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German coalition 


Papering over 
“ 4 the cracks 


C 


PW 18 


Medlamogpls 

Saudis embrace the 
computer age 

Pas* 6 



Green accounts 

Why. companies 
refuse to report 

Environment, Pag* 18 


FINANCIAL 



Todays surveys 

Derivatives 

Denmark 

Separate MGtfcHM 





* xV i 



Volvo profits soar 
as strong sales 
boost recovery 

whicte maker Volvo reported a jump in 
mne-month pre-tax profits to SKrl2.7bn (Sl. 7 bn) 
SKrL06bn a year earlier. Sales up 
S t0 SKrllIL2b “ big capital gaL 

sss.%r pany ’ s dramatic fr ° m 

J^3 ower ^ m ® ,rt, s future In balance: 

Ireland s parliament postponed a vote of no confi- 
Mhert Reynolds, leaving 
toe late of his coalition government in the balance 

rage 20 

Court clears way for trade deal: The 

European Court of Justice ruled on a dispute 
between the Commission and member states, dear- 
mg the way for the EU to ratify the Uruguay Round 
trade deal before the year-end deadline. Page 5; Edi- 
tonal Comment Page 19 

Euro stock market plan announced: Plans 
for a pan-European stock market were unveiled by 
a group of European venture capitalists, the Paris 
Bourse and the US Nasdaq market The new market 
would give fast-growing companies access to equity 
finance at an earlier stage than national exchanges 
currently allow. Page 3; Lex, Page 20 

Lauda finally cleared for take-off to Paris: 

France responded to 
strong pressure for 
access to Orly airport in 
southern Paris by saying 
it would bring forward 
the date on which it will 
grant landing rights. The 
transport ministry said 
earners from EU states 
would be allowed to 
launch services from 
next January rather than 
having to wait until 
spring: Meanwhile Nikki Lauda (above), founder 
and chairman, of Lauda Air, finally won permission 
to pilot his airline’s first services to Paris. Allowed 
to land at Charles de Gaulle airport, he is pressing 
for rapid access to Orly. Page 20 

Apec alms for free trade zone: The 

Asia-Pacific Economic Co-operation summit agreed 
to create the world's largest free trade zone by 2020 . 
Page 5; Editorial Comment, Page 19 

Tokyo eases listing rules: The Tokyo stock 
exchange is to ease its share-listing rules in a move 
aimed at reviving the market’s faded attraction for 
foreign companies. Page 21' 

Mato to keep, embargo: Nato formally agreed it 
would maintain the arms embargo on Bosnia in 
spite of Washington's withdrawal from toe opera- 
tion. The alliance's military committee said the US 
move would have little real effect Page 20 

Cfba-GefgsT] Swiss chemical, and drug company, 
confljt&efc & negotiating, to acquire a “signifi- 
cant* mihodty st^kein US biotechnology company 
Chiron..The deal woixMinefttde the transfer to Chi- 
redr of jdba assets worth.’ afoond Slim. Page 21 

Beflts^Ug buy- bade UK retailer Boots spent 
£S08m {$333m) - 60 per bent of what it hopes to 
receive from the sale of its prescription (hugs busi- 
ness - on buying back its shares. The moves leave 
Boots' management free to focus on acquisitions in 
rKm-prescziption drugs. Page 22 

Arafat attacks donors: PLO chairman Yassir 
Arafat criticised what be called politically moti- 
vated delays in eb»nnaTHng promised funds to Pal- 
estinian authorities. “International donors had 
pledged $2.4bn to support infrastructure and devel- 
opment - $690m a year. Where is that money?”, he 
asked. 

Stress study: Work is the major cause of stress, 
according to a survey of more than 5,000 office 
workers in 16 countries. More thanhaK the respon- 
dents said stress levels at work had risen over the 
past, two years and almost one in five admitted tak- 
ing time off work because of stress.. 

Algerian fall break: Eight people were reported 
triHpri and 60 injured when Moslem mi li tan t s mi 
death row led an attempt to break out of a prison in 
southern Algeria. 

Azerbaijan signs deal: Azerbaijan’s pa r liament 
ratified a $7.4bn contract to develop three Caspian 
sea oilfields with a foreign consortium. Iran has 
been offered a share in the project. 

Trade surplus fading, says Japan: Japan said 
its dollar-based trade surplus was heading down- 
wards after seeing the surplus shrink in Oct ober l or 
the third month running. The politically sensitive 
surplus with the US fell A8 per cent from a year ago 
to an unadjusted $4.79bn. 


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Commission officials dismiss Court of Auditors report as ill-informed 

EU attacked on spread of fraud 


By Lionel Barber in Strasbourg, 
David Gardner In Brussels and 
Kevin Brown In London 

The European Union's Court of 
Auditors yesterday criticised the 
European Commission for lax 
financial management and a fail- 
ure to tackle fraud, which It said 
had become endemic inside the 
EU. 

Commission officials called 
part of the court's 484- page report 
ill-informed, but Eurosceptic Con- 
servative Mi’s in the UK c laime d 
it would stiffen opposition to leg- 
islation increasing British contri- 
butions to the EU. which will be 
announced at the opening of par- 
liament today. 

Mr Andre Middelhoek. court 
president said in Strasbourg that 
it was impossible to estimate how 


much money went astray from 
the Ecu64.2bn ($79bn) of EU 
funds paid out in 1993. “Fraud 
exists everywhere. There's no 
question of it just being some- 
thing that happens in one coun- 
try as opposed to another.” he 
said. 

But the court's strictures on 
EU aid to east and central 
Europe, and the former Soviet 
republics - worth Ecul.lbn and 
Ecu530m respectively last year - 
were dismissed as "misleading, 
inaccurate, or by now outdated” 
by officials working with 
Sir Leon Brittan, the commis- 
sioner responsible for the pro- 
grammes. 

They “reflect an insufficient 
understanding of how the pro- 
grammes work or the specific cir- 
cumstances on the ground”, one 


official said, describing some of 
the allegations as “completely 
false". 

The court, for instance, says 
that EU food aid going to the 
Baltic states undercut the local 
food prices, then driving an 

Price cushion to end Page 2 

Rebel Tory MPs seize on EU 
fraud report Page 6 

embryonic private sector out of 
business. Sir Leon's officials say 
that food prices were already 
well below world levels, and that 
the Commission and Baltic gov- 
ernments therefore set higher 
minimum prices to prevent the 
former state-owned enterprises 
from undercutting private trad- 
ers. 


The report identifies several 
serious cases of fraud, misman- 
agement or incompetence in the 
EU. 

• Wine production has risen by 
one-fifth since 1989 despite EU 
spending totalling Ecul.2bn to 
take vineyards out of production. 

• The European Parliament 
failed to enforce competitive ten- 
ders for its new budding in Brus- 
sels. The cost has risen from orig- 
inal estimates of about Ecuibn to 
EculA3bn. 

• EU payments to persuade 
milk and wine producers to cut 
production are still being offset 
by political incentives to increase 
output. 

The report's appearance coin- 
cides with a planned Ecu600m 
increase in the EU budget in 
1996, which could face opposition 


in some member states, notably 
the UK. 

Mr Bill Cash, a leading right- 
wing Eurosceptic, seized on the 
report as evidence that British 
taxpayers were contributing to a 
“bottomless, fraudulent pit”. 

Other rightwingers forecast a 
rebellion against the bill. 

But British ministers praised 
the Court of Auditors for identi- 
fying the fraud. They played 
down the prospects of a back- 
bench rebellion. Mr Kenneth 
Clarke, chancellor, dismissed the 
rebels as “obscure backbenchers 
who have a complete bee in their 
bonnet about Europe”. 

Mr Douglas Hurd. UK foreign 
secretary, called for the Euro- 
pean Parliament to play a bigger 
role in monitoring the European 
Co mmissi on and EU spending. 


Fears on Russian 
share security 
deter investors 


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— 


By Ch/ysDa Freeland 
in Moscow 

Fears that factory officials may 
tamper with share registers are 
^ m erging ^ an impe dimen t to 
foreign investment in Russia. 

The head of a Trading western 
fund manager said the custody of 
shares by factory hoses “is the 
single largest deterrent to west- 
ern investment”. 

She added that big investment 
hanks , were kran to expand in 
Russia but not without “proper 
settlement and custody of 
shares”. Russia was the worst of 
the world's emerging markets in 
terms of offering investors’ secu- 
rity for their share purchases. 

The sole document that estab- 
lishes ownership over shares in 
Russia is the register of share- 
holders in a particular privatised 
enterprise. Legally, share regis- 
ters of companies with more than 
1,000 shareholders must be held 
by independent registrars, but 
many of Russia’s largest compa- 
nies directly control their own 
registers. 

“It is a totally insecure sys- 
tem.” said one western invest- 
ment banker in Moscow. “It goes 
without saying that there's a corv 
flict of interest when the factory 
controls the shareholders* regis- 
ter. 

Foreign investors are con- 
cerned that the system is being 
abused by factory directors who 
might be tempted to rid them- 
selves of unwanted new owners 
by deleting them from the share 
register. 

Mr David Reuben, president of 
Transworld, the London-based 


company which dominates the 
Russian metals' trade, alleges 
share tampering took place last 
week at the Krasnoyarsk 
Al uminium Smelter, one of the 
world's largest al uminium pro- 
ducers. 

“The 20 per cent stake in the 
company [which could be worth 
as much as $300mJ owned by our 
proxies was simply erased from 
toe register," Mr Reuben claims. 
“The R ussian law is a complete 
-disaster. Shareholders are com- 
pletely at the mercy of the fac- 
tory managers." 

According to Mr Vladimir 
Lysyn and Mr Sergei 
Sukholinski-Mestechkm, Mr Reu- 
ben's two Moscow business asso- 
ciates, the alleged share tamper- 
ing became clear last Tuesday, 
when they travelled to Krasno- 
yarsk to participate in a share- 
holders' meeting. 

Mr Lysyn says that when he 
and his colleague arrived at the 
factory gates they were turned 
away by armed guards and told 
their names no longer appeared 
on the register. 

Mr Sergei Petrushin. director of 
the securities department at the 
Krasnoyarsk Aluminium 
Smelter, confirmed that the 
shares held by Transworld's 
proxies bad been struck from the 
share register, which is directly 
controlled by the factory. But he 
contended that the shares bad 
been improperly purchased in the 
first place. 

“We made a mistake in May by 
including them in the share reg- 
ister and now we have corrected 

Con tinned on Page 20 



Helmut Kohl of Germany 
receives a bunch of flowers in 
the German parliament yester- 
day after he was re-elected chan- 
cellor by one vote in a ballot in 
the lower house. The presenta- 
tion was made by fellow member 
of parliament Brigitte Baumeis- 
ter. Watching is the foreign min- 
ister, Klaus Kinkel. Mr Kohl's 
razor-thin majority is not 
unprecedented in postwar Ger- 
man politics. In 1949 the Chris- 
tian Democrat father figure Kon- 
rad Adenauer won wh at was 
then the minimum 202 votes 
needed to become Bonn's first 


chancellor- In 1969. Willy Brandt 
was only two votes over the min- 
imum and seven years later Hel- 
mut Schmidt cleared toe hurdle 


with only one vote to spare after 
winning the 1976 general elec- 
tion against the challenger, Mr 
Kohl. Report, Page 2 howr r«m» l 


US raises 
short-term 
interest 
rates by 
a 3 A point 

By George Graham hi 
Washington and Patrick 
Harverson in New York 


The US Federal Reserve raised 
short-term interest rates by a 
larger-than-expected % of a per- 
centage point yesterday in an 
effort to keep inflation under con- 
trol in the rapidly growing US 
economy. 

The Federal Open Markets 
Committee, which decides on the 
Fed's Interest rate policy, said 
the increase was “necessary to 
keep inflation contained, and 
thereby foster sustainable eco- 
nomic growth”. 

The decision will raise the fed- 
eral funds rate, which b anks 
charge each other on overnight 
balances they hold at the Fed, 
from 4.75 per cent to 5.5 per cent 
The discount rate, which the Fed 
charges banks on borrowings 
from its emergency discount win- 
dow, will rise from 4 per cent to 
4.75 per cent 

“These measures were taken 
against the background of evi- 
dence of persistent strength in 
economic activity and high and 
rising levels of resource utilisa- 
tion," the FOMC said after its 
meeting in Washington. 

The rate rise - the largest 
since 1980 - was initially well 
received an Wall Street, where 
stocks, bonds and the dollar all 
rallied wi thin minutes of toe cen- 
tral bank's announcement 

The feet that the rate increase 
was larger than generally expec- 
ted - most analysts had forecast 
an increase in shortterm rates of 
‘A a point - pleased investors, 
who welcomed the Fed's willing- 
ness to take the necessary pre- 
emptive action to restrain future 
inflation. 

The Dow Jones Industrial 
Average rose 10 points after the 
rate rise, and by 2.30pm was at 
3.850.58, up 20.85 on the day. Soon 
after, however, stocks slipped 
back on profit-taking. 

The 30-year bond rose half a 
point, pushing its yield down to 
below 8 per cent The dollar 
appreciated against the yen and 
the D-Mark, and in early after 


Continued on Page 20 
Fed sees fast growth. Page 7 
Editorial Comment, Page 19 
Lex, Page 20 


Whirlpool to cut 3,zuu joo: 
in $150m cost-saving drive 

By Richard Tomkins to New York at increasing competitiveness. In Yesterday the company sa 

Rui-ono it onlri rosH-urh inner will pYtpnd the annmach to 


By Richard Tomkins to New York 

Whirlpool, the US-based maker of 
washing machines and other 
home appliances, yesterday said 


It said the job losses were part 


The brunt of the job losses will 


Whirlpool, the world's biggest 


at increasing competitiveness. In 
Europe, it said, the restructuring 
was part of a process of integra- 
tion that had been going on since 
the company completed the 
acquisition of the Philips Elec- 
tronics home appliance business 
in 1991. 

Recently. Whirlpool’s financial 
performance has been strong. In 
the quarter to September, big 
increases in sales helped the com- 
pany produce a 40 per cent 
increase in net income to $98m. 
But pro Stability in Europe has 
consistently lagged that of the 
company’s US operations. 

Like other big manufacturers. 
Whirlpool has been trying to 
improve European profitability 
by reorganising itself on pan- 
European lines. As part of the 
process it has already consoli- 
dated most functions, including 
buying, product development, 
customer service, information 
technology and some manufac- 
turing. 


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Yesterday the company said it 
will extend the approach to sales 
and marketing and complete the 
process in other functions. The 
result would be job losses across 
all functions and geographic 
areas. However, no European fac- 
tories would be closed. 

In contrast, the job losses in 
North America will come mainly 
from plant closures. Whirlpool 
said it was dosing a plastic com- 
ponents factory in Columbia. 
South Carolina, with the loss of 
5ft) jobs, and a clothes drier fac- 
tory in Cambridge. Ontario, with 
the loss of 400 jobs. The rest 
would fell on salaried staff in US 
manufacturing. 

Whirlpool said production of 
the plastic components made in 
Columbia would be transferred to 
existing suppliers near Whirl- 
pool's US assembly plants. 
Clothes drier production at Cam- 
bridge would be transferred to 
the company's Marion, Ohio, 
plant. 


{.tfrimSE 31 

Wall So** 37-40 

Onuses _ 37,-40 

5wwp 

OtouaiMcs — .Section II 
Denman Secoai H 


SJANCIAL TIMES LIMITED 1994 No 32,525 Week No 46 LONDON • PARIS ■ FRANKFURT • MEW YORK 


TOKYO 


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FINANCIAL TIMES WEDNESDAY NOVEMBER 16 1994 


NEWS: EUROPE 


Kohl stays chancellor by one vote 


By Judy Dempsey and Michael 
Undemann in Bonn 

Mr Helmut Kohl was yesterday 
re-elected chancellor of Ger- 
many, hut with only one vote 
to spare after three of his own 
coalition partners voted 
against him in a secret ballot 

Mr Kohl. 64, who received 
338 of the 671 parliamentary 
votes, just one above the 
required majority to get 
elected in the first round, said 
after his re-election, “I didn't 
expect all the votes from the 
coalition. It was the result I 
had expected." he said. 

The opposition Social Demo- 
crats. Greens, and reformed 


east German communist Party 
of Democratic Socialism, all 
cast their combined 330 votes 
against him. There were no 
abstentions and only one dep- 
uty, of the SFD. was absent 
berause he was in hospital 

A smiling Mr Kohl, re-elected 
chancellor for the fifth succes- 
sive time, stood to acknowl- 
edge the ovation from his own 
benches after Mrs Rita SQss- 
muth. speaker of the house, 
announced the result. Coali- 
tion deputies then broke into a 
rhythmic applause, while the 
opposition sat stoney-faced. 

Mr Rudolf Scharping. leader 
or the SPD. walked over to con- 
gratulate Mr Kohl, while the 


Chancellor, in an unusual ges- 
ture. shook hands with Mr Gre- 
gor Gysi. leader of the PDS. 

But with a narrow victory, 
secured by Mr Wolfgang 
Schauble. parliamentary leader 
of Chancellor Kohl's Christian 
Democratic Union and the 
Christian Social Union, its 
Bavarian sister party, who per- 
sonally made sure every dep- 
uty' would attend the vote, Mr 
Scharping warned that the 
□ext legislative period would 
be difficult for Mr Kohl. 

“It will be tight now [for Mr 
Kohl].** he said. “Making diffi- 
cult political decisions with 
such a narrow majority will be 
like walking on a tightrope." 


he added. He was also referring 
to the coalition's narrow par- 
liamentary majority- It had a 
134 majority' in the last parlia- 
ment cut to just 10 in this one. 

But the decision by three 
(unnamed) members of Mr 
Kohl s own coalition to vote 
against the chancellor suggests 
he will require, and try to 
impose, strict discipline across 
party ranks to push through 
his agenda for the forthcoming 
legislative period. 

Mr Kohl's agenda for the 
next four years will be spelt 
out tomorrow when he 
addresses the Bundestag. The 
agenda, agreed at the weekend 
between the CDU. CSU and the 


Free Democrats, the junior 
partner in the coalition, and 
which is called "Making united 
Germany fit for the future" 
includes curbing the budget 
deficit, pressing ahead with 
privatisation, creating more 
jobs, slimming the bureau- 
cracy. and social security cut- 
backs. 

At the same time. Mr Kohl 
will announce the new cabinet, 
which will be reduced in size. 
The Free Democrats are expec- 
ted to retain the foreign and 
economic ministries, but it is 
still unclear if Mr GQnter 
Rexrodt will retain the eco- 
nomics portfolio. 

The FDP's bargaining posi- 


tion for its share of cabinet 
posts has been weakened fol- 
lowing last month's federal 
elections when its number of 
Bundes t ag seats fell by 32 to 
47. although Mr Kohl is more 
than ever dependent an them 
given the coalition's slim over- 
all majority. 

Yesterday, Mr Werner Hoyer, 
general secretary of the FDP. 
announced his resignation, 
apparently because he is held 
responsible for the party's elec- 
tion debacle. His resignation 
will take effect next month 
when the liberals hold a spe- 
cial party conference to assess 
the disastrous results as well 
as a future strategy. 


Irish coalition teeters on the brink 

John Murray Brown reports from Dublin on how a political marriage turned sour 


I reland woke up wearily 
yesterday to the realisation 
that yet another govern- 
ment had been dragged close 
to the brink of collapse. 

The political showdown, 
which could yet be resolved in 
parliament today, has nonethe- 
less soured relations between 
Fianna Fail and its Labour 
partner. 

On this occasion it was trig- 
gered by Labour party criti- 
cism of the attorney general's 
mishandling of a child abuse 
case. The Fianna Fail prime 
minister, Mr Albert Reynolds, 
almost certainly misjudged the 
reaction of his junior coalition 
partner to his appointment of 
the attorney general Mr Harry 
Wheleban, as president of the 
High Court 

However, the roots of this 
particular breakdown go 
deeper and lie in the unhappy 
marriage between Fianna Fail, 
the dominant force in Irish pol- 
itics since the foundation of 
the state in the 1920s, and 
Labour, the small left-of-centre 
party. 

From the beef tribunal scan- 
dal to the famous X-case 
involving the attorney gener- 
al's injunction preventing a 14- 
vear-old rape victim from seek- 
ing an abortion in the UK. 
Labour has looked increasingly 
uncomfortable. 

Even on the key foreign pol- 
icy issue of Northern Ireland, 
there were suggestions that 
Labour was unhappy with Mr 
Reynolds’s insistence on forc- 
ing the pace on the peace pro- 
cess. 

The government was formed 
in January 1993. after the 1992 
general election prompted by 
Fianna Fail's falling out with 
its former partners, the Pro- 
gressive Democrats. 

There have been natural pol- 
icy differences. On social 
issues. Labour has had to swal- 



AJbert Reynolds (above): fundamental personality difference with coalition partner Dick Spring p- 


low hard. Despite six cabinet 
posts against Fianna Fail's 
nine , it has appeared isolated 
from the key economic deci- 
sion-making. A tax amnesty 
aimed at enticing black earn- 
ings into the exchequer, passed 
last year, was unsuccessfully 
resisted by Labour. There have 
been squabbles about how to 
spend the £7bn Ireland receives 
from the European Union in 
farm support and structural 
and other funds. 

But in many dispassionate 
Irish eyes, the coalition, the 
first between these two parties, 
has made considerable legisla- 
tive progress, passing some 40 
bills. 

At one level the Reynolds- 
Spring team seemed an awk- 
ward combination. It was 
partly a question of generation 


- Mr Reynolds at 59. is 15 
years older than the Labour 
leader, Mr Dick Spring. Mr 
Reynolds, despite heading 
what is in Ireland the estab- 
lishment party, is unusual in 
being a self-made man, having 
amassed a fortune in the pet 
food business and before that 
as a showband impresario. Mr 
Spring, by contrast, entered 
politics in 1981, taking over the 
North Kerry seat on the death 
of his father, a dynastic prac- 
tice common in the Irish par- 
liament 

But at a deeper level, there 
is a fundamental personality 
difference. Mr Reynolds's 
can-do approach to policy has 
often seemed high-handed, and 
has irritated the prickly and 
rather solemn Labour leader. 

In the current row, for all 


the high moral talk of "public 
accountability", there were few 
illusions in Dublin that the 
real scalp Mr Spring is seeking 
is that of Mr Reynolds himself. 

They have clashed before: on 
both occasions Mr Spring gave 
ground. First, there was the 
case of the two foreigners who 
had invested in Mr Reynolds's 
petfood business who were 
given citizenship: the so-called 
“passports for. sale" scandal. 

The final straw was the Beef 
Tribunal an investigation into 
the misuse of official export 
credits, where Mr Spring again 
found himself questioning the 
prime minister’s role. With 
convenient timing, when the 
DaU (parliament) came to 
debate the issue, the contro- 
versy was overshadowed by 
the IRA’s ceasefire. 


In forcing the issue to a 
head. Mr Spring has clearly 
calculated that this crisis is 
sufficient to take to the coun- 
try. a measure of how the 
moral climate has changed in 
Ireland in the past two 
decades. 

The emotive issue of child 
abuse by a Catholic priest, is 
seen by the Labour strategists 
as a natural winner, pitting 
"secular" Labour against 
Fianna Fail, traditionally the 
church's political ally, 

Fianna Fail may still com- 
mand the loyalty of its largely 
rural-based support: an opinion 
poll only 10 days put the party 
streets ahead, with 50 per cent. 
However, with one of the 
youngest populations in 
Europe, and the fastest rates of 
rural depopulation, this latest 
crisis could well signal a signif- 
icant shift in the centre of 
political gravity in Irish poli- 
tics. 

Like British attitudes to roy- 
alty. the Irish have a fascina- 
tion with the moral mishaps of 
their priests. As Hanna Fail's 
popularity at the polls fades, so 
the church's hold over society 
has weakened, and the old irre- 
dentist myths of a united 
Ireland have faded. 

In a society which holds its 
rock stars up as examples of 
excellence. Fianna Fail no lon- 
ger looks to many younger peo- 
ple like the natural party of 
government 

It would doubly ironic if, as 
seemed possible yesterday. 
President Mary Robinson were 
now to play a key role in this 
crisis. It was her election, more 
than any other recent event 
which underlined these 
changes. Her victory as 
Ireland's first woman president 
marked Fianna Fail's first ever 
defeat for its presidential can- 
didate. 


Hungary risks fury over hotel sell-off 


By Virginia Marsh and Anthony 
Robinson hi Budapest 

The Hungarian government's 
credibility with foreign investors was 
on the line last night as reformers and 
foreign advisers sought to persuade 
socialist ministers to complete long run- 
ning plans to sell the last state-owned 
hotel chain. 

Senior ministers in the socialist-lib- 
eral coalition government have been 
pressing for the state to ignore an inter- 
national tender for the 15 properties 
owned by HungarHotels six weeks ago 
and transfer the assets Instead to the 
cash-strapped state social security fund. 

One western banker in Budapest said: 
“1 am shocked. It is one thing for a 
foreign investor to lose a tender to a 


competitor. It is another thing alto- 
gether to go through with an expensive 
tendering process only to have the gov- 
ernment pull out at the last moment." 

Mr Ferenc Bartha, the privatisation 
commissioner, told an FT investment 
conference here that he hoped for a 
"positive” decision at a meeting on the 
sale today which would allow one of the 
three shortlisted foreign bidders to con- 
tinue purchase negotiations. The top 
contenders for the group, which owns 
some of the country’s prime tourist 
hotels, are American General Hospital- 
ity, a privately-owned US group, and 
Intercontinental, the Japanese-owned 
international hotel chain. 

Mr Bartha said that the privatisation 
authorities were “resisting unjustified 
claims” that in currently depressed 


market conditions foreign bids were too 
low and that the assets should be used 
instead to bolster the social security 
system’s coffers. 

The current government inherited 
from the former conservative adminis- 
tration an obligation to transfer assets 
totalling $3bn, around 20 per cent of the 
total value of remaining state-owned 
assets, to the social security and related 
fUnds. The new socialist-led govern- 
ment has promised to honour this com- 
mitment. At the same time, however, it 
is relying on foreign investment and 
the proceeds from privatisation to cut 
government debt 

Foreign investment bankers warned 
last night that cancellation of the Hun- 
garHotel deal, planned as one of the 
biggest privatisation deals this year, 


would send highly negative signals to 
potential investors. They point out the 
government is budgeting for another 
$2bn in foreign capital inflows to help 
finance the expected $2bn balance of 
payments current account deficit next 
year. 

Analysts believe that most of the 15 
hotels require substantial investment 
and a foreign strategic partner to bring 
them up to modem standards. But 
senior socialist ministers, influenced by 
the strong trade union lobby, argue 
that the government must be seen to be 
responsive to its electorate's demand 
for adequate social security provisions 
if it is to retain political support for the 
tough 1995 budget. This is slated to cut 
spending in real terms by more than 8 
per cent next year. 


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Growth slows in 
sale of new cars 


WEST EUROPEAN NEW CAR REGISTRATIONS 
January-October 1994 


Volume 

(Units) 


Volume Share (%) Share (%) 
Change* %) Jan-Oct 1 94 Jan-Ocf 93 


By Kevin Done, 

Motor Industry Correspondent 

New car sales in west Europe 
rose by 3.3 per cent in October 
year -on-year to 916,700, accord- 
ing to provisional figures from 
Acea. the European Automo- 
bile Manufacturers Associa- 
tion. The rate of growth has 
slowed since the early summer, 
and last month sales were 
lower than a year ago in eight 
of the 17 markets. 

In the first 10 months of the 
year sales rose by 4 J per cent 
to 10.18m with higher sales in 
II markets. 

The pace of recovery has 
been slowed by the German 
market where October sales 
are estimated to have fallen by 
l per cent to 250,000. The Euro- 
pean market was also hit by a 
3 per cent decline in the UK, 
which had previously played 
an important role in leading 
the industry out of recession. 

However, there was continu- 
ing strong growth in France 
and Spain, where demand has 
been stimulated by govern- 
ment incentives. There are 
signs too that the deep reces- 
sion in the Italian market may 
be over. Sales rose by an esti- 


mated 6.2 per cent in October 
against a 6.7 per cent decline in 
the first 10 months. 

Growth has been strongest 
this year in the Nordic coun- 
tries. Sales in the 10 months 
have risen in Denmark by 73.3 
per cent year-on-year, Norway 
(39.5). Sweden (27.5) and Fin- 
land (22.7). 

Japanese carmakers have 
lost ground with sales falling 
by 6.7 per cent in the period. 
Their share has declined to ll.l 
per cent from LL5 per cent a 
year ago with their competi- 
tiveness under heavy pressure 
from the strong yen. 

The Japanese have only 
small shares, too. in some of 
the protected markets such as 
France and Spain, which have 
shown strongest growth among 
the big volume markets. 

The PSA Peugeot CitroSn 
group and Renault have bene- 
fited most from rising demand 
in these two markets and have 
emerged this year as the fast- 
est growing volume carmakers 
in west Europe. 

Peugeot Citroen has 
increased its sales by 10.1 per 
cent and has raised its market 
share to 12.S per cent from 12.2 
per cent a year ago. 


TOTAL MARKET 

MANUFACTURERS: 
Volkswagen group 

- VoBtswagen 

- Audi 

- Seat 

- Skoda- 
General Motors# 

- Opel/Vauxhafl 

- Saab" 

PSA Peugeot Citroen 

- Peugeot 

- Citroen 
Ford groups 

- Ford 

- Jaguar 
Renault 
Fiat group HI 

- Flat 

- Lancia 

- Alta Romeo 
BMW group 

- BMW 

- Rover 

Mercedes-Benz 

Nissan 

Toyota 

Volvo 

Mazda 

Honda 

Mitsubishi 

Suzuki 

Total Japanese 

MARKETS: 

Germany 
United Kingdom 
France 
Italy 


10,177,400 


1.623£00 

1.046.300 

265.200 

260.400 

51.700 
1.314,700 
1 .255,200 

42.700 
1,307,500 

786.500 

521.100 
1,212,800 

1.188.300 
9.100 

1.105£00 

1,085,600 

849.300 

136.200 
85.600 

659.100 

330.200 
329,000 

368.200 

335.300 

269.400 

171.300 

154.500 
146,600 
102.900 

64.800 

1(130,200 


2,722.500 

1,710,800 

1.607.900 

1,399,000 

754.400 


+4.9 


+2JI 

+0.3 

-0.4 

+16.3 

+15.1 

+3.6 

+3.2 

+24.7 

+ 10.1 

+9.4 

+ 11.1 

+6.7 

+6.5 

-37 

+7.6 

+&3 

+9.8 

-4.7 

-15.0 

+&6 

+4.1 

+7.0 

+25.3 

-3.7 

- 2.8 

+19.7 

-9.8 

+5.2 

-16.4 

-21.3 

-6.7 


-0.4 

+8.5 

+13.8 

-6.7 

+ 21.8 


100.0 


ion 

10.3 
2.6 
2.6 
0.5 

12J9 

12.3 
0.4 

128 

7.7 

5.1 

11.9 

11.7 
0.1 

108 

10.7 

8.3 

1.4 
O.B 
BM 
32 
3 2 

3.6 

3.3 
26 

1.7 
145 

1.4 
1.0 
0.6 

11.1 


26.8 

16.8 

15.8 

13.7 

7.4 


1004) 


16.3 

10.7 

2.7 

2.3 
0.5 

121 

12.5 
0.4 

1241 

7.4 

4.8 

11.7 

11.5 
0.1 

108 

10.6 
8.0 

1.5 
1.0 
04 

3.3 
32 
3.0 

3.6 

2.9 
1.5 
1.8 

1.4 
1.3 
0.9 

1ZS 


28.2 

16.3 

14.6 

15.5 

8.4 


y y .y* 1 rear and mawjwnenr comm/ o t Skoda 

**}'**«« Impomu torn US and sag n wesam Europe. 


50 com »>tf nwie^renf conmt e# Saab Aioamotw 
»w<P moUcfei Loreto, Mia Romeo, ftmocana. Swarf and Moots a 
vam * flCSA lEuwpaw ArtomcMi Msnutaaww A ao ociatatl esamuM. nquraa m wmdad. 


EU plans 
to scrap 
farm price 
cushion 

By David Gardner in Brussels 

One of the European Union's 
most expensive policies, origi- 
nally intended to enshion 
farmers' incomes from cur- 
rency fluctuations, is to be 
scrapped under plans Brussels 
will publish today. 

The policy, which is known 
as “switchover*’, has cost the 
EU bndget around Ecnfibn 
(£4.7bn) since it was intro- 
duced a decade ago. It has 
added 21 per cent to European 
farm prices, according to Euro- 
pean Commission officials. 

One Brussels official yester- 
day heralded the near-certain 
abolition of the scheme as “the 
death of a great dinosaur”. 

Only Germany, at whose 
behest the system was intro- 
duced in 1984, opposes ending 
switchover. But as current 
president of the EU it is in the 
invidious position of having to 
chair next month's meeting of 
agriculture ministers which 
should decide on the issue; 
this obliges Bonn to concen- 
trate on winning consensus 
rather than allies. 

Switchover, part of the EC’s 
complex “green money** sys- 
tem for converting agricul- 
tural subsidies into national 
currencies, realigns farm 
prices in every EU member 
state to follow the upward 
movements of the strongest 
EU currency, Invariably the 
D-Mark but often the Dutch 
guilder as wefi. 

Although designed to pro- 
tect Germany's politically 
influential farmers, it has 
become an inflation machine 
which locks farm price 
increases permanently into the 
EU budget, over half of which 
goes on the Common Agricul- 
tural Policy. 

The Commission fought to 
abolish switchover after 
reform of the CAP in 1992 cut 
farm prices sharply. But Ger- 
many won a two-year exten- 
sion following that autumn's 
turmoil in the European 
exchange rate mechanism cur- 
rency grid. 

But, after the decision in 
August 1993 to float all cur- 
rencies within wide bands of 
the ERM, there have been no 
formal realignments and Brus- 
sels put the scheme in abey- 
ance. Germany argues that, in 
practice, the “hard" ERM cur- 
rencies have continued to 
trade within narrow bands, 
putting farmers in the coun- 
tries concerned at a disadvan- 
tage against currencies such 
as the lira, the peseta or ster- 
ling, which have “floated** 
over the past two years. 

The Commission is unmoved 
and holds a strong hand. 
Moreover, it would be particu- 
larly hard for Germany, which 
complains that it is by for the 
largest contributor to the EU 
budget, to produce cogent 
arguments to retain or extend 
in ti me such manifestly indis- 
criminate compensation. 

“The Germans have to 
recognise that every time the 
switchover is triggered, 
they're paying a third of the 
bill, while their formers are 
only getting about a quarter of 
the take,” one Commission 
official said. 

What the Commission now 
wants is to target compensa- 
tion on farmers who lose out 
on sharp currency realign- 
ments and pay them directly, 
rather than by increasing 
prices. But It may insist this is 
paid out of national budgets 
and would be tough on eligi- 
bility “in the light of the 20 
per cent windfall many form- 
ers have had over the past 10 
years" through switchover, 
one Brussels official said. 

Here too, the Commission is 
in a strong position. Any 
Increase in EU aid which 
raises farm prices now qnickly 
runs into three formidable and 
linked obstacles: a tight agri- 
culture budget ceiling; a 
reformed CAP whose success 
depends on prices coming 
down; and EU commitments 
under the Uruguay Round 
world trade agreement to 
slash form price support. 


EUROPEAN NEWS DIGEEST 



loses immunity 

Ukraine's parliament yesterday revoked the immuni ty of Mr 
Yefim Zvyahilsky, the former prime minister accused of 
e mhoggHng millions of dollars in barely eight months ini' office, 
thus opening the door to his prosecution. Detailed charges 
a gaingf Mr Zvyahilsky, who headed the government from 
October 1993 to last June, centre -on allegedly fraudulent 
business deals, illegal currency trading and akiTunung off state 
contracts. The prosecutor, Mr Vladislav Datsyuk. yesterday 
sa id the former prime minister, now a deputy, would' be 
charged with theft and grand larceny - activities which, he 
said, cost Ukraine fgfim- Mr Datsyuk claimed the for mer pr ime 
minister was accused of arranging-, the sale of strategic 
high-grade aviation fuel to a Greek-registered company at tow 
prices; the state only received $lOm of a reportedly $15m 
contract, he said. The prosecutor also told deputies that Mr 
Zvyahilsky. a former coal mine director from Donetsk, a large 
city in eastern Ukraine; was suspected of emb ez zli n g around 
$3m from a state-owned agro-industry company. The funds, 1 
allegedly transferred to a Swiss bank account, have not been 
recovered. 

Mr Zvyahflsky Is currently In Israel undergoing medical 
treatment. After yesterday's vote, the prosecutor may seek his 
formal Bvtra diti on .- If convicted, the 61-year -old faces a mini- 
mum of 15 years in jail Matthew Kaminski, Kiev 

Norway warming to Europe 

Norwegians are increasingly warming to the idea of European 
Union membership and more people are taking a stand on the 
issue although opposition to the move continues to -hold a 
clear lead, according to four opinion polls undertaken after 
Sweden voted to join the European Union. Since Sweden's Yes 
vote on Sunday, Norway has stepped up its campaign to 
convince a reluctant electorate to approve membership in a 
referendum on November 28. 

The surveys revealed that the Yes camp has narrowed the 
gap by between 5-6 percentage points and has gathered sup- 
port for the move from 38.3 per cent of the voters. But those 
opposed retain a strong lead, increasing support for a No vote 
by just under one percentage point to an average-47. per cent 
The sharpest movement in the polls was by those undecided 
where the figures dropped sharply to an average 14B per cent 
from 208 per cent Karen FossH, Oslo 

Plea to lift electricity curbs 

Failure to deregulate the European electricity industry could 
hamper widespread introduction of more environmentally- 
sound processes at European oil refineries. Mr Tomihiro Tani- 
guefai of the International Energy Agency told a Financial 


Times conference yesterday that an environmentalty-sound 
gasification process existed to turn high sulphur fuel oil and 
other unwanted refinery residues into fuel for highly efficient 


combined cycle power plants. But the economics of such 
projects are “crucially dependent” on refineries being able to 
sell the electricity. Only deregulated markets were likely to 
offer prices high enough to justify such investments, he said 
France in particular has consistently opposed moves within 
the European Union to deregulate electricity. Conference 
speakers predicted that European demand for fuel oil would 
continue to contract Demand for diesel and aviation fuel 
would grow the fastest with petrol demand growing only 
modestly. Robert Corzxne, Amsterdam 

EMI council’s first meeting 

Mr Alexandre Lamfolussy, president of the European Mone- 
tary Institute, last night warned strongly against the setting in 
advance of tight exchange rate stability criteria for countries 
se eking to enter European Monetary Union. After the first 
council meeting of the EMI - forerunner of the planned 
European central bank - at its new F rankfo rt headquarters, 
he said it would be ‘'counter-productive and very dangerous" 
to set explicit exchange rate bands ahead of monetary union 
which he expects after 1999. The decision should be taken at 
the end of the two-year period in which “normal fluctuation 
margins” have to be adhered to. “I just don’t see how we can 
put any precise figure on that today.” He said the “very hard 
lesson” of crises in the European exchange rate me chanism 
showed that very specific currency fluctuation margins “give 
a bonus to speculative pressure”. Andrew Fisher, Frankfurt 

Azerbaijan oil deal ratified 

The Azerbaijan parliament yesterday ratified a $7.4bn (£4.6bn! 
contract with a foreign ofl consortium to exploit oil reserves ol 
some 500m tonnes in the Caspian Sea. The consortium 
includes the National Oil company of Iran, together with 
several US and UK oil companies. The ratification or the 
September 20 contract removes the last legal obstacle in Azer- 
baijan to the project - but leaves open the vexed Issue oi 
Russia's stance on it. The Russian foreign ministry, a vocal 
opponent of the contract said yesterday the link with Iran 
was causing “great concern.” John Lloyd, Moscow 

Yeltsin continues reshuffle 

Mr Boris Yeltsin yesterday continued his leisurely government 
changes by appointing Mr Vladimir Polevanov, the governor 
of the Amur region, as deputy prime minister for privatisa- 
tion. He succeeds Mr Anatoly Chubais, who was promoted to 
first deputy prime minister. Mr Polevanov, who had overseen 
the privatisation erf the Tokar gold deposits in Amur earlier 
this year, has been under scrutiny by the communist-domi- 
nated regional parliament for his handling of the privatisation. 

Meanwhile, Professor Richard Layard of the London School 
of Economics said in Moscow yesterday that Russia is now set 
to begin a long period of growth" and was already seeing an 
end to the foil in gross domestic product John Lloyd. 

ECONOMIC WATCH 


W German GDP up ‘about 1%’ 


Western Germany 

Real GDP growth, annual % change 



1992 93 

Sam* Oataasreon 


West German gross domest 
product rose “about 1 pi 
cent” in the third quarts 
bringing aggregate growth fi 
the first nine months to 2J 
per cent, the economics mi 
istry said yesterda; 
Although the recovery no 
extended to the whole com 
try and was firmly based, 
was still not safe to say thi 
an extended upswing w< 
assured, the ministry addc 
in its monthly report cm tl 
economy. Rising internatiom 
interest rates and the marke 
strengthening of the D-Mai 
against the US dollar pre 
ented risks to recovery whic 


made i. an the more toportan, to 
restraint in the 1995 wages round. Final figures are not exn 
weeks ' but the data published yesterday is still 
V10l i S J 076 ™™® 11 * foreca sts made just before i 
]ast mon *- Christopher Porkes, Frankfurt 

-*■ * *>* -ffs 

■ Italy^s industrial production grew 4.1 per cent durimr i 
first mne months compared to the same pSSd 
Moording.to the national statistics inS A stto 
recovery is under way in nearly every sector of indS 
Production consumer goods to the 
per cent and that of intermediate goods increased 4.8 per ce 






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FINANCIAL TIMES 


WEDNESDAY NOVEMBER 16 1994 




NEWS: EUROPE 


Pan-Europe stock market planned 


By Richard Gouriay 
G,ow ing Business Correspondent 

”a“offS“ r ?, a stock 

a° group 'of 

I ne new market would provide entr*. 

S™ ly ; led com P an *es of any size 
Jith access to equity finance at an ezr 
Iter stage than their national stock 
‘Ranges currently allow. 

The groitp led by the European Ven- 
tnr ® ^ apital Association, hopes the 
“artet - to be called Easdaq*^ wiU 

Sfk S ^, 1995 ' This would coincide 
with the ED directive calling for free 
movement of financial servkU across 


borders which most he Implemented 
nationally by 1996. 

A survey conducted by accountants 
Coopers and Lybrand and funded by 
the European Commission, established 
that nearly half the companies seeking 
a flotation in four European countries 
would be suitable for Easdaq. 

But its success Tests on whether 
institutional investors worldwide will 
be prepared to invest in the entrepre- 
neur! ally-led fast growth companies. 

Mr Jos Peeters. chairman of the 
working group on Easdaq, said there 
were 15,000 venture capital backed 
companies in Europe “among which 
the star performers are potential candi- 
dates for a listing on the new market”. 

Easdaq would also appear to compete 


in the UK with the Alternative Invest- 
ment Market which the London Stock 
Exchange will launch next year to 
replace the Unlisted Securities Market 

Mr Ronald Cohen, chairman of Apar 
Partners and one of the main driving 
forces behind Easdaq. said the new 
market would be highly regulated 
against fraud. Companies wanting a 
listing would need a conventional 
investment bank sponsor and would 
need to keep the market Ted regularly 
with relevant information. 

The London Stock Exchange does not 
currently expect companies floating on 
the Alternative Investment Market 
would be heavily regulated, a short- 
coming for serious institutional invest- 
ment, some investors say. The Easdaq 


would also have an independent man- 
agement team, unlike AIM which 
would remain within the I»SB- 
Launching the plans for Easdaq. 21 
European and US financial institutions 
yesterday founded a new body, the 
European Association of Securities 
Dealers, which will develop the techno- 
logical infrastructure and settlement 
systems for the new market 
The Easdaq - which stands for the 
European Association of Securities 
Dealers Automated Quotation market - 
will be a profit-making company. 

Before the project can get off the 
ground the Easdaq company will need 
to raise about EculOm (£7.8bn) in 
equity capital. 

See. Lex 


Former 
bank chief 
accused 
of fraud 

By Tom Bums in Madrid 

Mr Mario Conde. the 
flamboyant banker who was 
dismissed as chairman of 
Banesto by the Bank of Spain 
at the end of last year, and 
nine former directors of the 
troubled bank were yesterday 
formally accused of c riminal 
fraud by the public prosecutor 
of Madrid's high court. 

A high court judge will now 
decide whether to charge Mr 
Conde and his associates. The 
accusation came as members 
of a parliamentary commission 
on the collapse of Banesto 
were drafting their conclusions 
to six months of hearings. A 
member of the commission 
said the parliamentarians were 
likely to recommend c riminal 
action against Mr Conde. 

The prosecutor’s formal 
accusation yesterday brings to 
a head the second big financial 
scandal in Spain in the past 
month. Mr Javier de la Rosa, 
the Barcelona finan cier who 
together with Mr Conde 
became an emblem of Spain's 
booming late 1980s. was 
imprisoned pending fraud 
charges three weeks ago. 

The prosecutor, who 
demanded surety totalling 
PtalZbn {£50raj against all the 
ten accused in the Banesto 
case, has passed the results of 
his investigation to a judge at 
the senior court dealing with 
monetary offences. 

Details of the accusations 
were not released at the 
prosecutor’s request and court 
officials said the judge had up 
to two weeks to decide whether 
to bring the case to court 

Mr Conde was removed as 
Banesto chairman after a Bank 
of Spain inspection revealed it 
had heavily overvalued its 
assets. A self-made millionaire, 
Mr Conde became chairman in 
1987 at age 39 after he used the 
proceeds of disposal of a 
pharmaceutical business to 
buy shares in the bank. 

The most damning public 
evidence against the bank’s 
former executives came from 
Banesto’s present chairman, 

Mr Alfredo S&enz, who told the 
parliamentary investigation: 

“In Banesto there are cases in 
which money has not been 
lost; it has disappeared and 
somebody has it" 

Mr S&em, became chairman 
of Banesto after it was 
acquired by Banco Santander 
In April following a lifeboat 
operation involving Pta780bn 
in public and private monies to 
salvage the institution. The 
Bank of Spain said Banesto 
had been " grossly 
mismanaged” when it ordered 
the removal of Mr Conde, who 
claimed the move was political. 

Spain has been gripped a by 
several spectacular public 
ran rials this year. Mr Mariano 
Rubio, the former central bank 
governor, was jailed over a 
share sale and still faces 
charges. The former chief or 
the Civil Guard is on the run 
from Spanish police and Prime 
Minister Felipe Gcmzdlez is at 
the centre of a controversy for 
allegedly favouring a family 
member with government 
contracts. 


Power struggle over EU policy 
stalls Austrian coalition talks 


By Eric Frey In Vienna 

A power struggle over who 
should be in charge of Euro- 
pean policy is bolding up Aus- 
trian government coalition 
talks more than a month after 
disenchanted voters returned 
the traditional conservative 
and socialist coalition partners 
with less than their usual over- 
whelming majority. 

At the same time, an ambi- 
tious austerity plan to cut gov- 
ernment and social spending 
by A8ch220bn (£12.8bn> over 
four years has run into strong 
opposition from the trade 
union forces within Chancellor 
Franz Vranitzky’s Social Dem- 
ocratic party fSPOe). Hie cuts 
are needed to bring Austria’s 
budget deficit in line with the 
European Union’s Maastricht 
convergence criteria for eco- 
nomic and monetary union. 

Observers still expect the 
SPOe and the conservative 
People’s party (OeVP) will 
patch up their differences and 
continue the so-called grand 
coalition that has ruled Aus- 
tria since 1966. But five weeks 
after the elections, in which 
SPOe and OeVP saw their 
majority shrink from 97 to 51, 
there Is growing talk In Vienna 
of a breakdown of the coali- 
tion. 

Waiting in the wings is the 
right-wing Freedom party 
(FPOe) led by Mr J6rg Haider, 
which boosted its voting share 
to almost a quarter and has 
made the OeVP the tempting 
offer to back a minority gov- 
ernment in parliament. 
Because of Mr Haider’s extrem- 
ist and xenophobic views, lib- 
eral forces in the OeVP, which 
holds only 52 seats in the 183- 
seat parliament, have ruled out 
any partnership with the 
FPOe. - 

However, foreign minister 
Alois Mock, who represents the 
conservative wing of the OeVP, 
has shown few qualms about 
co-operation with Mr Haider. 
Even though he is seriously ill 
with Parkinson’s disease, Mi- 
Mock still hopes to become 
chancellor and has not for- 
given Mr Vranitzky for deny- 
ing him this post in a closely 
contested election in 1986. IBs 
demand to be put in charge of 
all aspects of European policy 
when Austria joins the EU on 
January 1 is seen as a ploy to 
break up the coalition talks 
and wrest control over the 
party from its liberal chairman 
Mr Erhard Busek. 

Mr Vranitzky, by contrast, 
wants the co-ordination of EU 
policy to rest in the chancel- 
lery. He argues that the issues 
decided in Brussels go well 
beyond traditional diplomacy 
and touch every aspect of gov- 
ernment policy. He wants a 
strong state secretary for Euro- 
pean affairs in his office to bal- 
ance the foreign ministry's 
role. 

The dispute is hard to solve 
because the constitution does 
not clearly define the chancel- 
lor’s responsibilities. He heads 
the weekly cabinet meeting, 
but is not officially charged 
with coordinating government 
policy. 

The outcome of the power 
struggle is certain to affect 
Austria's position on European 
security policy. While Mr Mock 
wants to abandon nentrality 


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and join the Western European 
Union, Mr Vranitzky wants to 
preserve neutrality as long as a 
common defence policy does 
not yet exist. Mr Mock and Mr 
Vranitzky are also at odds over 
relations with eastern Europe 
and EU policy toward Bosnia. 
Mr Mock is much keener on 
integrating eastern Europe 
quickly and on supporting the 
Bosnian government, including 
ending the arms embargo. 

Even if the coalition contin- 
ues. the current impasse could 


still spell trouble for the gov- 
ernment in the coming 
months. Few observers expect 
it to last the full four years. 

While the right wing of the 
OeVP is pressing Mr Busek. 
the party chief, to play the 
Haider card, leftwingers in the 
SPOe are calling for a retreat 
into the opposition to recover 
strength sifter the disastrous 
election result. 

Meanwhile, the powerful 
trade unions are challenging 
Mr Vranitzky’s pragmatic and 


pro-business policy and are 
demanding a better social bal- 
ance in the current round of 
spending cuts. On Monday, the 
trade union representative in 
the SPOe’s negotiating team. 
Mr Rudolf Nuernberger, 
walked out of the talks . The 
OeVP. however, insists on a 
brake on Austria's generous 
social programmes to bring the 
budget deficit below 3 per cent 
of gross domestic product until 
1998 from 4.7 per cent this 
year. 


Italian unions call 
new general strike 


By Robert Graham In Rome 

The confrontation between the 
Berlusconi government and 
Italy's trades union movement 
escalated yesterday with the 
calling of a new and more 
extensive general strike to pro- 
test against the 1995 budget. 

The fresh strike call came 
within hours of the govern- 
ment's derision to impose a 
confidence motion on today's 
debate in the chamber of depu- 
ties on the articles in the bud- 
get relating to pensions reform. 

The government's use of a 
confidence motion Tor the sec- 
ond time in the budget debate 
is intended to retain tight dis- 
cipline among the fractious 
right-wing coalition. But it was 
also a clear signal to the 
unions that - despite the huge 
weekend protest in Rome of 
1.5m demonstrating against 
the budget - the government 
was determined not to make 
more compromises. 

The general strike will be 
staged on December 2 and will 
last eight hours. This will 
cause much more disruption 
than the previous stoppage on 
October 14 which lasted four 
hours. Outlining plans last 
week for the demonstration in 
Rome, union leaders had more 
or less talked themselves into a 


new general strike if the gov- 
ernment failed to respond by 
reopening talks on pensions. 

Yesterday the northern sec- 
tion of the engineering union, 
said It would stage a three- 
hour stoppage today in protest 
against the government move 
and this will foreshadow stop- 
pages elsewhere. In an effort to 
prevent further industrial 
action the government will 
meet the unions next Tuesday. 

The government had little 
option but to appear tough. 
The 1995 budget target of hold- 
ing the public sector deficit 
down to L138.000bn (£55bn), 
equivalent to 8 per cent of 
GDP, is already at risk due to a 
combination of concessions 
and the higher cost of servic- 
ing Italy's debt stock. Some of 
the concessions relate to pen- 
sion reform, making it easier 
for people to still benefit from 
early retirement provisions. 

But the populist Northern 
League of Mr Umberto Bossi 
has been pressing its partners 
in the right-wing coalition to 
accept a large number of 
amendments to pension 
reform. Some of these are in 
line with union requests which 
are seeking to avoid hardship 
cases and ensure that the 
reform is thorough - not a mere 
cost-cutting measure to reduce 


government spending. 

The government plans to 
raise L8.000bn through cuts in 
the pension benefits. Yesterday 
Mr Lamberto Dial, the trea- 
sury minister, said the League 
amendments would cost an 
extra Lll.OOObn over the next 
six years. One of the two main 
amendments the League has 
sought to introduce concerns 
the process whereby those who 
retire either before the normal 
retirement age or before they 
have made their full contribu- 
tions will be penalised. 

Mr Bossi has -frequently 
threatened to break with the 
government over pensions. But 
yesterday a League spokesman 
said it would observe the disci- 
pline imposed even though it 
disapproved of the guillotine 
method of the confidence 
motion. To deflect attention 
from this volte face. Mr Bossi 
said the League would seek to 
establish a bridge with the gov- 
ernment for renewed dialogue. 

By retreating Mr Bossi has 
shown he is not yet willing to 
break up the coalition. His 
stance yesterday was in part 
determined by the prospect of 
local elections this weekend 
where he needs the backing of 
Mr Silvio Berlusconi’s Forza 
Italia to ensure League may- 
oral candidates win. 


I know its late, kut III like some 
suski. How far do I liave to cfo? ” 





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WEDNESDAY NOVEMBER 16 1994 


NEWS: WORLD TRADE 


Court clears 


EU path on 
trade accord 


Brussels 
to ratify 
deal by 
Christmas 


By Frances Williams in Geneva 


By Emma Tucker In Brussels 


The European Court of Justice 
yesterday paved the way for 
EU ratification of the Uruguay 
Round trade accord before the 
year-end deadline by ruling on 
a dispute between the Commis- 
sion and member states. 

In a long-awaited pronounce- 
ment. the court ruled that the 
Commission will have to share 
responsibility with member 
states for negotiation in cer- 
tain trade areas, such as trans- 
port, services and intellectual 
property rights. 

The ruling supports the 
argument made by member 
states that the Commission's 
existing authority does not 
extend to these areas, which 
will come to the fore in future 
trade negotiations under Gatt's 
successor body, the World 
Trade Organisation. 

Although the court's verdict 
was interpreted as a setback 
for the Commission, Sir Leon 
Brittan, trade commissioner, 
said: “Wei now have a clear 
basis on which we can all work 
together in Europe both to 
ensure that the WTO enters 
into force on time, with full 
European participation, and to 
ensure that Europe plays a 
strong role from day one in 
shaping the agenda for the 
WTO itself." 

The Commission had argued 
that the Uruguay Round 
accord should be ratified under 
those articles of the Rome and 
Maastricht treaties that give it 
exclusive authority to negoti- 
ate on trade. The full implica- 
tion of the court's opinion will 
take time to digest but the 
Commission highlighted a 
number of points yesterday. 

• Trade in goods will con- 
tinue to fall completely within 
the exclusive jurisdiction of 
the Commission. This includes 
trade in nuclear goods and in - 
coal and steel products. 

• Cross-border services such 
as telecommunications, audio 
visual, and financial services 


that are transmitted electroni- 
cally across frontiers are analo- 
gous to trade in goods, and 
therefore fall under the juris- 
diction of the Commission. 

• Other types of services 
which imply movement of peo- 
ple or establishment within the 
community - for example, 
when a third country company 
sets up a subsidiary -- will be a 
shared responsibility. 

• In intellectual property 
rights jurisdiction remains 
with member states, other 
than in the case of counterfeit 
goods crossing borders. The 
court added the community 
may be called on to act in any 
case where there was a direct 
repercussion on the function- 
ing of the common market. 

The Commission and the 
member states will now have 
to decide on the best way to 
proceed. An. EU official said 
yesterday that the parties 
would need a code or conduct 
as a basis for negotiation, but 
added that an original code - 
drawn up by the German gov- 
ernment and the Commission 
- was now out of date and that 
a new one would have to be 
considered. 

“There has been agreement 
that some sort of code of con- 
duct will be needed, but there 
is not yet a unanimous view of 
what sort of code. We have to 
look at the court decision and 
decide what sort of rules are 
appropriate," the official said. 

All 12 national parliaments 
must now ratify the Uruguay 
Round deal before the end of 
the year. Three countries - 
Greece, Germany and the UK - 
have already ratified the 
accord setting up the WTO and 
its annexes containing the spe- 
cific agreements negotiated 
under Gatt on areas such as 
agriculture, textiles and tele- 
communications. 

EU foreign ministers have 
also sent the accord to the 
European Parliament to press 
on with its own ratification 
procedures. 


The European Union expects 
to ratify the Uruguay Round 
trade accords “before Christ- 
mas”. a settlor EU trade offi- 
cial said yesterday. 

The official, who was in 
Geneva for a meeting of the 
Quad group of leading traders, 
said the other Quad members 
- the US, Japan and Canada - 
planned to ratify the accords 
before the Uruguay Round 
Implementation conference on 
December 8. 

He forecast that most EU 
member states would ratify by 
the time or the implementa- 
tion conference, which is 
expected to set a January l 
1995 date for the Uruguay- 
Round and the World Trade 
Organisation, that will police 
the accords, to become effec- 
tive. But he said alt 12 nations 
might not complete national 
procedures until EU foreign 
ministers met on December 
19-20. The EU itself would 
then be in a position to ratify. 

The official said that the EU, 
Japan and Canada favoured a 
limited transition period dur- 
ing which the WTO and the 
Genera) Agreement on Tariffs 
and Trade (Gatt) would oper- 
ate in parallel. 

The US has already said it 
intends to pull ont of GaU as 
soon as possible after the WTO 
comes into force, bat the EU 
official said he saw “no major 
difficulty” with a short transi- 
tion of perhaps one year. Of 
the 125 participants in the 
Ronnd, only about 80 are 
likely to have ratified the 
trade accords by January 1. 

Japanese legislators said 
earlier this month that Tokyo 
was likely to ratify the pact 
daring its current parliamen- 
tary session ending on Decem- 
ber 3, but might postpone dip- 
lomatic steps to seal the pact 
due to delays in the US and 
Europe. 

Brussels also remains confi- 
dent that its candidate for 
WTO director-general, Mr Ren- 
ato Ruggiero of Italy, will be 
chosen by next month. 


Carmakers jostle for stake in China project 


, Mercedes-Benz unveils 


people’s car prototype 


By Tony Walker in Bering 


Mercedes-Benz was prepared to 
invest up to DM2bn ($L3bn) in 
China to build 250.000 models a 
year of its “people's car" 
designed specifically for the 
local market, a senior repre- 
sentative of the German car- 
maker said yesterday. 

Mr Jfirgen Hubbert, head of 
Mercedes-Benz’s car division, 
said that efforts to win Chinese 
approval ;for the Tamlly car 
project were part of the “gto- 
balisattoTij" of the company’s 
business. 

“The increasing internation- 
alisation df world business has 
led the company to go one step 
farther than export or foreign 
assembly,” he said. “Mercedes- 
Benz is now looking for over- 
seas production locations 
where it will not just assemble, 
but develop and manufacture 
passenger, cars of the highest 
quality.” : 

Mr Hubbert was speaking 
after Mercedes-Benz had 
unveiled its prototype Family 
Car China (FCC) at a lavish 
exhibition, in Beijing, attended 
by 22 international carmakers 
showing their wares in an 
attempt to be selected as part- 
ners in a '.Chinese people’s car 
project 

China's: Ministry of Machin- 
ery Industry, responsible for 
the vehicle sector, said it 
would select successful bidders 
within a year. 

It is not clear whether there 
will be more than one com- 
pany selected. 

China atmounced earlier this 
year that jt aimed by the year 
2000 to have built an industry 
capable of supplying 90 per 

cent of domestic requirements 

of about 1.5m cars annually. 

China manufactured 234,000 
cans last year. 

Among* Mercedes-Benz s 
competitors are Porsche ana 
Volkswagen of Germany, Nis- 
san and 'to yota of Japan* nat 
of Italy, Daewoo and Hyundai 
of South 'Korea and General 
Motors and Ford of the US. 

Porsche, like Mercedes-Benz, 

has developed a prototype for 
the Chinese market kno wn as 
the C88. To overcome scepo- 

cism about the involvement of 

a luxury carmaker in the proj- 
ect, Porspbe executive are 
publicising the feet that it was 
Ferdinand Porsche who 
designed ,and built the fifst 
Volkswagen In the ®Jd-^30s. • 

Mr Stefen Geist, ^rsche s 
marketing manager, -\Said that 



Tough c o mpet i tion: Mercedes' prototype Family Car China 


one of the company’s aims was 
to show that “we not only pro- 
duce sports cars, we are also 
able to do other things like pro- 
viding design and engineering 
services”. 

Unlike Mercedes-Benz, whose 
interest is In a 50-50 joint ven- 
ture producing cars, Porsche 
wants to supply basic design 
and engineering assistance to a 
Chinese manufacturer in 
return for a fee or royally on 
models produced. 

Ford, which is showing its 
Fiesta and other small models 
in Beijing this- week, also 
invoked the past to strengthen 
Its claims' to participate in the 
people;® car project 

Referring to the Model T 
Ford, the world's, first mass- 
produced car, ’Mr Wayne 


Booker, executive vice-presi- 
dent for international automo- 
tive operations, said: “Ninety- 
one years ago Henry Ford had 
a vision of providing the great- 
est good for the greatest num- 
ber of people. From that begin- 
ning Ford has adhered to the 
vision of serving working peo- 
ple." 

Volkswagen, the German 
carmaker which is already the 
leading car producer in China, 
said the Seat Cordoba, intro- 
duced in China recently as the 
City Golf, could be the basis 
for a people’s car. 

Mr Martin Posth, responsible 
for Asia, said VW would pres- 
ent a complete concept cover- 
ing development, production, 
national specialisation, distri- 
bution and service. 


Mahathir mars Apec consensus 


Pacific rim leaders yesterday agreed to 
draw up concrete plans in the next year 
for completely free trade and invest- 
ment in the region by the year 2 020 in a 
move they said would give a powerful 
Impetus to further liberalisation in 
the rest of the world, write Peter 
Montagnon and Gny de Jonquil res in 
Jakarta. 

However, the impact of their decision 
at the Asia-Pacific Economic Coopera- 
tion forum in Bogor. near Jakarta, was 
marred by reservations from Malaysia. 
Its prime minister. Dr Mahathir 
Mohamad, said the agreement was non- 
binding and the timetable merely indic- 
ative. 

Other leaders of the 18-member group 
hailed the agreement as an historic 
breakthrough, but said they had yet to 
define what “free and open trade” 
meant. Crucial questions include how 
for it should cover services as well os 
goods, and whether Apec should 


ASIA-PACIFIC ECONOMIC CO-OPERATION 


demand concessions from other coun- 
tries before extending its planned liber- 
alisation to tbe rest of the world. 

Mr Paul Keating, Australian prime 
minister, said decisions on these issues 
would have to wait at least until next 
year s Apec meeting in Osaka. Japan. 
But be called the statement, which 
commits the region's more advanced 
countries to free trade by 2010, a 
triumph comparable to the foundation 
of the Bretton Woods institutions in 
1944. 

US President Bill Clinton said the 
agreement was "potentially historic." 
but its realisation would require con- 
tinuing commitment by political lead- 
ers. 

The summit gave a boost to China's 
hopes of joining the new World Trade 
Organisation next year by stating that 


“full and active participation in and 
support of the WTO by all Apec econo- 
mies” was vital to strengthening the 
world trade system. 

The meeting agreed to accelerate 
implementation of the Uruguay Round 
world trade deal and announced a 
standstill “under which we will endea- 
vour to refrain" from measures which 
increase trade protection. 

Several leaders sought to play down 
worries about another clause In the 
statement which would apparently 
allow countries not ready to participate 
in co-operative arrangements to join at 
a later date. “To have gone this far is 
frankly amazing.” said Sir Hamish 
Macleod, Hong Kong’s financial secre- 
tary. “If you think back a year or two, 
you would not have believed it could 
happen.” 


The widespread assumption Is that 
Malaysia's objections will be insuffi- 
cient to prevent work proceeding. Mal- 
aysia has offered to host Apec's meeting 
in 1998 and demonstrated its interest in 
free trade by sharply cutting tariffs in 
last month's budget. 

Dr Mahathir's chief concern is to 
avoid being sucked in to a process dom- 
inated by the US and outside the multi- 
lateral framework. 

Other countries, such as China, 
Japan and Thailand, may raise similar 
objections once work begins on the 
details. 

Apec officials have warned privately 
that defining the scope of the pro- 
gramme will be even harder than set- 
ting a timetable for its completion. 
Already Japan. South Korea and some 
other countries have said full liberalisa- 
tion of their agricultural markets would 
be politically difficult. 

See Editorial Comment and Observer 


Leaders committed to 
further liberalisation 


By Guy de Jonqu teres 


The leaders of the 17-member 
Apec countries agreed to build 
on the Uruguay Round world 
trade deal and take the lead in 
strengthening the open multi- 
lateral trading system, saying 
the “full and active participa- 
tion in and support for the 
WTO [World Trade Organisa- 
tion] of all Apec economies” 
was vital to this objective. 

They would accelerate imple- 
mentation of their Uruguay 
Round commitments and 
aimed to deepen and broaden 
its results. 

“We also agree to commit 
ourselves to our continuing 
process of unilateral trade and 
investment liberalisation. As 
evidence of our commitment to 
the open multilateral trading 
system, we further agree to 
endeavour to refrain from 
using measures which would 
have the effect of increasing 
levels of protection", they said. 

They pledged promptly to 
reduce further trade and 
investment barriers "in a Gatt- 
consistent manner” and 
believed this would stimulate 
further multilateral liberalisa- 
tion. “We wish to emphasise 


our strong opposition to the 
creation of an inward- looking 
trade bloc that would divert 
from the pursuit of global free 
trade. . . The outcome of trade 
and investment liberalisation 
in Asia-Pacific will not only be 
the actual reduction of barriers 
among Apec economies but 
also between Apec economies 
and non-Apec economies." 

Tbe leaders urged the suc- 
cessful launching of the WTO. 
“Full and active participation 
in and support of the WTO by 
ail Apec economies is key to 
our ability to lead the way in 
strengthening the multilateral 
trading system. We call on all 
non-Apec members of the WTO 
to work together with Apec 
economies toward further mul- 
tilateral liberalisation." 

The statement outlined the 
vision for Asia-Pacific econo- 
mics as “based on a recogni- 
tion of the growing interdepen- 
dence of our economically 
diverse region, which com- 
prises developed, newly indus- 
trialising and developing econ- 
omies. 

“The Asia-Pacific industria- 
lised economies will provide 
opportunities for developing 
economies to increase further 


their economic growth and 
level of development” 

Free and open trade and 
investment in Asia-Pacific 
would be achieved by develop- 
ing countries by the year 2020 
and by industrialised econo- 
mies by 2010. it continued. 

However, in another part of 
the statement, the leaders said: 
“In order to facilitate our 
co-operation, we agree the 
Apec economies that are ready 
to initiate a co-operative 
arrangement may proceed to 
do so while those that are not 
yet ready to participate may 
join at a later date. 

“We direct our ministers and 
officials immediately to begin 
preparing detailed proposals 
for implementing our present 
decisions. The proposals are to 
be submitted soon to Apec eco- 
nomic leaders for their consid- 
eration and subsequent deci- 
sions. Such proposals should 
also address all impediments to 
achieving our goal.” 

The leaders also agreed to 
examine the possibility of a 
voluntary consultative dispute 
mediation service, while stress- 
ing that the WTO should be 
the primary channel for resolv- 
ing trade disputes. 



S5 

i&S&Jfcr'iJ 

Dr Mahathir Mohamad: agreement ’ 


non-binding 


MALAYSIAN CONCERNS 


In an unpublished 
memorandum circulated in 
Jakarta last night, Malaysia 
said it would “only commit to 
undertaking further 
liberalisation on a unilateral 
basis at a pace and capacity 
commensurate with our level 
of development”. It said Apec 
liberalisation should “not 
create an exclusive free trade 
area in Asia Pacific*’. 
Liberalisation must be 
consistent with the Gatt and 
WTO and “on an 
unconditional MFN [Most 
Favoured Nation] basis”. 

It said the target dates of 
2020 and 2010 for Apec 


liberalisation were “indicative 
and non-binding.” and 
liberalisation should be 
“undertaken on a best 
endeavour basis” consistent 
with countries' level of 
economic development 
Liberalisation should “only 
cover a substantial proportion 
of Asia Pacific trade and 
should not go beyond the 
provisions of Gatt and WTO”. 
Referring to the provision in 
the statement allowing 
countries to join Apec 
liberalisation at a later stage, 
Malaysia said “decisions in 
Apec should be taken on the 
basis of consensus”. 


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Tin- Bnlish Telecom ,liver>ilreali*»f Ills in-ljvd n> establish ;i 
keener fumifiunt) with ilk.* urns.; nta/kci. winch we *ee j.% heemn- 
ing increasingly iinpxnaiii in the years Jlte:i*l. 

We've said thru w wish to he the Kink lor .ill Smith A Ini. is peo- 
ple — and we arc. .is independent surveys have •Iiowii. I he news 
market has reeogntsi.l u% as such. Wc-'\c posim-neil *iurselves 
well. 

Together with NcdKmk. we created ihe st.ind.iids 1 --r smart cauls 
in South Africa. It's hewn well acccpiaiiscd liy our e iisiomers The 
smart said hi is u-wmI f.fiiinie s. ilmiik\ f.i .1 puui-iliil ship I 
believe it lias evsiiin .* p**\si 1 'iliik-v 

The homily ul Ilk* 'Hurt card 1% that while it's Mipliisik jted. H s-.in 
he readily used hy ,111 unsophisticated uiorksi lb's is what hap- 
pens in South Airs, .l We have the-c highly sophist is ated hirst 
World systems ( mni. illy developed for the blips curt* •rales), 
which we've adapred 10 serve ilk- country's IlmJ World compo- 
nent. 

I find it very graiilyntg that South Alma'-. Iliud W. idd eiMiipn- 
neirr has taken <0 .tint accepted (lie*’ very nifisepls 

F.veii llhmgll they ought he pmirty educated they know which 

huliiHis 10 press 

WH has mine a long way over rhs pa-.l live veal* .it recession. 
We didn't sit hack .md beimsiii ihe fuel lieu nines ws-ie l* nigh We 
recognised nines ssetv bad and asked ourselves «li.u »o were 
going 10 do-ihotil 11 mid how we weic going slay ahead ol lltc 
coni)kliiiim anil ahead **f ilk- world in ivints ol • ■11 systems and 
the way in whielt we serve «Hir customer- 
We placed cmpKi'rs on rite simple old (lung vaMed service. Yon 
don't need system, for service Soivhc is .1 .r.il> ol mind ami 
we've hcvn siks'esstul ill ineuh.iling (he need and ilcsirc to serve 
among our jvnple 

In ihe eirviinisinik'cs. therelorc. we've dime veiv well indeed hi 
ihe pnsi year >.tnr profit growth firtv been very s'** ‘I In die past 
live year, il's averaged nk*re than 5 |VIXciii .1 ve.ir in real Icnns. 
mi cur shareholders; are lia|»py. We've heeii able in build capital 
and have ihe ahilily 10 fake adv .Ullage of ihe ii|isv*ing 111 Ihe econ- 
omy tlUin an cnf.crged sapiiai {use. 

We have more than 27 IKYI employees, our s. 1pn.1l is in excess of 
R.k hill n hi. iwr market capitalisation is close In Klo billion .md 
*mr Mai asss-r- eseetnl R 6 ri Million • and are growing 
We've inaits- market -h.il e yams in .1 inimi's-r of areas, among 
them in the Ihhiic loan sphere and in iiisialnieiii siedil. uliere we 
art the large -a 111 South Aim a We ve al-i irvqueiitlv been ilk- 
lead hank 111 lincc project fiiLuiee. 


lime they were this high was when inflation was 14 percent: it's 
now '.i percent - ;uid the underlying inflation rale is lower, since 
the recent upliefc ii because of food ra temporary, seasonal phe- 
nomenon). Take fond out and it's fi percent. 

Thi the face of it. the behaviour of the capital markets is an enig- 
ma. Alter all. government has said it will evereisc fiscal disci- 
pline. the Budget was a goud one and. to dote, there's been no 
ovcmin in government -folding. 

I think what ilk- market is saying is that it's siill early days: that 
the new gnvenimcni has mode all the right noises but has yet U» 
establish a record of financial discipline. 



Btirry Swart 


Spira: What is Ihe outlook Tor investment — from both 
domestic und foreign sources? 


.Swart: All iiin-srurs warn certainty. They seek a low and pre- 
d it I able lax raie. stability in the labour murker and a government 
wholly Lon m 1 1 lied (0 lice markets. 

In addiliiMi. foreign investor* want to be able lo invest their 
money snlcly and enjoy the facility of being able Like it out when 
they s*i wish. Overseas investors have many option!, around the 
ivurld - countries where wages .ire lower and prndueli vity high- 
er than 111 S**iili Africa. They're driven hy but turn line returns. 
We're the new buys on the hhk-fc. We're highly visibk- — which 
h;ts ii s pros and its cons 

•>1 the plus M*(e. South Alrku has been out in the cold Tor so long 
and has dune sn well to get its house in order that there's a gen- 
uine desire to help us. I see a distinct window uf opportunity here. 
The principal negative is that SihiUi Africa is viewed us heiiig 
|iiin of Africa, where mi many naii*)iis have made a iik-ss of 
things. They te:ir that South Africa wiff go the same way. 

Will, a view in aecvntuuling the pros and eliminating the cons, we 
need to du Ihe following; 

* Create .in .utmenve u* em ironment. We've already gone parr 
ul ihe way along this route by reducing the corporate las rate. 

' l-urge .in envirunnieni in which money can tw invested with 
satciy. Herhaps an investment code which spells nut die 
foreign investor's righLs and obligorionv would lielp. 

* libmiiLite exchange control. 


the country's level of trade with the cuntiik-m. 

SADC is concerned thru Ss<uih Africa will dominate Ihe orgtuii- 
saiion. South Africa dtk-sn't want lu domiiuh.- anything, but it's 
foci of life that the South African economy i-t hy lar die largest nn 
iheenmineni. so we'll he a dominating influence in any event — 
whether we like it or nut. 

The iwue hmls down 10 hirer wo can tast help the SADC eoun- 
tries 10 develop their own e-eonuniHA. It's difficult, because we 
ha«c just so much manpower and juM so much money. 

Sonic 1 African countries believe we luve a greaf deal of money lu 
pump into their economies. However, the little that we have inuM 
he pumped into developing our own country .md miruwii pue*.>- 
pie. though, of course, we ha ve to be mindful of the need lo assist 
our neighbours wherever and whenever we can. 

Millions of people front throughout Africa are -areotning across 
our bonlcrc It's nothing but an economic issue. If countries to 
our nonh can establish decent economics, sve won't have this 
influx of foreign illegal immigrants. It's therefore in South 
Africa's inlcre&l 10 help develop ihe economies of sub-Saliaran 
Africa. 


Spira: Africa walk, what is the extmt to FNB's activities dsc- 
wherc in the world? 


Spiro: Will exchange eon! rid be scrapped in Ihe near future? 
Why would it be drsirable to do .so? 


Spira: You've mcntioik-d an upturn in emnnmy. In it siLsiufn- 
obk and at »hut rute? 


Swuri: We si a tied seeing .m itpltini in -uir stalista-v in the l:iM 
quarter .if f.isi vear. ilinrrglr it drMn'r <mp.(et <•« lire enure cvij- 
■Hiniic xjVviniiii. It henetited. lor ex.nnple. 1 lie iiurinr in.inuluc- 
lurer-; land hviux- Wesh.mk. mir ui.i.iliiicm ciedil anhl. hut m 
other sebt**i> it *jk wen! 

Ihiwx-icr. ihc KXX'ierv .«kl l>V n«»vi *rf "(ihnir,ni Ji.iv since 
hecxHiie inore wide--|ir*st>l We slhxiliin 1 1 .*.* I** .1 huge revival 
(in tail, mans have scaled down iltcu i-*|kVl.ilion* for nest ye.iri. 
bill we're ik-vertheLv. ,nmei|i.ilmg t iiil* growth of 2 to 2 ..‘» |Vr- 
iv'itf in |*WJ IVroKilil piiili.ihly J»**k In r I juitent nvvi year. 
Big hnsiiii-s-v-' .tie m 1 c ,k *d iwi^Hii'h .11 ilk- moment A ha of 
them :tr<* e.ish rkb ;ui nh .il isr- n 1- -n lu ■■ e*«ne inns :m upturn 


Swart: rhe linanciul mnd. which facilitates financial liunsnc- 
lions between foreigners, isn't an obstacle to pun folio invest- 
ment. foreigners tail invor today and gel their money uui tomor- 
row il they so wish. 

II. ud. lixed iiivestincni is MHiveihing else. H is this ealegioy of 
inve.vtiiK.-nt that 11 olfecied by exchange tunlrv.il and while such 
coiuo ih are in force, we won't get meaningful investment front 
ahtuml. 

M’c are paiT “I the gluKil village, with Hie result ilutf there has lu 

he free nu*veiik-nl of capital and labour 

rhen.* are two levels of debate on exchange control. 

(.in the mil* hand, ihe Reserve Bank maintains that the discount 
h.-t ween the financial rand and ihe commcre-uil rand must narrow 
before exchange citnuui con be abolished. The narrower it 
heevuik-s. the easier ii is 10 get nd nf the linaneial rand. 

Problem is. vve then iimmaliausly have muc Ihan 510 billion of 
extra foreign ilebl. We have live weeks' reserves - - insulllck-m 
cover the ciipiiuf ran How that is likely lu ensue. 

At die S.111K: rime, this will likely be a relatively short-lived phe- 
nomenon. l-ur llul short term, wc would need a comprehensive 
package credit lines fnnti the iMK the Wortd Bank and other 
in(L-marii*i(.il iiLstiturioitv We could then frrtartce any oulUow. 
alter which llu.- silu.tlion would sc-llle down and money would 
return in South Africa. 

My view - and tin > is the *uhcr sqle uf the debate — is that it is 
never rite riijhr rime n> fail evcbnngt* roniniJ. Consn/uenjJy. wc 
inuy as well d*i mi nghi m«w nnd bite on the hulkf — in spite of 
ihc'sigmikiutl risks in vi jived. 


Swart: In the litr East. PNB Asia, based in Hung Kong, has -Jou- 
Mcd its balanee sheet in the short period it's been ihere. Wc’rc 
getting to know the market, which is drlfc-reni and more buoyant 
than we expected. We're looking to upgrade the nature- of this 
operation. 

In the UK. we've completed our nuiunaiisiiira of An-Jviehcr. 
particularly in the lamdon oltiee. We see our merehiun Kinking 
operation starting to move from the next linaneial year onward. 
Ansbacher’s trading activities :irc* doing well. 

Also mnving ahead salisfoiiorily is FNB's Intenununul Trust 
Go.<up in the Cumbcjn, Monaco. Zurich und the Channel IsfaruK 
We hufu to expand funher in ihe years ahead. 


Spine Why should foreigners ate FNB? 


■Swart: Wc'rc the okicst bank in South Africa. We’ve been going 
since 1 SJ 8 . 

We have an exec-lleni branch network: are a compk-tely di vcim- 
liexl hanking nfgnnivuiiun. We uITer in nvsliilment credit, a mer- 
ehnni bank, mongages - any nnd every tneei ol financial ser- 
vices. In ellcet. we're a large linaneial cungluincuK-. 

So wc con certainly advise anyone corning m South Africa on 
capital markc-Ls. rat selling up businesses, giving advice on when; 
and how best to nc-f it up. tvtare to find people . wlrere to find cap- 
ital. legal requirements, and mi mi. 

We cun physically help them get established in Souih Africa. And 
once cslahlishcii here, they would need banking services on ail 
/ingoing taris. ttfc am provide ihe whole gaimtl of liruneui scr- 


SpiiD: VVhai h the extent of FNB's intrmts in Africa? 


Spim: Jhi- lopiltil iintrkrt Is expressing rtnulit nu-r the gin- 
emnii-nl's ahilily In cnulrol its expenditure. VYlut is vmir 
view? 


Swuri: J ntij.’ lu Hi I»ki*I rate- .ire iliw' In 17 percvtil Hie last 


Swurt: Wc .ire ik>w the biggest bank in Bobwana uml Namihia. 
both of which iipcr.it i* ins are doing very well. 

We've jiluavs bev-n involved in traik- wiih Africa, liven in the 
itiri iLiys wc were invulved with all but four African coiinirics. 
We've hod tthire than our fair si ure ol that trade, which has been 
iiicreiLsing c.kh year. 

S'juiIi Alricj htLs joined SADC - - a move that will further raise 


ff'f First National Bank 


P.O. Box 1064 
JOHANNliSBURG 
JIJWJ 

Tcl.HHl}.17l-ftW0 
Fox. (OH I J7I-bl«taA> 


/' 




/ T. ■ > - ■ ' 



FINANCIAL TIMES WEDNESDAY NOVEMBER 16 I9W 


NEWS: INTERNATIONAL 


Africa leaders Law of the Sea promises many disputes 

• J a By Bjuce dark, grave maritime disputes reflects confusion over the dif- other’s contract 

Ml) GQll/QOP Diplomatic Correspondent involves China and Vietnam, ference between territorial Sovereignty over the Sprat- 

lf 1 1| III T locked in a war of words over waters - which may be lys - and hence control of the 

^ The United Nations oil rights in the South China extended, under the UN Law. surrounding economic zone- 

. _ Convention on the Law of the Sea. up to 12 miles - and the "eco- is crucial to each side's claim 

A I * Sea. which enters full force Both China and Vietnam nomie zone" which coastal to energy rights, and the • 

Ijk i|i»| ffl H vS ■ today, seems likely to be claim to be acting in accor- states are entitled to claim, salience of this issue is expec- 

X treated by coastal states as a dance with the Law of the Sea amounting to either 200 miles ted to grow as the UN conven- 

O A n>h source of legal and rhetor- but their interpretations of the or the hill extent of their conti- tion enters force. 


By Our Foreign Staff 

African leaders met in Zambia 
yesterday In an urgent attempt 
to keep Angola's faltering 
peace accord on track. 

The meeting of southern 
African states followed a last- 
minute postponement from 
yesterday to Sunday of tbe 
signing of the accord, painstak- 
ingly negotiated by United 
Nations mediators over 11 
months. 

The leaders, who earlier this 
year used both carrot and stick 
to reverse a coup ousting one 
of their members In Lesotho, 
were drafting a tough state- 
ment telling Angola's warring 
sides to stop the bloodletting, 
officials said. 

Mr Thabo Mbeki, South 
Africa's deputy president, has 
already warned that the lead- 
ers will take action - widely 
seen as including military 
intervention - should tbe lat- 
est Angolan peace bid crumble 
as others before it 

Although UN officials 
declined to give reasons for 
postponing the signing cere- 
mony. officials said It was 
because Angola’s Unita rebels 
bad refused to sign while the 
government intensified the 
war. 

In the past two weeks, after 
the government and Unita had 
Initialled the pact, Angolan 
army troops overran Unita's 
stronghold of Huambo in 
central Angola, throwing 
tbe peace process into 
doubt. 

The Lusaka talks are testing 
the capacity of the southern 
African states, which origi- 
nally came together to help in 
the overthow of white minority 
governments in Rhodesia and 
South Africa, to act as guaran- 
tors of a regional security pact 
based on democratic govern- 
ments. 

If such a grouping can suc- 
ceed in southern Africa, it 
could set an example of con- 
flict resolution from which 
the rest of the continent can 
learn. 


Whether manoeuvres in the 
field are designed to win 
advantages at the negotiating 
table, or the last resort of par- 
ties or individuals who fear the 
outcome of the ballot box. 
Angola Is no different from 
other African states where an 
upsurge of violence has fre- 
quently preceded peace agree- 
ments. 

This time, however, the 
MFLA government may have 
turned the tables on Mr Jonas 
Savimbi, leader of the Unita 
movement 

Since he rejected his 1992 
election defeat, be has tried to 
win an ascendancy on the bat- 
tlefield that would be reflected 
in the composition of the gov- 
ernment that would emerge 
from the Lusaka peace talks. 

The MPLA. however, seems 
to have made two critical cal- 
culations. The tost is that it 
could take Huambo. The sec- 
ond was based on an assess- 
ment of international opinion, 
in particular Washington and 
Moscow, the two key outside 
powers. 

When Mr Savimbi resorted 
to war after his election defeat 
he lost most of his friends in 
western capitals. Whether the 
MPLA has broken the spirit of 
the Lusaka talks or not, 
Unita’s cries of foul play will 
have little impact. 

No one underestimates the 
capacity of Mr Savimbi further 
to disrupt the peace process. 
Even if the signing goes ahead 
on Sunday formidable obsta- | 
cles remain - not the least of 
which is the integration of two 
rival forces into a national 
army. 

But regional and interna- 
tional developments are put- 
ting him under intense pres- 
sure. The prize is bringing 
peace to a region where the 
wars for independence began 
in the early 1960s: even the 
unpredictable Mr Savimbi, 
argue frontline officials in 
Lusaka, knows that sooner or 
later he has to settle his differ- 
ences at the conference table 
and abide by the result 


By Bruce Clark, 

Diplomatic Correspondent 

The United Nations 
Convention on tbe Law of the 
Sea. which enters full force 
today, seems likely to be 
treated by coastal states as a 
rich source of legal and rhetor- 
ical arguments to be used 
against rivals. 

This is in spite of the fact 
that the last thing the law's 
drafters wanted was to provide 
disputatious countries with 
extra torpedoes. One of the 
law’s ostensible purposes is to 
encourage compromises over 
the exploitation of maritime 
resources, even among coun- 
tries with unresolved disputes. 

Apart from a standoff in the 
Aegean - where Turkey has 
threatened war if Greece 
extends its territorial waters to 
12 miles - one of the most 


grave maritime disputes 
involves China and Vietnam, 
locked in a war of words over 
oil rights in the South China 
Sea. 

Both China and Vietnam 
claim to be acting in accor- 
dance with the Law of the Sea 
but their interpretations of the 
document are miles apart. 

Over the last month. China 
has accused Vietnam of 
infringing Its interests in inter- 
national waters by inviting US 
and European companies to 
explore for oil in the Tonkin 
Gulf. 

Vietnam has retorted that it 
is exercising its legitimate 
rights in the economic zone to 
which it is entitled by the UN 
convention, it said that under 
the terms of that treaty, there 
were no international waters 
in the Gulf. 

This dialogue of the deaf 


reflects confusion over the dif- 
ference between territorial 
waters - which may be 
extended, under the UN Law. 
up to 12 miles - and the "eco- 
nomic zone" which coastal 
states are entitled to claim, 
amounting to either 200 miles 
or the toll extent of their conti- 
nental shelf, whichever is 
larger. 

China and Vietnam are also 
arguing over resources around 
the Spratly Islands, a group of 
reefs and atolis whose other 
would-be owners are Taiwan, 
Brunei. Malaysia and the Phi- 
lippines. 

China has awarded an explo- 
ration contract to the US com- 
pany C-restone for an area 
south-west of the Spratlys. 
while Vietnam has awarded a 
consortium led by Mobil a bloc 
slightly further to the west. 
Each state has denounced the 


Import boom spurs fall 
in Japan’s trade surplus 


By William Dawkins in Tokyo 

Japan's trade surplus fell 
faster than expected for the 
third month in n row in Octo- 
ber. thanks to an import boom. 
Economists greeted this as 
fresh evidence of change in the 
country's economic structure. 

The politically contentious 
trade balance shrank by 15.2 
per cent compared with the 
same month last year to 
S9.2Sbn (£5.B5bn). That is well 
below the lowest forecast by 
Tokyo economists, and likely 
to strengthen Japan's position 
in trade talks this week with 
the US and, separately, the 
European Union. 

This brings the three-month 
moving average for the surplus 
to $8.47bn. the lowest since 
May 1992. A finance ministry 
official said the surplus was 
□ow at a turning point. 

Imports surged ahead in 
October by 24 per cent to 
S25.34bn, more than twice as 
fast as exports, up by 10.4 per 
cent to $34.62bn according to 
preliminary finance ministry 
figures. Sates of foreign goods 
in Japan have risen in dollar 


Japan 

Viable trade balance. Sbn 
14 



Jan 1994 Oct 

Soun»; Datastrejm 

terms every month this year. 

Import penetration of the 
domestic market may be grow- 
ing, said economists. The yen's 
rise against the dollar has 
made many imports cheaper in 
the Japanese currency. There 
has also been an increase in 
imports from the growing 
number of Japanese factories 
which flee high-cost Japan for 
cheaper overseas locations. 

Japan's domestic market is 
also gradually growing again 
and hence sucking in imports. 


The rise in domestic demand 
was underlined yesterday by 
separate official reports of a 0.7 
per cent rise in private sector 
machinery orders in the year 
to September and a 9.8 per cent 
rise in steel output in October, 
to reach a three-year high. 

Previous rises in imports on 
this scale, in the mid 1980s, 
have been led by European lux- 
ury goods. The latest increases 
have been more broadly based, 
geographically and by sector. 
Imports have grown across all 
nine industrial sectors mea- 
sured by the finance ministry, 
from food to machines, as well 
as from all Japan’s seven main 
trade regions. 

The surplus with the US fell 
for the first time in eight 
months, by 6.8 per cent to 
S4.79bn. helped by a 26.4 per 
cent rise in imports. October 
was the fourth consecutive 
month in which Japan’s pur- 
chases from the US grew faker 
than its sales to the US. 
Imports from the European 
Union rose even faster, by 33.6 
per cent, while the rest of Asia 
sold 21.7 per cent more to 
Japan than It did a year ago. 


Taiwan expresses regret 
over shelling of China 


By Laura Tyson in Taipei and 
Tony Walker in Beijing 

Taiwan yesterday expressed 
regret over what it described 
as the accidental shelling of 
China after a burst of Taiwan- 
ese anti-aircraft rounds landed 
on the mainland, seriously 
wounding two people. 

Beijing reacted angrily, 
describing the shelling as a 
vicious attack that "sabotaged 
the peaceful atmosphere across 
the Taiwan Strait". 

China c laim ed that 12 shells 
had landed in a suburb of Xia- 
men which Is located on tbe 
mainland coast adjacent to 
Taiwan. It expressed “grave 
concern" and demanded severe 
punishment for those responsi- 
ble. 

Taiwan's defence ministry 
said it was investigating the 
"unfortunate mistake" in 


which anti-aircraft shells used 
in a training exercise had 
failed to explode in mid-air but 
landed instead on the main- 
land. 

“We express deep regret over 
this mistaken incident which 
had no hostile intent," said a 
Taiwanese statement. 

Taiwanese officials have not 
at this stage explained how the 
shells came to be fired in the 
direction of the mainland in 
the first place. Taiwan has 
offered to pay compensation to 
the wounded. 

The errant shells were fired 
from anti-artillery batteries on 
the island of Lesser Quemoy, 
six kilometres to the east of 
Xiamen. The Island was often 
at the centre of fierce 
artillery duels In the 1950s 
between Taiwan and the main- 
land. 

Yesterday's incident will add 


to unease across the Taiwan 
Strait, but seems unlikely to 
affect a timetable for continu- 
ing talks between Taiwanese 
and mainland officials aimed 
at improving working rela- 
tions. 

Tfie next round of talks is 
due to be held in the Yangtze 
River town of Nanjing between 
November 21-23. The discus- 
sions have been dealing with 
issues such as illegal immigra- 
tion, postal and telecommuni- 
cations links and prisoner 
exchanges. 

In Taiwan, Mr William Li, 
spokesman for the Mainland 
Affair Council which formu- 
lates China policy, said he 
doubted yesterday’s shelling 
would have a serious impact 
on relations. 

“This is an isolated incident 
and it will not affect relations 
across the straits," he said. 




Filipinos picking their way along a road south of Manila 
yesterday after an earthquake bad left it deeply fissured. The 
earthquake killed at least 23 people and destroyed 200 homes, ap 


other’s contract 
Sovereignty over the Sprat- 
lys - and hence control of the 
surrounding economic zone- 
is crucial to each side's claim 
to energy rights, and the 
salience of this issue is expec- 
ted to grow as the UN conven- 
tion enters force. 

However a study by a Lon- 
don-based law firm, maintains 
that the law favours pragmatic 
joint exploitation accords, even 
among countries with unre- 
solved disputes.* 

Laying out the common- 
sense arguments for such 
accords, it notes that oil depos- 
its which straddle two states’ 
economic zones cannot be 
exploited by one without dam- 
aging the other’s interests. 
When one state drills, oil from 
the rival state's zone is liable 
to flow across the boundary 
line as a result. 

IMF set to 
assist more 
ex-Soviet 
states 

By Stave LeVine In Alma Ata 

The International Monetary 
Fund is considering support 
agreements in Uzbekistan, 
Armenia and Azerbaijan, the 
last three candidates for a 
scaled-down programme spe- 
cifically designed for eastern 
Europe and the former Soviet 
Union. 

If the three republics are 
granted Systemic Transforma- 
tion Facilities, the IMF will be 
assisting almost all the inde- 
pendent nations that emerged 
after the Soviet collapse. 

It would leave just ex-Yugo- 
slavia, Georgia, Tajikistan and 
Turkmenistan without IMF 
assistance when die STF pro- 
gramme closes to new mem- 
bers next month. 

The IMF has eased its 
requirements in this pro- 
gramme, a special case being 
made for eastern Europe and 
the former Soviet Union. In 
general, the IMF has 
responded to criticism that its 
guidelines were too tough for 
this region. 

The two Caucascos republics 
of Armenia and Azerbaijan, 
for example, have among the 
region's worst economies 
mostly because of their six- 
year undeclared war against 
one another. Uzbekistan, con- 
versely, has suffered little 
instability but has been among 
the most reluctant to adopt 
genuine economic reform. 

“These have been the lag- 
gards all along,” said a west- 
ern economist, referring to the 
last three STF candidates. 
“You don't know whether they 
are now committed to reform, 
or if they simply see the boat 
leaving and don't want to miss 
it" 

Analysts believe Armenia 
will almost certainly reach 
agreement with the IMF. 
While economists are not 
entirely satisfied with Azber- 
bajjan's performance, it would 
be politically difficult for the 
IMF to admit Armenia but not 
its enemy. 

Uzbekistan is trying to per- 
suade the IMF that it win stop 
indirect subsidies to state 
enterprises and reduce state 
control over its main industry, 
cotton. 


Saudi businessmen reach for the media stars 

Roula Khalaf tracks a crowded race for dominance of the Mideast satellite television market 


R ival Saudi Arabian 
businessmen are 
spending close to $lbn 
in a race to become the Middle 
East’s media moguls. Seduced 
by the glamour of the media 
age, and driven by an urge to 
influence the content of infor- 
mation and entertainment in 
one of the world's most conser- 
vative societies, they are 
already beaming more than 20 
satellite television channels 
across the region. 

Satellite dishes have prolifer- 
ated on rooftops In the area 
since the Gulf war with more 
than 400,000 in Saudi Arabia 

alone, in spite of a long-stand- 
ing ban on dishes. CNN and 
Star TV, among others, opened 
a window to the world for a 
population that had to contend 
for years with heavy-handed 
censorship of state-owned 
channels. Programming Is so 
poor In some places that view- 
ers look forward to the com- 
mercial breaks, and rent tapes 
of commercials from video 
shops. 

Saudi businessmen have 
rushed to capitalise on the new 
wave. They knew that the sat- 
ellite intrusion was unnerving 
conservative governments. It 
was no longer acceptable for 
the image of an embracing cou- 
ple on American shows such as 
Dallas or Dynasty, for example, 
to be frozen and substituted 
with a channel’s logo, a com- 



mon practice on some, state 
-owned television stations. 
The would-be media magnates 
reckoned they could please 
both governments and viewers 
by launching a series of agree- 
able but sanitised channels. 

Three rival Saudis have led 
the quest for the Middle East’s 
satellite viewers (there are an 
estimated lm to 2.5m dishes in 
the Middle East): Sheikh Walid 
A1 Ibrahim, a businessman 
whose sister is the wife of King 
Fahd; Sheikh Saleh Kamel the 


billionaire owner of Islamic 
banking group Dallah Al-Bar- 
aka; and Emir Khalid Ibn 
Abdallah Ibn Abdel Rahman, 
who is married to the King's 
sister, and is head of the 
Mawarid Group, one of the 
kingdom's largest conglomer- 
ates. Mr A1 Ibrahim started the 
trend in 1991 when he enlisted 
Mr Kamel’s financial support 
to launch the Middle East 
Broadcasting Centre (MBC), 
the first pan-Arab satellite 
television station, which 


quickly gathered an audience 
of 27m as some Arab countries 
picked up the MBC signal and 
rebroadcast it MBC. broadcast 
from London, is self-censored 
but its seeming independence 
from government control and 
Its news programmes’ interna- 
tional flavour - it has an office 
in Jerusalem, for instance - 
have made it popular In the 
region. 

Last year Mr Kamel sold his 
stake in MBC to launch a rival 
media company, Cairo-based 
Arabian Radio and Television 
(ART), which beams four dedi- 
cated channels of children's 
programmes, sports, movies 
and music. 

“We will do anything we can 
do to protect our Arab children 
from the coming invasion from 
western countries." Mr Saria 
A1 Khatib, a manager at ART, 
says. 

MBC is preparing to launch 
four additional channels. 
Media consultants say ART 
and MBC are spending at least 
S200m each on their projects. 

Mr Ibn Abdallah has loftier 
ambitions, a more liberal mind- 
set and a fatter wallet In May, 
his Rome-based Orbit Commu- 
nications Company is spending 
about S500m launching 16 tele- 
vision and four radio channels 
targeted at Mideast viewers. 

More Arab businessmen are 
joining the race. Mr Moham- 
mad A1 Sager, editor of A1 


Qabas. Kuwait's largest daily, 
is the biggest shareholder in a 
new company which has raised 
$50m to set up yet another pan- 
Arab channel, expected to be 
on the air next year. Various 
Arab countries, meanwhile, are 
broadcasting their state-owned 
channels via satellite. 

The Middle East market, 
however, is not big enough to 
support all the new channels. 
ART and MBC are aiming to 
attract mass audiences by 
beaming services for free until 
they get on cable systems, still 
to be set up in most of the 
region. 

Advertising revenue is still 
too low to support that many 
channels. In Saudi Arabia, the 
largest advertising market in 
the region, total advertising 
expenditure stood at S247m in 
1993 with television's share a 
mere $57m, according to the 
Dubai-based Pan-Arab 
Research Centre. 

Orbit, meanwhile, is a pay 
television service catering to a 
small group of western-minded 
and more liberal viewers. It 
has signed lavish deals with 
American networks to rebroad- 
cast news and entertainment 
programmes and commis- 
sioned the BBC to create a 
World Service Television in 
Arabic, which is already on the 
air. Orbit says it buys pro- 
grammes that would not offend 
the sensitivities of the region 


and leaves them unedited. 

Just a few mouths into 
launch, however, some Orbit 
dealers who had been selling 
decoders for $10,000 have low- 
ered their price to $6,000 - still 
a lot considering customers 
have to pay $90 to $200 a year 
in subscription fees after the 
first year. 

Meanwhile, the Saudi gov- 
ernment earlier this year said 
it would begin to enforce its 
ban on satellite dishes. 
Although few have been taken 
down as a result and a black 
market in dishes is flourishing, 
the ban has dampened hopes of 
growth. 

At the same time the govern- 
ment is investing up to $500m 
in a cable system, which is 
easier to censor. That will put 
further pressure on the market 
but may give MBC an edge 
over its rivals because the sys- 
tem will be operated by an 
MBC affiliate, also majority 
owned by Mr A1 Ibrahim. 

The system will start with 20 
channels and eventually reach 
30. Five channels are likely to 
go to MBC, and Arab govern- 
ment channels, which will 
receive priority, will take at 
least a half dozen more. And as 
the Saudi government seeks to 
make a return on its invest- 
ment in cable, it may at last 
close the doors of the most 
lucrative Mideast market to 
satellite (fishes. 



Article 83 of the UN conven- 
tion says that pending final 
agreement on zones, countries 
should “make every effort to 


enter into provisional arrange- 
ments of a practical nature* 7 . 

As an example of such. a 
deal, the study bites the 1389 
accord between Australia- and 
Indonesia over waters south of 
Timor.. - 

However, such accords -ass- 
hot a panacea. Portugal - stffl- 
seen by the UN as legal admin- 
istrator of East Timor - has 
challenged Australia’s right to 
enter the accord, before the 
International Court of Justice. 

The entry into force Of. the. 
UN Law comes a year after its 
ratification by theinihhnmn of 
60 states. Another break- 
through came this summer 
when provisions on deepsea 

mining — OUtSfde the ZOUfiS of 

any country - were amended 
so as to convince the US, tbe 
UK and Germany to sign. 

Voexrbr Oierht potmoo of Lout ttftfcr Ar- 
rant 05 HoBxxn Vfaduct Union B2tA SOT 


INTERNATIONAL NEWS DIGEST 

Growth rate at 
2.6% in S Africa 

South Africa said yesterday its gross domestic product grew 
by a worse- than -expected 2.6 per cent in the third quarter of 
the year. Folk) wing a decline in GDP of 3.6 per cent in the first 
quarter and a rise of only L6 per cent in the second quarter, 
the latest figures mean that the final growth rate for 1991 Is 
likely to be about 2 per cent, only slightly up on last year’s LI 
per cent The announcement is a blow for the government, 
which earlier In the year had been forecasting growth of 3-4 
per cent for 1994. However labour unrest and political uncer- 
tainty surrounding the country’s April elections appear to 
have dented growth in the first half of t he yea r. . 

The news, which, ramp as the administration presented the 
latest version of its centrepiece economic plan, the Recon- 
struction and Development Programme (KDP), to parliament, 
may also make it difficult for the administration to meet its 
revenue targets for the year. The White Paper on the RDP is 
predicated on a 3 per cent annual growth rate for South 
Africa. Mark Suzman, Johannesburg 

Charity quits Rwandan camps 

MMecins Sans Frontifcres, the international medical charity, 
has evacuated its staff from Rwandan refugee camps in east- 
ern Zaire where lawless Hutu militia have imposed a reign of 
terror. MSF said soldiers and militia finked to the ousted 
Rwandan government had taken control of the camps around 
Bukavu, home to some 250,000 refugees. MSF medical staff 
have witnessed the intimidation, arrest and assassination of 
refugees wishing to return to Rwanda. Charity workers who 
have tried to intervene to save lives have themselves received 
death threats. Hutu militia carry weapons inside the camps 
and are dr a ftin g young Hutu men into forced military train- 
ing. They have also taken control of the distribution of food 
aid. “The situation has deteriorated to such an extent that it 
has become ethically, impossible for MSF to continue aiding 
and abetting the perpetrators of the Rwandan genocide,” BAs 
Samantha Bolton, an BASF spokeswoman, said yesterday in 
Nairobi Leslie Crawford, Africa correspondent 

Uncertainty in Nepal election 

Nepalis voted yesterday 
to choose a new parlia- 
ment amid scattered vio- 
lence and anxieties that 
no dear majority would 
emerge to guide the new 
Himalayan democracy 
out of poverty. Despite 
the deployment of more 
than 100,000 members of 
the security forces, at 
least 13 people were 
injured in clashes 
between supporters of 
rival parties, police and 
local officials said. More 
than 1,250 election 
observers, including 130 
foreigners from 28 coun- 
tries. were posted in 205 
constituencies for the 
kingdom's second gen- 
eral election since pro-democracy protests ended an absolute 
monarchy in 1990. 

In 1991 the centrist Nepali Congress party won the country’s 
first free elections in 31 years after King Birendra was forced 
to relinquish almost all of his power. But factional infighting 
and corruption allegations plagued the ruling party, forcing 
Prime Minister GLrija Prasad Kolrala to call parliamentary 
polls 18 months ahead of schedule. A total or 12.3m people 
were eligible to vote. No idea of the outcome was expected 
bef ore Fr iday. Political observers were split over whether the 
Congress party, which held 114 of 205 seats in the outgoing 
parliament, would overcome Internal wrangling to retain a 
majority. Reuter, Kathmandu 

Nagano backs bank’s ‘lottery’ 

The growing row among Japanese banks over a plan by one of 
a lottery-finked deposit account was joined 
yesterday by one of the country's leading businessmen. Mr 
Takeshi Nagano, the president of the Japan Federation of 
Emptoyers Associations (Nikkeiren) told a news conference 
that he regarded the new account launched by the Johnan 

the rciM fry's largest credit bank, as within the 
bounds of free competition. 

Last week the bank provoked fury among its rivals by 
^ deposit amount that carries with ft 
a S 1 *® 17 m " Wch savers can win up to Y50.000 
(£320). The bank s competitors claimed this breached volnn- 
tary rules that they would not offer large cash prizes as 
incentives to depositors. But Johnan S hinkin said the real 
tha ‘ l 4 113,1 broken a closet cartel that kept 
Kafr* liberalised last month by toe 
M^stiy of Finance but since then there has been little 
difference between rates offered by the country’s banks. The 
other banks put their objections to the 2t?y1£on 

"It mav £ i ? qu, £ y to rev 11 ™ the bank’s actions, 

it ^^a I “ atter i for J :he Finance Ministry but I think 

the framework of liberty for the management of 
financial institutions, Mr Nagano said. Gerard Baker, Tokyo ' 

Australian budget deficit down 

Mr Ralph Willis the Australian treasurer, said yesterday that 
government s budget deficit for the 199^S3y5£ 
could turn out to be lower than the Aill/Tbn 7?fSf 
castHe also said Australia’s 

mm 

large wage claims recently. Nikki Tcdtsydn^ ^ * “* 


fed * 


l 


Republic 






financial times Wednesday November 16 1994 


7 


- HEWS; THE AMERICAS 

Fed sees growth flying too fast for comfort 

George Graham on why interest rates have risen by % of a percentage point 


I f the Federal Reserve's policy-set 

h?l ?r n , Market6 Co smitUn 
whJtu la st-minute doubt 

f the f US economy was rralli 

dars^?Jti^n fast for Comfort - JWtw 
oay s statistics on retail sales am 

ffidustnai production will have helper 

to remove them, prompting its deci 

raise shortWSS rote 

age ^^ er ' than ' expected % percent 
Retail saies jumped by l.l per cem 

thp C SS bef j* 7 5 V* r cent ovei 
year ; led b >' sensitive 
“^ ier ^terest rates such as care 

nS ff Y*! buildi ng materials 
industrial production rose 0.7 per cem 
to stand 6.7 per cent higher than « 
year ago. Manufacturing product ior 
rose 0.9 per cent in October and 7t 
per cent over the last year 


The economy is 
humming along at 
near full capacity 

These latest statistics provide fur- 
ther evidence that even though the 
US economy is now in its third year of 
recovery from recession, it is still 
barely slowing from a pace that, for a 
fully industrialised country, can be 
counted as torrid. If the 6.3 per cent 
annualised rate of gross domestic 
product growth recorded in the fourth 
quarter of 1993 was a freak on the 
high side, the 3.3 per cent rate of the 
first quarter of this' year was abnor- 
mally low. partly because of the Calif- 
ornia earthquake. 

Growth at a 4.1 per cent rate in the 
second quarter and at 3.4 per cent in 
the third quarter - and accelerating 
again in the fourth quarter, according 
to many Wall Street economists - 
remains much faster than the roughly 



Cfvfllan employment (mfflon) 
125 



8 * - 



1989 90 91 92 93 94 

Source: Oatastreom 


2.5 per cent pace the Fed would be 
comfortable with as sustainable with- 
out giving way to a surge in inflation. 
Although there have been some 
recent signs of slowdown, by most 
measures the economy is humming 
along at very close to full capacity. 

The number of payroll jobs has 
risen by 2.6m in the firet 10 months of 
this year, bringing unemployment 
down to 5.8 per cent last month, lower 
than the point at which most econo- 
mists estimate that labour shortages 
start to make themselves felt in the 


shape of higher wage demands. 

Job creation has been even stronger 
than measured by the Labor Depart- 
ment's statistics. A statistical adjust- 
ment added another 760.000 new jobs 
to the figures for last March. 

Interpretation of the unemployment 
statistics is rendered more hazardous 
because of a radical change intro- 
duced earlier this year in the way the 
data is collected. Nevertheless, anec- 
dotal sig ns of labour market pressures 
are showing up - sharp rises in the 
wages paid to skilled construction 


workers in some markets. 
Tor example - even though aggregate 
numbers show wage inflation still to 
be well under control. 

Yesterday's industrial production 
data, too, showed tightness in the 
manufacturing industry. The overall 
industrial capacity utilisation rate of 
84.9 per cent in October is the highest 
recorded since the Fed revised its sta- 
tistical series in 1982. topping the rate 
of 84,8 per cent recorded at the very 
peak of the last business cycle. A util- 
isation rate of 84.6 per cent Tor manu- 
facturing industry is only just below 
the last cyclical peak of 85.1 per cent 

These statistics are problematic, for 
it is uncertain how much capacity has 
expanded as a result of the heavy 
corporate investment or the last two 
years. Yet here, too. signs of capacity 
constraints are showing up. Purchas- 
ing managers report longer delivery 
times from suppliers, and manufac- 
turers are increasingly turning over- 
seas for supplies, especially for steeL 

Indeed, the US trade deficit - Sep- 
tember's figure is to be announced on 
Friday and is expected to be unrepen- 
tan tly large - can be read on one 
level as confirmation that US demand 
is growing faster than the domestic 
economy can supply. With the world's 
other major economies p ulling out of 
their own recessions, their eagerness 
to export may diminish, and with it 
the brake they put on US manufactur- 
ers' ability to raise prices. 

If these indicators all point to infla- 
tionary pressures, the one place 
where inflation is scarcely showing 
its face is in the price indices. The 
consumer price index remains reso- 
lutely well-behaved: today’s 
announcement of the October index is 
expected by Wall Street economists to 
show an increase of around 02 per 
cent from September, which would 
lower the year on year rate to around 
2£ per cent. Warning lights can be 


found in segments of the producer 
price data - prices of core intermedi- 
ate goods, excluding food and energy, 
rose by 0.7 per cent last month, 
though still only by 3.0 per cent year 
on year - but tbe overall index 
remains resolutely well behaved. 

But the Fed wants - and the finan- 
cial markets want the Fed to want - 
to control inflation before it shows its 
face, to avoid either having to raise 
interest rates sharply at the risk of 
provoking a recession, or losing the 
gains made in ten years of wringing 
inflation out of the economy. Tbe dif- 
ficult judgment is whether the Fed's 
five interest rate increases between 
February and August, together with 
yesterday’s increase, have tightened 
monetary policy enough to chill the 
economy next year. 


Largest adjustment 
in interest rates 
since 1980 


The response to the Fed’s actions 
comes with "long and variable lags," 
as economists like to put it In the 
housing sector, for example, tbe 
immediate response to higher interest 
rates may be a rush of buyers, anx- 
ious not to miss the boat before rates 
move higher yet And Fed governors 
have been scolding banks for taking 
some of the sting out of their efforts 
to raise interest rates by relaxing 
their own credit terms. They must 
now hope their decision to raise inter- 
est rates by V, of a point - the largest 
adjustment the Fed has made in inter- 
est rates since 1980. which banks 
charge each other on overnight bal- 
ances held at the Fed - will not jam 
the brakes on the economy so hard 
that it plunges into recession. 


Unions and 
farmers in 
rate protest 


By Nancy Dunne 
in Washington 

Trade unionists, fanners and 
consumer groups yesterday 
protested qver rising interest 
rates in a rally at the steps of 
the Federal Reserve building In 
Washington. 

A rate rise for the sixth time 
this year to counter the threat 
of inflation would “clobber job 
prospects, squeeze wages, and 
raise mortgages and other loan 
payments for millions of 
Americans," according' to a 
rally leaflet 

Popular concern about rising 
interest rates is shared by 
some business groups and 
economists. They believe the 
Fed and the bond market have 
grown “paranoid" over infla- 
tion and have failed to take 
account of the the competitive 
conditions in the global econ- 
omy which curb inflation. 

At a briefing last week spon- 
sored by two Washington 
t hink -t anks - the Economic 
Strategy Institute and the Eco- 
nomic Policy Institute - a 
panel of economists and busi- 
nessmen attacked what has 
been the fastest tightening of 
interest rates since the second 
world war. 

Mr Jerry Jasinowski. presi- 
dent of the National Associa- 
tion of Manufacturers, said a 
majority of chief executive offi- 
cers in NAM opposed further 
interest rate rises. 

“There is no evidence the US 


economy is about to overheat, 
and any further rise in interest 
rates will simply stifle a 
steadily growing economy." 
said Mr Jasinowski. 

The US can now produce 
more with less inflation, he 
said. “While productivity 
growth was highest in the 
manufacturing sector from 
1983 to 1993, price increases in 
manufacturing were the low- 
est." 

Mr James Medoff. a Harvard 
economics professor, said busi- 
nesses. already burdened by 
high levels of corporate debt, 
have been forced to cut 
employment and make use of 
temporary workers and over- 
time. “Large wage increases 
are a last resort by firms seek- 
ing additional labour." 

The Fed's concern about 
inflation may have inflamed 
the fears of foreign investors 
and currency traders, causing 
them to sell dollars, increasing 
the possibility of inflation, said 
Mr Medoff. “The difficulties for 
the dollar began just when the 
interest rate increase began, 
and the sequence of events in 
the markets in February sug- 
gests that the Fed's action was 
the cause of the dollar's 
decline rather than a response 
to the dollar's decline. " he said. 
Mr Preston Martin, former Fed 
vice chairman, warned that 
continued rises next year “por- 
tends too great a recession 
risk” 


Republicans threaten to strip DC of voting 


US arms sales move 


By Jurek Martin in Washington 

The new Republican leadership 
in Congress is threatening to 
take away the limited voting 
rights in the House of Repre- 
sentatives enjoyed by the Dis- 
trict of Columbia and to down- 
grade the status of the 
congressional committee 
responsible for the nation’s 
capital. 

Mrs Eleanor Holmes Norton. 


the DC delegate, emerged hum 
a meeting with Mr Newt Ging- 
rich, certain to be the next 
Speaker of the House, promis- 
ing to fight his proposals. 

But tbe return of Mr Marion 
Barry as Washington's mayor 
after -a four-year hiatus com- 
bined with Republican control 
of the legislature threatens the 
city, already in a deep budget- 
ary crisis, with the probability 
of an extremely unsympathetic 


reception on Capitol HilL 

Under current procedure Mrs 
Norton, first elected in 1990. 
may serve on House commit- 
tees, address the floor or the 
chamber and vote when the 
House sits as “a committee of 
the whole". But her votes on 
actual legislation are not 
recorded. The nation's capital 
has no representation in the 
Senate. 

Mr Gingrich reportedly told 


her that he intended to take 
away the limited voting privi- 
lege and deprive her of the 
right to speak when the House 
considered the District's 
affairs. 

Mrs Norton received some 
support for her stand yester- 
day from Congresswoman Con- 
nie Morelia, the moderate 
Republican representing the 
wealthy Maryland suburb 
immediately north of the city. 


She agreed that it would be 
unfair to reduce the District, 
whose citizens pay federal 
income taxes, to the status of 
the four offshore protectorates 
- Puerto Rico. Guam, the 
American Virgin Islands and 
American Samoa - which, 
although exempt from federal 
income taxes, were granted 
more limi ted representation by 
the Democratic majority last 
January. 


rights 

Mr Gingrich also plans to 
replace the fully fledged House 
District Committee, recently 
under the chairmanship of 
Congressman Julian Dixon, the 
black Democrat from Calif- 
ornia, with an unspecified sub- 
committee of presumably less 
authority. The message to the 
District is that it will have to 
put its own finances in order 
without help or even much of a 
hearing from Congress. 


The Clinton administration is 
considering a new policy which 
could ease restrictions on US 
foreign arms sales by taking 
into account tbe financial 
health of the nation's defence 
industry, defence officials said 
yesterday. Reuter reports from 
Washington. Such a step could 
be a boon to the struggling US 
arms industry, hit hard by Pen- 
tagon budget cuts and falling 
overseas military sales. 

The defence officials, who 


asked not to be identified, said 
President Bill Clinton had not 
given final approval to the 
plan, and they stressed that US 
national security interests 
would remain as the chief fac- 
tor in deciding whether to sell 
arms to other countries. 

The Los Angeles Times 
reported yesterday that the US 
defence industry had won a big 
victory and that the adminis- 
tration was preparing to adopt 
the new policy. 



The dayk dealing had been 
even more successful than I'd 
hoped. But now I was 
feeling as limp as my suit, and the 
decision whether to dive 
into the bar or the shower first 
was going to be a tough one. 
"Thke me to the Hilton* 

A few phone calls and faxes, and 
I’d be able to relax. 

Tonight, it would be dinner for two, 
with a bottle of something 
suitably extravagant from the Hifton’s 
impressive cellar 
Soon, together with my suit, I’d be 
restored to my former sell 



HILTON 

Where you can be 
your iS^again. 



HILTON 


INTERNATIONAL OPERATES OVER 160 HOTELS AROUND THE WORLD I'OH RESERVATIONS CONTACT YOUR TRAVEL AGENT. ANY HILTON HOTEL OR HILTON RESERVATIONS WORLDWIDE. 













FINANCIAL TIMES WEDNESDAY NOVEMBER 1<$ 1994 


NEWS: UK 


Rebel Tory MPs seize on EU fraud report 


By Kevin Brown, 

Political Correspondent 

A European Union report exposing 
massive waste and fraud in the EU 
will prompt a substantial Conserva- 
tive revolt against legislation increas- 
ing Britain’s contributions to the 
Union, leading Tory Eurosceptics 
claimed yesterday. 

Ministers sought to play down the 
report, by the Union’s Court of Audi- 
tors, which said it was impossible to 
estimate how much money went 
astray from the Ecu64.2bn (£50.52bn) 


of EU hinds paid out in 1993. 

Mr Douglas Hurd, UK foreign secre- 
tary. praised the court for exposing 
the fraud. "It is much better that it 
should be revealed than that it should 
lie hidden," he told BBC radio. 

But Mr Bill Cash, a leading Euros- 
Coptic backbencher, said the report 
raised "a very important question as 
to the extent to which the British 
taxpayer should continue to pour 
money into this bottomless, fraudu- 
lent pit" 

Right-wingers dismissed cabinet 
attempts to shore up support for the 


contributions bill, which will increase 
the UK's net payment to the EU by 
£75m next year, and about £250m a 
year by the end of the decade. 

They also claimed that only a major 
surprise in the legislative package to 
be' unveiled In today’s Queen's Speech 
could save the government from a 
severe mauling when the bill is tabled 
later this year. 

Most MPs expect a dull package of 
legislation featuring a dozen or so 
bills, with one or two surprises to 
compensate for the cabinet’s decision 
to drop Post Office privatisation in 


the face of backbench opposition. 

Right-wingers are threatening a 
repeat of the damaging backbench 
campaign waged against a bill imple- 
menting the Maastricht treaty after 
the 1992 general election, which ended 
only when the government called a 
vote of confidence. 

Ministers are resigned to a battle 
with the Eurosceptics, but plan to 
limit the opportunities for parliamen- 
tary manoeuvreing by ensuring that 
the bill is sufficiently tightly drafted 
to bead off backbench amendments. 

Labour and the Liberal Democrats 


will try to embarrass the government 
by calling for amendments to the 
Common Agricultural policy, but will 
not seek to defeat the thrust erf the 
bill, which both parties support 
Right-wingers said the timing of the 
EU report might help to stiffen sup- 
port for a backbench challenge to Mr 
John Major's leadership of the Tory 
party, which has to be mounted 
within the next two weeks or delayed 
until next winter. Rebels claimed crit- 
icism of the prime minister's leader- 
ship was spreading from the right to 
the centre of the parliamentary party. 


Bank courts smaller firms 


By John Gapper, 

Banking Editor 

Growing competition among 
UK banks to lend to medium- 
sized companies was indicated 
yesterday when Yorkshire 
Bank, a subsidiary of National 
Australia Bank, unveiled plans 
to increase its share of the 
market 

Yorkshire Bank offered a l 
per cent interest-rate reduction 
for a year on new capital 
investment loans of up to £2m. 
It also offered to remove 
arrangement fees for compa- 
nies transferring loans of up to 
£10m from other banks. 

Mr Tom Gallagher, the 
bank's chief executive, warned 
that loan covenants - the 


financial terms which borrow- 
ers must meet if loans are not 
to be withdrawn - were being 
loosened by large banks 
because of growing competi- 
tion to lend. 

He said: “I see signs in this 
market that some banks are 
prepared to lower their lending 
standards. I cannot believe it 
What on earth have they 
learned?" Many banks suffered 
losses following unwise lend- 
ing in the late 1980s. 

Although margins on syndi- 
cated loans to the biggest com- 
panies have narrowed sharply 
in the past year, Yorkshire 
Bank's move is one of the first 
indications that competition is 
spreading to the mid-sized cor- 
porate sector. 


Mr Gallagher said that the 
hank , which has £4bn In assets 
and 130,000 business custom- 
ers. had no target for lending 
but wanted to add to market 
share. 

He said the bank was "send- 
ing a signal" that it would be 
competing more strongly for 
medium-sized companies' busi- 
ness. He added: “We are very 
determined to gradually extend 
our footprint" 

The move to cut lending 
rates under a “business invest- 
ment loan" package, which is 
available until March 31, was 
welcomed by Mr Stan Men- 
dharn, founder of the Forum of 
Private Business, who said it 
was a small move towards 
reducing costs. 


UK directors pay ‘higher’ 


By Richard Donldn 

Main board directors of UK 
listed companies receive bigger 
pay rises than their counter- 
parts in foreign-owned compa- 
nies in Britain, a survey out 
today shows. 

Half received basic salary 
increases of 7.4 per cent or 
more, compared with rises of 
5.2 per cent for directors of for- 
eign-owned firms, including 
Mobil Oil of the US and Japa- 
nese-owned Toyota. 

The survey by Hay Manage- 
ment Consultants analysed 
more than i 1.000 senior manag- 
ers and directors in 476 organi- 
sations in the 12 months to 
July. 

Inflation is currently at 22. 


per cent while average earn- 
ings are edging towards 3.75 
per cent. 

The mid-level cash increase 
- including bonus - For UK 
board directors was 11.2 per 
cent. Mr Richard Bednarek, 
Hay’s director of executive 
remuneration, said while the 
figure seemed high, earnings 
per share had risen 20 per cent. 

“The higher bonus earnings 
this year are indicative of the 
strength of the recovery in the 
UK and are not unexpected at 
this stage of the economic 
cycle." he said. 

The highest paid sectors 
were insurance 1 16 per cent 
above average); oil ( 13 per cent 
above); and retail (14 per cent 
above). The lowest paid was 


engineering, paying an average 
of 10 per cent below the total 
average. 

Of the 227 non-executive 
directors surveyed, most were 
paid between £15,000 and 
£25.000 for an average of 17 
days’ work per year. The mid- 
level of pay for non-executive 
chairmen was £68,000 for an 
average of 70 days a year. 

This is the latest in a series 
of pay surveys which have put 
directors’ rises well ahead of 
inflation. According to Day 
Associates. City managerial 
salaries have risen on average 
by even greater amounts. 
Including bonus, it said, mana- 
gerial pay in City institutions 
went up by 15.2 per cent in the 
year to August. 







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UK NEWS DIGEST 

Top aides go 
in shake-up 
Major’s team 

Mr John Major extended the diakwip ofhfa Jnner^de <rf 
advisers yesterday by announcing (hat two of the most promi- 
nent backroom politicians in Downing Street would be 

replaced. . . . " 

In a further restructuring of the team which will master- 
mind the Conservative party's campaign at the nett cfecffaii 
the p rimp minister’s office announced that Mrs Sarah Hogg 
would he standing down, as head of the No. 10 Policy Unit. 

Mrs Hogg, one of the prime minister’s closest aides, has h ad 
the post for four years. But she has recently been strongly 
criticised by Tory MPS Cor some of the policy failures that 
have beset the prime minister. „ • - 

It was confirmed that Mr Jo n a tha n HID would be 
leaving his job as political secretary to the prime minister. He 
win be replaced by Mr Howell James, a Conner director of 
corporate affairs at the BBC and one-time adviser to Lord 
Young, the former trade secretary. 

A Downing Street spokesman emphasised that Mrs H ogg, 
who was in charge of the prime minister's political strategy , 
was leaving at her own request and had told Mr Major, of her 
wishes last s umme r. 

The advisers' departure further indicates Mr Major's deter- 
mination. to make a sweep of the top jobs in his kitchen 
cabinet with little more than two years until the next election. 

Hualon accused over 
stance on competition 

The Hualon Corporation of Taiwan has been accused of plan- 
ning to go back on its pledge not to compete directly with 
European producers at its projected Belfast textiles plant. 

The British Apparel and Textile Confederation is appealing 
to the European Court against the European Commission's 
approval of £6Im in government aid for the £I57m project 
Mr James McAdam, confederation chair man, told its annual 
convention that remarks by the company “have strengthened 
the grounds of our appeaT. 

He said the commission's decision to approve toe aid "was 
based almost entirely on assurances, given by Northern 
Ireland’s Industrial Development Board, that production from 
the plant would be high-volume goods of low added value to 
compete with low cost imports". 

But he said the company had “stated that the opposite is the 
case and that the output of the plant will be high added-value 
products competing directly with existing European produc- 
tion. This is in conflict with what the government has con- 
tended”. The confederation says the project makes poor use of 
taxpayers’ money, and claims there is 20 per cent overcapacity 
in the European Union. 

Calf exporters’ court move 

Ex po rte rs of veal calves yesterday won permission to bring an 
early High Court challenge against a ban an using Coventry 
airport to fly livestock to the Continent. 

Phoenix Aviation and C C Freight, a consortium of farmers 
and cattle dealers, claimed they w ere given permission to use 

the airport thte month. 

But the' Labour-led city council, which owns the airport and 
has come under pressure from animal rights activists, said no 
decision had been taken and it was entitled to suspend flights 
meanwhile. 

Sir Christopher Prout QC, appearing for Pho enix and CC 
Freight at the High Court, emphasised the desperate need of 
farmers to be allowed to export livestock or face the loss of 
long-established Continental markets. 

He told Mr Justice Tucker toe trade had been hit by the 
refusal of ferries to ship live animate. Only two airports, one of 
them Coventry, were currently available. 

Sir Christopher asked for leave to seek judicial review on 
the grounds that the council had acted unlawfully and unrea- 
sonably in suspending fli ghts. 

Manchester passenger record 

Manchester Airport yesterday reported record passenger fig- 
ures of 1.4m for October - 8 per cent up on October last year 
and more than the airport's annual total 30 years ago. 

The continuing growth brought the airport's moving annual 
total of passengers carried to 14.72m, 12 per cent ahead of the 
same point in 1993. The airport expects to reach 15m passen- 
gers this year. 

The increases came in spite of the withdrawal of British 
Airways’ Los Angeles service, Canadian Airlines' flights to 
Toronto and South African Airways’ Johannesburg service, 
and the suspension until spring or American Airlines' New 
York service. 

However, Aer Lingus has started a New York service from 
Manchester, Uzbekistan Airways now has a route to Tashkent 
and France’s Regional has started a service to mhp The 
airport offers 175 destinations, flown by 95 airlines. 

Frequencies were increased on services between Manchester 
and Rome, Brussels. Amsterdam and Glasgow, while Lauda 
Air will double its Vienna return ni ghty to two a day from 
next March. 


Housing group 
to raise funds 
from US marke 


By Richard Lapper 

A UK housing association has 
broken new ground by borrow- 
ing long-term funds in the US 
capital markets. 

Sanctuary Housing Associa- 
tion, the fifth-biggest in the 
country, has raised $75m 
(£47.3m) by placing bonds pri- 
vately with a group of four US 
insurance companies and pen- 
sion funds. The deal, the first 
overseas borrowing by a hous- 
ing association, was organised 
by Hambros, the merchant 
bank. 

Mr David Bennett, managW 
director of Hertford-based 
Sanctuary, said: “We are 
delighted to bring this major 
new funding option forward to 
the US housing sector” Sanc- 
tuary owns more than 19,000 
houses and flats. 

Housing associations, which 
provide low-cost rented accom- 
modation or home-ownership 
have grown significantly since 
the mid-1970s and now control 
about 4 per cent or the UK’s 
housing stock. 

The government reduced 
support in 1988 - grants now 
account for only 50 per cent of 
annual capital funding - and 
associations have been active 
borrowers in UK markets 


Funding has sometimes beer 
both expensive and difficult in 
the UK, prompting associations 
to look elsewhere. 

Mr David Ehowlton, director 
of finance at Sanctuary, said: 
“A number of associations 
have been waiting for some- 
body to dip their toe in the 
water. This opens up the mar- 
ket for other associations.” 

Mr Charles Arbuttmot of 
Ham bros said the funds, repay- 
able over 17 years, were 
obtained at a cost of 120 basis 
points - a basis point is one 
hundredth of a percentage 
point - over the equivalent US 
trea sury bond rate. 

Mr Arbuthnot said the pro- 
reals were swapped into ster- 
ling, with the overall cost 
secured at a “competitive 
rate". Exact terms were not 
disclosed. 

The funds, in common with 
other loans, wtU be repaid from 
Sanctuary's rental Income of 
about £30m a year. 

The Housing Corporation, 
which funds and monitors the 
work of housing associations, 
said-' “There has been nothing 
like this in the housing associ- 
ation sector before, ft is inno- 
vative and unique.” 

More UK News, Page 13 






FINANCIAL TIMES WEDNESDAY NOVEMBER 16 1994 


* 



Astronomical cost 
has kept the future of 
personal communications 

up in the air. 












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Today’s market clamors for truly portable, global personal commu- consistent communicap^to.s^s<^^gg^p^^^^^W^^ 
nications. But the astronomical costs of building, launching, operating do s 6 at a price that compar^^ivprab^;|^^ela^a®r^g^^g 
and maintaining such a system - costs that will ultimately come out of Odyssey's overall life cycle cost will be st^^nti^J0wer wwgfc 
the consumer's pocket - have remained dauntingly high. Until today, any low-earth orbit (LEO) voice communication 
Because today we launch the Odyssey™ system. In a world in which Simple?; technology and faster start-up - are 
most people lack access to even basic telephone service, this satellite- Odyssey system into service within five years- SujPpOf ■ 
based mobile communication system will provide convenient, effective, imal user cost will attract subscribers worldwide. * 

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*.**% - ■.-y * " — - 


AUGMENTING EXISTING NETWORKS TO 
TAKE YOU BEYOND 

Odyssey will be made available through your cellular carrier. In areas 
served by cellular and public switched telephone networks, Odyssey will 
augment service, providing connections through existing systems, 
regardless of regional or carrier compatibility. Where terrestrial service 
is absent - or interrupted - your handset will link you directly to an 
Odyssey satellite. The switch in mode will be transparent, providing you 
with seamless, high-quality communications. 


A JOINT VENTURE OF TRW AND TELEGLOBE 

TRW Inc. is a global leader in advanced, electronics and space systems. For more 
than time decades , the company has stood at the forefront of space communications, 
enjoying a worldwide reputation built on innovation , reliability and technical 
excellence. The company has built and launched more than 185 satellites , many of 
which are in use today. 

Teleglobe Inc., through its subsidiaries, is one of North America's foremost inter- 
continental telecommunications carriers and operates a vast, gbbal digital network. 
Respected for its entrepreneurship and ingenuity. Teleglobe is a quickly emerging 
leader in the global mobile arena. 

Together, TRW and Teleglobe create the dmnngforce behind Odyssey. 



IS^O sateHites are more refiabte r .feaaer tojlauwsK • 
and need fewer ground stationswith less complic^d 
software than do LEO systems. It addsf-up to rfeptd " _ : - *'.» 
system start-up and the lowest overall' operating ;■/ 
and end-user costs. rM 


Even in remote comers of the world, Odyssey 
will recognize your handset and connect it 
directly with a satellite. Hand-held portability 
and cellular-style pricing will make it a practical, 
realistic solution for personal communications. 

THE OPTIMUM ORBIT FOR MINIMUM 
SUBSCRIBER COST 

Odyssey consists of a constellation of 12 satellites that will operate at 
medium-earth orbit (MEO) for simultaneous multi-regional service to 
users around the world. The system will provide flexible dual-satellite 
coverage and double the service capacity to major markets. 

The advantages of a MEO system are manifold. Sound quality and 
continuity of service are greatly improved. Start-up, operating and life 
cycle costs are dramatically lower than those of other satellite-based 
communication systems. And the investment required on the part of the 
end-user, both in equipment and service, is minimal. 






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At MEO altitude, the voice delay and 
echo of geostationary fGEO] satellite 
systems are not apparent. MKTs higher 
line-obsight elevation angles minimize 
the shadowing effect of tall buildings 
and other obstacles that interrupts LEO 
and cellular systems. 


*A RMrabamn ot Selected Mobile SeceAm Co mm u nfcao ona Systems: BSpaa. 
Gtodatetar. krSirn and Odyssey;* 1S3J. The Mure Cor p oration 

1 TRW and Odyssey are tredanerka of TRW he. Telegtabe he.. fcensed user. 










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MEO: THE COST-EFFECTIVE, HIGH-PERFORMANCE ORBIT 


Directed antenna coverage concentrates 
service on land masses worldwide. Dual-satellite 
coverage provides even greater assurance 
of reliable communications. 


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CHARACTERISTICS | 

LEO 


GEO 

Space Segment Cost 

Highest 


Medium 

Satellite Lifetime. Years 

3-7 

''t 'Si 

10-15 

Terrestrial Gateway Cost 

Highest 

,.n ~ j 

Lowest 

" Handheld 

Yes 


No 

Local Time Delay 

Imperceptible 


Poor 

Elevabon Angles 

Poor 

■'•'i.'i Sea." ” , vj'v .'i 

Good 

Operations 

Complex 

- /■. '• 

Simplest 

Call Handover 

Frequent 


None 

Building Penetration 

Limited 

• -Umtedt” ./ 

None 

Phased Start-up 

No 


Yes 

Development Time 

Long 

. short* •.'? 

Long 

Deployment Time 

Long 

• • MediuM 

Short 

Technology Risk 

High 

Low. V';" • •. ■ /]’ 

Medium 


r 


THE BEST VALUE FOR THE USER 


Essentially a palm- 
sized earth station, 
the Odyssey handset 
will operate in both 
satellite and cellular 
modes. Its open 
specifications will be 
available to multiple 
manufacturers. 


DIRECTED COVERAGE FOR MAXIMUM EFFICIENCY 

An important characteristic of the Odyssey system is its use of directed 
coverage to serve the Earth’s land masses and keep users “in sight” If 
you’ve ever had a cellular call interrupted at a crucial moment, you can 
appreciate the value.of such a feature. Directed coverage will also give 
Odyssey the unique ability to focus service where there is the greatest 
demand, making far more efficient use of system capacity, a fact that 
translates into lower cost to the user. 


Market demand for personal communications is growing furiously, 
outstripping all predictions and fueling many telecommunication con- 
cepts. But Odyssey is not a concept. It is a planned system, scheduled 
to enter global service in 1999, before any other. 

Basic system design for Odyssey is complete and licensing authority 
is expected in early 1995. Moreover, unlike other MEO systems, 
Odyssey will use frequencies already allocated for this type of service 
and components derived from proven TRW technology. 

The initial start-up costs for the Odyssey system will be 60 percent 
lower than those for the two other major systems included in a recent 
study.* And Odyssey’s constellation price will be fixed. Estimating over 
a 10 -year period, replacement satellites for the other systems evaluated 
will give Odyssey an even more dramatic cost advantage. Just as impor- 
tantly, subscriber projections indicate that Odyssey will offer the best 
value for the end-user. 

Today, TRW and Teleglobe forge a new alliance to launch Odyssey. 
For more information, please contact: 

North America & South America 

(New York) Tel: 212 903 4267 
Europe (London) Tel.: 081 247 0123 
Asia (Hong Kong) Tel.: 852 845 1008 


ODYSSEY 


the adventure is just beginning 









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financial times 


WHONF-SDAY NOVEMBER. 16 1994 


13 


NEWS: UK 


Radioactive waste disposal laboratory recommended 


By Clive Cookson 
Science Editor 

bodl U h* by Britain,s senior scientific 

a ™ 

Biuuml - should te buu/S sSum 

KKSlble to establish whether the Sel- 
Wield area of Cumbria “northere 

“ suitabl ? for the deep dis- 
of radioactive wastes. 

The Royal Society report on the 


activities of UK Nirex, the nuclear 
industry's waste disposal company, 
was published yesterday. 

“The Society retains an open mind 
on whether Sellafield can meet the 
safety criteria for a UK deep reposi- 
tory,” the report, which was commis- 
sioned by Nirex, concluded. 

If the site does turn out to be suit- 
able, the Royal Society said, the 
nuclear industry should consider 
depositing its most radioactive “high 


level waste” there, as well as the low 
and intermediate level wastes Nirex 
is currently considering. 

Nirex itself moved quickly yester- 
day to distance itself from that pro- 
posal. aware that it could inflame 
public opposition to the project. 
“Nirex has no remit for high level 
waste and the repository is not being 
designed to accept it," the company 
said. “High level waste needs 50 
years to cool before disposal.” 


Tunnelling a way to solving 
one of the world’s hot issues 


The £120m rock laboratory would 
help to establish whether the area's 
geology - particularly the flow of 
water underground - was suitable 
for keeping radioactive materials iso- 
lated from the environment for tens 
of thousands of years. 

Sir Alan Muir Wood, the consult- 
ing engineer who chaired the Royal 
Society study group, conceded that 
Nirex appeared to have chosen Sella- 
field for political reasons, because it 


was already a nuclear site. “It is 
unlikely that Sellafield would have 
been first choice on geological fea- 
tures alone,” he said. “But it does 
not have to be the best possible site 
so long as it passes certain tests." 

The report recommends that the 
repository should be built in two 
stages. The first would be for 
short-lived wastes whose radioactiv- 
ity would die away within a few 
hundred years. 


The second stage would be an 
extension Into deeper geological 
strata - below 1.000 metres - where 
there is less risk of radioactivity 
reaching the surface. Long-lived 
wastes would be stored there. 

The environmental groups, Green- 
peace and Friends of the Earth, both 
said that the Royal Society’s recom- 
mendations on the rock laboratory 
and high level wastes could not be 
justified by the scientific evidence. 


Underground storage: radioactive waste plans 


E xcavating a tunnel is 
risky enough at the best 
of times - as engineers 
involved in the collapse under 
Heathrow airport will attest - 
but to construct caverns under 
Cumbria to store some of the 
world’s most deadly materials 
represents a huge engineering 
task. 

The problem of how to keep 
secure long-lived radioactive 
waste from nuclear power sta- 
tions is taxing the construction 
ingenuity of many nations. 
Political skills may also be 
required to persuade communi- 
ties to accept the development 
of deep underground struc- 
tures which will need to 
remain safe for hundreds of 
thousands of years. 

In the UK the task falls to 
Nirex, which is jointly owned 
by British Nuclear Fuels, 
Nuclear Electric, the UK 
Atomic Energy Authority and 
Scottish Nuclear. The com- 
pany, in which the government 
holds a golden share, has spent 
£50rh on investigating 500 pos- 
sible sites for a repository in 
the UK. 

The choice has been nar- 
rowed down to 2 sq km of land 
beneath Longlands Farm, 


Andrew Taylor on problems to 
be faced in the construction of 
a waste disposal research facility 


beside the Sellafield nuclear 
reprocessing works in Cum- 
bria, which produces about 60 
per cent of the country's inter- 
mediate-level waste. 

An alternative site was 
shortlisted, close to Dounreay 
nuclear power stations in 
Caithness, but was rejected 
because of cost and the poten- 
tial risk of transporting waste 
over long distances to such a 
remote site. 

A final decision on whether 
to go ahead at Sellafield will 
depend on the outcome of some 
of the most intensive and 
costly geological and engineer- 
ing studies conducted in this 
country. 

By tiie time construction Is 
due to start in 2005. Nirex 
expects to have spent close to 
£lbn and 18 years just on 
design and planning. A public 
inquiry still has to be held into 
the project expected to cost 
£2bn in total. 

A further £100m has been 
spent on preliminary investiga- 


tions. This has included dril- 
ling 20 bore holes up to 2km 
deep. 

Scientists have also been 
investigating the gravitational 
fields of various rock outcrops 
and conducting comprehensive 
seismic and aero-magnetic 
tests to help determine likely 
ground and water movements 
during and after excavation. 

Engineers will have to take 
into account the possible 
effects of global warming as 
well as predictions that an Ice 
Age could return to Cumbria 
during the next 10,000 years. 

Their next step will be to 
build a £l20m underground 
laboratory to determine more 
precisely how rocks, laid down 
470m years ago, may respond 
to large-scale excavation. Some 
1,200 metres of tunnels are due 
to be dug 700 metres below the 
surface to create the test facil- 
ity. 

A planning application to 
build the “rock characterisa- 
tion facility” was submitted to 


Cumbria County Council this 
year. Engineers may have to 
freeze surface sandstones to 
prevent water entering access 
shafts during construction, 
said Nirex. 

The test facility - and ulti- 
mately the repository itself - 
will be built in dense volcanic 
rock underlying the sandstone. 
The volcanic rocks, equivalent 
to a medium-strength granite, 
allow very little water to per- 
meate as minerals washed out 
of the rock, in hundreds of tiny 
fissures, form a natural grout. 

This is important as water 
seeping into the caverns could 
carry radioactivity back to the 
surface unless precautions are 
taken. 

Intermediate-level waste, 
including cladding from spent 
nuclear fuel, filters, worn-out 
plant and equipment which 
has been in contact with radio- 
active materials as well as iso- 
topes used in medical treat- 
ment will be placed in steel 
containers. 

These will be filled to the 
brim with cement before being 
stored underground. 

The steel drums and boxes 
will eventually corrode, said 
Nirex, which has developed a 


1. Intermediate-lewd 
waste win be ptecad 
In steel drums or 
boxes which vnll be 
topped up with 
concrete 





2. The space around these 
boxes ««A be back-fiSsd with a 
cement-based grout to retard 
the movement of the radioactive 
particles. They wffl then bo 
placed In caverns haK a mile 
belowground 


excavated out of tbs rock, reached 
by train dawn sloping tunnels 


chemical additive to a cement 
which will be used as a third 
layer of protection, completely 
filling in around the steel con- 
tainers. 

Dr Alan Hooper, Nirex sci- 
ence manager, said the com- 
pany is seeking a patent for 
the cement which is "designed 
to inhibit radioactive particles 
from dissolving in the water 



and will remain effective for 
thousands of years”. 

Nirex is working with its 
French and Swedish equiva- 
lents ANDRA and SKB on a 
£lm project to test methods of 
construction by building two 
tunnels five metres in tunnels, 
430 metres below ground, at 
As pc in Sweden. These will he 
excavated by various tech- 


niques from blasting to using a 
tunnel boring machine. 

Mr Brendan Breen, Nirex's 
mining manag er, who has pre- 
viously worked in the UK, Can- 
ada. Italy and France, says: ”1 
have never worked on a project 
where the planning has been 
so meticulous but the conse- 
quences of failure is so horren- 
dous.” 


World wide plans for 
underground storage of 
intermediate and high 
level radioactive waste: 


O UK: Some 27 per cent of 
UK's electricity produced by 
35 reactors during 1993. Site 
in Cambria close to Sellafield 
identified for underground 
repository to take mostly 
intermediate level waste over 
50 years. Repository due to be 
completed in 2010. 

• US: 20 per cent of electric- 
ity produced by 110 licensed 
reactors. Site identified under 
Yucca Mountain, Nevada, for 
deep level repository. Con- 
struction of underground labo- 
ratory already under way. 

• GERMANY: 34 per cent of 
electricity from 19 nuclear 
plants. Two sites being consid- 
ered for repositories at a for- 
mer Iron ore mine at Konrad 
and a site at Gorleben, both in 
Lower Saxony. An abandoned 
salt mine at Bartensleben in 
eastern Germany has been 
used since 1981 for low and 
intermediate level waste. 

• FRANCE: 78 per cent of 
electricity from 58 reactors in 
1993. Two sites expected to be 
short-listed for potential 
underground repository for 
long-lived waste. 

• JAPAN: 31 per cent of elec- 
tricity produced by 48 nuclear 
plants in 1993. Power Reactor 
Fuel Development Corporation 
(PNC) plans to construct 
underground lab at Honrobe 
on the island of Hokkaido to 
study disposal of high level 
waste in sedimentary rock. 

• SWEDEN: decided in 1980 
to phase out by 2010 all 
nuclear power stations which 
currently produce about half 
of the country's electricity. 
Exact timetable still the be 
established. Low and interme- 
diate level waste is stored 
underground near the Fors- 
mark plant, 50 metres below 
the Baltic Sea bed. Investiga- 
tions continuing to identify 
site for high-level waste. 


Channel rail link bill set 


for parliament next week 


By Charles Batchelor, 
Transport Corre sp ondent 

Draft legislation, to allow 
construction of a £2.7bn rail 
link between the Channel tun- 
nel and London is expected to 
be put to the British parlia- 
ment on November 24. 

The rail link hill will be one 
of the first pieces of legislation 
considered in the new session 
of parliament, which starts 
today with the Queen’s Speech. 
It will mark the start of a par- 
liamentary process expected to 
take up to two years. 

Provided there are no unfor- 
seen difficulties construction 
should start in early 1997 for 
completion in 2002. The fast 
rail link will cut 30 minutes off 
the three-hour journey 
between London and Paris. 


The route, which passes 
under the Thames near Gra- 
vesend before crossing Strat- 
ford and east London to St 
Pancras station, has been 
decided - although small vari- 
ations are allowed within a 
designated “envelope.” 

Even so, the legislation is 
expected to prompt several 
thousand protests from resi- 
dents and other interested par- 
ties along the 68-mile route. 

The bill takes the form of a 
“hybrid bill" under Commons 
procedures covering legislation 
involving both public and pri- 
vate interests. It is expected to 
be given its first reading on 
Thursday of next week. It 
could receive its second read- 
ing by Christmas before going 
into committee for detailed 
consideration. Protestors will 


be able to petition the select 
committee which considers the 

ba- 
in parallel with the passage 
of the bill through parliament 
the department of transport 
will select a consortium to 
build and operate the rail link. 
Four consortia were shortlisted 
in August They are Eurorail, 
including BICC and GEC; 
Hochtief and Costain: London 
and Continental including Blue 
Circle. National Express and 
Virgin; and Union Link, includ- 
ing Holzmann. Mowlem and 
Taylor Woodrow. 

Bids must be made by March 
14 and the government will 
decide on the winning consor- 
tium by late nest year. 

The consortium which builds 
the route will be granted a 999- 
year lease to operate services. 


Interactive TV trial delay 


By Raymond Snoddy 

British Telecommunications 
has delayed the start of trials 
for its interactive television 
project until the middle of next 
year to add a wider range of 
services than simply video-on- 
demand- 

The 2,500-home trial will 
offer home shopping, banking 
and educational prog ramming 
as well as the film and televi- 
sion service that had been 
scheduled to start In the 
spring. 

Shopping-o n-demand will be 
offered under individual 
brands. Thomas Cook will offer 
holidays and travel, Sears fash- 
ion and sporting goods and 


W.H. Smith books, compact 
discs and videos. A grocery ser- 
vice will be developed by Safe- 
way stores. 

Mr Rupert Gavin, director of 
BTs Information Communica- 
tion and Entertainment pro- 
gramme said yesterday. “In 
order to test the capability of 
interactive TV, it is important 
to offer consumers a wide 
range of services.” 

Technical trials in 60 homes 
showed it was possible to send 
good quality pictures in digital 
form down ordinary telephone 
lines at the same' time as the 
lines were being used for a 
telephone conversation. 

BT, which has a telephone 
network linking 20m homes. 


found the technology had a 
wider than expected range. 
This suggested 92 per cent of 
the network could handle 
interactive services. 

The first commercial trial is 
likely to cost more than £30m. 
BT should have enough infor- 
mation by the end of next year 
to decide whether to roll out 
the service across the UK, 
which could cost several bil- 
lion pounds. 

BT wants to find out what 
services people are prepared to 
pay for and what is the best 
method of charging. 

The commercial trial will 
include monthly subscriptions, 
paying for individual items and 
a mixture of the two. 


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14 


FINANCIAL TIMES WEDNESDAY NOVEMBER 1.6 1994 


MANAGEMENT 



J ust a few yards off Fleet Street 
on the first floor of the London 
headquarters of Reuters Hold- 
ings, one of the most far-reach- 
ing examples of “virtual busi- 
ness practice” is unfolding. 

It represents a break with tradi- 
tional business structures and 
pushes at the frontiers of current 
management thinking - it could 
radically redefine the nature of 
organisations. 

In the. UK, the concept of the “vir- 
tual organisation" has been largely 
technology-driven, with a number 
of companies using networked com- 
puter terminals to create an IT 
infrastructure - or “virtual office" 
- which exists independently of the 
physical location of employees. 
IBM. Mercury Communications and 
Digital Equipment, for example, 
have all experimented with this sort 
of model using electronic-mail and 
other IT tools to enable employees 
working remotely to {dug into vir- 
tual offices. 

However, commentators in the US 
claim that the virtual concept can 
be taken further. Tom Peters, in 
particular, argues that an important 
strength of software companies in 
California's Silicon Valley lies in a 
complex web of relationships that 
promotes multiple collaborations. 
This, he says, results In amorphous 
business groupings that can reconfi- 
gure to create new virtual organisa- 
tions without the pain and expense 
of restructuring or redundancies. 

It is this model that inspired Greg 
Garrison, director of the Reuters 
usability group, to create what is 
probably one of the first truly vir- 
tual organisation in Europe; one 
which spans two continents and 
incorporates people from 12 other 
companies - including Microsoft, 
Logica and Admiral Computing. 

Garrison's achievement has 
brought a ringing endorsement 
from Peters who described him in 
the September issue ot his newslet- 
ter On Achieving Excellence as “an 
impresario, creating a new way of 
doing business as he goes". 

In early 1993, Garrison was 
drafted into the Reuters London 
headquarters from its Asia Pacific 
office to set up the usability group. 
His brief was to achieve a break- 
through in the user-friendliness of 
the financial Information services 
provided by Reuters to interna- 
tional bankers, brokers and dealers 
in ISO countries. 

The aim was to seize competitive 
advantage through the creation of 
highly intuitive user interfaces 
which accurately matched the deliv- 
ery of information with the way 
customers in dealing room environ- 
ments wanted to work. With keen 
competition from other suppliers, 
including Bloombergs Financial 
Services and Dow Jones Telerate, 
Reuters’ leadership of the highly 
lucrative market for real-time infor- 


'bnpressaria' Greg Garrison solved a dHamma by creating a virtual organisation that usea consultants in an innovative way 

Cherry-picking 
top talent 

Reuters Holdings has taken the ‘virtual’ office concept 
beyond its usual boundaries, finds Desmond Dearlove 


mation was at stake. 

Garrison’s starf-up plan for the 
usability operation railed for a staff 
of 24 hill-time Reuters employees 
specialising In human-computer 
interface design. But a combination 
of hiring controls and the compa- 
ny's reluctance to employ perma- 
nently specialists with the esoteric 
skills required meant Garrison was 
allowed only two of the 24 staff 
requested. Board level commitment 
to the initiative, however, ensured a 
generous budget to fund the staff- 
ing requirements from outside. 

Garrison's dilemma was how to 
assemble the team of highly speci- 
alised IT experts. The traditional 
method was to outsource. But an 
initial evaluation of the sorts of 
skills required - ergonomics, soft- 
ware prototyping, interface graphic 
design and artificial intelligence - 
convinced him that no single con- 
sultancy in the UK could provide all 
the solutions. 

In response he invented a “vir- 
tual" organisation, cherry-picking 
the top talent from 12 companies 
around the world. 

“I needed an organisation which 
would be a constantly evolving and 
changing team of experts - some of 


wham would be from other compa- 
nies, some of whom would be inde- 
pendent - but most of whom would 
not be permanent Reuters' staff," 
Garrison explains. “I wanted to 
employ them very flexibly on a proj- 
ect-by-project basis when and as I 
needed them.” 

Using the promise of substantial 
contracts as a carrot. Garrison was 
able to convince the consultancies 
to takp the unusual step of si gning 
non-disclosure contracts, not just 
with Reuters but with each other. 
This laid the foundation for a col- 
laborative environment. 

What he now has at his disposal 
is an extended virtual team of 50 
people, consisting of a core group of 
between 12 and 24 who work on-site 
at the Reuters' office in London. 
Some individuals contribute from 
other UK locations, and consultants 
based in the US and Europe partici- 
pate in the team remotely using 
E- mail, fax and telephone. 

Garrison operates his virtual 
organisation as a "just-in-time” 
skills pool, which shrinks and 
grows - and can even change its 
skills composition - to match the 
workload. When not required, par- 
ticipating consultants return to 


their own companies. 

Such an arrangement does not 
come cheap, however. Team mem- 
bers are charged to Reuters on a 
day rate, typically between £300 and 
£500 per person. But Garrison calcu- 
lates that savings on recruitment 
costs and staff benefits including 
holidays, sick leave and pensions 
mean that he pays a premium of 
only 8 per cent to 15 per cent above 
the market rate for his virtual 
employees. He believes that the cali- 
bre of the staff alone justifies the 
premium. It also enables him to 
start and stop projects almost 
instantaneously. 

Along with the expertise they 
bring, each of the 50 or so consul- 
tants also brings access to the skills 
pool or the organisation. In one 
case, by accessing the Microsoft 
product research laboratories in the 
US, team members from Microsoft 
were able to provide a software tool 
that Reuters needed but which 
wasn't available in the marketplace. 

Reuters has just installed state-of- 
the-art usability testing laboratories 
to enable Garrison to continue the 
virtual experiment. This suggests 
that so Ear at least the virtual con- 
cept is delivering tangible results. 


A fresh perspective 
on training 

Lisa Wood looks at an innovative Tec that lias 
created real accountability to business 


ill 

* M I 


management 


0 Hold a contest for 

the most innova- 
0 $ tive Tr ainin g and 

Enterprise Council 
in England and 
Wales, and the Tec 
for South and East 
Cheshire would 
almost certainly 
take the prize. 

The Tec has a long list of “Gists” 
to its name, Including being among 
the first to agree a merger with its 
local chamber of commerce. It has 
also set up a membership scheme 
that has created real accountabil- 
ity to local businesses and built 
strong links with employers. 

At the core of South and East 
Cheshire's activities is a philoso- 
phy of working as closely as possi- 
ble with its local community. “We 
approached everything we did 
from that perspective,” says 42- 
year-old Richard Guy, the innova- 
tive chief executive who joined the 
Tec from the Department of 
Employment, but who recently 
took up a new post in Manchester. 

Tecs, numbering 32 in England 
and Wales, are private companies 
established by the government in 
1991 to drive a skills revolution in 
the UK. They receive nearly £2bn a 
year to run government-funded 
training programmes for young 
people and the unemployed, as 
well as working with other part- 
ners. such as local authorities and 
chambers of commerce, to improve 
enterprise activities in their areas. 

At first, many Tecs found it easi- 
est to continue r unning training 
programmes in the same way as 
the civil servants who preceded 
them. This approach usually guar- 
anteed a reasonable place on the 
government's league tables, which 
measure a narrow range of Tecs* 
activities and exclude most of their 
economic development work. 

South and East Cheshire, how- 
ever, has taken a mare entrepre- 
neurial approach. On Youth Train- 
ing, for example. Guy jettisoned 
the system of using managing 
agents to place young people on 
employers' training schemes. Such 
intermediaries he says deprived 
him of a point of contact with 
employers necessary to integrate 
YT operations effectively in the 



Richard Guy contracts ' 
directly with employers to 
provide training places 

Tec's other work. 

So Guy started to contract 
directly with some 800 employers 
to provide training places. One 
benefit has been that the Tec has 
one of the highest levels of young 
people cm YT working as employ- 
ees. Where manag in g agents are 
used, they normally have nan-em- 
ployed status which means the 
young person is not guaranteed a 
job at the end of training. 

As important, the switch has 


allowed Guy to involve local 
employers much more in the work 
of.the Tea They are Invited to join 
a business membership scheme, 
which also gives joint membership 
with the local chamber of com- 
merce. Members total 2,000, : abbut 
55 par cent of employers with five 
or more employees in' the area. 
They are able to attend the annual 
meeting, cast votes on key policy 
issues and elect board members. " 
The scheme, probably the best 
developed of the handful set up by 
Tecs, offers direct accountability to 
local businesses that, is . often 
absent elsewhere. 

- The membership- scheme also 
offers special discounts Cor busi- 
ness support services offered 
through Business Link; -the “one- 
stop shop” the Tec operates with 
other partners on behalf of the 
Department of Trade and Industry. 

Each company joining the -Tea 
or Business Link, with more than 
five snployees is allotted' a per- 
sonal business adviser. " 

Guy’s strategy has its detractors. 
Some critics point to the Tec's 
comparatively large staff of 120, 50 
of whom are engaged in Business 
T.mit They Hi at Tecs should 

not be involved in the direct deliv- 
ery of services, not least because it 
can be more expensive than- sate 
contracting. ■ 

Guy says: “We do- sub-contract 
all things that are specialised, and 
that accounts for 75 percent of our 
budget This does lead, to savings. 
But the direct service is important 
because we can pull firms together 
and. sub-contract very effectively 
on behalf of the gronp:“ 

The strategy has been well-re- 
ceived among its customers in 
Cheshire. “The Tec is a good 
sounding board .for impartial 
advice,” says Garry Crosby, man- 
aging director of Alert Reactive 
Systran, an 18-month-oM building 
management contracting company 
in KmrtrfonL T can’t praise my 
business adviser at -the . Tec 
enough. Hie number of tunes that 
I have picked up the phone in des- 
peration. It can be a lonely ' job 
setting up a business after working 
for a big company which took care 
of all the support systems like law- 
yers and accountants.” 







How seriously are we taking 
the demands of 


In June 1992 representatives of 153 states 
and trie European Community signed a decla- 
ration at the Earth Summit in Rio de Janeiro - the 
biggest environmental conference ever held. 
The declaration calls for our planet to be protected 
through sustainable and environmentally accept- 
able development that does not upset the sodo- 
ecologicaJ equilibrium. 

Bayer will play its part in meeting the Rio 
objectives. By conserving raw materials, making 
our products last longer, recycling, improving 
production processes and applying responsible 
risk management 

Environmentally acceptable operations and 
responsible conduct are, to us, important 
steps forward in preserving the natural 
basis of life for generations to come. 

b®Ppy to provide more information upon reouesL 

-SEWS 



The Rio dedanriion cate on nations of the world to protect the environment 


Bayer 


Expertise with Responsibility 


























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Have you woken up to the possibilities of cable’s ability to carry telephony, television and information 
services over a single network? Working peacefully from home without the joys of journeys through commuter 

feasible. And for the future, video conferencing and on-line databases delivered via cable 


crowds is alrcsdy 

to your personal computer are areas where we’re doing our homework. TEUEWEST 










16 


FINANCIAL TIMES WEDNESDAY NOVEMBER 161994 


BUSINESS AND THE ENVIRONMENT 


US staff 
biking 
to work 


U S workers who commute 
by bicycle are becoming 
pampered employees at 
many companies. Nike, the Ore- 
gon-based sports shoe manufac- 
turer, gives workers a $1 credit 
at the company's cafeteria, fit- 
ness centre or store if they pedal 
to work. 

At Fleetwood, a maker of 
motor homes in Southern Calif- 
ornia, biking employees enjoy 
mini-garages for storage, a free 
repair facility, showers and 
changing rooms, the free loan of 
a bicycle, and a safety kit. 
USAA, an insurance group in 
San Antonio, Texas, encourages 
workers to form bicycling clubs 
to articulate needs to manage- 
ment and to help riders devise 
the best routes to the office. 

The bike-to-work movement is 
being pushed along by govern- 
ment initiatives. Next year, Ore- 
gon will eo force a law that 
requires all businesses in the 
state to provide covered storage 
spaces Tor customers and work- 
ers. Massachusetts plans to 
spend $6m (£3.6m) over the next 
few years to adapt roads to bicy- 
cle use. 

Under Clean Air legislation 
passed during Ute Bush adminis- 
tration, every state must present 
a plan to encourage bicycle use 
by the end of 1995. 

“San Antonio has launched a 
big bicycle-mobility plan 
because they are on the edge of 
non-attainment of the Clean Air 
Act standards," says Andrew 
Clarke, deputy director of the 
Bicycle Federation of America. 
“If they do not take the initia- 
tive themselves, the federal gov- 
ernment will force them to." 

Biking is an increasingly pop- 
ular way to reduce air pollution, 
say politicians, because it costs 
relatively little compared with 
public transport improvements. 

Refitting roads to accommo- 
date bicycles does raise the ire 
of many, though. In densely 
populated cities, it often means 
eliminating traffic lanes, slow- 
ing the flow for drivers. And by 
providing shelters for bicycles, 
businesses may have to cut the 
parking spaces available for 
tars. 

Victoria Griffith 


E nvironmental reporting is a 
waste of time and money. 
This could be the view of 
the vast majority of compa- 
nies that steadfastly ignore 
demands to publish regular volun- 
tary reports an their emissions, 
waste, and efforts to reduce their 
impact on the environment 
After a spate of reports in the 
early 1990s from blue-chip compa- 
nies in western Europe and North 
America, environmental reporting 
appears to be at a crossroads. Those 
companies that have reported - 
about 150 worldwide - are wonder- 
ing whether it is worth continuing. 
The non-reporters appear to be hop- 
ing that reporting is a dying fash- 
ion. 

“Reporting by some companies 
spurs on competition among others. 
But a diversity of styles and lack of 
conformity has undermined this 
competition because there is no 
benchmarking. And, of course, 
those companies which choose not 
to report are deeply comfortable 
with this," says John Elkington, a 
director of SustainAbility, a UK 
consultancy advising the United 
Nations Environment Programme 
on reporting. 

Unep is trying to encourage 
small- and medium-sized companies 
throughout the world to report. 
Such companies produce most of 
the world's pollution, but because of 
their size and low visibility they are 
less affected by public pressure. 
Unep's underfunded campaign is 
only beginning, but the chances or 
success look slim unless there is 
renewed pressure to report. 

The future of voluntary reporting 
is uncertain, for three reasons. 
First, those companies that have so 
far reported have received, at best, 
a muted response from the audience 
that was calling for voluntary 
reporting, mainly campaign groups. 

Second, recession and the rapid 
slide of the environment down the 
political agenda have reduced the 
pressure to report. Only businesses 
in those sectors whose record is 


An absence of benchmarking has undermined reporting, 
but Peter Knig ht says the City could provide an impetus 

Second push for 
green reporting 



constantly under public scrutiny, 
such as water, chemicals and 
energy, feel the need to report. 

Third, information contained in 
the vast majority of reports lacks 
credibility and is of little use to 
most audiences, such as investors. 

“Environment reporting is still 
the product of the public relations 
industry." says Clive Bates, 


a campaigner at Greenpeace UK. 

“Investors, employees and the 
public need the unexpurgated envi- 
ronmental facts just as much as 
they need to see the mandatory* 
finan cial accounts," he adds. 

Greenpeace is not alone in its crit- 
icism of the value of the informa- 
tion found in environmental 
reports. Bill Dale, environment ana- 




iyst at S.G. Warburg, says the City 
finds it difficult to identify potential 
environmental risk because of the 
poor quality of information made 
available by companies. 

“Although more data are now 
being revealed in annual reports 
there is a high degree of discretion 
in what is reported," he said. 

It seems unlikely that companies 


will ever be forthcoming with all 
the facts until they are forced. 
Although there have been hints 
that the European Union could leg- 
islate on the Issue, this now seems 
unlikely. 

The EU's voluntary scheme, 
called Eco Management and Audit 
Scheme, is up and running but has 
yet to fulfil one of its primary goals 
- to encourage companies to con- 
form to its standards and so gain a 
competitive advantage. And. Etnas 
is only aimed at very large indus- 
trial operations. . - 

The general trend in tire EU’s atti- 
tude towards the environment is 
away from prescriptive legislation 
and towards a greater use of volun- 
tary and fiscal measures to encour- 
age improved environmental perfor- 
mance. 

This does not mean, however, 
that environmental reporting is off 
the agenda. F,nrin gtnn sits on the 
EU's consultative forum on the 
envir onmen t, a group of business 
people and representatives from 
consumer groups, local government, 
trades unions and non-governmen- 
tal groups. “In our discussions, 
reporting is seen as absolutely fun- 
damental,” he said. 

And companies that continue to 
report say they find benefits other 
than public recognition for their 
efforts. The process forces them to 
set up the systems to gather infor- 
mation about their products and 
processes. This enables them to 
manage their businesses better. 

"Our report gives us the opportu- 
nity to provide concise information 
on our environmental performance 
to outsiders and employees. We find 
it a useful communications 1001," 
says Richard Robson, environment 
communications manager at I Cl. 

Thom EMI has just produced a 
highly detailed report on its perfor- 
mance and the Kingfisher retailing’ 
group, which includes Comet, B&Q, 
Super drug and Woolworths, is 
expected to publish its first environ- 
mental report this year. 

“Reporting is a primary strategic 


communications tool;” says Elking- 
ton. “A prime example here 4s. the 
success of Dow Europe. Because it 
does not have an. annual report for. 
the European ..business its -. their 
environmental report is a. window 
thro ugh which, people can view 
Dow" 

But in spite of such advantages, ft 
appears that many. companies will 
not take environmental reporting 
seriously unless theyare put under 
more pressure. . ■ . 

Early Indications are that in the 
absence of any official initiative/ 
the financial community could pro- 
vide the impetus. 

Asbestosis claims and concerns 
about possible: effects oP climate 
change on catastrophic property . 
casualty exposures bare increased 
the world Insurance' industry's 
interest in the environment. Banks 
are paying more attention to their 

If the : financial 
community is tb - 
convert its concerns 
into action it needs ; : 
better information- r 

exposure to environmental, risk and - 
investors are starting to showcon- 
cem about risks posed by compa- 
nies with poor environmental 
records. 

. But if the financial c ommunity is 
to convert its concerns into action it 
needs better information. Dale says: 
“Most of the information, including 
specific quantitative detail, is arbi- 
trary and self-determined. In. very 
few cases is it possible to draw 
direct conclusions as to the implica- 
tions for revenues and profit mar- 
gins. While investors wait for better 
s tandar ds at reporting they will be 
more impressed by those companies 
which publish separate reports on 
their environmental performance. 
Particular credit will be. given to 
information that is independently 
audited or verified." 


Why markets are ignoring the issues 


M ost City analysts ignore 

environmental pressures on 
companies because they cannot 
price the impact Half do not trust 
information published by companies on 
their environmental performance and 
two-thirds think the current standard of 
reporting is inadequate. 

These are some of the findings of a 
survey of 85 top Extel Financial-rated 
analysts working in 28 sectors. It was 
conducted by researchers NOP on behalf of 
the charity Business in the Environment 
(Bi£) and funded by Extel Financial. 

Most analysts feel the bulk of 
environmental issues are moral or 
emotional and are therefore irrelevant to 


their job of making rational assessments. 
Sixty-one per cent said the subject was of 
no interest to their clients, although a 
third had received requests from clients for 
more information, especially in the utilities 
and natural resources sectors. 

Three-quarters of those surveyed do not 
see the environment as a competitive issue 
within the business sectors they cover, but 
most feel the environment will become 
more important in the next 10 years. 
Analysts under the age of 35 are better 
informed about environmental issues than 
their older colleagues. 

Analysts thought that company-produced 
environmental performance reports should 
be externally verified to be credible. 


Meanwhile, a separate report sponsored 
by Greenpeace, suggests that investors do 
not take adequate account of 
environmental factors when valuing 
companies, at least in the carbon fuel 
sector, which includes coat oil and gas. 

The author Mark Mansley, an investment 
analyst, argues that tbe financial markets 
are underestimating the risk that global 
wanning will lead to dramatic measures by 
government to curtail carbon fuel 
consumption. These measures could 
include carbon taxes and limits on demand. 

“Climate change presents major 
long-term risks to the carbon fuel 
industry," he says. “These risks have not 
yet been adequately discounted by the 


financial markets. The risks increase the 
longer it takes to develop adequate policy 
responses to the threat of c lima te change." 

Mansley says that most carbon fuel 
projects, being very large, take longer than 
10 years to pay back, meaning their 
viability depends on events in the distant 
future. Typically, markets respond to 
events only as they become visible, and 
investors could not be certain that they . 
could sell their stock once the risks of 
global warming began to materialise. 

Until this discount had been made, 
investors should avoid heavy exposure to 
the oU, gas and coal sectors. Mansley says 
investors would do better to put their 
money in alternative energy companies 


because they offer greater growth ... 
prospects than carbon Aid industries. 
Diversification in this direction would also 
offset some of the risks of climate change. 

*City Analysts and the Environment: a 
survey of environmental attitudes in the City 
of London. Available from BUS, 8 Stratton 
Street, London W1X5FD. TeL 071 629- 1600- 
Price nos. 

**The long-term financial risks to the 
carbon fuel industry front climate change. 

The Delphi Croup. Tel: 071-404 2964; Fax: 404 
0326 

David Lascelles 
Peter -Knight-. 



■«<? 


.yt 


if: 


SIME DARBY BERHAD 

(Incorporated in Malaysia) 

NOTICE OF BOOK CLOSURE 

The Directors of Sime Darby Berhad are pleased 
to announce that the ordinary shareholders at the 
Annua! General Meeting held on 5th November, 
1994 have approved: 

(I) the payment of a final dividend of 17.5 sen 
gross per share comprising 16.5 sen less 
Malaysian tax and 1.0 sen tax exempt for 
the year ended 30 June 1994. 

(it) the bonus issue of 352, 1 62,346 new ordinary 
shares of RM0.50 each on the basis of one 
(1) new share for every five (5) existing 
shares held by capitalising RM 176, 08 1,1 73 
from the share premium account. 

Notice is hereby given that the Transfer Books 
and Register of Members of the Company will be 
closed on 1 6 December 1 994 for the purpose of 
determining shareholders entitlement to the final 
dividend and the Bonus Issue. 

Duly completed transfers received by the 
Company's Registrar, Barclays Registrars, Bourne 
House, 34 Beckenham Road, Beckenham, Kent 
BR3 4TU, England, up to the dose of business at 
5:00 p.m. on 16 December 1994 will be registered 
before entitlement to the final dividend and the Bonus 
issue are determined. 


£ 


■ y By Order of the Board 

V\ 

■v 

MARTIN G. MANEN 
■■■ Secretary 

% Kuala Lumpur 

Date: 16 November 1994 





YOU HEARD IT FIRST FROM EXTEL-— 

FBI Your Boats!! 

On Tuesday 15th November Extel told subscribers of the 
Imminent Boots sham buy-back nearly ten 
ntinules before Ihe official announcement 

and before the stock rose twenty pence. 

Ollier news wires didn't. 

If you want la know more about our service, 
telephone James Barnitt on 07t 825 8233. 

EXTEL NEWS 

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E\hH Financial Limited, 13-17 Epworth Street, London, EC2A 4DL 

A Member of the Financial Times Group 
A PEARSON COMPANY 


ADVERTISEMENT 



Sir Archibald Forster has 
been appointed non-executive 
director of pctro-chemiculs 
company Engcn Ltd. South 
Africa. 

Previously chief executive 
of Esso UK until 1993. Sir 
Archibald is currently a director 
of Midland Bank PLC. Trafalgar 
House PLC, United Newspapers 
PLC and Montague Private 
Equity Ltd. He is a member or 
the Monopolies und Mergers 
Commission and was knighted 
in 1987. 



Mr. John Bentley has been 
appointed executive director of 
pctro-chemicals company 
Engcn Ltd. South Africa. 

A former director of Gencor 
(UK] Ltd and managing director 
of Suo Bento Mincracao SA in 
Brazil, Bentley has headed up 
Engen’s Exploration and 
Production division since 1993. 


TO SAVE THE 
RAINFOREST WE 
PROVIDE TREES 
TO CHOP DOWN. 

By helping people 

m the rauiiutm lo pbm trcr». WWF 
air working ro wive some of 
tbe problentt (far cane dcforeitatjon. 

Where oca ire chopped 
down far firewood, we help plant tar 
growing uplings a a renewable 
source of fuel. Thii h panicubriy 
vahubic in (he Impenetrable Forett. 

Uganda, where milage no us 
hardwoods rake up lo two hundred 
years ro tniruie. 

The Markkmu tmn trees WWF gave 
do (he local vdbgrs are 
ready far harvesting m only five yean. 
Where urn are chopped 
down far use ui construction, a m 
Hikaun, we supply 
fast growing local pine species. 

The idea behind 

all our work u that rainforests used 
wisely can be used lorencr. 

Wnre lo the Membership t.Ifficer 


PEOPLE 


Cockshaw becomes 
chief exec - again 


Sir Alan Cockshaw, 57, (far 
right), chairman of Amec, is to 
take on the role of chief execu- 
tive following the announce- 
ment that John Bateson, 53, 
(right) is to take early retire- 
ment after seven years at the 
helm of the engineering and 
construction group. 

Bateson, who has worked for 
the group for 25' years, will 
retire at the end of March 1995. 
Sir Alan, who has worked in 
tandem with Bateson for over 
20 years, said yesterday that 
Bateson had always said he 
wanted to go in 1995. 

Sir Alan characterised Bate- 
son’s departure as nothing 
more than a “straightforward 
retirement". He said he was 
“very sorry” to lose Bateson 
but understood that he wanted 
to devote more time to his fam- 
ily’s caravan park business. 


Amec said that Bateson will 
not receive any special com- 
pensation when he goes and he 
will continue to assist the 
group on a number of specific 
matters. 

Amec has been struggling to 
recover from the recession and 
this year's estimated profits of 
around £25m are still going to 
be more than two thirds below 
the figure of five years ago. 
The news of Bateson's depar- 
ture comes only three months 
after the replacement of Den- 
nis Clark, head of Amec's pro- 
cess and energy business, and 
is likely to increase City con- 
cerns about Sir Alan's auto- 
cratic management style and 
the question of management 
succession. 

Sir Alan, who was Amec's 
chief executive between 1984 
and 1988, stressed yesterday 


The 

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that he did not plan to take on 
the chief executive’s job per- 
manently. He expected to pick 
a new chief executive within 
the next year and said that he 
very much hoped that Amec’s 
□ext chief would come from 
inside the group. 

Keith Humphreys, who is 


chairman of the UK arm of 
Rhdne-Poulenc and joined 
Amec’s board last year, has 
been appointed non-executive 
deputy chairman of Amec. 
Meanwhile, George Payne, who 
replaced Clark and heads the 
process and energy sector, has 
Joined the board. William Hall 


Non-executive 

directors 




Appear in the Financial Times 
on Tuesdays, Fridays and Saturdays. 

For further information or to advertise 
in this section please contact 

Karl Loynton on +44 71 873 4780 or 
Lesley Sumner on +44 71 873 3308 

FINANCIAL TIMES I 

tUKOWl KlllMdl NEWSPAPER | 


■ Andrew Simon (above), 

former executive chairman of 
Evode Group, at ASSOCIATED 
BRITISH PORTS. 

■ Patrick Lnpo, chairman and 
ceo of DHL Worldwide 
Express, at W.H. SMITH. 

■ Paul Loach has resigned 
from the THROGMORTON 
TRUST and T.T. FINANCE. 

■ John Ingfeby has resigned 
from JAMES FINLAY and Its 
subsidiaries. 

■ John Walker at WARD 
HOLDINGS having ceased to 
be executive. 

■ Patrick MacDougall, 
chairman of West Merchant 
Bank, and Roger Ferry, 
professor of environmental 
control and waste 
management, at NUCLEAR 
ELECTRIC. 

■ Christopher Biae has retired 
from The ALLIANCE TRUST. 

■ Harry Westropp, chairman 


of Britton Group, as chairman 
at ABACUS, on the retirement 
of Peter Grundy. 

■ Andrew Davison, chairman 
of the Emerging Markets 
Country Investment Trust, and 
David Telling, chairman of 
Mitie Group, at BROOKS 
SERVICE GROUP. 

■ Brian McGillivray has 
resigned from BUNZL. 

■ Anthony Wright, chief 
executive or Birkby’s Plastics, 
at JOHNSON & FIRTH 
BROWN. 

■ Mike Townsend, finance 
director of Rolls-Royce, at 
NORTHERN ELECTRIC. 

■ Roderick Paul, chief 
executive of Severn Trent, at 
The RUGBY GROUP. 

■ John Lusher, retired Marks 
& Spencer director, at BRENT 
INTERNATIONAL. 

■ Ray Hoiuey, former 
chairman of Rayford Holdings 
and chairman of Jermyn 
Investment Co, and Philip 
Lovegrove, chairman of 
Associated British 
Engineering, as chairman at 
REGENT CORPORATION. 

■ Julian Paul, former md of 
Guinness Mahon, and Janies 
Rowsell of James Capel. at 
TELE-CINE CELL GROUP, 

■ Lord Stokes has resigned 
from GWR Group. 

■ Trevor West, retired finance 
director of Y. J. Lovell, at 
AMEY HOLDINGS. 

■ Michael Flinders at MMT 
COMPUTING. 

■ Gerald Scanlan, retired 
deputy chairman of Allied Irish 
Banks, at FYFFES. 


Changeover 
at Daiwa 
Europe 



Nick Clegg, 58, one or many 
ex-Hiil Samuel bankers scat- 
tered around the City, Is retir- 
ing as co-chairman of Daiwa 
Europe, the European arm of 
the Japanese securities firm. 

Daiwa Europe has grown 
rapidly since Clegg joined in 
1986. Staff numbers in London 
have grown five fold to 750, 
and the group's European busi- 
ness now employs over 1,000 
people and is backed by £500m 
of capital Clegg is giving up 
his full-time executive respon- 
sibilities at the end or the year 
but Will remain chai rmaq 
Daiwa Europe Bank. 

Alex Monnas, 43, (above) 
another ex r HilI Samuel banker 
who now heads Daiwa 
Europe’s fixed Income division, 
has been appointed deputy 


chief executive and will report 
to Ryonosuke Miyoshi, 50, 
chairman and chief executive 
of Daiwa Europe. Masayasu. 
Ohi, 47, general manager of- 
Daiwa Securities’ international 
investment banking depart-; 
ment in Tokyo, is moving to 
London to be manag in g direc- 
tor and president. 

■ Brian Morton has been 
promoted to md of Newcastle ' . 
Bank (Gibraltar), part of the 
NEWCASTLE BUILDING 
SOCIETY. 

■ Jim Dannis, formerly a 
partner at Cleary Gottlieb 
splitting his time between 
London and Moscow, has been 
appointed a director in 
SALOMON'S London office to 
coordinate activities in the 
equity markets of Russia and 
the former Soviet Union. 

■ Onno van den Broek, 
general manager of ING Bank 
International has been 
appointed chairman and oeo of 
ING (UK) Capital in London, 
David Stuart, formerly director 
of market services at the 
London Clearing House, has 
been appointed operations 
director of ING Derivatives. 

■ Adrian Warr, formerly - 

treasurer at ING Bank, ■ 

London, has been appointed 
treasury director of LEOPOLD 
JOSEPH & Sons in succession 
to Robert McIntyre. 

■ Nigel Fletcher and Jeffrey 
Lawrence have been appointed 
directors of AMERICAN 
EXPRESS BANK; they both 
move from Merrill Lynch. 


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financial timjls 


WEDNESDAY NOVEMBER 16 1994 


17 



l )av:d Lasct 
Poser Kni 




* 


ARTS 


Getting 

T eventnr h, notallIe television 
HL? Past: took place on 

jtaMSfiSJSKSj"-; 

SSKff.J2? lfc , ,t 18 70 °W and 

sss3Wjrars?H 

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the London Film Festival. So in what 
sense was it a television ev^nt? 

BritS.®!?;! 7 14 years ago when the 

British Film Institute and Thames Teleyi- 

ScS^ted.Kevin BrownSlupSy 
^^I erS -° n of Abel Gance’s 1927 
sitedttastendece Napoleon. Thames TV 

^d fop Caxi Davis to write a new score 

V s ^ tbe Wran Orchestra 

^““Empire Theatre, Leicester Square. 
™ event began at 10.30 in the morning 

EjjMjS at , 5 - 30 when It seemed as 
though the applause would go on for ever 
I was not alone in asking when it would be 
possible to repeat that astounding seven- 
hour experience, and in time further per- 
were given in Britain. France, 
aijd the US. Then Channel 4 screened the 
movie for a national audience in Britain. 

Since then Kevin Brownlow and David 
Gui have continued their meticulous work 


Television/Christopher Dunkley 

to the heart of the matter 


on nlflg-qtns of the silent cinema- T hames 
TV maintained their support and encour- 
aged Brownlow and Gill to make memora- 
ble documentary series about the early 
days of Hollywood, and. when Thames lost 
its broadcasting licence. Channel 4 took 
over the baton. Memorable restorations 
have included The Thief Of Bagdad and 
The Wind. British television is now seen 
as the driving force in the historic restora- 
tion of the silent cinema to its rightful 
place. 

This latest offering, The iron Horse, fore- 
shadows most of Ford’s later preoccupa- 
tions: the frontier spirit, the renegade 
white man in league with evil redskins (as 
Brownlow warned Sunday’s audience, 
there is something here to offend practi- 
cally everyone nowadays), man braving a 
huge and dangerous landscape, the lone 
Pony Express rider in a mad gallop to 
catch the thundering train and gain a safe 
haven, the fight in foe saloon. Today they 
may seem like cliches but not, sorely, in 
1924. The experience of watching this 
movie on television when Channel 4 trans- 
mits it nationally in 1995 will not be the 
same as watching it in a theatre with an 
orchestra, but it will be so much better 
than never seeing it at all. 

The week’s second most notable televi- 
sion event was also provided by Channel 4, 
this time in the Without Walls series 
which commissioning editor Waldemar 
Januszczak is steadily expanding from its 


original arts base into foe widest conceiv- 
able - and admirably provocative - “cul- 
ture” magazine. Last week the first half 
was devoted to a tough and sceptical reap- 
praisal of Calcutta’s angel of mercy in 
Christopher Hitchens* polemical item 
"Hell’s Angel: Mother Teresa". Hitchens’ 
argument is now widely known: that, 
although treated as a saint, Mother Teresa 
seems much given to fraternising with 
right wing extremists, dodgy when It 
comes to relieving the suffering of those in 
her care, and remarkably effective at 
increasing the misery of the world’s poor 
by opposing birth control 

I t was a brave broadcast because the 
hysterical reaction from the huge 
and influential religious lobby was 
wholly forseeable. Before this sort of 
programme can get on the air you 
have to have people throughout a broad- 
casting organisation (In this case from 
Chief Executive Michael Grade to pro- 
ducer Tariq All) who believe that freedom 
of speech means the freedom to say what 
the majority do not already believe. The 
last time this happened in television was 
when Hugh Greene ran the BBC, and 
there were ructions then, too. 

This time Channel 4 rushed to give a 
voice to foe religious lobby (n Right To 
Reply, and chairman Roger Bolton sternly 
demanded to know of Hitchens and Jan- 
uszczak where was the "balance” in their 


programme, for all the world as though he 
had missed the feet that theirs was the 
first attempt in years to counter the tons 
of unbalanced adulation weighing down 
the other side. Moreover, where was Bol- 
ton when we really needed him, during all 
those decades when religious proselytise rs 
were pouring out their imbalanced pro- 
grammes foil of unsubstantiated stories 
about supernatural beings who would 
“save" us all? Indeed, since such pro- 
grammes continue, why is Bolton not reg- 
ularly issuing stem challenges to the peo- 
ple in dog collars to achieve balance, to 
bring in level headed rationalists along- 
side the preachers and happy clappers to 
remind viewers that foe evidence for ris- 
ings from the dead, the afterlife, holy 
ghosts and so on is precisely nil? 

The third most notable television event 
of the week was ITVs Open Fire , a sort of 
drama-documentary ("based on the true 
story . . .") about a man named David Mar- 
tin. Since he is now Henri, having hanged 
himself in prison, most of us would proba- 
bly never have heard of him had he not 
been the man whom the police thought 
they were shooting when they actually 
shot Stephen Waldorf as he sat in a yellow 
Mini in a London street in 1983. Anyone 
who knows even a little about the Waldorf 
affair must have asked himself "How did 
foe police get themselves into such a state 
of panic that they pumped that many 
rounds into the wrong man?” By telling 



The Waldorf affair: Rupert Graves as David Martin in ‘Open Fire’ 


the story of Martin, writer/director Paul 
Greengrass has provided a credible answer 
to that question. It showed Martin as a 
violent, gun-toting, transvestite bank rob- 
ber and expert lock picker who, under- 
standably enough, terrified some of foe 
policemen who were pursuing him. 

Of course it is difficult to know whether 
Martin was really as startlingly good 
looking in drag as actor Rupert Graves 
made him. It is hard to know whether he 
really exulted in violence as was shown 
here, and hard to know what his sexual 
proclivities were, assuming he knew him- 


self. But however questionable the details, 
Open Fire suggested one coherent and 
believable version of what could have hap- 
pened. In the process it provided the 
opportunity for Graves and the remark- 
able Kate Hardie (unforgettable as foe 
teenage runaway in Safe) to give outstand- 
ing performances as Martin and his girl 
friend Sue. Open Fire was almost certainly 
as close to the truth of 1983 as Iron Horse 
was to the truth of railroad building in foe 
18G0s, at least in the sense of emotional 
truth - and that, surely, is hugely what 
the Hitchens programme was about too. 


I f you want to see a really spar- 
kling first play, pick Nick 
Gross’s Peaches at the Royal 
Court’s Theatre Upstairs. This 
has authenticity written all over it, 
yet the touch remains light 
throughout The background is the 
numerical explosion of Britain's 
student population. Here are semi- 
educated young people at univer- 
sity, at first just messing about, 
drinking and dancing, then ulti- 
mately looking for jobs and a place 
in foe real world. 

The university is Leeds, suitably 
far north, but still only a few hours 
drive from the seemingly magnetic 
pufi of London. 

Driving plays a large part in foe 
piece. The scenes where students 
drive and talk in cars up and down 
the Ml are beautifully done - 
almost to the point where you think 
that Peaches might have been made 
for television. Yet this' is the trick: 
the play is so well written and so 
well done that it works on stage. 

In a succession of short scenes 
Grosso uses smtitles to Indicate the 
location and the characters. Far 
from being trendy, the men are 
frankly reactionary. “Peaches” is 
the word for women which, as one 
of the 'tiifefi' says,' is what the male' 
students think, about all foe time, 
even if they occasionally talk about 
something else. They regret that so 
many of foe women, have turned 
gay, vegetarian or vegan. One of the 
women may even have found a job 
on Channel 4. 

Grosso writes without bias or 
preaching. He simply shows the stu- 
dents as they are. Some education 
has clearly rubbed off on them, 
though they try to conceal it For 
instance: "Do you know Raymond 
Chandler?” "You mean, the one who 
played for Fulham?" Or “what’s 
foot book about the future - 1973? 
Thejr had to change the title." The 
men live in the past. 

There are also social nuances 
even among students trying to be 
egalitarian. Watch the embarrass- 
ment when Frank (Ben Chaplin) 
goes .off to a girl friend’s country 
house and finds be doesn't like the 
country. 

.The play has a pedigree. It com e s 
from the Studio of the Royal 
National Theatre, where they do 
intensive rehearsing and experi- 
menting. The work pays off. Not & 
line nor a movement in this piece is 
lost. Under James Macdonald's 
direction and David Roger’s design, 
there is marvellous attention detafl. 
Note the cows outside the country 
house »nd, better still, the pigeons 



Ben Chaplin and Kate Hardie in Nick Gross’s sparkling first play, ‘Peaches’ 

Theatre/Malcolm Rutherford 


MastalrUnh- 


Simple ideas come off best on the Fringe 


outside the window of a London 
flat 

Yet. it cannot be quite true that 
the National Theatre can make a 
good production out of almost any- 
thing. The writing has to be there 
in the first place. The only trouble 
with Peaches, which perhaps owes 
something to the influence of televi- 
sion, is that it lasts for only 76 min- 
utes. 

★ 

Beware of plays that try to be too 
clever. One good Idea is usually 
A^nmgb. At foe Gate Theatre Maria 
Irene Fames has an excellent idea 
at the start of The Danube, it could 
be sustained throughout, but dis- 
tractions get in the way. 

The piece plays around with for- 
eign language teaching. It is Buda- 
pest 1938. On the board is Unit One: 
Basic sentences. A visiting Ameri- 
can talks to some locals in that slow 


stilted style that goes with learning 
a new language. “Are you a Hun- 
garian?” “No, I am an American.” 
The conversation moves on: “What 
do you eat for breakfast, as a rale?” 

There are some promising devel- 
opments. A Hungarian father 
(Simeon Andrews) muses that some 
say that German is the language of 
the fixture, but that others say that 
it is English. The father has a 
marked preference for German ciga- 
rettes. Since this is close to the eve 
erf foe second world war, all that is 
appropriately ominous 

Then The Danube shoots off all 
over the place. As a programme 
note puts it the play “soon departs 
from chronologically (sic) realism". 
The notes also refer to nuclear fall- 
out from north eastern Kazakstan, 
pollution in Budapest and the Lon- 
don suburb of Putney, as well as the 
alleged misdeeds of foe mining com- 


pany, RTZ. Certainly foe characters 
begin to suffer from respiratory and 
other diseases, yet nothing is very 
clear. 

Meao while, the play continues in 
its language lesson format, eventu- 
ally reaching Unit 14. This is a use- 
ful dramatic venture in itself. It 
shows how the Language of the text 
books is not always so different 
from the language people speak if 
they lack Individual self-expression. 
It could be further explored. Ms 
Fomes throws away the chance by 
trying to do too much. 

One other slight cavil. Short plays 
seem to be catching. The Danube 
lasts only 80 minutes. There is. 
however, one joy. Hannah Miles 
makes her first professional appear- 
ance as the Hungarian daughter. 
Previously she bad played Hedda 
Gabler at the Guildhall school. She 
has great poise, and is clearly an 


actress to be watched. Direction is 
by Nancy Meckler for the Shared 
Experience Theatre. 

* 

At the Cockpit, John Constable’s 
Tulip Futures suffers even more 
than The Danube from seeking to be 
too clever. It may sound a good idea 
to write a play about the financial 
market in Dutch tulips in the 17th 
century measured against the mar- 
ket for art it is a piece about rela- 
tive values. Yet good ideas are not 
always inherently dramatic: it helps 
to have characters, feeling and wit 
Still, the piece is redeemed by a 
splendid last five minutes when the 
characters in the original portraits 
speak from their now elevated posi- 
tion in the National Gallery. Abigail 
Morris directs and there is a 
remarkably ambitious set, perhaps 
too big for this theatre, designed by 
Tom Piper. 


South Bank Music/David Murray 

Harnoncourt and more 


O n Sunday at the Royal 
Festival Hall the Philhar- 
monia concluded its 
cycle of Beethoven sym- 
phonies under Nikolaus Harnon- 
court with the Ninth, prefaced by 
the C minor piano concerto. The 
soloist in the latter should have 
been Martha Argerich, but her 
place was taken by the 29-year-old 
TOl Fellner, the Viennese winner of 
last year's Clara Hasiril competi- 
tion: Hn g lin p with nin si<?l intelli- 
gence, light-fingered and agile, but 
a touch self-effacing still 
Brio was notably absent from 
Harnoncourt’s opening Allegro con 
brio, which may have left Fellner 
slightly at a loss. The first orches- 
tral statement was briskly 
up-tempo, but in Harnoncourt’s 
hands foe m usic soon became dour 
and square-cut not a good spring- 
board for the soloist In the Largo 
Fellner hoped that thoughtful sin- 
cerity would do duty for 
full-blooded projection, but it didn’t 
Only in the Rondo fid he and Har- 
noncourt find a c ommo n ground, 
where the yoimg pianist could show 
his real promise, mettle and wit 
In the “Choral” Symphony, Har- 
noncourt’s rigorous attention to 
phrasing and voicing paid off hand- 
somely. Chiefly on the stringed 
instruments - I was astonished that 
he tolerated the horns’ and timpa- 
ni's smudgy dotted-triplets when he 
had demanded such sharp precision 
from his strings yet the Scherzo 
was a model of urgency. The Alle- 
gro had been just as lithe, though it 
lacked some ballast for Beethoven's 
gravity, six double-hasses are sim- 
ply too few in the Festival Hall 
The great Adagio was all temper- 
ate, studied density, though my 
companion repined at Harnon- 
court’s turning it into “a mere 
Andante". Difficult we know that 
18th and 19th century Adagios went 
fester than they have done in the 
last 5faodd years; but how far we 
should adjust our sensibilities to 
historical rectitude is a moot point 
With the sterling Philharmonic 
Chorus in the Finale, Hans Peter 
Blochwitz (a late substitute) stood 
out among the soloists for style and 
brightness, sturdily abetted by Luba 
Orgonasova and Ann Murray. Step- 
hen Roberts’s baritone was disap 
pointing. Harnoncourt took the 
visionary passages with a kind of 


measured breathlessness - no mys- 
tical haze, but controlled awe; and 
he raced away at last to an honest, 
inspiriting close. As highly calcu- 
lated performances go, this one was 
rewarding far beyond the norm. 

There had been a pre-concert con- 
cert at 6 o’clock, the second in foe 
Philharmonia’s “Music of Today” 
series: an excellent bonus in princi- 
ple, but this time a damp squib. 
Instead of the music originally 
announced, by Heine Goebells and 
Michael Torke, we got one piece for 
14 players by James MacMillan. As 
the orchestra's Visiting Composer, 
he runs foe series. 

The Exorcism of Rio Sump&l is a 
bleeding-heart response to some- 
thing that happened in the Third 
World in 1986, in the spirit of many 
pieces by Nigel Osborne and Mac- 
Millan's teache r John C aakan. Sup 
poseefty, helicopters of the El Salva- 
dor military name to shoot out a 
peasant village; miraculously 
nobody was killed; then the parish 
priest, and children, and soon 
everyone else, took up “a strangely 
comical dance" of relief and devout 
thanks. Not a bad scenario; but 
MacMillan’s lengthy spoken intro- 
duction mentioned only what would 
anyway be obvious, the little 
ensemble sounded shy and wan in 
the big halL The music fell short of 
the intensity he promised. 

T wo nights earlier, the Bir- 
mingham Contemporary 
Music Group, Electro- 
Acoustic Sound Theatre 
and student choirs (under Jonty 
Harrison) gave their all to foe 1972 
“Europa-version” of Stockhausen’s 
Moments in the Queen Elizabeth 
Hall ft used sometimes to be taken 
for a momentous work, but it paled 
on re-acquaintance. It came from 
one of Stockhausen’s crazier peri- 
ods. when his marital life was 
undergoing fission. What the innu- 
merable short-breathed “moments” 
of the music could not convey - 
erotic rapture, mostly - is meant to 
be stuffed into the spoken texts and 
giggles. Though the dominating 
soprano, Angela Tunstall, was 
superbly equal to every demand, 
the score now seems a patchy thing 
for its length, propped up by music- 
theatrical whimsy. There is much 
better Stockhausen than this auto- 
biographical silliness. 





BONN 

sthovenhalie In tomorrow’s _ 
icart, Steven Sloane conducts trie 
rthovsnhalJe Orchestra and 
Sara in works by Mahter and 
iri. Vladimir Spfvakov is director 
J sok> vtoHnist next Tues withthe 
scow Virtuosi in works by Bacn, 
tok, Stravinsky and Haydn 
28-773668) ... 

erlfhte month’s repertory 

sists of i/erdPs La travrata with 

risa Vrtafi/Hasmfc 
tetts, Puccini’s La fanehJad® 
st with Barbara Daniels and 
seppe Giacomini, the new 
imttte/Gflorge Whyte dance - 

rra about 1i» Dr^rfus^V®™ 

uarany, an opera 

izfllan composer Antonio Carlos 
ties. Vouri Vamos' new 
ducaon dfSteegjfl 
ms o n New 27 (0228-77 3667)^ 

BORDEAUX 

ate das Sports Tonight 

{enow: Stanisisw Skrowaczewski 

ducts Orchestra National 
deaux Aquitaine In works by 


Barber, Lutostewski and Brahms, 
with piano sototst Gerhard Oppitz. 
Next Wed and Thurs: Gidon Kremer 
f9ays Schumann’s Violin Concerto 
(5648 5854) 

■ COLOGNE 

Opemhaus Tonight, Sat concert 
performances of BeffinTs La 
Sonnambula with cast headed by 
Edita Gruberova. Tomorrow, Sun: La 
ttaviate. Fri, next Wed: Lothar 
Zagrosek conducts Michael 
Hampe’s new production of Lulu, 
with cast headed by Patricia Wise, 
Hanna Schwarz and Wolfgang 
SchOne (0221-221 8400) 
PttBiarmonle Fri: Fritz Lang's 1925 
silent film Metropofis with live piano 
a c compa ni ment Next Tues: Semyon 
Bychkov conducts Orchestra de 
Paris in works by Strauss, DutiUeux 
and Stravinsky (0221-2801) 
Schauspiefoaus Fri: first night of 
new p reduction of Brecht’s Die 
WanbOrgerhochzeit. cflrected by 
HannekK-a Roger. Repertory also 
Indudes the musical Fiddler of the 
Roof and Shakespeare’s King Lear 
(0221-221 8400) 

■ COPENHAGEN 

Royal Theatre Tonight-new Danish 
choreography. Tomorrow, Mon: 
Hemming Ffindfs new production of 
Prokofiev’s opera The Love for 
Three Oranges. Fit FTindfs staging 
of Thomas KoppeTs ballet The 
Triumph of Death. Sat, next Tues: 
Don Carlo (tel 3314 1002 fax 3312 
3692) ... 

■ DRESDEN 

Semper ©per Tonight (5pm): Der 


RosenkavaJler. Tomorrow: Ariadne 
auf Naxos. Fri, Sun, next Tues: The 
Bartered Bride. Sat: Un baHo in 
maschera (0351-484 2323) 


■ DUSSELDORF 

Schauspiefttaus Tonight, Sat, Sun: 
Shakespeare's The Merchant of 
Venice, directed by Karin Beler. 
Tomorrow, Mon: Brecht's Arturo Ui. 
Fri, Tues: Die Fledermaus 
(0211-369911) 

Deutsche Oper am Rhein Tonight: 
Heinz Spoerii’s ballet A Midsummer 
Night's Dream. Tomorrow, Sun: Kiss 
Me Kate. Fri, Sat new ballet 
workshop programme. Tues: 
Mahagonny (0211-690 8211). The 
Duisburg Theatre has Der fliegende 
Hollander tonight and Fri, Rigdetto 
tomorrow and Fiddler on the Roof 
on Sat (0203-300 9100) 


■ FRANKFURT 

Oper Tonight, Sun: new production 
of Schoenberg’s Pierrot Lunaire and 
Janacek's Diary of a Young Man 
Who Disappeared, staged by 
RetohHd H offmann and conducted 
by Mathias Didac/Sylvain 
Cambrel ing. Nov 27: first night of 
new production of Don Giovanni 
(069-236061) 

Alto Oper Tonight: Bach’s B minor 
Mass. Tonight (Mozart Saal): Dorris 
Soffei song redtaL Tomorrow: 
Semyon Bychkov conducts 
Orchestra de Paris in Ravel's Plano 
Concerto in G (Hdtene Grimaud) and 
Mahler's Fifth Symphony. Fri: Roger 
Norrington conducts Chamber 
Orchestra of Europe in Weber, 
Stravinsky and Mendelssohn. Sat 
The Dubliners. Sun morning, Mon 
evening: Sytvafn Cambreting 


conducts Frankfurt Opera Orchestra 
in Berlioz, Hindemith and 
Beethoven, with viola soloist Kim 
Kashkashian. Sun evening: Daniel 
Nazareth conducts Middle German 
Radio Symphony Orchestra in 
Beethoven and Berlioz, with piano 
soloist Homero Franceses (069-134 
0400) 


■ GOTHENBURG 

Konserthueet Tonight tomorrow. 
Sat afternoon: Niklas Widen 
conducts Gothenburg Symphony 
Orchestra in works by Beethoven, 
Lindgren and Tchaikovsky, with 
piano soloist Peter Jablonski 
(031-167000) 

Operan Tonight: Robert North's 
production of Prokofiev's ballet 
Romeo and Juliet Sat: Blomdahl's 
1959 space opera Anlara. Nov 26, 
27: Neeme Jfevi conducts 
Gothenburg Symphony Orchestra 
and Chorus in Mahler's Eighth 
Symphony (031-131300) 


■ HAMBURG 

Staatsoper Tonight, Sat: Hamburg 
Ballet In John Neumeierts Requiem, 
music by Mozart. Tomorrow, Sun: 
Neumeier's production of The 
Nutcracker. Fri: Siegfried with Heinz 
Kruse and Simon Estes. Next Tues: 
Ariadne auf Naxos. Next Wed: 
GfitterdSmmerung (040-351721) 
Musikhalle Tonight: Hamburg 
Mozart Orchestra plays Tchaikovsky 
and Mozart. Sat: Beaux Arts Trio. 
Sun: Moscow Virtuosi with director/ 
violin soloist Vladimir Spivakov. 

Mon: Semyon Bychkov conducts 
Orchestra de Paris in works by 


Ravel and Mahler, with piano soloist 
H6ISne Grimaud (040-354414) 


■ HELSINKI 
Finnish National Opera Tonight 
Sat next Wed: Oteilo. Tomorrow: La 
boheme. Fri: Miguel Gcmaz-Martinez 
conducts concert performance of 
Falla's Atiarrtida (0-4030 2211) 


■ LYON 

Yevgeny Kiss in plays the Schumann 
piano concerto at Auditorium 
Maurice Ravel tomorrow, Fri and Sat 
with the Orchestra National de Lyon 
conducted by Gilbert Varga (7860 
3713) 


■ MUNICH 

Gasteig Tonight Semyon Bychkov 
conducts Orchestra de Paris in 
Schubert's Second Symphony and 
Mahler's Fifth. Tomorrow: Gianluigi 
Gelmetti conducts Munich 
Philharmonic Orchestra and Chorus 
in Rossini's Stabat Mater. Sat 
Herib&t Basse! conducts Klassische 
Ph0harmonle Bonn in Beethoven 
and Mozart Sun: Arthur Fagen 
conducts Bavarian Radio Orchestra 
in an evening of opera arias, with 
mezzo Vesselina Kasarova and 
baritone Boje Skovhus (089-4809 
8614) 

Staatsoper Tomorrow, Sun: 

Carmen. Fri, Mon: Bektra with Jan is 
Martin, Leonie Rysanek and Sabine 
Hass. Sat La traviata starring 
Tiziana Fabbriclni and Francisco 
Araiza (089-221316) 

Deutsches Theater Tonight 
tomorrow: Rafael Aguilar's Ballet 
Teatro Espanol in a flamenco 
programme (089-5523 4360) 


Prinzregenterrtheater Tonight 
tomorrow: Chicago, the Kander and 
Ebb musical in a production directed 
by Jeffrey Dunn (089-2916 1414) 


■ OSLO 

Konsertfius Tomorrow, Fri: Martas 
Jansons conducts Oslo 
Philharmonic Orchestra in works by 
Beethoven, Bartok and Berlioz, with 
piano soloist Yefim Bronfman. Sat 
Matin Tumovsky conducts concert 
of operatic extracts, with vocal 
soloists Inva Mufa-Tchako and Keith 
Lewis (2283 3200) 


■ STOCKHOLM 

Royal Opera Tonight Le nozze df 
Figaro. Tomorrow, Sat afternoon, 
next Tues: Natalie Conus’ 
production of Swan Lake. Fri, Mon: 
La traviata (tickets 08-248240 
information 08-203515) 
Konserfhuset Sat afternoon: Anne 
Sofie von Otter song recital. Sat 
evening: first concert in a week-long 
Sandstr&m festival (tickets 
08-102110 information 08-212520) 


■ STUTTGART 

Staatstheater Tonight Rolf Riehm’s 
new opera Das Schweigen der 
Sirenen. Tomorrow, Sat B6farfs 
choreographic version of Die 
ZauberflOte. Fri and Sun: Lady 
Macbeth of Mtsensk with Kathryn 
Harries as Katerina Nov 24: first 
night of new production of 
Janacek's From the House of the 
Dead (0711-221795) 


ARTS GUIDE 

Monday: Baffin, New York and 
. Parts. 

Tuesday: Austria, Belgium, 
Netherlands, Switzerland, Chi- 
cago, Wa shi ngton. 
Wednesday: France, Ger- 
many, Scandinavia. 

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

Friday: Exhibitions Guide. 

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

MOMMY 

NBC/Super Channel: FT 
Reports 1230. 

TUESDAY 

Euronews: FT Reports 0746, 
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; 




IS 


Ian Davidson 


Monday’s meet- 
ing of foreign 
and defence 
ministers of 
the Western 
European 
Union was an 
object lesson in 
the current 
acceleration of history. 

The occasion was supposed 
to break ground in two ways: 
with a first substantive debate 
on the development of a dis- 
tinctively European defence 
policy; and with a first joint 
session with minis ters from 
eastern Europe. 

In the event, both these inno- 
vations fell Oat. because they 
were over-shadowed by 
another bit of history-making 
that was not supposed to be on 
the agenda: uproar and agita- 
tion at the US decision to 
break r anks over the UN arms 
embargo on Bosnia 
This American decision may 
not, perhaps, make much prac- 
tical difference to the effective- 
ness of the embargo or to the 
war in former Yugoslavia But 
no one can disguise the poten- 
tial political damage that it 
could inflic t on the transatlan- 
tic relationship. 

First, this conflict goes sym- 
bolically to the heart of the 
future of the Atlantic alliance. 
The US has on many previous 
occasions pursued military pol- 
icies which the Europeans did 
not like: the Vietnam war, for 
example, or the bombing of 
Libya But this is the first time 
that the US has deliberately 
engaged in strategic conflict 
with the European allies in the 
European theatre. 

What makes this so worrying 
is what it says about American 
attitudes towards the alliance 
after the end of the cold war. 
That relationship must mean 
much less to the Americans 
than we used to be told if they 
are prepared to jeopardise it 
for the sake of what they have 
so little reason to hope will be 
a “fairer” war in Bosnia. 

The second cause for con- 
cern is that the US move seems 
to have been made in disregard 
of bigger geo-strategic objec- 
tives. By any rational assess- 
ment, the west ought to give a 
higher priority to the general 
strategic relationship with 
Moscow than to a unilateral 
and unpredictable intervention 
in the Bosnian war. 

But the Russians also have 
an essential practical role in 
international efforts to deal 
with the Bosnian war the west 
persuaded them to join the 
five-nation “contact group". 


Conflict 

of 


A t 11.13 yesterday 
morning, a hush fell 
over Germany's Bund- 
estag. Mrs Rita Siiss- 
muth, the speaker, had 
returned to her seat. “Look, 
there go the flowers - he's 
made it," a cameraman whis- 
pered. Seconds later Mr Hel- 
mut Kohl rose out of his front 
row seat to acknowledge an 
ovation from the massed ranks 
behind him. There was not a 
flicker of emotion from the 
opposition benches. 

Mr Kohl had made it By the 
skin of his teeth - with just 
one vote more than the 337 he 
needed to have an absolute 
majority in the 673-seat assem- 
bly - be had been elected chan- 
cellor for a fifth term. 

That was the easy part. The 
tough time is still to come. For 
the next four years. Mr Kohl 
will have to keep control of a 
tired and fractious coalition, 
with a majority of just 10 votes 
in the Bundestag, and a hostile 
majority in the Bundesrat, the 
second chamber of the German 
parliament where the 16 states 
are represented. 

He must do so with a budget 
that is already seriously over- 
stretched. a continuing drain 
of funds to support the col- 
lapsed economy in east Ger- 
many. and a soaring public 
debt burden that is set to 
exceed D M2, OOOb n. or some 62 
per cent of gross domestic 
product, in 1995. 

Much of what Mr Kohl 
intends to do is spelt out in his 
agenda for the coming legisla- 
tive period, a 49-page document 
agreed in record time between 
his Christian Democratic 
Union (CDU), its more conser- 
vative Bavarian sister party 
the Christian Social Union 
(CSU), and the Free Demo- 
cratic party (FDP), since they 
won their narrow victory in 
the October 16 general election. 

The focus is clear: it includes 
reducing the budget deficit, 
cutting public expenditure and 
creating jobs to counter the 
rise in long-term unemploy- 
ment in west Germany as well 
as the east. 

But implementing this 
agenda may well expose the 
cracks in the coalition, particu- 
larly since the government's 
majority now depends on its 
weakest partner, the FDP. led 
by Mr Klaus Kinkel. the for- 
eign minister, saw its support 
slump from 11 per cent to 6.9 
per cent in the election and 
now needs to assert its inde- 
pendence to regain support. 
Tax reform, and the whole 
effort to reduce the budget def- 
icit, may prove the first test 
The previous government's 
medium-term fiscal plan envis- 
aged a decline in the deficit 


interest 


The US move 
on Bosnia 
disregards 
broader 
strategic goals 


precisely because outside pres- 
sure bad much less chance of 
persuading the belligerents to 
settle without co-operation 
from the Russians, traditional 
allies of the Serbs. 

These strategic consider- 
ations are now in jeopardy. 
Any lifting of the arms 
embargo on the Bosnians will 
provoke a parallel lifting of the 
embargo on the Serbs, either 
overt or covert; the Russians 
will be under domestic pres- 
sure to help their Serbian pro- 
teges: and the anti-western 
camp in Russia will be 
strengthened. It is hard to 


This conflict goes 
symbolically to the 
heart of the future 
of the Atlantic 
alliance 


believe that this adds up to an 
advantageous strategic bargain 
[or the US, for the sake of an 
intervention in Bosnia whose 
effects must be marginal. 

It is certainly not a good 
strategic bargain for western 
Europe. The over-riding prior- 
ity of the members of the Euro- 
pean Union just now is to work 
out, ahead of the Inter-Govem- 
mental Conference (IGC) in 
1996, a new European architec- 
ture for the post-cold war 
world. By now, there is fairly 
common agreement that this 
must include the expansion of 
the EU to include the countries 
of eastern Europe. But there is 
so far no consensus whether 
this means a loose and floppy 
organism with opt-outs galore 
(the British vision), or a tightly 
integrated structure with a 
semi-federal “hard core" (the 
German model). This conun- 
drum will be much more diffi- 
cult if western Europe also has 


to deal with a bigger war in 
the Balkans. 

And yet the row over Bosnia 
has one large compensation: it 
should ensure that future dis- 
cussions of the new architec- 
ture for Europe take account of 
the fact that the transatlantic 
relationship is now unavoid- 
ably different from what it was 
during the cold war. 

The UK government's argu- 
ment for a loose, floppy, amoe- 
ba-like organism has rested on 
the assumption that Nato, the 
American leadership of Nato, 
and the Anglo-American “spe- 
cial relationship" would all go 
on as before. That assumption 
has been crumbling in the face 
of the facts; now it is no longer 
tenable. In the post-cold war 
world, the transatlantic Alli- 
ance is losing its pulling- 
power on policy in Wash- 
ington. 

Some European diplomats 
minimise the US move away 
from the arms embargo, under 
the pretext that it was imposed 
on President Bill Clinton by 
Congress. Yet the fact is that 
Clinton himself has been at 
odds with Europe over Bosnia; 
and if the latest move was 
imposed by the old Congress, 
just wait to see what the new 
one will do. The chances are it 
will be more hostile to Russia, 
more hostile to the UN and all 
the constraints of multilateral 
diplomacy, and more impatient 
with what it sees as the wim- 
pish Europeans. 

This cannot fail to have 
repercussions on the 1996 
debate. All European countries 
would much prefer the 
Americans to lead the alliance 
as before, because that would 
save them so much trouble; 
above all, it would exonerate 
them from taking charge of 
their own destiny. But if the 
alliance has become less cen- 
tral to US policy, as is inevita- 
ble, then it must also become 
less central to European policy. 
You cannot follow a leader 
who does not want to go any- 
where you want him to go. 

The Americans have just 
raised the stakes for the 1996 
European negotiation in ways 
they may not have expected. If 
the EU expands to the east it 
will need a real foreign and 
security policy: the combina- 
tion of the east Europeans 
inside, and the Russians out- 
side. will make it almost 
unavoidable. It will become 
inevitable if the west Euro- 
peans come to believe that 
their strategic objectives and 
those of the Americans are no 
longer the same. 



FINANCIAL TIMES WEDNESDAY- NOVEMBER J 1994 


The hard work is 


still to come 


Kohl must control a fractious coalition government, 
write Judy Dempsey and Michael Lindemaim 




employers’ ' fade ration ' pres- 
: ented an ambitions programme 
- to restructure the social secu- 
rity system just, two days after 
theOetabereleetion. • 

.But Mr Kdhi knows the issue 
remains divisive .within his: 
own 'CDU, arid feces a battle to 
push social' spending cuts 
" through ' the. 'Bundesrat. The 
SPD ' nominally, controls- 41 . of 
the ' chamber’s 68 - seats ...r 
enough to Hock most fegisla- 
. fion. In practire, the states in 
the Bundesrat.; rarely vote on 
panel; partypdMtkal lines. But 








it will stffl- take .all the. gov- 
ernment's tactical -gkfn« toout- 


manoeuVre-theSPIX .7 
. There are piefificaT tensions 
as welL Tfce;SPD,L~the Greens^ 
and thfi: Batty, . of .Democratic 
Socialism, the mistime East 
German Communist' party, will 
seize every; opportunity to 
exploit the g ov e rnm ent's tiny 
majority, and espedafiy - to 
detach the FDP from its- coall- . 
tion partners. .. . 


w L 

W eS 


Gr 


Coalition builders: Foreign Minister Elans KmkeL, Finance Minister Theo Waigel and Helmut Kohl 


from 4.4 per cent of GDP in 
1993 to less than 1 per cent of 
GDP in 1998. Such a reduction 
would lead to a decrease in the 
public debt ratio, from the 
peak of 62 per cent in 1995 to 
57.5 per cent in 1998. This 
would allow Germany to f ulfil 
the requirements Tor entering 
the European Monetary Union. 

Mr Thomas Mayer, chief 
economist at Goldman Sachs, 
the US investment bank, says 
“this desired deficit reduction 
would require keeping the 
annual average increase in 
total government expenditures 
to 2.4 per cent in 1995-1998.” 
compared with a predicted 
nominal growth rate of 5-25 per 
cent a year over that period. 

That will be tough enough to 
achieve. But the need for 
expenditure restraint will be 
greatest for the 11 west Ger- 
man states, to allow for above- 
average spending growth of 
the five east German states to 
fund high infrastructure and 
social spending. Since most of 
the states are dominated by 
the opposition Social Demo- 
cratic Party (SPD). Mr Kohl 
will be forced to strike bar- 
gains with the Bundesrat to 
push through all the cuts he 
needs. 

The FDP is already chafing 
at the re-imposition of the 


so-called solidarity surcharge 
from next January l, a 7.5 per- 
centage point addition to 
income tax designed to raise 
an estimated DM2Sbn for 
investment in eastern Ger- 
many. This will curb the defi- 
cit which Mr Theo Waigel. the 
finance minister, admits will 
still total DM64bn this year. 

But in keeping with its lib- 
eral, tax-cutting traditions, the 
FDP tried to negotiate a dead- 
line by which the surcharge 
would be scrapped. It had to 


Cuts in social 
spending remain 
a priority for 
German 
industry 


make do. instead, with an 

annual review, and the issue is 

certain to strain relations 
between the coalition partners. 
“How long can the taxpayer 
tolerate high taxes?” asked a 
liberal deputy. 

The SPD, for its part, is 
already challenging the coali- 
tion's other taxation policies. 
The biggest bone of contention 
is the way in which the gov- 
ernment will finance an 
increase in the income tax 


threshold -. demanded by the 
federal constitutional court - 
so that no tax is paid below 
subsistence leveL Achieving 
this means a rise in tax-free 
income from DM5,060 to 
DM12,000, at a cost, according 
to Mr Waigel, of DM15bn. An 
independent commission, 
which he appomted/argues tits 
cost of raising the tax thresh- 
old will be closer to DM40bn. 

And the three coalition part- 
ners have yet to explain bow 
the government trill imple- 
ment cuts in social spending 
while finding the money to 
finance their election promises. 
Two commissions have been 
appointed to assess what needs 
to be changed. 

One will examine tire range 
of welfare benefits to see 
whether they are necessary; 
the other is to determine what 
can be done to encourage the 
long-term nn employed to 
return to work, even if the jobs 
are low-paid. Neither is expec- 
ted to report until 1996 and the 
coalition programme contains 
few hints about how money 
can be saved before than. 

Cuts in social spending 
remain a priority for German 
industry which still complains 
about the burden of social 
security contributions. To 
underline its concerns, the 


G ne tense issue is cer- 
tain to be the gov- 
ernment's lampaT gri 
against organised - 
crime. This would include 
installing electronic . surveil- 
lance. and bogging, devices in 
" homes, something which .the 
liberals oppose. It was dropped 
from the : coalition’s agenda 
because of bitter, disagree* 
merits between the partners. . 

: Given the. vulnerability' of 
the FDP, which exposes the 
fragility of the coalition, it will 
be left up .to Mr Wolfgang 
Schauble, parliamentary head 
of the CDU/CSU ' faction, to 
impose not . only party disci- 
pline across ranks, Jjyj jjJsq 
to. weaken the opposition by 
dividing it He has already 
made tentative overtures to 
the G reens. Last Wecjk, It was 
the CDU , and not the SHL that 
elected Ms Ahtje Vollmer, a 
. senior member of the Greens, 
as one of the Bundestag's four 
deputy speakers. 

“The last thing Mr. Kohl 
wants is a united opposition 
whose policies might appear 
attractive to the PDF,” said a 
dose colleague of the Chancel- 
lor. “Given this weakened 
majority and a strong SPD in 
the Bondesrat, I just wonder if 
this government has enough 
political will to push through 
its poUtiesT said- Mr Mayer. 

Mr Kohl only just made, it 
yesterday. He . has gone before 
parliament five times since 
1982 to be elected chancellor - 
yesterday’s margin of victory 
was his smallest ever. That in 
itself augurs badly for the com- 
ing four years. His greatest 
strength, though, remains his 
ability to surprise. He may do 
so again. 


-Apec an 


LETTERS TO THE EDITOR 


Number One Southwark Bridge, London SE1 9HL 

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


Sustainable pay rise, 
not minimum wage 


State of US healthcare no 
threat to Canadians 


From Phillip Oppenhetm MP. 

Sir, John Monks, secretary 
general of the Trades Union 
Congress, indicated in his let- 
ter (November 14) that the 
union movement is considering 
seriously its policy on a 
national minimum wage. 

We in government share Mr 
Monks's wish for there to be a 
sustainable increase in levels 
of pay. However, Mr Monks 
and his colleagues have failed 
to tell us how they would han- 
dle the implications of a mini- 
mum wage on differentials. Bill 
Jordan, president of the AEEU 
engineering and electrical 
union, has already indicated 
that his union would oppose 
any squeeze on pay differen- 
tials. 

The unhappy experience of a 
minimum wage in Spain and 
France emphasises the need 
for pay to be determined 
between employers and work- 
ers in the light or their particu- | 
lar circumstances. This i 
enables increases in pay and | 


investment to be sustained 
through increased productiv- 
ity. 

The only way to ensure sus- 
tainable increases in pay in the 
UK is to boost our economic 
competitiveness by achieving 
monetary and fiscal stability. 
One only has to look at the 
increase in productivity since 
1979 to see that we have made 
progress in this field, but we 
must ensure that this progress 
continues. 

Our success with this policy 
can be illustrated by the fact 
that the real take-home pay of 
a single man in the bottom 10 
per cent of the full-time wage 
distribution is 23 per cent 
higher than in 1979. Under the 
last Labour government, it fell 
by 1 per cent. 

Phillip Oppenheim, 
parliamentary undersecretary 
of state. 

Department of Employment, 
Carton House, 

TolhiU Street, 

London SWIH 9NF 


From Ms Carol Clemenhagen. 

Sir, Mr Fredric Steinberg of 
Atlanta, Georgia (Letters, Octo- 
ber 24), expresses great con- 
cern that Canadians will have 
nowhere to go for treatment “if 
US healthcare goes down the 
socialised road to medical 
oblivion”. 

Do please let me allay Mr 
Steinberg’s fears: in spite of all 
the American-based propa- 
ganda he may have baud to 
the contrary. Canada's health 
system, like the Canadians 
who use it, is alive, well and 
thriving. Yes, we are working 
to improve elements of our 
health system and we are cer- 
tainly faced with cutbacks in 
publicly-funded health pro- 
grammes. However. Canadian 
governments, healthcare pro- 
viders and the general public 


remain firmly committed to 
the principle of financially 
unimpeded access to health- 
care as a building block far the 
continued well-being of our 
population. 

Irrespective of the future 
state of our American neigh- 
bour’s health system, Cana- 
dians can continue to look for- 
ward to first-rate care within 
our own borders without 
regard to an individual's abil- 
ity to pay. We sympathise with 
the uninsured Americans who 
do not now seem likely to 
share that privilege and secu- 
rity in their own country. 
Carol Clemenhagen, 
president, 

Canadian Hospital Association, 
17 York, Suite 100. 

Ottawa, Ontario KIN 9J6> 
Canada 


Assistance should be real 


VUtt 


e r co i 


Result lacked decisiveness 


From Mr John Storming. 

Sir, “Sweden gives clear Yes 
to EU" said your headline 
(November 14). No, it did not 
It gave only a very dubious 
Yes. Nearly half the voters (47 
per cent) said No. 

Your story describes Fin- 
land's vote as “decisive 
approval". In fact 43 per cent 


voted No iu the Finnish refer- 
endum. Neither country has 
accepted EU membership 
wholeheartedly. 

John Stanning, 

St Mary's, 

Sleepers Hill, 

Winchester, 

Hampshire 
S022 4ND 


From Mr JR Read. 

Sir, In his review of Sir 
James Goldsmith's book. The 
Trap (“Trapped in a protection- 
ist world", November 10), Mar- 
tin Wolf states that “if we are 
all concerned about unemploy- 
ment and the distribution of 
the gains from growth, the best 
and most politically honest pol- 
icy is direct, rather than indi- 
rect, assistance to the work- 
ers". 

However, before any assis- 
tance is given, would it not be 
a good idea to remove the bar- 


riers to employment? After all, 
what is the point or simulta- 
neously discouraging an activ- 
ity and then trying to assist it? 

Put another way. why levy 
tens of billions of pounds on 
employment and then try to 
encourage it by handing q Hny 
fraction back, at the same time 
hying to delude everybody 
that the net result is assis- 
tance? 

John Read. 

St Anne’s, 

8 Turner Drive, 

Condon NWlI 6TX 


Little evidence of poor performers being prime takeover targets 

Frnrn Dr TVm Jontfncnn mn rt I nnk n„WU,. an I ... . ® 


From Dr Tim Jenkinson and 
Professor Colin Mayer. 

Sir. In a recently published 
book, Hostile Takeovers: 
Defence. Attack and Corporate 
Governance (McGraw Hill), we 
report that there is little evi- 
dence that targets of takeovers 
are poorly performing firms 
experiencing either earnings or 
dividend reductions or below 
average stock market perfor- 
mance. Reviewing the book 
(FT Review of-Business Books: 
“Handle with care", November 
2), David Wlghton suggests 
that, during periods of rising 
earnings, companies with 
below average growth rather 
than declining earnings and 
dividends may also be legiti- 
mate targets of bids. Even if 
this were true, it simply does 


not apply: more than 80 per 
cent of the targets where we 
report no evidence of poor per- 
formance actually experienced 
earnings increases above the 
market average. 

In regard to stock market 
returns, Wlghton suggests that 
anticipation of bids may have 
inflated targets' share prices, 
causing poor performance to 
be disguised. We specifically 
avoid this problem by allowing 
poor performance to be 
revealed up to two years before 
the bid: 70 per cent of the tar- 
gets with above average stock 
market performance outper- 
formed two as well as one year 
before the bid. 

Contrary to the impression 
created by the review, the book 
is not primarily about perfor- 


mance; others have provided 
more detailed evidence in sup- 
port of the above. Instead, the 
book examines the strategies 
employed by raider and target 
company. The detailed case 
studies reveal that hostile bids 
are frequently motivated by 
strategic objectives of the 
raider rather than poor perfor- 
mance of targets. It Is a pity 
that the review of the book 
makes no mention of one of its 
main observations, and that is 
the few defences which targets 
can employ once, in particular, 
cash bids have been launched.' 

The book argues that share- 
holders should be able volun- 
tarily to implement takeover 
defences, as they commonly do 
in virtually every country out- 
side the UK, on.the grounds 


that a large group of dispersed 
shareholders may be unable to 
to particular corporate 
policies in the absence of such 
self-denying ordinances. On 
the basis of evidence from sev- 
eral recent studies, the burden 
of proof that the UK should 
have the most liberal hostile 
takeover market of any conn- 
try in the world, including the 
US, now rests firmly in the 
ha nds of those who wish to 
establish that no consequential 
damage is imposed on target 
companies. 

Tim Jenkinson, 

Stock Exchange fellow. 

Kebte College, 

Oxford, 

Colin Mayer, 

School of Management Studies, 
university of Oxford 






FINANCIAL TIMES 


Wednesday November \6 1994 


19 


financial times 

Tel" 1 ™ E? Soutl ' wark Bridge. London SEI 9HL 
' ° 71 ’ 873 3000 Telex: 922186 Fax: 071-407 5700 

Wednesday November 16 1994 


Mr Greenspan 
gives up 


Sensible it may have been 

U , Was DQL With the 

h^hiS e K* ,OII f eIec tions now 
behind him, few doubted that Mr 

woulti deckle to 
raise US interest rates at yester- 
day s Federal Reserve Open Mar- 

Jna meet ing. In the 

end. he did a little more than 
many expected. 

. TJe thiwquarter point rise in 
both the discount rate and the 
rate on federal funds will not 
please everybody. But Mr Green- 
span is not there to please. He Is 
there to keep inflation broadly sta- 
ble. as the US recovery matures 
To date, there is little to suggest 
that he has got much wrong. 

The Federal Reserve chair man 
zs attempting a difficult feat with 
highly imperfect tools. Mr Green- 
span would like to engineer a “soft 
landing" for a healthy economy, 
now well into its fourth year of 
expansion. The five rate rises 
since the beginning of the year, 
which preceded yesterday’s 
change, have so far failed to bring 
the annual rate of growth in real 
GDP, currently 3.8 per cent, to the 
2J> per cent historically associated 
with stable inflation. 

News of continued growth of 
both retail sales and industrial 
production in October did little to 
dispel Investors' belief in the econ- 
omy’s underlying vigour. Before 
yesterday, they have increasingly 
condemned Mr Greenspan's efforts 
as lethargic, especially in light of 
persistent downward pressure on 
the dollar. Yet the fact that Inter- 
est rate changes have most of 
their effect a year or two after the 
event makes this judgment a lot 


easier to assert than to prove. 

Mr Greenspan has been slower 
to raise interest rotes in the cur- 
rent upturn than his predecessor 
in the early 1980s. But, if one were 
judging by history alone, one 
would have to call this year's 
tightening pre-emptive. 

There is only anecdotal evidence 
of an acceleration in consumer 
prices, which grew at an annual 
rate of 3 per cent in September, 
only a little above its cyclical low 
of 2.7 per cent Growth in the nar- 
row measure of money supply, one 
of the more useful forward predic- 
tors of inflation during the 1980s, 
has fallen steadily over the past 
year, to a mere 1 per cent annual 
rate. 

This anaemic narrow money 
growth has come with stronger 
expansion of lending and rapid job 
creation. Clearly, many of the old 
rules for gauging future inflation- 
ary pressures no longer apply. 
Unfortunately for Mr Greenspan, 
he has had to improvise, before an 
unusually attentive - and critical 
- audience in Washington and the 
financial markets. 

Over the past several decades, 
the real rate on federal funds has 
averaged 2 per cent Yesterday's 
rise - the largest single increase 
Mr Greenspan has sanctioned in 
his career as Federal Reserve 
chairman - took it significantly 
above that level, for the first time 
this cycle. It is unlikely to be the 
last increase that Mr Greenspan is 
required to make in the months 
ahead. With luck, however, his 
uncharacteristic decisiveness will 
curb future inflation as well as his 
market critics. 


Apec and Europe 


Is it plausible that the mixed bag 
of countries represented at the 
summit of the Asia-Pacific Eco- 
nomic Co-operation forum will 
actually attain “free and open 
trade ... no later than 2020"? The 
answer most be no. Yet the fact 
that they have even made this 
commitment is intriguing. 

The question is what precisely 
has been deckled. Apart from the 
broad commitment to liberalisa- 
tion and the call for specific pro- 
posals to be advanced next year, 
there is only the agreement that 
industrialised countries should 
liberalise by 2010 and the rest by 
2020. All else remains obscure. 

What, for example, is meant by 
free trade or by Apec’s “opposition 
to the creation of an inward- 
looking trading bloc that would 
divert from the pursuit of global 
feee trade”? How can liberalisation 
be pursued within the region, 
while ensuring that the result, is 
“not only the actual reduction of 
barriers among Apec countries 
but also between Apec economies 
and non-Apec economies"? 

Any kind of discriminatory 
arrangement within so large a 
part of the world’s economy would 
be undesirable. Why, for example, 
should Malaysia discriminate 
against Bangladesh in favour of 
the US? Yet non-dlscriminatory 
liberalisation within Apec would 
almost certainly be impossible, 
of the concern about free- 
riders. Hie only escape from the 
rtiinmma would he global negotia- 
tions. But it would be unsatisfac- 
tory for such negotiations to be 
launched only after Apec had 


already decided its own position, 
since the rest of the world would 
then be presented with a “take 
it or leave it” negotiating pos- 
ition. 

The right way for any global 
negotiation to proceed is globally. 
Ideally, therefore, Apec should be 
a catalyst for global negotiations 
and neither a substitute for such 
negotiations, nor an Independent 
forum. The only outside entity 
capable of insisting upon this is 
the EU. But, first, it must commit 
itself to that notion and, more 
broadly, to engagement with the 
rising economies of East Asia. 

Before that, the EU has to ratify 
the Uruguay Round, something 
that should now be possible after 
yesterday’s ruling by the Court of 
Justice on the powers of the Com- 
mission and the member states. If 
the EU is to be an effective negoti- 
ator, it will also have to develop a 
modus operands for negotiations in 
areas of mixed competence. If 
nothing else, the outcome of the 
Apec summit should encourage it 
to do this swiftly. Otherwise it 
may find itself ignored, because It 
will he judged too intractable a 
negotiating partner. 

The promising aspect of Apec is 
the momentum it should impart to 
global liberalisation. How that 
momentum will, and should, be 
guided is, however, obscure. The 
essential prior step is ratification 
of the Uruguay Round. Then the 
priority must be further global 
progress. It is up to the EU, 
as the major player outside Apec, 
to give voice to that wider inter- 
est 


Utter contempt 


There are various reasons why the 
government of one sovereign state 
might wish to give £234m to that 
of another, as the UK promised 
Malaysia it would in 1989. 

There might be general consid- 
erations of foreign or trade policy: 
Malaysia is a country of growing 
wealth and influence, whose gov- 
ernment, headed by a notoriously 
prickly prime minister, has impor- 
tant contracts in its gift- That 
gives Britain an interest in keep- 
ing him sweet Or again there 
might be a specific interest in sec- 
uring a particular contract in this 
instance a £1-Sbn arms deal. We 
know that such a linkage was 
explicitly made in a protocol 
signed, but subsequently repudi- 
ated, by Lord Younger, then 
defence secretary. 

The UK’s modest overseas aid 
budget however, has a more 
restricted application. An act of 
parliament says that the primary 
purpose of money disbursed under 
this heading must be the eco- 
nomic benefit of a foreign country 
or welfare of its people. • 

That still allows a considerable 
latitude. The Malaysian govern- 
ment claims to be convinced that 
the Pergau dam will benefit the 
country and add to its peoples 
welfare. The British government 
could, in theory, have agreed. How 
ministers must wish that Sir Tim- 
othy Lankester. then permanent 
secretary at the Overseas Develop- 
ment Adminis tration, had done 
just that. Instead of advising 
the foreign secretary, then 
as now Mr Douglas Hurd, that 
funding the dam was an 


abuse of the aid programme. 

It Is rather to their credit that 
Sir Timothy’s career does not 
seem to have suffered: he now 
heads the much larger department 
of education. But his authoritative 
view on Pergau remains on file, 
and last week the High Court 
decided that in overriding it Mr 
Hurd broke the law. 

There the matter should have 
ended. Clearly Britain cannot now 
get out of paying Malaysia the 
money it has promised. Equally 
clearly, that- money should not 
come (nit of the meagre aid bud- 
get, which is badly needed for 
more deserving causes. It must 
come from somewhere else - the 
obvious place being the defence 
budget So much of this is already 
devoted to keeping British arms 
manufacturers in business that an 
extra £234m would hardly be 
missed, whereas that sum could 
still meet the basic needs of quite 
a few people in the world’s poorest 
countries. 

Alas, that conclusion is appar- 
ently not so obvious to British 
minis ters. Treasury officials, pre- 
sumably so instructed by their 
political masters, are now examin- 
ing a scheme whereby the pay- 
ment to Malaysia would come out 
of the Treasury's contingency 
fund, and the ODA budget would 
be cut by a corresponding amount 
Thus the letter of the High Court's 
judgment would be respected, its 
spirit flagrantly and deliberately 
ignored. Such ts the humility and 
respect for the law which Conser- 
vative politicians have learnt dur- 
ing 15 unbroken years in office. 


A* 


Timely escape 
from the sidings 

British Rail privatisation is getting back on track sifter 
the signalworkers’ strike, says Charles Batchelor 



The liule train was Quite exhausted. 
Ik had only a very little coal left in 
his boiler. When that was gone he 
would not be able to travel any fur- 
ther. He would just come to a stop, 
until someone came and pushed him 
into a siding, when he would get 
older and older and rustier and rus- 
tier and nobody would remember 
him. 

S even months alter British 
Rail began implementing 
the legislation intended to 
privatise its activities, 
many travellers and some 
would-be investors are beginning to 
wonder if BR feces the same gloomy 
fete as the hero of Graham Greene's 
story The Little Train. 

BR privatisation appeared to have 
been shunted Into a siding alter this 
summer's signalmen’s strike high- 
lighted the losses that train opera- 
tors could suffer through disruption 
in the rail network. The lack of visi- 
ble progress in shaping a railway Gt 
for life in the private sector added 
further to that appearance. 

But appearances deceive. Talk to 
the BR managers busily preparing 
to mount management/employee 
buy-outs of the companies that run 
trains and a very different picture 
emerges. Visit one of the numerous 
conferences arranged to explain the 
privatisation process and the atten- 
dance list attests to the strong 
interest from the commercial sec- 
tor. There is a lot going on behind 
the scenes, and continued interest 
from potential investors. 

The government has set the man- 
agers in charge of privatisation a 
demanding timetable. Nearly 100 
businesses ore up for sale over the 
next two to three years. These 
range in estimated value from 
around Elm, for the small manufac- 
turers of timber sleepers and con- 
crete bridge beams, to between £2bn 
and £4bn for all three of the compa- 
nies that will lease rolling stock to 
train operators. 

Mr David Blake, managing direc- 
tor of the 20-strong BR unit in 
charge of the sales acknowledges 
that the timetable is challenging. 
But he hopes that the five merchant 
banks working on the sales will find 
buyers for its heavy maintenance 
workshops. Red Star and the 
FreightLiner container business by 
next March. 

The 14 companies that carry out 
track maintenance and repairs - 
with combined sales of more than 
Elbn and a workforce of 30,000 - 
should all be in the private sector 
by December 1995. 

But many hurdles remain before 
it will be possible to describe the 
privatisation as a success. 

The profit and loss accounts or 
the first businesses to be put up for 
sale revealed some unexpected hor- 
rors, previously hidden inside BR's 
byzantine accounting systems. For 
example, when the Red Star parcels 


business was first put up for sale in 
June 1993, it revealed losses or £9m 
on a £43m turnover. Not surpris- 
ingly, it failed to find a bidder and 
has since undergone a thorough 
restructuring in preparation for sale 
by the end of December. 

And the signalworkers' strike has 
almost certainly dashed hopes of an 
early flotation on the stock market 
for Rail track, the BR company set 
up to operate the track and most 
stations. With an estimated market 
capitalisation of £3bn-£3.5bn. the 
company would be one of the top 
100 quoted companies and join the 
FT-SE U» Index. 

The government still hopes for a 
flotation before the next election. 
But Railtrack is the part of BR that 
causes others in the business the 
most concern, thanks to its power 
to impose unreasonable charges and 
conditions on those who wish to 
run trains on its tracks. 

Mr John Swift QC, the rail regula- 
tor, is currently consulting the 


industry on the access agreements 
to be signed between Railtrack and 
train operators. It is clear that he 
sees the need for curbs on Rail- 
track's monopoly. 

He questions the Treasury's 
method of valuing Railtrack’s 
assets, with 100-year-old viaducts 
having been valued on a modem 
replacement basis. He also chal- 
lenges its requirement for a return 
on those assets of 5.1 per cent, ris- 
ing to 8 per cent, when commercial 
rates of return have been falling in 
line with lower inflation. Railtrack 
may to charging too much for 
access because of these rules, he 
implies, burdening the train opera- 
tors with higher costs. 

Until the framework for track 
charges is finalised, it will be hard 
to proceed with privatising BR’s 
passenger train businesses. They 
are to be privatised by selling fran- 
chises to run passenger services for 
periods expected to run for between 
seven and 10 years. 


Franchising allows the govern- 
ment to bring private sector disci- 
plines into the passenger railway 
while m aintainin g government sub- 
sidies to businesses that will strug- 
gle to make a conventional profit. 
But it imposes a hideously complex 
task on Mr Roger Salmon, the for- 
mer merchant banker who Is direc- 
tor of passenger rail franchising. He 
now has to negotiate the myriad 
contracts between the different 
players in the industry, including 
the train operators, the rolling 
stock leasing companies and Rail- 
track. 

Mr Peter Field, managing director 
of South West Trains, estimates 
that he has paid his lawyers for 
3.000 hours of work on the 200 legal 
agreements he needs to operate 
trains services in his region. It is 
clear that moving from a single 
monolithic railway system, where 
procedures are controlled by memo 
and the rule book, to one of con- 
tracts between independent compa- 


nies is proving time-consuming. 

Mr Salmon says his task is to 
ensure that the risks of r unning a 
railway are shared fairly and that 
the companies Involved have suffi- 
cient performance incentives. His 
ideal is a set of “self-policing" agree- 
ments, which encourage the parties 
to work together to solve problems 
rather than resorting to the courts. 

He aims to ensure that the sale of 
the first half dozen companies is 
completed by the end of 1995, with 
more than half of the passenger 
railway network in private hands 
by April 1996. 

He hopes that the train operating 
companies should be able to present 
potential investors with their first 
set of audited accounts, covering 
the 12 months ending March 19%. 
in the middle of next year. 

A lthough it will be some 
months before the pas- 
senger franchises are 
formally offered for sale, 
the current managers, 
for the most part long-term BR 
men, are eager to ensure that their 
companies emerge the victors when 
the franchises are put up to compet- 
itive bidding. 

After many years spent juggling 
their costs they now see an opportu- 
nity to exert, for the first time, a 
significant influence on their reve- 
nues. ScotRail, for example, has 
launched a promotional campaign 
which should provide up to Im cus- 
tomers with Tree or reduced price 
travel. South West Trains has 
upgraded its London to Southamp- 
ton service to a 20-minute “shuttle," 
while Gatwick Express has signed 
up the airlines to sell its tickets 
before the plane even lands at Gat- 
wick. 

But while the operators see this 
as a way of creating closer links 
with their customers, critics of rail 
privatisation Tear it is further proof 
of the risk of breaking up the 
national network. Gatwick Express 
has already been taken to task by 
Mr Swift for favouring its services 
above those of its two competitors 
at Gatwick station. 

For the designers of the new rail- 
way age, one of the main aims of 
the contracts that they are now 
drawing up is the prevention of 
fragmentation. Their grand prqject 
is the engineering of a structure 
and system that will ensure that 
decentralisation works - that the 
railways perform as an effective 
whole. This, they hope, will remove 
the need for costly changes later, 
when the private sector makes its 
bids for, or is actually running, the 
railways. 

Only a system that can achieve a 
balance of risk and market strength 
between the near 100 companies 
that will provide railway services 
after privatisation will remove the 
danger of some parts of BR, at least, 
ending up rusting in the sidings. 


Better deal for personal pensions 



PERSONAL 
VIEW 


This year's budget 
is expected to intro- 
duce greater flexibil- 
ity over when peo- 
ple with personal 
pensions in the UK 
must buy an annu- 
ity, probably by 
allowing them to 
postpone the purchase until the age 
of 75 rather than on retirement 

It would be better to remove the 
obligation to buy an annuity alto- 
gether. This would transform per- 
sonal pensions into a flexible 
savings vehicle for retirement, simi- 
lar to the American individual 
retirement account and would give 
people greater choice. 

Whether an annuity is an appro- 
priate investment for an individual 
depends on factors that are impossi- 
ble to forecast: how long a person 
will live, the rate of inflation, and 
the future performance of invest- 
ment portfolios. 

The income from an annuity is 
initially greater than the income 
from a conventional portfolio. This 
reflects actuarial assumptions 
about mortality rates and the use or 
capital. In effect, early deaths 


finance higher initial benefits. 

Inflation, however, erodes the real 
value of an annuity. The cost of 
indexing an annuity is expensive. 

Even if prices are stable, eco- 
nomic growth and rising returns on 
equities mean that, over 10 to 15 
years, the return on an investment 
portfolio will overtake the income 
from an annuity. The combination 
of innation and economic growth 
has a lethal effect on the relative 
attraction of opting for an annuity. 
But under present pension rules, 
you do not have a choice - you 
have to buy an annuity. 

Also, you have no control over 
the capital and an annuity dies with 
you. There is nothing left fur your 
heirs. If you live a long time, you 
benefit from the flow of annuity 
payments, but you will not be able 
to dispose of capital before or after 
your death. This does immense 
damage to the dignity and indepen- 
dence of very elderly people. 

The official rationale for the 
annuity rule is threefold. First, the 
Inland Revenue is anxious to tax 
the capital sum. This is reasonable, 
given that it is accumulated tax 
free. The principal reason for retain- 


ing the annuity rule at 75 appears 
to be the Revenue's tax concerns. 

The Revenue is familiar with tax- 
ing annuities; it has had virtually 
200 years experience of doing so. It 
is possible to find alternative 
arrangements to tax the accumu- 
lated sum without obliging people 
to buy an annuity. Excess pension 


Economic growth and 
inflation have a lethal 
effect on the relative 
attraction of opting 
for an annuity 

contributions are already, for exam- 
ple. taxed at 35 per cent. 

The second reason for the annuity 
rule is the social security depart- 
ment's concern that people who 
have received tax relief should not 
be in a position to "blow" the accu- 
mulated capital and end up on 
income support Obliging people to 
take an annuity prevents that from 
happening. 

But this concern can be resolved 
by requiring people to retain suffi- 


cient capital in a segregated 
account to generate enough income 
to keep them off income support. 
The annuity rule is not necessary. 
The proposals in Social Security 
Secretary Peter Lilley's pensions 
white paper demonstrate that it is 
irrelevant This is because people 
will be allowed to defer tbe annuity 
until they are 75, but will only be 
able to take out an annual income 
equivalent to that of an annuity. 

Tbe third justification, however, 
is that an annuity is the only way 
of guaranteeing someone an income 
until death. This is based on the 
premise that, even where individu- 
als make seemingly adequate provi- 
sion to support themselves through 
an investment portfolio, the returns 
may prove erratic. This argument 
ignores problems, like credit risk, 
timing and the level of interest 
rates that attach to annuities. 

it also neglects the impact of 
inflation, which can result in a per- 
son who lives for a long time ending 
up needing income support anyway. 
Someone in their 90s, for example, 
who retired with an annuity equiva- 
lent to male average earnings - a 
remarkable achievement, given that 


pensions are only normally expec- 
ted to provide around two-thirds of 
final salary - would now be living 
on the princely sum of £1,000 a year. 

The Revenue's instinct is that 
there is something wrong with peo- 
ple having the freedom to choose 
how to invest funds that have been 
accumulated in a tax-privileged 
form. Instead, they ought to do 
what the Revenue thinks best and 
finds most convenient 

It is a profoundly collectivist 
reflex. Like all collectivist 
approaches, it has the effect of 
impoverishing the people it is 
Intended to assist and, by depriving 
them of control over their capital, it 
contributes to a lack of dignity and 
independence in old age. The chan- 
cellor and the secretary or state for 
social security should go the whole 
hog and end this Iniquitous actu- 
aries’ tontine. 

Warwick Lightfoot 


The author, a former Treasury 
adviser, is an economist with the 
Royal Bank of Scotland. 


Observer 


Hands off 
Argentina 

■ Today Argentina gets out the red 
carpet for the UK's Duke of York, 
the first official royal visitor since 
the end of the Anglo-Argentine 
F alklands war in 1982. 

Prince Andrew, a helicopter pilot 
in that war, today re- inaugurates in 
Buenos Aires a statue of 19th 
century British statesman George 
Canning, which had its hands 
lopped off by anti-British protestors 
in 1982, when the statue itself fell. 

Disagreement lingers over what 
exactly happened to the statue, 
once toppled. The British say 
Canning was stored away. 
Argentina’s federation of war 
veterans says the "great English 
thief” was “deposited in the murky 
waters of the River Plate as an act 
of repudiation against British 
imperialism”. 

And what of Canning's hands? 
Have the originals been re-affixed, 
or are they tucked away in a 
Buenos Aires apartment? “You can 
rest assured that it will not be a 
statue without hands,” is the signal 
from the Foreign Office. 


Hogging it 

■ Douglas Hogg has at least two 
reasons to celebrate his wife 
Sarah's stepping down as head of 
prime minister John Major's policy 
unit. 


Douglas, a minister of state at the 
foreign office, will be delighted that 
Sarah will now occasionally come 
home; her Downing Street work 
frequently occupied as many as 16 
hours a day. 

And maybe his own career will 
get a boost. Hogg never had a 
chance of a seat at the cabinet table 
while Sarah was in Number 10: too 
nepotistic. 

But if the attorney general. Sir 
Nicholas LyelL gets chopped as a 
result of the Scott report on the 
arms- to- Iraq affair, Douglas must be 
In with a chance. 

Along with Sarah goes Jonathan 
Hill, Major’s political secretary. But 
the shadow of Sir Tim Bell, 

Baroness Thatcher's image-maker 
and chairman of PR firm Lowe Bell, 
still looms. Hill was previously a 
Lowe Bell employee; he is returning 
there as a consultant. 

Hill’s post is being taken by 
Howell James - one of Bell's closest 
friends. And when he was at Capital 
Radio. James employed Bell's wife, 
Virginia. 

Nice to see Major slicking by 
family values. 


Richter scaled 

■ Heaving Helmut Kohl back on to 
his throne as German chancellor 
yesterday was easier said than 
done. 

In order to avoid any last-minute 
slip-ups, deputies were ordered to 
report at 9am sharp, an hour before 
the Bundestag vote. Six erstwhile 



‘It could be yon - but it won’t’ 


missing deputies made it in time for 
the vote. 

One almost didn't A pale Roland 
Richter, a new CDU deputy, 
careered into the Bundestag at 10.44 
- two minutes before voting ended. 
He apparently looked a good deal 
paler after Wolfgang Schfluble. the 
party’s parliamentary leader, had 
finished with him. 


It could be you 

■ Forget tips on how to play the 
National Lottery. The nightmare for 
any impoverished member of tbe 
Lloyd's of London insurance 
market is winning tbe damn 
thing and then finding that 


Lloyd's claims tbe prize. 

Hence any gamblers left at 
Lloyd's will be glad to hear that 
Elias Freeman, a firm of solicitors, 
has produced a guide to help 
members of Lloyd's keep their 
winnings. Call 071 353 4212 for a free 
copy. 


Timorous weather 

■ The Asia-Pacific Economic 
Cooperation Forum in Indonesia 
hardly set the world alight, despite 
the presence of more than 500 hacks 
and assorted national leaders. But 
Indonesian president Suharto did 
manage to pull one trick. 

Bogor. the site of the conference, 
is known for its downpours and the 
president was worried that Apec's 
great and not-so-good might get 
drenched when lining up for some 
serious photo-opportunities. So a 
rain man, or “pauving hujan ”, was 
hired, and told to pray for dry 
weather. 

Sure enough, Bogor’s skies were 
grey but there were no downpours. 
“We told him ithe pawang) that if it 
rained we wouldn't pay him," said 
an Indonesian official. Better than 
some incentive schemes on offer in 
the vicinity. 


Rats rule OK? 

■ Apparently Malaysia has a 
problem with stray dogs. About lm 
of them are plaguing life, despite 
the official extermination of 205,000 


since 1990. Dog bite cases rose from 
73 in 1990 to 95 in 1992. with two 
human fatalities in the last year. 

Grim stuff. But things are not 
that much better back in the UK, 
where the problem Is not so much 
stray dogs as an exploding rat 
population. The 1993 National 
Rodent Survey - carried out by the 
Chartered Institute of 
Environmental Officers - shows 
that since the last survey, years 
ago, rat infestation has grown by 40 
per cent 

Nice to know that something has 
prospered under the Tories. 


Wiped out 

■ This is either taking recycling 
too far, or shows remarkable 
insouciance in the face of adversity. 
Some of Ukraine's increasingly 
worthless interim Karbovanets 
banknotes are now being turned 
into toilet paper. 

A Dnepropetrovsk papermil] - 
about 500km east of Kiev - is 
turning 35 tonnes of old banknotes 
into loo-rolls every month. One 
dollar currently fetches about 
135,000 karbovanets on the streets 
of Kiev, against 50.000 in 
mid-September. "We get top quality 
paper from the banknotes. Only the 
colour - blue, pink or green - gives 
away what It once was," says 
Vladimir Vereshchak, the mill’s 
director. 

It no doubt gives a cynical 
population some measure of 
satisfaction, anyway. 


r 








- 






2 

0 ★ 




Shepherd 

Design & Build 


Frederick House, Putted Road. York YOl 4EA. 
Telephone 0904 632401. Fex:09Q46lQ256. 


FINANCIAL TIMES 

Wednesday November 16 1994 


ANDOEl 


Global Provider of 
Structured Networking Solutions 
Tel: 01753 636884 


Troop mobilisation prompts US action i Irish leader 


Nato considers Bihac 


weapons exclusion zone 


By Our Foreign Staff 


The TJS and its Nato allies are 
considering establishing a heavy 
weapons exclusion zone around 
the Serb-besieged Bosnian town 
of Bihac, the US Defence Depart- 
ment said yesterday. 

The possibility of such a zone 
has been raised as forces loyal to 
Mr Fflcret Abdic, the ousted Mos- 
lem leader of the Bihac enclave, 
are being mobilised to join a Serb 
offensive against Bihac, UN offi- 
cials reported yesterday. 

American officials added pri- 
vately that the US bad raised the 
issue and that the allies, at a 
meeting of Nato ambassadors in 
Brussels, had agreed to look into 
the proposal, which could allow 
allied air power to prevent Serb 
forces from overrunning the Mos- 
lem-held Bihac enclave In 
north-west Bosnia. 

“There have been discussions 


of the North Atlantic Council on 
the possibility of an exclusion 
zone around Bihac. No decision 
has been matte- These consulta- 
tions and discussions are con- 
tinuing,” said Mr Ren Bacon, the 
defence department spokesman. 

But he would not confirm that 
the US had raised the issue with 
the council, Nato's political 
arm. 

Other US officials said 
that Washington had indeed 
raised the possibility with the 
allies of establishing a 10km 
heavy weapons exclusion zone 
around Bihac. 

“It is one of a number of sug- 
gestions that has come up for 
how to deai with the situation 
there, and I'd rather not be more 
specific about it now,” Mr Bacon 
said. 

“There are a whole series of 
options you could t hink of. An 
exclusion zone is one.” 


UN spokesman Mr Michael Wil- 
liams, speaking in Sarajevo, said: 
“Our estimate is that Mr Abdic is 
presently mob ilising a force of at 
least 3,000 from refugee camps." 

Bosnian Serb forces are report- 
edly closing in on Bihac. Mr Wil- 
liams yesterday confirmed they 
fired seven Sam anti-aircraft mis- 
siles at the Bihac area on Mon- 
day. 

About 30,000 civilians and sol- 
diers loyal to Air Abdic fied the 
Bihac pocket, designated a UN 
safe area, last August after being 
defeated by Bosnian government 
forces. 

They lived under difficult con- 
ditions in Serb-held lands in 
Croatia when Zagreb refused to 
let them cross into the self-styled 
Serb state. 

Local Serbs have re-armed Mr 
Abdic’s soldiers, apparently pre- 
paring an assault from Croatia, 
which borders the Bihac pocket. 


apologises 
in row 
over child 
abuse case 


By John Murray Brown hi Dublin 


France brings forward start 
of foreign flights to Orly 


By John Ridding hi Paris 


Hie French government which is 
under strong pressure from Euro- 
pean governments and airlines to 
allow access to Orly airport in 
southern Paris, said yesterday it 
wonld bring forward the date on 
which it would allow landing 
rights. 

The transport ministry said 
that carriers from European 
Union member states would be 
allowed to launch services from 
January next year. The French 
government had previously said 
that the services could not start 
before the spring. 

The European Commission has 
ordered France to open up Orly, 
which is the main hub for domes- 
tic French flights and closer to 
central Paris than Charles de 
Gaulle, the other main airport in 
the French capital. 

But in spite of this ruling and 
strong pressure from European 
carriers, including British Air- 


ways and KLM of the Nether- 
lands, the French government 
has resisted the opening of Orly. 
It has argued that it needs time 
to prepare for competition and to 
take measures to prevent distur- 
bance to inhabitants of the Orly 
area. 

Yesterday's announcement 
coincided with the latest test of 
strength between the French gov- 
ernment and a foreign carrier 
seeking access to Orly. 

Alter a protracted wrangle, Mr 
Nikki Lauda, the former Formula 
1 motor racing champion and 
founder and chairman of Lauda 
Air, the Austrian airline, yester- 
day landed his inaugural flight at 
Charles de Gaulle airport. He 
then pressed for rapid access to 
Orly. 

Mr Lauda had threatened as 
late as Monday evening to fly to 
the airport in southern Paris, in 
spite of the refusal by the French 
authorities to grant his airline 
landing permission. He said yes- 


terday that he had been given 
permission to fly to Orly from the 
beginning of next year. 

Lauda Air said it had been 
awarded landing slots for Orly in 
the s umm er. Six weeks ago, how- 
ever, the company claimed it had 
been told by the French govern- 
ment that it could not start ser- 
vices as planned. 

In June. France was forced to 
allow British carriers to fly to 
Orly from London after a con- 
frontation with the British gov- 
ernment and the Commission. 

Hie start of services by Euro- 
pean carriers to and from Orly 
airport is set to coincide with the 
launch of flights between Orly 
and Marseilles and Orly and 
Toulouse, which are the most 
profitable routes in the French 
domestic market 

A ruling last month by the 
European Court of Justice upheld 
a decision by the European Com- 
mission that competition should 
be introduced on the two routes. 


Share fears I US rates 


US interest rates 


Continued from Page 1 


Continued from Page 1 


Par cent 
6 — 


it," he said. “It is our responsibil- 
ity as a factory to make sure that 
the proper owners are on the 
shareholder register. The register 
is like our own accounting hook.” 

Russian bankers say this inse- 
cure share registry system has 
spun off a mini-industry in the 
sale of shares by brokers who do 
not actually own them. 

Hie unfortunate buyers learn 
they have been deceived only 
when they try to add their names 
to the official register and 
discover that either the broker 
or the vendor does not 
exist 


noon trading was up slightly at 
Y98.42 and almost a pfennig 
higher at DML553. 

The FOMC started to tighten 
monetary policy in February, and 
in five steps this year it had 
raised the Federal fluids rate by 
1.75 percentage points. But at its 
last meeting in September the 
committee decided to leave rates 
unchanged, despite the growing 
conviction of Wall Street econo- 
mists that another move would 
be needed. 

Economic data available at the 
time of the September meeting 
showed that US gross domestic 


4 >-n<- 

.WtovflL 


I&rsikl 


JW 1993 
Soutok FT Graphite 


1994 Mov 


product had grown at a 3.8 per 
cent annualised pace in the sec- 
ond quarter. 

Since then, second quarter 
growth has been revised up to 4.1 
per cent 


In a last-ditch attempt to hold on 
to his premiership, Mr Albert 
Reynolds, the Irish leader, yes- 
terday expressed “deep and gen- 
uine regret to the Irish people” 
over the mishandling of a child 
abuse case that has led to a crisis 
for his Hanna Fail-led coalition 
government 

His undertaking that the bun- 
gled extradition of the priest 
accused in the case “will never 
be allowed to happen again in 
this country” bought a 24-hour 
delay in the confidence vote 
scheduled for yesterday. 

With Mr Reynolds' Labour 
party partners last night consid- 
ering whether to accept his 
explanation, the future of the 22- 
montb-old coalition hung in the 
balance. 

The prime minister's future 
depends largely on the response 
today of his deputy Mr Dick 
Spring, the Labonr leader and 
foreign minister, who is consid- 
ering siding with opposition par- 
ties to force a general election. 

This wonld come at a critical 
point in the Northern Ireland 
peace process as the LIE and 
Irish governments are working 
on a framework document to 
provide a durable constitution 
for Ulster. While the paramili- 
taries' ceasefire has held for 10 
weeks, their participation in the 
political process is by no means 
assured. 

In an atmosphere of tense 
expectation in the Dail, Mr Reyn- 
olds attempted to appease 
Labour concerns over his 
appointment of the attorney-gen- 
eral, Mr Harry Whelehan, as 
president of the High Court Mr 
Whelehan allegedly delayed the 
priest's extradition. In a special 
debate, Mr Reynolds feD short of 
an outright apology to Mr Spring 
but said he was committed to 
restoring trust with his Labour 
partner. 

Mr Reynolds urged the House 
not to let “a single judicial 
appointment” jeopardise “the 
biggest breakthrough in North- 
ern Ireland in 25 years". 

In a calculated appeal to Mr 
Spring, the prime minister paid 
tribute to the Labour leader's 
role, affirming that “the success 
of these negotiations will under- 
write the future of this country 
and history will record Dick 
Spring’s essential contribution to 
that success". 

The immediate response of 
Labour party backbenchers to 
the impassioned appeal was one 
of disappointment Despite Mr 
Reynolds’ announcement of 
immediate reforms in extradi- 
tion procedures, they felt the 
prime minister had not ade- 
quately explained the attorney 
general’s seven-month delay in 
the extraditing the priest 
involved in the case. 


Irish coalition teeters an the 
brink. Page 2 


FT WEATHER GUIDE 


Europe today 


■ 7- 


1010 1020 


A depression and an associated frontal zone 
over the Atlantic will approach north-western 
Europe, but wfll not affect the UK until late on 
Wednesday. Sunshine will be Interspersed with 
cloud and Hght showers in the western UK. 

The Benelux and northern France win also have 
sunny spells and showers. Conditions will be 
overcast with rain in central France and along 
the northern coast of Spain. 

Rain win also dampen the Alps and northern 
Italy. Elsewhere in Italy and in the Balkans, 
there wifi be a mixture of sun and cloud. North- 
eastern Europe and eastern Scandinavia win be 
overcast, while central Scandinavia will have 
Intervals of doud and sunshine. Wintry 
conditions wiN persist in the north. 














Five-day forecast 

Unsettled conditions will remain over north- 
western Europe. Thera wffl be rain or snow in 
northern Europe. 

Conditions win be mainly tranquil over southern 
Europe, although heavy rainfall is expected in 
the Balkans late in the week. Heavy rainfall is 
expected to develop in the south-east at the 
weekend. 






' "-if • 





^O.oio 

' % . 


Wnd speed In KPH 


\ TEMPERATURES 


Situation at 12 GMT. Temperatures maximum for day. Fonxasta by Mateo Consutt of Netherlands 



Maximum 

Baflkna 

dud 

7 

Caracas 


Cetsfcjs 

Belfast 

shower 

9 

CartSff 

Abu Dhabi 

fair 

31 

Belgrade 

shower 

14 

Casablanca 

Accra 

lair 

32 

Beriki 

shower 

10 

Chicago 

Algiers 

nun 

23 

Bermuda 

fair 

24 

OdofpM 

Amsterdam 

shower 

12 

Bogota 

shower 

20 

Dakar 

Mhens 

sun 

18 

Bombay 

fair 

38 

Ddfas 

Atlanta 

fair 

21 

Brussels 

shower 

11 

Dew 

B. Aires 

rah 

20 

Budapest 

shower 

13 

Dubai 

BJiam 

shower 

11 

C-hagen 

doudy 

9 

Dublin 

Bangkok 

Mr 

33 

Cairo 

cloudy 

22 

Dubrovrrik 

Barcelona 

eun 

10 

Cape Town 

shower 

23 

Edinburgh 


No global airline has a younger fleet 


Lufthansa 


fair 

32 

Faro 

fair 

22 

Madid 

shower 

11 

Frankfurt 

shower 

10 

Majorca 

sun 

21 

Geneva 

shower 

13 

Malfa 

fair 

11 

Qtxaftar 

sun 

21 

Mmchastsr 

shower 

11 

Glasgow 

rain 

B 

Mania 

sun 

29 

Hamburg 

shower 

9 

Melbourne 

doudy 

16 

Helsinki 

snow 

2 

Mexico City 

sun 

27 

Hong Kong 

fair 

28 

Miami 

fair 

32 

Honolulu 

fair 

30 

Mian 

shower 

10 

Istanbul 

sun 

14 

Montreal 

fair 

19 

Jakarta 

doudy 

33 

Moscow 

shower 

9 

Jersey 

doudy 

12 

Munich 



Keracfa 

sun 

3S 

Nairobi 



Kuwait 

shower 

28 

Naples 



L Angeles 

Mr 

20 

Nassau 



Us Palmas 

Mr 

24 

New York 



Uma 

doudy 

22 

Nk» 



Lisbon 

fair 

20 

Moods 



London 

doudy 

12 

Odo 



UDtbourg 

shower 

10 

Paris 



Lyon 

shower 

13 

Perth 



Madeira 

doudy 

22 

Prague 


17 Rangoon 
21 Reykjavik 
21 Ho 

10 Roms 
31 S. Fraco 
21 SeoU 

20 Singapore 

27 Stockholm 
13 Strasbourg 

6 Sydney 
2 Tangier 

11 Tel Aviv 
24 Tokyo 

19 Toronto 

28 Vancouver 

18 Venice 
18 Vienna 

20 Warsaw 

4 Washington 

12 WeWngton 
30 Winnipeg 
10 Zulch 


lair 30 
snow 1 


cloudy 22 
fair 19 
shower 13 
shower 14 
thund 32 
shower 2 
shower 12 
OnsS 23 
sun 22 
thund 20 
fair 16 

cloudy 7 
rain 4 
cloudy 14 
rain 11 
shower 7 


(air 19 
fair 14 


doudy 3 
rain 10 


THE LEX COLUMN 


Red meat for the 


The bond and currency markets have 
beep flpmanriipg red meat Yesterday 
the US Federal Reserve gave it to 
them. Hie 75 basis point rise in inter- 
est rates may not have been the full 
one percentage point than many 
wanted, but it was more than the 50 
basis point rise that almost everybody 
expected. The Fed's action should help 
slow down the US economy, so minim- 
ising the risk of inflation taking off. 
The size of the increase also means 
the Fed win probably have a reason- 
able chance of delaying Anther rises 
beyond the end of 1994. 

The immediate reaction from the 
mar kets was positive, with the yield 
on the long Treasury band dipping 
below 8 per cent Other markets across 
the globe are likely to take their lead 
from Treasuries. The dollar’s current 
value should be underpinned and bond 
yields outside the US falL Equities 
should be carried higher too. Still, one 
wonders whether the positive mood 
will last So far this year, the markets 
have taken the view that the Fed has 
acted too little too late to combat infla- 
tion, Unless they are convinced that 
the Fed is now “ahead of the curve”, 
they will be back for more red meat 
before long. 


BOC Group 


Shane price relative to'tfra 1 
FT-SE-A Afl-Shaw Index 
130 — — — -r“ rr 



ling synergy with the rest of the I 
group. There is no urgency to dispose-: 
of the operation because its new 
a naesthe tic drug should- compensate 
tor tiie deffln* in its did product. Hie 
long-twin . danger Is 'that like -Boots 
and Fisons it wITl fmrl lfttfe Bi gnfftnant 
hi the research and development pipe- 

line. If the right price is offered, BOC 
would do well to exit 


rot 92 

Soutok FT Qrspttte 


ous. Mr Kerkorian Is also right to criti- 
cise the bid defences in place at Chrys- 
ler. Given its record, Chiysler's man- 
agement need have nothing to fear 
from a bid - and should have no 
qualms about disp ensing with “poison- 
PUT defences. 


BOC 


Chrysler 

Mr Kirk Kerkoriau's call for higher 
dividends and an end to anti-takeover 
defences at Chrysler is unlikely to 
presage a bid for the company. Mr 
Kerkoriau's move seems motivated 
less by the desire to flush out a preda- 
tor than by frustration with the valua- 
tion accorded the group’s stock. 
Despite its earnings recovery, Chrys- 
ler 's shares have performed poorly 
this year and now stand at only four 
to five times expected earnings for 
1995. This p/e ratio is about a third of 
the average for US companies - too 
low even allowing for the highly cycli- 
cal nature of the automotive industry. 

At issue is the way in which the 
group's management disposes of the 
plentiful cash generated as the indus- 
try nears its peak. Mr Kerkorian 
would like more to be transferred to 
the company’s owners. Dividends have 
yet to return to the level of the late 
1980s. Insofar as pressure from Mr 
Kerkorian induces a more generous 
pay-out policy, perhaps accompanied 
by a share buy-back, it is to be wel- 
comed by investors. The manage- 
ment's desire to husband cash is pru- 
dent But with $6-6bn of liquid assets 
at the end of the third quarter the 
company can afford to be more gener- 


The slow, steady progress of indus- 
trial gas rran panieg tends to look less 
thaw exciting during a cyclical upturn. 
During the fourth quarter, operating 
profits at BOCs core gases operations 
rose an underlying 13 per cent, a mod- 
est increase compared with the rest of 
the chemicals sector. That helps to 
explain the' company’s 15 per cent 
underperfonnance a gains t the sector 
over the past two years. 

But the qualities of gas companies 
start to shine raw the peak ss cyclical 
companies’ earnings growth deceler- 
ates. BOCs steady progress should be 
sustained lrmg after that despite con- 
tinuing price pressures. BOC has been 
aggressively cutting costs and busy 
improving its product miT. But most 
of the earnings growth will be driven 
by strong volumes. The industrial gas 
market expands almost twice as test 
as GDP and BOC is heavily exposed to 
the test-expanding Asian economies. 

The stock is at a price earnings pre- 
mium to the market for 1995 of about 
20 per cent In the near-term BOC has 
little chaTinp of outperforming. But its 
resilience will look increasingly attrac- 
tive by 1996 when the market's earn- 
ings growth is expected to slow to 
about 5 per n«rt- 

BOCs biggest headache remains its 
pharmaceuticals business which is 
small, risky and provides no compel- 


Buy-backs 

The £500m spent by Boots , buying i 
back its shares may look large. Bid i 
given that the group is due to receive 
£850m from, selling its prescription : 
drugs business and is highly casbgea- 
erative, the sum is actually quite mod- 
est. Boots should end the^currant 
fipanritti year .wiffi nearly HKited net 
c ash. Even so, it is something that 
Boots has acted at all Too few British 
companies - Reuters' and most 
regional electricity companies being 
the notable exceptions - have been 
prepared to shrink their equity, bases" 
and so boost earnings per share, ; Ih the 
US, companies r^gulaily buy back 
shares even when already , geared 
Buy-backs are less common in the UK 
partly because institutional investors 
are not as. aggressive in pushing Jo?: 
thpm. But part Of the Mr plaiprtltm is I 
also that rights Issues ': can. ' be 
nerve-racking for companies: since 
raising equity is traumatic; it Is not 
surprising that managements are 
reluctant to hand it back. 


Growing companies 

The Stock Exchange’s plan for a 
junior stock market risks being under- 
cut by a rival scheme unvaOed yester- 
day by the European Association of 
Securities Dealers. The main differ- 
ence is that the wasp plan, is commer- 
cially motivated. Since its backers will 
be required to risk their own capital, it , 
will be marketed vigorously. EASD is 
already targeting entrepreneurial 
groups across Europe. The Stock 
Exchange plan for ah Alternative 
Investment Market, by contrast, was a 
response to the ontay when it decided 
to close the Unlisted Securities Mar 1 
ket So far AIM has no dear focus, 
beyond being a home for companies 
unsuitable for the exchange's main 
market There may, of course, be room 
for both markets. But the bigger ques- 
tion is whether there is room for 
either. EASD has shown that compa- 
nies want to raise capital through 
such a market Now it must convince 
shareholders to invest through it ■ - 




PRIMORSK 


PRIMORSK Shipping 
Corporation 


Department of 
National Heritage 


US$75 million 
Newbuilding Ship Finance 


Hill Samuel jointly arranged a Term Loan 
Facility with the European Bank for 
Reconstruction and Development 


Hill Samuel is advising the Department 
on the options for the future of the 
BBC’s Transmission Services 



H O UR 


Transnet 


The Go-Ahead Group PLC 


US$75 million 


£25 million 
Senior Debt Facility 


Hill Samuel arranged a Medium Term 
Financing for one Boeing 747-300 


Hill Samuel structured and underwrote 
a Senior Debt Faciliry to assist in die 
acquisition of London Central 
Bus Company Limited 


Doing what we do best. 



Hill Samuel 


Hill Samuel Bank Limited • 100 Wood Street • London EC2P 2AI 
A member of the Securiries & Futures Authority • A member of the TSB Group 






A 


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** --S 












5 $ 

>**•» 


a*s, 



Try a plain vanilla, or 
maybe a butterfly 
Page 5 


FINANCIAL TIMES SURVEY 


DERIVATIVES 


Health hazards of a physically 
demanding profession 

Page 12 


,,, ^ 

Safe 

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?.i* 

-V3?f 

- J££*?S 

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^.rr .. _ r a® 

►T.'i bato 


After th e shocks which followed the increase in US 
interest rates, bankers and traders are optimistic 
about t he prospects for growth. Richard Lapper 
jgoks at a hazardous year for the industry 

Caution called for 
on the road ahead 




iai 

\ v .,r^ au -’ - ^ 
a 

• • .-^^asjsui 

; . \ — E ™* 1 
'-1!'“-”^ " 3 *t| 
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. *. t< t'zzz 

• ;'• > ;2" f ;••* i’ii ; r' 


!. r ' V ZtJ, < 

i?'» ’ : -i HUst 7w— i 

Ij, 


The fi nan c i al hurricane which 
swept- through the world's 
financial markets this year has 
rocked the- rapidly growing 
derivatives industry. Falls in 
the dollar and world bond mar- 
kets have triggered or com- 
cided with news of multibillion- 
derivatives-related losses by a 
string of large international 
companies. -. 

Yet, eight mont-ha after the 
US Federal Reserve raised 
interest rates, bankers, traders 
and even corporate buyers are 
sanguine 'about the potential, 
for continuing growth in denv- 
atives : products ’ — in spite of 
estimated losses of more than 
$6bn by corporate users over 
the past. 18 mouths, a flood of 
adverse publicity, two legal 
cases and the. prospect of more 
litigation to pome. And there is 
a general', welcome for the 
increased 11 emphasis on disclo- 
sure ,’S transparency and 
accountability which has 
ensued - in tigb-Twake of this 
year's 1 trouble*. 

ThefeUmtheltondmarket, 
triggered by the increase in 
short tenn US interest rates, is 
the gmgjto ebanozaic fj^tnr to , 
have dope meet damage, with, 
heavily leveraged investors in 
over-the-counter products such .. 
as structured notes particu- 
larly baiflyhit -./■'? .‘f ]■ 

“The JLast_f«w years have- 
seen ahuD market for interest' ' 
rates. tfco^htthese-low 
rates ^B^^goiBg^to^ebgpae.; ■'= 
and gotr.tjtings oci af per^eo; •; 
tive. Tfeftofe tnfflt "■ 

out Panl ^Hnas, pusher: 
Swaps, Monitor; A ■ specialist 
newslAteF. - Vi r'.'V- ,l .,' ■ • !■ > -* „ . 

Twofyxs&rsdt. forest irate 7, 

":C- .'-Atrf C.*. : 


products - Gibson Greetings 
and Procter & G amb le - have 
already sued Bankers Trust, 
which sold them the products. 
In the biggest case Procter & 
Gamble, the consumer prod- 
ucts giant, in tlctober launched 
a suit seeking damages of more 
than $i30m. 

Procter & Gamble suffered 
- losses from a complex interest’ 
rate swap contract, under 
which it agreed with the bank 
to exchange payments in the 
future based on the interest 
rates prevailing at the time. 

The wider economic, turmoil 
had a knock-on effect else- 
where, with - increased volatil- 
ity in equity markets and a 
rise in commodity prices, a gain 
upsetting the projections of 
buyers, investors and traders. 

And the unexpected tkvstne 
in the dollar has also led to 
same losses. 

P ublicity has also been 
attracted by losses such 
as those incurred by 
MetaQgesellschaft. the German 
engineering company, which 
was hit by a faE in the oQ 
price, especially daring the last 
three, months of 1993. An MG 
trading subsidiary was forced 
to unwind expensive hedges 
' designed to protect it against a 
rise in price. . - 
Bankers are: quick to point 
' but Brat businesses which Sim- 
ply ; invested in cash -markets 
hav^ beoi hurt this year and. 
.they ,7 say 1 that changes in 
e<*ountancy jffactices and the 
tncreafam g tanjtenry - of b anks 
to mark fh» Ysfojerqf toe assets 
to prevailing .market values 


trading losses. 

However, they accept that 
some of their business has 
been hit. Figures from the 
International Swaps and Deriv- 
atives Association, the indus- 
try body, show that the 
notional value of swaps and 
other over-the-counter (OTC) 
deals outstanding reached 
$8,475bn in 1993, an increase of 
58 JS per, cent over 1992. But fol- 
lowing last year’s surge in 
derivatives turnover, growth in 
the OTC market could slow 
this year. 

Although few figures are 
available Mr Spraos reports a 
sharp fall in the hi g hl y lucra- 
tive structured notes market, 
with activity running about a 
third of last year's leveL 
Indeed, bankers are quick to 
concede that the appetite for 
structured >»«« declined. 
One leading banker suggests 
the overall value of over-the- 
counter transactions could fan 
by mom than 15 per cent this 
year. 

However, the story has been 
far from completely negative. 
It is widely accepted that the 
number of transactions could 
easily equal last year’s figures, 
although the unit sfa» of each 
individual transaction may 

fail 

Economic volatility has 
increased interest in many cat- 
egories of products, inclnding 
the simpler less complex prod- 
ucts traded on futures and 
options, exchanges. Exchange 
traded volume rase sharply in 
the first ' six months of the 
yeaiv. The most impressive 
growth came from Tokyo Inter- 
national Financial Futures 



IN THIS SURVEY 

□ The regulatory debate 

□ Future of futures trading 

Page 2 


□ Technology 

□ Currency risk 


Page 4 


□ Emerging markets 
P Glossary 


Page 5 


□ New applications 

□ Equity derivatives' 


Pages 


□ Insurance 

□ Commodities 


Pages 


□ Interest rate swaps 

□ Hedge funds' 

Page 9 


□ Exchanges profSes 


10 


□ Profiles 


11 


□ Health hazards 


Page 12 


Editorial production: fley Terry 


Exchange (Tiffe), where in 
June monthly volumes broke 
through the 4m level for the 
first time, overall volume dou- 
bling compared with the same 
period Iasi year. Europe’s three 
largest exchanges saw volume 
increase by more than 40 per 
rent in the first half. 

Bankers are optimistic about 
sales of some categories of 
more complex products. This 
year has seen the launch of a 
number of funds which invest 
in OTC commodities products 
and other financial instru- 
ments whose value is tied to 
commodity prices. 

There is confidence in some 
quarters about the prospect for 
equity-based products, particu- 
larly in emerging markets 
where index-based products 
offer a solution to problems 
suidi as settlement and cus- 
tody. This could be especially 
important in more primitive 
markets such as Russia. “A 
structured solution might give 


you control of these risks,” 
says Barry Davies, head of 
equity derivatives at Morgan 
Stanley. A number of houses 
are also keen to promote prod- 
ucts based on credit risks. 
“People have less clear-cut 
views an the direction of inter- 
est rates, but a clearer view on 
the evolution of spreads. As a 
result, derivatives linked to 
spread have become popular 
among investors," says Yves 

de Bfllmann , c hairman of 
Bankers Trust International in 
London. 

ore broadly though 
there is some confi- 
dence that the uproar 
over losses may leave some 
positive effects, especially if - 
as many in the Industry now 
hope the threat of tougher 
external regulation has 
receded. 

A series of reports by multi- 
lateral ' and governmental 
organisations as well as post- . 


mortems into the losses at indi- 
vidual companies, have served 
to focus attention on account- 
ability and disclosure. 

A report by the 030, a group 
of senior bank executives, pub- 
lished cnrtipr this year - sug- 
gest the speed of the market’s 
development has in some cases 
left behind less sophisticated 
end users, for example. 

“The G-30 report [and a sepa- 
rate report by the US General 
Accounting Office] all spell the 
same to me. There needs 
to be accountability of senior 
mniyigpmptnt Both client and 
investment bank have to be 
fully aware of what is going on 
in their organisation,” con- 
cludes Mr Davies. 

“Boards have not always 
been aware of the magnitude 
of the risks they have been 
running. A long stretch of suc- 
cesses made people sloppy.” 
says Jean-Christian Cheysson. 
manag in g director of. Credit 
Suisso Financial Products. 


Bankers have responded by 
emphasising the need for their 
clients to adopt effective risk 
management procedures and 
argue that there is now an 

ftnwr ghip fl onsRhS iM amnng the 

industry, buyers and regula- 
tors about the need for better 
information flows and report- 
ing, including a global stan- 
dard for disclosure, in early 
October, JP Morgan took the 
unprecedented step of making 
a component of its “black box” 
- the daily data on interest, 
rates, including money mar- 
kets. swaps, and government 
bands, and other market statis- 
tics, ami the methodologies it 
uses to measure themn - avail- 
able free of charge to anyone 
who wants them. By establish- 
ing -a benchmark for risk mate 
qpynen t. through, the launch 
of this. Riskmetrics system, 
Morgan hopes that it can help 
improve the overall, health of 
. the market 

There are also signs that the 


Industry is making some prog- 
ress hr developing better ways 
of accounting for. derivatives. 
Increasingly-the focus for these 
efforts are the risks arising 
from adverse movements in 
the markets rather than the 
risk of default by counter- 
parties in the oVer-tfcecounter 
market, sore ailed “credit 
risks”. The . International 
Swaps and Derivatives’- Associ- 
ation is working on new disclo- 
sure guidelines which would 
taite these rharkia risks into 
account, possibly by- the adop- 
tion of the concept ofivalue at 
risk., which estimates how 
much an investment portfolio 
can lose over time. . J . ^ -1 
“I think we are making good 
p rogress," concludes ; Mf Kurt 
Viermetz, yice-chafrsuai of JP 
Morgan. “Participants are 
learning in terms' of transpar- 
ency and statistics.' Kit the 
lemming curve is very Steep for 
.the whole market around tie 
globe.” 



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II 


FINANCIAL TIMES WEDNESDAY NOVEMBER 



The regulatory debate: Patrick Harverson reports 

Bankers breathe a little easier 


DERIVATIVES CONTRACTS 


Position Contract 


A year ago, the regulatory 
environment surrounding the 
derivatives business appeared 
fraught with danger for the 
banks and derivatives houses 
which were prospering from 
the surge in the market for 
derivative instruments. 

At the time, central hanks 
and financ e ministries were 

just beg inning to COme to 

terms with the growth of the 
derivatives business, and the 
possibility that this growth 
threatened the stability of the 
global financial system. As the 
inquiries into the business dug 
deeper, and the air thickened 
with warnings of impending 
catastrophe. Wail Street bank* 
ers trembled at the prospect of 
big regulatory guns being 
brought to bear on their mar- 
ket 

Today, the regulatory cli- 
mate has changed dramatic- 
ally, and the bankers are 
breathing a little easier. Fears 
that various national and inter- 
national authorities would 
impose strict new regulations 
on banks and securities firms’ 
derivatives activities proved 
unfounded, and a consensus 
among regulators has been 
established. They now mostly 
agree that derivatives enable 
companies to better manage 
their financial risks and to 
lower the costs of their borrow- 
ings, and that new rules gov- 
erning banks and securities 
firms’ activities are unneces- 
sary. 

Regulators believe that their 
attention is best focused on 
making sure that dealers and 
users of derivatives properly 
report, account for. and dis- 
close the full extent of their 
activities, and that dealers 
have the capital to support 
their derivatives businesses 
and possess the appropriate 
systems to measure the risks 
they are taking. 

So close, in fact, have regula- 
tors in the US moved towards 
the industry position that 
derivatives play a positive role 
in business and finance, that 
they now stand side by side 
with the banks and securities 
houses against a common foe - 
Congress. 

The fear among US bankers 
and regulators alike is that if 
lawmakers introduce legisla- 
tion tightening federal regula- 


tion of derivatives dealers, the 
market’s growth could be 
badly undermined. As Joseph 
Lynyak, head of the American 
Bar Association’s banking 
c ommit tee on derivatives, says*. 
“The question is whether they 
[the legislators] are going to 
throw the baby out with the 
bath water, and perceive deriv- 
atives to be such a problem 
that they over-regulate the 
business to the point where 
they destroy the market.” 

Since the summer, regula- 
tors have been telling lawmak- 
ers at a series of Congressional 
hearings on derivatives that 
present regulation of the mar- 
ket is adequate, and that their 
efforts to improve self-regula- 
tion. within the derivatives 
business is preferable to legis- 


and Edward Markey, all senior 
members of important House 
of Representatives' banking 
and finance committees - 
appear determined to proceed 
with their efforts to tighten 
derivatives supervision when 
the new Congress convenes 
early next year. 

Their ambitions, however, 
are greeted with scepticism 
within the industry, which is 
adamantly opposed to any kind 
of legislation- Of the lawmak- 
ers’ plans for 1995, Robert 
Bench, managing partner for 
Price Waterhouse’s regulatory 
advisory practice in Washing- 
ton, says: “They are expected 
to reintroduce legislation in 
the new Congress, but what’s 
curious about it Is that there 
does not seem to be any sup- 


Fears that strict regulations would be 
imposed on derivatives trading have 
proved to be unfounded 


lation that could lead to over- 
regulation-. 

There is an ironic twist to 
the regulators' new, more con- 
ciliatory approach to deriva- 
tives. They have become more 
supportive of the derivatives 
community at a time when it 
has been struggling to over- 
come the debilitating impact of 
a reversal in interest rate 
trends worldwide and a loss of 
confidence by some derivatives 
users following a string of well- 
publicised losses and lawsuits 
- the sort of developments 
which in the past might have 
persuaded regulators to take 
immediate action to rein in 
banks and dealer firms’ activi- 
ties. 

It was the wave of bad pub- 
licity that swamped derivatives 
earlier this year which embold- 
ened Congress to tackle the 
market h ea d on. 

Over the summer, several 
influential lawmakers drafted 
legislation granting banking 
and securities industry author- 
ities broad new regulatory 
powers over the derivatives 
market 

Although regulatory officials 
have already said they are 
opposed to derivatives legisla- 
tion. the leaders behind the 
various initiativ es - including 
Henry Gonzalez, Jim Leach 


port for legislation beyond [a 
few] individuals.” 

While the regulatory commu- 
nity in the US has been oppos- 
ing attempts on Capitol Hill to 
introduce new rules for deriva- 
tives, it has also been busy pro- 
moting better self-regulation 
among derivatives dealers and 
users by drafting recommenda- 
tions for improving reporting, 
accounting and disclosure 
standards within the industry. 

Among the authorities that 
have issued recommendations 
along these lines, or that have 
begun inquiries into deriva- 
tives disclosure, are the Office 
of the Comptroller of the Cur- 
rency (the Treasury’s bank 
regulating arm), the Securities 
and Exchange Commission 
(which oversees securities 
firms), the Commodity Futures 
Trade Commission (which reg- 
ulates exchange-traded deriva- 
tives), and the Financial 
Accounting Standards Board 
(which wants companies to dis- 
close more about their deriva- 
tives holdings). 

Of the SBC and CFTC’s 
investigations of derivatives, 
Mr Bench says: “The degree to 
which the inquiries may lead 
to, if not necessarily legislation 
then some kind of defining reg- 
ulation, r emains to be seen.” 
Mr Lynyak, however, believes 


the regulators wifi continue to 
favour a policy of self-regula- 
tion. "What you are going to 
see is probably some minor 
accounting changes, clearly 
some securities disclosure 
changes, and some capital 
requirements arising from the 
Basle committee.” 

The Basle committee of the 
Bank for International Settle- 
ments. meanwhile, is at the 
heart of international efforts to 
improve regulation, reporting 
and risk management in the 
derivatives business. 

In July, the Basle committee 
and the International Organi- 
sation of Securities Commis- 
sions flOSCO) jointly issued 
guide lines stressing sound 
internal risk management for 
derivatives trading by banks 
and securities firms, and last 
month the Basle co mmi ttee 
weighed in again on the need 
for dealers to disclose more 
about the various risks inher- 
ent in their derivatives activi- 
ties. and on the need for deal- 
ers to maintain up-to-date 
systems for measuring those 
risks. 

The Basle committee’s work 
with IOSCO is part of a co-op- 
erative effort among interna- 
tional regulators to align 
reporting, accounting, disclo- 
sure and capital standards 
worldwide. Yet, establishing 
widely-recognised interna- 
tional standards is one of the 
toughest tasks facing the 
industry. Inevitably, different 
national regulators have differ- 
ent views on how to respond to 
growth in the derivatives mar- 
ket. 

At a recent IOSCO meeting 
in Tokyo, for example, dear 
policy differences emerged 
between the regulators in 
Japan, which want tighter 
supervision of the market, and 
those in the US and the UK. 
which do not want to impede 
international capital flows or 
financial markets' innovation 
and favour a lighter tough at 
the controls. 

Arthur Levitt, chairman of 
the SEC. hinted at the exasper- 
ation that the more laisser-faire 
oriented regulators were feel- 
ing in Tokyo when he said: 
"There’s greater progress being 
made in other countries, and I 
wish we could all get in the 
samp place at the samp time.” 


Top cont ra ct s 


Exchange Jan-Jun94 Jan-JinSS Position Contort . . . • 

German Bund ( 
Euroyen f ' 

3 month Euronwk f 
US T-bond o 
Interest rate f 
Eurodollar o 
10 year T-Nate f ' 


Exc ha nge JerfjhnM Jihlw 93 


1 <1) 

US T-bond f 

CBOT 

55.914,655 

38.734260 

2 13) 

Eurodollar f 

CME 

54.770,703 

32584,460 

3 (2) 

sap ioo o 

CSOE 

41,078,033 

34527/191 

4(4\ 

Nottonnel f 

Matif 

31,363,785 

17/152,147 

5(10) 

German Bund f 

Liffe 

21.713*91 

9581579 

6(8) 

3 month Euroyen f 

TWe 

20,900.020 

10,085.704 

7(7) 

3 month ELHumark f 

Liffe 

17.286332 

10551573 

8(6) 

US T-bond a 

CBOT 

15,869/151 

10.794592 

9(3) 

(merest rate f 

BM&F 

14,330,194 

9,428.154. 

10 (11) 

Eurodollar o 

CME 

14*282^458 

8504731 

11 (-) 

Ibex 35 f 

Met? RV 

14.280072 

3,683,132 

12 (5) 

Crude oil f 

Nymex 

14.016^)81 

14926561 

13 (12) 

□ax o 

DTB 

12389,626 

8555534 

14 (13) 

10 year T-note f 

CBOT 

12.855,375 

8505551 

15(18) 

S&P 500 f 

CBOE 

12.711.850 

7570.659 

16 (-) 

Long gilt f 

Liffe 

11,847,936 

4524.480 

17 (-) 

Notiormel o 

Matif 

10384,160 

5,197571 

18 (16) 

S&P 500 f 

CME 

9,153.178 

6.775593 

19 (19) 

3 month sterling f 

Liffe 

8,437.058 

5507.764 

20 (-) 

Gold f 

Tocom 

8,317.43? 

2540.409 

Stock indices 

i (D 

S&P 100 O 

CBOE 

41,079.033 

34527/S91 

2 (7) 

ibex 35 f 

Meff RV 

14,280072 

3583,132 

3 (2) 

Dax □ 

DIB 

12,869,626 

4355534 

4 (3) 

S&P 500 o 

CBOE 

12.711,850 

7.970559 

5(4) 

SSP 500 f 

CME 

9.153,178 

6.775593 

8 (10) 

CAC 40 t 

Matif 

4,066,142 

2554602 

7 (-) 

Ibex 35 O 

Mefl RV 

3.910890 

1.624597 

8 (5) 

Ibovsspa f 

BM&F 

3.791 .983 

5574592 

9 (9) 

SMI o 

Soffex 

2.988.875 

2544539 

10 (6) 

Nikkei 225 f 

Osaka 

2,985.037 

4505.475 

Currencies 

1 (3) 

SCruzeiro f 

BM&F 

6519,867 

3591,030 

2 (1) 

Deutschemaik f 

CME 

6,107,408 

6575512 

3 (6) 

Yen f 

CME 

3,499501 

2,715518 

4 (5) 

Swiss franc f 

CME 

2.762,460 

2569.129 

5 (4) 

Deutschemark o 

CME 

2.749516 

3.188531 

6 (8) 

French franc 1 

PHLX 

2524599 

1525572 

7 (2) 

Deutschemark □ 

PHLX 

1,927536 

3,747.144 

8 (7) 

Sterling f 

CME 

1.902 599 

1.732,775 

9 (91 

Yen o 

CME 

1.667,614 

894187 

10(-) 

SCanada f 

CME 

881579 

589529 

Interest rates 

i (i) 

US T-bond 1 

CBOT 

553 14.665 

34T3426Q 

2 (2) 

Eurodollar f 

CME 

5C.770.703 

32584/180 

3 (3) 

Noliomel f 

Matif 

31,363,785 

17,462,147 


4® 

5® 

6® 

7(4) 

8 P) 
9® . 
10 m 


liffe 

We 

Lilfe 

cbot 

BM8F 

CME 

GBOT 


21.713.99t 95BT.Bfo 
20900,020 10,065,704 

17,286,232 10^61^73 

.15A89/B1 1078*082 
14,830,184.- 9^28,154- 
142821458 : ASOq,73T 
13855575 ,8505551 


1® 
2 ( 1 ) 
3® 
4(4) 
5® 
6(7) 
7® 
8 ® 
9H 
10 (10) 


Gold t . . 
C opper f 
■ Aluminium f 
Gold f - 
Gddo 
S8ver f 
Platinum f 
Zinc 1 
Nickel f 
Copper f 


Toconv. 
LME- 
LHE 
Co max 
BM&F 

Oonw 

Tocom 
LME. 
LME ■ 
Come* 


The future of futures trading: Laurie Morse reports 


Shift away from US continues 


hi fur a ljf 


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Ten years ago, when 95 per 
cent of the world’s futures 
trading occurred in the US and 
London's Liffe was considered 
an “emerging market”, Chica- 
go’s fa tores visionaries 
believed the route to global 
expansion was through elec- 
tronic connections. 

Their vision of a single 
global after-hours trading sys- 
tem anchored and governed In 
Chicago, uniting a confedera- 
tion of trading countries 
across time zones, has not 
materialised. Instead, a host of 
competing futures exchanges 
have blossomed across Europe 
and Asia, and continue to 
emerge in economies as 
diverse as China, South Africa 
and Peru. 

Last year, for the first time, 
more futures contracts traded 
abroad than in the US. This 
year, as the world’s top 10 ten 
futures exchanges top- 
ple volume records, the geo- 
graphic shift in market share 
away from the US continues. 
Futures Industry Association 
data show that for the first 
nine months of this year, US 
futures and options exchanges 
had a cumulative volume of 
498.2m contracts, while the 
rest of the world combined 
had traded 594*8m during the 
same period. 

Listed derivatives trading 
outside the US is growing at a 
rate of 545 per cent this year, 
compared to the US growth 
rate of 28 per cent On a per- 
centage basis, the biggest 
gainers in are exchanges that 
have been In existence for 
fewer than five years. 

Surprisingly, despite the 
proliferation, relatively few 
alliances have been forged 
between futures exchanges. 
The robust growth in deriva- 
tives trading has allowed each 
exchange to develop indepen- 
dently, while demand for 
futures products outside 
domestic time zones has 
proved lighter than Imagined. 

Renters’ costly experiment 
with a global electronic trad- 
ing network, Globex, has dem- 
onstrated that day-to-day 
demand for after-hoars access 
to financial futures contracts 
is meagre. However, such 
systems are still invaluable 
because they provide escape 
rentes during times of crisis. 
Futures’ industry experts say 
that just knowing contracts 
can be exited after regular 
business hours gives traders a 
kind of insurance policy that 
significantly reduces market, 
credit, and political risk. 

Grand visions for Globex 
have fizzled out, with only the 
Chicago Mercantile Exchange 
and France's Matif still contri- 
buting to the system. How- 
ever, other state of bilateral 
cooperations are being devel- 
oped, and during the next 
decade may evolve into power- 
ful trading blocs. 

The future of futures trad- 
ing, it appears, may follow the 
example of the CME’s 10-year- 
old mutual offset agreement 
with Singapore, rather than 
the Globex model. The CME / 
Simex arrangement allows 
financial contracts, such as 
the CME’s Eurodollar futures 
and options, to trade inter- 
changeably in Chicago and 
Singapore. 

The newest cross-exchange 
futures cooperation fs Matifs 


Top 10 derivatives axebages 

(tanked by futures and options contract volume} 1 


Rank 

Exchange 

Jan-Sept 1994 

Jan-Sept 1993 

% change 

1 

CBOT (Chicago) 

171.1m 

- 1315m 

30 

2 

CME (Chicago) 

153.0m 

• 1105m 

38 

3 

Liffe (London) 

1185m 

685m 

72 

4 

CBOE (Chicago) 

82.6m 

61.7m 

34 

5 

Matif (Parts) 

765m 

53.6m 

42 

6 

BM&F (Braza) 

705m 

39.1m 

80 

7 

Nymex {New York} 1 

605m 

54.8m 

10 

8 

DIB (German) 

395m 

22.6m 

74 

9 

LME (London) 

345m 

25.3m 

35 

10 

Tiffe (Tokyo) 

295m 

10.7m 

77 


1 vtAan* ot c^joona traded on InOMduaf aacutfes is not tndufed. 2 Nymm tefanea m Nycnax m 
Com* cantoned, ter both jaoo Scarce ftnusa MMy AuoBUbn, WtnHngtan 


Global futures and 


I options business 



Source- ftmuto tnounry 


i soum Amenca 

• ‘ 1 ;**■: Ttt: — L- i t- . A »* s . 

, World traefeg votame to triTionsof contracts l.03B^ ’ - 


link with Germany's DTB. 
MatiFs liquid contracts and 
DTB’s excellent technology 
have the potential, over time, 
to create a formidable alliance, 
and give Matif an after-hours 
alternative to Globex, should 
Renters discontinue that proj- 
ect 

Gerard Pfanwadel, MatiFs 
chairman, has said he win also 
consider joint ventures with 
Europe’s smaller, fast-growing 
exchanges in Spain, the 
Netherlands, and Switzerland. 
However, building such link* 
is a treacherous business, 
since they require co-operating 
exchanges to put aside compet- 
itive differences and harmon- 
ise roles that can differ dra- 
matically from country to 
country. 

Loose electronic links that 
allow exchanges to market 
into different time zones are 
forming for two specific prod- 
ucts: government bond futures 
and energy derivatives. The 
Chicago Board of Trade, Lon- 
don's Liffe, and the Sydney 
Futures Exchange are examin- 
ing the technological feasibil- 
ity of linking their existing 
after-hours co m p uters so thetr 
respective government securi- 
ties products could be avail- 
able electronically to traders 
at the partner exchanges. 

Along a similar vein, the 
Sydney Futures Exchange 
recently agreed to list its 
energy products on Access, the 
after-hours computer trading 
system operated by the New 
York Mercantile Exchangw. 

Unlike Matif, Liffe sees its 
expansion opportunities out- 
side Europe. It is in talks with 
Simex to distribute its euro- 
deutschemark futures con- 
tract, is exploring cooperative 
arrangements with Tokyo's 
Tiffe for a euroyen product, 
and has an agreement with be 
Tokyo Stock Exchange where 
Tokyo’s opening price is used 
to settle Uffe’s Japanese Gov- 
ernment Bond contract 
These talks, and those Liffe 
is conducting with the GBOT, 
are in such preliminary stages, 
however, that results are diffi- 
cult to predict. 


A secondary force, the trend 
toward international harmoni- 
sation of regulations govern- 
ing futures trading and 
co-operation between regula- 
tory agencies worldwide, is 
smoothing the way far these 
sorts of links Ibis trend was 
set in motion during the early 
days of Globex development, 
and continues as world futures 
trading expands. 

While potential links 
between various futures 
exch a n ges are interesting for 
competitive reasons, they are 
merely a sideshow to the main 
event Most of the world's 
futures are traded in open out- 
cry during regular business 
hours. 

The world’s four largest 
futures exchanges - the CBOT, 
tiie CME, Liffe, and Matif - 
are all riding the crest of an 
interest rate derivatives boom 
that has brought unprece- 
dented growth to their buffing 
floors. It now appears that 
boom is levelling out, with the 
International Swaps and 
Derivatives Association report- 
ing a slowdown in the past 12 
months, particularly in US dol- 
lar-deno initiated transactions. 

Although some exchanges 
still grumble that the over-the- 
counter markets are stealing 


INDEX OF FT SURVEYS 

July 1992 - July 1994 


"5®* ba* been compiled for researchers 
and l.branes jid those who require a sound 
bnefmg on national and international sub(ects. 


A U ^e°^ index 0,a1 ' ^ »“wy« published 
in the above penod, listed in alphabetical 

order and subject. 


To receive you- copy, send a cheque tor E 3 00 
"*de payable to 


London SE1 9HL 
Tet +44(0)171 873 3213 



5 


i 


8571,437. 2MW$ 
8,252575 B.13S28Z 
7,121,181 4,522,808 

4707-469 4515*64 
4£«W74 .’£017,393 
3^58,193: *160566 
2534507 25^4503 

2,814,790 1,727,778 
1,571,349 • 971,110 ' 

-1,40*713. :■ 987744 




Drains . 


1 0 

Corn f 

cbot:. 

• 8575.634 : 4558597 

2(1) 

Soybean f 

.CBOT . 

6529532. .4509,464 

3 (3) 

Bed beans f 

TG£. 

2536522 3,123,151 

4f9 

Soybean ofl f 

’ CBOT . 

252L384 1589,193 

5(4) 

Soybean meal 1 

• CBOT .. 

-2580556 2.114557 



Hants • ‘ 


1 (1) 

Live cattle f 

CME " 

. 1.836,143 -1,705.112 

2(2) 

Live hogs f 

CME 

753530 - .768592 

3(3) 

Park befltes f 

CME 

354587 395566 

4(4) 

Uve caste 0 

- CME - 

272559. 274605 

5(5) 

Feeder cattio f 

CME 

.236557. 205J511 



Eitaiw 


1 (1) 

Crude ofl f 

• Nymex - 

14516581 10528561 

2 (25 

Brant crude I . 

IPE 

5,007558 358B537 

3(3) 

Heating ofl f 

Nymeoc : 

- 4,712521 3500541 

4 (4) 

Unleaded gas f 

Nymax_ - 

3564541 3599564 

5® 

Crude on 0 

Nymex 

3590739 3594572 



Softs 

: - •' ' , •- >; 1 - 

1 a) 

Sugar No 11 f 

C8CE 

2/159.335 2543,186 

2(3) 

Coffee Cf 

CSCE 

1,586,471 - 1572,163 

3(2) 

Cotton f 

Tocom • 

1.497530 1547,491 


Cocoa f 

CSCE 

1581522 816567 

55 ) 

Cotton f 

NYCE . 

1570545 81 3507 


Source Fbttnn SOpBone 


business, most now recognise 
that: the bank markets are 
their best customers. The 
CME, a prime example, has 
semi volume double in the past 
five years, and seat values rise 
to near Hm, primarily because 
Its eurodollar pits provide a 
hedging haven for off-ex- 
change interest rate deriva- 
tives transactions. G ro wth in 
the contract ramped higher 
tiris year on volatility gener- 
ated by Federal Reserve credit 
tightening. 

Eurodollar futures and 
options during the first nine 
months at this year comprised 
84.7 per cent of the CME’s 
total volume, compared with 
45 per cent in 1989. While the 
CME’s badness shows no signs 
of slackening, its future is 
unusually vulnerable to a 
slump in the bank swaps mar- 
ket 

CME competitors such as 
Liffe have more diversified 
product portfolios which make 
them less dependent on the 
long-term fortunes of a single 
product However, even those 
exchanges will have to cope 
with a rapid maturation of the 
markets that underpin their 
products and a consequent 
flattening in their growth 
curves. 

The only futures exchanges 
that have not shared equally 
In the swirling success of 
derivatives this year are 
devoted primarily to physical 
commodities. Although money 
managers have rediscovered 
commodities as an asset class, 
their effect on exchange vol- 
ume has been spotty - New 
York orange juice awl coffee 
futures, for example, have 
thrived as a result of WalW 
Street's recent attention, whfltP/ 
some other commodities have 
escaped notice. 

To strengthen their posi- 
tions, a number of commodity 
e x cha ng es have quietly consol- 
idated. The largest of these 
consolidations was in New 
York, where the Comes 
merged with the Nymex to cre- 
ate the biggest commodity 
exchange in the world. 
Equally significant li«« been 
the gradual combination of 
Japan's broadly-fragmented 
physical exchange markets. 

In Europe, China, mil Rus- 
sia. new exchanges are devel- 
oping to help risk in 

agricultural commodities that 
have recently been released 
from centrally-planned pric- 
ing. 




4 



-Ji31 fj*} 


Spark 


The really creative 
part of derivatives 
is asking the right 
questions. The 
ones that let us 
figure out how to 
help a client gain 
a real business 
advantage, as well 
as a financial one.' 




Using derivatives for strategic 
advantage requires more than 
advanced technology. It demands 
advanced thinking. With experts 
in every major market, a track 
record long on innovation, and 
capital strength few can equal, we 
approach risk management not 
as a stand-alone business but 
as part of an integrated approach 
to supporting our clients’ 
objectives. At J.P. Morgan we find 
the best solutions because we 
ask the right questions. 






s 
















JP Morgan 


... ' . rf# 

nc •' ■ 

and *^ r 












D 


S hut an ex-derivatives trader into 
a room with two electronics 
designers and a financial prod* 
acts engineer. Wait for 11 months. 
What emerges is a blueprint for the 
future of derivatives trading systems, 
according to the manufacturer’s claims 
for one new product 
Fun is not the word most people asso- 
ciate with trading systems. But the new 
system for modelling financial instru- 
ments, FICAD, promises to be fun to 
use, and illuminating about the various 
risks and relationships in, for example, 
trading exotics. 

FiCAD is modelled on graphics - 
computer-aided design (Cad), to be 
more precise. Cad is used by architects 
and designers for creating 
three-dimensional models of everything 
from buildings to computer chips. 
Because of its graphical nature, and the 
ability to deal with “related" values, 
derived from elsewhere, it is the ideal 
tool for dealing with exotics, and other 
complex products that require imagina- 
tive handling. 

The person proposing this scheme is 
Rod Beckstrom, a former derivatives 
trader at Morgan Stanley International 
Despite his MBA from Stanford, it is 
likely that noone would take him seri- 
ously if he were not also the founder 
and chief executive of the company that 
claims the lead in software systems for 
derivative trading. CATS - Computer 
Aided Trading Systems of Palo Alto. 

Four years ago the CATS brainstorm- 
ing team came up with the idea of 
“sketching” the complex relationships 
that underpin derivatives. They worked 
on development for a year - but chose 
inappropriate technology as the vehicle, 
threw it all away, and began again. “We 
started coding before we got the design 
right" admits Mr Beckstrom. 

Steve Jobs, the founder of Apple Com- 
puter and. more recently, of Next Com- 
puter. became associated with the proj- 
ect. and development went ahead using 
Next's computer environment and soft- 
ware development tools. 

No-one was laughing by the time the 
FiCAD - Financial Computer Aided 
Design - system was launched in 
March this year. The idea of dealing 
with derivative products through a 
computerised drawing pad sounds less 
fcrazy when tt becomes dear that banks 
and other users are not being asked to 
abandon their existing investments. 
FiCAD effectively “bolts on” to previ- 
ous, more rigid systems that use older 
technology and mind sets. 

Mr Beckstrom has a track record of 
backing outsiders that win. In the past 
he has made technical decisions that 
seemed risky, only to watch the rest of 
the field follow the trend. When he first 
envisaged the design of the original 
CATS package in 1986, the underlying 
principle of cashfl ow analysis seemed 
unconventional in software design, and 
the hardware choice of Unix open 
systems almost outrageous. 

Unix, subsequently adopted by many 
hardware suppliers as a standard oper- 
ating environment for shared multi- 




Keyed up in Rankfurt: trading at the Deutsche Termlnborse 


Technology: Cjaire Gooding reports 


Systems get a 
new look 


user systems, was then still emerging 
as a standard. It gives end-users a 
choice of hardware suppliers and the 
ability to transfer or upgrade hardware 
without changing software: hence 
“openness". Users can share data and 
applications on a Unix network, while 
still retaining Imm ense local power 
through, a desktop work station. Unix 
operating functions and many Unix 
applications are written in the powerful 
language called C. 

CATS built the first cash-flow-based 
system in 1986, adopting the best prac- 
tice at the time, by representing any 
part of the value of a payment as cash 
flow. “In 1986 we used the C program- 
ming language, and Unix operating 
systems on Sun Microsystems work sta- 
tions.'* says Mr Beckstrom. “It was 
heretical at the time, but everyone else 
followed the architecture. We feel we 
have broader cash flow functionality 
than anyone, but we've also taken it to 
the extreme and tested its limitations. 

“The breaking down of instruments 
into cash flows over time was a useful 
way of describing all sorts of contracts, 
but they didn't describe complex 
options mid the plethora of new prod- 
ucts finan cial engineers have been 


creating - the exotics T he adds. “So we 
had to answer the question: *if the low- 
est level elements of instruments are 
not cash flows, then what are they?"* 
Mr Beckstrom believes they would 
never have found the answer without 
“fresh blood in the room to penetrate 
the financial jargun",and it was pro- 
vided by James Kleckner, technical 
director of CATS, whose experience in 
simulation techniques and Cad system 
Systems! is evident in the techniques 
used by FiCAD. 


T he product uses techniques the 
FT world has been parading as 
state of the art for some time, 
such as object-oriented programming, 
and parallel processing. Parallel pro- 
cessing shares tasks across several com- 
puters to provide higher speed. 

Object-oriented progr amming (OOP) 
is a quick but very flexible way of 
developing software programs. The 
technique produces complex applica- 
tions- that are nevertheless “intuitive”, 
very easy for end-users to navigate, and 
just as important in the changing world 
of finance, easy to maintain and update. 

Such OOP programs gather disparate 
information into consolidated “objects”. 


depicted on the computer screen in a 
graphical “icon" which can be opened 
up (via lists or menus) into Us various 
components and relationships with a 
point-and-click mouse. The company is 
signing up third-party developers who 
plan to build FiCAD product offerings. 

“We've taken the most dynamic 
object-technology in the world and 
applied it to the most dynamic indus- 
try.” says Mr Beckstrom. “It's totally 
visual computing. We're convinced that 
NeXT is the reference architecture for 
the future. You can model any instru- 
ment, process it in real time. Our users 
are speed freaks, because there's such a 
value to getting the answer Easter than 
your competitor. The others are all hop- 
ing we're mad but we've been proved 
right in the past It's a risk, but a calcu- 
lated risk.” 

Mr Becks tram's stance is that banks 
are throwing away money on develop- 
ing old technology, and are in danger of 
continuing to do so. “We're not going to 
replace those back-office monoliths 
managing the loan portfolio overnight 
But banks are amply going to be throw- 
ing away millions of pounds on develop- 
ments that simply will not have the 
flexibility to accommodate changes and 
developments in the market" 

Sun Microsystems (which accounts 
for 70 per cent of the installed workstat- 
ion base in the financial market) has 
made a commitment to OpenStep from 
NeXT and Microsoft is rumoured to be 
interested. CATS claims applications 
developed in FiCAD will run on Sun 
Unix today and on Microsoft Windows 
95 when available. 

Most people in the industry agree 
with Mr Beckstrom 's assertion that the 
primary challenge to systems is that of 
data integration, even if they would dis- 
agree with much else. 

Steve Husk, of ACT Business 
Systems, a supplier to the derivatives’ 
industry, notes that there is a need to 
draw systems together and consolidate. 
Organisations seem compelled to spend 
whatever it costs to achieve this, and 
speed - of systems development and of 
information delivery - is vital to a com- 
pany's competitive status. 

The problem driving users towards 
simple “graphical user interfaces” 
(GUIs) is that dealers have to negotiate 
complex systems. “What really matters 
is the skill of the dealer." says Mr Husk. 

“ Taking a position m eans taking a 
risk, and a good computer system 
means you can identify the risks. This 
mak es it doubly important that a sys- 
tem is simple to use, however complex 
it is in its functions." ACT is one of two 
UK -originated software offerings that 
have done well in the derivatives mar- 
ket. The other is SunGard Capital Mar- 
kets which took over Devon Systems. 

Some organisations are exploring 
“neural networks” for the simulation of 
risks and the identification of areas of 
exposure, or even of under-valuation. 
The systems simulate human intelli- 
gence in gathering data and analysing 
it to make connections and propose 
likely scenarios. 


OPEN 


a new era 


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you’ve seen before, it combines all the proven power of The Devon 
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can realise the . full potential of rapid pricing, advanced analytics and 
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AUCKLAND v CHICAOO » COHKHA6IN • MOWS MONO • MILAM • PAH1S • PHILADELPHIA - STOCKHOLM • SYDNEY • ZURICH 
FRANKFURT («B) SH 14-0 • LONDON (171J 337 8000 • NEW YORK (2121 371 111S ■ TOKYO |3) 3239 H3| 


A s many multinationals 
have discovered to their 
cost, fluctuating 
exchange rates can have a dra- 
matic impact on their fortunes. 
Japanese carmaker Mazda, for 
example, revealed a loss of 
Y65bn on its foreign exchange 
transactions in its 1993/94 
accounts. Italian fashion house 
Benetton, however, achieved a 
one-off gain of L50bn from 
some well-timed currency 
hedges when the lira strength- 
ened against the D-Mark by 
almost 10 per cent in three 
months last year. 

It is not surprising, there- 
fore. that currency risk is 
regarded by most corporate 
treasurers as a more pressing 
concern than interest rate risk 
or commodity price risks. 

An increasingly popular tool 
for managing foreign exchange 
risk is the barrier option which 
some derivatives dealers say 
now represents some 10 per 
cent of all currency option 
business. This growing interest 
in barriers contrasts with fall- 
ing demand for aggressively 
leveraged products. The deriva- 
tives market has grown up this 
year and the em phasi s now is 
on “putting your risk where 
you want it", says Fred Siam- 
baugh, global head of currency 
options marketing with Chase 
Manhattan B ank. 

Like the vast majority of cur- 
rency options, barrier options 
are over-the-counter instru- 
ments, tailor-made by banks to 
suit customers' precise needs 
or market views. There are 
four basic types - palls and 
puts, each with either a knock- 
out or knock-in feature. 

A knock-in barrier option 
pays nothing at expiry unless 
it is first brought to life as a 
result of the underlying 
exchange rate reaching a cer- 
tain p re-determined level (the 
barrier). A knock-out option, 
on the other hand, begins life 
as a standard option but is 
killed off if the underlying 
exchange rate touches the bar- 
rier. Because of their uncertain 
life, they are generally much 
cheaper than conventional 
options. They have particular 
appeal to chart enthusiasts 
who wish to express ideas 
about support and resistance 
levels in their choice of hedg- 
ing strategy. 

Consider, for example, a US 
company which imports Ger- 
man goods and expects a bill 
for DM20 in three months’ 
time. If the importer is happy 
to pay the hill at the present 
exchange rate of DM1.515/S, he 
would simply buy a three- 
month DM call/dollar put with, 
this exercise price. This would 
allow him to boy the necessary 
D-Marks at this exchange rate 
in three months' time. Such an 
option might cost 2.5 per cent 
of the underlying amount 


Building 


Banks and other traders are 
all faring the same problem of 
polling data together from all 
over the world for analysis. 

Even a huge central data- 
base Is unlikely to manage the 
speeds and volumes of data 
required to manage risk effec- 
tively. Many of the new wave 
of products are based on flexi- 
ble “client/server* architec- 
ture, which links workstations 
to a shared processor. These 
are unlikely to replace core 
systems, running Tnfilkms of 
loans, but new risk manage- 
ment systems must be able to 
interface with existing 
systems, and pass values back 
and forth. 

“There’s a general trend 
towards bringing all these 
systems under one roof, with 
commensurate financial activi- 
ties,” observes Roger Lang, 
president and chief executive 
of Infinity Financial Technol- 
ogy of Mountain View, Calif- 
ornia. “There are two compel- 
ling reasons for such a move: 
to make more money, and to 
cut operational costs.” 

Infinity's Montage line of 
products includes development 
tools and front-end applica- 
tions tailored specifically for 
derivatives trading options. 
Based on Unix open sy s te ms 
architecture, they can contrib- 
ute to the management of 
swaps, caps/floors, swaptions, 
forward rate agreements 
(FRAs), bonds, money mar- 
kets, futures, futures options 
and foreign exchange. Clients 
include Chemical Bank, Chase 
Manhattan Bank, Sanwa 
Bank, ABN Amro Bank, Bar- 
ing Brothers, and Price Water- 
house. The company claims to 
be the leading provider of 
open systems to the global 
financial services marke t 

Unlike CATS, Infinity sticks 
to industry-wide tools such as 
the Oracle and Sybase data- 
bases. Chase Manhattan is 
bail ding its entire back-office 
and transactions processing 
for derivatives - specifically 
exotics - using the Infinity 
toolset. Analysts believe the 
attraction is the ability Infin- 
ity clients have of building 
their own exotics, and being 
able to process them down- 
stream. 

While Mr Lang dismisses the 
PC as a potential liability, cli- 
ent-server architecture, with 






its emphasis on interconnected 
personal work sta tions is more 
promising. “The PC was not 
the enabling technology that 
allowed traders to explore: it 
was the spreadsheet. But this 
is a dangerously self-contained 
tool, a two-edged sword 
because it gave rise to innova- 
tion, but left pools of uninte- 
grated data, at the same time 
juxtaposed’ to m ainfr ame 
systems. Now we have folly 
n e twor k able workstation envi- 
ronments, whereas , before 
there was the central mono- 
lithic mainframe: two com- 
pletely different architectures, 
achieving the same thing but 
with a canyon between them. 
What client-server and open 
architecture has allowed is to 
give power to the personal 
workspace so that It can 
finally rival die power of the 
mainframe." 

Infinity’s approach is to 
offer a toolset alongside its 
applications, which leaves the 
door open for users to write 
their own s ystem s , or to create 
“building blocks”. Many 
banks license tools and appli- 
cations. “We embrace the 
toolkit approach because of 
the speed of development” 
says Mr Lang. “It wmw that 
your expensive technology tal- 


ent doesn’t waste, time mam-~ 
tatntifg systems written, from 
scratch. In-house talent can' 
concen t rate on the highpriced 
high-value extras and addl- 


The toolkit also enables pro- 
grammers to integrate previ- 
ously disparate systems. "In 
the past “ explains Mr Lang, 
“a portfolio might be managed 
by different syste ms , and the 
only way of bringing together 
a pool of transactions would 
be to build separate reporting 
facilities. The trend is now to 
pool the data under one roof 
and drive the reporting from a 
consolidated set of data. 


“Once there is access to con- 
solidated data, a marketer can 
use toe customer information 
database, with knowledge of 
the market movement. A 
trader can go to the market 
looking for specific trades, and 
hedg« that position. A risk 
manager can. engage in a myr- 
iad of analytical and model- 
ting exercises to get a more 
intuitive profile of the compa- 
ny’s risk, and an operations 
professional can streamtine aU 
the different clerical processes 
and transactions. 1 * 


Claire Gooding 


LET ME EXPLAIN DERIVATIVES TRADING 
SIMPLY; YOU PLACE ONE BULLET IN THE 
CHfi » J ® 6R " rHEN - 



Currency risk: Graham Cooper reports 


Traders put up 
the barriers 


V erfl 


... .*5**-\. * 




- 

ter#*!** 








; v 


• J L . 


(DM500,000). It would protect 
the importer against the dollar 
weakening against the D-Mark 
but if the dollar strengthened 
significantly against the Ger- 
man currency in the next three 
months, the option could be 
allowed to expire unexercised 
and the DMZOm could be 
bought in the spot market at a 
more attractive rate. 

A knock-out DM call/dollar 
put would give the same down- 
side protection but only until 
the exchange rate reaches a 
level at which the importer 
feels this insurance Is no lon- 
ger needed. For example, a 
knock-out option with the 
same strike price and a barrier 
set at DL60/$ might cost only 
half as much as the standard 
option. If, at any time within 
the three months, the spot 
exchange rate touches DML60, 
the option ceases to exist The 
importer could then buy the 
necessary D-Marks in the spot 
market at this price and put it 
on deposit until needed. The 
user must be able to react 
quickly in the event of the 
option being knocked out, as 
the favourable rate may not 
last for long. 


reason cited by non-users. 

Conventional option pricing 
models are inadequate for the 
valuation of barrier options 
and, although leading banks 
claim to be able to mice and 
hedge most of these structures, 
they admit it is not always 
easy. The difficulties are most 
pronounced when the underly- 
ing exchange rate is close to 
the barrier level as the option 
approaches maturity. “Hedging 
some of these options close to 
expiry is a real nightmare," 
says Chase’s Stambaugh. 

To hedge options which they 
have sold, banks traditionally 
take an offsetting position in 
the underlying asset, but the 
size of this position has to be 
continually adjusted as the 
spot price of the asset changes. 
Close to the barrier the option 
value is extremely sensitive to 
changes in the spot value of 
the exchange rate, so big sales 
or purchases in the underlying 
currencies may be needed to 
keep the position hedged. 

As a result, barrier options 
are generally offered only on 


the most heavily traded 
exchange rates such as dollar/ 
D-Mark and dollar/yen. “We 
are not too keen on doing bar- 
rier options where there isn't a 
continuous spot market," says 
Paul Jackson, head of foreign 
exchange options at Midland 
Global Markets in London. 

Hedging of barrier options is 
one of the hot topics in deriva- 
tives research at present, and a 
favoured solution by many is 
.to use conventional options 
alongside a long position in the 
underlying asset to offset a 
short position in barrier 
options. This achieves a 
“static” hedge which does not 
need cantinoally adjusting and 
tons greatly reduces transac- 
tion costs. 

As these cheaper hedging 
techniques become more 
widely used, barrier options 
are starting to be applied to 
less actively traded currencies. 

Another growth area for 
these structures is in invest- 
ment products to enhance 
yield or to allow investors to 
express a view on two or more 
assets with a single instru- 
ment 

Bankers Trust for example, 
has been marketing a call ^ 
option on a basket of Belgian ' 
shares which knocks out if toe 
Belgian franc appreciates by 
more than 3J5 per cent against 
the D-Mark. This is an wramp lfl 
of an outside barrier, in which 
the barrier asset is different 
from the asset on which the 
bask: option is written. 

Another popular application 
in this year's low interest rate 
environment, says Midland’s 
Mr Jacks o n, has been to use 
two knock-out options to -cre- 
ate structured notes which pay 
highs returns provided an 
underlying asset remains 
within a certain range. Institu- 
tions have been particularly 
active in selling such notes. A 
typical example is a one-year 
dollar-denominated bond 
which yields some 200 basis 
points more than cnmna nUntial 
one-year paper provided the 
dollar/D-Mark exchange rate 
remains within the ranges 
DMl.48-DMl.68. Many varia- 
tions have been sold, with a 
narrower currency range 
allowing greater yield enhance- 
ment 




littl 



D espite the undoubted 
attractions of barrier 
options, in terms of cost 
and flexibility, some company 
treasurers are wary. “We can't 
price these options ourselves, 
so 1 am loathe to recommend 
them." says the treasurer at a 
top UK company, who declined 
to be identified. The extra diffi- 
culty in explaining such prod- 
ucts to the board is another 


ftticori^tig FTsurveySy caJfc' 



Overseas calier&jiratJKr 7* 


amt.-' 



5". 


* 53 * 












times Wednesday November 16 1994 




v 


Emerging markets: Richard Lapper looks at exotic ideas for trades 

Of naked dogs and bull spreads 


Try a 
plain 
vanilla, 
or maybe 
a butterfly 

The astonishing 
growth of the 
emerging debt market 
has given birth to a 
new generation of 
derivatives, says Ms 
Alexandra McLeod, of 
Bank of America, 
Illinois. Plain vanilla 
put and call options 
and structures such as 
straddles, strangles, 
bull spreads and 
butterflies are some of 
the exotic names of 
products developed in 
the rocket science 
laboratories of the 
world’s leading 
investment banks 


The naked dog basket is not 
the title of a film showing at 
your local art house cinema, 
nor a contender for next year's 
Booker prize. It is. in fact, an 
idea for a new 
financial prod- 
uct - one of the 
latest to 
emerge from 
the “rocket sci- 
ence” laborato- 
ries of the 
world's leading 
investment 
banks. 

And it pro- 
vides a graphic 
illustration of 
the connec- 
tions between 
derivatives and 
the emerging 
markets of 
Asia. Latin 
America and 
Europe. The 
basket of dogs 
is made up of a 
selection of 
Brady bonds, 
exchange for the rescheduled 
debts of developing countries. 

The dogs are naked because 


the yield on the US long bond, 
which in its zero coupon form 
serves as collateral for these 
issues, is stripped from the 
return on the Bra dies. 

The coupon on the “dogs" is 
therefore directly tied to the 
so-called “stripped spread" - 
the difference between the US 
long bond rate and the yield on 
the Bradies. 

The instrument is one of the 
most exotic derivatives trades 
and there has been limited 
activity to date. 

Nevertheless the wider mar- 
ket in both traded options in 
distressed and securitised 
emerging market debt Is sub- 
stantial Even though activity 
has tailed off to some extent 
since the upward move in US 
bond rates in February, busi- 
ness has grown rapidly over 
the past two years. 

Ms Alexandra McLeod, head 
of emerging markets at Bank 
of America. Illinois, said in a 
recent paper that the “aston- 
ishing" growth of the emerging 
debt market has “given birth 
to a new generation of deriva- 
tives”. 

The notional value of emerg- 
ing market options traded in 
1992 was estimated at $I5.5bn 
and there has been significant 
growth since then, with insti- 
tutional fund managers, as 
well as hedge funds and spe- 
cialist boutiques all active in 
the market 

On offer are plain vanilla put 
and call options on Brady 
bonds issued by big debtors 
such as Brazil. Argentina. 
Venezuela, Mexico and Poland, 
as well as the distressed debt 


they were holding by selling 
covered calls. "If a bank had 60 
per cent provisions on its Bra- 
zilian loans and tbe market 
was at 36. it would be bappy to 
sell a can on its debt at 40, in 
order to realise a fee,” Ms 
McLeod explained. 

Since 1993. a liquid market 
bas developed on all principal 
assets, with high levels of 
options activity this year in 
Venezuelan and Russian debt 
paper, reflecting high volatility 
and political risk in both coun- 
tries. 

One reflection of rising inter- 
est was the issue earlier this 
year by the Emerging Markets 
Traders Association of their 
own master agreement for 
over-the-counter options, 
designed to simplify hedging in 
emerging markets. Hie agree- 
ment published in April, was 


Asset allocation: dividing 
Instrument funds among 
markets to achieve 
diversification or maximum 
return. 

As-you-like option (or 
chooser option or the 
call-or-put option) enables the 
holder to convert from one 
style of option to a different 
style of option over a preset 
period of time. 

Average rate option (or Asian 
option): an option in which the 
settlement Is based on the 
difference between the given 
strike and the average prices 
of the underlying stock or 
Index on selected dates. 
Barrier options: a family of 
path-dependent options whose 
pay-off pattern and survival to 
the expiration date depend not 
only on the final price of the 
underlying security but also on 
whether or not the underlying 
security seifs at or goes 
through a p re-determined 
barrier at any time during the 
life of the option. Barrier 
options include: 

Down-and-out calf/put an 
option which expires worthless 
if the market price of the 
underlying security drops 
below a pre-determined price. 

Down-and-in call/pub an 


accompanied by six recom- 
mended market practices for 
options transactions on emerg- 
ing markets. 

Whereas the International 



Swaps and Derivatives Associ- 
ation (1SDA) master agreement 
provides for structures such as 
collars, straddles and strangles 
to be built into OTC agree- 


opbon which becomes 
effective if the market price of 
the underlying security drops 
below a pre-determined price. 

Up-and-out call/put an 
option that expires worthless if 
the market price of the 
underlying security rises above 
a pre-determined price. 

Up-and-in call/put an 
option that becomes effective 
if the market price of the 
underlying security rises above 
a pre-determined price. 

Best- of -two option (or 
either-or option or alternative 
option: provides the option 
holder with a payoff based on 
the independent performances 
of two separate and distinct 
securities or indices. 

Box options: instead of 
placing cash in a money 
market instrument and 
generating interest income, 
equity options are purchased 
the payoffs of which create 
capital gains that can be offset 
against current capital losses. 
Call option: the right to buy a 
given stock, commodity, index, 
or futures contract at a fixed 
price on or before a specified 
date. 

Cap: contract between a 
borrower and a lender where 
the borrower is assured that he 


meats, tbe emerging market 
documentation is simpler, and 
more geared to plain vanilla 
put and call options. 

Equity 1 derivatives have been 
well known in tbe Asian mar- 
kets over the past decade, 
according to traders, with the 
range extending more recently 
to Latin American markets. 
For example, earlier this year 
the Chicago Board Options 
Exchange launched an option 
on a Mexican stock exchange 
index, based ott 10 US listed 
Mexican ADRs and ADSs. 

Component stocks represent 
a range of economic sectors. 
One of the stocks. Telefonos de 
Mexico, is the most widely 
traded equity option in the US. 

On a smaller scale, this year 
has also seen developments in 
eastern Europe. In January, 
the Austrian stock exchange 


will not have to pay more than 
some maximum interest rate 
on borrowed funds. 

Collar a floating rate debt 
contract that establishes both 
a maximum and a minimum 
Interest rate to be paid by the 
borrower. 

Commodity swap: a swap in 
which counterparties exchange 
cash flows based on a 
commodity price on at least 
one side of the transaction. 
Compound option: an option 
on an option. The holder has 
the right to purchase another 
option on a pre-set date, at a 
pre-set premium. 

Contango: a condition in a 
futures market where the more 
distant delivery months trade 
at a premium to the near term 
delivery months. 

Covered call: one of the most 
popular option strategies, 
using an existing equity 
position. Calls are sold on the 
underlying security with strikes 
which are higher than the 
market price. The strike price 
chosen limits the profit a 
security holder can realise 
from the position and this 
strategy is best used when the 
holder is fairty certain that 
there will be little movement in 
the security's share price. 


issued warrants, denominated 
and settled in Austrian schil- 
lings. were issued, based on 
baskets of blue chip Czech and 
Hungarian equities. 

And last month. Citibank 
announced the launch of a 
warrant on a basket of 10 Turk- 
ish equities, the first ever 
derivative product on a diversi- 
fied Turkish equity portfolio 
offered to both local and inter- 
national Investors. 

Many of the products offer 
investors the chance to lever- 
age up already attractive 
sounding returns in exchange 
for greater exposure to the 
risks. 

But derivative instruments 
can also offer investors a safer 
and more viable means of 
entry into the markets. Willy 
Hemetsberger. vice-president 
equity derivatives, emerging 


CtaTency swap: an exchange 
of equal initial principal 
amounts of two currencies at 
the spot exchange rate. Over 
tiie term of the agreement, the 
counterparties exchange fixed 
or floating rate interest 
payments in their swapped 
currencies. At maturity, the 
principal amount is reswapped 
at a predetermined exchange 
rate so that the parties end up 
with their original currencies. 
Derivative: a contract the 
value of which changes in 
concert with the price 
movements in a related or 
underlying commodity or 
financial instrument The term 
covers standardised, 
exchange-traded futures and 
options, as well as 
over-the-counter swaps, 
options, and other customised 
instruments. 

Equity swap: a contract 
between two counterparties to 
exchange two different cash 
flows over time. During the life 
of the swap one party agrees 
to pay the rate of return on an 
equity or the equity index while 
the other party agrees to pay a 
floating or fixed rate of 
interest. 

Floor: an aspect of a floating 
rate debt contract that 



markets, at Citibank in Lon- 
don. insists that they can elim- 
inate problems linked to cus- 
tody, documentation, and 
settlement. 

The primitive character of 
custody arrangements in Rus- 
sia. for example, means that 
investors may need to travel to 
a company's headquarters in a 
remote Siberian town, for 
example. 


specifies a minimum interest 
rate for a borrower. 

Forward: an over-the-counter 
agreement for a buyer and 
seller to exchange a particular 
good for a particular price at a 
specified future date. 

Futures contract an 
agreement between a buyer 
and a seller to exchange a 
particular good for a particular 
price at a future date as 
specified in a contract 
common to all participants in a 
market on an organised futures 
exchange. Collateral must be 
posted for performance bonds, 
and positions are marked to 
market at least once a day. 
Hedge: a transaction that 
reduces risk of an underlying 
security or commodity position 
by making the appropriate 
offsetting derivative 
transaction. 

Hybrid security: a complex 
security consisting of virtually 
any combination of two or 
more risk management 
building blocks - bond or 
note, forward, future, or option, 
interest-rate swap: the 
exchange between 
counterparties of fixed-rate 
and floating-rate debt in a 
single currency. 

Lookback option: an option 
the payout of which is 
calculated using the highest 
intrinsic value of the underlying 
security or index over the life 
of an option. In the case of a 


Buying into Russia by means 
of a derivative whose value 
reflects that of the underlying 
share is a more practicable 
option. And in highly' volatile 
markets, derivatives, especially 
those based on indices or bas- 
kets, can help to diversify 
risks. 

By reflecting the value of 
indices derivatives can also 
help investors gain access to 
markets that can sometimes be 
highly illiquid. “The trick is to 
develop products that allow 
Investors to participate. You 
can guarantee the downside,” 
explains Mr Hemetsberger. 

And there are increasing 
signs, too. that within the 
emerging markets themselves 
local companies are becoming 
active users of derivatives, a 
feet reflected in the emergence 
of a number of powerful local 
exchanges. 

Last year, Brazil's Bolsa Mer- 
cadorias e Futures was the 
world's fifth most active 
exchange, with its interest 
rate, stock index and gold 
futures sitting comfortably 
among the world's top 30 con- 
tracts. 


lookback call, the highest 
market price is used whereas 
for a lookback put, the lowest 
market price is used. 

Put option: the right to sell a 
particular stock, bond, 
commodity or Index at a 
specified future date at a 
specified price. 

Quanto option (or guaranteed 
exchange rate option): an 
option in which foreign 
exchange risks in an 
underlying security have been 
eliminated. 

Risk reversal: this strategy 
combines the purchase of a 
put option with the sale of a 
call option. The put option 
preserves the capital value of 
the shareholding while the sale 
of a call option reduces or 
eliminates the cost of this 
insurance, at the expense of 
giving up some of the upside 
potential of the stock. 

Swap: a contract to exchange 
a stream of periodic payments 
with a counterparty. 

Swaption: an option to enter 
into a swap contract 
Warrant an option to 
purchase or sell an underlying 
instrument at a given price and 
time or series of prices and 
times. It Is ordinarily issued for 
longer than a year. 

SamcOtaiaMvgfniMUflU 
Mnwvnmt. ty Gay GMhMu: Ckrtion VOta*, 
Bid Pricing SMgln by Snofcfcn NMantMrp 
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issued in 


of Nigeria and Russia. Increas- 
ingly. too. 
structures such 
as straddles, 
strangles, bull 
spreads, and 
butterflies, are 
aisn available. 

Overall 
options trading 
has now out- 
paced the 
growth of the 
cash market. 
“With new par- 
ticipants and 
broking houses 
entering the 
market and 
increasing its 
liquidity, vol- 
umes seem to 
be on an 
upward spiral ” 
added Ms 
McLeod. 

Derivatives on emerging 
market debt were first sold in 
1990, when banks sought to 
enhance the yield on the debt 


What do they mean by that? 




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PROFIT FROM THE EXPERIENCE? 



FINANCIAL TIMES WEDN ESDAY NOVEMBER 



R onald Coase, the Nobel 
prize- winning econo- 
mist, once explained 
that if it were well understood 
that trading involved the 
exchange of rights to certain 
things, rather than the 
exchange of the underlying 
things themselves, our uni- 
verse of tradeable commodities 
and securities would be far 
larger than it |$. 

The people who structure 
derivatives strategies under- 
stand this uncoupling very 
wefl. Every day they engineer 
contracts where the rights to 
certain returns and their asso- 
ciated risks are disassembled 
and repackaged to suit their 
customers’ needs. 

Once viewed as exotic, deriv- 
ative instr umen ts used to man- 
age all sorts of market risks - 
interest rate, currency, com- 
modity, or equity - have 
achieved widespread accep- 
tance in the financial world. 
Their primary route of expan- 
sion now is through applica- 
tion in new industries where 
the concept of risk manage- 
ment remains a novel idea. 

However, other uses for 
derivatives are evolving, and 
these new applications take 
the craft Ear beyond managing 
just market risk. One of these, 
the evolution of products used 
to manag e credit risk, has had 

a troubled start, though its 
supporters say it could became 
a $ 1 . 000 bn industry. 

Another class of new deriva- 


New applications: Laurie Morse examines novei ideas for contracts 

Rights-thinking strategies 


lives focuses on using market 
forces to allocate scarce 
resources. These include sec- 
ondary markets for trading pol- 
lution allowances that have 
been issued as part of the US 
clean air act Introduced two 
years ago as a radical new way 
to ration pollution while allow- 
ing polluters some flexibility 
when facing regulatory con- 
straints, these products also 
have not lived up to their early 
promise. 

US futures exchanges in 


customers bad a secondary 
need: a means to manage the 
credit uncertainties in their 
portfolio. 

Managing credit risk has 
long been the purview of bank- 
ers, and the bread-and-butter 
of credit rating agencies. 
Transferring, or trading, credit 
risk has been nearly Impossi- 
ble without liquidating the 
rash instrument in question. 

However, derivative experts 
say it is possible to keep a 
high-yielding, high-risk secu- 


Another class of new derivatives being 
developed focuses on using market 
forces to allocate scarce resources 


some cases are taking the lead 
in innovation, trying to expand 
the risk management capacity 
of industries as diverse as 
catastrophe insurance and 
electricity generation. 

Merrill Lynch. Bankers 
Trust, and Credit Suisse First 
Boston took the lead in the 
experiment with credit deriva- 
tives. In a logical extension of 
their success with interest rate 
and currency swaps, these 
bankers and brokers saw their 


rity In portfolio, and manage 
the credit risk while still enjoy- 
ing an above-market return. 
Brokers are now willing to 
write an option on the differ- 
ence. or “spread” on the yield 
between the high-risk securi- 
ties and more secure invest- 
ment like a Treasury security. 

The options insulate the cus- 
tomer if the credit risk of his 
securities increases, while the 
broker who wrote the speci- 
alised option neutralises his 


exposure by performing an off- 
setting trade from a global 
selection of corporate credit 
deals. These highly-structured 
instruments are efficient only 
if the broker has access to a 
global corporate debt network. 

To date, credit derivatives' 
volumes have disappointed 
their backers, who say lack of 
liquidity and efficient pricing 
are limiting the market. 

Making new commodities 
out of pollution credits, elec- 
tricity, and even trash have 
proved equally frustrating. The 
US Environmental Protection 
Agency, in writing the Clean 
Air Act of 1990. surmised that 
reducing nationwide sulphur 
dioxide emissions, a key ingre- 
dient in acid rain, might be 
made cheaper and more effi- 
cient if polluters had a set of 
options to choose from. 

The agency assigned each 
main sulphur dioxide polluter 
(mostly coal-burning electricity 
plants) certificates represent- 
ing allowable levels of emis- 
sions. If the power generating 
company chooses to abate its 
sulphur dioxide output by 
switching to cleaner fuels or 
installing a costly smokestack 
scrubber, it is free to sell its 


excess allowances to another 
polluter. 

Over time the allowances 
expire, with US sulphur diox- 
ide emissions due to fall to half 
of their present levels by 2,000. 

Trading experts such as New 
York-based Cantor. Fitzgerald 
and the Chicago Board of 
Trade tumbled over each other 
to capture this new market-in- 
the making two years ago. 
However, time and experience 
have proven that utilities, qua- 
si-public entities which rarely 
have to deal with market 
forces of any kind, do not make 
carefree traders. 

Although the Chicago Board 
of Trade has conducted two 
annual pollution allowance 
auctions, and Cantor and other 
dealers have brokered private 
allowance trades, the majority 
of utilities have banked their 
allowances and pursued more 
costly abatement solutions. 

Mike Walsh, senior econo- 
mist at the Chicago Board of 
Trade, notes that the emission 
allowance program, to be a 
success, does not require active 
trading. “In fact, it’s working 
very well - companies are 
switching fuel, retiring dirty 
units, and many companies are 



Smoking zone limbed (reefing dashed hopes for a derivative marie* in pollution crecMs 


trading allowances within 
their own operations, transfers 
that don’t show up publicly.” 
he says. 

However, the limited trading 
has dashed hopes for a deriva- 
tive market in pollution cred- 
its. Mr. Walsh said the Chicago 
Board of Trade has shelved its 


idans to trade pollution allow- 
ance futures until a viable pri- 
mary market develops. 

In fact, the rapid deregu- 
lation of the electric power 
industry in the US may rekin- 
dle interest in allowance trad- 
ing. However, Mr Walsh and 
others believe that electric util- 


ities will first learn to use 
futures and options to price 
and hedge their electricity out- 
put as their markets become 
finer. The New' York Mercan- 
tile Ffrpihflng ft, the world’s lead- 
ing energy futures market, has 
plans to introduce electricity 
futures within the next year. 



Stock exchange: the weakness of toe UK stock market has slowed the 
launch of derivatives products 


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Who’s been moving in the 

Derivatives Markets since 1982? 

KENNEDY STEPHENS 

EXECUTIVE SCARCItSPiXlAUCTS IN DERIVATIVES 
20 Cousin Lane. London. EC4R 3TETefc (71) 236 7307. far (7 1)433 1130 

LONDON NEW YORK TOKYO HONG KONG 


Equity derivatives: the futures market has increased in importance since the crash of 1987, says Philip Coggan 

Staggering growth of a product here to stay 


The recent furore about the 
dangers and misuses of deriva- 
tives has left equity futures 
and options untouched. 

Equity derivatives were 
blamed by some for the stock 
market crash of 1987. But the 
recent derivatives problems 
have been concentrated in the 
bond market, where specula- 
tion on lower interest rates 
caused some corporations and 
hedge funds to come unstuck. 

In fact, the equity futures 
market has increased enor- 
mously in importance since 
the crash. In London, for 
example, turnover in the 

FT-SE 100 

Index future 
has increased 
from 458,000 
contracts in 
1987 to 3.1m 
last year. **i"*""" 

While the UK leads the rest 
of Europe in terms of futures 
use, it still lags behind the US 
where equities fixtures turn- 
over is 10 times the volume of 
the cash market. 

Often, the futures markets 
win be portrayed as leading 
the cash markets up or down, 
although in practice this is 
probably an unreal distinc- 
tion. Nowadays, the two mar- 
kets are inextricably 
entwined. 


A purchase of tbe index 
future, for example, is likely 
at some stage in the chain to 
result in purchases in the cash 
market to hedge toe transac- 
tion. Furthermore, arbitrage 
keeps the two markets from 
getting far out of line. 

Many investment institu- 
tions, which 10 years ago 
might have looked askance at 
the idea of using derivatives, 
have come to embrace the 
market. “Most equity inves- 
tors are, by definition, 
tnvolved in a certain amount 
of risk. They realise that 
derivatives can he used to 


Many investment institutions, which 10 
years ago might have looked askance at 
derivatives, have embraced the market 


reduce that risk,” said Mark 
Rush ton, a director of the 
investor coverage group at 
Swiss Bank Corporation. 

If an investor wants to put 
£100m into the equity market 
in a quick and efficient man- 
ner, then the Footsie future is 
probably the most suitable 
vehicle. Options are widely 
used, but most institutions 
tend to buy, rather than write 
(sell). Buying puts is a com- 
mon means of insurance 


against a fall In the market or 
in an individual share. 

Some institutions do write 
calls, which gives them extra 
income but limits the upside 
on the security. Writing puts, 
where the downside is nnquan- 
tifiable. is much more rare. 
But SBC’s Mr Rnshton said: 
“Some institutions write puts 
when they have a pot of cash 
which they are waiting to 
invest when the market falls." 

Over-the-counter options are 
often used when institutions 
need to hedge in advance of a 
particular date, such as a 
review of their portfolio, 

which does not 

fit in with toe 
fixed contract 
terms osed on 
the exchanges. 

Institutions 
ma y also use 
over-the-counter options to 
hedge against an overseas 
risk, where their portfolio is 
not particularly correlated 
with an index future, for 
example, if their US exposure 
mostly consists of small stocks 
not within the S&P 500. 

The problem with OTC 
options is, of coarse, toe lack 
of liquidity, which may 
encourage all participants in 
toe market to pay dose atten- 
tion to the credit risk of their 


YOU PROMISED NOT 70 MENTION 

DERIVATIVES TRADING? 



counterparties. 

The use of derivatives has 
also gained a boost from the 
popularity of “guaranteed” 
equity products. These prod- 
ucts, sold to private investors, 
combine an element of equity 
exposure with a guarantee 
that the original capital will 
be returned, normally after 
five years. Institutions which 
offer such products usually 
hedge their exposure via the 
derivatives market 


The past few months have 
semi a slowdown in the launch 
of such products, perhaps 
because of the weakness of toe 
UK stock market, or perhaps 
because of the rise in bond 
yields and base rates which 
started to make other products 
more competitive. 

The long-term fixture of 
guaranteed products will prob- 
ably depend on whether the 
current set of products makes 
it through the five-year period 


successfully. If the guarantees 
are called upon, they must be 
fulfilled. A product failure 
would be devastating for pri- 
vate investor confidence. 

Guaranteed products quietly 
disguise their link to toe 
world of derivatives. Funds 
which more openly embrace 
the derivatives markets have 
yet to win over the private 
investor; Fidelity, for example, 
dropped its futures ftmds ear- 
lier this year. 

Private investors are slowly 
warming to the idea of enter 
fng the derivatives market 
directly, through the use of 
options. One development 
which may encourage such nse 
is toe introduction of rolling 
settlement, which will put a 
stop to one of toe favourite 
habits of risk-nrinded private 
investors - dealing within the 
account Options are a natural 
alternative for such specula- 
tive trading. 

Of course, such growth car- 
ries its dangers, as shown by 
tiie reports of private inves- 
tors* option losses following 
the crash of 1987. There will 
undoubtedly be scandals to 
come, and calls for greater 
regulation. But the staggering 
growth of equity derivatives 
means that few can doubt soch 
products are here to stay. 


T he news emanating from 
the derivatives market 
this year could hardly 
have been much worse. 

Reports of multi-million dol- 
lar losses (Procter & Gamble), 
collapsed investment funds 
(As kin Capital Management), 
companies pushed to near- 
bankruptcy (Metallgesell- 
schaft) and high-profile law- 
suits (Procter & Gamble again) 
have left a nasty stain on the 
business. 

As one corporate treasurer 
put it recently: “Derivatives 
have become a four-letter 
word." 

Certainly, the bad publicity 
surrounding the business has 
put many derivatives practitio- 
ners - from the bankers that 
create and sell them , to the 
corporate treasurers who use 
them - on the defensive. It has 
also grabbed the attention of 
regulators and legislators, who 
have questioned whether east- 
ing supervisory and reporting 
structures are up to the job of 
handling the explosive growth 
in the over-the-counter deriva- 
tives market; and it has eaten 
into the profits toe big Wall 
Street banks and securities 
houses earn from helping their 
clients to manage risk. 

Yet, amid all the gloom, 
there are those in the industry 
who believe the market has 
already begun to recover from 
its mid-summer trough, when 
industry analysts said activity 
at the high end of the market - 
where the more complex deriv- 
atives are sold - shrank by as 
much as a third. Bankers 
Trust, the most active bank in 
the business, says that deriva- 
tives activity actually picked 
up in the third quarter, and 
that its earnings from risk 
management during the first 
nine months of the year were 
down only 7 per cent, com- 
pared with toe record year of 
1993. 

Also, a few Industry partici- 
pants believe that some good 
may eventually come of all the 
bad news surrounding deriva- 
tives (although, not surpris- 
ingly, it Is the bankers who are 
the most upbeat about the cur- 
rent situation). 

Mr Mark BrickeU. head of 
derivatives strategies at JP 



* 




McDonald’s, wtth its hugs exposures to currency risk, is one o t the biggest users of d o riva tise a among multinational compmlea 

Effects of bad publicity: Patrick Harverson considers the implicat ions 

Dark cloud or wake-up call? 


Morgan, says: “One useful 
aspect of all the publicity in 
1994 was that it stimulated 
firms to take a second look at 
their portfolios, to reassure 
themselves that what they had 
was what they wanted. . . 
That’s good for the system." 

Another who sees a silver 
lining in the dark clouds hov- 
ering above derivatives is Mr 
Fred Cohen, managing director 
at Price Waterhouse’s capital 
markets and treasury practice. 
He says: “What we're observ- 
ing now is that for the end-user 
community [the big corpora- 
tions, insurance companies, 
pension funds, foundations and 
mutual funds], this is a 
wake-up call. It has pointed out 
to them soma of the risks 
inherent in these types of prod- 
uct and has given them cause 
to reassess the quality of their 
frameworks for identifying, 
assessing and managing risk.” 

Such is the desire to find 
grounds for optimism in the 
market that some profession- 
als have actually welcomed 
Procter & Gamble’s lawsuit 


against Bankers Trust over a 
soured interest-rate swap. 
Although the headlines sur- 
rounding the case are only 
likely to add fuel to the anti-de- 
rivatives Ore currently raging 
through Congress (where a few 
lawmakers see derivatives as 
the biggest threat to the US 
financial system since Mr 
Michael Milken and his junk 
bonds), bankers hope that the 
case will answer some impor- 
tant questions. 

For example, how much 
responsibility for educating 
corporations about the risks 
involved in using derivative 
products should tie with the 
dealer? Also, how much know- 
ledge and sophistication 
should the dealer assume on 
behalf of the client? 

If the courts rule that it was 
up to PAG - a multinational 
company with a long and suc- 
cessful record of operating in 
the financial markets - to 
ensure that it was fully aware 
of the risks involved in buying 
the disputed contract from 
Bankers Trust, an important 


ground-rale may be estab- 
lished. 

The upbeat mood among 
some derivatives professionals, 
however, cannot disguise the 
fact that tixe market has been 
bruised by the setbacks of this 
year. 

Although the problems 
stemmed primarily from the 
sharp rise in US interest rates 
and the subsequent slump in 
US and international bond 
markets - a development 
which could hardly be blamed 
on the derivatives market itself 
- such is the leveraged nature 
of some derivatives (particu- 
larly the more exotic instru- 
ments) that the negative 
impact of rising interest rates 
has been greatly exaggerated. 
The damage inflicted left some 
users and dealers nursing huge 
losses on. their investment 
portfolios, or from botched 
hedging strategies. 

Consequently, the more con- 
servatively-minded corporate 
users have been steering clear 
of the more complex deriva- 
tives in favour of simpler con- 


tracts that are easier to value 
and which leave the user less 
vulnerable to heavy collateral 
damage from declining mar- 
kets. “People are more sensi- 
tive to what they’re buying 
now,” said one derivatives con- 
sultant 

Other companies, however, 
say that they have not changed 
their policies toward deriva- 
tives, primarily because they 
claim that they do not use the 
complicated contracts that 
have been the root-cause of 
many of tbe problems. McDon- 
ald's, with its huge exposures 
to currency risk, is ohe of the 
biggest users of derivatives 
among multinational compa- 
nies. The fast-food group says 
it has continued to use deriva- 
tives as it always has - for 
basic financing purposes. “We 
have always been conservative 
about derivatives,” says Mr 
Chuck Eberiing, a spokesman 
for McDonald’s. 

One banker at a New York 
securities house makes a simi- 
lar point, claiming that the 
lawsuits and losses have not 


unsettled corporate treasurers, 
because, in most large compa- 
nies, the treasurers are well- 
versed in the risks of using 
complex derivative instru- 
ments. “They’re not scared off 
by headlines. They know from 
personal experience what's 
complicated and what isn’t, 
and which transactions make 
sense for them.” For every 
Procter & Gamble or Gibson’s 
Greetings (another company 
suing Bankers Trust over 
derivatives losses), there are 
scores of McDonald’s, he says. 

One clear consequence of the 
upheavals in the market thfs 
year, however, has been a gen- & 
oral reassessment by compa- *' 
nies of management’s responsi- 
bilities in tracking the use of 
derivatives. According to Mr 
Cohen, of Price Waterhouse, 
the most important lesson 
teamed this year has been that 
senior management and com- 
pany directors need to be bet- 
ter informed of the risks 
involved in derivatives. As Mr 
Cohen puts it: “There’s been a 
general acknowledgement that 
corporate policies need to be 
better defined and docu- 
mented, and that there should 
be a clearer statement of tbe 
goals, objectives and risk toler- 
ances of an organisation by its 
senior management and board 
of directors.’' 

This reassessment h^s been 
partly to blame for the slow- 
down in the pace of derivatives 
activity, says Mr Cohen. 
“Today, companies are using 
instruments with multiple lev- 
els of risk, and there is a realis- 
ation that there's a need to 
have appropriate models and 
systems to evaluate them." In 
most cases, comp anie s are 
looking to outside advisers - 
investment hanks or specialist 
consultants - to provide the 
tools for making these evalua- r- 
tions. 

One such tool is the “Risk- * 
Metrics" risk manage ment sys- 
tem developed by the US hank 
•I.P.^ Morgan, which is now 
available to derivatives users. 
Whether access to J.P. Mor- 
gan’s “black box" will prevent 
future derivatives debacles 
remains to be seen, but judging 
oy the events of this year, 
some companies need all the 
help they can get 


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YOU NEED TO KNOW 

WHEN DERIVATIVES ARE THE 


AND WHEN THEY’RE 

THE WRONG SOLUTION 


AND ITS 


IF THIS IS WHAT YOU 

EXPECT FROM A BANK. 

THIS IS THE BANK 

YOU'RE LOOKING FOR. 


understand 


At. Citibank, we take the lixmvtp 
vour business needs. \X/hen. -the . situation uis 
right. we recommend prudent ris : k manage- 
nient solutions. J his is why X -diti ha nk.p ^dpesj 
derivatives transactions tor more- client^ in 
more countries than any other bank. - Y; y 


1994 Citibank, N. A. Citibank is a member uf SFA and !MRO. 












FINANCIAL TIMES WEDNESDAY NpVEHBER-\l^^^^ : 


DERIVATIVES 8 



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Delayed action: claims from the California earthquake continue to cfimb 


T here has seen some 
important progress in 
the establishment of a 
market for insurance deriva- 
tives this year - even though 
sceptics, especially in the con- 
servative insurance industry, 
are numerous. 

In October, for example, the 
Chicago Board of Trade (CBoT) 
approved the wordings of four 
agricultural insurance con- 
tracts, which could begin trad- 
ing in the first half of 1995. 

The same exchange has seen 
a steady growth in trade in its 
catastrophe insurance con- 
tracts, albeit from an 
extremely modest base. 

And in the over-the-counter 
market there has been an 
incr easing amount Of trade in 
reinsurance policies which 
incorporate some of the fea- 
tures of an exchange- traded 
catastrophe contract intro- 
duced in 1992, 

Perhaps most important of 
all, sensing the commercial 
potential of a new derivatives 
market, US investment banks 
are investing resources in the 
business, with specialists 
changing jobs frequently. 

The new agricultural con- 
tracts - Illinois soya beans. 
Iowa corn, Kansas winter 
wheat and North Dakota 
spring wheat - were approved 
by the CBoT on October 18 and 
must now be approved by the 
authorities in Washington. 

The contracts - known as 


Insurance: Richard Lapper discusses an important new development 


■ V 1 7^* 


Reaping rewards from 








area yield options - provide a 
means for hedging against 
shortfalls in the harvest of par- 
ticular crops. 

Traders select a strike yield 
for a crop. A holder of a call 
option might select a strike of 
100 bushels an acre. If the 
actual yield, as assessed by the 
US Department of Agriculture 
after harvest, was greater than 
the strike, the call holder 
would receive cash. Con- 
versely. a put holder would 
receive payment if the crop 
was smaller than the chosen 
strike. 

Morton Lane, managing part- 
ner of Lane Financial, a com- 
pany that advises brokers, 
says: “It’s natural for the CBoT 
to do this. It means we are 
committed to this area." 

Mr Lane, one of the archi- 
tects of the new insurance-re- 
lated market, is also confident 
about the prospects for the 
catastrophe reinsurance con- 
tracts. launched by the CBoT 
in December 1992, despite a 
slow start Between May and 
September this year some 6.000 
national and eastern catastro- 
phe contracts were traded, 10 
times more than in the same 


period last year. 

“It is not enough to satisfy 
anybody but it underscores 
there Is still interest," notes Mr 
Lane, who explains that most 
of the contracts are call 
spreads, used to limit and iso- 
late a particular layer of risk. 

Futures contracts are priced 
according to moves in a loss 
ratio, based on figures for 
claims and premiums compiled 
by the Insurance Services 
Office (ISO). The settlement 
price of each increases by $250 
for each one percentage point 
upwards movement in the 
ratio. For example, while a loss 
ratio of 20 per cent would give 
each contract a value of $5,000, 
a loss ratio of 120 per cent 
would make the contract worth 
$30,000. 

Typically, buyers pay for an 
option to buy a futures con- 
tract when the loss ratio 
exceeds 50 per cent and sell 
when the ratio exceeds 70 per 
cent. The arrangements in 
effect give protection in the 
same way as an excess of loss 
reinsurance contract 

More importantly perhaps, 
the ISO loss index has been 
integrated into a more tradi- 


tional reinsurance contract, 
the loss warranty. 

Observers believe that as 
much as 20 Httibs more busi- 
ness has been traded in these 
Chicago-influenced loss war- 
ranties in the over-thecounter 
market than at the CBoT itseUL 

A number of reinsurers* 
underwriting loss warranty 
products have begun to hedge 
their own exposures in Chi- 
cago, implying ♦fra* the »mu» 
interaction between OTC and 
exchange-rated products which 
has helped fuel the growth of 
other markets, could be begin- 
ning in this market, too. 


W ithin the derivatives 
industry, few doubt 
that a derivatives 
market will eventually be 
established, even though some 
believe the development could 
be long term. Bankers Trust, 
Citibank, and Morgan Stanley 
are looking into the potential 
Most appear to be interested 
in trading rather fl**" under - 
writing risk, but Mr Lane says 
a number of smaller US inves- 
tors are considering invest- 
ment funds which would be 
dedicated to seiwng the rein- 


surance contracts; 

In the insurance industry, 
' too, from where, after all, most 
initial demand MB come, there 
have also been some develop- 
ments. Zurich Insurance, 
through its Bermuda-based 
subsidiary Centre He, has been 
an active backer of these alter- 
native products. 

Centre He owns a chunk of 
Centre Financial Products, a 
New York boutique investment 
firm. Richard Sandor,. chair- 
man of Centre Financial, is a 
founding father of the financial 
derivatives industry and. an 
enthusiastic fan of the develop- 
ment “It is past its infancy 
and is starting to crawL" ' 

Insurance and reinsurance 
brokers, such as Sedgwick, 
Willis Corroon, Alexander & 
Alexander and CT Bowring, 
are also exploring the- market 
Andrew Martin, mana gi ng 
director of Sedgwick Payne 
Insurance Strategy, concedes 
that trading has been slack 
this autumn and is keen to see 
modifications to some of the 
exchange traded contracts. 

In particular, some buyers 
would prefer to see annual 
rather t han three-month, con- 


tracts, to take into a«OTWrtte~ 
actual size of a loss which may 
not.be known ' for more 'tfcgn’' 
siXTnonfiis after theevenfc" ■ 

- Estimates of claims 
Northrldge earthquake inr CaL 
ifonna* earlier- tinsyearhayfe: 
continued to .climb/ itine 
mrrnthg after the. event ftsglfL 
This questions the use£ujtne<s - 
of the current contests,' whkix- 
cover loss events during, a 
three-month period and are 
closed aftter ah . additional^ 

three-month repea ting period.; v 

In the meantime, along with, 
others Sedgwick is Making on 
the development of a separate 
UK or broader European loss . 

index, which, would allow for 
the development of a ; wider - 
range of products. And Mr 
Martin remains canvteced that 
the mismatch between the 
insurance - and . reinsurance. 
indu£dry*s capital baseand the 
scale of potential exposures 
faced by business should con- 
tinue to drive interest in deriv- 
atives. as a means of attracting ' 
new capital into , the business. 

A sudden increase in the"' 
number of. could - 

make that mismatch -appear, 
even starker. 




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C ommodities have become a hot 
topic this year. Explosive price 
increases in raw materials such as 
copper and aluminium, fuelled by renewed 
economic growth across most of the world, 
has triggered interest in how best to take 
advantage of these rising prices, while at 
the gamp Hmp protecting against the risks 
that they represent. 

The result has been a rapid development 
of the over-the-counter (OTC) commodities 
swaps market The exchange-traded mar- 
ket. highly liquid and transparent and 
already widely used by many of the large 
commodity producers and consumers, con- 
tinues to expand. But it is to the over-the- 
counter market that many new and tradi- 
tional users of commodity-linked deriva- 
tives are turning. 

They are attracted by the flexibility and 
variety of the instruments offered by 
banks in this market. Users can buy tools 
which allow exposure to commodities on 
terms and over maturities simply not 
available on the traded exchanges. 
Exchanges reduce instruments to their 
lowest common denominator, which every- 
one can buy, trade and use, but which do 
not always correspond to an investor's 
needs. OTC instruments, on the other 
hand, can be tailor-made to the particular 
requirements of each individual user. 
“There is infinitely more flexibility In 


Commodities: Graham Bowley on rapid development of the OTC market 


Increasing prices heighten interest 


the OTC market," said Martin Fraenkel, 
manag er of commodity risk management 
at Chase Manhattan h ank in London. 
“This manife sts itself in a whole variety of 
swap, forward and option contracts with 
different settlement periods to the 
exchange contracts." 

At the same time, users are becoming 
increasingly aware of the vast array of 
instruments available to them. They are 
also gradually acquiring a greater under- 
standing and appreciation of the benefits 
that the instruments can provide. 

“Many users really are looking at the 
market for the first time," said Keith Mur- 
phy. vice-president and head of commodity 
derivatives at JP Morgan in London. 
“They did not know some of the things we 
are offering could be done." 

“We maintain relationships with 10 to IS 
of the world’s largest commodity produc- 
ers and around 90 per cent of these are 
actively hedging their price risk using the 
swaps market. We have never been 
busier" said one banker in charge of com- 


modity derivatives at a bank in London. 

But it is not just producers and consum- 
ers of raw materials that are turning in 
increasing numbers to the OTC market. 
Investors, keen to exploit the spectacular 
price increases witnessed in many com- 
modity sectors, are looking to the OTC 
market to gain exposure to commodities. 

The result has been the arrival in the 
market of a number of big operators, such 
as Goldman Sachs, JP Morgan. Merrill 
Lynch and other large banks, offering a 
variety of instruments pegged to different 
commodity baskets or indices. 

In addition, a number of investment 
funds have recently been created. For 
example, the BZW commodities trust will 
invest in various types of OTC derivative 
instruments with the aim of outperform- 
ing the Goldman Sachs commodity index. 
Fleming is to run a natural resources 
investment trust, which will get exposure 
to commodities by buying shares in com- 
panies involved in ext racting and process- 
ing natural resources. 


The thinking behind these innovations 
is that commodities are now ready to be 
treated as an asset class in their own right 
- to be used by investors as a way of 
diversifying their portfolios away from a 
simple reliance on other assets such as 
stocks and bonds, as well as a hedge 
against inflation and a play on economic 
growth. 


C ommodities tend to rise in price 
during periods of economic growth, 
whereas bonds generally fall in 
value as inflation and interest rates rise, 
as has happened in such dramatic fashion 
this year. 

“There is now a lot of interest among 
investors in using commodities to diver- 
sify away from stocks and bonds," said 
Sohail Jaffer, vice-president in the finan- 
cial institutions group at Citibank in Lon- 
don. 

“Investors are showing a new interest in 
metals and other commodities," said Mr 
Murphy. “They have made a leap of faith 


and at last they are listening to what we 
have been triling them." 

The growth of the OTC market has not 
detracted from the exchange-traded mar- 
ket, however. In fact, quite the contrary - 
many of the users of the OTC market and 
the intermediary banks that provide the 
OTC products have tended to use the 
exchan ges more and more to hedge their 
exposures in the OTC market. 

The exchanges, such as the London 
Metal Exchange, which moved to larger 
premises in the City of London at the end 
of last month, wiH continue to play an 
important role. This is especially true for 
those investors who require quick and 
easy access to their investments. Sabre 
Fund Management, for example, a ftmd 
which has $90m under management in 
commodities, uses only the exchange- 
traded market 

“We take an active rather than a passive 
approach to ftmd management and will 
not want to hold the same position over 
the course of. say, five years, but will want 


to change our positions," said John 
Demaine of Sabre. “So we -use tire 
exchange-traded market for its liquidity 
and transparency.” 

Nevertheless, the development of the 
OTC market looks set to continue. Hus is 
in spite of the bad publicity surrounding 
the heavy losses accrued by some compa- 
nies, . such as Proctor & Gamble and 
Metailgesellschaft, and the charges that 
many derivative products are being, mar- 
keted in an irresponsible maimer by some 
banks. 

“Recent articles about losses an deriva- 
tives have not had a negative impact," 
said Mr Murphy. “Instead, they have been 
positive in focusing both consumers and 
producers cm the pricing risk arid on the 
possibilities offered by risk management” 

However, further growth' in the OTC 
market is unlikely to be uniform across all 
commodity sectors. 

“Five years ago the oil swaps sector was 
booming; but nowit has fallen back a lot,” 
said one commodity derivatives trader in 

New York. “Over the past two years, the 
natural gas market has taken over, going 
from five^ transactions a day to 4Q transac- 
tions a day now, mainly because of the 
deregulation of the US natural gas market 
So perhaps the next market to boom wiH 
be the US electricity market since this is 
being deregulated at the moment” 




*1 


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Foreign Exchange, Interest Rate, Emerging Market and Commodity Activities 


The Leading Edge In Asian Equity Derivatives 


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HONG KONG 


TOKYO 


LONDON 


NEW YORK 




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FINANCIAL TIMES 




■°Ph, 


WEDNESDAY NOVEMBER. 16 1994 


DERIVATIVES 9 


■ - i^;-. * 




)crivative$ 


pro vi< 


iding 


A s an essential tool of 
rtak management as 
well as a means of 
reducing funding costs, both 

ecchange-traded and over-SL 

punier interest rate swaps 
experienced strong 
growto m recent years and are 

«« 

The amount of interest rate 
outstaDlJ ing totalled 
at the end of 1993 
according to the International 
Swaps and Derivatives Associ- 

^ marJtet 
of 60 per cent last year. 
The benefits of using such 
sophisticated derivative instru- 
ments have doubtless contin- 
ued to be appreciated by bor- 
rowers in this year's difficult 
market conditions. With inves- 
tor sentiment likely to remain 
bearish and markets volatile 
with business becoming ever 
more global, and in spite of 


Interest rate swaps: Graham Bowley looks at an essential tool of risk management 

How borrowers cut funding costs 


heavy losses incurred by some 
companies on certain deriva- 
tive contracts, the growth erf 
the interest rate swaps mar- 
kets looks set to continue. 

An interest rate swap allows 
counterparties to exchange the 
risk associated with borrowing 
funds at either a or a 
floating Interest rate. For 
example, one borrower may be 
able to raise funds relatively 
cheaply in the fixed-rate mar- 
ket- However, be may require 
floating-rate funds. He can 
therefore use a swap to borrow 
at a fixed rate of interest but 
exchange the proceeds with 
another borrower who has a 


comparative advantage in the 
floating-rate sector. 

In this way. corporate trea- 
surers can significantly cut the 
costs of funding and at the 
same time manage their expo- 
sure to interest rate move- 
ments across a wide range of 
currencies. The role of the 
banks in this equation has tra- 
ditionally been to match 
counterparties with offsetting 
borrowing requirements, 
although as the liquidity of the 
market has risen, their role is 
becoming more that of a mar- 
ket maker, making prices in 
the different swap products. 

Although most swap trades 


Hedge funds: Conner Middelmann reports 

Down but not out 


Hfidge funds have been blamed 
for a wide variety of financial 
market upheavals ranging 
toom the 1993 breakdown of 
the exchange rate mechanism 
of the European Monetary Sys- 
tem to this year's bloodbath in 
the bond markets. 

Yet, beyond the sensational 
headlines about the big bucks 
and big egos associated with 
this Industry, few people have 
a clear understanding of how 
hedge funds work. What is 
more, although hedge fund 
managers, like many other 
financial market participants, 
have lost large amounts of 
money in this year's market 
turbulences, talk about the 
imminent demise of the indus- 
try is premature. 

“This year has been an aber- 
ration." says Dixon Boardman, 
managing director of Optima 
Funds, who run some $650m in 
multi-manager 
funds. “These 
people are the 
great invest- 
ment brains of 
the fund man- 
agement indus- 
try, and a 
great brain 
doesn’t go stu- 
pid overnight. 

They will rise 
and shine 
again."* 

As observers 
try to assess 
the- success - 
rate of . the 
mantfriM strat- 
egies pursued 
by hedge fund 
managers, the 
debate over 
what exactly 
constitutes a 
hedge fund 
continues. 

Originally, hedge funds were 
OS equity funds which 
"hedged” against market 
declines by holding short, as 
well as long, positions. In 
recent years, however, funds 
started using leverage and 
derivatives to enhance returns 
and taking ' large bets on the 
direction of markets. The pic- 
ture is further complicated by 
managed futures funds, which 
use s imilar techniques to some 
hedge funds but invest only in 
derivatives, rather than cash 
securities. 

According to estimates by 
Tass, a London-based research 
firm which monitors some 
1,600 absolute-return manag- 
ers, $7Sbn to $80bn are 
invested in hedge funds, which 
number between 800 and 900 
worldwide. "With a handful of 
big players dominating the 
market, some 35 per cent of 
that money is said to be man- 
aged by about 1 per cent of the 
fond managers. Meanwhile, 
some 825bn are under manage- 
ment with about 450 to 500 
active futures managers, 
according to Tass. 

“The expression hedge-fund 
industry is a misnomer," says 
Joseph Nicholas, president of 
Hedge Fund Research, a Chica- 
go-based consulting firm. *Tt 
has become a catch-all for a 
variety of skill-based strate- 
gies, many of which don’t even 
use derivatives.” 

HFB have devised a lis t of 12 
typical investment strategies 
employed by hedge fund man- 
agers, and track the perfor- 


mance of each of these sectors 
on a quarterly basis. These 
include short-sellers, funds 
which invest in distressed 
securities, emerging markets 
funds, macro funds, convert- 
ible arbitrage funds, and 
merger arbitrage funds. 

Rather than putting all their 
eggs in one basket by picking 
ope particular type of fund 
manager, many investors 
choose to spread their money 
- and their risk - across a 
spectrum of management 
styles by buying so-called mul- 
ti-manager funds. These are 
iiuids which are invested with 
a selection of hedge-fund man- 
agers pursuing different strat- 


“We try to blend together a 
group of these managers and 
aim to give oar investors a 
smooth ride,” says Mr Board- 
man, who runs such a fund. 




“hi this year's volatile mar- 
kets, the multi-manager 
approach .has been vindi- 
cated,” be says, adding: "At 
Optima, we haven't attended 
any weddings this year, hut 
lam happy to say we also 
haven’t attended any funer- 
als.” 

In 1993, most hedge funds, 
especially those Investing in 
fixed income, produced stellar 
performances as the global 
bond market rally pushed 
yields close to historical lows. 
With billions of dollars to 
invest, some of the large 
global, or macro, participants 
were unable to take large posi- 
tions in equity markets and 
traded file bond and currency 
markets, the only ones big 
enough to offer the bqmdkty 
they needed. 

Steep yield curves enticed 
hedge fluids and banks’ propri- 
etary traders to leverage up 
massively by borrowing 
money low rates and bay 
European bonds. 

That lucrative game came to 
an end early this year amid 
growing signs that the bond 
rally was overdone. The fide 
turned abruptly on February 
4, when the OS Federal 
Reserve raised short-term 
rates for file first time in the 
current cycle, triggering a 
sharp sell-off in the bond mar- 
kets and inflicting heavy dam- 
age on the most highly lever- 
aged operators. 

“We have had a slow, pain- 
ful bond market crash which 
has created an extremely diffi- 
cult environment for many 


people, and huge losses by 
some of the big participants 
have given the hedge-fond 
industry a reputation it 
doesn’t deserve," says Jean- 
Franpois Bnisseret, managing 
director of Concerto Research, 
which advises a Jersey-based 
multi-manager investment 
company. 

Many macro fund managers 
also lost money on the mis- 
taken bet that the dollar 
would rise substantially In 
1994. 

Among this year’s most 
widely publicised casualties 
were three hedge fluid manag- 
ers referred to as “the three 
Davids”: David Askin, David 
Gerstenhaber and David WeilL 
At the beginning of 1993, their 
fund management companies 
had combined equity under 
management of around p 
today, after heavy losses, 
redemptions 
and, in one 
case, bank- 
ruptcy, that 
has dwindled 
to around 
$70m. 

Some of the 
big macro fund 
managers, 
such as Mich- 
ael Steinhardt, 
Leon Cooper- 
man and 
Julian Robert- 
son, also 
incurred sharp 
losses due to 
their high 
exposure to 
bond markets. 
According to 
Tass, macro 
funds lost 
between 18 and 
20 per cent in 
the year to end-October. 

Meanwhile, many smaller 
hedge fund ma n a gers employ- 
ing more specialist strategies 
managed to protect their 
downside or even post gains in 
this difficult environment. 
“About 60 per cent of money 
under management in hedge 
fluids showed disappointing 
results, but in terms of fund 
managers, only about 20 per 
cent did really badly,” says Mr 
Bnisseret 

As be sees it, specialised 
niche players, rather than the 
big macro participants, hold 
the key to the future. “I am a 
great believer in specialisa- 
tion; markets are becoming 
more and more sophisticated 
and price movements are 
increasingly difficult to pre- 
dict unless you know a lot 
about the market yon are oper- 
ating in." 

However, the macro opera- 
tors should not be relegated to 
the rubbish heap of fund- man- 
agement history, boasting as 
they do highly respectable 
long-term track records. 

“Looking back over the past 
five to 10 years, investors in 
these funds know they still did 
vastly better than if they 
invested in conventional 
funds," says Mr Boardman. 

Indeed, despite their pour 
performance this year, “we are 
staying with the macro man- 
agers and are confident they 
will recover their losses", says 
Michael Goldman, managing 
director of Momentum Asset 
Management, which runs mul- 
ti-manager hedge funds. 


hn iic 


Abbreviations 

Amex American Stock Exchange 

AOM Australian Options Market 

ATA Agricultural Futures Exchange Amsterdam 

Be/fox Betgfan Futures 4 Options Exchange 

BM&F Botea Mercadorias & da Futures 

CBOE Chicago Options Exchange 

CBCfT Chicago Board of Trade 

CME Chicago Mercantile Exchange 

CRCE Chicago Wee & Cotton Exchange 

DTB Deutsche TarmkibOrse 

EOF European Options Exchange 

Rnex ' Financial Instrument Exchange 

Stop Guarantee Fund Danish Options & Futures 

POM Finnish Options Marius 

HKFE Hong Kong Futures Etftens* 

IPE Marwtional Petroleum Exchange 

KCST Kansas (Sty Board of Trade 

Kenex Kaiwal AgficulMal Commotfitles Exchange 
ST SS/m*****! Rnanctel 

Futures Exchange^ _ 

LCE London GomtnodRy Exchange 

fcSf Marche a Teirne hitematwnal de France 

Meff RF Matt Berta flja 

MF Mercato teiiano Fut wes 

MGE Mtnneapofe Grain , E xchange 

Meff RV Men Bate yarfa&te p*^—**, 

MJdAm MUAmeitea Commodity Exchange 


Tocom 

Toronto 

TGE 

TSE 

WCE- 


Marche dee Options Negodabtea 
de la Bowse de Pans 
New York Cotton Exch ange 
New York Futures E xchange 
New York Me rca n tile Exchange 
New Zealand Futures & Options 
Exchange 

Stockholm Options Market 
London Secwities & Derivatives 

Exchange 

Osaka Securities Exchange 
Oslo Stock Exchange 
Austrian Futures & Options 
Exchange 

Philadelphia Stock Exchange 
South African Futures Exchange 
Sydney Fuhies Exchange 
Singapore International Monetary 
Exchange 

Swiss Options & Financial 
Futures Exchange 
Tokyo In te rnational Financial 
Futures Exchange 
Tokyo CommodKy Exchange 
Toronto Stock Exchange 
Tokyo Grain Exchange 
Tokyo Stock Exchange 
Winnipeg Commocfity Exchange 


are between counterparties 
exchanging fixed- and floating- 
rate risk in a single currency, 
it is also possible to swap 
between currencies. This 
allows borrowers to exploit the 
comparative advantage they 
may have in a particular cur- 
rency sector. For example, a 
borrower may raise fixed inter- 
est rate D-Marks but swap 
them for floating-rate dollars. 
According to Isda, there was 
$900bn of currency swaps out- 
standing by the end of 1993. 

A wide variety of swap prod- 
ucts can be purchased from 
and traded on many of the 
world's derivative exchanges. 
Large and highly liquid, the 
exchanges allow investors to 
switch their exposures from 
one market to another in a 
matter of moments. However, 
being standardised products, 
exchange-traded swaps do not 
always meet users' exact 
needs. Increasingly, therefore, 
it is to the over-the-counter 
market that corporate treasur- 
ers are turning for their swap 
needs. 

In this market, where the 
degree of innovation in types 
of new products has been stag- 
gering, intermediaries such as 
banks offer products which are 
tailored to borrowers’ particu- 
lar requirements. 

In an attempt to compete, 
exchanges have developed 
more customised exchange 
products such as Flex con- 
tracts in Chicago. However, to 
a large extent they remain 
eclipsed by the variety and 
flexibility in terms of maturity 
and structure or instruments 
that the OTC market can offer. 

Nevertheless, exchanges con- 
tinue to play an important role 
in the swaps market. This is 
because of their size and 
liquidity, and not least because 
they are used by corporate 


AfpnH br Swb|f <r Ca 


managers to hedge their posi- 
tions in the OTC market and 
by the banks, the providers of 
the OTC instruments, as pro- 
tection against their exposure. 

One of the main reasons for 
the rise of the interest rate 
swaps market has been the 
Increasing international basis 
on which business is being 
conducted. As barriers 
between markets, which had 
forced both investors to rely on 
limited domestic sectors, have 
been removed over the past 10 
years, many large institutions 
have begun to focus increas- 
ingly on investment opportuni- 
ties available in new overseas 
markets. As a result, their 
funding needs and their 
income streams have become 
more varied. 

Alongside these develop- 
ments have been the techno- 
logical advancements which 
have made almost rostant 


access to these new overseas 
markets possible. A greater 
understanding among users of 
how derivative products work 
and a greater appreciation of 
the value that they can add 
has also played a significant 
role in allowing the market to 
develop. 

“Corporate managers are 
becoming more and more com- 
fortable with the concept of 
risk management,” said -Step- 
hen Compton, bead of interest 
rate derivative trading at Citi- 
bank in London. "The large 
corporates are now using swap 
products in a far more sophisti- 
cated way and are exploiting 
the instruments’ full poten- 
tial." 

Bad publicity surrounding 
the heavy losses on some 
derivative contracts incurred 
by companies such as Ger- 
many’s Metallgesellschaft. and 
Proctor & Gamble, and the 


charges that some banks are 
marketing swaps in an irre- 
sponsible manner has done lit- 
tle to dampen market activity. 
Rather, according to many 
market participants. It bas 
focused attention on the bene- 
fits that derivatives have to 
offer. 

"The publicity has been a 
constructive warning to the 
market," said Mr Compton: 
“The result has been a real 
push to best-practices." 

Germany’s Metallgeselschaft 
had to be rescued by its banks 
when a trading subsidiary 
incurred estimated losses of 


Swaps enable corporate 
treasurers to manage 
their exposure to interest 
rate movements 


$lbn os oil .derivatives. Proctor 
& Gamble has filed a lawsuit 
against Bankers Trust after 
losing more than 8100m on 
swaps sold by the bank. P&G 
claims that Bankers Trust did 
not “accurately and fully" dis- 
close information about the 


derivatives contract 

Despite these setbacks, the 
development of the interest 
rate swaps market looks set to 
continue, particularly in 
emerging sectors such as the 
Greek drachma market, which 
has witnessed strong growth 
recently- there will also be a 
continued need for sophisti- 
cated instruments while mar- 
ket conditions worldwide 
remain difficult, which looks 
likely. What is more, deriva- 
tives do not rely solely on price 
rises - they can be used to 
exploit bearish as well as bull- 
ish price movements, so there 
is no logical reason why activ- 
ity should drop off as market 
conditions worsen. 

“The development of the 
interest rate swaps market will 
certainly continue,” said Jim 
L 'Estrange, head of marketing 
for derivatives in Europe at 
Citibank m London. "Off-bal- 
ance sheet risk management 
tools remain the most efficient 
way of managing exposures, as 
wefl as enabling people to bor- 
row where it is cheapest and 
then convert the funds to 
where they were wanted in the 
first place." 


OVER-THE-COUNTER BUSINESS 

Swaps outstanding as of December 31. 1993 


INTEREST RATE SWAPS 


CURRENCY SWAPS 


US$m equiv 

% change from 

Currency as 

Currency 

USStn equhr 

% change from 

Currency as 


year-end 1992 

% at total 



year-end 1992 

% of total 

2.457.043 

39.6 

39-8 

US dotiar ($) 

320.041 

3.6 

356 

131,130 

28.2 

2.1 

Australian dollar (AS) 

46,347 

-3.4 

52 

31.102 

119.5 

0.5 

Belgian franc (BFi) 

6,793 

307 

08 

437,138 

48.3 

7.1 

British starting (£) 

44.143 

10.0 

4.9 

126,309 

28.1 

2.0 

Canadian deter (C$) 

35333 

-222 

3.9 

9,110 

79.3 

0.1 

Danish leone (DKr) 

3.255 

115.2 

04 

629.724 

B2.8 

10.2 

Oeutscfcamai* (DM) 

69.689 

30.7 

7.7 

52.052 

66.8 

as 

Dutch guilder (FI) 

9,747 

31.4 

1.1 

133.133 

43.0 

22 

European currency unit (Ecu) 

36.755 

2.2 

4.1 

456,371 

228.1 

7.4 

French franc (Ffi) 

22377 

44.8 

2.5 

9.467 

90S 

0.2 

Hong Kong dollar (HKS) 

2,086 

185-6 

021 

162.042 

178.3 

2.6 

ttaSan lira (L) 

22.720 

S3 

2JS 

1.247,444 

76.7 

202 

Japanese yen (V) 

158.795 

2-9 

17.7 

6.209 

370.0 

0.1 

New Zealand dollar (NZS) 

2.436 

33.8 

03 

42,115 

176.6 

0.7 

Spanish peseta (Pta) 

16£98 

-15.4 

1.9 

32.049 

81.0 

0.5 

Sweetish krona (SKi) 

17.2Q2 

15.2 

1.9 

182,207 

29.8 

2.9 

Swiss franc (SR) 

73,272 

54 

8.1 

32.707 

6,177,352 

47.1 

60L4 

0.5 

ioolo 

Other curencies 

TOTALS 

11,133 

8994)18* 

-26.9 

4-6 

15 

1004) 


■ Took sooted la accaun hr doth Mfca of a cuiwKy 


S am: Ir w iwtt n tf gu an a and Oa ri i i M rou A uuJto an 





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DERIVATIVES 10 



FINANCIAL TIMES WEDNESDAY NOVEMBER 


Milan Stock Exchange: Andrew Hill discusses the new stock index future 

A symbol of modernisation 


The fact that Italians already trade futures 
on government bonds, but are only now 
getting round to establishing a future on 
the equity index tells you a lot about Ital- 
ian markks. 

Government bonds have long been the 
investment instrument of choice for Ital- 
ians. particularly for savings. The market 
is popular and liquid. 

But the equity market has been viewed 
with some suspicion. The feet that a small 
number of stocks are quoted - only 210 
domestic companies are listed compared 
with twice that number in Germany and 
France, and eight times in the UK - cou- 
pled with a perceived absence of regula- 
tion (a law to make insider trading illegal 
was only introduced comparatively 
recently, for instance), seemed to make it 
a market for the brave professional. 

In that sense, the introduction of a 
future on the revamped index of most liq- 
uid Italian stocks - the MIB 30 - is being 
heralded by the stock exchange authori- 
ties as the latest and most important sym- 
bol of the modernisation of the Milan- 
based market. It is no coincidence that a 
presentation on the new equity derivatives 
market was at the centre of the Italian 
investment road show in London and New 
York. The road show also promoted devel- 
opments such as the move to full screen- 
based trading of equities, and the gradual 
transformation from a monthly account 
system to five-day rolling settlement. 

The futures market should be launched 
“on or around” November 28. according to 
Ettore Fumagalli. who heads the stock 
exchange's equity derivatives committee, 
and the first product will be the MIB 30 


index future. The contract will have a face 
value of LlQOm - calculated by multiply- 
ing the base value of the underlying index 
(fixed at 10,000 points) by the LLO.OOG value 
of each index point, which will also be the 
minimum price variation of the contract 
Trading will take place between 9.30am 
and 5.30pm (compared with the equity 
market Itself which, from November 28, 
will trade between 10am and 5pm). Settle- 
ment will be in cash. 

Potential traders seem broadly optimis- 
tic about the prospects for Italian equity 
derivatives. Some 70 Sims (locally regis- 
tered securities houses) have signed up to 
trade on the computerised market. Tm 
very confident,” says one trader with a 
foreign bank. Tm also happy that a lim- 
ited number of companies has requested 
machines, because, frankly, the require- 
ments of Consob [the fin an c ial market reg- 
ulator] on capital backing were too low." 

In the next phase, the stock exchange 
authorities hope to introduce an option on 
the MIB 30 index, and then, probably early 
next year, options on single shares. 

T he stock exchange's forecasts on 
trading volume of the new future 
are comparatively modest - daily 
volume of L4l2bn, half that of the total 
underlying volume, with around 2,750 con- 
tracts traded in about 900 transactions - 
but the exchange says the impact on the 
liquidity of the underlying market should 
be notable. “There should be a positive 
effect on volumes," agrees Alberto Pasqua- 
lone, chief trader at Sigeco in Milan. 

In this respect the introduction of the 
future comes at exactly the right time. 


This has been one of the most volatile 
years in recent memory for the Italian 
market, which has taken its lead from the 
constantly changing political scene. Imme- 
diately after the March election of a pro- 
business right-wing coalition, headed by 
media magnate Silvio Berlusconi, equities 
surged ahead, prompting a string of oppor- 
tunistic rights issues. But since June, 
uncertainty about the coherence of that 
same coalition, and its robustness in the 
face of escalating industrial action, has 
brought the stock market back to pre-elec- 
tion levels or lower 

“International investors, who have been 
extremely active in the underlying market 
for the past year or so, have been par- 
ticularly keen to be able to use futures and 
options, either to obtain or hedge their 
exposure, or to profit from the volatility of 
the market.” Mr Fumagalli told analysts 
during the London roadshow. 

The Italians are eager to emphasise that 
unlike in some other European trading 
centres, both the underlying market and. 
the derivatives market use the same trad- 
ing system and come under the same regu- 
latory and management authority. “Specif- 
ically. we believe that through these 
advantages, market participants will bene- 
fit from the possibility of creating inte- 
grated information, research and trading 
systems.” says Mr Fumagalli. 

Starting a new market not easv. Other 
fledgling futures and options markets 
have struggled with technical and trading 
problems - in Belgium, the new Belfox 
exchange took nearly two years from its 
1991 launch to overcome teething troubles. 


Profile: BM&F, Sao Paulo’s commodities and futures exchange 

Stability lifts hopes in 


It was Brazil's soaring 
inflation and economic volatil- 
ity that helped give birth to 
Sao Paolo's commodities and 
futures exchange (BM&F), 
today the fifth biggest fttnres 
exchange in the world. 

And although inflation has 
recently fallen dramatically, 
following the launch of a new 
currency linked to Brazil's for- 
eign reserves, the BM&F 
i Bo Isa Mercadorias & de Futu- 
res) has continued to grow as 
new uncertainties emerge. 

Created in 1986, the 
exchange has expanded dra- 
matically in recent years. The 
□umber of contracts traded 
jumped to 60m last year from 
45m in 1992, while daring the 
first nine months of this year 
contract volume reached 64m 
and financial volume was 
S754bn. 

Market analysts hope that 
following last month's presi- 
dential election of Mr Fern- 
ando Henri que Cardoso, who 
helped introduce tbe new real 
currency and is expected to 
push for structural economic 
reforms, Brazil is on tbe path 
towards long-term economic 
stabilisation. 

That process is likely to cre- 
ate sustained economic growth 
and reverse the short termism 
which dominates Brazil's 
financial system, as well as 


increase the assets of pension 
funds and unit trusts. These 
factors are in turn likely to 
increase demand for deriva- 
tives from companies and 
investment funds. 

But the BM&F has still to 
overcome problems, including 
government restrictions that 
limit foreign investment and 
hamper trading links with 
exchanges abroad. Also, 
important areas such as agri- 
cultural futures generally lack 
liquidity, 


which is con- 
centrated in 
just a few con- 
tracts, notably 
one-day inter- 
bank deposit 
contracts, dol- 
lar futures and stock index 
futures. 

Another problem is tbe nar- 
row customer base, which is 
dominated by Brazil’s banks. 
They generated mneb of tbe 
exchange’s growth in their 
need to hedge one-day inter- 
bank deposit contracts, Bra- 
zil's benchmark interest rate. 

“There are probably only 
around 200 customers, nearly 
ail financial instHxttkms,” says 
a Sio Paulo banker, adding 
that most company treasurers 
still do not use derivatives 
because of the short-term out- 
look prevalent in Brazil, 


Created in 1986, the 
exchange has expanded 
dramatically in recent 
years 




caused by high inflation. 
Another reason has been that, 
despite inflationary volatility, 
other areas of the economy 
used to be relatively stable. 

For example, the central 
bank used to devalue the local 
currency on a daily baste, in 
line with inflation, expecta- 
tions; but since the new cur- 
rency was launched the bank 
has generally not Intervened 
in the foreign exchange mar- 
ket, and instead has allowed 

' the real to 

float against 
the dollar. This 
has created 
new uncertain- 
ties for compa- 
nies and a 
growth in dol- 
lar futures trading. 

Bankers say the small size of 
Brazil’s over-the-counter mar- 
ket, which represents about 
10-15 per cent of the BM&Fs 
volume, is an indication of 
how underdeveloped the use of 
derivatives by companies is. 

But If long-term economic 
stabilisation Is achieved, ana- 
lysts expect the balance sheets 
of companies und financial 
institutions to lengthen, which 
will probably create more 
demand for hedging. This pro- 
cess has already begun. Since 
the real was launched in July, 
futures contract terms have 
been gradually lengthening. 
Mr Marwis Eugdnio da Silva, a 
University of Sfio Paulo econo- 
mist, expects the next six 
months to be a period of adap- 
tation to low inflation. 

He notes that in the pre-real 
days, when inflation was 4050. 
per cent a month, there was 
only very short-term liquidity 
for the key one-day interbank 
deposit futures. “Now that 
there are fewer worries about 
inflation, some Interbank 
deposit contracts are being 
negotiated for terms of six 
months,” he says. 

As well as encouraging the 
lengthening of contract terms, 
the BM&F is trying to develop 
international i™k«, partly to 
increase tbe volume of agricul- 
tural futures trading, which 
currently represents 5 per cent 
of contracts, and also to take 
advantage of Brazil’s position 
as one of the world's leading 
agricultural producers. 

The exchange would like to 


attract some of the agricul- 
tural fhtnres trading from Chi- 
cage to Sfip Panlo, particularly 
-for commodities such - as cof- 
fee. of which Brazil is the 
world's leading producer. ^ 

However, the exchange hag 
had limited success in estab- 
lishing liquidity for agricul- 
tural contracts. Part of; the 
problem, according to Mr. da 
Silva, Is that . production tn . 
Brazil of commodities such as 
orange jtflee, cotton and sugar 
cane are concentrated among a 
few companies; which are 
often .suspicious of the futures 
market. He - adds that - estab- 
lishing international links is. 
hampered by Brazil’s lack of a 
stable and convertible cur- 
rency. 

Another problem in creating 
trading links .with foreign - 
exchanges is government 
restrictions. - 

Government restrictions 
aim limit foreign, inves tment 
in the BM&F. Only foreign 
Investors who hold shares on 
Brazilian stock markets can. 
Invest in futures. Foreign ’ 
investment is mainly in stock 
index and dollar futures, the 
latter for investors seeking to 
hedge the value of their port- ' 
folios, and represents 7.5 per 
cent of total investment, 
according to Mr Laura de. 
Araujo Silva, 1 BM&F market 
relations director. 

liberalising foreign Invest- 
ment would increase specula- 
tion and liquidity, say ana- 
lysts. They point - to the 
example of Sfio Paulo’s stock 
market, where average daily 
trading volume has increased 
tenfold to $400-500m since it 
was opened to international 
investors in 1991. 

“We are seeking ways for 
International investors to 
trade here, in the same way as 
they do in New York or Lon- 
don,” says Mr Araujo Silva. 

The - BM&F wants the gov- 
ernment to liberalise foreign 
investment in order to prevent 
development abroad of the 
market for Brazilian stock 
futures- The US over-the- 
counter market already trades 
futures of the Brazilian stock 
indices and basket options 
made up of a handful of blue- 
chips. 

Patrick McCuny 


Profile: South African Futures Exchange 

Interest from 
abroad rises 


Like most other aspects of the 
South African financial sys- 
tem, the country's derivatives 
market has come under greatly 
increased international scru- 
tiny over the past year. And, as 
they have done after looking 
over the stock market and 
banks, most international 
observers come away generally 
impressed with the range and 
sophistication of available 
products. 

The bulk of South Africa’s 
derivatives trading takes place 
on the South African Futures 
Exchange, a Johannesburg- 
based body that celebrated its 
fifth anniversary this year. 
Since its formation, it has 
grown from a small organisa- 
tion. regarded with some suspi- 
cion by local banks and bro- 
kers, to a thriving, and rapidly 
expanding market. 

Indeed, Safex’s growth has 
been so dynamic, that at least 
one local company has fallen 
prey to the same trap that 
snared companies in the bigger 
international markets: banking 
group Sechold was unable to 
close its positions at the end of 
last year and lost R198m. 

However, the exchange has 
largely shrugged off unfavour- 
able publicity resulting from 
the Sechold affair, and the 
monthly value of futures and 
options traded on the exchange 
has risen from less than R5bn 
as recently as 1992, to a high of 
R25bn this year. 

The bulk of the trade is done 
by merchant banks and broker- 
ages, which each account for 
around 40 per cent of total 
business, with the rest taken 
up by a mix of individuals and 
other institutions. 

Reflecting the market's 
steady growth, the number of 
exchange members has also 
expanded steadily and now 
stands at 82, while the price of 
a seat on Safex is now around 
R13Q.OOO. comparing favourably 
E*** 1 !* start-up price of 
R35.000 in 1988 and well up on 
the low of R4.000 reached in 
1991. 

By far the bulk of the trade 
on Safex is in equity futures 
based on the main gold and 
industrial indices on the 
Johannesburg Stock Exchange 
(JSE). Indeed, this market has 
been so successful that Safex 
ranks in the top 12 interna- 
tional equity futures markets. 

The exchange has also 
recently made representation 
to the registrar of financial 
institutions to begin trading in 


individual shares. It plans to 
focus initially on five blue- 
chips, including industrial 
giant South African Breweries, 
and mining houses Anglo 
American and De Beers. 

So far, however, despite 
heavy government lobbying by 
Safex members, permission has 
not yet been granted and there 
is a strong constituency among 
established brokers on the JSE 
who are wholly against such 
innovations. The plan's detrac- 
tors charge not only that they 
are unnecessary because the 
shares in question are already 
relatively liquid, but that there 
is inadequate surveillance to 
prevent front-running. 

U ndaunted, Safex is 
pressing ahead while 
also experimenting with 
a number of other instruments. gj 
Most notably it is p lanning to * 
replace its lacklustre dollar 
gold price contracts, which 
have failed to excite interest 
because of South Africa’s lack 
of direct access to the global 
spot markets, with Krugerrand 
contracts. These would become 
the first .physically delivered 
contracts in the country. 

There are plans also to sell 
commodities futures. Although 
these have normally been the 
first options available in most 
countries, given the highly reg- 
ulated domestic commodities 
market, they have not yet been 
possible to implement in South 
Africa. 

However, because of the gov- 
ernment ’s deregulation pro- 
gramme. the exchange hopes 
to begin contracts in potatoes 
and meat on an experimental 
basis shortly. 

Other more exotic instru- 
ments, including trading in 
currency and interest rate 
futures are also available, but 
have attracted relatively little 
attention. The former instru- 
ment will have to wait for tbe 
scrapping probably next year 
of the financial rand, the 
investment currency that for- 
eigners have to use to invest in 
South Africa. 

Even without a wide range 1 
of derivatives, however, for- 
eign interest is already sub- 
stantial, accounting for some 
10 per cent of all trade on 
Safex. This year, Safex also for- 
mally joined the US-based 
Futures Industry Association, 
highlighting its new interna- 
tional profile. 

Mark Suzman | 









FINANCIA L T.MES WEDNESDAY NOVEMBER 16 1994 


XI 


DERIVATIVES 11 


Profile: BANKERS TRUST 




Forced on to the defensive 


Every risk. says the 
«r nt - deserves a sec 

Fm Bankers Trust, author of 
the message, the line must 
have something of a hollow 

°* New York- 
based bank has been forced on 
to the defensive In Its risk 
management business - nrevi- 
ously one of its fastest-growing 
and most profitable areas - by 
a string of accusations and 
lawsuits. Did its ambitious 
strategy in the derivatives 
puriness blind Banker* Trust 
to the risks it was running? 

One test will be the outcome 
of the lawsuits against it, in 
particular a $l30m claim from 
Procter & Gamble. The fall-out 
from that case has highlighted 
three areas of risk and raised 
questions about the bank's 
abilities to deal with th*™ 

These are: the risk posed by 
volatile financial markets, the 
risk to the bank's reputation 
when the complex financial 
products it deals in turn sour, 
and the risk that regulators 
will take action against the 
bank specifically and against 
the derivatives markets more 
generally. 

Market risk has surfaced in 
two forms for Bankers Trust 
this year - as a dampener on 
its own trading profits, anrf as 
a .potential threat to the risk- 
management structures it 
devises for customers. In the 
first of these, it can draw com- 
fort from its performance dur- 
ing turbulent world bond mar- 
kets eply this year. 

While the markets were 
awash with rumours of huge 
losses at Bankers Trust - forc- 
ing it to take the unusual step 
of issuing a denial - the first 
three months of the year 
brought a loss of only $48m 
from trading and proprietary 
position-taking, followed by 
profits in the following two 
quarters which were roughly 
in line with average quarterly 
earnings in 1991 and 1992. At a 
time when many other big 
traders were taking a bath, 
from hedge funds run by 
George Soros to the propri- 
etary ripskq of banks such as 
Salomon, this counts as a cred- 
itable performance. 

For its client risk manage- 
ment business - which creates 
complex derivatives to reduce 
corporate or institutional cus- 


tomers' risks to movements in 
interest rates, currencies or 
commodities - the upheaval in 
financial markets could have a 
longer lasting impact. The 
complex interest rate swap cre- 
ated for Procter & Gamble in 
November last year turned 
sour as US rates rose. 

Bankers Trust Is believed to 
have suffered no market losses, 
since it has a policy of hogg in g 
its risks In such cases (accord- 
ing to Procter & Gamble, the 
hedges used to cover the $20Qm 
swap had a nominal value of 
S3bn - an indication of the 
huge risks embedded, in the 
instrument). But tbe swap left 
Procter & Gamble committed 
to paying an interest rate of 
14.12 per cent above the com- 
mercial paper rate for the next 
4'A 1 years, rather than the 40 
basis points below CP rate 
which had been its target fund- 
ing rate. 

Whatever the merits of Proc- 
ter & Gamble's legal claim, it is 
clear that the product failed 
spectacularly. 

This highlights the second 
risk: to the bank's reputation. 
Arguably, its ambitions In the 
derivatives business, where it 
has a clear lead over most com- 
petitors, blinded it to tbe oper- 
ational risks it was r unning . 

The preliminary results of an 
internal investigation, which 
has turned up apparent irregu- 
larities in bookkeeping and 
sales practices in its corporate 
derivatives business, suggest 
that internal controls failed 
(though it is far from dear yet 
whether this supports the legal 
claims of Procter & Gamble 
and Gibson Greetings, which 
say they were misled about the 
nature of the financial instru- 
ments they bought). 

Meantime, )in spite of the 
bad publicity it has attracted. 
Bankers Trust’s earnings from 
the risk management business 
have held up this year. On 
average, income each quarter 
this year has matched or 
exceeded the experience of 
recent years - despite fall-off 
in position-taking by hedge 
fund and other so-called “direc- 
tional" traders. 

“The biggest impact this 
year has been the foil In the 
market It is holding back 
hedgers and view-takers at the 
same timer says Brian Walsh, 
head of derivatives. Bankers 


Trust 

Despite this, greater demand 
from corporate and institu- 
tional customers, including 
strong growth in the business 
in Europe, means that the 
bank continues to grow. "Our 
risk management advisory 
teams are very busy,” says 
Charles Sanford, chairman of 
Bankers Trust 

The third risk is still harder 
to quantify, but could have lon- 
ger-term repercussions: that 
zealous regulators will make 
the derivatives markets a less 
profitable place to do business. 

Client financial risk 
management 

$ mUfan 
ISO 


the following two quarters. 

A bigger challenge will be to 
lift profitability back to the lev- 
els which had put Bankers 
Trust among the top-perform- 
ing US banks since the turn of 
the decade. Last year's return 
on equity of 26 per cent was 
the fourth consecutive year the 
bank bad topped 20 per cent. 

Matching that will not be 
easy. Most analysis agree that 
1993 was an exceptional year in 
finnnriai markets that will not 
be repeated for some time. And 
even matching the absolute 
level of trading profits of ear- 

Trading and positioning 


Ouortertyamnige 


too 


50 



1991 1992 1993 1994- 

6ora BnMn TrueJ Now York 

The threat of derivatives reg- 
ulation from Congress has 
died, at least for now. But both 
the Securities and Exchange 
Commission (SEC) and the 
Commodities and Futures 
Trading Commission are 
looking into the claims against 
Bankers Trust - the first clear 
sign that both agencies, feeling 
the heat from politicians, want 
to establish some jurisdiction 
over the over-the-counter 
swaps markets. 

If they are successful, the 
extra layers of regulation could 
add to the costs of derivatives 
activity. Some dealers com- 
plain that the SEC’s capital 
adequacy rules would hamper 
the swaps market 

These are risks for the 
future. In the meantime. Bank- 
ers Trust’s results for 1994 so 
far have been remarkably 
steady - a testament to the 
success of diversification and 
risk management policies 
designed for just such eventu- 
alities. Even daring the turbu- 
lent first quarter, the bank’s 
return on equity reached 15 per 
cent It stayed at that level in 



1991 1992 1993 1994 

. Soucs Bonhcn Tiuot Nww Yon, 

Her years will not produce a 
superior return on capital in 
the future, given the much 
higher levels of capital Bank- 
ers Trust now carries. 

At the beginning of L990, the 
bank's total shareholders’ 
funds were $3bn: by the end of 
September this year, the figure 
had jumped to $4.5bn. That 
may make Bankers Trust a bet- 
ter capitalised bank, but it 
leaves open the question of 
how it can grow its profits. 

The answer depends in part 
on whether Bankers Trust can 
employ its capital as profitably 
in future in the proprietary 
trading. “We think that [it] will 
be a good business again,” says 
Mr Sanford. 

Has the amount of capital 
committed to the market by 
hedge funds and the propri- 
etary desks of banks changed 
the character of markets, mak- 
ing it more difficult to identify 
“directional'’ trends? “No, I 
don’t think so," says Mr San- 
ford. “There's just more volatil- 
ity." 

Richard Waters 


Richard Waters re-examines the Metallgesellschaft hedging strategy 

Case study for business schools 


ffletallgesellschaft's disaster In 
the oil derivatives markets is 
destined to remain a favourite 
business-school case study for 
years to come. 

Was the hedging strategy 
undertaken by the group’s US 
subsidiary, MG Corp, fatally 
flawed from the start? Or was 
it a panic by the group’s super- 
visory board in Germany 
(along with its bankers) that 
led to eventual "hedging” 
losses of more than Sibn? 

With a batch of prominent 
US academics pointing the fin- 
ger at the supervisory board in 
recent months, this arcane 
subject has taken on an 
unusual twist - prompting 
Metallgesellshcaft and its lead 
banker, Deutsche Bank, to 
mouut a public defence of 
their position. 

Tbe facts are these. MG Corp 
signed long-term contracts to 
supply oil products to custom- 
ers in the US at fixed prices. 
Then it used futures and 
swaps to protect itself against 
a rise in the oil price, which 
otherwise might have 
destroyed the profit margins 
on the supply contracts. 

During 1993 - and especially 
in the final three months of 
the year - the oil price plum- 
meted, hitting the value of the 
derivative instruments held as 
hedges. In theory, that would 
not have caused a problem 
over the long term: if the oil 
price remained low, the deriv- 
atives losses would be bal- 
anced by higher profits on the 
oil supply contracts over time. 
But in the short term, MG had 
to pay oat over S900m in the 
form of additional margin on 
its futures positions, and extra 
collateral to counterparties on 
over-the-counter 3waps. 

The result: a liquidity crisis 
of massive proportions, lead- 
ing to an emergency line of 
credit from banks and a forced 
unwinding of most of the com- 
pany’s derivative positions 
(and, apparently, also of its 
underlying supply contracts). 

According to the academics, 
this is where MG went wrong. 
In a joint paper, Professor 
Merton Miller, a Nobel laure- 
ate, and Christopher Culp, a 
graduate student, argue that 
the company's "problem was 
not with its derivatives group, 
but more likely was with its 
supervisory board and sup- 


porting banks who may not 
have understood the hedging 
strategy and forced the prema- 
ture liquidation of fits] hedge 
positions." 

A paper by Culp and Profes- 
sor Steve Hanke, of John Hop- 
kins University, puts it more 
strongly still: MG’s "real oper- 
ational risk was not that its 
supervisory board noticed the 
'problem' too late, but rather 
that it misdiagnosed the prob- 
lem entirely." It is not just tbe 
company's board that is critic- 
ised: mistakes by regulators in 
the US also precipitated the 

Brent crude oil 

1 month forward (S per barrel) 

20 - - — - 


MG's losses hitting other 
members. Conld it really be 
blamed for falling to extend 
privileges to a company that 
had brought a liquidity crisis 
down on itself7 

■ The second, and most signif- 
icant, question is whether, by 
liquidating its positions, the 
Metallgesellschaft board 
turned what were only paper 
losses into real ones. 

Tbe unwinding was precipi- 
tated by the German group’s 
bankers, who balked at 
extending further funding to 
support the group's hedging 



Source DaExunum 

losses, they claim. 

There are three questions at 
the heart of the case. 

■ First, did futures regulators 
and the Nymex, where MG 
bought oil futures, add to the 
problems and indirectly force 
MG to liquidate its holdinp? 
As the company's liquidity 
problems emerged in early 
December last year, Nymex 
doubled the company's margin 
requirements, adding to its 
cash problems. Later, it also 
took away the company's 
hedgers’ exemption, effectively 
halving the position limits it 
was allowed to maintain on 
the exchange and preventing 
it maintaining its hedge posi- 
tions. 

According to an MG spokes- 
man: "The liquidation was, for 
the most part, determined by 
the unwillingness of OTC 
counterparties to trade with 
MG and the order by the 
Nymex to trade for liquidation 
purposes only." 

For its part, though, the 
Nymex’s main concern was to 
protect the integrity of its 
clearing process and prevent 


strategy. 

"This funding problem was 
the result of MG's creditors 
not understanding [its] funda- 
mental financial position,” 
according to Professor Frank- 
lin Edwards, of Columbia Uni- 
versity’s business school. 
"They should have been will- 
ing to lend against the specific 
collateral of these [derivative] 
contracts." 

Professor Edwards is joint 
author of a textbook on 
futures and options with Ms 
Cindy Ma, herself a risk man- 
ager with MG Corp during the 
fateful period. 

What this argument fails to 
take account of, though, is the 
funding costs that MG would 
have faced while waiting out 
the 10 years of its long-term 
supply contracts (and, accord- 
ing to the company, many of 
those contracts were struc- 
tured for the bulk of the deliv- 
eries to be nude right at tbe 
end of the ten-year period). 
Given its liquidity problems, 
the company’s cost of fnnds 
would have been high indeed. 

Also complicating the ques- 


tion was the fact that MG was 
losing money every time it 
rolled over its oil futures con- 
tracts. On each rollover date, 
as it sold expiring fixtures con- 
tracts and bought new ones to 
carry the hedge forward, MG 
had to pay more for the new 
contracts than it received for 
the old ones (forward prices 
were higher than current ones, 
the equivalent of a positive 
yield curve). 

According to MG, this "rol- 
lover cost” amounted to $20m- 
30m in each of October and 
November, and would have 
been $50m in December. 

■ Tbe third question: should 
MG really have rushed to 
unwind its derivatives posi- 
tions at what turned out to the 
be the very bottom of tbe mar- 
ket? Oil prices have risen 
around $4 a barrel since last 
December. Assuming MG had 
an open position of 150,000 
barrels (as stated in a lawsuit 
brought against the company 
by its former head of risk 
management, Arthur Benson), 
it would have reduced Its 
losses by $600m if it had 
waited until now to sell. 

According to MG, though, 
the position it was rolling over 
in the market each month was 
so big that it was distorting 
the normal equilibrium of sup- 
ply and demand. The company 
says its massive position was 
equivalent to 85 days’ worth of 
the entire output of Kuwait 
"It is incorrect to assume,” 
says an MG spokesman, "that 
the market would have 
rebounded If the company con- 
tinned its scheme.” 

There is one other aspect of 
this sorry tale that deserves 
note. Having unwound many 
of Its original supply contracts 
along with the derivatives, MG 
Corp no longer had the same 
need in the future to fray huge 
amounts of oil and oil prod- 
ucts to sell on to customers. 

It had earlier signed 
long-term contracts to bay oil 
products from a US refining 
company, Castle Energy, at an 
agreed margin over market 
prices (MG also bought a large 
minority stake in Castle). In 
September. MG reached an 
agreement to terminate those 
contracts - at a cost, in terms 
of the debt and other claims 
over Castle it has given op, of 
around $500m. 


Structured 
note investors 
thrown by 
bucking 
market 

Derivatives blamed 
for 


o; 



Heading for a fell ? 
We can take control. 


Interest Rate Risk (010 44) 71 696 1588 
Equity, Commodity, Currency, Credit Risk (010 44) 71 696 1575 
Structured Finance (010 44) 71 696 161 1 

^ Mitsubishi Finance international pic 

6 Broadgate, London EC2M 2AA 


"If this is your view of global futures markets 
you're missing a world of opportunities" 



hike stone, MANAGING Director, HSBC FUTURES: "When ming fit lures and options, our 
t iienti have very high suindards in terms oj liquidity and security. MA I'lh meets these standards". 

MATIF, the Marche A Temur International de France. li.LS become one of the world’s leading hi cures exchanges not 
only through the success of its contract - such os the Notional, Pibor and CAC 40 Index, which an be traded around the 
dock on GLOBKX". and the recently introduced currency options - but also through right security control. MATIF, rime 
and again, meets the demanding requirements of its international clients. 

FOR FURTHER INFORMATION PLEASE CONTACT MATJF AT (33 I) 40 21 BJ 81 


M 


M 


MATIF 


O F 


U 


rr 


Wabar, Nodal. Schmid, 


XII 


FIN ANCIAJL TIMES WEDNESDAY NGVENnWaR 16 *§£4 


DERIVATIVES 12 


THE HBWXSEflR 
lr/ywwTrgEVV>U- 

\ r&kof 

THIS/ 



Health hazards: Conner Middelmann looks at one of the City’s most physically demanding professions 


A pitful of stress and strain 



of stress-related illnesses. 

“Ton are on edge all day, 
from the moment the pit evens 
until the moment it closes," 
says Mr Hart of RZW. “Often, 
your brain doesn't get any 
time to think, it's purely reac- 
tive,” be adds. 

This breeds a wide variety of 
stress-related affli ctions, such 




located in fee same bafldtog^s 
iiffa - is frequented by aHise 
number of dealers 
some of their steam by 
ihg iron or tbras^ihgn squash 
baff around., 

■ However, for dfeate^Wffe 
femilies it is not always easy to 
make time for sports, rape-, 
dally if they lucre -a. kmgjciur-, 
ney to.worb. “As it is, I 
12 iMurs.a awayrJhom 
home - am i supposed to tell 
my three-year-old kid: Daddy 
would love to- play wife you, 
but he has to: go and. work 
out’ ” aafet cos dealer. 

Alas, many of., the City’s 
stresseufferess actually 
acknowledge feat they, fed. 
mentally or physically 
'stretched. 

"People who come to us will 
'not skeasarQy presem stress 
as their primary problem," 
says Dr John Brifia, who runs 
Canno ns’ Healt h EnBahogment 
Centre. The centre screens cli- 
ents* health and lifestyles and 
makes recommendations -on - 
bow they can improve-: their 
physical and mental well-be- 
ing- 

“Working in the -City is 
. tnhar ently stressful, but a- lot 
of people don’t acknowledge 
that,” he says- For one,.; he 
says, it’s because “everyone 
else Is stressed, so they think 
ifs thebano”. 

But even when they are 
aware of the stress burden, 
"there’s -a fair degree of 


W arning: derivatives 
trading can seriously 
damage your health. 
Whether they are scrambling 
around a trading pit in their 
brightly-coloured jackets, 
wildly gesticulating and 
shouting prices, or hunched 
over the keyboard of a screen- 
based trading system, eyes 
glued to the screen in neon-lit, 
smoky offices, futures traders 
have a tough life. 

"Dus is one of the toughest, 
most physically and mentally 
demanding professions in exis- 
tence, apart from professional 
sports,” says the floor manager 
of a large member firm of the 
London International Futures 
and Options Exchange (Liffe). 
"The pressure you have to deal 
with on a daily basis can be 
unrelenting and absolutely 
merciless. 

Being in an environment 
where hundreds of millions of 
dollars, pounds or D-marks 
change hands each day, where 
markets can gyrate in roller- 
coaster fashion and where a 
split second can mean the dif- 
ference between making or los- 
ing fortunes can offer an 
immense stimulus, “When 
you're on a roll, it’s exhilarat- 
ing, ifs like a drug,” gushes 
one dealer. 

But even when traders are 
on a winning streak, the 
demands of their jobs are 
immense, and often take a 
heavy toll on their health. 

For a start, there are the 
purely physical side-effects. 

In a trading pit, such as the 
ones found on Liffe. dealers 
stand in octagonal, tiered are- 
nas, buying and selling futures 
contracts through the use of 
hand signals, reinforced by 
vocal price dissemination - 
hence the term “open outcry”. 

This exerts high ripmanris on 
various parts of their anato- 
mies. beginning with their 
vocal chords. “If you're in this 
business long enough, you 
tend to go hoarse - as l have," 
rasps one of Liffe's old-timers. 

Foot problems also abound. 
“When you're standing around 
all day, you tend to get swollen 
feet, callouses and lots of dead 
skin." complains one trader. 
Orthopaedic shoes are hardly 
an option. “If you appear in a 
pair of Scholl’s, you'll have the 
Shoe Committee on your 
back," he laughs. 

The so-called Shoe Commit- 
tee. a regular source of hilarity' 
for Liffe dealers, is a self-ap- 
pointed “watchdog” made up 
of floor traders who derive 
amusement from keeping 
"unsuitable” footwear - such 
as Doc Martens, brown or 
suede shoes - off the floor. 


The tight throng of human 
bodies in the pits also makas 
them perfect breeding ground 
for bacteria, which are trans- 
mitted through droplet infec- 
tion as dealers shout out 
prices. “If one person comes in 
with a cold, the next day half 
the pit will be sneezing and 
wheezing,” says a trader. 

And then there are the 
odours which inevitably arise 
when hot, sweaty humans are 
packed together in restricted 
space. “Bad breath, sweat, and 
other unmentionable smells," 
sighs a dealer. 

In an environment where 
tensions run high and fully 
grown men - for only 30 per 
cent of the floor population 
(including broking and admin- 
istrative staff) are female - jos- 
tle for space in small pits, mar- 
ket participants can come to 
blows, a not insignificant 
health hazard considering 
some of them are former box- 
ers and many play contact 
sports such as rugby. 

“There are many reasons for 
fisticuffs,” says a Liffe dealer. 
For one, he says, “working 
conditions are appalling - 
we're crowded into the pits like 
rats in a small cage and have 
to perform an exacting func- 
tion where mistakes are not 
tolerated." What's more, many 
dealers trade their own money, 
and “when they lose money, 
they can lose their temper”, he 
says. In volatile markets, these 
factors can create a highly 
charged atmosphere where 
people may be tempted to use 


physical violence - a tempta- 
tion to which some occasion- 
ally yield. 

“Heated arguments tend to 
occur in the more volatile pits, 
such as bunds and Italian gov- 
ernment bonds," says Dorian 
Hart floor manager on Liffe 
for BZW Futures. 

However, the price of physi- 
cal violence in the pits is high: 
a strict code of conduct is 
enforced by close supervision 
of the Liffe trading floor, and 
offenders face harsh fines. Liffe 
penalises offenders much more 
heavily than a court would do 
for fee same offence, wife fines 
for violent behaviour - which 
includes pushing and shoving 
- running as high as £5,000. 
The ultimate sanction for 


repeated misconduct is suspen- 
sion from the trading floor - 
effectively a one-way ticket 
into unemployment 

“The exchange comes down 
very, very hard to ensure feat 
business is not disrupted.” 
says a Liffe spokeswoman. 

Screen traders face different 
but similarly debilitating com- 
plaints. At Europe's largest 
electronic exchange, Ger- 
many's DTB, dealers trade 
futures and options on stocks 
and bonds on a screen. 
Unsourced bid and offer prices 
appear on a screen and traders 
press keys on a keyboard or 
click a button on a computer 
mouse to buy or sell. This 
means that dealers have to 
continually monitor changes in 


prices, not just in the front- 
month but also in back-month 
contracts, requiring their eyes 
to rove constantly around the 
screen. 

“Eyestrain and back strain 
are typical complaints." says 
Karl Haeling, head of Deutsche 
Bank's futures and options 
group in Frankfort “You need 
to stare intensely at the screen 
all the time, the li ghting may 
not be optimal and the chairs 
can be uncomfortable.” 

Others complain of repetitive 
strain injuries which can occur 
when making a certain move- 
ment over and over again. This 
is a common affliction among 
keyboard operators, involving 
tendon injuries and sometimes 
chronic conditions which can 


lead to early retirement 

In countries where smoking 
on trading floors is permitted - 
for instance in many German 
hanks - dealers often smoke 
while t rading , especially when 
the markets are choppy and 
tensions mount “Traders are 
nervous, nervous people often 
smoke, hence most traders 
smoke,” quips Franpois Bloch, 
a long-time DTB trader. Obvi- 
ously, inhaling smoke - be it 
one’s own or that of a col- 
league - is a further health 
hazard. 

The psychological impact of 
the stresses and strains of this 
job can be as serious as - if not 
mare so than - the physical 
side-effects, and psychological 
burn-out can lead to a variety 


as eczema, ulcere, nervous 
twitches, heart problems and 
alcohol abuse, says a dealer. “If 
people feel they need a drink 
after work, I rati that alcohol 


pie, fee nine-hour trading day 
is followed by about hours 
of electronic "automated pit 
trading”. The creation of 
Globes, the 24-hour electronic 


markets going around the 
dock. 

There are many ways dealers 
try to unwind after a long 
day’s toiling: While same opt 
for less regenerative pastimes 
such as d rinking or gambling 
many seek to improve their 
health and stamina wife the 
help of regular exercise. Can- 
nons Sports dub, a health chib 


machismo in the City feat 
doesn’t allow them to admit 
that they cant cop&" 
Although the dpniaTwte of the 


Frankfort 

White some stiff fed that ftp 
is best- in the open-outcry envi- 
ronment, traders’ physique is 
not as important as their social 


communication skills.” 

Screen traders do not have to 
be as extroverted as their col- 
leagues in fee pits. “At the 
screen, you can be a shy and 
retiring guy and still wipe fee 
floor with the rest of the mar- 
ket," says Mr Lamb. 

“in some respects, you could 
think of it as The Revenge of 
fee Nerds,” quips Mr Haeling. 


dependency - although Fm 
sure not everyone would agree 
wife me,” he says. . . 

Moreover, “fee globalisation 
of financial market s and . the 
increase in computer technol- 
ogy makes for longer and lon- 
ger trading days, which leads 
to greater burn-out” says 
Deutsche's Mr Haeling. On 


job sound daunting, it manages 
to attract all types: the huge, 
broad-shouldered rugby-pteydr 
types wife booming voices; the 
fimaTij agile operators; a 
growing number of women. 
“There is no one stereotype: 
the types who survive and do 
wdl are at absolute extremes 
of fee scale.” says Alex Lamb, 
a. former pit trader and now 
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77 




DENMARK 



Wednesday November 16 1994 



r Pool Nyrup Rasmus- 
sen, Denmark's Social 
, . Democratic prime min- 

ister, pulled off a remarkable 
PObtjcal conjuring trick in Sep- 

, Although his coalition suf- 
“ red what amounted to a sting, 
tag reverse in the general dec- 
™ one member-party 
win reflection to the 
Ftdketing - Mr Nyrup Rasmus- 
sen nevertheless returned to 
power at the head oE a weak- 
ened but relatively secure 
tbree-party government 


Economic strength 
is put to the test 


Hugh Camegy and Hilary Barnes see a weakened 
government trying to cut unemployment, defend a 
costly welfare system and clarify its attitude to Europe 


m*uuu 4U6 ijenmanrs rrag- 
mented pariiampirfrary jigsaw of 
nine parties, Mr Nyrup Rasmus- 
sen was able to side-step a 
surge in support for the right- 
wing liberal party, securing the 
establishment of a minority 
Social Democratic-Radical-Cen- 
tre Democrat coalition with the 


the socialist People’s party and 
the Unity List 

As the restored prime minis- 
ter set about continuing his 
dogged twin task of attempting 
to lower Denmark’s 12 per owi* 
unemployment rate, while 
defending its extensive and 
'expensive welfare system, it 
was left to an eccentric inde- 
pendent candidate in tie elec- 
tion to liven up an otherwise 
dull contest 

Mr Jacob Haugaard, a 
well-known comedian, became 
only the third independent to 
win a seat in the FoEketing 
since 1915. His party of “Con- 
sciously Work-Shy Elements” 
polled 23,200 votes in the city erf 
Arhus, with its promise of tail- 
winds for cyclists, more boy- 
friends for single mothers and 
more gifts from Father Christ- 
mas. - 

The success of Mr Hangaard, 
dad in his ants sewn from old 
sacks, amounted to more than 
just a frivolous sid&sbow in the 
rfurfy i fl Tjfcp all good satirists, 
he made a pointed comment 
about Denmark as well as rais- 
ing a laugh. 

The country has grown used 
to twotiurds of the adult popu- 
lation receiving their incomes 
from the gn wnm iant either as 
dependants on the welfare state 
or as employees of the govern- 
ment itself. But aWwnig h the 
economy is performing more 
strongly than most in Europe, 
unemployment poses - a 


long-term threat to Denmark’s 
comfortable system of state 
handouts and safety-nets. 

The opposition, spearheaded 
by the Liberals under Mr Uffe 
EUemann-Jensen. , the party's 
combative leader, has argued 
strongly that reforms to trim 
the welfare state are needed to 
create the conditions for signif- 
icant employment growth. The 
liberals won 13 more seats in 
the election, to hold 42 out of 
the 179 Folketing seats. But 
their Conservative and Progress 
party allies lost seats, dashing 
the chances of a right-cf-centre 
g ov er n ment 

Instead, the Social Democrats 
ami their a THRU, promising to 
sustain and even enhance the 
welfare state, hung on to power, 
despite the loss of seven of the 
SDFs 69 seats and the ousting 
from parHarewnt of the Chris- 
tian party, previously a govern- 
ment member. 

The result was hardly a ring- 
ing endorsement of Mr Nyrup 
Rasmussen, a rather colourless 
leader whose central stance 
since he became prime wmiictar 
in early 1998 has been a defen- 
sive attachment to the welfare 
system. Bat the electorate 
appeared to be willing to give 


deficit which has g rown over 
the past two years following a 
relaxation of fiscal policy made 
to help stimulate the recovery. 
The governments budget pro- 
posal aims to reduce the gen- 
eral government (including 
local authorities) financial defi- 
cit next year to close to 3 per 
emit of gross domestic product, 
the upper limit set by the Euro- 
pean Union in the Maastricht 
treaty as one of the covergenoe 
criteria for European monetary 
union. 

A more restrictive fiscal 
Stance will be one of tile factors 
holding down 1995 GDP growth 
to around 3 per cent, compared 
with expected growth of up to 
4.5 per cent this year. But the 
government recognises that it 
most redoes the share of GDP 
accounted for by public expen- 
diture - at 60 per cent, second 
only to Sweden in Europe - to 
ensure the national debt inter- 
est rates and inflation are kept 
under control and conditions 
for steady employment growth 
secured. 

To do this, it is likely to seek 
support for its budget from the 
Liberal and Conservative par- 
ties, rather than from its 
left-wing allies “We had sup- 



H*s business as usual in central 
Copenhagen, wftSe prime minister 
Foul Nyrup Rasmussen (above) 
copes ariUi a parliamentary Jigsaw 



in train a tax reform to lower 

the Country’s high faflnnra tav 

rates, shifting the burden 
towards so-called ‘'green” taxes 
such as higher petrol prices, 
increased taxes on CO, emis- 
sions and other si milar mea- 


ALSO « THIS 4-PAGE SURVEY 

□ Electronic purse: the latest step towards a cashless society? 

□ Europe’s most liberated women: how happy are they? 

□ In place of redundancy: can leave-from-work schemes help? 


him a further o p port u nity to 
achieve the daunting target of 
tnming around unemployment 

without having to give up the 
benefits that flow from the 
state. 

What, then, is the govern- 
ment’s strategy for meeting 
these expectations? 

The first step is to enact a 
1995 budget that trims a budget 


port from the Socialist People's 
party to form a government 
But we have told them from the 
beginning that, in respect of the 
budget, there will be no step 
out of hue from the guidelines 
we have set for a reduction in 
expenditure and a reduction of 
the deficit,” says Mr Mogens 
Lykketoft, the finance minister. 

The government has also set 


sures. 

At the same time, it is 
looking to active labour-market 
policies to reduce unemploy- 
ment It is committed to ensur- 
ing that collective wage agree- 
ments, in the two-year wage 
round due to be negotiated over 
the next few months, are mod- 
erate and exert no upward pres- 
sure on annual inflation, which 
is currently running at around 
2 per cent 

But the core labour market 
strategy is to enhance skills lev- 
els and promote job-sharing, 
rather than to dismantle Den- 
mark’s high minimum-wage 
and benefit levels. This year, 
tbe government's main 


response to unemployment has 
been to promote a “leave from 
work” scheme which allows 
people state-subsidised time off 
from work (up to one year in 
every five) to study, rear their 
children or amply take a break. 
At present, mare than 754M0 are 
on such leave. 

The right-of-centre opposition 
and most business leaders are 
highly critical of this approach, 
saying it has little real effect an 
unemployment and can even 
create labour shortages in some 
sectors. Most notably, the 
health services have been 
forced to look abroad for nurses 
to compensate for the absence 
on parental leave of some 3,000 
of the country’s 45,000 nurses. 

The government’s critics 
argue that it is unrealistic to 
expect that training schemes 
can lever most erf the unem- 
ployed - some two-thirds of 
whom are long-term unem- 


ployed - back into jobs. “You 
cannot malm a computer pro- 
grammer out of someone who is 
a potential doorman,” com- 
mented one senior Danish econ- 
omist. 

Instead, they call for mea- 
sures such as lower unemploy- 
ment benefits and lower mini- 
mum wages to price more 
people into work. Without that, 
they say, Denmark will not be 
able to generate the service-sec- 
tor and small-company jobs 
growth that the government is 
seeking to lead the way to 
lower unemployment 

Despite the minority position 
of the government however, it 
seems likely to be able to sur- 
vive, thanks to the lack of a 
realistic alternative coalition. 
Mr Ellezuann-Jensau hopes to 
woo the Centre Democrats back 
into the Liberal-Conservative 
camp (the three parties were in 
coalition during much of the 


1980s). But the party shows no 
sign of being prised loose from 
the present government, at 
least until after tbe next gen- 
eral election. 

In the TnugnHmp an issue 
which may strain the govern- 
ment is D enmar k’s r elationship 
with the EU. Next year, Mr 
Nyrup Rasmussen faces the 
task of formulating the coun- 
try’s position for the EU*s 1996 
Intergovernmental conference 
which will review the Maas- 
tricht Treaty on European 

lrninn 

Denmark only approved 
Maastricht in a referen d um last 
year after it had secured agree- 
ment from its EU partners to 
opt out, if it so chooses, from 
key provisions covering EMU, 
the formulation of a common 
flefenffft policy, EU citizenship 
and some legal matters. 

Many. TVmiah leaders, includ- 
ing some senior Social Demo- 


crats, are beginning to argue 
that Denmark should be pre- 
pared to drop these exemptions 
tn order to play a full role in 
the Ell’s development, a step 
that would require a further ref- 
erendum. But the Socialist Peo- 
ple’s party and the Unit; List - 
tbe latter a fiercely anti-EU 
organisation - are resisting 
such a move. Mr Nyrup Ras- 
mussen’s hope of achieving a 
consensus position going into 
the IGC looks forlorn. 

However, the clear referen- 
dum votes in Sweden and Fin- 
land, Denmark’s Nordic neigh- 
bours, to join the EU should 
help tbe prime minister, as 
their membership will establish 
a strung Nordic presence in tbe 
Union and bolster support for 
the EU among Denmark's noto- 
riously sceptical electorate. The 
effect wifi, be further reinforced 
if Norway, in its referendum.on 
November 28, also votes to join. 


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II 


FINANCIAL TIMES WEDNESDAY 






DENMARK 2 








•. ■ .* * ' 




-& 2 :niUbR& 

im«. rnkblap A ■ Punl NvWUP.fiatuhUB^M^^ 

Currency (Krone) at November 4~$1=DKrfk974t £fc=DKH»JS 0 B 7 

■ , " 

■ - - 1983 - 


Total GDP (Sbn) - -- ~ 

>1345; 

• ^'vftaV 

Red GDP growth — - 

. . . 1.2 .■ 

. - •. :■ ; 3J3 ••• 

GDP per capita ($). —4. — 

25,962 

.' . n» ■ 

Consumer prices pfe pa)-L— ...— 

VL2. ‘ 

■ -25- 

Manuf. production (% pa).- — — - 

- -2.7 - 

• 22.- 

Unemployment (% of lab force)- 

125 ■ 

V ' tt.5 

3 month money (%) - 


: fi JS> ~ 

10 year bond yield (%) 

. 75 

-s9.b 

FT-A index (% change on yea)— 

- 43B : 


Currant account balance (Sbn)-.. 

E4vr 

.• as ■ ■ 

Exports (Sbn). — — ' 

•3aa i 

OA ■ 

Imports (Sbn) : 

32.0.' 

• n.«. . 

Trade balance (Sbn). 

... 75 


MAIN TRADING PARTNERS 

. - . •' , 


(1992. % by usAMS)-.- 

, Exports. .• 

■ Imports- 

Germany 

.22.4 

.• ' 22.1 

Sweden .. — 

‘ : 11.5 

105 

UK™ 

■ 10.3.. 

- - 8.0 

EC. ™_ ; — - 

54w0 

- : 52.7 

Efts ' 

V24 J5 

22.8- 

“ 1994 figures - SU forecasts. Interest rates (Nov 4,-1994). fT-A 1 

| index (% change from Dec 31, 1993 to Nov 4; 1994). 

- 

| Sources: IMF. Datastream. 

Economist tntdVgerice Urfc j 


The economy: fears of inflation have receded, says Hugh Carnegy 

Welfare costs take their toll 


M-m, 


Stegerrefc 


HfcOnvrg i 


fradarita ha e n 


SWEDEN 


Compared with many 
European countries struggling 
to overcome recession and 
high budget deficits, Denmark 
is in good economic shape. 

This year, gross domestic 
product is set to grow by up to 
45 per cent after a long period 
of stagnation or recession, 
spurred by a fall in interest 
rates late last year and a fiscal 
stimulus this year and last 
from the government 

In 1995, the pace of growth is 
expected to slow to around 3 
per cent, due to the recent 
reverse in the interest-rate 
trend and budgetary tighten* 
ing, which will check this 
year's surge in private con- 
sumption. But there are few 
worries about this, as the 
slower pace of growth has 
helped to calm fears of infla- 
tionary overheating. 

Inflation has risen along 
with the pick-up in the econ- 
omy to a current annual rate 
of around 2 per cent, but the 
finance ministry predicts that, 
over the rest of the decade, it 
will stabilise around an aver- 
age of Z3 per cent. 

The loosening of fiscal policy 
over the past two years has 
skewed the public finances 
somewhat, leading to a general 
government budget deficit 
projected this year to be more 
than 4 per cent of GDP. But a 
tightening of the state’s belt in 
the budget for next year will 
see the deficit decline towards 
3 per cent in 1995. 

Exports continue to grow, 
sustaining a surplus on the 
balance-of-payments current 
account equivalent to more 


than 2.5 per cent of GDP. and 
holding down Denmark’s once- 
alarming net foreign debt to 
well below 30 per cent of GDP. 
The country is well on course 
to reach Its target of meeting, 
by 1996 or 1997. all four criteria 
for infla tion, public-sector defi- 
cits. public-sector debt and 
interest rates laid down by the 
European Union as conditions 
for achieving European mone- 



Mogens Lykketoft has shffied the 
burden towards ‘green’ taxes 

tary union. 

“In sum," the Organisation 
of Economic Co-operation and 
Development pronounced In 
August, “having eliminated 
most of the imbalances built 
up in the 1980s. the Danish 
economy seems set for a period 
of expansion, based on mone- 
tary and exchange-rate stabil- 
ity. relatively sound public 
finances and a favourable busi- 
ness climate.” 

There is, however, one out- 
standing blot in this otherwise 
bright picture. Denmark has 


suffered for some years from 
high levels of unemployment. 
This year, unemployment 
stands at just under \3 per cent 
of the workforce. Without any 
doubt, unemployment poses 
the biggest challenge to the 
future structure and health of 
the Danish economy. 

The country. like its Nordic 
neighbours Sweden, Norway 
and Finland, has a highly 
developed state welfare sys- 
tem. But the burden placed on 
the system by the costs of high 
unemployment puts it under 
considerable strain. Although 
Denmark’s public finances are 
“relatively sound", they have 
been kept in this condition by 
the biggest tax burden in the 
OECD, equivalent to 50 per 
cent of GDP. Paying some of 
the world’s most generous 
unemployment and other wel- 
fare benefits has pushed up 
public expenditure to the 
equivalent of more than 60 per 
cent of GDP - second only to 
Sweden among the 24 coun- 
tries in the OECD. 

Mr Mogens Lykketoft. the 
finance minister, readily 
acknowledges that, unless 
unemployment can be signifi- 
cantly reduced, the Social 
Democratic-led government’s 
primary aim of maintaining 
the welfare system will be put 
in jeopardy. 

“If you look at the next five 
to 10 years, if we are not able 
to change the [budget] deficit 
into a surplus through a sub- 
stantial increase in employ- 
ment. the conclusion must be 
that we cannot afford the wel- 
fare system.” Mr Lykketoft 


said in an interview. ‘ There 
would have to be a reduction 
all over - and a reduction in 
living standards. We have a 
high level of ambition on social 
services, but it depends on 
growth." 

The return to growth over 
the past year has produced a 
surge in new jobs, leading the 
finance ministry to predict that 
the unemployment "curve” 
will at last begin to turn down. 
It forecasts that unemployment 
will fall below' 11 per cent next 
year to around 10.5 per cent. 
Its aim is for the creation of 
215.000 new jobs between this 
year and 2000. reducing unem- 
ployment (coincidentally) to 
the same level of 215.000. or 
between 7 and 8 per cent of the 
workforce. 

Mr Lykketoft emphasises 
that the new jobs must come 
from the private sector. He has 
already introduced cuts in 
income taxes, shifting the bur- 
den in the direction of indirect 
“green taxes” on energy', water 
and packaging. He is commit- 
ted to keeping tbe public 
finances and inflation under 
strict control. 

The government is looking 
at measures to increase the 
obligation on the unemployed 
to take up vacancies. Above 
all, when it comes to labour- 
market measures, it is seeking 
to upgrade skill and qualifica- 
tion levels within tbe work- 
force. aiming for high-skill, 
high-wage jobs to solve unem- 
ployment. rather than low- 
skill. low-wage jobs. 

However, many economists 
and industrialists question 






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whether the government’s 
strategy will succeed. They say 
that most of the jobless - more 
than 75 per cent - who are 
long-term unemployed are not 
susceptible to significant skill 
enhancement. They strongly 
criticise schemes such as the 
controversial “leave from 
work” programme - which 
allows employees state-subsi- 
dised time off for retraining, 
parental leave or sabbatical 


leave - as an indulgence which 
risks causing labour bottle- 
necks and. ultimately, infla- 
tion. 

Critics argue that, instead, 
there should be a thorough 
overhaul of the welfare bene- 
fits and labour market systems 
to price people into work. With 
the minimu m wage at DKr6? 
an hour and maximum unem- 
ployment benefits at 
DKrl32.00Q year, they say the 


basic incentive to work is lack- 
ing far many. “Nowhere in the 
world can you find a system 
where people can continue on 
benefits at such a level that 
the wages they would receive 
for a job are lower," says Mr 
Poul Erik Petersen, head of the 
Danish Employers Association. 

But for the time being at 
least, the government is com- 
mitted to a path that does not 
alter the fundamental struc- 


ture of- the existing labour and', 
welfare system. There is moan 
or less a consensus in Den- ' 
mark that we should not put 
adult Danes on lower mini- 
mum wages," says Mr Lykke- 
toft. "That means we are exclu- 
ding some kinds of job, .but 
they are not- the- main road to 1 : 
increased employment The 
ambition is to give people men* 
qualifications to give the possi- 
bility "of jobs at higher levels." : 


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BIRGER IaUSGaTAN 7 
P.O. BOX 70447 
S-IOT II STOCKHOLM 
SWEDEN 

TEL -461018-713 SB OO 
Fax -miois-bii i»*i 


ALFRED BERC 
AMAUEGADE 33 

p.a box :r> s 

DK-I017 COPENHAGEN R 
DENMARK 

TEL -41 33-64 IOOO 
FAX MI U-H 1 1 00 


ALFRED BERG 
GLOCaYAN 3 
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HI LONDON WALL 
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MEMBER OF SFA 
TEL *44(0171-256 4900 
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7U FIFTH AVENL'E 
24TH FLOOR 
NEW TORK N.T.UMI9 
VIA 

TEL -1-212 247 9200 
FAX -1-212 24 7 7881 


T he Danes have passed an 
important milestone on 
the road to the cashless 
society. They have established 
the world's first national ftilly 
functional “electronic purse- 
system. using p re -paid smart 
cards to replace •.'ash in vending 
machines, payphones, canteens. 
| laundries and parking meters. 

After trials in IS92 in the 
I town of Naestved. about 70km 
I south-west of Copenhagen, the 
, development of a national pre 
: paid card system, known as 
! Danmonr (literally translated: 
; Dan-coin) began last December. 

The service is now available in 
• 27 towns, and transactions are 
I increasing rapidly. They were 
! up by 32 per cent to 19I.-U9 
from the first to the second 
| quarters of this year, and by 46 
- per cent to 280394 from the sec- 
; ond to the third quarters. 

■ The use of prepaid cards is 
not new. What is new about the 
Danish system is that it is not a 
closed system (involving, for 
example, only the payphone 
customer and the phone com- 
pany!, but an open system. 

There are many card issuers 
and many service providers, 
and the card-holder can use the 
card for all the various services 
on offer, such as payphone, can- 
teen. newspaper dispenser, 
laundromat - even, in central 
Copenhagen, at 10 plug-in 
points for recharging the bat- 
teries on electrically-operated 
cars. A debit is made each time 
the card is used. At present, the 
card expires when there is no 
credit left. Re-chargeable cards 
are the next step. 

They have already been 
developed and are working in 
Danmoent’s laboratory, but 
they will not be introduced 
until final agreement has been 
reached on a European techni- 
cal standard for smart cards. 
The system is still in its early 
days. The number of transac- 
tions is tiny, compared with tbe 
millions which take place every 
day using money and other 
credit card systems. 

The card has been introduced 
initially in selected areas, usu- 
ally in a vicinity where there 
are schools and other educa- 
tional establishments, and 
where a large number of young 
people are present 
Mr Henning N. Jensen, man- 
aging director of the Danmoent 
operating company, believes 
that it will take from five to 
seven years for consumers to 
become accustomed to the sys- 
tem. but well before the end of 
the century he expects that 50 
per cent of the population wifi 
be using prepaid cards for most 
of the daily transactions they 
now make by cash. 

Mr Jensen is a hard person to 
catch. International interest in 
the Danish system is so intense 
that he and many of his staff 
spend much of their time 
abroad, advising would-be elec- 
tronic-purse operators on how 
to set up a system. So far. no 
one else has, on this scale, and 
that, says Mr Jensen, is related 
to the fact that few other coun- 
tries enjoy such a system of 


Towards a cashless society 

‘Coin’ cards now 
used in 27 towns 


close cooperation between the 
banks, and between the banks 
and the telephone companies, 
as Denmark does. 

Denmark also operates one of 
the most successful debit-card 
systems, the national Dankort 
system, which, since its incep- 
tion in 19S2 for use at retail 
level, hag reduced the number 
of cheque transactions from 
2S0m a year (1986) to tinder 
100m in 1993. 

O ne of the essential fac- 
tors for the success of 
the system was the abil- 
ity of the banks and savings 
hanks to agree to the establish- 
ment of a singte-card system, 
using the clearing system, PBS. 
which is owned jointly by all 
170 banks and savings hanks 
some of them quite strut! l. 

Debit-card systems have been 
ter less successful in countries 
where the banks have tried to 
set up competing systems, Mr 
Jensen noted. Almost every 
adult now has a Dankort, and it 
is accepted by virtually all 
retailers, restaurants, hotels, 
cinemas, and theatres. There 
were many initial difficulties in 
introducing the Dankort sys- 
tem. and considerable scepti- 
cism about its future, but 
within seven years it was in 
general use. 

This is the span of time 
which Mr Jensen believes will 
be necessary for Danmoent to 
become accepted. The system is 
a logical extension of the exist- 
ing payments infrastructure. 
Danmoent itself is owned 
jointly by the PBS (Le.. by the 
banks) and KTAS. the Copen- 
hagen telephone company, on 
behalf of ail the phone compa- 
nies, whose transmission facili- 
ties are essential to the system. 

Danmoent itself is a tiny 
organisation of only 18 people 
As the system operator, it is 
responsible for laying down the 
standards for the hardware, 
such as terminals, the integrat- 
ed-circuit cards themselves, and 
for surveillance of the clearing 
and security systems, and 
finally for marketing the sys- 
tem. But Danmoent is not, and 
has no ambition to become, an 
equipment producer or supplier. 
There is complete independence 
between card issuers, such as a 
phone company, and service 
providers, such as a laundro- 
mat. Similarly, there is indepen- 
dence between service provid- 
ers and equipment suppliers, 
which means that an indepen- 
dent laundromat operator, who 
does not issue his own card, 
can nevertheless install a termi- 
nal and thus gain access to the 
system. 

In tect, this is what has hap- 
pened, according to Mr Jensen. 


The dominant suppliers of 
washing machines quickly real- 
ised tbe advantages of the Dan- 
ko rt system (me of them Is that 
there is no cash around to 
attract thieves) and introduced 
te rminate am! cards; but Other 
laundromat owners were able 
to install the same terminals, 
which acc ep te d the samp cards 
receiving payment through the 
Danmoent clearing system, 
thus staying competitive with 
the business round the corner 
from them. It will be some time 
before Danmoent becomes prof- 
itable, because this will require 
a very large number of transac- 
tions. 

Meanwhile, the cards are 
being used as an advertising 
medium, an extra way of earn- 
ing money - and tiie expired 
cards have become collectors’ 
items. 

Hilary Bames 



SB*.- 

Tomorrow you may not need to 
queue tor cash Tony 


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London 

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London EC4R OAT 
Tel: (0) 171 623 3121 
Fax: (0) 171 936 2545 
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Copenhagen 

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SCANDINAVIAN BUSINESS LAW GROUP 

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FINANCIAL times WEDNESDAY NOVEMBER 16 1994 



111 


DENMARK 3 


o 


ver the next year, Den- 
(marie's awkward rela- 
- tionship with the Euro- 
pean Union is likely once again 
to become an awkward and 

SSi25f“ y mvisive domes ^ 

political issue. 

Most Danes must have honed 

the political frontline for some 
time to come when they voted 
rnMay last year, at the second 
tone of asking, to accept the 
JJ^stneht treaty on European 
Union. 

Denmark had thrown the EU 

- or the EC as it then still was 

- into turmoil in June 1992 by 
rejecting the treaty in a refer- 
endum, threatening to derail 
Off whole project A year later 
after securing a series of "opt- 
outs" on key Danish objections 
to Maastricht, Copenhagen 
managed to save its own 
blushes and the blushes of 
Brussels by winning a Yes vote 
in a second plebiscite. 

But the Eli's intergovernmen- 
tal conference (IGC) in 1996, 
which will review Maastricht 
and set a course for the Union 
to follow into the next century, 
means Denmark’s politicians 
must shortly grapple once more 
with the question of the coun- 
try’s role in Europe - and , spe- 
cifically, reopen the debate on 


The country must shortly re-examine its attitude towards Europe. Hugh Camegy sets the scene 


Dissonant voices raised over opt-outs 


Denmark's “opt outs" from 

Maastricht 

The debate will be influenced 
by the recent referendum deci- 
sions in Sweden and Finland to 
join the Union - 22 years after 
Denmark joined the then Euro- 
pean Economic Community. 
Danish public opinion is likely 
to be more susceptible to deep- 
ening the country’s integration 
in the EU once its Nordic 
neighbours are also members. 
The three Nordic applicants 
(Including Norway) have fully 
accepted the terms of Maas- 
tricht If. on November 28, Nor- 
way also votes to join, it will 
strengthen the hand of tbone 
arguing that Denmark should 
drop its opt-outs. 

In order to win the second 
Maastricht referendum, Copen- 
hagen won the agreement of its 
EU partners to opt out of four 
of the treaty’s provisions. These 
were the drive towards Euro- 
pean monetary union (Emu) 
and a single currency; closer 


defence co-operation (specifi- 
cally, Denmark reserves the 
right not to become a fall mem- 
ber of the Western European 
Union); measures on European 
citizenship; and legal and home 
affaire matters. 

The present Social Democrat- 
ic-led Government of prime min- 
ister Poul Nyrup Rasmussen, 
formed after September's gen- 
eral election, said in its inaugu- 
ral policy statement that these 
opt-outs, agreed at the Elf's 
Edinburgh summit in Decem- 
ber 1992, remained the basis of 
Danish EU policy. 

Mr Ove Flch, the Social Dem- 
ocratic chairman of parlia- 
ment’s Europe committee, says 
a contract was made with the 
electorate last year on the opt- 
outs that had to be honoured 
He sees no need to reopen the 
debate on the exemptions, 
believing the (GC in any case 
will concentrate on central and 
eastern Europe. “The main 
issue will be enlargement - all 



f> ' 

mi- 


Uffe ra e ma nn-Jensen favour* dropping the opt-outs 


other discussions will be seen 
in that light," be says. 

But there are other voices, 
both within government ranks 
and in opposition, which argue 
that the Edinburgh opt-outs - 
although unchallenged by any 
of Denmark's EU partners - are 
unsustainable for Denmark in 
the face of the IGC, and that 


the country should prepare to 
drop them. The differences are 
such that the all-party consul- 
tations that Mr ttyrup Rasmus- 
sen intends to hold next year 
with the intention of achieving 
a pre-IGC Danish consensus are 
set to be fraught 
What makes the issue more 
difficult is the necessity to hold 


a further referendum if any or 
all of the Edinburgh opt-outs 
are to be dropped - a step 
which few politicians would 
take lightly, given the experi- 
ence of 1992. 

The strongest advocate of 
dropping the opt-outs is Mr Uffe 
Kflemann-Jensen. leader of the 
right-wing liberal party. Ironi- 
cally it was he, as foreign min- 
ister at the time, who negoti- 
ated the Edinburgh deal. But 
he did so only out of political 
necessity, not because he 
thought the exemptions were In 
Denmark’s best interests. 

Mr EUemann-Jensen argues 
that Denmark should aim to be 
a “hard core" member of Emu 
(it will be one of the first coun- 
tries to meet the convergence 
criteria, for Emu) and, as a 
member of Nato, should 
quickly become a full member 
of the WEU (it has observer sta- 
tus at present) to put itself at 
the heart of Europe’s evolving 
security structures. If not, the 


country could be left on the 
fringes of the EU. 

"What we lade is the political 
courage to go out and tell the 
Danes: these are the facts." he 
says. “We are not holding the 
Internal debate to prepare 
Danes for what is going to hap- 
pen at the IGC, and that is dan- 
gerous." 


enmark’s new EU Com- 
f nrissioner, Ms Ritt Bjer- 
regaard, a prominent 
Social Democrat, is among 
those within government ranks 
who thinks that eventually the 
opt-outs should be dropped. But 
she points out the difficulty for 
a minority government in 
adopting such a position when 
it relies to a large degree for 
parliamentary support from the 
Socialist People's party. The lat- 
ter, though not anti-EU, is 
under pressure itself from the 
stridently anti-EU Unity List 
which won election to the Folk- 
eting for the first time in Sep- 


tember. 

The Social Democrats also 
know that many of their own 
supporters are cool towards the 
EU, and are still smarting from 
a humiliating showing in the 
EU parliamentary elections in 
June when the party slumped 
to just 15.8 per cent of the vote. 

"Because of this, the govern- 
ment has to be extremely cares 
fuL" says Ms Bjerregaard. “It 
says it is sticking to the exemp- 
tions - but it is not promising 
never to change them." 

Her hope is that the whole 
range of issues facing the EU 
will have shifted sufficiently by 
1996 to present a different sce- 
nario to Danish voters. For 
example, the WEU is likely to 
be more clearly defined as an 
integral part of Nato; enlarge- 
ment of the EU to the north, 
and the planned integration of 
central and eastern European 
countries (popular in Denmark) 
may change the emphasis on 
the pace and method of EU 
integration. 

“If we can convince people 
that lots of things have 
changed and that we cannot 
stand still, then things can be 
different There might be many 
things to include in a referen- 
dum as a result of new negotia- 
tions,” Ms Bjerregaard says. 


A shocking encounter 
awaited me when I first 
visited Denmark, as a 
teenager, some 40 years ago: 
an elderly lady who habitually 
smoked cigars. The distaff half 
of the Danish population is 
sti!i puffing away. About 41 
per cent of women were smok- 
ers ,in 1991, significantly 
higher titan in other European 
countries. 

Some things have changed 
over the past 30 years, bnt not 
for the better, as many Danish 
women as men are now classi- 
fied as heavy smokers, and 
while fewer men smoke now 
than- 30 years ago, just as 
many women do. 

Danish women gained the 
vote in 1915, before women in 
any other European country, 
and ever since they have made 
a point of adopting the same 
social rights as men as well - 
to and drink t!hn the 

men, to choose their sexual 
partners as freely as men. 

European attitude surveys 
suggest that Danish women 
regard themselves as more lib- 
eral and independent-minded 
than women in other Euro- 
pean countries. Religions con- 
siderations do not place 
restraints mi their behaviour. 
They are less inclined than 
their sisters abroad to accept 
decisions taken an their behalf 
by “authorities", taking little 
notice, for example, of official 
anti-smoking or anti-alcohol 
camp aigns. 

Since the 1960s, they have 



How happy are Europe’s most liberated women? asks Hilary Barnes 


‘Live strong and die young’ 


□ Suicide among graduate 
women is a much more fre- 
quent cause of death than 


Liberated - but the price looks high 


Pfctura in Via Tt*oa Omkm: Tony Arafcn* 


also taken to working like 
men. The female labour partic- 
ipation rate in Denmark is 
almost 80 per emit - higher 
than in any other country in 
Europe except Sweden. Gener- 
ous provirion for institutional 
care for children from the age 
of six months onwards has 
encouraged a family structu re 


in which both parents work. 
The “housewife” as a demo- 
graphic category has virtually 
disappeared. 

Equally extensive facilities 
for the care of the elderly have 


fare state: it has freed 
the individual from the tyr- 
anny of the family. 

Ms Anne Knadsen. an 
anthropologist, recently 
caused public controversy by 
asserting that Denmark has 
become a matriarchy, in which 
women dominate opinion. 
This, said Ms Knud sen, was 
not a good thing, as women 
are too conservative-minded 
and hold back necessary 
change. 

How much truth there is in 
her thesis is difficult to know, 
but there is a long way to go 
before women have achieved 
equality of influence as mea- 
sured by tiie number of women 
who reach the top in politics 
and business. About one third 
of the members of the Fotk- 
eting and of the present Cabi- 
net are women, and two of the 
eight parties represented in 
the Folketing are led by 
women (three until last 
month, when the Progress par- 
ty’s Ms Pia Kjaersgaard was 
demoted); but in business, 
women in top jobs are few are 
far between. 


recently, as she puffed away at 
her third cigarette within the 
hour, “coming along nicely." 
But emancipation is not with- 
out its costs, which were high- 
lighted tins year by a report 
from the ministry of health. 

The report examined female 
mortality rates in Denmark in 
the age group 35-64 year (part 
of an extensive 16-volume 
study of mortality rates 
among both men and women). 
Mortality in this age group is 
still higher for men, at about 
700 per 100,000, bnt while the 
male mortality rate has fallen 
from about 850, 30 years ago, 
the female mortality rate has 
remained aiwm«t unchang ed at 
about 500 per 100,000. 

Particularly striking is a 
comparison of the mortality 
rate among Danis h women lit 
the 55-59 age group, compared 
with women in other Euro- 
pean countries (Sweden, Nor- 
way, Holland and France). In 
Denmark the rate increased 
from 811 to 825 between 


1955-59 and 1985-89. fn the 
other countries the rates were 
mnch lower, and they have 
fallen significantly. In the case 
of France the rate fell dramat- 
ically from 838 in 195559 to 
472 in 1985-89. 

The ministry's report attri- 
buted the Danish trend to 
increased death rates from 
heart disease, chronic respira- 
tory diseases, long cancer, cir- 
rhosis of the liver, cancer of 
the breast and suicide. Fonr 
out of six of these conditions 
are directly related to alcohol 
or smoking or both. 

The number of women aged 
35-64 dying from cirrhosis of 
the liver has doubled over the 
past 20 years. Deaths from 
lung cancer in the 45-54 age 
group have risen from about 
eight per 100,000 in the early 
1960s to 35 in 1985-89. and 
almost 100 per 100,000 for the 
5559-year-olds. For both age 
groups, the lung cancer mor- 
tality rate is much lower in 
the other European countries. 


Denmark has always had a 
relatively high suicide rate, 
but for women In this age 
group it has increased, rising 
from about 23 per 100,000 of 
the 35-64 age group in early 
1960s to 32-33 per 100.000 
throughout the period 
1970-1990. There is evidence to 
suggest that mortality rates, 
as well as other life-style prob- 
lems, are especially high 
among university-educated 
women, the career women who 
are the spearhead of the posh 
for equality with men. 

A survey of living conditions 
by the Danish Institute for 
Social Research, published in 
1992, fonnd. among other 
things: 

□ Women graduates have a 
higher mortality rate than 
women in general, while male 
graduates have a lower mor- 
tality rate than the average. 

□ The risk of death from 
breast cancer is 40 per cent 
higher for women graduates 
than for women in general. 


among other groups of women, 
or among male graduates. 

□ One in three graduate 
women have no children by 
the age of 35. One in five grad- 
uate never have children. 

□ Among women In manage- 
ment positions, every other 
one has experienced a divorce 
(one in five for men in similar 
positions), and one in fonr 
attributes divorce to problems 
associated with a career. One 
in five live alone, compared 
with only 7 per cent of men in 
similar positions. 

“If the result of all onr 
efforts is stress and death, 
wouldn’t it be a good idea to 
return to the good old days?” 
asked Ms Hanne Dam. a writer 
on women's issues, in a lead- 
ing article in her newspaper 
Information in August “Not at 
all," she went on. "... It 
behoves society to provide 
women with the opportunity 
for a worthier life." 

The young woman journalist 
at dinner, as she puffed her 
way to a possible early 
decease, was even less equivo- 
cal: “Live strong, die young. 
That’s the Danish women’s 
motto," she said. 


freed children from caring for 
their elderly parents as well. 
As a Swedish sociologist once 
said of the Scandinavian wel- 


Perhaps equality is, as a 
young woman Journalist spe- 
cialising in youth culture com- 
mented at a dinner party 


A Japanese technique is helping companies improve productivity 


Pooling everyone’s ideas 


“Continuous improvement* - 
productivity-improving tech- 
niques based on the Japanese 
ttnbvn principle - is increas- 
ingly popular in Danish indus- 
try. 

“In other countries, continu- 
ous improvement is practised 
by some of the large and 
well-known companies. What 
is exceptional about Denmark 
is that it is being practised 
throughout industry," said Mr 
Fa Bronsholt Nielsen, consul- 
tant at the Federation of Dan- 
ish Industries, where he has 
helped to Introduce continuous 
improvement techniques to a 
network of 150 Jutland compa- 
nies, which Is one of four 
regional groups working with 
the techniques. 

The starting point was a 
study-tour to Japan by a group 
of Danish industrialists in 1987. 
They visited a selection of the 
best Japanese companies, to 
^yarning some of the factors 
which made them masters of 
productivity development The 
tour resulted in a book, and in 
the successful adoption of 
some of the techniques which 
• hart been teamed at a handful 
of companies, hut only in the 
past two years has the move- 
ment caught on. 


“We think we have devel- 
oped something unique by 
combining the culture of the 
Danish firm with organisa- 
tional development and man- 
agement tools,” said Mr Niel- 
sen. “We have concluded that 
you cannot make the tools 
ffust-in-tizne’ or quality circles, 
for example] work without tak- 
ing the culture of the company 
into account" 

Kaizen, as adapted to Danish 
requirements, is called 
“employee activated produc- 
tion development". The baric 
aim is to involve everyone in 
tiie firm, from the management 
down to the shop floor, in a 
process of improving produc- 
tivity by making things work 
more smoothly mid efficiently. 

The results have been gener- 
ally good, in some cases spec- 
tacular. One company achieved 
a 50 per cent productivity 
improvement over a period of 
18 months. Many companies 
report productivity increases of 
IQ to 20 per cent 

“What has surprised me and 
many others is that the 
improvements in productivity 
in firms which have been using 
the technique for several years 
are achieved year after year." 
said Mr Nielsen. 


Using common sense to elim- 
inate errors or inefficiencies in 
the production system is one 
way of describing the inten- 
tions of the programme. It 
works when everyone in the 
company contributes, both by 
pointing to the problems and 
by suggesting solutions. 

It has caught on so spectacu- 
larly in Denmark, Mr Nielsen 


One company achieved a 
SO per cent productivity 
improve me nt over a 
period of 18 months. 
Many report increases of 
10 to 20 per cent 


KROMANN a MONTER 


Kroraann 8c Monter is a major Danish taw firm wilh an 
extensive international practice. 


We provide 8 fuD range of legal services, 
tadoding all aspects of husoes* transactions 
ht and through Denmark. 


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thinks, because of an existing 
culture of co-operation 
between the management and 
the workforce In Danish indus- 
try, at both industry and com- 
pany level. Danish labour rela- 
tions are regulated by law, but 
legislation is rarely imposed 
unless with the joint agree- 
ment of the employers and the 
trade unions; and almost 
everyone - the companies and 
their employees - is a member 
of either an employer associa- 
tion or a trade union. 

"At company level, it is part 
of the culture that we talk 
things over. Labour conflicts 
are rare," said Mr Nielsen. “We 
also have a generally high 
level of education among the 
employees, and they are not 


afraid of raising questions 
about the way things are done, 
especially not the younger gen- 
eration." 

When the Idea of employee- 
activated production develop- 
ment is being launched by a 
company, it is common for a 
consultant from the Federation 
of Danish Industries to join a 
consultant from the Metal 
Workers’ Union in explaining 
to employees what the idea is 
all about 

“If we can convince the 
workforce that this process 
helps to improve working con- 
ditions for employees as well 
as productivity, that jobs 
become more interesting and 
the employee’s influence is 
increased, then everyone is 
happy,” said Mr Nielsen. 

The movement had spread 
fast through networking - 
another process which works 
well in Denmark, because com- 
panies listen and pass on their 
own experiences, so that col- 
leagues. and even competitors, 
can learn, he added. 

The Federation of Industries 
started the process by bringing 
together a small group of com- 
panies, whose managements 
met to discuss their experi- 
ences several times a year. 
When the news is good, it 
spreads rapidly and more com- 
panies want to hear how they 
can benefit from the process. 


Hilary Barnes 


INDEX OF FT SURVEYS 

July 1992 - July 1994 


This index has been compiled for researchers 
and libraries and those who require a sound 
briefing on national and international subjects. 


A useful cross index of all FT surveys published 
in the above period, listed in alphabetical 
order and subject 


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IV 




FINANCIAL TIMES WEDNESDAY NOVEMBER. IE 


DENMARK 4 


Leave-from-work schemes are saving jobs 


MABUSE LINE 


Hilary Barnes profiles two of the country’s best-knovte£o^ 




In place of redundancy 


It sounds like a trade unionist’s dream: to 
prevent dozens of redundancies by putting work- 
ers on a rota of statesubsidised extra holiday. 
But for Copenhagen bus drivers the dream 
became reality this year, thanks to the govern- 
ment’s leave-from-work schemes designed to cot 
unemployment and promote job-sharing. 

When the local bus drivers’ union faced a cut 
of several hundred drivers from the 2,500-strong 
municipal force, because of privatisation. It 
adopted a system already worked out by a fellow 
union in the rubbish-collection sector. 

Exploiting a programme allowing workers to 
take IQ) to a year in sabbatical leave - bandied by 
generous state benefits while absent - the bus 
drivers’ union worked out a scheme by which its 
members could take off one week in every nine 
on a rotation basis, thus catting down the num- 
bers of workers who had to be dismissed. 

As a result, some 75 jobs were saved. And each 
driver participating in the scheme has won six 
weeks of extra holiday a year, on top of their 
normal paid holiday 


allowances. While on Mounting voices among employers and 


SWTS Tt opposition Parties question the schemes’ £"£*5 “iToiS 


Under the training scheme, an employee can take 
op to one year to undergo work-related education 
at 100 per cent of the maximum unemployment 
benefit Under an easing of the rules recently, 
employers were relieved of the obligation to take 
on replacement workers. 

The government estimated that 20,000 people 
would take advantage of the three schemes this 
year. Bat d emand has soared to the point where 
76.000 are now on leave, and almost as many 
again are expected to have applications approved 
in the course of the year. Of those currently on 
leave, 45,000 are on parental leave and 25,000 are 
on training leave. The vast majority (90 per cent 
in the case of parental leave) are women. Most 
are In tiie public sector. 

Oddly, almost half the leave-takers are unem- 
ployed. They are entitled to take advantage of 
the schemes, an attractive option because, in 
effect, taking leave extends the period during 
which a jobless person is eligible tor full unem- 
ployment benefits. Most controversial has been 

— — the rush by nurses to 

>ng employers and ‘f®|* advantage of paren- 
.J? JL tal leave. Up to 3,000 of 


of the fUATimiim Danish costs 3itu 

unemployment benefit 

allowance - which works out at about DKr2,000 
a week before tax. 

“I think this is a very good model for helping 
to break the unemployment curve by slowly 
reducing working time,” says Mr Bjarue Hansen, 
of the Copenhagen bos drivers’ union. He adds; 
“Bus drivers are going to Poland, to Paris and to 
London on their week off. It is very nice, people 
really tike it” 

There are, however, mounting voices among 
employers and right-of-centre opposition parties, 
arguing that the leave-from-work schemes are an 
expensive and ineffective way of combatting 
unemployment They warn that the programmes, 
winch have moved more popular than antici- 
pated since they were introduced two years ago, 
threaten to cause disruptive shortages of skilled 
workers in certain areas of the economy. 

The sabbatical leave programme exploited by 
the bos drivers is, in fact the least papular of the 
three leave schemes. Most periods of leave are 
bring taken under the parental leave and train- 
ing leave programmes. 

Parents of children up to the age of eight years 
may each take up to a year off work for each 
child, separately or together, while receiving 80 
per cent of the maximum unemployment benefit 


costs and effectiveness 


Techveness nurses are on leave, for- 

cing the health service 
to look abroad - mainly to Sweden and the 
Netherlands - to make up the shortages. 

Mr Awl Erik Petersen, bead of the Danish 
Employers Association, says the case of the 
nurses illustrates the danger of the Icave-from- 
work scheme. He says it can lead to serious 
bottlenecks to the labour market, which could 
begin to feed inflation into the economy rather 
than tackle unemployment which, though sta- 
tistically, reduced by the schemes is to real terms 
little changed. He says skill shortages are also 
showing up in the furniture and construction 
industries. 

“The nurses’ union is now seeking a 15 per 
cent wage increase - they realise how the market 
economy works,” he says. “There is a danger 
that tins can spread to the whole economy.” 

The government rejects these fears as being 
overstated. It is reviewing the schemes with a 
view at least to reducing the level of benefits 
available to the users of parental and sabbatical 
leave. But its commitment to leave for training is 
solid, as this is a fundamental to its strategy of 

tackling unemployment by increasing skill levels 

to the economy. 


Hugh Camegy 


T he A.P. Moller group’s 
Maersk Line may or may 
not be the world's larg- 
est cargo liner shipping service 
- it depends on the definition. 
But Mr Vagn Lehd Moller, 
vice-president in charge of 
liner services, accepts the 
description “the most compre- 
hensive” global liner service. 

Maersk Line owns 47 vessels 
and operates a total fleet of 93 
vessels. They operate global 
east-west services and are 
active on all three major world 
trading routes, the North 
Atlantic, Europe-Far East and 
the US-Far East 
The fleet operated by Maersk 
Ltoe has a carrying capacity of 
124.643 containers (at October 
1. this year) - more than any 
other shipping company except 
Taiwan’s Evergreen. Fourteen 
of the ships can each carry 
more than 4,000 containers. 

The east-west services are 
linked at a number of hub 
ports with north-south services 
and "feeder" services, which 
leave few geographical areas 
not directly serviced by Maersk 
Line. 

A.P.Molier. by far is Den- 
mark’s biggest industrial 
group, was founded in 1904 by 
the late Mr A.P. Moller. whose 
son, Mr Maersk Mc-Kinney 
Moller, remains chairman of 
the group's twin holding com- 
panies, the listed D/S Svend- 
borg and D/S 1912. 

Apart from passenger trans- 
port , the group has interests in 
all forms of shipping - and 
also in offshore drilling. It pro- 
duces oil and gas from the 
Danish sector of the North Sea. 
and operates its own shipyard 
(the Odense Steel Shipyard) 
and its own airline (Maersk 
Air), as well as manufacturing 
and retailing businesses. 

The group's structure means 
that consolidated figures for all 
its various operations are not 
available, but turnover in the 
oil and shipping operations 
under the twin parent compa- 
nies came to DKi27.6bn in 1993, 
and there was a net profit of 


Containers cover the 




m /y/ j/ i 
"jt-Ss // .1 

A Maersk container arrives at Haiphong's Doan Xa terminal 


mm 


DKr2_91bn - a good start for Mr 
Jess Soderberg. who succeeded 
Mr Moller as chief executive 
officer, in charge of day to day 
operations, in mid-1992, when 
Mr Moller turned 80. 

In the highly competitive 
and secretive world of 
shipping, no one knows exactly 
bow much the other large 
operators make, or how. To the 
irritation of Denmark's 
corporate analysts and 
business journalists. 
A.P.Moiier keeps its financial 
cards close to its chest. No 
financial information covering 
Maersk Line slips out But the 
AJ*. Moller shipping operations 
as a group consistently report 
profits. 

Maersk Line, founded in 
1928, has expanded rapidly 
since it went into container 
transport in the early 1970s. 

“The new-building 
programme for 1995. 1996 and 


1997 is in place," said Mr Lehd 
Moller. which indicates that 
the liner business is still doing 
well enough to invest in 
supplementing its fleet The 
fleet is young, with an average 
age of about seven years. “We 
need high-speed, high-quality 
ships." he sa id. 

Mr Lehd Mailer does not see 
expansion taking place 
through cut-throat competition 
for market-share in a sta gnant 
market. “As we see it, the 
global market for containers 
will grow in coming years," he 
said. “We believe we will see 
growth of at least 6 per cent a 
year for as far as we can see. 
More and more cargo will go 
into containers. More an d more 
markets will mature." He 


believed that containerisation 
Would spread to relatively 
under-developed markets, 
including east Europe - and 
Russia. 

Containers are * also 
becoming more flexible. and 
sophisticated. “They can cater 
Tor just about anything,” he 
said. An example was the 
growth of refrigerated cargo 
(“reefer”) containers. Maersk 
Container Indnstri A/S, ..the 
group's container 
manufacturing company in 
Denmark, is planning to 
deliver reefer containers,- . and 
Maersk Line recently took 
delivery of 500 20ft and 2fi00 
40ft reefer containers from 
Korea’s HyundaL 

Maersk Line is the world 
leader to reefer containers, a. 
fact which, probably means it is . 
a larger carrier of refrigerated 
cargoes than any of the . fleets 
of bulk-carrying reefer ships ' 
operated, by competitors. 
Reefer containers, says Mr 
Lehd Moller, have at least the 
same r eliab ility and are just as 
sophisticated as reefer vessels. 

Another business a rea which 
is being developed by Maersk - 
line is known as "logistics” - 
in which the ocean shipping 
company undertakes to 
provide a complete transport 
service from producer (for 
example, a shoe manufacturer 
in China) to the final customer 
(a shoe retailers in Europe).’ 

“This is building up very 
nicely,” said Mr Lehd Moller. 
Bat it is a very complicated 
business. Contracts . for 
Maeisk's most complete Three 
Star logistics solution, which 
may involve transporting 
20,000 containers a year tor one. 


customer, are- numbered r In ' 
single figures; but it has. a 
much larger - number , of 
somewhat less - sophisticated - 
Two Star conteacta. This is 
vahieaddad business ’ “very - . 
much iso”, said Mr Lehd Moller 
- and requires considerable 
investment in the development - 
ofsystexns.“Youdoart get paid ' 
immediately,”, he nxplaincd, - - 
and . then . outlined. . .the : 
compterttyof the operation, ■ 

To- {s tart with , shnpff ' inintf 

be of the right sia^' -cototfr and 
quality- They mast be packed 
properly.- Documentation is - 
earned but, and then customs 
■' M WBtlQftiiys tea 
are- ^required, -so- that the 
customer knows; where the 
goods are and when they will . 
be arrivin& and the goods first 
have, to Jbe. transported to a . 
port, then delivered to the 
stores by , Maersk- line's 
dedicated train and- truck - 
services (which are not owned 
by Maersk, but are.on contract 
or.dtartertoit). 

Maersk Line is widely 
acknowledged to the Industry ' 
as an efficient operator with v 
high standards of- service. An ® 
executive at Carls berg, the 
Danish brewery group, recalled . 
attending a reception given, by .--A 
a third company in : Hong | 
Kong. A Maersk Line vessel 
came into view approaching - 
.port “Ah,” said an AJP. Moller - 
executive, “it will dock to U 
minutes time; and ih exactly 29 ' 
minutes the captain, will 
appear her&”.‘- 

The - predictions proved 
correct ~ a neat illustration of 
the group’s motto, a phrase 
coined by Mr A.P: Moller -J 
Timely a ttentio n.” ... " • 


Bank, are 





A sound recovery 


BANG & OLUFSEN 




we hold a ;lea*£rtg 

7~~. 

of ^ : ji ; y ■ 

batiks,:, 0 en . Danske- Bank -has ; the 


' r^nd. expertise tj eCessary -taL’ ; >/- ' . • 


ts attain theSf ~ individual - 




--^Please caU our Investmiem Bank 


on +45 $ 34^)00 jbrroUr . 


Bang & Olufsen can be likened 
to a French chef, says Mr 
Anders Knutsen, the group's 
chief executive: he buys the 
best-available raw materials in 
the market and his reputation 
is based on the way he mixes 
them to produce exquisite 
dishes. 

The Danish producer of up- 
market audio and video prod- 
ucts does something similar. It 
buys much of what goes into 
its products from outside, but it 
puts them together to such a 
way - with a substantial input 
of its own technical flair and 
software - that the product is 
exceptional 

If this were a process anyone 
could do successfully, B&O 
would not be the only surviv- 
ing independent manufacturer 
in Europe that produces a fall 
range of both audio and video 
products. Indeed, a couple of 
years ago. after the group had 
suffered three successive years 
in the red, B&O’s own survival 
hung in the balance. 

It has staged a remarkable 
recovery under of Mr Knutsen, 
who was made chief executive 
in the autumn of 1992 after a 20 
years with the company, to the 
year ending last May 31, the 
group made a profit of 
DKrl25m, against a loss to the 
previous year of DKr42m, and 
sales were up to DKr2.40bn 
from DKi2.12bm 
The first half of the current 
year is expected to produce an 
equally good performance. The 
financial market's confidence 
in the group has returned. The 
share price, which plunged to 
around DKr200 in 1992-93, is 
now at DKrl.200. 

At the groups' headquarters 
in Struer, a small town in 
north-west Jutland, Mr Knut- 
sen attributed its long-term 
success to “a unique combina- 
tion of technological ex ce ll e n ce 
and emotional appeal" - the 
emotional, or aesthetic, appeal 
arising from the superb design 
which, more than anything, 
has generated a brand-name 
awareness of B&O products. 

To rebut the suggestion that 
B&O merely presents conven- 
tional technical solutions to 
brilliant packaging, Mr Knut- 
sen darted from the room to 
return a moment later with the i 
insides of two television sets, a 
standard product from Philips 
and a B&O set - a graphic way 
of illustrating the difference to i 

complexity and performance ^ 
between the two sets. < 

This autumn the company i 



Anders Knutsen meets everyone 
arauany, and makes sure they 
understand the strategic vMon 


tendon Branch k 


turns another comm- with the 
launch of an ingenious all-in- 
one television and video set, 
known as the Avanta, the first 
such product set to reach the 
market to typical B&O design. 
It win grace the most elegant of 
drawing rooms, though at a 
price which less choosy con- 
sumers may find steep. 

The recovery in the compa- 
ny’s fortunes is the result of a 
combination of factors; but one 
explanation which Mr Knutsen 
does not accept is that it is 
riding high in a cyclical recov- 
ery to the market The Danish 
market recovered in 1993, but 
the other European markets 
did not. Yet, in Germany, 
where the market is still 
depressed, says Mr Knutsen, 
the company has this year 
boosted sales by 28 per cent 
Clearly, a lot of things have 
been put right to achieve this 
kind of growth to a stagnant 
market The starting point was 
a “break point” prog ramme 
launched in the aut umn 0 f 
1992. Group employment was 
reduced by 700 to 2,300. Produc- 
tion was rationalised by cen- 
tralising the electronics produc- 
tion and the mechanical 
engineering operations respec- 
tively in one plant 
The sales and marketing 
structure was changed, cutting 
costs substantially. Direct 
ordering and direct distribution 
has been introduced. A retailer 
to, say. Madrid places an order, 
using his personal computer, 
with B&O in Denmark. B&O 
distributes directly from its 
store. If the model ordered is 








_■» *-.r 


j****'" n 




not to store, toe Danish com- 
pany undertakes to dehvtr in 
five days - two for manufactur- 
ing and three for transport 
Flexible production and low 
invfflrtories are keywords. The 
production range has been 
broadened, introducing TV sets 
at the relatively low price of 
about DKrlO.000, extending 
through a complete range to 
sunuund-sound audio systems 
which lighten the. pocket by 
around DKrlOO.OOO. 

- Productivity in the manufac- 
turing divisions of the company 
improved by 15 per cent in 
199&44 from the previous year, 
and the aim is a further 10 per 
cent improvement this year 
and next. This is the result 
partly of a programme to 
improve logistics and the pro- 
duction structure, which began 
six years ago, but it is also a 
result of a programme to 
involve the workforce to an 
ever-increasing degree in bring- 
ing about production improve- 
ments. 

Two layers in the 
management structure whye 
eliminated by Mr Knutsen, so 
there are now four, from 
shop-floor to board of 
management. Foremen (or 
supervisors) and shop-floor 
workers have been given 
greater responsibilities, which 
has required an intensive 
process of education and 
training. It also involves Mb’ 
Knutsen - or Anders, as 
everyone in Struer calls him - 
in a heavy programme. He 
meets every employee at least 
once a year in groups of 50 at a 
tune, which means about 50 
meetings annually. 

He maims sure that everyone 
understands the strategic 
vision and the management’s 
goals, and he receives direct 
feedback in the form of 
questions and comments. “It is 
a hard programme, fait it is a 
good investment," he said. 

It quickly becomes apparent 
to a visitor to Struer that the 
Change Of top managpmpnt has 
been very important. Mr 
Knutsen says it himself, 
explaining the significance of 
having a board of management 
which is to full agreement 
about where it wants to-take 
the group and how to get there. 

But it is the unsolicited 
com ment s from everyone else 
one m eets that are most teDing, 
from the secretaries and the 
shop floor upwards. “The 
present directors know what 
rosy are doing, and when they 
take a decision they stick toil," 
observed one secretary. 


[l,-V i* 1 ?' 




T— 


DANISH IMPORT COMPANY SEEKS AGENCY 


*. .v r* 


Well-reputed import company established in 1968 seeks 

non-food agency 

Annual turnover envisaged is £250.000 minimum. 


and reralktium 






Please write in confidence c/o: 
Room 030 

The British Embassy 
Kastelsvej 36 
DK-2100 Copenhagen 0 




■d3f 


) . 













O* 


O'/’- x 


' 9lok 


overy 


p 

> 

BRITISH VITA PLC 


FINANCIAL TIMES 


21st CENTURY 

Materials amh 
technqi nPiv 
T • o • d • a • v 


IN BRIEF 


Retail therapy 
lifts US stores 

Three of the biggest US retailing groups - J.C. 
Penney .Dayton Hudson and Home Depot - each 
reported strong increases in earnings for the three 
months to October yesterday. Page 24 

BCI misses Ambroveneto deadline passes 

Eanca Commerciale I tali ana, the Milan-based bank, 
appears Formally to have abandoned its attempt to 
gain control of Banco Ambrosiano Veneto, its 
quoted competitor. Page 22 

Yamaha strikes a sweet note 


VdAAHA 

AtjMj 


^ .■ DAV5 ' *#£ 
M £p£ fakth j 

j 


Yamaha Corp. the world’s largest maker of musi- 
cal Instruments, and leader of Japan's Yamaha 
group of companies, announced k 110 per cent rise 
in its unconsolidated recurring profits for the six 
months to September. Page 25 

Difficulties mount for Portuguese banks 

Third-quarter results for Portugal's banks were the 
worst for almost a decade. The once-buoyant sector 
has been hit by recession, tougher competition and 
a collapse in bond trading. profits. Page 24 

JR West float shelved 

The Japanese government has shelved until next 
year the flotation of state-ownAi West Japan Rail- 
way (JR West ). Page 25 

Weakness at Swedish bank 

A big fall in loan losses enabled Svenska Handels- 
bankan. one of Sweden's leading commercial banks, 
to lift profits by 148 per cent, but the improvement 
obrcured a poorer underlying performance. Page 22 

BOC lifted by rising gas prices 

A sharp rise in gas prices and volumes in the final 
quarter helped BOO, the UK chemical group, to 
increase 8 per cent to £3.48bn ($5.7bn) for the year 
to September 30. Page 26 

De La Rite advances to £73m 

Record banknote production helped De La Rue, the, 
UK's security printer, payment and transaction 
systems group, report better than expected interim 
profits yesterday. Page 26 

AccMsttiohs bolster Great Portland ' 

Acquisitions following its 1993 rights issue helped 
Great Portland Estates, the UK’s sixth largest prop-, 
e;ty company, announce interim pre-tax profits up/ 
from S16m to £21.4pi. (S35m). Page 28 ^ 

Companies In IWs issue' 


ABB 

AMP 

AmWovaneto 

Amer 

Atomic i 

bct. 

BHP 

BOC 

BSkyBif- 

Banco Totta b Aeons 
Boots 

Breafc for Che Botj'ier 
Bitghtreasons 
Brtttah Biotech * 

CGD 


Cedandata 
‘ Celsius 
Qiartes;3ldney 
Chlwi ' 

Chtyeler 

CJba 

Cretflt tyos.iafs 
Daytar. Hudson 
Da La Rue ' 
Dk*K (James) 

auny ‘ 

European Colour 
First Choice 
General AceWent 
Great FtoJand Ests 
Heath (CQ - ’ • ' 

^ Home Depot 
.,‘wHydro Inti 
nwesco Korea 
JC Penney 
' John Lusty 
Lauda Ait ' 


24 Loblaw 

23 MAM 

22 Marshalls 1 
22 Madco 
22 Mercedes-Benz 
22 Merck 

.• 23 New World Payphones 
27,20 Piper European 
28 PowerGen 

24 Rap 

20J22 S China Morning Post 

28 SGS-Thomson 

26 Scantronlc 

29 Schering-Plough 
24 SeaPerfect 

29 Sedgwick 
29 Shan Australia 1 
29 Shlnawatra 
24 Sims Food 
29 Singer & Frtedlander 
21 Smith & Nephew 
• 20 SmithKBne, Beecham 
21 St James's Place 
29 ;Stagecoach 
24 Sumitomo Realty 
20 Svenska Handdsbank 
28 Symonds Eng 
24 TT 

28 Telecom hake 

28 TatefCntea 

29 Ushers 
28 Volvo 

27 Watergtade Inti 

24 West Japan RaUway 
26 Whirlpool 

28 Wffshaw 
24 Woodakte 

. 29 Yamaha 

20 Yorkshire Tyne-Tees 


Market Statistics 

AAnnual reports sente 32-33 

BenOnrvk Govt Bonds t 2* 

Bond futures and options » 

Bond pdces'jnd yltfls 
Conunorfltfes priest* 30 

Dtwtenife announced, 26 

WS currency rctes w 

Euobond prices » 

Fted Siteresf indices 25 

FT-A World Indices Back Page 
FT-fioW Mines Index 31 

FMSMA Bid bond SVC 25 

F1-SE Actuaries Indices 31 


Foreign exchange 38 

GS& prices 25 

Ltffe equity options 31 

London share sendee 32-33 

'London trad! opdornt 31 

Managed funds sendee 34-35 

Money markets 36 

New Ina fcmd Issues 25 

New VBrk share service 38-39 

Recent Issues, UK 31 

Short-term frit rates 38 

U5 Interest rates 25 

world Stock Markets - 37 


Chief price changes yesterday 


FRANKFURT (DM) 



euw ’ 

789 

* 

13 

Banc Comp 

570 

♦ 

22 


Mrntar'Bnz 

. 767.5 

f" 

1E5 

Immotonqoe 

BIO 

+ 

19 


GaKxtettdi 

826 

♦' 

IS 

Sunco 

480 

+ 

23.8 

-■ 

KouBitf 

" 473 

+ 

12 

UF8 LncflD 

41M 


1U 


Vtta 

Mb 

SSLS 

*4r 

64 

Union Hub 

Fafi* 

448 


34 


Aachen Rg 1 O 10 

NEW YORK |S) 

RhM 


25 

mrtdhnqs 
TOKYO (Van) 
MM 

460. 


11 


BtittO 

46ft 

* 

.h 

<14. 

Mo Cans 

504 

*■ 

13 


Ofl Equip 

Nome (4* 




BrrtAror «* - » 

Dayton Hdsi 81ft - »» 

PARtsmt 

New YAk prices at 1 & 30 pm. 
i LONDON (PeflM) 


CWcWbu 
ft* Sirti 
KHert 
IHbstilK 

Pan* 

Mp WW 


55S 4 ZB 

52? 4 17 

1600 4- 70 

662 + 37 


BU 

Coot? 

Break Mr Border 
De La Rue 
KcMe Harass) 
EurctunneUAs 
K Portland Est 

HSBC pop ansa 

Hmttrn 

KttflfCB 

ia 

IteflOUHl PtMT 


196 + * 

525 + 1 2 

53 + * 

1034 + 31 

. 168 + H 


232+13 
78W + W 
121+7 


Hate fleet YW 650 + 13 

Portato 725 + 37 

HamarEnergy 256 + 33 

RUttm 13 ♦ 2,4 

Sins Food 87+6 

Santtrt CMd 297 ■+ ID 

Fells 

Cadttt 2 *H - SHr 

&n Acddert ’565 - 18- 

Spnn ifl-5 

war* Storeys 383 - B 


COMPANIES & MARKETS 


f Overseas Moving 
by M ichael Ge rson 

• I OSl'446 1300 1 “ 


£TU£ FINANCIAL TIMES LIMITED IW 


Wednesday November 16 1994 


Truck and car operations in Europe and US spearhead recovery 

qJyq sm-ges a big ioad off hs mina 

on sales and 


capital gains 


Tokyo to ease 
regulations for 
foreign listings 


By Hugh Camegy in Stockholm 

Volvo, Sweden's biggest manu- 
facturer, yesterday reported a 32- 
fold leap in profits in the first 
nine months of the year. Surging 
sales for its cars and trucks and 
big capital gains consolidated the 
company's dramatic recovery 
from recession. 

Pretax profits reached 
SKrl2.7bn (Sl.Tbn). compared 
with SKrl.06bn in the same 
period last year, as sales rose to 
SKrii2J2bn from SKr73.5bn. 

The result was boosted by the 
inclusion of BCP, the food and 
drinks group now fully -owned by 
Volvo, which added SKrl52bn to 
group sales and SKrl.6bn to 
group operating profits of 
SKr6.6bn. 

The bottom line was also 
inflated by SKr4.2bn earned by 
the sale during the period of non- 
core assets, in line with Volvo's 
strategy of concentrating on 
motor vehicle production follow- 
ing the breakdown last year of a 
plan to merge with Renault of 
France. 

But both the car and truck 
divisions continued a significant 
recovery under way throughout 
this year, driven by growing 


demand in their main US and 
European markets. Volvo man- 
aged to bring its new flagship 850 
car model and FH truck series. on 
to the market just as recession in 
its main markets was coming to 
an end. 

Unit car sales rose 18 per cent 
to 2&.6O0, pushing up the value 
of sales to SKr52.8bn from 
SKr39.8bn and producing a leap 
in operating profits to SKrl.95tm, 
from SKrlOm. 

Truck sales, benefiting from a 
recovery in demand in all main 
markets except Germany, grew 
faster, with worldwide unit sales 
rising to 19.400, a jump of 38 per 
cent. 

Sales totalled SKr37.3bn. com- 
pared with SKr27bn, while oper- 
ating profits rose to SKr2.7bn 
from SKrl83m. 

However, Mr Sfiren Gyll. chief 
executive, struck a warning note. 
“While the improvement in earn- 
ings in our core operations is 
gratifying, it is not yet ade- 
quate," he said. 

He expressed satisfaction with 
the truck performance, saying 
the operating margin stood at 7 
per cent. But he warned that the 
car division, with an operating 
margin of 4 per cent had been 


Turnover 

(SKrbnl 

ISO • — 

j 1 Rrs rfne months 
1QO - • ~ 


a&saaa; 


Income before taxes and 
minority holdings (SKr bn) 


Source. DatoMream/Company accounts 

held back by higher costs caused 
by a change in production and 
foreign exchange hedging which 
restricted the benefits from the 
devaluation last year of the 
Swedish krona. 

“A doubling [of car division 
profits] is required. An operating 
margin of 7 per cent is judged to 
be adequate for continued expan- 
sion," Mr Gyll said. 

He also said that the strong 
demand for trucks and cars had 
led to delays in deliveries of as 


Swiss group follows Roche and Sandoz into the US 

Ciba may seek 50% 
holding in Chiron ” « 


By Tony Jackson in New York 

Ciba. the Swiss chemical and 
drug company, confirmed it is in 
talks to acquire a “significant" 
minority stake - believed to be 
Jjust under 50 per cent - in Chi- 
ron, the US biotechnology com- 
pany. The deal would include the 
transfer from Ciba to Chiron of 
assets worth about Si bn. 

Neither company would com- 
ment in detail, and emphasised 
the transaction might not take 
place. However, Ciba said the 
deal would involve giving Chiron 
its diagnostic business and its 
half share of Biodne, a vaccine 
manu&cturer Jointly formed by 
the two companies in 1987. Ana- 
lysts speculated that the diagnos- 
tics company. Ciba Corning Diag- 
nostics, might be valued at 
$800m- The share of the vaccine 


venture, which is developing vac- 
cines against hepatitis, herpes 
and Aids, might be worth more 
than StoOm. 

Neither company would com- 
ment on reports that Ciba 
planned to buy almost 50 per cent 
of Chiron at S1QQ per share. Mr 
Samuel Isaly. of the Wall Street 
research firm Mehta and Isaly, 
said he believed Ciba would buy 
13.4m shares in the open market 
and have a further 13.4m issued 
to it by Chiron, in return for 
around Slbn in assets and 5300m 
in cash, involving Ciba in a cash 
outlay of about Sl-6bn. 

The link between the compa- 
nies was “a hand in glove fit 
from top to bottom", Mr Isaly 
said. Ciba has a worldwide mar- 
keting network for its diagnostics 
business, in which the biggest 
product is its ACS ISO machine 


Barry Riley 


Jan 1994 Nov 

Source: FT Graphite 

for early identification and moni- 
toring of diseases. Chiron has 
developed new DNA-based tech- 
nology to measure viruses such 
as hepatitis and HIV, which are 
not expected it to reach the mar- 
ket until 1996. 

Ciba’s move brings it in line 
with the two other big Basle- 
based drug companies, Roche and 
Sandoz. in making large US 
acquisitions this year. 


Inflation is not dead 
but has moved elsewhere 


Is long-run price 
stability here at 
Fi - i — r L last? HSBC's Lon- 

don chief econo- 
Roger Bootle 
fepspvjL is celebrating with 
a- 70-page study 
called The End of 
1 ■ v ■ the Inflationary 

Era . Because HSBC Greenwell is 
one of London's leading bond 
houses he can. be excused for 
trumpeting favourable news for 
fixed income investors. But his 
arguments may be in some 
respects misleading. 

He seems to be overimpressed 
by the recent inflationary slow- 
down in the UK and in one or 
two other former black spots for 
price stability such as Australia 
and Italy. But looking more 
broadly at western economies the 
real breakthrough was achieved 
in the mid-1980s, when average 
consumer price inflation in the 
Group of Ten countries fell to 2J 
per cent in 1986. Only this year 
has inflation declined to that 
level. 

German inflation has deterio- 
rated and that in the US has 
barely improved, although in 
countries such as Japan and Can- 
ada, infla tion has fallen to levels 
where it is effectively non-exis- 
tent. 

With the global economy now 
growing rapidly there is a risk of 
another cyclical upswing in infla- 
tion. Last time the UK and Swe- 
den led the way with inflation of 
around 10 per cent In 1990, and 
even Switzerland spoiled its 
image with 6 per cent 
Elsewhere in the world Infla- 
tion is as prevalent as ever. It is 
running at 27 per cent In China, 
and at hyper-inflationary rates in 
parts of eastern Europe and Latin 
America. How can we be sure 


that the infection will not spread, 
perhaps stimulated by rising 
commodity prices? 

Bootle cites various powerful 
economic trends, such as rapid 
technological progress, growing 
competition from Third World 
manufacturers and chronic 
labour surpluses in the western 
economies. These are all interest- 
ing themes. But are they really 
responsible for eliminating per- 
sistent postwar inflation? Bootle 
surely underplays the monetary 
indicators which in the past have 
been crucial in signalling infla- 
tionary risks. 

With the global 
economy now 
growing there is 
a risk of 
another upswing 
in inflation 

It was the link with gold that 
kept the value of money steady 
over the centuries. After the sec- 
ond world war inflation was per- 
sistent rather than rapid, despite 
the significant inflationary poten- 
tial of the post-gold Bretton 
Woods system. The main reason 
for the moderation was that 
credit creation was firmly con- 
trolled in most countries. Once 
that changed in the 1970s the 
genie of inflation was out of the 
bottle. 

Recessions in the mid-1970s and 
early 1980s cooled the fever, but 
countries that subsequently suf- 
fered renewed credit binges let 
the side down: the UK, the Nor- 
dic countries, at one stage the 
US, also Japan; and eventually 


post-unification Germany lost its 
grip, too, in the early 1990s. 

Most of these later credit 
excesses have boosted financial 
asset prices rather than general 
inflation. Asset price surges are 
readily reversible, so there has 
been a painful banking hangover 
and private sector indebtedness 
remains high. In 1986, when gen- 
eral inflation was low. broad 
money growth in the US. Japan 
and the UK was surging at 
between 9 and 16 per cent. Now 
the money growth is 2 to 5 per 
cent. This is the clearest pointer 
that low inflation is here to stay. 
Any worries now focus on Ger- 
many. 

Both borrowers and lenders 
have learned expensive lessons 
from the excessive reliance upon 
short-term credit during the 1970s 
and 1980s. There has been a 
increase in the role of the 
long-term capital markets, both 
by governments and industry. In 
the US. in particular, sections of 
banking activity - such as mort- 
gage lending - have been exten- 
sively securitised. It is these 
trends which inflation-watchers 
need to track, rather than devel- 
opments in technology or inflows 
of cheap goods. 

Capital markets are restricted, 
however, by their reliance on 
finite flows of saiings. whereas 
banking systems can create new 
credit almost without limit. The 
global recovery has therefore 
quickly come up against resis- 
tance from high real interest 
rates. 

The danger signals will come if 
bond market financing is seen to 
have become too expensive, in 
which case there may be increas- 
ing resort to banks and m partic- 
ular to the monetisation of public 
sector debt. 


1 1 Rmt nine mooifta 



1990 91 92 93 84 


much as six months as Volvo hit 
capacity ceilings. “We are work- 
ing hard to correct this problem," 
he said. 

Volvo is investing SKr 390m to 
raise truck capacity to 50.000 a 
year outside the US by next July. 
The company said a decision on a 
further SKrlbn investment to 
raise capacity by up to another 
10,000 - much of it to be added in 
Sweden - would be taken by next 
January. 

Background. Page 22 


By Gerard Baker in Tokyo 

The Tokyo Stock Exchange 
yesterday ann ounced wide-rang- 
ing measures to ease share- listing 
requirements in an attempt to 
revive the attraction to foreign 
companies of Japan's lacklustre 
stock market 

Mr Mitsuhide Yamaguchi, the 
president of the exchange, said 
the proposed new rules, which 
may take effect next January, 
were aimed at removing the prin- 
cipal obstacles to a Tokyo listing, 
especially for Asian companies. 

The stipulation that companies 
must be listed on their own 
national stock exchanges will be 
scrapped, as will the rule requir- 
ing a minimum one-year morato- 
rium after a privatisation. These 
reforms are designed specifically 
to attract the former state enter- 
prises of China and other Asian 
countries. 

In the past year a succession of 
Chinese enterprises have listed 
on the Hong Kong and New York 
stock markets where the rules 
are less rigid. Mr Yamaguchi 
expects the changes to pave the 
way for more than 200 Chinese 
and east Asian companies to join 
the exchange in the next few 
years. 

The minimum asset require- 
ment for companies will be cut 
from YlOObn to YlObn (S103m),~ 


and instead of a regulation that 
companies must have had at 
least three years' annual profits 
of Y2Qm. the exchange will 
require that companies have 
profits averaging Y2m over the 
three years prior to a listing. 

Foreign companies in Tokyo 
welcomed the measures. “There 
Is no question that privatised 
businesses in emerging markets 
desperately need access to a 
highly liquid market if they are 
to realise their potential growth," 
said the chief executive of one 
large financial institution. 
“These measures will facilitate 
that." 

The changes are not expected 
to improve prospects signifi- 
cantly for companies already 
listed in Tokyo. In the past year, 
at least seven overseas compa- 
nies have announced plans to 
delist from the exchange, includ- 
ing. most recently, British Gas. 

The number of foreign shares 
listed on the exchange has fallen 
from 127 in 1991 to fewer than 
100. Most companies have left 
because of the collapse in share- 
trading volumes and exorbitant 
trading commissions. 

While the exchange has 
pledged to seek a reduction in 
commissions, the prospect of a 
significant cut in trading-related, 
as distinct from listing-related, 
costs is remote. 


UK fund manager calls a 
halt to ‘soft commissions’ 


By Norma Cohen, 

Investments Correspondent 

Mercury Asset Management, the 
UK's largest fund management 
company, has decided that from 
next January it will no longer 
accept “soft commissions" - free 
goods or services - from brokers 
it agrees to channel business 
through. 

MAM’S move comes as regula- 
tors in tiie US. UK and Hong 
Kong are scrutinising the rules 
on soft commissions out of con- 
cern they can lead to a subtle 
form of bribery which barms the 
interests of the clients on whose 
behalf funds are managed 

Fund managers may pay more 
for securities than they ought to 
in order to generate toe agreed 
level of business. 

In the UK, the move is likely 
to heighten pressure on MAM's 


competitors to adopt a similar 
stance as pension fund clients 
seek greater transparency in 
fees to their fund managers. 

Mr Colin Clark, marketing 
director at MAM, said MAM had 
taken a tough line on soft com- 
mission for several years and 
that the value of services which 
they receive under soft commis- 
sion arrangements was “under 
£2m" per year. 

Imro, the UK self-regulatory 
body for the fund management 
industry, has recently issued a 
discussion document which pro- 
poses restricting the types of 
goods and services which fund 
managers can accept. 

“Regulators internationally 
have felt there was scope for 
abuse around the boundaries," 
said Mr Robin Clark, director of 
monitoring at Imro. “It Is one 
thing to accept [soft commis- 


sions] for research and another 
for travel to warm sunny cli- 
mates," he said. 

Earlier this year, Imro fined a 
division of Abbey Life for allow- 
ing its fund managers to accept 
free travel. . 

Under soft commission 
arrangements, brokers agree to 
the provision of such things as 
research, performance measure- 
ment services, Reuters or Bloom- 
berg screens in exchange for a 
fund manager’s guarantee that a 
minimum amount of business 
will be executed through the 
firm. 

Soft commission services are 
typically those which fund man- 
agers would normally bave to 
pay for ont of tbeir own pocket 
It would be considered an abuse 
to use soft commissions to pay 
for office furniture, rent or 
entertainment expenses. 


TU:- iMM lm.i m.-'i: jyfiJr- j- j mjIisi •'/ 


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KM 

MANTA 


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Acquisition from BP NUTRITION 
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NKR and FFR Mezzanine Loan 
of $50,000,000 equivalent 


Lcihl Arranger, Lead Underwriter and Agent of the Mezzanine Loan 

Intermediate Capital Group PLC 

C".4'M<i>vr J’lj C«-U’i.Lr:,’r,t,-r ,•> llif nun.- Ltkin 

Samuel Montagu & Co. Limited 


M.’l-IHI'lt' Fll'l.fr J-.TI./.I# 1*11 

intermediate Capital Group PLC 
Samuel Montagu Jr Co. Limited 
Electra Investment Trust P.L.C. 
Foreign & Colonial Ventures Limited 
Mithras Investment Trust pic 
Morgan Grenfell & Co. Limited 


EmUS intermediate capital group 

ICB plc 

B t>2-o3 Thre*dseedlf Street. London EC2R SHE. Telephone: 071-628 984g 
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MEMBER OF IMRO 









INTERNATIONAL COMPANIES AND FINANCE 


Fall in loan losses offsets 
weakness at Swedish bank 


By Christopher Brown-Humes 
In Stockholm 


Svenska Handel sbanken 


A big fall in loan losses 
enabled Svenska Handelsban- 
ken. one of Sweden's leading 
commercial banks, to boost 
profits to SKr3.18bn (S438m) 
from SKrl.28bn at the nine- 
month stage. 

However, the 14S per cent 
improvement obscured a 
poorer performance in the 
bank's underlying results in 
the face of weak loan demand 
and narrower margins. 

Its result before loan losses 
was down 19 per cent at 
SKr5.3bn. largely because net 
interest income was 14 per cent 
lower at SKr6.45bn. 

The main feature of the 
results was a SKr3.1bn fall in 
loan losses to SKr2.14bn. The 
recovery in the Swedish econ- 
omy on the back of lower inter- 
est rates has led to a sharp 
improvement in the business 
climate, to the benefit of all the 
country's banks. 


Share pnce (SKr) 
150 



Source; FT Grapttw 


Even so. Handel sbanken's 
loan losses as a percentage of 
total lending still amount to 1 
per cent - four times the level 
in the late 1980s, Mr Arne Mar- 
tensson, chief executive, 
believes the figure could fall to 
0.5 per cent next year. 

Mr Martensson was also 
optimistic about underlying 
prospects, saying the third 


quarter had shown the first 
clear signs of a rise in loan 
demand for more than two 
years. He expects the momen- 
tum to be maintained following 
Sweden's endorsement of Etl 
membership in Sunday's refer- 
endum. 

He said the bank had 
ploughed much of its surplus 
liquidity into bonds, expanding 
its portfolio to SKrl03bn from 
SKr64bn in the last year. 
’"These funds are only being 
parked until loan demand 
rises," he stressed. 

The bank made a nine-month 
profit on bond trading activi- 
ties. despite the turbulence in 
money markets. The result, 
however, was much lower than 
a year ago. A SKi3.5bn unreal- 
ised deficit in its bond invest- 
ment portfolio has hit the 
bank's equity, but not the 
profit and loss account. 

Problem loans were 
SKrT.36bn at the end of Sep- 
tember. down 41 per cent from 
the last year. 


PowerGen 
lifts payout 
by 27% for 
half-year 


Asset sales hold Volvo on course 



By Hugh Camegy 
in Stockholm 


By Michael Smith in London 


Lower tax I Boots in £508m 

bill helps , ill 

Teief6nica share buy-back 


Telefonica de Esparto, Spain's 
state-run telecommunications 
group, lifted consolidated net 
profit in the first nine months 
of 1994 by 17 per cent, to 
Pta86.61bn (S68.12m) from 
Pta73.72bn last time. AP-DJ 
reports from Madrid- 

Pre-tax profit climbed 11 per 
cent to Ptal04.65bn from 
Pta94.63bn. The high growth in 
net profit is attributable to the 
declining corporate tax burden, 
which is now around 17 per 
cent of profit. 

However, with 7.6 per cent 
growth in operating expenses, 
group operating profits 
advanced 3.8 per cent to 
Pta289.7bn from Pta278.98bn. 

Telefonica said subsidiaries' 
contributions to group pre-tax 
profits jumped to 15.7 per cent 
in the first nine months, from 
9.5 per cent in the first half. 

• Iberdrola, Spain's largest 
private electric utility, pushed 
up consolidated net profit in 
the first nine months of 1994 
by 43 per cent to Pta60.05bn 
from Pta4l.96bn last time. > 


By Daniel Green 
and Paul Cheeseright 
in London 


Boots, the UK retailer, 
yesterday spent £508m 
i i .$$33. 12m) buying back its 
shares on the stock market. 
The sum represents 60 per cent 
of the money it hopes to 
receive from the sale of its 
prescription drugs arm to 
BASF, the German chemical 
company. 

The buy-back leaves Boots* 
management free to concen- 
trate on acquisitions in over- 
the-counter (non-prescription) 
drugs, probably in Germany. 

Once the BASF sale is com- 
pleted. Boots will have about 
£500m in cash, although it 
refused to say whether this 
sum had been earmarked for 
its acquisition programme. 

The buy-back came as BASF 
sought to reassure worried 
employees of their future 
under new ownership. 

Boots employees' unions had 
expressed fears that BASF, 


which has a drugs division of 
its own. would seek to cut 
costs by cutting the division's 
5.750 workforce, of which 1.600 
people are in the UK. BASF 
said it wanted to integrate the 
Boots operations in collabora- 
tion with Boots management. 

There are 575 Boots research 
and development staff in the 
UK and 295 in other countries. 

Boots management will tell 
officials representing the work- 
ers on Friday that "virtually 
all" the pharmaceuticals divi- 
sion's employees will be trans- 
ferred to BASF and that the 
Germany company will decide 
on their long-term future. 

The interests of Boots 
smaller shareholders had 
prompted it to take the deci- 
sion to buy back shares rather 
than pay a special dividend. 

A dividend would "simply , 
have transferred cash to share- 1 
holders, favouring those insti- 1 
tutions who are tax exempt. 
The buy-back favours all share- 
holders," Boots said. 

Lex, Page 20 


PowerGen. the UK electricity 
generation company, yester- 
day provided a fillip for share- 
holders. including the govern- 
ment. by announcing an 
interim dividend rise higher 
than expected, at 26.6 per cent. 

Shares in the company rose 
8p to 559p. National Power, 
which announced half-year 
results on Thursday, rase 7.5p 
to 502p. 

PowerGen said it had bene- 
fited from a 3 per cent 
increase in national electricity 
demand and above average 
performance of its two new 
gas-fired power stations. 

Market share was higher 
than expected, at 24.5 per cent, 
although for the first time in 
any half. Nuclear Electric, the 
state-owned company, pro- 
duced more electricity than 
PowerGen. 

PowerGen said an agree- 
ment had been finalised to 
make it the lead project devel- 
oper for a 900MW gas-fired 
power plant in Portugal. 

It ruled out more buy-backs 
before the government's sale 
in February of its 40 per cent 
stakes in PowerGen and 
National Power. “The market 
conditions are not right." said j 
Mr Ed Wallis, chief executive. I 

This is likely to be welcomed 
by some investors who would 
have viewed with anxiety the 
effect of buy-backs on the 
share price in the run-up to 
the 40 per cent share sales. 

The dividend rise to 5p from 
3.95p for the six months to 
October 2 comes at an awk- 
ward time politically as the 
Labour Party has gone on the j 
offensive over some payments 
to shareholders by privatised ! 
companies. [ 

PowerGen's 9.3 per cent | 
increase in pre-tax profits to ; 
£IlSm (SI 93.52m) from £l08m • 
would have attracted little | 
attention but the dividend rise 
will fuel criticism of the indus- 
try. PowerGen said the divi- 
dend rise was partly due to its 
policy of decreasing dividend 
cover to between 2.5 and 2.7 I 
times and partly due to in trod- i 
ucing a more “appropriate bal- i 
ance" between dividends in 
tbe two balves of the year. 
Details, Page 29 


j The rapid drive back io big 
I profits this year by Volvo's car 
j and truck divisions may have 
caught most of rhe attention, 
but a significant contribution 
to the Swedish manufacturer's 
nine-month surplus of 
SKrl2.7bn t$l.73bn) came from 
a non-core asset disposal pro- 
gramme that has only just 
begun. 

The net gain on asset sales 
in the first nine months con- 
tributed SKr4.2bn - or nearly 
one-quarter of the pre-tax 
profit - as Volvo began a strat- 
egy of focusing on core motor 
[ vehicle operations, adopted fol- 
lowing the collapse late last 
| year of a plan to merge with 
[ France's Renault. 

These sales helped produce a 
marked strengthening of Vol- 
vo's financial position over the 
period. Net debt has been 
driven down from SKrI4.5bn at 
the end of last year to SKrTOOm 
at the end of September, while 
the group's equity-to-assets 


ratio has risen from 21 per cent 
to 30 per cent. 

This has pot Volvo well on 
the road to achieving the finan- 
cial strength it needs to under- 
pin the long-term development 
of its car and truck businesses, 
now that it is not sharing costs 
with Renault 

The target set for the assets 
disposal programme by Mr 
Sfiren Gyll, chief executive, 
earlier this year was an 
equity-to-assets ratio of 50 per 
cent. 

That target looks as though 
it will be comfortably exceeded 
as the biggest plums in the 
Volvo assets pie have yet to be 
sold. This year, Volvo sold its 
interests in Cardo, an indus- 
trial holding group, to the Wal- 
lenberg empire for a capital 
gain of SKriebm Custos, an 
investment company; Nor- 
way's Saga Petroleum: Cultor, 
a Finnish sugar producer, and 
Hertz, the car hire group. 

Still to come, however, are 
Volvo's residual holding in 
Renault; its wholly-owned sub- 
sidiary BCP. a food and bever- 


ages producer; ite 27.5 per 
stake In Pharmacia, one of the 
world's top 20 pharmaceutical- 
companies by sales; and its * 
Swedish investment - bank 
Alfred Berg- 

At the recently-announced 
privatisation price for Renault, - 
Volvo’s 20 per cent holding is 
worth around FFr8bn ($1.5bn). 
At present market prices. Vol- . 
vo's share in Pharmacia is. 
worth around SKr9bn. Volvo is f 
wary of putting .a price on 
rem aining assets, but some 
estimates have reckoned the 
BCP, Pharmacia and Alfred 
Berg sales could raise between 
SKr40bn and SKrfSbn gross. 

Mr GyD wants to complete 
the disposal programme by the ‘ 
end of 1996. Under an agree- 
ment with the Swedish govern- 
ment, which is the other main 
shareholder in Pharmacia, 
Volvo cannot sell its holding in 
the company until January 
1996 at the earliest 

Most attention is therefore 
focused on how and when 
Volvo will sell off BCP, a com- 
pany with turnover in the first 


nine months of $Kri5to and 
operating profits '-of JSKrliSbfe - 
Volvo is understood- to favours - 
direct sale .to "a . corporate^ 
buyer, rather tiudr a flotation. 

It says If has been in tfiscus- ■ 
sions with up to 30 potential - 
buyers, although the only com- 
pany .sq ter to declare ’publicly ' 
its Interest iaNestSLihe Swiss . 

foodgtmtp. , Y-’I-. 

If there is no; flotation, the - 
most' important issfe vrtll be 
. whether BCP Is split up or sold - 
as a' whole. -I te main cdinpo- . 
nents are Swedish Match, a . 
beverages - division which 
makes Pripps beer and Ram-. 
lOsa mineral water Jmd:a food 
division- 'with a big market, 
share in Sweden. . 

Volvo says price will dictate . 
whether BCP is' broken , up or " 
sold intact. " . .. 

When the asset disposals are 
complete, Volvo will certainly 
be a cash-rich motor .company. . 
Then it will have to show that 
it can achieve toe same strong 
returns on the money in its car 
and tzuck qpezatioris.as it did 
in its diversified investments. 


lllVs-’-' 5 ' 1 ' 


open m 

W . 


BCI quiet as Ambroveneto deadline passes 


By Andrew Hill In Milan 


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Banca Comraerciale Italians, 
the Milan-based bank, appears 
formally to have abandoned its 
attempt to gain control of 
Banco Arabrosiano Yeneto. its 
quoted competitor. 

BCI had hoped to acquire a 
15 per cent stake by yesterday, 
as the basis for a formal L7.000- 
a -share offer for a 50.1 per cent 
stake in .Ambroveneto. But the 
self-imposed deadline passed 
yesterday without comment 
from BCl". 


Ambroveneto announced 
that its main shareholders - 
controlling a majority of the 
shares - had rallied to its 
defence on November 5, only 
three days after BCI revealed 
its intention to bid for control 
Crediop. a subsidiary of the 
Turin-based San Paolo banking 
group, and Credit Agricole, tbe 
French bank, agreed to buy the 
13.52 per cent stake offered to 
them by a group of small Ven- 
eto banks, and renew the 
shareholder syndicate of which 
they are members. BCI had 


hoped to buy the Veneto 
banks* stake. 

Ambroveneto ’s shares closed 
yesterday at LA354, up slightly 
on the opening price of IA3I4. 

BCI, which would have paid 
about LL750bn (Si. lim) for half 
of Ambroveneto, raised about 
Ll,575bn with an issue of 
shares and warrants earlier 
this year. Conversion of the 
warrants before the end of next 
year would bring in a further 
L787bn. There is speculation 
the bank will use these funds 
on alternative expansion plans. 


BCI’s neighbour and rival, 
Credifo Itallano (Credit), ; is still 
awaiting a decision from the 
Bank of Italy on whether it can. . 
go ahead with its planned bid., 
for control .of Bologna-based : 
Credit® Romagnolo (RoloV 
The central bank last week 
approved Hold's proposal for a 
defensive merger with the 
group which ' controls ' the 
savings bank, Cassa di Rispar- 
mio in Bologna. Cariplo, the 
Milan-based savings b ank, is 
watching the atuation in -case 
the merger does not go ahead. 


Amer buys Atomic to expand sports side 


By Christopher Brown-Humes 


Amer of Finland is 
strengthening its position as 
the world's second-largest 
sports equipment group by 
buying Austria’s Atomic group 
for SchSOOm (S83.$m). 

Atomic collapsed into bank- 
ruptcy In September after sev- 
eral years of losses. Amer. 
however, believes it can rerive 
the company's fortunes, partly 
because of overlaps with its 
own activities. 


The purchase will increase 
the F inni sh company's com- 
mitment to its core business, 
while expanding its sports 
operations. 

Atomic, the world's second 
largest manufacturer of alpine 
skis, has an S per cent share of 
the ski ea.uipment market. It 
also ranks as' Austria's biggest 
producer of equipment for 
alpine and cross-counrry skiing 
and in-line skating. 

Its marketing names include 
Atomic, Dynamic. Koflach, 


Ess, Colt and Oxygen. 

Mr Seppo Ahonen, Amer 
chief executive, said Atomic 
had a strong market position 
in Europe and Japan. “It oper- 
ates globally, balancing tbe 
seasonal fluctuations of our 
present sporting goods busi- 
nesses," he said. 

Amer is a diversified com- 
pany which combines sporting 
goods with car sales, tobacco 
processing, and printing and 
publishing. 

However, the group wants to 


concentrate more on sporting 
and leisure goods. Sports 
equipment as a percentage of 
total sales mil rise to 60 per 
cent following the purchase, 
compared with 48 per cent 
now. 

Atomic, with annual sales of 
FM700m ($150.6m), has eight 
subsidiaries In Austria. Can- 
ada, France. Switzerland and 
the US. Around 56 per cent of 
sales are generated in Europe, 
24 per cent in Japan and 19 per 
cent in North America. 


All oj these securities having been sold through a global offering, this 
announcement appears as a matter of record only. 


NEW ISSUE 


September 30, 1994 


US$500,000,000 




The Korea Development Bank 


at it is 


8.09% Notes Due October 6, 2004 




Global Coordinator 


CS First Boston 


CS First Boston Goldman, Sachs & Co. 
J.P. Morgan Securities Inc. 


Merrill Lynch & Co. 
Salomon Brothers Inc 


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Chemical Securities Inc. Citicorp Securities. Inc. 
IBJ International pic KDB Securities Co., Ltd. 
Lehman Brothers Morgan Stanley & Co. 

IiK-orporaieiJ 

Paribas Capital Markets 

Sumitomo Trust International pic UBS Securities 1 


BT Securities Corporation 
Deutsche Bank AG London 
Korea Associated Securities Inc. 


Setback 


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Limited 


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Invest mem Banking Inc. 


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CAISSE AUT ONOME 
DE REFINANCEMENT 
USD 100,000.000.- 
T.V. 1990/19 95 


Bondholders are hereby 
informed that rhe rate 
applicable for the tenth 
period of interest has 
oven fixed at 5.98 Sr. 


AadwiSbarejukiw 
071 g7J4#54 


The Coupon N° 10 will be 
payable at the price oF 
USD 3006.61 on 
May 15th, 1995 representing 
ISl days of interest. 


•• Tel ' (0442) S7601 5 ♦ Fa*: (0442) 876834 


covering the period from 
November 15th, 1994 to 


November 15th, 1994 to 
May 14th. 1995 inclusive. 

The Reference Agent and 
Principal Paying Agent 

B CREDfr 1YONMAIS 


J.P. Morgan & Co. 
Incorporated 
USS250.000.000 
Subordinated floating rate 
notes due November 2002 
In accordance with rhe 
provisions of the notes, notice 
IS hereby gii<en that for the 

•^res, period 16 fhmniber 

to 16 May 1995 the notes 
wilt cany an interest rate of 
b. /25ft; per annum. Interest 
payable on the relevant interest' 
Payment date 16 May 1995 will 
amount to USS 1 53.98 per 
US$S.i)Q0 note and US$3.079. 60 
per USSIon.ow note. 


fe' : Co^ n "y GUara " ty 


JP Morgan 


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j'fcnfl*'-* 


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FINANCIAL times WEDNESDAY NOVEMBER 16 1994 


INTERNATIONAL COMPANIES AND CAPITAL MARKETS 


K 


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P3SS8 


ports side 


V ' • \ 
i.ii • * * 


Japan postpones privatisation of JR West 


By WBfiani Dawkins 
In Tokyo 

The Japanese government 
yesterday shelved® SneSf 

*ga Raitoay {JR West*, the 
a ^nes of embarrass- 
25, “S®? 8 to its privatisa- 
tion programme. 

Mr ShizuKa Kamei. transport 
“muster, said the flotation 
would have “adverse effects on 
the stock market” if it took 
place as scheduled, in the cur- 
rent tax year to March. 


He feared the value of the 
company, one of seven estab- 
lished from the 1987 break-up 
of Japan National Railways, 
“may not be recognised ade- 
quately”. 

The stock exchange believes 
the listing will take place after 
the company's anniial results 
next June. 

The postponement was seen 
by Tokyo stockbrokers as a 
government recognition of the 
market's dislike of its unique 
pricing system for new issues, 
in which the price is decided at 


a pre-offer auction among a 
restricted number uf large 
investors. 

This contrasts with the book- 
building system, used for most 
international equity issues, 
where professional advisers set 
the price after consulting the 
main institutional buyers. 

Critics of the Japanese 
equity pricing system say it 
tends to set prices too high, a 
factor in the flop of the latest 
privatisation, of Japan 
Tobacco, the cigarette making 
monopoly, last month. The 


Investors hope Clarke will 
open market in UK repos 

W hen the UK's chan- many operators complain the sury." says Mr Corrigan. 

ceuor of the exche- system is inflexible and unfair "If a gilt repo market alii 
Quer . Mr KpnnPfK t/t aim mam« aCPaai;«a a.amm 


W hen the UK's chan- 
cellor of the exche- 
quer. Mr Kenneth 
Clarke, presents his budget on 
November 29. gilt market par- 
ticipants hope he will 
announce the establishment of 
an open market in the UK for 
gilt repurchase agreements, or 
repos. 

Although the UK h as a lim- 
ited repo and bond lending 
facility, pressure has been 
mounting for a system which 
would enable all market partic- 
ipants freely to borrow and 
lend government bonds 
between each other. 

Government bond markets in 
other countries, including the 
US, France and Germany, have 
well-developed repo facilities. 
However, although London is 
the European centre of non- 
dollar repo business, the ster- 
ling sector has yet to see an 
all-encompassing repo system. 

This may soon change. The 
Bank of England has spent the 
last year in dose consultation 
with gilt market makers 
(Gemms) about a fUlly-fledged 
gilt repo market and is set to 
issue a consultation paper 
shortly. Many believe this will 
coincide with the Budget 
The UK has two types of gflt 
repurchase agreements. First, 
there are the Bank of 
England’s fortnightly .money 
market repos, under which the 
Bank lends two- and four-week 
funds to the market against 
the security of gilts. This facil- 
ity is limited to b anks with eli- 
gible liabilities of more than 
£L5bn. ($2. 46 bn), building soci- 
eties, discount houses and 
Gemms. 

Alongside these, the Bank 
runs a system of stock borrow- 
ing and lending via a handful 
of stock exchange money bro- 
kers (SEMBs), accessible only 
to Gemms This allows Gemms 
to finance their bond holdings 
and go short of stock, and 
enables investing institutions 
to lift their investment returns 
by earning income an the stock 
they lend. 

Ibis system has the advan- 
tage that the Bank of England 
can monitor daily the level of 
stock borrowing. However, 


many operators complain the 
system is inflexible and unfair 
to market participants who are 
not Gemms. 

“An open repo would gener- 
alise the stock lending system 
that exists now. but it would 
allow everyone to have the 
same access to the facility, 
rather than just market mafc- 


The Bank of 
England is set to 
issue a consultation 
paper about a gilt 
repo market, 
writes Conner 
Midri elmafin 


ere," says Mr John Shepperd, 
at Yamaichi International, one 
of the 21 Gemms. "A repo sys- 
tem would put the gilt market 
on an international standard - 
the UK is idiosyncratic in not 
allowing it” 

Observers say an open gilt 
repo market would have sev- 
eral advantages. “Repos would 
make the financing of long 
positions and covering of short 
positions more efficient, and 
thus add to the liquidity of the 
overall market,” says Mr 
Danny Corrigan, head of repo 
trading at Nat West Markets. 
In other markets, repos have 
enhanced liquidity” he says. 

Such an increase in liquidity 
could attract more overseas 
participants, broadening the 
range of investors. “A lot of 
foreigners would be happier 
trading gilts if there were a 
repo market,” says Mr Brian 
Flaistowe, at Nomura. 


M any say the 
increased liquidity 
arising from a sys- 
tem of open repos could reduce 
market pricing anomalies, 
such as between high- and low- 
coupon. stocks. Some say it 
could lead to a redaction in gilt 
yields, easing the government’s 
cost of funding. “Additional 
liquidity will lead to tighter 
bid-offer spreads and reduce 
the funding costs for the Trea- 


sury,“ says Mr Corrigan. 

"If a gilt repo market allows 
more effective cash manage- 
ment by corporates and finan- 
cial institutions, this should 
benefit the economy on a wider 
view.” adds Mr Ifty Islam, UK 
economist at Merrill Lynch. 

Some argue that the estab- 
lishment of an open repo mar- 
ket would require a change in 
the taxation of gilts, requiring 
gross payment of gilt income 
rather than the current system 
of paying dividends net of tax. 
This could result in a lass of 
tax revenue for the govern- 
ment in the first year because 
tax payments would be 
deferred, and the Inland Reve- 
nue might find it more difficult 
to collect aU the tax due. 

Mr Kevin Adams. UK bond 
strategist at BZW, says a repo 
market need not necessarily be 
accompanied by a change in 
the tax regime. "It is not clear 
how big a consideration tax 
actually is - a large number of 
gilt investors suffer nil or very 
low effective tax rates.” 

Although most observers say 
the benefits of repos override 
the disadvantages, the risks 
should not be ignored. 

Repo participants face two 
types of credit risk: security 
and counterparty risk. The 
security risk is probably s mall, 
given that most such bonds are 
government securities with 
low default risk, but operators 
will have to pay close attention 
to the credit risk of their 
counterparties. 

According to Mr Islam, the 
Bank of England may be wor- 
ried that “by extending the 
range of institutions that can 
short gilts beyond the Gemms, 
over whom they have substan- 
tial influence:, to others, most 
notably hedge funds, over 
whom they have much more 
limited power, the}' may lose 
control of the markets". There 
may be concern about the 
effects of greater participation 
of leveraged investors on mar- 
ket volatility, he says. 

Such concerns mean that, if 
the UK authorities decide to 
set up a repo market, the Bank 
may follow a cautious strategy 
in im plementing it. 


What it is and what it does 


By Phffip Coggan 

A repo is, in essence, a loan agreement between 
two parties, in which bonds act as collateral. 

Hie i ns titution which owns the bonds, sells 
them to the counterparty and in return receives 
cash. At a set date in the fixture, the original 
bond owner agrees to buy back the bonds for a 
set sum. The buy back sum will be higher than 
the original cash amount, with the difference 
reflecting the rate of interest on the loan. 

Both parties. In theory, can gain from this 
transaction. The original bond owner gets 
finance at a cheaper rate than if it had bor- 
rowed without using collateral. M ean a lgo raise 
«tch without missing out on a potential rise in 
the bond market 

Meanwhile, the lender receives interest at a 
better rate than if it had just deposited the cash 


with a bank, and has the comfort of the bonds 
as security for the loan. 

If an interest payment is made on the bond 
during the life of the repo, then it will automat- 
ically be received by the counterparty. The nor- 
mal practice is for the counterparty to pay it 
back to the original owner. 

A repo market would allow investors to go 
short of gilts, that is, speculate that prices are 
due to fall. Investors go short by selling bonds 
they do not own. To do so, they need to be able 
to deliver bonds to the buyer. 

They could do this in a repo market by bor- 
rowing bonds and agreeing to sell them back at 
a future date. 

For the investor going short, this is a cheap 
way of financing a speculative position; for 
those lending the bonds, this is a way of earn- 
ing extra Income on their holdings. 


Setback for Sumitomo Realty 


By Emiko Terazono 
In Tokyo and agencies 

Sumitomo Realty and 
Development, a Japanese prop- 
erty developer, saw sales and 
profits plunge in the first six 
months to September due to 
sluggish sales of high-maigm 
Co ndominiu ms. 

Nan-consolidated recurring 
profits - before extraordinary 
items awd tax - fell 44.4 per 


Kingdom of Sweden 

UStL500.000.000 
Floating rate notes 1996 

Notice is fterefiygwen flWdrrtr 
interest period 16 November /9W 
toft February 1993 the notes mil 
canyon interest rale of 5- ® *5* 
per annum. Interest payable on 

IS February 1995 will amount to 

USSI4.S3perUSS1.000note. 
Agent: Morgan Guaranty 

Bust Company 

jPMorgan 


cent to Y2L8bn ($28.7m), while 
sales nosedived 52.4 per cent to 
Y90.4bn. After-tax profits 
plunged 68.2 per cent to 
YL2bn. 

Part of the decline in reve- 
nue was attributed to the feet 
that in last year’s first half the 
company made a one-off sale of 
properties as it cut its real 
estate inventories. 

Revenue from Sumitomo's 
real estate sales fell 75 per 


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cent Operating profits rose 2.7 
per cent to Y20Bbn as the com- 
pany eliminated Y8.1bn in aid 
to its financial subsidiary last 
year. 

For the full year to next 
March, the company faces 
lower profit margins due to 
cuts in rent prices. It expects a 
13.3 per cent fell in n on-consol- 
idated pre-tax profits to Y7.5bn 
on a 28.6 per cent drop in sales 
to Yaoobn. 


OSTERREtCHtSCHE 
POSTSPAR KASSE * 

US $100,000,000 
Range Floating Rale Notes 
due 1996 

For tfis Interest period August tSrti. 
1994 » November 15th. 1994 the 
coupon amounts pay at*? November 
15th, 1934 have been calculated as 
follows: US SO. 00 per US Si. 000 note. 
US $0.00 per US Sl&OOO note and 
US $0.00 per US SI 00.000 note. For ihe 
uitovst penod November 15th, 1994 to 
February Mth. 1995 interest writ accrue 
at 6.5625% tor each day that Libor lags 
on cm- withm the range 2 5% -4 75 % 
Swiss Bar* Corporation 
London 
Reference Bank 


finance ministry was left with 
280,000 Japan Tobacco shares 
after small investors spumed 
the issue, it traded yesterday 
at Y991.000 a share, well below 
its Y1.438m Issue price. 

As a result of the Japan 
Tobacco experience, the 
finance ministry has launched 
a review of the method of pric- 
ing flotations. 

The delay to JR West's priva- 
tisation will leave another 
shortfall in tbe finance minis- 
try's revenues this year. They 
have already been depleted by 


lower than expected income 
tax revenues. 

However, the ministry is 
accustomed to the unexpected 
where privatisations are con- 
cerned. The 1990 stock market 
collapse forced it to delay 
reducing its stake in Nippon 
Telegraph and Telephone, still 
at 65.6 per cent, to the targeted 
50 per cent. For the same rea- 
son, the government delayed 
the flotation of East Japan 
Railway, tbe Duly rail operator 
to have been privatised so far. 
for a year until 1993. 


Shell confirms key 
role for Woodside 


By David Lascefies 
in Melbourne 

Woodside, the publicly-quoted 
Australian oil and gas com- 
pany. is to remain an impor- 
tant part of Shell's upstream 
operations in spite or recent 
changes in Woods ide's owner- 
ship structure. 

Mr Ric Charlton, chairman 
and chief executive of Shell 
Australia, said yesterday that 
Shell had no intention of 
reducing its interest in Wood- 
side, which gives Shell 
enlarged access to the North 
West Shelf, Australia's largest 
oil and gas project 

Earlier this month. Broken 
Hill Proprietary, the Austra- 
lian resources group, severed 
its ties with Woodside by sell- 
ing its remaining 10 per cent 
interest. This consisted of 4.5 
per cent owned directly and 
half of an ll per cent stake 
owned jointly with Shell. 

Shell also sold its half of that 
stake, rather than have to own 
it with a new partner. This 
reduced Shell’s stake from 40 
per cent to 34.27 per cent, 
prompting speculation that it 
was planning a gradual divest- 
ment. But Mr Charlton was 
enthusiastic about prospects 
for the North West Shelf proj- 
ect based around the liquefied 
natural gas plant at Karra tha. 

Woodside is the operator of 
the project, in which Shell also 
has a one-sixth direct interest 
Other acreage owned by Wood- 
side off Australia's north-west 
coast provided opportunities 
for expansion of production of 
oil and liquid petroleum gas, 
and further capacity would 
come on stream over the next 

Yamaha Corp 
rises 110% 
at halfway 

By Our Financial Staff 
di London 

Yamaha Corp, the world's 
largest maker of musical 
instruments and the leader of 
Japan’s Yamaha group of com- 
panies, yesterday announced a 
110 per cent rise in its unconso- 
lidated recurring profits - 
before extraordinary items and 
tax - to Y6.15bn ($63.4m) for 
the six months to September, 
from Y2.92bn a year ago. 

Net profits rose 149 per cent 
to Y3.G5bn from YlJ22bn Last 
time, as sales edged up just 2A 
per cent to Yi76.95bn from 
Y172.14bn. 

The dividend is held at Y3 
per share. 

Yamaha said its higher 
recurring profits resulted from 
both increased sales and its 
restructuring efforts. 

As previously reported, 
Yamaha said it took an 
extraordinary loss of Y14.70bn 
in the first half in order to 
merge a money -losing Hok- 
kaido resort development com- 
pany with another subsidiary. 
The company said it sold 
Y14.66bn of marketable securi- 
ties to offset the loss. 

For the full year to March. 
Yamaha is forecasting recur- 
ring profits of Y4bn, up 83 per 
cent on last year's actual 
Y2.19bn. and net profits 237 per 
cent higher at Y2bn, against 
Y593m, on expected sales up -I 
per cent to Y330bn from 
Y316.18bn. 

On the Tokyo stock 
exchange yesterday, Yamaha 
shares closed Y40 higher at 
Y1.25CI. 

The interim results were 
announced after the market 
had closed. 


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Ric Charlton: enthusiastic 
about North West Shelf project 

two years. Mr Charlton said 
Woodside had recently made a 
promising oil find in the Timor 
channel. 

Mr Charlton said Shell Aus- 
tralia’s restructuring had left it 
more robust, and closer to its 
target of a 15 per cent return 
on capital employed. 

Last year. Shell Australia 
earned 9.3 per cent on capital, 
which Mr Charlton said was 
unsatisfactory. Since then, the 
company has floated off its 
metals interests in a new pub- 
lic company, Acacia, and cut 
its workforce by one-fifth. The 
resulting savings will help 
reduce gearing from 42 per 
cent in 1993 to 15-20 per cent by 
the end of this year. 

Shell has modernised Gee- 
long, one of its two refineries 
in Australia, raising its already 
dominant share of the domes- 
tic gasoline market. The com- 
pany's strong cash position 
win enable it to take advan- 
tage of purchase opportunities. 


NEWS DIGEST 

Japanese banker 
sees disappointing 
first-half earnings 

Japan's leading commercial banks will post 
disappointing earnings for the first half of the 
current financial year, the president of the 
country’s largest bank warned yesterday, 
writes Gerard Baker In Tokyo. 

"Tough conditions are continuing," said Mr 
Toshio Morikawa, president of Sumitomo 
Bank and chairman of the Federation of Bank- 
ers' Associations of Japan. Mr Morikawa said 
his own bank would report a year-on-year 
decline in unconsolidated after-tax profits from 
core banking business for tbe six months to 
the end of September, as a result of poor profit 
margins. He blamed slu ggish lending at home 
and increases in US interest rates for the diffi- 
cult conditions. 

Mr Morikawa added that write-offs of non- 
performing loans would continue to erode pre- 
tax and net profits for the entire banking sec- 
tor. Japan's 21 leading banks have seen profits 
decline for Tour consecutive years and are 
expected to report another fell for the current 
full-year. They are scheduled to announce 
their half-year results on November 24. 

Telecom Italia 
injunction overturned 

Telecom Italia, Italy's state-controlled telecom- 
munications operator, has won the second 
round of a legal battle with a smaller competi- 
tor attempting to break the company’s monop- 
oly in business services, writes Andrew Hill in 
Milan . 

Telsystem, a small Milan -based company, 
wants to lease lines from Telecom Italia to 
construct virtual voice and data networks for 
business users, and has asked Italy’s anti-trust 
authority to examine the case. 

Fending a full decision, Telsystem won an 
interim injunction with a Milan court last 
month obliging Telecom Italia to lease lines. 
That injunction has now been overturned for 
what Telsystem described as procedural 
reasons. 

Telecom Italia says it favours liberalisation 
in the sector - in line with EU rales which 
have yet to be implemented in Italy - but only 
if properly co-ordinated. Telsystem. which says 
its financial situation is gradually worsening, 
is p inning its hope on the outcome of the 
anti-trust investigation, expected next month. 

BHP to sell fibre-optics 
unit to US group 

Broken Hill Proprietary, the Australian 
resources group, is to sell AOFR, Us fibre- 
optics products group, to Minneapolis-based 
ADC Telecommunications for an undisclosed 
sum, writes Nikki Tait in Sydney. BHP said 
the business - which c laims to be the world's 
largest producer of fibre-optic couplers - 
required an established industry parent to 
maximise its growth potential, and ADC was 


This announcement appears as matter of record only 



better suited to this role. BHP acquired the 
business in 1990. 

Separately, the company announced that Mr 
Frederic Hamilton, founder of the Hamilton 
Oil business which is a wholly-owned subsid- 
iary of BHP, would step down as chief execu- 
tive of the unit in December. Mr Hamilton will 
remain chairman, and the chief executive's 
role will be split between Mr James Rie- 
mersma, general manager of the Europe, 
Africa and Middle East division, and Mr 
Edward Blair, general manager of the Ameri- 
cas division. 

General counsel 
appointed at AMP 

Australian Mutual Provident, the large Austra- 
lian life insurance group which owns the Pearl 
and London Life in the UK. yesterday said it 
was appointing Mr Gary Traill, formerly chair- 
man of the Gadens Ridgeway law firm, to the 
new post of general counsel. 

One of the tasks facing Mr Traill will be a 
re-examination the option of ‘‘demutualising" 
the AMP - that is, turning it into a company 
owned by shareholders. 

Mr fen Salmon, the AMP’s previous manag- 
ing director, indicated that this was not a 
possibility, but Mr George Trumbull, who 
moved from Cigna in the US to take over the 
top job at the AMP earlier this year, has 
indicated that demutualisation will be recon- 
sidered. 

Poor third quarter at 
Thai telecoms group 

Shinawatra Computer & Communications, 
Thailand's leading telecommunications com- 
pany, has reported disappointing third -quarter 
net profits of Btl.23bn i$49.2m), writes William 
Barnes in Bangkok. 

This lifts net profits for the first nine 
months 238 per cent to Bt2.44bn from Btl.02bn 
last year. However, the latest figures have 
been lifted by a previously-announced extraor- 
dinary gain of BtS40m. 

Advanced Information Services, the cellular 
telephone subsidiary, reported third-quarter 
profits of Bt400m lifting nine-month profits to 
Btl.l8bn from Bt 628m. Another unit. United 
Communications, saw its third-quarter net 
profits rise to Bt576m from BtS2m by unexpect- 
edly strong mobile phone subscriptions. Nine- 
month profits stand at BtL44bn. 

Kuok confirms talks 

Mr Robert Kuok, the Malaysian-Chinese mil- 
lionaire who is the largest shareholder of 
South China Morning Post (Holdings), con- 
firmed yesterday that the Hong Rong pub- 
lisher plans to launch a financially-oriented 
English-language paper in China, AP-DJ 
reports from Hong Kong. 

He said the company was in talks with a 
mainland partner, which he did not name, 
about launching a financially-oriented English 
paper in China, although he expressed uncer- 
tainty that a deal could be reached to print 
and distribute such a paper in China. 


October 1994 


ENGIL SGPS, SA 


PTE 6,792,120,000 


Private Equity Offering 


Banco Santander de Negocios Portugal 
Banco Portugues do Atlantico 

CISF Banco de Investimento 
Caixa Geral de Depositos 
Banco Totta & Azores 



Santander Investment 


jr*-V 











■: v ' .*: *• *?*,-• 


FINANCIAL TIMES WEDNESDAY NOVEMBER 


INTERNATIONAL COMPANIES AND FINANCE 


Big US retailers advance 
sharply in third quarter 


By Richard Tomkins 
in New York 


Three of the biggest retailing 
groups in the US - J.C. Pen- 
ney. Dayton Hudson and Home 
Depot - yesterday reported 
strong Increases in earnings 
for the three months to Octo- 
ber. 

Their results coincided with 
the latest monthly report from 
the US Commerce Department 
showing that retail sales rose 
by 1.1 per cent overall in Octo- 
ber and by 0.6 per cent exclu- 
ding the volatile auto sector. 
Both figures were much higher 
than expected. 

J.C. Penney, enjoying a third 
consecutive year of strong 
sales and record earnings, 
increased third-quarter net 
income by 24 per cent to 5274m 
from $22 lm. excluding an 
extraordinary charge in the 
year-earlier period. Earnings 
per share, excluding extraordi- 


nary charges, rose to Sl.04 
from 83 cents. 

The increase was flattered by 
a one-time tax charge the pre- 
vious yean pre-tax profits were 
up rather less, by 13 per cent. 
The gain also reflected a 9 per 
cent increase in sales reve- 
nues, which the company attri- 
buted to better targeting 
of goods in its stores and cata- 
logue. 

Dayton Hudson, owner of 
the Target and Mervyn's store 
groups, saw a surge in net 
income to £67 m from S43m. 
with fully diluted earnings per 
share rising to 83 cents from 53 
cents. Total revenues rose by 9 
per cent to So .Gob n. while 
same-store revenues increased 
3 percent 

The company said Target 
had continued its strong per- 
formance. and Mervyn's, which 
suffered difficulties last year 
partly because of the sluggish 
Californian economy, had 


improved from a low base. The 
department store division, 
however, had come in slightly 
below expectations, with oper- 
ating profits unchanged. 

Home Depot, the biggest 
home improvement retailer in 
the US, reported a 36 per cent 
surge in third-quarter net 
income to £14Lm from Sl03m. 
with earnings per share rising 
to 31 cents from 23 cents. 

Sales revenues rose by 40 per 
cent to S3.2bn. while on a com- 
parable store-for-store basis 
they rose by 9 per cent. During 
the quarter the company 
opened 15 new stores, includ- 
ing 13 in the US and two in 
Canada. 

• Tiffany, the US jeweller, 
increased net income to S4.7m 
from 83.3m on sales up from 
S135m to 8160m. It said the fig- 
ures reflected strong retail 
sales growth In the US. where 
same-store sales were up 12 per 
reut. and in Japan. 


Merck purchase under scrutiny 


By Richard Waters 
in New York 


Merck, the biggest drugs 
maker in the US. confirmed 
yesterday that its S6.7bn acqui- 
sition of Medco Containment 
Services was being reviewed 
by anti-trust regulators, more 
than 10 months after the deal 
was completed. 

The Federal Ttade Commis- 
sion is also looking into the 
S2.3bn acquisition earlier this 
year of Diversified Pharmaceu- 
tical Services, another phar- 
macy benefits management 
company, by the Anglo-US 
drugs group SmithKline Bee- 
chain. 

The reviews mark a new 
Interest by regulators in the 
way some drug manufacturers 
in the US have bought control 
of distribution companies. 

Both companies said they 
believed they had already sat- 
isfied any concerns that the 
regulators may have. 


-We are confident that this 
review, as was the case with 
the FTC’s review performed 
last year, will demonstrate the 
pro-competitive effects'' of the 
Medco acquisition. Merck said. 

The 84bn takeover by Eli 
Lilly of PCS, another distribu- 
tor. was given FTC clearance 
two weeks ago. but only after a 
consent agreement with the 
regulators which laid down 
several conditions. 

This agreement was seen at 
the time as an indication of the 
FTC’s renewed interest in the 
area, in spite of the fact that it 
had earlier cleared the Merck 
and SmithKline deals. 

In a statement on the Lilly 
decision. the two FTC commis- 
sioners who backed the deal in 
a 2-1 majority decision warned: 
“We remain concerned about 
the overall competitive impact 
of vertical integration by drug 
companies into the pharmacy 
benefits management market." 

In spite of its earlier 


approval for the deals, the FTC 
has the power to review' Merck 
and SmithKline’s activities to 
see if they have led to any 
breach of anti-trust laws. 

The agreement with Lilly 
has been seen in the drugs 
industry as a blueprint for the 
sort of conditions that the reg- 
ulators may try to impose on 
the other companies. The main 
elements of this were a '‘fire- 
wall". to prevent pricing infor- 
mation about other drugs sold 
through the distributors being 
leaked to Lilly, and a require- 
ment for Lilly to maintain an 
“open formulary” under which 
customers can continue to 
receive any pharmaceuticals 
through PCS’s drug plans. 

Both Merck and SmithKline 
said they already met both of 
these requirements. "We 
believe any agency concerns 
are already addressed by the 
manner in wbich Medco con- 
ducts its business," Merck 
added. 


Loblaw rises in 
third quarter 


By Robert Gib bens In Montreal 


Celsius ahead 29% to 
SKr644m at nine months 


Loblaw, Canada’s biggest food 
distributor, posted a 37 per 
cent rise in third-quarter net 
profit to CS33_5m fUSS24.69m). 
or 39 cents a share, on sales of 
CS3.1bn. up 7 per cent. 

Loblaw. controlled indirectly 
by the Weston family, said 
sales were up 10 per cent in 
eastern Canada, flat in the 
west and up 9 per cent in the 
US. Operating net income was 
up 36 per cent to C$75.7m_ 

Nine-month net profit was 
C$84.3m. or CSl a share, up 
from C867.3m. or 76 cents, on 
sales of CS7.6bn against 
C$7 ’bn. 


By Christopher Brown -Humes 
m Stockholm 


Celsius, the Swedish defence 
group, yesterday announced 
income after financial items of 
SKr644m tSS8.4m> for the first 
nine months, a 29 per cent 
increase from SKr499m in the 
same 1993 period. 

This year's performance 
reflected a strong operating 
result and some capital gains, 
whereas a year ago it was 
strong money market returns 
on the back of falling interest 
rates which generated most of 
the profit. 

The improved operating 


profit of SKr449m. against 
SKri96m, was due mainly to 
rationalisation. 

On top of this there was a 
SKrl43m capital gain from the 
sale of 40 per cent of Safe Part- 
ners. an offshore company, in 
September. 

However, the overall result 
was dragged lower by bond 
market turbulence, which dra- 
matically lowered tbe returns 
on the group's money market 
portfolio. The result was a 
sharp drop in financial income 
for the period to SKr52m from 
SKr303m. 

The group expects a full-year 
profit of around SKiHOOm. 


This announcement appears as a matter of record only. 


Yen 3,600,000,000 


cockerill||sambre 


Notes due 1 999 and 2001 


The undersigned acted as financial advisor 
and private placement agent 
in connection with this transaction 


sjsta FIRST CHICAGO 

1 The First National Bank of Chicago 


Chip maker 
set to raise 
$480m from 
share issue 


US stock funds remain in favour 

Rising rates have not deterred investors, writes Patrick Harverson 

A lthough the increase in ing demographics among . ■ , / _ at least temjjoranlv-^) 

US interest rates this investors. In the past few mutiml fumteiwt. with the low returns 

vear has taken its toll vears, Tndlinnc of “baby boom- raw cash flown ffftn) . exchange for the known 


115 


T« 




September 1994 


By John Ridding 
in Paris 


SCS-Thomson, the Franco* 
Italian semiconductor manu- 
facturer. has announced plans 
to raise up to S480m through 
the issue of shares on the Mew 
York and Paris stock markets. 

The operation is a signifi- 
cant step in the development 
of tbe semiconductor group, 
which was formed in 1987 
through the merger of state- 
owned groups Thomson Semi- 
conductor of France and 
Italy's SGS Microelectronics. 

Analysts in Paris said the 
issue of shares, which will rep- 
resent about 20 per cent of the 
| company's enlarged capital. 

| would reinforce its balance 
sheet and could mark a step 
towards privatisation. 

The decision to raise capital 
on the stock market follows a 
strong Improvement at the 
company, which is Europe's 
second largest semiconductor 
manufacturer. Last month it 
reported net profits of 8166. lm 
for the six months to the end 
of July - more than for the 
whole of the previous financial 
year- Sales for the current 
financial year are expected to 
rise by about 20 per cent, com- 
pared with the S2bn recorded 
in 1993. The debt to equity 
ratio stood at about 25 per 
cent at tbe end of July. 

Profits at SGS-Thomson 
have been boosted by the 
upswing in the international 
semiconductor market and by 
reduced financial charges fol- 
lowing two capita] increases of 
8250m last year. The compa- 
ny's principal products include 
semiconductors for telecoms, 
computers and control 
systems. Its main markets are 
Europe, North America and 
the Asia-Pacific region. 

Under the terms of the issue. 
2lm shares will be offered. 
Just over 13.6m will be offered 
to investors in the US and Can- 
ada. with the balance being 
offered in other countries. 

In addition to listings on the 
New York and Paris stock 
exchanges, tbe shares are 
expected to be quoted on Seaq 
International. SGS-Thomson is 
also considering a quotation 
on Telematico, the Italian 
screen-based dealing market 

Tbe shares are to be priced 
at between 821 and S23. Mor- 
gan Stanley will be global 
co-ordinator and lead manager 
of the issue, with Banque 
Indosuez and Lehman 
Brothers as co-global co-ordi- 
nators. 


A lthough the increase in 
US interest rates this 
year has taken its toll 
on stock and bond markets, the 
equity mutual fund business in 
the US has held up remarkably 
well. 

The hundreds of billions of 
investor dollars which flowed 
into stock funds during the 
early 1990s as rates tumbled 
have not flowed out again 
because rates have reversed 
course. Even though interest 
rates may eo up further this 
year (the Federal Reserve Is 
expected to tighten monetary 
policy again this week after 
yesterday's meeting of its Open 
Market Committee), analysts 
believe investor confidence in 
stock funds is solid. 

So far this year both short- 
and long-term interest rates 
have risen sharply. The rate on 
overnight bank loans has 
climbed to about 5 per cent 
from 3 per cent, and long-term 
interest rates las measured by 
the yield on the 30-year govern- 
ment bond i have jumped to 8.1 
per cent from a low- of 5.8 per 
cent. 

Also, the stock market has 
performed poorly - the Stan- 
dard & Poor's 500 index has 
fallen just under 1 per cent so 
far this year. 

Yet. in spite c>f rising rates 
and flat share prices, individu- 
als and institutions have con- 
tinued to favour equity funds 
over other forms of invest- 
ments. In the third quarter, net 
new- sales of stock funds aver- 
aged Sio.abn a month, slightly 
higher than the S10.4bn a 
month rate recorded in the 
same three months of 1993. the 
year sales broke all records. 

Money continues to flow into 
stock funds at rates compara- 
ble to last year because of sev- 
eral factors, including chang- 


ing demographics among 
investors. In the past few 
years, millions of “baby boom- 
ers" bom in the 1950s and 
1960s have reached middle-age 
and have begun to save more 
of their income to pay for their 
children’s education and their 
own retirement 

As relatively sophisticated 
savers, many have chosen to 
invest in stock fluids, which 
they believe guarantee the best 
return of any form of invest- 
ment over the long-term. A 
year of rising interest rates 
and a dull stock market is not 
going to persuade these inves- 
tors to take their money out of 
funds. 

As Mr Richard Hoey. chief 
economist at the Dreyfus 
investment fund group in New 
York, says: “There is a portion 
of the market where there’s an 
underlying demand to invest 
in assets for longer-term 
reasons.” 


1994 

Equity 

Bond & 
Income 

January 

18.4 

11 ja 

February 

14.4 

1.1 

Match 

e:& 

■ - 7.7 

Apr3 

.11.8 

- -4.8 

May 

11.8 

-2.1 

June . . 

7J: 

- -1.7 

July 

92 

-5L9 

August 

14.1 


September 

a.i 

-4j8 


Sauce tno m mt Owtvmy 


A nother factor is the 
continuing popularity 
of foreign stocks. With 
share prices flat at home, more 
investors are looking to benefit 
from the growth potential of 
overseas markets by investing 
in international equity funds 
offered by US money manag- 
ers. Mr Todd Schapera of the 
Boston-based Scudder invest- 
ment group says that signifi- 
cant amounts of money have 
continued to flow into its inter- 
national equities funds in 
recent months. 

For tbe industry as a whole, 
net new sales of international 
funds have been averaging 
S2.7bn a month so far tills year, 
up from SLobn a month in tbe 
same period of 1993. 

A third factor supporting 
demand for stock funds has 
been the lack of an attractive 


alternative. While short-term 
interest rates have risen from 
their 30-year lows of late 1993, 
returns on short-term invest-, 
meats remain meagre by his- 
torical standards. Rank certifi- 
cates of deposit and money , 
market mutual funds today 
yield no more than between . 4 
per cent and 5 per cent, while 
some stock funds have been 
able to provide investors with 
returns as high as 9 per emit or 
10 per cent They have been 
able to do this by avoiding 
interest rate-sensitive sectors 
and concentrating on stocks of 
companies whose performance 
is closely tied to the economy. 

As for long-term bond funds, 
they have been decimated by 
the rise in interest rates, which 
provoked the biggest bond 
market crash in a generation. 
As bond prices plummeted, 
investors rushed to take their 
money out of bond funds to 
protect the value of their prin- 
cipal. la the third quarter, 
bond funds suffered net out- 
flows of cash at the rate of 
S3.5bn a month. 

Although some of that 
money will have gone into 
stock funds, much of it appears 
in the last month eg so to have 
gone into money market funds, 
where investors are willing - 


at least temporarily -= to Into 
with the low returns.. 'inr 
exchange for the knowledge 
that their capital is .relatively 
securC- The total of. assets hr: 
money market funds held 
steady around $580bn -between * 
January and September , this 
year, hut suddenly jumped in 
October to more than $6i6bn. 

JUr. Roger Servison, manag- 
ing director at Fidelity Invest- 
ments. the largest mutual fo nd 
group in the US, says the total. * 
of money . market fund assets 
should climb even : higher. as ' 
the year progresses.; Tfcbple 
are. looking 1 to protect theft 
principal until they, fed that 
long-term- rates have settled - 
down . * > What we’ve seen in 
our own market surveys is that . 
most investors feel interest . 
rates are still going higher.” . 






Y et. Mr Servison says 
that at some. 'stage 
interest rates’ will 
peak, and when they do- inves- 
tors may begin to took at bond 
funds again, hoping to lock in 
high yields after having 
escaped the worst of the slump 
in bond prices. This could lead 
to some switching of money 
from stock funds into bond 
funds.. 

Determining , when the cur- 
rent cycle of interest rate 
increases will end. however, 
will not be easy given the Fed's 
reluctance . to discuss future 
policy. Although many Wall 
Street analysts believe tiiat if 
the central bank raises rates 
this week It could he the last 
tightening for a couple of quar- 
ters, investors are unlikely to 
want to bet on them being 
right just yet As Mr Servison 
says: “"The $64J)00-question is - 
will the next move be enough 
to change investor expecta- 
tions?" 


ply anl 

\450bn 


FDA approves Schering-Plough anti-allergy drug 


By Richard Waters 


Schering-Plough became only 
the second company in the US 
to win approval for a prescrip- 
tion drug which combines an 
antihistamine with a deconges- 
tant strengthening its position 
in the growing market for anti- 
allergy products. 

Claritin-D. which was 


cleared by the US Food and 
Drug Administration late on 
Monday, will compete with Sel- 
dane-D. a Marion HerreD Dow 
drug. Launched in the US in 
August 1991, Seldane-D had 
sales of S142m last year. 

The basic form of Claritm, 
which does not contain a 
decongestant, has become one 
of the fastest-growing new 


products for Schering-Plough. 
Sales of the drug around the 
world, together with sales of 
Claritin-D in those countries 
where it already has approval, 
grew to $38Qm in the first nine 
months of this year, from 
S295m in the whole of 1993. 

Schering-Plough estimates 
that 14m of the 35m hay fever 
sufferers in the US also experi- 


ence congestion as a major 
symptom, and therefore could 
benefit from the new drug. 

Both Claritin and Seldane 
are non-sedating drags, which 
rnihire traditional antihista- 
mines do not induce drowsi- 
ness in patients. According to 
IMS, a research firm, the total 
market for such drugs last 
year was worth around Slbn. 




F ■ ^ 


Difficult third term for Portuguese banks 


By Peter Wise in Lisbon 


ABB plans to 
sell off telecoms 
equipment unit 


By Also Cana 


Asea Brown Boveri, the 
Swiss-based industrial group, 
is planning to sell off its tele- 
communications equipment 
manufacturing arm, ABB 
Nera. 

An Initial placing will be 
made with a group of institu- 
tional investors before the rest 
of the company is floated on 
tbe Oslo stock market early In 
the new year. 

ABB has been progressively 
concentrating on its core busi- 
ness of electrical engineering, 
i Mr Asbjorn Birkeland. Nera’s 
| managing director, said yes- 
terday the sell-off was in tbe 
interests of both companies. 
The unit would retain its exist- 
ing management and would 
find it easier to raise funds for 
expansion as an independent 
company. 

Formed in 1987, Nera has 
been growing at an average 20 
per cent a year, he said. 

Based in Bergen. Norway, 
Nera employs about 1,450 peo- 
ple and claims to be one of the 
largest manufacturers of 
equipment for satellite-based 
mobile communications. 

Last year it turned over 
NKr2bn (829.8m), with profits 
before tax of about 5 per cent 
of sales. Some 80 per cent of 
sales are made outside Nor- 
way. It has manufacturing 
agreements with AT&T of the 
US and has worked on projects 
with Sweden's Ericsson. 


Third-quarter results for 
Portugal's banks were the 
worst for almost a decade. The 
once-buoyant sector has been 
hit by recession, tougher com- 
petition and a collapse in bond 
trading profits. 

Of the 12 banks that have 
posted results for the first nine 
months, nine have recorded a 
decline in net earnings, com- 
pared with the same period 
last year. State-owned Caixa 
Geral de Depdsitos (CGD), the 
biggest bank, is the only one of 
the top ten to report a profit 
increase. 

Competitive pressures have 
intensified since liberalisation 
of the previously state- 
dominated sector began in the 
mid-1980s. As a result, finan- 
cial margins - the difference 
between the rates at which 
banks raise funds and lend to 
customers - have fallen to an 
average of 3 per cent from 7 
per cent in 1989. 

This has hit one of the main 


Portugal's leading banks by assets: 
1994 third-quarter results (Es bn) 


Net consoOdated Change on 
profit year (%) 


Caixa Geral de DepOsitos 
Banco Portuguis do Ad&itico* 
Bawo Totta e Azores 
Banco Espfrtto Santo 
Banco Comercial Portugues 


■Nan-CBrnBa<*cvl (*+-&> pm* 


sources of bank earnings. Mr 
Miguel Namorado Rosa, an 
economist with Banco Comer- 
cial Portugues. calculates reve- 
nue from financial margins for 
the banking sector as a whole 
at about Es620bn (S4.8bn) in 
1994. Es84bn less than last 
vear. 

Two years of recession to 
mid- 1994 have squeezed bank 
profits. Credit to the private 
sector is forecast to grow by 
per cent this year, down from 
13.3 per cent last year. Non- 
performing loans are increas- 
ing as a proportion of total 
credit and deposit growth has 


been almost stagnant since 
1992. 

Banco Totta e Azores, which 
posted the biggest drop in 
earnings among the top five 
banks, blames a 16 per cent 
increase in provisions against 
bad debt for a 21.6 per 
cent slide in net profits to 
EslA9bn. 

Bankers expect business to 
deteriorate further in the last 
quarter before beginning to 
pick up, with an economic 
recovery forecast for 1995. 

Banks are estimated to have 
lost nearly Es90bn this year as 
a result of a sharp drop in 


interest rates on government 
debt securities. The combined 
loss from lower margins and 
trading losses is more than the 
sector's total 1993 profit of 
Esl72bn. 

But the real impact of the 
bond markets’ collapse may 
not yet have emerged because 
many Portuguese banks regis- 
ter bonds in their investment 
portfolios at purchase value 
and fail to report trading losses 
in their accounts. 

The fall of only 1.7 per cent 
in non-consolidated pre-tax 
earnings for Banco Portugufis 
do Atldntico, the second big- 
gest bank, might have been 
considerably larger if such 
losses had been folly reflected 
in results, one Lisbon stock 
market dealer said. 

Analysts also said some 
banks "window dress" results 
by domiciling credit in offshore 
centres to escape provisioning 
requirements, and generally 
underprovision for credit risks, 
although meeting their legal 
obligations. 




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financial times Wednesday November 16 1994 


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INTERNATIONAL CAPITAL MARKETS 


US Treasuries jump on news of rise in rates 


By Ljsa Bransten in New York 
and Martin Brice in London 

prices jumped 
Mriy yesterday afternoon after 

Reserve took the 

raisin S the tar- 

B ^ n 5 r r «Jeral funds rate. 

The benchmark 30-year gov- 
ernment bond was up >* a \ 

93 aI X elding 8012 Per rent 1 

At the short end of the matu- 

two-year note 
rose i to 99”, to yield 6377 per 
cent 

The markets were cheered 
by the news that the Federal 
Reserve s open market commit- 
tee had voted to boost the tar- 
get rate by 75 basis points, to 
554 per cent. 

. Analysts had expected an 
increase of at least 50 points 
and believed, the markets had 
already accounted for a 
50-point increase. 

The market therefore took 
the news that the Fed 
increased the target rate by 
wore than expected as a sign 
that the central bank was will- 


ing to continue a tough stance 
against inflation. 

Some economists had 
predicted the Fed would raise 
rates as much as 100 basis 
points, but were worried that 
such a large move might 
weaken the central bank's 
ability to respond to strong 
economic news later in the 
year. 

The next meeting of the open 
market committee is scheduled 
for December. 

The Fed cited the highest 
capacity . utilisation figures 
since February 1980 as its main 
reason for the rate increase. 

Earlier in the morning, it 
had announced that the econ- 
omy was using 843 per cent of 
its capital stock for the produc- 
tion of goods, and a 0.7 per 
cent increase in industrial pro- 
duction. 

Economists had anticipated 
a 0.6 per cent increase in indus- 
trial production and capacity 
utilisation of about 84.8 per 
cent, but the actual figures 
were considered generally in 


line with expectations. 

Bond prices dipped early in 
the morning following the 
announcement that retail 
spending for October grew by 
1.1 per cent - analysts had 
expected an increase of about 
0.6 per cent. 

However, they bounced back 
later in light trading as traders 
awaited an announcement on 
interest rate policy. Just before 

GOVERNMENT 

BONDS 

the Fed's announcement, 
prices were close to their late- 
Monday levels. 

“It is mostly people going 
flat before the [Fed's] num- 
bers.*' said one bond trader at a 
large Wall Street securities 
firm. 

“The bottom line is that the 
Fed's actions will outweigh the 
retail sales numbers and capac- 
ity utilisation and industrial 
production numbers," he 
added. 


■ European government bond 
markets drifted higher yester- 
day as investors waited for the 
result of the Federal Reserve 
meeting in the US. 

Mr Simon Maggs of IBJ in 
London said: “Trading has 
been very thin ahead of the 
FOMC- meeting, but European 
markets will be moving on the 
back of that meeting tomor- 
row." 

Most markets followed Ger- 
man government bonds 
upwards, although Italy regis- 
tered a Call as investors took 
stock of the difficulties the 
government is having in enact- 
ing budgetary reforms. 

■ German bunds broke 
tbrough an important resis- 
tance point at 9030 and the 
December bund futures con- 
tract ended at 90.®, up 0.41 on 
the day, in light trading. 

Mr Karl Haeling at Deutsche 
Bank in Frankfurt said: 
“Breaking through that point 
makes it very tempting to get 
bearish." 


However, he pointed out that 
if there were a rally in bunds, 
investors were likely to shift 
into US Treasuries. 

■ UK government bonds fol- 
lowed bunds up in thin trading 
and the December long gilt 
future closed around 102'.%, up 
£. The yield spread over bunds 
was 135 basis points. 

A £250m tranche of 8% per 
cent Treasury stock due 2017 
was exhausted in afternoon 
trading. The bonds were sup- 
plied at 10238, the Bank of 
England said. 

The tranche was one of four 
tap stocks announced on 
November 4. Two others, a 
£250m tranche of 85: per cent 
stock due 2005 and £l00m of 2V* 
per rent index-linked stock due 
2000 have already been 
exhausted. Another £l00m 
tranche of 2'.i per cent gilts 
due 2024 has not been sold out. 

While the sale of the tranche 
suggested demand for gilts, 
some analysts believed the 
bonds had been bought by 


market-makers and would con- 
tinue to hang over the market 
until sold on to investors. 

A raft of UK data is due out 
this morning, encompassing 
figures on government borrow- 
ing. inflation, employment and 
wages, as well as the minutes 
of the September 26 monetary 
policy meeting between Mr 
Kenneth Clarke, chancellor of 
the exchequer, and Mr Eddie 
George, governor of the Bank 
of England. 

■ The yield on the 10-year Ital- 
ian bond rose by 4 basis points 
to 11.91 per cent. Mr Adrian 
James at NatWest said this 
was due to worries over bud- 
getary change. “Clearly the 
populace is unhappy about the 
pension reform." he said. 

■ The yield on the benchmark 
11-year Swedish bond fell to 
1034 per cent from 1038 per 
cent Mr Simon Maggs at IBJ 
said the markets “believe the 
honeymoon is over for Swedish 
bonds". 


Sanctuary finds 
home in the US 


Italy annouuces terms of 
Y 450 bn euroyen offering 


By Graham Bowiey 

The Republic of Italy's 
long-awaited euroyen offering 
will consist of three tranches, 
of Y125bn of three-year, Y2Q0bn 
of Id-year and Y125bn of 
20-year bonds, the Italian Trea- 
sury said last night. 

The three-year tranche is 
likely to carry a coupon of 3% 
per cant the 10-year tranche a 
coupon of 5.0 per cent and the 
20-year tranche a coupon of 5.5 
per cent, market sources said. 

The deal, due to be launched 
early this morning, will be 
lead-managed by Daiwa, with 
Nomura as joint book-nnmer 
on the three and 20-year 
tranches. 


WORLD BOND PRICES 


BENCHMARK GOVERNMENT BONDS 

Bod Day’s 

Coupon Date Price change 

Australia 9.000 09/04 90.2900 +0.170 

Belgium 7.750 1Q/D4 8&8000 +0360 

Canada * &500 06/04 84.0000 +0950 

Denmark 7.000 12/04 88-5700 +0.870 

Franca BTAN a 000 0EW8 102.0700 +0.195 

OAT 8.750 TQ4J4 903200 +0.310 

Germany Bund 7.500 11/04 100.7D00 +0610 

Italy 8£0O 0S/04 823100 +0300 ' 

Japan No 119 4.800 08/99 102.9670 -0.050. 

Js&n No 164 4.100 12413 96.0660 -0-160 

Netherlands 7350 10/04 98.4000 +0320 

Spain 8A00 05/04 814000 +0390 


The three-year tranche is tar- 
geted mainly at Japanese retail 
investors, while the 20-year 
tranche hopes to find demand 
among Japanese institutional 
investors, Daiwa said. 

Daiwa hopes that the 10-year 
tranche will excite some inter- 

INTERNATIOiiAL 

BONDS 

est among Asian investors out- 
side Japan and among Euro- 
pean investors. 

The offering, the third timp 
Italy has tapped the yen mar- 
ket this year, is likely to com- 
plete its foreign borrowing pro- 
gramme for 1994. 


The Hellenic Republic is also 
rumoured to be close to 
launching its global dollar 
offering, which is expected to 
focus on the five-year area. 
Joint-lead manager Salomon 
Brothers was last night unable 
to comment on the size and 
terms of the offering. 

With market attention occu- 
pied by the outcome of the US 
Federal open market commit- 
tee meeting and by a series of 
new US economic statistics, 
there was little new issuance 
in the eurobond market yester- 
day. 

In the Dutch guider sector, 
Asfinag, the sovereign Aus- 
trian financing authority, 
launched a FI 300m offering of 


NEW INTERNATIONAL BOND ISSUES 


Borrower m, % % bp 

US DOLLAAS 

Sampo Corp.(a)S 50 2.75 100.00 Nov.2001 2.50 Jardlne Fleming 

YEN 

Swedish Export Credit* I5bn 3.75 99.99 Nov. 1997 0.30 - Nomura International 

Lanowtn. RentanbenL* lObn zero 85.50 Dec. 1998 ixXMcL - Marmehukm Unemotional 

Rabobank Nederland* lObn zero 85.45 Dec. 1996 undteci. - NonncftuMn International 

GUILDERS ~ ~ 

Ashnag 300 7.825 99 .92 SR Dac^OQg OJOR +20(BV4%-tg) ABN Amro Bonk 

LUXEMBOURG FRANCS 

Repubic of Portugal 2bn 825 102.45 Jan 2005 2.00 Krerfiw bar* 

Final terms end non-caUabte unless stated. The yield spread (over relevant government bond) a lamch Is tuppbed by the lead 
manager *UnBsled. §Conver8ble. R: fixed re-otler price: tees are shown a the re-otter level, a) Conv price fixed today a eqiaty 
etas mg price. Callable after 5 yrs subject lo 140% hurtBe. PuttaWe m 5 yre to ytd Ts +5Qbp. 


By Richard Lapper 

The successful private 
placement of $75m of senior 
debt with four US institutional 
investors by Sanctuary Hous- 
ing Association brings a new 
type of borrower to the US cap- 
ital markets. 

“It is a horse of a different 
colour," explained Mr Conrad 
Owen, assistant director in 
Hambros Bank's bond division. 

The bonds, which mature in 
2011, were issued at 120 basis 
points over the Interpolated US 
Treasury bond rate. Proceeds 
were then swapped into ster- 
ling, raising the equivalent of 
£47-9m. The use of an indepen- 
dent AAA-rated swap counter- 
party was described as a “key 
aspect" of the deal. 

Exact terms were not dis- 
closed but the funds were 
achieved at terms “competitive 
to those available to Sanctuary 
in the UK”, said Mr Owen. 

In recent deals in the UK, 
housing associations have bor- 
rowed long-term funds at 150 
to 170 basis points over equiva- 
lent gilt rates. 

However, funding has fre- 
quently been difficult to 


obtain, said Mr Owen. Banks 
are prepared to make loans 
over five to seven yeans, while 
the UK debenture market will 
look at deals of 20 to 25 years. 

“Between this range, funding 
has really not been available in 
appreciable quantities from 
any UK source," said Mr Owen. 

Government backing for 
housing associations was seen - 
as positive by investors, said 
Mr Owen. UK housing associa- 
tions have obtained 50 per cent 
of their funding from a govern- 
ment grant since 1988. 

The government stake is sub- 
ordinate to private financing. 
“This was an important ele- 
ment in the sale pitch. It was a 
big issue," explained Mr Owen. 

In addition US institutions 
were impressed by the low 
level of rent arrears and 
vacant property which Sanctu- 
ary boasts, in common with 
other housing associations. 

Mr David Knowlton. director 
of finance at Sanctuary, said 
he had little donbt that US 
investors will be keen to (to 
further transactions and hoped 
“other associations are able to 
tap in to what is undoubtedly a 
major source of funding”. 


India fund from Lazard 


eight-year bonds, priced to 
yield 20 basis points over 
Dutch government bonds. 

About Fi 150m of the offering 
was bought by Dutch institu- 
tions, lead manager ABN Amro 
said, with Belgian retail inves- 
tors also showing some inter- 
est. 

The proceeds were swapped 


into floating-rate Austrian 
schillings. 

In the dollar sector, Sampo 
Corporation launched a $5Qm 
offering of seven-year bonds 
offering a coupon of 2.75 per 
cent and callable after five 
years. 

Japan's Electric Power 
Development Company is 


rumoured to be poised to tap 
the dollar sector with a S300m 
offering of five-year bonds, IBJ 
is said to have the mandate to 
lead the deal 

In the Luxembourg francs 
sector, the Republic of Portu- 
gal launched a LFr2bn offering 
of bonds due January 2005, 
lead-managed by Kredietbank. 


By Conner Mtddebnann 

Lazard Investors is to launch 
an Indian equity fund this 
week in conjunction with BK 
Birla, the Indian business 
group, and Die Bombay-based 
merchant bank Creditcapital 
Finance Corporation, in which 
Lazard holds 40 per cent 
Lazard Birla India Invest- 
ment Trust CLBET) hopes to 
raise SlOOm for the fund, which 
plans to invest primarily in 
shares in companies listed on 
one of India's stock exchanges, 
securities offered by Indian 
companies on global markets. 


and in privatisation issues and 
IPOs of Indian companies. 

Shares in the fund, which is 
to be listed in London and 
Mauritius, will be sold from 
tomorrow at $1 each, with a 
minimum investment of $5,000. 
For every five shares investors 
will receive one warrant to buy 
further shares at $1 on Febru- 
ary 28 in any year between 
1996 and 2005. 

Mr Adrian Evans, a manag- 
ing director of Lazard Brothers 
and chairman of the LBQT, 
expects two-thirds of the hind 
to be placed with institutional 
investors. 




Week Month 
Yield ago ago 


Italy 

« NOTIONAL ITALIAN GOVT. BONO (BTP) FUTURES 
(UFFEJ* lira 200m lOOtte of 100* 


FT- ACTUARIES FIXED INTEREST INDICES 

Prtca favJces Tue Day's Mon Accrued xd at$. 

UK Gilts Nov 15 change * Nov 14 interest ytd 


— Low coupon yield— — Medfean cotton yMd — — High coupon yield — 
Nov IS Nov 14 Yr. ago Nov 15 Nov 14 Yt. ape Nov 15 New 14 Yr. ago 


ia7i 

10.10 


Open 

Sett price 

Change 

Htg/i 

Low 

Est vol 

Open OIL 

1 

Up to 5 years (24) 

11486 

40.19 

11483 

1.82 

9.83 

5 y n 

451 

457 

636 

458 

462 

431 

468 

8.77 

445 

448 

834 

Dec 

101.84 

10138 

-031 

10137 

101.18 

3Q298 

53840 

2 

5-15 years (23) 

13458 

+033 

139.12 

1.71 

11.49 

15 yra 

448 

453 

485 

460 

8.65 

738 

484 

489 

737 

9^5 

403 

M v 

10Q.82 

10032 

-0-34 

100.87 

10Q30 

2180 

10152 

3 

Over 15 yeore (B) 

15429 

+0.51 

15530 

232 

1037 

20 yrs 

8.48 

451 

736 

830 

465 

7.13 

476 

482 

739 

8.02 

888 









4 

Irredeemables (6) 

17478 

+033 

175.37 

06? 

13.47 

Irrad-t 

455 

457 

7.18 







738 

7A8 









6 

AH stocks (81) 

13490 

+032 

13447 

1.90 

10.93 











H 

?m 

80S 

TU 

■ ITALIAN GOVT. BOND (BTP) FUTURES OPTIONS flJFFE) Llra200m lOOths at 100+4 









— 

— Inflate 

Ml 6 % — 

— 

— 

inttstic 

ei 10% - 

— 



+0200 11-5ST 12-00 11-68 
-0.050 4.04 4.10 4.01 

-0-150 4.72 4.74 4.70 

+0-520 7X8 7.68 7.28 

+TL390 11.18 11-37 10.92 


Prlca 

Dac 

Mar 

Dec 

Mar 

6 Up to 5 years (2) 

18633 

+038 

188.07 

0.61 

5.07 

10100 

0.68 

1.90 

040 

238 

T Over 5 yeara(fl) 

173.83 

*0.12 

173.62 

1.0S 

436 

10150 

0.42 

1^0 

064 

2.87 

8 AH stocks (131 

17434 

+0.12 

174.03 

1.01 

4.41 

10200 

032 

1A9 

0.94 

3.17 








UK Gifts 

4000 

08/99 

90-20 

+11/32 

443 

839 

432 


4760 

11/04 

87-28 

+18/32 

458 

473 

447 


9300 

10/08 

103-10 

+17/32 

459 

470 

446 

:JS Treasray * 

7375 

11/04 

99-26 

+20/32 

731 

403 

7.62 

7300 

11/24 

83-22 

+30/32 

406 

416 

7.85 

ECU (French Govt) 

4000 

04/04 

84.3200 

+0380 

•447 

467 

441 


EsL voL total Cass 3083 Pula 2*27. Previous day's open W.. Con* 2634® Putt. 33386 


S year yMd - IB year yMd — 

Debentures and Loans Nov IS Nov 14 Yr. ego Nov 15 Nov 14 VL 

9 Debs A Loans (77) 127.71 +0.50 12708 2.25 9.82 9.82 9.68 7.88 9.59 9.65 84 

Awaya grass redrenpson yfckls ora thown efcora. Ctxpon Banda Lose Otfr-TfcK: MeCkxrt 8%-IOri*; High: It* an 0 over. T Rat yMd. ytd Tear lo data. 


Now IS Nov 14 Vr. ago 
956 9.61 8£1 


London cfcakat *Naw York mid--day 
t Grass pndudng wtiMOn y ant at 123 o> 
Prices: US, UK to SSnds. ottas n dacfcnd 

US INTER ES T RATES 


_ Yiafcte Lpcri msttrei aandsrd. 
Source: MUS hSBmgafcnri 


Treasury BA end Bond YWds 


Spain 

■ NOTIONAL SPANISH BOND FUTURES (MEFF) 
Open Sett price Change H#i 
Dec 87.25 87.24 +0.13 8767 

Mar 86.35 86 50 +0.07 8a 35 


Low Eat. voL Open InL 
87.15 28.949 77.337 
86.35 880 2.747 


FT FIXED INTEREST INDICES 


GILT EDGED ACTIVITY INDICES 



Nov 15 Nov 14 Nov 11 

NOV 10 

Nov 9 

Yr ago 

High- 

LOW 


Nov 14 

Nov 11 

Nov 10 

Nov 9 

Nov 8 

j- 

Govt Secs. (UK) 

91.83 9132 91.03 

91.45 

91.39 

103 84 

10734 

8934 

Grit Edged bargains 

753 


813 

84.0 

804 


Find Interest 

107.92 107.88 107.92 

10734 

107.68 

124.15 

133.87 

10450 

5-day average 

80.4 

8 12 

82.4 

813 

823 



it 

5% 

Ttwuaoiti 

Three naaft 

430 

448 

£69 

Ha* year 

Raajw 

Ifl+aar 

737 

7.67 

734 

UK 


OaajMr 

651 

»iear 

609 

■ NOTIONAL UK GILT FUTURES (UFFET CSO.OOO 32nda cri 100% 


- to- 1994. Government Srcurtas Ngh stace compftdkm. 127 40 {971/33. b> 49.18 P71/7» Fixed iraieet high star* cemp fe uw. 133J7 R 171/94) . kw 5033 (371/75) . Basie lOCt Oovantawnt Secuttae 16710/ 
26 a<d Fnad Inures 1026. SE safety n*» rebased 1074. . 


fditeb 

Fedtaxtaril 


BOND FUTURES AND OPTIONS 
France 

■ NOTIONAL FRB4CH BOND FUTURES (MATIF) 

Open Sea price Change High Lo* Est. wol. Open W. 
DOC 111.24 11168 +0.38 111.40 111.16 136.791 129,304 

Mer - 110.42 11058 +C38 110.58 11034 3580 1*206 

Jim 109JSB 109.72 +0J6 109.66 109.50 342 2£57 


■ LONG TCRM FRENCH BOND OPTIONS (MAT1F) 


Strfee 

Price 

Dec 

- CALLS — 
Mer 

Jun 

Nov 

— PUTS 
Dac 

110 

in 

112 

113 

1 14 

13Q 

D.72 

0.28 

0.07 

OHS 

136 

1.43 

130 

037 

438 

2.10 

413 

438 

039 

1.70 

1.88 


vd. tetri. Crite 46283 Puts 23.499 . Prevtoua Ota's open InL. Ode 313.165 Pira 28&BZ1. 


m Germany 

” ■ NOTIONAL 


Open Sett price Change ttgh Low EsL vol Open InL 
Dec 101-28 102-01 +0-10 102-07 101-23 42635 100712 

Mv 101-01 101-07 +0-10 101-11 100-31 2163 6109 

■ LONG GILT FUTURE? OPTIONS (UFFE) CSO.OOO 64tte of IQjHt 

Strata CALLS PUTS 

Wee Dac Mar Dec Mar 

102 0-39 1-33 0-37 2-19 

103 0-15 1-06 1-13 2-56 

104 004 0-50 2-02 3-36 

Eat. vat tetri. Cefe 7*82 Pu» 13302. Prerictn day's open tat. Cafe 756X Puts 49718 


Ecu 

■ ECU BOND FUTURES (MATIF) 

Open Sett price Change High Low Est vol Open ht 
Dac 61.02 61.38 *0.38 61.36 61.02 2.606 6.260 


M US TREASURY BOND FUTURES (CBT) Si 00.000 32nde ert 100% 


FT/iSMA lHTERt4Afl6NAL BOND SEHVlCH 


■ NOTIONAL GERMAN BUND FUTURES (LFFQ- DM250.000 IQOthe of 100% 

Open Sett price Chenge High Low Est vol Open InL 
Dac 90.45 90.66 +037 90.73 9037 120880 178792 

MW 89.50 89.76 4040 8901 69.46 6329 29161 


■ BUND FUTURES OPTIONS (UFFg DM2S0JB0 polnM of IQCtH 

________ CALLS — PUTS 

Wc? Dec Jan Feb Mar Dec Jan Fab Mar 

BOBO 0.67 0.68 082 0.98 042 TJO 1.58 J.72 

££ n*4 084 0.79 068 163 1.88 2.03 



Open 

Latest 

Change 

High 

Low 

Eel vol. 

Open (m. 

Dec 

97-08 

97-04 

-0-03 

97-13 

98-28 

301347 

390.871 

Mar 

98-18 

98-15 

-0-04 

96-24 

96-08 

9,405 

51.330 

Jui 

96-01 

95-28 

-0-09 

96-01 

95-22 

287 

11.746 


Strike 

Price 

Dee 

Jan 

CALLS — 
Fab 

Mar 

Deo 


0.67 

036 

482 

038 

442 


434 

039 

464 

479 

039 

9150 - 

418 

427 

448 

032 

1.03 

Co. voL tetri. 

Gala 29980 Puts 11937- Prewtoua dsjrW optn tot. 


Japan 

■ NOTIONAL LONG TEfttA JAPANESE GOVT. BOND FUTURES 

flJFFE) YIQOm 100th8 Of 100% 

Open Close Change Wgfi Low Esi. vol Open nt 
Dec 107.90 10785 107.88 1411 0 

Mar 107.22 107.27 107.20 1927 0 

■ LUTE e env a ota Baded OH APT. Ml Ooen Merest figs, are tor pravVM clay. 


UK GILTS PRICES 


— Ytatd— _ 

jum m art Meet 


— 1994 

ver- to* 


-YWd_ _18M_- 

rt fad Price E+cr- Ugh lire jlges 


— VMd .. 

(11 Cl meet 


_IW._ 
Mtfi Lon 


bm- ofM* w ft* *““L 

TnwBpcIWtt.. &» 

12pc 1905 — 

&£i 3pc (toB 1990-S5 — 3JM 

iWiPC 1895 — 1M0 

T7ees12V(ic199Sft 17M 

NUMja |5B 

BrtHS^IBBett 

CoraeaiaHOpc 1 ^— 
iitMBCnt7pel9srfr— 
mas 13/Upe Item — 

EHSKFjpelSW— M* 

Trees 8L pc 193714 

BrtTSXIBST- 

naBT*Mcia»ttr7r- 

T)MS6Lpc1B»-ae«- 759 

14pc 1999-1 — ’JS 

tnTis 

Brttiaciasg-— — 1^4 

Tiws9>»c1fl98tt 

BcaitfepcttW-— — • 

TmesHflaflelW- 

TJW9K1998#--- ** 


BwlD«taBn« 

CmwdailOWAeiBBB- 160 

Th»fflBWe1989 “ 

BbcZOOO 

toflpcanotf- — 

Trees 13 dc 2000 

TOW 2901 

7PBX01#- 

g 


-IDQ&al 
5.78 101 A 
570 884t 
838 10215 

6.63 mi 

696 I07H 
7.16 111 

727 toaa 

7.72 10*^ 
753 97U 
790 110 B 
799 1DSA 
8.11 101 lj 
619 117J1 
&32 103K 
830 BBS 
&32 9SJs 
443TT6*»JJ 

826 1SSA 

&48llHJd 

&M l5js 
851 nA 
651 107>jri 
8L44 «Vw 


65G10BW 

851 97ij 

852 1011| 
857 IlflH 
80 lOPe 
851 9ljs 
172 «B% 

8® 96A»* 
8.71 Wrt 
8® lift 


— 10H3 

— 107 A 

— sea 

— 107B 

— 

117* 

12111 

— lira 
*H 112* 
+* 1005s 
4i ISItt 
*h 11« 
IlOA 
*A 13141 
*A 114& 
+A 106i 
102 

*U 13 
+A 140* 

*A 125« 
*& 1164 
+& 126£ 
** 

*U IBIfi 


+* 121« 
_ 100* 
Pi Wh 
119* 
*h W6B 
+A 122* 

+>4 106* 

+& «nfi 

+4i mu 

+* 127* 

+* J23U 


FMgJhR 1SB9-4— 

too* OenNR«n9>zpe2004_.. 

101* TreaeBlipcaXKtt 



Gxt»9 >2 pe3»5 

T'tmi2h#za3-5 — 

]?S 

106* epezooz-ett 

TrsfelUd* 2003-7 — 

gp. Trees Blzpc 2007 » 

110* 13J3K! 2004-8 

1045 Tress 3pc 2008# 

100* Iren 8pc 2009 

116B 

heB 

OSS 

S3U 

OtarHRnsTnra 

110* Treat B l/4pc 2010 

10111 Dwq*tJi20iifL__ 

lira TtmspezoiZB 

105* Tiwsfee 2006-12#. 
S8d TrtaapeaW— 
73tW 2012-15# __ 

TBae(Btfc2017Jt 

BnaiZpc 2013-17 

io*S 

BOB 

» 

99^ 

nee SSJL. 

IQ3I3 WOTHSC 

on 

H Si OBWSizJBWfllL 

9Pk TNee^clOWL 

1041* Danb 2 > 2 p 0 — 

USB Trenl’zpc 


793 m 
867 105* 
858 87 
M6 »U 
M2 105U 
«J51?l%rt 
860 94 

8G 99i 

896 11541 
8GB 9tti 
6.® 129* 

897 tftti 

856 95* 


7.73 844 Stftd 
867 835 10312 

861 853 10Ue 

743 833 74 

838 848 95JJ 

834 840 93^ 

as 847 10ZB 
820 8RI130UN 


86* 

125* 

♦V 105*1 

Vs 100* 

*h 1251a 
*& T4S* 
*& lira 
+* nis, 
*£ 136* 
^ 11« 
+ft 151* 
rw/i 

*H 115* 


+B aw 
m irai 

**2 1ZI*I 

*41 934 
*h UTS 
*S 1144, 
1284. 
150*2 


h* 594| 

**t 543 

— 71 

— 44^ 
+1, 38>a 
-A 375, 


hfe-ueri M 

%c-96 «7.9) 2» 423 200,V t*i 20T* I97« 

1135J68 2J5 3 73 107* ♦*• 113* U*A 

2*2pC 171 (783) 3.M 3® 1®*$ +* 176% iffl'j 

2*jj)eTD (788) 153 185 iMW +,i 173% 158* 

4%pc *0411 (135.9 396 3® 108% ♦•« 118% 107% 

a«-0S 360 3 W 168*3 -*■ 16*H IBS,’, 

lltfCV 4789 3® 3 85152!!* +A 168,’, 149*« 

2*ap*'11 P4G 3 68 3 86 157J2 +* 175% 154*j 

2*2X13 4893 a» 186 12912 *A 1«*s 126% 

i*2PC'te #19) 3.73 3J7 13*,’, +,’, 157* 134% 

ZIjDC-W (8301 ITS 388 132N +A ]52iJ 128*2 

2i»c2ltt_07J) 173 1® J!D% *A »»* 

41rfeT0tt (13S.1I 3.7B 399 109 *s ♦* 128)1 105% 

ftosoecbve reri redemption rale on grape led Inflation ot tlj 103* 
and O 594. (b) Figuee n p are nlneaea alow RPI base lor 
indeodng fe 8 monttis prior to tesua) and nave been adp/sted lo 
reflect rebaring at RPI w 100 In February 1007. ConwraOfl 
factor 3J4S. BPI lor February 1984: 142.1 and far September 
1994: 145A 

Other Fixed Interest 

..Vfcid.. xi 199 f- 

ttns to tod Pttaf 


t*i 203% 1971 J 
+*t in* 106,’, 
+A 176% 163*2 
♦A 173 s ! 158* 
+ ■1 11t*| 1fl7>a 
-iB 16*44 IS hi 
♦A 16*,’. 1491* 
*A 175% 154*| 
+A 14fl*a 125*1 
♦A 157A 134% 
+A 1S2iJ 128*2 
*A IJ9,’. 106% 
♦A 126)1 105% 


LMBd are ihe Iriea mavnrtwrt bonds lor wtecftlfwre Is a» adequrie secondary maML Latest prices at 


U8 DOLLAR STRAIGHTS 

AfctwyNsa Treasiryf’j 03 1000 87% 

Afcena FWor 7% 98 1000 98% 

Aum 81 2 00 400 101 4i 

Baft Ned CoTBemn 7 99 «0D 96** 

Balk of Tc*VO #J» 96 100 101 

Bripum 5»2 03 1000 81*1 

BKE 73, 97 ISO UB>* 

Brian D 21 1500 

Canada 9 96 1000 1W4 

Chang Kong Rn 5*2 98 500 88% 

O«6>;04 1000 833,4 

UMd Ereope 8 96 100 *00% 

O-atf fire** 0:99 300 105*4 

Denrarlt 5% 98 ’000 94% 

East Japan RriMy S% 6t 600 88>* 

ECSCB*4 96 190 101% 

eC6*,96 100 101% 

BB 7% 96 250 100% 

BBS’s 97 — 1000 W 

Bscde France 9 98 300 m 

Eurotma 9>, 96 HO 1033* 

Ex-kn Bj* Japan 8 02 500 88^ 

Bqxtf Dav Gap 9*2 98 150 104% 

federal Natl Mon 7 40 04 1500 941, 

Frtand 6\ 97 3000 97>: 

Fcrd Motor OatSl B*. 98 1500 9S*1 

Gen Bee Caplri 8 *b « 300 !CP% 

GMAC Big 96 200 101% 

WBk^aiFn7%gr 200 99% 

irterAmerftv 7% 98 200 100% 

My 6% 23 3500 77 

Japan Cm> Ee> 6% 01 500 HD*3 

KroUEfec Pwr 10* 360 iQ3*j 

Korea Ehc Aomb 6% 03 1350 84% 

LIES fin 8 97 200 100 

Iftfeuriwa Bee 7% CO 1000 94 

Noway 7% 97 lOOO 99% 

Orsaro 7% 03 3000 93% 

Osier Kertrotar* 8*2 01 200 101% 

fturaCaaU 7% 96 200 99% 

Portuja 5% CO 1000 83% 

Ouabec Hw*o 9% 98 150 HM% 

OuelxcfiwSW 200 102 

Srinstwy 9% * 150 102*2 

SAS 1D99 200 JW 

SNC3F9*2 98 150 104% 

a»6*2 99 1500 93% 

Stria NSW 8*2 96 200 101% 

Sweden 5*2 95 2900 98% 

Suredsh Eqm 8% 96 700 101% 

Totao Bee Power 6% 03 1000 06 

ToKvo MsHpefB 8% 96 200 101% 

Toyota User 6% 98 1500 34 


TOO pm on November IS 
Bd OBar Ghg. VMd 





Ltoted Hng±sn7% 97 

_5S00 

101 

101% 


674 

88% 

4*4 

858 

Vctewagen toll Fn 7 03 

_ 1000 

94% 

94% 

*% 

732 

99% 

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736 

Worto Bar* 015 

— 2000 

20% 

21% 

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777 

102% 

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806 

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_3000 

88*2 

88% 


789 

96% 

**4 

736 

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110% 

111 

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733 







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651 

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100% 


756 

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835 

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525 

102% 

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705 

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96% 

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817 

88% 


419 

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96 

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863 



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105 

107 

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811 

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756 

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COMPANY NEWS: UK 


FINANCIAL. TIMES WEDNESDAY NOVEMBER 

S5Sg8^/ ! 


Record banknote production behind better than expected 10% rise 

De La Rue advances to £73m 


By Paul Taylor 

Record banknote production 
helped De La Rue, the security 
printer, payment and transac- 
tion systems group, report bet* 
ter than expected interim prof- 
its yesterday. 

Pre-tax profits increased by 
10 per cent to £72£m in the six 
months to September 30, up 
from £66.1m a year earlier 
when profits were boosted by a 
£9£m exceptional profit on the 
sale of the group's Brazilian 
operations. 

in the wake of the announce- 
ment analysts upgraded their 
full-year profits forecasts and 
the shares closed up 31p at a 
new high of £10.34p. 

The results were underpin- 
ned by a 20 per cent increase in 
operating profits to £52 .2m on 
turnover from continuing oper- 
ations up 21 per cent to £324m 

Pre-tax profits were also 
helped by higher net interest 
receipts of £6 An (£5.7m) and a 
significant increase, from 
£7 -3m to £13.7m, in the share of 


profits of De La Rue Giori, the 
group's Swiss-based banknote 
printing equipment associate. 

Mr Jeremy Marshall, chief 
executive, said the results, 
"demonstrated De La Rue's 
strengths across all our sec- 
tors". He said banknote pro- 
duction was at a record for a 
half year with strong demand 
from a broad range of custom- 
ers. 

The security printing con- 
tinuing operations contributed 
£3l-2m (£24.9m) to operating 
profits on turnover of £130m 
(£89 An), buoyed by an unusu- 
ally high volume of “bonanza" 
banknote printing undertaken 
on behalf of countries which 
had been unable to meet 
d eman d from their own state- 
owned presses. 

The group also generated 
sales of Rgfini for work com- 
pleted on state printing works 
projects, although it said it was 
taking a conservative approach 
to recognising profits from this 
source. 

The transaction systems 


De La Rue 

Share price (pence) 
1.050 



Nov 93 

Source: FT Graphite 


1904 


division, which made profits of 
£4 -5m (£2.5m) on turnover of 
£41.3m (£29.7 zd), also had “a 
very encouraging first half". 

Profits from the payment 
systems operations, which sell 
cash handling equipment, 
edged ahead to £l6-5m <£16m) 
on turnover of £155m (£149m). 

Earnings per share increased 
by 13 per cent to 28.1p (24.8p). 
Excluding non-recurring items. 


earnings advanced by 32 per 
cent. The interim dividend is 
raised by 17 per cent to 7p (dpi. 

• COMMENT 

With the exception of the pay- 
ments systems division. De La 
Rue's results were impressive 
- even though they benefited 
from a number of atypical fac- 
tors. Second half growth is 
unlikely to match that 
achieved in the first six 
months, but full-year pre-tax 
profits of £150m now look pos- 
sible. producing earnings of 
about 57.<5p. Profits from the 
mature core businesses should 
be solid over the next few 
years, but the group's perfor- 
mance in the longer term looks 
less certain. Without a large 
acquisition it could be difficult 
to maintain the momentum. 
Such concerns have yet to be 
reflected in the shares which 
are trading on a prospective 
p/e of 18 and have outper- 
formed the FT-SE-A All-Share 
Index by 35 per cent this 
year. 


Acquisitions help lift 
Sedgwick to £78.7m 


By Ralph Atkins 
Insurance Correspondent 

Sedgwick, the international 
insurance broker, yesterday 
announced increased pre-tax 
profits of £78.7m In the first 
nine months of 1994. buoyed 
by acquisitions and good 
growth in Its international 
retail broking business. 

Pre-tax profits for the first 
nine months of 1993 were 
restated at £66-lm. Earnings 
per share increased from 8.8p 
to 9.ip. 

Total brokerage and fees 
rose to £663.3m in the first 
nin e months, against £551 An. 
Excluding the effect of acquisi- 
tions, an underlying increase 
of 1 per cent in brokerage and 
fees was matched by a under- 
lying increase of 1 per cent in 
expenses. 

Mr Sax Riley, chief execu- 
tive, said underlying growth 
in retail brokerage and fees 
had been maintained at an 
annual rate of 5 per cent or 
more In North America, 
Europe and the Asia/Pacific 
regions. 


However, overcapacity in 
the London insurance market 
and competition from overseas 
bad curbed the performance of 
Sedgwick Payne, the group’s 
specialist insurance Operation- 
Brokerage and fees at Sedg- 
wick Payne showed only a 
modest increase to £134.2m 
(£133. 9m) in the first nine 
months. 

Mr Riley said Sedgwick’s 
attempts to broaden the range 
of consultancy services it can 
offer and reduce the propor- 
tion of commission-based 
income were on course. 

Sedgwick Noble Lowndes, 
including the employee bene- 
fits consultancy the group 
acquired last year, reported 
underlying pre-tax profits of 
£14m in the first nine months. 

The group’s results were 
broadly in line with expecta- 
tions and Sedgwick’s shares 
closed unchanged at 147p. 

Pre-tax profits In the UK 
increased to £37.5m (£30. lm). 
Continental Europe also saw 
an increase to £HMta (£7.5 m). 
There was a slight dip in US 
profits to £28JJm (£29. 5m). 


St James’s Place 
17% ahead at £16.5m 


By Christopher Price 

St James's Place Capital, the 
financial services group run by 
Lord Rothschild and Sir Mark 
Weinberg, turned in half-year 
pre-tax profits 17 per cent 
higher at £l6.5m, against 
£L4.1m. 

However, net assets per 
share showed a decline from 
86.3p at the year-end to 84.1p, 
although this was an 8 per cent 
improvement from the 77.5p of 
a year ago. 

In volatile market condi- 
tions, profits from dealing in 
investments jumped from 
£500,000 to £io.6m. reflecting 
the group's management of its 
short-term investments. How- 
ever. profits of £9.7m from the 
holding portfolio of invest- 
ments, the group’s longer-term 
play, were turned into losses of 
£2.2m as the market indices 
turned down. 

Fund management income 
more than tripled to £3 .2m 
<£lm>. 

In the life assurance busi- 
ness, Scottish Amicable has 
taken over the administration 


of J Rothschild International 
Assurance. The group said that 
it was “actively seeking fur- 
ther marketing arrangements 
with banks and other institu- 
tions" in a number of coun- 
tries. 

Plans to set up a new ven- 
ture to buy and manage life 
assurance companies, 
announced in September, were 
being advanced. SJPC is put- 
ting up some £30m of the 
£100m capital fund for Life 
Assurance Holding Corpora- 
tion. with a further £40m com- 
ing from New York Life and 
Scottish Amicable. The remain- 
der is being sought from other 
institutions. 

Mr Ron Bell, chief accoun- 
tant. said that with the volatil- 
ity and uncertainty’ surround- 
ing the world's bond and 
equity markets, the company 
preferred to concentrate its 
investments on specific compa- 
nies rather than exposure to 
markets m general 

Earnings per share fell 27 per 
cent to 4.3p (5.9p). 

The interim dividend is 
maintained at 1.5p. 


CONTRACTS & TENDERS 


REPUBLIC OF PARAGUAY 

MINISTRY OF PUBLIC WORKS 
AND COMMUNICATIONS 

1UNDERSECRETAR1AT OF PUBLIC WORKS AND COMMU-I 
NICATIONS 

DEPARTMENT OF ADJOINING ROADS 

RURAL COLONY CONSOLIDATION PROJECT IN THE 
CORES CORONEL OVIEDO - MBUTUY AND CONCEP- 
CION - PEDRO JUAN CABALLERO 

LOAN AGREEMENTS NOs 694/OC-PR & 891/S F- PH 


PBEQUAUFICATION OF CONTRACTORS CALL 

The Ministry of Public Works of the Republic of Paraguay 
Invites Firms and Corporations of countries members of 
Interamerican Bank of Development (BID), specialised in 
road works, to present prequaltfl cation proposal relative to 
contracting Firms and Corporations for the carrying-out of 
works of Reconstruction and Improvement of approxi- 
mately 328 Km. of Rural Roads included in the mentioned 
project, corresponding to the Groups 1,2,4 and 5 of the 
Coronei Oviedo - Mbutuy Core, and groups 6 and 8 of the 
Concepcion - Pedro Juan Caballero Core, to be partially 
financed by the Interamerican Bank of Development 
through foe Loan Agreements Nos. 694/OC-PR and 
891/SF-PR. Therefore, the financing of the Works shall be 
subject to such Agreements requirements. 

The works consist. In short, in the carrying out of. 

• Embankments 

e Coating of road with rubble 

• Wood bridges 

• Small bridges of tubes of H B A° 

• Vertical signing 

• Grass filling 

• Coating of ditches and energy dtssf paters 

In order to prequalify, the Firm or Corporation shall obtain 
a minimum score of 75 of the 100 points possible. The 
detail of the qualification system Is attached In the Bases 
and Specifications. 

Bids for the mentioned 328 Km are expected to be called 
during the first semester of 1 995, planning the beginning of 
the works during the second semester of the same year 
with an estimated carrying out time limit of 20 months. 

The qualification documents may be obtained from the 
Department of Adjoining Roads Administrative and 
Accounting Unit, in Oliva and Alberdl, MOPC budding, 2nd 
floor, Asuncion Paraguay, previous formal applications 
and pay of one hundred thousand guaranies that shall be 
deposited in Banco Central del Paraguay starting from 
November 17 of the current year. 

Applications will be received in the only Entrance Table, 
Ground Floor, of the Ministry of Public Works, until 8.00 
am of January 6, 1886, In the mentioned address. 


REPUBLIC OF PARAGUAY 

MINISTRY OF PUBUC WORKS 
AND COMMUNICATIONS 

(UNDERSECRETARIAT OF PUBUC WORKS AND COMMU 
NICATIONS 

DEPARTMENT OF ADJOINING ROADS 

NATIONAL PROGRAM OF RURAL ROADS, 

FIRST PHASE 

LOAN AGREEMENTS NOs 744/OC-PR AND 745/OC-PR 
INTERAMERICAN BANK OF DEVELOPMENT (BID) 

PREQUALIFICATION OF CONTRACTORS CALL 

The Ministry of Public Works of the Republic of Paraguay 
Invites Firms and Corporations of countries members of 
Interamerican Bank of Development (BID), specialised In 
road works, to present prequaliflcation proposal relative to 
contracting Firms and Corporations for the carrying-out of 
works of Improvement and Reconstruction of approxi- 
mately 670 Km. of Rural Roads included In foe mentioned 
program, corresponding to the Subprojects Salto - 
Corpus, San Pedro - General Aquino, VDtarrfca - San JosS 
and Itapua, to be partially financed by the Interamerican 
Bank of Development through the Loan Agreements Nos. 
744/OC-PR and 745/OC-PR. Therefore, the financing of 
the Works shall be subject to such Agreements require- 
ments. 

The works consist, In short, in foe carrying out of: 

• Embankments 

a Coating of road with rubble 

• Wood bridges 

• Small bridges of tubes of H" A- 

• Vertical signing 

• Grass filling 

• Coating of ditches and energy dlsslpaters 

In order to prequalify, the Firm or Corporation shall obtain 
a minimum score of 76 of foe 100 points possible. The 
detail of the qualification system Is attached in the Bases 
and Specifications. 

Bids for foe mentioned Subprojects are expected to be 
called during the first semester of 1995, planning the 
beginning of the works during the second semester of 
1995 with an estimated carrying out time limit of 24 
months. 

The qualification documents may be obtained from the 
Department of Adjoining Roads Administrative and 
Accounting Unit, In Oliva and Alberdl. MOPC building, 2nd 
floor, Asunddn Paraguay, previous formal applications 
and pay of one hundred thousand guaranies that shall be 
deposited In Banco Central del Paraguay In the Account 
No. 490 “Otros Recursos*, starting from November 17 of 
the current year. 

Applications win be received In the only Entrance Table, 
Ground Floor, of the Ministry of Public Works, until 8.00 
am of January 1 0, 1996, In the mentioned address. 


Reasons 
why float 
had to be 
pulled 

By Simon Davies 

BrigbtReasons. the owner of 
Pizzaland, has become the 
latest new issues casualty. 

The company announced 
yesterday that its share offer 
would be "delayed". 

Its brokers had advised that 
the shares would have to be 
offered at a price that its 
management was not prepared 
to accept 

The decision follows the 
sudden postponement of the 
share offer for New Look, the 
women's wear chain, after 
fund managers had shows 
limited interest in the offer. 

BrigbtReasons had planned 
to raise about £35m from 
Investors in an offer that 
would have valued the group 
at between £60m and £80m. 
The money was to have paid 
down debt built op in 
expanding restaurant chains, 
which include Pastifico, Prima 
Pasta and Pizza Piazza. 

Despite the recent stock 
market recovery, brokers UBS 
Securities advised that this 
valuation was not possible. 

BrightReasons was adamant 
that it was in no harry to float 
and that the issue would go 
ahead once market conditions 
were more favourable. The 
company's said Its recent 
trading performance had been 
“extremely strong". 

It has been a difficult period 
for new Issues. This year has 
broken records for both the 
number of companies and the 
size of offerings. However, a 
number of flotations have 
been followed by 
disappointing trading 
statements and institutional 
interest has waned. 

Property group London 
Capital Holdings was the first 
issue to be pulled, in May. It 
was followed by a number of 
others, including British 
Printing Company, Life Style 
Care, General Cable and 
Telewest which has recently 
resuscitated its share offer. 


BSkyB says piracy 
undermine float 



J-ri] 



By Raymond Snoddy 

British Sky Broadcasting, the 
satellite television consortium, 
has admitted in a High Court 
affidavit that piracy could 
undermine confidence in it s 
flotation unless rigorously 
tackled 

Last week BSkyB was 
granted a High Court injunc- 
tion. under copyright legisla- 
tion, against Mr Bill Leach and 
Mr Russell Craven, trading as 
BSB Electronics. 

The small electronics com- 
pany was alleged to have been 
using regional newspaper 
advertisements to sell a device 
It was claimed could switch on 
BSkyB smart cards whether 
the limiter pajfl their sub- 
scriptions or not 

Another blocker device was 
claimed to be able to prevent 
the satellite company deacti- 
vating the cards. 

The largest proportion of 
BSkyB's revenues are ea r ned 
by broadcasting channels, such 


as Sky Sports, which can only 
be viewed by subscribers who 
have a card to unloti the sig- 
naL 

The BSkyB case was that 
miia« the defendants were 
stopped, the satellite company, 
in which. Pearson, owners of 
the Financial Times currently 
holds 17.5 per cent, would suf- 
fer “substantial and unquantif- 
iable loss”. 

This was spelled out in the 
affidavit as: 

• a loss, perhaps accelerating, 
of current and potential sub- 
scnbers; 

• the possible loss of agree- 
ments and intended agree- 
ments with independent broad- 
casters; 

• posable loss of confidence 
in BSkyB's impending flota- 
tion. BSkyB's pathfinder pro- 
spectus, valuing the company 
at between £4bn and £4.6bn 
was published on Monday. 

The legal document also says 
that BSkyB has come across a 
few examples of pirate “period 


Y-TT head calls for 
joint Channel 5 bid 


By Raymond Snoddy 

Mr Ward Tho mas , nhafrman of 
Yorkshire-Tyne Tees Televi- 
sion, yesterday appealed to the 
FTV companies to make a joint 
bid for the new Channel 5. 

Although individual ITV 
companies are limi ted to a 
maximum stake of 20 per cent 
there is apparently nothing In 
the rules to prevent them mak- 
ing a joint bid. 

“1 think the most sensible 
thing would be if a consortium 
of ITV companies combined to 
bid for Channel 5. The BBC has 
two channels. Why not ITV?” 
Mr Thomas asfrgd 
The Yorkshire chairman also 
announced a return to profit 
for the company in die second 
half after serious problems last 
year with its advertising sals. 
In the current 15-month 


Hydro gets £10.5m 
value from placing 


By Peter Pearse 

The placing shares in Hydro 
International, which is coming 
to market, have been priced at 
80p, valuing the maker of con- 
trol systems for storm water 
control and sewage separation 
at about £10.5m. 

Some 4.63m shares are being 
placed by Allied Provincial 
Securities. Of these. 4m are 
new and the balance are being 
sold by Mr Tim. Lamb and Mr 
Bob Smissan. founding direc- 
tors and chief executive and 
deputy chairman respectively. 

Mr Lamb and Mr Smisson 
are being paid dividends total- 
ling £200,000, conditional on 
the listing. The board does not 
Intend to declare a dividend for 
the year to December 31; subse- 
quently a dividend policy will 
be Introduced "broadly 
reflecting growth in the 
group’s underlying profit”. 

Of the £2. 75m raised in the 
placing, some £2 An is to be 
used marketing Hydro's prod- 
ucts. investing in information 


technology, constructing a fur- 
ther test facility, and recruit- 
ing additional staff, particu- 
larly in research and 
development 

Mrs Elizabeth Kennedy, a 
director in Allied Provincial’s 
corporate finance department, 
said that Hydro was a develop- 
ment type company, though 
not a “blue sky” company, in 
that it has patented products 
bringing in revenue and profit 
In 1993 It made £156.000 on 
£4.im turnover and in the six 
months to June 30, profits were 
£154,000 on £2.4m turnover. 

She said that the pricing 
therefore fell between what the 
company thought It was worth 
and what the institutions were 
prepared to pay. Ten “main- 
line” institutions have taken 
shares, including Scottish Ami- 
cable. Friends Provident and 
Legal & General. 

Mrs Kennedy said $3.7m 
(£2.25m) orders from Colum- 
bus, Georgia, had acted as one 
of the triggers behind Hydro's 
deci si on to come to market 


Winding-up at Waterglade 


A winding up order was issued 
on November 9 against Water- 
glade International Holdings, 
the property development 
group. Its directors announced 
yesterday. 

Liquidators will be appointed 
shortly to the subsidiaries. 

Shares in Waterglade were 


suspended on October 10. On 
October 19 the directors 
reported that a rescue plan 
was impossible, given the 
group’s flna^< riai situation. 

Liabilities are £29m. The 
directors do not anticipate that 
any funds will be available for 
shareholders. 


period, pre-tax profits for the 
six months to September 30 
were £4.7m, cancelling out a 
£4. 6m loss in the first half and 
leaving profits for the year at 
£111,000 (£7.9m losses). Turn- 
over amounted to £225 xn 
(£237m) generating operating 
p rofi t s of £59.Sm (£35 .8m) for 
the 12 months. 

Mr Thomas, who has made it 
dear he would like to be part 
of a Channel 5 application, said 
Yorkshire's advertising reve- 
nue was starting to grow. 

The Yorkshire chairman also 
said be had tried to persuade 
the government to privatise 

fThnriTipl 4. 

“I am one of those trying to 
encourage the government to 

think about the 

of Channel 4,” said Mr 
Thomas, who added that 
£1.5bn could be raised. This 
could mean £flm for the gov- 
ernment and the rest could be 
used to reduce the total bid 
money ITV mnst pay to the 
government. Privatisation, 
however, sapms unlikely. 

Yorkshire, in which Pearson, 
owner of the Financial Times, 
has a 14 per cent stake , said 
the drive to cut costs contin- 
ued. It had cost of sales and 
operating expenses of £81.6m 
in the second half, down from 
£94.8m, while programme sales 
r emaine d strong. * 

“We will produce for any- 
body. That is where our busi- 
ness can expand and why we 
have to be cost effective," Mr 
Thomas said. 

Earnings per share for the 
six months amounted to 6-2p 
and for the 12 months to O.lp 
(ll.lp losses). At the end of the 
15-month period to December 
31 the directors will give “seri- 
ous consideration” to propos- 
ing a dividend. 

The shares rose 6p to 395p. 


Rap to float 
with likely 
£17m tag 


Two former BTR' directors are 
bringing a rubber and plastics 
distributor to. the market next- 
month which is expected to be 
valued at about £17X0. 

Rap, which distributes 
industrial products such as 
hoses, gloves, gaskets and uni- 
forms, is hoping to raise about 
£4. 6m in an institutional plac- 
ing. About £2 JLm of tiie net 
proceeds will be used to 
redeem preference shares and 
the balance win provide work- 
ing capital to fond expansion 
largely through acquisition. 

Rap's chief executive Is Mr. 
David Emmett former general 
manager and director at BTR 


Farington, and joint leader of 
Bap’s management buy-out 
from Haden MacLellan Hold- 
ings in 1991. He is joined an 
the board by Mr Lionel Stam- 
mers, former joint head of 
BIB'S European division, who 
is a non-executive director. 

Since the buy-out Rap has 
increased pre-tax profits from 
£496,000 in 1991 to £L22m in 
1993. Sales have risen in the 
same period from £l4Am to 
£l9-3m. However, the sharp 
rise in profits and sales was 
helped in part by acquisitions 
in 1993. 

In its pathfinder p rospectus 
published yesterday, the group 
forecast pre-tax profits for 
1994 of not less than £1.7m. 

The company said sales had 
Increased largely because of 
greater activity in its market 
sectors. Margins had improved 
through operating efficiencies. 

Rap trades from 23 outlets, 
which are mainly close to 
industrial areas. Its businesses 
include distribution of indus- 
trial and safety products, sup- 
ply and servicing of conveyor 
belts and import and whole- 
sale of gloves. 


I DIVIDENDS ANNOUNCED i 





Correa - 

Total 

Total 



Current 

Date of 

ponding 

for 

last 



payment 

payment 

dividend 

year 

year 

BOC _ 

Jnt 

124 

Feb 1 

11.8 

-ft 

23 J2 

Brak lor Border 

Jnt 

0.33 

Dec 23 




Brit Empire Secs — 

Jin 

0.71 

Jan 4 

0.68 

0.96 

0.B3 

Capitol 

Jnt 

1.2 

Dec 14 





Cedardsta 

Chartee Sidney 
Da La Rue 


.Int 

Jnt 


-fin 
J m 


Oldda (Junes) § ftn 

European Colour int 

Gt Portland Eats.. — Int 

Heath (CE) Jnt 

Maratatts ~ — Int 

PowarGen jnt 

St James's Place Jnt 

Sacurffd Endow fin 

Sima Pood Int 


S ymon da Eng 
WJfshew 


-Int 

Jnt 


Q.4T 

1.05 
2.3 
7 

2.5 
0.575 

29 

5t 

1.5 
5 

1.5 

2 

2t 

0.25 

OASt 


Fab 1 
Jan 4 

Jan 27 
Dec 21 
Jan 9 
Jan 5 
Jan 5 
Apr 8 
Dec 20 
Dec 29 
Jan 3 
Jan 5 
Jan 6 
Jan 31 


0.4 


6 

2 

0.35 

2.7 

5 

1.25 

3.95 

1.5 

2 

nil 

02 


3.5 

3.5 


3.5 


1.1 


20 

2 

1.15 
8 
16 
4 25 
12.85 
3 

7.5 

0.25 

0.8 


4 


9" cards - tiie mure, sbphfefr- 
cated cards Introduced In Mfiy 
to wipe out piracy: 

The cards were knoolMi dot:, 
by signals broadcast- over tbei 
air. ; 

Ms Sharon SoutfcwaH-Gtety, . 
BSkyB's deputy ftetf .tegal 
affairs, says in the document-, 
that some of the ibMvidnalfi- 
and co mpanie s involved In'; 
piracy have . sophisticated.'.' 
resources. *T believe ft is.only a . 
matter, of time before pirate', 
period 9 cards become avait 
able,” she conceded; 

fix its pathfinder tfoasn ent , 
BSkyB says pirate devices - 
range from counterfeit cards to 
“blockers" designed to upgrade 
genuine cards. 

The directors sa y they are 
not aware of counterfeit cards-' .' 
still functioning, and add that ' 
blockers were not in wide cir- 
culation. 

Apart from over-the-air .anfct 
piracy measures, BSkyB would 
continue to replace its cards • 
periodically. 




r 


We are pleased to announce the expansion 
of our 

Fixed Income Department 

Donald S. Galante 

Senior Vice President 
Head of Fixed Income 
(212) 383-51 0MJ9 


Thomas Fredericks 

Vice President 
(212) 363-5193 

Jose Vega 

Assistant Vice President 
(212) 363-5193 


Joseph DiPaolo 

Assistant Vice President 
(212) 363-5193 

John Astrologo 

Assistant Trader 
(212)363-5193 


Dresdner Securities (USA) Inc. 

Dresdner Bank North America 

One Banary Park Plaza 
New York, NY 10004 


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HYDRO 

INTERNATIONAL pic 

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Placing 
by 


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Alubj Provincial Securities Limited 
^,625,000 ORDiNARr SHARES OF 5p BACH AT 8Qp PER sharp 


Share Capital following the Placing 


Autionaael 
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1-ooaooo 80,000000 - £ c ? ia '"' y 8n *" * * 


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FINANCIAL times WEDNESDAY NOVEMBER 16 1994 


COMPANY NEWS: UK 


R -P to float 
'■ 5th likely 
-Hm tag 


Decline to £253m despite strong growth in gases division 

Restructuring charge hits BOC 


By Daniel Green 

A sharp rise in gas prices and 
volumes m the final quarter 
HE* BOC-s turnover 
by 8 per cent in the 
Se P ten *er 30. However, 
an £85ra restructuring charge 
“£ a £16 - 6 “ taw on disposes 
pretax Profits down at 
2253m, against £338m. 

Mr Pat Dyer, chief executive 
said the economic climate was 
fight for more gas price 
increases in the US. US gases 
plants were running at close to 
full capacity and some compet- 
itors had been rationing prod- 
ucts. 

Group turnover advanced to 
£3.48bn t£3.24bnj generating 
operating profits of £435m 
(£42im). The gases division 


accounts for 71 per cent of 
sales and achieved a 9 per cent 
increase in operating profits to 
£332m. with a fourth quarter 
gain of 20 per cent to £88 .2m- 
In creasing sales volumes had 
raised profit margins. Most of 
the price of each extra bottle of 
gas sold goes straight to the 
bottom line because capital 
costs changes little with out- 
put 

Mr Dyer said that average 
prices had fallen slightly 
because customers were on 
contracts that offered dis- 
counts for higher volumes. 

He added, however, that the 
recent surge in US prices indi- 
cated that there could be price 
rises elsewhere in 1993. 

BOC’s second biggest divi- 
sion, healthcare, continued to 


suffer from the expiry this year 
of patent protection on the 
anaesthetic gas Forane. Its 
market share in the US had 
fallen from “almost 100 per 
cent" to less than 35 per cent 
and the price had fallen by 
more than one-third. 

Healthcare’s turnover fell 2 
per cent to £56Sm (£577m) and 
operating profits dropped 37 
per cent to £54.6m <£86.2m). 

Mr Dyer warned that further 
competitors were likely to chal- 
lenge Forane within months. 
Forane's replacement. 
Suprane, continued to grow 
and had 35 per cent of the US 
market. 

The healthcare division's 
performance in Europe was 
hurt by a product recall of 
Suprane vaporisers, costing 


£5m by the year end. 

The company '5 third divi- 
sion, vacuum and distribution, 
registered strong growth 
thanks to the buoyancy of one 
of its main customers, the 
semiconductor industry. 

Turnover grew by 20 per 
cent to £435m and operating 
profit increased 55 per cent to 
£51 hl 

The exceptional charge, 
announced in January, left 
earnings per share at 23.82p 
I42.97p). Excluding the charge, 
earnings were 43.S7p. 

BOC announced 1995 divi- 
dends of 12.4p for each half, to 
make a total of 24.8p - a 7 per 
cent increase. 

BOC shares rose lQp to close 
at 720p. 

See Lex 


CE Heath hit by direct line costs 


By Christopher Price 

The cost of entering the direct 
line insurance business and 
accounting vagaries at an Aus- 
tralian associate depressed 
profits at CE Heath for the six 
months to the end of Septem- 
ber. 

The pre-tax figure fell from 
£14.9m - inflated by a £3.25m 
exceptional item - to £6.37m. 
Turnover on continuing 
operations was little changed 
at £8L5m (£815m). 

Heath's Premium Search 
telephone broking business 
incurred losses of £l.6m during 
its first four months of opera- 
tion, with Mr Peter Presland, 
chief executive, forecasting 
that the full-year deficit would 
be about £4m. He anticipated 
that the business, which is 
likely to employ up to 400 peo- 
ple, would move into profit In 
1996. 

Mr Presland denied that the 
company had left it too late to 


enter the direct line market 
"There is a big market out 
there for this kind of service 
and it is going to get bigger as 
more and more people look for 
their insurance needs away 
from the high street." 

CE Heath International Hold- 
ings. the group's Australian 
associate in which it holds a 23 
per cent stake, saw its profit 
contribution drop from £6m to 
E1.2m. The company blamed 
the fall on the halving of its 
stake, and Australian account- 
ing rules which make the com- 
pany reflect all investment 
gains and losses in its profit 
and loss account. 

Losses from the Hew York 
underwriting business widened 
from £450,000 to nearly film, 
although the company added 
that the subsidiary’s book of 
agricultural business had been 
sold and the losses would not 
recur. 

Profits from the computing 
services division rose 26 


US automotive recovery 
helps Wilshaw to £2.24m 


By Richard Wolffe 

Recovery in the US automotive 
industry helped lift interim 
profits at Wilshaw, the special- 
ist metals and distribution 
group, by 65 per cent 

The company announced 
pre-tax profits of £2.24m 
(£l-36m) for the six mouths to 
September 30, on turnover up 
by 26 per cent to £22.6m 
f£18m). 

Mr Guy Askham. chairman, 
said increased demand for 
magnets in cars helped the spe- 
cialist metals division to more 
than double operating profit to 
£989,000 on turnover of £7.73 m. 


The company is spending 
£500,000 building a new facility 
to manufacture bonded mag- 
nets far computers, electronics 
and small electric motors. 

.The distribution division, 
which sells tractor parts, 
reported operating profits up 
40 per cent to £1.61m on turn- 
over of £12 .2m. 

In April the company 
acquired Agripieces, the 
French distributor, for £1.75m 
in shares. This contributed 
£290,000 operating profit. 

Earnings per share rose to 
1.62p (L06p). 

The interim dividend is 
raised from (X2p to 0-25p. 


per cent to £2.7m <£2.14m). 

Earnings per share dropped 
46 per cent to 5.9p fl0.9pi. The 
Interim dividend is maintained 
at 5p. The shares rose 13p to 
232p. 

• COMMENT 

Heath's chunky dividend, cur- 
rently yielding nearly 9 per 
cent, should limit any down- 
side for the shares. However, 
in the short-term it is difficult 


to see where any sustained 
earnings growth is likely to 
come from. With its broking 
operations under pressure, 
underwriting contributions 
declining and the direct line 
service in its formative stages, 
it is only the fairly limited con- 
tribution from computer ser- 
vices which can be counted on. 
Worth holding for the yield, 
and on the off-chance a preda- 
tor might swing into view. 


Sims Food 
bounces 
to £1.21m 

By Richard Wottfe 

Shares in Sims Food Group 
climbed 6p to 87p yesterday as 
the meat processor and 
supplier turned losses of 
£l.26m to pre-tax profits of 
£1.21m in the six months to 
September 30. 

Strong demand in the fast 
food sector helped to lift sales 
by 4 per cent on continuing 
activities, although overall 
turnover fell 10 per cent to 

£134m <£I49u). 

Mr John Stone, chairman, 
reported that “we are enjoying 
improved trading conditions 
in all our divisions as input 
prices have eased and 
consumption has increased”. 

The Milton Keynes-based 
company reported retail sales 
up 9 per cent to £38. 8m, 
following a 40 per cent 
redaction in slaughtering 
capacity last year. 

Volumes at the core 
wholesale hamburger business 
rose 10 per cent to lift 
manufacturing sales 9 per cent 
to £l6.4m. 

The catering division 
reported sales down 14 
per cent at £23. 7m. as meat 
costs rose higher than 
expected. 

Earnings per share were of 
2.1p, compared to losses of 3p. 
The interim dividend is 
maintained at 2p. 


UK housebuilding rise 
behind Marshalls growth 


By Andrew Taylor, 

Construction Correspondent 

Pre-tax profits of Marshalls, 
the West Yorkshire-based 
building materials group, 
jumped by 40 per cent from 
£11. 3m to £15. 9m in the six 
months to September 30, 
assisted by a sharp rise in UK 
housebuilding- 

increased investment in com- 
mercial and industrial con- 
struction as the UK economy 
Improved also helped first-half 
sales, said Mr Andrew Mar- 
shall. chairman. 

About a quarter of group 
turnover, which rose by 22 per 
cent to £124.8m (£1 02.2m), is 
generated by the UK and US 
housing market, including 
sales for repair and mainte- 
nance. 

UK housebuilders, which 
started work on UL5 per cent 
more homes during the first 
nine months of this year com- 
pared with the corresponding 
period in 2993, hare been 
winning market share in a 
generally sluggish UK housing 
market. 

The increased activity has 
enabled building materials pro- 
ducers to raise prices for some 
products, particularly bricks, 
while increased sales volume 
has assisted margins. 

Marshalls' share price rose 
6p to I46p yesterday on the 


profits announcement, which 
followed a 64 per cent increase 
at the pre-tax level in the pre- 
vious 12 months. 

The interim dividend is 
increased from 1.25p to 1.5p. 
Earnings per share, fully- 
diluted, rose from 4.72p to 6.5p. 

UK operating profits from 
stone and concrete products, 
mainly for paving and flooring, 
rose by 30 per cent to £12. 7m 
(£9.78m). The division was 
helped by a 20 per cent rise in 
turnover, of which price 
increases accounted for only a 
small part 

US losses for stone and con- 
crete declined from £240,000 to 
£58,000 helped by “useful sales” 
from the Florida-based Paver 
Systems. 

UK clay products profits 
more than doubled from £l.5m 
to £3.42m helped by a sharp 


rise in brick prices and higher 
sales. 

Net debt at the end of Sep- 
tember stood at £ 13.5m, equiva- 
lent to gearing of 10-4 per cent. 

• COMMENT 

Marshalls' share price bad out- 
performed the sector by 30 per 
cent prior to yesterday's 
results. It is a well run com- 
pany, but will find it very hard 
to maintain recent growth 
rates. UK margins are already 
at the top end, although they 
could rise a little more, but fur- 
ther significant improvement 
may depend on increased sales 
volume - or perhaps an acqui- 
sition or two. given the 
strength of the balance sheet. 
Pre-tax profits of £30m would 
put the shares on a prospective 
pie of more than 11.5, which is 
rich enough for the time being. 


SeaPerfect intermediaries 
offer 44.75% subscribed 


The intermediaries offer within 
SeaPerfect 's flotation was 44.75 
per cent subscribed at the 3pm 
close on November 14. Valid 
applications in respect of 2.33m 
shares were received from nine 
intermediaries for the 5.21m 
available; therefore applica- 
tions have been met in hill. 


At I20p per share, the 
world's largest controlled pro- 
ducer of shellfish was valued 
at £59m in the placing and 
intermediaries offer. 

Some 15.6m shares, or 
75 per cent, were placed 
firm by Williams de 
Brag. 



General Accident 

CONTINUED EARNINGS GROWTH 


9 Months 
to 30.9.94 
Estimated 
Em 

9 Months 
to 30.9.93 
Estimated 
£m 

3,185.4 

3,142.4 

653.6 

607.0 

338.1 

352.8 

(46.4) 

(171.6) 

321.6 

206.5 

235.4 

160.8 

52.1p 

35.7p 


General Premiums 
Life Premiums 
Net Investment Income 
Underwriting Result 
Profit before Taxation 

Profit attributable to Ordinary Shareholders 
Earnings per Ordinary Share 


• Pre-tax profit for the nine months of £321.6m follows 
a profit in the third quarter of £119.2m 

• UK underwriting profit of £158.1m (1993:.£27.7m) 

• Improved performance in the United States 

• Results in Canada reflect the impact of storm losses in 
the first quarter and additional reserve strengthening 

• Good performance in the Pacific, with excellent results 
from New Zealand and Asia 

• Strong improvement continues in Europe 

• Further progress in Life operations with very 
encouraging new business production in the UK 

Nelson Robertson, Group Chief Executive, commented: 

"We achieved a further substantial improvement in our worldwide 
underwriting result in the third quarter and remain confident that 
an acceptable underwriting performance will be maintained / 7 

General Accident pic 

General Accident pic. World Headquarters: Pitheavlis, Perth, Scotland PH2 ONH ________ 


i 



28 


* 



Aguas Argentinas 

Fulfillment of First Five-Year Plan Objectives. 

Improvement and Service Expansion Plan. 
Drinking Water Distribution Networks and 
Sewers Expansion Works. 

National and International Call to 
Prequalification of Companies. 

Object: 

Preq unification of Companies interested in carrying out, during 3 years, 
drinking water distribution networks and sewer liquid collection expansion 
works, with their corresponding connections, in diameters ranging from 80 
to 2.000 mm. covering a total of approximately 3.200 km, distributed in 4 
regions (North, South, West l y West II) at the area denominated as Gran 
Buenos Aires, in Argentina. 

Total amount of works to bid: 

Approximately $ 450.000.000.- 




FINANCIAL TIMES WEDNESDAY NOVEMBER: 


yy 


COMPANY NEWS: UK 


Property group sees rental growth although tenant demand remains sporadic ;; ; 


- j-= - "V 




Acquisitions bolster Great Portland 


V-0 MV 




By Simon London 
Property Correspondent 

Acquisitions following its 1993 
rights issue helped Great Port- 
land Estates, the UK’s sixth 
largest property company, 
announce interim pre-tax prof- 
its ahead from £16m to £21 .4m. 

Since its preliminary 
announcement in June, Great 
Portland has bought four free- 
hold ofTice investments for 
£2tim. a portfolio of seven prop- 
erties in CardifF and Plymouth 
for £19m, and a pre-let ware- 
house development in Bury, 
Lancashire for £9m. 


These are expected to 
increase net rental income by 
£4.2Sm during a full year. 

However, Mr Richard Peskin, 
chairman, said that demand 
for space from tenants was still 
patchy. “Tenant demand is 
sporadic. Although, with devel- 
opment activity still low across 
the industry, we are optimistic 
that rental growth is on the 
horizon," he commented. 

Net rental income for the six 
months to September 30 rose 
from £40. Lm to £4rU&n. Only 3 
per cent of the portfolio 
remains unoccupied, reducing 

I ktr dknul PO 


The company has continued 
to dispose of unlet space. Its 
vacant development at 39-41 
Charing Cross Road -was sold 
for more than £5m, 20 per cent 
higher than bode value. 

The rights issue raised £95m. 
At the half-year stage, gearing 
stood at 62 per cent, although 
the property portfolio is only 
revalued at the year end. Mr 
Peskin said he would be com- 
fortable with gearing of up to 
90 per cent iT acquisition oppor- 
tunities arose. 

The company’s main devel- 
opment project is 160 Great 
Portland Street, London, where 


it is budding 80,000 sq ft of 
office space behind an existi n g 
facade. The building should be 
ready for occupation next 
autumn. 

After refurbishment costs 
and a dmin istration expenses, 

operating profits were £39 An 
(£3Sm). Net interest charges 
amounted to £l9An (£18.6m) 
and earnings per share were 5p 

<4Jjp). ^ " " 

The interim dividend is 
increased to 2J9p (2.7p); the 
company intends to pay a fin a l 
dividend of 5.85p, making a 
total for the year of 8.75p, 


OrwatFortfami, 

Store price WSafivato 
' FT-5E-A Atf-ShM. in***.; - 

170 



t®93;: 
Source: FT GrapWKj. 


: ' : 


Fleets of cash boxes on wheels 

Simon Davies analyses the bus companies’ race for acquisitions - 

Bus passenger Journeys 

BilHon 



Stagecoach 
pays £8m for 
Scottish bus 
holding 

Stagecoach, the UK's largest 
bus group, yesterday announ- 
ced its eighth acquisition of 
1994, with the £8 -3m purchase 
of a 20 per cent stake in SBH, 
the holding company for 
Strathclyde Buses, Scotland's 
leading bus operator, writes 
Simon Davies. 

Stagecoach will pay £l.5m 
cash, with the remainder in 
new shares. In addition, rt is 
to sell SBH 18 new buses, 
which Stagecoach had 
previously considered using on 
new routes iu Glasgow in 
direct competition with its 
new partner. 

Mr Derek Scott, finance 
director, said: “We have made 
no secret of the fact that we 
need to be in the major urban 
areas of Britain.” 

He said the SBH tie-up could 
open the way for a larger 
stake at a later stage, bnt that 
SBH might alternatively 
consider a flotation, providing 
a potentially profitable exit for 
Stagecoach. 

SBH was formed from a 
management buy-out from 
Strathclyde Council in 1993, 
and it recently expanded 
through the £11 An purchase 
of Kelvin Central Buses, a 
large competitor in Glasgow, 
creating a group with £86m 
annual turnover. 

The group owns L330 
vehicles and employs 3,700 
stafT. SBH said it approached 
Stagecoach, as it was looking 
to raise capital from the sale 
of a minority stake, so that it 
could compete with the larger 
listed groups while retaining 
independence. 

However, the Office of Fair 
Trading said it would look 
into the deal, given Stage- 
coach’s position as Scotland's 
third largest bus operator. 
There is an ongoing OFT 
inquiry into the SBH takeover 
of Kelvin. 


T he UK’s biggest bus 
groups are involved in a 
race against time. 
Declining passenger num- 
bers mean that - in the 
absence of initiatives to 
encourage urban public trans- 
port - acquisitions are the 
easiest route to meaningful 
profits growth. 

The fragmentation of the old 
government -owned National 
Bus Company into 90 new com- 
panies in 1987 has been rapidly 
reversed by the private sector. 

Stagecoach yesterday made 
its 10th acquisition in a year, 
at a total cost of £120m. 

Many analysts believe that 
by the turn of the century 
there will be four or five large 
operators, assuming they avoid 
political backlash over the cre- 
ation of private monopolies. 

The source of pressure for 
acquisitions was underlined by 
the latest Department of Trans- 
port statistics, issued Last 
week. These showed a decline 
in passenger numbers eveo’ 
year in the past decade, in 
spite of efforts to improve effi- 
ciency and service since priva- 
tisation. 

The most up to date figures, 
charting the year to April 1994, 
show a fail of 103m in the num- 
ber of passenger journeys to a 
total of 4.37bn. This is 23 per 
cent down on the 5.65bn jour- 
neys undertaken in 1984. 

Given this unhelpful macro- 
economic picture, operators 
have had to focus on control- 
ling costs and buying less effi- 
cient operators. The four listed 
bus companies have responded 
with enthusiasm, making 20 
substantial acquisitions in the 
past year. 

This has proved fortunate for 
the government, as it coincided 
with the privatisation of the 10 
London bus operators. Nine of 
these have been sold, with four 
going to listed companies and 
the remainder to management 
buy-outs. 

Mr Martin Higginson, eco- 


SoucaDap a rtrtwnraf Tranapert 

nomic adviser to the Confeder- 
ation of Passenger Transport, 
says: “The listed companies 
are making acquisitions 
because profits from the core 
businesses cannot expand rap- 
idly." However, given the 
increased muscle of the listed 
companies, bargains are hard 
to come by. As Mr Higginson 
says, “those who made a move 
in the earliest days of privati- 
sation got good bargains. Now, 
they are having to pay fair 
market value.” 

The operators argue that 
there are substantial efficien- 
cies to be stamped on an indus- 
try with decades of public sec- 
tor fat, and that takeovers are 
the best tnaans of advancing 
the efficiency drive. 

Buses are cash boxes on 
wheels, with predictable reve- 
nue streams and a cost base 
which offers big economies of 
scale. 

By renewing the fleets, new 
management has been able to 
reap the benefits of buying in 
bulk, and of reduced mainte- 
nance costs on vehicles. 

The extent of this trend was 
demonstrated by bus manufac- 
turer Trinity Holdings, which 
in the first half of the year 
received £33m of orders from 
Stagecoach and Badgerline, the 
two largest listed bus compa- 
nies. Badgerline plans to buy 


450 buses a year in 1995 and 
1996 to replace ageing buses 
that are in turn sold on to 
developing countries at or 
above book value. 

Management structures have 
been simplified and employ- 
ment agreements renegotiated. 
The net result has been a leap 
in profits, with all the listed 
companies expected to 
announce profits growth above 
50 per cent this year. 

However, acquisitions have 


expects that “there will be a 
flurry of acquisitions which 
will go a bit further and then 
fizzle out”. 

Recent management buy- 
outs of bus groups vriQ proba- 
bly become targets for acquisi- 
tion at a later stage, but the 
prices are rising. 

Mr Souter says there is 
potential organic growth left in 
bus companies through man- 
agement efforts to improve 
fleet usage, routes and the 
quality of service. 

He also suggests that OK 
companies' should look beyond 
the Channel “In the longer- 
term, the overseas markets are 
where the privatisation bar- 
gains are going to be.” 

Growing competition is mak- 
ing life harder for the bus com- 


panies and politics Could create 
Anther difficulties. 

The Office of Fair Trading 
has already launched a -hum- ; 
her of investigations^ mto- 
potential monopolies within 
the bus system. Stagecoach, 
the largest UK operator with ' 
dose to 12 per cent of the mar- ' 
ket, has borne the brunt -of 
these, with 20 mvestigatkmsby - 
the OFT since 1989 and three ’ 
adverse rulings. \ > '• 

The recent scuffle in Darling- 
ton - where the council-owned 
operator went out or business, 
complaining that Stagecoach 
had . “swamped” the city with 
free buses - suggests that 
political concerns over compe- 
tition will remain. 

The bus companies counter - 
that competition comes from 
the car that t h in win ulti- 
mately dictate ticket prices, 
rather than the existence of 
other operators. 

At . the same time; they are 
hoping that the government 
will help tot the playing field 
against the motorist 

The recent Royal Commis- 
sion on Environmental Poflu- 


ment has also spoken in favour 
of such a strategy, although lit- 
tle has yet been done. 

But the great hope of the bus 
operators is that growing com 
gestion in the cities will force 
action. There are already signs 
of local government initiatives 
to improve bus services, such 
as bus lanes. But it will take 
much, more to reverse the 
trend of declining passenger 
numbers. 

Mr Ballinger, managing 
director of Go-Ahead, said: 
“Ultimately we see our future 
in the urban areas, where we 
see changes in policy inevita- 
bly arising.” 

However, management will 
soon start to face the Increas- 
ing challenge of eking out 
growth from static revenues. 


provided the main thrust for tioa favoured a push to per- 
increases and Mr Brian Souter, suede motorists to convert to 
chairman of Stagecoach, public transport The govem- 


Prequalffication method: 

Based on technical and economical-financial capabilities as to perform 
such major works. 

Foreseen dates to bid and begin the works: 

Call to bid, in January 1995. Beginning of the works, in May 1995. 

Information, consultations and sale of specifications 
/pliegos: 

In Gerenda de Infraestruccura, Reconquista 823, 2nd floor, Capital Federal, 
Reptiblica Argentina, until. 15/1 1/94 inclusive, from 10 am to 3 pm. 

Cost of stipulations for prequalification : $ 5.000.- 

Deiivery of background information: 

In Genencia de Infraestructura, until December 5, 1 994 at 1 2:00 pm. 



Aguas Argentinas 





Templeton 


Templeton Global Strategy Sicav 
Societe d'lnvestissement a Capital Variable 
Centre Neuberg, 30. Grand-rue, Luxembourg 
R.C. 0-35.117 

Dividend Announcement 

Templeton Global Strategy SICAV will pay on November 18. 1994 the following dividends 
against presentation of the respective coupons: 

Templeton Global Convertible Fund Class A USD 0.04 Coupon no. I 

Templeton Global Balanced Fund Class A USD 0.02 Coupon no.2 

Templeton Global Income Fund Class A USD O.I6 Coupon no.2 

Templeton DM Global Bond Fund Class A DEM 0.13 Coupon no.2 

Templeton Yen Global Bond Fund Class A YEN 5.00 Coupon no.2 

Templeton Emerging Markets Fined Income Fond Class A USD 0.22 Coupon no.2 

Paying Agent In Luxembourg: 

The Chase Manhattan Bank Luxembourg 
5. rue Placiis 
L-2338 Luxembourg 

The fUnds arc traded ex-dividend as from November 1 1, 1994. 

For any queries, shareholders are invited to contact their nearest Templeton office: 

Edinburgh Fran kfurt Luxembourg 

Q3.L_469.4tmO 069-222Z3Q^~ : J^Jt63>&S2- L 

The Board of Directors 
Luxembourg. November 1994 




James Dickie doubles 


as margins improve 


Acquisitions and reorg- 
anisation in the previous 
period underpinned a strong 
frill-year performance at James 
Dickie, the engineering compo- 
nents manufacturer. 

On turnover ahead 31 per 
cent to £2L7m, pre-tax profits 
for the 12 months to August 31 
doubled from £678,000 to 
£L35m. 

The shares rose lip to 

166p. 

Mr Hugh Jack, chairman, 
said the company also bene- 
fited from increased volumes 
at its main, customers. Margins 


improved despite continuing 
difficulties in passing on costs. 

The order book was well 
ahead on a year-on-year basis: 
“Management is investigating 
ways of overcoming capacity 
constraints which we may 
come up against later in the 
year if our order book contin- 
ues to grow further,” he said. 

A proposed final dividend of 
2.5p brings the total to 3.5p 
(2p), covered 4.4 times by earn- 
ings of 15.3p (&4p) per share. 

The company intends to 
move Grom the USM to the Offi- 
cial List. 


Relaunch paying off at 
upbeat First Choice 


By Gary Evans 

Shares in First Choice 
Holidays, the former Owners 
Abroad group which re- 
launched itself in August in an 
attempt to regain market 
share, rose 2p to I2lp yester- 
day following an upbeat state- 
ment from the company. 

In an announcement issued 
prior to an analysts' visit to its 
key operational centres at Gat- 
wick and Manchester today, 
Mr Francis Baron, chief execu- 
tive, said: "We are very encour- 
aged with the performance of 
the group since the launch of 
our new brand structure." 

First Choice estimated that 
Its market share in the period 
since the relaunch had been 
more than 15 per cent “We are 
comfortably on track to meet- 
ing our stated objective of a 
minimum i per cent increase 
■in market share for the year,” 
Mr Baron commented. 

The group’s share of the 
summer market had fallen 
from 16 per cent in 1992 to an 
estimated 12 per cent this year 
prior to the relaunch. 

Mr Baron said yesterday that 
summer 1995 bookings had 
remained strong in a weak 
market. The group had now 
sold 275,000 holidays for next 


summer, representing a 30 per 
cent increase over last year, 
while market share was cur- 
rently exceeding target. 

Mr Baron said that after a 
slow start, winter bookings for 
the UK market had picked up 
well and the group had sold 
245,000 holidays - a 4 per cent 
increase. This programme, 
launched in May, Is still under 
the old brand structure. 

The summer 1994 pro- 
gramme ended in line with 
expectations, with total passen- 
gers 1 per cent lower at 1.6m. 

TT loses interest 
in Scantronic 

TT Group, the conglomerate, 
has ruled itself out of the bid- 
ding for Scantraniq Holdings, 
the security components com- 
pany. 

The group, which holds 3 per 
cent of Scantronic shares, said 
it had “no intention in current 
circumstances of making an 
offer for Scantronic and 
intends, when appropriate, to 
dispose of Its entire sharehold- 
ings”. 

Last month Menvler-Swaln 
announced its interest In mak- 
ing a bid for Scantronic. 


Export growth 
lifts European 
Colour by 64% 

European Colour continued its 
pattern of more than doubling 
pre-tax profits with a 64 per 
cent rise from £521,000 to 
£856,000 for the six months to 
end September, making the 
fifth successive half year of 
organically generated growth. 

Turnover was up from 
£7.75m to £8 -51m. 

Mr Henry Finchett, chair- 
man of the chemical colour 
manufacturer, said much of 
the growth had come from 
“concentrating upon Europe". 
This had “generated 29 per 
cent sales growth" and taken 
exports to more than a third of 
turnover. 

Ea rn i ngs per share came out 
ahead at L9p (l.i6p) and the 
interim dividend is increased 
to 0.575p (0_35p). 


Dublin expansion lifts 
Break for the Border 


August's £5m acquisition of 
Marino helped lift pre-tax 
profits at Break for the Border 
Group, the restaurateur and 
nightclub operator, from 
£140,000 to £259,000 in the six 
months to September 30. 

Turnover expanded from 
£ 1.95m to £3. 46m. 

Mr Robert Gunlack, chair- 
man, said that in their first 
two mouths wi thin the group, 
Marino’s Dublin outlets bad 
traded successfully, contribut- 
ing operating profits of 
£254,000 and “fttlly justifying 
the directors' expectations at 
the time of acquisition”. 

The integration of the 
Dublin operations, including 
the introduction of an 
improved system of HnanHai 
and operating controls, was 


proceeding smoothly and 
yielding immediate benefits, 
he added. 

Sales In Dublin in October 
and the first two weeks of 
November were in line with 
sales in August and Septem- 
ber, Mr Gunlack said. 

Sales for the group’s London 
outlets in October continued to 
be affected by the partial 
closure of the Argyll Street 
caf& M 

However, the reforbishment f 
was now complete and party 
bookings were currently sig- 
nificantly higher than last 
year. 

Fully-diluted earnings per 
share advanced from 1.04p to 
1.49p and the group is paying 
a first interim dividend of 
Q.33p. 


We are pleased to announce 

the relocation of our London Office. 

Lynch, Jones & Ryan, Inc. 

Member NYSE and other principal exchanges 

Hamilton House 
1 Temple Avenue 
London EC4Y OHA 
Tei. 0171 353 5440 
Fax 0171 353 5560 

for information about Lynch, Jones & Ryan* s 
international trading and research services, please call: 

Timothy J. Conway Cathy Frans 

General Manager, International Operations International Representative 


6 



i 




financial Times 


WEDNESDAY NOVEMBER 16 1994 


wheel 


s 




pansion lift 5 
the Border 


~ “C 


...if 

r ;•» 


£*■ 




1 >nii ,,n 
. lot - 


Offif' 



29 


GA shares drop 19p as 
net assets fall sharply 

By Ralph Atkins . 


COMPANY NEWS: UK 


By Ralph Atkms 

* nsuranc ® Correspondent 

fh fSJf 1 Sl neraJ Accident. 

the Scotland-based composite 
insora. feu igp yesterdayafter 

showing the group’s net 
asset value had been hit 
by poor performing world 
financial markets and a weak 
dollar. 

The drop in the share price 
to KBp, against a rising ££. 
ket, came despite a jump in 
pre-tax profits in the first nine 

Saw 0 ' 1994 t0 miSm 

Net assets per ordinary share 
fell to 4l0p, against 545p at the 
end of last year. GA blamed 
conditions on world equity 
markets and the weak dollar 
but Mr John Chester, insur- 
ance analyst at SG Warburg 
Mid the figures also reflected 
the high proportion of long 
term US bonds in Its portfolio. 

F ra mings were boosted by a 
strong performance in the UK, 
particularly on property 
insurance. Total premium 


income increased to £3.8bn 
(£3.1bn). 

GA’s underwriting profits 
confirmed the buoyancy of the 
UK insurance market, though 
Mr Nelson Robertson, group 
chief executive, acknowledged 
that the favourable conditions 
were unlikely to continue. 

He said GA was prepared. If 
necessary, to see segments of 
its businesses contract if com- 
petition was particularly fierce, 
in order to preserve its profit- 
ability. 

For example, the group has 
decided not to promote heavily 
sales of private motor insur- 
ance via GA Direct, its direct 
selling operation which contin- 
ues to serve about a fifth of 
GA’s motor policy holders, 
because competitors are cut- 
ting prices to unprofitable lev- 
els. 

However. GA has succeeded 
in expand its household insur- 
ance business. Premium 
income on personal household 
insurance policies jumped 25 
per cent to £267.4m in the first 


nine months, while personal 
motor premium income fell 5 
per cent to £l82.7m. 

Similarly premium income 
from commercial property poli- 
cies increased by more than 20 
per cent, but commercial 
motor premium income shrank 
by 8 per cent 

GA also bucked the trend in 
the UK life industry, increas- 
ing new annual premiums by 3 
per cent to £40Rm and single 
premiums by -16 per cent to 
£376.7m. 

Mr Robertson said GA expec- 
ted its Pacific and east Asian 
operations to provide growth 
opportunities and the group is 
looking for possible small or 
medium size acquisitions in 
the region. 

However. GA’s overseas 
underwriting results remained 
lacklustre. US and Canada 
reported underwriting deficits 
of £94.4m (£107 Jm) and £54.4ra 
(£26. Ira) respectively in the 
first nine months. Mr Robert- 
son blamed the figures on the 
impact of catastrophe losses. 


British Biotech cancer drug 
enters last stage of trials 


By Daniel Green 

British Biotech, the UK’s 
biggest biotechnology com- 
pany, has begun the last stage 
of nlininfll trials on batimastat, 
its most important drug. 

If the trials are successful, 
the anti-cancer drug will be 
submitted for regulatory 
approval in Europe “by the end 
of the first quarter of 1996”. 
Approval could follow later 
that year. 

Batimastafs success in ear- 
lier trials this year triggered a 
sharp rise in the share price. It 
had risen from 360p at the start 
of August to 5S6p yesterday. 


The drug blocks the action of 
enzymes which allow cancers 
to grow by destroying the con- 
nective tissue between healthy 
cells. 

This method of treatment 
differs from conventional 
drugs, which kill some healthy 
cells as well as cancerous 
ones. 

The last stage of testing. 
Phase m. is the most difficult 
for any potential drug. It 
involves large numbers of 
patients - 300 for batimastat - 
who will be treated in a “dou- 
ble blind” trial where neither 
doctor nor patient knows 
whether they have received the 


drug or a placebo. Batimastat 
is being tried on patients suf- 
fering from abdominal cancers 
such as ovarian cancer. 

Phase I trials are on healthy 
volunteers to look for side 
effects, and Phase U are on 
small groups of patients to find 
the best doses. 

Several US biotechnology 
drugs have failed this year at 
Phase QL 

British Biotech has also 
started Phase I trials on the 
follow-up to batimastat, BB- 
2516. ft is an Improvement over 
batimastat in that it can be 
taken orally rather than by 
injection. 


Credit Lyonnais 
offshoot withdraws 
from UK banking 


By Nicholas Denton 

The retrenchment of Credit 
Lyonnais, the lossmaking 
Preach bank, has led to one of 
its subsidiaries withdrawing 
from the UK, 

Credit Lyonnais Bank Neder- 
land, a Rotterdam-based unit, 
has agreed to sell its two 
branches in London and Man- 
chester and about £100m of 
assets, more than half of the 
UK loan book. 

The purchaser is Singer & 
Friedlander, the UK merchant 
bank, which is seeking to 
develop its operations in Man- 
chester and to trade finance. 
“It Is a nice extension to what 
we are doing and should pro- 
duce a modest improvement to 
our profitability," Singer & 
Friedlander said. 

Offices In the UK were only 
peripherally involved in 
GLEN’S most spectacular loss, 
on a $888m (£541m) loan to Mr 
Giancarlo Parretti to bny 


the UGH film studio. 

CLBN said most of its loans 
were performing and its per- 
formance bettered that of the 
UK clearing banks. Singer has 
nevertheless refused to take 
on a significant portion of 
CLBJTs UK portfolio. 

Credit Lyonnais itself 
recently experienced a setback 
to the UK when Health Care 
International, operator of a 
luxury hospital to Glasgow, 
went into receiyership after 
borrowing £30m from it 

GLEN’S contraction mirrors 
that of its parent, which 
recently announced the with- 
drawal from UK retail banking 
and the closure of half of its 
corporate banking branches. 

Credit Lyonnais has one of 
the largest pan-European 
branch networks and the new 
management has indica t ed no 
wholesale withdrawal. How- 
ever, reviews have been 
ordered into operations in Bel- 
gium, Spain and Italy. 


Piper European 
net assets slip 

Piper European Smaller 
Companies Trust, which alms 
to achieve capital growth 
through a portfolio of compa- 
nies, excluding the UK, valued 
at less than gasflm, had a net 
asset value of 92.6p per share 
at September 30, against 94.4 p 
at mid-April’s launch. 

Directors stressed, however, 
that the 1.9 per cent fell repre- 
sented an outperform an ce of 
the trust's benchmark - the 
James Capel Smaller European 
Companies Index (4th Quartile) 
- which dropped 5 per cent 

Net revenue was £59.000 for 
earnings of OJ58p per share. 


Smith & Nephew 
wins US contract 

Smith & Nephew, the 
healthcare group, has won a 
North American contract with 
a potential value of $400m 
(£251.6m) over five years. It 
will provide orthopaedic and 
woundcare products to Ameri- 
can Healthcare System, an alli- 
ance of 40 healthcare systems 
and 1,000 healthcare organisa- 
tions in the US. 


Charles 
Sidney 17% 
ahead to 
£2.87m 


By Pater Pearse 

Charles Sidney, the Mercedes- 
Benz truck and car dealer, out- 
stripped the German group's 
performance across the UK as 
it lifted pre-tax profits 17 per 
cent from £2. 46m to £2. 87m in 
the year to August 31. 

Mr Raymond Edwards, 
chairman, said the group was 
looking for acquisition possi- 
bilities involving other manu- 
facturers. 

He said the year had been 
spent making sure that share- 
holder value, excluding newly 
Incurred central costs, rose 
satisfactorily. Further, Mr 
Edwards wanted the Sooth 
Yorkshire business bought 
from the receiver and Aber- 
deen and Dundee Motor Group 
to be integrated. 

That done, he said discus- 
sions had been taking place 
with a view to making rela- 
tionships with other manufac- 
turers of trucks and cars, both 
specialist and volume. He was 
wary of spending too much 
and would avoid companies 
which used debt for trading. 

Turnover grew to £72. 2m 
(£55.8m) with Aberdeen and 
Dundee contributing £6. 16m to 
sales and £235,000 to operat- 
ing profits of £2 .84m (£2.44m). 
The group said that after 
adding back £450,000 of cen- 
tral costs, underlying profits 
from trading rose 38 per cent 
to £3.3m (£2.4 m). 

Profits from trucks 
advanced 24 per cent to 
£2. 17m on turnover of £43m 
(£35. lm) and cars contributed 
61 per cent more at 
£l.llm on turnover of £29 -2m 
(£20. 7m). 

Mr John Ross, managing 
director, said that cars had 
risen so sharply largely 
becanse of the impact of tbe C 
Class, the replacement for the 
190. 

As average profit per unit 
fell about 5 per cent across the 
group, Mr Ross said the high- 
margin after-sales and parts 
operations had become more 
important 

Earnings increased to 8.3p 
(7.9p) per share and a maiden 
final dividend of 2Jp makes a 
total of 3-5p. 


Generator looks overseas to honour commitment to regulator 

PowerGen plans joint ventures 


By Michael Smith 

PowerGen is considering joint 
ventures with other European 
companies as a means of hon- 
ouring a co mmitm ent to try to 
dispose of 2.000MW of plant 

Mr Ed Wallis, chief execu- 
tive. said putting some genera- 
tion plants into a European 
grouping was one of a series of 
options under consideration as 
a means of meeting the com- 
mitment to the electricity regu- 
lator. 

Mr Wallis was speaking as 
the generator reported interim 
pre-tax profits of £H8m 
f£106m) on turnover of £l.l4bn 
(£l.27bn) for the half year to 
October 2. Earnings per share 
were 10.8p (9.72p) and the 
interim dividend is 5p (3.95p). 

Mr Wallis said that Power- 
Gen had examined the possibil- 
ities of selling plant to UK 
companies and was now 
looking at options involving 
overseas concerns, including 
asset swaps and forming joint 
ventures in which PowerGen 
would have a minority stake. 


He said that a demerger, 
whereby a company could be 
split off from PowerGen with 
2.000MW of plant, looked 
unlikely. “A company of that 
size would be not be big 
enough or viable enough on its 
own,” he said. 

“The overseas option now 
looks the best for us, although 
we have not ruled out a UK 
buyer.” he said. 

PowerGen also announced 
tbe confirmation of its second 
significant overseas project It 
is to be lead project developer 
of a 900 MW power plant at 
Tapada in PortugaL Mr Wallis 
said the company’s stake 
would be more than the 22 per 
cent it has in its German gen- 
eration project at Schkopau. 

The total cost of the Portu- 
guese project would be about 
£300m plus interest charges 
during its construction, with 
about 80 per cent financed 
from debt and 20 per cent by 
equity. 

The company is also looking 
at projects in India, China, 
Malaysia and New Zealand. 


PowerGen 

Share price (pane*) 
800 - 



>33 1984 

Source FT Graphite 

Among developments in the 
UK, Mr John Rennocks. 
finance director, said coal 
stocks were down to 9.2m at 
tbe end of the period from 13m 
in March. He expected them to 
be 5m by tbe year e nd and 3m 
by March 1996. 

The total number of employ- 
ees fell by 200 to 4,185 during 
the six months, but Mr Wallis 
said the main push on staff 
numbers had finished , 


• COMMENT 

Other companies faced with 
Calling market share and the 
imminent sale of a 40 per cent 
shareholding would probably 
be feeling uncomfortable. Not 
so PoweiGen. Moving from its 
position as the second to 
the third largest generator in 
England and Wales has its 
compensations as market 
share is now below 25 per 
cent. That decreases the 
likelihood of a MMC referral 
should the company be unable 
to reach terms for selling off 
2.000MW by the end of next 
year. Profit growth may have 
slowed but, with dividend 
cover so hi g h , there is nothing 
to stop PowerGen increasing 
dividends by 16 to 20 per cent 
in the next three years at least 
especially if overseas expan- 
sion goes to plan. The shares 
are trading on a yield of 3.4 per 
cent, assuming a frill year divi- 
dend of 15p - up 18.6 per cent 
That is a high rating 
in a highly rated sector 
but the fun dam entals look 
strong. 


Cedardata 
advances 34% 
to £1.34m 

Cedardata, the supplier of 
financial accounting and com- 
mercial computer software 
which came to the market in 
February, raised pre-tax prof- 
its by 34 per cent from 
£998,000 to £1.34 m for the six 
months to September 30. 

Turnover grew 43 per cent 
to £3 .73m. 

With earnings per share at 
2£p (2.3p), the company has 
declared an interim dividend 
of l.Q5p - this compares with 
a forecast of not less than 
0.64p. 

Mr Sidney Cordier, chair- 
man, said the company 
obtained two significant con- 
tracts during tbe period, one 
of which necessitated the sup- 
ply of low margin computer 
hardware, in addition to cfacs 
software and services. 


Casket dips 
to £lm as 
demand falls 

Casket, the bicycle and 
clothing manufacturer, saw a 
52 per cent drop in pre-tax prof- 
its for the six months to mid- 
September, from £2.13m to 
£L.03m on turnover up from 
£51 .8m to £60m. 

The profits fall was blamed 
on lower than anticipated 
demand for UK-produced bicy- 
cles and a £607,000 operating 
loss in the Heidemann Fahrrad 
German bicycle manufacturing 
operation, acquired last 
November. 

The pre-tax figure was also 
hit by increased interest 
charges of £lm (£730,000). 
partly attributable to Heide- 
mann's additional working 
capital requirements. 

The reorganised clothing 
Side more than doubled operat- 
ing profits to £ 972,000 
(£365,000). 

Earnings per share fell to 
0.68p (l.SSp), but the interim is 
maintained at 0.4p. 


Symonds 
returns to 
the black 

Symonds Engineering, the 
sheetmetal and toolmaking 
specialist, swung back into the 
black in the six months to Sep- 
tember 30 as the benefits of its 
restructuring programme came 
through. 

Concentration on customers 
requiring higher added value 
products generated Improved 
margins and resulted in turn- 
over expanding 52 per cent to 
£3.2 Ira (E2.im) and trans- 
formed losses of £126,000 into 
pre-tax profits of £174.000. 

HBH, the toolmaker acquired 
for £560,000 in March, was suc- 
cessfully integrated, according 
to Mr Rod Ackrill, chairman, 
and made a 50 per cent contri- 
bution to profits. "HBH has 
given us a strengthened client 


New contracts and sales 
expansion lifts Ushers 


By Richard Wolffe 

Ushers, the Wiltshire-based 
brewer, yesterday published its 
pathfinder prospectus and 
reported a 35 per cent rise in 
pre-tax profits to the year to 
October 31. 

The pre-tax line rose to 
£10.4m (£7.76m) on turnover up 
12 per cent to £54.7m (£4&8m), 
as the company attracted new 
brewing contracts and 
increased sales of Ushers beers 
through its estate of 466 pubs. 

The company, bought from 
Courage by a team of former 
Grand Metropolitan managers 
for £71m in 1991, is expected to 
have a market value of about 
£100m from the placing and 
open offer. 

Mr Roger North, chief execu- 
tive, said: "Our work since the 
buy-in has improved volumes 
and profits. We have new cus- 
tomers for our contract brew- 


ing business and we are mak- 
ing good progress to upgrading 
the quality of the tied estate.” 

Operating profit at the brew- 
ing and wholesale division rose 
20 per cent to £7.72m (£6. 42m), 
while the estate division 
reported operating profit up 8 
per cent to £7 .54m (£6 56m). 

Ushers’ current brewing con- 
tract with Courage will fall 
from 210,000 barrels this year 
to 50,000 in 1997. 

The brewer hopes to replace 
the Courage volume with new 
contracts, which are expected 
to rise from 8,000 to 40,000 bar- 
rels in the current year. 

It also hopes to lift sales of 
Usher brands to its tied estate, 
where marg ins are five times 
higher than the Courage con- 
tract. Volumes sold through 
the estate increased 10 per cent 
since the company established 
its own distribution and tele- 
sales systems in April- 


NEWS DIGEST 


base and increased capacity.” 

Earnings per share emerged 
at 15p (losses of I57p) and the 
interim dividend is restored 
with a 055p distribution. 

Invesco Korea 

Invesco Korea Trust raised 
diluted net asset value by 12 
per cent to 156 37p in the six 
months to September 30. On an 
undiluted basis, the figure 
grew by 13 per cent to 167.57p. 
Over the same period, the 
Korea Composite Index appre- 
ciated by 15 per cent to sterling 
terms. 

After-tax revenue dropped to 
£24,000 (£85500) and earnings 
per share came to 0.1p (056p). 

John Lusty recovers 

John Lusty Group. USM- 
quoted food importer, reported 
pre-tax profits of £215,000 for 
the half year to September 30, 
the first since 1989. Losses last 
time were £51,000. 


The turaround follows the 
integration of Trustin-Eerwood 
and The Foodfinders into a 
new operating entity, Trustin 
the Foodfinders. Restructuring 
costs in the period were about 
£50.000. 

Turnover amounted to 
£7. 17m (£&58m). Earnings per 
share were 0.19p (G.44p losses). 

The company has applied to 
reduce its share capital by can- 
cellation of its deferred shares. 
No dividends can be paid until 
that is completed. 

Capitol improves 

Capitol Group, the specialist 
security company which came 
to the market in May. 
announced a 15 per cent rise in 
pre-tax profits from £472,000 to 
£542500 for the half year to 
September 30. 

All three divisions - investi- 
gatory, audit and stocktaking, 
and port and ferry security - 
had increased turnover and 
operating profits, Mr Michael 


Cash raised by the flotation 
will be used to clear the brew- 
er's existing debt of £35m, on 
which interest rates have been 
fixed within a band. 

Interest costs in the year to 
October 31 stood at £4.82m 
(£5.62m). 

It will also free the brewer to 
double its estate of tied pubs, 
which offer a 21 per cent 
return on capital. 

The main shareholders are 
Schroder Ventures and Swiss 
Rank Corporation. The direc- 
tors do not intend to sell their 
shares, and are likely to own 
about 8 per cent of the equity 
after flotation. 

The share price is expected 
to be announced on December 
1, with dealings be ginning cm 
December 15. 

The flotation is sponsored by 
Nat West Markets and the bro- 
ker is NatWest Wood Mac- 
kenzie. 


Griffiths, chairman, said. He 
added that the second half had 
started well and the directors 
were looking for acquisition 
opportunities. 

Turnover amounted to £3 .5m 
(£3.3m). Earnings per share 
came through at 352p (351 p) 
and the dividend is L2p. 

Payphones buy-out 

New World Payphones, the 
UK’s second largest payphone 
company after British Tele- 
communications, has been the 
subject of a management 
buy-out valuing the company 
at £ll.6m. 

A new company has been 
established, led by Mr Richard 
Thompson, managing director, 
and with equity funding of 
£8. 15m. The funding, commit- 
ted by The PhiJdrew Ventures 
Third F und, has bought 70 per 
cent of NWP from Antah Euro- 
pean Holdings, a subsidiary of 
Antah Holdings, the diversified 
Malaysian group. 


CONTRACTS & TENDERS 


GOVERNMENT OF THE REPUBLIC OF ALBANIA CRITI- 
CAL IMPORT PROJECT 

INDIVIDUAL PROCUREMENT NOTICE 

invitation for BIDS KESH/01/94 

Credit No. 2404 ALB 
Contract N«me: Electricity Meters 

1. The Government of the Republic of Albania has received a credit from 
’ gjg World Bank on various currencies under the Critical Imports Project 

and it fe intended that part of the proceeds of this loan will be applied to 
the payments under Che contract far Electricity Meters for the Albanian 
Blcaroenereetic Corporation. Bidding wilt be conducted through 
International Competitive Bidding procedures under the Guidelines for 
Procurement of the World Bank and Us open to ail bidders from eligible 
source countries as defined in the said Guidelines. 

2. Tie Project Implementation Unit of Albanian Blcciroeneigetic 
Corporation now invites scaled bids from eligible bidders for supplying; 

* Single - jAase meteis combined with ament Imiiicis protected by pbsfte 

banes - 30000 No. .... 

• Three - ptase maos combine wkh anrem lHmtBis protected by plastic 

boxes -3000 No. 

1 Interested eligible bidders may obtain further information from: 
project Implementation Unit, (PUJ) 

Albanian Ekarocnergwic Corporation 
BUokn “Veil SHANTO" 

Tirana 

Tfek+3&542 3622; Rue +355 42 32046; IblOK 2173 KESH AB 

4 a complete set of bid documents in English may be purchased by any 
eligible bidder on the submission of a written applfatore to iho above 
XL payment of a non rcfandable fee ofUSS 200. Tto 
Urilt hesent by DHL courier or landed to a ropreseorauve of the djgi- 
are robe made to 4439*07. National Commercial 

Bank, ShesM Skendctbeg, Tirana - Albania. 

4 All btdcHngrmiSl to accompanied by a BidSecuriqr.dctaib of which ate 

id befamd in the Bidding Documents. 

a n,vte will be ooened in the presence of those bidden representatives, 
*■ wStend at 12” NWII7 January. 1995 u the office indi- 

cated in para 3. 


personal 


PUBLIC WEAWNG 


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Pfaoaa contact Ttna MaOonnm 
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Fkc *4471 873 306* 


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0030 

023 

1084 

1048 

01 DO 

8£4 

040 

040 

0130 

025 

1684 

1048 

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025 


1014 

0230 

022 

18.04 

1048 


021 


1048 

Q33G 

022 


1048 

MOO 

0.14 

1084 

1048 

0490 

013 

1084 

1048 

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1002 

1002 

0630 

020 

021 

921 

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022 

1002 

1002 

0830 

023 

1084 

2078 

0700 

1006 


2185 


30M 


2038 

oboo 

3105 


3010 

0830 

3047 

43.11 

45.72 

0800 

31.07 


4445 

0030 

3229 

2045 

2886 

1000 

32.30 


2023 

1000 

S2J1 

33.42 

3588 

1100 

32J0 


3009 

1130 

3031 


3011 

1200 

4701 

3008 

39.13 

1230 

4701 

3006 

4106 

1300 

47.49 

37.19 

4001 

1330 

31.46 

2880 

2042 

1400 

31.43 

2881 

2035 

1430 

31413 

2042 

2082 

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3505 

2057 

2081 

1530 

3021 


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2003 

32.1* 

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4058 

44.73 

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121.18 

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52.47 

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5781 

63-43 

1300 

12787 

0041 

8888 

1830 

8025 

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8483 

1900 

48.19 

7229 

7093 

1830 

4308 

65.13 

7183 

2000 

3181 

3423 

3782 

2030 

3108 

25.12 

2788 

2100 

3105 

2199 

.'’5.93 

2130 

3105 

21.48 

2034 

2200 

2082 

1M9 

21.03 

2230 

3046 

18.18 

2182 

2300 

2&2B 

1083 

2077 

2330 

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021 

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U.S.S700,000,000 


* 


SUMITOMO BANK INTERNATIONAL 
FINANCE N.V. 

Guaranteed Floating Rate Notes 
due 2000 

Guaranteed on a Subordinated Basis as to 
Payment of Principal and Interest by 

The Sumitomo Bank, Limited 

In accordance with the Description of Notes and Guarantee, 
notice is hereby given that the rate of interest for the three 
months from 16th November, 1994 to 16th February, 1996 has 
been Fixed at 6.0625 per cent per annum and that the coupon 
amount payable on Coupon No. 18 on 16th February. 1995 will 
be US$154.93 per note of US$10,000.00, US$1,549.31 per note 
of US$1 00,000.00 and US$1 5,493.06 pernote of US$1,000,000.00. 


♦ 


The Sumitomo Bank, Limited 


u >15% 

off electricity 

? vo-i* crcanixas* ’rOL-nc 


fvliciisnds Electricib 


US $K)0, 000.000 

Continental Cablevision, Inc. 

Senior Subordinated Floating 
Rate- Debentures due 2004 

In uccnntnct with the provisions of the 
Debenture', nrvi«; es hereby Riven that 
fur tin- inurif.nl period Niivemher US, BiM 
u*i Kehmuy hi. lOXi the I*hrninm will 
tarty an tnuiwi mu- of 8 0k'*. per annum. 
Jnicrtwt payable on Oh- rvJ.-iMst micro* 
payment, ilnii- February K. IMG will 
iuimunl n. US |k.t US SWOflOl 

lX*in-nLuiv. 

Agent Bank: 

n 

Banque Paribas 


CONTRACTS & TENDERS 


Q®a®B^a®(L3AiL M©Tro©[i 

FARM MACHINERY SUB-COMPONENT 
MAF/B/ICB/6.2a/01 
LOAN NO.: 3760 HR 

This notice is an update of the General Procurement notice which appeared in the 
Development Business Issue No. 394, dated 16 July, 1994. 

The Government of Croatia has applied for a loan from the World Bank in various cur- 
rencies of US $128 million equivalent toward the cost of the Emergency Reconstruction 
Project Part of the proceeds of this Loan would be applied to eligible payments for the 
supply of Farm Machinery and Equipment Sub-componenL 

The Ministry of Agriculture and Forestry now invites sealed bids from eligible bidders for 
the following as a package to be supplied by the same bidder. 

250 Tractors with implements, (attachments and traitors and related spare parts and 
Services). Bids will be accepted for toe entire package, but no bids will be accepted for 
lesser number of items and quantities specified. Only one contract will be awarded for the 
entire package. 

It is expected that the bidding documents will be available 14 November, 1994. Bidding is 
open to all bidders from eligible sources as defined in toe World Bank procurement guide- 
lines. Interested bidders who would like to purchase the Bidding Documents can do so on 
toe submission of a written application to the address below and upon payment of a n on- 
refundable fee of US $200. 

Foreign remittance for toe purchase of the bidding documents can be made by any eligi- 
ble bidder to account number: 

Zagrsbacka Banka 2500-840-3271 005-ZABA-HR-XX 
in favour of: 

MINISTRY OF AGRICULTURE AND FORESTRY 
Vukovar Avenue 78, 41 000 ZAGREB, CROATIA 
phone: *■ 385 41 61 10 78 
telefax: + 385 41 61 03 10 


miiticcac 


y 


& 




1 


FINANCIAL TIMES WEDNESDAY NOVEMBER 16. 1994^.^ . 



COMMODITIES AND AGRICULTURE 


Accidents add to coal 
market supply tightness 


By Gerard McCloskey 


World steam coal supplies 
have been hit by a series of 
severe and largely uncon- 
nected accidents over the last 
few weeks that has added an 
extreme constraint to what 
had already become a very 
tight market 

Two derailments on the coal 
line to the South African 
export terminal at Richards 
Bay at the be ginning of Octo- 
ber, which looks likely to cut 
exports by 2m tonnes this year, 
have been followed by heavy 
rainfall in Colombia's Guajira 
region. In South Africa the 
derailments, linked to a 
break-up of the wheels on some 
of the rail cars, led to declara- 
tions of force mqjeune by three 
exporters, Trans-Natal, Rand- 
Coal and AmcoaL 

The Guajira downpour in 
Colombia led to a sharp slow- 
ing in production at the El Cer- 
rejon mines and long delays at 
the Puerto Bolivar loading 
port. While the operators of 
Cemyon North - Carbocol and 
Inter cor - are expecting 
throughput to be down 500,000 
tonnes this year. Prodeco, oper- 
ating the neighbouring Cerre- 
jon Central, has declared force 
majeure on all shipments. 


Then last week it became 
clear tha t one of the loaders 
operated by Colombia's other 
major exporter. Carbones del 
Caribe, had tilted at Barran- 
quiila, forcing the company to 
switch to other port facilities. 

A couple of years ago the 
coal market, such was its over- 
capacity, could have taken all 
this in Its stride. But this year 
poor performance by the Polish 
exporters and very robust 
demand levels in Asia have 
created severe shortages in 
both coking and steam coals. 

These events have coincided 
with the start of negotiations 
for annual pricing on contracts 
into Europe and Asia- Already 
there have been some 
extremely large rises reported 

- up to $9 a tonne, cif, for one 
Australian supplier into 
Europe and $9, fob. for Car- 
bones del Caribe for two of its 
customers. 

While it is too early to see a 
trend emerging in the market 

- not least because one US 
exporter, Ashland, has agreed 
an extremely low - $2 - rise 
with the Netherlands’ utility 
GEE - it Is clear that the Aus- 
tralians and the Colombians 
have very high ambitions for 
the 1995 market 

The South Africans, too. 


have set out their stall and are 
seeking prices in excess of $30 
a tonne, fob Richards Bay, and 
have already signed agree- 
ments at around $30.50 fob 
with Belgium's Electrabel. 
These prices compare with 
some as low as $19.50 for sales 
into the Danish market for this 
year's contracts. 

Into this already stressed 
market are about to come two 
major tenders - one for 4m 
tonnes from the Italian power 
company Enel and one for 
unlimi ted tonnage for 1995 
delivery for National Power in 
the UK. This latter is expected 
to be broken into three sec- 
tions: for imports: for UK-pro- 
duced coal: and for coal foiling 
outside the specifications that 
National Power normally 
demands of its suppliers. 

Many will see this surprise 
tender from National Power 
(which could net up to 2m 
tonnes) as the company’s first 
response to the proposed sale 
of British Coal's three regions 
to only one coal producer, RJB 
Mining. National Power is 
known to be extremely irri- 
tated at having to swap one 
monopoly supplier (British 
Coal) for another and Is anx- 
ious to hedge ag ains t being too 
dependent on one source. 


Russia digs into platinu 






By Kenneth Gooding, 
Mining Correspondent 


MARKET REPORT 


Base metals prices slip from highs 


Base metal market business 
slackened at the London Metal 
Exchange and prices slipped 
from their highs to close mixed 
when some speculator profit- 
taking emerged 

Three months COPPER, 
which peaked at S2.770 a tonne 
in the morning, closed at 
82,75440, up S340 on balance. 

ZINCs three months deliv- 
ery price had touched 51,200 a 
tonne for the first time in more 
than two years. But it could 
not erode resistance above that 
level and steadily backtracked 
to 81.18940 at the close, Sdown 
52.75. 

Supported by another large 


(A* at Monday's dose] 


Atuinl/Uum 

-14.025 

10 1.957,900 

Ahxntnkiin aOoy 

*40 

to 26.520 

Copper 

-ft675 

to 3 15.525 

Lind 

-72S 

to 366500 

Nderi 

-6 

to 150.492 

Zinc 

-1.050 

to 1.214.200 

nn 

-190 

to 28^90 


drawdown from LME ware- 
house stocks, three months 
ALUMINIUM rose to S1495 a 
tonne early on and threatened 
to test recent four-year peaks 
above 51,900. But it too 
retreated, closing S740 down 
on the day at SL87540 a tonne. 

At the London Commodity 


Exchange, COFFEE fixtures 
continued the recent slide. The 
January position touched 
S3.320 a tonne before closing at 
53449, down another 554. 

“There is not a blind bit of 
interest from industry," com- 
mented one dealer, adding that 
lower than expected retail 
demand in the last quarter bad 
sidelined industry buyers. 

COCOA futures rallied from 
early lows to end sharply 
higher following New York's 
bullish trend, dealers said. The 
March position closed at £981 a 
tonne, up £14. 


Compiled from Reuters 


Russia is digging deep into its 
precious metal stocks to reap 
the benefits of record world- 
wide pla tinum and palladium 
sales this year, according to 
Johnson Matthey. the world's 
biggest platinum group metals 
marketing organisation. 

JM suggests that platinum 
demand will rise by 7 per cent 
to a new peak of 442m troy 
ounces in 1994. driven up by 
the requirements of producers 
of anti-pollution car exhaust 
catalysts and jewellery makers. 
Palladium sales are expected to 
rise by 12 per cent to 4.735m 
ounces, thanks to a substantial 
increase in demand from 
Japan's electrical industry. 

Russia, the world's biggest 


producer of palladium and the 
second-biggest of platinum, is 
stepping up exports to provide 
much of the extra metal JM in 
its interim review of the mar- 
kets suggests that Russian 
sales of platinum will jump by 
17 per cent from the 1993 level 
to 800.000 ounces, while its pal- 
ladium sales are expected to be 
more than 20 per cent ahead, 
at 2Jm ounces. 

These export levels can be 
sustained only from stocks, 
suggests Mr Jeremy Coombes, 
the JM precious metals divi- 
sion's general manager, mar- 
keting. Russia’s platinum 
group metals are by-products 
of nickel production by the 
Norilsk combine and JM says 
Norilsk's output has fallen by 
about a half from the peak 
(estimated at between 800,000 


and 14m ounces) readied in 
the late 1980s. 

“Since there is little prospect 
of increased production from 
Norilsk in the near term, 
future sales will depend on the 
size of the stockpile and the 
readiness of the Russian gov- 
ernment to make metal avafi* 
able to the market," says Mr 
Coombes. Only a very few Rus- 
sian officials have any idea of 
the size of Russia’s stocks and 
how long they may last 

In l£3l a deluge of Russian 
metal caused great disturbance 
in the platinum market but 
this year Russia “is carefully 
tailoring platinum sales to 
meet demand, so its extra 
exports are causing no great 
concern," Mr Coombes says. 

The Russians do not want to 
see palladium's price go too 


frtg h - it recently reached Its 
highest point for five years - 
because they fear this will 
encourage substitution by 
other metals, particularly 
nickel, he exp la ins . 

“So ffitfrgfa wifi not let the 
paTiarirnm price race away, but 
it wifi want to see how high it 
can drift up." 

JM makes no palladium 
price forecast but it concludes 
that there wifi be a slight sur- 
plus this year. It suggests 
d ftTimnri will increase from 
4J2L5m to 4.735m ounces, while 
supply will rise from A2Sm to 
447m ounces. 

Platinum supply is forecast 
to foil sli g htl y , from 4.39m to 
4. 5g?Km ounces, while dem and 
is expected to rise from 4.03m 
to 4a*m ounces. This means 
that the platinum surplus,. 


380,000 ounces last year, wffl 
shrink to only 65£» ouncesis ■ 

1994 1 

Better fundamentals and. Qte- 
luterest of investment fimdsJh ,■ '. 
pbri-rhnm (as part of-ift general . 
move into commodities .this 
year) has helped buoy -up the : 
price, JM says. It expects sentt 
meati towards platinum v to 
remain positive, as further 
advances in d e man d result : 
from sustained . econ omic 
recovery around the worktand . 
that this will continue to sap- * 
port the price in a rrange of - 
$400 to £450 an amice daring 
the next six months. Hatmnm 
was In London yesteaday 
at $41645. 

Platinum 1994 interim retneuz. 
free from Johnson Matthey, is 
Hatton Garden, London ECW 
BJP, UK. • - : 




! ■*"’ ' T." 


k 

■f- 


Producer hedging seen capping gold price above $400 


By Kenneth Gooding 


Rising interest rates are 
encouraging more gold mining 
companies to hedge their 
future production and this 
appears to be putting a “cap" 
on any price rise above USS400 
a troy ounce, according to the 
World Gold Council. 

North American producers 


can now lock-in prices of about 
S41Q an ounce for deliveries 
one year forward, the WGC 
points out. In Australian dollar 
terms, forward pre miums look 
even more attractive, it reports 
in its latest quarterly Gold 
Demand Trends publication. 

Interest rate increases have 
pushed one-year gold contan- 
gos (premiums for future deliv- 


ery) to abov e 5 per cent. 

The WGC also points out 
that, when the gold price 
tested the top end of its 5370- 
S395 range “heavy trade selling 
was encountered and the price 
fell back". 

Countries monitored by the 
WGC, a promotional organisa- 
tion financed by some gold 
mining groups, account for an 


estimated 75 per cent of world 
demand. In these areas, third- 
quarter gold demand was <L2 
per cent above the 1993 lev el at 
593 tonnes. But for the first 
nine months, demand was 
down 6.4 per cent at 1,8904. 

Mr Roger Murphy of the 
WGC*s gold economics service 
in Europe, pointed out that 
rigmflnrt was very high in the 


first half of 1993 because the 
price was perceived" -to he 
exceptionally low. There had 
since been a rise of^abdut 20 
per cent and latest figures indi- 
cated demand was staMtistog. 

If the third-quarter trend . 
continued for the rest of 1994, 
gold consumption for the full 
year would come close to the 
1992 record of 2,473.6 frames. ' . 


B oo«s in 
g5 oom 

jj U y-back 


.v- - 


American prospectors look southwards 


By Kenneth Gooding 


US mining companies are 
acting on their threats to move 
most of their exploration 
efforts to Latin America 
because of the constraints they 
claim are put on their activi- 
ties in their own country. 

So for the first time Latin 
America is emerging as the 
most favoured area for mining 
exploration,, jumping from 
third place in 1993 to top this 
year. At the same time spend- 
ing in the US is fallin g, accord- 
ing to the latest annual survey 
of milling exploration expendi- 
ture by Metals Economics 
Group, the Canadian consul- 
tancy. 

Total expenditure budgeted 


for this year by the 151 compa- 
nies surveyed by MEG is up by 
a net USS206.4m from the 1993 
level to S9.l3hn - the second 
successive annual increase and 
conclusively reversing the 
trend for budget cuts seen at 
the end of the 1980s and in the 
early 1990s. 

MEG says its survey covers 
about 80 per cent of world-wide 
expenditures. The consultants 
attempt to exclude from the 
totals any portion of diversified 
company budgets devoted to 
energy minerals, iron ore or 
aluminium-related exploration. 

Companies with budgets 
totalling S2.05bn give a geo- 
graphic split of their spending. 
MEG says this shows 264 per 
cent (5543. 7m against S331m in 


1993) will be spent in Latin 
America, with Chile the most- 
favoured country followed by 
Mexico. Brazil Venezuela and 
Peru. 

Meanwhile, spending in the 
US, which has ranged between 
S340m and 5350m, is dropping 
below S325m this year, mark- 
ing “the first time that the per- 
ceived constriction caused by 
the more stringent US regula- 
tory environment has actually 
manifested in company budget 
allocations". 

Of the S9.13bn of total spend- 
ing covered by the survey, 56-4 
per cent (S1.2bn) is going 
towards gold exploration, up 
from 49 per cent (SS25m) in 
1993. Base metals exploration 
is down to 31 per cent 


(56604m), from 35 per cent 
($609m). Some 57 per cent of 
base metals expenditure is 
being directed this year at cop- 
per. 

Grassroots spending - as dis- 
tinct from exploration at or 
near ^fe t in g mina sites — is 
accounting for 53.5 per cent 
(SLlbn) of the total. 

MEG says junior companies 
are back in force this year and 
it was obliged to change its 
cut-off for budgets included in 
the survey to £2m instead of 
the Sim used in previous years. 
It estimates that about 85 
junior companies not included 
in its survey may be spending 
between 51m and $2m each on 
exploration for non-ferrous 
metal* and miner als this year. 


Byfo cafi o n . 
f!50 compantaa. total SZDSbn) 


usi.i&r». . ' jfc 

15ib4/- . i 


Car*daia6% 



PscScBasto&256 


AuefrHDaZr.bK r . 

u-l./ 


£*: • 

>• . -• 






<* 


uatAn ^ttatgBa%\ 


Source; idqUaiicananles 


Corporate Exploration Strate- 
gies: A worldwide analysis : 
US$7,500 from Metals Econom- 
ics Group, PO Box 2200, Hali- 
fax, Nona Scotia, Canada B3J 
3C4. 


r* 


r* 


COMMODITIES PRICES 


BASE METALS 


LONDON METAL EXCHANGE 

fPrrcos from AmMgamafed Metal Trading) 


Precious Metals continued 

■ SOLD COMEX (100 Trey or: S/troy cc.) 


GRAINS AND OIL SEEDS 

■ WHEAT LCECE pur tome) 


SOFTS 

■ COCOA LCE (tVtanne) 


MEAT AND LIVESTOCK 

■ UVE CATO-E CME (40,0002k: C8«s/S») 


■ ALUMINIUM. 99.7 PURITY (S per KAMI 


Caali 

3 pitta 

Close 

1857-6 

1B75-6 

Previous 

16805-9.5 

18823-33 

High/low 

1873 

1890/1877 

AM Official 

1872-3 

18883-9 

Kerb dose 


1878-80 

Open lm_ 

N/A 


Total daily turnover 

N/A 


■ ALUVWIWM ALLOY (S per tonne} 


Close 

1810-20 

1645-55 

Previous 

1810-20 

1BSO-5 

HtyiAow 


1865/1845 

AM Officta 

1625-35 

1060-5 

Kerb dose 


1830-40 

Open InL 

N/A 


Total ddy turnover 

N/A 


■ LEAD (Spar tonne) 



Close 

672-3 

890415 

Previous 

686.5-7.5 

684-5 

hlgMow 


691/866 

AM Offidd 

672-3 

890-03 

Kerb o)dsm 


886-7 

Open art. 

N/A 


Total defy turnover 

N/A 


■ NICKEL (S per tonna) 


Ckne 

7650-60 

7075-7 

Previous 

7510-20 

7636-40 

HJ£ft/tow 


7800/7850 

AM Offldd 

7865-7 

7790-5 

Kerb does 


7870-80 

Open InL 

N/A 


Total dally turnover 

N/A 


■ TIN (S per tonne) 



Close 

6200-10 

8300-5 

Previous 

6226-35 

6325-30 

HgMow 


6420*240 

AM Offldd 

6290-300 

6396-400 

Kerb dose 


6280-90 

Open InL 

N/A 


Told dally turnover 

N/A 


■ ZHfC, special high grade (S per tome) 

Close 

1164-5 

1188-00 

Prevta* 

1166.5-7.6 

1192-23 

WqMow 

1176 

1200/1188 

AM Ofltdal 

117S-8 

1200-1 

Kfflb dose 


1186-7 

Open kit 

N/A 


Total dafly turnover 

N/A 


■ COPPER, grade A (S per tonne) 



tar 

Ok 

■Ian 

M 

Hr 


Sett Day's 
pdce c h i mi n Hl||ii 
380.7 +22 

387.3 
388.1 
381 J) 

3944 

ms 


Open 

tat 


VDL 


Sob Oar'S 


Op n 


Total 


1 1 

+2.1 3873 3863 75.473 12,811 

+ 2.1 - - - - 

+2.1 3813 3903 25389 4.171 

+2.1 3962 38U 10099 2,014 

+2.1 3902 3962 10394 591 

184,478 23,781 


10336 +030 10429 103.75 376 


Her 

M 

JM 

ftp 

Total 


10655 +025 108.80 10045 1327 


11025 +020 11055 11040 119 


8175 +025 


43 




Sett 

Day's 



Open 



Yd 


price 

change 

MB* 

lew 

M 

W 


78 

tec 

956 

+15 

958 

934 

18.655 

1.492 

Dec 

98 

Mar 

981 

+14 

982 

962 

43.101 

1905 

Fee 

45 

May 

969 

+14 

990 

971 

14.851 

555 

Apr 

47 

Jd 

1002 

♦13 

1002 

966 

6.620 

89 

JUB 

5 

Sep 

1015 

♦14 

1015 

1000 

12.764 

63 

Aog 

- 

Ok 

1029 

+14 

1030 

1016 

9.795 

219 

Oct 

328 

Total 




1R873 

6,467 

Total 


■ PLATINUM NYMEX (50 Troyaz.: S/troy or.) 

■tan 4175 +29 4185 4165 17,473 1,877 

Apr 4211 +23 4235 4223 7,177 119 

JM 4265 +23 - - 1374 13 

Oct 431.8 +23 431.0 4319 500 

Jan 4343 +23 - ■ 10 

Total 27,134 1009 

■ PALLADIUM NYMEX pOO Troy oz.; $/troy caj 


WHEAT COT (S.OQCbti min; cents/BOb bushel} 


COCOA CSCE (10 tomes: S/tonnee) 


Sec Oar** Open 

price change Mgh L am tut 

70275 -OSS 70800 70175 27,787 

PITTS 41 IPS ES700 26180 

69575 -042S 89360 69500 15342 

65575 -0300 65500 05.425 5.417 

64125 -0300 B4425 64350 1348 

64350 -0250 65350 64800 517 

77^78 

UVE HOGS CME (40,000013; certs/fcs) 


Yol 

4.154 

3,113 

1573 

225 

87 

82 

0314 


DK 


378/2 
MV 38VE 

Bar 389/8 

Jul 338/0 

Dec 
TctM 


-2/4 383/D 3788) 25,544 5569 

-2/2 394/4 388/4 29.151 4.817 

- 373/2 388/4 4590 417 

■0* 341/2 337/2 10808 1582 

343/0 +0/2 345R 342 ft 336 4 

352/4 +0/4 364/D 352/0 158 10 

70894 12,179 


On 


1288 

+39 

1289 

1249 

2424 10,421 

Ok 

1335 

+29 

1340 

1310 

40.17811464 

Fab 

1381 

+24 

1383 

1337 

8.488 442 

Apr 

1385 

+25 

1389 

1358 

3,890 438 

Jot 

1408 

+25 

1408 

1385 

t,57B B9 

taB 

1438 

+25 

1422 

1422 

5,068 19 

oa 





67,85822405 

TOW 


Close 

2772-3 

2754-6 

Previous 

2781-2 

2750-2 

rtgti/tow 

2795/2770 

2770/2745 

AM Offidal 

2785-800 

2780-1 

Kerb dose 


2758-9 

Open InL 

N/A 


total deVy turnover 

N/A 



LME AM Offldte E/S rate: 14870 
LME naming £/$ rata: 15841 


S|KH5B40 3 rafts 1 5831 G rafts: 15810 9 rafts: 15785 
■ MGH GHADE COPPER (COMBO 



Gto» 

Pays 

ngfr 

Op« 

taw tat 

Yd 

Hw 

130.00 

+1.63 

130.00 

13000 1^38 

134 

UK 

129.05 

+165 

130.10 

12720 32,611 

2.019 

Jn 

127.70 

+180 

127:00 

127:00 926 

14 

Fab 

12&38 

+4L50 

- 

- 578 

1 

■tar 

125J5 

+035 

127.10 

124.90 1X565 

nm 

Apr 

122JB 

-0.30 

- 

553 

10 

TOW 




89,467 

6X33 


PRECIOUS METALS 

■ LONDON BULLION MARKET 
(Prices euppfad by N M HgggcMjg 


Ok 1KL85 +1.05 159J0 15658 3^51 414 

Mar 189.85 +1X5 IflOJO 19125 X67B 293 

Jte 16035 +160 160.75 160.75 488 

SK 181-10 +1.10 16125 161.25 31 

ToU 7^44 707 

■ SILVER COMEX (100 Trey OZ4 Cents/lray at) 

HOT 

520.9 

+48 

. 

- 

35 

35 

Dec 


+48 

5248 

3208 80.732 1Q.7B1 

Jan 

524J 

+48 

- 

- 

87 

1 

Mar 

5305 

+48 

53X0 

5298 31840 

3804 

Hay 

536.4 

+48 

5388 

538.0 

5819 

420 

Jri 

542.6 

+48 

544.0 

3400 

7868 

920 

Total 




07854 18,149 

ENERGY 






■ CRUDE OIL NYMEX (42JXX) US galls. S/borreQ 


Uteri 

Dara 



OPK 



price 

ctengo 

Mg" 

lew 

tat 

Vd 

Dk 

17.46 

■0.01 

1784 

17.41 50823 47827 

Ad 

17.51 

+0.01 

1787 

17A7 98,737 

56765 

Feb 

17.48 

+001 

1784 

17.43 42878 14851 

Hot 

17.47 

+0.03 

1786 

17.44 25.483 

4809 

Apr 

1742 

+001 

17.55 

17.42 17,740 

1831 

■nr 

1744 

+088 

17.45 

17.42 12891 

873 

Total 




987,209133803 

■ CRUDE Ol. IPE (S/barraQ 





Latest 

Day'a 



OpM 



prica 

Bhaage 

mm 

Urn 

M 

Ml 

DK 

17J8 

+089 

17.46 

1785 50837 25.420 

Jn 

1662 

+083 

1679 

1687 87,415 35802 

ft* 

I6L50 

+006 

1688 

1037 24728 

6749 

Mot 

16J5 

+0.10 

1041 

1685 1X242 

2898 

Apr 

1t33 

+016 

1033 

1019 

5823 

129 

*»ay 

1BL2B 

♦021 

1676 

1X26 

3.131 

245 

TOW 




195842 70895 

■ HEATING OS. NY1EX (42J300 US pfe; c*S gafa) 


Uteri 

Daft 



Open 



price 

ebango 

«#■ 

Law 

tat 

Vai 

Dao 

48.70 

-015 

4050 

4060 38719 

17, OB 

Jan 

4025 

-012 

5085 

49.10 

30293 

7,752 

feb 

4075 

-022 

5040 

49.75 24811 

3858 

MV 

4075 

-0.02 

5070 

49.75 

13825 

1719 


4015 

+088 

4025 

48.15 

8.313 

362 

"tar 

4050 

+003 

4885 

4050 

4,481 

154 

Total 




164866 31,398 

■ GAS OS. IPE (J/tame) 





Set 

Day's 



Opaa 



price 

ChKflB 

HOb 

LOTI 

tat 

*01 

OK 

151 25, 

-285 

15275 

15050 38801 

8774 

Jan 

153J25 

-280 

15475 

15250 2X976 

XI 74 

Fob 

t 54 jar 

-1.75 

15525 

15480 

11.438 

1818 

Mv 

15425 

-1.75 15580 15380 

7803 

445 

*pr 

152.75 

-175 

15X50 

15X00 

3843 

2SS 

»«y 

15X25 

-175 

- 

• 

785 

- 

Total 




94701 1X473 

■ NATURAL GAS NYWX 110000 inmBtD.: VmOai 


■ MAIZE car (5,000 bu tnft: cente/Bflft buahd) 

Dec 218/6 -0/2 218/8 218/4 88578 16261 

liar 22810 -0/2 2296 227* 75J12 8,418 

■ay 235/4 - 236* 235* 20610 2.376 

JU 240/2 -<V2 241* 2400 39.241 2250 

Sep 245* -012 248/4 244* 3560 300 

DK 248/2 -1* 251* 249* 19.709 1,224 

ToU 288,187 28503 

■ BARLEY LCE DC pea toma) 


Sto 
DK 
TUN 

■ COCOA (1CCO) (SOR'a/tonne) 


15,166 2528 
11584 2553 
5546 417 

2583 209 

623 55 

450 32 

37555 6440 
■ PORK BELUES CME (4Q,000Jba; cants**!) 


33.475 -0425 33575 33.400 
38575 -0250 38575 30500 
37575 -0025 37500 37500 
42.725 -0025 42750 42525 
42250 -0190 42250 42150 
39550 -0075 39.450 38525 


JOTTER PAD 


vV 


i: r 


lk» 14 
Daft _ 


MOT 

.98273 


Pnw. day 
968.95 


■ COFFEE LCE (S/tonne) 


10050 +075 
10225 +076 
10455 +075 
10550 

9250 -050 
94.25 -015 


I 

474 
130 
44 
30 
52 

Total 721 

■ SOYABEANS CBT ROOOtal Wits CBrt8*0W) IsataQ 


NOT 

960/2 

+4/4 

563* 

561/4 5752 

6,452 

Jn 

568* 

*3/4 

572* 

SOOT 54.834 18.BB7 

Hot 

577/2 

+3/2 

580/2 

sea* 27.715 

7790 

May 

584/2 

+2* 

588/4 

575* 14,504 

1765 

JaJ 

589/4 

+2* 

591* 

582* 22J01 

2888 

*»0 

592* 

+3/4 

583* 

5B8/4 1714 

85 

total 




138789 37772 

■ SOYABEAN OIL CBT (BOJKJOBra: oenta/ft) 



Hoy 

3325 

-35 

3330 

3290 

370 

49 

Jn 

3349 

■54 

3385 

3320 

9.758 2572 

Mar 

3321 

■42 

3340 

3290 

7598 1380 

May 

3303 

-30 

3305 

3270 

3701 

864 

JM 

3290 

-23 

3295 

3255 

1.331 

272 

tep 

3270 

-18 

3555 

3250 

2.106 

52 

ToM 





24547 8489 

■ copra ■C* CSCE (37.500ftK centsfflsM 


Dk 

17175 

-530 

176.00 

189.70 

8739 3431 

Mar 

17630 

-575 

18130 

17540 

14.493 4588 

•ta 

17950 

-800 

18X00 

179.50 

5.S08 

514 

JM 

18175 

-550 

18475 

180-75 

1408 

231 

teP 

18250 

-550 

18550 

182X0 

971 

74 

DK 

18X75 

-550 

18750 

182.75 

825 

8 


Fob 

Her 

Mer 

M 

Abb 

TOW 


40800 -0550 41500 40800 
41575 41500 41450 40850 
41550 -0.550 42550 41550 

42.750 -0500 4X100 42600 

41.750 -0500 - 41500 


8,139 

1,240 

951 

364 

87 


10,181 


1.462 

128 

32 

16 

2 

1,630 


■ >-•-> £ 


CROSSWORD 


No.8,612 Set by VIXEN 


T "7 
"I 


LONDON TRADED OPTIONS 

Strike price S tonne — Cate Puts — 


ALUMINIUM 


TMM 

■ OOrrtiE (ICO) (US cents/pound) 


32177 9548 


Rot 14 

Comp, dtftr 
15 day 


Price 

17272 

17758 


Fin. day 

17722 

17850 


Dk 

2878 

+0.67 

2877 

27.15 36799 

5411 

JM 

27.12 

+054 

Z7.15 

26.17 

22721 

4.444 

Mar 

28.10 

+078 

26.15 

25.40 

17.718 

4788 

May 

2X27 

+074 

2578 

2456 

14.082 

1710 

JM 

2452 

+045 

34.75 

2475 

X7B7 

1474 

teg 

2*23 

+043 

3475 

2470 

1.724 

103 

Total 




107747 18787 


■ No7 PREMIUM RAW SUGAR LCE (cama/tos) 


■ SOYABEAN MEAL CBT (100 loon; S/ton) 


- - - - 90 

■ey - 580 

JM - - - 450 

TOW 1,100 

■ WHITE SUGAR LCE (Vlonrw)[LMKa Prices) 


Dk 

1587 

+0.1 

161.7 

1584 M. mp 

3430 

Jn 

1605 

+0.1 

1635 

1605 20.638 

1.620 

Mar 

165.1 

+05 

1675 

1645 

18520 

932 

•tay 

169L4 

♦07 

1714 

168.7 10424 

1400 

JM 

174.1 

-07 

1755 

17X6 

9498 

578 

teg 

1784 

-0.1 

1777 

1755 

2401 

113 

Total 




102421 

8789 

■ POTATOES LCE (C/tome) 




HOT 

1054 


. 

. 

. 

_ 

Apr 

2525 

+0J 

2534 

2464 

1,465 

326 

■ay 

2654 

+154 

Tcnp 

260.0 

_ 

1 

Jn 

25X0 

- 

- 

- 

- 


total 






327 

■ PRBGHT (BOTEX) LCE (SIO/Mox point) 


Hot 

1850 

♦15 

I860 

1638 

260 

42 

Dac 

1800 

+5 

1805 

1B00 

383 

8 

Jaa 

1715 

+5 

1715 

1705 

1461 

15 

Apr 

1658 

+13 

1B55 

1650 

928 

4 

JM 

1473 

-17 

- 


132 


Oct 

1563 

-47 


. 

17 

_ 

Total 

Don 

Pltv 



27*1 

69 

m 

1838 

1830 






Oct 


38320 -030 385.00 38140 

37750 -150 378.60 375.40 
388.60 -070 36050 36050 

34250 +070 34250 33080 


9.848 1519 
X751 1.198 
2B01 1,124 
1282 518 

100 

Total 19,188 4,759 

■ SUGAR IV CSCE (112,000*8: conte/ttaj 

1354 -0.02 1X72 1353 100504 12,532 

1358 - 1174 1358 30107 4530 

1X43 -002 1X48 1X37 18,502 1.755 

1253 -002 1257 1250 15514 1,692 

Bar 1X38 +051 1244 1237 3.322 163 

Uy 1251 +OOT 1251 1228 253 52 

Total 16859421565 

■ COTTON NYCE gOXPOIba: cactaflbA 


(99.7%) LME 

Feb 

May 

Feb 

May 

1800 . 

125 

156 

27 

72 

IflfSO 

96 

129 

68 

93 

1000 

72 

108 

S3 

118 

■ COPPER 





(Grade A) LME 

Feb 

May 

Feb 

May 

2700 

133 

101 

78 

158 

2750 

107 

- 

99 

- 

2800 

84 

- 

106 

- 

■ COFFEE LCE 

Jan 

Mar 

Jan 

Mar 

3400 

IBS 

241 

216 

320 

3450 

146 

225 

247 

354 

3500 __ _ 

130 

209 

281 

388 

H COCOA LCE 

Dec 

Mar 

Dec 

Mar 

<w 

31 

81 

_ 

2S 

BSD . . 

9 

66 

3 

35 

975 

1 

52 

20 

48 

■ BRENT CRUDE IPE 

Jan 

Apr 

Jan 

Apr 

1650 . . 

65 

84 

46 

108 

1700 

49 

66 

65 

139 

1750 .. 

24 

51 

105 

174 


LONDON SPOT MARKETS 

■ CRUDE OH. FOB fpat barrai/Dec) 


+or- 


Ntay 


Del 


D“*»l S15.47-5.53z -023 

Brant Blend (dated) $1091-6.93 -021 

Brant Blend (Jan) Si 6.61 -6.63 -021 

W.T.I. (1pm est) S17.54-7.56rf 4L36 

■ oa. PROPUCTSNWE prompt defray OF (tonne) 



1 


5 i % .; ' , 

*T-« 


• - ' v W-* 


• -V I*,- . % . 


«ta| 


Oct 

Ok 

fetal 


7450 +1.10 7458 7350 16585 5524 

7555 +077 7038 75.60 21,126 X8S8 

7755 +070 7755 7670 7552 766 

7752 +067 7ai0 77.51 4512 273 

7150 +030 7150 7155 641 14 

7050 +030 70.55 7010 3,241 196 


■ ORAHQE JUICE NYCE (15.000lbs; Ogita*a) 


Gold (Troy Oi) 

$ price 

E equiv. 

Ctoee 

38080-387.10 


Opening 

38640-38740 


Morning fix 

386.45 

243.173 

Afternoon flx 

386.70 

343.683 

Day's Mgh 

367.10-387.40 


Day's Low 

386.80-38690 


Previous dose 

385.00-385.40 



Loco Ldn Mean Qahl Landing Rataa (Vs USS) 

1 month .....~~.m~.u 4.87 8 months £24 


2 months 4.93 12 months 

3 months 458 


-5.71 


SSwr Fbt 
Soot 

3 m onths 
6 months 
1 year 

Gold Corns j. 

Maple Leo» 3&7j304tefl50 

“=^81-94 


p/troy oz. 
328.15 
33250 
338.10 
35085 


US ets aqu/v. 
521.36 
53855 
538.15 
564J58- 


E KWW - r 



Latest 

Day's 



Opn 



Price 

danse 

Mgk 

Law 

tat 

Vai 

Bk 

1J00 

-6006 

1.718 

1485 28490 10413 

Jn 

1460 +0402 

1-870 

1450 20213 

4409 

Fab 

1.670 

- 

1480 

1.885 1X722 

1487 

Mot 

1400 


I486 

145G 

10753 

1456 

Apr 

1425 

-0005 

1430 

1425 

739 

355 

■w 

1.827 

-0.0Q7 

1430 

1425 

7,109 

373 

ToU 




147408 21430 

■ UNLEADED GASOLINE 




NYMEX (42JXU US galsj cflJSgaBoJ 




UM 

QUf t 



Opn 



price dongs 

Ugh 

taw 

tat 

VM 

Dk 

57.65 

-022 

5040 

5740 24 m 14.408 

Jn 

5545 

-032 

«« 

5440 3.133 

5479 

M 

5440 

■0.47 

6445 

5440 

8.072 

TJ31B 

Mar 

54.25 

-020 

5445 

5445 

4.456 

464 

Hr 

57.40 

-030 

57.70 

5740 

X1B2 

390 

Jte*_ 

-3&UB- 

■060 

- 

- 

1,699 

107 

ToU ' 

- 




70432 22411 


Km 

111.15 

■020 

111.35 

11050 

203 

49 

Jn 

11445 

-0.15 

115.25 

11175 15,721 

1.438 

tear 

11840 

+045 

11840 

11725 

5418 

657 

May 

121.50 

+005 

- 


1.709 

214 

JM 

13440 

+005 

124 SO 

12440 

915 

1 

Set 

127.45 

+050 


- 

12B5 

111 

TatM 





Z7JSZ 2JEB 


57-80 


Minor Metals 

European free market, from Motel Btriatm. S 
par ft in warehouse, unlees othenri&e stated 
fast week’s ta brackets, where changad). Antt- 
mony: 99.696, S per tonne, 5,850-8^0 (5520- 
6.CC0). atenmth: mb\ 99.9094. lame kite 3,60- 
3 S3. Cadmium: rrtrv 39.5 W,. 160-195 carts a 
pound. Cobalt: MB free market. 99.8%. 26.00- 
27.00 (26.50-27.30); 93.3%. 24^0-26.50 
(24^0-25.40). Herctay: min. 99^9fr>, $ per 78 
R> flask, 115-135. MotyMenuoi: drammed 
molyMfc oxide, 7.00-7.50 (8^0-6.80. Saie- 
nlum: min 96596, 3.45-4^5. Tiaigstan one 
standard min. 6596. S per tonne unit (lOkni 
WO, dt, 45-55, Vrinadtunu min. S6N, cri 
1.45-1.55 (1.40-1.55). (Jntnlum: Nuexco 
exchange value. 7.0ft. 


VOLUME DATA 

Open interast and Volune data shown tor 
co nti uco traded on COkffiX. NYMEX. CBT. 
NYCE, CME. CSCE and IPE Crude Oil are ana 
day In arrears. 


INDICES 

H REUTB1S (Baae: 18/3/31 =10q 


No* 15 Nov 14 month ago year ago 
213B.0 2133.1 208U4 16155 

I CRB Fimaw Base: 1967=1001 


Premium Gosoftne 

1173-175 


Gas 09 

1152-154 

-24 

Heavy Fuel 09 

SI 04-106 


Naphtha 

*172-175 


Jet fuel 

SI 76-1 77 

-4.0 

Diesel 

1159-161 

-24 

ROTulMn *gus. ret London ffrn 3S9 079? 


M OTHER 



Gold (per troy 07)4 

1366.95 

+1.75 

Silver (per troy ozji 

5224c 

+54 

PfaHnurn (per troy az.) 

1416.85 

+440 

Palladkan (per Lroy oz.) 

$158.00 

+1.60 

Copper (US prod) 

133.0c 

+4.0 

Lean (US prod.) 

40.75c 


Tin (Kuala Lumpur) 

15.60r 

♦0.02 

Tin (New YorK) 

2904c 


Cattle (Hve wdgWJf 

116. 79p 

4Q2BT 

Sheep Owe 

102JJ5P 

+1.34* 

Pigs (Bve weight) 

77.12p 

+046* 

Lon, day sugar (raw) 

5338:90 

+0.40 

Lon. day sugar (wto) 

1367.00 

-840 

Tate 6 Lyle axport 

1325.00 


Barley png. teed] 

Unq. 


Maize (US No3 Yellow) 

Unq. 


Wheat (US Darir North) 

£1 65.0v 


Rubber (DedV 

8625p 


Rubber Uaijy 

B6.7Sp 


Rubber (KLRSSNol JuQ 

342J3m 

-0.5 

Coconut 08 (Ft*l)§ 

S6974q 

-3SJ0 

Pam 01 (MalayJl 

S72a« 


Copra (Phfl)S 

*467. Ov 

-13-0 

Soyabeans (US) 

£164.0t 

+14 

Cotton OuBookW Index 

77.25C 

+040 

Wooltops (640 Super) 

455p 

+2 


Nov 14 

23328 


Nov 11 month ago yam- ago 
23354 - 222.54 




™ tittayslan camlkg. y Ntaftw. v Nw/Ghm. u 
. 2 ^n. t Nov. q Dac/Jan* l 


OcUNw. 1 Jan. t Nev. q DaeUtn* UmdW PhyricaL 5 CF 
Ronadom. 0 botuo doth don. 4 Shews (ju* might 
P"** 00 "■** O fttaes aro (or nttu day f 

- 14/11/W Cometod Sguv lor WT1 517^0-7.02 


ACROSS 

1 Man races around a further 
military display (6j 

4 l n „ br . ave hands 11 could be 
lethal (8) 

9 There’s quite a bnzz about 
this accommodation for work- 
ers (6) 

10 Bec oming hangers-on (8) 

12 Fair with skinhead in resi- 
dence (£) 

13 Set out and took down all 
someone bad (Gi 

15 The personnel list always 
includes a woman (4) 

16 Nobody paid to be admitted 

(7) 

20 Cache discovered in south- 
east Mediterranean island (7) 

21 Only water is required (4) 

25 An American scientist has no 
team backing (6) 

26 The making of secret changes 
without penalty (4-4) 

28 A guide covering British cur- 
rency as well as foreign (8) 

29 Abuse one may get in traffic 
16) 

30 Books about benefits avail- 
able (8) 

31 Centre being rebuilt in mod- 
ern style (6) 

DOWN 

1 Object about one point a mim- 
b er pu t Ln demonstrating (6) 

2 of exceptionally neat 

3 The monster in charge wifi 
get progressively worse (6) 

5 Scottish resort where there’s 
absolutely no prohibition (4) 


6 Stayed in custody (8) 

7 Temper shown when an incor- 
rect lane is used (6) 

8 Fate of Korean capital Is set- 
tled (6) 

11 Ask for one of the little peo- 
ple - filly stone! (7) 

14 The meeting's not in favour 
of discretion being exercised 

(7) 

17 Progressive man calling for 

la Srf ary . forc ® °° 1 (8) 

18 Get less iron (8) 

19 Flats for adults in principle 

( 8 ) 

22 A person who counts as an 
announcer (6) 

23 They're very big and may 
have a sting (6) 

24 Hit by industrial action (6) 

2 ' to® char E e is about 

right (4) 


A, 






Solution 8,611 








) 










o* 


S H 


ibov 


Svmde exsl0fM . 
^*jet 1994 


SSWORD 



a 


■ ■ 






m 


im 

00^}l 


FINANCIAL times WEDNESDAY NOVEMBER 16 1994 


MARKET REPORT 


LONDON STOCK EXCHANGE 


Buy programme drives Footsie through 3,100 


FT-SE-A All-Share index 


By Steve Thompson 

i ss^A&S 

-saa-.-SKSsstK 

100 stocks^a Ieadlft & ^ 

l JjgJ 5»ju «S=3 

fteS f Uent Cora Pany news 

heady cocktail was 
SJJ™*’ s 5°"S Performance by Wall 
aShS^tK? 1 * 11 g ? lned ground shortly 
**“ opening yesterday ahead 
of the outcome of the crucial Fed- 

fno 3 Committee meet- 

ing in Washington. Wall Street 
shrugged aside another batch of 
economic data from the US indicat- 
mg strong growth in the economy. 

At the close of trading, a nd with 
no news from the FOMC meeting 


Boots in 

£500m 

buy-back 

The market spotlight fell on 
Boots after the consumer prod- 
ucts retailer surprised the mar- 
ket, early in the day. with a 
£500m scheme to buy back its 
own shares. 

Turnover by the close had 
reached a hefty 213.4m shares, 
making it by far the day's most 
actively dealt stock, as it regis- 
tered a rise of 12 at 525p. 

S.G. Warburg, the company's 


Equity Shares Traded 

TV/new by volume (mkJtanj. Excfeidng: 
Intm-moftet buansss and overseas turnover 
1,000 - - - 


800 


available to the market, the FT-SE 
100 Index fulfilled recent market 
optimism, sweeping confidently 
through the 3,100 barrier and clos- 
ing a net 404 higher at 3.135.4. 

Second-line stocks shared in the 
buoyant mood of the market, the 
FT-SE Mid 250 closing 22£ stronger 
at 3.560.7. And there was a general 
air of optimism around City trading 
desks, with dealers adopting the 
view that, within reason, the UK 
market would take whatever was 
thrown at it by the Federal Reserve. 

"If we get 50 basis points, the 
market will say it is already in the 
prices; if we get 75 or even 100 
points, the bond market will love it 
and we will hang on to their coat 
tails,'' was the view of one top 
trader in London, although he cau- 
tioned that the market would defi- 
nitely not appreciate an absence of 


movement by the Federal Reserve. 

The overall bullish view was 
reinforced by a surge of activity in 
derivatives markets, where turn- 
over was said to have been the 
heaviest since mid-September. 

Turnover expanded rapidly 
throughout the session to reached 
961.4m shares, the highest seen for 
many weeks, with non-Footsle 
stocks accounting for an unusally 
low 39 per cent or the total. 

Dealers picked up the scent of a 
big market operation before the 
opening and prices across the board 
were marked better at the outset, 
when the FT-SE 100 was around 10 
points ahead. 

News that Boots had sent its bro- 
ker S.G. Warburg into the market to 
buy in around 10 per cent of its 
shares drove Boots sharply higher 
until the buy-back operation was 


satisfied. Boots’ move came 24 
hours alter it sold its pharmaceuti- 
cals division to BASF, the German 
chemicals company. 

At the same time, AMP Australia, 
the life assurance group, sold its 
3.2 per cent holding to Smith New 
Court, the UK securities house, who 
quickly placed the stock in the mar- 
ket, taking a 3p a share turn in the 
process. 

While these deals were being 
unwound, Goldman Sachs, the US 
investment bank, moved in to exe- 
cute a £160m-plus buy programme, 
spanning the FT-SE 100 and 250 
indices. These three big operations 
accounted for more than 270m 
shares, or 28 per cent of turnover in 
the market yesterday. 

At Its best, just before the close, 
the FT-SE 100 was more than 42 
points up, with dealers reporting 


only light profit-taking towards the 
close. 

Company trading reports pro- 
vided numerous outstanding fea- 
tures. including De La Rue, the 
banknote printing group, whose 
shares sprinted to an all-time high 
after excellent results, while Power- 
Gen fulfilled even the most optim- 
istic dividend forecasts. General 
Accident was the one real disap- 
pointment in the market as the 
steep fall In the insurance group's 
net asset value and middle of the 
range third-quarter profits left the 
market unimpressed. 

The best individual performance 
in the FT-SE 100-share Index came 
from Standard Chartered, viewed by 
many chartists as in the initial 
stages of a big upside break; dealers 
noted heavy turnover in Standard 
shares. 


1,550 -Hr— 

1-525 V- . 


Sap Oi 

Senna: FTOracfnt* 191 

■ Key Indicators 
Indices and ratios 



FT-SE 100 

3135.4 

+40.1 

FT Ordinary Index 

2408.4 

+28.7 

FT-SE Mid 250 

3560.7 

+22.6 

FT-SE-A Non Fins p/e 

1&80 

(18.87) 

FT-SE-A 350 

1570.2 

♦17.8 

FT-SE T 00 Fut Dec 

3TS1.0 

+52.0 

FT-SE-A Ait-Share 

1553.90 

+16.59 

10 yr GIR yield 

8.65 

(8.68) 

FT-SE-A AB-Shara yield 

3.91 

(3.95) 

Long gUt/equity yld ratio: 

2.24 

P-23) 

Best performing sectors 


Worst performing sectors 


1 Gas Distribution — 

— 

.... +2.9 

1 Insurance ... 

— 

-0.7 

2 Extractive Industries 



... +Z2 
.... +1.7 

2 Other Services & Bus. 

...... 

+0.0 

4 Mineral Extraction ... 



.... +1.7 

4 FT-SE SmaUCap 



.—+0.2 

S Banks 


... +1.7 

5 Engineering 


+02 


broker, bought a short 10 per 
cent of the Boots shares for 
cancellation, with the lowest 
price paid being 528p and the 
highest 535p. 

The market had expected the 
buy-back, although several 
researchers had indicated that 
they thought the company was 
only likely to make this move 
after the UK budget later this 
month. 

Warburg encountered little 
difficulty in acquiring the 
desired block of shares. Dealers 
suggested that there had been 
many willing sellers, with one 
retail specialist reporting 
estimates that Warburg could 
have bought as much as 30 per 
cent of the group’s Issued 


EQUITY- FUTURES ANDu OPTIONS . TRADING 


Stock index futures moved writes Jeffrey Brown. 
ahead strongly for the second The number of contracts 
day running, but it was the dead in the FT-SE 100 
surge In activity that mostly December contract soared to 
caught traders' imaginations, 19,792 during pit trading in 

■ FT-SE 10O INDEX FUTURES (UFFE) 625 py fufl Index powit (AP 



Open 

Sett price 

Change 

High 

Low 

E&L vd 

Open lAL 

Dec 

3116.0 

3151.0 

+52.0 

3158.0 

3113.0 

20686 

54811 

Mar 

3138.5 

31B7^ 

+52.0 

3188.0 

3I3&5 

271 

4539 

Jim 


3190.0 

+54 J) 



0 

80 


■ FT-SE MP 250 INDEX FUTURES (UFFE) CIO per Ml hide* port 

Dec 3577Q 415 0 4165 

■ FT-SE MID 250 WDEX FUTURES tOMLX) CiQ per Ml Index pofcit 

Dec 3.570 0 

Al open Imartar figures are tor prevtoua day. T Ex*r octane Nwwn. 

■ FT-SE 100 INDEX OPTION (UFFE) (*3135) E10 per M Index point 

2980 3000 30SO 3100 3150 3200 3260 3300 

CPCPCPCPCPCPCPCP 
Nov 1B7 1 147*2 1 981; 3 S3 7*2 19*2 24 1 * 4*2 W 1 114 1 164 

Dec 215 13 173 2f>2 134 32*2 07*2 48 60 70 46 fl0* 2 28> Z 1321;. 16 171*2 

Jen 23Bh32k20ri2 44 m 56*2 131*2 74 101 94 70*2 80*? E5 733*2 40 171*2 
Feb 257 32*2 220 44 184 56*2 153 74 123 94 00*2 120 77*2 150 68 1B7 

JUTlf 285 85*2 204 122*2 192*2170*2 108 227 

Cafe 10061 PUS 5928 

■ BUBO STYLE FT-SE 100 INDEX OPTION QJFFE) CIO per tuM Index potm 

3975 3025 3075 3125 3175 3225 3278 3328 

HN 172 1 123*2 2*2 7B 4*2 35 I3*j 10*2 38*2 2 80*2 1 129 1 179 

D(C IBS 18 15212 27 118 40 84 58 57 80*2 36 109*2 20 143*2 11 184 

Jan 216 33*2 176 45 145*? 62 115*i 81 00*2 106 67»j 132*2 50*2 165 36 119*2 

Mar 206*2 69 1* 104*2 07*2 154 61 215*2 

Jurt 282 S3 191 126*2 138 173 07*2227*2 

Ofti 1.077 no 7.701 ’ UndBrtjkq] Mu ekt Rankm tfoen an buM on nBcna* prices 
t long dare u»y jwwfm 

■ EURO STYLE FT-SE MID 2BO INDEX OPTION JOMLX) £10 per U index paint 


3400 3450 3600 3880 380 

Oct 0 0 0 

Cab 0 RAa 0 SaOanent iriws and wtanea are Mend 4 30pm. 


FT - SE Actuaries Share indices 


3700 3760 


share capital. 

Yesterday's move followed 
confirmation on Monday that 
Boots is selling its pharmaceu- 
ticals division, to BASF, the 
German chemicals and drugs 
group, for around £S50m. One 
analyst said the combination of 
the two developments left the 
company "flexible to make an 
acquisition''. 

Meanwhile, analysts expect 
the selling institutions to 
pump their newfound cash 
back into the retail sector. 

Oe La Rue jumps 

Shares in cash rich De La 
Rue, the bank note printer, bit 
an all-time high as the market 


heavy two-way business. 
Monday's volume was 8,545. 

At the 4.10pm official dose, 
December stood at 3,151, up 
50 points for a two-day 
advance of 78 points. The 
premium to the cash market 
was around 16 points, or 
roughly twice the fair value 
premium. 

There was a substantial 20- 
point premium to the cash 
market throughout almost the 
whole session, with the 
upward pressure only tailing 
off In the final hour of trading. 

December reached a peak of 
3,158 just after 3pm, and on 
the way up broke through a 
number of chart resistance 
points, notably 3.130 and 
3,150. 

Traders took encouragement 
from the way trade sizes 
widened, although with the 
December contract dipping to 
3,148 in late, screen trade, talk 
of a Arm platform for today's 
session begem to look slightly 
premature. 

Traded option volume 
expanded to 44,538 contracts 
from Monday's 31,163, with 
FT-SE and Euro FT-SE activity 
accounting for |ust under 
25,000 lots. British Gas was 
the busiest stock option. 


The BK ‘Series': 


Da/8 Year Dtv. Earn. P/E Xd ad) Total 

Now IS chgaM New 14 Nov 11 Nov 10 ago ytekftt yield*, ratio ytd Return 


FT-SE ICO 3135 

FT-SE MM 2S0 3580 

FT-SE Md 250 ox Irw Trusts 3563 

FT-SE-A 380 1570 

FT-SE SmaUCap 1781J 

FT-SE SmaflCap ax tnv Trusts 1748.' 

FT-SE-A ALL-SHARE 1563.1 

■ FT-SE Actuaries Alt-Share 


+13 3095.3 3075.9 3103S 3097.5 4.08 6.99 

+0-6 3638.1 3538.5 3542.9 3421.0 3.52 5.77 

+06 3541.8 3540J 3545.2 34183 3.68 9.25 

+1.1 1852-4 1644.7 1556.0 1641.7 3-96 A71 

+0.2 1777.92 1780.02 1782.13 1760.01 332 530 

+ai 1748X6 1748.98 1750.96 1740.61 3.53 557 

+1.1 1537.31 1530.39 1540.03 162634 3.91 8.69 


Day’s Year Wv. Earn 

Nov 15 chgo% Now 14 Nov 11 Nov 10 ago yiekl% ylefcflt 


10 MINERAL EXTRACTTOMflfl) 

12 ExtracOva industries^) 

15 09, imegratadp) 

16 CW Exploration & Proddi) 

20 GUEN MANUFACTURERS(2B7) 

21 BuHdre & ConsVuc0ont33> 

22 BuBding Mads & MwchafM) 

23 Chemteab(23) 

24 DKwsrSed Industriotoflfl) 

25 Bactronfc & Boa £qmpP4) 

26 Engneertna(71) 

27 Engineering. VeMdes(12) 

28 Printing. Paper & PcVg(26) 

29 Textttea 6 AooarelgO] 

30 COMSUMBT QOODS{97) 

31 BraweriSspT) 

32 Spirits. Wires 6 CbfefGpO) 

33 Food Manutooimersfza) 

34 Household Goodafl3) 

36 Health Cara(21) 

37 Pharmaceubcals(i2) 

38 TobaccoQ) 

40 8ERVlCESt219) 

41 OsiribiitorspO) 

42 Letsue & Hotete/251 

43 MedtaPS) 

44 Retaflera. Foodtl6) 

45 RetaSera. GeneralfiS) 

46 Support Servtees<41) 

49 Transport! 16) 

Si Other Sendees 8 Busmesa(7) 

60 UTTUTIESPH) 

62 Bectricftyfl ?) 

64 Gas DtarftwttonCZl 

EG Telecommunications^) 

68 Waterti.3) 

gg NON-FWANCIALSffgn 

70 FINANClALSflOq 

71 BontefKD 

73 InsuranceflT) 

74 LHe Assurance® 

75 Merchant BantotB) 

77 Ottw P*nandaK24) 

79 PropartyNl) 

50 INVESTM ENT TRUSTSfij*!— 
89 FT-SE-A ALL-SHAHE8MH9 


+1.7 267 &00 2667.65 2701.97 2376.70 
+£2 3788.62 3767.55 3803.43 3036.10 
+1.7 2648.52 2638.67 2876.84 2362.80 
+OJ 1663.42 1888.74 1 871 -52 1884.20 


+0.7 1882J3 1873.82 
+0* 1047.10 1053.67 
+0:6 1853^31855.33 
♦1.4 2297.94 2276.94 
+0.7 1799.15 1777.25 
+1.0 1881.45 188435 
+02 1818.90 1814.24 
♦0.8 2304*2 229635 
+14 2812.10279748 
+04 1566.78 157342 


188146 1890.10 
105749 1124.20 
1857.79 1855.60 
2280.052119.00 

1 794.75 106140 
190147 209040 
1808.89 170080 
229046 1980 60 

2804.76 240670 
1574.64 1883.90 


+0.9 2785.41 2751.30 2775.05 2750.40 
+04 221548 222241 223036 2006.70 
+14 283848 262240 264840 2672.30 
+06 2288.63 2281.79 2296.66 227040 
+082345.56 235014 2354.78 2641.70 
+0.8 1576.13 157849 1583.56 1672.60 
+04 306244 3061.11 3108.13 3077.00 
+1.7 377948 5756.31 3754.12 4 217.00 
+14 190644 1906.60 191548 1663.80 
+07 2501.36 2504.13 252S.13 2658.40 
+09 2062.00 206356 2065.77 180040 
+1.1 295643 2844.76 2853.40 2595.10 
+14 175447 1749.97 176043 161340 
+1.7 160547 1804.95 1619.83 1700.50 
+04 1S2645 152445 152032 1593.80 
+1.1 2252552251.62 226296 229140 
126058 1247.42 1243.65 119340 

*1.4 2413.19 239091 2420492466.70 
+04 2545.50 2537.08 2552.80 2124.30 
+24 196448 193740 1960.91 212060 
+1.4 2017.06 199062 2015.15 2324.00 
♦1.S 182079 183016 1847.88 1811.20 
+1.1 1657.31 1660.74 1682.63 183249 


*1.1 220071 
+1.7 292005 
-0.7 125342 
+1.0 239004 
+0.7 275042 
+0.8 1885.72 
+0.4144025 
+08 272081 


218074220148! 
2889.50 2923.86 i 
124340 124540 1 
2357.41 237061 ! 
274347 274044 : 
185446 185040 • 
1440.15 144004 1 
2725.27 2735.41 i 


3.47 6.02 

341 540 

361 5.58 

242 t 

4.07 6.16 

377 6.33 

4.00 541 

4.03 4.43 

5.06 5.08 

397 640 

349 SA1 

441 1.50 

3.05 540 

449 088 

441 7.21 

4.25 7.72 

390 074 

447 7.64 

387 7 99 

318 3.39 

443 090 

5.65 8.95 

343 6.50 

3.78 749 

034 4.75 

2.40 5.19 

368 8.99 

328 099 

2.76 6.38 

3.74 020 

4.01 349 

447 7.77 

362 9.79 

5.96 t 

4.13 7.68 

549 13.16 

3,90 038 

444 073 

4.06 054 

5.46 8.47 

548 7.71 

3.75 1046 

370 040 

442 4.46 

244 1.36 


1089 114.68 1191.18 
20.88 120.69 13*3.96 
19.45 125.77 1332.44 
17.65 56.40 122052 
2542 5144 1387.68 
22.96 5345 1368 37 
1004 55.18 1228.48 

P/E Xd ad). Total 
ratio yid Return 

25.18 89.83 109092 
23.34 9062 106066 
2241 98.44 1111.77 
t 38.03 1083.62 


+1.1 1537.31 163049 1540.93 152054 


18.01 111.21 965.47 

15.71 61.47 998 15 
17.05 101.23 964.26 
16.12 88.47 970.62 
1546 89 98 854.82 
41.52 48.24 926.02 
16.75 133.07 1000.63 

12.00 217,07 87044 
1081 56.61 352.75 
1642 86.25 876.08 

24.78 57.89 102022 
22.46 70.14 1005.33 

13.78 5032 1071.13 

17.63 52.76 879.13 
185 7 38.15 934.72 

19.00 87.01 897.24 

4080 2063 1085.40 

15.64 99.78 948 70 
12.19 101.85 107300 

t 11942 944.99 
15.88 5042 87240 
027 79. S3 933.29 
1080 5086 1190.18 
1348 90 24 887.78 
11.99 11649 804.77 
12.07 61.61 659.23 
15.82 127.82 93011 
11.18 97.76 840.01 
1445 64.85 100920 
26-11 45.12 828.81 

51.72 SP1B 925.94 

18.04 55.16 1228.48 


■ Hourly movements 

ftQft 1000 11-00 1240 IMP IMP 1540 16.10 HtghWay Uww/day 

— — — ; SHIS 31104 3123A 312&4 3130.7 31354 31308 3135.4 3137.4 3104.9 

.‘S 35444 35474 35504 35524 3564.1 35509 3560.5 3561.3 35604 3562.2 3544.0 

FtJe-A350 ^6.9 15566 1582A 1664.9 1566.7 15680 15703 15604 15702 1571.0 1556.7 

r ^ rf FT«iooo V '.h^a^^« M ^ FT - £E1w wwmKwii-aTuwt 

rn FT-SE Actuaries 350 Industry baskets 

ff.m IBM IIjOO 1240 1300 14J0 18 lM 16.10 Ctoee Piwteus Clangs 

~ 9&0 932^4 emi 9804 9352 994J M44 9656 9802 +6.4 

ai^&crwjren « goBM 3101.9 3097.1 3100.7 30984 3000.6 3096.7 3001.8 3065.3 +26.5 

PharniQCeuflC** is4e ^ 1B50 .0 18505 1867.3 18566 18600 18551 1634.8 16285 +283 

Watt* 2977:3 29WL2 29924 28944 30054 3014.0 301 S. 5 31X174 30105 30117 29630 +507 

— nr MUMM erase Mess la Mtahad n Gahntay mum. LW3 ot coneuierta are oveUHa horn Tee Rmnaul Trrws 

fcMttlonel grtowiBlM y* ** * efi ate_ nn FT-SEAWWa Sh— indteas Santo, etacn cevera a mng» ot electronic id papet-based 

umi. one freni RNGTAT. Ftooy House. 13-17 Eponnh Street Ujr0onK2A 4DL 

nmAiearetatoq W th— n iretaL Tile FT-8E 100. a* FT-SE MM 230. FT-SE ACMriW 350 »W Sie FT^E Aguanes leaaev 

llw FT -W haa EnMnge ot ■» UnM modern and ReptOA: el bgbmd and me FT-SE Aciums Af-Simra man s 

tj*e»J)re e*uw™w noth » cMateaen wditM inatAMalAauenn aid a* Faa«y <* Actuates under ■ standml set oi pomd nJee. 

osw le tf Of T*W Untad Kkvtiun end RapUKC o< Wana timed 1B94. O PM Ftoancw Tor— UnKad 1364. All Hjtn resered. 

C Hw Wemanona Swdt . tavtse at m Lorwon Sax* E^hanse-ond lha RnancW Tana* LMriM.Tfte FT-SE Actuaries Share 

and ^ffirSmWt.Seerer P/E arts P*nw then 80 are net oltowt. t VnU. are eegatM. 


responded to a sparkling set of 
interim results. Profits of 
£ 72.8m were boosted by a far 
higher than forecast input 
from its printing machine sub- 
sidiary, and compared with 
forecasts of £65m to £S7m. The 
interim dividend was raised by 
6 per cent 

The stock also received a fil- 
lip from the lively start to the 
National Lottery - De La Rue 
is one of the five companies in 
the Camelot consortium which 
runs the Lottery- Th e shares 
jumped 31 to 1034p, although 
some analysts were beginning 
to wonder if their premium rat- 
ing is beginning to look a little 
demanding. Paper group Por- 
tals. one of De La Rue's princi- 


■ Major Stocks Yesterday 


ASOAGMupt 
Abboy Nauatat 
Abefl FMwi 
A Dcvmcql 
AnqtanWAHf 
Aigos 

amoc. EH. Focoat 
Aosoc. EH. Ports 
flAAf 
BAT fnds.t 
BPT 

ecc 

BOCt 

apt 

BPeindo. 

BT+ 

BTRf 

Bor* of Scotfandt 
B«duy«t 
B+ot 
BJuo CrcJof 

Booker 

Boost 

Bo+aror) 

Bm. Aereapscvt 
BritJin Mrwsyst 
BmtohO»T 
Brash Land 
Brsofi Sweft 

SUnWl Castrott 
Biron 

Gobto&WHt 
C+coury Scnwepoes- 
CMdDOT 
Certun Comma t 
Com Vryata 
Comm UrUont 
CocKson 
CoolaOdst 

SGU 

Dtaiona 

Ewtm Becit 
Eaa Mdland Etocr. 
Qooroconip* 

Eng CNns Clays 
EhieT+tie CVt 
Eunjtamal U*s 
FW 
Ftoom 

RxOgriColLT 

Foist 

On AccWenrt 
Oenwel ESsclt 
Clturt 

Otynmd 

Bramdat 
Grind Matt 


Gulrr+«at 

HSB C<75p VWt 

Harnneraon 

Honeort 

itartaons Craafwu 

Hsys 

HUadoirn 

M 

Kit 

incmcet 
Jotnaoo Maafwy 
Kngftawrt 

XwrikSBM 

Umxotat 
Lend Soaeamt 

Laroni 

Lego! S GenoreJt 

Uc+OS Abbey 

Lows Burnt 

LASMO 

London Bset. 

Lmrrio 

Lxsh 

MffCt 

MfJ 

Memmb 

Mails 4 Sprocert 
Mkflarkfa Bad. 
Momson IWmj 
NfC 

NslWeST Banfct 
Naonsl Powsrt 
N*.t 

Noun Mol WMrf 
Northern Dan 
Hontoto Fixetat 


VoL 

Ctostaj 

Dayl 

DOQs 

prtM 


496 

3JI 

+1'l 

9.300 

66*4 


3,600 

*20 

•S 

1.400 

43 


2.300 

603 

+12 

1.600 

506 

Ml 

-.000 

3+7 

*8 

1J00 

272 

.?*’ 

1.700 

27e 


202 

5+fl 

,1 

1.100 

273 


3.000 

497 


8.100 

458 

•7*J 

1+00 

IDS 

J 7 

7^100 

356 


2400 

720 

*10 

aeoa 

4Z7*i 

*9 

1x00 

304 

-1 

12.000 

391 

.3*3 

27/500 

311 

*6*2 

1.800 

210*7 

7.400 

612 

rf*2 

2.500 

£41 

■i 

1.200 

304 

•3 

149 

409 


214/500 

525 

*12 

1.000 

061 

<55 

470 


«A50 

373}2 


11J500 

303*7 


65 

302 


21j000 

150*4 

-3*4 

831 

*05 

♦1 

+49 

*4+ 

♦1 

>74 

5.000 

303*2 

.11 


I4» 278 

583 890 

3J00 200 

1.900 550 


RMCt 

B17t 

Aauf 

Par* Org.T 

Ractjtl i CtSnant 

FtaMndt 
R«fl toO-t 


Aemerat , 3--00 +8+ 

Rota Boyoot . 3.100 ir* 

Ryf Bk Scbdandt 1.900 ++8 

Ftoyal InsOToncet 5.J00 290 

Ijrabuvt 2 +no + ' ? 

Schrodont '8 

SccmsMMwl T7 0 S<3 

Soot Ry-Hreeci JJOO 323 

Soorttai Ponwrt »f 

Seo-st 

Srd5wv* 716 147 

Seet>xnf 214 4 33 

Sovem Tiamt 0U9 563 

Sue* Trampont 4 3t»3 7l2‘j 

Sabot 1 3*M £67 

Si»yy> Evx. 7.400 22+ 

Snwi IWH) W1 4S9 

SnMh6 Meobont 4 iuO 

SmM Beoetwmt WJK0 *»2S 

Smf>3Bwt«m Ulb.t 8 000 386 

Srmjis ln.*s. 2WJ +0) 

Southern Eton t '.'.wo 822 

South Watoo El+a 79 8* 1 

J29 507 


1.900 550 +2 

8*4 248 -3 

1.100 486 *J 

673 4TJ -J 

1.300 103+ +J1 

1.600 180*7 -1 

800 606 *' 

231 686 

131 472 *4 

691 362 +3 

J40 360 *4 

4.100 2*4 «i+ 

1.000 164 +1 

4.000 130 »2«i 

683 136 +3 

1.400 233 

2.600 565 -18 

4.8C0 288*7 . m3 

9400 *27*7 *81? 

1.000 360 *2 

1.500 520 «8»J 

3.700 +U +» 

2 000 571 .17 

6.800 192 .1 

1.000 631 ,9 

3.200 +*9 *2*2 

1.100 7 SO .22 

17.000 341 -1 

17.000 232 J. 

1^00 169 .1 

783 234 »i 

2.700 17S -1 

708 321*1 ,1*7 

3.700 789>: .18*7 

715 431 >6 

218 581 

1.700 478 .6 

667 580 MO 

fl^CO 155 *2 

1.700 623 *4 

G7J 727 .10 

1.700 +» *4*2 

+33 332 *1 

3.800 568 .7*7 

10.000 148*1 t+7 

76 725 +2 

6./00 159*1 *3 

1X0 200 +1 

712 416 -I 

3.300 '+3 *4 

21 <16 -2 

7.300 407*7 i6’2 

281 78 S 

104 142 .2 

715 *79 

5.100 527 ,5*2 

4.100 5CT3 .7*7 

3.300 251 *6 

2.500 550 +13 

27 816 -I 

2.300 2)0 .5 

115 816 -1 

1.300 617 -*i 

T.100 83> 44 

2.100 106 .1 

2.-300 558 t8 

6JOO 326 -2*2 

124 1001 

4200 8S6 ^0 

2 400 235*1 -11*2 

MOO 41S ,5 

2.401 570 *6 

1.100 +70 ,4 

1.500 787 .14 

3W 238 »2 

*200 464 *9*2 

3.100 17< 

1.900 4+6 «1‘l 

3.200 291 

2 400 417 .7*7 

IS 1366 *10 

770 S'3 »11 

3JOO 3TJ -1 

4.10*3 357 *3 

5.200 106 *2 

716 147 

214 4 33 -2 

609 563 *11 

4 300 712*7 »"> 

I.3CO £67 *7 

2.400 224 *4 

061 459 -6 

4 300 147*7 *3 

103X30 .126 *6 


Souib Wwi Water 
South W*wi EJort 
S-juthem Waiu 
SundJni Crmirt f 
SMrthouoe 
Sun AHanwt 
UN 

Ti Group! 

TSBt 
Tarmac 
Tale 4 Lyle 
Taytor Woodrow 
Tuacot 

Thames Wautf 
Thom EMt 
Tomwnst 
Trafalga How*e 
Umgote 
Untorert 
Unied Bfecuriat 
Ukl NeMpaperi 
LtoHionat 
Wartx+q (SGTt 
Wtfcomet 
Webb Wa*w 

Mfessoa Wai* 

WMBraaot 
WAiQ hUga.1 
VMeCoxw 
Wimpay 
Wotatayt 
VorVahia Dec*. 
ibfUiirs Warn 
Zonacat 


14t 786 

>50; •« 

3i«» 297 .10 

72* 217 .2 

1.300 »0 -S 

247 21B 

6£.1 377 t* 

3.7t«1 ?30 »3 

1.6U0 <31 .3 

770 4JI *2 

21o 129 -1 

6 TOO 25* *2 -5 

2JOCP* 488 .5 

1 000 1001 *1 

7.000 225 .3*2 

1WW 83 +1*2 

355 -3 

624 1132 .8 

1.600 318 *5 

727 529 

mxwj ij‘: 

*05 847 -3 

7f£ 670 **2 

mo ew *w 

l(f* 312 ifi 

;i0 £53 *«■ 

7P! 350 *3 

•7 136 

ini 1*38 .9 

U» 771 -* 

0.-1I 74+ .1 

31 535 •« 

2.700 


Baaed on v»^<9 *'“ + ■++«i>ori c4 mu|f» 

Monm dean ihn>jgn *1» i4 r AL syausr 
yastarday laaii 4 30pm Traits o/'r+a ir!i!CiVT or 
more *6 luunow do«n ♦ lAlaaiM an n-9S 
100 Inna* r.imsiitoam 


pal suppliers, rose 37 to 725p. 

However. Racal. another of 
the Camelot partners, failed to 
share in yesterday's lottery 
fever, sliding ll 1 .* to 235Sp late 
in the afternoon as a sizeable 
line of stock hovered over the 
market. Turnover in the stock 
totalled 2.4m. 

GA disappointment 

The third-quarter figures sea- 
son for the insurance compos- 
ites ended with a whimper of 
disappointment as General 
Accident's results included 
shock paper tosses from its 
market investments, particu- 
larly in the US. 

The group has invested 
heavily in US long bonds, the 
area of government debt hit 
severely by growing concern 
over inflation. In spite of 
underwriting profits up at 
£321. 6m from £206.5m previ- 
ously. GenAcc revealed its 
investment portfolio had fallen 
by between £100m and £l50m 
over the third quarter. 

Those unrealised losses were 
primarily responsible for push- 
ing GenAcc’s net asset value 
down to 410p from 545p at the 
end of last year. And with no 
news of a Fed Rate rise in mar- 
ket hours to dampen down 
inflationary concern, the 
shares were trading at an 
unsustainable premium of 
around 38 per cent at the start 
of business yesterday. They 
were marked down 19 to 365p 
by the close. 

Cable group BfCC put on 2 at 
355p in heavy 7.4m turnover 
following a 3m-share agency 
cross by broker James Capel. 


NEW HIGHS AND 
LOWS FOR 1994 

NEWHK1H8P4. 

BANKS |1| Banco Btafu vocayx BREWERKS 
m Wettarepoon UDj. RSTRtBLiTORS (1) Actan 
« ttavav. ELECTRNC & ELECT EQUF P) 
E n aco n (LM|. M+grwn Pc*te*. MotordA 
EMOMEEWNa ra Bxyr+s <Cl Bud, & Decker. 
Sp+a+-34ica ENG. VEHICLES (I) Monets Motor. 
EXTRACTIVE IND8 P) CSMoms Moreq. Odd 
P-AK SA. Rsnon. HEALTH CARE [1) Snon 
Heanmre. INVESTMENT TRUSTS W LfiSUHE 
A HOTELS cag London CUs. VCL LIFE 
ASSURANCE (1) Liberty L+o Assoc. Ot Alnco. 
MEDIA (3) Btana. YorVshre Tyne-Toes TV. Oe 
Wnv OIL EXPLORATION 8 PROD 0) 

Crusader. PHARMACEUTICALS (tj Axn* a 
PRTN& PAPER A PACKS fl] De La Rua. 
P ROPER rr (1) ATOM or E3HL. SUPPORT 
5ERVS tat ADT. CvtoL Robe S Noum 
TELECOMMUNICATIONS (1) Voaksno. 
TEXTILES A APPAREL (1) Oun+mlsui Phipps. 
TRANSPORT <1» P t O S'VCC Prtd. 

AMERICANS (2) SOUTH AFRICANS (2) Anglo 
Am. kids.. NK Propo-jes. 

NEW LOWS (52}. 

BUUma * CHSTTIM a AMEC. Boot w. 
fume. BLDQ MAILS A MCHTS (2) Brttab 
Dredt pn/ Sycamore DISTRIBUTORS tn 
Casket, Hanker. HeJdUm, SS* tan. Do Prtd, 
DIVERSIFIED INDLS (2) SisvMy ndk. Guar 
Virrex. ELECTRONS • &£CT EOUP W Berkeley 
Buatamx DRS Djti Rei, Forward Pieesac. 
MMieERNO ff| OB ML EXTTMCnvK MDS 
fl) Emperor Mines. HEALTH CARE (I) AAH. 
INVESTMENT TRUSTS LEISURE & HOTELS 
(3) AJptie Airports, Ban A WAT. Da A . OIL 
EXPLORATION A PROD (1) Command 
PetTOMud OTHER FINANCIAL P) Energy 
CoprtaL tarun AneBa. Oceana ConskL. 
PHARMACEUTICALS (1| Ctai Coip~ PRTNQ, 
PAPER « PACKQ (2} Cropper LA Plyou. 
PROPERTY (S) ChesrarfleKL b-Lma TVypc Cv. 
2020, onres Prep.. PSTT, ScoOMi MahcpoMan. 
RETAILBtSk FOOD D) Geest RETAILERS, 
GENERAL |3| Fine Ait Derip!*. MHtex. S^ntt 
SUPPORT SERV3 (4) Mtaogen. Nova Pagana. 
Werner Hood. TEXTILES A APPAREL (3) 
PartOand, Readc+L Smmo. AMERICANS {3}. 

Mobile communications 
group Vodafone added 3% at 
221p as a powerful institutional 
two-way pull in the shares 
ahead of next Tuesday’s 
interim results triggered turn- 
over of 13m. 

Leading diversified indus- 
trial group BTR was the sec- 
ond most heavily traded Foot- 


sie stock, with 27m shares 
dealt on the back of a powerful 
institutional two-way pull. 
BTR gained 6 at 162‘Ap. 

Lonrho, the international 
trading conglomerate, put on 3 
at 159*/:p in turnover of 5im, 
adding to the rise over the past 
two weeks since joint chief 
executive Mr Tiny Rowland 
announced his departure. 

British Gas jumped 9 to 
303%p ahead of third-quarter 
figures due today. 

Turnover in Eurotunnel hit 
7.1m shares in Paris - 5.5m 
more than its nearest rival in 
the French activity charts - 
and generated enough excite- 
ment to push the stock a fur- 
ther 14 higher in London to 
284p. London turnover was 
4.1m. The shares have risen by 
more than 40 per cent in five 
weeks. 

BOC added 12 at 722p after 
the company released full-year 
results at the high end of ana- 
lysts’ forecasts. Hoare Govett 
lifted its current year forecast 
by £30m to £395m and moved 
from a hold to a buy. 

Mining group RTZ jumped 20 
to 859p in the registered 
shares, with dealers saying 
Cazenove, which never com- 
ments on market talk, had 
issued a buy note to clients. 

Smith Kline Seecham was 
restrained initially on news 
that its acquisition of Diversi- 
fied Pharmaceutical Services 
was being examined by the 
Federal Trade Commission. 
However, the shares recovered 
to close 6 better at 426p. 

Powergen advanced 8 to 559p 
after a better than expected 
28.6 per cent increase In the 


interim dividend. 

Many anticipate that Power- 
gen will announce a share buy- 
back scheme soon. 

Sentiment in Powergen 
boosted National Power, which 
reports interim figures tomor- 
row. It gained 7% at 503p. 

A recommendation by James 
Capel boosted Southern Elec- 
tricity, which moved forward 5 
to S22p. 

Among drinks stocks. Scot- 
tish & Newcastle benefited 
from a recommendation from 
Nomura. The shares put on 11 
at 523p. 

The Boots buy-back 
prompted the return of specu- 
lation that Great Universal 
Stores would make a similar 
move. GUS rose 17 to 571p. 

Turnover in property group 
Hammerson jumped to 17.6m 
after Smith New Court carried 
out a bought deal in which it 
placed a 3.2 per cent stake 
owned by life insurance group 
AMP Australia with a variety 
of institutions. The shares 
closed 5 off at 34lp. 

Elsewhere in the sector, a 
sharp increase in interim prof- 
its boosted Great Portland 
Estates 6 to 189p. 

Unlisted Ramco Energy, 
which services the petroleum 
and marine industries, jumped 
35 to 255p after announcing 
that an agreement with the 
State Oil Company of Azerbai- 
jan bad been ratified. 

MARKET REPORTERS: 

Peter John, 

Joel Kftrazo, 

Jeffrey Brown. 

■ Other statistics, Page 2S 


LONDON EQUITIES 


LIFFE EQUITY OPTIONS } H v : V 




— 

CWs 

— 

— 

Pub 

— 



— 

cab 

- 

.. — 

PUS 


Ootioo 


Jan 

Apr 


Jan 

Ay 

Jd 

Option 


NOV 

Fob 1 


Nov 

Fab 


AlfcCDomeeq 

600 

23h 

38 

45 

I7VJ 

25 

38 

Hanson 

220 

12V» 

181* 

20 

- 

51+ 


i-ew 1 

650 

6*4 

17 23*3 

51 

SStoi 


1*232 ) 

240 

1 

a urn 

8*4 

151* 

20 

Argy* 

2G0 

IB 

28 Vi : 

WH 

7*5 

13 

I8!» 

lasmo 

134 

13 

- 

- 

- 

- 

- 

1*27 1 1 

280 

a 

15*»204 

18** 

23 1 

29*3 

1*146 | 

154 

1 

- 

- 

8 

- 

- 

AS8A 

60 

a 

10 

11 

1*4 

3*5 

4 

Lucas tads 

200 

4 

13 

18 

3» 

10 

145* 

rw, > 

70 

2*3 

s 

8 

6*3 

8*3 

9 

COT) 

220 

- 

5* 

10 

20 

23 

26H 


HrtAtaray* 360 23 38 42 IT 17 25 

1*373 I 390 9* 21 Z7V, 28 J3 41 

SridWiniA 420 2TVi 32W 40 13 22V> IB 

{•4M J 460 7 16 2315 39 45W 50*» 

Boots 500 SB's 4015 B6VJ 8 12* 19 

C524 i 550 IT 22W 31 33*» *i* 43H 

BP 420 20*5 31 39 TO IB 13 

r<27 | 460 5H 1317 22 35 41 45 

Brush Stfri 140 17 22V» 34Vj 2 4W 6)5 

(-156 ) 160 S 12 14 10*7 13 15» 

Bass MO 44V, sj 57 8 14** 20V: 

1*500 > 550 11T» 23 32 22W 39 45» 

CAN 390 19W 33 40 J* 16’» 24H Ml 
I -394 I 420 9)6 20V4 Z7V» 35 41»j 46 

Coiratafe 460 21 T« 34M 42W 17 24 31 

1*465 J 500 6* ir* 29 43*1 4fl 55 

OwnUnWl 543 27^36*: - IB 31 - 

r5« I S9Z AH I6H - tt* 63 - 

IQ 750 57 69 1 79W 61+ 25 32K 

(-790 ) 800 28 41 52» 28*+ « «*» 

Ungteter 460 34 4SS1W10W 17 26V, 

<*478 l 500 134+ 2Sfc 32 29*» 37 47* 

LaM Socur «MJ 29 42M Mfc 25«i 

CB21 I 650 7 20 24T» 42 54 

Malta A S '*90 28 38 43 51 10V> 16 

1-407 i 420 III 21V* 26b 19 23W 30 

ItWWesi 500 39M SI 59 6 22* 28 

[-526 l 550 141- 26 3 SVj 31’v 49V, 54*7 

SaoiStaV 390 35 W47V: 53 51 11*517** 
1-417 | 420 16 291 38 16 2* 31 

Shed Trans. 700 301 411 49 121 281 311 
1-712 l 750 81 181 28 41 50 60 

SiOirtou* 100 20 231 271 3 51 81 

(116 I 220 71 12V* 181 111 14 18 

TtaUqar 60 6 9 ill 31 6 7 

C83 ) 'JO Z S 7 91 111 13 

Uruievcr 1100 511721 84 161 35 451 
C1132I 1150 2S4S1S61 40 601 71 

’frwa 850 441 60 71 19 37 441 

1-866 l 900 21 35 471 551 641 72 

Owtr Hw FtO May No» Fdi Mail 

Grand Mri 390 231 33 »1 11 12 151 

1*412 J 420 41 16 24 11 27 301 

IMbre+c 1*0 151 21 241 - 21 61 

T155 I 160 2 91 13 51 10 16 

Old Biscuit 300 T9 281 34 1 5.1 13 

rilB | 330 11 12 181 13 19 291 

Opoon Dec Mar Aai Dec Me iun 

Firs 130 Ti 151 181 61 111 131 

(•130 I *40 5 II 141 121 17 19 

Option Hov M» May Nav Fob tev 

Bra aero m i6i 38 511 71 23 36 

C469 1 500 2 221 341 32 451 581 

BAT taB 420 381 901 581 - 6 16 

(-459 1 460 8 25 34 7 19 331 

BTR JUT 12 231 281 I 8 IS 

1*311 1 130 - 9 141 19 24 32 

Bh) Ttteton 330 5fe 14 22 4i* 17 21 

1190 * 420 - 4H II 291 385* 41 

C+dbuv Sen 4M 191 321 381 1 9 161 

1*438 1 460 1 12’, 181 22 29 381 

ElifcreBK S*X 15 431 63 111 44 551 

i*W5 1 85C 11 251 42 46 73 83 

Giwmtss 460 12 261 34 11 Ifl Ml 

(-469 ) S00 - 91 151 31 34 *31 

(SC 280 10 16H 24 l 81 101 

i-3» 1 300 11 71 14 111 19 21 


PAD 600 39 581 6654 - 10 251 

C837 | 650 51 261 391 1554 291 491 

Pltaigron 180 81 13 18 1 51 71 

1*187 ) 200 *4 41 9 13 171 19 

PiurientiA 300 2B1 38 391 - 4 10 

(-328 ) 330 4 181 21 51 141 23 

BIZ 850 181 46 59 7 26 43 

f859 j 900 I 23 38 411 54 711 

HeAand 460 14 311401 21 16 30 

(-469 | 500 1 14 221 301 38 55 

Royal luxe 280 12 251 31 2 111 17 

(*290 > 300 2 151211 12 211271 

fasoo Z40 12 211271 I 6 12 

P251 ) 260 1 11 17 10 16 22 

Vooafww 217 61 151 - 2 10» - 

(-221 ) 233 1 - - 12*4 - - 

*V* lams 325 251 - - - - - 

<•350 I 354 31 - - 61 - - 

Upturn Jan Apr -to* Apr JU 

BAA 475 391 501 581 - 8 16 

(-497 | 500 161 281 36 141 20 261 

Thames Wtr 4$0 47 571 651 4 9 171 

1*498 1 500 20 33 41 161 24 351 

OpDon Doc Mar Jua Dtc Mac Jun 

Abbey Ned 420 161 29 341 81 211 Z71 
(*426 1 460 3 10 171 35 47 52 

AmKrafl 25 41 51 81 1 1 2 

r»l 30 II 3 4 21 31 41 

Barclays 600 261 441 531 11 261341 
1*612 | 650 6 21 31 41 551 63 

Ow CH* 300 1J!V 23 291 71 13 2(1 

(*304 | 330 3 101 161 27 31 39 

Brtc* Gas 300 10 201 281 51111 19 

1*303 1 330 1 8 131 »1 291 371 

DUre ISO 15 20 251 31 9 13 

1*190 1 200 5 101 16 13 191 23 

HKsdOMi 160 17 201231 1 3» 71 

1*175 I 180 41 81 13 81 12 18 

Lpnrtu 140 211 24 291 1 4 61 

(-150 I 160 71 12 19 61 121 15 

Mail Power 500 IS 311 431 15 25 34 

C5W I 550 11 13 23 51 561 63V- 

Soot Power 330 22 381 48 31 111 161 

(-357 | 360 13 211 32 141 241 30 

Seats 100 101 13 IS i 21 41 

1*109 ) 110 4 71 91 41 61 9 

Forte 220 161 231 27 3 61 111 

1*233 | 240 5 121 161 111 15 21 1 

Tarmac 130 7 13 16 51 91 121 

(130 I 140 3 B1 111 111 151 181 

rrum EM IOX zei 43 861 19 361 461 

riCOII 1050 71 221 43(? 511 66-1 75 

TS8 220 141 191 231 3 10 13 

1*230 1 240 5 91 14 13 201 24 

Tomkins 220 01 161 221 5 101 14 

1*224 ) 240 21 8 14 17 22 25 

Welcome 650 38 60 75 15 291 431 

(-669 | 700 151 36 51 41 55 691 

OpUon Jan Apr X* Jan Apr Jri 

Gtara 600 481 80 74 141 281 381 

(-628 ) 650 211 35 49 38 54 62 

KS0C (SnJK <1M 65 801 34 T1» 30 42 

1*747 | 1 750 34 62 871 31 54 661 

Remas 460 381 47 58 8 171 221 

(-484 ) 500 15 261 36 Ml 37 42 

Opuw Hag Fob May Nov Feb May 

RoM-ftw* 180 181 231 261 - 3 05* 

HTB | 180 3 11 15 e 101 15 

• Underlying eeramtv price. Piemuns inown ore 
Ms+d (X wntanem tmcaa- 
November IS.TbisI commas: 44J04 Calls: 
W/SOO Putt 24.414 


February 9 
February 23 


RISES AND PALLS YESTERDAY 


British Funds 5fl Z 10 

Other Fixed Interest ......... 4 0 10 

Aftteral Extraction 94 27 75 

General Manufacturers 185 78 387 

Consumer Goods — 47 28 112 

Services 122 56 317 

Utffities 27 5 12 

Flnandats 134 38 182 

Investment Trusts — 1B8 22 247. „ 

omere 61 21 3*J | 

Totaia 909 27B 1396 

Data based on nm companies Med an tae London Sine Samoa. 

TRADITIONAL OPTIONS 

First Dealings November 7 Expiry February 9 

Last Doalngs November IB Settlement February 23 

Calls: Bula Res, Caluia. Eurotunnel. Explaura, Fortune Ofl. Magnum Power, Med- 
eya. Scantronic, Smellt (J). TuBbw Ofl, Utd News, Waverley Mng. Puts: Signet, 
Smurffi (J). Puts & Cals: Bula Rea, Baotumei, HSBC. 


LONDON RECENT ISSUES: EQUITIES 

Issue Amt Mkt. Close 

price paid cap 1994 pnee 

p up (Em.) Ftgn Low Stock p 

- F.P. OS? ah 4 APTA Wmt a. 6 

- FJ>. 172 88 70 Abbust Latin Am B6 

- F J>. 2.06 83 52 Do Warrants 52 

- FJ». 1U 187 180 ^rAdare Prmg 1B6 

100 F P. 663 93 65^ BZW CommodMes 88 

- FJ>. 6.10 47 39 Da WHS 39 

- F.P. 51.8 96 65 {CaUuna 96 

280 FJ>. 30 J 287 2«J CfturcR* CWra 285 

83 F.P. 12.1 68 66 Ennantx 68 

- FJ>. 63.4 155 108 FBhonlc trtek 151 

115 fP. 343 126 111 Gamas Wortahop 112 

- F.P. 151 36 23 Group Dv Cap Wts 23 

- F.P. 28.0 62 58 Hambroa Sm Aslan 56 

- F.P. 2.70 30 27 Do Warrants 27 

100 FJ>. 30.3 102 38 Hoero Govett 1000 101 

- FP. 29.7 99 90 INVESCO Korea C 09 


- F.P. 151 36 23 Group Dv Cap 

- F.P. 2B.0 62 58 Hambroa Sm A 

- F.P. 2.70 30 27 Do Warrants 

100 FP. 30-3 102 38 Hoare Govett II 

- FJ*. 29.7 99 90 INYESCO Korea 

160 FP. 164.4 223 205 Irish Permanent 

- FP. 50.3 493 475 ProWc Inc A/L 

135 FP. 58.3 149 136 Servisalf 

115 FP. 224-4 128 117 TUG 

170 F.P. 20.0 173 108 Tele-Ctae Ce« 

- F.P. 8.01 62 67 WNtCtMtti 


RIGHTS OFFERS 


Net Dm. Ore p/e 
dlir. an. yld net 


026% 8.1 M 10.9 


RNSM 22 43 13.0 
RN0.71 53 14 62 

HN0.75 2.8 a6 EOS 
RN4S 22 5.1 10.8 


UN9J) 2.9 5.6 13 

BN3.8 IS ^3 33.5 
WN3.6 22 33 iai 
RN6.44 22 4.0 11.8 
HN1J6 3JJ 2.8 125 


Issue 

pnes 

p 

Amount 

paid 

up 

Latest 

Renxi. 

dote 

1994 

HI ah Low 

Stock 

Closing 

price 

p 

+or- 

20 

M 

9/12 

4*j pm 

1pm 

Butlers 

1pm 


310 

M 

2iyi2 

41pm 

19pm 

Kenwood Appi 

19pm 

-8 

27 

N« 

28/11 

3l2pm 

2*2pm 

Martin InD 

3pm 


500 

Nl 

12712 

50pm 

16pm 

Matthew Clark 

21 pm 

+3 

26 

Ml 

22711 

*4pm 

l 4pm 

Novo 

>4pm 


85 

N3 

23712 

I5pm 

13pm 

FYessac 

npm 


5 

Ni 

15/11 


*zcrn 

jjUrton Square 

*2 pm 






Hot 

14 

% dig 
on day 

Nga Hn Year 

11 10 23° 

Gross At 
vtem % 

52 week 

Wgd Low 

Gold Unas Index (34) 

2067.45 

-12 

2001X6 2094.40 2118.16 

2.10 

2387X017082 

■ Regional Indices 






Atnta 116) 

334164 

-14 

3363 12 337481 2384.63 

4 14 

3711 87 2304 45 

kustratma |7) 

264146 

-18 

268897 27X156 229061 

IBS 

301183 2171 66 

Nam America il ii 

1604.20 

-0.3 

1618.26 1618L2S 18*7 M 

0.53 

203965 146811 


Tnv F'rtarvaal Trees Lmned 19W _ _ s „ 

'^110 -1 tnv* Ja moa nunte cl cotraunes. Basts US Ddan Vsum 10004)0 3iri2ra2. 
Picd..-:.-ss« Go*a to**. Mai 15 257.8 . ttov's ctunoo +6 4 poets. Year ager 248 9 t ftaual 

LVf-ii •»»« tor itri wtolfiii 


FINANCIAL TIMES EQUITY INDICES 

Nov 15 Nov 14 Nov 11 Nov 10 Nov 9 Yr ago -High tow 

Ordinary Share 2408.4 2379.7 23655 23B4.T 2376.6 23476 27135 2240.6 
Out drv. yield 4.29 4.35 4.37 454 4.35 398 451 343 

Earn. yleL % tuJ 323 8.30 654 529 Bu31 4.63 651 352 

P/E ratio net 1B56 1834 1853 1858 >851 27.04 33.43 1&94 

P/E ratio nil 18.11 17.89 17.78 17.93 17.00 25.08 3050 >75B 

‘For 1994. Orkney Swr* tako since cnmpiukn high 27135 2TO2/94. loo 48+ 28/8/40 
FT Otinory Shm mdar base dale 1/7/35. 

OnSnary Share hourly changes 

Open 950 1050 11.00 18.00 1350 1450 1550 1650 High Lew 
23802 2383.5 2400,6 240a5 2404.0 2408J) 2411.1 2407.4 2409.6 2411.2 2388.3 
Nov 15 War 14 toll Nov 10 Nov 9 Yt ago 

SEAQ bargains 30.763 25.659 23,387 24.480 28,798 27,404 

Equity unover (Emit 867.0 1080.0 1139.2 1576.7 1322.4 

Equity bargamsT - 30,137 27^30 29,443 29.198 31^53 

Shams boded hnlJT - 438.8 436.4 521.3 613.1 5735 

TErOuang (oBB-mskot taenwwi and overaeoa tumow. 


A Prime Site for your 

Commercial Property Advertise 

Advertise your property to approximately 
1 million FT readers in 160 countries. 

For details: 

Call Emma Mullaly on +44T^f873 3574 
or Fax: +44 71 873 3098 toi , 


Nov 14 

Nov 11 

NOV 10 

Nov 3 

Vr ago 

25.659 

23,387 

24,480 

28,798 

27,404 

867.0 

1080.0 

11395 

1576.7 

1322.4 

30,137 

27.230 

29,443 

29.198 

31^53 

436.8 

436.4 

521.3 

813.1 

570.5 




4- 








































































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FINANCIAL TIMES WEDNESDAY NOVEMBER 1 6 . 
























































































































































FINANCIAL TIMES 


CURRENCIES AND MONEY 


markets report 


WORLD INTEREST RATES 


Fed keeps European markets on tenterhooks 


MONEY RATES 

November 16 Over One Tines 

night month nflhs 

Betaken 4ft 4ft 5ft 


'One Uwfc . Os. -f»NW. 

war Wr^. rt»r,:.wte. 


Betaken 
week ago 


8 M 740 


Currency markets in Europe 
spent a fruitless vigil waiting 
for the announcement of a 
shift in interest rates from the 
US Federal Reserve, which 
finally emerged well after the 
end of the European market 
day, unites Philip Gaaith. 

In the event, the action by 
the Fed at its Federal Open 
Markets Committee meeting in 
Washington, was greeted by 
US analysts as surprisingly 
aggressive. 

While markets during the 
day had been setting their 
expectations in the range of an 
increase in the federal funds 
rate of about 50 basis points to 
5.25 per cent, the Fed opted for 
a 0.75 per cent rise in both the 
discount rate and in the Fed 
funds rate. This action was 
seen as bolstering the outlook 
for the US dollar, as analysts 
said it quelled the notion that 
the Fed was behind the curve 
on US infla tion. “This is a good 
move by the Fed”, said Scott 
Pardee, chairman at Yamaichi 
International (America) Inc. M It 


has raised interest rates to lev- 
els that will have a constrain- 
ing effect on the economy." 

The dollar was firm ahead of 
the outcome of the meeting, 
closing in London at DML5454, 
from DM1.5453. Against the 
yen, it closed at YSL225 from 
Y98.425. 

Before the meeting, the Fed 
had raised rates five times this 
yean by 25 basis points in Feb- 
ruary. March and April, and by 
50 basis points in May and 
August. This took the Fed 
funds rate from 3 per cent to 
4.75 per cent, while the dis- 
count rate was increased by 50 
basis points in each of May and 
August, taking it to 4 per cent. 

The dominant view among 
observers was that bonds and 
the dollar would fall unless 
rates were raised by 50 basis 


points, and accompanied by a 
strong statement suggesting 
further increases were in the 
pipeline- 

Looking back at Fed tighten- 
ings t his year, Mr Brian Dur- 
rant. economist at brokers 
GNI, noted that $/DM typically 
jumps 0.75 - I pfennigs on the 
news, but subsequently surren- 
ders these gains within three 
days. 


US federal funds rate 


Per cent 

6-0 •- 


■ Pound ha Now York 


No* 15 

— ttae — 

- Prev. dose 

Lsoot 

10880 

1.5888 

I mth 

10867 

10865 

3m0i 

15851 

1.5858 

I yr 

1.5772 

1.5780 


■ The Irish punt has shown 
some weakness in recent days, 
as uncertainty about the survi- 
val of the r uling coalition has 
raised the prospect of an early 
general election. The punt 
closed at [£1.0187 against ster- 
ling. from I£1.0189. For the past 
few months it had traded in 
the I£1.01-U>13 range. 

But Mr Jim Power, senior 
economist at the Bank of 
Ireland in Dublin, said con- 
cerns about political instability 
were "totally overdone". 
Although elections were by no 
mpan«? assured, Mr Power said 
that even if there was to be a 



Mr Power said the recent 
decline in sterling had not 
been a factor in the weaker 
punt. Rather, this reflected the 
political uncertainty, and the 
fact that interest rate differen- 
tials across the yield curve bad 
moved too much in favour of 
sterling. 


elections, had been exagger- 
ated.* 

"Even a Delors victory does 
not have much policy implica- 
tion," said Mr Barr. From a 
financial market perspective, 
he said, there was little to 
choose between the likely Can- 
dida tes. 


week ago 
Oermaiy 
•week ago 


week ago 

wy 

«nk ago 


meek ago 
SwBndand 
week ago 
us 


Source: Dalastrsam 


new government, "we can be 
guaranteed that economic pol- 
icy will be virtually identical 
to what we have had so far." 

He said no politician would 
have the nerve to challenge the 
economic policy consensus, 
which was “largely dictated by 
the Maastricht convergence 
criteria.” 

Although the punt and ster- 
ling track each other closely. 


■ The Swedish krona slipped 
back towards the level ii was 
at before the Sunday referen- 
dum which voted in favour of 
joining the EU. After rising 
towards SKr4.65. from SKrft.75, 
against the D-Mark, in the first 
bout of post-election, the krona 
has since given back most of 
its gains. It closed in London at 
SKr4.736, from SKr4.712. 

Elsewhere in Europe the 
French franc recovered some 
of its recent losses to finish at 
FFr3.437 against the D-Mark, 
from FFr3.440. Mr Malcolm 
Barr, international economist 
at Chemical Bank in London, 
said recent franc weakness, on 
alleged uncertainty surround- 
ing next year's presidential 


■ In its daily activities the 
Bank of England cleared, at 
established rates, a £500m 
shortage in UK money mar- 
kets. Overnight money traded 
between 3* i and 5 per cent. 

Sterling weakened slightly 
against the D-Mark and the 
dollar, finishing at $1.5826, 
from $1.5849 against the latter. 
It has now fallen nearly 4 per 
cent from a high around SL64 
at the beginning of the month. 


Japan ‘ 
week ago 


weak ago 
US DoBar CO* 


6 H 

5ft 

: 644 

' 5* : 

8* 

5ft 

&ft 

5% 

H 

8 ft 

403 

405 

515 

506 

560 

408 

405 

515 

525 

580 

5ft 

BC 

M 

Sft- 

7ft 

Sft 

5% 

5% 

84. 

. 7ft' 

- 8 ft 

034 

. M. 

81 


8 K 

w 

8* 

«* 

' 10 ft 

404 

503 

523. 

534 

578 

404 

503 

524 

537 

57 7 

3% 

33 

3l 

414.' 

& 

Stt 

38 

4 

4tt 

”4% 

5ft 

544 

5N 

- 8 ft 


4N 

544 

5* 

6 ft 

. 6 ft 

2 ft 

2* 

2 ft 

2 ft 

2 % 

2 M 

wSon 

214 

‘ 2 ft 

2 ft 

’ 284 

_ 

Sft 

5| 

614 

BK 

- 

Sft 

58 

8 M - 

. 6 K 

_ 

528 

558 

583 

805 

_ 

5-26 

549 

507 

KM 

_ 

344 

3ft 

344 

4 

- 

3tt 

3ft 

« - 

4 


I r-L . 

i % t 


i jf 5 




1 

I -7- 




SORLtokadO* 3%4 3* 3* * - 

week ago - 3% 3 & 3* *.*•'. « ■"- 

ECU Lfeked 0 * wU ttute 1 mBe Ws 3 mthe St e ™ e W 64-1 1 **n SUBORIflilrtjrtrWip ■ 
ran are offend ra w ter Sto re goofed » tee n M by tew nW«n e» 6 n*» at k vodteg 

Tin l»W few Bartare That Bank of Tokyo. DwflyJfeW Mrtona Wfettenfeg;/ •_ - 

Md tafee are Pram fcr on domestic Money Rafeo. US S COi aad 80S Iktad 


■ OTHER CURRENCIES 


EURO CURRENCY INTEREST RATES 

Nov 15 Start 7 days one Three 


7 days One Three Sbc .’One - 

nonce month ; months - mo mha ■ ywm 


fancary 171143 • 17123D 110370 • ItB.flD 


lean K3C3 - 23QJ3 :7<3J3Q - 175000 
tstaf. 0 *72 - 34741 OSE7 - 0285 
Pttatt 373323 - 373360 225350 - 236250 
nussa -S3S33 - 434 £3 31=233 - 315200 
l*A£ 58222 - 5ST~3 1S7T5 * 2673S 




Europe 

Austria 

Belgkan 

Denmark 

Finland 

France 

Germany 

Greece 

Ireland 

Italy 

Luxembourg 

Netherlands 

Norway 

Portugal 

Spain 

Svreden 

Switzerland 

UK 

Ecu 

SDRt 

Americas 

Argentina 

Brazil 

Canada 


(5di) 17.2150 -01X319 080 - 235 170656 17.2080 170114 

IBFr) 50.3251 -0.0272 060 - 441 504620 50.3060 502951 

(DKr) 9.5610 -0.0067 565 - 655 9.5782 95565 9.5586 

(FM> 7.4333 +O.DS3 237 - 428 7.4540 73840 

(FR1 8.4039 -0.0203 991 - 067 8.4405 83691 8.4018 

(DM) 2.4456 -03035 445 - 467 2.4528 2.4445 2.4442 

(Dij 376.964 -0.163 564 - 363 

(IQ 1.0187 -0.0002 181 - 193 


(IQ 1.0187 
IU 2507.55 


•0.0067 565 - 655 9.5782 95565 95586 

*0.053 237 - 428 7.4540 73840 

0.0203 991 - 067 8.4405 83691 8.4018 

03035 445 - 467 2.4528 2.4445 2.4442 

-0.163 564 - 363 377.578 376 564 

0.0002 181 - 193 1.0204 10181 1.0185 


2.7420 -00045 410 - 430 


(ESI 249.537 


iPtnl 203.477 -0254 392 - 561 

ISKrt 1 1-SSS1 *904 766 - 936 
(SFr) 2.0566 -0.0009 553 - 578 


2.0593 2.0541 


- 13836 -00025 830 -911 

- 0.923899 


13880 1.2830 13837 


17.1996 

0.4 

. 


1151 

Austria 

(Set!) 

10 8785 

-0.004 

760 - 6T0 

10 8810 

10 6445 

10 8785 

00 

10.87S3 

3.0 

100335 

a? 

1040 

S022S1 

08 

50.0651 

0.5 

1169 

Betgum 

IBFr) 

31.BOOO 

♦0.03 

950 - 050 

31.8050 31.7050 

31 BI 

-0.4 

31.7475 

0.7 

31.59 

0.7 

1050 

90733 

-0.5 

90629 

0.1 

116.9 

Denmark 

(DKfl 

8.0415 

♦0.0047 

400 - 430 

6.0420 

6 0173 

5 0437 

-0.4 

6 048 

-04 

6.0735 

-00 

1003 


re 

, 

- 

89 1 

Frtartd 

FM) 

4.0970 

-a 0403 

920 - 020 

1 7033 

4 6515 

4.69S3 

0.4 

4.6225 

C.4 

4691 

0.1 

830 

8.3941 

00 

8.326 

0.9 

109.8 

France 

(Fftl 

5 3104 

-0.0049 

085 - 122 

5 3122 

5 2915 

5 3117 

-0.3 

50077 

00 

50329 

03 

1060 

2.4401 

0.9 

a-1078 

1.5 

126.1 

CerrnaT/ 

(Ol 

1.54S4 

♦ 0.0001 

450 - 457 

1 5480 

1 5405 

1.5449 

0.4 

T-5423 

0.7 

10283 


1070 


. 

. 

- 

- 

Greece 

(Pri 

238.200 

♦025 

000 - 400 

238.400 23T 240 

238.47 

-1.4 

239.025 

-1.4 

241075 

-10 

68.4 

1.0182 

03 

1.0199 

- 0.1 

104.6 

fret and 

dri 

10535 

- 0.0021 

529 - 540 

t.5604 

1 5525 

1.5534 

0.0 

10538 

3.0 

?04G5 

0.8 

- 

2524.S5 

-2.7 

2575 05 

-2.7 

74.2 

Italy 

(L) 

1584 50 

-2 

400 - 500 

1565. DC' 

1579 00 

158805 

-2.3 

15950 

-2.7 

1630 

-00 

740 

500291 

0.8 

50.06S1 

05 

116 9 

Luxembourg 

ILFO 

31 8000 

*0.03 

950 • 050 

ji.sosa 

31 7060 

31.31 

-0.4 

31.7475 

0.7 

3103 

0.7 

1050 

27362 

08 

2.7017 

1.5 

720.8 

NeUiertands 

IP) 

1.7327 

-0.0002 

324 • 329 

1.7335 

1 7267 

1.7322 

03 

1.730: 

c.e 

1.7164 

CL9 

7050 

tO 7061 

- 0.1 

10705 

00 

856 

Norway 

CNKri 

6.7640 

+ 0.011 

628 - 655 

6 772C 

6 7123 

6 7707 

-10 

5.7845 

-10 

6011 

-0.7 

950 

254.447 

-7.9 

- 

- 

- 

Portugal 

(ES) 

157.660 

+0.18 

630 - 730 

157 730 156 370 

*56005 

- 2.0 

15903 

-32 

16203 

-30 

950 

204.472 

-20 

207.087 

- 1.8 

858 

Spam 

fPIBJ 

128.575 

*0 03 

550 - 600 

128.660 128 200 

128.83 

-2.4 

*.22095 

-120 

131025 

-2.3 

800 

11.6466 

- 2.1 

11.7911 

- 1.8 

765 

Sweden 

(SKi) 

7.3206 

♦0.0362 

168 - 243 

7 324 3 

7 2448 

73339 

-20 

7.2=51 

-21 

7.4656 

-20 

820 

2.046 

21 

2.0037 

2.6 

1210 

Switzerland 

(SFr) 

129 95 

-0 0013 

990 - OGO 

1.2026 

1 2932 

10977 

1.7 

10934 

1.9 

10758 

2.1 

1060 

. 

- 

. 

. 

801 

UK 

(Q 

1 5826 

-0.0023 

822 - 329 

1.5905 

1 5822 

1 5S23 

00 

1.5S16 

03 

1.5741 

00 

880 

1.2838 

00 

10781 

0.4 

- 

Ecu 

- 

1.2330 

-0.0006 

327 - 332 

: 2360 

10327 

10325 

00 

1.0323 

C 0 

1032 

0.1 

- 


Bfesfen Fim 

Donah Krona 
D-Martt 
Dutch Gutter 
French Five 
Portuguese Esc: 
Spenfeta Peseta 
Storing 
Swiss Banc 
Can. Dote 
US Defer 
bate Ure 
Yen 

Asian SSreg 
Sol term eon a 


5%-M| 

5-4% 
5%«* 
8 % - 8 s * 
7% - 7A 
54-4% 
3, T . -3ft 

5%-5% 
9 - Th 

2 % - 2 * 

» cafe tor tee 


4a-4a *a-4« s%-sv 

6 % -5% 54-Si 6 V -6 ' 8 % * 6 % 


5-4% 5-4% 5ft- 8ft 5%; 5% 

5ft -4fl .5ft -5 S%-5ft _ 5% -5V 


5ft- Sft 5ft- 5ft 5V.54..fi%.-5%- 
8% - 8% 9ft - aft ioft - io% - nr 


7ft -7% 7ft -7ft 8-7% 8% - 8ft 
Sft -Sft 5% -Sft 6%-6 6% 7 5% 


3% -3% 3%-3% 


-3H 4%-4 


5ft - 5 . 5ft - Sft 5%-5l* 6 ft'- 6 ft 
5% -5% 5ft -5ft 6% -6 


8 % - 8 % 8 % - 8 % Sft -Sft 9 - 8 % 

2 ft - 2 % 2 ft - 2 % 2 % - 2 ft 2 % - 2 ft 


Sft - 2H 3% - 3% 3% - 3% 3% - 3% 

US Octkr and Yah. Others: two days’ ofefcn ' . • 
FUlWn (MATlF) Pfeia Interbank oOered rate 


«%-« 
TV- 7 

$%-5V 

0 % - 6 %-“ 

8% - tf : 
7% -.Ik 
4A-4ft 
Th -7 

9V-9% 

2 S-ZB 

A* 



Open 

Sett price 

Chengs 

High 

Low 

EsLvol 

Open ML 

Dec 

. 9407 

9407 

+aoi 

9408 

9426' 

5068 

49067 

Mar 

9304 

8304 

+0.01 

8306 

9303'- 

5071 

38,154 - 

Jun 

83.45 

BW 

+003 

93-47 

9304 

4053 

29050 

Sep 

83.14 

93.16 

+004 ' 

93.16 

93.12 

2064 

-20687 


THWEE MONTH EUHOPOLLAH (UFFEj* 51m pofcrti of 10096 ■ 

Open Settprice Change High Low Bat *d Open bit 


Dec 

9309 9306 

- 0.01 

9308 

93.05 

34 . 

2476 ' ' 

1 

Mar 

9307 

+001 



0 

1388 

! * 

Jim 

9206 

+ 0.02 



• 0 . 

3S4 - 

' 

Sap 

9209 

+ 0.01 



• 0 . 

BI ‘ * • 



: MONTH EUROMARK nnumS (UFFg* DM1 mpobttsoMOOK 


Argentina (Peso) 15827 -0.0025 822 - 831 

Brazil mn 1.3199 -0.0051 ieO - 217 

Canada (CS) 2.1565 *0.0061 556 - 573 

Mexico (New Peso) 5*611 -0 0045 570 - 651 

USA (SI 1.5826 -0.0023 322 - B29 

PacMc/Midtfle Eest/Afnee 


13905 1.5822 - - - - - - 

1.3237 10180 - - - - 

2.1641 2.1549 2.1555 0.6 01S42 94 2.1528 02 


SDflf 

Americas 

Argentina 

Brazil 

Caruaa 


(Peso) 1.0001 
(PH 08340 


5 4856 5.4570 
1.5905 1.5822 1.5823 


Australia 
Hong Kong 
Incfia 
Japan 
Malaysia 


IASI 2-1007 -0.009 9% - 016 2.1150 2.0995 2.1028 -12 2.1056 -09 2.11-36 -0.9 

(HKS) 1Z03Q7 -0.0188 272 - 342 12291 9 122272 1022T7 0.9 122174 0 4 12.1722 0.5 

(PS) 43 6466 -0.0895 336 - 635 496900 49 6336 - - - 

lY) 155.446 -0.546 372 - 520 156.370 155 .372 154 906 3.5 153.981 3.8 148 856 4.2 

(MS) 4 0569 -0.0035 552 - 586 4.0766 4 .0552 - • - - 

(NZS) 2.5511 -0 0048 491 - 531 2.5624 23491 23557 -20 2365 -23 2.5849 -13 


Caruaa (CS) 1 3627 

Mexico (New Peso) 3.4508 

USA (5) 

Pacific/MMefle East/ Africa 
Australia (N St 1 3274 

Hong Kong (HKS1 7 7285 


-0 0001 000 - 0)1 1.0001 11X03 - - - - 

-0.002 330 - 350 0 8360 0 8330 - - - - 

*0.0059 624 - 629 1.3635 1 3565 13629 -0.1 1.3621 02 13677 -0.4 83.6 

*0.0023 490 - 526 3.4526 3.45C6 3.4518 -0 3 3.4536 -0.5 3.461 -03 

ass 



Open 

Sett price 

Change 

«flh 

tow 

Eat vol 

Open int 


Dec 

9405 

9405 

+001 

9406 

- 9403 

13743 

139679 

\ 

Mar 

9407 

94.67 

+ 0.02 

94.68 

9404 

26941 

172516 


Jun 

9408 

9405 

+005 

9408 - 

9409 

-.26787 

119003 


Sep 

8304 

9306 

+004 

93.96 

9302 

10734 

63489 

i ; 


i MONTH EUROUM DITJUTK IVTUHW (LH=Q LlOOOm pobfe Of 10096 


-0.0038 270 - 278 1 3319 1.3270 13276 -02 1 5223 -03 V33S7 -OS 


-00004 280-290 7 7290 7.7230 7.7266 CJ 7.72151 0.1 


Japan |V> 155.446 -0.546 372 - 520 156.370 1551372 

Malaysia (M5) 4 0569 -0.0035 55? - 586 4.0766 40552 

New Zealand (NZS) 2.5511 -0 0048 491 - 531 £5624 * 5491 

Phdippmes (Peso) 335352 *0.0221 310 - 393 38.8080 38.1310 

Saudi Arabia (SHI 5.9354 -0.0089 337- 370 5.3649 5.9337 

Sngapcre (SS) 2.323S -0.0081 262 - 308 (L3396 20262 

S Africa (Ccm ) (R) 5.5718 -0.0122 693 - 742 5 6014 50693 

S AJnca (Fin ) (H| 6.4964 -0.0334 791 - 136 6.5155 6.4791 

South Korea (ir/onj 1260^7 -208 991 - 062 1266.52 1259.91 

Taiwan (TS) 41.4803 -0.0342 687 - 916 41 6662 41^1667 

Thailand (Bi) 39.5954 -0 0351 708 - 2 CO 39.7700 39.5708 


2565 -S3 2.5849 -10 


2.3396 22262 
£6014 5J693 
6.5155 6.4791 


Singapore 


(Rsi 

31 3725 

- 0.01 

700 - 750 

31 3625 310700 

31.4575 

-33 

31 .6025 

-20 

. 

- 

- 

(Y1 

980250 

- 0.2 

000 - 500 

98 4.JOO 981200 

97.975 

3.1 

97075 

30 

1153 

2.7 

150.4 

(MS) 

2.5635 

♦0.0016 

630 ■ 

■ 6+0 

25650 25614 

2.5543 

45 

2043 

30 

20165 

-2.1 

- 

(NTS) 

16120 

-0.0006 

111 - 129 

1.6145 1.611’ 

1.6129 

-0.7 

1.8148 

-0.7 

1.S231 

-CS 

_ 

(Peso) 

24.3500 

*0.05 

000 

cm 

24.1000 24 6000 


- 


. 

. 

- 

- 

(SR) 

3.7505 

- 0.0001 

503 ■ 507 

3.7507 3.7503 

3.7513 

-0.4 

3 7559 

- 0.6 

3.7745 

-OS 

- 

(SS) 

1.4720 

-0.0029 

715 - 725 

1.4740 1.4697 

1 4697 

1.9 

1.4649 

1.9 

1.44,3 

1.7 

- 

1 (PI 

3.5203 

-0.0025 

200 • 215 

30215 3.5200 

3.5354 

-5 0 

3067 

-50 

3.7261 

-56 

- 

(Rl 

4.1050 

-a 015 

950 

150 

4.1150 4 .0850 

4.1275 

- 6.6 

4.175 

-60 

4.4T 

-7.4 

_ 

(Wort 

796050 

-0.7 

300 - 400 

796000 796000 

799 35 

-40 

£02.85 

-33 

821 35 

-3.7 

_ 

(TS) 

260110 

♦0.0172 

MS ■ 125 

260310 260080 

26031 

-00 

26071 

-19 

. 

- 

- 

m 

25.0200 

+O.Q15 

100 - 300 

25.0300 25.0000 

25.0925 

-3.5 

2 S 02 

-30 

2S.7 

-2.7 

- 


Open Sett price 
9128 91.18 

90.72 9001 - 

9a.i5 aacx 

89.70 8901 

! MONTH EURO 8W» 


Open Sett price 


Change Ffigh Low Bsx, vd OpenM. 

-005 9128 91.18 6404 32903 

-008 90.73 90.60 ■ 4220 ‘ 34806 

-009 90.15 9a 03 1404 15994 

-007 89.70 8803 888 21045 

t HUMIC HflMP (LJFFg SFrlm pglnfai of 10094 
Change High Low Eat vol Open int 


tSDR ratna for No* 14. spraufe n me Rama Sp« tee dion oily On tel ttves rie oma l places. Forward retn we not dndty <arattd to the 

mrkei me sv enpted by ojiM Meresr rates Stobig ndto calodatod by the Bmk of EnptVKl. Bass nngi I9BS « ICQ. Bid. Otto and Mktwwie to both 
So and »>* Dda Spo: adne domed tarn THE WMiREUTBC CLOSING SPOT RATES. Some «fetm we rouided by the F.T. 


Taiwan (T5) 260110 

Thailand < 8 t| 25.0200 

tSOR rafe for Noe 14. Btotolfer aprmre 
but w« toeWed by cwierd (XeiewiWes. 


to the DoOtr Scat table show only the Iasi duee dec i m a l plate. FonKud ins se rsr. dreed; ryanfed re 9w natal 
UK. Ireland t ECU wo cuotod m US currency. Jf. LScrgwi nemnd ndcas Not 14. Baseererage : 290-1 00 


Dec 

9508 

9503 

■0.04 

9506 ■ 

’ 9501 

2140 

19350 

Mar 

65.74 

9507 

-008 

85.75 

9508 

7122 

20367 

Jun 

95.40 

9538 

-004 

95.40 

3504 

813 

5083 

Sep 

9507 

85.02 

•002 

9507 

9601 

480 

2444 

■ nmn month ecu nmiran pjffq Ecuim poMa of iooh 




Open 

Sett price 

Change 

High 

Low 1 

Eat vol 

Open tnt 

Dec 

64.00 

9402 

+0.04 

94.05 

84.00 

1264 

’ 8419 

Mar 

9166 

9167 

+004 

9170 

9166 

901 

7482 

Jun 

9117 

9118 

+004 

9300 

8117 

313 

4223 

Sep 

.9207 

92.70 

+004 

82.71 

82.67 _ 

83 

2328 

* UFFE futures Bated on APT 



. 




CROSS RATES ' AND DERIVATIVES 


EXCHANGE CROSS RATES 


Nov 15 


BFr 

DKr 

FFr 

DM 

E 

L 

H 

NKr 

Ee 

Pta 

SKr 

Sfr 

£ 

C$ 

% 

Y 

Ecu 

Brtgtam 

(BFr) 

100 

19.00 

16.70 

4.858 

2.023 

4981 

5.448 

2106 

4917 

404.1 

2101 

4.085 

1.987 

4084 

1145 

308.8 

2.551 

Denmark 

(DKr) 

52.64 

10 

8.790 

2057 

1.065 

2622 

2068 

11.19 

261.0 

212.7 

12.11 

2.150 

1048 

2055 

1.656 

162.5 

1.343 

France 

(FFr) 

59.B9 

11.38 

10 

2.909 

1011 

2963 

3063 

12.73 

2980 

242.0 

13.78 

1446 

1.190 

2065 

1.884 

1840 

1028 

Germany 

(DM) 

20.58 

3010 

3.437 

1 

0.416 

1025 

1.121 

4076 

103.0 

83.19 

4.736 

0841 

0.409 

0882 

0647 

6306 

0.525 

Ireland 

W5 

4904 

9092 

8055 

2.402 

1 

2463 

2.694 

1051 

245.1 

1990 

1108 

2020 

0082 

ana 

1.555 

152.7 

1081 

Italy 


2.008 

0081 

0035 

0098 

0.041 

100 . 

0.108 

0427 

9052 

B.113 

0462 

0062 

0040 

0.086 

0063 

6.199 

0051 

Netherlands 

(Fl) 

1806 

3.487 

3.065 

0092 

0071 

9140 

1 

3002 

9099 

74.18 

4023 

0750 

0.365 

0786 

0077 

5667 

0468 

Norway 

(NKr) 

47.04 

8036 

7.854 

2085 

0051 

2343 

2063 

10 

2312 

190.1 

10.82 

1021 

0.935 

2015 

1.479 

1450 

1000 

Portugal 

(EC) 

20.17 

3032 

3368 

0.980 

0.408 

1005 

1.099 

4089 

100 . 

8102 

4.641 

0.824 

0.401 

0064 

0034 

6208 

0015 

Spain 

(Pta) 

24-74 

4.701 

4.132 

1002 

0000 

1233 

1048 

5081 

122.7 

100 . 

5093 

1.011 

0492 

1060 

0778 

76.40 

0.631 

Sweden 

(SKr) 

4146 

8056 

7.257 

1111 

1879 

2165 

2068 

9040 

2150 

1750 

10 

1.776 

0864 

1.862 

1.387 

1340 

1.109 

Switzerland 

(SFr) 

24.48 

4.650 

4.088 

1.189 

0.495 

1219 

1034 

5004 

121.4 

98.93 

5032 

1 

0.486 

1.049 

0.770 

7508 

O02S 

UK 

ra 

50.33 

9.561 

8.404 

2.445 

1.018 

2507 

2.742 

1070 

249.5 

2014 

1108 

2056 

1 

2.156 

1083 

155.4 

1084 

Canada 

(CS) 

2134 

4.435 

3.898 

1.134 

1472 

1163 

1072 

4063 

115.7 

9404 

5071 

0.954 

0464 

1 

0.734 

72.08 

0.596 

US 

(S) 

31.79 

6.040 

5009 

1045 

0043 

1564 

1.732 

6-759 

157.6 

1280 

7015 

1099 

0632 

1062 

1 

08.17 

0811 

Japan 

m 

3209 

6.153 

5.408 

1010 

0066 

1613 

1.764 

6086 

1000 

1300 

7.452 

1023 

0044 

1067 

1019 

100 . 

0026 

Ecu 


3800 

7.446 

5045 

1.904 

0.793 

1952 

2.138 

8.333 

1940 

158.4 

9019 

1.601 

0.779 

1079 

1033 

1210 

1 


Tnn.ii/ 




Margined Foreign Exchange 
Trading 

Fast Competitive Quotes 24 Hours 
Tel: 071-815 0400 or Fax 071-329 3919 


"! 


INVESTORS - TRADERS - CORPORATE TREASURERS 


LONDON *71 329 3377 

LONDON ♦71 329 JJ77 NEW YORK +212269606 FHANEFUBT *4 90 44M7I 


, French Franc, 


: Bdglwi Franc. Yen. I 


, Ua and Peseta | 


FUTURES 

&0P1T0NS 

TRADERS 


MSMmmmR 


P-MAHK FLTTURga (»4M) DM 128000 per DM 


Open Latest Change Wgl 


KIMM) Yen 120 per Yen 100 


MWAltEmrTKfT 
x i y ntPFTTrm; siarvuE 


38 DOVER STREET, LONDON WK 3SB 
TEL: 0171 629 U33 FAX- 0171 496 0022 


Latest 

Change 

«gh 

Low 

Eat vci 

Open kit 


Open 

Latest 

Change 

High 

Low 

Eet vol 

Open inL 

00481 

+00004 

00493 

06472 

49.119 

87,066 

Dec 

1.0200 

1.0206 

+00001 

1.0224 

1.0191 

25026 

89075 

0.6492 

+00003 

06500 

0.6488 

1.168 

6.726 

Mar 

1.0295 

10293 

+00002 

10300 

10291 

765 

6.461 

0.6509 

-00062 

- 

■ 

12 

1000 

jun 

1.0400 

10400 

+00003 

1.0400 

10400 

3 

715 


■ SWISS FHAHC FUTURES (1MM) SR 125000 par SFr 



asmjM Ftmnss pmm) eta jsoo per e 


0.77Z1 +0.0002. 

a 7766 +00001 
a 7310 +0.0008 


1.5856 10660 +00004 10870 10852 

10840 - 10840 


LIVE FROM LIFFE - 0839 35-35-70 

Dial cow and bear the Footsie more with Bve commentary bom LUte, as it happens. 
For ttetaOa ol all Ufle Dues and our financial InformaUoo joy ices, call 071-895 9400. 
Calls are charged at 39p/nn cheap rate. 49p/mln aU other thues. 

Futures Pager Ltd. 19/21 Great Tower St London EC3R5AQ. 

Futures Call 


UK- INTEREST RATES . * *C % | 


LONDON MONEY RATES 

Nov is Over- 7 dm 




EMS EUROPEAN CURRENCY UNIT RATES 


Ecu can. 
rates 


Change % +/-trom K spread Dtv. 


X\X-FREE SPECULATION 
IX FLTURES 


Intertank Staring 
Sterling COs 
Treasury BUs 
Bank OKs 


Oar- 7 days One Three She One 

rvtfn injtim month months months year 


6-3% 5>4 - 5 Sii - 5ft 6 % - 6 6 % - 6h 7% - 7% 

5ft -51* 6 ft -5i* 6 % - 8 % 7ft -7% 
5ft - 5,'« 5% - 5H 

. - .. . - Sft-5ft 5ji-5% 


Local wittnrtty daps. 45? - 4J* 5ft - S, 1 , 5% - 5^ 6 ft - 5fi 6 ft - V. 7ft - 7ft 
□tocouit Mariet daps 5 - 4 Sft - 4|j 


UK deering bank base lending rata 5% per cent tram September 12, 1994 

Up to 1 1-3 3-6 6-9 9-12 

month month months months months 


Gfets of Tat dap. (El 00000) 4 3ft 3ft 3lj 


Carts of ItaxdwL unOwCiOOPOOW 1‘zpa Oepoaks wKhdreum badi kpa 
Aire, tender rats c* dscown SjBnate. ECOP ftsed rats SUg. Etpcn Ftosnee. Make up day Oct 31. 
IBM. Agreed rate tor period Non 28, 1994 to Dm 26. 1994. Schamas 1 6 « Tjj^ie. Hence rate hr 
period Oct 1, 1984 eo Oa 31. 1994. Sctanee IV S V S966pc. Ftoance Hcure Base Rate 6pc ban No» 
1. 1994 


■ THREE MONTH SIHHLMG FUTURBS (UFFE) £500000 points at 10094 



Qaen 

Sett price 

Change 

High 

Low 

Est vol 

Open fett. 

Dec 

9300 

8309 

♦ooi 

8303 

9158 

14587 

139720 

Mar 

82.77 

92.79 

+0.04 

92.82 

92.76 

20556 

75818 

Jui 

92.19 

9201 

+005 

8203 

92,17 

4751 

56495 

Sep 

81.77 

91.78 

+004 

91.79 

91.75 

4947 

57817 


Traded on APT. am epen wtwesr ifes. are ibr pmtous day. 


■ SHORT STERLING OPTIONS (UFFE) £800000 points of 10096 


strata 

Price 

Dec 

- CALLS “ 
Mar 

An 

Dec 

— PUTS 
Mar 

9360 

017 

oos 

006 

008 

Q.76 

9376 

0.05 

002 

003 

001 

098 

9400 

0.01 

0 

002 

042 

101 


Em. <«L lour, Cafe S44& Puls 1956. Prewoue day’s open tot. Casa 348537 Puts 211886 



Nettarlandfe 

2.19672 

2.14624 

-000035 

-030 

508 


Belgium 

400123 

390916 

-00125 

-004 

540 

15 

Germany 

1.94964 

101471 

-000014 

-1.79 

5.14 


Ireland 

0808828 

0797066 

+0001175 

-1.43 

4.75 

10 

Oenmaric 

7^43679 

7.47867 

+000217 

066 

066 

-4 

France 

853883 

608037 

-0.00529 

084 

060 

-5 

Portugal 

192054 

195408 

♦O0 

106 

107 

-9 

Spain 

1540SO 

159067 

+0.025 

a vn 

000 

-23 

NON ERM MEMBERS 






Greece 

284013 

294022 

-0003 

11.48 

-706 


iwty 

179119 

196208 

-1.8 

948 

-507 

_ 

UK 

0766748 

0761925 

*0001829 

-001 

309 

_ 

Bai central atm am by Ihe Brepewr Commfagton Cumnelra are to dmeandtog rate** MangOi. 
pwcwrtoae ctego* re tar Ecu; b poMve chanoa Cenrere a currency. CMwa fem few 



kr a curency, and few RERtown parntted percentage drefetton ol Bw curancy's marttet na bom Its 
Ecu caram rata, 

P7««J aeritag end Bate Lira aopaided ftom BtU. Artinvneni ctoctifefed by the Rnwnri TVnea. 

■ PHUOBMU SB £/S OPTIONS £31050 (cents per pouid) 



Shite 

Price 

Dec 

CALLS — 
Jan 

Feb 

Dec 

PUTS 

Jan 

Feb 

1023 

8.17 

645 

645 

Oil 

043 

043 

1050 

*00 

440 

4.49 

o.« 

005 

005 

1075 

207 

087 

087 

1.13 

100 

100 

1000 

106 

1.72 

1.72 

241 

103 

103 

1.625 

041 

083 

083 

400 

4.71 

4.71 

1060 

0.11 

045 

045 

63ft 

071 

6.71 

Piwtoua day’s voL Ctea 23013 Ras 11556 . 

Pm. day's opwi tot. Cate 370,7*4 Pula 321226 

1 r , , 


r'i 1 9fe'tt„ y 

T| 



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exchange rate specialists for ovci 20 years 
V»;.-ci*c by ?e-sc-sl :r»«s:rr«-.: Au'ic-i-v 


Ol 


Open Latest Change Ugh Low Est vol Opai kit 
8308 9305 -002 9309 9304 84087 417083 

93.48 33.46 -001 93-48 33^44 58078 422032 

8289 92.98 -0.02 9209 9204 36.164 304014 



34 HOLT. 

FOREIGN EXCHANGE 


London 
Dealing Desk 


CURRENCY MAKACEMDIT 
CORPORATION PLC 
llO Mfere y 

LarxSoo EC2R SD1J 

Tel: 071065(000 
ft* 071-9720979 


A REUTERS lOOO . 

|/V 

Fra UK BPI »ra Hire 


BASE LENDING RATES 


. FUTURES (MM) Sim per 10099 


Adam £ Company 5.75 

Ailed Trust Bank _5.7S 

AiBBarh 5.75 

•Harey Arahacher B.7TS 

BankofBaroda 573 

Banco BK»o MzcayB- 578 

Bank of Cyprus 5.75 

Bank of .......... 5.75 

BafftoTInda 575 

BankofScafiend 5.75 

BERtayaBmk 575 

Brit BkrfMkf East 575 

■QoMt Shlptoy ft Co Lid 575 
CLBonkNedariand... 575 

CWbarfcNA 575 

ClydesdateBank 575 

The Co-operafoe Bank. 575 

couos & co "."’d.Ty * ' 

Graft Lyorras 575 

PopiMa- Bank .075 


DiranUmria 575 

Bnator Bank Ltmaad _ 575 
Financial & Gen Bftok.. 88 
•Robert Ftamkig SCO -.575 

Girobank 575 

•GuinneM Mahon 575 

Hfeb Bari AG Zktoeh . 575 

•H am troaBa* 575 

HortWSa 8 Gen kiu Bk. 575 

•WSamuaL __575 

aHoare&Co 575 

HongtangiShanjfo. 575 

Jutan Hodgo Bank 575 

•Leopold Joseph &Sons 576 

Lloyds Bank -.573 

Metfra} Bank Ud ..575 

. .Mfiand Bank 5 . 75 ; * 

* Mouit Banlvig 8 

NatMtetminster -.575 

•Rea Brattera 575 


* RodxjrghH Guarantee 
ConxrabonLtonaadbno 
tanoerautufeadas 
a barking instbfea 8 

Royd Bk at Scotland _ 575 
•SMh&WtensnSacs. 575 

T88 576 

•UnSad Bk of Kuwsd __ 575 
Urtty Turn Bank Pta„ 575 

WMamTnat 5,75 

VWtearay LaUav .... 575 
YotetteBa*.. 575 




•FOREX ‘METALS -BONDS -SOFTS 

Objective analysis for professional investors 

0962 879764 

Fiennes House. 32Ssutr,ga?e Street. Winchester, 1 
Hants S023 3EH Fax 0424 774067 ; 


SUIiPLLJS 

OFFICES? 


r^pia^adrire.pralttaacaoD-peribnBrare , 

We wWktjora-oraca property M ichael 

OtatetBcteriWAr LAURIE 


r. o.vo'in :.n:r.T.>x he;vnks kjmnbkrgh 


Td; 071 493 TOO 


Fan 071 499 6279 


Strike 

Price 

Dec 

Jan 

CALLS - 
Fab 

Mar 

Dec 

9479 

013 

006 

010 

013 

003 

9500 

002 

002 

003 

005 

017 

9626 

0 

0 

001 

002 

040 


Pl/TB — 

Jan Fob 


Eat wL UOL Ctei 5120 Fite 4S3L PraritRB dqTa open ht, Cate 21SB21 PUs 201316 
■ EUroSWKSWWCOinTOWg (UFFE) 8 Fr 1m points Of 100 % 


• Marfinre ai London 
ImetenaUBarfdng 
Assodekte 

7 H admriMW I on 



_ M IKUNI’S 
CREDIT RATINGS 

on ohniit c rmn i . . * ^ L7 




ECU Hitum pie 
29 Mw, Place 
Belgravia 
London SW1XBHL 
Tat +n 249 0066 
ftec+71 335 6699 


FUTURES l OPTIONS BRQK5PS 


To Mitart 4 Oo. LW. 

unMcta Mol SuMtog 13-1 Until TH. ■ 

i Please send lunher toformauon 



EXECUTION ONLY 



v 


























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:'" i h 


FINANCIAL times WEDNESDAY NOVEMBER 16 1994 


WORLD STOCK MARKETS 


EUROPE 

flus ™A{N0V15/Sctij 


-»ajoo 

*5 1.270 
eu 
*>5 4.290 
*11 1.713 
-1 1J67 
-I 744 
“1 I.0B7 
-1 1.BS0 

-1 438 

*1 2S b 
-5 1,180 
*1 4oe 
-10 701 
+3 6oo 
♦* 4.340 


1.750 rc 
780 1 o 
M7 1 t 
2430 00 

1 130 1.4 

ijox o& 
548 .. 
M3 U 
8K J a 
3K. S3 
171 3.3 
874 _ 
312 i a 
548 2 a 
<30 l 7 
3.411 1,0 


® 4 “ WJnB W"«G (Nov 15 / Fre I 


:EST Bates 


Ada m 4J3C5 

5*"B8l 77» 

AnM 5X170 
BBL 4060 
gdrtU 10LOOP 
BflrtPI 22350 
gnqwm 36350 
Baraj 2/480 
a - 8 “ 
«W3m 12X00 
2,660 

gS* *« 
S IS 

fee® 5570 
QfnAC r hua 
fet® 2X40 

rnU, 5-222 

3/790 
SB Gp 1068 
gerBnq 7X30 
s won axso 
gw® 4.1 BO 
tmmnu ?>« 
Kntonk 6XGO 
«*AFV 6.230 
•tewi 6.100 
Hnane ixro 
PsnLux 19.775 
PlSna 6.490 
SNwfln 2015 

bom 


4.7W7 
■r-^' 4.050 

Socfirfi 2.2UO 
SGnAIV 2.180 
Soflna 13.225 
Sotme ixoo 

Ss? ’S-SSg 

ircm Bb52u 
WB 24.300 
UnMta 2.6B0 


*10 4.450 3.705 1.8 
Si, f-WO 7350 J.i 
*20 5 AW 4.000 
-10 4X90 X830 4 C 
~ WJ9W 15X50 20 
♦50 26X50 HUES 2.8 
*237S 44000 60 
-30 2.C50 2.J05 13 

-asauoaauso 1 ? 

♦751X07511.775 3Q 
♦50 2.700 2.190 33 
-70 BX60 5X00 43 

— 215 154 6 7 

*30 8X00 6,100 1.7 

-- 1X50 1,196 2.1 
-20 6430 5.110 70 
♦5 1781 2.870 44 

— 2470 2380 _ 
♦80 4430 X636 50 

— 4.470 3X50 5 0 

— 1.680 1.200 23 
♦■110X180 7.140 6.Q 

*10 10400 6.720 1.9 

-20 5i55D 4.150 27 
-35 3085 1750 53 
+100 8200 5.910 13 

— 7.050 6.090 1.8 

— 6X00 6X90 43 
+8 1.630 1.350 6.9 
..19X0611000 ... 

-50 HL775 9350 30 
-5 3X60X620 48 
♦8 588 420 38 
♦40 6300 <350 43 
+60 5X80 <320 4.3 
+5 2838 2.025 53 
+15 2X36 X015 5.1 
-25157091X550 40 
+45 1X75 1.450 8 5 
♦7517350 1J.750 4i 
-60 11X00 9.320 43 

— 28.100 2XM0 2.4 
-6 2X30X440 -+J 


-7 570 340101 
-II 70S 485 72 

♦ 15 902 661 2.0 
-10401 f» J77 33 

*5 10 167.70 1Q83B .. 

*9 1395 1,005 0.9 
*150 7. ICO 5,480 OX 
-2 38B53 210A _ 
♦430 624 426 34 

♦ 20 274 707 Ilf IX 
-130136.50 « JO 5.4 

+1 1348 8EB 58 
*l3OIK>99If2i0 62 
200 104 .... 
+5 50 525 715 40 
-1.50 535X120 7X 
-* M 23* 13850 XI 
+1.50 371 28380 7.1 
*1 «* 7M 10 
*3 1.006 7B5 - 
♦8 1.1SO 905 1J 

♦10 804 3k ID _ 

- 90 207 IK 10 3 J 
*1.1015740113 80 20 
*11 752 542 1 3 

- 645 650 20 

-4 1290 2380 1.9 
*1 734 576 X4 

-21 1.780 1.340 3.7 
♦5.50 46880 31710 2 6 
*4 600 472 22 
•1739 fi (0360X0 60 
*23X0 700 382 68 
+48 2470 1.790 __ 
-2 702 523 17 
♦3XB00 1.710 26 
-7.50 62S 23210 _ 
♦200 37722X40 4.6 
+5 SO 37X0 18350 23 
*15X120 X261 13 

♦ SO 214 132.10 50 
-.80 38U0 233.10 X4 

-1JHJ24 91 12550 XI 
*'£-80 494 333 X6 
*5 65042750 5.4 
*34 800 3BRU 7.4 
-5X0 308 SI 33 
-250 335 240 14 
♦1.40 365 227.10 4.4 


- Sttom 3,120 
_ sraoto 8.500 

... art 9060 

_ SmBP 1.988 
._ Teton 4|20Q 

— inti 23000 
_ Toafr 17.950 

Utam 10060 


-55 4X10 2.675 - 
•20511.7006,700 30 
+4611300 8X01 52 
+37 2.730 1 J82 2.5 
.... LlH 1363 =0 
.... SSJOD 22X50 13 
*410 MASS 1&GD0 3.1 
— IbJQO 0X58 12 


«nnGiui«Js(H0vis/ns.) 


DB8MAK(Nov15/Kr] 


A®PA 690 

BBam 180 

Cbm 277 

Codon 5.450 

0/21 IA 104.000 
□ntsco 211 

DonDl* 323 

EM® 149 

HftB 443 

GUM 542 

CSB 170 

Jytfcsfl 360 

Utrre 900 

MCTArS 320 

tetaB 550 

RatM 31 Or 
SostaA 51B 

SophaB 522 

SietHi 400 

TsEoa 330 

TopDan 716 


-10 760 SfiS 23 
♦2 281 176 26 

♦2 333 250 1.1 

— 7.600 5.300 00 
♦1X09 ULODK.O«l 00 

♦3 22817550 13 
+7 427 307 17 
+4 78X25 140 60 
♦10 615 375 2? 
♦2 643 445 2X 
+3 276 159 1 2 
_ 426 330 2.1 
1050 BOO a« 
+1 385 252 3.1 
-2TBX81 468 0.7 

+2 482 279 7.6 

— 615 487 OX 

+4 675 413 D.B 
-1 495 321 20 

-435633 300 

+151.372 510 IX 
+S 267 *0796 43 


r ®>««"WoiM5/0m.) 

— 15610 *2X0 13830 140 11 - 

524 *1 635 490 23 — 

— AflMnflg 1.010 -25 1.44C 1.0)0 1.4 _ 

” 2.445 *29 2.811 2.122 06 .... 

... fiP ’* 1 MS -569550 575 10 — 

£|>0 7 50 * 20 1.191 700 _ ._. 

— 075 ♦»» <JKS 615 1.1 _ 

BMP 31730 *2.7034180 276 20 _ 

— Start* 498 -.50 510 435 10 _. 

— Bnmca 359 485 34550 20 _ 

— ftiym 347.50 *1.80 40480 33819 33 .... 

"" Mg? 4 , S-5° ♦* 526 35850 35 — 

789 +13 929 639 10 ._ 

“ 465 ♦« 575 395 20 _.. 

“ B-aX* 1.050 +15 1J0S BIS 1.4 _ 

£S?£. 298 +4S0J48M 238 2.0 _. 

SS,®' 2S 70 * X7D 528 374 30 - 

B«Ba 83000 -SO K1 750 10 

QWCP1 ea) *9 1X30 755 13 ..♦ 

CKAC 1235 -10 1.EJ0 1.140 0 8 

OnmajtL32880 *2.80 3903200 30 _ 

CpnW 224 90 * 2 X 0 2 M 212 10 _ 

— DUX 422 +200 60038000 00 _ 

— Dmmfr 78700 +16J0 904 089 IX ... 


AMJWr 61.40 
ACCOM 109.10 
. AMU 51.90 
AKZOM 29130® 
BofeMKI 33X0 
BmMOA 3B 
68.80 

13930 

DMA 1HUO 
BM> 1730 
RMpR 1400 
FMMK 74 
Gonna 6920 
CBrOpfl 4430 
MW 141.70 
mm 247 
HoUB* 27400 
80 40 
7700 
. 4280 

MBOpfi 79X0 

Httkia 96-40 
KLM 48X0 

108* BT 51 
KPN 55. BO 

KPUJpA 46.10 
•um 56.10 
MITaiC 82X0 
NUMM 01 20 
OcoVGr 7X50 
PMtp 54.50 
Potyfir 7600 
Rccieca 11X10 
Itxknco 50.70 
Home no 
team 6240 
NDutcn 190.10 
Stoat 4170 
Untog 196X0® 
mj iso 
1 «KW 4800 
WNDBR 12100 


*30 7X70 54 4.7 

*1.7011000 9030 3.4 
*30 5140 4280 2 2 
+230 229IB7.S0 32 
+ .40 4730 3200 30 
+30 52 3400 31 

♦30 77. BO 82.60 .... 
+230 15650 105X8 1.1 
+30 200 17379 20 
*3019001400 ... 
-30 25 1300 51 

-.50 8140 6500 4.3 
-30 19800 99.10 43 
— 68X0 41 40 29 
-.90167.50 123 ... 

+00 25O26U0 IX 
*10033650 264 30 
-.10 83 48.50 50 

*.609300 8800 S3 
45.70 34 70 20 
♦ XO 04 70 72.10 03 
+1X09650 74.70 23 
-30 5730 4000 21 
+.70 52X0 4210 0.9 
+00 55X0 47 60 — 
+00 5730 43 30 3.3 
+1.10 8530 47.70 50 
-30 10030 72 24 

+1.10 B240 CS.75 -. 
+ 00 8X60 6500 2B 
+1305X10 40 09 

+.10 8400 7000 10 
+30 131 111.48 3.1 
-30 88 48X0 63 

+ 60 1 1540 1 13X0 28 
+.10 10050 8100 50 
+.BOZ1540 1HX0 40 
*06 50.30 4 030 1.8 
+.10 238171® XO 
*2 203184.58 20 
*00 56.50 45 21 

*1 1335010130 13 


*>- HQ l«» « 78 

*3 450 305 11 ... 

♦3 971 782 1 7 ... 

-1 100 14158 10 ... 

*1 S0I 660 10 .... 
-.1.9751.400 21 - 

*2 1.437 1083 21 . . 

-1 17511150 _ .♦. 

-10 1.738 1,300 40 

-20 5040 3070 

... 2B3 ITS 60 — 

+ 15 1040 1X01 _ _ 
•25 110« 10X75 0.4 

-isr.sns.iea as ... 

+26 2J0n 1040 23 ... 
+11 1.065 64; 1.4 .„ 
*.50 227 148 13 

*i Baa 635 

*4 870 608 ... ... 

*30 1.850 1360 27 . 
-7 1.100 S«5 20 -.. 
S 531 345 40 

-I 50 250 ISO 40 - 
-17 818 564 1 3 .... 
-18 817 515 1.3 .. 
♦15 888 735 _ - 
+1 10031X55 27 
-3 832 564 25 — 
-C 1015 1.125 1.8 _ 


PACIFIC 

JAPAN WHM5/ Yen) 


Nnmo 1370 
AaUr 649 
1.100 
ijao 
Amada 1330 
Amae 1050 


KKDNAY (Nor 15 / Kronen 


Ogurca 455 *2 568 426 10 

at Ban 227.50 +1286X0 210 _ 

DaeMBfc 762 +7008870086300 22 

OdWrh 15500 +1 169 131 20 

Dougs 433 -3 607 426 12 


— 112 60 40 

— 175 IX 0.7 
+.1019X0 1100 .... 

— IBS 125 13 
+00 114 u .... 
S 149 100 30 

+ 7 396257X0 2X 
-100 11SJ0 7X30 3.8 
+200 270X0 208 1.4 
._. 206 1+0 aa 
+4 306 180 20 
.-161X0 130 17 
-00 91 7200 2B 

-00 91 70 27 

+1 97 72 6 7 

+4 1229550 15 
... 161 110 2.4 

-.90 64X0 17 80 _.. 
89 55 14 


- SPAM (NOV 15/ PtS.) 


WLAM (Nov 1 5 / Uka) 




+1 154 

+1 178 
-1 109 

-.70 4900 : 

+1 233 

+01 1250 
+.10 GO 
+5 70S 
_ ISO 
+1 247 

+4 250 
_ 256 
-1 200 
-10 704 
+1.10 108 
_ 104 
-1 102 ! 
-100 6700 
+30 1201 
+1 2SB 
-30 31 1 

_ 70-50 

-1 129 


99 20 
121 10 
54 _ 
3500 10 
141 20 
500 _ 
45 2X 
60S 10 

100 ox 

140 IX 
138 10 
107 10 
190 10 
2S7 00 
60 — 
SO 14 
54.10 10 
41 ... 




3® 

•3 

337 


““ 


413 50 


340 ax 


GBC 

&GO 


RIB 



B/rblm 

ass 

-100 

307 


— 

Qdach 

525 

+15 

828 




222 

-2 

2*5 


— ■ 

HxldZm 

1X55 

+30 1X80 1.141 1ft 

re.. 


sea 

+fl 

601 


— 


322 





Hocnd 






327X0 +1X0X8X03*20 21 

— 

Htuiuni 

B55 

-0 1015 


““ 


206 


253 

205 2ft 

— ■ 


26300 +100 

313 

254 3ft 

-- 


333 


433 









567 


04A 



rW 


+12 




IOC 

12400 

+00181X11510 


MocMV 

1® 


179 1(2.70 17 



Unmyr 

840 

+5 

mo 

015 2ft 

re.. 

LW/ht 

020 

-4 

850 

612 1ft 


FRANCE (NOV t5/ FlS.) 


Unde 881 +1 968 830 IX 

UnoH 321 -2 410 311 20 

UXftn 20900 +10021650 157X7 _ 
LuftPf 198 +2 200 151 10 

MAN 41650 +8 470 375 I T 

MAN FT 321 +2 387 295 20 

Manmni 40100 *300 488X0 389 10 
HUM 850 _ B22 650 _ 

Mtaila 16900 +00 288 101 50 
MuAflg 2,790 +10 3017 2070 0L4 

PWA 242 +2 282 710 — 

PNtamra 505 -00 S30 433 30 
Poracn 070 +14 050 622 0.4 

Pltaag 4B2 +150 601 JD JIB 22 
ftWE 46500 +140 626X0 390 20 
fWIEPf 37000 +300 424 328 30 

WUf 1057 • +7 1020 1030 00 

FOminta 28500 +00 372 264 24 
RBnmPf 222 _ Zfi7 200 16 

IMH 236 -250 313 232 28 

Mima 089 +20 U«a 868 1.4 
ScMiO 381 +6 438 350 10 

Slirmna 623 -0O7WXO 007 21 
SpAxftg 648 +2 Rfc 810 IX 



I +300 a 

+14 766 604 30 

I -ID 614 2fl 
+170 9134 sue 5 l2 
*5X0 330 777 112 
+2 718 57D 4.4 
-JO 780X0 227 1.1 
+22 68344810 20 
+3 3.75O20BO 30 
_ 7GB 503 1/4 
+191^001033 40 
-5 1.166 704 4.4 

*23022850156X0 50 
+10021X20 16899 
-14 20181.711 30 
-100 205132J0 40 
—12 1070 1004 30 
—4 465 340 20 
i +27030090 201 10 
+7 1085 700 6.8 
+3 B58 870 30 
—400 49B 35170 
+700 737 370 140 
+60 ft 109 6000 0.7 
+8 1002 685 30 

*4 830 CIO _ 

+100 478 302 10 
-7 977 760 25 
♦1860 748 418 30 
+4 740 509 21 
+3 435 3S6.10 50 
382 296 60 
+500 282 181 117 
+21 l.Uffl 689 __ 
-6 865 850 60 
_ B30 B3S 1.7 
3/487 2750 28 
-12 2569 1,700 4.1 
+2 734 6S0 27 
-05 18.70 8.16 74 
+400 182 100 94 
-1 909 580 18 

-3080204440 J-J 
*300 576 3S0 3.1 
-20 2754 1070 04 
+3 38323850 20 
+00 646 343 34 

+80048190 388 27 
+9 6B0 485 27 
+11 710 403 54 

+191078 852 M 

-100 119 32 50 


SodQan S18 — 

Thyoon 290 JV +1.70 
KM 327 +100 


327 +100 380 288 11 
53000 +24095850 498 20 

35 +1 4^ % 

a 4^i? 


- ITALY (Nov 15/ Ure) 


-605082 8040 90 
+36 3085 2041 _ 
-1520601025 10 
211 7b _ 
+100 3050181600 10 
+120 12/4E0 8.110 — 
- IQ 1100 1084 20 
+182012 1002 — 
-25 2096 1,283 40 
_ 21X10 940 — 
+0 2518 1019 5.1 
+1001X274 8.150 — 
+39 2064 1.123 _ 
-40 7430 4071 10 
-43 4020 2119 27 
-5 8.196 2101 <4 
+200 17,160 ID/CD 40 
+17 10Ki iS 22 
-2004472333433 10 
+254080 2075 _ 
-30030700 15200 1.1 
+2OXSBO502G 10 
-200 14X00 0,170 _ 
-5024302000 _ 
+22915048 8062 00 
-00 6.440 4.455 22 
-201X3X012500 21 
—40 79.7T0 12010 10 
-2 1049 870 _ 
*5 1140 1.750 -- 
*46 8.100 3.440 1 0 
-51385 1070 _ 
*8003409) 17J00 1.7 
-9O1Z.160 7080 23 
+5019,164 8705 26 
+18 1088 400 — 
+156060 40® 21 
+50 70004,145 — 


5090 —20 8090 9,150 20 

5000 +120 8.700 4.700 50 
X37D *40 1535 2790 20 
2949 -15 3/400 2415 7.1 

4005 +K> 4.475 1075 40 

16.340 *340 17200 14000 4 0 
5000 *100 8021 4.400 50 
605 +16 1/135 700 227 

3X30 -65 1390 241 □ 3.1 

4070 ....5,1101400 27 

9290 +17011090 7.610 24 
1070 2715 1.746 40 

1/485 +5 1,775 1010 1.7 

2080 *30 XXO 2000 3-4 

5090 +170 9.100 5.100 24 
760 -2 1.700 703 50 

£00 —924 416 >29 

3025® *19107 5.140 1030 30 
878 +10 1010 780 70 

7000 -100 80004000 10 
5.760 +110 7030 4000 20 
4090 +30 6.490 3000 23 

10,370 *18012000 9.420 1 0 
227S *75 20961000 _ 

4050 +95 4000 3005 29 

-ft 395 102 0-4 

-4 898 351 HU 

-1 915 599 50 

3060 +70 4.450 2805 11 
1,735 +20 2,185 1.595 30 

987 +4 739 848 7.7 

1.070 +90 2000 95017.1 

1/400 -IQ 1,710 1.150 5/4 
2386 -35 3,120 1.990 21 

2275 .... 3 080 2 035 10 


i (Nov 15/ Krona) 


— 680 250 1 0 

— 886 438 10 

+250 20050 15 00 

+219050 144 00 
+00 10050 65 12 

+1 10050 79 9.2 

<6 438 2® IX 

•400 48700 328 10 
_ 134 87 29 

-1 134 B5 2-S 

*300 110 7800 60 
+1 430 251 1 6 
883000 20 
_. 311 137 10 

+3 312 178 20 
*5 550 1® 20 
+5 216 152 28 
+3 372 17 .. 

-1 155 14 7 0 

-100 1® 100 10 
-2 1® ICC? 30 
-2 156 99 30 

♦ 00 >64 122 ... 

*1 T 68 124 32 
+00 143 9000 1ft 
+1 142 600 10 

i -00 73 3900 _ 

— . 196X0 97 00 10 
+100 23310250 10 
+4 475 361 10 
+2 480 350 10 
-100 144 BS 21 

+2 110 86 IT 

♦1 122 8250 30 
+4 126 76 _ 

ISO 106 6.7 
175 105 5.8 


l (Nov tS / Fre.) 


+1 292 191 _ 
-14 721 568 20 
-14 713 507 2-0 
-40 1089 2173 1.4 
-6 10« 1015 10 
-2 2SO ISO 1.7 
-12 747 500 12 
+7 970 702 20 
+4 942 898 20 
*3 422 327 _ 
-10 1730 1 060 1 0 
+5 1.700 1060 20 
+10 2032 2140 11 
♦141050 859 14 


510 
1030 
335 
752 

ftflynn 880 
JpYMd 1.180 

2110 

10080 
Kagame 10JD 
Iran® 876 
RahnFn 101*0 
vdta 1010 
342 
778 
921 
2370 
504 
1.120 

_ 8 
KatSU 424 


—ID 1.420 1.200 .... .... 

+2 737 468 

... I J10 991 0 5 

.70 T0GO 970 

+30 1,300 S9l - ... 
_ 1,8801070 - 

♦ 13 744 550 1 A ... 

+20 1.700 940 

+11 634 402 10 _ 

+ 100 6X00 2220 _ 

♦ SO 5.640 4070 00 .... 

+10 10501000 - — 

_ 1050 1000 _ _ 
+3 811 500 10 .. 
+10 1.300 1,040 _ 

*8 629 410 00 — 
+2 513 380 1J 
-14 878 550 .. - 

-15 998 BSO — ... 
+20 1.890 10GO 00 - 

♦3 801 415 

+40 3.840 2410 ... ... 

_ 1020 842 4.8 _ 
+ 10 803 438 _ - 

— 1020 1.530 .... - 

-10 1500 2.590 . _ 390 
+10 1/410 1020 1.0 - 

+ t 811 315 — ... 

_. 462 337 10 
+2 997 841 ..„ „ 

+26 803 490 _ _ 
+20 1.440 1.040 05 _ 

-S 768 671 1.1 _ 

-102X732410 _ _ 

*11 1,330 991 _. — 

-2D 2780 7030 _ — 

-10 1.670 1010 _ _ 
+ 12 984 737 1.1 - 

+11 898 608 — ... 

+6 625 410 _ — 
+4 SS4 397 ... — 
+ 10 1X70 1090 „ _ 

+10 1X«0 1.050 19 .... 

_ 2060 1070 

-10 1010 1.400 - 

+ii 1020 eeo 

-11 1020 716 .. — 

-ft 910 SSl _ 
-1 570 415 .. .... 

+10 1070 993 — 

♦ 10 2070 1.560 -. 

♦ft 527 345 . — 

♦21 1.390 720 
+7 865 680 10 _ 
+4 1.120 951 _ __ 

-101.710 1010 60.7 

*401.670 1020 0.7 .._ 
+50 4,650 3000 18 
_ 705 S45 1.1 _ 

+8 638 403 _ 

*201,810 1050 — _ 
-20 1X60 1070 . . ~~ 
.. 1,180 993 _ 

+30 40+0 3.600 _. ._. 
+40 7M 512 09 ... 
+20 2.450 1.920 - _ 

-3 6D3 445 „ — 
+10 2060 2000 ™ _ 
♦1 738 595 1.1 ... 

+4 513 275 __ __ 

♦ 17 585 360 _ .... 

+101040 719 „„ . 

+ 10 1070 990 
-50 2X00 1050 
+20 1.180 Ml 

♦ft 788 514 

-3 933 735 — — 
-5 1050 588 .... 

+17 700 428 10 ... 
-3 1050 912 
-0 839 440 
.... 734 607 1 1 .... 

+4 640 577 .... .... 
+5 525 430 
+9 780 651 
+231.130 786 - — 
♦11 560 386 1.8 

+2 950 §79 
-5 1040 828 _ _ 
-20 6030 5.660 - — 
„ 678 5«B — — 
+4 1.120 612 .. __ 

+13 846 712 _ - 

-.2040 1. BSO _ 
_ 1.120 820 „ - 
+30 2J?60 1,610 _ -- 

rSHS a :: 

-2 790 881 ._ _. 

-10 2050 2.380 — 

_ 1X60 ISO .. _ 

♦16 tot) 566 .. 

♦20 2X40 1.910 1 0 .... 
-30 1420 1.650 - . . 

♦ 7 KO 303 _ „ 

5S°* - 

+2 1.070 753 . — 

-10 1.1+0 972 ... 

+20 1370 2.790 .. _ 

+12 KB 251 
+10 2010 1.370 .... _ 

+5 457 282 - 

+S 555 346 _ — 

+9 786 552 — ... 
+4 910 751 1.4 ._ 
♦20 0150 5.040 
♦20 744 420 _ ~ 

-40 2.070 1.7W . .... 

8M 528 

+20 1.7701.490 06 
*4 44ft 284 _ 

+4 778 COX 07 _. 

♦3 501 3» 

+ 11 686 478 - 

♦10 2.130 1010 - 

+2 400 286 

+7 Mb 590 

♦ 14 715 431 _ _ 

+10 1X40 852 00 
+20 2000 2.060 OX 
_ 1X400 9.780 . 

+20 1X70 1.190 17 . 

-1 1050 88 .... 

-10 1060 1070 — - 

♦40 2.482 1 050 _ _ 

-5 430 335 _ — 

+3 B26 518 0.9 ~ 

-7 570 430 

♦20 2070 2.330 
+12 S3 455 

1X101.110 . . — 
+4 500 338 

-1 452 271 

+1 457 303 


... KSeEn GIB _ 720 SOI _ .... 

... KMiT 563 +4 815 515 . .. 

... KDarri 838 +6 970 B14 08 ... 

.... KKW 7 £00 *70 1.935 1020 06 ... 

_ KHUN 828 -1 877 SOI ... .. 

. . Mti 1060 +10 10« 1030 ... 

... KobbS 318 +8 336 250 

M09DN 850 .. 050 737 ... 

Ki*EJo 1030 +30 2.460 1.700 _ 

MW 2+60 +100 2780 7,1X0 „ _ 

Kmaiai 615 -1 997 732 . .. 

~ Uiuea 745 +1 767 BOX _ .. 

" ftajuS 925 +2 B63 548 „. ._ 

••• K&da 724 -3 767 551 _ . 

•" hmOurm 450 .... 573 425 20 

Kurabo 415 +5 523 318 _ . 

”■ Kwara 1,190 -1O1£OI01O .. .. 

ftxrta 5U +S 64S *06 .... 

“ UB 2070 -10 3000 2070 

Km 7JI0 +60 7,620 5 080 

K-dftSh 3B0 -11 S55 375 IX ... 

KlMM 730 -3 BOO 730 ... . 

moaoH 940 - 1.050 905 

KlQPW 2.430 -10 2060 2.420 .. 

845 — 782 636 _. 

1,060 +10 1X30 788 

1000 — 1.3*0 a® 00 .. 

923 +15 960 512 _ _ 

1040 —2X20 1.75D _. ... 

540 +4 sea 428 .. _ 

760 ._ ECO 730 20 — 

394 *3 463 32! . 

1.710 -2010 1,420 1.3 _ 

1080 -10 2.020 1,700 _ 

1.530 -10 1X20 1000 

Malaua 1060 ... 1020 990 1.1 .... 

Malawi 2020 -20 10+0 2,400 _ 

~ 827 -3 960 711 .... .... 

557 +1 648 397 

720 +12 8B2 686 

85+ +11 732 557 . 

fiXO +0 792 582 0.7 .... 

MBmCC 1X80 -10 1040 1X50 0 9 — 

*25 *13 S63 480 ... 

484 *30 533 388 _ ... 

MeoMH 64Q +10 1.230 790 OB — 

K£a* 2.160 .20 3010 2.110 _ _ 

MCtan 556 +1 68+ +25 

1X80 -20 1.330 1020 .. 

788 +4 73ft 500 - 

1.110 +20 1X00 905 „ 

520 +13 550 135 _ .... 

748 tS 03 tU . ... 

53S +» 5BJ 33+ . „. 

829 +14 1.010 796 — . 

954 +10 1X30 842 _. .. 

729 +* m +87 _ 

461 *4 560 487 .... _ 

443 ... 484 316 

BIB +2 685 3SS _ 

IX'O ....1060 1.14® .. _ 

MMWqs 1020 *10 1010 (.450 — -. 

8 62 +37 800 +55 _ 

853 -2 885 672 

3J3 +4 400 301 

1010 +101.420 933 0 9 _ 

746 ... 890 721 0.9 ... 

42* *3 469 378 _ _ 

409 +1 453 337 .. 

904 +2 840 S78 . 

857 8+0 770 0.7 . . 

414 + 2 448 310 ... 78 0 

MffTrB 1.030 * 30 1.400 845 

963 -2 1.110 790 __ ._ 

1X80 2.230 1X30 0.4 _. 

581 *11 782 561 - 

970 -10 1.210 859 _ _ 

2030 ♦20 2.500 1083 04 .. 

IftnaoM 544 »2 624 485 09 .. 

MortS 2.550 +20 2.760 2000 _. .. 

.. MlfMttl 3.930 ... 4.+90 3.+72 _ . 

... ICC >,180 +20 1X10 as a _ .. 

• - NQC kl 1050 *30 1.178 965 — - 

. . NEK S0 1X20 +30 1.460 1.020 .... .... 

..MASS 545 +2 630 395 — 

27B -4 301 231 ... __ 

916 *10 939 565 — — 

761 -1 795 526 1.1 — 

705 +5 767 493 .. _ 

430 +3 494 315 - — 

tot* 630 +5 810 602 ._ _ 

... Maces* 931 +21.040 781 0.9 .... 

- Monro 485 ++ 566 481 ... _ 

17 NaMaa 1.470 +60 2080 1X90 - 

... No«Oft 1040 *20 1.100 887 _. _ 

1.370 — 1060 1X10 _ — 

OB« -4 815 661 

718 +19 BID 628 ... — 

436 *16 5SC 400 0.7 _ 

700 +30 851 578 — — 

+51 *2 520 412 ... 

I.OJO +30 1.440 981 08 .... 

947 +12 1 140 855 - — 

5.330 +30 7.500 5040 

610 — 6050 FG2 .. __ 

408 •« 482 316 __ 

2X40 +10 2.130 1.610 ... ... 

2020 +102.300 1X30 ._ _ 

1030 ... 1.110 937 __ _ 

676 +« 802 880 1.1 — 

514 X SO 4S0 

1.7*0 +10 2.190 1050 0.7 — 

728 +2 850 526 _ — 

88S +19 795 476 .. — 

1X60 — 1080 1.320 10 ._ 

878 -2 794 653 _ 

656 -34 790 508 _ _ 

750 +3 788 484 _. _ 

1030 -2D 1X90 1X20 1.1 

534 *4 617 450 .... 

997 +6 1.300 991 Oft „ 

530 +3 BIS 441 .. . 

NpSnt) 772 +2 1.110 742 ... 

1X50 +90 1.640 1090 

1.140 —1.510 1.130 

582 +2 588 335 . _ 

365 +3 403 302 — 

465 +10 534 345 .. _ 

23.400 +5oorrjaiift5no a* _ 
878000 +11H0B KBSI T+lUB ... _ ! 

_ 600 +4 630 364 — — 

_ NpYuen 647 +2 687 521 — — 

~ SEmS? 1000 +12 1X70 MB IX I ! 

:: Sift 5SI :i S » = r 

... Need 1X50 _ 1070 1X40 — _ 

_ MlO 1.140 -30 1X20 1070 __ — I 

.. NsmOl 832 ._ 002 781 ... — I 

.. MrfnSl 500 +7 516 325 ... ..I 

_ tecta* 1.150 . 1.270 815 . — I 

516 +3 558 401 ™ — ( 

784 +101040 770 — I 

... (lanfo 2X80 ...3000 2X50 1.1 - I 

. M9®4> 1.300 +301.710 7SS — — I 

_ MnoB 2B9 -1 372 264 . _ I 

NllDnl 1.630 ..1.700 1X30 ... I 

... Monwm 1030 *80 2070 1 797 00 _ . 

736 -1 853 65b ~ I 

704 +1 BOO Mb „. _ 

666 *7 773 562 I 

- u«.a 744 +16 833 533 I 

_ Mure 822 -8 (WO 575 — ._ I 

.. oKn&m 770 +12 1.110 746 1.4 — l 

... Wimp 1070 +10 1X40 999 _ . I 

Oman 1.740 ... 1,890 1.460 _ .- I 

OnsPtl 4080 -50 5.510 4,440 OX . I 

.. On+rtOo 1X90 — 1.500 1.050 10 ... I 

618 +8 744 TO .... I 

3020 +30 4X20 2.900 00 610 I 

408 +4 538 402 _ .. I 

_ 649 *16 779 530 1.4 „ I 

_. PVai 2010 +10 3X40 2.410 ... _ I 

PimoM 422 +74 582 ISO 1.2 — 

439 -1 610 438 1.7 . 

928 +121020 705 — .. 

4 . 110 +40 4050 3X30 I 

1J5C0 +20 1,770 1080 - I 

_ 577 -1 668 447 — - I 

. SaNA 1X10 +101.540 1X30 ... - j 

Saram 627 +18 7W 515 — I 

. Eoivyo 2010 +20 2.660 2.1 10 0.4 

. (a® 1X10 +40 2 150 1010 .. 

Smart* 1520 +10 2X701.850 „ I 

. Smart* 885 +9 1 000 880 . — I 

_ SntoEf 560 +10 809 415 . — I 

- Sppore 886 . 1000 870 .. - I 

„ Secom 6.37D -10 7X80 6X50 0 8 .. I 

- SeoaEn 5060 +110 9040 4.450 . — I 

5+fcufl 3040 -10 4.650 3X70 _ . I 

— SctaT 1050 -ID 1,920 1080 lib . I 

... Soya* 1.140 *40 1X90 1060 — — ! 

S*yu 1X80 *20 1.510 1.120 — . ! 

SaW3im 955 *10 7.160 92S ! 

_ SeMt+e 1.1 20 —14901060 1ft . ! 


951 

5umne lx® 
730 
1.180 
4.5G0 

1.700 
550 
774 

rmmo 1X60 
TMeCn 1.190 
799 


- 512 361 1.3 
+100 8.580 7.430 . 
.20 1010 1020 — 
» TO 2.860 2080 .. 
*1 1.110 775 _ 
+10 2X20 1010 
+5 1040 840 — 
-20 1X90 1.130 — 
♦ 10 1060 1.080 
•1 636 406 IX 
♦21 610 411 - 
+7 386 2SB ... 
+1 700 500 ... 

+5 633 480 „. 
_ 1090 1.110 ... 
...103)2.000 _. 
+4 838 700 Oft 
+30 6.460 5/430 _ 
-4 85? GIB ... 
+4 747 425 _ 
+20 2X90 1.7D0 _ 
+11 587 404 — 

-4 1.100 B37 _ 
+30 1080 1X80 — 
_ 475 3B0 ._ 
-4 485 38 ... 
+81030 B4Q 00 
-I 367 252 ... 
+91010 864 _ 
•3 573 432 . . 
-ft 734 581 1.5 
+8 1.13) 815 — 
♦30 1.820 1090 — 
_ 815 674 .. 

-101X20 1050 — 
*50 5050 3.780 .. 


M 


aewd 

202 


TNT 

2jtB 


TtantfC 

400® 



VBJiur 

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— 

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► /- HM Urn TM M 8®ai 


170 268 8X 200 
2.74 101 — 

4J2 3X8 30 — 
90S ft 70 SO _. 
B0O 5X0 1.1 ... 

SX2 700 2ft . 
285 218 4ft — 
556 403 43 ... 
5X2 3.70 IX _ 
253 2X0 4X — 


486761 BMH| 
521030 BncnAl 
■11089 is near I 
£962* Bf£ M 
|B7704 CmpMfa 

125500 Cnttxl 
■62683 CmbOSi 


- MM6MNiS(Mwt5/UXS 


229 -18 2448212 
20 +>* J201M. 
23% -%m23ii 
7% S71# 7 

88 -1 81 88 
340 +6 3408330 
Mi SMi Mi 
517% 17% 
-%SBL 12% 
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33*» 

SBsi 


AmorPr 9X0 
BEAM 3480 
ttmv** 11X0 
37X0 
3880 
6775 
700 
2300 
1870 
9X5 
4X0 
3650 
91 25 
IfljmaD 14.10 
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6.70 

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. 2210 1.700 1ft 


HlCLrt 


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545 


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re.. 



+ 14 1040 





... 60S 





-12 626 





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+3 B51 


















— 

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3500 


VasTrB 797 
1.030 

849 


+200 21 500 17XD0 ._ _ 
-10 3X30 2.430 _. _ 
„ 1,420 1.110 „ ... 

*8 538 326 _ _ 
+10 597 416 _. . . 
+40 1.390 1070 a? 

+5 620 421 . _ 

+10 1.720 1X60 _ — 

. £020 1.310 ._ _.. 
-10 2X00 1070 _ .. 

+20 3040 2.780 _ 

+40 3,460 2.740 

+4 570 426 .. _ 

♦ 5 705 S20 — _ 
+80 2.750 2X00 _ 

+20 2.140 1050 CL8 _ 
♦6 7BO 450 _ 

+7 829 832 

— 730 470 — — 

-101050 1.480 .... 

...10601,190 
-1 7 88 575 — „ 

+4 878 
♦3 1X60 
-5 779 433 — — 

— 823 679 — — 

*8 437 285 _ — 

♦30 2090 1,470 _ _ 

♦5 SS8 «?1 10 — 

2060 1.430 _ 5B0 
+7 754 515 _ _. 

+8 733 524 .._ .._ 

♦ 10 3.480 2.630 _ — 

*20 2X50 1.760 .._ 

... 527 330 „ .... 

— 1X50 866 _. — 

*1 505 310 — — 

+16 fiao 432 

+ 14 695 345 — _ 

-1 436 285 _. _. 

_ 418 272 _ _ 

_ 1.600 835 _ _ 

.20 1.330 1090 IX 
+40 1.430 930 
+17 989 820 _ _ 

+14 1010 592 1.1 — 

+40 2X30 1030 __ - 
♦30 1 010 1.350 _ 

-20 1X50 800 

+ 10 1X50 1.110 

+20 2X90 1040 D.B — 

.... 1X50 980 

+1 564 350 1ft — 

♦3 889 TO 1.0 47X 
+18 1030 734 — 

_. 1,120 780 __ - 
+1 9BS 834 _ _ 
-6 745 528 - - 

+8 1,160 850 — — 
+17 1,180 900 — _ 
-* 7B3 442 ... ... 
+5 745 488 — ... 


SNKPr m/sjo 
S tacvfir 1170 
SHc*E 2X0 
SoneO 925 
SOdtfP 405 
SHKCo XB3 
SnmA 57.75 
SmrcB 9 

TeMfir 3X60 
Wharf 3000 
Wfock 16.40 
mngQn 9,70 
WSBOt 10.75 


+05 15.60 8X5 ■ 
+00 5O2B0O 
+00 15X0 10.40 

♦ 00 523000 

+00 57 37 

-X5 81 50 

+05 14 075 

.00 27X01800 
+05 19.10 1020 : 

16X0 305 l 
+.10 305 4.10! 
♦1X0 452BX0 

+1.75 131 80 

+20 7100 11X0 . 
+100 8000 47X5 
♦05 13X0 980 

♦ .05 800 4 00 ■ 
+100 60X0 3200 ; 

+20 24X5 13! 

+20 1600 1910 
♦XO 54 2800 ! 
+.10 3500 20X0 ! 
♦XO 31.75 1700 i 
+ 15 30X517.75 ! 
+00 17.70 12 . 

♦ JO 1000 500 ■ 
+.70 4200 2700 ' 
4.15 33X5 19X5 - 

♦ OS 13.10 700 ( 

+.75 8400 4975 I 
+00 3800 24.90 I 
-XO 25 1200 J 
-.40 1200 9X0 I 
*00 4200 20X0 ■ 
.40 39 30 

*1 774TX0 

*.1016.50 11 

-XO 915 2.17 I 
+.10 15.40 9151 
*.10 505 300 I 

♦ ns 700 3X8 i 

+.75 71 50 

+.10 11X0 8 

+XO370O 23 

+00 41 2500 

+X0 2300 14.75 

♦ 10 1600 9® 
-.1517.40 OSS 



~ MALAYSIA (NOV 15 /MYR) 

“ Bousst 5® +X4 980 
~ Oersng 22.40 + JO 25.75 1 
fftCred 15X0 .00 19.10 I 
"■ UMBnt 17X0 +0019001 
■' IHlin 406 +X2 6X0 

“ AtiPurp 4X8 +X6 935 

“ PBB 4.16 +.oa B.0S 

__ SaneO 7.15 .05 B<0 

„ Tftatan 20 .XO 24 10 1 

_ TMtUP 11X0 +X0 20.901 


m 

100 FkaMi 


2400 Beat C 

■sra Okksaj 
211196 GentraJ 
26250 GUStrl 
■19258 Gull Cl 
13400 toSMl 


113475 HeoSix 

137247 Hanaafl® 

31037 ItoM 

■+17B5 HmJ 
116302 NudBeyl 
-28726 MLEn.J 
1B138 Knracol 
■75381 lmoOl| 
235520 in8 


19450 bW»»S 
71*82 hacaAl 
G0650 Jmcx 
■134 tonAdl 


- _ SWGAPORE (Nov 15 SS) 


DBS 1970 

FfBNv 1B90 

GdRA* X® 

KsaiPar 3X8 
mcrep 9® 

Keppef 13 

0C8C 1500 

OUQ 715 

SADf 14X0X9 
SPira 16X0 

S-praT 914 


*.10 1970 
+.10 1600 
+03 346 
♦ 10 306 
+ 10 6 65 

— 1300 
+.50 7 970 
+05 700 
-08 1910 

— 17.10 
+.04 308 
+04 4Xfi 

5X0 

+.10 1100 


1000 20 60 
15 00 _. 
934 30 — 
245 30 — 
402 93 — 
9 10 _. 
11 IX — 
975 00 
10.40 1ft — 
1310 1ft — 
306 10 — 
3.16 30 — 
308 IX — 
945 95 — 



■56128 IMHlA 
151505 MCOBl 


:: NORTH AMERICA 


TORONTO (Nov 15/Can 9 
4 pm close 




AUSTRALIA (NOV IS /AUEtS) 


AMn 300 

Amcor B.B0 

Amffti 378 

Amtts a® 

Aatnon 263 

ANZBk 373 

AusOLl 4X2 

AM 1.45 

BH> 19.10® 

amity 243 

Bor® 3X8 

BoogCC 006 

Mb 13 

Briwl 1.02 

BraaPn 3X1 

CS8 4.48 

CR A 1704 

C®Mk 3 

C3rtHH 216 

CCAIB® 840 

Coles** 411® 

Crnalco 5.10 

CommBk 7.38 

CmaV 1.30 

DamMnB 034 

Lire® 403 

EnnR* l.« 

FA f 001® 

f*Kt> 2.72b) 

RfcnC 3.38 

Foan 1.12 

GnPVIr 225 

GHAui 228 

GAIWffl 1 16 

SdniaiiF 1.18® 

MUM 90S 

MffAG 1X4 

MnsdiG 1.74 

lOAua 1000 

tOdstn 3X0 

LendLB 1964 

Uc+iN 950 

MM 254 

UayoeM 998 

10.66 
mra 920 

NentsCp S34tr 

NmaPos 920 

Nontl 3X5 

J>acDm 301 

Pancon 108 

100 

3X0 

PUPac 272 

Hirtnc 6 « 
P03SM 3.40 

Put*r 3.70 

oetta 408 

0CTR« 1X8 

BnaiSd 5 

Whim 910 

Sartos 302 

FrrrtnHw 509 

SomGwra 5X5ta 

SOlC'p 284 


_. 5.95 350 
+ 2D 11.12 942 
+ 8.10 306 
+.15 1100 7 BS 
+.04 302 958 
+07 5.72 306 
+04 4.70 300 
+.04 205 1.40 
+X2 20.7B 16 

_ 306 2» 
+06 402 3.15 i 

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1.18 0.34 
+01 503 3X5 
-05 5.46 4X5 
+X0 2050 1600 

-02 3.40 
+.10 12X0 700 ' 
+ 04 970 300. 

... 5 80 4X0 
+06 988 6X0 
+04 1.32 978 i 
— 058 0X4 
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♦08 102 1X0 
+01 1.40 0 68 
+ 10 3.45 244 , 
-.13 308 2X0 . 
-02 1.47 006 I 
-.03 980 207 
♦ 300 912 
+.03 1.7B 1.10 : 
-.03 1.78 1.18 ' 
+07 2® 198 , 
♦02 902 112. 
+ 06 962 1® 
+20 11.80 975 ! 

_ 4 60 2.63 
♦06 1964 18.70 ■ 
+06 140 205 I 
+ 06 3X9 947 ; 

♦ OS 1004 602 ■ 
+.13 4X1 205 . 
+.18 1306 997 . 
+ 10 700 525 ' 
-04 7X0 9)5 I 
-.04 279 100 : 

♦ 12 4.15 106 
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+ 09 915 1X6 
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._ 346 2-80 . 
+02 4X5 949 I 
+ 08 9XS 580 I 
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-ID 6XB 3.70 

♦ 03 606 4X0 ! 
+.01 1.74 1.15 ; 

. 6X5 4X8 I 

+.10 5X4 402 
+ .08 4 52 166 ! 
-01 7.10 505 ! 
+ 13 9® 4 05 | 
+.10 300 2® I 


14% +% SIS 14% 
34% +->.0*4. 34 
314+ 


?■? 302534 BUAaB 27% BTh 271, 

50 16047 BenuEr 20+ -6 210 20+ 

— 52660 BmMtfi 214+ +% SZI% 21% 

5 ■ TOKYO - HOST ACTIVE STOCKS! 


Nippon Steel 

ABhfkaga Bank — 

hfi&stiln Stool 

Kawasaki stool 
Mitsubishi Hvy 


743004 Ran En 
155730 Rapap 
9070 ngd 
221000 
147S6Z 
3S438B 
25225 RpyOak 
Tuesday, Nowerober 


i, 

18 *18 17% 

162 +2 182 180 

16 16 16 
400 *® 410 870 

ifl% +% RWj ia% 
105 -6 105 10b 
134. +% 514% 181- 

o -% o% a 

370 +5 370 36b 
184. +>« 610 16% 
0% 58% Bh 

8 58 a 

174, -4, S17fc 17% 

165 8 -l.^n 

38 *%»■* 35% 
13% SUh I9*a 

14% 815% 14% 

10% -% Sll 10% 
361 261 361 

204a -%S204. 

13% 614 13% 

16% +*• (15ft 15% 
■ 62 59 

14% — 4flST+ft 14*a 
480 -10 +05 480 
12 -h S12 11% 

,7 i1 3S£ ,T 5 

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174, +%I17ft 17 

& 

27% 128 27% 

38% +% 839 38% 
47 *474, 48% 

364, +%S3»,3ft4, 

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18% -%n4%®4% 

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21% *4,5214. 21 

9 *% SB S% 
8% -%»% ab 

2^4 

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46 +4aS«% 48 

23% — % 52* 23% 
11% ♦% 511ft 11% 
7% -% 55 7% 
400 -6 500 485 

18 % +%snftdi8% 

24% +% 52**, 244, 
IDS +3 110 1® 

4&+£ja# 

470 -16 476 470 
10% — *a 518% 10% 

+% 519ft 19 
8% —4, $84. B% 

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30 -1 30 2B 
7% -% 37% 87% 
+2 51 48 

-a 470 4® 
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15% 515ft 15% 

17 *17 17 

"R a 1 ® 
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-122% 21 
312 11% 

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-%B*% 24 

— *1 3134, 12% 
518% 15 
-%ISD% 20 

-%sir( 17% 
->tS9% fi% 
—% SZ7ft 27% 


MONTREAL (tar 15/ Can $) 
4 (Bit doss 


7% +%«% 7% 

1 H -''ZZ'X 

7 -4, 374, 7 


AFRICA 

soum AHRCA (NOV IS / Rand) 


ABSA 1000 



7% +%S17 
48 +4«Stt 


FtstPI 11940 
Saffian 12 

Seats 1BX5 
GABrew 0000 
SAMnAm 56.50 
a Be 34 

SIM 132 
HbObT 4975 
TnoHul 46.73 
VRaok 400 
WAras 75.10 

WDMO 1® 
IMkMt 01.50 


— 1005 970 4.1 

— 28 1700 91 

.._ 123 9300 3X 

— 255 115 91 
+00 284 50 18200 1.C 

♦4 506 344 3.0 

— 140 102 00 

_ 572600 — 

— 31 20.76 99 

_ 60 42 70 

— +.30 3.4ft 1ft 

♦25 121X5 9500 0.4 
-.15 1IL25 6,60 98 
+X5 7300 48 3.7 

_. 14X5 7X5 40 
+1 35 2200 3X 

— 42 30 40 

+00 23001900 4ft 
+00 BO 53.75 6.1 

_ 15X5 704 1ft 
+1 130 8700 1ft 
+X5 47 23X5 — 

-.10 2a 75 1976 7.9 

— 34 10 1ft 

+K2 405 915 1.3 

-1 104 55 1.4 

-1 122 70 1ft 

+00 8+00 6300 3.7 
-00 75 41 2.7 

-1 IDO 75 14 

— 221500 — 

+25 38.60 28 10 

+2 01 5800 60 

+.10 7.75 4JS 8ft 
+X5 5850 37. BO 23 

— 38752300 1ft 

— 2600 1800 10 

-.10 126 72 1 0 

— 1300 870 _ 

-00 20 15 1ft 

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— 68 2600 IX 

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+3 164 102 92 

... 56 40 1 0 

— 47 23X5 1ft 

— 498 350 3 .4 

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-100 230 1S1 99 
+00 80 4400 Sft 


WatwMMIrtB 

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UMM vtpn n nr5y M Bad® 
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Mwwai mart ttrtm AMavtaT® & 
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FT FRS AMIUAL REPORTO SBWKX 

Limiii) ■■naan iMi%.y—s«®Bmodi 
mi®, ng on 7 to om am a* Ma Mans 

takan® or to ®1 17Q 3822 ■ rafcq ta orttt «• 
IM. ®* **< ® 7» 0770 * la +4* H 77D 3ia 
names® art mtm mat tart y rt. rtpat » 


Stocks 

Ckwtog 

Change 

Traded 

Prices 

on day 

7.4m 

385 

+3 

4^117 

BOO 

+6 

4ftm 

500 

+7 

3.7m 

424 

+1 

3 An 

749 

4ft 


+3 Toshiba 

+6 Sumitomo Cfmtn 

+7 NKK 

+1 Sunttomo MU tod — 
+S Itochu — .... — — 


Stocks Closing Change 

Trotted Pilose on day 

2ftm 708 +4 

2.7 m 580 +11 

2.7m 278 -4 

2ftm 341 -1 

2.4m 742 +9 


Any time any place 
any share... 


Instant access to up-to-the-minute share prices from 
anywhere in the world 


Whether you’re doing business in Berlin or hatching deals in Hong 
Kong, FT Cityline International can link you with all the UK stock 
market information you need: 


INDICES 


\' * - . - ' I US INDICES.; : : 








J** 


.... ++' 



fttyaufci 

Onr® (29712777) 

(U) 1877730 f B75&70 25*7040 16/2 

1775680 3*4 

teste* 

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1941 A 
98B2 

1SB65 

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19600 

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234680 3/2 
113618 3R 

192650 14/11 
MUO 56 

tastoi 

CntgAXkXSWm 

TradBd tito<27Jfl1) 

102608 

38407 

102649 

38630 

103080 

48846 2/2 

tmj* M2 

37694 25/10 
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RH?n (i/ 1 W) 

139154 

13H7X1 

» 

154285 6/2 

133639 7710 

Brad 

Bomxa (29712/B3) 

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40*870 

485200 8611000 13» 

380000 371 

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304645 

4177X0 

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417008 

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329806 20H 
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185648 286 

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5597.1 

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3901X0 4/4 

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Cop«hag>fi83/1/Bg 

34193 

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19310 

18317 

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791.13 

2253.70 

211875 

785.73 

223500 

209629 

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223440 

207635 

850X7 18/5 
24B5J90 26 
2Z7l.11 166 

74204 5/10 
211630 5710 
»U8 7710 

ame 

Mhena ffl3l7i2/BH 

SI 827 

81301 

81539 

US466 18/1 

88408 10711 

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936705 1 2201 09 4/1 

638844 45 

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403549 

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405670 

483657 126 

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44932 127 

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180407 

180333 

180838 

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108114 1/7 

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94303 

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640.13 

1036ft 

84105 

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817.17 10/5 
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MW 10/S 

MM225(ISSM9 
Wdri300(WtW2) 
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2lJ 5^901 

1K31ft8 

28080 

152854 

2147.11 

19261.45 1926436 2155201 13S 
278J0 27800 31UI 13® 
151702 151707 17073 13« 
ZlllftB 211A78 S542JS W7 

1736674 471 
20622 VI 
144SS7 4/1 
18033 471 


IPC ( Nov 19 7B) 

C8S RRkGenpnO 83) 
CBS M Eh p® 835 

Cap. 


M 248604 ZS8S9 28*1.17 8/2 


204983 205*01 377803 243904 3/2 


40UD ?1/6 
35700 21* 


QstoSSMKZflOS 105580 105095 1046X9 1211.10 28/2 


I Coup (2/1/&5) 2827.70 290940 292601 330*37 471 


2S04X 29091 28890 322600 1 US 


SB M-Siwaaws STtUS 5B5J7 56303 54101 VI 


Dow Jooss Nov ta Nbv 1934 Sraco 

1* 11 10 Htfi Uw M» 

hdooiab 382973 3801 *7 387199 3978X5 3593JS 397138 

(31/11 l*/4| (31/1 /Ml 

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cmi fii/nj iiano/ss 

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cm hrtfl enm 

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ram OV9) rar (8/53) 

DJ km Cay'a JD4P ti nsao Ob J lo, JTftS O' 13779.93 1 fTTwc/orcal+i 
Cav i 3833.77 r3«l & I Lout 3798 10 0795 41 ) lAcrurtA* 


•real time share prices 
•updated financial reports 


•daily unit trust prices 
•persona) portfolio facility 


JSE Gold OB/a/78) 
JSE tiA. PBS/78 


21700^ 21B40 21M.0 2S34D0 7/9 
6K&0V 6794ft 8801ft 680800 15/11 


174*0) 14/2 
5*4600 19/1 


KmanoB«4TUaor 112500 112807 112957 113835 8/11 

fed" 

Madid SE 00/1205) 305X4 301X3 29024 35831 3171 

NtamMen 072737) 150520 148820 146430 15BL90 31/1 

Sato BkU (3VI2fi8) 120504 lSDIftf 1204.43 1423X4 31/1 

SBC General (1««7) 91 WE 917ft) 91903 1093X9 3171 

ttafcHM 

MBtftodR^VEfiSr 538100 B3 9 3X7 548208 7191.13 309 

itaim 

Baptfa* SET C50W7JS 1496® 147704 1466X2 17S3J3 471 

Tukqr 

total QnUJao 1S6B) 270085 ZnXEft 2E964X 2B58U0 1371 

WAD 

MS Q®U M (1/t/70)S BZSL1- 5240 675.4 64900 2/11 

auMna 

EdRteCk lOOCS/IOffiC) 135430 134703 1341.71 154819 3171 

&mTcp-1OD0SMq 1200X9 119231 118743 1311ft) 2/2 

jCMaOps (31/12/38) U 33100 33109 38519 VI 

8a*%* &!W»(771flQ 18005 17906 18024 19128 26(9 

■ CAC-40 STOCK MDEX FUTURES 9IATIF) 


4SLW 

46235 

464 37 

am in 

43892 


48200 

4.40 




C/21 

mi 


COT4I 

(16/37) 

555X8 

55087 

55303 

583.10 

51005 


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362 




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PI 

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C1/WB2) 

4275 

4251 

4281 

4694 

4139 


4640 

864 




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34 35 

287.H 

243.14 


257.71 

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113872 27/10 
83857 27710 


Dow Jones Irtd. D tv. Yie/d 

S S P lad Dn/. yield 
S 8 P Ind. P/E now 


Year ago 
2.7i 

Year ago 
2.41 
28 61 


FT Cityline has proved invaluable to business people and investors 
in the UK for years. And now it is available from anywhere in the 
world. 

If you would (ike further details fill in the coupon below or call 
the FT Cityline Help Desk on (071) 873 4378. 


FT Business Enterprises Limited, Number One Southwark Bridge, 
London SE1 9HL Registered in England Number 980896. 


■ STANDARD AMD POORS BOO MDEX FUTURES 8500 times, ind*. 


63,100 203.899 


FINANCIAL TIMES 



Open 

Latest 

Change 

rtgh 

Low 

Dec 

467.40 

467.40 

+0.30 

488.00 

46665 

Mar 

469.80 

470 70 

+0 75 

470.90 

469.80 

An 

- 

474 50 


474.50 

473.75 



Opal 

Sett Price Change 

Wgh 

LOW 

Nov 

1855.0 

1863.0 

+14.0 

1967.0 

1949.0 

Dec 

19QU 

19715 

+145 

1874.5 

1959.0 

Met 

- 

19685 

+155 

- 

- 


125848 5710 
113MB 571 D 
290X8 21/3 
141® 21/4 


Est. uol. Open im. 
17X07 23.514 

1,073 £5.957 

6X33 


C^en iwm r^urra om tc+ previous day. 


■ HEW YORK ACTIVE STOCKS 

hfcnby Stocks Qo» Change 

traded price on day 

Am ExuBSS 5 551.100 31% -% 

Gtvraar 3.M4.000 48% +2% 

Dial -Mart 3.67BOOD 23% %V> 

TtMoms 1560 560 5?'v -1% 

Gen Mokrt 2X92.300 38 s 


Open ran® Urmb tar prwtous day. 


\ ? S -J I 

fAm 




106474 MWJ1 UB9L87 13I44B 5* &U3 4» 

Ut+Jireri PlfcB (d Noro6 Oc+np & 11TG2S- B» wlo* o# ® tacfcrt aw IM awept Aaam Al OntaaiY aid 
' rtsd ®»a iB Ort. MSB Gen, SBF250L CMM. tiro Tbp-100, 1360 Ovartt Torento S 

iTmnTjSM) - 2 58?: JEE SG IndusKlali - 2BO; NYSE At Common - SO and Stinted and Paflrt - 10. » 
* '5S5J7 aa ul+U* J 1BS/DAX rar-twin ntac Not Ifi - 2112X1 +21.17 


Am Extras 

GJnste 
Wal-Mart 
Tetatanos 
Gen Mates 
PH 6 Monts 

Fun) 
a Man 
Sants Fa 
Pro* 


2.224.000 62% 

2.2W.2W 28-+ 

2.174.400 15V. 

2.103000 161- 

2088.700 21 


■ THAPINC ACTIVITY 

• VOme (mBoi) 

Nov 14 Nov 11 Nov 10 
Haw Tflrtc SE 260X80 218.428 280.876 
Amo 17 376 16.057 15070 


WSE 

Issues Traded 

(Uses 

Fife 

Unchanged 
Herr Higtts 
tar Ums 


'INTERNATIONAL 


Complete details below and send to: FT Cityline International, 
Number One Southwark Bridge, London SE1 9HL 


t ConMian. ■ a dC i/ a*** ® 1500 '3M1 • Exctekio 4 Iwtarti+i, F%» Uiatj®. F/uroi and Trraxnatan. 

4 ft® DJ tel. ndn lM 0 «Jc® day’s ft«r» J® loan am me uvunrjrs c* 0* r-jhe* and pneas reacted araj ite ttsv Dy aaeft 
rere*. rtwite tfw day's DAB -A) wvs Isuophed try T«Wi>s) nfrtsem the e^t«« aid loata v®uee di® the hde> has reacted 
taring the day. (The flgma in tncfcmi art- povtea dtt'A ¥ Srty»ct to 'Jhcinl wtate® 


Name:. 


Address: 


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FINANCIAL TIMES WEDNESDAY NOVEMBER 


4 pm dasa November 15 


NEW YORK STOCK EXCHANGE COMPOSITE PRICES 


Ck*to 
On ft**. 
U* Onto oats 

% 


12J 2 

3 

12 

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29$ 19% Afepaslx 
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21% 16% AQeny tot 
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26% 19%AB£UB 
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1*8 23 2? 2037 74% 73% 74 

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076 23 17 8161 u33 32% 32% 
0.50 34 11 H9 13% 13 13 
052 ZS 12 35 20% 20% 20% 
It 779 14% 14% 14% 
044 1.9 23 81 
8 639 
51 



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1. W 1.9493 3378 64% B3% 83$ 

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Continued m next page 



FINANCIAL TIMES 


WEDNESDAY NOVEMBER 16 1994 ★ 


39 




4 pm dose Afaifw&y 


NYSE COMPOSITE PRICES 


NASDAQ NATIONAL MARKET 


4 pm dose November is 


104 

Mod tM Stott 


- ^ 
0t» \ 


0 . 


P ■ Q 


p» a, 

{ IQDi 

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r 




WORLD STOCK MARKETS 


FINANCIAL TIMES 


Wednesday November 1615 




AMERICA 


EUROPE 


Dow volatile 
in wake of 
rate increase 


Wall Street 

US slocks swung higher and 
then lower yesterday after the 
Federal Reserve said it was 
raising the federal funds and 
discount rates by 0.73 of a per- 
centage point. 

The Daw Jones Industrial 
Average, which had been up 
about 12 points before the 
news, initially surged to a 25- 
point gain. But the advance 
quickly stalled and lost 20 
points before steadying in 
midaftemoon. 

Just before 3pm. the Dow 
was down some 6 points at 
3,825 while the more-broadly 
traded Standard & Poor's 500 
was down some 1.50 at around 
484. 

The discount rate was raised 
to 4.75 per cent, effective imme- 
diately. The federal funds rate 
that banks charge each other 
for money’ was raised to 5.5 per 
cent. 

It is the third rise this year 
in the discount rate and the 
sixth increase for the federal 
funds rate. 

Traders said that the initial 
reaction showed the marker 
viewed the aggressive Fed 
move as eliminating the possi- 
bility’ of further near-term rate 
hikes. Analysts said that the 
Fed move meant tbe economy 
would be slowing, which would 
hurt corporate profits going 
forward. 

Before the Fed moves, share 
prices were mixed among tbe 
banks which tend to be partic- 
ularly sensitive to interest rate 
changes. Gainers included Citi- 
corp up S*« at S46 1 *. Chemical 
Banking $'» at S38‘ 2. Chase 
Manhattan S' i at S36\ and J.P. 
Morgan S 3 ‘a at S60V Declining 
were NationsBank, down S'.a at 
547 ; *. and BankAmerica. S', 
lower at S42‘ i. 

Microsoft, the software- 
maker. saw its shares increase 
S'i to S&fa on news that it 
would launch a new. on-line 
service to be available in 35 
countries. Digital Equipment 
was up Sl l » at S33 J . on news 
that it would manage the cli- 


Mexico falls 1.5% 


Mexican stocks were hurt by 
political worries in connection 
with the investigation sur- 
rounding the assassination 
of Mr Jose Francisco Ruiz 
Massieu, secretary general of 
the ruling Institutional Rev- 
olutionary Party iPRI), in 
September. 

At midsession the IPC index 
was down 36.53 or 1.5 per cent 
at 2,450.11. Turnover had 
reached 233m pesos on 1.9m 
shares traded. 


The market turned negative 
after the man leading the 
investigation. Mr Mario Ruiz 
Massieu, brother of the mur- 
dered official, accused two 
senior PRI officials of trying to 
hinder his inquiry. 

However, investors were also 
anxiously awaiting the 
announcement from the US 
Federal Reserve on whether 
interest rates will be raised, 
fearing that this could lead to a 
repatriation of US funds. 


S Africa ends mildly firmer 


Shares in Johannesburg 
registered mild gains, with 
trading seen to Improve late in 
the day after a lethargic morn- 
ing session. Brokers remarked 
that turnover had been slow 
before rising towards the 
close, although individual 
share price movements had 
been restricted by the Federal 
Reserve's FOMC meeting. 

One of tbe features was a 
rise in the price of bullion, 
which lifted the golds index a 
modest 4 points to 2.168, a 
gain matched by the overall 
index, which closed at 5365 
after trading in a narrow 10- 
point range throughout the 


session. Industrials showed 
the best performance, advanc- 
ing 14 to 6,808. 

Among the most heavily 
traded stocks yesterday, De 
Beers recovered From a softer 
start to finish unchanged at 
R99.75 and Anglos was 50 
cents better at R24330. 

Elsewhere, Gencor put on 5 
cents at R15.20, Minorca relin- 
quished 50 cents to R107.50 
and Richemont softened 25 
cents to R3830. 

C.G. Smith, the industrial 
group, lost 50 cents at R18.25 
in spite of the release of year- 
end figures showing earnings 
up by 13 per cent to 106 cents. 


Most bourses higher anticipating US rate rise 




ent/server network for Micro- 
soft. ADRs of British Telecom- 
munications. which will help 
carry the new service traded 
up at 362- 

Shares in Apple Computer 
gained SV, at 342* i on news that 
it had shipped the most com- 
puters in tbe US during the 
third quarter. 

Whirlpool increased SI" at 
$53 , i after announcing it would 
streamline operations by cut- 
ting 3200 jobs in its European 
and North American 
operations and closing two 
North American plants. 

Two retailers gained on 
reports of strong third quarter 
earnings. Home Depot rose 8 s * 
at S47v« and J.C. Penney $*, at 
S47 1 Shares in Dayton Hud- 
son fell S2\ t at S81 l 2, in spite of 
a s trong earnings report. 

Canada 

Toronto held on to its gains at 
midday. expecting an 
announcement of a 50 basis- 
point rise in US short-term 
interest rates later in the day 
by the US Federal Open Mar- 
ket Committee. 

The TSE 300 was 13.1 higher 
at 4,190.3 by noon in heavy vol- 
ume of 32.8m shares. Declines 
led advances by 338 to 234. 
with 323 issues unchanged. 

Newbridge Networks rose 
CS2.0 to CS46 1 ’- in domestic 
trading after Merrill Lynch 
upgraded its recommendation 
to near-term above average 
from neutral. In New York 
trading. Newbridge rose SI 1 . to 
334‘i.. 

Suncor picked up CS‘» to 
CS34‘i after the group said it 
planned to spend CS250m to 
expand production from its 
Alberta oil sands operations by 
20 per cent by 1998. 

Teleglobe held steady at CS18 
after announcing a joint ven- 
ture with TRW to build and 
operate a worldwide satellite- 
based communication system. 

Petro-Canada remained the 
most active stock, trading at 
CS1T. in volume of 2.5m 
shares after one large block 
trade. 


Most bourses rose on the 
prospect of a US rate rise after 
Continental market hours. Zur- 
ich begged to differ, writes OUr 
Markets Staff. 

FRANKFURT appeared to 
extend itself ahead of today's 
holiday, the Dax index closing 
the session 21.46 higher at 
2,110.75 and creeping up fur- 
ther to 2,112.21 by the end of 
the post bourse. But. said Ms 
Barbara Altmann at B Metzler 
in Frankfurt, the market was 
more nervous than it looked. 

Turnover picked up to 
DM6.6bn. from DM4.4bn on 
Monday. The big gains were in 
banks, on an improving bond 
market and on the feeling that 
the sector had seen the worst 
of this year’s bad news: and in 
carmakers, reflecting the lim- 
ited recovery in the dollar and 
a degree of short-covering. 

Schering responded to good 
prospects for its BetaSeron 
multiple sclerosis drug, rising 
DM28 to DM995 by the end of 
the day: and Veba continued to 
respond to last week’s progress 
report with a gain of DM7.50 at 
DM532.50. 

Underperformers included 
Volkswagen, relative to other 
carmakers, with a gain of DM3 
at DM459 after recent outper- 
formance; and Siemens, tbe 
only Dax stock to lose ground 
on the day. with a decline of 

ASIA PACIFIC 


DM1.70 to DM622.50. 

PARIS saw turnover 
increase to a more satisfactory 
FFr3.4 bu as the CAC-40 index 
unproved 13.45 to 1.954.53. 

Eurotunnel topped the list of 
most active stocks, with some 
7m shares traded, and put on 
FFrl.35 or 6 per cent at 
FFr24.00. Brokers reported that 
most of the buying seemed to 
come from the domestic retail 
side with no substantial busi- 
ness from institutions. 

In contrast. Euro Disney was 
marked down 35 centimes or 
3.6 per cent to FFr9.30 in 
strong volume of 1.6m shares 
as worries surfaced that it 
might be replaced as a constit- 
uent of the CAC-40 index by 
Renault. 

Among automotive stocks. 
Peugeot shrugged off domestic 
reports of a decline in quality 
control to close with a gain of 
FFrl at FFr828. Michelin added 
80 centimes at FFr216.80. 

Thomscn-CSF rose 90 cen- 
times to FFr154.90 as SGS- 
Thomson. the French-ltaiian 
semiconductor manufacturer, 
said that it would list 21m 
shares in Paris and New York 
in an initial public offering. 
Tborason-CSF indirectly holds 
23.S1 per cent of SGS- Thomson 
and will see its stake fall to 
around 20 per cent following 
the IPO. which will run from 


bilSifc tf:rijanes- Share indices 


Nov 15 THE EUROPEAN SERES 

Hwrtf changes Opan 1030 HJQ 1ZJ0 ilCO TAJO 15-00 Oca 

FT-SE BmlizA 1352JA 1 35121 1353 S3 13S35C 1354.51 135122 1354.16 1354.70 

FT-S? 2® U12.98 U14.73 U1437 1*1438 141530 141727 U1S23 1415SS 


FT-SE Fimacfc 100 1347.63 13*1 J1 1345S2 134514 132429 

FT-SE Eunjtra* 2W 140112 13S&52 140568 WC&3S 138*32 

to Itnr&ia'ft. TG3 ■ 135657. TOO -1417 71 Urtfay ten- 185241 


November 21 to December 8. 

LVMH advanced FFr15 to 
FFr863 following nine month 
sales figures released late on 
Monday. 

ZURICH was unable to make 
much progress as interest rate 
sensitive banks and insurers 
came under pressure, although 
C-iba's confirmation that it was 
seeking a minority’ stake in 
Chiron, the US biotechnology 
company, provided a focus. 

The SMI index picked up late 
in the day io finish 1.0 hi gher 
at 2.591.9 as some investors 
reflected that Sweden's vote in 
favour of EU membership, and 
expectations that Norway 
would follow suit on November 
28. bad turned a spotlight on 
Switzerland's increasing isola- 
tion within Europe. 

Ciba added SFr7 to SFr753 
with some analysts arguing 
against a deal with Chiron, 
unless the Swiss group was 
assured of ultimate majority 


controL However, Mrs Birgit 
Knlhoff at UBS. who saw sub- 
stantial benefits for Ciba from 
a link, noted that the compa- 
nies bad different corporate 
cultures and said it was impor- 
tant for Chiron's future suc- 
cess that it retained its own 
identity. 

Among the financials, CS 
Holding lost SFrl2 to SFr558 
and Swiss Re, which, has risen 
by 40 per cent over the last two 
months, gave up SFr7 to 
SFr705 on profft-t alring , with 
heavy selling by one private 
bank reported. 

Holderbank, an the upward 
path since its strong profits 
forecast ll days ago. was a 
beneficiary of swindling from 
the financials. The shares rose 
SFrl 4 to SF rl.049. 

AMSTERDAM made ground, 
a number of solid gains coming 
to notice as the AEX index 
rose 3.29 to 412JZL 

KPN, the telecommunica- 


tions group, rose to a new, 
year's high, adding 50' cents to 
FI 55.80. The newly privatised 
group has benefited from bro- 
ker’s upgrades recently, and is 
seen to be one of the most 
attractively priced telecoms 
stocks in Europe. 

Futher strong support was 
semi for XNP BT, ti» paper 
and parlrag in g - company. Up 70 
cents to FI 61.00 on expecta- 
tions of good third quarter 
results, due on Friday. 

Hoare Govett was confident 
that the results would be posi- 
tive, with operating profits 
expected to show a recovery in 
paper and graphic systems, but 
a decline in paper merchant- 
ing, pffirg systems and packag- 
ing. 

Other good gains were seen 
in with Akzo Nobel 

and DSM putting an FI 2J20 and 
FI 2 J 0 respectively to F120L20 
and FI 139 A0. 

MILAN'S attention turned 
back to politics with today’s 
confidence vote on pension 
reform, and news that the 
unions had called a general 
strike for December 2 pulling 
prices back from early highs. 
The Comit index was 3.40 
hi gher at B4&53 but the late 
weakness was reflected in an 
11-point foil in the Mibtel 
index, to 10,253. 

Against the t rend, RAS, the 


insurer, picked up L72S .frf - ,- 
109,411 with sbme laige.-bt^ " : 
orders noted ahead ofthe-.;.? 
launch of its LS^OObn.GapitdL 
increase tanwrow.-. l.i 
■ MADRID Said fietfy that 3 50 . ' 
basis points Fed .Tate : rise - 
wotM justifir yesterday's r : . - 
or L2 pa- cent gain to the gea- -■ 
eral index to-3(&24j Jess tfear 
that," and the market would W - 
vnlnerahlermore, art ft might - 
rise farther., Block trades 
bloated turnover to PtaSThn, 
COPENHAGEN was . higher ' v 
tor the fifth bbha«utive a«y- • 
with the advance support ed by -.' 
a linn bond market. The KFX ; 
fade* rose L27 to 95224. - 
. R isin g bond prices brought . f 
buyers back into bank- stoefes, . 
which foil heavily last week. .- - 
DUBLIN was depressed, by 
the Irish political crisis ltdlow- 
Ing the government’s handling 
of a child sex abuse case, -the : .; 
ISEQ overall Index rose eaSy* r \. 
0.74 to 1304.07. " V 

WARSAW duly dropp ed to’a 
new 19M low, its sixth succes- 
sive decline taking the Wig •/' 
index down 355.1, or 49. per 
cent to 6,880.8. The market Was 
said to be flooded with sefl • 
offers, and turnover rose 42.4 . ' 
per emt to 576hn zlotys. ' ; 

Written and edited by WBBaro . 
Cochrane, John Pitt and Ifctani ' 
Morgan 





Ultra*"* , 

treaW M 






Second section outperforms as Nikkei index recovers 


A'.l 


Tokyo 

Bargain hunting and arbitrage 
buying supported share prices 
and the Nikkei 225 average 
gained ground in low volume. 
writes Emiko Terazono in 
Tokyo. 

The index closed 130.23 up at 
19.391.68 after fluctuating in a 
narrow range between 19.432.59 
and 19.314.76. Brokerage deal- 
ers and domestic institutions 
purchased shares, but foreign 
investors turned net sellers 

Sentiment stayed subdued, 
with many investors remaining 
cautious ahead of the US Fed- 
eral Open Market Committee 
meeting, and volume eased 
from 229m shares to 219m. 

The Topis index of all first 
section stocks finned 10.82 to 
1,528.64 and the Nikkei 300 
moved forward 2.10 to 280.80. 
while rises outnumbered falls 
by 738 to 219, with 205 issues 
unchanged. But in London the 
ISE/Nikkei 50 index eased 1.06 
to 1.259.44. 

Traders said speculative 
investors, discouraged by the 
low volatility in the first sec- 
tion, explored the second sec- 
tion and the over-the-counter 
market A branch manager at 
Nikko Securities said he would 
recommend that clients focus 
on small-capitalisation stocks 
on the second section and in 
the OTC market backed by 
strong earnings growth. The 
second section index climbed 
35.25 or 1.7 per cent to 2,147.11. 

Privatisation issues, which 
had been battered by recent 
profit-taking, staged a rally. 
Reports that the government 
had abandoned the plan to list 
West Japan Railways in the 
current fiscal year cheered 
market participants. 

Japan Tobacco recouped 
Y30.000 at Y991.000 on buying 
by corporate investors, break- 
ing out after six straight ses- 
sions of decline. Nippon Tele- 
graph and Telephone gained 
Y 12,000 at Y878.000- 

Brokers, which have been 
hurt by the recent drop in the 
stock market, advanced. 
Nomura Securities rose Y60 to 
Yl.930 and Nikko Securities 
Y30 to Yl.030. 

Steels and shipbuilders were 
actively traded but finished 


Japan 

Tofryo SE Index 
1.650 


1.500 1 1 * ’ 

Sep 1994 Nov 
Source. Daujsiream 

mixed. Nippon Steel, the most 
active issue of the day. moved 
up Y3 to Y385 and Mitsubishi 
Heavy Industries added Y9 at 
Y749. NKK dipped Y4 to Y276. 

High-technology stocks were 
firm. NEC improved Y20 to 
YL180 and Hitachi Y4 to Y974. 
Sony rose Y30 to Y5.780. but 
Matsushita Electric Industrial 
receded Y10 to Yl.530 in spite 
of strong consolidated earnings 
growth. 

In Osaka, the OSE average 
put on 143.89 at 21.437.47 in vol- 
ume of 58m shares. Aoyama 
Trading, the men’s suits 
maker, rose Y120 to Y2.420. 

Roundup 

Senior markets, in particular, 
were inspired by Wall Street's 
overnight gains and prospects 
following an expected rise in 
US interest rates. Jakarta, 
hosting the APEC summit, was 
closed for the second day in 
succession before reopening 
today. 

HONG KONG rose 2 per cent, 
the Hang Seng index climbing 
186.74 to 9.565.66 and turn- 
over more than doubling to 
HKS3-91bn from Monday's four- 
month low of HK$1.78bn. 

However, the view remained 
that the US situation offered 
trading, rather than invest- 
ment, potential Concerns over 
US inflation data and rates 
trends over the longer term 
were expected to linger after 
the US credit tightening move 
widely expected yesterday. 

Recently weak banks and 
property shares attracted the 
most attention, with HSBC, the 


FT- ACTUARIES WORLD INDICES 


Jointly complied by The Rri an caal Times Ltd.. 
NATIONAL AND 

REGIONAL MARKETS -- - 

fVjtwa It pararfhraea US Day's 
shorn* number ol 8nes Dollar Change 

of stock Index 96 


Goldman, Sachs A Go. and NatWest Securities Ltd. in conjunction with the Institute of Actuaries and the Faculty of Actuaries 


- MONDAY NOVEMBS) 14 1994 

Pound Local Local 

Sterling Yen DM Currency 96 chg 

Index Index Index index on day 


Australia (B8)_ — 

Austria (16) — . — 

Belgium [35) 

BncS (28)... 

Canada 1103) 

Denmark (33}., _ 

Finland (24) .. 

Franca turn 

Germany (58) 

Hong Kong (56) 

Ireland (i4j. 


— 765.32 

177.64 

187.27 

.185.75 

131.32 

...J47.T0 
—.164.88 
. >..169.39 

142.75 

_.,„380.M 
— ..201.17 


FRIDAY NOVEMBER 11 1994 DOLLAR INDEX 

US Pound Local Year 

Dolar Sterling Yen DM Currency 52 week 52 week ago 
Index Index Index Index Index High Low (aturop 

167.63 15&28 103-26 133.09 148.07 189.15 149.36 154.49 

16081 107.59 111.43 143.83 143.72 198.89 187.48 171.60 

16am 158.47 104.04 134.10 130 S3 177.04 151 07 151.07 




Japan (468) 

Malaysia (97) 

....154.89 

™518.79 

Mexico (18)...._ 

.^028.70 

—213.80 

New Zealand (14) 

.74.78 


..-390.14 

South Africa {59) 

...^33.48 

Sweden (36) 

...J40.68 

Switzerland (47) 

Thailand (48) 

Untied Kingdom (2<M) 

USA (51 5).. ....- 

,._163.65 

—174.09 

199.42 

-.190.55 


181.11 188.13 

178.95 189.67 


Americas (684) 178.18 

Europe (707). -..,...,.171.75 

Nortec 1110) -220.21 

Pacific Basin (703) 164.38 

Euro-Pacific (1500) ..-187.34 

North America (818) 188.91 

Europe Ex UK (503) 153-34 

Pacific Ex Japan (325)—. _..._255.47 

World Ex US (1708) 169.28 

World Ex UK (2019) 172.97 

World Ex Japan (1755) ——187.9 7 

77* World Index (2223)1!..™ 17S.30 


most active stock, appreciating 
HKS1.75 to HKS91.25, Sun Hung 
Kai Properties HKS1 to 
HKS5S.25 and Henderson Land 
HKS1.50 to HKS49.90. 

KUALA LUMPUR reported 
strong retail and institutional 
buying as the KLSE index rose 
25.43 or 2.4 per cent to 1,069.74. 
its largest single-day gain in 
more than three months. 

Volume swelled to 299m 
shares, its highest in four 
weeks, from Monday's 132m. 
Brokers said the market had 
factored in a 50 basis-point 
increase in US interest rates, 
but that a larger rise could put 
some pressure on the market 

Meanwhile. Baring Securities 
market strategist Mr Alan 
Butler-Henderson said in his 
Tiger Talk monthly that the 
Malaysian market would have 
the “best bounce" after any 


US interest rate increase. 

BANGKOK surged as the 
market finally discounted 
expectations of a rise in US 
interest rates, and the SET 
index closed 19.01 better at 
1 .496.55 in heavy turnover iff 
Bt&69bn- 

Buying interest emerged ini- 
tially in the finance sector, and 
spilled over to some property 
issues. 

SINGAPORE ended off intra- 
day highs, the Straits Times 
Industrial intfey finally stand- 
ing 14.24 up at 2341.18. 

Foreign held bank shares 
were firm. Overseas Union 
Bank foreign gaining 25 cents 
at SSS.75. United Overseas 
Bank foreign 20 cents at 
SS16.30 and Overseas Chinese 
Bank foreign 50 cents at 
SS15.S0. 

WELLINGTON was led down 


by forestry stocks Fletcher 
rhaiiwign and Carter Holt Har- 
vey as the NZSE-40 index 
retreated 11.98 to 2,042.63. 
Fletcher finished 14 cents off at 
NZ$4.12 after some forecasters 
downgraded their expectations, 
and Carter slipped 6 cents to 
NZ$3.78 in sympathy. 

Workers at Fletcher Chal- 
lenge Canada's three British 
Columbia pulp and paper mills 
voted on Monday In favour of 
strike action over working con- 
ditions, which would not have 
helped the stock’s time, said 
brokers. 

SYDNEY'S All Ordinaries 
index rallied 15.0 to 1,941.4. 
with brokers noting bargain 
hunting in resource stocks fol- 
lowing the heavy selling in 
this sector in the previous few 
days. 

Among the day’s best per- 


formers, BHP moved abaad^n 
cents to AJ19.10, CRA lSo^ ' 
to A$T7£4 and MIM 6 waits h) 
A&54. . 

In the media section, New 
Corp was down 4. cents _*at 
A$5.34 after losing ' an e*tf . 
gain, but Fairfax advanced 12 . 
cents to AS2.72. r v -’ 

KARACHI sagged at the 
close as market sentiment 
remained depressed by fears of 
ethnic violence in KamOd, 
political uncertainty and short* 
age of funds. The KSE J&- 
share index fell 18.67 or 0-ff per 
cent to 2.178JU- 
SHANGHAI’S A share index - 
declined sharply after Beftiag' 
denied reports that ft platujed- 
to allow pension fimds to 
invested in the domestic mar-. - 
ket. The index dropped 29.8 
or 3.9 per cent to a day’s 
low of 724.55. ■... .- „ 




Zxzvjs. 




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163.99 709.08 14083 147.35 


175.55 162.72 


139.45 146.74 


copy^fx Die Bn maa Tmes Umiett QoUrmn, Sachs anti Ca and NatW w Sawfflw LMeti. 1887 
law nrtcM ware ixwuiltele for ma eanea