads 
them to fake profits earlier 
ttiwfrdtouKtortohoIdofl 


ft 




■** - 








ir 


toey&WrfJL Fund maoag- 

themselves to 

fear toa lota* ted to run with 
toe gains*. 

Lomhard Odlte's bond fluids 
hate consistently outper- 
formed market Indices 
recgttffr. m 1993, its US dollar- 
based Global Fixed Income 
Fund posted a return of 2&06 
percent, compared with a HUB 
per cent rise in JP Morgan's 
global government bond index 
(traded). This compares with 
the industry average of liffi 
per cent, according to data 
from HSW, a ftmd performance 
measurement company. 

In toe three years to December 
1993, Lombard Odier 1 a global 
bond ftmd posted a 49.40 per 
cfent return vesus 35.52 per 
cent on JP Morgan’s index; 
aver toe part seven years it 
gained 147.58 per cent, against 
93.25 per cant on the index. 




fit's 




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FINANCIAL TIMES 


©THE FINANCIAL TIMES LIMITED 1994 


Thursday May 26 1994 




HALL & TAWSE 


QUALITY 

CONSTRUCTION & DESIGN-BUILD 
NATIONWIDE 

TkkpbM*: eUm KMoao 

AmMdUiyof Bufnrplc 


IN BRIEF 


Iberia negotiates 
with Lufthansa 

Iberia, Spain’s state-owned naHimaT airline, is 
negotiating a wide-ranging commarcfal ^ g r^W ^rt 
with Gennany*s Lufthansa. Page 20 

Francs to Mil intunr stake 

The French government is p lanning to float a 
substantial part of its stake in Caisse Nationale 
de Prfevoyance, the state-owned life insurance 
group. Page IS 

RepMl plans International offering 

Hie Spanish government is to make an interna- 
tional offering of Repeal shares that coold raise 
between Pta200bn and Pta300bn ($1.4hn to £L2bn). 
Page 18 

Papor producers grab power 

A spate of proposed price increases has firmly 
tilted the balance oT power in North American 
and European pulp arwi paper markets. 

Page 20 

Knmagtrf Gum! reports a decline 

Kumagzd Gmm, the Japanese property developer 
and construction, c omp a ny . reporteda 20.58 per 
cent decline in taxable profits. Page 21 
Japanese drags companies saw sluggish profits 
for the year to last March. Page 22 

Managers, derivatives and the Bank 

Senior US company managers needed to understand 
and control the risks of derivatives, Mr Brian 
Quinn, the 'Rank of Tin gbmriV i pYprrrt-iv p director 
of banking supervision, said. Page 23 

Courtaufds secs rise fen markets 

Courta ulds , the UK fhomWiig ftbrea group, 
said it was seeing recovery in some of the mar kets 
hit by last year's credit squeeze in flKina 
Page 24 

UK property riss underlined 

The scale of the recovery to the UK property 
investment market was yesterday underlined 
by a 3A3 per cent rise in the net asset value of 
Land Securities, the UK’s largest property com- 
pany, over the year. Page 24 

Argyll faH» 13% 

Depredation charges, tough compet i tion and 
a poor performance at its Lo-Cost discount chain 
combined to produce a 13 per cent fell In pre-tax. 
profits at Argyll Grom the UK’s thinHargest 
grocery retailer. Page 26 

Vesper Thomycroft pdw—eee 13% 

Vosper Thornycroft Holdings, the DR shipbuilding 
«nd engineering group, increased atmnai profits 
by 13 per cent Page 26 


Bankers Trust 
cuts credit to 
Austrian bank 


By Patrick Harverson fart New 
York and Ian Rodger In Vienna 

Bankers Trust of New York and 
five other international banks 
have withdrawn credit lines from 
Bank fllr Arbeit und Wlrtschaft 
(Bawag}, a leading Austrian bank 
under Investigation, for irregular 
offshore investment practices. 

Bankers Trust said tt withdrew 
a 3100m line of credit from 
Bawag last week because it was 
uncomfortable with the hank's 
dealings with a Bermuda-based 
hedge fund operation run by Mr 
Wolfgang Flottl, the son of 
Ba wag's chief executive, Mr Wal- 
ter FlflttL The credit line was 
used to cover Bankers Trust’s 
exposure in Its foreign exchange 
trades with Bawag. 

Meanwhile, a confidential 
Interim report by investigators 
from the Austrian National Bank, 
named five other international 
banks — Crddii Lyonnais and 
Paribas of France, Commerzbank 
and BHF of German? flTM * Repub- 
lic National Bank of New York - 
as having withdrawn credit fines 
from Bawag 

Austrian news magazines 
revealed last month that. Mr Wal- 
ter Flettl had secretly directed up 
to Sch224bn ($2bn), more than a 
tenth of the bank’s total balance 
sheet, to offshore investment 
-contpaxnes controlled by his son. 
The bank, which had been carry- 


ing out these operations for more 
than six years, subsequently 
repatriated the entire amount 

Mr Tom parffl, head of public 
relations at Bankers Trust, said 
that in spite of the repatriation, 
“we felt that the credit profile of 
the bank had been adversely 
affected by this exposure to the 
hedge fund”. 

Noting that Ba wag's executive 
committee had not been fully 
informed of the ingnw to compa- 
nies run by Mr FM til's son, and 
that a large part of Bawag’s earn- 
ings seemed to have been derived 
from this activity, Mr Parisi said: 
"We just didn't like the smeD of 
it" 

The Austrian central bank 
investigators concluded that the 
liquidity of the bank left "no 
grounds for concern", but they 
could not yet confirm “whether 
Bawag has any further financial 
obligations resulting freon these 
credit transactions”. 

Mr Erwin Schmidbauer, direc- 
tor of financial markets at the 
Austrian National Bank, said 
that, supervisors twigKt. have As- 
covered the irregularities sooner 
If frifaMTinrinnai f trmf flow statis- 
tics compiled by the Bask for 
International Settlements were 
more precise. In particular, he 
wished that the Bank of England 
could separate out Channel 
Islands bank exposures. 
Background, Page 18 


Nokia plans to 
raise FM2bn in 


Cwtton ceMnvtM 

Mr Michael Green, chairman of the PE's Carlton 
Communications, celebrated a 33. per cent rise 
In interim pre-tax profits. Page 27 


new equity issue 


Compmlw In tMs issue 

ACT 

27 Kumagai Gumi 

21 

ANZ 

21 Ladbroka 

29 

Air France 

S Lasmo 

25.18 

Arcadian Inti 

26 Leeds 

28 

Argyfl 

25 Legal & General 

11 

Avtovaz 

20 Liberty 

24 

BDOP 

18 London Clubs Inti 

28 

BSGIntJ 

25 Lufthansa 

2p 

Barton Trust 

17 MAI 

29 

Bawag 

to 17 Mercury Asset 

28 

Budonn 

17 MetflBgeseOschaft 

17 

Burnings 

22 Moriand 

27 

CHdeP 

18 Mtxflnem 

18 

Cadbuy Schweppes 

29 15 Murray Enterprise 

28 

Camelot 

15 NSK 

22 

Carisborg 

21 New London Capital 

28 

Cwtton Comma 

29. 27 Nokia 

17 

Celsius 

20 North American Gea 

28 

Ctomborfin & H8I 

27 Opal 

17 

Ctga 

18 Paramouit 

28 

ConsoMatad Prau 

22 Poseidon Gold 

21 

Countryside Props 

24 Prudential Corp 

11 

Crown Casino 

22 Quaflty Software 

27 

Do La Rub 

29 . 16 Racai 

2415 

Doneion Tyson 

28 Rank Organisation 

29 

Dundee & London 

28 Rapsoi 

- 18 

East Japan Raiwey 

22 SAS 

20 

CetmreUa fUJ 

Hiiflfpnsti 

25 , 18 SQ Warburg 

29, 17 

Eurotunnel 

29 Sankyo 

22 

f=SC Emarrang Mwtafci 28 -SHonogi 

22 

Fupsawe 

22 Stopbsnk 

20 

Gartner 

27 Snam 

18 

General Motors 

TT State Bank NSW 

22 

Granada 

29 StByr-OalmJor-Pucb 

18 

Greenafe 

20 TNT 

21 

GtocP 

15 Takeda Chemical 

22 

Wgh Goaforth Park 

- 28 Tokyo Qeetric Power 

22 

Hydro-Quebec 

20 Wag 

21 

ICL . ■ . 

15 Votper Thomycroft 

28 

Iberia 

20 Wesfarmers 

22 

Japan Tobacco 

22 Yamanouchl 

22 

Kansbo 

22 Young S Co's 

27 

Market Statistics 


ffcnuai reports sente 30-31 
B a rictKBart; Govt bonds 23 
Band Mure# and opflnns 23 
Bond prims and ytaMe 23 
ComrwWra prices 2B 

QMdsndB anranoBtf, IK 28 
EMS currency rates * 

Eurobond prion 23 

feed Merest Mas 23 

FT-A World indices Bn* p*s» 
FT Gold lines Index Beck Page 
FMSMH fntt bond aw 23 
FT-8E Actuaries tadtes 2S 


Foreign ostmoB 31 

Gits prices 23 

Utto equity optaw BwkPso* 
London share eanfce 30-31 
London trad! options Back Page 


Msraoed tabs sente 

32-88 

Money -maitats 

SB 

Now loti bond lanes 

23 

Recto teams. UK 

29 

Short-term irt rates 

SB 

US Merest rates 

23 

Worid Stock Markets 

37 


Chief price changes yesterday 


HUOKNIIT 

Mis 

mto 


tom Ranee 

528 

+ 

JKHlIUl 

590 - 

215 

SUC 

am 

+ 

Utt 

500 - 

IB 

— — - 



urn* 

ifiignto 

PWA 

710 - 

231 - 

229 - 

45 

29 

TZ5 

Bancato CUV 

knew 

580 

501 

- 

1U. .1,, 

782 - 

» 

UPan 


— 

muvvoukm 


TOKYO (Vm^ 



hm 


a 

Nm* 



CnqMQCmp 

11TO 4- 


455 

+ 

BM 

Stomp Tacfa 

VMs 

m + 

38N ♦ 

H 

ip 

IfltoeaSK 

Maittgeku 

1130 

759 

+ 

* 

GtadtWp 

23U - 

12 

Man*) UkMw 

4S1 


HnMtotck 

TOP - 

m 


4- 

tal Same Tleft 
nutotmi 

21* - 

« 

TWyoBuMn 

879 

+ 

Mom 

Erttatat 

705 *■ 

s 

QMna 

1050 

- 


Nm York prtfiN n l&aDpm. 


Him 



DOMkAltoto 

15 

- 

m 

1M 

+ 

8 

snowier 

344 

— 

Optt&WP 

148 

+ 

7 

MriheBotoi 

399 

- 

JBMon&tw 

282 

+ 

10 

MM 

240 


Mtayhb 

■e.j. - j 

toonasQ 

288 

SIB 

+ 

+ 

8 

10 

NSM 

163 

- 

(tatBee 

238 

■* 

13 

MM 

COB 

— 1 

TSSStam 

185 

* 

7 

Porta* 

7GS 


WttBttevm 

555 

* . 

12 

Re* Off 

380 

- 

ftto 

(Mon nyffpr 

Osntpnmm 

Grotum 

sm 

in 

140 

- 

a 

» 

9 

aw* 

UBtttoopepn 

WBtOonM) 

144 

588 

180 

- 


SB 

- 

5 

Wovqtil 

184 

“ 


28 

50 

ig 

20 

48 


33 

60 

58 

38 

48 

SO 


4 

SB 

42 

IS 

14 

28 

30 

23 

W 

25 

12 

14 


By Christopher Brown-Humoa 
In Stockholm 

Nokia, the Finnish telecommun- 
ications group, yesterday 
announced plans to raise more 
than FM2bn ($37Qm) of new 
equity in the biggest interna- 
tional share issue by a Finnish 
company. 

Up to to preferred shares win 
be offered, increasing total out- 
standing shares to 74.9m. At yes- 
terday’s dosing price of FM410, 
the issue would be worth more 
than FM2.4bn. 

The offer could take foreign 
ownership to the group above 50 
per cent. About 46 per cent of 
the company’s capital is bald 
overseas, compared with 20 per 
cent a year ago. Around 90 per 
cent of the shares will be tar- 
geted at non-Finnish Institu- 
tions, the rest being offered on 
the domestic market 

Most of the international offer 
will be directed at the US, where 
the company plans to Hat its pre- 
ferred stock, in the form of 
American Depositary Receipts, 
on the New York Stock 
Exchange. Mr Janna Olffla, pres- 

MetalJgesellschaft 
shares fall 15% on 
fresh provisions 

By David WaOer in Frankfurt and were meant to have been cleared 
Laurie Morse In Chicago up.” said , one analyst, who pre- 

dicted font the provision could 
Shares in MetallgeseUschaft amount to DMlbn or more, 
dropped 15 per cent yesterday fid- MefcaUgesellschaft said the new 

lowing the disclosure on Tuesday provisions arose as a result of 
night that the Frankfurt-based contracts made between MG 
group will have to make fresh Corp. a MetallgeseUschaft subsid- 
pro visions to cover newly identi- iary in New York, and Castle 
fled risks arising from its oil Energy Corporation, an ail refi- 
operaiiaas in North America. nery in which MG Carp owns a 

The group’s shares fell DM40 to minority stake. 

DM220, still well above the low of This has no conne ct ion with 
DM175 to which they slid in the MG Corp’s oil futures trading 
wake of Metallgesellschaft’s which incurred total losses of 
DM3.4bn (|Zbn) rescue package to DM2.Sbn in 1993-94. bringing 
January. ■ MetengesaBacfta ft to the brink of 

The metals, mining and indue- bankruptcy earlier fids year, 
trial group refused yesterday to Castle Energy is a creature of 
put a figure on the new provf- MG Corp’s making, a project 
etwiti fri its statement' an Tues- crafted by Mr Siegfried Hodapp, 
day it said it planned to sell tfcs 80 MG Corp’s former chairman. Mr 
per cent stake in the Buderns Hodapp and other MG Corp exec- 
engineering company and other drives controlled the Castle 
assets to finance the new provi- board, tnasformisg the Permsyl- 
dous and cover the costs of fur- vaniahased company from a pro- 
ther restructuring in German vider of advice an oil and gas 
malting . partnerships to an oil refining 

Buderus made pre-tax profits of operation. 

DMISSm last year' on sales of MG Coxp agreed to buy virtu- 
DM2.77bn. A manufacturer of ally all Castle's refinery output at 
h paring equipment and other prices above the existing market, 
building products, it has a star- These contracts, unusual by oil 
ket capitalisation of DMLfibn, Industry standards, triggered the 
valuing MetaQgesellschaft’s 60 need for further risk previsions, 
per cent stake at DML28bn. MG Corp and Castle are contest- 

“Metallgesellschaft's problems ing the tanas of the contracts. 


idem, said Nokia would be the 
first Finnish company to list on 
the New York Stock Exchange. 

The fends would be used to 
finance the group’s rapidly grow- 
ing telecoms and mobile tele- 
phone businesses and to 
strengthen its balance sheet 
Gearing would be cut from 52 
per cent at the year-end. 

It will be the group's second 
big share issue in a yean it 
raised FM918m last summer. 

The buying has been driven by 
a sharp improvement in the 
group's performance, winch last 
year brought pre-tax profits of 
FMLlAm after a FM158m loss in 
- lags. The company, the world’s 
second biggest supplier of mobile 
telephones after Motorola of the 
US, has seen huge growth in the 
sales of mobile and fixed tele- 
phone equipment Its share price 
has risen five-fold from FM92 at 
the beginning of 1993. 

Nokia intends to launch the 
issue during the summer, but is 
seeking shareholder approval at 
an e xtr aordinary general meet- 
ing on June 23. Its shares fell 
FM21, or nearly 5 per cent, on 
yeste r day's 


GM is using Opel as a springboard for global growth, writes Kevin Done 


Making its marque 
all over the world 



GM*a “world cars’: Production/assombly of Opel cars in emerging markets: 


Existing: 

Phoned: 

Possible: 

Corsa: 

Braril 

Mexico 

China, Russia 

Astra: 

Hungary, Taiwan,S Africa, Turkey 
Poland, India, Thailand, Indonesia 

Vectra: 

Brazil, Turkey, Egypt, Malaysia 
Indonesia, ThaBancL 

Other ysnOrnss unefar study. Ph&ppktes, Pakistan, Colombia. Venezuela, and Zimbabwe. 


G eneral Motors is using 
its German subsidiary 
Opel to spearhead its 
expansion fatn international car 
markets outside the US. 

While its domestic North 
American automotive operations 
have racked up four years of 
heavy losses, GM has opted to 
use its much healthil y European 
car business as its springboard 
for geographic expansion. 

GM Europe’s agreement to 
establish a joint venture in India 
to assemble the Opel Astra is the 
latest In a series of moves by the 
world's leading vehicle maker to 
gain a foothold In car 

markets. 

Opel products have been in the 
forefront of GW’s effort to set up 
assembly in Turkey and eastern 
Europe - the Astra small family 
car is produced to Hungary and 
production is due to begin in 
Poland, They are also leading the 
drive to build GM7s presence in 
Asia. 

Assembly of the Opel Astra 
began in Taiwan last year, small 
volume production of the Opel 
Vectra large family car win start 
in Tm4rvnp«rin later ^ year, to be 
followed by production of the 
Astra in India from the third 
quarter of 1995. 

Mr Louis Hughes, executive 
vice-president of GM’s interna- 
tional operations president of 
GM Europe, says that the group 
"has made a strategic decision to 
further internationalise and 
expand the Oped name and Opel 
products around the world". 

The world's biggest carmakers 
are united in the view that the 
Asia/Pacific region holds the 
brightest prospects for growth. . 
Car sales in Asia (excluding 
Japan) are expected to triple dur- 
ing the next 15 years. 

According to Mr Alex Trotman, 
chairman and chief executive of 
Ford, GM’s rival, 80 per cent of 
the world's population lives out- 
side the traditional automotive 
markets of western Europe, 
North America and Japan. 

The number of cars end tracks 
sold in these regions, however, 
represents only about 8 per cent 
of the global totaL 
ThiH view is co nfi r m ed by the 
lai^t study of world car markets 
released by DEI McGraw-Hill, the' 
London-based automotive ana- 
lysts, which forecasts that new 
car sales worldwide will rise from 
3a2m last year to 42.5m in 1999, a 
near 30 per cent jump. The DRI 
report cries South Korea, China, 
Thailand, Latin America and 
eastern Europe as offering the 
best growth prospects. 

For a long time US vehicle 
makers — as well as the Euro- 
peans — neglected Asian markota. 
allowing them to became largely 
the preserve of their Japanese 
rivals. Belatedly they are seeking 
to regain lost ground. 

“We are number two in Europe 
and in Latin America and our 
sights are zeroed in an growth in 
Asia and the Pacific,” Mr Jack 


Smith, GM chief executive, told 
the group’s shareholders last 
week. 

While Ford has embarked on 
an ambitious strategy of merging 
its North American and Euro- 
pean operations to try to eHmi- 
nate duplication and lay the 
foundations for developing more 
so-called “world cars”, GM has 
chosen to lead its international 
operations from Europe with the 
aim of integrating its European, 
Latin -ATnariran and Australian 

pn gtnuq rin g aitivltiiw. .. •- 

Most of the products tohe sold 
in these regions, as well as in 
Asia, will originate from the Opel 
technical development centre in 
BQaselsheim, near Frankfurt, and 
will be developed from the Euro- 
pean product range. 

Mr Hughes describes the Opel 
Corsa supermini as. CHI's most 
international car. Already in pro- 
duction in Spain, Germany and 
Brazil a™i planned for Mexico, 
GM is also studying possible 
Corsa assembly in China and 
Russia. 

Apart from building a network 
of Opel assembly plants across 
Asia, GM is also increasing 
exports of cars from Europe. Opel 
is being used as the group’s main 
marque in Japan, where GM has 


set a target of selling 100,000 cars 
a year by 2000. 

It has taken advantage of the 
conflict between the Volkswagen 
group and Yanase, the VW/ Audi 
importer to Japan, to win over 
the Yanase dealer network for 
Opel 

Sales of Opel cars to Japan 
jumped last year to 17,042 from 
only L371 in 1992. By contrast 
VW/Audi sales plunged to 24378 
from 42383. 

“In the last four to five years 
Opel has gone from being very 
much, a Europe-oriented car- 
maker to an international com- 
pany with global export sales and 
local assembly and manufactur- 
ing. Our intent is to get ever 
menu aggressive.” says Mr Peter 
Hanenherger, GM Europe vice- 
president for design, product and 
nuamfac tnring engineering. 

W hile the thrust of the 
GM Europe-led expan- 
sion has been outside 
North America, signs are emerg- 
ing that GM eventually plans 
closer co-ordination, between 
Opel and its North American 
automotive operations. 

(HI Europe is developing a ver- 
sion of its recently launched Opel 
Omega executive car for sale to 


North America under the Cad- 
illac brand name. 

This will be the US carmaker's 
first substantial export of cars 
from Europe to Neath America 
since the early 1960s, and the 
first European-produced GM car 
to be sold under a North Ameri- 
can nameplate. 

It is an important step in the 
globalisation of GM’s vehicle 
development and engineering, 
which is seen as a way to cut 
costs and make better use of 
worldwide resources. 

The process can also happen to 
reverse. GM is planning for the 
that time to export to Europe a 
version of its next generation US- 
produced MPV (multi-purpose 
vehicle) for sale under the Opel/ 
Vauxhall badges, to compete 
with vehicles such as the Renault 
Espace. 

According to Mr Smith, the 
programme for a European-pro- 
duced Cadillac is “one of the 
most significant international 
projects GM undertaken ... It 
makes Uttie sense to build dupli- 
cate components or near-dupli- 
cate platforms [chassis] for differ- 
ent regional market segments, 
when one region can adapt or 
tailor what is being developed for 
another.” 


Warburg 
names the 
heirs to its 
top roles 

By Norma Cohen, 

Investments Correspondent 

S.G. Warburg, the UK-based 
i n ves tm ent bank, yesterday put 
to rest speculation about the suc- 
cession of the firm’s top manage- 
ment, saying its chief executive 
Lord Cairns, will succeed chair- 
man Mr David Scholey when be 
retires in 1995. 

There will be no new thief 
executive; Lord Cairns, with the 
title of executive chairman, will 
fill both roles. TUs is a depar- 
ture from recommended best 
practice for corporate boards 
which urges separation of the 
roles. 

Meanwhile, Warburg also said 
that its 90-year old co-founder 
and senior president, Mr Henry 
Grunfeld, would no longer hold 
that position from next year. Mr 
Grunfeld, who emigrated to 
Britain in 1934, founded the orig- 
inal New Trading Company with 
the late Mr Sigmund Warburg. 

The announcement came as 
Warburg revealed record profits 
of 2297m ($44&5m) for the year 
to March 31, despite a 40 pm* 
cent rise to salary costs and a 
slowdown in trading profits to 
the second half. 

Mercury Asset Management, 
Warburg's 75 per cent-owned 
fund management arm, reported 
a 83 per emit jum p to pre-tax 
profits to filOSim, despite a 30 
per cent rise in operating costs 
following increases in perfor- 
mance related pay and staffing. 

MAM also saM it had provi- 
sionally agreed to buy the 50 per 
cent of the Geneva-based Bank 
S.G. Warburg Soditie A.G. it 
does not already own. It will pay 
£4&3m cash, roughly twice the 
sum paid to S.G. Warimrg for the 
first 58 per cent to 1990. 

Lex, Page 16; Details, Page 25 


GERMANY 


- If your corporation is 
looking fox a foothold in Ger- 
many or intends to broaden 
its existing base by an acquisi- 
tion, we can assist in search, 
approach and negotiation. 

As our domestic clients 
are usually entrepreneurs, 
proprietors or shareholders 
of privately-owned German 
companies, we are well ac- 
quainted with their mentali- 
ty. We are sensitive. to this 
when making approaches 
and during negotiation and 
valuation. 

If local competence is 
needed to realize your acqui- 
sition goals in Germany suc- 
cessfully, please contact us 
for further information. 


Fuchs Consult 


Kreuzberger King 64 - 65205 Wiesbaden 
Telephone <x 49 611) 70 00 40 - Fax tx 49 611) 71 04 04 







18 


FINANCIAL TIMES THURSDAY MAY 26 1994 


INTERNATIONAL COMPANIES AND FINANCE 


French government to sell 
stake in insurance group 


By John redding in Paris 

The French government is 
planning to float a substantial 
part of its stake in Caisse Nat* 
ionaie de Prevoyance, the 
state-owned life insurance 
group, within the next few 
months, Mr Edmond Alphan- 
dery, the economy minis ter, 
said yesterday. 

Hie indicated, however, that 
the sale of shares in the insur- 
ance group would represent 
only a partial privatisation and 
that state institutions, includ- 
ing the Caisse des Depots et 
Consignations, would retain 
majority control. 

The French government 
holds about 43 per cent of the 
shares in CNP, the country's 


largest life insurance group 

with annual turnover of SbOUt 

FFrfton (HL35bn). 

According to the economy 
minister, the French govern- 
ment will relax its influence 
over Credit National, the pri- 
vate sector bank which was 
established in 1919 to help 
finance reconstruction after 
the first world war. Mr Alphan- 
dSry said the government 
would surrender its right to 
appoint the chairman of the 
bank and Its power of veto 
over board decisions. 

The aTin rt imcpmftn t comes as 
public sector companies axe 
bracing for a round of musical 
chairs. Between now and the 
end of September, 27 public 
sector chairmen will see their 


mandates expire. Many of the 
most important posts are 
unlikely to be affected because 
of recent appointments. These 
include Mr Jean Peyrelevade, 
at Credit Lyonnais, and Mr 
Lolk le Floch-Prigent. who was 
moved last year from Elf 
Aquitaine to the head of Gaz 
de France. 

Question marks remain, 
however, over Mr Alain 
Gomez, chairman of Thomson, 
the electronics group, and Mr 
Jean Gandois, head of Pech- 
iney, the aluminium group. 
Both are keen to retain their 
posts but Mr Gomez has 
already had his mandate 
renewed three times, the legal 
limit, and Mr Gandois is 
approaching retirement age. 


I Euris gets 
| go-ahead to 
| take stake 
in Moulinex 


Bawag spotlight shifts offshore 

Ian Rodger explains how the Austrian bank bolstered its earnings 


Ciga suffers L200bn net loss 


By Andrew Hffl in Rome 

Ciga. the Italian luxury hotels 
rharn yesterday announced a 
net consolidated loss for 1993 of 
L200bn ($126m), weighed down 
by the heavy cost of financing 
more than L1.000bn of debt 

Net financial charges 
reached L149bn, against 
Ll96bn in 1992, but overall debt 
grew from LSTZbn at end-1992 
to L1.102bn at end-1993. 

Having been courted by ITT 
Sheraton of the US and Forte 
of the UK, Ciga has now gained 
a fragile independence follow- 
ing the unexpected success of a 


Ll,003bn rights issue. 

The Ll,OOOa-share issue was 
expected to fail, delivering a 
majority of shares to Ciga's 
creditor banks and then to FIT 
Sheraton, which had offered 
L740 a share for the company. 

Ciga has now started direct 
negotiations with creditors to 
reduce its debt, most of which 
is short-term. Talks are likely 
to take some weeks. 

The rights issue moarre that 
Ciga is no longer controlled by 
Fimpar, the Aga Khan's hold- 
ing company. 

Attention is now focused on 
the shareholder assembly 


called for June 24 or July 6. at 
which new investors could 
press for board changes. 

• Snam, the gas distribution 
subsidiary of Eni, Italy's state- 
owned energy and chemicals 
group, made net profits in 1993 
of L127bn. against Li39bn in 
1992. Sales rose to Ll2,0llbn 
from LMLSOTbn. 

The volume of methane gas 
sold during 1993 increased 3 
per cent to L49.7bn cubic 
metres, just under half of 
which was sold in the house- 
hold sector and 175bn cubic 
metres to industry. 


Lasmo accuses 
bid predator 

By Peggy HoOtnger in London 

The battle for control of Lasmo 
shifted gear yesterday as the 
UK oil explorer accused its 
rival and predator Enter prise 
Oil, which has made a £1.4bn 
($2.11bn) all-paper bid, of flat- 
tering profits with unaccept- 
able accounting practices. 

Mr Rudolf Agnew. Lasmo 
chairman, alleged in a letter to 
shareholders that Enterprise 
Oil breached UK accounting 
practices in treatment of sev- 
eral acquisitions. Earnings will 
have benefited by tqj to £650m 
over the life of the asset, as a 
result, he said. 


Founders cede control of 
French advertising firm 


By AEce Rawsthom 

Boulet Dru Dupuy Petit 
(BDDP), the French advertising 
group, yesterday ended a long 
struggle to retain its indepen- 
dence. Its four founders 
announced they were ceding 
control Of the company to a 
consortium of institutional 
investors in a FFr7 00m 
(£124. lm) rescue package. 

BDDP, which has ex panded 
rapidly to become one of 
France’s largest advertising 
agencies since its creation 10 
years ago, has come under 
intense pressure during the 


recession. It has been search- 
ing for capital to reduce its 
debt for some time. 

The deal means the four 
founders, led by Mr Jean- 
Claude Boulet, chairman, will 
now own 15 per cent of the 
group, rather than their cur- 
rent combined share of 55 per 
cent. The rest of the equity will 
be divided between ESI. an 
investment fund, and a group 
of banks including Banque 
Nationals de Paris and Credit 
Lyonnais. 

After the restructuring, 
BDDP*s debt will be reduced to 
FFi300m from FFrlbn. 


; By Alice Rawsthom in Paris 

i 

! Moulinex, the ailing French 
i household appliances group, 
■ yesterday took a step towards 
| completing its financial 
| re stru ctur in g when its share- 
holders voted to allow Euris. 
; an investment consortium, to 
i take a stake In the company. 

The shareholders, who are 
dominated by Moulinex’s 
employees and founders, were 
presented with offers from two 
prospective shareholders - 
Euris, a group of French inves- 
tors led by Mr Jean-Charles 
Naouri. a financier, and Glen 
D implex, an Irish business 
which is one of Moulinex’s 
closest competitors with the 
Morphy Richards brand. 

Euris had long been the 
favourite. Moulinex’s work* 
force voiced concern earlier 
this year at a stake being sold 
to Glen Dimplex, on the 
grounds that it could lead to 
redundancies. 

However, last Tuesday 
shareholders postponed the 
meeting at which they were 
scheduled to vote on the two 
offers. Despite this delay the 
Euris bid carried the day when 
the shareholders eventually 
met yesterday afternoon. 

Moulinex now intends to fin- 
alise a FFrlbn rights issue. 

Moulinex warned earlier 
this week that its losses had 
deepened in its last financial 
year to March 31. Moulinex 
then sustained a net deficit of 
around FFr550m (including 
provisions of FFrSOOm) against 
a net loss of FFrliSm on 
FFr8.22bn ($1.43bn) sales in 
the previous year. 


A ustnan bankers have 
marvelled for years at 
bow Bank fUr Arbeit 
tend Wtrtschaft (Bawag), the 
country’s third largest bank, 
has been able to achieve high 
growth and high profitability. 

The bank, controlled by Aus- 
tria's trade unions, has nearly 
doubled its total assets in the 
past decade to Sch220.3bn 
f$i9ba>. and raised its market 
share in the savings deposit 
field from 2 per cent to just 
over 6 per cent. 

Over the same period, its 
operating profits have jumped 
more than six-fold to Schl.45bn 
last year. 

In the past few weeks, as 
investigations into offshore 
investment structures operated 
secretly for several years by 
the bank's chief executive and 
his son have progressed, the 
explanation for this excep- 
tional performance has become 
much clearer. 

The bank has confirmed that 
up to a third of its profits came 
from these offshore activities. 

The full scope and nature of 
these activities has still not 
been uncovered. But Mr Walter 
FlottL the Bawag chief execu- 
tive, has admitted that for 
more than six years he has 
directed some Sch22 9bn. a 10th 
of the bank’s balance sheet, to 
offshore companies controlled 
by his son. Wolfgang, a high- 
rolling Wall Street trader. 

In a statement last week. Mr 
Walter FlottI spoke vaguely of 
"direct loans, indirect loans 
and securities’* arranged by 
Ross Capital Markets, a private 


Bermuda based company con- 
trolled by his son. 

Bawag has also confirmed 
that the investments included 
collateralised bond obligations, 
while Bankers Trust of New 
York, which last week with- 
drew a JlOOm credit line to the 
bank, said it was unhappy with 
Bawag ’s dealing with a Ber- 
muda based hedge fund. 

Mr Flbtti. a 70-year-old icon 
of Austrian banking, angrily 
rejected accusations that he 
exposed the bank to unaccept- 
ably high risks. “If we had in 
fact been involved in such 
risky activities, we could not 
have had an unbroken six-year 
record of profits." Loans were 
granted only against excellent 
collateral, he claims. 

He also defended the connec- 
tion with his son. "We had no 
branch in New York and for 
this reason, we used speci- 
alised firms which we could 
trust. Precisely because the 
son of the chief executive was 
the director of these firms we 
were able to build such a bum- 
ness relationship." Mr Flftttl 

saf<f 

T he bank's supervisory 
board and the Austrian 
government’s banking 
supervisors bad been unaware 
of these operations for most of 
the past six years, while its 
auditors, KPMG Austria Wirt- 
schaftspxHfungs, appear to 
have been satisfied with imper- 
fect explanations. 

He has not answered other, 
more pointed, questions. If the 
operations were safe and pro- 


duced such high returns, why 
has he closed them down? And 
why has Bawag been lass than 
forthcoming in dealing with 
questions from central beak 

Investigators and journalists? 

(The FT submitted questions 
early this week in writing, as 
requested by Bawag, but has 
not yet received replies.) 

At a time when banking 
authorities and investors 
everywhere are increasingly 
worried about big hanks’ 
investment policies, observers 
wonder how the conventional 
control mechanisms could 
have been circumvented for so 
long. 

Austrian bankers have 
pointed out that the amounts 
involved were more than dou- 
ble Bawag's own capital, ff 
something bad gone wrong, the 
bank could have been wiped 
out . 

When the scale of the FlOttl 
offshore operations became 
known in April, the Austrian 
National Bank sent in a four- 
man team to investigate. Tbs 
FT has obtained a copy of the 
team’s confidential interim 
report submitted on May 11. 

While it confirms that all the 
bank's capital has been repatri- 
ated, the investigators admit- 
ted that they were still far 
from having a complete under- 
standing of what had gone on. 

"No final verdict can be 
given at this point on the ques- 
tion of whether Bawag has any 
further financial obligations 
resulting from these credit 
transactions." 

They chased down one loan 


file whae the credit rase from 
343m in 1992 to 158.8m last 
year, bu t on w hich no written 
contract existed. 

- Austrian banking supervi- 
sors are embarrassed by the 
whole affair. They admit that 
it exposes not only failures of 
the bank’s own risk manage- 
ment and internal audit fuse, 
tana bid also lacunae in the 
regulatory apparatus. 

Only from this year will Aus- 
trian batiks he required to pub- 
lish full consolidated accounts. 
And. as in most countries, 
there is es yet no regulation of 
off-balance sheet activities. 

M r ' Erwin Schmid- 
baoer. director of 
financial markets in 
the Austrian National Bank, 
said the central bank first 
noticed lhat Bawag was up to 
something unusual last year 
by studying R»nh fin- Interna- 
tional firttfommts (BIS) bank 
exposts* statistics. 

Mr Schmidbauer also said 
suspicions would have been 
aroused much sooner if the 
Bank of England separated 
exposures to the Channel 
laluids from those of the UK as 
a whole. 

The . Austrian authorities 
emphasise that Bawag remains 
a sound and liquid bank. How- 
ever, investigations into trans- 
gressions of banking regula- 
tions: and Bawag's own 
internal rules will probably 
crams its style for some time. 

As for Mr FWttl. his contract 
exp i re s next year, and no one 
expects it to be renewed. 


Spain to make offering of Repsol shares 


Probe into Steyr 
share trading 

Austria's state prosecutor is 
investigating alleged insider 
dealing in the shares of Steyr- 
Daimler-Puch, the motor 
group, writes Ian Rodger. 

It is the first investigation 
since insider trading became 
illegal last October. 

Steyr shares rose 14.5 per 
cent after it decided to 
increase co-operation with the 
German tractor maker, KlSck- 
ner-Humbol d-Deotz und FendL 


By Tom Bums in Madrid 

The Spanish government is to 
mate an internati onal offering 
of Repsol shares in the last 
quarter of this year that could 
raise between Pta2D0bn and 
Pta300bn (Sl.-ibn to S2-2bn), Mr 
Oscar Fanjui, chairman of the 
state-controlled energy and 
chemicals group said yester- 
day. 

The size of the offer suggests 
that ENH. the state's energy 
holding company, is consider- 
ing reducing its present 41 per 
cent stake in Repsol to close to 
20 per cent Mr Fanjul said he 
expected INH to decide in the 


near future the extent of the 
offer. 

Last year, INH realised 
PtallObn when it reduced its 
equity in Repsol from 54 per 
cent to 41 per cent through an 
international placing. 

Repsol is at present complet- 
ing tite acquisition by Gas Nat- 
ural. its gas distribution sub- 
sidiary. of Enagas, the fully 
state-owned monopoly supplier 
of industrial gas. 

Gas Natural, which is 45 per 
cent owned by Repsol is likely 
to pay about Pta80bn for Ena- 
gas ’s main business and will 
have the option to acquire a 
Pta300bn pipeline being built 


linking Spain, via Morocco, to 
Algeria's natural gas fields. 

Mr Fanjul said the acquisi- 
tion would be announced 
shortly after final details on 
pricing and consumption had 
been resolved between Enagas 
and Spain’s electricity utilities. 

The main obstacle to the 
acquisition had been Enagas's 
commitment to the 1,265km 
pipeline which Gas Natural 
was unwilling to undertake. 
This has been resolved by the 
creation of a separate public 
company. Sagane, which will 
build the pipeline. 

Repsol has toe option to buy 
Sagane from INH, the compa- 


ny’s present owner, when the 
pipeline becomes operational. 

The acquisition of Enagas 
completes a lb-yrer long diver- 
sification by Repsol into the 
domestic gas business. Gas 
Natural controls 41 per cent of 
natural gas sales in Spain. 
Aft ff the takeover, it will have 
dose to 90 per emit 

Gas Natural’s contribution to 
RepsoTs operating income rose 
from 9 per cant in 1989 to 25 
per cent last year. 

Repsol increased its 1993 net 
profit by 11.4 per cent to 
PtaSfclnbn and its first-quarter 
net profit this year by 11.6 per 
cent to Pta4&4bn. 


On charted course 



Refrigeration 


Industrial Gases 


Our company was among those 
affected by the recession and the 
ensuing decline in demand. Even so, 
we were able to achieve satisfactory 
results during 1993.The focused 
expansion of our fields of activity, the 
early introduction of measures to 
reduce costs and raise efficiency in 
all segments of the company, and the 
innovative, future-oriented range of 
products and services we provide 
leave us in a stronger position at the 
beginning of the new business year. 

We expect 1994 to bring increased 
sales and improved earnings. 


Linde Group in Figures 
(DM millions unless stated otnenwsej 


1993 

1992 1 

Sales 

7,172 

7.534 | 

Orders received 

7.327 

7.367 

Orders in hand 

5.693 

5,419 

Capital expenditure 

675 

731 

Year-end staff total 
(number employed) 

29.636 

30.424 | 

Equity capital 

As percentage of balance sheet total 

2,959 

47.5 

2.945 ! 
47.4 j 

Profit on ordinary activities 

369 

530 1 

Net profit for the year 

178 

355 

Dividend paid per DM 5*3 share of 
Unde AG (DM) 

14 

f 

l 

!Li 


If you would like additional information. 

please write to Unde AG. Public Relations, Abraham- 

Lincotn-Str. 21, 65189 Wiesbaden. Germany. 

Unde in UK. represented by. 

Lansing Unde Ltd. Unde Refrigeration Lid. 

Basingstoke Abingdon. Oxon. 

Unde Cryogenics Ltd. Unde Gas UK Ltd . 

Aldershot Redditch 




CONSOLIDATED 

BALANCE 

SHEET 

(At 01st March 1994) 


10,402 


1 

INCOME FROM OPERATIONS 

(USS mflflon) 

Net interest Income 

87 

Other operating Income 

67 

TOTAL INCOME 

154 

OPERATING EXPENSES 

. 93 

OPERATING PROFIT 


BEFORE LOAN LOSS PROVISIONS 

61 

Loon loss provisions 

<(19) 

PROFIT BEFORE TAXATION AND 

MINORITY INTERESTS 

42 

Taxation on foreign operations 

(10) 

Minority Interests In subsidiaries 

<4> 

IET PROFIT FOR THE PERIOD 

2A 

(Reviewed by Ernst & Young. Bahrain) 





(V* f ’ U?) t Aj? - dj> 1 1 | 

Arab Bonking Corporation (B.S.C.) 

ADC Tower. Kptomoric Area. P.O. Box 5693. Manama. Bahrain 
Tel: (973) 532235. Tbt 9432 ADC BAH BN. Fa* (973) 533163/533062 
CR.No. 10299 




19 



FINANCIAL TIMES THURSDAY MAY 26 1994 




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20 


FINANCIAL TIMES THURSDAY MAY 26 1994 


INTERNATIONAL COMPANIES AND FINANCE 


Iberia, Lufthansa in talks 
on closer co-operation 


By Tom Bums in Madrid 

Iberia, Spain’s state-owned 
national airline, is negotiating 
a wide-ran g in g commercial 
agreement with Germany's 
Lufthansa. 

The talks form the third leg 
of a series of preliminary 
agreements also involving 
United Airlines of the US. The 
US carrier has already 
announced co-operation pacts 
with both Lufthansa and 
Iberia. 

A senior Iberia source said 
the pi™ of the Lufthansa i*n« 
was to establish as close a 
cooperation on routes, ticket 


sales and promotion as Is 
allowed by the European 
Unions' anti-cartel limits. 

A share swap between the 
two national carriers was not a 
“primary objective", the source 
said, and “would not. in any 
case, occur in the short term". 

Iberia sees Lufthansa as its 
ideal European partner 
because the routes of the two 
airlines, weighted towards east 
Europe and the Middle East in 
the case of the German airline 
and Central and South Amer- 
ica in Iberia's, are complemen- 
tary. The airlines share his- 
toric bonds going back to the 
1920s. 


The Lufthansa agreement 
will make little impact on 
Iberia's balance sheet but it 
could bring additional business 
to its hub it operates in Miami 
and to destinations in the 
Caribbean and Central Amer- 
ica. The hub has incurred 
heavy losses. The source said a 
decision would be taken at the 
end of the year on whether to 
sell it to United Airlines. 

The Spanish carrier is also 
hoping to dispose of part of its 
80 per cent shareholding in 
Aerollneas Argentina^. 

Iberia hopes to halve its 
losses this year to around 
Pta30bn ($220m>. 


SAS forecasts full-year profit 


By Christopher Brown-Humes 

Scandinavian Airtimes System 
said yesterday it was on course 
for its first profit hi five years 
following a dramatic improve- 
ment in its first-quarter fig- 
ures. 

Although the airline 
remained in the red, pre-tax 
losses fell to SKrlOlm ($18 .07m) 
from SKrl-53bn_ The result 
reflected higher traffic 
volumes, cost-cutting, 
exchange gains and lower 
interest costs. 


The airline expects the 
improvement to continue, 
despite intense competition, as 
the second and third quarters 
are traditionally stronger than 
the first Confidence is based 
on an improving traffic trend 
and- the impact of tough 
restructuring. 

First-quarter group revenues 
were SKr8.99bn, compared 
with SKr8.67bn, while operat- 
ing losses after depreciation 
were cut to SKrS4m from 
SKrfSlm. 

All business units showed 


better results, but the improve- 
ment was felt most in the core 
flying operations. Traffic was 5 
per cent higher and yields 
were up 3 per cent 
There was also a much bet- 
ter financial performance. The 
stronger krona produced a 
SKr200m unrealised exchange 
gain, compared with a 
SKrSOOm loss in the first quar- 
ter of 1993. Interest costs fell to 
SKrl94m from SKr465m due to 
lower interest rates and a 
SKr2bn reduction in net debt 
since the start of the year. 


Celsius 
opens with 
advance 
of 20% 


By Christopher Brown-Htnwes 
in Stockholm 

Celsius, the Swedish defence 
group privatised last year, yes- 
terday announced a 20 per 
cent increase in first-quarter 
profits to SKrl86m ($24. 07m). i 

The group said rationalise- i 
tion had driven the results ! 
from SErlSSm a year ago, I 
allowing it to compensate for \ 
reduced financial income. j 

An improved business cli- ; 
mate and the group’s emphasis ; 
on high technology niches ; 
enabled sales to reach i 
SKr3.1bn, up SEr200m- The 
order intake rose to SSr2J5bn 
from SKrLSbn partly due to 
the recent acquisition of Era- 
tor, a data technology group. 

Operating profit more than 
doubled to SKr246m from 
SKr58m, even though the con- 
tribution from associate com- 
panies fell to SKrlOm from 
SKr26m. Lower intacst rates 
meant financial income was 
SKiS7m lower at SKr40m. 

The group predicted that its 
full-year result would exceed 
last year's SEr72im. It expects 
higher sales and increased effi- 
ciency to compensate for 
reduced financial income and 
a lower contribution from 
associate companies. 


Paper producers win back power 


By Bernard Simon ta Toronto 

A spate of proposed price 
increases has firmly tilted the 
balance of power In North 
American and European pulp 
and paper markets towards 
producers. 

International Paper, the 
world's biggest paper company, 
based in Purchase. New York, 
last week announced plans to 
cut discounts on coated 
grcundwood paper by about 7 
per cent on July l. 

The planned price hike coin- 
cides with the peak ordering 
period for mail-order and 
Christmas catalogues. If imple- 
mented. it would be the first 
increase for this grade of paper 
in four years. 


In the newsprint market, US 
and Canadian producers plan 
to cut discounts by between 6 
per cent and 7 per cent on 
August 15. the second price 
increase this year. 

Sizeable increases are also 
scheduled for llnerboard and 
corrugating medium, used to 
make cardboard braes. The 
proposed USMO per ton hike 
for llnerboard is the third - 
and biggest - since last Octo- 
ber. It would bring the price to 
$385 per ton. up from $290 last 
autumn. 

In Europe, producers of 
coated grades made from 
chemical pulp are pushing for 
a 10 per cent mice rise on top 
of hikes of 15-20 per cent over 
the past six months. 


Producers will not necessar- 
ily succeed in pushing through 
the full increases. Prices of 
some grades, such aa tissue, 
remain weak. 

But the ste of the planned 
rises points to a more pro- 
longed tightening in paper 
markets than most observers 
expected. “The situation could 
continue for a white." said Mr 
Mads Asprem. analyst at Mor- 
gan Stanley In London. Mr 
Asprem has backed away from 
forecasts that pulp prices win 
turn down this autumn. 

Mr Ross Hay-Roe, analyst at 
Equity Research Associate In 
Vancouver, says that a combi- 
nation of rising demand ami 
shrinking haa brou g h t 

the North American newsprint 


market Into balance for the 
first time Steel 1968. 

Mr Haysfoe predicted inhk 
late st martet commentary that 
“there won't be eoough news- 
print to around* tf the US 


The shift in bargaining 
power is fiutratad by Fletcher 
ChaEeiqp Canada’s decision 
not to rttiw a kmgtenn news- 
print contract with Times Mir- 
ror. pu^fistwr of the Los 
Angeles ' 

According to one paper am- 
sutant. Tones Mirror, which 
gained » reputation as one of 
the toughest bargainers among 
buyer* has yet to find another 
supplier willing to provide 
bmg-tarm protection against 
further price increases. 


Skopbank reduces 
operating loss 56% 


By Christopher Brown-Humes 

A teg reduction in credit losses 
enabled Skopbank, f frp Finnish 
state-owned bank, to cut its 
operating loss by 56 per cent to 
FM216m ($39 96m) in the first 
four wKtnHwt from FM488m a 
year ago. 

It expects to remain in the 
red for the rest of the year, 
although the 1994 deficit will 
be around half last year's 
Fmebn total 


The drop in credit losses 
to FM207m from FM526m 
reflected an Improving Finnish 
economy and lower interest 
rates. Non-performing assets 
totalled FM2-27bn at the end of 
April, against FM397bn a year 
earlier. 

The bank, the biggest casu- 
alty of the Finnish banking cri- 
sis. said income from financial 
operations fell to FM82m from 
FMll7m due mainly to a 
FM33m loss on bonds. 



ZURICH 

INSURANCE COMPANY 


Invitation to shareholders 
to attend the 121st ordinary general meeting of 

Zurich Insurance Company 

on Wednesday, June 22, 1994, at 10.00 am, 

in the KongresssaaJ, entry K, Zurich Kongresshaus, Claridenstrasse 3, 8002 Zurich. Doors open at 9.00 am. 


Agenda 

1. Approval of the annual report, the annual financial state- 
ments and the consolidated financial statements for 1993, 
cognizance of the auditors 1 and group auditors' reports. 

The board of directors proposes that the annual report, the annual financial 
statements and the consolidated financial statements for 1993 be approved. 


2. Utilization of available earnings for 1993 
Annual profit for 1993 
Profits brought forward 
Available earnings for 1993 


Sfr. 319,013,539.- 
Sfr. 12,847,167.- 
Sfr. 331,860,706.- 


The board of directors proposes that these shall be utilized as follows: 


— transfer to the free reserve fund 

— payment of a Sfr. 20.- dividend for the 1993 
financial year on each of the 9,094,929 dividend - 
paying shares (nominal value Sfr. 50.-). 

Payable from June 24, 1994, less a 35% deduction 
for Swiss withholding tax 

— undistributed profit carried forward 


Sfr. 140,000,000.- 


Sfr. 181,898,580.- 
Sfr. 9,962,126.- 
Sfr. 331,860.706.- 


If this proposal is approved, dividends of Sfr. 13.- net (after deduction of 
withholding tax) will be paid free of charge from June 24, 1994 upon presen- 
tation of coupon number 2 in the case of bearer shares, or a dividend pay- 
ment order in the case of registered shares. 

3. Release for members of the board of directors and 
other executive bodies 

The board of directors proposes that members of the board of directors and 
the executive bodies be released from liability for their activities in the 1993 
financial year. 

4. Elections 

4.1 Board of Directors 

The terms of office of Vreni Spoerry-Toneatti and K. as par Cass an i expire at 
the next general meeting on June 22, 1994. 

The board of directors proposes that Vreni Spoerry-Toneatti and Kaspar 
Cassani be elected for a further four-year term of office as members of the 
board of directors. 

4.2 Auditors and group auditors 

The board of directors proposes that Schweizerische Treuhandgesellschaft- 
Coopers & Lybrand AC, Zurich, be elected as statutory auditors and group 
auditors for the 1994 financial year. 

Business report 

The business report, with the annual report, annual financial statements and 
the consolidated financial statements for 1993, and the auditors' and group 
auditors’ reports will be available for inspection at the company domicile 
(reception desk, Mythenquai 2) from May 30, 1994. All shareholders may 
request that a copy of the business report be sent to them (contact address: 
Zurich Insurance Company share register, P. O. Box, 8022 Zurich). An order 
form is enclosed with the invitation sent to all registered shareholders 
entered in the share register as shareholders with the right to vote. 


Invitations, admission cards 

Registered shareholders entered in the share register on June 10, 1994 as 
shareholders with the right lo vote will receive the invitation together with a 
registration and order form, which they may use to order admission cards and 
voting papers from Zurich Insurance Company share register. P.O. Box, 
8022 Zurich. By returning this promptly (by June 13, 1994 at the latest), 
shareholders help to ease preparations for the general meeting. No entries 
conferring voting rights will be made in the share register in the period from 
June 11 to the end of the general meeting. 

Shareholders who dispose of their shares before the general meeting are no 
longer entitled to vote. If some of the shares recorded on the admission card 
are sold before the general meeting, this admission card should be corrected 
before the general meeting, at the information counter. 

Bearer shareholders should collect their entry cards by Friday, June 17, 1994, 
at the latest, against deposit of their shares until after the end of the general 
meeting, or against presentation of an appropriate deposit certificate with a 
restriction note. The entry cards should be exchanged for admission cards 
with voting papers at the information counter by the admission gate. Entry 
cards may be obtained from the share register at the company’s office 
(Mythenquai 2, 8002 Zurich), from the bank where their shares are deposited 
or from a Swiss office of one of the following banks: 

Credit Suisse 

Swiss Bank Corporation Union Bank of Switzerland 

Bank Leu Ltd. Cantonal Bank of Zurich 

Proxies, authorization 

Bearer shareholders may arrange to be represented by any other shareholder 
with voting rights, while registered shareholders may only be represented by 
a person entered in the share register as a shareholder with the right to vote. 
However, partnerships and legal entities may be represented by signatories, 
minors and wards by their legal representatives, and married shareholders by 
their spouses, even if these representatives are not shareholders. Alterna- 
tively, shareholders may be represented by one of the following: 

- Zurich Insurance Company 

- a bank or other professional asset manager acting as proxy for deposited 
shares as specified in article 689d of the Swiss Code of Obligations 

- ATAG Ernst & Young AG (Andreas Keller). P. 0. Box, 8022 Zurich, acting 
as independent proxy as specified in article 689c of the Swiss Code of 
Obligations. 

These proxies will exercise their votes in favour of the proposals made by the 
board of directors, unless expressly instructed otherwise. 

The appropriate proxy authorization should be granted by signing the authori- 
zation section of the registration and order form, or of the admission or entry 
cards, and writing on the form or card such instructions as may be appro- 
priate. Proxy authorizations on the registration and order form should be sent 
to the share register, while those on the entry or admission form should be 
handed to the appropriate representative (together with the voting papers in 
the case of the admission form). 

Proxy holders of deposited shares are requested to notify the company the 
number, kind and par value of the shares which they represent as soon as 
possible, at the latest however by June 21, 1994. 


Zurich, May 26, 1994 


The Chairman, F. Gerber, 
on behalf of the board of directors 
Zurich Insurance Company 


Hydro-Quebec up 
23% at C$643m 


By Robert QBib«n» In Mo ntr e al 

Hydro-Quebec,ooe of Canada's 
two biggest electric power util- 
ities earned CS645m 
(US$465 An) in the first quar- 
ter, up 23.7 per cent from a 
year earlier, as harsh winter 
weather boosted domestic and 
export demand. 

Electricity sales rose 8.4 per 
emit by volume and revenues 
&2 per cent to C$&3bn. Sales In 
Quebec rose per coot by vol- 
ume and revenues by 6.4 per 
cent. A rate rise generated an 
additional C$32m in the latest 
period. 

Revenues from power 
exports, mainly to the US, 
but also other provinces, 
were up 4.4 per cent to 
C$i44m. 

Spending rose 3J3 per cent 
largely because new generat- 
ing and transmission equip- 
ment came on stream, increas- 


ing depredation and amortisa- 
tion. _ 

Tight controls heW operating 
opals steady, while taxes were 
up 7 A per cent The utility cut 
staff, ’controlled overtime 
strictly and began a pay freeze. 

HydroQuebec, TOO per cent 
owned ter the Quebec govern- 
ment. Invested C$639m in the 
quarter, Aram from CSTSSm a 
year earlier. Total investment 
in 1984 will be C$3.86bn, 
against C|4bh last time, mostly 
for James Bay hydro expansion 
and for the distribution sys- 
tem. Many large projects are 
searing completion. 

The utility arranged a C$lbn 
global issue and total 1994 bor- 
rowing will be almost C$3hn. 

Cancellation of a US export 
contract to take effect In 1999 
will not affect the utility’s con- 
struction programme. An exist- 
ing 800 MW contract may be 
extended beyond 1998 expiry. 


Russian carmaker 
secures $100m loan 


By Ctuystia Rwefamd 

Avtovaz, the Russian carmaker 
which produces the Lada, yes- 
terday signed a SMXkn medium- 
term loan facility from Stan- 
dard Chartered Bank. The loan 
is the third Avtovaz has negoti- 
ated with western basks over 
the past year, bringing its total 
western borrowing to $3S0m. 

Avtovaz, which produces 
some 7 per cent of Russia's 
GNP, was the first Russian 
manufacturer to borrow 
directly from western banks 
without Russian government 
guarantees. 

Yesterday’s loan is a seven- 
year revolving facility and is 
secured against Avtovaz’s 


Mr Nikolai Glouchkov, dep- 
uty. general -director of Avto- 
vaz, said high inflation and 
interest rates in Russia compel 
domestic companies to seek 
western financing for medium 
or long-term infrastructure 
projects. 

The transaction was struc- 
tured and arranged by Euro- 
pean Capital, a UK merchant 
bank. 

Standard Chartered Bank is 
providing $i00m to LM Interna- 
tional Finance, a private Lux- 
embourg company, jointly 
owned by Avtovaz, Manual 
Corporation, a private Middle 
Eastern company, and Avto- 
vazbank. LM International 
Finance will then tend the 
money to Avtovaz. 


Finex Europe launch date set 


By Antonia Sharps 

Finex, the financial futures 
and options division' of the 
New York Cotton Exchange, is 
due to launch its European 
fi nan cial futures trading facil- 
ity in Dublin on June 17. mark- 
ing the first time that, an 
exchange operates a comple- 
mentary trading floor outside 
its home country. 

The la unch of the European 
trading floor, located in the 
recently -opened exchange facil- 


ity in Dublin’s International 
Fframctal Services Centre, will 
cotndde with the introduction 
of currency cross-rate (D-Mark 
based) futures mid options and 
dollar /D-Mark futures, which 
will be traded around the clock 
in NSw York and Dublin. 

Finex has sold more than 75 
Finex Europe permits at 
$10,000 each. The mate buyers 
have been Euro pean finanriai 
institutions and futures bro- 
kerage operations in London, 
Chicago and New York. 


^ KOLON INTERNATIONAL COUP. 

(fi i re r p o.o»cti»icft.B q p i^ acqf'fl«TP b«Wi (i n atif 

Notice 

to the holders of the outstanding 
U.S. $20,000,000 
1% Convertible Bonds due 2008 

(tha ’BondB*) 

Of 

Kolon International Corp. 

(the ‘Company') 

Notice is hereby given to the hoWera of the Bonds that the Board of Directors 
ot the Company by a resolution dated April 28. 1994 auffioriaed ihe issue of a 
domestic Convertible Bonds of Won SjroaooqQOQ orvMay 9,1994. Pursuant 

to the provisions of tha TVusJ Deed constituting the Bon*, fta Conversion 
Price of the Bonds has been adjusted result ot the OomertcCowwttte 
Bonds Issue from Wfao 16.050 to Wton 16.026 ettecOw May 9. 1994. 

The Chase Manhattan Bank, NA. 
tar and on behalf of 

Kokin International Corp. ■■ 


CHASE 


CS First Boston Group 

CS First Boston 
Finance, B.V. 

(lonMTty eSrt Aunre SV ) 

US$200,000,000 
Guaranteed subordinated 
floating rate notes 2003 

Notice is herebygioen that far 
(fie interest period 26 May 1994 
to 28 November 1294 the notes 
will carry an interest rate of 
S.87S a iperannim. interest 
payable on 2S November 1994 
will amount to USS30.3S 
per ItSSl.OQQ note and 
USS3QlS4perUSSIO.aOO 
note and USS3.035.42 per 
USSmOOOnote. 

Agent: Morgan Guaranty 
Trust Company 

JP Morgan 


IIIIIIIIII1II1IIIIIII1IIII 

m 

NORmawiiogr 

MBBUUftJGSOGEiyn 

£100,000,000 

Floating Rate Notes 1994 

In accordance with the 
pwaicna of the Now, aodee a 


period 24dt May, ISM 
» 24th Aogm, 19SM the Nous 

will bear ortacat at the (*H 
of 5 Vi per cent, per aiMSm- 
Coupon No. 9 will therefore be 
payaUe on Auguu, 1994 at 

£1,354.79 pet coupon f«w . 

Note* of £100,000 nominal «d 
£l 35.41 per co u p on from Nowa 
of £10,000 nomfaL 


S.G. Warburg & Co. Ltd. 
A$*nlBenk 

llllllllllllllllllllllllll 



21 




FINANCIAL TIMES THURSDAY MAY 26 1994 

- INTERNATIONAL COMPANIES AMP FINANCE 



’ J >- 


Kumagai Gumi hit by investment 


By WHtam Dawktnu 

Tokyo 

Kumagai Gumi, the inter- 
nationally ambitious Japanese 
property developer and con- 
struction company, yesterday 
reported a 20.56 per cent 
decline in taxable profits and 
forecast worse to come. 

Taxable profits, which have 
been bit by an unprecedented 
long decline in capital' 
investment by Kumagai Guro- 
vs Japanese industrial custom- 
ers, fell to Y23~56bn ($224J8m) 
in the year to March, from 


Y23.65bn in the previous year,. 

Net profits fell even more 
steeply, after a higher-than- 
forecast Y33.56bn extraordi- 
nary loss on the cost of puffing 
out of poorly performing pro- 
jects in Europe and Asia and 
the reorganisation of Hs south- 
east Asian businesses. 

This brought net earnings 
down by 88 per cent over the 
year to YLDSra, or YL6 per 
share, from Y13f» per share to 
the previous year. As a result 
Kumagai Gumi was obliged to 
slash its dividend from Y9 to 
Y3 per share. Directors, conse- 


quently, have given' up their 
bonuses. 

The result hi g hli ghts the 
twin problem faced by several 
leading Japanese contractors, 
faced with a weak home mar- 
ket and losses on overseas 
developments undertaken dur- 
ing the fast growth in asset 
prices of the late 1980s. 

Kumagai Gumi’s formerly 
dwindling stock of new orders 
recovered slightly over the 
year, by 1.7 per cent to 
Y865.5bn. This was entirely 
due to a 10 per cent rise in 
public sector orders, respond- 


ing to the government's peddle 
spending packages. Civil engi- 
neering contracts from the pri- 
vate sector dipped, the .group 
said. 

Sales tell by ZL9 per cent to 
Y842bn. doe to a sharp decline 
in orders for office property 
and industry hufldtags ami are 
expected to decline again this 
year, to YB40bn, 

AS this Indicates that pre-tax 
profits will faS by 36-3 per cent 
to Y15bn in the current year, it 
warned. 

Moreover, the, group plans to 
seS another Y50bn of overseas 


decline 

holdings, reducing the total to 
Y44Qbn> on which it expects to 
book a Y23bn extraordinary 
loss. 

Accordingly, net earnings in 
the current year to next March 
are forecast to tell by 8 per 
cent to Yibn. 

Of last year’s Y3S.56bn 
extraordinary loss. Yl0.7bn 
comes from the sale of Thames 
Exch ange in London, to Scot- 
tish Amicable, a UK insurance 
and investment group. 

Another Y6bn was due to the 
sale of a stake in a Frankfurt 
property developer. 


Sharp first-half improvement at ANZ Banking 


By Ntkld Taft 

Australia and New Zealand 
Banking Corporation, one -of 
the big four Australian banks, 
yesterday reported a sharp 
improvement in first-half oper- 
ating profits after tax but 
before abnormal Items, at 
A$863Am (US$267.7m). 

This figure compared with 
A$1 70.3m in the same period of 
the previous year, and 


A$289.4m in the following six in the domestic economy 
months to end-September. to declining bad and doubtful 
Aft er abnonnals, profits debts, 
were unchanged in the most The profit levels we are 
recent period, although they back to are reasonable and 
were reduced to AS72.lm in the respectable, although that’s 
corresponding period of the not to say that there won’t be 
previous year. farther improvement,'* said Mr 

. Like National Australia Don Mercer/ANZ’s chief execu- 
Bank and Westpac, which five, yesterday- 
reported interim figures last ANZ’s net interest income in 
week, ANZ attributed the the six months was A|L3Sbn, 
improvement to the recovery up from A$L23bn in the previ- 


ous year. Other operating 
income rose from A95L8m to 
Alzbn, while operating 
expenses increased by 8J3 per 
cent, to AX1.58bn. Specific pro- 
visions for bad doubtful 
debts fell from Af377.4m a year 
ago, to A$22k5m, and ANZ's 
total non-accrual loans by end- 
March stood at AS&B&m, com- 
pared with A*L89m a year ear- 
lier. 

This left operating profit 


before tax at AJ570.8m, up 
from A$243Jm a year ago. On 
a ■ divisional basis, ANZ 
reported good profits growth 
from its Australian and inter- 
national operations. Profits in 
New Zealand declined, how- 
ever, due to a competitive 
squeeze on .roa i- ffrnq. although 
Mr Mercer said that the perfor- 
mance in that country had 
been “very solid” under file cir- 
cumstances. 


Carlsberg 
posts 5% 
interim rise 

By HSary Samos 
n Copenhagen 

Carlsberg, the Danish brewer, 
increased first-half pre-tax 
profits by 6 per cent to 
DKr73lm (9113m) in the six 
months to March 31, compared 
with the year-ago figure of 
DRxttKm, but warned that the 
improvement might not be 
maintained in the second half. 

The group attributed the 
improvement to better-than- 
expected performances by sev- 
eral of its breweries. However, 
Carisberg-Tetley, its joint ven- 
ture In the UK with Allied 
Lyons, was hit by faffing beer 
consumption and a small loss 
of market share. 

First-half group sales were 
ahead by 8 per cent to 
DKr7.87bn. 

Carlsberg said that exten- 
sive restructuring plans were 
on schedule aid would result 
in operating economies In 
coming years, which would 
more than affect depreciation 
and interest in the Invest- 
ments. 


Ansett helps TNT 
maintain its rally 


By Nikki Taft 
fin Sydney 

The turnround at TNT, the 
Australian transport and deliv- 
ery services group, has contin- 
ued in the third quarter, allow- 
ing the company to post an 
operating profit before abnor- 
mal items of A$2&9m (¥2L26m) 
on an equity consolidated 
basis, for the nir^ m ont hs to 
end-Marcb. 

This compares with a loss of 
A$4L5m in the same period of 
1992-93. Revenues during the 
period reached AJUJWbn, com- 
pared with A*4.07bn a year 
ago. The equity-consolidated 
operating profit before tax was 
A$KH3m, up from A$4-2m In 
the first nine months of 

1992-93. 

TNT said yesterday that the 
progress was largely due to 
improved earnings at Ansett, 
the Australian afr-Hn» which it 
owns jointly with Mr Rupert 
Murdoch’s News Corporation, 
and reduced losses from its GD 
Express Worldwide joint ven- 
ture, the international express 


delivery business formed by 
TNT and a consortium of over- 
seas post offices. 

On a consolidated basis - 
ignoring the impact of associ- 
ate companies - the picture 
looked less rosy: TNTs operat- 
ing profit before tax appeared 
to have increased only margin- 
ally, from A$28Rm to AJSten. 
But the company said that the 
1992-93 figure included “sub- 
stantial'' non-recurring profits 
and revenues resulting from 
TNT Leisure’s involvement in 
Expo '92 and the 1992 Olympic 
Games. It said that there was 
an underlying profit Improve- 
merit of A$19.7tn at the pretax 
level, once this factor was 
removed. 

TNT said that many of its 
operations, including those in 
Australia, North America, the 
UK and Germany, were seeing 
an improvement. The Italian 
business traded “in hue with 
expectations” and TNT Chran- 
oservice in France, continued 
to reduce losses. But Spain 
remained "disappointing*, 
with increased losses. 



’**in carmaker 

rw SI (Him loan 


iiN’-in 



:1 1 K\Ul^ 


CJf 







Viag forecasts a full 
recovery by year-end 


By NRchael Undemam 
hi DQsseMorf 

Viag, the German industrial 
conglomerate, yesterday said it 
was an the way to a frill recov- 
ery following a 19 per cent 
drop in group profits to 
DM302m ($188.27) from 
DM37im tiie year before. The 
dividend will remain 
unchanged at DM9. 

Mr Alfred Pfeiffer, chief exec- 
utive, said profits in the first 
quarter of tills year rose about 
33 per cent and were expected 
to grow, at the same level tec 
the year overall He said the 
group's industrial sectors, 
including aluminium and 
chemical units, were perform- 
ing particularly well 
Viag said it was “confident* 
it would win tiie bid far a data 
transmission contract, due to 
be awarded by the post minis- 
try later this month. 1 
In July the company will 
complete its takeover of Bay- 
emwerk, Germany’s third, larg- 
est utility, for which, it will pay 


NEWS DIGEST 

Poseidon Gold 
plans Aztec 
asset transfer 

Poseidon Gold, the 
Adelaide-based metals group 
which earlier this year won a 
A$287m (USJ2LL15) Ud battle 
for Aztec Mining, is proposing 
to transfer two of Aztec’s 
assets to Normandy Poseidon, 
Fosgokf s parent, in exchange 
for A$62.5m in cash, writes 
Nikki Tail 

The assets involved are a 20 
per cent interest in the Golden 
Grove joint venture project, 
and full ownership of the 
Woodcutters zinc mine, south 
of Darwin. Posgold had said it 
was putting the assets up for 
auction, but yesterday 
announced no outside bidders 
had emerged for Golden Grove 
and only one other interested 
buyer of Woodcutters. 

Carter Holt ahead 

Carter Holt Harvey, the for- 
estry group which has Inter- 
ests in New Zealand and Chile, 


the Bavarian government 
DM5-515bn, including a cash 
payment of DMZ3ba 

Viag said the deal was "not 
cheap”, but “still pretty attrac- 
tive’' given Bayemwerk’s 
annual pre-tax profits of about 
DMtim and the high liquidity 
of the electricity generation 
business. The takeover of Bay- 
emwerk will increase group 
turnover to about DM40bn, 
moving Viag Into the top 10 
German companies in sales 
terms. 

Mr Pfeiffer said the company 
would still consider acquisi- 
tions to its filwHiiwilii 

unit but this would ondy hap- 
pen once Bayemwerk had been 

fully consolidated. 

. Group turnover in 1993 tell 
two per cent to DM23. 7bn, from 
DM24L3bn the year before, due 
to losses in the aluminium and 
packaging operations. The 
company has spent DM12Qm an 
redundancy costs for about 10 
per cent of its worirfbree and 
said it would shed a further 
4/MO jobs tiria year. 


yesterday reported a 34 per 
cent rise in tax-paid profits to 
NZ$325m (US$191.16m), 

reflecting cost-cutting and effi- 
ciency measures over the past 
12 months, writes Terry Hag 
in Wellington. 

The chief executive, Mr 
David Osktn, 

said that during the com in g 
year the company intended to 
extend Its operations into off- 
shore markets in Australia, 
Asia and South America and to 
take aim to become a leading 
force within the Pacific Rim 
area. 

Operating earnings before 
interest and tax rose 55 per 
emit to NZ$368nu 

Turnover was NZ$2,478m, 
against NZ$2,460Lm a year ago, 
and tax was NZJSOrn, up from 
NZ$19m. 

International Paper of New 
York manages Carter Holt Har- 
vey and is the biggest 
shareholder with 24 per 
cent 

In March, Brierley Invest- 
ments effectively wound down 
the joint venture which con- 
trolled the company by selling 
International paper an 8 per 
coot stake. BIL retains 7 per 
cent. 


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PARAMOUNT PX.C. 

(Ittcaporaud in England and Wda Ntti 193*366) 

Introduction to the Official List sponsored by Stew &. Co Limited 
Rights Issue of up to 65,806,521 new ordinary 
shares of 2.5p each at 9p per share 
and 

Proposed Acquisition of licensed premises from 
Greenalls 


» Panmwai Creep U prtacipoDy 

seagii in Dcxnsedaoce wWchi* looted pnabndautOy ui the North We« of 
■Cland.- North Wdei and *e We« Wdtanda. 

Stan eretel fetoHdktelr feltoMftR ito R%te >Me 

• AMtmtiaJ tawed and ropy paid 

Number Amman 

.000.000 3,7SOJ>DO On&UKy ihaiei of iSp each 1 16,057.488 2JJ0I.437 
00.000 1 1.403,000 Preference abarea of £1 eadb 1,400000 £1^00.000 

win, on admWod to EsiBg, 

shales o( the Company 
dedaied, macta or 

pfei of to UstaK Ptadratai dmed 25tb Mv S 9W i»y b« obtained «ta^n««d 
laxss toaxaaf&b md 27th May JWd from *c Conyaaaa ABno unOR rocaas 
la, awA r>rhimrr Tower C<wd Court entrance, off Bartholomew Lane. 

MO i* daring on any 

efcday (Satadap exceptod) up B> and mdodirtS 10* loat 1 99* mm.— 



Shaw ft Co. Ltated 
4 Loottao WM) BuSWoga, 

BkmAeU Sheet, 
LniwGC2M2NT 

Dated Hth May 1994 


Parmaotart P.L.C. 

St Wertangb Chataba*. 

Chester 

CHI 2EP 


Just A Recent Example 
Of Our Performance 
In The Eurocapital Markets. 




t 

















22 


12 



Ail qf these securities having been sold, this onzimmcernent appears as a matter of record only. 


Off 


Banco O’Higgins 

4,956, 771 American Depositary Shares 

Representing 

29, 740,626 Shares of Common Stock 


1,350,000 Shares 

This portion of the offering was offered outside the United States and Canada by the undersigned 


MORGAN STANLEY & CO. 

International 

CREDIT LYONNAIS SECURITIES 


CS FIRST BOSTON JAMES CAPEL & CO. 

LATINVEST SECURITIES LIMITED UBS LIMITED 


3,606,771 Shares 

This portion of the offering was offered in the United States and Canada by the undersigned 


MORGAN STANLEY & CO. 

htmrptraUA 

DONALDSON, LUFKIN & JENRETTE 

SeeariUn Corporation 

LEHMAN BROTHERS 
OPPENHEIMER & CO., INC 
SALOMON BROTHERS INC 
ARNHOLDANDS. BLEICHROEDER, INC. 
INTERSTATE/JOHNSON LANE 

Corpora t ion 

CJ. LAWRENCE/DEUTSCHE BANK 

Securities Corporation 

McDonald & company 

Seeuritko, Ine. 

May 19 % 


CS FIRST BOSTON 

A.G. EDWARDS & SONS, INC. GOLDMAN, SACHS & CO. 

JJP. MORGAN SECURITIES INC. 
PRUDENTIAL SECURITIES INCORPORATED 
SMITH BARNEY SHE ARSON INC. 
SANFORD C. BERNSTEIN & C0. t INC 
JANNEY MONTGOMERY SCOTTINC. 
LEGG MASON WOOD WALKER 

Incorporated 

WHEAT FIRST BUTCHER SINGER 


Redemption Notice 

Cookson Finance N.V. 

5%% Guaranteed Redeemable 
Convertible Preference Shares due 2004 
guaranteed on a subordinated basis by, and 
convertible into Ordinary Shares of, 

Cookson Group pic 

Nodes Is hereby given that pursuant to Che Articles of Incorporation of Cookson 
Finance N.V. (the issuer! constituting the 554% Guaranteed Redeemable 
Converflbfa Preference Shares due 3004 (the ■Preference Shares!, the Issuer 
elects to redeem on 26th June. 1904 afl outuarafng Preference Shares In reaped 
of wHch no notice of redemption or nodes ol conversion has been received by any 
Paying Agent named below prior to the dose of business in llte relevant plaice ot 
detvery on 21st May, W94. In the case of a noflea of redemption or 19th Jime, 1994, 
hi the case of a notice of conversion. 

The Issuer will redeem such Prelerenoe Shares al a redempdon price etk«Mo their 
PekJ Up Value together with dividends accrued but unpaid » (hut excluding} 2Mi 
June, 1934. The Paid Up Value of eadi Preteranca Share is £1,000. 

Payment In respect of any amount payable on redemption of Ihe Pro terenca Shares 
wM be made against presentation and surrender ol Uu Preference Shares, m 
the case of Bearer neferenca Shares, together withal unrnatured coupons apper- 
latrtng thereto a! the apedfled office of any of the PSytng Agents named below 
and. m the case of Retfetarad Preference Shares, ai Ihe specified office of the 
Registrar or Tteitafer Agent named below. 

PRINCIPAL PAVING AGENT 
The Chase Manhattan Bank, NA 
Wooigate House. Coleman Street, London EC2P 2HD 

PAYING AND CONVERSION AGENTS 
Chase Manhattan Bank Chase Manhattan Bank 

Luxembourg S. A. (Switzerland} 

5 Rue PtaeUs 63 Rue du Rhone 

L-2338 Luxembourg CH-1204 Geneva. Switzerland 

Banque Bruxelles Lambert SLA. 

24 Avenue Mambc, B-1050 Brussels. Belgium 


REGISTRAR 

The Chase Manhattan Bank, NA, 
4 Chase MetroTech Centre 
Brooklyn, 

New York. NY 11245 


TRANSFER AGENT 
Chase Manhattan Bank 
Luxembourg SJL 
SRuoPlaetto 
L-233S Luxembourg 


For end on behalf of Cookson Finance RV. Pnnlrcinn 
By: The Chase Manhattan Bank, NJL IjUUKSUIJL 
London, Principal Paying Agent 


Cookson Group pte 


26th May, 1994 


Notice of Redemption 

Sakura Finance Australia Limited 

ftorwriy Muati THye Kobe 4j«aJu UnAxB 

U.S.5 5 0,000,000 

Guaranteed Floating/Fixed Rate Notes due 2001 

In accordance with Paragraph 6{Q of the Terns and Conditions of ihe Notes, 
notice is hereby given that the Issuer will redeem the above-mentioned 
Notes on 20th lune, 1994 at their principal amount- 
Payment of the principal and of the interest due on 20th June, 1994 will be 
made In accordance with the Terms and Conditions of the Notes. 

Interest on the Notes will cease to accrue as from 20th June, 1994. 

SAKURA TRUST INOERNAnONALUMmO 
Fiscal Agent 


26th May, 1994 


Signal 


O 1SK software appScatior* O 
P RT DATA FROM *10 A DAY O 
O Spot SOFTWARE GUIDE O 
Cal London S 44 +■ (0) Tl S3t 3596 
tor your taida and annul price tet 





ECU Tur n ** —I PIC 

» C hrehw.P teo, 

London awiXBHL 
Tw:*n MBQoaa 
hc+nisan 


- UTU'fl = s options on OK 


C'.CCi.li.lS’-N -Nil 




ISSUE OF UP TO US 5 600,000,000 

BANQUE FRANQAISE DU COMMERCE EXTER1EUR 

FLOATING RATE NOTES DUE 1996 
OF WHICH US $ 350,000,000 IS BEING ISSUED 
AS THE INITIAL TRANCHE 

In accordance with the provisions of the above mentioned 
Floating Rate Notes, the rata interest for the period May 24, 1994 
to November 24, 1994 has been fixed at 4.73% per annum. 

The interest payable will be USS 1,208.78 per note of 50,000 and 
US$ 6,043.89 per note Of US$ 250,000. 

Fiscal Agent 

BANQUE INTERNATIONALE Bii 
A LUXEMBOURG - " 


W 


COMMERZBANK OV ERSEAS FINANCE N.V. 
U-S.S 200,000,000 Floating Rate Notes 
of 1993/2005 

In accordance with the provisions of the Notes the following notice 
Is hereby given: 

Interest Period: May 23, 1994 to November 23, 1994(184 days) 
Interest Rate: 5 % p-a. 

Coupon Amount: U.S-S 127.78 per U-S-S 5,000 Note 
U.Sk 2J5B5J5B per U.SJI 100,000 Note 
Payment Date: November 23, 1994 


Frankfurt/Maln, May 1994 

COMMERZBANK 


SAMMK STEEL CO- LTD. 

(Inanpomud ta rtf Republic of Korea trim limited liability} 
Notice to tteWamathoUtn of the outstanding 


IK per cent. Bonds doe 1994 with Warrants 
to subscribe for Non-voting Shares of SammJ Steel Co, Ltd. 

NOTICE ES HEREBY GIVEN to the Wamnlh^dcn dui on 28th April, 

1994, the Company has authorised the issuance of Bonds (W3 Billion) 
convertible into Common Shares of the Company. The issue date waa 9th 
May, 1994 and the initial conversion price was set at W6,900. 

The consfakradon per Common Share receivable (W6.900) by the 
Company from the iseae Is tegs than the current market price (determined 
in a cco rdance with the provision of dm Instrument wimritnUni, the 
Warrants) at 28ih April 1994, which was W8.T89. 

Aecocdingly, in accordance with the provision of dm sakl Instrument, the 
ousting subscription price of W43.9I0 has been adjusted with effect 
from 7tfa May, 1994, to W43.830. 


May 26th, 1994 


Saamtl Steel CtK, Ltd. 


East Investment Fund 

Fond* common de placement 
(in liquidation) 

Upon decision of the Board of directors of East Inv es tment Fund 
Management Company S.A., acting as Management Company to 
East Investment Fund (the «Funa»), and with the approval of 
Kredietbank S.A. Luxembourgeoise as Custodian, the Fund was 
put into liquidation on 5th May, 1994. 

East Investment Fund Management Company S.A, with its regis- 
tered office at 1 1, rue Aldringcn, Luxembourg, has been appointed 
as liquidator. 

The Liquidator 


FINANCIAL TIMES THURSDAY MAY 26 1994 

INTERNATIONAL COMPANIES AND FINANCE 

Sankyo ahead in doll drugs sector 


By EroSko Tarazooo 
in Tokyo 

Japanese drugs companies saw 
sluggish profits for the year to 
last March, due to a tall in 
sales of antibiotics as the 
number of flu patients in the 
second half feU sharply from 
the previous year. 

A steep fall in purchases 
ahead of the price cuts 
implemented last month by 
the ministry of health and 

welfare also affected sales 
during the six months to 
March. 

Taknte Chemical Indus trios 
said unconsolidated sales fell 
in ail units except Its overseas 
medical drug division. 
Opeating profits rose 5J per 
cent to YBSBbn ($63Sm), due to 
a YL9bn cut in advertising 
expenses and a foil in prices of 
raw materials. 

However, a fall in financial 
items hurt pre-tax profits and 
aftotax earnings rose 17.3 per 
cent to Y37bn. 

Sankyo posted a firm 
nan- consolidate d earnings rise 


Jspsmte drugs ootqmlei results 199344 (Yto] 

Company 

8*. 

Change 

(ft) 

Pre-tax 

preflt 

Chaogn 

(ft) 

Tatecta 

S61.6 

•OA 

773 

4X4 

Sankyo 

386.7 

-OB 

80.4 

♦14J 

SNonotf 

2302 

-3.6 

33b 


Yamanoudrt 

2508 

**e 

84.4 

-*A 

Fufsewa 

334,9 

4L5 

HL9 

■tSL3 

Mnm Cimi**V nsMi 


on the back of profits from 
Mevalotin, its antlhyper- 
lipedemlc. in spite of an overall 
sales decline due to the 
transfer of its antiallergic 
cures to Sandoz. After-tax 
profits rose 30.6 per cent to 
rasbn. 

Parent sales at Shhmogl 
declined due to a fall In 
antibiotic sales, but earnings 
rose thanks to cost cutting and 
streamlining Its management 
personnel. After-tax profits 
rose 225! per cent to YlOSbn as 
a result of a fall in corporate 
taxes. 

Yamanouchi's sales were 
supported by strong demand 
for its stomach ulcer drugs. 


However, the foil in financial 
Income due to lower interest 
rates depressed pre-tax profits. 
After-tax profits rose 1A per 
cent to Y27.6bn. 

Earnings at Fujisawa ware 
hit by the decline In antibiotic 
sales and sluggish exports due 
to the string yen. Net profits, 
however, soared 71.8 times to 
Y 100 bn due to sales of lte 
product rights and stake In 
Fujisawa- Astra, the Joint 
venture with Astra, the 
Swedish drug group. 

For the current year to 
March, the companies face a 
squeeze on sales and profits 
due to the government's 
official drug price cuts. The 


amowxtof drufs prescribed b 

likely to be hit due to stricter 
UmlU os consultation foes 
reimbursed to doctors by the 

h«rtlr wrttrf«tw . 

Mr YoebthWe Yoda. 
phannacacttcal analyst atDBS 
Securities, forecasts a 5 per 
cent feS la pretag profits for 
the industry, white the aba of 
the market to expected to grow 
by 2 per cant 

Tofceda forecasts a 6.7 per 
cent feU in pretax profits 
white salet are expected to 
remain almost unchanged at 
Y56Shn, Sankyo sees pre-tax 
profits rising M per cent to 
YBSba on a flat growth In sates 
to YS96bn.: 

Shhmogl eomects earnings to 

fell tea par cent to rafifcn on 

a 2.7 par cent dectioe In sates 
to YXHbn and Yananouchi 
predicts earnings to remain 
almost fiat at YStdta cm a 2 
per cent . rise In sales to 
Y* Rm. 

Fujisawa forecasts a aa per 
cant rise to pretax profits to 
YIBbn cm a 8.3 per cent rise In 
sales to Y227bn. 


Kanebo 
chiefs step 
down after 
losses rise 

By Mlchiyo Nakamoto 
in Tokyo 

Both the president and 
chairman of Kanebo, the Japa- 
nese cosmetics- to- textiles com- 
pany, are to resign their posts 
following a much larger pre- 
tax loss and lower sales In the 
1993-94 year compared with a 
year earlier. 

The company said the two 
were taking responsibility for 
the company's poor perfor- 
mance last year and its deci- 
sion to pass its dividend. The 
moves were aimed at winning 
employee co-operation for 
wide-ranging restructuring 
plans the company is likely to 
adopt in an effort to return to 
profitability. 

Both men will stay with the 
company. Mr Masao Nagata, 
president, replaces Mr Kazu- 
tomo Ishizawa as chairman. 
Mr Ishizawa becomes honor- 
ary adviser. The senior manag- 
ing director, Mr Soichi Ishi- 
hara, becomes president. 

Kanebo suffered an 18 per 
cent drop in unconsolidated 
sales to Y418LSbu ($4bn), from 
a previous Y510.1bn, in the 
year to March 1994, Pre-tax 
losses ballooned to Y6.7bn 
from Y4.5bn, and the company 
fell into a net loss of Y3.7bn 
compared with a net profit of 
YL6bn in the previous year. 

Sales had been depressed by 
the weakness of the Japanese 
economy with sales of textiles 
particularly hard hit by slow 
consumer demand for clothing 
since the Japanese economy 
plunged into recession. 

Sales of textiles, which make 
up about 45 per cent of overall 
sales, dropped 22 per emit as 
the company was also hit by 
cheaper imports from Asian 
countries such as Pakistan, 
Korea, China. 

The pharmaceuticals and 
new materials businesses held 
np but cosmetics, which 
accounts for 37 per cent of 
sales, made a loss. Foods, a 
smaller business for Kanebo, 
fell 57 pm* cant 

Efforts to restructure the 
business area muter way. The 
company has introduced cost 
redactions, is keeping a lid on 
new recruitment and moving 
production overseas In a bid to 
improve profitability. 

Kanebo forecasts higher 
sates in the current year at 
Y420hn, and larger pre-tax and 
net losses of Y9.8bn and 
Y7.8bn respectively. 


Japan Tobacco 
bucks trend 
with 10.9% rise 

By WIHbam Dawkins 

Japan Tobacco, the 
state-owned cigarette group 
aiming for privatisation this 
year, yesterday bucked the 
trend of a grim results season 
and reported a sharp rise In 
annual profits. 

Taxable profits at the group, 
the world’s third-largest 
tobacco company, rose by 10.9 
per cent to Yll0.45bn 
(Sl.Odbn) in the year to the mid 
of March, mainly due to cost 
redactions, on sales up by L6 
per cent to Y3,462bn. 

The small Increase in turn- 
over reflects the fact that 
Japan’s tobacco market, where 
Japan Tobacco holds an 83 per 
cent share, is mature. Bat the 
group has lowered its 
break-even point by cutting 
staff and reducing the number 
of outlets In a re st r u c t uring 
programme which began in 
1985. 

However, pretax profits for 
the current year are expected 
to stagnate at around YllOtra, 
said the group, on sales up 
slightly to YSjSOObn. 


Tepco surprises with profit rise 


By Gerard Baker 
In Tokyo 

Tokyo Electric Power (Tepco). 
the world’s largest private sec- 
tor electric utility company, 
reported a slight increase in 
pre-tax profits for the year to 
March 31. Unconsolidated pre- 
tax earnings were Y159.9bn 
(SLSbn), up 1 per cent on the 
previous year, on turnover 
higher by 0.4 per cent at 
Y4.721bn. 

The figures surprised ana- 
lysts. who had expected a diffi- 
cult economic and regulatory 
environment to be reflected in 
lower earnings. Lost autumn, 


Tepco was required by the gov- 
ernment to cut Its charges to 
offset windfall gains caused by 
the appreciation of the yen. A 
large proportion of the compa- 
ny's costs are oil imports, 
which foil in price as the yen 
rose, and Tepco’s tariffs were 
reduced by an average 1.6 per 
cent 

Higher demand brought an 
by a cold winter partially offset 
the Impact of lower prices, but 
the overall effect was to 
depress operating profit by IS 
percent 

However, sharply lower 
interest rates boosted earnings 
at the pre-tax level. Like 


most, utility companies, 
Tepco carries a heavy debt 
burden, and the steep fall 
in the cost of borrowing 
throughout fee year cut Inter- 
est COstS- 

A company Spokesman said 
that debt service costa were 
around Y4bn tower than had 
been forecast at the half- 
year. 

The company expects a diffi- 
cult 1964. Last week the 
government announced that 
utility charges would be 
from for the coming year, and 
Tepco forecast a 12 per cent 
fell In pre-tax profits to 
YHDbn. 


Sluggish earnings for JR East 


By Emlka Terazono 

East Japan Railway (JR East), 
the semi-prlvatlsed railway 
group, posted sluggish earn- 
ings figures for the year to last 
March due to a decline in reve- 
nue from its passenger 
operations. 

Consolidated pre-tax profits 
fell 1.8 per cent to Y108.6bn 
($lbn), on a 0.4 per cent fall in 
the group's revenue to 


Y2,343.35bn_ Aftertax profits 
fell 62 per cent to Yfi&Tbn. 

The company said its pom* 
performance in the railway 
operations eroded the gains 
from sales increases in 
its kiosks, travel agent 
and real estate leasing 
division. 

On s nan-consolidated basis, 
JR East posted a 0.6 per- cent 
rise in pre-tax profits to 
Y1012hn thanks to a Y20bn foil 


In interest payments due to 
lower interest rotosTRevennes 
fell 0.3 per cent fall to 
Yl.974.35bn and aftertax 
profits fell 0.4 per cent 
to Y58.7TJU. 

For the current year to next 
March, the company expects j 
consolidated pretax profits to 
.remain almost flat, down OlB 
iper cent to YU&ftbn, on a 6.7 
per cent rise in sales to 
Y2£02£bn. 


NSK declines 20% to Y3.33bn 


By WHBam Dawkins 
In Tokyo 

NSK, Japan’s largest maker of 
ball-bearings, yesterday 
reported a 20 per cent foil in 
pretax profit for the 12 months 
to March, but forecast a slight 
recovery this year. 

The group had to sail securi- 
ties to keep its published earn- 
ings in the black, a technique 
used by many Japanese compa- 


nies to tide them through the 
longest decline in operating 
earnings since the second 
world war. 

NSK7s taxable profits fell to 
Y&33hn (432m). on sales down 
by 8.4 per cent to Y325.16bn. 
The pre-tax profit includes a 
Y7.3bn capital gain from secu- 
rities sales, said Mr Shunji 
Saigo, managing director. 

Sales of bearings and parts 
to the car industry fen by 9 per 


cent and demand from the elec- 
trical and Information equip- 
ment industry was poor, he 
said. 

Earnings rose from Y4.47 per 
share in 1999 to Y6.43 last year. 
The dividend is to be cat from 
an uncovered Y7 per share to a 
barely covered Y6 per share. 

hi the current year, NSK 
expects pre-tax profit to show a 
small recovery to Y&Sbn, on 
tales up to Y330bn. 


Wesfarmers offers 
A$275m for Bunnings 


By NUdd Tatt 
in Sydney 

Wesfarmers, the Australian 
diversified rural products and 
services group, yesterday 
announced a A$275m-plus bid 
for the outstanding 51.9 per 
cent which it does not already 
own of Bunnings, the Perth- 
based forest products, manu- 
facturing and merchandising 
company. The offer, which 
comprises a mixture of cash, 
shares and options, values the 
whole of Bunnings at more 
than A$S35m (US$394m). 

Under the terms of the bid, 
Wesfarmers Is proposing to 
offer AS22.60 In cash plus two 
of its own shares and an option 
to subscribe for one Wesfarm- 
ers share at A$liL50 by end-De- 
cember 1997, in exchange for 
every four Bunnings shares 
held. 

It noted that this represented 
a premium over the average 
Bunnings market price of 
AJ9.53 during the past month, 
and a "substantial increase” 


over the A83.55 a share offer 
which Wesfarmers made for 
Bunnings back In February 
1992. The news came after the 
stock market closed yesterday; 
Wesfarmers shares were down 
6 emits at A$9.34, while Bun- 
nings were 4 cents tower at 
AJ10J.6, 

Wesfarmers, which first 
acquired an interest in Bun- 
nings in 1987 and has had three 
board representatives since It 
raised its stake significantly in 
1992, said It believed that Bun- 
nings' future would "be 
enhanced fay being a wholly- 
owned member of the Wes- 
farmers’ group", although It 
would continue to treat Bun- 
nings as "an independent busi- 
ness unit" with its own corpo- 
rate identity. 

Wesfarmers' earlier offer for 
Bunnings, in 1992, was rejected 
by the target company. Last 
night, Bunnings reacted cau- 
tiously to the now bid, saying 
that the offer would be dis- 
cussed at a board meeting 
today. 


NSW State Bank sale 
details due in August 


By NHdd Tatt 

An announcement on the 
future of the State Bank of 
New South Wales, the fifth- 
largest bank in Australia 
and due to be privatised by 
the state government, will be 
made In August, according to 
state treasurer, Mr Pater Col- 
lins. 

He said that legislation, 
including the name of the bid- 
der and the sale price, would 
be put before the state parlia- 
ment in September. 

The sale Is proving trouble- 
some, with many of the inter 


ested bidders pulling out of the 
bidding In recent weeks. Only 
one name Is known to be left - 
Colonial Mutual, the insurance 
group - while Australia’s four 
big national banks were barred 
from entering the auction at 
the outset 

Earlier this week, the NSW 
premier, Mr John Fahey, indi- 
cated that the government 
might be willing to delay the 
sale to get a better price. 

However, Mr Collins denied 
yesterday that the gov- 
ernment was backing down 
on the sale or planning to 
defer It 


Packer 
raises stake 
in winning 
casino rival 

By Nlkld Taft 

Mr Kerry Packer, the 
Australian businessman: who 
lost a joint bid to develop the 
new Atlbn-plos (US$735m) 
Sydney casino earlier this 
month, has raised his muterty- 
ing interest in Crown Casino, 
the mm pa try currently devel- 
oping the rival Melbourne 

property. 

In a statement to the Axtetre- 
Uan Stock Exchange, Hr Pack- 
er's Consolidated Press said 
that a farther 18.7m shares 
had been w ihIhiH. raising Its 
inte re s t along with that of its 
associates, from KL47 per cent 
to 67.23 per cent The shares 
were bought at a price of 
Atl.4*. 

Ahead of the latest 
purchases, which wars 
rumoured to have taken place 
earlier ibis week* ConsPress 
owned around 22 per cent of 
Crown, white Its associate, 
Hudson Conway, o wiled 28.4 
per cent CoosPress a lso ha s 
an option over some farther 
shares. 

Crown won the right to 
bofld the Af750m Melbourne 
casino tent year, which, whta 
completed, will be one of fw 
world's largest gaming proper* 
ties with 200 tables and A*00 

The « rr f"n is being bum on 
the banks of Yarra River • 
which flows through the Victo- 
rian dty. ■ • 

Mr Pfudtor, who had teamed 
up with Circus Circus, tb® 
large OS gaming gwtaj* 
the surprise. loan* in tb® Ash* 
tor the even larger 
casino development- Hte 
was beaten by the Leighton 
Holdings/Showboat consor- 
tium. 





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23 


INTERNATIONAL CAPITAL MARKETS 


German auction withdrawal batters European prices 


By Graham Sowtey and 
Antonia Sharp* in London and 

> = rank McGurty in New YovK 

Germany led a sharp decline in 
European government bond 
markets yesterday after the 
withdrawal of an auction of 
short-dated German govern- 
ment bonds intensified doubts 
oyer further cuts in official 
interest rates In the near term. 

The Bundesbank cancelled 
its auction of four-year 5.875 
per cent bonds because of 
^sufficient demand, the first 
time this has happened since 
September 1990. The next ten- 
der of four-yem f notes will be in 
August 

The Bundesbank’s 
was taken badly by investors, 
whose confidence had been 
undermined earlier this week 
by cautionary comments by 
Bundesbank president Mr 
Hans Tietxneyer and data 


showing continued rapid 
grow th in M3 money simply. 
Surveys showing an accelera- 
tion in Germany's economic 
recovery, and speculation that 
the Bundesbank would 
announce an auction of 10- yoar 

GOVERNMENT 

BONDS 

bunds early next month, atMafl 
to the gloom. 

Mr Hetmeyer’s comments an 
Monday, which suggested the 
market should not expect far- 
ther interest rate cuts in the 
near future, were reinforced by 
comments yesterday from 
Bundesbank council member 
Mr Retmut Jochimsen. thwf, the 
recent high M3 growth posed 

an inflationary threat. 

Although the Bundesbank’s 
decision to cut its repo rate by 
only three points, to s») 


per cent, was in line with most 
dealers’ expectations, it still 
disappointed the market The 
June Bund future on Lffie 
reached a new low for the year, 
of 93J0, before rising to S&55 
in late trading, down 0.69 point 
on the day. 

The Bundesbank is due to 
meet today, tart is not expected 
to take any action on interest 
rates. 

■ the fan in bunds dragged 
down UK government bonds 
already depressed by the 
higher-than-expected price 
realised at the Bank of 
England auction of the govern- 
merit’s first convertible gilt 
since 2987. In late trading, the 
June long got future an liflfe 
was down # at 103%. 

A tail of four basis points, 
the difference between the 
yield on the average and low- 
est accepted bids, was greater 


than bad been expected, and 
reflected the wide range of 
bids. 

The auction of the 7 per cent 
gilts due 1997, convertible into 
9 per emit 2012 gfits, was cov- 
ered US times. Analysts said 
this was a good result, given 
the uncertainty about the 
issue. 

■ The heavy fall m bunds 
weighed on other continental 
markets, most of which suf- 
fered losses of around one 
point 

Italian futures were among 
the worst casualties, following 
news that more leading politi- 
cal figures had been ordered to 
stand trial in connection with 
illegal mm f-ing of political 
parties. 

By late afternoon, the June 
Italian government bond 
fixture an Liffe was trading at 
109.76, down 1.61 point, in 


heavy trading of more than 
8(1000 contracts. 

In France, data providing 
more evidence the recovery is 
gathering momentnm fldled to 
support prices. On the Mati^ 

the June nfltfninal French goy. 

eminent band contract fell as 
tow as U&S2, before recovering 
to stand at 119.04 In the late 
afternoon, down 0.06 paint on 
the day. 

The Bundesbank's decision 
to cut only three basis points 
off the repo rate also depressed 
French bond prices - it rules 
out any easing by the Bank of 
France. 

■ US Treasury bonds slipped 
yesterday morning in spite of a 
tame reading on orders of 
durable goods last wrontb , as 
caution prevailed of an 
afternoon supply auction. 

By midday, the benchmark 
90-year government bond was 


% lower at 85$, with the yield 
rising to 7.429 per cent At the 
short end, the two-year note 
was off k at 99ft, to yield 5359 
percent 

The deterioration came 
despite economic news that 
appeared favourable for bands. 
The Commerce Department 
reported that orders of goods 
expected to last more than a 
year bad risen by just 01 per 
cent in April, against expecta- 
tions of 1 per cent. This 
suggested the economy had 
grown at a measured pace last 
m on t h, improving the likeli- 
hood that inflation remained in 
check. 

Such a signal might have 
been expected to trigger a rally 
in fixed-rate go ve r nm ent secu- 
rities, whose value is eroded by 
inflation. Further declines in 
commodity prices provided 
what should have been addi- 
tional support for bonds. 


GrandMet braves unease 
to launch $1.2bn offering 


NEW INTERNATIONAL BOND ISSUES 


Mahafty Fm* 


By Peter John 

Several companies issued 
doUar-denominated debt yes- 
terday, braving a choppy inter- 
national bond market 

Grand Metropolitan, the 
large UK food and drink group, 
returned far the second tim e 
within a week to issue $L2bn 
c# zero-coupon 10-year paper in 
the Yankee market, the US 
domestic bond market for for- 
eign. borrowers. 

The offer is GrandMetis first 
zero-coupon funding and one of 
the largest each offerings fn 
the market It is part of the 
company's strategy to develop 
a longer-term portfolio of 
debt 

Bookrunner Goldman Sachs, 
which controlled about three- 
quarters of the allocation, said 
its own quota had been nearly 


two times subscribed. The 
bends were priced at 4&55 with, 
an effective yield of 8.1 per 
cent 

They are expected to raise 

INTERNATIONAL 

BONDS 

some 8600m for GrandMet 
were targeted at US insurance 
and pension groups which are 
required to hold a certain 
amount of zero-coupon paper 
in their portfolios. 

Short-dated dollar paper was 
also in vogue: AT&T, the dou- 
bte-A rated US telecommunica- 
tions company, offered 8400m 
of two-year paper priced to 
yield 18 basis points above US 
Treasuries. 

When CS First Boston broke 
syndicate, the yield spread on 


the bonds narrowed - an 

TTrmtfnal «it \yiHqn -in Hib cur- 
rent market. By the and of 
trading in London, the spread 
had come down to around 10 

TiaBTg prrtnte 

Ford Motor Credit offered 
Mfflm of threeyear debt priced 
to yield 46 basis points above 
Treasuries. The deal was 
announced before lead man- 
ager Deutsche Bank had 
formed a syndicate, and deal- 
ers said that the pricing was 
too aggressive. One com- 
mented: “It equates to taiw 
phis 20 {basis points] arid you 
can already buy an the Ford 
paper you want at Libor pins 
25.” 

Toyota Motor Credit Carp 
was rumoured to be planning a 
short-dated dollar issue. 
Dealers said the Japanese 
car company was expected to 


Oamraar 

US DOLLARS 

ATBT 

PUTT 

Fort Motor Credtt Ca 

MriOw Mwdco Trtratffl 

as. 

400 

250 

160 

125 

% 

6.126 

105288 

6.78 

9.79# 

89515R 

90485 

96,68474 

10055R 

Jun.1696 

Jun2Q04 

JUn.1807 

Jun.1907 

% 

aisR 

0576 

CL25R 

1.00R 

6P 

+18 P5494-S0) CS FM Boston 
+3S0(7VC.»-O4)BT SwwttM 
+43 |MiC-S7) Deutariie Bank London 
Samuel Montagu 

vn 

Hnntah Emxt CtodhWt 
Hrrtah Export CtodRO# 

5bn 

(all# 

9750 

Jun.1909 

undtacL 

> 

Morgen Stanley inti. 

■ 5bn 

tblN 

8800 

Jun. 1999 

undtac*. 

- 

Morgan Stanley IML 

DMB« 

10Bn 

(el) 

100.00 

Jun.1907 

vraBaeL 

- 

Morgan Stanley ML 

OULDERS 

(nUe Nedwtanden Grasp 

600 

7.125 

9956R 

JUO2D04 

05QR 

+38 (54488-04) MG Bank 

ITALIAN LB4E 

VWd 

lEObn 


10156 

JWL2O01 

1.75 

to 

BNL 

Comit Ftoano* (JraaeyJW 

lOObn 

1000 

10050 

JU12004 

2.00 

- 

Sanaa Coman; tale tteOana 


FM turn and mvcaMMa trim stated "The yMd apteral (over relevant flpvarranen t bong at launch is aupptod tty the Ml 
manager. jH Wha rati not*. fSerrdrannuaJ ooipon. R: feed re-oltar price; ferae are whom at the re-otfa r level a} Tranche K «1 j 4ft% 
tad sa to let yr and W% - 2 x 4-yr am p ntt (pita IK. fetog one® only) iM W . b J Tranche B. t*t) 4%% bed a* to 1« yr and 10296 
- 2 x 4-yr MMP rata frrin IK. fetag ones on*) tharaartar. cf CriMbto on 20096 at par. cl) £9* to 20*0/95 and 3MK thoraafiat <9 
Bch a nqeebta at Wun optton nudy tram JuvSB boo FBN p Mkw 6-nth Lfcor ml d!) 16%% - 12-rrth Ubor (1st yr 10**). a) 
B t c hanpaafala at loauara optical on 2WB/V9 Into FRN paying 8-mtfi Ubor +%%. 0 Coupons (but not prindpaO Indaseed to peeo. 


offer some 8200m of three- 
year paper through a Swiss 
bank. 

The World Bank chose the 
Eurolira to lannob its 
structured medium-term note 
pw ig r u mma, announced in Feb- 
ruary. It achieved sub-Libor 
funding by swap ping the pro- 
ceeds of the L isbfan offering of 


seven-year reverse floating-rate 
notes. The issuer has the 
option to exchange the notes 
into a straight FRK at tire end 
of the bwmH year. 

The braids, via BNL, traded 
at 99.48, 10 basis points within 
fees, despite the slump in Ital- 
ian grs mrwmMit bond futures 
yesterday afternoon. 


• Moody’s Investors Service 
upgraded the long-term foreign 
currency debt of the Czech 
Republic, to Baa2 from Baas. 
Moody's said the Republic was 
making progress towards 
becoming a fail market econ- 
omy and had integrated 
quickly into the world trade 
system. 


US management 
urged to improve 
use of derivatives 


By John Sapper and 

Conner Mddabnann 

Senior US company managers 

needed to understand and con- 
trol the risks of using deriva- 
tive financial products, Mr 
Brian Quinn, the Bank of 
Ragland's executive director of 
banking supervision, said yes- 
terday. 

Mr Quinn said recent losses 
announced by US companies 
"seem to have the common 
thanA that o^rrinr management 
did not have full knowledge or 
fall understanding or what was 
befog transacted". 

Hie told a conference organ- 
ised by the Futures Industry 
Association, and the Futures 
and Options Association that 
the need for companies trading 
derivatives to have “fall and 
proper controls" was as great 
as for banks. 

Mr Quinn said he "fnlly- 
endoraed 1 * recent remarks on 
controls by the US General 
Accounting Office. “There will 
always be some products to 
which the correct response for 
an end-user is to say ‘no’, or at 
least hurt yeti" he said. 

He said the responsibility of 
hanks selling derivatives to 
companies varied depending 
on whether they were acting as 
advisers or simply as counter- 
parties. In the latter case, there 
was no "best advice" require- 
ment 

“Of course, commercial con- 
siderations may narrow the dif- 
ference, but it must be correct 
for the precise nature of the 
relationship to be made clear 
from the beginning. Beyond 
that, caveat emptor," Mr 
Quinn said. 

He 8a id the use of deriva- 
tives would probably grow fur- 
ther “albeit, perhaps at a less 
hectic pace”. The rate of 


growth would depend on treat- 
ment by financial regulators, 
and whether the number of 
market-makers grew. 

He said these were signs the 
differences between exchange 
trade products and over-the- 
counter derivatives were befog 
eroded, with the development 
of more customised exchange 
products such as Flex con- 
tracts in Chicago. 

Separately, the accounting 
firm Price Waterhouse said 
yesterday derivatives were not 
excessively risky for compa- 
nies to use, provided they took 
appropriate care. 

Mr Andrew Coleman, a part- 
ner at the firm, said any com- 
pany looking to manage ri sks 
should “ensure that the appro- 
priate risk culture is In place, 
that risk management policies 
are set and compliance moni- 
tored’*. 

He said these requirements 
were the responsibility of 
senior management. Senior 
executives had to have a 
detailed understanding of the 
risks the business was trying 
to manage and the hedging 
techniques it was adopting. 

In a number of recent cases, 
companies bad incurred losses 
through the use of derivatives 
which seemed to involve types 
of Interest rate swaps with an 
option embedded in the struc- 
ture, Mr Coleman said. 

"If the user is not sophisti- 
cated enough to recognise and 
control these risks, they could 
easily be overlooked in a com- 
pany's internal review,” he 
said. 

He said the swap market was 
evolving too rapidly for some 
players to keep pace. Many 
companies were now relying 
on banks to help them value 
some of the more exotic deriva- 
tive products. 


I WORLD BOND PRICES 1 

BBRICHIUIIK OOVBVNMDfT BONDS 

Red Day's 

Coupon One Price dwgt YWd 

Week Month 
■go ago 

Maly 

■ NOTIONAL ITALIAN QOVT. BOND (5TP) FUTURES 

OJFFET Urn 2Q0m IQOthe of TOOK 

FT-ACTU ARIES FIXED INTEREST INDICES 

Plioe fexBcee Wed Da/a Tua Accrued 

UK Grits Uay 2S ctranga H Mag 2A Into eat 

xdaef. 

** 

— Lora ooitoon ylaM— -Matriun oo^on yWd- — NgM ooupon yWd — 
Mray 76 May 24 Yr. ago May 25 May 24 Yr. ego May 25 Miry 24 Yc. ego 


Australia 


9500 

06/D3 

1045500 

-0450 

6.75 

858 

8.15 

Belgium 


7550 

OW4 

875800 

-man 

758 

756 

7.47 

Canada * 


6500 

06lO4 

865500 

-0550 

8.48 

855 

755 

Deraneik 


7.000 

1204 

96.1000 

-0570 

759 

,7.19 

752 

Franca 

STAN 

8000 

05796 

1055000 

-0580 

658 

654 

6J20 


OAT 

5500 

04704 

685800 

-1.400 

7.13 

6.88 

8.74 

Germany 


0.750 

06/04 

885900 

-1570 

651 

652 

8L51 

My 


8500 

OU04 

94.0000 

-1570 

-9w48t 

952 

652 

Japan 

No 118 

4.800 . 

0609 

1075420. 

+0530 

356 

3.16 

346 

No 157 

4500 

08/03 

1052160 

+0-140 

3.73 

3.78 

358 



5.750- 

01/04 

915900 

-0640 

653 

655 

651 

Spein 


10500 

10/03 

105.1800 

-0550 

952 

ft 44 

9.25 

UK Gits 


6500 

064*9 

92-16 

-20/32 

7.79 

753 

749 



6.750 

11/04 

89-16 

-3B/3Z 

857 

750 

7.78 



9500 

10/06 

105-10 

-45/32 

856 

853 

750 

US Treasury 

• 

6575 

02AM 

SO-29 

-1602 

7.19 

758 

658 


k wn 

06/23 

85-29 

-30/32 

7 M 

750 

7.11 

ECU (French Goui) 

8000 

04AM 

86.4500 

-1540 

756 

758 

7.18 



Of3an 

Sett price 

Change 

HN* • 

Lora 

Eat vol 

Open It 

1 

Jun 

11145 

10958 

-159 

11153 

10950 

78891 

63831 

? 

Sep 

110180 

10853 

-1.73 

11050 

10840 

5884 

11821 

3 

Deo 

- 

10853 

-1.73 

- 

- 

0 

0 

4 


■ ITALIAN QOVT. BOW) pm FUTURES OCTION8 (UFF3 UraCOQm lOOttw ot 100% 


1 Up to 5 para (23) 
2- 5-16 years (22) 

3 Over IS yaara (8) 
■fflOfalMfS) 
5 AM stocks 00) 


12253 

-051 

12352 

259 

454 5 yis 

757 

7.70 

7.12 

858 

752 

755 

8.14 

759 

757 

14250 

-1.14 

14854 

2.11 

552 15yn 

850 

8109 

852 

859 

8.19 

843 

8.72 

851 

859 

15077 

-1.79 

18258 

259 

456 20 yn 

857 

857 

B5S 

859 

8.19 

854 

855 

854 

8.74 

18155 

-2.02 

18559 

057 

6.12 irraat 

859 

an 

352 







13953 

-150 

14155 

256 

452 















— 

— HMonSK 

— 

Marion 10 % - 

— 



SHce 

Price • 

Sep 

■ CALLS — — — — 
Dec 

Bap 

- puts 

Dec 

10860 

244- 

350 

251 

257 

10900 

2.16 

3 55 

253 

3.12 

10980 

151 

252 

248 

359 


May 25 May 24 Yr. t&> 


May 25 May2« Yr. mo 


B Up to 5 year* (2} . 

7 Over 5 yews (11) ' 

8 At stocks fl 3) 


-18021 

17801 

175.72 


-021 185m 

-an 17008 

-CL88 17088 


0.73 

1.15 

1.10 


253 

168 

1.77 


Up to 5yn 
Omt S ya 


3.71 

3.71 


082 

006 


303 

096 


209 


260 

246' 


224 

237 


E*t *L total, eras 20B1 Me ISM. Prtooua d ayt op ao to. CMh 9087 Pias MX 


5 yew-yMd 15year ytetd 29 yaaryMd- 

May 25 May 24 Yc. ego May 25 May 24 Yr. ago May 26 May 24 Yr. 


8 Debs & Leant (76) 


12246 


-128 13128 126 282 9.47 033 921 042 823 

Coupon BMC Lara 0K-7KM; Madras tot-lMK: H&t 11% am owe t Re yWd. yw Ye* to data. 


9.48 


927 


217 261 


.•NraraYortcirid-oay 

t Qraea (hdudlrn vriMicUng tax at 125 par rant payatlo by 
:U3, UK h&n. often tadacfenal 


YWdc Locd nrafcet atwdard 


Sauce: MS fatonaHoraf 


US INTEREST RATES 


Luncttkra 


taJu* 

FdUaMaMraaou 


Qraaw«i_ 
7?* TTaoara*- 
Urea msi£h_ 


ItBoaqr EBsBxf Bond YUk 
S8B TWijrar. 


Spain 

■ HOTK)KAL8P*»8aH BOND FUTURES frgpq 
Open Sod price CtranQe Hgh 
Jun 9274 96-83 -080 ‘ 8276 

Sap 9628 9669 -060 9628 


Lou 

8274 

9527 


BOvcL Open M. 
64229 116283 

2010 ' 112ZD 


FT FIXED Ml MS I MMCM 

May 25 Miy 24 May 23 May 20 May 19 Yr ago Hfatr U nr 


CULT EDQBD ACTIVITY INDICES 

May 24 May 23 May 20 


May 18 May 18 


a 


4.1 B TTrsa |flar. 
431 Rm ye* _ 
430 10-yaw 
524 “ 


527 

Ut 

271 

721 

744 


Qovt. Srara. (UK) 
Ftod kitoraat 


89.79 84.70 9654 9692 9684 9488 10704 9820 

11274 11258 11420 114.73 11428 111X7 13287 11092 


0*t Edged largda 
B-day m a n ga 


053 

907 


802 

927 


977 

1007 


11 W 
829 


109.0 

820 


UK 

■ NOTIONAL UK OET RITUHES (LfffEJ* CSO0OO 32nda c< 10OM 


’ for 1984 QMnnat aecuWraWgh a fac* CoaadMan: 1W4 0 gn/asi bra 4018 p/1/73). Ftod htoraer Mgli Mica c am p awlon : 18887 (n/WB4 . low 9088 prt/ 75 . Barn 100s Qovammaa i»*«t 160V 


88 rad FWad Meat IBB. 8E 1 


1874 


BOND FUTURES AND OPTIONS 
Franca 



C*an 

Sett price 

Change 

Hgh 

Low 

EsL rad 

Open InL 

J»to 

104*14 

103-10 

-1-04 

104-16 

102-30 

112081 

106171 

Sep 

103-07 

102*07 

-1-0S 

103-13 

102-00 

15321 

7209 

Deo 

- 

101-07 

-1-05 

- 

- 

0 

0 


FT/tSMA INTERNATIONAL BOND SERVICE 


tided am fceUeatHamtiorai 


■ lOtWQBT FUTURES OPnON8 8JffE) £5Q000 64ttaof1 00* 


bonds lor iMditwe ban 
laauad Od Oder a*. YWd 



Open San price Change 

1 High 

Low 

Eat voL 

Open tat 

Jut 

12054 

119.10 -158 

12QS8 

11858 

278557 

113558 

Sep 

11852 

118.16 -158 

11940 

11850 

10,140 

2*595 

Dec 

11844 

11758 -158 

11344 

1184* 

2 

T4S1 

■ LONG TERM FRSICH BOND OPTIONS WAT*) 




Strfca 

— 

CALLS 

■— 

— -■ 

pure — 

— — — 

Price 

•tun 

Sep 

Dec 

•km 

Sap 

Dec 

118 

0.40 

154 

. 

nyp 

253 

- 

120 

055 

1.06 

- 

054 

254 

- 

121 

052 

0.74 

151 

15* 

347 

- 

122 

051 

048 

- 

25* 

4.10 

- 

123 

- 

059 

- 

350 

- 

- 

Eat. wL total Cato 33584 

Pura 81517 . Piwitara daY» open InL, Cal# 5105« P«4 WM0. 


PUTS 


PHce 

102 

103 

104 


Sep 

2-28 

1-82 

1-35 


Ett. aoL toW. Cdh «34T ftiM ma. 


Dec Sep Dee 

2-61 2-15 3-47 

M3 2-48 4-18 

2-08 3-21 4-68 

Prarfooe cMy'a open tot. CaM 18BZ0 Pus. 10548 


(12 OOUAR STnUQHTS 

Abbey MdlbMuy 6^03 WOO 81 h 

AbartAn*»g%95 BOO 104^ 

Atttoaizoo 400 io5*i 

Baric oTUNdSIiBB 100 lOfi* 

BadaraBSgBB 250 HSV 

flrcS7l»87 15Q 102** 


MHiGaeOZI. 

OatoKflSB. 


Ecu 

■ ecu BOND FUTURES 6AATF) 


CharagKonBFki5*z88 . 
CMa6>*M. 


.1900 10% 

.«00 10ft 

.500 VSU 

.1000 aft 


Oomuny 

■ NOTIONAL QEWMAN BUND RfTURBS Q-ffRU* DM2SOAOO IQOthe Of 100X 


Open 

8Nt price 

Change 

Wflh 

Lora 

EeL vd 

9443 

9356 

-0.88 

9450 

9350 

240471 

9356 

9358 

-0-69 

9355 

92.60 

14091 

93.10 

92.78 

-are 

93.10 

9310 

10 


Jun 


US 


Open SaC price Chanpa 
STAB 6232 -124 


8730 


LjPW 

8630 


Eat voL Open fert 
905 10342 


OaraNBrapeB* 100 in 

Oadlftnearft 9B 30 0 10ft 

Drama* ft SB 1000 Oft 

BCSCftK 183 103*2 

SCftflB 100 10ft 

BB7%K 250 10ft 

9 ft 97 TCOO Wft 


Jun 
Sep 
Deo 

■ BUW FUTURES OPT10tW(l]FI^OM2SOJX«polrit8 ol 10095 


■ U8 TBEASWY BOND RITUBE8 pSI) $100300 32nds (t 100X 


BacdeHraca996. 
Era*mft9B. 


30387 

192 


Price 

8300 


■a. wL total. 


Ju> 

Aug 

CALLS — 
Sep 

Dec 

JU 

Aug 

pure — 
Sep 

Dec 

0.97 

153 

150 

152 

051 

1.17 

144 

Z06 

0.71 

097 

156 

-150 

1.16 

141 

1.70 

254 

051 

073 

15* 

140 

145 

1.89 

158 

254 



Open 

Latest 

Change 

High 

Low 

EK. VOL 

Open M. 

Jun 

104-03 

103-17 

-0-19 

104-04 

103-16 

483636 

33752S 

Sep 

108-06 

102-19 

-two 

103417 

102-19 

11,132 

99526 

Dec 

102-14 

101-30 

-0-18 

102-14 

101-30 

1,117 

34566 


.200 10ft 
.100 10ft 

&k-4nB**JapraeQ2 S» 10ft 

BqntDwOeipftW ISO 10ft 

fWarfftW ^ 200 10ft 

ftalahBpartft 95 . 


200 10ft 

fad M*r Ora* ft 98 1300 97 

Sen Bao 01(08 ft 96 300 10ft 

eweftag aoo 10ft 

,200 Iflft 


Cato 18048 Pule 23?sa. AmMra dff*a open tac. O* 10J871 Ptaa 118808 


(Uffg YlOOm lOOtfie of 100N 


WBk Japan Hnft 87 
Mar Aim-Draft «_ 

Wyft 23 3600 8ft 


.as 10ft 


■ NOTIONAL MEDIUM THIM OBMAN OOV2 BOND 
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24 


FINANCIAL TIMES THURSDAY MAY 26 19*4 


COMPANY NEWS: UK 


Recovery seen in Chinese markets helps sustain share price 

Courtaulds falls to £121. 6m 



Measuring up: SIpko Hmsmans having a suit made in Tencel, Courtaulds’ new profitable fibre 


By David Wighton 

Courtaulds, the ch emicals awH 
fibres group, yesterday said it 
was seeing recovery in some of 
the markets hit by last year's 
credit squeeze in fThma 

Mr Sipko Hoisxnans, chief 
executive, said that acrylic 
fibre prices had started to 
harden, helped by the prob- 
lems of the Chinese cotton 
crop, and that demand for ace- 
tate tow, used in cigarette fil- 
ters, was picking up. 

The comments helped Court- 
aulds' shares remain 
imphangpri at 527p in a felling 
marirpt despite a sharp drop in 
annual pre-tax profits from 
£186 .2m to £12i.6m on turnover 
of £2bn (£2.09bn), including 
£43.7m (wai-gm) from discon- 
tinued activities. 

The figures were affected by 
a number of exceptional ftgmg 
and a higher interest bQL At 
the operating level profits 
slipped 11 per cent to £L74J5m. 

About half the fall was due 
to a sharp drop in acetate tow 
prices after C hina suspended 
purchases in its anH-ftnflatirm 

drive. Profits from acetate tum- 
bled by £l2m to £28m. 

Although Chinese purchases 
have resumed Mr Huismans 
does not expect to see much 
improvement in the short- 
term. "The price position win 
take some years to recover.” 

But the prospects for fibre 
prices have improved following 
a disappointing cotton crop in 
China. “It is now such a big 
economy that marginal 
changes start to have a signifi- 
cant impact on world mar- 
kets," said Mr Huismans. 


Following the figures several 
analysts upgraded their fore- 
casts with Mr Martin Evans at 
Hoare Govett increasing bis 
pre-tax prediction from £170m 
to £185m before excepttonals, 
up from £146 -2m last year. 

Total profits from fibres and 
chemicals fell to £93m (£lG3m) 
on sales of £727m (£775m) with 
Tencel, Courtaulds new fibre, 
making a net profit 

Mr Huismans said Tencel’s 
contribution this year would 
be held back by the costs of 
building European and Asian 
operations. Courtaulds is con- 


structing a second US Tencel 
plant costing $134m (£90m) and 
is still examining four possible 
sites for its European factory. 

Capital investment, which 
rose to £130m, or 1.7 times 
depredation, wifi increase fur- 
ther this year but gearing was 
down to 30 per cent (39 per 
cent) helped by disposals prof- 
its of £25.1m. 

There were £49.7m of 
restructuring charges, relating 
largely to the previously 
announced rationalisation in 
coatings and sealants, and the 
interest bill rose £l0.1m to 


£31. 6m, including a £9JLm 
charge to close interest race 
swaps no longer required. 

Profits from coatings and 

naalawtc gti pp o ^ tO fSOnn (£64m) 

an sales of £875m (£848m) with 
the marine paint business 
buoyant but US industrial mar- 
kets still in recession. Polymer 
products were steady at £32m 
an turnover of £352m (E33fen). 

Dividends are up 5.7 per cent 
to 14.8p, via a 10-Sp final, 
although earnings foil to 20.3p 
(35. ip) or 25.8p before excep- 
tionals. 

See Lex 


Concert 
party at 
Liberty 

By CaroRne Southey 

Mr Brian Myerson, who has 
forced a number of changes at 
liberty, yesterday announced 
a concert party with a Malay- 
sian group to press for farther 
at the upmarket fab- 
ric and fashion group. 

Mr Myerson and Insas. an 
investment bolding company 
quoted on the Kuala Lumpur 
stock exchange with a market 
capitalisation of £205 m, will 
control 1&8 per cent of Liber- 
ty’s capital after June's 
enfranchisement of the non- 
voting shares. 

Mr MyensoH’s family vehicle 
- Concerto Capital Corpora- 
tion - will hold 12 & per cent 
and Insas 4 per cent. 

Since he began his campaign 
in 1992, Mr Myerson has been 
instrumental in the appoint- 
ment of a new chief executive 
at liberty, the appointment of 
non-executive directors and 
the enfranchisement 

This will reduce the votes 
controlled by the founding 
families from just over 50 
per cent to about 40 per 
cent. 

Mr Myerson said the object 
of the concert party was to 
"maximise liberty's value to 
all shareholders". This, he 
said, included developing mar- 
kets in the Pacific Rim, 
improving merchandising, and 
promoting changes of person- 
nel at the company. 

liberty's success at its new 
outlet at Heathrow's Terminal 
3 has led to the view that 
there is pent-up demand in 
east Asia. 


NW Water ahead of expectations with £269m 


By Peggy Hol&nger 

North West Water yesterday said it was 
comfortable with the initial outcome of 
the current price review process, as it 
announced a 9 per cent increase in pre- 
tax profits. 

Replying to questions over whether 
North West frit the industry regulator 
had taken a tough approach to the draft 
price increases issued at the weekend. 
Sir Desmond Pitcher, chairman, said: 
“The logic and methods by which Ian 
Byatt goes about it leave one with a 
feeling of comfort.” 

The UK’s 31 water and sewerage com- 
panies are preparing replies for Oftoat 


on the draft K factors - the rate above 
inflation by which they will be allowed 
to raise prices from 1995 to 200 0. The 
final allowances will be announced on 
July 28. Analysts estimates for North 
West's increase range from 2 to 2£. 

The utility kicked off the water com- 
pany results season with better than 
expected figures, largely due to a reduc- 
tion from £36m to £12m in provisions 
for restructuring the regulated busi- 
ness. Pre-tax profits rose from £247m to 
£269m on turnover up from £878m to 
£924m. 

The increase masked a disappointing 
performance from the process engineer- 
ing business, where profits before inter- 


est and tax foil from £19.7m to £8Bm. 

On the international contract bust 
ness North West wrote off £8m In 
investments against £9. 6m last time. 

The regulated businesses showed a 15 
per cent increase In profits before inter- 
est and tax to £326m because of reduced 
working capital and operating efficien- 
cies. A dpcHne in industrial and com- 
mercial turnover held back the advance 
in sales to 6 per cent at £729m. 

Gearing fell from 29.1 per cent to 27.3 
per cent 

The final dividend is increased to 
15.4p for a total 8 per cent higher at 
23.07p (2L4p). Earnings rose from 62J3p 
to 70.8p. 


• COMMENT 

North West warned at the interim stage 
that process engineering would be diffi- 
cult, but one might wonder why it has 
taken the group two years to spot 
excessive overheads. The utility, as 
expected, has returned a sterling perfor- 
mance. All of this is almost irrelevant, 
however, given uncertainty over fixture 
price increases. Until the K factors are 
known the sector will be unattractive. 
Forecasts are for £290m this year, for a 
prospective multiple of 7 and a yield of 
6 per cent. Yesterday’s noises may leave 
existing investors as comfortable as the 
chairman, but they may not be enough 
to tempt new ones in. 


Land Securities’ £237m 
beats City forecasts 


"There has been some strengtheating of yields had 
encouraging signs of stability made it ten attractive to 
and strengthening of demand, purchase investment proper- 
particularly for mime retail ties. 


By Vwmsa Moukfer, 

Property Correspondent 

The scale of the recovery in 
the property investment mar- 
ket was yesterday underlined 
by a 34 per cent rise from 5Wp 
to 677p in the net asset value 
per share of Land Securities, 
the UK’s largest property com- 
pany, during the year to March 
31. 

Pre-tax profits increased by 
3J» per cast, from £229. lm to 
£237 Jm. 

The group's properties were 
valued at just above £5bn, an 
increase of £934m. Following 
the better-than-expected 
results, the shares rose 2ttp to 
663p. 

The recovery in the asset 
value reflected a sharp decline 
in yields, the ratio of income 
to capital value, which fell 
from 99 per cent to &2 per 
cent 

The occupational market 
showed little sign of recovery 
during the year, although rand 
Securities said that the down- 
turn in rents appeared to be 
coming to an end. 


locations and top quality cen- 
tral London office buildings,'' 
said Mr Peter Hunt, chairman. 
“However, we do need to see 
rental growth coming through 
to underpin the investment 
market and to reduce Its 
dependence on yield compari- 
sons with gilts and other finan- 
cial instruments.'' 

Mr Hunt was cautious about 
the scope for profits growth. 
“There are positive signs of 
economic recovery but until 


tioos in which It bought nearly 
lm sq ft of retail. Industrial 
and warehouse space. 

Mr Hunt said that the recent 


Land Securities has restarted 
Ha development programme, 
Last year it spent £23m on 
denkvnunto; it has commit- 
ted a farther £l28m to develop- 
ments ti de year. 

Gearing foil from 59.6 per 
cent to 464 per cent Available 
tends at March Si amounted to 
£341 Am. 

Values of properties 
increased by 19 per cent in the 
City and by 19^ per cent in the 
west end and Victoria. Shop 
and cdDre properties elsewhere 


A final dividend of i7.4p is 
recommended, making a total 
of ftp, am Increase of 5 per 
cent 

See Lex 


businesses have sufficient con- 
fidence to expand their tn the UK rose by 16.4 per cent 
operations and create the Out-of-town retail property 
demand for more space, the in crea se d hi value by 341 per 
potential for increasing rave- cent vend industrial and ware- 
nue profit remains limited,” be house property by 2QJ> per 
said. cenL \ 

Over the past three years. Earnings per share Increased 
the company has spent £800m by 8.6 per cent to 35.66p 
on properties, more than GO pear foiSSp). 
cent of which was on acquisi- - 


Countryside Properties 
finds strengthening demand 


By Andrew TUytor, 

Construction Correspondent 

Countryside Properties, one of 
south-east England's biggest 
housebuilders, has strength- 
ened its balance sheet substan- 
tially with the sale for £60m 
cash of its commercial prop- 
erty investment portfolio to 
BriTel Fund Trustees, the Brit- 
ish Telecommunications pen- 
sion scheme. 

The sale, announced yester- 
day, emphasises the continu- 
ing strong institutional 
demand for commercial prop- 
erty as this market continues 
to recover. 

Countryside intends to use 
the proceeds initially to reduce 
borrowings to equiva- 
lent to gearing of 29 per cent, 
compared with 103 per cent at 
the end of March. 

A number of inquiries were 
received about the portfolio 
from prop e rty companies and 


institutions, hut BriTel made 
the most attractive after, said 
Mr Alan Chany, Countryside’s 
chairman. The book value of 
tire investment properties was 
£56.7m at end^Septomber. 

Mr Cherry said that pre-tax 
profits for the six months to 
March 31 had risen by 43 per 
cent from £2.6m to £3. 72m. 
Turnover increased by 62 per 
cent from £4L9m to £87^m- 

The company is paying a 
maintained interim dividend 
of 1.41p on an enlarged share 
capital following last year's 
£16-8nx rights issue. Earnings 
per share for the latest six 
months were also maintained, 
at 4.1p. 

Mr Cherry said that the 
number of private tenses sold 
had risen from 161 to 224. Eco- 
nomic conditions continued to 
ease in spite of last month’s 
tax increases, which had foiled 
to dent the gradual recovery 
in the housing market - 


The number of homes com- 
pleted for bousing associations 
had folkm from 494 to 146, due 
to the timing of handovers. 
Weak for housing associations 
measured by on-going con- 
tracts had actually increased 
from £85m to £ll5m since the 
end of the last financial year. 

Overall housing turnover 
hod risen by more than 50 per 
cent to £5&5m (£38.7m) while 
profits had increased by 28 per 
cat to £3.9m (£3.im). 

Mr Cherry said the group 
would continue to build com- 
mercial properties for sale. 
TUs Addon increased profits 
from £88,000 to £487.000 in the 
first, half and recently has 
negotiated forward sales of 
developments in Bishop's 
StortfonL Brentwood and Not- 
tingham. 

The property investment 
portfolio incurred a £600,000 
loss in tin first half, the same 
as last time. 


We are proud to be Bankers 


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Tuesday 21 June 1994 


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FINANCIAL TIMES THURSDAY MAY 26 1994 


' ,,r \'Pertie s i 
^^‘iiingdenu 


■ . . *„ 

•. ' — ««;■ 

. . ‘R 






- ‘“Tjj : 


me Results 
:cment 


Marine 


Wide-ranging review of Safeway in progress 

Argyll 13% down after 
depreciation charges 


By Neil Bucfctey 

Depreciation charges, tough 
competition and a poor perfor- 
mance at its Lo-Cost discount 
chain combined to produce a 13 
per cent fall in pretax profits 
at Argyll Group, the UK’s 
fchird-largest grocery retailer, 
in the year to April 2. 

The fall, to £36L8m, com- 
pared with £417-3m fhr the pre- 
vious S3 weeks, or £407m on. a 
52-week basis. 

This year's - figure was 
depressed by £37. Im of new 
depreciation charges after 
Argyll began writing down 
superstores, and a £3m prop- 
erty Loes. 

Adding those back, profits 
were still lower than last year 
- in contrast with Argyll's 
competitors, Tesco and Sains- 
bury, which were also hit by 
depreciation and property 
charges, but improved profits 
before the accounting changes. 

In spite of a fall in ftprotogv 
from 27.1p to 22. 6p per share, 
the total dividend goes up to 
lL5p (109PX with a proposed 
final of 7.75p. 

However, directors said 
future rises would be in line 
with earnings growth. 


Sir Alistair Grant, ch«irmaw ) 
said competition would remain 
tough, but there were signs the 
market was stabilising aftw* a 
downward adjustment in mar- 


The gross margin at Safeway 
had fallen 0.3 percentage 
points in file second half, but 
was now running only 0.1 to 
(L2 points below last year. 

Current trading showed 
same encouragement with hke- 
for-Hks sales up 05 per cent, 
before price deflation of 0.7 per 
cent 

Sales at Safeway increased 
by 12 per cent on a 62-week 
basis to fiififlm, with operating 
profits up 7.4 per cent to 
2361.2m. New stores contrib- 
uted IL6 points, with 04 points 
from existing stores. Inflation 
averaged X2 per cent, but 
prices had fallen in the last 
four months of the year. 

.Presto and Lo-Cost fared 
less well, with sales up 2 per 
cent on a 62- week basis to 
ELilbn, but operating profits 
were down by 20 per cent to 
£40.7nu 

The company said cutting 
prices at Lo-Cost to strengthen 
its position in the discount 
market had improved sales but 


not profitability, and a funda- 
mental review of the business 
was under way: Analysts 
believe it wiD be sold. 

Safeway has also appointed 
consultants to review all its 
operations and the results wifi 
be announced with the interim 
profits in November. 

• COMMENT 

As it admitted yesterday, 
Argyll is a follower rather than 
a l e a d er. It has lagged behind 
its yiafn rivals in inatitriting a 
strategic review - and in 
revealing the expected cost 
savings - as well as to diversi- 
fying or expanding overseas. 
The business is sound and 
well-run, and the business 
review and other initiatives 
should certainly cut costs. But 
while the threats ctf a price war 
have receded, the outlook 
remains tough, and without a 
dose of inflation, earnings 
dividend growth prospects look 
unexciting. However, with cur- 
rant-y ear f orecasts averaging 
about £375m the shares are on 
a prospective multiple of only 
1025, which may suggest they 
are a little oversold - espe- 
cially given the 6 per cent 
yield. 


Sustained growth in fees 
behind Warburg’s £297m 


By Nonna Cohen, 

Inve s t me n ts Correspondent 

SG Warburg, the investment 
hank, reported record pre-tax 
profits for the year to March 
31 reflecting sustained growth 
in commission and fee income 
from advisory and underwrit- 
ing activities. 

At £297m, pro fi t s were dou- 
ble the comparable £l4&2m, 
on total operating income of 
£i.04m (£7i5.8m). Earnings 
per share were 82.4p (39.6p) or 
75.7p <37.5p) fully diluted. The 
total dividend is increased to 
22p (lop) with a proposed final 
of lBp. 

Mercury Asset Management, 
the 75 per centowned subsid- 
iary, reported a .33 per cent 
rise in pre-tax profits to 
£109 .5m (£32.3m) despite a 
sharp rise in expenses. Earn- 
ings per share rose to 42.9p 
(S2.6p) and the dividend is 
raised 50 per cent to l&5p 
(Up), lowering cover to 1-99 
times. 

tvip investment inwMng 
recovered to 087.5m, almost 
three times the £65.9m of the 
previous year. Funds under 
management - rose from 
£49.7hn to £60.4bn, of which 
£&.7bn was net new cash. 

A little more than 25 per 
cent of the new cash came 
from UK institutions, the 
source of most of MAM’S fund 
management business. 


Another £lbn came from 
investment trusts, £40Qm from 
charities and private hanMiif 
with the remainder from inter- 
national sources. 

"The business, in common 
with the industry, has had a 
good year," said Lord Cairns, 
chief executive. However, he 
added; “It could prove to be a 
peak year in the economic 
Cycle.” . 

After a strong first half, rev- 
enues from fee and commis- 
sion-based activities continued 
to grow strongly throughout 
the year. 

Group fee and commission 
income rose from £47&lm to 
£749.1m, of which £446. 6m 
was earned hi the second half. 

While declining to predict 
whether fees .could maintain 
m omentum . Lord Cairns said: 
"The pipeline of business is 
still very strong.” And he 
noted that new issue under- 
writing was the single most 
id giii fi pt o t contributor. 

Although revenues from 
marketmaking and propri- 
etary trading improved from 
£145 .5m to 2207.2m, most - 
£140.6m - were received in the 
first half, limy were signifi- 
cantly lower in the second six 
months, which included vola- 
tile trading conditions in most 
world markets in February. 

However. Lord Cairns said 
that a greater, and more sta- 
ble, percentage of overall prof- 


PUBUC WORKS LOAN BOARD RATES 


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maim W principal. tT B y agy ri JV hat^a ey wtor (ftwri ayN 

hekito prtrtsrt and tomS J W#» P%in«» of htaraat an^ 


its was Hkely to be derived 
from trading in the future 
titan is currently the case. 

Largely as a result of the 
increased trading activities, 
gearing rose sharply to 41 per 
emit, having hovered at about 
15 per cent for the previous 
three years, and may rise fur- 
ther. "We Sifafc our gwriwg is 
conservative relative to the 
industry,” Lord Cairns said. 

He said that more ttaw go 
per emit of the group’s busi- 
ness was now derived from 
outside the UK and would 
increasingly be international. 

Mr Hugh Stev enson, mam 1 
chairman, «*id that the fond 
management c ompany 's activi- 
ties were also . increasingly 
international with about 20 
per cent of all funds under 
management being those of 
non-UK rfipwtw. 

Growing demand for fond 
management services for 
so-called defined co n t ri b u tion 
schemes helped assets of Mer- 
cury life, tiie life assurance 
division, to nearly triple to 
£155m. 

However, expenses have 
risen in the past year by a 
third to £133m, while turnover 
rose more modestly. Mr Stev- 
enson attributed tire rise to 
increased performance-related 
pay and an increase in bade 
office staff in the later half of 
1993 to cope with the sharp 
rise in trading turnover. 

BSG enhanced share 

alternative take-up 

BSG International yesterday 
announced it had received elec- 
tions for the enhanced share 
alternative in Hea of the final 
dividend for the 1993 year in 
respect of holdings totalling 
244m ordinary shares - more 
than 93 per cent of the issued 
capital 

Of these elections Panmure 
Gordon has received accep- 
tances for its cash offer in 
respect of Km shares - 22£ 
per cent 


COMPANY NEWS: UK 


Calling the accountants to account 

Andrew Jack reports on the latest move in the Lasmo/Enterprise Oil bid battle 

L ate 1980s accounting . 
met with old-style 
aggressive 1960b acquisi- 


L ate 1980s accounting 
met with old-style 
aggressive 1960b acquisi- 
tion battle tactics yesterday as 
the escalating war ctf criticism 
by Lasmo in its deface from 
Enterprise’s hostile bid 
switched to its predator's 
financial reporting poticies. 

In a 12-page document called 
“Enterprise Oil: the financial 
myth", Lasmo accused the oil 
company of a series of manipu- 
lations and of oonicavaning UK 
accounting standards. 

“This goes to the heart of 
[Enterprise’s] value.” said Mr 
Rudolph Agnew, La sino's 
chairman. “They have over- 
stated profits, have an uncov- 
ered divi dend a nd an unsus- 
tainable share price.” 
Enterprise lost no time in 

fi ghting hack. Mr Andre w Shfl . 
at on. finance director, said; 
“This is incredibly mischie- 
vous. We have absolutely not 
broken the rules. To get a lec- 
ture on accounting from 
t .agmn given their history is a 
bit rich.” 

1 The company’s auditors, 

> KPMG Peat Marwick, also 
, Issued a statement saying: “We 
have signed an unqualified 
audit report and in our opinion 
the accounts of Enterprise OtL 
do and have complied with UK 
accounting standards." 

The dftWTWKm t iM wa ante ^ 
outcome of work conducted by 
teams from Ernst & Young, 
Lasmo’s auditors, and Coopers 
& Lybrand. Both firms said 
yesterday they stood by the 
Bmwntifws made. 

Lasmo’s central attack is 
that Enterprise has not 
recorded the assets bought to 
large acquisitions at their pur- 
chase price, which would then 
require substantial depreda- 
tion. Instead, it has written 
them down immediately 
against reserves In the balance 
sheet, which it argued “contra- 
venes" areo nnthig s tandards 





Rudolph Agnew: ‘We’ve laid out all the feds. Mow It is for the market to study them* 

It highlights two examples. 

In 1988 Enterprise bought an 
interest in Beryl Properties for 
£158m and wrote the assets 
down against reserves by 
£149m to leave a recorded 
value of £9m. In 1989 it 
acquired assets from Texas 
Eastern Corporation for £442m, 
and wrote down their value by 

CWBm- 

The document also shows company had used merger were as mergers," 
that Enterprise used merger accounting, which allowed It to abided by the 
accounting whan it bought IQ “add the balance sheets existed then. Thi 
Petroleum in 1987, and that if together” without the need to mindless interpre 
acquisition accounting had readjust for the fair values of commerriaBy-test 
beat used instead, net assets the assets. He said he believed Fred 6, a draft 
would have been recorded at this was more prudent ing standard 

£109m higher. “We took the view that the become mand 

Mr Shjjston said that the substance of the transactions autumn, will pn 


were as mergers," he said. “We 
abided by the rules that 
existed then. This was not a 
mindless interp reta tion but a 
commercially-based decision-" 
Fred 6, a draft new account- 
ing standard which will 
become mandatory this 
autumn, will prevent Enter- 



prise’s approach to the acquisi- 
tions in the future. 

Lasmo criticises Enterprise 
for “opaque accounting” in its 
presentation of Elf Enterprise 
Petroleum, a joint venture one 
third owned by Enterprise cre- 
ated in 1991, which in turn 
acquired an interest in the 
Piper Field in the North Sea 
and has so far been heavily 

IfiswnaMwg . 

However, Mr Shllston said 
that Lasmo had itself acquired 
a direct interest in the field “at 
a sbghtly higher price”. “We 
would not disagree that the 
Piper add took longer and cost 
more than expected. But 
Lasmo has been subjected to it 
infinitely more directly and 
wyriwfaiiy than US.” 

Finally, Lasmo attacks 
Enterprise’s dividend policy, 
saying it Is overdistrtbuted 
because its earnings are 
inflated and because it is using 
a higher proportion of its cash 
flow to fund the dividend pay- 
ment; and of raising its divi- 
dend while its underlying earn- 
ings have Mien. 

Mr Shfiston said the rela- 
tively high dividend paid by 
Enterprise reflected the compa- 
ny’s strength. “We are quite 
happy to be associated with 
the quality end of the market 
What’S the frmharrafwwipnt ? 1 * 

He stressed that the com- 
pany bad adequate cash flow 
to fund the dividend payments, 
which was far more important 
as a measure of its ability to 
pay than the earnings figure. 

Enterprise is believed to 
have w ri tte n to the Takeover 
Panel complaining about the 
accusations. However, Ur 
Agnew stood by the charges. 
“We have laid out all the fects. 
Now it is for the market to 
study them. If they believe we 
have made a telling point 
Enterprise will be severely 
rtnmap wt ff they ignore 
God help us aJL” 


DAWSON INTERNATIONAL PLC 
DAWSON FINANCE NV 


REVOCATION OF GUARANTEE GIVEN BY D AWSON INTERN ATIONAL P LC 
tun nmii ffprmw or THE 9V.PERCEWI GUARANTEED KEDuuMABLE CONVERTIBLE 
PREFERENCE SHARES 2004 ISSUED BY DAWSON FINANCE NV 

26th May 1994 

Tbs The holder* of toe 9>/«per cent Guaranteed Redeemable Convertible Preference Shaw 200* 
leaned by Damon Finance NV 


SSSS'taSaeSof foe deed poB Issued by Dawson and dated os of 19& January 1989) with effect 
from 26th July 1994. 

Accordingly, Dawson and foe Issuer heteby give notice feet .fee Pawnee Shares mpamta g ootetan ding 
mSfejK 1994(fee -Redemption Date-) win be redeemed ■‘P^P value on such date, together with 
an b«i> unpaid On the Preference glares at such date. 

Holders of tt« Preference Shares remain entitled to exercise their rights toconvert feefteference Shares 
intn n,i,iin.ni in Atf nf Dawson (“Ordinary Shares^. Such conyemon rigjda will oease to be 

except in certain Unified circumstances. 

SSeSaSSffiSsSHBSBW** 


By order of foe board 

Dawson International PLC 

Ifcwson Finance NV 


Dawson International PLC 


Dawson Finance NV 

tncwpoiated wi* limited liability ift fteNefoerfandsAiiBIIes 


As Universal as BTR 


International 


Informed 


In position 




FOB YOUR COPY OP BTB'S 1995 REPOST A ACCOUNTS WRITE TO BTR pic, 8ILVERT0WN BOUSE, VINCENT SQUARE, LONDON SWJP 2PL. 





26 


COMPANY NEWSs UK 


FINANCIAL TIMES THURSDAY. MAY 26 1994 


Order book worth £500m and prospects for new contracts good 

Vosper builds 13% advance 


By Andrew Bulger 

Vosper Thomycroft Holdings, 
the Southampton-based ship- 
building and engineering 
group, increased annual profits 
by 13 per cent and said yester- 
day its order book was worth 
£50Qm. 

Pre-tax profits rose from 
£I9m to £21 .5m in the year to 
March 31, while turnover 
increased by 22 per cent to 
2239m. 

Mr Peter Usher, chai rman , 
said the policy of broadening 
the group's customer base con- 
tinued. Businesses independent 
of Vosper winning warship 
contracts had risen to 15 per 
cent of group earnings - and 
would reach 20 per cent, fol- 
lowing the acquisition last 
month of HSDE, a business 
which makes electronic con- 
trol systems for gas tur- 
bines. 

Vosper has bid against the 
GEC- Yarrow yard on the Clyde 
to build up to seven San- 
down class minehunters for 
the Royal Navy and said it 
hoped to hear the outcome in 
the next few months. The 
Southampton group has built 
the five existing Sandown ves- 
sels, which have fibreglass 
hulls. 


Vosper Thomycroft 



Peter Usher continuing to broaden the group’s customer base 


Mr Usher said: “We have 
responded vigorously to this 
tender and were pleased to 
note that bids proposing for- 
eign hulls will not be accepted 
on this occasion." 

Vosper is competing with 
German and French shipyards 
for a patrol craft order for the 
Kuwait navy. 

It is also interested in a joint 
venture to build six mine- 
hunters for the Royal Austra- 
lian Navy, which would be 


• :• p 

. • : The Financial Times * /J ? ' t 
Ians to publish a Sifryey on ^ ; ' 

. ■. ■. v. ■ 

ritain's Ethnic 

.01 



1 v 

-i 1 i UK 

• • ’j .• 

onThurscfay, C 


The surrey wfll report on the important contribution made to the 
economy by ethnic minority businesses In the United Kfogdam. it win 
examine how their future prospects will be affected by competition at 
homo and from abroad, and how they are responding to tbe duDogt of 
am monite rsvtvfo in the UK. 

For more I nform a tion on edttortal contact and details of advertising 
opportunities available In this survey, please contact: 

ANTHONY G HAYES 

Teh 021 454 0922 Fax: 021 456 0889 


FT Surveys 


constructed in Australia, 
but using Vosper techno- 
logy. 

Mr Usher said that with good 
prospects of new orders from 
home and abroad, he had every 
expectation that the group 
could continue to report 
good results in the year 
ahead. 

Earnings per share rose 12 
per cent to 46.2p (4L3p). A final 
dividend of I2.7p gives a total 
ISp (lfLSp), an increase of 14 
percent 

• COMMENT 

These results, slightly ahead of 
expectations, showed again 
that Vesper’s focus on mine- 
hunters and patrol craft - sell- 
ing mainly to the Middle East 
and east Asia - has it insu- 
lated from the downturn in 
spending by former cold 


1962 
'Turn* rum mini 

warriors. A lack of recent 
orders has brought down the 
future order book from more 
than £700m last year to £500m. 
but the group se ems well 
placed to win some of the 
work to be awarded soon. The 
Royal Navy minehunters order 
would be particularly welcome, 
as the proportion of work 
being done for the Ministry 
of Defence has slumped to 
only 2 per cent, with 95 per 
cent earmarked for export. 
Forecast profits of £24m put 
the shares, down lp yesterday 
at 778p, on a prospective multi- 
ple of 15^ - an 8 per cent pre- 
mium to the market. The 
shares are tightly held and 
have had a good run. more 
than tripling in value since 
1992, but they could advance 
further if the minehunter order 
comes through. 


1 DIVIDENDS ANNOUNCED [ 


Carres - 

Total 

Total 

Current Date of 

ponding 

for 

last 

payment payment 

dividend 

year 

year 


Argyfl 

—fin 

7.75 

Aug 23 

7.35 

115 

10.9 

Carlton Comma int 

aist 

Aug 26 

7.4 

- 

18.7 

Chamberlin HOI „ 

—fin 

4.5 

July 30 

4X> 

as 

6-25 

Countryside 

— int 

1 Alf 

Sept 6 

1.41 

- 

4.11 



10.8 


10.2 

14.8 

14 

Dundee & London 

—im 

3 

July 29 

3 


9 

Fleming High Inc...— fin 

1.1 

Juiy 1 

1.45 

4.4 

as 

Land Securities 

fin 

17.4 

July 18 

16.55 

24 

22X15 

Leeds 

—int 

2.1 

July 1 

1-833’ 

- 

5.667* 

London Smaflac fin 

JL33 

July 11 

2.29 

3.17 

3X37 

Mercury Asset fin 

18.5 

July 1 

12 

22-5 

IS 

Norland 

— Int 

3X56 

July 15 

2-78 

- 

9.74 

Murray Ent' prise int 

0.7 

Jufy 29 

nfl 

- 

0.7525 

New London Cap — int 

0j5* 

July 15 

- 

. 

• 

North West Water. 

— fin 

15.4 

Oct 3 

14.27 

23.07 

21.4 

Vosper 

—fin 

12.7 

Aug 16 

11.1 

18 

15E 

Warburg (SG) 

—fin 

16 

July 1 

13.75 

22 

19 

Young & Co's 

—fin 

7.75 

July 12 

7.5 

15 

14.5 


Dividends shown penes par share net fOn increased capital. §USM stock. 
"Equivalent after aflowing for scrip issue. * Maiden dividend. 


m 


FINANCIAL TIMES CONFERENCES 

WORLD GOLD 
CONFERENCE 

London - 6 & 7June, 1994 

This important conference, which has been timed to coincide with the tercentenary 
celebrations of the Bank of England, will feature central bank presentations, a review of 
international mining developments and a major forum on the role of the markets in the 
mid-1990s. To be chaired by Mr Dick Gazmararian, Republic Mase Bank Limited; 
Mr Tom R N Main, Chamber of Mines of South Africa and Mr David Pryde, J P Morgan, 
speakers will include: 


Mr Rupert Pennant- Rea 

Bank of England 

Dr Chris Stals 

South African Reserve Bank 


Mr Phil Wilson 

Standard Chartered Bank 
The Mocatta Group 

Mr Kevin A Foo 

Bakyrchik Gold PLC 

Mr Clem Sunter 

Anglo American Corporation of 
South Africa Limited 


Mr Harry M Conger 

Homestake Mining Company 

Mr Jean Zwahlen 

Swiss National Bank 


Mr Robert Ashley 

Rothschild Australia Limited 

Mr Yuri Mitvuk 

Bank for Foreign Trade of Russia 

Mr James P Riley, Jr 

J Aron & Company/Goldman, Sachs 
& Company 


A FINANCIAL TIMES CONFERENCE in association with THE BANKER 


WORLD GOLD 


Please send me conference details 


Financial Times Conference Organisation 
PO Box 3651, London SW12 8PH, 

Tel: 081-673 9000 Fax:081-6731335 


| — | Please send me details about marketing opportunities 
| [ Please send me details about The Banker 


A FINANCIAL TIMES 
CONFERENCE 

lx moc Mflqpwfcfa 

THE BANKER 


Name Mr/Mrs/Mis/Other _ 
Position 


_Dept_ 


Compaoy/Organisaiion 
Address 



Post Code_ 
Tel 


Tlx 


_City 

Country 

Fax 


Type of Business. 


HA 


Leeds up 
i despite 
margin 
pressure 

: By David Blackwell 

Leeds Group, the West 
Yorkshire-based textile dyer 
and printer, lifted profits by 17 
per cent and sales by 21 per 
cent in its first half. 

■We have managed to wring 
some growth out of pretty 
challenging market condi- 
tions," said Mr Robert Wade. 

rhabrnan. 

Pre-tax profits rose from 
£2-9 2m to £3.4 1m in the six 
months to March 31. cm turn- 
over ahead from £21.7m to 
£26.40. 

Mr Wade said the UK high 
street fashion business had 
been under constant price 
pressure. 

Continental Europe had 
been at a low ebb since the 
autumn, mairing trading tough 
in the Benelux countries, Ger- 
many and France. But while 
many continental competitors 
were losing money, the 
group's transfer printing busi- 
ness is the Netherlands, 
acquired last year, was trading 
profitably. 

Margins were also under 
pressure, from increased 
prices for both wool and cot- 
ton and demands for extended 
credit However, tbe group had 
attained across the board cuts 
of at least 5 per cent from its 
dye wares and chemicals sup- 
pliers. 

The group, which makes 
most of its money through 
commission business, had suc- 
ceeded in reducing its depen- 
dence on clothing by going for 
curtain and upholstery busi- 
ness. 

The outcome included 
£332,000 (£385,000) of business 
interruption insurance follow- 
ing a fire at a factory in 
November 1992. 

Earnings rose from 7.2p to 
Sp. The interim dividend is 
increased from 1.83p to 2-lp. 


Approach 
to High 
Gosforth 

High Gosforth Park, which 
owns and runs Newcastle 
Racecourse, said it had 
received an approach which 
might or might not lead to an 
offer for the company. It 
advised shareholders to take 
no action for the tune being. 

Last week the company's 
application for planning per- 
mission to develop its green 
belt site was turned down by 
Mr John Gmmner, the environ- 
ment secretary. In the light of 
that decision, the directors said 
they were reviewing all possi- 
ble options. 

Loss of £0.47m for 
enlarged Arcadian 

Arcadian International 
reported pre-tax losses of 
£471,000 for the eight months 
to December 31, its new year- 
end- In the year to April 30 
1993 there were losses of 
£994.000. 

Mr Robert Breare, chief exec- 
utive, said the reporting period 
had been one of transition for 
the company whose core busi- 
ness was now the ownership 
and operation oF hotels and lei- 
sure facilities. 

The results were the first 


Flotation puts £141.5m 
value on London Clubs 


By Daufcl Biackwofl 

London Clubs International, 
owner of the Rltz CLub and 
five other London casinos, yes- 
terday finalised its flotation, 
pricing the shares at 200p to 
give It a market capitalisation 

Of £141 JSttL 

Or the 16.38m ordinary 
shares to be placed with insti- 
tutions, 4.09m will be subject 
to a clawback to meet retail 
demand through intermedi- 
aries. 

The shares - of which 
15m are new - have been 
placed by Samuel Montagu, 
which has fully underwritten 
the issue. 

The placing will raise about 
£27.5m net of expenses, which 
win be used to pay off bank 
debt incurred under the 1989 
management buy-out from 
Grand Metropolitan. 

The group will be quoted on 
the USM because the manage- 
ment has only two years’ expe- 
rience of the company, and 
Stock Exchange rules require 
three years. 

The change of management 


followed a police raid in 1981 
under the Gaming Act. just 
days before a previous planned 
flotation. 

The chibs were Issued with 
new licences in autumn 1992. 
Mr Alan Goode no ugh, chief 

executive, said the company 

considered tie events of 1991 
as "very much a thing of the 
past". The company would be 
seeking a full listing next 
year. 

The prospectus shows the 
group, which operates casinos 
in Europe and Egypt as well as 
on cruise ships, made pretax 
profits of £l4m in the SI weeks 
to March 27, compared with 
£9.lm in the 53 weeks to April 
6 1993. 

Turnover amounted to 
n 46.4m (£1 43.7m). 

Pro forma pretax profits are 
put at £23.lm. and earnings per 
share before restructuring 
costs of £2ra at 22Jp, giving a 
multiple of 8.9. 

The prospectus said the 
directors would have recom- 
mended a dividend of 11.92p, 
giving a notional gross yield of 
7.45 per cent 


Mr Goodenough said the 
group intended to export its 
expertise la the industry. 

Early next month It is open- 
ing a new casino In Tuba, 
Egypt, across the border 
from the Israeli resort of 
Eilat. 

• COMMENT 

This issue has been priced to 
go, even an a day when the 
market fell sharply and the 
National Lottery winner was 
announced. Although the high 
rolling Rite accounted for 
almost two thirds of last year's 
trading profits, the portfolio of 
casinos is strong. This helps to 
minimise the risk of relying 
too heavily on a few high 
speteflng players, although It Is 
worth recalling this week’s 
warning from Ladbroke that 
credit betting profits were 
down in the first four months. 
The yield to very high, and 
strong cash generation, will 
sustain it Providing the mar- 
ket does not come back too far, 
the shares should move to a 
premium when dealings start 
on June & 


Paramount calls for £5.42m 


By Carolina Southey 

Paramount the public house operator, is raising 
£5.42m net of expenses through a 1-fbr-l rights 
issue. 

Most of the proceeds will be used to buy* 28 
pubs from Greenalls Group for a total consider- 
ation of £3 27m. 

The issue of 69Bm shares, priced at 9p each, 
has been fully underwritten by Meespierson. 

The company’s shares closed up V«p yesterday 
at Up. 

The company also announced it had applied 
to move from the Unlisted Securities Market to 
a full listing. 

The acquisition will increase the number of 
pubs owned by Paramount to 124. It operates 246 
pubs in north-west En gland and Wales. All its 
establishments are tenanted. 

Paramount also intends to use port of the 


NEWS DIGEST 


proceeds to make a farther investment in Real 
Inns, a joint venture company owned equally 
with John Labatt (UK), a subsidiary of Labatt, 
the Canadian brewer. Real Inns owns 77 
pubs. 

Paramount said It was buying the new pubs 
os part of its strategy to increase the overall 
value of its estate and to improve operating 
margins. 

"The additional pubs will give us greater pur- 
chasing power with breweries. Our aim is to 
increase our borrelage through a large estate 
while keeping our overheads lean,” the com- 
pany said. 

Its strategy is to buy smaller value pubs - in 
the £100.000 to £140,000 range - and to develop 
this niche market 

In tbe six months to November 30 1993 the 
company reported pretax profits just ahead 
from £261,000 to £273,000. ' 


since the increase in capital 
and the acquisition of tbe dip- 
per and Hidden hotels in 
November. 

Turnover was £l2.8m 
(£326.000). Losses per share 
came through at lJtp (8.6p) 
after a tax credit of £325,000 
(charge £73,000). 

Donelon Tyson 
accounts delayed 

Shares in Donelon Tyson fell 
4p to 15p yesterday as the 
Cheshire-based building and 
civil engineering company 
announced that its annual 
accounts would be delayed and 
that the dividend was likely to 
be passed. 

The directors that their 
expectations of the group's 
results for the year ended 
December 31 1993 were based 
on an assessment of the value 
of work in progress which 
reflected the recognition of cer- 
tain contractual claims. 

Because of delays In agree- 
ing some of those claims they 
could not now be included in 
tbe 1993 results, they said. 

The value of the unresolved 
c laims is B3 Sm 

New London Capital 
declares dividend 

New London Capital, one of 
the recently formed Lloyd’s 
Investment trusts, reported its 
results for the period from 


incorporation to March 31 1994. 

Net assets per share of the 
trust at end-March stood at 
91Jip. Attributable revenue far 
the period amounted to 
£539,592. Earnings per share 
emerged at 0£p and an interim 
dividend of OJp is declared 

North American 
Gas net assets down 

Net asset value per share of 
North American Gas Invest- 
ment Trust stood at 9083p at 
April 30, against 10L68p a year 
earlier. 

For the nine months to end- 
April there were after-tax 
losses of £88,000 (£316,000 reve- 
nue), equivalent to OJ25p (05p 
earnings) per share. 

Dundee & London 
beats benchmark 

Dundee & London Investment 
Trust achieved growth of 10 
per cent in its net asset value 
per share over the six months 
to April 30 against 7.4 per emit 
by the benchmark FT-SE 
SmallCap ex Investment Trusts 
Index. 

The figure improved from 
303.4p to 3339p. At the previ- 
ous year end the figure was 
270p. 

Net revenue far the half year 
to end-April was £725,000 
(£654,000) for earnings per 
share of 4J28p (3.85p). The 
interim dividend is held at 3p. 


F&C Emerging net 
asset value at 117.1p 

Foreign & Colonial Emerging 
Markets Investment Trust 
reported net asset value per 
shire, of 117.1p at . March 31 
against 83.7p a year earlier and 
!00-2p at the September 30 year 
and. 

There was a net loss for the 
six months to end-March of 
£270.000 (£222,000 revenue) for 
losses per share of 027p (earn- 
ings 022p). 

Murray Enterprise 
net assets fall 

Murray Enterprise, the invest- 
ment trust specialising in 
smaller UK quoted companies, 
reported a fall in net asset 
value per share from I4l.48p to 
136.02p during the year to 
March 31. 

The decline over the last six 
months was even more marked 
with the figure at September 80 
being I44.4ip. 

However, the fully -diluted 
figures showed an increase to 
l35J38p (lQ5L48p), with the Sep- 
tember 30 figure at I24.42p. 

Net revenue for the six 
months to the en d of March 
was £280,000 (£2,000) reflecting 
the extensive chang es in the 
portfolio in the period. Earn- 
ings per share were 1.3p (0.01 p) 
or L16p (aoip) fully diluted. 

An interim dividend of Q.7p 
(nil) Is declared. 


CENTRA LE NUCLEAIRE 
- EUROPEENNE 
A NEUTRONS RAPIDES 
S.A. - NERSA FRF 

"EHranaF 

Coupon nr 79 
. Amount FRF 143,75 
for thee enomination of 

THE PRINCIPAL PAYING 
AGE NT SOGENAL 
SOC1ETE GENERALE GROUP 

15, A/. E Router 
LUXEMBOURG 



The andeabted faaalaeas aad 
towteappaal onto PriadpaMr ■* 

be esBBiinwl wtu particular 

amp* sal* on Banking. Plnanoa 
Baatnaaa Services end tba 
I CoeCanece hakMbv. 


Seen anaid tba weitd by a adOon 
Idoa raadam tide toney aria ba an 
Idas! odvarthilaf madhua for ell 
tawineaaaa Involved la the 

Maotgaaqoe ecaia*v. 

For an edtorfal ajnapd* and 
advattMog b t oc ma tlon cab 
Dtantaie Qood In Peri* 

1*1(1) 43 97 06 SO 
or tax (1) 42 97 OO 24 

FT Surveys 


Notice to the Shareholders of 

Portuguese Investment Fund Limited 


Registered Office: 

Portuguese investment Company Limited 
Cayman Internationa] Trust Bulkling 
Albert Panton Street 
P.O. Box 309 

Grand Cayman, Cayman Islands 

Notice is hereby given that die Animal General Meeting of the Company will be held at Morgan 
Stanley Bank Luxembourg, 6C route de Treves, L-2663 Senningetberg Luxembourg on June 30, 
1994. at 9dX) AM to outsider the following agenda: 


Paying Agent 

Morgan Stanley Bank Luxembourg 
6C route de Treves 
L-2663 Senningexbexg 
Luxembourg 


1. Proposal to hear the management report of the Directors on the business of the Company and 
the conduct of its affairs during the fiscal year ended December 31, 1993. - 

2. Proposal to approve the Statements of Assets and Labilities of the Company as of December 
31 r 1993 and the Statement of Operations for the period commencing January 1, 1993 to 
December 31, 1993, as audited by Arthur Andersen & Co. Such statements ore available at the 
Company's regbterd office listed above. 

3. Proposal to approve the selection of Arthur Anderson & Co. as the Company’s independent 
auditor. 

4. To consider and act upon any other business as may properly come before the meeting or any 
adjournment thereof. 

A Member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend end 
vote in his stead. A proxy need not be a Member of foe Company. The requisite instrument of proxy 
is available at the offices of the Paying Agent listed above and mutt be delivered to five Paying 
Agent AT LEAST 48 HOURS BEFORE THE TIME OF THE MEETING. Membtn bidding bearer 
shares mutt either present their share certificates at the meeting or attach the certificates to (he 
proxy, tzi lieu of share certificates. Members may substitute a voting certificate obtained through the 
company's Paying Agent by dep ositing their shores with the Paying Agent AT LEAST 48 HOURS 
BEFORE THE TIME OF THE MEETING. A Member wishing to ap point a proxy is advised to 
defivg a completed and signed ipatnanent of proxy to the address specified via courier in order to 
ensure his representation at tbe meeting. 

The Articles of Association of the Company do not provide far telex, cable or other means 

of telecommunication in respect of instruments to proxy. 

The Board of Directors 







FINANCIAL TIMES THURSDAY MAY 26 1994 


27 


COMPANY NEWS: UK 




.*5 


4 « 


alls f„ r 


£54i 


^ <5 
^3* 





f *M ilfcrjsi 
-iiiair 


f:v: 

:k ’ .>*.> !L 


Young hits 
out over 
duty after 
standstill 

By Graham Deflor 
Mr John Young, the normally 


2* 


Co's Brewery, was hi far from 
jocular mood yesterday as he 
launched a fresh attack an the 
government's "short-sighted 
policy on beer doty. 

“British brewers contribute 
niorcta [excise] doty thaw in 
the rest of the European Union 
put together, which puts ns at 
a major disadv antage ." 

Mr Young was speaking 
after announcing results virtu- 
ally unchanged for the S3 
weeks to April 2. “We are 
being hampered by levels of 
duty that are totally rnifgh* 
when' compared with the low 
rates levied on our European 
competitors." 

He continued: “Cheap, and 
often illegal, imparts are tak- 
ing away much of our trade 
and therefore the govern- 
ment’s Income." He called for 
a immediate reduction in Brit- 
ish rates “to restore confi- 
dence and to safeguard thou- 
sands of jobs*. 

Pretax profits amounted to 
£ 5 . 18m (£5, 17m). Despite the 
extra week’s trading, turnover 
showed a marginal decline to 
2TZ3m (£72-9m). Following a 
sizeable drop at the halfway 
stage, interest charges for the 
foil year remained relatively 
high at £2. 73m (£3. 02m) 
reflecting finance of the deben- 
ture stock Issued in April 
1993. “The long term security 
and stability the debenture 
gives us has meant that we 
have been unable to benefit In 
fall from lower rates’*, Mr 
Young said. 

A recommended final divi- 
dend af7.75p Hits the total by 
0.5p to ISp, covered 1J8 thmw 
by earnings of 2&43p (26.4p). 


ACT division 
forms alliance 
with Gartner 

ACT Business Systems, a 
division of the Bfradiighani- 
based computing services com- 
pany, has formed a strategic 
partnership in Europe -with 
fhe Garina- Group, a Ieadmg 
US information technology 
consultancy, writes Alan Cane. 

The alliance marks a further 
stage in ACT’S transformation 
from computer manufacturer 
to a provider of computing ser- 
vices. 

The alliance is intended to 
exploit the expertise of BIS 
Information Systems, which 
ACT bought last year for 
£94m, and ACT Logsys, part of 
the group which specialises in 
open systems far central and 
local government. 

Last year, ACT made pre-tax 
profits of tIISm on rales of 
£108m. Gartner, once a Saat- 
chi & Snatch! subsidiary but 
now a US company quoted on 
Nasdaq, advises companies on 
information technology strate- 
gies. It will be the prime con- 
tractor is the new alliance, 
subcontracting analytical 
work to ACT. 

Mr Harvey Farr, managing 
director of ACT Business 
Systems, said he believed the 
division, which had sales of 
about £32m last year, was 
complementary to ACT’S core 
financial interests. 


Increases in television, activities and continuing growth in video sales 

Carlton advances 33% to £73m 


By Raymond Snoddy 

Mr M ichael Green, chairman of 
Carlton Communications, m«y 
have picked a losing National 
Lottery ticket yesterday but he 
was stiD able to celebrate an 
unexpectedly high 33 per cent 
rise in interim pre-tax 
prefits. 

Carlton bad a 10 per cent 
stake in the Great British Lot- 
tery Company, one of the 
seven losers in the battle for 
the National Lottery licence. 

Profits of £73.4m (£55.lm) for 
the six months to the end of 
March ware boosted by grow- 
ing profits from Carlton Televi- 
sion, holders of the London 
weekday ITV licence and con- 
tinuing growth, from the video 
sates market, which helped 
Technicolor’s performance. 

Excluding the two month 
contribution from-Ceatral Tele- 
vision, the underlying profit 
increase was about 25 per cent. 

Ironically Carlton, which 



TonyMM 

Michael Green: picked wrong lottery ticket but results ahead 


sow owns the two largest ITV 
companies, will benefit from 
toe launch of the National Lot- 
tery in November, ft is likely 
to generate huge sums in tele- 
vision advertising. 

Most analysts woe predict- 


ing profits of 265m to £7Qm for 
the half year and yesterday 
were raising their expectations 
far the fall year from £l70m to 
£l8Qm. 

“The first six* months have 
shown good growth, both in 


trading, and progressing our 
strategy to expand and mate- 
tain our leading position in 
broadcast television and fib" 
and video services," said Mr 
Green, adding that prospects 
far the next six months were 
encouraging: 

Turnover was £658.7m 
f£469-9m). an increase of 40 per 
cent, fownfrigg Per share rose 
by 16 per cent to 2L3p Q&8p); 
the interim dividend is 
increased to 8J5p (7-4p). 

Turnover in broadcast televi- 
sion, including the Central con- 
tribution, rose to £202. 6m 
(£64.1xo) and pre-tax profits 
were up to £22An (£600,000). 

Pre-tax profits In the video 
and audio products division 
rose to £S5.6m (£308m), largely 
because of the increase in 
demand for seB-lhrough video 
cassettes. Turnover was 
£234L3m (£207Aml. 

The share price yesterday 
fell 22p at 90ip. 

See Lex 


Old Speckled Hen boosts Morland 


By Paul Tayfor 

Morland, the Thames Valley-based brewer, 
yesterday reported a 10.6 per cent increase 
In interim profi t s buoyed by a better than 
expected 21 per cent increase in sales of its 
own ales, ted by Old Speckled Hen. 

Pre-tax profits rose to £4.02m (£&63m) in 
the six mouths to March 31, on turnover 
ahead 12 per cent at £2&6m (£23.7m). 

Earnings per share were lZ8p (£L9p) . 
and the interim dividend is lifted to SB6p 
(2.78p.) The shares rose lOp to 5JSp. 

Mr Jasper Ghxttetimck, chairman, arid 

the result continued a trend of sustained 
growth and had been achieved despite a 


generally depressed trading environment 

Operating profits rose 123 par cent to 
£5Ahn but were reduced by a £109,000 
(£30,000) deficit an property disposals mid 
net interest costs of £1.28m (£L.16m). 

Sales of Old Speckled Hen, now its big- 
gest selling beer brand, more than doubled 
over the same period last year, helped by a 
series of agreements with wholesalers and 
other brewers. Overall beer volumes were 
ahead 13 per cent; and the group said it 
plans to increase capacity at its Abingdon 
brewery next year. 

Volumes in the tenanted estate were 
slightly lower but profits were marginally 
ahead on a Hke-for-Eke baste. The 75-pub 


estate, showed a 17 per cent increase in 
profits with those pubs specialising in food 
again recording strong growth. 

Food now represents 27 per cent of sales, 
and meals in the Artist's Fare restaurants 
showed a 12 per cent increase. The group 
is seeking more Artist's Fare and Ale 
House sites. 

Volumes in the the free trade, including 
wholesalers, were 50 per cent higher and, 
combined with a £100,000 reduction in bad 
debts, led to a marked improvement In 
profit contribution. 

Net borrowings were 2233m, down from 
£24.8m at the year end, equivalent to gear- 
ing of 22.7 per cent 


Quality Software to 
raise £1.6m via placing 


By Alan Cana 

Quality Software Products, the 
Gateshead-based developer of 
accounting software for large 
companies, is raising £L6m 
through a placing to enable the 
development of international 
business relationships. 

The share price rose 4p to 
405jp.- . . 

QSP has invested some £ 16 m 
over the past few years in 
developing an advanced sys- 
tem, Universal Olas, which has 
now been sold to eight custom- 
ers. 

Last year, it concluded a deal 
with Global Software, a US 
accounting software company, 
through which Global will 
distribute Universal Olas at 


m f nfm m n cost to QSP. 

It Is understand that the 
company h«» been having dis- 
cussions with potential part- 
ners in Japan, France, South 
America, the Middle East and 
east Asia, with a view to stri- 
king similar distribution 
arrangements. 

The company believes that 
£600,00 . will be needed to 
ftnaticn the^ret of these deals. 
The rest of the money is being 
used partly for product devel- 
opment and partly as p r imin g 
finance should opportunities 
from new business partner- 
ships present themselves. 

QSP recently annouixigd an 
alliance with Hewlett Packard, 
a leading US electronic manu- 
facturer. 


Chamberlin & Hill shows 
11% decline to £1.42m 


Chamberlin & thh , the Tnakw 
of iron castings, electrical con- 
duit fittings and switchgear, 
reported a near 11 per cent 
decline in pretax profits from 
£L59m to £L42m for toe year to 
oid-March. 

The outcome was struck on 
turnover up by 8 per cent, from 
£20 An to £22m. Interest pay- 
able was £131,000 (£141,000) and 
after tax of £288.000 (£44UX») 
earnings per share came out at 
15.T8P (16J07P). 

Despite the fall in earnings 
directors are recommending an 
unchanged final dividend of 


A5p, making &5p (&25p) for the 
year. 

Mr John Eccles, chairman, 
said the second half of the year 
had proved more volatile than 
expected and the forecast 
improvement in the trading 
position following high levels 
of capital expenditure at the 
Bloxwich foundry did' not 
materialise. 

In addition. Fitter & Poulton 
ended the year with second 
half profits well below its esti- 
mates as a result of price com- 
petition and sharply reduced 
margins. 


This advertisement is Issued in compliance with the requirements ofThc international Stock Exchange 
of the United Kingdom and the Republic of Ireland limited (the “London Stock Exchange”), ft does 
not constitute an Invitation to any person 10 subscribe for or purchase any. securities. 

Application has been made to the London Stock Exchange for the grant of permission to uade on the 
Unlisted Securities Market of the London Stock Exchange In the whole of the ordinary share capital 
of London Clubs International pic (the ‘'Company") Issued and now being Issued. It Is expected that 
admission to trading will become effective and trot dealings in the Ordinary Shares will co m mence 
on Monday, 6th June, 1994- It Is emphasised that no application has been made for these securities 
to be admitted to the Official List. 

LONDON CLUBS INTERNATIONAL pic 

(Incorporated in -England under the Companies Act 1985. No. 2962479) 

PLACING AND INTERMEDIARIES OFFER 

by 

SAMUEL MONTAGU 
of 

16,378,989 Ordinary Shares of 5p each 
at 200p per share payable in full on application 
(of which 4,094,7^8 Ordinary Shares of 5p each 
are being placed subject to recall to satisfy applications 
by Intermediaries and Preferential Applicants) 

A rhnriwvl “ "" 

umortjca Amount No - Amount 

2M*SiSs 100 1 678 255 Ordinary Shares of 5p each 70,753,751 £3,537.688 

22 124 000 £221,240 DefiW Shares of Ip 22.124.000 *221,240 

' 50 505 450,505 B Shares of 21 each 50,505 £50,505 

IXStKirtSturcsarcKltw'retlocnicdand the B Shares purclwed by iIwCofii|nayj» *otwmpoe*Ible foOciwlaji the Pbdng. 

IjuuIm n,,Ko dx out of a total Of 21 casinos In London where the Company has a. market 

JSftf <£nt. of the total win. In addition, the Company operates in a number ■ 

of overseas locations. 

, h _ intermediaries Offermust be received by 12.00 noon on Wednesday, 1st June, 
be^ember firms of the London Stock Exchange orotber securities 

below. 

Copks of the Prospectus 

Ami t^Londbn” Sioc Sc Excnange, Loouunouxac ™wuks »v*w, 

Announcements Office of the Lont»"-> ec2n tifpffor collection oniyjandidurfng normal business 
Entrance, ^BmhojnnKW holidays excepted) up to and including 9th June, 1994, 

srs So's'xs™ 


Company's registered 
Samuel Montagu A Co. Limited 
tQ Lower Thames Street 
London EC3R 6AE 


Thames Exchange, 10 


James Cape] & Co. Limited 
0 Queeq Sum Place : 


26th May, 1994 


London EC4R 1BL 


MOSCOW NARODNY BANK LIMITED 

Record Profits For 1993 



1993 

1992 

Financial Highlights of consolidated results 

£m 

£.171 

for the year ended 31st December 1993 



Total Operating Income 

30.9 

27,9 

Retained Profit/(Loss) For The Year 

43.6 

(316.0) 

Total Assets 

951.8 

8S4.3 

Shareholders’ Funds 

197.8 

150.2 


•OPERATING INCOME UP I IX 


•PROFIT REACHES £43.6M 


•ESTABLISHED 75 YEARS IN THE CITY OF LONDON 


Moscow Narodny Bank Limited has been incorporated in the City 
of London since 1919 and provides a comprehensive range of 
international and merchant banking products and services to corporate, 
government and private customers with particular emphasis on business 
related to the economics of the Commonwealth of Independent States 
(CIS) and of Central Europe. 

To receive a copy of Moscow Narodny Bank's annual accounts please 
contact the bank at the following address: 

MOSCOW NARODNY BANK LIMITED 

81 KING WILLIAM STREET, LONDON K’4P 4]S TEL: 071 621 2066 PAX. 071 2SJ 4840 





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28 


FINANCIAL TIMES THURSDAY MAY 26 1994 


COMMODITIES AND AGRICULTURE 




Grain price fall 
sparks sell-off 
in commodities 


By Deborah Hargreaves and 
Kenneth Gooding 


Commodity markets sustained 

a long-awaited sell-off yester- 
day as the drop in grain 
futures prices in Chicago 
spilled over into other markets. 

July coffee futures price at 
the London Commodity 
Exchange lost almost $250 a 
tonne at one stage in hectic 
trading. It later recovered to 
close down $138 a tonne at 
$2,210 a tonne. The nervous- 
ness in the commodity marirpfe; 
also affected cocoa which lost 
£30 a tonne at £1,024 a tonne. 

The fall in price was partly 
due to speculators and fund 
buyers taking a breath in their 
current commodities baying 
spree. But analysts said the 
coffee market still looked tight 
even at these prices and could 

move hi gher a gain 

“Given the magnitude of the 
rally, the market still seems 
well supported at these breaks 
and I don’t think we’ve seen 
the highs yet," said Mr Bill 
O’Neill, softs analyst at Merill 
Lynch in New York. 

The coffee market has been 
pushed upwards by the reluc- 
tance of many companies to 
sell stocks they are holding 
because they are worried about 
further price rises. But supply 
tightness is expected to remain 


even In spite of the decision 
earlier this week by members 
of the Association of Coffee 
Producing Countries to sell off 
the rest of the stocks held 
under their export retention 
programme. 

Investor interest in commod- 
ity mar kets has been sparked 
by the current price rises, 
which have received a lot of 
attention in the media. This 
has added fttel to the recent 
price spiral. Mr Lawrence 
Eagles, analyst at GNI, the 
London brokers said: “I’ve 
never known as much media 
interest in commodities in all 
the seven years I’ve covered 
the markets as there has been 
in the past week.” 

Some of the heat was also 
taken out of London Metal 
Exchange trading. There was 
much less business than in 
recent stormy days and copper 
trading became hesitant above 
$2^00 a tonne - but metal for 
delivery in three months 
reached $2^05 before a down- 
ward reaction set in. By the 
official close three-month cop- 
per was down $17 at $2,279.50 a 
tonne and in late trading it fell 

a gain tO tOUCh $2^50. 

Traders suggested that the 
market was going through a 
necessary period of consolida- 
tion before making another 
upward move. 


MARKET REPORT 


Base metals follow copper 


London Metal Exchange base 
metals prices generally fol- 
lowed copper higher in early 
trading yesterday and then 
lower as the day progressed. 

ALUMINIUM moved in a 
narrow range, meeting resis- 
tance around $1+370 a tonne for 
three months delivery end- 
ing at $1^3 66, a $5 loss. 

NICKEL struggled near the 
lower end of the day's range 
for most of the session, but 


traders said buying was being 
attracted on the dips. The 
three months position ended at 
$6*555 a tonne, down $135. 

At the Txingnn bullion mar - 

ket the GOLD price recovered 
most of Tuesday's fell as buy- 
ing was prompted by the 
weaker dollar and sharp drops 
in bond prices. But the market 
looked very much in the hands 
of the investment funds. 
Compiled from Reuter 


Hydro and 
Amoco in 
Russian oil 
agreement 


By Karan Fossfl in Oslo 


Norway’s Norsk Hydro 
production and Amoco Eurasia 
Petroleum Company yesterday 
announced a co-operation 
agreement that nmiid ipad to 
joint rights for petroleum 
exploration and development 
In the southern part of the 
Russian sector of the Barents 
Sea and the Pechora Sea. 

The ag re e m e n t cove r s joint 
evaluation of oil and gas pro- 
duction opportunities of the 
vast region and close coopera- 
tion with Russian companies 
and research ms f i f n tes - 

The two companies have sep- 
arately studied this part of the 
Arctic during the past five 
years but have joined forces to 
co-ordinate resources in an 
e ffo rt to enhance their evalua- 
tions and working knowledge 
of the area, for which the Rus- 
sians have announced their 
infwiHnn to issue exploration 
rights. 

A Norsk Hydro executive 
said that the two companies 
would also be looking at sites 
to identify a potential location 
for an oil export terminal. 

Amoco and Hydro last 
month joined Texaco and 
Exxon in establishing the 
Tinian Pechora Company, 
which is negotiating a produc- 
tion sharing contrac t with Rus- 
sia for an area onshore in the 
Tinian Pechora Basin. 

In the Barents and Pechora 
Seas Hydro and Amoco will he 
seeking to identify areas where 
exploration could be under- 
taken. 

Five years ago Hydro pro- 
vided tec hnical assistance to 
the Russians during produc- 
tion testing of the giant Shtok- 
manovskoye field, believed to 
be one of the world's biggest 
gas fields, in the northern part 
of the Barents Sea. Hydro bad 
hoped to be awarded a produc- 
tion sharing agreement for the 
field, which went instead to 
the Russian company RosshelL 
Hydro withdrew from the proj- 
ect in 1992. 


Economic reform brings golden dawn in Peru 

Sally Bowen on the flood of foreign miners into South America’s ‘new Eldorado’ 




T o judge from the inter- 
est shows in last week’s 
first ever gold sympo- 
sium hpld in Lima, Peru is now 
seen as the continent's new 
Eldorado. More than 800 gold 
experts - geologists, metallur- 
gists. traders, environmental- 
ists and just plain miners - 
attended the three-day event, 
“It’s like Chile was 15 years 
ago.” said Mr Johan Smit of 
Newcrest’s Peruvian subsid- 
iary. “There’s a let’s go’ feel- 
ing which is tremendously 
exciting. It’s the herd i n sti n ct, 
but in this case the herd is 
right" 

Acting as chief for 

foreign interest - and drawing 
gold prospectors to the north- 
central Andean department of 
Cgj amar ca - is the provenly 
successful Miners Yanacocfaa 
operation, a joint venture 
between Newmont Mining of 
Denver, leading local group 
Buenaventura and France's 
BRGM. 

Yanacocha is a perfect adver- 
tisement for the opportunities 
on offer in Peru today. Its gold, 
in a low-grade disseminated 
deposit, was commercially 
unrecovoable until the devel- 
opment of leaching tnrhntrp wc 
over the past decade. Now. 
since coming on stream last 
August, the company has 
clawed back its S37m initial 
investment in just seven 

mnnthc 

Carachugo, Yanacocba’s first 
deposit, has mineable reserves 
in CTrggj of Mm tnnwpg averag- 
ing 1.38 grams of gold per 
tonne. By November a second, 
nearby deposit known as 
Maqui Maqui will be producing 
its first dore bullion. Larger 
and richer even than Cara- 
chugo, Maqui Maqui promises 
40m tonnes of ore at an aver- 


Dexaand for gold in markets covered by the 
World Gold Council fell by about 25 per cent in 
the first quarter compared with the same 
months a year ago. from 68&Z tonnes to OILS 
tosses, the producers’ organisation reported 
yesterday, writes Kenneth Gooding, mining cor- 
respondent. 

In early 1993 gold prices in IS dollar terms 
touched a seven-year low and demand was also 
boosted by Import liberalisation in India where 
the number of jewellery shops consequently 
increased tenfold, the council pointed out the 
market was retaining to normality and d-nami 
was bolding up weti, it said in Its latest Gold 
Demand Trends publication. 

The markets monitored by the council repre- 
sent about 75 per cent of total world demand . 


Among the price-sensitive "developinf mar- 
kets" demand in India was down from 153.1 
tonnes In the first quarter of IMS to $84 
tonnes this year; in “Greater China" - which 
includes Hong Kong and Taiwan - it was down 
from 1664 to 1034 tonnes; and in the Gulf 
states It fell from 73 to 494 tonnes. In Tokay, 
where the market was hit by political uncer- 
tainty and devaluation of tin local cm 
demand fell from 32.7 to 12 tonnes. 

In the developed markets, demand in the IK 
was flat at 574 tonnes compared with 584 
tonnes, while in Japan It fell from 554 to 49.1 
tonnes. Most European markets ware fiat in the 
first quarto 1 except for Italy, also affected hy 
political uncertainties, where demand Ml from 
20 to 17.1 tonnes. 


curacy. 


age LSI grams a tonne. 

Unlike Carachugo. whose 
porous ore can be scooped up 
and damped directly on to 
leach-pads, Maqui Maqui will 
be exploited as an open-cast 
min»- Trials ind the leach- 
ing cycle will take 120 days 
with a 60 per cent recovery 
rate, comp ar ed with Carachu- 
go’s exceptional 35-day cycle, 
80 per cent recovery. 

Development of Maqui 
Maqui is fn«tfng Newmont and 
partners $40m. With produc- 
tion costs around $150 a troy 
ounce and projected annual 
output of 180,000 ounces, 
Minera Yanacocha is on to 
awntfw hugely profitable oper- 
ation. 

Combined output from the 
two Yanacocha deposits should 
top 400JXX) ounces next year. 
That alone will boost national 
gold production to close to 40 
tonnes a year and catapult 
Peru up the Latin American 
gold league table, still well 

htfrrnri Br awl fart vyin g f o r SPC- 

ond place with Chile. Gold 
would then become Peru’s sec- 
ond most important export 
after copper. 


Hard on the heels of New- 
mont in the current Peruvian 
gold rush is American Barrick. 
also Nevada-based. In the past 
six months, Barrick has estab- 
lished an aggressive presence, 
with “between 40 and 60“ geol- 
ogists and minerals experts siz- 
ing up maybe a dozen Peruvian 
prospects. 

Barrick is already drilling at 
Cerro Corona in Cajamarca. 
The company is tight-lipped 
about its findings but industry 
rumours credit Cerro Corona 
with some 15m tonnes at 3 
grams a tonne in an “attrac- 
tive, eminently teachable oxide 
cap" with huge sulphide depos- 
its below, initial investment is 
expected to be in the region of 
$20m. 


A n equally 

newcomer to Peru is 
Canada's Cambior, 
which in March acquired the 
Cqjamarce copper deposits of 
La Graqja. Investing an initial 
$31m in the five-year explora- 
tion stage, Cambior expects to 
start d rilling in June. 

Simultaneously, the Cana- 
dian company will commenc- 


ing development of a recently- 
acquired gold deposit in the 
remote ea ste rn jungle depart- 
ment of Apurimac, the first for- 
eign company to venture Into a 
zona hitherto considered dan- 
gerous. Some 35 people are 
involved in Cambior’s Peru- 
vian operation and investment 
in exploration locally Is “doa- 
ble what we’re spending in 
Chile tills year", according to 
Mr Andre Gauthier, Cambior’s 
regional manager. 

Yet another Canadian com- 
pany, Placer Dome, has also 
gained a foothold In Peru In 
January, it outbid Newmont to 
secure a gold deposit known as 

. tehrmmnr rn. fS>n»riwm the 

northern department of Lam- 
bay eque. Initial studies are 
under way. 

All of this is good news tor 
the long-suffering Peruvian 
mining community. Inward- 
looJdng, nationalistic and pro- 
tectionist economic policies 
meant Peru had been shunned 
by international investors for a 
foil 25 years. With the excep- 
tion of the giant Asarcoowned 
Southern Peru Capper Corpora- 
tion and Japan's Mitsui - 


which Hu continued with a 
tow-pnoflte operation - mining 
derej ogaeat has been left to 

lOC&l (XpttKDttCtfefeSft 

“flow ' hundred mining con- 
cerns have closed downtn the 
past 1$ years and the restore 
badly decapitalised.* said Ur 
Roque Benavides, president of 
the national mining society. 
"Thereto been aimost no new 
exploration. The deposits you 
see today wen known in the 
19S0B." 

Privatisation was an initial 
tri gg e r for Ifriy naHnnal Invea. 

tors. AngtoAmerican/Maotos 
Bhmcos, Cyprus Minerals and 
ChinatoShougang Corporation, 
in addition to Placer Dome and 
Cambior. all acquired their 
stakes lay bidding for formerly 
state-owned deposits at puhHc 
auction. 

. Other foreign tunatm are 
forming associations with 
Puruyten mine-owners, many 

nf irtii— lixM piwiMm rinhni 

bat cannot finance develop- 
ment. Stiff others are partid- 
patingJn the anticipated 
by acquiring shares - many 
teadtog Peruvian mining com- 
panies have large, liquid hold- 
ings available for purchase 
through the Lima stock 
exchange. 

But for many mining con- 
cerns like Newcrest and RTZ. 
Peru's attraction lies in its 
largely unexplored territory. 
Over the past year. Peru's 
mines ministry has seen twice 
as many ctatms lodged as In 
the preriouB four decades. 

“2h Peru, the nice surprises 
come, from grassroots explora- 
tion,* says Mr Smlt.' With 
increasingly attractive macro- 
economic conditions and a 
much improved security situa- 
tion, Useems plenty of foreign 
investors agree. 


0 ei 
sh cf 
jectt 


Firestone man to take over as rubber buffer stock manager 


By IGeran Cooke 
in Kuala Lumpur 


Mr James Hegarty, a senior 
manager at the US Firestone 
Tire and Rubber company, has 
been named as the new buffs: 
stock manager of the Interna- 


tional Natural Rubber Organi- 
sation. 

He replaces Mr Aldo Hof- 
meister, who retires in August 
after nearly nine years with 
Inro. The organisation groups 
the six main natural rubber 
producing countries and 21 


consumer nations. 

At a meeting here this week 
Inro members agreed to 
request for a further confer- 
ence, held under Unctad aus- 
pices. to discuss the formation 
of a new International Natural 
Rubber Agreement. The confer- 


ence Is likely to be held in 
Geneva during the first two 
weeks erf October. 

Despite a rally in natural 
rubber pices in recent months 
Malaysia’s production has con- 
tinued to fell as further land is 
given over to industrial uses or 


planted with the more lucra- 
tive palm oiL The Malaysian 
statistics department says that 
the country's natural robber 
production was 241,202 tonnes 
In the first quarter of the year, 
a drop of 18 per emit on the 
1993 figure. 


COMMODITIES PRICES 


CROSSWORD 


BASE METALS 


LONDON METAL EXCHANGE 

(Pricn from Amalgamated Metal Traded 
■ ALUMINIUM. BBJ PURITY (S per tonne) 


Precious Metals continued 

■ GOLD CQMSt (100 Troy acj <ftroy os) 


GRAINS AND OIL SEEDS 

■ WHEAT LCE (E per tome) 


SOFTS 


MEAT AND LIVESTOCK 


No.8,463 Set by DOGBERRY 


M Vri. 



Cash 

3 mbs 

Ckae 

133X9 

1388-85 

RraviouB 

1342-3 

1372-3 

HgWlow 

133X5 

138971382 

AM OfflcU 

133X5-38 

136X5-9.0 

Kerb dose 


1308-7 

Open tat 

252,778 


Total daSy turnover 

45.166 


H ALUMINUM ALLOY (S par tamo) 


CJosa 

ISfiO-S 

13SO-5 

ProvJous 

1345-55 

1360-66 

HgMaw 

1351 


AM Offidri 

13B1-6 

1360-5 

Kart> dose 


1346-55 

Opon bit 

3.788 


Total dafiy turnover 

1^)10 


■ LEADS par tonne) 



Ckm 

483-4 

501-2 

Previous 

48X5-79 

504-5 

MgMow 

481 

504/488 

AM Offk*4 

481-2 

488-0 

Korb dose 


502-3 

Opan tat 

3X894 


Total daJy turnover 

7.751 


■ MCKEL (5 per tome) 


Ckwa 

6480-90 

8575-80 

Previous 

8830-40 

6720-30 

HgMow 


6680/8610 

AM OTQcU 

6525-30 

6625-35 

Korb dosa 


6660-60 

Open tat 

63,809 


Total daly turnover 

22,456 


■ TIN (S per tonne) 



Close 

8546-65 

5625-35 

Previous 

5566-85 

5630-36 

mgh/low 


0870/3670 

AM Official 

5580-70 

6640-50 

Kerb dose 


5620-30 

Oprai tat 

1X480 


Tatri daly brnover 

4.531 


■ HNC, special wde (6 per tenrw} 

Ctaoo 

962-3 

977-6 

Previous 

96X5-95 

9943-X0 

HflMow 

9687967 

991/972 

AM Official 

958-9 

9843-XO 

Kerb ctooa 


974-5 

Open tat 

102574 


Tatri drily twnover 

18596 


■ copper, wade A (S per tome) 


Ctase 

2271-2 

2278-60 

Prevtaus 

2298-8 

2296-7 

Hgh/fcjw 


2308/2262 

AM Offidri 

2287-9 

2295-6 

Kerb dow 


2274-8 

Open tat 

21X410 


Total daily turnover 

87555 


M LME AM OffieM V% rate: L5085 

LME Ctoetng £W rabe iJStOS 


teoeuim 3teaciJ07g 6mB*i5ora 9m«*i iora 

■ HIQH GRADE COPPER (COfcSX) 


tor* 


OpH 

One cringe 

Hrf i km 

tat M 

H» 10X90 -2.10 1Q8J0 10X20 

1.258 11 

Jh itaJO -223 

- 

1285 SO 

Jul 10X30 -225 10X55 102® 3X751 Ml 

AH 10295 -195 

- 

494 12 

Sep 10290 -190 10L30 10190 

8.858 2/ 

Oct 10220 -1J0 

- 

228 15 


pice dro M0 law 

gq 3B8L6 -<L5 - - - 2 

JBS 3869 -09 388.7 3855 B3JB2A 401018 

Jal 3883 -05 .... 

teg 3693 -04 3813 3886 44J01B 1*581 

Oct 383.1 -04 394 5 382 5 5.134 82 

Dsc 3804 -OS 3887 3880 20088 <533 

TOW 15*908 70228 

■ PLATWUM NYMEXflO Troy tnro y azj 


sae oafs 

pries ctenga Lot 

1H05 -0.10 114.15 11X75 
98.15 - 9825 9X00 


10320 -035 
10525 -020 


TbM 


DM* 

tat 

M 


SMt 
prtot i 

or* 

tew 

Hgh 

OP* 

lam tat Vri 


639 

25 

■■y 

983 

-Si 

1000 

985 35 37 

Jn 

514 

IS 

tel 

1024 

-c 

1041 

1009 22.149 4.456 

*°b 

1.841 

49 

sra 

10C 

-41 

1056 

1029 15£73 1A03 

Oct 

uaj7 

15 

Dr 

1063 

-36 

TQ77 

1050 25511 15« 

Dr 

357 

- 

Mar 

1084 

-38 

1100 

1078 27,363 1J0GS 

FR 

208 

vm 

184 

Mte 

Tatri 

1098 

-37 

1105 

1096 106C 116 
113^07 SABO 

ter 

Triri 


tel 

4043 

-X6 

4065 

4039 17,316 

2972 

on 

40X8 

-39 

4im 

4069 

4188 

150 

tea 

40Sl0 

■39 

4119 

4119 

1930 

43 

ter 

411JJ 

-39 

- 

. - 

1966 

12 

Tote 





23970 

3977 

■ PALLADIUM NYMEX (100 Hoy at; S/troy oz) 

ten 

13195 

-185 137J5 13390 

1989 

878 

Sep 

13445 

-MO 

13890 

13390 

39Z4 

723 

Dr 

13470 

-380 13835 13835 

664 

21 

Mr 

13470 

-390 

- 

- 

8 

- 

Tetri 





5983 


■ firiJVBt COT^X (100 Th>y at; Osnta/tray ok) 

Mv 

553J 

-6 A 

8639 

5809 

111 

14 


55X5 

-84 

- 

- 

3 

- 

Jri 

555J 

-69 

5689 

5529 8X992 3X490 

9r 

5607 

-69 

5745 

56X0 

11,170 

2924 

DR 

56X6 

-69 

5829 

5669 

17910 

3905 

tea 

5703 

■69 

- 

- 

32 

■ 


sw 

tee 


■ WtgAT C8T pJOOObu mtn; cenriAHXb btahal) 

330® 4-1® 334® 326*13X425 5X460 

3304 +05 3COM 332® 41,320 12230 

347® • 352® 344/4 54230 22275 

Bar 351/4 40® 355® 3SM 4710 1,375 

by 348® - 255 5 

Jri 324® 44® 325® 322/4 810 30 

Tste 2*1,550 88488 

■ MAIZE C8T (5J0Q bu mtn; oenta/sab bushel) 

Jri 258® -fl/t Z70/4 263/4822205158220 

Ste 261® -2® 208/2 299® 174215 201160 

Me 254® -4® 2SW 252® 439280 113255 

Mar 281/2 -4® 208® 258/4 47215 X485 

■ty 2B8/2 -4 a 270® 284® 5,175 575 

Jri 266® -4/2 7TV 4 285/4 13200 2250 

ToH 12108299275 

■ BARLEY LCE (E par tonrwt 


M COCOA CSCE pO tomaa; S/tonnea) 


San Day's Opm 

pries ctra aga M0 Cot tat 
82475 -1.500 64.150 62.475 232S3 
8X32S -1280 64575 6X325 23282 
65250 -1200 67250 85250 12579 
67.400 -1200 88250 67-400 9285 
6X100 -1200 60750 6X160 5748 
6X700 -1200 71700 88700 2708 
77,178 

■ LIVE HOPS CME (40200B»; canatea) 


1362 

-W 

U13 

1355 37.058 14. IBS 

Jm 

47950 

-1.175 48900 46900 

8928 

8881 

1390 

-15 

1440 

1385 19J24 7979 

Jri 

47975 

-1.425 48475 47950 

8297 

8580 

1425 

-9 

1462 

1415 7919 2980 

teg 

48980 

-1350 47950 45900 

4J« 

19» 

1453 

-14 

1502 

1453 10278 577 

Oct 

42J75 

•0900 <1560 42825 

8755 

226 

1485 

-14 

1495 

1465 3969 1967 

Dr 

43.750 

-0925 44400 43950 

8840 

209 

1507 

•T4 

- 

■ 1724 87 

n* 

43900 

-0925 44300 4X700 

682 

88 




83981 259BB 

Tate 



30321 

*885 


Jri 
ToW 

■ COCOA PCGO? (SOfTaftonna] 


■ PORK BELUE3 C8C tiPJOOBie; oHa/ftto 


May 24 

nair — 


Mca 

108122 


102528 


io ten 
■ OOTTEELCEffftCWWt 


NM 


HM 


7302*9 43299 


ENERGY 

■ CRUDE OX NYMEX (42200 US gate jjpri 


tee 

9840 

-090 

170 

Hoi 

9U0 

-036 10090 10Q90 

267 7 

Jm 

101.15 

-aio 

30 

Ms 

10295 

- 

10 

»»* 

Tetri 

10495 


5 

512 7 

M SOYABEANS CBT (5JXX&U min; cants/tob BurtMQ 


tea 


Tetri 


2225 -128 2295 2100 479 21 

2207 -141 2270 2100 13236 4766 

2177 -145 2240 208S 1X225 X159 

2152 -142 2210 2060 5586 800 

2132 -141 2185 2090 8,416 878 

2075 -145 2139 2085 Z/OB 116 

44^37 8748 

■C* CSCE ffTgSOOtejC cantateri 



talari 



open 



grto 



LOT tat 

w 

Jri 

1793 

♦091 

1X07 

1793118996 44933 

Aag 

1798 

♦093 

1738 

1798 51934 

18990 

Sap 

1793 

♦094 

1791 

17.46 30987 

7934 

act 

17.44 

♦094 

17A7 

1738 22347 

3917 

Hm 

1734 

-001 

17.44 

1734 14943 

8313 

Dr 

17-3* 

-091 

17M 

1739 23,781 

3915 

Tatri 




38X875 8X025 

M CRUDE OIL IPE (S/barreQ 




Uriri 

Dor** 


Open 



rike 

cringe 


lOT W 

Vri 

Jri 

1627 

•005 

1644 

1838 80315 

1X048 

Aag 

1616 

-006 

1831 

1X14 34371 

10318 

Sop 

1X10 

♦091 

1623 

1X09 18850 

1960 

OCl 

1X15 

4095 

1X18 

1892 7964 

438 

Roe 

1892 

-005 

1892 

1892 5,041 

101 

Dr 

1892 

-005 

1614 

1092 6915 

1303 

Tote 




1819B1 30302 

■ HEATING OIL NWX (48000 US grite; e®8 gribj 


latest 

tor's 


open 



Mice 

cringe 

ffigh 

Low h* 

Vri 


fad 875® -20® 693® 670® 329725 207585 

teg 672/2 -19® 595® 667® 76710 18265 

teg 656® -16/2 678/4 653® 43715 6580 

Has 843® -18® 583/4 639® 281 700 142740 

tea 847® -18® 667/4 844® 23510 2785 

Iter 653® -18® 672® 650® 9,753 789 

TOM 783,145382930 

■ SOYABEAN OX. C8T (SqOOOtba: cantaflb) 


Dee 


12775 -575 132J0 12470 2675214,145 
12X30 SM 12X50 12290 16*15 X5B4 

177.S5 -470 12X00 121.45 1X962 2.142 

12X48 -530 mSO 11973 S£78 573 

11X60 -480 12ZSD 11975 682 153 

11X00 -400 - - 90 4 

6X311 23JB11 

OOFHX gCCjjjSoantaftxwsS 


Jri 

27 J8 

-146 

2S32 

2775 45960 15987 


27.71 

-146 

2934 

2797 15J73 

27S0 

Ste 

2798 

-T32 

2695 

2730 1X498 

1386 

oct 

2673 

-139 

ZBJZ0 

2670 TtMJ 

04O 

Dr 

3673 

-138 

2790 

2608 21388 

5337 


2605 

-126 

2740 

2895 2934 

305 

Triri 




108950 2B948 

■ SOYABEAN AfflAL CBT fl OO taw S/tan) 


Jri 

1017 

-17 

1065 

1923 344® 

1X503 


1812 

-39 

1979 

1013 1X381 

4325 

Sap 

1019 

-29 

1853 

1903 9723 

2,130 

oct 

1509 

-Z2 

1033 

1865 X101 

1942 

Dr 

18X1 

-29 

1829 

I860 1X695 

7390 

Jte 

1804 

-2.1 

1829 

1865 1388 

217 

TOW 




8X771 349« 

p POTATOES LCE (E/tonnaJ 




Mr 24 


Prfca 

ftn. riy 





■ No7 PREMIUM RAW SUOAR LCE (perOriftte 

Jri 1X16 -095 1230 1230 

Oct 1235 -614 1232 1231 

Jm 1192 ... 

Iter 1193 -092 

Tote 

■ WWTE SUGAR LCE (5/tonne) 

2948 2 

896 152 

a 

XS0* 162 


Oct 

Dae 


34X00 -230 34X80 34550 12378 1.171 

32X50 -190 32X30 32X00 X7S3 701 

31X90 -1.40 31X00 31600 084 5 

31460 -1.40 - - 1,757 

31460 -1.40 - - 205 

317.40 -1.70 31X00 31X00 235 20 

in 24008 1,897 

■ SUGAR 11- CSCE P12TO0P8; camsrtta) 


Mar 


5« 

dot 


Tetri 


4800 4X40 4X10 
4X40 4033 4X55 
4X03 4028 4X12 
4000 4016 5010 
5030 4028 5090 
51.75 +028 5200 


4790 24360 

4X00 3X389 
4X70 14582 
4X81 11,102 
5090 6855 
51.78 5^48 


11,390 

1X842 

4.E18 

1777 

2 

48 

31^64 


Tatri 


■ GAS OtL PE gtenee) 


909 

. 


Jri 

1195 

-096 

1292 

1131 47,8281X101 

1059 

- 

- 

Oct 

1294 

-098 

1220 

1200 50316 X153 

1299 -05 1309 12X9 

704 

24 

Iter 

11.76 

■094 

1190 

1173 21335 771 

1400 

• 

. 

toy 

11.73 

-004 

1199 

1195 3.418 56 

1079 


- 

Jri 

11.71 

-094 

1178 

11.70 1.414 1 

704 

8HT (BIFFEX) LCE (5io/tnrtex print) 

24 

Od 

Tew 

1192 

-aw 

' 

- 640 78 

t2X5S2 19348 


Total 


W 967 


PRECIOUS METALS 

■ LONDON BULLION MARKET 
Fricas suppled by N M ReteacMdl 



Sea 

Deft tote 



price 

ctaage m* lorn tat 

Vri 

tee 

13035 

+<L23 15190 1te90 2X741 

4,46B 

Jri 

15190 

435 15290 15390 2X590 

3.T1& 

Aag 

15275 

46S 15390 15290 8973 

542 

Sep 

15*35 

-050 1590 15435 6*40 

534 

Oct 

15790 

-035 15735 15790 6488 

82 

Nov 

15990 

-035 15000 15X75 3948 

110 

Triri 


31972 10976 

■ NATURAL QAS Pm« PftOW SJB8BL Slmflte) 


GoW(Troy cz) 
Oooe 
Opening 
Morning Sx 

Afternoon Rx 
Day's Ugh 
Day's Lot 
Previous dose 
Loco Uta Mean 
1 month 


2 eqriv. 


$ price 
38750-38790 
387.85-388.35 

38X40 25X657 

387 JO 25X916 

38X00-38X30 


38X00-38050 



Uteri 

price 

Iteyi 

cfaaage 

«B ft 

to« 
Lot M 

Vol 

Jri 

1955 

-0028 

1985 

1931 25393 

6125 

teg 

1935 

-093 

1970 

1925 13970 

V7KP 

sto 

2905 

-0917 

2930 

2000 13328 

1982 

Oct 

2975 

-0007 

2990 

2080 4130 

740 

Bta* 

21 (S 

-0912 

2180 

2180 10371 

489 

DR 

Tate 

2280 

-0907 

2295 

2280 143*1 1990 
125968 1X148 


■te 

1480 

♦6 

1480 

1475 

1938 

28Z 

■ COTTON NYCE (5Q900(bs: cam/8n} 

Jte 

1295 

-15 

1307 

1295 

799 

16 

Jri 

83.74 

♦096 

8X85 

6397 21,616 2988 

Jri 

1216 

-6 

1220 

1216 

73* 

173 

oct 

7798 

+678 

7795 

7X72 5.785 305 

Ori 

1300 

+2 

1300 

1798 

371 

5E 

Dec 

7554 

4X58 

7599 

7525 21903 2341 

Jan 

1310 

-8 

1320 

1320 

207 

ID 

MW 

7X92 

♦090 

7X85 

7X30 2J597 177 

AW 

1348 

-2 

- 

- 

78 

• 

May 

7798 

♦099 

7735 

7X90 1913 20 

Trial 





33*7 

339 

Jal 

77.80 

♦X77 

77.00 

7790 198 12 


Oasa 

Prre 





Tote 




53334 5951 

BR 

1498 

1499 





M ORANGE JUICE NYCE [15j000te centsfltn) 








Jri 

9X55 

-030 

9X40 

9590 13997 2374 








Sep 

9990 

-670 IDT 30 

9790 3993 843 








Nn 

9995 

-090 10190 

9465 1383 27 








Jm 

10133 

■070 

mss 

10190 2588 1*3 








Mar 

10275 

-095 

10490 

101.73 824 49 









to 

104J5 

-095 

- 

- 24 


(Vs US*) 


2 mortths 

3 mortho 
88vor h* 

Spot 

3 months 
a months 
1 war 
QoM Cotas 
Krugerrand 
Matte Leaf 
New Soweign 



■ IMfiUB) Q1SOLBE 
HYMEXH2J00USgsCa;oUSga8sJ 


p/tray co. 

US ctm aqriv. 

Jh 

36890 

55X75 

Jri 

37496 

563.15 

Aag 

378.70 

56XGO 

Sap 

38X40 

HSJfl 

OH 

t prtoe 

E oqiriv. 

tor 

301-304 

260-263 

Triri 

3889040090 



9000 

6003 



Ltori 




to« 


Price 

dago 

MWl 

Lot 

lot 

Vri 

3190 

+0.14 

5243 

31 JO Z3J47 

12468 

3225 

+037 

8275 

9295 3X807 

7971 

5215 

♦0.19 

■won 

5195 14,728 

1,478 

5190 

♦096 

cynn 

5190 

1X398 

490 

4X95 

+099 

5025 

4895 

3393 

117 

4890 

♦0.14 

4X05 

4X85 

2.709 

309 


as/wn -njm 


Cotton 


Umpool-Spat «I ritemant ss*« amounted 
to 168 terms for the weak ended 20 May. 
agataat 440 toma In the pagriow weak. Sd>- 
tejed offiahe dd not bring many opa a H u iB. 
te«port W64 forthcoming in certain apadaflat 
styles notably in the American range. 


Tetri 


2X683 3438 


VOLUME DATA 

Open Interest and Volume data shown for 
contracts traded on CQMEX. NYM0L C8T. 
NYCE, CXC. CSCE and IPE Cnido Ol are one 
day In aneais, 


INDICES 

■ gangs gaag iggg^iog 


May 25 May 24 month ago year ago 
1983.7 200AS 1«7^ 1B7740 


Jri 41925 -1J75 41150 41900 

133 38 

Ate 4X800 -1350 42.100 4X450 

5975 1987 

Hb 50750 -1325 S19S0 50^50 

2925 487 

Iter 50975 -1325 30300 50973 

314 152 

Mr 51250 -1350 

- 53350 

25 1 

Jri B4900 

- 

30 1 

Ml 


X288 2978 

LONDON TRADED OPTIONS 

Strika priev $ tutm 

— Cato — 

— Puts — 

■ alums am* 



(BX79q LME 

Aug Nov 

Aug Nov 

1325 

67 100 

28 37 

1375 

41 n 

51 58 

1425 — 

23 SO 

82 85 

■ copren 



(Grade A) UrE 

Aug Nov 

Aug Nov 

2200 

127 123 

62 83 

2250 

98 38 

98 107 

pom 

74 7B 

74 135 

m COFFEE LCE 

Jri Sep 

Jri Sep 

1800 

414 448 

7 72 

iRsn , 

368 414 

11 87 


324 381 

17 104 

■ COCOA LCE 

Jri Sep 

Jri Sep 

onn 

127 153 

3 11 

Q2fi 

104 133 

5 16 

QRCl 

83 114 

0 22 

m BRSfT CRUDE IPE 

Jri Aug 

Jri Aug 

ISOO 

86 

4 20 

1550 

47 

11 


27 as 

30 44 

LONDON SPOT MARKETS 

■ CRUDE OIL FOB (per banoKM) 

♦or- - 

Dubri 

SI 4.87-4. 92w -0.1 B 

Brant Stand (dated) 

S1636-XZ9 -0366 

Brent Bend (Jri) 

$1X21-033 -0.18 

w.T.l (ipm egq 

$17.78-790* -022 

■ OL PRODUCTS WWEprompf tteBmy Of (tam^ 

PremMn Gsaetoe 

$181-183 


Goa O* 

*160-161 

♦1 

Heavy Fuel Ofl 

$82-84 

-1 

Naphtha 

*157-158 

-05 

Jot Fuel 

$100-161 


fteobun Aot Ea&mm 



■ OTHER 



Gold (per troy 

$367,45 

+1J0 

saver (par troy oi>J 

56290c 

•29 

PtaOnum (per troy az.) 

$405.10 

■2.40 

PaBadten (per troy azj 

$13845 

-095 

Copper (US prod.) 

11190c 


Lead (US prod.) 

35.00c 


Tin (Kuala Lunpu) 

Unq 


Tin (New York) 

25790c 


Zinc (US Prime WJ 

Unq. 


Cattle 0foe wdght)t 

12798p 

-1.19" 

Sheep (Bve wefght)T* 

13395P 

*1492* 

Pigs (tarn wrighfl 

8836P 

♦298* 

Lon. d3y sugar (raw) 

$285.4 

-69 

ban. day euger (wte) 

*3580 

-49 

Tate & Lyle export 

£3019 

-5.0 

Barley (Eng. feed) 

Unq. 


Maize (US No3 Ydow) 

$14X0 


Where (US Deck North) 

El 85.0 


Rubber (Jri)f 

703Sp 

-0.75 

Rubber £Aug)^ 

7090p 

. 

Rubber(KL RSS Nol Jin) 

26390m 


Coconut 0« (PM0§ 

S835.QZ 

+S9 

Palm OH (MalayjS 

$48X0y 

-189 

Copra (Pbqf 

$397.0' 


Sayoboons (US) 

Cl 829; 

-3 

Cotton Outlook A Index 

8890c 


WoaKopa (843 Staler) 

426p 




■*k 


I 


ACROSS 

1 Backward marsm^als allowed 
in by legal expert (9) 

6 Shoot puritans back to front 
(5) 

9 Instrument of gold »r>ri jade- 
turned over (5) 

10 Playing dice with a girl tike 
Clytemnestra f9) 

11 One who 13s with dong GO) 

12 Pianofort e amwaiing the for- 
eign money (4) 

14 Affected, entering peak and 


4 Twisting, bust out - one gets 
the point (7) 

5 Senior hnwting fabric up may 
take a step back (7) 

6 Dismiss plunder (4) 

7 Spine chiller (topless) (5) 

8 Feel cargo shifting In such 




conditions (4.5) 

IS Imbue with rising 1 


15 Like teacher receiving junk 
mall CO 

17 Bit of wood containing deco- 
ration in London (3) 

19 Extraordinary reflection, say, 
on northern arts (7) 

20 Growth contributing to Patsy 
Cline’s comeback M) 

22 Prospective partus- perform- 
ing dirge to the undergrowth 

25 The sap of spring? (5,4) 

26 Second woman about to tarn 
to crime (5) 

27 Flower not quite at the back 
(5) 

28 Operated lever In the cape 
without feeling (9) 

DOWN 

1 Mock gorge (5) 

2 It’s important for mathwmati- 
dans to record a pulse, they 
say (9) 

3 May 1 not manipulate sup- 
port? (10> 


ire in Irreg- 
ular tempi (10) 

14 Many a party turning molten 
stuff Into helmet (9) 

16 Force to drive out into road 
for some seafood C9) 

18 Marx on fishing gear (7) 

19 Furnisher of seats not so 
pleased about laptop (7) 

21 Show off prop (5) 

23 Less major road before sun- 
rise® 

24 Drunkenly utter calumny (4) 


Solution 8,482 



1-1 




■ CRB ftto— (Bass: 4/9^56=100) 


24 May 23 month ago year ago 
234,00 23X36 221.86 20X80 


E par tmo mini ttmit tuted p pnmtq. c cmWfa, 
t itaggMq. n lUMn caresfto. * JMJti. y Jui. m M. 


f Lwimo_Ph)*tai. 5 OF Unea ten . » Bteon martte 
* Cftang* an mtX 


doaa. f 9wap pJ» P*a* 

/w wfal a M latoaL 



V 




dV 

U 'Ijl 
1- "* 









1 An 


" v n i 


' n \ 

j MARKET REPORT 


FINANCIAL TIMES THURSDAY MAY 26 1994 


LONDON STOCK EXCHANGE 




•j i| RUNUI IKTUHI 

5 footsie falls 2.2 per cent to new low for 1994 

By Tony Btfand, eraumuta rmoncu? t. - ^ • ‘ _ _ 


FT-SE-A AB-Sbara Index 


Equity Shane Traded 

Tlriow by wok™(tr»ort.EwkJdfcv 
wra -n a tot o udn ea a and wwu mwwr 

MOO 


*•* 


i \ 










V >. 

•- S» 


By Tony Btfand, 

UK $toeK Market Editor 

Umdon bad no choice but to join in 
the setback in securities markets 
across Europe yesterday as this 
week’s growing fear that the Jan in 
German interest rates may be over 
drove investors out of equities. The 
FT-SE 100 Index fen 68.4 points to 
3,020.7, a new low for the year ana a 
loss of 2J2 per cant on the day. 
Weakness in the US dollar gave a 
further blow to international bine 
chip stocks at the dose of the ses- 
sion. 

Trading volume increased 
sharply, but remained below r**»fr 
levels as marketmakers straggled to 
cut share prices before the sellers 
could strike. Once the important 
3,050 mark on the Footsie was lost, 
several computer-led sales pro- 


grammes opened in the stock index 
futures market and the collapse in 
Prices rapidly increased. Across the 
broader market, shares fell away 

sharply to record a loss of 62 wants 

cm the FT-SE Mid 260 Index which 
ended the day at 3,629.4, a feu of 
about L7 per cent 

Equities opened firmly, helped by 
Wall Street’s steadiness overnight 
first quarter figures on UK gross 
domestic product showing a mod- 
est rise of 0.7 per rep* were com- 
fortably taken and the stock market 
remained in positive territory for 
the first hour of official 
trading. 

However, British government 
bond prices began to slide In sympa- 
thy with other European band mar- 
kets and UK stocks torpid off in 
their wake. The setback was TnodApt 
at first, however, despite the disap- 


taimimt PwEng Pratera 

— ' - ~ii8T »ii 

May ib 

Jra« 

Jin 20 

OpOea Dadaratfaeae 
Juo 2 

dm 18 

Junto 

Laatnatete' . 

JaaS 

A* 17 

Jdl 

Arantte 

Jut 13 

Jan 27 

JU 11 

-New ttoe daaNoga 

tetemteoe— m. 

am taka 

pfeace ha two 


pointingly small reduction in rates 
at ihe weekly Bundesbank repo auc- 
tion. 

The blow fell at mid-session when 
it was disclosed that the Bundes- 
bank had cancelled a note auction 
because of lack of demand for its 
paper in the German market. Bauds 
began to fell In earnest and losses 
in share prices increased dramatic- 
ally as the UK market absorbed tire 
possibility that domestic interest 


rates might be forced higher much 
sooner than expected. 

At worst, the Footsie was down 
by 77.8 at 3,01X3 as traders began to 
assess the prospects for Wall Street. 
But US durable goods orders data 
for April turned out to be less 
threatening than feared and UK 
stocks tried to rally. The recovery 
was very alight indeed, because 
Wall Street remained 15 Dow points 
Off in UK trading hours, with Fed- 
eral bonds also lower, 

Seaq volume reached 646.1m 
shares, compared with 555 An in the 
previous session; Tuesday's equity 
business was worth £L23hn in retail 
value. 

The rout in the market swept all 
sectors along with it Hard hit were 
the merchant banks which earn 
their profits in securities rng rt-gf-g 
and also their assets in the 


form of shares and bonds. With 
markets heavily down across the 
global range, inte rnational - such 
- as Reuters. HSBC, RTZ. BP and 
Shell- were all under pressure as 
London traders waited to see how 
Wall Street would perform. 

Market strategists expressed sig- 
nificant concern over the outlook 
for the UK market now that it has 
plunged below the 3,050 support 

fevel. ft g»Tltng rvmtirnutg into next 

week, the Footsie could be at risk of 
another fell of 70 points or more, 
according to the equity chart ana- 
lysts. The UK markets are regarded 
as trapped between other European 
bourses, which are threatened by 
the apparent shift of stance at the 
Bundesbank, and Wall Street which 
is now perceived to be in danger of 
a further tightening of the credit 
screws by the Federal Reserve. 



SounacrTftephfei 


■ Kay Indteators 

fandtew and nUw 

FT-SE 100 3C20.7 -6&4 

FT-SE Mid 250 3829.4 S2JQ 

FT-SE-A 350 1532.6 -32.7 

FT-SE-A AU-Shar* 152&62 -31.00 

FT-SE-A AB-StoreytaW L84 (3.76J 

Beat performing sectors 

1 Property -03 

2 Other Set A Bus -0.4 


FT OrcSnwy index 
FT-SE-A Non Fins pfe 19.56 

FT-SE iQQFut dun 2909.0 
10 yr G« yield &32 

Long gTB/aquity ytd ratio: 2.23 

Wont performing esotors 


-47.1 

119-89) 

-98.0 

8.17 

??? 


3 Chamicais 

4 FT-SE SmaBCap ex Us 

5 Gaft Dtetefbutfon .... 


. - 0.6 
. -0.7 
.-0.7 


Uiwtlw .... ... 

-as 

Leisure & Hotels 

--a.1 


a.i 


.9 0 

Tobacco - 

-aa 


•**v 




-■W ^ 




V 


ffir stuck 




* ■*> 


managt 


Bumper 
cash call 
expected 

Strong speculation that 
Ch a nne l tunnel operator Euro- 
tunnel would launch its long- 
awaited £850m rights issue 
today swept through, the mar- 
ket 

Dealers suggested that the 
issue would be at a deep dis- 
count to the current share 
prices with, the best estimates 
pointing to a three-for-flve at 
27(8) 8 share issue. 


Rumours of the rights issue 
came as Eurotunnel 
announced that it had secured 
additional financing from its 
creditor banks. The shares, 
which had followed the market 
lower, clawed bade some of the 
ear her Wes to finish 5 down 
at 355p on toe news, an volume 
of L3m. 

The company's broker and 
merchant b ank were said to 
have done the rounds of insti- 
tutions over the last three days 
in a bid to ensure that the 
Issue was underwritten. 

However, one market 
watcher said: “They thought 
they could get it away with 
only a 20 per cent discount but 
no one would take it at that 


price. It bad to be in the region 
of a 30 per cent discount for 
any chance of success." 

Warburg r e treats 

The sudden collapse of stock 

nn ri bond nm nmrt fop 

world wiped out an early big 
gain in SG Warburg shares, 
toe only Tnprrthant Twit in flw 

FT-SE 100 list and, ironically, 
one of the most important 
bond and equity trading 
houses in Loudon. 

Early in toe session Warburg 
had rocketed to 740p in the 
wake of doubled preliminary 
profits, which was towards the 
top end of the range of market 
estimates. The near 16 per cent 


EQUITY FUTURES AND OPTIONS TRADING 


dividend in crea se was in Hiw 
with market forecasts. But by 
the Muj of a m rt" * l «i* sewrinn 
Warburg shares had retreated 
to 694p before closing 4 down 
on balance at 899p as dealers 
became increasingly worried 
by the slide in international 
markets. 

The early surge in the shares 
r/nrut amid relief that Warburg 
had rnanflgpfl to avoid any big 
losses resulting fr om toe vola- 
tility and overall weakness in 
world markets following the 
decision by the US Federal 
Reserve to tighten monetary 
policy early in February. 

One merchant banking spe- 
cialist said there was a big 
question mark over the sos- 


TRADING VOLUME 


Stock index futures crashed - 
through the 3,000 barrier to . 
trbde at a sharp discount to 
the cash market as dealers 
reacted to the strong setback 


In European bond markets, 
writes Joe/ Kibazo. 

After opening at 3,078, the 
June contract on the FT-SE 
100 briefly moved ahead to 


■ FT-SC IDO MPEX FUTURES (LiFfQ E26 par M Into port 


(APT) 



Open 

Sett price 

Ctmga 

wari 

Low Eat vci 

Open int 

Jun 

3078 J3 

29800 

-7&0 

3001 .0 • 

2998.0 

28241 

49402 

Sap 

3097.0 

30145 

-715 

31015 

3017 J) 

1370 

5191 

Dec 

3099.0 

3024 J) 

-78.0 

3009. □ 

3099.0 

20 

251 

■ FT-8EMD 250 WDOt FUTURES (UFFE) CIO par ftt Mex point 



Jun 

3870.0 

36000 

-TOO 

36700 

36105 



Sep 

3887.0 

381 7 J) 

-700 

3887.0 

3887J7 

- 

- 


CROSSWORD 



■ FT-SE M« 280 tHDEX FUTURES per tuft tatexpotal 

Im 3885.0 3800.0 _ 771 

M epMi Kmn Spires are far previous dey. t Boot tetane mown. 

■ FT-SE 100 INDEX OmOWpJFFq f3<»5) OO per Ml todmt point 

2880 000 2960 3000 3050 3100 3180 3200 
CPCPCPC PCPCPCP CP 

All MB 9b 118>z18b » 32 B 53h 302 83>2 18 118 7)2 100b S 209fe 

JU 190b 26 143 39 190 54 90 70 90 1Q2b3Bb 13* 23b 172b 13b 215b 

Aug SIMb *3 100 55b MB 72b mb' 8T 79 119 57 M8b«b 184 28b 222b 
Sep 2S S3b 178 63 mb 83b Ml 105. -98 131b7*b180b .55 190b 40 230b 

Diet 2Mb 101 UO 140 H2 192 72b 254 

CtfsiUtt Mi 11374 . . 

■ EURO STYLE FT-SE 100 INDEX OPTION CIO prrM lodw port 

3078 3128 3178 

U 96b 11 198b 4b 179b 
46 113b 28b Wb Mb 100 
48b 15B 

88 mb 

. 98 197 


Jm mb Ob mb 13 9Bb 2Ab 95b 42b 38b «b 

JU 187b 17b 190b 29b 122 41b 82 01 Mb B3b 

tag 210 31b 143 57 06 96b 

Sap . 22Bb 42 158b 71b 102b 113 

DKf 2B7b 74 ' 201 104b 144 145 

» 22S Ma 1736 * tota«te War tern, nanfeaoi atona m toaed « ratente prioa. 

■ EURO STYLE FT-SE UP 280 teOBT OPHOW (OAXjq CIO par (IS Wat point 

3700 3760 3800 3880 3000 

J0 23 115 13 7b r 
CMs 0 W* 0 Satenrat pricat aod team* «e Utan at 4X0pm. 


FT - SE Ac 


3950 4000 


D*r» 

jjn 20 cteaW May 24 May 23 May 20 


touch 3,091. This turned out. . 
to be the high of the day. 

However, the contract soon 
succumbed to active sailing 
said to have been led by 
brokers Mantrad and Fimat, 
with one of them reported to 
have been. a seller of 5,000 

lOtSL 

The slide was attributed to 
talk that there would be no 
further reductions in interest 
rates. This not only sent fed 
to the decline of the contract 
but also pufied the underlying 
cash market lower. The decline 
of the US dollar was also said 
to have played apart in the 
day’s fall. 

At the day’s low, June 
traded at 2,998 but steadied 

to dose at 2,999, a day's fall 
of 79 points and around 18 . 
points below Its fair value 
premium to cash of about 
minus 3. Volume Improved 
sharply to reach 25.099. 

The traded options also saw 
heavy volume as a total of 
53,800 contracts were dealt. 
The FT-SE 100 option was 
particularly busy, trading 
26£62 tote by the 
dose. 

Land Securities was the 
most active stock option with 
a total of 3,372 contracts. 


s he UK Series 


Yi 

VoL 

SSS& 


ctMfas o*> 

-asss. 


eS? 1 

0ATlnda.t 


OTt 

flfmf 

Btnk of ScorfWf 

aEortl*t 


afti 


MWlSMlt 
Bum - 
Bumati P—enft 
Buton 

CafalaAMat 

citan3oran*.t 
SSWESt • 

Codkaao 

CourW**rf 

STffU 


BigChfaX 


2.100 

a.raa 


■tainabffity of ea rning p at SG 
Warburg. “Wartnng relies very 
much on ftaming« from flota- 
tions and rights issues which 
are very much reliant on a 
strong equity market If the 
market collapses so does toe 
earnings stream at Warburg 
and the other merchant 
banks." 

The candidates involved in 
toft bid for tiifl National Lot- 
tery suffered a mivad reaction 
to the mid-moraing news that 
the Camelot consortium - 
which includes De La Roe, 
Cadbury Sc h we p pes and Bacal 

- h ad won the franchise. 

Bacal shares bounded away 

on the news, gnrfrng the day 13 
ahead at 238p. Smith New 
Court estimates that Racal will 
be toe biggest winner from the 
contest, its earnings potential 
boosted by 22 per cent. De La 
Rue shares dosed 3 op at 880p, 
although dealers raid tw« was 
as much in reaction to several 
weeks of weakness - the stock 
stood at 1021p two months ago 

- as to the lottery result 
Smith has pencilled in a poten- 
tial 9 par cent earnings boost 
for the printing group fln>1 3 
per cent for Cadbury. Its 
shares retreated 13 to 479p. 

Among the losing candi- 
dates, Carlton Communica- 
tions slid 22 to 901p, a solid set 
of results notwithstanding. 
BZW inched up its 1995 fore- 
cast to £l79m and raterated its 
positive stance. Ladbroke 
ended three days of weakness 
following Monday’s veiled prof- 
its warning more steadily, the 
shares off 3% at 1725-ip. MAI 
lost. 13 to 249p, Granada 
remained friendless, finishing 


NEW HIGHS AND 
LOWS FOR 1994 


•AMKS (1) MM T«. < 8k». BUKOMO « 
CwiW<gJu«R.«J»Mau4Mems 
w B«or. I I Hl .a u H Mwmten. BftPTHHC ft 
M3CT BOUF M Jtahtt A. CM. 
MosatMo* UMW. Pimame. 
0WCBWa«|E W nKUL.F«luivMiy < 
flyman*. Tbrd* ft CMtf* EXTRACTIVE IMM 
01 MM cum. Kkten. 

W aUWAWCg ff) WMdan fan. MWBftTMBir 
THUWft w I WWrT MB ff C O WJUMa ID 
MBNA 01 CM. Ooflno KMafriv. anmy 

njfal, OR. EXFUMAUOft « POOO {O 
FfKNWITY to Data ftt). MCTMUM, 
OBBRAL (ft AuMtn RMd, UbMtr. DO mr. 
toumAmCAiMtq. 
new um (27M. 

MLZB 01 OTHER (4HB> MTBTBrT (4 HANKS 
m MO. Abbfl- NMU Mgto MM. B«* Sooted. 
DMMt Bm*. anCMMRMS w amt 
■UUNNQ A CNsnw n Oornfan lyMa. EBC. 
M0W A ra. MMrmaQ. PL ■**» 
MAIU A MCNIB PR CM9MCA13 (IJ 


P WHltfl L U PUft Ml BJCWNC A — CT 
BWF m BICCCWk M. IIWpB Bdfc HOB. 
Jotrvon, Kanwxxt 
M«u,«WKxnm3W0M. 
EXTTMCTM MW 0) Antfaman. EngMCMn 
Clara, POOD MANUT H) Bootar. IMgay. 
UHmt, Do NV. HKALTH CAIKn 
HOOBBfOLOOOOOBnMaRUHIftnftM 
BOO W, Jay— .IMSURAMCK WNIMIlMir 
Tunis MU MWIH MMMM PI 
LMURE A HOTELS M Oanate Do 7 Jp fm 
nt. Rank. Do 8M« VMt Pli, U« ASSURAMCE 
n MBNA n eaten Caam aap Pit. 
OandaQold, Mnar, On Daraand fete Paanan. 
(feted NMMte MBRCHAHT ftAWCft ft) 

Oft. EXndWIION A PROD m pfefanotet 

aim hnancw. m onat sswb a 
■m n ptM^B, MMwamHu m 
Catete FRTTMk PAPBI A PMM M Banter. 
Do 7T*pc Pit. CfanfaMi. Rrm. teOPCRTY 
flT| ITETAUR* FOOD M Sna, Icated. IMt 
3 m. ShopflM, rKTAAJm, OBSVU. 
BJPPOBTB C IvaO) date Date aac.0—. 
MoOomal fete Mbwa RantcMl Steal 6% 
TBXTUB A APMRB. O) Matent, Rfatada, 
TOBACCO » BAT, Mama M. Ua, 
uuMFonr n tooth n uu m Kant 
AMBBCAin ts CAKAUANB n. 


18 off at 490p, while Hank 
Organisation tumbled 25 to 
S80p. 

A hefty jump in the nrt asset 
value of Land Securities 


helped the shares remain one 
of the few shades of blue 
among the FTSE 100 stocks. 
The maiket had been predict- 
ing an NAV range of 630p460p. 
so Land’s 677p saw toe shares 
leap to an immediate 20p pre- 
mium. They later came back 
with toe market to close 2% up 
at 663p on turnover of 3.4m. 
James CapeL long-term bulls of 
toe property sector, are fore- 
casting an NAV for next year 
of 790p. 

Widespread talk around the 
market that the sudden col- 
lapse in world markets had 
caught some of the big market 
operators on the wrong foot, 
triggering potentially huge 
trading losses, unsettled all the 
big clearing banks and the 
merchant banks. 

Among the clearers Bar- 
clays, 527p, and NatWest, 439p, 
which control two of the UK’s 
biggest institutional broking 
firms, BZW and NatWest Secu- 
rities, dipped 14 and 12% 
respectively, while HSBC, 
which only on Tuesday said 
reports it had made big losses 
in hrmd trading were inaccu- 
rate, fell 24 to 725p_ 

The insurance broking sector 
endured more pain after the 
recent dismal profits perfor- 
mances with US investors said 
to have been steady sellers of 
Willis Garroon and responsible 
for driving the shares down 12 
more to I69p, their lowest level 
since September 1992. 

Chemicals group Courtaulds 
was among a handful of FT-SE 
100 constituents to remain in 
positive territory during an dif- 
ficult trading session, with the 
company’s shares bolstered by 


a 6 per cant increase in the 
dividend total. At the close 
Courtaulds shares were 
unchanged at 527p. 

A fell in profits at Argyll 
Group added to the pressure 
on the shares in a weak food 
retail sector. The company said, 
a disappointing performance 
from its Lo-Cost chain was 
partly to blame remained 
cautious over the trading out- 
look. Argyll shares fell 9 to 


Good results from Moriand 
helped the regional brewer for- 
ward 10 to 518p. 

A shift of stance from BZW, 
the investment bank, was an 
additional burden on the build- 
ing materials sector. BZW 
shifted from overweight to 
neutral in the aectoT, highlight" 
lug Blue Circle as “fully val- 
ued” and therefore a "sell”. 
BC1 lost 5 to 3Q2p. 

BOC was one of the five 
FT-SE 100 constituents to resist 
the market's sudden decline, 
the shares closing 2 harder at 
730p following the recent excel- 
lent results and subsequent 
broker recommendations. 

Shares in enghren-Ing group 
Glynwed International held cm 
well, dosing a penny lower at 
358p after a twoday visit to the 
company by institutions and 
analysts. Smith New Court and 
Panmure Gordon were 
reported positive on the stock. 

MARKET REPORTERS: 

Stove Thompson, 

Christopher Price, 

Joel Kibazo. 

■ Othar statistics. Page 23 


LONDON EQUITIES 


UI 

u. 

LL 

J 

EQUITY OPTIONS 





ryainw 

M Oct Jan Jrf Oct Jte Opto 

A08 tee m fag to Mi 


R»eS AND FALLS YESTERDAY 


»- F. -1 

DrTDsn runes . 


FT-8C100 8020.7 

FT-SE MM 230 ' 382M 

FT-SE Md 280 wc In* Trusts 38383 

FT-SE-A 380 1632,8 

FT-8E SmsMCsp 190220 

FT-SE SnsSCap ax Bis Trusts 157*83 

FT-SE-A ALL-SHARE 152842 

■ FT-SE Actuaries AH-Share 


-22 3088.1 3108^4 31 27^ 2846a 4.07 635 

-1.7 3881-4 37023 3714^ 3176l5 340 5^8 

-1.7 3700.7 37124 3723a 31064 354 843 

-21 15833 15744 1S824 14201 341 646 

-0.7 1S1S48 1B2250 1923^8 1615.07 202 <17 
-OL7 188148 189842 189848 162748 347 441 

-20 155742 1S8658 157348 140640 264 848 


1746 40.78 112444 
21.74 40.88 138326 
2044 41.40 183247 
1041 1847 118740 
2346 19.16 145335 
2848 1845 144306 
1843 .1346 118245 



Msy 25 cftprtt May 24 May 23 Msy 20 


■8® 


Mr. Earn 
yWrftt 


P/E 

ratio 


Xda4. Tow 
YW Ratum 


10 IWNBUL EXTRACIIONfiS} 
12 ExtmcflYs fndundasfq 
16 04, biiapBtadn 
18 08 Esntaadon 3 Prodfll) 


20 OBi MANUFACTURBtSfKQ 

21 BuHtag & ConatnjctooPl) 

22 BuBSng MsS$ & Moreha(30} 

23 OwrtcsW21) 

24 OlWfeiflad MustrtBlKtQ 

25 Ssctronk: & Bod EqufpM 

26 &gkrasrinafr1> 

27 Enghsering, V*Wcte(13 
to printing, Pspsr 3 PdigpTJ 


264443 -24 270742 270309 2706.17 2220.70 352 4.42 2340 3748 1050.77 

3787.49 -3.1 380646 302048 903041 310740 342 642 2446 4349 103346 

259147 -24265042 284361289741214540 345 447 27.18 4043 105145 

197044 —14 200747 203372 204947 181300 341 14B 80001- 1542 112356 

2011.73 -1.7 204641 208347 207344 177240 373 448 27.78 2447 100842 

124377 -2.1 127248 127341 128339 1077.70 340 372 34.70 1318 80644 

183543 -2.1 187840 188330 201247 170740 346 378 3390 2378 90148 

247145 -04248346248048 251547212240 372 443 2741 2848 107746 

2026.73 -24 2072.12 200448 211218 188740 444 448 2747 3045 101328 

208033 -1.1 2102.70311018 210313 187140 343 843 1840 1240 88648 

164364 -14 187848 188245 189445 150240 2.82 348 3043 2011 104440 

224345 -14228364231147230342170310 446 220 8325 3242 107448 

274318 -14 280247 263845 2871442304.10 341 5.18 2300 2346 106366 

174342 -14177O821773461776.13183540 442 S.78 22.40 2305 96046 



30 CONSUMBt 00008(98 

262955 

-25 29835B 2891.25 270852 209350 

4AS 

754 

1456 4449 

891.71 

■* 

31 Drawartra(l7) 

216891 

-25 2216.78 224657 2288.16 193850 

456 

7.78 

15.78 

1353 

96156 

- 

32 Spfefla, Wines & OdarndO) 

288857 

-25 2954.88 296859 298850 2684.70 

350 

650 

1754 

41.70 

984.79 



224159 

-1.7 227950 228852 2309-71 221950 

454 

851 

1457 

42.75 

S3Z58 


34 Houaehoid GoorfatlS) 

-2514.79 

-1.7 »57.04 2S6856 2B81 .60 2243.T0 

340 

7.10 

18.71 

4&74 

88699 

- 

36 Health Oarepp) 

1691/47 

-09 17D758 172008 173658 1670-60 

397 

5.71 

2051 

1900 

87077 



270152 

-15 2732.17 273996 Z73756 312490 

4J4 

M2 

14.17 

47.15 

84646 

% 

38 Ttaboecod) 

353151 

-28 3B32/47 366SL45 373754 383250 

597 

954 

11.03 10255 

78646 




SR2? 

Udbntef 
Land O scurtesf 
Laports 

LagMAQanaralt 

London act. 
Umdie 


tententtev) 

PSWSSflBST 

WMItef 


NortemFemBt 
Nonwab. 
Fsanjwrt 
P A Of 


3000 

1,100 


1J00 


S40 39H4BH - 12 2DM - 
588 11 to - 30 47 — 
220 22 28 29 7X 11J4 16 
840 I 14 1IH18M22M Z7 
50 7* 9 11 2 4 4U 
00 2# 4* 8 7 10 10* 

12 40* © 9 18 21* 

an 14M* 30 204 31 36* 
390 21 31 36* 17 27*39* 
430 I* 16* 38 36 45* 51* 
500 32 42 50* 13 20* 27 
550 a 18**7* 43 48 55 

3« to 32 to ISM 21 26 
420 6* 18* 2631*38*42* 
1» 13*17*20* 5 « 10 
140 7* 12* M 9*12* 15 
500 #4*35*44* 21 26 40* 
550 7* IS* 24 57 61 73* 

450 18 — — 25 - — 
475 ■ - - 44 - - . 

500 34* 47* to* 13 21*29* 
550 18* to* 32* 42 50 57 
Qm Unto 500 54K5TCKK 6* 11* 17* 
CSG) BGO 19* to* 36* 22 33* 37 


Hum 240 26*24*27* 4 8* 11* 

r2B5) 200 6* 14 17 13 18 21* 

LMM 13(26* 26* - 5* 7* - 

(*1« 1 154 10* 16* - 12* 15* - 

Lucia WB 160 34* 20 31 3* 6 11 

H78 ) in 11* 17* 16* 11* 17* 21 

P60 600 63* 06* 73 12* 29* 35 

(6341 650 S 38* 46* 34* ST* 62* 

PMgtao 1W 15 23 26* 7* 12* 17 

ft* I 200 712*17M20*2(KZ7M 

ftHMM 280 22 27 32 9* 16 17 

(■209 } 300 11 17 22* 29 27 to 

RIZ 800 83 82* 97* 14* 32* 39* 

f836 ) 650 32* E* 71*35*56* 64 

Mtod 460 46 36* to 8 18 23* 

r«8 ) 500 26* 96 C 24* 38 43 

Royal baca 240 27 33* 36 6 13*15* 

r254 | 260 IS to 28 15* 23* 25* 

Tam 200 to* 29 30* S 8*10* 

(7151 22011* 17 1813* 18 IBM 

Vtadtons 500 46 51 67 16 2B 33* 

(SB) 59017*31*43*43* S3 60* 

Mtom 33016*26* 4714*24*13* 

f-356) 960 7 16 26* 36 43*27* 

Option te Oct Jto Jr* fct Jan 


Othar f%csd Mmat — . 

MbwniEidnctan 

Oeneral ManufectLrare . 

CDnsumsr Goads - 

SsfvJcos 


UtEUfes. 

Hnandte 

fewsstmant Trusts . 

OttMIS — 


tew 

FHa 

Same 

2 

B4 

8 

0 

15 

0 

23 

101 

77 

45 

324 

286 

18 

80 

93 

42 

231 

240 

6 

33 

7 

41 

179 

156 

9 

306 

156 

38 

01 

28 


Totals 


224 1,994 


1058 


Dte band <ai thoaa conoanUs iMd on r 


TRADmOHAL OPTIOIIS 

FkatDoitegs May 23 

LsstOsatoga June 10 


Last Dodaradons 
ForsaniamMit 


Sopt 1 

Sopti2 


Cob: Areon tot, Dyson (J&4. 9ymonte Big, V arsoti tot. Wyndal i m Pram 0VO), 
UWCa Pirla: Bnpa Enargy, Lucto Ww. Pifts ft Mr Hanson Wts. 

LONDON RECENT ISSUES: EQUITIES 


611 



600 41*54* to 24 41 SO* 
60017* « « 53 87 78* 
550 KH 46 61* 17 26*35* 
600 16* 26 36*46*56* 63 


650 to a 42 21* 
700 5 18* to 60 
36016* 26 36* 11 
420 6* 18* 21 20* 


420 36*37* 
460 10*18* 


28 34* 
62 67 
16 21* 
83 30 


47 10* 20* 24 
26 32 43 48* 


PoomQtnf 

ftiteMMf 


r») 


360 36* 36 46*10* 17 23 
390 13 29* 30 24*32* 37 


SMI Turn. 700 36 46* 66* 13 28* 30* Mto Ga 


55? 

RlZf 


mu 


75011* 22 31* 43 53* 

200 21*20*36* 4* 8 11* 


1^ 


m 

<$ 


40 9BFMCES02O} 

41 OiaMiutorsOII 284605 

42 Lteura & HoWs(2q 2Q92£4 

43 Mnrlamn 294603 

44 nattosra. Fbod(17J 1S9634 

45 FMaeara. Gener«544) 1896W . 

48 SltoPDft S«rvte«(4(9 1604JW 

49 lYanapuctriQ 

51 Othar Sarvtoss A Buatow aflOl 1187J8 
.60 

82 SactrioTtyflT) 

64 Gas 0teb*utton(2) 187004 

68 . Ttem niniunl cai l n n tf ^ 1988^7 

to WMarfia 1754.M 


-2.4 2XB1JBZ 2023-32 203734 177030 609 

-1^ 289039 296261 2974JI8 2581 JS0 009 

-61 216038 220043 223079 17SU20 648 

-63 304568 3074.71 310677 231490 619 

-65 1637^1 163648 1837,48 1825.70 698 

-61 1735L36 175648 178608 1471 JOO 685 

-64 164615 1854.75 1684.14 160630 656 

—1.7 235607 2371 JX) 839677 206440 687 
-64 119692 ii«m7 119 6.78123600 A51 

-1.4 2279J1 2281.00 2287^6211920 48S 

-1.1 2187.85 2158^72171.07 1721 JSD 698 
-0.7 188684 1901.78190618 1913.80 641 

-1.72023^8203673204637109620 4 JOO 
-16 178643 175720 1737.37 1711^0 627 


686 2611 1640 94650 

690 19m 34.05 97613 

459 2649 19L42 101627 
611 2687 3445 101692 

674 1674 1672 93SL97 

618 20.13 1>-74 88658 

670 2031 988 96690 
4.77 2689 1614 091.53 

630 aUOOt 691 100610 
638 15.00 1463 844^4 
11/48 1084 1685 86680 

t t 53.43 854.83 
7 St 1621 009 827/44 
14^7 612 640 84487 




2W 

Ate Am 


-4>a 


6*go 



1864.42 

-29 168750 1087.18 17USL30 152038 

353 

851 

19X6 1925 

116051 

^&g r HHAWClAL0f1Og) 

PfNHI 

Vf7S>lnaurarpan7) 

:y."|4\te Aaraaanpan 
< », Atotent B«*a<q 
: 77 iithar nmeU(24 

211854 

270350 

1217/43 

228350 

2833/48 

183550 

157198 

-29 2106.41 21B1.70 2191X0 196550 
-29 2781.02 2S035B 2011.87 2438.10 ' 
-25 1253.79 126890 128245 127370 
-15 231052 2300942332.03 255850 
-C5 285894 290952 2910.89 251440 
-14 188158 188551 1868.40 141350 
-05 1578.77 1584.14158550 1345J0 

424 

490 

528 

844 

397 

353 

3X8 

824 

8L57 

11X8 

axe 

1057 

8X5 

398 

1397 41X4 
1356 5007 
943 27X4 
1031 8858 
1191 2328 
18X3 2016 
8156 10X8 

82048 

80051 

602X7 

066X9 

838.18 

084X0 

68223 

80 ■WB&TMCHT THUSTSfiag 

278155 

-14 2822.00 2W30.90 283940 228020 

2 3D 

155 

6452 25X4 

92946 

89 FT-8&A ALL-a«AREpS6) 

152852 

-25 1657.82 158658 1573X8 1406X0 

aX4 

038 

1853 1948 

1132X6 

■ Hoorty nMwwiMiit* 

Open 950 

1090 

1190 1290 1390 MOO 

1500 

10.10 (Wtotate.i 

jamMmj 


BoonWiAHant 


SaanlMt 


BDutoltetWrav 


(-214) 

220 8 IS 

19 14 17*21* 

Tteter 

88 10* - 

- 4 - - 

r«i 

87 • — 

- 8 - - 

tern 

950 58 81* 

91 11* 22 to 

C«8| ' 

ITO to « to* 33* 43* 9 


toO 56* 86* 

78 7 10* 25* 

P«) 

7m 24 86* 40* 20* 42* 48* 

Opto 

Am Mr M Aao to W> 

to* tel 

420 to «t 

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FT-SE MB 250 
FT-SE* 350 


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15861 


30310 

3687.6 

19869 


30967 

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15068 


30767 

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30572 

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27760 


1191/4 

27060 

17565 

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(-161 ) 180 T* 6* OH 20* 23* 24* 

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(-141 ) ID 13 » 11 20* 2B 29* 

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(-425) 480 2 13 70* 46 51 55 

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(729) 240 2ft 71 14 16 25 27* 

totnraa 550 38 84 68 11 S3 43 

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700 toto* Ito V 47 58* 
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281 

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150 FJ>. 

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160 

154 vymura 

130 


1444 

22 

3X 

15X 


RIGHTS OFFERS 

tone Amount Latest 
price paid Renun 
P «4> (M 


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Stock 


27 

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105 

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1%3m 

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ter *c60 ter Mar 
si «ttf 21 at 


■to |WK 


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FINANCIAL TIMES EQUITY INDICES V. 

M«y 25 Hgy 24 May 23 May 20 May 19 Vr ago Uto - ^ 

Otebrarr «*• Z39L8 244&9 2459J aflJJl" M7 TjB 22WLR 

Ord.dhr.yWd 420 4.12 4.08 4.03 4 j03 4^3 

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wyas Mgya tor/ IQ 

EEAObragete 26.18S 23^81 24558 24,774 


(teVfOK. The AtecW Tfeiwe Ltated 1984. 

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LONDON SHARE SERVICE 


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CURRENCIES AND MONEY 


FI NANCIAL T1MKS THURSDAY MAY 26 1994 

""I EY MARKET FUNDS 


MARKETS REPORT 


Dollar weakens again 


The dollar's recovery oa the 
foreign exchanges proved 
shortlived yesterday as the US 
currency came under renewed 
pressure from a stronger 
D-Mark, writes Philip Gmmth. 

The agreement on Tuesday 
to restart the US-Japan trade 
talks had bolstered the US cur- 
rency, but weaker than expec- 
ted April durable goods figures 
were the catalyst for a steady 
weakening of the dollar. 

The dollar finished in Lon- 
don at DM1.6447 against the 
D-Mark, from DM1.6478 on 
Tuesday and an intra-day high 
of DML6545. It was barely 
changed against the yen at 
Y104-455. 

Activity was generally fairly 
quiet until the dollar started to 
weaken in the European after- 
noon- Apart from generalised 
D-Mark strength, the features 
of Europe were the weaker lira, 
the Portuguese escudo coming 
under pressure again, and the 
firm Greek drachma. 

The futures markets were 
again very volatile, with most 
of the movement in eurosterl- 
ing. Sterling had a steady day 
with the sterling index finish- 
ing at 80 from 733 as strength 
against the dollar offset weak- 
ness against the D-Mark. 

■ US April durable goods 
orders were only 0.1 per cent 
up in April, compared to mar- 
ket expectations in the 0.8 per 
cent to 1.5 per cent range. 
Although durable goods fig- 
ures are not normally closely 
watched, the disappointment 
was sufficient to deflate what- 
ever thin veneer of optimism 
had come to surround the dol- 
lar. 

Contributing to the dollar’s 
difficulties was a general firm- 
ing of sen timent towards the 
D-Mark. The catalyst for this 
was the fairly small fall of only 
three basis points in the Ger- 
man repo rate, to 5.20 per cent 
Although widely expected, it 
appeared to confirm recent 
comments from Mr Hans Tiet- 
meyer, president of the Bund- 
esbank, suggesting that the 
pace of German monetary eas- 
ing would slow. 

These sentiments were fur- 
ther strengthened by com- 
ments from two senior Bundes- 
bank figures yesterday. Mr 
Otmar Issing was quoted in a 
German business daily saying 


Dollar 

Against the D-Mark (DM per S) 
1.88 



Apr 1994 May 29 
SOWCK □attCtKMRI 

■ Pound In Hw York 


that “current money supply 
figures did not match a land- 
scape of falling Interest rates. 1 * 
M3 grew at a seasonally 
adjusted, annualised rate of 
1&8 per cent in April. 

Mr Reimut Jochimsen, a cen- 
tral council member, was «ian 
quoted expressing concern 
about differences between 
Bundesbank policies and gov- 
ernment fiscal policy. 

Some analysts believe the 
D-Mark is being re-rated by the 
market as economists upgrade 
their forecasts of German 
growth. Yesterday the German 
currency had a mixed perfor- 
mance in Europe, finishing at 
FFr3.421 against the French 
franc from FFr3.422. 

■ The escudo returned to mar- 
ket attention yesterday with 
the Bank of Portugal forced to 
step in to support the currency 
when it fell below Esl04 
a gains t the D-Mark. Dealers 
said a series of rumours about 
alleged crises were undermin- 
ing sentiment, while the cur- 
rency also seemed to be acting 
in sympathy with the weaker 
bond market 

In Greece, by contrast, the 
drachma had a steady day 
despite the overnight down- 
grading of Greece's senior for- 
eign currency debt by the rat- 
ing agency Moody’s. 

Ms Wendy Niffikeer, senior 
economist at IBJ International 
in London said she believed 
the worst was probably past 
for the Greek currency. "If 


there was going to be a serious 
crisis, it would have happened 
by now,” she said. 

Last week many in the mar- 
ket were predicting a devalu- 
ed The short term aim oF the 
Greek, government, some ana- 
lysts argue, is to try and sup- 
port the drachma through the 
European elections, and until 
Greece hands over the presi- 
dency of the European Union. 

Hie lira was weak yesterday, 
closing at L969 against the 
D-Mark from L965. Analysts 
said this was probably a func- 
tion of heightened political 
uncertainty following the 
announcement that Mr 
Umberto Boss!, the Northern 
League leader, would have to 
appear in court. 

■ The futures markets enjoyed 
another hectic day. Trade in 
the euromark futures was 
again heavy, with the Decem- 
ber contract trading over 57,000 
lots. Price movement, however, 
was fairly sedate after the 
recent gyrations, with the 
December contract closing 
unchanged at 94.77. 

Trade was fairly heavy in 
eorosterllng too, with the 
December future trading 
nearly 34,000 lots, and closing 
fifteen basis points lower at 
93.80. Analysts said it was diffi- 
cult to make sense of the 
move, which appeared to flow 
from weakness at the longer 
end of the yield curve. A lot of 
the selling was technically 
driven as price falls triggered 
various chart points. 

■ The Rank of England pro- 
vided £525m of late assistance 
to the UK money markets after 
predicting a £750m shortage. 
The Bank had earlier provided 
£76m liquidity to the market 
Overnight rates moved 
between 4% per cent and 6% 
per cent 

In the German money mar- 
kets call money rates eased to 
5J25/5J5 per cent from 5.30/5.40 
per cent after the Bundesbank 
added a net DM7.5bn in its 
money market operations. 

■onmcuH—HCM 

K*?25 E S 

Hungary 155023 - 15S246 W2530 - K&730 
Iran 2B23JJ0 - 26X00 174M0 - 179000 
Knot 04407 - 04511 02977 - 02385 

Poland 338805 - 33S507 224300 - 224700 
RMk 2863-16 - 287071 109000 - 190000 
UAE 55473 - 55503 16715 - 35735 


POUND SPOT FORWARD AGA'NST THE POUND 


m -546 
047 ■ 723 
201-321 
965 - 061 
923 - 009 
837 ■ 959 
562 733 
191 - 210 
721 -967 
047 - 723 

asa - mi 

505 - 586 
163 - 433 
562 - 738 
2S4 - <2 
1i7 - 195 


May 25 

i 

ctcMtg 

IbdHUMtt 

Europe 



Austria 

rscre 

17.4768 

Belgium 

{Bfd 

51.1385 

Donmartc 

®W) 

97261 

rntend 

(TM) 

51755 

franco 

<FFn 

54866 

Gemany 

(DM) 

£1848 

Graeco 

BW 

367283 

Mend 

« 

1.0201 

My 

M 

2<0644 

Luxembourg 

OR) 

5U385 

Netherimas 

(R) 

2.7877 

Norway 

pKO 

10.75*5 

Portugal 

fEe) 

257296 

Span 

(Pta) 

204890 

Swadan 

(SKrl 

11.7338 

Sswttwtand 

(SFr) 

£1186 

UK 

n 

- 

Ecu 


12903 

SORT 

- 

0940873 


Three months 

One yore 

Her* at 

Ran 

tePA 

Rate 

«MJrf£ Jrate* 

17.4074 

02 

. 

. 

1141 

51.1335 

00 

90 8835 

03 

1134 

9.7419 

-01 

9.7593 

OJ 

115.6 



. 


6t2 

65053 

-0.4 

64718 

03 

1055 

2.4850 

-01 

24731 

08 

1240 

10211 

-0.* 

10223 

-09 

1044 

242384 

-20 

2*54 49 

-!9 

77.8 

51. 1335 

00 

308635 

09 

1134 

2.7S7 

ai 

27841 

08 

ins 


Money Market 
Trust Funds 


tMMAfli 


W Mm NMMWt Cat* 
taHa M W| Ibid. f i l to n H»U0 
rwinimmu. Utv 

DHWiwRMtalM 


02 2.787 

08 10.78U 
-4.5 280218 

ao 20am 

-22 11.7888 

09 2.1128 


43 107528 00 
-45 - 

>2.6 20081 -2.0 
-1.8 116748 -10 
1.1 2.0839 1 9 


15934 1.2880 1291 5 -1.1 15924 -06 15907 OO 


Amrleti 

Argentina (too) *£061 *0332 C76 - CM 

Onal fCr) 26SOC6 -4S.J7 9*3 - OH 

Canada (CS) 20877 *0 0072 688 - 88S 

Modco (Now Poop) 4.9813 *9-0096 726 - 900 

USA (S) :91Q9 *0.9026 105 - 5T2 

padflc/Mddto Eest/AMc* 

Austrafca (AS) 2.0580 +aX78 588 - SSI 

Hong Kong (HKSJ 11.6721 -€ 0137 888 -756 

India fife) 479954 -0.0789 80S - 101 

Japan £Y> 157.816 *0571 742 • 890 

Malaysia (MS) 39207 -0.3026 190 - 223 

Now Zealand (NZS) 2967: *00026 850 - 892 

ptttpptoea (Peso) 409*41 -00664 060 - 802 

Saud Arabia (SR) 5 6660 *03082 645-675 
Singapore (SS) 29207 *00023 194-23} 

S Africa (Cora.) (H) 5 5441 *00102 405 - 478 

S Africa (Fin.) (H) 79730 -0012 Ml ■ 898 

South Korea {Wo rj 121&43 -2.43 807 • 878 

Taman ITS) 409668 -02928 3*6 • 989 

Thafland <BQ 38.0659 *00843 495 - 822 

tSOR rat* lor Stay 24 Btfoflw amh r. an tod Son SC* 
but m by oarint *am«raML String asm aawaan 

tM Data Seal tscfaa dwiwrj tan THE WMSCUZStS CL06I 


19085 15016 
2651 00 259690 
29885 20729 2.0804 

4.9900 449627 
1 5120 15035 1.51 

20085 20467 20673 

116766 116216 11664 

47.4110 47.1340 
158.430 157350 1 57.401 
13225 19074 
£9695 2S662 25684 
41.1830 40LS783 
5.6879 56416 
21220 23127 
5.5485 55161 
7.4221 73*25 

121639 171137 
410000 40,8200 
38.0830 370230 
i da* any toe tat Brea daoiml | 
I by As Bm* el Erataai. Brea mm 
HQ SPOT RATES, jam uakMi • 


-10 20626 -0,9 2.1079 -1.0 
0.7 1.5067 06 18067 0 3 


04 20557 04 2.0&47 02 
06 11.6601 04 116871 -Ol 


32 196.631 10 152746 37 
03 25699 -0.4 2.57B5 -04 


frwstoaMuaaeiKaSM .on -Matsu 
Drew .1 ue -I mbImm 

OMt M. or Bn. ofOwrob of Matt 
IftaStoAlMtolCrrXta “.WrtMWl 
Drew _l *J4 -I IMliw 

Money Market 
Bank Accounts 

mm m m a** 
MMMMMgfe 

»t» aw uan Kirin. uiuwg 

ita aayltasii-tap u lMtaM l ta toas 

ouremm.. an areas I uh m> 
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s| hi s 
si is £ 

MUtMKIfW WI-WSWO 

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mttseassL*- 

“ijsli. 

lail sif t 



age iflSS - 100M OW and imwm n l 
i munctod by i* f.t. 


DOLLAR SPOT FORWARD AGAINST THE DOLLAR 



ir r rr ' , rereSal 


Sfttf {SreS S a Wa MW w .WWM 

iUfta.UWH.- TU UM I *»l 


May 25 

Closing 

nad-pont 

CTtarga BtoAtCbr 
on day spread 

Oeyte mkf 
high low 

One month 
Rate %PA 

Three MonBre 
Rria %PA 

One rear 4.P Morgan 
Rato %PA baton 

Europe 

Austria 

(Sch) 

113675 

-002 660-700 

11.6625 11.5600 

11.575 

-0.8 

11.5765 

-03 

11.4903 

07 

103.4 

Brighan 

(BftJ 

33.8*75 

-00825 330 - 820 

34.0830 338300 

338728 

-09 

33.8975 

-06 

33.7675 

02 

KM 7 

Denmark 

(DM) 

64373 

-0.0169 360 • 400 

8.4860 8.4350 

6447 

-1.8 

646 

-1.4 

64655 

-04 

104.0 

Finland 

(FM) 

5.4T1* 

*00068 065 - 183 

64383 5-4039 

64139 

-06 

54159 

-0.3 

64269 

-03 

763 

France 

(FP») 

68237 

-00153 222-252 

58660 66222 

5.6308 

-18 

5.639 

-1.1 

66105 

02 

104.6 

Germany 

(D) 

18447 

-00031 443-450 

18571 1.6440 

18462 

-1.1 

1.6475 

-0.7 

1.6413 

02 

1062 

Graeco 

(DO 

243.500 

-1.668 000 - 000 

246700 242.500 

244.65 

-07 

245.7 

-38 

248 

-18 

667 

Ireland 

TO 

1.4812 

*00062 801 -822 

1.4830 1.4695 

1.4796 

1.1 

1.4776 

1.0 

1.4742 

05 

- 

My 

<U 

1594-10 

*3.73 366 - 454 

159822 153356 

1596.55 

-33 

18066 

-3.1 

1627 60 

-21 

786 


an in mi 

ire iH m> 

xH ire ire wn 

am mi are are 

MM fit *43 Mb 

*. a Ire 4M w 


ntmMftui 


jb amiUMfti ml aruswau 

mare * 1 area ins 1 ure( a> 

QD»nw ..Itw im litrel nr 

BtakotloaOntf 

anwMiMsiaafHH Bn-anrere 

aniMMt amoan,) ua »a I xrel m 

atsnu^Ja hi hI s 


nreiM 

KSSCT. 


a xx ) 'ireftM 

xx | are Mfir- 

b'^IbIm 


aw reireaare re 

Mi. Mi ire 


Uixembowg (UFi) 33.8475 -0.0825 330 - 620 347830 318300 318725 -09 318975 -0.8 317875 07 104.7 

Nethariandi (FT) 1.8451 -00032 448-456 17585 1.6445 17464 -08 1.8471 -04 1.8347 06 1040 

Norway (NKi) 7.1182 -00162 172 • 192 7.1796 7.1160 7.1212 -05 7.1227 -03 7.0982 03 98.6 

Portugal {Ex) 170300 -0125 250-350 171.900 170750 171765 -OB 172.083 -8.1 17775 -4.1 826 

Spare Pud 135.480 -0145 440 - 520 138.400 135.400 135.875 -IS 136755 -37 130455 -27 60.4 

Sweden (SKr) 7.7064 *0042 626 - 701 7J975 7.7242 7.7849 -27 77109 -2.3 7.6714 -1.4 81.9 

SMtwrend (SFr) 1.4023 -00068 020-025 1.4165 1.4020 1.4025 -0.1 1.4007 0.5 13846 1.3 »37 

UK (Q 13109 *00025 105 - 112 1.5120 1.5035 1.51 07 13087 06 <3067 03 68.5 

Ecu - 1.1710 *00021 70S - 715 1.1715 1.1639 1.1696 13 1.1B79 1.1 1.1727 -01 

SORf - 1.41545 - - 

Americas 

Argentina (Paso) 09982 -00003 961 - 962 0.9983 0.9380 - - - 

Brazil (Cr) 1754.02 *2939 401 -402 1754.05 175431 - - - 

Canada (CS) 13818 *00025 815-820 13825 13770 13839 -1.8 1387 -13 13991 -1.3 83.4 

Mental (Now Peso) 12970 *0001 920 - 020 12990 32920 3298 -04 32996 -03 33072 -03 

USA (S) - - - ........ 100.0 

PadBe/Mkkfle EaotMMca 

Australia (AS) 13622 *0003 617 - 626 13661 13600 13875 -43 1.3664 -12 13647 -02 692 

Hong Kong (HKS) 7.7255 *00005 250 - 260 7.7285 7.7245 7.725 0.1 7.7275 -0.1 7.7417 -02 



4ao Mr 
4.H T*My 
BBS «Mr 
us Mr 
3» vawy 




Bardbntt Prim Account KJJCJI. 

forer(5, w w re r N i nreami 

ngoMire.. lino m awl a* 

cuw-cmw— zjs ire { ur| a* 

tiuaMHM I i.is am are ire 

sure _. 1 uo an I xml aa 

drown Sh^lty A Co Ud 

Famdm Owl. IsMwy, UwSOT KJ 071 -ON MU 

MCA 1 400 Ua *07 0* 

MDHNM J*N loot *07 1 Or 



.BTt-OSlMt 

agsaa st .9 Fa 

dhn areureuOiiiu I -ua aial«il.ar 


- 675 - 725 313725 313675 31.46 -11 31395 -2.9 


1887 

-10 

18991 

-1.3 

864 

62998 

-03 

63072 

-08 

- 

* 

- 

- 

- 

1000 

1.3684 

-12 

10647 

-02 

a 98 

7.7275 

-01 

7.7417 

-02 

- 

31895 

-2.9 

. 

. 

_ 

10682 

£4 

101895 

69 

1458 

2884 

1.7 

2815 

-08 

- 

1.7056 

-18 

1.7272 

-1.7 

- 

67528 

-00 

67855 

-0.4 


1835 

03 

1.537 

-Ol 

- 

67133 

-4.8 

679 

-63 

- 

40725 

-7.6 

- 

- 

- 

81205 

-30 

831.45 

-3.1 

- 

27.175 

-08 

• 

• 

- 

26395 

-62 

25875 

-67 

- 


CROSS RATES AND DERIVATIVES 


EXCHANGE CROSS RATES 


May 25 


Bn- 

DKr 

FFr 

DM 

K 

L 

FI 

NKr 

Ea 

Pta 

SKr 

SFr 

£ 

CS 

S 

Y 

Ecu 

Balghaa 

(Bft) 

100 

10.02 

1662 

4850 

1096 

4709 

5452 

2102 

6061 

4002 

2204 

6144 

1055 

6063 

£955 

3068 

£522 

Denmark 

(DKr) 

6288 

10 

6739 

2855 

1.049 

2478 

2887 

1106 

2840 

2100 

1206 

£179 

1028 

£147 

1054 

1828 

1228 

Franco 

FFr) 

60.16 

11.44 

10 

£824 

1200 

2833 

3280 

1285 

302.7 

2408 

1380 

£493 

1.178 

£458 

1.77B 

1858 

1218 

Germany 

(DM) 2088 

3014 

6A21 

1 

QA1Q 

9600 

1.122 

4228 

1038 

8227 

6720 

0053 

0402 

0840 

0808 

8600 

0019 

Mend 

TO 

5014 

9835 

6333 

6436 

1 

2381 

£733 

1054 

2522 

2007 

1100 

£077 

0980 

£047 

1481 

1567 

1885 

Italy 

(U 

6124 

0404 

0853 

0103 

0042 

100. 

0118 

0448 

1089 

6601 

0487 

0088 

0042 

0087 

0063 

8053 

0054 

Netherlands 

TO 

1884 

6489 

6049 

0891 

0888 

8867 

1 

6858 

9229 

7342 

6207 

0760 

03S9 

0749 

0042 

5660 

0483 

Norway 

(NKr) 

4787 

9047 

7807 

2812 

0049 

2240 

2893 

10 


1904 

1001 

1071 

0030 

1042 

1.408 

1488 

1800 

Portugal 

(N 

1988 

6780 

6304 

0966 

0.386 

9960 

1.084 

6178 

100. 

7908 

4059 

0824 

0289 

0812 

0587 

8123 

0001 

Spain 

(Pta) 

2488 

6751 

4.152 

1214 

0488 

1178 

1282 

6292 

125.7 

100 

6730 

1035 

0489 

1020 

0.738 

7709 

0830 

^ i r-| M rs 

(TVfauora 

(SKi) 

4600 

6292 

7246 

6118 

0870 

2053 

£377 

9.165 

2184 

1765 

10 

1808 

0853 

1.780 

1888 

1365 

1.100 

Switzerland 

(SFr) 

2613 

6890 

6011 

1.173 

0491 

1138 

1818 

6073 

121.4 

9800 

5038 

1 

0472 

0985 

0713 

7*47 

0009 

UK 

B 

51.14 

9.726 

6500 

£485 

1020 

2408 

£788 

1073 

2672 

2067 

11.73 

£119 

1 

£088 

1011 

1572 

1890 

Canada 

(CS) 

24.49 

4058 

6071 

1.190 

0489 

1153 

1235 

6148 

1232 

9804 

6618 

1.015 

0479 

1 

0724 

7507 

0618 

US 

ra 

3385 

6437 

5.626 

1845 

0875 

1694 

1845 

7.114 

1703 

1360 

7.783 

1402 

0082 

1282 

1 

1064 

0854 

Japan 

(V) 

324.1 

6183 

8387 

1675 

04A 

15260 

1787 

6612 

1831 

1297 

7633 

13.43 

8237 

1623 

9075 

iooa 

6175 

Ecu 


3984 

7840 

0560 

1028 

0791 

1887 

£161 

8233 

1990 

1567 

9093 

1.843 

am 

1819 

1.171 

1222 

1 


Indbl (Rs) 313700 - S75 - 725 313725 313675 31.46 -11 31395 -2.9 - 

Japan (V) 104.455 *001 430-480 104830 104.430 10425 2.4 103.82 £4 101395 £9 1453 

Malaysia (M5) 23950 -00025 945 - 955 £5980 23940 23875 33 2384 1.7 2315 -08 

Now Zealand (NZS) 13991 -0001 981 -001 1.7015 1.6980 1.7009 -13 1.7055 -13 1.7272 -1.7 

PlflppinH (Paso) 27.1000 - 500-500 272500 26.9000 - - - - 

Saudi Arabia (SR) 17502 - SCI - SG3 17503 17500 3.7507 -02 17526 -03 17BS5 -0.4 

Singapore (SS) 13360 -0301 355 - 365 13380 1.S356 1.5353 0.8 1335 03 1.537 -0.1 

SAMca(Cara4 (R) 16695 *03007 680 - 710 16830 3.6830 3.885 -5.1 3.7133 -4.B 3.79-33 

S Africa (fin.) (H) 43800 - 700 - 900 43300 48800 4.9137 -5.3 43723 -7.6 

South Korea (Won) S0&450 *03 400 - 500 806800 808200 808.46 -43 81235 -32 831.45 -3.1 

Tanwsi (15) 27.1150 *0.13 000-300 27.1500 273100 27.136 -03 27.175 -03 

Thatend (Bt) 25.1850 *0315 900-000 252000 25.1900 252675 -33 25395 -32 25375 -2.7 

tSOR rata lor May 24 BrSbure ipread* in O* Dofer Sooc taei* drew orty tire hre Urea dadmfll piacre. Fgnmd ram are noi cMciiy quBiad to OM ireW 

but m> fnpfauj ty ewnnt nxras: mm. UK. Ireland & ECU at* quoad in US owncy. JJ 1 . Uofipn nomnil intScM May 24 B«M avoaga 1M0-1Q0 


ERAS EUROPEAN CURRENCY UNIT RATES 


5.95 15 

5.10 

487 9 

4.62 

£62 -8 

136 -11 

0.03 -21 

000 -24 


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May 29 

Ecu cea 
raun 

ReH 

against Ecu 

Change 
on day 

%+/-from 
con. rata 

Ireland 

0808828 

0790770 

-0001777 

-281 

Nathartande 

£19872 

£18558 

*000145 

-1.42 

Belgium. 

408123 

39.7295 

■*00357 

-180 

Germany 

184984 

183088 

*000157 

-098 

Franca 

803883 

880242 

-000024 

097 

Denmark 

743879 

705783 

*000564 

1.82 

Spata 

156250 

156790 

-013 

£94 

Portugal 

19£B54 

199824 

+0445 

681 

NON SIM MEMBERS 




Greece 

286613 

286478 

-0637 

7.90 

Italy 

179619 

188308 

+■106 

383 

UK 

0.788749 

0775034 

-000283 

-1.49 


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BRgK ^r rfs^ u.i uai 

aw I ajol 

mooo-ewuH — am ua I a«l 

■mnxMrewa ua mb ut 

DDMUN 231 Uai 232 1 

reread mdn * rerewaiMa am 


llkaryScfln 

ntCMibii 

StiMBreiiOm 

Wretare Treat 


M Ocy ■ oai -4*x a*3i j 

miUlUre mb! aal or i 

larteaiMftCoUd 


SlaT-S 

■mm w»tetenaiOiiiiiiB*oB_ 

areu. h&fllUM 07SB4I' 

* ara are} are « 

nareo— are are I are i 
Kre*Z.. .(*28 awl 431 1 i 


Cireytere 

i ’..oramra 


f V 




MMOMI «■ 
nwr, M *n mremv 


■ P-24AWK PlfniWW QMM) DM 126000 par DM 


i Rmo, Escudo. Lira and fesata par 100. 

■ JMMUOMI YW FUTURES (IMM) Yen 123 par Yan 1TO 



Open 

Latent 

Change 

High 

Low 

Est. uol 

Open M. 


Open 

Latest 

Change 

High 

Low 

EaL vol 

Open Ira. 

Jun 

08040 

00085 

+00028 

08068 

08033 

33085 

122.087 

Jun 

08670 

08577 

+00014 

08579 

08861 

3722B 

62,775 

Sap 

0.0035 

0.6058 

+00027 

08058 

08036 

423 

10210 

Sep 

00620 

08642 

+00011 

08642 

08820 

937 

8274 

Doc 

08053 

00080 

+00019 

00060 

08093 

17 

294 

Dec 

- 

09703 

- 

- 

- 

148 

957 


Italy 1793.19 186168 *136 333 -030 

UK 0.780749 1775034 -000283 -1.48 518 

Ecu caMM rain sat by aw Empoan Cqmntetoa CUnendoa m h dMcandho nUtm aerngdi 
pNosntaga chmgm are lor Eac a pobthn rdange danous a waak cunncy. Obiwganca shorn Itw 
ratio bsbuew two spreads: fts pswamga ranwancs b*n»ssn th* acrud nwl** and Ew oresat raMs 
tar a ernw. and Bw mmiun psrrnMsd paceraags dreWlaa of ms cmwieyM msrfcst rats born Ka 

(1 TAMS) SMrfttg wid Onion Lha suspandad (rein BM Adfuatmani catatiilsd by M RnsicM Tknts. 

■ PWAPHPmsi C/HOPnoHS 831.250 (cants psrporen9 


■ swsa franc remmura (MM) SFM25300 par SFr 


I nnums 0AM) £82 300 par £ 


Jun 

0.7069 

07113 

+00044 

07114 

07067 

16049 

41042 

Jun 

10064 

18072 

+00024 

10078 

18048 

8064 

43089 

Sep 

07091 

07120 

+00040 

07120 

07089 

257 

2098 

Sep 

10020 

10054 

+00024 

10060 

18020 

133 

£544 

Dec 

- 

07160 

- 

07160 

- 

5 

339 

Deo 

10070 

10068 

- 

18070 

10088 

12 

59 


Strfea 

Price 

Jun 

- CALLS - 
Jiti 

Aug 

Jut 

— PUTS — 
JUl 

Aug 

1-425 

605 

788 

610 

- 

002 

ftgp 

1.460 

5.81 

671 

001 

- 

018 

006 

1078 

618 

384 

4.14 

003 

059 

1.15 

1800 

181 

£04 

£81 

049 

1.42 

£10 

1025 

081 

086 

106 

189 

£*77 

643 

1880 


037 

084 

481 

4.87 

618 


ANGLOVAAL GROUP 


Dedaratkm ©f Final Dividends M\kS\ 

- Year Ending 30 June 1994 *1. yiV 

DrridenJi hmc today been declared in ihc aarency of die Republic oT SauhAAici 
10 hokfan of atdinaiy dnua Breed bdow. S^ent dales (dared U these dedatstians 



WORLD INTEREST RATES 


MONEY RATES 

May 25 O w* 


PmvtaM «4, C4k iw Puts BJflO . ft**. d*j^« op»n HU Cobs 494d*3 Puts 452JBB 


INTEREST 


■ TWB MOMTll ■HROMAHK RITURBS (UF^*_OM1m points of 10096 


Belgium 

5ft 

SH 

Oft 

irerit ego 


571 

554 

France 

fifl 

5fi 

5ft 

week ago 

5K 

5tt 

654 

Germany 

680 

585 

6.08 

week ago 

60S 

505 

6.03 

Ireland 

5ft 

Si 

6ft 

week ago 

Sfl 

5ft 

6 

a** 

m 

774 

7ft 

weak ago 

774 

744 

7ft 

Netherlands 

616 

619 

620 

week ago 

613 

619 

505 

Switzerland 

414 

4ft 

4K 

week ago 

4 VS 

4ft 

4ft 

US 

*4 

454 

4ft 

week ago 

*4 

414 

4ft 

Japan 

2 

254 

254 

weak ago 2 

■ (UBOR FT London 

254 

254 

Interbank Fixing 

- 

444 

4ft 

weak ago 

- 

474 

4ft 

US Dollar COa 

- 

4.16 

4.40 

week ago 

- 

4.18 

4*41 

son Linked De 

- 

3ft 

4 

week ago 

- 

3ft 

4 


Lamh. 

Dta. 

Repo 


Open 

Sen price 

Change 

HW 

Low 

Est vol 

Open im. 

inter. 

rate 

rale 

Jun 

9483 

9487 

+003 

9488 

94.83 

25192 

162855 

7.40 

400 

_ 

Sep 

9482 

9483 

+002 

9489 

9480 

52238 

183812 

7.40 

400 

_ 

Dec 

94.79 

94L77 

- 

9408 

94 75 

56331 

237206 

640 


675 

Mar 

9485 

9403 

801 

94.72 

94.60 

34495 

211586 

580 

- 

0.76 

■ thu 

Bl MONTH 

■UROURA 

HTJUTI 

FUTURES (UFFE) LI 000m points Ot 100ft 

600 

600 

400 

480 

a on 

WM 


Open 

Sett price 

Change 

High 

Low 

Ear. vol 

Open lot. 



605 

Jun 

9200 

92.19 

-008 

9200 

82.15 

3688 

30788 

„ 

_ 

805 

S«P 

9205 

9206 

-007 

8207 

82.19 

owe* 

49781 

_ 

700 

786 

Dec 

9200 

9206 

-009 

9£20 

9203 

5162 

47807 

- 

7.00 

786 

Mar 

gun 

91.89 

-008 

92.00 

9185 

885 

12S40 


LONDON MONEY RATES 

May 25 Ovur- 7 days 


I HWBC WITU8P (UFFg Sfrlm points Of 10016 


6625 

506 

300 

" 


Open 

Sett price 

Change 

mgrt 

LCW 

EaL vol 

6825 

300 


Jun 

6507 

95.70 

-0.07 

9503 

9678 

4277 


300 

_ 

Sep 

9581 

9676 

-013 

9682 

95.73 

9622 

_ 

380 

_ 

Dee 

9580 

9587 

-013 

9584 

9665 

1628 

- 

1.76 

- 

Mar 

3667 

9606 

■008 

85,67 

9502 

1030 


MOUTH ECU I 


1(UFE) Ba/irn pomoof IQOte 


- 

- 

- 

Jun 

Open 

94,05 

Sett price 
93.99 

Change 

-006 

High 

94,10 

LDW 

9388 

EM. vd 
1384 

— 


“ 

Sep 

9408 

94.19 

-005 

9402 

9400 

793 

- 

“ 

“ 

Dec 

94.16 

9409 

-0.02 

P4.1B 

9409 

475 


” 

” 

Mar 

93.93 


-006 

9308 

9385 

329 


May 25 Ovar- 7 days Ona Thrsu 8Jx Ons 

nlqttt nodes month montiw montfa year 

Iniarbanfc Starting 61 2 - 4% 4fJ - i\ 5.V - f H 6A - 6i 5^-81, S3 - 

Staring COS - - 5 - 4fl 5* - 5^ • «A S^t - 5fJ 

Treasury B«s - 4^ - 4fl 4% - 4« 

BMW Ob - 4B - 4jJ *g - 4^ 5lj . 5^ 

Load authority daps. 4(3 - 4)J 4$ - 4« 5/* - *!3 5^-8 S&-SA R-A 

Otecowit MSricat dqpa SM - 5 4^ - 4H 

UK dsarlng bank baaa Iredng rats Sis par cant born Fotauary a. 1994 

Up W 1 1-3 3-6 69 9-12 

nkwfili monfli months tuonUB months 

Certs of Tm dap. (£101000) 1h 4 3ii 9ls 3>j 

Cana of Tw dap. undor £100000 la Ujpc. Osposlb wWidBMi la- cash W, 

Are. tender rate of discount 47430pc. ECQO flsad rare SHq. Export finanoa. KUta up day Apr! 59. 
199*. Ap—d raM torpglBd May 26. l994BJunZ5. 199*. Sdianw B & ■ RsMnno* rate lor 

P*“Aprl. ™«»flprZ9. 1*4. ScbemaS IV a V SJtttoo. Fkwica Hooab Bam Ma Mtpo tam 
**wy >i is?SM 


■ THWBS MOUTH STTOUMO WjWW 0JFFE) £500300 poteta of 10QH 


Last day to regoter Dir dividends and for chances .. 

of address or dividend uratmctimis 

Period daring wUdi transfier books sad ftgbmiof 

ntembenwill be dated (bodi days indusbe) 

Currency catvatkx) date Cor starting paymeatow 

shareholders paid from London 

Dividend wMTanti passed, (on. or sbouQ 


Nanwareonpapy 


Friday l7Jtmel«M 
SaWtdsy /F riday 
18 to 24 June 1994 

Monday Z7 fuse 1994 
Ftkky22Iuly 19N 


Notaf 

No. 

DMdeedtfactaNd 
Cents par ihare 
Jsme June 

1994 1993 

Totalfar. .. 
flsMMWyrsr 

Cents per sksrc ‘ 
1994 I9U 


88 

‘8 

7 

14 

12 


77 

85 

. « 

100 

93 ' 

2 

44 

140 

103 

260 

13.23 


ecu Unkad Ds arid ratox 1 rrarc Oi; 3 irshs en e mths 6 ; 1 year; 8 . S UBOR knatbo* Una 
robs are ottered rates lor 510m quoted a Dm iraiw by lour ratoance bulks at nan each wratna 
day. Th* ttar*a are: Bantam Duet Bank at TOcyo. Barclays and National Wa aB idfHW. 
mo mas ha damn lor Bm domestic Monoy Rates, US S CDs and 80fl Urtred Oepoate (Ofl. 


‘ UFFE hama tradad en APT 


■ TWMaMIMflMMIOOOUJWiM^tlmpoInttollOOW 


wn 

12054 


Open 

Seti price 

Change 

Wflh 

Low 

Eat. wl 

Open W. 

7824 

Jun 

94.70 

9489 

- 

94.71 

9489 

5246 

66282 

3237 

Sep 

9408 

9401 

-006 

9408 

9400 

14466 

91448 


Dec 

8307 

3380 

-0.15 

9388 

9380 

33438 

123140 


Mar 

33.43 

9305 

-018 

93.43 

8308 

8877 

53754 


EURO CURRENCY INTEREST RATES 

May 26 Short 7 days Ons Hw 

wm nodes month moot 


Three 8tx 
months months 


Open 

Latest 

Change 

High 

Low 

Est vol 

Open M. 

9504 

9503 

-001 

9504 

9501 

41881 

386,400 

9405 

9482 

-002 

9406 

9480 

84,122 

410092 

9406 

9403 - 

-005 

9409 

9403 

161,433 

402,481 


Ttetisd On AFT. M Open tawsst tgs. ara far prauimit day. 


■ SHORT antrtUttQ OynOM (LfFrE) ESOOJOO points Of IQCWf. 


Eastern Transvaal 

CoossHrtatod Macs. Ltd 88 8 7 14 12 

Rm. No. 01108442/06 • • ' 

Hartcbecstfbtiteta GsM ' ~ 

Mining Company Ud 77 85 . 63 160 95 ' 

ffey.Wn.03/jlJ9aV0d . . 

Znadpas Gold Mining ' 

Company Ltd 2 44 146 103 2&6 1343 

R*S No. SS/024I4HH 

Moles l .The dividends are paid subject to erred i tiow which can be inspected si tire 
registered ofTke nr office of the London Secretaries of the companies. 
These compsrda are Jnoorpnmcd In Itn Rcpobhc of Sontii Africa, 

lEsomaeed profit after taxation amoaMS to ft!MI 373 060 (1993: R20 132 DOO) 
and aawwdabaothed by tMvMcati|>»R34 634 000(1993: Rt9W6 008). 

By order of the boards London Secretaries Reglstared offlea 

Angloraal United AngtovaalTrntsees limited Aqghrresl Homo 

Se cr etaries 33 Doric* Street 30 Mata Street 

London WIY IfN '. 2001 WtMBHStmi 

Per KG Wiilliiara 
23 May 1994 


Bdgian Franc 
Danish Krons 
D-Mark 
Dutch GufWr 
French Franc 
Potteguesa Esc. 
Spantai Peseta 
Stating 
Franc 
Can. Dofttr 
US Doflar 
Italian Lbs 
Yen 

Asian BSing 
Short mn nsaa a 


6^ • 5V; 
6*9 * 5^| 
6^1-Wl 
5^-64 

9*a-a»fl 
7> -71a 
63|-«* 

4*2-41, 
S\-#i 
4*4 -4l« 
0-712 
2*8 -Stk 

3% - 3\ 
l Cta lorUl* 


ft -04 ft - ft 

ft- ft 5S - 5* 
ft -ft 5ft - SA 
ft-ft 5ft ■ 6*i 
SJJ - 5ft Sfi-Sft 
\ft - 10H 13k - 12*4 
734-7*2 TH - 7ft 


SH - B« 6*-lAt 

ft - A 4ft - 4ft 
7% ■ 7*4 71g-7l4 

2*9 • 2ft 2ft - 2ft 
ft- ft 4ft * 4ft 
US Dotar ml Van, Mura: 


ft - 6*4 6ft - 5ft 
3U-5ft 5S-6ft 
5ft -5ft 5ft -G, 1 * 

6ft 'ft 5ft- 5*9 

6ft -5ft Sft-Sft 
tt-llh 11*2-11 
7«-7ft 7H-7A 

6ft - 6ft sjj - 
4^1 - 4l* 43| - 41* 

oft - 8ft 6*2.618 
ft- ft 4B-4H 
7S»-7^ 7*8-7^ 

2ft - 2ft zWft 

4i| - 4l| 5ft • 5ft 
too d*y «/ rtOtie*. 


558-6*2 
512 -SA 
5*4-519 
6}* - 5ft 

Sfi-Sft 
m - 10*a 

711 - 7ft 

sU-sU 

-4ft 

6 H* 8 « 

5*2-6% 

8*8-7% 

ft-2A 

5H-5H 


■ Ul TTIgASURY BBX W7TUM8 (IMM) jlm per 100% 

Jun 95.81 95.84 *0.01 95.64 95.G1 4,011 17.158 

Sop 95.08 85.07 -0.01 9538 9536 1325 1SJ46 

Dae , 9468 9459 -0,03 9459 9458 182 7.341 

« Open Irnarast Bos. am tor pradcut day 

■ HWQ9MWK OPTWHS (UFFE) DM1 m points of 10016 


straw 

Price 

Jun 

- CALLS - 
Sep 

Dec 

Jm 

— PUTS 
Sep 

IMS) 

0.19 

Oil 

008 

0 

030 

9475 

0.03 

005 

005 

009 

049 

8800 

0 

002 

002 

001 

0.71 


Est vet. UtaL Cdfa 8132 Rit* 3300. Mm day's open let, Cn*s 17*030 Pub 190231 


strata 

Price 

Jun 

- CALLS - 
Sep 

Dec 

Jun 

— PUTS “ 
Sep 

Dec 

9478 

9600 

9525 

013 

002 

0 

007 

0.14 

006 

007 

018 

009 

001 

016 

008 

009 

001 

008 

025 

008 

057 


BASE LENDING RATES 


lwnUHB8(MATq Parte Interbank ottered rate 



Open 

Sett price 

Change 

High 

LOW 

EaL vol 

Open M. 

Jun 

94*41 

94.42 

- 

9444 

9409 

14,104 

65001 


9400 

94.49 

-O.Q1 

9484 

94.47 

20848 

47,781 

Dec 

B4.40 

9488 

-0.01 

9444 

9437 

15,036 

37,497 

Mar 

9407 

9408 

-0.02 

9433 

S423 

7(497 

37,738 

■ TWtaBi MONTH BUtoOOQLUW (UfiF^* Sim potato Of 100ft 




Cfoan 

Sett price 

Change 

. High 

Low 

Eat vol 

Open Ira. 

•Kn 

9504 

9583 

- 

9606 

9604 

21 

5883 

Sep 

9480 

94.82 

-003 

9486 

9464 

14 

2065 

Dee 

94.09 

94.03 

-008 

9409 

0408 

177 

1508 

Mar 

9388 

S3.7B 

-0.10 

9386 

9383 

107 

1049 


w. «*. M tL Csfei 216*1 Pure 6WJ8. Pimtota days open u. Cato z«9335 Puss 185370 
■ lino OTBaa FHA»C OPtMtea (UFFg 3ft im potato of 10056 

Onto — CALLS ■ PUTS 

flee Jun Sep poo Jut Sep Doc 

9878 008 018 029 004 0.17 (L34 

9600 0.01 CUN a. IB 022 0S3 048 

BBSS 0 004 CUB (L48 0J3 0.66 

Est w* total, Crh 0 Puts IM, Prertous day's open tt, Csta 4M PUS 890* 


AdamS Company.... ass 

AaadTiuatBank 925 

AS Baric.,, &2S 

•Hanry Anatadw 42S 
Baric of Barada sss 

Banco BBreo Vtmya^ &2S 

Boric of Cyprus 526 

Baric Ulratond 535 

Barit of MS 526 

Baric of Scotiand — 525 

BaretsyaBtak 52S 

Brit Bk Of Mto East. ^ 525 
•Brmsi ateiey&Oo Ud 525 
CL Bank Nederland... S25 

Cater* NA £26 

QydeacWeBar* _S2S 

The Cooperriho Bar*. &29 

Gouda SCo ...._ - 629 

CracKLySreais 526 

Cyprus Bcpritr Bta* -626 


16 

Duncan Laurie 523 

Beater Bank Lfenaed_ 526 
Hnencta&QonBar*.- 6 
•Hobort Barring S CO -525 

Ghtoertt...- 323 

MMtwaa Mahon 32S 

Hal* Bar* AG Zurich. 525 
•Hantros Bank... ....... 529 

Haritat>la6GanlwBk.&2S 


CHoaraaCo 523 

Hongkong & Shanghai. 92S 
Jirion Hodge Bank — 526 
•Leopold Joseph 6 Sore 525 

Uoyres**- 925 

MetfmIBBrtcUd, — 529 

Urgent Bor* 529 

* Moure Bgritina 8 

Na t W eaWts to r - 529 

•RaaEtalhM 525 


-RtaburdhoQiawtoa 
Corporation Um*d la no 

longer auBwrt a Bd aa 
ahtaWnghaSufat. 5 

Royal Bk of Scotiand - 925 
■an* & VWnan Son . 52S 

TSB 525 

•UnKedBkomrwat-. S2S 
urey Treat Bank Pto _ 525 

Wbaasm Dust 625 

Whtaoaay Lririwr .... 526 
Yortcsrira Baric... 626 

• Members ol British 
Merchant Banking & 
Socurfties Houses 


Yukong Limited 

(inexxporated in the Republic of Korea with limited liability) 

Notice 

tothaWiarranthoWers 
to subscribe for Common Sharwt of 

Yukong Limited 
U.S. $75,000,000 5% per cent; 
Bonds due 1996 with Warrants 

NOTICE is hereby Given to tho Waiwuhoktaf* iftti iii iwu# 

of grant by tfw Company la holders of &s shares and » 
ampioysas of nghta to subscribe for up to 3/494,000 shares of 
common stock of ths Company described In lha NotteaHrivsn to lha 


Waiwnthoktera on 28th March, 1994, ths twisting Subset 
per share of common atock of the Company has, oursu 
pro vision s of the foammant constitutira the Warm 
adjusted from V*a6d475»wa8.021vt«heSecUrom«hi 


aeth May, 1994 


YWcongUroSad 




TIMES THURSDAY Mav 26 1994 



WORLD STOCK MARKETS 


28 


13 


33 


m 


23 

^ , 

13 


&4 

...., ! 

13 


23 

u 

33 


33 

_ 1 

0J 

13 

— | 

2-0 


7 3 

| 

83 


4J 

___ 1 

i 2 

l 

23 

■” 1 


ii ~ 

m 



0.7 _ 

WBB 

343 



HKDpR 


WMMKt 


EH 


12,7m — 

*480 -TOD 
2.170 *20 

820 42 

1TB 42 
725 -rS 
3375)8 — 

BSD -2 
uaa + 20 
ar£5. *4 

302 -6 

186 -130 
KB -8 

SB i 

’’we -to 

1.328 -7 




■rr 






— 'liaH I 


ITT, 

iv« 
iR 

->i 9*6 aK 


18 CIO IS 
7S 33 25 
US +SP*T Hij 

■J* ^ W» ft 

% assi 

2** -J. jnss 
35H -J,*»s5v 
is£ tm 18H 
m 4*« *17 18% 
10*. J,»SiO', 
ISA, sift i*»» 
2Ui mjz : i 

stasia 
14 I i gS® 

& +* 1*W. Vi 

ja^gsjss 


120830 m»> 
32841 Hn Oil 


11*10 __ — 
1313 *2 _. 
157.43 __ 

\xn *o 

346 2.1 __ 

mm 13 , 

5.1 _ 
3* 27 _- 
400 __ _ 
0711.1 _ 
a^o a7 _ 
000 _ _ 
881 13 — 
780 33 _ 

^sa r 

3KL50 A3 _ 


A* 


K 


% 






INDICES 


1- 1B +33 

2- 4* SB 
170 — JE 


53 _ 
*7122 
S3 __ 
2 22 23 
73 _ 
SO 7.7 
2S — 


US INDICES 


m »w m 

as 24 23 


m m 

» Z3 


19* 


1 IT 


1M3D 56 
99U0 56 


41844 96 
watt 96 


• tnvi2<i 
Sift W* 
»V V. 
*i*1T 17 

i*aa 

•Wl 

ns is 

.A A 


DU » 
27 1730 2.1 ... 

120 9330 2 8 _ 
IBS 115 *1 — 

24511250 13 „ 
425 344 3.3 ... 
131 102 03 _ 
57 2830 ... ._ 
31 20.73 33 ... 
S3 4283 _ 
430 338 ._ 

as 

13 _ 

2.7 ... 

53 — 
43 __ 
40 ._ 
0.7 

3.7 ._ 
4.3 _. 

13 — 


Itta +1, ms DUV 




±asar 


m 




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Financial Times. Europe’s Business Newspaper. 





























































38 


FINANCIAL TIMES THURSDAY MAY 26 1994 


/* 


4 pm do* May 2S 


NEW YORK STOCK EXCHANGE COMPOSITE PRICES 


m w tk am 

% E TO 00 Lew (Ml 

(MS 13*87 a 14 % I 4 i, 1 * 5 , 

0.18 U 32 &fl M 1 A t~ 

28 23 5 S 7 65 % 65 % 

26 16*4 53 % 54 ? 

M 52 *V 11 , 

100 4 J 28 417 * 35 , <25 
078 IS 1720715 30 ? 281 , 

050 4.1 a 5 12 % 12 % 12 % 


am 


23 10 t 
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109 101 


14 % MR 

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66 57% Off 
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10 % 8 % 40 * 0 * 10 ) 09 S 1 L 1 
12 ftACUDKSi US 11.1 
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9 % SACUMnagd 072 &B 

15% 5%Aras» 044 42 12 
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28% 23*0*08 06Q 21 14 

8 % A*» 036 *2 2 ... __ 

«% 1T%taan> TO S6Z 15% 

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64 4 B? AdMonx 

31 % I 



8 % SMMOp 
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85 % 49 % MOL 
33 b =% After 

20 % iB%«nai 

4 ijAnlE 

S 38 ?AkftC 
3 Tb Atari Rt 
28 } 9 %*k 0 BUC 
16 % 14 % Atone 
21 %/MTdl 
W 1 AWA 16 
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21 % 17 % Amy tot 
15 % 13 % Atari 
19 % AftQ )6 
21 % 17 % ACUbrA 

S .. j 25 %AMn 
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23 % MbSrmq 
14 AtaM 


148 8 % 8 % 

51 10 % 10 % 10 % 

43 7 % 7 % 7 % 

8 28 % 28 % 28 % 

877 a? fh 8 % 

5 % 15 % . 

100 1 * 1519 SB a 

ioon .1 11 8877 27 % 25 % 27 % +% 


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030 08 22 387 37 % 37 37 % 

43 95 24 % 24 % 24 % 
104 110 12 GB 15 % 15 % 15 % 
10902 23 % 23 % 23 % 
016 70 3 104 104 10 * 

020 10 9 95 15 % 15 % ift 
035 20 30 32 17 % 817 % 17 % 
020 13 484 15 % IS 15 % 

028 14 14 135 20 % d 19 b 20 % 
028 lO 13 168 18817 % 17 % 

044 10 22 Z 784 28 % 

030 1.3 40 3142 22 ’ 

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0 fl 3 20 4 464 28 % 

1 O 0 &5 28 1323 IB 14 % 



17 Afc«Urix 048 V 16 412 17 % 17 % 


2 B% 20 %/fcgP 
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25 % ® 4 tagmx 
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27 % Z 1 %*UkU 
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29 % MAMDp 

6 % 4 % Ahtaris 
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8 % 6 %Amn 6 d 
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51 % **Aad*Hx 
9 % 8 % Am M|R 

35 % 


104 77 11 339 21 % 21 
016 09 14 340 17 % 16 
0*0 TO 15 542 24 % 24 
7 2 t 1 % 1 
104 12 a 328 20 % 

016 10 94 9 b 

104 50 13 18 23 

067 lO 7 4520 35 % 

088 14 18 18 a 28 % 

19 88 5 % 

B 835 25 % 

TOO 20 95 2047 70 % 
462006 25 % 
099107 228 9 

025 30 24 8 7 % 

008 10 6 878 8 

0*8 20 14 150 21 % 

060 12 a 830 50 % 

024 29 297 9 % 

MiBriitCkxOlO 04 32 8397 24 % 

200 62 94719 


9 % 


I 


10 % 17 % Am Arid M 052 20 12 
25 % 20 ? MBnPldx 080 30 13 
8 6 % Am Cap W 085 04 
20 % 17 % Am CM BO 
2 ft 15 % tor Cap CP 
52 42 %/ncyMx 
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28 28 % 
17 % 17 % 
58 % 57 % 


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104 SO a 61 18 % 18 18 % 

10 B 02 0 12 a 20 % 20 % 

105 18 29 1703 51 % 30 % 51 % 

2.40 U 15 1874 29 28 % 29 

10 D 14 12 5185 29 % 29 % 29 % 

1.18 40 23 4559 27 % 28 % Z 7 % 

7 % 7 % 7 % 

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% 

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044 50 5 54 7 % 7 % 7 % 
048 lO 72 B 9 B 25 % 

18 Am Wflr 5 » 125 62 20 20 % 

108 30 12 75 27 % 

102 40 13 2702 38 % 

128 30 5 10 36 % 

024 12140 482 14 % 

120 30 15 8088 
an U 6 SB 
012 3 L 8 56 a 
140 44 TO 444 
72 541 
030 00 803785 
77 248 
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144 28 25 am 
267100 3 

18 301 


9 % S% Am Sort In 
27 % 24 % AI 0 Mil I* 
20 % iftfatMga 
65 % 55 %taHome 
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27 % 23 %Anftcm 
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27 % a ~ 

22 % 

32 % Z 7 AMWM 
43 % 36 % Aintcti 

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43 % 35 
14 % 11 

58 % 50 % AflKCo 
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28 % 24 % AaQeBca 
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18 % 14 % Antfaaqrtax 0*4 29 16 14 15 % 


35 30 tonCp 1 S 2 58 7 378 
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10 % 9 %ApmltaFx 073 70 105 81 

18 % 14 % AW S 631 17 % 16 

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22 % 18 % ApM Par Ax 012 OB a 19 20 % 19 % . . 

27 % 22 % Jfrttfhi 0.10 04 17 382 23 % 23 % 23 % 

43 ? Art Cite 250 54 a 7 B 46 % 46 % 48 % 



47 An» 45 Px 450 94 4 

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a% 22 % AMIOari* 040 10 10 17 


44 % 34 AM 09 X 

25 % ifttotaPacF 
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57 % 49 %Arar 
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100 27 13 1028 
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020 64 1 140 3 % 



012 03 2 * 35 36 % 35 % aP* jj 


102 24 1156 * 55 % 55 % 55 % 

200 1.1 < 100244 % 244 % 244 % 

34 Atari GMX 208 00 14 108 84 % 34 % 34 % 

9 % 8 % HUB Sol 028 40 fittOO 6 % flB% 6 % 

a% 17 % Atari Egy 104 80 10 782 18 17 % 18 


H 2 %a%A«WlX 500 14 a 258811 
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20 % 17 % Ataxia Eapyx 008 40 8 33 
12 % 8 %ADaAriA 0 R 048 49 4 158 


H 


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H% 47 % i 

20 % i*% Avtmeo 
19 14 Ate 
45 30 % Anri 
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14 % 11 % AydriOxp 
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38 % 34 % BCE 
9 % 7 BET ADR 

4 % 31 


268 

015 

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048 

040 

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1.10 


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22 % 18 % Bri 171838 172 
23 % 17 % Saar Sir, 057 

50 * 8 % ItaffRA 203 
31 % 27 % Itoortnga 064 
28 % 23 Baaanoto 1*0 


7.7233 347 35 34 % 

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24 168 17 1 

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10 29 388 111 ! . 

30 10167*5 32 % 

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89 2 63 S 3 

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17 1 ® 48 % 48 

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20 20 931 
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19 18 3827 5 
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69 14 48 

03 25 _ „ . 

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2022 82 32 % 31 _ 
1.7 19 2 B 1 24 23 % 


35 




TECHMOlOGVTHXTVinRXSKMUK 


Samsung 
8mm Camcorder 



8 Times Power Zoom 
Palm-Size 




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7 % 58*57 

69 % <9 BellB 
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SB 45 % BM Ax 
25 20 % Seal* A 
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to BBanyFar 
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2 S% 28 % Beast 2 
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24 % 18 % B«tS 
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16 % 12 ?BtoCrt 
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10 % 3 %a*n»T» 


ns. n t 
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430 73 am 57 % 057 % 

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S 17 ^ 17 

1*0 183001828018200 -IDO 
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24 % 20 %Bnaor 
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34 % 30 % B£ Pop 
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41 35 %Budiei«n 
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17 15 %Bu 9 arlCI 
28 % ib sun coo 
68 % 52 % Bow 
49 ? 4 i%BritoRnc 
19 % 179 iai*aanft 


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225 34 232225 71 % 

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140 42 88 1 » 38 % 

132 5.1 4 SO 6 % 

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146 14 19 57 16 ? 

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120 21 181074 58 % 55 % 55 % 

055 14 « 3801 42 41 % 42 

1.40 74 23 1 ® 17 % 17 % 17 % 



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132 % BB% CaUriroB 
58 % 48 %bMCx 
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14 % ! 2 %Cprid 12 Sx 148 17 
37 % 23 %Capad 14 1.60 18 
42 % 2 S%CMBrilf 0 a 342127 


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Brrteyvm 044 14 31 38% 37% 37% ft 
BH4&p 012 13 448 9% d8% 9ft 
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018 162911 12% 11% 11 A -A 
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37 2B80 3S% 34 34% ft 
172168 10 9% 10 ft 

1X4 11 64 30% 30 30% ft 
17 3005 54% 52% 54% 
Bcatnan SX1X4 113249 34% 34% 34% ft 
Bob Ena 027 18 311 20% 20% 20% +% 
Bode SB 15 253029% 2B% 2B% +1 
ta« 194061 10% 10 1W, 
Boston Bk X 07B 51132 30% 629 29% -% 
Baton Tc - 449261 10% 8% 9% ft 
BradyWA 089 18X100 46 46 48 
Branco 020 291840 11% 10% 11% +1 
BrenoS 0X41B B2S 7% 7% 7% 
BSSBncpx OJB 8 28 027% 25 29% ft 
BTSNpng 0A8 7 10 3% 3% 3% 


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FfettM 0X4 81670 31% 31% 31% -ft 
FatBdMcx 1X0 10 236 2*% 23% 23% 

FatOtfk 060 21 377 24% 24% 24% -ft 

FtfEady* 1X4 11 17B 29% 28% 29 ft 

ffetTam 158 9 150 41% 41 41% 

FttWtam 036 7 75 9 B% 0% 

FMedMksx 052 6 381 28% 22% 23 +A0 

155 11 487 46% 45% 46% ft 
43 18 7% 7% 7% 
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FrttiRn 1X4 11 171 26% 28 28% ft 
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UFW 040 6 197 16% 15% 19% ft 
37 K2B 27% 27% +1 ft 
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22 26% 25% 25% 

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115 3% 

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AMEX COMPOSITE PRICES 


4 pm ckm May 25 


n 5k 

Stock Dto. E ISOi np LatrOoae (tag 

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1X5 2 306 8% 6% B? 

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AmaMroA • 45 44 

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BAT led 029 12 314 7% 7% 7L 

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BHa Manx 040151 5 2T%d2i% 21 V 

BkHWA 51 54 19% 18 1ft 

BtirtA 050 40 15 37% 37 37% 

BMlMky MR 9 10% 10% 10% 

30 133 3 2% 3 

030 9 71 20% 20% 20% 

1X1 15 222 14% 1ft 14% 


020 13 3 22^ 22? _ 

0X8 22 4 12% 12% 1 

<L01 8 322 3ft ft 
: 6 B 3% 3% 

46 164 32% 3T% 
225 5331 4% 4% 
004 26 807 10 9% 

0X1 28 5% ft 


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QowbCB 040 14 55 ift 18% l" 

CtMc 053 83 40 

Cua&taami 14 non 

mods 13 30 

Dkrnrk 28 38 

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0X73752425 11% 11 11% 

050 10 7 13 12% 13 

6 32 ft 7% 7% 
152982 35% 34% 35% 
4910583 4 3% 3H 

10 800 16% 16% 18% 


Abhor 

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AtCHyenc 020 13 
A*bU 052 72 
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0X3 18 217 69% Sft 63% ft 
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012 28 297 20% 19% 20 
090 17 11 15% 15% 15% ft 
010 1 6 1ft l£ 1ft ft 


31 2 29 28% 29 

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0X7W 8S3 18% 18% IE 

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25 1424 10% ift 1 
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1.12 19 280 13% 1 3^ 


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CabdUtd 9 487 ft 7% 7% ft 

CbdSdMpa 1X1 18 239 29% 29% 2B% ft 

ttotnuAnKIXO 201133017% ift 17+1% 
Caere Cp 11B 278 7% 7% 7% 

calgana 225 9 5715 14% 13% 1« ft 

CalMDC 18 387 20% 19% 2ft ft 

tebrtfc l 198 1% 1ft 1ft 

CandaiaL 2 7 3% ft 3% 

Cndto* 0 545 2% 1% 2% ft 

Mco toe 0X0112 37 81% 81% 81% ft 

Mode 1 68 ft 2 % ft 

Carte 9.12 2S 144 46% Aft 4ft 
CarftxOn 0X3 23 803 28 27% 27% 

Caacadex QA 18 38 20% 19% 20 
tears on 151504 io%tno% 10% ft 
(tarn 4 73 ft ft 8% ft 

Cater 9 334 1ft 18% 1ft 

CWGP 17 17 12011% 11% 

CanetfTal 77 169 11 10% 10% 

Ctobxxr 520507 13% 12% 13 ft 
OfflRd 1.12 12 671 «32% 31% 32 ft 

Cranspr 23 2 11% 11% 11% +% 

8 29 4% 4,’, V. +* 
0X0 81948 21% 20% 21% +1% 
QvraSh 0X9 134486 8% 9 9% ft 

temtoon 42 47 uS% 8& 8% 

OomW) 15 * 10% 10% 10% ft 

Cheafti 1 290 % ft % 

tentooaer 12 6 5% 3% 3% 

CHpaST* 81354 4% 4X4 4% ft 

(HranOP 6022159 65 81%B2X7 -4X6 

OtiRn 128 12 209 52% 52 62 -% 
(MmCp 017 W 207 32 31% 31% • 

Bnualxc 355473 83% 31% 33% +1% 
OS Tech 1 34 B38 2fl 2% 2S ft 

1*20539 29 24% 25% ft 

in 16 IS 25% 28 2B% ft 
24 a 7% 7 7 -% 


Bento* Cp 4X0 44 973 26% a 26 
Genus toe 133 30 ft 3% 4 

Ganzyraa 69 5555 31 29% 29% 

BBoonGtx 040 11 286 1ft 18% 18% 
LX 012 168813 22% 21% 22 
Start A 080 17 1682 1ft 15% 18 

BahBton 11 29 5% ft ft 

awi tor* i4 1648 11% 11% 11% 

toddxPtnp 0X0 19 fSB 22% 21% 22% 
GradcoSys 35 30 2% 1% 2% 
tonka 020 a 380 21% 20% 20% 
Breen APx 024 11 S3 18% 17% 1ft 


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0 576 

1 888 
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ft 

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MS Cart 17 752 20% 1ft 19% 

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HagnaSre 079 12 903 19% 11% ift 
13 52 ft Bft 
Cp 29 79 1ft 10 10% 

Mam Dr 12 145 4% 4% 4ft 

Marta Cp 9 5 40% 39% 40% 

Atonwsar 1 2 2 2 2 

19 178 9 8% 8% 

MaoUSrakAO.44 10 136 1ft 10 10% 

X 060 12 497 22% 21% 22% 

9 IBS 8% 8 8i +,‘« 

Mata kit 38 563 52% 50% 51 -1% 
Cp 02226 6 5% 5% ft 

H 044 13 588 18% 18 18% 
McOomic 0.48173279 21% 21 21% ft 
IfcCaaC 484727 52% 52% 52% ft 
•tod knag 0 703 % K S 4* 

Medextac 018 15 124 12% 12 12 

(MS 18 132 22% 21% 22% 

024 6 233 5% d4% 5 

'Cp 018 45 20 14% 13% 13% 

MenbG 02*212307 I1%dl0% 11 

MereanUJ 068 10 82 19% 19% 19% 
Mareuy6 070 71337 28% 26% 28% +1% 
1X6 11 20SB 30% 30% 30% ft 
174117 17% IB 17,1 +1A 
A On IS 4Q7 1ft 14% 14% ft 

F 020 16 58* 11% 11% 11% ft 

MctlNae £00354 1937 078 75% 78 +2 

McreHOi 8 88 A dJ% 3% -ft 

Mtioage 20 1383 28% 25% 28 -2 

Mcromm 8 637 5% 5% 5% +% 

Mcnpmi 166179 6% 8 8% +% 

MkxpCto 3 550 6% B% 9% 

Mkatt 1528404 lX2% 50% 52% +1% 

MdAlM 425135 49% 40% 48% -1% 
MMfc 040 11 1851 29% 29% 29% -ft 
Mdotobl 050 28 45 32% 32% 32% ft 
NtoerHx DS1B 846 25 24% 25 4% 
tea 1020 23 22% 22% ft 

tantodi 14 896 11% 10% 11x5 +.« 
MoMaTel 422967 17% 16% 17% +% 

ktademCo 020 18 8 7% 7% 7% 

Itotfne UTX052 19 45 27 2ft 27 

004 455 35% 35 35 

Make OD4 28 215 37% 37 37% 

00* 18 95 10% 10% 10% 

IP 0-36 22 12 30% 2ft 30% 

Ur Coffee 1B4358 14% 14% u H *A 

UTSSfl 056 11 16 27 28% 28% -% 

Mbnod 13 138* 29% 20 29% 

taouan 4 345 10% 10% 10% 


- s - 

1X6 02O43 55% 54% 55 
Sandmen 02013 440 ift it 11% 
StttmfipA 030 18 450 25% 24% 28 
SdMBdL B 1963 30% 26% 30 

setsyrtn 11 i69i 14% 14% 14% 

Stow 8 622 0% dS% 6% 

SckKCpx 0X2 71204 16% 15% 16 

ScomM 91071 9 9% 8% 

SamWrix 120 48 96 3ft 37% 37% 
11 7089 24% 22% 23A 
012 22 012 18 17% 17% 

0X6 1 67 1% lH| 1% 
1.12 IS 54 25% 24% 25% 
641003 14 13% 13% 

27 401 
13 205 
23 54 
16 125 


Is-gna 

ICp 

SatoakB 

Sekcdn 

Saquanr 


+1 

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•% 

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ft 

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SanTaOi 

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Samoon 

Stated 

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*% 

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ShotazP 

SkrraOn 

StonaTuc 

StinMx 

SttnaDaa 

StoMBc 

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4% 3% 4A 

9% ft 9% 

«% 4% 4% 

18 17% 17% 

044 17 772 23% 23% 23% 

3 315 7% 6% 7% 

271281 18% 1ft 18% 

ID 253 11% 10% 11% 

19 7M 23% 22% 22% 

2 18 3% 3% 3% 

033 191404 42% 41% 42% +X8 

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GET YOUR FT DELIVERED TO 
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TakxiSys 8 1 526 u15 14% 14% ft 
TatoCammA 294514S 20% 20 20% ft 
TtoeH 74337 5% 4% 5ft 

Tefeti 28 4270 38% K% 38% ft 
TtorenCp OXi aaiB38 17% 16% 16% ft 
TabiTac 71 174 8% 8% 8% 

T«aPMDR*llZ7 232827 23 22% 22% ft 
Three Com 3814248 54% 82% 52% -1% 
TJ W 022 33 829 23 21% 21% -% 
Tola Mud 2 S72 4 3% 4 ft 

Tokyo War 037 38 2 64% 64% Bft 

Tom Brawn 71 1MBM4% 13,% 13% +% 
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IHBikr 43041 8% 7% 7% ft 
Tantf 10 480 11 10% 11 +% 

Trtnwfck 1X0 11 95* 41% 41ft 41% ft 

Tikara 8 MS 3 2% 2% ft 

Tifenbto 48 518 B% 8% 9% ft 

TratoB flU 1X0 10 15 20% 20% 20% ft 

Taaagla&xDX0 13 972 7% 7% 7ft -ft 


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knagaQP i 300 2% 2% 2& *A 
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nffbtida 1X0 37 8 201199% 201 -5 


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Jetoyn Cp* 120 ii 13 25% 24% aft 
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Ttiteurtap OK 13 88 13% 13% 13% 
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PfexWSS 014 13 534 25% 24% 24% ft 

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WCcat 2M097 13% 13% 1ft ft 
MUFet » 11 5% 4% S% ft 

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19 MS 17% 17 17% ft 

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271783 21% M 21% +1 

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1 73 278 ft ft 4& 

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1.12 



40 


WORLD STOCK MARKETS 


FINANCIAL 


Thursday May 26 1994 


AMERICA 


EUROPE 


* 


Orders data reinforce Bourses face ‘corrosion of confidence’ & 


sour mood in equities 


Wall Street 


Blue chip stocks followed 
bonds to moderately lower lev- 
els yesterday morning, with 
the sour mood re i nforced by 
data suggesting that the econ- 
omy was losing steam, writes 
Frank McGurty in New York. 

By 1pm, the Dow Jones 
Industrial Average was 15.04 
lower at 3,736.58, but the more 
broadly based Standard & 
Poor’s 500 was down a scant 
0.95 at 453.86 in moderate 
NYSE trading volume of 143m 
shares. 

In the secondary markets, 
the American SE composite 
was 139 easier at 437.79, and 
the Nasdaq composite shed 2.49 
to 72838. 

Early in the session, equity 
investors were forced to con- 
tend with an unlikely combina- 
tion of negatives - weak eco- 
nomic news, in conjunction 
with Anther declines in the US 
Treasury market 

Though indications of an 
economic slowdown were 
likely to worry shareholders 
betting on strong growth in 
corporate earnings, sock data 
in the past often triggered an 
upturn by bonds because of the 
improved outlook an inflation, 
which threatened the value of 
fixed-rate investments. Higher 
bond prices, and a concurrent 
decline in yields, were usually 
a plus for equities. 

Yesterday, however, Trea- 
sury prices receded in spite of 
the Commerce Department's 
announcement that orders of 
durable goods last month had 
grown by a meagre 0.1 per 
cent, against expectations of a 
solid 1.0 per cent gain. The 
bond market shrugged oft the 
development amid concern 
ova an afternoon note auction. 
By midday, the benchmark 30- 
year security was showing 
moderate losses. 

The double blow hit stocks 
across the board, with the blue 
chips showing a 21-point 
decline by mid-morning. Later 
the broader market improved 
as bonds recovered some lost 
ground. News of a solid L2 per 
cent increase in sales of exist- 


ing frnmpg last month brought 
no reaction, as the gain was in 
line with expectations. 

The session’s biggest loser 

was Gtech Holdings, which 

plummeted $12, or 34 per cent, 
to $23%. The company, which 
designs and operates on-line 
lotteries and games, warned 
that net income in fiscal 1995 
would not show improvement 
on fiscal 1994 because of stag- 
nant sales and lower margins. 
International Game Technol- 
ogy, a competitor, shed $% to 
$21% in brisk trading. 

Among the Dow industrials, 
trading in Philip Morris was 
halted during the morning. Its 
board was meeting amid 
stepped-up pressure from insti- 
tutional investors to consider 


$63% but Apple was unchanged 
at $30%. 

Storage Technology was 
marked up for the second con- 
secutive session. The stock 
gained $!/’/. to $33% a day after 
revealing a promising start for 
its Iceberg 2000 storage system. 


Canada 


Philip Morris 


Stare price ($) 

02 . 


Toronto bonds and equities 
sank is tandem after the Ger- 
man authorities cancelled a 
bond auction when bids failed 
to reach expectations. 

In equities, losses in con- 
sumer products, conglomer- 
ates, and industrial products 
overwhelmed slight gains in 
momhanriieiTig as the TSE 300 
composite index fell 23.41 to 
436337 at midday. 

The consumer products 
group dropped 5929 to 6,626.76, 
with the heavily-weighted Sea- 
gram Co off C$% at CS40H. 



Brazil 


Jan 94 

Source: Oatestra am 


May 


splitting its tobacco and food 
operations into separate enti- 
ties. The stock fell 2.7 per cent 
to $53% in the previous session. 

Technology issues again gen- 
erated activity but the results 
were mixed. 

Hewlett-Packard dropped 
$2% to $79% after the company 
held a briefing for analysts in 
New York. The computer 
maker suggested during the 
meeting that its revenue 
growth may begin to slow from 
the current rate of 20 per cent, 
although it stressed that sales 
would remain strong. 

Elsewhere, Compaq Com- 
puter jumped $2% to $119% on 
news that it had displaced IBM 
and Apple as the world’s lead- 
ing supplier of personal com- 
puters. IBM was $% higher at 


S3o Paulo saw a rise of 23 per 
cent in quiet trade as investors 
continued to focus on technical 
factors while awaiting new 
developments in Brazil’s presi- 
dential race. 

The Bo vespa index was up 
602 at 21380 at 11.45 local time, 
but brokers said that the mar- 
ket could rally further if Tele- 
bras, the most popular stock in 
Brazil, broke a Cr€2-30 resis- 
tance level. 

Telebras was up 2.6 per cent 
at Ci62. On the political front, 
players were waiting for a deci- 
sion from the former President, 
Mr Jose Sarney, on whether he 
would support the candidacy of 
the former economy minister, 
Mr Fernando Henrique Car- 
doso. 


Mexico 


Mexico eased in early trade on 
downward pressure from Wall 
Street and profit-taking after 
the gains of the previous six 
sessions. The 1PC index gave 
up 14.07 to 2,454.45 in moderate 
volume of 12.6m shares. 
Among the lasers, B shares of 
Unica, the investment com- 
pany lost 43 per cent 


EMERGING MARKETS: IFC WEEKLY INVESTABLE PRICE IfflMCES 


No. of 


Dollar terms 

May 20 % Change % Change 


Local currency terms 
May 20 % Change % Change 


Market 

stocks 

1994 

aver week 

on Dec ’93 

1994 

over week 

on Dec 93 

Latin America 

«210) 

61897 

+99 

-49 




Argentina 

(25) 

97295 

+8A 

-2 2 

536.781.07 

+8-4 

-22 

Brazfl 

(57) 

235.46 

+179 

+19 

534^445993.1 

+27.6 

+425.9 

Chile 

(25) 

63496 

+5.6 

+15.0 

1,077.93 

+5.4 

+13.1 

Cokjmbte' 

P1> 

91293 

-09 

+419 

1962.78 

-0.4 

+479 

Mexico 

(69) 

890.10 

+89 

-119 

196799 

+7.8 

-6.1 

Pen/* 

01) 

15497 

+49 

+279- 

20696 

+49 

+29.6 

Venezuela 1 

02) 

554.64 

+3.1 

-6.3 

1,75690 

+6.1 

+239 

Aria 

(557) 

24499 

+0.7 

-16.0 




CWna* ■ 

08) 

32-80 

+19 

-37.B 

101.56 

+1.1 

-38.1 

South Korea 1 

(156) 

132-20 

-09 

+119 

140.11 

-09 

+11.6 

Philippines 

08) 

28222 

-19 

-17.1 

364.71 

-0.7 

-179 

Taiwan. China* 

00) 

13191 

-39 

-3.0 

132.02 

-29 

-19 

India 7 

(76) 

12495 

-19 

+69 

137.74 

-19 

+6.9 

Indonesia* 

(37) 

103.73 

45.5 

-169 

12195 

+59 

-14 A 

Malaysia 

(105) 

269.16 

+09 

-20.6 

257.17 

-09 

-23.7 

Pakistan* 

(15) 

354.64 

-2.0 

-8.6 

482.02 

-19 

-69 

Sri Lanka* 

(5) 

170-30 

+29 

-09 

189.03 

+2.4 

-1.0 

Thailand 

(55) 

378.89 

+69 

-20.7 

379.87 

+69 

-21.4 

EUra/MM East 

(125) 

10099 

• +29 

-4R4 




Greece 

(25) 

22596 

-2.4 

-19 

37990 

-19 

-19 

Hungary" 

CS) 

19793 

-89 

+189 

24395 

-39 

+209 

Jordan 

(13) 

164.46 

-1.0 

-0.7 

23790 

-0.7 

-09 

Poland* 

(12) 

70695 

+119 

-13.7 

190492 

+119 

-9.0 

Portugal 

(25) 

12028 

+3.0 

+5.7 

140.66 

+1.0 

+19 

Turkey 1 * 

(40) 

74.87 

+39 

-649 

1,173.60 

+3.7 

-19.3 

Zimbabwe" 

(5) 

29092 

+29 

+449 

343.02 

+19 

460.6 

Composite 

(882) 

309.79 

+4.9 

-129 





i percentage m overrent Iran (to pxsrtour Friary, Bam data: Oac 1909.100 accept 


anc UJFab 1 JS&; QDac SI 1992; OJm 3 1990: mac 31 1992: &Jan 3 1992: OJan 4 1991: (T)Nt* 3 1990: 
Oac 31 rriJOac 31 1882: fiajOuc 31 1932: flWuo 4 1939: P4Uy 2 1993. 


100 
28199ft 


to) nofctf 
1 1991; fU) 


The Bombay stock exchange tomorrow launches a broadly based 200-share index, as a 
first step towards index-based futures trading to replace the banned carry-forward 
system, Reuter reports. The index is expected eventually to replace the BSE 30-share 
index which, critics say, is unfairly weighted in favour of a few blue chips. The BSE is 
also introducing a dofiar-based index, to help foreign investors measure their returns 
on Indian bourses. Mr Asit Mehta of Nucleus Financial Services, who proposed the 
system, said that index-based fixtures trading would solve the bourses’ problems of 
illiquidity, inadequate hedging opportunities and a cumbersome settlement mechanism. 
India's 22 bourses have been seeking a replacement to the bacfla, or carry-forward 
trading, since it was banned six months ago on the grounds that it caused excessive 
eolation. Analysts say that index-based fixtures, though not the ideal solution, were 
viable alternative. 


spec ota tii 

tne only 


FT-ACTUAR1ES WORLD INDICES 


Including Monday's trading on 
Seaq international as part of 
the sequence, bourses regis- 
tered a fifth consecutive 
de cline yesterday, writes Our 
Markets Staff. 

Mr Andrew Bell, director of 
European strategy at Barclays 
de Zoete Wedd, called this a 
“corrosion of confidence", and 
attributed it to several factors, 
including: 

• optimism over recovery 
prospects approaching a crest 

• interest rate cuts likely to 
be on bold in Europe, in the 
face of inflated German M3 
money supply figures: 

• uncertainty over US infla- 
tion prospects, which could 
delay any robust recovery in 
bonds and the US dollar, 

• European cydicals kidring 
tired after their recent 

and an nnw ifiiUgMSS 

to buy financials because of 
interest rate uncertainties; and 

• the unabated boom is sew 
equity i ssues. 

FRANKFURT, once again, 
was hit hard. The Dax index 
Cell 39.95. or 13 per cent to 
2,158.77 during the session, and 
lost another percentage point 
in the afternoon, ending at an 
Ibis-indicated 2.137.56 after 
weakness on Wall Street and 
late pressure on the dollar 


against (be D-Mark. 

Turnover rose from DW7bn 
to DMSJSn. in financials. Alli- 
anz took the biggest beating, 
dropping DM70, or 23 per cent, 
to DM2.439 on the session and 
DM21 to DM2,415 after hours. 

Carmakers and chemicals 
were savaged among the cydi- 
cals but. as expected, the worst 
fall of the day was reserved for 
MetaligeseHschaft after its rev- 
elations of newly identified 
risks which it would have to 
cover in the CS. 

The shares dropped DM29 to 
DM231 on the session, and 
DUII more to DM220 in the 
afternoon for an overall fall of 
15.4 per cent 

PARIS was infected by Ger- 
man rate cut worries after the 
Bundesbank cut its repo rate 
by only 3 basis points. The 
C AC-40 index fell 48.91. or 23 
per emit to 2,064.41 in turnover 
of FFr4.4bn. 

Thomson-CSF. which 
delayed fur ther the publication 
of its 1993 results, fell FFr530 
to FFr175.10. 

MILAN turned back after an 
early rally prompted further 
coifing The Cotnit ind e x fin- 
ished 4.55 higher at 759.79, 
although the real-time Mibtel 
index registered a 2.6 per cent 
fall over the day. 


FT-SE Actives S 


Mayas 


THE EUROPEAN SERES 

QpM 1030 1100 KflQ OOO IU0 15.00 Ont 


FT'S&nBKfetfD MMM MUt 14KI8 M38.H IflUO HllK WtM MIS 

FT4E Erase* 20q H01 72 WV72 WM MBA MSI 85 1«N KNUR 


mt n 


n 


FT-SE Etnacfc IflO MSS 77 MM2 MSB* MM. 18 UTUg 

FT-SE Essex* 200 148590 146&75 1474* M804J 

— » BOO TOUT M»- MiniM* M0 • 1*WW KB - MUI 


Insurers were marked down 
as investors lightened their 
holdings in preparation for the 
Ina privatisation, scheduled for 
the end of June. 

Generali fell L1308 or 23 per 
cent to L45 J039. RA S LI, 039 or 
33 per cent to L29324 and Toro 
L2.070 or 6.6 per cent to 

T.»,Sg> 

Montedison fell L82 or 5.7 per 
cent to L1350 amid speculation 
that its chemical joint venture 
with Shell would foil to win 
European Union approval: the 
ffnmpany said that the commis- 
sion competition authorities 
were still considering the deal 

Mediobanca gave up another 
L567 or 33 per cent to L 15.644 
on continuing fears that it 
could be dragged into police 
investigations of the back- 
ground to the Ferruzzi group's 
debt problems. 

ZURICH was lower in line 


with other markets and with 
the domestic outlook clouded 
by worries about Interest rates. 
The SMI index fell 18.9 to 
2373.1. 

Holder bank dipped SFrt to 
SFriHO after the group said it 
expected better results this 
year if economic ebenmstanees 
remained favourable. 

Sandoz fintohed SFr5 ahead 
at SFT725, after a day’s Ugh of 
SFT737, after Tuesday’s sharp 
foil which followed news of its 
agreed bid for Gerber Products 
in the US. 

MADRID dropped 13 per 
cent, the general indue losing 
6.07 to 330.43 as turnover 
climbed to Pta34.4Sbn. 

In New York, Natwest Secu- 
rities announced an upgrading 
of Telefonica after the stock 
dropped Pta50 to Ptai365 In its 
domestic market. 

AMSTERDAM fell in 


response to the weakness on 
Wall Street and in domestic 
and German bond. markets. 
The ASX indaat dipped <79 to 
408.50. although price move, 
manta tended to -be exagger- 
ated by thin trading. 

The recently Arm Hoofov*as 

led the way down with a FI 1J» 

dsdtea to FI TWO on profit-tak- 
tag. . . 

UnSarar bat FI 190 to a u 
month low of PI 188 in 
re a pa aa e -to the slower than 
expected economic recovery 
and continuing brand battles. 

ATHENS tumbled another 
53 per cent, hitting a year's 
low for the third consecutive 
saHko. with soaring Interest 
rates cccntteotog to drive inves- 
tors away from equities and 
into bank to customer repur- 
chase agreements. The general 
index EMI 4738 to 854.25 In 
active volume of 2m shares. 

Jatosa Capri 

said that with all capital con- 
trols now lilted, a drachma 
devaluation seemed inevitable. 
"The market would view a 
devaluation positively and, in 
the event, we would expect a 
rebound from these very low 
taralx" 


Written and edited by WHBare 
Cochin end Mobial Morgen 


ASIA PACIFIC 


Nikkei edges up yet again as region wavers 


Tokyo 


Buying by overseas investors 
narrowly outpaced large-lot 
selling by domestic institu- 
tions, and the Nikkei index fin- 
ished marginally higher, gain- 
ing ground far the sixth 
consecutive day, writes Entiko 
Terazono in Tokyo. 

The 225 average rose 4L51 to 
2036333 after a low of 2050930 
and a high of 20,70034. Active 
selling by corporate and finan- 
cial investors pulled share 
prices down in the afternoon 
session, but overseas buying 
tfrpn came in and flip ttiHpt 
recouped its losses. 

Arbitrageurs, who were 
heavy buyers on Tuesday, 
retreated to the sidelines as 
they adjusted their positions 
ahead erf today’s last trading 
session for April settlements. 
Volume totalled 440m shares 
against 552m. 

The Topix index of an first 
section stocks rose 236 to 
1,658.13, and the Nikkei 300 by 
0.60 to 30327. Gainers led los- 
ers by 506 to 503 with 173 
unchanged and, in London, the 
ISE/Nikkei 50 index fell 134 to 
1^358.77. 

Traders said that investors 
were growing cautious in reac- 
tion to the recent gains in 
share prices. However, Mr 
Jason James, a strategist at 
James Capel, said that increas- 
ing evidence that corporate 
earnings were now bottoming 
out was underp inning shar e 
prices. 

Buying by overseas investors 
pushed up heavy electricals. 
Hitachi rose Y20 to Y1.030 and 
Toshiba gained Y7 to Y803. 
Consumer electronics shares 
also rose with Matsushita 
adding Y60 to Yl£10 and Sony 
up Y30 to Y5.970. TDK, the 
video game maker, lost Y90 to 
YL540 on poor profits. 

Large capital shipbuilders 
were also strong on foreign 
buying. Mitsui Engineering 
and Shipbuilding rose Y14 to 


Y373 and Mitsubishi Heavy 
Industries added Y8 to Y723. 

Nippon Telegraph and 
Telephone saw continued 
support from bargain hunting 
after its recent weakness. 
The stock rose Y25.000 to 
Y867.00Q. 

Speculative stocks lost 
ground on profit-taking. Sumi- 
tomo Coal Mining fell Y32 to 
Y948 and Chino fell Y90 to 
Y1.050. 

Non-life insurers lost ground. 
The industry had been request- 
ing an increase in fire 
insurance premiums, but it has 
been hit by the government’s 
decision to freeze all rises in 
public service rates. Tokio 
Marine and Fire fell YI0 to 
YL330. 

Mining stocks, which had 
gained In tandem with com- 
modity prices, met profit-tak- 
ing. Sumitomo Metal Mining 
fell Y2 to Y942. 


In Osaka, the OSE average 
rose 12£5 to 22,724.04 In vol- 
ume of sftftrn shares. 


Roundup 


Sentiment was mixed around 
the Pacific Rim. Singapore, 
Klin in Lumpur, Jakarta, Bom- 
bay and Colombo were closed 
for public holidays. 

SYDNEY seemed in confused 
disarray as weakness in the 
gold, hanking and resource sec- 
tors left the All Ordinaries 
index down 26.5, or 1.2 per 
cent, at 2.105.9. 

In the hanking sector, down 
nearly 3 per cent overall. ANZ 
took the sharpest fall to end 22 
cents, or almost 5 per cent 
lower at A$4.44 although it 
posted a big jump in half year 
profits. 

The golds sub-index dropped 
39.9, or 1.7 per cent to £333.4 
following weakness in New 


York bullion overnight, and 
the resource and commodity 
sectors followed suit, this time 
on profit-taking. 

MANILA’S buyers paused for 
breath and again and the com- 
posite index fell another 22.77 
to 2379.21 although traders 
said that the mood remained 
positive. 

Turnover fell from lbn pesos 
to 762m pesos. 

HONG KONG balanced after- 
noon profit-taking against posi- 
tive Chinese comments on air- 
port project financing, and the 
H6ng Seng index rose 3L26 to 
9,521.37, well below the day's 
peak of 9,664.07. Turnover 
improved from HKfSJffhn to 
HESLSShn. 

Jardine Matheson outper- 
formed with a rise of HKSSL50, 
or <L2 per cent to HK$62£Q on 
insti tution al bargain hunting. 

TAIPEI featured strength in 
electronics as the weighted 


hides staged a weak rebound 
after seven straight sessions o! 
foils, closing 6.06 higher at 
5,775.18 in slow turnover of 
TS&asbn. 

Reports that the government 
had agreed gradually to raise 
the ceiling of foreign equity 
investment funds to T$2Gtm 
from the current US$7 ^bn. 
lifted electronics, a foreign 
fevourite, with ASE up TH50 
to TKtt.50 and Acer T$LE0 bet- 
ter at TS57. 

BANGKOK was led higher 
by the finance and' banking 
sectors, which accounted for 
over 45 per cent of the business 
done yesterday as the SET 
index closed 10.21 higher at 
L34&80 in turnover of Bt7.1bn 

KARACHI dosed flat in low 
volume, the KSE 100 Index 
rising 033 to 2346.61, but Fecto 
Cement put on Rsl.25 
to Rs52.75 on dividend 
hopes. 


SOUTH AFRICA 

Golds were weak to low vol- 
ume, following the overnight 
pattern to North America and 
Australia as the sector index 
shed 46 at 1,949. Industrials 
rose by a token 23 points to 
6,656, but tbe overall index 
atm ended 32 lower at 5,486. 


JoWly compand by The Rrendal TUrm ItA, GtMman, Sachs & Co. and NaMfest Securities Ua h conjunction wftti the InaSlita of Actual ata Ita Faculty of Attwte 
NATIONAL AM) 

HBQKMAL MARKETS 
Figures to poranttceea 
show number of Ones 

Of stock 


US Day's Pound 
Odder Change Staring Yen 
Iratoc % Wk Index 


TUeSDAY MAY 24 1004 . 


l fyq j Local 
DM Currency % cbg 
Indwc Index on gay 


Dfr. 

YMd 


MONDAY MAY 28 IBM DOLLAR INDEX 

US Pctrd Local Year 

DoSar Sterthg Yen DM Currency 52 week 62 week ago 

index Wg Index tndax Wb Hfltl Low (approx) 


AustraSa (to) . 
Austria (17). 


17090 

.177.98 


0.4 175.76 

-1.2 17422 


Belgium (39) 

Canada (106) 
Denmzr* (33) 

175.79 
130.72 
251.78 




Hong Korn ffiffl - 

-<U*R(V7 




— 8192 

Japan (460) 

159.04 


-06 172.79 

-0.4 128.49 


-19 247,48 

-1.0 151.22 


-1.4 171.95 

-03 139.42 


-in 381.46 

-IS 184.42 


i (M). 
Mexico (18). 


-467.50 


0.7 

on 


89.77 

15633 


N*hert*xJ(W) 

New Zealand (14) 

Norway 03). 


- 2101.51 
— 201.65 
7041 


-1.7 459.53 

0.7 206568 
-1.1 19831 


nao5 

11749 

11806 

WOO 

16823 

101.57 

11549 

83.66 

25621 

123.87 

6028 

10500 

308.66 

1387.44 

133.13 


Singapore W 

South Africa (59) 

1(42)- 


— 20080 
— -346L80 
■ — 26328 


09 

-in 


<*21 

18728 


Sweden P©- 


1*7).. 


. 14049 
.226.48 


-14 340.39 

-03 29090 


-06 14094 

-15 222.60 


Unitad Kingdom (206). 
USA (510) 


-157.06 

190.77 

-186.42 


-1.4 15428 

-05 187151 


04 16226 


13397 

22696 

173.89 

86.69 

14991 

10569 

126.85 

12242 


15518 

16246 

15058 

11199 

216.69 

131.79 

149-86 

12191 

332.46 

16073 

7824 

13625 

40050 

180090 

172-76 

8092 

172.02 

237.10 

225.64 

12508 

194.01 

13495 

16543 

15824 


161.63 

16227 

14799 

13098 

221.02 

17498 

1S4.7S 

12191 

38498 

179.10 
10847 
10500 
46796 

7573.17 

iraii 

6398 

19490 

24593 

28093 

15399 

25096 

137.11 
16791 
18542 


02 

- 1.1 

-09 

-03 

-19 

-09 

- 1.1 

-22 

-19 

-as 

0.7 

ao 

-19 

07 

-19 

19 

-09 

-19 

-09 

-04 

-0.7 

-1.4 

-0.7 

04 


399 

1.07 

ore 

298 

193 
094 
291 
1.70 

2.76 
399 
146 
0.77 
1.43 
1.03 
390 

3.76 
1.70 

194 
520 
398 
154 

1.77 
397 
298 


17512 

180.13 

17694 

13123 

25648 

15695 

177.32 

14523 

391.98 

19045 

80.73 

15509 

47590 

2086.19 

88.77 

20299 

351.74 

284.10 

15021 

22994 

15994 

191.79 

16498 


17590 
177 .23 
17394 
12515 
252.41 
15299 
17491 
142.83 

385.77 
18743 

8929 

15698 

488.07 

2053.08 

20070 

6898 

19897 

348.16 

25897 

14793 

228.19 

160.71 

183.75 

181.78 


11795 

11697 

11657 

8890 

16996 

10292 

117.02 

8594 

250.58 

12S96 

5998 

10498 

31397 

1376.72 

13498 

4004 

133.89 

232.12 

17492 

99.13 

151.68 

105.09 

12897 

12198 


15299 

154.11 

151.12 
112.27 
219.42 
13291 
161. TO 
12425 
33526 
16294 

77.82 

13011 

40090 

1784.78 

174.48 

6998 

17398 

300.33 

22899 

12891 

196.64 

13023 

164.09 

19001 


16193 

15394 

14793 

131.00 
22493 
175.47 
15052 
12495 
38076 
18022 
107.72 
10496 

475.00 
752394 

17197 

6291 

19010 

24033 

28233 

15495 

260.76 

139.05 

18075 

184.68 


189.15 

19591 

176.67 

14591 

275.79 

156.72 

18597 

147.07 

50056 

20993 

87.78 

16691 

62193 

2647.08 

207.43 

77-59 

20042 

37892 

28098 

155.78 

231.35 

17896 

21496 

196.04 


130.19 

140.14 
14192 

121.46 
20798 

6594 

14060 

10799 

27192 

155.83 
5798 
12494 
31291 

1431.17 

164.14 
4897 

15091 

242.46 

175.83 
11893 
18395 
12292 
17092 
17895 


133.03 

140.T4 

14491 

129.11 

21018 

10091 

151.75 

108.16 

295.17 

15790 

71.78 

14495 

33077 

150392 

184.14 

48.05 

15695 

2S197 

20191 

12015 

178.99 

1292 

17695 

18395 


EUROPE (721). 
Nordo (115)- 


Pacific Bash (750). 


Euo-PacMe (1471).. 


Nrwi America (625) 
EuepeE«cUKCS16)_ 

Pacific Ex. Japan ( 281 ) 

World Ex. US (1634) 

World Ex. UK (1968) 


World Ex. So. Af. (21149 
Wirt Be Japan (1704} — 


188.46 

-19 

16057 

111.88 

145.17 

15029 

-08 

2.83 

171.18 

106A0 

11296 

14045 

15990 

17898 

^,91423 

-1.4 

21068 

141.44 

18893 

21398 

-09 

1.40 

21799 

21394 

143.46 

18598 

21598 

22060 

— 10790 

-ai 

10495 

11079 

143.78 

115.12 

-ai 

195 

16893 

16597 

11098 

143.76 

11594 

16890 

18894 

-as 

165-47 

111.14 

14491 

13290 

-05 

194 

169.19 

16690 

111.88 

144,74 

132.81 

17078 

16292 

04 

17892 

12D.17 

15593 

181.63 

04 

297 

18197 

17890 

11998 

166.17 

180.97 

192.73 

— 153.88 

-13 

1S13E 

W1.00 

13191 

13898 

-1.1 

231 

• 16697 

15390 

10093 

133.44 

141.47 

157.47 

—253.62 

-9.7 

24990 

167.44 

21727 

227.75 

-07 

290 

2SS.44 

25193 

16897 

21694 

22895 

28691 

— 16Q.+2 

-as 


11195 

145.13 

13690 

-0.4 

195 

17023 

167.53 

11294 

14594 

13021 


— 17295 

-ai 

168.12 

ii3.se 

14799 

147.64 

-0.1 

293 

17028 

10995 

113.68 

14799 

147.73 

17598 

173.18 

-02 

17023 

11494 

14086 

15090 

-0.1 

222 

173.48 

17a 73 

11498 

148.42 

15092 

17056 

~ — 18390 

-99 

180A7 

12192 

1S79B 

17797 

-02 

294 

18493 

181.12 

12195 

15795 

17026 

19020 


The World 173 . 7 ? -02 1 rare 1 14.68 148.82 


14190 

15592 

134.79 

14198 

17597 

12237 

18238 

142.04 

15392 

15590 

18072 


14394 

16092 

14000 

14698 

179.70 

124.05 

180,60 

14737 

156.81 

158.15 

16790 


?W64 V w PnMW Hue 
Xnaiuiwu In Ucu 300. 


18136 -0.1 232 174.02 17198 11494 14698 15191 17S97 1SS.17 15834 


’ n re enm . Saeto and Co. . 

2M ma ZW3* upM (a Rna. 


and NssWsar Seasftos 


UnML 1887 

and The Wortd 


h».lM8UiwitmWeWMMIn 


LAND SECURITIES 


ANNUAL RESULTS 

Year ended 31 March 1994 


NET ASSETS Per Share 

677p 

up 

34.3% 

ADJUSTED EARNINGS Per Share 35.20p 

(Excluding pro&/lo» on sales of properties) 

up 

4.5% 

EARNINGS Per Share 

35.66p 

up 

8.6% 

PRE-TAX REVENUE PROFIT 

(Excluding pro ik/loss on sales of properties) 

^234.8m 

up 

£l*4m 

PRE-TAX PROFIT 

^237.1m 

up 

£8m 

DIVIDENDS Per Share 

(Proposed final 17. 4p) 

24p 

up 

5% 


PORTFOLIO VALUATION £5,032.4m 
VALUATION SURPLUS £824m 




SHAREHOLDERS’ FUNDS ^3,453.1m up 35.7% 


Voids reduced to 2.8% of rent roll 

Over 80% of rental income secured beyond March 2000 

j£600m. expenditure on properties in last 3 years ■ 


Nearly l million sq ft of quality retail, industrial and 
warehouse space acquired 






.t* 


> 


tii 






>-• 


.ask *‘is. 


£ j 


fc-a • 












The Report and Financial Statement* for the year ended 31 March 1994 wiU be posted on lljunc 1994. Mon-fthoreholden 
who would like a copy are requested to write to: The Secretary, Land Securities PLC, 5 Strand, London WC2N 3AF. 


1 ;- 


•- 'V